SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
TEKELEC
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
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:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date filed:
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(1) Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE>
TEKELEC
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 21, 1997
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Shareholders (the
"Annual Meeting") of Tekelec, a California corporation (the "Company"), will be
held Wednesday, May 21, 1997, at 9:30 a.m., Eastern Daylight-Saving Time, at the
Company's offices located at 5151 McCrimmon Parkway, Suite 216, Morrisville,
North Carolina 27560, for the following purposes, each as more fully described
in the attached Proxy Statement:
1. To elect six directors to serve for the ensuing year. The names of
the nominees intended to be presented for election are: Robert V. Adams,
Jean-Claude Asscher, Daniel L. Brenner, Howard Oringer, Jon F. Rager and Allan
J. Toomer.
2. To approve amendments to the Company's 1994 Stock Option Plan to
increase the number of shares of Common Stock authorized for issuance thereunder
from 2,000,000 to 3,000,000.
3. To ratify the appointment of Coopers & Lybrand L.L.P. as
independent accountants of the Company for the year ending December 31, 1997.
4. 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 April 1,
1997 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 10, 1997
<PAGE>
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 Wednesday, May 21, 1997, at 9:30
a.m., Eastern Daylight-Saving 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
offices located at 5151 McCrimmon Parkway, Suite 216, Morrisville, North
Carolina 27560.
These proxy solicitation materials were first mailed on or about April 10,
1997 to all shareholders entitled to vote at the Annual Meeting.
Only shareholders of record at the close of business on April 1, 1997 (the
"Record Date") are entitled to notice of, and to vote at, the Annual Meeting. At
the Record Date, 12,390,027 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.
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 six
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 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).
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<PAGE>
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 1998 must be received by the Company no later than December 11, 1997 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 21, 1997.
PROPOSAL 1 - ELECTION OF DIRECTORS
NOMINEES
A board of six directors will be elected at the Annual Meeting. Unless
otherwise instructed, proxy holders will vote the proxies received by them for
the Company's six 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:
Name Age Position(s) with the Company Director Since
- ------------------- --- -------------------------------------- --------------
Jean-Claude Asscher 68 Chairman of the Board 1972
Robert V. Adams 65 Director 1991
Daniel L. Brenner 45 Director 1990
Howard Oringer 54 Director 1992
Jon F. Rager 57 Director 1981
Allan J. Toomer 54 Director and President 1996
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<PAGE>
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. Adams also serves
as Chairman of the Board of Directors of Documentum, Inc. and as a director of
ENCAD, Inc. and Document Sciences Corporation.
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. 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 and from August 1996 until December 1996, Mr. Oringer served as a
consultant to the Company. See "Compensation of Directors" below. Mr. Oringer
also serves as a director of Verilink Corporation.
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).
Mr. Toomer was appointed a director and President of the Company in
November 1996. He served as the Company's Senior Vice President, Network
Products from October 1992 until July 1993 and as Senior Vice President and
General Manager, Network Switching Division from July 1993 until November 1996.
From 1973 until June 1992, Mr. Toomer held various officer positions at Northern
Telecom, Inc., a telecommunications equipment manufacturer, where he most
recently served as Vice President, Customer Service.
INFORMATION REGARDING THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors held a total of 14 meetings during 1996 and acted
six times by unanimous written consent. During 1996, each director of the
Company (other than Mr. Adams) attended at least 75% of the aggregate of the
total number of meetings of the Board of Directors held during the period for
which he was a director and the total number of meetings held by the committees
of the Board on which he served.
The Audit Committee, which is presently comprised of Messrs. Adams,
Brenner, Oringer and Rager, met four times during 1996. The Audit Committee
recommends the engagement of independent auditors, reviews accounting policies,
internal accounting controls and results of audit engagements and
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<PAGE>
generally performs functions related to the financial condition and policies of
the Company. The Compensation Committee, which is presently comprised of Messrs.
