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SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[X] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
INTERFACE SYSTEMS, INC.
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(Name of Registrant as Specified in Its Charter)
N.A.
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(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.:
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(3) Filing party:
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(4) Date filed:
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PRELIMINARY COPY
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, 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
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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.
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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.
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<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 1997
Executive Officer of
the Company
Bruce E. Rhoades, 49 President, Bruce E. Rhoades 1997
Consulting, Inc., a business
consulting firm
David C. Seigle, 58 President, Technology Edge, 1969
Inc., a franchisor of
computer resellers
Robert A. Seigle, 70 President of Concord 1969
Personnel, Inc., a
personnel recruiting company
Lloyd A. Semple, 58 Attorney and Chairman 1996
Dykema Gossett PLLC,
a 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- 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 recruting company, for over five years.
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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.
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."
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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.
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.
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
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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 an initial fee 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"), 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."
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
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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
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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.
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
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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, 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
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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 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
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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
13
<PAGE> 15
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 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
14
<PAGE> 16
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.
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
15
<PAGE> 17
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. 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 the optionee ceases to serve on the Board, whichever
is earlier.
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 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
16
<PAGE> 18
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. 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.
17
<PAGE> 19
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 Director Plan
will not recognize income on the exercise of a nonqualified option until the
later of the exercise date or the date the Section 16(b) restrictions lapse, at
which time the optionee will recognize income on the spread between the option
price and the fair market value on the later of the exercise date or the date
the restrictions lapse, and the Company will receive a corresponding deduction.
In the alternative, if the Section 16(b) restrictions have not lapsed on the
date of exercise, an optionee subject to Section 16(b) may file a Code Section
83(b) election with the Internal Revenue Service within 30 days after the
exercise of the option and be taxed on the difference between the option price
and the fair market value of the shares on the date of exercise and the Company
will receive a corresponding tax deduction. When an optionee who has filed 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.
18
<PAGE> 20
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
COMMON STOCK SUBJECT TO
NAME POSITION OPTIONS PREVIOUSLY GRANTED
---- -------- --------------------------
<S> <C> <C>
Robert A. Nero . . . . . . . . . . . . . . . . . President and -0-
Chief Executive 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 17,100 (1)
Director Nominee
Robert A. Seigle . . . . . . . . . . . . . . . . Current Director and 23,100 (1)
Director Nominee
David C. Seigle . . . . . . . . . . . . . . . . . Current Director and 23,100 (1)
Director Nominee
Lloyd A. Semple . . . . . . . . . . . . . . . . . Current Director and 17,100 (1)
Director 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.
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.
19
<PAGE> 21
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 persons)........................................... 347,341 (9) 7.65%
</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.
20
<PAGE> 22
(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.
(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.
21
<PAGE> 23
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 51
Chief Executive Officer
John R. Ternes Vice President of Finance and 42
Chief Financial Officer
George W. Perrett, Jr. Vice President of Operations and 60
Secretary
David O. Schupp Vice President and Treasurer 61
Keith N. Bauserman Vice President of Sales 53
Eric D. Shishko Vice President of Marketing and 41
General Manager of Cleo E.C.
</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.
22
<PAGE> 24
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 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 the optionee ceases to serve on
the Board, whichever is earlier.
Mr. Rhoades received $8,356 from the Company for his services as a
consultant in fiscal 1997.
23
<PAGE> 25
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
Annual Other Awards
Fiscal Compensation Annual Securities 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 Executive 1996 45,200 - - 5,100 -
Officer and Chairman of the Board 1995 - - - - -
</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) $3,593 for a car allowance.
(4) Mr. Graber was appointed Interim Chief Executive Officer of the
Company in June 1996, and served in this position until Mr. Nero was
appointed in January 1997. Mr. Graber served as Interim Chief
Executive Officer of the Company as a consultant to the Company. He
did not become an employee of the Company or participate in any of the
Company's fringe benefit plans.
24
<PAGE> 26
OPTION GRANTS AND RELATED INFORMATION
The following table provides information with respect to options
granted to the Named Executive Officers during fiscal year 1997.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
------------------------------
Potential
Realizable
Value At Assumed
Annual Rates of
Number of % of Total Stock Price
Securities Options Appreciation For
Underlying Granted to Exercise or Option Term (3)
Options Employees in Base Price Expiration -------------------
Name Granted (#) Fiscal year ($/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% $4.00 8/08/07 13,080 49,320
</TABLE>
- -------------------
(1) These options, which were granted pursuant to the Company's 1992 Stock
Option Plan, were granted at market value on the date of grant, become
exercisable annually in 33 1/3% increments beginning one year after the
grant date and have a term of ten years. The exercisability of these
options may be accelerated in the event of a change in control of the
Company. See "Employment Agreements and Termination/Change in Control
Agreements."
