<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
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 Rule 14a-11(c) or Rule 14a-12
INTERFACE SYSTEMS, INC.
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
INTERFACE SYSTEMS, INC.
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- - --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- - --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- - --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- - --------------------------------------------------------------------------------
(5) Total fee paid:
- - --------------------------------------------------------------------------------
/ / 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:
- - --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- - --------------------------------------------------------------------------------
(3) Filing party:
- - --------------------------------------------------------------------------------
(4) Date filed:
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<PAGE> 2
INTERFACE SYSTEMS, INC.
5855 Interface Drive
Ann Arbor, Michigan 48103
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 19, 1996
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Interface
Systems, Inc., a Delaware corporation, will be held at Weber's Inn, 3050 Jackson
Road, Ann Arbor, Michigan on Friday, April 19, 1996 at 3:00 p.m. local time, for
the following purposes:
1. To elect three Directors who will serve until the Annual Meeting of
Stockholders in 1999.
2. To approve an amendment to the Company's Certificate of Incorporation to
increase the number of shares of Common Stock authorized for issuance
from 8,000,000 to 20,000,000.
3. To approve an amendment to the Company's 1992 Stock Option Plan to
increase the number of shares authorized for issuance.
4. To approve an amendment to the Company's 1993 Stock Plan for
Non-Employee Directors.
5. To transact such other business as may properly come before the meeting
or any adjournment thereof.
Stockholders of record at the close of business on February 23, 1996 are
entitled to notice of, and to vote at, the Annual Meeting. You are cordially
invited to attend. However, whether you expect to be present at the meeting or
not, please execute and return the enclosed proxy which is solicited by the
Board of Directors. The proxy is revocable and will not affect your right to
vote in person if you attend.
By Order of the Board of Directors,
CARL L. BIXBY, President
Ann Arbor, Michigan
March 8, 1996
<PAGE> 3
INTERFACE SYSTEMS, INC.
PROXY STATEMENT
1996 ANNUAL MEETING OF STOCKHOLDERS
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Interface Systems, Inc. (the "Company"), to
be used at the Annual Meeting of Stockholders of the Company to be held on
Friday, April 19, 1996 or at any adjournment thereof, for the purposes set forth
in the accompanying Notice of Annual Meeting of Stockholders and in this Proxy
Statement. Any stockholder giving a proxy in the accompanying form may revoke it
at any time prior to its exercise. The expense of solicitation of proxies will
be borne by the Company. This Proxy Statement and form of proxy are being first
sent to or given to stockholders of the Company on or about March 8, 1996. The
mailing address of the Company's principal executive offices is 5855 Interface
Drive, Ann Arbor, Michigan 48103.
Only stockholders of record at the close of business on February 23, 1996
will be entitled to vote at the meeting or any adjournment thereof. Each holder
of the issued and outstanding 4,495,646, shares of Common Stock, $.10 par value
per share (the "Common Stock"), is entitled to one vote for each share held of
record. Ten days before the Annual Meeting a complete list of stockholders
entitled to vote at the meeting will be open to examination by any stockholder
for any purpose germane to the meeting during ordinary business hours at the
Company's principal offices.
Shares represented by a proxy in the accompanying form, unless previously
revoked, will be voted at the meeting if the proxy, properly executed, is
received by the Company before the close of business on April 18, 1996. Shares
represented by a proxy received after that time will be voted if the proxy is
received by the Company in sufficient time to permit the necessary examination
and tabulation of the proxy before a vote is taken. Shares represented by a duly
executed proxy which does not indicate how it is to be voted will be voted for
the election of management's nominees for directors and for the proposals
listed. Stockholders who execute a proxy in the accompanying form may
nevertheless revoke the proxy at any time before it is exercised by notice to
the Company and may vote in person if they attend the Annual Meeting or any
adjournment thereof.
For purposes of determining the number of votes cast with respect to the
election of directors, only those cast "for" are included. In determining
whether the requisite vote is received on the proposal to amend the Company's
Certificate of Incorporation, abstentions and broker non-votes will have the
effect of a vote against the approval of such proposal. In determining whether
the requisite vote is received on the proposals to amend the 1992 Stock Option
Plan and the 1993 Stock Plan for Non-Employee Directors, abstentions will have
the effect of a vote against such proposal and broker non-votes will have no
effect. Abstentions and votes withheld from directors are counted for the
purpose of determining whether a quorum is present at the Annual Meeting.
PRINCIPAL STOCKHOLDERS
The following table sets forth information as of February 1, 1996,
concerning the only stockholder known by the Company to be the beneficial owner
of more than 5% of its outstanding Common Stock. Such stockholder exercises sole
voting and investment power with respect to the shares beneficially owned.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME AND ADDRESS OF BENEFICIAL PERCENT
OF BENEFICIAL OWNER OWNERSHIP OF CLASS
- - ------------------------------------------------------------------- ----------------- --------
<S> <C> <C>
Carl L. Bixby...................................................... 334,500(1) 7.3%
5855 Interface Drive
Ann Arbor, MI 48103
</TABLE>
- - ------------------
(1) Based on information contained in a Schedule 13D dated February 20, 1996
filed with the Securities and Exchange Commission.
<PAGE> 4
MATTERS TO COME BEFORE THE MEETING
I. ELECTION OF DIRECTORS
The Bylaws of the Company provide that the Board of Directors shall be
divided into three classes as nearly equal in number as possible, with the term
of one class expiring each year. The term of office of each class of directors
is three years.
The following table sets forth information regarding all nominees for
election, current directors whose terms of office will continue, all executive
officers and all executive officers and directors as a group. All of the
nominees are currently directors of the Company. If, as a result of
circumstances not now known or foreseen, any of such nominees shall be
unavailable to serve as a director, proxies will be voted for the election of
such other person or persons as management may select. Except as otherwise
noted, each person indicated below exercises sole voting and investment power
with respect to the shares of the Company's common stock owned by him.
Directors will be elected by a plurality of the votes of the shares present
in person or represented by proxy entitled to vote at the meeting. PROXIES IN
WILL BE VOTED FOR THE ELECTION OF THE NOMINEES LISTED BELOW UNLESS THE
SPECIFICATION IS MARKED ON THE PROXY INDICATING THAT AUTHORITY TO DO SO IS
WITHHELD.
