<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Dialogic Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Dialogic Corporation
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
[LOGO] DIALOGIC
Voice With Vision
DIALOGIC CORPORATION
March 28, 1997
Dear Shareholder:
On behalf of the Board of Directors and management, I am pleased to invite
you to the 1997 Annual Meeting of Shareholders of Dialogic Corporation. The
meeting will be held on Tuesday, April 29, 1997 at 10:00 a.m. at the Hanover
Marriot Hotel, 4101 Route 10 East, Whippany, New Jersey. A notice of meeting,
proxy statement and proxy card are enclosed for your review.
I urge you to read the enclosed materials carefully and to complete, sign
and mail promptly the proxy card contained with this letter to assure that
your vote will be counted.
The officers, directors and staff of Dialogic sincerely appreciate your
continuing support.
Very truly yours,
Nicholas Zwick
Chairman of the Board
<PAGE>
DIALOGIC CORPORATION
NOTICE OF ANNUAL MEETING
The Annual Meeting of Shareholders of Dialogic Corporation (the "Company")
will be held at the Hanover Marriot Hotel, 4101 Route 10 East, Whippany, New
Jersey on Tuesday, April 29, 1997 at 10:00 a.m., to consider and act upon the
following:
1. Election of two directors to serve for a term of three years;
2. A proposal to adopt the Company's 1997 Incentive Benefit Plan (the "1997
Plan").
3. A proposal to amend the Company's 1988 Incentive Compensation Plan (the
"1988 Plan") to incorporate in the 1988 Plan certain features of the
1997 Plan.
4. A proposal to adopt an amended and restated 1993 Non-Employee Director
Stock Option Plan.
5. A proposal to adopt the Company's 1997 Director Stock Election/Deferral
Plan.
6. The transaction of such other business as may properly come before the
meeting or any adjournment thereof.
Only shareholders of record at the closing of business on March 11, 1997 are
entitled to notice of, and to vote at, the meeting.
Theodore M. Weitz
Secretary
Parsippany, NJ
March 28, 1997
TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE MEETING, PLEASE COMPLETE,
DATE, SIGN AND MAIL PROMPTLY THE ENCLOSED PROXY CARD IN THE RETURN ENVELOPE
PROVIDED.
1
<PAGE>
DIALOGIC CORPORATION
1515 U.S. ROUTE 10
PARSIPPANY, NEW JERSEY 07054
PROXY STATEMENT
The Board of Directors of Dialogic Corporation (the "Company") is soliciting
proxies for use at the Annual Meeting of Shareholders to be held at the
Hanover Marriot Hotel, 4101 Route 10 East, Whippany, New Jersey on Tuesday,
April 29, 1997 at 10:00 a.m., and for use at any adjournments thereof (the
"Annual Meeting"). This Proxy Statement and the enclosed form of proxy are
first being sent to shareholders on or about March 28, 1997.
RECORD DATE AND QUORUM. Only shareholders of record at the close of business
on March 11, 1997 (the "Record Date") will be entitled to vote at the Annual
Meeting. On that date, there were outstanding 15,827,782 shares of Common
Stock of the Company ("Common Stock"). Each share of Common Stock is entitled
to one vote on each matter to be voted on at the Annual Meeting. The presence
at the Annual Meeting, in person or by proxy, of holders as of the Record Date
of a majority of the issued and outstanding shares of Common Stock will
constitute a quorum.
VOTING PROCEDURES. Directors will be elected by a plurality of the votes
cast. The proposals to (i) adopt the Company's 1997 Incentive Benefit Plan
(the "1997 Plan"), (ii) amend the Company's 1988 Incentive Compensation Plan
(the "1988 Plan"), (iii) adopt an amended and restated 1993 Non-Employee
Director Stock Option Plan (the "Non-Employee Director Stock Option Plan" or
the "1993 Plan") and (iv) adopt the Company's 1997 Director Stock
Election/Deferral Plan (the "Director Election/Deferral Plan") (the proposals
with respect to the 1997 Plan, the 1988 Plan, the Non-Employee Director Stock
Option Plan and the Director Election/Deferral Plan are collectively referred
to herein as the "Plan Proposals") will require the affirmative vote of
holders of a majority of the votes cast thereon at the Annual Meeting.
Approval of any other matter to be submitted to the shareholders will require
the affirmative vote of a majority of the votes cast thereon at the Annual
Meeting. Properly executed proxies will be voted as directed in the proxy;
however, if no direction is given, a properly executed proxy will be voted FOR
the election of the nominees described below and FOR each of the Plan
Proposals. Votes will not be considered "cast" if the shares are not voted for
any reason, including if an abstention is indicated as such on a written proxy
or ballot or if votes are withheld by a broker. Accordingly, abstentions and
broker non-votes will be counted only for purposes of determining whether a
quorum is present; if a quorum is present, abstentions and broker non-votes
will have no effect upon the election of directors or upon the approval of the
Plan Proposals or any other matters submitted to shareholders at the Annual
Meeting.
PROXIES AND REVOCATION. A proxy card is enclosed. Any shareholder giving a
proxy may revoke it at any time before it is exercised. In order to revoke a
proxy, the shareholder must either give written notice of such revocation to
the Secretary of the Company or to the Secretary of the Annual Meeting or vote
the shares of Common Stock subject to the proxy by a later dated proxy or by
written ballot at the Annual Meeting. The presence at the Annual Meeting of
any shareholder who has given a proxy will not in and of itself revoke the
proxy.
ELECTION OF DIRECTORS OF THE COMPANY
The Company's Board of Directors is divided into three classes, with each
class serving staggered terms of three years, so that only one class is
elected in any one year. At present there are seven directors on the Board.
Two directors are to be elected at the Annual Meeting to serve until the 2000
Annual Meeting and until their respective successors are elected and have
qualified.
Each of the nominees for director is presently a director of the Company.
Each has consented to being named as a nominee in this Proxy Statement and has
agreed to serve as a director if elected at the Annual
1
<PAGE>
Meeting. It is the intention of the persons named as proxies to vote the
shares represented by the accompanying form of proxy for the election of each
of the nominees listed below. If any nominee shall become unable or unwilling
to serve as a director, the persons named as proxies will cast their votes for
the remaining nominees and have discretion to vote for other persons
designated by the Board of Directors. The Board of Directors has no reason to
believe that any of the nominees will be unavailable for election.
The following describes the current and past five years' business
experience, certain directorships and age of each nominee for director and of
each director whose term extends beyond 1997 and thus is continuing in office.
The following information is given as of January 31, 1997 and was furnished to
the Company by the respective nominees and continuing directors:
Nominees
. MASAO KONOMI: Chief Executive Officer of Konomi, Inc. (Tokyo-based
international investment banking firm) (more than the past five years);
President, Pan Communications, Inc. (Tokyo-based communications device
developer) (more than the past five years). Director since 1993. Age: 53.
. JAMES J. SHINN: Co-founder of the Company; Senior Fellow, Council on
Foreign Relations (February 1994 to present); Executive Vice President,
International Marketing, of the Company (June 1993 to August 1994);
Executive Vice President, International Group, of the Company (August
1992 to June 1993); Vice President of Sales of the Company (August 1991
to August 1992); Vice President of Sales and Marketing of the Company
(prior years). Director since 1983. Age: 45.
Continuing Directors Serving Until 1998
. HOWARD G. BUBB: President and Chief Executive Officer of the Company
(June 1993 to present); Executive Vice President (July 1991 to June 1993)
and Chief Operating Officer (August 1992 to June 1993) of the Company;
Consultant (February 1991 to July 1991). Director since 1994. Age: 42.
. KENNETH J. BURKHARDT, JR.: Co-founder of the Company; Executive Vice
President of New Business Development of the Company (October 1992 to
present); Executive Vice President of Operations of the Company (prior
years). Director since 1983. Age: 51.
. JOHN N. LEMASTERS: Retired senior executive and board member; retired in
1994 as Chairman and Chief Executive Officer of Computer Products, Inc.
(multi-national electronics manufacturer) (prior years); formerly senior
executive of Contel Corporation and Harris Corporation; current member of
the boards of directors of Computer Products, Inc. and Augat, Inc.
Director since 1993. Age: 63.
Continuing Directors Serving Until 1999
. FRANCIS G. "BUCK" RODGERS: Author and lecturer (more than the past five
years); former Vice President, Marketing, of IBM Corporation; current
member of the boards of directors of Bergen Brunswig Corporation,
Mercantile Stores, Inc. and Milliken and Company. Director since 1993.
Age: 70.
. NICHOLAS ZWICK: Co-founder of the Company; Chairman of the Board of the
Company (March 1993 to present); President and Chief Executive Officer of
the Company (prior years to May 1993). Director since 1983. Age: 44.
During 1996, the Board of Directors held seven meetings, the Audit Committee
held three meetings and the Compensation Committee held six meetings. During
1996, no director attended less than 75 percent of the aggregate number of
meetings of the Board of Directors of the Company and committees of the Board
of which he was a member. There are no relationships by blood, marriage, or
adoption, not more remote than first cousin, between any nominee for director,
continuing director or executive officer of the Company and any other nominee
for director, continuing director or executive officer of the Company.
