<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
INTERPHASE CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------------------
<PAGE>
[LOGO]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 11, 1996
- --------------------------------------------------------------------------------
To the Holders of Common Stock of
INTERPHASE CORPORATION:
NOTICE IS HEREBY GIVEN that the annual meeting of shareholders of
Interphase Corporation, a Texas corporation (the "Company"), will be held at the
offices of the Company, 13800 Senlac, Dallas, Texas on April 11, 1996 at 10:00
a.m., local time, for the following purposes:
(a) to elect eight directors of the Company to serve until the next annual
meeting of shareholders or until their respective successors shall be
elected and qualified;
(b) to ratify and approve an amendment to the Company's Amended and
Restated Stock Option Plan to allow for the grant of nonqualified
stock options at prices below fair market value;
(c) to ratify and approve an amendment to the Company's Directors Stock
Option Plan to provide for the automatic grant of an option to each
director elected or appointed at a time other than an annual meeting
of shareholders; and
(d) to transact such other business as may properly come before the
meeting or any adjournment thereof.
IT IS DESIRABLE THAT AS LARGE A PROPORTION AS POSSIBLE OF THE SHAREHOLDERS'
INTERESTS BE REPRESENTED AT THE MEETING. WHETHER OR NOT YOU PLAN TO BE PRESENT
AT THE MEETING, YOU ARE REQUESTED TO SIGN THE ENCLOSED PROXY AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE.
By order of the Board of Directors
S. THOMAS THAWLEY
SECRETARY
Dallas, Texas
March 15, 1996
<PAGE>
INTERPHASE CORPORATION
13800 SENLAC
DALLAS, TEXAS 75234
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 11, 1996
- --------------------------------------------------------------------------------
This Proxy Statement is furnished to shareholders of Interphase
Corporation, a Texas corporation (the "Company"), in connection with the
solicitation of proxies by the Board of Directors of the Company for use at the
annual meeting of shareholders to be held on April 11, 1996. Proxies in the
form enclosed will be voted at the meeting, if properly executed, returned to
the Company prior to the meeting and not revoked. The proxy may be revoked at
any time before it is voted by giving written notice to the Secretary of the
Company. This proxy statement is first being mailed to shareholders on or about
March 15, 1996.
OUTSTANDING CAPITAL STOCK AND RECORD DATE
The record date for shareholders entitled to notice of and to vote at the
annual meeting is March 12, 1996. At the close of business on that date, the
Company had issued, outstanding and entitled to be voted at the meeting
4,691,233 shares of Common Stock, no par value ("Common Stock").
ACTION TO BE TAKEN AT THE MEETING
The accompanying proxy, unless the shareholder otherwise specifies in the
proxy, will be voted (i) for the election as directors of the Company of the
eight persons named under the caption "ELECTION OF DIRECTORS," (ii) to ratify
and approve the amendment to the Company's Amended and Restated Stock Option
Plan, as described under the caption "AMENDMENT OF AMENDED AND RESTATED STOCK
OPTION PLAN," (iii) to ratify and approve the amendment to the Company's
Directors Stock Option Plan, as described under the caption "AMENDMENT OF
DIRECTORS STOCK OPTION PLAN," and (iv) at the discretion of the proxy holders on
any other matter that may properly come before the meeting or any adjournment
thereof.
Where shareholders have appropriately specified how their proxies are to be
voted, they will be voted accordingly. If any other matter or business is
brought before the meeting, the proxy holders may vote the proxies at their
discretion. The directors do not know of any such other matter or business.
QUORUM AND VOTING
The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of Common Stock is necessary to constitute a quorum at the
annual meeting. In deciding all questions, a holder of Common Stock is entitled
to one vote, in person or by proxy, for each share held in his name on the
record date. Abstentions will be included in vote totals and, as such, will
have the same effect on each proposal other than the election of directors as a
negative vote. Broker non-votes, if any, will not be included in vote totals
and, as such, will have no effect on any proposal.
1
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information as to the number of
shares of Common Stock of the Company beneficially owned as of March 1, 1996 by
(i) each person who is known to the Company to own beneficially more than 5% of
the outstanding Common Stock of the Company, (ii) certain executive officers and
each director of the Company, (iii) all executive officers and directors as a
group. Each of the persons named below has sole voting and investment power
with respect to the shares of Common Stock beneficially owned by him or it
unless otherwise indicated.
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership of Class
- --------------------------- -------------------------- --------
(NUMBER OF SHARES)
<S> <C> <C>
Michael E. Cope (1) 843,900(2) 18.0%
S. Thomas Thawley (1) 301,125(2) 6.4%
R. Stephen Polley (1) 118,112(2) 2.5%
David H. Segrest (1) 54,400(2) 1.2%
James F. Halpin (1) 12,000(2) 0.3%
Dale Crane (1) 41,500(2) 0.9%
Paul N. Hug (1) 37,300(2) 0.8%
Robert H. Lyon 0(3) -
Paula E. D. Jandura (1) 10,533(4) 0.2%
James C. Gleason (1) 18,300(4) 0.4%
Gregory R. Iverson (1) 0 -
Robert L. Drury (1) 6,000(4) 0.1%
Ernest Godsey (1) 6,000(4) 0.1%
All executive officers and directors
as a group (14 persons) 1,449,170(5) 31.0%
Motorola, Inc. 660,000(6) 14.1%
1303 E. Algonquin Road
Schaumburg, IL 60196
Third Avenue Value Fund, Inc. 300,000 6.4%
767 Third Avenue
New York, NY 10017
Dimensional Fund Advisors, Inc. 239,100 5.1%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
</TABLE>
(1) The address for Messrs. Cope, Thawley, Polley, Segrest, Halpin, Crane, Hug,
Gleason, Iverson, Drury, Godsey and Ms. Jandura is Interphase Corporation,
13800 Senlac, Dallas, TX 75234.
(2) Includes options issued to Mr. Polley to purchase 101,112 shares of Common
Stock at exercise prices ranging from $4.50-$11.44 per share (fair market
value on the date of grant). Includes options issued to Mr. Cope to
purchase 92,500 shares of Common Stock at exercise prices ranging from
$5.88-$10.25 per share (fair market value on the date of grant). Includes
options to purchase Common Stock with exercise prices ranging from
$4.38-$16.88 per share (fair market value on the respective dates of grant)
as follows: Mr. Crane, 29,500 shares; Mr. Hug, 29,500 shares; Mr. Segrest,
29,500 shares; Mr. Halpin,10,000 shares; and Mr. Thawley, 29,500 shares.