Adams, Brenner, Oringer and Rager, met 12 times during 1996 and acted three
times by unanimous written consent. The Compensation Committee is responsible
for administering the Company's stock option plans, including determining the
persons to whom options are granted and the terms of such options, and the
Company's Employee Stock Purchase Plan and for assisting the Board of Directors
in matters involving executive compensation. 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
$3,000 (except the Chairman of the Board who is paid $4,000), plus $1,250 for
attending a Board of Directors' meeting in person or telephonically and
reimbursement for reasonable expenses for attending a Board of Directors'
meeting. In addition, each member of the Compensation Committee receives $500
per quarter (except the Chairman of the Compensation Committee who is paid $750)
and $1,250 for attending a Compensation Committee meeting in person or
telephonically. The Chairman of the Audit Committee receives $750 per quarter
and each member of the Audit Committee receives $750 for attending a committee
meeting in person or telephonically. 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 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 and each
non-employee director elected at the Company's annual shareholder meeting in
1996 automatically received and, subject to the availability of shares under the
Director Plan, each non-employee director elected at the Company's annual
shareholder meeting in 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 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 on the last Regular Grant Date.
In August 1996, the Company entered into a Consulting Agreement with Mr.
Oringer pursuant to which Mr. Oringer performed consulting services for the
Company through December 1996 in consideration for $30,000 and the issuance to
him of five-year warrants to purchase 30,000 shares of the Company's Common
Stock at an exercise price of $9.50 per share (i.e., the closing sales price of
the Company's Common Stock on The Nasdaq Stock Market on the date of grant). The
warrants vested in installments of 1,250 shares each, with one installment
vesting for each day of services performed by Mr. Oringer under the Consulting
Agreement, and are fully vested as to all 30,000 shares.
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<PAGE>
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, 1997 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 7 and (iv)
all current directors and executive officers of the Company as a group:
PERCENT
NAME OF BENEFICIAL OWNER(1) SHARES BENEFICIALLY OWNED OF CLASS
- ------------------------------------- ------------------------- --------------
Jean-Claude Asscher 3,555,920(2)(3) 28.9%
Tekelec-Airtronic, S.A.
5, rue Carle Vernet
92315 Sevres Cedex, France
Edouard Givel 2,767,064(4) 22.5
Natinco, S.A.
26, rue de l'Athenee
1206 Geneva, Switzerland
Chancellor LGT Asset Management, Inc. 1,412,100(5) 11.5
Fifty California Street, 27th Floor
San Francisco, CA 94111-4624
Kopp Investment Advisors, Inc. 1,011,990(6) 8.2
6600 France Ave. S., Suite 672
Edina, MN 55435
Franklin Resources, Inc. 955,000(7) 7.8
777 Mariners Island Boulevard
San Mateo, CA 94404
Philip J. Alford 171,275(8) 1.4
Gilles C. Godin 96,180(3) *
Allan J. Toomer 94,195(3) *
Howard Oringer 91,188(3) *
Shigeru Suzuki 69,144(3) *
Daniel L. Brenner 42,772(3) *
Robert V. Adams 33,246(3) *
Jon F. Rager 29,672(3)(9) *
Scott R. Gardner 25,624(3) *
All current directors and executive
officers as a group (9 persons) 4,037,941(2)(3)(9) 31.9
- ---------------
* 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.
(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
188,296 shares owned by Tekelec-Airtronic, a French corporation of which
Mr. Asscher is the President and majority shareholder.
(footnotes continued on following page)
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<PAGE>
(3) Includes 10,000, 96,180, 63,398, 50,000, 41,724, 30,000, 13,000, 10,000,
25,100 and 339,402 shares subject to options and/or warrants held by
Messrs. Asscher, Godin, Toomer, Oringer, Suzuki, Brenner, Adams, Rager and
Gardner and all current directors and executive officers as a group,
respectively, which are exercisable or become exercisable within 60 days
after March 1, 1997.
