<PAGE> 1
SOLICITATION OF PROXIES
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:
[ x ] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Telular Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Telular Corporation
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing Fee (Check the Appropriate box):
[ x ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
---------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
---------------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:(1/)
---------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
---------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
---------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
---------------------------------------------------------------
(3) Filing Party:
---------------------------------------------------------------
(4) Date Filed:
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(1/) Set forth the amount on which the filing fee is calculated and
state how it was determined.
<PAGE> 2
PRELIMINARY PROXY STATEMENT
FILED UNDER RULE 14a-6(a)
TELULAR CORPORATION
920 DEERFIELD PARKWAY
BUFFALO GROVE, IL 60089
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JANUARY 28, 1997
TO THE SHAREHOLDERS OF TELULAR CORPORATION:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of the
Telular Corporation, a Delaware corporation (the "Company"), will be held on
Tuesday, January 28, 1997, at 9:00 a.m. local time, at the North Shore Hilton,
the Grand Ballroom, located at 9599 Skokie Boulevard, Skokie, Illinois 60077
for the purpose of considering and acting upon the following matters:
1. To elect six directors to serve until the next Annual Meeting
of Shareholders and until their successors are duly elected.
2. To amend the Articles of Incorporation to increase the number
of authorized shares of Common Stock from 40,000,000 to
75,000,000.
3. To approve the Company's Second Amended and Restated Stock
Incentive Plan, which amends the existing Stock Incentive Plan
to increase the number of shares of Common Stock authorized for
issuance under such plan from 2,000,000 to 3,000,000, and
increases the maximum number of shares of Common Stock that may
be issued to any one individual in any three-year period from
500,000 to 700,000.
4. To ratify and approve the selection of Ernst & Young LLP as
independent auditors for the fiscal year ending September 30,
1997.
5. Such other or further business as may properly come before the
meeting.
These items of business are more fully described in the Proxy
Statement accompanying this notice.
The Board of Directors has fixed the close of business on November 29,
1996 as the record date for the determination of shareholders entitled to
notice of and to vote at such meeting or any adjournment thereof.
By Order of the Board of Directors
Kenneth E. Millard
Chief Executive Officer and President
Buffalo Grove, Illinois
December 9, 1996
IMPORTANT: WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE AND
PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED.
<PAGE> 3
PRELIMINARY PROXY STATEMENT
FILED UNDER RULE 14a-6(a)
TELULAR CORPORATION
PROXY STATEMENT FOR 1997
ANNUAL MEETING OF SHAREHOLDERS
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited by the Board of Directors of the
Telular Corporation, a Delaware corporation (the "Company"), for use at the
Annual Meeting of Shareholders to be held on Tuesday, January 28, 1997, at 9:00
a.m. local time, or at any adjournment thereof, for the purposes set forth in
this Proxy Statement and the accompanying Notice of Annual Meeting of
Shareholders. The Annual Meeting will be held at the North Shore Hilton, the
Grand Ballroom, located at 9599 Skokie Boulevard, Skokie, Illinois. The
Company's principal executive offices are located at 920 Deerfield Parkway,
Buffalo Grove, Illinois 60089. The Company's telephone number at that address
is (847) 465-4500.
These proxy solicitation materials were mailed on or about December
16, 1996 to all stockholders entitled to vote at the meeting.
REVOCABILITY OF PROXIES
Any shareholder who has executed and returned a proxy pursuant to this
solicitation may revoke it any time before it is voted. It may be revoked by
filing with the Secretary of the Company at the Company's principal executive
office, a written notice of revocation or a duly executed proxy bearing a later
date, or it may be revoked by attending the meeting and voting in person.
Attendance at the meeting will not, by itself, revoke a proxy.
OUTSTANDING SHARES AND VOTING
Only shareholders of record at the close of business on November 19,
1996 are entitled to notice of the meeting and to vote at the meeting. Each
shareholder is entitled to one vote for each share held. At the record date,
31,614,960 shares of the Company's Common Stock were issued and outstanding.
All votes will be tabulated by the inspector of election, appointed
for the Annual Meeting. Under Delaware law, properly executed proxies that are
marked "abstain" or are held in "street name" by brokers that are not voted on
one or more particular proposals (if otherwise voted on at least one proposal)
will be counted for purposes of determining whether a quorum has been achieved
at the Annual Meeting. Abstentions will have the same effect as a vote against
the proposal to which such abstention applies. Broker non-votes will be
treated as neither a vote for nor a vote against any of the proposals to which
such broker non-votes apply. Proxy cards which are timely signed and returned
with no other marking will be voted in accordance with the recommendation of
the Board of Directors.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies
including preparation, assembly, printing and mailing of the proxy statement,
the proxy and any additional information furnished to shareholders. In
addition, the Company may reimburse brokerage firms and other persons
representing beneficial owners of shares for their expenses in forwarding
solicitation material to such beneficial owners. Original solicitation of
proxies by mail may be supplemented by telephone, telegraph or personal
solicitations by directors, officers or employees of the Company. No
additional compensation will be paid for any such services.
2
<PAGE> 4
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors will consist of six directors to be elected at
the annual meeting of shareholders to hold office until the next annual meeting
or until their successors are elected and qualified. A Board of Directors
resolution in December 1996 reduced the number of directors from nine to six.
The proxies solicited by and on behalf of the Board of Directors will be voted
FOR the election of the six nominees listed below, unless authority to do so is
withheld as provided in the proxy. Except for Mr. Berndt, all nominees are
currently members of the Company's Board of Directors. If for any reason one
or more of the nominees should be unable to serve or refuse to serve as a
director (an event which is not anticipated), the persons named as proxies will
vote for another candidate or candidates nominated by the Board of Directors,
and discretionary authority to cast such votes is included in the proxy. The
nominees receiving the highest numbered votes of shares of Common Stock, up to
the number of directors to be elected, shall be elected.
Pursuant to the Shareholders' Agreement, see "Certain Transactions",
among certain shareholders of the Company, the holders of approximately 55% of
the Company Stock are required to vote in favor of the one nominees designated
by Motorola. Director Richard D. Haning has been so designated by Motorola.
The nominees, and certain information about them as of November 1996,
are set forth below.
William L. De Nicolo, age 50, is the founder of the Company and has
served as Chairman of the Board (including service to DNIC Brokerage Co. (DNIC)
prior to formation of The Telular Group L.P.) since its formation in 1986. Mr.
De Nicolo served as Chief Executive Officer (CEO) of the Company from 1986
until November 1993 and from November 1995 until April 1996. Mr. De Nicolo
continues to serve as President and Chairman of the Board of Directors of DNIC,
a principal stockholder of the Company. Mr. De Nicolo is also a Director of
Wells-Garner Electronics Corporation.
Kenneth E. Millard, 49, has served as a director, President and Chief
Executive Officer of the Company since April 1996. Mr. Millard served as
President and Chief Operating Officer of Oncor Communications, based in
Bethesda, Maryland. He worked for Ameritech from 1989 to 1992 where he served
as President and Chief Executive Officer of Michigan Bell Telephone Company
from 1989 to 1992. Prior to 1989, he held the positions of Senior
Vice-President of Corporate Strategy for three years and Senior Vice President
and General Counsel of Ameritech. From 1972 to 1982, Mr. Millard worked for
AT&T and Wisconsin Bell as an attorney.
John E. Berndt, age 54, has been nominated by the Board of Directors
for election at the annual shareholders meeting. Mr. Berndt has been
President of New Business Development/Multimedia & Technologies for Lucent
Technologies Inc., which was spunoff from AT&T Corporation ("AT&T"), since
February 1996 and held the same position with AT&T since 1993. Mr. Berndt was
employed by AT&T since 1963 and was President of its Business Services from
1991 until 1993 and President of International Communications Services from
1987 until 1991. Mr. Berndt is the Chairman of the Board of Trustees for the
American Graduate School of International Management and a member of the Board
of Directors for the University of Wisconsin Foundation.
Larry J. Ford, age 55, has served as a director of the Company since
March 1994. Mr. Ford has been the President and Chief Executive Officer of
Information Advantage since April 1995. Mr. Ford was previously employed by
Systems Software Associates, Inc. as a Vice Chairman from November 1994 -
March 1995, and the Chairman, Chief Executive Officer and President from August
1991 - October 1994. Previously, Mr. Ford spent 28 years with IBM, his most
recent position being Vice President of Information and Telecommunications
Systems.
David P. Mixer, age 44, has served as a director of the Company and
its predecessor since June 1992. Mr. Mixer is a Managing Director of Columbia
Capital Corporation, which he has served as an officer since its formation in
March 1989. Prior to that time, Mr. Mixer was President of Providence Journal
Cellular Corporation, a cellular service provider. Mr. Mixer is also a
Director of Saville Systems PLC.
3
<PAGE> 5
Richard D. Haning, age 44, has served as a director of the
Company since April 1995. Mr. Haning has been a Corporate Vice-President with
Motorola since 1994, and has been a Vice-President and Director of Finance
since 1990. Mr. Haning has been with Motorola for the past 18 years. Mr. Haning
is the designee of Motorola for election to the Board pursuant to a
Shareholders' Agreement, see "Certain Transactions -- Shareholders' Agreement".
There are no family relationships among any officers and directors of
the Company.
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended September 30, 1996, the Board of
Directors held ten meetings. The Board has an Audit Committee and a
Compensation Committee. Each incumbent Board member attended at least 75% of
the aggregate of (i) the total number of meetings of the Board held during the
period during which he was a director, and (ii) the total number of meetings
held by all committees of the Board on which he served during the period that
he was a committee member.
The Audit Committee is responsible for reviewing the Company's
financial management practices, internal controls, internal audit function and
to meet with the Company's independent accountants to discuss the scope and
results of the annual audit. The Audit Committee, which is required to have at
least two "Independent Directors", in fiscal 1996 consisted of Mr. Ford, Joel
J. Bellows and John A. Blanchard III, and met three times during such fiscal
year.
The Compensation Committee is responsible for developing and making a
compensation policy for Executive Officers of the Company, which includes
approving employment agreements, reviewing and approving compensation plans,
establishing performance targets and assessing their performance, and making
grants of salary, annual incentive compensation and long-term incentive
compensation. The Compensation Committee, which as of the end of fiscal 1996
consists of Messrs. Ford and Mixer, met three times during the fiscal year.
COMPENSATION OF DIRECTORS
Directors of the Company who are either employees of the Company or
affiliated with a significant beneficial owner of the Company, receive no
compensation for serving on the Board of Directors. Messr. Millard is an
employee of the Company. Messrs. De Nicolo, Mixer and Haning are affiliated
with a significant beneficial owner.
During fiscal 1996, Messrs. Blanchard and Ford were the Independent
Directors. Each Independent Director was compensated for attending
meetings of the Board or committee meetings of the Board with a grant of stock
options. A grant of 10,000 stock options were issued to each Independent
Director. The options vest on February 28, 1997, the exercise price is
$5.5625, and all options, if not exercised or terminated, shall terminate on
the sixth anniversary of the date of grant. These options are subject to the
Stock Incentive Plan amendments to be voted upon by the shareholders in
Proposal 3.
All directors are reimbursed for all reasonable expenses of attendance
at each meeting.