<TABLE>
<CAPTION>
FEBRUARY 1, 1996
------------------------
FIRST SHARES PERCENT
ELECTED BENEFICIALLY OF
NAME AND AGE PRINCIPAL OCCUPATION DIRECTOR OWNED(1) CLASS(1)
- - ----------------------- ---------------------------------------- -------- ------------ --------
<S> <C> <C> <C> <C>
NOMINEES FOR ELECTION TO SERVE UNTIL THE 1999 ANNUAL MEETING:
Robert A. Seigle, 68... President of Concord Personnel, Inc., a 1969 84,310 1.9%
personnel recruiting company
Garnel F. Graber, 64... Retired 1974 61,454(2) 1.4%
Lloyd A. Semple, 56.... Attorney, and Chairman, Dykema Gossett 1996 1,000 *
PLLC, a Detroit, Michigan law firm
DIRECTORS WHOSE TERMS OF OFFICE CONTINUE UNTIL THE 1998 ANNUAL MEETING:
Milton Handelman, 79... Independent business consultant 1990 7,000 *
David C. Seigle, 56.... Retired 1969 13,500 *
George W. Perrett, Secretary and Vice President of 1985 73,647(3) 1.6%
58................... Operations of the Company; President of
I.G.K. Industries, Inc., a subsidiary of
the Company
DIRECTORS WHOSE TERMS OF OFFICE CONTINUE UNTIL THE 1997 ANNUAL MEETING:
Carl L. Bixby, 56...... President and Chief Executive Officer of 1969 334,500 7.3%
the Company
David O. Schupp, 59.... Vice President and Treasurer of the 1969 82,602(4) 1.9%
Company
G. Paul Horst, 45(5)... Retired 1988 147,609 3.4%
All executive officers and directors as a group (9 persons)(1)(2)(3)........ 895,622 17.9%
</TABLE>
- - ------------------
* Less than 1%
(1) Includes shares which the following directors have a right to acquire within
60 days pursuant to the exercise of stock options: Mr. Handelman -- 6,000
shares; Mr. Robert Seigle -- 11,500 shares; Mr. Perrett -- 35,000 shares;
Mr. Bixby -- 96,000 shares; Mr. Schupp -- 13,000 shares; Mr. Horst -- 6,000
shares; Mr. David Seigle -- 11,500 shares and Mr. Graber -- 11,500 shares.
For purposes of computing the individual percentages, the shares which can
be acquired upon the exercise of options within 60 days were added to the
shares owned beneficially of record by such persons on February 1, 1996 and
to the shares outstanding on that date.
2
<PAGE> 5
(2) Mr. Graber has sole voting power with respect to 552 shares of the Common
Stock beneficially owned by him, and shares investment power with his son,
Glen F. Graber, with respect to such shares. Mr. Graber also serves on the
board of directors of Nematron Corporation.
(3) Includes 16,969 shares held by the George W. Perrett, Jr. Trust, of which
Mr. Perrett is a Trustee and a beneficiary. Does not include 1,300 shares
owned by Mr. Perrett's children, as to which Mr. Perrett disclaims
beneficial ownership.
(4) Includes 69,602 shares held by the David O. Schupp Revocable Trust of which
Mr. Schupp is the Trustee and beneficiary.
(5) Mr. Horst also serves on the board of directors of Nematron Corporation.
Each of the directors listed above other than Garnel Graber, G. Paul Horst,
Lloyd A. Semple and David Seigle has been engaged or employed in the principal
occupation reflected in the table for more than five years. Mr. Graber retired
in 1994, prior to which time he was Chairman and Chief Executive Officer of
Applied Dynamics International for at least the five years preceding the date of
this Proxy Statement. Mr. Horst was President of Nematron Corporation for at
least five years before he retired in May 1994. Mr. Semple has been an attorney
with Dykema Gossett PLLC for 32 years and Chairman of such law firm since
January 1, 1996. Prior to his retirement in November 1991, Mr. Seigle was Vice
President of File Net Corporation, a manufacturer of document image processors.
David C. Seigle and Robert A. Seigle are first cousins.
MEETINGS AND COMMITTEES OF THE BOARD
During the Company's fiscal year ended September 30, 1995, the Board of
Directors held four meetings and the Compensation Committee and Audit Committee
each met twice. The Compensation Committee is responsible for recommending
salaries and other compensation arrangements for officers of the Company and
performing such functions as may be delegated to it under the provisions of any
bonus, stock option or other compensation plan adopted by the Company. The
Compensation Committee consists of five directors who are not employees of the
Company (i.e., Messrs. Graber, Handelman, Horst Robert Seigle and David Seigle).
The Audit Committee also consists of the five directors listed above who
are not employees of the Company. The Audit Committee has authority to recommend
to the Board the independent public accountants to serve as auditors, review
with the independent auditors the annual audit plan, the financial statements,
the auditors' report and their evaluation and recommendations concerning the
Company's internal controls.
During the fiscal year ended September 30, 1995, each director attended 75%
or more of all Board meetings and each director, other than Mr. Graber, attended
75% or more of the meetings held by all committees of the Board on which such
director served.
REPORTING OF BENEFICIAL OWNERSHIP BY DIRECTORS AND EXECUTIVE OFFICERS
Under the securities laws of the United States, the Company's directors,
its executive officers, and any persons holding more than ten percent of the
Company's common stock are required to report their ownership of the Company's
common stock and any changes in that ownership to the Securities and Exchange
Commission and the National Association of Securities Dealers, Inc. Specific due
dates for these reports have been established and the Company is required to
report in this proxy statement any failure to file by these dates. No person
associated with the Company who was required to file under these rules failed to
file any such required report. In making this statement, the Company has relied
on the written representations of its directors and officers and copies of the
reports that have been filed with the Commission.
3
<PAGE> 6
II. AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION TO INCREASE THE
NUMBER OF SHARES OF COMMON STOCK AUTHORIZED FOR ISSUANCE
On January 12, 1996, the Board of Directors approved an amendment to the
Company's Certificate of Incorporation to increase the number of shares of
Common Stock authorized for issuance from 8,000,000 shares to 20,000,000 shares.
As of the February 23, 1996, there were 4,495,646 shares of the Company's
Common Stock issued and outstanding out of 8,000,000 authorized shares of Common
Stock. As of February 23, 1996, approximately 386,667 additional shares of
Common Stock are reserved for issuance pursuant to the Company's stock option
plans.
