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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
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 (S) 240.14a-11(c) or (S) 240.14a-12
Dialogic Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
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[LOGO OF DIALOGIC]
DIALOGIC CORPORATION
April 9, 1999
Dear Shareholder:
On behalf of the Board of Directors and management, I am pleased to invite
you to the 1999 Annual Meeting of Shareholders of Dialogic Corporation. The
meeting will be held on Thursday, May 6, 1999 at 10:00 a.m. at the
Headquarters Plaza, Morristown, 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,
/s/ Nicholas Zwick
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 Headquarters Plaza Hotel, Morristown, New Jersey, on
Thursday, May 6, 1999 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. An amendment to increase the number of shares issuable under the
Company's Employee Stock Purchase Plan; and
3. The transaction of such other business as may properly come before the
meeting or any adjournment thereof.
Only shareholders of record at the close of business on April 2, 1999 are
entitled to notice of, and to vote at, the meeting.
/s/ Theodore M. Weitz
Theodore M. Weitz
Secretary
Parsippany, NJ
April 9, 1999
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.
<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
Headquarters Plaza Hotel, Morristown, New Jersey, on Thursday, May 6, 1999 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 April 9, 1999.
Record Date and Quorum. Only shareholders of record at the close of business
on April 2, 1999 (the "Record Date") will be entitled to vote at the Annual
Meeting. On that date, there were outstanding 16,199,106 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. 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 the increase in
the number of shares of Common Stock issuable under the Company's Employee
Stock Purchase Plan. 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 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 give a 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.
PROPOSAL I
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 2002
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 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 1999 and thus is continuing in
<PAGE>
office. The following information is given as of January 31, 1999 and was
furnished to the Company by the respective nominees and continuing directors:
Nominees
. 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: 72.
. 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: 46.
Continuing Directors Serving Until 2000
. 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: 55.
. James J. Shinn: Co-founder of the Company; Senior Fellow, Council on
Foreign Relations (February 1994 to June 1997); 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: 47.
Continuing Directors Serving Until 2001
. 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); currently on the Board of
Directors of Pairgain Technologies, Inc. Director since 1994. Age: 44.
. 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); currently on the Board of Directors at Voice Control Systems Inc.
Director since 1983. Age: 53.
. John N. Lemasters: Chairman and CEO of Augat Inc., during 1996. 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. Director since 1993. Age: 65.
During 1998, the Board of Directors held six meetings, the Audit Committee
held four meetings and the Compensation Committee held six meetings. During
1998, 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.
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 applicable
financial reporting statutes
2
<PAGE>
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 1, 1999, 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 Percentage
Common Stock Beneficially Beneficially
Beneficial Owner Owned (1) (2) Owner
- ---------------------------------------- ------------------------- ------------
<S> <C> <C>
John G. Alfieri......................... 62,015 (3) *
Thomas G. Amato......................... 22,196 (3) *
Howard G. Bubb.......................... 341,669 (4) 2.04
Kenneth J. Burkhardt, Jr................ 1,552,550 (5) 9.47
Charles H. House........................ 43,837 (6) *
Masao Konomi............................ 27,627 *
John Landau............................. 33,875 *
John N. Lemasters....................... 27,695 *
Francis G. Rodgers...................... 27,695 *
James J. Shinn.......................... 1,154,137 (7) 7.06
Nicholas Zwick.......................... 3,024,899 (8) 18.45
All executive officers and directors as
a group (16 persons)................... 6,355,369 (9) 37.57
</TABLE>
- --------
* Represents less than 1% of the outstanding Common Stock. There were
16,394,993 shares outstanding on February 1, 1999.
(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 Route
10, Parsippany, New Jersey 07054.
(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 1, 1999 or within 60 days of such date:
Mr. Alfieri, 55,515 shares; Mr. Amato, 10,000 shares; Mr. Bubb, 328,875
shares; Mr. House, 28,750 shares; Mr. Konomi, 26,500 shares; Mr. Landau,
33,875 shares; Mr. Lemasters, 4,000 shares; Mr. Rodgers, 20,875 shares;
Mr. Shinn 4,000 shares and all executive officers and directors as a
group, 521,265 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. Amato, 696 shares; Mr. Bubb,
2,794 shares; Mr. House, 2,076 shares and all executive officers and
directors as a group, 6,631 shares.
3
<PAGE>
(3) Includes 6,000 and 5,000 shares, respectively, subject to restricted stock
awards granted on January 19, 1999, to Messrs. Alfieri and Amato,
respectively.
(4) Includes 10,000 shares subject to a restricted stock award granted on
January 28, 1999.
(5) Includes 103,500 shares held by Dr. Burkhardt's wife as trustee of trusts
for the benefit of their children.
(6) Includes an aggregate of 14,000 shares subject to restricted stock awards
granted on January 1, 1998 and July 1, 1998, respectively.
(7) Includes 80,000 shares held by Mr. Shinn's wife as trustee of trusts for
the benefit of their children.
(8) Includes 108,000 shares held by a charitable trust.
(9) Includes an aggregate of 22,140 shares subject to restricted stock awards
granted to a certain executive officer on August 31, 1998 and January 19,
1999.
Other than Messrs. Burkhardt, Shinn and Zwick, the only shareholders known
by the Company to beneficially own more than five percent of the outstanding
Common Stock as of December 31, 1998 were Kopp Investment Advisors, Inc.