4
<PAGE> 6
PROPOSAL 2
APPROVAL TO AMEND THE ARTICLES OF INCORPORATION TO
INCREASE THE NUMBER OF AUTHORIZED SHARES FROM 40,000,000 TO 75,000,000
The Company's Certificate of Incorporation presently authorizes the
issuance of a total of 40,000,000 shares of Common Stock with a par value of
$0.01 per share. At November 19, 1996, the Company had the approximately
31,314,960 shares of Common Stock issued and outstanding. The Company expects
to issue 150,000 shares of Common Stock to TelePath Corporation ("TelePath") as
part of an agreement to increase its equity position in TelePath to 50% by
August 31, 1997. See "Certain Transactions -- Relationship and Transactions
with TelePath Corporation". Another 100,000 shares of Common Stock are
reserved for the Company's Convertible Debentures. The Company has
approximately 360,000 shares of Common Stock reserved for stock options issued
as non-qualified stock option agreements. In addition, 2,000,000 shares of
Common Stock were reserved for issuance under the Company's Stock Incentive
Plan. Thus at December 1, 1996, there were approximately 6,075,000 authorized
shares of Common Stock unissued and not reserved for issuance.
The proposal to increase the Stock Incentive Plan and an effort to
raise capital will further reduce the shares of Common Stock unissued and not
reserved for issuance. If the stockholders approve Proposal 3, an additional
1,000,000 shares of Common Stock will be reserved for the Stock Incentive Plan.
Also, the Company estimates that another 4,000,000 shares will be reserved as
part of an effort to raise capital to fund product development projects.
Taking into effect the number of shares of Common Stock to be added to the
Stock Incentive Plan and the number of shares of Common Stock required to raise
the additional capital, the number of authorized shares of Common Stock
unissued and not reserved for issuance would be approximately 1,075,000.
On December 3, 1996, the Board of Directors, by unanimous vote,
adopted resolutions approving and recommending that the stockholders adopt and
amendment to Article IV of the Company's Articles of Incorporation ("articles")
to increase its authorized Common Stock from 40,000,000 to 75,000,000 shares.
The relative rights and limitations of the Common Stock would remain unchanged
under the amendment. The Board of Directors believes that the increase of
authorized shares of Common Stock contemplated by the proposed amendment to
Article IV of the articles is desirable to make additional unreserved Common
Shares available for issuance or reservation without further shareholder
authorization, except as required by law, the Company's By-Laws or exchange
rules.
The Board of Directors believes the proposed amendment to Article IV
of the articles will provide several long-term advantages to the Company and
its stockholders. The ability to issue shares, as deemed in the Company's best
interests by the Board of Directors, will permit the Company to avoid the
expenses which are incurred in holding special shareholders' meetings.
Transactions dependent upon the issuance of additional shares of Common Stock
would be less likely to be undermined by delays and uncertainties occasioned by
the need to obtain shareholder authorization prior to the consummation of such
transactions.
The passage of Proposal 2 may enable the Company to enter into
transactions which it believes provide for growth and profit. The Company has
in the past and expects in the future to issue shares of Common Stock as part
of transactions intended to increase shareholder value. Additional authorized
shares of Common Stock could be issued to raise cash through sales to public or
private investors. Proceeds from the sales of shares could be used to reduce
borrowing costs, fund product development projects or make strategic
investments. Additional authorized shares of Common Stock could be issued in
exchange for services thus freeing cash reserves for other purposes.
Additional authorized shares of Common Stock could be issued to pursue
acquisitions that benefit future growth. Additional authorized shares of Common
Stock could be issued as part of a joint venture through which the Company
expects to increase shareholder value. With the limited number of shares
currently available for such uses, it is impractical for the Company's to
pursue or evaluate such transactions.
5
<PAGE> 7
The issuance of additional shares of Common Stock may have a dilutive
effect on earnings per share and on the equity and voting power of existing
holders of Common Stock. It may also adversely affect the market price of the
Common Stock. However, in the event additional shares are issued in
transactions that provide favorable business opportunities or that provide
working capital sufficient to adequately capitalize the Company to allow it to
pursue it business plan, the market price may increase.
The Company has 10,000,000 shares of Preferred Stock with a par value
of $0.01 authorized with no shares outstanding at December 1, 1996. Proposal 2
does not amend the number of authorized shares of Preferred Stock .
RECOMMENDATION
Shareholders are requested in this Proposal 2 to approve the amendment
to Article IV of the Articles of Incorporation to increase the number of
authorized shares to 75,000,000. Amending Article IV shall be approved by the
affirmative vote of the holders of a majority of the outstanding shares present
in person or represented by proxy and entitled to vote at the Annual
Shareholders Meeting.
PROPOSAL 3
APPROVAL OF THE SECOND AMENDED
AND RESTATED STOCK INCENTIVE PLAN
The Second Amended and Restated Stock Incentive Plan (the "Plan")
amends the Company's current Amended and Restated Stock Incentive Plan in two
respects: It increases the number of shares for which options may be awarded
under the Plan from 2 million to 3 million, and it increases the maximum number
that may be issued to any one individual in any three-year period from 500,000
to 750,000.
The essential features of the amendments to the Company's Stock
Incentive Plan (the "Plan") are outlined below. A copy of the Plan is attached
to Exhibit A hereto.
GENERAL
The Telular Corporation Stock Incentive Plan is effective as of
November 17, 1993. Under the Plan, incentive options of up to 2,000,000 shares
may be issued to officers and key employees of the Company. An aggregate of
1,371,000 shares have been granted under the plan, and only 629,000 shares
remain available for future grant under the Plan. On December 3, 1996, the
Board of Directors has approved and adopted, subject to shareholder approval,
amendments to increase the number of shares of Common Stock authorized for
issuance under such plan from 2,000,000 to 3,000,000, and to permit the grant
of stock options to directors, officers, and all employees of the Company.
REASON FOR AMENDMENTS
The amendments have been proposed to assure that the Company has
sufficient shares available under the Plan to provide proper inducements to
encourage grantees to either serve or remain employed with the Company, to
perform in a superior manner, and to share in the future success of the
Company's business.
RECOMMENDATION
Shareholders are requested in this Proposal 3 to approve the Plan.
Approval of the Plan requires the affirmative vote of the holders of a majority
of the outstanding shares present in person or represented by proxy and
entitled to vote at the Annual Shareholders Meeting.
6
<PAGE> 8
PROPOSAL 4
RATIFICATION OF SELECTION OF
INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending September 30, 1997 and has
further directed that management submit the selection of independent auditors
for ratification by the stockholders at the Annual Meeting. Ernst & Young LLP
has audited the Company's financial statements since December 1992.
Representatives of Ernst & Young LLP are expected to be present at the 1997
Annual Meeting of Shareholders, will have an opportunity to make a statement if
they so desire, and are expected to be available to respond to appropriate
questions.
7
<PAGE> 9
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to the
Company with respect to beneficial ownership of the Company's Common Stock as
of November 19, 1996, (i) by each person who is known by the Company to own
beneficially more than 5% of the outstanding shares of Common Stock, (ii) by
each director of the company, (iii) by each Named Executive Officer, and (iv)
by all directors and executive officers of the Company as a group:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER OF
BENEFICIAL OWNER SHARES PERCENT
------------------------ ------ -------
<S> <C> <C>
Motorola (1) . . . . . . . . . . . . . . . . . . . . . 4,752,989 15.2%
1303 E. Algonquin Rd.
Schaumburg, IL 60601
DNIC Brokerage(1)(3) . . . . . . . . . . . . . . . . . 4,479,841 14.3%
20546 N. Milwaukee Ave.
#356
Deerfield, IL 60014
Mark R. Warner (1)(2) . . . . . . . . . . . . . . . . . 2,495,988 8.0%
201 North Union St.
Suite 300
Alexandria, VA 22314
Robert B. Blow (1)(2) . . . . . . . . . . . . . . . . . 2,431,233 7.8%
6410 Poplar Avenue
Suite 395
Memphis, TN 38119
Telular Canada (1) . . . . . . . . . . . . . . . . . . 1,878,085 6.0%
89 Skyway Avenue
Suite 208
Toronto, Ontario
M9W 6R4 Canada
Columbia Capital Corporation (1) . . . . . . . . . . . 41,543 *
William L. De Nicolo (3)(4)(6) . . . . . . . . . . . . 4,534,242 14.5%
Kenneth E. Millard (4)(5)(9) . . . . . . . . . . . . . 36,648 *
John E. Berndt (4) . . . . . . . . . . . . . . . . . . 0 *
Larry J. Ford (4) . . . . . . . . . . . . . . . . . . . 1,671 *
David P. Mixer (1)(2)(4) . . . . . . . . . . . . . . . 785,740 2.5%
Richard D. Haning (4)(7) . . . . . . . . . . . . . . . 4,752,989 15.2%
Robert C. Montgomery (5)(9) . . . . . . . . . . . . . . 98,734 *
Raymond M. O'Leary (5)(9) . . . . . . . . . . . . . . 29,560 *
George Claudio, Jr (5)(9) . . . . . . . . . . . . . . 96,376 *
Gordon T. Jenkins (5) . . . . . . . . . . . . . . . . 37,000 *
Richard T. Gerstner (8) . . . . . . . . . . . . . . . . 52,170 *
John R. Wilkins, Jr. (8) . . . . . . . . . . . . . . . 0 *
Patrick L. Murtha (8) . . . . . . . . . . . . . . . . . 0 *
All Directors and Officers as a group (16)
Persons(10)(11) . . . . . . . . . . . . . . . . . . . 12,315,699 39.3%
</TABLE>
- ----------
* Less than one percent.
8
<PAGE> 10
(1) The entities named in the table are parties to a Shareholders'
Agreement that contains certain restrictions and requirements
in connection with the voting and disposition of Common Stock.
See "Certain Transactions -- Shareholders' Agreement." By
virtue of the Shareholders' Agreement, the parties thereto may
be deemed to share voting and dispositive power over shares of
Common Stock, representing approximately 56% of the total
outstanding on the date hereof. The parties thereto disclaim
any beneficial interest attributed to them by virtue of such
Shareholders' Agreement.
(2) Through their ownership of stock of Columbia Capital
Corporation Messrs. Mark Warner, Robert Blow and David Mixer
have indirect beneficial interest in 41,543 shares of the
Company held by or attributed to Columbia Capital Corporation.
As directors of Columbia Capital Corporation, they may be
deemed to share voting and investment power with respect to
all shares of the Company held by or attributed to Columbia
Capital Corporation.
(3) Through his ownership of stock of DNIC, William L. De Nicolo
has an indirect beneficial interest of 71.2% in the shares of
the Company held by DNIC. As a director and principal
stockholder of DNIC, he may be deemed to have voting and
investment power with respect to all shares of the Company
held by DNIC.
(4) The named individual is a director of the Company.
(5) The named individual is a Named Executive Officer of the
Company as of September 30, 1996.
(6) Includes 4,479,841 shares held by DNIC. Mr. De Nicolo, as a
director and principal stockholder of DNIC, may be deemed to
share voting and investment power with respect to the shares
held by DNIC.
