<PAGE>1
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 Section 240.14a-11(c) or Section 240.14a-12
ELCOTEL, INC.
- ------------------------------------------------
(Name of Registrant as specified in its charter)
ELCOTEL, INC.
- ------------------------------------------------
(Name of person(s) filing proxy statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1) or 14a-6(j)(2)
or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities
to which transaction applies: ________________________________
(2) Aggregate number of securities
to which transaction applies: ________________________________
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11: _____________________________
(4) Proposed maximum aggregate value of transaction: _________________________
(A) Set forth the amount on which the filing fee is calculated and state how it
was determined.
[ ] Check the 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.
<PAGE>2
(1) Amount Previously Paid: _____________________________
(2)Form, Schedule or Registration Statement No.: _________________________
(3)Filing Party: _____________________________
(4)Date Filed: _____________________________
<PAGE>3
ELCOTEL, INC.
6428 Parkland Drive, Sarasota, Florida 34243
NOTICE AND PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD 9:00 A.M., OCTOBER 15, 1996
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Elcotel, Inc.
(the "Company") will be held on Tuesday, October 15, 1996, at 9:00 a.m., local
time, at Michael's On East, 1212 East Avenue South, Sarasota, Florida, for
consideration of and action by the holders of the Company's Common Stock upon
the following matters:
1. The election of a Board of seven directors, with each director to
serve until the next annual meeting of Shareholders or until the
election and qualification of his respective successor;
2. To approve an amendment to the 1991 Stock Option Plan to, among other
things, increase the number of shares by 500,000;
3. The ratification of the appointment of Deloitte & Touche LLP as the
Company's independent public accountants for the fiscal year ending
March 31, 1997; and
4. The transaction of such other business as may properly come before
the Annual Meeting and any adjournment thereof, and matters incident
to the conduct of the Annual Meeting.
The Board of Directors has fixed the close of business on August 30, 1996, as
the record date for the determination of holders of Common Stock of the
Company entitled to notice of, and to vote at, the Annual Meeting. The
Company's Annual Report to Shareholders for the year ended March 31, 1996,
accompanies this Notice and Proxy Statement.
SHAREHOLDERS (WHETHER THEY OWN ONE OR MANY SHARES AND WHETHER THEY EXPECT TO
ATTEND THE ANNUAL MEETING OR NOT) ARE REQUESTED TO VOTE, SIGN, DATE AND RETURN
PROMPTLY THE ACCOMPANYING PROXY IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO
POSTAGE IF MAILED IN THE UNITED STATES.
By Order of the Board of Directors
September 6, 1996 Ronald M. Tobin, Secretary
<PAGE>4
ELCOTEL, INC.
6428 Parkland Drive, Sarasota, Florida 34243
PROXY STATEMENT
This Proxy Statement is furnished and is being mailed with the accompanying
proxy on approximately September 6, 1996, to each Shareholder of record of
Elcotel, Inc. (the "Company") in connection with the solicitation of proxies
by the Board of Directors of the Company, to be voted at the Annual Meeting
of Shareholders of the Company (the "Meeting") to be held on Tuesday,
October 15, 1996, at 9:00 a.m., local time, at Michael's On East, 1212 East
Avenue South, Sarasota, Florida, and at any adjournment thereof, for the
purposes stated below.
Any person giving a proxy has the power to revoke it at any time before its
exercise by a later dated proxy, a written revocation sent to the Secretary of
the Company or attendance at the Meeting and voting in person. In the absence
of contrary instructions, properly executed proxies, received and unrevoked,
will be voted by the persons named in the proxy: (i) for the election of the
directors proposed by the Board of Directors; (ii) for amendment to the 1991
Stock Option Plan to, among other things, increase the number of shares by
500,000; (iii) for the ratification of Deloitte & Touche LLP as the Company's
independent public accountants for the fiscal year ending March 31, 1997; and
(iv) in their discretion, on such other business as may properly come before
the Meeting and matters incident to the conduct of the Meeting.
VOTING SECURITIES OF THE COMPANY
Only Shareholders of record at the close of business on August 30, 1996, are
entitled to notice of, and to vote at, the Meeting. On that date, the
outstanding voting securities of the Company consisted of 8,102,494 shares of
Common Stock. Each share of Common Stock is entitled to one vote on all matters
presented to the Meeting with no right to vote cumulatively.
The Company's By-laws provide that the presence, in person or by proxy, of a
majority of the issued and outstanding shares of the Company entitled to vote
at the Meeting will constitute a quorum. Provided that the quorum requirements
are met, the nominees for election as directors of the Company at the Meeting
who receive the greatest number of votes cast will be elected as directors.
Abstentions and broker non-votes are counted for purposes of determining whether
a quorum is present for the transaction of business at the Meeting. Abstentions
are counted as negative votes in tabulations of the votes cast on proposals
presented to Shareholders, whereas broker non-votes have no effect on the
outcome of voting.
<PAGE>5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, at August 30, 1996, the number and percentage
of shares of Common Stock which, according to information supplied to the
Company, are beneficially owned by: (i) each person who is the beneficial owner
of more than 5% of the Common Stock; (ii) each of the directors, and named
executive officers of the Company individually; and (iii) all current directors
and executive officers of the Company as a group. Under rules adopted by the
Securities and Exchange Commission, a person is deemed to be a beneficial
owner of Common Stock with respect to which he has or shares voting power
(which includes the power to vote or to direct the voting of the security),
or investment power (which includes the power to dispose of, or to direct the
disposition of, the security). A person is also deemed to be the beneficial
owner of shares with respect to which he could obtain voting or investment
power within 60 days of August 30, 1996, such as upon the exercise of options
or warrants.
Number of
Name and Address Shares (1) Percentage
- -------------------------- ---------------- ----------
C. Shelton James. . . . . . . . 1,542,422 (2) 19.0%
6428 Parkland Drive
Sarasota, Florida 34243
Fundamental Management Corporation 1,417,723 17.5%
4000 Hollywood Boulevard
Suite 610N
Hollywood, Florida 33021
Alvaro R. Quiros. . . . . . . . 546,577 (3) 6.7%
6428 Parkland Drive
Sarasota, Florida 34243
Thomas R. Wiltse. . . . . . . . 400,000 (4) 4.9%
6428 Parkland Drive
Sarasota, Florida 34243
Tracey L. Gray. . . . . . . . . 148,543 (5) 1.8%
6428 Parkland Drive
Sarasota, Florida 34243
T. Raymond Suplee . . . . . . . 28,300 (6) 0.3%
6428 Parkland Drive
Sarasota, Florida 34243
<PAGE>6
Thomas E. Patton. . . . . . . . 9,000 (7) 0.1%
6428 Parkland Drive
Sarasota, Florida 34243
Dwight Jasmann. . . . . . . . . 8,890 (8) 0.1%
6428 Parkland Drive
Sarasota, Florida 34243
Charles H. Moore. . . . . . . . 11,100 (9) 0.1%
6428 Parkland Drive
Sarasota, Florida 34243
Hugh H. Durden. . . . . . . . . 5,000 (10) 0.1%
6428 Parkland Drive
Sarasota, Florida 34243
All directors and executive officers as
a group (12 persons) . . . . 2,819,282 (11) 33.9%
_______________________________________
(1) Unless otherwise indicated, each shareholder has sole voting
and investment power with respect to all listed shares.
