SCHEDULE 14A
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INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
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(Name of Registrant as Specified in Its Charter)
Telular Corporation
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<PAGE>
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<PAGE>
TELULAR CORPORATION
647 NORTH LAKEVIEW PARKWAY
VERNON HILLS, IL 60061
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JANUARY 30, 2001
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Telular
Corporation, a Delaware corporation (the "Company"), will be held on Tuesday,
January 30, 2001, at 9:00 a.m. local time, at the Northbrook Hilton, located
at 2855 North Milwaukee Avenue, Northbrook, Illinois 60062 for the purpose of
considering and acting upon the following matters:
1. Election of six directors to the Company's Board of Directors to serve
until the next Annual Meeting of Shareholders or until their successors
have been duly elected and qualified.
2. Approval of the Fourth Amended and Restated Stock Incentive Plan. The
Fourth Amended and Restated Stock Incentive Plan amends the Company's
Third Amended and Restated Stock Incentive Plan by increasing from
1,750,000 to 2,350,000 the number of shares of common stock available
for issuance pursuant to options and other permitted awards.
3. Such other business as may properly come before the Annual Meeting of
Shareholders or any adjournment thereof.
The matters set forth above are more fully described in the Proxy Statement
accompanying this Notice of Annual Meeting of Shareholders.
The Board of Directors has fixed the close of business on November 10, 2000 as
the record date for the determination of shareholders entitled to notice of,
and to vote at, the Annual Meeting of Shareholders or any adjournment thereof.
A list of such shareholders will be available for inspection at the Company's
headquarters located at 647 North Lakeview Parkway, Vernon Hills, IL 60061
during ordinary business hours for the ten-day period prior to the Annual
Meeting of Shareholders.
By Order of the Board of Directors
/S/ Kenneth E. Millard
Chief Executive Officer and President
Vernon Hills, Illinois
December 15, 2000
IMPORTANT: WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN, DATE
COMPLETE AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED. YOU
MAY REVOKE YOUR PROXY AT ANY TIME PRIOR TO VOTING BY FILING WITH THE SECRETARY
OF THE COMPANY A WRITTEN NOTICE OF REVOCATION OR A DULY EXECUTED PROXY BEARING
A LATER DATE, OR BY ATTENDING THE MEETING AND VOTING IN PERSON.
<PAGE>
TELULAR CORPORATION
PROXY STATEMENT FOR 2001
ANNUAL MEETING OF SHAREHOLDERS
The enclosed proxy is solicited by the Board of Directors of Telular
Corporation, a Delaware corporation (the "Company"), for use at the Company's
Annual Meeting of Shareholders to be held on Tuesday, January 30, 2001, at
9:00 a.m. local time (the "Annual Meeting"), or at any adjournment thereof,
for the purposes set forth in this Proxy Statement and the accompanying Notice
of Annual Meeting of Shareholders (the "Notice"). The enclosed proxy, Proxy
Statement and Notice were first mailed to stockholders on or about December
20, 2000. The Annual Meeting will be held at the Northbrook Hilton, located at
2855 North Milwaukee Avenue, Northbrook, Illinois 60062. The Company's
principal executive offices are located at 647 North Lakeview Parkway, Vernon
Hills, Illinois 60061. The Company's telephone number at that address is (847)
247-9400.
Voting Rights and Solicitation of Proxies
The Company's common stock is the only class of security entitled to vote at
the Annual Meeting. As of the close of business on November 10, 2000,
12,670,559 shares of the Company's common stock were issued and outstanding.
Each stockholder is entitled to one vote for each share of common stock held
of record by such stockholder as of the close of business on November 10,
2000. Consequently, only stockholders of record at the close of business on
November 10, 2000 are entitled to notice of, and to vote at, the Annual
Meeting. All shares represented by valid proxies that are received prior to
the Annual Meeting and are not subsequently revoked will be voted, and voted
in accordance with the directions specified in the proxy. See "Votes Required"
for a description of the treatment of proxies in which no directions are
specified. Shares of common stock may not be voted cumulatively. All votes
will be tabulated by the inspector of election appointed for the Annual
Meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes.
Revocability of Proxies
Any shareholder who has executed and returned a proxy may revoke it at any
time before the proxy is voted. The proxy 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 by
attending the meeting and voting in person. Attendance at the meeting will
not, by itself, revoke a proxy.
Quorum
The Company's bylaws provide that the holders of fifty percent (50%) of the
Company's common stock issued and outstanding and entitled to vote at the
Annual Meeting, present in person or represented by proxy, shall constitute a
quorum for the transaction of business at the Annual Meeting. Abstentions and
broker non-votes will be counted as present for the purpose of determining the
presence of a quorum.
<PAGE>
Votes Required
Proposal 1. Directors are elected by a plurality of the affirmative votes cast
by those shares present in person, or represented by proxy, and entitled to
vote at the Annual Meeting. The nominees for director receiving the highest
number of affirmative votes will be elected. Abstentions and broker non-votes
will not be counted toward a nominee's total. In the event no directions are
specified, valid proxies that are not revoked will be voted FOR the nominees
identified in this Proxy Statement. Should any nominee identified in this
Proxy Statement decline or prove unable to serve as a director at the time of
the Annual Meeting, valid proxies voted FOR the nominee and that are not
revoked will be voted for any nominee who may be designated by the present
Board of Directors to fill the vacancy. Each of the nominees identified in
this Proxy Statement has consented to being named in this Proxy Statement and
to serve if elected. To the knowledge of the Company's Board of Directors, as
of the date of this Proxy Statement no nominee intends to decline service as a
director or will prove unable to serve as a director.
Proposal 2. Approval of the Company's Fourth Amended and Restated Stock
Incentive Plan requires the affirmative vote of a majority of those shares
present in person, or represented by proxy, and entitled to vote at the Annual
Meeting. Abstentions will be counted as votes against approval. Broker non-
votes will be counted as neither votes for nor votes against approval. In the
event no directions are specified, valid proxies that are not revoked will be
voted FOR approval of the Company's Fourth Amended and Restated Stock
Incentive Plan. The Board of Directors recommends that shareholders vote FOR
approval of the Company's Fourth Amended and Restated Stock Incentive Plan.
Solicitation
The Company will bear the entire cost of solicitation of proxies including
preparation, assembly, printing and mailing of this Proxy Statement, the proxy
and any additional soliciting material furnished to stockholders. Soliciting
material will be furnished to brokerage houses, fiduciaries, and custodians
for forwarding to beneficial owners. The Company may reimburse such persons
for their costs in forwarding the soliciting material. The original
solicitation of proxies by mail may be supplemented through solicitation by
telephone, telegram, or other means by directors, officers, employees or
agents of the Company. No additional compensation will be paid to these
individuals for any such services. The Company may also employ a proxy
solicitation service, in which case the Company may pay a fee to the proxy
solicitation service.