2
<PAGE>
(3) Excludes 660,000 shares of Common Stock beneficially owned by Motorola,
Inc., for which Mr. Lyon (an employee of Motorola, Inc.) serves as a
director pursuant to Motorola, Inc.'s contractual right to nominate one
director of the Company.
(4) Includes options to purchase Common Stock as follows: Mr. Gleason 7,800
shares; Ms. Jandura 4,000 shares; Mr. Drury 6,000 shares; Mr. Godsey 6,000
shares. See also section entitled "EXECUTIVE COMPENSATION."
(5) Includes 345,412 shares which may be acquired upon exercise of stock
options.
(6) Excludes an additional 660,000 shares which may be acquired upon exercise
of warrants held by Motorola, Inc., which warrants currently are not
exercisable.
ELECTION OF DIRECTORS
Eight directors are to be elected at the meeting. To be elected a
director, each nominee must receive a plurality of all of the votes cast at the
meeting for the election of directors. Should any nominee become unable or
unwilling to accept nomination or election, the proxy holders may vote the
proxies for the election in his stead of any other person the Board of Directors
may recommend. Each nominee has expressed his intention to serve the entire
term for which election is sought.
A brief description of each nominee for director of the Company is provided
below. Directors hold office until the next annual meeting of the shareholders
or until their successors are elected and qualified.
R. STEPHEN POLLEY, 45, was hired as President and Chief Operating Officer
of the Company in November 1993 and was appointed a director by the Board of
Directors in November 1993. Effective June 1, 1994, Mr. Polley was also
appointed Chief Executive Officer and Chairman of the Board of the Company. Mr.
Polley is also the sole member of the New Employee Stock Option Committee of the
Board of Directors. From August 1992 to June 1994, Mr. Polley served as a
director for Computer Automation, Inc. Computer Automation provides various
products and services for use in facsimile management systems, minicomputers and
microcomputers. From 1987 to April 1992, Mr. Polley served as President, Chief
Executive Officer and a director of Intellicall, Inc., a diversified supplier of
telecommunications products and services including private pay telephones and
microprocessor-based automated operator systems.
MICHAEL E. COPE, 48, is a co-founder of the Company and has served as Chief
Executive Officer, Treasurer and Chairman of the Board of Directors of the
Company from inception in 1977 through the date of his retirement which was
effective May 31, 1994. Mr. Cope also served as President of the Company since
inception until his resignation from this position in November 1993. Mr. Cope
is a member of the Audit Committee.
S. THOMAS THAWLEY, 54, is a co-founder of the Company and has served as
Secretary and a director of the Company since its inception in 1977. Through
November 1991 he also served as Executive Vice President of the Company.
DALE CRANE, 48, was elected a director in 1983. He has been engaged in
business and financial consulting and real estate development since 1976 as
owner of The Dale Crane Company. Mr. Crane is a member of the Audit Committee
and the General Stock Option Committee, and is Chairman of the Compensation
Committee of the Board of Directors.
JAMES E. HALPIN, 45, was appointed a director in 1995. He is the Chief
Executive Officer of CompUSA.
3
<PAGE>
PAUL N. HUG, 52, was elected a director in 1983. He has been a certified
public accountant engaged in public accounting practice as owner of Paul Hug &
Co. CPA's since 1988. Mr. Hug is a member of the Compensation Committee and the
General Stock Option Committee, and is Chairman of the Audit Committee of the
Board of Directors.
DAVID H. SEGREST, 51, was elected a director in 1983. He has been engaged
in the practice of law since 1970 and has served as a partner of Gardere &
Wynne, L.L.P., and its predecessors since 1975. Gardere & Wynne, L.L.P., has
served as counsel to the Company since 1978. Mr. Segrest is a member of the
Audit Committee and the Compensation Committee of the Board of Directors.
ROBERT H. LYON, 61, was elected a director in March 1989. He is employed
as the Vice President of Engineering of Motorola, Inc.'s Computer Group. For
more than the past five years he has held a number of managerial positions in
design and manufacturing at Motorola.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors has established four committees, the Audit
Committee, the Compensation Committee, the General Stock Option Committee, and
the New Employee Stock Option Committee. The Audit Committee is composed of Mr.
Hug, Chairman, Mr. Crane, Mr. Segrest and Mr. Cope. The Audit Committee met
five times during (or with regard to) fiscal 1995. The Audit Committee's
responsibilities are described below under the caption "AUDIT COMMITTEE
CHAIRMAN'S LETTER". The Compensation Committee is composed of Mr. Crane,
Chairman, Mr. Hug and Mr. Segrest. The Compensation Committee met three times
during (or with regard to) fiscal 1995 and reviewed the executive compensation
plan of the Company in light of industry practices and circumstances unique to
the Company. The General Stock Option Committee is composed of Mr. Hug,
Chairman, and Mr. Crane. The General Stock Option Committee met one time during
(or with regard to) fiscal 1995. The General Stock Option Committee has the
authority, as does the full Board of Directors, to grant stock options under the
Amended and Restated Stock Option Plan. The New Employee Stock Option Committee
is composed of one member, Mr. Polley. The New Employee Stock Option Committee
has the authority to grant stock options under the Amended and Restated Stock
Option Plan to newly hired employees of the Company for up to 5,000 shares of
Common Stock of the Company per grant. It is not intended that the New Employee
Stock Option Committee will grant options to officers or directors of the
Company.
The Board of Directors held nine meetings during the fiscal year ended
October 31, 1995. None of the directors attended fewer than 75% of the meetings
of the Board of Directors and its committees on which they served except for Mr.
Lyon who attended six of the nine meetings of the Board of Directors and Mr.
Halpin who attended the only meeting of the Board of Directors which he was
eligible to attend.
COMPENSATION OF DIRECTORS
CASH COMPENSATION. The Company compensates five of its independent directors,
Mr. Crane, Mr. Hug, Mr. Halpin, Mr. Segrest and Mr. Thawley, based upon the
number of meetings attended, plus an annual retainer. This amount is reasonably
estimated to be approximately $25,000 per year, per director. The remaining
directors do not receive cash compensation.
