<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Exchange Act Rules 14a-11(c) or 14a-12
TEKELEC
-------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
TEKELEC
-------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
____________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
____________________________________________________________________
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:1
____________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
____________________________________________________________________
[ ] 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:_____________________________________________
(2) Form, schedule or registration statement no.:_______________________
(3) Filing party:_______________________________________________________
(4) Date filed:_________________________________________________________
- - ------------------
1 Set forth the amount on which the filing fee is calculated and state
how it was determined.
<PAGE> 2
PRELIMINARY PROXY STATEMENT
TEKELEC
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 12, 1995
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Shareholders
(the "Annual Meeting") of Tekelec, a California corporation (the "Company"),
will be held Friday, May 12, 1995, at 9:30 a.m., California time, at the
Company's corporate headquarters located at 26580 W. Agoura Road, Calabasas,
California 91302, for the following purposes, each as more fully described in
the attached Proxy Statement:
1. To elect seven directors to serve for the ensuing
year. The names of the nominees intended to be presented for election are:
Robert V. Adams, Philip J. Alford, Jean-Claude Asscher, Philip Black, Daniel L.
Brenner, Howard Oringer and Jon F. Rager.
2. To approve amendments to the Company's 1994 Stock
Option Plan to increase the aggregate number of shares of Common Stock
authorized for issuance thereunder from 800,000 to 1,400,000.
3. To approve an amendment to the Company's Employee
Stock Purchase Plan to increase the aggregate number of shares of Common Stock
authorized for issuance thereunder from 450,000 to 600,000.
4. To approve an amendment to the Company's Bylaws to
authorize the Company's Board of Directors to approve loans to, and guarantees
of the obligations of, the Company's officers.
5. To ratify the appointment of Coopers & Lybrand L.L.P.
as independent accountants of the Company for the year ending December 31,
1995.
6. To transact such other business as may properly come
before the Annual Meeting or any adjournment(s) thereof.
Only record holders of Common Stock at the close of business on March
23, 1995 are entitled to notice of, and to vote at, the Annual Meeting and at
any adjournment(s) thereof.
All shareholders are cordially invited to attend the Annual Meeting in
person. Whether or not you expect to attend the Annual Meeting in person, in
order to ensure your representation at the Annual Meeting, please mark, sign,
date and return the enclosed proxy card as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any shareholder attending
the Annual Meeting may vote in person even if such shareholder has returned a
proxy.
By Order of the Board of Directors
Ronald W. Buckly
Secretary
Calabasas, California
April ___, 1995
<PAGE> 3
TEKELEC
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited by and on behalf of the Board of
Directors of Tekelec ("Tekelec" or the "Company") for use at the Annual Meeting
of Shareholders (the "Annual Meeting") to be held Friday, May 12, 1995 at 9:30
a.m., California time, or at any adjournment(s) thereof, for the purposes set
forth herein and in the accompanying Notice of Annual Meeting of Shareholders
(the "Notice"). The Annual Meeting will be held at the Company's corporate
headquarters located at 26580 W. Agoura Road, Calabasas, California 91302.
These proxy solicitation materials were first mailed on or about April
___, 1995 to all shareholders entitled to vote at the Annual Meeting.
Only shareholders of record at the close of business on March 23, 1995
(the "Record Date") are entitled to notice of, and to vote at, the Annual
Meeting. At the Record Date, _________ shares of Common Stock were issued and
outstanding.
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before its use by delivering to the Secretary of
the Company a written notice of revocation or a duly executed proxy bearing a
later date or by attending the Annual Meeting and voting in person.
IN MARCH 1995, THE COMPANY EFFECTED A TWO-FOR-ONE STOCK SPLIT PURSUANT
TO WHICH EACH SHAREHOLDER OF THE COMPANY RECEIVED ONE ADDITIONAL SHARE FOR EACH
SHARE OF THE COMPANY'S COMMON STOCK HELD OF RECORD ON MARCH 17, 1995. ALL
REFERENCES TO NUMBERS OF SHARES AND PER SHARE PRICES SET FORTH HEREIN, IN THE
NOTICE AND IN THE ENCLOSED PROXY CARD HAVE BEEN ADJUSTED TO REFLECT THE STOCK
SPLIT.
VOTING AND SOLICITATION
Every shareholder voting in the election of directors may cumulate
such shareholder's votes and give one candidate a number of votes equal to the
number of directors to be elected multiplied by the number of votes to which
such shareholder's shares are entitled (one vote per share of Common Stock), or
distribute such votes on the same principle among as many candidates as the
shareholder chooses, provided that votes cannot be cast for more than seven
candidates. However, no shareholder may cumulate votes unless the name of the
candidate or candidates for whom such votes would be cast has been placed in
nomination prior to the voting and any shareholder has given notice, at the
Annual Meeting prior to the voting, of such shareholder's intention to cumulate
votes. The candidates receiving the highest number of votes up to the number
of directors to be elected will be elected. On all other matters, each share
of Common Stock has one vote. Except as otherwise required by law or the
Company's Articles of Incorporation, the affirmative vote of a majority of
shares represented and voting at the Meeting (which shares voting affirmatively
must also constitute at least a majority of the required quorum) is required
for the approval of such other matters. Abstentions are included in the
determination of the number of shares present and entitled to vote for purposes
of determining the presence of a quorum. Abstentions, however, do not
constitute a vote "for" or "against" any matter and thus will be disregarded in
the calculation of a plurality or of "votes cast." Broker non-votes are
counted as shares that are present and entitled to vote for purposes of
determining a quorum. If a broker indicates on the
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<PAGE> 4
proxy that it does not have discretionary authority to vote on a particular
matter as to certain shares, those shares will be counted for purposes of
determining the presence of a quorum but will not be treated as present and
entitled to vote with respect to that matter (even though such shares are
considered present and entitled to vote for quorum purposes, and may be
entitled to vote on other matters).
The cost of this solicitation will be borne by the Company. The
Company has retained the services of Corporate Investor Communications, Inc. to
assist in distributing proxy materials to brokerage houses, banks, custodians
and other nominee holders. The estimated cost of such services is $1,000 plus
out-of-pocket expenses. Although there are no formal agreements to do so, the
Company may reimburse brokerage houses and other persons representing
beneficial owners of shares for their expenses in forwarding proxy materials to
such beneficial owners. Proxies may be solicited personally or by telephone or
telegram by certain of the Company's directors, officers and regular employees,
without additional compensation.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
Proposals of shareholders of the Company which are intended to be
presented by such shareholders at the Company's annual meeting of shareholders
to be held in 1996 must be received by the Company no later than December 6,
1995 in order that they may be included in the proxy statement and form of
proxy relating to that annual meeting. It is recommended that shareholders
submitting proposals direct them to the Secretary of the Company via certified
mail, return receipt requested, in order to ensure timely delivery. No such
proposals were received with respect to the Annual Meeting scheduled for May
12, 1995.
PROPOSAL 1 - ELECTION OF DIRECTORS
NOMINEES
A board of seven directors will be elected at the Annual Meeting.
Unless otherwise instructed, proxy holders will vote the proxies received by
them for the Company's seven nominees named below, all of whom are currently
directors of the Company. In the event that any nominee of the Company is
unable or declines to serve as a director at the time of the Annual Meeting,
the proxies will be voted for any nominee who shall be designated by the
present Board of Directors to fill the vacancy. In the event that additional
persons are nominated for election as directors, the proxy holders intend to
vote all proxies received by them in such a manner in accordance with
cumulative voting as will assure the election of as many of the nominees listed
below as possible, and, in such event, the specific nominees to be voted for
will be determined by the proxy holders. It is not expected that any nominee
will be unable or will decline to serve as a director. The term of office of
each person elected as a director will continue until the next annual meeting
of shareholders and such time as his successor is duly elected and qualified or
until the earlier of his resignation, removal or death.
The names of the nominees, and certain information about them, are set
forth below:
<TABLE>
<CAPTION>
Name Age Position(s) with the Company Director Since
- - ---- --- ---------------------------- --------------
<S> <C> <C> <C>
Jean-Claude Asscher 66 Chairman of the Board 1972
Robert V. Adams 63 Director 1991
Philip J. Alford 41 Director and President 1994
Philip Black 40 Director 1994
</TABLE>
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<PAGE> 5
<TABLE>
<CAPTION>
Name Age Position(s) with the Company Director Since
- - ---- --- ---------------------------- --------------
<S> <C> <C> <C>
Daniel L. Brenner 43 Director 1990
Howard Oringer 52 Director 1992
Jon F. Rager 55 Director 1981
</TABLE>
There is no family relationship between any director or executive
officer of the Company and any other director or executive officer of the
Company.
Mr. Asscher has been a director of the Company since July 1972 and
Chairman of the Board since June 1982. He served as President of the Company
from October 1975 to June 1982, and as Vice President from July 1972 to May
1973. He has been the President and principal shareholder of
Tekelec-Airtronic, S.A. ("Tekelec-Airtronic"), a French electronics company,
since he founded that company in 1961. See "Certain Relationships and Related
Transactions" below.
Mr. Adams has been a director of the Company since December 1991.
Since March 1989, he has been the Chief Executive Officer and President of
Xerox Technology Ventures, a venture capital company which identifies, develops
and manages new business opportunities for Xerox Corporation.
Mr. Alford has been a director and President of the Company since
January 1994. He served as the Company's Chief Financial Officer from June
1985 until February 1994, as Vice President, Finance from May 1986 until
October 1990, as Senior Vice President from October 1990 until July 1993, and
as Senior Vice President and General Manager, International Division from July
1993 until January 1994.
Mr. Black became a director of the Company in 1981, resigned in
October 1991 and was re-elected in February 1994. He also served as the
Company's Vice President from September 1979 until June 1982, as President from
June 1982 until August 1987, as Chief Executive Officer from December 1985
until August 1987 and as Vice Chairman of the Board from August 1987 until
October 1991. Mr. Black served as an independent consultant to the
telecommunications industry from August 1987 until March 1990, when he became
Managing Director of Echelon Europe, Ltd., a sense and control networking
company. Mr. Black served as Chief Executive Officer, Treasurer and a director
of Avalon Control Technologies, a private consulting firm for industrial
networks, from September 1991 until June 1994 when that company ceased
operations. Since April 1994, Mr. Black has served as President and Chief
Executive Officer of Chevry, a software marketing company.
Mr. Brenner has been a director of the Company since May 1990. From
September 1986 to June 1992, he was an Adjunct Professor of Law and the
Director of the Communications Law Program at the University of California, Los
Angeles. In June 1992, Mr. Brenner assumed his present position as Vice
President, Law and Regulatory Policy for the National Cable Television
Association. Mr. Brenner served on the Board of Directors of the Corporation
for Public Broadcasting from November 1986 to March 1991, and served as its
Vice Chairman from 1989 to March 1991.
Mr. Oringer has been a director of the Company since January 1992.
From February 1987 until November 1994, he served as Chairman of the Board and
Chief Executive Officer of TeleSciences, Inc., a manufacturer of
telecommunications equipment. Since November 1994, Mr. Oringer has served as
Managing Director of Communications Capital Group, a consulting firm. From
January 1994 until July 1994, Mr. Oringer also served as a consultant to the
Company. See "Compensation of Directors" below.
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<PAGE> 6
Mr. Rager became a director of the Company in October 1975, resigned
in September 1979 and was re-elected in January 1981. Since 1976, Mr. Rager
has been a practicing accountant with, and President of, Rager Bell Doskocil &
Meyer CPAs (and its predecessors).
INFORMATION REGARDING THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors held a total of ten meetings during 1994.
During 1994, each director of the Company attended at least 80% of the
aggregate of all meetings of the Board of Directors held during the period for
which he was a director and all meetings held by the committees of the Board on
which he served.
The Audit Committee, which during 1994 was comprised of Messrs. Adams,
Brenner and Rager (Chairman) until July 1994, and of Messrs. Adams, Brenner,
Rager and Black thereafter, met four times during 1994. The Audit Committee
recommends the engagement of independent auditors, reviews accounting policies,
internal accounting controls and results of audit engagements and generally
performs functions related to the financial condition and policies of the
Company. The Compensation Committee, which during 1994 was comprised of
Messrs. Brenner and Rager (Chairman) until July 1994, and of Messrs. Brenner,
Rager and Adams thereafter, met once during 1994. The Compensation Committee
is responsible for administering the Company's Amended and Restated 1984 Stock
Option Plan and 1994 Stock Option Plan, including determining the persons to
whom options are granted and the terms of such options. The Company does not
have a nominating committee or any committee performing the function thereof.
COMPENSATION OF DIRECTORS
The Company currently pays each non-employee director a quarterly fee
of $2,500, plus $1,000 for attending a Board of Directors' meeting in excess of
four hours, $500 for attending a Board of Directors' meeting of four hours or
less and reimbursement for reasonable expenses for attending a Board of
Directors' meeting. In addition, each member of the Compensation Committee
receives $500 per quarter, each member of the Audit Committee receives $500 for
attending a committee meeting and the Chairman of the Audit Committee receives
$500 per quarter. Committee members also receive reimbursement for reasonable
expenses for attending a committee meeting.
Directors who are not employees of the Company are ineligible to
participate in the Company's Amended and Restated 1984 Stock Option Plan, 1994
Stock Option Plan and Employee Stock Purchase Plan. Under the Company's
Non-Employee Director Equity Incentive Plan (the "Director Plan"), each
non-employee director as of July 24, 1993 automatically received, and each
non-employee director elected at the Company's annual shareholder meetings in
1996 and 1999 will automatically be granted, a nonstatutory stock option to
purchase 30,000 shares of the Company's Common Stock (the dates of such grants
are hereinafter referred to as "Regular Grant Dates"). A non-employee director
elected or appointed to the Board after July 24, 1993 other than on a Regular
Grant Date automatically receives a nonstatutory stock option covering a pro
rata number of shares. All options granted under the Director Plan have an
exercise price equal to the fair market value of the Common Stock on the date
of grant and a term of seven years and terminate seven months after a director
ceases to serve as a non-employee director of the Company. Options granted on
a Regular Grant Date vest in 12 equal quarterly installments as long as the
holder remains a non-employee director of the Company; options granted on dates
other than Regular Grant Dates vest in the same number of quarterly
installments as would be remaining with respect to the unvested portion of the
options granted under the Director Plan as of the last Regular Grant Date.
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<PAGE> 7
In January 1994, the Company entered into a six-month Consulting
Agreement with Mr. Oringer pursuant to which Mr. Oringer performed consulting
services for the Company in consideration for $1,000 per day of services
performed and the issuance to him of five-year warrants to purchase 20,000
shares of the Company's Common Stock at an exercise price of $3.4375 per share
(i.e., the closing price of the Company's Common Stock on the Nasdaq National
Market on the date of grant). The warrants vested in five equal monthly
installments over the term of the Consulting Agreement and Mr. Oringer was paid
a total of $52,000 under the Consulting Agreement.
In accordance with the terms of the Director Plan, upon his election
to the Board in February 1994, Mr. Black was granted an option to purchase
22,500 shares of the Company's Common Stock at an exercise price of $4.3125 per
share. Such options vest and become exercisable in nine equal quarterly
installments commencing March 31, 1994. In April 1994, in connection with Mr.
Black's election to the Board, the Company granted to him seven-year warrants
to purchase 10,000 shares of the Company's Common Stock at an exercise price of
$3.375 per share (i.e., the closing price of the Company's Common Stock on the
Nasdaq National Market on the date of grant). Such warrants vest in 20 equal
quarterly installments commencing April 19, 1994 and continuing as long as Mr.
Black remains a director of the Company.
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<PAGE> 8
COMMON STOCK OWNERSHIP OF
PRINCIPAL SHAREHOLDERS AND MANAGEMENT
The following table sets forth certain information regarding
beneficial ownership of the Company's Common Stock as of March 1, 1995 by (i)
each person who is known to own beneficially more than 5% of the outstanding
shares of the Company's Common Stock, (ii) each of the Company's directors,
(iii) each of the executive officers named in the Summary Compensation Table on
page 9 and (iv) all current directors and officers of the Company as a group:
<TABLE>
<CAPTION>
NAME OF BENEFICIAL OWNER(1) SHARES BENEFICIALLY OWNED PERCENT OF CLASS
- - --------------------------- ------------------------- ----------------
<S> <C> <C>
Jean-Claude Asscher 3,868,520(2)(3) 42.1%
Tekelec-Airtronic, S.A.
5, rue Carle Vernet
92315 Sevres Cedex, France
Edouard Givel 2,767,064(4) 30.1
Natinco, S.A.
26, rue de l'Athenee
1206 Geneva, Switzerland
Kopp Investment Advisors, Inc. 1,317,320(5) 14.4
6600 France Ave. S., Suite 672
Edina, MN 55435
Philip J. Alford 179,260(3) 1.9
Robert V. Adams 49,746(3) *
Shigeru Suzuki 48,538(3) *
Howard Oringer 37,688(3) *
Gilles C. Godin 34,700(3) *
Daniel L. Brenner 22,772(3) *
Philip Black 15,000(3) *
William C. Shaw 9,770(3) *
Jon F. Rager 9,672(3)(6) *
Allan J. Toomer 8,000(3) *
Peter N. Vicars 0(7) 0
All current directors and officers
as a group (12 persons) 4,292,666(2)(3)(6) 45.2
</TABLE>
- - ------------------
* Less than one percent.
(1) Such persons have sole voting and investment power with respect to all
shares of Common Stock shown as being beneficially owned by them, subject
to community property laws, where applicable, and the information contained
in the footnotes to this table.
(footnotes continued on following page)
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<PAGE> 9
(2) Includes 2,767,064 shares which are owned by Mr. Givel and of which Mr.
Asscher may be deemed a beneficial owner (see footnote 4 below), and
975,292 shares owned by Tekelec-Airtronic, a French corporation of which
Mr. Asscher is the President and majority shareholder.
(3) Includes 116,000, 11,500, 20,000, 27,702, 36,500, 34,700, 2,500, 21,000,
15,000, 8,000, 8,000 and 309,902 shares subject to options and/or warrants
held by Messrs. Alford, Adams, Asscher, Suzuki, Oringer, Godin, Rager,
Brenner, Black, Shaw and Toomer and all current directors and officers as a
group, respectively, which are exercisable or become exercisable within 60
days after March 1, 1995.
(4) These shares are held in the name of Natinco, S.A. ("Natinco"), a
Luxembourg investment company which holds minority interests in a number of
Europe-based companies, including a minority interest in Tekelec-Airtronic.
Mr. Givel has advised the Company that he owns substantially all of the
equity interest in Natinco and holds the shares in the Company for
investment only. Mr. Asscher has from time to time acted for, and is the
advisor to, Mr. Givel with respect to his investment in the Company. Due
to Mr. Asscher's relationship with Mr. Givel and his role as advisor, Mr.
Asscher may be deemed to share voting and investment power with respect to
these shares and therefore to be a beneficial owner thereof within the
meaning of Rule 13d-3 of the Securities Exchange Act of 1934. Mr. Asscher
has advised the Company that he has no beneficial or financial interest in
Natinco and that he disclaims beneficial ownership of these shares.
(5) Based on a Schedule 13G dated February 10, 1995, wherein Kopp Investment
Advisors, Inc. reported shared dispositive power as to 1,317,320 shares.
(6) 7,172 of these shares are held by TI Partners, a partnership of which Mr.
