<PAGE>
UNITED STATES
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:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
[X] Definitive Proxy Statement Rule 14a-6(E)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
Syntellect Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- -------------------------------------------------------------------------------
Name of person(s) Filing Proxy Statement, if other than the Registrant)
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:
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(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:
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(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 Statement No.:
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(4) Date Filed:
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Notes:
<PAGE>
[LETTERHEAD OF SYNTELLECT APPEARS HERE]
1000 Holcomb Woods Parkway, Suite 410A
Roswell, Georgia 30076
-------------------------------------
NOTICE AND PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 21, 1998
-------------------------------------
To the Stockholders:
The 1998 Annual Meeting of Stockholders (the "Annual Meeting") of Syntellect
Inc., a Delaware corporation (the "Company"), will be held on Thursday, May
21, 1998, at 10:00 a.m., Atlanta, Georgia time, at Northeast Atlanta Hilton,
5993 Peachtree Industrial Blvd., Norcross, Georgia 30092, for the following
purposes:
1. To elect one director to the Board of Directors to serve for a three-year
term;
2. To approve an amendment to the Company's 1990 Employee Stock Purchase Plan to
increase the number of shares of the Company's Common Stock authorized for
issuance thereunder from 400,000 to 800,000 shares;
3. To approve certain amendments to the Company's Nonemployee Director Stock
Plan to, among other things, increase the number of shares of the Company's
Common Stock authorized for issuance thereunder from 50,000 to 150,000 shares
and to extend the expiration date of each option granted thereunder from six
years to ten years; and
4. To transact such other business as may properly come before the Annual
Meeting.
Each outstanding share of the Company's Common Stock entitles the holder of
record at the close of business on March 23, 1998, to vote at the Annual
Meeting or any adjournment thereof. Shares can be voted at the Annual Meeting
only if the holder is present or represented by proxy. A copy of the Company's
1997 Annual Report to Stockholders, which includes certified financial
statements, is enclosed. Management cordially invites you to attend the Annual
Meeting.
By Order of the Board of Directors
/s/ Neal L. Miller
Neal L. Miller
Secretary
Atlanta, Georgia
April 15, 1998
IMPORTANT
STOCKHOLDERS ARE EARNESTLY REQUESTED TO SIGN, DATE, AND MAIL THE ENCLOSED
PROXY. A POSTAGE-PAID ENVELOPE IS PROVIDED FOR MAILING IN THE UNITED STATES.
<PAGE>
[LETTERHEAD OF SYNTELLECT APPEARS HERE]
1000 Holcomb Woods Parkway, Suite 410A
Roswell, Georgia 30076
-------------------------
PROXY STATEMENT
-------------------------
This Proxy Statement is furnished to the stockholders of Syntellect Inc., a
Delaware corporation ("Syntellect" or the "Company"), in connection with the
solicitation of proxies on behalf of the Board of Directors of the Company for
use in voting at the Annual Meeting of Stockholders to be held on Thursday,
May 21, 1998, at 10:00 a.m., Atlanta, Georgia time (the "Annual Meeting"), and
at any adjournment or adjournments thereof. The proxy materials were mailed on
or about April 15, 1998, to stockholders of record at the close of business on
March 23, 1998 (the "Record Date"). The Company had 13,581,073 shares of
common stock outstanding, par value $.01 per share ("Common Stock"), as of the
close of business on the Record Date. Only stockholders of record on the
Record Date will be entitled to vote at the Annual meeting. The holders of a
majority of the voting power of the issued and outstanding Common Stock
entitled to vote, present in person or represented by proxy, shall constitute
a quorum at the Annual Meeting.
Each stockholder is entitled to one vote per share for the election of
directors and on each other proposal, as well as on all other matters that may
be properly considered at the Annual meeting. If the accompanying proxy is
signed and returned, the shares represented thereby will be voted in
accordance with any directions on the proxy. A person giving the enclosed
proxy has the power to revoke it at any time before it is exercised by:
(i) attending the Annual Meeting and voting in person; (ii) duly executing and
delivering a proxy bearing a later date; or (iii) sending written notice of
revocation to the Secretary of the Company at 1000 Holcomb Woods Parkway,
Suite 410A, Roswell, Georgia 30076.
Votes cast by proxy or in person at the Annual Meeting will be tabulated by
the inspectors of election appointed for the meeting and will determine
whether or not a quorum is present. Shares held by nominees for beneficial
owners will be counted for purposes of determining whether a quorum is present
if the nominee has the discretion to vote on at least one of the matters
presented, even if the nominee may not exercise discretionary voting power
with respect to other matters and voting instructions have not been received
from the beneficial owner (a "broker non-vote"). Abstentions with respect to a
proposal are counted for purposes of establishing a quorum. The affirmative
vote of a plurality of the shares present in person or by proxy and entitled
to vote is required to elect directors. With respect to other matters
submitted at the Annual Meeting, the approval of any such matter will require
a greater number of votes cast favoring the matter than the number of votes
cast opposing such matter. Abstentions will not be counted as votes for or
against the election of directors, but will have the effect of a vote against
any other matter. Broker non-votes will not be counted as votes for or against
any matter submitted to a vote of shareholders, including the election of
directors.
The Company will bear the cost of the solicitation of proxies, including the
charges and expenses of brokerage firms and others for forwarding solicitation
material to beneficial owners of the outstanding Common Stock of the Company.
In addition to the use of the mails, proxies may be solicited by personal
interview, telephone, or facsimile. The Company has retained Corporate
Investor Communications, Inc., at an estimated cost of $3,000, plus
reimbursement of expenses, to assist in soliciting proxies from brokers,
nominees, institutions and individuals. Arrangements will also be made with
custodians, nominees, and fiduciaries, and the Company will reimburse such
custodians, nominees and fiduciaries for reasonable expenses incurred in
connection herewith.
As of the date of this Proxy Statement, the Company knows of no matter to be
brought before the meeting other than those referred to in the accompanying
notice of annual meeting. If, however, any other matters properly come before
the meeting, it is intended that proxies in the accompanying form will be
voted thereon in accordance with the judgment of the persons voting such
proxies.
1
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors of the Company (the "Board of Directors") consists of
six positions and is divided into three classes. Each director is elected for
three years and the terms are staggered so that only one class is elected by
the stockholders annually. The present terms of Messrs. Michael R. Bruce and
Steve G. Nussrallah will expire at the Annual Meeting, and Mr. Nussrallah will
not be seeking re-election. On August 12, 1997, Daniel D. Ross resigned from
the Board of Directors to pursue other interests, and Mr. Bruce was elected by
the Board of Directors to serve his remaining term. On January 30, 1998, A.
LeRoy Ellison resigned from the Board of Directors to pursue other interests.
The Board has determined to maintain its current level of four members, with
two Board seats to remain vacant. The Board of Directors reserves the right to
evaluate candidates to fill these vacancies. Stockholders will not be entitled
to nominate or cast votes at the Annual Meeting for directors to fill these
remaining vacancies. Mr. Bruce has been nominated for re-election as director
of the Company and, unless otherwise noted thereon, the shares represented by
the enclosed proxy will be voted for the election of Mr. Bruce as director of
the Company. If either Mr. Bruce becomes unavailable for any reason, or if an
additional vacancy should occur before election (which events are not
anticipated), the shares represented by the enclosed proxy may be voted for
such other person or persons as may be determined by the holders of such
proxy. The nominee receiving the highest number of votes cast at the Annual
Meeting will be elected and will serve as director for three years or until
his successor is duly elected and qualified.
INFORMATION CONCERNING DIRECTORS AND NOMINEES
Information concerning the names, ages, terms, positions with the Company,
and business experience of the Company's current directors is set forth below:
<TABLE>
<CAPTION>
TERM
NAME AGE POSITION EXPIRES
---- --- -------- -------
<S> <C> <C> <C>
J. Lawrence Bradner..... 46 Chairman of the Board, Chief 1999
Executive Officer, President, and Chief
Operating Office
William P. Conlin
(1)(2)................. 64 Director 1999
Jack R. Kelly, Jr. (1)
(2).................... 63 Director 2000
Michael R. Bruce (2).... 50 Director 1998
</TABLE>
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(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
J. Lawrence Bradner became Chairman and Chief Executive Officer of the
Company upon completion of the merger with Pinnacle Investment Associates Inc.
("Pinnacle") on March 14, 1996. He served as Chairman and Chief Executive
Officer of Pinnacle and its wholly owned subsidiary, Telecorp Systems, Inc.
since their formation in 1991. On March 31, 1998, Mr. Bradner also assumed the
positions of President and Chief Operating Officer of the Company. From 1977
to 1990, Mr. Bradner was employed by Scientific-Atlanta, Inc. ("Scientific-
Atlanta"), a leading provider of satellite and other telecommunications
products based in Atlanta, Georgia. Mr. Bradner served as President of the
Broadband Communications Business Division of Scientific-Atlanta and as
Corporate Vice President from 1987 to 1990. Mr. Bradner holds a Bachelor's
Degree, with honors, in Industrial and Systems Engineering from the Georgia
Institute of Technology and a Master of Business Administration degree from
Harvard Business School.
William P. Conlin has served as a director of the Company since February
1995. Mr. Conlin serves as a private consultant to several high-tech companies
in the Southern California area, including Odetics, Inc., Airborne Systems,
Inc., and Facilities Management, Inc. Mr. Conlin served as President and Chief
Executive Officer of CalComp, Inc., an Anaheim, California computer graphics
and distribution company, from 1983 to 1993. From 1960 to 1983, Mr. Conlin
served in a variety of management positions at Burroughs Corp. (now Unisys).
Mr. Conlin currently serves as director and is on the Compensation Committee
for Structural Dynamics
2
<PAGE>
Research Corporation, a leading supplier of mechanical design automation
software. Mr. Conlin also serves as a director for Apparell Technologies,
Inc., a company that provides advanced proprietary technology for digital
fabric printing and is on the advisory boards of the Graduate School of
Management and the School of Engineering at the University of California,
Irvine.