DIRECTORS STOCK OPTIONS. In March 1990, the Company granted options to each of
Mr. Crane, Mr. Hug and Mr. Segrest to purchase 11,500, 6,500 and 11,500 shares
of Common Stock, respectively, at an exercise price of $4.75 per share (fair
market value on the date of grant). As of March 1, 1996, each of these options
have been fully exercised. In December 1993, the Company granted options to
each of Mr. Crane, Mr. Hug, Mr. Segrest and Mr. Thawley to purchase 12,000
shares of Common Stock (or 48,000
4
<PAGE>
shares in the aggregate) at an exercise price of $4.38 (fair market value on
the date of grant). Such options were fully vested upon grant and expire in
2003. In May 1994, each incumbent director, with the exception of Mr. Lyon, was
granted an option for 12,500 shares of common stock (an aggregate of 75,000
shares). These options have an exercise price of $6.63 per share (fair market
value on the date of grant) and are fully vested. In March 1995, each incumbent
director, with the exception of Mr. Lyon, was granted an option under the
Directors Stock Option Plan for 5,000 shares of Common Stock (an aggregate of
30,000 shares). These options have an exercise price of $10.25 per share (fair
market value on the date of grant) and will fully vest at 5 p.m. on the day
preceding the annual meeting. In September 1995, Mr. Halpin was granted an
option under the Directors Stock Option Plan for 10,000 shares of Common Stock.
This option has an exercise price of $16.88 per share (fair market value on the
date of grant) and will fully vest at 5 p.m. on the day preceding the annual
meeting. Mr. Lyon, in accordance with Motorola Inc.'s policy, has elected not
to accept any of the options granted under the Directors Stock Option Plan.
AUDIT COMMITTEE CHAIRMAN'S LETTER
The Audit Committee (under this caption, the "Committeee") of the Board of
Directors is composed of Mr. Hug, Chairman, Mr. Cope, Mr. Crane, and Mr.
Segrest. Other than Mr. Cope, none of these directors is a current or former
employee of the Company.
The purpose of the Audit Committee is to assist the Board of Directors in
carrying out its responsibility to oversee the Company's internal controls and
financial reporting process. The Committee may take whatever actions it deems
necessary to carry out its function. At a minimum, however, the Committee is
charged with taking the following actions:
1. Meeting privately with the independent public accountants prior to the
public release of quarterly and annual operating results;
2. Meeting privately with the independent public accountants as soon
as possible after receipt of the final audit report;
3. At least annually, meeting privately with the Company's outside
counsel;
4. At least annually, meeting privately with the Company's Chief
Accounting Officer;
5. At least annually, meeting with the President, Chief Financial Officer
and Chief Accounting Officer to discuss (a) any significant financial
reporting issues discussed with the independent public accountants since
the last meeting, (b) any significant legal issues discussed with the
Company's outside legal counsel since the last meeting, and (c) any
other matters which management or the Committee requests be discussed;
6. At least annually, reporting to the Board of Directors its activities
since the last meeting or any other matters which the Committee feels should
be brought to the Board's attention;
7. Confirming management's selection of the independent public accountants; and
8. Writing a letter to be included in the Company's Annual Report or Proxy
Statement describing the Committee's responsibilities and activities during
the year.
The Committee took all these actions during (or with regard to) the fiscal
year ended October 31, 1995. In its private meetings with the independent
public accountants, the Committee inquired as to such things as its overall
level of comfort with the Company's financial statements and internal controls,
whether it considered management's determination of reserves and other estimates
used in preparing the financial statements to be reasonable, whether there had
been any disagreement (resolved or not) with management regarding any financial
reporting issue, and if there were any other matters which needed to be brought
to the Committee's attention.
December 6, 1995 Paul N. Hug
Chairman
5
<PAGE>
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE OF THE
BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The Compensation Committee (under this caption, the "Committee") is
responsible for structuring and monitoring the Company's executive compensation
program. The Committee is composed of three non-employee members of the Board
of Directors: Mr. Crane, Chairman, Mr. Hug and Mr. Segrest. Recommendations of
the Committee are ultimately reviewed, considered and approved by the Board of
Directors; however, after the executive compensation program has been approved
by the Board of Directors, the Committee performs ministerial functions
effecting and implementing aspects of the program on behalf of the Board of
Directors.
The Committee views its primary objective to be the structuring of a
compensation strategy designed to align the interests of executives with the
interests of shareholders by creating incentives which are performance-based
and tied to the attainment of overall Company goals. The markets in which the
Company competes are highly competitive and to succeed in them over the long
term the Company must be able to attract, motivate and retain executives with
extraordinary qualifications and talents. The Committee evaluates the
compensation strategy and compensation plans accordingly.
Salient components of the executive compensation program include annual
salary, annual bonus plan and stock option grants.
ANNUAL SALARY
The Committee attempts to establish annual salary levels that are
appropriate with regard to (i) competitive salary levels, (ii) qualifications
and experience, and (iii) the longevity, performance and responsibility of the
executive. At least annually, the Committee reviews executive salaries and
recommends adjustments where appropriate.
EXECUTIVE BONUS PLAN
The executive bonus plan is intended to link executive compensation with
the attainment of (i) defined Company goals on a quarterly and annual basis, and
(ii) individual personal objectives of the executive.
Each fiscal year the Committee, after consulting with management of the
Company, establishes quarterly and annual financial targets for the Company.
Also, the Committee approves specific personal objectives of each executive.
Personal objectives typically are goals benefiting the Company for which the
particular executive's contribution is significant and identifiable. A target
annual bonus amount is established based upon these financial targets and
personal objectives. The actual payment of bonuses is primarily dependent upon
the extent to which these Company-wide and personal bonus objectives are
achieved.
STOCK OPTIONS GRANTS
Through the granting of stock options the Company intends to align the
executives' long term interests with those of the shareholders of the Company by
tying executive compensation to the long term performance of the Company's stock
price. This is the Company's principal long-term incentive to executives.
6
<PAGE>
The Committee recommends to the General Stock Option Committee the number
of shares to be granted to an executive based upon several factors including,
but not limited to, management's recommendation, the executive's salary level,
performance, position, contribution to the management team, and contribution to
the overall success of the Company.
CHIEF EXECUTIVE OFFICER COMPENSATION
During fiscal 1995, Mr. Polley received a base salary of $200,000 under an
employment agreement with the Company. Additionally, Mr. Polley participated in
the 1995 annual bonus plan which established specific operating objectives
related to Company-wide financial performance plus certain defined personal
goals of the CEO, including development and implementation of key product and
strategic plans of the Company. As a result of the Company exceeding its
financial objectives and Mr. Polley attaining all of his personal objectives, he
was awarded an annual bonus of $96,000, which amount was consistent with the
formula provided for in the plan adopted by the Board of Directors.
