SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| 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 Rule 14a-11(c) or Rule 14a-12
COMMISSION FILE NO. 0-20887
TELIDENT, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(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 (set forth the amount on
which the filing fee is calculated and state how it was
determined):
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:
<PAGE>
TELIDENT, INC.
TEN SECOND STREET, N.E., SUITE 212
MINNEAPOLIS, MINNESOTA 55413
September 29, 1998
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders
of Telident, Inc. (the "Company"), to be held in the Galaxy Room of the
Marquette Hotel, located on the 50th floor of the IDS Center, 80 South Eighth
Street, Minneapolis, Minnesota, on Wednesday, October 28, 1998, at 4:00 p.m.
local time.
At the Annual Meeting you will be asked to vote for the election of
seven directors, to consider and vote upon adoption of the Company's 1998 Stock
Option Plan and to ratify the selection by the Board of Directors of Deloitte &
Touche LLP as the Company's independent public accountants for the fiscal year
ending June 30, 1999. The accompanying material contains the Notice of Annual
Meeting, the Proxy Statement, which includes information about the matters to be
acted upon at the Annual Meeting, and the related proxy card.
Whether or not you are able to attend the Annual Meeting in person, I
urge you to sign and date the enclosed proxy card and return it promptly in the
enclosed envelope.
Very truly yours,
TELIDENT, INC.
/s/ W. Edward McConaghay
W. Edward McConaghay
President and Chief Executive Officer
<PAGE>
TELIDENT, INC.
TEN SECOND STREET, N.E., SUITE 212
MINNEAPOLIS, MINNESOTA 55413
-------------
NOTICE
OF
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD
OCTOBER 28, 1998
--------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Telident, Inc., a Minnesota corporation (the "Company"), will be held in the
Galaxy Room of the Marquette Hotel, located on the 50th floor of the IDS Center,
80 South Eighth Street, Minneapolis, Minnesota, on Wednesday, October 28, 1998,
at 4:00 p.m. local time, for the following purposes, as more fully described in
the accompanying Proxy Statement:
1. To elect seven directors for the ensuing year and until their
successors have been duly elected and qualified;
2. To consider and vote upon approval of the Company's 1998 Stock
Option Plan;
3. To ratify the appointment of Deloitte & Touche LLP as the
Company's independent public accountants for the fiscal year
ending June 30, 1999; and
4. In their discretion, the proxies are authorized to vote upon
such other business as may properly come before the Annual
Meeting or any adjournment or postponement thereof.
Only shareholders of record at the close of business on September 23,
1998, are entitled to notice of and to vote at the Annual Meeting. Whether or
not you expect to attend the Annual Meeting in person, please mark, date and
sign the enclosed proxy exactly as your name appears thereon and promptly return
it in the envelope provided, which requires no postage if mailed in the United
States. Proxies may be revoked at any time before they are exercised and, if you
attend the Annual Meeting in person, you may withdraw your proxy and vote
personally on any matter brought properly before the Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Brian D. Wenger
Brian D. Wenger
Secretary
Minneapolis, Minnesota
September 29, 1998
<PAGE>
TELIDENT, INC.
TEN SECOND STREET, N.E., SUITE 212
MINNEAPOLIS, MINNESOTA 55413
-------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD
OCTOBER 28, 1998
--------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Telident, Inc. (the "Company") for use
at the Annual Meeting of Shareholders to be held in the Galaxy Room of the
Marquette Hotel, located on the 50th floor of the IDS Center, 80 South Eighth
Street, Minneapolis, Minnesota, on Wednesday, October 28, 1998, at 4:00 p.m.
local time, or at any adjournment or postponement thereof. All shares of Common
Stock, Series I Convertible Preferred Stock and Series III Convertible Preferred
Stock represented by properly executed and returned proxies, unless such proxies
have previously been revoked, will be voted at the Annual Meeting and, where the
manner of voting is specified on the proxy, will be voted in accordance with
such specifications. Shares represented by properly executed and returned
proxies on which no specification has been made will be voted FOR election of
the nominees for director named herein, FOR adoption of the Company's 1998 Stock
Option Plan and FOR ratification of the appointment of the independent public
accountants for the fiscal year ending June 30, 1999. If any other matters are
properly presented at the Annual Meeting for action, including a question of
adjourning or postponing the Annual Meeting from time to time, the persons named
in the proxies and acting thereunder will have discretion to vote on such
matters in accordance with their best judgment.
The Notice of Annual Meeting, this Proxy Statement and the related
proxy card are first being mailed to shareholders of the Company on or about
September 29, 1998.
RECORD DATE AND OUTSTANDING VOTING STOCK
The Board of Directors has fixed the close of business on September 23,
1998, as the Record Date for determining the holders of the Company's
outstanding voting shares entitled to notice of, and to vote at, the Annual
Meeting. On that date, there were 2,786,735 shares of Common Stock, 37,500
shares of Series I Convertible Preferred Stock and 400,000 shares of Series III
Convertible Preferred Stock (collectively, the "Preferred Stock") issued,
outstanding and entitled to vote.
REVOCABILITY OF PROXIES
Any shareholder who executes and returns a proxy may revoke it at any
time before it is voted. Any shareholder who wishes to revoke a proxy can do so
by (i) executing a later-dated proxy relating to the same shares and delivering
it to the Secretary of the Company prior to the vote at the Annual Meeting, (ii)
filing a written notice of revocation bearing a later date than the proxy with
the Secretary of the Company prior to the vote at the Annual
<PAGE>
Meeting, or (iii) appearing in person at the Annual Meeting, filing a written
notice of revocation and voting in person the shares to which the proxy relates.
Any written notice or subsequent proxy should be delivered to Telident, Inc.,
Ten Second Street, N.E., Suite 212, Minneapolis, Minnesota 55413, Attention:
Secretary of the Company, or hand- delivered to the Secretary of the Company
prior to the vote at the Annual Meeting.
VOTING AND SOLICITATION
Each shareholder is entitled to one vote, exercisable in person or by
proxy, for each share of Common Stock, Series I Convertible Preferred Stock or
Series III Convertible Preferred Stock held of record on the Record Date.
Shareholders do not have the right to cumulate votes in the election of
directors.
Expenses incurred in connection with the solicitation of proxies will
be paid by the Company. The proxies are being solicited principally by mail. In
addition, directors, officers and regular employees of the Company may solicit
proxies personally or by telephone, for which they will receive no consideration
other than their regular compensation. The Company will also request brokerage
houses, nominees, custodians and fiduciaries to forward soliciting material to
the beneficial owners of shares of Common Stock and Preferred Stock held as of
the Record Date and will reimburse such persons for their reasonable expenses so
incurred.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The presence, in person or by proxy, of the holders of at least a
majority of the voting shares outstanding and entitled to vote is necessary to
constitute a quorum for the transaction of business at the Annual Meeting. All
votes will be tabulated by the inspector of election for the Annual Meeting, who
will separately tabulate affirmative and negative votes, abstentions and broker
non-votes.
If a properly executed proxy is returned and the shareholder has
abstained from voting on any matter, the shares represented by such proxy will
be considered present at the Annual Meeting for purposes of determining a quorum
and for purposes of calculating the vote, but will not be considered to have
been voted in favor of such matter.
If a properly executed proxy is returned by a broker holding shares in
street name which indicates that the broker does not have discretionary
authority as to certain shares to vote on one or more matters, such shares will
be considered present at the Annual Meeting for purposes of determining a
quorum, but will not be considered to be represented at the Annual Meeting for
purposes of calculating the vote with respect to such matter.
2
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to the Company
regarding beneficial ownership of its Common Stock as of August 31, 1998, by (i)
each person who is known to the Company to own beneficially more than five
percent of the Company's Common Stock, (ii) each of the Company's directors and
nominees for director, (iii) the executive officers named in the "Summary
Compensation Table" below, and (iv) all current directors and executive officers
as a group. Unless otherwise noted, each person identified below has sole voting
and investment power with respect to such shares. Except as otherwise noted
below, the Company knows of no agreements among its shareholders which relate to
voting or investment power with respect to its Common Stock.
