SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended December 31,1996.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ____ to ______.
Commission File Number 33-59598
DIALOGIC CORPORATION
(Exact name of registrant as specified in its charter)
New Jersey 2-2476114
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
1515 Route 10, Parsippany, New Jersey 07054 (201) 993-3000
(Address and telephone number, including area code, of registrant's
principal executive office)
Securities registered pursuant to Section 12(b) of the Act: none.
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
Common Stock, no par value
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No____
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
Aggregate market value of voting stock held by non-affiliates as of
February 14, 1997 was approximately $325 million.
Number of shares of Common Stock outstanding as of February 14, 1997:
15,796,671.
Documents incorporated by reference: Annual report to shareholders for
the year ended December 31, 1996 (Part II); Definitive proxy statement for the
registrant's 1997 annual meeting of shareholders (Part III).
DIALOGIC CORPORATION
TABLE OF CONTENTS
PART I Page
Item 1 Business of the Company........................................... 3
Item 2 Properties........................................................ 24
Item 3 Legal Proceedings................................................. 24
Item 4 Submission of Matters to a Vote of Security Holders............... 25
Item 4A Executive Officers of the Registrant.............................. 25
PART II
Item 5 Market for the Registrant's Common Equity and Related Stockholder
Matters.
27
Item 6 Selected Financial Data.......................................... 28
Item 7 Management's Discussion and Analysis of Results of Operations and
Financial Condition.............................................. 28
Item 8 Financial Statements and Supplementary Data....................... 28
Item 9 Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.......................................... 28
PART III
Item 10 Directors of the Registrant...................................... 28
Item 11 Executive Compensation........................................... 29
Item 12 Security Ownership of Certain Beneficial Owners and Management.... 29
Item 13 Certain Relationships and Related Transactions.................... 29
PART IV
Item 14 Exhibits, Financial Statements Schedules and Reports on Form
8-K............................................................... 30
Signatures ............................................................... 33
Item 1. Business of the Company
Introduction
Dialogic Corporation ("Dialogic" or the "Company") was incorporated in
New Jersey in 1983. Its principal executive offices are located at 1515 Route
10, Parsippany, New Jersey 07054, and its telephone number is (201) 993-3000. On
June 6, 1994, Dialogic acquired GammaLink, a California manufacturer of
facsimile boards for various computer-based applications ("GammaLink"). On
February 27, 1995, the Company acquired Spectron Microsystems, Inc., a
California supplier of digital signal processor ("DSP") system software products
("Spectron"). Both of these mergers were accounted for as a pooling of
interests. During February 1995, Dialogic also acquired from Digital Equipment
Corporation its computer integrated telephony server technology; these resources
are now provided by Dialogic from its CT Division. In June 1996, Dialogic
acquired Dianatel Corporation, a California manufacturer of digital network
interface and other signal computing products ("Dianatel"). The Dianatel merger,
resulting in the issuance of approximately 55,500 shares of the Company's Common
Stock, the payment of approximately $1.1 million in cash and the grant of
options to purchase approximately 29,800 shares of Dialogic Common Stock, was
accounted for as a purchase. As used in this Annual Report, the terms "Dialogic"
and the "Company" refer to Dialogic Corporation and its subsidiaries.
Dialogic, GammaLink, Spectron, Dianatel and many of the Company's,
GammaLink's, Spectron's and Dianatel's product names referred to herein are
trademarks or trade names of the Company, GammaLink, Spectron or Dianatel. This
Annual Report also includes references to trademarks and trade names of other
companies.
This Annual Report contains certain forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995
("Forward-Looking Statements"). Such statements are subject to risks and
uncertainties that could cause actual results to differ materially from those
projected in such Forward-Looking Statements. Certain factors which could
materially affect such results and the future performance of the Company are
described below under "-- Risk Factors".
General
Dialogic designs, manufactures and markets hardware and software
signal computing components for "computer telephony" systems. "Computer
telephony" is the term used to encompass a wide variety of technologies and
applications that use the information processing capabilities of a computer
(often a server) to add intelligence to telephone functions and to combine these
functions with data processing. The Company's products are offered as modular
building blocks that enable its customers--primarily VARs, OEMs, systems
integrators, service providers and applications developers--to design computer
telephony systems that meet the applications demands of their end-user
customers. Dialogic has promoted the acceptance of open, non-proprietary
computer telephony systems, enabling its customers to respond to end-user demand
for standards-based systems and expanding the types of systems into which the
Company's products may be incorporated. The Company's customers vary in size
from small ventures to major computer and telecommunications companies
worldwide.
The Company's signal computing products receive and process signals
from telecommunications networks and perform computing functions to convert the
signals to data appropriate for various types of computer systems. These
computing functions are based upon algorithms for a variety of features,
including voice compression, voice storage, speech recognition, tone recognition
and facsimile compression. Conversely, the Company's signal computing products
also take computer data and convert it to signals compatible with
telecommunications networks by using algorithms for features such as speech
synthesis, voice decompression, tone signaling and facsimile generation.
Dialogic's signal computing products typically combine two elements--a signal
processing resource and a network interface. Signal processing resources perform
specific functions. Network interfaces connect a system, normally a personal
computer, to telephone and data networks. Dialogic's hardware products are
offered in the form of circuit boards/platforms to be installed in a variety of
computer chassis. The Company also licenses the use of various software
products.
Dialogic offers a broad product line, allowing its customers to
develop computer telephony applications with components that are compatible and
scaleable across different ranges of density and performance. Such applications
include:
Database interaction applications, which query and make changes to
databases based on touchtone or voice input, including:
Audiotex - giving 24-hour telephone access to a menu-
selected database of recorded (spoken) information
Fax-on-demand - giving 24-hour telephone access to a menu-
selected database of printed information
Interactive voice response - giving 24-hour telephone access,
with update privileges, to an indexed database of records
Interactive fax response - faxing hard-copy confirmations
of touchtone queries or transactions
Fax and voice messaging applications, including:
Voice mail
Fax servers, which pool fax resources across a network
of users, for the purpose of broadcasting fax messages
and storing fax messages for later retrieval
Paging
Unified messaging, which presents e-mail, fax and voice
messages through one screen interface and converts from
e-mail to fax or voice for remote telephone access
Intelligent call control applications, which automate services
that once required the Intervention of an operator,
including:
Call centers, where a large number of agents process inbound
requests or outbound sales calls
Help desk automation, which directs a call to the support
staffer with the appropriate expertise
Conferencing, which enables more than two parties to call a
control number, with active or passive (i.e., listening)
privileges
Predictive/autodialing, which dials out to lists of phone
numbers, screens out certain calls (e.g., no-answers) and
delivers live prospects to telemarketing agents
Personal communications agents, which screen and forward calls
based on a user's itinerary and instructions
Internet gateway applications, including:
Voice over the Internet
Fax over the Internet
Strategy
The first computer telephony systems, like the first computing
systems, were built using proprietary hardware and software. Over the last few
years, however, numerous computer telephony vendors have adopted open, or
non-proprietary, personal computer ("PC") platforms and standard operating
systems, such as Windows 95, Windows NT, UNIX, OS/2, MS-DOS and Netware, as
elements of their computer telephony systems. This shift toward open platforms
has been driven by the rapid increase in performance and power of standard
microprocessors, the general availability of add-on hardware and software
components, growth in the functionality of the PC and cost savings due to lower
PC prices.
The Company's strategy is to position Dialogic to benefit from the
growing acceptance of open call processing systems. The Company seeks to support
this strategy through the following approaches:
o Advocate Open Systems. The Company believes that open architectures provide
many advantages to systems developers, including (i) reducing the time
needed to bring new products to market, (ii) reducing customers'
maintenance and continuing engineering costs, (iii) providing access to a
variety of technologies from third-party vendors, (iv) enabling customers
to focus their efforts on marketing and end-user applications, (v)
protecting customers so that they will not be dependent upon a particular
technology and therefore be precluded from accessing new technologies and
(vi) enabling customers and end-users to benefit from the economies
associated with open architectures. As part of its commitment to open
architectures, Dialogic designs its modular components to satisfy
established industry standards. Its products work in PC platforms with
PC/AT or Micro Channel standards and support standard operating systems.
Furthermore, to support its international sales efforts, the Company
designs its products to meet international telecommunications standards. At
the same time, Dialogic advocates the value to end users of requesting
their computer telephony vendors to provide open systems, thereby
encouraging the "pull through" of open components.
o Develop Signal Computing Technologies. Dialogic believes that voice, image
and data processing technologies are converging at a rapid rate. This
convergence is reflected in the growing demand for unified messaging
systems in the telecommunications and computing industries. In the
telecommunications field, voice processing systems are being designed to
integrate voice, fax and e-mail messages; similarly, within the computing
industry, unified messaging may be addressed by servers that provide the
client with access to voice, fax and e-mail messages. By focusing on signal
computing technologies, Dialogic seeks to have its products incorporated in
a wide variety of business computing applications that address one or more
voice, image and data processing functions. As PC platforms decline in
price and continue to be widely deployed, and as reliable, user-friendly
multi-tasking operating systems become more widely accepted, the Company
intends to provide its customers with products that support
multi-application uses and that benefit from this technological
convergence. This statement regarding the Company's intent constitutes a
Forward-Looking Statement. Actual results may differ from the Company's
intentions as a result of a number of factors, including the extent to
which the Company is able to respond to technological developments and
competitive responses. See "--Risk Factors".
o Initiate and Promote Uniform Standards. In 1993, Dialogic introduced a new
architecture initiative, known as Signal Computing System Architecture
("SCSA"). SCSA reflects the Company's commitment to the expansion of
existing call processing technology through open architectures. The goal of
SCSA is to develop and gain broad domestic and international acceptance for
a variety of computer telephony standards and technologies. The essential
elements of SCSA are the development of (i) software standards for use by
the computer telephony industry, (ii) buses with increased bandwidth and
capability to support high capacity platforms, (iii) a wide range of
products available from multiple vendors that enable systems developers to
integrate voice, image and data technologies in order to build unified
messaging solutions and (iv) technologies that will permit scaleability
from single node stand-along systems to multi-node distributed systems,
thereby allowing customers to expand from low to high capacity products
with relative ease. SCSA participants include computer suppliers, component
manufacturers, hardware suppliers, algorithm and technology developers,
call processing systems suppliers and leading telecommunications equipment
manufacturers. Substantially all of the major products in Dialogic's
current product line incorporate one or more aspects of SCSA. In 1995,
Dialogic joined Digital Equipment Corporation, Ericsson Business Networks,
Hewlett-Packard and Northern Telecom in forming the Enterprise Computer
Telephony Forum ("ECTF"). The principal goal of the ECTF is to oversee the
evolution of industry-wide standards implementation for computer telephony.
Dialogic has contributed to ECTF its Telephone Application Object (TAO)
software framework to assist in the development of a series of open
interfaces.
o Leverage Technological Expertise in Computer Telephony. Dialogic's core
technical competence is the development of computer telephony technologies
that are embedded in the Company's hardware, software and digital signal
processing algorithms. Dialogic believes that its future success depends
upon its ability to continually expand its technical capabilities and to
provide technically advanced components that are responsive to
technological advances and changes in industry standards. Accordingly, the
Company spends, and intends to continue to spend, substantial amounts on
research and development. Statements in this Annual Report regarding future
research and development spending constitute Forward Looking Statements.
See "--Risk Factors". Factors that could affect the level of research and
development spending include market conditions, the nature of customer
demand, competitors' product announcements, patent and/or license
availability and claims and regulatory requirements.
o Provide Customers with a Broad Range of Products. Dialogic enables its
systems developer customers to develop and offer a broad range of
applications by providing its customers with building blocks that are
designed to conform to widely accepted standards, much in the same way that
the standardization of PC platforms has resulted in an entire industry of
data processing software developers. The Company's modular approach also
enables systems developers and integrators to build progressively larger
systems with more application features without making significant changes
in the underlying technologies.
o Develop Collaborative Customer Relationships. Dialogic believes that it is
essential to maintain close communications with its customers in order to
understand their needs. Through contacts at both the field and management
levels, the Company reviews application design and hardware configuration
issues and application objectives with its customers. Dialogic seeks to
serve as a problem solver in helping to construct new and enhanced call
processing systems. The Company also seeks to educate systems developers
about the broad range of applications that may be provided through use of
the Company's computer telephony components, in part by conducting seminars
to train customers' engineers in the use and potential applications of
Dialogic modules.
o Expand International Presence. Dialogic believes that advances in voice,
image and data processing technologies, growing international acceptance of
the benefits available from these technologies and deregulation and
privatization of international telecommunications networks will drive
increased acceptance of computer telephony technology in international
markets. Thus, during February 1997, negotiators at the World Trade
Organization in Geneva signed a telecommunications pact designed to open
telephony markets to competition. However, no assurances can be given with
respect to the pace of deregulation and privatization, which may differ
significantly from country to country. In Central Europe, economic issues
(recessionary pressures) and regulatory issues (generally, a slowdown in
the deregulation of the telecom industry) appear to be impeding the
deployment of computer telephony projects. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations." The Company's
familiarity with international regulatory requirements has enabled it to
gain approvals for its products in several international markets, thus
providing its customers with the opportunity to reduce the time necessary
to market their products internationally.
o Complement Internal Growth with Strategic Acquisitions and Investments.
Prior to its acquisition of GammaLink in June 1994, Dialogic's growth had
occurred principally through internal development. However, as reflected by
the GammaLink, Spectron and Dianatel transactions and the Company's
acquisition of Digital Equipment Corporation's computer integrated
telephony server technology, Dialogic believes that opportunities exist to
extend and enhance its current lines of business and distribution
capabilities through investments in or acquisitions of businesses in the
computer telephony industry and related fields. Management intends to
analyze acquisition opportunities that become available to the Company and
to consider pursuing those opportunities that complement or supplement its
business strategies.
Dialogic's presentation above of its business strategies reflects the Company's
planning for the future and thus may constitute a Forward-Looking Statement. No
assurance can be given as to whether or as to the extent that the Company will
be successful in the pursuit of its business strategies. Factors which could
impact the Company's ability to pursue such strategies are set forth below under
"--Risk Factors".
Products
Dialogic's signal computing products are computer expansion boards
which typically fit in a PC chassis and operate under the control of an industry
standard PC operating system, such as Windows 95, Windows NT, UNIX, Netware,
OS/2 or DOS. With its emphasis on developing modular building blocks for
computer telephony systems, Dialogic offers products that operate over a
continuum in performance and density. Its traditional products enable developers
to create call processing systems with voice processing, facsimile, data, speech
recognition, and speech synthesis capabilities. Its high density products,
introduced during 1994 as the Company's first implementation of SCSA, provide
advanced switching and computer telephony features that enable Dialogic's
customers to extend their product offerings into call center and enhanced
services environments. Its VME platform products, consisting of high density
products based on the VME computer bus and form factor, are designed to support
existing call processing features with significant enhancements for telephone
central office use.
Dialogic's products typically include two elements - a network
interface and signal processing resources. Network interfaces connect a call
processing system to telephone and data networks. Signal processing resources
use digital signal processing techniques to perform useful computing functions,
such as digitalization and compression, on telephony and data signals. The
Company's product line includes network interfaces and signal processing
resources for voice processing, fax and data processing, speech recognition and
speech synthesis, as well as an open signal processing platform for a wide
variety of Dialogic and third party algorithms. The product line also includes
system software for developing applications.
Technologies Supported by Dialogic Products
Dialogic's platforms support a variety of technologies, which are
largely driven by the computer technology application software supplied by the
Company's customers and other third-parties. These technologies include:
o Voice. Voice technology involves processing and manipulating audio signals
in a computer telephony system. Voice technology functions include
filtering, analyzing, recording, digitizing, compressing, storing,
expanding and replaying such signals, as well as receiving, recognizing and
generating specific telephone and network tones.
o Network Interfaces. A call coming from the telephone network to a computer
telephony system can be carried on a variety of lines, from analog loop
start and DID (direct inward dial) to digital, T-1 and E-1 and primary rate
integrated services digital network (ISDN) lines. Dialogic manufactures and
sells platforms that are compatible with the various popular network
interfaces utilized throughout the world.
o Facsimile. Fax technology transmits a copy of paper-based documents and
images over telephone lines. In a PC-based system, fax technology can also
transmit and receive computer-generated files.
o Automatic Speech Recognition ("ASR"). ASR is an algorithm that recognizes
human speech. Speaker-independent ASR can recognize a limited group of
words and numbers from any caller. Speaker-dependent ASR can identify a
large vocabulary of commands from a specific speaker.
o Text-to-Speech ("TTS"). TTS is an algorithm that generates intelligible,
synthetic speech from text stored in computer files, designed to provide
access to information that would be too expensive or impractical to record
using voice technology.
o Switching and Conferencing. Switching and conferencing involve routing,
transferring and connecting voice signals to more than two parties.
Low and Medium Density Voice Processing Resources
Dialogic's platforms span a range of system densities. By developing
products in a modular approach that allows customers to expand the performance
capabilities of their systems in a scaleable manner, Dialogic seeks to enable
its customers to select a performance range that most suits their systems and
their target markets. Dialogic's basic low density voice processing platforms,
the D/21H and D/41H, provide voice processing and analog network interface
functions simultaneously on two or four independent telephone lines. These
products connect directly to the telephone lines, automatically answer inbound
calls, detect touchtones, play voice messages to a caller, digitize, compress
and record voice signals, make outbound calls, and automatically report the
results of outbound calls. The D/21H and D/41H provide standard features
required for most voice processing applications, including voice mail and voice
messaging, interactive voice response, audiotex, inbound and outbound
telemarketing, operator services, dictation, auto dialers, telecomputing
services, notification systems and on-line data entry and query.
During 1996, Dialogic introduced the DIALOG/4, a half size four port
voice processing platform designed for computer telephony installations that
cannot support full-size voice boards. This product provides four telephone line
interface circuits that connect directly to analog loop start lines. The
functions and applications are similar to the D/21H and D/41H and, like the
D/41H, is scaleable up to 64 ports. Dialogic also introduced its Proline/2V two
port voice processing board during 1996. Designed for small computer telephone
system development, multiple Proline/2V boards can be installed in a single PC
chassis for system expansion up to 32 ports.
The D/42-SX, D/42D-SL, D/42-NS and D/42-NE2 are voice processing
boards with network interface daughterboards which emulate proprietary PBX
station sets and provide connections to four PBX lines. These products connect
to the Mitel SX, Northern Telecom SL-1, Northern Telecom Norstar and NEC NEAX
switches, respectively. These products are used to provide special integration
features in a call processing application.
The Company's VR/40 is a daughterboard that mounts directly on the
D/41H platform. The VR/40 provides speaker-independent isolated word speech
recognition capabilities in six languages for up to four channels
simultaneously.
Dialogic's low and medium density voice processing resources typically
reflect a dual-processor architecture, consisting of a DSP and a general purpose
microprocessor. This imbedded architecture handles all telephony signaling and
performs touchtone and audio/voice signal processing tasks.
High Density Products
Voice Processing
Dialogic's D/160SC-LS, D/240SC-TI and D/300SC-E1 are 16, 24 and 30
port DSP - based voice boards with onboard analog, digital T-1 and digital E-1
telephone interfaces. Based upon SCSA standards, these platforms enable
developers to build high density systems by configuring multiple boards in a
single PC. Applications include voice messaging, interactive voice response,
voice/audio response, audiotex, operator services, telemarketing/call centers,
dictation, auto dialers, notification systems and on-line data entry and query.
The Company recently introduced its DualSpan series of digital voice
and network interface boards. These platforms provide two E-1 or T-1 lines of
service termination and call processing for up to 60 voice channels in a single
PC slot. The DualSpan boards are functionally equivalent to two single-span
boards, such as the D/300SC-E1, combined into one single-slot board.
Network Interfaces
The Company offers several high capacity network interfaces to connect
computer telephony applications to public and private telephone networks. These
network interfaces connect a telephone line and handle all of the network
signaling necessary between the call processing system and the telephone line.
Telephone lines vary in complexity, from a normal analog tip-and-ring line found
in most homes to an integrated services digital network (ISDN) line that can
carry more than two million digital bits per second. Dialogic's network
interface products include the following:
o The LSI/81SC and LSI/160SC are analog interface boards which provide loop
start telephone network connections for 8 and 16 lines, respectively. These
boards connect to other call processing boards over a digital bus and are
designed for SCSA-based computer telephony systems.
o The DTI/240SC, DTI/241SC, DTI/300SC, and DTI/301SC are digital interface
boards which provide T1/E1 network connections for 24 (T-1) and 30 (E-1)
lines. These boards, which connect to other call processing boards over a
digital bus, support Dialogic's SCbus and also provide access to worldwide
ISDN networks. Dual span configurations (the DTI/480SC and DT1/600SC)
permit similar connections for 48 (T-1) and 60 (E-1) lines.
o The MSI and MSI/240SC are station interface boards which provide
connections to telephones and headsets. These products are used to connect
agents to a call processing system for call center applications. The
MSI/240SC supports Dialogic's SCbus.
Antares
The Antares Open Platform is a general purpose signal processing
platform which connects to other call processing platforms over a digital bus.
This platform was designed to be compatible with SCSA standards and to
facilitate the integration of a wide variety of technologies from Dialogic and
third parties into a single call processing system. It runs Spectron's realtime
DSP operating system (SPOX), and is sold with a set of software development
tools. An Antares development kit consists of an Antares card, SPOX, DSP tools
and SCSA software.
Algorithm developers can use Antares' single standardized programming
interface to port their technologies to the Antares platform. The Antares
platform can be used in various stages of technology implementation, from
initial algorithm development and rapid prototyping through large-scale
deployment.
Each of the four DSPs on the Antares platform provides enough
processing power to support one or more types of technology. Therefore,
application developers can download algorithms supporting different technologies
to each of the DSPs, allowing the creation of a multifunctional platform that
can support, for example, both ASR and TTS. These technologies can be used to
support multiple applications on a single platform, or they may be used at
different times within a single application. Technologies that can be used to
develop applications on the Antares platform include ASR, TTS, call processing,
data communications and fax image processing.
Various third-parties have developed enhanced software for the Antares
platform. Speech recognition capability, provided by companies such as Voice
Control Systems, Lernout & Hauspie, PureSpeech, Telefonica, CSELT and France
Telecom/CNET, enables call processing applications to interpret words spoken by
a telephone caller. Enhanced capabilities include continuous speech recognition,
alphabet recognition and speaker verification. Text-to-speech software has been
developed for the Antares platform by Lernout & Hauspie, Centigram, Telefonica
and CSELT. These products convert ASCII text to synthesized speech, enabling
call processing applications to play back information files which are too large
or dynamic to be pre-recorded.
Open Buses
Many of the Company's products incorporate buses that embody
technology developed by Dialogic. Buses connect resource modules and network
interfaces to enable VARs and OEMs to expand their systems in a modular manner.
The Company's buses are utilized not only for connecting Dialogic components,
but also for connecting products made by third parties. The Dialogic bus
products utilized in high density systems are described below:
o PCM Expansion Bus. Dialogic's PCM Expansion Bus ("PEB") was developed for
systems with higher capacities than the systems which utilize Dialogic's
first generation analog expansion bus ("AEB"). The PEB, a time division
multiplexed bus, permits a sharing of resource modules over a larger number
of telephone lines, resulting in cost efficiencies as the number of
inter-connected telephone lines increases.
o SCbus. Dialogic's signal computing bus is a third generation system bus
that is implemented on a custom integrated circuit (the SC 2000), made
available to all SCSA developers and designed for systems that require
especially fast connections. The SCbus has compatibility modes for the PEB,
the Siemens PCM Highway, the Mitel STbus and other communications buses.
The SCbus provides up to 131 megabits per second, equivalent to 2,048
channels, for interconnecting sophisticated SCSA-based systems. While the
Company continues to support the AEB and PEB, its principal bus focal point
is on the switching capabilities of the SCbus. As a result, the Company is
seeking to expand the number and types of its products that are
SCbus-compatible.
VME Products
Dialogic has developed a family of high density platforms supplied in
the VME form factor. "VME" represents a global industrial standard for computer
chassis that allows easy front access for maintenance purposes. Dialogic's VME
products support standard features of the Company's product line and are
intended to furnish technology enhancements for advanced intelligent networks,
including higher port density for lower cost per port efficiency, SCbus
integration, non-PC telephony grade hardware, central office switching
capability and multiple operating system support.
Facsimile and Data Resources
Prior to its acquisition of GammaLink in June 1994, the Company's
facsimile products were designed primarily for voice-processing intensive
applications that require facsimile capability. The newest generation of these
products are the VFX/40SC, VFX/40ESC and VFX/40ESC-plus four-port fax boards.
These boards are four channel daughter-boards which connect to the D/41ESC to
provide integrated voice and fax processing in a single PC slot. By integrating
voice and fax processing, these products enable users to take advantage of a
variety of applications, including fax-on-demand, facsimile broadcasting and
facsimile messaging.
With its GammaLink acquisition in 1994, the Company expanded its
facsimile product line to include products that provide scaleable facsimile
density for facsimile-only applications or for applications with significant
facsimile volume, including LAN faxing, image servers, broadcast servers, host
servers and service bureaus. GammaLink's enterprise fax family of products are
utilized in small and medium-sized facsimile systems, fax gateways and LAN-based
facsimile servers. GammaLink's telco fax family of products are high performance
boards used in high volume fax broadcast, interactive voice/fax response and T-1
connections for fax. These telco products can be used in a resource-sharing
manner with Dialogic's voice processing products through the switching
capabilities of the Company's bus products.
CT-Connect
CT-Connect is a computer telephony call control server capable of
connecting a wide range of telephone switches to a variety of data processing
environments. CT-Connect is based on Digital Equipment Corporation's computer
integrated telephony ("CIT") technology acquired by Dialogic in February 1995.
The software runs under the Microsoft Windows NT operating system, either on
Intel architecture or with Digital Equipment Corporation's Alpha processors. It
is intended to be used by application developers, VARs and OEMs to construct
end-user computer-telephone solutions for call control purposes. Dialogic also
offers CIT consulting services through its Synapse Group.
System Software
Dialogic's board level products are supported by device drivers and
Application Programming Interfaces ("APIs") for the leading PC operating
systems, including Windows 95, Windows NT, MS-DOS, UNIX, OS/2 and Netware. The
device drivers and APIs enable an application to access the features of a board
through standard programming language function calls.
The Company's SCSA software module enables a call processing system to
function as a media server in a client-server environment. In February 1997, the
Company announced CT Media, an open standards-based client-server product for
computer telephony server design. CT Media is designed to streamline the
development process by handling the details of media resource control and
functions internal to the computer telephony server. Developers and integrators
are spared from managing these low-level functions from within their
applications, thereby enabling Dialogic's customers to focus on the requirements
of application development and integration.
Through its acquisition of Spectron, the Company provides system
software and development environments for DSPs and for multi-media processing on
the Pentium processor. Spectron has two primary products: (i) SPOX, a DSP
operating system that supports multiple vendors' DSPs and industry-standard
platforms; and (ii) IASPOX, an Intel architecture version of SPOX jointly
developed by Spectron and Intel.
Dialogic works with many third parties to provide software toolkits
which simplify application development. Toolkits are available in each of the
supported operating systems.
Research and Product Development
The Company believes that the timely enhancement of its existing
products and development of new products is critical to maintain its competitive
position. The Company's ongoing product development goals include the
enhancement (in terms of performance and cost efficiency) of current products,
the adaptation of third-party technologies to Dialogic's products and the
development of new product options and features. Dialogic's product development
teams work closely with customers in an effort to define necessary improvements
and enhancements and to analyze potential new products.
The Company has announced several research and development
initiatives, including the following:
DM3 Mediastream Resource Architecture. On January 27, 1997, Dialogic
announced the development of a new set of specifications and core firmware
modules that are intended to govern how the Company's next generation of
products will be designed. The core elements of this architecture are
general purpose embedded processors designed to manage multiple application
technologies from multiple vendors simultaneously. The technologies
contemplated include real time and message-based media processing for
firmware resources such as voice, fax, voice over the Internet, automatic
speech recognition, text-to-speech and real time network signaling. The DM3
architecture is intended to further expand the density of computer
telephony platforms, contemplating "quad span" boards with up to 96 ports
available for a variety of applications. Such boards are functionally
equivalent to four single-span boards combined into one single-slot board.
For the system developer, the availability of products meeting the
Company's DM3 goals are intended to allow the creation of bigger, faster
and more cost-efficient products and to allow the combination of functions
on a single board (as opposed to current configurations which require such
combinations to be placed on multiple boards).
No assurance can be given that the Company's DM3 architecture development
projects will result in market accepted products or profitable ventures.
Like any announcement in the computer telephony industry, Dialogic's DM3
initiative is subject to a variety of risks, including the length of time
required for Dialogic to bring products to market, competitive responses,
customer acceptance, development or manufacturing difficulties, the
availability of regulatory approvals, and general market conditions.
Internet Access. Dialogic is pursuing the development of technology
and components to enable the transmission of voice and fax messages over
the Internet.The Company is working with vendors of voice-over-the-Internet
software to develop hardware and software for Internet and "intranet"
servers. Such servers would combine Dialogic's board level components with
the vendor's software to enable standard telephones to send and receive
calls over the Internet. The Company also recently announced the
availability of a development kit to enable systems developers to create
fax applications for the Internet. The Company anticipates that there will
be substantial competition within its industry with respect to the
development of Internet telephony products. No assurance can be given that
Dialogic will be successful in competing against other companies (many of
whom have substantially greater resources than the Company) with respect to
Internet telephony products. Factors which may influence the success of
Dialogic's Internet telephony initiative include the rapid and
unpredictable changes in Internet technology and usage, regulatory
initiatives which may affect costs, chassis, interfaces and access
services, competitive responses, market acceptance of standards and market
conditions.
Dialogic's research and development staff included 349 persons as of
December 31, 1996. For the years ended December 31, 1994, 1995 and 1996,
research and development expenses amounted to $21.6 million, $29.0 million, and
$40.7 million, respectively, representing 17% of revenues in 1994 and 1995 and
19% of revenues in 1996.
International Business
Dialogic's international market opportunities are defined primarily by
the nature of the telephone networks in particular countries (which affect the
types of network interfaces that can be utilized) and a variety of regulatory
issues. These regulatory issues center around the homologation (or approval)
process and service offering regulations that affect the ability of the
Company's customers to sell their products in particular countries. In certain
countries, approvals can be granted at the component level. Such approvals are
not dependent upon the particular PC or application being utilized. Accordingly,
once such approvals are obtained, specific products can be utilized by customers
in the applicable country without further interaction with regulatory officials.
As of December 31, 1996 Dialogic had received approvals in more than 60
countries throughout the world. The Company believes that its success in
obtaining component, platform or system level approvals constitutes a
significant competitive advantage, in that it permits Dialogic's products to be
sold in the applicable countries while the products of competitors which have
not successfully completed the approval process cannot be sold in those
countries.
In each of 1994, 1995 and 1996, international sales (excluding exports
from North America) accounted for approximately 29% of the Company's revenues.
See Note 10 of the Notes to the Company's Consolidated Financial Statements
incorporated by reference herein. In certain European markets, primarily Central
Europe, economic issues (recessionary pressures) and regulatory issues
(generally, a slowdown in the deregulation of the telecom industry) appear to be
impeding the deployment of computer telephony products.
The Company conducts its international operations primarily through
foreign subsidiaries. These entities are managed by local managing directors who
are given substantial autonomy in order to assure that product offerings and
customer contacts are sensitive to the needs of local customers. Efforts are
made to match product capabilities offered in particular countries with local
product needs, networks and infrastructures.
International sales are subject to inherent risks, including changes
in regulatory and standards requirements, exchange rates, tariffs and other
barriers, difficulties in staffing and managing foreign subsidiary operations,
potentially adverse tax consequences and specialized inventory requirements
applicable to particular foreign countries. There can be no assurance that these
factors will not have an adverse impact on the Company's future international
sales or operating results. As the Company expands its international operations,
exposure to gains and losses on international currency transactions may
increase. Dialogic does not currently engage in international currency hedging
transactions. A substantial percentage (but not all) of the Company's
international sales have been billed and collected in U.S. dollars.
Sales, Marketing, Customers and Customer Support
Dialogic markets its products primarily to VARs, OEMs, systems
integrators, service providers and applications developers. In the United
States, Dialogic sells to these customers through its own sales force and
distributors, as well as through telemarketing and advertising efforts.
Internationally, the Company utilizes its own sales force and selected sales
representatives and agents. As of December 31, 1996, the Company had 152 direct
sales employees. Increased reliance has been placed on distributors, sales
representatives and sales agents in recent periods. Such reliance may subject
the Company to the uncertainties that affect the businesses of these independent
third-parties.
Dialogic's United States sales personnel are based in various field
sales offices, including offices in California, Georgia, Illinois,
Massachusetts, New Jersey, Texas and Washington. These offices are staffed with
individuals that have sales and/or customer support backgrounds. The Company's
international sales offices include locations in Argentina, Belgium, Brazil,
Canada, China, France, Italy, Israel, Ireland, Japan, Germany, Singapore and the
United Kingdom. These international offices also provide technical support to
the Company's international customer base and, in certain instances, perform
development activities.
The Company's marketing activities include participation in industry
trade shows and seminars, advertising in selected trade publications, public
relations activities with the trade and business press, publication of technical
articles and distribution of sales literature and product specifications. The
Company's Internet website, http://www.dialogic.com, has become an increasingly
important vehicle for Dialogic's marketing and customer support functions. As of
December 31, 1996, the Company's marketing group consisted of 88 employees.
The Company sold products to more than 3,000 customers during 1996. A
total of 50 of these customers represented approximately 47% of Dialogic's
revenues, and no customer accounted for 10% or more of revenues in 1996.
The Company believes that customer service and support have been a
significant factor in distinguishing the Company from other computer telephony
component manufacturers. Given the need to blend signal computing component
technology with applications software, it is important for Dialogic to maintain
close communication with its customers. This communication enables Dialogic to
educate existing and potential customers with respect to the functionality of
the Company's product line and new product offerings and enables Dialogic to
assess and understand the needs of its customers.
The Company's technical developments are communicated to customers by
its sales engineering group, its field applications engineering group, its
technical support group, its design group and its website. The Company also
furnishes its customers with documentation that provides performance and other
data regarding complex systems configurations and alerts customers to the market
opportunities available through utilization of Dialogic's products. Moreover,
Dialogic's processor-driven products typically are software upgradeable. Thus,
as developments in the technology for such products are introduced by the
Company, that new technology typically can be incorporated into an existing call
processing system by changing the software provided by Dialogic.
In addition to having its sales representatives personally meet with
larger customers in the field and having headquarters telemarketing
representatives contact other developers by telephone, the Company provides
engineering assistance to its customers and helps obtain any required
certifications from regulatory authorities. The Company also offers extensive
documentation describing its products and provides telephone support to assist
its customers in their support of end users.
Competition
The computer telephony industry is highly competitive. Moreover, the
Company believes that competition is likely to intensify in the future. Dialogic
believes that its principal competitors are (i) companies that specialize in
particular computer telephony functions, (ii) companies that provide a broad
range of computer telephony products and (iii) companies, many of which have
substantially greater resources than Dialogic, which have chosen to, or which
may choose to, produce computer telephony components in-house. Within the second
group, Dialogic's principal competitors include Brooktrout Technology, Natural
Microsystems and Rhetorex (a subsidiary of Octel). In the future, the Company
may also face competition from new market entrants, including those with
substantially greater resources and name recognition than Dialogic.
New and enhanced products can be expected from the Company's
competitors in the future. The competitive factors in the computer telephony
components industry include the time required to produce a market-ready product,
engineering expertise, product quality, reliability and performance, price,
brand name awareness, customer support and service and access to distribution
channels. The Company believes that it competes or may compete on the basis of
the breadth and quality of its product line, its customer service and support,
its technical capabilities, its name recognition and price.
In high-volume applications, GammaLink faces competition from
companies which offer multi-line products. In the LAN fax market, GammaLink
faces competition from manufacturers of fax cards and fax modems. Other
competitors have announced multi-channel fax cards combining voice and fax on
the same processor. Spectron faces competition from both major corporate
competitors and smaller companies and competes primarily on the basis of its
technological advances and customer support and services.
While the Company believes that its commitment to open computer
telephony architectures positions Dialogic as a "technology enabler" for the
computer telephony industry, this commitment may reduce the technical
constraints that otherwise would limit the entry of additional competitors to
the market and may commoditize Dialogic's market.
Proprietary Rights
The Company holds patents covering certain aspects of its technology
and has applied for additional patent protection. While Dialogic believes that
its technology provides it with certain competitive advantages, there can be no
assurance that the Company's competitors will not be able to develop similar
technology. Dialogic currently licenses certain technology from third parties
and plans to continue to do so in the future. This statement regarding future
licensing arrangements constitutes a Forward-Looking Statement. There can be no
assurance that in the future the Company will be able to obtain licenses of
intellectual property rights owned by third parties or that such licenses can be
obtained on terms favorable to the Company. If the Company is unable to obtain
licenses of protected technology, it could be prohibited from manufacturing and
marketing products incorporating that technology. Factors which could affect the
Company's ability to maintain such licensing arrangements in the future include
the strength of third-parties' patent protections, the willingness of such
third-parties to contract with Dialogic, the availability of competing products
and technologies, the cost of manufacturing alternative solutions and other
competitors' responses.
Dialogic has received from time to time, and may receive in the
future, communications from third parties asserting intellectual property rights
relating to certain of the Company's products and technologies. The Company
investigates each of these claims. To date, most of these claims have been based
on application-oriented patents that the Company would not directly infringe.
However, application-oriented patents may be used by the holder to restrict the
types of markets in which Dialogic or Dialogic's customers are able to compete.
Application-oriented patents may also be used to induce customers and potential
customers to purchase computer telephony components from competitors of the
Company that are affiliated with the holders of such patents.
The Company has received certain claims from holders of
application-oriented patents asserting that Dialogic, as opposed to customers
using the Company's components to build applications, may violate existing
patent rights. There can be no assurance that in the future, other similar
claims will not be made against Dialogic. Further, there can be no assurance
that the Company will be able to resolve such claims, either by convincing the
claimants that the Company's technology is non-infringing, obtaining a license
on terms favorable to the Company, redesigning its products or defending any
legal action taken against it. The costs that may be incurred by Dialogic in
pursuing any such response could have a material adverse effect upon Dialogic.
Should the Company or its customers be found to infringe the proprietary rights
of others, the Company could be required to pay substantial damages to the
infringed party, which in turn could have a material adverse effect upon
Dialogic. Furthermore, intellectual property claims are frequently accompanied
by claims of violations of applicable antitrust laws. Antitrust litigation is
often fact-intensive and thus can be extremely time-consuming and expensive.
From time to time, the Company considers steps to be taken with
respect to outstanding patents prior to any claim being made by the patent
holder against Dialogic or its customers. Such steps may include obtaining a
license or joining or sponsoring litigation to challenge the validity of an
outstanding patent. No assurances can be given that the commencement of any such
litigation will not result in counterclaims being made directly or indirectly
against the Company.
In the computer telephony industry, intellectual property claims by
third-parties can result in substantial expenditures of time, effort and money.
For information regarding legal proceedings involving Dialogic and Brooktrout
Technology, Inc., see "Legal Proceedings".
Manufacturing
The Company utilizes contract manufacturing for substantially all of
its manufacturing processes, thereby allowing Dialogic to focus resources on its
product development and customer support efforts. The Company has employed three
principal suppliers located in New Jersey and New York - Electronic Associates,
Inc., Ridge Associates and American Computer Assembly, Inc. - as well as small
contract suppliers in California. The activities of these suppliers are
coordinated by Dialogic's manufacturing personnel. The Company's internal
operations consist primarily of production of prototypes, test engineering,
materials purchasing and inspection, final product configuration and testing,
quality control and service repair. The Company is currently negotiating a
written agreement which, if consummated, would result in Dialogic's moving a
significant amount of its manufacturing to another contract manufacturer. No
assurances can be given as to whether or when such negotiations will result in
an agreement being signed by the parties.
At present, Dialogic does not have a long-term supply contact with any
of its manufacturing subcontractors or component suppliers. Certain key
components incorporated in the Company's products (including the DSPs used
throughout Dialogic's product lines) are supplied by only one source, and others
are available from limited sources. To date, Dialogic has been able to obtain
supplies of products and components in a timely manner, in part because
Dialogic's principal sole source products are acquired from well-established
vendors with long-standing relationships with Dialogic. However, in the event
that any of its sole source suppliers were to experience difficulties that
resulted in a reduction or interruption in supply to the Company or in the event
that any of Dialogic's contract manufacturers were unable to perform, Dialogic's
results of operations could be materially adversely affected (after available
inventory is used) until the Company establishes alternative sources. The
Company owns all of the engineering and sourcing documentation and functional
test equipment used in the manufacturing of its principal products and believes
that it could shift product assembly to alternate suppliers or in-house if it
experienced difficulties with its contract manufacturers. This statement
regarding the availability of alternate approaches to contract manufacturing may
constitute a Forward Looking Statement, which could be affected by several
factors, including the demands imposed upon, and the sophistication of,
alternate suppliers, the lead time available to such suppliers and market
acceptance of the products made by means of such alternate approaches.
Accordingly, actual results may differ materially from the Company's
expectations.
Risk Factors
This Annual Report contains, and Dialogic may make in the future,
certain Forward-Looking Statements. Such statements are subject to risks and
uncertainties that could cause actual results to differ materially from those
projected in such Forward-Looking Statements. Risks and uncertainties applicable
to Dialogic include the following:
Risks Relating to Technological Developments. The market for the
Company's products is characterized by rapid technological advances, changes in
customer requirements and frequent new product introductions and enhancements.
Dialogic's future success will depend upon its ability to (i) enhance its
current products, (ii) achieve the objectives of its DM3 Mediastream Resource
Architecture, (iii) develop and introduce new products that keep pace with rapid
technological developments and evolving industry and regulatory standards, (iv)
respond to changes in customer requirements and (v) achieve market acceptance.
In particular, the Company believes it must continue to respond to customers'
needs for broad functionality and multiple platform support. Any failure by the
Company to anticipate or respond adequately to technological developments and
customer requirements, or any significant delays in product development or
introduction, could have a material adverse effect on Dialogic's business,
operating results and financial condition. There can be no assurance that
Dialogic will be successful in developing and marketing new products or product
enhancements on a timely basis or that the Company will not experience
significant delays in the introduction of new products. In addition, there can
be no assurance that new products or product enhancements developed by the
Company will achieve market acceptance.
Competition. The computer telephony industry is highly competitive.
Moreover, the Company believes that competition is likely to intensify in the
future. For information regarding such competition, see "-- Competition". No
assurance can be given that the Company will be able to compete successfully in
the future or that price competition will not materially and adversely affect
the Company's consolidated results of operations and financial condition.
Fluctuations in Quarterly Operating Results. The Company's total
revenues may vary significantly from quarter to quarter due to a variety of
factors, including the timing of customer orders, changes in Dialogic's
products, geographic and customer mix, the introduction of new products by the
Company or its competitors, pricing pressures, regulatory developments,
unanticipated development and/or manufacturing difficulties or expenses, and
economic conditions. The Company typically operates with relatively little
backlog and substantially all of its revenues in each quarter ordinarily result
from orders received in that quarter. In addition, the Company often incurs
significant development, sales and marketing expenses in anticipation of future
revenues. If near-term demand for the Company's products weakens or if orders
are not shipped in any quarter as anticipated, Dialogic's results of operations
for that quarter could be materially and adversely affected. Any shortfall in
revenues or earnings from the levels anticipated by analysts could have a
substantial adverse impact on the market price of Dialogic's Common Stock. The
Company is likely not to learn of any such shortfalls until late in its fiscal
quarter.
Uncertainties Relating to Proprietary Matters. For information
regarding substantial risks relating to the availability of licenses to the
Company and relating to potential intellectual property and related claims by
third-parties, see "-- Proprietary Rights."
Dependence on Sales by Third Parties. The Company's revenues are
dependent upon the ability of its OEM and VAR customers to develop and sell
computer telephony systems that incorporate Dialogic's modular components.
Factors, including economic conditions, patent positions, regulatory
requirements and other marketing restrictions, that adversely affect the
revenues of Dialogic's OEM and VAR customers can have a substantial impact upon
the Company's financial results. No assurances can be given that Dialogic's OEM
and VAR customers will not experience financial or other difficulties that will
materially and adversely affect their purchases from Dialogic and, in turn, the
results of operations and financial condition of the Company.
Risks Associated with International Operations. International
operations are subject to certain risks, including changes in regulatory and
standards requirements, exchange rates, tariffs and other barriers, difficulties
in staffing and managing foreign subsidiary operations, potentially adverse tax
consequences and specialized inventory requirements applicable to particular
foreign countries. There can be no assurance that these factors will not have an
adverse impact on the Company's future international sales or operating results.
A substantial percentage (but not all) of the Company's international sales have
been billed and collected in U.S. dollars. As the Company continues to expand
its international operations, exposures to gains and losses on international
currency transactions may increase. Dialogic does not currently engage in
international currency hedging transactions.
Dependence on Third-Party Suppliers. The Company contracts with three
domestic companies for the manufacture of substantially all of its products.
Certain key components incorporated in the Company's products (including the
DSPs used throughout Dialogic's product lines) are supplied by only one source,
and others are available from limited sources. The Company does not have a
long-term agreement with any of these suppliers of services or components,
although it is currently negotiating a written agreement with a contract
manufacturer. See "-- Manufacturing". Although the Company has not experienced
any material difficulties in obtaining supplies in the past, any reduction or
interruption in supply from these third-party contractors could materially and
adversely affect Dialogic's results of operations until alternative sources are
established. Moreover, operating results could be materially and adversely
affected by the receipt of defective components or products, an increase in
prices from suppliers or the inability of Dialogic to obtain lower prices in
response to competitive price reductions.
Uncertainties Regarding Regulatory Matters. The Company seeks to
obtain regulatory approvals for its products as a means of enabling its
customers to bring their systems to market as rapidly as possible. Changes in
regulations or in interpretations of regulations or delays in deregulation may
substantially hamper end-users and Dialogic's customers and may cause such
customers to delay or cancel orders.
Dependence on Key Personnel. The Company depends substantially on key
personnel involved in engineering, research and development, marketing, sales,
finance and administration. The loss of the services of key persons in any
functional area could have a material adverse effect on Dialogic's current
operations and on new product development efforts. Dialogic's success depends
upon its ability to attract and retain skilled employees. Its success also
depends upon the ability of Dialogic's officers and key employees to manage
growth successfully and to continue successful development of product
enhancements and new products. There can be no assurance that the Company will
be able to hire or retain sufficient qualified staff to meet its goals. The
Company does not maintain key-person life insurance for any of its personnel.
Risks Associated with Potential Acquisitions. Since the date of its
initial public offering in 1994, Dialogic has acquired GammaLink, Spectron,
Dianatel and certain computer integrated telephony technology from Digital
Equipment Corporation. The Company's business strategy contemplates that
Dialogic will continue to seek to complement its internal growth with additional
acquisitions of and investments in businesses in the computer telephony industry
and related fields. Although management expects to carefully analyze any such
opportunity before committing the Company's resources, there can be no assurance
that such transactions will result in long-term benefits to Dialogic or that
Dialogic's management will be able to effectively manage the resulting
businesses.
Excess or Obsolete Inventory. Dialogic's customers typically expect
delivery of the Company's hardware and software products from stock. Because the
manufacturing lead-time for several of Dialogic's products can be significant,
the Company builds its products to meet forecasted demand. Although a portion of
customer demand is ascertainable from volume purchase arrangements, the
Company's forecasts also depend upon management's estimates of sales to existing
and potential customers. Several factors could affect the accuracy of such
estimates, including unanticipated changes in customer demand, new developments
in the computer telephony industry, unanticipated development delays and
competitive inroads into the Company's business. Should management's predictions
prove to be inaccurate, the Company could have excess or obsolete inventory.
Volatility of Stock Price. The market price of Dialogic's Common Stock
has fluctuated significantly since its initial public offering in April 1994.
Factors such as announcements of technological innovations or new products by
Dialogic, its competitors or other third parties, consolidations within the
computer telephone industry, quarterly variations in the Company's consolidated
results of operations, shortfalls in the Company's revenues, gross margins or
earnings from analysts' expectations, regulatory conditions, economic
conditions, capital market conditions and general industry conditions, may all
affect the market price of the Common Stock and cause it to fluctuate
significantly. In addition, in recent years, the stock market in general, as
well as the market prices of the stocks of many high technology companies in
particular, experienced wide fluctuations which have not necessarily been
related to the operating performance of individual companies. There can be no
assurance that the market price of the Company's Common Stock will not continue
to experience significant volatility.
Backlog
Because the Company's products are typically shipped within one month
of receipt of the order, the Company does not believe that its backlog as of any
particular date is indicative of future sales levels.
Employees
As of December 31, 1996, the Company had 905 full-time employees. The
Company's continued success will depend in part upon its ability to attract and
retain skilled employees. Dialogic has never had a work stoppage and no
employees are represented by a labor organization. The Company considers its
employee relations to be good.
Item 2. Properties
The Company's corporate headquarters are located in Parsippany, New
Jersey, in a leased facility. The lease expires in 2005, with options to renew
for two subsequent five-year terms. The lease presently covers approximately
192,000 square feet of space. Further, the Company has an option, exercisable
through 1999, to expand the lease space by an additional 20,000 square feet. The
Company also leases all of its other domestic and foreign offices. See Note 9 of
the Notes to the Company's Consolidated Financial Statements incorporated by
reference herein.