2
<PAGE>
Audit Committee--The functions of the Audit Committee include recommending
the appointment of a firm of independent public accountants to audit the books
and records of the Company and its subsidiaries, discussing with management
and auditors the results of annual and other audits, monitoring the Company's
internal accounting and management controls, appraising the scope of proposed
audits, analyzing audit fees, reviewing the Company's financial plans and
budgets, monitoring the procedures and systems used in preparing the Company's
consolidated financial statements, assessing compliance with the Company's
internal accounting procedures and controls, assessing compliance with
applicable financial reporting statutes and regulations and monitoring the
staffing of the Company's accounting and financial departments. The Audit
Committee is composed of four directors who are not officers or employees of
the Company or its subsidiaries. The current members of the Audit Committee
are Mr. Lemasters, Chairman, and Messrs. Konomi, Rodgers and Shinn.
Compensation Committee--The functions of the Compensation Committee include
reviewing and approving salary policy and management incentive compensation
plans, administering the Company's stock benefit plans, reviewing and
approving changes in certain other benefit plans and reviewing other
management benefits. The Compensation Committee is composed of four directors
who are not officers or employees of the Company or its subsidiaries. The
current members of the Compensation Committee are Mr. Rodgers, Chairman, and
Messrs. Konomi, Lemasters and Shinn.
The Board has no nominating committee; the functions of a nominating
committee are performed by the entire Board. No procedures have been developed
with respect to obtaining nominations from shareholders.
SECURITIES OWNERSHIP OF MANAGEMENT AND OTHERS
The following table sets forth the beneficial ownership of shares of Common
Stock as of February 14, 1997 by the directors of the Company, by the
executive officers named in the Summary Compensation Table below and by all
directors and executive officers of the Company as a group. Information in
this table was furnished to the Company by the respective directors and
executive officers.
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK BENEFICIALLY PERCENTAGE BENEFICIALLY
BENEFICIAL OWNER OWNED (1)(2) OWNED
---------------- ------------------------- -----------------------
<S> <C> <C>
John G. Alfieri............ 35,375 *
Howard G. Bubb............. 298,523 1.85
Kenneth J. Burkhardt, Jr... 1,753,550(3) 11.10
Darrayl E. Cannon.......... 131 *
Edward B. Jordan........... 35,868(4) *
Masao Konomi............... 22,500 *
John E. Landau............. 9,000 *
John N. Lemasters.......... 22,500 *
Francis G. Rodgers......... 22,500 *
James J. Shinn............. 1,346,550(5) 8.52
Nicholas Zwick............. 3,239,899 20.51
All executive officers and
directors as a group (13
persons)..................... 6,788,044 41.91
</TABLE>
- --------
* Represents less than 1% of the outstanding Common Stock. There were
15,796,671 shares outstanding on February 14, 1997.
(1) Except as set forth below, the persons named in the table, to the
Company's knowledge, have sole voting power and sole investment power with
respect to all shares of Common Stock shown as beneficially owned by them,
subject to community property laws where applicable. All directors and
executive officers beneficially owning more than 5% of the Company's
Common Stock have a business address c/o Dialogic Corporation, 1515 U.S.
Route 10, Parsippany, New Jersey 07054.
3
<PAGE>
(2) Includes, for the following persons or group, the following number of
shares that may be obtained through the exercise of stock options which
were exercisable as of February 14, 1997 or within 60 days of such date:
Mr. Alfieri, 34,875 shares; Mr. Bubb, 297,375 shares; Mr. Jordan, 6,950
shares; Mr. Konomi, 22,500 shares; Mr. Landau, 9,000 shares; Mr.
Lemasters, 11,250 shares; Mr. Rodgers, 16,875 shares; and all executive
officers and directors as a group, 400,075 shares. Includes, for the
following persons or group, the following number of shares held for such
persons or group pursuant to the Company's Employee Stock Purchase Plan:
Mr. Bubb, 1,148 shares; Mr. Cannon, 131 shares; Mr. Jordan, 808 shares;
and all executive officers and directors as a group, 2,485 shares.
(3) Includes 103,500 shares held by Mr. Burkhardt's wife as trustee of trusts
for the benefit of their children.
(4) Includes 600 shares held by Mr. Jordan's wife as custodian for their
children.
(5) Includes 80,000 shares held by Mr. Shinn's wife as trustee of trusts for
the benefit of their children.
Other than Messrs. Burkhardt, Shinn and Zwick, the only shareholder known by
the Company to beneficially own more than five percent of the outstanding
Common Stock is Kopp Investment Advisors, Inc. ("Kopp"). Kopp has advised the
Company that as of December 31, 1996, it beneficially owned 2,138,183 shares
of Common Stock (i.e., approximately 13.6% of the outstanding shares as of
that date).
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table and accompanying footnotes set forth certain summary
information, relating to the three years ended December 31, 1996, with respect
to the Company's Chief Executive Officer and the Company's four other most
highly compensated executive officers during 1996 (the "Named Officers"):
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------------------------ ----------------
SECURITIES
NAME AND PRINCIPAL BONUS OTHER ANNUAL UNDERLYING ALL OTHER
POSITION YEAR SALARY($) ($)(2)(3) COMPENSATION ($) OPTIONS/SARS (#) COMPENSATION($)(5)
- ---------------- ---- --------- --------- ----------------- ---------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Howard G. Bubb 1996 $206,725 $76,266 -- 25,000 $6,825
President and
Chief 1995 161,339 58,960 -- 20,000 7,065
Executive Offi-
cer 1994 139,231 63,439 30,000(4) 40,000 6,708
John G. Alfieri 1996 115,300 92,784 -- 10,000 7,163
Vice President, 1995 96,138 82,568 -- 10,000 7,232
Americas 1994 81,635 72,402 -- 10,000 8,141
Darrayl E. Can-
non (1) 1996 150,000 36,597 58,109(4) 5,000 2,671
Vice President,
Operations 1995 46,200 73,372 -- 40,000 148
Edward B. Jordan 1996 127,900 40,492 -- 7,000 6,845
Chief Financial 1995 123,861 29,018 -- 8,000 6,882
Officer 1994 117,009 28,348 -- 8,000 7,905
John E. Landau 1996 127,868 37,214 -- 8,500 6,318
Vice President, 1995 117,657 29,187 -- 8,000 6,104
Dialogic Archi-
tecture Labs 1994 113,077 30,713 -- 6,000 4,995
</TABLE>
- --------
(1) Mr. Cannon was only employed by Dialogic for four months during 1995.
4
<PAGE>
(2) For all Named Officers other than Mr. Alfieri for a given year, includes
bonuses paid after year-end with respect to performance during such year
and excludes bonuses paid during such year for performance during the
prior year.
(3) For Mr. Alfieri, for a given year, includes sales commissions and bonuses
paid after year-end with respect to performance during such year and
excludes sales commissions and bonuses paid during such year for
performance during the prior year.
(4) Represents reimbursement to Mr. Bubb and Mr. Cannon for relocation
expenses. During the years presented, no other Named Officer received
personal benefits from the Company in excess of 10% of such individual's
reported salary and bonus. Amounts below this threshold are not included
in the table.
(5) For 1996, represents contributions made by the Company to the Company's
401(k) plan on behalf of the Named Officers to match 1996 pre-tax
elective deferral contributions (included under "Salary") made by the
Named Officers to such plan, as follows: Mr. Bubb, $3,800; Mr. Alfieri,
$3,800; Mr. Cannon, $1,894; Mr. Jordan, $3,482; and Mr. Landau, $3,436.
For 1996, also includes $3,025, $3,363, $777, $3,363 and $2,882,
respectively, paid to Messrs. Bubb, Alfieri, Cannon, Jordan and Landau,
respectively, pursuant to certain profit-sharing arrangements (including
amounts paid in 1997 relating to 1996 and excluding amounts paid in 1996
relating to 1995).
EMPLOYEE STOCK OPTIONS
The Company presently maintains a 1986 stock option program, the 1988 Plan
for employees and stock option programs for former employees of GammaLink,
Spectron Microsystems, Inc. ("Spectron") and Dianatel Corporation ("Dianatel")
who held stock options granted by GammaLink, Spectron and Dianatel that were
outstanding at the time that these corporations were acquired by the Company
(collectively, the "Existing Option Plans"). As of December 31, 1996, options
to purchase approximately 2.2 million shares of Common Stock were outstanding
under the Existing Option Plans. The options granted under the Existing Option
Plans generally have terms of ten years and terminate at or within a specified
period of time after the Optionee's employment with the Company ends. Options
are exercisable in installments determined at the date of grant. However,
options granted to executive officers and certain other officers of the
Company will accelerate (i.e., become fully exercisable) if their employment
is terminated within twelve months after a "Change in Control" occurs. In
general, a "Change in Control" means the acquisition of 50.1% or more of the
Common Stock, merger of the Company or certain substantial changes in the
composition of the Board of Directors. For information regarding proposals to
adopt a new employee stock incentive plan and to amend the 1988 Plan, see
"Proposal Two" and "Proposal Three", respectively.
The following table and accompanying footnotes contain information regarding
the grant of stock options to the Named Officers during 1996 under the
Existing Option Plans.