The increase in the number of authorized shares of Common Stock will
provide additional authorized and unissued shares which may be used by the
Company for any proper corporate purpose and without additional stockholder
approval unless such approval is required by federal or state law or the rules
and regulations of The Nasdaq Stock Market National Market. Such purposes might
include, without limitation, issuance in public or private sales for cash as a
means of obtaining additional capital for use in the Company's business and
operations, issuance as part or all of the consideration required to be paid by
the Company for acquisition of other businesses or properties and possible
distributions or dividends to holders of the Common Stock. Many of the foregoing
transactions will not require additional stockholder approval. There are no
transactions under present review by the Board of Directors which would result
in the issuance of the additional shares of Common Stock being considered for
authorization under this proposal, although the Company does consider from time
to time proposals or transactions involving the issuance of additional shares of
Common Stock or instruments convertible into or exercisable for Common Stock.
Although the Board of Directors would authorize the issuance of additional
shares of Common Stock based on its judgment as to the best interests of the
Company and its stockholders, the issuance of additional authorized shares would
have the effect of diluting the voting power per share and could have the effect
of diluting the book value per share of the outstanding shares of Common Stock.
In addition, increasing the authorized shares of Common Stock could, in certain
instances, render more difficult or discourage a merger, tender offer, or proxy
contest and thus potentially have an "anti-takeover" effect, especially if
additional shares of Common Stock were issued in response to a potential
takeover. Such an effect could deter certain types of transactions that might be
proposed, whether or not such transactions were favored by the majority of the
stockholders, and could enhance the ability of officers and directors to retain
their positions.
If the amendment is authorized, the text of Article FOURTH of the Company's
Certificate of Incorporation shall be amended to read as follows:
"FOURTH: The total number of shares of stock, which the Corporation
shall have authority to issue is Twenty Million (20,000,000) shares of
Common Stock, par value $.10 per share".
RECOMMENDATION AND VOTE REQUIRED
The affirmative vote of the holders of a majority of the outstanding shares
of Common Stock entitled to vote at the Meeting is required to authorize the
proposed amendment to the Certificate of Incorporation. THE BOARD OF DIRECTORS
RECOMMENDS A VOTE FOR THE APPROVAL OF THIS PROPOSAL.
PROXIES WILL BE VOTED "FOR" THE APPROVAL OF THE AMENDMENT TO THE COMPANY'S
CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK
AUTHORIZED FOR ISSUANCE UNLESS OTHERWISE INDICATED ON THE PROXY.
4
<PAGE> 7
III. PROPOSAL TO AMEND THE 1992 STOCK OPTION PLAN
PROPOSED AMENDMENT
The Interface Systems, Inc. 1992 Stock Option Plan (the "1992 Plan") was
approved by the Board of Directors on March 27, 1992 and by the stockholders on
May 6, 1992. There are currently 400,000 shares of Common Stock reserved for
issuance under the 1992 Plan. On February 21, 1996, the Board of Directors of
the Company approved for submission to stockholders an amendment to the 1992
Plan which will increase the number of shares of Common Stock reserved for
issuance under the 1992 Plan from 400,000 shares to 800,000 shares.
As of February 23, 1996, options for 246,367 shares were granted and
outstanding, and 13,333 options had been exercised. There are currently 140,300
shares of Common Stock available for grant under the 1992 Plan and, if the
amendment is approved, there will be 540,300 shares of Common Stock available
for grant under the 1992 Plan.
REASON FOR THE AMENDMENT
The Company utilizes stock option grants as part of its compensation
program for executives and key employees. In this way, the Company links
compensation at various levels within the organization to performance and
believes that it is appropriate to continue such practice in the future through
the use of stock options. In addition, the Company believes that the use of
stock option grants to executives and key employees helps to provide incentive
for their continued employment and otherwise more closely aligns their interests
with those of the Company's stockholders. As a result, the Board of Directors
believes that 400,000 additional shares of Common Stock should be made available
under the 1992 Plan in order to facilitate the continued use of stock options as
a part of the Company's incentive compensation program.
TERMS OF THE 1992 PLAN
The 1992 Plan is administered by the Compensation Committee (the
"Committee") of the Board of Directors, which consists of two or more members of
the Board who are not eligible to participate in the 1992 Plan. The Committee
adopts such rules and regulations to administer the 1992 Plan as it deems
appropriate.
The 1992 Plan provides for the grant of incentive stock options ("ISOs")
that qualify under Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"), and nonqualified options that do not meet ISO requirements
("Nonqualified Options"). Stock options are awarded to key employees, including
officers and directors who are full time employees of the Company and its
subsidiaries, at the discretion of the Committee. As of February 23, 1996, there
were approximately 35 employees eligible for selection to participate in the
1992 Plan. Options may be granted under the 1992 Plan until March 27, 2002, when
the 1992 Plan will expire.
The exercise price for ISOs granted under the 1992 Plan may not be less
than 100% of the fair market value of the Company's Common Stock on the date of
the grant. ISOs granted to optionees owning more than 10% of the Company's
outstanding shares are subject to an additional restriction that the exercise
price must be at least 110% of the fair market value of the Company's Common
Stock on the date of the grant. During any one calendar year, an optionee is not
eligible to first exercise an ISO to purchase shares of Common Stock with a fair
value at the date of the grant in excess of $100,000.
Payment for shares to be acquired upon the exercise of options may be made
in cash, by certified check or other case equivalent or, if the Committee so
approves at the time of exercise (i) by surrender of previously owned shares of
Common Stock in accordance with the 1992 Plan and the agreement relating to such
option, or (ii) by delivery of a properly executed notice together with
irrevocable instructions to the optionee's broker to deliver to the Company a
sufficient amount of cash to pay the exercise price and any withholding taxes.
Surrendered shares of the Common Stock will generally be valued for such
purposes at the average of the bid and asked prices for the last preceding day
in which the Common Stock was traded prior to the date with respect to which the
fair market value is to be determined.
5
<PAGE> 8
The 1992 Plan may be terminated or amended at any time by the Board of
Directors. No amendment or modification, without stockholder approval, shall (i)
increase the amount of Common Stock as to which options may be granted, (ii)
materially increase the benefits accruing to participants in the 1992 Plan, or
(iii) materially modify the eligibility requirements unless such amendment or
modification is permitted under Rule 16b-3 of the Exchange Act without
stockholder approval.
TAX CONSEQUENCES
Incentive Stock Options. Under the Code as now in effect, at the time an
ISO is granted or exercised, the optionee will not be deemed to recognize any
income and the Company will not be entitled to any deduction. However, the
spread between the exercise price and the fair market value of the purchase
shares on the date of exercise is an item of tax preference which may subject
the optionee to the alternative minimum tax. The holder of an ISO generally will
be accorded long-term capital gain or loss treatment on the disposition of
Common Stock acquired by the exercise of the options; provided that the
disposition occurs more than two years from the date of the grant and one year
from the date of exercise. Payment of the option price with previously acquired
ISO shares that have not been held for the statutory holding periods will be
treated as a disqualifying disposition of those shares.