Item 3. Legal Proceedings
In June 1995, the Company entered into a settlement agreement that
resulted in the dismissal of various legal proceedings involving, among others,
the Company and Brooktrout Technology, Inc. ("Brooktrout"). In November 1995,
Brooktrout filed a complaint in the United States District Court for the
District of Massachusetts naming the Company, its GammaLink subsidiary and its
Chairman of the Board as defendants. The complaint sought to rescind the
settlement agreement and obtain unspecified compensatory and punitive damages on
the basis of allegations that the defendants fraudulently induced Brooktrout to
enter into the settlement agreement. The defendants deny the substantive
allegations of this complaint and have filed a counterclaim seeking damages from
Brooktrout. In December 1996, the District Court entered an order of summary
judgment against Brooktrout dismissing certain of its claims, but leaving
unresolved a statutory unfair practice claim by Brooktrout and leaving
unresolved all of the defendants' counterclaims. Such order remains appealable
at this time. Although outcomes of legal proceedings are difficult to predict
and cannot be assured, the Company does not believe that such proceedings will
materially adversely affect its consolidated financial condition, results of
operations or liquidity.
During the third quarter of 1996, a complaint was filed in New Jersey
Superior Court against the Company and certain of its directors alleging that
the defendants breached principles of common law fraud in connection with
certain public statements made prior to the Company's July 8, 1996 press release
announcing preliminary results for the quarter ended June 30, 1996. The
complaint seeks monetary damages on behalf of a purported class of purchasers of
the Company's Common Stock. Management is unable to predict a potential range of
monetary exposure, if any, to the Company, but believes that the substantive
claims asserted are without merit and that a material adverse effect on the
Company's consolidated financial condition, results of operations or liquidity
is less than probable. However, based on the extent of the decline in the market
price of the Company's Common Stock after such press release was published, an
unfavorable result could have a material adverse effect on the Company.
The Company is also engaged in other legal proceedings arising in the
ordinary course of business, the results of which proceedings are not expected
to have a material adverse effect on the Company's consolidated financial
condition, results of operations or liquidity.
Management intents to defend each of the above-mentioned legal
proceedings vigorously. The Company's statements in this Item 3 regarding the
potential effect of each of these legal proceedings constitute Forward-Looking
Statements. Actual results could differ materially from these statements,
depending upon uncertainties that exist in any litigation relating to
interpretations of legal issues and the development and presentation of factual
issues.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 4A. Executive Officers of the Registrant
The Company's executive officers, their respective ages (as of January
31, 1997) and their positions with the Company are set forth below:
Name Age Title
Nicholas Zwick 44 Chairman of the Board
Howard G. Bubb 42 President and Chief Executive Officer;
Director
John G. Alfieri 37 Vice President, Sales and Service, the
Americas
Kenneth J. Burkhardt, Jr. 51 Executive Vice President, New Business
Development; Director
Darrayl E. Cannon 49 Vice President, Operations
Edward B. Jordan 36 Vice President, Chief Financial Officer
and Treasurer
John E. Landau 43 Vice President and General Manager,
Dialogic Architecture Labs
Samuel T. Liss 38 Vice President, Corporate Marketing
Theodore M. Weitz 50 Vice President, General Counsel and
Secretary
Mr. Zwick, a co-founder of the Company, has been a Director of the
Company since Dialogic's inception in 1983, its President and Chief Executive
Officer from 1985 to May 1993 and its Chairman of the Board since March 1993.
Mr. Zwick was an Area Technical Manager and Field Applications Engineer for
Advanced Micro Devices (a semiconductor manufacturing company) from 1979 to
1985.
Mr. Bubb joined the Company as an Executive Vice President in July
1991. In August 1992, Mr. Bubb was promoted to Chief Operating Officer. In June
1993, he was promoted again to President and Chief Executive Officer. Prior to
joining the Company, Mr. Bubb was a consultant from February 1991 to July 1991
and Senior Vice President and General Manager of Lexar Business Systems, a
marketer of PBX products and an affiliate of Telenova, Inc., from December 1989
to January 1991. He served as Vice President of the telecommunications business
of Memorex Telex, N.V. from January 1986 to December 1989.
Mr. Alfieri was named Vice President, North American Sales and Service
in January 1993. He has been employed by the Company since 1988, first as the
Eastern Regional Manager and then (in 1990) as Manager of North American Sales.
Prior to joining Dialogic, Mr. Alfieri held various sales and marketing
positions within IBM from 1983 to 1988.
Dr. Burkhardt, a co-founder of the Company, served as the Executive
Vice President of Operations of the Company through October 1992, when he
assumed his current position as Executive Vice President of New Business
Development. He has been a Director of the Company since 1983. Dr. Burkhardt was
a Systems Architect for Unisys Corporation, a computer systems company, from
1981 to 1986.
Mr. Cannon was hired by Dialogic as its Vice President, Operations in
September 1995. Prior to joining the Company, he served as the Vice President,
Manufacturing and Quality Assurance, at McDATA Corporation (a supplier of data
communications products) from 1992 to 1995 and as Vice President, Engineering
and Manufacturing, at McDATA from 1990 to 1992. From 1983 to 1989, he served as
a director of a power systems division of the NCR Corporation. From 1969 to
1983, Mr. Cannon held various manufacturing positions with NCR and Magnavox.
Mr. Jordan joined the Company in 1987 as its controller and was named
Dialogic's Chief Financial Officer in October 1992, Treasurer in March 1993 and
Vice President in August 1993. Prior to joining the Company, he served in the
Audit Department of Touche Ross & Co. (now Deloitte & Touche) from 1982 to 1986.
Mr. Jordan is a Certified Public Accountant.
Mr. Landau was named Vice President and General Manager, Dialogic
Architecture Labs, in 1995. He served as Vice President, Marketing of the
Company from February 1993 until 1995. Mr. Landau was as an area sales manager
for Dialogic from May 1988 until February 1989. From February 1989 to 1990, he
was the Director of Marketing at Benchmarq Microelectronics (a semi-conductor
manufacturer) and from 1990 until he rejoined Dialogic in February 1993, Mr.
Landau was Vice President, Marketing at Benchmarq Microelectronics. From
November 1983 until May 1988, he held various marketing positions at Advanced
Micro Devices (a semiconductor manufacturer) and from June 1978 until November
1983, he held various operations and product marketing responsibilities at
Mostek Corporation (a semiconductor manufacturer).
Mr. Liss joined Dialogic in February 1995 and was named to his present
position in September, 1995. Prior to joining Dialogic, he served as the Manager
of Channel Marketing within the Advanced Services Division of Novell from 1994
to 1995, the Eastern Region Sales Manager and then Director of Business
Development of Fluent, Inc. (a multi-media software and hardware company which
ultimately was acquired by Novell) from 1990 to 1994, an associate with the
consulting firm of Booz, Allen & Hamilton from 1987 to 1990, a Product Line
Marketing Manager for Analog Devices, Inc. (a semiconductor manufacturer) from
1984 to 1987 and as a sales engineer for Intel Corporation (a semiconductor
manufacturer) from 1980 to 1982.
Mr. Weitz joined the Company in January 1997 as its General Counsel
and was named a Vice President and Secretary in February 1997. Prior to joining
the Company, he served in senior counsel positions for Lucent Technologies in
1996, for AT&T from 1993 to 1996, for UNIX System Laboratories from 1991 to 1993
and for various AT&T affiliates from 1978 to 1991.
The Company's executive officers serve at the pleasure of the Board,
subject to contractual provisions when and if applicable.
PART II
Item 5. Market for the Registrant's Common Equity and related Stockholder
Matters
The registrant incorporates by reference herein information set forth
in its Annual Report to Shareholders for the year ended December 31, 1996 that
is responsive to the information required with respect to this Item.
During 1996, the registrant issued a total of 55,424 shares of its
Common Stock pursuant to transactions that were not registered under the
Securities Act of 1933, as amended (the "Act"). All of such shares were issued
by the registrant in connection with its acquisition of Dianatel Corporation
("Dianatel") in June 1996. This acquisition was effected as a merger pursuant to
which Dianatel became a wholly-owned subsidiary of the registrant. The issuance
of such shares was exempt from registration under the Act pursuant to Section
4(2) of the Act as a transaction not involving a public offering of securities.
At the time of the acquisition, Dianatel had six shareholders. Such
shareholders' certificates have been legended, subject to the right of such
shareholders to resell those shares pursuant to a registration statement filed
by the registrant subsequent to the acquisition.
Item 6. Selected Financial Data
The registrant incorporates by reference herein information set forth
in its Annual Report to Shareholders for the year ended December 31, 1996 that
is responsive to the information required with respect to this Item.
Item 7. Management's Discussion and Analysis of Dialogic's Financial Condition
and Results of Operations
The registrant incorporates by reference herein information set forth
in its Annual Report to Shareholders for the year ended December 31, 1996 that
is responsive to the information required with respect to this Item.
Item 8. Financial Statements and Supplementary Data
The registrant incorporates by reference herein information set forth
in its Annual Report to Shareholders for the year ended December 31, 1996 that
is responsive to the information required with respect to this Item.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
PART III
Item 10. Directors of the Registrant
The registrant incorporates by reference herein information set forth
in its definitive proxy statement for its 1997 annual meeting of shareholders
that is responsive to the information required with respect to this Item.
Item 11. Executive Compensation
The registrant incorporates by reference herein information set forth
in its definitive proxy statement for its 1997 annual meeting of shareholders
that is responsive to the information required with respect to this Item.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The registrant incorporates by reference herein information set forth
in its definitive proxy statement for its 1997 annual meeting of shareholders
that is responsive to the information required with respect to this Item.
Item 13. Certain Relationships and Related Transactions
The registrant incorporates by reference herein information set forth
in its definitive proxy statement for its 1997 annual meeting of shareholders
that is responsive to the information required with respect to this Item.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) The following financial statements and related report are
incorporated by reference into Item 8 of this Annual Report on Form 10-K (page
references are to the Company's Annual Report to Shareholders for the year ended
December 31, 1996):
Page
Independent Auditors' Report............................................ 8
Consolidated Balance Sheets as of December 31, 1995 and
1996............................................................... 9
Consolidated Statements of Income for the Years Ended
December 31, 1994, 1995 and 1996...................................10
Consolidated Statements of Shareholders' Equity
for the Years Ended December 31, 1994, 1995 and 1996...............11
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1994, 1995 and 1996...................................12
Notes to Consolidated Financial Statements.............................13
(b) The following financial statement schedule is filed as part of
this Annual Report:
Schedule Description Page
Independent Auditors' Report S-1
II Valuation and Qualifying Accounts S-2
All other schedules have been omitted because they are not applicable
or the required information is included in the financial statements or notes
thereto.
(c) The following exhibits are incorporated by reference herein or
annexed to this Annual Report:
Exhibit Description
3.1 Restated Certificate of Incorporation is incorporated by reference
to Exhibit 3.1 to the Registrant's Registration Statement on Form
S-1 (No. 33-59598).
3.2 By-laws, as amended, are incorporated by reference to Exhibit
3.2 to the Registrant's Registration Statement on Form S-1
(No. 33-59598).
10.1 1986 Stock Option Program, and form of option agreement executed
by certain optionees under such Program, are incorporated by
reference to Exhibit 10.1 of the Registrant's Registration
Statement on Form S-1 (No. 33-59598).
10.2 1988 Incentive Compensation Plan, as amended and restated through
March 28, 1997 (the "1988 Plan").
10.3 Proposed amendments to the 1988 Plan approved by the Registrant's
Board of Directors and submitted for shareholder approval at the
1997 Annual Meeting of Shareholders.
10.4 1993 Non-Employee Director Stock Option Plan (the "1993 Plan")
is incorporated by reference to Exhibit 10.3 of the
Registrant's Registration Statement on Form S-1 (No. 33-59598).
10.5 Amended and Restated 1993 Plan approved by the Registrant's
Board of Directors and submitted for shareholder approval at the
1997 Annual Meeting of Shareholders
10.6 1997 Director Stock Election/Deferral Plan approved by the
Registrant's Board of Directors and submitted for shareholder
approval at the 1997 Annual Meeting of Shareholders
10.7 Employment Agreement between the Registrant and Howard G. Bubb,
as amended, is incorporated by reference to Exhibit 10.4
to the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1995.
10.8 Registrant's loan agreements, as amended, are incorporated by
reference to Exhibit 10.6 of the Registrant's Registration Statement
on Form S-1 (No. 33-59598).
10.9 Registrant's headquarters lease, dated August 31, 1993, as amended.
10.10 Registrant's Agreement and Plan of Merger with Spectron
Microsystems, Inc. is incorporated by reference to Exhibit 2 to
Registrant's Current Report on Form 8-K dated March 10, 1995.
10.11 1997 Incentive Benefit Plan approved by the Registrant's Board of
Directors and submitted for shareholder approval at the 1997 Annual
Meeting of Shareholders
11.1 Calculation of Income Per Share.
13.1 Incorporated portions of the Annual Report to Shareholders for the
year ended December 31, 1996.
21.1 Principal subsidiaries of the Registrant.
23.1 Independent Auditors' Consent.
24.1 Power of Attorney.
27.1 Financial Data Schedule.
(d) During the quarter ended December 31, 1996, the Company
did not file any Current Reports on Form 8-K.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, this 31st day of
March, 1997.
DIALOGIC CORPORATION
By:/s/ Edward B. Jordan
________________________________
Edward B. Jordan, Vice President
and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signatures Title Date
/s/Howard G. Bubb* President, Chief Executive March 31, 1997
_________________________ Officer and Director
Howard G. Bubb
/s/Nicholas Zwick*
__________________________ Director March 31, 1997
Nicholas Zwick
/s/Kenneth J. Burkhardt, Jr.* Director March 31, 1997
_____________________________
Kenneth J. Burkhardt, Jr.
/s/Edward B. Jordan Chief Financial Officer
______________________________ and Treasurer (Chief March 31, 1997
Edward D. Jordan Financial and Accounting
Officer)
/s/Masao Konomi* Director March 31, 1997
____________________________
Masao Konomi
/s/John N. Lemasters* Director March 31, 1997
____________________________
John N. Lemasters
/s/Francis G. Rodgers* Director March 31, 1997
____________________________
Francis G. Rodgers
/s/James J. Shinn* Director March 31, 1997
____________________________
James J. Shinn
*/s/Edward B. Jordan
____________________________
Edward B.Jordan,
Attorney-in-Fact
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
of Dialogic Corporation
Parsippany, New Jersey
We have audited the financial statements of Dialogic Corporation as of December
31, 1995 and 1996, and for each of the three years in the period ended December
31, 1996, and have issued our report thereon dated February 10, 1997; such
financial statements and report are included in your 1996 Annual Report to
Shareholders and are incorporated herein by reference. Our audits also included
the financial statement schedule of Dialogic Corporation, listed in Item 14.
This financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits. In
our opinion, such financial statement schedule, when considered in relation to
the basic financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
New York, New York
February 10, 1997
<TABLE>
<CAPTION>
SCHEDULE II - Valuation and Qualifying Accounts
(Dollars in thousands)
Column A Column B Column C Column D Column E
- ---------------------------------------------------------------------------------------------------------------------------------
Balance at Charged to Charged to
beginning of costs and other (1) Balance at
Description year expenses accounts Deductions end of year
----------- ------------ ----------- ---------- ----------- -----------
Allowance for Doubtful Accounts
<S> <C> <C> <C> <C> <C>
December 31, 1994...................... $ 608 358 1 418 549
December 31, 1995...................... 549 724 37 416 894
December 31, 1996...................... 894 724 57 846 829
</TABLE>
(1) Amounts include write-offs of accounts receivable deemed uncollectible.
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
10.2 1988 Incentive Compensation Plan, as amended
and restated through March 28, 1997 (the "1988
Plan").
10.3 Proposed amendments to the 1988 Plan approved
by the Registrant's Board of Directors and
submitted for shareholder approval at the 1997
Annual Meeting of Shareholders.
10.5 Amended and Restated 1993 Plan approved by
the Registrant's Board of Directors and submitted
for shareholder approval at the 1997 Annual
Meeting of Shareholders
10.6 1997 Director Stock Election/Deferral Plan
approved by the Registrant's Board of Directors
and submitted for shareholder approval at the
1997 Annual Meeting of Shareholders
10.9 Registrant's headquarters lease, dated August
31, 1993, as amended
10.11 1997 Incentive Benefit Plan approved by the
Registrant's Board of Directors and submitted for
shareholder approval at the at the 1997 Annual
Meeting of Shareholders
11.1 Calculation of Income Per Share
13.1 Incorporated portions of the Annual Report
to Shareholders for the Year ended December 31,
1996
21.1 Principal subsidiaries of the Registrant
23.1 Independent Auditors' Consent
24.1 Power of Attorney
27.1 Financial Data Schedule
EXHIBIT 10.2
1988 INCENTIVE COMPENSATION PLAN
OF
DIALOGIC CORPORATION
(as amended through March 28, 1997)
Section 1. Definitions.
As used in this Incentive Compensation Plan the following terms have
the meanings stated. The singular includes the plural, and the masculine gender
includes the feminine and neuter genders, and vice versa, as the context
requires. The word "person" includes any natural person and any corporation,
firm, partnership or other form of association.
"Award Date" means the date on which an Incentive is awarded as
specified by the Board.
"Board" means the Board of Directors of the Company.
"Cash Award" means a cash payment by the Company to a Participant as
additional compensation for that Participant's services to the Group.
"Code" means the Internal Revenue Code of 1986, as it may be amended
from time to time.
"Committee" means a committee of two or more members of the Board, to
which the Board has delegated the authority to administer the Plan under Section
3.
"Common Stock" means the Common Stock, no par value, of the Company.
"Company" means Dialogic Corporation.
"Director" means a member of the Board.
"Disability" means a permanent and total disability as defined in
Section 22 of the Code.
"Disinterested Person" means a person who has not been granted or
awarded Incentives under the Plan nor any substantially similar incentives under
any other plan of the Company or any member of the Group for at least one year
before serving on the Committee, except that participation in a formula plan
meeting the conditions set forth in Securities and Exchange Commission Rule
16b-3(c)(2)(ii) shall not disqualify a Director from being a Disinterested
Person.
"Election" has the meaning stated in Section 13.08(a).
"Exercise Date" means the date on which the Company receives a notice
of the exercise of an Incentive, which notice meets the requirements of this
Plan.
"Fair Market Value" has the meaning stated in Section 13.12.
"Group" means the Company, each parent corporation to the Company, and
each of the Company's subsidiaries, as these terms are defined in Sections
424(e) and 424(f) of the Code.
"In Tandem" means that two Incentives are related to each other such
that, the number of shares subject to the first Incentive is reduced by the
number of shares for which the second Incentive is exercised, and the number of
shares subject to the second Incentive is reduced by the number of shares for
which the first Incentive is exercised.
"Incentive Stock Option" means a stock option intended to qualify as
an incentive stock option under Section 422 of the Code.
"Incentives" mean the economic incentives listed in Section 5 that may
be awarded under this Plan.
"Non-Statutory Stock Option" means any Stock Option other than an
Incentive Stock Option.
"Participant" means an employee or director of any member of the Group
to whom an Incentive has been awarded.
"Performance Stock Right" means a contingent right to receive Shares
upon the achievement of certain performance objectives.
"Plan" means this 1988 Incentive Compensation Plan of the Company.
"Qualified Person" means a Participant's legal guardian or legal
representative or a deceased Participant's heir or legatee who has a legal right
to or in respect of an Incentive of that Participant.
"Restricted Stock Award" means the award of Shares by the Company to
the Participant at a price that may be below Fair Market Value, or without
payment to the Company, but these Shares are subject to restrictions on sale and
other transfer and are subject to forfeiture.
"Retirement" means (i) the voluntary termination of employment by a
Participant who is 59-1/2 years old or older unless, prior to such termination,
such Participant advises the Company that he intends to be employed on a
full-time basis by an employer that is not a member of the Group or (ii) the
voluntary termination of employment by any Participant if the Board determines,
prior to such termination, that such termination shall be deemed to be a
"Retirement" for purposes of the Plan.
"SAR" means a stock appreciation right relating to the Common Stock
and is a right to receive Shares, cash or a combination thereof without payment
to the Company.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
as it may be amended from time to time.
"Share" means a share of Common Stock.
"Stock Award" means the award of Shares by the Company to a
Participant as additional compensation and without payment to the Company.
"Stock Option" means an Incentive Stock Option or a Non-Statutory
Stock Option.
"Tax Date" has the meaning stated in Section 13.08(a).
"Unit of Phantom Stock" means a right to receive, without payment to
the Company, cash, dividends or a combination thereof.
Section 2. Purpose.
The purpose of this Plan is to advance the interests of the Group by
furnishing Incentives designed to attract, retain and motivate employees.
Incentives may consist of opportunities to acquire Shares or cash or both, as
provided by this Plan.
Section 3. Administration.
3.01. Administrative body. Subject to Section 3.02, the Plan shall be
administered by the Board or the Committee. The Board may in its sole
discretion, but subject to Section 3.02, delegate the authority to administer
the Plan to the Committee. If the Committee has been delegated the authority to
administer the Plan, all references to the Board in this Plan (except in this
Section 3.01, Section 3.02, Section 13.07 and Section 13.11) shall mean and
refer to the Committee.
3.02. Public company. If any member of the Group has any stock
registered under Section 12 of the Securities Exchange Act, this Section 3.02
shall apply. Unless all of the members of the Board are Disinterested Persons,
the Board shall delegate the authority to administer the Plan to a Committee of
two or more Directors each of whom is a Disinterested Person.
3.03. Authority. Subject to applicable law and the terms of the Plan,
the Board shall have plenary authority to (a) award Incentives under the Plan,
(b) set the terms, conditions and restrictions of the Incentives, their exercise
and all related rights, (c) accelerate the date on which a previously granted
Incentive may be exercised, (d) prescribe the form of agreements awarding and
governing the Incentives, (e) interpret the Plan, (f) establish any rules or
regulations relating to the Plan and (g) make all other determinations for the
proper administration of the Plan. Terms, conditions and restrictions of
Incentives may vary from Participant to Participant and from award to award. The
Board's decisions on matters relating to the Plan shall be final and conclusive
on the Group and the Participants and their respective successors, assigns,
transferees, heirs and representatives.
Section 4. Eligibility.
4.01. Designation of employees. All employees of any member of the
Group, including officers and directors who are employees, are eligible to
receive Incentives under the Plan. Directors and officers who are not employees
of any member of the Group may not receive Incentives under the Plan.
4.02. Participants. The Board may consider any factor in selecting
Participants and in determining the type and amount of their Incentives,
including, but not limited to, (a) the current or anticipated financial
condition of the Group, (b) the contributions by the Participant to the Group
and (c) the other compensation provided to the Participant. The Board's award of
an Incentive to a person in any year shall not require the Board to award any
Incentive to that person in any other year.
Section 5. Types of Incentive.
Incentives may be granted in any one or any combination of the
following forms: (a) Non-Statutory Stock Options (Section 7); (b) Incentive
Stock Options (Section 7); (c) SARs (Section 8); (d) Units of Phantom Stock
(Section 9); (e) Stock Awards (Section 10); (f) Restricted Stock Awards (Section
10); (g) Performance Stock Rights (Section 11); and (h) Cash Awards (Section
12).
Section 6. Shares Subject to the Plan.
6.01. Number of Shares. Subject to Section 13.07, the aggregate number
of Shares which may be issued under the Plan shall not exceed 3,025,000 Shares.
For purposes of this Section 6.01, each Unit of Phantom Stock shall constitute a
single Share. Notwithstanding any provision of this Plan to the contrary, the
aggregate consideration (including cash and property) paid to the Company upon
the purchase of all Shares on which "Pre-Public Incentives" are issued shall not
(unless and until the shares issuable pursuant to this Plan are registered with
the Securities and Exchange Commission) exceed $5,000,000 or such lesser amount
from time to time permitted under Rule 701 of the Securities and Exchange
Commission or any successor rule. For purposes of this Section 6.01, the term
"Pre-Public Incentives" means Incentives issued prior to the first date on which
the Company becomes subject to the reporting requirements of Section 13 or 15(d)
of the Securities Exchange Act.
6.02. Expiration and cancellation. If an Incentive granted under the
Plan expires, is terminated or is otherwise cancelled before exercise, that
Incentive and the related shares of Common Stock, SARs or phantom stock shall
not apply toward the limits provided in Section 6.01. If Shares, SARs or Units
of Phantom Stock issued or awarded under this Plan are forfeited, cancelled,
terminated or reacquired by the Company, those forfeited, cancelled, terminated
or reacquired Shares, SARs, and Units of Phantom Stock shall not apply toward
the limits provided in Section 6.01 and shall be available again for the grant
of Incentives.
6.03. Maintenance of stock. Shares issued under the Plan shall be
authorized and unissued shares or shares of treasury stock. The Company shall
always maintain the number of such Shares at least equal to a number of Shares
for which Incentives have been granted and remain outstanding and unexercised.
Section 7. Stock Options.
Each Stock Option granted under this Plan shall be subject to the
following terms and conditions:
7.01. Price. The option price per share shall be determined by the
Board; provided, however, that the option price shall not be less than 75% of
the Fair Market Value on the Award Date of the Common Stock subject to the
option.
7.02. Number. The number of Shares subject to the Stock Option shall
be determined by the Board.
7.03. Duration and time for exercise. The Award Date of a Stock Option
shall be the date specified by the Board, provided that that date shall not be
before the date on which the Stock Option is actually awarded. The term of each
Stock Option shall be determined by the Board but shall not exceed 10 years from
the date of grant. Each Stock Option shall become exercisable at such time or
times and in such amount or amounts during its term as shall be determined by
the Board at the time of grant. If Section 3.02 then applies, no Stock Option
may be exercised during the first six months of its term. The Board may
accelerate the exercisability of any Stock Option. Unless otherwise specified by
the Board, once a Stock Option becomes exercisable, whether in full or in part,
it shall remain so exercisable until its expiration, forfeiture, termination or
cancellation.
7.03A Limitation. Any Stock Option granted subsequent to February 27,
1997 at an exercise price that is less than 100% of the Fair Market Value on the
Award Date of the Common Stock subject to the Stock Option shall not vest sooner
than three years from the Award Date (and shall not have its vesting accelerated
to a date that is less than three years from the Award Date unless acceleration
occurs pursuant to Section 14 hereof) unless such vesting arises as a result of
the optionee's satisfying performance criteria approved by the Board.
7.04. Exercise. A Stock Option may be exercised, in whole or in part,
by giving written notice to the Company (Attention: Chief Financial Officer) at
its principal office or to such transfer agent as the Company may designate. The
notice shall identify the Incentive being exercised and shall contain such other
information and terms as the Board may require. The notice shall be accompanied
by full payment of the purchase price for the Shares (a) in United States
dollars in cash or by check, (b) at the discretion of the Board, by delivery of
previously acquired Shares having a Fair Market Value equal on the date of
exercise to the cash exercise price of the Stock Option, or (c) at the
discretion of the Board, by a combination of (a) and (b) above. As soon as
practicable after receipt of the written notice, the Company shall deliver to
the person exercising the Stock Option the one or more certificates for the
Shares.
7.05. Incentive Stock Options. Notwithstanding anything in this Plan
to the contrary, the following additional provisions shall apply to the grant of
Incentive Stock Options:
(a) The aggregate Fair Market Value on the Award Date of the Shares
with respect to which Incentive Stock Options are exercisable for the first time
by any Participant during any calendar year (under all plans of the Group) shall
not exceed $100,000;
(b) All Incentive Stock Options must be granted within 10 years from
the date on which the Plan was adopted by the Board;
(c) Unless exercised sooner, each Incentive Stock Option shall expire
no later than 10 years after the Award Date for that Incentive Stock Option;
(d) The option price for each Incentive Stock Option shall be not less
than 100% of the Fair Market Value of the Shares subject to the option on the
Award Date of that Incentive Stock Option;
(e) No Incentive Stock Option shall be granted to any Participant who,
at the time that option is granted, owns (within the meaning of Section 422 of
the Code) stock having more than 10% of the total combined voting power of all
classes of stock of the Company or any member of the Group, unless the option
price is equal to at least 110% of the Fair Market Value of the Shares subject
to the option on the Award Date and the option is not exercisable later than
five years from the Award Date;
(f) Incentive Stock Options may be issued alone or with other
Incentives (including Non-Statutory Stock Options) but may not be issued In
Tandem with Non-Statutory Stock Options; and
(g) Each Incentive Stock Option agreement referred to in Section 13.05
shall contain or be deemed to contain all provisions required in order to
qualify those Stock Options as incentive stock options under Section 422 of the
Code, and the provisions of this Plan shall be interpreted and construed to
effect such treatment under that Section.
Section 8. Stock Appreciation Rights.
An SAR may be granted (i) together with any Stock Option granted under
this Plan in which case it shall be exercisable with and in addition to that
Stock Option, (ii) In Tandem with any Stock Option granted under this Plan
(except with respect to an Incentive Stock Option if the grant of the SAR would
cause the Incentive Stock Option not to qualify as such under Section 422 of the
Code) or (iii) alone, without reference to any Stock Option. Each SAR granted
under this Plan shall be subject to the following terms and conditions:
8.01. Number. Each SAR shall relate to the number of Shares as may be
determined by the Board.
8.02. Duration. The term of each SAR shall be determined by the Board
but shall not exceed 10 years from the Award Date of the SAR. If Section 3.02
then applies, no SAR may be exercised during the first six months of its term.
Except as provided in the preceding sentence, the Board may accelerate the
exercisability of any SAR.
8.03. Exercise. An SAR may be exercised, in whole or in part, by
giving written notice to the Company (Attention: Chief Financial Officer) at its
principal office or to such transfer agent as the Company shall designate. The
notice shall identify the Incentive being exercised and shall contain such other
information and terms as the Board may require. As soon as practicable after
receipt of the written notice, the Company shall deliver to the person
exercising the SAR certificates for the Shares, cash or a combination thereof to
which that person is entitled under Section 8.04.
8.04. Payment. When the Board awards an SAR, it shall specify whether
the SAR is exercisable (a) for cash only, (b) for Shares only, (c) for any
combination thereof as specified by the person exercising the SAR at the time of
the exercise of the SAR or (d) for any combination thereof as specified by the
Board at the time of the exercise of the SAR.
(a) If an SAR is exercisable for Shares, the number of Shares issuable
upon the exercise of the SAR shall be determined by dividing:
(i) the number of Shares for which the SAR is exercised
multiplied by the amount of the appreciation per Share (for this purpose
the "appreciation per Share" shall be the amount by which the Fair Market
Value of a Share on the Exercise Date exceeds (A) in the case of an SAR
granted In Tandem with a Stock Option, the option price or (B) in the case
of an SAR granted alone without reference to a Stock Option, the Fair
Market Value of a Share on the Award Date of the SAR); by
(ii) the Fair Market Value of a Share on the Exercise Date.
(b) If an SAR is exercisable for cash, the amount of cash payable upon
exercise shall be equal to the Fair Market Value on the Exercise Date of any or
all of the Shares that would be issuable if the SAR were exercised for Shares.
(c) No fractional Shares shall be issued upon the exercise of an SAR.
Instead, the holder of the SAR shall receive a cash payment equal to the Fair
Market Value of the fractional share. Notwithstanding the foregoing, the Board
may decide to pay cash to Participants covered by Section 16 of the Securities
Exchange Act only if the Company, the Board and the Participant comply with all
applicable provisions of that Section 16 and the related regulations.
Section 9. Phantom Stock.
Each Unit of Phantom Stock granted under this Plan shall be subject to
the following terms and conditions:
9.01. Number. Each Unit of Phantom Stock shall relate to one Share.
9.02. Duration. The term of each Unit of Phantom Stock shall be
determined by the Board but shall not exceed 10 years from the Award Date for
that Unit of Phantom Stock. If Section 3.02 then applies, no Unit of Phantom
Stock may be exercised during the first six months of its term. Except as
provided in the preceding sentence, the Board my accelerate the exercisability
of any Unit of Phantom Stock.
9.03. Exercise. A Unit of Phantom Stock may be exercised, in whole or
in part, by giving written notice to the Company (Attention: Chief Financial
Officer) at its principal office or to such transfer agent as the Company shall
designate. The notice shall identify the Incentive being exercised and shall
contain such other information and terms as the Board shall require. As soon as
practicable after receipt of the written notice, the Company shall deliver to
the person exercising the Unit of Phantom Stock the amount of cash to which that
person is entitled under Section 9.04.
9.04. Payment.
(a) When the Board awards a Unit of Phantom Stock, it shall specify
whether that unit is entitled to the dividends that would accrue to a single
Share. If any Unit of Phantom Stock is so entitled, dividends shall be paid on
the unit as if the unit were a Share.
(b) The amount of cash payable upon exercise of a Unit of Phantom
Stock shall be the excess of Fair Market Value of one Share on the Exercise Date
over the Fair Market Value of one Share on the Award Date.
Section 10. Stock Awards and Restricted Stock.
Stock Awards and Restricted Stock Awards shall be subject to the
following terms and conditions:
10.01. Number of Shares. The number of Shares to be issued by the
Company to a Participant under a Stock Award or a Restricted Stock Award shall
be determined by the Board; provided, however, that no more than 100,000 Shares
may be issued under all Stock Awards and Restricted Stock Awards granted
pursuant to the Plan subsequent to February 27, 1997. 10.02. Sale price. The
Board shall determine the prices, if any, at which Shares issued under a
Restricted Stock Award shall be sold to a Participant, which prices may vary
from time to time and among Participants and which may be below the Fair Market
Value of Shares at the date of sale. The Shares of restricted stock awarded at a
price must be paid for (a) in United States Dollars in cash or by check, (b) at
the discretion of the Board, by delivery of Shares having a Fair Market Value
equal on the purchase date to the purchase price or (c) at the discretion of the
Board, by a combination of (a) and (b) above.
10.03. Duration. Shares of restricted stock that are to be sold to the
Participant must be fully paid for by the Participant within the time specified
by the Board. If payment is not timely made, the Incentive shall lapse and
terminate.
10.04. Delivery. As soon as practicable after granting a Stock Award,
the Company shall deliver to the Participant one or more certificates for the
Shares awarded. As soon as practicable after granting a Restricted Stock Award
and, if the restricted stock is to be sold to the Participant, after payment of
the full purchase price, the Company shall deliver one or more certificates for
the Shares as provided in Section 10.06.
10.05. Restrictions. All Shares issued under a Restricted Stock Award
shall be subject to such restrictions as the Board may determine, including, but
not limited to, any or all of the following:
(a) a prohibition against the sale, transfer, pledge, encumbrance or
other disposition of the Shares. Such a prohibition shall lapse at the time or
times that the Board may determine (whether in annual or more frequent
installments, at the time of the death, disability or retirement of the
Participant, or otherwise); and
(b) a requirement that the Participant forfeit (or in the case of
Shares sold to a Participant, resell to the Company at the same price at which
the Participant purchased the Shares) all or any part of those Shares if the
Participant's employment is terminated during any period in which those Shares
are subject to restrictions.
10.05A Limitation. Notwithstanding the foregoing, all Shares issuable
pursuant to a Restricted Stock Award shall be subject to at least one of the
following conditions:
(a) the Participant shall be required to forfeit the Shares if the
Participant ceases to be employed by a member of the Group within three years
after the date of grant; or
(b) the Participant shall be required to forfeit the Shares if the
Participant fails to satisfy performance criteria approved by the Board.
10.06. Escrow. Shares issued under a Restricted Stock Award shall be
registered in the name of the Participant and deposited, together with a stock
power endorsed in blank, in escrow with the Company. Each certificate for those
Shares shall bear a legend in substantially the following form:
The transfer of this certificate and the shares of Common Stock represented
by it is subject to the terms and conditions (including conditions of
forfeiture) contained in the 1988 Incentive Compensation Plan of Dialogic
Corporation (the "Company") and an agreement entered into between the
registered owner and the Company. Copies of the Plan and agreement are on
file in the office of the Secretary of the Company.
10.07. End of restrictions. After the restrictions have expired,
certificates evidencing the Shares shall be delivered to the Participant free of
the legend. The Shares, however, shall remain subject to all other restrictions
stated in this Plan or in the agreement providing for that Incentive.
10.08. Stockholder. Subject to the terms and conditions of the Plan
and any other restrictions determined by the Board and set forth in the
agreement for the Restricted Stock Award, each Participant who receives Shares
under a Restricted Stock Award shall have all of the rights of a stockholder
during any period in which the Shares are subject to restrictions, including,
but not limited to, the right to vote the Shares. Dividends on the Shares paid
in cash or property shall be paid to the Participant. Dividends payable in
Shares or other stock, however, shall be paid in restricted Shares subject to
all provisions of this Section 10.
Section 11. Performance Stock Rights.
The award of Performance Stock Rights shall be subject to such terms
and conditions as the Board considers appropriate. Each award of a Performance
Stock Right shall include the performance objectives to be achieved by the Group
or the Participant. The number of Shares to be issued by the Company to a
Participant under a Performance Stock Right shall be determined by the Board;
provided, however, that no more than 100,000 Shares may be issued under all
Performance Stock Rights granted pursuant to the Plan subsequent to February 27,
1997. If the performance objectives are achieved, the Participant shall be
issued a number of Shares equal to the number of Performance Stock Rights
granted to that Participant. In the event that the performance objectives for a
particular Performance Stock Right relate solely to continued employment, three
years from the date of grant of such Right shall be the minimum period of
continued employment required in order to satisfy such performance objectives.
Section 12. Cash Awards.
The amount of any Cash Award shall be determined by the Board. Cash
Awards shall be subject to other terms and conditions as the Board may
determine.
Section 13. General.
13.01. Effective date. This Plan was adopted by the Board on December
5, 1988.
13.02. Duration. Unless the Plan is terminated earlier, the Plan shall
terminate 10 years from the date on which the Plan is adopted by the Board. No
Incentive or other rights under the Plan shall be granted thereafter. The Board,
without further approval of the Company's stockholders, may at any time before
that date terminate the Plan. After termination of the Plan, no further
Incentives may be granted under the Plan. Incentives granted before any
termination shall continue to be exercisable in accordance with the terms of the
Incentive.
13.03. Non-transferability of Incentives; exercise by Participant. No
Incentive (except Cash Awards) may be sold, pledged, assigned, encumbered,
disposed of or otherwise transferred other than by will or the laws of descent
and distribution. The Company shall not be required to recognize any attempted
disposition by any Participant or Qualified Person. During a Participant's
lifetime, such Participant's Incentives are only exercisable by such
Participant.
13.04. Effects of termination of employment or death. Each agreement
providing for an Incentive shall include such provisions as the Board may
determine for the exercise and termination of the Incentive, the rights
thereunder, the forfeiture thereof and the rights of the Company to repurchase
or convert into non-voting or other Shares the Shares acquired thereunder in
each case if the Participant ceases to be an employee of the Company or any
member of the Group for any reason; provided, however, that notwithstanding any
provision to the contrary herein or in any Incentive Agreement, the provisions
of Section 13.04A shall govern in the event that the employment of a holder of a
Stock Option terminates as a result of death, Disability or Retirement or in the
event that the employment of a holder of a Stock Option is terminated for
reasons other than death, Disability or Retirement that do not constitute
"cause" (any determination of cause to be made by the Committee). An employee's
employment shall be deemed to have terminated when the Company gives the
employee notice of termination or receives a notice of termination from the
employee, irrespective of the subsequent payment of salary, wages or severance
or other benefits. The Board's determination as to whether leave of absence
(whether or not by approval of the Company or by reason of military or
governmental service) constitutes termination of employment for purposes of the
Plan shall be binding and conclusive.
13.04A Termination of Employment as a Result of Death, Disability or
Retirement. Notwithstanding any provision to the contrary herein or in any
Incentive Agreement, the following provisions shall apply with respect to Stock
Options held by a Participant at the termination of such Participant's
employment with members of the Group in the event that such Participant's
employment terminates as a result of death, Disability or Retirement or in the
event that such Participant's employment is terminated for reasons other than
death, Disability or Retirement that do not constitute "cause" (any
determination of "cause" to be made be the Committee):
(a) If such employment terminates as a result of death, the
Participant's estate shall have the right to exercise the
Participant's Stock Options for a period ending on the
earlier of the expiration dates of such Stock Options or one
year from the date of termination of employment, provided
that such Stock Options shall be exercisable by such
estate only to the extent exercisable on the date of
termination of employment.
(b) If such employment terminates as a result of Disability, the
Participant shall have the right to exercise his Stock
Options for a period ending on the earlier of the expiration
dates of such Stock Options or one year from the date that
the Participant is notified that he will not longer be
employed by any members of the Group (the "Notification
Date"), provided that such Stock Options shall be
exercisable by the Participant after termination of
employment only to the extent exercisable on the
Notification Date.
(c) If such employment terminates as a result of Retirement, the
Participant shall have the right to exercise his Stock
Options for a period ending on the earlier of the expiration
dates of such Stock Options or one year from the date of
termination of employment, provided that such Stock Options
shall be exercisable by the Participant after Retirement
only to the extent exercisable on the date of termination of
employment.
(d) If such employment terminates for reasons that do not
constitute death, Disability, Retirement or "cause", the
Participant shall have the right to exercise his Stock
Options for a period ending on the earlier of the expiration
dates of such Stock Options or ninety days from the date of
termination of employment, provided that such Stock Options
shall be exercisable by the Participant after termination of
employment only to the extent exercisable on the date of
termination of employment.
13.05. Incentive agreements. Except in the case of Cash Awards, the
terms of each Incentive shall be stated in an agreement between the Company and
the Participant in a form approved by the Board. The Participant must execute
and deliver the agreement to the Company as a condition to the effectiveness of
the Incentive. The Board may also determine to enter into agreements with
holders of options (a) to reclassify or convert certain outstanding options,
within the terms of the Plan, as Incentive Stock Options or as Non-Statutory
Stock Options or (b) to eliminate SARs for all or part of such options and any
other previously issued options. All such agreements may contain all terms and
conditions as the Board considers advisable that are not inconsistent with the
Plan, including, but not limited to, transfer restrictions, rights of first
refusal, forfeiture provisions, representations and warranties of the
Participant and provisions to ensure compliance with all applicable laws,
regulations and rules and provided in Section 13.06.
13.06. Compliance with law. The Company may determine, in its sole
discretion, that it is necessary or desirable to list, register or qualify (or
to update any listing, registration or qualification of) any Incentive or the
Shares issuable or issued under any Incentive or this Plan on any securities
exchange or under any federal or state securities law, or to obtain consent or
approval of any governmental body as a condition of, or in connection with, the
award of any Incentive, the issuance of Shares under any Incentive or this Plan,
or the removal of any restrictions imposed on such Shares. If the Company makes
such a determination, the Incentive shall not be awarded or the Shares shall not
be issued or the restrictions shall not be removed, as applicable, in whole or
in part, unless and until the listing, registration, qualification, consent or
approval shall have been effected or obtained free of any conditions not
acceptable to the Company. The Company's obligation to sell or issue Shares
under an Incentive is subject to compliance with all applicable laws and
regulations. The Board, in its sole discretion, shall determine whether the sale
and issue of Shares is in compliance with all applicable laws and regulations.
13.07. Adjustment. If the outstanding Shares of Common Stock are
increased or decreased or changed into or exchanged for a different number or
kind of securities of the Company (after the filing of the Restated Certificate
of Incorporation approved by the Board on February 25, 1993) or of another
corporation, by reason of reorganization, merger, consolidation,
recapitalization, reclassification, stock split, combination of securities or
dividend payable in corporate securities, then an appropriate adjustment shall
be made by the Board in the number, kind and/or price of Shares for which
Incentives may be granted under the Plan. In addition, the Board shall make
appropriate adjustment in the number, kind and/or price of Shares as to which
outstanding Incentives, or portions thereof then unexercised, shall be
exercisable. In the event of any such adjustment, the exercise price of any
Stock Option, the performance objectives, restrictions or other terms and
conditions of any Incentive and the Shares issuable under any Incentive shall be
adjusted as and to the extent appropriate, in the sole and absolute discretion
of the Board, to provide each Participant with substantially the same relative
rights before and after such adjustment to the extent practical.
13.08. Withholding.
(a) The Company shall have the right to withhold from any payments
made under the Plan or to collect as a condition to any award, payment or
issuance of Shares under the Plan any taxes required to be withheld by Federal,
state or local law. Whenever a Participant is required to pay to the Company an
amount required to be withheld under applicable tax laws in connection with a
distribution of Shares or cash or upon exercise of a Stock Option or SAR, the
Participant may satisfy this obligation in whole or in part by electing (the
"Election") to have the Company withhold from the distribution that number of
Shares having a value equal to the amount required to be withheld. The value of
the Shares to be withheld shall be based on the Fair Market Value of the Shares
on the date on which the amount of tax to be withheld is determined ("Tax
Date").
(b) Each Election must be made before the Tax Date. The Board may
disapprove any Election, may suspend or terminate the right to make Elections,
or may provide with respect to any Incentive that the right to make an Election
shall not apply to that Incentive. An Election is irrevocable.
(c) If a Participant is subject to the restrictions of Section 16 of
Securities Exchange Act, then an Election is subject to the following additional
restrictions:
(i) No Election shall be effective for a Tax Date that
occurs within six months of the Award Date of the Incentive; and
(ii) The Election must be made either six months before the
Tax Date or during a period beginning on the third business day after
release for publication of the Company's quarterly or annual summary
statements of sales and earnings and ending on the twelfth business day
after that release.
13.09. No right to continued employment. No Participant under the Plan
shall have any right to continue in the employ of the Company or any member of
the Group for any period of time because of his or her participation in the
Plan.
13.10. No right as stockholder. No Participant or Qualified Person
shall have the rights of a stockholder with respect to the Shares covered by an
Incentive unless a stock certificate is issued to that person for the Shares. No
adjustment shall be made for cash dividends or similar rights for which the
record date is before the date on which such stock certificate is issued.
13.11. Amendment of the Plan. The Board may amend the Plan from time
to time in such respects as the Board deems advisable. No such amendment,
however, shall (a) change or impair an Incentive without the consent of the
Participant or Qualified Person holding that Incentive, or (b) without the prior
approval of the Company stockholders (i) increase the limits provided in Section
6.01 (except by adjustment under Section 11.07), (ii) change or expand the types
of Incentives that may be granted under the Plan, (iii) change the class of
persons eligible to receive Incentives under the Plan, (iv) materially increase
either the benefits accruing to Participants under the Plan or the cost of the
Plan to the Company, or (v) make any other change that requires approval of the
Company stockholders under applicable law or to preserve the treatment of the
Incentive Stock Options as such under Section 422 of the Code.
13.12. Definition of fair market value. Whenever "Fair Market Value"
of Common Stock is to be determined for purposes of this Plan, it shall be
determined as follows:
(a) If the Common Stock is publicly traded at the time Fair Market
Value is to be determined under the Plan, "Fair Market Value" shall mean closing
sale price on that date on the over-the-counter market as reported by NASDAQ or,
if the Common Stock is then traded on a national securities exchange, the
closing sale price on that date on the principal national securities exchange on
which it is so traded; or
(b) If the Common Stock is not publicly traded at the time Fair Market
Value is to be determined under the Plan, "Fair Market Value" shall be
determined in good faith from time to time by the Board.
13.13. Repurchase, replacement and substitution of options. Upon
approval of the Board, the Company may repurchase a previously granted Stock
Option from a Participant by mutual agreement before that Stock Option has been
exercised upon such terms and conditions as the Company and the Participant
shall agree, provided that the purchase price per Share shall not exceed the
amount by which the Fair Market Value of the Common Stock subject to the option
on the date of purchase exceeds the option price. The Board may agree to the
cancellation of Stock Options in order to make a Participant eligible for the
grant of a replacement Stock Option at a lower price than the option to be
cancelled. In the event of a merger or consolidation, or the acquisition by the
Company of property or stock of an acquired corporation or any reorganization or
other transaction qualifying under Section 424 of the Code, the Board may, in
accordance with the provisions of that section, substitute Stock Options under
this Plan for options under the plan of the acquired corporation, provided that
(a) the excess of the aggregate Fair Market Value of the Shares subject to the
option immediately after the substitution over the aggregate option price of
such Shares is not more than the similar excess immediately before such
substitution, and (b) the new option does not give the Participant or Qualified
Person holding that Stock Option additional benefits.
13.14. Fractional and minimum Shares. In no event shall a fraction of
a Share be purchased or issued under the Plan without Board approval. The Board
may specify a minimum number of Shares for which each Stock Option and/or SAR
must be exercised, which number, however, shall not be more than 100.
13.15. Application of funds. The proceeds received by the Company from
the sale of Shares under the Plan shall be used for general corporate purposes.
13.16. Other incentives and plans. Nothing in this Plan shall prohibit
any member of the Group from establishing other employee incentives and plans.
13.17. Governing law. The validity and construction of the Plan and of
each agreement evidencing Incentives shall be governed by the laws of the State
of New Jersey, excluding the conflict-of-laws principles thereof.