(7) Includes 4,752,989 shares held by Motorola. Mr. Haning, as an
executive officer of Motorola, may be deemed to share voting
and investment power with respect to the shares held by
Motorola. He disclaims beneficial ownership of these shares.
(8) The Named Executive Officer's employment with the Company
terminated before September 30, 1996. All shares noted are
beneficially owned by the individual as of November 19, 1996.
(9) The number of shares shown as beneficially owned includes
options that are exercisable within 60 days of December 1,
1996.
(10) Includes 265,240 shares that Officers of the Company may
acquire pursuant to options exercisable within 60 days of
November 19, 1996.
(11) Includes, in addition to shares held beneficially by executive
officers and directors as shown in the foregoing table,
4,752,989 shares held by Motorola, 4,479,841 shares held by
DNIC, 1,878,085 shares held by Telular Canada and 41,543
shares held by Columbia Capital Corporation. Certain directors
may be deemed to be beneficial owners of such shares. Named
Executive Officers Mr. Gerstner, Mr. Wilkins and Mr. Murtha
are excluded due to their employment terminations before
September 30, 1996, see note (8).
9
<PAGE> 11
EXECUTIVE COMPENSATION
The following table sets forth the aggregate compensation earned by
the Chief Executive Officers, the four most highly compensated executive
officers whose salary and bonus combined exceeded $100,000 in fiscal 1996 and
two named executive officers whose employment terminated with the Company
during the fiscal year, but for that fact, disclosure would have been required.
During that period, except for Mr. Millard, who received restricted stock with
a fair-market value of $25,000 as part of his fiscal 1996 bonus, no Named
Executive Officer received any restricted stock award, stock appreciation right
or payment under any long term incentive plan.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
OTHER AWARDS ALL
ANNUAL ------ OTHER
NAME YEAR SALARY($) BONUS($) COMPENSATION($) OPTIONS(#)(1) COMPENSATION($)
---- ---- --------- -------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
William L. De Nicolo(2) . . . . . 1996 $ 183,718 (3) $ 0 $ 0 0 $ 0
Chairman of the Board 1995 239,250 (3) 0 0 0 0
1994 241,315 (3) 0 0 0 0
Kenneth E. Millard(2) . . . . . . 1996 $ 114,423 (4) $ 50,000 (4) $ 0 500,000 $ 22,973 (4)
Chief Executive Officer
President and Director
Richard T. Gerstner(2) . . . . . 1996 $ 27,855 $ 0 $ 0 0 $ 126,347 (5)
Chief Executive Officer, 1995 211,667 104,500 6,000 59,201 0
President and Director 1994 183,333 40,100 289,165(6) 177,992 50,000(7)
Robert C. Montgomery . . . . . . 1996 $ 177,184 $ 54,788 $ 0 246,000(8) $ 0
Chief Operating Officer 1995 161,250 15,000 0 36,000 0
Executive Vice-President 1994 146,625 15,000 0 0 0
Raymond M. O'Leary . . . . . . . 1996 $ 160,529 $ 0 $ 14,509 (9) 100,000(10) $ 0
Senior Vice-President 1995 89,327 0 97,021 24,000 0
Sales and Marketing 1994 30,467 0 15,234 0 0
George Claudio, Jr. . . . . . . . 1996 $ 131,223 $ 16,000 $ 0 48,209(11) $ 0
Senior Vice-President 1995 116,666 19,000 0 48,209 0
Engineering 1994 0 0 0 0 0
Gordon T. Jenkins . . . . . . . . 1996 $ 98,257 $ 21,903 $ 0 37,000(12) $ 0
Vice-President, Finance 1995 89,425 15,000 0 12,000 0
1994 81,300 15,000 0 0 0
John R. Wilkins, Jr. (13) . . . . 1996 $ 123,135 $ 33,750 $ 0 0 $ 0
Senior Vice-President 1995 168,541 72,500 0 46,354 0
Manufacturing and 1994 14,167 4,375 0 25,680 0
Development
Patrick L. Murtha.. . . . . . . . 1996 $ 123,750 $ 0 $ 0 0 $ 50,000 (14)
Vice-President 1995 148,332 43,100 0 0
Corporate Development 1994 103,000 20,000 0 0 0
</TABLE>
(1) Represents the number of options granted during the fiscal year.
10
<PAGE> 12
(2) The named executive officer served as Chief Executive Officer (CEO)
during fiscal 1996. Mr. Gerstner served as CEO from October 1, 1996
until the date of his resignation, November 15, 1995. Mr. De Nicolo
served as CEO from November 15, 1995 until Mr. Millard was named CEO on
April 17, 1996.
(3) All amounts represent fees earned by Mr. De Nicolo under a consulting
agreement except as noted in fiscal 1994, see "Employment Contracts".
For fiscal 1995, approximately $40,000 of the amount earned was paid in
shares of the Company's unregistered Common Stock. For fiscal 1994,
this amount represents $228,392 earned under the consulting agreement,
and salary earned of $12,923 while serving as Chief Executive Officer in
October 1993.
(4) Earned as part of Mr. Millard's employment agreement with the Company,
see "Employment Contracts". Approximately $25,000 of Mr. Millard's
bonus was paid in shares of the Company's unregistered Common Stock. All
other compensation represents approximately $10,000 in moving expenses
and $13,000 in consulting fees paid to Mr. Millard, which were incurred
prior to being employed by the Company.
(5) Represents a $50,000 relocation bonus and $72,000 loan and interest
accrued thereon forgiven and discharged in full upon Mr. Gerstner's
resignation, in accordance with Mr. Gerstner's modified employment
agreement.
(6) Includes $235,966, which represents the dollar value of the difference
between the price paid and the fair market value of Company stock
purchased, $47,199 for taxes paid on a portion of the tax liability
incurred on the purchase of shares at below fair market value, and
$6,000 to defray anticipated costs of life insurance.
(7) Represents a one-time payment in order to defray the costs of moving to
the Chicago, Illinois, metropolitan area.
(8) Includes 36,000 options repriced from $8.25 to $4.50 during the fiscal
year ended September 30, 1996.
(9) Represents commission income.
(10) Includes 24,000 options repriced from $8.25 to $4.50 during the fiscal
year ended September 30, 1996.
(11) Includes 48,209 options repriced from $8.25 to $5.5625 during the fiscal
year ended September 30, 1996.
(12) Includes 12,000 options repriced from $8.25 to $5.5625 during the fiscal
year ended September 30, 1996.
(13) The named executive officer's employment terminated with the Company
during the fiscal year. But for that fact, disclosure would have been
required pursuant to Securities Regulations, and, therefore, is
required.
(14) Represents severance payment made to Mr. Murtha upon his separation with
the Company.
EMPLOYMENT CONTRACTS
Effective November 1, 1993, Mr. De Nicolo entered into a consulting
agreement with the Company pursuant to which he will advise and assist the
Company on strategic planning, negotiation of transactions, and development of
business opportunities. Under the consulting agreement, Mr. De Nicolo is
entitled to receive a per diem of $1,500 per day, guaranteed, in any 12 month
period, to aggregate not less than $200,000. Mr. De Nicolo's services under
the consulting agreement can be terminated with 12 months notice.
11
<PAGE> 13
On April 18, 1996, the Company entered into a two year employment
agreement with Kenneth E. Millard, pursuant to which Mr. Millard agreed to
serve as Chief Executive Officer and President of the Company. Employment is on
an "at-will" basis and shall continue in effect until terminated by either the
Company or Mr. Millard at least 60 days prior to notice under the agreement.
Under the agreement, Mr. Millard is to received an annual salary of $250,000
and incentive bonus of $200,000 based on performance targets established by the
Board of Directors. For any fiscal year for which Mr. Millard achieves 100% of
the performance targets, he will receive the incentive bonus, of which $100,000
shall be paid in cash and $100,000 shall be paid in the form of Common Stock of
the Company at fair market value. Mr. Millard was granted 500,000 options as
part of his employment agreement with the Company. Options to acquire 50,000
shares of the Company's Common Stock at $5.00 per share vested on April 18,
1996. Options to acquire 150,000 shares of the Company's Common Stock at $4.50
per share vest in 36 monthly installments from June 1996 through May 1998.
Options to acquire 300,000 shares of the Company's Common Stock at $4.50 per
share shall vest on April 30, 2003 or earlier if certain "cliff' vesting
targets are met. Under cliff vesting, for each $2.00 increase over a base
price of $5.00 in the closing bid price on NASDAQ for the Company Shares which
remains in effect for 30 consecutive trading days, options for 25,000 Company
Shares will vest on the first business day after such 30-day period. There may
be coterminous periods for which the closing bid price of the Company Shares
have increased over the applicable base price by more than $4.00. Under cliff
vesting, during the first, second and third years of Mr. Millard's employment,
of the 300,000 options subject to cliff vesting no more than 40%, 30% and 30%,
respectively, of the options may vest. All options granted to Mr. Millard
terminate on May 1, 2006 or 180 days after Mr. Millard is no longer employed
with the Company.
On November 17, 1993 the Company entered into a three year employment
agreement with Richard T. Gerstner, pursuant to which Mr. Gerstner agreed to
serve as Chief Executive Officer and President of the Company. Under the
agreement, Mr. Gerstner received an annual salary of at least $200,000, subject
to annual increases of at least 10%, plus an incentive bonus of from 10% and
100% of his salary, based upon the performance of the Company relative to the
budgets approved by the Board of Directors. Pursuant to the agreement, Mr.
Gerstner was required to purchased 72,170 shares of the Company's Common Stock
on or before December 31, 1993. Additionally, the Company granted to Mr.
Gerstner options to acquire up to 237,193 shares of Common Stock. The Company
also agreed to grant Mr. Gerstner incentive options in the future, exercisable
at the market price at the time of grant, with the number of shares granted for
any year based on the total cash compensation payable during that year. On
April 1, 1995, Mr. Gerstner's employment agreement was modified. In
conjunction with the modified agreement and the resignation of Mr. Gerstner's
employment in November 1995, Mr. Gerstner was paid a bonus of $104,500 for the
fiscal year ending September 30, 1995, became fully vested in all stock options
outstanding, received a relocation bonus of $50,000, and the Company's loan to
Mr. Gerstner in the principal amount of $72,000 was forgiven and discharged in
full. Mr. Gerstner also resigned as a director of the Company in November
1995.
On September 22, 1992, Robert C. Montgomery entered into an employment
agreement with the Company's wholly-owned subsidiary, Telular-Adcor Security
Products, Inc. (formerly Adcor Electronics International, Inc.), for a term
extending through December 31, 1997. The amended agreement provides for an
annual salary of $181,500, payment of all operating expenses for automobiles
operated by immediate family members as well as a monthly automobile allowance,
fees related to the preparation of personal income tax returns, participation
in the Company's Employee Stock Incentive Plan, participation in the Company's
bonus plan for executives and a minimum severance payment of equivalent to six
months of salary if terminated without caused before the term of the contract.
On September 22, 1992, Gordon T. Jenkins entered into an employment
agreement with the Company's wholly-owned subsidiary, Telular-Adcor Security
Products, Inc. (formerly Adcor Electronics International, Inc.), for a term
extending through December 31, 1997. The amended agreement provides for an
annual salary of $100,650, payment of all operating expenses for automobiles
operated by immediate family members as well as a monthly automobile allowance,
participation in the Company's Employee Stock Incentive Plan, participation in
the Company's bonus plan for executives and a minimum severance payment if
terminated without caused before the term of the contract.