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Board of Directors will consist of six directors to be elected at
the Annual Meeting to hold office until the next Annual Meeting of Shareholders
or until their successors have been duly elected and qualified. All nominees
are currently members of the Company's Board of Directors.
The nominees, and certain information about them as of December 1, 2000, are
set forth below.
William L. De Nicolo, age 54, is the founder of the Company and has served
as Chairman of the Company's Boards of Directors and its predecessors,
including DNIC Brokerage Co. ("DNIC") and The Telular Group L.P., since 1986.
Mr. De Nicolo served as Chief Executive Officer of the Company and its
predecessors 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, now a principal stockholder of the Company.
Kenneth E. Millard, age 53, 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 from 1992 to 1996. 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 for four years. From 1972 to 1982,
Mr. Millard worked for AT&T and Wisconsin Bell as an attorney.
John E. Berndt, age 60, has served as a director of the Company since December
1996. Mr. Berndt retired from Sprint Corporation on September 30, 2000. From
1998 to September 2000, Mr. Berndt was President of Sprint International, an
operating unit of Sprint Corporation. From 1997 to 1998, Mr. Berndt was
President of Flour Daniel Telecom, an operating company of Flour Daniel, Inc.
Mr. Berndt was President of AT&T New Business Development/Multimedia Ventures
from 1993 until the spinoff of Lucent Technologies from AT&T occurred in 1997.
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 a former member of the Board of Directors for
the University of Wisconsin Foundation.
Larry J. Ford, age 59, has served as a director of the Company since March
1994. Mr. Ford joined ADC Telecommunications Inc. as Senior Vice President
and President of ADC's Integrated Solutions Group in October 1999. Mr. Ford
was previously President and Chief Executive Officer of Information Advantage
from April 1995 to August 1999. Prior to that time, Mr. Ford was employed by
Systems Software Associates, Inc. as a Vice Chairman from November 1994 to
March 1995, and the Chairman, Chief Executive Officer and President from
August 1991 to October 1994. Prior to his service with Systems Software
Associates, Inc., Mr. Ford worked for IBM for 28 years, his most recent
position being Vice President of Information and Telecommunications Systems.
<PAGE>
Richard D. Haning, age 49, has served as a director of the Company since April
1995. Mr. Haning is a Senior Vice President of Motorola and has been a
Corporate Vice President with Motorola since 1990. Mr. Haning has been with
Motorola for the past 23 years.
Daniel D. Giacopelli, age 42, has served as a director and Executive Vice
President -- Chief Technology Officer of the Company since October 28, 1997.
Mr. Giacopelli founded and was President and Chief Executive Officer of
Wireless Domain, Incorporated from September 1995 to October 1997. Prior to
that time, Mr. Giacopelli was Director of Engineering of the Wireless Group of
Telephonics Corporation from 1987 to 1995. Prior to 1987, Mr. Giacopelli was
President and CEO of Valinor Electronics, Inc.
There are no family relationships among any officers and directors of the
Company.
Board Committees and Meetings
During the fiscal year ended September 30, 2000, the Board of Directors held
seven meetings. The Board of Directors has an Audit Committee and a
Compensation Committee. The Board of Directors does not have a standing
Nominating Committee. Each incumbent Board of Directors member attended at
least 75% of the aggregate of (i) the total number of meetings of the Board of
Directors held during the period during which he was a director, and (ii) the
total number of meetings held by all committees of the Board of Directors on
which he served during the period that he was a committee member.
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 for, and assessing the performance of the
Company's executive officers, and making grants of salary, annual incentive
compensation and long-term incentive compensation. The Compensation Committee,
which as of the end of fiscal year 2000 consisted of Mr. Ford and Mr. De
Nicolo, met five times during fiscal year 2000.
The Board of Directors has an Audit Committee, which assists the Board of
Directors in fulfilling its responsibilities to stockholders concerning the
Company's financial reporting and internal controls, and facilitates open
communication among the Audit Committee, the Board of Directors, the outside
auditors and the Company's management. The Audit Committee discusses with
management and the outside auditors the financial information developed by the
Company, the Company's systems of internal controls and the Company's audit
process. The Audit Committee recommends to the Board of Directors each fiscal
year the independent auditors who will audit the books of the Company for that
year. The independent auditors meet with the Audit Committee to review and
discuss various matters pertaining to the audit, including the Company's
financial statements, the report of the independent auditors on the results,
scope and terms of their work, and their recommendations concerning the
financial practices, controls, procedures and policies employed by the Company.
The Board of Directors has adopted a written charter for the Audit Committee,
a copy of which is attached to this Proxy Statement as Appendix B. The Audit
Committee consists of Messrs. Berndt, De Nicolo and Ford, each of whom
qualifies as an "independent director" under Rule 4200(a)(14) of the National
Association of Securities Dealers' listing standards. The Audit Committee met
five times during the fiscal year ended September 30, 2000.
<PAGE>
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 and Mr. Giacopelli are employees
of the Company. Mr. De Nicolo and Mr. Haning are affiliated with a significant
beneficial owner.
Each director who is neither an employee of the Company nor affiliated with a
significant beneficial owner of the Company is compensated in the form of stock
options for attending meetings of the Board of Directors and committee meetings
of the Board of Directors. During the fiscal year ended September 30, 2000, Mr.
Berndt and Mr. Ford, who are neither employees of the Company nor affiliated
with a significant beneficial owner of the Company, each received an option to
purchase 5,000 shares of the Company's common stock. These stock options were
issued on October 26, 1999, have a strike price of $1.44 (the market price of
the Company's common stock on that date), and were fully vested as of October
26, 2000.
All directors are reimbursed for all reasonable expenses of attendance at each
meeting.
PROPOSAL 2
APPROVAL OF THE FOURTH AMENDED
AND RESTATED STOCK INCENTIVE PLAN
The Company's Fourth Amended and Restated Stock Incentive Plan (the "Plan")
amends the Company's Third Amended and Restated Stock Incentive Plan by
increasing from 1,750,000 to 2,350,000 the number of shares of common stock
available for issuance pursuant to options and other permitted awards.
A copy of the Plan is attached to this Proxy Statement as Appendix A.
General
The original Telular Corporation Stock Incentive Plan became effective on
November 17, 1993. Under the Telular Corporation Stock Incentive Plan, as
subsequently amended, stock options and stock awards for up to 1,750,000
shares of common stock may be issued to officers and key employees of the
Company. On September 6, 2000, 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 the Telular Corporation Stock
Incentive Plan, as amended, from 1,750,000 to 2,350,000.