SUMMARY
The Compensation Committee, in its judgment, has established executive
compensation levels which reflect the Committee's desire to reward executives
for individual contribution to the attainment of the Company's goals while
linking each executive's financial opportunity with increased value to the
shareholders.
THE COMPENSATION COMMITTEE
Dale Crane
Paul N. Hug
David H. Segrest
7
<PAGE>
EMPLOYMENT AGREEMENT
The Board of Directors approved Mr. Polley's current employment agreement,
effective November 9, 1994, pursuant to which the Company employs Mr. Polley as
its Chairman of the Board, Chief Executive Officer, Chief Operating Officer and
President until November 9, 1997, at a base salary of $200,000 per year. In
addition, in accordance with his employment agreement, Mr. Polley (i) received a
non-qualified stock option for 150,000 common shares, (ii) is entitled to an
annual bonus based upon the guidelines contained in the Company's Executive
Bonus Plan, with his "annual bonus target" being established by the Compensation
Committee, and (iii) is entitled to certain benefits available to officers of
the Company generally.
Mr. Polley's employment agreement permits the Company to terminate Mr.
Polley without further compensation for overt misconduct. The Company is also
able to terminate Mr. Polley for any reason or no reason upon 30 days written
notice to Mr. Polley. If the Company terminates Mr. Polley for any reason other
than overt misconduct, then Mr. Polley will be entitled to (i) receive severance
compensation equal to his base salary for the greater of the remainder of the
term of his employment agreement or twelve months, (ii) receive a pro rata
payment of his bonus for the year in which he is terminated, and (iii) payment
of health insurance premiums for the same term that he receives severance
compensation payments.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Segrest is a member of the Compensation Committee and the Audit
Committee of the Board of Directors of the Company. Mr. Segrest is also a
partner of Gardere & Wynne, L.L.P., the Company's general counsel. Mr. Segrest
and others at Gardere & Wynne, L.L.P., provide legal services to the Company and
are typically compensated at prevailing hourly rates. During fiscal 1995, the
Company paid Mr. Segrest (for services as a director) and Gardere & Wynne,
L.L.P., approximately $288,000 for services provided.
8
<PAGE>
SUMMARY COMPENSATION TABLE
A summary compensation table has been provided below and includes
individual compensation information on the Chief Executive Officer and certain
other executive officers (collectively, the "Named Executive Officers") during
fiscal 1995.
<TABLE>
<CAPTION>
Long-term
Annual Compensation (1) Compensation
---------------------------------------- -----------------
Other Securities
Annual Underlying All Other
Name and Salary Bonus Compensation Options/SAR's (3) Compensation (2)
Principal Position Year ($) ($) ($) (#) ($)
- --------------------------- ----- --------- -------- ------------ ----------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
R. Stephen Polley 1995 $200,000 $96,000 --- 155,000 $8,868
Chairman of the Board, 1994 162,917 84,000 --- 162,500 8,778
Chief Executive Officer, 1993 --- --- --- --- ---
President and
Chief Operating Officer
James C. Gleason 1995 130,000 61,000 --- 25,000 10,644
Vice President of 1994 111,250 51,000 --- 80,000 11,844
Sales and Operations 1993 105,000 --- --- 19,500 8,400
Paula E.D. Jandura 1995 110,000 49,000 --- 10,000 3,300
Vice President of 1994 102,083 42,000 --- 35,000 8,556
Administration 1993 100,000 --- --- 15,000 8,004
Robert L. Drury 1995 110,000 49,000 --- 10,000 7,548
Chief Financial Officer, 1994 99,167 42,000 --- 30,000 6,104
Vice President of Finance 1993 87,083 --- --- 40,000 7,596
and Treasurer
Ernest E. Godsey 1995 110,000 49,000 --- 10,000 7,548
Vice President of 1994 95,000 34,000 --- 30,000 9,298
Business Development 1993 88,749 --- --- 40,000 8,987
Greg R. Iverson 1995 76,667 --- --- 24,000 64,913
Former Vice President 1994 115,000 25,000 --- 60,000 9,572
of Marketing 1993 61,917 --- --- 40,000 4,025
</TABLE>
(1) The table does not include the cost to the Company of benefits furnished to
certain officers, including premiums for life and health insurance. No
executive officer named above received other compensation in excess of the
lesser of $50,000 or 10% of such officers' salary and bonus compensation.
(2) Except as provided in the next sentance, "All Other Compensation" consists
of matching and discretionary (as defined) payments by the Company pursuant
to its 401(k) plan as well as payment of accrued, but unused, vacation
benefits pursuant to Company policy. Mr. Iverson's amount includes $56,142
paid to Mr. Iverson in accordance with that certain Separation Agreement,
dated effective June 30, 1995, between the Company and Mr. Iverson, and
$8,771 related to 401k plan benefits.
(3) The number of securities included in this table is inclusive of new
repricing grants. See table under the caption "TEN YEAR OPTION/SAR
REPRICING."
9
<PAGE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table provides information with respect to stock options/SARs
granted to the Named Executive Officers during the fiscal year ended October 31,
1995. The potential realized value reported below assumes compounded annual
rates of return over the term of the options (six or ten years).
<TABLE>
<CAPTION>
Percent of
Number of Total Options/ Potential Reliazable Value
Securities SARs Granted at Assumed Annual Rates
Underlying to Employees of Stock Price Appreciation
Options/SARs in Fiscal Exercise Expi- for Option Term
Granted (1) Year Price ration 5 Percent 10 Percent
Name (#) (%) ($) Date ($) ($)
- ------------------- ------------ -------------- -------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
R. Stephen Polley 150,000 26% $11.44 11/8/04 $1,079,183 $2,734,862
5,000 1% 10.25 3/21/00 17,430 39,543
James C. Gleason 25,000 4% 11.44 11/8/04 179,864 455,810
Paula E. D. Jandura 10,000 2% 11.44 11/8/04 71,946 182,324
Robert L. Drury 10,000 2% 11.44 11/8/04 71,946 182,324
Ernest E. Godsey 10,000 2% 11.44 11/8/04 71,946 182,324
Gregory R. Iverson 24,000 4% 11.44 9/30/97 28,142 57,658
</TABLE>
(1) The number of securities included in this table is inclusive of new
repricing grants. See table under the caption "TEN YEAR OPTION/SAR
REPRICING."