<TABLE>
<CAPTION>
NUMBER OF PERCENT
SHARES BENEFICIALLY
BENEFICIALLY OWNED
NAME AND ADDRESS OF BENEFICIAL OWNER(1) OWNED(1)(2) (1)(2)
- --------------------------------------- ----------- ------------
<S> <C> <C>
John D. Wunsch(3)........................................................... 1,817,972 51.2%
FAMCO III, Limited Liability Company(4)..................................... 1,817,096 51.2%
Interchange Tower, Suite 850
600 S. Highway 169
Minneapolis, MN 55426
Special Situations Private Equity Fund, L.P.(5)............................. 400,000 12.6%
153 East 53rd Street
New York, NY 10022
Willis K. Drake(6).......................................................... 179,189 6.4%
Mark W. Sheffert(7)......................................................... 62,986 2.2%
John Sagan(8)............................................................... 43,316 1.5%
W. Edward McConaghay(9)..................................................... 6,250 *
Scott R. Anderson(10)....................................................... 1,982 *
David F. Durenberger(11).................................................... 1,832 *
Mack V. Traynor............................................................. 0 0
Craig A. Lowder............................................................. 0 0
All current directors and executive officers as a group (8 persons) (12).... 2,113,527 57.9%
</TABLE>
- -------------------
* Represents beneficial ownership of less than 1% of the outstanding shares
of Common Stock.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission (the "Commission") and includes voting
or investment power with respect to securities. Unless otherwise indicated,
the address for each listed shareholder is c/o Telident, Inc., Ten Second
Street, N.E., Suite 212, Minneapolis, Minnesota 55413. To the Company's
knowledge, except as indicated in the footnotes to this table and pursuant
to applicable community property laws, the persons named in the table have
sole voting and investment power with respect to all shares. The number of
shares beneficially owned includes shares issuable pursuant to warrants and
stock options that are exercisable within 60 days of August 31, 1998.
(2) Percentage of beneficial ownership is based on 2,786,735 shares of common
stock outstanding as of August 31, 1998. Shares issuable pursuant to the
conversion of Preferred Stock and the exercise of warrants and stock
options are deemed outstanding for computing the percentage of the person
holding such Preferred Stock, warrants or options but are not deemed
outstanding for computing the percentage of any other person. Certain
warrants reported herein contain antidilution rights which may be triggered
upon exercise. Because the Preferred Stock conversion ratio is dependent
upon the market price of the Company's Common Stock immediately prior to
conversion, a ratio of one-for-one has been assumed.
(3) Mr. Wunsch is the President and Chief Executive Officer of Family Financial
Strategies ("FFS"), which is an affiliate of FAMCO III, Limited Liability
Company ("FAMCO"). As a result, FAMCO's shares are included in the
beneficial ownership of Mr. Wunsch and the beneficial ownership of all
directors and executive officers as a group. Mr. Wunsch's beneficial
ownership also includes 876 shares purchasable by Mr. Wunsch pursuant to
the exercise of stock options.
3
<PAGE>
(4) Includes 200,000 shares purchasable pursuant to the conversion of Series
III Convertible Preferred Stock, and 564,907 shares purchasable pursuant to
the exercise of warrants. The number of shares purchasable pursuant to one
of FAMCO's warrants has been adjusted to reflect previously triggered
antidilution rights.
(5) Includes 200,000 shares purchasable pursuant to the conversion of Series
III Convertible Preferred Stock and 200,000 shares purchasable pursuant to
the exercise of warrants.
(6) Includes 12,500 shares purchasable pursuant to the conversion of Series I
Convertible Preferred Stock, 1,596 shares purchasable pursuant to the
exercise of stock options and 14,583 shares purchasable pursuant to the
exercise of warrants.
(7) Mr. Sheffert is President of Manchester Companies, Inc. ("Manchester"). As
a result, Manchester's warrant to purchase 25,000 shares is included in the
beneficial ownership of Mr. Sheffert and the beneficial ownership of all
directors and executive officers as a group. Mr. Sheffert's beneficial
ownership also includes 4,749 shares purchasable by Mr. Sheffert pursuant
to the exercise of stock options and 25,000 shares purchasable by Mr.
Sheffert pursuant to the exercise of warrants.
(8) Includes 2,911 shares purchasable pursuant to the exercise of stock options
and 5,833 shares purchasable pursuant to the exercise of warrants.
(9) Includes 5,000 shares purchasable pursuant to the exercise of stock
options.
(10) Represents 1,982 shares purchasable pursuant to the exercise of stock
options.
(11) Includes 1,645 shares purchasable pursuant to the exercise of stock
options.
(12) Includes 12,500 shares purchasable pursuant to the conversion of Series I
Convertible Preferred Stock, 200,000 shares purchasable pursuant to the
conversion of Series III Convertible Preferred Stock, 18,739 shares
purchasable pursuant to the exercise of stock options, and 635,323 shares
purchasable pursuant to the exercise of warrants.
4
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
NOMINEES
The Board of Directors currently consists of eight members serving
one-year terms. Seven persons, all of whom currently serve as directors, have
been nominated for election as directors to serve one-year terms expiring in
1999 and until their successors have been duly elected and qualified. There are
no family relationships between any director or officer.
It is intended that votes will be cast pursuant to the enclosed proxy
for the election of the nominees listed in the table below, except for those
proxies which withhold such authority. Shareholders do not have cumulative
voting rights with respect to the election of directors, and proxies cannot be
voted for a greater number of directors than the number of nominees. In the
event that any of the nominees shall be unable or unwilling to serve as a
director, it is intended that the proxy will be voted for the election of such
other person or persons as the remaining directors may recommend in the place of
such nominee. The Company has no reason to believe that any of the nominees will
not be candidates or will be unable to serve.
VOTE REQUIRED
The seven nominees receiving the highest number of affirmative votes of
the shares entitled to vote at the Annual Meeting shall be elected to the Board
of Directors as directors. An abstention will have the same effect as a vote
withheld for the election of directors and a broker non-vote will not be treated
as voting in person or by proxy on the proposal. Set forth below is certain
information concerning the seven nominees for election as directors. THE BOARD
OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE NOMINEES LISTED BELOW.
Name Age Principal Occupation
- ---- --- --------------------
Mark W. Sheffert 51 President of Manchester Companies, Inc.
W. Edward McConaghay 49 President and Chief Executive Officer of the
Company
Scott R. Anderson(1) 58 President and Chief Executive Officer of North
Memorial Health Center
Willis K. Drake(1) 75 Private Investor
David F. Durenberger(2) 64 Vice President of Public Policy Partners
Mack V. Traynor(2) 40 President of Manitou Investments, Inc.
John D. Wunsch(1) 50 President and Chief Executive Officer of Family
Financial Strategies, Inc.
- --------------------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
MARK W. SHEFFERT has been Chairman of the Board of Directors of the
Company since May 1994. He is President of Manchester Companies, Inc., a private
investment and management consulting firm formed in 1993. From 1990 to 1993, he
served as managing partner of Sheffert & Wein, Inc., a management consulting
firm. From September 1982 to October 1989, Mr. Sheffert served in various
executive positions with First Bank System, Minneapolis, Minnesota, including
Chairman and CEO, First Trust Company, FBS Mortgage Company, FBS Card Services,
Inc., and FBS Insurance. Mr. Sheffert currently is serving on the board of
directors of Combined Financial Group, Inc., Fourth Shift, Inc., LifeRate
Systems, Inc. and Medical Graphics Corporation.
W. EDWARD MCCONAGHAY has been the President and Chief Executive Officer
of Telident, Inc. since April 1997. He was President and Chief Executive Officer
of Digital Technics, a telecommunications firm, from 1996 to 1997. During 1995,
he was a principal in Key Indicators, a consulting firm specializing in new
product and market development for information and technology based businesses.
He was Senior Vice President of Sales and Marketing for Deluxe Corporation, a
Minnesota check and business forms printing company, from December 1993
5
<PAGE>
to January 1995. From 1983 to 1993, he served in various executive positions at
Northern Telecom, Ltd. Mr. McConaghay currently serves on the board of directors
of Medical Graphics Corporation.
SCOTT R. ANDERSON joined the Board of Directors in July 1995. Mr.
Anderson is President and Chief Executive Officer of North Memorial Health Care
in Robbinsdale, Minnesota. He has been associated with North Memorial since
August 1964, serving 17 years as Executive Vice President, and since 1981 in the
position of President and Chief Executive Officer. During his career he has
served as a member of many committees and boards, both locally and nationally,
and has served as chairman of the board of the following organizations:
Metropolitan Healthcare Council (Council of Hospital Corporations), Health
Employers, Inc., Healthcare Education and Research Foundation and Medical Alley.
He currently serves as a director of EMPI, Inc.
WILLIS K. DRAKE has been a private investor over the last nine years.