("Kopp"), 6600 France Avenue South, Edina, MN 55435, and Fidelity Management &
Research Co. ("FMR"), 82 Devonshire Street, Boston, MA 02105. Kopp has advised
the Company that as of December 31, 1998, it beneficially owned 2,098,856
shares of Common Stock (i.e., approximately 12.89% of the outstanding shares
as of that date). FMR has advised the Company that as of December 31, 1998, it
beneficially owned 861,700 shares of Common Stock (i.e., approximately 5.29%
of the outstanding shares as of that date.) On March 1, 1999, Microsoft
Corporation ("Microsoft"), One Microsoft Way, Redmond, WA 98052, purchased
860,681 shares of Common Stock (i.e., approximately 5.00% of the outstanding
shares as of that date) from the Company.
Section 16 (a) Beneficial Ownership Reporting Compliance
Section 16 (a) of the Securities Exchange Act of 1934 requires the Company's
directors, executive officers and 10% shareholders to file with the Securities
and Exchange Commission certain reports regarding such person's ownership of
the Company's securities. The Company is required to disclose any failures to
file such reports on a timely basis. During the year ended December 31, 1998,
Messrs. Konomi, Lemasters, Rodgers and Shinn, directors of the Company, first
reported 2,000 options automatically granted to each director on July 1, 1997
pursuant to the 1993 Non-Employee Director Stock Option Plan approved by the
shareholders of the Company on April 29, 1997. Also during 1998, Mr. Zwick,
Chairman of the Board, reported late the December 8, 1998 sale of 10,000
shares of Common Stock and Mr. Lemasters, a director of the Company, reported
late the May 29, 1998 exercise of options to purchase 11,250 shares of Common
Stock. The failures to report these transactions on a timely basis were
inadvertent. The transactions were reported promptly after the failure to
report was discovered.
4
<PAGE>
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, 1998, with respect
to the Company's Chief Executive Officer and the Company's four other most
highly compensated executive officers during 1998 (the "Named Officers"):
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
------------------------------------ ---------------
Other Annual Securities All Other
Name and Principal Salary Bonus Compensation Underlying Compensations
Position Year ($) ($)(2)(3) ($) Options/SARs(#) ($)(5)
- ------------------ ---- -------- --------- ------------ --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Howard G. Bubb.......... 1998 $293,349 $127,474 -- 50,000 $5,384
President and Chief 1997 263,096 101,750 -- 50,000 6,494
Executive Officer 1996 206,725 76,266 -- 25,000 6,825
John G. Alfieri......... 1998 165,638 42,816 -- 33,000 5,617
President, The Americas 1997 140,192 55,975 -- 15,000 7,094
1996 115,300 92,784 -- 10,000 7,163
Thomas G. Amato (1)..... 1998 225,000 66,333 -- 18,000 3,199
Chief Financial Officer 1997 137,049 72,135 $87,793(4) 40,000 2,096
Charles H. House........ 1998 340,620 51,527 53,545(4) 41,000 4,783
Executive Vice
President, 1997 207,879 70,382 35,477(4) 15,000 5,545
Core Systems Development 1998 200,000 83,228 -- 50,000 4,217
John Landau............. 1998 167,923 40,165 -- 15,000 5,447
Vice President, 1997 147,800 37,075 -- 9,000 6,024
Strategic Marketing 1996 127,868 37,214 -- 8,500 6,318
</TABLE>
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(1) Mr. Amato was only employed by Dialogic for seven months during 1997.
(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. Amato and Mr. House for relocation
expenses. Included in Mr. House's relocation is forgiveness of $7,500
principal and $1,800 interest on a relocation loan. In addition, Mr. House
was granted a short term $250,000 interest bearing loan on July 1, 1998.
The loan and related interest was paid in full on March 15, 1999. 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 1998, represents contributions made by the Company to the Company's
401(k) plan on behalf of the Named Officers to match 1998 pre-tax deferral
contributions (included under "Salary") made by the Named Officers to such
plan, as follows: Mr. Bubb, $3,233; Mr. Alfieri, $3,248; Mr. Amato,
$2,605; Mr. House, $3,267; and Mr. Landau, $3,296. For 1998, also includes
$2,151, $2,369, $594, $1,516 and $2,151, respectively, paid to Messrs.
Bubb, Alfieri, Amato, House and Landau, respectively, pursuant to certain
profit-sharing arrangements (including amounts paid in 1999 relating to
1998 and excluding amounts paid in 1998 relating to 1997.)
Incentive Compensation Plans
The Company presently maintains the 1997 Incentive Benefit Plan and the 1988
Incentive Compensation Plan for employees and also has outstanding stock
option programs for former employees of GammaLink, Spectron Microsystems, Inc.
("Spectron") and Dianatel Corporation ("Dianatel") who held stock options
5
<PAGE>
granted by GammaLink, Spectron, and Dianatel that were outstanding at the time
that these corporations were acquired by the Company (collectively, the
"Existing Incentive Compensation Plans"). As of December 31, 1998, (i) 29,140
restricted shares of Common Stock had been granted and (ii) options to
purchase approximately 3.2 million shares of Common Stock were outstanding
under the Existing Incentive Compensation Plans. The restrictions on the
restricted shares are to be lifted based on the achievement of certain
performance objectives or continued employment. The options granted under the
Existing Incentive Compensation Plans generally have terms of eight or 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 and restricted
shares granted to executive officers and certain other executives of the
Company will accelerate (i.e., become fully exercisable) if such officers or
executives undergo a "Termination Event" 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 by a third party, a merger of the Company or
certain substantial changes in the composition of the Board of Directors.
