SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
PERIPHONICS CORPORATION
(Name of Registrant as Specified In Its Charter)
Kevin J. O'Brien, Secretary
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check Appropriate Box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
4) Proposed maximum aggregate value of transaction:
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement:
3) Filing Party:
4) Date Filed:
<PAGE>
[LOGO]
(a Delaware corporation)
NOTICE OF 1996 ANNUAL
MEETING OF STOCKHOLDERS TO BE
HELD AT 10:00 A.M. ON NOVEMBER 8, 1996
To the Stockholders of PERIPHONICS CORPORATION:
NOTICE IS HEREBY GIVEN that the 1996 Annual Meeting of Stockholders (the
"Meeting") of PERIPHONICS CORPORATION (the "Company") will be held on November
8, 1996 at 10:00 a.m. at The Radisson Hotel Islandia, 3635 Express Drive North,
Hauppauge, New York 11788 to consider and vote on the following matters
described under the corresponding numbers in the attached Proxy Statement:
1. election of two Class II directors;
2. the amendment of the Company's Amended and Restated Certificate
of Incorporation;
3. the amendment of the Company's 1995 Stock Option Plan;
4. ratification of the selection of Deloitte & Touche LLP as the Company's
independent auditors for the fiscal year ending May 31, 1997; and
5. such other matters as may properly come before the Meeting.
The Board of Directors has fixed September 27, 1996, at the close of
business, as the record date for the determination of stockholders entitled to
notice of and to vote at the Meeting, and only holders of shares of Common Stock
of the Company of record at the close of business on that day will be entitled
to vote. The stock transfer books of the Company will not be closed.
A complete list of stockholders entitled to vote at the Meeting shall be
available at the offices of the Company during ordinary business hours from
October 29, 1996 until the Meeting for examination by any stockholder for any
purpose germane to the Meeting. This list will also be available at the Meeting.
Whether or not you expect to be present at the Meeting, please fill in,
date, sign and return the enclosed Proxy, which is solicited by management of
the Company. The shares represented by the Proxy will be voted according to your
specified response. The Proxy is revocable and will not affect your right to
vote in person in the event you attend the Meeting.
By Order of the Board of Directors
Kevin J. O'Brien, Secretary
Date: October 7, 1996
<PAGE>
------------------------------------
PROXY
------------------------------------
PERIPHONICS CORPORATION
4000 Veterans Memorial Highway
Bohemia, NY 11716
This Proxy is Solicited on Behalf of the Board of Directors.
The undersigned, revoking all previous proxies, hereby appoints Peter J.
Cohen, Jayandra Patel and Kevin J. O'Brien, and each of them, proxies with power
of substitution to each, for and in the name of the undersigned to vote all
shares of Common Stock of Periphonics Corporation (the "Company"), held of
record by the undersigned on September 27, 1996 which the undersigned would be
entitled to vote if present at the Annual Meeting of Stockholders of the Company
to be held on November 8, 1996, at 10:00 a.m. at The Radisson Hotel Islandia,
3635 Express Drive North, Hauppauge, New York 11788, and any adjournments
thereof, upon the matters set forth in the Notice of Annual Meeting.
The undersigned acknowledges receipt of the Notice of Annual Meeting, Proxy
Statement and the Company's 1996 Annual Report.
1. ELECTION OF DIRECTORS
FOR all nominees listed Withhold Authority to vote
below (except as marked for all nominees listed
to the contrary below) ______ below ______
(Instruction: To withhold authority to vote for an individual nominee
strike a line through such nominee's name in the list below.)
EDWARD H. BLUM RICHARD A. DANIELS
2. AMENDMENT OF THE COMPANY'S AMENDED AND RESTATED CERTIFICATE
OF INCORPORATION
FOR ______ AGAINST ______ ABSTAIN ______
3. AMENDMENT OF THE COMPANY'S 1995 STOCK OPTION PLAN
FOR ______ AGAINST ______ ABSTAIN ______
4. RATIFICATION OF THE SELECTION OF DELOITTE & TOUCHE AS
INDEPENDENT AUDITORS
FOR ______ AGAINST ______ ABSTAIN ______
5. IN THEIR DISCRETION, ON SUCH OTHER MATTERS AS MAY PROPERLY
COME BEFORE THE MEETING
FOR ______ AGAINST ______ ABSTAIN ______
<PAGE>
PLEASE SIGN ON THE REVERSE SIDE AND RETURN THIS PROXY PROMPTLY IN THE
ENCLOSED ENVELOPE.
(BACK OF PROXY CARD)
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS and when
properly executed will be voted as directed herein. If no direction is given,
this Proxy will be voted FOR Proposals 1, 2, 3, 4 and 5.
- ---------------------------------
(Date)
- ---------------------------------
(Signature)
- ---------------------------------
(Signature, if held jointly)
Please sign exactly as name appears below. If Shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please list full title as such. If a corporation, please
sign in full corporate name by president or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
Please sign, date and return promptly in the enclosed envelope. No postage
need be affixed if mailed in the United States.
<PAGE>
[LOGO]
4000 Veterans Memorial Highway
Bohemia, NY 11716
------------------------------
PROXY STATEMENT
------------------------------
1996 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AT 10:00 A.M. ON NOVEMBER 8, 1996
The enclosed proxy is solicited by the management of PERIPHONICS
CORPORATION (the "Company") in connection with the 1996 Annual Meeting of
Stockholders (the "Meeting") to be held on November 8, 1996 at 10:00 a.m. at The
Radisson Hotel Islandia, 3635 Express Drive North, Hauppauge, New York 11788 and
any adjournment thereof. The Board of Directors has set September 27, 1996, at
the close of business, as the record date for the determination of stockholders
entitled to notice of and to vote at the Meeting. A stockholder executing and
returning a proxy has the power to revoke it at any time before it is exercised
by filing a later proxy with, or other communication to, the Secretary of the
Company or by attending the Meeting and voting in person. The proxy will be
voted in accordance with your directions as to:
(1) election of the persons listed herein as Class II directors of
the Company;
(2) amendment of the Company's Amended and Restated Certificate
of Incorporation;
(3) amendment of the Company's 1995 Stock Option Plan;
(4) ratification of the selection of Deloitte & Touche LLP as the
Company's independent auditors for the fiscal year ending
May 31, 1997; and
(5) such other matters as may properly come before the Meeting.
In the absence of direction, the proxy will be voted in favor of these
proposals.
The entire cost of soliciting proxies will be borne by the Company. The
cost of solicitation, which represents an amount believed to be normally
expended for a solicitation relating to an uncontested election of directors,
will include the cost of supplying necessary additional copies of the
solicitation materials and the Company's 1996 Annual Report to Stockholders (the
"Annual Report") to beneficial owners of shares held of record by brokers,
dealers, banks, trustees, and their nominees, including the reasonable expenses
of such record holders for completing the mailing of such materials and Annual
Report to such beneficial owners.
Only stockholders of record of the Company's Common Stock outstanding at
the close of business on September 27, 1996 will be entitled to vote, taking
into account the 2 for 1 stock dividend payable to shareholders of record on
October 31, 1996, a total of 13,622,332 shares of Common Stock will be
outstanding on the date of the stockholder meeting. Each share of Common Stock
is entitled to one vote. Holders of a majority of the outstanding shares of
Common Stock must be represented in person or by proxy in order to achieve a
quorum. The Proxy Statement, the attached Notice of Meeting, the enclosed form
of Proxy and the Annual Report are being mailed to stockholders on or about
October 7, 1996. The mailing address of the Company's principal executive
offices is 4000 Veterans Memorial Highway, Bohemia, New York 11716.