An optionee who disposes of shares acquired upon exercise of an ISO prior
to the expiration of the foregoing holding periods recognizes ordinary income
upon the disqualifying disposition equal to the difference between the option
price and the lesser of the fair market value of the shares on the date of
exercise or the date of disposition. Any appreciation between the date of
exercise and the date of disposition is taxed as long- or short-term capital
gain depending upon the holding period of the shares. To the extent ordinary
income is recognized by the optionee, the Company may deduct a corresponding
amount as compensation.
Nonqualified Options. Upon the exercise of a Nonqualified Option, an
optionee will recognize ordinary income equal to the difference between the
option price and the fair market value of the Common Stock at the time of
exercise (however, payment of the option price for shares of Common Stock by
surrender of previously owned shares of Company Common Stock owned by the
optionee will not give rise to a recognized gain on the shares surrendered). The
Company is required to withhold FICA and income taxes on the exercise spread and
will be entitled to a tax deduction in an amount equal to the ordinary income
recognized by the optionee. When the optionee disposes of shares acquired by the
exercise of an option, the amount received in excess of the fair market value on
the date of the exercise will be treated as long-term or short-term capital
gain, depending on the holding period of the shares.
INFORMATION ABOUT OPTIONS GRANTED UNDER THE 1992 PLAN
The following table provides information as to the number of options
granted under the 1992 Plan, from its inception through February 23, 1996, to
the executive officers named in the Summary Compensation Table under "Further
Information -- Compensation of Executive Officers and Directors -- Executive
Compensation", all persons who received more than 5% of the options granted, all
current executive officers as a group, all directors (other than executive
officers) as a group and all other employees as a group. The exercise prices of
all options granted under the 1992 Plan, ranging from $5.25 to $11.00, were at
least equal to the fair market value of the Common Stock as of the respective
grant dates. All such options become exercisable as specified by the Committee
in the terms of the grant award. All options terminate within 10 years of the
date of grant. None of the Company's non-employee directors participate in the
1992 Plan. No associates of the directors, executive officers or director
nominees, other than Mr. Bixby's spouse who is also employed by the Company,
6
<PAGE> 9
received options under the 1992 Plan, and no person other than those listed in
the table received more than 5% of the options granted under the 1992 Plan.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
COMMON STOCK SUBJECT TO
NAME POSITION OPTIONS PREVIOUSLY GRANTED
- - ------------------------------------------- ---------------------------- --------------------------
<S> <C> <C>
Carl L. Bixby.............................. President 60,000
David O. Schupp............................ Vice President and Treasurer 7,500
George W. Perrett.......................... Vice President and Secretary 7,500
All current executive officers as a group
(3) persons.............................. 75,000
All directors who are not executive
officers as a group (5) persons.......... -0-
Associates of the executive officers....... 6,000
All other employees as a group............. 184,700(1)
</TABLE>
- - ------------------
(1) Includes options granted to the associates of executive officers who are
also employed by the Company.
RECOMMENDATION AND VOTE REQUIRED
The affirmative vote of the majority of the Company's Common Stock present
in person or by proxy and entitled to vote at the Annual Meeting is required to
approve the amendment to the 1992 Plan. THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR THE APPROVAL OF THIS PROPOSAL.
PROXIES WILL BE VOTED FOR THE APPROVAL OF THE AMENDMENT TO THE 1992 PLAN
UNLESS OTHERWISE INDICATED ON THE PROXY.
IV. PROPOSAL TO AMEND THE 1993 STOCK PLAN FOR NON-EMPLOYEE DIRECTORS
PROPOSED AMENDMENT
On January 12, 1996, the Board of Directors of the Company approved an
amendment, subject to stockholder approval, to the Company's 1993 Stock Plan for
Non-Employee Directors (the "Directors Plan"). The amendment would increase the
number of shares of Common Stock reserved for issuance under the Directors Plan
from 42,000 shares to 175,000 shares. In addition, the Directors Plan would be
amended to provide for an initial grant (an "Initial Grant") to each eligible
director of an option to purchase 5,100 shares of the Company's Common Stock and
subsequent grants (a "Subsequent Grant") to each eligible director of an option
to purchase 5,100 shares of the Company's Common Stock, on the later of January
11, 1996 or the date such director joins the Board of Directors, and,
thereafter, on every third anniversary of the date the director received the
prior Subsequent Grant, until the Directors Plan is terminated.
As of February 23, 1996, options for 30,000 shares were granted and
outstanding and there were 12,000 shares of Common Stock available for grant
under the Directors Plan. In addition, as of February 23, 1996, there were
proposed grants of options to the eligible directors to purchase 30,600 shares
of Common Stock. As a result, assuming the amendment is approved and taking into
consideration the proposed grants, as of February 26, 1996, there would have
been 114,400 shares of Common Stock available for future grants under the
Directors Plan.
REASONS FOR THE AMENDMENT
The Directors Plan was adopted to promote the best interests of the Company
and its stockholders by attracting and motivating highly qualified individuals
to serve as directors of the Company. The Directors Plan was further adopted to
encourage increased ownership of Common Stock by the Company's non-employee
directors, and to provide such directors with incentive-based compensation so as
to further align their interests with the interests of the Company's
stockholders. The amendment will enable the Company to further the purposes of
the Directors Plan by providing more shares which will be available for grants
of options to existing and future non-employee directors.
7
<PAGE> 10
TERMS OF THE PLAN
The Directors Plan was adopted by the Board of Directors on March 26, 1993
and approved by the stockholders of the Company on March 24, 1994.
The Directors Plan provides for the issuance of up to 42,000 shares of the
Company's Common Stock. Persons eligible for awards under the Directors Plan are
directors of the Company who are not employees and who are members of the Board
on the date an option is granted under the Directors Plan.
Under the Directors Plan, each non-employee director, on the later of the
effective date of the Directors Plan or the date the director is elected or
appointed to the Board, receives an a one-time grant to purchase 6,000 shares of
Common Stock at a purchase price equal to not less than the Fair Market Value of
the Common Stock on the date of grant. On February 23, 1996, the closing price
of the Common Stock on the Nasdaq Stock Market was $18.00 per share. The options
are exercisable in thirds, with the first one-third becoming exercisable on the
first anniversary date of grant. On each succeeding anniversary date of the
grant, the option may be exercised up to an additional 1/3 of the shares subject
to option, so that after the expiration of the third anniversary the option
shall be exercisable in full. To the extent not exercised, installments are
cumulative and may be exercised in whole or in part. All options granted under
the Directors Plan are non-qualified under the Internal Revenue Code, as
amended.