Jack R. Kelly, Jr. was named a director of the Company upon the completion
of the merger with Pinnacle on March 14, 1996. Mr. Kelly served as a director
of Pinnacle since its formation in 1991. Since 1983, Mr. Kelly has been a
partner of the general partner of Noro-Moseley Partners, a venture capital
firm located in Atlanta, Georgia. Prior to that, Mr. Kelly served as Chief
Operating Officer of Scientific-Atlanta. Since 1995, Mr. Kelly has served as a
director and a member of the Compensation Committee of Novoste Corporation, a
high-tech developer of medical devices used in cardiology and other
interventive surgery. Since 1993, he has served as a director and a member of
the Compensation Committee of SpectRx, Inc., a developer of medical devices
with an emphasis on non-evasive diagnostics. Mr. Kelly previously served as a
director of Minnesota Power, a diversified utility company serving industrial
and residential customers in Northern Minnesota. Mr. Kelly holds a Bachelor's
Degree in Physics from Georgia State University.
Michael R. Bruce has served as director of the Company since December 1997.
Mr. Bruce serves as Managing Director and Chief Investment Officer of American
Asset Management in New York. Prior to joining American Asset Management in
1993, Mr. Bruce helped form Johnston Bruce Asset Management where he served as
Managing Director and Portfolio Manager for four years. He was also a general
partner of Adler & Shaykin, an investment banking firm, from 1983 to 1989. Mr.
Bruce holds a Bachelor's Degree from Hamilton College. In addition, he earned
a CFA designation in 1976 and is a member of the New York Society of Security
Analysts and the Financial Analysts Federation.
3
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the number and percentage of outstanding
shares of Common Stock beneficially owned by (a) each director of Syntellect,
(b) the Chief Executive Officer and each of the four other most highly
compensated officers of the Company for the fiscal year ended December 31,
1997 (collectively, the "Named Executive Officers"), (c) each person known by
Syntellect to beneficially own more than 5% of such stock; and (d) all
directors and Named Executive Officers of Syntellect as a group.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED (1) OWNED
------------------------------------ ------------ -------
<S> <C> <C>
Jack R. Kelly Jr. (2)..................................... 1,280,640 9.4%
Noro-Moseley Partners II., L.P. (3)....................... 1,225,000 9.0%
Michael D. Kaufman (4).................................... 1,170,000 8.6%
Cox Communications, Inc.(5)............................... 1,150,000 8.4%
MK GVD Fund(6)............................................ 1,070,000 7.9%
Dimensional Fund Advisors Inc. (7) ....................... 973,800 7.2%
J. Lawrence Bradner (8)................................... 854,854 6.3%
Steve G. Nussrallah (9)................................... 840,054 6.2%
T. Rowe Price Associates, Inc (10)........................ 700,000 5.2%
W. Scott Coleman (11)..................................... 104,691 *
David C. Phillips (12).................................... 65,234 *
Michael R. Bruce.......................................... 40,000 *
Neal L. Miller (13)....................................... 18,582 *
William P. Conlin (14).................................... 9,800 *
All Directors and Named Executive Officers as a group (8
persons) (15)............................................ 3,213,855 23.7%
</TABLE>
- --------
* Represents less than 1% of the outstanding Common Stock.
(1) This information regarding security ownership of the Common Stock is as
of February 1, 1998 except for the security ownership information
regarding Dimensional Fund Advisors Inc., which is derived from a
Schedule 13G filed by Dimensional Fund Advisors Inc., with the
Securities and Exchange Commission (the "Commission") on February 9,
1998, and T. Rowe Price Associates, Inc., which is derived from a
Schedule 13G file by T. Rowe Price Associates, Inc. with the Commission
on February 12, 1998. The percent owned calculations are based on the
number of shares of Syntellect Common Stock outstanding on February 1,
1998, although a person is also deemed the beneficial owner of any
shares of Common Stock of which that person has the right to acquire
beneficial ownership within 60 days.
(2) The total for Mr. Kelly includes 1,225,000 shares held by Noro-Moseley
Partners II, L.P. ("Noro-Moseley"). Mr. Kelly is a general partner of
Moseley and Company II, the general partner of Noro-Moseley. Mr. Kelly
disclaims beneficial ownership of these shares; however, Mr. Kelly
shares the power to vote and control the disposition of such shares and,
therefore, may be deemed to be a beneficial owner thereof. Mr. Kelly's
total also includes 5,640 shares subject to unexercised options which
were exercisable on February 1, 1998, or within 60 days thereafter. Mr.
Kelly's address is c/o Noro-Moseley Partners, 4200 Northside Parkway
N.W., Building 9, Atlanta, Georgia 30327.
(3) Noro-Moseley Partners II, L.P. is an Atlanta-based venture capital firm.
The address of Noro-Moseley Partners II, L.P. is c/o Noro-Moseley
Partners, 4200 Northside Parkway N.W., Building 9, Atlanta, Georgia
30327.
(4) The total for Mr. Kaufman includes 1,070,000 shares held by MK GVD Fund.
Mr. Kaufman is a general partner of MK GVD Management, the general
partner of MK GVD Fund. Mr. Kaufman disclaims beneficial ownership of
these shares; however, Mr. Kaufman shares the power to vote and control
the disposition of such shares and, therefore, may be deemed to be a
beneficial owner thereof. Mr. Kaufman's address is c/o MK GVD Fund, 2471
E. Bayshore Road, Suite 520, Palo Alto, California 94303.
(5) Cox Communications, Inc. is a diversified media and broadband
communications company. The address of Cox Communications, Inc. is 1400
Lake Hearn Drive, Atlanta, Georgia 30319.
4
<PAGE>
(6) MK GVD Fund is a California-based venture capital firm. The address of
MK GVD Fund is 2471 E. Bayshore Road, Suite 520, Palo Alto, California
94303.
(7) Dimensional Fund Advisors Inc. ("Dimensional") is a California-based
registered investment advisor. Dimensional is deemed to have beneficial
ownership of 973,800 shares of Common Stock, all of which are held in
portfolios of DFA Investment Dimensions Group Inc., a registered open-
end investment company, or in series of the DFA Investment Trust
Company, a Delaware business trust, or the DFA Group Trust and DFA
Participation Group Trust, investment vehicles for qualified employee
benefit plans, all of which Dimensional serves as investment manager.
Dimensional disclaims beneficial ownership of all such shares of Common
Stock. The address of Dimensional is 1299 Ocean Avenue, 11th Floor,
Santa Monica, California 90401.
(8) The total for Mr. Bradner includes 338,052 shares subject to unexercised
options which were exercisable on February 1, 1998, or within 60 days
thereafter.
(9) The total for Mr. Nussrallah includes 333,252 shares subject to
unexercised options which were exercisable on February 1, 1998, or
within 60 days thereafter. Mr. Nussrallah's address is 605 Buttercup
Trace, Alpahretta, GA 30202.
(10) T. Rowe Price Associates, Inc. is a Maryland-based investment advisor.
These shares of Common Stock are owned by various individuals and
institutional investors, of which T. Rowe Price Associates, Inc. serves
as investment adviser with power to direct investments and/or sole power
to vote the securities. For purposes of the reporting requirements of
the Securities Exchange Act of 1934, T. Rowe Price Associates, Inc. is
deemed to be a beneficial owner of such securities; however, T. Rowe
Price Associates, Inc. expressly disclaims the beneficial ownership of
such securities. The address of T. Rowe Price Associates, Inc. is 100 E.
Pratt Street, Baltimore, Maryland 21202.
(11) The total for Mr. Coleman includes 84,420 shares subject to unexercised
options which were exercisable on February 1, 1998, or within 60 days
thereafter.
(12) The total for Mr. Phillips includes 28,331 shares subject to unexercised
options which were exercisable on February 1, 1998, or within 60 days
thereafter.
(13) The total for Mr. Miller includes 13,500 shares subject to unexercised
options which were exercisable on February 1, 1998, or within 60 days
thereafter.
(14) The total for Mr. Conlin includes 9,800 shares subject to unexercised
options which were exercisable on February 1, 1998, or within 60 days
thereafter.
(15) The total for all directors and Named Executive Officers as a group
includes an aggregate of 812,995 shares subject to unexercised options
which were exercisable on February 1, 1998, or within sixty days
thereafter.
BOARD OF DIRECTORS' MEETINGS, COMPENSATION, AND COMMITTEES
During the fiscal year ended December 31, 1997, the Board of Directors of
the Company met on six occasions. Each of the Company's directors attended 75%
or more of the meetings of the Board of Directors and of the meetings held by
committees of the Board of Directors on which he served, except for Daniel D.
Ross who resigned from the Board of Directors on August 12, 1997 to pursue
other interests.
Directors who are not officers or employees of the Company are compensated
$1,500 for attendance at regular Board meetings, $200 for participation in
telephonic Board meetings, and $200 for attendance at, or participation by
telephone in, meetings of Board committees of which they are members. In
addition, nonemployee directors also receive an annual retainer of $5,000 in
return for their service with the Company. Nonemployee directors are
reimbursed for reasonable out-of-pocket expenses incurred in connection with
their attendance at each meeting of the Board of Directors. Pursuant to the
Company's Nonemployee Director Stock Plan, nonemployee directors are eligible
to receive (i) a one-time grant of options to purchase 10,000 shares of Common
Stock on the third business day after the nonemployee director is first
elected or appointed to the Board of Directors and (ii) an annual grant of
options to purchase 2,000 shares of Common Stock on each June 1 through and
including June 1, 1998. See "Proposal 3 -- Proposed Amendment to the
Syntellect Inc.
5
<PAGE>
Nonemployee Director Stock Plan." A nonemployee director must be a member of
the Board of Directors on the relevant June 1 in order to receive the annual
grant of options for that year.