Rager is the managing general partner, as to which shares Mr. Rager has
sole voting and investment power. Mr. Rager, together with a trust of
which he is the trustee and a beneficiary, owns a majority interest in such
partnership.
(7) Based on the records of the Company's transfer agent.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Under Section 16(a) of the Securities Exchange Act of 1934, the
Company's directors and officers and persons holding more than ten percent of
the Company's Common Stock are required to report their ownership of the
Company's Common Stock and any changes in that ownership to the Securities and
Exchange Commission ("SEC"). The specific due dates for these reports have
been established by the SEC, and the Company is required to report in this
Proxy Statement any failure to file by the established dates during 1994.
Based on the written representations of the Company's directors, officers and
ten percent shareholders and copies of the reports they have filed with the
SEC, the Company believes that during 1994 all directors, officers and ten
percent shareholders of the Company filed on a timely basis all reports
required to be filed under Section 16(a).
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<PAGE> 10
EXECUTIVE OFFICERS
The executive officers of the Company, and certain information about
them, are as follows:
<TABLE>
<CAPTION>
Name Age Title
- - ---- --- -----
<S> <C> <C>
Philip J. Alford 41 President
Allan J. Toomer 52 Senior Vice President and General Manager, Network Switching Division
William C. Shaw 47 Senior Vice President and General Manager, Network Diagnostic Division
Shigeru Suzuki 45 Vice President, Japan Operations and President, Tekelec, Ltd.
Gilles C. Godin 36 Vice President, Finance and Chief Financial Officer
William J. Minchin 58 Vice President, Operations
</TABLE>
Officers are appointed by and serve at the discretion of the Board of
Directors. For information concerning Mr. Alford, see "Election of Directors -
Nominees" above.
Mr. Toomer joined the Company in October 1992 as Senior Vice
President, Network Products and became Senior Vice President and General
Manager, Network Switching Division in July 1993. From 1973 until June 1992,
he held various officer positions at Northern Telecom, Inc., a
telecommunications equipment manufacturer, where he most recently served as
Vice President, Customer Service.
Mr. Shaw joined the Company in November 1993 as Senior Vice President
and General Manager, Network Diagnostic Division. He was employed by
Hewlett-Packard from April 1990 until November 1993 as a Business Unit Manager
at its Colorado Telecommunications Division, and from 1983 until April 1990, as
the Marketing and Research and Development Manager for its Roseville Personal
Computer Division.
Mr. Suzuki joined the Company in September 1985 as President of
Tekelec, Ltd., the Company's wholly owned Japanese subsidiary, and has also
served as the Company's Vice President, Japan Operations since May 1988.
Mr. Godin joined the Company in November 1986 as Controller and served
as Corporate Controller from October 1990 until July 1993 and as Treasurer from
October 1990 until February 1994. Mr. Godin has served as Vice President,
Finance since July 1993 and as Chief Financial Officer since February 1994.
Mr. Minchin joined the Company in April 1988 as Vice President,
Operations.
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<PAGE> 11
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information for the three years
ended December 31, 1994 concerning compensation paid or accrued by the Company
and its subsidiaries to or on behalf of the Company's President, the Company's
former Chief Executive Officer and each of the Company's four most highly
compensated executive officers other than its President for the year ended
December 31, 1994:
<TABLE>
<CAPTION> ANNUAL COMPENSATION LONG-TERM
------------------------------------------------- COMPENSATION
OTHER AWARDS
NAME AND ANNUAL ------------ ALL OTHER
PRINCIPAL POSITION YEAR SALARY($)(1) BONUS($)(2) COMPENSATION($)(3) OPTIONS(#) COMPENSATION($)(4)
- - ----------------------------- ---- ------------ ----------- ------------------ ------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
Philip J. Alford(5) 1994 $210,000 $80,000(6) $ -- 50,000 $ 530
President 1993 150,328 0 -- 100,000(7) 0
1992 148,000 0 -- 20,000 1,366
Peter N. Vicars(8) 1994 19,182 0 -- 0 485,515(9)
Former Chief Executive 1993 237,548 0 -- 150,000(7) 0
Officer and President 1992 250,000 0 -- 30,000 865
Shigeru Suzuki 1994 227,945 49,423 -- 20,000 ____
Vice President, Japan 1993 215,918 0 -- 82,000(7) 0
Operations and 1992 198,627 0 -- 10,000 0
President, Tekelec, Ltd.
Allan J. Toomer(10) 1994 168,270 55,500 -- 80,000 2,310
Senior Vice President and 1993 155,000 0 -- 80,000(7) 0
General Manager, 1992 32,308 0 -- 80,000 0
Network Switching Division
William C. Shaw(11) 1994 165,000 50,063 136,240(12) 120,000(14) 1,306
Senior Vice President and 1993 21,575 2,286(13) 158,997(12) 80,000 0
General Manager,
Network Diagnostic Division
Gilles C. Godin 1994 128,847 60,000(6) -- 50,000 0
Vice President, Finance 1993 92,789 0 -- 50,200(15) 0
and Chief Financial Officer 1992 85,118 0 -- 8,000 0
</TABLE>
- - ------------------
(1) Includes amounts, if any, deferred by the named officer pursuant to the
Company's 401(k) Plan.
(2) Bonuses are based on Company performance and, except as otherwise noted in
footnotes 6 and 13 below, were paid under the Company's Officer Bonus Plan.
No bonuses were paid to the named officers for services performed in 1992
or 1993 except for the bonus paid to Mr. Shaw for 1993 as noted in footnote
13 below.
(3) As permitted under the rules of the Securities and Exchange Commission, no
amounts are shown with respect to any perquisites paid to a named officer
unless the aggregate amounts of such perquisites exceeds the lesser of (i)
$50,000 or (ii) 10% of the total annual salary and bonus of a named
officer.
(4) The amounts shown in this column for 1992 and 1994 (except for Mr. Vicars
for 1994) represent Company matching contributions allocated under the
Company's 401(k) Plan to the accounts of the named officers.
(5) Mr. Alford became President of the Company in January 1994.
(6) Amounts shown for 1994 with respect to Messrs. Alford and Godin include
$16,400 and $21,000, respectively, paid to them as discretionary bonuses.
(7) Such options were granted in May 1993 under the Company's Amended and
Restated 1984 Stock Option Plan (the "1984 Plan") in exchange for certain
existing options.
(footnotes continued on following page)
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<PAGE> 12
(8) Mr. Vicars resigned in January 1994.
(9) Of such amount, $41,765 was paid to Mr. Vicars for accrued but unused
vacation and $443,750 was paid to Mr. Vicars as severance compensation
during 1994 under the terms of the Company's Officer Severance Plan. See
"Employment Agreements and Termination of Employment and Change-in-Control
Arrangements" and "Certain Transactions" below.
(10) Mr. Toomer's employment with the Company commenced in October 1992.
(11) Mr. Shaw's employment with the Company commenced in November 1993.
(12) These amounts were paid or accrued as reimbursement for certain
relocation and moving expenses (including $1,742 and $59,688 paid in 1993
and 1994, respectively, as reimbursement for related income taxes). See
"Employment Agreements and Termination of Employment and Change-in-Control
Arrangements" below.
(13) Mr. Shaw was paid this amount as a guaranteed bonus for 1994 in
connection with the commencement of his employment with the Company. See
"Employment Agreements and Termination of Employment and Change-in-Control
Arrangements" below.
(14) Includes an option to purchase 80,000 shares which was originally
granted to Mr. Shaw in November 1993 under the 1984 Plan and was
subsequently amended in March 1994 solely to reduce the exercise price
thereof. See "Option Grants in 1994," "Repricing of Options" and "Board
of Directors and Compensation Committee Reports on Executive Compensation -
Compensation Committee Report on Executive Compensation" below.
(15) Includes options to purchase an aggregate of 20,200 shares granted to
Mr. Godin in May 1993 under the 1984 Plan in exchange for certain
previously granted options.
OPTION GRANTS IN 1994
The following table sets forth certain information concerning stock
option grants in 1994 to the executive officers named in the Summary
Compensation Table:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------------------
PERCENT
NUMBER OF OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE GRANT DATE
OPTIONS EMPLOYEES PRICE EXPIRATION PRESENT
NAME GRANTED(#)(1) IN 1994(2) ($/SHARE)(3) DATE VALUE(4)
---- ------------- ---------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
Philip J. Alford 50,000(5) 3.9% $3.375 2/01/04 $33,015
Shigeru Suzuki 20,000(5) 1.6 3.00 3/31/04 11,972
Allan J. Toomer 40,000(5) 3.2 3.25 3/04/04 32,456
40,000(6) 3.2 4.00 9/14/04 25,756
William C. Shaw 40,000(5) 3.2 3.25 3/04/04 25,756
80,000(7) 6.3 3.595 11/02/03 49,700
Gilles C. Godin 50,000(5) 3.9 3.375 2/01/04 33,015
</TABLE>
- - ------------------
(1) Such options vest and become exercisable in 20 equal quarterly installments
over five years and were granted for terms of ten years subject to earlier
termination under certain circumstances relating to termination of
employment.
(2) In 1994, the Company granted options to employees to purchase an aggregate
of 1,269,640 shares, of which options covering 743,360 shares were granted
under the 1984 Plan and options covering 526,280 shares were granted under
the Company's 1994 Stock Option Plan (the "1994 Plan").
(footnotes continued on following page)
-10-
<PAGE> 13
(3) The exercise price per share of all such options was not less than 100% of
the reported closing price of the Company's Common Stock on the Nasdaq
National Market on the date of grant.
(4) The Grant Date Present Value is equal to the grant date option value
calculated using a modified Black-Scholes American Options Pricing Model
(the "Black-Scholes Model"), adjusted to reflect the risk that the options
will be forfeited prior to exercise. Black-Scholes Model input assumptions
included: (a) an option term of 5.039 years equal to the average vesting
period of options granted plus 2.539 years (the average time between
vesting and exercise for the Company's optionholders during 1990-1994); (b)
an interest rate equal to the interest rate on U.S. government debt
instruments with maturities approximately equal to the options' expected
time to exercise; (c) volatility equal to the standard deviation of Tekelec
Common Stock, calculated using monthly closing stock prices for the period
from May 1989 to April 1994; and (d) an expected dividend yield of 0%. The
risk of forfeiture was calculated by applying the annualized
weighted-average occurrence of cancellation of the Company's options prior
to exercise for the period during 1990-1994 (20.18%) compounded over the
expected 5.039-year option term. There can be no assurance that the value
realized by an optionee will be at or near the value estimated by the
Black-Scholes Model.
(5) Such options were granted under the 1984 Plan.
(6) Such options were granted under the 1994 Plan.
(7) Such options were originally granted under the 1984 Plan in November 1993
and were amended in March 1994 solely to reduce the exercise price thereof
to $3.595 per share. See "Repricing of Options" below.
AGGREGATED OPTION EXERCISES IN 1994 AND OPTION VALUES AT DECEMBER 31, 1994
The following table sets forth certain information concerning stock
option exercises during 1994 and unexercised options held as of December 31,
1994 by the executive officers named in the Summary Compensation Table:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF
SHARES UNDERLYING UNEXERCISED UNEXERCISED IN-THE-MONEY
ACQUIRED OPTIONS AT 12/31/94(#) OPTIONS AT 12/31/94($)*
ON VALUE ---------------------------- -----------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Philip J. Alford 0 $ 0 130,500 99,500 $1,658,936 $1,280,939
Peter N. Vicars 68,800 120,400 0 0 0 0
Shigeru Suzuki 36,000 244,590 22,584 51,416 291,633 670,612
Allan J. Toomer 0 0 40,000 120,000 514,840 1,537,560
William C. Shaw 18,000 162,360 6,000 96,000 77,745 1,243,920
Gilles C. Godin 0 0 29,550 73,050 390,286 960,332
- - --------------------------------
</TABLE>
* Represents the difference between the closing price of the Company's Common
Stock on December 30, 1994 as reported on the Nasdaq National Market (i.e.,
$16.4375) and the exercise price of such options.
TEKELEC, LTD. RETIREMENT PLAN
Effective January 1994, Tekelec, Ltd., the Company's wholly owned
Japanese subsidiary, adopted Retirement Pension Rules (the "Plan") to provide
retirement benefits to its directors who have completed at least three years of
service. The benefit payable is based on years of eligible service and a
director's highest monthly compensation during his or her service as a
director. A director who retires other than at retirement age with at least
three years of eligible service is entitled to receive one lump sum payment
-11-
<PAGE> 14
equal to a multiple (ranging from one to three for a director with three years
of eligible service to 47 for a director with 40 years of eligible service) of
his or her highest monthly compensation.
If a director of Tekelec, Ltd. retires at retirement age after at
least 20 years of eligible service, in lieu of the lump sum payment described
above, he or she will receive a retirement benefit payable over ten years or,
under certain circumstances, in one lump sum payment equal to the present value
of future amounts otherwise payable. Such retirement benefit ranges from a
monthly amount of 26% of a director's highest monthly salary, for a director
with 20 years of eligible service, to 51% of such salary for a director with 40
or more years of eligible service.
If a director dies before receiving all or any part of the benefit to
which he or she would be entitled under the Plan, such benefit would be paid to
his or her surviving spouse or other relative.
Mr. Suzuki is one of two current participants in the Plan. As of
April 1, 1995, Mr. Suzuki was credited with nine years of eligible service and
would be entitled to receive approximately $207,800 as a lump sum payment under
the Plan if his employment were terminated by Tekelec Ltd.
EMPLOYMENT AGREEMENTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
In May 1993, the Company implemented an officer severance plan (the
"Severance Plan") pursuant to which officers of the Company are entitled to
receive certain severance benefits following termination of employment, if such
termination is non-temporary, involuntary and without cause. In addition, if
there is a "change in control" of the Company, an officer will receive benefits
under the Severance Plan if such officer terminates his or her employment with
the Company either for any reason within one year following the change in
control or for "good reason" (which includes the assignment to the officer of
duties significantly inconsistent with his or her prior position or a reduction
in his or her compensation or benefits) within two years following such change
in control.
Each eligible officer is entitled to severance pay based on his or her
highest annual compensation (i.e., base salary plus bonus), the number of years
employed by the Company and the highest office attained prior to termination.
Based on such factors, the amounts that would be payable under the Severance
Plan to Messrs. Alford, Suzuki, Toomer, Shaw and Godin if their employment were
terminated as of April 1, 1995 and they were eligible for severance benefits
under the Severance Plan would be $457,500, $389,025, $192,400, $188,050 and
$262,500, respectively. Mr. Vicars, whose employment relationship with the
Company was terminated as of January 31, 1994, received severance compensation
under the Severance Plan totalling $532,500. See "Summary Compensation Table"
above and "Certain Relationships and Related Transactions" below.
In October 1993, Mr. Shaw accepted an offer of employment with the
Company pursuant to which he became Senior Vice President and General Manager,
Network Diagnostic Division. Under the terms of his employment, as amended to
date, Mr. Shaw received a guaranteed bonus of $14,850 during his first year of
employment with the Company and certain relocation benefits in the aggregate
amount of $295,237 in connection with the relocation of his primary residence
to California. See "Summary Compensation Table" above.
In February 1994, the Company agreed that in the event either Mr.
Alford's or Mr. Godin's employment with the Company is terminated under
circumstances entitling such officer to severance benefits under the Severance
Plan, then the options to purchase 50,000 shares of the Company's Common Stock
granted to each of them in February 1994 will vest and become exercisable in
full upon such termination.
-12-
<PAGE> 15
In September 1994, Mr. Toomer entered into an early retirement
agreement with the Company pursuant to which, upon the termination of his
employment with the Company at either his or the Company's election and
provided he has met certain performance objectives, Mr. Toomer would be
entitled to receive in lieu of any benefits which might otherwise be payable to
him under the Severance Plan (i) a payment equal to 130% of the sum of his then
current salary and the highest annual bonus paid to him by the Company and (ii)
the accelerated vesting of all incentive stock options then held by him. If
such performance objectives are not met, Mr. Toomer would remain eligible to
receive severance benefits under the Severance Plan.
REPRICING OF OPTIONS
In March 1994, the Company amended options previously granted under
the 1984 Plan in October 1993 and November 1993 to purchase an aggregate of
87,000 shares and 80,000 shares, respectively, with exercise prices of $5.50
and $5.625 per share, respectively, solely to provide for a new exercise price
equal to $3.595 per share, which amended exercise price exceeded the then
current market price of $3.25 per share. See "Board of Directors and
Compensation Committee Reports on Executive Compensation - Compensation
Committee Report on Executive Compensation" below.
The following table sets forth, for the period commencing May 19, 1986
(i.e., the date of the Company's initial public offering) and ending December
31, 1994, certain information concerning the repricing of options held by the
executive officers named in the Summary Compensation Table and any person who
was an executive officer of the Company at the time of such repricing:
<TABLE>
<CAPTION>
NUMBER OF LENGTH OF
SECURITIES MARKET PRICE EXERCISE ORIGINAL OPTION
UNDERLYING OF STOCK AT PRICE AT NEW TERM REMAINING
OPTIONS TIME OF TIME OF EXERCISE AT DATE OF
NAME DATE REPRICED (#) REPRICING ($) REPRICING ($) PRICE ($) REPRICING
- - ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Philip J. Alford 5/14/93 57,552 3.125 8.6875 3.595 93 months
President 5/14/93 22,448 3.125 8.6875 3.595 93 months
5/14/93 20,000 3.125 7.375 3.595 104 months
Peter N. Vicars 12/5/87 222,220 1.875 2.25 1.875 80 months
Former Chief 12/5/87 27,780 1.875 2.25 1.875 80 months
Executive Officer 5/14/93 57,552 3.125 8.6875 3.595 93 months
and President 5/14/93 62,448 3.125 8.6875 3.595 93 months
5/14/93 30,000 3.125 7.375 3.595 104 months
Shigeru Suzuki 12/5/87 10,000 1.875 3.5625 1.875 71 months
Vice President, 10/28/89 12,000 4.375 6.75 4.375 114 months
Japan Operations 5/14/93 12,000 3.125 4.375 3.595 72 months
and President, 5/14/93 57,552 3.125 8.6875 3.595 93 months
Tekelec, Ltd. 5/14/93 2,448 3.125 8.6875 3.595 93 months
5/14/93 10,000 3.125 7.375 3.595 104 months
</TABLE>
(table continued on following page)
-13-
<PAGE> 16
<TABLE>
<CAPTION>
NUMBER OF LENGTH OF
SECURITIES MARKET PRICE EXERCISE ORIGINAL OPTION
UNDERLYING OF STOCK AT PRICE AT NEW TERM REMAINING
OPTIONS TIME OF TIME OF EXERCISE AT DATE OF
NAME DATE REPRICED (#) REPRICING ($) REPRICING ($) PRICE ($) REPRICING
- - ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Allen J. Toomer 5/14/93 80,000 3.125 6.25 3.595 113 months
Senior Vice
President and
General Manager,
Network Switching
Division
William C. Shaw 3/04/94 80,000 3.25 5.625 3.595 116 months
Senior Vice
President and
General Manager,
Network Diagnostic
Division
Gilles C. Godin 5/14/93 4,200 3.125 4.375 3.595 81 months
Vice President, 5/14/93 8,000 3.125 8.6875 3.595 93 months
Finance and 5/14/93 8,000 3.125 8.25 3.595 107 months
Chief Financial
Officer
William J. Minchin 5/14/93 50,000 3.125 8.6875 3.595 93 months
Vice President, 5/14/93 12,000 3.125 7.375 3.595 104 months
Operations
William Atkinson 5/14/93 70,000 3.125 9.25 3.595 98 months
Former Vice 5/14/93 16,000 3.125 7.375 3.595 104 months
President and
General Manager,
Network Monitoring
Division
Joseph A. Noble 12/5/87 22,455 1.875 3.5625 1.875 71 months
Former Vice 12/5/87 22,344 1.875 3.5625 1.875 71 months
President, Sales
Fred Tinch 10/28/89 10,000 4.375 6.75 4.375 114 months
Former Vice 5/14/93 16,000 3.125 7.375 3.595 104 months
President, 5/14/93 10,000 3.125 4.375 3.595 72 months
Engineering-
Network
Products
Janice Waterman 5/14/93 30,000 3.125 9.25 3.595 98 months
Former Vice 5/14/93 10,000 3.125 7.375 3.595 104 months
President, Human
Resources
</TABLE>
-14-
<PAGE> 17
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1994, the Compensation Committee consisted of Jon F. Rager and
Daniel L. Brenner until July 1994, and of Messrs. Rager, Brenner and Adams
thereafter, all of whom are non-employee directors. No member of the
Compensation Committee is or was a current or former officer or an employee of
the Company or any of its subsidiaries other than Mr. Rager who served as the
Company's Treasurer from October 1975 to June 1985 and as its Secretary from
October 1975 to December 1985.
