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______________________________________________________________________________
FORM 10-K/A NO. 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
_________________
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995 COMMISSION FILE NUMBER 0-15135
TEKELEC
(Exact name of registrant as specified in its charter)
CALIFORNIA 95-2746131
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
26580 WEST AGOURA ROAD, CALABASAS, CALIFORNIA 91302
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (818) 880-5656
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, WITHOUT PAR VALUE
(Title of class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES [ X ] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates
of the registrant, based upon the last reported sale price of the Common Stock
on March 1, 1996 as reported on the Nasdaq National Market, was approximately
$92,500,000.
The number of shares outstanding of the registrant's Common Stock on
March 1, 1996 was 11,655,189.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive Proxy Statement to be
delivered to shareholders in connection with their Annual Meeting of
Shareholders to be held on May 10, 1996 are incorporated by reference into Part
III of this Annual Report.
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EXPLANATORY NOTE
This Form 10-K/A No. 1 is being filed solely: (i) to amend Item 14 to
include a footnote to Exhibit 10.19 indicating that confidential treatment has
been requested with respect to portions of the Exhibit, and that such
confidential portions have been deleted and filed with the Commission pursuant
to Rule 24b-2 promulgated under the Securities Act of 1934 and (ii) to include
an amended Exhibit 10.19 which, in response to the Commission's comments
regarding the Registrant's request for confidential treatment of such Exhibit,
includes certain portions of such Exhibit which were omitted in the original
filing of the Form 10-K.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K.
(a) The following documents are filed as part of this Report:
CONSOLIDATED FINANCIAL STATEMENTS PAGE
. Report of Independent Accountants F-1
. Consolidated Statements of Operations for each of the
three years in the period ended December 31, 1995 F-2
. Consolidated Balance Sheets as of December 31, 1995
and 1994 F-3
. Consolidated Statements of Cash Flow for each of the
three years in the period ended December 31, 1995 F-4
. Consolidated Statements of Shareholders' Equity for
each of the three years in the period ended December
31, 1995 F-5
. Notes to Consolidated Financial Statements F-6
PAGE
CONSOLIDATED FINANCIAL STATEMENT SCHEDULE
. Schedule II Valuation and Qualifying Accounts
and Reserves for each of the three
years in the period ended December
31, 1995
S-1
Schedules which are not listed above have been omitted because they
are not applicable or the information required to be set forth therein is
included in the consolidated financial statements or notes thereto.
LIST OF EXHIBITS
3.1 Amended and Restated Articles of Incorporation(1)
3.2 Bylaws, as amended(2)
10.1 Amended and Restated 1984 Stock Option Plan, including
forms of stock option agreements(3)(4)
10.2 Employee Stock Purchase Plan and form of subscription
agreement(5), as amended January 29, 1988(6), January 28,
1989(7), March 15, 1991(8), May 15, 1992(9), December 8,
1992(9), March 24, 1993(9) and October 29, 1994(4)(10)
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10.3 Amended and Restated Non-Employee Director Equity Incentive
Plan, including forms of stock award certificate and
nonstatutory stock option agreements(4)(11)
10.4 1994 Stock Option Plan, including forms of stock option
agreements(11), as amended February 4, 1995(12) and March 3,
1995 (4)(12)
10.5 Retirement Pension Rules of Tekelec Ltd.(1)(4)
10.6 Form of Indemnification Agreement between the Registrant and
all directors of the Registrant(4)(13)
10.7 Lease dated as of February 8, 1988 between the Registrant and
State Street Bank and Trust Company of California, N.A., not
individually, but solely as an Ancillary Trustee for State
Street Bank and Trust Company, a Massachusetts banking
corporation, not individually, but solely as Trustee for the
AT&T Master Pension Trust, covering the Company's principal
facilities in Calabasas, California(14)
10.8 Form of International Distributor Agreement(15) and Schedule
of Distributors
10.9 Loan and Security Agreement dated September 14, 1993 between
the Registrant and CoastFed Business Credit Corporation(16),
as amended by Amendment to Loan Documents dated May 18,
1994(17)
10.10 Accounts Collateral Security Agreement dated September 14,
1993 between the Registrant and CoastFed Business Credit
Corporation(16)
10.11 Equipment Collateral Security Agreement dated May 18, 1994
between the Registrant and CoastFed Business Credit
Corporation(17)
10.12 Officer Severance Plan, including form of Employment
Separation Agreement(4)(18)
10.13 Consulting Agreement dated as of January 20, 1994 between the
Registrant and Howard Oringer, including warrant and
confidentiality agreement(4)(18)
10.14 Warrant issued to Robert V. Adams on January 16, 1992, as
amended by Amendment No. 1 dated July 24, 1993(4)(18)
10.15 Warrant issued to Howard Oringer on January 16, 1992, as
amended by Amendment No. 1 dated July 24, 1993(4)(18)
10.16 Warrant issued to Philip Black on April 16, 1994(4)(10)
*10.17 Distributorship Agreement dated September 16, 1994 between the
Registrant and AT&T Corp.(19)
10.18 Memo of Understanding dated October 27, 1994 between the
Registrant and Stratus Computer, Inc.(1)
*10.19 Compensation agreement dated November 22, 1995 between the
Registrant and Allan Toomer(4)
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11.1 Statement of Computation of Earnings Per Share
21.1 Subsidiaries of the Registrant(1)
23.1 Consent of Coopers & Lybrand L.L.P.
27.1 Financial Data Schedule
-----------------
* Confidential treatment has been requested or granted with respect to
portions of this exhibit, and such confidential portions have been
deleted and filed with the Commission pursuant to Rule 24b-2
promulgated under the Securities Act of 1934.
