PROXY PROXY
TELESOFT CORP.
an Arizona corporation
THIS PROXY IS SOLICITED ON BEHALF OF THE COMPANY'S
BOARD OF DIRECTORS FOR THE 1996 ANNUAL MEETING
OF SHAREHOLDERS TO BE HELD AUGUST 7, 1996
The undersigned hereby appoints Joseph W. Zerbib and Michael F. Zerbib,
and each of them, with full power of substitution, as proxies, to represent the
undersigned at the 1996 Annual Meeting of Shareholders of Telesoft Corp. (the
"Company") to be held at the offices of the law firm of Streich Lang,
Renaissance One, Two North Central Avenue, Phoenix, Arizona 85004, on
Wednesday, August 7, 1996 at 10:00 a.m., Mountain Standard Time, and at any
adjournment thereof, and to vote all shares of the Company's Common Stock
standing in the name of the undersigned on the matters set forth below and
upon any other matters that may properly come before the meeting or any
adjournment thereof as follows:
ITEM NO. 1 RATIFICATION OF INDEPENDENT
ACCOUNTANTS
___ VOTE FOR RATIFICATION of SEMPLE & COOPER
as the independent public accountants for the Company's fiscal year 1996
___ VOTE AGAINST RATIFICATION
___ ABSTAIN
ITEM NO. 2 ELECTION OF SIX DIRECTORS
Joseph W. Zerbib
Thierry E. Zerbib
Brian H. Loeb
Michael F. Zerbib
Cecile Silverman
Kalvan Swanky
___ VOTE FOR all nominees listed above
___ VOTE FOR all nominees listed above, except
___ CUMULATIVE VOTES for one or more nominees as
follows:
Joseph W. Zerbib ;
Thierry E. Zerbib ;
Brian H. Loeb ;
Michael F. Zerbib ;
Cecile Silverman ; and
Kalvan Swanky .
___ WITHHOLD AUTHORITY to vote for all nominees
listed above
ITEM NO. 3. APPROVAL OF ADOPTION OF 1996 INCENTIVE STOCK OPTION PLAN AND
1996 RESTRICTED STOCK PLAN
___ VOTE FOR the Adoption of the 1996 Incentive Stock Option Plan and 1996
Restricted Stock Plan
___ VOTE AGAINST the Adoption of the 1996 Incentive Stock Option Plan and 1996
___ ABSTAIN
The shares represented by this Proxy will be voted at the meeting in
accordance with the specifications appearing above. THE SHARES WILL BE
VOTED "FOR" ANY PROPOSAL FOR WHICH NO CONTRARY
SPECIFICATION IS MADE.
Dated:_____________________, 1996 Signed
(Print Name)
Please sign exactly as
the name appears on
the stock certificate.
When signing as
attorney, executor,
administrator, trustee,
guardian, etc., give
full title as such. If
stock is held jointly,
each joint owner
should sign.
PLEASE DATE, SIGN AND RETURN PROMPTLY
TELESOFT CORP.
3216 North Third Street
Phoenix, Arizona 85012
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
June 28, 1996
The 1996 Annual Meeting of Shareholders of Telesoft Corp. (the
"Company") will be held at the offices of the law firm of Streich Lang,
Renaissance One, Two North Central Avenue, Phoenix, Arizona 85004 on
August 7, 1996, at 10:00 a.m., Mountain Standard Time, for the following
purposes:
1. To vote on ratification of the selection of Semple & Cooper
as the independent public accountants for the Company's 1996 fiscal year;
2. To vote for the election of six directors;
3. To approve adoption of 1996 Incentive Stock Option Plan and 1996
Restricted Stock Plan; and
4. To transact such other business as may properly come before the meeting or
any adjournment thereof.
The close of business on June 21, 1996 has been fixed as the record
date for the determination of the shareholders of record entitled to notice of,
and to vote at, this meeting or any adjournment thereof. The list of
shareholders entitled to vote at this meeting is available at the offices of
Telesoft Corp., 3216 North Third Street, Phoenix, Arizona 85012, for
examination by any stockholder.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE
MEETING, PLEASE SIGN, DATE AND RETURN THE ENCLOSED
PROXY, WHICH IS SOLICITED BY AND ON BEHALF OF THE
BOARD OF DIRECTORS. THE GIVING OF SUCH PROXY WILL NOT
AFFECT YOUR RIGHT TO REVOKE SUCH PROXY OR TO VOTE IN
PERSON SHOULD YOU LATER DECIDE TO ATTEND THIS
MEETING.
By Order of the Board of
Directors
Joseph W. Zerbib
President
Phoenix, Arizona
June 28, 1996
TELESOFT CORP.
3216 North 3rd Street
Phoenix, Arizona 85012
DEFINITIVE PROXY STATEMENT
Proxies in the form enclosed are solicited by the board of directors of
Telesoft Corp., an Arizona corporation (the "Company"), for use at the 1996
Annual Meeting of Shareholders of the Company to be held on August 7,
1996, and any adjournment thereof. The proxy materials were mailed on or
about June 28, 1996 to shareholders of record as of the close of business on
June 21, 1996.
Execution of the enclosed proxy will not in any way affect a
shareholder's right to attend the meeting and vote in person. Shareholders
giving proxies may revoke them at any time before they are exercised by filing
with the Secretary of the Company a written revocation or a duly executed
proxy bearing a later date or by attending the meeting and voting in person.
The Company will bear the cost of solicitation of proxies, including
the charges and expenses of brokerage firms and others who forward proxy
materials to beneficial owners of stock. Solicitation by the Company will be
by mail, except for any incidental personal solicitation made by directors,
officers and employees of the Company, who will receive no additional
compensation therefor.
Voting Securities Outstanding
As of June 21, 1996, the record date for shareholders entitled to vote
at the meeting, there were 3,787,500 outstanding shares of the Company's
Common Stock. Each share of Common Stock is entitled to one vote on each
matter of business to be considered at the 1996 Annual Meeting, except for
the election of directors in which case cumulative voting is permitted. A
majority of the outstanding shares entitled to vote at such meeting will
constitute a quorum.
1
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Company's board of directors, acting upon the recommendation
of its Audit Committee, has selected, and is submitting to shareholders for
their confirmation, the appointment of Semple & Cooper as auditors for the
Company for its current fiscal year ending November 30, 1996. The approval
of the shareholders is being sought because of the importance of independent
public accountants to a publicly held corporation. If the shareholders do not
approve the appointment of Semple & Cooper, the Company's board of
directors will reconsider its selection of independent accountants.
The Company does not expect that representatives of Semple &
Cooper will be present at the 1996 Annual Meeting.
For the year ended November 30, 1995 ("fiscal 1995"), Semple &
Cooper provided audit services to the Company, including examination of the
annual consolidated financial statements of the Company, review of unaudited
quarterly financial information, assistance and consultation in connection with
filing the Company's other filings with the Securities and Exchange
Commission ("SEC"), and consultation in connection with various audit-
related and accounting matters.
Each year, the Audit Committee will review and approve in advance
the scope of the annual audit by the Company's independent accountants. The
Audit Committee will also be advised of significant non-audit professional
services provided by such accountants to assess whether the rendering of such
services would impair the independence of the firm.
It is intended that the proxies will be voted in favor of ratifying the
selection of the Company's independent accountants unless instructions to the
contrary are indicated on the accompanying proxy form.
Your directors recommend a vote FOR Proposal No. 1
2
ELECTION OF DIRECTORS
The Articles of Incorporation of the Company provide for a board of
directors of not fewer than two nor more than 15 in number and may be
altered as provided in the Company's bylaws. The term of office of all
directors elected at the meeting will expire at the 1997 Annual Meeting of
Shareholders. Vacancies occurring during a term may be filled by the
Company's board of directors for the remainder of the full term.
On April 15, 1996, the Company's board of directors nominated
Joseph W. Zerbib, Thierry E. Zerbib, Brian H. Loeb, Michael F. Zerbib,
Cecile Silverman and Kalvan Swanky for re-election to the board of directors.
If the shareholders elect the nominees, the composition of the Company's
board of directors following the election will be as follows:
Joseph W. Zerbib
Thierry E. Zerbib
Brian H. Loeb
Michael F. Zerbib
Cecile Silverman
Kalvan Swanky
For information regarding the nominees proposed for election at the
Annual Meeting, see "Directors and Executive Officers" in the following
section.
Cumulative Voting
Pursuant to the provisions of Arizona General Corporation Law, at
each election for director, every shareholder entitled to vote at such election
has the right to vote, in person or by proxy, the number of shares owned by
him for as many persons as there are directors to be elected for whose election
he has a right to vote, or to cumulate his votes by giving one candidate as
many votes as the number of such directors multiplied by the number of
shares he owns, or by distributing such vote on the same principle among any
number of such candidates.
It is intended that the proxies will be voted for the nominees or for a
substitute nominee, in the case of any nominee who becomes unavailable, on a
pro rata basis among the nominees unless instructions to the contrary are
indicated on the accompanying proxy form.