All employment agreements are terminable for cause.
12
<PAGE> 14
OPTION/SAR GRANTS
The following table sets forth information concerning stock option/SAR
grants made to each of the Named Executive Officers for the twelve months ended
September 30, 1996.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------
% OF TOTAL
OPTIONS/SARS
GRANTED TO
EMPLOYEES POTENTIAL REALIZABLE VALUE AT
IN TWELVE ASSUMED ANNUAL RATES OF
MONTHS STOCK PRICE APPRECIATION
OPTIONS/SARS ENDED EXERCISE FOR OPTION/SAR TERM (1)
GRANTED SEPT. 30 PRICE EXPIRATION ----------------------------------
NAME (#) 1996 ($/SH) DATE 0%($) 5%($) 10%($)
---- --- ---- ------ ---- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C>
William L. De Nicolo . . 0 N/A N/A N/A $ 0 $ 0 $ 0
Kenneth E. Millard . . . 450,000 (2) 43.4% 4.50 5/01/06 478,125 2,052,327 3,989,337
50,000 4.8% 5.00 5/01/06 28,125 203,036 443,260
Richard T. Gerstner . . 0 N/A N/A N/A 0 0 0
Robert C. Montgomery . . 185,000 (2) 17.8% 4.50 4/17/06 196,563 843,734 1,640,061
25,000 4.4% 5.00 4/17/06 14,063 101,518 221,630
36,000 (3) N/A 4.50 4/17/06 38,250 164,186 319,147
Raymond M. O'Leary . . . 76,000 (2) 7.3% 4.50 4/17/06 80,750 346,615 673,755
24,000 (3) N/A 4.50 4/17/06 25,500 109,457 212,765
George Claudio, Jr. . . . 48,209 (4) N/A 4.50 4/17/06 0 168,646 427,382
Gordon T. Jenkins. . . . 25,000 2.4% 5.56 4/17/06 0 87,456 221,630
12,000 (4) N/A 5.56 4/17/06 0 41,979 106,382
John R. Wilkins, Jr. . . 0 N/A N/A N/A 0 0 0
Patrick L. Murtha. . . . 0 N/A N/A N/A 0 0 0
</TABLE>
(1) The dollar amounts under these columns are the result of calculations at
the 5% and 10% assumed annual growth rates mandated by the Securities and
Exchange Commission and, therefore, are not intended to forecast possible
future appreciation, if any, in the Company's stock price. The calculations
were based on the market price of the option/SAR from the date of the grant
to the end of the option/SAR term. No gain to the options/SARS is possible
without an increase in stock price, which will benefit all shareholders
proportionately. The 0% column represents the grant-date market price of
options with and exercise price below market at the date of grant
(2) Options for 300,000, 123,000 and 51,000 shares to Millard, Montgomery and
O'Leary, respectively, were granted to acquire the Company's Common Stock
at $4.50 per share and shall vest on April 30, 2003 or earlier if certain
"cliff" vesting targets are met. Under cliff vesting, each $2.00 increase
over a base price of $5.00 in the closing bid price on NASDAQ for the
Company Shares which remains in effect for 30 consecutive trading days,
options for 25,000 Company Shares shall vest on the first business day
after such 30-day period. There may be coterminous periods for which the
closing bid price of the Company Shares have increased over the applicable
base price by more than $4.00. Under cliff vesting, during the first,
second and third years of Messrs. Millard's, Montgomery's and O'Leary's
employment, of the options subject to cliff vesting, no more than 40%, 30%
and 30%, respectively, of the options may vest.
(3) Represents options repriced from $8.25 to $4.50 during the fiscal year
ended September 30, 1996.
(4) Represents options repriced from $8.25 to $5.5625 during the fiscal year
ended September 30, 1996.
13
<PAGE> 15
OPTION/SAR EXERCISES AND HOLDINGS
The following table sets forth information concerning the value of
exercisable and unexercisable options/SARS held by each of the Named Executive
Officers as of September 30, 1996.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN THE
OPTIONS/SARS AT FY-END(#) MONEY OPTIONS/SARS($)(1)
-------------------------- ---------------------------
SHARES VALUE
NAME ACQUIRED(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William L. De Nicolo . . . . 0 $ 0 0 0 $ 0 $ 0
Kenneth E. Millard . . . . . 0 0 0 500,000 0 284,500
Richard T. Gerstner . . . . . 0 0 227,193 0 0 0
Robert C. Montgomery . . . . 0 0 0 246,000 0 41,250
Raymond M. O'Leary . . . . . 0 0 0 100,000 0 62,500
George Claudio Jr. . . . . . 0 0 93,376 48,209 404,297 0
Gordon T. Jenkins. . . . . . 0 0 24,850 37,000 0 0
John R. Wilkins, Jr.. . . . . 0 0 15,904 66,130 33,149 311,087
Patrick L. Murtha. . . . . . 0 0 0 0 0 0
</TABLE>
- ----------
(1) Represents the fair market value per share of the underlying shares on the
last day of the fiscal year less the option/SAR exercise price multiplied
by the number of shares. The fair market value per share was $5.125 based
upon the closing price of the Common Stock on the NASDAQ National Market
System on the last trading day of the fiscal year.
CERTAIN TRANSACTIONS
SHAREHOLDERS AGREEMENT
Certain shareholders of the Company are parties to a Shareholders'
Agreement that contains certain provisions as to voting and transfer of Common
Stock held by those stockholders. Pursuant to the Shareholders' Agreement, each
of Telular Canada and Motorola has the right to nominate for election a number
of directors proportionate to its respective holdings of outstanding shares,
rounded to the nearest whole number in the case of Telular Canada and rounded
up to the nearest whole number in the case of Motorola (provided, in the case
of Telular Canada, that as long as it holds at least 10% of the outstanding
shares of Common Stock it may nominate at least one director and, in the case
of Motorola, that as long as it holds at least 10% of the outstanding shares of
Common Stock it may nominate at least one director, and that as long as it
holds at least 20% of the outstanding shares of Common Stock it may nominate at
least two directors), and the principal shareholders of the Company have agreed
to vote in favor of each such nominee. For the six person Board to be elected
at the Meeting, this arrangement entitles Motorola to one nominee but does not
entitle Telular Canada to a nominee. As required by the Shareholders'
Agreement, the Certificate of Incorporation provides that the following actions
may not be taken without the affirmative vote of stockholders holding at least
two-thirds of the outstanding voting shares:
(i) merger, consolidation, reorganization, amalgamation or similar
transaction (other than certain permitted transactions);
(ii) disposition of all or substantially all of the assets of the
Company;
(iii) amendment or supplement to the Certificate of Incorporation or
Bylaws of the Company; or
(iv) discontinuance, dissolution or liquidation of the Company or the
Company's business.
14
<PAGE> 16
Until such time as all Common Stock of the Company owned by Telular
Canada became freely available to be traded, subject to United States
securities laws, the shares held by the stockholders who are parties to the
Shareholders' Agreement were subject to either a right of first refusal prior
to sale or, in the event of a sale of more than 10% of the shares held by the
selling shareholder, a right to have their shares sold together with those of
the selling stockholder. These restrictions have now been lifted.
If at any time the Company or the stockholders party to the
Shareholders' Agreement receive an unsolicited offer to acquire a majority of
the stock of the Company or all or substantially all of its assets, they must
notify Motorola. If the Company or its stockholders intend to consider the
offer, Motorola will have the right to submit a bid as well. The Company and
such stockholders may not approve a transaction with a third party which is at
a valuation lower than that offered by Motorola. The rights of Motorola will
terminate upon any sale by Motorola of shares of Common Stock after which
Motorola owns less than 20% of the outstanding shares of Common Stock on a
fully-diluted basis.
Under the Shareholders' Agreement, each of DNIC and Columbia has
agreed not to compete with the Company for so long as it is a stockholder and
for a period of three years thereafter.
TRANSACTIONS WITH DNIC AND ITS AFFILIATES
Pursuant to the partnership agreement of The Telular Group L.P., DNIC
retained and did not contribute to the Company the right to receive the first
$250,000 per year in royalty payments under licensing agreements. A total of
$250,000 was received by DNIC pursuant to the agreement during the fiscal year
September 30, 1996.
TRANSACTIONS WITH COLUMBIA AND ITS AFFILIATES
During fiscal 1996, the Company rented office space from Columbia
Capital Corporation ("CCC) and also reimbursed CCC for expenses related to
attendance at Board meetings for Messrs. Blow, who resigned on December 3,
1996, and Mixer, employees of CCC. During fiscal year 1996, the Company paid
to CCC a total of $27,295.
TRANSACTIONS WITH MOTOROLA
Pursuant to a Patent Cross License Agreement entered into on March 23,
1990, and amended November 2, 1993, the Company licenses to Motorola the right
to manufacture and sell cellular interfaces in a variety of products. In
addition, the agreement allows the Company to couple its interface to Motorola
transceivers, and grants the Company the right to purchase Motorola
transceivers. This Patent Cross License Agreement is royalty-bearing to the
Company. During fiscal year 1996 the Company received approximately $643,800 in
royalty payments from Motorola and purchased transceivers and other equipment
from Motorola for approximately $12,983,000.
On November 2, 1993, Motorola purchased from the Company 3,824,240 of
Common Stock of the Company in consideration for $11.0 million in cash
(including $1.0 million to be used as a market development fund for fixed
cellular products incorporating Motorola transceivers) and certain other
undertakings by Motorola. These undertakings include: reduction of the pricing
on AMPS transceivers currently being purchased by the Company from Motorola; an
elimination of the royalties payable by the Company to Motorola under the
Patent Cross License Agreement; increase of the Company's credit line for
purchases; the opportunity to purchase transceivers based on any transmission
technology or standard which Motorola's Cellular Subscriber Group offers to any
of its customers if, as and when available to the public; and, on a
fee-for-services basis, subject to availability, access to Motorola's Cellular
Subscriber Group's worldwide service and maintenance organization, engineering
support, and purchasing system. These undertakings terminate on the later of
September 20, 1998, and the date on which Motorola ceases to own any Common
Stock. The Company granted to Motorola a limited right of first refusal with
respect to transceiver purchases by the Company.
15
<PAGE> 17
In October 1995, the Company announced it was awarded a contract to
supply its PHONECELL product to Motorola's Cellular Infrastructure Group for
deployment in existing and future wireless local loop projects in Hungary. The
first phase of the of deliveries started in June 1996 and are expected to
continue into the Spring of 1997.
Also in October 1995, the Company and the Network Ventures Division
(NVD) of Motorola jointly announced the signing of a Preferred Supplier
Agreement whereby Telular will be presented as a preferred supplier of fixed
wireless subscriber equipment to NVD's cellular joint ventures worldwide. NVD
currently has equity positions in cellular operations throughout the world,
including Asia, Europe, the Middle East and Latin America.
