<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:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
INTERFACE SYSTEMS, INC.
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(Name of Registrant as Specified in Its Charter)
N.A.
- -------------------------------------------------------------------------------
(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:
- --------------------------------------------------------------------------------
(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:
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(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 FEBRUARY 20, 1998
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, February 20, 1998 at 10:00 a.m. local time,
for the following purposes:
1. To elect six directors who will serve until the Annual Meeting of
Stockholders in 1999.
2. To consider and act upon the approval of a change in the Company's state
of incorporation from Delaware to Michigan.
3. To consider and act upon the adoption of the Employee Stock Purchase
Plan.
4. To consider and act upon the approval of an amendment to the 1993 Stock
Plan for Non-Employee Directors to provide the Board of Directors with
discretionary authority to grant options under such plan from time to
time for such number of shares of Common Stock and upon such other terms
as it may designate.
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 December 31, 1997 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,
ROBERT A. NERO
ROBERT A. NERO, President
Ann Arbor, Michigan
January 20, 1998
<PAGE> 3
INTERFACE SYSTEMS, INC.
PROXY STATEMENT
1998 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, February 20, 1998, 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 January
20, 1998. The mailing address of the Company's principal executive offices is
5855 Interface Drive, Ann Arbor, Michigan 48103.
The Company's Annual Report to Stockholders for the year ended September
30, 1997 is enclosed herewith.
Only stockholders of record at the close of business on December 31, 1997
will be entitled to vote at the meeting or any adjournment thereof. On that
date, 4,424,944 shares of Common Stock, $.10 par value per share (the "Common
Stock") were issued and outstanding. Each stockholder is entitled to one vote
for each share held of record on the record date. Shares cannot be voted at the
Annual Meeting unless the holder is present in person or represented by proxy.
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 February 19, 1998.
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. Stockholders who
execute a proxy in the accompanying form may nevertheless revoke the proxy at
any time before it is exercised by giving written notice to the Secretary of the
Company bearing a later date than the proxy, by submitting a later-dated proxy,
or by voting the shares represented by such proxy in person at the Annual
Meeting.
The election of directors will require the affirmative vote of a plurality
of the shares of Common Stock represented and voting in person or by proxy and
entitled to vote at the Annual Meeting. The proposal to change the Company's
state of incorporation from Delaware to Michigan will require the affirmative
vote of a majority of the outstanding shares of Common Stock. The adoption of
the proposals relating to the approval of (i) the Employee Stock Purchase Plan
and (ii) the amendment to the 1993 Stock Plan for Non-Employee Directors to
provide the Board of Directors with discretionary authority to grant options
under such plan, will require the affirmative vote of a majority of the Common
Stock represented in person or by proxy and entitled to vote at the Annual
Meeting. In determining whether any proposal has received the requisite number
of affirmative votes, abstentions and broker non-votes will be counted and have
the same effect as a vote against the proposal. Abstentions and broker non-votes
will not be counted as votes cast in connection with determining the plurality
required to elect a director and will have no effect on the outcome of that
vote.
<PAGE> 4
MATTERS TO COME BEFORE THE MEETING
I. ELECTION OF DIRECTORS
Six directors will be elected, each to hold office until the Company's 1999
Annual Meeting and until his successor is elected and qualified, or until the
director's resignation or removal. All of the nominees are currently directors
of the Company. The individuals who will be nominated by the Board of Directors
for election at the Annual Meeting are listed below. 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.
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 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>
FIRST ELECTED
OR
NAME AND AGE PRINCIPAL OCCUPATION APPOINTED DIRECTOR
------------ -------------------- ------------------
<S> <C> <C>
Garnel F. Graber, 66........... Retired 1974
Robert A. Nero, 51............. President and Chief Executive Officer of the 1997
Company
Bruce E. Rhoades, 49........... President, Bruce E. Rhoades Consulting, Inc., a 1997
business consulting firm
David C. Seigle, 58............ President, Technology Edge, Inc., a franchisor of 1969
computer resellers
Robert A. Seigle, 70........... President of Concord Personnel, Inc., a personnel 1969
recruiting company
Lloyd A. Semple, 58............ Attorney and Chairman Dykema Gossett PLLC, a 1996
Detroit, Michigan law firm
</TABLE>
Mr. Nero was appointed President and Chief Executive Officer of the Company
in January 1997. Prior to that time, he was from 1994 to 1996, President of Bell
& Howell PSC and, from 1989 to 1994, Vice President of Legent Corp.
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 his retirement. Mr. Graber also serves on the Board of
Directors of Nematron Corporation.
Mr. Rhoades has been President of Bruce E. Rhoades Consulting, Inc. since
April 1995. Prior to that time, Mr. Rhoades was, from 1992 to 1995, Vice
President of Strategy and Business Development of Lexis-Nexis, Inc., an
electronic information retrieval company and a division of Mead Corp.
Mr. David C. Seigle retired in November 1991 and, in 1996, became the
President of Technology Edge, Inc. Prior to his retirement in 1991, Mr. Seigle
was Vice President of File Net Corporation, a manufacturer of document image
processors.
Mr. Robert A. Seigle has served as President of Concord Personnel, a
personnel recruiting company, for over five years.
Mr. Semple has been an attorney with Dykema Gossett PLLC for 33 years and
Chairman of such law firm since January 1, 1996. Dykema Gossett provides legal
services to the Company.
David C. Seigle and Robert A. Seigle are first cousins.
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MEETINGS AND COMMITTEES OF THE BOARD
During the Company's fiscal year ended September 30, 1997, the Board of
Directors held six meetings and the Compensation Committee and Audit Committee
met two times and one time, respectively. 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 currently consists of five
directors who are not employees of the Company (i.e., Messrs. Graber, Rhoades,
Semple, Robert A. Seigle and David C. 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, 1997, each director attended 75%
or more of all Board meetings and 75% or more of the meetings held by all
committees of the Board on which such director served.
II. PROPOSAL TO APPROVE A CHANGE IN THE COMPANY'S STATE OF INCORPORATION FROM
DELAWARE TO MICHIGAN
INTRODUCTION
At the Annual Meeting, the stockholders of the Company will consider and
vote upon a proposal to change the state of incorporation of the Company from
Delaware to Michigan (the "Reincorporation Proposal") by adoption of the
Agreement and Plan of Merger (the "Merger Agreement"), attached hereto as
Appendix A. The Company's Board of Directors has unanimously approved the
Reincorporation Proposal and, for the reasons set forth below, believes that
approval of the Reincorporation Proposal is in the best interests of the Company
and its stockholders. Approval of the Reincorporation Proposal will effect a
change in the legal domicile of the Company and certain other changes described
in this Proxy Statement.
Stockholder approval of the Reincorporation Proposal will constitute
approval of: (i) the Merger Agreement and all transactions relating to it; and
(ii) the change of the name of the surviving corporation from "Michigan
Interface Systems, Inc." to "Interface Systems, Inc."
The following discussion summarizes certain aspects of the Reincorporation
Proposal. This summary is not intended to be complete and is qualified in its
entirety by reference to the Merger Agreement attached hereto as Appendix A and
to Michigan Interface Systems, Inc.'s Articles of Incorporation ("Articles") and
Bylaws, attached hereto as Appendices B and C.
THE MERGER
The proposed reincorporation will be accomplished by merging the Company
into a wholly-owned subsidiary of the Company ("Michigan Interface Systems,
Inc.") formed under the laws of the State of Michigan solely for the purpose of
reincorporating the Company in that state. Immediately prior to the Effective
Time of the Merger (as defined in the Merger Agreement), Michigan Interface
Systems, Inc. will have no operating history, assets or liabilities. The Merger
Agreement provides that the Merger may be abandoned at any time prior to the
Effective Time of the Merger at the discretion of the Board of Directors of the
Company.
Approval of the Reincorporation Proposal will not result in any change in
the name, business, management, location of the principal executive officers,
assets or liabilities of the Company. The Board of Directors of Michigan
Interface Systems, Inc. will be comprised of the six (6) nominees for election
as directors of the Company who are currently serving as directors of the
Company (assuming their re-election -- See "Election of Directors"). Each of the
officers of Michigan Interface Systems, Inc. is currently serving as an officer
of the Company.
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Michigan Interface Systems, Inc. will succeed to all assets and liabilities
of the Company. The stated purposes of Michigan Interface Systems, Inc., as set
forth in its Articles, will permit the Company in the future to enter into any
lawful business activity, with such power and authority as is equivalent to the
Company's current status under Delaware law and its present Certificate of
Incorporation.
Michigan Interface Systems, Inc. was incorporated with an initial
capitalization of 60,000 shares of Common Stock. The Company intends to amend
the Articles of Incorporation of Michigan Interface Systems, Inc. to increase
its authorized shares of Common Stock from 60,000 to 12,500,000 if the
stockholders approve the Reincorporation Proposal. This amendment would become
effective prior to the Effective Time of the Merger.
Pursuant to the Merger Agreement, at the Effective Time of the Merger, each
outstanding share of the Company's Common Stock, par value $ 0.10 per share,
will automatically be converted into one share of Common Stock of Michigan
Interface Systems, Inc., the surviving corporation. Each outstanding certificate
representing shares of the Company's Common Stock will continue to represent the
same number of shares of Michigan Interface Systems, Inc. Common Stock. IT WILL
NOT BE NECESSARY FOR STOCKHOLDERS OF THE COMPANY TO EXCHANGE THEIR EXISTING
STOCK CERTIFICATES FOR STOCK CERTIFICATES OF MICHIGAN INTERFACE SYSTEMS, INC.
The Company's Common Stock will continue to be traded on the Nasdaq Stock Market
National Market as at the present time. Delivery of the Company's Common Stock
certificates will constitute "good delivery" for transactions following the
Merger.
The Company's stock option and stock purchase plans will be continued by
Michigan Interface Systems, Inc., and each option or other right with respect to
the Company's Common Stock issued pursuant to such plans will automatically be
converted into an option or right with respect to the same number of shares of
Michigan Interface Systems, Inc. Common Stock, upon the same terms and subject
to the same conditions as set forth in the applicable plan. Other employee
benefit plans and arrangements of the Company will be continued by Michigan
Interface Systems, Inc. upon the terms and subject to the conditions currently
in effect.
If the Company's stockholders approve the Reincorporation Proposal, the
Merger will take effect on the date upon which the Certificate of Merger is
filed with the appropriate offices of the States of Michigan and Delaware, which
filing is anticipated to be as soon as practicable after approval of the Merger
Agreement by the Company's stockholders.
PURPOSE OF PROPOSED REINCORPORATION
The Board of Directors of the Company believes that the best interests of
the Company and its stockholders will be served by changing the Company's state
of incorporation from Delaware to Michigan. The Company was organized under the
laws of the State of Delaware in 1969 as a result of the consolidation of
Kencorp, Inc. with Interface, Inc. The Board of Directors has determined that
the Company can reincorporate in Michigan and maintain substantially all of the
benefits of doing business as a Delaware corporation, but without the
significant tax burden imposed by the State of Delaware, as described below. The
Company's executive offices are located in Michigan and the Reincorporation
Proposal is consistent with the Company's strong connections to the State of
Michigan.
The Delaware annual franchise taxes are significantly greater than those
Michigan imposes on corporations organized under its laws. The Delaware
franchise tax for the Company was approximately $22,000 in 1996 and is expected
to be approximately $27,000 in 1997. The fees for the Company, if incorporated
in Michigan, would be initial fees of approximately $8,810 and a $15 annual fee
thereafter.
COMPARISON OF STOCKHOLDERS RIGHTS
GENERAL
Upon consummation of the Merger, the Company will be governed by the
Articles of Incorporation and Bylaws of Michigan Interface Systems, Inc. and the
Michigan Business Corporation Act ("Michigan Law"),
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which differ in some respects from the Company's Certificate of Incorporation
and Bylaws and the General Corporation Law of Delaware ("Delaware Law"). The
Articles of Incorporation and Bylaws of Michigan Interface Systems, Inc. are
attached to this Proxy Statement as Appendices B and C, respectively. If the
Reincorporation Proposal is approved, Article I of the Articles of Incorporation
of Michigan Interface Systems, Inc. will be amended to change the name of
Michigan Interface Systems, Inc. to "Interface Systems, Inc.," and Article III
will be amended to increase the authorized shares of Common Stock from 60,000 to
12,500,000.
Although it is impractical to note all of such differences, the following
is a summary of certain differences which may affect the rights and interests of
the Company's stockholders. Except as set forth below, the Board does not
believe that the reincorporation would materially affect the rights of the
stockholders of the Company.
ANTI-TAKEOVER PROVISIONS
Delaware Law prohibits certain transactions between a Delaware corporation
and an "interested stockholder," which is defined as a person that is directly
or indirectly a beneficial owner of 15% or more of the voting power of the
outstanding voting stock of a Delaware corporation and such persons' affiliates
and associates. This provision prohibits certain business combinations (defined
broadly to include mergers, consolidations, sales, leases, exchanges, mortgages,
pledges, transfers, or other dispositions of assets having an aggregate value
equal to 10% or more of either the consolidated assets of the corporation or the
aggregate market value of all the outstanding stock of the corporation, and
certain other transactions) between an interested stockholder and a corporation
for a period of three (3) years after the date the interested stockholder became
an interested stockholder. However, the prohibition does not apply if: (i) the
business combination or the transaction which resulted in the interested
stockholder becoming an interested stockholder is approved by the corporation's
board of directors prior to such time; (ii) upon consummation of the transaction
which resulted in the stockholder becoming an interested stockholder, such
stockholder owned at least 85% of the voting stock of the corporation (excluding
shares held by directors of the corporation who are also officers and shares
held under certain employee stock plans); or (iii) at or subsequent to such time
the business combination is approved by a majority of the board of directors and
authorized at an annual or special meeting of stockholders, and not by written
consent, by the affirmative vote of at least two-thirds of the outstanding
voting stock which is not owned by the interested stockholder. This provision of
Delaware Law applies automatically to a Delaware corporation unless otherwise
provided in its certificate of incorporation or bylaws, it has less than 2,000
stockholders of record, it does not have voting stock listed on a national
securities exchange or listed or authorized for quotation on the Nasdaq Stock
Market, or certain other circumstances.