As of September 30, 2000, stock options to purchase 1,001,211 shares of common
stock were outstanding under the Telular Corporation Stock Incentive Plan, and
1,009,514 shares of common stock were available for issuance.
Reason for Amendment
The proposed amendment to the Company's Third Amended and Restated Stock
Incentive Plan is intended to ensure that the Company has sufficient capacity
for additional equity-based incentives, including the 318,642 options
authorized by the Compensation Committee of the Board of Directors (the
"Compensation Committee") on September 6, 2000 and described below. See
"Summary of the Plan -- Purpose."
<PAGE>
On September 6, 2000, the Compensation Committee authorized the issuance,
subject to stockholder approval of the Plan, of options for an additional
318,642 shares of the Company's common stock, at an option exercise price of
$17.50 per share (the closing sales price of the Company's common stock on that
date), as follows:
<TABLE>
Options to Exercise Expiration
Name Position be granted Price Date
--------------------- ----------------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Kenneth E. Millard President & CEO 73,047 $17.50 09/06/06
Daniel D. Giacopelli Executive VP & CTO 44,271 17.50 09/06/06
Jeffrey L. Herrmann Executive VP & COO 26,262 17.50 09/06/06
James M. Hawthorne Senior Vice President 3,126 17.50 09/06/06
Richard D. Beckley Senior Vice President 0 0 n/a
Executive Group 146,706 17.50 09/06/06
Non-Executive Directors n/a n/a n/a
Non-Executive Officer
Employee Group 171,936 17.50 09/06/06
</TABLE>
As of December 8, 2000, the closing sales price of the Company's common
stock as reported by the NASDAQ National Market System was $6.38 per
share.
SUMMARY OF THE PLAN
Purpose
The Plan enables officers and key employees of 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. The Plan is designed to assist in the
attraction and retention of officers and key employees of outstanding ability,
and to increase the identity of interests between such officers and employees
and the Company's shareholders. 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 its
shareholders.
Number and Source of Shares Subject to the Plan
The Company may grant awards under the Plan (including awards granted under the
Telular Corporation Stock Incentive Plan, as amended prior to the amendment and
restatement that is the subject of shareholder approval in the Annual Meeting)
with respect to not more than 2,350,000 shares of common stock, 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.
Administration
The Compensation Committee shall have discretion to determine whether to grant
or award options, stock appreciation rights, or any other equity-based
incentives under the Plan, to select participants in the Plan, and to make
decisions concerning the timing, pricing and the amount of grants or awards
under the Plan.
<PAGE>
TYPES OF AWARDS
Incentive Stock Options
The Plan provides for the issuance of "incentive stock options" within the
meaning of Section 422(b) of the Internal Revenue Code of 1986, as amended
(the "Code"). The exercise price established by the Compensation Committee for
an incentive stock option shall not be less than the fair market value of the
common stock 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 more than 10 percent of the total combined voting power of all
classes of stock of the Company (such a grantee, a "Ten Percent Shareholder"),
the exercise price shall not be less than 110 percent of the fair market value
of the common stock on the date the option is granted.
The term of each incentive stock option shall end on a date fixed by the
Compensation Committee and set forth in the relevant option agreement;
provided, however, that the term may not extend beyond ten years from the date
the option is granted. Moreover, in no event shall the term of an incentive
stock option granted to a Ten Percent Shareholder exceed five years from the
date the option is granted.
The recipient of an incentive stock option is not taxed when the incentive
stock option is granted or when it is exercised, although, when an incentive
stock option is exercised, the difference between the exercise price of the
incentive stock option and the then-current fair market value of the common
stock underlying the incentive stock option is treated as income for
alternative minimum tax purposes. When the recipient later sells or otherwise
disposes of the shares acquired upon exercise of the incentive stock option,
the recipient generally pays taxes at capital gains rates on the difference
between the exercise price of the incentive stock option and the sale price of
the common stock underlying the incentive stock option. At no time can the
Company take a business expense deduction for incentive stock options unless
the recipient sells the shares underlying the incentive stock option in
violation of certain holding period requirements (in which case the incentive
stock option would be treated as a nonqualified stock option).
Nonqualified Stock Options
Any option not designated by the Compensation Committee as an incentive stock
option shall constitute a nonqualified stock option within the meaning of
Section 422(b) of the Code. The term of each nonqualified stock option shall
end on a date fixed by the Compensation Committee and set forth in the
relevant option agreement; provided, however, that the term may not extend
beyond ten years from the date the option is granted.
In no event may the exercise price for a nonqualified stock option be less
than the par value of the common stock underlying the nonqualified stock
option. Subject to the foregoing limitation, the exercise price for a
nonqualified stock option shall be established by the Compensation Committee
and set forth in the option agreement.
<PAGE>
The recipient of a nonqualified stock option is not taxed when the
nonqualified stock option is granted unless the option itself has a readily
ascertainable market value or the recipient elects to pay income tax at that
time. A recipient who is not taxed when the nonqualified stock option is
granted generally is taxed at ordinary income rates, when the nonqualified
stock option is exercised, on the difference between the exercise price of the
nonqualified stock option and the then-current fair market value of the common
stock underlying the nonqualified stock option. In addition, the Company can
take a business-expense deduction for nonqualified stock options when the
nonqualified stock options are exercised equal to the amount the recipient
recognizes as ordinary income. When the recipient sells or otherwise disposes
of the shares underlying the nonqualified stock option, the recipient
generally pays taxes at capital gains rates on the difference between the sale
price and the fair market value of the common stock underlying the
nonqualified stock option at the time of exercise.
Stock Appreciation Rights
The Compensation 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 Compensation Committee shall determine.
Any stock appreciation right shall permit the grantee to receive, upon exercise
of the right, an amount (to be paid in cash, in shares of the Company's common
stock, or in both cash and shares of Company's common stock, as determined by
the Company in its sole discretion at any time prior to or after exercise)
equal 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 exercise price of the related option in the case of a right
that is related to an option, or (ii) in the case of a right that is not
related to any option, the fair market value of a share of the Company's common
stock as of the date the right was granted.
Performance Shares
The Compensation Committee may, from time to time, grant performance shares. A
performance share shall entitle the grantee to receive, as soon as practicable
after a payment date specified by the Compensation Committee at the time the
performance share is granted, an amount equal to the excess (if any) between
(1) the fair market value of a share of the Company's common stock on the
payment date, and (2) the fair market value of a share of the Company's common
stock on the date the performance share is granted. Unless the Compensation
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 (as defined in the Plan) until the payment date.
<PAGE>
Stock-Based Awards
The Compensation 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 of the
Company's common stock, provided that such grants comply with applicable law.