In November 1995, the Company announced an agreement with Motorola's
Cellular Infrastructure Group (CIG) providing for CIG to purchase $100 million
of Telular's fixed wireless terminals (FWT) and provide funding for engineering
and product development activities over a three year period, commencing on
January 1, 1996. The companies also modified existing technology license
agreements and expanded their purchase/supply relationship into a cross OEM
arrangement under which Telular will sell additional FWTs to CIG, and Motorola
will sell current and future cellular products to Telular.
During fiscal year 1996, the Company made sales to Motorola and
affiliates of approximately $8,629,000.
RELATIONSHIP AND TRANSACTIONS WITH TELULAR CANADA
Telular Canada is a publicly-held Canadian corporation, shares of
which are traded on the Toronto Stock Exchange. The Company does not own any
stock of Telular Canada, although DNIC owns approximately 1,012,267 of Telular
Canada's outstanding shares.
Pursuant to an exclusive distribution agreement between the Company
and Telular Canada, Telular Canada is the exclusive distributor of the
Company's products in Canada. The distribution agreement expires in 2007, and
is terminable prior to that period only for cause.
Telular Canada holds title to the Canadian patents for the Company's
technology and the right to acquire by transfer technology that allows Telular
Canada to manufacture and sell in Canada products incorporating the Company's
patented technology. In addition, the Company has licensed to Telular Canada
the use in Canada of the mark "Telular(R)" and the Company's logo. The
foregoing licenses to Telular Canada are without royalty to the Company.
In February 1995, Global Data Inc. ("GDI"), a wholly-owned subsidiary
of Telular Canada, entered into a non-exclusive master distribution agreement
(the "Agreement") with the Company to purchase and resell the Company's product
in the United States. The Agreement will also allow GDI to use the Company's
trademarks and logos on its sales literature, and will provide GDI with an open
line of credit of $100,000. During fiscal year 1996, the Company made sales to
GDI and Telular Canada of $42,500.
16
<PAGE> 18
RELATIONSHIP AND TRANSACTIONS WITH TELEPATH CORPORATION
On June 28, 1996, the Company acquired a one-third interest in
TelePath for $1,000,000 in cash and common stock of the Company valued at
$2,187,500. TelePath is a radio developer, based in Hauppauge, New York, that
specializes in the design of advanced cellular and personal communication
services products. The agreement calls for the Company to increase its equity
position in TelePath to fifty percent by August of 1997 by purchasing an
additional one-sixth of TelePath for 150,000 shares of the Company's common
stock as well as payments totaling $500,000. The agreement includes a
multi-year product development program designed to provide a new generation of
state-of-the-art fixed wireless terminals, which include both analog and
digital radio standards, for markets worldwide. The agreement contemplates
that TelePath will provide and the Company will purchase certain development
services including the conversion of Telular's patented interface technology
into a chip set, integration of Telular's patented interface technology with
new and existing cellular radio standards, and development of new feature
functions for future generations of analog and digital terminals. During fiscal
year 1996, the Company purchased services from TelePath for approximately
$675,000.
OTHER TRANSACTIONS AND EVENTS
Bellows and Bellows, of which Joel Bellows is the principal, has
provided legal services to the Company. Mr. Bellows was a director of the
Company until December 3, 1996, and is shareholder of the Company and a
shareholder of DNIC. During fiscal year 1996, the Company paid Bellows and
Bellows aggregate fees of $50,500.
On November 17, 1993, Richard T. Gerstner entered into an employment
agreement with the Company that provided, among other things, for the purchase
by Mr. Gerstner of 72,170 shares of Common Stock from the Company on or before
December 31, 1993, at a purchase price of $500,035. See "Employment
Contracts". To enable Mr. Gerstner to pay a portion of the tax liability
incurred from the purchase of these shares, the Company loaned him $72,000 in
April 1994. The term of the loan originally expired upon either (i) the sale
of the shares by the officer, or (ii) the termination of the officer's
employment. The loan was non-interest bearing. This loan was forgiven in
November 1995 in connection with the termination of Mr. Gerstner's employment.
Mr. Gerstner was also given a $50,000 bonus to cover moving expenses as part of
his employment agreement.
Hamman and Benn, of which George Hamman and Marvin Benn are
principals, have provided legal services to the Company. Mr. Hamman and Mr.
Benn are shareholders of the Company and shareholders of DNIC. During fiscal
year 1996, the Company paid Hamman and Benn aggregate fees of $466,000.
17
<PAGE> 19
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
Executive compensation is administered by the Compensation Committee
of the Board of Directors. The Compensation Committee is a standing committee
composed of two non-employee Directors, David Mixer, Managing Director of
Columbia Capital and Larry Ford, President and Chief Executive Officer of
Information Advantage.
Since Telular's Initial Public Offering in January 1994, the
Compensation Committee of the Board of Directors has developed and administered
the Company's management compensation policies and plans. The Committee
reviews, recommends and grants salary and bonus incentives for executive
officers. The Compensation Committee also administers the Stock Incentive Plan
and is responsible for the selection of participants in the Plan and decisions
concerning the timing, pricing and the amount of grants or awards to be made.
In fiscal 1996, the Company continued to pursue performance-based
compensation programs that provided significant equity incentives. Vesting of
certain stock options has been structured to relate to attainment of stock
appreciation rights.
In April 1996, the Company decided to reprice all outstanding options
then held by Company employees. This action was taken in response to a
sustained decline in the market price of the Company's stock to a level well
below the outstanding options' $8.25 exercise price. The Compensation
Committee determined that the discrepancy between the exercise price was so
great that the options had ceased to provide a sufficient incentive to the
option holders. Moreover, in connection with the hiring of new executives, new
options were being issued at an exercise price significantly below that of the
outstanding options. In the view of the Compensation Committee, this
discrepancy could have become disruptive to employee morale.
In all but a few cases, the exercise price was reduced to the
then-prevailing market price of $5.56. In two cases, those of Mr. Montgomery
(the Chief Operating Officer) and Mr. O'Leary (the Vice-President of Sales),
the exercise price was set at $4.50, in order to be in parity with options that
had been granted to Mr. Millard at the time of his employment. The following
table summarizes options repriced for executive officers:
<TABLE>
<CAPTION>
LENGTH OF
MARKET ORIGINAL
NUMBER OF PRICE OPTION TERM
SECURITIES OF STOCK AT EXERCISE PRICE REMAINING
UNDERLYING TIME OF AT TIME OF NEW AT DATE OF
OPTIONS/SARS REPRICING OR OF REPRICING OR EXERCISE REPRICING OR
NAME AND TITLE DATE AMENDED AMENDMENT AMENDMENT PRICE AMENDMENT
- -------------- ---- ------- --------- --------------- ----- ---------
<S> <C> <C> <C> <C> <C> <C>
Robert C. Montgomery, COO . . . . 4/17/96 36,000 $ 5.56 $ 8.25 $ 4.50 5 Years
Raymond M. O'Leary, VP-Sales. . . 4/17/96 24,000 5.56 8.25 4.50 5 Years
George Claudio Jr., VP - Engineering 4/17/96 48,209 5.56 8.25 5.56 5 Years
Gordon T. Jenkins, VP - Finance . 4/17/96 12,000 5.56 8.25 5.56 5 Years
Timothy L. Walsh, Comptroller . . 4/17/96 10,000 5.56 8.25 5.56 5 Years
</TABLE>
Before making compensation recommendations with respect to officers
during the past fiscal year, the Committee reviewed base salaries proposed by
the CEO, and evaluated each officer's experience and proposed responsibilities
and the salaries of similarly situated executives. In determining its
recommendations for adjustments of officer's base salaries for fiscal 1997, the
Committee focused primarily on each officer's contributions towards the
Company's success in moving toward its long term goals during the fiscal year,
the accomplishment of goals set by the officer and approved by the Committee,
and the Committee's assessment of the quality of services rendered by the
officer.
The CEO's compensation for 1996 was established pursuant to an
employment agreement negotiated prior to the CEO's acceptance of the position
in April 1996. The CEO's compensation package has a significant equity
incentive component. For fiscal year 1996, the CEO received a bonus of
fifty-thousand dollars, which was paid half in cash and half in stock. Also,
stock options for 500,000 shares were granted.
David Mixer, Chairman
Larry Ford
18
<PAGE> 20
PERFORMANCE MEASUREMENT COMPARISON
The following graph compares total stockholder returns of the Company
since its initial public offering of Common Stock on January 27, 1994 to two
indices: the NASDAQ Composite Index and the Hambrecht & Quist Technology Index
(the "HQ-T"). The total return calculations assume the reinvestment of
dividends, although dividends have never been declared for the Company's stock,
and is based on the returns of the component companies weighted according to
their capitalizations as of the end of each monthly period. The NASDAQ
Composite tracks the aggregate return of all equity securities traded on the
NASDAQ National Market System (the "NMS"). The HQ-T tracks the aggregate
return of technology companies, including electronics, medical and other
related technology industries. The Company's Common Stock is traded on the NMS
and is a component of the NASDAQ Composite.
COMPARISON OF 32 MONTH CUMULATIVE TOTAL RETURN*
AMONG TELULAR CORPORATION, THE NASDAQ STOCK MARKET-US INDEX
AND THE HAMBRECHT & QUIST TECHNOLOGY INDEX
<TABLE>
<CAPTION>
Cumulative Total Return
--------------------------------------------------------------------------------------------
PERIOD 1/27/94 3/94 6/94 9/94 12/94 3/95 6/95 9/95 12/95 3/96 6/96 9/96
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
TELULAR CORPORATION 100 81 77 48 31 40 86 69 43 21 29 26
NASDAQ STOCK MARKET-US 100 94 89 97 96 104 119 134 135 142 153 159
HAMBRECHT & QUIST TECHNOLOGY 100 96 89 102 111 123 150 170 166 170 178 189
</TABLE>
* $100 INVESTED ON 1/27/94 IN STOCK OR INDEX-
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING SEPTEMBER 30.
Telular Corporation's stock price on the last trading date of the 1996
fiscal year, September 30th, was $5.125 per share. The latest sales price
attainable before the printing of this proxy was $4.63 per share on November
19, 1996.
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee are Messrs. Ford and Mixer.
Neither Mr. Ford nor Mr. Mixer is now or was at any time an officer of the
Company.
SECTION 16 COMPLIANCE
All executive officers, directors and holders of more than 10% of the
Company's Common Stock reported all transactions in the Company's Common Stock
during fiscal year 1996 in timely filings with the Securities and Exchange
Commission ("SEC") as required under Section 16(a) of the Securities and
Exchange Act of 1934 except for the following, which were filed after the due
date therefore: (I) initial Form 3 for Frank J. M. ten Brink; and (ii) Form 4
Changes in Beneficial Ownership for John A. Blanchard III and Larry J. Ford.
SHAREHOLDER PROPOSALS
Shareholder proposals submitted for evaluation as to inclusion in the
proxy materials for the Company's next annual meeting of shareholders must be
received by the Company not later than August 15, 1997, at the Company's
principal executive offices at 920 Deerfield Parkway, Buffalo Grove, Illinois
60089.
OTHER MATTERS
The Company knows of no other matters to be submitted to the meeting.
If any other matters properly come before the meeting, it is the intention of
the persons named in the enclosed proxy card to vote the shares they represent
as the Board of Directors may recommend.