14. Change in Control. In the event that a "Senior Level Optionee" (as
defined herein) experiences a "Termination Event" (as defined herein) within
twelve months after a "Change in Control Event" (as defined) occurs, all Options
granted hereunder which are held by such Senior Level Optionee on the date that
such Termination Event occurs (the "Termination Date") shall be deemed to be
fully vested hereunder as of such Termination Date for purposes of determining
the exerciseability of such Options on and after such Termination Date. For
purposes of this Section 14, the term "Change in Control Event" shall mean any
of the following events occurring after the "Two Year Date" (as defined herein):
(i) the acquisition by any one person, or more than one
person acting as a group, of ownership of stock of the Company, other than
any person or group of persons who held such total voting power on April
10, 1994 (the day before the Company commenced its initial public
offering), possessing 50.1% or more of the total voting power of the
capital stock of the Company;
(ii) the approval by the stockholders of the Company of (i)
any consolidation or merger of the Company, in which the holders of voting
stock of the Company immediately before the consolidation or merger will
not own 50% or more of the voting shares of the continuing or surviving
corporation immediately after such consolidation or merger, or (ii) any
sale, lease, exchange or other transfer (in one transaction or series of
related transactions) of all or substantially all of the assets of the
Company; or
(iii) a change of 50% (rounded to the next whole percent) in
the membership of the Board of Directors within a 12-month period, unless
the election, or nomination for election by stockholders, of each new
director within such period was approved by the vote of 80% (rounded to the
next whole person) of the directors then still in office who were in office
at the beginning of such 12-month period.
For purposes of this Section 14, a Senior Level Optionee shall be deemed to have
experienced a "Termination Event" if, and only if, within twelve months after a
"Change in Control Event" occurs, (i) such Senior Level Optionee's employment
with the Company or any subsidiary thereof is terminated by the Company or such
subsidiary without cause, (b) such Senior Level Optionee's base salary
(excluding bonuses and/or commissions) is reduced by more than 10% per annum or
(c) the duties and responsibilities of such Senior Level Optionee are
substantially reduced without such Senior Level Optionee's consent.
For purposes of this Section 14, the term "Two Year Date" shall mean (x) the
date hereof if the event described in clauses (i), (ii) or (iii) above is not to
be accounted for as a pooling of interests or (y) if the event described in
clauses (i), (ii) or (iii) above is to be accounted for as a pooling of
interests, February 16, 1997 (the date two years after this Section 14 was first
approved by the Board of Directors of the Company).
For purposes of this Section 14, the term "Senior Level Optionee" shall mean the
Company's Chairman of the Board, the Company's Chief Executive Officer and each
vice president of the Company who, on the date on which a Change in Control
Event occurs, reports directly to the Company's Chief Executive Officer pursuant
to the Company's then existing table of organization.
EXHIBIT 10.3
The following amendments to the 1988 Incentive Compensation Plan (the
"Plan") have been approved by the Board of Directors of Dialogic Corporation,
subject to the approval of the shareholders of Dialogic Corporation at the 1997
annual meeting of shareholders:
1. Section 3.03 of the Plan is hereby amended by adding the following
sentence at the end of such Section 3.03:
"Notwithstanding any provision herein to the contrary, all
decisions which would be made by the Board hereunder with respect to
persons who constitute "covered employees" within the meaning of
Section 162(m) of the Code shall be made by a committee of the Board
consisting of all those members of the Board who constitute "outside
directors" within the meaning of Section 162(m) of the Code. If,
however, there are less than two such "outside directors" on the Board,
then all such decisions shall be made by the Board.
2. Section 7.02 of the Plan is hereby amended in its entirety to provide as
follows:
"Number. The number of Shares subject to Stock Options shall
be determined by the Board; provided, however, that the maximum number
of Shares covered by Stock Options granted to any Participant in any
calendar year shall not exceed 375,000 Shares (subject to adjustment
pursuant to Section 13.07 hereof)."
3. Section 13.03 of the Plan shall be amended in its entirety to provide as
follows:
"Limited Transferability of Incentives. Except as provided in
the balance of this Section 13.03, no Option granted under this Plan
shall be transferable otherwise than by will or the law of descent and
distribution following the Optionee's death, and during the lifetime of
the Optionee, shall be exercisable only by him or for his benefit by
his attorney in fact or guardian. An Incentive other than an Incentive
Stock Option may, in connection with a Participant's estate plan and
with the approval of the Board, be assigned in whole or in part during
the Participant's lifetime to one or more members of the Participant's
immediate family or to a trust established exclusively for one or more
such family members. The assigned portion may only be exercised by the
person or persons who acquire a proprietary interest in the Incentive
pursuant to the assignment. The terms applicable to the assigned
portion shall be the same as those in effect for the Incentive
immediately prior to such assignment and shall be set forth in such
documents issued to the assignee as the Board may deem appropriate."
4. Section 13.04A of the Plan shall be amended in its entirety to provide
as follows:
"Termination of Employment as a Result of Death, Disability
or Retirement; Other Terminations of Employment. Notwithstanding any
provision to the contrary herein or in any Incentive Agreement, the
following provisions shall apply with respect to Stock Options and SARs
held by a Participant at the termination of such Participant's
employment with members of the Group in the event that such
Participant's employment terminates as a result of death, Disability or
Retirement or in the event that such Participant's employment is
terminated by the Company either with "cause" or without "cause" (any
determination of "cause" to be made by the Board and to be binding and
conclusive for purposes of the Plan):
(a) If such employment terminates as a result of death, the
Participant's Stock Options and SARs shall be deemed fully
exercisable as of the date of death and such Participant's
estate shall have the right to exercise the Participant's
Stock Options and SARs for a period ending on the earlier of
the expiration dates of such Stock Options and SARs or three
years from the date of termination of employment.
(b) If such employment terminates as a result of Disability,
the Participant's Stock Options and SARs shall be deemed fully
exercisable as of the date that the Participant is notified
that he will not longer be employed by any members of the
Group (the "Notification Date") and such Participant shall
have the right to exercise his Stock Options and SARs for a
period ending on the earlier of the expiration dates of such
Stock Options and SARs or three years from the Notification
Date, provided that if an Incentive Stock Option is exercised
beyond the last date consistent with treatment of such option
as an "incentive stock option" under the Code, such option
shall be deemed to be a Non-Statutory Stock Option hereunder.
(c) If such employment terminates as a result of Retirement,
the Participant shall have the right to exercise his Stock
Options and SARs for a period ending on the earlier of the
expiration dates of such Stock Options and SARs or three years
from the date of termination of employment, provided that
unless the Board determines otherwise (i.e., determines that
some or all of a retiring Participant's unvested Stock Options
be deemed fully vested) with respect to a particular
Retirement, such Stock Options and SARs shall be exercisable
by the Participant after Retirement only to the extent
exercisable on the date of termination of employment and
provided that if an Incentive Stock Option is exercised beyond
the last date consistent with treatment of such option as an
"incentive stock option" under the Code, such option shall be
deemed to be a Non-Statutory Stock Option hereunder.
(d) If such employment is terminated by the Company without
"cause", the Participant shall have the right to exercise his
Stock Options and SARs for a period ending on the earlier of
the expiration dates of such Stock Options and SARs or three
months from the date of termination of employment, provided
that such Stock Options and SARs shall be exercisable by the
Participant after termination of employment only to the extent
exercisable on the date of termination of employment.
(e) If such employment is terminated by the Company with
"cause", all Stock Options and SARs held by such Participant
shall terminate as of the date on which such employment
terminates.
(f) In the event that an employee continues to serve as a
director or Consultant of any member of the Group after such
employee ceases to be employed by any member of the Group, the
employee shall, for purposes of the Plan, be deemed to
continue in the employment of the Company until such time that
such person ceases to serve as a director of, Consultant to or
employee of any member of the Group; provided that if an
Incentive Stock Option is exercised beyond the last date
consistent with treatment of such option as an "incentive
stock option" under the Code, such option shall be deemed to
be a Non-Statutory Stock Option hereunder."
EXHIBIT 10.5
DIALOGIC CORPORATION
1993 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
(as amended and restated through March 28, 1997)
1. Purpose of the Plan. The purpose of this Stock Option Plan
("Plan"), to be known as the "Dialogic Corporation 1993 Non-Employee Director
Stock Option Plan", is to attract qualified personnel to accept positions of
responsibility as outside directors with Dialogic Corporation, a New Jersey
corporation ("Company"), and to provide incentives for qualified persons to
remain on the Board of the Company as outside directors.
2. Definitions. As used in the Plan, unless the context requires
otherwise, the following terms shall have the following meanings:
(a) "Anniversary Date" shall mean, for each Outside Director, the
annual anniversary of the date on which such Outside Director is first
elected to serve on the Board.
(b) "Board" shall mean the Board of Directors of the Company.
(c) "Committee" shall mean a committee of the Board designated by
the Board and consisting solely of members of the Board who are not
Outside Directors.
(d) "Common Stock" shall mean the Company's common stock, no par
value, or if, pursuant to the adjustment provisions of Section 11
hereof, another security is substituted for the Common Stock, such
other security.
(e) "Existing Outside Director" shall mean each member of the
Board on January 1, 1997 who did not serve as an employee of the
Company or any of its subsidiaries during 1996.
(f) "Fair Market Value" shall mean the fair market value of the
Common Stock on the Anniversary Date or other relevant date. If on
such date the Common Stock is listed on a stock exchange or is quoted
on the automated quotation system of NASDAQ, the Fair Market Value
shall be the closing sale price (or if such price is unavailable, the
average of the high bid price and the low asked price) on such date.
If no such closing sale price or bid and asked prices are available,
the Fair Market Value shall be determined in good faith by the
Committee in accordance with generally accepted valuation principles
and such other factors as the Committee reasonably deems relevant.
(g) "New Outside Director" shall have the meaning set forth in
Section 7(a) hereof.
(h) "Option" shall mean the right, granted pursuant to Section 7
of the Plan, to purchase one or more shares of Common Stock.
(i) "Optionee" shall mean a person to whom an option has been
granted under the Plan.
(j) "Outside Director" shall mean any member of the Board who, on
the date such person is to receive a grant of an Option hereunder,
shall not have served as an employee of the Company or any of the
Company's subsidiaries during the twelve months preceding such date of
grant.
(k) "Vesting Options" shall mean all Options other than Add-on
Options (as defined in Section 8 hereof).
3. Stock Subject to the Plan. There will be reserved for use upon the
exercise of Options granted from time to time under the Plan an aggregate of
150,000 shares of Common Stock, subject to adjustment as provided in Section 11
hereof. The Committee shall determine from time to time whether all or part of
such 150,000 shares shall be authorized but unissued shares of Common Stock or
issued shares of Common Stock which shall have been reacquired by the Company
and which are held in its treasury. If any Option granted under the Plan should
expire or terminate for any reason without having been exercised in full, the
unpurchased shares shall become available for the grant of Options under the
Plan.
4. Administration of the Plan. The Plan shall be administered by the
Committee. Subject to the provisions of the Plan, the Committee shall have full
discretion:
(a) To determine the exercise price of Options granted hereunder
in accordance with Section 7(b) hereof;
(b) To interpret the Plan;
(c) To promulgate, amend and rescind rules and regulations
relating to the Plan, provided, however, that no such rules or
regulations shall be inconsistent with any of the terms of the Plan;
(d) To subject any Option to such additional restrictions and
conditions (not inconsistent with the Plan) as may be specified when
granting the Option; and
(e) To make all other determinations in connection with the
administration of the Plan.
5. Eligibility. The only persons who shall be eligible to receive
Options under the Plan shall be persons who, on the date such Options are to be
granted hereunder, constitute Outside Directors.
6. Term. No Option shall be granted under the Plan more than ten years
after the date that the Plan is first adopted by the Board.
7. Grant of Stock Options. The following provisions shall apply with
respect to Options granted hereunder:
(a) Automatic Grants to New Outside Directors. The Company shall
grant to each Outside Director who first becomes a director of the
Company after January 1, 1997 and during the term of the Plan (a "New
Outside Director") an Option to purchase ten thousand (10,000) shares
of Common Stock (subject to adjustment pursuant to Section 11 hereof)
on the date of his first election as an Outside Director of the
Company. On the July 1st following the fourth Anniversary Date of each
New Outside Director's election as a director of the Company, and on
each July 1 thereafter during the term of the Plan, the Company shall
grant to such New Outside Director an Option (a "New Outside Director
Add-on Option") to purchase two thousand (2,000) shares of Common
Stock (subject to adjustment pursuant to Section 11 hereof), provided
that such New Outside Director is a member of the Board and
constitutes an Outside Director on the applicable date of grant.
(b) Prior Grants to Existing Outside Directors. Notwithstanding
any provision herein to the contrary, the terms of any Options granted
to Existing Outside Directors prior to January 1, 1997 shall be
governed by the terms of this Plan in effect as of December 31, 1996.
(c) Automatic Grants to Existing Outside Directors. On July 1,
1997 and on each July 1 thereafter during the term of the Plan, the
Company shall grant to each Existing Outside Director an Option (an
"Existing Outside Director Add-on Option") to purchase two thousand
(2,000) shares of Common Stock (subject to adjustment pursuant to
Section 11 hereof), provided that such Existing Outside Director is a
member of the Board and constitutes an Outside Director on the
applicable date of grant.
(d) Option Price. The price at which shares of Common Stock shall
be purchased upon exercise of an Option granted pursuant to Sections
7(a) and 7(c) hereof shall be equal to the Fair Market Value of such
shares on the date of grant of such Option.
(e) Expiration. Except as otherwise provided in Section 10
hereof, each Option granted pursuant to Sections 7(a) and 7(c) hereof
shall cease to be exercisable ten years after the date on which it is
granted.
8. Exercise of Options. New Outside Director Add-on Options and
Existing Director Add-on Options (collectively, "Add-on Options") may be
exercised at any time on or after the date of grant. Unless the exercise date of
a Vesting Option granted pursuant to Sections 7(a) and 7(c) hereof is
accelerated pursuant to Section 12 hereof, the following provisions shall apply
with respect to the exercise of such Vesting Options:
(a) during the first year after the date of grant, such Option
shall not be exercisable; and
(b) during the second year after the date of grant, such Option
may only be exercised as to up to 25% of the shares of Common Stock
initially covered thereby; and
(c) during the third year after the date of grant, such Option
may only be exercised as to up to 50% of the shares of Common Stock
initially covered thereby (provided that the provisions of paragraph
(b) above shall not have been violated); and
(d) during the fourth year after the date of grant, such Option
may only be exercisable as to up to 75% of the shares of Common Stock
initially covered thereby (provided that the provisions of paragraphs
(b) and (c) above shall not have been violated); and
(e) such Option may be exercised in its entirety or as to any
portion thereof at any time during the fifth year after the date of
grant and thereafter until the term of such Option expires or
otherwise ends.
9. Method of Exercise. To the extent permitted by Section 8 hereof,
Optionees may exercise their Options from time to time by giving written notice
to the Company. The date of exercise shall be the date on which the Company
receives such notice. Such notice shall be on a form furnished by the Company
and shall state the number of shares to be purchased and the desired closing
date, which date shall be at least fifteen days after the giving of such notice,
unless an earlier date shall have been mutually agreed upon. At the closing, the
Company shall deliver to the Optionee (or other person entitled to exercise the
Option) at the principal office of the Company, or such other place as shall be
mutually acceptable, a certificate or certificates for such shares against
payment in full of the Option price for the number of shares to be delivered,
such payment to be by a certified or bank cashier's check and/or, if permitted
by the Committee in its discretion, by transfer to the Company of capital stock
of the Company having a Fair Market Value (as determined pursuant to Section
2(f)) on the date of exercise equal to the excess of the purchase price for the
shares purchased over the amount (if any) of the certified or bank cashier's
check. If the Optionee (or other person entitled to exercise the Option) shall
fail to accept delivery of and pay for all or any part of the shares specified
in his notice when the Company shall tender such shares to him, his right to
exercise the Option with respect to such unpurchased shares may be terminated.
10. Termination of Board Status. In the event that an Optionee ceases
to serve on the Board for any reason other than cause, death or disability, such
Optionee's Options shall automatically terminate three months after the date on
which such service terminates, but in any event not later than the date on which
such Options would terminate pursuant to Section 7(e) hereof. In the event that
an Optionee is removed from the Board by means of a resolution which recites
that the Optionee is being removed solely for cause, such Optionee's Options
shall automatically terminate on the date such removal is effective. In the
event that an Optionee ceases to serve on the Board by reason of death or
disability, an Option exercisable by him shall terminate one year after the date
of death or disability of the Optionee, but in any event not later than the date
on which such Options would terminate pursuant to Section 7(e) hereof. During
such time after death, an Option may only be exercised by the Optionee's
personal representative, executor or administrator, as the case may be. No
exercise permitted by this Section 10 shall entitle an Optionee or his personal
representative, executor or administrator to exercise any portion of any Option
beyond the extent to which such Option is exercisable pursuant to Section 8
hereof on the date such Optionee ceases to serve on the Board.
11. Changes in Capital Structure. In the event that, by reason of a
stock dividend, recapitalization, reorganization, merger, consolidation,
reclassification, stock split-up, combination of shares, exchange of shares, or
comparable transaction, the outstanding shares of Common Stock of the Company
are hereafter increased or decreased, or changed into or exchanged for a
different number or kind of shares or other securities of the Company or of any
other corporation, then appropriate adjustments shall be made by the Committee
to the number and kind of shares reserved for issuance under the Plan upon the
grant and exercise of Options and the number and kind of shares subject to the
automatic grant provisions of Sections 7(a) and 7(c) hereof. In addition, the
Board shall make appropriate adjustments to the number and kind of shares
subject to outstanding Options, and the purchase price per share under
outstanding Options shall be appropriately adjusted consistent with such change.
In no event shall fractional shares be issued or issuable pursuant to any
adjustment made under this Section 11. The determination of the Committee as to
any such adjustment shall be final and conclusive.
12. Mandatory Exercise. Notwithstanding anything to the contrary set
forth in the Plan, in the event that (x) the Company should adopt a plan of
reorganization pursuant to which (i) it shall merge into, consolidate with, or
sell substantially all of its assets to, any other corporation or entity or (ii)
any other corporation or entity shall merge into the Company in a transaction in
which the Company shall become a wholly-owned subsidiary of another entity, or
(y) the Company should adopt a plan of complete liquidation, then (I) all
Options granted hereunder shall be deemed fully vested and (II) the Company may
give an Optionee written notice thereof requiring such Optionee either (a) to
exercise his or her Options within thirty days after receipt of such notice,
including all installments whether or not they would otherwise be exercisable at
such date, (b) in the event of a merger or consolidation in which shareholders
of the Company will receive shares of another corporation, to agree to convert
his or her Options into comparable options to acquire such shares, (c) in the
event of a merger or consolidation in which shareholders of the Company will
receive cash or other property (other than capital stock), to agree to convert
his or her Options into such consideration (in an amount representing the
appreciation over the exercise price of such Options) or (d) to surrender such
Options or any unexercised portion thereof.
13. Option Grant. Each grant of an Option under the Plan will be
evidenced by a document in such form as the Committee may from time to time
approve. Such document will contain such provisions as the Committee may in its
discretion deem advisable, including without limitation additional restrictions
or conditions upon the exercise of an Option, provided that such provisions are
not inconsistent with any of the provisions of the Plan. The Committee may
require an Optionee, as a condition to the grant or exercise of an Option or the
issuance or delivery of shares upon the exercise of an Option or the payment
therefor, to make such representations and warranties and to execute and deliver
such notices of exercise and other documents as the Committee may deem
consistent with the Plan or the terms and conditions of the option agreement.
Not in limitation of any of the foregoing, in any such case referred to in the
preceding sentence the Committee may also require the Optionee to execute and
deliver documents (including the investment letter described in Section 14)
containing such representations, warranties and agreements as the Committee or
counsel to the Company shall deem necessary or advisable to comply with any
exemption from registration under the Securities Act of 1933, as amended, any
applicable State securities laws, and any other applicable law, regulation or
rule.
14. Investment Letter. If required by the Committee, each Optionee
shall agree to execute a statement directed to the Company, upon each and every
exercise by such Optionee of any Options, that shares issued thereby are being
acquired for investment purposes only and not with a view to the redistribution
thereof, and containing an agreement that such shares will not be sold or
transferred unless either (1) registered under the Securities Act of 1933, as
amended, or (2) exempt from such registration in the opinion of Company counsel.
If required by the Committee, certificates representing shares of Common Stock
issued upon exercise of Options shall bear a restrictive legend summarizing the
restrictions on transferability applicable thereto.
15. Requirements of Law. The granting of Options, the issuance of
shares upon the exercise of an Option, and the delivery of shares upon the
payment therefor shall be subject to compliance with all applicable laws, rules,
and regulations. Without limiting the generality of the foregoing, the Company
shall not be obligated to sell, issue or deliver any shares unless all required
approvals from governmental authorities and stock exchanges shall have been
obtained and all applicable requirements of governmental authorities and stock
exchanges shall have been complied with.
16. Tax Withholding. The Company, as and when appropriate, shall have
the right to require each Optionee purchasing or receiving shares of Common
Stock under the Plan to pay any federal, state, or local taxes required by law
to be withheld.
7
17. Nonassignability. No Option shall be assignable or transferable by
an Optionee except by will or the laws of descent and distribution or pursuant
to a qualified domestic relations order as defined by the Internal Revenue Code
of 1986, as amended (the "Code"), or Title I of the Employee Retirement Income
Security Act ("ERISA") or the rules thereunder, in which event the terms of this
Plan, including all restrictions and limitations set forth herein, shall
continue to apply to the transferee. Except as otherwise provided in the
immediately preceding sentence, during an Optionee's lifetime, no person other
than the Optionee may exercise his or her Options.
18. Optionee's Rights as Shareholder and Board Member. An Optionee
shall have no rights as a shareholder of the Company with respect to any shares
subject to an Option until the Option has been exercised and the certificate
with respect to the shares purchased upon exercise of the Option has been duly
issued and registered in the name of the Optionee. Nothing in the Plan shall be
deemed to give an Optionee any right to a continued position on the Board nor
shall it be deemed to give any person any other right not specifically and
expressly provided in the Plan.
19. Termination and Amendment. The Board may at any time terminate or
amend the Plan as it may deem advisable, except that (i) the provisions of this
Plan relating to the amount of shares covered by Options, the exercise price of
Options or the timing of Option grants or exercises shall not be amended more
than once every six months, other than to comport with changes in the Code,
ERISA or the rules thereunder, (ii) no such termination or amendment shall
adversely affect any Optionee with respect to any right which has accrued under
the Plan in regard to any Option granted prior to such termination or amendment,
and (iii) no such amendment shall be effective without approval of the
stockholders of the Company if the effect of such amendment is to (a) materially
increase the number of shares of Common Stock authorized for issuance pursuant
to the Plan (otherwise than pursuant to Section 11), (b) increase the number of
shares of Common Stock subject to Options, (c) reduce the exercise price of
Options, (d) materially modify the requirements as to eligibility for
participation in the Plan or (e) materially increase the benefits accruing to
participants under the Plan. Any termination of this Plan will terminate the
obligation of the Company to grant any Option scheduled to be granted after the
date of such termination.
20. Shareholder Approval. Any Options granted after January 1, 1997
shall be subject to the condition that the stockholders of the Company approve
this amended and restated Plan at the Company's first Annual Meeting of
Shareholders following January 1, 1997.
21. Sunday or Holiday. In the event that the time for the performance
of any action or the giving of any notice is called for under the Plan within a
period of time which ends or falls on a Sunday or legal holiday, such period
shall be deemed to end or fall on the next date following such Sunday or legal
holiday which is not a Sunday or legal holiday.
EXHIBIT 10.6
DIALOGIC CORPORATION 1997 DIRECTOR STOCK ELECTION/DEFERRAL PLAN
Article 1. Name. The name of this plan is the Dialogic Corporation
1997 Director Stock Election/Deferral Plan (the "Plan").
Article 2. Sponsor. The Plan is sponsored by Dialogic Corporation, a
New Jersey corporation (the "Company").
Article 3. Effective Date. The effective date of the Plan is April 29,
1997.
Article 4. Purpose. The purposes of the Plan are (i) to provide any
member (a "Director") of the Board of Directors of the Company (the "Board")
with the option of having the fees payable to him by the Company for his serving
as a Director (the "Fees") paid in the form of (a) cash or, at the option of the
Company, cash equivalent ("Cash"), (b) shares of common stock ("Common Stock")
of the Company, or (c) any combination thereof, and (ii) to allow any Director
to defer payment to him by the Company of such portion of his Fees as are
payable by the Company hereunder in the form of Common Stock (the "Common Stock
Portion"), all in accordance with and subject to the terms hereof.
Article 5. Administration. The Plan shall be administered by a
committee (the "Committee") established by the Board, which shall be comprised
of one or more members of the Board who are employees of the Company or its
subsidiaries; provided, however, if none of the members of the Board are
employed by the Company or its subsidiaries, the Plan shall be administered by
the Board and the term "Committee" shall refer to the Board. The Committee shall
have the sole and exclusive authority to (a) interpret the Plan, (b) determine
eligibility to participate, (c) determine the number of shares of Common Stock
and amount of Cash distributable under the Plan, (d) determine the time or times
at which shares of Common Stock and Cash shall be distributable under the Plan,
(e) establish, amend, or rescind rules relating to the Plan, and (f) make all
other determinations necessary or appropriate to administer the Plan. All
decisions, determinations, and interpretations made by the Committee shall be
binding and conclusive on all persons. Neither the Committee, the Board, nor any
of their respective members (each, an "Indemnitee") shall be liable for any
action they may take or fail to take with respect to the Plan other than in bad
faith, and the Company shall defend, indemnify, and hold harmless each
Indemnitee for any such action or inaction.
Article 6. Eligibility to Make an Election. Any Director may elect to
have his Fees for any calendar year paid by the Company either as Cash or shares
of Common Stock, or any combination thereof (subject to the rules hereof), by
filing his written election ("Election") with the Chief Financial Officer of the
Company or his designee in accordance with the terms of the Plan. If a Director
fails to make a timely Election, the Fees shall be paid entirely in Cash. A
director filing an Election shall specify in the Election the percentage of each
Fee (up to 100%) to be paid in the form of Common Stock (the "Stock
Percentage").
Article 7. The amount of the Fees shall be determined from time to
time by the Company in its sole discretion, subject to the following rules:
(a) The dollar amount of the Fees (including any annual
retainer fee and any per meeting fee) for each calendar year with
respect to any Director shall be determined by the Company prior to
January 1 of such year. With respect to calendar year 1997, the Fees
shall be set at the same levels as the comparable Fees applicable in
1996.
(b) With respect to each Fee payable to a Director in a
particular calendar year, the portion, if any, of such Director's Fee
to be payable in Common Stock shall be that number of shares of Common
Stock (rounded down to the nearest whole number) equal to (i) the
product of such Director's Stock Percentage multiplied by such Fee (the
"Stock Amount"), divided by (ii) the Fair Market Value (as defined
below) of one share of Common Stock on December 31 of the immediately
preceding calendar year (the "December Value").
(c) With respect to each Fee payable to a Director in a
particular calendar year, the portion, if any, of such Director's Fee
to be payable in Cash shall equal the sum of (i) the dollar amount of
such Fee minus the Director's Stock Amount and (ii) to the extent that
such Director would have been entitled to a fractional share but for
the requirement to round down as set forth in Section 7(b) hereof, a
cash amount equal to such fraction multiplied by the December Value.
(d) "Fair Market Value" shall mean the fair market value of a
share of Common Stock on the relevant date. If on such date the Common
Stock is listed on a stock exchange or is quoted on the automated
quotation system of NASDAQ, the Fair Market Value shall be the closing
sale price (or if such price is unavailable, the average of the high
bid price and the low asked price) on such date. If no such closing
sale price or bid and asked prices are available, the Fair Market Value
shall be determined in good faith by the Committee in accordance with
generally accepted valuation principles and such other factors as the
Committee reasonably deems relevant.
(e) The total of all Cash and the aggregate December Value for
all shares of Common Stock payable to a Director as his Fees for any
calendar year shall equal the Fees payable to such Director for such
year, and shall be payable to the Director at or about the time that
Fees are regularly paid to members of the Company's Board of Directors.
Article 8. Election. The form of Election shall be a form approved for
use by the Committee with respect to the Plan. In order to be effective for Fees
payable with respect to a particular calendar year, such Election must be signed
by the applicable Director and delivered to the Company's Chief Financial
Officer or his designee prior to January 1 of such calendar year, except that
with respect to calendar year 1997, such Election must be delivered by April 29,
1997.
Article 9. Eligibility for Deferral Treatment. Any Director may elect
to become a participant ("Participant") in the deferral aspects of the Plan by
filing a written notice of participation ("Notice of Participation") with the
Committee in such form as shall be prescribed by the Committee.
Article 10. Deferred Compensation. Subject to an exception with
respect to calendar year 1997 described in Article 11 below, any Participant may
elect each calendar year, in accordance with Article 11 below, to defer the
payment by the Company of his Common Stock Portion which would otherwise be
distributable under the Plan during the following calendar year. The number of
shares of Common Stock represented by any Common Stock Portion deferred pursuant
to this Article 10 shall be recorded by the Company in a deferred compensation
account (the "Account") that is maintained by the Company on its books and
records in the name of the Participant. The Account shall be credited, on the
dates (the "Fee Dates") that the Fees for any calendar year would be payable
(but for the Participant's deferral election hereunder), with the number of
shares of Common Stock representing the Common Stock Portion as to which payment
has been deferred by the Participant under the Plan. The Company shall furnish
each Participant with a statement of his Account at least annually, which
statement shall reflect, for each such year, (a) the number of shares of Common
Stock credited to such Participant's Account, (b) the dollar amount of such
Participant's Fees represented by such shares, and (c) the Fair Market Value on
the applicable Fee Dates.
Article 11. Election To Defer Compensation. The Participation Notice
by which a Participant elects to defer his Fees pursuant to the Plan shall be
signed by the Participant, dated and delivered to the Committee prior to (a)
January 1 of the calendar year in which the Fees to be deferred would otherwise
be distributable to the Participant for any calendar year after 1997, and (b)
April 29, 1997, with respect to the deferral of any Fees which would otherwise
be distributable to the Participant in 1997 after April 29, 1997. Any deferral
election made by a Participant shall be irrevocable with respect to any Fees
covered by such election. If a Director fails to file a Participation Notice on
a timely basis, he shall be deemed to have waived any right he may have
hereunder to defer the associated Fee.
Article 12. Adjustments. In the event that the outstanding shares of
Common Stock are hereafter increased, decreased, changed into, or exchanged for
a different number or kind of shares or securities through merger,
consolidation, combination, exchange of shares, other reorganization,
recapitalization, reclassification, stock dividend, stock split, or reverse
stock split, an appropriate and proportionate adjustment shall be made by the
Committee in the number and kind of shares as to which distribution is to be
made under the Plan and in the number of shares of Common Stock subject to the
Plan.
Article 13. Privileges of Stock Ownership; Dividends.
(a) No Director shall have any of the rights or privileges of
a stockholder of the Company in respect of any shares of Common Stock
to be paid under the Plan until certificates representing such shares
have been issued by the Company and delivered to the Participant.
(b) A Director's Account shall not be credited with any amount
with respect to any dividends or other distributions paid by the
Company on its outstanding Common Stock.
Article 14. Distribution. With respect to deferred Fees, distribution
of a Participant's Account shall be made as follows:
(a) The number of shares of Common Stock representing a
Director's deferred Fees with respect to any calendar year (rounded
down to the nearest whole number) shall be distributed by the Company
to such Participant on the earlier of (i) February 1 of the fifth
calendar year following the calendar year for which such Fees were
earned or (ii) the date on which such Director ceases serving on the
Board for any reason.
(b) The distribution by the Company of a certificate or
certificates for the number of shares of Common Stock representing a
Participant's deferred Fees shall be a complete discharge of the
Company's liability hereunder with respect to such number of shares. No
fractional shares shall be distributed pursuant to the Plan.. To the
extent that a Participant would have been entitled to a fractional
share but for the requirement to round down as set forth in Sections
14(b) and 14(c) hereof, a cash amount, equal to such fraction
multiplied by the Fair Market Value of one share of Common Stock on the
date of distribution, shall be paid to such Participant.
Article 15. Tax Withholding. The delivery of any shares of Common
Stock shall be subject to the condition that if at any time the Company shall
determine, in its discretion, that the satisfaction of withholding tax or other
withholding liabilities under any state or federal law is necessary or desirable
as a condition of, or in connection with, such delivery pursuant hereto, then no
such shares shall be delivered unless and until such withholding tax or other
withholding liabilities shall have been satisfied in a manner acceptable to the
Company.
Article 16. Investment Letter; Restrictions or Obligation of the
Company to Issue Securities; Restrictive Legend. Any person acquiring Common
Stock or other securities of the Company under the Plan, as a condition
precedent to such acquisition, may be required by the Committee to submit a
letter to the Company stating that the shares of Common Stock or other
securities are being acquired for investment and not with a view to the
distribution thereof. The Company shall not be obligated to issue any shares of
Common Stock or other securities pursuant to the Plan unless, on the date such
shares or other securities otherwise would be issued, such shares or other
securities are either registered under the Securities Act of 1933, as amended,
and all applicable state securities laws, or exempt from registration
thereunder. If, pursuant to the immediately preceding sentence, the Company is
not so obligated to issue such shares on such date, it shall pay to the
applicable Director in Cash the Fair Market Value (as of such date) of such
shares otherwise distributable under the Plan to such Director on such date. If
applicable, all shares of Common Stock and other securities issued pursuant to
the Plan shall bear a restrictive legend summarizing the restrictions on
transferability applicable thereto, including those imposed by federal and state
securities laws.
Article 17. Participant's Rights Unsecured. The rights of any
Participant or his designated beneficiary to receive a distribution from an
Account hereunder in shares of Common Stock shall be an unsecured claim against
the general assets of the Company, and neither the Participant nor his
designated beneficiary shall have any rights in or against any amount credited
to the Participant's Account or any other specific assets of the Company. The
number of such shares credited to an Account shall constitute an unsecured
promise of the Company to pay such shares. The Company may, but shall not be
obligated to, acquire shares of Common Stock from time to time in anticipation
of its obligation to make distributions under the Plan, but no Participant or
beneficiary shall have any rights in or against any shares so acquired. All such
shares shall constitute general assets of the Company and may be disposed of by
the Company at such time(s) and for such purpose(s) as the Company may deem
appropriate.
Article 18. Non-Transferability. The rights of a Director or any
beneficiary to any payment under the Plan may not be anticipated, alienated,
sold, transferred, assigned, pledged, encumbered, attached, or garnished, except
(a) by will or by laws of descent and distribution, or (b) as otherwise may be
required by law.
Article 19. Plan Amendments. The Board may amend the Plan at any time,
without the consent of any person; provided, however, that no such amendment
shall divest any Participant or beneficiary of the number of shares of Common
Stock credited to the Participant's Account or of any rights to which he would
have been entitled if the Plan had been terminated immediately prior to the
effective date of such amendment or of any unpaid Fees theretofore earned by a
Director.
Article 20. Plan Termination. The Board may terminate the Plan at any
time. Upon termination of the Plan, payment of the number of shares of Common
Stock credited to a Participant's Account shall be made in the manner and at the
time heretofore prescribed. No additional credits shall be made to the Account
of a Participant following termination of the Plan.
Article 21. Expenses. Costs of administration of the Plan shall be
paid by the Company.
Article 22. Notices. Any notice or election required or permitted to
be given hereunder shall be in writing and shall be deemed to be filed:
(a) on the date it is personally delivered to the Committee
or its designee; or
(b) three business days after it is sent by registered
or certified mail, addressed to the Committee or its designee.
Article 23. Authorized Shares. A total of 40,000 shares of Common
Stock shall be authorized for issuance pursuant to the Plan.
Article 24. Governing Law. The Plan shall be governed by and construed
in accordance with the law of the State of New Jersey, without giving effect to
its choice of law doctrine.
Article 25. Pronouns. The pronouns used in the Plan are in the
masculine gender but shall be construed as feminine or neuter as occasions may
require.
<PAGE>
Director's Election to Defer Benefits Pursuant to the
Dialogic Corporation Director Stock Election/Deferral Plan
Pursuant to the Dialogic Corporation Director Stock Election/Deferral Plan
(the "Plan"), the undersigned hereby makes the following election:
I hereby elect to defer, as provided in the Plan, the receipt of all
such shares of common stock ("Common Stock") of Dialogic Corporation
(the "Company") payable to me, as my Director's Fees to be earned in
connection with the performance of my services as a member of the
Board of Directors of the Company for the calendar year 199_.
I hereby designate ____________________________ as my beneficiary to
receive the total number of such shares allocated to my Account under
the Plan which have not been paid to me on or prior to the date of my
death.
---------------------------------
Director's Signature
Director's Name
Date
<PAGE>
Director's Election Regarding Payment of the Fees Payable under the Dialogic
Corporation Director Stock Election/Deferral Plan
Pursuant to the Dialogic Corporation Director Stock Election/Deferral
Plan (the "Plan"), the undersigned hereby elects to have the amount payable to
me by Dialogic Corporation (the "Company") as my Director Fees, to be earned in
connection with the performance of my services as a member of the Board of
Directors of the Company for the year 199__, paid to me in the following form:
|_| Paid 100% in Cash
|_| Paid 100% in whole shares of Common Stock, with any fractional
shares payable in Cash
|_| Paid ____% in whole shares of Common Stock, with any balance
payable in Cash
---------------------------------
Director's Signature
Director's Name
Date
EXHIBIT 10.9
OFFICE LEASE
1515 ROUTE TEN
PARSIPPANY, NEW JERSEY
between
ROUTE TEN JOINT VENTURE, L.P.
(Landlord)
and
DIALOGIC CORPORATION
(TENANT)
Dated: August 31, 1993
<PAGE>
OFFICE LEASE
1515 ROUTE TEN
PARSIPPANY, NEW JERSEY
Lease Summary
Landlord: Route 10 Joint Venture, L.P.
Landlord's Address: c/o MONY Real Estate Investment Management
1740 Broadway, New York, New York 10019
Tenant: Dialogic Corporation
Tenant's Space Total - 125,000 square feet
Annual Fix Rent Approximately 115,000 square feet office;
10,000 square feet storage
<TABLE>
<S> <C> <C> <C>
Office: Lease Years Fixed Rent Per Year Monthly Installment Rent Per Square Foot
Year 1 $ $ $15.50*
Year 2 $ $ $15.50*
Year 3 $ $ $15.50*
Year 4 $ $ $15.50*
Year 5 $ $ $15.50*
Year 6 $ $ $17.50*
Year 7 $ $ $17.50*
Year 8 $ $ $17.50*
Year 9 $ $ $17.50*
Year 10 $ $ $17.50*
</TABLE>
For the first two (2) years, Tenant shall receive free rent for 35,000 square
feet of office space.
<TABLE>
<S> <C> <C>
Storage Lease Years Fixed Rent Per Year Monthly Installment Rent Per Square Foot
Year 1 $ $ $.00*
Year 2 $ $ $.00*
Year 3 $ $ $.00*
Year 4 $ $ $.00*
Year 5 $ $ $.00*
Year 6 $ $ $4.00*
Year 7 $ $ $4.00*
Year 8 $ $ $4.00*
Year 9 $ $ $4.00*
Year 10 $ $ $4.00*
*Plus Tenant's electrical
</TABLE>
Electricity Rent: Tenant to pay all its own electric which will be directly
metered
Lease Term Commencement Date:
Lease Term Expiration Date:
Fix Rent Commencement Date:
Base Operating Expense Year: The calendar year 1994 as if the Building is
fully assessed and 95% occupied.
Base Tax Year: The calendar year 1994
Option to Renew: Two (2) five year options with base rent to be
increased by fifteen percent (15%) over the five
year period preceding the option period.
Rentable floor area of Tenant's Office Space: 115,000 square feet, subject to
identification and measure by
BOMA method (also entire building)
Rentable floor area of Tenant's storage space:10,000 square feet, subject to
identification and measure by
BOMA method (also entire building)
Security Deposit: None
Tenant's Proportionate Share:
Tenant's SIC Number: 7373
<PAGE>
TABLE OF CONTENTS
ARTICLE
1. Premises
2. Term
3. Rent
4. Additional Rent
5. Electricity
6. Improvements in Preparation for Occupancy
7. Alterations
8. Repairs and Maintenance
9. Utilities and Services
10. Insurance
11. Use
12. Assignment and Subletting
13. Default
14. Remedies of Landlord
15. Destruction, Fire or other Casualty
16. Condemnation
17. Subordination
18. Indemnification and Hold Harmless
19. Landlord's Obligations
20. Cumulative Remedies
21. Advances by Landlord
22. No Waiver by Landlord
23. Landlord's Right to Exhibit the Premises
24. No Acceptance of Surrender
25. Quiet Enjoyment
26. Estoppel Certificates
27. Parking
28. Notices
29. Bind and Inure
30. Waiver of Trial by Jury
31. Brokerage Fees
32. Execution
33. Recordation of Lease
34. Surrender
35 Access; Change in Facilities
36. Integration of Agreement
37. Security Deposit
38. Inability to Perform
39. Rules and Regulations
40. Governing Law
41. Landlord Liability
42. Signage
43. Arbitration
44. Non-Disturbance
Schedule A Floor Plan of Premises
Schedule B Property Description
Schedule C Cleaning and Routine Maintenance Service
Schedule D Parking Spaces
Schedule E Rules and Regulations
<PAGE>
LEASE
THIS LEASE, made as of this ___ day of August, 1993, by and between
ROUTE TEN JOINT VENTURE, a limited partnership with offices and a principal
place of business c/o MONY Real Estate Investment Management, 1740 Broadway, New
York, New York 10019 (the "Landlord") and Dialogic Corporation, a New Jersey
corporation with offices and a principal place of business which will be located
at 1515 Route 10, Parsippany, New Jersey (the "Tenant").
WITNESSETH:
WHEREAS, Landlord is the owner of the real property located at 1515
Route Ten, Parsippany, New Jersey (the "Building") as more fully described on
the legal description set forth on Schedule "B" annexed hereto, and as also
described on a certain site plan prepared by Murray Hochauser, which site plan
has been separately provided to Tenant with the representation that the site
plan is no longer entirely accurate; and
WHEREAS, Tenant wishes to lease form Landlord and Landlord wishes to
lease to Tenant approximately 115,000 square feet of office space on the second
and first floors of the Building and 10,000 square feet of storage space on the
basement level.
NOW THEREFORE, in consideration of the mutual covenants hereinafter
set forth, and of other good and valuable consideration, the receipt of which is
hereby acknowledged, Landlord and Tenant agree as follows:
1. Premises.
1.1. Landlord hereby leases to Tenant and Tenant hereby leases from
landlord approximately 125,000 square feet on the second, first and basement
floors of the Building (the "Premises"), as shown on the floor plan which will
be annexed hereto as Schedule A and made a part hereof, together with the right
to parking as designated herein, the common area right designated herein, right
of ingress and egress to the Building in common with others. The Premises will
consist of the entire second floor, 10,000 square feet of storage in the
basement and the remainder on the first floor. Within third (30) days of the
signing of this Lease, Landlord shall cause the Building and the Premises to be
measured pursuant to the BOMA method and the exact square footage shall be
deemed fixed. Promptly thereafter, Landlord shall cause to be delivered to
Tenant the dimensions of the Building and the Premises as measured pursuant to
the BOMA method.
2. Term.
2.1. The Premises are leased for a term ("Term") which shall commence
on a date ("Commencement Date") which shall be the earlier of:
(a) January 1, 1994, unless such date is adjusted in accordance with
the provisions of Section 6.3; or
(b) the date Tenant shall occupy the Premises or any part thereof for
the purposes of conducting its business.
2.2. The Term shall end at 12 o'clock noon on the last day of the
month in which the tenth anniversary of the commencement date occurs
("Expiration Date") unless the Term shall sooner terminate pursuant to any of
the terms, covenants or conditions of this Lease or pursuant to law.
2.3. As soon as practicable after the Commencement Date, Landlord
shall deliver to Tenant written notice confirming the Commencement Date and
Expiration Date, and Tenant shall acknowledge such Commencement Date and
Expiration Date by returning to Landlord an executed copy of such notice within
five (5) business days of Tenant's receipt of such notice.
2.4. If the last day of the Term of this Lease or any renewal thereof
falls on a Sunday, this Lease shall expire at 12 o'clock noon on the preceding
Saturday unless it be a legal holiday in which case it shall expire at 12
o'clock noon on the preceding business day.
2.5. Tenant shall have two (2) options to renew the term for the
leased premises, each for a period of five (5) years. Each option shall be
exercisable respectively only prior to the end of the ninth year and fourteenth
year of Tenant's occupancy. Each option shall be exercisable only by Tenant
sending written notice of Tenant's affirmative intent to exercise each option.
The written notice shall be effective only if received by Landlord at lease one
(1) year prior to the end of the then current term. The Fixed Rent to be paid
for each option period shall be equal to the Fixed Rent paid over the five (5)
year period immediately preceding the option period, increased by fifteen (15%)
percent.
2.6. In addition to the two (2) options provided for in Paragraph 2.5
herein of this Lease, Tenant shall have the option to lease an additional 35,000
square feet of office space within the Building. This option may be exercised by
Tenant only within the first five (5) years of the term, and only by sending
written notice to Landlord, which is received by Landlord prior to the last day
of the fifth year of the term. The notice shall be effective one (1) year from
the date on w which it is received by Landlord. The option for the additional
35,000 square feet of office space shall in no way be construed to obligate
Landlord to provide 35,000 square feet which is contiguous to the Premises. The
additional 35,000 square feet shall be on the western side of the third floor.
In the event the option for the additional 35,000 square feet is exercised, then
the Fixed Rent and Additional Rent shall be charged in accordance with the terms
and at the rate set in Article Three (3) below, and Tenant' s fit up allowance
of S25.00 per square foot (based on a ten-year term) shall be pro rated based
upon the number of months then remaining in the Term, including the term of any
renewal option(s) then exercised (i.e. if at least 120 months are remaining, the
full fit up allowance will be granted), plus an additional S2.50 per square foot
for Tenant' s architectural fees.
2.7. Tenant shall have a right of first refusal on all other space
within the Building as that right is described in this paragraph. In the event
that Landlord receives a request for a proposal to lease space, then Landlord
must notify Tenant, in writing, of the identity of the proposed tenant or the
proposed leasing agent, and the proposed use, together with a description of the
proposed space to be leased. Tenant shall have ten (10) business days from
receipt of the written notification to inform Landlord whether or not Tenant
desires to lease the proposed space. In the event Tenant notifies Landlord of
Tenant's desire to lease the proposed space, then Tenant shall commence leasing
the space effective sixty (60) days from the date Tenant notifies Landlord of
Tenant's desire to lease the proposed space and shall pay the base rent
described in Article Three (3) below, as adjusted by the Consumer Price Index
for the N.Y./N.E.N.J. area for the proposed space. In addition, Tenant shall pay
Additional Rent as provided for in Article Three (3) below. Landlord shall
provide Tenant with Tenant's fit up allowance equal to S25.00 per square foot
(based on a ten-year term), said sum to be pro rated based upon the number of
months remaining in the Term, including the term of any renewal option(s) then
exercised (i.e. if at least 120 months are remaining, the full fit up allowance
will be granted), plus an additional S2.50 per square foot for Tenant's
architectural fees.
3. Rent.
3.1. (a) Fixed Rent. Tenant shall pay to Landlord an annual base rent
(the "Fixed Rent") for the Premises, which shall be paid without set-off or
deduction, in equal monthly installments in advance on the first day of each and
every calendar month during the Term of this Lease, to Landlord or to Landlord's
agent, at such place as Landlord may designate to Tenant, in lawful money of the
United States of America for the payment of all debts, public and private, as
follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Fixed Rent Monthly Rent Per
Office Lease Years Per Year Installment Square Foot
Year 1 $ $ $15.50*
Year 2 $ $ $15.50*
Year 3 $ $ $15.50*
Year 4 $ $ $15.50*
Year 5 $ $ $15.50*
Year 6 $ $ $17.50
Year 7 $ $ $17.50
Year 8 $ $ $17.50
Year 9 $ $ $17.50
Year 10 $ $ $17.50
</TABLE>
For the first two (2) years, Tenant shall receive free Fixed Rent for 35,000
square feet of office space.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Fixed Rent Monthly Rent Per
Storage Lease Years Per Year Installment Square Foot
Year 1 $ $ $.00*
Year 2 $ $ $.00*
Year 3 $ $ $.00*
Year 4 $ $ $.00*
Year 5 $ $ $.00*
Year 6 $ $ $4.00*
Year 7 $ $ $4.00*
Year 8 $ $ $4.00*
Year 9 $ $ $4.00*
Year 10 $ $ $4.00*
* Plus Tenant's electric pursuant to section 4.13.
</TABLE>
3.2. In addition to the above, Landlord represents that effective the
Commencement Date of this Lease, Landlord shall either (a) pay Tenant a sum each
month equal to $71,524.00, or (b) pay directly to Tenant's current landlord a
sum each month equal to $71,524.00. In no event shall the monthly payments made
by Landlord pursuant to this section exceed $71,524.00 each month. Tenant
warrants and represents that its current lease expires September 15, 1994 and no
payments will be due after that date. Tenant warrants and represents further
that if its current and future monthly obligations to its current landlord
exceed $71,524.00 each month, then Tenant shall pay such excess. Landlord may
negotiate a lump sum payment at a discount with Tenant's current landlord.