The Board of Directors maintains a standing Compensation Committee and a
standing Audit Committee. The Compensation Committee, which met twice during
1997, reviews all aspects of compensation of executive officers of the Company
and approves or makes recommendations on such matters to the full Board of
Directors. The Audit Committee, which met twice during 1997, is primarily
concerned with the effectiveness of the audits of the Company by its internal
audit staff and by the independent auditors. Its responsibilities include
recommending the selection of independent auditors, reviewing the organization
and scope of the Company's internal system of audit and controls, and
evaluating the Company's financial reporting activities and the accounting
standards and principles followed. The Company does not maintain a standing
nominating committee or other committee performing similar functions.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's officers, directors and persons who
own more than 10% of the Company's Common Stock, to file reports of beneficial
ownership and changes in such ownership with the Commission. Based solely upon
a review of the copies of such forms furnished to the Company, or written
representations from certain reporting persons that no Form 5 was required for
such person, the Company believes that, during 1997, all officers, directors,
and persons who own more than 10% of the Company's Common Stock complied with
the applicable Section 16(a) filing requirements.
6
<PAGE>
EXECUTIVE COMPENSATION
The table below sets forth information concerning the annual and long-term
compensation for services rendered in all capacities to the Company during the
fiscal years ended December 31, 1997, 1996, and 1995, by the Named Executive
Officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION
-------------------------------- SECURITIES
NAME AND OTHER ANNUAL UNDERLYING ALL OTHER
PRINCIPAL SALARY BONUS COMPENSATION OPTIONS COMPENSATION
POSITION YEAR ($) ($) ($) (1) (#) (2) ($)
- --------- ---- ------- ------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
J. Lawrence
Bradner (3) 1997 252,000 0 0 27,500 6,437(4)
Chairman of
the Board and 1996 198,853 63,000(5) 0 115,000 3,707(6)
Chief
Executive
Officer 1995 -- -- -- -- --
Steve G.
Nussrallah (7) 1997 210,000 0 0 25,000 4,756(8)
President and 1996 166,847 52,500(5) 0 105,000 5,798(9)
Chief
Operating
Officer 1995 -- -- -- -- --
Neal L. Miller
(10) 1997 145,000 0 0 10,000 3,237(11)
Vice
President,
Chief 1996 129,859 18,750(5) 0 0 343(12)
Financial
Officer 1995 6,121 0 0 25,000 19(13)
Secretary and
Treasurer
W. Scott
Coleman (14) 1997 178,192 0 0 25,000 3,714(15)
Senior Vice
President and 1996 152,394 101,719(16) 0 20,000 388(17)
General
Manager 1995 132,162 33,500 0 60,000 482(18)
David C.
Phillips (19) 1997 137,500 0 0 10,000 2,210(20)
Vice President
of Operations 1996 97,110 18,750(5) 0 15,000 3,055(21)
1995 -- -- -- -- --
</TABLE>
- --------
(1) Other annual compensation for the periods presented was less than 10% of
the respective executive officer's total annual salary and bonus.
(2) The amounts shown in this column represent outstanding stock options
granted pursuant to Syntellect's Long-Term Incentive Plan and Restated
Stock Option Plan.
(3) Mr. Bradner joined the Company and became its Chairman and Chief
Executive Officer effective March 14, 1996. Under the terms of his
employment agreement, Mr. Bradner's salary for the fiscal year ending
December 31, 1996 was based upon an annualized salary of $240,000. See
"Employment Agreements." Effective March 31, 1998, Mr. Bradner also
assumed the positions of President and Chief Operating Officer of the
Company.
(4) The amount shown includes contributions made by the Company during 1997
on behalf of Mr. Bradner to the Syntellect 401(k) Plan of $2,886 and
long-term disability and life insurance premiums paid on Mr. Bradner's
behalf of $3,551.
(5) The 1996 bonus amounts shown for Messrs. Bradner, Nussrallah, Miller,
and Phillips represent bonuses earned in 1996 that were not paid until
1997.
(6) The amount shown includes contributions made by the Company during 1996
on behalf of Mr. Bradner to the Pinnacle 401(k) Plan of $2,852 and life
insurance premiums paid on Mr. Bradner's behalf of $855.
(7) Mr. Nussrallah joined the Company and became its President and Chief
Operating Officer effective March 14, 1996. Under the terms of his
employment agreement, Mr. Nussrallah's salary for the fiscal year ending
December 31, 1996 was based upon an annualized salary of $200,000.
Effective March 31, 1998, Mr. Nussrallah resigned as an officer of the
Company, and he will not seek re-election as a director of the Company.
See "Employment Agreements."
7
<PAGE>
(8) The amount shown includes contributions made by the Company during 1997
on behalf of Mr. Nussrallah to the Syntellect 401(k) Plan of $2,020 and
long-term disability and life insurance premiums paid on
Mr. Nussrallah's behalf of $2,736.
(9) The amount shown includes contributions made by the Company during 1996
on behalf of Mr. Nussrallah to the Pinnacle 401(k) Plan of $3,680 and
life insurance premiums paid on Mr. Nussrallah's behalf of $2,118.
(10) Mr. Miller joined the Company and became its Vice President, Chief
Financial Officer, Secretary and Treasurer in December 1995. Effective
March 31, 1998, Mr. Miller assumed the additional role of President of
Syntellect Interactive Services, Inc.
(11) The amount shown includes contributions made by the Company during 1997
on behalf of Mr. Miller to the Syntellect 401(k) Plan of $2,776 and
long-term disability and life insurance premiums paid on Mr. Miller's
behalf of $461.
(12) The amount shown represents payments made by the Company during 1996 for
life insurance premiums on Mr. Miller's behalf.
(13) The amount shown represents payments made by the Company during 1995 for
life insurance premiums on Mr. Miller's behalf.
(14) Mr. Coleman joined the Company and became its Vice President of Product
Development in February 1993. Mr. Coleman served in the Office of the
Chief Executive Officer from October 1995 to March 1996, and served as
Senior Vice President and General Manager, Call Center Systems, from
March 1996 to April 1997. Mr. Coleman was promoted to President, Call
Center Systems, in May 1997.
(15) The amount shown includes contributions made by the Company during 1997
on behalf of Mr. Coleman to the Syntellect 401(k) Plan of $3,135 and
long-term disability and life insurance premiums paid on Mr. Coleman's
behalf of $579.
(16) The 1996 bonus amount for Mr. Coleman includes a bonus of $26,719 for
1996 that was not paid until 1997, and a $75,000 stay-in-place bonus
that was contingent on Mr. Coleman remaining with Syntellect through the
sixth month anniversary of the Company's March 14, 1996 acquisition of
Pinnacle.
(17) The amount shown represents payments made by the Company during 1996 for
life insurance premiums on Mr. Coleman's behalf.
(18) The amount shown represents payments made by the company during 1995 for
life insurance premiums on Mr. Coleman's behalf.
(19) Mr. Phillips joined the Company and became its Vice President of
Operations effective March 14, 1996. Mr. Phillips' salary for the fiscal
year ending December 31, 1996 was based upon an annualized salary of
$125,000.
(20) The amount shown represents payments made by the Company during 1997 on
behalf of Mr. Phillips to the Syntellect 401(k) Plan.
(21) The amount shown includes contributions made by the Company during 1996
on behalf of Mr. Phillips to the Pinnacle 401(k) Plan of $2,694 and life
insurance premiums paid on Mr. Phillips' behalf of $361.
8
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning the grants of stock
options to the Named Executive Officers pursuant to the Company's Long-Term
Incentive Plan during the fiscal year ended December 31, 1997. No SARs were
granted during 1997.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS (1) (2) POTENTIAL REALIZABLE
-------------------------------------------------- VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF STOCK
SECURITIES PERCENT OF TOTAL PRICE APPRECIATION FOR
UNDERLYING OPTIONS GRANTED EXERCISE OPTION TERM (3)
OPTIONS TO EMPLOYEES IN PRICE PER EXPIRATION ----------------------
NAME GRANTED(#) FISCAL YEAR SHARE($/SH) DATE 5%($) 10%($)
---- ---------- ---------------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
J. Lawrence Bradner..... 27,500 8.9% 3.125 05/20/07 54,046 136,962
Steve G. Nussrallah..... 25,000 8.1% 3.125 05/20/07 49,132 124,511
W. Scott Coleman........ 25,000 8.1% 3.125 05/20/07 49,132 124,511
Neal L. Miller.......... 10,000 3.3% 3.125 05/20/07 19,653 49,804
David C. Phillips....... 10,000 3.3% 3.125 05/20/07 19,653 49,804
</TABLE>
- --------
(1) All options granted in 1997 are exercisable commencing one year from the
date of grant, with 24% of the shares of Common Stock subject to the
options vesting at that time and an additional 2% vesting monthly
thereafter until the options are fully vested.
(2) All options were granted at the fair market value (the closing price of
the Common Stock on The Nasdaq Stock Market, as reported in The Wall
Street Journal) on the date of grant. The exercise price and tax
withholding obligations related to exercise may be paid by delivery of
already owned shares or by offset of the underlying shares, subject to
certain conditions.
(3) Gains are reported net of the option exercise price, but before taxes
associated with exercise. These amounts represent certain assumed rates
of appreciation. Actual gains, if any, on stock option exercises are
dependent on the future performance of the Common Stock and overall stock
market conditions, as well as the option holder's continued employment
with the Company throughout the vesting period. The amounts reflected in
this table will not necessarily be achieved.