The following table and accompanying footnotes contain information regarding
the grant of stock options to the Named Officers during 1998 under the
Existing Incentive Compensation Plans.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
---------------------------------------------
Potential
Realizable Value at
Percent of Assumed Annual
Number of Total Rates of Stock
Securities Options/SARs Exercise Price Appreciation
Underlying Granted to or Base for Option Term(1)
Options/SARs Employees in Price Expiration -------------------
Name Granted(#) 1998 ($/sh.) Date 5%($) 10%($)
---- ------------ ------------ -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Howard G. Bubb.......... 50,000 2.7% $35.9375 7/30/06 $857,928 $2,054,855
John G. Alfieri......... 17,000 0.9% $35.9375 7/30/06 $291,695 $ 698,661
John G. Alfieri......... 16,000 0.9% $22.6875 10/30/06 $173,316 $ 415,264
Thomas G. Amato......... 12,000 0.6% $35.9375 7/30/06 $205,903 $ 493,172
Thomas G. Amato......... 6,000 0.3% $22.6875 10/30/06 $ 64,994 $ 155,724
John Landau............. 7,000 0.4% $35.9375 7/30/06 $120,110 $ 287,684
John Landau............. 8,000 0.4% $22.6875 10/30/06 $ 86,658 $ 207,632
Charles H. House........ 4,000 0.2% $42.3750 1/1/02 $ 36,528 $ 78,664
Charles H. House........ 13,000 0.7% $35.9375 7/30/06 $223,061 $ 534,270
Charles H. House........ 24,000 1.3% $22.6875 10/30/06 $259,974 $ 622,896
</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.
6
<PAGE>
The following table and accompanying footnotes set forth certain information
regarding stock options exercised by the Named Officers during 1998 and stock
options held by the Named Officers as of December 31, 1998.
AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised
Unexercised Options/SARs In-The-Money Options/SARs
at Year-End(#) at Year-End(1)($)
Shares Acquired Value ----------------------------------- --------------------------
Name On Exercise(#) Realized($) Exercisable Unexerciseable Exercisable Unexerciseable
- ---- --------------- ----------- --------------- ----------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Howard G. Bubb.......... 10,500 455,438 328,875 134,250 $2,024,298 $14,040
John G. Alfieri......... 360 10,350 55,515 62,625 621,134 65,312
Thomas G. Amato......... -- -- 10,000 48,000 6,600 19,800
John Landau............. -- -- 33,875 47,125 293,760 182,355
Charles H. House........ -- -- 28,750 87,250 -- --
</TABLE>
- --------
(1) Based upon the closing price of the Common Stock on the Nasdaq National
Market System on December 31, 1998 ($19.66), less the exercise price,
multiplied by the number of shares covered by the option; options with
exercise prices equal to or greater than $19.66 were excluded from the
calculation of the value of unexercised options.
Employment Agreement
The Company has entered into an employment agreement with Howard G. Bubb as
President and Chief Executive Officer which runs for an initial term through
January 1, 2000, at an initial base salary of $275,000 subject to annual
increase. He is also eligible for bonuses and stock options in accordance with
Company plans. The agreement is terminable by either party upon six months
notice. Under the agreement, Mr. Bubb received the salaries reflected in the
table under the caption "Summary of Cash and Certain Other Compensation" and
is entitled to receive cash bonuses based upon Company and individual
performance. He is also entitled to the use of a Company-supplied automobile
and to receive such insurance, vacation, disability and other benefits as were
generally available to the Company's executive officers. He also received
various stock options pursuant to that agreement.
7
<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 or restricted shares, together with 401(k),
health and other benefit programs. 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 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 at other surveyed companies. For executive positions, the
Company participated in three total compensation surveys employing one survey
as a primary and preferred source and two others for additional information
and as an independent comparison against the results of the primary survey.
The focus of the primary survey is high technology firms within a similar
range of revenue. This information serves as the primary basis for the
external competitive assessment of total cash compensation except that in the
case of Mr. Bubb, analysis of proxy information on selected peer companies
plays an equally important role. The peer companies selected for proxy
analysis in 1998 were approximately the same as those considered in 1997. In
addition, the Company participated in a survey focused on equity practices in
order to assess the competitiveness of that portion of executive compensation
packages.
The Chief Executive Officer's performance is analyzed against his objectives
by the full Board of Directors (other than Mr. Bubb). In 1998, these
objectives for Mr. Bubb included quantitative measures of revenue and
earnings, qualitative measures of leadership, target market penetration, new
product development and time-to-market, as well as operational targets related
to financial management and quality. In 1998, the Compensation Committee
reviewed Mr. Bubb's performance and decided to increase his base salary to
$315,000 per annum. 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. Other executive officers are similarly reviewed by their
managers. The total compensation of each executive is reviewed on an annual
basis after consideration of these performance analyses and the compensation
paid by surveyed companies.
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
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<PAGE>
Officer, in turn, reviews his "direct reports" to determine whether quarterly
bonuses have been earned. Mr. Bubb received bonuses of $127,474 for 1998
performance pursuant to this quarterly bonus program. For 1999, the Board has
determined to evaluate Mr. Bubb's performance on an annual basis for purposes
of bonus payment.
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 1998, Mr. Bubb earned $2,151 pursuant to the
Company's profit-sharing arrangements.
Stock Options
The Compensation Committee believes that stock options provide 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.