Michigan Interface Systems, Inc. automatically will become subject to
Chapters 7A and 7B of Michigan Law at the Effective Time of the Merger. Chapter
7A of Michigan Law provides that business combinations between a Michigan
corporation which is subject to Chapter 7A and a beneficial owner of 10% or more
of the voting power of such corporation require an advisory statement from the
board of directors and the approval by an affirmative vote of at least 90% of
the votes of each class of stock entitled to be cast and at least 2/3 of the
votes of each class of stock entitled to be cast other than shares owned by such
10% owner. Such requirements will not apply if (i) the corporation's board of
directors approves the transaction prior to the time that the 10% owner becomes
such or (ii) the transaction satisfies certain fairness standards, certain other
conditions are met and the 10% owner has been such for at least five years.
Chapter 7B of Michigan Law provides that, "control shares" of a corporation
subject to Chapter 7B that are acquired in a control share acquisition have no
voting rights except as granted by the corporation. "Control shares" are shares
that, when added to all shares previously owned by a stockholder, increase such
stockholder's voting stock to 20% or more, 33 1/3% or more or a majority of the
outstanding voting power of the corporation. A control share acquisition must be
approved by a majority of the votes cast by the corporation's stockholders
entitled to vote, excluding shares owned by the acquirer and certain officers
and directors. Delaware Law has no similar provision.
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Chapters 7A and 7B of Michigan Law, like the anti-takeover provisions under
Delaware Law, may discourage persons seeking to acquire control of a corporation
from proceeding without negotiating the terms of such acquisition with the Board
of Directors. If the stockholders approve the Reincorporation Proposal, Chapters
7A and 7B of Michigan Law may have the effect of discouraging a future takeover
attempt which is not approved by the Board of Directors but which the
stockholders may deem to be in their best interests or in which the stockholders
may receive a substantial premium for their shares over then current prices.
LIMITATION ON DIRECTORS' LIABILITY
The Company's Certificate of Incorporation provides that a director shall
not be liable to the corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director, except (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders; (ii) for acts
or omissions not in good faith or which involve intentional misconduct or
knowing violation of law; (iii) under Section 174 of the Delaware Law (involving
unlawful payments of dividends or unlawful stock repurchases or redemption); or
(iv) for any transactions from which the director derived an improper personal
benefit. The Certificate also provides that if the Delaware Law is amended to
permit further limiting of the personal liability of directors of the Company,
then the liability of the Company's directors to the Company and its
stockholders shall be limited to the fullest extent permitted by such law, as
amended.
The Articles of Michigan Interface Systems, Inc. limit the liability of
directors to the corporation or its stockholders to the fullest extent permitted
by Michigan Law. Directors would not be personally liable to Michigan Interface
Systems, Inc. or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for (i) the amount of a financial benefit received by
a director to which he or she is not entitled; (ii) intentional infliction of
harm on the corporation or the shareholders; (iii) a violation of Section 551 of
Michigan Law (involving unlawful distributions to stockholders and loans to
directors, officers or employee contrary to Michigan Law); or (iv) an
intentional criminal act. The Articles also provide that if Michigan Law is
amended to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of directors of Michigan
Interface Systems, Inc. shall be eliminated or limited to the fullest extent
permitted by Michigan Law, as amended.
PAYMENT OF DIVIDENDS
Under Delaware Law, a corporation may generally pay dividends out of
surplus or, if there is no surplus, out of the net profits for the fiscal year
in which the dividend is declared and/or the preceding fiscal year, unless the
capital of the corporation has been diminished by depreciation in the value of
its property, losses, or otherwise, to an amount less than the aggregate amount
of the capital represented by issued outstanding stock of all classes having a
preference upon the distribution of assets. A Michigan corporation may not pay
dividends or make any other distribution to its stockholders if, after giving
effect to the payment, the corporation would not be able to pay its debts as
they became due in the usual course of business, or the corporation's assets
would be less than its liabilities plus, unless the Articles permit otherwise,
the amount required, if the corporation were to be dissolved at the time of
distribution, to satisfy preferential rights upon dissolution of stockholders
whose preferential rights are superior to those receiving the distribution.
APPRAISAL RIGHTS
Under Michigan Law and Delaware Law, holders of shares have the right, in
certain circumstances, to dissent from certain extraordinary corporate
transactions as to which they have voting rights and to demand payment in cash
for their shares equal to the fair value of such shares, as determined by
agreement with the corporation or by a court in an action timely brought by the
corporation or the dissenters.
Delaware Law excludes appraisal rights in most situations where the shares
held are listed on a national securities exchange or designated as national
market system securities on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or held of record by 2,000 or more
stockholders. Appraisal rights are also not available for any shares of a
corporation surviving a merger if the merger did not require for its approval
the vote of the stockholders of the surviving corporation under Delaware Law.
Delaware Law,
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however, provides that notwithstanding such exclusion, shares shall have
appraisal rights if in the merger such shares receive anything except one or
more of the following: (i) shares of the surviving corporation, (ii) shares
listed on a national securities exchange or designated as national market system
securities or held of record by more than 2,000 stockholders, (iii) cash in lieu
of fractional shares, or (iv) any combination of shares described in (i), (ii),
and (iii).
Michigan Law excludes appraisal rights for certain corporate actions (i)
where the shares are listed on a national securities exchange or designated as
national market system securities on an interdealer quotation system by the
National Association of Securities Dealers, Inc. and (ii) in certain
transactions where stockholders receive cash or shares that satisfy the
requirements of (i).
POSSIBLE DISADVANTAGES
Despite the belief of the Company's Board of Directors that the
Reincorporation Proposal is in the best interests of the Company and its
stockholders, stockholders should be aware that Michigan Law and its provisions
have not received the same extent of scrutiny and interpretation by the courts
as has Delaware Law. Delaware Law is widely regarded as the most extensive and
well-defined body of corporate law in the United States. Because of Delaware's
prominence as a state of incorporation for many major corporations, both the
legislature and courts in Delaware have demonstrated an ability and willingness
to act quickly and effectively to meet changing business needs. Furthermore,
Delaware corporations are often guided by the extensive body of court decisions
interpreting Delaware's corporate law.
Michigan Law is a modern corporation statute, which was significantly
updated in 1989 and further amended in 1997. The Company's Board of Directors
believes that Michigan Law, as supplemented by its legislative history, will
provide Michigan Interface Systems, Inc. with a comprehensive flexible legal
structure under which to operate. Furthermore, Michigan courts have frequently
referred to the analysis of the Delaware courts in addressing issues raised by
similar provisions of Michigan Law and Delaware Law.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The Merger provided for in the Merger Agreement is intended to qualify as a
tax-free reorganization under the Internal Revenue Code of 1986, as amended (the
"Code") and, no gain or loss will be recognized by the holders of the Company's
Common Stock upon conversion of their shares into Michigan Interface Systems,
Inc. Common Stock. The basis of Michigan Interface Systems, Inc. Common Stock
received by the Company's stockholders will be the same as the basis of the
Company's Common Stock converted into Michigan Interface Systems, Inc. Common
Stock. The holding period of the Michigan Interface Systems, Inc. Common Stock
will include the period during which the Company's Common Stock converted into
Michigan Interface Systems, Inc. Common Stock was held, provided that the
Company's Common Stock was held as a capital asset at the time of the Merger.
THE DISCUSSION OF FEDERAL INCOME TAX CONSEQUENCES SET FORTH ABOVE IS
INCLUDED HEREIN FOR INFORMATIONAL PURPOSES ONLY. THE DISCUSSION IS BASED ON
CURRENTLY EXISTING PROVISIONS OF THE CODE, EXISTING OR PROPOSED TREASURY
REGULATIONS THEREUNDER AND CURRENT ADMINISTRATIVE RULINGS AND COURT DECISIONS.
ALL OF THE FOREGOING ARE SUBJECT TO CHANGE AND ANY SUCH CHANGE COULD AFFECT THE
CONTINUING VALIDITY OF THIS DISCUSSION. EACH STOCKHOLDER SHOULD CONSULT HIS OR
HER TAX ADVISER REGARDING THE SPECIFIC TAX CONSEQUENCES OF THE MERGER, INCLUDING
THE APPLICATION AND EFFECT OF STATE AND LOCAL TAX LAWS.
SECURITIES ACT CONSEQUENCES
The shares of Michigan Interface Systems, Inc. to be issued in exchange for
shares of the Company are not being registered under the Securities Act of 1933,
as amended (the "1933 Act"). In that respect, Michigan Interface Systems, Inc.
is relying on Rule 145(a)(2) of the Securities and Exchange Commission (the
"SEC") under the 1933 Act, which provides that a merger which has as its sole
purpose a change in the
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domicile of the corporation does not involve the sale of securities for purposes
of the 1933 Act. After the Merger, Michigan Interface Systems, Inc. will be a
publicly held company, its Common Stock will be traded and it will file with the
SEC and provide to its stockholders the same type of information that the
Company has previously filed and provided. Stockholders whose stock in the
Company is freely tradable before the Merger will continue to have freely
tradable shares of Michigan Interface Systems, Inc. Stockholders holding
restricted securities of the Company will be subject to the same restrictions on
transfer as those to which their present shares of stock in the Company are
subject. In summary, Michigan Interface Systems, Inc. and its stockholders will
be in the same respective positions under the federal securities laws after the
Merger as were the Company and its stockholders prior to the Merger.
NO APPRAISAL RIGHTS
Under Section 262 of the Delaware Code, stockholders of the Company will
not be entitled to dissent and obtain payment of the fair value of their shares
from the Company in connection with the Reincorporation because the Company's
shares are listed on the Nasdaq Stock Market National Market at the time of the
record date fixed to determine the stockholders entitled to receive notice of
and to vote at the meeting of stockholders held to act upon the Merger
Agreement.
ABANDONMENT
Notwithstanding a favorable vote of the stockholders, the Company reserves
the right by action of the Board of Directors to abandon the proposed
reincorporation prior to effectiveness of the Merger if it determines that such
abandonment is in the best interests of the Company. The Board of Directors has
made no determination as to any circumstances which may prompt a decision to
abandon the proposed reincorporation.
REQUIRED VOTE
The affirmative vote of a majority of the Company's issued and outstanding
common stock is required to approve the reincorporation proposal. THE BOARD OF
DIRECTORS RECOMMENDS STOCKHOLDERS VOTE FOR APPROVAL OF THIS PROPOSAL. PROXIES
WILL BE VOTED FOR THE APPROVAL OF THE REINCORPORATION PROPOSAL UNLESS THE
SPECIFICATION IS MARKED ON THE PROXY INDICATING THAT AUTHORITY TO DO SO IS
WITHHELD.
III. PROPOSAL TO APPROVE THE COMPANY'S EMPLOYEE STOCK PURCHASE PLAN
The Board of Directors approved the adoption of the Company's Employee
Stock Purchase Plan (the "Employee Stock Plan") on October 31, 1997, and
directed that the Employee Stock Plan be submitted to stockholders for approval
at the Annual Meeting. The Employee Stock Plan provides eligible employees of
the Company with a means to purchase, through payroll deductions, up to an
aggregate of 225,000 shares of the Company's Common Stock. Eligible employees
who participate in the Employee Stock Plan will purchase Company Common Stock
directly from the Company and thus avoid brokerage fees and commissions. The
Employee Stock Plan was adopted in order to encourage increased ownership of the
Company's Common Stock by employees of the Company, including its executive
officers, thus identifying their interests with those of the stockholders.
ELIGIBLE PARTICIPANTS
All employees of the Company who are employed by the Company on the first
day of a Purchase Period (as defined below) are eligible to participate in the
Employee Stock Plan. The Company's non-employee directors are not eligible to
participate in the Employee Stock Plan. As of November 1, 1997, there were 105
employees eligible to participate in the Employee Stock Plan. Employees may not
participate in the Employee Stock Plan to the extent they own or hold Common
Stock and options to purchase Common Stock equal to 5% or more of the
outstanding Common Stock. In addition, employees may not purchase more than
$25,000
8
<PAGE> 11
of Common Stock under the Employee Stock Plan (and any future plan qualified
under Section 423 of the Code) in any calendar year.
TERMS OF THE EMPLOYEE STOCK PLAN
The Employee Stock Plan will be administered by the Compensation Committee,
comprised of non-employee members of the Board, as defined in Rule 16b-3 under
the Securities Exchange Act of 1934, as amended. The Compensation Committee from
time to time may grant to all eligible employees of the Company options to
purchase shares of Common Stock under the Employee Stock Plan. The exercise
price for options granted under the Employee Stock Plan shall be the lower of
85% of the fair market value of the Common Stock on the date the option is
granted or 85% of the fair market value of the Common Stock on the date the
option is exercised. For purposes of the Employee Stock Plan, the fair market
value of the Common Stock shall be determined by the last sale price of shares
of the Company's Common Stock on the Nasdaq Stock Market National Market on the
applicable determination date. As of the close of business on January 5, 1998,
the price per share of Common Stock as quoted on the Nasdaq Stock Market
National Market was $2.75.
An employee may elect to participate in an offering by presenting an
election form and payroll deduction form specifying the percentage of his or her
cash compensation that the Company is authorized to withhold within the election
period designated by the Company. Payroll deductions will be made in
installments over a minimum six month purchase period (the "Purchase Period"). A
participating employee may not authorize payroll deductions which, in the
aggregate, are less than 1%, or are more than 15%, of his or her cash
compensation during the Purchase Period. An employee may suspend contributions
during a Purchase Period at any time during a Purchase Period upon written
notice as described in the Employee Stock Plan which shall become effective no
later than the next payroll period following the suspension. An employee's
option shall be deemed to have been exercised as of the last day of the Purchase
Period. In the event that there are insufficient shares available for purchase
under the Employee Stock Plan at the end of the Purchase Period, the shares
available for purchase will be allocated to participating employees
proportionately on the basis of compensation.
In the event of any change in the number of outstanding shares of Common
Stock due to a stock dividend, subdivision or combination of shares, or
reclassification of shares, the aggregate number of shares of stock for which
options may be granted and the number of shares subject to each outstanding
option and the stated option price shall be appropriately adjusted by the
Compensation Committee, whose determination shall be conclusive. In the event of
a merger in which the Company is the surviving corporation, an employee shall be
entitled to exercise his or her option for the number of shares of stock or
other securities which such employee would have been entitled to receive if at
the time of merger such employee had been a holder of record of the number of
shares of Common Stock underlying the option. If the Company liquidates, or is
not the surviving corporation in the event of a merger, then the Purchase Period
for any option granted shall terminate but each employee shall have the right,
immediately prior to such event, to exercise his or her option for such Purchase
Period in full on the earlier to occur of the effective date of such merger or
liquidation or the last day of the Purchase Period.