He served as Chairman of the Board of Directors of Telident from 1989 to August
1993. Mr. Drake spent the early years of his career with Univac in a sales and
marketing capacity. He later became a founder of Control Data Corporation. In
1969, he became founder, Chairman and President of Data Card Corporation, a
manufacturer of high-performance embossing/encoding equipment for the plastic
card industry. When he retired in 1983, Data Card had sales in excess of $100
million. Since his retirement, Mr. Drake has used his entrepreneurial,
management, marketing and technical experiences to assist a variety of
companies. He serves as a director of Analysts International Corporation, Digi
International and Innovex, Inc.
DAVID F. DURENBERGER is vice president of health care consultant firm,
Public Policy Partners, Durenberger/Foote, and a Senior Fellow, for the
University of St. Thomas Graduate School of Business. Prior to that time, he
served as a United States Senator for the state of Minnesota from 1978 to 1995.
Mr. Durenberger has over 20 years of public service, and while a U.S. Senator,
served on several committees including the Finance, Select Intelligence, and
Office of Technology committees. In addition he has been the executive director
and chaired numerous committees on both a state and national level. In November
1995, Mr. Durenberger plead guilty to misdemeanor charges of falsifying a
statement for reimbursement of $425.
MACK V. TRAYNOR is a private investor and President of Manitou
Investments, Inc., a strategic investment and business advisory firm. He served
as Chief Executive Officer, Chief Operating Officer, and as a director of
Eltrax, a nationwide provider of networking products and managed services from
1995 to 1997. Mr. Traynor was the chief architect for that company's shift in
strategy and dramatic growth through acquisition. He continues to serve on the
Eltrax board of directors. Prior to Eltrax, Mr. Traynor served as President and
Chief Operating Officer of Military Communications Center, Inc. ("MCC"), a
company which provided telecommunications services to U.S. Military personnel
and which was acquired by WorldCom, Inc. in October 1994. Prior to MCC, Mr.
Traynor served in executive positions with US West, most recently as President
of US West Enterprises Technologies Division. Mr. Traynor is on the board of
directors of HEI, Inc., a contract manufacturing company.
JOHN D. WUNSCH has been President and Chief Executive Officer of Family
Financial Strategies, Inc., a registered investment advisory firm, since January
1997. Family Financial Strategies, Inc., specializes in services to high net
worth families, manages a diversified investment strategy including several
equity pools and direct investments in real estate, venture capital, energy and
other non-traditional investments throughout the country. From 1990 to January
1997, he served as President of Perrybell Investments, a registered investment
advisory firm. Mr. Wunsch is a director of ADC Telecommunications, Inc. and
Medical Graphics Corporation.
BOARD MEETINGS AND COMMITTEES
The Board of Directors held a total of eight meetings during the fiscal
year ended June 30, 1998. No director attended fewer than 75% of the total
number of meetings of the Board of Directors or committees of the Board of
Directors held in fiscal year 1998. The Board of Directors has established Audit
and Compensation Committees, both of which consist of only non-employee
directors.
6
<PAGE>
The Audit Committee, which currently consists of Messrs. Durenberger,
Sagan, and Traynor, held four meetings during fiscal year 1998. This committee
makes recommendations to the Board of Directors regarding the selection of
independent accountants, reviews the results and scope of audit and other
services provided by the Company's independent accountants and reviews and
evaluates the Company's audit and control functions.
The Compensation Committee, which currently consists of Messrs.
Anderson, Drake and Wunsch, held two meetings during fiscal year 1998. This
committee reviews and recommends to the Board of Directors the compensation
guidelines for executive officers and other key employees. This committee also
makes recommendations regarding the Company's 1988 Stock Option Plan,
administers such plan and makes decisions concerning salaries and incentive
compensation for employees and consultants of the Company.
DIRECTOR COMPENSATION
Directors currently do not receive any cash compensation from the
Company for their service as members of the Board of Directors, although members
are reimbursed for certain expenses in connection with attendance at Board of
Directors and committee meetings. Non-employee directors have received periodic
option grants under the Company's 1988 Stock Option Plan and will be eligible to
receive periodic grants under the 1998 Stock Option Plan, provided that such
plan is adopted by the shareholders. See "Certain Transactions."
7
<PAGE>
PROPOSAL NO. 2
ADOPTION OF 1998 STOCK OPTION PLAN
GENERAL
Pursuant to the terms of the Company's 1988 Stock Option Plan, no new
stock options may be issued under such plan after December 13, 1998. To provide
the Company with the flexibility to issue stock options in the future, the Board
of Directors adopted, effective October 1, 1998 and subject to shareholder
approval, the Company's 1998 Stock Option Plan (the "Plan"). The Board of
Directors has reserved 350,000 shares of Common Stock for issuance pursuant to
the Plan. A general description of the Plan is set forth below, but such
description is qualified in its entirety by reference to the full text of the
Plan, a copy of which is appended to this Proxy Statement as Exhibit A.
DESCRIPTION OF THE PLAN
PURPOSE. The purpose of the Plan is to promote the success of the
Company by facilitating the employment and retention of competent personnel and
by furnishing incentive to directors, officers, key employees, independent
contractors and others upon whose efforts the success of the Company will depend
to a large degree by encouraging stock ownership in order to increase the
proprietary interest of such individuals in the Company's success.
TERM. The term of the Plan is for ten years, effective October 1, 1998;
however, the Board may terminate the Plan at any time, provided that such
termination will not affect options then outstanding and provided further that
no incentive stock options may be granted under the Plan after September 30,
2008.
ADMINISTRATION. The Plan will be administered by the Compensation and
Personnel Committee of the Board. The Plan gives broad powers to the Committee
to administer and interpret the Plan, including the authority to select the
individuals to be granted options and to prescribe the particular form and
conditions of each option (which may vary from optionee to optionee).
ELIGIBILITY. All employees of the Company or any subsidiary are
eligible to receive incentive stock options pursuant to the Plan. All employees,
directors and officers of, and consultants and advisors to, the Company or any
subsidiary are eligible to receive nonqualified stock options. As of June 30,
1998, the Company had 19 employees and officers and 7 outside directors.
OPTIONS. When an option is granted under the Plan, the Committee, in
its discretion, specifies the option price, the type of option (either
"incentive" or "nonqualified") to be granted, and the number of shares of Common
Stock which may be purchased upon exercise of the option. The exercise price of
a stock option may not be less than 100% of the fair market value of the
Company's Common Stock on the date of grant. On September 23, 1998, the closing
price of the Company's Common Stock as reported on the Nasdaq SmallCap Market
was $1.50. The term during which an option may be exercised and whether an
option will be exercisable immediately, in stages or otherwise are set by the
Committee, but the term of any option may not exceed seven years from the date
of grant. Optionees may pay for shares upon exercise of options with cash,
certified check or Common Stock of the Company valued at the stock's then fair
market value. Each option granted under the Plan is nontransferable during the
lifetime of the optionee.
The Committee will determine the form of stock option agreements which
will be used for stock options granted under the Plan. Such agreements will
govern the right of an optionee to exercise an option upon termination of
employment or affiliation with the Company during the life of an optionee and
following an optionee's death. The Board or the Committee may impose additional
or alternative conditions and restrictions on the incentive or nonqualified
stock options granted under the Plan; however, each incentive option must
contain such limitations and restrictions upon its exercise as are necessary to
ensure that the option will be an incentive stock option as defined under the
Internal Revenue Code.
8
<PAGE>
AMENDMENT. The Board of Directors may from time to time suspend or
discontinue the Plan or amend it in any respect; provided, however, that no such
revision or amendment may impair the terms and conditions of any outstanding
option to the material detriment of the optionee without the consent of the
optionee. An amendment shall be subject to the approval of the Company's
shareholders only to the extent required by applicable law, rule or regulation.
ANTIDILUTION PROVISIONS. The Board of Directors shall equitably adjust
the maximum number of shares of Common Stock reserved for issuance under the
Plan, the number of shares covered by each outstanding option and the option
price per share in the event of stock splits or consolidations, stock dividends
or other transactions in which the Company receives no consideration.
TAX INFORMATION
Under present law, no tax results upon the grant of nonqualified
options pursuant to the Plan. However, in the year that a nonqualified stock
option is exercised, the optionee must recognize compensation, taxable as
ordinary income, equal to the difference between the option price and the fair
market value of the shares on the date of exercise. The Company normally will
receive a deduction equal to the amount of compensation the optionee is required
to recognize as ordinary income if the Company complies with any applicable
federal income tax withholding requirements.