By Order of the Board of Directors
Frank J.M. ten Brink
Chief Financial Officer, Senior Vice-President
and Secretary
Buffalo Grove, Illinois
December 9, 1995
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<PAGE> 22
EXHIBIT A
TELULAR CORPORATION
SECOND AMENDED AND RESTATED STOCK INCENTIVE PLAN
1. PURPOSE
The Telular Corporation Stock Incentive Plan (the "Plan") is an
amendment and restatement of the Telular Corporation Amended and Restated Stock
Option Plan. The Plan is designed to enable directors, officers and all
employees of Telular Corporation (the "Company") to acquire or increase a
proprietary interest in the Company, and thus to share in the future success of
the Company's business. Accordingly, the Plan is intended as a means of
attracting and retaining directors, officers and employees of outstanding
ability, and of increasing the identity of interests between them and the
Company's shareholders, by providing an incentive to perform in a superior
manner and rewarding such performance. Because the individuals eligible to
receive Awards under the Plan will be those who are in positions to make
important and direct contributions to the success of the Company, the directors
believe that the grant of Awards will advance the interests of the Company and
the shareholders.
2. DEFINITIONS
In this Plan document, unless the context clearly indicates otherwise,
words in the masculine gender shall be deemed to refer to females as well as to
males, any term used in the singular also shall refer to the plural, and the
following capitalized terms shall have the following meanings:
(a) "Agreement" means the written agreement to be entered into by the
Company and the Grantee, as provided in Section 7 hereof.
(b) "Award" means an Option, a Stock Appreciation Right, a Performance
Share, or any award described in Section 15 hereof.
(c) "Beneficiary" means the person or persons designated in writing by the
Grantee as his beneficiary with respect to an Award in the event of
the Grantee's death; or, in the absence of an effective designation or
if the designated person or persons predecease the Grantee, the
Grantee's Beneficiary shall be the person or persons who acquire by
bequest or inheritance the Grantee's rights in respect of an Award. In
order to be effective, a Grantee's designation of a Beneficiary must
be on file with the Committee before the Grantee's death. Any such
designation may be revoked by the Grantee and a new designation
substituted therefor at any time before the Grantee's death.
(d) "Board of Directors" or "Board" means the board of directors of the
Company.
(e) A "Change in Control" shall be deemed to occur when and if any of the
following events occurs:
(i) the Company acquires knowledge that any "person" or "group"
within the meaning of Section 13(d) and 14(d)(2) of the 1934 Act
in a transaction or series of transactions has become the
"beneficial owner," as defined in Rule 13d-3 under the 1934 Act,
directly or indirectly, of a majority of the then outstanding
voting securities of the Company (not including voting
securities held by officers or directors of the Company within
the meaning of Section 16 of the 1934 Act), otherwise than
through a transaction or series of transactions arranged by, or
consummated with the prior approval of, the Board; or
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<PAGE> 23
(ii) the consummation of a merger or consolidation of the Company
with, or a sale of all or substantially all of the assets of the
Company to, another corporation unaffiliated with the Company
that has been approved by the holders of a majority of the
outstanding voting securities of the Company (not including any
voting securities that are held by directors or officers of the
Company within the meaning of Section 16 of the 1934 Act) and
after which merger, consolidation or the shareholders of the
Company immediately prior thereto do not beneficially own at
least a majority of the combined voting power of the then
outstanding voting securities entitled to vote generally in the
election of directors of the corporation surviving such merger
or consolidation or to which all or substantially all such
assets are transferred.
(f) "Code" means the Internal Revenue Code of 1986, as amended from time
to time.
(g) "Committee" means a committee, appointed or approved by the Board
pursuant to Section 5(a) below, consisting of not less than two
directors who are "disinterested persons" within the meaning of Rule
16b-3 under the 1934 Act (or any successor rule of similar import) or
such greater number of directors as may be required to satisfy the
requirements of Rule 16b-3 as in effect from time to time. To the
extent that it is determined desirable to exempt any compensation
earned under the Plan from the limitation on deductions imposed by
Section 162(m) of the Code and the rules and regulations thereunder,
membership in the Committee may be limited as necessary to exempt such
compensation from such limitation.
(h) "Company" means Telular Corporation.
(i) "Disability" means having a total and permanent disability as defined
in Section 22(e)(3) of the Code.
(j) "Fair Market Value" means, when used in connection with the Shares on
a certain date, (1) the closing price if Shares are listed on NASDAQ
or any national stock exchange, or (2) if Shares are not so listed,
any other appropriate method that the Committee deems fair and
equitable.
(k) "Grantee" means a person to whom an Award has been granted under the
Plan.
(l) "Incentive Stock Option" means an Option that complies with the terms
and conditions set forth in Section 422(b) of the Code and is
designated by the Committee as an Incentive Stock Option.
(m) "1934 Act" means the Securities Exchange Act of 1934, as amended from
time to time.
(n) "Nonqualified Stock Option" means an Option granted under the Plan
other than an Incentive Stock Option.
(o) "Option" means an option to purchase a Share or Shares under the Plan.
Unless the context clearly indicates otherwise, the term "Option"
shall include both Incentive Stock Options and Nonqualified Stock
Options.
(p) "Parent" means any parent corporation of the Company within the
meaning of Section 424(e) of the Code (or a successor provision of
similar import).
(q) "Payment Date" means the date specified by the Committee at the grant
of a Performance Share that is used to determine the amount and timing
of a payment with respect to a Performance Share. A Payment Date may
be a certain date or the date on which a performance goal is attained.
(r) "Performance Share" means a right that provides for a payment in
accordance with Section 14 hereof.
(s) "Plan" means the Telular Corporation Stock Incentive Plan, as set
forth herein and as amended from time to time. Unless the context
clearly indicates otherwise, the term "Plan" includes the Telular
Corporation Stock Option Plan prior to its amendment and restatement.
(t) "Shares" means shares of the common stock, par value $.01 per Share,
of the Company.
22
<PAGE> 24
(u) "Stock Appreciation Right" or "Right" means a right that provides for
a payment in accordance with Section 10 hereof.
(v) "Subsidiary" means any subsidiary corporation of the Company within
the meaning of Section 424(f) of the Code (or a successor provision of
similar import).
(w) "Term" means the period during which a particular Option or Right may
be exercised.
3. ADOPTION AND DURATION OF THE PLAN
(a) The Plan is effective as of November 17, 1993, and shall terminate ten
years after such effective date, unless it is sooner terminated in
accordance with Section 22 hereof. Any Award outstanding at the time
that the Plan is terminated shall not cease to be or cease to become
exercisable pursuant to its terms because of the termination of the
Plan.
(b) The Plan shall be approved either (1) by the affirmative vote of the
holders of a majority of the outstanding Shares present in person or
represented by proxy and entitled to vote at a meeting of the
stockholders of the Company duly called for such purpose, or (2) by
the written consent of the holders of a majority of the outstanding
Shares entitled to vote.
4. NUMBER AND SOURCE OF SHARES SUBJECT TO THE PLAN
(a) The Company may grant Awards under the Plan (including Options granted
prior to this amendment and restatement) with respect to not more than
3,000,000 Shares (subject, however, to adjustment as provided in
Section 21 hereof), which Shares may be provided from the Company's
treasury, by the issuance of authorized but unissued Shares, and/or by
the purchase of outstanding Shares in the open market or in private
transactions. The grant of an Award shall be deemed to be a grant of
Shares equal to the greater of (i) the number of Shares on the basis
of which the Award is calculated or (ii) the number of Shares issued
(if Shares are issued) or the number of Shares with a Fair Market
Value at the time of distribution equal to the cash distributed (if
cash is distributed).
(b) If, and to the extent that, all or part of an Award previously granted
(including an Option granted prior to this amendment and restatement)
is surrendered, lapses, expires, is forfeited or is terminated, in
whole or in part, in such manner that all or some of the Shares that
are the subject of the Award are not issued to a Grantee (and cash or
any other form of consideration is not paid in lieu thereof pursuant
to any tandem arrangement or otherwise), then such Shares subject to
the Award again shall become available for the granting of Awards
under the Plan within the limitation stated in subsection (a).
Notwithstanding the foregoing, (i) if, while any Award is outstanding,
the Grantee thereof receives any benefits of ownership of the Shares
(such as the right to vote or receive dividends) or (ii) if any Shares
previously issued under the Plan are surrendered, or any Shares
issuable under the Plan are withheld, in payment of the exercise price
or purchase price of an Award or to satisfy tax withholding
obligations associated with any Award, then in each such case such
Shares shall not again be available for Awards under the Plan.
5. ADMINISTRATION OF THE PLAN
(a) The Plan shall be administered by the Committee. The members of the
Committee shall be appointed by the Board from time to time and shall
serve at the pleasure of the Board.
(b) The Committee shall adopt such rules of procedure as it may deem
appropriate for the proper administration of the Plan. All actions of
the Committee under the Plan shall be effective if taken either (1) by
a majority vote of the members then in office at a meeting duly called
and held or (2) by execution of a written instrument signed by all of
the members then in office.
23
<PAGE> 25
(c) The powers of the Committee shall include plenary authority to
interpret the Plan. Subject to the provisions of the Plan, the
Committee shall have the authority, in its sole discretion, from time
to time: (1) to select the officers and key employees to whom Awards
shall be granted; (2) to determine the date on which each Award shall
be granted; (3) to prescribe the number of Shares subject to each
Award; (4) to determine the type of each Award; (5) to determine the
Term of each Award; (6) to determine the periods during which Awards
may be exercised and the restrictions and limitations upon exercise of
Awards or the receipt of Shares; (7) to prescribe any performance
criteria pursuant to which Awards may be granted or may become
exercisable or payable; (8) to prescribe any limitations, restrictions
or conditions on any Award; (9) to prescribe the provisions of each
Agreement, which shall not be inconsistent with the terms of the Plan;
(10) to adopt, amend and rescind rules and regulations relating to the
Plan; and (11) to make all other determinations and take all other
actions that are necessary or advisable for the implementation and
administration of the Plan.
6. INDIVIDUALS ELIGIBLE TO RECEIVE AWARDS
(a) Awards may be granted under the Plan to officers and key employees of
the Company or any Subsidiary, including officers and key employees
who also serve as members of the Board. All determinations by the
Committee as to the individuals to whom Awards shall be granted
hereunder shall be conclusive.
(b) Directors who are not regular salaried employees of the Company or any
Subsidiary shall not be eligible to receive Awards.
(c) A Grantee may receive more than one Award. A Grantee may not receive
Awards with respect to more than 750,000 Shares (subject, however, to
adjustment as provided in Section 21) in any three-year period. For
purposes of the application of this limitation, if an Award is
canceled, the Shares subject to the canceled Award shall continue to
be counted against the maximum number of Shares for which Awards may
be granted to the Grantee. If, after the grant of an Award, the
exercise price or purchase price of the Award is reduced, transaction
shall be treated as a cancellation of the Award and a grant of a new
Award, and both the Shares subject to the Award that is deemed to be
canceled and the Shares subject to the Award that is deemed to be
granted shall reduce the maximum number of Shares for which Awards may
be granted to the Grantee.