(2) Includes 1,417,723 shares held by Fundamental Management
Corporation, as to which shares Mr. James disclaims beneficial
ownership, and 25,000 shares which may be issued upon exercise
of stock options within 60 days.
(3) Includes 5,000 shares which may be issued upon the exercise
of stock options within 60 days.
(4) Includes 32,000 shares which may be issued upon the exercise
of stock options within 60 days.
(5) Includes 25,000 shares which may be issued upon the exercise
of stock options within 60 days.
(6) Includes 26,000 shares which may be issued upon the exercise
of stock options within 60 days.
(7) Includes 500 shares held jointly with Mr. Patton's wife.
Includes 8,000 shares which may be issued upon the exercise
of stock options within 60 days.
(8) Includes 6,000 shares which may be issued upon the exercise
of stock options within 60 days.
(9) Includes 75 shares held by Mr. Moore's wife and 25 shares held
by Mr. Moore's daughter. Includes 10,000 shares which may be
issued upon the exercise of stock options within 60 days.
<PAGE>7
(10) Includes 5,000 shares which may be issued upon the exercise
of stock options within 60 days.
(11) Includes a total of 1,417,723 shares held by Fundamental
Management Corporation and shares held by family members as
to which shares the respective officers and directors disclaim
beneficial ownership. Also includes 210,300 Shares which may
be issued upon exercise of stock options within 60 days.
<PAGE>8
ELECTION OF DIRECTORS
In accordance with the Company's By-laws, a Board of seven directors will serve
until the next Meeting or until successors to the directors have been elected
and have qualified. All directors are elected annually. It is the intention
of the persons named in the proxy, unless otherwise directed, to vote all
proxies in favor of the election to the Board of Directors for the nominees
listed below. The Board has no reason to believe that any of the nominees will
be unable or unwilling to be a candidate for election at the time of the
Meeting. If any nominee is unable or unwilling to serve, the persons named in
the proxy will use their best judgment in selecting and voting for a substitute
candidate.
The Board of Directors has unanimously recommended a slate of nominees for
election as directors at the Meeting. The names of the nominees for directors
of the Company, their ages and certain other information is set forth as
follows:
Name Age Position
- --------------------- --- ---------------------------
C. Shelton James 56 Chief Executive Officer and
Chairman of the Board
Tracey L. Gray 64 President, Chief Operating
Officer and Director
Dwight Jasmann 60 Director
Charles H. Moore 67 Director
Thomas E. Patton 55 Director
T. Raymond Suplee 49 Director
Thomas R. Wiltse 72 Director
_____________________________
Mr. James has served as Chief Executive Officer of the Company since May 1991
and has been a director of the Company since December 1990. Mr. James is
currently an investor in and business advisor to a number of companies. While
he has devoted a substantial amount of time to the Company since May 1991, he
has also served as Executive Vice President of Fundamental Management
Corporation, an investment management company, since April 1990, and was
appointed President of that company in April 1993. He is a member of the
boards of Cyberguard Corporation, Concurrent Computer Corporation,
NAI Technologies, Fundamental Management Corporation, CSPI and
SK Technologies, Inc. From 1980 to 1989, Mr. James had been Executive Vice
President of Gould, Inc., a diversified electronics company, and President of
Gould's Computer Systems Division.
<PAGE>9
Mr. Gray has served as President and Chief Operating Officer of the Company
since July 1991 and has been a director of the Company since August 1991.
From June 1986 until joining the Company, Mr. Gray had been a Vice President
of the Government Systems Division, Network Systems Division and Federal
Systems Division, respectively, of Sprint.
Mr. Jasmann has been a director of the Company since December 1993. Mr. Jasmann
has been President and General Manager for COMSAT International Ventures in
Bethesda, Maryland, a business unit of COMSAT Corporation that manages
telecommunications companies in overseas markets, since August 1996. From
January 1995 to July 1996, Mr. Jasmann had been Vice President of Human
Resources for AirTouch Communications in San Francisco, a domestic and
international operator of wireless services. From August 1992 to December 1994,
he was an international telecommunications advisor for various U.S. and
foreign telecommunications operators including COMSAT Corporation and Fax
International, Inc. From February 1959 to May 1992, Mr. Jasmann held various
positions with AT&T, most recently as President and Managing Director of
AT&T Communications Pacific based in Hong Kong. He previously served on the
boards of the Pacific Telecommunications Council in Hawaii, the Information
Communication Institute of Singapore and Philcom, a Philippines telephone
company.
Mr. Moore has been a director of the Company since December 1993. Mr. Moore
has been Director of Athletics for Cornell University since November 1994.
From November 1992 to October 1994 Mr. Moore was Vice Chairman of Advisory
Capital Partners, Inc., an investment advisory firm. From July 1988 to
October 1992, Mr. Moore served as President and Chief Executive Officer of
Ransburg Corporation, a producer of industrial coating systems and equipment,
and from August 1991 to October 1992 as Executive Vice President of Illinois
Tool Works, Inc., a multinational manufacturer of highly engineered components
and systems. Mr. Moore is currently a director of The Turner Corporation and
is Chairman of the Audit Committee of the United States Olympic Committee.
Mr. Patton has been a director of the Company since July 1989. Mr. Patton has
been a partner in the Washington, D.C. law firm of Tighe, Patton, Tabackman &
Babbin, engaged in civil and criminal business litigation, securities law
enforcement matters, corporate finance and corporate compliance, since
August 1994. From 1979 until July 1994, Mr. Patton was a partner in the
Washington, D.C. law office of Schnader, Harrison, Segal & Lewis, engaged in
civil and criminal securities litigation and general business litigation.
Mr. Patton also serves on the board of directors of Infomation Exchange, Inc.,
a financial services marketing database company.
Mr. Suplee has been a director of the Company since September 1986. Since 1982,
Mr. Suplee has been the Senior Partner and President of Suplee & Shea, P.A., a
certified public accounting firm located in Sarasota, Florida. Mr. Suplee is
currently a director of First of America Bank (Florida) and serves on its audit
committee, and is also a director of Plymouth Harbor adult retirement facility.
Mr. Wiltse has been a director of the Company since July 1990. Since 1985 Mr.
Wiltse has been active as a private investor. For more than thirty years, until
his retirement in 1985, Mr. Wiltse served in a variety of managerial and
executive capacities with General Motors Corporation's worldwide foundry
operations.