3.3. On execution hereof, Tenant shall pay to the Landlord an amount
equal to one (1) monthly installment of Fixed Rent payable under this Lease. If
the Commencement Date shall be any day other than the first day of a calendar
month, the Fixed Rent for the period between the Commencement Date and the first
day of the first full calendar month of the Term shall be pro-rated on a per
diem basis and Landlord shall credit any excess amount paid pursuant to this
Section 3.2 toward the payment of the Fixed Rent for the next succeeding
calendar month in which a payment of Fixed Rent is due.
4. Additional Rent.
4.1. In addition to the Fixed Rent payable under Article Three (3)
hereof, Tenant shall pay to Landlord additional rent consisting of all sums of
money as shall become due and payable by Tenant under this Lease including, but
not limited to, the payments due under this Article 4 (collectively, the
"Additional Rent").
4.2. The following terms shall have the meanings set forth herein:
"Base Operating Expenses" shall mean Operating Expenses payable
for the Base Operating Expense Year, adjusted and calculated as if the
Building is ninety-five (95%) percent occupied for the entire year.
"Base Operating Expense Year" shall be the calendar year 1994
adjusted and calculated as if the Building is ninety-five (95%)
percent occupied for the entire year.
"Base Tax Year" shall be the calendar year 1994.
"Base Taxes" shall mean Taxes payable for the Base Tax Year. Base
Taxes shall be deemed to have been incurred by Landlord in the Base
Tax Year and shall be adjusted to reflect a fully assessed Building
for the entire base tax year.
"Operating Expenses" as referred to in the Lease shall include
all actual expenses reasonably incurred by Landlord in connection with
the operation and maintenance of the Building, comparable to such
expenses incurred with respect to office buildings similarly situated
and occupied, but shall not include the following: (a) the cost of
construction of any improvements on the real property, including any
addition, alteration or refurbishing of space leased to other tenants
in the Building, except that amounts equal to savings of labor or
other costs in connection with the operation of the Building resulting
from such capital improvements shall be included; (b) expenses for
repairs or other work occasioned by fire, windstorm or other casualty
in excess of a reasonable deductible amount provided in Landlord's
insurance policy; (c) expenses incurred in leasing or procuring new
tenants for the Building (e.g. commissions, advertising, renovation
and legal); (d) legal expenses in enforcing the terms of any lease
other than this Lease; (e) interest or principal amortization payments
on any mortgage; (f) any Taxes, as referred to in the Lease, corporate
franchise or net worth taxes, income taxes (state and federal),
personal property taxes, excess profit taxes, license, inspection and
permit fees; (g) any expenses incurred for which Landlord has a right
of reimbursement from a tenant in the Building; (h) claims paid by
Landlord in satisfaction or settlement of liability in tort; (i) any
payments to the ground lessor; (j) depreciation of the Building or
other improvements located on the real property and (k) replacement of
the parking lot, roof, HVAC equipment or other capital (as determined
in accordance with generally accepted accounting principles) items.
All expenses paid by Landlord to persons or business entities which
are affiliated in any way with Landlord must be reasonable and
comparable to similar expenses paid by landlords generally in
arms-length transactions in order to be includable in operating
expenses.
"Common Areas" shall mean all portions of the Building not
intended as rentable area, including, without limitation the parking
facilities appurtenant to the Building.
"Governmental Authority" shall mean any Federal, State, County,
municipal or local government and all departments, commissions,
boards, bureaus, and offices thereof having or claiming jurisdiction
over the Building.
"Landlord's Statement" shall mean written statements issued by
the Landlord from time to time containing computations of Additional
Rent due pursuant to the provisions of this Article 4.
"Landlord's Tax Statement" shall have the meaning given to such
term in Section 4.3(b) hereof.
"Monthly Tax Payment" shall have the meaning given to such term
in Section 4.3(c) hereof.
"Operational Year" shall mean each period of twelve consecutive
months after the Base Operating Expense Year.
"Projected Taxes" shall have the meaning given to such term in
Section 4.3(b) hereof.
"Taxes" shall mean all real estate taxes, assessments, special or
otherwise (but not including added or omitted assessments relating to
periods prior to the Commencement Date), sewer rents, rates and
charges, water rents, rates and charges, or any other charge of a
Government Authority of a similar or dissimilar nature, of any kind,
which may be levied or assessed upon or with respect to the Building,
or any part thereof, or on the appurtenances, sidewalks, streets and
roads adjacent to the Building or on any use or occupation of the
Building and all taxes or charges levied on the Fixed Rent or
Additional Rent or the gross receipts from the Building which are in
lieu of or substitute for, any other tax or assessment or charge upon
or with respect to the Building. For purposes of determining Taxes
incurred in any Tax Year, all assessments and other similar charges
shall be deemed to be paid by Landlord over the maximum number of
installments permitted, except that Tenant shall pay all interest
charges incurred by virtue of any installment payments. Taxes shall
not be deemed to include:
(a) franchise or similar taxes of Landlord;
(b) income, excess profits or other taxes, if any, of
Landlord, except to the extent such taxes are
expressly in lieu of or a substitute for any other
tax, assessment or charge upon the Building, which,
if such other tax, assessment or charge were in
effect, would be payable by Tenant as provided
herein, in which event such taxes shall be computed
as if the Building were the only property of
Landlord, and the Fixed and Additional Rent hereunder
the only income of Landlord; and
(c) any penalty or interest for late payment of Taxes.
"Tax Year" shall mean the period of twelve (12) consecutive
months commencing on January 1st of each year after the Base Tax Year.
"Tenant's Proportionate Share" shall be equal to a fraction, the
numerator of which is the gross rentable square feet for the Premises
and the denominator of which is equal to the gross rentable square
feet of the Building. In calculating Tenant's proportionate share,
all basement space shall be excluded.
4.3. (a) If Taxes payable in any Tax Year falling wholly or partially
within the Term shall be greater than the Base Taxes, Tenant shall pay to
Landlord, as Additional Rent, Tenant's Proportionate Share of the amount by
which the Taxes for such Tax Year exceed the Base Taxes ("Excess Taxes").
(b) As soon as practicable, Landlord shall determine or estimate
the Excess Taxes, if any, for each Tax Year and shall submit such information to
Tenant in a written statement ("Landlord's Tax Statement").
(c) Commencing on the first day of each Tax Year or, if later,
the first day of the month immediately following the submission of any
Landlord's Tax Statement and continuing thereafter until Landlord renders the
next Landlord's Tax Statement, Tenant shall pay to Landlord on account of its
obligation under Section 4.3(a) hereof, a sum (the "Monthly Tax Payment") equal
to one-twelfth (1/12) of Tenant's Proportionate Share of the Excess Taxes for
such Tax Year. Tenant's first Monthly Tax Payment after receipt of Landlord's
Tax Statement shall be accompanied by the payment of an amount equal to the
product of the number of full months, if any, within the Tax Year which shall
have elapsed prior to such first Monthly Tax Payment, times the Monthly Tax
Payment, minus any Additional Rent already paid by Tenant on account of its
obligation under this Section 4.3 for such Tax Year.
(d) Each Landlord's Tax Statement shall reconcile the payments
made by Tenant pursuant to the preceding Landlord's Tax Statement with Tenant's
Proportionate Share of the actual Excess Taxes imposed for the period covered
thereby. Any balance due to Landlord shall be paid by Tenant within thirty (30)
days after Tenant's receipt of Landlord's Tax Statement: any surplus due to
Tenant shall be applied by Landlord against the next accruing monthly
installment(s) of Additional Rent. If the Term has expired or has been
terminated, Tenant shall pay the balance due to Landlord or, alternatively,
Landlord shall refund the surplus to Tenant, whichever the case may be, within
thirty (30) days after Tenant's receipt of Landlord's Tax Statement; provided,
however, if the Term shall have been terminated as a result of a default by
Tenant, then Landlord shall have the right to retain such surplus to the extent
Tenant owes Landlord any Fixed Rent or Additional Rent.
4.4. (a) If Landlord shall receive any refund of Taxes in respect of a
Tax Year and if Tenant shall have paid Additional Rent based on the Taxes paid
prior to the refund, Landlord shall deduct from such tax refund any expenses,
including, but not limited to, attorney's fees and appraisal fees, incurred in
obtaining such tax refund, and out of the remaining balance of such tax refund,
Landlord shall credit Tenant's Proportionate Share of such refund against the
next accruing monthly installments of Additional Rent, or if the Term shall have
expired, Tenant's Proportionate Share of such refund shall be refunded to Tenant
within thirty (30) days after receipt thereof by Landlord; provided, however, if
the Term shall have expired as a result of a default by Tenant, Landlord shall
have the right to retain Tenant's Proportionate Share of the refund to the
extent Tenant owes Landlord any Fixed Rent or Additional Rent.
(b) Notwithstanding anything to the contrary contained in this
Lease, Tenant shall not have the right to contest or appeal the validity of any
Taxes or the amount of the assessed valuation of the Building without the prior
written consent of Landlord, which consent shall not be unreasonably withheld.
(c) While proceedings for the reduction in assessed valuation for
any Tax Year is pending, the computation and payment of Tenant's Proportionate
Share of Excess Taxes shall be based upon the original assessments for such
year.
(d) Tenant shall also pay to Landlord, as Additional Rent, upon
demand, the amount of all increases in Taxes and/or all assessments or
impositions made, levied or assessed against or imposed upon the Building or any
part thereof which are attributable to additions or improvements in, on or about
the Premises made by or on behalf of Tenant or which in whole or in part belong
to Tenant, subsequent to the Commencement Date.
4.5. [INTENTIONALLY DELETED]
4.5A. (a) If Operating Expenses payable in any Operational Year
falling wholly or partially within the Term shall be greater than the Base
Operational Expenses, Tenant shall pay to Landlord, as Additional Rent, Tenant's
Proportionate Share of the amount by which the Operating Expenses for such
Operational Year exceed the Base Operating Expenses ("Excess Expenses").
(b) As soon as practicable, Landlord shall estimate the Operating
Expenses and Excess Expenses for each Operational Year and shall submit such
information to Tenant in a written statement ("Landlord's Statement"); provided
that the estimate of operating expenses shall not be more than 110% of the
Operating Expenses actually incurred in the prior Operational Year.
(c) Commencing on the first day of each Operational Year or, if
later, the first day of the month immediately following the submission of any
Landlord's Statement and continuing thereafter until Landlord renders the next
Landlord's Statement, Tenant shall pay to Landlord on account of its obligation
under Section 4.5(A) hereof, a sum (the "Monthly Expense Payment") equal to
one-twelfth (l/12) of Tenant's Proportionate Share of the Excess Expenses for
such Operational Year. Tenant's first Monthly Expense Payment after receipt of
Landlord's Statement shall be accompanied by the payment of an amount equal to
the product of the number of full months, if any, within the Expense Year which
shall have elapsed prior to such first Monthly Expense Payment, times the
Monthly Expense Payment, minus any Additional Rent already paid by Tenant on
account of its obligation under this Section 4.5 A for such Expense Year.
(d) Each Landlord's Statement shall reconcile the payments made
by Tenant pursuant to the preceding Landlord's Statement with Tenant's
Proportionate Share of the actual Excess Expenses imposed for the period covered
thereby. Any balance due to Landlord shall be paid by Tenant within thirty (30)
days after Tenant's receipt of Landlord's Statement; any surplus due to Tenant
shall be applied by Landlord against the next accruing monthly installment(s) of
Additional Rent. If the Term has expired or has been terminated, Tenant shall
pay the balance due to Landlord or, alternatively, Landlord shall refund the
surplus to Tenant, whichever the case may be, within thirty (30) days after
Tenant's receipt of Landlord's Statement, provided, however, if the Term shall
have been terminated as a result of a default by Tenant, then Landlord shall
have the right to retain such surplus to the extent Tenant owes Landlord any
Fixed Rent or Additional Rent.
4.6. [INTENTIONALLY DELETED]
4.7. Landlord's failure to render Landlord's Statement with respect to
any Operational Year or Tax Year, or Landlord's delay in rendering said
Statement beyond a date specified herein, shall not prejudice Landlord's right
to render a Landlord's Statement with respect to that or any subsequent
Operational Year or Tax Year. The obligations of Landlord and Tenant under the
provisions of this Section with respect to any Additional Rent shall survive the
expiration or any sooner termination of the Term.
4.8. Each Landlord's Statement shall be conclusive and binding upon
the Tenant, unless Tenant shall notify Landlord, within thirty (30) days after
receipt of Landlord's Statement, that it disputes the correctness of Landlord's
Statement, specifying the respects in which Landlord's Statement is claimed to
be incorrect. Pending the adjudication of such dispute, Tenant shall pay
Additional Rent equal to the Additional Rent payable pursuant to Landlord's
Statement in dispute and such payment shall be without prejudice to Landlord's
or Tenant's position in any legal proceeding commenced by Landlord or Tenant.
4.9. [INTENTIONALLY DELETED]
4.10. Any Additional Rent payable pursuant to this Article 4 shall be
collectible by Landlord in the same manner as Fixed Rent, and Landlord shall
have the same remedies for non-payment thereof as Landlord has hereunder for
non-payment of Fixed Rent.
4.11. Any payments of Additional Rent or refunds due to Tenant
hereunder for any period of less than a full year, or any adjustment required
due to the change in the area of the Premises, shall be equitably prorated.
4.12. If Tenant shall fail to pay when due, including any grace period
for the purpose hereof, any installment of Fixed Rent or any Additional Rent,
Tenant shall pay interest thereon at the interest rate, provided for in Section
21 hereof, from the date when such installment or payment shall have become due
to the date of the payment thereof, together with a late charge equal to three
percent (3%) of the sum unpaid, which interest and late charge shall be deemed
Additional Rent.
4.13. Tenant shall pay (a) Tenant's electricity which is directly
metered, (b) all actual costs of electric for overtime HVAC costs and (c)
Tenant's Proportionate Share of any increase over base in Common Area electrical
charges to the extent payable as part of Monthly Expense Payments.
4.14. In no event shall any adjustment in Tenant's obligation to pay
Additional Rent under this Article 4 result in a decrease in the Fixed Rent
payable hereunder; however, any decrease below the base year in Taxes or
Operating Expenses or decrease in Tenant's Proportionate Share shall be passed
on to Tenant. Tenant's obligation to pay Additional Rent, and Landlord's
obligation to credit and/or refund to Tenant any amount, pursuant to the
provisions of this Article 4, shall survive the Termination Date.
5. Electricity.
5.1. [INTENTIONALLY DELETED]
5.2. Landlord shall cause the electric power supply to the Premises to
be separately metered, excluding HVAC and other building systems. Tenant shall,
however, continue to be liable to the extent payable as part of Monthly Expense
Payments for Tenant's Proportionate Share of any increase over the base year
electrical expenses incurred for the operation of any Common Areas. Landlord
shall not be liable in any way to Tenant for any failure or defect in the supply
or character of electricity furnished to the Premises by reason of any
requirement, act or omission of the public utility serving the Building with
electricity or for any other reason not attributable to Landlord. Except for
Landlord's obligations under Article 6 herein, Tenant shall furnish and install
all lighting tubes, lamps and bulbs required in the Premises, at Tenant's
expenses, or shall pay Landlord's reasonable charges therefor on demand. Tenant
shall not pay (as part of Operating Expense Payments or otherwise) replacement
costs for lighting tubes, lamps and bulbs for other tenants.
5.3. Tenant's use of electricity in the Premises shall not, at any
time, exceed the capacity of any of the electrical conductors and equipment in
or serving the Premises. Tenant shall not, without Landlord's prior consent make
any alteration or addition to the electrical systems in the Premises or the
Building. All additional risers or other equipment required therefor shall be
provided by Landlord and the cost thereof shall be paid by Tenant upon
Landlord's demand.
6. Improvements in Preparation for Occupancy.
6.1. Landlord shall have final approval over and cause to be
constructed certain improvements to the Premises in preparation for Tenant's
occupancy (the "Initial Improvements") in accordance with the specifications
attached hereto as Schedule B and the Plans referred to in Section 6.2. Landlord
will provide an allowance of $25.00 per rentable square foot of leased office
space, plus $2.50 per rentable square foot of leased office space (the
"Allowance") that will be applied to the Initial Improvements and the
architectural and engineering design and plans, provided that necessary
demolition costs, the cost of erecting demising walls and installation of
separate metering of electrical power to the Premises shall be the Landlord's
responsibility and shall not be applied against the Allowance. The Tenant shall
prepare demolition plans and deliver same with the construction drawings and
specifications. In the event Tenant's design and improvement costs actually
exceed $27.50 per rentable square foot, then Tenant may request up to an
additional $10.00 per rentable square foot, which additional funds shall be
provided by Landlord. Tenant shall repay the additional funds per square foot,
at a rate of ten percent (10%) interest per year, in equal monthly installments
with the first monthly installment due within thirty (30) days of the receipt of
the funds and the last monthly installment due with the rent for month 119,
i.e., the expiration of the initial Term. The loan for the additional funds,
principal and interest, shall be fully amortized over the initial Term. Tenant
shall pay, as Additional Rent, all expenses incurred by Landlord over the
Allowance resulting from any delay, change order and specifications by Tenant in
connection with the Initial Improvements.
6.2. Tenant will prepare and deliver to Landlord the schematic plans
for the Premises (the "Schematic Plans") on or before September 8, 1993.
Landlord will deliver to Tenant written notice that it has approved the
Schematic Plans within two (2) weeks of receipt of the Schematic Plans. Tenant
shall deliver construction drawings within six (6) weeks of receipt of
Landlord's approval of the Schematic Plans. Landlord's comments to the
construction drawings and specifications shall be provided within seven (7) days
of the delivery of construction documents. Thereafter, Tenant shall have five
(5) days to revise the construction drawings and specifications. Construction of
the Initial Improvements shall not commence until Landlord delivers written
notice to Tenant that it has approved the Plans in full. Landlord shall commence
construction of the Initial Improvements upon delivery of final construction
drawings consistent with the Schematic Plans and in conformance with acceptable
engineering standards, and shall use best efforts to complete construction
within one hundred twenty (120) days thereafter. Landlord's allowance shall not
be applied to the construction of the demising walls or the installation of
separate metering of electric power to the Premises as those items will be
undertaken by the Landlord.
6.3. The Premises shall be conclusively deemed available for Tenant's
occupancy on, and the Commencement Date shall be, January 1, 1994, or such later
date that the following conditions have been met:
(a) a temporary certificate of occupancy (whether or not subject to
conditions), permitting occupancy of the Premises has or have
been issued by the applicable governmental authority; and
(b) the Initial Improvements have been substantially completed
(excluding any details of construction, decoration or mechanical
adjustment which do not materially interfere with Tenant's use of
such part of the Premises); and
(c) five (5) days notice of the occurrence of the events described in
Subsections (a) and (b) has been given to Tenant; and
(d) thirty (30) days after Tenant is first given access to the
Premises to install its trade fixtures and other equipment.
(e) Subject to Section 6.4, if the Commencement Date does not occur
on or before June 1, 1994, Tenant may elect to terminate this
Lease.
6.4. Notwithstanding the provisions of Section 6.3, if there is a
delay in the availability of the Premises for occupancy due to any default,
delay, change order or omission by Tenant, including without limitation Tenant's
issuance of change orders during the course of construction, Tenant or Tenant's
agents interfering with Landlord's performance of the Initial Improvements, or
building code issues arising from Tenant's requirements, then the Premises shall
be deemed available for occupancy, and the Commencement Date shall be, on the
date when the Premises would otherwise have been available but for such default,
delay, change order or omission.
6.5. Tenant has inspected the Premises and accepts the same "as is" in
its present condition, subject to Landlord's completion of the Initial
Improvements. By entering into occupancy of any part of the Premises (excluding
access as contemplated by Section 6.7), Tenant shall be conclusively deemed to
have agreed that Landlord, up to the time of such occupancy, had performed all
of its obligations hereunder with respect to such part of the Premises and that
such part, except for minor details of construction, decoration and mechanical
adjustment, was in satisfactory condition as of the date of such occupancy,
unless within ten (10) days after such date Tenant shall give notice to Landlord
specifying the respects in which the same was not in such condition.
6.6. If Landlord is delayed in delivering possession of the Premises
to Tenant because of the fact that a certificate of occupancy has not been
procured, or for any other reason, Landlord shall not be subject to any
liability for damages for failure to give possession on said date and the
validity of this Lease shall not be impaired under such circumstances.
6.7. Prior to the Commencement Date, Tenant shall be permitted access
to install its Trade Fixtures and other equipment.
6.8. Landlord shall cause the Building, but not the Premises, to be
delivered and maintained in compliance with the provisions of the Americans with
Disabilities Act. Nothing contained herein shall relieve Tenant of its
obligation, at Tenant's sole cost and expense, to plan, cause to be constructed
and maintain the Premises in compliance with Law (including the Americans with
Disabilities Act of 1991 (the "ADA").
7. Alterations.
7.1. Following the Initial Improvements, Tenant shall make no
alterations, installations, additions, improvements or changes in or to the
Premises of any structural nature (the "Subsequent Improvements") without
Landlord's prior written consent, which consent shall not be unreasonably
withheld or delayed.
7.2. [INTENTIONALLY DELETED]
7.3. If Tenant performs any Subsequent Improvements, Tenant shall,
prior to the commencement of construction or demolition, at its expense, obtain
all building permits, approvals and certificates required by any Governmental
Authority and upon completion, a certificate of occupancy and shall deliver
promptly duplicates of all such permits, approvals and certificates to Landlord.
Tenant will cause Tenant's contractors and subcontractors to carry workers'
compensation, general liability, auto liability, property damage insurance,
naming as additional insured Landlord, Landlord's property manager, and any
holder of a Superior Mortgage, as Landlord may require. The limits of such
insurance will not be less than those reasonably required by the Landlord at the
time demolition or construction. Tenant agrees to obtain and deliver to
Landlord, prior to the commencement of any demolition or construction,
certificates of insurance evidencing the required coverage. If any mechanic's
lien is filed against the Premises or the Building, for work claimed to have
been done for, or materials furnished to, Tenant, whether or not done pursuant
to this Article, the same shall be discharged or bonded by Tenant within thirty
(30) days thereafter, at Tenant's expense.
7.4. All improvements to the Premises, including without limitation
the Initial Improvements, and all fixtures, panelling, partitions, railings and
like installations (excluding movable partitions and Tenant's personal property
and equipment but including wall-to-wall carpeting, drapes and fixtures)
installed in the Premises at any time, either by Tenant, or by Landlord on
Tenant's behalf, shall become the property of Landlord and shall remain upon and
be surrendered with the Premises unless Landlord, by notice to Tenant at the
time of approval (to the extent approval is required by the terms of this
Lease), elects to have the same removed by Tenant, in which event, the same
shall be so removed from the Premises by Tenant no later than the end of the
Term, at Tenant's expense and Tenant shall immediately and at its sole expense,
repair and restore the Premises as may be necessary to maintain its structural
integrity following removal and repair any other damage to the Premises or the
Building due to such removal. Notwithstanding the foregoing, at the time
Landlord approves the Initial Work, Landlord shall inform Tenant what of the
Initial Improvements shall be removed at the end of the Term. Tenant's trade
fixtures and personal property may be removed by Tenant at the end of the Term.
All property permitted or required by Landlord to be removed from the Premises
at the end of the Term that, nonetheless, remains in the Premises after Tenant's
surrender thereof shall be deemed abandoned and may, at the election of
Landlord, either be retained as Landlord's property or may be removed from the
Premises by Landlord at Tenant's expense.
8. Repairs and Maintenance.
8.1. Landlord, at its expense, shall keep, maintain and repair in good
condition the Premises and Building, both exterior and interior, its grounds,
fixtures, equipment and systems, except for (i) those repairs which arise out of
the fault or negligence of Tenant, (ii) those repairs for which Tenant is
responsible pursuant to any provision of this Lease, or (iii) repairs to
Tenant's personal property; provided, however, that Landlord shall have no
obligation or liability to perform repairs until receipt of written notice from
Tenant specifying the repairs required.
8.2. Tenant shall, throughout the Term, take good care of and maintain
the Premises and the fixtures and appurtenances therein, and shall make all
repairs and replacements, as and when needed to preserve the Premises in good
working order and condition. Landlord, however, shall maintain and repair the
existing HVAC, exterior walls and roof and structural elements and building
systems. All damage or injury to the Premises or to any other part of the
Building, or to its grounds, fixtures, equipment, systems and appurtenances,
whether requiring structural or nonstructural repairs, caused by or resulting
from any carelessness, act, omission, negligent or improper conduct of Tenant,
Tenant's servants, employees, contractors, agents, invitees or licensees, or by
the use or manner of use of the Premises by Tenant or any such person, shall be
repaired promptly by Tenant at its sole cost and expense, to the reasonable
satisfaction of Landlord. Tenant shall also repair all damage to the Building
and to the Premises caused by the moving of Tenant's fixtures, furniture, or
equipment into or out of the Premises or the installation thereof. All such
repairs shall be of quality and class equal to the Initial Improvements. If
Tenant fails after ten (10) days' notice to proceed with due diligence to make
any repairs required to be made by Tenant (except in an emergency, wherein
Landlord may proceed immediately if Tenant does not immediately, proceed to
repair), such repairs may be made by the Landlord at the expense of Tenant and
the costs and expenses thereof incurred by Landlord shall be collectible as
Additional Rent on the date on which the next installment of Fixed Rent is due
hereunder following delivery by Landlord of an invoice therefor.
8.3. Landlord shall deliver the Building's existing mechanical and
electrical systems in good working order. The lobby, cafeteria, elevators,
bathrooms and common areas now are being substantially refurbished and this work
will be substantially completed by the Commencement Date in accordance with a
letter from Cushman & Wakefield, dated August 4, 1993, to Landlord.
8.4. (a) Subject to the provisions of this paragraph, Tenant, at
Tenant's own expense, shall have an exclusive option to plan, propose and
construct recreational facilities on five (5) acres of land, which land may be
presently improved with parking and landscaping ("Land") and a basketball hoop
at the perimeter of the parking lot. All expenses for planning, proposing,
constructing, obtaining approvals, maintaining insurance and increased insurance
and taxes and all actual operating expenses, shall be borne by Tenant, but
Tenant shall pay no Fixed Rent.
(b) Tenant, at Tenant's own expense, shall have an exclusive
option to plan, propose and construct a recreational facility within the
basement, outside of the 10,000 square feet designated as leased as part of the
initial Premises. All expenses for planning, proposing, constructing, obtaining
approvals for maintaining insurance and increased insurance, taxes and increased
taxes and all actual operating expenses shall be borne by Tenant.
(c) In the event a recreational facility is constructed pursuant
to subparagraphs 8.4[(a)] or (b), Tenant shall make the recreational facility
available to all tenants within the Building for a fee reasonable for Tenant to
defray its capital and operational costs, but not at a profit.
8.5. (a) Tenant, at Tenant's own expense, shall have an exclusive
option to plan, propose and construct a child care facility at a location on the
property ("Location"), which location shall be requested by Tenant and consented
to by Landlord, such consent not to be unreasonably withheld or delayed. All
expenses for planning, proposing, constructing, obtaining any and all insurance
and increased insurance costs to Landlord and any and all increased taxes shall
be paid by Tenant. The Tenant shall have two years from the Commencement Date to
exercise this option. In the event this option is exercised, Tenant shall rent
the Location pursuant to a triple net ground lease, at an annual fixed rent of
$12.00 per year, payable to Landlord in equal monthly installments. The term of
this triple net lease shall expire as of the same date of this Lease, unless
otherwise terminated earlier by the Landlord for cause.
(b) Subject to space availability, the child care facility also may be
located on the first floor within the Building. If situated on the first floor,
then Tenant shall pay Rent and Additional Rent together with all of the expense
itemized in paragraph 8.5(a). At the expiration of the term of the Lease, Tenant
shall restore the space where the child care facility is located to the original
shell condition.
8.6. In connection with the exercise of Tenant's rights under Section
8.4 and 8.5, the parties recognize that Tenant shall have the right to reduce
the parking area and spaces presently constructed on the Property, but in no
event below the minimum zoning requirements, and Landlord agrees to cooperate
with Tenant's site plan or other applications relating to such exercise of
rights. If the location of either facility is not acceptable to any agency
exercising jurisdiction over such application, then Tenant shall request a
separate location and Landlord shall not unreasonably withhold or delay giving
consent to the separate location. Landlord shall have no right to subdivide or
further develop the Property or to take any other action which would either
increase the footprint of the Building, increase the parking requirements
applicable to the Property or otherwise adversely affect Tenant's rights
hereunder.
9. Utilities and Services.
9.1. As long as Tenant is not in default under any of the covenants of
this Lease, Landlord shall provide: (a) necessary elevator facilities; (b)
heating, ventilating and air-conditioning ("HVAC") to the Premises when and as
required on business days (holidays excepted) from 8 a.m. to 6 p.m. (weekdays)
and 8 a.m. to 1 p.m. (Saturday); (c) water for ordinary purposes; and (d)
cleaning services in accordance with Schedule C hereto, for the common areas of
the Building, and the Premises, on business days (holidays excepted), provided
that the same are kept in order by Tenant. Special cleaning services in excess
of those provided by Landlord, at Tenant's request, shall be at Tenant's sole
cost and expense and subject to Landlord's reasonable approval. Landlord shall
maintain a guard service from six o'clock p.m. to eleven o'clock p.m., Monday
through Friday; and, nine o'clock a.m. to four o'clock p.m. on Saturdays and
Sundays. In addition, Landlord shall maintain a full time building manager and a
full time porter on site five days a week.
9.2. Landlord reserves the right to suspend services of the heating,
elevators, plumbing, air conditioners, power systems or cleaning or other
services, when necessary by reason of accident or for repairs, alterations,
replacements or improvements necessary for as long as may be reasonably required
by reason thereof, or by reason of strikes, accidents, laws, order or
regulations or any other reason beyond the control of Landlord, and in such
case, Tenant shall not be entitled to any abatement of rent or any other offset
whatsoever. Landlord shall provide Tenant with advance notice of any proposed
suspension of services and the duration of the suspension and will use
commercially reasonable efforts to effect the repairs, alterations and
replacements.
9.3. Tenant may request and Landlord shall designate an area on the
Building roof for supplemental HVAC equipment. Landlord shall review all plans
and Landlord's approval for all plans shall not be unreasonably withheld or
delayed. Tenant shall pay all costs for a supplemental system. At the expiration
of this Lease, Tenant shall restore the Building and Premises to the condition
existing prior to any modifications for supplementary HVAC.
9.4. Tenant shall request and Landlord shall designate a certain area
within Tenant's basement space for water supply and discharge piping, subject to
Tenant obtaining permit. Tenant shall submit to Landlord all plans for the
piping for Landlord's approval, which approval shall not be unreasonably
withheld or delayed.
9.5. Landlord shall permit and use its best efforts to cause a third
party to maintain and operate a commercial food service during regular business
hours for the benefit of the Building's tenants, including Tenant. Regular
business hours shall be deemed 8:00 A.M. through 3:00 P.M., Monday through
Friday. In the event that the food service provider ceases operation, then
Landlord shall replace the commercial food service within a reasonable period of
time. In no event, shall Landlord itself have to maintain or operate a food
service.
10. Insurance.
10.1. Tenant shall maintain commercial general liability insurance
providing coverage for bodily injury, personal injury, property damage and
contractual liability with limits of at least S3, 000, 000 per occurrence and
$5,000,000 annual aggregate, or such higher limits as Landlord shall prudently
require, with carriers and in forms reasonably satisfactory to Landlord.
10.2. If Tenant shall fail to maintain such insurance as is required
by this Article 10, Landlord may obtain such insurance, the amount of the
premium or premiums paid by Landlord for such insurance shall be collectible as
Additional Rent on the date on which the next installment of Fixed Rent is due
hereunder following delivery by Landlord of an invoice therefor.
10.3. All insurance policies maintained by Tenant under this Article
10 shall name Landlord, Landlord's property manager and any holder of a Superior
Mortgage as an additional insured.
10.4. Landlord, at Landlord's cost and expense, will maintain all-risk
property insurance in an amount not less than the replacement cost of the
Building.
10.5. Tenant shall carry fire and extended coverage insurance insuring
its interest in Tenant's personal property, including but not limited to, office
furniture, equipment and supplies therein. Tenant shall maintain Workers'
Compensation insurance as required by the State of New Jersey as well as
Employers' Liability insurance with a limit of at least $100,000 per employee
per accident. Tenant shall maintain workers compensation insurance as required
by the State of New Jersey as well as Employer's Liability insurance with limits
as required by the Landlord.
10.6. Each party hereby waives any rights of action against the other
for loss or damage covered by the property insurance required hereunder and each
party covenants and agrees with the other that it will obtain a waiver from the
carriers of such property insurance policies releasing such carrier's
subrogation rights as against the Landlord and/or Tenant, as the case may be.
Tenant shall provide Landlord with Certificates of Insurance which shall
evidence that the insurance required hereunder is in full force and effect, that
such insurance will not be terminated or canceled without thirty (30) days'
prior written notice to Landlord by the carrier of such insurance and that the
carrier of such insurance waives all right of recovery by way of subrogation
against the Landlord. The Certificates will be delivered prior to occupancy of
the Premises and shall deliver new Certificates showing the renewal of the
coverage at least 10 days prior to the expiration of the existing coverage.
10.7. Tenant shall not do anything, or suffer or permit anything to be
done in or about the Premises, the Building or its common areas which shall (a)
subject Landlord to any liability or responsibility for injury to any person or
property by reason of any activity being conducted on the Premises, (b) cause
any increase in the fire insurance rates applicable to the Building or equipment
or other property located therein, or (c) be prohibited by any license or other
permit required or issued by governmental authority. Tenant, at Tenant's
expense, shall comply with all rules, orders, regulations or requirements of the
National Board of Fire Underwriters or any similar body. In the event that any
alteration of the Premises by Tenant, any act or omission of Tenant, or Tenant's
occupancy of the Premises shall cause the rate of fire or other insurance on the
Building or the Premises to be increased, Tenant shall pay the amount of any
such increase as Additional Rent on the date on which the next installment of
Fixed Rent is due hereunder following delivery by Landlord of an invoice
therefor.
11. Use.
11.1. Tenant shall use the Premises for general business,
professional, executive, and administrative offices, light manufacturing and
such activities as are normally incidental thereto as allowed under Tenant's
variance dated July 14, 1993. Tenant shall not use the Premises for any other
purpose.
11.2. Tenant shall not use or occupy, suffer or permit the Premises or
any part thereof to be used in any manner, or anything to be done therein or
suffer or permit anything to be brought into or kept therein, which would in any
way tend to or: (a) cause substantial or objectionable noise, (b) violate any
laws or requirements of a governmental authority, (c) make void or voidable any
insurance policy then in force with respect to the Building and Common Areas,
(d) make unobtainable from reputable insurance companies authorized to do
business in the State of New Jersey at standard rates any fire insurance with
extended coverage, or liability, elevator, boiler or other insurance required to
be furnished by Landlord under the terms of a Superior Mortgage (e) cause, or be
likely to cause, physical damage to the Building, Common Areas or any part
thereof, (f) constitute a public or private nuisance, (g) impair the appearance,
character or reputation of the Building, (h) discharge objectionable fumes,
vapors or odors into the Building's air conditioning system or into the
Building's flues or vents or otherwise in such manner as may unreasonable offend
other occupants, or (i) impair or interfere with any of the Building's services,
including the furnishing of electrical energy, or the proper and economic
cleaning, air conditioning or other servicing of the Building or the Premises,
or impair or interfere with the use of any of the other areas of the Building,
or occasional discomfort, annoyance or inconvenience to Landlord or any of the
other Tenants or occupants of the Building. The provision of this Section, and
the application thereof, shall not be deemed to be limited in any way to or by
the provisions of any other Section of this Article or any of the Rules and
Regulations set forth in Schedule E hereto.
11.3. Tenant will not at any time use or occupy, or suffer or permit
to use or occupy the Premises in violation of any certificate of occupancy
issued for or insurance policies issued on the Building or any applicable laws,
statutes, rules, ordinances, orders, regulations of any Governmental Authority,
including, without limitation, any recycling laws or other environmental or
conservation laws.
11.4. Except in accordance with all legal requirements, Tenant shall
not store, use, or dispose of any hazardous materials (as defined in ss.1014(14)
of the Comprehensive Environmental Response Compensation and Liability Act of
1980, as amended from time to time (42 U.S.C. ss. 9601 et seq.) or N.J.A.C.
7:16-1.1), in, on, under or about the Premises. Tenant shall, at Tenant's own
expense, comply with the Industrial Site Recovery Act, N.J.S.A. 13:1k-6 et seq.,
and all other applicable federal, state, and local laws, promulgated with
respect to hazardous substances and the regulations promulgated thereunder
applicable to the Premises and Tenant's use thereof. Tenant shall defend,
indemnify and hold harmless Landlord from and against all claims, costs, and
liabilities, including attorneys' fees, arising out of or in connection with
Tenant's breach of its obligations under this Section 11.4. Tenant's obligations
under this Section 11.4 shall survive the expiration or earlier termination of
this Lease.
11.5. Tenant shall not place a load upon any floor of the Premises
that exceeds the floor load per square foot that such floor was designed to
carry and which is allowed by certificate, rule, regulation, permit or law. If
Tenant wishes to place any safe, heavy machinery, heavy equipment, bulky matters
or fixtures in the Premises, it may do so at its own expense, but Landlord
reserves the right to prescribe their weight and position. Business machines and
mechanical equipment in the Premises shall be placed and maintained by Tenant,
at Tenant's expense, in such manner as shall be sufficient in Landlord's
judgment to absorb vibration and noise and prevent annoyance or inconvenience to
any other Tenant or occupant of the Building.
11.6. Tenant shall have the exclusive use of one secure loading dock
identified on Schedule "A". Said dock shall have a demising wall. Tenant may
have partial use of a second loading dock.
12. Assignment and Subletting.
12.1. Neither this Lease, nor the term and estate hereby granted, nor
any part hereof or thereof, shall be assigned, mortgaged, pledged, encumbered or
otherwise transferred by Tenant, and neither the Premises, nor any part thereof,
shall be encumbered in any manner by reason of any act or omission on the part
of Tenant or anyone claiming under or through Tenant without Landlord's prior
written consent which consent shall not be unreasonably withheld or delayed.
Tenant shall have the right, with the prior consent of Landlord which consent
shall not be unreasonably withheld or delayed, to assign this lease or to sublet
the Premises or any portion thereof provided:
(a) Tenant shall furnish Landlord with the name and business
address of the proposed assignee or subtenant, a copy of the proposed assignment
or subletting agreement which includes the rental amounts to be paid by the
subtenant, and reasonably satisfactory information with respect to the nature
and character of the business and financial condition of the proposed assignee
or subtenant. Any proposed assignee or subtenant must, in the reasonable
judgment of the Landlord, be of a character, engage in a business and maintain a
financial condition which is in keeping with the reasonable standards of
Landlord for the Building.
(b) The purposes for which the proposed assignee or subtenant
intends to use the Premises are expressly permitted by this Lease;
(c) No subletting shall be for a term (including renewals, if
any) ending later than one day prior to the expiration date of this Lease;
(d) No Event of Default shall have occurred and be continuing,
either at the time that Landlord's consent to any assignment or subletting if
required or on (i) the proposed effective date of the assignment, or (ii) the
date of the commencement of the term of any such assignment or subletting;
(e) Tenant agrees to pay the Landlord, in consideration for
Landlord's consent to the assignment or subletting, net of expenses incurred by
Tenant, fifty percent (50%) of the difference of between the amount Tenant pays
to Landlord pursuant to this Lease with respect to the Premises, or the portion
thereof sublet or assigned, and the amount received by Tenant from its assignee
or subtenant with respect thereto;
(f) Tenant agrees to pay to Landlord an amount that will
reimburse Landlord for reasonable legal fees actually incurred by it to engage
outside counsel to assist it in reviewing and approving the proposed assignment
or subletting, but, in no event, shall reasonable fees exceed $1,000.00; and
(g) Tenant shall deliver promptly to Landlord an executed copy of
each assignment or subletting agreement as may be authorized by this Article
upon the execution of any such agreement.
12.2. Landlord and Tenant agree that it will not be unreasonable for
Landlord to withhold its consent to any assignment or subletting if the
assignment or subletting will increase Landlord's financial risk or
responsibility or jeopardize the enforceability of the Lease or restrict its
ability to lease other space in the Building.
12.3. [INTENTIONALLY DELETED]
12.4. No assignment, subletting or occupancy shall be deemed a waiver
of the provisions in this Article 12 or a release of Tenant from the full
performance by Tenant of all of the terms, conditions and covenants of this
Lease. Each assignee shall assume and be deemed to have assumed this Lease and
shall be and remain liable jointly and severally with Tenant for the payment of
the Fixed Rent and Additional Rent and for the due performance of all the terms,
covenants, conditions and agreements herein contained on Tenant's part to be
performed for the Term of this Lease. No merger or business consolidation, sale
of control or shares or other change of ownership or management shall constitute
an assignment or subleasing hereunder.
13. Default.
13.1. Each of the following events shall constitute an "Event of
Default" under this Lease:
(a) the failure of Tenant to pay an installment of Fixed Rent or
Additional Rent, or other sum of money whatsoever when due which Tenant shall be
obligated to pay under the provisions of this Lease, if such failure continues
for ten (10) days from the date Landlord delivers to Tenant notice of such
failure:
(b) the failure of Tenant to perform or observe any of the other
terms, covenants, conditions or agreements of this Lease, if such failure
continues for thirty (30) days after delivery by Landlord of written notice to
Tenant of such failure (provided, that in the case of any such default which
cannot be cured by the payment of money and cannot with diligence be cured
within said 30-day period, if Tenant shall commence promptly to cure the same
and thereafter prosecutes the curing thereof with diligence and provides
Landlord with written evidence thereof, the term within which such default may
be cured shall be extended for such period as is necessary to complete the
curing thereof with diligence).
(c) the levy of any execution or attachment against Tenant or any
of Tenant's property pursuant to which the Premises may be taken or occupied by
someone other than Tenant;
(d) if Tenant shall file a voluntary petition in bankruptcy or
insolvency, or shall be adjudicated a bankrupt or insolvent, or shall file any
petition or answer seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under the present or
any future federal bankruptcy act or any other resent or future applicable
federal, state or other statute or law, or shall make any assignment for the
benefit of creditors or shall seek or consent to or acquiesce in the appointment
of any trustee, receiver or liquidator of Tenant, or of all or any part of
Tenant's property and, provided further, that within sixty (60) days after the
commencement of any such proceeding against Tenant, such proceeding shall not
have been dismissed or stayed, or if, within sixty (60) days after the
appointment of any trustee, receiver or liquidator of Tenant, or of all or any
part of Tenant's Property, without the consent or acquiescence of Tenant, such
appointment shall not have been vacated or otherwise discharged, or if any
execution or attachment shall be issued against Tenant or any of Tenant's
Property pursuant to which the Premises shall be taken or occupied or attempted
to be taken or occupied: or
(e) if any event shall occur or any contingency shall raise
whereby this Lease or the estate hereby granted or the unexpired balance of the
Term, would, by operation of law or otherwise, devolve upon or pass to any
person, firm or corporation other than Tenant except as is expressly permitted
under Article 12; or
(f) if the Premises shall become vacant, deserted or abandoned
for a period of thirty (30) consecutive days; or
(g) if Tenant shall assign this Lease or sublet the Premises in
violation of the terms and provisions of Article 12 hereof.
13.2. In the event Tenant becomes a debtor in a case pending under the
Bankruptcy Code (11 U.S.C. Section 101 et. seq.), Landlord's right to terminate
this Lease shall be subject to the right of the trustee in bankruptcy, or debtor
in possession, as the case may be, to assume or assign this Lease. To the extent
permitted or allowed by law, the trustee or debtor shall not have the right to
assume or assign this Lease, until the trustee or debtor (i) promptly cures all
defaults under the lease, (ii) promptly compensates Landlord for monetary
damages incurred as a result of such default, and (iii) provides "adequate
assurance of future performance", which shall mean, in addition to any other
requirements of 11 U.S.C. Section 365(b)(3), that all of the following have been
satisfied: (a) in addition to rent payable under the Lease, the trustee or
debtor shall establish with Landlord a security deposit equal to three months of
Fixed Rent; (b) maintain said security deposit in said amount whenever it is
drawn upon by Landlord after a default by Tenant; (c) trustee or debtor must
agree that Tenant's business shall be conducted in a first class manner; and (d)
the use of the Premises shall not change. If all the foregoing are not
satisfied, Tenant shall be deemed not to have provided Landlord with adequate
assurance of future performance of this Lease.
14. Remedies of Landlord.
14.1. If at any time during the term of this Lease, one or more Events
of Default shall have occurred and shall not have been remedied, then, and in
any such case, Landlord, at Landlord's option, may elect to:
(a) terminate this Lease at any time by giving notice of
termination to Tenant, and the term hereof shall expire by limitation upon the
date prescribed in such notice as fully and completely as if said date were the
date herein originally fixed for the expiration of the Term, and Tenant shall
thereupon quit and peacefully surrender the Premises to Landlord without payment
therefor by Landlord:
(b) re-enter the Premises, and remove all persons and property
therefrom, either by summary proceedings or by any suitable action or proceeding
at law; and/or
(c) commence summary dispossess and/or ejectment proceedings
based on Tenant's failure to pay rent.
14.2. In the event of the termination of this Lease, or of reentry by
summary proceedings, ejectment or by any suitable action or proceeding at law,
or by agreement, or by force or otherwise, by reason of default hereunder on the
part of Tenant or Tenant's abandonment of the Premises, the prevailing party
shall pay reasonable attorneys' fees and costs. Landlord's damages at the
election of Landlord, are either:
(a) sums equal to the Fixed Rent and the Additional Rent payable
hereunder which would have been payable by Tenant had this Lease not so
terminated, or had Landlord not so reentered the Premises, payable monthly, in
advance, but otherwise upon the terms therefor specified herein following such
termination or such reentry and until the conclusion of the Term, provided,
however, that if Landlord shall re-let the Premises or any portion or portions
thereof during said period, Landlord shall credit Tenant with the net rents
received by Landlord from such re-letting, such net rents to be determined by
first deducting from the gross rents as and when received by Landlord from such
reletting, the reasonable expenses incurred or paid by Landlord in terminating
the Lease or in reentering the Premises, including reasonable attorneys' fees,
and in securing possession thereof, as well as the reasonable expenses of
reletting, including altering and preparing the Premises or any portion or
portions thereof for new Tenants, brokers' commissions, advertising expenses,
and all other expenses properly chargeable against the Premises and the rental
therefrom; it being understood that any such re-letting may be for a period
shorter or longer than the remaining term of this Lease, but in no event shall
Tenant be entitled to receive any excess of such net rents over the sums payable
by Tenant to Landlord hereunder, nor shall Tenant be entitled in any suit for
the collection of damages pursuant to this subsection to a credit in respect of
any rents from a reletting, except to the extent that such rents are actually
received by Landlord. Landlord shall make commercially reasonable efforts to
mitigate damages. If the Premises or any part thereof should be re-let in
combination with other space or for greater than the balance of the Term, then
proper apportionment shall be made of the rent received from such reletting and
of the expenses of re-letting, and Landlord shall have the right to grant
reasonable rent concessions to attract one or more new Tenants and to permit the
term of any new lease covering part or all of the Premises to be for a shorter
or longer period than provided for herein; or
(b) on demand, a liquidated sum which at the time of such
termination of this Lease or at the time of any such reentry by Landlord, as the
case may be, represents the present value, discounted by the prime rate of Chase
Manhattan Bank then in effect, of the excess of (i) the aggregate of the Fixed
Rent and the Additional Rent payable hereunder which would have been payable by
Tenant (conclusively presuming the Additional Rent to be the same as was payable
for the year immediately proceeding such termination) for the period commencing
with such earlier termination of this Lease or the date of such reentry, as the
case may be, and ending with the conclusion of the Term, had this Lease not so
terminated or had Landlord not so reentered the Premises, over (ii) the rental
value (calculated as of the date of such termination or reentry) of the Premises
for the same period.
14.3. If the Premises or any part thereof be re-let by Landlord for
the unexpired portion of the Term of this Lease, or any part thereof, before
presentation of proof of such damages to any court, commission or tribunal, the
amount of rent reserved upon such re-letting shall, prima facie, be the rental
value, for purposes of Section 14.2(b), for the Premises, or part thereof, so
re-let during the term of the re-letting. Landlord shall in no event and in no
way be responsible or liable for any failure to re-let the Premises or any part
thereof or for failure to collect any rent due upon any such re-letting.
14.4. In the event Landlord elects to collect damages from Tenant
under Section 14.2(a), at any time subsequent to such election and upon ten (10)
days prior written notice to Tenant, Landlord may elect to collect a lump sum
under Section 14.2(b), crediting Tenant with amounts theretofore received by
Landlord as damages.
14.5. The foregoing Sections of this Article shall also apply if the
default by Tenant has occurred prior to the Commencement Date and/or prior to
Tenant taking possession of the Premises.
14.6. Landlord, in putting the Premises in good order or preparing the
same for re-rental may, at Landlord's option, make such alterations, repairs,
replacements, and decorations in the Premises as Landlord, in Landlord's
reasonable judgment, considers advisable and necessary for the purpose of
re-Letting the Premises, and the making of such alterations, repairs,
replacements, and decorations shall not operate or be construed to release
Tenant from liability hereunder as aforesaid.
14.7. Mention in this Lease of any particular remedy shall not
preclude Landlord or Tenant from any other remedy, in law or in equity.