If an employee participating in the Employee Stock Plan dies, becomes
disabled or ceases to be employed by the Company for any reason, the aggregate
amount of such employee's payroll deductions during the Purchase Period will be
returned to such employee or his or her executor, or administrator or other
legal representative.
Unless previously terminated, the Employee Stock Plan will terminate on
October 30, 2007. The Board may at any time prior to that date terminate or
discontinue the Employee Stock Plan, or from time to time amend or modify the
Employee Stock Plan; provided, however, that the Board may not amend or modify
the Employee Stock Plan in a manner that would disqualify the Employee Stock
Plan under Section 423 of the Code. No amendment, modification or termination of
the Employee Stock Plan shall affect any option previously granted without the
consent of the holder.
9
<PAGE> 12
FEDERAL INCOME TAX CONSEQUENCES
The Employee Stock Plan is not a retirement plan qualified under Section
401 of the Code, but is intended to be a qualified employee stock plan under
Section 423 of the Code. An employee will not recognize taxable income prior to
the sale or other disposition of the shares of Common Stock purchased. If the
Common Stock has been held by the employee for two years from the date of grant
(the first day of the Purchase Period) and one year from the date of exercise
(the last day of the Purchase Period) (the "Holding Period"), upon the sale or
other disposition of such Common Stock, the employee will recognize ordinary
income in an amount equal to the difference between the purchase price and the
lower of (i) the fair market value of the Common Stock on the date of grant or
(ii) the disposition price. The employee also will receive long or short-term
capital gain on the amount by which the disposition price exceeds the fair
market value of the Common Stock on the date of grant, if any. If the
disposition price is less than the option price, the employee will not recognize
ordinary income and will have a long-term capital loss in the amount of the
difference between the disposition price and the option price. If the employee
disposes of the shares prior to satisfying the Holding Period requirements, the
employee will recognize ordinary income on the difference between the purchase
price and the fair market value of the shares on the date of exercise, and the
Company will receive a corresponding compensation deduction. Any amount received
on disposition in excess of the fair market value of the Common Stock on the
date of exercise will be taxed to the employee as capital gain. If the
disposition price is less than the purchase price, the employee will not
recognize capital gain or ordinary income and will have a capital loss in the
amount of the difference between the disposition price and the purchase price.
REQUIRED VOTE
The affirmative vote of a majority of the shares present in person or
represented by proxy at the meeting and entitled to vote on this proposal is
required to approve the Employee Stock Purchase Plan. THE BOARD OF DIRECTORS
RECOMMENDS SHAREHOLDERS VOTE FOR THE APPROVAL OF THIS PROPOSAL. PROXIES WILL BE
VOTED FOR THE APPROVAL OF THE EMPLOYEE STOCK PURCHASE PLAN UNLESS THE
SPECIFICATION IS MARKED ON THE PROXY INDICATING THAT AUTHORITY TO DO SO IS
WITHHELD.
IV. PROPOSAL TO AMEND THE 1993 STOCK PLAN FOR NON-EMPLOYEE DIRECTORS
PROPOSED AMENDMENT
On August 8, 1997, 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") to give the Board discretionary
authority to grant stock options to the Company's non-employee directors from
time to time upon such terms and conditions as determined by the Board of
Directors, in addition to the automatic grants provided for in the Directors
Plan. Stockholder approval of the amendment is required by the regulations of
The Nasdaq Stock Market.
On August 8, 1997, the Board of Directors approved the grant of
discretionary options to purchase 12,000 shares of the Company's Common Stock at
an exercise price of $4.00 per share to each of the Company's non-employee
directors (Messrs. Graber, Rhoades, David C. Seigle, Robert A. Seigle and
Semple), subject to stockholder approval of this proposal. If the Company's
stockholders approve this proposal, such discretionary options will become
immediately exercisable, and will be exercisable for a period of ten years from
the date of grant or until earlier terminated under the terms of the plan.
REASONS FOR THE AMENDMENT
Prior to the amendment, the Directors Plan provided only for automatic
grants of options because of the requirements of former Rule 16b-3 of the
Securities Exchange Act of 1934. Because this rule has been changed so that this
restriction is no longer necessary, the Board believes that it is advantageous
to amend the Directors Plan to give the Board of Directors additional authority
to grant discretionary options from time to
10
<PAGE> 13
time upon such terms and conditions as determined at the time of grant. This
amendment will provide the Company with additional flexibility in order to
attract and retain qualified non-employee directors.
On August 8, 1997, the Board of Directors approved the issuance of an
aggregate 60,000 discretionary options to the Company's current non-employee
directors, as discussed above. In light of the compensation (amount and form)
typically paid by other public companies to their non-employee directors and the
fact that none of the outstanding non-employee stock options granted under the
Directors Plan prior to that date were in-the-money, these additional grants
were intended by the Board of Directors to serve as an immediate incentive to
the non-employee directors to continue their service as directors of the
Company.
TERMS OF THE DIRECTORS 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 175,000 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.
The Directors Plan provides 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
every third anniversary thereafter until the Directors Plan is terminated. All
such automatic option grants are granted at an exercise price per share equal to
the fair market value per share of Common Stock as of the date of grant. On
January 5, 1998, the closing price of the Common Stock on the Nasdaq Stock
Market National Market was $2.75 per share. The automatic option grants 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 one-third 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 Board may amend or terminate the Directors Plan from time to time
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 sate 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
11
<PAGE> 14
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 a Section 83(b) election disposes
of the shares acquired by the exercise of the option, any amount received in the
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 payment 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 December 31, 1997,
to the executive officers named in the Summary Compensation Table under
"Executive Compensation," all persons who received more than 5% of the options
granted, all current executive officers as a group, all current directors (other
than executive officers) as a group, each nominee for election as a director and
all other employees as a group. All Initial Grants and Subsequent Grants under
the Directors Plan become exercisable in thirds, with the first one-third
becoming exercisable on the first anniversary date of the grant, and the
discretionary option grants for 60,000 shares, which were granted contingent
upon stockholder approval, will become immediately exercisable if the
stockholders approve this proposal. 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>
Robert A. Nero.......................... President and Chief Executive -0-
Officer
Garnel F. Graber........................ Former Interim Chief Executive 23,100(1)
Officer, Chairman of the Board
and Director Nominee
Bruce E. Rhoades........................ Current Director and Director 17,100(1)
Nominee
Robert A. Seigle........................ Current Director and Director 23,100(1)
Nominee
David C. Seigle......................... Current Director and Director 23,100(1)
Nominee
Lloyd A. Semple......................... Current Director and Director 17,100(1)
Nominee
All current executive officers as a
group (6) persons..................... -0-
All directors who are not executive
officers as a group (5) persons....... 103,500(2)
All other employees and former employees
as a group............................ -0-
</TABLE>
- ------------------
(1) Includes 12,000 options which will become immediately exercisable if the
proposal to amend the Directors Plan is approved.
(2) Includes an aggregate 60,000 options which will become immediately
exercisable if the proposal to amend the Directors Plan is approved.
12
<PAGE> 15
REQUIRED VOTE
The affirmative vote of majority of the shares present in person or
represented by proxy at the meeting and entitled to vote on this proposal 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 THE SPECIFICATION IS
MARKED ON THE PROXY INDICATING THAT AUTHORITY TO DO SO IS WITHHELD.
FURTHER INFORMATION
PRINCIPAL STOCKHOLDERS
The Common Stock is the only voting security of the Company. The Company is
not aware of any person who beneficially owned five percent or more of such
stock as of December 1, 1997.
STOCK OWNERSHIP OF MANAGEMENT
The following table sets forth the beneficial ownership of shares of the
Company's Common Stock by each of the Company's directors, Named Executive
Officers and by all executive officers and directors as a group as of December
1, 1997.
<TABLE>
<CAPTION>
COMMON STOCK OF THE
COMPANY PERCENT OF
NAME OWNED BENEFICIALLY(1) CLASS
---- --------------------- ----------
<S> <C> <C>
Garnel F. Graber............................................ 59,354(2) 1.34 %
Robert A. Nero.............................................. 65,000(3) 1.45 %
George W. Perrett........................................... 51,697(4) 1.16 %
Bruce E. Rhoades............................................ -0- *
David O. Schupp............................................. 66,102(5) 1.49 %
Robert A. Seigle............................................ 79,100(6) 1.78 %
David C. Seigle............................................. 9,400(7) *
Lloyd A. Semple............................................. 3,700(8) *
All executive officers and directors as a group (11 347,341(9) 7.65 %
persons)..................................................
</TABLE>
- ------------------
* Less than one percent.
(1) To the best of the Company's knowledge, based on information reported by
such directors and officers or contained in the Company's stockholder
records, unless otherwise indicated by any additional information included
in the footnote to the table, each of the named persons is presumed to have
sole voting and investment power with respect to all shares shown.
(2) Includes 9,400 shares which Mr. Graber has, or within 60 days of December 1,
1997 will have, the right to acquire pursuant to the presently exercisable
portion of options granted under the Directors Plan.
(3) Includes 55,000 shares which Mr. Nero has, or within 60 days of December 1,
1997 will have, the right to acquire pursuant to the presently exercisable
portion of options granted under the Company's 1992 Stock Option Plan.
(4) Includes (i) 22,500 shares which Mr. Perrett has, or within 60 days of
December 1, 1997 will have, the right to acquire pursuant to the presently
exercisable portion of options granted under the 1992 Stock Option Plan,
(ii) 16,969 shares held by the George W. Perrett, Jr. Trust, of which Mr.
Perrett is a Trustee and beneficiary, and (iii) 750 shares owned by Mr.
Perrett's children, as to which Mr. Perrett disclaims beneficial ownership.
(5) Includes (i) 20,500 shares which Mr. Schupp has, or within 60 days of
December 1, 1997 will have, the right to acquire pursuant to the presently
exercisable portion of options granted under the Company's 1982 and 1992
Stock Option Plans and (ii) 45,602 shares held by the David O. Schupp
Revocable Trust of which Mr. Schupp is the Trustee and beneficiary.
13
<PAGE> 16
(6) Includes 9,400 shares which Mr. Seigle has, or within 60 days of December 1,
1997 will have, the right to acquire pursuant to the presently exercisable
portion of options granted under the Directors Plan.
(7) Represents 9,400 shares which Mr. Seigle has, or within 60 days of December
1, 1997 will have, the right to acquire pursuant to the presently
exercisable portion of options granted under the Directors Plan.
(8) Includes 1,700 shares which Mr. Semple has, or within 60 days of December 1,
1997 will have, the right to acquire pursuant to the presently exercisable
portion of options granted under the Directors Plan.
(9) Includes 127,900 shares which certain directors and executive officers have,
or within 60 days of December 1, 1997 will have, the right to acquire
pursuant to the presently exercisable portion of options granted under the
Directors Plan and 750 shares as to which beneficial ownership is
disclaimed.
EXECUTIVE OFFICERS
The persons listed below currently are the executive officers of the
Company.
<TABLE>
<CAPTION>
NAME OFFICE(S) AGE
---- --------- ---
<S> <C> <C>
Robert A. Nero.................. President and Chief Executive Officer 51
John R. Ternes.................. Vice President of Finance and Chief Financial Officer 42
George W. Perrett, Jr. ......... Vice President of Operations and Secretary 60
David O. Schupp................. Vice President and Treasurer 61
Keith N. Bauserman.............. Vice President of Sales 53
Eric D. Shishko................. Vice President of Marketing and General Manager of Cleo E.C. 41
</TABLE>
Each of the Company's executive officers has been employed in the offices
reflected the table below for more than five years, except Messrs. Nero, Ternes,
Shishko and Bauserman.
Mr. Nero was appointed President and Chief Executive Officer of the Company
in January 1997. See "Election of Directors" for further information concerning
Mr. Nero.
Mr. Ternes was appointed Vice President of Finance and Chief Financial
Officer of the Company in April 1997. Prior to assuming this position Mr. Ternes
was Vice President and Financial Officer of Network Express from 1994 to 1997,
and served as manager of corporate audits for United Technologies from 1992 to
1994.
Mr. Bauserman was appointed Vice President of Sales of the Company in 1994
after having served as the Company's National Sales Manager from 1992 to 1994.
Mr. Shishko was appointed Vice President of Marketing of the Company and
General Manager of the Company's Cleo Electronic Commerce business in October
1997. Prior to assuming these positions, Mr. Shishko had been Vice President of
Business Development for Bell & Howell Company since 1994, and served as Vice
President of Bell & Howell Postal Systems Inc. from 1991 to 1994.
The executive officers serve at the pleasure of the Board of Directors.
DIRECTOR COMPENSATION
The Chairman of the Board is paid a quarterly retainer of $3,000, and the
Company's other non-employee directors are paid a quarterly retainer of $1,000.
In addition, each non-employee director is paid 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.
In addition, the Company has a 1993 Stock Plan for Non-Employee Directors
(the "Directors Plan"). For a description of the Directors Plan, see "Proposal
to Amend the 1993 Stock Plan for Non-Employee Directors." On August 8, 1997, Mr.
Rhoades was granted an Initial Option under the Directors Plan to purchase 5,100
shares of the Company's Common Stock at an exercise price of $3.25 per share,
exercisable in three annual installments, beginning August 8, 1998. The option
is exercisable for a ten-year period from the
14
<PAGE> 17
date of grant or until Mr. Rhoades ceases to serve on the Board, whichever is
earlier. On August 8, 1997, the Board of Directors granted each of Messrs.
Graber, Rhoades, David C. Seigle, Robert A. Seigle and Semple a discretionary
option to purchase 12,000 shares of Common Stock at an exercise price of $4.00,
contingent upon receiving stockholder approval of an amendment to the Directors
Plan to permit the grant of discretionary options. See "Proposal to Amend the
1993 Stock Plan for Non-Employee Directors." If the Company's stockholders
approve this proposal, these discretionary options will become immediately
exercisable for a ten-year period from the date of grant or until earlier
terminated under the terms of the plan.
Mr. Rhoades received $8,356 from the Company for his services as a
consultant in fiscal 1997.