5
<PAGE>
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------
PERCENT OF POTENTIAL REALIZABLE VALUE AT
NUMBER OF TOTAL ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS/SARS STOCK PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM(1)
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION -----------------------------
NAME GRANTED (#) 1996 ($/SH.) DATE 5% ($) 10%($)
- ---- ------------ ------------ ----------- ---------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Howard G. Bubb.......... 15,000 2.9% $26.25 8/1/06 $248,063 $626,063
10,000 1.9% 53.50 8/1/06 -- 144,900
John G. Alfieri......... 10,000 1.9% 26.25 8/1/06 165,375 417,375
Darrayl E. Cannon....... 5,000 1.0% 26.25 8/1/06 82,688 208,688
Edward B. Jordan........ 7,000 1.3% 26.25 8/1/06 115,763 292,163
John E. Landau.......... 8,500 1.6% 26.25 8/1/06 140,569 354,769
</TABLE>
- --------
(1) Amounts represent hypothetical gains that could be achieved if the options
described in the table were exercised at the end of the option term. These
gains are based on assumed rates of stock price appreciation of 5% and
10%, compounded annually from the date the options were granted to their
expiration date, based upon the fair market value of the Common Stock as
of the date the options were granted. Actual gains, if any, on stock
option exercises and Common Stock holdings are dependent upon the future
performance of the Company and overall financial market conditions. There
can be no assurance that amounts reflected in this table will be achieved.
The following table and accompanying footnotes set forth certain information
regarding stock options exercised by the Named Officers during 1996 and stock
options held by the Named Officers as of December 31, 1996.
AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED IN-
UNEXERCISED OPTIONS/SARS THE-MONEY OPTIONS/SARS
AT YEAR-END (#) AT YEAR- END(1)($)
----------------------------------- -------------------------
SHARES ACQUIRED VALUE
NAME ON EXERCISE (#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ---------------- ----------- ---------------- ---------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Howard G. Bubb.......... 10,000 $439,444 297,375 86,250 $5,445,293 $935,624
John G. Alfieri......... 1,500 74,687 34,875 37,625 946,677 544,628
Darrayl E. Cannon....... -- -- -- 45,000 -- 196,250
Edward B Jordan......... 8,250 136,812 6,950 40,800 152,925 697,450
John E. Landau.......... 4,000 189,333 9,000 48,000 206,000 859,374
</TABLE>
- --------
(1) Based upon the closing price of the Common Stock on the Nasdaq National
Market System on December 31, 1996 ($31.50), less the exercise price,
multiplied by the number of shares covered by the option; options with
exercise prices equal to or greater than $31.50 were excluded from the
calculation of the value of unexercised options.
EMPLOYMENT AGREEMENT
The Company previously entered into an employment agreement with Howard G.
Bubb, the Company's Chief Executive Officer, which agreement expired on
December 31, 1996. Under that agreement, Mr. Bubb received the salaries
reflected in the table under the caption "Summary of Cash and Certain Other
Compensation" and was entitled to receive cash bonuses based upon Company and
individual performance. He was also entitled to the use of a Company-supplied
automobile, to receive such insurance, vacation, disability and other benefits
as were generally available to the Company's executive officers and to be
reimbursed by the Company for certain relocation expenses. He also received
various stock options pursuant to that agreement. Mr. Bubb and the Company
presently are negotiating a new employment agreement.
6
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is responsible for implementing, overseeing and
administering the Company's overall compensation policy. The basic objectives
of that policy are to (a) provide compensation levels that are fair and
competitive with peer companies, (b) align pay with performance and (c) where
appropriate, provide incentives which link executive and stockholder interests
and long-term corporate objectives through the use of equity-based incentives.
Overall, the Company's compensation program is designed to attract, retain and
motivate high quality and experienced employees at all levels of the Company.
The principal elements of executive officer compensation are base pay, bonus,
profit-sharing and stock options, together with 401(k) and health benefits.
The various aspects of the compensation program, as applied to the Company's
Chief Executive Officer and the Company's other executive officers, are
outlined below.
Executive officer compensation is, in large part, determined by the
individual officer's ability to achieve his or her performance objectives.
Each of Dialogic's executive officers participates in the development of an
annual business strategy from which individual objectives are established and
performance goals are measured quarterly. Initially, the objectives are
proposed by the particular officer involved. Those objectives are then
determined by the Chief Executive Officer or, in the case of Mr. Bubb's
objectives, by the Chairman of the Board.
Base Pay
The Company determines base pay for its executive officers through an
evaluation of the extent to which such individuals have achieved their
performance objectives and a comparative analysis of total compensation for
similar positions within other surveyed companies. Four specific categories of
comparable companies were considered by the Compensation Committee in 1996.
First, the Committee considered a peer group of companies that were utilized
by the Company's underwriters in its 1994 initial public offering as a base
group of comparable businesses. Second, the Committee analyzed compensation
paid to a group of high technology, high growth companies that are positioned
in their fields in a manner comparable to the Company's position within the
computer telephony industry. Third, the Company participated in a total
compensation survey and utilized the results of that survey to further
validate information from the other two surveys. Fourth, the Committee
performed a comparative analysis and assessment of Dialogic's equity incentive
program as compared with comparable programs of a selected group of
telecommunications and networking firms.
The Chief Executive Officer's performance is analyzed against his objectives
by the full Board of Directors (other than Mr. Bubb). Mr. Bubb, in turn,
reviews the performance of his "direct reports" (including each of the
Company's executive officers other than directors Burkhardt and Zwick) against
their performance objectives on a quarterly basis. Salaries are reviewed on an
annual basis after consideration of performance analyses and compensation paid
by surveyed companies. In 1996, the Compensation Committee reviewed Mr. Bubb's
performance and decided to increase his base salary to $250,000 per annum.
Of the Named Officers, Mr. Alfieri is the only officer whose cash
compensation includes commissions. Commission-based compensation is considered
to be appropriate for Mr. Alfieri in light of his sales responsibilities.
Bonus
Each executive officer of the Company is eligible to receive a quarterly
bonus if such officer achieves his or her individual performance objectives
and the Company achieves its quarterly performance goal. The Company's
performance goal is based upon earnings before interest and taxes. The Board's
quarterly review of the Chief Executive Officer's performance determines
whether he will receive a quarterly bonus. The Chief Executive Officer, in
turn, reviews his "direct reports" to determine whether quarterly bonuses have
been earned. Mr. Bubb received bonuses of $76,266 for 1996 performance
pursuant to this quarterly bonus program.
7
<PAGE>
Profit-Sharing
The Company has established a quarterly profit-sharing program pursuant to
which a portion of the Company's quarterly profits are allocated among all
employees. Under this formula approach, payments are made if the Company
reaches 85% of its quarterly after-tax earnings objective (as established by
the Chief Executive Officer). In that event, the Company pays seven percent of
its quarterly after-tax earnings in the form of profit-sharing payments.
Amounts are allocated based upon months of service and salary, subject to
certain limitations. During 1996, Mr. Bubb earned $3,025 pursuant to the
Company's profit-sharing arrangements.
Stock Options
The Compensation Committee believes that a stock option plan provides
capital accumulation opportunities to participants in a manner that fosters
the alignment of the participants' interests and risks with the interests and
risks of the Company's public shareholders. The Compensation Committee further
believes that stock options can function to assure the continuing retention
and loyalty of employees. Many of the options that have been granted to
executive officers carry long-term (i.e., five year or seven year) vesting
schedules. Officers who leave the Company's employ before their options are
fully vested will lose a portion of the benefits that they might otherwise
receive if they remain in the Company's employ for the entire vesting period.
Historically, stock option grants for existing employees have been based upon
a comparative analysis of equity-based compensation among peer companies and
an analysis of the performance of the employees involved in light of the
objectives established for such employees.
The Company's 1988 Incentive Compensation Plan, the plan under which most of
the Company's stock options have been granted, expires by its terms in 1998.
While options granted thereunder prior to the expiration date continue to be
exercisable for the terms of such options, no additional options may be
granted thereunder after the expiration date. As of December 31, 1996,
approximately 650,000 shares of Common Stock remained available for future
stock option grants under the 1988 Incentive Compensation Plan. In light of
the importance of stock options within the Company's compensation structure
and the 1998 expiration date, the Compensation Committee recommended to the
Board of Directors, and the Board (subject to shareholder approval) approved,
the Company's 1997 Incentive Benefit Plan described elsewhere herein. The
Compensation Committee, with the assistance of the Company's Vice President of
Human Resources and an outside consultant, considered various alternative
stock benefit features in developing the proposed 1997 Incentive Benefit Plan.
The Committee believes that the proposed Plan, like the 1988 Incentive
Compensation Plan, enables the Company to link employee incentives with
shareholder interests.
During 1996, Mr. Bubb was granted two stock options on the same date. One
such option, covering 15,000 shares, was granted at an exercise price equal to
the then current market price of the Company's Common Stock, $26.25. The other
option, covering 10,000 shares, was granted at an exercise price of $53.50 per
share. This second option will have value to Mr. Bubb only in the event that
the fair market value of the Company's Common Stock increases substantially
above the market price on the date of grant.