BOARD OF DIRECTORS AND COMPENSATION COMMITTEE
REPORTS ON EXECUTIVE COMPENSATION
The Board of Directors and the Compensation Committee of the Board of
Directors share responsibility for determining and administering the Company's
compensation program for its executive officers. The Company's executive
compensation program consists of both cash-based and stock-based compensation.
The Board of Directors is responsible for determining the annual base salaries
of the Company's executive officers and approving the terms of the officer
bonus plan and has delegated to the Compensation Committee the responsibility
of administering the Company's stock option plans pursuant to which stock
options are granted as an additional incentive to key employees.
The reports on executive compensation by the Board of Directors and
the Compensation Committee and the Performance Graph on page 19 shall not be
deemed incorporated by reference by any general statement incorporating by
reference this Proxy Statement into any filing under the Securities Act of 1933
or under the Securities Exchange Act of 1934, except to the extent that the
Company specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such Acts.
BOARD OF DIRECTORS REPORT ON EXECUTIVE COMPENSATION
The principal objectives of the Company's executive compensation
program are to attract, motivate and retain qualified, experienced individuals
to serve as officers of the Company and to provide incentives to attain the
financial and strategic objectives of the Company. The Company's executive
compensation program consists of three basic components -- annual base
salaries, cash bonuses and stock options.
The Board of Directors reviews and approves the salaries of all
executive officers. Annual salaries are based on consideration of a number of
factors, including an officer's responsibilities, experience and
qualifications, an evaluation of such officer's past performance and
contributions to the Company, information concerning competitive compensation
and the Company's operating results and financial condition. Due to the
Company's net losses in 1992 and 1993 and its financial condition at December
31, 1993, salaries of its executive officers were increased during 1994 only in
connection with an officer's promotion or assumption of additional
responsibilities.
The Board believes that a significant portion of each officer's annual
compensation should be related to the Company's financial performance.
Accordingly, under the terms of the Officer Bonus Plan for 1994, each executive
officer was eligible to receive a cash bonus equal to a percentage of his or
her annual base salary if the Company achieved certain pre-established
financial performance goals. Bonuses would only be paid if the Company's
revenues and operating income met or exceeded both a threshold 105% of the
revenue goal and the operating income goal set forth in the Company's business
plan.
-15-
<PAGE> 18
Based on the Company's financial results in 1994, an aggregate of
$279,586 in bonuses was earned by the Company's executive officers under the
Officer Bonus Plan. Individual bonuses ranged from 20% to 30% of an officer's
base salary. In addition to such bonuses received under the Officer Bonus Plan
and in recognition of the Company's improvement in 1994 in its financial
results and financial condition, the Board awarded discretionary bonuses to
Messrs. Alford and Godin in the amounts of $16,400 and $21,000, respectively.
The Board was also responsible for determining the annual base salary
of Philip Alford, the Company's President since January 15, 1994. In
determining Mr. Alford's base salary, the Board took into consideration the
same factors that were considered in setting the base salaries of the Company's
other executive officers. Under the terms of the Officer Bonus Plan for 1994,
Mr. Alford was eligible to receive a cash bonus equal to a percentage (a
minimum of 15% and a maximum of 30%) of his annual base salary if the Company
achieved a specified threshold percentage (at least 105%) of the revenue and
operating income goals set forth in the Company's business plan. Although Mr.
Alford is a member of the Board of Directors, he did not participate in any
discussions or decisions of the Board or the Compensation Committee regarding
the setting of his salary or the awarding of any bonus. For services rendered
in 1994, Mr. Alford's cash compensation consisted of base salary in the amount
of $210,000 and a bonus of $80,000.
Under recently enacted Section 162(m) of the Internal Revenue Code of
1986, as amended (the "Code"), a publicly-held corporation such as the Company
will not be allowed a federal income tax deduction for compensation paid to the
executive officers named in the Summary Compensation Table to the extent that
compensation (including stock-based compensation) paid to a particular officer
exceeds $1 million in any fiscal year unless such compensation was based on
performance goals or paid under a written contract that was in effect on
February 17, 1993. Proposed regulations to implement the new limitation were
published in December 1993. Although the $1 million limitation became
effective with the 1994 fiscal year, certain provisions will not apply to the
Company until future years, and qualifying performance-based compensation will
not be subject to the deductibility limitation if certain conditions are met.
Based upon the Company's current compensation plans and policies and the
proposed regulations under Section 162(m), it appears that the compensation to
be paid to the Company's executive officers for 1995 will not exceed the $1
million limitation per officer.
BOARD OF DIRECTORS
Jean-Claude Asscher, Chairman
Robert V. Adams
Philip J. Alford
Philip Black
Daniel L. Brenner
Howard Oringer
Jon F. Rager
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Stock Options. Options to purchase the Company's Common Stock are a
key component of the Company's executive compensation program. The
Compensation Committee views the grant of stock options as a valuable incentive
to attract and retain key employees and to motivate them to maximize
shareholder value. The Compensation Committee reviews and considers
recommendations by the Company's President with regard to the grant of stock
options to executive officers (other than the
-16-
<PAGE> 19
President) and other key employees whose contributions and skills are important
to the long-term success of the Company. Each officer typically receives a
stock option grant upon first joining the Company and thereafter is eligible to
receive additional stock options. In determining the size and other terms of
an option grant to an executive officer, the Compensation Committee considers a
number of factors, including such officer's position and responsibilities,
individual job performance, previous stock option grants (if any) and length of
service to the Company.
The exercise price of options is not less than the market price of the
Company's Common Stock on the date of grant. Options generally vest over five
years in 20 equal quarterly, or five equal annual, installments following the
date of grant as long as the optionee remains an employee of the Company and,
therefore, encourage an optionee to remain in the employ of the Company. In
1994, options to purchase an aggregate of 320,000 shares of Common Stock were
granted to all executive officers as a group and represented 25.2% of all
options granted in 1994. Information concerning options granted during 1994 to
the executive officers named in the Summary Compensation Table is provided in
the table entitled "Executive Compensation and Other Information - Option
Grants in 1994."
Option Repricing. In March 1994, the Compensation Committee repriced
options previously granted to an executive officer and certain key employees
under the 1984 Plan in October 1993 and November 1993 to purchase an aggregate
of 87,000 and 80,000 shares, respectively, with exercise prices of $5.50 and
$5.625 per share, respectively. The exercise prices of such options were
amended to $3.595 per share (which amended price exceeded the then current
market price of $3.25 per share and was equal to the exercise price of the
Company's option repricing in May 1993). The market price of such stock
options had declined following their grant and the Committee believed that such
decline was undermining the Company's ability to retain and motivate the
holders of such options. Accordingly, in order to enhance the retentional and
motivational value of such options, the Committee approved the repricing of
such options solely to amend the exercise prices thereof.
COMPENSATION COMMITTEE
Jon F. Rager, Chairman
Robert V. Adams
Daniel L. Brenner
-17-
<PAGE> 20
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following are certain transactions entered into between the
Company and its officers, directors and principal shareholders and their
affiliates since January 1, 1994:
The Company sells products to Tekelec-Airtronic and its wholly owned
subsidiaries which serve as distributors of the Company's products in Europe.
During 1994, the aggregate sales of the Company's products to Tekelec-Airtronic
and its subsidiaries were approximately $3,809,000. As of December 31, 1994,
Tekelec-Airtronic and its subsidiaries owed the Company approximately
$1,538,000 for purchases of the Company's products, of which approximately
$576,000 was owed as of March 1, 1995. The Company anticipates that during
1995 it will sell products to Tekelec-Airtronic and its subsidiaries in an
aggregate amount exceeding the aggregate amount of sales to such parties
during 1994.
The Company also purchases certain telecommunications test equipment
and components from Tekelec-Airtronic and certain of its subsidiaries. During
1994, the Company purchased such equipment and components from
Tekelec-Airtronic and its subsidiaries at an aggregate cost of approximately
$49,000. As of December 31, 1994, the Company owed approximately $41,000 for
purchases of such equipment and components, none of which was outstanding as of
March 1, 1995. The Company anticipates that during 1995 it will continue to
purchase telecommunications test equipment and components from, and may from
time to time provide consulting services to, Tekelec-Airtronic and its
subsidiaries, and expects that the aggregate amount of such transactions will
not be significantly greater than the aggregate amount of such transactions
during 1994.
In satisfaction of the Company's obligations under the Company's
Officer Severance Plan, the Company entered into an Employment Separation
Agreement with each of Peter Vicars, William Atkinson and Janice Waterman
pursuant to which such former officers of the Company were entitled to receive
severance compensation of $532,500, $120,000 and $86,250, respectively, arising
out of the termination of their respective employments with the Company in
January 1994, December 1993 and December 1993, respectively. See "Executive
Compensation and Other Information - Employment Agreements and Termination of
Employment and Change-in-Control Arrangements" above.
-18-
<PAGE> 21
PERFORMANCE GRAPH
The following graph compares the cumulative total return on the Company's
Common Stock with the cumulative total return of the Total Return Index for the
Nasdaq National Market (U.S. Companies) and the Nasdaq Computer Manufacturers
Index for the five-year period commencing January 1, 1990. The stock price
performance shown on the graph below is not necessarily indicative of future
price performance.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
AMONG TEKELEC, TOTAL RETURN INDEX FOR THE NASDAQ NATIONAL MARKET
(U.S. COMPANIES) AND NASDAQ COMPUTER MANUFACTURERS INDEX
<TABLE>
<CAPTION>
NASDAQ
MEASUREMENT PERIOD NATIONAL NASDAQ
(FISCAL YEAR COVERED) TEKELEC MARKET (U.S.) COMPUTER MFRS.
<S> <C> <C> <C>
12/31/89 100 100 100
12/31/90 162 85 107
12/31/91 150 136 149
12/31/92 106 159 200
12/31/93 85 181 190
12/31/94 387 177 209
</TABLE>
- - ---------------
* Assumes (i) $100 invested on January 1, 1990 in Tekelec Common Stock, Total
Return Index for the Nasdaq National Market (U.S. Companies), and Nasdaq
Computer Manufacturers Index and (ii) immediate reinvestment of all dividends.
-19-
<PAGE> 22
PROPOSAL 2 - APPROVAL OF AMENDMENTS TO
THE COMPANY'S 1994 STOCK OPTION PLAN
In 1994, the Board of Directors of the Company adopted and the
shareholders of the Company approved the 1994 Stock Option Plan (the "1994
Plan") under which 800,000 shares of Common Stock were authorized for issuance
pursuant to the exercise of stock options granted thereunder.
In February 1995 and March 1995, the Board of Directors amended the
1994 Plan, subject to shareholder approval, to increase the number of shares
authorized for issuance thereunder by 100,000 and 500,000 shares, respectively.
If such amendments are approved, a total of 1,400,000 shares will have been
authorized for issuance under the 1994 Plan. As of March 1, 1995, a total of
10,870 shares had been issued upon the exercise of options under the 1994 Plan,
a total of 761,760 shares was subject to outstanding options, and 27,370 shares
(not including the 600,000-share increase subject to shareholder approval)
remained available for option grants under the 1994 Plan. To the extent
options have been or will be granted to purchase any of such additional 600,000
shares prior to obtaining shareholder approval of such amendments, such options
are or will be expressly conditioned upon obtaining such approval. See "New
Plan Benefits" below.
AT THE ANNUAL MEETING, THE SHAREHOLDERS WILL BE REQUESTED TO CONSIDER
AND APPROVE THE AMENDMENTS TO THE 1994 PLAN INCREASING THE NUMBER OF SHARES
AUTHORIZED FOR ISSUANCE THEREUNDER BY AN AGGREGATE OF 600,000 SHARES. THE
AFFIRMATIVE VOTE OF A MAJORITY OF THE SHARES OF THE COMPANY'S COMMON STOCK
PRESENT OR REPRESENTED AND ENTITLED TO VOTE AT THE ANNUAL MEETING WILL BE
REQUIRED TO APPROVE THE AMENDMENTS TO THE 1994 PLAN. THE BOARD OF DIRECTORS
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR APPROVAL OF THE AMENDMENTS.
NEW PLAN BENEFITS
The following table sets forth certain information as of March 1, 1995
concerning stock options granted in 1995 by the Compensation Committee to key
employees of the Company under the 1994 Plan, which grants are subject to and
expressly conditioned upon shareholder approval of the amendments to the 1994
Plan increasing the number of shares authorized for issuance thereunder by an
aggregate of 600,000 shares.
<TABLE>
<CAPTION>
Number of
Shares Underlying
Name and Position Options(#)(1)
- - ------------------------------------------------------------ ------------------
<S> <C>
Philip J. Alford 70,000
President
Gilles C. Godin 50,000
Vice President, Finance and Chief Financial Officer
Executive Group (6 persons) 120,000
Non-Executive Director Group (6 persons) 0(2)
Non-Executive Officer Employee Group 0
</TABLE>
- - ------------------
(1) Such options are granted at an exercise price per share equal to the
closing price of the Company's Common Stock on the date of grant.
(2) Only employees of the Company are eligible to participate in the 1994 Plan.
-20-
<PAGE> 23
SUMMARY OF 1994 PLAN
A summary of the principal provisions of the 1994 Plan is set forth
below and is qualified in its entirety by reference to the 1994 Plan. A copy
of the 1994 Plan is available from the Company's Secretary upon request.
PURPOSE
The purposes of the 1994 Plan are to (i) attract and retain the
services of selected key employees of the Company who are in a position to make
a material contribution to the successful operation of the Company's business;
(ii) motivate such persons, by means of performance-related incentives, to
achieve the Company's business goals; and (iii) enable such persons to
participate in the long-term growth and financial success of the Company by
providing them with an opportunity to purchase stock of the Company.
ADMINISTRATION
The 1994 Plan is required to be administered by a committee designated
by the Board of Directors and composed of not less than two disinterested
non-employee Board members. The 1994 Plan is currently administered by the
Compensation Committee of the Board, which is comprised of three disinterested
non-employee directors. The interpretation and construction of any provision
of the 1994 Plan is within the sole discretion of the members of the committee
of the Board, whose determination is final and binding.
ELIGIBILITY
The 1994 Plan provides that nonstatutory stock options and incentive
stock options may be granted only to employees (including officers and
directors who are also employees) of the Company. As administrator of the 1994
Plan, the Compensation Committee selects the optionees and determines the type
of option (i.e., incentive or nonstatutory) and the number of shares to be
subject to each option. In making such determination, there is taken into
account a number of factors, including the employee's position and
responsibilities, individual job performance, previous stock option grants (if
any), length of service to the Company, and other relevant factors. As of
March 1, 1995, approximately 310 persons were eligible to receive options and
144 optionees were holding options under the 1994 Plan.
TERMS OF OPTIONS
Options granted under the 1994 Plan may be either "incentive stock
options" as defined in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code), or nonstatutory stock options. Each option is evidenced
by a written stock option agreement between the Company and the person to whom
such option is granted and is subject to the following additional terms and
conditions:
(a) Number of Shares: The aggregate fair market value (determined
as of the grant date) of the stock for which an employee may
be granted incentive stock options that first become
exercisable during any one calendar year under all the
Company's plans may not exceed $100,000. In addition, the
maximum number of shares which may be awarded as options under
the 1994 Plan during any calendar year to any one optionee may
not exceed 200,000 shares.
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(b) Exercise of the Option: The optionee must earn the right to
exercise the option by continuing to work for the Company.
Options granted under the 1994 Plan will become exercisable at
such times and in such cumulative installments as the
Compensation Committee determines subject to earlier
termination of the option upon termination of the optionee's
employment for any reason. Options are typically exercisable
in cumulative installments (e.g., 20 equal quarterly
installments) over five years. An option is exercised by
giving to the Company written notice of exercise specifying
the number of shares of Common Stock as to which the option is
being exercised and by tendering payment to the Company of the
purchase price. The form of payment for shares to be issued
upon the exercise of an option is determined by the
Compensation Committee and may consist of cash, check,
previously owned shares of Common Stock, a combination thereof
or such other consideration as is determined by the
Compensation Committee.
(c) Exercise Price: The exercise price per share for the shares
to be issued pursuant to the exercise of an option is
determined by the Committee and may not be less than 100% of
the fair market value of the Common Stock on the grant date.
The fair market value of the Common Stock on the date of an
option grant will be equal to the closing price of the Common
Stock on the Nasdaq National Market as reported in The Wall
Street Journal on the date of the option grant. On March 31,
1995, the closing price of the Company's Common Stock on the
Nasdaq National Market was $_____ per share.
(d) Termination of Employment: If the optionee's employment with
the Company is terminated for any reason, other than death or
total and permanent disability, the option may be exercised
within three months after such termination as to all or part
of the shares as to which the optionee was entitled to
exercise the option at the time of termination.
(e) Death or Disability: If an optionee should die or become
permanently and totally disabled while employed by the
Company, the options granted to him or her may be exercised at
any time within six months after such death or disability, but
only to the extent the optionee was entitled to exercise the
options at the date of his or her termination of employment
due to such death or disability.
(f) Expiration of Options: Options may not have a term greater
than ten years from the grant date. No option may be
exercised after its expiration.
(g) Nontransferability of Option: An option is nontransferable by
the optionee, other than by will or the laws of descent and
distribution or transfers between spouses incident to a
divorce, and is exercisable only by the optionee during his or
her lifetime or, in the event of the death of the optionee, by
the estate of the optionee or by a person who acquires the
right to exercise the option by bequest or inheritance.
(h) Other Provisions: The option agreement may contain such other
terms, provisions and conditions not inconsistent with the
1994 Plan as may be determined by the Compensation Committee.
ADJUSTMENT UPON CHANGES IN CAPITALIZATION
In the event that a change, such as a stock split or stock dividend,
is made in the Company's capitalization which affects the stock for which
options are exercisable under the 1994 Plan, appropriate adjustment will be
made in the exercise price of and the number of shares covered by outstanding
options, and in the number of shares available for issuance under the 1994
Plan. In the event of a dissolution or
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liquidation of the Company, a sale of substantially all of the assets of the
Company, or the merger, consolidation or reorganization of the Company with or
into another corporation as a result of which the Company is not the surviving
corporation, outstanding options will be assumed by the successor corporation
or the Board of Directors will declare that any option will terminate as of a
date fixed by the Board which is at least 30 days after notice thereof is given
to optionees and permit each optionee to exercise all or a portion of the
shares covered by such option, including shares as to which the option would
not otherwise be exercisable.