(1) Incorporated by reference to the Registrant's Annual Report on Form
10-K (File No. 0-15135) for the year ended December 31, 1994.
(2) Incorporated by reference to Amendment No. 2 to the Registrant's
Registration Statement on Form S-3 (Registration No. 33-58551) filed
with the Commission on May 18, 1995.
(3) Incorporated by reference to the Registrant's Registration Statement
on Form S-8 (Registration No. 33-48079) filed with the Commission on
May 22, 1992.
(4) Constitutes a management contract or compensatory plan or arrangement
required to be filed as an exhibit to this Annual Report.
(5) Incorporated by reference to the Registrant's Registration Statement
on Form S-8 (Registration No. 33-16094) filed with the Commission on
December 9, 1986.
(6) Incorporated by reference to the Registrant's Registration Statement
on Form S-8 (Registration No. 33-22370) filed with the Commission on
June 8, 1988.
(7) Incorporated by reference to the Registrant's Registration Statement
on Form S-8 (Registration No. 33-30475) filed with the Commission on
August 11, 1989.
(8) Incorporated by reference to the Registrant's Registration Statement
on Form S-8 (Registration No. 33-40612) filed with the Commission on
May 16, 1991.
(9) Incorporated by reference to the Registrant's Registration Statement
on Form S-8 (Registration No. 33-63102) filed with the Commission on
May 24, 1993.
(10) Incorporated by reference to the Registrant's Registration Statement
on Form S-8 (Registration No. 33-87558) filed with the Commission on
December 19, 1994.
(11) Incorporated by reference to the Registrant's Registration Statement
on Form S-8 (Registration No. 33-82124) filed with the Commission on
July 28, 1994.
(12) Incorporated by reference to the Registrant's Registration Statement
on Form S-8 (Registration No. 33-60611) filed with the Commission on
June 27, 1995.
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(13) Incorporated by reference to the Registrant's Annual Report on Form
10-K (File No. 0-15135) for the year ended December 31, 1987.
(14) Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q (File No. 0-15135) for the quarter ended June 30, 1988.
(15) Incorporated by reference to the Registrant's Registration Statement
on Form S-1 (Registration No. 33-4123) filed with the Commission on
March 19, 1986.
(16) Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q (File No. 0-15135) for the quarter ended September 30, 1993.
(17) Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q (File No. 0-15135) for the quarter ended June 30, 1994.
(18) Incorporated by reference to the Registrant's Annual Report on Form
10-K (File No. 0-15135) for the year ended December 31, 1993.
(19) Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q (File No. 0-15135) for the quarter ended September 30, 1994.
(B) REPORTS ON FORM 8-K
No reports on Form 8-K were filed or required to be filed by the
Registrant during the quarter ended December 31, 1995.
(C) EXHIBITS
See the list of Exhibits under Item 14(a)3 of this Annual Report on
Form 10-K.
(D) FINANCIAL STATEMENT SCHEDULES
See the Schedule under Item 14(a)2 of this Annual Report on Form 10-K.
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SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this amendment to the
Registrant's Annual Report on Form 10-K to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Calabasas, California.
TEKELEC
By: PHILIP J. ALFORD
-------------------------
Philip J. Alford,
Chief Executive Officer
Dated: July 18, 1996
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Exhibit
- ----------- -------
<S> <C>
10.19 Compensation Agreement dated November 22, 1995
between the Registrant and Allan Toomer*
</TABLE>
______________________
* Confidential material has been omitted from this Exhibit pursuant to
Rule 24b-2 and filed separately with the Securities and Exchange
Commission.
<PAGE> 1
EXHIBIT 10.19
November 22, 1995
Mr. Allan Toomer
Senior Vice President & General Manager
Tekelec
Network Switching Division
3000 Aerial Parkway
Suite #120
Morrisville, NC 27560
Dear Allan,
I am very pleased to offer the following compensation program
to you as Senior Vice President and General Manager of Tekelec's Network
Switching Division ("NSD"). This package, once accepted by you, will supersede
and replace any executory portions of that agreed to in my letter to you dated
September 5, 1994 (see attached). I am proposing a longer term commitment
through 1997 from both you and Tekelec to supersede the previous arrangement. I
believe this is beneficial to both of us because of the potential the EAGLE
business offers and the contribution you can continue to make to its success.
1. Your base salary will be $203,000 per annum payable
$7,807.69 bi-weekly effective October 1, 1995. It
will be reevaluated annually each year thereafter
based on my recommendations to the Compensation
Committee of the Board and subject to final Board
approval.