The Compensation Committee believes that an appropriate compensation program
can help in fostering a continuation of profitable operations if the program
reflects a suitable balance between providing appropriate awards to key
employees while at the same time effectively controlling compensation costs,
principally by establishing cash compensation at competitive levels and
emphasizing supplemental compensation that correlates to the performance of
individuals, the Company and the Company's Common Stock.
This report has been furnished by the Compensation Committee of Dialogic's
Board of Directors.
Francis G. Rodgers, Chairman
Masao Konomi
John N. Lemasters
James J. Shinn
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1994, James J. Shinn became a member of the Company's Compensation
Committee, after he ceased serving as an executive officer and employee of the
Company. Mr. Shinn is a co-founder of the Company, was an executive officer
and employee of the Company for several years and has served on the Board of
Directors of the Company since its inception. No other member of the
Compensation Committee has ever been employed by the Company. During 1996, the
Company paid Director Francis G. Rodgers $1,000 in consulting fees. See
"Director Compensation".
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PERFORMANCE GRAPH
The following graph compares the percentage change in the cumulative total
shareholder return on the Company's Common Stock with the cumulative total
return of the Nasdaq Stock Market--United States Index and the Hambrecht &
Quist Technology Index for the period from April 12, 1994 (the date on which
the Common Stock was first publicly traded) through December 31, 1996. For
purposes of the graph, it is assumed that the value of the investment in the
Company's Common Stock and each index was 100 on April 12, 1994 and that all
dividends were reinvested.
COMPARISON OF 33 MONTH CUMULATIVE TOTAL RETURN
AMONG DIALOGIC CORPORATION, THE NASDAQ
STOCK MARKET--US INDEX AND THE
HAMBRECHT & QUIST TECHNOLOGY INDEX*
<TABLE>
<CAPTION>
DIALOGIC CORPORATION HAMBRECHT & QUIST TECHNOLOGY NASDAQ STOCK MARKET-US
<S> <C> <C> <C>
4/12/94 100 100 100
6/94 102 95 96
9/94 121 108 104
12/94 165 118 103
3/95 199 131 112
6/95 125 159 128
9/95 174 181 143
12/95 270 177 145
3/96 296 180 152
6/96 418 188 164
9/96 249 201 170
12/96 221 212 178
</TABLE>
- --------
* $100 INVESTED ON 04/12/94 IN COMPANY'S COMMON STOCK OR ON 3/31/94 IN INDEX
INCLUDING REINVESTMENT OF DIVIDENDS
10
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DIRECTOR COMPENSATION
Employee directors do not receive any compensation for serving on the Board.
Non-employee directors receive an annual retainer of $12,000, $1,000 for each
Board meeting that they attend in person, $500 for each Board meeting attended
by telephone and for each committee meeting attended in person, and $250 for
each committee meeting attended by telephone. See "Proposal Five" for
information regarding a proposed plan that will enable directors to invest
their director fees in Common Stock and to defer receipt of such shares for
five years. As noted above, during 1996, the Company paid Director Francis G.
Rodgers $1,000 in consulting fees with respect to consulting services that he
provided regarding sales and marketing matters.
The Company maintains a stock option plan (the 1993 Non-Employee Director
Stock Option Plan) for non-employee directors. As initially adopted, this plan
provided for the automatic grant of options covering 22,500 shares of Common
Stock to be made on a one-time basis when non-employee directors commenced
their service on the Company's Board of Directors. The plan as initially
adopted also provided that options granted thereunder would vest in equal
installments over a four-year period, commencing one year after service on the
Board commenced. Messrs. Konomi, Lemasters and Rodgers have each been granted
options pursuant to this plan, all of which options are now fully vested. See
"Proposal Four" for information regarding a proposal to amend and restate this
plan.
PROPOSAL TWO
PROPOSAL TO ADOPT THE COMPANY'S
1997 INCENTIVE BENEFIT PLAN
GENERAL
On February 27, 1997, the Company's Board of Directors approved the Dialogic
Corporation 1997 Incentive Benefit Plan (the "1997 Plan"), subject to approval
by the Company's shareholders at the Annual Meeting. The Board recommends that
shareholders of the Company approve the 1997 Plan. The 1997 Plan is designed
to attract qualified employees and to encourage existing employees to acquire
a proprietary interest in the Company, to continue their employment with the
Company and to render superior performance during their period of employment.
The 1997 Plan is, in many respects, a renewal (with the changes described
under "Proposal Three") of the 1988 Plan, which will expire in 1998. The 1997
Plan, like the 1988 Plan, is designed to enable the Company to grant stock
options, stock appreciation rights, stock grants and other awards to employees
of the Company and its subsidiaries. The 1997 Plan also permits the Company to
grant stock incentives to consultants and other advisors.
The following description of the principal features of the 1997 Plan is
subject to, and is qualified in its entirety by reference to, the actual
provisions of the 1997 Plan set forth in Exhibit A annexed to this Proxy
Statement.
ADMINISTRATION
In general, the 1997 Plan will be administered by two committees appointed
by the Board, a Selected Participants Committee and a General Participants
Committee. Under the terms of the 1997 Plan, the members of the Compensation
Committee of the Board will serve as the Selected Participants Committee. The
current members of the Compensation Committee are Francis G. Rodgers
(Chairman), Masao Konomi, John Lemasters and James Shinn. The 1997 Plan
provides that the General Participants Committee may consist of one or more
directors, none of whom need be outside directors. Howard Bubb, the Company's
President and Chief Executive Officer, has been named as the sole member of
the General Participants Committee. The 1997 Plan provides, in general, that
the Selected Participants Committee will have full authority (i) to award non-
statutory stock options ("Non-Statutory Options"), incentive stock options
("Incentive Options" and, collectively with Non-Statutory
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Options, "Options"), stock appreciation rights ("SARs"), units of phantom
stock, stock awards, restricted stock awards, performance stock rights and
cash awards (collectively, "Incentives") to those employees of the Company who
constitute "Selected Participants" (as defined), (ii) set the terms,
conditions and restrictions of the benefits awarded under the 1997 Plan, their
exercise and all related rights with respect to Selected Participants, (iii)
accelerate the date on which previously granted Incentives may be exercised by
Selected Participants, (iv) prescribe the form of agreements awarding and
governing all benefits under the 1997 Plan to all participants, (v) interpret
the 1997 Plan with respect to all participants, (vi) establish rules and
regulations relating to the 1997 Plan with respect to all participants and
(vii) make all other determinations for the proper administration of the 1997
Plan, except to the extent that authority is expressly conferred upon the
General Participants Committee. In turn, the General Participants Committee
generally has the authority (i) to award Incentives to all participants other
than Selected Participants, (ii) to set the terms, conditions and restrictions
of such benefits, their exercise and all related rights with respect to all
participants other than Selected Participants and (iii) to accelerate the date
on which previously granted Incentives may be exercised by all participants
other than Selected Participants. The General Participants Committee will be
required to abide by Incentive budgets (i.e., budgets limiting the number of
Incentives to be granted) and guidelines to be established from time to time
by the Selected Participants Committee.
In general, the 1997 Plan defines "Selected Participants" to include the
Company's executive officers, persons who, by virtue of their position with
the Company, are subject to the short-swing profit rules of Section 16(b) of
the Securities Exchange Act of 1934, consultants, advisors and other persons
designated from time to time by the Selected Participants Committee. Under the
1997 Plan and as used in this Proxy Statement, the term "Award Authority"
refers to the Selected Participants Committee with respect to actions to be
taken with respect to Selected Participants and refers to the General
Participants Committee with respect to actions to be taken with respect to all
participants other than Selected Participants.
The 1997 Plan assigns to a separate committee (the "Benefit Administration
Committee"), consisting solely of those members of the Compensation Committee
who constitute "outside directors" as such term is defined under Section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), certain
responsibilities of the Selected Participants Committee, with respect to those
executive officers of the Company whose compensation may be subject to the
provisions of Section 162(m) of the Code ("Section 162(m)"). In general, such
executive officers will be the Chief Executive Officer and the four other
highest paid executive officers of the Company. At present, the members of the
Compensation Committee who constitute "outside directors" within the meaning
of Section 162(m) of the Code are Masao Konomi, John Lemasters and Francis G.
Rodgers. If there are not two members of the Compensation Committee who
constitute "outside directors", the functions of the Benefit Administration
Committee will be performed by the entire Selected Participants Committee,
which may result in certain compensation being subject to the provisions of
Section 162(m). In general, Section 162(m) denies deductibility for certain
compensation in excess of $1 million received in a taxable year by an officer
of certain public companies if such officer constitutes a "covered employee".
For purposes of this Proxy Statement, all references to the Selected
Participants Committee include references to the Benefit Administration
Committee to the extent that the latter is required to perform the functions
of the former.
ELIGIBILITY
All employees of the Company and its subsidiaries are eligible for selection
by the Award Authority to participate in the 1997 Plan. "Consultants", defined
as persons who perform consulting services for, or who serve as advisors to,
the Company or its subsidiaries, are eligible to receive any Incentive other
than Incentive Options. Non-employee directors and non-employee officers are
not eligible to receive any benefits under the 1997 Plan, unless they serve
also as "Consultants". The Company is unable, at the present time, to
determine the identity or the number of executive officers, directors and
other employees who may be granted Incentives under the 1997 Plan in the
future.