AMENDMENT AND TERMINATION
The Compensation Committee may amend or terminate the 1994 Plan at any
time or from time to time without the approval of the Company's shareholders;
provided, however, that approval of the holders of voting shares represented
and entitled to vote at a valid meeting of shareholders is required for any
amendment to the 1994 Plan which would: (a) materially increase the number of
shares which may be issued thereunder other than in connection with an
adjustment upon changes in capitalization; (b) materially change the
designation of the class of employees eligible to participate; (c) remove the
administration of the 1994 Plan from the Board of Directors or its committee;
(d) extend the term of the 1994 Plan beyond its initial ten-year term; (e)
materially increase the benefits to participants under the 1994 Plan; or (f)
materially modify the requirements as to eligibility for participation. In any
event, the 1994 Plan will terminate on the tenth anniversary of its adoption by
the Board of Directors, provided that any options then outstanding will remain
outstanding until they expire by their terms.
TAX INFORMATION
The federal tax consequences of options are complex and subject to
change. The following discussion is only a brief summary of the general
federal income tax rules currently in effect which are applicable to stock
options. A taxpayer's particular situation may be such that some variation of
the general rules may apply. This summary does not cover the state, local or
foreign tax consequences of the grant or exercise of options under the 1994
Plan or the disposition of shares acquired upon exercise of such options or
federal estate tax or state estate, inheritance or death taxes.
INCENTIVE STOCK OPTIONS
If an option granted under the 1994 Plan is treated as an "incentive
stock option" as defined in Section 422 of the Code, then the optionee will not
recognize any income for regular income tax purposes upon either the grant or
the exercise of the option and the Company will not be allowed a deduction for
federal tax purposes. Upon a sale of the shares, the tax treatment to the
optionee and the Company will depend primarily upon whether the optionee has
met certain holding period requirements at the time of sale. In addition, as
discussed below, the exercise of an incentive stock option may subject the
optionee to alternative minimum tax liability in the year of exercise.
If an optionee exercises an incentive stock option and does not
dispose of the shares received within two years of the date of the grant of
such option and within one year after the exercise of the option, whichever
ends later, any gain realized upon disposition will be characterized as
long-term capital gain, and any loss will be long-term capital loss. In either
such case, the Company will not be entitled to a federal income tax deduction.
If the optionee disposes of the shares either within two years after
the date the option is granted or within one year after the exercise of the
option, such disposition will be treated as a disqualifying disposition and an
amount equal to the lesser of (1) the fair market value of the shares on the
date of exercise less the purchase price or (2) the amount realized on the
disposition less the purchase price will
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be taxed as ordinary income in the taxable year in which the disposition
occurs. Any such ordinary income will increase the optionee's tax basis for
purposes of determining gain or loss on the sale or exchange of such shares.
The excess, if any, of the amount realized over the fair market value of the
shares at the time of the exercise of the option will be treated as short-term
or long-term capital gain, as the case may be, and any loss realized upon the
disposition will be treated as a capital loss. An optionee will be generally
considered to have disposed of shares if he or she sells, exchanges, makes a
gift of or transfers legal title to such shares (except by pledge, in certain
non-taxable exchanges, a transfer in insolvency proceedings, incident to a
divorce, or upon death). If the amount realized is less than the purchase
price, generally the optionee will not recognize income.
The exercise of an incentive stock option may subject an optionee to
alternative minimum tax liability in the year of exercise because the excess of
the fair market value of the shares at the time an incentive stock option is
exercised over the option price is an adjustment in determining an optionee's
alternative minimum taxable income for such year. Consequently, an optionee
may be obligated to pay alternative minimum tax in the year he or she exercises
an incentive stock option. If such a disqualifying disposition occurs in the
same year as an option is exercised, the amount of ordinary income resulting
from such disposition may offset any adjustment to alternative minimum taxable
income for the year of exercise. In the case of a disqualifying disposition
which occurs after the year of exercise, an individual would be required to
recognize an adjustment to alternative minimum taxable income in the year of
exercise and ordinary income in the year of such disqualifying disposition in
an amount determined under the rules described above. An optionee's
alternative minimum tax liability is affected by the availability of a special
credit, a basis adjustment and other complex rules. Optionees are urged to
consult their tax advisors concerning the applicability of the alternative
minimum tax to their own circumstances.
In general, there will be no federal tax consequences to the Company
upon the grant, exercise or termination of an incentive stock option. However,
in the event an optionee sells or disposes of stock received upon the exercise
of an incentive stock option prior to satisfying the two-year and one-year
holding periods described above, the Company will be entitled to a deduction
for federal income tax purposes in an amount equal to the ordinary income, if
any, recognized by the optionee upon disposition of the shares.
NONSTATUTORY STOCK OPTIONS
Nonstatutory stock options granted under the 1994 Plan do not qualify
as "incentive stock options" and, accordingly, do not qualify for any special
tax benefits to the optionee. An optionee will not recognize any income at the
time he or she is granted a nonstatutory option. However, upon its exercise,
the optionee will generally recognize ordinary income for federal tax purposes
measured by the excess of the then fair market value of the shares over the
option price. The income realized by the optionee will be subject to income
tax withholding by the Company out of the compensation paid to the optionee.
If such earnings are insufficient to pay the withholding tax, the optionee will
be required to make a direct payment to the Company to cover the withholding
tax liability.
Upon a sale of any shares acquired pursuant to the exercise of a
nonstatutory stock option, the difference between the sale price and the
optionee's basis in the shares will be treated as a long-term or short-term
capital gain or loss, as the case may be. The optionee's basis for
determination of gain or loss upon any subsequent disposition of shares
acquired upon the exercise of a nonstatutory stock option will ordinarily be
the sum of the amount paid for such shares plus any ordinary income recognized
as a result of the exercise of such option.
In general, there will be no federal tax consequences to the Company
upon the grant or termination of a nonstatutory stock option or the sale or
disposition of the shares acquired upon exercise
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of a nonstatutory stock option. However, upon the exercise of a nonstatutory
stock option, the Company will be entitled to a deduction to the extent and in
the year that ordinary income from the exercise of the option is recognized by
the optionee, provided the Company has satisfied its withholding obligations
under the Code.
PROPOSAL 3 - APPROVAL OF AMENDMENT TO
THE COMPANY'S EMPLOYEE STOCK PURCHASE PLAN
In 1986, the Board of Directors of the Company adopted, and in 1987
the shareholders of the Company approved, the Company's Employee Stock Purchase
Plan (the "Purchase Plan") under which 100,000 shares of Common Stock were
initially reserved for issuance thereunder. The Purchase Plan was amended in
1989, 1991, 1992 and 1993 to increase the number of shares authorized for
issuance thereunder by 80,000, 70,000, 100,000 and 100,000 shares,
respectively.
In October 1994, the Board of Directors amended the Purchase Plan,
subject to shareholder approval, to increase the number of shares authorized
for issuance under the Purchase Plan by an additional 150,000 shares. If the
amendment is approved, a total of 600,000 shares will have been authorized for
issuance under the Purchase Plan since its inception (of which 450,000 shares
had been issued as of March 1, 1995).
Purchases of the Company's Common Stock under the Purchase Plan are
made at the discretion of the participants therein. Accordingly, future
purchases under the Purchase Plan are not yet determinable.
AT THE ANNUAL MEETING, THE SHAREHOLDERS WILL BE REQUESTED TO CONSIDER
AND APPROVE THE AMENDMENT TO THE PURCHASE PLAN INCREASING THE NUMBER OF SHARES
AUTHORIZED FOR ISSUANCE THEREUNDER BY 150,000 SHARES. THE AFFIRMATIVE VOTE OF
A MAJORITY OF THE SHARES OF THE COMPANY'S COMMON STOCK PRESENT OR REPRESENTED
AND ENTITLED TO VOTE AT THE ANNUAL MEETING WILL BE REQUIRED TO APPROVE SUCH
AMENDMENT. THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR
APPROVAL OF THE AMENDMENT.
A summary of the principal provisions of the Purchase Plan is set
forth below and is qualified in its entirety by reference to the Purchase Plan.
PURPOSE
The purpose of the Purchase Plan is to provide employees of the
Company and its subsidiaries with an opportunity to purchase Common Stock of
the Company through payroll deductions.
ADMINISTRATION
The Purchase Plan may be administered by the Board of Directors or a
committee appointed by the Board of Directors and is currently being
administered by the Board of Directors. All questions of interpretation or
application of the Purchase Plan are determined in the sole discretion of the
Board of Directors and its decisions are final, conclusive and binding upon all
participants. Members of the Board of Directors who are eligible employees are
permitted to participate in the Purchase Plan.
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OFFERING DATES
The Purchase Plan is implemented by one offering during each six-month
period in which such plan remains in effect. The offering periods commence on
January 1 and July 1 of each year. The first offering period began on January
1, 1987.
ELIGIBILITY
Employees (including officers and directors) are eligible to
participate in the Purchase Plan if they are employed more than 20 hours per
week and have completed six months of continuous employment with the Company or
its subsidiaries as of the first day of an offering period. Of 256 employees
eligible to participate in the offering which commenced January 1, 1995, 93
employees were participating as of March 1, 1995.
PARTICIPATION IN THE PLAN
Eligible employees become participants in the Purchase Plan by
delivering to the Company, prior to the commencement of an offering, a
completed subscription agreement authorizing payroll deductions. By executing
such subscription agreement, an employee becomes entitled to have shares placed
under option to him or her, but does not become obligated to purchase such
shares. An employee's participation in the Purchase Plan continues from
offering period to offering period at the deduction rate authorized in the
subscription agreement unless the participant files a new subscription
agreement specifying a different rate or withdraws from the Purchase Plan. An
employee who first becomes eligible to participate in the Purchase Plan after
the commencement of an offering may not participate until the commencement of
the next offering.
No employee will be permitted to participate in the Purchase Plan if,
immediately after the grant of an option thereunder, the employee would own 5%
or more of the voting stock or value of all classes of stock of the Company or
its subsidiaries (including stock which may be purchased through subscriptions
under the Purchase Plan or pursuant to any other options), nor will any
employee be granted an option which would permit the employee to buy more than
$25,000 worth of stock (determined at the fair market value of the shares at
the time the option is granted) pursuant to the Purchase Plan in any calendar
year. Furthermore, if the number of shares which would otherwise be placed
under option at the beginning of an offering period exceeds the number of
shares then available under the Purchase Plan, a pro rata allocation of the
shares remaining will be made among all participants in as equitable a manner
as is practicable.
PURCHASE PRICE
The purchase price per share under the Purchase Plan is 85% of the
lesser of the fair market value of a share of Common Stock on the date the
offering period commences or on the date the offering period terminates. The
fair market value of the Common Stock on a given date will be equal to the
closing sales price of the Common Stock on such date on the Nasdaq National
Market as reported in The Wall Street Journal.
PAYMENT OF PURCHASE PRICE; PAYROLL DEDUCTIONS
The purchase price of the shares is accumulated by payroll deductions
over the offering period. The rate of deductions may not exceed 10%, or such
other rate as may be determined from time to time by the Board of Directors, of
a participant's compensation. A participant may discontinue his or her
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participation in the Purchase Plan at any time, but may not increase or
decrease the rate of payroll deductions for an offering period after it
commences.
All payroll deductions are credited to the participant's account under
the Purchase Plan and are deposited with the general funds of the Company. All
payroll deductions received or held by the Company may be used by the Company
for any corporate purpose.
PURCHASE OF STOCK; EXERCISE OF OPTION
The maximum number of shares placed under option to a participant in
the Purchase Plan at the commencement of an offering period is the number of
whole shares of Common Stock determined by dividing 10% of the participant's
total compensation for the six months preceding an offering period by 85% of
the fair market value of a share of Common Stock at the beginning of such
offering period.
Unless an employee discontinues his or her participation in the
Purchase Plan, his or her option will be exercised automatically to purchase
the shares subject thereto using accumulated payroll deductions on the last day
of the offering period at the applicable price. The shares purchased for an
employee will be delivered to him or her as promptly as practicable after the
end of the applicable offering period, together with any cash remaining to the
credit of his or her account under the Purchase Plan after the purchase of such
shares, other than any amount representing a fractional share. Any amount
representing a fractional share will be credited to a participant's account for
the next offering or returned to the participant.
WITHDRAWAL
A participant's interest in an offering may be terminated in whole,
but not in part, by signing and delivering to the Company a notice of
withdrawal from the Purchase Plan at any time prior to the end of an offering
period. Promptly after such withdrawal, the payroll deductions credited to a
participant's account will be returned to him or her without interest. A
participant's withdrawal from an offering or an employee's decision not to
participate in an offering does not have any effect upon such participant's or
employee's eligibility to participate in subsequent offerings under the
Purchase Plan; provided, however, that an employee who is an officer or
director of the Company who ceases participation in the Purchase Plan may not
participate again for at least six months following such cessation of
participation.
TERMINATION OF EMPLOYMENT
If a participant terminates his or her employment for any reason,
including retirement or death, or fails to remain employed by the Company for
more than 20 hours per week during an offering period, his or her participation
in the Purchase Plan will automatically be terminated. In such event, the
payroll deductions credited to the participant's account will be refunded
without interest.
ADJUSTMENT UPON CHANGES IN CAPITALIZATION
Subject to any required action by the shareholders of the Company, the
number of shares of Common Stock covered by an option under the Purchase Plan
and the number of shares which are available for issuance, as well as the
option price per share of an unexercised option, will be proportionately
adjusted for any change in the number of shares of Common Stock resulting from
a stock split, stock dividend, spin-off, reorganization, recapitalization,
merger, consolidation, exchange of shares or the like. In the event of a
dissolution or liquidation of the Company, a sale of substantially all of the
assets of the Company, or the merger or consolidation of the Company with or
into another corporation,
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outstanding options will be assumed by the successor corporation or the Board
will declare that any option will terminate as of a date fixed by the Board of
Directors or its committee which is at least 30 days after the notice thereof
and, unless a participant terminates his or her participation in the Purchase
Plan prior to such date, his or her option for the purchase of shares will be
automatically exercised on such date and the accumulated payroll deductions
credited to a participant's account on such date will be applied to purchase
whole shares of the Company's Common Stock (up to the maximum number of shares
subject to his or her option).
NONASSIGNABILITY
No rights or accumulated payroll deductions of a participant in the
Purchase Plan may be pledged, assigned or transferred for any reason (other
than upon the death of a participant as provided in the Purchase Plan), and any
such attempt may be treated by the Company as an election by the participant to
withdraw from the Purchase Plan.
AMENDMENT AND TERMINATION OF THE PURCHASE PLAN
The Board of Directors may at any time amend or terminate the Purchase
Plan, except that termination of the Purchase Plan may not affect options
previously granted thereunder nor may any amendment make any change in an
option granted prior thereto which adversely affects the rights of any
participant without the prior written consent of the participant. No amendment
may be made to the Purchase Plan without prior approval of the shareholders of
the Company if such amendment would increase the number of shares reserved
under the Purchase Plan, materially modify the eligibility requirements or
materially increase the benefits which may accrue to participants under the
Purchase Plan. In any event, the Purchase Plan will terminate on November 6,
1996, provided that such termination shall not affect options then outstanding.
TAX INFORMATION
The Purchase Plan and the right of participants to make purchases
thereunder are intended to qualify under the provisions of Sections 421 and 423
of the Code. Under these provisions, no income will be taxable to a
participant at the time of an option grant or purchase of shares. As
summarized below, a participant may become liable for tax upon disposition of
the shares acquired under the Purchase Plan.
If shares are not disposed of by a participant within two years after
the date of the beginning of the offering period in which such shares were
acquired or within one year after the transfer of the shares to the
participant, the lesser of (i) the excess of the fair market value of the
shares at the time of such disposition over the purchase price of the shares or
(ii) the excess of the fair market value of the shares at the beginning of the
offering period in which such shares were acquired over the purchase price of
the shares (computed as of the commencement of such offering period) will be
treated as ordinary income to the participant. Any further gain upon such
disposition will be treated as long-term capital gain. If shares are disposed
of in a transaction in which the sales price is less than the purchase price,
the participant would not recognize any ordinary income and would have a
long-term capital loss equal to the difference.
If shares are disposed of by a participant (including by way of gift)
before the expiration of the two-year and one-year holding periods described
above, the excess of the fair market value of the shares on the date the option
is exercised (i.e., the last day of an offering period) over the purchase price
of the shares will be treated as ordinary income to the participant. This
excess will constitute ordinary income
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in the year of sale or other disposition even if no additional gain is realized
on the sale. The balance of any gain realized on such disposition will be
treated as a short-term or long-term capital gain, as the case may be. Even if
the shares are sold for less than their fair market value on the date the
option was exercised, ordinary income will be recognized equal to the
difference between the sales price and the value of the shares on the option
exercise date.
Any amount taxed to a participant as ordinary income under the rules
described above would be added to the actual purchase price of the shares in
determining the tax basis of the shares for the purpose of determining capital
gain or loss on a sale or other disposition of the shares.
The Company is entitled to a deduction for amounts taxed as ordinary
income to a participant only to the extent that (i) ordinary income is
recognized upon disposition of shares by a participant before the expiration of
the two-year and one-year holding periods described above and (ii) the Company
has satisfied its withholding obligations under the Code.
PROPOSAL 4 - APPROVAL OF AMENDMENT TO
THE COMPANY'S BYLAWS
The California General Corporation Law permits a corporation with 100
or more shareholders of record to make loans to, and to guarantee the
obligations of, its corporate officers, or to implement an employee benefit
plan authorizing such loans or guarantees, upon approval of the corporation's
Board of Directors alone after the Board has determined that such a loan,
guarantee or employee benefit plan may reasonably be expected to benefit the
corporation. Before a corporation may act pursuant to such law, however, the
corporation's shareholders are required to approve a bylaw authorizing the
corporation's Board of Directors to approve such loans, guarantees and employee
benefit plans without further shareholder approval.
The Board of Directors regards the Company's ability to make loans to
its officers to be important in ensuring that the Company is able to attract
and retain personnel of high caliber to serve as its officers, which personnel
are in great demand. If the proposed amendment to the Bylaws is approved by
the shareholders, any future loans to officers could be authorized by the Board
of Directors, without further shareholder approval. The Company proposes to
authorize loans under the proposed amendment to the Bylaws to, among other
things, provide to officers funds needed in connection with relocations. The
terms of such loans would be established by the Board of Directors and matters
such as the terms of loans, interest rates and collateral would be determined
by the Board on a case-by-case basis. The Company does not currently have an
employee benefit plan that authorizes loans to or guarantees of the obligations
of its officers, nor does it anticipate adopting such a plan. The proposed
amendment to the Bylaws would, however, authorize the Board of Directors to
adopt such a plan and to provide for the use of the Company's assets to fund
loans to and to support guarantees of the obligations of its officers pursuant
to such a plan.