The individual awards of stock options are based on several factors
including the executive's position, performance, potential contribution to
Company success, previous stock option grants, currently held stock options,
as well as competitive equity practices. The amount of any award may also be
adjusted based on Compensation Committee discretion. Most equity compensation
granted in 1998 was in the form of non-qualified stock options which vest
ratably on the first four anniversaries of the grant date (25% per year). The
Committee also granted restricted stock in 1998 to certain key employees. In
each case, the restricted stock either replaced long-term incentives, which
were forfeited when employees left their former employers, served to retain
key employees, or was a performance-based reward. Many of the options that
have been granted to executive officers carry long-term (i.e., five year or
eight year) vesting schedules. Officers who leave the Company's employ (other
than due to death, disability or retirement) 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.
The Company issues options and other incentives under the 1988 Incentive
Compensation Plan and the 1997 Incentive Benefit Plan. At December 31, 1998,
approximately 1.8 million shares of Common Stock remained available for future
stock grants under the 1988 Incentive Compensation Plan and the 1997 Incentive
Benefit Plan. The Compensation Committee believes that these plans enable the
Company to link employee incentives with shareholder interests.
During 1998, Mr. Bubb was granted a stock option, covering 50,000 shares, at
an exercise price equal to the then current market price of the Company's
Common Stock, $35.9375, and under a four-year vesting schedule.
Executive Investment Option Plan
In December 1998, the Board of Directors authorized the implementation of a
program with provides for options in certain mutual funds to be provided in
exchange for a reduction in cash compensation and acceptance of certain
vesting requirements. This program begins in 1999.
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.
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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
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.
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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, 1998. 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 57 MONTH CUMULATIVE TOTAL RETURN
AMONG DIALOG CORPORATION,
THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE HAMBRECHT & QUIST TECHNOLOGY INDEX*
Dialogic Corp. (DLGC)
Cumulative Total Return
-----------------------------------------------
4/12/94 12/94 12/95 12/96 12/97 12/98
DIALOGIC CORPORATION 100 165 270 221 307 138
NASDAQ STOCK MARKET (US) 100 103 145 178 219 308
HAMBRECHT & QUIST
TECHNOLOGY 100 119 178 221 260 404
- --------
* $100 INVESTED ON 04/12/94 IN COMPANY'S COMMON STOCK OR ON 4/1/94 IN INDEX
INCLUDING REINVESTMENT OF DIVIDENDS
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Director Compensation
Employee directors do not receive any compensation for serving on the Board.
During 1998, non-employee directors receive an annual retainer of $12,000,
$1,000 for each Board meeting that they attended 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. To remain
competitive in retaining directors and to recruit future directors, effective
January 1, 1999, the Board increased to $20,000 the annual retainer non-
employee directors will receive. On April 29, 1997, the shareholders of the
Company approved the Director Stock Election/Deferral Plan which 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. During
1998, the following shares were granted in lieu of director's fees:
<TABLE>
<S> <C>
James Shinn....................... 497 shares
Francis Rodgers................... 497 shares
Masao Konomi...................... 485 shares
John Lemasters.................... 497 shares
</TABLE>
Approximately 35,000 shares remain available for future grant pursuant to such
plan.
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.
Amendments to this Plan were approved by the shareholders of the Company on
April 29, 1997. The plan as amended provides generally for annual option
grants covering 2,000 shares of Common Stock to each outside director for each
year that he or she serves on the Board for each year after he or she has been
on the Board for four years. Accordingly, in 1998, Messrs. Konomi, Lemasters,
Rodgers and Shinn were granted options covering 2,000 shares pursuant to the
amended plan. The size of initial grants for new outside directors was also
reduced to options covering 10,000 shares of Common Stock.
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PROPOSAL TWO
PROPOSAL TO AMEND THE COMPANY'S
EMPLOYEE STOCK PURCHASE PLAN
On February 22, 1999, the Board of Directors approved (subject to
shareholder approval at the Annual Meeting) an amendment to the Company's 1995
Employee Stock Purchase Plan (the "Plan") increasing the number of shares of
Common Stock which may be purchased pursuant to the Plan from 300,000 shares
to 500,000 shares. The Plan was previously approved by shareholders at the
1995 Annual Meeting. The following is a summary of certain terms of the Plan.
Purpose
The purpose of the Plan is to provide employees of the Company with an
opportunity to purchase shares of Common Stock through payroll deductions and
to foster interest in the Company's success, growth and development.
Plan Periods; Investment Limitations
Employee purchases are made on a quarterly basis (each calendar quarter
constitutes a "Purchase Period"). Employees who participate in the Plan will
authorize the Company to withhold from each paycheck a specific percentage of
their "Base Compensation," (as defined in the Plan) subject to the following
limitations: (i) no more than 10% of Base Compensation may be withheld; (ii)
no more than $25,000 may be invested by any participant in any calendar year;
(iii) no less than $10 per paycheck may be invested by any participant; and
(iv) no more than three thousand or less than five shares may be purchased by
a participant in any Purchase Period. Furthermore, no more than 35,000 (the
"Maximum Number") shares may be purchased by all employees during any given
Purchase Period. In the event that investments made during a Purchase Period
would result in more than the Maximum Number of shares being purchased, the
Plan provides for an automatic pro rata reduction in the number of shares
purchased by each participant and the return to employees of an equivalent
portion of the purchase price.