EXECUTIVE COMPENSATION
The following table provides summary information concerning compensation
paid by the Company to (or accrued on behalf of) the Company's Chief Executive
Officer and the Chairman of the Board who served as Chief Executive Officer for
a portion of the 1997 fiscal year (the "Named Executive Officers") for the
periods indicated. The salary and bonus paid to each of the Company's other
executive officers, who served as executive officers during the 1997 fiscal
year, did not exceed $100,000 and therefore is not disclosed in the table below.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
ANNUAL -------------------------------
COMPENSATION OTHER SECURITIES
FISCAL ------------------ ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL OCCUPATION YEAR SALARY BONUS COMPENSATION(2) STOCK OPTIONS COMPENSATION(3)
- ----------------------------- ------ ------ ----- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Robert A. Nero(1)............ 1997 $138,474 $50,000 $3,432 165,000 $15,610
Chief Executive Officer,
President and a Director
Garnel F. Graber(4).......... 1997 55,600 -- -- 12,000 --
Former Interim Chief 1996 45,200 -- -- 5,100 --
Executive Officer and 1995 -- -- -- -- --
Chairman of the Board
</TABLE>
- -------------------------
(1) Mr. Nero was appointed as President and Chief Executive Officer of the
Company in January 1997.
(2) "Other Annual Compensation" for Mr. Nero for fiscal 1997 is comprised of a
tax gross up for the apartment rental payment referred to in footnote 3
below.
(3) "All Other Compensation" for Mr. Nero for fiscal 1997 is comprised of (i)
$12,017 for rental payments on an apartment in Ann Arbor, Michigan and (ii)
$3,593 for a car allowance.
(4) Mr. Graber was appointed Interim Chief Executive Officer of the Company in
June 1996, and served in this position until Mr. Nero was appointed in
January 1997. Mr. Graber served as Interim Chief
15
<PAGE> 18
Executive Officer of the Company as a consultant to the Company. He did not
become an employee of the Company or participate in any of the Company's
fringe benefit plans.
OPTION GRANTS AND RELATED INFORMATION
The following table provides information with respect to options granted to
the Named Executive Officers during fiscal year 1997.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------- POTENTIAL REALIZABLE
NUMBER OF VALUE AT ASSUMED
SECURITIES % OF TOTAL ANNUAL RATES OF STOCK
UNDERLYING OPTIONS PRICE APPRECIATION FOR
OPTIONS GRANTED TO EXERCISE OR OPTION TERM(3)
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION -----------------------
NAME (#) FISCAL YEAR ($/SH.) DATE 5%($) 10%
---- ---------- ------------ ----------- ---------- ----- ---
<S> <C> <C> <C> <C> <C> <C>
Robert A. Nero................ 165,000(1) 47.3% $4.00 4/17/07 $313,500 $891,000
Garnel F. Graber.............. 12,000(2) 3.4% $4.00 8/08/07 13,080 49,320
</TABLE>
- -------------------------
(1) These options, which were granted pursuant to the Company's 1992 Stock
Option Plan, were granted at market value on the date of grant, become
exercisable annually in 33 1/3% increments beginning one year after the
grant date and have a term of ten years. The exercisability of these options
may be accelerated in the event of a change in control of the Company. See
"Employment and Termination/Change in Control Arrangements."
(2) These options were granted to Mr. Graber in his capacity as a non-employee
director of the Company under the Directors Plan, and were granted
contingent upon stockholder approval of the amendment to the Directors Plan.
See "Proposal to Amend the 1993 Stock Plan for Non-Employee Directors."
(3) Represents value of option at end of ten year term, assuming the market
price of the Company's Common Stock appreciates at an annually compounded
rate of 5% to 10%. These amounts represent assumed rates of appreciation
only. Actual gains, if any, will be dependent on overall market conditions
and on future performance of the Company's Common Stock. There can be no
assurance that the amounts reflected in the table will be achieved.
OPTION EXERCISES AND HOLDINGS
The following table provides information with respect to the Named
Executive Officers concerning the exercise of options during fiscal year 1997
and unexercised options held as of the end of the Company's last fiscal year,
September 30, 1997. All options were granted under the Company's 1992 Stock
Option Plan or the Directors Plan.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR ("FY")-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
SHARES VALUE UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
ACQUIRED ON REALIZED OPTIONS AT FY-END(#) IN-THE-MONEY OPTIONS
NAME EXERCISE(#) ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Robert A. Nero.................. -- -- 0/165,000 (2)
Garnel F. Graber................ -- -- 9,400/1,700(1) (2)
</TABLE>
- ------------------
(1) The options held by Mr. Graber at September 30, 1997 were granted to Mr.
Graber in his capacity as a non-employee director of the Company under the
Directors Plan.
(2) None of the options held by Messrs. Nero and Graber at September 30, 1997
were in-the-money.
16
<PAGE> 19
EMPLOYMENT AND TERMINATION/CHANGE IN CONTROL ARRANGEMENTS
Mr. Nero is paid an annual salary of $200,000, which is subject to annual
review by the Board of Directors. In the event of (a) a "change in control" of
the Company followed by Mr. Nero's resignation 3 months thereafter, (b) a
material diminution in his position, salary or other compensation, or
responsibilities, and within 3 months thereafter he resigns or (c) termination
of his employment by the Company for any reason other than "termination for
cause," the Company has agreed to continue payment of Mr. Nero's salary and
fringe benefits for a period of 18 months following his termination or
resignation. For purposes of this severance arrangement, "change in control" has
the same definition as it does in the Company's 1992 Stock Option Plan.
"Termination for cause" means termination by the Board of Directors upon its
reasonable determination that he has committed an act of dishonesty or willful
misconduct or has failed to materially perform his duties and responsibilities.
Mr. Nero and Mr. Ternes were granted stock options to purchase 165,000
shares and 40,000 shares, respectively, of the Company's Common Stock under the
1992 Stock Option Plan during fiscal 1997. The three-year vesting schedule for
these options is subject to acceleration in the event of a "change in control"
of the Company. Under the 1992 Stock Option Plan, a "change in control" shall be
deemed to have occurred if (i) any person is or becomes the beneficial owner of
securities of the Company representing 20% or more of the combined voting power
of the Company's then outstanding securities entitled to vote in the election of
directors of the Company; (ii) consummation of certain mergers, consolidations
or similar transactions with respect to which the Company is a constituent
corporation (other than a transaction for the purpose of changing the Company's
corporate domicile); (iii) any liquidation or dissolution of the Company, or any
sale of all or substantially all of the Company's assets to an entity not
controlled by persons who were members of the Board of Directors or officers of
the Company as of the 1997 Annual Meeting of Stockholders or by any employee
benefit plan or employee benefit plan trust maintained by the Company; and (iv)
a change in the identity of a majority of the members of the Company's Board of
Directors within any twelve-month period, which change or changes are not
recommended by the incumbent directors immediately prior to any such change or
changes.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
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. The Company's executive
compensation program consists of three principal components: base salary, bonus
and stock option awards.
BASE SALARY
The Committee recognizes the importance of a competitive compensation
structure in retaining and attracting valuable senior executives. The Committee
reviews the base salary of each executive officer annually. The base salary for
each executive officer is determined after the Committee reviews competitive
executive compensation data and evaluations of each executive officer's duties
and performance, submitted by the chief executive officer.
In addition to reviewing the salaries of current executive officers in
fiscal 1997, the Committee also considered the compensation packages necessary
to attract well-qualified candidates to become President and Chief Executive
Officer and Chief Financial Officer.
The Committee retained a management consulting firm to develop the position
requirement and compensation guidelines for the office of President and Chief
Executive Officer. An executive recruiting firm was retained to conduct an
extensive search. These outside firms participated in developing an offer and in
successful negotiations which resulted in Mr. Nero's engagement as the Company's
President and Chief Executive Officer effective January 1997 at an annual base
salary of $200,000. The Committee established Mr. Nero's compensation package
based upon guidelines suggested by the management consulting firm, an
17
<PAGE> 20
assessment of his qualifications, position and level of responsibility, and the
terms and conditions required to attract him to the Company.
The Committee applied the same principles in setting Mr. Ternes'
compensation as the Company's new Chief Financial Officer, with the exception of
the retention of outside firms. Mr. Ternes was appointed to this position in
April 1997 at an annual base salary of $105,000.
Prior to Mr. Nero's appointment as President and Chief Executive Officer,
Mr. Graber, the Company's Chairman of the Board, was retained to serve as
Interim Chief Executive Officer until a new Chief Executive Officer was
appointed. The Company paid Mr. Graber $800 per day in consulting fees for
serving in this position. Mr. Graber did not become an employee of the Company
nor did he participate in the Company's fringe benefit plans.
BONUS
The Company's bonus policy is designed to encourage increased profitability
and, historically has been linked to the Company's earnings per share
performance. For fiscal 1997, Mr. Nero was eligible to receive a bonus in the
amount of $2,000 for each $0.01 of operating net earnings per share achieved by
the Company for the fiscal year, with a minimum guaranteed bonus of $50,000,
which was negotiated as part of his compensation package at the time he joined
the Company. The Company's other executive officers were eligible for a bonus of
$1,000 per $0.01 per share of operating net earnings for fiscal 1997. Mr. Nero
was paid a bonus of $50,000 pursuant to his agreement with the Company. Mr.
Ternes was paid a bonus of $13,000, which was negotiated as part of his
compensation package at the time he joined the Company. No other bonuses were
paid for fiscal 1997 due to the Company's disappointing financial performance.
STOCK OPTIONS
For many years, the Company has had in place stock option programs. Stock
options are typically granted at exercise prices not less than the market value
of the Company's Common Stock on the date of grant and therefore have no value
unless the Common Stock appreciates in value. As a result, through the use of
stock options, the Committee relates the benefits received by the executive
officers to the amount of appreciation realized by stockholders over comparable
periods. Stock options have the added benefit of providing incentive-based
compensation without the expenditure of the Company's cash resources.
The Committee granted Messrs. Nero and Ternes the majority of employee
stock options awarded in fiscal 1997. Mr. Nero received 165,000 stock options
and Mr. Ternes received 40,000. The Committee determined the number of stock
options to be granted to these officers after extensive negotiations, and, in
each case, the stock options comprised a key part of the offer. Both executives
were recruited to assume the responsibility of redirecting a company which had
experienced some significant problems and faced formidable challenges. In
addition, the Company could not afford to increase either officer's base
compensation or bonus potential in light of its limited financial resources. As
a result, Messrs. Nero and Ternes accepted stock options as a significant part
of their compensation packages. The stock options will reward them to the extent
the Company's stock price appreciates as a result of their efforts.
The Company customarily has granted stock options with a three-year vesting
schedule to enhance its ability to retain key employees. At the time they joined
the Company, Messrs. Nero and Ternes were charged with enhancing stockholder
value by exploring all alternatives available to the Company, including
transactions which could result in a change in control of the Company. Under the
Company's customary three-year vesting schedule, some of the stock options
granted to these new executives could have been forfeited in a change in control
transaction. To avoid a potential for conflict of interest, the Committee
granted stock options to Messrs. Nero and Ternes with vesting schedules which
accelerate in the event of a change in control. See "Executive Compensation --
Employment and Termination/Change in Control Arrangements."
In addition, the Committee granted 15,000 options to each of Messrs.
Perrett and Schupp in fiscal 1997 as a reward for their loyalty during a
difficult period of management transition and as an incentive to continue their
efforts on behalf of the Company.
18
<PAGE> 21
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
The Committee has reviewed 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 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.
Compensation Committee, as of
September 30, 1997
Garnel F. Graber
David C. Seigle
Robert A. Seigle
Lloyd A. Semple
Dated: January 5, 1998
19
<PAGE> 22
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 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>
Measurement Period Interface Systems, Nasdaq (U.S. Nasdaq (Computer
(Fiscal Year Covered) Inc. Companies) Mfg.)
<S> <C> <C> <C>
1992 100.00 100.00 100.00
1993 140.48 130.98 104.94
1994 148.67 132.06 116.84
1995 191.49 182.41 207.11
1996 242.86 216.45 270.57
1997 158.34 297.08 387.36
</TABLE>
20
<PAGE> 23
CERTAIN TRANSACTIONS AND RELATED TRANSACTIONS
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 Lloyd A. Semple 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 Program.
On February 21, 1996, the Company made a loans under the Executive Loan
Program to George W. 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 loan is secured by publicly-traded common stock of other
companies. Mr. Schupp's loan is secured by shares of Common Stock of the
Company. As of September 30, 1997, $55,000 and $50,000 in principal amount were
outstanding under Mr. Perrett's and Mr. Schupp's loans, respectively.
INDEPENDENT PUBLIC ACCOUNTANTS
On June 24, 1997, the Audit Committee of the Board of Directors of the
Company determined not to retain the firm of BDO Seidman, LLP to audit the
Company's financial statements for the year ending September 30, 1997. BDO
Seidman, LLP had been the Company's principal accountants for the purpose of
auditing its financial statements since September 30, 1987.
The reports of BDO Seidman, LLP on the financial statements for the years
ended September 30, 1996 and 1995 contained no adverse opinion or disclaimer of
opinion, nor were they modified as to uncertainty, audit scope or accounting
principles.
The Company has had no disagreements with BDO Seidman, LLP on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure which disagreements, if not resolved to the satisfaction of
BDO Seidman, LLP, would have caused it to make reference to the subject matter
of the disagreements in connection with its reports relating to the auditing of
the Company's financial statements for the years ended September 30, 1996 and
1995.
21
<PAGE> 24
On June 24, 1997, the Company engaged the accounting firm of Arthur
Andersen LLP as its principal accountants to audit the Company's financial
statements for the fiscal year ending September 30, 1997.
The Board of Directors has selected Arthur Andersen, LLP to audit the
financial statements of the Company for the fiscal year ending September 30,
1998. Representatives of Arthur Andersen LLP 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.
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. During the
period from October 1, 1996 to September 30, 1997, all of these applicable
requirements were complied with by each of the Company's directors, executive
officers and greater than ten percent stockholders. In making this statement,
the Company has relied on the written representations of its incumbent directors
and executive officers and copies of the reports received by it.
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 1999 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 September 22, 1998.
Stockholder proposals to be presented at the 1999 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,
ROBERT A. NERO
ROBERT A. NERO, President
Ann Arbor, Michigan
January 20, 1998
22
<PAGE> 25
APPENDIX A
AGREEMENT AND PLAN OF MERGER
OF MICHIGAN INTERFACE SYSTEMS, INC.
AND
INTERFACE SYSTEMS, INC.
THIS AGREEMENT AND PLAN OF MERGER dated as of January 16, 1998 (the
"Agreement") is between Michigan Interface Systems, Inc., a Michigan corporation
("Michigan Interface Systems"), and Interface Systems, Inc., a Delaware
corporation ("Interface Systems"). Michigan Interface Systems and Interface
Systems are sometimes referred to herein as the "Constituent Corporations".