Section 3.11(b) of the Company's Bylaws currently authorizes the
Company to make loans to its officers, to guarantee their obligations and to
adopt employee benefit plans providing for such loans or guarantees. Each such
loan, guarantee or employee benefit plan requires shareholder approval,
however, because the Section has not been approved by the Company's
shareholders. In February 1995, the Company's Board of Directors authorized an
amendment to the Company's Bylaws which would replace Section 3.11(b) of the
Bylaws with the following provision:
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"(b) The Board of Directors alone may approve
loans of money or property to, or the guarantee of obligations
of, any officer of the corporation, whether or not a director,
or an employee benefit plan authorizing such a loan or
guaranty to an officer provided that (1) the Board of
Directors determines that such a loan or guaranty or plan may
reasonably be expected to benefit the corporation, (2) the
corporation has outstanding shares held of record by 100 or
more persons (determined as provided in Section 605 of the
California General Corporation Law) on the date of approval by
the Board of Directors, and (3) the approval of the Board of
Directors is by a vote sufficient without counting the vote of
any interested director or directors."
The principal purpose of the proposed amendment to the Bylaws is to
permit the Board of Directors, upon its approval alone, to authorize the making
of loans to, and the guarantee of obligations of, the officers of the Company
without the delay and expense of having to seek the approval of the Company's
shareholders in each individual case. If the proposed amendment is approved by
the Company's shareholders, the Board of Directors will have the power, without
further shareholder approval, to authorize such loans or guarantees, or
employee benefits plans providing for such loans or guarantees, after the Board
has determined that such loans, guarantees or employee benefit plans may
reasonably be expected to benefit the Company. If the proposed amendment is
not so approved, such loans, guarantees or employee benefit plans involving
officers will continue to require approval by the shareholders on a
case-by-case basis. Loans and guarantees to employees who are not officers or
directors of the Company do not require shareholder approval under present
California corporate law.
AT THE ANNUAL MEETING, THE SHAREHOLDERS WILL BE REQUESTED TO CONSIDER
AND APPROVE THE PROPOSED AMENDMENT TO THE BYLAWS. SUCH AMENDMENT REQUIRES THE
AFFIRMATIVE VOTE OF A MAJORITY OF THE OUTSTANDING SHARES OF THE COMPANY'S
COMMON STOCK ENTITLED TO VOTE. THE BOARD OF DIRECTORS RECOMMENDS THAT THE
SHAREHOLDERS VOTE FOR APPROVAL OF THE AMENDMENT.
PROPOSAL 5 - RATIFICATION OF APPOINTMENT
OF INDEPENDENT ACCOUNTANTS
The Board of Directors has appointed Coopers & Lybrand L.L.P.,
independent accountants, to audit the Company's consolidated financial
statements for the year ending December 31, 1995, and recommends that
shareholders vote for ratification of such appointment. In the event of a
negative vote on such ratification, the Board of Directors will reconsider its
selection. A representative of Coopers & Lybrand L.L.P. is expected to be
present at the Annual Meeting, will have an opportunity to make a statement if
he or she desires to do so and is expected to be available to respond to
appropriate questions.
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OTHER MATTERS
The Company currently knows of no matters to be submitted at the
Annual Meeting other than those described herein. If any other matters
properly come before the Annual Meeting, it is the intention of the persons
named on the enclosed proxy card to vote the shares they represent as the Board
of Directors may recommend.
BY ORDER OF THE BOARD OF DIRECTORS
Ronald W. Buckly
Secretary
Calabasas, California
April ___, 1995
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PRELIMINARY PROXY CARD
PROXY CARD
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
TEKELEC
1995 ANNUAL MEETING OF SHAREHOLDERS
The undersigned shareholder of Tekelec, a California corporation (the
"Company"), hereby acknowledges receipt of the Notice of Annual Meeting of
Shareholders and Proxy Statement, each dated April ___, 1995, and Annual Report
to Shareholders for the year ended December 31, 1994, and hereby appoints
Philip J. Alford and Gilles C. Godin, and each of them, proxies and
attorneys-in-fact, with full power to each of substitution, on behalf and in
the name of the undersigned, to represent the undersigned at the Annual Meeting
of Shareholders of the Company to be held May 12, 1995, at 9:30 a.m.,
California time, at the Company's corporate headquarters located at 26580 W.
Agoura Road, Calabasas, California 91302, and at any adjournment(s) thereof,
and to vote all shares of Common Stock to which the undersigned would be
entitled, if then and there personally present, on the matters set forth below:
1. ELECTION OF DIRECTORS:
[ ] FOR ALL nominees listed below (except as marked to the contrary below).
[ ] WITHHOLD AUTHORITY to vote for ALL nominees listed below.
(Instruction: To WITHHOLD the authority to vote for any
individual nominee, mark the box next to the nominee's name below.)
Name of Nominee:
[ ] Robert V. Adams [ ] Philip J. Alford [ ] Jean-Claude Asscher
[ ] Philip Black [ ] Daniel L. Brenner [ ] Howard Oringer
[ ] Jon F. Rager
2. APPROVAL OF AMENDMENTS TO THE 1994 STOCK OPTION PLAN:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
To approve amendments to the Company's 1994 Stock Option Plan to increase the
aggregate number of shares of Common Stock authorized for issuance thereunder
from 800,000 to 1,400,000.
3. APPROVAL OF AMENDMENT TO THE EMPLOYEE STOCK PURCHASE
PLAN:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
To approve an amendment to the Company's Employee Stock Purchase Plan to
increase the aggregate number of shares authorized for issuance thereunder from
450,000 to 600,000.
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4. APPROVAL OF AMENDMENT TO THE BYLAWS:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
To approve an amendment to the Company's Bylaws to authorize the Company's
Board of Directors to approve loans to, and guarantees of the obligations of,
the Company's officers.
5. APPOINTMENT OF INDEPENDENT ACCOUNTANTS:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
To ratify the appointment of Coopers & Lybrand L.L.P. as independent
accountants of the Company for the year ending December 31, 1995, as described
in the Proxy Statement.
6. OTHER BUSINESS:
In their discretion, the Proxies are authorized to vote upon such
other business as may properly come before the meeting or any adjournment(s)
thereof.
Any one of such attorneys-in-fact or substitutes as shall be present
and shall act at said meeting or any adjournment(s) thereof shall have and may
exercise all powers of said attorneys-in-fact hereunder.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED FOR PROPOSALS 1, 2, 3, 4 AND 5 AND AS SAID PROXIES DEEM
ADVISABLE ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
Dated:________________________, 1995
______________________________________
(Signature)
______________________________________
(Signature)
(This Proxy should be marked, dated
and signed by the shareholder(s)
EXACTLY as his or her name appears
hereon and returned promptly in the
enclosed envelope. Persons signing
in a fiduciary capacity should so
indicate. If shares are held by
joint tenants or as community
property, both should sign.)
DO NOT FOLD, STAPLE OR MUTILATE
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TEKELEC
1994 STOCK OPTION PLAN
1. ESTABLISHMENT AND PURPOSES OF THE PLAN.
Tekelec hereby establishes this 1994 Stock Option Plan to promote the
interests of the Company and its stockholders by (i) helping to attract and
retain the services of selected key employees of the Company who are in a
position to make a material contribution to the successful operation of the
Company's business, (ii) motivating such persons, by means of
performance-related incentives, to achieve the Company's business goals and
(iii) enabling such persons to participate in the long-term growth and
financial success of the Company by providing them with an opportunity to
purchase stock of the Company.
2. DEFINITIONS.
The following definitions shall apply throughout the Plan:
a. "AFFILIATE" shall mean any entity that directly, or indirectly through one
or more intermediaries, controls or is controlled by, or is under common
control with, the Company.
b. "BOARD OF DIRECTORS" shall mean the Board of Directors of the Company.
c. "CODE" shall mean the Internal Revenue Code of 1986, as amended.
References in the Plan to any section of the Code shall be deemed to include
any amendment or successor provisions to such section and any regulations
issued under such section.
d. "COMMON STOCK" shall mean the common stock, without par value, of the
Company.
e. "COMPANY" shall mean Tekelec, a California corporation and any
"subsidiary" corporation, whether now or hereafter existing, as defined in
Sections 424(f) and (g) of the Code.
f. "COMMITTEE" shall mean the committee of the Board of Directors appointed
in accordance with Section 4(a) of the Plan or, if no such committee shall be
appointed or in office, the Board of Directors.
g. "CONTINUOUS EMPLOYMENT" shall mean the absence of any interruption or
termination of employment by the Company. Continuous Employment shall not be
considered interrupted in the case of sick leave, military leave or any other
leave of absence approved by the Committee or in the case of transfers between
locations of the Company.
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h. "DISINTERESTED PERSON" shall mean an administrator of the Plan who during
the one year prior to service as an administrator of the Plan, has not been
granted or awarded, and during such service, is not granted or awarded stock
options or stock appreciation rights pursuant to the Plan or any other plan of
the Company or any of its Affiliates entitling the participants therein to
acquire stock, stock options or stock appreciation rights of the Company or any
Affiliates, except for any plan under which the award of stock, stock options
or stock appreciation rights is not subject to the discretion of any person or
persons.
i. "EMPLOYEE" shall mean any employee of the Company, including officers and
directors who are also employees.
j. "FAIR MARKET VALUE" shall mean, with respect to Shares, the fair market
value per Share on the date an option is granted and, so long as the Shares are
quoted on the National Association of Securities Dealers Automated Quotations
("NASDAQ") System, the Fair Market Value per Share shall be the closing price
on the NASDAQ National Market System as of the date of grant of the Option, as
reported in The Wall Street Journal or, if there are no sales on such date, on
the immediately preceding day on which there were reported sales.
k. "INCENTIVE STOCK OPTION" shall mean an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code.
l. "NON-STATUTORY STOCK OPTION" shall mean an Option which is not an
Incentive Stock Option.
m. "OPTION" shall mean a stock option to purchase Common Stock granted to an
Optionee pursuant to the Plan.
n. "OPTION AGREEMENT" means a written agreement substantially in one of the
forms attached hereto as Exhibit A, or such other form or forms as the
Committee (subject to the terms and conditions of the Plan) may from time to
time approve, evidencing and reflecting the terms of an Option.
o. "OPTIONED STOCK" shall mean the Common Stock subject to an Option granted
pursuant to the Plan.
p. "OPTIONEE" shall mean any Employee who is granted an Option.
q. "PLAN" shall mean this Tekelec 1994 Stock Option Plan.
r. "SHARES" shall mean shares of the Common Stock or any shares into which
such Shares may be converted in accordance with Section 10 of the Plan.
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3. SHARES RESERVED.
The maximum aggregate number of Shares reserved for issuance pursuant to the
Plan shall be Eight Hundred Thousand (800,000) Shares* or the number of shares
of stock to which such Shares shall be adjusted as provided in Section 10 of
the Plan. Such number of Shares may be set aside out of authorized but
unissued Shares not reserved for any other purpose, or out of issued Shares
acquired for and held in the treasury of the Company from time to time.
Shares subject to, but not sold or issued under, any Option terminating,
expiring or canceled for any reason prior to its exercise in full, shall again
become available for Options thereafter granted under the Plan, and the same
shall not be deemed an increase in the number of Shares reserved for issuance
under the Plan.
4. ADMINISTRATION OF THE PLAN.
a. The Plan shall be administered by a Committee designated by the Board of
Directors to administer the Plan and comprised of not less than two directors,
each of whom is a Disinterested Person. In addition, each director designated
by the Board of Directors to administer the Plan shall be an "outside director"
as defined in the Treasury regulations issued pursuant to Section 162(m) of the
Code. Members of the Committee shall serve for such period of time as the
Board of Directors may determine or until their resignation, retirement,
removal or death, if sooner. From time to time the Board of Directors may
increase the size of the Committee and appoint additional members thereto,
remove members (with or without cause) and appoint new members in substitution
therefor or fill vacancies however caused.
b. Subject to the provisions of the Plan, the Committee shall have the
authority, in its discretion: (i) to grant Incentive Stock Options, in
accordance with Section 422 of the Code, or Non-Statutory Stock Options; (ii)
to determine, upon review of relevant information, the Fair Market Value per
Share; (iii) to determine the exercise price of the Options to be granted to
Employees in accordance with Section 6(c) of the Plan; (iv) to determine the
Employees to whom, and the time or times at which, Options shall be granted,
and the number of Shares subject to each Option; (v) to prescribe, amend and
rescind rules and regulations relating to the Plan subject to the limitations
set forth in Section 12 of the Plan; (vi) to determine the terms and provisions
of each Option granted to Optionees under the Plan and each Option Agreement
(which need not be identical with the terms of other Options and Option
Agreements) and, with the consent of the Optionee, to modify or amend an
outstanding Option or Option Agreement; (vii) to accelerate the exercise date
of any Option; (viii) to determine whether any Optionee will be required to
execute a stock repurchase agreement or other agreement as a condition to the
exercise of an Option, and to determine the terms and provisions of any such
agreement (which need not be identical with the terms of any other such
agreement) and, with the consent of the Optionee, to amend any such agreement;
(ix) to interpret the Plan or any agreement entered into
_________________
* Such number of shares has been adjusted to reflect the Company's
two-for-one stock split effective March 17, 1995.
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with respect to the grant or exercise of Options, to determine the eligibility
of an Employee for benefits hereunder and the amount thereof; (x) to authorize
any person to execute on behalf of the Company any instrument required to
effectuate the grant of an Option previously granted or to take such other
actions as may be necessary or appropriate with respect to the Company's rights
pursuant to Options or agreements relating to the grant or exercise thereof;
and (xi) to make such other determinations and establish such other procedures
as it deems necessary or advisable for the administration of the Plan.
c. All decisions, determinations and interpretations of the Committee shall
be final and binding on all Optionees and any other holders of any Options
granted under the Plan.
d. The Committee shall keep minutes of its meetings and of the actions taken
by it without a meeting. A majority of the Committee shall constitute a
quorum, and the actions of a majority at a meeting, including a telephone
meeting, at which a quorum is present, or acts approved in writing by a
majority of the members of the Committee without a meeting, shall constitute
acts of the Committee.
e. The Company shall pay all original issue and transfer taxes with respect
to the grant of Options and/or the issue and transfer of Shares pursuant to the
exercise thereof, and all other fees and expenses necessarily incurred by the
Company in connection therewith; provided, however, that the person exercising
an Option shall be responsible for all payroll, withholding, income and other
taxes incurred by such person on the date of exercise of an Option or transfer
of Shares.
5. ELIGIBILITY.
Options may be granted under the Plan only to Employees. An Employee who has
been granted an Option may, if he or she is otherwise eligible, be granted
additional Options.
6. TERMS AND CONDITIONS OF OPTIONS.
Options granted pursuant to the Plan by the Committee shall be either
Incentive Stock Options or Non-Statutory Stock Options and shall be evidenced
by an Option Agreement providing, in addition to such other terms as the
Committee may deem advisable, the following terms and conditions:
a. Time of Granting Options. The date of grant of an Option shall for all
purposes, be the date on which the Committee makes the determination granting
such Option. Notice of the determination shall be given to each Optionee
within a reasonable time after the date of such grant.
b. Number of Shares. Each Option Agreement shall state the number of Shares
to which it pertains and whether such Option is intended to constitute an
Incentive Stock Option or a Non-Statutory Stock Option. The maximum number of
Shares which may be awarded as Options under the Plan during any calendar year
to any Optionee is Two Hundred Thousand
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<PAGE> 40
(200,000) Shares.* If an Option held by an Employee of the Company is canceled,
the canceled Option shall continue to be counted against the maximum number of
Shares for which Options may be granted to such Employee and any replacement
Option granted to such Employee shall also count against such limit.
c. Exercise Price. The exercise price per Share for the Shares to be issued
pursuant to the exercise of an Option, shall be such price as is determined by
the Committee; provided, however, such price shall in no event be less than
one-hundred percent (100%) with respect to Non-Statutory Stock Options, and
one hundred percent (100%) with respect to Incentive Stock Options, of the Fair
Market Value per Share on the date of grant.
In the case of an Incentive Stock Option granted to an Employee who, at the
time the Incentive Stock Option is granted, owns or is deemed to own (by reason
of the attribution rules applicable under Section 424(d) of the Code) stock
possessing more than ten percent (10%) of the combined voting power of all
classes of stock of the Company, the exercise price per Share shall be no less
than one-hundred-ten percent (110%) of the Fair Market Value per Share on the
date of grant.
d. Medium and Time of Payment. The consideration to be paid for the Shares
to be issued upon exercise of an Option, including the method of payment, shall
be determined by the Committee and may consist entirely of cash, check or
Shares having a Fair Market Value on the date of surrender equal to the
aggregate exercise price of the Shares as to which said Option shall be
exercised, or any combination of such methods of payment, or such other
consideration and method of payment permitted under any laws to which the
Company is subject which is approved by the Committee; provided, however, that
the Optionee shall be required to pay in cash an amount necessary to satisfy
the Company's withholding obligations. In the case of an Incentive Stock
Option, such provision shall be determined on the date of the grant.
If the consideration for the exercise of an Option is the surrender of
previously acquired and owned Shares, the Optionee will be required to make
representations and warranties satisfactory to the Company regarding his or her
title to the Shares used to effect the purchase, including without limitation
representations and warranties that the Optionee has good and marketable title
to such Shares free and clear of any and all liens, encumbrances, charges,
equities, claims, security interests, options or restrictions, and has full
power to deliver such Shares without obtaining the consent or approval of any
person or governmental authority other than those which have already given
consent or approval in a manner satisfactory to the Company. The value of the
Shares used to effect the purchase shall be the Fair Market Value of such
Shares on the date of exercise as determined by the Committee in its sole
discretion, exercised in good faith.
e. Term of Options. The term of an Incentive Stock Option may be up to ten
(10) years from the date of grant thereof; provided, however, that the term of
an Incentive Stock Option granted to an Employee who, at the time the Incentive
Stock Option is granted, owns or is deemed to own (by reason of the attribution
rules of Section 424(d) of the Code) stock possessing more than ten percent
(10%) of the total combined voting power of all classes of
_________________
* Such number of shares has been adjusted to reflect the Company's
two-for-one stock split effective March 17, 1995.
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<PAGE> 41
stock of the Company, shall be five (5) years from the date of grant thereof or
such shorter term as may be provided in the Option.
The term of a Non-Statutory Stock Option may be up to ten (10) years from
the date such Employee first becomes vested in any portion of an Option award.
The term of any Option may be less than the maximum term provided for herein
as specified by the Committee upon grant of the Option and as set forth
therein.
f. Maximum Amount of Incentive Stock Options. To the extent that the
aggregate Fair Market Value (determined at the time an Incentive Stock Option
is granted) of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by an Optionee during any calendar year under
all incentive stock option plans of the Company exceeds One Hundred Thousand
Dollars ($100,000), the Options in excess of such limit shall be treated as
Non-Statutory Stock Options.
7. EXERCISE OF OPTION.
a. In General. Any Option granted hereunder to an Employee shall be
exercisable at such times and under such conditions as may be determined by the
Committee and as shall be permissible under the terms of the Plan, including
any performance criteria with respect to the Company and/or the Optionee as may
be determined by the Committee.