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<PAGE>
TERMS AND CONDITIONS OF OPTIONS
Types of Options
Options that may be granted under the 1997 Plan may either be Incentive
Options or Non-Statutory Options. To date, all Options granted by the Company
under the 1988 Plan have been Non-Statutory Options. Incentive Options are
designed to qualify as "incentive stock options" within the meaning of Section
422 of the Code. See "Tax Matters". The determination of whether a particular
Option granted under the 1997 Plan will be an Incentive Option or a Non-
Statutory Option will be made by the Award Authority at the time of grant.
Term
No Option may be granted pursuant to the 1997 Plan after February 26, 2007.
Furthermore, no Options may be exercised more than eight years after the date
of grant. In addition, an Incentive Option granted to a person who owns more
than 10% of the combined voting power of all classes of the Company's capital
stock on the date of grant (a "Ten Percent Shareholder") will expire no later
than five years after the date on which such Option is granted.
Exercise Price
The exercise price of an Incentive Option cannot be less than the "fair
market value" of a share of the Common Stock on the date of grant. However,
Incentive Options granted to Ten Percent Shareholders cannot be issued at an
exercise price of less than 110% of "fair market value". The 1997 Plan
provides that the exercise price of Non-Statutory Options will not be less
than 75% of the "fair market value" of a share of Common Stock on the grant
date. However, any Non-Statutory Option granted at an exercise price that is
expressly designated at the time of grant as an exercise price of less than
100% of "fair market value" cannot vest (i.e., become exercisable) sooner than
three years from the date of grant unless such vesting arises as a result of
the optionee's satisfying performance criteria approved by the Committee.
For purposes of the 1997 Plan, the term "fair market value" equals the
average of (i) the highest sale price of the Common Stock as reported on the
"Applicable Market" on the valuation date and (ii) the lowest sale price of
the Common Stock as reported on the Applicable Market on the valuation date.
The "Applicable Market" means the Nasdaq Stock Market. If, however, the Common
Stock is instead traded on a national securities exchange, the "Applicable
Market" will mean such national securities exchange. If the Common Stock is
not publicly traded on any Applicable Market on the applicable valuation date,
"fair market value" will be determined by the Selected Participants Committee.
All references in this summary description of the 1997 Plan to the term "fair
market value" contemplate this definition of fair market value.
Payment
The exercise price of an Option is payable in full at the time of exercise.
Payment is to be made (i) by cash or check, (ii) if permitted by the Award
Authority, by a tender of shares of the Company's Common Stock having a "fair
market value" on the date of exercise equal to the exercise price of the
Option or (iii) if permitted by the Award Authority, by a combination of cash
or check and delivery of such shares. As an administrative matter, the Company
may permit Optionees to pay the exercise price by means of a so-called
"cashless exercise" through arrangements made with a broker-dealer.
Vesting
The 1997 Plan provides that each Option will become exercisable at such time
or times and in such amount or amounts during its term as the Award Authority
may determine at the time of grant. In the absence of any determination to the
contrary with respect to specific options, Options will vest in four equal
annual 25% installments commencing one year after the date of grant. The Award
Authority may, at any time, accelerate the exercisability of any Option.
Options granted to certain senior officers of the Company will automatically
13
<PAGE>
accelerate (i.e., become fully exercisable) if their employment is terminated
within twelve months after a "Change in Control" occurs. In general, a "Change
in Control" means the acquisition of 50.1% or more of the Company's Common
Stock by a third-party, the merger of the Company or certain substantial
changes in the composition of the Board of Directors.
The aggregate fair market value of an Optionee's Incentive Options that
first become exercisable in any one calendar year (under the Plan and any
other Dialogic plan) cannot exceed $100,000.
Method of Exercise
Optionees may exercise Options granted pursuant to the 1997 Plan from time
to time by giving written notice to the Company. The date of exercise will be
the date on which the Company receives such notice. Such notice will be on a
form to be made available by the Company and will state the number of shares
to be purchased. At the closing, the Company will be required to deliver such
shares against payment in full of the option price for the number of shares to
be delivered.
Termination of Employment
If a recipient of an Option or SAR granted under the 1997 Plan ceases to be
employed by the Company or any subsidiary as a result of "retirement", then,
in general, all of such recipient's Options and SARs may be exercised, to the
extent exercisable on the date of termination of employment (unless the
Selected Participants Committee, in its discretion, permits the Participant to
exercise unvested benefits), for a period ending on the earlier of the
expiration date of the Options or SARs or three years from the date of
termination of employment due to "retirement". The term "Retirement" will have
the meaning given to that term in any retirement plan adopted by the Company's
Board of Directors. In the absence of any such plan, the term "retirement" is
defined under the 1997 Plan to mean (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 a third-party or (ii) the voluntary
termination of employment by any participant if the Committee determines,
prior to such termination, that such termination should be treated as a
"Retirement" for purposes of the 1997 Plan. If a recipient of an Option or SAR
terminates employment with the Company because such person has become
"disabled" (as defined in the 1997 Plan), then, in general, all of such
recipient's Options and SARs may be exercised, regardless of whether they are
then vested, for a period ending on the earlier of the expiration date of the
Options or SARs or three years after the date of termination of employment due
to disability. If a recipient of Options or SARs dies while employed by the
Company, then, in general, all of such recipient's Options may be exercised,
regardless of whether they are then vested, for a period ending on the earlier
of the expiration date of the Options or SARs or three years after the date of
termination of employment due to death. If employment terminates for "cause",
all Options and SARs held by the terminated employee will cease to be
exercisable upon termination of employment. If a recipient of Options or SARs
is terminated by the Company but not for "cause", then, in general, all of
such recipient's Options and SARs may be exercised, to the extent exercisable
on the date such employment ceases, for a period ending on the earlier of the
expiration date of the Options/SARs or three months after such employment is
terminated. 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.
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<PAGE>
Maximum Number of Options
The maximum number of shares covered by Options which may be granted under
the 1997 Plan to any one participant in any one calendar year is 1,000,000
shares.
OTHER BENEFITS
In addition to Options, the 1997 Plan authorizes other types of benefits,
including stock appreciation rights, stock awards, restricted stock awards,
performance stock rights and cash awards. These benefits are described briefly
below.
Stock Appreciation Rights
The 1997 Plan authorizes the Award Authority to grant SARs together with
Options, in tandem with Options or independent of any Options. At the time
that an SAR is granted, the Award Authority will specify whether the SAR is
exercisable (a) for cash only, (b) for shares of Common Stock 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. If an
SAR is exercisable for shares of Common Stock, the number of shares issuable
upon the exercise of the SAR will equal (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" will be the amount by which the
"fair market value" of a share of Common Stock on the exercise date exceeds
(A) in the case of an SAR granted in tandem with an Option, the option
exercise price, or (B) in the case of an SAR granted alone without reference
to an Option, the "fair market value" of a share of Common Stock on the date
that the SAR was awarded), divided by the "fair market value" of a share of
Common Stock on the date that the SAR is exercised (the "Exercise Date"). If
an SAR is exercisable for cash, the amount of cash payable upon exercise will
equal the "fair market value" of a share of Common Stock on the Exercise Date
multiplied by the number of shares that would be issuable if the SAR were
exercised for shares of Common Stock.
Units of Phantom Stock
Units of phantom stock entitle participants to cash payments based upon
appreciation in the fair market value of the Common Stock between the date of
grant and the date of exercise. Under the 1997 Plan, the amount of cash
payable upon the exercise of a unit of phantom stock equals the excess of the
"fair market value" of one share of Common Stock on the date on which the unit
is exercised over the "fair market value" of one such share on the date on
which the unit is granted.
Stock Awards and Restricted Stock Awards
The 1997 Plan authorizes the grant of Stock Awards and Restricted Stock
Awards. No more than 500,000 shares of Common Stock may be issued to all
participants pursuant to Stock Awards and Restricted Stock Awards (independent
of the number of shares subject to Performance Stock Rights).
A Stock Award represents an unrestricted award of shares of Common Stock
without the requirement that the Participant make any payment to the Company.
A Restricted Stock Award is a stock award that is accompanied by
restrictions which may relate to continuing employment with the Company,
performance or such other factors as the Award Authority may determine at the
time of grant. The Award Authority will also determine the price, if any,
which a Participant must pay (in cash or, at the discretion of the Award
Authority, in shares of Common Stock or a combination of cash and such shares)
in order to receive the shares covered by the Restricted Stock Award. Shares
issued pursuant to a Restricted Stock Award will be held by the Company in
escrow pending the satisfaction of all restrictions.
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<PAGE>
Performance Stock Rights
The 1997 Plan authorizes the Award Authority to grant Performance Stock
Rights which entitle the recipients to receive a specified number of shares of
Common Stock upon the satisfaction of certain performance goals. Such goals
(which may be defined in terms of individual performance, work unit
performance, subsidiary performance, Company performance, a combination
thereof or otherwise), as well as the terms and conditions applicable to any
such Rights, would be specified at the time of grant. The 1997 Plan limits the
aggregate number of shares which may be issued pursuant to Performance Stock
Rights to 500,000 shares (independent of the number of shares subject to Stock
Awards and Restricted Stock Awards).