Eligibility
In order to be eligible to participate in the Plan for any Purchase Period,
a participant (i) must have been employed by the Company or its subsidiaries
on a "Full-Time Basis" (as defined) during the six months immediately
preceding the commencement of the Purchase Period and (ii) must not own five
percent or more of the Company's voting stock. For purposes of the Plan, a
participant will be deemed to be employed on a Full-Time Basis if he or she
works at least 20 hours per week. Non-employee directors and non-employee
officers of the Company are not eligible to participate.
Purchase Price; Payment
For any Purchase Period, shares of Common Stock are purchased under the Plan
at a price equal to 85% of the lesser of (i) the "Closing Price" (as defined)
of the Common Stock on the first trading day of the Purchase Period (the "Base
Option Price") and (ii) the Closing Price of the Common Stock on the last
trading day of the Purchase Period. In general, the term "Closing Price" means
the closing sale price of a share of Common Stock on the Nasdaq National
Market System as quoted in The Wall Street Journal.
Promptly after the end of the Purchase Period, the Company utilizes the
amounts invested by participants, to purchase Common Stock at the purchase
price determined in accordance with the formula described above, subject in
all instances to the purchase limitations described above. Fractional shares
are not purchased. Instead, payments which would have been utilized to
purchase fractional shares are retained in a participant's account for
investment during the following Purchase Period.
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<PAGE>
Enrollment
In order to participate in the Plan with respect to a Purchase Period, an
employee must enroll in the Plan prior to, and must satisfy all eligibility
requirements as of, the first day of the Purchase Period. Unless a participant
withdraws, enrollment automatically carries over from Purchase Period to
Purchase Period; employees need not re-enroll each Purchase Period in order to
continue participating in the Plan.
Withdrawals and Reductions
A participant that has enrolled in the Plan for any Purchase Period may
withdraw from the Plan at any time prior to the last day of such Purchase
Period. An employee shall automatically be deemed to have withdrawn from the
Plan upon termination of employment for any reason. Upon withdrawal, the
Company returns to the participant all of his or her payroll deductions during
the current Purchase Period. An employee who withdraws from the Plan during a
Purchase Period may not re-enter the Plan until the following Purchase Period.
Participants may reduce, but may not increase, the amount of their payroll
deductions (expressed either in dollar amounts or as a percentage of Base
Compensation) during the Purchase Period. To ease the administrative burden
upon the Company, a participant may only reduce his or her payroll deductions
once during each Purchase Period.
Shares Covered by the Plan
Under the current Plan, a total of 300,000 shares of Common Stock may be
purchased pursuant to the Plan. The Amendment would increase by 200,000 the
number of shares of Common Stock which may be purchased pursuant to the Plan.
Such shares may either be treasury shares purchased on the market by the
Company or shares originally issued by the Company.
Administration
The Plan is administered by the Compensation Committee of the Company's
Board of Directors. The Compensation Committee is authorized to make,
administer and interpret rules and regulations determined by the Compensation
Committee to be necessary to administer The Plan. Any determination, decision
or action of the Committee in connection with the interpretation,
administration or application of the Plan is binding upon all participants.
Amendment or Termination
The Board of Directors may amend or terminate the Plan at any time. In the
event that the Plan is terminated prior to the last day of a Purchase Period,
such Purchase Period shall be deemed to have ended on the effective date of
such termination.
Federal Income Tax Consequences
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.
Participants of the Plan are advised to consult their own personal tax
advisors. In addition, the following summary is based solely upon an analysis
of the Internal Revenue Code of 1986, as amended, as currently in effect,
existing laws, judicial decisions, administrative rulings, regulations and
proposed regulations, all of which are subject to change.
The Plan is not subject to the requirements of the Employee Retirement
Income Security Act of 1974, but is intended to qualify as an "employee stock
purchase plan", as defined in Section 423 of the Internal Revenue Code of
1986, as amended. Under such a plan, an employee must report as compensation
in the year of disposition of a share purchased under the Plan (or at the
employee's death) the lesser of (a) the excess of the
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<PAGE>
fair market value of the share at the time of disposition (or death) over the
purchase price of the share or (b) the excess of the fair market value of the
share at the time the option was granted over the initial Base Option Price.
Any excess of appreciated value is considered a capital gain. In order to
qualify for capital gains tax treatment, the employee must hold the stock to a
date that is more than two years from the date of option grant and one year
from the date of purchase. If these holding requirements are met, the Company
is not entitled to any deduction for tax purposes. On the other hand, if the
employee does not meet the holding period requirements, the employee realizes
at the time of disposition ordinary income to the extent of the difference
between the price paid for the share and fair market value of the share on the
purchase date, irrespective of the price at which the employee disposes of the
share, and an amount equal to such ordinary income is deductible by the
Company in the year of the disposition.
Administrative Matters
The amounts received by the Company upon the purchase of shares of its
Common Stock pursuant to the Plan are used for general corporate purposes.
No current directors who are not employees will receive any benefit as a
result of the adoption of the amendment to the Plan. The benefits that will be
received as a result of the adoption of the amendment to the Plan by the
current executive officers of the Company and by all eligible employees are
not currently determinable. As of January 1, 1999, approximately 425 employees
of the Company participated in the Plan.
The Board of Directors recommends that the shareholders vote FOR the
Amendment to the Company's 1995 Employee Stock Purchase Plan.