9
<PAGE>
FISCAL YEAR END OPTION VALUES
The following table sets forth information concerning the fiscal year end
value of unexercised options held by the Named Executive Officers. No Named
Executive Officer exercised options in 1997.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY OPTIONS
UNDERLYING UNEXERCISED AT FISCAL YEAR END ($)
OPTIONS AT FISCAL YEAR END (#) (1)
---------------------------------- -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- ---------------- ----------- -------------
<S> <C> <C> <C> <C>
J. Lawrence Bradner..... 331,152 94,200 266,588 0
Steve G. Nussrallah..... 326,952 85,900 266,588 0
Neal L. Miller.......... 12,000 23,000 0 0
W. Scott Coleman........ 76,960 63,040 0 0
David C. Phillips....... 26,137 21,288 6,441 188
</TABLE>
- --------
(1) Options are considered to be "in-the-money" if the fair market value of
the underlying securities exceeds the exercise price of the options on the
specified date. The amounts shown in these columns represent the difference
between the closing price of the Common Stock on December 31, 1997
($1.8125), and the exercise price of the options. In those instances where
the exercise price of the options exceeds the fair market value, no value
has been reported.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's executive compensation program is administered by the three-
member Compensation Committee of the Board of Directors (the "Committee"). The
members of the Committee, who are not employees of the Company, have furnished
the following report on executive compensation:
Executive Compensation Policies
Overview. The Company compensates its executives through a combination of
short-term and long-term compensation programs. The principal components of
executive compensation are base salary, an annual bonus program, or, in the
case of marketing and sales personnel, sales commissions, and stock-based
compensation incentives. The Committee believes that this balanced approach to
compensation helps the Company attract and retain senior executives and
rewards executives for their collective and individual contribution to the
leadership and the short-term and long-term growth and profitability of the
Company.
Base Salary. The foundation of the Company's executive compensation package
is base salary. Each executive receives a base salary which, when aggregated
with their maximum bonus amount or potential sales commissions, is intended to
be commensurate with his or her responsibilities and level of performance and
competitive with similarly situated executives in the electronics industry.
Among the elements that the Committee considers in setting an executive's base
salary for the year are: (i) the executive's position relative to other
executives in the Company, (ii) any promotions achieved or changes in
responsibility, (iii) the achievement of performance objectives set by the
Committee, and (iv) compensation information provided by independent surveys
and outside consultants relating to the compensation of similarly situated
executives in the electronics industry.
10
<PAGE>
Annual Bonus Program. The second aspect of the Company's executive
compensation package is the annual bonus. Over the past several years, the
Company has established an annual bonus program for its executive officers at
the beginning of each fiscal year. Under this program, the Committee sets a
target bonus amount for each executive, which is tied to achievement of
certain financial performance objectives that relate directly to the Company's
operating plan for the year. This program is also approved by the Board of
Directors. The amount of the annual bonus varies with the position and the
role of the executive within the Company. In addition, special bonuses may be
awarded to an executive for any reason that the Board of Directors or the
Committee deems appropriate.
At the end of 1997, the Committee reviewed the performance of the Company's
executives in relation to the bonus program. The Company did not achieve the
financial performance targets established at the beginning of the year.
Accordingly, no bonuses were awarded in 1997.
Stock-Based Compensation Incentives. The third aspect of the Company's
executive compensation package is stock-based compensation incentives or stock
options. The Committee believes that executives with an equity stake in the
Company will have interests that are more closely aligned with the interests
of the Company's stockholders and that this will encourage them to remain with
the Company. Toward this end, the Committee grants options to Company
executives from time to time. Historically, all options granted have had
exercise prices set at the fair market value of the Company's Common Stock on
the date of grant, as determined by the closing price of the Common Stock on
The Nasdaq Stock Market.
In selecting recipients and the number of options granted in 1997, the
Committee looked to several criteria, including (i) options granted to
executives at other technology companies, (ii) options granted to other
executives within the Company, (iii) the individual executive's specific role
and performance with the Company, and (iv) the Company's overall performance.
Compensation Committee Interlocks and Insider Participation
The Committee is comprised of outside directors, none of whom have any
interlocking relationships with the Company.
Compliance with Section 162(m) of the Internal Revenue Code
Section 162(m) of the Internal Revenue Code, as amended, generally limits to
$1 million the deduction that can be claimed by any publicly-held corporation
for compensation paid to any "covered employee" in any taxable year beginning
after December 31, 1993. The term "covered employee" for this purpose is
defined generally as the Chief Executive Officer and the four highest paid
employees of the corporation.
Performance-based compensation is outside the scope of the $1 million
limitation and, hence, generally can be deducted by a publicly-held
corporation without regard to amount; provided that, among other requirements,
such compensation is approved by stockholders. The Committee currently does
not anticipate that any executive will exceed the limit. It is the policy of
the Company to comply with Section 162(m), and it will continue to do so to
the extent such compliance is consistent with the best interests of the
Company's stockholders. The Committee will continue to review the impact of
this tax code section and make appropriate recommendations to stockholders in
the future.
Employment Agreements
On March 14, 1996, the Company entered into an employment agreement with Mr.
Bradner, whereby he would serve as the Chairman and Chief Executive Officer of
the Company. The employment agreement provides Mr. Bradner with an annual
salary of $240,000; an annual target bonus opportunity of $144,000, which is
tied to achievement of certain financial performance objectives that relate
directly to the Company's operating plan for the year; and a special bonus
opportunity which is subject to the executive's achievement of certain
subjective performance criteria developed by the Committee. The employment
agreement also provided Mr. Bradner with stock options to purchase up to
282,851 shares of Common Stock at a purchase price of $0.87 per share. These
options represent part of the Pinnacle options assumed by the Company in
connection with the merger.
11
<PAGE>
In the event of termination without cause, Mr. Bradner would receive twelve
months salary plus health benefits. The Company currently has no employment
agreements or change-in-control arrangements with any other executive
officers.
Effective March 31, 1998, Mr. Nussrallah resigned as an officer of the
Company and decided not to stand for re-election as a director of the Company.
The Company and Mr. Nussrallah entered into a Separation Agreement dated
February 20, 1998 which provides for the continuation of Mr. Nussrallah's
annual salary of $210,000 through March 31, 1999, the continuation of Mr.
Nussrallah's medical insurance coverage through March 31, 1999, and the
payment of any contractual bonus due to Mr. Nussrallah for 1998 pursuant to
his employment agreement. In addition, the Separation Agreement provides that
the expiration date of Mr. Nussrallah's options to purchase 282,852 shares of
Common Stock at a purchase price of $0.87 per share shall be unaffected by his
resignation as an officer of the Company.
This report is made by Jack R. Kelly, Jr., William P. Conlin, and Michael R.
Bruce, the members of the Company's Compensation Committee during fiscal 1997.
COMPENSATION COMMITTEE
Jack R. Kelly, Jr., Chairman
William P. Conlin
Michael R. Bruce
12
<PAGE>
STOCK PRICE PERFORMANCE GRAPH
The graph below compares the cumulative total return on the Company's Common
Stock with The Nasdaq Stock Market index (U.S. companies) and an index
consisting of Nasdaq Telecommunications Stocks (U.S. and foreign) for the
period from December 31, 1992, to December 31, 1997. The comparison assumes
that $100 was invested on December 31, 1992, in the Company's Common Stock and
in each of the comparison indices, and assumes reinvestment of dividends.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
12/31/93 12/30/94 12/29/95 12/31/96 12/31/97
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Syntellect Inc. $46 $86 $42 $52 $23
NASDAQ Stock Market (U.S. Compa-
nies) $115 $112 $159 $195 $240
NASDAQ Telecommunications Stocks $154 $129 $169 $172 $255
</TABLE>
PROPOSAL 2
PROPOSED AMENDMENT TO THE SYNTELLECT INC. 1990
EMPLOYEE STOCK PURCHASE PLAN
Stockholders are being asked to approve an amendment to the Syntellect Inc.
1990 Employee Stock Purchase Plan (the "Purchase Plan") which increases the
number of shares of Syntellect Common Stock authorized for issuance thereunder
from 400,000 to 800,000 shares (the "Purchase Plan Amendment"). As of
December 31, 1997, 23,494 shares of Common Stock remained available for
purchase under the Purchase Plan. The following discussion of the Purchase
Plan is qualified in its entirety by reference to the complete text of the
Purchase Plan attached hereto as Exhibit A.
The Purchase Plan, which is intended to qualify under Section 423 of the
Internal Revenue Code, is administered by the Board of Directors of the
Company. Employees are eligible to participate if they are employed by the
Company for at least 20 hours per week and more than five months per year. As
of December 31, 1997, the Company had 339 employees, all of whom are eligible
to participate in the Purchase Plan. The Plan permits eligible employees to
purchase Common Stock through payroll deductions which may not exceed 10% of
an employee's compensation. The purchase price under the Purchase Plan is 85%
of the lower of the fair market value of the Common Stock at the beginning or
at the end of each six-month offering period. To participate in a given
offering period, employees must enroll in the Purchase Plan prior to the start
of the offering
13
<PAGE>
period. They may not increase their payroll deductions during an offering
period. Employees may end their participation in the Purchase Plan at any time
during the offering period, and their participation ends automatically upon
termination of their employment with the Company. Employees owning or holding
options to purchase 5% or more of all of the outstanding stock of the Company
are not eligible to participate in the Purchase Plan. In addition, employees
are not able to buy more than a total of $25,000 worth of the Company's Common
Stock during any calendar year pursuant to the Purchase Plan.
With respect to the "options" granted pursuant to the Purchase Plan, neither
the grant of the option nor the exercise of the option by an employee will
result in income to such employee. If an employee sells shares of Common Stock
purchased through the Purchase Plan prior to the expiration of two years from
the first day of the offering period in which the shares were purchased, the
difference between the price paid by the employee and the market value of the
shares on the date of purchase is treated as ordinary income, and the
difference between the amount received by the employee on the disposition of
the shares and the market value of the shares on the date of purchase is
treated as a capital gain or loss (long-term if the shares have been held more
than one year). If an employee sells shares acquired pursuant to the Purchase
Plan after the expiration of two years or more from the first day of the
offering period in which such shares were purchased, or dies at any time, any
loss is treated as long-term capital loss. If there is a gain on the sale of
shares acquired pursuant to the Purchase Plan, the lesser of the entire gain
or the excess of the fair market value of the shares at the time of the grant
of the option over the exercise price, assuming the option was exercised on
the date of grant, is treated as ordinary income. All other gain is taxable as
long-term capital gain. If shares purchased pursuant to the Purchase Plan are
sold prior to the expiration of two years from the first day of the offering
period in which such shares were purchased, the Company is entitled to a tax
deduction (provided the Company satisfies applicable federal income tax
reporting requirements) equal to the amount that is treated as ordinary
income. No deduction is available if a sale occurs after the two-year holding
period.