10
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAREND OPTION/SAR VALUES
The following table discloses incentive stock option exercises for the
Named Executive Officers during the fiscal year ended October 31, 1995. In
addition, the number and value of unexercised options/SARs that were outstanding
at October 31, 1995 are summarized in the table. A distinction is made between
options/SARs that were exercisable (vested) at October 31, 1995 and those
options/SARs that were not exercisable at October 31, 1995.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money
Shares Options/SARs Options/SARs
Acquired Value at fiscal Year End at fiscal Year End
On Exercise Realized Exercisable/Unexercisable Exercisable/Unexercisable
Name (#) ($) (#) ($)
- ------------------- ----------- -------- ---------------------------- -------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
R. Stephen Polley 7,500 $82,500 43,890 / 266,110 $280,605 / $793,020
James C. Gleason 17,800 192,110 1,800 / 69,400 13,500 / 273,840
Paula E. D. Jandura 30,333 395,783 1,000 / 36,000 7,500 / 165,020
Robert L. Drury 7,000 80,100 4,000 / 34,000 30,000 / 158,040
Ernest E. Godsey 11,000 12,860 4,000 / 30,000 30,000 / 128,040
Gregory R. Iverson 10,000 60,255 - / 24,000 - / 1,440
</TABLE>
11
<PAGE>
TEN YEAR OPTION/SAR REPRICING
The following table discloses the impact of all incentive stock option
repricings during the past 10 years for the Named Executive Officers. The
repricing that occurred in October 1993 was offered to all grantees of incentive
stock options and gave the holder the right to surrender existing option(s) for
new options which were priced at the fair market value of the Company's Common
Stock on the date of the repricing. All repriced options are subject to normal
vesting terms and therefore, cumulative vesting has been forfeited for all
options that were surrendered.
<TABLE>
<CAPTION>
Length of
Number of Market Original
Securities Price of Exercise Option Term
Underlying Stock at Price at Remaining
Options/SARs Time of Time of New at Date of
Repriced or Repricing/ Repricing/ Exercise Repricing/
Amended Amendment Amendment Price Amendment
Name Date (#) ($) ($) ($) (months)
- ------------------- -------- ------------ ---------- ---------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
James C. Gleason 6/21/93 40,000 $5.88 $6.63 $5.88 71
10/20/93 5,000 4.00 8.00 4.00 7
10/20/93 4,000 4.00 6.88 4.00 51
8/11/93 500 4.69 6.25 4.69 1
Paula E. D. Jandura 6/21/94 15,000 5.88 6.63 5.88 71
6/21/94 5,000 5.88 8.00 5.88 0
10/20/93 5,000 4.00 6.88 4.00 50
Robert. L. Drury 6/21/94 15,000 5.88 6.63 5.88 71
10/20/93 20,000 4.00 6.88 4.00 62
Ernest E. Godsey 6/21/94 15,000 5.88 6.63 5.88 71
10/20/93 20,000 4.00 6.88 4.00 62
Gregory R. Iverson 6/21/94 30,000 5.88 6.63 5.88 71
10/20/93 20,000 4.00 6.75 4.00 66
</TABLE>
12
<PAGE>
STOCK PERFORMANCE GRAPH
The following chart compares the cumulative total shareholder return on Common
Stock during the five fiscal years ended October 31, 1995 with the cumulative
total return on the NASDAQ market index and a peer group index. The peer group
consists of companies with the same four-digit SIC code as the Company (3577).
The Company relied upon information provided by another firm with respect to the
peer group stock performance. The Company did not attempt to validate the
information supplied to it other than review it for reasonableness. The
comparison assumes $100 was invested on October 31, 1990 in the Common Stock and
in each of the foregoing indices and assumes reinvestment of dividends.
[GRAPH]
13
<PAGE>
AMENDMENT OF AMENDED AND RESTATED STOCK OPTION PLAN
In 1984, the Company adopted a stock option plan for employees, which was
amended and restated in 1994 (the "Employee Plan"). The Employee Plan covers
1,350,000 shares of Common Stock. All employees of the Company are eligible for
grants, and the Company receives no consideration as a result of option grants
or extensions. The Employee Plan is administered by the Board of Directors.
The Board of Directors has delegated the authority to grant stock options under
the Employee Plan to a General Stock Option Committee and a New Employee Stock
Option Committee. See also "ELECTION OF DIRECTORS-COMMITTEES AND MEETINGS OF
THE BOARD OF DIRECTORS."
Incentive options ("Incentive Options") may be granted for a term of up to
five years in the case of employees who own in excess of 10% of the combined
voting power of all classes of the Company's stock and up to ten years in the
case of all other employees. Nonqualified stock options ("Nonqualified Stock
Options" ) may be granted for a term of up to ten years to all employees.
Incentive Options may be granted to purchase shares at not less than their fair
market value as of the date of grant, or 110% of fair market value in the case
of any employee holding in excess of 10% of the outstanding stock as of the date
of the grant. Prior to the subject amendment, Nonqualified Stock Options could
not be granted to purchase shares at less than their fair market value as of the
date of grant. Options granted under the Employee Plan cannot be transferred
other than by will or by the laws of descent and distribution. The fair market
value of the Common Stock as of March 1, 1996, was $11.125 per share.
The Board of Directors has adopted an amendment to the Employee Plan (see
Exhibit A), subject to the approval of the shareholders at the annual meeting.
The effect of the amendment is to allow for the exercise price for Nonqualified
Stock Options granted under the Employee Plan to be any price determined by the
Board of Directors or the applicable committee of the Board of Directors.
The purpose of the Employee Plan is to strengthen the Company's ability to
attract and retain key employees and to furnish additional incentives to such
persons by encouraging them to become owners of Common Stock.
The Employee Plan provides that if an optionee dies or becomes disabled
while in the employ of the Company but prior to termination of his right to
exercise an option in accordance with the provisions of his stock option
agreement without having totally exercised his option, the option may be
exercised, to the extent of the shares with respect to which the option could
have been exercised by the optionee on the date of the optionee's death or
disability, by (i) the optionee's estate or by the person who acquired the right
to exercise the option by bequest or inheritance or by reason of the death of
the optionee in the event of the optionee's death, or (ii) the optionee or his
personal representative in the event of the optionee's disability, provided the
option is exercised prior to the date of its expiration or not more than one
year from the date of the optionee's death or disability whichever first occurs.
