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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
Filed by a Party other than the Registrant /X/
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
MYLEX CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
MERRILL CORPORATION
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / $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:
------------------------------------------------------------------------
/X/ Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
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4) Date Filed:
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[LOGO]
MYLEX CORPORATION
March 22, 1996
Dear Fellow Shareholder:
The Board of Directors and officers of Mylex Corporation are pleased to
invite you to attend the Company's 1996 Annual Meeting of Shareholders to be
held on Tuesday, April 30, 1996, at 2:00 p.m., at the principal executive
offices of the Company located at 34551 Ardenwood Boulevard, Fremont, California
94555.
As described in the accompanying Notice of Annual Meeting of Shareholders
and Proxy Statement, shareholders will be asked to vote (i) on the election of
directors for the Company; (ii) to approve the amendment of the Company's
Articles of Incorporation to increase the number of its authorized shares of
Common Stock from 25,000,000 to 40,000,000 shares; (iii) to approve the adoption
of the Company's 1995 Employee Stock Purchase Plan covering 300,000 shares of
Common Stock; (iv) to approve the change of the Company's state of incorporation
from Florida to Delaware through a merger of the Company with and into its
wholly-owned subsidiary; (v) to approve an amendment of the Company's 1993 Stock
Option Plan to increase the number of shares of Common Stock available
thereunder by 850,000 shares; and (vi) to approve the appointment of KPMG Peat
Marwick LLP as independent public accountants of the Company for the fiscal year
ending December 31, 1996.
I urge you to vote your proxy as soon as possible. Your vote is very
important, regardless of the number of shares you own. Please mark, sign and
date each proxy card you receive and return it, at your earliest convenience, in
the postage-paid envelope provided, even if you currently plan to attend the
Annual Meeting. Returning your proxy card will not prevent you from voting in
person, but will assure that your vote is counted if you are unable to attend. I
encourage you to vote 'FOR' each of the Board's nominees for director and 'FOR'
each of the proposals referenced above.
Please vote and promptly return your proxy card.
Sincerely,
Al Montross
PRESIDENT AND CHIEF EXECUTIVE OFFICER
<PAGE>
[Logo]
MYLEX CORPORATION
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NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS
------------------------
APRIL 30, 1996
TO THE SHAREHOLDERS OF MYLEX CORPORATION:
NOTICE IS HEREBY GIVEN that the 1996 Annual Meeting of Shareholders of Mylex
Corporation, a Florida corporation (the "Company"), will be held on Tuesday,
April 30, 1996, at 2:00 p.m., at the principal executive offices of the Company
located at 34551 Ardenwood Boulevard, Fremont, California 94555, for the
following purposes:
1. To elect directors to serve for the following year and until their
successors are duly elected.
2. To approve an amendment to the Company's Articles of Incorporation
to increase the number of authorized shares of the Company's Common Stock
from 25,000,000 to 40,000,000.
3. To approve the adoption of the Company's 1995 Employee Stock
Purchase Plan under which employees of the Company may purchase shares of
the Company's Common Stock. The plan, which will cover 300,000 shares of
Common Stock, is intended to qualify under Section 423 of the Internal
Revenue Code.
4. To approve the merger of the Company with and into Mylex Merger Sub,
Inc. ("Merger Subsidiary"), a wholly-owned subsidiary of the Company newly
formed under Delaware law, for the purpose of, among other things, changing
the Company's state of incorporation from Florida to Delaware pursuant to
the terms of an Agreement and Plan of Merger, dated as of March 20, 1996, by
and between the Company and Merger Subsidiary, which provides, among other
things, that the Company will be merged with and into Merger Subsidiary and
that each outstanding share of Common Stock, $0.01 par value, of the Company
will be converted into and become one share of Common Stock, $0.01 par
value, of Merger Subsidiary.
5. To approve an amendment to the Company's 1993 Stock Option Plan to
increase the number of shares of the Company's Common Stock authorized for
issuance thereunder by an additional 850,000 shares, to an aggregate of
2,925,000 shares.
6. To ratify the appointment of KPMG Peat Marwick LLP as independent
public accountants of the Company for the fiscal year ending December 31,
1996.
7. To transact such other business as may properly come before the
meeting or any adjournments thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
<PAGE>
Only shareholders of record at the close of business on March 20, 1996 are
entitled to notice of and to vote at the meeting.
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
HOWEVER, TO ASSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE URGED TO MARK,
SIGN, DATE AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE ENVELOPE
ENCLOSED FOR THAT PURPOSE. ANY SHAREHOLDER ATTENDING THE MEETING MAY VOTE IN
PERSON EVEN IF HE OR SHE PREVIOUSLY RETURNED A PROXY.