The Board of Directors believes that the Purchase Plan promotes the success
and enhances the value of the Company by linking the personal interests of the
participants to those of the Company's other stockholders. In addition, the
Purchase Plan offers participants the ability to purchase shares of the
Company's Common Stock at a potential discount which grants the Company the
ability to motivate, attract and retain the services of employees upon whose
judgment, interest and special effort the success of the Company is largely
dependent.
The affirmative vote of the holders of a majority of the outstanding shares
of the Company's Common Stock present at the Annual Meeting in person or by
proxy is required for approval of the Purchase Plan Amendment.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE PURCHASE PLAN AMENDMENT
AND RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR APPROVAL OF THE PURCHASE PLAN
AMENDMENT.
PROPOSAL 3
PROPOSED AMENDMENT TO THE SYNTELLECT INC.
NONEMPLOYEE DIRECTOR STOCK PLAN
Stockholders are being asked to approve certain amendments to the Syntellect
Inc. Nonemployee Director Stock Plan (the "Directors Stock Plan"). The
amendments to the Directors Stock Plan (the "Directors Stock Plan Amendment")
are as follows:
(1) Shares Available under the Directors Stock Plan. The Directors Stock
Plan currently authorizes the issuance of up to 50,000 shares of the Company's
Common Stock. The proposed amendment would increase the number of authorized
shares to 150,000 shares.
14
<PAGE>
(2) Annual Grants to Nonemployee Directors. The Directors Stock Plan
currently provides for an annual grant to each nonemployee director of an
option to purchase 2,000 shares of Common Stock on each June 1 through June 1,
1998. The proposed amendment would extend the date of such annual awards for
so long as shares of the Company's Common Stock are available for issuance
under the Directors Stock Plan.
(3) Duration of Options. The Directors Stock Plan currently provides that
each option will expire six years from the date of grant. The proposed
amendment would extend the expiration date until ten years from the date of
grant.
As of December 31, 1997, 4,000 shares of Common Stock remained available for
issuance under the Directors Stock Plan. The following discussion of the
Directors Stock Plan is qualified in its entirety by reference to the complete
text of the Directors Stock Plan attached hereto as Exhibit B.
The Directors Stock Plan provides for each nonemployee director to receive
two types of option grants to purchase the Company's Common Stock: (i) a one-
time grant to purchase 10,000 shares of the Company's Common Stock on the
third business day after the nonemployee director is first elected or
appointed to the Board of Directors, and (ii) an annual grant to purchase
2,000 shares of the Company's Common Stock on June 1, 1995, and on each
anniversary of that date. A nonemployee director must be a member of the Board
of Directors on the relevant June 1 in order to receive the option to purchase
2,000 shares of the Company's Common Stock for that year.
Options granted under the Directors Stock Plan, including both the one-time
and annual option grants, will vest and become subject to exercise in
accordance with the following schedule: 24% of the shares subject to an option
granted will vest upon the first anniversary of the date of grant, while the
remaining shares subject to the option will vest at a rate of 2% per month
thereafter. The vesting of an option shall accelerate automatically upon a
"change in control" (as defined in the Directors Stock Plan). The exercise
price of all options granted under the Directors Stock Plan will be the fair
market value of the Company's Common Stock on the date of grant (i.e., each
June 1 for the annual grants and the third business day after the nonemployee
director is elected or appointed to the Board for the one-time grants). All
options granted under the Directors Stock Plan will expire ten years from the
date of grant unless earlier terminated, forfeited, or surrendered.
If an optionee ceases to be a member of the Board of Directors for any
reason, except for reasons related to death or disability, the optionee will
forfeit his or her unvested options. Vested but unexercised options will
remain exercisable for ninety days after the date he or she ceases to be a
director, to the extent that such options have not otherwise expired, after
which time they will be immediately forfeited to the Company. If an optionee
ceases to be a member of the Board of Directors due to death or disability,
the optionee will forfeit his or her unvested options. Vested but unexercised
options will remain exercisable by the optionee or his or her estate or heirs,
as the case may be, for one year after the date he or she ceases to be a
director, to the extent that the options have not otherwise expired, after
which time they will be immediately forfeited to the Company.
The Directors Stock Plan is administered by a committee appointed by the
Board of Directors to administer the Directors Stock Plan (the "Committee").
The Committee has the full power, discretion, and authority to interpret and
administer the Directors Stock Plan in a manner that is consistent with the
Directors Stock Plan's provisions. However, the Committee does not have the
power to (i) determine Directors Stock Plan eligibility, or determine the
number, the price, the vesting period, or the timing of awards made under the
Directors Stock Plan, or (ii) take action that would result in the awards not
being treated as "formula awards" within the meaning of Note (3) to Rule 16b-
3(d) or any successor provision, promulgated pursuant to the Securities
Exchange Act of 1934, as amended. In addition, the Committee may not amend the
Directors Stock Plan without prior approval of the stockholders of the Company
if such amendment would materially increase the benefits accruing to
participants under the Directors Stock Plan, materially increase the number of
shares of Common Stock that may be issued under the Directors Stock Plan, or
materially modify the requirements as to eligibility for participation in the
Directors Stock Plan. Furthermore, provisions relating to the amount, price
and timing of
15
<PAGE>
securities to be awarded under the Directors Stock Plan may not be amended
more than once every six (6) months, other than to comport with changes in the
Internal Revenue Code, the Employee Retirement Income Security Act, or the
rules thereunder.
The Directors Stock Plan will remain in effect until such time as the
Directors Stock Plan is terminated by the Board of Directors. Notwithstanding
the foregoing, all outstanding options will remain in effect until such
options have expired or until such options are forfeited. Amendment,
termination, or modification of the Directors Stock Plan will not affect
outstanding options without the consent of the recipient.
An optionee will not recognize any taxable income upon the grant of an
option, and the Company will not be entitled to take an income tax deduction
at the time of such grant. Upon the exercise of an option, the optionee
generally will recognize ordinary income and the Company will be entitled to
take an income tax deduction (provided the Company satisfies applicable
federal income tax reporting requirements) in an amount equal to the excess of
the fair market value of the Common Stock on the date of exercise over the
exercise price. Upon a subsequent sale of the Common Stock by the holder
thereof, such individual will recognize short-term or long-term capital gain
or loss (depending on the applicable holding period) with respect to the
difference between the amount realized on the disposition and the fair market
of the Common Stock on the date of exercise. The Company will not be entitled
to an income tax deduction as a result of such disposition.
The Board of Directors believes that the Directors Stock Plan promotes the
success and enhances the value of the Company by granting the Company the
ability to attract and retain the services of experienced and knowledgeable
individuals as directors of the Company. The Directors Stock Plan further
provides directors with an incentive to work in the best interests of the
Company and its shareholders.
The affirmative vote of the holders of a majority of the outstanding shares
of the Company's Common Stock present at the Annual Meeting in person or by
proxy is required for approval of the Directors Stock Plan Amendment.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE DIRECTORS STOCK PLAN
AMENDMENT AND RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR APPROVAL OF THE
DIRECTORS STOCK PLAN AMENDMENT.
RELATIONSHIP WITH
INDEPENDENT ACCOUNTANTS
The principal independent public accounting firm utilized by the Company
during the fiscal year ended December 31, 1997, was KPMG Peat Marwick LLP,
independent certified public accountants (the "Auditors"). It is presently
contemplated that the Auditors will be retained as the principal accounting
firm to be utilized by the Company during the current fiscal year. A
representative of the Auditors will attend the Annual Meeting for the purpose
of responding to appropriate questions and will be afforded an opportunity to
make a statement if the Auditors so desire.
STOCKHOLDER PROPOSALS
Stockholder proposals may be submitted for inclusion in the Company's 1999
proxy material after the 1998 Annual Meeting but no later than 5:00 p.m.,
Atlanta, Georgia time on December 16, 1998. Proposals must be in writing and
sent via registered, certified, or express mail to: Secretary, Syntellect
Inc., 1000 Holcomb Woods Parkway, Suite 410A, Roswell, Georgia 30076.
Facsimile or other forms of electronic submissions will not be accepted.
16
<PAGE>
OTHER MATTERS
The Board of Directors does not intend to present at the Annual Meeting any
matters other than those described herein and does not presently know of any
matters that will be presented by other parties. As of the date of this Proxy
Statement, the Company knows of no matters to be brought before the meeting
other than those referred to in the accompanying notice of annual meeting. If,
however, any other matters properly come before the meeting, it is intended
that proxies in the accompanying form will be voted thereon in accordance with
the judgment of the persons voting such proxies.
SYNTELLECT INC.
/s/ Neal L. Miller
Neal L. Miller
Secretary
April 15, 1998
17
<PAGE>
EXHIBIT A
SYNTELLECT, INC.
1990 EMPLOYEE STOCK PURCHASE PLAN
(AS AMENDED THROUGH FEBRUARY 28, 1998)
The following constitute the provisions of the 1990 Stock Purchase Plan of
Syntellect, Inc.