RECITALS
A. Interface Systems is a corporation duly organized and existing under the
laws of the State of Delaware and has an authorized capital of Twenty Million
(20,000,000) shares of Common Stock, $0.10 par value, of which 4,424,944 shares
are issued and outstanding. The outstanding shares of Interface Systems are
entitled to vote on the Merger described below.
B. The Board of Directors of Interface Systems has determined that it is in
the best interests of Interface Systems and its shareholders to reincorporate in
Michigan. Interface Systems has formed Michigan Interface Systems as a wholly
owned subsidiary for the purpose of effecting the reincorporation of Interface
Systems in the State of Michigan. Therefore, Interface Systems, by this
Agreement, shall merge with and into Michigan Interface Systems upon the terms
and conditions herein provided.
C. Michigan Interface Systems is a corporation duly organized and existing
under the laws of the State of Michigan and has an authorized capital of 60,000
shares of Common Stock, of which 100 shares are issued, outstanding, held by
Interface Systems and entitled to vote on the Merger.
D. The respective Boards of Directors of Michigan Interface Systems and
Interface Systems have approved this Agreement and have directed that this
Agreement be submitted to a vote of their respective stockholders and executed
by the undersigned officers.
NOW, THEREFORE, in consideration of the mutual agreements and covenants set
forth herein, Michigan Interface Systems and Interface Systems hereby agree,
subject to the terms and conditions hereinafter set forth, as follows:
I.
MERGER
1.1 Merger. In accordance with the provisions of this Agreement, the
Delaware Business Corporation Law and the Michigan Business Corporation Act,
Interface Systems shall be merged with and into Michigan Interface Systems (the
"Merger"), the separate existence of Interface Systems shall cease and Michigan
Interface Systems shall be, and is herein sometimes referred to as, the
"Surviving Corporation".
1.2 Filing Effectiveness. The Merger shall become effective when all of the
following actions shall have been completed:
(a) This Agreement and the Merger shall have been adopted and approved
by the stockholders of each Constituent Corporation in accordance with the
requirements of the Delaware Business Corporation Law and the Michigan
Business Corporation Act.
(b) All of the conditions precedent to the consummation of the Merger
specified in this Agreement shall have been satisfied or duly waived by the
party entitled to satisfaction thereof;
<PAGE> 26
(c) An executed Certificate of Merger or an executed counterpart of
this Agreement meeting the requirements of the Delaware Business
Corporation Law shall have been filed with the Department of State of the
State of Delaware; and
(d) An executed Certificate of Merger meeting the requirements of the
Michigan Business Corporation Act shall have been filed with the
Corporation, Securities and Land Development Bureau of the State of
Michigan.
The date and time when the Merger shall become effective, as aforesaid, is
herein called the "Effective Date of the Merger".
1.3 Effect of the Merger. Upon the Effective Date of the Merger, the
separate existence of Interface Systems shall cease and Michigan Interface
Systems, as the Surviving Corporation, (i) shall continue to possess all of its
assets, rights, powers and property as constituted immediately prior to the
Effective Date of the Merger, (ii) shall be subject to all actions previously
taken by its and Interface Systems' Board of Directors, and shall assume all
obligations of Interface Systems relating to the indemnification of its officers
and directors, (iii) shall succeed, without other transfer, to all of the assets
rights, powers and property of Interface Systems in the manner as more fully set
forth in Section 724 of the Michigan Business Corporation Act, (iv) shall
continue to be subject to all of its debts, liabilities and obligations as
constituted immediately prior to the Effective Date of the Merger, (v) shall
assume, without any further action, all employee benefit plans of Interface
Systems, including, but not limited to, all stock option, stock purchase,
deferred compensation, welfare and savings plans, as well all employment and
severance agreements, subject, in each case, to the terms and conditions of such
plans and agreements, and (vi) shall succeed, without other transfer, to all of
the debts, liabilities and obligations of Interface Systems in the same manner
as if Michigan Interface Systems had itself incurred them, all as more fully
provided under the applicable provisions of the Delaware Business Corporation
Law and the Michigan Business Corporation Act.
II.
NAME OF SURVIVING CORPORATION,
CHARTER DOCUMENTS, DIRECTORS AND OFFICERS
2.1 Name. The name of the Surviving Corporation shall be Interface Systems,
Inc. as provided in the Amendment to the Articles of Incorporation of the
Surviving Corporation set forth in Section 2.2 below.
2.2 Articles of Incorporation. The Articles of Incorporation of Michigan
Interface Systems as in effect immediately prior to the Effective Date of the
Merger shall continue in full force and effect as the Articles of Incorporation
of the Surviving Corporation until duly amended in accordance with the
provisions thereof and applicable law except that (i) Article I thereof shall be
amended to read as follows: "The name of the corporation is Interface Systems,
Inc."
2.3 By-laws. The By-laws of Michigan Interface Systems as in effect
immediately prior to the Effective Date of the Merger shall continue in full
force and effect as the By-laws of the Surviving Corporation until duly amended
in accordance with the provisions thereof and applicable law.
2.4 Directors and Officers. The directors and officers of Michigan
Interface Systems immediately prior to the Effective Date of the Merger shall be
the directors and officers of the Surviving Corporation until their successors
shall have been duly elected and qualified or until as otherwise provided by
law, the Articles of Incorporation of the Surviving Corporation or the By-laws
of the Surviving Corporation.
III.
MANNER OF CONVERSION OF STOCK
3.1 Interface Systems Common Stock. Upon the Effective Date of the Merger,
by virtue of the Merger and without any action by the Constituent Corporations
or any other person, (i) each share of Interface Systems Common Stock issued and
outstanding immediately prior thereto shall be converted into and exchanged for
one fully paid and nonassessable share of Common Stock of the Surviving
Corporation,
A-2
<PAGE> 27
(ii) each restricted share of Interface Systems Common Stock issued and
outstanding immediately prior thereto shall be converted into and exchanged for
one restricted share of Common Stock of the Surviving Corporation, subject to
the same restrictions as were applicable prior to the Merger, and (iii) each
option or right to purchase a share of Interface Systems Common Stock issued and
outstanding immediately prior thereto shall be converted into and exchanged for
one option or right, as the case may be, to purchase a share of Common Stock of
the Surviving Corporation.
3.2 Michigan Interface Systems Common Stock. Upon the Effective Date of the
Merger, each share of Common Stock of Michigan Interface Systems issued and
outstanding immediately prior thereto shall, by virtue of the Merger and without
any action by Michigan Interface Systems, the holder of such shares or any other
person, be canceled and returned to the status of authorized but unissued
shares.
3.3 Exchange of Certificates. After the Effective Date of the Merger, the
holder of an outstanding certificate representing shares of Interface Systems
Common Stock may, at such stockholder's option, surrender the same for
cancellation to the Surviving Corporation and such holder shall be entitled to
receive in exchange therefor a certificate or certificates representing the
number of shares of the Surviving Corporation's Common Stock into which the
surrendered shares were converted as herein provided. Until so surrendered, each
outstanding certificate theretofore representing shares of Interface Systems
Common Stock shall be deemed for all purposes to represent the number of whole
shares of the Surviving Corporation's Common Stock into which such shares of
Interface Systems Common Stock were converted in the Merger.
The registered owner on the books and records of the Surviving Corporation
of any such outstanding certificate shall, until such certificate shall have
been surrendered for transfer or conversion or otherwise accounted for to the
Surviving Corporation, have and be entitled to exercise any voting and other
rights with respect to and to receive dividends and other distributions upon the
shares of Common Stock of the Surviving Corporation represented by such
outstanding certificate as provided above.
IV.
GENERAL
4.1 Covenants of Michigan Interface Systems. Michigan Interface Systems
covenants and agrees that it will, on or before the Effective Date of the
Merger:
(a) File any and all documents with the appropriate tax authority of
the State of Delaware necessary for the assumption by Michigan Interface
Systems of all of the corporate and/or franchise tax liabilities of
Interface Systems; and
(b) Take such other actions as may be required by the Michigan
Business Corporation Act.
4.2 Further Assurances. From time to time, as and when required by Michigan
Interface Systems or by its successors or assigns, there shall be executed and
delivered on behalf of Interface Systems such deeds and other instruments, and
there shall be taken or caused to be taken by Michigan Interface Systems and
Interface Systems such further and other actions, as shall be appropriate or
necessary in order to vest or perfect in or conform of record or otherwise by
Michigan Interface Systems the title to and possession of all the property,
interests, assets, rights, privileges, immunities, powers, franchises and
authority of Interface Systems and otherwise to carry out the purposes of this
Agreement, and the officers and directors of Michigan Interface Systems are
fully authorized in the name and on behalf of Interface Systems or otherwise to
take any and all such action and to execute and deliver any and all such deeds
and other instruments.
4.3 Abandonment. At any time before the Effective Date of the Merger, this
Agreement may be terminated and the Merger may be abandoned for any reason
whatsoever by the Boards of Directors of Interface Systems and Michigan
Interface Systems, notwithstanding the approval of this Agreement by the
stockholders of Interface Systems, the sole shareholder of Michigan Interface
Systems, or by both.
4.4 Amendment. The Boards of Directors of the Constituent Corporations may
amend this Agreement at any time prior to the filing of this Agreement (or a
certificate in lieu thereof) with the applicable departments of the States of
Michigan and Delaware, provided that an amendment made subsequent to the
A-3
<PAGE> 28
approval of this Agreement by the stockholders of either Constituent Corporation
shall not: (1) alter or change the amount or kind of shares, securities, cash,
property and/or rights to be received in exchange for or on conversion of all or
any of the shares of any class or series thereof of such Constituent
Corporation, (2) alter or change any term of the Articles of Incorporation of
the Surviving Corporation to be effected by the Merger, or (3) alter or change
any of the terms and conditions of this Agreement if such alteration or change
would adversely affect the holders of any class of shares or series thereof of
such Constituent Corporation.
4.5 Registered Office. The registered office of the Surviving Corporation
in the State of Michigan is located at 5855 Interface Drive, Ann Arbor,
Michigan, 48103, and Robert A. Nero is the registered agent of the Surviving
Corporation at such address.
4.6 Agreement. Executed copies of this Agreement will be on file at the
principal place of business of the Surviving Corporation at 5855 Interface
Drive, Ann Arbor, Michigan 48103 and copies thereof will be furnished to any
stockholder of either Constituent Corporation, upon request and without cost.
4.7 Governing Law. This Agreement shall in all respects be construed,
interpreted and enforced in accordance with and governed by the laws of the
State of Michigan and, so far as applicable, the merger provisions of the
Delaware Business Corporation Law.
4.8 Counterparts. In order to facilitate the filing and recording of this
Agreement, the same may be executed in any number of counterparts, each of which
shall be deemed to be an original and all of which together shall constitute one
and the same instrument.
IN WITNESS WHEREOF, this Agreement, having first been approved by
resolutions of the Boards of Directors of Michigan Interface Systems and
Interface Systems, Inc., is hereby executed on behalf of each of such two
corporations and attested by their respective officers thereunto duly
authorized.
<TABLE>
<S> <C>
ATTEST: MICHIGAN INTERFACE SYSTEMS, INC.
A Michigan corporation
By: /s/ GEORGE W. PERRETT By: /s/ ROBERT A. NERO
------------------------------------------------- -------------------------------------------------
George W. Perrett, Secretary Robert A. Nero, President
ATTEST: INTERFACE SYSTEMS, INC.
A Delaware corporation
By: /s/ GEORGE W. PERRETT By: /s/ ROBERT A. NERO
------------------------------------------------- -------------------------------------------------
George W. Perrett, Secretary Robert A. Nero, President
</TABLE>
A-4
<PAGE> 29
C&S 500 (REV. 7/96) APPENDIX B
MICHIGAN DEPARTMENT OF CONSUMER AND INDUSTRY SERVICES
CORPORATION, SECURITIES AND LAND DEVELOPMENT BUREAU
Date Received (FOR BUREAU USE ONLY)
<TABLE>
<S> <C> <C> <C>
Name
Steven C. Tyshka (313) 568-6585
- -------------------------------------------------------------------
Address
Dykema Gossett PLLC, 400 Renaissance
Center
- -------------------------------------------------------------------
City State Zip Code EFFECTIVE DATE:
Detroit Michigan 48243 January 15, 1998
- -------------------------------------------------------------------
</TABLE>
Document will be returned to the name and address you enter above
CID Number: 508-822
ARTICLES OF INCORPORATION
For use by domestic profit corporations
Pursuant to the provisions of Act 284, Public Acts of 1972, as amended, the
undersigned corporation executes the following Articles:
ARTICLE I
The name of the corporation is Michigan Interface Systems, Inc.
ARTICLE II
The purpose for which the corporation is organized is to engage in any
lawful activity within the purposes for which corporations may be organized
under the Business Corporation Act of Michigan, as it exists on the date hereof
and as it may be amended from time to time hereafter (the "Michigan Business
Corporation Act").
ARTICLE III
The total number of shares of the capital stock which the corporation has
authority to issue is Sixty Thousand (60,000) shares of common stock ("Common
Stock").
Holders of Common Stock shall be entitled to receive such dividends as may
be declared by the Board of Directors of the Corporation from time to time and
in the event of any liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, to receive pro rata all the remaining assets
of the Corporation available for distribution.
Holders of the Common Stock shall have equal voting and other rights share
for share, and each holder of Common Stock is entitled to one vote per share.
ARTICLE IV
The address and the mailing address of the registered office of the
corporation is 5855 Interface Drive, Ann Arbor, Michigan 48103.
<PAGE> 30
The name of the resident agent at the registered office is Robert A. Nero.
ARTICLE V
The name and address of the incorporator is as follows: Steven C. Tyshka,
Dykema Gossett, PLLC, 400 Renaissance Center, Detroit, Michigan 48243-1668.
ARTICLE VI
When a compromise or arrangement or a plan or reorganization of this
corporation is proposed between this corporation and its creditors or any class
of them or between this corporation and its shareholders or any class of them, a
court of equity jurisdiction within the state, on application of this
corporation or of a creditor or shareholder thereof, or on application of a
receiver appointed for the corporation, may order a meeting of the creditors or
class of creditors or of the shareholders or class of shareholders to be
affected by the proposed compromise or arrangement or reorganization, to be
summoned in such manner as the court directs. If a majority in number, and
representing three-fourths in value of claims, of the creditors or class of
creditors, or if the shareholders or class of shareholders to be affected by the
proposed compromise or arrangement or a reorganization representing
three-fourths of such shares, agree to a compromise or arrangement or a
reorganization of this corporation as a consequence of the compromise or
arrangement, the compromise or arrangement and the reorganization, if sanctioned
by the court to which the application has been made, shall be binding on all the
creditors or class of creditors, or on all the shareholders or class of
shareholders, as the case may be, and also on this corporation.