An Option may be exercised in accordance with the provisions of the Plan as
to all or any portion of the Shares then exercisable under an Option from time
to time during the term of the Option. However, an Option may not be exercised
for a fraction of a Share.
b. Procedure. An Option shall be deemed to be exercised when written notice
of such exercise has been given to the Company at its principal business office
in accordance with the terms of the Option Agreement by the person entitled to
exercise the Option and full payment for the Shares with respect to which the
Option is exercised has been received by the Company, accompanied by any other
agreements required by the terms of the Plan and/or Option Agreement or as
required by the Committee and payment by the Optionee of all payroll,
withholding or income taxes incurred in connection with such Option exercise
(or arrangements for the collection or payment of such tax satisfactory to the
Committee are made). Full payment may consist of such consideration and method
of payment allowable under Section 6(d) of the Plan.
c. Decrease in Available Shares. Exercise of an Option in any manner shall
result in a decrease in the number of Shares which thereafter may be available,
both for purposes of the Plan and for sale under the Option, by the number of
Shares as to which the Option is exercised.
d. Exercise of Stockholder Rights. Until the Option is properly exercised in
accordance with the terms of this section, no right to vote or receive
dividends or any other
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rights as a stockholder shall exist with respect to the Optioned Stock. No
adjustment shall be made for a dividend or other right for which the record
date is prior to the date the Option is exercised, except as provided in
Section 10 of the Plan.
e. Termination of Eligibility. If an Optionee ceases to serve as an Employee
for any reason other than death or permanent and total disability (within the
meaning of Section 22(e)(3) of the Code) and thereby terminates his or her
Continuous Status as an Employee he or she may, but only within three (3)
months following the date he or she ceases his or her Continuous Status as an
Employee (subject to any earlier termination of the Option as provided by its
terms), exercise his or her Option to the extent that he or she was entitled to
exercise it at the date of such termination. To the extent that he or she was
not entitled to exercise the Option at the date of such termination, or if he
or she does not exercise such Option (which he or she was entitled to exercise)
within the time specified herein, the Option shall terminate. Notwithstanding
anything to the contrary herein, the Committee may at any time and from time to
time prior to the termination of a Non- Statutory Stock Option, with the
consent of the Optionee, extend the period of time during which the Optionee
may exercise his or her Non- Statutory Stock Option following the date he or
she ceases his or her Continuous Status as an Employee; provided, however, that
the maximum period of time during which a Non-Statutory Stock Option shall be
exercisable following the date on which an Optionee terminates his or her
Continuous Status as an Employee shall not exceed an aggregate of six (6)
months, that the Non-Statutory Stock Option shall not be, or as a result of
such extension become, exercisable after the expiration of the term of such
Option as set forth in the Option Agreement and, notwithstanding any extension
of time during which the Non-Statutory Stock Option may be exercised, that such
Option, unless otherwise amended by the Committee, shall only be exercisable to
the extent the Optionee was entitled to exercise it on the date he or she
ceased his or her Continuous Status as an Employee.
f. Death or Disability Of Optionee. If an Optionee's Continuous Status as an
Employee ceases due to death or permanent and total disability (within the
meaning of Section 22(e)(3) of the Code) of the Optionee, the Option may be
exercised within six (6) months (or such other period of time not exceeding one
(1) year as is determined by the Committee at the time of granting the Option)
following the date of death or termination of employment due to permanent or
total disability (subject to any earlier termination of the Option as provided
by its terms), by the Optionee in the case of permanent or total disability, or
in the case of death by the Optionee's estate or by a person who acquired the
right to exercise the Option by bequest or inheritance, but in any case (unless
otherwise determined by the Committee at the time of granting the Option) only
to the extent the Optionee was entitled to exercise the Option at the date of
his or her termination of employment by death or permanent and total
disability. To the extent that he or she was not entitled to exercise such
Option at the date of his or her termination of employment by death or
permanent and total disability, or if he or she does not exercise such Option
(which he or she was entitled to exercise) within the time specified herein,
the Option shall terminate.
g. Expiration of Option. Notwithstanding any provision in the Plan,
including but not limited to the provisions set forth in Sections 7(e) and
7(f), an Option may not be exercised, under any circumstances, after the
expiration of its term.
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h. Conditions on Exercise and Issuance. As soon as practicable after any
proper exercise of an Option in accordance with the provisions of the Plan, the
Company shall deliver to the Optionee at the principal executive office of the
Company or such other place as shall be mutually agreed upon between the
Company and the Optionee, a certificate or certificates representing the Shares
for which the Option shall have been exercised. The time of issuance and
delivery of the certificate or certificates representing the Shares for which
the Option shall have been exercised may be postponed by the Company for such
period as may be required by the Company, with reasonable diligence, to comply
with any law or regulation applicable to the issuance or delivery of such
Shares.
Options granted under the Plan are conditioned upon the Company obtaining
any required permit or order from appropriate governmental agencies,
authorizing the Company to issue such Options and Shares issuable upon exercise
thereof. Shares shall not be issued pursuant to the exercise of an Option
unless the exercise of such Option and the issuance and delivery of such Shares
pursuant thereto shall comply with all relevant provisions of law, including,
without limitation, the Securities Act of 1933, as amended, the Securities
Exchange Act of 1934, as amended, applicable state law, the rules and
regulations promulgated thereunder, and the requirements of any stock exchange
upon which the Shares may then be listed, and may be further subject to the
approval of counsel for the Company with respect to such compliance.
i. Withholding or Deduction for Taxes. The grant of Options hereunder and
the issuance of Shares pursuant to the exercise thereof is conditioned upon the
Company's reservation of the right to withhold, in accordance with any
applicable law, from any compensation or other amounts payable to the Optionee
any taxes required to be withheld under Federal, state or local law as a result
of the grant or exercise of such Option or the sale of the Shares issued upon
exercise thereof. To the extent that compensation and other amounts, if any,
payable to the Optionee are insufficient to pay any taxes required to be so
withheld, the Company may, in its sole discretion, require the Optionee, as a
condition of the exercise of an Option, to pay in cash to the Company an amount
sufficient to cover such tax liability or otherwise to make adequate provision
for the delivery to the Company of cash necessary to satisfy the Company's
withholding obligations under Federal and state law.
8. NONTRANSFERABILITY OF OPTIONS.
Options granted under the Plan may not be sold, pledged, assigned,
hypothecated, gifted, transferred or disposed of in any manner, either
voluntarily or involuntarily by operation of law, other than by will or by the
laws of descent or distribution or transfers between spouses incident to a
divorce.
9. HOLDING PERIOD.
In the case of officers and directors of the Company, at least six (6) months
must elapse from the date of grant of the Option to the date of disposition of
the underlying Shares.
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10. ADJUSTMENT UPON CHANGE IN CORPORATE STRUCTURE.
a. Subject to any required action by the stockholders of the Company, the
number of Shares covered by each outstanding Option, and the number of Shares
which have been authorized for issuance under the Plan but as to which no
Options have yet been granted or which have been returned to the Plan upon
cancellation or expiration of an Option, as well as the exercise or purchase
price per Share covered by each such outstanding Option, shall be
proportionately adjusted for any increase or decrease in the number of issued
Shares resulting from a stock split or combination or the payment of a stock
dividend (but only on the Common Stock) or any other increase or decrease in
the number of issued Shares effected without receipt of consideration by the
Company (other than stock awards to Employees); provided, however, that the
conversion of any convertible securities of the Company shall not be deemed to
have been effected without the receipt of consideration. Such adjustment shall
be made by the Committee, 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 affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of Shares subject to the Plan or
an Option.
b. In the event of the proposed dissolution or liquidation of the Company, or
in the event of a proposed sale of all or substantially all of the assets of
the Company (other than in the ordinary course of business), or the merger or
consolidation of the Company with or into another corporation, as a result of
which the Company is not the surviving and controlling corporation, the Board
of Directors shall (i) make provision for the assumption of all outstanding
options by the successor corporation or (ii) declare that any Option shall
terminate as of a date fixed by the Board of Directors which is at least thirty
(30) days after the notice thereof to the Optionee and shall give each Optionee
the right to exercise his or her Option as to all or any part of the Optioned
Stock, including Shares as to which the Option would not otherwise be
exercisable provided such exercise does not violate Section 7(e) of the Plan.
c. No fractional shares of Common Stock shall be issuable on account of any
action aforesaid, and the aggregate number of shares into which Shares then
covered by the Option, when changed as the result of such action, shall be
reduced to the largest number of whole shares resulting from such action,
unless the Board of Directors, in its sole discretion, shall determine to issue
scrip certificates in respect to any fractional shares, which scrip
certificates, in such event shall be in a form and have such terms and
conditions as the Board of Directors in its discretion shall prescribe.
11. STOCKHOLDER APPROVAL.
Effectiveness of the Plan shall be subject to approval by the stockholders of
the Company within twelve (12) months before or after the date the Plan is
adopted; provided, however, that Options may be granted pursuant to the Plan
subject to subsequent approval of the Plan by such stockholders. Stockholder
approval shall be obtained by the affirmative votes of the holders of
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a majority of voting Shares present or represented and entitled to vote at a
meeting of stockholders duly held in accordance with the laws of the state of
California.
12. AMENDMENT AND TERMINATION OF THE PLAN.
a. Amendment and Termination. The Committee may amend or terminate the Plan
from time to time in such respects as the Committee may deem advisable and
shall make any amendments which may be required so that Options intended to be
Incentive Stock Options shall at all times continue to be Incentive Stock
Options for the purpose of Section 422 of the Code; provided, however, that
without approval of the holders of a majority of the voting Shares represented
or present and entitled to vote at a valid meeting of stockholders, no such
revision or amendment shall (i) materially increase the benefits accruing to
participants under the Plan; (ii) materially increase the number of Shares
which may be issued under the Plan, other than in connection with an adjustment
under Section 10 of the Plan; (iii) materially modify the requirements as to
eligibility for participation in the Plan; (iv) materially change the
designation of the class of Employees eligible to be granted Options; (v)
remove the administration of the Plan from the Board of Directors or its
Committee; or (vi) extend the term of the Plan beyond the maximum term set
forth in Section 15 hereunder.
b. Effect of Amendment or Termination. Except as otherwise provided in
Section 10 of the Plan, any amendment or termination of the Plan shall not
affect Options already granted and such Options shall remain in full force and
effect as if the Plan had not been amended or terminated, unless mutually
agreed otherwise between the Optionee and the Company, which agreement must be
in writing and signed by the Optionee and the Company. Notwithstanding
anything to the contrary herein, this 1994 Stock Option Plan shall not
adversely affect, unless mutually agreed in writing by the Company and an
Optionee, the terms and provisions of any Option granted prior to the date the
Plan was approved by stockholders as provided in Section 11 of the Plan.
13. INDEMNIFICATION.
No member of the Committee or of the Board of Directors shall be liable for
any act or action taken, whether of commission or omission, except in
circumstances involving willful misconduct, or for any act or action taken,
whether of commission or omission, by any other member or by any officer,
agent, or Employee. In addition to such other rights of indemnification they
may have as members of the Board of Directors, or as members of the Committee,
the Committee shall be indemnified by the Company against reasonable expenses,
including attorneys' fees actually and necessarily incurred in connection with
the defense of any action, suit or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party by reason of any action
taken, by commission or omission, in connection with the Plan or any Option
taken thereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel selected by
the Company) or paid by them in satisfaction of a judgment in any action, suit
or proceeding, except in relation to matters as to which it shall be adjudged
in such action, suit or proceeding that such Committee member is liable for
willful misconduct in the performance of his or her duties;
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<PAGE> 46
provided that within sixty (60) days after institution of any such action, suit
or proceeding, a Committee member shall in writing offer the Company the
opportunity, at its own expense, to handle and defend the same.
14. GENERAL PROVISIONS.
a. Other Plans. Nothing contained in the Plan shall prohibit the Company
from establishing additional incentive compensation arrangements.
b. No Enlargement of Rights. Neither the Plan, nor the granting of Shares,
nor any other action taken pursuant to the Plan shall constitute or be evidence
of any agreement or understanding, express or implied, that the Company will
retain an Employee for any period of time, or at any particular rate of
compensation. Nothing in the Plan shall be deemed to limit or affect the right
of the Company or any such corporations to discharge any Employee thereof at
any time for any reason or no reason.
No Employee shall have any right to or interest in Options authorized
hereunder prior to the grant thereof to such eligible person, and upon such
grant he or she shall have only such rights and interests as are expressly
provided herein and in the related Option Agreement, subject, however, to all
applicable provisions of the Company's Certificate of Incorporation, as the
same may be amended from time to time.
c. Notice. Any notice to be given to the Company pursuant to the provisions
of the Plan shall be addressed to the Company in care of its Secretary (or such
other person as the Company may designate from time to time) at its principal
office, and any notice to be given to an Optionee whom an Option is granted
hereunder shall be delivered personally or addressed to him or her at the
address given beneath his or her signature on his or her Stock Option
Agreement, or at such other address as such Optionee or his or her transferee
(upon the transfer of the Optioned Stock) may hereafter designate in writing to
the Company. Any such notice shall be deemed duly given when enclosed in a
properly sealed envelope or wrapper addressed as aforesaid, registered or
certified, and deposited, postage and registry or certification fee prepaid, in
a post office or branch post office regularly maintained by the United States
Postal Service. It shall be the obligation of each Optionee holding Shares
purchased upon exercise of an Option to provide the Secretary of the Company,
by letter mailed as provided hereinabove, with written notice of his or her
direct mailing address.
d. Applicable Law. To the extent that Federal laws do not otherwise control,
the Plan shall be governed by and construed in accordance with the laws of the
state of California, without regard to the conflict of laws rules thereof.
e. Incentive Stock Options. The Company shall not be liable to an Optionee
or other person if it is determined for any reason by the Internal Revenue
Service or any court having jurisdiction that any Incentive Stock Options are
not incentive stock options as defined in Section 422 of the Code.
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<PAGE> 47
f. Information to Optionees. The Company shall provide without charge to
each Optionee copies of such annual and periodic reports as are provided by the
Company to its stockholders generally.
g. Availability of Plan. A copy of the Plan shall be delivered to the
Secretary of the Company and shall be shown by him or her to any eligible
person making reasonable inquiry concerning it.
h. Severability. In the event that any provision of the Plan is found to be
invalid or otherwise unenforceable under any applicable law, such invalidity or
unenforceability shall not be construed as rendering any other provisions
contained herein as invalid or unenforceable, and all such other provisions
shall be given full force and effect to the same extent as though the invalid
or unenforceable provision was not contained herein.
15. EFFECTIVE DATE AND TERM OF PLAN.
The Plan shall become effective upon stockholder approval as provided in
Section 11 of the Plan. The Plan shall continue in effect for a term of ten
(10) years unless sooner terminated under Section 12 of the Plan.
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<PAGE> 48
EXHIBIT A-1
TEKELEC
1994 STOCK OPTION PLAN
INCENTIVE STOCK OPTION AGREEMENT
Tekelec, a California corporation (the "Company"), hereby enters into this
agreement (the "Option Agreement") with ______________________________ (the
"Optionee") on this _____ day of _______________, __________, whereby the
Company grants to the Optionee the right and option to purchase an aggregate of
__________ shares of Common Stock (the "Shares") of the Company. This Option
is in all respects subject to the terms, definitions and provisions of the
Tekelec 1994 Stock Option Plan (the "Plan") adopted by the Company and
incorporated herein by reference. The terms defined in the Plan shall have the
same meanings herein.
1. NATURE OF THE OPTION. This Option is intended by the Company and the
Optionee to qualify as an Incentive Stock Option, as defined in Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code").
2. EXERCISE PRICE. The exercise price is $ __________ per Share, which price
is not less than one hundred percent (100%) of the Fair Market Value thereof on
the date of the grant.
3. METHOD OF PAYMENT. The consideration to be paid for the Shares to be
issued upon the exercise of this Option may consist entirely of cash, check,
Shares already owned by the Optionee which have a Fair Market Value on the date
of surrender equal to the aggregate exercise price of the Shares as to which
this Option is exercised, or any combination of such methods of payment,
subject to the provisions of Section 6(d) of the Plan; provided, however, that
the Optionee shall be required to pay in cash an amount necessary to satisfy
the Company's withholding obligations.
4. EXERCISE OF OPTION. This Option shall be exercisable during its term only
in accordance with the terms and provisions of the Plan and this Option as
follows:
(a) This Option shall vest and be exercisable cumulatively in
____________________ ( ) equal quarterly installments commencing [e.g.,
with the first installment vesting on ________________ and one additional
installment vesting on the last day of each calendar quarter thereafter, as
long as the Optionee continues to serve as an Employee]. An Optionee who has
been in continuous employment with the Company since the grant of this Option
may exercise the exercisable portion of his or her Option in whole or in part
at any time during his or her employment. However, an Option may not be
exercised for a fraction of a Share. In the event of the Optionee's
termination of employment with the Company or disability or death, the
provisions of Sections 6 or 7 below shall apply to the right of the Optionee to
exercise the Option.
<PAGE> 49
(b) This Option shall be exercisable by written notice which shall state
the election to exercise this Option, the number of Shares with respect to
which this Option is being exercised and such other representations and
agreements as may be required by the Company hereunder or pursuant to the
provisions of the Plan. Such written notice shall be signed by the Optionee
and shall be delivered in person or by certified mail to the Secretary of the
Company or such other person as may be designated by the Company. The written
notice shall be accompanied by payment of the purchase price and an executed
Notice of Exercise of Stock Option in the form attached hereto. The
certificate or certificates for the Shares as to which this Option is exercised
shall be registered in the name of the Optionee.
(c) No rights of a stockholder shall exist with respect to the Shares
under this Option as a result of the mere grant of this Option or the exercise
of this Option. Such rights shall exist only after issuance of a stock
certificate in accordance with Section 7(h) of the Plan.
5. RESTRICTIONS ON EXERCISE. This Option may not be exercised until such
time as the Plan has been approved by the stockholders of the Company as set
forth in Section 11 of the Plan, or if the issuance of Shares upon Optionee's
exercise or the method of payment of consideration for such Shares would
constitute a violation of any applicable Federal or state securities law or
other applicable law or regulation. As a condition to the exercise of the
Option, the Company may take such steps as in its judgment are reasonably
required to prevent any such violation and may require the Optionee to make any
representations, warranties or acknowledgements to the Company as may be
required by any applicable law or regulation.
6. TERMINATION OF EMPLOYMENT. If the Optionee ceases to serve as an Employee
for any reason other than death or permanent and total disability (within the
meaning of Section 22(e)(3) of the Code) and thereby terminates his or her
Continuous Status as an Employee, the Optionee shall have the right to exercise
this Option at any time within three (3) months after the date of such
termination to the extent that the Optionee was entitled to exercise this
Option at the date of such termination. To the extent that the Optionee was
not entitled to exercise this Option at the date of termination, or to the
extent this Option is not exercised within the time specified herein, this
Option shall terminate. Notwithstanding the foregoing, this Option shall not
be exercisable after the expiration of the term set forth in Section 8 hereof.
7. DEATH OR DISABILITY. If the Optionee ceases to serve as an Employee due
to death or permanent and total disability (within the meaning of Section
22(e)(3) of the Code), this Option may be exercised at any time within six (6)
months after the date of death or termination of employment due to disability,
in the case of death, by the Optionee's estate or by a person who acquired the
right to exercise this Option by bequest or inheritance, or, in the case of
disability, by the Optionee, but in any case only to the extent the Optionee
was entitled to exercise this Option at the date of such termination. To the
extent that the Optionee was not entitled to exercise this Option at the date
of termination, or to the extent this Option is not exercised within the time
specified herein, this Option shall terminate. Notwithstanding the foregoing,
this Option shall not be exercisable after the expiration of the terms set
forth in Section 8 hereof.