Incentive stock options granted under the Plan are intended to qualify
for favorable tax treatment under Section 422 of the Internal Revenue Code.
Under Section 422, an optionee recognizes no taxable income when the option is
granted. Further, the optionee generally will not recognize any taxable income
when the option is exercised if he or she has at all times from the date of the
option's grant until three months before the date of exercise been an employee
of the Company. The Company ordinarily is not entitled to any income tax
deduction upon the grant or exercise of an incentive stock option. Certain other
favorable tax consequences may be available to the optionee if he or she does
not dispose of the shares acquired upon the exercise of an incentive stock
option for a period of two years from the granting of the option and one year
from the receipt of the shares.
The foregoing is only a summary of the general effect of U.S. federal
income taxation upon the optionee and the Company with respect to the grant and
exercise of options under the Plan and the subsequent sale of shares. This
summary does not discuss the income tax laws of any state or foreign country in
which an optionee may reside.
NEW PLAN BENEFITS
Assuming that Board members continue to receive quarterly retainers
payable in stock options, that the Chairman of the Board continues to receive a
monthly retainer payable in stock options and that each committee chairperson
continues to receive stock options for such service, the following option grants
will be made pursuant to the Plan during fiscal year 1999. There are no stock
options currently contemplated other than those described below, although the
awards anticipated to be granted are not necessarily indicative of amounts that
may be awarded in the future.
1998 STOCK OPTION PLAN
NAME AND POSITION DOLLAR VALUE NUMBER OF SHARES
------------------------------------------- ------------ ----------------
W. Edward McConaghay ...................... 0 0
President and Chief Executive Officer
Executive Group ........................... 0 0
Non-Executive Director Group .............. * 7,862
Non-Executive Officer Employee Group ...... 0 0
- ------------
* Indeterminable.
9
<PAGE>
VOTE REQUIRED. The affirmative vote of holders of a majority of the
voting shares present in person or represented by proxy and entitled to vote at
the Annual Meeting is required to approve the Plan. Abstentions will be
considered shares entitled to vote in the tabulation of votes cast on the
proposal and will have the same effect as negative votes. Broker non-votes are
counted towards a quorum, but are not counted for any purpose in determining
whether this matter has been approved. THE BOARD OF DIRECTORS CONSIDERS THE PLAN
TO BE IN THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS AND RECOMMENDS
THAT YOU VOTE FOR APPROVAL OF THE PLAN.
10
<PAGE>
PROPOSAL NO. 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed Deloitte & Touche LLP as
independent public accountants for the Company for the fiscal year ending June
30, 1999. A proposal to ratify that appointment will be presented to
shareholders at the Annual Meeting. If the shareholders do not ratify such
appointment, another firm of independent public accountants will be selected by
the Board of Directors. Representatives of Deloitte & Touche LLP are expected to
be present at the Annual Meeting, will have an opportunity to make a statement
if they desire to do so, and will be available to respond to appropriate
questions from shareholders in attendance.
During the two year period prior to the engagement of Deloitte & Touche
LLP, the Company did not consult with Deloitte & Touche LLP on items which
involved the application of accounting principles to a specified transaction,
either completed or proposed, or involved the type of audit opinion that might
be rendered on the Company's financial statements, or concerned the subject
matter of a disagreement or reportable event with the former auditor.
The Company dismissed McGladrey & Pullen LLP as its certified public
accountants by action of the Audit Committee on June 26, 1997, with all members
of the Audit Committee in attendance and approving the decision. McGladrey &
Pullen LLP's reports for the two years prior to the engagement of Deloitte &
Touche LLP contained no adverse opinions, disclaimers, or qualifications or
modifications as to uncertainty, audit scope or accounting principles, and
during such two-year period and the subsequent interim period since then, there
have been no disagreements with McGladrey & Pullen LLP on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure which if not resolved to the satisfaction of McGladrey &
Pullen LLP, would have caused it to make reference to the subject matter of the
disagreement in connection with its reports.
11
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information with respect to compensation
paid by the Company for services rendered to the Company by the President and
Chief Executive Officer and the other highest paid executive officer whose
annual compensation exceeded $100,000 during fiscal year 1998 (the "Named
Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
--------------------------
ANNUAL
COMPENSATION AWARDS
----------------- --------------------------
SECURITIES ALL OTHER
FISCAL SALARY BONUS UNDERLYING COMPENSATION
YEAR ($) ($) OPTIONS ($)
------ ------- ----- ---------- ------------
<S> <C> <C> <C> <C> <C>
W. Edward McConaghay(1)......................... 1998 165,000 - - -
President and Chief Executive Officer 1997 41,250 - - -
Craig A. Lowder(2).............................. 1998 92,727 - - 23,553(3)
Vice President of Sales 1997 75,833 9,626 40,500 36,438(4)
</TABLE>
- --------------------
(1) Mr. McConaghay's employment commenced on April 1, 1997.
(2) Mr. Lowder's employment commenced on September 1, 1996 and terminated
on March 31, 1998.
(3) Consists of sales incentives.
(4) Consists of moving expenses.
The following table sets forth the number and value of the unexercised
options held by the Named Executive Officers as of the end of fiscal year 1998.
No stock options were granted to or exercised by the Named Executive Officers
during fiscal year 1998.
OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
VALUE OPTIONS AT FY-END AT FY-END($)(1)
SHARES REALIZED -------------------------- --------------------------
ACQUIRED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
-------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
W. Edward McConaghay - - 5,000 20,000 0 0
Craig A. Lowder - - - - 0 0
</TABLE>
- ---------------------
(1) Value is based on the June 30, 1998 closing price of $2.25 per share of
Common Stock as listed on the Nasdaq SmallCap Market less the exercise
price for such shares.
REPRICING OF STOCK OPTIONS
In September 1997, the Board of Directors reviewed the compensation
structure in place for its members. Prior to this review, the Company had
provided its Board members with cash compensation and stock options for their
service. To better align the interests of Board members with the Company's
shareholders, it was determined that (i) the Board would not receive cash
compensation for attending Board or committee meetings with retroactive effect
through fiscal year 1997 and (ii) that all outstanding stock options held by
members of the Board, with exercise prices ranging from $5.00 to $20.00, would
be canceled and
12
<PAGE>
replaced with new options to purchase two-thirds of the shares purchasable
pursuant to the canceled options at $4.50 per share.
EXECUTIVE COMPENSATION PLAN
The Board of Directors adopted an executive compensation plan for
fiscal year 1998, which was based on the Company's performance compared to the
operating budget adopted for the year. The plan provided for cash bonuses of up
to 50% of base compensation and for stock option awards provided that certain
financial objectives were met. No awards were made pursuant to this plan during
fiscal year 1998.
13
<PAGE>
CERTAIN TRANSACTIONS
On June 28, 1997, the Board of Directors authorized the conversion of
the Company's 10% Subordinated Convertible Debentures into Common Stock at a
conversion price of $7.876 per share. Additionally, for every two shares of
Common Stock issued in conjunction with the conversion, the Company agreed to
issue a warrant to purchase one share of Common Stock at 125% of the Debenture
conversion price. During fiscal year 1997, Willis K. Drake and John Sagan, both
current directors, converted all of their individual Debenture holdings, or
$125,000 and $50,000, respectively. As of July 15, 1998, all of the principal
and accrued interest on the Debentures had been converted into shares of Common
Stock or paid in full.
On July 23, 1997, the Company concluded a $1,250,000 equity private
placement for which FAMCO was issued 277,778 shares of Series II Convertible
Preferred Stock. FAMCO has converted all of its Series II Convertible Preferred
Stock into Common Stock. FAMCO also was issued a warrant to purchase up to
364,907 shares of Common Stock (as adjusted pursuant to previously triggered
antidilution rights). The Company may call the warrant if the bid price of its
Common Stock trades at 175% of the conversion price for ten successive trading
days immediately before the call. Additionally, John D. Wunsch, President and
Chief Executive Officer of Family Financial Strategies, an affiliate of FAMCO,
became a director of the Company in connection with such private placement.
On February 25, 1998, the Company issued a warrant to Mack V. Traynor,
a member of the Board of Directors, in connection with efforts relating to a
consulting agreement dated February 25, 1998 by and between the Company and Mr.
Traynor (the "Consulting Agreement"), entitling him to purchase 100,000 shares
of Common Stock at $1.188 per share. This warrant may be exercised commencing
five years after its issuance to and including its termination date, which
occurs on the earlier of (i) its seventh anniversary or (ii) the date on which
the Consulting Agreement is terminated, unless extended as provided in the
warrant. The vesting of the warrant accelerates upon the Company's achievement
of certain financial results.