The Compensation Committee may subject such awards to such vesting or earnout
provisions, restrictions on transfer, and/or other restrictions on incidents
of ownership as the Compensation Committee may determine, provided that such
restrictions are not inconsistent with the terms of the Plan. The Compensation
Committee may grant awards under the Plan that require no payment of
consideration by the grantee (other than services previously rendered or, to
the extent permitted by applicable law, services to be rendered in the
future), either on the date of the grant or the date one or more restrictions
on the grant are removed.
Rights as Shareholders
No award shall confer upon a grantee any rights of a shareholder unless and
until shares of common stock are actually issued to the grantee. Subject to
any required approval by the Company's shareholders, if the Company shall be a
party to any merger, consolidation or reorganization in which shares of the
Company's common stock 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 shares of the Company's common
stock equal to the amount subject to the award would be entitled to receive
pursuant to such merger, consolidation or reorganization.
Termination, Suspension or Modification of Plan
The Board of Directors may at any time terminate, suspend or modify the Plan,
except that the Board of Directors shall not, without the approval of the
holders of a majority of the Company's outstanding shares of common stock
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 of common stock
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); (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, without the grantee or beneficiary's prior consent, 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. However, adjustments for changes in capitalization will be
assumed not to adversely affect any of the rights described in the previous
sentence.
<PAGE>
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of November 10, 2000 with
respect to ownership of the Company's common stock as of November 10, 2000, (i)
by each person who is known by the Company to own beneficially more than 5% of
the shares of the Company's common stock outstanding as of November 10, 2000,
(ii) by each director of the Company, (iii) by each individual serving as the
Company's chief executive officer, or in a similar capacity, during the fiscal
year ended September 30, 2000 (the "CEO"), (iv) by each of the Company's four
most highly compensated executive officers who served as executive officers of
the Company during the fiscal year ended September 30, 2000 (together with the
CEO, the "Named Executive Officers"), and (iv) by all directors of the Company
and Named Executive Officers as a group. Common stock is the Company's only
outstanding class of equity security.
<TABLE>
Name of Beneficial Owner Number of Shares Percent
------------------------ ---------------- -------
<S> <C> <C>
Motorola 1,188,247 9.4%
1303 E. Algonquin Rd.
Schaumburg, IL 60601
DNIC(1) 1,044,959 8.2%
20546 N. Milwaukee Ave.,#356
Deerfield, IL 60014
William L. De Nicolo(1)(3)(4) 1,102,498 8.6%
Kenneth E. Millard(2)(3)(6) 42,270 *
John E. Berndt(2)(6) 26,250 *
Larry J. Ford(2)(6) 29,168 *
Richard D. Haning(2)(5) 1,188,247 9.4%
Daniel D. Giacopelli(2)(3)(6) 175,273 1.4%
Jeffrey L. Herrmann(3)(6) 32,470 *
James M. Hawthorne(3)(6) 4,167 *
Richard K. Beckley(3)(6)(8) 0 *
All Directors and Named Executive
Officers as a group(8persons)(7) 2,600,343 20.5%
</TABLE>
<PAGE>
---------------------------------
* Less than one percent.
(1) As a director of DNIC and owner of 68.7% of the outstanding common
stock of DNIC, Mr. De Nicolo may be deemed to have sole or shared
voting or investment power with respect to common stock of the
Company held by DNIC.
(2) The named individual is a director of the Company.
(3) The named individual is a Named Executive Officer.
(4) Includes 1,044,959 shares of common stock held by DNIC.
(5) Includes 1,188,247 shares of common stock held by Motorola. As an
executive officer of Motorola, Mr. Haning may be deemed to have sole
or shared voting or investment power with respect to the shares of
common stock held by Motorola. Mr. Haning disclaims beneficial
ownership of these shares of common stock.
(6) The number of shares shown as beneficially owned includes options
that are exercisable within 60 days of November 10, 2000.
(7) Includes 187,243 shares of common stock that directors of the
Company and named executive officers may acquire pursuant to options
exercisable within 60 days of November 10, 2000.
(8) Officer's employment with the Company terminated on June 2, 2000.
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain information relating to compensation
received by each of the Named Executive Officers for services rendered during
each of the Company's last three completed fiscal years.
<TABLE>
Annual Compensation
Long-Term
Compensation All
Awards/ Other
Name Year Salary Bonus Options(1) Compensation
-------------------------- ---- -------- ------ ---------- ------------
<S> <C> <C> <C> <C> <C>
Kenneth E. Millard 2000 $250,000 $100,000 73,047 $2,969,574(2)(3)
Chief Executive Officer 1999 250,000 0 162,500 2,922(2)
President and Director 1998 250,000 200,000 0 9,615(2)
Daniel D. Giacopelli 2000 $200,000 $ 50,000 44,271 $ 854,448(3)
Chief Technology Officer 1999 200,000 0 62,500 0
Executive Vice-president 1998 200,000 100,000 0 0
Director
Jeffrey L. Herrmann 2000 $158,077 $ 25,000 70,012 $ 546,663(3)
Chief Financial Officer 1999 125,000 4,359 26,250 0
Executive Vice-President 1998 112,500 52,025 10,000 0
Secretary
James M. Hawthorne 2000 $114,048 $ 28,750(4) 3,126 $ 71,666(3)
Senior Vice-President
Richard K. Beckley(5) 2000 $ 73,500 $ 29,450(4) 23,000 $ 323,618(3)
Senior Vice-President
</TABLE>
(1) Represents the number of shares of common stock underlying options
granted during each fiscal year.
(2) Amount includes medical expenses paid by the Company pursuant to Mr.
Millard's employment agreement with the Company
(3) Includes amount realized from the exercise of stock options - See
"Option Exercise and Fiscal Year-End Options Values" table below.
Amount realized is equal to the difference between the exercise
price and the closing sales price, on the date of exercise, of the
Company's common stock as reported by the NASDAQ National Market System.
(4) Represents sales commissions.
(5) Executive's employment with the Company terminated on June 2, 2000.
<PAGE>
Employment Contracts
On April 18, 1996, the Company entered into an employment agreement with
Kenneth E. Millard, pursuant to which Mr. Millard agreed to serve as Chief
Executive Officer and President of the Company. Under the employment agreement,
Mr. Millard's term of employment shall continue until terminated by either the
Company or Mr. Millard with at least 60 days prior notice. The employment
agreement entitles Mr. Millard to receive an annual base salary of $250,000.
Mr. Millard is also eligible under the employment agreement to receive an
annual incentive bonus of up to $200,000. The annual incentive bonus is payable
quarterly, one-half in common stock of the Company and one-half in cash.
Payment of the bonus is dependent upon the achievement by Mr. Millard of annual
performance targets established by the Compensation Committee. If Mr. Millard's
employment is terminated by the Company other than for "cause", as defined in
the employment agreement, Mr. Millard will be entitled to receive upon
termination a lump-sum severance payment in an amount equal to $250,000.