<PAGE>10
Executive Officers
- -------------------
In addition to those directors listed above who are executive officers of the
Company in the positions indicated, the following persons are also executive
officers of the Company:
Name Age Position
- ----------------------- --- ------------------------
Alvaro R. Quiros 64 Executive Vice President
Ronald M. Tobin 53 Vice President, Finance
Chief Financial Officer,
Secretary and Treasurer
Hugh H. Durden 48 Vice President, Domestic Sales
Frederick O. Hawkes 50 Vice President, Engineering
and Development
Kenneth W. Noack 59 Vice President, Operations
_________________________________
Mr. Quiros was a founder of the Company and has served as an executive officer
since its inception and as a director from its inception until December 1993.
He has served as Executive Vice President of the Company, responsible for
international marketing, since June 1991 and, in addition, is currently
assisting in development of a strategic direction for future and emerging
technologies and applications. He had served as President of the Company from
its inception in April 1985 until June 1991.
Mr. Tobin has served as Vice President, Chief Financial Officer, Secretary and
Treasurer of the Company since July 1992. Prior to joining the Company he held
various financial positions with SmithKline Beecham Corporation in Philadelphia
since September 1970, and most recently had been Corporate Controller of
SmithKline Beecham Clinical Laboratories in King of Prussia, PA since
February 1982.
Mr. Durden rejoined the Company in June 1991 as Vice President of Sales after
having previously served as district sales manager for the Company from
March 1987 until August 1989. From August 1989 until rejoining the Company,
Mr. Durden founded and served as Chief Executive Officer and President of two
privately-held telecommunications companies. From November 1984 until
February 1987, Mr. Durden was President of Communications Central, Inc., a
privately-held operator of payphones.
Mr. Hawkes rejoined the Company in October 1993 as Vice President of Engineering
and Development, having previously served in the same capacity from August 1991
to April 1992. From April 1992 until October 1993, Mr. Hawkes was a consultant
to Harris Corporation and from September 1989 until May 1991, he was a director
of a product division of Harris.
<PAGE>11
Mr. Noack has served as Vice President of Operations since January 1993, having
joined the Company in July 1992 as Director of Operations. Prior to joining
the Company he was with AT&T Paradyne Corporation in Largo, Florida since 1973,
and most recently was Vice President and Director of Operations Planning and
Materials.
- -----------------------------------
Section 16 Compliance
- ----------------------
Based solely upon a review of certain reports required to be filed by the
Company's current or former directors and officers and beneficial owners of
more than 10 percent of the outstanding Common Stock pursuant to Section 16(a)
of the Securities Exchange Act of 1934, the following person failed to file, on
a timely basis, reports so required to be filed during the fiscal year ended
March 31, 1996.
Number of
Transactions
Number of Not Reported on a
Name Title Late Reports Timely Basis
-------------- --------------------- ------------ -----------------
Tracey L. Gray President, 1 2
Chief Operating Officer
and Director
<PAGE>12
BOARD OF DIRECTORS AND COMMITTEES
The Company's Board of Directors held four meetings during the fiscal year ended
March 31, 1996. Each of the then-serving directors attended or participated in
at least 75% of the aggregate of all meetings of the Board and all committees of
which he was a member during the fiscal year ended March 31, 1996.
The Company has a Compensation and Stock Option Committee, presently composed of
Messrs. Jasmann, Moore, Suplee and Wiltse. The Compensation and Stock Option
Committee is authorized to administer and grant options pursuant to the
Company's 1991 Stock Option Plan. The Compensation and Stock Option Committee
held two meetings during the fiscal year ended March 31, 1996, which were
attended by all of the then-serving committee members.
The Company has an Audit Committee composed of Messrs. Moore, Patton, Suplee and
Wiltse, which recommends the independent public accountants for appointment by
the Board of Directors and reviews reports submitted by the accountants. The
Audit Committee held two meetings during the fiscal year ended March 31, 1996,
which were attended by all of the then-serving Audit Committee members.
The Company has a Nominating Committee composed of Messrs. Moore, Patton, Suplee
and Wiltse which recommends a slate of directors for election at the annual
meeting of shareholders. The Nominating Committee held no meetings during the
fiscal year ended March 31, 1996.
The Company has a Management Committee composed of Messrs. James, Gray, Jasmann
and Wiltse which works with management to facilitate the establishment and
review of the strategic direction of the Company. The Management Committee
held one meeting during the fiscal year ended March 31, 1996, which were
attended by all of the then-serving Management Committee members.
The Company's By-laws provide that Shareholders may make nominations for
election to the Company's Board of Directors if such nominations are in
writing and delivered to the Secretary of the Company not less than 135 days
before the day and month of the previous year's annual meeting. Thus,
nominations for election to the Board of Directors at the 1997 Annual Meeting
must be delivered to the Secretary by June 2, 1997. The shareholder making the
nomination must provide information about the persons nominated that is
required to be disclosed in a proxy statement for solicitation of proxies with
respect to nominees for election as directors pursuant to the regulations
under the Securities Exchange Act of 1934. Only those persons nominated by
the Board of Directors and by Shareholders as described above shall be voted
upon at the Meeting.
<PAGE>13
EXECUTIVE COMPENSATION
The following table sets forth certain information covering the compensation
paid or accrued by the Company during the fiscal years indicated to its Chief
Executive Officer and to each of its most highly compensated executive
officers whose annual salary and bonus exceeded $100,000 during the fiscal
year ended March 31, 1996 ("named executive officers"):
SUMMARY COMPENSATION TABLE
---------------------------
Long Term
Compensation
Annual Compensation Awards
------------------------ -----------
(a) (b) (c) (d) (e) (g) (i)
Number of
Secur- All
Fiscal Other ities Other
Year Annual Under- Compen-
Name and Ended Salary Bonus Compensation lying sation
Principal Position March 31, ($) ($) ($) Options(3) ($)
- -------------------- --------- ------- ------- --------- --------- ----------
C. Shelton James 1996 $78,654 0 25,000 $1,838 (2)
Chairman of the Board and 1995 73,004 $35,450 40,000 1,555 (2)
Chief Executive Officer 1994 73,613 40,450 20,000 1,151 (2)
Tracey L. Gray 1996 138,039 0 25,000 3,463 (2)
President and 1995 127,461 60,450 40,000 2,738 (2)
Chief Operating Officer 1994 125,599 71,450 20,000 2,245 (2)
Hugh H. Durden 1996 184,876 0 7,500 3,173 (2)
Vice President 1995 201,859 8,100 10,000 3,369 (2)
1994 189,661 7,538 10,000 2,144 (2)
Alvaro R. Quiros 1996 104,000 0 7,000 2,761 (2)
Executive Vice President 1995 102,295 0 10,000 2,404 (2)
1994 84,298 450 0 1,740 (2)
______________________
(1) Represents options granted under the Company's 1991 Stock Option Plan.