ARTICLE VII
The number of directors which shall constitute the whole Board of Directors
shall be the number from time to time fixed by the Board of Directors. During
the intervals between annual meetings of shareholders, any vacancy occurring in
the Board of Directors caused by resignation, removal, death or incapacity, and
any newly created directorships resulting from an increase in the number of
directors, shall be filled only by a majority vote of the directors then in
office, whether or not a quorum. Each director chosen to fill a vacancy shall
hold office until the next election of directors. No decrease in the number of
directors shall have the effect of shortening the term of any incumbent
director. Any director may be removed from office as a director at any time, but
only for cause, by the affirmative vote of shareholders of record holding a
majority of the outstanding shares of stock of the corporation entitled to vote
in elections of directors given at a meeting of the shareholders specifically
called for that purpose.
ARTICLE VIII
No director of the corporation shall be personally liable to the
corporation or its shareholders for money damages for any action taken or any
failure to take any action as a director, except liability for any of the
following: (i) the amount of financial benefit received by the director to which
the director is not entitled; (ii) intentional infliction of harm on the
corporation or its shareholders; (iii) a violation of Section 551 of the
Michigan Business Corporation Act; or (iv) an intentional criminal act. If the
Michigan Business Corporation Act hereafter is amended to authorize the further
elimination or limitation of the liability of directors, then the liability of a
director of the corporation, in addition to the limitation on personal liability
contained herein, shall be eliminated or limited to the fullest extent permitted
by the Michigan Business Corporation Act as so amended. No amendment or repeal
of this Article VIII shall apply to or have any effect on the liability or
alleged liability of any director of the corporation for or with respect to any
acts or omissions of such director occurring prior to the effective date of any
such amendment or repeal.
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ARTICLE IX
The Corporation reserves the right to amend, alter, change, or repeal any
provision contained in these Articles of Incorporation in the manner now or
hereafter prescribed by law, and all rights and powers conferred herein on
shareholders, directors and officers are subject to this reserved power.
ARTICLE X
Directors and officers of the corporation shall be indemnified in
connection with any actual or threatened action or proceeding (including civil,
criminal, administrative or investigative proceedings) arising out of their
service to the corporation or to another organization at the corporation's
request, and shall be paid expenses incurred in defending any such proceeding in
advance of its final disposition to the fullest extent permitted by law. Persons
who are not directors or officers of the corporation may be similarly
indemnified in respect of such service to the extent authorized at any time by
the Board of Directors or the Bylaws of the corporation. The provisions of this
Article shall be applicable to actions or proceedings commenced after the
adoption hereof, whether arising from acts or omissions occurring before or
after the adoption hereof, and to persons who have ceased to be directors,
officers or employees, and shall inure to the benefit of their heirs, executors
and administrators. The right to indemnification and advancement of expenses
conferred hereunder shall be a contract right which may not be modified
retroactively without the written consent of the director or officer and shall
not be deemed exclusive of any other rights to indemnification or advancement of
expenses such person may have or to which such person may be entitled.
If a claim under this Article X is not paid in full by the corporation
within thirty days after a written claim has been received by the corporation,
the indemnitee may at any time thereafter bring suit against the corporation to
recover the unpaid amount of the claim. If successful in whole or in part in any
such suit or in a suit brought by the corporation to recover advances, the
indemnitee shall be entitled to be paid also the expense of prosecuting or
defending such claim. In any action brought by the indemnitee to enforce a right
hereunder (other than an action brought to enforce a claim for expenses incurred
in defending any proceeding in advance of its final disposition where the
required undertaking has been tendered to the corporation) it shall be a defense
that, and in any action brought by the corporation to recover advances the
corporation shall be entitled to recover such advances if, the indemnitee has
not met the applicable standard of conduct set forth in the Michigan Business
Corporation Act. Neither the failure of the corporation (including its Board of
Directors, a committee of its Board of Directors, independent legal counsel, or
its shareholders) to have made a determination prior to the commencement of such
action that indemnification of the indemnitee is proper in the circumstances
because the indemnitee has met the applicable standard of conduct set forth in
the Michigan Business Corporation Act, nor an actual determination by the
corporation (including its Board of Directors, a committee of its Board of
Directors, independent legal counsel or its shareholders) that the indemnitee
has not met such applicable standard of conduct, shall be a defense to an action
brought by the indemnitee or create a presumption that the indemnitee has not
met the applicable standard of conduct. In any action brought by the indemnitee
to enforce a right hereunder or by the corporation to recover payments by the
corporation of advances, the burden of proof shall be on the corporation.
ARTICLE XI
Notwithstanding any other provisions of these Articles of Incorporation, no
amendment to these Articles of Incorporation shall amend or repeal any or all of
the provisions of Articles VII, VIII, X or this Article XI of these Articles of
Incorporation, and the shareholders of the corporation shall not have the right
to amend or repeal any or all provisions of the Bylaws of the corporation,
unless so adopted by the affirmative vote of the holders of not less than
three-fourths of the outstanding shares of stock of the corporation generally
entitled to vote in the election of directors, considered for purposes of this
Article XI as a class; provided, however, that in
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the event the Board of Directors of the corporation shall recommend to the
shareholders the adoption of any such amendment of a nature described in this
Article XI, the shareholders of record holding a majority of the outstanding
shares of stock of the corporation entitled to vote in elections of directors,
considered for the purposes of this Article XI as a class, may amend, modify or
repeal any or all of such provisions.
Signed this 14th day of January, 1998.
By: /s/ STEVEN C. TYSHKA
------------------------------------
Steven C. Tyshka, Incorporator
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APPENDIX C
BYLAWS
OF
MICHIGAN INTERFACE SYSTEMS, INC.
ARTICLE I
OFFICES
1.01 PRINCIPAL OFFICE. The principal office of the corporation shall be at
such place within or outside the State of Michigan as the Board of Directors
shall determine from time to time.
1.02 OTHER OFFICES. The corporation also may have offices at such other
places as the Board of Directors from time to time determines or the business of
the corporation requires.
ARTICLE II
SEAL
2.01 SEAL. The corporation may have a seal in such form as the Board of
Directors may from time to time determine. The seal may be used by causing it or
a facsimile to be impressed, affixed, reproduced or otherwise.
ARTICLE III
CAPITAL STOCK
3.01 ISSUANCE OF SHARES. The shares of capital stock of the corporation
shall be issued in such amounts, at such times, for such consideration and on
such terms and conditions as the Board shall deem advisable, subject to the
provisions of the Articles of Incorporation of the Corporation and the further
provisions of these Bylaws, and subject also to any requirements of the laws of
the State of Michigan.
3.02 CERTIFICATES FOR SHARES. The shares of the corporation shall be
represented by certificates signed by the Chairman of the Board, Vice Chairman
of the Board, President or a Vice President of the corporation, and may be
sealed with the seal of the corporation or a facsimile thereof. A certificate
representing shares shall state upon its face that the corporation is formed
under the laws of the State of Michigan, the name of the person to whom it is
issued, the number and class of shares, and the designation of the series, if
any, which the certificate represents and such other provisions as may be
required by the laws of the State of Michigan.
3.03 TRANSFER OF SHARES. The shares of the capital stock of the corporation
are transferable only on the books of the corporation upon surrender of the
certificate therefor, properly endorsed for transfer, and the presentation of
such evidences of ownership and validity of the assignment as the corporation
may require.
3.04 REGISTERED SHAREHOLDERS. The corporation shall be entitled to treat
the person in whose name any share of stock is registered as the owner thereof
for purposes of dividends and other distributions in the course of business, or
in the course of recapitalization, consolidation, merger, reorganization, sale
of assets, liquidation or otherwise and for the purpose of votes, approvals and
consents by shareholders, and for the purpose of notices to shareholders, and
for all other purposes whatever, and shall not be bound to recognize any
equitable or other claim to or interest in such shares on the part of any other
person, whether or not the corporation shall have notice thereof, save as
expressly required by the laws of the State of Michigan.
3.05 LOST OR DESTROYED CERTIFICATES. Upon the presentation to the
corporation of a proper affidavit attesting the loss, destruction or mutilation
of any certificate or certificates for shares of stock of the corporation, the
Board of Directors shall direct the issuance of a new certificate or
certificates to replace the certificates so alleged to be lost, destroyed or
mutilated. The Board of Directors may require as a condition
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precedent to the issuance of new certificates a bond or agreement of indemnity,
in such form and amount and with such sureties, or without sureties, as the
Board of Directors may direct or approve.
ARTICLE IV
SHAREHOLDERS AND MEETINGS OF SHAREHOLDERS
4.01 PLACE OF MEETINGS. All meetings of shareholders shall be held at the
principal office of the corporation or at such other place as shall be
determined by the Board of Directors and stated in the notice of meeting.
4.02 ANNUAL MEETING. The annual meeting of the shareholders of the
corporation shall be held on such date and at such time and place as may be
specified in the notice of annual meeting to be sent to shareholders. Directors
shall be elected at each annual meeting and such other business transacted as
may come before the meeting. Any annual meeting of shareholders may be adjourned
by the Chairman of the meeting or pursuant to a resolution of the Board of
Directors.
4.03 SPECIAL MEETINGS. Special meetings of shareholders may be called by
the Board of Directors, the Chairman of the Board (if such office is filled) or
the President. At any special meeting of shareholders, the business which may be
transacted shall be limited to that which was specifically stated in the notice
of such special meeting provided to shareholders.
4.04 NOTICE OF MEETINGS. Except as otherwise provided by statute, written
notice of the time, place and purposes of a meeting of shareholders shall be
given not less than 10 nor more than 60 days before the date of the meeting to
each shareholder of record entitled to vote at the meeting, either personally or
by mailing such notice to his last address as it appears on the books of the
corporation. No notice need be given of an adjourned meeting of the shareholders
provided the time and place to which such meeting is adjourned are announced at
the meeting at which the adjournment is taken and at the adjourned meeting only
such business is transacted as might have been transacted at the original
meeting. However, if after the adjournment a new record date is fixed for the
adjourned meeting a notice of the adjourned meeting shall be given to each
shareholder of record on the new record date entitled to notice as provided in
this Bylaw.
4.05 RECORD DATES. The Board of Directors may fix in advance a date as the
record date for the purpose of determining shareholders entitled to notice of
and to vote at a meeting of shareholders or an adjournment thereof, or to
express consent or to dissent from a proposal without a meeting, or for the
purpose of determining shareholders entitled to receive payment of a dividend or
allotment of a right, or for the purpose of any other action. The date fixed
shall not be more than 60 nor less than 10 days before the date of the meeting,
nor more than 60 days before any other action. In such case only such
shareholders as shall be shareholders of record on the date so fixed shall be
entitled to notice of and to vote at such meeting or adjournment thereof, or to
express consent or to dissent from such proposal, or to receive payment of such
dividend or to receive such allotment of rights, or to participate in any other
action, as the case may be, notwithstanding any transfer of any stock on the
books of the corporation, or otherwise, after any such record date. Nothing in
this Bylaw shall affect the rights of a shareholder and his transferee or
transferor as between themselves.
4.06 LIST OF SHAREHOLDERS. The Secretary of the corporation or the agent of
the corporation having charge of the stock transfer records for shares of the
corporation shall make and certify a complete list of the shareholders entitled
to vote at a shareholders' meeting or any adjournment thereof. The list shall be
arranged alphabetically, showing the name of, the address of, and the number of
shares held by, each shareholder; be produced at the time and place of the
meeting; be subject to inspection by any shareholder during the whole time of
the meeting; and be prima facie evidence as to who are the shareholders entitled
to examine the list or vote at the meeting.
4.07 QUORUM. Unless a greater or lesser quorum is required in the Articles
of Incorporation or by the laws of the State of Michigan, the shareholders
present at a meeting in person or by proxy who, as of the record date for such
meeting, were holders of a majority of the outstanding shares of the corporation
entitled
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to vote at the meeting shall constitute a quorum at the meeting. Whether or not
a quorum is present, a meeting of shareholders may be adjourned by a vote of the
shares present in person or by proxy.
4.08 PROXIES. A shareholder entitled to vote at a meeting of shareholders
or to express consent or dissent without a meeting may authorize other persons
to act for the shareholder by proxy. A proxy shall be signed by the shareholder
or the shareholder's authorized agent or representative and shall not be valid
after the expiration of three years from its date unless otherwise provided in
the proxy. A proxy is revocable at the pleasure of the shareholder executing it
except as otherwise provided by the laws of the State of Michigan.
4.09 VOTING. Each outstanding share is entitled to one vote on each matter
submitted to a vote, unless otherwise provided in the Articles of Incorporation.
Votes shall be cast in writing and signed by the shareholder or the
shareholder's proxy. When an action, other than the election of directors, is to
be taken by a vote of the shareholders, it shall be authorized by a majority of
the votes cast by the holders of shares entitled to vote thereon, unless a
greater vote is required by the Articles of Incorporation or by the laws of the
State of Michigan. Except as otherwise provided by the Articles of
Incorporation, directors shall be elected by a plurality of the votes cast at
any election.
4.10 MEETINGS OF SHAREHOLDERS.
(A) Annual Meetings of Shareholders. (1) Nominations of persons for
election to the Board of Directors of the corporation and the proposal of
business to be considered by the shareholders may be made at an annual meeting
of shareholders (a) pursuant to the corporation's notice of meeting, (b) by or
at the direction of the Board of Directors or (c) by any shareholder of the
corporation who was a shareholder of record at the time of giving of notice
provided for in this Bylaw, who is entitled to vote at the meeting and who
complied with the notice procedures set forth in this Bylaw.
(2) For nominations or other business to be properly brought before an
annual meeting by a shareholder pursuant to clause (c) of paragraph (A)(1) of
this Bylaw, the shareholder must have given timely notice thereof in writing to
the Secretary of the corporation. To be timely, a shareholder's notice shall be
delivered to the Secretary at the principal executive offices of the corporation
not less than 60 days nor more than 90 days prior to the first anniversary of
the preceding year's annual meeting; provided, however, that in the event that
the date of the annual meeting is advanced by more than 30 days or delayed by
more than 60 days from such anniversary date, notice by the shareholder to be
timely must be so delivered not earlier than the 90th day prior to such annual
meeting and not later than the close of business on the later of the 60th day
prior to such annual meeting or the 10th day following the day on which public
announcement of the date of such meeting is first made. Such shareholder's
notice shall set forth (a) as to each person whom the shareholder proposes to
nominate for election or reelection as a director, all information relating to
such person that is required to be disclosed in solicitations of proxies for
election of directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (including such person's written consent to being named in the
proxy statement as a nominee and to serving as a director if elected); (b) as to
any other business that the shareholder proposes to bring before the meeting, a
brief description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting and any material interest in
such business of such shareholder and the beneficial owner, if any, on whose
behalf the proposal is made; (c) as to the shareholder giving the notice and
beneficial owner, if any, on whose behalf the nomination or proposal is made (i)
the name and address of such shareholder, as they appear on the corporation's
books, and of such beneficial owner and (ii) the class and number of shares of
the corporation which are owned beneficially and of record by such shareholder
and such beneficial owner.