<PAGE>
1. ELECTION OF DIRECTORS
The Company's Amended and Restated Certificate of Incorporation provides
that the Board of Directors shall be divided into three classes, with each class
consisting, as nearly as may be possible, of one-third of the total number of
directors constituting the entire Board. The Company's Board of Directors
presently consists of six members with two members in each of Classes I, II and
III. Each Class is elected for a term of three years. The term of office of
Class I, II and III directors is scheduled to expire at the 1996, 1997 and 1998
annual meeting of stockholders, respectively. At each annual meeting, directors
are elected to succeed those in the class whose term expires at that annual
meeting, such newly elected directors to hold office until the third succeeding
annual meeting and the election and qualification of their respective
successors.
Two directors are to be elected as Class II directors by a plurality of the
votes cast at the Meeting, each to hold office until the 1999 annual meeting of
stockholders and until their respective successors are elected and qualified.
Unless otherwise directed, the persons named in the accompanying Proxy have
advised management that it is their intention to vote for the election of Edward
H. Blum and Richard A. Daniels as Class II directors.
Each of the nominees for election as a Class II director has advised the
Company of his willingness to serve as a director and management believes that
each nominee will be able to serve. If any nominee becomes unavailable, proxies
may be voted for the election of such person or persons who may be designated by
the Board of Directors. The Board of Directors recommends voting FOR the
election of Edward H. Blum and Richard A. Daniels as Class II directors.
Information Regarding Directors
The following table sets forth certain information with respect to (i) the
nominees for election as Class II directors, including the year in which such
nominees terms would expire, if elected, and (ii) each of the Class I and Class
III directors whose terms will continue after the Meeting:
<TABLE>
<CAPTION>
Name Age Position Year Term Expires, if
Elected, and Class
<S> <C> <C> <C>
Edward H. Blum* 56 Director 1999
Class II
Peter Breitstone 42 Director 1998
Class I
Peter J. Cohen 58 Chairman of the Board, President and 1997
Chief Executive Officer Class III
Richard A. Daniels* 52 Senior Vice President, Treasurer and 1999
Director Class II
Kevin J. O'Brien 42 Chief Financial Officer, Vice President- 1998
Finance and Administration, Secretary Class I
and Director
Jayandra Patel 44 Senior Vice President-Product 1997
Development, Assistant Treasurer and Class III
Director
</TABLE>
- ---------------------
*nominee for Class II director
Mr. Blum was elected a director in June 1995. Since 1988 Mr. Blum has been
the President and Chief Executive Officer of Blum & Company, a strategic
advisory firm. Since 1990 he has been the President and Chief Executive Officer
of Blum, Clark & Co., also a strategic advisory firm. Mr. Blum
2
<PAGE>
received a BS in Chemical Engineering from Carnegie Mellon University in
1961 and a Ph.D in Chemical Engineering from Princeton University in 1965.
Mr. Breitstone was elected a director in June 1995. Since 1984 Mr.
Breitstone has been engaged in the private practice of law. Mr. Breitstone has
also been the President of Breitstone & Co., Ltd., a general insurance agency,
since 1989 and the President of Shinnecock Insurance Ltd., an offshore Bermuda
captive reinsurance company, since 1991. Mr. Breitstone received a BBA from
Adelphi University in 1976 and a JD from Temple University School of Law in
1979. He is also a director of American Medical Alert Corp.
Mr. Cohen joined the Company as President in January 1984 and currently
serves as its Chairman of the Board, President and Chief Executive Officer. He
has been a Director and Chairman of the Board since May 1986. Prior to joining
the Company, from 1981 to 1983, Mr. Cohen was President of Intuit Telecom, Inc.,
a company which he founded. From 1969 to 1981, he was President and the founder
of Databit, Inc. From 1962 to 1969, he was employed by Telesignal Corp. in
various positions, including Project Engineer and Chief Engineer. From 1957 to
1962, he was employed by Western Union Telegraph Company as an engineer. Mr.
Cohen received a BSEE and MSEE from City College of New York.
Mr. Daniels joined the Company in September 1984 and currently serves as
Senior Vice President and Treasurer. Mr. Daniels has been a Director since May
1986. Prior to joining the Company, from 1967 to 1984, Mr. Daniels was employed
by Exxon Corporation in various sales, marketing, operations and planning
positions. Mr. Daniels received a BSEE from City College of New York and a MS in
Management Science from Massachusetts Institute of Technology.
Mr. O'Brien joined the Company in September 1981 and currently serves as
Chief Financial Officer, Vice President-Finance and Administration and
Secretary. He has been a Director since May 1986. Prior to joining the Company,
from 1979 to 1981, Mr. O'Brien was Vice President of Finance for American
Technical Ceramics Inc. From 1978 to 1979, he was employed by Comtech
Laboratories as Accounting Department Manager. From 1976 to 1978, he was
employed by Arthur Andersen & Co. as an auditor. Mr. O'Brien is a certified
public accountant and received a BBA in accounting from Hofstra University.
Mr. Patel joined the Company in February 1983 and currently serves as
Senior Vice President- Product Development, Assistant Treasurer and Director.
Prior to joining the Company, from 1980 to 1983, Mr. Patel was Director of
Engineering of Ontel Corporation. From 1978 to 1980, he was employed by IBM as a
Senior Associate Engineer. From 1976 to 1978, he was employed by Telephonics
Corporation as a Project Engineer. Mr. Patel received a BSEE from Birla
Institute of Technology and Science in India and a MSEE from the Florida
Institute of Technology.
3
<PAGE>
Information Regarding Executive Officers
The following is information concerning the executive officers of the
Company other than those who also serve as directors:
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C> <C>
George W. Cole 52 Vice President-Major Accounts and
Assistant Secretary
Richard G. Giannotti 50 Vice President-Technical Services
Terence Meehan 51 Vice President-Marketing
</TABLE>
Mr. Cole joined the Company in February 1975 and currently serves as its
Vice President-Major Accounts and Assistant Secretary. Prior to joining the
Company, from 1970 to 1975, Mr. Cole was a member of the research staff of
Brookhaven National Laboratory. Mr. Cole received an A.B. in Physics and a Ph.D
in Nuclear Physics from Yale University.
Mr. Giannotti re-joined the Company in 1985 and currently serves as Vice
President-Technical Services. Prior to re-joining the Company, from 1983 to
1985, Mr. Giannotti was Director of Engineering for Porta Systems Inc. From 1971
to 1983, Mr. Giannotti was employed by the Company in various positions. From
1967 to 1971, he was employed by Sanders Associates.
Mr. Meehan re-joined the Company in July 1985 and currently serves as Vice
President- Marketing. Prior to re-joining the Company, from 1983 to 1985, Mr.
Meehan was director of Software Development for Lundy Electronics Systems, Inc.
From 1973 to 1983, Mr. Meehan was employed by the Company in a variety of
managerial and technical positions. From 1965 to 1973, Mr. Meehan was employed
by Brookhaven National Laboratory as a Computer Analyst.
Executive officers of the Company are elected annually by the Board of
Directors and serve until their successors are duly elected and qualified.
There are no family relationships between any of the directors, executive
officers or persons nominated or chosen by the Company to become directors or
executive officers.
The Company carries insurance providing indemnification, under certain
circumstances, to all of its directors and officers for claims against them by
reason of, among other things, any act or failure to act in their capacities as
directors or officers. No sums have been paid to any past or present director or
officer of the Company under this or any prior indemnification insurance policy.
The Company has also entered into Indemnity Agreements with all of its
directors and executive officers. The Indemnity Agreements provide for
indemnification of the Company's directors and executive officers to the fullest
extent permitted by the provisions of the General Corporation Law of the State
of Delaware.