Cash Awards
The 1997 Plan authorizes the Award Authority to grant cash payments to
participants in accordance with terms and conditions determined by the Award
Authority.
SHARES ISSUABLE PURSUANT TO THE PLAN
As of December 31, 1996, there were approximately 650,000 shares of Common
Stock available for the issuance of future grants under the 1988 Plan. The
Company has the flexibility to grant benefits under either the 1988 Plan or
the 1997 Plan until December 5, 1998, at which time no further Incentives may
be granted pursuant to the 1988 Plan. The 1997 Plan provides that the
aggregate number of shares of Common Stock which may be issued under the 1997
Plan will not exceed the sum of 2,000,000 shares plus the lesser of (i)
400,000 shares and (ii) the number of shares that would be available for the
award of benefits under 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 that date, without giving effect to lapses, cancellations or forfeitures
that occur subsequent to December 5, 1998. Notwithstanding the foregoing, the
maximum number of shares of Common Stock issuable pursuant to Incentive
Options under the 1997 Plan is 2,000,000 shares. For purposes of calculating
the number of shares of Common Stock issuable pursuant to the 1997 Plan, each
Unit of Phantom Stock will constitute a single share. If any Incentives
granted under the 1997 Plan expire or terminate for any reason before they
have been exercised in full, the shares subject to those expired or terminated
Incentives will again be available for issuance pursuant to the 1997 Plan.
ADJUSTMENTS
The number of shares available for Incentives and the number of shares
covered by outstanding Incentives granted under the 1997 Plan will be adjusted
equitably for stock splits, stock dividends, recapitalizations, mergers and
other similar changes in the Company's capital stock. Comparable changes will
be made in the exercise price or base price of outstanding Incentives.
ASSIGNMENT
Incentive Options granted under the 1997 Plan generally are not assignable
or transferable other than by will or the laws of descent and distribution.
With the permission of the Award Authority, other Incentives may be
transferred by a participant to his or her immediate family members or to
trusts established exclusively for the benefit of such family members. In the
event of any such transfer, termination provisions will continue to be based
upon the employment of the participant who was initially granted the Incentive
under the 1997 Plan.
TERMINATION, AMENDMENT AND MODIFICATION
The Board of Directors of the Company may at any time terminate, suspend or
amend the 1997 Plan as it may deem advisable, except that no such termination,
suspension or amendment shall deprive participants of any right which has
accrued under the 1997 Plan with respect to Incentives previously awarded
pursuant to the 1997 Plan without the consent of such participants.
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FEDERAL INCOME TAX CONSEQUENCES
For information regarding federal income tax matters relating to the
benefits receivable under the 1997 Plan and the option plans described in
Proposal Three and Proposal Four, see "Tax Matters".
THE BOARD OF DIRECTOR UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS APPROVE
PROPOSAL TWO DESCRIBED ABOVE.
PROPOSAL THREE
PROPOSAL TO AMEND THE COMPANY'S 1988 INCENTIVE COMPENSATION PLAN
On February 27, 1997, the Board of Directors of the Company approved various
amendments to the 1988 Plan designed to incorporate into the 1988 Plan several
features of the proposed 1997 Plan. Pursuant to the provisions of the 1988
Plan, certain of those amendments (which may be deemed to materially increase
the benefits available to participants under the 1988 Plan) require the
approval of the Company's shareholders. Other amendments, which did not
require shareholder approval, (i) limited to 100,000 shares of Common Stock
the number of shares which may be issued under Stock Awards and Restricted
Stock Awards granted subsequent to February 27, 1997 under the 1988 Plan, (ii)
limited to 100,000 shares of Common Stock the number of shares which may be
issued under Performance Stock Rights granted subsequent to February 27, 1997
under the 1988 Plan, (iii) increased the minimum price at which Non-Statutory
Options may be granted under the 1988 Plan to 75% of "Fair Market Value", (iv)
mandated that options granted subsequent to February 27, 1997 with exercise
prices of less than 100% of Fair Market Value have minimum vesting of at least
three years or be subject to performance criteria and (v) required that
restricted stock awards and performance stock units have a vesting period of
at least three years or be subject to performance criteria established by the
Committee administering the 1988 Plan.
The amendments to the 1988 Plan to be submitted to the shareholders of the
Company at the Annual Meeting, all of which the Board recommends for
shareholder approval, are described below. This description is subject to, and
is qualified in its entirety by reference to, the text of such amendments set
forth in Exhibit B annexed to this Proxy Statement.
TRANSFERABILITY
The 1988 Plan presently provides that benefits granted thereunder may not be
transferred other than upon death. The Board recommends that the shareholders
approve an amendment to the 1988 Plan which would permit employees to transfer
such benefits (other than Incentive Options) to members of their immediate
families and to trusts established exclusively for the benefit of such family
members. In the event of any such transfer, the rights of the transferee
remain based upon the rights of the transferor. Thus, for example, upon a
transferor's termination of employment, his or her transferee's Options will
terminate at the same time as if such Options had not been transferred. Any
such transfer would be subject to the approval of the Committee administering
the 1988 Plan. The Board believes that such transferability may be
advantageous to certain optionees in connection with their estate planning.
EXERCISABILITY
Under the 1988 Plan, stock options cease to vest upon a termination of
employment due to death or disability. Thus, while the estate of a deceased
optionee may exercise such optionee's options for a period of time after
termination of employment, and while a disabled optionee may exercise his or
her options for a period of time after termination of employment due to
disability, such exercises under the 1988 Plan may only apply to options
vested as of the date termination. The Board has approved an amendment to the
1988 Plan, subject to shareholder approval, that would have the effect of
accelerating the exercisability of options such that, upon the
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termination of employment of an optionee due to death or disability, all of
such optionee's stock options will be fully exercisable. The Board has also
approved amendments, subject to shareholder approval, extending the period
during which options may be exercised after termination of employment due to
death, disability or retirement (as defined under the 1988 Plan). Presently,
the 1988 Plan permits options to be exercised for a period of up to one year
after such termination. The amendments approved by the Board (subject to
shareholder approval) permit the exercise of options for a period ending on
the earlier of the date of expiration of such options and three years after
the termination of employment due to death, disability or retirement. Similar
revisions would be made with respect to the treatment of SARs.
MAXIMUM NUMBER
At present, there is no ceiling on the number of shares which may be subject
to Options granted to an optionee in a single year. In order to satisfy the
compensation deductibility limitations set forth in Section 162(m) of the
Code, the Board has approved an amendment to the 1988 Plan that provides that
the maximum number of shares that may be subject to Options granted to any
optionee in any calendar year under the 1988 Plan is 375,000 shares.
SPECIAL COMMITTEE
The Board has proposed an amendment to the 1988 Plan which assigns to a
separate committee (comparable to the Benefit Administration Committee under
the 1997 Plan), consisting solely of those members of the Compensation
Committee who constitute "outside directors" as such term is defined under
Section 162(m) of the Code, certain responsibilities of the Committee with
respect to those executive officers of the Company whose compensation may be
subject to the provisions of Section 162(m) of the Code. If there are not two
members of the Compensation Committee who constitute "outside directors", the
functions of such separate committee will be performed by the Compensation
Committee, which may result in certain compensation being subject to the
provisions of Section 162(m) of the Code. In general, Section 162(m) denies
deductibility for certain compensation in excess of $1 million received in a
taxable year by an officer of certain public companies if such officer
constitutes a "covered employee".
The Board of Directors believes that the above-mentioned amendments are
consistent with the overall objectives of the 1988 Plan. Each of the
amendments to the 1988 Plan are comparable to provisions set forth in the 1997
Plan.
THE BOARD OF DIRECTOR UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS APPROVE
PROPOSAL THREE DESCRIBED ABOVE.
PROPOSAL FOUR
PROPOSAL TO ADOPT THE AMENDED AND RESTATED 1993
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
The 1993 Plan awards stock options to non-employee directors. As initially
adopted, the 1993 provided for the automatic grant of options covering 22,500
shares of Common Stock to be made on a one-time basis when non-employee
directors commenced their service on the Company's Board of Directors. Options
initially granted under the 1993 Plan vest in equal installments over a four-
year period, commencing one year after service on the Board commences. To
date, under the 1993 Plan, the Board had granted options covering a total of
67,500 shares of Common Stock to Messrs. Konomi, Lemasters and Rodgers. Those
options, initially granted in 1993, are now fully vested. The Board of
Directors, with Messrs. Konomi, Lemasters, Rodgers and Shinn abstaining, have
adopted amendments to the 1993 Plan and have restated the 1993 Plan to reflect
those amendments, all subject to shareholder approval. The Board recommends
that the shareholders approve the amended and restated 1993 Plan. The
substantive amendments to the 1993 Plan are described below. This description
is subject to, and is qualified in its entirety by reference to, the text of
the amended and restated 1993 Plan (the "Restated 1993 Plan") set forth in
Exhibit C annexed to this Proxy Statement.