(3) Notwithstanding anything in the second sentence of paragraph (A)(2) of
this Bylaw to the contrary, in the event that the number of directors to be
elected to the Board of Directors of the corporation is increased and there is
no public announcement naming all of the nominees for director or specifying the
size of the increased Board of Directors made by the corporation at least 70
days prior to the first anniversary of the preceding year's annual meeting, a
shareholder's notice required by this Bylaw shall also be considered timely, but
only with respect to nominees for any new positions created by such increase, if
it shall be delivered to the Secretary at the principal executive offices of the
corporation not later than the close of business on the 10th day following the
day on which such public announcement is first made by the corporation.
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(B) Special Meetings of Shareholders. Only such business shall be conducted
at a special meeting of shareholders as shall have been brought before the
meeting pursuant to the corporation's notice of meeting. Nominations of persons
for election to the Board of Directors may be made at a special meeting of
shareholders at which directors are to be elected pursuant to the corporation's
notice of meeting (a) by or at the direction of the Board of Directors or (b) by
any shareholder of the corporation who is a shareholder of record at the time of
giving of notice provided hereunder, who shall be entitled to vote at the
meeting and who complies with the notice procedures set forth in this Bylaw.
Nominations by shareholders of persons for election to the Board of Directors
may be made at such a special meeting of shareholders if the shareholder's
notice required by paragraph (A)(2) of this Bylaw shall be delivered to the
Secretary at the principal executive offices of the corporation not earlier than
the 90th day prior to such special meeting and not later than the close of
business on the later of the 60th day prior to such special meeting or the 10th
day following the day on which public announcement is first made of the date of
the special meeting and of the nominees proposed by the Board of Directors to be
elected at such meeting.
(C) General. (1) Only such persons who are nominated in accordance with the
procedures set forth in this Bylaw shall be eligible to serve as directors and
only such business shall be conducted at a meeting of shareholders as shall have
been brought before the meeting in accordance with the procedures set forth in
this Bylaw. The Chairman of the meeting shall have the power and duty to
determine whether a nomination or any business proposed to be brought before the
meeting was made in accordance with the procedures set forth in this Bylaw and,
if any proposed nomination or business is not in compliance with this Bylaw, to
declare that such defective proposal shall be disregarded.
(2) For purposes of this Bylaw, "public announcement" shall mean disclosure
in a press release reported by the Dow Jones News Service, Associated Press or
comparable national news service or in a document publicly filed by the
corporation with the Securities and Exchange Commission pursuant to Sections 13,
14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this Bylaw, a shareholder
shall also comply with all applicable requirements of the Exchange Act and the
rules and regulations thereunder with respect to the matters set forth in this
Bylaw. Nothing in this Bylaw shall be deemed to affect any rights of
shareholders to request inclusion of proposals in the corporation's proxy
statement pursuant to Rule 14a-8 under the Exchange Act.
ARTICLE V
DIRECTORS
5.01 NUMBER. The business and affairs of the corporation shall be managed
by a Board of not less than three nor more than twelve directors as shall be
fixed from time to time by the Board of Directors. The directors need not be
residents of Michigan or shareholders of the corporation.
5.02 ELECTION, RESIGNATION AND REMOVAL. Directors shall be elected at each
annual meeting of the shareholders, each to hold office for the term for which
the director is elected and until the director's successor is elected and
qualified, or until the director's resignation or removal. A director may resign
by written notice to the corporation. The resignation is effective upon its
receipt by the corporation or a subsequent time as set forth in the notice of
resignation. A director or the entire Board of Directors may be removed, with
cause, by the affirmative vote of shareholders of record holding a majority of
the outstanding shares entitled to vote at an election of directors given at a
meeting specifically called for that purpose.
5.03 VACANCIES. Vacancies in the Board of Directors occurring by reason of
death, resignation, removal, increase in the number of directors or otherwise
shall be filled by the affirmative vote of a majority of the remaining directors
though less than a quorum of the Board of Directors. Each person so elected
shall be a director for a term of office continuing until the next election of
directors.
5.04 ANNUAL MEETING. The Board of Directors shall meet each year
immediately after the annual meeting of the shareholders, or within three (3)
days of such time excluding Sundays and legal holidays if
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such later time is deemed advisable, at the place where such meeting of the
shareholders has been held or such other place as the Board may determine, for
the purpose of election of officers and consideration of such business that may
properly be brought before the meeting; provided, that if less than a majority
of the directors appear for an annual meeting of the Board of Directors the
holding of such annual meeting shall not be required and the matters which might
have been taken up therein may be taken up at any later special or annual
meeting, or by consent resolution.
5.05 REGULAR AND SPECIAL MEETINGS. Regular meetings of the Board of
Directors may be held at such times and places as the majority of the directors
may from time to time determine at a prior meeting or as shall be directed or
approved by the vote or written consent of all the directors. Special meetings
of the Board may be called by the Chairman of the Board (if such office is
filled) or the President and shall be called by the President or Secretary upon
the written request of any two directors.
5.06 NOTICES. No notice shall be required for annual or regular meetings of
the Board or for adjourned meetings, whether regular or special. Twenty-four
hours written notice shall be given for special meetings of the Board, and such
notice shall state the time, place and purpose or purposes of the meeting.
5.07 QUORUM. A majority of the Board of Directors then in office, or of the
members of a committee thereof, constitutes a quorum for the transaction of
business. The vote of a majority of the directors present at any meeting at
which there is a quorum shall be the acts of the Board or of the committee,
except as a larger vote may be required by the laws of the State of Michigan. A
member of the Board or of a committee designated by the Board may participate in
a meeting by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can communicate with
the other participants. Participation in a meeting in this manner constitutes
presence in person at the meeting.
5.08 EXECUTIVE AND OTHER COMMITTEES. The Board of Directors may, by
resolution passed by a majority of the whole Board, appoint three or more
members of the Board as an executive committee to exercise all powers and
authorities of the Board in management of the business and affairs of the
corporation, except that the committee shall not have power or authority to (a)
amend the Articles of Incorporation, except that a committee may prescribe the
relative rights and preferences of shares of a series; (b) adopt an agreement of
merger or share exchange; (c) recommend to shareholders the sale, lease or
exchange of all or substantially all of the corporation's property and assets;
(d) recommend to shareholders a dissolution of the corporation or revocation of
a dissolution; (e) amend these Bylaws; (f) fill vacancies in the Board; or (g)
unless expressly authorized by the Board, declare a distribution or dividend or
to authorize the issuance of stock.
The Board of Directors from time to time may, by like resolution, appoint
such other committees of one or more directors to have such authority as shall
be specified by the Board in the resolution making such appointments. The Board
of Directors may designate one or more directors as alternate members of any
committee who may replace an absent or disqualified member at any meeting
thereof.
5.09 DISSENTS. A director who is present at a meeting of the Board of
Directors, or a committee thereof of which the director is a member, at which
action on a corporate matter is taken is presumed to have concurred in that
action unless the director's dissent is entered in the minutes of the meeting or
unless the director files a written dissent to the action with the person acting
as secretary of the meeting before the adjournment thereof or shall forward such
dissent by registered mail to the Secretary of the corporation promptly after
the adjournment of the meeting. Such right to dissent does not apply to a
director who voted in favor of such action. A director who is absent from a
meeting of the Board, or a committee thereof of which the director is a member,
at which any such action is taken is presumed to have concurred in the action
unless the director files a written dissent with the Secretary of the
corporation within a reasonable time after the director has knowledge of the
action.
5.10 COMPENSATION. Except as provided in the Articles of Incorporation, the
Board of Directors, by affirmative vote of a majority of directors in office and
irrespective of any personal interest of any of them, may establish reasonable
compensation of directors for services to the corporation as directors or
officers.
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ARTICLE VI
NOTICES, WAIVERS OF NOTICE AND MANNER OF ACTING
6.01 NOTICES. All notices of meetings required to be given to shareholders,
directors or any committee of directors may be given by mail, telecopy,
telegram, radiogram or cablegram to any shareholder, director or committee
member at his last address as it appears on the books of the corporation. Such
notice shall be deemed to be given at the time when the same shall be mailed or
otherwise dispatched.
6.02 WAIVER OF NOTICE. Notice of the time, place and purpose of any meeting
of shareholders, directors or committee of directors may be waived by telecopy,
telegram, radiogram, cablegram or other writing, either before or after the
meeting, or in such other manner as may be permitted by the laws of the State of
Michigan. Attendance of a person at any meeting of shareholders, in person or by
proxy, or at any meeting of directors or of a committee of directors,
constitutes a waiver of notice of the meeting except when the person attends the
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened.
6.03 ACTION WITHOUT A MEETING. Any action required or permitted at any
meeting of shareholders or directors or committee of directors may be taken
without a meeting, without prior notice and without a vote, if all of the
shareholders or directors or committee members entitled to vote thereon consent
thereto in writing.
ARTICLE VII
OFFICERS
7.01 NUMBER. The Board of Directors shall elect or appoint a President, a
Secretary and a Treasurer, and may select a Chairman of the Board, and one or
more Vice Presidents, Assistant Secretaries or Assistant Treasurers. Any two or
more of the above offices, except those of President and Vice President, may be
held by the same person. No officer shall execute, acknowledge or verify an
instrument in more than one capacity if the instrument is required by law, the
Articles of Incorporation or these Bylaws to be executed, acknowledged, or
verified by one or more officers.
7.02 TERM OF OFFICE, RESIGNATION AND REMOVAL. An officer shall hold office
for the term for which he is elected or appointed and until his successor is
elected or appointed and qualified, or until his resignation or removal. An
officer may resign by written notice to the corporation. The resignation is
effective upon its receipt by the corporation or at a subsequent time specified
in the notice of resignation. An officer may be removed by the Board with or
without cause. The removal of an officer shall be without prejudice to his
contract rights, if any. The election or appointment of an officer does not of
itself create contract rights.
7.03 VACANCIES. The Board of Directors may fill any vacancies in any office
occurring for whatever reason.
7.04 AUTHORITY. All officers, employees and agents of the corporation shall
have such authority and perform such duties in the conduct and management of the
business and affairs of the corporation as may be designated by the Board of
Directors and these Bylaws.
ARTICLE VIII
DUTIES OF OFFICERS
8.01 CHAIRMAN OF THE BOARD. The Chairman of the Board shall preside at all
meetings of the shareholders and of the Board of Directors at which the Chairman
is present. The Chairman shall see that all orders and resolutions of the Board
are carried into effect and the Chairman shall have the general powers of
supervision and management usually vested in the chief executive officer of a
corporation, including the authority to vote all securities of other
corporations and organizations held by the corporation.
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8.02 VICE CHAIRMAN. The Vice Chairman, if such position is filled, shall,
in the absence or disability of the Chairman, perform the duties and exercise
the powers of the Chairman of the Board and shall perform such other duties as
the Board of Directors or the Chairman of the Board may from time to time
prescribe.
8.03 PRESIDENT. The President shall have the general powers of supervision
and management over the day-to-day operations of the corporation. The President
shall see that all orders and resolutions of the Board are carried into effect
and shall be ex officio a member of all management committees. He may execute
any documents in the name of the corporation and shall have such other powers
and duties as may be prescribed by the Board.
8.04 VICE PRESIDENTS. The Vice Presidents, in order of their seniority,
shall, in the absence or disability of the President, perform the duties and
exercise the powers of the President and shall perform such other duties as the
Board of Directors or the President may from time to time prescribe.
8.05 SECRETARY. The Secretary shall attend all meetings of the Board of
Directors and of shareholders and shall record all votes and minutes of all
proceedings in a book to be kept for that purpose, shall give or cause to be
given notice of all meetings of the shareholders and of the Board of Directors,
and shall keep in safe custody the seal of the corporation and, when authorized
by the Board, affix the same to any instrument requiring it, and when so affixed
it shall be attested by the signature of the Secretary, or by the signature of
the Treasurer or an Assistant Secretary. The Secretary may delegate any of the
duties, powers and authorities of the Secretary to one or more Assistant
Secretaries, unless such delegation is disapproved by the Board.
8.06 TREASURER. The Treasurer shall have the custody of the corporate funds
and securities; shall keep full and accurate accounts of receipts and
disbursements in books of the corporation; and shall deposit all moneys and
other valuable effects in the name and to the credit of the corporation in such
depositories as may be designated by the Board of Directors. The Treasurer shall
render to the President and directors, whenever they may require it, an account
of his or her transactions as Treasurer and of the financial condition of the
corporation. The Treasurer may delegate any of his or her duties, powers and
authorities to one or more Assistant Treasurers unless such delegation is
disapproved by the Board of Directors.
8.07 ASSISTANT SECRETARIES AND TREASURERS. The Assistant Secretaries, in
order of their seniority, shall perform the duties and exercise the powers and
authorities of the Secretary in case of the Secretary's absence or disability.
The Assistant Treasurers, in the order of their seniority, shall perform the
duties and exercise the powers and authorities of the Treasurer in case of the
Treasurer's absence or disability. The Assistant Secretaries and Assistant
Treasurers shall also perform such duties as may be delegated to them by the
Secretary and Treasurer, respectively, and also such duties as the Board of
Directors may prescribe.
ARTICLE IX
SPECIAL CORPORATE ACTS
9.01 ORDERS FOR PAYMENT OF MONEY. All checks, drafts, notes, bonds, bills
of exchange and orders for payment of money of the corporation shall be signed
by such officer or officers or such other person or persons as the Board of
Directors may from time to time designate.
9.02 CONTRACTS AND CONVEYANCES The Board of Directors of the corporation
may in any instance designate the officer and/or agent who shall have authority
to execute any contract, conveyance, mortgage or other instrument on behalf of
the corporation, or may ratify or confirm any execution. When the execution of
any instrument has been authorized without specification of the executing
officers or agents, the Chairman of the Board, the President or any Vice
President, and the Secretary or Assistant Secretary or Treasurer or Assistant
Treasurer, may execute the same in the name and on behalf of this corporation
and may affix the corporate seal thereto.