2. The terms of your bonus plan for 1995 will be as
follows:
(a) Up to * of your annual salary based on
achievement of 105% of NSD's business plan revenues
for 1995 (see attached) and operating income of * or
(b) Up to * of your annual salary based on
achievement of 110% of NSD's business plan revenues
for 1995 and operating income of *.
Under these criteria, the aggregate amount of your bonus for
1995 will be determined as follows:
o one third of the bonus will be based on
achievement of the revenue objective
o one third of the bonus will be based on
achievement of both the revenue and operating
income objectives
________________
* Confidential material has been omitted pursuant to Rule 24b-2 and
filed separately with the Securities and Exchange Commission.
<PAGE> 2
Mr. Allan Toomer
Page 2
o one third of the bonus will be based on
achievement of both the revenue objectives
and management objectives set forth in your
1994 review and based on my recommendation to
the Board.
The bonus plan for each year thereafter will be based on the
Tekelec Corporate Executive bonus program recommended annually by me and
approved by the Board of Directors.
3. The terms of the Early Retirement Bonus Plan outlined
in the letter of September 5, 1994, will be amended
as follows and will be in lieu of the benefits you
are eligible to receive under the Officer Severance
Plan. If you elect on or after 1/1/97 and prior to
4/1/97 to retire, or if your employment with Tekelec
terminates prior to 4/1/97 as a result of your death
or long-term disability, then you receive the
following:
A bonus payment equal to 130% of the sum of
your then current salary plus the highest
annual bonus paid to you by Tekelec in the
three calendar years prior to your retirement
date. At a minimum this will amount to
$300,000.
In addition, if your employment with Tekelec
terminates prior to 4/1/97 as a result of your death
or long-term disability, then all stock options
granted to you prior to 9/30/95 under Tekelec's 1984
and 1994 Stock Option Plan which remain unvested at
the date of such termination would immediately vest.
4. The vesting of the unvested portion of all stock
options granted to you prior to September 30, 1995
under Tekelec's 1984 and 1994 Stock Option Plan will
accelerate on a "first-in-first-out basis" and become
exercisable as follows:
<TABLE>
<S> <C>
December 31, 1995 26,000
March 31, 1996 23,000
June 30, 1996 20,000
September 30, 1996 17,000
December 31, 1996 10,000
------
96,000
</TABLE>
5. Provided a successor as General Manager of NSD has
been identified and approved by the Board of
Directors and upon the effective date of your
full-time retirement, then Tekelec will enter into a
consulting agreement with you for 6 months for up to
20 hours per week at a rate of $2,500 per week. You
will still be eligible for all other Tekelec benefits
for which you qualify during this period. This
consulting agreement may be extended by mutual
agreement.
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Mr. Allan Toomer
Page 3
6. I will recommend that the Compensation Committee of
the Board of Directors grant to you additional Stock
Options with an aggregate exercise cost of $300,000,
based on 100% of the closing price at November 22,
1995 of Tekelec Common Stock with vesting in 7
quarterly installments to commence 12/31/95 and
ending 6/30/97.
You will also be eligible for further grants of Stock Options
based on my recommendation and subject to the discretion of the Compensation
Committee of the Board. There can be no assurance, however, that such
recommendations will be made or approved for you.
7. In the event of termination of your employment prior
to January 1, 1997, you would still be eligible to
receive your severance benefits in accordance with
the terms of the Officer Severance Plan. In addition,
if you are entitled to receive severance benefits
under the Officers Severance Plan, all options
granted to you prior to September 30, 1995 which
remain unvested at the date of termination would
immediately vest.
Over the next two years there are some significant and
exciting goals outlined below that I believe we have agreed you would like to
achieve for Tekelec with NSD and Eagle. Obviously, in a rapidly changing
environment new business opportunities will evolve that could change these
goals and we will keep this under review. *
o Continue to develop the NSD management team encompassing all
major functions of sales, engineering, marketing and customer
service. *
o Continue to develop the EAGLE product line and business to at
least $* in revenues and operating income of at least *% in
1997.
*
Although this agreement is subject to Board approval, I do not
envision that it will not be approved.
_____________
* Confidential material has been omitted pursuant to Rule 24b-2 and
filed separately with the Securities and Exchange Commission.
<PAGE> 4
Mr. Allan Toomer
Page 4
Allan, I believe that this compensation program meets both our
objectives. I am looking forward to continuing the working relationship we have
developed and to the opportunity to build on the success you have achieved for
EAGLE and Tekelec. * I look forward to receiving your agreement to the
foregoing.
Sincerely,
/s/ Philip J. Alford
- --------------------
Philip J. Alford
President & CEO
Agreed and accepted:
Agreed and accepted effective
/s/ Allan Toomer as of November 22, 1995
- --------------------- -----------------------
Allan Toomer
cc: Compensation Committee
Ronald W. Buckly, Coudert Brothers
______________
* Confidential material has been omitted pursuant to Rule 24b-2 and
filed separately with the Securities and Exchange Commission.
