<PAGE>
SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. __)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
TMCI ELECTRONICS, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
PRELIMINARY COPY
TMCI ELECTRONICS, INC.
1875 Dobbin Drive
San Jose, California 95133
Dear Stockholder:
You are cordially invited to attend the 1997 Annual Meeting
of Stockholders of TMCI Electronics, Inc. (the "Company") which will be held
on Monday, December 22, 1997 at 10:00 a.m. (local time) at the Silicon Valley
Capital Club, 50 West San Fernando Street, Suite 1700, San Jose, California.
This booklet includes the notice of the meeting and the
proxy statement which contains information about the functions of your Board
of Directors and personal information about each of the nominees for the
Board.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE
MEETING REGARDLESS OF THE SIZE OF YOUR HOLDINGS. I URGE YOU TO COMPLETE, SIGN,
DATE AND RETURN YOUR PROXY CARD PROMPTLY.
If you plan to attend the meeting and are a stockholder of
record, please mark your proxy card in the space provided for that purpose.
However, if your shares are not registered in your own name, please advise the
stockholder of record (your bank, broker, etc.) that you wish to attend. Such
stockholder of record must provide you with evidence of your ownership which
will enable you to gain admittance to the meeting.
Sincerely,
Rolando Loera
Chairman, President and
Chief Executive Officer of the Company
December 1, 1997
YOUR VOTE IS IMPORTANT
PLEASE COMPLETE, SIGN, DATE AND PROMPTLY RETURN
YOUR PROXY CARD IN THE ENCLOSED ENVELOPE
<PAGE>
NOTICE OF
ANNUAL MEETING
OF
STOCKHOLDERS
Dear Stockholder:
The 1997 Annual Meeting (the "Meeting") of Stockholders of
TMCI Electronics, Inc., a Delaware corporation (the "Company"), will be held
at the Silicon Valley Capital Club, 50 West San Fernando Street, Suite 1700,
San Jose, California on Monday, December 22, 1997 beginning at 10:00 a.m.
(local time) for the following purposes:
1. TO APPROVE AN AMENDMENT TO THE BY-LAWS OF THE COMPANY TO PROVIDE
FOR A CLASSIFIED BOARD OF DIRECTORS;
2. TO ELECT DIRECTORS;
3. TO APPROVE AN AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF CAPITAL STOCK OF THE COMPANY TO
A TOTAL OF THIRTY-FIVE MILLION (35,000,000) SHARES, CONSISTING OF TWENTY-FIVE
MILLION (25,000,000) SHARES OF COMMON STOCK, PAR VALUE $.001 PER SHARE
("COMMON STOCK") AND TEN MILLION (10,000,000) SHARES OF PREFERRED STOCK, PAR
VALUE $.001 PER SHARE ("PREFERRED STOCK");
4. TO APPROVE THE 1997 STOCK OPTION PLAN;
5. TO APPROVE THE 1997 EMPLOYEE STOCK PURCHASE PLAN; AND
6. TO TRANSACT SUCH OTHER BUSINESS AS MAY BE PROPERLY BROUGHT BEFORE
THE MEETING AND ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF.
Only holders of record of the Company's Common Stock as of the
close of business on November 10, 1997 are entitled to notice of and to vote
at the Meeting and any adjournments or postponements thereof.
By Order of the Board of Directors,
Robert Loera
Secretary
TMCI ELECTRONICS, INC.
1875 Dobbin Drive
San Jose, California 95133
December 1, 1997
<PAGE>
GENERAL INFORMATION
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of TMCI Electronics, Inc., a Delaware
corporation (the "Company"), for use at the 1997 Annual Meeting of
Stockholders of the Company (the "Meeting") which will be held at 10:00 a.m.
on Monday, December 22, 1997 at the Silicon Valley Capital Club, 50 West San
Fernando Street, Suite 1700, San Jose, California and at any and all
adjournments of the Meeting for the purposes set forth in the accompanying
Notice of Meeting of Stockholders. This Proxy Statement and the enclosed proxy
card will be mailed to stockholders on or about December 1, 1997. The
Company's principal executive offices are located at 1875 Dobbin Drive, San
Jose, California 95133.
The accompanying proxy card is designed to permit each stockholder of
record at the close of business on November 10, 1997 (the "Record Date") to
vote at the Meeting and any adjournments or postponements thereof. As of the
Record Date, [3,596,332] shares of common stock, par value $.001 per share
("Common Stock") were issued and outstanding. Each holder of record will be
entitled to one vote for each share of Common Stock held of record. Holders of
shares of Common Stock are entitled to vote on all matters and no shares have
cumulative voting rights. The presence of a majority of the votes represented
by outstanding shares of Common Stock, voting as a single class, represented
in person or by proxy at the meeting, will constitute a quorum. The proxy card
provides space for a stockholder to withhold voting for any or all nominees
for the Board of Directors or to abstain from voting for any proposal if the
stockholder chooses to do so. Shares represented by properly executed proxy
cards received by the Company at or prior to the Meeting will be voted at the
Meeting according to the instructions indicated thereon or otherwise as
provided therein. The election of directors requires the affirmative vote of a
plurality of the votes cast. The proposed amendment to the Company's
Certificate of Incorporation to increase the capital stock of the Company
requires the affirmative vote of a majority of the shares outstanding. The
proposed amendment to the By-Laws to provide for a classified Board of
Directors, the approval of the 1997 Stock Option Plan and the approval of the
1997 Employee Stock Purchase Plan require the affirmative vote of a majority
of the votes cast at the Meeting in person or by proxy. For purposes of
determining the number of votes cast with respect to any voting matter, only
those cast "FOR" or "AGAINST" are included. Abstentions and broker non-votes
are counted only for purposes of determining whether a quorum is present at
the Meeting.
Unless instructions to the contrary are indicated, the persons named on
the proxy card will be deemed to have intended to vote the shares so
represented "FOR" the amendment to the By-Laws, "FOR" the election of the
nominated directors, "FOR" the amendment to the Certificate of Incorporation,
"FOR" the 1997 Stock Option Plan and "FOR" the 1997 Employee Stock Purchase
Plan. As to any other business which may properly come before the Meeting, the
persons named on the proxy card will vote according to their best judgment.
A proxy may be revoked at any time before it is voted at the Meeting by
filing with the Secretary of the Company an instrument revoking it, by a duly
executed proxy bearing a later date, or by voting by ballot at the Meeting.
This proxy is solicited by the Board of Directors of the Company. The cost
of preparing, assembling and mailing this notice of meeting, proxy statement,
and proxy will be borne by the Company. In addition to solicitation of the
proxies by use of the mails, some of the officers, directors and regular
employees of the Company, without extra remuneration, may solicit proxies
personally or by telephone, telegraph, or cable. The Company may also request
brokerage houses, nominees, custodians and fiduciaries to forward soliciting
material to the beneficial owners of stock held of record. The Company will
reimburse such persons for their reasonable expenses in forwarding soliciting
material.
<PAGE>
PROPOSAL NO. 1
PROPOSAL TO AMEND THE BY-LAWS OF THE COMPANY TO PROVIDE FOR A
CLASSIFIED BOARD OF DIRECTORS
The Board of Directors has unanimously approved and recommends to
stockholders that they approve a proposal to amend the Company's By-Laws to
provide for a classified Board of Directors. Directors of the Company are
currently elected to serve until the next annual meeting of stockholders or
until their successors are elected and qualified. The Board of Directors has
determined it to be advisable to divide the directors into three classes with
the term of office of one class expiring each year. Under this proposal Class
I directors would serve until the next annual meeting, Class II directors
would serve until the second succeeding annual meeting and Class III directors
would serve until the third succeeding annual meeting. Thereafter, each
director would serve until the next election of the class for which such
director was chosen.
The Board of Directors believes that establishing a classified board is
in the best interests of the Company in that it will provide for greater
stability and continuity of management. One of the effects of this change is
that, in the event the stockholders of the Company want to change the
composition of the Board of Directors, it will take two annual meetings before
a change in the majority of the Board can be effected. This change may also
have the effect of discouraging attempts to acquire control of the Company.
If the proposal to establish a classified Board of Directors is not
approved by the stockholders, directors will be elected to serve until the
next annual meeting of stockholders. The text of the proposed amendment is set
forth in Appendix A hereto.
REQUIRED VOTE OF STOCKHOLDERS
The affirmative vote of the majority of the shares of outstanding Common
Stock of the Company represented at the Meeting in person or by proxy is
required for approval of the foregoing proposal.
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<PAGE>
PROPOSAL NO. 2
ELECTION OF DIRECTORS
At the Meeting, the stockholders of record will elect seven (7) directors
to hold office until the 1998 annual meeting of stockholders or until their
respective successors have been duly elected and qualified. At present, the
Company's By-Laws provide for not less than one director nor more than nine
directors. If Proposal No. 1 is approved by the stockholders, the Company's
By-Laws, as amended, will provide for a staggered Board of Directors, such
that members of the Board are divided into three classes, as nearly equal in
numbers as the then total number of directors constituting the entire Board
permits, with the term of office of one class expiring each year. Currently,
there are seven directors of the Company. All of the current Directors are
being nominated for reelection in classes as follows. Messrs. Polimeni and
Shaw have been nominated as Class I directors, each to serve until the annual
meeting of stockholders to be held during the year 1998. Messrs. Fink, Lipkin
and Robert Loera have been nominated as Class II directors, each to serve
until the annual meeting of stockholders to be held during the year 1999.
Messrs. Chaffin and Rolando Loera have been nominated as Class III directors,
each to serve until the annual meeting of stockholders to be held during the
year 2000. If Proposal No. 1 is not approved by the stockholders, all
directors will be elected to serve until the next annual meeting of
stockholders.
There are no family relationships among any of the officers or directors
of the Company except that Robert Loera is the brother of Rolando Loera.
Biographical information for each director, including their age, position held
with the Company, term of office as director, employment during the past five
years, and certain other directorships is set forth below:
<TABLE>
<CAPTION>
Name Age Position
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Rolando Loera 44 Chairman, President and Chief Executive Officer;
Director
Charles E. Shaw 53 Vice President, Chief Financial Officer; Director
Robert Loera 30 Controller and Secretary; Director
Thomas F. Chaffin 40 Director
Robert C. Fink 62 Director
Boris Lipkin 55 Director
Dominic A. Polimeni 51 Director
</TABLE>
NOMINEES FOR ELECTION FOR A ONE-YEAR TERM EXPIRING AT THE 1998 ANNUAL MEETING
DOMINIC A. POLIMENI. Mr. Polimeni has been a Director of the Company
since March 1996. Mr. Polimeni has been President, Chief Operating Officer and
a Director of Questron Technology, Inc., a distributor of electronic
fasteners, since March 1995 and Chairman and Chief Executive Officer of that
company since February 1996. Since May 1996, Mr. Polimeni has been a director
of Healthcare Imaging Services, Inc., a publicly held company based in
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<PAGE>
Middletown, New Jersey which provides healthcare management and services. Mr.