(2) These options were granted to Mr. Graber in his capacity as a non-employee
director of the Company under the Directors Plan, and were granted
contingent upon stockholder approval of the amendment to the Directors
Plan. See "Proposal to Amend the 1993 Stock Plan for Non- Employee
Directors."
(3) Represents value of option at end of ten year term, assuming the market
price of the Company's Common Stock appreciates at an annually compounded
rate of 5% to 10%. These amounts represent assumed rates of appreciation
only. Actual gains, if any, will be dependent on overall market conditions
and on future performance of the Company's Common Stock. There can be no
assurance that the amounts reflected in the table will be achieved.
25
<PAGE> 27
OPTION EXERCISES AND HOLDINGS
The following table provides information with respect to the Named
Executive Officers concerning the exercise of options during fiscal year 1997
and unexercised options held as of the end of the Company's last fiscal year,
September 30, 1997. All options were granted under the Company's 1992 Stock
Option Plan or the Directors Plan.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR ("FY")-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of
securities
underlying Value of
unexercised unexercised
options in-the-money
Shares Value at FY-End (#) options
acquired on realized exercisable/ exercisable/
Name exercise (#) ($) unexercisable 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.
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
26
<PAGE> 28
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 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.
27
<PAGE> 29
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
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<PAGE> 30
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.
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
29
<PAGE> 31
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>
1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
Interface Systems, Inc. $100.00 $140.48 $148.67 $191.49 $242.86 $158.35
NASDAQ (U.S. Companies) $100.00 $130.98 $132.06 $182.41 $216.45 $297.08
NASDAQ (Computer Mfg.) $100.00 $104.94 $116.84 $207.11 $270.57 $387.37
</TABLE>
30
<PAGE> 32
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.
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<PAGE> 33
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.
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.
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<PAGE> 34
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, President
Ann Arbor, Michigan
January 20, 1998
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<PAGE> 35
APPENDIX A
FORM OF AGREEMENT AND PLAN OF MERGER
OF MICHIGAN INTERFACE SYSTEMS, INC.
AND
INTERFACE SYSTEMS, INC.
THIS AGREEMENT AND PLAN OF MERGER dated as of ____________ (the
"Agreement") is between Michigan Interface Systems, Inc., a Michigan
corporation ("Michigan Interface Systems", and Interface Systems, Inc., a
Delaware corporation ("Interface Systems, Inc."). 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 12,500,000 shares of Common Stock, of which [ ] 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:
<PAGE> 36
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;
(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
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<PAGE> 37
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, (ii) each restricted share of Interface Systems
A-3
<PAGE> 38
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.
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<PAGE> 39
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 FIRPTA Notification.
(a) On or before the Effective Date of the Merger,
Interface Systems shall deliver to Michigan Interface Systems, as
agent for the stockholder of Michigan Interface Systems, a properly
executed statement in such form as reasonably requested by counsel for
Michigan Interface Systems and conforming to the requirements of
Treasury Regulation Section 1.897-2(h)(1)(i) (the "Statement").
Michigan Interface Systems shall, upon request, provide a copy thereof
to the sole stockholder of Michigan Interface Systems. In consequence
of the approval of the Merger by the sole stockholder of Michigan
Interface Systems, (i) such shareholder shall be considered to have
requested that the Statement be delivered to Michigan Interface
Systems as its agent and (ii) Michigan Interface Systems shall be
considered to have received a copy of the Statement at the request of
the stockholder of Interface Systems' obligations under Treasury
Regulation Section 1.1445-2(c)(3).
(b) Interface Systems shall deliver to the Internal
Revenue Service a notice regarding the Statement in accordance with
the requirements of Treasury Regulation Section 1.897-2(h)(2).
(c) Interface Systems hereby represents that it is not,
and has not been at any time during the five year period preceding the
Effective Date, a "United States real property holding corporation" as
defined in Section 817 of the Internal Revenue Code of 1986, as
amended.]
4.4 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.
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<PAGE> 40
4.5 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 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.
4.6 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.
4.7 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.
4.8 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.
4.9 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.
ATTEST: MICHIGAN INTERFACE SYSTEMS, INC
A Michigan corporation
By:____________________________
, Secretary By:_________________________
President
A-6
<PAGE> 41
ATTEST: INTERFACE SYSTEMS, INC.
A Delaware corporation
By:____________________________
, Secretary By:_______________________________
President
A-7
<PAGE> 42
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)
Name
Steven C. Tyshka (313) 568-6585
-----------------------------------------------------
---------------------------
Address
Dykema Gossett PLLC, 400 Renaissance Center
- -------------------------------------------------------
------
City State Zip Code
EFFECTIVE DATE:
Detroit Michigan 48243
------------------------------------------------------
-----------------------
Document will be returned to the name and address you enter above
CID Number:
------------
FORM OF 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 purposes 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 Twelve Million Five Hundred Thousand (12,500,000)
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.