(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 that Natinco 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 7, 1997, wherein Chancellor LGT
Asset Management, Inc., Chancellor LGT Trust Company and LGT Asset
Management, Inc. reported sole voting and dispositive power as to such
shares.
(6) Based on an Amendment No. 5 to Schedule 13G dated January 30, 1997 filed by
Kopp Investment Advisors, Inc., wherein LeRoy C. Kopp reported shared
dispositive power with Kopp Investment Advisors, Inc. as to 983,990 of such
shares, shared voting and dispositive power with the Kopp Family Foundation
as to 10,000 of such shares, and sole voting and dispositive power as to
18,000 of such shares.
(7) Based on an Amendment No. 1 to Schedule 13G dated February 12, 1997,
wherein Franklin Resources, Inc. reported sole voting and shared
dispositive power as to 878,900 of such shares, and Franklin Advisory
Services, Inc. reported sole voting and dispositive power as to 76,100 of
such shares.
(8) Based on information provided by Mr. Alford.
(9) 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.
EXECUTIVE OFFICERS
The executive officers of the Company, and certain information about them,
are as follows:
Name Age Title
- --------------- --- ----------------------------------------------------------
Allan J. Toomer 54 President
Shigeru Suzuki 48 Vice President, Japan Operations and President,
Tekelec, Ltd.
Gilles C. Godin 38 Vice President, Finance and Chief Financial Officer
Scott R. Gardner 44 Vice President, Human Resources
Officers are appointed by and serve at the discretion of the Board of
Directors. For information concerning Mr. Toomer, see "Election of Directors -
Nominees" above.
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. Gardner joined the Company in November 1991 as Manager, Employment and
Employment Relations and served as Director, Human Resources from June 1993
until August 1994 and as Senior Director, Human Resources from August 1994 until
January 1996 when he became Vice President, Human Resources.
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<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information for the three years
ended December 31, 1996 concerning compensation paid or accrued by the Company
and its subsidiaries to or on behalf of the Company's former Chief Executive
Officer and each of the Company's four most highly compensated executive
officers other than its Chief Executive Officer for the year ended December 31,
1996:
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
--------------------------------------------- LONG-TERM
OTHER COMPENSATION
NAME AND ANNUAL AWARDS ALL OTHER
PRINCIPAL POSITION YEAR SALARY($)(1) BONUS($)(2) COMPENSATION($)(3) OPTIONS(#) COMPENSATION($)(4)
- ----------------------------- ---- ------------ ----------- ------------------ ------------ ------------------
<C> <C> <C> <C> <C> <C> <C>
Allan J. Toomer(5) 1996 $208,000 $25,000(6) $ 0 20,400 $ 2,375
President 1995 189,500 24,000(6) 0 18,000 2,310
1994 168,270 55,500 0 80,000 2,310
Philip J. Alford(7) 1996 250,000 0 0 18,500 526,309(8)
Former Chief Executive 1995 225,000 40,000(6) 0 70,000 1,123
Officer and President 1994 210,000 80,000(9) 0 50,000 530
Shigeru Suzuki 1996 253,278 15,000(6) 0 9,800 0
Vice President, Japan 1995 282,054 26,072(6) 0 20,000 0
Operations and 1994 227,945 49,423 0 20,000 0
President, Tekelec, Ltd.
Gilles C. Godin 1996 162,000 15,000(6) 0 8,400 0
Vice President, Finance 1995 150,000 19,000(6) 0 50,000 0
and Chief Financial Officer 1994 128,847 60,000(9) 0 50,000 0
Scott R. Gardner(10) 1996 110,000 5,000(6) 0 10,500 1,454
Vice President,
Human Resources
- ----------------------------------
<FN>
(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 9 below, were paid under the Company's Officer Bonus Plan.
(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 (except for Mr. Alford for 1996) represent
Company matching contributions allocated under the Company's 401(k) Plan to
the accounts of the named officers.
(5) Mr. Toomer was elected President of the Company in November 1996.