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<PAGE> 50
8. TERM OF OPTION. This Option may not be exercised more than ________ ( )
years from the date of the grant of this Option and may be exercised during
such term only in accordance with the Plan and the terms of this Option
Agreement. Notwithstanding any provision in the Plan with respect to the
post-employment exercise of this Option, this Option may not be exercised after
the expiration of its term.
9. WITHHOLDING UPON EXERCISE OF OPTION. The Company reserves the right to
withhold, in accordance with any applicable laws, from any consideration
payable to Optionee any taxes required to be withheld by Federal, state or
local law as a result of the grant or exercise of this Option or the sale or
other disposition of the Shares issued upon exercise of this Option. If the
amount of any consideration payable to the Optionee is insufficient to pay such
taxes or if no consideration is payable to the Optionee, upon the request of
the Company, the Optionee shall pay to the Company in cash an amount sufficient
for the Company to satisfy any Federal, state or local tax withholding
requirements it may incur, as a result of the grant or exercise of this Option
or the sale or other disposition of the Shares issued upon the exercise of this
Option.
10. NONTRANSFERABILITY OF OPTION. This Option may not be sold, pledged,
assigned, hypothecated, gifted, transferred or disposed of in any manner either
voluntarily or involuntarily by operation of law or otherwise, other than by
will or by the laws of descent or distribution or transfer between spouses
incident to a divorce. Subject to the foregoing and the terms of the Plan, the
terms of this Option shall be binding upon the executors, administrators,
heirs, successors and assigns of the Optionee.
11. NO RIGHT OF EMPLOYMENT. Neither this Plan nor any Option granted
hereunder shall confer upon any Optionee any right to continue in the
employment of the Company or limit in any respect the right of the Company to
discharge the Optionee at any time, with or without cause and with or without
notice.
12. MISCELLANEOUS.
(a) Successors and Assigns. This Option Agreement shall bind and inure
only to the benefit of the parties to this Option Agreement (the "Parties") and
their respective successors and assigns.
(b) No Third-Party Beneficiaries. Nothing in this Option Agreement is
intended to confer any rights or remedies on any persons other than the Parties
and their respective successors or assigns. Nothing in this Option Agreement
is intended to relieve or discharge the obligation or liability of third
persons to any Party. No provision of this Option Agreement shall give any
third person any right of subrogation or action over or against any Party.
(c) Amendments. (i) The Committee reserves the right to amend the terms
and provisions of this Option Agreement without the Optionee's consent to
comply with any Federal or state securities law.
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<PAGE> 51
(ii) Except as specifically provided in subsection (i) above, this Option
Agreement shall not be changed or modified, in whole or in part, except by
supplemental agreement signed by the Parties. Any Party may waive compliance
by any other Party with any of the covenants or conditions of this Option
Agreement, but no waiver shall be binding unless executed in writing by the
Party making the waiver. No waiver or any provision of this Option Agreement
shall be deemed, or shall constitute, a waiver of any other provision, whether
or not similar, nor shall any waiver constitute a continuing waiver. Any
consent under this Option Agreement shall be in writing and shall be effective
only to the extent specifically set forth in such writing. For the protection
of the Parties, amendments, waivers and consents that are not in writing and
executed by the Party to be bound may be enforced only if they are
detrimentally relied upon and proved by clear and convincing evidence. Such
evidence shall not include any alleged reliance.
(d) Notice. Any notice, instruction or communication required or
permitted to be given under this Option Agreement to any Party shall be in
writing and shall be deemed given when actually received or, if earlier, five
days after deposit in the United States mail by certified or express mail,
return receipt requested, first class postage prepaid, addressed to the
principal office of such Party or to such other address as such Party may
request by written notice.
(e) Governing Law. To the extent that Federal laws do not otherwise
control, the Plan and all determinations made or actions taken pursuant hereto
shall be governed by the laws of the state of California, without regard to the
conflict of laws rules thereof.
(f) Entire Agreement. This Option Agreement and the Plan constitute the
entire agreement between the Parties with regard to the subject matter hereof.
This Option Agreement supersedes all previous agreements between the Parties,
and there are now no agreements, representations, or warranties between the
Parties, other than those set forth herein.
(g) Severability. If any provision of this Option Agreement or the
application of such provision to any person or circumstances is held invalid or
unenforceable, the remainder of this Option Agreement, or the application of
such provision to persons or circumstances other than those as to which it is
held invalid or unenforceable, shall not be affected thereby.
(h) Optionee Representation. Optionee acknowledges receipt of the Plan, a
copy of which is attached hereto, and hereby accepts the grant of this Option
subject to all the terms and provisions thereof.
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<PAGE> 52
IN WITNESS WHEREOF, this Option Agreement has been duly executed on behalf of
the Company by an authorized representative of the Company and by the Optionee
on the date and year first written above.
DATE OF GRANT: ______________________________
Tekelec
By: ____________________________________
Title: ____________________________________
Dated: ____________________________________
Optionee
____________________________________
Dated: ____________________________________
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<PAGE> 53
EXHIBIT A-2
TEKELEC
1994 STOCK OPTION PLAN
NONSTATUTORY STOCK OPTION AGREEMENT
Tekelec, a California corporation (the "Company"), hereby enters into this
agreement (the "Option Agreement") with ______________________________ (the
"Optionee") on this _____ day of _______________, __________, whereby the
Company grants to the Optionee the right and option to purchase an aggregate of
__________ shares of Common Stock (the "Shares") of the Company. This Option
is in all respects subject to the terms, definitions and provisions of the
Tekelec 1994 Stock Option Plan (the "Plan") adopted by the Company and
incorporated herein by reference. The terms defined in the Plan shall have the
same meanings herein.
1. NATURE OF THE OPTION. This Option is intended to be a nonstatutory stock
option and is not intended to be an incentive stock option within the meaning
of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"),
or to otherwise qualify for any special tax benefits to the Optionee.
2. EXERCISE PRICE. The exercise price is $ __________ per Share, which price
is not less than one-hundred percent (100%) of the Fair Market Value thereof on
the date of the grant.
3. METHOD OF PAYMENT. The consideration to be paid for the Shares to be
issued upon exercise of this Option may consist entirely of cash, check, Shares
already owned by the Optionee which have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which this
Option is exercised, or any combination of such methods of payment, subject to
the provisions of Section 6(d) of the Plan; provided, however, that the
Optionee shall be required to pay in cash an amount necessary to satisfy the
Company's withholding obligations.
4. EXERCISE OF OPTION. This Option shall be exercisable during its term only
in accordance with the terms and provisions of the Plan and this Option as
follows:
(a) This Option shall vest and be exercisable cumulatively in
____________________ ( ) equal quarterly installments commencing on the
last day of the calendar quarter which follows the first full calendar quarter
after commencement of the Optionee's service as an Employee of the Company. An
Optionee who has been in continuous service with the Company since the grant of
this Option may exercise the exercisable portion of his or her Option in whole
or in part at any time during his or her employment. However, an Option may
not be exercised for a fraction of a Share. In the event of the Optionee's
termination of employment with the Company, or disability or death, the
provisions of Sections 6 or 7 below shall apply to the right of the Optionee to
exercise this Option.
<PAGE> 54
(b) This Option shall be exercisable by written notice which shall state
the election to exercise this Option, the number of Shares in respect to which
this Option is being exercised and such other representations and agreements as
may be required by the Company hereunder or pursuant to the provisions of the
Plan. Such written notice shall be signed by the Optionee and shall be
delivered in person or by certified mail to the Secretary of the Company or
such other person as may be designated by the Company. The written notice
shall be accompanied by payment of the purchase price and an executed Notice of
Exercise of Stock Option in the form attached hereto (as may be amended from
time to time). The certificate or certificates for the Shares as to which this
Option is exercised shall be registered in the name of the Optionee.
(c) No rights of a stockholder shall exist with respect to the Shares
under this Option as a result of the mere grant of this Option or the exercise
of this Option. Such rights shall exist only after issuance of a stock
certificate in accordance with Section 7(h) of the Plan.
5. RESTRICTIONS ON EXERCISE. This Option may not be exercised until such
time as the Plan has been approved by the stockholders of the Company as set
forth in Section 11 of the Plan, or if the issuance of Shares upon Optionee's
exercise or the method of payment of consideration for such Shares would
constitute a violation of any applicable Federal or state securities law or
other applicable law or regulation. As a condition to the exercise of this
Option, the Company may require the Optionee to make any representation and
warranty to the Company as may be required by any applicable law or regulation.
6. TERMINATION OF EMPLOYMENT. If the Optionee ceases to serve as an Employee
for any reason other than death or permanent and total disability (within the
meaning of Section 22(e)(3) of the Code) and thereby terminates his or her
Continuous Status as an Employee, the Optionee shall have the right to exercise
this Option at any time within three (3) months after the date of such
termination to the extent that the Optionee was entitled to exercise this
Option at the date of such termination. The Committee may at any time and from
time-to-time prior to the termination of this Option, with the consent of
Optionee, extend the period of time during which the Optionee may exercise this
Option following the date the Optionee ceases to serve as an Employee for a
period which shall not exceed an aggregate of six (6) months; provided,
however, that this Option shall remain exercisable only to the extent that the
Optionee was entitled to exercise this Option at the date of such termination.
To the extent that the Optionee was not entitled to exercise this Option at the
date of termination, or to the extent this Option is not exercised within the
time specified herein, this Option shall terminate. Notwithstanding the
foregoing, this Option shall not be exercisable after the expiration of the
term set forth in Section 8 hereof.
7. DEATH OR DISABILITY. If the Optionee ceases to serve as an Employee due
to death or permanent and total disability (within the meaning of Section
22(e)(3) of the Code), this Option may be exercised at any time within six (6)
months after the date of death or termination of employment due to disability,
in the case of death, by the Optionee's estate or by a person who acquired the
right to exercise this Option by bequest or inheritance, or, in the case of
disability, by the Optionee, but in any case only to the extent the Optionee
was entitled to
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<PAGE> 55
exercise this Option at the date of such termination. To the extent that the
Optionee was not entitled to exercise this Option at the date of termination,
or to the extent this Option is not exercised within the time specified herein,
this Option shall terminate. Notwithstanding the foregoing, this Option shall
not be exercisable after the expiration of the term set forth in Section 8
hereof.
8. TERM OF OPTION. This Option may not be exercised more than ten (10) years
from the date of grant of this Option and may be exercised during such term
only in accordance with the Plan and the terms of this Option Agreement.
Notwithstanding any provision in the Plan with respect to the post-employment
exercise of an Option, an Option may not be exercised after the expiration of
its term.
9. WITHHOLDING UPON EXERCISE OF OPTION. The Company reserves the right to
withhold, in accordance with any applicable laws, from any consideration
payable to Optionee any taxes required to be withheld by Federal, state or
local law as a result of the grant or exercise of this Option or the sale or
other disposition of the Shares issued upon exercise of this Option. If the
amount of any consideration payable to the Optionee is insufficient to pay such
taxes or if no consideration is payable to the Optionee, upon the request of
the Company, the Optionee shall pay to the Company in cash an amount sufficient
for the Company to satisfy any Federal, state or local tax withholding
requirements it may incur, as a result of the grant or exercise of this Option
or the sale or other disposition of the Shares issued upon the exercise of this
Option.
10. NONTRANSFERABILITY OF OPTION. This Option may not be sold, pledged,
assigned, hypothecated, gifted, transferred or disposed of in any manner either
voluntarily or involuntarily by operation of law, other than by will or by the
laws of descent or distribution or transfer between spouses incident to a
divorce. Subject to the foregoing and the terms of the Plan, the terms of this
Option shall be binding upon the executors, administrators, heirs, successors
and assigns of the Optionee.
11. NO RIGHT OF EMPLOYMENT. Neither the Plan nor this Option shall confer
upon the Optionee any right to continue in the employment of the Company or
limit in any respect the right of the Company to discharge the Optionee at any
time, with or without cause and with or without notice.
12. MISCELLANEOUS.
(a) Successors and Assigns. This Option Agreement shall bind and inure
only to the benefit of the parties to this Option Agreement (the "Parties") and
their respective successors and assigns.
(b) No Third-Party Beneficiaries. Nothing in this Option Agreement is
intended to confer any rights or remedies on any persons other than the Parties
and their respective successors or assigns. Nothing in this Option Agreement
is intended to relieve or discharge the obligation or liability of third
persons to any Party. No provision of this Option
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<PAGE> 56
Agreement shall give any third person any right of subrogation or action over
or against any Party.
(c) Amendments. (i) The Committee reserves the right to amend the terms
and provisions of this Option without the Optionee's consent to comply with any
Federal or state securities law.
(ii) Except as specifically provided in subsection (i) above, this Option
Agreement shall not be changed or modified, in whole or in part, except by
supplemental agreement signed by the Parties. Any Party may waive compliance
by any other Party with any of the covenants or conditions of this Option
Agreement, but no waiver shall be binding unless executed in writing by the
Party making the waiver. No waiver or any provision of this Option Agreement
shall be deemed, or shall constitute, a waiver of any other provision, whether
or not similar, nor shall any waiver constitute a continuing waiver. Any
consent under this Option Agreement shall be in writing and shall be effective
only to the extent specifically set forth in such writing. For the protection
of the Parties, amendments, waivers and consents that are not in writing and
executed by the Party to be bound may be enforced only if they are
detrimentally relied upon and proved by clear and convincing evidence. Such
evidence shall not include any alleged reliance.
(d) Notice. Any notice, instruction or communication required or
permitted to be given under this Option Agreement to any Party shall be in
writing and shall be deemed given when actually received or, if earlier, five
days after deposit in the United States mail by certified or express mail,
return receipt requested, first class postage prepaid, addressed to the
principal office of such Party or to such other address as such Party may
request by written notice.
(e) Governing Law. To the extent that Federal laws do not otherwise
control, the Plan and all determinations made or actions taken pursuant hereto
shall be governed by the laws of the state of California, without regard to the
conflict of laws rules thereof.
(f) Entire Agreement. This Option Agreement and the Plan constitute the
entire agreement between the Parties with regard to the subject matter hereof.
This Option Agreement supersedes all previous agreements between the Parties,
and there are now no agreements, representations, or warranties between the
Parties, other than those set forth herein.
(g) Severability. If any provision of this Option Agreement or the
application of such provision to any person or circumstances is held invalid or
unenforceable, the remainder of this Option Agreement, or the application of
such provision to persons or circumstances other than those as to which it is
held invalid or unenforceable, shall not be affected thereby.
(h) Optionee Representation. Optionee acknowledges receipt of the Plan, a
copy of which is attached hereto, and hereby accepts the grant of this Option
subject to all the terms and provisions thereof.
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<PAGE> 57
IN WITNESS WHEREOF, this Option Agreement has been duly executed on behalf of
the Company by an authorized representative of the Company and by the Optionee
on the date and year first written above.
DATE OF GRANT: ______________________________
Tekelec
By: ____________________________________
Title: ____________________________________
Optionee
____________________________________
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<PAGE> 58
AMENDMENT NO. 1 TO
TEKELEC
1994 STOCK OPTION PLAN (1) (2)
Section 3 of the Tekelec 1994 Stock Option Plan is hereby amended to read in
its entirety as follows:
"3. SHARES RESERVED.
The maximum aggregate number of Shares reserved for issuance pursuant to
the Plan shall be Nine Hundred Thousand (900,000) Shares or the number of
shares of stock to which such Shares shall be adjusted as provided in
Section 10 of the Plan. Such number of Shares may be set aside out of
authorized but unissued Shares not reserved for any other purpose, or out of
issued Shares acquired for and held in the treasury of the Company from time
to time.
Shares subject to, but not sold or issued under, any Option terminating,
expiring or canceled for any reason prior to its exercise in full, shall
again become available for Options thereafter granted under the Plan, and
the same shall not be deemed an increase in the number of Shares reserved
for issuance under the Plan."
Dated: February 4, 1995
________________________
(1) Subject to shareholder approval.
(2) The number of shares set forth herein has been adjusted to reflect
Tekelec's two-for-one stock split effective March 17, 1995.
<PAGE> 59
AMENDMENT NO. 2 TO
TEKELEC
1994 STOCK OPTION PLAN (1) (2)
Section 3 of the Tekelec 1994 Stock Option Plan is hereby amended to read in
its entirety as follows:
"3. SHARES RESERVED.
The maximum aggregate number of Shares reserved for issuance pursuant to
the Plan shall be One Million Four Hundred Thousand (1,400,000) Shares or
the number of shares of stock to which such Shares shall be adjusted as
provided in Section 10 of the Plan. Such number of Shares may be set aside
out of authorized but unissued Shares not reserved for any other purpose, or
out of issued Shares acquired for and held in the treasury of the Company
from time to time.
Shares subject to, but not sold or issued under, any Option terminating,
expiring or canceled for any reason prior to its exercise in full, shall
again become available for Options thereafter granted under the Plan, and
the same shall not be deemed an increase in the number of Shares reserved
for issuance under the Plan."
Dated: March 3, 1995
________________________
(1) Subject to shareholder approval.
(2) The number of shares set forth herein has been adjusted to reflect
Tekelec's two-for-one stock split effective March 17, 1995.
<PAGE> 60
TEKELEC
EMPLOYEE STOCK PURCHASE PLAN
The following constitutes the provisions of the Employee Stock
Purchase Plan (the "Plan") of Tekelec (the "Company").
1. Purpose. The purpose of the Plan is to provide employees of
the Company and its subsidiaries with an opportunity to purchase Common Stock
of the Company through payroll deductions. It is the intention of the Company
that the Plan qualify as an "Employee Stock Purchase Plan" under Section 423 of
the Internal Revenue Code of 1954, as amended (the "Code"). 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) "Compensation" means total earnings, including
amounts attributable to overtime, shift premium,
incentive compensation, bonuses and commissions.
(b) "Employee" means any person, including an officer,
who is customarily employed for more than twenty (20)
hours per week by the Company or its subsidiaries.
(c) "Subsidiary" means any corporation in which the
Company owns, directly or indirectly, 50% or more of
the voting shares.
(d) "Offering date" means the first business day of an
offering period of the Plan.
(e) "Termination date" means the last business day of an
offering period of the Plan.
3. Eligibility.
(a) General Rule. Any Employee, as defined in Section 2,
who shall have completed at least six months of
continuous employment by the Company or its
Subsidiaries on the date his participation in the
Plan is effective shall be eligible to participate in
the Plan, subject to the limitations imposed by
Section 423(b) of the Code.
(b) Exceptions. Any provisions of the Plan to the
contrary notwithstanding, no Employee shall be
granted an option under the Plan if:
<PAGE> 61
(i) immediately after the grant, such Employee
(or any other person whose stock ownership
would be attributed to such Employee pursuant
to Section 425(d) of the Code) would own
shares and/or hold outstanding options to
purchase shares possessing five percent (5%)
or more of the total combined voting power or
value of all classes of shares of the Company
or of any subsidiary of the Company; or
(ii) such option would permit the Employee's
rights to purchase shares under all employee
stock purchase plans of the Company and its
Subsidiaries to accrue (i.e., become
exercisable) at a rate which exceeds
Twenty-Five Thousand Dollars ($25,000) of
fair market value of such shares (determined
at the time such option is granted) for each
calendar year in which such option is
outstanding at any time.
4. Offerings. The Plan shall be implemented by two offerings
during each twelve month period of the Plan commencing on January 1, 1987.
Each offering shall be of six months duration. Offering I shall commence on
January 1 and end on June 30 of each year of the Plan; Offering II shall
commence on July 1 and end on December 31 of each year of the Plan.