Polimeni has been a Managing Director of Gulfstream Financial Group, Inc., a
privately held financial consulting and investment banking firm, since August
1990. Prior to that he held the position of Chief Financial Officer of Arrow
Electronics, Inc. ("Arrow") for four (4) years. He also held several other
positions, including general management positions, with Arrow over an
eight-year period. Prior to that he practiced as a Certified Public Accountant
for more than 12 years and was a Partner in the New York office of Arthur
Young & Company. He has also held the position of Chief Operating Officer of
Fugazy Express, Inc., a New York based transportation company in its start-up
phase. He holds a bachelor of business administration degree from Hofstra
University.
CHARLES E. SHAW. Mr. Shaw has been Vice President, Chief Financial
Officer, and a Director of the Company since December 1995 and has held the
same positions with Touche Manufacturing Company, Inc., a wholly owned
subsidiary of the Company ("Touche") since 1993. Prior to that he was
President and Chief Executive Officer of Compro Business Solutions, Inc., a
business and management consulting firm established by Mr. Shaw in 1992. From
1988 through 1992, he served as Vice President and Chief Financial Officer of
Douglas Broadcasting, Inc. a $51 million radio broadcast network. Mr. Shaw has
a B.S. in Business Administration from the City University of New York, a
Masters of Business Administration from New York University and an L.L.B. from
LaSalle Law School.
NOMINEES FOR ELECTION FOR A TWO-YEAR TERM EXPIRING AT THE 1999 ANNUAL MEETING
ROBERT C. FINK. Mr. Fink has been a Director of the Company since
November 1997. Since 1993 Mr. Fink has been Senior Vice President of Corporate
Support and Chief Operating Officer of Lam Research Corporation, a
manufacturer of semiconductor processing equipment. From 1988 to 1993 he
served as President of Drytek, Inc., a former subsidiary of General Signal
Corporation. From 1984 to 1988, he was a Director of VLSI Operation (North
America) for ITT Corporation's Semiconductor Division. Prior to 1984, Mr. Fink
served for 12 years as Director of World Wide Manufacturing Resources for
General Instrument Corporation's Microelectronics Division.
BORIS LIPKIN. Mr. Lipkin has been a Director of the Company since
November 1997. Mr. Lipkin has been President of the Track Division and
Corporate Vice President of Silicon Valley Group, Inc., a San Jose, CA based
medical test equipment company, since 1995. From 1992 to 1995 he was Vice
President and General Manager of Varian Associates, a semiconductor equipment
company. From 1978 to 1992 he served in various management and engineering
positions at IBM's Fishkill, New York facility. Mr. Lipkin received a Master
of Science Degree in electro mechanical engineering at the Polytechnical
Institute in Kharkov, Russia.
ROBERT LOERA. Mr. Robert Loera has been Controller, Secretary and a
Director of the Company since December 1995 and has been Controller of Touche
since June, 1992. Mr. Robert Loera has a B.S. in Business Administration from
the University of Washington.
NOMINEES FOR ELECTION FOR A THREE-YEAR TERM EXPIRING AT THE 2000 ANNUAL MEETING
THOMAS F. CHAFFIN. Mr. Chaffin has been a Director of the Company and a
member of the Audit Committee of the Board of Directors since January 1997.
Mr. Chaffin has been a partner in the law firm of Rosenblum, Parish & Isaacs,
San Jose, CA since January 1995. During the period 1988-1995, Mr. Chaffin was
a law partner in the law firm of Berliner, Cohen, San Jose, CA. He holds a
Bachelor's Degree in accounting from the University of California, Santa
Barbara and earned a J.D. with honors from the University of San Francisco
School of Law. He also holds an LL.M. in Taxation from the New York University
School of Law and
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<PAGE>
is a Certified Specialist in Taxation Law by the State Bar of California Board
of Legal Specialization.
ROLANDO LOERA. Mr. Rolando Loera has been Chairman, President, Chief
Executive Officer and a Director of the Company since December 1995 and has
held similar positions with Touche since September 1992. Prior to that he was
Chief Financial Officer of a predecessor of Touche for eight years. Mr. Loera
holds a bachelor of arts degree in Business Administration from the University
of Washington.
The Board of Directors held one meeting during the fiscal year ended
December 31, 1996 and acted by unanimous written consent four times during
such fiscal year.
The members of the Audit Committee are Messrs. Chaffin and Polimeni. The
Committee is responsible for considering management's recommendation of
independent certified public accountants for each fiscal year, recommending
the appointment or discharge of independent accountants to the Board of
Directors and confirming the independence of the accountants. It is also
responsible for reviewing and approving the scope of the planned audit, the
results of the audit and the accountants' compensation for performing such
audit; reviewing the Company's audited financial statements; and reviewing and
approving the Company's internal accounting controls and discussing such
controls with the independent accountants.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth remuneration paid by Touche and TEI during
fiscal years 1993, 1994 and 1995, to the named officers and directors of the
Company. For the periods shown, no other executive officer received
remuneration in excess of $100,000 per annum.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
------------------------------------------------------------------
Annual Securities Underlying Other
Name of Individual Position with Company Year Compensation Options/SARs(#) Compensation(1)
- -------------------------- --------------------- ---- ------------ ---------------- ---------------
Salary Bonus
------ -----
<S> <C> <C> <C> <C> <C> <C>
Rolando Loera Chairman, President 1996 $225,000 -0- -0- $14,900
and Chief Executive 1995 $225,000 -0- 100,000 $10,200
Officer; Director 1994 $150,648 -0- -0- -0-
</TABLE>
- ----------------------
(1) Includes payments for Company car and employer 401(k) contributions.
OPTION/SAR GRANTS
There were no grants during 1996 of stock options or stock appreciation
rights to any person named in the Summary Compensation Table.
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<PAGE>
AGGREGATED OPTIONS/SAR'S EXERCISED IN LAST
FISCAL YEAR AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Shares Options/SARs at Options/SARs at
Acquired on Value FY-End (#) FY-End ($)
Name Exercise (#) Realized($) Exercisable/Unexercisable Exercisable/Unexercisable
---- ------------ ----------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Rolando Loera -0- -0- 0/100,000 0/593,000.00(1)
</TABLE>
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(1) The value of the unexercised in-the-money option was determined using the
average of the bid and the asked price of the Company's Common Stock as of
December 31, 1996.
EMPLOYMENT AGREEMENT
The Company has entered into an employment agreement ("Agreement") dated
as of December 28, 1995 with Rolando Loera. The term of employment commenced
on March 5, 1996 and will expire on the fifth anniversary thereof. The annual
salary under the Agreement is $225,000. The term of employment will be
automatically extended for an additional five year term in the absence of
notice from either party. This salary may be increased to reflect annual cost
of living increases and may be supplemented by discretionary and performance
increases as may be determined by the Board of Directors except that during
the first three years following the Effective Date, his salary may not exceed
$225,000. Mr. Loera is also eligible to receive an annual bonus of up to
$100,000, payable in four quarterly installments. The Agreement provides that
during the initial three years of the term of employment, an annual bonus of
$100,000 will be awarded to Mr. Loera and that such bonus awards will be used
by Mr. Loera to repay the $473,952 loan by TEI to Touche Properties, Inc. See
"Related Party Transactions." The 1996 bonus was waived by Mr. Loera and no
payments were made to Touche Properties, Inc. during 1996. Bonuses during the
remainder of the term of employment will be at the discretion of the Board of
Directors. No objective criteria have been established for determining the
amount of any bonuses for subsequent years.
The Agreement provides, among other things, for participation in an
equitable manner in any profit-sharing or retirement plan for employees or
executives and for participation in other employee benefits applicable to
employees and executives of the Company. The Agreement further provides for
the use of an automobile and other fringe benefits commensurate with his
duties and responsibilities. The Agreement also provides for benefits in the
event of disability. Under the Agreement, the Company is also obligated to
procure and pay the premiums for a $1 million term life policy and, in the
event of Mr. Loera's death, to use the death benefit under such policy to
purchase from Mr. Loera's estate shares of the Company's Common Stock at its
fair market value.
Pursuant to the Agreement, employment may be terminated by the Company
with cause or by the executive with or without good reason. Termination by the
Company without cause, or by the executive for good reason, would subject the
Company to liability for liquidated damages in an amount equal to the
terminated executive's current salary ($225,000) and a pro rata portion of his
prior year's bonus (up to $100,000) annually, for the remaining term of the
Agreement, payable in equal monthly installments, without any set-off for
compensation received from any new employment. In addition, the terminated
executive would be entitled to continue to participate in and accrue benefits
under all employee benefit plans and to receive supplemental retirement
benefits to replace benefits under any qualified plan for the remaining term
of the Agreement to the extent permitted by law.
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<PAGE>
1995 STOCK OPTION PLAN
The Company has adopted a stock option plan, effective December 22, 1995.
Under such plan, key employees and officers and consultants of the Company may
be granted options to purchase shares of the Company's Common Stock at their
fair market value on the date of grant. The plan provides for an aggregate of
500,000 options. Options to purchase 100,000 shares at $3.75 per share were
granted to Rolando Loera effective December 22, 1995. These options vest two
years from the date of grant and will expire December 2005. The plan also
permits Stock Appreciation Rights to be granted in tandem with options.
Finally, the plan permits awards of Restricted Stock.
Any future awards will be determined by the Board of Directors or a
Committee established by the Board.
VOTING SECURITIES AND SECURITIES OWNERSHIP
VOTING SECURITIES
The Board of Directors has fixed the close of business on November 10,
1997 as the record date for the determination of stockholders entitled to
notice of, and to vote at, the Meeting and any adjournments thereof. Only
stockholders on the Record Date will be able to vote at the Meeting. The list
of stockholders entitled to vote at the Meeting will be available for the
examination of any stockholder for any purpose germane to the Meeting at the
offices of TMCI Electronics, Inc., 1875 Dobbin Drive, San Jose, California for
ten days prior to the date of the Meeting.
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following table sets forth certain information, as of November 10,
1997, known to the Company regarding beneficial ownership of the Company's
Common Stock by (i) any person who is known by the Company to own beneficially
more than five percent of the outstanding shares of the Company's Common
Stock; (ii) the Company's directors; and (iii) all executive officers and
directors as a group. The following calculations were based upon 3,596,332
shares of the Company's Common Stock being issued and outstanding as of the
Record Date.
<TABLE>
<CAPTION>
Position Number Percentage
Name and Address(1) With Company of Shares of Shares(2)
- ------------------- ------------ --------- ------------
<S> <C> <C> <C>
Rolando Loera Chairman, President and Chief 767,600(3) 20.77%
Executive Officer; Director
Charles E. Shaw Vice-President, Chief Financial -0- --
Officer; Director
Robert Loera Controller and Secretary; -0- --
Director
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<PAGE>
Thomas F. Chaffin Director -0- --
Rosenblum, Parish &
Isaacs
160 W. Santa Clara St.
15th Floor
San Jose, CA 95113
Robert C. Fink Director -0- --
Boris Lipkin Director -0- --
Dominic A. Polimeni Director -0- --
c/o Gulfstream Financial
Group, Inc.