Your directors recommend a vote FOR the election of the six
nominees under Proposal No. 2
PROPOSAL NO. 3
Approval of Adoption of 1996 Incentive Stock Option Plan and 1996
Restricted Stock Plan
The Board of Directors adopted the 1996 Incentive Stock Option Plan
and the 1996 Restricted Stock Plan subject to submission of these plans to the
stockholders for approval. The affirmative vote of the majority of the
outstanding shares of Common Stock will be required to approve these
proposed Plans. Set forth below are descriptions of the Plans:
1996 Incentive Stock Option Plan. The Board of Directors adopted
the 1996 Incentive Stock Option Plan (the "Plan") in April 1996, a copy of
which is attached hereto as Exhibit A. Under the Plan, 260,000 shares of
Common Stock of the Company are reserved for issuance. The Plan
authorizes the Company to grant to key employees of the Company (i)
incentive stock options to purchase shares of Common Stock and (ii) non-
qualified stock options to purchase shares of Common Stock. Such Plan is
being submitted to the stockholders for approval at the Annual Meeting of
Shareholders to be held August 7, 1996.
The objectives of the Plan are to provide incentives to key employees
to achieve financial results aimed at increasing stockholder value and
attracting talented individuals to the Company. The Compensation Committee
formed by the Board of Directors is comprised of disinterested Directors who
will have the discretion to make awards of stock options. Although the Plan
does not specify what portion of the shares may be awarded in the form of
incentive stock options or non-statutory options, it is anticipated that a
substantially greater number of incentive stock options will be awarded under
the Plan. The incentive stock options are qualified stock options under the
Internal Revenue Code. Further, the Plan is a stock option plan meeting the
requirements of Rule 16b-3 promulgated under the Securities and Exchange
Act of 1934, as amended ("Exchange Act"). Persons eligible to participate in
the Plan will be those employees of the Company whose performance, in the
judgment of the Compensation Committee, can have significant effect on the
success of the Company.
The Plan will be administered by the Compensation Committee, which
will have the authority to interpret its provisions, to establish and amend
rules for its administration, to determine the types and amounts of awards to
be made pursuant to the Plan, subject to the Plan's limitations, and to approve
recommendations made by management of the Company as to who should receive
awards.
Incentive stock options may be granted under the Plan for terms of up
to ten years and at an exercise price at least equal to 100% of the fair market
value of the Common Stock as of the date of grant, and 85% of the fair market
value in the case of non-statutory options, except that incentive options
granted to any person who owns stock possessing more than 10% of the
combined voting power of all classes of the Company's stock or of any parent
or subsidiary corporation must have an exercise price at least equal to 110%
of the fair market value of the Company's Common Stock on the date of grant.
The aggregate fair market value, determined as of the time an incentive stock
option is granted, of the Common Stock with respect to which incentive stock
options are exercisable by an employee for the first time during any calendar
year shall not exceed $100,000. There is no aggregate dollar limitation on the
amount of non-statutory stock options which may be exercisable for the first
time by an employee during any calendar year. Payment of the exercise price
is to be in cash, although the Compensation Committee may, in its discretion,
allow payment in the form of shares of the Company's Common Stock under
certain circumstances. Any option granted under the Plan will expire at the
time fixed by the Committee, which will not be more than ten years after the
date it is granted. Any employee receiving a grant must remain continuously
employed by the Company for a period of twelve months after the date of the
grant, as a condition to the exercise of the option. The Compensation
Committee may also specify when all or part of an option becomes
exercisable, but in the absence of such specification, the option will
ordinarily be exercisable in whole or part at any time during its term.
In addition, optionees who are directors or executive officers of the Company
may not exercise any portion of an option within six months of the date of
grant. Subject to the foregoing, the Compensation Committee may accelerate the
exercisability of any option in its discretion.
Options granted under the Plan are not assignable. Options may be
exercised only while the optionee is employed by the Company or within
twelve months after termination by reason of death, within twelve months after
the date of disability, or within ten days after termination for any other
reason.
The Company may assist optionees in paying the exercise price of
options granted under the Plan by either the extension of a loan by the
Company for payment by the optionee of the exercise price in installments, or
a guarantee by the Company of a loan obtained by the optionee from a third
party. The terms of any loan, installment payments or guarantees, including
the interest rate and terms of repayment and collateral requirements, if any,
shall be determined by the Board of Directors in its sole discretion.
As of the date of this Proxy Statement, options to purchase 156,408
shares have been granted by the Company under the Plan, which options are
effective only upon the approval of the Plan by the shareholders of the
Company. Of such options, 16,000 options were granted each to Joseph W.
Zerbib, Thierry E. Zerbib, Michael F. Zerbib and Brian H. Loeb, who are
officers, directors and principal shareholders of the Company. Such options
are exercisable to purchase Common Stock at a price of $5.23 per share for a
term of five years following their effective date. A total of 92,000 options
were granted to other employees under the Plan, which options are exercisable
for a term of five years from their effective date at a price of $4.75 per
share.
Tax Consequences Respecting Options Under the 1996 Plan. An
employee or director will not recognize income on the awarding of incentive
stock options and nonstatutory options under the 1996 Plan. An employee
will recognize ordinary income as the result of the exercise of a nonstatutory
stock option in the amount of the excess of the fair market value of the stock
on the day of exercise (or, generally six months thereafter in the case of
employees subject to Section 16(b) of the Exchange Act) over the option
exercise price. Exercise of an option with previously owned stock is not a
taxable disposition of such stock.
An employee will not recognize income on the exercise of an incentive
stock option, unless the option exercise price is paid with stock acquired on
the exercise of an incentive stock option and the following holding period for
such stock has not been satisfied. He will recognize long-term capital gain or
loss on a sale of the shares acquired on exercise, provided the shares acquired
are not sold or otherwise disposed of before the earlier of: (i) two years
from the date of award of the option or (ii) one year from the date of
exercise. If the shares are not held for the required period of time, the
employee will recognize ordinary income to the extent the fair market value
of the stock at the time the option is exercised exceeds the option price,
but limited to the gain recognized on sale. The balance of any such gain
will be a short-term capital gain.
An employee generally must include in alternative minimum taxable
income the amount by which the price he paid for an incentive stock option is
exceeded by the option's fair market value at the time his rights to the stock
are freely transferrable or are not subject to a substantial risk of
forfeiture.
The Company and its subsidiaries will be entitled to deductions for federal
income tax purposes as a result of the exercise of a nonstatutory option and
the disqualifying sale or disposition of incentive stock options in the year
and the amount that the employee recognizes ordinary income as a result of
such disqualifying disposition.
The affirmative vote of a majority of the outstanding shares will be
required to bring the Plan into compliance with Section 16(b) of the Exchange
Act. It is intended that the proxies will be voted for adoption of the Plan
unless instructions to the contrary are indicated on the accompanying proxy
form.
1996 Restricted Stock Plan. The Board of Directors adopted the
1996 Restricted Stock Plan ("Restricted Stock Plan") in April 1996, a copy of
which is attached hereto as Exhibit B. Such plan is being submitted to the
shareholders for approval at the Annual Meeting of Shareholders to be held
August 7, 1996. Under the Restricted Stock Plan, shares of Common Stock
of the Company are reserved, in such amounts as determined by the Board of
Directors, for issuance as part of the total shares reserved under the Plan
described above. The Restricted Stock Plan authorizes the grant of shares of
Common Stock to key employees, consultants, researchers and to members of
the Advisory Board. The Restricted Stock Plan is administered by the Board
of Directors or a committee of the Board, which determines the persons to
whom shares of Common Stock will be granted and the terms of such share
grants.
As of the date hereof, no shares have been granted under the
Restricted Stock Plan. If the shareholders approve the Restricted Stock Plan,
the Company anticipates that shares will be granted under the Restricted Stock
Plan from time to time commencing in 1996 and thereafter depending upon the
performance of the Company.
Directors and Executive Officers
The following sets forth certain information with respect to directors
and executive officers of the Company with the year in which each director's
term expires in parentheses.
Position
With
Name Age Company and Tenure
--------------- --- ------------------
Joseph W. Zerbib 60 President and Director since 1982. (1996)
Thierry E. Zerbib 34 Vice President - Software/Systems, Secretary and
Director since 1982. (1996)
Brian H. Loeb 34 Vice President - Marketing/Sales and Operations
and Director since 1992. (1996)
Michael F. Zerbib 29 Vice President - Finance, Treasurer and Director
since 1990. (1996)
Cecile Silverman 71 Director since 1995. (1996)
Kalvan Swanky 32 Director since 1995. (1996)
Directors hold office until the next annual meeting of shareholders and
until their successors are elected and qualified or until their prior
resignation. The terms of the executive officers are continuous, subject to
the authority of the Company's Board of Directors.
Joseph W. Zerbib was born in Algeria and has lived in the Middle
East, Europe and the United States. From 1982 to the present, Mr. Zerbib has
been the President of the Company. He concentrates on strategic planning and
financial, accounting and human resources management. From 1975 to 1982
Mr. Zerbib managed a large supermarket chain in Israel. From 1960 to 1975
Mr. Zerbib owned and managed a full service drug store and blood analysis
laboratory in Paris, France. Mr. Zerbib is the treasurer, principal
shareholder and a director of International FiberCom, Inc. ("IFC"), a publicly
held company traded on the Nasdaq Small-Cap Market. Mr. Zerbib estimates that
the time required for his management duties at IFC are not substantial and will
not adversely impact on the management time required for the Company.
Thierry E. Zerbib has been with the Company since 1982. His
responsibilities include day-to-day supervision of software/hardware customer
service, system configuration, system implementation, research and
development, and quality control. He holds dual degrees in computer science
and math from the University of Tel Aviv, Israel.
Brian H. Loeb has been with the Company since 1982. His
responsibilities include day to day supervision of sales, marketing, customer
service, and service bureau implementation.
