<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant /x/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement / / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/x/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
TELULAR CORPORATION
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(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
/x/ No Fee Required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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<PAGE> 2
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 750,000.
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 11, 1996
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IMPORTANT: WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE
AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED.
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<PAGE> 3
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 23,
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 29, 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,
31,398,084 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.
<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 number of 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 nominee designated by
Motorola. Director Richard D. Haning has been so designated by Motorola.
The nominees, and certain information about them as of December 1, 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 1982 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.
MR. BERNDT, 56, has served as a director of the Company since December
1996. Mr. Berndt was President of New Business Development/Multimedia Ventures &
Technologies for Lucent Technologies, Inc. before he retired. He held the same
position with AT&T prior to the Lucent spinoff. Mr. Berndt was employed by AT&T
since 1963 and was President of its Business Services Business Unit from 1991
until 1993 and President of the International Communications Services Business
Unit from 1987 until 1991. Mr. Berndt is a member of the Council of Foreign
Relations and served on the U.S. Trade Representative's Services Policy Advisory
Commission from 1987 until 1993. Mr. Berndt is a member of the Board of Trustees
for the American Graduate School of International Management and 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.
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
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<PAGE> 5
Motorola for election to the Board pursuant to a Shareholders' Agreement, see
"Certain Transactions -- Shareholders' Agreement".
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.
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 meetings
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 fiscal 1996. Mr. Ford and
Mr. Berndt have been nominated to serve on the audit committee for fiscal 1997.
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
consisted 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. Mr. 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 was 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.
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 29, 1996, the Company had approximately 31,398,084
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
3
<PAGE> 6
its equity position in TelePath to 50% by August 31, 1997. See "Certain
Transactions -- Relationship and Transactions with TelePath Corporation". The
Company has approximately 360,000 shares of Common Stock reserved for stock
options issued in connection with 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 November 29, 1996, there were
approximately 6,092,000 authorized shares of Common Stock unissued and not
reserved for issuance.
The proposal to increase the Stock Incentive Plan and an effort to raise
additional 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 additional 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 additional capital, the number of authorized shares of Common Stock
unissued and not reserved for issuance would be approximately 1,092,000.
On December 3, 1996, the Board of Directors, by unanimous vote, adopted
resolutions approving and recommending that the stockholders adopt an 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, to pursue acquisitions
that benefit future growth or 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 to pursue
or evaluate such transactions.
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 its
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
4
<PAGE> 7
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 2,000,000 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 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 as 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 1,500,000
shares have been granted under the plan, and only 500,000 shares remain
available for future grant under the Plan. On December 3, 1996, the Board of
Directors 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 increase 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 750,000.
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.
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.
5
<PAGE> 8
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 29, 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 15.1%
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)(8)......................... 4,534,242 14.4%
Kenneth E. Millard(4)(6)(11)............................. 36,648 *
Joel J. Bellows(4)(5).................................... 45,171 *
John E. Berndt(4)........................................ 0 *
John A. Blanchard III(4)(5).............................. 1,671 *
Larry J. Ford(4)......................................... 1,671 *
David P. Mixer(1)(2)(4).................................. 785,740 2.5%
Richard D. Haning(4)(9).................................. 4,752,989 15.1%
William E. Spencer(4)(5)(9).............................. 4,752,989 15.1%
Robert C. Montgomery(6)(11).............................. 98,734 *
Raymond M. O'Leary(6)(7)(11)............................. 29,560 *
George Claudio, Jr(6)(11)................................ 96,376 *
Gordon T. Jenkins(6)..................................... 37,000 *
Richard T. Gerstner(6)(10)............................... 52,170 *
John R. Wilkins, Jr.(6)(10).............................. 0 *
Patrick L. Murtha(6)(10)................................. 0 *
All Directors and Officers as a group
(14 Persons)(12)(13)................................... 10,408,725 33.2%
</TABLE>
- ---------------
* Less than one percent.
(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
55% of the total outstanding on the date hereof. The parties thereto
disclaim any beneficial interest attributed to them by virtue of such
Shareholders' Agreement.
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<PAGE> 9
(2) Through their ownership of stock of Columbia Capital Corporation, Messrs.
Warner, Blow and 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 director of the Company that did not stand as a
nominee for re-election or retired from the Board of Directors.
(6) The named individual is a Named Executive Officer of the Company as of
September 30, 1996.
(7) The Named Executive Officer's employment with the Company terminated after
November 29, 1996.
(8) 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.
(9) Includes 4,752,989 shares held by Motorola. As an executive officer of
Motorola, the director may be deemed to share voting and investment power
with respect to the shares held by Motorola. The Director disclaims
beneficial ownership of these shares.