6400 Congress Avenue
Suite 200A
Boca Raton, FL 33487
Rolando Loera Trustee for Touche Employee 27,280(4) *
Stock Ownership Plan
All Officers and Directors 1,018,920 27.57%
as a Group (9 persons)(5)
</TABLE>
- -----------------
* Less than 1%
(1) Unless otherwise noted, c/o TMCI Electronics, Inc., 1875 Dobbin Drive,
San Jose, CA 95133.
(2) Includes options to purchase 100,000 shares of Common Stock granted to
Rolando Loera which vest on December 21, 1997.
(3) Includes options to purchase 100,000 shares which vest on December 21,
1997.
(4) Mr. Loera shares investment power with respect to these shares.
(5) Includes 224,040 shares owned by certain executive officers of the
Company.
RELATED PARTY TRANSACTIONS
The Company was incorporated in the State of Delaware on December 7,
1995, under the name TMCI Electronics, Inc. A predecessor of the Company was
organized under the laws of the State of California ("TMCI California") on
September 26, 1995 and was merged into the Company on December 28, 1995.
Mr. Loera was originally issued 600,000 shares of TMCI California's
common stock for $1,000. Upon the merger of TMCI California into the Company,
Mr. Loera was issued 600,000 shares of the Company's Common Stock in exchange
for his shares of TMCI California.
On March 16, 1994, $50,000 and on April 1, 1994, $25,000 was advanced to
Touche by Frank Ramirez III and Livino Ribaya, Jr., employees of Touche and
TEI, in exchange for convertible promissory notes bearing interest at 7.382%
and 6.75% per annum and payable in monthly installments of $920 and $979,
respectively, through 2009. Identical loans were made to TEI on the same dates
by the same employees. In June 1995, $25,000 was advanced to each of Touche
and TEI by Jose Antonio Agredano in exchange for a convertible promissory note
bearing interest at 10% per annum and payable in monthly installments of $950.
All of these notes were converted into shares of Touche and TEI immediately
prior to the Effective Date of the Stock Purchase Agreements described below.
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<PAGE>
On December 30, 1996, the Company made loans in the principal amounts of
$95,986, $34,479, and $32,761, respectively, to Frank Ramirez III, Jose A.
Agredano and Livino Ribaya, Jr. Such loans shall be repaid over ten years
bearing interest at 10% per annum.
The Company entered into Stock Purchase Agreements dated as of December
28, 1995 (the "Stock Purchase Agreements") with Rolando Loera, Chairman,
President and Chief Executive Officer of the Company, and Rolando Loera as
Trustee for the Touche Employee Stock Ownership Plan pursuant to which the
Company has acquired all of the issued and outstanding stock of Touche and TEI
in exchange for the issuance of 893,600 shares of the Company's Common Stock.
Immediately prior to the close as of the public offering on March 11, 1996,
Messrs. Jose Antonio Agredano, Frank Ramirez III and Livino Ribaya, Jr.
exercised their right to acquire shares of Touche and TEI which they converted
into 74,680, 149,360 and 74,680 shares of the Company, respectively. The
remaining 594,880 shares were issued to Rolando Loera and to the Touche
Employee Stock Ownership Plan.
TEI leases approximately 78,000 square feet of space located at 1881-1899
Dobbin Drive, San Jose, California from Touche Properties, Inc. ("TPI"), a
company wholly owned by Rolando Loera, Chairman, President and Chief Executive
Officer of the Company, pursuant to a lease agreement dated November 1, 1993.
In addition, TEI leases space to subtenants. Touche is one subtenant. The
other two subtenants are unaffiliated with the Company. Rent expense amounted
to approximately $576,144 in 1996. Such amounts represent payments by TEI and
Touche to TPI, exclusive of any subtenant payments.
In connection with its acquisition of 1881-1899 Dobbin Drive (the
"Property"), TPI borrowed $1,000,000 from the Small Business Administration.
This loan bears interest at 6.359% per annum, matures on January 1, 1994 and
is secured by a first mortgage on the Property. Touche and TEI, inter alia,
have guaranteed the satisfaction of TPI's obligations under this loan.
TPI also borrowed $303,325 from TEI in December, 1993. This loan bears
interest at 10% per annum, and principal and interest are payable in equal
monthly installments until satisfied. The principal balance on the loan
increased as a result of certain expenses of TPI advanced by Touche. The
outstanding balance of the loan as of December 31, 1996 was $473,952.
In addition, in 1993 Touche made loans to Rolando Loera aggregating
$87,190.39. This loan bears interest at 10% per annum and is payable in
monthly installments of $1,000. Certain additions were made to the principal
amount of the loan in fiscal 1996 to account for payments of certain personal
expenses of Rolando Loera by Touche. Accordingly, the outstanding principal
balance on the loan was $238,166 at December 31, 1996.
In 1995, Touche owed Textron Financial approximately $401,700 which
Antonio Zertuche, Touche's landlord, agreed to repay in exchange for Touche's
promissory note to make monthly installments of approximately $6,322,
including interest at 11.5% per annum, maturing December 1996. In January
1996, the Company refinanced the note, and issued a new note for approximately
$291,000 which is the difference between the Company's original note payable
of approximately $401,700 and its cancellation of an outstanding note
receivable from the landlord of approximately $99,000, plus approximately
$11,600 in the overpayment of property taxes on leased property located at
1875 Dobbin Drive, San Jose, California. The new note payable was satisfied in
March 1996, from the proceeds of the initial public offering (IPO).
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COMPLIANCE WITH SECTION 16 OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than 10% of a
registered class of the Company's equity securities, to file reports of
ownership of equity securities of the Company with the Securities and Exchange
Commission. Officers, directors and greater-than-ten-percent shareholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms that they file.
Based solely on a review of the copies of Forms 3, 4 and 5 and amendments
thereto furnished to the Company, or written representations from certain
reporting persons that such persons have filed on a timely basis all reports
required by Section 16(a), and without researching or making any inquiry
regarding delinquent Section 16(a) filings, the Company believes that, during
the fiscal year ended December 31, 1996, an initial Statement of Beneficial
Ownership on Form 3 was filed on a non-timely basis by Mr. Polimeni and Mr.
Chaffin and that a Change of Beneficial Ownership on Form 4 was filed on a
non-timely basis by Mr. Rolando Loera.
REQUIRED VOTE OF SHAREHOLDERS
Election of the above nominees as Directors of the Company requires a
plurality of the votes represented at the meeting in person or by proxy. In
case any of the nominees should become unavailable for election for any reason
not presently known or contemplated, the persons named on the proxy shall have
discretionary authority to vote pursuant to the proxy for a substitute.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ABOVE-NAMED NOMINEES.
PROPOSAL NO. 3
APPROVAL OF AMENDMENT TO THE CERTIFICATE OF INCORPORATION
TO INCREASE THE AUTHORIZED CAPITAL STOCK.
The Company's Certificate of Incorporation currently authorizes the
issuance of twenty-five million (25,000,000) shares of common stock, par value
$.001 per share ("Common Stock"). The Board of Directors has adopted, subject
to stockholder approval, an amendment to the Company's Certificate of
Incorporation to increase the number of authorized shares of capital stock of
the Company to a total of thirty-five million (35,000,000) shares, consisting
of twenty-five million (25,000,000) shares of Common Stock and ten million
(10,000,000) shares of preferred stock, par value $.001 per share ("Preferred
Stock").
The Board of Directors believes that it is in the Company's best
interests to have such shares of Preferred Stock available for issuance to
meet the Company's future business needs as they arise. The Company's
management has no present arrangements, agreements, understandings or plans
with respect to the Preferred Stock proposed to be issued.
The Board believes that the availability of such additional shares will
provide the Company with the flexibility to issue shares of Preferred Stock in
addition to the Company's ability to issue previously authorized shares of its
Common Stock, for a variety of other corporate purposes as the Board of
Directors may deem advisable without further action by the Company's
stockholders, except as may be required by law, regulation or stock exchange
rule. These purposes could include, among other things, the sale of stock to
obtain additional capital funds, the purchase of property, the acquisition or
merger into the Company of other companies, the
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use of shares for various equity compensation and other employee benefit
plans, and other bona fide corporate purposes.
The additional shares of Preferred Stock that would become available for
issuance if the proposal were adopted could also be used by the Company to
oppose a hostile takeover attempt or delay or prevent changes in control of
management of the Company. Although management is not currently aware of any
effort by any person to gain control of the Company, in the event of such an
effort, such shares could be used, under certain circumstances, to create
voting impediments to deter persons seeking to effect a takeover or otherwise
gain control of the Company. Such shares could be sold in public or private
transactions to purchasers who might side with the Board of Directors in
opposing a takeover bid which the Board of Directors determines not to be in
the best interests of the Company and its stockholders. The authorized shares
might have the effect of discouraging an attempt by another person, through
the acquisition of a substantial number of shares of the Company's stock, to
acquire control of the Company with a view to imposing a merger, sale of all
or any part of the Company's assets or similar transaction, since the issuance
of new shares could be used to dilute the stock ownership of such person or
entity.
In addition, any such issuance of shares may cause current stockholders
of the Company to suffer significant dilution and may adversely affect the
market for the Company's securities.
Adoption of the proposed amendment and issuance of the Proposed Stock
would not affect the rights of the holders of currently outstanding Common
Stock of the Company, except for effects incidental to increasing the number
of shares of the Company's Common Stock outstanding, such as dilution of the
earnings per share and voting rights of current holders of Common Stock. If
the proposal is adopted, it will become effective upon filing of a Certificate
of Amendment to the Company's Certificate of Incorporation. The text of the
proposed amendment is set forth in Appendix B hereto.
REQUIRED VOTE OF STOCKHOLDERS
The affirmative vote of a majority of the shares outstanding is required
for approval of this amendment to the Certificate of Incorporation.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE FOREGOING PROPOSAL.
PROPOSAL NO. 4
APPROVAL OF 1997 STOCK OPTION PLAN
SUMMARY OF THE 1997 STOCK OPTION PLAN
The Board of Directors submits to the stockholders for their approval a
1997 Stock Option Plan (the "Plan"), which is summarized below. The summary is
qualified in its entirety by reference to the text of the Plan which is
attached hereto as Appendix C. The purpose of such Plan is to enhance the
interest and concern of the Company's employees, officers, directors and
consultants in the success of the Company by giving them an ownership interest
in the Company and to give them an incentive to continue their service to the
Company.
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Administration
The Plan shall be administered by a Stock Option Committee (the
"Committee"), which shall consist of not less than two directors of the
Company, or, at the election of the Board or if the Board consists of fewer
than two directors, may consist of the entire Board.
The Committee shall have the authority to determine the individuals to
whom, and the time at which, options are granted and the number and purchase
price of the shares subject to each option. The Committee shall also have the
authority to adopt, alter and repeal administrative rules, guidelines and
practices governing the Plan as it, from time to time, deems advisable to
supervise the administration of the Plan. However, no amendment to the Plan
shall be made without the approval of the Company's stockholders to the extent
such approval is required by law or agreement, except that the Board of
Directors of the Company shall have the authority to amend the Plan to take
into account changes in law and tax and accounting rules, as well as other
developments and to grant options which qualify for beneficial treatment under
such rules without shareholder approval. The Plan shall terminate on
_________, 2007, or upon earlier termination by the Board.
Eligibility
Officers, employees, directors and consultants of the Company and its
subsidiaries who are responsible for or contribute to the management growth
and profitability of management, the business of the Company and its
subsidiaries are eligible to be granted options under the Plan. The Company
estimates the approximate number of officers, employees, directors and
consultants eligible to participate in the Plan to be 5, 460, 7 and 5,
respectively. The benefits or amounts that will be received by or allocated to
the Company's chief executive officer, the Company's next four most highly
compensated officers who were serving as executive officers at the end of the
last completed fiscal year, and other Plan beneficiaries cannot be determined.