Michael F. Zerbib has been with the Company since 1990 with main
emphasis on service bureau sales and financial reporting. He holds a Bachelor
of Science degree in finance and a Master degree in taxation and financial
accounting from Arizona State University. Mr. Zerbib also holds a
certification from the Arizona State Board of Accountancy.
Cecile Silverman is a certified public accountant employed by the
firm of Schwartz, Cohen & Co. She was a partner/shareholder of such firm
from 1975 to 1989 and is now employed with the firm on a part-time basis.
Ms. Silverman specializes in tax planning for corporations and individuals, as
well as representing clients before various governmental agencies. She
graduated from Syracuse University with a degree in public accounting.
Kalvan Swanky has been employed for the past ten years by Storage
Technology Corporation, which develops, manufacturers and distributes
computer memory devices. Mr. Swanky has held a number of positions with
Storage Technology, most recently as Direct Sales Manager for Arizona and
Nevada. He received a Bachelor of Science degree from the University of
Colorado.
Joseph W. Zerbib is the father of Thierry E. Zerbib and Michael F.
Zerbib and the father-in-law of Brian H. Loeb. Accordingly, Thierry E.
Zerbib and Michael F. Zerbib are brothers and Brian H. Loeb is the brother-
in-law of Thierry and Michael Zerbib.
Business of the Board of Directors
During the fiscal year ended November 30, 1995, the Company's
board of directors held one meeting. All directors attended this meeting,
except Mr. Swanky.
Compensation and Audit Committees
The Board of Directors appointed Cecile Silverman and Kalvan
Swanky to the Compensation and Audit Committees of the Board of Directors
in June 1995 and continue to serve in such capacity. Such persons are not
officers or employees of the Company and thus are Independent Directors.
Such individuals will not have any contractual or other relationships with the
Company during the present fiscal year, except as directors and except that
Ms. Silverman's accounting firm provides tax advisory services to the
Company.
Audit Committee. The functions of the Audit Committee are to
receive reports with respect to loss contingencies, the public disclosure or
financial statement notation of which may be legally required; annually review
and examine those matters that relate to a financial and performance audit of
the Company's employee plans; recommend to the Company's board of
directors the selection, retention and termination of the Company's independent
accountants; review the professional services, proposed fees and independence
of such accountants; and provide for the periodic review and examination of
management performance in selected aspects of corporate responsibility. The
Audit Committee held one meeting during the fiscal year ended November 30,
1995. See "Compensation Committee Interlocks and Insider Participation" in
the following section.
Compensation Committee. The functions of the Compensation
Committee are to review annually the performance of the chairman and
president and of the other principal officers whose compensation is subject to
the review and recommendation by the Committee to the Company's board of
directors. Additionally, the Compensation Committee is to review
compensation of outside directors for service on the Company's board of
directors and for service on committees of the Company's board of directors,
and to review the level and extent of applicable benefits provided by the
Company with respect to automobiles, travel, insurance, health and medical
coverage, stock options and other stock plans and benefits. The
Compensation Committee did not meet during the fiscal year ended November
30, 1995. See "Compensation Committee Interlocks and Insider
Participation" in the following section.
The Compensation Committee has adopted a policy that the Company
should be competitive in total compensation and include as a part of total
compensation opportunities for equity ownership and utilize incentives that
offer competitive compensation. Pursuant to these policies, the Compensation
Committee has instructed the Company's agents to obtain more specific
information regarding the Company's competitors and the industry generally,
with respect to compensation and options. It is anticipated that the
Compensation Committee will review these materials and make
recommendations in fiscal 1996 to the Board of Directors regarding executive
compensation.
Compensation Committee Interlocks and Insider Participation
Cecile Silverman and Kalvan Swanky serve as members of the
Compensation Committee. They were appointed in June 1995 and continue to
serve in such capacity. These persons are disinterested directors for purposes
of administering the 1995 Incentive Stock Option Plan under SEC Rule
16(b)(3) and will administer Plan proposed for adoption at the 1996 Annual
Meeting of Shareholders.
Director Compensation
Directors receive no compensation for their services as members of
the Board of Directors. The Company may reimburse the independent
directors for their reasonable out-of-pocket expenses in connection with their
attendance at meetings. The Company may issue stock options or pay other
compensation to Ms. Silverman and Mr. Swanky in the future.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act 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, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission ("SEC"). Such
officers, directors and shareholders are required by SEC regulation to furnish
the Company with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by the
Company, or representations from certain reporting persons that no forms
were required for those persons, except as described hereafter, the Company
believes that during fiscal 1995 all filing requirements applicable to its
officers, directors and ten percent beneficial owners were satisfied.
Certain Transactions
The Company leases 13,500 square feet of office space from Joseph
W. Zerbib, an officer, director and principal shareholder of the Company.
The Company's obligations under the terms of the lease agreement were
approximately $84,336 for fiscal 1995. The Company has leased this office
in fiscal 1996 on a month-to-month basis at a rate of $7,028 per month. The
Company believes that the foregoing lease rate is no less favorable than it
could obtain from an unaffiliated third party for comparable space.
The Board of Directors has adopted a policy that provides that all
transactions between the Company and its executive officers, directors,
employees and affiliates are subject to the approval of a majority of
disinterested directors of the Board of Directors and will be on terms that are
no less favorable to the Company than those that could be negotiated with
unaffiliated parties.
The Company retired approximately $280,000 of debt which the
Company owed to First Interstate Bank of Arizona out of a portion of the
proceeds of its June 1995 initial public offering. Joseph W. Zerbib, Thierry
E. Zerbib, Michael F. Zerbib and Brian H. Loeb had personally guaranteed
payment of this obligation and therefore received a benefit to such extent upon
the Company's payment of the loan.
The Company has entered into one-year employment agreements with
Joseph W. Zerbib, Thierry E. Zerbib, Michael F. Zerbib and Brian H. Loeb in
their respective capacities. See "Executive Compensation - Employment
Agreements."
The Company issued options to purchase a total of 164,000 shares of
Common Stock to Joseph W. Zerbib, Thierry E. Zerbib, Michael F. Zerbib
and Brian H. Loeb in fiscal 1995 under the 1995 Incentive Stock Option Plan.
Such options were divided equally among the four individuals. In April 1996
the Company also granted options under the Plan to purchase 64,000 shares of
Common Stock to the same four individuals in equal proportions, such grants
to be effective only upon approval of the Plan by the shareholders at the 1996
Annual Meeting of Shareholders. The options are exercisable at a price of
$5.23 per share for a term of five years after their effective date. Finally,
in April 1996 the Company granted options to Cecile Silverman and Kalvan
Swanky exercisable to purchase 1,000 shares of Common Stock at a price of
$4.75 per share through April 15, 2001. See "Option Grants in 1995 Fiscal
Year," "Stock Option and Restricted Stock Plans," "Approval of Adoption of
1996 Incentive Stock Option and 1996 Restricted Stock Plan" and "Principal
Stockholders."
Policy Regarding Transactions
Management believes that all of its existing transactions with
affiliates are on terms no less favorable than could have been obtained from
unaffiliated parties. The Board of Directors has adopted a policy that all
future material transactions and loans between the Company and its executive
officers, directors, employees and affiliates will be subject to the approval
of the majority of independent and disinterested directors and that such
transactions and loans, and any forgiveness of loans, will be on terms that are
no less favorable to the Company than those that are generally available from
unaffiliated third parties.
Summary Compensation Table
The following table sets forth the total compensation received by the
chief executive officer and each additional executive officer whose
compensation exceeded $100,000, paid to the named individuals and group for
services rendered in all capacities to the Company and its subsidiaries for the
fiscal years ended November 30, 1995 and 1994.
<TABLE>
<CAPTION>
Long Term Compensation <F1>
----------------------------------
Annual Compensation Awards Payouts
----------------------------- -------------------- -------
Other All
Name and Annual Restricted Other
Principal Compen- Stock Options/ LTIP Compen-
Position Year Salary Bonus sation Awards SARs<F3> Payouts sation
- -------- ---- ------ ----- ------- ---------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Joseph W. Zerbib 1995 $120,000 0 0 41,000 0 0 0
President 1994 $144,000 $115,000
Thierry E. Zerbib 1995 $120,000 0 0 41,000 0 0 0
Vice President - 1994 $144,000 $398,500
Softare/Systems
and Secretary
Michael F. Zerbib 1995 $120,000 0 0 41,000 0 0 0
Vice President - 1994 $144,000 $398,500
Finance and
Treasurer
Brian H. Loeb 1995 $120,000 0 0 41,000 0 0 0
Vice President - 1994 $144,000 $398,500
Marketing, Sales
and Operations
<FN>
<F1>
See "Stock Options and Restricted Stock Plans" below for additional
information on options which were granted to these four officers.
<F2>
The Company entered into one-year employment agreements with
Joseph W. Zerbib, Thierry E. Zerbib, Brian H. Loeb and Michael F.
Zerbib which provide for an annual salary of $96,000 each, effective
July 1, 1995. The Compensation Committee, composed of Independent Directors,
will determine future executive compensation. The Company's policy is to
maximize the net income of the Company by providing performance incentives to
management based on the performance of the Company.
<F3> Does not include options granted to purchase 64,000 shares of
Common Stock divided equally among such individuals under the
Plan, effective only upon approval of the Plan by the shareholders at
the 1996 Annual Meeting of Shareholders. See "Option Grants in
1995 Fiscal Year" and "Approval of Adoption of 1996 Incentive
Stock Option Plan and 1996 Restricted Stock Option Plan."
