SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB/A
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1997
COMMISSION FILE NO. 1-13830
TELESOFT CORP.
(Exact name of Registrant as specified in its charter)
ARIZONA 86-0431009
(State of Incorporation) (IRS Employer Identification No.)
3443 NORTH CENTRAL AVENUE #1800
PHOENIX, ARIZONA 85012
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (602) 308-2100
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Title of Class Name of each exchange on which registered
---------------- -----------------------------------------------
COMMON STOCK, NO PAR VALUE PACIFIC STOCK EXCHANGE, INC.
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT : NONE
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
-----------
Check if there is no disclosure of delinquent filings in this Form and no
disclosure will be contained in the definitive Proxy Statement incorporated by
reference in Part III of this Form 10-KSB. X
---------
Issuer's revenues from continuing operations for its fiscal year: $22,593,450
As of April 1, 1998, the number of shares of Common Stock outstanding was
3,787,500 and the aggregate market value of the Common Stock (based on the
closing price on that date) held by non-affiliates of the Registrant was
approximately $6,990,000.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive Proxy Statement for its forthcoming
Annual Meeting of Shareholders are incorporated herein by reference into Part
III of this Report.
Exhibit Index Page 10
-3-
PART I
ITEM 1. BUSINESS.
MAJOR CUSTOMERS AND SUPPLIERS
The Company is provided a significant portion of its long-distance
telecommunications services by one telecommunications company. Although the
Company is dependant upon this supplier, management believes comparable
suppliers are available.
During the fiscal year ended November 30, 1996, the Company had one
customer representing ten percent of total revenues. During the fiscal 1997,
the Company did not have any customers which accounted for greater than 10% of
its revenues.
ITEM 2. PROPERTIES.
During fiscal 1996 and 1997, the Company leased 13,500 square feet of
office space in Phoenix, Arizona, from Joseph W. Zerbib, an officer, director
and principal shareholder of the Company. The Company's obligations under the
terms of its Phoenix office lease were approximately $84,000 and for both
1997 and 1996, under a verbal month-to-month lease. The Company vacated this
space in January 1998 and will be obligated for a minimum of 90 days,
depending upon the time needed to remove Company assets from those premises.
The Company also leases office space in Phoenix, Arizona for its STS and,
previously, its GoodNet operations. In January 1998, the Company relocated
all of its Phoenix, Arizona based operations to this office. The Company's
obligation under the terms of this lease agreement was approximately $130,000
and $40,000 for the fiscal years ended November 30, 1997 and 1996,
respectively.
RATEX leases 2,200 square feet in Fort Washington, Pennsylvania. The
Company's obligations under the terms of its Fort Washington office lease were
approximately $32,000 and $39,000 for 1997 and 1996, respectively.
Finally, the Company leases office space in Tempe, Arizona, which was
used for GoodNet headquarters prior to its acquisition by the Company. This
lease agreement expires in March 2000. The Company is currently subleasing
this space under terms similar to the Company's obligation for this lease,
which was $7,456 for the fiscal year ended November 30, 1997.
ITEM 3. LEGAL PROCEEDINGS.
The Company is not involved as a party to any other legal proceeding
other than various claims and lawsuits arising in the normal course of its
business, none of which, in the opinion of the Company's management, are
individually or collectively material to the Company's business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to security holders through the solicitation of
proxies or otherwise during the fourth quarter of the fiscal year covered by
this report.
<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS. (CONTINUED)
<TABLE>
<CAPTION>
RESULTS OF OPERATIONS BY PRODUCT LINE FOR THE FISCAL YEAR ENDED NOVEMBER 30, 1997 WITH TOTALS FOR THE YEAR ENDED NOVEMBER
30, 1996
For the year ended November 30, 1997
------------------------------------
<S> <C> <C> <C> <C>
System Sales/ Customized
STS Maintenance Billing Total
-------------------------- --------------------
Sales, Net. . . . . . . . . . . . . . . . . . . . $ 17,430,383 $ 4,197,480 $965,587 $22,593,450
Cost of Sales . . . . . . . . . . . . . . . . . . 13,288,224 1,042,164 - 14,330,388
-------------------------- -------------------- -------- -----------
Gross Profit. . . . . . . . . . . . . . . . . . . 4,142,159 3,155,316 965,587 8,263,062
-------------------------- -------------------- -------- -----------
General & Administrative Expenses:
General . . . . . . . . . . . . . . . . . . . . . 3,386,395 3,177,039 210,532 6,773,966
Depreciation. . . . . . . . . . . . . . . . . . . 125,470 201,682 - 327,152
Amortization. . . . . . . . . . . . . . . . . . . - 8,333 - 8,333
Bad Debt. . . . . . . . . . . . . . . . . . . . . 197,327 655 - 197,982
Corporate Allocations:
General . . . . . . . . . . . . . . . . . . . . . 127,155 127,155 7,706 260,015
Depreciation. . . . . . . . . . . . . . . . . . . 44,591 87,831 - 134,423
-------------------------- -------------------- -------- -----------
3,880,938 3,602,695 218,238 7,701,871
-------------------------- -------------------- -------- -----------
Operating Income (Loss) . . . . . . . . . . . . . 261,221 (447,379) 747,349 561,191
Other Income. . . . . . . . . . . . . . . . . . . 163,094
-----------
Pretax Income . . . . . . . . . . . . . . . . . . 724,285
Income Tax Provision 321,300
-----------
Income from Continuing Operations $ 402,985
===========
Primary Earnings per Share-Continuing Operations $ 0.11
===========
<S> <C>
Total for the
year ended
November 30, 1996
Sales, Net. . . . . . . . . . . . . . . . . . . . $20,742,993
Cost of Sales . . . . . . . . . . . . . . . . . . 12,821,582
-----------
Gross Profit. . . . . . . . . . . . . . . . . . . 7,921,411
-----------
General & Administrative Expenses:
General . . . . . . . . . . . . . . . . . . . . . 5,732,588
Depreciation. . . . . . . . . . . . . . . . . . . 312,641
Amortization. . . . . . . . . . . . . . . . . . . 8,333
Bad Debt. . . . . . . . . . . . . . . . . . . . . 264,056
Corporate Allocations:
General . . . . . . . . . . . . . . . . . . . . . 212,824
Depreciation. . . . . . . . . . . . . . . . . . . 93,207
-----------
6,623,649
-----------
Operating Income (Loss) . . . . . . . . . . . . . 1,297,762
Other Income. . . . . . . . . . . . . . . . . . . 30,773
-----------
Pretax Income . . . . . . . . . . . . . . . . . . 1,603,535
Income Tax Provision. . . . . . . . . . . . . . . 614,200
-----------
Income from Continuing Operations . . . . . . . . 989,335
===========
Primary Earnings per Share-Continuing Operations $ .26
===========
</TABLE>
<PAGE>
FUTURE EXPECTATIONS
STS revenues are projected to increase to approximately 10%-15% from
fiscal 1997 levels during the fiscal year ending November 30, 1998. This
increase is due to large accounts added during the fourth quarter of fiscal
1997, however, there can be no assurance that revenues will increase as
expected.