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 shall, accordingly, 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 Syntellect, Inc., a Delaware corporation.
e. "Compensation" shall mean all base straight time gross earnings
including payments for overtime, shift premium, incentive compensation,
incentive payments, bonuses, commissions or other compensation.
f. "Designated Subsidiaries" shall mean the Subsidiaries which have 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 purposes of tax withholding under the Code whose customary employment
with the Company or any Designated Subsidiary 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 90 days and the
individual's right to reemployment is not guaranteed either by statute or
by contract, the employment relationship will 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.
j. "Offering Period" shall mean an initial period commencing on the date
the Company's registration statement respecting its public offering is
declared effective by the Securities and Exchange Commission and ending on
December 31, 1990, and subsequent six month exercise periods thereafter
commencing on July 1, 1990 during which options granted pursuant to the
Plan may be exercised.
k. "Plan" shall mean this Employee Stock Purchase Plan.
l. "Subsidiary" shall mean a corporation, domestic or foreign, of which
not less than 50 of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter
organized or acquired by the Company or a Subsidiary.
m. "Trading Day" shall mean a day on which national stock exchanges and
the National Association of Securities Dealers Automated Quotation (NASDAQ)
System are open for trading.
A-1
<PAGE>
3. Eligibility.
a. Any Employee as defined in paragraph 2 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) if, immediately
after the grant, such Employee (or any other person whose stock would be
attributed to such Employee pursuant to Section 425(d) of the Code) would
own stock and/or hold outstanding options to purchase stock possessing five
percent (5%) or more of the total combined voting power or value of all
classes of stock of the Company or of any subsidiary of the Company, or
(ii) which permits his rights to purchase stock under all employee stock
purchase plans of the Company and its subsidiaries to accrue 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 after the initial Offering Period with a new Offering Period
commencing on the first Trading Day of July and January of each year, or on
such other date as the Board shall determine, and continuing thereafter until
terminated in accordance with paragraph 19 or 22 hereof. The Board shall have
the power to change the duration of Offering Periods with respect to future
offerings without shareholder approval if such change is announced at least
fifteen (15) days prior to the scheduled beginning of the first Offering
Period to be affected.
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 A to this Plan and filing it with the Company's payroll
office at such time as is specified by the Company and is prior to the
applicable Enrollment Date (unless a later time for filing the subscription
agreement is set by the Board for all eligible Employees with respect to a
given Offering Period). Once properly made, an eligible Employee's election
to participate shall be automatically renewed for each subsequent offering
period, subject to any termination or withdrawal as provided in
paragraph 10.
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 paragraph 10.
6. Payroll Deductions.
a. At the time a participant files his subscription agreement, he shall
elect to have payroll deductions made on each payday during the Offering
Period in an amount not exceeding ten percent (10%) of the Compensation
which he receives on each payday during the Offering Period, and the
aggregate of such payroll deductions during the Offering Period shall not
exceed ten percent (10%) of the participant's Compensation during said
Offering Period.
b. All payroll deductions made for a participant shall be credited to his
account under the Plan and will be withheld in whole percentages only. A
participant may not make any additional payments into such account.
c. A participant may discontinue his participation in the Plan as
provided in paragraph 10, or may decrease (but not increase) the rate of
his payroll deductions during the offering period by completing or filing
with the Company a new authorization for payroll deduction. The change in
rate shall be effective fifteen (15) days following the Company's receipt
of the new authorization.
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d. Notwithstanding the foregoing, to the extent necessary to comply with
Section 423(b)(8) of the Code and paragraph 3(b) herein, a participant's
payroll deductions may be decreased to 0% at such time during any Offering
Period which is scheduled to end during the current calendar year (the
"Current Offering Period") that the aggregate of all payroll deductions
which were previously used to purchase stock under the Plan in a prior
Offering Period which ended during that calendar year plus all payroll
deductions accumulated with respect to the Current Offering Period equal
$21,250. 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 paragraph 10.
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 will 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.
a. 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 for such Offering Period (at the per share
option 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 lower of (i) eighty-five percent (85%) of the fair
market value of a share of the Company's Common Stock on the Enrollment
Date or (ii) eighty-five percent (85%) of the fair market value of a share
of the Company's Common Stock on the Exercise Date; provided that in no
event shall an Employee be permitted to purchase during each Offering
Period more than a number of shares determined by dividing $12,500 by the
fair market value of a share of the Company's Common Stock on the
Enrollment Date, and provided further that such purchase shall be subject
to the limitations set forth in Sections 3(b) and 12 hereof. Exercise of
the option shall occur as provided in Section 8, unless the participant has
withdrawn pursuant to Section 10, and shall expire on the last day of the
Offering Period. Fair market value of a share of the Company's Common Stock
shall be determined as provided in Section 7(b) herein.
b. The option price per share of the shares offered in a given Offering
Period shall be the lower of: (i) 85% of the fair market value of a share
of the Common Stock of the Company on the Enrollment Date; or (ii) 85% of
the fair market value of a share of the Common Stock of the Company on the
Exercise Date. The fair market value of the Company's Common Stock shall be
the closing bid price of the Common Stock for such date, as reported by the
NASDAQ National Market System, or, in the event the Common Stock is listed
on a stock exchange, the fair market value per share shall be the closing
price on such exchange on such date, as reported in the Wall Street
Journal. In the event the Enrollment Date or the Exercise Date occurs on a
weekend or legal holiday, the fair market value shall be based on the
closing bid price on the next trading day.
8. Exercise of Option. Unless a participant withdraws from the Plan as
provided in paragraph 10 below, his option for the purchase of shares will 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 option price with the accumulated payroll deductions in his
account. No fractional shares will be purchased. During a participant's
lifetime, a participant's option to purchase shares hereunder is exercisable
only by him or her.
9. Delivery. As promptly as practicable after the Exercise Date of each
Offering Period, the Company shall arrange the delivery to each participant,
as appropriate, a certificate representing the shares purchased upon exercise
of his option. Any cash remaining to the credit of a participant's account
under the Plan after a purchase
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by him of shares at the termination of each Offering Period, or which is
insufficient to purchase a full share of Common Stock of the Company, shall be
returned to said participant.
10. Withdrawal; Termination of Employment.
a. A participant may withdraw all but not less than all the payroll
deductions credited to his account and not yet used to exercise his option
under the Plan at any time by giving written notice to the Company in the
form of Exhibit B to this Plan. All of the participant's payroll deductions
credited to his account will be paid to such participant promptly after
receipt of notice of withdrawal and such participant's option for the
Offering Period will be automatically terminated, and no further payroll
deductions for the purchase of shares will be made during the Offering
Period. If a participant withdraws from an Offering Period, payroll
deductions will not resume at the beginning of the succeeding Offering
Period unless the participant delivers to the Company a new subscription
agreement.
b. Upon a participant's ceasing to be an Employee for any reason or upon
termination of a participant's employment relationship (as described in
Section 2(g)), the payroll deductions credited to such participant's
account during the Offering Period but not yet used to exercise the option
will be returned to such participant or, in the case of his death, to the
person or persons entitled thereto under paragraph 14, and such
participant's option will be automatically terminated.
c. In the event an Employee fails to remain an Employee of the Company
for at least twenty (20) hours per week during an Offering Period in which
the Employee is a participant, he will be deemed to have elected to
withdraw from the Plan and the payroll deductions credited to his account
will be returned to such participant and such participant's option
terminated.
d. A participant's withdrawal from an Offering Period will not have any
effect upon his 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.
11. Interest. No interest shall accrue on the payroll deductions of a
participant in the Plan.
12. 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 800,000 shares, subject
to adjustment upon changes in capitalization of the Company as provided in
paragraph 18. 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 will 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 will be
registered in the name of the participant or in the name of the participant
and his spouse.
d. The Common Stock to be sold to participants under the Plan may, at the
election of the Company, be either treasury stock or stock originally
issued for such purpose.
13. Administration. The Plan shall be administered by the Board of the
Company or a committee appointed by the Board; provided, however, the
administration of the Plan shall be consistent with Rule 16b-3 ("Rule 16b-3")
under the Securities Exchange Act of 1934. The administration, interpretation
or application of the Plan by the Board or a committee appointed by the Board
shall be final, conclusive and binding upon all participants.
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14. 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.
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.
15. 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, a "qualified domestic relations order" under the Code and the
Employee Retirement Income Security Act ("ERISA"), or as provided in paragraph
14 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 paragraph 10.
16. 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.
17. Reports. Individual accounts will be maintained for each participant in
the Plan. Statements of account will be given to participating Employees at
least annually, which statements will set forth the amounts of payroll
deductions, the per share purchase price, the number of shares purchased and
the remaining cash balance, if any.
18. Adjustments Upon Changes in Capitalization. Subject to any required
action by the shareholders of the Company, the number of shares of Common
Stock covered by each option under the Plan which has not yet been exercised
and the number of shares of Common Stock which have been authorized for
issuance under the Plan but have not yet been placed under option
(collectively, the "Reserves"), as well as the price per share 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 issue by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall effect, 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.
In the event of the proposed dissolution or liquidation of the Company, the
Offering Period will terminate immediately prior to the consummation of such
proposed action, unless otherwise provided by the Board. 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, each option under the
Plan shall be assumed or an equivalent option shall be substituted by such
successor corporation or a parent or subsidiary of such successor corporation,
unless the
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Board determines, in the exercise of its sole discretion and in lieu of such
assumption or substitution, to shorten the Offering Period then in progress by
setting a new Exercise Date (the "New Exercise Date"). If the Board shortens
the Offering Period then in progress in lieu of assumption or substitution in
the event of a merger or sale of assets, the Board shall notify each
participant in writing, at least (30) days prior to the New Exercise Date,
that the Exercise Date for his option has been changed to the New Exercise
Date and that his option will be exercised automatically on the New Exercise
Date, unless prior to such date he has withdrawn from the Offering Period as
provided in paragraph 10. For purposes of this paragraph, an option granted
under the Plan shall be deemed to be assumed if, following the sale of assets
or merger, the option confers the right to purchase, for each share of option
stock subject to the option immediately prior to the sale of assets or merger,
the consideration (whether stock, cash or other securities or property)
received in the sale of assets or merger by holders of Common Stock for each
share of Common Stock held on the effective date of the transaction (and if
such holders were offered a choice of consideration, the type of consideration
chosen by the holders of a majority of the outstanding shares of Common
Stock); provided, however, that if such consideration received in the sale of
assets of merger was not solely common stock of the successor corporation or
its parent (as defined in Section 425(e) of the Code), the Board may, with the
consent of the successor corporation and the participant, provide for the
consideration to be received upon exercise of the option to be solely common
stock of the successor corporation or its parent equal in fair market value to
the per share consideration received by holders of Common Stock and the sale
of assets or merger.