Shares to be optioned and sold under the Employee Plan may be made
available from either authorized but unissued Common Stock or Common Stock held
by the Company in its treasury. Shares that by reason of the expiration of an
option or otherwise are no longer subject to purchase pursuant to an option
granted under the Employee Plan may be reoffered under the Employee Plan.
The Employee Plan may be amended or discontinued by the Board of Directors
without the approval of the shareholders of the Company, except that any
amendment that would (a) materially increase the benefits accruing to
participants under the Employee Plan, (b) materially increase the number of
securities that may be issued under the Employee Plan, or (c) materially modify
the requirements or eligibility for participation in the Employee Plan must be
approved by the shareholders of the Company.
14
<PAGE>
Unless sooner terminated by action of the Board of Directors, the Employee
Plan will terminate on November 8, 2004.
Pursuant to the Employee Plan the following options are outstanding: Mr.
Polley - 292,500 shares, Mr. Gleason - 71,200 shares, Ms. Jandura -37,000
shares, Mr. Drury - 38,000 shares, Mr. Godsey - 34,000, and Mr. Iverson - 24,000
shares. All current executive officers as a group have outstanding options
under the Employee Plan covering 502,700 shares of Common Stock. As of March 1,
1996, options covering 935,190 shares of Common Stock were outstanding under the
Employee Plan. No current director who is not an executive officer holds any
option under the Employee Plan.
Incentive Options granted under the Employee Plan are currently entitled to
"incentive stock option" treatment for federal income tax purposes provided by
Section 422 of the Internal Revenue Code. An optionee, upon exercise of an
Incentive Option under the Employee Plan, will not realize taxable income, nor
will the Company then be entitled to a deduction. The optionee's gain on
exercise (the excess of the fair market value at the time of exercise over the
exercise price) of an Incentive Option is a tax preference item and,
accordingly, is included in the computation of alternative minimum taxable
income. The gain realized upon the subsequent disposition of the stock acquired
upon exercise of the Incentive Option will be entitled to capital gain
treatment, provided that no such disposition is made within two years after the
Incentive Option was granted or one year after the Incentive Option was
exercised. If such holding period requirements are not satisfied, the optionee
will recognize ordinary income equal to the lesser of (i) the fair market value
of the stock on the date of exercise minus the exercise price or, (ii) the
amount realized on the disposition minus the exercise price, and may receive a
credit against income tax to the extent alternative minimum tax liability was
incurred upon exercise. If the optionee must recognize ordinary income, the
Company will be entitled to a corresponding deduction.
Under present federal income tax laws, the grant of Nonqualified Stock
Options under the Employee Plan will not result in taxable income to the
optionee. Generally, the exercise of a Nonqualified Stock Option under the
Employee Plan will result in recognition of ordinary income following exercise
in an amount equal to the excess of the then fair market value of shares
acquired over the exercise price for those shares. The Company will be entitled
to a corresponding deduction at that time.
The foregoing statements are based upon federal income tax laws and
regulations and are subject to change if the tax laws and regulations, or
interpretations thereof, change.
The amendment to the Employee Plan is being submitted for shareholder
approval in order to satisfy one of the conditions set forth in Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended. Approval of
the amendment will require the affirmative vote of the holders of a majority of
the shares of Common Stock present in person or by proxy and entitled to be
voted at the meeting. The Board of Directors has approved the amendment and
recommends that the shareholders vote "for" approval of the amendment to the
Employee Plan.
15
<PAGE>
AMENDMENT OF DIRECTORS STOCK OPTION PLAN
In 1994, the Board of Directors of the Company formalized its program of
granting stock options to the Directors (the "Directors Plan"), which provides
for the grant of stock options for up to 500,000 shares of Common Stock of the
Company. All directors of the Company are eligible for grants under the
Directors Plan, and the Company receives no consideration as a result of option
grants or extensions. The Directors Plan is administered by the Board of
Directors.
The Directors Plan provides that options granted prior to May 6, 1994 (the
"Prior Options"), by the Board of Directors to Messrs. Crane, Hug, Segrest, and
Thawley will continue in accordance with the terms of the respective
nonqualified stock option agreements issued by the Company to such directors.
The Directors Plan further provides that, on May 6, 1994, each director of the
Company was granted a five-year option to purchase 12,500 shares of Common Stock
of the Company at an option price equal to the closing price of the Company's
Common Stock on May 6, 1994 (the "1994 Options"). The Directors Plan further
provides that in each year during the term of the Directors Plan each director
elected at the annual shareholders meeting (beginning with the 1995 Annual
Meeting of Shareholders) who has not previously served as a director of the
Company will automatically be granted a five-year option to purchase 10,000
shares of Common Stock at an option price equal to the closing price of Common
Stock on the date of such annual shareholders meeting. The Directors Plan
further provides that in each year during the term of the Directors Plan each
other director elected at the annual shareholders meeting (beginning with the
1995 Annual Meeting of Shareholders) will automatically be granted a five-year
option to purchase 5,000 shares of Common Stock at an option price equal to the
closing price of Common Stock on the date of such annual shareholders meeting.
As of March 1, 1996, the aggregate number of shares for which options have been
granted under the Directors Plan is 115,000.
The Prior Options will vest in accordance with their respective terms. The
1994 Options were fully vested on May 6, 1994. All other options granted under
the Directors Plan will only be exercisable if the optionee is a director of the
Company on the day preceding the annual shareholders meeting which follows the
date the option is granted. See also "ELECTION OF DIRECTORS-COMPENSATION OF
DIRECTORS."
Directors may elect by written notice to the Company not to receive one or
more option grants under the Directors Plan. Each director accepting an option
under the Directors Plan will sign a stock option agreement in the form approved
by the Board of Directors. Options cannot be transferred except by will or the
laws of descent and distribution. The fair market value of the Common Stock as
of March 1, 1996, was $11.125 per share.
The Board of Directors has adopted an amendment to the Directors Plan (see
Exhibit B), subject to the approval of the shareholders at the annual meeting.
The effect of the amendment is to provide for the automatic grant of an option
to each newly elected or appointed director immediately upon his election or
appointment even if elected or appointed at a time other than an annual
shareholders meeting.
The purpose of the Directors Plan is to provide directors of the Company
with a proprietary interest in the Company through the granting of options which
will increase the interest of the directors in the Company's welfare, furnish an
incentive to the directors to continue their services for the Company, and
provide a means through which the Company may attract able persons to serve on
the Board of Directors.