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ARTICLE X
BOOKS AND RECORDS
10.01 MAINTENANCE OF BOOKS AND RECORDS. The proper officers and agents of
the corporation shall keep and maintain such books, records and accounts of the
corporation's business and affairs, minutes of the proceedings of its
shareholders, Board and committees, if any, and such stock ledgers and lists of
shareholders, as the Board of Directors shall deem advisable, and as shall be
required by the laws of the State of Michigan and other states or jurisdictions
empowered to impose such requirements. Books, records and minutes may be kept
within or without the State of Michigan in a place which the Board shall
determine.
10.02 RELIANCE ON BOOKS AND RECORDS. In discharging his or her duties, a
director or an officer of the corporation is entitled to rely on information,
opinions, reports, or statements, including financial statements and other
financial data, if prepared or presented by any of the following: (a) one or
more directors, officers, or employees of the corporation, or of a business
organization under joint control or common control whom the director or officer
reasonably believes to be reliable and competent in the matters presented, (b)
legal counsel, public accountants, engineers, or other persons as to matters the
director or officer reasonably believes are within the person's professional or
expert competence, or (c) a committee of the Board of Directors of which he or
she is not a member if the director or officer reasonably believes the Committee
merits confidence. A director or officer is not entitled to rely on such
information if he or she has knowledge concerning the matter in question that
makes such reliance unwarranted.
ARTICLE XI
INDEMNIFICATION
11.01 NON-DERIVATIVE ACTIONS. Subject to all of the other provisions of
this Article XI, the corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative and whether formal or informal (other than an action by or in the
right of the corporation), by reason of the fact that the person is or was a
director or officer of the corporation, or is or was serving at the request of
the corporation as a director, officer, partner, trustee, employee, or agent of
another foreign or domestic corporation, partnership, joint venture, trust or
other enterprise, whether for profit or not, against expenses (including
attorneys' fees), judgments, penalties, fines and amounts paid in settlement
actually and reasonably incurred by him or her in connection with such action,
suit or proceeding, if the person acted in good faith and in a manner the person
reasonably believed to be in or not opposed to the best interests of the
corporation or its shareholders, and with respect to any criminal action or
proceeding, if the person had no reasonable cause to believe his or her conduct
was unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which the person reasonably believed to be in
or not opposed to the best interests of the corporation or its shareholders,
and, with respect to any criminal action or proceeding, had reasonable cause to
believe that his or her conduct was unlawful.
11.02 DERIVATIVE ACTIONS. Subject to all of the provisions of this Article
XI, the corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that the person is or was a director or officer of the
corporation, or is or was serving at the request of the corporation as a
director, officer, partner, trustee, employee, or agent of another foreign or
domestic corporation, partnership, joint venture, trust or other enterprise,
whether for profit or not, against expenses (including attorneys' fees) and
amounts paid in settlement incurred by the person in connection with such action
or suit if the person acted in good faith and in a manner the person reasonably
believed to be in or not opposed to the best interests of the corporation or its
shareholders. However, indemnification shall not be made for any claim, issue or
matter in which such person has been found liable to the corporation unless and
only to the extent that the court in which such action or suit was brought has
determined upon application
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that, despite the adjudication of liability but in view of all circumstances of
the case, such person is fairly and reasonably entitled to indemnification for
the expenses which the court considers proper.
11.03 EXPENSES OF SUCCESSFUL DEFENSE. To the extent that a person has been
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Section 11.01 or 11.02 of these Bylaws, or in defense
of any claim, issue or matter in the action, suit or proceeding, the person
shall be indemnified against expenses (including attorneys' fees) incurred by
such person in connection with the action, suit or proceeding and any action,
suit or proceeding brought to enforce the mandatory indemnification provided by
this Section 11.03.
11.04 DEFINITIONS. For the purposes of Sections 11.01 and 11.02, "other
enterprises" shall include employee benefit plans; "fines" shall include any
excise taxes assessed on a person with respect to an employee benefit plan;
"serving at the request of the corporation" shall include any service as a
director, officer, employee, or agent of the corporation which imposes duties
on, or involves services by, the director or officer with respect to an employee
benefit plan, its participants or beneficiaries; and a person who acted in good
faith and in a manner the person reasonably believed to be in the interest of
the participants and beneficiaries of an employee benefit plan shall be
considered to have acted in a manner "not opposed to the best interests of the
corporation or its shareholders" as referred to in Sections 11.01 and 11.02.
11.05 CONTRACT RIGHT; LIMITATION ON INDEMNITY. The right to indemnification
conferred in this Article XI shall be a contract right, and shall apply to
services of a director or officer as an employee or agent of the corporation as
well as in such person's capacity as a director or officer. Except as provided
in Section 11.03 of these Bylaws, the corporation shall have no obligations
under this Article XI to indemnify any person in connection with any proceeding,
or part thereof, initiated by such person without authorization by the Board of
Directors.
11.06 DETERMINATION THAT INDEMNIFICATION IS PROPER. Any indemnification
under Section 11.01 or 11.02 of these Bylaws (unless ordered by a court) shall
be made by the corporation only as authorized in the specific case upon a
determination that indemnification of the person is proper in the circumstances
because the person has met the applicable standard of conduct set forth in
Section 11.01 or 11.02, whichever is applicable. Such determination shall be
made in any of the following ways:
(i) By a majority vote of a quorum of the Board consisting of
directors who were not parties to such action, suit or proceeding.
(ii) If the quorum described in clause (i) above is not obtainable,
then by a committee of directors who are not parties to the action, suit or
proceeding. The committee shall consist of not less than two (2)
disinterested directors.
(iii) By independent legal counsel in a written opinion. Legal counsel
for this purpose shall be chosen by the Board or its committee prescribed
in clauses (i) or (ii), or if a quorum of the Board cannot be obtained
under clause (i) and a committee cannot be designated under clause (ii), by
the Board.
(iv) By the shareholders. Shares held by directors or officers who are
parties or threatened to be made parties to the action, suit or proceeding
may not be voted.
11.07 AUTHORIZATION OF PAYMENT OF INDEMNIFICATION. (1) The payment of
indemnification as conferred by this Article XI to a person entitled to such
indemnification shall be authorized in any of the following ways:
(a) By the Board in one of the following ways:
(i) If there are two (2) or more directors who are not parties or
threatened to be made parties to the action, suit, or proceeding, by a
majority vote of directors who are not parties or threatened to be made
parties, a majority of whom shall constitute a quorum for this purpose.
(ii) By a majority of the members of a committee of two (2) or more
directors who are not parties or threatened to be made parties to the
action, suit, or proceeding.
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(iii) If the corporation has one (1) or more independent directors
who are not parties or threatened to be made parties to the action,
suit, or proceeding, by a majority vote of all independent directors who
are not parties or are threatened to be made parties, a majority of whom
shall constitute a quorum for this purpose.
(iv) If there are no independent directors and less than two (2)
directors who are not parties or threatened to be made parties to the
action, suit, or proceeding, by the vote necessary for action by the
Board in accordance with section 5.07 of these Bylaws, in which
authorization all directors may participate.
(b) By the shareholders, but shares held by directors, officers,
employees, or agents who are parties or threatened to be made parties to
the action, suit, or proceeding may not be voted on the authorization.
(2) To the extent that the articles of incorporation include a provision
eliminating or limiting the liability of a director pursuant to the Michigan
Business Corporation Act (MBCA) 450.1209(1)(c), the corporation may indemnify a
director for the expenses and liabilities described below without a
determination that the director has met the standard of conduct set forth in
sections 11.01 and 11.02, but no indemnification may be made except to the
extent authorized in MBCA 450.1564c, if the director received a financial
benefit to which he or she was not entitled, intentionally inflicted harm on the
corporation or its shareholders, violated MBCA 450.1551, or intentionally
violated criminal law. In connection with an action or suit by or in the right
of the corporation, as described in section 11.02, indemnification under this
section 11.07(2) may be for expenses, including attorneys' fees, actually and
reasonably incurred. In connection with an action, suit or proceeding other
than, one by or in the right of the corporation, as described in section 11.01,
indemnification under this section 11.07(2) may be for expenses, including
attorneys' fees, actually and reasonably incurred, and for judgments, penalties,
fines, and amounts paid in settlement actually and reasonably incurred.
11.08 PROPORTIONATE INDEMNITY. If a person is entitled to indemnification
under Section 11.01 or 11.02 of these Bylaws for a portion of expenses,
including attorneys' fees, judgments, penalties, fines, and amounts paid in
settlement, but not for the total amount thereof, the corporation shall
indemnify the person for the portion of the expenses, judgments, penalties,
fines, or amounts paid in settlement for which the person is entitled to be
indemnified.
11.09 EXPENSE ADVANCE. Expenses incurred in defending a civil or criminal
action, suit or proceeding described in Section 11.01 or 11.02 of these Bylaws
shall be paid by the corporation in advance of the final disposition of such
action, suit or proceeding if the corporation receives from the person
requesting such advance the following: (i) a written affirmation of the person's
good faith belief that the person has met the applicable standard of conduct in
Section 11.01 or 11.02 and (ii) a written undertaking by or on behalf of the
person to repay the expenses if it is ultimately determined that the person is
not entitled to be indemnified by the corporation. The undertaking shall be an
unlimited general obligation of the person on whose behalf advances are made but
need not be secured. Determinations and evaluations under this section 11.09
shall be made as specified in section 11.06, and authorizations shall be made in
the manner specified in section 11.07. A provision in the articles of
incorporation, these bylaws, a resolution by the board or the shareholders, or
an agreement making indemnification mandatory shall also make advancement of
expenses mandatory unless the provision specifically provides otherwise.
11.10 NON-EXCLUSIVITY OF RIGHTS. The indemnification or advancement of
expenses provided under this Article XI is not exclusive of other rights to
which a person seeking indemnification or advancement of expenses may be
entitled under a contractual arrangement with the corporation. However, the
total amount of expenses advanced or indemnified from all sources combined shall
not exceed the amount of actual expenses incurred by the person seeking
indemnification or advancement of expenses.
11.11 INDEMNIFICATION OF EMPLOYEES AND AGENTS OF THE CORPORATION. The
corporation may, to the extent authorized from time to time by the Board of
Directors, grant rights to indemnification and to the advancement of expenses to
any employee or agent of the corporation to the fullest extent of the provisions
of this Article XI with respect to the indemnification and advancement of
expenses of directors and officers of the corporation.
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11.12 FORMER DIRECTORS AND OFFICERS. The indemnification provided in this
Article XI continues as to a person who has ceased to be a director or officer
and shall inure to the benefit of the heirs, executors and administrators of
such person.
11.13 INSURANCE. The corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against the
person and incurred by him or her in any such capacity or arising out of his or
her status as such, whether or not the corporation would have power to indemnify
the person against such liability under these Bylaws or the laws of the State of
Michigan.
11.14 CHANGES IN MICHIGAN LAW. In the event of any change of the Michigan
statutory provisions applicable to the corporation relating to the subject
matter of this Article XI, then the indemnification to which any person shall be
entitled hereunder shall be determined by such changed provisions, but only to
the extent that any such change permits the corporation to provide broader
indemnification rights than such provisions permitted the corporation to provide
prior to any such change. Subject to Section 11.15, the Board of Directors is
authorized to amend these Bylaws to conform to any such changed statutory
provisions.
11.15 AMENDMENT OR REPEAL OF ARTICLE XI. No amendment or repeal of this
Article XI shall apply to or have any effect on any director or officer of the
corporation for or with respect to any acts or omissions of such director or
officer occurring prior to such amendment or repeal.
ARTICLE XII
AMENDMENTS
12.01 AMENDMENTS. Subject to Section 11.15, the Bylaws of the corporation
may be amended, altered or repealed, in whole or in part, by a majority vote of
the Board of Directors at any meeting duly held in accordance with these Bylaws,
provided that notice of the meeting includes notice of the proposed amendment,
alteration or repeal.
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<TABLE>
<S><C>
PLEASE MARK VOTES REVOCABLE PROXY
/X/ AS IN THIS EXAMPLE INTERFACE SYSTEMS, INC.
ANNUAL MEETING OF STOCKHOLDERS With- For All
FEBRUARY 20, 1998 For hold Except
[ ] [ ] [ ]
The undersigned hereby constitutes and appoints Robert 1. Election of Directors:
A. Nero and John R. Ternes, or either of them, attorneys,
agents and proxies with power of substitution to vote all of GARNEL F. GRABER DAVID C. SEIGLE
the shares of Common Stock of Interface Systems, Inc. (the ROBERT A. NERO ROBERT A. SEIGLE
"Company") that the undersigned is entitled to vote at the BRUCE E. RHODES LLOYD A. SEMPLE
Annual Meeting.
INSTRUCTION: To withhold authority to vote for any individual
nominee, mark "For All Except" and write that nominee's name in
the space provided below.
------------------------------------------------------------------
For Against Abstain
2. APPROVE CHANGE IN THE [ ] [ ] [ ]
COMPANY'S STATE OF
INCORPORATION FROM DELAWARE TO MICHIGAN
3. APPROVE ADOPTION OF [ ] [ ] [ ]
EMPLOYEE STOCK
PURCHASE PLAN
4. APPROVE AMENDMENT TO [ ] [ ] [ ]
1993 STOCK PLAN FOR
NON-EMPLOYEE DIRECTORS TO PROVIDE BOARD WITH
DISCRETIONARY AUTHORITY TO GRANT OPTIONS
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 and FOR proposals 2, 3 and 4.
Discretionary authority is hereby conferred as to any other
matters as may properly come before the meeting.
-------------------------
Please be sure to sign and date Date
this Proxy in the box below.
- ------------------------------- -------------------------
__Stockholder sign above_____ Co-holder (if any) sign above___
- -----------------------------------------------------------------------------------------------------------------------------------
- DETACH ABOVE CARD, SIGN, DATE AND MAIL IN POSTAGE PAID ENVELOPE PROVIDED. -
INTERFACE SYSTEMS, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF INTERFACE SYSTEMS, INC.
The above signed acknowledges receipt of the Notice of Annual Meeting of Stockholders and the Proxy Statement dated
January 20, 1998, 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.
Please sign exactly as your name(s) appear(s) on stock records. When signing as attorney, administrator, trustee,
guardian or corporate officer, please so indicate.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
</TABLE>