<PAGE> 43
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.
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 stockholders or any class of them,
a court of equity jurisdiction within the state, on application of this
corporation or of a creditor or stockholder 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 stockholders or class of stockholders 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 stockholders or class of stockholders 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 stockholders
or class of stockholders, 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 stockholders, 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
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cause, by the affirmative vote of stockholders 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 stockholders specifically
called for that purpose.
ARTICLE VIII
No director of the corporation shall be personally liable to the
corporation or its stockholders 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 stockholders; (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.
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
stockholders, 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.
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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 stockholders) 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 stockholders) 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 stockholders 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 the
event the Board of Directors of the corporation shall recommend to the
stockholders the adoption of any such amendment of a nature described in this
Article XI, the stockholders 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 ___ day of ________, 1998.
By: _______________________________
Steven C. Tyshka, Incorporator
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APPENDIX C
FORM OF 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
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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 STOCKHOLDERS. 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 stockholders, and for the purpose of notices
to stockholders, 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 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
STOCKHOLDERS AND MEETINGS OF STOCKHOLDERS
4.01 PLACE OF MEETINGS. All meetings of stockholders 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 stockholders 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 stockholders.
Directors shall be elected at each annual meeting and such other business
transacted as may come before the meeting. Any annual meeting of stockholders
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 stockholders may be
called by the Board of Directors, the Chairman of the Board (if such office is
filled) or the President. At any special
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meeting of stockholders, the business which may be transacted shall be limited
to that which was specifically stated in the notice of such special meeting
provided to stockholders.
4.04 NOTICE OF MEETINGS. Except as otherwise provided by statute,
written notice of the time, place and purposes of a meeting of stockholders
shall be given not less than 10 nor more than 60 days before the date of the
meeting to each stockholder 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 stockholders 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 stockholder 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 stockholders entitled to
notice of and to vote at a meeting of stockholders or an adjournment thereof,
or to express consent or to dissent from a proposal without a meeting, or for
the purpose of determining stockholders 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 stockholders as shall be stockholders 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 stockholder and his
transferee or transferor as between themselves.
4.06 LIST OF STOCKHOLDERS. 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 stockholders
entitled to vote at a stockholders' 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 stockholder; be produced at the time and
place of the meeting; be subject to inspection by any stockholder during the
whole time of the meeting; and be prima facie evidence as to who are the
stockholders 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
stockholders 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 to vote at the meeting shall constitute a quorum at
the meeting. Whether or not a quorum is present, a meeting of stockholders may
be adjourned by a vote of the shares present in person or by proxy.
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4.08 PROXIES. A stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent without a meeting may authorize
other persons to act for the stockholder by proxy. A proxy shall be signed by
the stockholder or the stockholder'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
stockholder 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 stockholder or
the stockholder's proxy. When an action, other than the election of directors,
is to be taken by a vote of the stockholders, 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 STOCKHOLDERS.
(A) Annual Meetings of Stockholders. (1) Nominations of persons
for election to the Board of Directors of the corporation and the proposal of
business to be considered by the stockholders may be made at an annual meeting
of stockholders (a) pursuant to the corporation's notice of meeting, (b) by or
at the direction of the Board of Directors or (c) by any stockholder of the
corporation who was a stockholder 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 stockholder pursuant to clause (c) of paragraph
(A)( 1) of this Bylaw, the stockholder must have given timely notice thereof in
writing to the Secretary of the corporation. To be timely, a stockholder'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 stockholder 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 stockholder's notice shall set forth (a) as to each person whom the
stockholder 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 stockholder 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
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and any material interest in such business of such stockholder and the
beneficial owner, if any, on whose behalf the proposal is made; (c) as to the
stockholder giving the notice and beneficial owner, if any, on whose behalf the
nomination or proposal is made (i) the name and address of such stockholder, 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 stockholder 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 stockholder'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.
(B) Special Meetings of Stockholders. Only such business shall be
conducted at a special meeting of stockholders 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 stockholders 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 stockholder of the corporation who is a stockholder
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 stockholders of persons for election to
the Board of Directors may be made at such a special meeting of stockholders if
the stockholder'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
stockholders 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
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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
stockholder 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 stockholders 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 stockholders of the corporation.
5.02 ELECTION, RESIGNATION AND REMOVAL. Directors shall be elected
at each annual meeting of the stockholders, 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 stockholders 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 stockholders, or within three (3)
days of such time excluding Sundays and legal holidays if such later time is
deemed advisable, at the place where such meeting of the stockholders 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.
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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 stockholders the sale, lease or
exchange of all or substantially all of the corporation's property and assets;
(d) recommend to stockholders 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
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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.