The Company expects revenues from Customized Billing Services to increase
based upon existing proposals outstanding; however, it is not possible to
ascertain the amount of such increase until actual contracts are in place.
The Company has experienced delays in the release and installation of
certain modules of TelMaster, the "Client/Server" and "Graphical User
Interface" environment version of the Company's existing text based
telemanagement software modules. Certain modules of this product were
released in the third quarter of 1996, and installations have been completed
in the second and third quarters of 1997. Based on the full product release
in January 1998, the Company expects to sell and install a significantly
higher number of TelMaster systems in fiscal 1998, however, there can be no
assurance that this will happen.
It is anticipated that the cost of human resources, for continuing
operations, will grow 5%-10% as the company increases its employee base to
expand its products, services and market penetration. This increase will
ensure adequate research and development, and sales and support for
anticipated short and long-term growth.
This report contains forward-looking statements within the meaning of
section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Such statements involve certain risks and uncertainties
that could cause actual results to differ materially from those in the
forward-looking statements. Certain factors which may cause such a difference
include, but are not limited to, the following: the impact of increased
competition from competitors with significant financial resources and market
share; unforeseen difficulties in integrating acquired businesses; and the
amount and rate of growth in general and administrative expenses associated
with building a strengthened corporate infrastructure to support operations.
<PAGE>
PART III
ITEM 10. EXECUTIVE COMPENSATION.
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, 1997, 1996,and 1995.
<TABLE>
<CAPTION>
LONG TERM COMPENSATION (1)
ANNUAL COMPENSATION AWARDS PAYOUTS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OTHER ALL
ANNUAL RESTRICTED OTHER
NAME AND . . . . . . . . . . . . . . . . . . . . COMPEN STOCK OPTIONS/ LTIP COMPEN
PRINCIPAL POSITION . . . . . . . . . . . . . . . YEAR SALARY(2) BONUS -SATION AWARDS SARS PAYOUTS -SATION
- ------------------------------------------------ ----- --------- ----- --------- ---------- ------ ------- -------
Joseph W. Zerbib . . . . . . . . . . . . . . . . 1997 $ 144,000 -0- -0- -0- 26,000 -0- -0-
President. . . . . . . . . . . . . . . . . . . . 1996 $ 108,000 -0- -0- -0- 26,000 -0- -0-
1995 $ 120,000 -0- -0- -0- 41,000 -0- -0-
Thierry E. Zerbib. . . . . . . . . . . . . . . . 1997 $ 144,000 -0- -0- -0- 26,000 -0- -0-
Vice President - Technologies and Secretary. . . 1996 $ 126,000 -0- -0- -0- 21,000 -0- -0-
1995 $ 120,000 -0- -0- -0- 41,000 -0- -0-
Michael F. Zerbib. . . . . . . . . . . . . . . . 1997 $ 104,000 -0- -0- -0- 26,000 -0- -0-
Chief Financial Officer and Treasurer. . . . . . 1996 $ 100,000 -0- -0- -0- 28,000 -0- -0-
1995 $ 120,000 -0- -0- -0- 41,000 -0- -0-
Brian H. Loeb. . . . . . . . . . . . . . . . . . 1997 $ 144,000 -0- -0- -0- 26,000 -0- -0-
Vice President - Marketing, Sales and Operations 1996 $ 126,000 -0- -0- -0- 21,000 -0- -0-
1995 $ 120,000 -0- -0- -0- 41,000 -0- -0-
<FN>
(1) See "Stock Option Grants in 1997 Fiscal Year and Stock Options and Restricted Stock Plans" below for additional
information on options which were granted to these four officers.