(10) 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 29, 1996.
(11) The number of shares shown as beneficially owned includes options that are
exercisable within 60 days of November 29, 1996.
(12) Includes 234,750 shares that Officers of the Company may acquire pursuant
to options exercisable within 60 days of November 29, 1996.
(13) 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 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 terminating with the
Company before September 30, 1996, see note (10).
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<PAGE> 10
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, for whom, 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 $25,000 as part of his fiscal 1996 bonus, no Named
Executive Officer received any restricted stock award, stock appreciation right
or payment under any long term incentive plan.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
OTHER ANNUAL ------------- ALL OTHER
NAME YEAR SALARY($) BONUS($) COMPENSATION($) OPTIONS(#)(1) COMPENSATION($)
- --------------------------- ---- --------- -------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
William L. De Nicolo(2).... 1996 $ 200,000(3) $ 0 $ 0 $ 0 $ 0
Chairman of the Board 1995 239,250(3) 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(15)..... 1996 160,529 0 14,509(9) 100,000(10) 0
Senior Vice-President 1995 89,327 0 97,021(9) 24,000 0
Sales and Marketing 1994 30,467 0 15,234(9) 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(13)...... 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 and/or repriced during the fiscal
year.
(2) The named executive officer served as Chief Executive Officer (CEO) during
fiscal 1996. Mr. Gerstner served as CEO from November 1993 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
8
<PAGE> 11
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 from
the Company.
(15) The named executive officer's employment terminated with the Company
subsequent to September 30, 1996 and 76,000 options were canceled.
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 and the Company
agreed to terminate the consulting agreement effective September 30, 1997.
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 with at least 60 days prior to notice. Under the agreement, Mr. Millard
is to receive 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.
9
<PAGE> 12
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% to 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 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 equivalent to six
months of salary if terminated without cause 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 $100,650, payment of all operating expenses for automobiles
operated by immediate family members as well as a monthly automobile allowance,
participation in the Company's Employee Stock Incentive Plan, participation in
the Company's bonus plan for executives and a minimum severance payment if
terminated without cause before the term of the contract.
All employment agreements are terminable for cause.
10
<PAGE> 13
OPTION/SAR GRANTS
The following table sets forth information concerning stock option/SAR
grants made to each of the Named Executive Officers for the twelve months ended
September 30, 1996.
<TABLE>
<CAPTION>
INDIVIDUAL
GRANTS
------------
% OF TOTAL
OPTIONS/SARS
GRANTED TO POTENTIAL REALIZABLE VALUE AT
EMPLOYEES IN ASSUMED ANNUAL RATES OF STOCK
TWELVE PRICE APPRECIATION FOR OPTION/SAR
OPTIONS/SARS MONTHS ENDED EXERCISE TERM(1)
GRANTED SEPT. 30, PRICE EXPIRATION ----------------------------------
NAME (#) 1996 ($/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 5/01/06 168,750 1,548,388 3,665,023
50,000 4.8% 5.00 5/01/06 0 147,043 382,225
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 1,836,623
25,000 4.4% 5.00 4/17/06 14,063 101,518 235,692
36,000(3) N/A 4.50 4/17/06 38,250 164,186 357,397
Raymond M. O'Leary................ 76,000 (2) 7.3% 4.50 4/17/06 80,750 346,615
24,000(3) N/A 4.50 4/17/06 25,500 109,457 238,265
George Claudio, Jr................ 48,209(4) N/A 5.56 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.(5)........... 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 an 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, 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 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 $5.5625 during the fiscal year
ended September 30, 1996.
(5) Shares granted were also canceled during the year and, therefore, were not
included in the table.
11
<PAGE> 14
OPTION/SAR EXERCISES AND HOLDINGS
The following table sets forth information concerning the value of
exercisable and unexercisable options/SARS held by each of the Named Executive
Officers as of September 30, 1996.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN THE
OPTIONS/SARS AT MONEY OPTIONS/SARS($)(1)
FY-END(#)
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 0 287,500
Richard T. Gerstner......... 0 0 227,193 0 0 0
Robert C. Montgomery........ 0 0 0 246,000 0 141,250
Raymond M. O'Leary.......... 0 0 0 100,000 0 62,500
George Claudio Jr........... 0 0 96,376 48,209 404,297 0
Gordon T. Jenkins........... 0 0 24,850 37,000 0 0
John R. Wilkins, Jr......... 0 0 18,023 0 0 0
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.
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.
12
<PAGE> 15
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
ended 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 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 shares
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.
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 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
13
<PAGE> 16
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 $8,586,000.
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.
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 provides the Company with fifty percent control of TelePath, and
it 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.