ARTICLE VI
NOTICES, WAIVERS OF NOTICE AND MANNER OF ACTING
6.01 NOTICES. All notices of meetings required to be given to
stockholders, directors or any committee of directors may be given by mail,
telecopy, telegram, radiogram or cablegram to any stockholder, 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 stockholders, 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 stockholders,
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 stockholders or directors or committee of directors may be taken
without a meeting, without prior notice and without a vote, if all of the
stockholders or directors or committee members entitled to vote thereon consent
thereto in writing.
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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 stockholders and of the Board of Directors at which the
Chairman is present. The Chairman shall be the Chief Executive Officer of the
corporation. 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.
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
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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 be the Chief Operating Officer
of the corporation and 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 stockholders 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 stockholders 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.
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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.
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 stockholders, Board and committees, if any, and such stock ledgers and
lists of stockholders, 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.
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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 stockholders, 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 stockholders,
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 stockholders. 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 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
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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 stockholders" 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 stockholders. 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.
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11.07 AUTHORIZATION OF PAYMENT OF INDEMNIFICATION. 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.
(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 which authorization all directors may
participate.
(b) By the stockholders, 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.
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
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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.
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.
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.
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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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Appendix D
INTERFACE SYSTEMS, INC.
EMPLOYEE STOCK PURCHASE PLAN
1. Purpose. The purpose of the Interface Systems, Inc. Employee
Stock Purchase Plan (the "Plan") is to promote the best interests of Interface
Systems, Inc. (the "Company") and its stockholders by encouraging employees of
the Company to acquire a proprietary interest in the Company, thus identifying
their interests with those of stockholders and encouraging the employees to
make even greater efforts on behalf of the Company. The Plan is intended to
constitute an "employee stock purchase plan" under Section 423 of the Internal
Revenue Code of 1986, as amended (the "Code").
2. Certain Definitions. As used in this Plan, the term
"employee" means an individual with an "employment relationship" with the
Company as defined in Regulation 1.421-7(h) of the Income Tax Regulations; the
term "employment" means employment with the Company, the term "Purchase Period"
means a six month offering period commencing each June 1 and December 1; and
the term "compensation" means cash compensation, not including overtime and
bonuses.
3. Stock. The stock subject to option and purchase under the
Plan shall be the Common Stock of the Company (the "Common Stock") and may be
either authorized and unissued shares or shares that have been reacquired by
the Company. The total amount of Common Stock on which options may be granted
under the Plan shall not exceed 225,000 shares, subject to adjustment in
accordance with Section 12. Shares of Common Stock subject to any unexercised
portion of a terminated, canceled or expired option granted under the Plan may
again be used for option grants under the Plan.
4. Administration. The Plan shall be administered by the
Compensation Committee (the "Committee") of the Board of Directors ("Board"),
comprised of nonemployee members of the Board, as defined in Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended ("Exchange
Act"). The Committee may prescribe rules and regulations from time to time for
the administration of the Plan and may decide questions which may arise with
respect to its interpretation or application. The decisions of the Committee
in interpreting the Plan shall be final, conclusive and binding on all persons,
including the Company, its employees and optionees. In the event of
insufficient shares during a Purchase Period, the Committee shall allocate
shares proportionately on the basis of compensation.
5. Participants. (a) Except as provided in Section 6, below, any
employee who is employed by the Company on the first day of a Purchase Period
is eligible to participate in the Plan in accordance with its terms.
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6. Ownership and Purchase Limitations. Notwithstanding anything
herein to the contrary, no employee shall be entitled to participate in an
offering under the Plan if such employee, immediately after a grant under this
Plan, would, in the aggregate, own or hold options to purchase shares of Common
Stock equal to or exceeding five percent (5%) or more of the total combined
voting power or value of all classes of stock of the Company or of its
subsidiary corporations. For the foregoing purposes, the rules of Section
424(d) of the Code shall apply in determining stock ownership. With respect to
individual employees, Section 424(d) provides that an employee shall be
considered as owning the stock owned directly or indirectly, by or for his
brothers and sisters (whether by the whole or half blood), spouse, ancestors,
and lineal descendants. No employee shall be granted an option under the Plan
which, together with options granted under all employee stock purchase plans
(qualified under Section 423 of the Code) of the Company and its subsidiaries
permits the employee to accrue option rights to purchase shares in any calendar
year in excess of $25,000 of fair market value of such shares (determined at
the time the option is granted). For purposes of this Plan, the "grant date"
shall be the first day of each Purchase Period, as defined in Section 9(b),
below. The Company's non-employee directors are not eligible to participate in
the Plan.
7. Option Price. The option price of the shares shall be the
lower of 85% the fair market value of the Common Stock on first day of the
Purchase Period or 85% of the fair market value of the Common Stock on the last
day of the Purchase Period. For purposes of this paragraph, the fair market
value as of any date and in respect of any share of Common Stock shall be the
last sale price of the Common Stock on The Nasdaq Stock Market, National Market
(the "National Market"), on the date of determination or, if no such reported
sale of the Stock shall have occurred on such date on the National Market, on
the preceding date on which there was such a reported sale on such National
Market.