The Indemnity Agreements provide that the Company will pay any costs which
an indemnitee actually and reasonably incurs because of claims made against him
by reason of services rendered as a director or officer of the Company, except
that the Company is not obligated to make any payment which the Company is
prohibited by law from paying as indemnity, or where (a) a final determination
is
4
<PAGE>
rendered on a claim based upon the indemnitee's obtaining a personal profit
or advantage to which he was not legally entitled; (b) a final determination is
rendered on a claim for an accounting of profits made in connection with a
violation of Section 16(b) of the Securities Exchange Act of 1934, or similar
state or common law provisions; (c) a claim where the indemnitee was adjudged to
be deliberately dishonest; or (d) a final determination is rendered that
indemnification is not lawful.
The Company does not have a nominating committee of the Board of Directors.
In June 1995, the Company formed an Audit Committee comprised of Messrs. Cohen,
Blum and Breitstone and a Compensation Committee comprised of the entire Board
of Directors. The function of the Audit Committee is to recommend annually to
the Board of Directors the appointment of the independent public accountants of
the Company and review the results and scope of the audit and other services
provided by the Company's independent auditors. The function of the Compensation
Committee is to approve salaries and certain incentive compensation for
management and key employees of the Company. The Audit and Compensation
Committees met in April 1996. The Company has a Stock Option Committee which
awards stock options. The Stock Option Committee consists of the entire Board of
Directors. The Board of Directors met on five occasions during the last fiscal
year.
Director's Compensation
The Company has no arrangements for compensating its directors for their
services other than participation by the Company's outside directors in the
Company's Non-Employee Director Stock Option Plan and the reimbursement of
expenses incurred by all directors in attending meetings.
Executive Compensation
The table below sets forth information concerning compensation for services
in all capacities awarded to, earned by or paid to the Company's Chief Executive
Officer and the four most highly compensated executive officers of the Company
whose aggregate cash compensation exceeded $100,000 (collectively, the "Named
Executives") during the three fiscal years ended May 31, 1996, 1995 and 1994:
5
<PAGE>
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Compensation
Name and Principal Position Year Salary Bonus
<S> <C> <C> <C>
Peter J. Cohen........................................................... 1996 $393,995 $240,897
Chairman of the Board, President and Chief Executive Officer 1995 354,391 233,880
1994 320,039 175,937
Richard A. Daniels....................................................... 1996 354,191 194,904
Senior Vice President and Treasurer 1995 318,588 189,227
1994 287,707 143,010
George W. Cole........................................................... 1996 281,436 129,057
Vice President-Major Accounts and Assistant Secretary 1995 253,147 125,298
1994 228,609 95,573
Jayandra Patel........................................................... 1996 260,194 89,686
Senior Vice President-Product Development, Assistant Treasurer 1995 218,082 77,478
and Director 1994 205,254 56,834
Kevin J. O'Brien......................................................... 1996 226,569 76,192
Chief Financial Officer, Vice President-Finance and 1995 203,796 72,403
Administration and Secretary 1994 184,042 53,112
</TABLE>
Stock Option Plans
1986 Stock Option Plan. The Company's 1986 Incentive Stock Option Plan (the
"1986 Option Plan") was adopted by the Board of Directors and approved by the
stockholders of the Company in December, 1986. A total of 500,000 shares of
Common Stock are reserved for issuance upon exercise of options to be granted
under the 1986 Option Plan. The 1986 Option Plan is administered by the Board of
Directors of the Company. Subject to the provisions of the 1986 Option Plan, the
administrator of the 1986 Option Plan has the discretion to determine the
optionees and the terms of the option grants. The exercise price of an option
shall be not less than the fair market value (prior to the date of the Company's
initial public offering book value was utilized to determine fair market value)
per share of the Common Stock on the date of grant or, in the case of an
optionee who beneficially owns 10% or more of the outstanding capital stock of
the Company, not less than 110% of the fair market value per share on the date
of grant. Shares obtained upon the exercise of options granted pursuant to the
1986 Option Plan may not be sold until the expiration of the one year period
commencing on the exercise date of such option. The options terminate not more
than ten (10) years from the date of grant, subject to earlier termination on
the optionee's death, disability or termination of employment with the Company.
Options are not assignable or otherwise transferable except by will or the laws
of descent and distribution.
As of May 31, 1996, options to purchase 73,000 shares are outstanding under
the 1986 Option Plan at exercise prices of between $1.50 and $3.35 per share,
and 160,000 shares remained available for future option grants under the 1986
Option Plan. The Board of Directors, however, has determined not to grant any
additional options under the 1986 Option Plan. Options have not been granted to
any of the Named Executives under the 1986 Option Plan.
6
<PAGE>
1995 Stock Option Plan. On February 8, 1995, the Board of Directors of the
Company adopted, and the stockholders approved, the 1995 Stock Option Plan (the
"1995 Option Plan"). The 1995 Option Plan has 400,000 shares of Common Stock
reserved for issuance upon the exercise of options designated as either (i)
incentive stock options ("ISOs") under the Code or (ii) non-qualified options.
ISOs may be granted under the 1995 Option Plan to employees and officers of the
Company. Non-qualified options may be granted to consultants, directors (whether
or not they are employees), employees or officers of the Company.
The purpose of the 1995 Option Plan is to encourage stock ownership by
certain directors, officers and employees of the Company and certain other
persons instrumental to the success of the Company and to give them a greater
personal interest in the success of the Company. The 1995 Option Plan is
administered by the Option Committee of the Board of Directors. The Option
Committee, within the limitations of the 1995 Option Plan, determines, with the
approval of the Chief Executive Officer of the Company, the persons to whom
options will be granted, the number of shares to be covered by each option,
whether the options granted are intended to be ISOs, option purchase price per
share, the manner of exercise, the time, manner and form of payment upon
exercise of an option, and restrictions such as repurchase rights or obligations
of the Company. Each option vests in four annual installments of 25% each on the
first, second, third and fourth anniversary of the date of grant. Options
granted under the 1995 Option Plan may not be granted at a price less than the
fair market value of the Common Stock on the date of grant (or 110% of fair
market value in the case of persons holding 10% or more of the voting stock of
the Company). The aggregate fair market value of shares for which ISOs granted
to any employee are exercisable for the first time by such employee during any
calendar year (under all stock option plans of the Company and any related
corporation) may not exceed $100,000. Options granted under the 1995 Option Plan
will expire not more than ten years from the date of grant (five years in the
case of ISOs granted to persons holding 10% or more of the voting stock of the
Company). Options granted under the 1995 Option Plan are generally not
transferable during an optionee's lifetime but are transferable at death by will
or by the laws of descent and distribution.
The Company has granted options to purchase 213,000 shares of Common Stock
at exercise prices ranging from $14.00 to $28.25 per share. Options have not
been granted to any of the Named Executives under the 1995 Plan.