Mr. Quiros was not granted options during the fiscal year ended
March 31, 1994.
(2) Includes taxable portion of Company paid Group Term Life Insurance and the
Company's matching contribution to the 401(k) savings plan. Group Term
Life Insurance for Messrs. James, Gray, Durden and Quiros, respectively,
for Fiscal 1996 is $450, $702, $174 and $702, for Fiscal 1995 is $450,
$702, $174 and $702 and for Fiscal 1994 is $288, $702, $174 and $702.
401(k) Savings plan matching contributions for Messrs. James, Gray, Durden
and Quiros, respectively, for Fiscal 1996 are $1,388, $2,761, $2,999 and
$2,059, Fiscal 1995 are $1,105, $2,036, $3,195 and $1,702 and for Fiscal
1994 are $863, $1,543, $1,970 and $1,038.
<PAGE>14
Stock Option Grants
- -------------------
The following table sets forth the number of securities underlying options, the
exercise price and the expiration date for stock options granted to the Chief
Executive Officer and the named executive officers who received options during
the fiscal year ended March 31, 1996.
Option Grants in Last Fiscal Year
---------------------------------
Individual Grants
________________________________________________________________________
(a) (b) (c) (d) (e)
% of
Total
Options
Granted to Exercise
Options Employees or Base
Granted in Fiscal Price Expiration
Name (#) (1) Year ($/Sh) Date
---------------------------------------------------------------------
C. Shelton James 25,000 11.9% $6.1875 2/20/01
Tracey L. Gray 25,000 11.9% $6.1875 2/20/01
Hugh H. Durden 7,500 3.6% $6.1875 2/20/01
Alvaro R. Quiros 7,000 3.3% $6.1875 2/20/01
(1) Options become exercisable one fourth each year,
cumulatively, beginning on February 20, 1997, and expire
on February 20, 2001.
<PAGE>15
Stock Option Exercises and Holdings
- -----------------------------------
The following table sets forth the number of exercisable and unexercisable
options as of March 31, 1996 and the value of such options for the Chief
Executive Officer and the named executive officers.
AGGREGATED OPTION EXERCISE IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTIONS VALUE TABLE
(a) (b) (c) (d) (e)
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
FY-End (#) FY-End ($)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized ($) Unexercisable Unexercisable
- -------------------------------------------------------------------------------
C. Shelton James 40,773 $246,270 59,227/65,000 $226,714/$ 86,900
Tracey L. Gray 100.000 $490,937 20,000/65,000 $51,900/$ 86,900
Hugh H. Durden 37,500 $274,325 0/20,000 0/$ 30,325
Alvaro R. Quiros - - 2,500/14,500 $4,375/$ 13,125
Directors' Compensation
- -----------------------
Directors who are not employees of the Company receive an annual retainer fee
of $5,000 per year plus $1,500 for each Board meeting attended, and $500 for
each committee meeting attended. Directors are also reimbursed for expenses in
attending Board and Board committee meetings.
During the fiscal year ended March 31, 1996, options were granted to the
Company's non-employee directors (Messrs. Jasmann, Moore, Patton, Suplee and
Wiltse), pursuant to the Company's Directors' Stock Option Plan, in the amount
of 1,000 shares, 3,000 shares, 2,000 shares, 4,000 shares and 6,000 shares,
respectively, at $5.25 per share. These options are fully exercisable on
March 31, 1997 and expire on March 31, 2001.
<PAGE>16
APPROVAL OF AMENDMENT TO
1991 STOCK OPTION PLAN
Summary of the 1991 Stock Option Plan
- -------------------------------------
The Company's Board of Directors adopted the 1991 Stock Option Plan (the "1991
Plan") on July 2, 1991, and the Company's shareholders approved the 1991 Plan
on October 2, 1991. On July 25, 1994, the Company's Board of Directors
approved an amendment to the 1991 Plan, and the Company's shareholders approved
such amendment on October 12, 1994, to increase by 350,000 shares the number of
shares of Common Stock available for issuance upon exercise of options granted
under the 1991 Plan, thereby increasing the number of shares issuable under the
1991 Plan to 1,100,000 shares of Common Stock. As of August 1, 1996, 1,089,179
shares of Common Stock were reserved for issuance upon exercise of options
previously granted under the 1991 Plan and 10,821 shares were reserved for
the grant of future options.
At the meeting of the Board of Directors on August 6, 1996, the Board approved
an amendment to the 1991 Plan, subject to shareholder approval, to increase by
500,000 shares the number of shares of Common Stock available for issuance upon
exercise of options granted under the 1991 Plan, thereby increasing the number
of shares issuable under the 1991 Plan to 1,600,000 shares of Common Stock.
The Board adopted this amendment to ensure that the Company will continue to be
able to grant stock options to officers and key employees of the Company.
In addition, the amendment to the 1991 Plan would permit the Board of Directors
to modify the 1991 Plan in certain respects without the necessity of
shareholder approval. The amendment would delete the shareholder approval
requirement for changes in the plan that increase the benefits accruing to
participants. However, shareholder approval would still be required for
increasing the number of shares issuable or changing the eligibility
requirements for participation. The Board included this change in the
amendment to the 1991 Plan in order to afford more flexibility in adapting
the 1991 Plan as necessary to best carry out its purposes of increasing the
stakes of participants in the Company's continued success and progress and
attracting and retaining key employees.
At the Annual Meeting, the shareholders are being requested to consider and
approve the amendment to the 1991 Plan. The affirmative vote of the holders
of a majority of the outstanding shares of Common Stock present in person or
by proxy will be required to approve the amendment.
The purpose of the 1991 Plan is to enable the Company to obtain and retain the
services of key employees and to provide them with increased motivation and
incentive to exert their best efforts on behalf of the Company by enlarging
their personal stake in its success.
The 1991 Plan is administered by the Company's Compensation and Stock Option
Committee (the "Committee") composed of at least two directors of the Company.
A member of the Committee may not be granted or awarded stock, stock options,
or stock appreciation rights under any plan at any time he is serving as a
member of the Committee or within one year prior thereto, unless the plan
provides for formula grants or awards. The Committee members act as
administrators of the 1991 Plan, and the Committee has authority, subject to
the terms of the 1991 Plan, to determine the persons to whom options will be
granted, whether the options will be incentive stock options or nonqualified
stock options, the number of shares subject to each option, and the terms and
provisions of each option.
<PAGE>17
Officers and key employees of the Company are eligible to receive options.
The Company estimates that there are currently approximately 44 officers and
other key employees of the Company who are eligible to receive options under
the 1991 Plan.
Subject to the usual antidilution provisions for stock dividends, stock splits
or other subdivisions or reclassifications of the Common Stock, options may be
granted under the 1991 Plan, as amended, to purchase not more than 1,600,000
shares of Common Stock. If any option expires or terminates without being
fully exercised and before the 1991 Plan terminates, the unpurchased shares
subject thereto will again be available for purposes of the 1991 Plan.