15. Destruction, Fire or other Casualty.
15.1. If the Building, Premises or any improvement therein, excepting
all items which Tenant is obligated to insure pursuant to Section 10.2 of this
Lease, now or hereafter erected in or upon the Building shall be damaged or
destroyed, by fire, storm, earthquake or other casualty, then, Tenant shall give
prompt notice thereof to Landlord and Landlord shall, at Landlord's cost and
expense proceed with reasonable diligence to conduct any necessary demolition
and to repair and restore the Building or such improvements.
15.2. Landlord shall have no obligation to repair or replace any of
Tenant's furniture, equipment or supplies destroyed by fire, storm, earthquake,
water or other casualty.
15.3. If (a) more than fifty (50%) percent of the Premises is damaged
or destroyed or (b) the Building is damaged or destroyed to the extent that the
Premises or access thereto cannot, with reasonable diligence, be fully repaired
or restored by Landlord with one hundred eighty (180) days after the date the
damage or destruction, notwithstanding the fact that the Premises may have not
been damaged or destroyed, or (c) Landlord elects to demolish the Building
following a substantial casualty, either party may terminate this Lease. The
terminating party shall notify the other party of its determination, in writing,
within sixty (60) days after the date of the damage or destruction. If the
Premises can be fully repaired or restored within the one hundred eighty (180)
day period, or if such repair or restoration cannot be made within said period
but neither party does not elect to terminate this Lease, this Lease shall
remain in full force and effect, and Landlord shall diligently repair and
restore the damage as soon as reasonably possible, subject to the provisions of
Section 15.2 herein.
15.4. If the Premises are partially destroyed or damaged and Landlord
repairs or restores them pursuant to the provisions of this Article, the Fixed
Rent and Additional Rent payable hereunder for the period during which such
damage, repair or restoration continues shall be abated in proportion to the
degree to which Tenant's reasonable use of the Premises is substantially
impaired. Except for abatement, if any, of Fixed Rent and Additional Rent,
Tenant shall have no claim against Landlord for any damages suffered by reason
of any such damage, destruction, repair or restoration.
16. Condemnation.
16.1. If the Building or such part thereof as will render the Premises
unsuitable for Tenant's reasonable use shall be acquired or condemned for any
public or quasi-public use or purpose, this Lease shall end as of the date of
the vesting of title in the condemning authority.
16.2. In the event of any such acquisition or condemnation of all or
any part of the Premises, Landlord shall be entitled to receive the entire award
for any such acquisition or condemnation. Tenant shall have no claim against
Landlord or the condemning authority for the value of any unexpired portion of
the Term and Tenant hereby expressly assigns to Landlord all of its right, title
and interest in and to any such award, and also agrees to execute any and all
further documents that may be required in order to facilitate the collection
thereof by Landlord. Nothing contained herein shall be deemed to prevent Tenant
from making a separate claim in any condemnation proceedings for any moving
expenses, for the value of any Tenant's property which would be removable at the
end of the Term pursuant to the provisions of this Lease or for other damages
which do not detract from or reduce Landlord's share of the award.
17. Subordination.
17.1. This Lease and the term and estate hereby granted are and shall
be subject and subordinate to the lien of each mortgage which may now or at any
time hereafter affect all or any portion of the Premises or Landlord's interest
therein and to all ground leases which may now or at any time hereafter affect
all or any portion of the Premises (any such mortgage or ground lease being
herein called a "Superior Mortgage") and each and every advance made or
hereafter to be made under a Superior Mortgage and to all renewals,
modifications, replacements, substitutions and extensions of a Superior
Mortgage. The foregoing provisions for the subordination of this Lease and the
term and estate hereby granted to the holder of a Superior Mortgage shall be
self-operative and no further instrument shall be required to effect any such
subordination; provided, however, at any time and from time to time, upon not
less than ten (10) days' prior notice by Landlord, Tenant shall execute,
acknowledge and deliver to Landlord any and all reasonable instruments that may
be necessary or proper to effect such subordination or to confirm or evidence
the same.
17.2. If all or any portion of Landlord's estate in the Premises shall
be sold or conveyed to any person, firm or corporation upon the exercise of any
remedy provided for in any Superior Mortgage or by law or equity, such person,
firm or corporation and each person, firm or corporation thereafter succeeding
to its interest in the Premises (a) shall not be bound by any payment prior to
such sale or conveyance of Fixed Rent, Additional Rent or other payments for
more than one month in advance (except prepayments in the nature of security for
the performance by Tenant of its obligations hereunder), and (b) shall be liable
for the keeping, observance and performance of the other covenants, agreements,
terms, provisions and conditions to be kept, observed and performed by Landlord
under this Lease.
17.3. In the event of an act or omission by Landlord which would give
Tenant the right to terminate this Lease or to claim a partial, total or
constructive eviction, Tenant will not exercise any such right until it has
given written notice of such act or omission, or, in the case of the Premises or
any part thereof becoming untenantable as the result of damage from fire or
other casualty, written notice of the occurrence of such damage, to the holder
of any Superior Mortgage whose name and address shall previously have been
furnished to Tenant in writing, by delivering such notice of such act, omission
or damage addressed to such holder at said address or if such holder hereafter
furnishes another address to Tenant in writing at the last address of such
holder so furnished to Tenant, and, unless otherwise provided herein, until a
reasonable period for remedying such act, omission or damage shall have elapsed
following such giving of such notice, provided any such holder, with reasonable
diligence, shall, following the giving of such notice, promptly (a) state in
writing its intention to remedy such act, omission or damage and (b) commence
and continue to remedy such act, omission or damage or to cause the same to be
remedied.
17.4. If, in connection with obtaining financing for the Premises or
refinancing any Superior Mortgage, the prospective lender requests reasonable
modifications to this Lease as a condition precedent to such financing or
refinancing, then Tenant hereby covenants and agrees not to unreasonably
withhold, delay or condition its consent to such modifications, provided such
modifications do not increase the Fixed Rent or Additional Rent, do not reduce
the length of the Term, do not materially and adversely affect the leasehold
interest created by this Lease or the rights of Tenant hereunder and do not
materially and adversely affect the manner in which Tenant's operations are
conducted at the Premises.
18. Indemnification and Hold Harmless.
18.1. Tenant on behalf of itself and any party holding by, through or
under Tenant, agrees to indemnify and hold harmless Landlord, its agents,
contractors, employees, in the following manner:
(a) against any default under this Lease by Tenant or any party
holding by, through or under Tenant for any direct damages, costs, claims or
liabilities, including reasonable attorneys' fees, sustained by Landlord or any
party holding by, through or under Landlord as a result of such default;
(b) against any and all claims, damages, losses and liabilities,
including reasonable attorneys' fees, whatsoever their nature, cause or origin,
excluding, however, loss of profit, special, indirect or consequential damages,
attributable in any manner to the omission, fault, willful act, negligence or
other misconduct of Tenant, its agents, contractors, employees, licensees or
invitees arising out of the use and occupancy of the Premises by Tenant, its
agents, contractors, employees, licensees or invitees; and
(c) against any and all damage or injury to the Premises, to
Tenant, its agents, contractors, employees, licensees, or invitees except to the
extent same is attributable to the omission, fault, willful act, negligence or
other misconduct of Landlord, its agents, contractors, employees, licensees or
invitees.
(d) The Tenant hereby absolutely and unconditionally indemnifies,
defends and holds the Landlord free and harmless of, from and against any and
all claims, costs, expenses, liabilities, losses, liens, encumbrances, fees,
damages, judgments, penalties, causes of action and other charges of whatsoever
kind of nature (including, without limitation, attorneys' fees and disbursements
and the fees and expenses of any environmental and analytical laboratories,
consultants and engineers) suffered or incurred by the Landlord, including the
cost of any required or necessary repair, removal, remediation, cleanup,
detoxification and any action required, necessary or otherwise taken prior to or
following a transfer of title to the Premises or any portion thereof, and
arising, from (i) the violation of any of the Environmental Laws (as hereinafter
defined) by Tenant, as same shall affect all or any part of the Premises, (ii)
the release by Tenant of any Hazardous Materials (as hereinafter defined) in,
on, under, the Premises or any part thereof and (iii) any Hazardous Activity (as
hereinafter defined) by Tenant at or in connection with the Premises or any part
thereof. The obligations or the Tenant referred to in this Paragraph
[(collectively, the "Toxic Waste Obligations"] shall continue notwithstanding
the satisfaction, discharge, release, termination or cancellation of the Lease.
(e) The Tenants covenant and agree that the Premises shall at all
times hereafter be maintained, occupied, operated and maintained in strict
compliance with all of the Environmental Laws. The Tenant shall at all times
maintain in full force and effect all necessary permits, licenses, approvals and
other authorizations required under the Environmental Laws for the Premises and
the use or intended use thereof. The Tenant shall provide the Landlord with a
copy of any request for information or any inspection of the Premises by any
governmental authority with respect to any Hazardous Materials or Hazardous
Activity and a copy of any response to each such request or inspection and any
written notice of any pending or threatened proceeding, advice or inquiry
concerning the Premises (or any portion thereof) which relates to any Hazardous
Materials, Hazardous Activity, or pollution or protection of the environment,
promptly after delivery thereof. The Tenant shall, promptly upon gaining notice
thereof, notify the Landlord in writing of any release, discharge or spill of
any Hazardous Materials in, on, under or about the Premises or the existence of
any Hazardous Materials emanating from or passing through the Premises.
(f) For purposes of this Article 18, the following terms shall
have the following meanings:
(i) "Environmental Laws" shall mean all present and future
federal, state and local environmental, health and safety laws, rules,
statutes, directives, binding interpretations, binding policies,
ordinances and regulations now or hereafter in effect and as same have
been or may hereafter be amended, modified or supplemented, from time
to time, including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 (42
U.S.C. ss.9601, et seq.), the Hazardous Materials Transportation
Control Act of 1970 (49 U.S.C. ss.1802 et seq.), the Resource
Conservation and Recovery Act of 1976 (42 U.S.C. ss.6901 et seq.), the
Water Pollution Control Act (33 U.S.C. ss.1251 et seq.), the Safe
Drinking Water Act (42 U.S.C. ss.300h et seq.), the Clean Air Act (42
U.S.C. ss.1857 et seq.), the Solid Waste Disposal Act (42 U.S.C.
ss.6901 et seq.), the Toxic Substances Control Act (15 U.S.C. ss.2601
et seq.), the Emergency Planning and Community Right-to-Know Act of
1986 (42 U.S.C. ss.11001 et seq.), the Radon Gas and Indoor Air
Quality Research Act of 1986 (42 U.S.C. ss.7401 note, et seq.), the
Superfund Amendments and Reauthorization Act of 1986 (42 U.S.C.
ss.9601 et seq.), and the counterparts of such statute. as enacted by
state and local governments with jurisdiction over the Premises or the
Tenants or any principal, partner, shareholder, officer or director of
the Tenants, and any and all rules and regulations promulgated under
any and all of the aforementioned laws, including but not limited to,
the Industrial Site Recovery Act (N.J.S.A. 13:1K-6 et. seq.) and the
New Jersey Spill Act (N.J.S.A. 58:10-23.11 et. seq.)
(ii) "Hazardous Materials" mean any substances defined or
identified as "hazardous substances", "hazardous wastes", "toxic
wastes", "toxic substances" or "pollutants" in any of the
Environmental Laws, including, without limitation, asbestos or
asbestos-containing materials, polychlorinated biphenyls, fuel oil,
petroleum, hazardous waste and any other hazardous or toxic
substances, contaminants, materials or pollutants.
(iii) "Hazardous Activity" shall mean the disposal,
generation, handling, manufacturing, processing, production,
refinement, storage, transfer, transportation and/or use of Hazardous
Materials in, on, under or about the Premises or any part thereof in
violation of any Environmental Law.
19. Landlord's Obligations.
19.1. Except as otherwise provided in this Lease, Landlord shall
operate and maintain the Building and its grounds, exclusive of Tenant's
recreational areas, in first class condition and agrees to keep in good order,
condition and repair the roof, Common Areas, exterior walls and structure of the
Building and its grounds (including all plumbing, mechanical and electrical
systems), all insofar as they affect the Premises, except that Landlord shall in
no event be responsible to Tenant for any condition in the Premises, the
grounds, or the Building caused by any act or neglect of Tenant, its invitees or
contractors. Landlord shall not be responsible to make any improvements or
repairs to the Building or the grounds other than as provided in this Section
unless expressly provided otherwise in this Lease.
19.2. Landlord shall not be liable to Tenant for any compensation or
reduction of Fixed Rent or Additional Rent by reason of inconvenience or
annoyance or for loss of business arising from the necessity of Landlord or its
agents entering the Premises for any of the purposes in this Lease authorized,
or for repairing the Premises or any portion of the Building. In case Landlord
is prevented or delayed from making any repairs, alterations or improvements, or
furnishing any services or performing any other covenant or duty to be performed
on Landlord's part, by reason of an Unavoidable Delay, as defined in Section
38.2, Landlord shall not be liable to Tenant therefor, nor shall Tenant be
entitled to any abatement or reduction of rent by reason thereof unless and
until Tenant's occupancy is thus substantially impaired for a period of sixty
(60) days, nor shall the same give rise to a claim in Tenant's favor that such
failure constitutes actual or constructive, total or partial, eviction from the
Premises. If Tenant's occupancy is substantially impaired for more than one
hundred and eighty (180) days, then Tenant may elect to terminate this Lease.
19.3. Landlord represents that, except in accordance with law, no
Hazardous Materials or waste has been used, treated or stored on the Premises.
In addition, Landlord represents and covenants that prior to the Commencement
Date of this Lease, no hazardous material has been or will be disposed of on the
Premises. Landlord hereby agrees to indemnify and hold harmless Tenant and its
shareholders, directors, officers and employees from and against any and all
claims, damages, losses and liabilities, including reasonable attorneys fees,
attributable to Hazardous Materials on the real property on which the Building
is located which are present on or prior to the Commencement Date.
19.4. Landlord or its agents shall not be liable for any loss of or
damage to any property of Tenant by theft, nor for any injury or damage to
persons or property resulting from any cause of whatsoever nature: nor shall
Landlord or its agents be liable for any such damage caused by other Tenants of
the Building or persons, in, upon or about the Premises or caused by operations
in construction of any private, public or quasi-public work. The foregoing shall
not limit Landlord's obligations as set forth herein, including to provide quiet
enjoyment, to fund improvements, to provide environmental indemnity and to make
common area and system improvements.
20. Cumulative Remedies.
20.1. The rights given to Landlord herein are in addition to any
rights that may be given to Landlord by any statute or otherwise.
21. Advances by Landlord.
21.1. If Tenant shall fail to perform any term, covenant or agreement
contained herein to be performed by Tenant, upon thirty (30) days advance
written notice to Tenant, Landlord may elect to make advances to perform the
same or to cause the same to be performed, in which event Tenant, shall pay to
Landlord all such sums reasonably advanced by Landlord, as Additional Rent, on
the date on which the next installment of Fixed Rent is due hereunder following
delivery by Landlord of an invoice therefor. All such sums advanced by Landlord,
shall accrue interest commencing on the date of Landlord's advance at the higher
of 12% per annum, or the then prime rate of the Chase Manhattan Bank, N.A., but
in no event higher than the highest rate of interest permitted by law computed
from the date of each advance to the date such sums are paid to Landlord.
Anything to the contrary herein notwithstanding any such advances made by
Landlord shall not be or be deemed a waiver of any default on the part of Tenant
in the observance of the terms, covenants and agreements under this Lease or of
any rights or remedies of Landlord upon any such default.
22. No Waiver by Landlord.
22.1. The failure of Landlord to insist in any instance on strict
performance of any covenant or condition hereof, or to exercise any option
herein contained, shall not be construed as a waiver of such covenant, condition
or option in any other instance. Unless otherwise expressly provided herein,
this Lease cannot be changed or terminated except in writing.
23. Landlord's Right to Exhibit the Premises.
23.1. During the last twelve (12) months of the term of this Lease,
Landlord or its agents or designees may have admission to the Premises at all
reasonable hours and upon advance notice for the purpose of exhibiting the same
to prospective lessees of all or any part of the Building.
24. No Acceptance of Surrender.
24.1. No act or thing done by Landlord or Landlord's agents or
employees during the Term of this Lease shall be deemed to accept a surrender of
the Premises by Tenant and a termination of this Lease, or shall be valid,
unless in writing, signed by Landlord.
25. Quiet Enjoyment.
25.1. If and so long as Tenant pays the Fixed Rent, Additional Rent
and all other sums agreed to be paid by the Tenant under this Lease and promptly
and faithfully performs and observes the terms, covenants and agreements in this
Lease provided to be performed and observed by Tenant, Tenant quietly shall have
and enjoy the Premises.
26. Estoppel Certificates.
26.1. Within ten (10) days after receipt of request therefor, either
party will certify to the other and to any party named by the other party, (a)
that as of the date of such certification, whether or not this Lease is in full
force and effect; (b) that, to certifying party's best knowledge, neither party
to this Lease is in default in keeping, observing or performing any term,
covenant, agreement, provision, condition or limitation contained in this Lease,
and, if in default, specifying each such default and whether or not to the best
knowledge of the person making such certification, any event has occurred which
with the passage of time, the giving of notice, or both would constitute a
default hereunder; (c) the last day to which the Fixed Rent and Additional Rent
payable under this Lease have been paid; and (d) as to Tenant, that Tenant
neither has nor claims to have any right of set-off or deduction against the
payment of Fixed Rent or Additional Rent, or if a right of set-off or deduction
is alleged, specifying the nature and extent thereof.
27. Parking.
27.1. Tenant will be provided with parking in accordance with Schedule
D attached hereto and made a part hereof. Landlord shall provide Tenant with no
less than four (4) cars per 1,000 rentable square feet of Tenant's office space.
No other tenant of the Building shall have a right to a greater ratio of parking
space per rentable square feet.
28. Notices.
28.1. Any and all notices, consents, approvals, requests and other
communications (collectively, "notices") required to be given or served by the
terms and provisions of this Lease, either by Landlord to Tenant, or by Tenant
to Landlord, shall be in writing and signed by the party giving the notice, or
by a duly authorized officer or representative of a corporate party, and shall
be deemed to have been delivered by Landlord when postmarked and sent by
certified or registered mail, return receipt requested, proper postage prepaid
and addressed to the party to be notified. Notice on behalf of either party
shall be addressed to that party at the address set forth below, or to such
other address as that party hereafter shall furnish in writing to the other
party:
To Landlord:
Ms. Debra Kloper
Route 10 Joint Venture
c/o MONY Real Estate
Investment Management
1740 Broadway
New York, New York 10019
with a copy to:
David C. Berman, Esq.
435 East 79th Street
Suite 7W
New York, New York 10021
with a copy to:
Brad Fenlon
Cushman & Wakefield
One Meadowlands Plaza, Suite 1100
East Rutherford, New Jersey 07073
To Tenant:
Edward Jordan
Dialogic Corporation
1515 Route 10
Parsippany, New Jersey 07054
with a copy to:
R. Barry Stiger, Esq.
Lowenstein, Sandler, et al.
65 Livingston Avenue
Roseland, New Jersey 07068
29. Bind and inure.
29.1. The terms, covenants and conditions contained in this Lease
shall bind and inure to the benefit of the successors and assigns of the parties
with the same effect as if mentioned in each instance where a party is named or
referred to, except that no violation of the provisions of Article 12 shall
operate to vest any rights in any successor or assignee of Tenant.
29.2. [INTENTIONALLY DELETED]
29.3. Nothing contained in this Lease shall be deemed to confer upon
any Tenant, or anyone claiming under or through any Tenant, any right to insist
upon, or to enforce against Landlord or Tenant, the performance or observance by
Tenant of its obligations hereunder. Landlord shall enforce the Rules and
Regulations against all tenants of the Building.
30. Waiver of Trial by Jury.
30.1. Landlord and Tenant hereby waive trial by jury in any action,
proceeding or counterclaim brought by either against the other on any matter
whatsoever arising out of or in any way connected with this Lease.
30.2. [INTENTIONALLY DELETED]
31. Brokerage Fees.
31.1. Each party represents that there was no broker(s) instrumental
in consummating this Lease except Cushman & Wakefield and Edward S. Gordon
Company. Each party agrees to hold the other harmless from and against any and
all claims or demands for brokerage commissions arising out of or in connection
with the execution of this Lease based on conversations or negotiations with
such party on the part of any broker other than the above-named brokers, whose
fees shall be paid by Landlord in accordance with separate agreements between
such brokers and Landlord. Landlord shall pay the real estate commissions owing
to such brokers and represents to Tenant that no other broker was instrumental
in the consummation of this Lease.
32. Execution.
32.1. This Lease may be executed in counterparts, each of which, when
taken together, shall constitute one and the same agreement.
33. Recordation of Lease.
33.1. In no event shall Tenant have the right to record this Lease and
any such recording shall constitute an Event of Default. Landlord and Tenant
shall record a memorandum of this Lease.
34. Surrender.
34.1. On the last day of the Term, or upon any earlier termination of
this Lease, or upon any re-entry by Landlord upon the Premises, Tenant shall, at
its own expense, quit and surrender the Premises to Landlord broom clean, in
good order, condition and repair except for ordinary wear, tear and damage by
fire or other insured casualty, together with all improvements which have been
made upon the Premises (except as otherwise provided for in this Lease,
including, but not limited to, in Sections 6 and 7 hereof). Tenant shall remove
from the Premises and the Building all of Tenant's furniture, trade fixtures and
equipment and all personal property and personal effects of all persons claiming
through or under Tenant, except as previously agreed by Landlord, Tenant shall
pay the cost of repairing all damage to the Premises and the Building occasioned
by such removal and shall deliver all keys and pass cards to Landlord.
34.2. If the Premises are not surrendered at the expiration of the
Term, Tenant shall indemnify Landlord against loss or liability resulting from
delay by Tenant in so surrendering the Premises, including any claims made by
any succeeding Tenant founded on such delay. If the Premises shall not be
surrendered upon the termination of this Lease, unless otherwise agreed by
Landlord and Tenant, Tenant shall be deemed to be occupying the Premises as a
Tenant from month-to-month, subject to all the terms and provisions of this
Lease insofar as the same are applicable to a month-to-month tenancy, at a
monthly rental equal to twice the sum of: (i) the monthly installments of Fixed
Rent; (ii) the Electricity Rent for the last month of the Term; (iii) the
Monthly Tax Payment for the last month of the Term; and (iv) Tenant's Projected
Share for the last month of the Term.
34.3. Tenant's obligations under this Article shall survive the
Expiration Date or sooner termination of this Lease.
35. Access; Change in Facilities.
35.1. Landlord reserves the right, at any time, without incurring any
liability to Tenant therefor, to make such changes in or to the Building and the
fixtures and equipment of the Building, as well as in the entrances,
passageways, halls, doors, doorways, corridors, elevators, escalators, stairs,
toilets and other public parts of the Building, as it may reasonably deem
necessary or desirable, provided any such change does not materially and
adversely affect Tenant's access to or use of the Premises.
35.2. Tenant shall permit Landlord to install, use and maintain pipes,
ducts and conduits within or through the Premises, or through the walls, columns
and ceilings therein, provided that the installation work is performed at such
times and by such methods as will not unreasonably interfere with Tenant's use
and occupancy of the Premises, or damage the appearance thereof.
35.3. Landlord or Landlord's agents shall have the right to enter the
Premises at all times for any of the purposes specified in this Article and (a)
to examine the Premises or for the purpose of performing any obligation of
Landlord or exercising any right or remedy reserved to Landlord in this Lease;
(b) to exhibit the Premises to others; (c) to make such decorations, repairs,
alterations, improvements or additions, or to perform such maintenance,
including the maintenance of all air-conditioning, elevator, plumbing,
electrical, sanitary, mechanical and other service or utility systems an
Landlord may reasonably deem necessary or desirable; (d) to take all materials
into and upon the Premises that may be required in connection with any such
decorations, repairs, alterations, improvements, additions or maintenance; and
(e) to alter, renovate and decorate the Premises at any time during the Term if
Tenant shall have removed all or substantially all of Tenant's Property from the
Premises. If practical, under the circumstances, Landlord shall give Tenant
notice and use its best efforts to give Tenant notice of such entry.
35.4. The exercise of any right reserved to Landlord in this Article
shall not constitute an actual or constructive eviction, in whole or in part, or
entitle Tenant to any abatement or diminution or rent, or relieve Tenant from
any of its obligations under this Lease, or impose any liability upon Landlord
or Landlord's agents.
36. Integration of Agreement.
36.1. This Lease contains the entire agreement of the parties hereto
and no representations, inducements, promises or agreements, oral or otherwise,
between the parties not embodied herein, shall be of any force or effect. If any
term or provision of this Lease shall be invalid or unenforceable, the remaining
terms and provisions hereof shall not be affected thereby. If the application of
any term or provision of this Lease to any person or circumstance shall to any
extent be invalid or unenforceable such term or provision shall remain
applicable as to those persons or circumstances to which it shall be valid and
enforceable to the fullest extent permitted by law.
37. [INTENTIONALLY DELETED]
38. Unavoidable Delays.
38.1. In the event Landlord or Tenant shall be delayed in the
performance of any act or obligation hereunder by reason of Unavoidable Delays,
then performance of such act or obligation shall be excused for the period of
the delay, the period for the performance of any such act or obligation shall be
extended for a period equivalent to the period of such delay.
38.2. "Unavoidable Delays" shall mean any and all delays beyond a
party's reasonable control, including, without limitation, delays caused by the
other party, governmental restrictions, governmental regulations, controls,
undue delays, order of civil, military or naval authority, governmental
preemption, strikes, labor disputes, lock-outs, shortage of labor or materials,
inability to obtain materials or reasonable substitutes therefor, default of any
Building or construction contractor or subcontracts, Acts of God, fire,
earthquake, floods, explosions, actions of the elements, extreme weather
conditions, undue precipitation, other weather conditions, enemy action, civil
commotion, riot or insurrection, fire or other unavoidable occurrence.
39. Rules and Regulations.
39.1. Tenant and Tenant's servants, employees, agents, visitors and
licensees shall observe faithfully and comply strictly with any reasonable Rules
and Regulations for the Building as Landlord, or Landlord's agents, may from
time to time adopt. Notice of any such Rules or Regulations shall be given in
such manner as Landlord may elect. Landlord shall take all reasonable steps to
enforce such Rules and Regulations, or terms, covenants, or conditions in any
other lease, as against all other tenants. Providing that Landlord is seeking to
enforce such Rules and Regulations through all reasonable efforts, Landlord
shall not be liable to Tenant for violation of the same by any other Tenant, its
servants, employees, agents, visitors, or licensees. In the event any such Rule
or Regulation conflicts with any provision of this Lease, said provision of this
Lease shall control. The current Rules and Regulations in effect with respect to
the Building are attached hereto as Schedule E and made a part hereof.
40. Governing Law.
40.1. This Lease shall be construed and enforced in accordance with
the Laws of the State of New Jersey.
41. Landlord Liability.
41.1. Tenant agrees to look solely to Landlord's estate and interest
in the Building and the Premises for the satisfaction of any right or remedy of
Tenant for the collection of a judgement (or other judicial process) requiring
the payment of money by Landlord, in the event of any liability of Landlord, and
not other property or assets of Landlord and no property or assets of any
shareholder, director, officer or principal of Landlord shall be subject to
levy, execution, attachment, or other enforcement procedure for the satisfaction
of Tenant's remedies under or with respect to this Lease, the relationship of
Landlord and Tenant hereunder, or Tenant's use and occupancy of the Premises, or
any other liability of Landlord to Tenant. Notwithstanding the foregoing, the
Landlord personally guarantees funds sufficient to pay Landlord's costs of
Tenant's Initial Improvements and all of Landlord's work prior to the
Commencement Date and to make the payments required under Section 3.2.
42. Signage.
42.1. Tenant may have signage on the existing monument sign
proportionate to Tenant's share of the total rentable square feet in the
Building. If Tenant occupies 75% or more of the Building's total office space,
then Tenant, at Tenant's own cost and expense, shall have the right to apply for
a permit which allows Tenant to erect a sign directly on the Building. Any and
all applications and additional signs are subject to Landlords approval, which
approval shall not be unreasonably withheld.
43. Arbitration.
43.1. Except as provided in Paragraph 14.1(c), the parties hereto
consent to arbitration of all disputes.
43.2. The party desiring arbitration shall give notice to that effect
to the other party. Within ten (10) days thereafter, the party not requesting
arbitration shall propose three (3) arbitrators and the other party shall select
one (1) of the three (3).
43.3. The arbitrator shall be a fit and impartial person who shall
have had at least 10 years experience in the State of New Jersey in a calling
connected with the matter of the dispute and shall have no prior, present or
proposed future affiliation or connection with either party.
43.4. The arbitration shall be conducted to the extent consistent with
this Article in accordance with the then prevailing rules of the American
Arbitration Association (or any organization successor thereto). The decision
and award shall be rendered by the Arbitrator within 30 days after the
appointment of the Arbitrator. Such decision and award shall be in writing and
shall be final and conclusive on the parties and counterpart copies thereof
shall be delivered to each of the parties. In rendering such decision and award,
the Arbitrator shall not add to, subtract from or otherwise modify the
provisions of this Lease. Judgment may be had on the decision and award of the
Arbitrator so rendered in any court of competent jurisdiction.
43.5. Each party shall pay the fees and expenses of the Arbitrator and
all other expenses of the arbitration (other than the fees and disbursements of
attorneys or witnesses for each party) shall be borne by the parties equally.
43.6. Notwithstanding anything to the contrary elsewhere provided in
this Lease, if the subject matter of a dispute which is provided in this Lease
to be determined by an arbitration is (a) one which would directly affect the
liability of an insurer under any of the policies of insurance referred to
herein and the party which is the insured under such policy so notifies the
other party or (b) one which cannot be the subject of arbitration under a
superior mortgage, then unless such insurer or the superior mortgagee gives its
written consent to the determination of such matter by arbitration, the dispute
shall not be determined by arbitration and the parties shall be left to such
other remedies as they may have.
44. Non-Disturbance.
44.1. Provided that Tenant is not in default (beyond any period given
Tenant to cure such default) in the payment of Fixed Rent or Additional Rent or
in the performance of any of the terms, covenants, or conditions of the Lease on
Tenant's part to be performed, then subject to the terms and conditions of this
Lease, Tenant's rights and privileges under the Lease, or any extensions,
expansions or renewals shall not be defeated by any mortgagor or lender.
<PAGE>
IN WITNESS WHEREOF, the parties have hereunto set their hands and
seals as of the date first written above.
ROUTE 10 JOINT VENTURE
Landlord
Name: Theodore R. Sayers
Title: General Partner
______________________________ By:_______________________________
Witness Theodore R. Sayers
Name: The Mutual Life Insurance
Company of New York
Title: General Partner
/s/Mary McKinney
_________________________ By:/s/Stephen DeNardo
Assistant Secretary _______________________________
Stephen DeNardo,
Vice President
DIALOGIC CORPORATION
Tenant
Name: Edward B. Jordan
Witness Title: Vice President
/s/ Peter H. Ehrenberg
______________________________ By:/s/Edward B. Jordan
Peter H. Ehrenberg, Witness ____________________________
<PAGE>
GUARANTEE AND MORTGAGEE'S CONSENT
The Mutual Life Insurance Company of New York guarantees the
landlord's obligations as set forth in Paragraphs 3.2, and 41.1 and Consents to
non-disturbance as contemplated by Paragraph 44.1 of this Lease.
/s/ Mary McKinney
______________________________ The Mutual Life Insurance Company
Assistant Secretary of New York
By:/s/Stephen DeNardo
_______________________________
Stephen DeNardo,
Vice-President
<PAGE>
CORPORATE ACKNOWLEDGMENT
STATE OF NEW JERSEY :
ss.:
COUNTY OF ESSEX :
BE IT REMEMBERED, that on this 23rd day of August, 1993, before me,
the subscribed, an attorney at law of the State of New Jersey, personally
appeared Edward B. Jordan, who, being by me duly sworn on his oath, deposed and
made proof to my satisfaction that he is the Vice President of Dialogic
Corporation, and the person who has signed the within instrument; and I having
first made known to him the contents thereof, he did acknowledge that he signed,
sealed with the proper corporate seal and delivered the same as such officer on
behalf of the corporation as its voluntary act and deed, made by virtue of
authority from its board of directors, for the uses and purposes therein
expressed.
/s/Peter H. Ehrenberg
----------------------------------
Peter H. Ehrenberg
An Attorney at Law of the
State of New Jersey
<PAGE>
STATE OF NEW YORK )
) SS:
COUNTY OF )
I certify that on 1st day of September, 1993 Mary McKinney
personally came before me and this person acknowledged under oath, to my
satisfaction, that:
(a) This person is the assistant secretary of Mutual Life
Insurance Company of New York, the corporation described in
the foregoing documents;
(b) This person is the attesting witness to the signing of said
documents by the proper corporate officer who is
Stephen DeNardo, the Vice President of the Corporation;
(c) The documents were signed and delivered by the Corporation
as its voluntary act duly authorized by a proper corporate
resolution;
(d) This person knows the proper seal of the corporation which
was affixed to said documents; and
(e) This person signed this proof to attest to the trust of
these facts.
/s/ Mary McKinney
_____________________________
Assisant Secretary
Signed and worn to before
me this 1st day of September, 1993
/s/ Denise A. Caulkin
_______________________________
Notary Public
<PAGE>
SCHEDULE A
FLOOR PLAN OF PREMISES
<PAGE>
EXHIBIT B
DESCRIPTION
ALL that parcel of land located in the Township of Parsippany-Troy Hills and the
Township of Hanover, County of Morris and State of New Jersey which is more
particularly described by the following legal metes and bounds description:
BEGINNING at a point in the newly dedicated Southwesterly sideline of New Jersey
State Highway Route 10, said point of beginning being distant the following 2
courses along said sideline, as measured Southwesterly from its point of
intersection with the Southeasterly sideline of Johnson Road:
(a) along the Southwesterly sideline of New Jersey State Highway
Route 10, South 48 degrees 33 minutes 20 seconds East
1473.83 feet to a jog therein;
(b) partially along the 2nd line of Lot 1.01 South 41 degrees 03
minutes 46 seconds West 20.00 feet to the beginning corner
of the herein described premises and running:
THENCE (1) along the newly dedicated Southwesterly sideline of New Jersey State
Highway Route 10, South 48 degrees 33 minutes 20 seconds East 931, feet to a
point;
THENCE (2) along the Southeasterly line of the whole tract, of which this parcel
is a part, South 39 degrees 30 minutes 25 seconds West 852.23 feet to a point;
THENCE (3) along the Southwesterly line of the whole tract, of which this parcel
is a part, North 49 degrees 34 minutes 20 seconds West 505.89 feet to a point;
THENCE (4) still along same, North 48 degrees 56 minutes 14 seconds West 235.11
feet to a point;
THENCE (5) along the 4th line, reversed, of Lot 1.01, North 41 degrees 0 minutes
46 seconds East 276.88 feet to a point;
THENCE (6) along the 3rd line, reversed, of said Lot 1.01, North 48 degrees 56
minutes 14 seconds West 213.78 feet to a point in the centerline of a heavy duty
road;
THENCE (7) along the centerline of said heavy duty road, and partially along the
2nd course, reversed, of Lot 1.01 North 41 degrees 03 minutes 46 seconds East
586.89 feet to the place of BEGINNING.
KNOWN and designated as Lot 1.02 in Block 200 on the Official Tax Map of the
Township of Parsippany-Troy Hills, County of Morris, State of New Jersey and
Lots 13 and 14 in Block 303 on the Official Tax Map of the Township of Hanover,
County of Morris and State of New Jersey.
The Initial Improvements referenced as Schedule B in paragraph 6.1
will be supplied in accordance with the provisions of paragraph 6.2.
<PAGE>
SCHEDULE C
CLEANING AND ROUTINE MAINTENANCE SERVICE
Cleaning and Routine Maintenance Service will be provided only for conventional
office space, which space is reflected on the plans on the following page, as
follows:
NIGHTLY
Empty and clean wastepaper baskets, ashtrays and other receptacles.
Tenant shall segregate all recyclables as required by law prior to
Landlord's removal of same.
Sweep all flooring, vacuum clean or carpet sweep (as required) all
carpets and rugs. Sweep or dust stone, ceramic tile, marble, terrazzo
and other unwaxed flooring, excluding kitchen area (cleaning of kitchen
is Tenant' s responsibility).
Dust and wipe clean all office furniture and window sills.
Wipe clean all water fountains and coolers.
Dust all leather and leather-type furniture.
Replace plastic bags in wastebaskets when necessary-cost per bag charge
to Tenant.
Remove normal wastepaper and refuse; cost of unusual waste removal to
be charged to Tenant.
After cleaning, all lights shall be turned off, windows closed, doors
locked and offices left in an orderly condition.
MONTHLY
Dust all pictures, frames, charts, graphs, and similar wall hangings
not reached in nightly cleaning.
QUARTERLY
Dust all Venetian blinds.
ANNUALLY
Dust ceiling surfaces other than acoustical ceiling material and vacuum
clean only acoustical materials and other similar surfaces, if
necessary.
WINDOW CLEANING
Wash all interior and exterior windows quarterly.
<PAGE>
SCHEDULE D
PARKING SPACES
<PAGE>
SIDEWALKS, ENTRANCES, ROADWAYS AND PARKING AREAS:
To be kept free and clear of refuse, snow and ice.
AS REQUIRED BY Tenant
Clean inside of all lighting fixtures and globes.
<PAGE>
SCHEDULE E
RULES AND REGULATIONS
1. The sidewalks, entrances, driveways, passages, courts, elevators,
vestibules, stairways, corridors or halls shall not be obstructed or
encumbered by any Tenant or used for any purpose other than for ingress
to and egress from the Premises and for delivery of such merchandise
and equipment in a prompt and efficient manner using elevators and
equipment and passageways designated for such delivery by Landlord.
There shall not be used in any space, or in the public hall of the
Building, either by any Tenant or any jobbers or others in the delivery
or receipt of merchandise, any hand trucks, except those equipped with
rubber tires and sideguards.
2. The water and wash closets and plumbing fixtures shall not be used for
any purpose other than those for which they were designed or
constructed and no sweepings, rubbish, rags, acids or other substances
shall be deposited therein, and the expense of any breakage, stoppage,
or damage resulting from the violation of this rule shall be borne by
the Tenant who, or whose agents, employees or visitors, shall have
caused it.
3. No carpet, rug or other article shall be hung or shaken out of any
window of the Building; and no Tenant shall sweep or throw or permit to
be swept or thrown from the Premises any dirt or other substances into
any of the corridors or halls, elevators, or out of the doors or
windows or stairways of the Building, and Tenant shall not use, keep or
permit to be used or kept any foul or noxious gas or substance in the
Premises, or permit or suffer the Premises to be occupied or used
in a manner offensive or objectionable to Landlord or other occupants
of the Building by reason of noise, odors and/or vibrations, or
interfere in any way with other Tenants or those having business
therein, nor shall any animals or birds be kept in or about the
Building. Smoking or carrying lighted cigars or cigarettes in the
elevators of the Building is prohibited.
4. No awnings or other projections shall be attached to the outside walls
of the Building without the prior written consent of Landlord.
5. No sign, advertisement, notice or other lettering shall be exhibited,
inscribed, painted or affixed by any Tenant on any part of the
outside of the Premises or the Building or on the inside of the
Premises if the same is visible from the outside of the Premises
without the prior written consent of Landlord, except that the name
of Tenant may appear on the entrance door of the Premises and the
directory in the lobby of the Building. In the event of the violation
of the foregoing by any Tenant, Landlord may remove same without
any liability, and may charge the expense incurred by such removal
to Tenant or Tenant violating this rule. Interior signs on doors and
directory tablet shall be inscribed, painted or affixed for each
Tenant by Landlord at the expense of such Tenant, and shall be of a
size, color and style acceptable to Landlord.
6. No Tenant shall mark, paint, drill into, or in any way deface any part
of the Premises or the Building. No boring, cutting or stringing of
wires shall be permitted, except with the prior written consent of
Landlord, and as Landlord may direct.
7. No Tenant shall obtain for use upon the Premises ice, drinking water,
towel or other similar services, or accept barbering or boothblacking
Services in the Premises, except from persons authorized by Landlord,
and at hours and under regulations fixed by Landlord. Canvassing,
soliciting and peddling in the Building is prohibited and each Tenant
shall co-operate to prevent the same. Notwithstanding the foregoing,
Tenant may maintain soda and juice machines and water coolers in the
Premises.
8. Landlord reserves the right to exclude from the Building between the
hours of 6 P.M. and 8 A.M. and at all hours on Sundays and legal
holidays all persons who are not employees of Tenant.
9. Landlord shall have the right to prohibit any advertising by any Tenant
which, in Landlord's opinion, tends to impair the reputation of the
Building or its desirability as a Building for offices, and upon
written notice from Landlord, Tenant shall refrain from or discontinue
such advertising.
10. Tenant shall not bring or permit to be brought or kept in or on the
Premises, any inflammable, combustible or explosive fluid, material,
chemical or substance, or cause or permit any odors of cooking or other
processes, or any unusual or other objectionable odors to permeate in
or emanate from the Premises.
11. If the Building contains central air conditioning and ventilation
Tenant agrees to keep all windows closed at all times and to abide by
any rules and regulations issued by the Landlord with respect to such
services. If Tenant requires air conditioning or ventilation after the
usual hours, Tenant shall give notice in writing to the building
superintendent prior to 3:00 P.M. in the case of services required on
weekdays, and prior to 3:00 P.M. on the day prior in the case of after
hours service required on weekends or on holidays.
FIRST AMENDMENT TO LEASE AGREEMENT RE: COMMENCEMENT DATE
THIS FIRST AMENDMENT TO LEASE AGREEMENT regarding the rent commencement
date, made as of this 20th day of January, 1994, by and between MUTUAL LIFE
INSURANCE COMPANY OF NEW YORK, c/o M.O.N.Y. Real Estate Investment Management,
One Atlantic Street, Stamford, CT 06901 (the "Landlord"), and DIALOGIC
CORPORATION, A New Jersey corporation, with offices and a principal place of
business to be relocated to 1515 Route Ten, Parsippany, New Jersey 07054 (the
"Tenant").
WITNESSETH:
WHEREAS, Landlord is the owner of the real property and all the
improvements thereto located at 1515 Route Ten, Parsippany, New Jersey (the
"Building"); and
WHEREAS, Tenant desires to lease from Landlord and Landlord desires to
lease to Tenant approximately 115,000 square fee of office space on the first
and second floor of the building and 10,000 square fee of storage space on the
basement level; and
WHEREAS, prior to the signing of this First Amendment to the Lease
Agreement the Landlord and Tenant have signed a written lease agreement (the
"Lease") for the space described in the preceding paragraph; and
WHEREAS, pursuant to the terms of the Lease the commencement date (the
"Commencement Date) for the Lease now is not a date certain; and
WHEREAS, the Landlord and the Tenant both now desire to fix the
Commencement Date as a date certain; and
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth and for good and other valuable consideration, the receipt of which is
hereby acknowledged, Landlord and Tenant agree as follows:
1. Delivery Date and Commencement Date
The Delivery Date shall be on or about April 1, 1994, and the
Commencement Date shall be five business days after the Delivery Date. The term
"Delivery Date" shall mean the date when the conditions of sections 6.3(a), (b)
and (c) of the Lease are satisfied, subject to any adjustment as provided in
section 6.4 of the Lease. For the purpose of section 6.4, no act or omission
prior to January 6, 1994 shall be considered.
2. Phased Occupancy
If Tenant occupies any leased space for the conduct of business prior
to the Delivery Date, exclusive of access under section 6.7 of the Lease, then
rent shall commence for that space as of the date of occupancy.
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals
as of the date first written above.
Name: The Mutual Life Insurance Company of
New York, Landlord
_______________________________ By: ________________________________
Witness Stephen DeNardo
Vice President
Name: Dialogic Corporation
______________________________ By: ________________________________
Witness Name: Edward B. Jordan
Title: Vice President
SECOND AMENDMENT TO LEASE AGREEMENT
re: terms for Additional Space
THIS SECOND AMENDMENT TO LEASE AGREEMENT regarding certain terms for
additional space, made as of this 20th day of January, 1994, by and between
MUTUAL LIFE INSURANCE COMPANY OF NEW YORK c/o M.O.N.Y. Real Estate Investment
Management, One Atlantic Street, Stamford, CT 06901 (the "Landlord"), and
DIALOGIC CORPORATION, A New Jersey corporation, with offices and a principal
place of business to be relocated to 1515 Route Ten, Parsippany, New Jersey
07054 (the "Tenant").
WITNESSETH:
WHEREAS, Landlord is the owner of the real property and all the
improvements thereto located at 1515 Route Ten, Parsippany, New Jersey (the
"Building"); and,
WHEREAS, Tenant desires to lease from Landlord and Landlord desires to
lease to Tenant approximately 115,000 square fee of office space on the first
and second floors of the building and 10,000 square feet of storage space on the
basement level; and
WHEREAS, prior to the signing of this Second Amendment to the Lease
Agreement the Landlord and Tenant have signed a written Lease Agreement (the
"Lease") for the space described in the preceding paragraph; and
WHEREAS, The Landlord and the Tenant both now desire to amend certain
terms of the Lease governing Tenant's rights and obligations for possible
additional space pursuant to the terms of the Lease; and
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth, and for good and other valuable consideration, the receipt of which
is hereby acknowledged, Landlord and Tenant agree as follows:
1. The option to lease an additional 35,000 square feet as set forth in
paragraph 2.6 of the Lease shall be modified as follows:
A. The option shall be for 35,006 square feet of space on the
eastern side, and not the western side, of the third floor. A schedule
delineating the eastern and western sides of the third floor is annexed hereto
as Exhibit A.
B. Tenant's notice shall be effective two (2) years, and
not one (1) year from the date upon which it is received by Landlord.
2. Except as expressly set forth herein and in the First Amendment to
Lease Agreement of even date herewith, the terms of the Lease shall remain in
full force and effect.
IN WITNESS WHEREOF, the parties have hereunto set their hands and
seals as of the date first written above.
Name: The Mutual Life Insurance Company of
New York, Landlord
_______________________________ By: /s/ Stephen DeNardo
_________________________________
Witness Stephen DeNardo
Vice President
Name: Dialogic Corporation, Tenant
/s/ Debra L. Blanco
______________________________ By: /s/ Edward B. Jordan
__________________________________
Witness Name: Edward B. Jordan
Title: Vice President
THIRD AMENDMENT TO LEASE AGREEMENT
This THIRD AMENDMENT TO LEASE AGREEMENT, made as of this 19th day of
July, 1994, by and between MUTUAL LIFE INSURANCE COMPANY OF NEW YORK C/O
M.O.N.Y. Real Estate Investment Management, One Atlantic Street, Stamford, CT
06901 (the "Landlord"), and DIALOGIC CORPORATION, a New Jersey corporation, with
offices and a principal place of business at 1515 Route Ten, Parsippany, New
Jersey 07054 (the "Tenant").
WITNESSETH:
WHEREAS, Landlord is the owner of real property and all the
improvements thereto located at 1515 Route Ten, Parsippany, New Jersey (the
"Building"); and,
WHEREAS, Landlord and Tenant have executed a written lease agreement
dated August 31, 1993 (the Lease") for 115,000 square feet of office space on
the first and second floors of the Building and 10,000 square feet of storage
space on the basement level (the "Premises"); and,
WHEREAS, the Lease, at section 1.1 defines the Premises; and
WHEREAS, the Landlord and the Tenant both now desire to increase by
7,987 rentable square feet of office space, the square footage of the Premises,
hereinafter known as the ("First Expansion Space"); as depicted on the attached
Exhibit A.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth, and for good and other valuable consideration, the receipt of which
is hereby acknowledged, Landlord and Tenant agree to amend the Lease as follows:
1. The Premises will consist of 10,000 square feet of storage area in
the basement and 122,987 square feet of office space. The office space will
consist of the entire second floor and part of the first floor as depicted on
Exhibit B annexed hereto and made a part hereof.
2. Landlord shall use its best efforts to have the construction of the
First Expansion Space substantially completed and available for Tenant's
occupancy on September 9, 1994. In the event the First Expansion Space is not
available for Tenant's occupancy on September 9, 1994, Landlord shall provide
temporary space as of September 12,1994 for Tenant's use and occupancy on the
eastern part of the third floor of the Building, as depicted in the
cross-hatched area of Exhibit C of this Amendment (the "Temporary Space").
Tenant shall pay Landlord rent for the use of the Temporary Space in the sum of
eight dollars ($8.00) per square foot per annum, pro rata, until such time that
Landlord has substantially completed the First Expansion Space. Substantial
Completion for the purpose of this amendment only means that the First Expansion
Space has been substantially constructed (except for minor punchlist items and
treatments to the finishes) and has been issued a temporary or final certificate
of occupancy by the appropriate building department authorities responsible for
the issuance of such certificates of occupancy. Landlord shall give written
notice to Tenant of the date of Substantial Completion of the First Expansion
Space.
3. In the event Tenant occupies the Temporary Space on or after September
12, 1994, Landlord agrees to move Tenant from such temporary third floor space
to the First Expansion Space. Landlord shall pay such reasonable moving expenses
incurred by the Tenant within third (30) days after receiving the invoice of
such costs.