The Directors Plan provides that if an optionee dies or becomes disabled
prior to termination of his right to exercise an option in accordance with the
provisions of his stock option agreement without having totally exercised his
option, the option may be exercised at any time prior to the date of its
expiration by (i) the optionee's estate or by the person who acquired the right
to exercise the option by bequest or inheritance or by reason of the death of
the optionee in the event of the optionee's death, or (ii) the optionee or his
personal representative in the
16
<PAGE>
event of the optionee's disability, subject to the other terms of the Directors
Plan and applicable laws, rules, and regulations.
Shares to be optioned and sold under the Directors Plan may be made
available from either authorized but unissued Common Stock or Common Stock held
by the Company in its treasury. Shares that by reason of the expiration of an
option or otherwise are no longer subject to purchase pursuant to an option
granted under the Directors Plan may be reoffered under the Directors Plan.
The Directors Plan may be amended or discontinued by the Board of Directors
without the approval of the shareholders of the Company, except that any
amendment that would (a) materially increase the benefits accruing to
participants under the Directors Plan, (b) materially increase the number of
securities that may be issued under the Directors Plan, or (c) materially modify
the requirement of eligibility for participation in the Directors Plan, must be
approved by the shareholders of the Company. In addition, the Directors Plan
cannot be amended more than once in any six-month period, except in limited
circumstances.
Unless sooner terminated by action of the Board of Directors, the Directors
Plan will terminate on May 5, 2004.
Under present federal income tax laws, the grant of an option under the
Directors Plan will not result in taxable income to the director. Generally,
the exercise of an option granted under the Directors Plan will result in the
recognition of ordinary income following exercise in an amount equal to the
excess of the then fair market value of shares acquired over the exercise price
for those shares. The Company will be entitled to a corresponding deduction at
that time. The foregoing statements are based upon federal income tax laws and
regulations and are subject to change if the laws and regulations, or
interpretations thereof, change.
The amendment to the Directors Plan is being submitted for shareholder
approval in order to satisfy one of the conditions set forth in Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended. Approval of
the amendment will require the affirmative vote of the holders of majority of
the shares of Common Stock present in person or by proxy and entitled to be
voted at the meeting. The Board of Directors has unanimously approved the
amendment and recommends that the shareholders vote "for" approval of the
amendment to the Directors Plan.
17
<PAGE>
CERTAIN TRANSACTIONS
David H. Segrest, a director of the Company, is a partner in the law firm
of Gardere & Wynne, L.L.P., which acts as general counsel to the Company.
Michael E. Cope, a director of the Company and a former officer of the Company,
was paid approximately $153,000 during the fiscal year ended October 31, 1995,
in accordance with that certain Separation Agreement, dated effective June 1,
1994, between the Company and Mr. Cope.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten percent of the Common
Stock to file reports of ownership and changes in ownership on Forms 3, 4 and 5
with the Securities and Exchange Commission and furnish the Company with a copy.
Based solely on the Company's review of the copies of such forms it has
received, the Company believes that all its officers, directors, and greater
than ten percent shareholders complied with all filing requirements applicable
to them during the reporting period ended October 31, 1995.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
ARTHUR ANDERSEN LLP served as the independent auditors of the Company for
the fiscal year ended October 31, 1995. A representative of ARTHUR ANDERSEN LLP
is expected to be present at the annual meeting and will have the opportunity to
make a statement and will be available to answer appropriate shareholder
questions.
SHAREHOLDERS' PROPOSALS
Any proposals that shareholders of the Company desire to have presented at
the 1997 annual meeting of shareholders must be received by the Company at its
principal executive offices no later than November 15, 1996.
MISCELLANEOUS
The accompanying proxy is being solicited on behalf of the Board of
Directors of the Company. The expense of preparing, printing and mailing the
form of proxy and the material used in the solicitation thereof will be borne by
the Company. In addition to the use of the mails, proxies may be solicited by
personal interview, telephone and telegram by directors, officers and employees
of the Company.
Arrangements may also be made with brokerage houses and other custodians,
nominees and fiduciaries for the forwarding of solicitation material to the
beneficial owners of Common Stock held of record by such persons, and the
Company may reimburse them for reasonable out-of-pocket expenses incurred by
them in connection therewith.
By Order of the Board of Directors
S. THOMAS THAWLEY
Secretary
Dallas, Texas
March 15, 1996
18
<PAGE>
EXHIBIT A
Resolved that the Amended and Restated Stock Option Plan of the Company be,
and it hereby is, amended by restating Section 9 which reads:
9. OPTION PRICE. The option price shall not be less than 100%
of the fair market value per share of the Common Stock on the date the
option is granted.
So that it will be revised to read:
9. OPTION PRICE. The option price for Incentive Options shall
not be less than 100% of the fair market value per share of the Common
Stock on the date the Incentive Option is granted. The option price
for Nonqualified Options shall be, as determined by the Board, any
price per share of the Common Stock that is greater than par value per
share of the Common Stock.
19
<PAGE>
EXHIBIT B
Resolved that the Directors Stock Option Plan of the Company be, and it
hereby is, amended by restating Sections 5(b)-(e), 6, 7, and 11(a) which read:
5. ALLOTMENT OF SHARES. Grants of options under the Plan shall be as
described in this Section 5.
(b) Subject to approval by the Company's stockholders pursuant to
Section 5(f), each director of the Company on the Effective Date shall be
granted an option, effective as of the date establishing the option price
under Section 7 (the "Grant Date"), to purchase 12,500 shares of Common
Stock of the Company.
(c) Each director of the Company elected at the annual stockholders
meeting who has not previously served as a director of the Company shall be
granted an option, effective as of the Grant Date, to purchase 10,000
shares of Common Stock of the Company.
(d) Each other director of the Company elected at the annual
stockholders meeting shall be granted an option, effective as of the Grant
Date, to purchase 5,000 shares of Common Stock of the Company.
(e) Directors may elect by written notice to the Company not to
receive one or more option grants hereunder, as follows:
(i) With respect to an initial option grant, by electing on
the Effective Date or the date of initial election as a director.
(ii) With respect to other grants, by electing at least six
months in advance of the Grant Date of the option.
6. GRANT OF OPTIONS. All options under the Plan shall be
automatically granted as provided in Section 5. The grant of options shall
be evidenced by stock option agreements containing such terms and
provisions as are approved by the Board, but not inconsistent with the
Plan. The Company shall execute stock option agreements upon instructions
from the Board.