Mr. Millard was granted options to purchase 125,000 shares of the Company's
common stock as part of his employment agreement with the Company. Options to
acquire 12,500 shares of the Company's common stock at $12.25 per share vested
on April 18, 1996. Options to acquire 37,500 shares of the Company's common
stock at $12.25 per share vested in 36 monthly installments from June 1996
through May 1999. Options to acquire 75,000 shares of the Company's common
stock at $12.25 per share shall vest on April 30, 2003 or earlier if certain
cliff vesting targets are met. Under cliff vesting, for each $8.00 increase
over a base price of $20.00 in the closing bid price on NASDAQ for the
Company's common stock which remains in effect for 30 consecutive trading days,
options for 6,250 shares will vest on the first business day after such 30-day
period. There may be 30-day periods for which the closing bid price of the
common stock has increased over the applicable base price by more than $16, in
which case the amount of shares subject to cliff options that have vested will
increase in corresponding multiples of 6,250. Under cliff vesting, during the
first, second and third years of Mr. Millard's employment, cliff options for no
more than 40%, 30% and 30%, respectively, of the 75,000 shares of common stock
covered by cliff options shall vest. All options granted under Mr. Millard's
employment agreement terminate on the earlier of May 1, 2006 and the date that
is 180 days after Mr. Millard is no longer employed by the Company. Mr. Millard
has been granted options to acquire an additional 273,047 shares of the
Company's common stock separate from his employment agreement.
On November 10, 1997, in connection with the Company's acquisition of Wireless
Domain, Inc., the Company entered into an employment agreement with Daniel D.
Giacopelli, pursuant to which Mr. Giacopelli agreed to serve as Executive Vice-
President and Chief Technology Officer of the Company. Mr. Giacopelli's
employment agreement provides for an annual salary of $200,000. Mr. Giacopelli
is also eligible under the employment agreement to receive an annual incentive
bonus of up to $100,000. The annual incentive bonus is payable quarterly, one-
half in common stock of the Company and one-half in cash. Payment of the bonus
is dependent upon the achievement by Mr. Giacopelli of annual performance
targets established by the Compensation Committee. If Mr. Giacopelli's
employment is terminated by the Company other than for "cause", as defined in
the employment agreement, Mr. Giacopelli shall be entitled to receive up to
six months' salary in severance. Under the employment agreement, Mr.
Giacopelli was granted an option to acquire 62,500 shares of Company's common
stock at $12.25 per share, with 100% vesting on October 29, 2004. Mr.
Giacopelli has been granted options to acquire an additional 106,771 shares of
the Company's common stock separate from his employment agreement.
<PAGE>
Except for Mr. Millard and Mr. Giacopelli, none of the Named Executive Officers
have entered into written employment agreements with the Company.
Option Grants
The following table sets forth information concerning stock option grants made
to each of the Named Executive Officers during the fiscal year ended September
30, 2000.
<TABLE>
% of Total Potential Realizable Value
Number of Options at Assumed Annual Rates of
Shares Granted to Stock Price Appreciation
Underlying Employees for Option Term(1)
Options in Fiscal Exercise Expiration ---------------------
Name Granted Year Price Date 0% 5% 10%
---------- ---------- ---------- -------- --------- -- -------- --------
<S> <C> <C> <C> <C> <C><C> <C>
Kenneth E.
Millard 73,047 10.1% $17.50 09/06/06 $0 $434,752 $986,304
Daniel D.
Giacopelli 44,271 6.1% 17.50 09/06/06 0 263,487 597,761
Jeffrey L.
Herrmann 26,262 3.6% 17.50 09/06/06 0 156,303 354,598
Jeffrey L.
Herrmann 43,750 6.0% 10.00 12/15/09 0 275,141 697,262
James M.
Hawthorne 3,126 0.4% 17.50 09/06/06 0 18,605 42,208
Richard K.
Beckley 23,000 3.2% 1.88 09/22/00 0 n/a n/a
</TABLE>
(1) The dollar amounts under these columns are the result of calculations
based on an assumed 5% and 10% annual rate of appreciation in the market
price of the Company's common stock over the terms of the options. These
calculations are mandated by the Securities and Exchange Commission. We
can provide no assurance that during the terms of the options the market
price of the Company's common stock will appreciate at the 5% or 10%
assumed annual appreciation rates.
<PAGE>
Option Exercise and Fiscal Year-End Option Values
The following table sets forth information concerning option exercises by Named
Executive Officers during the fiscal year ended September 30, 2000 and the
value of the Named Executive Officers' option holdings as of September 30,
2000.
<TABLE>
Number of Value of
Unexercised Unexercised in the
Shares Options at FY-End Money Options(1)
Acquired ---------------- ----------------
upon Value Exer- Unexer- Exer- Unexer-
Name exercise Realized cisable cisable cisable cisable
------------------- -------- ---------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Kenneth E. Millard 178,906 $2,965,674 27,083 192,058 $247,214 $448,982
Daniel D. Giacopelli 36,458 854,448 55,988 76,825 112,723 164,363
Jeffrey L. Herrmann 34,796 546,663 25,673 53,113 92,340 118,420
James M. Hawthorne 6,249 71,666 0 9,377 0 39,349
Richard K. Beckley 34,583 323,618 0 0 0 0
</TABLE>
(1) Represents the fair market value per share of the Company's common stock
on the last day of the fiscal year less the option exercise price for each
of the options multiplied by the number of shares underlying each of the
options. The fair market value per share was $12.88, based upon the closing
sales price of the Company's common stock on the last trading day of the
fiscal year, as reported by the NASDAQ National Market System.
<PAGE>
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 these shareholders. Pursuant to the Shareholders' Agreement, Motorola has
the right to nominate at least one director to the Company's Board of Directors
if it holds at least 10% of the outstanding shares of the Company's common
stock, and if it holds at least 20% of the outstanding shares of the Company's
common stock it may nominate at least two directors. In each of the above
cases, the principal stockholders of the Company are party to the Shareholders'
Agreement and have agreed to vote in favor of the election of Motorola's
nominee(s). Motorola currently owns 9.4% of the Company's common stock and is
not entitled to name a nominee under the Shareholder's Agreement. As required
by the Shareholders' Agreement, the Company's 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 shares of
the Company's voting stock:
(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 of, or supplement to, the Company's certificate of
incorporation or bylaws; or
(iv) discontinuance, dissolution or liquidation of the Company or the
Company's business.
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 the stockholders party to the Shareholders'
Agreement intend to consider the offer, Motorola will have the right to submit
a bid as well. The Company and the stockholders party to the Shareholders'
Agreement may not approve a transaction with a third party that is at a
valuation lower than that offered by Motorola. The rights of Motorola will
terminate upon any sale by Motorola of common stock after which Motorola owns
less than 20% of the outstanding shares of the Company's common stock on a
fully-diluted basis.