</FN>
</TABLE>
Option Grants in 1995 Fiscal Year
The following executive officers were granted stock options by the
Company in fiscal 1995 in recognition of their past contributions to the
Company. In each case, the option price was in excess of the fair market
value of the Common Stock on the date of grant.
<TABLE>
<CAPTION>
Percentage of Total
No. of Shares for which
Shares Underlying Options Granted Expiration
Name Options Granted to Employees Exercise Price Date<F1>
- ---------------- ---------------- ------------------ -------------- ----------
<S> <C> <C> <C> <C>
Joseph W. Zerbib 41,000 15.5 $6.60 9/27/00
Thierry E. Zerbib 41,000 15.5 6.60 9/27/00
Brian H. Loeb 41,000 15.5 6.60 9/27/00
Michael F. Zerbib 41,000 15.5 6.60 9/27/00
<FN>
<F1>
Options became exercisable September 28, 1995.
<F2>
Does not include options granted to purchase 64,000 shares of
Common Stock divided equally among such individuals under the
Plan, effective only upon approval of the Plan by the shareholders at
the 1996 Annual Meeting of Shareholders. See "Option Grants in
1995 Fiscal Year" and "Approval of Adoption of 1996 Incentive
Stock Option Plan and 1996 Restricted Stock Plan."
<FN/>
</TABLE>
Option Exercises in 1995 Fiscal Year
There were no exercises of outstanding stock options in fiscal 1995.
Stock Option and Restricted Stock Plans
1995 Incentive Stock Option Plan. The Board of Directors adopted
the 1995 Incentive Stock Option Plan ("Plan") on February 1, 1995. Under
the Plan, 264,000 shares are reserved for issuance and all of such shares are
now subject to options granted under the Plan. The Plan authorizes the
Company to grant to key employees of the Company (i) incentive stock
options to purchase shares of Common Stock and (ii) non-qualified stock
options to purchase shares of Common Stock. Such Plan was approved by
the stockholders at a Special Meeting of Stockholders which was held on
February 1, 1995.
The objectives of the Plan are to provide incentives to key employees
to achieve financial results aimed at increasing stockholder value and
attracting talented individuals to the Company. The Compensation Committee
to be formed by the Board of Directors and comprised of disinterested
Directors will have the discretion to make awards of stock options. Although
the Plan does not specify what portion of the shares may be awarded in the
form of incentive stock options or non-statutory options, at the time of
adoption it was anticipated that a substantially greater number of incentive
stock options would be awarded under the Plan. The incentive stock options
are qualified stock options under the Internal Revenue Code. Further, the Plan
is a stock option plan meeting the requirements of Rule 16b-3 promulgated
under the Exchange Act. Persons eligible to participate in the Plan will be
those employees of the Company whose performance, in the judgment of the
Compensation Committee, can have significant effect on the success of the
Company.
The Plan is administered by the Compensation Committee, which has
the authority to interpret its provisions, to establish and amend rules for its
administration, to determine the types and amounts of awards to be made
pursuant to the Plan, subject to the Plan's limitations, and to approve
recommendations made by management of the Company as to who should
receive awards.
Incentive stock options may be granted under the Plan for terms of up
to ten years and at an exercise price at least equal to 100% of the fair market
value of the Common Stock as of the date of grant, and 85% of the fair market
value in the case of non-statutory options, except that incentive options
granted to any person who owns stock possessing more than 10% of the
combined voting power of all classes of the Company's stock or of any parent
or subsidiary corporation must have an exercise price at least equal to 110%
of the fair market value of the Company's Common Stock on the date of grant.
The aggregate fair market value, determined as of the time an incentive stock
option is granted, of the Common Stock with respect to which incentive stock
options are exercisable by an employee for the first time during any calendar
year shall not exceed $100,000. There is no aggregate dollar limitation on the
amount of non-statutory stock options which may be exercisable for the first
time by an employee during any calendar year. Payment of the exercise price
is to be in cash, although the Compensation Committee may, in its discretion,
allow payment in the form of shares of the Company's Common Stock under
certain circumstances. Any option granted under the Plan will expire at the
time fixed by the Committee, which will not be more than ten years after the
date it is granted. Any employee receiving a grant must remain continuously
employed by the Company for a period of twelve months after the date of the
grant, as a condition to the exercise of the option. The Compensation
Committee may also specify when all or part of an option becomes
exercisable, but in the absence of such specification, the option will
ordinarily be exercisable in whole or part at any time during its term. In
addition, optionees who are directors or executive officers of the Company
may not exercise any portion of an option within six months of the date of
grant. Subject to the foregoing, the Compensation Committee may accelerate the
exercisability of any option in its discretion.
Options granted under the Plan are not assignable. Options may be
exercised only while the optionee is employed by the Company or within
twelve months after termination by reason of death, within twelve months after
the date of disability, or within ten days after termination for any other
reason.
The Company may assist optionees in paying the exercise price of
options granted under the Plan by either the extension of a loan by the
Company for payment by the optionee of the exercise price in installments, or
a guarantee by the Company of a loan obtained by the optionee from a third
party. The terms of any loan, installment payments or guarantees, including
the interest rate and terms of repayment and collateral requirements, if any,
shall be determined by the Board of Directors in its sole discretion.
The Company issued options under the Plan to purchase 100,000
shares of Common Stock to certain key employees and options to purchase
164,000 shares to its four executive officers, Joseph W. Zerbib, Thierry E.
Zerbib, Michael F. Zerbib and Brian H. Loeb in June 1995. Such options are
exercisable commencing September 28, 1995 through September 27, 2000.
The exercise price of the options granted to key employees is $6.00 per share.
The exercise price of the options granted to the executive officers, is $6.60
per share. See "Principal Shareholders" and "Certain Relationships and
Related Transactions."
1995 Restricted Stock Plan. The Board of Directors adopted the
1995 Restricted Stock Plan ("Restricted Stock Plan") on February 1, 1995.
Such Plan was approved by the stockholders at a Special Meeting of
Stockholders which was held on February 1, 1995. Under the Restricted
Stock Plan, shares of Common Stock of the Company are reserved, in such
amounts as determined by the Board of Directors, for issuance as part of the
total shares reserved under the Plan described above. The Restricted Stock
Plan authorizes the grant of shares of Common Stock to key employees,
consultants, researchers and to members of the Advisory Board. The
Restricted Stock Plan is administered by the Board of Directors or a
committee of the Board, which determines the persons to whom shares of
Common Stock will be granted and the terms of such share grants.
No shares have been granted under the Restricted Stock Plan. The
Company anticipates that shares will be granted under the Restricted Stock
Plan by the Compensation Committee from time to time in the future
depending upon the performance of the Company and availability of
unreserved shares under the Plan and Restricted Stock Plan.
Limitation of Liability of Directors
The General Corporation Law of the State of Arizona, under which
the Company is organized, was amended in 1987 to add Section 10-054(9)
permitting the inclusion of a provision in the Articles of Incorporation
limiting or eliminating the potential monetary liability of directors to a
corporation or its shareholders by reason of their conduct as directors. The
provision would not permit any limitation on or the elimination of liability
of a director for disloyalty to his corporation or its shareholders, failing
to act in good faith, engaging in intentional misconduct or a knowing
violation of the law, obtaining an improper personal benefit or paying a
dividend or approving a stock repurchase that was illegal under the General
Corporation Law of the State of Arizona. Accordingly, the provisions limiting
or eliminating the potential monetary liability of directors permitted by
Section 10-054(9) apply only to the "duty of care" of directors, that is, to
unintentional errors in their deliberations or judgments and not to any form
of "bad faith" conduct.
The Board of Directors of the Company subsequently recommended
and the shareholders approved an amendment to the Articles of Incorporation
of the Company eliminating the personal monetary liability of directors to the
extent allowed under Arizona law. Under the amendment, a shareholder is
able to prosecute an action against a director for monetary damages only if he
can show a breach of the duty of loyalty, a failure to act in good faith,
intentional misconduct, a knowing violation of law, an improper personal
benefit or an illegal dividend or stock repurchase, as referred to in the
amendment, and not "negligence" or "gross negligence" in satisfying his duty
of care. The amendment does not apply to any act or omission occurring prior
to the effective date of the amendment. In addition, the amendment applies
only to claims against a director arising out of his role as a director and
not, if he is also an officer, his role as an officer or in any other capacity
or to his responsibilities under any other law, such as the federal securities
laws.
Ownership of Common Stock by Nominees for Directors, Executive
Officers and Certain Shareholders
The following table sets forth information, as of June 21, 1996, with
respect to the number of shares of Common Stock of the Company
beneficially owned by individual directors, by all directors and officers of
the Company as a group, and by persons known by the Company to own more
than 5% of the Company's Common Stock. The Company has no other class
of stock outstanding.