(6) Amounts shown for 1995 and 1996 were paid as discretionary bonuses.
(7) Mr. Alford resigned as President in November 1996 and as Chief Executive
Officer in December 1996.
(8) Of such amount, $42,564 was paid to Mr. Alford for accrued but unused
vacation, $457,500 was payable to Mr. Alford as severance compensation,
$25,000 was payable directly to an outplacement services agency for
outplacement services to be rendered to Mr. Alford, and $1,245 represented
the Company's matching contribution allocated under the Company's 401(k)
Plan to the account of Mr. Alford.
(9) Amounts shown for 1994 with respect to Messrs. Alford and Godin include
$16,400 and $21,000, respectively, paid to them as discretionary bonuses.
(10) Mr. Gardner was elected Vice President, Human Resources in January 1996.
</TABLE>
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<PAGE>
OPTION GRANTS IN 1996
The following table sets forth certain information concerning stock option
grants in 1996 to the executive officers named in the Summary Compensation
Table:
<TABLE>
<CAPTION>
Individual Grants
-------------------------------------------------------
Percent
Number of of Total
Securities Options
Underlying Granted to Exercise Grant Date
Options Employees Price Expiration Present
Name Granted (#)(1) in 1996(2) ($/Share)(3) Date Value(4)
- --------------- -------------- ------------- ------------ ---------- ----------
<C> <C> <C> <C> <C> <C>
Allan J. Toomer 5,400 0.5% $12.00 01/27/06 $ 46,527
15,000 1.3 10.00 08/24/06 107,036
Philip J. Alford 18,500 1.6 12.00 01/27/06 158,234
Shigeru Suzuki 9,800 0.9 12.00 01/27/06 84,179
Gilles C. Godin 8,400 0.7 12.00 01/27/06 71,869
Scott R. Gardner 10,500 0.9 12.00 01/27/06 90,627
- ---------------
<FN>
(1) Such options were granted under the Company's 1994 Stock Option Plan (the
"1994 Plan"), 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 1996, the Company granted options to employees under the 1994 Plan to
purchase an aggregate of 1,145,250 shares.
(3) The exercise price per share of all such options was not less than 100% of
the reported closing sales price of the Company's Common Stock on The
Nasdaq Stock 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 expected time to exercise of five years; (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 daily closing sales prices for the period from January
1992 to December 1996; 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 1992-1996 (18.46%) compounded over the expected years to
exercise of five years. 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.
</TABLE>
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<PAGE>
AGGREGATED OPTION EXERCISES IN 1996 AND OPTION VALUES AT DECEMBER 31, 1996
The following table sets forth certain information concerning stock option
exercises during 1996 and unexercised options held as of December 31, 1996 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 12/31/96(#) Options at 12/31/96($)(1)
on Value -------------------------- --------------------------
Name Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
- ---------------- ----------- ----------- ----------- ------------- ----------- -------------
<C> <C> <C> <C> <C> <C> <C>
Allan J. Toomer 52,000 $550,060 69,560 18,840 $ 830,350 $ 99,150
Philip J. Alford 43,451 509,592 150,324 24,725(2) 1,794,420 300,075(2)
Shigeru Suzuki 10,000 99,050 28,214 23,002 335,432 215,032
Gilles C. Godin 0 0 70,960 40,040 874,259 437,322
Scott R. Gardner 1,500 15,938 17,575 25,425 200,570 235,245
- ---------------
<FN>
(1) Represents the difference between the closing sales price of the Company's
Common Stock on December 31, 1996 as reported on The Nasdaq Stock Market
(i.e., $15.75) and the exercise price of such options.
(2) Such options terminated unexercised effective as of the close of business
on December 31, 1996 as a result of the termination of Mr. Alford's
employment with the Company on that date.