The Company will not incur any expense and has no obligation to issue options
with respect to past services or current services.
Types of Options
The Committee will have the plenary authority to grant options to
officers, employees, directors and consultants of the Company or its
subsidiaries. Options granted to participants of the Plan include incentive
stock options and non-statutory stock options, as defined and regulated under
the Plan. Employees may be granted either incentive or non-statutory options.
Consultant and outside directors of the Company may be granted non-statutory
options only. The options are subject to such terms and conditions as
determined by the Committee and which may differ from grant to grant. The
prices, expiration dates and other material conditions upon which the options
may be exercised and the consideration received or to be received by the
Company or its subsidiaries for the granting or extension of the options are
to be determined by the Committee and are indeterminable as of the date of
this Proxy Statement.
Number of Shares
The total number of shares of Stock reserved and available for
distribution as options under the Plan will be 1,000,000 shares of the
Company's Common Stock. As of November 10, 1997 no options have been granted
under the Plan. The Company intends to register the options and the shares
underlying the options with the Securities and Exchange Commission.
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Change of Control
The Plan provides that, in the event of a merger or consolidation (in
which the Company is not the surviving corporation), a dissolution or
liquidation of the Company, the sale of substantially all of the Company's
assets, or any other change in control of the Company, any or all outstanding
options may be assumed or replaced by the successor corporation, or the
successor corporation may substitute an equivalent option. In the event such
successor corporation refuses to assume or substitute options, such options
shall expire.
Summary of Certain Federal Income Tax Consequences of the 1997 Stock Option
Plan
The following summary is intended only as a general guide as to the
federal income tax consequences under current law for options granted pursuant
to the Plan and does not attempt to describe all potential tax consequences.
Furthermore, the tax consequences are complex and subject to change, and a
taxpayer's particular situation may be such that some variation of the
described rules is applicable. For example, different rules apply to holders
of 10% or more of the Company's stock, or if shares acquired on the exercise
of the option are subject to repurchase rights in favor of the Company.
Incentive Stock Options. Options designated as incentive stock options
are intended to satisfy the requirements of the provisions of Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code"). An optionee
recognizes no taxable income as a result of the grant or exercise of such an
option.
For optionees who do not dispose of their shares within two years
following the date that the option was granted and within one year following
the transfer of the shares acquired upon exercise of the option, the gain on
sale of the shares (which is the difference between the sale price and the
purchase price of the shares) will be taxed as capital gain. If an optionee
disposes of shares within two years from the date of the option grant or
within one year of the date of exercise (a "disqualifying disposition"), the
difference between the lower of (i) the option exercise price and the fair
market value of the shares on the date of exercise, or (ii) the option
exercise price and the sale price will be taxed as ordinary income at the time
of the sale. Any additional gain and any loss upon the disqualifying
disposition will constitute a capital gain or loss. A capital gain or loss
will be long-term if the optionee's holding period of the stock is more than
twelve months. In the event that any optionee exercises the option and sells
the underlying stock on the same day, the difference between the option
exercise price and the sale price will be taxed as ordinary income. Any
ordinary income recognized by the optionee upon a disqualifying disposition of
stock should be deductive by the Company for federal income tax purposes.
Any excess of the fair market value of the shares acquired on the
exercise of an incentive stock option over the option exercise price is an
adjustment in computing the optionee's alternative minimum taxable income and
may be subject to an alternative minimum tax which is paid if such tax exceeds
the regular tax for the year. Such excess is measured on the determination
date (which is generally the date of exercise). Special rules may apply with
respect to certain subsequent sales of the shares in a disqualifying
disposition, certain basis adjustments for purposes of computing the
alternative minimum taxable income on a subsequent sale of the shares and
certain tax credits which may arise with respect to optionees subject to the
alternative minimum tax.
Nonqualified Stock Options. Nonqualified stock options have no special
tax status. An optionee generally recognizes no taxable income as the result
of the grant of such an option. However, if the option is granted with certain
restrictions, such as vesting, the optionee may
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<PAGE>
elect to be taxed on the value of the option on the date of grant (generally
nothing) instead of on the date of exercise (generally the difference between
the fair market value of the stock and the option exercise price). Upon
exercise of a nonqualified stock option, the optionee normally recognizes
ordinary income on the excess of the fair market value on the date of exercise
over the option exercise price (assuming that the optionee did not make the
election). If the optionee is an employee, such ordinary income generally is
subject to withholding of income and employment taxes. Upon the sale of stock
acquired by the exercise of a nonqualified stock option, any gain or loss,
based on the difference between the sale price and the fair market value on
the date of recognition of income, will be taxed as a capital gain or loss. A
capital gain or loss will be long-term if the optionee's holding period is
more than twelve months. In the event that the option is exercised an
underlying common stock sold on the same day, the optionee recognizes ordinary
income on the difference between the option exercise price and the sale price.
No tax deduction is available to the Company with respect to the grant of the
option or the sale of stock acquired upon exercise of the option. The Company
should be entitled to a deduction equal to the amount of ordinary income
recognized by the optionee as a result of the exercise of the nonqualified
stock option.
REQUIRED VOTE OF SHAREHOLDERS
The affirmative vote of the majority of the shares of outstanding Common
Stock of the Company represented at the Meeting in person or by proxy is
required for approval of the foregoing proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE 1997 STOCK OPTION
PLAN.
PROPOSAL NO. 6
APPROVAL OF 1997 EMPLOYEE STOCK PURCHASE PLAN
SUMMARY OF THE 1997 EMPLOYEE STOCK PURCHASE PLAN
The Board of Directors submits to the stockholders for their approval the
TMCI Electronics, Inc. 1997 Employee Stock Purchase Plan (the "ESP Plan"),
which is summarized below. The summary is qualified in its entirety by
reference to the text of the ESP Plan which is attached hereto as Appendix D.
If approved by shareholders, the ESP Plan will provide eligible employees with
an opportunity to purchase common stock of the Company through accumulated
payroll deductions. The ESP Plan is intended to enable eligible employees to
acquire a proprietary interest in the Company through ownership of the
Company's common stock.
Eligible Participants
Any individual who is employed for at least 20 hours per week and more
than 5 months in any calendar year by the Company or a subsidiary is eligible
to participate in the ESP Plan.
Approximately 460 employees would have been eligible to participate in
the ESP Plan as of November 10, 1997.
Number of Shares
The maximum number of shares of common stock which may be purchased under
the ESP Plan shall be 250,000 shares, subject to adjustment in the event of
stock dividends, stock splits, combination of shares, recapitalizations, or
other combinations or reclassifications of the
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outstanding Common Stock. Any such adjustment will be made by the Board of
Directors. The Company plans to register the shares with the Securities and
Exchange Commission.
Material Features of the ESP Plan
The ESP Plan shall be implemented in six month offering periods each year
the Plan is in effect. On the first day of each offering period (the
"Enrollment Date"), each eligible employee shall be granted an option to
purchase shares on the last day of such offering period (the "Exercise Date").
The purchase price of the shares shall be an amount equal to 85% of the fair
market value of one share of common stock on the Enrollment Date or the
Exercise Date, whichever is lower. The purchase price shall be accumulated by
payroll deductions during the offering period in an amount not to exceed 15%
of the participant's compensation. Compensation for purposes of the ESP Plan
includes all base straight time gross earnings, commissions, overtime, shift
premium, incentive compensation, incentive payments, bonuses and other
compensation. All payroll deductions shall be credited to the participant's
account under the Plan. The employee's option for the purchase of shares shall
be exercised automatically on the Exercise Date and the maximum number of full
shares subject to the option shall be purchased for such participant with the
accumulated payroll deductions in the participant's account. A participant may
terminate his or her interest in a given offering by withdrawing all, but not
less than all, of the accumulated payroll deductions credited to such
participant's account at any time prior to the Exercise Date by giving written
notice to the Company.
No employee is permitted to purchase shares under the ESP Plan if,
immediately after the grant, such employee would own capital stock of the
Company and/or hold outstanding options to purchase stock representing 5% or
more of the total combined voting power or value of all classes of the capital
stock of the Company or of any subsidiary, nor is any employee entitled to
purchase more than $25,000 worth of stock (based upon the fair market value of
the shares at the time such option is granted) in any calendar year in which
such option is outstanding at any time.
All payroll deductions received or held by the Company under the ESP Plan
may be used by the Company for any corporate purpose, and the Company shall
not be obligated to segregate such payroll deductions.
Summary of Certain Federal Income Tax Consequences of the 1997 Employee Stock
Purchase Plan
The following summary is intended only as a general guide as to the
federal income tax consequences under current law for options granted pursuant
to the 1997 Employee Stock Purchase Plan and does not attempt to describe all
potential tax consequences. Furthermore, the tax consequences are complex and
subject to change, and a taxpayer's particular situation may be such that some
variation of the described rules is applicable.
A participant recognizes no taxable income either as a result of
commencing to participate in the Employee Stock Purchase Plan or purchasing
the Company's Common Stock under the terms thereof.
If a participant disposes of shares purchased under the plan within two
years from the first day of the applicable offering period or within one year
from the date of purchase (which is the first day of a purchase period) (a
"disqualifying disposition"), the participant will recognize ordinary income
in the year of such disposition equal to the amount by which the fair market
value of the shares on the date of the shares were purchased exceeds the
purchase price. The amount of ordinary income will be added to the
participant's basis in the shares and any
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<PAGE>
additional gain or resulting loss recognized on the disposition of the shares
will be a capital gain or loss. A capital gain or loss will be long term if
the participant's holding period is more than twelve months, otherwise it will
be short term.
If the participant disposes of shares purchased under the Employee Stock
Purchase Plan at least two years after the first day of the applicable
offering period and at least one year after the date of the purchase, the
participant will recognize ordinary income in the year of the disposition
equal to the lesser of (i) the excess of the fair market value of the shares
on the date of disposition over the purchase price or (ii) 15% of the fair
market value of the shares on the first day of the applicable offering period.
The amount of any ordinary income will be added to the participant's basis in
the shares, and any additional gain recognized upon the disposition after such
basis adjustments will be long term capital gain. If the fair market value of
the shares of the date of disposition is less than the purchase price, there
will be no ordinary income and any loss recognized will be a long term capital
loss.
The Company will be entitled to a deduction in the year of the
disqualifying disposition equal to the amount of ordinary income recognized by
the participant as a result of the disposition. In all other cases, no
deduction is allowed to the Company.
REQUIRED VOTE OF SHAREHOLDERS
The affirmative vote of the majority of the shares of outstanding Common
Stock of the Company represented at the Meeting in person or by proxy is
required for approval of the foregoing proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE 1997 EMPLOYEE STOCK
PURCHASE PLAN.