Under the Shareholders' Agreement, DNIC 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 a contribution agreement with The Telular Group L.P., predecessor
of the Company, in which DNIC contributed a variety of assets including
intellectual property rights, DNIC retained and did not contribute the right
to receive the first $250,000 per year in royalty payments under license
agreements with respect to the contributed technology. The Company collects
these revenues for the benefit of, and pays them over to, DNIC. A total of
$250,000 was received by the Company and paid over to DNIC pursuant to this
agreement during the fiscal year ended September 30, 2000.
<PAGE>
Transactions with Motorola
Pursuant to a Patent Cross License Agreement entered into on March 23, 1990,
and amended November 2, 1993 and May 5, 1998, 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 the fiscal year ended September 30, 2000, the Company received
approximately $1,496,000 in royalties from Motorola and purchased transceivers
and other equipment from Motorola for approximately $9,114,000.
In November 1993, Motorola purchased from the Company 956,060 shares of common
stock (the other 232,187 shares Motorola holds were purchased from shareholders
of the Company in April, 1994) 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; an 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 19, 1998, and the date on which Motorola ceases to own any common
stock of the Company. The Company granted to Motorola a limited right of first
refusal with respect to transceiver purchases by the Company.
Relationship and Transactions with Wireless Domain Incorporated (formerly
Telepath Corporation)
Effective October 1, 1997, the Company acquired Wireless Domain Incorporated
("WD"). Under the terms of the merger, the Company issued 125,000 shares of
common stock and relinquished control of the 125,000 shares of the Company's
common stock held by WD. Prior to October 1, 1997, the Company had acquired 50%
of WD in three separate transactions during 1997 and 1996. Prior to the merger,
the Company purchased development services from WD.
The former president of WD, Daniel D. Giacopelli, has served as a director,
Executive Vice President and Chief Technology Officer of the Company since
October 28, 1997.
Other Transactions and Events
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 2000,
the Company paid Hamman and Benn aggregate fees of $478,602. Cash payments
totaled $362,328 and payments made in the form of common stock of the Company
were valued at $116,274 based upon the fair value of legal services received.
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
Executive compensation is administered by the Compensation Committee of the
Board of Directors (the "Compensation Committee"). The Compensation Committee
is a standing committee composed of two directors, Mr. Ford and Mr. De Nicolo.
Since Telular's initial public offering in January 1994, the Compensation
Committee 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 and employees. The Compensation
Committee also administers the Company's stock incentive plans and is
responsible for, among other things, the selection of participants and
decisions concerning the timing, pricing and the amount of grants or awards.
The Compensation Committee upon recommendation of the CEO decided to provide
merit wage increases to non-executive employees for fiscal year 2000. These
employees were granted the continued opportunity to participate in two Company
incentive plans.
Before making compensation recommendations with respect to executive officers
during the past fiscal year, the Compensation Committee reviewed base salaries
proposed by the CEO, and evaluated each executive officer's experience and
proposed responsibilities and the salaries of similarly situated executives. In
determining its recommendations for adjustments of executive officers' base
salaries for fiscal year 2000, the Compensation Committee focused primarily on
each officer's contributions towards the Company's success in moving toward its
long term goals, the accomplishment of goals set by the executive officer and
approved by the Compensation Committee, and the Compensation Committee's
assessment of the quality of services rendered by the executive officer. The
executive officers were granted the continued opportunity to participate in a
Company incentive plan.
The CEO's compensation for fiscal year 2000 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 significant equity and cash
incentive components. During fiscal year 2000, the CEO received $100,000 in
cash incentive compensation.
<PAGE>
The following table summarizes options repriced for past and present executive
officers:
<TABLE>
TEN-YEAR OPTION REPRICINGS
Length of
Number of Market Original
Securities Price of Exercise Option Term
Underlying Stock at Price at New Remaining
Repricing Options Time of Time of Exercise at Date of
Name Date Repriced Repricing Repricing Price Repricing
------------------- -------- -------- --------- --------- ----- ---------
<S> <C> <C> <C> <C> <C> <C>
Kenneth E. Millard 10/28/97 37,500 $12.25 $19.12 $12.25 8.5 Years
Kenneth E. Millard 10/28/97 125,000 12.25 18.00 12.25 5.0 Years
Robert C. Montgomery 10/28/97 18,750 12.25 19.12 12.25 5.5 Years
Robert C. Montgomery 10/28/97 46,250 12.25 18.00 12.25 8.5 Years
Robert C. Montgomery 10/28/97 6,250 12.25 20.00 12.25 8.5 Years
Robert C. Montgomery 4/17/96 9,000 22.24 33.00 18.00 5.0 Years
S.W.R.(Sandy) Moore 10/28/97 12,500 12.25 22.25 12.25 9.0 Years
Jeffrey L. Herrmann 10/28/97 5,000 12.25 23.75 12.25 5.5 Years
Raymond M. O'Leary 4/17/96 6,000 22.24 33.00 18.00 5.0 Years
George Claudio Jr. 4/17/96 12,052 22.24 33.00 22.24 5.0 Years
Gordon Jenkins 4/17/96 3,000 22.24 33.00 22.24 5.0 Years
Timothy Walsh 4/17/96 2,500 22.24 33.00 22.24 5.0 Years
</TABLE>
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
Larry J. Ford
William L. De Nicolo
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors (the "Audit Committee") has
reviewed and discussed with the Company's management the audited financial
statements of the Company for the fiscal year ended September 30, 2000. The
Audit Committee has discussed with Ernst & Young LLP, the Company's independent
auditors, the matters required to be discussed by Statement on Auditing
Standards No. 61, as currently in effect. The Audit Committee has received the
written disclosures and the letter from Ernst & Young LLP required by
Independence Standards Board Standard No. 1, as currently in effect, and has
discussed with representatives of Ernst & Young LLP the independence of Ernst &
Young LLP. Based on the review and discussions described above, the Audit
Committee has recommended to the Board of Directors that the audited financial
statements for the fiscal year ended September 30, 2000 be included in the
Company's Annual Report on Form 10-K for the fiscal year ended September 30,
2000, for filing with the Securities and Exchange Commission.
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
John E. Berndt
William L. De Nicolo
Larry J. Ford
<PAGE>
PERFORMANCE MEASUREMENT COMPARISON
The following table compares total stockholder returns of the Company since its
initial public offering on January 27, 1994 to two indices: the NASDAQ Stock
Market (U.S.) 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
Stock Market (U.S.) Index. The Company's stock price on the last day of the
2000 fiscal year, September 30, 2000, was $12.88. The latest stock price
attainable prior to the printing of this stock price was $6.38 on December 8,
2000.