<TABLE>
<CAPTION>
Name of Beneficial Number of Percent of Common
Owner and Address Shares<F1><F2><F3> Stock Owned<F1><F2>
- ----------------------- ------------------ -------------------
<S> <C> <C>
Thierry E. Zerbib 618,500 16.2
3216 North Third Street
Phoenix, Arizona 85012
Brian H. Loeb and 618,500 16.2
Irene Loeb
3216 North Third Street
Phoenix, Arizona 85012
Michael F. Zerbib 613,500 16.0
3216 North Third Street
Phoenix, Arizona 85012
Joseph W. Zerbib 334,250 8.7
3216 North Third Street
Phoenix, Arizona 85012
Nicolas Zerbib 293,750 7.7
3216 North Third Street
Phoenix, Arizona 85012
Cecile Silverman 1,000 <F4>
3216 North Third Street
Phoenix, Arizona 85012
Kalvan Swanky 1,000 <F4>
4725 North 33rd Street
Phoenix, Arizona 85018
All directors and 2,480,500 64.8
officers as a group
(six persons)
<FN>
<F1>
Includes 41,000 shares of Common Stock which are issuable upon
exercise of stock options the Company granted to each of the
following: Joseph W. Zerbib, Thierry E. Zerbib, Michael F. Zerbib
and Brian H. Loeb. The options were exercisable commencing
September 28, 1995 through September 27, 2000 to purchase shares
of Common Stock at a price of $6.60 per share. See "Option Grants
in 1995 Fiscal Year" and "Stock Option and Restricted Stock Plans."
<F2>
Does not include options granted to purchase 64,000 shares of
Common Stock divided equally among such individuals under the
Plan, effective only upon approval of the Plan by the shareholders at
the 1996 Annual Meeting of Shareholders. See "Option Grants in
1995 Fiscal Year" and "Approval of Adoption of 1996 Incentive
Stock Option Plan and 1996 Restricted Stock Option Plan."
<F3>
Includes 1,000 shares of Common Stock which are issuable upon
exercise of stock options which the Company granted each to Cecile
Silverman and Kalvan Swanky in April 1996. The options are
exercisable at a price of $4.75 per share through April 15, 2001 and
were not issued pursuant to any stock option plan of the Company.
<F4>
Less than 1%
</FN>
</TABLE>
OTHER MATTERS
The Company's board of directors is not presently aware of any
matters to be presented at the meeting other than those described above.
However, if other matters properly come before the meeting, it is the intention
of the persons named in the accompanying proxy to vote said proxy on such
matters in accordance with their judgment.
Shareholder Proposals
Any shareholder desiring to have a proposal included in the
Company's proxy statement for its 1997 Annual Meeting must deliver such
proposal (which must comply with the requirements of Rule 14a-8
promulgated under the Securities Exchange Act of 1934) to the Company's
principal executive offices not later than April 6, 1997.
Annual Report
The Company's Annual Report on Form 10-KSB with certified
financial statements required to be filed for the fiscal year ended November
30, 1995, accompanies this Notice and Proxy Statement and was mailed this
date to all shareholders of record on June 28, 1996. Any exhibit to the annual
report on Form 10-KSB will be furnished to any requesting person who sets
forth a good faith representation that he or she was a beneficial owner of the
Company's Common Stock on June 21, 1996. The fee for furnishing a copy
of any exhibit will be 25 cents per page plus $3.00 for postage and handling.
-19-
Exhibit A
TELESOFT CORP.
1996 INCENTIVE STOCK OPTION PLAN
1. Purposes of the Plan. The purposes of this 1996 Incentive
Stock Option Plan are to provide additional incentive to Employees of the
Company to achieve financial results aimed at increasing stockholder value
and to attract and retain the best available personnel for positions of
responsibility within the Company through the grant of options to purchase
shares of the Company's Common Stock.
Options granted hereunder may be either Incentive Stock or
Non-Statutory Stock Options, at the discretion of the Board. The type of
options granted shall be reflected in the terms of written Stock Option
agreements.
2. Definitions. As used herein, the following definitions shall
apply:
(a) "Board" shall mean the Board of Directors of the
Company or, when appropriate, the Committee administering the
Plan, if one has been appointed.
(b) "Code" shall mean the Internal Revenue Code of
1986, as amended, and the rules and regulations promulgated
thereunder.
(c) "Common Stock" shall mean the common stock of
the Company described in the Company's Articles of Incorporation, as
amended.
(d) "Company" shall mean TELESOFT CORP., an
Arizona corporation, and shall include any parent or subsidiary
corporation of the Company as defined in Sections 425(e) and (f),
respectively, of the Code.
(e) "Committee" shall mean the Committee appointed by
the Board in accordance with paragraph (a) of Section 4 of the Plan,
if one is appointed.
(f) "Employee" shall mean any person, including
salaried officers and directors, employed by the Company. The
payment of a director's fee by the Company shall not be sufficient to
constitute "employment" by the Company.
(g) "Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended.
(h) "Fair Market Value" shall mean, with respect to the
date a given Option is granted or exercised, the value of the Common
Stock determined by the Board in such manner as it may deem
equitable for Plan purposes but, in the case of an Incentive Stock
Option, no less than is required by applicable laws or regulations;
provided, however, that where there is a public market for the
Common Stock, the Fair Market Value per Share shall be the mean of
the bid and asked prices of the Common Stock on the date of grant, as
reported in the Wall Street Journal, or, if not so reported, as
otherwise reported in the National Association of Securities Dealers
Automated Quotation System ("Nasdaq") or, in the event the Common
Stock is listed on the New York Stock Exchange, the American Stock
Exchange, the Nasdaq National Market or the Nasdaq SmallCap
Market, the Fair Market Value per Share shall be the closing price on
the relevant Nasdaq market or exchange on the date of grant of the
Option, as reported in the Wall Street Journal.
(i) "Incentive Stock Option" shall mean an Option which
is intended to qualify as an incentive stock option within the meaning
of Section 422 of the Code.
(j) "Option" shall mean a stock option granted under the
Plan.
(k) "Optioned Stock" shall mean the Common Stock
subject to an Option.
(l) "Optionee" shall mean an Employee of the Company
who has been granted one or more Options.
(m) "Nonstatutory Stock Option" shall mean an Option
which is not an Incentive Stock Option.
(n) "Parent" shall mean a "parent corporation," whether
now or hereafter existing, as defined in Section 425(e) of the Code.
(o) "Plan" shall mean this 1996 Incentive Stock Option
Plan.
(p) "Share" shall mean a share of the Common Stock, as
adjusted in accordance with Section 11 of the Plan.
(q) "Stock Option Agreement" shall mean the written
agreement between the Company and the Optionee relating to the
grant of an Option.
(r) "Subsidiary" shall mean a "subsidiary corporation,"
whether now or hereafter existing, as defined in Section 425(f) of the
Code.
(s) "Tax Date" shall mean the date an Optionee is
required to pay the Company an amount with respect to tax
withholding obligations in connection with the exercise of an option.
3. Common Stock Subject to the Plan. Subject to the
provisions of Section 11 of the Plan, the maximum aggregate number of
shares which may be optioned and sold under the Plan is Two Hundred Sixty
Thousand (260,000) Shares of Common Stock. The Shares may be
authorized, but unissued, or previously issued Shares acquired by the
Company and held in treasury.
If an Option should expire or become unexercisable for any
reason without having been exercised in full, the unpurchased Shares covered
by such Option shall, unless the Plan shall have been terminated, be available
for future grants of Options.
4. Administration of the Plan.
(a) Procedure.
(i) The Plan shall be administered by the Board
in accordance with Rule 16b-3 under the Exchange Act
("Rule 16b-3"); provided, however, that the Board may
appoint a Committee to administer the Plan at any time or
from time to time, and, provided further, that if the Board is
not "disinterested" within the meaning of Rule 16b-3, the Plan
shall be administered by a Committee in accordance with
Rule 16b-3.
(ii) Once appointed, the Committee shall
continue to serve until otherwise directed by the Board. From
time to time the Board may increase the size of the Committee
and appoint additional members thereof, remove members
(with or without cause), appoint new members in substitution
therefor, and fill vacancies however caused: provided,
however, that at no time may any person serve on the
Committee if that person's membership would cause the
Committee not to satisfy the "disinterested administration"
requirements of Rule 16b-3.
(b) Powers of the Board. Subject to the provisions of
the Plan, the Board shall have the authority, in its discretion: (i) to
grant Incentive Stock Options and Nonstatutory Stock Options; (ii) to
determine, upon review of relevant information and in accordance
with Section 2 of the Plan, the Fair Market Value of the Common
Stock; (iii) to determine the exercise price per Share of Options to be
granted, which exercise price shall be determined in accordance with
Section 8(a) of the Plan; (iv) to determine the Employees to whom,
and the time or times at which, Options shall be granted and the
number of Shares to be represented by each Option; (v) to interpret
the Plan; (vi) to prescribe, amend and rescind rules and regulations
relating to the Plan; (vii) to determine the terms and provisions of
each Option granted (which need not be identical) and, with the
consent of the Optionee thereof, modify or amend each Option; (viii)
to accelerate or defer (with the consent of the Optionee) the exercise
date of any Option; (ix) to authorize any person to execute on behalf
of the Company any instrument required to effectuate the grant of an
Option previously granted by the Board; (x) to accept or reject the
election made by an Optionee pursuant to Section 17 of the Plan; and
(xi) to make all other determinations deemed necessary or advisable
for the administration of the Plan.
(c) Effect of Board's Decision. All decisions,
determinations and interpretations of the Board shall be final and
binding on all Optionees and any other holders of any Options granted
under the Plan.
5. Eligibility.
(a) Consistent with the Plan's purposes, Options may be
granted only to Employees of the Company as determined by the
Board. An Employee who has been granted an Option may, if he is
otherwise eligible, be granted an additional Option or Options.
Incentive Stock Options may be granted only to those Employees who
meet the requirements applicable under Section 422 of the Code.