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INDEPENDENT PUBLIC ACCOUNTANTS
Due to the recent acquisitions by the Company and the Company's
corresponding expansion of its operations, the Board of Directors believes
that it is in the best interest of the Company to undertake an evaluation of
its future needs with respect to services to be provided by independent public
accountants. Accordingly, no independent public accountants for the fiscal
year ended December 31, 1997 have been selected at this time. The independent
public accountants for the fiscal year ended December 31, 1996 was Moore
Stephens, P.C.
OTHER BUSINESS
It is not expected that any business other than that set forth in the
Notice of Annual Meeting of Stockholders and more specifically described in
this Proxy Statement will be brought before the meeting. However, if any other
business should properly come before the meeting, it is the intention of the
persons named on the enclosed proxy card to vote the signed proxies received
by them in accordance with their best judgment on such business and any
matters dealing with the conduct of the meeting.
1998 STOCKHOLDER PROPOSALS
To be eligible for inclusion in the Company's Proxy Statement for the
1998 Annual Meeting of Stockholders, to be held on or about December 11, 1998,
stockholder proposals must be received by the Company at its principal
executive office, TMCI Electronics, Inc., 1875 Dobbin Drive, San Jose,
California 95133 on or before August 13, 1998.
ANNUAL REPORT
The Securities and Exchange Commission rules require that an annual
report precede or accompany proxy material. Copies of the Company's Annual
Report on Form 10-KSB for the fiscal year ended December 31, 1996 accompany
this proxy statement. More than one annual report need not be sent to the same
address, if the recipient agrees. If more than one annual report is being sent
to your address, mailing of the duplicate copy to the account you select will
be discontinued upon your request.
By Order of the Board of Directors,
Robert Loera
Secretary
Date: December 1, 1997
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE FILL IN, SIGN, AND
DATE THE PROXY SUBMITTED HEREWITH AND RETURN IT IN THE ENCLOSED STAMPED
ENVELOPE. THE GIVING OF SUCH PROXY WILL NOT AFFECT YOUR RIGHT TO REVOKE SUCH
PROXY IN PERSON SHOULD YOU LATER DECIDE TO ATTEND THE MEETING. THE ENCLOSED
PROXY IS BEING SOLICITED BY THE BOARD OF DIRECTORS.
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APPENDIX A
PROPOSAL NO. 1
The By-Laws of the Company are proposed to be amended by deleting Section 3.02
of Article III in its entirety and substituting the following in lieu
therefor:
NUMBER, DESIGNATION AND ELECTION OF DIRECTORS
(a) Number. The number of directors which shall constitute the whole
Board shall not be less than one nor more than nine and be such as
shall be determined from time to time by the Board of Directors.
Unless and until changed by the Board of Directors, the number of
directors shall be seven. Directors need not be stockholders. Any
director may resign at any time by giving written notice to the
Corporation; such resignation shall be effective immediately upon
receipt by the Corporation if no time is specified therein or at such
later time as such director may specify.
(b) Election.
1. The directors shall be elected at the annual meeting of
stockholders, except as provided in Section 3.03, and each
director shall be elected to serve until such director's
successor has been elected. Election of directors need not
be by written ballot. At each meeting of the stockholders
for election of a director or directors, the person or
persons receiving the greater number of votes up to the
number of directors then to be elected, cast by the
stockholders present in person or by proxy at the meeting
shall be elected.
2. The Board of Directors shall be divided into three classes:
Class I, Class II, and Class III (individually a "Class" and
collectively, the "Classes"). Such Classes shall be as nearly
equal in number of directors as possible. Each director
shall serve for a term ending at the third annual
stockholder's meeting following the annual meeting at which
such director was elected; provided, however, that the
directors first appointed to Class I shall serve for a term
ending at the annual meeting for 1998, the directors first
appointed to Class II shall serve for a term ending at the
annual meeting to be held in 1999 and the directors first
appointed to Class III shall serve for a term ending at the
annual meeting to be held in 2000. Notwithstanding the
foregoing, each director shall serve until such director's
successor is elected and qualified or until the earlier of
such director's death, resignation or removal.
3. At each annual election, the directors chosen to succeed
those whose terms then expire shall be identified as being
the same Class as the directors they succeed, unless, by
reason of any intervening changes in the authorized number
of directors, the Board of Directors shall designate one or
more directorships whose term then expires as directorships
of another Class in order to more nearly achieve equality in
the number of directors among the Classes. When the
directors fill a vacancy resulting from the death,
resignation or removal of a director in accordance with
paragraph 3.03 below, the director chosen to fill such
vacancy shall be of the same Class as the director being
succeeded.
<PAGE>
(c) Designation of Classes. The members of the current Board of Directors
are hereby assigned to the Classes opposite their names:
Director Class
-------- -----
Dominic Polimeni I
Charles Shaw I
Robert Loera II
Thomas Chaffin III
Rolando Loera III
A-2
<PAGE>
APPENDIX B
PROPOSAL NO. 3
The Certificate of Incorporation of the Company is proposed to be amended by
deleting clause 1) of ARTICLE FOURTH in its entirety and substituting the
following in lieu therefor:
"1) The total number of shares of all classes of
capital stock which this corporation is authorized to issue
is thirty-five million (35,000,000) shares, of which
twenty-five million (25,000,000) shares shall be Common
Stock, par value $.001 per share ("Common Stock"), and ten
million (10,000,000) shares shall be preferred stock, par
value $.001 per share ("Preferred Stock"). The Preferred
Stock may be issued with full, multiple or fractional voting
rights with such designations, preferences, qualifications,
privileges, limitations, options, conversion rights and
other special relative rights that shall be fixed from time
to time by resolution of the Board of Directors."
<PAGE>
APPENDIX C
TMCI ELECTRONICS, INC
1997 STOCK OPTION PLAN
1. Purposes.
TMCI Electronics, Inc. a Delaware corporation (hereinafter
called the "Company") has adopted this Plan to enhance the interest and
concern of the Company's employees, officers, directors and consultants in the
success of the Company by giving them an ownership interest in the Company,
and to give them an incentive to continue their service to the Company.
2. Stock Subject to Plan.
The Company shall reserve One Million (1,000,000) shares of
its $0.001 par value Common Stock (hereinafter called the "Shares") to be
issued upon exercise of the options which
may be granted from time to time under this Plan. As it may from time to time
determine, the board of directors of the Company (hereinafter called the
"Board") may authorize that the Shares may be comprised, in whole or in part,
of authorized but unissued shares of the Common Stock of the Company or of
issued shares which have been reacquired. If options granted under this Plan
terminate or expire before being exercised in whole or in part, the Shares
subject to those options which have not been issued may be subjected to
subsequent options granted under the plan.
3. Administration of the Plan
The Board shall appoint a Stock Option Committee
(hereinafter called the "Committee") which shall consist of not fewer than two
(2) members of the Board, or, at the election of the Board or if the Board
consists of fewer than two directors, may consist of the entire Board, to
administer this Plan. Subject to the express provisions of this Plan and
guidelines which may be adopted from time to time by the Board, the Committee
shall have plenary authority in its discretion (a) to determine the individuals
to whom, and the time at which, options are granted, and the number
<PAGE>
and purchase price of the Shares subject to each option; (b) to determine
whether the options granted shall be "incentive stock options" within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended
(hereinafter called the "Code"), or non-statutory stock options, or both; (c)
to interpret the Plan and prescribe, amend and rescind rules and regulations
relating to it; (d) to determine the terms and provisions (and amendments
thereof) of the respective option agreements subject to Section 6 of the Plan,
which need not be identical, including, if the Committee shall determine that
a particular option is to be an incentive stock option, such terms and
provisions (and amendments thereof) as the Committee deems necessary to
provide for an incentive stock option or to conform to any change in any law,
regulation, ruling or interpretation applicable to incentive stock options;
and (e) to make any and all determinations which the Committee deems necessary
or advisable in administering the Plan. The Committee's determination on the
foregoing matters shall be conclusive. The Committee may delegate any of the
foregoing authority to the President with respect to Options granted to or
which are held by non-officers and non-directors.
4. Persons Eligible.
Employees of the Company or its subsidiaries may be granted
either incentive or non-statutory options. Consultants (including directors)
of the Company and its subsidiaries may be granted only non-statutory options,
except directors who are also employees, who may be granted either incentive
or non-statutory options. For this purpose, "employee" shall conform to the
requirements of Section 422 of the Code, and "subsidiary" means subsidiary
corporations as defined in Section 424 of the Code.
The aggregate fair market value (determined as of the time
the option is granted) of the Shares with respect to which incentive stock
options are exercisable for the first time by an Optionee during any calendar
year (under all incentive stock option plans of the Company or its parent or
subsidiaries) shall not exceed $100,000.
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<PAGE>
5. Changes in Capital Structure.
(a) Effect on the Plan. In the event of changes in the
outstanding capital stock of the Company by reason of any stock dividend,
stock split or reverse split, reclassification, recapitalization, merger or
consolidation, acquisition of 80 percent or more of its gross assets or stock,
reorganization or liquidation, the Committee and/or the Board shall make such
adjustments in the aggregate number and class of shares available under the
Plan as it deems appropriate, and such determination shall be final, binding
and conclusive.
(b) Effect on Outstanding Options.
(i) Stock Splits and Like Events.
Should a stock dividend, stock split, reverse stock
split, or reclassification occur, then the Committee and/or the Board shall
make such adjustments in (i) the number and class of shares to which optionees
will thereafter be entitled upon exercise of their outstanding options and
(ii) the price which optionees shall be required to pay upon such exercise as
it in its sole discretion in good faith deems appropriate, and such
determination shall be final, binding and conclusive. Such adjustment shall
have the result that an optionee exercising an option subsequent to such
occurrence shall have paid the same aggregate exercise price to exercise the
entire option and shall then hold the same class and aggregate number of
shares as if such optionee had exercised the outstanding option immediately
prior to such occurrence.
(ii) Recapitalizations; Assumption of Options.
(a) In the event of (i) a merger or
consolidation in which the Company is not the surviving corporation (other
than a merger or consolidation with a wholly owned subsidiary, a
reincorporation of the Company in a different jurisdiction, or other
transaction in which there is no substantial change in the shareholders of the
Company and the options granted under this
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Plan are assumed by the successor corporation, which assumption shall be
binding on all optionees); (ii) a dissolution or liquidation of the Company;
(iii) the sale of substantially all of the assets of the Company; or (iv) any
other transaction which qualifies as a "corporate transaction" under Section
424(a) of the Code wherein the shareholders of the Company give up all of
their equity interest in the Company (except for the acquisition, sale or
transfer of all or substantially all of the outstanding shares of the
Company), any or all outstanding options may be assumed or replaced by the
successor corporation, which assumption or replacement shall be binding on all
optionees. In the alternative, the successor corporation may substitute an
equivalent option.
(b) In the event such successor
corporation, if any, refuses to assume or substitute options, as provided
above, pursuant to a transaction described in Section 5(b)(ii)(a) above, such
options shall expire upon the effective date of such transaction.