4. Except as expressly modified herein or by the Second Amendment to
Lease, all of the terms and conditions of the Lease shall remain in full force
and effect.
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals
as of the date first written above.
Name: The Mutual Life Insurance Company of
New York
______________________________ By: /s/ Debra Kloper
_______________________________
Witness Debra Kloper, Real Estate V.P.
Name: Dialogic Corporation, Tenant
______________________________ By: /s/ Edward B. Jordan
________________________________
Witness Edward B. Jordan, Vice President
FOURTH AMENDMENT TO LEASE AGREEMENT
This FOURTH AMENDMENT TO LEASE AGREEMENT, extending the term and
expanding the size of the leasehold, made as of this 20th day of December 1994,
by and between MUTUAL LIFE INSURANCE COMPANY OF NEW YORK, c/o M.O.N.Y. Real
Estate Investment Management, One Atlantic Street, Stamford, CT 06901 (the
"Landlord"), and DIALOGIC CORPORATION, a New Jersey corporation, with offices
and a principal place of business located at 1515 Route Ten, Parsippany, New
Jersey 07054 (the "Tenant").
W I T N E S S E T H :
WHEREAS, Landlord is the owner of the real property and all the
improvements thereon located at 1515 Route Ten, Parsippany, New Jersey (the
"Building"); and,
WHEREAS, Tenant desired to lease from Landlord and Landlord desired to
lease to Tenant approximately 115,000 square feet of office space on the first
and second floors of the building and 10,000 square feet of storage space on the
basement level (the "Premises"); and,
WHEREAS, on August 31, 1993 Landlord and Tenant entered into a written
lease agreement (the "Lease") for the Premises; and,
WHEREAS, on November 5, 1993 Landlord and Tenant entered into a
written Interim Use and Occupancy Agreement (the "First Use Agreement"); and,
WHEREAS, on February 15, 1994 Landlord and the Tenant entered into a
second written Interim Use and Occupancy Agreement (the "Second Use Agreement");
and,
WHEREAS, during January 1994 a proposed first amendment to the Lease
(the "First Amendment") was proposed, but never agreed upon or effective; and,
WHEREAS, on January 20, 1994 Landlord and Tenant entered into a
written second amendment to the Lease (the "Second Amendment"); and,
WHEREAS, on March 10, 1994 Landlord and Tenant entered into a written
third amendment to the Lease (the Third Amendment"); and,
WHEREAS, Tenant now desires to increase the size of the leasehold and
extend the term of the Lease.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth, and for good and other valuable consideration, the receipt of which
is hereby acknowledged, Landlord and Tenant agree to amend the Lease as follows:
THE SECOND EXPANSION SPACE
1. The Premises will be increased by approximately 25,000 rentable
square feet (the "Second Expansion Space"). The Second Expansion Space will be
subject to measurement in accordance with B.O.M.A. methodology. The measurements
shall be completed within 30 days and the exact square footage shall be deemed
fixed. Promptly hereafter, Landlord shall deliver to Tenant the measured
dimensions.
2. The Second Expansion Space shall be located in the Western Wing of
the third floor as reflected on Exhibit A annexed hereto and made a part hereof.
3. Tenant shall submit line drawings and any and all related
specifications to Landlord no later than January 15, 1995. For each day
subsequent to January 15, 1995 that Tenant delays in delivering such
information, the date for Landlord's delivery of the Second Expansion Space, as
specified below in sections, 4, 8, and 23, shall be extended one day without
penalty.
4. Landlord shall use its best efforts to complete construction of,
and deliver, the Expansion Space to Tenant by June 15, 1995, but shall not be
penalized in any manner whatsoever for failing to deliver the Expansion Space on
or before July 15, 1995. Landlord will seek competitive bids from at least three
separate vendors for the construction. Unless Tenant otherwise instructs, the
work shall be awarded to the lowest bidder.
5. Landlord will contribute $2.50 per square foot for architect's
expenses, whether incurred by Tenant or Landlord. Tenant shall pay the
architectural expense in excess of $2.50 per square foot. If Landlord retains
H.O.K. as the project architect, the work product of such firm for the Second
Expansion Space shall be Landlord's sole responsibility.
6. Landlord, at its own expense, shall provide separate metering for
the electric utilities for the Second Expansion Space.
7. Tenant shall be responsible for payment of all costs associated
directly with the demolition of the Second Expansion Space in preparation for
construction. Tenant's responsibility under this paragraph is capped at $1.10
per square foot, and Landlord shall pay any excess.
8. Landlord and Tenant agree that the target date for delivery of the
Second Expansion Space is June 15, 1995 (the "Target Date"). Rent for the Second
Expansion Space (the "Second Expansion Rent") shall commence on the date when
Landlord has substantially completed the work, obtained a temporary certificate
of occupancy and delivered the space, or on the date when Landlord would have
done so but for delays attributed solely to Tenant (the "Second Expansion
Commencement Date"). Unless the Abatement described in paragraph 23 below is
triggered, under no circumstances shall there be any delay or offset on the
payment of the Second Expansion Rent. During years 1 through 4, the Second
Expansion Rent shall be equal to $15.50 per square foot, per annum. During years
5 through 9, the Second Expansion Rent shall increase to $17.50 per square foot,
per annum. During year 10, the Second Expansion Rent shall be equal to $20.13
per square foot, per annum. Irrespective of whether there is an Abatement, all
increases shall be calculated based upon an assumed Second Expansion
Commencement Date of June 15, 1995 (e.g., year 5 rent will become effective June
15, 2000). The Second Expansion Rent shall be payable monthly in the same form
and manner as specified for the payment of rent in the Lease. The Base Year as
defined in the Lease shall remain unchanged for the purpose of calculating any
and all other charges to Tenant. In the event that the Second Expansion Space is
delivered to Tenant prior to June 15, 1994, then the Second Expansion
Commencement Date shall be June 15, 1995, but Tenant shall pay rent, on a pro
rated basis, at a sum equal to the amount established for the first year.
9. Landlord's obligation to pay for any construction costs and to
deliver a "turnkey" space shall not exceed the sum of $25.00 per square foot,
said sum being a cap on Landlord's expenses and not construed as a minimum or
reasonable expense. Any and all construction cots above $25.00 per square foot
shall be paid by Tenant. Said costs shall not include demolition costs, which
costs shall be paid by Tenant in accordance with paragraph 7 above. To the
extent that the architect's expenses is more than $2.50 per square foot and the
construction cots are less than $25.00 per square foot, then the difference
between the actual construction cots and the $25.00 per square foot shall be
applied by Landlord to architect's expenses.
10. The term (the "Term") of the Lease as specified in Article Two of
the Lease shall be extended through the ten (10) year duration of this fourth
Amendment concerning the Second and Third Expansion Space, i.e., June 14, 2005.
Except as stated herein, this extension period (the "Extension Period") does not
extend by implication any other deadlines contained in the Lease concerning free
rent, rent increases or other obligations. The rent for the Extension Period
shall be equal to $20.13 per square foot, per annum, (except for the basement
level where the rent shall be $4.60 per square foot, per annum, during the
Extension Period).
THE THIRD EXPANSION SPACE
11. The Premises will be increased by approximately 20,000 rentable
square feet (the "third Expansion Space"). The Third Expansion Space will be
subject to measurement in accordance with B.O.M.A. methodology. The measurements
shall be completed within 30 days and the exact square footage shall be deemed
fixed. Promptly thereafter, Landlord shall deliver to Tenant the measured
dimensions.
12. The Third Expansion Space shall be comprised of approximately
10,000 square feet located in the Eastern Wing of the first floor, as reflected
on Exhibit B annexed hereto and made a part hereof, and approximately 10,000
square feet located contiguous to the Expansion Space, as reflected on Exhibit A
annexed hereto and made a part hereof.
13. Tenant shall submit line drawings and any and all related
specifications to Landlord no later than January 15, 1995. For each day
subsequent to January 15, 1995 that Tenant delays in delivering such
information, the date for Landlord's delivery of the Third Expansion Space, as
specified below in sections 4, 8, and 23, shall be extended one day without
penalty.
14. Landlord shall use its best efforts too complete construction of,
and deliver, the Third Expansion Space to Tenant by June 15, 1995, but shall not
be penalized in any manner whatsoever for failing to deliver the Third Expansion
Space on or before July 15, 1995. Landlord will seek competitive bids from at
least three separate vendors for the construction. Unless Tenant otherwise
instructs, the work shall be awarded to the lowest bidder.
15. Landlord will contribute $2.50 per square foot for architect's
expenses, whether incurred by Tenant or Landlord. Tenant shall pay the
architectural expense in excess of $2.50 per square foot. If Landlord retains
H.O.K. as the project architect, the work product of such firm for the Third
Expansion Space shall be Landlord's sole responsibility.
16. Landlord, at its own expense, shall provide separate metering for
the electric utilities.
17. Tenant shall be responsible for payment of all costs associated
directly with the demolition of the Third Expansion Space in preparation for
construction. Tenant's responsibility under this paragraph is capped at $1.10
per square foot, and Landlord shall pay any excess.
18. Landlord and Tenant agree that the target date for delivery of the
Third Expansion Space is June 15, 1995 (the "Target Date"). Rent for the Third
Expansion Space (the "Third Expansion Rent") shall commence on the date when
Landlord has substantially completed the work, obtained a temporary certificate
of occupancy and delivered the space, or on the date when Landlord would have
done so but for delays attributed solely to Tenant (the "Third Expansion
Commencement Date"). Unless the Abatement described in paragraph 23 below is
triggered, under no circumstances shall there be any delay or offset on the
payment of the Third Expansion Rent. During the first year, the Third Expansion
Rent is fixed at $6.72 per square foot, per annum. In the event that thorough no
fault of Tenant the Third Expansion Space is delivered subsequent to July 15,
1995, or as extended by paragraph 13 herein, then Tenant shall receive a credit,
on a pro rated basis, such that Tenant's rent of the first twelve months does
not exceed $6.72 per square foot, per annum, for the Third Expansion Space.
during years 2 thorough 4, the Third Expansion Rent shall increase to $15.50 per
square foot, per annum. During years 5 through 9, the Third Expansion Rent shall
increase to $17.50 per square foot, per annum. In year 10, the Third Expansion
Rent shall be equal to $20.13 per square foot, per annum. Irrespective of
whether there is an Abatement, all increases shall be calculated based upon an
assumed Third Expansion Commencement Date of June 15, 1995, (e.g., year 5 rent
will become effective June 15, 2000). The Third Expansion Rent shall be payable
monthly in the same form and manner as specified for the payment of rent in the
Lease. The Base Year as defined in the Lease shall remain unchanged for the
purpose of calculating any and all other charges to Tenant. In the event that
the Third Expansion Space is delivered to Tenant prior to June 15, 1995, then
the Commencement Date shall be June 15, 1995, but, Tenant shall pay rent, on a
pro rated basis, at a sum equal to the amount established for the first twelve
months.
19. Tenant shall pay for any and all construction costs to deliver a
"turnkey" Third Expansion Space. Landlord shall reimburse Tenant a sum for said
construction costs by a sum not to exceed $25.00 per square foot. Said
construction cots shall not include demolition costs, which costs shall be paid
by Tenant in accordance with paragraph 17 above. Tenant's payment to landlord
shall be made upon Landlord's submission to Tenant of proof of total cost for
construction of the Third Expansion Space, and Landlord's reimbursement to
Tenant shall be payable by Landlord to Tenant, in full, on the first anniversary
date of Tenant's occupancy of the Second and Third Expansion Spaces. Any and all
construction cots above $25.00 per square foot shall be paid by Tenant, said sum
being a cap on Landlord's expenses and not construed as a minimum or reasonable
expense. Any and all construction costs above $25.00 per square foot shall be
paid by Tenant. To the extent that the architect's expense is more than $2.50
per square foot and the construction costs $25.00 per square foot, then the
difference between the actual construction cots and the $25.00 per square foot
shall be applied by Landlord to architect's expenses.
20. The option space referred to in the Second Amendment shall be
relocated to be contiguous to the Second Expansion Space on the third floor, as
reflected on Exhibit A annexed hereto and made a part hereof.
21. Subject to the signage being located in a location mutually
agreeable to Landlord and Tenant, subsequent to the demolition work required by
this Fourth Amendment being completed the Tenant may exercise its rights under
Article 42 of the Lease.
22. The term (the "Term") of the Lease as specified in Article Two of
the Lease shall be extended to be coterminous with the 10 year duration of this
Fourth Amendment concerning the Second and Third Expansion Space, i.e., June 14,
2005. The 2 options set forth in paragraph 2.5 of the Lease shall be exercisable
respectively only prior to the end of the 9th and 14th year of this Fourth
Amendment, i.e., June 14, 2004 and June 14, 2009, respectively.
23. Notwithstanding the separate captions and definitions herein for
the Second and Third Expansion Spaces, the parties agree that the Second and
Third Expansion Spaces should be constructed and delivered simultaneous to one
another. The Second and Third Expansion Commencement Dates shall be delayed to
the extent caused by the unavoidable delays as defined in section 38.2 of the
Lease. However, if the Expansion Commencement Dates are delayed by the acts or
omissions of Landlord beyond July 15, 1995 or such later date to which
Landlord's deadlines are extended under section 3 and/or 13 herein, then
Tenant's obligation to pay Rent shall be abated by an amount equal to three free
days rent for each day the Commencement Dates are delayed beyond July 15, 1995
or such later date to which Landlord's deadlines are extended under sections 3
and/or 13 herein (the "Abatement").
In the event that Tenant elects to accept delivery of the Second
Expansion Space prior to the Third Expansion Space or the Third Expansion Space
prior to the Second Expansion Space, but prior to June 15, 1995, then Tenant's
obligation to pay rent shall be triggered upon delivery of the respective space
or spaces. For the time period commencing with delivery of the respective space
or spaces and continuing until June 14, 1995, the rent shall be at the amount
specified above in paragraphs(s) 8 and/or 18 for the first year(s), on a pro
rated basis.
In the event that Tenant elects to accept delivery of the Second
Expansion Space prior to the Third Expansion Space or the Third Expansion Space
prior to the Second Expansion Space, but subsequent to July 15, 1995, then
Tenant's obligation to pay rent shall be dependent upon whether Landlord or
Tenant caused the delay. If one or both expansion spaces are delivered
subsequent to June 15, 1995 due to Tenant's actions or omissions, other than as
extended pursuant to paragraphs 3 and/or 13 herein, then Tenant's obligation to
pay all rent for the Second and Thirds Expansion Spaces shall commence on the
date they would otherwise have been delivered but for Tenants acts or omissions.
Tenant may elect to take delivery of one expansion space prior to the
other expansion space. In the event Tenant makes such an election, then
immediately upon delivery of that part of the expansion space which Tenant
elects to occupy, Tenant shall commence paying rent for that part of the
Expansion Space at the rate specified above. In the event Tenant makes such an
election, the Abatement shall apply only to that portion of the space which is
not delivered. If there is an Abatement due to late delivery, the rent increases
will remain in effect at the time periods specified above. Except as expressly
modified herein, all of the terms and conditions of the Lease shall remain in
full force and effect.
TEMPORARY SPACE
24. Landlord permits Tenant to use and occupy the temporary space (the
"Temporary Space") described on Exhibit C annexed hereto and made a part hereof.
The Temporary Space is fixed for the purpose of this agreement as being exactly
11,000 square feet, together with the parking and other common areas of the
Building. Under no circumstances shall the Temporary Space be relocated.
25. The Temporary Space may be used and occupied by Tenant for a term
(the "Temporary Space Term") commencing the date Tenant takes occupancy. The
Temporary Space Term shall expire on the last day of the month during which
Landlord delivers both the Second and Third Expansion Spaces which ever is
later. Tenant shall have an option to terminate the Temporary Space Term upon
thirty (30) days written notice to Landlord. At any time after Landlord delivers
both the Second and Third Expansion Spaces, Landlord shall have the right to
terminate the Temporary Space Term upon thirty (30) days written notice.
26. During the first six (6) months of the Tenant's occupancy of the
Temporary Space, Tenant shall pay on or before the first day of each month the
sum of three dollars and thirty six cents ($3.36) per square foot, per annum,
plus Tenant Electric equal to one dollar and twenty five cents ($1.25) per
square foot. Thereafter, the rent shall increase to six dollars and seventy two
cents ($6.72) per square foot, per annum, plus Tenant Electric. Landlord and
Tenant agree that the sums specified in this paragraph are subject to Edward S.
Gordon reducing its commission by a sum equal to $18,480.00. In the event that
Edward S. Gordon does not sign an agreement to reflect the reduction of
$18,480.00, then the sums payable pursuant to this paragraph shall be increased
to cover said $18,480.00.
27. It is expressly agreed and understood that the Temporary Space is
provided at Tenant's request and is an accommodation by Landlord. Landlord shall
obtain all necessary approvals, including, without limitation, a temporary
certificate of occupancy. Tenant shall provide proof of all insurance required
by the Lease. The obligations of Tenant and Landlord under the Lease shall be
deemed incorporated herein unless otherwise inconsistent with the express terms
and purpose of the Temporary Space.
IN WITNESS WHEREOF, the parties have hereunto set their hands and
seals as of the date first written above.
Name: The Mutual Life Insurance Company
of New York, Landlord
_____________________________ By: /s/ Debra F. Kloper
____________________________
Witness Debra F. Kloper
Real Estate Vice President
Name: Dialogic Corporation, Tenant
_____________________________ By: /s/ Edward B. Jordan
____________________________
Witness Name: Edward B. Jordan
Title: Vice President
FIFTH AMENDMENT TO LEASE AGREEMENT
This Fifth Amendment to lease Agreement ("Agreement") is made and
entered into as of this _____ day of April, 1996, by and between The Mutual Life
Insurance Company of New York with offices at 1740 Broadway, New York, New York
10019 (the "Landlord"), and Dialogic Corporation, a New Jersey corporation, with
offices and a principal place of business located at 1515 Route 10, Parsippany,
New Jersey 07054 (the "Tenant").
WITNESSETH:
WHEREAS, Landlord is the owner of the real property and all the
improvements thereon located at 1515 Route 10, Parsippany, New Jersey (the
"Building"); and,
WHEREAS, Tenant desired to lease from Landlord and Landlord desired to
lease to Tenant approximately 115,000 square feet of office space on the first
and second floors of the Building and 10,000 square feet of storage space on the
basement level (the "Original Premises"); and,
WHEREAS, on or about September 1, 1993 Landlord and Tenant entered
into a written Lease Agreement (the "Original Lease") for the Premises; and,
WHEREAS, during January 1994 a first amendment to the Original Lease
(the "First Amendment") was proposed, but never agreed upon or effective; and,
WHEREAS, as of January 20, 1994 landlord and Tenant entered into a
Second Amendment to Lease Agreement (the "Second Amendment"); and,
WHEREAS, as of July 19, 1994 (notwithstanding that the Fourth
Amendment, as defined below, sets the date as of March 10, 1994) Landlord and
Tenant entered into a Third Amendment to lease Agreement (the "Third
Amendment"); and,
WHEREAS, as of December 20, 1994 Landlord and Tenant entered into a
Fourth Amendment to Lease Agreement (the "Fourth Amendment"; the Second
Amendment, Third Amendment and Fourth Amendment are collectively referred to as
the "Amendments"; and the Original Lease, as modified by the Amendments, is
referred to as the "Lease"); and,
WHEREAS, Landlord and Tenant do now hereby desire to amend and modify
certain terms of the Lease as more particularly set forth below.
NOW, THEREFORE, it is hereby agreed that in consideration of the
mutual covenants contained herein, and for such other good and valuable
consideration, the sufficiency of which are hereby mutually acknowledged by the
parties hereto, Landlord and Tenant agree as follows:
1. Capitalized terms used but not otherwise defined herein shall have
their meanings described to them in the Lease.
2. Tenant warrants, covenants and acknowledges that a) Landlord is not in
default under the Lease and no event has occurred which, with the
giving of notice or the passage of time or both, would constitute a
default under the Lease as modified by the Agreement on the part of
the Landlord; b) Tenant does not contest the validity or
enforceability of the Lease and this Agreement, and Tenant has no
claims or defenses as to obligations under the Lease and this
Agreement and is not entitled to any offset or abatement with respect
thereto; c) Landlord has performed all of its obligations of an
executory nature pursuant to the terms and provisions of the Lease;
and d) the Commencement Date as such term is defined in the Lease was
____________, and the Expiration Date, as defined in the Lease
(without giving effect to any renewal options, but giving effect to
paragraphs 10 and 22 of the Fourth Amendment) is June 14, 2005.
3. In addition to those premises that Landlord has previously leased to
Tenant and Tenant has previously leased from Landlord pursuant to the
Original Lease and the Amendments, Landlord hereby leases to Tenant
and Tenant hereby leases from Landlord the following additional
premises: a) approximately 9,000 square feet on the third floor of the
Building, as shown on the floor plan annexed hereto as Exhibit A and
made a part hereof (the "Fourth Expansion Space"); b) approximately
14,370 square feet on the third floor of the Building as shown on the
floor plan annexed hereto as Exhibit B and made a part hereof (the
"Fifth Expansion Space"); and c) approximately 1,000 square feet on
the first floor of the Building as shown on the floor plan annexed
hereto as Exhibit C and made a part hereof (the "Sixth Expansion
Space"). Within thirty (30() days of the signing of this Agreement,
Landlord shall cause the Fourth Expansion Space, Fifth Expansion Space
and Sixth Expansion Space to be measured pursuant to the BOMA method,
and the exact square footage shall be deemed fixed. Promptly
thereafter, Landlord shall deliver to Tenant the measured dimensions.
4. The Premises, as such term is defined in the Original Lease and which
has previously been increased pursuant to certain of the Amendments,
shall be further increased and shall now be deemed to include the
Fourth Expansion Space, Fifth Expansion Space and Sixth Expansion
Space (and to the extent not previously included, the Premises shall
also be deemed to include the First Expansion Space (as such term is
defined in the Third Amendment), the Second Expansion Space and Third
Expansion Space (as such terms are defined in the Fourth Amendment).
All references to the Premises in the lease as modified herein, shall
refer to the Premises as defined in this Agreement, unless the context
clearly requires otherwise.
5. Within fourteen (14) days from the date the Tenant executes this
Agreement, Tenant shall prepare and deliver to Landlord line drawings
and any and all related plans and specifications (collectively the
"Plans and Specifications") for the Fourth Expansion Space, Fifth
Expansion Space and Sixth Expansion Space.
6a. Landlord, in accordance with the Plans and Specifications, shall use
its best efforts to substantially complete construction ("Landlord's
Work") of the Fourth Expansion Space, Fifth Expansion Space and Sixth
Expansion Space and deliver to Tenant the Fourth Expansion Space,
Fifth Expansion Space and Sixth Expansion Space by September 30, 1996
(subject to unavoidable delays as defined in Section 38.2 of the
Original Lease ("Unavoidable Delays") and Tenant Delays, as defined
herein), provided, however, that the Lease, as modified herein, and
the obligations of the Landlord and Tenant hereunder shall
nevertheless continue in full force and effect, and except as
otherwise provided herein, Landlord shall have no liability to Tenant
for, and delay in, delivering the fourth Expansion Space, the Fifth
Expansion Space, or Sixth Expansion Space.
6b. Landlord's Work shall be deemed substantially completed,
notwithstanding the fact that minor details of construction,
mechanical adjustments or decoration remain to be performed that do
not materially interfere with Tenant's use of the Fourth Expansion
Space, Fifth Expansion Space and/or Sixth Expansion Space or its
business, provided that a Certificate of Occupancy (whether permanent
or temporary) has been issued (if required).
6c. If the Fourth Expansion Space, the Fifth Expansion Space and/or Sixth
Expansion Space are not ready for occupancy by Tenant on September 30,
1996 due to one or more Tenant Delays, Landlord shall have no
liability for such delay and the Fourth Expansion Space, Fifth
Expansion Space and/or Sixth Expansion Space (whichever of said spaces
might have been affected by such Tenant Delay) shall be deemed
substantially completed on the date when said space would otherwise
have been substantially completed but for such Tenant Delay. The term
"Tenant Delay" shall mean any delay in substantially completing
Landlord's Work and/or any delay in the date that the Fourth Expansion
Space, Fifth Expansion Space and/or Sixth Expansion Space shall be
available for Tenant's occupancy, which is due to any act or omission
of Tenant, its agents, employees, contractors or anyone acting under
or for Tenant, Tenant Delay shall also include the following: (i)
delays in delivering the Plans and Specifications; (ii) delays arising
from changes in the Plans and Specifications; and (iii) delays
resulting from Tenant's direction to Landlord to suspend Landlord's
Work.
7a. In connection with landlord's Work, Landlord shall be responsible a)
for no more than $2.25 per square foot of costs and expenses
associated with architectural and engineering design and plans and b)
for no more than $22.50 per square foot of the costs and expenses
associated with substantially completing the Fourth Expansion Space.
Fifth Expansion Space and Sixth Expansion Space (the amounts which
Landlord has agreed to incur in order to perform Landlord's Work shall
be referred to as "Landlord's Allowance"). Tenant shall be solely
responsible for all costs and expenses which exceed Landlord's
Allowance; it being the intent of the parties that Tenant pay said
excess as Additional Rent and such sum(s) shall be payable by Tenant
within ten (10) days after receipt of an invoice from Landlord.
Notwithstanding the foregoing, and except as provided in paragraph 9
below, Landlord shall not be obligated to incur any costs or expenses
with respect to demolition of the Fourth Expansion Space, Fifth
Expansion Space and Sixth Expansion Space, nor shall such costs or
expenses be considered a portion of Landlord's Allowance, it being the
intent of the parties that this be the sole responsibility of the
Tenant.
7b. Notwithstanding anything contained in the Lease, including Section 6.1
o the Original Lease as such section may have been modified, Tenant
agrees that Landlord shall have no obligation to provide any
additional funds with respect to Landlord's Work.
8. Tenant acknowledges that Landlord has separately metered the Fourth
Expansion Space, Fifth Expansion Space and Sixth Expansion Space for
electric usage.
9. Tenant shall be solely responsible for payment of all costs or
expenses with respect to demolition of the Fourth Expansion Space,
Fifth Expansion Space and Sixth Expansion Space ("Demolition"), and
such sums shall be collectable as Additional Rent within ten (10( days
after receipt of an invoice from Landlord. Notwithstanding the
foregoing, Landlord shall be responsible for all costs and expenses
that relate to Demolition that exceed $1.10 per square foot.
10. Fixed Rent shall be as follows:
a) Fourth Expansion Space: Fixed Rent for the Fourth Expansion Space
(the "Fourth Expansion Space Rent") shall commence ("Fourth-
Commencement Date") on the earliest of:
i) the date when Landlord's Work has been substantially
completed as contemplated in Paragraphs 6a, 6b and 6c above (or on
the date when landlord would have done so but for delays attributable
solely to Tenant), or
ii) the date Tenant shall occupy any of the Fourth Expansion
Space, and shall be payable by Tenant without any prior notice or
demand therefor, and without any abatement, deduction or setoff
whatsoever, in equal monthly installments in advance on the first day
of each and every calendar month during the Term of this lease, to
Landlord or to Landlord's agent, at such place as Landlord may
designate to Tenant, in lawful money of the United States of America
as follows:
<TABLE>
<CAPTION>
Monthly Annual Fixed Rent
Period Installment per Square Foot
<S> <C> <C>
Fourth-Commencement Date through May 31, 1999 $12,975.00 $17.30*
June 1, 1999 through May 31, 2004 $13,125.00 $176.50*
June 1, 2004 through June 14, 2005 $15,097.50 $20.13*
*Plus Tenant's electric.
</TABLE>
If the Fourth-Commencement Date is other than the first date of the
calendar month, then the Fourth Expansion Space Rent for the calendar
month in which said date occurs shall be prorated on a per diem basis. A
similar credit shall be granted against the installment due for the rent
during the month which is the month of the Expiration Date.
h) Fifth Expansion Space: Fixed Rent for the Fifth Expansion Space
(the "Fifth Expansion Space Rent") shall commence ("Fifth-Commencement
Date") on the earliest of:
i) the date when Landlord's Work has been substantially
completed as contemplated in Paragraphs 6a, 6b and 6c above (or
on the date when Landlord would have done so but for delays
attributable solely to Tenant), or
ii) the date Tenant shall occupy any of the Fifth Expansion
Space, and shall be payable by Tenant without any prior notice or
demand therefor, and without any abatement, deduction or setoff
whatsoever, in equal monthly installments in advance on the first day
of each and every calendar month during the Term of this Lease, to
Landlord or to Landlord's agent, at such place as Landlord may
designate to Tenant, in lawful money of the United States of America as
follows:
<TABLE>
<CAPTION>
Monthly Annual Fixed Rent
Period Installment per Square Foot
<S> <C> <C>
Fifth-Commencement Date through May 31, 1999 $18,561.25 $15.50*
June 1, 1999 through May 31, 2004 $20,956.25 $17.50*
June 1, 2004 through June 14, 2005 $24,105.68 $20.13*
*Plus Tenant's electric.
</TABLE>
If the Fifth-Commencement Date is other than the first date of the
calendar month, then the Fifth Expansion Space Rent for the calendar
month in which said date occurs shall be prorated on a per diem basis.
A similar credit shall be granted against the installment due for the
rent during the month which is the month of the Expiration Date.
c) Sixth Expansion Space: Fixed Rent for the Sixth Expansion Space
(the "Sixth Expansion Space Rent") shall commence ("Sixth-Commencement
Date") on the earliest of:
i) the date when Landlord's Work has been substantially
completed as contemplated in paragraphs 6a, 6b and 6c above (or on the
date when Landlord would have done so but for delays attributable
solely to Tenant), or Landlord would have done so but for delays
attributable solely to Tenant), or
ii) the date Tenant shall occupy any of the Sixth Expansion
Space, and shall be payable by Tenant without any prior notice or
demand therefor, and without any abatement, deduction or setoff
whatsoever, in equal monthly installments in advance on the first day
of each and every calendar month during the Term of this Lease, to
Landlord or to Landlord's agent, at such place as Landlord may
designate to Tenant, in lawful money of the United States of America
as follows:
<PAGE>
<TABLE>
Monthly Annual Fixed Rent
Period Installment per Square Foot
<S> <C> <C>
Sixth-Commencement Date through May 31, 1999 $1,291.67 $15.50*
June 1, 1999 through May 31, 2004 $1,458.33 $17.50*
June 1, 2004 through June 14, 2005 $1,677.50 $20.13*
*Plus Tenant's electric.
</TABLE>
If the Sixth-Commencement Date is other than the first date of the
calendar month, then the Sixth Expansion Space Rent for the calendar
month in which said date occurs shall be prorated on a per diem basis.
A similar credit shall be granted against the installment due for the
rent during the month which is the month of the Expiration Date.
11a. Notwithstanding anything else contained in this Agreement, the parties
acknowledge that the Fourth Expansion Space, Fifth Expansion Space and
Sixth Expansion Space might not be substantially completed
simultaneously. Should the completion dates not be simultaneous, the
parties agree that the obligation of the Tenant to pay Fixed Rent and
Additional Rent in accordance with Paragraphs 10 and 13 hereunder, for
the space that is substantially completed is independent of its
obligations regarding the space not yet substantially completed (e.g.
should the Fourth Expansion Space be substantially completed prior to
the Fifth Expansion Space and/or the Sixth Expansion Space, or the
Fifth Expansion Space prior to the Fourth Expansion Space and/or the
Sixth Expansion Space, or the Sixth Expansion Space prior to the
Fourth Expansion Space and/or Fifth Expansion Space), and the Tenant
shall be obligated to accept such substantially completed premises and
to pay Fixed Rent and Additional Rent in accordance with this
Agreement for the space that is then substantially completed.
11b. Landlord and Tenant agree that (i) if delivery of the Fourth Expansion
Space is delayed solely by the negligence or willful misconduct of
Landlord beyond September 30, 1996, as such date has been extended by
the number of days attributable to a Tenant Delay or an Unavoidable
Delay ("Outside Date"), then the Tenant shall receive one day of free
Fourth Expansion Space Rent for each two days during the period from
the Outside Date to the substantial completion of the Fourth Expansion
Space; (ii) if delivery of the Fifth Expansion Space is delayed solely
by the negligence or willful misconduct of Landlord beyond the Outside
Date, then the Tenant shall receive one day of free Fifth Expansion
Space Rent for each two days during the period from the Outside Date
to the substantial completion of the Fifth Expansion Space; and (iii)
if delivery of the Sixth Expansion Space is delayed solely by the
negligence or willful misconduct of Landlord beyond the Outside Date,
then the Tenant shall receive one day of free Sixth Expansion Space
Rent for each two days during the period from the Outside Date to the
substantial completion of the Sixth Expansion Space.
12. Notwithstanding anything else contained in the Original Lease or any
of the Amendments, or herein, should Tenant exercise its option(s) to
renew the term of the leased premises, as provided for in ss.2.5 of
the Original Lease, said renewal term(s) shall be operative for the
entire Premises (as such term is defined herein). Furthermore,
the calculation to determine the Fixed Rent to be paid for each
option period shall include the base rent that is payable because
of the First Expansion Space, Second Expansion Space, Third Expansion
Space, Fourth Expansion Space, Fifth Expansion Space and Sixth
Expansion Space.
13. Tenant's obligation to pay Tenant's Proportionate Share (as such share
shall be increased giving effect to the transaction contemplated
herein) of Operating Expenses and Taxes, as such obligations are
expressed in the Lease, shall commence on a) with respect to the
Fourth Expansion Space, Fourth-Commencement Date; b) with respect to
the Fifth Expansion Space, the Fifth-Commencement Date and c) with
respect to the Sixth Expansion Space, the Sixth-Commencement Date. The
Base Tax Year and the Base Operating Expense Year, as defined in the
Lease, shall remain unchanged for the purpose of calculating any and
all charges to Tenant. Tenant and Landlord agree that Tenant's
Proportionate Share with respect to the Fourth Expansion Space is 4%.
Tenant's Proportionate Share with respect to the Fifth Expansion Space
is 6.5% and Tenant's Proportionate Share with respect to the Sixth
Expansion Space is .5%. All other items of Additional Rent shall be
payable in accordance with the terms of the Lease as modified herein.
Notwithstanding anything contained herein to the contrary, Tenant
agrees to pay to Landlord, as Additional Rent, within thirty (30( days
of the date Tenant executes this Agreement, the sum of Thirty Thousand
($30,000.00) Dollars, in consideration of Landlord having agreed to
modify, pursuant to this Agreement, the date fixed rent and additional
rent is to commence with respect to the Fourth Expansion Space from
May 8, 1996 to the Fourth-Commencement Date (as defined above).
14. Tenant has inspected the Fourth Expansion Space, Fifth Expansion Space
and Sixth Expansion Space and accepts the same "As Is" in their
present condition subject to Landlord's Work. Acceptance of possession
by Tenant of the Fourth Expansion Space. Fifth Expansion Space or
Sixth Expansion Space shall (except to the extent that Tenant has
otherwise notified Landlord within 30 days), be the conclusive
evidence that Landlord's obligation to construct said accepted
premises has been fully performed in accordance with the requirements
of this Agreement.
15. All tenant improvements constructed in the Fourth Expansion Space,
Fifth Expansion Space and Sixth Expansion Space, whether by Landlord
or by (or on behalf of) Tenant, and whether at Landlord's or Tenant's
expense, shall become part of the Premises and shall be and remain the
property of Landlord, unless Landlord specifically agrees otherwise in
writing.
16. Notwithstanding paragraph 28.1 of the Original Lease, in addition to
the addresses listed therein, Tenant shall furnish a copy of an and
all notices, consents, approvals, requests and other communications to
the following:
ARES Realty Capital, Inc.
One Atlantic Street
Stamford, Connecticut 06901
Attn: Steve Jacobs
17. Tenant and Landlord, each respectively warrants and represents that it
was not dealt with any broker or real estate agent in connect with
this Fifth Amendment to Lease Agreement or its negotiation, other than
Edward S. Gordon of New Jersey and Cashman & Wakefield of New Jersey.
Each party shall indemnify and hold the other harmless from any cost,
expense or liability (including costs of suit and reasonable
attorneys' fees) for any compensation, commission or fees claimed by
any real estate broker or agent in connection with this Agreement or
its negotiation by reason of any act of the indemnifying party.
18. Notwithstanding anything to the contrary contained in the Lease,
including Section 2.6 of the Original Lease, as such section was
modified by the Second Amendment, Tenant agrees and acknowledges that
the remaining expansion space square footage that Tenant shall have
the option to lease the remaining vacant office space, 19,630 square
feet.
19. The covenants, agreements, terms and conditions contained in this
Agreement shall bind and inure to the benefit of the parties hereto
and their respective legal successors and assigns.
20. This Amendment may not be changed orally, but only by writing signed
by the party against which the enforcement thereof is sought.
21. Except as expressly modified by this Agreement, the Lease and all the
covenants, agreements, terms and conditions thereof shall remain in
full force and effect and are hereby in all respects ratified and
confirmed.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands
and seals or caused their presence to be signed by its proper corporate officers
and caused it proper corporate seal to be hereunto affixed, the day and the year
first above written.
WITNESS; THE MUTUAL LIFE INSURANCE
COMPANY OF NEW YORK
_________________________________ By:/s/ Debra F. Kloper
________________________________
Name: Debra F. Kloper, Senior V.P.
ARES Realty Capital, Inc.
Authorized Signatory
WITNESS: DIALOGIC CORPORATION
_________________________________ By:/s Edward B. Jordan
________________________________
Vice President
EXHIBIT 10.11
1997 INCENTIVE BENEFIT PLAN
OF
DIALOGIC CORPORATION
Section 1. Rules of Interpretation; Definitions.
As used in this Incentive Benefit Plan, (i) the singular includes the
plural, and the masculine gender includes the feminine and neuter genders, and
vice versa, as the context requires; and (ii) the word "person" includes any
natural person and any corporation, firm, partnership or other form of
association.
For purposes of this Incentive Benefit Plan, the following terms shall
have the following meanings:
"Award Authority" means either the Selected Participants Committee or
the General Participants Committee, depending upon the context in which such
term is used. With respect to Incentives awarded or to be awarded to Selected
Participants, the term "Award Authority" refers to the Selected Participants
Committee. With respect to Incentives awarded or to be awarded to Participants
other than Selected Participants, the term "Award Authority" refers to the
General Participants Committee.
"Award Date" means the date on which an Incentive is awarded by the
Award Authority.
"Benefit Administration Committee" shall mean a committee of the Board
consisting solely of all members of the Compensation Committee who are
Disinterested Persons.
"Board" means the Board of Directors of the Company.
"Cash Award" means a cash payment by the Company to a Participant as
additional compensation for that Participant's services to the Group.
"Change in Control Event" has the meaning stated in Section 14 hereof.
"Code" means the Internal Revenue Code of 1986, as it may be amended
from time to time.
"Common Stock" means the Common Stock, no par value, of the Company.
"Company" means Dialogic Corporation and any successor thereto.
"Compensation Committee" shall mean the Compensation Committee of the
Board, as it may be constituted from time to time.
"Consultant" shall mean any person who performs consulting services
for, or who serves as an advisor to, any member of the Group.
"Director" means a member of the Board.
"Disability" means a permanent and total disability as defined in
Section 22 of the Code.
"Disinterested Person" means a person who is an "outside director"
within the meaning of Section 162(m) of the Code as amended by the Revenue
Reconciliation Act of 1993.
"Election" has the meaning stated in Section 13.09(a) hereof.
"Exercise Date" means the date on which the Company receives a notice
of the exercise of an Incentive, which notice meets the requirements of the
Plan.
"Fair Market Value" has the meaning stated in Section 13.13 hereof.
"General Participants Committee" means a committee of one or more
members of the Board, none of whom need be a Disinterested Person, to which the
Board has delegated certain authority to administer the Plan under Section 3
hereof.
"Group" means the Company, each "parent corporation" of the Company,
and each "subsidiary corporation" of the Company, as these terms are defined in
Sections 424(e) and 424(f), respectively, of the Code.
"In Tandem" means that two Incentives are related to each other such
that the number of shares subject to the first Incentive is reduced by the
number of shares for which the second Incentive is exercised, and the number of
shares subject to the second Incentive is reduced by the number of shares for
which the first Incentive is exercised.
"Incentive Stock Option" means a stock option intended to qualify as
an incentive stock option under Section 422 of the Code.
"Incentives" mean the economic incentives listed in Section 5 hereof
that may be awarded under the Plan.
"Named Executive Officer" shall mean (i) any Selected Participant who
is named in any proxy statement of the Company as either the chief executive
officer of the Company or as one of the five highest paid (in terms of salary
and bonus) executive officers of the Company and (ii) any other Selected
Participant designated as a "Named Executive Officer" by the Compensation
Committee in a notice delivered by the Compensation Committee to the Secretary
of the Company.
"Non-Statutory Stock Option" means any Stock Option other than an
Incentive Stock Option.
"Participant" means any part-time or full-time employee of, and any
Consultant to, any member of the Group to whom an Incentive has been or is to be
awarded.
"Performance Stock Right" means a contingent right to receive Shares
upon the achievement of certain performance objectives.
"Plan" means this 1997 Incentive Benefit Plan of the Company.
"Qualified Person" means a Participant's legal guardian or legal
representative or a deceased Participant's executor, administrator, heir or
legatee who has a legal right to or in respect of an Incentive of that
Participant.
"Restricted Stock Award" means the award of Shares by the Company to a
Participant at a price that may be below Fair Market Value, or without payment
to the Company, but these Shares are subject to restrictions on sale and other
transfer and are subject to forfeiture.
"Retirement" shall have the meaning ascribed to such term in any
retirement plan adopted by the Board. In the absence of any such plan,
"Retirement" means (i) the voluntary termination of employment by a Participant
who is 59-1/2 years old or older unless, prior to such termination, such
Participant advises the Company that he intends to be employed on a full-time
basis by an employer that is not a member of the Group or (ii) the voluntary
termination of employment by any Participant if the Board determines, prior to
such termination, that such termination shall be deemed to be a "Retirement" for
purposes of the Plan.
"SAR" means a stock appreciation right relating to the Common Stock
and is a right to receive Shares, cash or a combination thereof without payment
to the Company.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
as it may be amended from time to time.
"Selected Participant" means (i) any person who is identified as an
executive officer of the Company in any Annual Report on Form 10-K filed by the
Company pursuant to the Securities Exchange Act or who has the title of Vice
President, President or Chairman of the Board of the Company, (ii) any person
who, by virtue of his or her position with the Company, is advised by counsel to
the Company that he or she is subject to Section 16 of the Securities Exchange
Act, (iii) any Consultant whom the Special Participants Committee determines
should receive an Incentive under the Plan and (iv) any other part-time or
full-time employee of any member of the Group whom the Special Participants
Committee designates, in a notice delivered by the Special Participants
Committee to the Secretary of the Company, as a "Selected Participant" for
purposes of the Plan. A person who becomes a Selected Participant solely by
virtue of clause (i) above shall cease to be a Selected Participant in the event
that he or she does not have the title of Vice President, President or Chairman
of the Board of the Company and is advised by counsel to the Company that he or
she is not an executive officer of the Company. A person who becomes a Selected
Participant solely by virtue of clause (iv) above shall cease to be a Selected
Participant when and if the Special Participants Committee delivers a notice to
the Secretary of the Company stating that such Participant is no longer to be
treated as a Selected Participant.
"Selected Participants Committee" means either the Compensation
Committee or the Benefit Administration Committee, depending upon the context in
which the term is used. All actions which this Plan contemplates be taken by the
Selected Participants Committee with respect to Named Executive Officers shall
be taken by the Benefit Administration Committee if there are at least two
Disinterested Persons on the Benefit Administration Committee at that time; in
such instances, references to the Selected Participants Committee herein shall
constitute references to the Benefit Administration Committee. All actions which
this Plan contemplates be taken by the Selected Participants Committee other
than with respect to Named Executive Officers, and all actions which this Plan
contemplates be taken by the Selected Participants Committee when there are not
at least two Disinterested Persons on the Benefit Administration Committee,
shall be taken by the Compensation Committee; in such instances, references to
the Selected Participants Committee herein shall constitute references to the
Compensation Committee. All questions of interpretation as to whether the term
"Selected Participants Committee" refers to the Compensation Committee or the
Benefit Administration Committee shall be resolved by the Compensation
Committee, whose determination shall be final and conclusive.
"Share" means a share of Common Stock.
"Stock Award" means an award of Shares by the Company to a Participant
on an unrestricted basis as additional compensation and without payment to the
Company.
"Stock Option" means a stock option granted pursuant to the Plan. Any
Stock Option which is not designated as an Incentive Stock Option at the time of
grant or which ceases to qualify as an "incentive stock option" under the Code
shall be deemed to be a Non-Statutory Stock Option for purposes of the Plan.
"Tax Date" has the meaning stated in Section 13.09(a).
"Unit of Phantom Stock" means a right to receive, without payment to
the Company, cash, dividends or a combination thereof.
Section 2. Purpose.
The purpose of the Plan is to advance the interests of the Group by
furnishing Incentives designed to attract, retain and motivate employees and, in
circumstances identified by the Special Participants Committee, Consultants to
the Group. Incentives may consist of opportunities to acquire Shares or cash or
both, as provided by the Plan.
Section 3. Administration.
3.01. Administrative Body. The General Participants Committee shall
have authority to administer the Plan to the express extent provided for in the
Plan. Except to the extent that the Plan expressly provides for the General
Participants Committee to administer the Plan, the Plan shall be administered by
the Special Participants Committee. Any interpretive question regarding whether
authority to administer any aspect of the Plan is vested in the Selected
Participants Committee or the General Participants Committee shall be resolved
by the Special Participants Committee, whose determination shall be final and
conclusive. From time to time, the Board shall designate one or more Directors
who need not be Disinterested Directors to serve on the General Participants
Committee.
3.02. Award Authority. The Selected Participants Committee shall serve
as the Award Authority with respect to the Selected Participants. The General
Participants Committee shall serve as the Award Authority with respect to all
part-time and full-time employees of each member of the Group other than any
such employees who are Selected Participants. Subject to applicable law and the
terms of the Plan, the Award Authority shall have plenary authority to (a) award
Incentives under the Plan, (b) set the terms, conditions and restrictions of the
Incentives, their exercise and all related rights and (c) accelerate the date on
which a previously granted Incentive may be exercised. Terms, conditions and
restrictions of Incentives may vary from Participant to Participant and from
award to award. Acceleration may be to any date, including the date on which an
Incentive is granted.
3.03. Authority of the Selected Participants Committee. Subject to
applicable law and the terms of the Plan, the Selected Participants Committee
shall have plenary authority, with respect to Incentives granted to all
Participants, to (a) prescribe the form of agreements awarding and governing the
Incentives, (b) interpret the Plan, (c) establish any rules or regulations
relating to the Plan and (d) make all other determinations for the proper
administration of the Plan. The Selected Participants Committee's decisions on
matters relating to the Plan shall be final and conclusive on the Group, all
part-time and full-time employees of, and all Consultants to, all members of the
Group, all Participants and their respective successors, assigns, transferees,
heirs and representatives.
3.04 Limitations on the Authority of the General Participants
Committee. From time to time, the Selected Participants Committee shall deliver
to the General Participants Committee a memorandum setting forth the maximum
number of Shares for which the General Participants Committee may award
Incentives during a specified period of time and setting forth the guidelines
under which the General Participants Committee may grant such Incentives during
such period. Such memorandum may be amended by the Selected Participants
Committee at any time. Without the prior approval of the Selected Participants
Committee, the General Participants Committee shall not award Incentives in any
such period in excess of the applicable maximum Share limit established by the
Selected Participants Committee and shall not grant Incentives that do not
satisfy the applicable guidelines established by the Selected Participants
Committee.
Section 4. Eligibility.
4.01. Designation. All part-time and full-time employees of any member
of the Group, including officers and directors who are part-time or full-time
employees of any member of the Group, are eligible to receive Incentives under
the Plan. All Consultants of any member of the Group are eligible to receive
Incentives (other than Incentive Stock Options) under the Plan. Directors and
officers who are not employees of any member of the Group and who are not
Consultants to any member of the Group may not receive Incentives under the
Plan.
4.02. Participants. The Award Authority may consider any factors in
selecting Participants and in determining the types and amounts of their
Incentives, including, but not limited to, (a) the current or anticipated
financial condition of the Group, (b) the contributions by the Participant to
the Group and (c) the other compensation provided to the Participant. The Award
Authority's award of an Incentive to a person in any year shall not require the
Award Authority to award any Incentive to that person in any other year.
Section 5. Types of Incentives. Incentives may be granted in any one
or any combination of the following forms: (a) Non-Statutory Stock Options
(Section 7); (b) Incentive Stock Options (Section 7); (c) SARs (Section 8); (d)
Units of Phantom Stock (Section 9); (e) Stock Awards (Section 10); (f)
Restricted Stock Awards (Section 10); (g) Performance Stock Rights (Section 11);
and (h) Cash Awards (Section 12).
Section 6. Shares Subject to the Plan.
6.01. Number of Shares. Subject to Section 13.08 hereof, the aggregate
number of Shares which may be issued under the Plan shall not exceed the sum of
2,000,000 Shares plus the "Unused Shares". For purposes of the plan, the term
"Unused Shares" shall mean the lesser of (i) 400,000 Shares and (ii) the number
of Shares that would be available for the award of benefits under the Company's
1988 Incentive Compensation Plan (the "1988 Plan") on December 5, 1998 but for
the fact that the 1988 Plan expires (with respect to the grant of new incentive
awards) on such date, without giving effect to lapses, cancellations or
forfeitures that occur subsequent to such date. For purposes of this Section
6.01, each Unit of Phantom Stock shall constitute a single Share. Subject to
Section 13.08 hereof, the maximum number of Shares which may be issued under the
Plan pursuant to Incentive Stock Options is 2,000,000 Shares.