7. AGREEMENT
(a) Each Award shall be evidenced by an Agreement setting forth the number
of Shares subject to the Award or to which such Award corresponds, and
the terms, conditions and restrictions applicable thereto.
(b) Appropriate officers of the Company are hereby authorized to execute
and deliver Agreements in the name of the Company as directed from
time to time by the Committee.
8. INCENTIVE STOCK OPTIONS
(a) The Committee may authorize the grant of Incentive Stock Options to
directors, officers and employees, subject to the terms and conditions
set forth in the Plan. The Agreement relating to an Incentive Stock
Option shall state that the Option evidenced by the Agreement is
intended to be an "incentive stock option" within the meaning of
Section 422(b) of the Code.
(b) The Term of each Incentive Stock Option shall end (unless the Option
shall have terminated earlier under another provision of the Plan) on
a date fixed by the Committee and set forth in the applicable
Agreement. In no event shall the Term of the Option extend beyond ten
years from the date of grant of the Option. In the case of any Grantee
who, on the date the Option is granted, owns (within the meaning of
Section 424(d) of the Code) more than 10 percent of the total combined
voting power of all classes of stock of the Company, a Parent (if
any), or a Subsidiary (if any), the Term of the Option shall not
extend beyond five years from the date of grant.
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<PAGE> 26
(c) To the extent that the aggregate Fair Market Value of the stock with
respect to which Incentive Stock Options (determined without regard to
this subsection (c)) are exercisable by any Grantee for the first time
during any calendar year (under all stock option plans of the Company,
its Parent (if any) and its Subsidiaries (if any)) exceeds $100,000,
such Options shall not be Incentive Stock Options. For the purposes of
this subsection (c), the Fair Market Value of stock shall be
determined as of the time the Option with respect to such stock is
granted. This subsection (c) shall be applied by taking Options into
account in the order in which they were granted.
(d) The Option price per Share established by the Committee for an
Incentive Stock Option shall not be less than the Fair Market Value of
a Share on the date the Option is granted, except that in the case of
an Incentive Stock Option granted to a Grantee who, on the date the
Option is granted, owns (within the meaning of Section 424(d) of the
Code) more than 10 percent of the total combined voting power of all
classes of stock of the Company, a Parent (if any), or a Subsidiary
(if any), the Option price for each Share shall not be less than 110
percent of the Fair Market Value of a Share on the date the Option is
granted. In no event may an Incentive Stock Option be granted if the
Option price per Share is less than the par value of a Share.
(e) Any Grantee who disposes of Shares purchased upon the exercise of an
Incentive Stock Option either (1) within two years after the date on
which the Option was granted, or (2) within one year after the
transfer of such Shares to the Grantee, shall promptly notify the
Company of the date of such disposition and of the amount realized
upon such disposition.
9. NONQUALIFIED STOCK OPTIONS
(a) The Committee may authorize the grant of Nonqualified Stock Options
subject to the terms and conditions set forth in the Plan. Unless an
Option is designated by the Committee as an Incentive Stock Option, it
is intended that the Option will not be an "incentive stock option"
within the meaning of Section 422(b) of the Code and instead, will be
a Nonqualified Stock Option. The Agreement relating to a Nonqualified
Stock Option shall state that the Option evidenced by the Agreement
shall not be treated as an Incentive Stock Option.
(b) The Term of each Nonqualified Stock Option shall end (unless the
Option shall have terminated earlier under another provision of the
Plan) on a date fixed by the Committee and set forth in the applicable
Agreement. In no event shall the Term of the Nonqualified Stock Option
extend beyond ten years from the date of grant of the Option.
(c) The Option price to be paid by the Grantee for each Share purchased
upon the exercise of a Nonqualified Stock Option shall be established
by the Committee and set forth in the applicable Agreement. The Option
price per Share of a Nonqualified Stock Option may not be less than
the par value of a Share.
10. STOCK APPRECIATION RIGHTS
(a) The Committee may, from time to time, grant Stock Appreciation Rights
either (1) in tandem with all or a portion of an Option granted under
the Plan or (2) independent of any Option granted under the Plan. A
tandem Right shall be exercisable only at such times, and to such
extent, as the related Option is exercisable. An independent Right
shall be exercisable at such time and to such extent as the Committee
shall determine.
(b) Any Stock Appreciation Right shall permit the Grantee to receive, upon
exercise of the Right, an amount (to be paid in cash, in Shares or in
both cash and Shares, as determined by the Committee in its sole
discretion at any time prior to or after exercise) equal in value to
the difference between (1) the Fair Market Value on the date of
exercise of the Shares with respect to which the Right is exercised
and (2) either (i) the Option price of the related Option in the case
of a Right that is related to an Option or (ii) the Fair Market Value
of a Share on the date the Right was granted in the case of a Right
that is not related to any Option.
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<PAGE> 27
(c) With respect to Rights granted under the Plan, the Committee may
establish such waiting periods, exercise dates and other limitations
as it shall deem appropriate in its sole discretion, provided that (1)
no Right that is granted in tandem with an Option may be exercised
after the expiration of the Term of such Option and (2) the exercise
of a Right (whether or not in tandem with an Option) for cash by a
director or officer (within the meaning of Rule 16b-3 under the 1934
Act) of the Company is subject to the following conditions: (A) the
Company shall have been subject to the reporting requirements of
Section 13(a) of the 1934 Act for at least one year prior to the
exercise and shall have filed all reports required to be filed under
Section 13(a) during such period, (B) the Company shall have regularly
released for publication quarterly and annual summary statements of
sales and earnings, (C) the Committee, which shall have sole
discretion to approve or disapprove the election of the Grantee to
receive cash as whole or partial settlement of the Right, approves the
Grantee's election to receive cash after the election is made, (D) the
exercise occurs during one of the window periods described in clause
(e)(3) of Rule 16b-3 and (E) the Right is not exercised prior to the
expiration of a six-month period after the date of the grant or, if
later, stockholder approval of the Plan as provided in Section 3(b).
In addition, the Committee may impose a prohibition on the exercise of
Rights for such period or periods as it, in its sole discretion, deems
to be in the best interest of the Company.
(d) The right of a Grantee to exercise an Option shall be canceled if and
to the extent that the Shares subject to the Option are used to
calculate the amount to be received upon the exercise of a tandem
Right, and the right of a Grantee to exercise a tandem Right shall be
canceled if and to the extent that the Shares subject to the Right are
purchased upon the exercise of the related Option.
(e) A tandem Right may be granted coincident with or after the grant of
any related Option; provided that the Committee shall consult with
counsel before granting a tandem Right after the grant of a related
Incentive Stock Option.
11. EXERCISABILITY OF OPTIONS AND RIGHTS
(a) The Committee shall have authority to grant (1) Options and Rights
that are exercisable in full at any time during their Term and (2)
Options and Rights that become exercisable in installments during
their Term. In exercising an Option or Right, the Grantee may purchase
less than all of the Shares available under the Option or Right. No
Option or Right granted to a director or officer of the Company
(within the meaning of Section 16 of the 1934 Act) shall be
exercisable within six months after the date of the grant of such
Option or Right (or, if later, within six months following the date of
stockholder approval of the Plan as provided in Section 3(b)).
(b) The Committee may provide in the Agreement that the Option and/or
Right becomes exercisable in full, notwithstanding the applicability
of any limitation on the exercise of such Option or Right (other than
the six-month waiting period described in the final sentence of
subsection (a) above) beginning on the date on which a Change in
Control has occurred.
12. EXERCISE OF OPTION OR RIGHT
(a) Options or Rights shall be exercised by delivering or mailing to the
Committee: (1) in the form and in the manner prescribed by the
Committee, a notice specifying the number of Shares to be purchased or
the number of Shares with respect to which a Right shall be exercised,
and (2) if an Option is exercised, payment in full of the Option price
for the Shares so purchased by a method described in Section 17
hereof.
(b) Subject to Section 16(a) hereof, upon receipt of the notice of
exercise and payment of the Option price in the case of an Option, the
Company shall promptly deliver to the Grantee (or Beneficiary) a
certificate or certificates for the Shares to which he is entitled,
without charge to him for issue or transfer tax.
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<PAGE> 28
(c) Upon the purchase of Shares under an Option or Right, the stock
certificate or certificates may, at the request of the purchaser or
recipient, be issued in his name and the name of another person as
joint tenants with right of survivorship.
13. EXERCISE OF OPTIONS OR RIGHTS AFTER TERMINATION OF EMPLOYMENT
(a) The Committee may provide in the Agreement that the Option and/or
Right shall cease to be exercisable after the Grantee's employment
with the Company and its Subsidiaries (if any) terminates. The
Committee also may provide in the Agreement that the Option and/or
Right shall continue to be exercisable for a specified period (but not
after such period) after the Grantee's employment with the Company and
its Subsidiaries (if any) terminates. The period during which the
Option and/or Right shall remain exercisable may vary according to the
reason for the termination. In no event shall an Option and/or Right
be exercisable after the expiration date specified in the Agreement.
(b) An Incentive Stock Option shall be treated as a Nonqualified Stock
Option if it is exercised more than 12 months after a termination of
employment because of a Disability or more than three months after a
termination of employment for any reason other than death or
Disability.
(c) The Committee may provide in the Agreement that the Option and/or
Right shall become immediately exercisable in full upon the Grantee's
termination of employment for specified reasons such as Disability or
death; notwithstanding any provision of the Option and/or Right that
provides for the exercise of the Option and/or Right in installments,
except for the six-month waiting period described in the final
sentence of Section 11(a). Any Option or Right that would have become
immediately exercisable in full upon such a termination but for the
application of such six-month waiting period shall become immediately
exercisable in full upon the expiration of such six-month waiting
period.
14. PERFORMANCE SHARES
The Committee may, from time to time, grant Performance Shares. A
Performance Share shall entitle the Grantee to receive a payment as soon as
practicable after a Payment Date (specified by the Committee at the time of the
grant of the Performance Share) in an amount equal to the excess (if any)
between (1) the Fair Market Value of a Share on the Payment Date and (2) the
Fair Market Value of a Share on the date the Performance Share is granted.
Unless the Committee provides otherwise at the time of grant, a Grantee may
receive payment only if the Grantee remains continuously employed with the
Company or a Subsidiary until such Payment Date. Payment may be made in cash,
Shares or in both cash or Shares, as determined by the Committee in its sole
discretion at any time prior to the Payment Date. A Performance Share does not
confer the right to vote or the right to receive dividends. At the time of the
grant of the Performance Share, the Committee may establish such terms,
limitations and restrictions as it deems advisable, including providing for the
acceleration of the Payment Date upon the occurrence of certain events.
15. STOCK-BASED AWARDS
The Committee may, from time to time, grant Awards under the Plan that
consist of, are denominated in or payable in, are valued in whole or in part by
reference to, or otherwise are based on or related to, Shares, provided that
such grants comply with applicable law. The Committee may subject such Awards
to such vesting or earn-out provisions, restrictions on transfer, and/or other
restrictions on incidents of ownership as the Committee may determine, provided
that such restrictions are not inconsistent with the terms of the Plan. The
Committee may grant Awards under this Section 15 that require no payment of
consideration by the Grantee (other than services previously rendered or, as
may be permitted by applicable law, services to be rendered), either on the
date of grant or the date any restriction(s) thereon are removed. Awards
granted under this Section 15 may include, by way of example, restricted
Shares, performance bonus awards, and other Awards that are payable in cash, or
that are payable in cash or Shares or other property (at the election of the
Committee or, if the Committee so provides, at the election of the Grantee),
provided that such Awards are denominated in Shares, valued in whole or in part
by reference to Shares, or otherwise based on or related to Shares.