On June 13, 1998, the Company issued a warrant to Manchester Companies,
Inc. pursuant to an Engagement Agreement dated June 13, 1998 by and between the
Company and Manchester Financial Group, Inc., entitling it to purchase 25,000
shares of Common Stock at $2.688 per share. This warrant may be exercised
through its fifth anniversary unless extended as provided in the warrant. Also
on June 13, 1998, the Company issued a warrant to Kenneth W. Hager pursuant to
an Engagement Agreement dated June 13, 1998 by and between the Company and
Manchester Financial Group, Inc., entitling him to purchase 25,000 shares of
Common Stock at $2.688 per share. This warrant may be exercised through its
fifth anniversary unless extended as provided in the warrant. Mark W. Sheffert,
a member of the Board of Directors, is President of Manchester Companies, Inc.
In August 1998, the Company concluded a private placement of equity in
which it issued 400,000 shares of Series III Convertible Preferred Stock to two
institutional investors, FAMCO and Special Situations Private Equity Fund, L.P.
(the "Investors"), in exchange for $1,000,000. Each share of the Series III
Preferred Stock is convertible at the option of the holder into Common Stock (at
the applicable conversion ratio). The Investors also received, in the aggregate,
warrants to purchase 400,000 shares of Common Stock. The warrants are
exercisable at $3.125 per share and expire two years from the closing date of
the transaction. The funds, which were placed into escrow accounts during April
1998, were released to the Company and the shares and warrants, which were also
placed into escrow accounts during April 1998, were released to the Investors in
August 1998 upon the Company's certification to the investors that it complied
with the requirements of the Nasdaq SmallCap Market. As the President and Chief
Executive Officer of Family Financial Strategies, an affiliate of FAMCO, John D.
Wunsch was an interested party to this transaction.
On the first day of each quarter during fiscal year 1998, each
non-employee director was granted an option to purchase 188 shares of Common
Stock as a quarterly retainer. For each Board meeting attended during fiscal
year 1998, each non-employee director was granted an option to purchase 125
shares of Common Stock (other than the Chairman of the Board who received an
option to purchase 250 shares of Common Stock for each Board meeting
14
<PAGE>
attended). Each non-employee director was also granted an option to purchase 63
shares of Common Stock for each Committee meeting personally attended, not to
exceed options to purchase 188 shares per committee member for the year.
Further, each non-employee director who served as the chairperson of a committee
received an option to purchase 175 shares of Common Stock. In addition to the
quarterly grant given to non-employee directors, the Chairman of the Board also
received an option to purchase 250 shares of Common Stock as a monthly retainer.
The Company believes that all of the transactions set forth herein were
made on terms no less favorable to the Company than could have been obtained
from unaffiliated third parties. All future transactions, including loans (if
any), between the Company and its officers, directors, and principal
shareholders and their affiliates will be approved by a majority of the Board of
Directors, including a majority of the independent and disinterested
non-employee directors, and will be on terms no less favorable to the Company
than could be obtained from unaffiliated third parties.
INDEMNIFICATION
The Company's Articles of Incorporation limits the liability of its
directors for monetary damages arising from a breach of their fiduciary duty as
directors, except to the extent otherwise required by the Minnesota Business
Corporations Act. Such limitation of liability does not affect the availability
of equitable remedies such as injunctive relief or rescission.
MANAGEMENT OF THE COMPANY
The following table provides information with respect to the Company's
executive officers. Each executive officer has been appointed to serve until his
successor is duly appointed by the Board of Directors or his earlier removal or
resignation from office.
NAME AGE POSITION
---- --- --------
W. Edward McConaghay 49 President and Chief Executive Officer
W. EDWARD MCCONAGHAY - See "Election of Directors."
COMPLIANCE WITH SECTION 16(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers, directors and persons who own more than ten percent of a
registered class of the Company's equity securities to file reports of ownership
and changes in ownership with the Commission and to provide the Company with
copies of all such reports. To the Company's knowledge, based solely on its
review of copies of reports filed with the Commission during fiscal year 1998,
all applicable Section 16(a) filing requirements were satisfied, except that
eight reports on Form 5 setting forth the issuances during fiscal year 1998 of
options to purchase an aggregate of 40,725 shares of Common Stock by Messrs.
Wunsch, Drake, Traynor, Sheffert, Sagan, McConaghay, Anderson and Durenberger
were not filed on a timely basis.
SHAREHOLDER PROPOSALS
Shareholders wishing to present proposals for action by the
shareholders at the next annual meeting must present such proposals at the
principal offices of the Company not later than June 1, 1999. Due to the
complexity of the respective rights of the shareholders and the Company in this
area, any shareholder desiring to propose such an action is advised to consult
with his or her legal counsel with respect to such rights. It is suggested that
any such proposals be submitted by certified mail, return receipt requested.
15
<PAGE>
ANNUAL REPORT TO SHAREHOLDERS
A copy of the Company's Annual Report to Shareholders for fiscal year
1998 accompanies this Notice of Annual Meeting, Proxy Statement and related
proxy card. No part of the Annual Report to Shareholders is incorporated herein
and no part thereof is to be considered proxy soliciting material.
FORM 10-KSB
THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH PERSON WHOSE PROXY IS
BEING SOLICITED, UPON WRITTEN REQUEST OF ANY SUCH PERSON, A COPY OF THE
COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE FISCAL YEAR ENDED JUNE 30, 1998,
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING THE FINANCIAL
STATEMENTS AND THE FINANCIAL STATEMENT SCHEDULES THERETO. THE COMPANY WILL
FURNISH TO ANY SUCH PERSON ANY EXHIBIT DESCRIBED IN THE EXHIBIT INDEX
ACCOMPANYING THE FORM 10-KSB, UPON THE PAYMENT, IN ADVANCE, OF FEES BASED ON THE
COMPANY'S REASONABLE EXPENSES IN FURNISHING SUCH EXHIBIT(S). REQUESTS FOR COPIES
OF SUCH REPORT AND/OR EXHIBIT(S) SHOULD BE DIRECTED TO W. EDWARD MCCONAGHAY,
PRESIDENT AND CHIEF EXECUTIVE OFFICER, AT THE COMPANY'S PRINCIPAL ADDRESS.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ W. Edward McConaghay
W. Edward McConaghay
President and Chief Executive Officer
Minneapolis, Minnesota
September 29, 1998
16
<PAGE>
EXHIBIT A
TELIDENT, INC.
1998 STOCK OPTION PLAN
SECTION 1.
DEFINITIONS
As used herein, the following terms shall have the meanings indicated
below:
(a) "Affiliated Entity" means any entity other than a Subsidiary in
which the Company has a material interest, including a joint venture.
(b) "Book Value" shall mean the book value of a share of the Company's
Common Stock derived from the most current available financial
statements of the Company by dividing total shareholders' equity by the
number of shares issued and outstanding and making such adjustment for
results of operations since the date of such financial statements as
the Board of Directors or Committee shall deem appropriate.
(c) "Committee" shall mean a Committee of two or more directors who
shall be appointed by and serve at the pleasure of the Board. As long
as the Company's securities are registered pursuant to Section 12 of
the Securities Exchange Act of 1934, as amended ("Exchange Act"), then,
to the extent necessary for compliance with Rule 16b-3, or any
successor provision, each of the members of the Committee shall be a
"Non-Employee Director." For purposes of this Section l(b)
"Non-Employee Director" shall have the same meaning as set forth in
Rule 16b-3, or any successor provision, as then in effect, of the
General Rules and Regulations under the Exchange Act. In addition, such
directors shall satisfy such requirements of the Internal Revenue Code
for outside directors acting under plans intending to qualify for
exemption under section 162(m)(4)(c) of the Code.
(d) The "Company" shall mean Telident, Inc., a Minnesota corporation.
(e) "Exercise Price" shall mean the price per share at which Option
Stock may be purchased in accordance with an option agreement and this
Plan.