(c) Subject to any greater rights granted
to optionees under the foregoing provisions of this Section 5, in the event of
the occurrence of any transaction described in Section 5(b)(ii)(a), any
outstanding options shall be treated as provided in the applicable agreement
or plan of merger, consolidation, dissolution, liquidation, sale of assets or
other "corporate transaction."
(d) The Company, from time to time, also
may substitute or assume outstanding awards granted by another company,
whether in connection with an acquisition of such other company or otherwise,
by either (i) granting an Option under the Plan in substitution of such other
company's award, or (ii) assuming such award as if it had been granted under
the Plan if the terms of such assumed award could be applied to an option
granted under the Plan. Such substitution or assumption shall be permissible
if the holder of the substituted or assumed option would have been eligible to
be granted an Option under the Plan if the other company had applied the rules
of the Plan to such grant. In the event the Company assumes an award granted
by another company, the terms and conditions of such award shall remain
unchanged (except that the exercise price and the number and nature of shares
issuable upon exercise of any such option will be adjusted
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appropriately pursuant to Section 424(a) of the Code). In the event the
Company elects to grant a new Option rather than assuming an existing option,
such new Option may be granted with a similarly adjusted exercise price.
6. Terms and Conditions of Options.
Each option granted under this Plan shall be evidenced by a
stock option agreement (hereinafter called "Agreement") which is not
inconsistent with this Plan, and the form of which the Committee and/or Board
may from time to time determine, provided that the Agreement shall contain the
substance of the following:
(a) Option Price. The option price shall be not less than
100% of the fair market value of the Shares at the time the option is granted,
which shall be the date the Committee and/or Board, or its delegate, awards
the grant, except in the case of non-statutory stock options, in which case
the option price shall be not less than 85% of the fair market value of the
Shares at the time the option is granted. If the optionee, at the time the
option is granted, owns stock possessing more than ten percent (10%) of the
total combined voting power of all the classes of stock of the Company or of
its parent or subsidiaries (a "Principal Shareholder"), the option price of
incentive and non-statutory stock options shall be not less than 110% of the
fair market value of the Shares at the time the option is granted. The fair
market value of the Shares shall be determined and the option price of the
Shares set by the Committee and/or Board in accordance with the valuation
methods described in Section 20.2031-2 of the Treasury Regulations.
(b) Method of Exercise. At the time of purchase, Shares
purchased under options shall be paid for in full either (i) in cash, (ii) at
the discretion of the Board, with a promissory note secured by the Shares
purchased, or (iii) a combination of promissory note (if permitted pursuant to
(ii) above) and cash. To the extent that the right to purchase Shares has
accrued under an option, the optionee may exercise said option from time to
time by giving written notice to the Company stating the number of Shares with
respect to which the optionee is exercising the option, and submitting
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with said notice payment of the full purchase price of said Shares either in
cash or, at the discretion of the Board and/or Committee as described above,
with a promissory note, or a combination of cash and promissory note. As soon
as practicable after receiving such notice and payment, the Company shall
issue, without transfer or issue tax to the optionee (or other person entitled
to exercise the option), and at the main office of the Company or such other
place as shall be mutually acceptable, a certificate or certificates
representing such Shares out of authorized but unissued Shares or reacquired
Shares of its capital stock, as the Board and/or Committee, or its delegate,
may elect, for the number of Shares to be delivered. The time of such delivery
may be postponed by the Company for such period as may be required for it with
reasonable diligence to comply with such procedures as may, in the opinion of
counsel to the Company, be desirable in view of federal and state laws,
including corporate securities laws and revenue and taxation laws. If the
optionee (or other person entitled to exercise the option) fails to accept
delivery of any or all of the number of Shares specified in such notice upon
tender of delivery of the certificates representing them, the right to
exercise the option with respect to such undelivered Shares may be terminated.
(c) Option Term. The Committee and/or Board may grant
options for any term, but shall not grant any options for a term longer than
ten (10) years from the date the option is granted (except in the case of an
incentive option granted to a Principal Shareholder in which case the term
shall be no longer than five (5) years from the date the option is granted).
Each option shall be subject to earlier termination as provided in this
section 6 of this Plan.
(d) Exercise of Options. Each option granted under this Plan
shall be exercisable on such date or dates, upon or after the occurrence of
certain events, or upon or after the achievement of certain performance
milestones (which dates may be advanced or which occurrences or achievements
may be waived in whole or in part or extended at the discretion of the
Committee and/or Board) and during such period and for such number of Shares
as shall be determined by the Committee and/or Board. An incentive option
granted to a non-officer may not be exercised at any time unless the optionee
shall have continuously served, to the extent determined by the Committee
and/or Board, as an employee of the Company or its subsidiary throughout a
period commencing
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on the date an option is granted and ending at a specified time no more than
three (3) months and no fewer than thirty (30) days before an attempted
exercise of the option, and, if applicable, unless the Committee and/or Board
shall determine and notify the optionee in writing that certain events have
occurred or certain performance milestones have been achieved.
(e) Nonassignability of Option Rights. No option shall be
assignable or transferable by the optionee except by will or by the laws of
descent and distribution. During the life of an optionee, the option shall be
exercisable only by the optionee.
(f) Effect of Termination of Employment or Death or
Disability. In the event the optionee's employment with the Company and its
subsidiaries ceases, as determined by the Committee, during the optionee's
life for any reason (except disability or death), including retirement, any
incentive option or unexercised portion thereof granted to a non-officer
optionee which is otherwise exercisable shall terminate unless exercised
within a specified period not to exceed three (3) months nor to be fewer than
thirty (30) days from the date on which such employment ceased but not later
than the date of expiration of the option period. In the event of the death or
disability (as defined in Code Section 22(e)(3)) of the optionee while
employed or within a specified period not to exceed three (3) months nor to be
fewer than thirty (30) days from the date on which such employment ceases, any
option or unexercised portion thereof granted to the optionee, if otherwise
exercisable by the optionee at the date of death or disability, may be
exercised by the optionee (or by the optionee's personal representatives,
heirs or legatees) at any time prior to the expiration of one year from the
date of death or disability of the optionee but not later than the date of
expiration of the option period.
(g) Rights of Optionee. The optionees shall have no rights
as a stockholder with respect to any Shares subject to an option until the
date of issuance of a stock certificate to the optionee for such Shares. No
adjustment shall be made for dividends or other rights of which the record
date is prior to the date such stock certificate is issued. Neither this Plan,
nor any action or agreement thereunder, shall confer any rights of employment,
any rights to election or retention as
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an officer or director, or any rights to serve as a consultant.
7. Use of Proceeds.
The proceeds from the sale of stock pursuant to options
granted under the Plan shall constitute general funds of the Company.
8. Amendment of Plan.
The Board may at any time amend the Plan, provided that no
amendment may affect any then outstanding options or any unexercised portions
thereof. In addition, any amendment to the Plan increasing the number of
Shares reserved under the Plan, altering the employees or class of employee
eligible to be granted incentive stock options under the Plan, causing options
granted to employees and intended to be incentive options under the Plan not
to qualify as "incentive stock options" under Section 422 of the Code, or
amending this Section 8 shall be subject to shareholder approval as shall any
amendment which would cause the Plan not to satisfy the conditions of Rule
16b-3 once the Company registers a class of equity securities pursuant to
Section 12 of the Securities Exchange Act of 1934.
9. Financial Information.
Whenever the Company provides financial statements, whether
audited or unaudited, to all of its shareholders as a group, the Company shall
concurrently provide each optionee with a copy of such financial statements.
Notwithstanding the foregoing, the Company shall provide each optionee at the
end of its fiscal year with a copy of its financial statements, either audited
or unaudited, for such fiscal year, within ninety (90) days after the end of
such fiscal year if such person is then an optionee. In connection with such
provision, the Company may require the optionee to enter into a nondisclosure
agreement; provided, however, that such nondisclosure agreement may not
contain provisions which are more stringent than those the Company imposes on
its shareholders
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which are also receiving the financial statements.
10. Effective Date and Termination of Plan.
This Plan was adopted by the Board on , 1997 and
approved by the shareholders on ,1997. The Board may terminate this Plan
at any time. If not earlier terminated, the Plan shall terminate ,2007.
Termination of the Plan will not affect rights and obligations theretofore
granted and then in effect.
This Plan, the granting of any option hereunder, and the
issuance of stock upon the exercise of any option, shall be subject to such
approval or other conditions as may be required or imposed by any regulatory
authority having jurisdiction to issue regulations or rules with respect
thereto, including the securities laws of various governmental entities.
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APPENDIX D
TMCI ELECTRONICS, INC.
1997 EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the 1997 Employee Stock
Purchase Plan of TMCI Electronics, Inc., a Delaware Corporation.
1. Purpose. The purpose of the Plan is to provide employees of the
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company through accumulated payroll deductions. It is the
intention of the Company to have the Plan qualify as an "Employee Stock
Purchase Plan" under Section 423 of the Internal Revenue Code of 1986, as
amended. The provisions of the Plan, accordingly, shall be construed so as to
extent and limit participation in a manner consistent with the requirements of
that section of the Code.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the
Company.
(b) "Code" shall mean the Internal Revenue Code of
1986, as amended.
(c) "Common Stock" shall mean the Common Stock of the
Company.
(d) "Company" shall mean TMCI Electronics, Inc., a Delaware
Corporation, and any Designated Subsidiary of the Company.
(e) "Compensation" shall mean all base straight time gross
earnings, commissions, overtime, shift premium, incentive compensation,
incentive payments, bonuses and other compensation.
(f) "Designated Subsidiaries" shall mean Touche Electronics,
Inc., a California Corporation, Touche Manufacturing Company, Inc., a
California Corporation, and any other Subsidiaries which have been designated
by the Board from time to time in its sole discretion as eligible to
participate in the Plan.
(g) "Employee" shall mean any individual who is an Employee
of the Company for tax purposes whose customary employment with the Company is
at least twenty (20) hours per week and more than five (5) months in any
calendar year. For purposes of the Plan, the employment relationship shall be
treated as continuing intact while the individual is on sick leave or other
leave of absence approved by the Company. Where the period of leave exceeds 90
days and the individual's right to reemployment is not guaranteed either by
statute or by contract, the employment relationship shall be deemed to have
terminated on the 91st day of such leave.
(h) "Enrollment Date" shall mean the first day of each
Offering Period.
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(i) "Exercise Date" shall mean the last day of each Offering
Period.
(j) "Fair Market Value" shall mean, as of any date, the
value of Common Stock determined as follows:
(1) If the Common Stock is listed on any
established stock exchange or a national market system, including without
limitation the Nasdaq National Market or The Nasdaq SmallCap Market of The
Nasdaq Stock Market, its Fair Market Value shall be the closing sales price
for such stock (or the closing bid, if no sales were reported) as quoted on
such exchange or system for the last market trading day prior to the time of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable, or;
(2) If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean of the closing bid and asked prices for the
Common Stock on the date of such determination, as reported The Wall Street
Journal or such other source as the Board deems reliable, or;
(3) In the absence of an established market for the
Common Stock, the Fair Market Value thereof shall be determined in good faith
by the Board.