</TABLE>
<PAGE>
OPTION GRANTS IN 1997 FISCAL YEAR
The following executive officers were granted stock options by the
Company in fiscal 1996 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>
<S> <C> <C> <C> <C>
No. of Percentage of Total Options Granted Exercise Price Expiration Date(2)
Name . . . . . . . Shares Underlying Options Granted to Employees in Fiscal Year
- ------------------ --------------------------------- -----------------------------------
Joseph W. Zerbib . 26,000 11.13 $ 3.23 10/23/02
Thierry E. Zerbib 26,000 11.13 $ 3.23 10/23/02
Brian H. Loeb. . . 26,000 11.13 $ 3.23 10/23/02
Michael F. Zerbib 26,000 11.13 $ 3.23 10/23/02
<FN>
(1) Options become exercisable one fourth on October 23, 1998, one fourth on October 22, 1999, one fourth on October 22,
2000 and one fourth on October 22, 2001.
</TABLE>
OPTION EXERCISES IN 1997 FISCAL YEAR
There were no exercises of outstanding stock options in fiscal 1997.
STOCK OPTION AND RESTRICTED STOCK PLANS
1995, 1996 and 1997 Incentive Stock Option Plans. The Board of Directors
adopted the 1995 Incentive Stock Option Plan ("1995 ISO Plan") on February 1,
1995, the 1996 Incentive Stock Option Plan ("1996 ISO Plan") on April 15,
1996, and the 1997 Incentive Stock Option Plan ("1997 ISO Plan") on October 2,
1997. The 1997 ISO Plan has not yet been approved by the shareholders. (The
1995 ISO Plan, 1996 ISO Plan, and 1997 ISO Plan are collectively referred to
as the "Plans"). The terms and conditions of the 1995 ISO Plan, the 1996 ISO
Plan, and the 1997 ISO Plan are substantively similar, therefore the following
description is valid for both Plans.
There are 264,000 shares under the 1995 ISO Plan, and 260,000 shares for
both the 1996 ISO Plan and 1997 ISO Plan, reserved for issuance subject to
options granted under the Plans, for a total of 784,000 shares. The options
granted under the 1997 ISO Plan shall not be effective until the shareholders
approve such plan. Each of the Plans 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.
The objectives of the Plans 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, which is
comprised of non-employee Directors, has the discretion to make awards of
stock options. Although the Plans do not specify what portion of the shares
may be awarded in the form of incentive stock options or non-statutory
options, at the times of their adoption it was anticipated that a
substantially greater number of incentive stock options would be awarded under
the Plans. The incentive stock options are qualified stock options under the
Internal Revenue Code. Further, the Plans are stock option plans meeting the
requirements of Rule 16b-3 promulgated under the Exchange Act. Persons
eligible to participate in the Plans 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 Plans are administered by the Compensation Committee, which has the
authority to interpret their provisions, to establish and amend rules for
their administration, to determine the types and amounts of awards to be made
pursuant to the Plans, subject to the Plans' 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 Plans 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 Plans 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 Plans 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 Plans 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 1995 ISO 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."
<PAGE>
The Company issued options under the 1996 ISO Plan to purchase 141,400
shares of Common Stock to certain key employees and options to purchase 96,000
shares of Common Stock to its four executive officers, Joseph W. Zerbib,
Thierry E. Zerbib, Michael F. Zerbib and Brian H. Loeb in two grants, one in
April 1996 and one in October 1996. The options granted in April 1996 are
exercisable one fourth on April 14, 1997, one fourth on April 14, 1998, one
fourth on April 14, 1999, and one fourth on April 14, 2000. The options
granted on October 22, 1996 are exercisable one fourth on October 22, 1997,
one fourth on October 22, 1998, one fourth on October 22, 1999 and one fourth
on October 22, 2000.
The Company issued options under the 1997 ISO Plan to purchase 129,500 shares
of Common Stock to certain key employees and options to purchase 104,000
shares of Common Stock to its four executive officers, Joseph W. Zerbib,
Thierry E. Zerbib, Michael F. Zerbib and Brian H. Loeb in October 1997. The
options granted on October 23, 1997 are exercisable one fourth on October 23,
1998, one fourth on October 23, 1999, one fourth on October 23, 2000 and one
fourth on October 23, 2001.
1995, 1996, and 1997 Restricted Stock Plan. The Board of Directors
adopted the 1995 Restricted Stock Plan on February 1, 1995, the 1996
Restricted Stock Plan on April 15, 1996 and the 1997 Restricted Stock Plan on
April 10, 1997. The 1995 Restricted Stock Plan was approved by the
stockholders at a Special Meeting of Stockholders, which was held on February
1, 1995. The 1996 Restricted Stock Plan was approved by the stockholders at
the 1996 Annual Meeting held on August 7, 1996. Under both Restricted Stock
Plans, 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 Plans authorize
the grant of shares of Common Stock to key employees, consultants,
researchers, and to members of the Advisory Board. The Restricted Stock Plans
are 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 Plans. However,
the Company anticipates that shares will be granted under the Restricted Stock
Plans 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 1995 and 1996 ISO Plans and Restricted Stock Plans.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
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 leased this office in
fiscal 1996 and 1997 on a month-to-month basis at a rate of $6,978 per month.
The Company vacated this space in January 1998, however is obligated to pay
rent for a minimum 90 days subsequent to that time.
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.
<PAGE>
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 1996 Incentive Stock Option Plan to
purchase 64,000 shares of Common Stock to the same four individuals in equal
proportions, such grants became effective upon approval of the Plan by the
shareholders at the 1996 Annual Meeting of Shareholders on August 7, 1996.
These options are exercisable at a price of $5.23 per share for a term of five
years after their effective date. Also, 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.