(b) All Options granted to Employees of the Company
under the Plan will be subject to forfeiture until such time as the
Optionee has been continuously employed by the Company for one
year after the date of the grant of the Options, and may not be
exercised prior to such time. At such time as the Optionee has been
continuously employed by the Company for one year, the foregoing
restriction shall lapse and the Optionee may exercise the Options at
any time otherwise consistent with the Plan.
(c) With respect to Incentive Stock Options, the
aggregate Fair Market Value (determined at the time the Incentive
Stock Option is granted) of the Common Stock with respect to which
Incentive Stock Options are exercisable for the first time by the
employee during any calendar year (under all employee benefit plans
of the Company) shall not exceed One Hundred Thousand Dollars
($100,000).
6. Stockholder Approval and Effective Dates. The Plan
became effective upon approval by the Board. The grant of any options under
the Plan is effective only upon approval of the Plan by the Shareholders. No
Option may be granted under the Plan after April 14, 2006; provided, however
that the Plan and all outstanding Options shall remain in effect until such
Options have expired or until such Options are canceled.
7. Term of Option. Unless otherwise provided in the Stock
Option Agreement, the term of each Option shall be ten (10) years from the
date of grant thereof. In no case shall the term of any Option exceed ten (10)
years from the date of grant thereof. Notwithstanding the above, in the case
of an Incentive Stock Option granted to an Employee who, at the time the
Incentive Stock Option is granted, owns ten percent (10%) or more of the
Common Stock as such amount is calculated under Section 422(b)(6) of the
Code ("Ten Percent Stockholder"), the term of the Incentive Stock Option
shall be five (5) years from the date of grant thereof or such shorter time as
may be provided in the Stock Option Agreement.
8. Exercise Price and Payment.
(a) Exercise Price. The per Share exercise price for the
Shares to be issued pursuant to exercise of an Option shall be
determined by the Board, but in the case of an Incentive Stock Option
shall be no less than one hundred percent (100%) of the Fair Market
Value per share on the date of grant, and in the case of a Nonstatutory
Stock Option shall be no less than eighty-five percent (85%) of the
Fair Market Value per share on the date of grant. Notwithstanding
the foregoing, in the case of an Incentive Stock Option granted to an
Employee who, at the time of the grant of such Incentive Stock
Option, is a Ten Percent Stockholder, the per Share exercise price
shall be no less than one hundred ten percent (110%) of the Fair
Market Value per Share on the date of grant.
(b) Payment. The price of an exercised Option and the
Employee's portion of any taxes attributable to the delivery of
Common Stock under the Plan, or portion thereof, shall be paid:
(i) In United States dollars in cash or by check,
bank draft or money order payable to the order of the
Company; or
(ii) At the discretion of the Board, through the
delivery of shares of Common Stock with an aggregate Fair
Market Value equal to the option price and withholding taxes,
if any; or
(iii) At the election of the Optionee pursuant to
Section 17 and with the consent of the Board pursuant to
Section 4(b)(x), by the Company's retention of such number
of shares of Common Stock subject to the exercised Option
which have an aggregate Fair Market Value on the exercise
date equal to the Employee's portion of the Company's
aggregate federal, state, local and foreign tax withholding and
FICA and FUTA obligations with respect to income
generated by the exercise of the Option by Optionee;
(iv) By a combination of (i), (ii) and (iii) above;
or
(v) In the manner provided in subsection (c)
below.
The Board shall determine acceptable methods for
tendering Common Stock as payment upon exercise of an Option and
may impose such limitations and prohibitions on the use of Common
Stock to exercise an Option as it deems appropriate.
(c) Financial Assistance to Optionees. The Board may
assist Optionees in paying the exercise price of Options granted under
this Plan in the following manner:
(i) The extension of a loan to the Optionee by
the Company; or
(ii) Payment by the Optionee of the exercise
price in installments; or
(iii) A guaranty by the Company of a loan
obtained by the Optionee from a third party.
The terms of any loans, installment payments or
guarantees, including the interest rate and terms of repayment, and
collateral requirements, if any, shall be determined by the Board, in its
sole discretion. Subject to applicable margin requirements, any loans,
installment payments or guarantees authorized by the Board pursuant
to the Plan may be granted without security, but the maximum credit
available shall not exceed the exercise price for the Shares for which
the Option is to be exercised, plus any federal and state income tax
liability incurred in connection with the exercise of the Option.
9. Exercise of Option.
(a) Procedure for Exercise; Rights as a Stockholder.
Any Option granted hereunder shall be exercisable at such times and
under such conditions as determined by the Board, including
performance criteria with respect to the Company and/or the
Optionee, and as shall be permissible under the terms of the Plan.
Unless otherwise determined by the Board at the time of grant, an
Option may be exercised in whole or in part. An Option may not be
exercised for a fraction of a Share.
An Option shall be deemed to be exercised when
written notice of such exercise has been given to the Company in
accordance with the terms of the Option by the person entitled to
exercise the Option and full payment for the Shares with respect to
which the Option is exercised has been received by the Company.
Full payment may, as authorized by the Board, consist of any
consideration and method of payment allowable under Section 8(b) of
the Plan. Until the issuance (as evidenced by the appropriate entry on
the books of the Company or of a duly authorized transfer agent of
the Company) of the stock certificate evidencing such Shares, no right
to vote or receive dividends or any other rights as a stockholder shall
exist with respect to the Optioned Stock, notwithstanding the exercise
of the Option. No adjustment will be made for a dividend or other
right for which the record date is prior to the date the stock certificate
is issued, except as provided in Section 11 of the Plan.
Exercise of an Option in any manner shall result in a
decrease in the number of Shares which thereafter may be available,
both for purposes of the Plan and for sale under the Option, by the
number of Shares for which the Option is exercised.
(b) Termination of Status as an Employee. If an
Employee's employment by the Company is terminated for cause, then
any Option held by the Employee shall be immediately canceled upon
termination of employment and the Employee shall have no further
rights with respect to such Option. Unless otherwise provided in the
Stock Option Agreement (which may reduce but not increase the time
period described below), if an Employee's employment by the
Company is terminated for reasons other than cause, and does not
occur due to death or disability, then the Employee may, with the
consent of the Board, but only within ten (10) days after the date he
ceases to be an Employee of the Company, exercise his Option to the
extent that he was entitled to exercise it at the date of such
termination. To the extent that he was not entitled to exercise the
Option at the date of such termination, or if he does not exercise such
Option (which he was entitled to exercise) within the time specified
herein, the Option shall terminate.
(c) Disability. Unless otherwise provided in the Stock
Option Agreement (which may reduce but not increase the time period
described below), notwithstanding the provisions of Section 9(b)
above, in the event an Employee is unable to continue his employment
with the Company as a result of his permanent and total disability (as
defined in Section 22(e)(3) of the Code), he may, but only within
twelve (12) months from the date of termination, exercise his Option
to the extent he was entitled to exercise it at the date of such
termination. To the extent that he was not entitled to exercise the
Option at the date of termination, or if he does not exercise such
Option (which he was entitled to exercise) within the time specified
herein, the Option shall terminate.
(d) Death. Unless otherwise provided in the Stock
Option Agreement (which may reduce but not increase the time period
described below), if an Employee dies during the term of the Option
and is at the time of his death an Employee of the Company who shall
have been in continuous status as an Employee since the date of grant
of the Option, the Option may be exercised at any time within twelve
(12) months following the date of death (or such other period of time
as is determined by the Board) by the Employee's estate or by a
person who acquired the right to exercise the Option by bequest or
inheritance, but only to the extent that an Employee was entitled to
exercise the Option on the date of death. To the extent the Employee
was not entitled to exercise the Option on the date of death, or if the
Employee's estate, or person who acquired the right to exercise the
Option by bequest or inheritance, does not exercise such Option
(which he was entitled to exercise) within the time specified herein,
the Option shall terminate.
10. Non-Transferability of Options. An Option may not be
sold, pledged, assigned, hypothecated, transferred or disposed of in any
manner other than by will or by the laws of descent or distribution, or
pursuant to a "qualified domestic relations order" under the Code and ERISA,
and may be exercised, during the lifetime of the Optionee, only by the
Optionee.
11. Adjustments Upon Changes in Capitalization or Merger.
Subject to any required action by the stockholders of the Company, the
number of shares of Common Stock covered by each outstanding Option, and
the number of shares of Common Stock which have been authorized for
issuance under the Plan but as to which no Options have yet been granted or
which have been returned to the Plan upon cancellation or expiration of an
Option, as well as the price per share of Common Stock covered by each such
outstanding Option, shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from a
stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration." Such adjustment shall be made by
the Board, whose determination in that respect shall be final, binding and
conclusive. 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 of Common Stock subject to
an Option.
In the event of the proposed dissolution or liquidation of the
Company, the Option will terminate immediately prior to the consummation of
such proposed action, unless otherwise provided by the Board. The Board
may, in the exercise of its sole discretion in such instances, declare that any
Option shall terminate as of a date fixed by the Board and give each Optionee
the right to exercise his Option as to all or any part of the Optioned Stock,
including Shares as to which the Option would not otherwise be exercisable.