<TABLE>
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG TELULAR CORPORATION,
THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE CHASE H & Q TECHNOLOGY INDEX
DOLLARS
9/95 9/96 9/97 9/98 9/99 9/00
<S> <C> <C> <C> <C> <C> <C>
TELULAR CORPORATION $100 $ 37 $ 23 $ 7 $ 4 $ 30
NASDAQ STOCK MARKET (U.S.) 100 119 163 166 270 368
HAMBRECHT & QUIST TECHNOLOGY 100 110 164 152 293 477
* $100 INVESTED ON 9/30/95 IN STOCK OR INDEX - INCLUDING REINVESTMENT
OF DIVIDENDS. FISCAL YEAR ENDING SEPTEMBER 30.
</TABLE>
<PAGE>
Compensation Committee Interlocks and Insider Participation
The members of the Compensation Committee are Mr. Ford and Mr. De Nicolo. Mr.
Ford is not now nor was at any time an officer of the Company. Mr. De Nicolo is
a former CEO of the Company. No executive officer of the Company serves as a
member of the Board of Directors or compensation committee of any entity that
has one or more executive officers serving as a member of the Company's Board
of Directors or Compensation Committee.
Section 16(a) Beneficial Ownership Reporting 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 2000 in timely filings with the Securities and Exchange Commission
as required under Section 16(a) of the Securities and Exchange Act of 1934.
<PAGE>
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, 2001, at the Company's
principal executive offices. Shareholders who intend to present a proposal for
the next annual meeting of shareholders without inclusion of such proposal in
the Company's proxy materials are required to provide notice of such proposal
to the Company no later than October 31, 2001 at the Company's principal
executive offices. All notices should be sent to: Telular Corporation,
Attention: Secretary, 647 North Lakeview Parkway, Vernon Hills, Illinois 60061.
Independent Auditors
The Board of Directors has appointed Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending September 30, 2001. 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 Annual
Meeting, will have an opportunity to make a statement if they so desire, and
are expected to be available to respond to appropriate questions.
Other Matters
The Company knows of no other matters to be submitted to the Annual 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
/S/ Jeffrey L. Herrmann
Executive Vice-President, Chief Operating
Officer, Chief Financial Officer and
Secretary
Vernon Hills, Illinois
December 15, 2000
<PAGE>
Appendix A
TELULAR CORPORATION
FOURTH 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.
<PAGE>
(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 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.
<PAGE>
(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.
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.
<PAGE>
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
2,350,000 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.
<PAGE>
(c) The powers of the Committee shall include plenary authority to interpret
the Plan. Subject to the provisions of the Plan, the Committee shall have
the authority, in its sole discretion, from time to time: (1) to select
the officers and key employees to whom Awards shall be granted; (2) to
determine the date on which each Award shall be granted; (3) to prescribe
the number of Shares subject to each Award; (4) to determine the type of
each Award; (5) to determine the Term of each Award; (6) to determine the
periods during which Awards may be exercised and the restrictions and
limitations upon exercise of Awards or the receipt of Shares; (7) to
prescribe any performance criteria pursuant to which Awards may be
granted or may become exercisable or payable; (8) to prescribe any
limitations, restrictions or conditions on any Award; (9) to prescribe
the provisions of each Agreement, which shall not be inconsistent with
the terms of the Plan; (10) to adopt, amend and rescind rules and
regulations relating to the Plan; and (11) to make all other
determinations and take all other actions that are necessary or advisable
for the implementation and administration of the Plan.
6. Individuals Eligible to Receive Awards
(a) Awards may be granted under the Plan to officers and key employees of the
Company or any Subsidiary, including officers and key employees who also
serve as members of the Board. All determinations by the Committee as to
the individuals to whom Awards shall be granted hereunder shall be
conclusive.
(b) Directors who are not regular salaried employees of the Company or any
Subsidiary shall not be eligible to receive Awards.
(c) A Grantee may receive more than one Award. A Grantee may not receive
Awards with respect to more than 750,000 Shares (subject, however, to
adjustment as provided in Section 21) in any three-year period. For
purposes of the application of this limitation, if an Award is canceled,
the Shares subject to the canceled Award shall continue to be counted
against the maximum number of Shares for which Awards may be granted to
the Grantee. If, after the grant of an Award, the exercise price or
purchase price of the Award is reduced, transaction shall be treated as a
cancellation of the Award and a grant of a new Award, and both the Shares
subject to the Award that is deemed to be canceled and the Shares subject
to the Award that is deemed to be granted shall reduce the maximum number
of Shares for which Awards may be granted to the Grantee.
7. Agreement
(a) Each Award shall be evidenced by an Agreement setting forth the number of
Shares subject to the Award or to which such Award corresponds, and the
terms, conditions and restrictions applicable thereto.
(b) Appropriate officers of the Company are hereby authorized to execute and
deliver Agreements in the name of the Company as directed from time to
time by the Committee.
<PAGE>
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 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.
<PAGE>
(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 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.
<PAGE>
(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.
<PAGE>
13. Exercise of Options or Rights After Termination of Employment
(a) The Committee may provide in the Agreement that the Option and/or Right
shall cease to be exercisable after the Grantee's employment with the
Company and its Subsidiaries (if any) terminates. The Committee also may
provide in the Agreement that the Option and/or Right shall continue to
be exercisable for a specified period (but not after such period) after
the Grantee's employment with the Company and its Subsidiaries (if any)
terminates. The period during which the Option and/or Right shall remain
exercisable may vary according to the reason for the termination. In no
event shall an Option and/or Right be exercisable after the expiration
date specified in the Agreement.
(b) An Incentive Stock Option shall be treated as a Nonqualified Stock Option
if it is exercised more than 12 months after a termination of employment
because of a Disability or more than three months after a termination of
employment for any reason other than death or Disability.
(c) The Committee may provide in the Agreement that the Option and/or Right
shall become immediately exercisable in full upon the Grantee's
termination of employment for specified reasons such as Disability or
death; notwithstanding any provision of the Option and/or Right that
provides for the exercise of the Option and/or Right in installments,
except for the six-month waiting period described in the final sentence
of Section 11(a). Any Option or Right that would have become immediately
exercisable in full upon such a termination but for the application of
such six-month waiting period shall become immediately exercisable in
full upon the expiration of such six-month waiting period.
14. Performance Shares
The Committee may, from time to time, grant Performance Shares. A
Performance Share shall entitle the Grantee to receive a payment as soon as
practicable after a Payment Date (specified by the Committee at the time of the
grant of the Performance Share) in an amount equal to the excess (if any)
between (1) the Fair Market Value of a Share on the Payment Date and (2) the
Fair Market Value of a Share on the date the Performance Share is granted.