In October 1996 the Company granted options to purchase Common Stock under the
1996 Incentive Stock Option Plan to purchase 10,000 shares in the case of
Joseph W. Zerbib, 5,000 shares each to Thierry E. Zerbib and Brian H. Loeb and
12,000 shares to Michael F. Zerbib. In October 1997, the Company granted
options to purchase Common Stock under the 1997 Incentive Stock Option plan to
purchase 26,000 shares to each of Joseph W. Zerbib, Michael F. Zerbib, Thierry
E. Zerbib and Brian H. Loeb upon exercise of stock options which become
exercisable one fourth on October 23, 1998, one fourth on October 23, 1999,
one fourth on October 23, 2000 and one fourth on October 23, 2001 and expire
on October 23, 2002 at a purchase price of $3.23 per share. See "Option
Grants in 1997 Fiscal Year," "Stock Option and Restricted Stock Plans," and
"Item 12. Security Ownership of Certain Beneficial Owners and Management."
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.
<PAGE>
PART IV
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a)(1) Financial Statements
The following financial statements of the Company and its subsidiaries
were included in Part II, Item 7 of the Company's 10-KSB for the fiscal year
ended November 30, 1997:
Consolidated Balance Sheets as of November 30, 1997;
Consolidated Statements of Operations for the fiscal years ended November
30, 1997 and 1996;
Consolidated Statements of Changes in Stockholders' Equity for the fiscal
years ended November 30, 1997 and 1996;
Consolidated Statements of Cash Flows for the fiscal years ended November
30, 1997 and 1996; and
Notes to Consolidated Financial Statements.
(a)(2) Financial Statement Schedules
None.
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable, and therefore
have been omitted, or the required information is otherwise included in the
consolidated financial statements and the notes thereto.
(a)(3) Exhibits
<TABLE>
<CAPTION>
The following Exhibits are filed herewith pursuant to Rule
601 of Regulation S-K and paragraph (c) of this Item 14.
<S> <C> <C>
DESCRIPTION REFERENCE
NO.
- -----
3.1 . Amended and Restated Articles of Incorporation of Registrant dated April 13, 1995 (1)
4.1 . Form of Common Stock Certificate (1)
10.1. 1995 Incentive Stock Option Plan (1)
10.2. 1995 Restricted Stock Plan (1)
10.3 Asset Purchase Agreement between Telesoft Acquisition Corp., Uniquest Incorporated and CSI Acquisition Corp.
dated March 13, 1995 (1)
10.4 Form of Employment Agreement between the Registrant and Joseph W. Zerbib effective as of the date of the Prospectus
hereunder (1)
10.5 Form of Employment Agreement between the Registrant and Thierry E. Zerbib effective as of the date of the Prospectus
hereunder (1)
10.6. Form of Employment Agreement between the Registrant and Brian H. Loeb effective as of the date of the Prospectus
hereunder (1)
10.7 Form of Employment Agreement between the Registrant and Michael F. Zerbib effective as of the date of the Prospectus
hereunder (1)
10.9. Contract between Registrant and the University of Delaware (1)
10.10 1996 Incentive Stock Option Plan (2)
10.11 1996 Restricted Stock Plan (2)
10.12 1997 Incentive Stock Option Plan *
10.13 1997 Restricted Stock Plan *
11. . Statement Re: Computation of per Share Earnings (5)
16. . Letter on Change in Certifying Accountants (3)
16.1. Letter on Change in Certifying Accountants (4)
21. . Subsidiaries of Registrant (5)
<FN>
______________________________
* Filed herewith
(1) Filed with Registration Statement No. 33-91234-LA, dated June 30,
1995.
(2) Filed with Form 10-KSB/A for the fiscal year ended November 30, 1996,
dated March 7, 1997
(3) Filed with Current Report on Form 8-K/A, dated February 27, 1997
(4) Filed with Current Report on Form 8-K dated October 23, 1997
(5) Filed with Form 10-KSB for the fiscal year ended November 30, 1997,
dated February 27, 1998
</TABLE>
(b) Current Reports on Form 8-K
During the last quarter of the fiscal year ended November 30, 1996, the
Company issued an 8-K regarding the change in accountants. See "Item 9.
Changes and Disagreements with Accountants on Accounting and Financial
Disclosure".
<PAGE>
The Accompanying Notes are an Integral Part
of the Consolidated Financial Statements
F-2
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
TELESOFT CORP.
Dated: April 1, 1998 By /s/ Joseph W. Zerbib
Joseph W. Zerbib,
President and Principal Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature and Title Date
- --------------------- ----
/s/ Joseph W. Zerbib
Joseph W. Zerbib, April 1, 1998
President, Principal Executive Officer and Director
/s/ Thierry E. Zerbib
Thierry E. Zerbib, Vice President - Technologies, April 1, 1998
Secretary and Director
/s/ Brian H. Loeb
Brian H. Loeb, Vice President - Marketing, April 1, 1998
Sales and Operations and Director
/s/ Michael F. Zerbib
Michael F. Zerbib, Chief Financial Officer April 1, 1998
Treasurer and Director
/s/ Cecile Silverman April 1, 1998
Cecile Silverman, Director
/s/ Kalvan Swanky April 1, 1998
Kalvan Swanky, Director
TELESOFT CORP.
1997 INCENTIVE STOCK OPTION PLAN
The following definitions shall be applicable throughout the Plan:
(a) "Board" means the Board of Directors of the Company.
(b) "Articles of Incorporation" means the Company's Articles of
Incorporation, as amended or restated from time to time.
(c) "Code" means the Internal Revenue Code of 1986, as amended from
time to time. Reference in the Plan to any Section of the Code shall be
deemed to include any amendments or successor provisions to such Section and
any rules or regulations under such Section.
(d) "Committee" means the committee appointed by the Board to
administer the Plan as referred to in Article V.