6.02. Expiration and cancellation. If an Incentive granted under the
Plan expires, is terminated, is forfeited or is otherwise canceled before the
related Shares are issued, that Incentive and the related Shares, SARs or Units
of Phantom Sock shall not apply toward the limits provided in Section 6.01 and
shall be available again for the grant of Incentives under the Plan.
6.03. Maintenance of stock. Shares of Common Stock issued under the
Plan shall be authorized and unissued shares or shares of treasury stock. The
Company shall always reserve a number of Shares at least equal to the number of
Shares which remain issuable pursuant to the Plan.
Section 7. Stock Options. Each Stock Option granted under the Plan
shall be subject to the following terms and conditions:
7.01. Price. The option price per share shall be determined by the
Award Authority; provided, however, that the option price shall not be less than
75% of the Fair Market Value on the Award Date of the Common Stock subject to
the option. Any option granted subsequent to February 27, 1997 at an exercise
price that is expressly designated at the time of grant as an exercise price of
less than 100% of the Fair Market Value on the Award Date of the Common Stock
subject to the option shall not vest sooner than three years from the Award Date
(and shall not have its vesting accelerated to a date that is less than three
years from the Award Date) unless such vesting arises as a result of the
optionee's satisfying performance criteria approved by the Committee.
7.02. Number. The number of Shares subject to Stock Options shall be
determined by the Award Authority; provided, however, that the maximum number of
Shares covered by Stock Options granted to any Participant in any calendar year
shall not exceed 1,000,000 Shares (subject to adjustment pursuant to Section
13.08 hereof).
7.03. Duration and time for exercise. The Award Date of a Stock Option
shall be the date specified by the Award Authority, provided that that date
shall not be prior to the date on which the Stock Option is actually granted.
With respect to an employee that is granted a Stock Option pursuant to the Plan,
the Award Date (i.e., the date of grant) of such Stock Option shall not be prior
to the date on which such employee commences employment with a member of the
Group. With respect to a Consultant that is granted a Stock Option pursuant to
the Plan, the Award Date (i.e., the date of grant) of such Stock Option shall
not be prior to the date on which such Consultant commences providing consulting
or advisory services to a member of the Group. The term of each Stock Option
shall be determined by the Award Authority, but shall not exceed eight years
from the date of grant. In the event that the term of a Stock Option is not
specified in the applicable grant agreement, the term of such Stock Option shall
be eight years from the Award Date. Each Stock Option shall become exercisable
at such time or times and in such amount or amounts during its term as shall be
determined by the Award Authority at the time of grant; provided, however, that
the Special Participants Committee may accelerate the exercisability of a Stock
Option granted to any Participant at any time. In the event that the vesting
schedule of a Stock Option is not specified in the applicable grant agreement,
such Stock Option shall vest in four equal annual 25% installments commencing
one year after the date of grant and continuing thereafter on each of the next
three annual anniversaries of the date of grant. Unless otherwise specified by
the Award Authority, once a Stock Option becomes exercisable, whether in full or
in part, it shall remain so exercisable until its expiration, forfeiture,
termination or cancellation.
7.04. Exercise. A Stock Option may be exercised, in whole or in part,
by giving written notice to the Company (Attention: Chief Financial Officer) at
its principal office or to such transfer agent as the Company may designate. The
notice shall identify the Incentive being exercised and shall contain such other
information and terms as the Company may require. The notice shall be
accompanied by full payment of the purchase price for the Shares (a) in United
States dollars in cash or by check, (b) at the discretion of the Award
Authority, by delivery of previously acquired Shares having a Fair Market Value
on the date of exercise equal to the exercise price of the Stock Option, or (c)
at the discretion of the Award Authority, by a combination of (a) and (b) above.
As soon as practicable after receipt of the written notice, the Company shall
deliver to the person exercising the Stock Option one or more stock certificates
representing the Shares.
7.05. Incentive Stock Options. Notwithstanding anything in the Plan to
the contrary, the following additional provisions shall apply to the grant of
Incentive Stock Options:
(a) the aggregate Fair Market Value on the Award Date of the
Shares with respect to which Incentive Stock Options are exercisable for the
first time by any Participant during any calendar year (under all plans of the
Group) shall not exceed $100,000;
(b) all Incentive Stock Options must be granted on or before
February 26, 2007;
(c) unless exercised sooner, each Incentive Stock Option shall
expire no later than 8 years after the Award Date for that Incentive Stock
Option;
(d) the option price for each Incentive Stock Option shall be not
less than 100% of the Fair Market Value of the Shares subject to the option on
the Award Date of that Incentive Stock Option;
(e) only part-time or full-time employees of any member of the
Group are eligible to receive an Incentive Stock Option;
(f) no Incentive Stock Option shall be granted to any person who,
at the time that option is granted, owns (within the meaning of Section 422 of
the Code) stock having more than 10% of the total combined voting power of all
classes of stock of the Company or any member of the Group, unless the option
price is equal to at least 110% of the Fair Market Value of the Shares subject
to the option on the Award Date and the option is not exercisable later than
five years from the Award Date;
(g) Incentive Stock Options may be issued alone or with other
Incentives (including Non-Statutory Stock Options) but may not be issued In
Tandem with Non-Statutory Stock Options; and
(h) each Incentive Stock Option agreement referred to in Section
13.06 shall contain or be deemed to contain all provisions required in order to
qualify those Stock Options as incentive stock options under Section 422 of the
Code, and the provisions of the Plan shall be interpreted and construed to
effect such treatment under that Section of the Code.
Section 8. Stock Appreciation Rights. An SAR may be granted by the
Award Authority (i) together with any Stock Option granted under the Plan, in
which case it shall be exercisable with and in addition to that Stock Option,
(ii) In Tandem with any Stock Option granted under the Plan (except with respect
to an Incentive Stock Option if the grant of the SAR would cause the Incentive
Stock Option not to qualify as such under Section 422 of the Code) or (iii)
alone, without reference to any Stock Option. Each SAR granted under the Plan
shall be subject to the following terms and conditions:
8.01. Number. Subject to Section 13.15 hereof, each SAR shall relate
to such number of Shares as shall be determined by the Award Authority.
8.02. Duration and Time for Exercise. The Award Date of an SAR shall
be the date specified by the Award Authority, provided that that date shall not
be before the date on which the SAR is actually granted. With respect to an
employee that is granted an SAR pursuant to the Plan, the Award Date (i.e., the
date of grant) of such SAR shall not be prior to the date on which such employee
commences employment with a member of the Group. With respect to a Consultant
that is granted an SAR pursuant to the Plan, the Award Date (i.e., the date of
grant) of such SAR shall not be prior to the date on which such Consultant
commences providing consulting or advisory services to a member of the Group.
The term of each SAR shall be determined by the Award Authority, but shall not
exceed eight years from the date of grant. In the event that the term of an SAR
is not specified in the applicable grant agreement, the term of such SAR shall
be eight years from the Award Date. Each SAR shall become exercisable at such
time or times and in such amount or amounts during its term as shall be
determined by the Award Authority at the time of grant; provided, however, that
the Selected Participants Committee may accelerate the exercisability of an SAR
granted to any Participant at any time. Unless otherwise specified by the Award
Authority, once an SAR becomes exercisable, whether in full or in part, it shall
remain so exercisable until its expiration, forfeiture, termination or
cancellation.
8.03. Exercise. An SAR may be exercised, in whole or in part, by
giving written notice to the Company (Attention: Chief Financial Officer) at its
principal office or to such transfer agent as the Company shall designate. The
notice shall identify the Incentive being exercised and shall contain such other
information and terms as the Special Participants Committee may require. As soon
as practicable after receipt of the written notice, the Company shall deliver to
the person exercising the SAR stock certificates for the Shares, cash or a
combination thereof to which that person is entitled under Section 8.04 hereof.
8.04. Payment. When the Award Authority awards an SAR, it shall
specify whether the SAR is exercisable (a) in United States dollars in cash or
by check, (b) for Shares only, (c) for any combination thereof as specified by
the person exercising the SAR at the time of the exercise of the SAR or (d) for
any combination thereof as specified by the Award Authority at the time of the
exercise of the SAR. The following provisions apply with respect to the exercise
of an SAR under the Plan:
(a) If an SAR is exercisable for Shares, the number of Shares
issuable upon the exercise of the SAR shall be determined by dividing:
(i) the number of Shares for which the SAR is exercised
multiplied by the amount of the appreciation per Share (for this purpose,
the "appreciation per Share" shall be the amount by which the Fair Market
Value of a Share on the Exercise Date exceeds (A) in the case of an SAR
granted In Tandem with a Stock Option, the exercise price or (B) in the
case of an SAR granted alone without reference to a Stock Option, the Fair
Market Value of a Share on the Award Date of the SAR); by
(ii) the Fair Market Value of a Share on the Exercise Date.
(b) If an SAR is exercisable for cash, the amount of cash payable
upon exercise shall be equal to the Fair Market Value of a Share on the Exercise
Date multiplied by the number of Shares that would be issuable if the SAR were
exercised for Shares.
(c) No fractional Shares shall be issued upon the exercise of an
SAR. Instead, the holder of the SAR shall receive a cash payment equal to the
Fair Market Value of the fractional share. Notwithstanding the foregoing, the
Selected Participants Committee may decide to pay cash to Participants covered
by Section 16 of the Securities Exchange Act only if the Company, the Special
Participants Committee and the Participant comply with all applicable provisions
of such Section 16 and the related regulations.
Section 9. Phantom Stock. Each Unit of Phantom Stock granted under the
Plan shall be subject to the following terms and conditions:
9.01. Number. Each Unit of Phantom Stock shall relate to one Share.
9.02. Duration and Time for Exercise. The Award Date of a Unit of
Phantom Stock shall be the date specified by the Award Authority, provided that
that date shall not be before the date on which the Unit of Phantom Stock is
actually granted. With respect to an employee that is granted a Unit of Phantom
Stock pursuant to the Plan, the Award Date (i.e., the date of grant) of such
Unit of Phantom Stock shall not be prior to the date on which such employee
commences employment with a member of the Group. With respect to a Consultant
that is granted a Unit of Phantom Stock pursuant to the Plan, the Award Date
(i.e., the date of grant) of such Unit of Phantom Stock shall not be prior to
the date on which such Consultant commences providing consulting or advisory
services to a member of the Group. The term of each Unit of Phantom Stock shall
be determined by the Award Authority, but shall not exceed eight years from the
date of grant. In the event that the term of a Unit of Phantom Stock is not
specified in the applicable grant agreement, the term of such Unit of Phantom
Stock shall be eight years from the Award Date. Each Unit of Phantom Stock shall
become exercisable at such time or times and in such amount or amounts during
its term as shall be determined by the Award Authority at the time of grant;
provided, however, that the Selected Participants Committee may accelerate the
exercisability of a Unit of Phantom Stock at any time. Unless otherwise
specified by the Award Authority, once a Unit of Phantom Stock becomes
exercisable, whether in full or in part, it shall remain so exercisable until
its expiration, forfeiture, termination or cancellation.
9.03. Exercise. A Unit of Phantom Stock may be exercised, in whole or
in part, by giving written notice to the Company (Attention: Chief Financial
Officer) at its principal office or to such transfer agent as the Company shall
designate. The notice shall identify the Incentive being exercised and shall
contain such other information and terms as the Board shall require. As soon as
practicable after receipt of the written notice, the Company shall deliver to
the person exercising the Unit of Phantom Stock the amount of cash to which that
person is entitled under Section 9.04.
9.04. Payment.
(a) When the Award Authority awards a Unit of Phantom Stock, the Award
Authority shall specify whether that unit is entitled to the dividends that
would accrue to a single Share. If any Unit of Phantom Stock is so entitled,
dividends shall be paid on the unit as if the unit were a Share.
(b) The amount of cash payable upon exercise of a Unit of Phantom
Stock shall be the excess of Fair Market Value of one Share on the Exercise Date
over the Fair Market Value of one Share on the Award Date.
Section 10. Stock Awards and Restricted Stock Awards. Stock Awards and
Restricted Stock Awards shall be subject to the following terms and conditions:
10.01. Number of Shares. The number of Shares to be issued by the
Company to a Participant under a Stock Award or a Restricted Stock Award shall
be determined by the Award Authority; provided, however, that no more than
500,000 Shares may be issued under all Stock Awards and Restricted Stock Awards
(independent of the number of Shares covered by Performance Stock Rights)
granted pursuant to the Plan.
10.02. Sale Price. The Approval Authority shall determine the prices,
if any, at which Shares issued under a Restricted Stock Award shall be sold to a
Participant, which prices may vary from time to time and among Participants and
which may be below the Fair Market Value of Shares at the date of sale. The
Shares of Restricted Stock awarded at a price must be paid for (a) in United
States Dollars in cash or by check, (b) at the discretion of the Award
Authority, by delivery of Shares having a Fair Market Value equal on the
purchase date to the purchase price or (c) at the discretion of the Award
Authority, by a combination of (a) and (b) above.
10.03. Duration. Shares of restricted stock that are to be sold to the
Participant must be fully paid for by the Participant within the time specified
by the Award Authority. If payment is not timely made, the Incentive shall lapse
and terminate.
10.04. Delivery. As soon as practicable after granting a Stock Award,
the Company shall deliver to the Participant one or more stock certificates for
the Shares awarded. As soon as practicable after granting a Restricted Stock
Award and, if the restricted stock is to be sold to the Participant, after
payment of the full purchase price, the Company shall deliver one or more stock
certificates for the Shares as provided in Section 10.07.
10.05. Restrictions. All Shares issued under a Restricted Stock Award
shall be subject to such restrictions as the Award Authority may determine,
including, but not limited to, any or all of the following:
(a) a prohibition against the sale, transfer, pledge, encumbrance
or other disposition of the Shares. Such a prohibition shall lapse at the time
or times that the Award Authority may determine (whether in annual or more
frequent installments, at the time of the death, disability or retirement of the
Participant, or otherwise); and
(b) a requirement that the Participant forfeit (or in the case of
Shares sold to a Participant, resell to the Company at the same price at which
the Participant purchased the Shares) all or any part of those Shares if the
Participant's employment is terminated during any period in which those Shares
are subject to restrictions.
10.06 Limitation. Notwithstanding the foregoing, all Shares issuable
pursuant to a Restricted Stock Award shall be subject to at least one of the
following conditions:
(a) the Participant shall be required to forfeit the Shares
if the Participant ceases to be employed by a member of the Group within three
years after the date of grant; or
(b) the Participant shall be required to forfeit the Shares if
the Participant fails to satisfy performance criteria approved by the Committee.
10.07. Escrow. Shares of Common Stock issued under a Restricted Stock
Award shall be registered in the name of the Participant and deposited, together
with a stock power endorsed in blank, in escrow with the Company. Each stock
certificate for those Shares shall bear a legend in substantially the following
form:
"The transfer of this certificate and the shares of Common Stock
represented by it is subject to the terms and conditions
(including conditions of forfeiture) contained in the 1997
Incentive Benefit Plan of Dialogic Corporation (the "Company")
and an agreement entered into between the registered owner and
the Company. Copies of the Plan and agreement are on file in the
office of the Secretary of the Company."
10.08. End of restrictions. After the restrictions have expired, stock
certificates evidencing the Shares shall be delivered to the Participant free of
such legend. The Shares, however, shall remain subject to all other restrictions
stated in the Plan or in the agreement providing for that Incentive.
10.09. Stockholder. Subject to the terms and conditions of the Plan
and any other restrictions determined by the Award Authority and set forth in
the agreement for the Restricted Stock Award, each Participant who receives
Shares under a Restricted Stock Award shall have all of the rights of a
stockholder during any period in which the Shares are subject to restrictions,
including, but not limited to, the right to vote the Shares. Dividends on
restricted Shares paid in cash or property shall be held in escrow together with
the restricted Shares and shall not be released to the Participant unless and
until the restrictions lapse or the conditions to release are satisfied.
Dividends payable in Shares or other stock, however, shall be paid in restricted
Shares subject to all provisions of this Section 10.
Section 11. Performance Stock Rights. The award of Performance Stock
Rights shall be subject to such terms and conditions as the Award Authority
considers appropriate. Each award of a Performance Stock Right shall include the
performance objectives to be achieved by the Group or the Participant or both
the Group and the Participant. The number of Shares to be issued by the Company
to a Participant under a Performance Stock Right shall be determined by the
Award Authority; provided, however, that no more than 500,000 Shares may be
issued under all Performance Stock Rights (independent of the number of Shares
covered by Stock Awards and Restricted Stock Awards) granted pursuant to the
Plan. If the performance objectives are achieved, the Participant shall be
issued a number of Shares equal to the number of Performance Stock Rights
granted to that Participant. In the event that the performance objectives for a
particular Performance Share Unit relate solely to continued employment, three
years from the date of grant of such Unit shall be the minimum period of
continued employment required in order to satisfy such performance objectives.
Section 12. Cash Awards. The amount of any Cash Award shall be
determined by the Award Authority. Cash Awards shall be subject to such other
terms and conditions as the Award Authority may determine.
Section 13. General.
13.01. Effective Date; Effectiveness. The Plan was adopted by the
Board on February 27, 1997. Any Incentive granted pursuant to the Plan prior to
the date on which the shareholders of the Company approve the Plan shall be
granted subject to the condition that the shareholders of the Company approve
the Plan on or before February 26, 1998. This Plan shall be void and of no
effect if such shareholder approval is not given on or before February 26, 1998.
13.02. Duration. Unless the Plan is terminated earlier, the Plan shall
terminate on February 26, 2007. No Incentive or other rights under the Plan
shall be granted thereafter. The Board, without further approval of the
Company's stockholders, may at any time before that date terminate or suspend
the Plan. After termination of the Plan, no further Incentives may be granted
under the Plan. Incentives granted before any termination or suspension of the
Plan shall continue to be exercisable in accordance with the terms of such
Incentives.
13.03. Limited Transferability of Incentives. Except as provided in
the balance of this Section 13.03, no Option granted under this Plan shall be
transferable otherwise than by will or the law of descent and distribution
following the Optionee's death, and during the lifetime of the Optionee, shall
be exercisable only by him or for his benefit by his attorney in fact or
guardian. An Incentive other than an Incentive Stock Option may, in connection
with a Participant's estate plan and with the approval of the Award Authority,
be assigned in whole or in part during the Participant's lifetime to one or more
members of the Participant's immediate family or to a trust established
exclusively for one or more such family members. The assigned portion may only
be exercised by the person or persons who acquire a proprietary interest in the
Incentive pursuant to the assignment. The terms applicable to the assigned
portion shall be the same as those in effect for the Incentive immediately prior
to such assignment and shall be set forth in such documents issued to the
assignee as the Award Authority may deem appropriate.
13.04. Effects of Termination of Employment or Death. Each agreement
providing for an Incentive shall include such provisions as the Award Authority
may determine for the exercise and termination of the Incentive, the rights
thereunder and the forfeiture thereof, in each case if the Participant ceases to
be an employee of, or a Consultant to, the Company or any member of the Group
for any reason; provided, however, that notwithstanding any provision to the
contrary herein or in any Incentive Agreement, the provisions of Section 13.05
shall govern in the event that the employment of an employee-holder of a Stock
Option or SAR terminates as a result of death, Disability or Retirement or in
the event that the employment of an employee-holder of a Stock Option or SAR is
terminated by the Company either with "cause" or without "cause" (any
determination of "cause" to be made by the Special Participants Committee and to
be binding and conclusive for purposes of the Plan) or is terminated voluntarily
by such employee-holder. Subject to Section 13.05(e) hereof, an employee's
employment shall be deemed to have terminated when the Company gives the
employee notice of termination or receives a notice of termination from the
employee, irrespective of the subsequent payment of salary, wages or severance
or other benefits. The Special Participants Committee's determination as to
whether a leave of absence (whether or not with approval of the Company or by
reason of military or governmental service) constitutes termination of
employment for purposes of the Plan shall be binding and conclusive.
13.05 Termination of Employment as a Result of Death, Disability or
Retirement; Other Terminations of Employment. Notwithstanding any provision to
the contrary herein or in any Incentive Agreement, the following provisions
shall apply with respect to Stock Options and SARs held by an
employee-Participant at the termination of such Participant's employment with
members of the Group in the event that such Participant's employment terminates
as a result of death, Disability or Retirement or in the event that such
Participant's employment is terminated by the Company either with "cause" or
without "cause" (any determination of "cause" to be made by the Special
Participants Committee and to be binding and conclusive for purposes of the
Plan):
(a) If such employment terminates as a result of death, the
Participant's Stock Options and SARs shall be deemed fully
exercisable as of the date of death and such Participant's
estate shall have the right to exercise the Participant's
Stock Options and SARs for a period ending on the earlier of
the expiration dates of such Stock Options and SARs or three
years from the date of termination of employment.
(b) If such employment terminates as a result of Disability,
the Participant's Stock Options and SARs shall be deemed
fully exercisable as of the date that the Participant is
notified that he will not longer be employed by any members
of the Group (the "Notification Date") and such Participant
shall have the right to exercise his Stock Options and SARs
for a period ending on the earlier of the expiration dates
of such Stock Options and SARs or three years from the
Notification Date, provided that if an Incentive Stock
Option is exercised beyond the last date consistent with
treatment of such option as an "incentive stock option"
under the Code, such option shall be deemed to be a
Non-Statutory Stock Option hereunder.
(c) If such employment terminates as a result of Retirement,
the Participant shall have the right to exercise his Stock
Options and SARs for a period ending on the earlier of the
expiration dates of such Stock Options and SARs or three
years from the date of termination of employment, provided
that unless the Special Participants Committee determines
otherwise (i.e., determines that some or all of a retiring
Participant's unvested Stock Options be deemed fully vested)
with respect to a particular Retirement, such Stock Options
and SARs shall be exercisable by the Participant after
Retirement only to the extent exercisable on the date of
termination of employment and provided that if an Incentive
Stock Option is exercised beyond the last date consistent
with treatment of such option as an "incentive stock option"
under the Code, such option shall be deemed to be a
Non-Statutory Stock Option hereunder.
(d) If such employment is terminated by the Company without
"cause", the Participant shall have the right to exercise
his Stock Options and SARs for a period ending on the
earlier of the expiration dates of such Stock Options and
SARs or three months from the date of termination of
employment, provided that such Stock Options and SARs shall
be exercisable by the Participant after termination of
employment only to the extent exercisable on the date of
termination of employment.
(e) If such employment is terminated by the Company with
"cause", all Stock Options and SARs held by such Participant
shall terminate as of the date on which such employment
terminates.
(f) In the event that an employee continues to serve as a
director or Consultant of any member of the Group after such
employee ceases to be employed by any member of the Group,
the employee shall, for purposes of the Plan, be deemed to
continue in the employment of the Company until such time
that such person ceases to serve as a director of,
Consultant to or employee of any member of the Group;
provided that if an Incentive Stock Option is exercised
beyond the last date consistent with treatment of such
option as an "incentive stock option" under the Code, such
option shall be deemed to be a Non-Statutory Stock Option
hereunder.
Unless otherwise provided by the Award Authority in the applicable Incentive
Agreement or at the time of termination of employment, if a Participant
voluntarily terminates his or her employment with all members of the Group, the
Participant shall have the right to exercise his Stock Options and SARs for a
period ending on the earlier of the expiration dates of such Stock Options and
SARs or three months from the date of termination of employment, provided that
such Stock Options and SARs shall be exercisable by the Participant after
termination of employment only to the extent exercisable on the date of
termination of employment. The Award Authority may provide at any time before or
within one week after such voluntary termination of employment that a
Participant's right to exercise Stock Options or SARs in such instance shall
terminate as of the date of termination of employment.
13.06. Incentive Agreements. Except in the case of Cash Awards, the
terms of each Incentive shall be stated in an agreement between the Company and
the Participant in a form approved by the Special Participants Committee. The
Participant must execute and deliver the agreement to the Company as a condition
to the effectiveness of the Incentive. The Award Authority may also determine to
enter into agreements with holders of options (a) to reclassify or convert
certain outstanding options, within the terms of the Plan, as Incentive Stock
Options or as Non-Statutory Stock Options or (b) to eliminate SARs for all or
part of such options and any other previously issued options. All such
agreements may contain such terms and conditions as the Award Authority
considers advisable that are not inconsistent with the Plan, including, but not
limited to, transfer restrictions, rights of first refusal, forfeiture
provisions, representations and warranties of the Participant and provisions to
ensure compliance with all applicable laws, regulations and rules as provided in
Section 13.07 hereof.
13.07. Compliance with Law. The Company may determine, in its sole
discretion, that it is necessary or desirable to list, register or qualify (or
to update any listing, registration or qualification of) any Incentive or the
Shares issuable or issued under any Incentive or the Plan on any securities
exchange or under any federal or state securities law, or to obtain consent or
approval of any governmental body as a condition of, or in connection with, the
award of any Incentive, the issuance of Shares under any Incentive or the Plan,
or the removal of any restrictions imposed on such Shares. If the Company makes
such a determination, the Incentive shall not be awarded or the Shares shall not
be issued or the restrictions shall not be removed, as applicable, in whole or
in part, unless and until the listing, registration, qualification, consent or
approval shall have been effected or obtained free of any conditions not
acceptable to the Company. The Company's obligation to sell or issue Shares
under an Incentive is subject to compliance with all applicable laws and
regulations. The Special Participants Committee, in its sole discretion, shall
determine whether the sale and issue of Shares is in compliance with all
applicable laws and regulations.
13.08. Adjustment. If the outstanding Shares of Common Stock are
increased or decreased or changed into or exchanged for a different number or
kind of securities of the Company or of another corporation, by reason of a
reorganization, merger, consolidation, recapitalization, reclassification, stock
split, combination of securities or dividend payable in corporate securities,
then an appropriate adjustment shall be made by the Board in the number, kind
and/or price of Shares for which Incentives may be granted under the Plan. In
addition, the Special Participants Committee shall make appropriate adjustment
in the number, kind and/or price of Shares as to which outstanding Incentives,
or portions thereof then unexercised, shall be exercisable. In the event of any
such adjustment, the exercise price of any Stock Option, the performance
objectives, restrictions or other terms and conditions of any Incentive and the
Shares issuable under any Incentive shall be adjusted as and to the extent
appropriate, in the sole and absolute discretion of the Special Participants
Committee, to provide each Participant with substantially the same relative
rights before and after such adjustment to the extent practical.
13.09. Withholding.
(a) The Company shall have the right to withhold from any payments
made under the Plan or to collect as a condition to any award, payment or
issuance of Shares under the Plan any taxes required to be withheld by Federal,
state or local law. Subject to Section 13.09(b) hereof, whenever a Participant
is required to pay to the Company an amount required to be withheld under
applicable tax laws in connection with a distribution of Shares or cash or upon
exercise of a Stock Option or SAR, the Participant may satisfy this obligation
in whole or in part by electing (the "Election") to have the Company withhold
from the distribution that number of Shares having a value equal to the amount
required to be withheld. The value of the Shares to be withheld shall be based
on the Fair Market Value of the Shares on the date on which the amount of tax to
be withheld is determined ("Tax Date"). Each Election must be made before the
Tax Date.
(b) The Special Participants Committee may disapprove any Election,
may suspend or terminate the right to make Elections, or may provide with
respect to any Incentive that the right to make an Election shall not apply to
that Incentive. An Election is irrevocable.
(c) If a Participant is subject to the restrictions of Section 16 of
the Securities Exchange Act, then an Election is subject to the following
additional restrictions:
(i) No Election shall be effective for a Tax Date that occurs
within six months of the Award Date of the Incentive; and
(ii) The Election must be made six months before the Tax Date.
13.10. No right to a Continued Relationship. No employee-Participant
under the Plan shall have any right to continue in the employ of the Company or
any member of the Group for any period of time because of such employee's
participation in the Plan. No Consultant-Participant under the Plan shall have
any right to continue as a consultant or advisor to the Company or any member of
the Group for any period of time because of such Consultant's participation in
the Plan.
13.11. No Right as Stockholder. No Participant or Qualified Person
shall have the rights of a stockholder with respect to the Shares covered by an
Incentive unless a stock certificate is issued to that person for the Shares. No
adjustment shall be made for cash dividends or similar rights for which the
record date is before the date on which such stock certificate is issued.
13.12. Amendment of the Plan. The Board may amend the Plan from time
to time in such respects as the Board deems advisable. No such amendment,
however, shall change or impair an Incentive without the consent of the
Participant or Qualified Person holding that Incentive.
13.13. Definition of Fair Market Value. Whenever the "Fair Market
Value" of the Common Stock is to be determined as of a particular date (the
"Valuation Date") for purposes of the Plan, "Fair Market Value" shall be
determined as follows:
(a) If the Common Stock is quoted on the Nasdaq Stock Market on
the Valuation Date, "Fair Market Value" shall equal the average of (i) the
highest sales price of the Common Stock as reported on the Nasdaq Stock Market
on the Valuation Date and (ii) the lowest sales price of the Common Stock as
reported on the Nasdaq Stock Market on the Valuation Date.
(b) If the Common Stock is then traded on a national securities
exchange, "Fair Market Value shall equal the average of (i) the highest sales
price of the Common Stock as reported on such exchange on the Valuation Date and
(ii) the lowest sales price of the Common Stock as reported on such exchange on
the Valuation Date.
(c) If the Common Stock is not publicly traded at the time that
"Fair Market Value" is to be determined under the Plan, "Fair Market Value"
shall be determined in good faith by the Special Participants Committee.
13.14. Repurchase, Replacement and Substitution of Options. Upon
approval of the Board, the Company may repurchase a previously granted Stock
Option from a Participant by mutual agreement before that Stock Option has been
exercised upon such terms and conditions as the Company and the Participant
shall agree, provided that the purchase price per Share shall not exceed the
amount by which the Fair Market Value of the Common Stock subject to the option
on the date of purchase exceeds the exercise price. The Award Authority may
agree to the cancellation of Stock Options in order to make a Participant
eligible for the grant of a replacement Stock Option at a lower price than the
option to be canceled. In the event of a merger or consolidation in which the
Company is the effective survivor, or the acquisition by the Company of property
or stock of an acquired corporation or any reorganization or other transaction
qualifying under Section 424 of the Code, the Company may substitute Stock
Options under the Plan for options under a plan of the acquired corporation,
provided that (a) the excess of the aggregate Fair Market Value of the Shares
subject to the option immediately after the substitution over the aggregate
option price of such Shares is not more than the similar excess immediately
before such substitution, and (b) the new option does not give the Participant
or Qualified Person holding that Stock Option additional benefits. In the event
that (x) the Company should adopt a plan of reorganization pursuant to which (i)
it shall merge into, consolidate with, or sell substantially all of its assets
to, any other corporation or entity or (ii) any other corporation or entity
shall merge into the Company in a transaction in which the Company shall not be
the effective survivor, then the Company shall have the right to provide for all
Incentives granted hereunder to be assumed by the acquiring or surviving
corporation on such terms as the Selected Participants Committee shall determine
to be appropriate.
13.15. Fractional and Minimum Shares; Maximum Shares In no event shall
a fraction of a Share be purchased or issued under the Plan without approval of
the Special Participants Committee. The Special Participants Committee may
specify a minimum number of Shares for which each Stock Option and/or SAR must
be exercised, which number, however, shall not be more than 100.
13.16 Application of Funds. The proceeds received by the Company from
the sale of Shares under the Plan shall be used for general corporate purposes.
13.17 Other Incentives and Plans. Nothing in the Plan shall prohibit
any member of the Group from establishing other employee incentives and plans.
13.18 Governing Law. The validity and construction of the Plan and of
each agreement evidencing Incentives shall be governed by the laws of the State
of New Jersey, excluding the conflict-of-laws principles thereof.
14. Change in Control. In the event that a "Senior Level Optionee" (as
defined herein) experiences a "Termination Event" (as defined herein) within
twelve months after a "Change in Control Event" (as defined herein) occurs, all
Stock Options granted hereunder which are held by such Senior Level Optionee on
the date that such Termination Event occurs (the "Termination Date") shall be
deemed to be fully vested hereunder as of such Termination Date for purposes of
determining the exerciseability of such Stock Options on and after such
Termination Date. For purposes of the Plan, the term "Change in Control Event"
shall mean any of the following events:
(a) the acquisition by any one person, or more than one person
acting as a group, of ownership of stock of the Company, other than any person
or group of persons who held such total voting power on April 10, 1994 (the day
before the Company commenced its initial public offering), possessing 50.1% or
more of the total voting power of the capital stock of the Company;
(b) the approval by the stockholders of the Company of (i) any
consolidation or merger of the Company, in which the holders of voting stock of
the Company immediately before the consolidation or merger will not own 50% or
more of the voting shares of the continuing or surviving corporation immediately
after such consolidation or merger, or (ii) any sale, lease, exchange or other
transfer (in one transaction or series of related transactions) of all or
substantially all of the assets of the Company; or
(c) a change of 50% (rounded to the next whole percent) in the
membership of the Board within a 12-month period, unless the election, or
nomination for election by stockholders, of each new director within such period
was approved by the vote of 80% (rounded to the next whole person) of the
directors then still in office who were in office at the beginning of such
12-month period.
For purposes of this Section 14, a Senior Level Optionee shall be
deemed to have experienced a "Termination Event" if, and only if, within twelve
months after a "Change in Control Event" occurs, (i) such Senior Level
Optionee's employment with the Company or any subsidiary thereof is terminated
by the Company or such subsidiary without cause, (ii) such Senior Level
Optionee's base salary (excluding bonuses and/or commissions) is reduced by more
than 10% per annum or (iii) the duties and responsibilities of such Senior Level
Optionee are substantially reduced without such Senior Level Optionee's consent.
For purposes of this Section 14, the term "Senior Level Optionee"
shall mean the Company's Chairman of the Board, the Company's Chief Executive
Officer and each vice president of the Company who, on the date on which a
Change in Control Event occurs, reports directly to the Company's Chief
Executive Officer pursuant to the Company's then existing table of organization.
<TABLE>
<CAPTION>
EXHIBIT 11.1
Calculation of Income Per Share As of December 31,
(In thousands, except per share amounts) 1994 (B) 1995 1996
--------------- ------------------- ------------------
<S> <C> <C> <C>
Primary Earnings
Income applicable to shares used in $13,608 $16,302 $25,548
calculation of income per share
Shares used in calculation of income per share:
Weighted average shares outstanding 13,726 15,340 15,654
Dilutive effect of stock options after application of
treasury stock method 661 699 763
Dilutive effect of shares that would have to be sold on
a pro forma basis to generate sufficient proceeds to pay
a dividend which was declared prior to the
consummation of the public offering 122 - -
_______ _______ ___________
Number of shares in calculation of income
per share 14,509 16,039 16,417
Income per share $ 0.94 $ 1.02 $1.56
========= ========= =====
Fully Diluted Earnings (A)
Income applicable to shares used in
calculation of income per share $ 13,608 $ 16,302 $25,548
--------- -------- -------
Shares used in calculation of income per share:
Weighted average shares outstanding 13,726 15,340 15,654
Dilutive effect of stock options after application of
treasury stock method 661 721 822
Dilutive effect of shares that would have to be sold on
a pro forma basis to generate sufficient proceeds to pay
a dividend which was declared prior to the
consummation of the public offering 122 - -
--- ------- --------
Number of shares in calculation of income
per share 14,509 16,061 16,476
Income per share $ 0.94 $ 1.02 $ 1.55
========= ========== =======
</TABLE>
_____________
(A) In 1995 and 1996, fully diluted net income per share is not required on the
face of the income statement in accordance with Accounting Principles
Board Opinion No. 15 since it dilutes primary earnings per share by less
than 3%.
(B) Dialogic was an S corporation through April 1994. For 1994, income and per
share amounts have been computed on a pro forma basis as if Dialogic had
been taxed as a C corporation throughout 1994.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Overview
The past three years have been years of significant growth for
Dialogic. Year-to-year revenue growth exceeded 30% in 1994 and 1995 and amounted
to 27% in 1996. Revenue increases have enabled the Company to increase profits
during the period and invest substantially in research and development.
Liquidity was enhanced as well during this period; Dialogic's working capital
increased from $15 million at January 1, 1994 to $100 million three years later,
reflecting the Company's 1994 initial public offering (the "IPO"), strong
operating cash flows and realized and unrealized gains from the Company's
investment in Voice Control Systems, Inc. ("VCS").
The Company consummated two acquisitions during 1995 and one
acquisition during 1996. On February 14, 1995, Dialogic acquired certain assets,
consisting principally of computer telephone integration software technology,
from Digital Equipment Corporation. This acquisition led to the Company's
introduction of its CT Connect products in July 1995 and Dialogic offering
consulting services through its Synapse Group. On February 27, 1995, the Company
acquired Spectron Microsystems, Inc. ("Spectron"), a California-based producer
of digital signal processor ("DSP") operating systems. This transaction was
accounted for as a pooling of interests. Since the historical operations of
Spectron prior to the merger were not material to the Company's consolidated
operations and financial position, prior period financial statements were not
restated to reflect the merger. On June 27, 1996, the Company acquired Dianatel
Corporation ("Dianatel"), a California-based manufacturer of digital network
interface and other signal computing products. The Dianatel acquisition was
accounted for as a purchase. Other than $1.3 million of expenses relating to the
Spectron transaction and $4.7 million of goodwill associated with the Dianatel
acquisition which will be amortized over five years beginning with the
acquisition, the Company's results of operations were not materially affected by
any of these acquisitions. For information regarding the Company's acquisitions
see Note 2 to the Company's Notes to the Consolidated Financial Statements.
Percentage of Revenues
The following table sets forth, for the periods indicated, certain
statements of income data as a percentage of total revenues:
Year Ended December 31, 1994 1995 1996
Revenues 100.0% 100.0% 100.0%
Costs and expenses:
Cost of goods sold 40.0 39.6 39.7
Research and development expenses 17.0 17.2 19.0
Selling, general and administrative expenses 27.2 28.3 28.1
Merger costs - .8 -
Interest income - net (.9) (1.2) (1.1)
Net realized gains on available
for sale securities - (.2) (4.3)
Income before provision for income taxes 16.7 15.5 18.6
Provision for income taxes 4.2 5.8 6.6
Net income 12.5 9.7 12.0
Pro forma net income(1) 10.7 - -
(1) Dialogic was an S corporation through April 1994. The pro forma information
presented herein has been computed as if the Company had been taxed as a C
corporation throughout 1994.
Percentage Change
The following table sets forth, for the periods indicated, the
percentage increase of certain items included in the Company's consolidated
statements of income:
1995 1996
Compared With Compared With
1994 1995
Revenues 32.6% 26.7%
Costs of goods sold 31.4 26.8
Research and development expenses 34.2 40.0
Selling, general and
administrative expenses 37.6 26.0
Net income 2.6 56.7 (2)
Pro forma net income(1) 19.8 -
(1) Dialogic was an S corporation through April 1994. The pro forma
information presented herein has been computed as if the Company had been taxed
as a C corporation throughout 1994.
(2) During 1996, the Company recorded a net pre-tax gain of $9.1 million as a
result of its first quarter sale of a portion of its equity position in VCS.
Excluding this gain, the percentage increase of 1996 compared with 1995 would
have been 21.8%. See Note 5 of the Company's Notes to the Consolidated Financial
Statements.
Revenues
Revenues increased by $41.4 million or 33% in 1995 and by $44.9
million or 27% to $213.6 million in 1996. Excluding revenues generated in 1995
by Spectron, CT-Connect and the Synapse Group, revenue growth would have been
approximately 29% in 1995. Revenue gains in 1995 were primarily attributable to
the sales of new products incorporating SCSA technology across the Company's
entire product line, increased demand from existing customers for low density
products used in call processing, unified messaging and call center systems and
demand from existing and new customers for high density components for use in
call completion, wireless and intelligent peripheral applications. During 1996,
revenue growth was primarily driven by the sales of high density products,
principally T-1 and E-1 single and DualSpan cards. Much of that growth was
attributable to new customers. During 1996 the Company also experienced unit
growth and to a lesser extent revenue growth in its low density product lines.
However, the rate of growth of low density product revenues has decreased over
the last several years. There were no material price adjustments during 1994 and
1995. In 1996, the Company reduced prices on its low density products during the
first quarter and on certain high density products during the fourth quarter.
The Company will consider price adjustments in the future in order to enter new
and emerging markets or to react to price reductions on competing products.
International sales, primarily in Europe and Asia/Pacific, increased
by $12 million or 32% from 1994 to 1995 and by $13 million or 26% to $62.3
million in 1996. In 1996, a substantial percentage increase in Asia/Pacific
revenues was partially offset by a lesser percentage increase in certain
European markets, primarily Central Europe. In these markets, economic issues
(recessionary pressures) and regulatory issues (generally, a slowdown in the
deregulation of the telecom industry) appear to be impeding the deployment of
computer telephony products. As reflected below, the allocation of domestic and
international revenues have remained relatively constant over the past three
years ($000's):
Year Ended December 31, 1994 1995 1996
Domestic:
Amount $89,908 $119,336 $151,293
Percentage of total revenues 70.7% 70.8% 70.8%
------ ------- -------
International:
Amount $37,327 $49,316 $62,311
Percentage of total revenues 29.3% 29.2% 29.2%
------ ------- ------
Dialogic includes in international revenues, revenues of the Company's
international subsidiaries and export revenues from the America's to customers
in Asia/Pacific and Europe. Revenues from domestic customers are treated as
domestic revenues even if the Dialogic components sold to such domestic
customers are incorporated into systems which are ultimately sold overseas.
Cost of Goods Sold/Gross Margin
Dialogic's gross margin and cost of goods sold percentage decreased
slightly from 1994 to 1995 and remained relatively unchanged from 1995 to 1996.
The decrease in cost of goods sold as a percentage of revenue from 1994 to 1995
reflects design improvements and reductions in material costs for the Dialogic/
GammaLink product lines and the addition of Spectron's and CT-Connect's higher
margin products. In 1996, gross margins remained relatively unchanged as a
percentage of revenues. During 1996 the Company continued its efforts to cost
reduce many of its products, and continued to benefit from reductions in
material costs. These reductions in cost of goods sold were offset at the gross
margin level by the reduced revenues resulting from the Company's 1996 price
reductions and a one-time charge of $1.0 million related to a patent licensing
agreement entered into with Syntellect. Increases in the dollar amount of cost
of goods sold primarily reflect the Company's increased sales volume and the one
time charge associated with the Syntellect agreement.
Research and Development Expenses
Research and development expenses increased by $7.4 million or 34%
from 1994 to 1995 and by $11.6 million or 40% to $40.7 million in 1996. As a
percentage of revenues, such expenses represented 17.0%, 17.2% and 19.0% of
revenues in 1994, 1995, and 1996, respectively. The increase in the dollar
amount of such expenses over the past three years reflect the continued
expansion of the Company's engineering staff and related overhead, the addition
of engineering resources from the Company's 1995 and 1996 acquisitions and a
substantial investment of engineering resources that resulted in Dialogic's
February 1997 announcement of its DM3 Mediastream Resource Architecture ("DM3").
DM3 represents a new set of specifications, hardware and core firmware modules
that are intended to govern how the Company's next generation of products will
be designed.
The increase in the percentage relationship of research and
development expenses to total revenues during 1996 reflects the Company's DM3
initiative, engineering efforts associated with the development and roll-out of
low and high density products and GammaLink fax products, and the development of
software products.
The Company continues to believe that investment in technologies is
critical to its future growth and continued technological competitiveness. The
Company anticipates that during 1997 the relative percentage of research and
development expenses to revenues will be comparable to 1996. This statement
constitutes a forward looking statement under the Private Securities Litigation
Reform Act of 1995. Actual research and development spending may differ
materially as a result of various factors, including technological developments,
availability of qualified personnel, market conditions and competition. At
December 31, 1996, 349 of Dialogic's 905 employees were engaged in research and
development activities.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased by $13 million
or 38% from 1994 to 1995 and by $12.4 million or 26% to $60.1 million in 1996.
Excluding the impact of the Spectron acquisition in 1995, selling, general and
administrative expenses increased by 28% from 1994 to 1995. Such expenses
represented 27.2%, 28.3% and 28.1% of revenues during 1994, 1995 and 1996,
respectively. The increases in selling, general and administrative expenses in
1995 and 1996 primarily reflect, in both years, the continuing growth of
domestic and international sales and marketing efforts (including expenses
associated with obtaining international approvals), marketing expenses
associated with new product launches and sales and marketing expenses associated
with acquired companies. In 1996, such expenses also reflect marketing expenses
relating to the expansion of the Company's distribution channels and the
development of enhanced financial and distribution systems necessary to support
the Company's expanded business activities.
Interest Income
Dialogic recorded net interest income of $2.0 million in 1995 and $2.4
million in 1996, nearly double such income from 1994. The amounts recorded in
1995 and 1996 reflect interest earned on cash balances and interest earned from
the Company's elections in the past two years to convert accrued interest on the
note of VCS into capital stock of VCS. During 1996, the Company invested much of
its cash in tax-free securities. Such securities generated a lower pre-tax yield
than the pre-tax yield received by the Company in prior years on fully taxable
instruments. See Note 5 of the Company's Notes to the Consolidated Financial
Statements.
On January 1, 1997, upon the maturity of the VCS note, the Company
converted the principal balance of the note into capital stock of VCS.
Accordingly, interest income during 1997 and future periods will not include
interest relating to the VCS note.
Net Realized Gains on Available for Sale Securities
During 1996, the Company recorded a net gain of $9.2 million primarily
as a result of its first quarter sale of a portion of its equity position in
VCS. At December 31, 1996, the Company's balance sheet reflected an unrealized
gain of $5.6 million associated with the balance of Dialogic's equity position
in VCS.
Provision for Income Taxes
The Company's provision for income taxes reflects Dialogic's status as
an S corporation through the Company's IPO in April 1994 and as a C corporation
thereafter. In conjunction with the termination of Dialogic's S corporation
status, a cumulative net federal deferred tax asset of $1.1 million was
established with an offsetting credit to (and thus a reduction in) the 1994
provision for income taxes. The recognition of the deferred tax asset did not
affect the Company's pro forma provision for income taxes in 1994. The pro forma
provision for 1994 reflects the Company's pro forma pre-tax income, offset in
part by the utilization of certain tax credits (applicable also to the actual
provision for income taxes).
The Company's provision for income taxes increased by $2.2 million or
28%, on a pro forma basis, from 1994 to 1995 and by $4.3 million or 44% to $14.2
million in 1996. The increase in the provision for income taxes in 1995 and 1996
reflects increased pre-tax income and the unavailability of research and
development tax credits during the second half of 1995 and the first half of
1996, offset in part in 1996 by the effect of Dialogic's investment in
tax-exempt securities and by certain international tax strategies.
Inflation, Foreign Currency Exchange and Other Matters
Inflation has not had a significant impact on the Company's operating
results to date. Foreign currency gains and loses are included within the
Company's general, selling and administrative expenses. While the amounts of
such gains or losses have not been significant to the Company's year-end results
to date, as the Company continues to expand its international operations,
exposure to gains and losses on international currency transactions may increase
and may be material to quarterly results.
The consolidated financial statements of the Company reflect the
translation of the functional currencies of its foreign subsidiaries under
Statement of Financial Accounting Standards ("SFAS") No. 52. The decline in the
US dollar against the functional currencies during 1995 had the effect of
magnifying the impact of foreign revenues and expenses on the Company's
consolidated results of operations. The improvement in the US dollar against the
functional currencies during 1996 had a countervailing effect during 1996.
For information regarding certain accounting pronouncements, see Note
1 of the Notes to the Company's Consolidated Financial Statements.
Liquidity and Capital Resources
As of December 31, 1996, Dialogic had working capital of $100 million
and a current ratio (i.e., the ratio of current assets to current liabilities)
of 5.9 to 1, as compared with working capital of $77 million and a current ratio
of 4.4 to 1 at December 31, 1995.
Dialogic's cash, cash equivalents and short-term investments increased
by $7.6 million during 1996. This increase primarily reflects the $7.4 million
of cash provided by the Company's operating activities and after tax proceeds of
$6.9 million on the sale of VCS stock. Capital expenditures of $10.7 million
during 1996 primarily reflect the acquisition of new computer equipment and
software associated with Dialogic's growth and furniture and fixtures acquired
in connection with the expansion of the Company's offices worldwide.
The Company has financed its operations primarily through cash flows
from operations, as well as from the net proceeds of its initial public offering
and the net realized gain from the sale of VCS securities. Dialogic is a party
to two credit facilities pursuant to which the Company may borrow up to $35
million on an unsecured basis for working capital purposes. See Note 7 of the
Notes to the Company' Consolidated Financial Statements.
The Company believes that the combination of its current liquidity,
cash generated from operations and the credit available under its existing bank
lines will be sufficient to meet the liquidity and capital requirements of
Dialogic for at least the next twelve months. This statement represents a
forward-looking statement under the Private Securities Litigation Reform Act of
1995. The actual sufficiency of such capital resources could differ materially
from the Company's expectations, depending primarily upon the extent to which
unanticipated capital requirements may arise and the extent to which
unanticipated events may have a materially adverse effect on the Company's
profitability.