The 1991 Plan permits the grant of incentive stock options within the meaning
of Section 422 of the Internal Revenue Code (the "Code"), and of nonqualified
stock options. An option may be granted under the 1991 Plan for a term of up
to five years, and may be exercised at any time during its term unless the
Committee fixes a specific vesting period or periods for exercise of any
option. If any proposed transaction may result in a change in control of the
Company, in connection therewith, the Committee, with the approval of the
majority of the members of the Board who are not then holding options, may
accelerate the exercise periods of any options.
Options are not transferable by the optionee except by will or the laws of
descent and distribution. During the lifetime of the optionee, options are
exercisable only by the optionee or to the extent such exercise would not
prevent an option from qualifying as an incentive stock option, by his or her
guardian or legal representative.
An optionee's rights under any option terminate upon the termination of
employment for any reason other than death, disability or retirement, except
that the Committee may permit exercise of such option for a period ending on
the earlier of the expiration date of the option and a date thirty days after
the termination of employment as to the total number of shares purchasable
under the option as of the date of termination. The 1991 Plan provides that
in the event of termination of an optionee's employment by reason of the
optionee's death, retirement or disability, any outstanding option held by
such optionee will immediately become exercisable as to the total number of
shares purchasable thereunder and will remain so exercisable at any time prior
to its expiration date or, if earlier, the first anniversary of termination
of the optionee's employment.
The purchase price per share of Common Stock deliverable upon the exercise of
an option is determined by the Committee at the time of grant. However, the
purchase price per share under an option may not be less than the greater of
100% (110% in the case of incentive stock options granted to optionees who own
more than ten percent of the voting power of the Company) of the fair market
value per share on the date the option is granted and $0.75. The fair market
value of the Company's Common Stock on August 23, 1996, was $7.625 based on
the average of the high and low prices on that date as reported on the NASDAQ
National Market System. The purchase price may be paid in cash or by certified
or cashier's check or, to the extent permitted by the Committee, in shares of
the Company's Common Stock.
The 1991 Plan will continue in effect until July 2, 2001, unless earlier
suspended or discontinued. The 1991 Plan may be modified, terminated or
amended at any time by the Board of Directors except that, without shareholder
approval, the Board may not materially increase the benefits to optionees,
<PAGE>18
increase the number of shares which may be issued under the 1991 Plan or modify
the requirements as to eligibility for participation. The modification,
amendment or termination of the 1991 Plan will not affect the rights of an
optionee under any option previously granted to the optionee unless the
optionee consents thereto.
As stated above, the 1991 Plan permits the grant both of options that qualify
as incentive stock options under Section 422 of the Code and of nonqualified
options. Options which qualify as incentive stock options are entitled to
special tax treatment if shares purchased pursuant to the exercise of such an
option are not disposed of by the optionee within two years from the date of
granting of the incentive stock option and within one year after the issue of
the shares to the optionee upon exercise of the incentive stock option. If
this condition is satisfied neither the grant nor the exercise of incentive
stock options will result in taxable income to the recipient or in a deduction
to the Company. If cash is used to exercise, the optionee receives a tax basis
in the stock purchased under an incentive stock option equal to the option
price. The optionee realizes, upon subsequent sale or other disposition of
stock purchased pursuant to an incentive stock option, capital gain (or loss)
equal to the excess (or deficiency) of the amount realized upon disposition
over such tax basis. The difference between the option price and the fair
market value of the shares acquired upon exercise of an incentive stock option
will be treated as an "item of tax preference" for purposes of the alternative
minimum tax.
An optionee who transfers shares purchased under an incentive stock option
within the one- or two-year holding period, subject to certain exceptions,
will realize, in the year of such disposition, (a) ordinary income equal to
the excess of (i) the fair market value of the shares on the date of exercise
over (ii) the option price and (b) capital gain equal to the excess, if any,
of the amount realized upon disposition over the fair market value of the
shares on the date of exercise. If the amount realized on disposition is
less than the fair market value of the shares on the date of exercise and the
disposition occurs in a sale or exchange with respect to which a loss (if
sustained) would be recognized, then the ordinary income realized by the
optionee will, in most cases, be limited to the excess of the amount realized
over the option price. Upon such a disposition, the Company will be entitled
to deduct an amount equal to the ordinary income realized by the optionee.
If an incentive stock option is exercised and the optionee uses previously
owned shares of Common Stock to pay the option price, the optionee's tax basis
will carry over to an equal number of shares purchased. The remaining Common
Stock received upon exercise of the option will receive a zero tax basis. The
optionee will realize no gain or loss as a result of the disposition of the
previously-owned shares, provided, if the shares were purchased under an
incentive stock option, the holding period requirement was satisfied.
The grant of nonqualified stock options will not result in any taxable income
to the recipient or in a deduction by the Company. However, upon exercise of a
nonqualified option, the optionee will realize ordinary income equal to the
excess of the fair market value of the shares on the date of exercise over the
purchase price, and the Company will be entitled to a deduction equal to the
amount the employee is required to treat as ordinary income. If cash is used
to exercise the option, the optionee will receive a tax basis in stock purchased
under a nonqualified option equal to its fair market value at the time of
exercise. On subsequent disposition of the shares, the optionee will realize
capital gain (or loss) equal to the excess (or deficiency) of the amount
realized over such tax basis. The gain or loss will be long- or short-term
depending on the optionee's holding period for the shares.
<PAGE>19
If a nonqualified option is exercised and the optionee uses previously-owned
shares of Common Stock to pay the purchase price, the optionee will realize
ordinary income as described above, but will realize no gain or loss as a
result of the disposition of the previously-owned shares, provided, if the
shares were purchased under an incentive stock option, the holding period
requirement was satisfied. The optionee's tax basis will carry over to an
equal number of shares purchased. The remaining shares of Common Stock will
take a tax basis equal to their fair market value.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL TO
APPROVE THE AMENDMENT TO THE 1991 STOCK OPTION PLAN.
RATIFICATION OF APPOINTMENT
OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed the Company's present independent public
accountants, Deloitte & Touche LLP, for the fiscal year ending March 31, 1997.
This appointment will be submitted to the Shareholders for ratification at the
Meeting.
The submission of the appointment of Deloitte & Touche LLP for ratification by
the Shareholders is not required by law or by the By-laws of the Company. The
Board of Directors is nevertheless submitting it to the Shareholders to
ascertain their views. If the Shareholders do not ratify the appointment, the
selection of other independent public accountants will be considered by the
Board of Directors.
Representatives of Deloitte & Touche LLP are expected to be present at the
Meeting to respond to appropriate questions and will have the opportunity to
make a statement if they so desire.
OTHER MATTERS
No other matters requiring a vote of the shareholders are expected to come
before the Meeting. However, if other matters should properly come before
the Meeting, it is the intention of the persons named in the enclosed proxy
to vote in accordance with their best judgement on such matters.