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ADDITIONAL OPTIONS
As initially adopted, the 1993 Plan did not provide for the grant of any
options beyond the options granted to outside directors at the time that they
joined the Company's Board. With all of the initially granted options now
having vested, the members of the Board (other than the abstaining members)
concluded that it is in the best interest of the Company for the outside
directors to have the opportunity to receive additional options after the
initially granted options have fully vested. Accordingly, the Board has
approved an amendment, subject to shareholder approval, granting to each
outside director stock options covering 2,000 shares of Common Stock in each
year that he or she serves on the Board beyond the period that his or her
initial options fully vest. Each such additional option would be immediately
exercisable.
REVISED DEFINITION OF NON-EMPLOYEE DIRECTOR
As initially approved by the Board and the Company's shareholders, directors
were eligible to participate in the 1993 Plan only if they had never been
employed by the Company or any of its subsidiaries. The Board (excluding the
abstaining directors) has concluded that this definition is overbroad. The
Board believes that directors who have ceased to be employed by the Company
and its subsidiaries for more than one year should be treated as non-employee
directors. Accordingly, the Board has proposed an amendment, subject to
shareholder approval, that would enable directors to participate in the
Restated 1993 Plan if, as of the applicable date, they had not been employed
by the Company or any of its subsidiaries for at least one year. James Shinn,
who has not been employed by the Company since 1994, is the only director
currently on the Board who would benefit from this proposed amendment. If the
shareholders approve the Restated 1993 Plan, Mr. Shinn, like Messrs. Konomi,
Lemasters and Rodgers, would be entitled to receive fully vested stock options
covering 2,000 shares of Common Stock for each year of continued service on
the Board, as described in the immediately preceding paragraph.
NUMBER OF SHARES SUBJECT TO INITIAL GRANT
The Board has concluded that it is appropriate to reduce the number of
shares of Common Stock that would be subject to stock options granted to new
outside directors. At present, new outside directors would be entitled to a
grants of stock options covering 22,500 shares of Common Stock. The Restated
1993 Plan reduces the size of such initial grants to options covering 10,000
shares of Common Stock.
THE BOARD OF DIRECTORS (WITH MESSRS. KONOMI, LEMASTERS, RODGERS AND SHINN
ABSTAINING) RECOMMENDS THAT THE SHAREHOLDERS APPROVE PROPOSAL FOUR DESCRIBED
ABOVE.
PROPOSAL FIVE
PROPOSAL TO ADOPT THE DIRECTOR ELECTION/DEFERRAL PLAN
At its meeting on February 27, 1997, the Board of Directors of the Company
approved the Director Election/Deferral Plan. This Plan permits those
directors who receive director fees from the Company to elect to receive their
fees in Company Common Stock and, if they choose to receive their fees in the
form of Common Stock, to defer such receipt for a period of five years. The
proposed plan is described below. This description is subject to, and is
qualified in its entirety by reference to, the text of such plan set forth in
Exhibit D annexed to this Proxy Statement.
At present, directors who are employed by the Company or any of its
subsidiaries are not entitled to receive director fees from the Company. All
other directors of the Company ("Eligible Directors") receive an annual
retainer fee of $12,000 per year and meeting fees described elsewhere herein.
The Director Election/Deferral Plan would not affect either the determination
of which directors are eligible to receive fees from the Company or the amount
of such fees. Instead, the Director Election/Deferral Plan provides only that
those directors who are eligible to receive such fees will have certain rights
to receive Common Stock and to defer such receipt under the Director
Election/Deferral Plan.
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Excluding the impact of transition rules applicable to the director fees for
1997, the Director Election/Deferral Plan requires that Eligible Directors
wishing to receive their director fees in the form of Common Stock rather than
cash make their election by December 31 of the year prior to the year in which
such fees are to be paid. At each meeting of the Board in the subsequent year
at which cash fees would be paid, Eligible Directors who have elected to
receive Common Stock will receive such number of shares as shall equal the
dollar amount of such fees (or such portion of such fees as to which an
election shall have been made) divided by the closing sale price of the Common
Stock on the Nasdaq Stock Market on December 31 of the immediately preceding
calendar year.
Those Eligible Directors who elect to receive Common Stock pursuant to this
Plan will also have the right to defer receipt of such shares for a period of
five years (or until their service on the Board ceases, whichever occurs
first). Shares of Common Stock will not be issued to such directors and will
not be segregated during that period. Rather, the Director Election/Deferral
Plan will constitute an unfunded promise of the Company to deliver the
appropriate shares in the future, placing the applicable directors in the
status of general, unsecured creditors of the Company unless and until such
time as shares are delivered to the Eligible Directors upon completion of the
applicable deferral periods.
Pursuant to the terms of the Director Election/Deferral Plan, a total of
40,000 shares have been reserved for issuance pursuant to such plan, subject
to the receipt of shareholder approval.
FEDERAL INCOME TAX CONSEQUENCES
For information regarding federal income tax matters relating to the
Director Election/Deferral Plan, see "Tax Matters".
THE BOARD OF DIRECTORS (WITH MESSRS. KONOMI, LEMASTERS, RODGERS AND SHINN
ABSTAINING) RECOMMENDS THAT THE SHAREHOLDERS APPROVE PROPOSAL FIVE DESCRIBED
ABOVE.
TAX MATTERS
BECAUSE OF THE COMPLEXITY OF THE FEDERAL INCOME TAX LAWS AND THE APPLICATION
OF VARIOUS STATE INCOME TAX LAWS, THE FOLLOWING DISCUSSION OF TAX CONSEQUENCES
IS GENERAL IN NATURE AND RELATES SOLELY TO FEDERAL INCOME TAX MATTERS.
OPTIONEES AND RECIPIENTS OF OTHER AWARDS GRANTED UNDER THE PLANS DESCRIBED
HEREIN ARE ADVISED TO CONSULT THEIR PERSONAL TAX ADVISORS BEFORE EXERCISING AN
OPTION OR AWARD OR DISPOSING OF ANY STOCK RECEIVED PURSUANT TO THE EXERCISE OF
ANY SUCH OPTION OR AWARD. IN ADDITION, THE FOLLOWING SUMMARY IS BASED UPON AN
ANALYSIS OF THE CODE AS CURRENTLY IN EFFECT, EXISTING LAWS, JUDICIAL
DECISIONS, ADMINISTRATIVE RULINGS, REGULATIONS AND PROPOSED REGULATIONS, ALL
OF WHICH ARE SUBJECT TO CHANGE.
TREATMENT OF OPTIONS
The Code treats Incentive Options and Non-Statutory Options differently.
However, as to both types of Options, no income will be recognized by an
Optionee at the time of the grant of Options under the 1988 Plan, the 1993
Plan or the 1997 Plan, nor will the Company be entitled to a tax deduction at
that time.
Upon exercise of a Non-Statutory Option and options granted under the 1993
Plan, an Optionee will be subject to ordinary income tax on the excess of the
fair market value of the stock on the exercise date over the exercise price.
If shares acquired upon such exercise are held for more than one year before
disposition, any gain on disposition of such shares will be treated as long-
term capital gain.
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For Incentive Options, there is no tax to an Optionee at the time of
exercise. However, the excess of the fair market value of the stock on the
date of exercise over the exercise price will be taken into account in
determining whether the "alternative minimum tax" will apply for the year of
exercise. If the shares acquired upon exercise are held at least two years
from the date of grant and one year from the date of exercise, any gain or
loss upon the sale of such shares will be long-term capital gain or loss
(measured by the difference between the sales price of the stock and the
exercise price). Under current Federal income tax law, a capital gain will be
taxed at a rate which may be less than the maximum rate of tax on ordinary
income. If the two-year and one-year holding period requirements are not met
(a "disqualifying disposition"), an Optionee will recognize ordinary income in
the year of the disqualifying disposition in an amount equal to the lesser of
(i) the fair market value of the stock on the date of exercise minus the
exercise price or (ii) the amount realized on the disqualifying disposition
minus the exercise price. The remainder will be treated as long-term or short-
term capital gain, depending upon whether the stock has been held for more
than one year. If an Optionee makes a disqualifying disposition, the Company
will be entitled to a tax deduction equal to the amount of ordinary income
recognized by the Optionee.
In general, if an Optionee, in exercising an Option, tenders shares of
Common Stock in partial or full payment of the option price, no gain or loss
will be recognized on the tender. However, if the tendered shares were
previously acquired upon the exercise of an Incentive Option and the tender is
within two years from the date of grant or one year after the date of exercise
of the other option, the tender will be a disqualifying disposition of the
tendered shares.
As noted above, the exercise of an Incentive Option could subject an
Optionee to the alternative minimum tax. The application of the alternative
minimum tax to any particular Optionee depends upon the particular facts and
circumstances which exist with respect to the Optionee in the year of
exercise. However, as a general rule, the amount by which the fair market
value of the Common Stock on the date of exercise of an Option exceeds the
exercise price of the Option will constitute an item of "adjustment" for
purposes of determining the alternative minimum tax that may be imposed. As
such, this item will enter into the tax base on which the alternative minimum
tax is computed, and may therefore cause the alternative minimum tax to become
applicable in any given year.