The Board may, if it so determines in the exercise of its sole discrection,
also make provision for adjusting the Reserves, as well as the price per share
of Common Stock covered by each outstanding option, in the event the Company
effects one or more reorganizations, recapitalizations, rights offerings or
other increases or reductions of shares of its outstanding Common Stock, and
in the event of the Company being consolidated with or merged into any other
corporation.
19. Amendment or Termination.
a. The Board may at any time and for any reason terminate the Plan. The
Board may also amend the Plan from time to time in such respects as the
Board may deem advisable. Except as provided in paragraph 18, 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 shareholders. Except as provided in
paragraph 8, no amendment may make any change in any option theretofore
granted which adversely affects the rights of any participant. To the
extent required by applicable law, the Company shall obtain shareholder
approval.
b. Without shareholder 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 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 discrection advisable which are
consistent with the Plan.
c. Notwithstanding the foregoing, the Board or a committee appointed by
the Board may not amend the Plan formula for determining the amount, price
or timing of options to purchase shares of the Company's Common Stock
granted under the Plan more than once every six months, other than to
comport with changes in the Code and ERISA.
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20. 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.
21. 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.
22. 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 shareholders
of the Company. It shall continue in effect for a term of twenty (20) years
unless sooner terminated under paragraph 19.
23. Gender. For purposes of this Plan, words used in the masculine gender
shall include the female and neuter, and the singular shall include the plural
and vice versa, as appropriate.
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EXHIBIT B
SYNTELLECT INC.
NONEMPLOYEE DIRECTOR STOCK PLAN
ARTICLE 1 ESTABLISHMENT, PURPOSE, AND DURATION
1.1. Establishment of the Plan. Syntellect Inc. a Delaware corporation,
hereby establishes the Syntellect Inc. Nonemployee Director Stock Plan (the
"Plan") for the benefit of its Nonemployee Directors. The Plan sets forth the
terms of one-time and annual grants of Nonqualified Stock Options to
Nonemployee Directors. All such grants are subject to the terms and provisions
set forth in this Plan.
1.2. Purpose of the Plan. The purpose of the Plan is to encourage ownership
in the Company by Nonemployee Directors, to strengthen the ability of the
Company to attract and retain the services of experienced and knowledgeable
individuals as Nonemployee Directors of the Company, and to provide
Nonemployee Directors with a further incentive to work for the best interests
of the Company and its shareholders.
1.3. Effective Date. The Plan is effective as of the date approved by the
Company's shareholders (the "Effective Date"). 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 in accordance with
the applicable provisions of the Delaware General Corporation Law and the
Company's By-Laws and Certificate of Incorporation. Any Awards granted under
the Plan prior to shareholder approval are effective when made, but no Award
may be exercised or settled before shareholder approval. If the shareholders
fail to approve the Plan, any Award previously made shall be automatically
cancelled without any further act.
1.4. Duration of the Plan. The Plan shall remain in effect until such time
as the Plan is terminated by the Board of Directors pursuant to Article 7 or
Section 8.4.
ARTICLE 2 DEFINITIONS AND CONSTRUCTION
2.1. Definitions. For purposes of the Plan, the following terms will have
the meanings set forth below:
(a) "Award" means a grant of Nonqualified Stock Options under the Plan.
(b) "Board" or "Board of Directors" means the Board of Directors of the
Company, and includes any committee of the Board of Directors designated by
the Board to administer this Plan.
(c) "Change of Control" means and includes each of the following:
(1) there shall be consummated any consolidation or merger of the
Company in which the Company is not the continuing or surviving entity,
or pursuant to which Stock would be converted into cash, securities or
other property, other than a merger of the Company in which the holders
of the Company's Stock immediately prior to the merger have the same
proportionate ownership of beneficial interest of common stock or other
voting securities of the surviving entity immediately after the merger
(2) there shall be consummated any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of
assets or earning power aggregating more than 40% of the assets or
earning power of the Company and its subsidiaries (taken as a whole);
(3) the shareholders of the Company shall approve any plan or proposal
for liquidation or dissolution of the Company;
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(4) any person (as such term is used in Section 13(d) and 14(d)(2) of
the Exchange Act), other than any employee benefit plan of the Company or
any subsidiary of the Company or any entity holding shares of capital
stock of the Company for or pursuant to the terms of any such employee
benefit plan in its role as an agent or trustee for such plan, shall
become the beneficial owner (within the meaning of Rule 13d-3 under the
Exchange Act) of 20% or more of the Company's outstanding Stock; or
(5) during any period of two consecutive years, individuals who at the
beginning of such period shall fail to constitute a majority thereof,
unless the election, or the nomination for election by the Company's
shareholders, of each new director was approved by a vote of at least
two-thirds of the directors then still in office who were directors at
the beginning of the period.
(d) "Code" means the Internal Revenue Code of 1986, as amended from time
to time.
(e) "Committee" means the committee appointed by the Board to administer
the Plan.
(f) "Company" means Syntellect Inc., a Delaware corporation, or any
successor as provided in Section 8.3.
(g) "Disability" means a permanent and total disability, within the
meaning of Section 22(e)(3) of the Code. To the extent permitted pursuant
to Section 16 of the Exchange Act, Disability shall be determined by the
Board in good faith, upon receipt of sufficient competent medical advice
from one or more individuals, selected by the Board, who are qualified to
give professional medical advice.
(h) "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor provision.
(i) "Fair Market Value" means the closing price for Shares on the relevant
date, or (if there were no sales on such date) the closing price on the
immediately preceding date on which such sales occurred, as reported in The
Wall Street Journal or a similar publication selected by the Committee.
(j) "Grant Date" means, for Options issued under Section 6.1, the third
business day after the date the Nonemployee Director is elected or
appointed to the Board of Directors, and for Options issued under Section
6.2, June 1, 1995 and each anniversary of that date.
(k) "Nonemployee Director" means any individual who is a member of the
Board of Directors of the Company, but who is not otherwise an employee of
the Company.
(l) "Nonqualified Stock Option" or "NQSO" means an option to purchase
Shares, granted under Article 6, that is not intended to be an incentive
stock option qualifying under Section 422 of the Code.
(m) "Option" means a Nonqualified Stock Option granted under the Plan.
(n) "Participant" means a Nonemployee Director of the Company who has been
granted an Award under the Plan.
(o) "Shares" means the shares of the Company's common stock described in
the Company's Certificate of Incorporation.
2.2. Gender and Number. Except as indicated by the context, any masculine
term also shall include the feminine, the plural shall include the singular,
and the singular shall include the plural.
2.3. Severability of Provisions. With respect to persons subject to Section
16 of the Exchange Act, transactions under this Plan are intended to comply
with all applicable conditions of Rule 16b-3 or its successors under the
Exchange Act. To the extent any provision of the Plan or action by the Board
fails to so comply, it shall be deemed null and void, to the extent permitted
by law and deemed advisable by the Board, and the remaining provisions of the
Plan or actions by Board shall be construed and enforced as if the invalid
provision or action had not been included or undertaken.
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2.4. Incorporation by Reference. In the event this Plan does not include a
provision required by Rule 16b-3 to be stated herein, such provision (other
than one relating to eligibility requirements or the price and amount of
Awards) shall be deemed automatically to be incorporated by reference herein,
insofar as Participants subject to Section 16 of the Exchange Act are
concerned.
ARTICLE 3 ADMINISTRATION
3.1. The Committee. The Plan will be administered by the Committee, subject
to the restrictions set forth in the Plan.
3.2. Administration by the Committee. The Committee has the full power,
discretion, and authority to interpret and administer the Plan in a manner
that is consistent with the Plan's provisions. However, the Committee does not
have the power to (i) determine Plan eligibility, or to determine the number,
the price, the vesting period, or the timing of Awards to be made under the
Plan to any Participant or (ii) take any action that would result in the
Awards not being treated as "formula awards" within the meaning of Rule 16b-
3(c)(ii) or any successor provision, promulgated pursuant to the Exchange Act.
3.3. Decisions Binding. The Committee's determinations and decisions under
the Plan, and all related orders or resolutions of the Board shall be final,
conclusive, and binding on all persons, including the Company, its
stockholders, employees, Participants, and their estates and beneficiaries.
ARTICLE 4 SHARES SUBJECT TO THE PLAN
4.1. Number of Shares. The total number of Shares available for grant under
the Plan may not exceed 150,000, subject to adjustment as provided in Section
4.3. The Shares issued pursuant to the exercise of Options granted under the
Plan may be authorized and unissued Shares or Shares reacquired by the
Company, as determined by the Committee.
4.2. Lapsed Awards. If any Option granted under the Plan terminates,
expires, or lapses for any reason, any Shares subject to purchase pursuant to
such Option again will be available for grant under the Plan.
4.3. Adjustments in Authorized Shares. In the event of any merger,
reorganization, consolidation, recapitalization, separation, liquidation,
stock dividend, split-up, Share combination, or other change in the corporate
structure of the Company affecting the Shares, the number and/or type of
Shares subject to any outstanding Award, and the Option exercise price per
Share under any outstanding Option will be automatically adjusted so that the
proportionate interests of the Participants will be maintained as before the
occurrence of such event.
ARTICLE 5 ELIGIBILITY AND PARTICIPATION
5.1. Eligibility. Eligibility to participate in the Plan is limited to
Nonemployee Directors.
5.2. Actual Participation. All eligible Nonemployee Directors will receive a
grant of Options pursuant to Article 6.
ARTICLE 6 GRANT OF OPTIONS
6.1. One-Time Grant of Options. An Option to purchase 10,000 Shares shall be
granted to each Nonemployee Director on the third business day after the date
the Nonemployee Director is first elected or appointed to the Board of
Directors. The specific terms of the Options are subject to the provisions of
this Article 6 and the Option Agreement executed pursuant to Section 6.3.