(e) "Commission" means the Securities and Exchange Commission or any
successor agency.
(f) "Company" means Telesoft Corp., an Arizona corporation.
(g) "Date of Grant" means the date on which the granting of an Option
is authorized by the Board or such later date as may be specified by the Board
in such authorization as referred to in Article V.
(h) "Eligible Employee" means any person regularly employed by the
Company or a Subsidiary on a full-time salaried basis who satisfies all of the
requirements of Article IX.
(i) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and the rules and regulations promulgated
thereunder.
(j) "Fair Market Value" is defined in Article IV.
(k) "Holder" means an employee of the Company or a Sub-sidiary who
has been granted an Option.
(l) "Incentive Stock Option" means any Option intended to be and
designated as an "incentive stock option" within the meaning of 422 of the
Code.
(m) "Non-Employee Director" means a member of the Board who qualifies
as a "Non-Employee Director" as defined in Rule 16b-3, as promulgated by the
Commission under the Exchange Act or any successor definition adopted by the
Commission.
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290774-1 12129-100
(n) "Non-Incentive Options" means an Option which is not an Incentive
Stock Option
(o) "Normal Termination" means termination at retirement pursuant to
the Company or Subsidiary retirement plan then in effect.
(p) "Option" means an award granted under Article IX of the Plan and
includes both Non-Incentive Options and Incentive Stock Options.
(q) "Plan" means this 1997 Incentive Stock Option Plan.
(r) "Securities Act" means the Securities Act of 1933, as amended
from time to time, and the rules and regulations promulgated thereunder.
(s) "Share" means a share of Stock.
(t) "Stock" means common stock of the Company as described in the
Articles of Incorporation.
(u) "Subsidiary" means "subsidiary corporation" as defined in 424(f)
of the Code.
(v) "Termination" means separation from employment with the Company
or any of its Subsidiaries for any reason except due to death.
(w) "Treasury" means the Department of the Treasury of the United
States of America.
ARTICLE I.
DESIGNATION AND PURPOSE OF THE PLAN
----------------------------------------
The Plan shall be known as the "Telesoft Corp. 1997 Incentive Stock
Option Plan." The purpose of the Plan is to provide additional incentives to
Employees and Non-Employee Directors of the Company to achieve financial
results aimed at increasing shareholder 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.
The Plan was approved by the Board on October 22, 1997 and is subject to the
approval by the shareholders of the Company. Subject to the determination of
the Board or a Committee appointed by the Board, Options granted under this
Plan may be Incentive Stock Options or Non-Incentive Options.
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290774-1 12129-100
ARTICLE II.
SHARES AVAILABLE FOR PURCHASE
--------------------------------
A maximum of 260,000 authorized but unissued shares of the Company's
common stock may be issued upon the exercise of Options granted pursuant to
the Plan. Such Shares shall be deemed to have been used in the exercise of
Options whether actually delivered or whether the Fair Market Value equivalent
of such Shares is paid in cash. In the event that any Option granted under
the Plan expires or terminates for any reason whatsoever without having been
exercised in full, the Shares subject to, but not delivered under such Option
shall become available for other Options which may be granted under the Plan;
or shall be available for any other lawful corporate purpose.
ARTICLE III.
LIMIT ON VALUE OF OPTION SHARES
------------------------------------
In the case of an Incentive Stock Option, the aggregate Fair Market Value
(determined as of the time such Option is granted) of the Shares with respect
to which the Incentive Stock Option is exercisable for the first time by an
individual during any calendar year (under all plans of the Company) shall not
exceed $100,000.
ARTICLE IV.
DETERMINATION OF FAIR MARKET VALUE
----------------------------------
As used herein the term "Fair Market Value" shall mean, with respect to
the date a given Option is granted or exercised, the value determined by the
Board or any Committee appointed in accordance with Article VI hereof in good
faith using a generally accepted valuation method and, in the case of an
incentive stock option, determined in accordance with applicable Treasury
regulations; provided, however, that where there is a public market for the
common stock of the Company, the Fair Market Value per share shall be the mean
of the final bid and asked prices of the Stock on the date of grant, as
reported in The Wall Street Journal (or, if not so reported, as otherwise
reported by the National Association of Securities Dealers Automated Quotation
System) or, in the event the stock is listed on a stock exchange, the fair
market value per share shall be the closing price on such exchange on the date
of grant of the option, as reported in The Wall Street Journal.
ARTICLE V.
STOCK OPTIONS AND OPTION AGREEMENTS
---------------------------------------
(a) Stock Options under the Plan may be of two types: Incentive Stock
Options and Non-Incentive Options. Any Stock Option granted under the Plan
will be in such form as the Board may from time to time approve. The Board
will have the authority to grant any optionee Incentive Stock Options,
Non-Incentive Options or both types of Options. The Date of Grant of an
Option will be the date the Board by resolution selects an individual to be a
participant in any grant of an Option, determines the number of Shares to be
subject to such Option to be granted to such individual and specifies the
terms and provisions of the Option. Incentive Stock Options may only be
granted to Eligible Employees. To the extent that any Option is not
designated as an Incentive Stock Option or even if so designated does not
qualify as an Incentive Stock Option, it will be deemed to be a Non-Incentive
Option. The Board may grant Non-Incentive Options to Non-Employee Directors
under the Plan. Anything in the Plan to the contrary notwithstanding, no term
of the Plan relating to Incentive Stock Options will be interpreted, amended
or altered nor shall any discretion or authority granted under the Plan be
exercised so as to disqualify the Plan under 422 of the Code or, without the
consent of the optionee, to disqualify any Incentive Stock Option under such
422.