</TABLE>
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. Toomer, Suzuki, Godin and Gardner if their employment were
terminated as of April 1, 1997 and they were eligible for severance benefits
under the Severance Plan would be $316,250, $321,780, $294,000 and $92,250,
respectively. Severance benefits also include continuation, at the Company's
expense, of health care insurance and term life insurance for a period of 18
months following termination of employment. Mr. Alford, William Minchin, the
Company's former Vice President, Operations, and William Shaw, the Company's
former Senior Vice President and General Manager, Network Diagnostic Division,
whose employment relationships with the Company were terminated during 1996,
have received or will receive severance compensation under the Severance Plan
totalling $457,500, $164,656 and $179,016, respectively. In addition, upon the
termination of Messrs. Alford's and Minchin's employment relationships with the
Company, the vesting of options to purchase 20,000 and 11,700 shares,
respectively, was accelerated and such options became vested and
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<PAGE>
exercisable in full as of their respective dates of termination. In the case of
Mr. Alford, such options were accelerated pursuant to the terms of his original
option agreement with the Company. In connection with the termination of Mr.
Alford's employment with the Company, the Company also agreed to pay up to
$25,000 directly to an outplacement services agency for outplacement services to
be rendered to Mr. Alford.
In February 1994, the Company agreed that in the event Mr. Godin's
employment with the Company is terminated under circumstances entitling him to
severance benefits under the Severance Plan, then the unvested installments of
an option to purchase 50,000 shares of the Company's Common Stock granted to him
in February 1994 will vest and become exercisable in full upon such termination.
As of March 1, 1997, such option was unvested as to 20,000 shares.
In March 1997, Mr. Toomer entered into an agreement with the Company
pursuant to which the Company agreed to pay to Mr. Toomer, in lieu of any
benefits which might otherwise be payable to him under the Severance Plan, a
lump sum payment in the amount of $400,000 upon the termination of his
employment with the Company after June 30, 1997 for any reason or upon his death
or disability at any time. The agreement also provides that (i) if Mr. Toomer
remains an officer of the Company through December 31, 1997, all installments of
stock options granted to him under the Company's 1994 Stock Option Plan that are
scheduled to vest after December 31, 1997 will vest in full and become
immediately exercisable on December 31, 1997, and (ii) if Mr. Toomer's
employment is terminated prior to December 31, 1997 for any reason other than
his voluntary termination without "good reason" or by the Company "for cause"
(as such terms are defined in the Officer Severance Plan), then the warrants to
purchase 40,300 shares of the Company's Common Stock granted to Mr. Toomer in
January 1997 will vest in full and become immediately exercisable. See "Certain
Relationships and Related Transactions" below.
TEKELEC, LTD. RETIREMENT PLAN
In January 1990, Tekelec, Ltd., the Company's wholly owned Japanese
subsidiary, adopted Retirement Pension Rules (the "Plan") to provide retirement
benefits to its employees, other than directors and certain other specified
categories of employees, who have completed at least three years of service.
Effective January 1994, the Plan was amended to provide retirement benefits to
directors as well as to employees. The benefit payable under the Plan to a
director 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 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% (for a director with 20 years of eligible service) to 51% (for a
director with 40 or more years of eligible service) of a director's highest
monthly salary.
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,
1997, Mr. Suzuki was credited with 11 years of eligible service and would be
entitled to receive approximately $281,000 as a lump sum payment under the Plan
if his employment were terminated by Tekelec, Ltd.
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<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1996, the Compensation Committee consisted of Messrs. Adams,
Brenner, Oringer and Rager until July 1996, of Messrs. Adams, Rager and Brenner
from July 1996 until November 1996, and of Messrs. Adams, Brenner, Oringer and
Rager thereafter. 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
compensation program for the Company's executive officers. The Company's
executive compensation program consists of both cash-based and stock-based
compensation. With respect to calendar year 1996 compensation of the Company's
executive officers, the Board of Directors was responsible for determining the
annual base salaries of such officers and approving the terms of the officer
bonus plan and the award of discretionary bonuses. The Board 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 14 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 annual base 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 (e.g., compensation surveys) concerning competitive
compensation and the Company's financial results and condition. For calendar
year 1996, principally in recognition of the Company's improved financial
results and achievement of certain corporate objectives in 1995, the Board
increased the annual base salaries of the Company's executive officers named in
the Summary Compensation Table by 4.4% to 11.1% over 1995 levels.