Risks and Uncertainties
Dialogic's business is subject to certain risks which are described in
greater detail in Item 1 of the Dialogic Annual Report on Form 10-K for the year
ended December 31, 1996. Such risks include (i) the possibility that the
Company's products may become obsolete in light of rapidly changing
technological developments or that the Company may fail to respond adequately to
such developments; (ii) the advances that other companies may make in the highly
competitive CT industry, (iii) the likelihood that Dialogic revenues may vary
significantly from accounting period to accounting period due to a variety of
factors, including the timing of significant customer orders and other factors
that impact customer demand, changes in Dialogic's products, geographic mix and
customer mix, the introduction of new products by Dialogic or its competitors,
pricing pressures or other competitive marketing initiatives, regulatory
developments, economic conditions or unanticipated development and/or
manufacturing difficulties or expenses, (iv) disputes that may arise in the
future regarding the intellectual property rights of the Company, its
competitors or other third-parties, (v) the outcome of litigation, which
typically is difficult to predict in light of the uncertainties involved in
legal proceedings, (vi) uncertainties resulting from the Company's dependence on
only one or a limited number of sources for certain critical components and
relating to the Company's reliance upon third-party suppliers which perform
manufacturing functions on behalf of the Company, (vii) the extent to which
Dialogic is able to obtain regulatory approvals throughout the world, (viii) the
Company's dependence on key personnel and its ability to attract and retain
qualified personnel to support future technology developments and business
growth, (ix) risks that may arise as a result of efforts to integrate any
companies that Dialogic may acquire in the future and (x) the possibility that
Dialogic may hold excess or obsolete inventory at any time as a result of the
rapidly changing technology or needs of its customers. Such factors, as well as
announcements of technological innovations or new products by Dialogic, its
competitors or third-parties, consolidations or other substantial changes within
or affecting the computer telephony industry, quarterly variations in the
Company's results of operations, shortfalls in Dialogic revenues, gross margins
or earnings as compared with analysts' expectations, regulatory developments,
capital market conditions and general and economic conditions, may also cause
substantial volatility in the market price of the Company's Common Stock.
Independent Auditors' Report
To the Board of Directors and Shareholders of
Dialogic Corporation
Parsippany, New Jersey
We have audited the accompanying consolidated balance sheets of
Dialogic Corporation and subsidiaries as of December 31, 1995 and 1996, and the
related consolidated statements of income, shareholders' equity and cash flows
for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and signicant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the financial position of Dialogic Corporation and
subsidiaries as of December 31, 1995 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, New York
February 10, 1997
<PAGE>
Consolidated Balance Sheets
Dialogic Corporation and Subsidiaries
(In thousands, except share amounts)
December 31, 1995 1996
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 5,987 $ 11,848
Short term investments 24,689 26,443
Convertible note, options and
shares recorded at fair
market value 12,777 11,030
Accounts receivable (net of allowance
for doubtful accounts of $894 in
1995 and $829 in 1996) 25,727 34,706
Inventory 23,969 27,762
Deferred income taxes 3,067 3,871
Other current assets 3,107 5,086
----- -----
Total current assets 99,323 120,746
------ -------
PROPERTY AND EQUIPMENT - Net 15,126 20,408
GOODWILL (net of accumulated amortization
of $56 in 1995 and $442 in 1996) 79 4,434
DEPOSITS AND OTHER ASSETS 2,834 2,661
----- -----
TOTAL ASSETS $ 117,362 $ 148,249
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 9,232 $ 7,043
Accrued expenses 7,199 8,256
Deferred income taxes 5,320 4,623
Current maturities of long-term
liabilities 595 559
--- ---
Total current liabilities 22,346 20,481
------ ------
LONG-TERM LIABILITIES 2,259 2,926
SHAREHOLDERS' EQUITY:
Preferred stock, no par value -
10,000,000 shares authorized;
none issued
Common stock, no par value - 60,000,000
shares authorized; 15,491,965 and
15,774,222 shares outstanding,
respectively 199 203
Additional paid-in capital 38,697 46,740
Retained earnings 46,723 72,271
Cumulative translation adjustment 373 14
Net unrealized gains on available
for sale securities 6,765 5,614
----- -----
Total shareholders' equity 92,757 124,842
------ -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $117,362 $ 148,249
======== =========
See notes to consolidated financial statements.
<PAGE>
Consolidated Statements of Income
Dialogic Corporation and Subsidiaries
(In thousands, except share amounts)
Year Ended December 31, 1994 1995 1996
REVENUES $ 127,235 $ 168,652 $ 213,604
---------- ---------- ----------
COSTS AND EXPENSES:
Cost of goods sold 50,841 66,829 84,764
Research and development expenses 21,650 29,045 40,666
Selling, general and administrative
expenses 34,646 47,673 60,052
Merger costs - 1,294 -
Interest expense 107 44 95
Interest income (1,321) (2,080) (2,535)
Net realized (gains)/losses on
available for sale securities 15 (309) (9,175)
------- ------- -------
Total costs and expenses 105,938 142,496 173,867
------- ------- -------
INCOME BEFORE PROVISION FOR INCOME TAXES 21,297 26,156 39,737
PROVISION FOR INCOME TAXES 5,408 9,854 14,189
----- ----- ------
NET INCOME $ 15,889 $ 16,302 $ 25,548
=========== ========== ==========
Income per share $ 1.02 $ 1.56
========== ===========
Shares used in the calculation
of income per share 16,039 16,417
====== ======
PRO FORMA INCOME DATA (Unaudited):
Income before provision for income
taxes as reported $ 21,297
Pro forma income taxes 7,689
-----------
Pro forma net income $ 13,608
===========
Pro forma income per share $ .94
===========
Shares used in the calculation of pro
forma income per share 14,509
===========
See notes to consolidated financial statements.
<PAGE>
<TABLE>
Consolidated Statements of Shareholders' Equity
Dialogic Corporation and Subsidiaries
(In thousands, except share data)
<CAPTION>
Unrealized
Gains/Losses
Note Additional Cumulative on Total
Common Stock Receivable Paid-in Retained Translation Available for Shareholders'
Shares Amount for Stock Capital Earnings Adjustment Sale Securities Equity
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1994 11,356,006 $151 $(476) $4,249 $17,496 $ (2) $ - $ 21,418
---------- ---- ----- ------ ------- ----- ---- ----------
Exercise of stock options 464,027 5 - 1,177 - - - 1,182
Issuance of common stock 2,889,375 39 - 27,854 - - - 27,893
Dividends declared - - - - (2,455) - - (2,455)
Currency translation gain - - - - - 212 - 212
Repayment of note
receivable for stock - - 191 - - - - 191
Net unrealized gains on
available for sale securities - - - - - - 2,301 2,301
Reclassication of undistributed
S corporation retained earnings - - - 1,000 (1,000) - - -
Other - - - 243 (78) - - 165
Net income - - - - 15,889 - - 15,889
Balance, December 31, 1994 14,709,408 195 (285) 34,523 29,852 210 2,301 66,796
---------- --- ---- ------ ------ --- ----- ------
Exercise of stock options 351,342 4 - 2,753 - - - 2,757
Issuance of common stock
in connection with
acquisitions 430,229 - - 1,201 569 - - 1,770
Currency translation gain - - - - - 163 - 163
Repayment of note
receivable for stock - - 285 - - - - 285
Net unrealized gains on
available for sale
securities - - - - - - 4,464 4,464
Issuance of common stock under
employee stock purchase
plan 15,119 - - 220 - - - 220
Purchase and retirement
of treasury stock (14,133) - - - - - - -
Net income - - - - 16,302 - - 16,302
Balance, December 31, 1995 15,491,965 199 - 38,697 46,723 373 6,765 92,757
---------- --- --- ------ ------ --- ----- ------
Exercise of stock options 179,822 3 - 2,881 - - - 2,884
Issuance of common stock
in connection with
acquisitions 55,424 1 - 3,794 - - - 3,795
Currency translation (loss) - - - - - (359) - (359)
Net unrealized (losses) on
available for sale
securities - - - - - - (1,151) (1,151)
Issuance of common stock under
employee stock purchase
plan 47,011 - - 1,368 - - - 1,368
Net income - - - - 25,548 - - 25,548
Balance, December 31, 1996 15,774,222 $203 $ - $46,740 $72,271 $ 14 $ 5,614 $ 124,842
========== ==== === ======= ======= ====== ======= ==========
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
Consolidated Statements of Cash Flows
Dialogic Corporation and Subsidiaries
(In thousands)
Year Ended December 31, 1994 1995 1996
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 15,889 $ 16,302 $ 25,548
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 2,002 3,223 6,103
Provision for inventory obsolescence 307 826 159
Provision for bad debts 357 724 724
Deferred rent 483 327 336
Tax benefit from exercise of
stock options 666 1,865 1,902
Minority interest - 46 39
Deferred income taxes (581) (1,107) (587)
Non-cash interest income (597) (532) (1,069)
Net realized (gain) loss on available for
sale securities 15 (309) (9,175)
Non-cash merger costs - 609 -
Changes in operating assets and liabilities:
(Increase) in accounts receivable (4,035) (8,995) (9,234)
(Increase) decrease in inventory 940 (12,682) (3,639)
(Increase) decrease in other current assets 325 (951) (1,910)
(Decrease) increase in accounts payable (1,966) 2,503 (2,393)
Increase (decrease) in accrued expenses (605) 3,092 789
Other 182 445 (143)
Net cash provided by
operating activities 13,382 5,386 7,450
------ ----- -----
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (7,226) (7,614) (10,722)
Purchase of short-term investments (25,318) (23,257) (45,937)
Proceeds from sales of short-term investments 3,275 21,808 44,044
Proceeds from sales of other investments - - 10,100
Acquisition of business - 378 (820)
Net cash used in investing activities (29,269) (8,685) (3,335)
------- ------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (5,125) - -
Principal payments under capital
lease obligations (236) (392) (104)
Proceeds from short-term borrowings 19,615 2,157 12,625
Repayments on short-term borrowings (20,482) (2,157) (12,625)
Exercise of stock options 516 892 982
Issuance of common stock 27,893 220 1,368
Repayment of note receivable
for stock 191 285 -
Other (114) - (500)
Net cash provided by financing
activities 22,258 1,005 1,746
------ ----- -----
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS 6,371 (2,294) 5,861
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 1,910 8,281 5,987
CASH AND CASH EQUIVALENTS, END OF YEAR $ 8,281 $ 5,987 $11,848
========= ======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 107 $ 28 $ 95
Income taxes 5,442 8,264 13,739
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING
AND FINANCING ACTIVITIES
Equipment acquired under capital lease obligations $ 118 $ - $ 157
Other assets acquired by incurring long-term debt 2,000 - -
Change in net unrealized (losses)/gains
on available for sale securities 2,301 4,464 (1,151)
Stock and options issued for acquisition of business - - 3,795
===== ======= =======
See notes to consolidated financial statements.
</TABLE>
<PAGE>
Notes to Consolidated Financial Statements
Dialogic Corporation and Subsidiaries
1. Summary of Signicant Accounting Policies
Nature of Business - Dialogic designs, manufactures and sells high performance,
standards-based computer telephony (CT) components sold globally to original
equipment manufacturers, value added resellers and service providers through
both a direct sales force and distributors. Computer telephony systems built
with Dialogic products manage telephone, facsimile and multi-media calls
answered by computers over wireless and wired networks worldwide. Dialogic's
products are used in voice, fax, data, voice recognition, speech synthesis and
call center management CT applications. Dialogic products are offered as modular
building blocks that enable its customers to design CT systems that meet the
application demands of their end-user customers. The company is headquartered in
Parsippany, New Jersey, with regional headquarters in Tokyo, Japan, Brussels,
Belgium and Buenos Aires, Argentina. Dialogic employs approximately 900 people
worldwide, and has offices in major industrial centers around the world.
Principles of Consolidation - The consolidated financial statements include the
accounts of Dialogic Corporation and its subsidiaries (collectively, the
"Company"). Signicant intercompany accounts and transactions have been
eliminated.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, and
the reported amounts of revenues and expenses during the reporting period. The
preparation of financial statements in conformity with generally accepted
accounting principles also requires management to make estimates and assumptions
that affect the disclosures of contingent assets and liabilities at the date of
the financial statements. Actual results could differ from those estimates.
Reclassications - Certain reclassications were made to the 1994 and 1995
financial statements to conform to the 1996 presentation.
Revenue Recognition - The Company recognizes revenues on the date of shipment.
Inventory - Inventory is stated at the lower of cost (first-in, first-out
method) or market.
Property and Equipment - Property and equipment are stated at cost less
accumulated depreciation and amortization. Depreciation and amortization are
computed at straight-line or accelerated methods at rates adequate to allocate
the cost of the applicable assets over their expected useful lives, which range
from one to five years on equipment (including software) and seven years for
furniture and fixtures. Equipment under capital lease and leasehold improvements
are amortized over the lease term or estimated useful life, whichever is
shorter.
Income Taxes - Immediately prior to the consummation of the Company's IPO, the
Company terminated its status as an S corporation. While the Company was an S
corporation, federal income taxes and state income taxes for those states which
recognize S corporation status were reported by and taxed directly to the
Company's shareholders rather than to the Company. Due to the termination of its
status as an S corporation on April 16, 1994, the Company is now subject to
federal and all applicable state income taxes on taxable income earned. The
Company provides deferred income taxes on temporary differences between amounts
of assets and liabilities for financial reporting purposes and such amounts as
measured by tax laws in accordance with SFAS No. 109 "Accounting for Income
Taxes."
Research and Development Expenses - Research and development is charged to
expense in the year incurred.
Software Development Expenses - The development of new software products and
substantial enhancements to existing software products is expensed as incurred
until technological feasibility has been established, at which time any
additional costs would be capitalized in accordance with SFAS No. 86. Because
the Company believes its current process for developing software is essentially
completed concurrently with the establishment of technological feasibility, no
costs have been capitalized to date.
Foreign Currency Translation - For the Company's international operations,
assets and liabilities are translated at year-end exchange rates and income
statement items are translated at average exchange rates prevailing during the
year. Translation adjustments are recorded as a separate component of
shareholders' equity.
Cash Equivalents and Investments - Cash equivalents are highly liquid
investments, including certicates of deposit, government securities and time
deposits, with maturities of three months or less at the time of purchase.
Short-term investments are similar investments with maturities of more than
three months. Cash equivalents are stated at cost which approximates market
value. Included in cash and cash equivalents is $324,000 and $533,000 which was
withheld from employees for employee benefit plans at December 31, 1995 and
1996.
On January 1, 1994 the Company adopted SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities". This Statement requires that debt
and equity securities that have readily determinable fair values be carried at
fair value unless they are held to maturity. Securities are classied as held to
maturity only if the Company has the positive intent and ability to hold these
securities to maturity. If not classied as held to maturity, such securities are
classied as securities available for sale or trading securities. Unrealized
gains or losses for securities held in the available for sale portfolio are
excluded from earnings and reported net of tax as a separate component of
shareholders' equity. Short-term investments and the convertible note, options
and shares (see Note 5) are classied as available for sale securities. Realized
gains and losses on sales of investments, as determined on a specific
identification basis, are included in the Consolidated Statements of Income.
Fair values are determined by reference to market prices for securities as
quoted based on publicly traded exchanges or as determined by a municipal bond
pricing service which utilizes current trade, bids, offers and other issue
specific data at the valuation date.
Concentration of Credit Risk - Financial instruments which potentially subject
the Company to concentration of credit risk consist principally of accounts
receivable from customers in the computer telephony industry. This risk is
mitigated by the large number of customers in the Company's customer base and
the Company's procedures for extending credit and collection of receivables.
Income Per Share - Income per share is based on the weighted average number of
common shares and common share equivalents outstanding during the periods
presented. Stock options have been included in the computations using the
treasury stock method when their effect would be dilutive. In 1994 income per
share was computed on a pro forma basis as the Company was an S Corporation
through April 1994. Pro forma tax expense is computed as though the Company was
a C Corporation for the entire year.
Accounting Pronouncements - In March 1995, the Financial Accounting Standards
Board (FASB) issued SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of." This statement is effective
for fiscal years beginning January 1, 1996. The adoption of this statement did
not have an effect on the Company's consolidated financial condition or results
of operations.
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation," which is effective for the Company beginning January 1, 1996.
SFAS No. 123 requires expanded disclosures in annual financial statements of
stock-based compensation arrangements with employees and encourages (but does
not require) compensation cost to be measured based on the fair value of the
equity instrument awarded. Companies are permitted, however, to continue to
apply Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock
Issued to Employees," which recognizes compensation cost based on the intrinsic
value of the equity instrument awarded. The Company will continue to apply APB
Opinion No. 25 to its stock based compensation awards to employees and has made
the required disclosure of the pro forma effect on net income and income per
share in Note 6 to the Company's Consolidated Financial Statements.
2. Acquisitions
On June 6, 1994, the Company issued 1.4 million shares of its Common Stock for
all of the outstanding stock of GammaLink, a California based developer of
facsimile boards for computer-based applications. In addition, formerly
outstanding options to acquire shares of GammaLink's capital stock were
converted into options to purchase a total of 279,000 shares of Dialogic Common
Stock. This acquisition has been accounted for as a pooling of interests.
The following summarizes the separate results of the Company and GammaLink
from January 1, 1994 through the end of the interim period nearest the
acquisition ($000's):
Dialogic GammaLink Eliminations (1) Total
--------- --------- ---------------- ------
Six Months Ended June 30, 1994 (Unaudited)
Revenues $ 51,669 $ 8,472 $ (895) $59,246
Net Income 7,705 777 (188) 8,294
(1) Intercompany transactions between Dialogic and GammaLink.
On February 14,1995, the Company completed the purchase of certain assets,
consisting principally of software technology, from Digital Equipment
Corporation. Such assets have enabled the Company to develop, market and sell a
server product for computer control of telephone switches. Under the terms of
the agreement, the purchase price was $250,000. Additionally, the Company is
required to make future royalty payments (not to exceed $1.75 million)which will
be based on sales of products utilizing the acquired technology over a three
year period.
On February 27, 1995, the Company acquired Spectron Microsystems, Inc.
("Spectron") a California-based producer of DSP operating systems. The
acquisition was structured as a merger pursuant to which a wholly-owned
subsidiary of Dialogic merged with and into Spectron and shareholders of the
acquired entity exchanged all of their capital stock for a total of 430,229
shares of the Company's Common Stock. Spectron stock options were replaced by
stock options entitling their holders to purchase a total of 97,308 shares of
the Company's Common Stock. This transaction has been accounted for as a pooling
of interests. Since the historical operations of Spectron prior to the date of
the merger were not material to the Company's consolidated operations and
financial position, prior period financial statements have not been restated.
On June 27, 1996, the Company acquired all of the outstanding common stock
of Dianatel Corporation in exchange for 55,424 shares of Dialogic common stock,
$1.1 million in cash and options to purchase 29,874 shares of Dialogic common
stock. The merger has been accounted for as a purchase. The merger resulted in
goodwill of approximately $4.7 million which is being amortized over five years
beginning with the date of the acquisition.
3. Balance Sheet Detail
Consisted of the following ($000's)
December 31, 1995 1996
Inventories
Raw materials $ 11,900 $ 10,399
Work-in-process 2,784 4,607
Finished goods 9,285 12,756
--------------- ------------
$ 23,969 $ 27,762
=============== ============
Allowances for excess or obsolete inventories were $1,460 and $1,552 at the end
of 1995 and 1996, respectively.
Property and Equipment
Furniture and fixtures $ 4,835 $ 5,843
Equipmen 18,613 27,328
Leasehold improvements 1,815 3,059
------------ ------------
$ 25,263 $ 36,230
============ =============
Less accumulated
depreciation and
amortization 10,137 15,822
------------ -----------
$ 15,126 $ 20,408
============ ===========
Deposits and Other assets
Deposits $ 761 $ 720
License fees 1,924 1,563
Other 149 378
------------- -----------
$ 2,834 $ 2,661
============ ===========
Long-Term Liabilities
Deferred rent $ 963 $ 1,299
License fees 1,250 750
Note payable (prime + 1%) - 634
Other 46 243
------------- ----------
$ 2,259 $ 2,926
============ ==========
4. Shareholders' Equity
In 1994, the Company effected a 1.5 for 1 stock split of common shares and
amended its certicate of incorporation to increase the number of shares of
Common Stock that the Company is authorized to issue to 60,000,000. During
November 1993, the Board declared a dividend in the amount of $2.7 million,
which was paid in February 1994.
On April 19, 1994, Dialogic consummated its IPO, issuing a total of
2,889,375 shares of Common Stock, which resulted in net proceeds to Dialogic of
approximately $27.9 million. Upon termination of the Company's S corporation
status, cash distributions totaling $2.4 million were paid to stockholders from
the undistributed S corporation retained earnings. The remaining undistributed S
corporation retained earnings of approximately $1.0 million have been reclassied
as additional paid in capital.
Note Receivable for Stock - GammaLink had an employment agreement with one of
its officers. Under the agreement, the officer acquired 96,754 shares of
Common Stock for $50,000 and notes in the principal amount of $476,000. The
notes were secured by the Company's Common Stock. In December 1994 and
January 1995 the notes were repaid.
5. Available For Sale Securities
The following is a summary of the available for sale securities as of December
31,1996 and 1995 ($000's):
<TABLE>
<CAPTION>
Cost Gross Gross Estimated
Unrealized Unrealized Fair Value
1996 Gains Losses
<S> <C> <C> <C> <C>
Municipal Bonds $ 26,395 $ 48 $ - $ 26,443
Convertible note and shares 1,954 9,076 - 11,030
----- ----- ------
Total available for sale securities $ 28,349 $ 9,124 $ - $ 37,473
======== ======= ======== =======
</TABLE>
Included in the convertible note and shares
are equity securities of $792, net of
unrealized gains of $274.
<TABLE>
<CAPTION>
1995
<S> <C> <C> <C> <C>
Government Bonds $ 17,765 $ 236 $ - $ 18,001
Municipal Bonds 2,045 6 - 2,051
Corporate Bonds 4,566 78 (7) 4,637
----- -- -- -----
Total short term investments 24,376 320 (7) 24,689
------ --- -- ------
Convertible note, options and shares 1,904 10,873 - 12,777
----- ------ ------
Total available for
sale securities $ 26,280 $11,193 $ (7) $ 37,466
========== ======= ===== ========
</TABLE>
Included in the convertible note, options and shares are equity securities of
$742, net of unrealized gains of $4,954.
The cost and estimated fair value of debt securities at December 31, 1996, by
contractual maturity, are as follows ($000's):
Cost Estimated
Fair Value
1997 $ 5,409 $ 14,228
1998 13,006 13,023
1999 2,992 2,995
2000 - -
2001 - -
Thereafter 6,150 6,161
----------- ----------
$ 27,557 $ 36,407
=========== ==========
During 1995 and 1996, the gross realized gains on sales of securities totaled
approximately $327 and $9,345, respectively, and the gross realized losses
totaled approximately $18 and $170, respectively.
In 1991, the Company completed a series of agreements with VCS which
were subsequently amended as of March 14, 1994; such agreements provide, among
other things, as follows:
(a) The Company paid $900,000 in cash for a convertible note in the
principal amount of $1.2 million with interest at "prime" plus 2% and having a
maturity date of January 1, 1997. In addition, the Company received a security
interest in certain technology. Under the note agreement, the Company had the
right to convert all or any part of the principal amount of the note and accrued
interest into shares of VCS stock at a rate of one share for each $.92 of
principal and interest accrued.
(b) VCS granted to the Company an option to purchase up to 914,231
shares of VCS common stock at a purchase price of $.61 per share.
During 1994, 1995, and 1996, the Company recognized interest income in
amounts of $335,000, $532,000, and $1,069,000, respectively, based on the
estimated fair values of the VCS stock which the Company elected to receive in
lieu of cash on each of the interest payment dates of the convertible note. In
1994, upon reassessing the creditworthiness of VCS, the Company recognized a
discount of $262,000, which is reflected in interest income. During 1996, the
Company sold 1,150,000 shares of stock in VCS's public offering for proceeds of
$10.1 million by exercising its option and by selling additional shares held.
The Company realized a pre-tax gain on available for sale securities of $9.1
million. On January 1, 1997 the Company converted the principal of the note into
1,264,474 shares of capital stock of VCS, after which the Company's total
holdings in VCS amounted to 1,399,715 shares of capital stock.
The convertible note, options and shares were classified as available
for sale under SFAS 115, since the Company views these as investments. The fair
values of the Company's investments in VCS have been determined by reference to
the market prices for VCS stock as quoted on publicly traded exchanges on the
respective valuation dates. Prior to December 31, 1996 such fair values included
discounts to reflect the possible illiquidity in the market for VCS stock.
VCS is a supplier to the Company of certain proprietary voice
recognition technologies. During 1994, 1995 and 1996, the Company's purchases
from VCS amounted to $2,651,000, $5,825,000, and $2,953,000, respectively.
6. Employee Benefit Plans
Bonus Plan - The Company has a quarterly bonus program in which all employees
participate, except certain members of senior management. Each quarter a pool is
created based upon the achievement of targeted profit goals. Payments are made
to employees on a quarterly basis. For the years ended December 31, 1994, 1995,
and 1996, the Company recorded expenses under the program of $874,000, $990,000,
and $978,000, respectively.
Savings Plan - The Company has a savings plan, which qualifies under Section
401(k) of the Internal Revenue Code. Under the plan, participating U.S.
employees may defer up to 15% of their pre-tax salary, but no more than
statutory limits. The Company contributes forty cents for each dollar
contributed by a participant, with a maximum contribution of 2% of a
participant's earnings. The Company's matching contributions to the savings plan
were $250,000, $311,000, and $458,000 in 1994, 1995, and 1996, respectively.
Stock Compensation Plans - At December 31,1996, the Company had certain
stock-based compensation plans, which are described below. The Company applies
APB Opinion No. 25 and related Interpretations in accounting for its plans.
Accordingly, no compensation cost has been recognized for either type of plan.
Had compensation cost been determined in accordance with the method of SFAS No.
123 "Accounting for Stock-Based Compensation", based on the fair value at the
grant date for awards during 1995 and 1996 under those plans, the Company's net
income and income per share would have been reduced to the pro forma amounts
indicated below ($000's except per share amounts):
1995 1996
Net Income
As reported $ 16,302 $ 25,548
Pro forma $ 14,818 $ 22,340
Income per share
As reported $ 1.02 $ 1.56
Pro forma $ .92 $ 1.36
The effects of applying SFAS No. 123 for providing pro forma disclosures are not
likely to be representative of the effects on reported net income for future
years, because options vest over several years and additional awards generally
are made each year. The fair value of the 29,874 stock options issued in
connection with the 1996 acquisition of Dianatel is included in the Dianatel
purchase price and therefore does not affect the pro forma amounts indicated
above.
Stock Option Plans - The Company has stock option plans for directors, officers
and all employees, which provides for nonqualified and incentive stock options.
At December 31, 1996, 652,520 shares were available for future grants under the
plans. All options have been granted at exercise prices at or above fair market
value at the date of grant and vest over periods of up to seven years. All
options have a maximum term of ten years.
For the purposes of the pro forma amounts indicated above and other
disclosures, the fair value of each option grant was estimated on the date of
grant using the Black-Scholes option pricing model with the following
assumptions:
Year of Grant 1994 1995 1996
------ ---- ----
Volatility 75% 75% 75%
Weighted average risk free interest rate 7.0% 6.4% 6.3%
Expected life (yrs) 6 6 6
No dividends are assumed to be paid during the expected life of any option.
<PAGE>
A summary of the status of the Company's stock option plans as of
December 31,1994, 1995, and 1996 and changes during the years ending on those
dates is presented below:
<TABLE>
<CAPTION>
1994 1995 1996
---------------------------- ---------------------------- -------------------------------
Shares Weighted-Average Shares Weighted-Average Shares Weighted-Average
(000) Exercise Price (000) Exercise Price (000) Exercise Price
Options outstanding
<S> <C> <C> <C> <C> <C> <C>
at beginning of year 2,031 $ 5.00 1,850 $ 7.00 1,962 $ 12.00
Granted 319 13.00 511 23.00 626 31.00
Exercised (464) 1.00 (351) 3.00 (173) 5.00
Forfeited/Canceled (36) 5.00 (48) 10.00 (146) 29.00
Options outstanding
at end of year 1,850 $ 7.00 1,962 $ 12.00 2,269 $ 16.00
===== ===== =====
Options Exercisable at
year end 827 759 855
Weighted average fair
value of options granted
during the year $ 10.00 $ 16.00 $ 23.00
</TABLE>
The following table summarizes information about stock options outstanding at
December 31, 1996:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
- ----------------------------------------------------------------------------------------- --------------------------------------
Number Weighted-Average
Outstanding Remaining Weighted-Average Number Exercisable Weighted-Average
Range of Exercise Prices at 12/31/96 Contractual life (yrs) Exercise Price at 12/31/96 Exercise Price
- ------------------------------- ----------- ---------------------- ---------------- ------------------ ----------------
<C> <C> <C> <C> <C> <C> <C>
$ 1.33 to $ 4.93 497,000 4.6 $ 3.60 391,000 $ 3.57
5.73 to 9.33 449,000 6.7 7.10 246,000 7.50
10.67 to 18.88 376,000 7.4 15.13 158,000 14.23
21.00 to 28.75 719,000 8.9 24.94 60,000 23.50
30.00 to 55.75 228,000 9.6 36.44 - -
--------- --- -------- ------- ------------
2,269,000 7.3 $ 16.27 855,000 $ 8.08
========= === ======= ======= ============
</TABLE>
Employee Stock Purchase Plan - On April 28,1995, the Company's stockholders
approved the establishment of the Employee Stock Purchase Plan (the "ESPP").
Under the ESPP, employees meeting certain eligibility requirements may elect to
use up to ten percent of their compensation to purchase the Company's common
stock at a purchase price equal to eighty-five percent of the fair market value
of the stock at the beginning or end of each offering period, whichever is
lower. Certain members of senior management are not eligible to participate in
the ESPP. Under the ESPP, the Company reserved for issuance a total of 300,000
shares. Approximately fifty percent of eligible employees have participated in
the ESPP during the last two years. Under the ESPP, the employees purchased or
committed to purchase 29,109 shares and 49,770 in 1995 and 1996, respectively.
For the purpose of the pro forma amounts indicated above, compensation cost was
based on the fair value of the employee's purchase rights on the date of grant,
which was estimated using the Black-Scholes model with the following assumptions
for 1995 and 1996; no dividends, an expected life of .25 years, expected
volatility of seventy-five percent, and weighted average risk-free interest
rates of 5.5 and 5.1 percent. The fair value of those purchase rights granted in
1995 and 1996 was $169,000 and $588,000, respectively.
7. Credit Facilities
The Company maintains credit facilities, with two different lenders, pursuant to
which the Company may borrow up to $35 million on an unsecured basis for working
capital purposes.
Loans made under these agreements bear interest, at the option of the
Company, primarily at a rate equal to the lenders' base rate less one-quarter
percent or LIBOR plus one percent. At December 31, 1995 and 1996 no borrowings
were outstanding pursuant to these credit facilities. Future borrowing under
this facility will be due and payable on July 1, 1997.
8. Provision for Income Taxes
The provision for income taxes is comprised of the following ($000's):
<TABLE>
<CAPTION>
Year Ended December 31, 1994 1995 1996
- ----------------------- ------- ------- -------
Federal:
<S> <C> <C> <C>
Current $ 4,212 $ 9,24 12,343
Deferred 479 (926) (599)
------- ---------- ------
Total federal 4,691 8,798 11,744
------- ---------- ------
State:
Current 854 1,136 1,616
Deferred 87 (227) (39)
------- ---------- ------
Total state 941 909 1,577
------- ---------- ------
Foreign:
Current 848 134 824
Deferred 38 13 44
------- --------- -----
Total foreign 886 147 868
------- --------- -----
Provision before cumulative net
federal deferred tax asset 6,518 9,854 14,189
------- --------- ------
Cumulative net federal deferred tax asset (1,110) - -
-------- --------- ------
Total provision $ 5,408 $ 9,854 $ 14,189
========= ========= ==========
</TABLE>
The Company provides for deferred taxes, arising from the cumulative
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes, by
recording an income tax benefit or charge for such deferred taxes in its
consolidated statements of income. In conjunction with the termination of the
Company's S corporation status in 1994, a cumulative net federal deferred tax
asset of $1.1 million was recognized with an offsetting credit to the provision
for income taxes.
The federal and state tax effects of signicant items comprising
the Company's deferred tax assets and liabilities are as follows ($000's):
December 31, 1995 1996
Deferred tax assets:
Allowance for doubtful accounts $ 234 $ 222
Inventory reserves 614 645
Credit memo reserve 339 557
Self insurance reserve 213 291
Warranty reserve 220 144
Deferred revenue and deferred rent 527 701
Other reserves 375 595
Other 545 716
------- ------
Total deferred tax assets $ 3,067 $3,871
======= ======
Deferred tax liabilities:
Unrealized gains on available
for sale securities $(4,440) $(3,507)
Depreciation (510) (633)
Other (370) (483)
-------- --------
Total deferred tax liabilities $ (5,320) $(4,623)
========= ========
The effective income tax rates differed from the federal statutory
income tax rates as follows ($000's):
<TABLE>
<CAPTION>
December 31, 1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Federal taxes at statutory rate $ 7,454 $ 9,155 $ 13,908
Cumulative net federal deferred tax asset (1,110) - -
State taxes net of federal benefit 612 591 1,025
Effect of foreign taxes 254 5 180
Effect of S corporation status (1,568) - -
Research and development credits (340) (438) (721
Acquisition costs - 429 -
Foreign sales corporation benefit - - (319)
Tax exempt income - - (233)
Goodwill amortization - - 131
Other 106 112 218
---------- -------- ---------
Total $ 5,408 $ 9,854 $ 14,189
========== ======== ========
</TABLE>
Provision has not been made for deferred U.S. income taxes on undistributed
earnings of foreign subsidiaries totalling $3.6 million since those earnings are
intended to be permanently invested. It is not practicable to estimate the
income tax liability that might be incurred upon the remittance of such
earnings.
Pro Forma Provision for Income Taxes (Unaudited) - The unaudited pro forma
provision for income taxes represents estimated income taxes that would have
been reported had the Company fled its tax return as a taxable C corporation for
1994. The Company has accounted for income taxes on a pro forma basis in
accordance with SFAS No. 109.
The pro forma provision for income taxes is comprised of the following
($000's):
December 31, 1994
----
Federal:
Current $5,427
Deferred 435
------
Total federal 5,862
------
State:
Current 854
Deferred 87
------
Total state 941
------
Foreign:
Current 848
Deferred 38
Total foreign 886
------
Total provision $7,689
======
<PAGE>
9. Commitments and Contingencies
(a) Lease Commitments - Equipment with a net book value of $248,000 and
$282,000 at December 31, 1995 and 1996, respectively (net of accumulated
depreciation of $478,000 and $601,000), is leased under capital leases.
The Company leases certain office/warehouse space and equipment under
operating leases which expire at various times through 2005. Total rent expense
under operating leases amounted to approximately $3.3 million, $4.5 million and
$5.8 million for the years ended December 31, 1994, 1995, and 1996,
respectively. At December 31, 1996 future minimum lease payments are as follows
($000's):
Operating Capital
Year Ending December 31, Leases Leases
--------- -------
1997 $ 6,726 $ 59
1998 6,768 40
1999 6,592 40
2000 6,157 40
2001 5,279 30
Thereafter 17,680 -
-------- ------
Total $ 49,202 $ 209
========= ======
Amounts representing interest (40)
--------- ------
Present value of minimum lease payments 169
--------- ------
Current portion $ 59
========= ======
(b) Legal Proceedings - In June 1995, the Company entered into a settlement
agreement that resulted in the dismissal of various legal proceedings involving,
among others, the Company and Brooktrout Technology, Inc. ("Brooktrout"). In
November 1995, Brooktrout filed a complaint in the United States District Court
for the District of Massachusetts naming the Company, its GammaLink subsidiary
and its Chairman of the Board as defendants. The complaint sought to rescind the
settlement agreement and obtain unspecified compensatory and punitive damages on
the basis of allegations that the defendants fraudulently induced Brooktrout to
enter the settlement agreement. The defendants deny the substantive allegations
of this complaint and have filed a counterclaim seeking damages from Brooktrout.
In December 1996, the District Court entered an order of summary judgment
against Brooktrout dismissing certain of its claims, but leaving unresolved a
statutory unfair practice claim by Brooktrout and leaving unresolved all of the
defendant's counterclaims. Such order remained appealable. Although outcomes of
legal proceedings are difficult to predict and cannot be assured, the Company
does not believe that such proceedings will materially adversely affect its
consolidated financial condition, results of operations or liquidity.
During the third quarter of 1996, a complaint was filed in New Jersey
Superior Court against the Company and certain of its directors alleging that
the defendants breached principles of common law fraud in connection with
certain public statements made prior to the Company's July 8, 1996 press
release announcing preliminary results for the quarter ended June 30, 1996.
The complaint seeks monetary damages on behalf of a purported class of
purchasers of the Company's Common Stock. Management is unable to predict a
potential range of monetary exposure, if any, to the Company, but believes
that the substantive claims asserted are without merit and that a material
adverse effect on the Company's consolidated financial condition, results of
operations or liquidity is less than probable. However, based on the extent of
the decline in the market price of the Company's Common Stock after such press
release was published, an unfavorable result could have a material adverse
effect on the Company.
The Company is also engaged in other legal proceedings arising in the
ordinary course of its business, the result of which proceedings are not
expected to have a material adverse effect on the Company's consolidated
financial condition, results of operations and liquidity.
Management intends to defend each of the above-mentioned legal proceedings
vigorously. The Company's statements regarding the potential effect of each of
these legal proceedings constitute forward-looking statements. Actual results
could differ materially from these statements, depending upon uncertainties that
exist in any litigation relating to interpretations of legal issues and the
development and presentation of factual issues.
10. Operations in Geographic Areas
Information about the Company's operations in different geographic areas at
December 31, 1996, 1995, and 1994 and the years then ended is presented below
($000's):
Adjustments
Asia/ and
1996 Americas Pacific Europe Eliminations Consolidated
---------- ------- ------ ------------ ------------
Revenues:
Customers $171,517 $12,282 $29,805 $ - $213,604
Intercompany 32,752 4,212 2,071 (39,035) -
--------- ------- ------- ----------- ------------
Total revenues $204,269 $16,494 $31,876 $ (39,035) $213,604
========= ======= ======= =========== ============
Net income $ 24,788 $ 400 $ 686 $ (326) $ 25,548
Identiable assets $194,316 $ 6,297 $11,531 $ (63,895) $148,249
Adjustments
Asia/ and
1995 Americas Pacific Europe Eliminations Consolidated
-------- ------- -------- ------------ ------------
Revenues:
Customers $133,930 $ 9,439 $25,283 $ - $ 168,652
Intercompany 26,144 2,688 1,412 (30,244) -
--------- ------- ------- ----------- ----------
Total revenues $160,074 $12,127 $26,695 $ (30,244) $ 168,652
========= ======= ======= =========== ==========
Net income $ 16,667 $ 223 $ 26 $ (614) $ 16,302
Identiable assets $131,924 $ 4,063 $ 8,163 $ (26,788) $ 117,362
Adjustments
Asia/ and
1994 Americas Pacific Europe Eliminations Consolidated
-------- ------- ------ ------------ ------------
Revenues:
Customers $103,318 $ 7,553 $16,364 $ - $127,235
Intercompany 17,462 1,663 414 (19,539) -
-------- ------- ------- ----------- -----------
Total revenue $120,780 $ 9,216 $16,778 $ (19,539) $127,235
======== ======= ======= =========== ===========
Net income $ 15,410 $ 577 $ 340 $ (438) $ 15,889
Identiable assets $ 79,398 $ 3,384 $ 6,049 $ (6,967) $ 81,864
Intercompany sales are at prices which in general provide for a profit to
the selling subsidiary. The above-mentioned revenues for the Americas included
export sales to customers (in Asia/Pacic and Europe) as follows ($000's):
Asia/Pacific Europe Total
---------------- ------- --------
1996 $ 20,224 $ - $20,224
1995 14,594 - 14,594
1994 12,361 1,049 13,410
Supplementary Financial Information
Selected Quarterly Financial Information (Unaudited)
(In thousands, except share amounts)
Quarter Ended
1996 March 31, June 30, Sept 30, Dec 31,
---------- --------- -------- ---------
Total revenues $48,732 $50,054 $55,432 $59,386
Costs of goods sold 19,751 19,908 22,733 22,372
Net income(1) 10,612 4,566 4,793 5,577
Income per share(1) .65 .28 .29 .34
Quarter Ended
1995 March 31, June 30, Sept 30, Dec 31,
---------- -------- --------- ---------
Total revenues $ 35,812 $ 40,625 $ 44,029 $ 48,186
Costs of goods sold 14,336 16,210 17,914 18,369
Net income(2) 2,050 4,014 4,929 5,309
Income per share(2) .13 .25 .31 .33
(1) Net of $9.1 million pre-tax or $.35 per share gain on sale of 1,150,000
shares of Voice Control Systems, Inc. in the first quarter and a $1.0 million
pre-tax or $.04 per share one-time charge related to the Company's patent
licensing agreement with Syntellect Technology Corp. in the third quarter.
(2) Net of $1.3 million pre-tax or $.05 per share of merger costs related to
the Spectron acquisition in the first quarter.
Market Price and Dividend Data
The Company's Common Stock (the "Common Stock") is traded in the
over-the-counter market and quoted on the Nasdaq National Market System
("NASDAQ") under the symbol "DLGC." The following table sets forth the high and
low bid prices of the Common Stock on NASDAQ during the periods indicated. Such
prices reflect inter-dealer prices without retail mark-up, mark-down or
commissions and may not represent actual transactions.
High Low
Quarter ended March 31, 1995 $ 31.50 $ 20.25
Quarter ended June 30, 1995 29.00 16.50
Quarter ended September 30, 1995 27.50 16.00
Quarter ended December 31, 1995 44.25 20.75
Quarter ended March 31, 1996 41.50 25.50
Quarter ended June 30, 1996 60.00 36.75
Quarter ended September 30, 1996 55.25 22.50
Quarter ended December 31, 1996 38.00 27.00
As of January 31, 1997, there were approximately 250 holders of record of the
Common Stock. Since its IPO, the Company has not paid any cash dividends on
its capital stock; prior to that offering, the Company declared aggregate S
corporation dividends of $2.5 million in 1994 and $8.7 million in 1993. The
Company's current policy is to retain earnings for use in its business.
Accordingly, the Company does not anticipate paying cash dividends in the
future. Any payment of cash dividends in the future will depend upon the
financial condition, capital requirements, potential growth and earnings of
the Company, as well as such other factors as the Board of Directors may deem
relevant.
Selected Financial Data
The following selected consolidated financial data should be read in
conjunction with the Company's Consolidated Financial Statements and the Notes
thereto included elsewhere herein. All financial information presented herein
for periods prior to the 1994 acquisition of GammaLink by Dialogic have
been retroactively adjusted in order to account for that transaction as a
pooling of interests. For information regarding 1995 and 1996 acquisitions,
see "Management's Discussion and Analysis of Financial Condition and Results
of Operations".
<TABLE>
<CAPTION>
Year Ended December 31, 1992 1993 1994 1995 1996
----- ------ ---- ---- ----
(In thousands, except share amounts)
Statement of Income Data:
<S> <C> <C> <C> <C> <C>
Revenues $ 65,416 $ 95,613 $127,235 $ 168,652 $ 213,604
Costs and expenses:
Cost of goods sold 25,164 38,151 50,841 66,829 84,764
Research and development expenses 13,140 16,687 21,650 29,045 40,666
Selling, general and administrative
expenses 19,658 27,409 34,646 47,673 60,052
Merger costs - - - 1,294 -
Interest expense (income) - net (40) (75) (1,214) (2,036) (2,440)
Net realized losses/(gains) on available
for sale securities - - 15 (309) (9,175)
Income before provision for income taxes 7,494 13,441 21,297 26,156 39,737
Provision for income taxes 994 1,317 5,408 9,854 14,189
-------- --------- --------- --------- --------
Net income $ 6,500 $ 12,124 $ 15,889 $ 16,302 $ 25,548
======== ========= ========= ========= ========
Income per share $ 1.02 $ 1.56
======== ========= ======================= ========
Shares used in the calculation of pro forma income per share(2) 16,039 16,417
Pro Forma Data(1):
Income before provision for
income taxes as reported $ 7,494 $ 13,441 $ 21,297
Provision for income taxes 3,017 4,986 7,689
------- --------- -----------
Net income $ 4,477 $ 8,455 $ 13,608
======= ========= ===========
Income per share - $ .69 $ .94
======= ========= ===========
Shares used in the calculation
of pro forma income per share(2) - 12,282 14,509
Balance Sheet Data:
Working capital $12,053 $ 14,903 $ 55,711 $ 76,977 $ 100,265
Total assets 24,463 38,572 81,864 117,362 148,249
Long-term obligations, net of current maturities 337 630 2,465 2,259 2,926
Shareholders' equity(3) 17,318 21,418 66,796 92,757 124,842
</TABLE>
(1) From 1992 through the IPO in April 1994 (the "S Period"), the
Company was an S corporation and, accordingly, was not subject to federal and
certain state corporate income taxes. The pro forma statement of income
information has been computed as if the Company had been subject to federal and
all applicable state corporate income taxes during the S Period, based on the
statutory tax rates and the tax laws then in effect. See Note 1 of the Notes to
the Company's Consolidated Financial Statements.
(2) For information regarding the shares used in the calculation of
pro forma income per share (i.e., pro forma to reflect Dialogic as if it were
taxed as a C corporation throughout), see Note 1 of the Notes to the Company's
Consolidated Financial Statements.
(3) The Company declared an aggregate of $4.2 million, $8.7 million
and $2.5 million in S corporation dividends in 1992, 1993 and 1994,
respectively. No other dividends were declared during the periods presented.
EXHIBIT 21.1
PRINCIPAL SUBSIDIARIES
NAME OF SUBSIDIARY JURISDICTION OF ORGANIZATION
Dialogic Investment Corporation New Jersey
GammaLink California
Spectron Microsystems, Inc. California
Dianatel Corporation California
Dialogic (NZ) Limited New Zealand
Dialogic Telecom Europe S.A. Belgium
Dialogic Systems K.K. Japan
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements No.
33-81414, No. 33-90264, No. 33-93366, No. 333-11373 and No. 333-8183 of Dialogic
Corporation on Form S-8 and in Registration Statements No. 33-91164 and No.
333-11369 on Form S-3 of Dialogic Corporation of our Reports dated February 10,
1997 appearing in and incorporated by reference in this Annual Report on Form
10-K of Dialogic Corporation for the year ended December 31, 1996.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
New York, New York
March 28, 1997
POWER OF ATTORNEY
WHEREAS, the undersigned officers and directors of Dialogic
Corporation desire to authorize Howard G. Bubb, Edward B. Jordan and Theodore M.
Weitz to act as their attorneys-in-fact and agents, for the purpose of executing
and filing an Annual Report on Form 10-K, including all amendments thereto,
NOW, THEREFORE,
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Howard G. Bubb, Edward B. Jordan and
Theodore M. Weitz, and each of them, his true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, to sign the Dialogic
Corporation Annual Report on Form 10-K for the year ended December 31, 1996,
including any and all amendments and supplements thereto, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully and to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned have executed this power of
attorney in the following capacities on this 27th day of February, 1997.
SIGNATURE TITLE
/s/ Howard G. Bubb President, Chief Executive Officer and Director
___________________
Howard G. Bubb
/s/ Kenneth J. Burkhardt, Jr. Director
______________________
Kenneth J. Burkhardt, Jr.
/s/ Masao Konomi Director
______________________
Masao Konomi
/s/ John N. Lemasters Director
_____________________
John N. Lemasters
/s/Francis G. Rodgers Director
_____________________
Francis G. Rodgers
/s/ James J. Shinn Director
_____________________
James J. Shinn
/s/Nicholas Zwick Director
_____________________
Nicholas Zwick
/s/Edward B. Jordan Treasurer, Vice President and Chief
______________________________ Financial Officer (Chief Financial
Edward B. Jordan and Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS FINANCIAL DATA SCHEDULE CONTAIN SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM DIALOGIC CORPORATION'S BALANCE SHEET AT DECEMBER 31,
1996 AND TWELVE MONTHS INCOME STATEMENT ENDING DECEMBER 31, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 11,848
<SECURITIES> 37,473
<RECEIVABLES> 34,706
<ALLOWANCES> 894
<INVENTORY> 27,762
<CURRENT-ASSETS> 120,746
<PP&E> 20,408
<DEPRECIATION> 6,103
<TOTAL-ASSETS> 148,249
<CURRENT-LIABILITIES> 20,481
<BONDS> 0
0
0
<COMMON> 203
<OTHER-SE> 124,639
<TOTAL-LIABILITY-AND-EQUITY> 148,249
<SALES> 213,604
<TOTAL-REVENUES> 213,604
<CGS> 84,764
<TOTAL-COSTS> 84,764
<OTHER-EXPENSES> 100,718
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 95
<INCOME-PRETAX> 39,737
<INCOME-TAX> 14,189
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25,548
<EPS-PRIMARY> 1.56
<EPS-DILUTED> 1.55
</TABLE>