(b) Each Option granted under the Plan shall be evidenced by an
option agreement ("Option Agreement"), which shall indicate on its face
whether it is an agreement for an Incentive Stock Option or a Non-Incentive
Option, or both and shall be signed by an officer of the Company on behalf of
the Company and by the employee who was granted the Option and which shall
contain such provisions as may be approved by the Board or any Committee
appointed by the Board according to Article VI. The provisions shall be
subject to the following terms and conditions:
(i) Any Option or portion thereof that is exercisable shall be
exercisable as to such number of Shares and at such times as set forth in the
Stock Option Agreement, except as limited by the terms of the Plan heretofore;
(ii) Every Share purchased through the exercise of an Option shall be
paid for in full at the time of the exercise. Each Option shall cease to be
exercisable, as to any Share, when the Holder purchases the Share, or when the
Option lapses;
(iii) Options shall not be transferable by the Holder except by will
or the laws of descent and distribution and shall be exercisable during the
Holder's lifetime only by the Holder; and
(iv) An unexpired Option shall become immediately exercisable (1)
automatically on the Holder's Normal Termination, (2) at the discretion of the
Board, in whole or in part, on the date the Holder becomes eligible to receive
early retirement benefits, as defined under the retirement plan of the Company
then in effect, (3) upon any change in control of the Company, and (4) under
such other circumstances as the Board may direct.
(c) The Option Agreements shall constitute binding contracts between
the Company and the employee. Every employee, upon acceptance and execution
of such option agreement, shall be bound by the terms and conditions of this
Plan and of the Option Agreement.
(d) The terms and conditions of the Option Agreement shall be in
accordance with this Plan, but may include additional provisions and
restrictions, provided that the same are not inconsistent with the Plan.
ARTICLE VI.
COMPENSATION AND STOCK OPTION COMMITTEE
-------------------------------------------
The Plan shall be administered by the Board or a Committee appointed by
the Board in accordance with Rule 16b-3 of the Exchange Act ("Rule 16b-3").
Any Committee which has been delegated the duty of administering the Plan by
the Board shall be composed of two or more persons each of whom (i) is a
Non-Employee Director and (ii) is an "outside director" as defined in
162(m)(4) of the Code. To the extent reasonable and practicable, the Plan
shall be consistent with the provisions of Rule 16b-3 to the degree necessary
to ensure that transactions authorized pursuant to the Plan are exempt from
the operation of Section 16(b) of the Exchange Act. If such a Committee is
appointed, the Committee shall have the same power and authority to construe,
interpret and administer the Plan and from time to time adopt such rules and
regulations for carrying out this Plan as it may deem proper and in the best
interests of the Company as does the Board. Any reference herein to the Board
shall, where appropriate, encompass a Committee appointed to administer the
Plan in accordance with this Article VI.
The Board shall, from time to time, in its discretion, determine which of
the Eligible Employees are to be granted Options and the form, amount and
timing of such Options and, unless otherwise provided herein, the terms and
provisions thereof and the form of payment of an Option, if applicable, and
such other matters specifically delegated to It under this Plan. Subject to
the express provisions of the Plan, the Board shall have authority to
interpret the Plan and Options granted hereunder, to prescribe, amend and
rescind rules and regulations relating to the Plan, and to make all other
determinations necessary or advisable in administering the Plan, all of which
determinations shall be final and binding upon all persons. A quorum of the
Board shall consist of a majority of its members and the Board may act by vote
of a majority of its members at a meeting at which a quorum is present, or
without a meeting by a written consent to the action taken signed by all
members of the Board. No member of the Board shall be liable for any action,
interpretation or construction made in good faith with respect to the Plan or
any Option granted hereunder.
ARTICLE VII.
OPTION PRICE
-------------
The Option price at which Shares may be purchased under an Option granted
pursuant to this Plan shall be set by the Board, but shall in no instance be
less than the Fair Market Value of such Shares on the Date of Grant in the
case of Incentive Stock Options. Such Fair Market Value shall be determined
by the criteria set forth in Article IV hereof. The Option price will be
subject to adjustments in accordance with provisions of Article X herein.
In the event that an employee granted an Incentive Stock Option hereunder
owns, directly or indirectly, immediately after such grant, more than 10% of
the total combined voting power of all classes of the issued and outstanding
stock of the company, the option price shall be at least 110% of the Fair
Market Value of the stock subject to the Option and such Option by its terms
shall not be exercisable after the expiration of five (5) years from the date
such Option is granted.
ARTICLE VIII.
EXERCISE OF OPTION
--------------------
(a) Subject to the provisions of Articles VII and IX the period
during which each Option may be exercised shall be fixed by the Board at the
time such Option is granted, subject to the following rules:
(i) such Option is granted within ten (10) years from the date the
Plan is adopted, or the date such Plan is approved by the stockholders,
whichever is earlier;
(ii) such Option by its terms is not exercisable after the expiration
of ten (10) years (in the case if Incentive Stock Options, not to exceed five
years for Eligible Employees owning 10% or more of the combined voting power
of all classes of stock of the Company) from the Date of Grant as shall be set
forth in the Stock Option Agreement relating to such grant; and,
(iii) such Option by its terms states that a person's rights and
interests under the Plan, including amounts payable, may not be assigned,
pledged, or transferred except, in the event of an employee's death, to a
designated beneficiary as provided in the Plan, or in the absence of such
designation, by will or the laws of descent and distribution.