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 & 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, 1999. 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 matter, other than the election
of directors and the amendment to the Company's Employee Stock Purchase Plan,
to be presented at the Annual Meeting for action by shareholders. However, if
any other matter is properly brought before the Annual Meeting or any
adjournment thereof, it is intended that votes will be cast with respect to
such matter, 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 2000 Annual Meeting of Shareholders, the
proposal must be received at the Company's principal executive
15
<PAGE>
offices by December 9, 1999. If a shareholder of the Company wishes to have a
proposal considered at the 2000 Annual Meeting of Shareholders (but not
included in the proxy statement, for such meeting), the proposal must be
received at the Company's principal executive offices by February 24, 2000.
By Order of the Board of Directors,
/s/ Theodore M. Weitz
Theodore M. Weitz, Secretary
April 9, 1999
A copy of the Company's Annual Report to Shareholders for the year ended
December 31, 1998, 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.
16
<PAGE>
Proposed Amended and Restated
DIALOGIC CORPORATION EMPLOYEE STOCK PURCHASE PLAN
1. Purpose. The purpose of the Dialogic Corporation Employee Stock Purchase
Plan (the "Plan") is to provide employees of Dialogic Corporation and its
subsidiaries (collectively, the "Corporation") with an opportunity to purchase
common stock of Dialogic Corporation through quarterly offerings to be made in
accordance with the directions of the Compensation Committee, as well as to
foster interest in the Corporation's success, growth and development. It is
the intention of the Corporation to have the Plan qualify as an "Employee
Stock Purchase Plan" within the meaning of Section 423 of the Internal Revenue
Code of 1986, as amended (the "Code"). The provisions of the Plan shall,
accordingly, be construed so as to extend and limit participation in a manner
consistent with the requirements of that Section of the Code.
2. Definitions. The following terms shall have the following meanings:
(a) "Base Compensation" means regular straight time earnings, including
Commissions and excluding payments for overtime, incentive compensation,
bonuses (other than Commissions) and other special payments, except to the
extent that the inclusion of any such items is specifically approved by the
Committee for purposes of the Plan.
(b) "Commissions" shall mean commissions paid by the Corporation to its
sales personnel as compensation based on sales.
(c) "Committee" means the Compensation Committee authorized under
Paragraph 12 to monitor the Plan.
(d) "Employer" means Dialogic Corporation and its subsidiaries. A
corporation shall constitute a subsidiary of Dialogic Corporation if, and
only if, it constitutes a subsidiary within the meaning of Section 424(f)
of the Code.
(e) "Employee" means, with respect to any Purchase Period, any person,
including an officer, who has been employed by an Employer for 20 hours or
more per week during the six month period prior to the commencement of such
Purchase Period.
(f) "NASDAQ" means the National Market System of the National Association
of Securities Dealers Automated Quotation System.
(g) "Participant" means an Employee who has agreed to participate in an
offering hereunder and has met the requirements of Paragraphs 3 and 5
hereof.
(h) "Purchase Period" means any calendar quarter, commencing with the
quarter beginning on July 1, 1995, during which a Participant may purchase
stock pursuant to any particular offering under the Plan.
3. Eligibility.
(a) Any Employee shall be eligible to participate in the Plan as of the
first day of a calendar quarter coincident with or next following his or
her completion of six months of continuous service with one or more
Employers, subject to the limitations set forth in Section 3(b) hereof.
(b) Any provision of the Plan to the contrary notwithstanding, no
Employee shall be granted an option:
(i) if, immediately after the grant, such Employee would own shares,
and/or hold outstanding options to purchase shares, possessing 5% or
more of the total combined voting power or value of all classes of
stock of Dialogic Corporation or of any subsidiary of Dialogic
Corporation; or
(ii) which permits him or her rights to purchase shares under all
employee stock purchase plans of the Corporation at a rate which
exceeds $25,000 of fair market value of stock per calendar year,
determined on the basis of the Market Price (as defined in Section 7 )
on the first business day of the Purchase Period of any offering.
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<PAGE>
4. Offerings. On the first day of each calendar quarter commencing with the
quarter beginning on July 1, 1995, the Corporation will make an offering to
Employees to purchase the common stock of Dialogic Corporation (the "Common
Stock") under the Plan. During each Purchase Period, the amounts received as
Base Compensation by an Employee shall constitute the measure of such
Employee's participation in the offering.
5. Participation. An Employee who will be, on the first day of any Purchase
Period, eligible to participate in the offering commencing on such date in
accordance with Paragraph 3 hereof, may so participate by completing and
submitting to the Vice President Human Resources of Dialogic Corporation (the
"HR Vice President"), prior to the commencement of such Purchase Period, a
written authorization of payroll deductions on a form provided by the HR Vice
President. Payroll deductions for a Participant who has timely submitted such
a written authorization shall commence on the first payday within such
Purchase Period and shall end on the last payday during such Purchase Period,
unless sooner terminated as provided herein. An Employee who has enrolled in
the Plan with respect to a particular Purchase Period shall automatically be
deemed to have re-enrolled in the Plan for all subsequent Purchase Periods at
the payroll reduction rate in effect immediately prior to the commencement of
each such subsequent Purchase Period unless (i) the Employee withdraws from
the Plan or (ii) prior to the commencement of a new Purchase Period, the
Employee advises the HR Vice President in writing that he or she desires to
change his or her payroll reduction rate for such new Purchase Period.
6. Payroll Deductions.
(a) At the time an Employee files his or her authorization for a payroll
deduction, he or she shall elect to have deductions made from such
Employee's pay on paydays during the Purchase Period at a rate not to
exceed 10% of such Employee's Base Compensation. At a minimum, an Employee
must authorize a payroll deduction of at least $10.00 per pay period.