In the event of a proposed sale of all or substantially all of the assets of
the Company, or the merger of the Company with or into another corporation, the
Option shall be assumed or an equivalent option shall be substituted by such
successor corporation or a parent or subsidiary of such successor corporation,
unless the Board determines, in the exercise of its sole discretion and in
lieu of such assumption or substitution, that the Optionee shall have the
right to exercise the option as to all of the Optioned Stock, including Shares
as to which the Option would not otherwise be exercisable. If the Board makes
an Option fully exercisable in lieu of assumption or substitution in the event
of a merger of sale of assets, the Board shall notify the Optionee that the
Option shall be fully exercisable for a period of sixty (60) days from the date
of such notice (but not later than the expiration of the term of the Option
under the Option Agreement), and the Option will terminate upon the expiration
of such period.
12. Time of Granting Options. The date of grant of an Option
shall, for all purposes, be the date on which the Board makes the
determination granting such Option. Notice of the determination shall be
given to each Employee to whom an Option is so granted within a reasonable
time after the date of such grant.
13. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may
amend or terminate the Plan from time to time in such respects as the
Board may deem advisable; provided, however, that the following
revisions or amendments shall require approval of the Stockholders of
the Company, to the extent required by law, rule or regulation:
(i) Any material increase in the number of
Shares subject to the Plan, other than in connection with an
adjustment under Section 11 of the Plan;
(ii) Any material change in the designation of the
Employees eligible to be granted Options; or
(iii) Any material increase in the benefits
accruing to participants under the Plan.
(b) Effect of Amendment or Termination. Any such
amendment or termination of the Plan shall not affect Options already
granted and such Options shall remain in full force and effect as if
this Plan had not been amended or terminated, unless mutually agreed
otherwise between the Optionee and the Board, which agreement must
be in writing and signed by the Optionee and the Company.
14. Conditions Upon Issuance of Shares. Shares shall not be
issued pursuant to the exercise of an Option unless the exercise of such Option
and the issuance and delivery of such Shares pursuant thereto shall comply
with all relevant provisions of law, including, without limitation, the
Securities Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange upon
which the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
As a condition to the exercise of an Option, the Company
may require the person exercising such Option to represent and warrant at the
time of any such exercise that the Shares are being purchased only for
investment and without any present intention to sell or distribute such Shares
if, in the opinion of counsel for the company, such a representation is
required by any of the aforementioned relevant provisions of law.
Inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the
Company's counsel to be necessary to the lawful issuance and sale of any
Shares hereunder, shall relieve the Company of any liability in respect of the
failure to issue or sell such Shares as to which such requisite authority shall
not have been obtained.
In the case of an Incentive Stock Option, any Optionee who
disposes of Shares of Common Stock acquired upon the exercise of an Option
by sale or exchange (a) either within two (2) years after the date of the grant
of the Option under which the Common Stock was acquired or (b) within one
(1) year after the acquisition of such Shares of Common Stock shall notify the
Company of such disposition and of the amount realized upon such
disposition.
15. Reservation of Shares. The Company will at all times
reserve and keep available such number of Shares as shall be sufficient to
satisfy the requirements of the Plan.
16. Option Agreement. Options shall be evidenced by Stock
Option Agreements in such form as the Board shall approve.
17. Withholding Taxes. Subject to Section 4(b)(x) of the Plan
and prior to the Tax Date, the Optionee may make an irrevocable election to
have the Company withhold from those Shares that would otherwise be
received upon the exercise of any Option, a number of Shares having a Fair
Market Value equal to the minimum amount necessary to satisfy the
Company's federal, state, local and foreign tax withholding obligations and
FICA and FUTA obligations with respect to the exercise of such Option by
the Optionee.
An Optionee who is also an officer of the Company must
make the above described election:
(a) at least six months after the date of grant of the
Option (except in the event of death or disability); and
(b) either:
(i) six months prior to the Tax Date, or
(ii) prior to the Tax Date and during the period
beginning on the third business day following the date the
Company releases its quarterly or annual statement of sales
and earnings and ending on the twelfth business day following
such date.
18. Miscellaneous Provisions.
(a) Plan Expense. Any expense of administering this
Plan shall be borne by the Company.
(b) Use of Exercise Proceeds. The payment received
from Optionees from the exercise of Options shall be used for the
general corporate purposes of the Company.
(c) Construction of Plan. The place of administration of
the Plan shall be in the State of Arizona, and the validity,
construction, interpretation, administration and effect of the Plan and
of its rules and regulations, and rights relating to the Plan, shall be
determined in accordance with the laws of the State of Arizona
without regard to conflict of law principles and, where applicable, in
accordance with the Code.
(d) Taxes. The Company shall be entitled if necessary or
desirable to pay or withhold the amount of any tax attributable to the
delivery of Common Stock under the Plan from other amounts
payable to the Employee after giving the person entitled to receive
such Common Stock notice as far in advance as practical, and the
Company may defer making delivery of such Common Stock if any
such tax may be pending unless and until indemnified to its
satisfaction.
(e) Indemnification. In addition to such other rights of
indemnification as they may have as members of the Board, the
members of the Board shall be indemnified by the Company against
all costs and expenses reasonably incurred by them in connection with
any action, suit or proceeding to which they or any of them may be
party by reason of any action taken or failure to act under or in
connection with the Plan or any Option, and against all amounts paid
by them in settlement thereof (provided such settlement is approved
by independent legal counsel selected by the Company) or paid by
them in satisfaction of a judgment in any such action, suit or
proceeding, except a judgment based upon a finding of bad faith;
provided that upon the institution of any such action, suit or
proceeding a Board member shall, in writing, give the Company
notice thereof and an opportunity, at its own expense, to handle and
defend the same before such Board member undertakes to handle and
defend it on her or his own behalf.
(f) Gender. For purposes of this Plan, words used in the
masculine gender shall include the feminine and neuter, and the
singular shall include the plural and vice versa, as appropriate.
(g) No Employment Agreement. The Plan shall not
confer upon any Optionee any right with respect to continuation of
employment with the Company, nor shall it interfere in any way with
his right or the Company's right to terminate his employment at any
time.
-4-
Exhibit B
TELESOFT CORP.
1996 RESTRICTED STOCK PLAN
1. Purposes of the Plan. The purposes of this 1996 Restricted
Stock Plan are to provide additional incentive to employees and others who
provide services to the Company to achieve financial results aimed at
increasing stockholder value and to attract and retain the best available
personnel for positions of responsibility within the Company through the grant
of restricted shares of the Company's Common Stock.
2. Definitions. As used herein, the following definitions shall
apply:
(a) "Award" shall mean a grant of one or more shares of
Restricted Stock.
(b) "Board" shall mean the Board of Directors of the
Company or, when appropriate, the Committee administering the
Plan, if one has been appointed.
(c) "Code" shall mean the Internal Revenue Code of
1986, as amended, and the rules and regulations promulgated
thereunder.
(d) "Common Stock" shall mean the common stock of
the Company described in the Company's Articles of Incorporation, as
amended.
(e) "Company" shall mean TELESOFT CORP., an
Arizona corporation, and shall include any parent or subsidiary
corporation of the Company as defined in Sections 425(e) and (f),
respectively, of the Code.
(f) "Committee" shall mean the Committee appointed by
the Board in accordance with paragraph (a) of Section 4 of the Plan,
if one is appointed.
(g) "Employee" shall mean any person, including
salaried officers and directors, employed by the Company.
(h) "Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended.
(i) "Fair Market Value" shall mean, with respect to the
date a given Award is granted, the value of the Common Stock
determined by the Board in such manner as it may deem equitable for
Plan purposes; provided, however, that where there is a public market
for the Common Stock, the Fair Market Value per Share shall be the
mean of the bid and asked prices of the Common Stock on the date of
grant, as reported in the Wall Street Journal, or, if not so reported, as
otherwise reported in the National Association of Securities Dealers
Automated Quotation System ("Nasdaq"), or, in the event the
Common Stock is listed on the New York Stock Exchange, the
American Stock Exchange, the Nasdaq National Market or the
Nasdaq SmallCap Market, the Fair Market Value per Share shall be
the closing price on the relevant Nasdaq market or exchange on the
date of grant of the Award, as reported in the Wall Street Journal.
(j) "Grantee" shall mean an employee or other
individual who provides services to the Company who has been
granted one or more shares of Restricted Stock.
(k) "Parent" shall mean a "parent corporation," whether
now or hereafter existing, as defined in Section 425(e) of the Code.
(l) "Plan" shall mean this 1996 Restricted Stock Plan.
(m) "Restricted Stock" shall mean Common Stock, issued
and outstanding, restricted as to transfer and subject to a substantial
risk of forfeiture.
(n) Share" shall mean a share of the Common Stock, as
adjusted in accordance with Section 8 of the Plan.
(o) "Stock Purchase Agreement" shall mean the written
agreement between the Company and the Grantee relating to the grant
of an Award.
(p) "Subsidiary" shall mean a "subsidiary corporation,"
whether now or hereafter existing, as defined in Section 425(f) of the
Code.
(q) "Tax Date" shall mean the date a Grantee is required
to pay the Company an amount with respect to tax withholding
obligations in connection with an Award.
3. Common Stock Subject to the Plan. Subject to the
provisions of Section 8 of the Plan, the maximum aggregate number of shares
of Common Stock which may be granted under the Plan may be determined by
the Board of Directors, for issuance as part of the total Shares reserved under
the 1996 Incentive Stock Option Plan. The Shares may be authorized, but
unissued, or previously issued Shares acquired by the Company and held in
treasury. If Restricted Stock is forfeited, the forfeited Shares shall,
unless the Plan shall have been terminated, be available for future grants
under the Plan.
4. Administration of the Plan.
(a) Procedure.