1995 Non-Employee Director Stock Option Plan. On February 8, 1995, the
Board of Directors of the Company adopted, and the stockholders approved, a
Non-Employee Director Stock Option Plan (the "Directors Plan"). The Directors
Plan has 100,000 shares of Common Stock reserved for issuance. Pursuant to the
terms of the Directors Plan, each independent unaffiliated Director shall
automatically be granted, subject to availability, without any further action by
the Board of Directors or the Stock Option Committee: (i) a non-qualified option
to purchase 7,500 shares of Common Stock upon their election to the Board of
Directors; and (ii) a non-qualified option to purchase 5,000 shares of Common
Stock on the date of each annual meeting of stockholders following their
election to the Board of Directors. The exercise price under each option is the
fair market value of the Company's Common Stock on the date of grant. Each
option has a five year term and vests in four annual installments of 25% each on
the first, second, third and fourth anniversary of the date of grant. Options
granted under the Directors Plan are generally not transferable during an
optionee's lifetime but are transferable at death by will or by the laws of
descent and distribution. In the event an optionee ceases to be a member of the
Board of Directors (other than by reason of death or disability), then the
non-vested portion of the option immediately terminates and becomes void and any
vested but unexercised portion of the option may be exercised for a period of
180 days from the date the optionee ceased to be a member of the Board of
7
<PAGE>
Directors. In the event of death or permanent disability of an optionee,
all options accelerate and become immediately exercisable until the scheduled
expiration date of the option.
An option to purchase 25,000 shares of Common Stock at exercise prices
ranging from $17.75 to $26.50 per share has been granted to each of Messrs. Blum
and Breitstone under the Directors Plan.
Stock Performance Graph
The following graph compares the percentage change in the cumulative total
stockholder return for the period beginning on March 31, 1995 and ending on May
31, 1996, based upon the market price of the Company's Common Stock, with the
cumulative total return of the NASDAQ U.S. Public Companies Index and a defined
peer group based on similar market capitalization. The graph assumes a $100
investment on March 31, 1995 in each of the indices and the reinvestment of any
and all dividends.
Comparison of Total Return Among Periphonics Corporation,
NASDAQ U.S. Public Companies Index and Peer Group
<TABLE>
<CAPTION>
NASDAQ U.S.
Public Companies
Period Ending Periphonics Corporation Index Peer Group
<S> <C> <C> <C> <C>
Measurement
Pt-3/31/95 $100 $100 $100
5/31/95 $106 $106 $104
5/31/96 $239 $154 $210
</TABLE>
Employment Agreements
In March, 1995 the Company entered into employment agreements with the
Named Executives, which became effective April 1995 and terminate May 31, 1998.
These employment agreements automatically renew for consecutive two year terms
unless at least one year prior to expiration of the existing term either party
gives notice of cancellation. The agreements provide for an annual base salary
as of August 10, 1995 of $389,801, $350,420, $278,440, $239,871 and $224,159,
including annual cost of living increases beginning June 1, 1996, for Messrs.
Cohen, Daniels, Cole, Patel and O'Brien, respectively, subject to annual review
following the end of each fiscal year, by the Board of Directors of the Company
or the Compensation Committee thereof. Each employment agreement provides for
reimbursement of business expenses, health and disability insurance and related
benefits and an annual bonus to be determined in accordance with the provisions
of the Company's Performance Incentive Plan. Each employment agreement requires
that all of the Named Executive's business time be devoted to the Company. Each
employment agreement provides that it may be terminated if the Named Executive
becomes permanently disabled (as a result of ill health, physical or mental
disability, or inability for reasons beyond his control to perform duties for
six consecutive months or for nine months in any 12 consecutive month period) or
if the Company discontinues operating its business. The agreements also provide
that if the Named Executive is terminated without cause he will be paid his base
salary and bonus through the remainder of the term of his agreement. Each
employment agreement further provides that the Named Executive will not compete
with the Company during the term of the agreement and for a period of two years
from termination of employment.
8
<PAGE>
Performance Incentive Plan
The Company maintains a Performance Incentive Plan ("Performance Plan")
pursuant to which the Company grants bonuses to eligible key employees,
including the Named Executives. Under the Performance Plan, a participant's
bonus, expressed as a percentage of the participant's annual salary, is a
function of the Company's net margin growth and return on capital employed and
may vary from one participant to another. Currently, no participant's agreement
under the Performance Plan will result in a bonus exceeding sixty percent of the
participant's annual salary. The identity of eligible Performance Plan
participants is determined by the Board of Directors.
401(k) Plan
The Company sponsors a voluntary contribution plan qualified under Section
401(k) of the Code (the "401(k) Plan"). All regular employees of the Company who
have attained the age of 21 are eligible to participate in the 401(k) Plan.
Under the 401(k) Plan, each employee may elect to contribute to the 401(k) Plan,
through payroll deductions, a specified percentage of his or her compensation up
to the statutory limitation. Each employee is fully vested at all times with
respect to his or her contributions. The Company pays only the administrative
expenses of the 401(k) Plan and currently makes no contributions to the 401(k)
Plan.
Compensation Committee Interlocks and Insider Participation in Compensation
Decisions
During the fiscal year ended May 31, 1995 the Company did not have a
Compensation Committee. Consequently, all directors participated in
deliberations concerning compensation of management and key employees including
decisions relative to their own compensation.
It is important to note that the Compensation Committee of the Board of
Directors (the "Committee"), established in June 1995, will assume
responsibility for all fiscal 1997 compensation decisions. The Committee is
composed of two independent outside directors and four inside directors of the
Company. The two independent outside directors, alone, make decisions impacting
the compensation of the four inside directors.
Board of Directors
Peter J. Cohen
Edward H. Blum
Peter Breitstone
Richard A. Daniels
Kevin J. O'Brien
Jayandra Patel
Compensation Committee Report on Executive Compensation
The Committee met one time during fiscal 1996 to carry out its
responsibilities including the development and administration of policies
governing annual compensation for senior executives of the Company.
9
<PAGE>
In developing and administering these policies, the Committee has focused
on compensating Company executives:
(1) on a competitive basis with other comparably sized and
managed companies;
(2) in a manner consistent and supportive of overall Company
objectives; and
(3) balancing the long-term and short-term strategic initiatives
of the Company.
The Committee intends that the executive compensation program will:
(1) reward executives for strategic management and enhancement of
stockholder value;
(2) facilitate both the short-term and long-term planning process; and
(3) attract and retain key executives believed to be critical
to the long-term success of the Company.
The Company's compensation program for executive officers generally
consists of a fixed base salary, participation in the Performance Incentive Plan
and long-term incentive compensation in the form of stock options. In addition,
Company executives are able to participate in various benefit plans generally
available to other full-time employees of the Company.
Base Salary
The Company's base salary is intended to provide competitive remuneration
for services provided to the Company over a one year period. Base salary levels
for the Named Executive Officers (the "Named Executives") were established by
employment agreements on December 15, 1993, which agreements were restated,
effective on the closing of the Company's initial public offering, to reflect
the transition from a private to public corporation. Base salaries were set at
levels designed to attract and retain the most appropriately qualified
individuals for each of the key management level positions within the Company.
The employment agreements stipulated that future increases in base salary would
be determined by the Board of Directors or the Board Compensation Committee. In
determining these increases, the Board takes into consideration compensation
information for comparable companies, industry patterns, and levels of
responsibility for each executive. The key factor in determining the appropriate
adjustment to base salary has been performance of the Company.
Short-term Plan
Short-term incentive payouts are paid primarily to recognize specific
operating performance achieved within the last fiscal year. Since such incentive
payments are related to performance, the Board understands and accepts that such
payments may vary considerably from one year to the next. The Company's
short-term incentive program, the Periphonics' Performance Incentive Plan,
correlates executive compensation directly back to return on total capital
employed and net margin growth. Through this program, in fiscal 1996, each Named
Executives' short-term incentive payment was derived from specific measures of
Company performance. Depending on management level, Executives can receive
Performance Incentive Plan payouts up to a maximum of 60% of base salary (at the
CEO level).
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<PAGE>
Long-term Incentives
In keeping with its desire to align long-term compensation with long-term
stockholder value, the Board has instituted an employee stock program.