(b) All payroll deductions made for a Participant shall be deposited by
the Corporation in an escrow account with a custodian bank (the "Bank").
Participants may not make separate cash payments into such account.
(c) A Participant may, at any time during a Purchase Period, decrease
(but not increase until the next Purchase Period) the amount authorized to
be deducted from such Participant's pay, provided the minimum deduction
provided in Paragraph 6(a) hereof is maintained. Authorizations to reduce
the amount of payroll deductions shall be made on forms provided by the HR
Vice President and shall be effective for the next pay period after the pay
period in which the authorization form is submitted to the HR Vice
President. A Participant may reduce his or her payroll deductions only once
during any Purchase Period.
(d) In the event that a balance remains in an Employee's account at the
end of any Purchase Period, such balance may be retained in the Employee's
account and used towards the purchase of stock in the subsequent Purchase
Period unless the employee requests that the balance be withdrawn and
returned to him. Such carryover balance shall be treated identically to
payroll deductions during the Purchase Period.
7. Granting of Option.
(a) Each Participant participating in any offering under the Plan will be
granted an option, effective as of the first date of such offering, to
purchase as many full shares of Common Stock as he or she may be entitled
to purchase with the payroll deductions credited to his or her account
during such Employee's participation in that offering.
(b) The option price of shares purchased with payroll deductions made
during the Purchase Period for a Participant shall be equal to 85% of the
lesser of (i) the Market Price of the Common Stock on the first trading day
of the Purchase Period and (ii) the Market Price of the Common Stock on the
last trading day of the Purchase Period.
The term "Market Price" shall mean, as of any date, (a) if the Common Stock
is quoted on NASDAQ on such date, the closing price of the Common Stock on
NASDAQ on such date or, if no such closing price is
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reported on such date, the closing price of the Common Stock on NASDAQ on the
next preceding trading day on which such closing price is reported, (b) if the
Common Stock is listed on a national securities exchange on such date, the
closing price of the Common Stock on such exchange on such date, or, if no
such closing price is reported on such date, the closing price of the Common
Stock on such exchange on the next preceding trading day on which such closing
price is reported. In the event that the Common Stock is not quoted on NASDAQ
or listed on a national securities exchange on a date on which "Market Price"
is to be determined pursuant to the Plan, then "Market Price" shall mean the
fair market value of one share of Common Stock as determined by the Committee
in good faith.
8. Exercise of Option.
(a) As of the last day of the Purchase Period of any offering, the amount
of each Participant's account (representing accumulated payroll deductions)
shall be totaled. Subject to the limitations described in the remainder of
this Paragraph 8(a), each Participant shall be deemed to have exercised his
or her option to purchase a number of full shares of Common Stock
determined by dividing the amount in such Participant's account by the
option price and rounding down to the nearest whole number. If, pursuant to
such calculation (after giving effect to any proration required pursuant to
this Paragraph 8), the Participant would be entitled to exercise options to
purchase less than five whole shares, then such Participant shall not be
entitled to receive any shares, and all amounts in his or her account shall
be carried forward to the next purchase period. Upon all purchases by a
Participant under the Plan, such Participant's account shall be charged for
the amount of the purchase. Notwithstanding any provision to the contrary
contained herein, in no event shall all Participants with respect to any
offering be permitted to exercise options exceeding an aggregate of 35,000
shares (as such number may be adjusted from time to time by the Committee
to give effect to the types of transactions described in Paragraph 15) (the
"Maximum Number"). In the event that, in the absence of the immediately
preceding sentence, all such Participants would otherwise have elected to
exercise options exceeding the Maximum Number of shares with respect to any
such offering, then (i) the number of shares with respect to which each
Participant shall be deemed to have exercised his or her option with
respect to such offering shall be reduced on a pro rated basis so that the
total number of shares with respect to such offering for which all
Participants shall be deemed to have exercised options shall approximate as
closely as possible, but shall not exceed, the Maximum Number of shares and
(ii) the purchase price applicable to the shares that would have been
purchased but for this Section 8(a) shall be returned to Participants. In
no event shall any fractional shares be issued under the Plan.
(b) In no event may any Participant purchase more than 3,000 shares
during each Purchase Period. If, pursuant to the calculation described in
the second sentence of this Paragraph 8(a) (after giving effect to any
proration required pursuant to this Paragraph 8), a Participant would
otherwise be entitled to exercise options to purchase more than 3,000
shares during any Purchase Period, then such Participant shall not be
entitled to receive any shares in excess of 3,000 shares with respect to
such Purchase Period, and the purchase price applicable to the shares in
excess of 3,000 shares shall be refunded.
(c) Failure to participate in any offering will not bar an Employee from
participating in any subsequent offering. Payroll deductions shall be made
in each offering to the extent authorized by the Employee, subject to the
maximum and minimum limitations imposed for such offering. A separate
account balance will be maintained for each Participant with respect to
each offering. Any unused balance in a Participant's account at the end of
the last day of a Purchase Period after the exercise of options shall be
refunded if the Participant is not enrolled for the subsequent Purchase
Period and shall be retained in the Participant's account for the
subsequent Purchase Period if the Participant is so enrolled.
(d) A Participant may not purchase a share under any offering beyond
three calendar months from the effective date thereof. If a Participant
does not accumulate sufficient funds in his or her account to purchase at
least five shares within three months, the amounts in such Participant's
account will be carried forward to the next purchase period.