The Directors Plan is generally self-administered because the awards are
automatic and non-discretionary. To the extent necessary, the Board is
authorized to administer the Directors Plan. The Board may amend or terminate
the Directors Plan from time to time without stockholder approval, but no
amendment or termination shall increase the amount of Common Stock as to which
options may be granted, materially increase the benefits accruing to
participants under the Directors Plan, or materially modify the provisions
relating to the eligibility of directors to whom options may be granted without
the approval of the Company's stockholders, unless such amendment or
modification is permitted under Rule 16b-3 under the Exchange Act without
stockholder approval. No amendment, modification, or termination of the
Directors Plan shall in any manner affect any option granted under the Directors
Plan without the consent of the participant holding the option.
In the event that any dividend or other distribution (whether in the form
of cash, Common Stock, other securities, or other property), recapitalization,
stock split, reverse stock split, reorganization, merger, consolidation,
split-up, spin-off, combination, repurchase, or exchange of Common Stock or
other securities of the Company, issuance of warrants or other rights to
purchase Common Stock or other securities of the Company, or other similar
corporate transaction or event affects the Common Stock the Board may make such
adjustments, including in the number or type of shares authorized by the
Directors Plan, as it deems appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Directors Plan.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion is intended only as a brief summary of the federal
income tax rules relevant to the stock options. The following discussion is
limited to the federal income tax consequences and do not address the state or
local tax rules which may be relevant to the options.
A non-employee director is considered an insider for purposes of Section 16
of the Exchange Act and is subject to Section 16(b) thereof. As such, the
non-employee director who receives an option under the Directors Plan will not
recognize income on the exercise of a nonqualified option until the later of the
exercise date or the date the Section 16(b) restrictions lapse, at which time
the optionee will recognize income on the spread between the option price and
the fair market value on the later of the exercise date or the date the
restrictions lapse, and the Company will receive a corresponding deduction. In
the alternative, if the Section 16(b) restrictions have not lapsed on the date
of exercise, an optionee subject to Section 16(b) may file a Code Section 83(b)
election with the Internal Revenue Service within 30 days after the exercise of
the option and be taxed on the difference between the option price and the fair
market value of the shares on the date of exercise and the Company will receive
a corresponding tax deduction. When an optionee who has filed
8
<PAGE> 11
a Section 83(b) election disposes of the shares acquired by the exercise of the
option, any amount received in excess of the fair market value of the shares on
the date of exercise will be treated as long or short-term capital gain,
depending upon the holding period of the shares. Any ordinary income recognized
by a non-employee director under the foregoing rules is not subject to
withholding by the Company. However, a non-employee director must take such
income into account in determining the estimated tax payments such director is
required to make.
INFORMATION ABOUT OPTIONS GRANTED UNDER THE DIRECTORS PLAN
The following table provides information as to the number of options
granted under the Directors Plan, from its inception through February 23, 1996,
to the executive officers named in the Summary Compensation Table under "Further
Information -- Compensation of Executive Officers and Directors -- Executive
Compensation", all persons who received more than 5% of the options granted, all
current executive officers as a group, all directors (other than executive
officers) as a group and all other employees as a group. The exercise price of
all options granted to date under the Directors Plan was $5.25 and was equal to
the fair market value of the Common Stock as of the respective grant dates. All
such options become exercisable as specified by the Committee in the terms of
the grant award. All options terminate within 10 years of the date of grant. No
associates of the directors, executive officers or director nominees received
options under the Directors Plan, and no person other than those listed in the
table received more than 5% of the options granted under the Directors Plan.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
COMMON STOCK SUBJECT TO
NAME POSITION OPTIONS PREVIOUSLY GRANTED
- - ------------------------------------------ ----------------------------- --------------------------
<S> <C> <C>
Carl L. Bixby............................. President -0-
David O. Schupp........................... Vice President and Treasurer -0-
George W. Perrett......................... Vice President and Secretary -0-
All current executive officers as a group
(3) persons.............................
All directors who are not executive
officers as a group (6) persons......... 60,600(1)
All other employees and former employees
as a group.............................. -0-
</TABLE>
- - ------------------
(1) Includes 30,600 proposed to be granted if the Proposal to amend the
Directors Plan is approved.
RECOMMENDATION AND VOTE REQUIRED
The affirmative vote of the majority of the Company's Common Stock present
in person or by proxy and entitled to vote at the Annual Meeting is required to
approve the amendment to the Directors Plan. THE BOARD OF DIRECTORS RECOMMENDS A
VOTE FOR THE APPROVAL OF THIS PROPOSAL.
PROXIES WILL BE VOTED FOR THE APPROVAL OF THE AMENDMENT TO THE DIRECTORS
PLAN UNLESS OTHERWISE INDICATED ON THE PROXY.
9
<PAGE> 12
FURTHER INFORMATION
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
DIRECTORS COMPENSATION
Non-employee directors are paid an annual retainer of $4,000 and a fee of
$1,000 per meeting for attendance at regular Board meetings and $500 per meeting
for attendance at committee meetings not held in conjunction with a regular
Board meeting. Travel and lodging expenses incurred by directors residing
outside of the metropolitan Detroit area in order to attend meetings of the
Board are paid by the Company.
As additional consideration for their services to the Company, on April 24,
1987 non-employee directors, Garnel Graber, David Seigle and Robert Seigle, were
each granted options to purchase 5,000 shares of the Company's Common Stock at
the fair market value of $7.75 per share. After adjustment for the Company's
stock dividends and stock split, Messrs. Graber, David Seigle and Robert Seigle
each currently hold options to acquire 5,500 shares at $7.05 per share. The
options are exercisable for a ten-year period from the date of grant or until
the grantee ceases to serve on the Board, whichever is earlier.
On March 26, 1993, pursuant to the Company's 1993 Stock Plan for
Non-Employee Directors, Messrs. Graber, Handelman, Horst, David and Robert
Seigle were each granted options to purchase 6,000 shares of the Company's
Common Stock at the fair market value of $5.25 per share. The options are
exercisable in three equal annual installments, beginning March 23, 1994. The
options are exercisable for a ten-year period from the date of grant or until
the grantee ceases to serve on the Board, whichever is earlier.