(b) An Option shall lapse under the following circumstances:
(i) Ten (10) years after it is granted, three months after Normal
Termination, twelve months after the date of Termination if due to permanent
disability, three months after any other Termination or any earlier time set
by the grant.
(ii) If the Holder dies within the Option period, the Option shall
lapse unless it is exercised within the Option period and in no event later
than twelve months after the date of his death by the Holder's legal
representative or representatives or by the person or persons entitled to do
so under the Holder's last will and testament or, if the Holder shall fail to
make testamentary disposition of such Option or shall die intestate, by the
person or persons entitled to receive said Option under the applicable laws of
descent and distribution.
(iii) Notwithstanding the foregoing, in no event shall the period of
exercise be less than thirty days after Normal Termination or the death of the
Holder; provided, however, that in no event shall an Incentive Stock Option be
exercised more than ten years after the Date of Grant.
(c) No Shares shall be delivered pursuant to any exercise of an
Option until the requirements of such laws and regulations, as may be deemed
by the Board to be applicable, are satisfied and until payment in full of the
option price specified in the applicable Stock Option Agreement is received by
the Company. No employee shall be deemed to be an owner of any Shares subject
to any Option unless and until the certificate or certificates for them have
been issued, as reflected on the stock record and transfer books of the
Company.
ARTICLE IX.
ELIGIBILITY
-----------
All employees of the Company, including officers and directors who are
salaried employees, shall be Eligible Employees eligible to participate under
this Plan. The fact that an employee has been granted an Option under this
Plan shall not in any way affect or qualify the right of the employee to
terminate his employment at any time. Nothing contained in this Plan shall be
construed to limit the right of the Company to grant Options otherwise than
under the Plan for any proper and lawful corporate purpose, including but not
limited to Options granted to employees. Employees to whom Options may be
granted under the Plan will be those selected by the Committee from time to
time who, in the sole discretion of the Committee, have contributed in the
past or who may be expected to contribute materially in the future to the
successful performance of the Company.
ARTICLE X.
CAPITAL ADJUSTMENTS AFFECTING STOCK
--------------------------------------
(a) If the outstanding Stock of the Company shall at any time be
changed or exchanged by declaration of a stock dividend, split-up, combination
of Shares, recapitalization, merger, consolidation, or other corporate
reorganization in which the Company is the surviving corporation, the number
and kind of Shares subject to the Plan or subject to any Options theretofore
granted, and the Option prices, shall be appropriately and equitably adjusted
so as to maintain the proportionate number of Shares without changing the
aggregate Option price and the Board may make any other adjustments as the
Board deems appropriate for purposes of the Plan. The determination of the
Board as to the terms of any adjustment shall be conclusive except to the
extent governed by Treasury regulations applicable to Incentive Stock Options.
(b) In the event of a liquidation or dissolution of the Company, sale
of all or substantially all of its assets, or a merger, consolidation or other
corporate reorganization in which the Company is not the surviving
corporation, or any merger or other reorganization in which the Company is the
surviving corporation but the holders of its Stock receive securities of
another corporation, or in the event a person makes a tender offer to the
stockholders of the Company, the Board may, but need not, accelerate the time
at which unexercised Options may be exercised. Nothing herein contained shall
prevent the substitution of a new Option by the surviving or acquiring
corporation.
ARTICLE XI.
AMENDMENTS, SUSPENSION OR TERMINATION
----------------------------------------
(a) The Board shall have the right, at any time, to amend, suspend or
terminate the Plan, and if suspended, reinstate the Plan in whole or in part
in any respect which it may deem to be in the best interests of the Company,
provided, however, no amendments shall be made in the Plan which:
(i) Increase the total number of Shares for which Options may be
granted under this Plan for all employees or for any one of them except as
provided in Article X;
(ii) Change the minimum purchase price for the optioned Shares,
except as provided in Article X;
(iii) Affect outstanding Options or any unexercised rights
thereunder, except as provided in Article VIII;
(iv) Extend the option period provided in Article VIII or make an
Option exercisable earlier than as specified in Article VIII; or
(v) Extend the termination date of the Plan.
(b) The Board shall also have the right, with the express written
consent of an individual participant, to cancel, reduce or otherwise alter
such participant's outstanding Options under the Plan.
(c) Any such amendment, termination, suspension, cancellation,
reduction or alteration shall be further approved by the shareholders of the
Company if such approval is required to preserve or comply with any exemption,
whether under Rule 16b-3 or otherwise, from Section 16(b) of the Exchange Act
or to preserve the status of Incentive Stock Options within the meaning of
422 of the Code.
ARTICLE XII.
REPURCHASE OF SHARES
----------------------
Any time during an Optionee's employment with the Company, an Optionee
who has purchased shares of Common Stock upon exercise of Options granted
pursuant to this Plan, may, in writing, offer for sale to the Company such
Common Stock at the purchase price determined under the respective Stock
Option Agreement. If the Company does not acquire such Common Stock, the
Optionee may not, while he is in the employ of the Company, sell, transfer,
gift, pledge, encumber, burden or otherwise dispose of all or any portion of
such Common Stock to any other person or entity.
In the event that the employment of an employee is terminated or does
terminate, for any reason, including death, then in that event, to the extent
that Options have been exercised in whole or in part prior to the date of such
termination, the employee (or, if applicable, his assigns, heirs, successors,
administrators or executors) shall be required to sell back his Shares to the
Company upon such terms and conditions as determined by the Committee and as
reflected in the Option Agreement.
ARTICLE XIII.