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 1996, each executive
officer was eligible to receive a cash bonus equal to a percentage of his annual
base salary if the Company achieved certain pre-established financial
performance goals. Bonuses under such Plan would only be paid if the Company's
revenues and operating income met or exceeded both the revenue goal and the
operating income goal set forth in the Company's business plan.
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<PAGE>
Under the terms of the Officer Bonus Plan, no bonuses were earned by the
Company's executive officers because the Company did not meet the Plan's
financial performance goals. In recognition, however, of the achievement in 1996
of individual goals by certain of the Company's executive officers, the Board
awarded discretionary cash bonuses to Messrs. Toomer, Godin, Suzuki and Gardner
in amounts ranging from $5,000 to $25,000 and from 4.5% to 10.9% as a percentage
of an officer's annual base salary.
The Board was also responsible for determining the annual base salary of
Philip Alford, the Company's President from January 1994 until November 1996 and
Chief Executive Officer from July 1995 until December 1996. In determining Mr.
Alford's annual base salary for 1996, the Board took into consideration the same
factors that were considered in setting the annual base salaries of the
Company's other executive officers. Although Mr. Alford was a member of the
Board of Directors, he did not participate in any discussions or decisions of
the Board or the Compensation Committee regarding his salary. For services
rendered in 1996, Mr. Alford's cash compensation consisted of base salary in the
amount of $250,000 (an 11.1% increase over his 1995 salary).
Under Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), a publicly-held corporation such as the Company will generally not be
allowed a federal income tax deduction for otherwise deductible 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. Qualifying
performance-based compensation (including compensation attributable to the
exercise of stock options) 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 regulations under Section 162(m), it appears unlikely
that the compensation to be paid to any of the Company's executive officers for
1997 would exceed the $1 million limitation per officer.
BOARD OF DIRECTORS
Jean-Claude Asscher, Chairman
Robert V. Adams
Daniel L. Brenner
Howard Oringer
Jon F. Rager
Allan J. Toomer
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is responsible for administering the Company's
employee stock option plans. 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 Chief Executive Officer with regard to the grant of stock options to
executive officers (other than the Chief Executive Officer) 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 periodically 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, salary, previous stock option grants (if any) and length of service
to the Company.
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<PAGE>
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 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 1996, options to purchase an
aggregate of 67,600 shares of Common Stock were granted to all executive
officers as a group (including options to purchase 18,500 shares granted to Mr.
Alford) and represented 5.9% of all options granted in 1996. Information
concerning options granted during 1996 to the executive officers named in the
Summary Compensation Table is provided in the table entitled "Executive
Compensation and Other Information Option Grants in 1996."
COMPENSATION COMMITTEE
Robert V. Adams, Chairman
Daniel L. Brenner
Howard Oringer
Jon F. Rager
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, 1996:
The Company sells products to Tekelec-Airtronic and its wholly owned
subsidiaries which serve as distributors of the Company's products in Europe.
During 1996, the aggregate sales of the Company's products to Tekelec-Airtronic
and its subsidiaries were approximately $4,130,000. As of December 31, 1996,
Tekelec-Airtronic and its subsidiaries owed the Company approximately $2,381,000
for purchases of the Company's products, of which approximately $1,922,000 was
owed as of March 1, 1997.