EXPENSES OF SOLICITATION
The solicitation of proxies being on behalf of the Board of Directors, all
expenses in connection therewith will be paid by the Company. Request will
be made of brokerage houses and other custodians, nominees and fiduciaries to
forward the solicitation material at the expense of the Company to the
beneficial owners of stock held of record by such persons.
SHAREHOLDER PROPOSALS
Proposals by Shareholders intended to be presented at the next annual meeting
of Shareholders of the Company must be received by the Company at its
executive offices at 6428 Parkland Drive, Sarasota, Florida 34243, on or before
May 9, 1997, to be included in the Company's proxy statement and form of proxy
for the 1997 annual meeting.
<PAGE>20
THE COMPANY WILL PROVIDE TO EACH PERSON SOLICITED, WITHOUT CHARGE EXCEPT FOR
EXHIBITS, UPON REQUEST IN WRITING, A COPY OF ITS ANNUAL REPORT ON FORM 10-KSB,
INCLUDING THE FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES, AS FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION FOR THE FISCAL YEAR ENDED
MARCH 31, 1996. REQUESTS SHOULD BE DIRECTED TO MR. RONALD M. TOBIN, SECRETARY,
ELCOTEL, INC. 6428 PARKLAND DRIVE, SARASOTA, FLORIDA 34243.
By Order of the Board of Directors
Ronald M. Tobin, Secretary
<PAGE>21
(Front Side of Proxy Card)
ELCOTEL, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Tracey L. Gray, C. Shelton James, Dwight
Jasmann, Charles H. Moore, Thomas E. Patton, T. Raymond Suplee and Thomas R.
Wiltse, or any of them with full power of substitution, proxies to vote at the
Annual Meeting of Stockholders of Elcotel, Inc. (the "Company") to be held on
Tuesday, October 15, 1996 at 9:00 A.M., local time and at any adjournment or
adjournments thereof, hereby revoking any proxies heretofore given, to vote
all shares of common stock of the Company held or owned by the undersigned as
directed on the reverse, and in their discretion upon such other matters as
may come before the meeting.
(To Be Continued And Signed On The Reverse Side)
<PAGE>22
(Backside of Proxy Card)
[X] Please mark your
votes as in this
example
Nominees:
1. Election of [ ] [ ] Tracey L. Gray
FOR WITHHELD C. Shelton James
Dwight Jasmann
Charles H. Moore
Thomas E. Patton
T. Raymond Suplee
Thomas R. Wiltse
For except vote withheld from the following nominee(s):
___________________________________________________
2. Amendment to the 1991 Stock Option Plan to, among other things, increase
the number of shares by 500,000.
[ ] [ ] [ ]
FOR AGAINST ABSTAIN
2. Ratification of the appointment of Deloitte & Touche LLP as the Company's
independent accountants for the fiscal year ending March 31, 1997.
[ ] [ ] [ ]
FOR AGAINST ABSTAIN
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE
NOMINEES FOR DIRECTORS AND FOR PROPOSALS 2 AND 3, THIS PROXY WILL ALSO BE
VOTED ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
SIGNATURE_____________________________________ DATE_______________
SIGNATURE_____________________________________ DATE_______________
NOTE: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such.
<PAGE>
[DESCRIPTION] APPENDIX TO 1996 DEFINITIVE PROXY FOR ELCOTEL, INC.
ELCOTEL, INC.
1991 STOCK OPTION PLAN
(as amended through August 6, 1996)
1. Definitions
As used in this Plan, the following definitions apply to
the terms indicated below:
A. "Board" means the Board of Directors of the Company.
B. "Committee" means the Compensation and Stock Option
Committee appointed by the Board from time to time to administer the
Plan. The Committee shall consist of at least two persons, who shall
be directors of the Company and who shall not be or have been granted
or awarded, while serving on the Committee or within one year prior
thereto, stock, stock options, or stock appreciation rights pursuant
to any plan of the Company or any of its affiliates except a plan that
provides for formula grants or awards.
C. "Company" means Elcotel, Inc., a Delaware
corporation.
D. "Fair Market Value" of a Share on a given day means,
if the Shares are traded in a public market, the mean between the
highest and lowest quoted selling prices of a Share as reported on the
principal securities exchange on which the Shares are then listed or
admitted to trading, or if not so reported, the mean between the
highest and lowest quoted selling prices of a Share, or the mean
between the highest asked price and the lowest bid price as the case
may be, as reported on the National Association of Securities Dealers
Automated Quotation System. If the Shares shall not be so traded, the
Fair Market Value shall be determined by the Committee taking into
account all relevant facts and circumstances.
E. "Grantee" means a person who is either an Optionee
or an Optionee-Shareholder.
F. "Incentive Stock Option" means an option, whether
granted under this Plan or otherwise, that qualifies as an incentive
stock option within the meaning of Section 422 of the Internal Revenue
Code.
G. "Option" means a right to purchase Shares under the
terms and conditions of this Plan as evidenced by an option certificate
or agreement for Shares in such form, not inconsistent with this Plan,
as the Committee may adopt for general use or for specific cases from
time to time.
H. "Optionee" means a person other than an Optionee-Shareholder
to whom an option is granted under this Plan.
<PAGE>1
I. "Optionee-Shareholder" means a person to whom an
option is granted under this Plan and who at the time such option is
granted owns, actually or constructively, stock of the Company or of
a Parent or Subsidiary possessing more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company or
of such Parent or Subsidiary.
J. "Nonqualified Option" means an Option that is not an
Incentive Stock Option.
K. "Parent" means any corporation (other than the
Company) in an unbroken chain of corporations ending with the Company
if, at the time of granting an Option, each of the corporations in the
unbroken chain (other than the Company) owns stock possessing fifty
percent (50%) or more of the total combined voting power of all classes
of stock in one of the other corporations in the chain.
L. "Plan" means this Elcotel, Inc. 1991 Stock Option
Plan, including any amendments to the Plan.
M. "Share" means a share of the Company's common stock,
par value $.01 per share, either now or hereafter owned by the Company
as treasury stock or authorized but unissued.
N. "Subsidiary" means any corporation (other than the
Company) in an unbroken chain of corporations beginning with the
Company if, at the time of granting an Option, each of the corporations
in the unbroken chain (other than the last corporation in the chain)
owns stock possessing fifty percent (50%) or more of the total combined
voting power of all classes of stock in one of the other corporations
in the chain.
O. Options shall be deemed "granted" under this Plan on
the date on which the Committee, by appropriate action, approves the
grant of an Option hereunder or on such subsequent date as the
Committee may designate.
P. As used herein, the masculine includes the feminine,
the plural includes the singular, and the singular includes the plural.
2. Purpose
The purposes of the Plan are as follows.