8. Payment for Option Shares.
(a) Shares Under Option. An eligible employee may elect
to participate in an offering by filing with the Human Resources Department a
payroll deduction form within the election period designated by the Company
prior to each Purchase Period (the "Election Period"). An eligible employee's
election to participate and payroll deduction form from the preceding Election
Period automatically shall carry over to the next Election Period unless
affirmatively revoked by the employee. An employee who elects to participate
may not authorize payroll deductions which, in the aggregate, are less than one
percent (1%) of the employee's cash compensation during the Purchase Period
(not including overtime and bonus payments) or are more than 15% of the
employee's cash compensation during the Purchase Period (not including overtime
and bonus payments). Only whole shares of' Common Stock may be purchased under
the Plan.
(b) A participating employee must authorize payroll
deductions over a six month Period beginning on June 1 or December 1 (the
"Purchase Period"). Purchase Periods automatically shall run successively
unless designated otherwise by the Company. An employee may suspend payroll
deductions during a Purchase Period at any time upon written notice to the
Human Resources
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Department which shall become effective no later than the next payroll period
following the suspension; provided, however, that payroll deductions made prior
to the suspension shall still be used to purchase Common Stock for the employee
at the end of the Purchase Period. Upon suspension of such deductions, no
further deductions will be made during the Purchase Period or any future
Purchase Periods unless the employee submits the appropriate form to the Human
Resources Department electing to again participate in the Plan.
(c) Payroll deductions shall commence on the first
payroll date in the Purchase Period and shall continue until the last payroll
date in the Purchase Period; provided, however, that unless an election is
revoked, such election shall continue into successive six month Purchase
Periods.
(d) A participating employee's option shall be deemed to
have been exercised on the last business day of the Purchase Period.
(e) The Company retains the right to designate an
exclusive broker to handle the Common Stock transactions under the Plan. As
soon as practicable after the end of the Purchase Period, the Company shall
deliver to each employee or a designated brokerage account, through a
certificate or electronic transfer, the shares of Common Stock that such
employee has purchased. Any amount that has been deducted and withheld in
excess of the option price automatically shall be applied toward the purchase
of option shares in the next Purchase Period. An employee who elects not to
participate in the following Purchase Period shall receive a check from the
Company for any amount that has been deducted and withheld in excess of the
cost of shares.
9. Interest. No interest shall accrue or be paid on any amounts
paid by payroll deduction by any participating employee.
10. Termination of Employment, Unpaid Leave of Absence or Layoff.
If a participating employee ceases to be employed by the Company for any reason
(with or without severance pay), including but not limited to, voluntary or
forced resignation, retirement, death, layoff, or if an employee is on an
unpaid leave of absence, or during any period of severance, within a reasonable
time after notice of the termination or unpaid leave of absence, the Company
shall issue a check to the former employee (or executor, administrator or legal
representative, if applicable) in the aggregate amount of the employee's
payroll deductions that had not yet been applied towards the purchase of shares
as of the employee's date of separation.
11. Non-Assignability. No option shall be transferable by an
employee, and an option shall be exercised only by an employee. Upon the death
of a participating employee, his or her executor, administrator or other legal
representative shall receive a check from the Company representing the
aggregate amount of the deceased employee's payroll deductions that had not yet
been applied towards the purchase of option shares as of the date of death.
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12. Adjustments. The total amount of Common Stock for which
options may be granted under the Plan, and the number of shares subject to any
option granted to a participant (both as to the number of shares of Common
Stock and the option price), shall be appropriately adjusted for any increase
or decrease in the number of outstanding shares of Common Stock resulting from
payment of a stock dividend on Common Stock, a subdivision or combination of
shares of Common Stock, or a reclassification of Common Stock, and, pursuant to
the paragraph below, in the event of a merger in which the Company shall be the
surviving corporation.
After any merger of one or more corporations into the Company, or
after any consolidation of the Company and one or more corporations in which
the Company shall be the surviving corporation, each participant shall, at no
additional cost, be entitled upon the exercise of an option, to receive
(subject to any required action by stockholders), in lieu of the number of
shares to which such option shall then be exercised, the number and class of
shares of stock or other securities to which such participant would have been
entitled to receive pursuant to the terms of the agreement of merger or
consolidation if at the time of such merger or consolidation such participant
had been a holder of record of a number of shares of Common Stock equal to the
number of shares to which such option shall then be so exercised. Comparable
rights shall accrue to each participant in the event of successive mergers or
consolidations of the character described above.