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6.2. Annual Grant of Options. Each individual who is a Nonemployee Director
on the relevant Grant Date will be granted an Option to purchase 2,000 Shares,
subject to the limitations on the number of Shares that may be awarded under
the Plan. The specific terms of the Options are subject to the provisions of
this Article 6 and the Option Agreement executed pursuant to Section 6.3.
6.3. Option Agreement. The grant of Options will be evidenced by an Option
Agreement that will not include any terms or conditions that are inconsistent
with the terms and conditions of this Plan.
6.4. Option Exercise Price per Share. The Option exercise price per Share
under any Option granted pursuant to this Article 6 shall be the Fair Market
Value of such Share on the Grant Date (the "Exercise Price").
6.5. Duration of Options. Each Option granted to a Participant under this
Article 6 shall expire on the tenth (10th) anniversary date of the Grant Date,
unless the Option is earlier terminated, forfeited, or surrendered pursuant to
a provision of this Plan.
6.6. Vesting of Options Subject to Exercise. Subject to Section 1.3, the
Options granted to the Participants under this Article 6 shall vest and become
subject to exercise in accordance with the following schedule:
No part of (i) an Option granted under Section 6.1, or (ii) each annual
Option granted under Section 6.2 may be exercised until the first
anniversary of the Grant Date of such Option, at which time 24% of the
Shares subject to the Option shall vest and may be acquired upon exercise.
Thereafter, an additional 2% of the Shares subject to the Option shall vest
per month may be acquired upon exercise until the Option is fully vested.
6.7. Exercise or Disposition of Options. Participants shall be entitled to
exercise any Option that has vested at any time within the period beginning
with the Grant Date and ending six (6) years after the Grant Date; provided,
however, that the disposition by a Participant of any Shares acquired pursuant
to the exercise of an Option shall occur only after the end of the six (6)
month period beginning on the date that Company's shareholders approve the
Plan.
6.8. Payment. Options are exercised by delivering a written notice of
exercise to the Secretary of the Company, setting forth the number of Options
to be exercised and accompanied by a payment equivalent to the product of the
number of Options exercised multiplied by the Exercise Price (the "Total
Exercise Price"). The Total Exercise Price is payable:
(a) in cash or its equivalent;
(b) by tendering previously acquired Shares having a Fair Market Value at
the time of exercise equal to the Total Exercise Price;
(c) by a combination of (a) and (b).
As soon as practicable after receipt of a written notification of exercise
and full payment, the Company shall deliver to the Participant, in the
Participant's name, Share certificates in an appropriate amount based upon the
number of Shares purchased pursuant to the exercise of the Options.
6.9. Restrictions on Share Transferability. To the extent necessary to
ensure that Options granted under this Article 6 comply with applicable law,
the Board shall impose restrictions on the transferability of any Shares
acquired pursuant to the exercise of an Option under this Article 6,
including, without limitation, restrictions under applicable Federal
securities laws, under the requirements of any Stock exchange or market upon
which such Shares are then listed and/or traded, and under any blue sky or
state securities laws applicable to such Shares.
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6.10. Termination of Service on Board of Directors Due to Death or
Disability. If a Participant's service on the Board is terminated by reason of
death or Disability, any outstanding Options held by the Participant that are
not fully vested are immediately forfeited and returned to the Company. Any
outstanding options held by the Participant that are fully vested will remain
fully vested and subject to exercise.
To the extent an Option is fully vested and exercisable as of the date of
death or Disability, it will remain exercisable for one year after the date of
death or Disability by the Participant or such person or persons as shall have
been named as the Participant's legal representative or beneficiary, or by
such persons as shall have acquired the Participant's Options by will or by
the laws of descent and distribution. Any Option that is fully vested but not
exercised during this one-year period after death or Disability will be
immediately forfeited to the Company.
6.11. Termination of Service on Board of Directors for Other Reasons. If the
Participant's service on the Board is terminated for any reason other than for
death or Disability, any outstanding Options held by the Participant that are
not fully vested as of the date of termination are immediately forfeited to
the Company. To the extent an Option is fully vested and exercisable as of
such date, it will remain exercisable for ninety (90) days after the date the
Participant's service on the Board terminates. Any Option that is fully vested
but not exercised during this ninety (90) day period after termination of
service will be immediately forfeited to the Company.
6.12. Limitations on the Transferability of Options. No Option granted under
this Article 6 may be sold, transferred, pledged, assigned, or otherwise
alienated, other than by will, the laws of descent and distribution, or under
any other circumstances allowed by the Committee that would not violate the
transferability restrictions contained in Rule 16b-3(a)(2) or any successor
provision.
6.13. Change of Control. A Change of Control shall cause every Option
outstanding hereunder to become fully exercisable and allow each Participant
the right to exercise an Option prior to the occurrence of the event otherwise
terminating the Option.
ARTICLE 7 AMENDMENT, MODIFICATION, AND TERMINATION
7.1. Amendment, Modification, and Termination. Subject to the terms set
forth in this Section 7.1, the Committee may terminate, amend, or modify the
Plan at any time; provided, however, that shareholder approval is required for
any Plan amendment that would materially increase the benefits to Participants
or the number of securities that may be issued, or materially modify the
eligibility requirements in the Plan. Further, Plan provisions relating to the
amount, price, and timing of securities to be awarded under the Plan may not
be amended more than once every six (6) months, other than to comport with
changes in the Code, the Employee Retirement Income Security Act, or the rules
thereunder.
7.2. Awards Previously Granted. Unless required by law, no termination,
amendment, or modification of the Plan shall in any manner adversely affect
any Award previously granted under the Plan, without the written consent of
the Participant holding the Award.
ARTICLE 8 MISCELLANEOUS
8.1. Indemnification. Each individual who is or shall have been a member of
the Board or the Committee shall be indemnified and held harmless by the
Company against and from any loss, cost, liability, or expense that may be
imposed upon or reasonably incurred by him or her 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 taken
or failure to act under this Plan and against and from any and all amounts
paid by him or her in settlement thereof, with the Company's approval, or paid
by him or her in satisfaction of any judgment in any such action, suit, or
proceeding against him or her, provided he or she shall give the Company an
opportunity, at its own expense, to assume and defend the same before he or
she undertakes to defend it on his or her own behalf.
B-5
<PAGE>
The foregoing right if indemnification shall not be exclusive of any other
rights of indemnification to which such individuals may be entitled under the
Company's Certificate 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.
8.2. Beneficiary Designation. Each Participant under the Plan may name any
beneficiary or beneficiaries to whom any benefit under the Plan is to be paid
in the event of his or her death. Each designation will revoke all prior
designations by the same Participant, shall be in a form prescribed by the
Committee, and will be effective only when filed by the Participant in writing
with the Committee during his or her lifetime. In the absence of any such
designation, benefits remaining unpaid at the Participant's death shall be
paid to the Participant's estate.
8.3. Successors. All obligations of the Company under the Plan, with respect
to Awards granted hereunder, shall be binding on any successor to the Company,
whether the existence of such successor is the result of a direct or indirect
purchase, merger, consolidation, or otherwise, of all or substantially all of
the business and/or assets of the Company.
8.4. Requirements of Law. The granting of Awards under the Plan shall be
subject to all applicable laws, rules, and regulations, and to such approvals
by any governmental agencies or national securities exchanges as may be
required. Notwithstanding any other provision of the Plan, the Committee may,
in its sole discretion, terminate, amend, or modify the Plan in any way
necessary to comply with the applicable requirements of Rule 16b-3 promulgated
by the Securities and Exchange Commission as interpreted pursuant to no-action
letters and interpretive releases.
8.5. Governing Law. To the extent not preempted by Federal law, the Plan,
and all agreements hereunder, shall be construed in accordance with and
governed by the laws of the State of Arizona.
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This Proxy Is Solicited On Behalf Of The Board Of Directors
SYNTELLECT INC.
1998 ANNUAL MEETING OF STOCKHOLDERS
The undersigned hereby appoints J. Lawrence Bradner and Neal L. Miller,
or any one of them acting in the absence of the other with full powers of
substitution, the true and lawful attorneys and proxies for the undersigned and
to vote, as designated below, all shares of Common Stock of SYNTELLECT INC.,
which the undersigned is entitled to vote at the Annual Meeting of Stockholders
(the "Meeting") to be held on Thursday, May 21, 1998, at 10:00 a.m., Atlanta,
Georgia time at the Northeast Atlanta Hilton, 5993 Peachtree Industrial Blvd.,
Norcross, Georgia 30092 and at any and all 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 on the reverse side.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTIONS ARE
INDICATED, WILL BE VOTED FOR PROPOSALS ONE, TWO AND THREE AND AS SAID PROXIES
DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY COME BEFORE THE MEETING.
(to be signed on the reverse side)
FOLD AND DETACH HERE
<PAGE>
Please mark
your vote as [X]
indicated in
this example
1.RE-ELECTION OF DIRECTORS:
VOTE FOR WITHHOLD AUTHORITY
nominee to vote for
listed below nominee listed below
[ ] [ ]
Nominee: Michael R. Bruce
2.Proposal to approve an amendment to the Syntellect 1990 FOR AGAINST ABSTAIN
Employee Stock Purchase Plan to increase the number of
shares of Syntellect Common Stock authorized for issuance [ ] [ ] [ ]
thereunder from 400,000 to 800,000 shares.
3.Proposal to approve certain amendments to the Syntellect FOR AGAINST ABSTAIN
Nonemployee Director Stock Plan to, among other things,
increase the number of shares of Syntellect Common Stock [ ] [ ] [ ]
authorized for issuance thereunder from 50,000 to 150,000
shares and to increase the duration of each option from
six years to ten years.
Signature(s) Signature(s) Date
-------------------- ---------------- --------------
NOTE: Please sign as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such.
FOLD AND DETACH HERE