On January 11, 1996, pursuant to the proposed amendment to the Company's
Stock Plan for Non-Employee Directors, and subject to stockholder approval at
this meeting, Messrs. Graber, Handelman, Horst, David and Robert Seigle were
each granted Subsequent Options to purchase 5,100 shares of the Company's Common
Stock an exercise price of $11.00 per share. In the event that stockholder
approval is not received, such Subsequent Options will be null and void. If
stockholder approval is received, the Subsequent Options will become exercisable
in three equal annual installments, beginning January 11, 1997. The options are
exercisable for a ten-year period from the date of grant or until the grantee
ceases to serve on the Board, whichever is earlier. See "IV -- Proposal to Amend
the 1993 Stock Plan for Non-Employee Directors".
On February 21, 1996, pursuant to the proposed amendment to the Company's
Stock Plan for Non-Employee Directors, and subject to stockholder approval at
this meeting, Mr. Semple was granted an Initial Option to purchase 5,100 shares
of the Company's Common Stock an exercise price of $17.875 per share. In the
event that stockholder approval is not received, such Initial Option will be
null and void, and, under the current terms of the Directors Plan, Mr. Semple
was be awarded a one-time grant to purchase 6,000 shares of Common Stock at a
price of $17.875 per share, exercisable in three equal annual installments,
beginning February 21, 1997. If stockholder approval is received, the Initial
Option will become exercisable in three equal annual installments, beginning
February 21, 1997. The options are exercisable for a ten-year period from the
date of grant or until the grantee ceases to serve on the Board, whichever is
earlier. See "IV -- Proposal to Amend the 1993 Stock Plan for Non-Employee
Directors".
EXECUTIVE COMPENSATION
The following table sets forth the cash compensation paid by the Company as
well as other compensation paid or accrued during the Company's last three
fiscal years ended September 30, 1995 to the Chief Executive
10
<PAGE> 13
Officer and the two most highly compensated executive officers of the Company in
all capacities in which they served:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION AWARDS
--------------------------------
ANNUAL COMPENSATION(1) SECURITIES
NAME AND ---------------------------------- UNDERLYING ALL OTHER
PRINCIPAL OCCUPATION FISCAL YEAR SALARY BONUS STOCK OPTIONS COMPENSATION(2)
- - ------------------------------------ ----------- -------- ------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Carl L. Bixby....................... 1995 $185,380 $ 7,248 -- $20,043
Chief Executive Officer, 1994 165,375 47,978 -- 17,166
President and Director 1993 157,500 85,932 60,000 27,091
George W. Perrett, Jr............... 1995 85,000 3,624 -- 15,164
Secretary and Director 1994 85,000 38,150 -- 7,389
1993 85,000 55,406 7,500 8,578
David O. Schupp..................... 1995 86,008 7,248 -- 16,321
Vice President, Treasurer and 1994 82,688 74,326 -- 10,901
Director 1993 78,750 55,406 7,500 9,854
</TABLE>
- - ------------------
(1) Includes compensation deferred at the election of the executive in the
category and year earned.
(2) "All Other Compensation" is comprised of (i) contributions made by the
Company to the accounts of each of the named executive officers under the
Company's 401(k) Plan with respect to each of the fiscal years ended
September 30, 1995, 1994 and 1993, respectively, as follows: Mr. Bixby
$9,196, $13,860 and $12,908; Mr. Perrett $9,684, $7,389 and $8,578; and Mr.
Schupp $10,676, $9,421 and $8,374; (ii) the dollar value of any life
insurance premiums paid by the Company in the fiscal years ended September
30, 1995, 1994 and 1993, respectively, with respect to term life insurance
for the benefit of each of the named executives as follows: Mr. Bixby
$4,217, $3,306 and $14,183 and Mr. Schupp $1,480, $1,480 and 1,480 and
(iii) a car allowance paid by the Company in the fiscal year ended
September 30, 1995, respectively, as follows, for Mr. Bixby, $6,630, Mr.
Perrett, $5,480 and Mr. Schupp, $4,165.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR ("FY")-END OPTION/SAR VALUES
The following table provides information with respect to the named
executive officers concerning the exercise of options during 1995 and
unexercised options held as of the end of the Company's last fiscal year,
September 30, 1995. All options were granted under the Company's 1992 Stock
Option Plan or the now terminated 1982 Stock Option Plan.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING VALUE OF
UNEXERCISED UNEXERCISED
OPTIONS IN-THE-MONEY
SHARES VALUE AT FY-END(#) OPTIONS
ACQUIRED ON REALIZED EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) ($)(1) UNEXERCISABLE UNEXERCISABLE(1)
- - -------------------------------------------- ----------- -------- ------------- ----------------
<S> <C> <C> <C> <C>
Carl L. Bixby............................... -0- -0- 96,000/20,000 $34,372/12,500
George W. Perrett........................... -0- -0- 48,750/ 2,500 7,811/ 1,563
David O. Schupp............................. -0- -0- 13,000/ 2,500 7,811/ 1,563
</TABLE>
- - ------------------
(1) The dollar values in these columns are calculated by determining the
difference between the fair market value (on the date of exercise, in the
case of exercised options, or at the fiscal year end, in the case of
exercisable options) of the securities underlying the options and the
exercise price of the option. At the Company's 1995 fiscal year end
(September 30, 1995) and on February 23, 1996, the fair market value of the
Common Stock was $5.875 and $18.00, respectively. The dollar values in this
table as well as all other tables contained in this proxy are calculated on
a pre-tax basis.
11
<PAGE> 14
CERTAIN TRANSACTIONS AND RELATED TRANSACTIONS
1. THE EXECUTIVE LOAN PROGRAM
In October 1995, the Board of Directors of the Company adopted the
Interface Systems, Inc. Executive Loan Program (the "Executive Loan Program")
which provides for the making of loans to the executive officers of the Company
to enable such officers to purchase shares of the Company's common stock on the
open market or in privately negotiated sales.
The Executive Loan Program was adopted to encourage key executives in
acquiring and maintaining a significant equity interest in the Company's Common
Stock thereby aligning their interests with the interests of the Company's
stockholders. The following summarizes the principal features of the Executive
Loan Program.
All senior executives of the company are eligible to participate in the
Executive Loan Program. The maximum amount of any loan or loans outstanding to
any one executive cannot exceed Five Hundred Thousand Dollars ($500,000).
Loans under the program bear interest at a rate equal to the greater of the
Applicable Federal Rate for the month in which the loan was issued or the
interest rate paid by the Company on its corporate borrowings but shall not
exceed the maximum rate permitted by law. Such interest is payable annually.
Loans under the Program are required to be secured by collateral. Collateral can
include, any other things, a pledge or common stock of the Company owned by the
executive or a security interest in the real or other personal property of the
executive. The Company has the right to offset from the amounts owed by the
Company to the executive against any amount of the loan that remains unpaid.