Anything contained herein to the contrary, upon the dissolution or
liquidation of the Company or upon any merger or consolidation in which the
Company is not the surviving corporation, the Purchase Period for any option
granted under this Plan shall terminate as of the date of the aforementioned
event, but each participant who is then an employee of the Company or a
subsidiary shall have the right, immediately prior to such dissolution,
liquidation, merger or consolidation, to exercise his option for such Purchase
Period in full on the earlier of the date of the merger or liquidation or the
last day of the Purchase Period.
The foregoing adjustments and the manner of application of the
foregoing provisions shall be determined by the Committee in its sole
discretion. Any such adjustment may provide for the elimination of any
fractional share which might otherwise become subject to an option.
13. Termination and Amendment. The Board may terminate the Plan,
or the granting of options under the Plan, at any time. No option shall be
granted under the Plan after October 30, 2007.
The Board may amend or modify the Plan at any time and from time to
time, but no amendment or modification shall disqualify the Plan under Section
423 of the Code.
No amendment, modification, or termination of the Plan shall in any
manner affect any option granted under the Plan without the consent of the
participant holding the option.
14. Rule 16b-3 Requirements. Notwithstanding any other provision
of the Plan, the Committee may impose such conditions on the exercise of an
option as may be required to satisfy
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the requirements of Rule 16b-3 of the Exchange Act, as amended from time to
time (or any successor rule).
15. Rights Prior to Delivery of Shares. No participant shall have
any rights as a stockholder with respect to shares covered by an option until
the issuance of a stock certificate or electronic transfer to the employee or
his brokerage account of such shares. No adjustment shall be made for
dividends or other rights with respect to such shares for which the record date
is prior to the date the certificate is issued or the shares electronically
delivered to a brokerage account.
16. Securities Laws. Anything to the contrary herein
notwithstanding, the Company's obligation to sell and deliver stock pursuant to
the exercise of an option is subject to such compliance with federal and state
laws, rules and regulations applying to the authorization, issuance or sale of
securities as the Company deems necessary or advisable. The Company shall not
be required to sell and deliver stock unless and until it receives satisfactory
assurance that the issuance or transfer of such shares will not violate any of
the provisions of the Securities Act of 1933 or the Exchange Act, or the rules
and regulations of the Securities Exchange Commission promulgated thereunder or
those of any stock exchange on which the stock may be listed, the provisions of
any state laws governing the sale of securities, or that there has been
compliance with the provisions of such acts, rules, regulations and laws.
The Committee may impose such restrictions on any shares of Common
Stock acquired pursuant to the exercise of an option under the Plan as it may
deem advisable, including, without limitation, restrictions (a) under
applicable federal securities laws, (b) under the requirements of any stock
exchange or other recognized trading market upon which such shares of Common
Stock are then listed or traded, and (c) under any blue sky or state securities
laws applicable to such shares. No shares shall be issued until counsel for
the Company has determined that the Company has complied with all requirements
under appropriate securities laws.
17. Approval of Plan. The Plan shall be subject to the approval
of at least a majority of the votes cast by the holders of the Company's Common
Stock entitled to vote at a meeting of stockholders of the Company held within
12 months after the October 31, 1997 adoption of the Plan by the Board. If not
approved by stockholders within such 12-month period, the Plan and any options
granted hereunder shall become void and of no effect, and the participating
employees shall receive a check from the Company for all payroll deductions
relating to the Plan.
18. Effect on Employment. Neither the adoption of the Plan nor
the granting of an option pursuant to it shall be deemed to create any right in
any employee to be retained or continued in the employment of the Company.
19. Use of Proceeds. The proceeds received from the sale of
shares of Common Stock pursuant to the Plan shall be used for corporate
purposes by the Company.
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THIS EMPLOYEE STOCK PURCHASE PLAN is hereby executed on this the 21st
day of November, 1997.
INTERFACE SYSTEMS, INC.
By:/s/ Robert A. Nero
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Robert A. Nero
President
BOARD OF DIRECTORS APPROVAL: October 31, 1997
STOCKHOLDER APPROVAL:
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Appendix E
INTERFACE SYSTEMS, INC.
1993 STOCK PLAN FOR NON-EMPLOYEE DIRECTORS
(AS AMENDED AND RESTATED ON AUGUST 8, 1997)
1. CERTAIN DEFINITIONS.
The "Board" is the Board of Directors of the Company.
The "Code" is the Internal Revenue Code of 1986, as amended.
The "Common Stock" is the common stock, $.10 par value per share, of
the Company.
The "Company" is Interface Systems, Inc., a Delaware corporation.
"Disabled" or "Disability" means permanently disabled as defined in
Section 22(e)(3) of the Code.
"Employee" means an individual with an "employment relationship" with
the Company, or any Parent or Subsidiary, as defined in Regulation 1.421-7(h)
promulgated under the Code, and shall include, without limitation, employees
who are directors of the Company, or any Parent or Subsidiary.