Recognizing the value of these grants in motivating long-term strategic decision
making, the use of stock options in compensating other members of Company
management was again expanded beyond the Named Executives. In fiscal 1996, the
Named Executives, by agreement, did not receive any stock options. The Named
Executives will be eligible to receive stock options under the option plan
beginning April 1, 1998. Employee stock options were granted to other managers
and key employees of the Company. All options were granted at an exercise price
equal to the grant date market price, making the options valuable to these
executives, managers and key employees only if the share price appreciates. The
options become exercisable over a four-year period at a rate of 25% each year
and can be exercised within a period expiring five years after the grant date,
assuming the option recipient remains employed by the Company.
Chief Executive Officer
Since December 15, 1993, Peter Cohen, Chief Executive Officer, was
compensated under a previously disclosed employment agreement between himself
and the Company. This agreement will be effective until May 31, 1998.
Pursuant to the agreement, Mr. Cohen receives an annual increase in base
salary equal to an amount deemed appropriate by the Board. In addition, Mr.
Cohen is eligible to participate in the Performance Incentive Plan. The Board is
authorized to increase Mr. Cohen's base salary taking into consideration
performance of the Company and Mr. Cohen. For the 1996 fiscal year, Mr. Cohen
was granted an 11.2% increase over his fiscal year 1995 base salary based on the
Company's performance. Increases in base salary after June 1, 1996 and through
May 31, 1998, at a minimum, will be based on cost-of-living adjustments. Under
the Performance Incentive Plan, Mr. Cohen received a $240,897 bonus payment for
fiscal year 1996.
The Board believes that Mr. Cohen's compensation reflects his contribution
to the Company and achievement of its specific long-term and short-term
objectives.
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<PAGE>
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of the date hereof, without taking
into account the 2 for 1 stock dividend declared effective on October 31, 1996,
by (i) each person known to the Company to own beneficially more than 5% of the
outstanding shares of Common Stock, (ii) each of the Company's Named Executives;
and (iii) all Executive Officers and Directors of the Company as a group.
<TABLE>
<CAPTION>
Directors, Named Executives Amount and Nature of Percentage of
and 5% Stockholders Beneficial Ownership(4) Beneficial Ownership
<S> <C> <C> <C>
Peter J. Cohen (1)(5)............................ 458,245 6.7%
George W. Cole (1)............................... 275,375 4.0%
Richard A. Daniels (1)(6)........................ 390,114 5.7%
Kevin J. O'Brien (1)............................. 183,583 2.7%
Jayandra Patel (1)............................... 206,530 3.0%
GeoCapital Corporation (2)....................... 434,700 6.4%
OppenheimerFunds, Inc. (3)....................... 370,400 5.4%
All Executive Officers and Directors as
a group (nine persons) (7)....................... 1,757,680 25.8%
</TABLE>
(1) Addresses are care of Periphonics Corporation, 4000 Veterans Memorial
Highway, Bohemia, New York 11716.
(2) GeoCapital Corporation's address is 767 Fifth Avenue, New York, New
York 10153.
(3) OppenheimerFunds, Inc.'s address is Two World Trade Center, New York,
New York 10048.
(4) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within sixty (60) days from the date of this
Proxy Statement upon the exercise of options. Each beneficial owner's
percentage ownership is determined by assuming that options that are
held by such person (but not those held by any other person) and that are
exercisable within sixty (60) days from the date of this Proxy
Statement have been exercised. Unless otherwise noted, the Company
believes that all persons named in the table have sole voting and
investment power with respect to all shares of Common Stock
beneficially owned by them.
(5) Of these shares, 410,699 are held of record in a Grantor Retained
Annuity Trust for the benefit of Mr. Cohen's children of which
Mr. Cohen is a co-trustee and retains voting and dispositive power with
respect to the shares.
(6) Of these shares, 352,441 are held of record in a Grantor Retained
Annuity Trust for the benefit of Mr. Daniels' children of which
Mr. Daniels is the sole trustee.
(7) Includes 60,250 shares subject to options exercisable within sixty (60)
days of the date hereof.
12
<PAGE>
Compliance with Section 16(a) of the Exchange Act.
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors and persons who own more than ten percent of a registered
class of the Company's equity securities (collectively, the "Reporting Persons")
to file reports of ownership and changes in ownership with the Securities and
Exchange Commission and to furnish the Company with copies of these reports. New
rules governing these reports were adopted in February 1991 and generally became
effective in May 1991. Based solely on the Company's review of the copies of
such forms received by it during its fiscal year ended May 31, 1996, the Company
believes that all filing requirements applicable to the Reporting Persons were
complied with.
2. AMENDMENT TO THE COMPANY'S AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION TO INCREASE AUTHORIZED COMMON STOCK
On September 20, 1996, the Board of Directors determined it was advisable
to amend the Company's Certificate of Incorporation to increase the number of
authorized shares from 16,000,000 shares consisting of 15,000,000 shares of
Common Stock and 1,000,000 shares of preferred stock, to 31,000,000 shares
consisting of 30,000,000 shares of Common Stock and 1,000,000 shares of
preferred stock. The proposed amendment to the Amended and Restated Certificate
of Incorporation is set forth in full as Exhibit "A" to this Proxy Statement.
The additional shares of Common Stock for which authorization is sought
would be part of the existing class of Common Stock and would have the same
rights and privileges as the shares of Common Stock which are presently
authorized. Such additional shares would not (and the shares of Common Stock
presently outstanding do not) entitle the holders thereof to preemptive rights
to subscribe for additional shares or cumulative voting rights.
As of the date hereof, there were 15,000,000 shares of authorized Common
Stock of which 1,000,000 shares were reserved for issuance under the Company's
stock option plans; these numbers do not reflect the 2 for 1 stock dividend
declared effective on October 31, 1996. The remainder of shares of authorized
Common Stock are not issued or subject to reservation.
The Company does not currently have any plans, agreements or commitments
with respect to the issuance of additional shares of Common Stock.
Any authorized but unissued or unreserved Common Stock would be available
for issuance at such times, on such terms and for such purposes as the Board of
Directors may deem advisable in the future without further action by
stockholders, except as may be required by law or the rules of the stock
exchange on which the Company's capital stock is listed at the time. In addition
to being available for future financing and general corporate purposes,
including, without limitation, stock splits and stock dividends, the Common
Stock to be authorized by the proposed amendment would be available for use in
acquisitions.
13
<PAGE>
The Board of Directors believes that an increase in the authorized shares
is advisable at this time since it would give the Company greater flexibility in
negotiating future acquisitions using Common Stock, in addition to providing a
resource for future financing, and for other general corporate purposes.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR"
THE AMENDMENT OF THE COMPANY'S AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION TO INCREASE AUTHORIZED COMMON STOCK.
3. AMENDMENT TO THE COMPANY'S 1995 OPTION
PLAN TO INCREASE THE NUMBER OF SHARES RESERVED
FOR ISSUANCE THEREUNDER FROM 400,000 TO 600,000
At the meeting, the Company's stockholders will be asked to approve an
amendment to the 1995 Option Plan to increase the number of shares of common
stock authorized for issuance thereunder from 400,000 to 600,000. The 1995
Option Plan was adopted by the Board of Directors of the Company on February 8,
1995, and approved by the stockholders of the Company in February, 1995.