TREATMENT OF STOCK APPRECIATION RIGHTS, PHANTOM SHARES AND PERFORMANCE STOCK
RIGHTS
There will be no federal income tax consequences to either the recipient or
the Company upon the grant of an SAR, Phantom Share or Performance Stock
Right. Generally the recipient will recognize ordinary income upon the receipt
of payment pursuant to an SAR, Phantom Share or Performance Stock Right in an
amount equal to the fair market value of the Common Stock and the aggregate
amount of cash received. The Company generally will be entitled to a
corresponding tax deduction equal to the amount includible in the recipient's
income.
TREATMENT OF RESTRICTED SHARES
Generally, absent an election to be taxed currently under Section 83(b) of
the Code (a "Section 83(b) Election"), there will be no federal income tax
consequences to either the recipient or the Company upon the grant of a
restricted stock award. At the expiration of the restriction period and the
satisfaction of any other restrictions applicable to the restricted shares,
the recipient will recognize ordinary income and the Company generally will be
entitled to a corresponding deduction equal to the fair market value of the
Common Stock at that time. If a Section 83(b) Election is made within 30 days
after the date that the restricted shares are received, the recipient will
recognize an amount of ordinary income at the time of the receipt of the
restricted shares, and the Company generally will be entitled to a
corresponding deduction, equal to the fair market value (determined without
regard to applicable restrictions) of the shares at such time. If a Section
83(b) Election is made, no additional income will be recognized by the
recipient upon the lapse of restrictions on the shares (and prior to the sales
of such shares), but, if the shares are subsequently forfeited, the recipient
may not deduct the income
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that was recognized pursuant to the Section 83(b) Election at the time of the
receipt of the shares. Any dividends paid to an employee with respect to
restricted shares prior to their vesting constitute compensation and, as such,
are taxable to the participant and deductible by the Company.
STOCK AWARD
Generally, the recipient of an unrestricted Stock Award will recognize
ordinary income upon the receipt of unrestricted shares in an amount equal to
the fair market value of the shares received. The Company generally will be
entitled to a corresponding tax deduction equal to the amount includible in
the recipient's income if applicable withholding requirements are satisfied.
PERSONS SUBJECT TO LIABILITY UNDER SECTION 16(b) OF THE EXCHANGE ACT
Special rules apply under the Code which may delay the timing and alter the
amount of income recognized with respect to Incentives granted to persons
subject to liability under Section 16(b) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"). Such persons include directors,
"officers" (as defined under Section 16 of the Exchange Act) and holders of
more than 10% of the outstanding Common Stock.
LIMITATIONS ON THE COMPANY'S COMPENSATION DEDUCTION
Beginning in 1998, Section 162(m) of the Code may limit the deductions which
the Company may take for otherwise deductible compensation payable to certain
executive officers of the Company to the extent that compensation paid to such
officers in any such year exceeds $1 million, unless such compensation is
performance-based, is approved by the Company's stockholders and meets certain
other criteria. While the structures of the 1988 Plan and 1997 Plan have been
designed or modified to permit compliance with Section 162(m), no assurance
can be given that all compensation derived by covered executives from such
plans will be exempt under Section 162(m).
OTHER MATTERS
ERISA
The plans described herein are not subject to any provisions of the Employee
Retirement Income Security Act of 1974, as amended, and are not qualified
under Section 401 of the Code.
Tax Withholding
The Company, as and when appropriate, has the right to require each
participant acquiring shares of Common Stock pursuant to the 1988 Plan and
1997 Plan to agree to arrangements that will satisfy all withholding taxes and
withholding liabilities in a manner acceptable to the Company.
Stock Election/Deferral Plan
Directors who elect and receive shares of Common Stock in lieu of cash fees
under the Stock Election/Deferral Plan are deemed to receive ordinary income
equal to the fair market value of such shares. For federal income tax
purposes, directors who defer receipt of such shares will not be taxed upon
the receipt of such shares until the deferral period expires. At that time,
the applicable director will, under current law, recognize ordinary income in
an amount equal to the fair market value of the stock at the expiration of the
deferral period.
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OTHER MATTERS
COSTS
The cost of soliciting proxies will be borne by the Company. In addition to
solicitation by mail, proxies may be solicited personally or by telephone or
telegraph by regular employees of the Company and its subsidiaries. Brokerage
houses and other custodians, nominees and fiduciaries will be requested to
forward soliciting material to their principals, and the Company will, upon
request, reimburse them for the reasonable expense of doing so.
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
Deloitte and Touche, LLP, certified public accountants, have been selected
by the Board of Directors to audit and report on the Company's financial
statements for the year ending December 31, 1997. A representative of that
firm is expected to be present at the Annual Meeting and will have an
opportunity to make a statement if he or she so desires. The representative is
expected to be available to respond to appropriate questions from
shareholders.
OTHER MATTERS TO BE PRESENTED
The Board of Directors does not know of any matters, other than those
referred to in the accompanying Notice of the Annual Meeting, to be presented
at the Annual Meeting for action by shareholders. However, if any other
matters are properly brought before the Annual Meeting or any adjournment
thereof, it is intended that votes will be cast with respect to such matters,
pursuant to the proxies, in accordance with the best judgment of the persons
acting under the proxies.
SHAREHOLDER PROPOSALS
If a shareholder of the Company wishes to have a proposal included in the
Company's proxy statement for the 1998 Annual Meeting of Shareholders, the
proposal must be received at the Company's principal executive offices by
November 28, 1997.
By Order of the Board of Directors,
Theodore M. Weitz, Secretary
March 28, 1997
A COPY OF THE COMPANY'S ANNUAL REPORT TO SHAREHOLDERS FOR THE YEAR ENDED
DECEMBER 31, 1996, INCLUDING CONSOLIDATED FINANCIAL STATEMENTS, ACCOMPANIES
THIS PROXY STATEMENT. THE ANNUAL REPORT IS NOT TO BE REGARDED AS PROXY
SOLICITING MATERIAL OR AS A COMMUNICATION BY MEANS OF WHICH ANY SOLICITATION
IS TO BE MADE.
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EXHIBIT A
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.
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"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.
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"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.
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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.
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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
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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:
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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:
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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.
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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.
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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
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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.
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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
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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
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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.
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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.
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EXHIBIT B
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
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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."
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EXHIBIT C
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.
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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
Outside 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
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(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.
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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.
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.
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<PAGE>
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.
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<PAGE>
EXHIBIT D
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"). An Election shall be irrevocable for the calendar
year for which it is made.
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
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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.
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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(a) and 14(b)
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 on 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.
D-3
<PAGE>
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.
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<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 .
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
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<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 , 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
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<PAGE>
PROXY
DIALOGIC CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS, APRIL 29, 1997
The undersigned hereby appoints Howard G. Bubb, Edward B. Jordan and Theodore
M. Weitz, and each of them, attorneys and proxies, with power of substitution
in each of them, to vote for and on behalf of the undersigned at the annual
meeting of the shareholders of the Company to be held on April 29, 1997, and at
any adjournment thereof, upon matters properly coming before the meeting, as
set forth in the related Notice of Meeting and Proxy Statement, both of which
have been received by the undersigned. Without otherwise limiting the general
authorization given hereby, said attorneys and proxies are instructed to vote
as follows:
1.Election of the Board's nominees for Director.
[_] FOR ALL NOMINEES [_] WITHHOLD AUTHORITY FOR ALL NOMINEES
(THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR")
Nominees: Masao Konomi and James J. Shim
- --------------------------------------------------------------------------------
INSTRUCTION: To withhold authority to vote for any individual nominee, write
that name in the space provided above.
Adoption of the following Plan Proposals (the Board of Directors recommends a
vote "FOR" with respect to each of the following):
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
--- ------- -------
<S> <C> <C> <C>
2. Proposal to adopt the 1997 Incentive Benefit Plan [_] [_] [_]
3. Proposal to adopt amendments to the 1988 Incentive Com-
pensation Plan [_] [_] [_]
</TABLE>
<PAGE>
Adoption of the following Plan Proposals (the Board of Directors recommends a
vote "FOR" with respect to each of the following):
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
--- ------- -------
<S> <C> <C> <C>
4. Proposal to amend and restate the 1993 Non-Employee Di-
rector Stock Option Plan [_] [_] [_]
5. Proposal to adopt the 1997 Director Stock
Election/Deferral Plan [_] [_] [_]
</TABLE>
6. Upon all such other matters as may properly come before the meeting and/or
any adjournment or adjournments thereof, as they in their discretion may
determine. The Board of Directors is not aware of any such other matters.
Signed:__________________________
Dated:_____________________, 1997
NOTE: Please sign this proxy and
return it promptly whether or
not you expect to attend the
meeting. You may nevertheless
vote in person if you attend.
Please sign exactly as your name
appears hereon. Give full title
if an Attorney, Executor, Admin-
istrator, Trustee, Guardian,
etc. For an account in the name
of two or more persons, each
should sign, or if one signs, he
should attach evidence of his
authority.
UNLESS OTHERWISE SPECIFIED IN THE SQUARES OR SPACE PROVIDED IN THIS PROXY, THIS
PROXY, IF EXECUTED, WILL BE VOTED FOR THE BOARD'S NOMINEES AND FOR ADOPTION OF
EACH OF THE ABOVE- MENTIONED PLAN PROPOSALS.