7. OPTION PRICE. Except for options described in Section 5(a), the
option price shall be equal to the closing price of Common Stock of the
Company on (a) for grants under Section 5(b), the date of adoption of the
Plan by the Board and (b) for all subsequent grants, the date of the
Company's annual stockholders meeting.
11. VESTING.
(a) Options described in Section 5(a) will vest in accordance with
their respective terms. Options described in Section 5(b) will be fully
vested on the Grant Date. All other options will only be exercisable if
the participant is a director of the Company on the day preceding the
annual stockholders meeting which follows the Grant Date of the option.
20
<PAGE>
So that such sections will be revised to read:
5. ALLOTMENT OF SHARES. Grants of options under the Plan shall
be described in this Section 5.
(b) Subject to approval by the Company's stockholders pursuant
to Section 5(f), each director of the Company on the Effective Date
shall be granted an option, effective as of the date establishing the
option price under Section 7, to purchase 12,500 shares of Common
Stock of the Company.
(c) Each director of the Company who has not, during the three-
year period preceding the date of his election or appointment to the Board,
served as a director of the Company shall be granted an option, effective as of
the date of his election or appointment to the Board (the "Initial Grant Date"),
to purchase 10,000 shares of Common Stock of the Company, and each director of
the Company who has served as a director of the Company during such three-year
period but who was not elected at the preceding annual stockholders meeting
shall be granted an option, effective as of the Initial Grant Date, to purchase
5,000 shares of Common Stock of the Company.
(d) Each director of the Company elected at the annual
stockholders meeting shall be granted an option, effective as of the
date of the annual stockholders meeting (the "Annual Grant Date"), to
purchase 5,000 shares of Common Stock of the Company. This Section
5(d) shall not apply to a director whose Initial Grant Date is on the
same date as the Annual Grant Date.
(e) Directors may elect by written notice to the Company not to
receive one or more option grants hereunder, by so electing on or before
the Effective Date, on or before the Initial Grant Date, or at least six
months in advance of the Annual Grant Date (unless the director was elected
or appointed less than six months in advance of the Annual Grant Date, in
which case he may then so elect on or before the Initial Grant Date),
whichever is applicable, of the option.
6. GRANT OF OPTIONS. All options under the Plan shall be
automatically granted as provided in Section 5. The grant of options shall
be evidenced by stock option agreements containing such terms and
provisions as are approved by the Board, but not inconsistent with the
Plan.
7. OPTION PRICE. Except for options described in Section 5(a), the
option price shall be equal to the closing price of Common Stock of the
Company on (a) for grants under Section 5(b), the date of adoption of the
Plan by the Board and (b) for all subsequent grants, the Initial Grant Date
or the Annual Grant Date, whichever is applicable, on which such grants are
made.
11. VESTING.
(a) Options described in Section 5(a) will vest in accordance
with their respective terms. Options described in Section 5(b) will be
fully vested on the date of grant of the options. All other options will
only be exercisable if the participant is a director of the Company on the
day preceding the annual stockholders meeting which follows the date of
grant of the option.
21
<PAGE>
INTERPHASE CORPORATION
PROXY
FORM OF PROXY CARD FOR INTERPHASE CORPORATION 1996 ANNUAL MEETING
The undersigned hereby (a) acknowledges receipt of the Notice of Annual
Meeting of Shareholders of Interphase Corporation (the "Company") to be held at
the offices of the Company, 13800 Senlac, Dallas, Texas 75234, on April 11, 1996
at 10:00 a.m., local time, and the Proxy Statement in connection therewith, and
(b) appoints R. Stephen Polley and S. Thomas Thawley, and each of them, the
undersigned's proxies with full power of substitution, for and in the name,
place and stead of the undersigned, to vote upon and act with respect to all of
the shares of Common Stock of the Company standing in the name of the
undersigned or with respect to which the undersigned is entitled to vote and act
at said meeting or at any adjournment thereof, and the undersigned directs that
this proxy be voted as follows:
<TABLE>
<S> <C> <C> <C>
1. ELECTION OF DIRECTORS FOR nominees listed below WITHHOLD AUTHORITY
(EXCEPT AS MARKED TO THE CONTRARY BELOW) TO VOTE FOR ALL NOMINEES LISTED BELOW
/ / / /
</TABLE>
Michael E. Cope, Dale Crane, James F. Halpin, Paul N. Hug, Robert H. Lyon,
R. Stephen Polley, David H. Segrest and S. Thomas Thawley
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THAT NOMINEE'S NAME IN THE SPACE BELOW.
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
2. Proposal to amend the amended and restated stock option plan to allow the grant of nonqualified stock at prices
below fair market value.
</TABLE>
/ / FOR / / AGAINST / / ABSTAIN
<TABLE>
<S> <C> <C> <C>
3. Proposal to amend the directors stock option plan to provide for the automatic grant of an option to each
director elected or appointed at a time other than an annual meeting of shareholders.
</TABLE>
/ / FOR / / AGAINST / / ABSTAIN
<TABLE>
<S> <C> <C> <C>
4. In the discretion of the proxies, on any other matter that may properly come before the meeting or any
adjournment thereof.
</TABLE>
(CONTINUED AND TO BE DATED AND SIGNED ON THE REVERSE SIDE)
<PAGE>
If more than one of the proxies above shall be present in person or by
substitute at the meeting or any adjournment thereof, the majority of said
proxies so present and voting, either in person or by substitute, shall exercise
all of the powers hereby given.
THIS PROXY WILL BE VOTED AS SPECIFIED ABOVE. IF NO SPECIFICATION IS MADE,
THIS PROXY WILL BE VOTED FOR ALL NOMINEES FOR DIRECTOR, FOR THE PROPOSAL TO
AMEND THE AMENDED AND RESTATED STOCK OPTION PLAN AND FOR THE PROPOSAL TO AMEND
THE DIRECTORS STOCK OPTION PLAN.
The undersigned hereby revokes any proxy or proxies heretofore given to vote
upon or act with respect to such stock and hereby ratifies and confirms all that
said proxies, their substitutes, or any of them, may lawfully do by virtue
hereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY.
Dated:
------------------------------
------------------------------
Signature
------------------------------
(Signature if held jointly)
Please date the proxy and sign
your name exactly as it
appears hereon. Where there is
more than one owner, each
should sign. When signing as
an attorney, administrator,
executor, guardian or trustee,
please add your title as such.
If executed by a corporation,
the proxy should be signed by
a duly authorized officer.
Please sign the proxy and
return it promptly whether or
not you expect to attend the
meeting. You may nevertheless
vote in person if you do
attend.