The Company also purchases certain telecommunications test equipment and
components from Tekelec-Airtronic and certain of its subsidiaries. During 1996,
the Company purchased such equipment and components from Tekelec-Airtronic and
its subsidiaries at an aggregate cost of approximately $125,000. As of December
31, 1996, the Company owed approximately $145,000 for purchases of such
equipment and components, of which approximately $140,000 was owed as of March
1, 1997. The Company anticipates that during 1997 it will continue to purchase
telecommunications test equipment and components from Tekelec-Airtronic and its
subsidiaries, and expects that the aggregate amount of such purchases will not
be significantly greater than the aggregate amount of such purchases during
1996.
In January 1997, the Company issued to Mr. Toomer warrants to purchase
40,300 shares of the Company's Common Stock at an exercise price of $18.625 per
share (i.e., the closing sales price of the Company's Common Stock on The Nasdaq
Stock Market on the date of grant). Such warrants vest in three equal
installments on June 30, 1997, September 30, 1997 and December 31, 1997 as long
as Mr. Toomer remains an employee of the Company. The warrants may vest earlier
under certain circumstances upon the termination of Mr. Toomer's employment with
the Company. See "Executive Compensation and Other Information - Employment
Agreements and Termination of Employment and Change-in-Control Arrangements"
above.
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<PAGE>
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, 1992. 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
[PERFORMANCE GRAPH APPEARS HERE]
================================================================================
12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96
- --------------------------------------------------------------------------------
Tekelec 100 71 45 258 165 247
- --------------------------------------------------------------------------------
Nasdaq National Market 100 101 121 127 165 205
(U.S.)
- --------------------------------------------------------------------------------
Nasdaq Computer Mfrs. 100 134 127 140 220 296
================================================================================
- ---------------
* Assumes (i) $100 invested on January 1, 1992 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.
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<PAGE>
PROPOSAL 2 - APPROVAL OF AMENDMENTS TO 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 initially authorized for issuance pursuant
to the exercise of stock options granted thereunder. The 1994 Plan was amended
in 1995 and 1996 to increase the number of shares authorized for issuance
thereunder by an aggregate of 1,200,000 shares.
In February and March 1997, the Board of Directors further amended the 1994
Plan, subject to shareholder approval, to increase the number of shares
authorized for issuance thereunder by 100,000 and 900,000 shares, respectively.
If such increase is approved, a total of 3,000,000 shares will have been
authorized for issuance under the 1994 Plan. To the extent options are granted
to purchase any of such additional 1,000,000 shares prior to obtaining
shareholder approval of the amendments to the 1994 Plan, such options will be
expressly conditioned upon obtaining such approval.
As of March 24, 1997, under the 1994 Plan, a total of 148,326 shares had
been issued upon the exercise of options granted, a total of 1,841,816 shares
was subject to outstanding options, and there were 9,858 shares (not including
the 1,000,000-share increase subject to shareholder approval) remaining
available for option grants.
NEW PLAN BENEFITS
Grants under the 1994 Plan to purchase any of the additional 1,000,000
shares subject to shareholder approval will be made at the discretion of the
Compensation Committee to whom the Board of Directors has delegated the
administration of the 1994 Plan. As of April 10, 1997, no such grants had been
made. Future benefits under the 1994 Plan are therefore not yet determinable
because future optionees, the number of shares subject to option grants and
exercise prices have not yet been determined.
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 1,000,000 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.
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 who the Company believes 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
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<PAGE>
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 comprised of not less than two non-employee Board
members. The 1994 Plan is currently administered by the Compensation Committee
of the Board, which is comprised of four non-employee directors. The
interpretation and construction of any provision of the 1994 Plan is within the
sole discretion of the members of the Compensation Committee, 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, salary, previous stock option grants (if any), length of service to
the Company, and other relevant factors. As of March 1, 1997, approximately 371
persons were eligible to receive options and 366 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 optionee 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.
(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 at the time of grant 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.
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<PAGE>
(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 sales
price of the Common Stock on The Nasdaq Stock Market as reported in The
Wall Street Journal on the date of the option grant. On April 1, 1997,
the closing sales price of the Company's Common Stock on The Nasdaq
Stock Market was $21.00 per share.