A. To secure for the Company and its shareholders the
benefits arising from share ownership by those officers and key
employees of the Company and its Subsidiaries who will be responsible
for the Company's future growth and continued success. The Plan is
intended to provide an incentive to officers and key employees by
providing them with an opportunity to acquire an equity interest or
increase an existing equity interest in the Company, thereby increasing
their personal stake in its continued success and progress.
<PAGE>2
B. To enable the Company and its Subsidiaries to obtain
and retain the services of key employees, by providing such key
employees with an opportunity to acquire Shares under the terms and
conditions and in the manner contemplated by this Plan.
3. Plan Adoption and Term
A. This Plan shall become effective upon its adoption
by the Board, and Options may be issued upon such adoption and from
time to time thereafter; provided, however, that the Plan shall be
submitted to the Company's shareholders for their approval at the next
annual meeting of shareholders, or prior thereto at a special meeting
of shareholders expressly called for such purpose; and provided
further, that the approval of the Company's shareholders shall be
obtained within 12 months of the date of adoption of the Plan. If the
Plan is not approved by the affirmative vote of the holders of a
majority of all shares present in person or by proxy, at a duly called
shareholders' meeting at which a quorum representing a majority of all
voting stock is present in person or by proxy and voting on this Plan,
then this Plan and all Options then outstanding under it shall
forthwith automatically terminate and be of no force and effect.
B. Subject to the provisions hereinafter contained
relating to amendment or discontinuance, this Plan shall continue to
be in effect for ten (10) years from the date of adoption of this Plan
by the Board. No Options may be granted hereunder except within such
period of ten (10) years.
4. Administration of Plan
A. This Plan shall be administered by the Committee.
Except as otherwise expressly provided in this Plan, the Committee
shall have authority to interpret the provisions of the Plan, to
construe the terms of any Option, to prescribe, amend and rescind rules
and regulations relating to the Plan, to determine the terms and
provisions of Options granted hereunder, and to make all other
determinations in the judgment of the Committee necessary or desirable
for the administration of the Plan. Without limiting the foregoing,
the Committee shall, to the extent and in the manner contemplated
herein, exercise the discretion granted to it to determine to whom
Incentive Stock Options and Non-qualified Options shall be granted, how
many Shares shall be subject to each such Option, whether a Grantee
shall be required to surrender for cancellation an outstanding Option
as a condition to the grant of a new Option, and the prices at which
Shares shall be sold to Grantees. The Committee may correct any defect
or supply any omission or reconcile any inconsistency in the Plan or
in any Option in the manner and to the extent it shall deem expedient
to carry the Plan into effect and shall be the sole and final judge of
such expediency.
<PAGE>3
B. No member of the Committee shall be liable for any
action taken or omitted or any determination made by him in good faith
relating to the Plan, and the Company shall indemnify and hold harmless
each member of the Committee and each other director or employee of the
Company to whom any duty or power relating to the administration or
interpretation of the Plan has been delegated against any cost or
expense (including counsel fees) or liability (including any sum paid
in settlement of a claim with the approval of the Committee) arising
out of any act or omission in connection with the Plan, unless arising
out of such person's own fault or bad faith.
C. Any power granted to the Committee either in this
Plan or by the Board, except the timing and purchase price of and
number of Shares covered by any Option or the selection of individual
employees to participate in the Plan, may at any time be exercised by
the Board, and any determination by the Committee, other than with
respect to the timing and purchase price of and number of Shares
covered by any Option or the selection of individual employees to
participate in the Plan, shall be subject to review and reversal or
modification by the Board on its own motion.
5. Eligibility
Officers and key employees of the Company and its
Subsidiaries shall be eligible for selection by the Committee to be
granted Options. An employee who has been granted an Option may, if
he or she is otherwise eligible, be granted an additional Option or
Options if the Committee shall so determine.
6. Options
A. Subject to adjustment as provided in Paragraph 13
hereof, Options may be granted pursuant to the Plan for the purchase
of not more than 1,600,000 Shares; provided, however, that if prior to
the termination of the Plan, an Option shall expire or terminate for
any reason without having been exercised in full, the unpurchased
Shares subject thereto shall again be available for the purposes of the
Plan.
B. The aggregate fair market value (determined as of the
time Options are granted) of the stock with respect to which Incentive
Stock Options may be or become exercisable for the first time by a
Grantee during any calendar year (whether granted under this Plan or
any other plan of the Company or any Parent or Subsidiary corporation)
shall not exceed $100,000. To the extent an Incentive Stock Option may
be or become exercisable in violation of this limitation, it shall be
deemed to be a Nonqualified Option.
7. Option Price
The purchase price per Share deliverable upon the exercise
of an Option shall be determined by the Committee, but shall not be
less than the greater of:
<PAGE>4
(1) 100% of the Fair Market Value of such Share on
the date the Option is granted (110% of the Fair Market Value of such
Share on the date an Incentive Stock Option is granted to an
Optionee-Shareholder), and
(2) $0.75.
8. Duration of Options
Each Option and all rights thereunder shall expire and the
Option shall no longer be exercisable on a date not later than five
(5) years from the date on which the Option was granted. Options may
expire and cease to be exercisable on such earlier date as the
Committee may determine at the time of grant. Options shall be subject
to termination before their expiration date as provided herein.
9. Conditions Relating to Exercise of Options
A. The Shares subject to any Option may be purchased at
any time during the term of the Option, unless, at the time an Option
is granted, the Committee shall have fixed a specific period or periods
in which exercise must take place. To the extent an Option is not
exercised when it becomes initially exercisable, or is exercised only
in part, the Option or remaining part thereof shall not expire but
shall be carried forward and shall be exercisable until the expiration
or termination of the Option. Partial exercise as to whole Shares is
permitted from time to time, provided that no partial exercise of an
Option shall be for a number of Shares having a purchase price of less
than $100.
B. No Option shall be transferable by the Grantee
thereof other than by will or by the laws of descent and distribution,
and Options shall be exercisable during the lifetime of a Grantee only
by such Grantee or, to the extent that such exercise would not prevent
an Option from qualifying as an Incentive Stock Option under the
Internal Revenue Code, by his or her guardian or legal representative.
C. Certificates for Shares purchased upon exercise of
Options shall be issued either in the name of the Grantee or in the
name of the Grantee and another person jointly with the right of
survivorship. Such certificates shall be delivered as soon as
practical following the date the Option is exercised.
D. An Option shall be exercised by the delivery to the
Company at its principal office, to the attention of its Secretary, of
written notice of the number of Shares with respect to which the Option
is being exercised, and of the name or names in which the certificate
for the Shares is to be issued, and by paying the purchase price for
the Shares. The purchase price shall be paid in cash or by certified
check or bank cashier's check. Alternatively, to the extent permitted
by the Committee and in its sole discretion, the purchase price may be
paid by delivering to the Company:
<PAGE>5
(1) Shares (in proper form for transfer and
accompanied by all requisite stock transfer tax stamps or cash in lieu
thereof) owned by the Grantee having a Fair Market Value equal to the
purchase price; or
(2) a notarized statement attesting to ownership
of the number of Shares which are intended to be used at Fair Market
Value to pay the purchase price, with the certificate number(s)
thereof, and requesting that only the incremental number of Shares as
to which the Option is being exercised be issued by the Company.