(k) "Offering Period" shall mean a period of approximately
six (6) months, commencing on the first Trading Day on or after______________
and terminating on the last Trading Day in the period ending following
____________ or commencing on the first Trading Day on or after ______________
and terminating on the last Trading Day in the period ending the following
_____________. The duration of Offering Periods may be changed pursuant to
Section 4 of this Plan.
(l) "Plan" shall mean this Employee Stock Purchase Plan.
(m) "Purchase Price" shall mean an amount equal to 85% of
the Fair Market Value of a share of Common Stock on the Enrollment Date or on
the Exercise Date, whichever is lower.
(n) "Reserves" shall mean the number of shares of Common
Stock covered by each option under the Plan which have not yet been exercised
and the number of shares of Common Stock which have been authorized for
issuance under the Plan but not yet placed under option.
(o) "Subsidiary" shall mean a corporation, domestic or
foreign, of which not less than 50% of the voting shares are held by the
Company or a Subsidiary, whether or not such corporation now exists or is
hereafter organized or acquired by the Company or a Subsidiary.
(p) "Trading Day" shall mean a day on which national stock
exchanges and the
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Nasdaq System are open for trading.
3. Eligibility.
(a) Any Employee (as defined in Section 2(g)), who shall be
employed by the Company on a given Enrollment Date shall be eligible to
participate in the Plan.
(b) Any provisions of the Plan to the contrary
notwithstanding, no Employee shall be granted an option under the Plan (i) to
the extent that, immediately after the grant, such Employee (or any other
person whose stock would be attributed to such Employee pursuant to Section
424(d) of the Code) would own capital stock of the Company and/or hold
outstanding options to purchase such stock possessing five percent (5%) or
more of the total combined voting power or value of all classes of the capital
stock of the Company or of any Subsidiary, or (ii) to the extent that his or
her rights to purchase stock under all employee stock purchase plans of the
Company and its subsidiaries accrues at a rate which exceeds Twenty-Five
Thousand Dollars ($25,000) worth of stock (determined at the fair market value
of the shares at the time such option is granted) for each calendar year in
which such option is outstanding at any time.
4. Offering Periods. The Plan shall be implemented by consecutive
Offering Periods with a new Offering Period commencing on the first Trading
Day on or after ___________ and ___________ each year, or on such other date
as the Board shall determine, and continuing thereafter until terminated in
accordance with Section 19 hereof. The Board shall have the power to change
the duration of Offering Periods (including the commencement dates thereof)
with respect to future offerings without shareholder approval if such change
is announced at least five (5) days prior to the scheduled beginning of the
first Offering Period to be affected thereafter.
5. Participation.
(a) An eligible Employee may become a participant in the
Plan by completing a subscription agreement authorizing payroll deductions in
the form of Exhibit A to this Plan and filing it with the Company's payroll
office prior to the applicable Enrollment Date. Once filed, the subscription
agreement shall remain effective for all subsequent Offering Periods until the
eligible Employee withdraws from the plan as provided in Section 10 hereof or
files another subscription agreement which changes the payroll deductions.
(b) Payroll deductions for a participant shall commence on
the first payroll following the Enrollment Date and shall end on the last
payroll in the Offering Period to which such authorization is applicable,
unless sooner terminated by the participant as provided in Section 10 hereof.
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6. Payroll Deductions.
(a) At the time a participant files a subscription
agreement, the participant shall elect to have payroll deductions made on each
pay day during the Offering Period in an amount not exceeding fifteen percent
(15%) of the Compensation which the participant receives on each pay day
during the Offering Period.
(b) All payroll deductions made for a participant shall be
credited to the participant's account under the Plan and shall be withheld in
whole percentages only. A participant may not make any additional payments in
to such account.
(c) A participant may discontinue the participant's
participation in the Plan as provided in Section 10 hereof, or may increase or
decrease the rate of the participant's payroll deductions during the Offering
Period by completing or filing with the Company a new subscription agreement
authorizing a change in payroll deduction rate. The Board may, in its
discretion, limit the number of participation rate changes during any Offering
Period. The change in rate shall be effective with the first full payroll
period following five (5) business days after the Company's receipt of the new
subscription agreement unless the Company elects to process a given change in
participation more quickly. A participant's subscription agreement shall
remain in effect for successive Offering Periods unless terminated as provided
in Section 10 hereof.
(d) Notwithstanding the foregoing, to the extent necessary
to comply with Section 423(b)(8) of the Code and Section 3(b) hereof, a
participant's payroll deductions may be decreased to zero percent (0%) at such
time during any Offering Period which is scheduled to end during the current
calendar year (the "Current Offering Period") that the aggregate of all
payroll deductions which were previously used to purchase stock under the Plan
in a prior Offering Period which ended during that calendar year plus all
payroll deductions accumulated with respect to the Current Offering Period
equal $21,250. Payroll deductions shall recommence at the rate provided in
such participant's subscription agreement at the beginning of the first
Offering Period which is scheduled to end in the following calendar year,
unless terminated by the participant as provided in Section 10 hereof.
(e) At the time the option is exercised, in whole or in
part, or at the time some or all of the Company's Common Stock issued under
the Plan is disposed of, the participant must make adequate provision for the
Company's federal, state, or other tax withholding obligations, if any, which
arise upon the exercise of the option or the disposition of the Common Stock.
At any time, the Company may, but shall not be obligated to, withhold from the
participant's compensation the amount necessary for the Company to meet
applicable withholding obligations, including any withholding required to make
available to the Company any tax deductions or benefits attributable to sale
or early disposition of the Common Stock by the Employee.
7. Grant of Option. On the Enrollment Date of each Offering
Period, each eligible
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Employee participating in such Offering Period shall be granted an option to
purchase on the Exercise Date of such Offering Period (at the applicable
Purchase Price) up to a number of shares of the Company's Common Stock
determined by dividing such Employee's payroll deductions accumulated prior to
such Exercise Date and retained in the Employee's account as of the Exercise
Date by the applicable Purchase Price; provided that in no event shall an
Employee be permitted to purchase during each Offering Period more than a
number of shares determined by dividing $12,500 by the Fair Market Value of a
share of the Company's Common Stock on the Enrollment Date, and provided
further that such purchase shall be subject to the limitations set forth in
Sections 3(b) and 12 hereof. Exercise of the option shall occur as provided in
Section 8 hereof, unless the participant has withdrawn pursuant to Section 10
hereof. The Option shall expire on the last day of the Offering Period.
8. Exercise of Option. Unless a participant withdraws from the Plan
as provided in Section 10 hereof, the participant's option for the purchase of
shares shall be exercised automatically on the Exercise Date, and the maximum
number of full shares subject to option shall be purchased for such
participant at the applicable Purchase Price with the accumulated payroll
deductions in the participant's account. No fractional shares shall be
purchased; any payroll deductions accumulated in a participant's account which
are not sufficient to purchase a full share shall be retained in the
participant's account for the subsequent Offering Period, subject to earlier
withdrawal by the participant as provided in Section 10 hereof. Any other
monies left over in a participant's account after the Exercise Date shall be
returned to the participant. During a participant's lifetime, a participant's
option to purchase shares hereunder is exercisable only by him or her.
9. Delivery. As promptly as practicable after each Exercise Date on
which a purchase of shares occurs, the Company shall arrange the delivery to
each participant, as appropriate, of a certificate representing the shares
purchased upon exercise of the participant's option.
10. Withdrawal; Termination of Employment.
(a) A participant may withdraw all but not less than all the
payroll deductions credited to the participant's account and not yet used to
exercise the participant's option under the Plan at any time by giving written
notice to the Company in the form of Exhibit B to this Plan. All of the
participant's payroll deductions credited to the participant's account shall
be paid to such participant promptly after receipt of notice of withdrawal and
such participant's option for the Offering Period shall be automatically
terminated, and no further payroll deductions for the purchase of shares shall
be made for such Offering Period. If a participant withdraws from an Offering
Period, payroll deductions shall not resume at the beginning of the succeeding
Offering Period unless the participant delivers to the Company a new
subscription agreement.
(b) Upon a participant's ceasing to be an Employee (as
defined in Section 2(g) hereof) for any reason, the participant shall be
deemed to have elected to withdraw from the
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Plan and the payroll deductions credited to such participant's account during
the Offering period but not yet used to exercise the option shall be returned
to such participant or, in the case of the participant's death, to the person
or persons entitled thereto under Section 14 hereof, and such participant's
option shall be automatically terminated.
(c) A participant's withdrawal from an Offering Period shall
not have any effect upon the participant's eligibility to participate in any
similar plan which may hereafter be adopted by the Company or in succeeding
Offering Periods which commence after the termination of the Offering Period
from which the participant withdraws; provided, however, that a new
subscription agreement will need to be filed following a withdrawal.
11. Interest. No interest shall accrue on the payroll deductions of a
participant in the Plan.
12. Stock.
(a) The maximum number of shares of the Company's Common
Stock which shall be made available for sale under the Plan shall be Two
Hundred Fifty Thousand (250,000) shares, subject to adjustment upon changes in
capitalization of the Company as provided in Section 18 hereof. If, on a given
Exercise Date, the number of shares with respect to which options are to be
exercised exceeds the number of shares then available under the Plan, the
Company shall notify the participants and shall make a pro rata allocation of
the shares up to the amount of shares then available under the Plan in as
uniform a manner as shall be practicable and as it shall determine to be
equitable. The remaining options shall be cancelled and payroll deductions not
used to purchase shares returned to the Employee. The Company may seek
shareholder approval for additional shares to be added to the Plan, provided,
however, that no option shall be granted or exercised with respect to such
additional shares until such shareholder approval shall have occurred.
(b) The participant shall have no interest or voting right
in shares covered by the participant's option until such option has been
exercised.
(c) Shares to be delivered to a participant under the Plan
shall be registered in the name of the participant or in the name of the
participant and the participant's spouse.
13. Administration.
(a) Administrative Body. The Plan shall be administered by
the Board or a committee of members of the Board appointed by the Board. The
Board or its committee shall have full and exclusive discretionary authority
to construe, interpret and apply the terms of the Plan, to determine
eligibility and to adjudicate all disputed claims filed under the Plan. Every
finding, decision and determination made by the Board or its committee shall,
to the full extent permitted by law, be final and binding upon all parties.
(b) Rule 16b-3 Limitations. Notwithstanding the provisions
of Subsection (a)
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of this Section 13, in the event that Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or any
successor provision ("Rule 16b-3") provides specific requirements for the
administrators of plans of this type, the Plan shall be administered only by
such a body and in such a manner as shall comply with the applicable
requirements of Rule 16b-3. Unless permitted by Rule 16b-3, no discretion
concerning decisions regarding the Plan shall be afforded to any committee or
person that is not "disinterested" as that term is used in Rule 16b-3.
14. Designation of Beneficiary.
(a) A participant may file a written designation of a
beneficiary who is to receive any shares and cash, if any, from the
participant's account under the Plan in the event of such participant's death
subsequent to an Exercise Date on which the option is exercised but prior to
delivery to such participant of such shares and cash. In addition, a
participant may file a written designation of a beneficiary who is to receive
any cash from the participant's account under the Plan in the event of such
participant's death prior to exercise of the option. If a participant is
married and the designated beneficiary is not the spouse, spousal consent
shall be required for such designation to be effective.