The Board of Directors believes that in order to enable the Company to
attract and retain personnel of the highest caliber, provide incentives for
certain directors, officers and employees of the Company and certain other
persons instrumental to the success of the Company and to continue to promote
the well being of the Company, it is in the best interest of the Company and its
stockholders to provide to such persons, through the granting of stock options,
the opportunity to participate in the value and/or appreciation in value of the
Company's Common Stock. The Board of Directors have found that the grant of
options under the 1995 Option Plan has proven to be a valuable tool in
attracting and retaining key employees. It believes that such authority, in view
of the substantial growth of the Company and need to continue to expand, should
be expanded to increase the number of options which may be granted under the
1995 Option Plan. The Board of Directors believes that such authority (i) will
provide the Company with significant means to attract and retain talented
personnel; (ii) will result in saving cash which otherwise would be required to
maintain current key employees and adequately attract and reward key personnel;
and (iii) consequently will prove beneficial to the Company's ability to be
competitive.
As of May 31, 1996, the Company has granted options to purchase 213,000
shares of Common Stock under the 1995 Option Plan.
If the above-described amendment to the 1995 Option Plan is approved by the
stockholders, additional options may be granted under the 1995 Option Plan, the
timing, amounts and specific terms which cannot be determined at this time.
The following summary of the 1995 Option Plan does not purport to be
complete, and is subject to and qualified in its entirety by reference to the
full text of the 1995 Option Plan, as proposed to be amended, set forth as
Exhibit B to this Proxy Statement.
14
<PAGE>
Summary of the 1995 Option Plan
The 1995 Option Plan has 400,000 shares of Common Stock reserved for
issuance upon the exercise of options designated as either (i) incentive stock
options ("ISOs") under the code or (ii) non-qualified options. ISOs may be
granted under the 1995 Option Plan to employees and officers of the Company.
Non-qualified options may be granted to consultants, directors (whether or not
they are employees), employees or officers of the Company.
The purpose of the 1995 Option Plan is to encourage stock ownership by
certain directors, officers and employees of the Company and certain other
persons instrumental to the success of the Company and to give them a greater
personal interest in the success of the Company. The 1995 Option Plan is
administered by the Option Committee of the Board of Directors. The Option
Committee, within the limitations of the 1995 Option Plan, determines, with the
approval of the Chief Executive Officer of the Company, the persons to whom
options will be granted, the number of shares to be covered by each option,
whether the options granted are intended to be ISOs, option purchase price per
share, the manner of exercise, the time, manner and form of payment upon
exercise of an option, and restrictions such as repurchase rights or obligations
of the Company. Each option vests in four annual installments of 25% each on the
first, second, third and fourth anniversary of the date of grant. Options
granted under the 1995 Option Plan may not be granted at a price less than the
fair market value of the Common Stock on the date of grant (or 110% of fair
market value in the case of persons holding 10% or more of the voting stock of
the Company). The aggregate fair market value of shares for which ISOs granted
to any employee are exercisable for the first time by such employee during any
calendar year (under all stock option plans of the Company and any related
corporation) may not exceed $100,000. Options granted under the 1995 Option Plan
will expire not more than ten years from the date of grant (five years in the
case of ISOs granted to persons holding 10% or more of the voting stock of the
Company). Options granted under the 1995 Option Plan are generally not
transferable during an optionee's lifetime but are transferable at death by will
or by the laws of descent and distribution.
RECOMMENDATION AND VOTE REQUIRED
The vote of the holders of a majority of the shares of the Company's Common
Stock present in person or represented by proxy at the meeting is required to
adopt the foregoing proposal to amend the 1995 Option Plan.
THE BOARD OF DIRECTORS RECOMMENDS VOTING
"FOR" THE AMENDMENT TO THE COMPANY'S 1995
OPTION PLAN TO INCREASE THE NUMBER OF SHARES
RESERVED FOR ISSUANCE THEREUNDER FROM 400,000 TO 600,000
4. SELECTION OF AUDITORS
The Board of Directors recommends that the stockholders ratify the
selection of Deloitte & Touche LLP, independent auditors, which served as the
Company's independent auditors for the last fiscal year, as independent auditors
to audit the Company's consolidated financial statements for the fiscal year
ending May 31, 1997. A representative of Deloitte & Touche LLP is expected to be
present at the Meeting and will be given the opportunity to make a statement and
to answer any questions a stockholder
15
<PAGE>
may have with respect to the consolidated financial statements of the
Company for the year ended May 31, 1996.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" THE
SELECTION OF DELOITTE & TOUCHE LLP AS THE COMPANY'S INDEPENDENT
AUDITORS FOR THE FISCAL YEAR ENDING MAY 31, 1997
5. OTHER MATTERS
The Board of Directors has no knowledge of any other matters which may come
before the Meeting and does not intend to present any other matters. However, if
any other matters shall properly come before the Meeting or any adjournment
thereof, the persons named as proxies will have discretionary authority to vote
the shares of Common Stock represented by the accompanying proxy in accordance
with their best judgment.
Stockholder's Proposals
Any stockholder of the Company who wishes to present a proposal to be
considered at the next annual meeting of stockholders of the Company and who
wishes to have such proposal presented in the Company's proxy statement for such
Meeting must deliver such proposal in writing to the Company at 4000 Veterans
Memorial Highway, Bohemia, New York 11716, on or before May 30, 1997. In order
to curtail controversy as to the date on which the proposal was received by the
Company, it is suggested that proponents submit their proposals by certified
mail, return receipt requested.
By Order of the Board of Directors
----------------------------------
Kevin J. O'Brien, Secretary
The Company will furnish without charge to each person whose proxy is being
solicited by this proxy statement, on the written request of such person, a copy
of the Company's Annual Report on Form 10-K, for its fiscal year ended May 31,
1996. Such request should be addressed to Stockholder Relations, Periphonics
Corporation, 4000 Veterans Memorial Highway, Bohemia, New York 11716.
Dated: October 7, 1996
16
<PAGE>
EXHIBIT A
FORM OF AMENDMENT TO THE COMPANY'S
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
By striking out the whole of ARTICLE FOURTH, as it now exists, and
inserting in lieu and instead thereof a new ARTICLE FOURTH, reading as follows:
ARTICLE FOURTH: The total number of shares which the Corporation shall have
authority to issue is Thirty-One Million (31,000,000), consisting of Thirty
Million (30,000,000) shares of Common Stock, all of a par value of one cent
($.01) each, and One Million (1,000,000) shares of Preferred Stock, all of a par
value of One Cent ($.01) each.
<PAGE>
EXHIBIT B
PERIPHONICS CORPORATION
1995 STOCK OPTION PLAN, AS AMENDED
1. PURPOSE.
The purpose of this Stock Option Plan, to be known as the 1995 Stock
Option Plan (the "Plan"), is to advance the interests of Periphonics
Corporation (the "Company") by enhancing the ability of the Company to
attract and retain selected employees, consultants, advisors to the
Board of Directors and qualified directors (collectively the
"Participants") by creating for such Participants incentives and
rewards for their contributions to the success of the Company, and by
encouraging such Participants to become owners of shares of the
Company's Common Stock, par value $0.01 per share, as the title or par
value may be amended (the "Common Stock"). Options granted pursuant to
the Plan may be incentive stock options ("Incentive Options") as
defined in the Internal Revenue Code of 1986, as amended (the "Code")
or non-qualified options, or both. The proceeds received from the sale
of Shares pursuant to the Plan shall be used for general corporate
purposes.
2. EFFECTIVE DATE OF PLAN.
The Plan will become effective upon approval by the Board of Directors
(the "Board"), and shall be subject to the approval of the shareholders
of the Company as provided under the Securities Act of 1933, as amended
(the "Act").
3. AVAILABLE SHARES.
The total number of shares of Common Stock for which options may be
granted under the Plan shall not exceed 600,000 shares, subject to
adjustment in accordance with Paragraph 12 of the Plan. Shares of
Common Stock subject to the Plan are authorized but unissued shares of
Common Stock or shares of Common Stock that were once issued and
subsequently reacquired by the Company. If any options granted under
the Plan are surrendered before exercise or lapse without exercise, in
whole or in part, the shares of Common Stock reserved therefor shall
continue to be available under the Plan.