27
<PAGE> 29
16. CONDITIONS ON AWARDS
(a) The grant or exercise of an Award and the distribution of Shares or
cash under the Plan shall be subject to the condition that if at any
time the Company shall determine (in accordance with the provisions of
the following sentence) that it is necessary as a condition of, or in
connection with, such grant, exercise or distribution (1) to satisfy
withholding tax or other withholding liabilities, (2) to effect the
listing, registration or qualification on any securities exchange, on
any quotation system, or under any federal, state or local law, of any
Shares otherwise deliverable in connection with such grant, exercise
or distribution, or (3) to obtain the consent or approval of any
regulatory body, then in any such event such grant, exercise or
distribution shall not be effective unless such withholding, listing,
registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the
Company in its reasonable and good faith judgment. In seeking to
effect or obtain any such withholding, listing, registration,
qualification, consent or approval, the Company shall act with all
reasonable diligence. Any such postponement or limitation affecting
the right to exercise an Award or the grant or distribution of an
Award, Shares or cash shall not extend the time within which the Award
may be granted or exercised or the Shares or cash distributed, unless
the Company and the Grantee choose to amend the terms of the Award to
provide for such an extension; and neither the Company nor any of its
directors or officers shall have any obligation or liability to the
Grantee or to a Beneficiary by reason of any such postponement or
limitation.
(b) All Awards granted under the Plan shall be nontransferable other than
by will or by the laws of descent and distribution, and an Award may
be exercised during the lifetime of the Grantee only by him.
17. PAYMENT FOR AWARD
Any exercise or purchase price of an Award may be payable, at the
discretion of the Committee, by any one or a combination of the following
methods: (1) by money order, cashier's check or certified check; (2) by having
the Company withhold Shares otherwise deliverable to the Grantee or by the
tender of other Shares to the Company; or (3) unless the Committee expressly
provides otherwise (at the time of grant in the case of Incentive Stock Option
or at any time prior to exercise or purchase in the case of any other Award) by
cash payment made by the Grantee's broker pursuant to the Grantee's
instructions (and, if so instructed by the Grantee, cash payment by the
Grantee's broker of the amount of any taxes to be withheld in connection with
the exercise), accompanied by the Grantee's irrevocable instructions to the
Company to deliver the Shares issuable upon exercise of the Option promptly to
the broker for the Grantee's account; provided that, in the case of any
director or officer (within the meaning of Section 16 of the 1934 Act) of the
Company, such exercise would not subject the Grantee to short-swing profit
recovery provision of Section 16(b) of the 1934 Act. Shares tendered in
satisfaction of the exercise price or purchase price shall be valued at their
Fair Market Value on the date of tender. The Committee shall determine
acceptable methods for tendering Shares to exercise an Award under the Plan,
and may impose such limitations and prohibitions on the use of Shares to
exercise Awards as it deems appropriate. The date of exercise of an Award shall
be deemed to be the date on which the notice of exercise and payment of the
exercise price or purchase price are received by the Committee or, if such
notice of exercise and payment are mailed in the United States and the United
States Postal Service has stamped its postmark thereon, then on the date of
such postmark.
19. TAX WITHHOLDING
(a) The Company shall have the right to collect an amount sufficient to
satisfy any federal, state and/or local withholding tax requirements
that might apply with respect to any Award (including, without
limitation, the exercise of an Option or Right, the disposition of
Shares, or the grant or distribution of Shares or cash) in the manner
specified in subsection (b) or (c) below. Alternatively, a Grantee may
elect to satisfy any such withholding tax requirements in the manner
specified in subsection (d) or (e) below to the extent permitted
therein.
(b) The Company shall have the right to require Grantees to remit to the
Company an amount sufficient to satisfy any such withholding tax
requirements.
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(c) The Company and any Subsidiary also shall, to the extent permitted by
law, have the right to deduct from any payment of any kind (whether or
not related to the Plan) otherwise due to a Grantee any such taxes
required to be withheld.
(d) If the Committee in its sole discretion approves, a Grantee may
irrevocably elect to have any withholding tax obligation satisfied by
(i) having the Company withhold Shares otherwise deliverable to the
Grantee with respect to the Award, or (ii) delivering other Shares to
the Company; provided that, to the extent necessary for a director or
an officer (within the meaning of Section 16 of the 1934 Act) of the
Company to obtain exemption from the short-swing profit recovery
provisions of Section 16(b) of the 1934 Act, any such election either
(i) shall be made by an irrevocable election made at least six months
before the date on which the amount of the tax to be withheld is
determined or (ii) is subject to the following conditions: (A) the
Company shall have been subject to the reporting requirements of
Section 13(a) of the 1934 Act for at least one year prior to the
election and shall have filed all reports required to be filed under
Section 13(a) during such period, (B) the Company shall have regularly
released for publication quarterly and annual summary statements of
sales and earnings, (C) the Committee, which shall have sole
discretion to approve or disapprove such election, approves the
election after the election is made, (D) the election occurs during
(or in advance to take effect during) one of the window periods
described in clause (c)(3) of Rule 16b-3 and (E) the election does not
occur prior to the expiration of a six-month period after the date of
the grant of the Award or, if later, stockholder approval of the Plan
as provided in Section 3(b).
(e) If permitted by the Committee, a Grantee may elect to have any
withholding tax obligation satisfied in the manner described in
Section 17(3), to the extent permitted therein.
20. FRACTIONAL SHARES
No fractional Shares shall be issued pursuant to the Plan or any
Award. The Committee shall determine whether cash, other securities, or other
property shall be paid or transferred in lieu of fractional Shares, or whether
fractional Shares or any rights thereto shall be canceled, terminated or
otherwise eliminated.
21. SHAREHOLDER RIGHTS
(a) No Award shall not confer upon a Grantee any rights of a shareholder
unless and until the Shares are actually issued to him.
(b) Subject to any required action by the Company's shareholders, if the
Company shall be a party to any merger, consolidation or
reorganization in which Shares are changed or exchanged, a Grantee
holding an outstanding Award shall be entitled to receive, upon the
exercise of such Award, the same consideration that a holder of the
same number of Shares that are subject to the Award is entitled to
receive pursuant to such merger, consolidation or reorganization.
22. ADJUSTMENT FOR CHANGES IN CAPITALIZATION
In addition to the provisions of Section 20(b) above, in the event of
(i) any change in the Shares through merger, consolidation, reorganization,
recapitalization (ii) any dividend on the Shares that is payable in such
Shares, or (iii) a stock split or a combination of Shares, then, in any such
case, the aggregate number and type of Shares available for Awards, the number
and type of Shares subject to outstanding Awards, the exercise price or
purchase price per Share of each outstanding Award and the number of Shares
with respect to which Awards may be granted to a Grantee within any three-year
period, shall be adjusted by the Committee as it deems equitable in its sole
and absolute discretion to prevent substantial dilution or enlargement of the
rights of the Grantees, subject to any required action by the shareholders of
the Company; and provided that with respect to Incentive Stock Options, no such
adjustment shall be required to the extent that such adjustment would cause
such Options to violate Section 422(b) of the Code.
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23. TERMINATION, SUSPENSION OR MODIFICATION OF PLAN
The Board of Directors may at any time terminate, suspend or modify
the Plan, except that the Board shall not, without the approval of the holders
of a majority of the Company's outstanding Shares present in person or
represented by proxy and entitled to vote at a meeting of the stockholders of
the Company duly called for such purpose or by the written consent of the
holders of a majority of the outstanding Shares entitled to vote, (a) change
the class of persons eligible for Awards; (b) change the exercise price or
purchase price of Awards (other than through adjustment for changes in
capitalization as provided in Section 21 hereof); (c) increase the maximum
duration of the Plan; (d) materially increase the benefits accruing to
participants under the Plan; or (e) materially increase the number of
securities that may be issued under the Plan. No termination, suspension, or
modification of the Plan shall adversely affect any right acquired by any
Grantee or by any Beneficiary, under the terms of any Award granted before the
date of such termination, suspension or modification, unless such Grantee or
Beneficiary shall consent; but it shall be conclusively presumed that any
adjustment for changes in capitalization in accordance with Section 21 hereof
does not adversely affect any such right.
25. APPLICATION OF PROCEEDS
The proceeds received by the Company from the sale of Shares under the
Plan shall be used for general corporate purposes.
26. UNFUNDED PLAN
The Plan shall be unfunded. Neither the Company nor any Subsidiary
shall be required to segregate any assets that may be represented by any
Awards, and neither the Company nor any Subsidiary nor the Board shall be
deemed to be a trustee of any amounts to be paid under any Award. Any liability
of the Company or any Subsidiary to pay any Grantee or Beneficiary with respect
to an Award shall be based solely upon any contractual obligations created
pursuant to the provisions of the Plan and the applicable Agreement; no such
obligation shall be deemed to be secured by any pledge of, or encumbrance on,
any property of the Company or a Subsidiary.
27. GENERAL PROVISIONS
The grant of an Award at any time shall not give the Grantee any right
to similar grants at any other time or any right to be retained in the employ
of the Company or its Subsidiaries.
28. GOVERNING LAW
The Plan shall be governed and its provisions construed, enforced and
administered in accordance with the laws of the state of Illinois, except to
the extent that such laws may be superseded by any federal law.
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TELULAR CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. /X/
[ ]
DIRECTORS RECOMMEND:
A VOTE FOR ELECTION OF THE FOLLOWING DIRECTORS FOR ALL
AND A VOTE FOR PROPOSAL(S) 2, 3 AND 4 FOR WITHHELD EXCEPT
1. 1-John E. Berndt, 2-William L. De Nicolo, / / / / / /
3-Larry J. Ford, 4-Richard D. Haning,
5-Kenneth E. Millard, 6-David P. Mixer
TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE THAT NUMBER
FROM THE LIST ON THE LINE BELOW.
- ------------------------------
NOMINEE EXCEPTION
2. To Amend the Articles of Incorporation
to increase the number of authorized
shares of Common Stock from 40,000,000
to 75,000,000.
3. To approve the Company's Second Amended FOR AGAINST ABSTAIN
and Restated Stock Incentive Plan, / / / / / /
which amends the existing Stock Incentive
Plan to increase the number of shares of
Common Stock authorized for issuance under
such plan from 2,000,000 to 3,000,000, and
increases the maximum number of shares of
Common Stock that may be issued to any one
individual in any three-year period from
500,000 to 700,000.
4. To ratify and approve the selection FOR AGAINST ABSTAIN
of Ernst & Young LLP as independent / / / / / /
auditors for the fiscal year ending
September 30, 1997.
IN THEIR DISCRETION, ON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
MEETING OR ANY ADJOURNMENT THEREOF.
MARK HERE IF YOU PLAN TO ATTEND THE MEETING AND VOTE YOUR SHARES. / /
SIGNATURE: DATED: , 199
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