The Program is administered by Garnel F. Graber or such other individual or
entity selected by the Company's Board of Directors. The Administrator shall
have the power to make all determinations needed in connection with the
Executive Loan Program, to adopt forms of loan documents, to exercise all rights
and powers allocated to the Company and to do anything else which is helpful or
necessary to the proper operation of the Executive Loan Programs.
On December 1, 1995, the Company made a loan under the Executive Loan
Program to Carl L. Bixby in the principal amount of $500,000. Mr. Bixby's loan
bears interest at a rate of 5.79% and is secured by shares of Common Stock of
the Company owned by Mr. Bixby. As of February 23, 1996, $500,000 in principal
amount was outstanding under the loan.
On February 21, 1996, the Company made a loans under the Executive Loan
Program to George Perrett and David O. Schupp, in the principal amounts of
$55,000 and $80,000, respectively. Each such loan bears interest at a rate of
5.50%. Mr. Perrett's and Mr. Schupp's loans are secured by shares of Common
Stock of the Company owned by Mr. Perrett and shares of Common Stock of the
Company, and other public company common stock, owned by Mr. Schupp,
respectively. As of February 23, 1996, $55,000 and $80,000 in principal amount
were outstanding under Mr. Perrett's and Mr. Schupp's loans, respectively.
2. ADVANCE
On December 1, 1995, the Company advanced Mr. Bixby the sum of $150,000 to
enable Mr. Bixby to purchase shares of Common Stock of the Company. Mr. Bixby
repaid such advance on December 31, 1995.
COMMITTEE REPORT ON EXECUTIVE COMPENSATION TO STOCKHOLDERS
The Company's Compensation Committee consists of five directors who are not
employees of the Company (Garnel F. Graber, Milton Handelman, G. Paul Horst,
David C. Seigle, and Robert A. Seigle).
12
<PAGE> 15
COMPENSATION PHILOSOPHY
The Company's compensation policy is designed to provide competitive
compensation which rewards individual achievement and performance while
encouraging above average corporate performance. As part of the Company's
policy, the Company does not enter into contracts with its executive officers.
The elements of compensation are base salary, bonus and stock option awards.
BASE SALARY
The Committee reviews the base salary of each executive officer annually.
The base salary for each officer is determined after the committee reviews
competitive executive compensation data and evaluations of each officer's duties
and performance, submitted by the chief executive officer. The base compensation
for the chief executive officer is established by a determination of the same
factors.
BONUS
The Company's bonus policy is designed to encourage increased profitability
and, thus, is based on a formula linked to the Company's earnings per share
performance. In 1995, the executive officers, including the chief executive
officer, were eligible for and each was paid a bonus of $500 to $1,000 per $.01
per share of operating net earnings. In addition, the chief executive officer
was eligible for a bonus of $2,000 for each $.01 up to $.55 per share of
operating net earnings and was eligible for a bonus of $4,000 for each $.01 over
$.55 per share of operating net earnings.
STOCK OPTIONS
The Company's stock option plan is designed to retain key employees and
motivate officers to improve the Company's performance. No options were granted
to any of the Company's executive officers in fiscal 1995.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
The Company has reviewed the recent amendments to the Internal Revenue Code
and related regulations of the Internal Revenue Service which restrict
deductibility of executive compensation paid to any of its most highly
compensated executive officers at the end of any fiscal year to the extent such
compensation exceeds $1,000,000 in any year. The Committee does not believe that
the Company's current compensation program for executive officers is likely to
result in payments to any executive officer in the 1996 fiscal year which would
be subject to the restriction on deductibility, and therefore concluded that no
further action with respect to qualifying such compensation for deductibility
was necessary at this time. The Committee will continue to evaluate the
advisability of qualifying future executive compensation programs for
deductibility under the Internal Revenue Code.
The Committee continually reviews the compensation policies established for
the Company's executive officers but is not obligated to modify such policies
from year to year.
Garnel F. Graber
Milton Handelman
G. Paul Horst
David A. Seigle
Robert A. Seigle
February 21, 1996
13
<PAGE> 16
STOCK PRICE PERFORMANCE GRAPH
The following graph provides a comparison with the stated indices of the
cumulative five-year total stockholder return on the Company's Common Stock. All
dividends are assumed to be have been reinvested over the five year period. The
indices used are the Center for Research in Securities Prices Total Return Index
for the NASDAQ Stock Market (U.S. Companies) and the published index relating to
the NASDAQ Computer Manufacturer Stocks.
<TABLE>
<CAPTION>
NASDAQ
Measurement Period Interface NASDAQ (U.S. (Computer
(Fiscal Year Covered) Systems, Inc. Companies) Mfgrs.)
<S> <C> <C> <C>
1990 100.00 100.00 100.00
1991 128.57 157.33 169.35
1992 100.00 176.34 182.15
1993 140.48 230.97 191.15
1994 148.67 232.86 212.82
1995 191.49 321.47 377.24
</TABLE>
14
<PAGE> 17
INDEPENDENT PUBLIC ACCOUNTANTS
BDO Seidman, independent public accountants, audited the financial
statements of the Company for the fiscal year ended September 30, 1995. It is
anticipated that the Board of Directors will select BDO Seidman to audit the
financial statements of the Company for the fiscal year ending September 30,
1996 at its meeting immediately following the Annual Meeting of Stockholders.
Representatives of BDO Seidman are expected to be present at the Annual Meeting
to be available to respond to questions from the Stockholders and, if they
desire, will have an opportunity to make any statement they consider
appropriate.
OTHER MATTERS AND STOCKHOLDER PROPOSALS
At the date of this Proxy Statement, management is not aware of any matters
to be presented for action at the meeting other than those described above.
However, if any other matters should come before the meeting, it is the
intention of the persons named in the accompanying Proxy to vote in accordance
with their judgment on such matters.
Any proposals of stockholders to be presented at the 1996 Annual Meeting
which are eligible for inclusion in the Company's proxy statement for that
meeting under applicable rules of the Securities and Exchange Commission must be
received by the Company at the address of its principal offices set forth in
this Proxy Statement no later than November 9, 1996.
Stockholder proposals to be presented at the 1997 Annual Meeting which are
not to be included in the Company's Proxy Statement relating to that meeting
generally must be received by the Company not less than 60 days nor more than 90
days prior to the first anniversary of the preceding year's annual meeting. If
the meeting date has been advanced by more than 30 days or delayed by more than
60 days, then such proposal must be received by the Company not less than 60
days nor more than 90 days before the upcoming annual meeting or no later than
10 days after the day of the public announcement of the date of such meeting, in
accordance with the procedures set forth in the Company's Bylaws, in order to
properly be brought before the Annual or Special Meeting.