4. ADMINISTRATION.
The Plan shall be administered by the Board or by a committee appointed
by the Board (the "Committee"). In the event the Board fails to appoint
or refrains from appointing a Committee, the Board shall have all power
and authority to administer the Plan. In such event, the word
"Committee" wherever used shall be deemed to mean the Board. The
Committee shall, subject to the provisions of the Plan, have the power
to construe the Plan, to determine all questions hereunder, and to
adopt and amend such rules and regulations for the administration of
the Plan as it may deem desirable. The Committee shall consist of not
fewer than two members. Each of the members of the Committee must be a
"disinterested person" as that term is defined in Rule 16b-3 adopted
pursuant to the Securities Exchange Act of 1934 (the "Exchange Act"). A
majority of the members of the Committee shall constitute a quorum, and
all determinations of the Committee shall be made by the majority of
its members present at a meeting. Any determination of the Committee
under the Plan may be made without notice or meeting of the Committee
by a writing signed by all of the Committee members.
<PAGE>
5. ELIGIBILITY.
The Participants in the Plan shall be all employees, consultants,
advisors to the Board of Directors and qualified directors of the
Company or any of its present or future subsidiaries whether or not
they are also officers of the Company. Members of the Committee are
eligible only if they do not exercise any discretion in selecting
Participants who receive grants of options, in determining the number
of shares to be granted to any Participant or in determining the
exercise price of any options, or if counsel to the Company may
otherwise advise the Committee that the taking of any such action does
not impair the status of such eligible Committee members as
"disinterested persons" within the meaning of Exchange Act Rule 16b-3.
6. GRANTING OF OPTIONS.
(a) Subject to the provisions of the Plan, the Committee, with
the approval of the Chief Executive Officer of the Company,
shall determine and designate from time to time those persons
to whom options are to be granted. Options shall be granted on
such terms as the Committee, with the approval of the Chief
Executive Officer of the Company, shall determine except that
Incentive Options shall be granted on terms that comply with
the Code and Regulations thereunder.
(b) No options shall be granted after February 8, 2005 but
options previously granted may extend beyond that date.
7. EXERCISE PRICE.
The purchase price of the Common Stock covered by an option granted
pursuant to the Plan shall be 100% of the fair market value per share
of a share of Common Stock on the day the option is granted (the
"Exercise Price"). Notwithstanding the foregoing, if any person to whom
an option is to be granted owns in excess of ten percent of the
outstanding capital stock of the Company, then no option may be granted
to such person for less than 110% of the fair market value on the date
of grant as determined by the Board. The Exercise Price will be subject
to adjustment in accordance with the provisions of Paragraph 10 of the
Plan. For purposes of the Plan, "fair market value" shall be (i) the
closing price of the Company's Common Stock appearing on a national
securities exchange if the Company's Common Stock is listed on such an
exchange, or if not listed, the closing bid price appearing on the
National Association of Securities Dealers Automated Quotation System
("NASDAQ"); or (ii) if the Shares are not listed on NASDAQ, then the
closing bid price for the Company's Common Stock as listed in the
National Quotation Bureau's pink sheets; or (iii) if there are no
listed bid prices published in the pink sheets, then the market value
shall be based upon the closing bid price as determined following a
polling of all dealers making a market in the Company's Common Stock.
8. PERIOD OF OPTION.
Unless sooner terminated in accordance with the provisions of Paragraph
10 of the Plan, an option granted hereunder shall be for a term of five
(5) years.
9. VESTING OF SHARES AND NON-TRANSFERABILITY OF OPTIONS.
(a) Vesting. Options granted under the Plan shall not be exercisable
until they become vested. Options granted shall vest in the
optionee and become immediately exercisable
-2-
<PAGE>
by the optionee in four annual installments of 25% each on the
first, second, third and fourth anniversaries of the date of
grant.
(b) Legend on Certificates. The certificates representing such
shares of Common Stock shall carry such appropriate legends,
and such written instructions shall be given to the Company's
transfer agent, as may be deemed necessary or advisable by
counsel to the Company in order to comply with the
requirements of the Securities Act of 1933 or any state
securities laws.
(c) Non-transferability. Any option granted pursuant to the Plan
shall not be assignable or transferable other than by will or
the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Code, or
Title I of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or the rules thereunder, and shall
be exercisable during the optionee's lifetime only by him or
her.
10. TERMINATION OF OPTION RIGHTS.
All previously unexercised options including options which have not
vested shall terminate and be forfeited automatically upon the
termination for any reason whatsoever of a Participant's status as an
employee, consultant or advisor to the Board other than termination by
reason of the Participant's death or permanent disability.
If a Participant dies or becomes permanently disabled at a time when he
is entitled to exercise an option, then at any time or times within one
year after his death or permanent disability such options may be
exercised, as to all or any of the Shares which the Participant was
entitled to purchase immediately prior to his death or Permanent
Disability, by the Participant or, in the case of death, by his
personal representative or the person or persons to whom the options
are transferred by will or the applicable laws of descent and
distribution, and except as so exercised such options will expire at
the end of such period.
11. EXERCISE OF OPTION.
Subject to the terms and conditions of the Plan and the option
agreements, an option granted hereunder shall, to the extent then
exercisable, be exercisable in whole or in part by giving written
notice to the Company by mail or in person addressed to Periphonics
Corporation, 4000 Veterans Memorial Highway, Bohemia, New York 11716,
Attention: Chief Financial Officer, stating the number of shares of
Common Stock with respect to which the option is being exercised,
accompanied by payment in full for such shares of Common Stock. Payment
may be made:
(a) in United States dollars in cash or by certified check; or
(b) by tendering shares of Common Stock of the Company already
owned by the person or persons exercising the option (provided
that such shares of Common Stock have been owned for at least
six months prior to tender), valued at fair market value
determined in accordance with the provisions of Paragraph 7;
or
(c) by a combination of cash or certified check and Common
Stock as provided in (a) and (b) above; or
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<PAGE>
(d) in the discretion of the Committee, by the issuance by an
optionee of a promissory note, which shall be payable in more
or more installments and over such period of time (not in
excess of five years) as determined by the Committee and shall
bear interest at such rate as shall be determined by the
Committee, which in no event shall be less than the minimum
rate required by the provisions of Section 483 of the Code to
award the imputation of income to such optionee.
The Company's transfer agent shall, on behalf of the Company, prepare a
certificate or certificates representing such shares of Common Stock
acquired pursuant to exercise of the option, shall register the
optionee as the owner of such shares of Common Stock on the books of
the Company and shall cause the fully executed certificate(s)
representing such shares of Common Stock to be delivered to the
optionee as soon as practicably after payment of the option price in
full.
The holder of an option shall not have any rights of a stockholder with
respect to the shares of Common Stock covered by the option, except to
the extent that one or more certificates for such shares of Common
Stock shall be delivered to him or her upon the due exercise of the
option.
12. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION AND OTHER MATTERS.
Upon the occurrence of any of the following events, an optionee's
rights with respect to options granted to him or her hereunder shall be
adjusted as hereinafter provided:
(a) Stock Dividends and Stock Splits. If the shares of Common
Stock shall be subdivided or combined into a greater or
smaller number of shares or if the Company shall issue any
shares of Common Stock as a stock dividend on its outstanding
Common Stock, the number of shares of Common Stock deliverable
upon the exercise of options shall be appropriately increased
or decreased proportionately, and appropriate adjustments
shall be made in the purchase price per share to reflect such
subdivision, combination or stock dividend.