(f) "Fair Market Value" shall mean (i) if such stock is reported by the
Nasdaq National Market or Nasdaq SmallCap Market or is listed upon an
established stock exchange or exchanges, the reported closing price of
such stock by the Nasdaq National Market or Nasdaq SmallCap Market or
on such stock exchange or exchanges on the date the option is granted
or, if no sale of such stock shall have occurred on that date, on the
next preceding day on which there was a sale of stock; (ii) if such
stock is not so reported by the Nasdaq National Market or Nasdaq
SmallCap Market or listed upon an established stock exchange, the
average of the closing "bid" and "asked" prices quoted by the National
Quotation Bureau, Inc. (or any comparable reporting service) on the
date the option is granted, or if there are no quoted "bid" and "asked"
prices on such date, on the next preceding date for which there are
such quotes; or (iii) if such stock is not publicly traded as of the
date the option is granted, the per share value as determined by the
Board, or the Committee, in its sole discretion by applying principles
of valuation with respect to all such options.
(g) The "Internal Revenue Code" or "Code" is the Internal Revenue Code
of 1986, as amended from time to time.
(h) "Non-Employee Director" shall mean members of the Board who are not
employees of the Company or any subsidiary.
A-1
<PAGE>
(i) "Option Stock" or "Stock" shall mean Common Stock of the Company
(subject to adjustment as described in Section 13) reserved for options
pursuant to this Plan.
(j) The "Optionee" means an employee of the Company or any Subsidiary
to whom an incentive stock option has been granted pursuant to Section
9; or a consultant or advisor to or director (including a Non-Employee
Director), employee or officer of the Company or any Subsidiary to whom
a nonqualified stock option has been granted pursuant to Section 10.
(k) "Parent" shall mean any corporation which owns, directly or
indirectly in an unbroken chain, fifty percent (50%) or more of the
total voting power of the Company's outstanding stock.
(l) The "Plan" means this Telident, Inc. 1998 Stock Option Plan, as
amended hereafter from time to time, including the form of Option
Agreements as they may be modified by the Board from time to time.
(m) A "Subsidiary" shall mean any corporation of which fifty percent
(50%) or more of the total voting power of outstanding stock is owned,
directly or indirectly in an unbroken chain, by the Company.
SECTION 2.
PURPOSE
The purpose of the Plan is to promote the success of the Company and
any Subsidiary hereafter created or acquired by facilitating the retention of
competent personnel and by furnishing incentive to officers, directors,
employees, consultants, and advisors upon whose efforts the success of the
Company and any Subsidiary will depend.
It is the intention of the Company to carry out the Plan through the
granting of stock options which will qualify as "incentive stock options" under
the provisions of Section 422 of the Internal Revenue Code, or any successor
provision, pursuant to Section 9 of this Plan, and through the granting of
"nonqualified stock options" pursuant to Sections 10 and 11 of this Plan.
Adoption of this Plan shall be and is expressly subject to the condition of
approval by the shareholders of the Company.
SECTION 3.
EFFECTIVE DATE OF PLAN
The Plan shall be effective as of the date of adoption by the Board of
Directors, subject to approval by the shareholders of the Company as required in
Section 2.
SECTION 4.
ADMINISTRATION
The Plan shall be administered by the Board of Directors of the Company
(hereinafter referred to as the "Board") or by a Committee which may be
appointed by the Board from time to time (collectively referred to as the
"Administrator"). The Administrator shall have all of the powers vested in it
under the provisions of the Plan, including but not limited to exclusive
authority (where applicable and within the limitations described herein) to
determine, in its sole discretion, whether an incentive stock option or
nonqualified stock option shall be granted, the individuals to whom, and the
time or times at which, options shall be granted, the number of shares subject
to each option and the option price and terms and conditions of each option. The
Administrator shall have full power and authority to administer and interpret
the Plan, to make and amend rules, regulations and guidelines for administering
the Plan, to prescribe the form and conditions of the respective stock option
agreements (which may vary from Optionee to Optionee) evidencing each option and
to make all other determinations necessary or advisable for the
A-2
<PAGE>
administration of the Plan. The Administrator's interpretation of the Plan, and
all actions taken and determinations made by the Administrator pursuant to the
power vested in it hereunder, shall be conclusive and binding on all parties
concerned.
No member of the Board or the Committee shall be liable for any action
taken or determination made in good faith in connection with the administration
of the Plan. In the event the Board appoints a Committee as provided hereunder,
any action of the Committee with respect to the administration of the Plan shall
be taken pursuant to a majority vote of the Committee members or pursuant to the
written resolution of all Committee members.
SECTION 5.
PARTICIPANTS
The Administrator shall from time to time, at its discretion and
without approval of the shareholders, designate those employees, officers,
directors, consultants, and advisors of the Company or of any Subsidiary or
Affiliated Entity to whom nonqualified stock options shall be granted under this
Plan; provided, however, that consultants or advisors shall not be eligible to
receive stock options hereunder unless such consultant or advisor renders bona
fide services to the Company or Subsidiary or Affiliated Entity. The
Administrator shall, from time to time, at its discretion and without approval
of the shareholders, designate those employees of the Company or any Subsidiary
or Affiliated Entity to whom incentive stock options shall be granted under this
Plan. The Administrator may grant additional incentive stock options or
nonqualified stock options under this Plan to some or all participants then
holding options or may grant options solely or partially to new participants
including persons to whom an offer of employment has been extended. In
designating participants the Administrator shall also determine the number of
shares to be optioned to each such participant. The Board may from time to time
designate individuals as being ineligible to participate in the Plan.
SECTION 6.
STOCK
The Stock to be optioned under this Plan shall consist of authorized
but unissued shares of Option Stock. Three Hundred Fifty Thousand (350,000)
shares of Option Stock shall be reserved and available for options under the
Plan; provided, however, that the total number of shares of Option Stock
reserved for options under this Plan shall be subject to adjustment as provided
in Section 13 of the Plan. In the event that any outstanding option under the
Plan for any reason expires or is terminated prior to the exercise thereof, the
shares of Option Stock allocable to the unexercised portion of such option shall
continue to be reserved for options under the Plan and may be optioned
hereunder.
SECTION 7.
DURATION OF PLAN
Incentive stock options may be granted pursuant to the Plan from time
to time during a period of ten (10) years from the effective date as defined in
Section 3. Nonqualified stock options may be granted pursuant to the Plan from
time to time after the effective date of the Plan and until the Plan is
discontinued or terminated by the Board. Any incentive stock option granted
during such ten-year period and any nonqualified stock option granted prior to
the termination of the Plan by the Board shall remain in full force and effect
until the expiration of the option as specified in the written stock option
agreement and shall remain subject to the terms and conditions of this Plan.
A-3
<PAGE>
SECTION 8.
PAYMENT
Optionees may pay for shares upon exercise of options granted pursuant
to this Plan with cash, personal check, certified check or, if approved by the
Administrator in its sole discretion, Common Stock of the Company valued at such
Stock's then Fair Market Value, or such other form of payment as may be
authorized by the Administrator. The Administrator may, in its sole discretion,
limit the forms of payment available to the Optionee and may exercise such
discretion any time prior to the termination of the option granted to the
Optionee or upon any exercise of the option by the Optionee.
With respect to payment in the form of Common Stock of the Company, the
Administrator may require advance approval or adopt such rules as it deems
necessary to assure compliance with Rule 16b-3, or any successor provision, as
then in effect, of the General Rules and Regulations under the Exchange Act, if
applicable.
The Administrator may permit a participant to elect to pay the Exercise
Price by authorizing a third party to sell Stock (or a sufficient portion
thereof) acquired upon exercise of an Option and remit to the Company a
sufficient portion of the sale proceeds to pay the Exercise price and any tax
withholding resulting from such exercise.
The Administrator may permit all or any part of the Exercise Price and
any withholding taxes to be paid by delivering (on a form prescribed by the
Company) a full-recourse promissory note. The Exercise Price and any withholding
taxes may be paid, in whole or in part, in any other form that is consistent
with applicable laws, regulations and rules.
SECTION 9.
TERMS AND CONDITIONS OF INCENTIVE STOCK OPTIONS
Each incentive stock option granted pursuant to this Section 9 shall be
evidenced by a written stock option agreement (the "Option Agreement"). The
Option Agreement shall be in such form as may be approved from time to time by
the Administrator and may vary from Optionee to Optionee; provided, however,
that each Optionee and each Option Agreement shall comply with and be subject to
the following terms and conditions:
(a) Number of Shares and Option Price. The Option Agreement shall state
the total number of shares covered by the incentive stock option. To
the extent required to qualify the Option as an incentive stock option
under Section 422 of the Internal Revenue Code, or any successor
provision, the Exercise Price per share shall not be less than one
hundred percent (100%) of the Fair Market Value of the Common Stock per
share on the date the Administrator grants the option; provided,
however, that if an Optionee owns stock possessing more than ten
percent (10%) of the total combined voting power of all classes of
stock of the Company or of its Parent or any Subsidiary, the option
price per share of an incentive stock option granted to such Optionee
shall not be less than one hundred ten percent (110%) of the Fair
Market Value of the Common Stock per share on the date of the grant of
the option. The Administrator shall have full authority and discretion
in establishing the option price and shall be fully protected in so
doing.