(d) Termination of Employment: If an 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, his or her options
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 OR CONTROL
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 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
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<PAGE>
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 (i.e., April 3, 2004),
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 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.
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<PAGE>
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 a disqualifying disposition occurs in the same year
as an option is exercised, the amount of ordinary income resulting from such
disqualifying disposition is included in 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 resulting from such disqualifying disposition in the year of
such disposition. An optionee's regular tax liability is affected by the
availability of a credit for prior year alternative minimum tax, a basis
adjustment for alternative minimum tax 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 regular income 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 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.
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PROPOSAL 3 - 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, 1997, 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.
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 10, 1997
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APPENDIX
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.
<PAGE>
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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<PAGE>
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
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* 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>
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>
(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.
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* 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>
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 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
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<PAGE>
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 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
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<PAGE>
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.
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.
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<PAGE>
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.
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.
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<PAGE>
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 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
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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; 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.
-11-
<PAGE>
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.
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.
-12-
<PAGE>
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>
(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.
-2-
<PAGE>
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.
-3-
<PAGE>
(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.
-4-
<PAGE>
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: ______________________________
-5-
<PAGE>
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>
(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
-2-
<PAGE>
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
-3-
<PAGE>
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.
-4-
<PAGE>
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
______________________________
-5-
<PAGE>
AMENDMENT NO. 1 TO
TEKELEC
1994 STOCK OPTION PLAN*
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
- ---------------
* The number of shares set forth herein has been adjusted to reflect
Tekelec's two-for-one stock split effective March 17, 1995.
<PAGE>
AMENDMENT NO. 2 TO
TEKELEC
1994 STOCK OPTION PLAN*
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
- ---------------
* The number of shares set forth herein has been adjusted to reflect
Tekelec's two-for-one stock split effective March 17, 1995.
<PAGE>
AMENDMENT NO. 3 TO
TEKELEC
1994 STOCK OPTION PLAN
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 Two Million (2,000,000) 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: January 27, 1996
<PAGE>
AMENDMENT NO. 4 TO
TEKELEC
1994 STOCK OPTION PLAN*
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 Two Million One Hundred Thousand
(2,100,000) 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 26, 1997
- ---------------
* This Amendment is subject to the approval of the Company's shareholders at
their Annual Meeting scheduled to be held on May 21, 1997.
<PAGE>
AMENDMENT NO. 5 TO
TEKELEC
1994 STOCK OPTION PLAN*
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 Three Million (3,000,000) 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 19, 1997
- ---------------
* This Amendment is subject to the approval of the Company's shareholders at
their Annual Meeting scheduled to be held on May 21, 1997.
<PAGE>
ANNEX A
FORM OF PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
TEKELEC
1997 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 10, 1997, and Annual Report
to Shareholders for the year ended December 31, 1996, and hereby appoints Allan
J. Toomer 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 21, 1997, at 9:30 a.m., Eastern Daylight-Saving
Time, at the Company's offices located at 5151 McCrimmon Parkway, Suite 216,
Morrisville, North Carolina 27560, 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 [ ] Jean-Claude Asscher [ ] Daniel L. Brenner
[ ] Howard Oringer [ ] Jon F. Rager [ ] Allan J. Toomer
2. APPROVAL OF AMENDMENTS TO 1994 STOCK OPTION PLAN: 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 2,000,000 to
3,000,000, as described in the Proxy Statement.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. APPOINTMENT OF INDEPENDENT ACCOUNTANTS: To ratify the appointment of
Coopers & Lybrand L.L.P. as independent accountants of the Company for the year
ending December 31, 1997, as described in the Proxy Statement.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. OTHER BUSINESS: In their discretion, the Proxies are authorized to vote
upon such other business as may properly come before the Annual Meeting or any
adjournment(s) thereof.
<PAGE>
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 AND 3 AND AS SAID PROXIES DEEM
ADVISABLE ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
Dated: , 1997
---------------------------
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(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