EFFECTIVE DATE, TERM AND APPROVAL
-------------------------------------
The effective date for this Plan shall be upon approval by the
stockholders. Options may be granted as provided herein for a period of ten
years after such date unless an earlier termination date after which no
Options may be granted under the Plan is fixed by action of the Board, but any
Option granted prior thereto may be exercised in accordance with its terms.
The grant of any Options under the Plan is effective only upon approval of the
Plan by the stockholders. The Plan and all Options granted pursuant to it are
subject to all laws, approvals, requirements, and regulations of any
governmental authority or securities exchange which may be applicable thereto
and, notwithstanding any provisions of the Plan or option agreement, the
Holder of an Option shall not be entitled to exercise his Option nor shall the
Company be obligated to issue any Shares to the Holder if such exercise or
issuance shall constitute a violation by the Holder or the Company of any
provisions of any such laws, approvals, requirements, or regulations. The
Plan shall continue in effect until all matters relating to the payment of
Options granted under the Plan and administration of the Plan have been
settled.
ARTICLE XIV
GENERAL
-------
(a) Government and Other Regulations. 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, the Exchange Act, 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. 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.
(b) Reservation of Shares. The Company, during the term of this
---------------------
Plan, will at all times reserve and keep available such number of Shares as
shall be sufficient to satisfy the requirements of the Plan. The 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.
(c) Tax Withholding. The employee or other person receiving Stock
---------------
upon exercise of an Option may be required to pay to the Company or to a
Subsidiary, as appropriate, the amount of any such taxes which the Company or
Subsidiary is required to withhold with respect to such Stock. In connection
with such obligation to withhold tax, the Company may defer making delivery of
such Stock unless and until indemnified on such withholding liability to its
satisfaction.
(d) Claim to Options and Employment Rights. No employee or other
--------------------------------------
person shall have any claim or right to be granted an Option under the Plan.
Neither this Plan nor any action taken hereunder shall be construed as giving
any employee any right to be retained in the employ of the Company or a
Subsidiary.
(e) Beneficiaries. Any payment of Options due under this Plan to a
-------------
deceased participant shall be paid to the beneficiary designated by the
participant and filed with the Board. If no such beneficiary has been
designated or survives the participant, payment shall be made to the
participant's legal representative. A beneficiary designation may be aged or
revoked by a participant at any time provided the change or revocation is
filed with the Board. The designation by a married participant of one or more
persons other than the participant's spouse must be consented to by the
spouse.
(f) Nontransferability. A person's rights and interests under the
------------------
Plan, including amounts payable, may not be assigned, pledged, or transferred
except, in the event of an employee's death, to a designated beneficiary as
provided in the Plan, or in the absence of such designation, by will or the
laws of descent and distribution, or pursuant to a "qualified domestic
relations order" under the Code and ERISA.
(g) Indemnification. Each person who is or shall have been a member
---------------
of the Board shall be indemnified and held harmless by the Company against and
from any loss, cost, liability, or expense that may be imposed upon or
reasonably incurred by him in connection with or resulting from any claim,
action, suit, or proceeding to which he may be a party or in which he may be
involved by reason of any action or failure to act under the Plan and against
and from any and all amounts paid by him in satisfaction of judgment in such
action, suit, or proceeding against him. He shall give the Company an
opportunity, at its own expense, to handle and defend the same before he
undertakes to handle and defend it on his own behalf. The foregoing right of
indemnification shall not be exclusive of any other rights of indemnification
to which such persons may be entitled under the Company's Bylaws or Articles
of Incorporation, as a matter of law, or otherwise, or any power that the
Company may have to indemnify them or hold them harmless.
(h) Reliance on Reports. Each member of the Board shall be fully
-------------------
justified in relying or acting in good faith upon any report made by the
independent public accountants of the Company and its Subsidiaries and upon
any other information furnished in connection with the Plan by any person or
persons other than himself. In no event shall any person who is or shall have
been a member of the Board be liable for any determination made or other
action taken, including the furnishing of information, or failure to act, if
in good faith.
(i) Relationship to Other Benefits. No payment under the Plan shall
------------------------------
be taken into account in determining any benefits under any pension,
retirement, savings, profit sharing, group insurance, welfare or other benefit
plan of the Company or any Subsidiary.
(j) Expenses. The expenses of administering the Plan shall be borne
--------
by the Company and its Subsidiaries.
(k) Pronouns. Masculine pronouns and other words of masculine gender
--------
shall refer to both men and women.
(l) Titles and Headings. The titles and headings of the Sections in
-------------------
the Plan are for convenience of reference only, and in the event of any
conflict, the text of the Plan, rather than such titles or headings, shall
control.
(m) Fractional Shares. No fractional Shares shall be issued and the
-----------------
Board shall determine whether cash shall be given in lieu of fractional Shares
or whether such fractional Shares shall be eliminated by rounding up or
rounding down unless otherwise provided in the Plan.
(n) 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.
TELESOFT CORP.
1997 RESTRICTED STOCK PLAN
1. PURPOSES OF THE PLAN. The purposes of this 1997 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.
- 3 -
290641-1 12129-100
(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 1997 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 1997
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 comprised of
"non-employee" directors 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 does not qualify as a
"non-employee" director under the requirements of the Code.
(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, 2007. 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 certifi-cate
for Re-stricted 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 estab-lished a restriction period of such length as
shall be determined by the Board. Shares of Re----stricted Stock shall not be
sold, assigned, trans--ferred, pledged or other-wise 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 Com-pany shall re----deliver to the
Grantee (or his legal representative or de----signated bene-ficiary) the
Restricted Stock de-posited 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 dis--ability, the restriction imposed under
paragraph 7(a) shall lapse with re-spect 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.