Participation in one offering under the Plan shall neither limit nor require
participation in any other offering.
5. Participation. An eligible Employee may become a participant
in one or more offerings under the Plan by completing and signing a
subscription agreement authorizing payroll deductions on a form provided by the
Company (the "Subscription Agreement") authorizing payroll deductions and by
filing it with the Company's payroll office not less than three (3) days prior
to the first offering date with respect to which it is to be effective unless a
later time for filing the Subscription Agreement has been set by the Company
with respect to a given offering. An Employee's authorization and
participation in the Plan shall become effective on the first offering date
following the timely filing of his Subscription Agreement and shall remain
effective until revoked by the participant by the filing of a notice of
cancellation of option and withdrawal from the Plan as described in Section
10(a) hereof or by the filing of a new Subscription Agreement providing for a
change in the participant's payroll deduction rate. An Employee who becomes
eligible to participate in the Plan after the commencement of an offering
period may not become a participant in the Plan until the commencement of the
next offering.
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 next offering period
at a percentage rate equal to a positive whole number
and not exceeding ten percent (10%), or such other
maximum rate as may be determined from time to time
by the Company's Board of Directors (herein sometimes
referred to as the "Board") subject to the provisions
of
-2-
<PAGE> 62
Section 19 hereof, of the compensation which
would otherwise be payable to such participant on
each such payday; provided, however, that the maximum
amount withheld on behalf of a participant with
respect to an offering period shall not exceed the
maximum amount that a participant might be required
to pay upon the exercise of his option determined as
of the first day of an offering period.
(b) Payroll deductions for a participant shall commence
on the first payday following the date when a
participant's payroll deduction authorization becomes
effective and shall automatically continue from
offering period to offering period until changed or
terminated by the participant in accordance with the
terms hereof.
(c) A participant may elect to change his percentage rate
of payroll deductions by completing and filing with
the Company a new Subscription Agreement not less
than three (3) days prior to the first day of an
offering period with respect to which it is to become
effective, but such change shall not take effect
until the first payday following the first day of
such offering period.
(d) All payroll deductions authorized by a participant
shall be credited to the participant's individual
account under the Plan. A participant may not make
any additional payments into such account.
(e) A participant may terminate his participation in the
Plan at any time prior to the termination of the
offering period as provided in Section 10, but may
not change the rate of his payroll deductions with
respect to an offering period except as provided in
Section 6(c) hereof.
7. Grant of Option.
(a) On each offering date, and at the commencement of
each subsequent offering period with respect to which
a participant's payroll authorization is effective,
each participant in the Plan shall automatically be
granted an option to purchase (at the option price)
up to the number of whole shares of the Company's
Common Stock arrived at by dividing an amount equal
to ten percent (10%) of the lesser of (i) such
participant's aggregate compensation for the six
months prior to the offering date or (ii) $25,000, by
eighty-five percent (85%) of the fair market value of
a share of the Company's Common Stock at the offering
date subject to the limitations set forth in Sections
3(b) and 12 hereof. The fair market value of a share
of the Company's Common Stock shall be determined as
provided in Section 7(c) herein.
(b) The option price per share of the shares to be sold
during each offering shall be the lower of (i) 85% of
the fair market value of a share of the
-3-
<PAGE> 63
Common Stock of the Company at the offering date
or (ii) 85% of the fair market value of a share
of the Common Stock of the Company at the termination
date.
(c) The fair market value of the Company's Common Stock
shall be determined by the Company's Board of
Directors, acting in its sole discretion, and based
upon such factors as the Board determines relevant;
provided, however, if there is a public market for
the Common Stock, the fair market value of a share of
Common Stock on a given date shall be the mean of the
closing bid and asked prices for the Common Stock on
such date, as reported in The Wall Street Journal
(or, if not so reported, as otherwise reported by the
National Association of Securities Dealers Automated
Quotation ("NASDAQ") System), or, in the event the
Common Stock is listed on a national securities
exchange or on the NASDAQ National Market System, the
fair market value per share shall be the closing
price on such exchange or on the NASDAQ National
Market System as of the date of grant of the option,
as reported in The Wall Street Journal.
8. Exercise of Option. Unless a participant cancels his option
and withdraws from the Plan as provided in Section 10, his option for the
purchase of shares shall be exercised automatically at the termination date of
the offering period, and the accumulated payroll deductions credited to a
participant's account on the termination date will be applied to purchase whole
shares of the Company's Common Stock (up to the maximum number subject to
option as determined in Section 7(a) hereof) at the applicable option price.
Any amount credited to a participant's account and not applied to the purchase
of Common Stock by reason of the limitation on the number of shares subject to
option shall be refunded promptly to such participant after the termination
date, provided that any amount remaining in a participant's account and
representing a fractional share shall be carried over and applied to the
purchase of shares in the subsequent offering period if the participant
participates in the subsequent offering. During his lifetime, a participant's
option to purchase shares hereunder is exercisable only by such participant.
9. Delivery. As promptly as practicable after the end of each
offering period, the Company shall arrange the delivery to each participant, as
appropriate, of a certificate representing the shares purchased upon exercise
of his option.
10. Withdrawal; Termination of Employment.
(a) A participant may terminate his participation in the
Plan and withdraw all, but not less than all, the
payroll deductions credited to his account under the
Plan at any time prior to a termination date by
giving written notice of withdrawal to the Company on
a form provided for such purpose. All of the
participant's payroll deductions credited to his
account shall be paid to him promptly after receipt
of his notice of withdrawal, and his option
-4-
<PAGE> 64
for the current period shall be automatically
cancelled, and no further payroll deductions for
the purchase of shares shall be made except pursuant
to a new Subscription Agreement filed in accordance
with Section 5 hereof.
(b) Upon termination of a participant's employment for
any reason, including retirement or death, as soon as
practicable after such termination the payroll
deductions credited to his account shall be returned
to him or, in the case of his death, to the person or
persons entitled thereto under Section 14, and his
option shall be automatically cancelled.
(c) In the event an Employee fails to remain in the
continuous employ of the Company or its subsidiaries
for more than twenty (20) hours per week during the
offering period in which 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 him and his option will
be cancelled.
(d) A participant's withdrawal from an offering shall not
have any effect upon his eligibility to participate
in a subsequent offering or in any similar plan which
may hereafter be adopted by the Company.
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 One Hundred Thousand (100,000)
shares*, subject to adjustment upon changes in
capitalization of the Company as provided in Section
18. The shares to be sold to participants in the
Plan will be shares authorized but unissued. If the
total number of shares which would otherwise be
subject to options granted pursuant to Section 7(a)
hereof at the offering date exceeds the number of
shares then available under the Plan (after deduction
of all shares for which options have been exercised
or are then outstanding), the Company shall make a
pro rata allocation of the shares remaining available
for option grant in as uniform and equitable a manner
as is practicable. In such event, the Company shall
give written notice of such reduction of the number
of shares subject to the option to each participant
- - ---------------------------
* Such number of shares has been adjusted to reflect the Company's
two-for-one stock split effective March 17, 1995.
-5-
<PAGE> 65
affected thereby and shall reduce the rate of payroll
deductions, if necessary.
(b) A 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 shall, as specified in the participant's
Subscription Agreement, be registered in the name of
the participant or in the name of the participant and
his spouse.
13. Administration. The Plan shall be administered by the Board
of Directors of the Company or a committee appointed by the Board. The
administration, interpretation or application of the Plan by the Board or its
committee shall be final, conclusive and binding upon all participants.
Members of the Board or its committee who are eligible Employees are permitted
to participate in the Plan.
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
the termination date of an offering period but prior
to delivery to him 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 the
termination date of an offering period.
(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 valid designation of a beneficiary 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, or as provided in Section 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 in accordance with Section 10.
-6-
<PAGE> 66
16. Use of Funds. All payroll deductions received or held by the
Company on behalf of a participant 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. Individual statements of account will be given to
participating Employees semiannually as promptly as practicable following the
termination date of an offering period, which statements shall set forth the
amounts of payroll deductions, the per share option price, the number of shares
purchased and the remaining cash balance, if any, in a participant's account.
18. Adjustments Upon Changes in Capitalization.
(a) 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 or
which has been returned to the Plan upon the
cancellation of an option, as well as the option
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, stock
dividend, spin-off, reorganization, recapitalization,
merger, consolidation, exchange of shares or the
like. 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 affect, and no adjustment
by reason thereof shall be made with respect to, the
number or price of shares of Common Stock subject to
option.
(b) In the event of the proposed dissolution or
liquidation of the Company, or in the event of a
proposed sale of substantially all of the assets of
the Company, or the merger or consolidation of the
Company with or into another corporation, the Board
shall (i) make provision for the assumption of all
outstanding options by the successor corporation or
(ii) declare that any option shall terminate as of a
date fixed by the Board which is at least 30 days
after the notice thereof and unless a participant
terminates his participation in the Plan prior to
such date, his option for the purchase of shares will
be exercised automatically on such date and the
accumulated payroll deductions credited to a
participant's account on such date will be applied to
purchase whole shares of the Company's Common Stock
(up to the maximum number subject to option as
determined in accordance with Section 7(a) hereof) at
the applicable option price.
-7-
<PAGE> 67
(c) No fractional shares of Common Stock shall be
issuable on account of any adjustment described
herein, and the aggregate number of shares into which
shares then covered by an option, when changed as the
result of such adjustment, shall be reduced to the
largest number of whole shares resulting from such
adjustment, unless the Board, in its sole discretion,
shall determine to issue scrip certificates in
respect to any fractional shares, which scrip
certificates, in such event, shall be in a form and
have such terms and conditions as the Board in its
discretion shall prescribe.
19. Amendment or Termination. The Board of Directors of the
Company may at any time terminate or amend the Plan in such respects as the
Board may deem advisable. No such termination will affect options previously
granted, nor may an amendment make any change in any option theretofore granted
which adversely affects the rights of any participant without the prior written
consent of such participant, nor may an amendment be made without prior
approval of the shareholders of the Company if such amendment would:
(a) Increase the number of shares that may be issued
under the Plan;
(b) Materially modify the requirements as to eligibility
for participation in the Plan; or
(c) Materially increase the benefits which accrue to
participants under the Plan.
20. Term of Plan. The Plan shall become effective upon the
earlier to occur of its adoption by the Board or its approval by vote of a
majority of the outstanding shares of the Company entitled to vote on the
adoption of the Plan. The Plan shall continue in effect for a term of ten (10)
years unless sooner terminated under Sections 19 or 22 of the Plan.
21. Notices. All notices or other communications by a participant
to the Company 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.
22. Shareholder Approval. Notwithstanding anything to the
contrary herein, the continuance of the Plan and the effectiveness of any
option granted hereunder shall be subject to approval by the affirmative vote
of the holders of a majority of the outstanding shares of stock of the Company
present or represented and entitled to vote thereon, within twelve (12) months
before or after the date the Plan is adopted by the Board. No options granted
before such shareholder approval has been obtained shall be exercisable unless
such shareholder approval is obtained. If the Plan is not approved by the
shareholders of the Company within the above-referenced twelve-month period,
the Plan and any options granted thereunder shall terminate and all payroll
deductions credited to a participant's account shall be promptly returned to
him.
-8-
<PAGE> 68
23. No Enlargement of Employee Rights. The Plan is purely
voluntary on the part of the Company, and the continuance of the Plan shall not
be deemed to constitute a contract between the Company and any Employee, or to
be consideration for or a condition of the employment of any Employee. Nothing
contained in this Plan shall be deemed to give any Employee the right to be
retained in the employ of the Company, its parent, subsidiary or a successor
corporation, or to interfere with the right of the Company or any such
corporations to discharge or retire any Employee thereof at any time. No
Employee shall have any right to or interest in options authorized hereunder
prior to the grant of an option to such Employee, and upon such grant he shall
have only such rights and interests as are expressly provided herein, subject,
however, to all applicable provisions of the Company's Articles of
Incorporation, as the same may be amended from time to time.
24. Information to Participants. The Company shall provide
without charge to each participant in the Plan copies of such annual and
periodic reports as are provided by the Company to its shareholders generally.
-9-
<PAGE> 69
AMENDMENT NO. 1 TO
TEKELEC
EMPLOYEE STOCK PURCHASE PLAN
Section 7(a) of the Company's Employee Stock Purchase Plan is
hereby amended to read in its entirety as follows:
"7. Grant of Option.
(a) On each offering date, and at the
commencement of each subsequent offering period with
respect to which a participant's payroll
authorization is effective, each participant in the
Plan shall automatically be granted an option to
purchase (at the option price) up to the number of
whole shares of the Company's Common Stock arrived at
by dividing an amount equal to ten percent (10%) of
such participant's aggregate compensation for the six
months prior to the offering date by eighty-five
(85%) of the fair market value of a share of the
Company's Common Stock at the offering date subject
to the limitations set forth in Sections 3(b) and 12
hereof. The fair market value of a share of the
Company's Common Stock shall be determined as
provided in Section 7(c) herein;"
Dated: January 29, 1988
<PAGE> 70
AMENDMENT NO. 2 TO
TEKELEC
EMPLOYEE STOCK PURCHASE PLAN*
Section 12(a) of the Company's Employee Stock Purchase Plan is
hereby amended to read in its entirety as follows:
"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 One Hundred Eighty Thousand
(180,000) shares, subject to adjustment upon changes
in capitalization of the Company as provided in
Section 18. The shares to be sold to participants in
the Plan will be shares authorized but unissued. If
the total number of shares which would otherwise be
subject to options granted pursuant to Section 7(a)
hereof at the offering date exceeds the number of
shares then available under the Plan (after deduction
of all shares for which options have been exercised
or are then outstanding), the Company shall make a
pro rata allocation of the shares remaining available
for option grant in as uniform and equitable a manner
as is practicable. In such event, the Company shall
give written notice of such reduction of the number
of shares subject to the option to each participant
affected thereby and shall reduce the rate of payroll
deductions, if necessary."
Dated: January 28, 1989
- - ---------------------------
* The number of shares set forth herein has been adjusted to reflect
Tekelec's two-for-one stock split effective March 17, 1995.
<PAGE> 71
AMENDMENT NO. 3 TO
TEKELEC
EMPLOYEE STOCK PURCHASE PLAN*
Section 12(a) of the Company's Employee Stock Purchase Plan is
hereby amended to read in its entirety as follows:
"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 Two Hundred Fifty Thousand
(250,000) shares, subject to adjustment upon changes
in capitalization of the Company as provided in
Section 18. The shares to be sold to participants in
the Plan will be shares authorized but unissued. If
the total number of shares which would otherwise be
subject to options granted pursuant to Section 7(a)
hereof at the offering date exceeds the number of
shares then available under the Plan (after deduction
of all shares for which options have been exercised
or are then outstanding), the Company shall make a
pro rata allocation of the shares remaining available
for option grant in as uniform and equitable a manner
as is practicable. In such event, the Company shall
give written notice of such reduction of the number
of shares subject to the option to each participant
affected thereby and shall reduce the rate of payroll
deductions, if necessary."
Dated: March 15, 1991
- - ---------------------------
* The number of shares set forth herein has been adjusted to reflect
Tekelec's two-for-one stock split effective March 17, 1995.
<PAGE> 72
AMENDMENT NO. 4 TO
TEKELEC
EMPLOYEE STOCK PURCHASE PLAN*
Section 5 of the Company's Employee Stock Purchase Plan (the
"Purchase Plan") is hereby amended by adding the following as the last sentence
of Section 5:
"An Employee who is an officer or director who ceases
participation in the Plan may not participate again for at
least six months following such cessation of participation."
Section 15 of the Purchase Plan is hereby amended to read in
its entirety as follows:
"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, pursuant to a qualified domestic relations order
as defined by the Code or Title I of the Employee Retirement
Income Security Act, or the rules thereunder, or as provided
in Section 14 hereof) by the participant. Any such attempt at
assignment, transfer, pledge or other disposition will be
without effect, except that the Company may treat such act as
an election to withdraw funds in accordance with Section 10."
Dated: May 15, 1992
- - ---------------------------
* The number of shares set forth herein has been adjusted to reflect
Tekelec's two-for-one stock split effective March 17, 1995.
<PAGE> 73
AMENDMENT NO. 5 TO
TEKELEC
EMPLOYEE STOCK PURCHASE PLAN*
Section 12(a) of the Company's Employee Stock Purchase Plan is
hereby amended to read in its entirety as follows:
"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 Three Hundred Fifty Thousand
(350,000) shares, subject to adjustment upon changes
in capitalization of the Company as provided in
Section 18. The shares to be sold to participants in
the Plan will be shares authorized but unissued. If
the total number of shares which would otherwise be
subject to options granted pursuant to Section 7(a)
hereof at the offering date exceeds the number of
shares then available under the Plan (after deduction
of all shares for which options have been exercised
or are then outstanding), the Company shall make a
pro rata allocation of the shares remaining available
for option grant in as uniform and equitable a manner
as is practicable. In such event, the Company shall
give written notice of such reduction of the number
of shares subject to the option to each participant
affected thereby and shall reduce the rate of payroll
deductions, if necessary."
Dated: December 8, 1992
- - ---------------------------
* The number of shares set forth herein has been adjusted to reflect
Tekelec's two-for-one stock split effective March 17, 1995.
<PAGE> 74
AMENDMENT NO. 6 TO
TEKELEC
EMPLOYEE STOCK PURCHASE PLAN*
Section 12(a) of the Company's Employee Stock Purchase Plan is
hereby amended to read in its entirety as follows:
"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 Four Hundred Fifty Thousand
(450,000) shares, subject to adjustment upon changes
in capitalization of the Company as provided in
Section 18. The shares to be sold to participants in
the Plan will be shares authorized but unissued. If
the total number of shares which would otherwise be
subject to options granted pursuant to Section 7(a)
hereof at the offering date exceeds the number of
shares then available under the Plan (after deduction
of all shares for which options have been exercised
or are then outstanding), the Company shall make a
pro rata allocation of the shares remaining available
for option grant in as uniform and equitable a manner
as is practicable. In such event, the Company shall
give written notice of such reduction of the number
of shares subject to the option to each participant
affected thereby and shall reduce the rate of payroll
deductions, if necessary."
Dated: March 24, 1993
- - ---------------------------
* The number of shares set forth herein has been adjusted to reflect
Tekelec's two-for-one stock split effective March 17, 1995.
<PAGE> 75
AMENDMENT NO. 7 TO
TEKELEC
EMPLOYEE STOCK PURCHASE PLAN (1) (2)
Section 12(a) of the Company's Employee Stock Purchase Plan is
hereby amended to read in its entirety as follows:
"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 Six Hundred Thousand
(600,000) shares, subject to adjustment upon changes
in capitalization of the Company as provided in
Section 18. The shares to be sold to participants in
the Plan will be shares authorized but unissued. If
the total number of shares which would otherwise be
subject to options granted pursuant to Section 7(a)
hereof at the offering date exceeds the number of
shares then available under the Plan (after deduction
of all shares for which options have been exercised
or are then outstanding), the Company shall make a
pro rata allocation of the shares remaining available
for option grant in as uniform and equitable a manner
as is practicable. In such event, the Company shall
give written notice of such reduction of the number
of shares subject to the option to each participant
affected thereby and shall reduce the rate of payroll
deductions, if necessary."
Dated: October 29, 1994
- - ---------------------------
(1) Subject to shareholder approval.
(2) The number of shares set forth herein has been adjusted to reflect
Tekelec's two-for-one stock split effective March 17, 1995.