"Employment" means the state of being an Employee.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" shall mean the last sale price on the Nasdaq Stock
Market National Market, as reported in the Wall Street Journal, for the last
preceding day on which the Common Stock was traded prior to the date with
respect to which the fair market value is to be determined, as determined by
the Board of Directors in accordance herewith.
A "Nonqualified Stock Option" is an option granted under the Plan
other than an Incentive Stock Option, intended to meet the requirements of
Section 422 of the Code.
The "Plan" is the 1993 Stock Option Plan for Non-Employee Directors.
2. PURPOSE.
The purpose of the Plan is to promote the best interests of the
Company and its shareholders by attracting and retaining the best available
personnel to serve as directors of the Company, to
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provide the non-employee directors with additional incentive to direct the
Company's future affairs in the long-term benefit of the Company and its
shareholders and to encourage continued service on the Board.
3. ADMINISTRATION.
The Board of Directors shall interpret the Plan as it deems necessary
or advisable for administration of the Plan. The decision of the Board on any
matter on which it may make a determination under the immediately preceding
sentence shall be final and binding on all participants.
4. PARTICIPANTS.
Participants in the Plan shall be directors of the Company who are not
Employees and who are members of the Board on the date an option is granted
under the Plan.
5. STOCK.
The stock subject to options under the Plan shall be the Common Stock.
The total amount of Common Stock on which options may be granted under the Plan
shall not exceed 175,000 shares, subject to adjustment in accordance with
Section 11. Shares subject to any unexercised portion of a terminated,
canceled, forfeited or expired option granted under the Plan may again be
available for subsequent option grants under the Plan.
6. AWARD OF OPTIONS.
(a) Automatic Grants.
On the later of the effective date of the Plan or the date on
which a participant first becomes a member of the Board, each
participant shall, automatically and without discretion, be granted an
initial option to purchase 6,000 shares of Common Stock (a "Pre-
Amendment Option") with an exercise price equal to the Fair Market
Value per share of Common Stock on the date of grant. Effective
January 11, 1996, on the later of the effective date of the Plan or
the date on which a participant becomes a member of the Board, each
participant shall automatically and without discretion be granted an
initial option to purchase 5,100 shares of Common Stock (an "Initial
Option") with an exercise price equal to the Fair Market Value per
share of Common Stock on the day of grant. Subsequent thereto, (a) on
January 11, 1996, and every third January 11 thereafter, until the
termination of the Plan, every participant who is a member of the
Board of Directors on January 11, 1996, shall automatically and
without discretion be granted an option to purchase 5,100 shares of
Common Stock (a "Subsequent Option") with an exercise price equal to
the Fair Market Value per share of Common Stock on the date of grant,
and (b) on the third anniversay of the date a person became a member
of the Board of Directors and, thereafter, on the third
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anniversary of the date of grant of the prior Subsequent Option until
the termination of the Plan, every participant who becomes a member of
the Board of Directors after January 11, 1996, shall automatically and
without discretion be granted a Subsequent Option to purchase 5,100
shares of Common Stock with an exercise price equal to the Fair Market
Value per share of Common Stock on the date of the grant.
Pre-Amendment, Initial and Subsequent Options may be exercised in
installments as follows: (i) Beginning on the date after the first
anniversary date of grant, an option may be exercised up to 1/3 of the
shares subject to the option; (ii) After the expiration of each
succeeding anniversary date of the grant, the option may be exercised
up to an additional 1/3 of the shares subject to option, so that after
the expiration of the third anniversary the option shall be
exercisable in full; (iii) To the extent no exercised, installments
shall be cumulative and may be exercised in whole or in part.
(b) Discretionary Grants.
Subject to the limitations set forth in the Plan, the Board of
Directors from time to time may grant options to such participants and
for such number of shares of Common Stock and upon such other terms
(including, without limitation, the exercise price and the times at
which the option may be exercised) as it shall designate (a
"Discretionary Option"). The exercise price per share for
Discretionary Options shall not be less than the Fair Market Value per
share of the Common Stock on the date of grant and the expiration date
shall be no later than the tenth anniversary of the date of grant.
(c) General.
References herein to Options shall mean Pre-Amendment,
Initial, Subsequent and Discretionary Options, unless otherwise
provided. Options granted pursuant to this Plan shall be Nonqualified
Stock Options. Each option granted under the Plan shall meet all the
terms and conditions of the Plan.
7. PAYMENT FOR SHARES.
The purchase price for shares of Common Stock to be acquired upon
exercise of an option granted hereunder shall be paid in full, at the time of
exercise, in cash, by certified check, bank draft or money order or by
tendering to the Company shares of Common Stock then owned by the participant,
duly endorsed for transfer or with duly executed stock power attached, which
shares shall be valued at their Fair Market Value as of the date of such
exercise and payment. Notwithstanding the foregoing, the option exercise price
may be paid by delivery to the Company of a properly executed exercise notice,
acceptable to the Company, together with irrevocable instructions to the
participant's broker to deliver to the Company a sufficient amount of cash to
pay the exercise price, in accordance with a written agreement, if any, between
the Company and the brokerage firm ("Cashless Exercise").