(b) Term and Exercisability of Incentive Stock Option. The term during
which any incentive stock option granted under the Plan may be
exercised shall be established in each case by the Administrator. To
the extent required to qualify the Option as an incentive stock option
under Section 422 of the Internal Revenue Code, or any successor
provision, in no event shall any incentive stock option be exercisable
during a term of more than seven (7) years after the date on which it
is granted.
A-4
<PAGE>
(c) The Option Agreement shall state when the incentive stock option
becomes exercisable and shall also state the maximum term during which
the option may be exercised. In the event an incentive stock option is
exercisable immediately, the manner of exercise of the option in the
event it is not exercised in full immediately shall be specified in the
Option Agreement subject to Section 13, the Administrator may
accelerate the exercisability of any incentive stock option granted
hereunder which is not immediately exercisable as of the date of grant.
(d) Other Provisions. The Option Agreement authorized under this
Section 9 shall contain such other provisions as the Administrator
shall deem advisable. Any such Option Agreement shall contain such
limitations and restrictions upon the exercise of the option as shall
be necessary to ensure that such option will be considered an
"incentive stock option" as defined in Section 422 of the Internal
Revenue Code or to conform to any change therein.
SECTION 10.
TERMS AND CONDITIONS OF NONQUALIFIED STOCK OPTIONS
Each nonqualified stock option granted pursuant to this Section 10
shall be evidenced by a written Option Agreement. The Option Agreement shall be
in such form as may be approved from time to time by the Administrator and may
vary from Optionee to Optionee; provided, however, that each Optionee and each
Option Agreement shall comply with and be subject to the following terms and
conditions:
(a) Number of Shares and Option Price. The Option Agreement shall state
the total number of shares covered by the nonqualified stock option.
The option price per share shall be one hundred percent (100%) of the
Fair Market Value of the Common Stock per share on the date the
Administrator grants the option; provided, however, that the option
price may not be less than the higher of the Fair Market Value of the
Book Value of the Common Stock per share on the date of grant.
(b) Term and Exercisability of Nonqualified Stock Option. The term
during which any nonqualified stock option granted under the Plan may
be exercised shall be established in each case by the Administrator,
but shall not exceed seven (7) years. The Option Agreement shall state
when the nonqualified stock option becomes exercisable and shall also
state the term during which the option may be exercised. In the event a
nonqualified stock option is exercisable immediately, the manner of
exercise of the option in the event it is not exercised in full
immediately shall be specified in the stock option agreement subject to
Section 13, the Administrator may accelerate the exercisability of any
nonqualified stock option granted hereunder which is not immediately
exercisable as of the date of grant.
(c) Withholding. The Company or its Subsidiary shall be entitled to
withhold and deduct from future wages of the Optionee all legally
required amounts necessary to satisfy any and all withholding and
employment-related taxes attributable to the Optionee's exercise of a
nonqualified stock option. In the event the Optionee is required under
the Option Agreement to pay the Company, or make arrangements
satisfactory to the Company respecting payment of, such withholding and
employment-related taxes, the Administrator may, in its discretion and
pursuant to such rules as it may adopt, permit the Optionee to satisfy
such obligation, in whole or in part, by electing to have the Company
withhold shares of Common Stock otherwise issuable to the Optionee as a
result of the option's exercise equal to the amount required to be
withheld for tax purposes. Any stock elected to be withheld shall be
valued at its Fair Market Value, as of the date the amount of tax to be
withheld is determined under applicable tax law. The Optionee's
election to have shares withheld for this purpose shall be made on or
before the date the option is exercised or, if later, the date that the
amount of tax to be withheld is determined under applicable tax law.
Such election shall be approved by the Administrator and otherwise
comply with such rules as the Administrator may adopt to assure
compliance with Rule 16b-3, or any successor provision, as then in
effect, of the General Rules and Regulations under the Securities
Exchange Act of 1934, if applicable.
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(d) Other Provisions. The Option Agreement authorized under this
Section 10 shall contain such other provisions as the Administrator
shall deem advisable.
SECTION 11.
TRANSFER OF OPTION
Except as otherwise provided by the Administrator, awards under the
Plan are not transferable other than as designated by the Participant by will or
by the laws of descent and distribution.
SECTION 12.
RECAPITALIZATION, SALE, MERGER, EXCHANGE
OR LIQUIDATION
In the event of an increase or decrease in the number of shares of
Common Stock resulting from a subdivision or consolidation of shares or the
payment of a stock dividend or any other increase or decrease in the number of
shares of Common Stock effected without receipt of consideration by the Company,
the number of shares of Option Stock reserved under Section 6 hereof and the
number of shares of Option Stock covered by each outstanding option and the
price per share thereof shall be adjusted to reflect such change. Additional
shares which may be credited pursuant to such adjustment shall be subject to the
same restrictions as are applicable to the shares with respect to which the
adjustment relates.
In the event of an acquisition of the Company through the sale of
substantially all of the Company's assets and the consequent discontinuance of
its business or through a merger, consolidation, exchange, reorganization,
reclassification, extraordinary dividend, divestiture or liquidation of the
Company (collectively referred to as a "transaction"), the Board may provide for
one or more of the following:
(a) the complete termination of this Plan and cancellation of
outstanding options not exercised prior to a date specified by the
Board (which date shall give Optionees a reasonable period of time in
which to exercise the options prior to the effectiveness of such
transaction);
(b) that the continuing corporation or entity surviving the transaction
shall (i) assume options previously granted under this Plan or (ii)
issue new options in substitution for options granted under this Plan
so that an Optionee shall have the right thereafter, by exercising any
such option (or any new option substituted therefor), to purchase the
kind and amount of stock and other securities and property receivable
upon such merger or consolidation or other transaction as if the
Optionee had purchased all of the Option Stock subject to the option
immediately prior to the date of the contract closing of such
transaction;
(c) that Optionees holding outstanding incentive or nonqualified
options shall receive, with respect to each share of Option Stock
subject to such options, as of the effective date of any such
transaction, cash in an amount equal to the excess of the Fair Market
Value of such Option Stock on the date immediately preceding the
effective date of such transaction over the option price per share of
such options; provided that the Board may, in lieu of such cash
payment, distribute to such Optionees shares of stock of the Company or
shares of stock of any corporation succeeding the Company by reason of
such transaction, such shares having a value equal to the cash payment
herein;
(d) that all outstanding options shall become immediately exercisable,
whether or not such options had become exercisable prior to the
transaction; provided, however, that if the acquiring party seeks to
have the transaction accounted for on a "pooling of interests" basis
and, in the opinion of the Company's independent certified public
accountants, accelerating the exercisability of such options would
preclude a pooling of
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interests under generally accepted accounting principles, the
exercisability of such options shall not accelerate; or
(e) such other arrangements with respect to outstanding options as the
Board shall deem to be in the best interest of the Company.
The Board may restrict the rights of or the applicability of this
Section 13 to the extent necessary to comply with Section 16(b) of the
Securities Exchange Act of 1934, the Internal Revenue Code or any other
applicable law or regulation. The grant of an option pursuant to the Plan shall
not limit in any way the right or power of the Company to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure or to merge, exchange or consolidate or to dissolve, liquidate, sell
or transfer all or any part of its business or assets.
SECTION 13.
SECURITIES LAW COMPLIANCE
No shares of Common Stock shall be issued pursuant to the Plan unless
and until there has been compliance, in the opinion of Company's counsel, with
all applicable legal requirements, including without limitation, those relating
to securities laws and stock exchange listing requirements. As a condition to
the issuance of Option Stock to Optionee, the Administrator may require Optionee
to (i) represent that the shares of Option Stock are being acquired for
investment and not resale and to make such other representations as the
Administrator shall deem necessary or appropriate to qualify the issuance of the
shares as exempt from the Securities Act of 1933 and any other applicable
securities laws, and (ii) represent that Optionee shall not dispose of the
shares of Option Stock in violation of the Securities Act of 1933 or any other
applicable securities laws.