(b) Merger; Consolidation; Liquidation; Sale of Assets. In the
event the Company is merged into or consolidated with another
corporation under circumstances where the Company is not the
surviving corporation, or if the Company is liquidated or
sells or otherwise disposes of all or substantially all of its
assets to another corporation while unexercised options remain
outstanding under the Plan:
(i) subject to the provisions of clauses (iii), (iv)
and (v) below, after the effective date of such
merger, consolidation or sale, as the case may be,
each holder of an outstanding option shall be
entitled, upon exercise of such option, to receive
in lieu of shares of Common Stock, shares of such
stock or other securities as the holders of the
shares of Common Stock received pursuant to the
terms of the merger, consolidation or sale; or
(ii) the Committee may waive any discretionary
limitations imposed with respect to the exercise of
the option so that all options from and after a
date prior to the effective date of such merger,
consolidation, liquidation or sale, as the case may
be, specified by the Committee, shall be
exercisable in full; or
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<PAGE>
(iii) all outstanding options may be cancelled by the
Committee as of the effective date of any such
merger, consolidation, liquidation or sale,
provided that notice of such cancellation shall be
given to each holder of an option, and each holder
thereof shall have the right to exercise such
option in full (without regard to any discretionary
limitations imposed with respect to the option)
during a 30- day period preceding the effective
date of such merger, consolidation, liquidation or
sale; or
(iv) all outstanding options may be cancelled by the
Committee as of the date of any such merger,
consolidation, liquidation or sale, provided that
notice of such cancellation shall be given to each
holder of an option and each such holder thereof
shall have the right to exercise such option but
only to the extent exercisable in accordance with
any discretionary limitations imposed with respect
to the option prior to the effective date of such
merger, consolidation, liquidation or sale; or
(v) the Committee may provide for the cancellation of
all outstanding options and for the payment to the
holders of some part or all of the amount by which
the value thereof exceeds the payment, if any,
which the holder would have been required to make
to exercise such option.
(c) Issuance of Securities. Except as expressly provided herein,
no issuance by the Company of shares of stock of any
class, or securities convertible into shares of stock of any
class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares subject to
options, provided, however, in the event the Company issues or
sells any Common Stock or Common Stock Equivalents without
consideration or for consideration per share less than the
current fair market value per share (as defined in Paragraph 7
above) on the date of such issuance or sale, or fixes a record
date for the issuance of subscription rights, options or warrants
to all holders of Common Stock entitling them to purchase Common
Stock (or Common Stock Equivalents) at a price per share (or
having an exercise or conversion price per share) less than the
then current fair market value per share, the Exercise Price
shall be adjusted so that it will equal the price
determined by multiplying the Exercise Price in effect
immediately prior to the adjustment by a fraction, of which the
numerator shall be (i) the number of shares outstanding on the
record date for such sale or issuance, plus (ii) the number of
additional shares which the aggregate consideration received
by the Company upon such issuance or sale (plus the aggregate
of any additional amount to be received by the Company upon the
exercise of such subscription rights, options or warrants) would
purchase at the fair market value, and of which the denominator
shall be (x) the number of shares outstanding on the record
date for such issuance or sale, plus (y) the number of
additional shares offered for subscription or purchase
(or into which the Common Stock Equivalents so offered are
exercisable or convertible). Each adjustment shall become
effective retroactively immediately after the record date for
the issuance. To the extent that Common Stock (or Common Stock
Equivalents) are not delivered after the expiration of such
subscription rights, options or warrants, the Exercise Price
shall be readjusted to the Exercise Price which would then
be in effect had the adjustments made upon the issuance of such
rights, options or warrants been made upon the basis of delivery
of only the number of shares (or Common Stock Equivalents)
actually delivered. No adjustments shall be made for dividends
paid in cash or in property other than securities of the Company.
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(d) Adjustments. Upon the happening of any of the foregoing
events, the class and aggregate number of shares set forth in
Paragraph 3 of the Plan that are subject to options which
previously have been or subsequently may be granted under the
Plan shall also be appropriately adjusted to reflect such
events. The Committee shall determine the specific adjustments
to be made under this Paragraph 12 and its determination shall
be conclusive.
13. RESTRICTIONS ON ISSUANCE OF SHARES.
Notwithstanding the provisions of Paragraphs 9 and 11 of the Plan, the
Company shall not be obligated to deliver any Common Stock unless and
until, in the opinion of the Company's counsel, all applicable federal
and state laws and regulations have been complied with, nor, if the
outstanding Common Stock is at the time listed on any securities
exchange, unless and until the Common Stock to be delivered has been
listed (or authorized to be added to the list upon official notice of
issuance) upon such exchange, nor unless or until all other legal
matters in connection with the issuance and delivery of the Common
Stock have been approved by the Company's counsel.
14. REPRESENTATION OF OPTIONEE.
If requested by the Company, the optionee shall deliver to the Company
written representations and warranties upon exercise of the option that
are necessary to show compliance with Federal and state securities
laws, including representations and warranties to the effect that a
purchase of shares under the option is made for investment and not with
a view to their distribution (as that term is used in Securities Act of
1933).
15. OPTION AGREEMENT.
Each option is granted under the provisions of the Plan shall be
evidenced by an option agreement, which agreement shall be duly
executed and delivered on behalf of the Company and by the optionee to
whom such option is granted. The option agreement shall contain such
terms, provisions and conditions not inconsistent with the Plan as may
be determined by the Committee.
16. TERMINATION AND AMENDMENT OF PLAN.
Options may no longer be granted under the Plan after February 8, 2005,
and the Plan shall terminate when all options granted or to be granted
hereunder are no longer outstanding. The Committee may at any time
terminate the Plan or make such modification or amendment thereof as it
deems advisable; provided, however, that the Committee may not, without
approval by the affirmative vote of the holders of a majority of the
shares of Common Stock present in person or by proxy and entitled to
vote at the meeting:
(a) increase the maximum number of shares for which options may be
granted under the Plan (except by adjustment pursuant to Section 12);
(b) materially modify the requirements as to eligibility to participate
in the Plan;
(c) materially increase benefits accruing to option holders under the
Plan; or
(d) amend the Plan in any manner which would cause Rule 16b-3 to become
inapplicable to the Plan;
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and provided further that the provisions of the Plan specified in Rule
16b-3(c)(2)(ii)(A) (or any successor or amended provision thereof)
under the Securities Exchange Act of 1934 (including, without
limitation, provisions as to eligibility, amount, price, and timing of
awards) may not be amended more than once every six months, other than
to comport with changes in the Internal Revenue Code, ERISA, or the
rules thereunder. Termination or any modification or amendment of the
Plan shall not, without consent of a participant, affect his or her
rights under an option previously granted to him or her.
17. WITHHOLDING OF INCOME TAXES.
Upon the exercise of an option, the Company, in accordance with Section
3402(a) of the Internal Revenue Code, may require the optionee to pay
withholding taxes in respect of amounts considered to be compensation
includible in the optionee's gross income.
18. COMPLIANCE WITH REGULATIONS.
It is the Company's intent that the Plan comply with all respects with
Rule 16b-3 under the Securities Exchange Act of 1934 (or any successor
or amended version thereof) and any applicable Securities and Exchange
Commission interpretations thereof. If any provision of the Plan is
deemed not be in compliance with Rule 16b-3, the provision shall be
null and void.
19. GOVERNING LAW.
The validity and construction of the Plan and the instruments
evidencing options shall be governed by the laws of the State of
Delaware, without giving effect to the principles of conflicts of law
thereof.
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