(b) Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such participant's death, the Company shall
deliver such shares and/or cash to the executor or administrator of the estate
of the participant, or if no such executor or administrator has been appointed
(to the knowledge of the Company), the Company, in its discretion, may deliver
such shares and/or cash to the spouse or to any one or more dependents or
relatives of the participant, or if no spouse, dependent or relative is known
to the Company, then to such other person as the Company may designate.
15. Transferability. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option
or to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 14 hereof) by the participant. Any such
attempt at assignment transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 10 hereof.
16. Use of Funds. All payroll deductions received or held by the
Company under the Plan may be used by the Company for any corporate purpose,
and the Company shall not be obligated to segregate such payroll deductions.
17. Reports. Individual accounts shall be maintained for each
participant in the Plan. Statements of account shall be given to participating
Employees at least annually, which statements shall set forth the amounts of
payroll deductions, the Purchase Price, the number of shares
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purchased and the remaining cash balance, if any.
18. Adjustments Upon Changes in Capitalization, Dissolution,
Liquidation, Merger or Asset Sale.
(a) Changes in Capitalization. Subject to any required
action by the shareholders of the Company, the Reserves, as well as the price
per share and the number of shares of Common Stock covered by each option
under the Plan which has not yet been exercised, 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 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 not adjustment by reason thereof shall be made
with respect to, the number or price of shares of Common Stock subject to an
option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Offering Period shall terminate
immediately prior to consummation of such proposed action, unless otherwise
provided by the Board.
(c) Merger or Asset Sale. 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 Offering Period then in progress
shall be shortened by setting a new Exercise Date (the "New Exercise Date").
The New Exercise Date shall be before the date of the Company's proposed sale
or merger. The Board shall notify each participant in writing, at least ten
(10) business days prior to the New Exercise Date, that the Exercise Date for
the participant's option has been changed to the New Exercise Date and that
the participant's option shall be exercised automatically on the New Exercise
Date, unless prior to such date the participant has withdrawn from the
Offering Period as provided in Section 10 hereof.
19. Amendment or Termination.
(a) The Board of Directors of the Company may at any time
and for any reason terminate or amend the Plan. Except as provided in Section
18 hereof, no such termination can affect options previously granted, provided
that an Offering Period may be terminated by the Board of Directors on any
Exercise Date if the Board determines that the termination of the Plan is in
the best interests of the Company and its shareholders. Except as provided in
Section 18 hereof, no amendment may make any change in any option theretofore
granted which adversely affects the rights of any participant. To the extent
necessary to comply with Rule 16b-3 or under Section 423 of the Code (or any
successor rule or provision or any other applicable law or
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regulation), the Company shall obtain shareholder approval in such a manner
and to such a degree as required.
(b) Without shareholder consent and without regard to
whether any participant rights may be considered to have been "adversely
affected," the Board (or its committee) shall be entitled to change the
Offering Periods, limit the frequency and/or number of changes in the amount
withheld during an Offering Period, establish the exchange ratio applicable to
amounts withheld in a currency other than U.S. dollars, permit payroll
withholding in excess of the amount designated by a participant in order to
adjust for delays or mistakes in the Company's processing of properly
completed withholding elections, establish reasonable waiting and adjustment
periods and/or accounting and crediting procedures to ensure that amounts
applied toward the purchase of Common Stock for each participant properly
correspond with amounts withheld from the participant's Compensation, and
establish such other limitations or procedures as the Board (or its committee)
determines in its sole discretion advisable which are consistent with the
Plan.
20. Notices. All notices or other communications by a participant to
the Company under or in connection with the Plan shall be deemed to have been
duly given when received in the form specified by the Company at the location,
or by the person, designated by the Company for the receipt thereof.
21. Conditions Upon Issuance of Shares. Shares shall not be issued
with respect to an option unless the exercise of such option and the issuance
and delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the shares may then be listed,
and shall 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
provision of applicable law.
22. Term of Plan. The Plan shall become effective upon its adoption
by the shareholders of the Company and subject to such additional delays as
may be necessary to ensure compliance with applicable law and establishing the
administrative procedures necessary to execute the Plan as may be determined
by the Board of Directors in its sole and absolute discretion It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 19 hereof.
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EXHIBIT A
TMCI ELECTRONICS, INC.
1997 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
_____ Original Application Enrollment Date: _____
_____ Change in Payroll Deduction Rate
_____ Change of Beneficiary(ies)
1. ____________________________________________ hereby elects to
participate in the TMCI Electronics, Inc. 1997 Employee Stock
Purchase Plan (the "Employee Stock Purchase Plan") and subscribes to
purchase shares of the Company's Common Stock in accordance with this
Subscription Agreement and the Employee Stock Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the
amount of _____% of my Compensation on each payday (from 1 to 15%)
during the Offering Period in accordance with the Employee Stock
Purchase Plan. (Please note that no fractional percentages are
permitted.)
3. I understand that said payroll deductions shall be accumulated for
the purchase of shares of Common Stock at the applicable Purchase
Price determined in accordance with the Employee Stock Purchase Plan.
I understand that if I do not withdraw from an Offering Period, any
accumulated payroll deductions will be used to automatically exercise
my option.
4. I have received a copy of the complete Employee Stock Purchase Plan.
I understand that my participation in the Employee Stock Purchase
Plan is in all respects subject to the terms of the Plan. I
understand that my ability to exercise the option under this
Subscription Agreement is subject to shareholder approval of the
Employee Stock Purchase Plan.
5. Shares purchased for me under the Employee Stock Purchase Plan should
be issued in the name(s) of (Employee or Employee and Spouse only):
----------------------------------.
6. I understand that if I dispose of any shares received by me pursuant
to the Plan within 2 years after the Enrollment Date (the first day
of the Offering Period during which I purchased such shares), I will
be treated for federal income tax purposes as having received
ordinary income at the time of such disposition in an amount equal to
the excess of the fair market value of the shares at the time such
shares were purchased by me over
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<PAGE>
the price which I paid for the shares. I agree to notify the Company
in writing within 30 days after the date of any disposition of shares
and I will make adequate provision for Federal, state or other tax
withholding obligations, if any, which arise upon the disposition of
the Common Stock. The Company may, but will not be obligated to,
withhold from my compensation the amount necessary to meet any
applicable withholding obligation including any withholding necessary
to make available to the Company any tax deductions or benefits
attributable to sale or early disposition of Common Stock by me. If I
dispose of such shares at any time after the expiration of the 2-year
holding period, I understand that I will be treated for federal
income tax purposes as having received income only at the time of
such disposition, and that such income will be taxed as ordinary
income only to the extent of an amount equal to the lesser of (1) the
excess of the fair market value of the shares at the time of such
disposition over the purchase price which I paid for the shares, or
(2) 15% of the fair market value of the shares on the first day of
the Offering Period. The remainder of the gain, if any, recognized on
such disposition will be taxed as capital gain.
7. I hereby agree to be bound by the terms of the Employee Stock
Purchase Plan. The effectiveness of this Subscription Agreement is
dependent upon my eligibility to participate in the Employee Stock
Purchase Plan.
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the
Employee Stock Purchase Plan:
NAME: (Please print) ________________________________________________________
(First) (Middle) (Last)
Relationship
(Address)
Employee's Social
Security Number:
Employee's Address:
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<PAGE>
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated:
Signature Of Employee
Spouse's Signature (If beneficiary other than
spouse)
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<PAGE>
EXHIBIT B
TMCI ELECTRONICS, INC.
1997 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the TMCI
Electronics, Inc. 1996 Employee Stock Purchase Plan which began on __________
19_____ (the "Enrollment Date") hereby notifies the Company that the
undersigned participant hereby withdraws from the Offering Period. The
undersigned hereby directs the Company to pay to the undersigned as promptly
as practicable all the payroll deductions credited to the undersigned's
account with respect to such Offering Period. The undersigned understands and
agrees that the undersigned's option for such Offering Period will be
automatically terminated. The undersigned understands further that no further
payroll deductions will be made for the purchase of shares in the current
Offering Period and the undersigned shall be eligible to participate in
succeeding Offering Periods only by delivering to the Company a new
Subscription Agreement.
Name and Address of Participant:
Signature:
Date:
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<PAGE>
TMCI ELECTRONICS, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. THIS
PROXY WILL BE VOTED AS DIRECTED. IN THE ABSENCE OF DIRECTION,
THIS PROXY WILL BE VOTED "FOR" PROPOSALS 1, 2, 3, 4 AND 5.
The undersigned hereby appoints Rolando Loera and Robert Loera as Proxies,
with the full power of substitution, and hereby authorizes them to represent
and vote, as designated on the reverse hereof, all shares of Common Stock of
TMCI Electronics, Inc. (the "Company") held of record by the undersigned on
November 10, 1997, at the Annual Meeting of Stockholders to be held on
December 22, 1997, or any adjournment thereof, upon all such matters as may
properly come before the Meeting.
[X] Please mark your
votes as in this example. If you plan to attend [ ]
the Annual Meeting, place an
X in this box.
1. PROPOSAL TO AMEND THE COMPANY'S BY-LAWS to provide for a classified Board
of Directors.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2. ELECTION OF DIRECTORS.
FOR all nominees listed below [ ] WITHHOLD AUTHORITY [ ]
(except as marked to the contrary below) to vote for the nominees
listed below
(INSTRUCTION To withhold authority to vote for any
individual nominee strike a line through
the nominee's name in the list)
Nominees:* Dominic A. Polimeni, Charles E. Shaw
(Class I) Robert C. Fink, Boris Lipkin,
Robert Loera (Class II) Thomas F. Chaffin,
Rolando Loera (Class III)
* If proposal No. 1 is not approved, all nominees will be
elected to serve until the next annual meeting of
stockholders.
(THE PROXY CONTINUES AND MUST BE SIGNED ON THE REVERSE SIDE.)
<PAGE>
3. PROPOSAL TO AMEND THE CERTIFICATE OF INCORPORATION to increase the
number of authorized shares of capital stock to a total of thirty-five million
(35,000,000) shares.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. PROPOSAL TO APPROVE THE 1997 STOCK OPTION PLAN.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
5. PROPOSAL TO APPROVE THE 1997 EMPLOYEE STOCK PURCHASE PLAN.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
6. In their discretion upon such other business as may properly come before
the Annual Meeting or any postponement or adjournment thereof.
SIGNATURE: _________________________________________ DATE: ________________
SIGNATURE: _________________________________________ DATE: ________________
(SIGNATURE IF HELD JOINTLY)
NOTE: Please sign exactly as name or names appear on
stock certificate as indicated hereon. Joint owners
should each sign. When signing as attorney,
executor, administrator or guardian, please give
full title as such.
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STOCKHOLDERS ARE URGED TO DATE, MARK, SIGN AND RETURN
THIS PROXY PROMPTLY IN THE ENVELOPE PROVIDED, WHICH
REQUIRES NO POSTAGE IF MAILED WITHIN THE UNITED STATES.
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