14
<PAGE> 17
OTHER TRANSACTIONS AND EVENTS
Bellows and Bellows, of which Joel Bellows is the principal, has provided
legal services to the Company. Mr. Bellows is a director of the Company that
will not stand as a nominee for re-election, a 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.
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
15
<PAGE> 18
Mr. Millard at the time of his employment. The following table summarizes
options repriced for executive officers:
<TABLE>
<CAPTION>
LENGTH OF
ORIGINAL
OPTION TERM
NUMBER OF MARKET PRICE REMAINING
SECURITIES OF STOCK AT EXERCISE PRICE AT DATE OF
UNDERLYING TIME OF AT TIME OF NEW REPRICING
OPTIONS/SARS REPRICING OR REPRICING OR EXERCISE OR
NAME AND TITLE DATE AMENDED AMENDMENT AMENDMENT PRICE AMENDMENT
- ------------------------------ ------- ------------ ------------ -------------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Robert C. Montgomery,......... 4/17/96 36,000 $ 5.56 $ 8.25 $ 4.50 5 Years
Raymond M. O'Leary,........... 4/17/96 24,000 5.56 8.25 4.50 5 Years
George Claudio Jr.,........... 4/17/96 48,209 5.56 8.25 5.56 5 Years
Gordon T. Jenkins,............ 4/17/96 12,000 5.56 8.25 5.56 5 Years
Timothy L. Walsh,............. 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 officers' 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
16
<PAGE> 19
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>
Cummulative 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>
Tellular Corporation 100 81 77 48 31 40 86 69 43 21 29 26
NASDAQ Stock Market 100 94 89 87 96 104 119 131 135 142 153 159
Hambrecht&Quist Technology 100 96 89 102 111 123 150 170 146 170 178 189
</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 $5.00 per share on November 29,
1996.
17
<PAGE> 20
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) Form 4 Changes in Beneficial Ownership for Kenneth E.
Millard, Robert C. Montgomery, Frank J.M. ten Brink, Raymond M. O'Leary, Gordon
T. Jenkins, John A. Blanchard III and Larry J. Ford, and (ii) Form 5 Annual
Statement of Beneficial Ownership of Securities for Timothy L. Walsh and George
Claudio Jr.
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 11, 1996
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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
(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
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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.
(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.
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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.
(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
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<PAGE> 24
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.
(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
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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.
(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
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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.
(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
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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.
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.
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(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.
(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).
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(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.
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.
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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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PROXY PROXY
TELULAR CORPORATION
PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON JANUARY 28, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned hereby constitutes and appoints Kenneth E. Millard and
Frank J. M. ten Brink, with full power of substitution in each of them, for
and on behalf of the undersigned to vote as proxies, as directed and permitted
herein, at the 1997 Annual Meeting of Shareholders of the Company to be held
at the North Shore Hilton, 9599 Skokie Blvd., Skokie, IL 60077 on Tuesday,
January 28, 1997 at 9:00 a.m., and at any adjournment thereof, upon matters
set forth in the Proxy Statement and, in their judgment and discretion, upon
such other business as may properly come before the meeting.
PLEASE MARK THIS PROXY AND SIGN AND DATE IT ON THE REVERSE SIDE
AND RETURN IT IN THE ENCLOSED ENVELOPE.
(Continued and to be signed on reverse side.)
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TELULAR CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. / /
<TABLE>
<S> <C>
DIRECTORS RECOMMEND: A VOTE FOR ELECTION OF THE FOLLOWING DIRECTORS AND A VOTE FOR PROPOSAL(S) 2, 3 AND 4.
1. ELECTION OF DIRECTORS -- 3. To approve the Company's
1-John E. Berndt, 2-William L. DeNicolo, Second Amended and Restated
3-Larry J. Ford, 4-Richard D. Haning, FOR FOR ALL Stock Incentive Plan, which
5-Kenneth E. Millard, 6-David P. Mixer. ALL WITHHOLD EXCEPT amends the existing Stock FOR AGAINST ABSTAIN
/ / / / / / 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
Nominee Exception (To withhold authority Stock that may be issued to
to vote for any individual nominees, write any one individual in any
those numbers from the list on the line three-year period from
above) 500,000 to 750,000.
FOR AGAINST ABSTAIN
To Amend the Articles of Incorporation to / / / / / / 4. To ratify and approve the
increase the number of authorized shares of selection of Ernst & Young FOR AGAINST ABSTAIN
Common Stock from 40,000,000 to 75,000,000. 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.
FOR
MARK HERE IF YOU PLAN TO ATTEND / /
THE MEETING AND VOTE YOUR SHARES.
Dated: 199
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Signature(s)
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