E. Notwithstanding any other provision in this Plan, no
Option may be exercised unless and until (i) this Plan has been
approved by the shareholders of the Company, and (ii) the Shares to be
issued upon the exercise thereof have been registered under the
Securities Act of 1933 and applicable state securities laws, or are,
in the opinion of counsel to the Company, exempt from such
registration. The Company shall not be under any obligation to
register under applicable Federal or state securities laws any Shares
to be issued upon the exercise of an Option granted hereunder, or to
comply with an appropriate exemption from registration under such laws
in order to permit the exercise of an Option or the issuance and sale
of Shares subject to such Option. If the Company chooses to comply
with such an exemption from registration, the certificates for Shares
issued under the Plan, may, at the direction of the Committee, bear an
appropriate restrictive legend restricting the transfer or pledge of
the Shares represented thereby, and the Committee may also give
appropriate stop-transfer instructions to the transfer agent of the
Company.
F. Any person exercising an Option or transferring or
receiving Shares shall comply with all regulations and requirements of
any governmental authority having jurisdiction over the issuance,
transfer or sale of securities of the Company or over the extension of
credit for the purposes of purchasing or carrying any margin
securities, or the requirements of any stock exchange on which the
Shares may be listed, and as a condition to receiving any Shares, shall
execute all such instruments as the Committee in its sole discretion
may deem necessary or advisable.
G. Each Option shall be subject to the requirement that
if the Committee shall determine that the listing, registration or
qualification of the Shares subject to such Option upon any securities
exchange or under any state or Federal law, or the consent or approval
of any governmental or regulatory body, is necessary or desirable as
a condition of, or in connection with, the granting of such Option or
the issuance or purchase of Shares thereunder, such Option may not be
exercised in whole or in part unless such listing, registration,
qualification, consent or approval shall have been effective or
obtained free of any conditions not acceptable to the Committee.
10. Effect of Termination of Employment or Death
A. In the event of termination of a Grantee's employment
by reason of such Grantee's death, disability, or retirement with the
consent of the Board or in accordance with an applicable retirement
plan, any outstanding Option held by such Grantee shall,
notwithstanding the extent to which such Option was exercisable prior
to termination of employment, immediately become exercisable as to the
total number of Shares purchasable thereunder. Any such Option shall
remain so exercisable at any time prior to its expiration date or, if
earlier, the first anniversary of termination of the Grantee's
employment.
<PAGE>6
B. In the event of termination of a Grantee's employment
for any reason other than death, disability, or retirement with the
consent of the Board or in accordance with an applicable retirement
plan, all rights of any kind under any outstanding Option held by such
Grantee shall immediately lapse and terminate, except that the
Committee may, in its discretion, elect to permit exercise for a period
ending on the earlier of the expiration date of the Option and a date
thirty days after the termination of employment as to the total number
of Shares purchasable under the Option as of the date of the
termination.
C. Whether an authorized leave of absence or absence in
military or government service shall constitute termination of
employment shall be determined by the Committee. Transfer of
employment between the Company and a Subsidiary corporation or between
one Subsidiary corporation and another shall not constitute termination
of employment.
11. No Special Employment Rights
Nothing contained in the Plan or in any Option shall confer
upon any Grantee any right with respect to the continuation of his or
her employment by the Company or a Subsidiary or interfere in any way
with the right of the Company or a Subsidiary, subject to the terms of
any separate employment agreement to the contrary, at any time to
terminate such employment or to increase or decrease the compensation
of the Grantee from the rate in existence at the time of the grant of
an Option.
12. Rights as a Shareholder
The Grantee of an Option shall have no rights as a
shareholder with respect to any Shares covered by an Option until the
date of issuance of a certificate to him for such Shares. Except as
otherwise expressly provided in the Plan, no adjustment shall be made
for dividends or other rights for which the record date occurs prior
to the date of issuance of such certificate.
13. Anti-dilution Provision
A. In case the Company shall (i) declare a dividend or
dividends on its Shares payable in shares of its capital stock, (ii)
subdivide its outstanding Shares, (iii) combine its outstanding Shares
into a smaller number of Shares, or (iv) issue any shares of capital
stock by reclassification of its Shares (including any such
reclassification in connection with a consolidation or merger in which
the Company is the continuing corporation), the number of Shares
authorized under the Plan will be adjusted proportionately. Similarly,
in any such event, there will be a proportionate adjustment in the
number of Shares subject to unexercised Options (but without adjustment
to the aggregate option price).
<PAGE>7
B. In the event of any kind of transaction which may
constitute a change in control of the Company, the Committee, with the
approval of the majority of the members of the Board who are not then
holding Options, may modify any and all outstanding Options so as to
accelerate, as a consequence of or in connection with such transaction,
a Grantee's right to exercise any such Option. Notwithstanding the
foregoing, if the operation of this Paragraph 13B would cause an Option
to become exercisable in such a way as to violate Paragraph 6B hereof,
the exercisability of such Option shall be delayed as necessary to
avoid such a violation.
14. Withholding Taxes
Whenever an Option is to be exercised under the Plan, the
Company shall have the right to require the Grantee, as a condition
of exercise of the Option, to remit to the Company an amount sufficient
to satisfy the Company's (or a Subsidiary's) Federal, state and local
withholding tax obligation, if any, that will, in the sole opinion of
the Committee, result from the exercise. In addition, the Company
shall have the right, at the sole discretion of the Committee, to
satisfy any such withholding tax obligation by retention of Shares
issuable upon such exercise having a Fair Market Value on the date of
exercise equal to the amount to be withheld.
15. Amendment of the Plan
The Board may at any time and from time to time terminate
or modify or amend the Plan in any respect, except that, without
shareholder approval, the Board may not (a) increase the number of
Shares which may be issued under the Plan, or (b) modify the
requirements as to eligibility for participation under the Plan. The
termination or modification or amendment of the Plan shall not, without
the consent of a Grantee, affect his rights under an Option previously
granted to him or her. With the consent of the Grantee, the Board may
amend outstanding Options in a manner not inconsistent with the Plan.
16. Miscellaneous
A. It is expressly understood that this Plan grants
powers to the Committee but does not require their exercise; nor shall
any person, by reason of the adoption of this Plan, be deemed to be
entitled to the grant of any Option; nor shall any rights begin to
accrue under the Plan except as Options may be granted hereunder.
B. All expenses of the Plan, including the cost of
maintaining records, shall be borne by Company.
17. Governing Law
This Plan and all rights hereunder shall be governed by and
interpreted in accordance with the laws of the State of Delaware.
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