(i) The Plan shall be administered by the Board
in accordance with Rule 16b-3 under the Exchange Act
("Rule 16b-3"); provided, however, that the Board may
appoint a Committee to administer the Plan at any time or
from time to time, and, provided further, that if the Board is
not "disinterested" within the meaning of Rule 16b-3, the Plan
shall be administered by a Committee in accordance with
Rule 16b-3.
(ii) Once appointed, the Committee shall
continue to serve until otherwise directed by the Board. From
time to time the Board may increase the size of the Committee
and appoint additional members thereof, remove members
(with or without cause), appoint new members in substitution
therefor, and fill vacancies however caused: provided,
however, that at no time may any person serve on the
Committee if that person's membership would cause the
Committee not to satisfy the "disinterested administration"
requirements of Rule 16b-3.
(b) Powers of the Board. Subject to the provisions of
the Plan, the Board shall have the authority, in its discretion: (i) to
grant Restricted Stock; (ii) to determine, upon review of relevant
information and in accordance with Section 2 of the Plan, the Fair
Market Value of the Common Stock; (iii) to determine the Employees
and other individuals who provide services to the Company to whom,
and the time or times at which, Restricted Stock shall be granted and
the number of Shares to be represented by each Award; (iv) to
interpret the Plan; (v) to prescribe, amend and rescind rules and
regulations relating to the Plan; (vi) to determine the terms and
provisions of each Award granted (which need not be identical) and,
with the consent of the Grantee thereof, modify or amend each Award;
(vii) to accelerate or defer (with the consent of the Grantee) the date of
any Award; (viii) to authorize any person to execute on behalf of the
Company any instrument required to effectuate the grant of an Award
previously granted by the Board; (ix) to accept or reject the election
made by a Grantee pursuant to Section 14 of the Plan; and (x) to
make all other determinations deemed necessary or advisable for the
administration of the Plan.
(c) Effect of Board's Decision. All decisions,
determinations and interpretations of the Board shall be final and
binding on all Grantees and any other holders of any Restricted Stock
granted under the Plan.
5. Eligibility. Consistent with the Plan's purposes, Restricted
Stock may be granted only to Employees and other individuals who provide
services to the Company as determined by the Board. An Employee or other
individual who provides services to the Company who has been granted
Restricted Stock may, if he is otherwise eligible, be granted additional
Restricted Stock.
6. Stockholder Approval and Effective Dates. The Plan
became effective upon approval by the Board. No Award may be granted
under the Plan after April 14, 2006. The grant of any Restricted Stock under
the Plan is effective only upon approval of the Plan by the Shareholders.
7. Restricted Stock.
(a) Awards. The Committee may award Restricted
Stock to any Employee or other individual who provides services to
the Company. Each certificate for Restricted Stock shall be registered
in the name of the Grantee and deposited by him, together with a stock
power endorsed in blank, with the Company. Restricted Stock shall
be awarded by a signed written agreement containing such terms and
conditions as the Board may determine. At the time of an award there
shall be established a restriction period of such length as shall be
determined by the Board. Shares of Restricted Stock shall not be
sold, assigned, transferred, pledged or otherwise encumbered, except
as hereinafter provided, during the restriction period. Except for such
restrictions on transfer, the Grantee as owner of such shares of
Restricted Stock shall have all the rights of a holder of Common
Stock. At the expiration of the restriction period, the Company shall
redeliver to the Grantee (or his legal representative or designated
beneficiary) the Restricted Stock deposited pursuant to this paragraph
7.
(b) Termination. If a Grantee ceases to be an Employee
or to provide services to the Company with the consent of the Board,
or upon his death, retirement or total and permanent disability, the
restriction imposed under paragraph 7(a) shall lapse with respect to
such number of shares of Restricted Stock theretofore awarded to him
as shall be determined by the Board.
8. Adjustments Upon Changes in Capitalization or Merger.
Subject to any required action by the stockholders of the Company, the
number of shares of Common Stock which have been authorized for issuance
under the Plan but as to which no Award has yet been granted or which have
been returned to the Plan upon cancellation, shall be proportionately adjusted
for any increase or decrease in the number of issued shares of Common Stock
resulting from a stock split, reverse stock split, stock dividend, combination
or reclassification of the Common Stock, or any other increase or decrease in
the number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration." Such adjustment shall be made by
the Board, whose determination in that respect shall be final, binding and
conclusive. 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 of Common Stock subject to
the Plan.
9. Time of Granting Restricted Stock. The date of grant of
Restricted Stock shall, for all purposes, be the date on which the Board makes
the determination granting such Restricted Stock. Notice of the determination
shall be given to each Employee or other individual who provides services to
the Company to whom an Award is so granted within a reasonable time after
the date of such grant.
10. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may
amend or terminate the Plan from time to time in such respects as the
Board may deem advisable; provided, however, that the following
revisions or amendments shall require approval of the shareholders of
the Company, to the extent required by law, rule or regulation:
(i) Any material increase in the number of
Shares subject to the Plan, other than in connection with an
adjustment under Section 8 of the Plan;
(ii) Any material change in the designation of the
Employees or other individuals who provide services to the
Company eligible to be granted Restricted Stock; or
(iii) Any material increase in the benefits
accruing to participants under the Plan.
(b) Effect of Amendment or Termination. Any such
amendment or termination of the Plan shall not affect Restricted Stock
already granted and such Restricted Stock shall remain in full force
and effect as if this Plan had not been amended or terminated, unless
mutually agreed otherwise between the Grantee and the Board, which
agreement must be in writing and signed by the Grantee and the
Company.
11. Conditions Upon Issuance of Shares. Shares shall not be
issued pursuant to this Plan unless the issuance and delivery of such Shares
pursuant thereto shall comply with all relevant provisions of law, including,
without limitation, the Securities Act of 1933, as amended, the Exchange Act,
the rules and regulations promulgated thereunder, and the requirements of any
stock exchange upon which the Shares may then be listed, and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the grant of Restricted Stock the Company
may require the Grantee to represent and warrant at the time of any such grant
that the Shares are being acquired only for investment and without any present
intention to sell or distribute such Shares if, in the opinion of counsel for
the Company, such a representation is required by any of the aforementioned
relevant provisions of law.
Inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the
Company's counsel to be necessary to the lawful issuance and sale of any
Shares hereunder, shall relieve the Company of any liability in respect of the
failure to issue or sell such Shares as to which such requisite authority shall
not have been obtained.
12. Reservation of Shares. The Company will at all times
reserve and keep available such number of Shares as shall be sufficient to
satisfy the requirements of the Plan.
13. Purchase Agreement. Awards of Restricted Stock shall be
evidenced by Stock Purchase Agreements in such form as the Board shall
approve.
14. Withholding Taxes. Subject to Section 4(b)(ix) of the Plan
and prior to the Tax Date, the Grantee may make an irrevocable election to
have the Company withhold from those Shares that would otherwise be
received upon the grant, a number of Shares having a Fair Market Value equal
to the minimum amount necessary to satisfy the Employee's portion of the
Company's federal, state, local and foreign tax withholding obligations and
FICA and FUTA obligations with respect to the grant of Restricted Stock to
the Grantee.
A Grantee who is also an officer of the Company must make
the above described election:
(a) at least six months after the date of grant of the
Restricted Stock (except in the event of death or disability); and
(b) either:
(i) six months prior to the Tax Date, or
(ii) prior to the Tax Date and during the period
beginning on the third business day following the date the
Company releases its quarterly or annual statement of sales
and earnings and ending on the twelfth business day following
such date.
15. Miscellaneous Provisions.
(a) Plan Expense. Any expense of administering this
Plan shall be borne by the Company.
(b) Construction of Plan. The place of administration of
the Plan shall be in the State of Arizona, and the validity,
construction, interpretation, administration and effect of the Plan and
of its rules and regulations, and rights relating to the Plan, shall be
determined in accordance with the laws of the State of Arizona
without regard to conflict of law principles and, where applicable, in
accordance with the Code.
(c) Taxes. The Company shall be entitled if necessary or
desirable to pay or withhold the amount of any tax attributable to the
delivery of Common Stock under the Plan from other amounts
payable to the Grantee after giving the person entitled to receive such
Common Stock notice as far in advance as practical, and the
Company may defer making delivery of such Common Stock if any
such tax may be pending unless and until indemnified to its
satisfaction.
(d) Indemnification. In addition to such other rights of
indemnification as they may have as members of the Board, the
members of the Board shall be indemnified by the Company against
all costs and expenses reasonably incurred by them in connection with
any action, suit or proceeding to which they or any of them may be
party by reason of any action taken or failure to act under or in
connection with the Plan or any Restricted Stock, and against all
amounts paid by them in settlement thereof (provided such settlement
is approved by independent legal counsel selected by the Company) or
paid by them in satisfaction of a judgment in any such action, suit or
proceeding, except a judgment based upon a finding of bad faith;
provided that upon the institution of any such action, suit or
proceeding a Board member shall, in writing, give the Company
notice thereof and an opportunity, at its own expense, to handle and
defend the same before such Board member undertakes to handle and
defend it on her or his own behalf.
(e) Gender. For purposes of this Plan, words used in the
masculine gender shall include the feminine and neuter, and the
singular shall include the plural and vice versa, as appropriate.
(f) No Employment Agreement. The Plan shall not
confer upon any Grantee any right with respect to continuation of
employment with the Company, nor shall it interfere in any way with
his right or the Company's right to terminate his employment at any
time.
-8-