As a further condition to the grant of any incentive or nonqualified
stock option or the issuance of Option Stock to Optionee, Optionee agrees to the
following:
(a) In the event the Company advises Optionee that it plans an
underwritten public offering of its Common Stock in compliance with the
Securities Act of 1933, as amended, and the underwriter(s) seek to
impose restrictions under which certain shareholders may not sell or
contract to sell or grant any option to buy or otherwise dispose of
part or all of their stock purchase rights of the underlying Common
Stock, Optionee will not, for a period not to exceed 180 days from the
prospectus, sell or contract to sell or grant an option to buy or
otherwise dispose of any incentive or nonqualified stock option granted
to Optionee pursuant to the Plan or any of the underlying shares of
Common Stock without the prior written consent of the underwriter(s) or
its representative(s).
(b) In the event the Company makes any public offering of its
securities and determines in its sole discretion that it is necessary
to reduce the number of issued but unexercised stock purchase rights so
as to comply with any states securities or Blue Sky law limitations
with respect thereto, the Board of Directors of the Company shall have
the right (i) to accelerate the exercisability of any incentive or
nonqualified stock option and the date on which such option must be
exercised, provided that the Company gives Optionee prior written
notice of such acceleration, and (ii) to cancel any options or portions
thereof which Optionee does not exercise prior to or contemporaneously
with such public offering.
(c) In the event of a transaction (as defined in Section 13 of the
Plan) which is treated as a "pooling of interests" under generally
accepted accounting principles, Optionee will comply with Rule 145 of
the Securities Act of 1933 and any other restrictions imposed under
other applicable legal or accounting principles if Optionee is an
"affiliate" (as defined in such applicable legal and accounting
principles) at the time of the transaction, and Optionee will execute
any documents necessary to ensure compliance with such rules.
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<PAGE>
The Company reserves the right to place a legend on any stock
certificate issued upon exercise of an option granted pursuant to the Plan to
assure compliance with this Section 14.
SECTION 14.
RIGHTS AS A SHAREHOLDER
An Optionee (or the Optionee's successor or successors) shall have no
rights as a shareholder with respect to any shares covered by an option until
the date of the issuance of a stock certificate evidencing such shares. No
adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property), distributions or other rights for which the
record date is prior to the date such stock certificate is actually issued
(except as otherwise provided in Section 13 of the Plan).
SECTION 15.
AMENDMENT OF THE PLAN
The Board may from time to time, insofar as permitted by law, suspend
or discontinue the Plan or amend it in any respect; provided, however, that no
such revision or amendment, except as is authorized in Section 13, shall impair
the terms and conditions of any option which is outstanding on the date of such
revision or amendment to the material detriment of the Optionee without the
consent of the Optionee. An amendment shall be subject to approval by the
shareholders of the Company only if such approval is required for compliance
with the requirements of any applicable law, rule or regulation.
SECTION 16.
NO OBLIGATION TO EXERCISE OPTION
The granting of an option shall impose no obligation upon the Optionee
to exercise such option. Further, the granting of an option hereunder shall not
impose upon the Company or any Subsidiary any obligation to retain the Optionee
in its employ for any period.
SECTION 17.
LIMITATION ON PAYMENTS
Any provision of the Plan to the contrary notwithstanding, in the event
that the independent auditors most recently selected by the Board (the
"Auditors") determine that any payment or transfer by the Company under the Plan
to or for the benefit of a Participant (a "Payment") would be nondeductible by
the Company for federal income tax purposes because of the provisions concerning
"excess parachute payments' in section 280G of the Code, than the aggregate
present value of all Payments shall be reduced (but not below zero) to the
Reduced Amount; provided that the Committee, at the time of that such Award
shall not be so reduced and shall not be subject to this Section 18. For
purposes of this Section 18, the "Reduced Amount" shall be the amount, expressed
as a present value, which maximizes the aggregate present value of the Payments
without causing any Payment to be nondeductible by the Company because of
section 280G of the Code.
(a) If the Auditors determine that any Payment would be nondeductible
by the Company because of section 280G of the Code, then the Company
shall promptly give the Participant notice to that effect and a copy of
the detailed calculation thereof and of the Reduced Amount, and the
Participant may then elect, in his or her sole discretion, which and
how much of the Payments shall be eliminated or reduced (as long as
after such election the aggregate present value of the Payments equals
the Reduced Amount) and shall advise the Company in writing of his or
her election within 10 days of receipt of notice. If no such election
is made
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<PAGE>
by the Participant within such 10-day period, then the Company may
elect which and how much of the Payments shall be eliminated or reduced
(as long as after such election the aggregate present value of the
Payments equals the Reduced Amount) and shall notify the Participant
promptly of such election. For purposes of this Section 18, present
value shall be determined in accordance with section 280G(d)(4) of the
Code. All determinations made by the Auditors under this Section 18
shall be binding upon the Company and the Participant and shall be made
within 60 days of the date when a Payment becomes payable or
transferable. As promptly as practicable following such determination
and the elections hereunder, the Company shall pay or transfer to or
for the benefit of the Participant such amounts as are then due to him
or her under the Plan and shall promptly pay or transfer to or for the
benefit of the Participant in the future such amounts as become due to
him or her under the Plan.
(b) As a result of uncertainty in the application of section 280G of
the Code at the time of an initial determination by the Auditors
hereunder, it is possible that Payments will have been made by
additional Payments which will not have been made by the Company could
have been made (an "Underpayment"), consistent in each case with the
calculation of the Reduced Amount hereunder. In the event that the
Auditors, based upon that assertion of a deficiency by the Internal
Revenue Service against the Company or the Participant which the
Auditors believe has a high probability of success, determine that an
Overpayment has been made, such Overpayment shall be treated for all
purposes as a loan to the Participant which he or she shall repay to
the Company, together with interest at the applicable federal rate
provided in section 7872(f)(2) of the Code; provided, however, that no
amount shall be payable by the Participant to the Company if and to the
extent that such payment would not reduce the amount which is subject
to taxation under section 4999 of the Code. In the event that the
Auditors determine that an Underpayment has occurred, such Underpayment
shall promptly be paid or transferred by the Company to or for the
benefit of the Participant, together with interest at the applicable
federal rate provided in section 7872(f)(2) of the Code.
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<PAGE>
TELIDENT, INC.
TEN SECOND STREET, N.E., SUITE 212
MINNEAPOLIS, MINNESOTA 55413
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of Telident, Inc., a Minnesota corporation
(the "Company"), hereby acknowledges receipt of the Notice of Annual Meeting of
Shareholders and Proxy Statement, each dated September 29, 1998, and hereby
appoints W. Edward McConaghay and Mark W. Sheffert, or either of them, proxies
and attorneys-in-fact, with full power to each of substitution and revocation,
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 in the Galaxy Room
of the Marquette Hotel, located on the 50th floor of the IDS Center, 80 South
Eighth Street, Minneapolis, Minnesota, on Wednesday, October 28, 1998, at 4:00
p.m. local time, or at any adjournment or postponement thereof, and to vote, as
designated below, all shares of Common Stock and/or Preferred Stock of the
Company which the undersigned would be entitled to vote if then and there
personally present, on the matters set forth below.
1. To elect seven directors to have one-year terms expiring in 1999 and until
their successors have been duly elected and qualified.
[ ] FOR the nominees listed below [ ] WITHHOLD AUTHORITY to vote
(except as marked to the for all nominees listed below
contrary below)
MARK W. SHEFFERT, W. EDWARD MCCONAGHAY, SCOTT R. ANDERSON, WILLIS K. DRAKE,
DAVID F. DURENBERGER, MACK V. TRAYNOR, JOHN D. WUNSCH
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL, WRITE THAT
NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.
- --------------------------------------------------------------------------------
2. To consider and vote upon approval of the Company's 1998 Stock Option
Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To ratify the appointment of Deloitte & Touche LLP as the Company's
independent public accountants for the fiscal year ending June 30, 1999.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting or any adjournment
or postponement thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED ON THE
PROXY BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSALS 1 THROUGH 3. ABSTENTIONS WILL BE COUNTED TOWARDS THE
EXISTENCE OF A QUORUM.
Please sign exactly as name appears on this proxy. When shares are held by joint
tenants, both should sign. If signing as attorney, executor, administrator,
trustee or guardian, please give full title as such and, if not previously
furnished, a certificate or other evidence of appointment should be furnished.
If a corporation, please sign in full corporate name by president or other
authorized officer. If a partnership, please sign in partnership name by an
authorized person.
Dated:
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(Signature)
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