By Order of the Board of Directors,
CARL L. BIXBY, President
Ann Arbor, Michigan
March 8, 1996
15
<PAGE> 18
FIRST AMENDMENT TO
INTERFACE SYSTEMS, INC.
1993 STOCK PLAN FOR NON-EMPLOYEE DIRECTORS
Pursuant to the Amendment provisions in Section 13 of the Interface
Systems, Inc. 1993 Stock Plan for Non-Employee Directors (the "Plan"), the Plan
is hereby amended as set forth below.
1. Subject to stockholder approval at the Company's next Annual Meeting,
effective January 11, 1996, Sections 5 (Stock) and 6 (Award of Options) shall
be amended and restated in their entirety to read as follows:
5. Stock. The stock subject to options under the Plan shall be Common
Stock. The total amount of Common Stock on which options may be granted
under the Plan shall not exceed 175,000 shares, subject to adjustment
in accordance with Section 12. Shares subject to any unexercised portion
of a terminated, cancelled, forfeited or expired option granted under the
Plan may again be available for subsequent option grants under the Plan.
6. Award of Options. On the later of the effective date of the Plan
or the date on which a participant becomes a member of the Board, each
participant shall automatically and without discretion be granted an
initial option to purchase 5,100 shares of Common Stock (an "Initial
Option") with an exercise price equal to the Fair Market Value per share
of Common Stock on the day of grant. Subsequent thereto, (a) on January
11, 1996, and every third January 11 thereafter, until the termination of
the Plan, every participant who is a member of the Board of Directors on
January 11, 1996, shall automatically and without discretion be granted
an option to purchase 5,100 shares of Common Stock (a "Subsequent
Option") with an exercise price equal to the Fair Market Value per share
of Common Stock on the date of grant, and (b) on the third anniversary of
the date a person became a member of the Board of Directors and,
thereafter, on the third anniversary of the date of grant of the prior
Subsequent Option until the termination of the Plan, every participant
who becomes a member of the Board of Directors after January 11, 1996,
shall automatically and without discretion be granted a Subsequent Option
to purchase 5,100 shares of Common Stock with an exercise price equal to
the Fair Market Value per share of Common Stock on the date of grant.
References herein to options shall mean both Initial and Subsequent
Option. Options granted pursuant to this Plan shall be Non-Qualified
Stock Options. Each option granted under the Plan shall meet all the
terms and conditions of the Plan.
THIS FIRST AMENDMENT is hereby adopted as of January 11, 1996.
INTERFACE SYSTEMS, INC.
By:______________________________
Name:
Title:
1
<PAGE> 19
FIRST AMENDMENT TO
INTERFACE SYSTEMS, INC.
1992 STOCK OPTION PLAN
Pursuant to the Amendment provisions in Section 13 of the Interface
Systems, Inc. 1992 Stock Option Plan (the "Plan"), the Plan is hereby amended
as set forth below.
1. Subject to stockholder approval at the Company's next Annual Meeting,
effective February 21, 1996, Section 5 (Stock) shall be amended and restated in
their entirety to read as follows:
5. Stock. The stock subject to options under the Plan shall be the
Common Stock, and may be either authorized and unissued shares or
treasury shares held by the Company. The total amount of Common
Stock on which options may be granted under the Plan shall not exceed
800,000 shares, subject to adjustment in accordance with Section 11.
Shares subject to any unexercised portion of a terminated, cancelled or
expired option granted under the Plan may again be subjected to options
under the Plan.
THIS FIRST AMENDMENT is hereby adopted as of February 21, 1996.
INTERFACE SYSTEMS, INC.
By: ___________________________
Name:
Title:
1
<PAGE> 20
PROXY INTERFACE SYSTEMS, INC. PROXY
The undersigned hereby constitutes and appoints Carl L. Bixby and David
O. Schupp, or either of them, attorneys, agents and proxies with power of
substitution to vote all of the shares of Common Stock of Interface Systems,
Inc. (the "Company") that the undersigned is entitled to vote at the Annual
Meeting of Stockholders of the Company, to be held at Weber's Inn, 3050 Jackson
Road, Ann Arbor, Michigan on April 19, 1996 at 3:00 p.m., local time, and at any
adjournments thereof, upon the following matters:
1. Election of Directors: / / FOR all nominees / / WITHHOLD AUTHORITY
listed below (except to vote for all
as indicated to the nominees listed
contrary below) below
Robert A. Seigle Garnel F.Graber Lloyd A. Semple
(INSTRUCTION: To withhold authority to vote for any individual nominee
write that nominee's name in the space provided below.)
----------------------------------------------------------------------
2. Approval of the Amendment to the Company's Certificate of
Incorporation
/ / FOR / / AGAINST / / ABSTAIN
3. Approval of an Amendment to the Company's 1992 Stock Option Plan
/ / FOR / / AGAINST / / ABSTAIN
4. Approval of an Amendment to the Company's 1993 Stock Plan for
Non-Employee Directors
/ / FOR / / AGAINST / / ABSTAIN
5. In their discretion upon the transaction of such other business as
may properly come before the meeting.
SHARES REPRESENTED BY A DULY EXECUTED PROXY WHICH DOES NOT INDICATE
HOW IT WILL BE VOTED, WILL BE VOTED FOR THE ELECTION OF THE BOARD'S
NOMINEES, FOR THE AMENDMENT TO THE COMPANY'S CERTIFICATE OF
INCORPORATION, FOR THE AMENDMENT TO THE COMPANY'S 1992 STOCK OPTION
PLAN AND FOR THE AMENDMENT TO THE COMPANY'S 1993 STOCK PLAN FOR
NON-EMPLOYEE DIRECTORS. DISCRETIONARY AUTHORITY IS HEREBY CONFERRED AS
TO ANY OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
(CONTINUED AND TO BE SIGNED ON OTHER SIDE)
The undersigned acknowledges receipt of the Notice of Annual
Meeting of Stockholders and the Proxy Statement dated March 8, 1996,
and ratifies all that the proxy holders or either of them or their
substitutes may lawfully do or cause to be done by virtue hereof and
revokes all former proxies.
--------------------------------
(Signature)
--------------------------------
(Signature)
Dated:
-------------------------
NOTE: Please sign exactly as name(s) appear(s) on stock records.
When signing as attorney, administrator, trustee, guardian or
corporate officer, please so indicate.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF INTERFACE
SYSTEMS, INC.