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8. NON-ASSIGNABILITY.
No option shall be transferable by a participant except by will or the
laws of descent and distribution or pursuant to a qualified domestic relations
order as defined by the Code or Title I of the Employee Retirement Income
Security Act, or the rules thereunder. During the lifetime of a participant,
an option shall be exercised only by the optionee. No transfer of an option
shall be effective to bind the Company unless the Company shall have been
furnished with written notice thereof and such evidence as the Company may deem
necessary to establish the validity of the transfer and the acceptance by the
transferee of the terms and conditions of the option.
9. TERMINATION OF DIRECTORSHIP.
(a) If, prior to the date that an option shall first become
exercisable, the participant shall cease to be a director of the Company, with
or without cause, or due to the act, death, Disability, or retirement of the
participant, the participant's right to exercise the option shall terminate and
all rights thereunder shall cease. (b) If, on or after the date that an option
shall first become exercisable, a participant shall cease to be a director of
the Company for any reason other than death or Disability, the participant
shall have the right, prior to the earlier of (i) the expiration of the option
or (ii) the day which is three months after the date on which the Participant
ceased to be a director of the Company, to exercise the option to the extent
that it was exercisable and is unexercised on the date the participant ceased
to be a director of the Company, subject to any other limitation on the
exercise of the option in effect at the date of exercise. (c) If, on or after
the date that an option shall have become exercisable, the participant shall
die or become Disabled which a director of the company or while such option
remains exercisable, the participant or the executor or administrator of the
estate of the participant (as the case may be), or the person or persons to
whom the option shall have been transferred by will or by the laws of descent
and distribution, shall have the right, prior to the earlier of (i) the
expiration of the option or (ii) the day which is one year after the date of
the participant's death or Disability to exercise the option to the extent that
it was exercisable and unexercised on the date of death, subject to any other
limitation on exercise in effect at the date of exercise.
10. ADJUSTMENTS.
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 such that an
adjustment is determined by the Board of Directors to be appropriate in order
to prevent dilution or enlargement of the benefits or potential benefits
intended to be made available under the Plan, then the Board of Directors
shall, in such manner as it may deem equitable, adjust any or all of (a) the
number and type of shares of Common Stock or other securities which thereafter
may be made the subject of options, (b) the number and type of shares
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of Common Stock or other securities subject to outstanding options, and (c) the
exercise price with respect to any option, or, if deemed appropriate, make
provision for a cash payment to the holder of an outstanding option; provided,
however, that the number of shares of Common Stock subject to any option shall
always be a whole number.
11. RIGHTS PRIOR TO ISSUANCE OF SHARES.
No participant shall have any rights as a shareholder with respect to
any shares covered by an option until the issuance of a stock certificate to
the participant for such shares. No adjustment shall be made for dividends or
other rights with respect to such shares for which the record date is prior to
the date such certificate is issued.
12. TERMINATION AND AMENDMENT.
The Board may terminate the Plan, or the granting of options under the
Plan, at any time. No Option shall be granted under the Plan ten years after
adoption of the Plan by the Board or approval of the Plan by the Company's
shareholders, whichever is earlier. Termination of the Plan shall not affect
the rights of the holders of any options previously granted.
The Board may amend or modify the Plan at any time and from time to
time. No amendment, modification, or termination of the Plan shall in any
manner affect any option granted under the Plan without the consent of the
participant holding the option.
13. APPROVAL OF PLAN.
The Plan shall be subject to the approval of the holders of at least a
majority of the shares of Common Stock of the Company present and entitled to
vote at a meeting of shareholders of the Company. No option granted under the
Plan may be exercised in whole or in part until the Plan has been approved by
the shareholders as provided herein. If not approved by shareholders the Plan,
any options granted hereunder shall become void and of no effect.
APPROVED BY BOARD OF DIRECTORS: MARCH 26, 1993
APPROVED BY SHAREHOLDERS: MARCH 25, 1994
AMENDED: JANUARY 11, 1996
APRIL 17, 1997
AMENDED AND RESTATED: AUGUST 8, 1997
APPROVED BY SHAREHOLDERS: , 1998
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<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. Rhoades 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. Discretionary authority is hereby
conferred as to any other matters as may properly come before
the meeting.
The undersigned 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
Please be sure to sign and date Date either of them or their substitutes may lawfully do or cause
this Proxy in the box below. 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,
__Stockholder sign above_____ Co-holder (if any) sign above___ guardian or corporate officer, please so indicate.
- -----------------------------------------------------------------------------------------------------------------------------------
- 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.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
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