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<PAGE>
9. Withdrawal.
(a) With respect to a particular Purchase Period, a Participant may
withdraw payroll deductions credited to such Participant's account under
the Plan by giving written notice to the HR Vice President at any time
prior to the last day of such Purchase Period. All of the payroll
deductions credited to such Participant's account shall be paid to such
Participant after receipt of his or her notice of withdrawal, and no
further payroll deductions shall be made for that Purchase Period for that
Participant.
(b) An Employee's withdrawal will not have any effect upon his or her
eligibility to participate in any subsequent offering under this Plan.
(c) In the event that an Employee's employment with the Corporation is
terminated for any reason during a Purchase Period, such Employee shall be
deemed to have withdrawn from the Plan at such time and the balance in such
Employee's account shall be paid to such Employee.
10. Stock.
(a) The shares to be sold to Participants under the Plan are to be, in
the Committee's discretion, either authorized and unissued shares of Common
Stock or treasury shares of Common Stock; provided, however, that in the
event that the Committee fails to make such a determination with respect to
a particular Purchase Period, all shares to be purchased with respect to
such Purchase Period shall be authorized and unissued shares. In the event
that shares are to be transferred from the Company's treasury and the
shares in the Company's treasury are insufficient to cover the number of
shares to be purchased for a particular Purchase Period, Dialogic
Corporation shall retain an independent agent to purchase such shares in
the market. The maximum number of shares which shall be made available for
sale under the Plan during all offerings shall be 500,000 shares, subject
to adjustment upon changes in capitalization of Dialogic Corporation as
provided in Paragraph 15 hereof.
(b) None of the rights or privileges of a shareholder of Dialogic
Corporation shall exist with respect to shares purchased under the Plan
unless and until certificates representing such shares shall have been
issued and delivered to or for the benefit of the applicable Participant.
12. Administration. The Plan shall be administered by the Compensation
Committee of the Board of Directors of Dialogic Corporation. The Committee
shall be vested with full authority to make, administer, and interpret such
rules and regulations as it deems necessary to administer the Plan, and any
determination, decision, or action of the Committee in connection with the
construction, interpretation, administration or application of the Plan shall
be final, conclusive and binding upon all Participants and any and all persons
claiming under or through any Participant. The Committee may retain the
services of an outside firm to serve as its agent in administering the Plan on
a day-by-day basis.
13. Designation of Beneficiary. A Participant may file a written designation
of a Beneficiary who is to receive any cash credited to the Participant under
the Plan in the event of such Participant's death prior to the delivery of
such cash. Such designation of a Beneficiary may be changed by the Participant
at any time upon written notice. Upon the death of a Participant and upon
receipt by the Corporation of proof of the Participant's death and of the
identity and existence of a Beneficiary validly designated by such Participant
under the Plan, the Corporation shall deliver such cash to such Beneficiary.
In the event of the death of a Participant and in the absence of a Beneficiary
validly designated under the Plan who is living at the time of such
Participant's death, the Corporation shall deliver such cash to the executor
or administrator of the estate of the Participant. No designated Beneficiary
shall, prior to the death of the Participant by whom such Beneficiary has been
designated, acquire any interest in the shares or cash credited to the
Participant under the Plan.
14. Transferability. No rights with regard to the exercise of an option or
with regard to receipt of shares under the Plan may be assigned, transferred,
pledged or otherwise disposed of by an Employee. Options granted under the
Plan are not transferable by such Employee otherwise than by will or the laws
of descent and distribution, and are exercisable, during an Employee's
lifetime, only by such Employee.
4
<PAGE>
15. Changes in Capitalization. If any option under this Plan is exercised
subsequent to any stock dividend, split-up, spin-off, recapitalization,
merger, consolidation, exchange of shares, or the like, occurring after such
option has been granted, as a result of which shares of any class shall be
issued in respect of the outstanding shares of Common Stock, or shares shall
be changed into the same or a different number of the same or another class or
classes, the number of shares to which such option shall be applicable and the
option price for such shares shall be appropriately adjusted by the Committee.
16. Government Regulations. The Corporation's obligations to sell and
deliver Common Stock of the Corporation under the Plan are subject to the
approval of any governmental authority required in connection with the
authorization, issuance or sale of such stock.
17. Amendment or Termination. The Board of Directors of Dialogic Corporation
may at any time terminate or amend the Plan. In the event that the Plan is
terminated prior to the last day of a Purchase Period, such Purchase Period
shall be deemed to have ended on the effective date of such termination and
there shall be no subsequent Purchase Periods thereafter.
5
<PAGE>
Dialogic Corporation
Annual Meeting of Shareholders
Headquarters Plaza Hotel
3 Headquarters Plaza
Morristown, New Jersey 07950
May 6, 1999
10:00 A.M.
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PROXY
DIALOGIC CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS, MAY 6, 1999
The undersigned hereby appoints Howard G. Bubb, Thomas G. Amato 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 May 6, 1999, 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: Francis G. Rodgers and Nicholas Zwick
- --------------------------------------------------------------------------------
Instruction: To withhold authority to vote for any individual nominee, write
that name in the space provided above.
Adoption of the following Proposals (the Board of Directors recommends a vote
"FOR" with respect to the following):
2. Proposal to increase the number of shares to be issued under the Company's
Employee Stock Purchase Plan. [_] FOR [_] AGAINST [_] ABSTAIN
3. 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.
<PAGE>
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Signed:______________________________
Dated:_________________________, 1999
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,
Administrator, 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.