Unless the Committee provides otherwise at the time of grant, a Grantee may
receive payment only if the Grantee remains continuously employed with the
Company or a Subsidiary until such Payment Date. Payment may be made in cash,
Shares or in both cash or Shares, as determined by the Committee in its sole
discretion at any time prior to the Payment Date. A Performance Share does not
confer the right to vote or the right to receive dividends. At the time of the
grant of the Performance Share, the Committee may establish such terms,
limitations and restrictions as it deems advisable, including providing for the
acceleration of the Payment Date upon the occurrence of certain events.
<PAGE>
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.
(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.
<PAGE>
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.
<PAGE>
(d) If the Committee in its sole discretion approves, a Grantee may
irrevocably elect to have any withholding tax obligation satisfied by (i)
having the Company withhold Shares otherwise deliverable to the Grantee
with respect to the Award, or (ii) delivering other Shares to the
Company; provided that, to the extent necessary for a director or an
officer (within the meaning of Section 16 of the 1934 Act) of the Company
to obtain exemption from the short-swing profit recovery provisions of
Section 16(b) of the 1934 Act, any such election either (i) shall be made
by an irrevocable election made at least six months before the date on
which the amount of the tax to be withheld is determined or (ii) is
subject to the following conditions: (A) the Company shall have been
subject to the reporting requirements of Section 13(a) of the 1934 Act
for at least one year prior to the election and shall have filed all
reports required to be filed under Section 13(a) during such period, (B)
the Company shall have regularly released for publication quarterly and
annual summary statements of sales and earnings, (C) the Committee, which
shall have sole discretion to approve or disapprove such election,
approves the election after the election is made, (D) the election occurs
during (or in advance to take effect during) one of the window periods
described in clause (c)(3) of Rule 16b-3 and (E) the election does not
occur prior to the expiration of a six-month period after the date of the
grant of the Award or, if later, stockholder approval of the Plan as
provided in Section 3(b).
(e) If permitted by the Committee, a Grantee may elect to have any
withholding tax obligation satisfied in the manner described in Section
17(3), to the extent permitted therein.
20. Fractional Shares
No fractional Shares shall be issued pursuant to the Plan or any Award.
The Committee shall determine whether cash, other securities, or other property
shall be paid or transferred in lieu of fractional Shares, or whether
fractional Shares or any rights thereto shall be canceled, terminated or
otherwise eliminated.
21. Shareholder Rights
(a) No Award shall not confer upon a Grantee any rights of a Shareholder
unless and until the Shares are actually issued to him.
(b) Subject to any required action by the Company's Shareholders, if the
Company shall be a party to any merger, consolidation or reorganization
in which Shares are changed or exchanged, a Grantee holding an
outstanding Award shall be entitled to receive, upon the exercise of such
Award, the same consideration that a holder of the same number of Shares
that are subject to the Award is entitled to receive pursuant to such
merger, consolidation or reorganization.
<PAGE>
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.
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.
<PAGE>
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.
Appendix B
TELULAR CORPORATION
AUDIT COMMITTEE CHARTER
APRIL 24, 2000
Organization
This charter governs the operations of the audit committee. The committee
shall review and reassess the charter at least annually and obtain the
approval of the Board of Directors. The committee shall be appointed by the
Board of Directors and shall comprise of at least three directors, each of
whom are independent of management and the Company. Members of the committee
shall be considered independent if they have no relationship that may
interfere with the exercise of their independence from management and the
Company. All committee members shall be financially literate, and at least one
member shall have accounting or related financial management expertise.
Statement of Policy
The audit committee shall provide assistance to the Board of Directors in
fulfilling their oversight responsibility to the shareholders, potential
shareholders, the investment community, and others relating to the Company's
financial statements and the financial reporting process, the systems of
internal accounting and financial controls, the internal audit function, the
annual independent audit of the Company's financial statements, and the legal
compliance and ethics programs as established by management and the Board of
Directors. In so doing, it is the responsibility of the committee to maintain
free and open communication between the committee, independent auditors, the
internal auditors and management of the Company. In discharging its oversight
role, the committee is empowered to investigate any matter brought to its
attention with full access to all books, records, facilities, and personnel of
the Company and the power to retain outside counsel, or other experts for this
purpose.
Responsibilities and Processes
The primary responsibility of the audit committee is to oversee the Company's
financial reporting process on behalf of the Board of Directors and report the
results of their activities to the Board of Directors. Management is
responsible for preparing the Company's financial statements, and the
independent auditors are responsible for auditing those financial statements.
The committee in carrying out its responsibilities believes its policies and
procedures should remain flexible, in order to best react to changing
conditions and circumstances. The committee should take the appropriate
actions to set the overall corporate "tone" for quality financial reporting,
sound business risk practices, and ethical behavior.
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The following shall be the principal recurring processes of the audit
committee in carrying out its oversight responsibilities. The processes are
set forth as a guide with the understanding that the committee may supplement
them as appropriate.
The committee shall have a clear understanding with management and the
independent auditors that the independent auditors are ultimately accountable
to the Board of Directors and the audit committee, as representatives of the
Company's shareholders. The committee shall have the ultimate authority and
responsibility to evaluate and, where appropriate, replace the independent
auditors. The committee shall discuss with the auditors their independence
from management and the Company and the matters included in the written
disclosures required by the Independence Standards Board. Annually, the
committee shall review and recommend to the Board of Directors the selection
of the Company's independent auditors, subject to shareholders' approval.
The committee shall discuss with the internal auditors and the independent
auditors the overall scope and plans for their respective audits including the
adequacy of staffing and compensation. Also, the committee shall discuss with
management, the internal auditors, and the independent auditors the adequacy
and effectiveness of the accounting and financial controls, including the
Company's system to monitor and manage business risk, and legal and ethical
compliance programs. Further, the committee shall meet separately with the
internal auditors and the independent auditors, with and without management
present, to discuss the results of their examinations.
The committee shall review the interim financial statements with management
and the independent auditors prior to the filing of the Company's Quarterly
Report on Form 10-Q. Also, the committee shall discuss the results of the
quarterly review and any other matters required to be communicated to the
committee by the independent auditors under generally accepted auditing
standards. The chair of the committee may represent the entire committee for
the purposes of this review.
The committee shall review with management and the independent auditors the
financial statements to be included in the Company's Annual Report on Form 10-
K (or the annual report to shareholders if distributed prior to the filing of
Form 10-K), including their judgement about the quality, not just
acceptability, of accounting principles, the reasonableness of significant
judgments, and the clarity of the disclosures in the financial statements.
Also, the committee shall discuss the results of the annual audit and any
other matters required to be communicated to the committee by the independent
auditors under generally accepted auditing standards.