SINCERELY,
AL MONTROSS
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Fremont, California
March 22, 1996
ii
<PAGE>
[Logo]
MYLEX CORPORATION
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PROXY STATEMENT
1996 ANNUAL MEETING OF SHAREHOLDERS
------------------------
APRIL 30, 1996
GENERAL
The enclosed Proxy is solicited on behalf of Mylex Corporation (the
"Company") for the Annual Meeting of Shareholders (the "Meeting") to be held on
April 30, 1996, at 2:00 p.m., at the principal executive offices of the Company
located at 34551 Ardenwood Boulevard, Fremont, California 94555, or any
adjournment thereof, for the purposes set forth herein and in the accompanying
Notice of Annual Meeting of Shareholders. The Company's telephone number is
(510) 796-6100. These proxy solicitation materials were mailed on or about March
29, 1996, to all shareholders entitled to vote at the Meeting.
RECORD DATE AND SHARES OUTSTANDING
Only shareholders of record at the close of business on March 20, 1995 (the
"Record Date") are entitled to receive notice of and to vote at the Meeting. The
issued and outstanding voting securities of the Company at March 1, 1996
consisted of 19,631,550 shares of Common Stock, par value $0.01 (the "Common
Stock").
REVOCABILITY OF PROXIES
The enclosed Proxy is revocable at any time before its use by delivering to
the Secretary of the Company a written notice of revocation or a duly executed
proxy bearing a later date. If a person who has executed and returned a proxy is
present at the meeting and wishes to vote in person, he or she may elect to do
so and thereby suspend the power of the proxy holders with respect to his or her
proxy.
VOTING AND SOLICITATION
Each outstanding share of the Company's Common Stock is entitled to one vote
on all matters submitted to a vote at the Meeting.
The cost of soliciting proxies with respect to the Meeting will be borne by
the Company. In addition, the Company may reimburse brokerage firms and other
persons representing beneficial owners of shares for their expenses in
forwarding solicitation material to such beneficial owners. Proxies may also be
solicited by certain of the Company s directors, officers and regular employees,
without additional compensation, personally or by telephone, telegraph,
facsimile, or otherwise.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The Company's Bylaws provide that the presence, in person or by proxy, of
shareholders holding a majority of the shares of Common Stock issued and
outstanding and entitled to vote thereon shall constitute a quorum at the
Meeting and any adjournment thereof.
For determining whether a proposal has received a majority vote, abstentions
will be included in the vote totals, with the result that an abstention will
have the same effect as a negative vote. In instances where brokers are
prohibited from exercising discretionary authority for beneficial holders who
have not returned a Proxy (so called "broker non-votes"), those shares will not
be included in the vote totals and, therefore, will have no effect on the
outcome of the vote. However, broker non-votes, shares that abstain and shares
for which the authority to vote is withheld on certain matters will be treated
as present for quorum purposes on all matters.
<PAGE>
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
Proposals of shareholders of the Company that are intended to be presented
by such shareholders at the Company s 1997 Annual Meeting of Shareholders must
be received by the Company no later than November 25, 1996 in order that they
may be considered for inclusion in the proxy statement and form of proxy
relating to that meeting.
PROPOSAL ONE
ELECTION OF DIRECTORS
NOMINEES
A board of six directors is to be elected at the Meeting. Until otherwise
instructed, the proxy holders will vote all of the proxies received by them for
each of the Company's six nominees named below. Each of the nominees is
currently a director of the Company. In the event that any such nominee is
unable to serve as a director at the time of the Meeting, the proxies will be
voted for any nominee who shall be designated by the current Board of Directors
of the Company (the "Board") to fill the vacancy. In the event that additional
persons are nominated for election as directors, the proxy holders intend to
vote all proxies received by them in such a manner as will ensure the election
of as many of the nominees listed below as possible. In such event, the specific
nominees to be voted for will be determined by the proxy holders. The Company
believes that all the nominees will be able to serve. The term of office of each
person elected as a director will continue until the Company's next Annual
Meeting of Shareholders and until his successor has been elected and qualified.
The names of the nominees of management and certain information about them
are set forth below.
<TABLE>
<CAPTION>
DIRECTOR
NOMINEE AGE PRINCIPAL OCCUPATION SINCE
- -------------------- ---- ---------------------------------------- ---------
<S> <C> <C> <C>
Mr. Ismael Dudhia 61 Independent Consultant 1991
Mr. Richard Love 62 Principal, RJL Capital Management 1993
Mr. Stephen McKenzie 66 Chief Executive Officer of Resource
Management 1995
Dr. M. Yaqub Mirza 49 President of Mar-Jac Investments, Inc. 1988
Mr. Al Montross 59 Chief Executive Officer and President of
the Company 1994
Dr. Inder M. Singh 50 President of Lynx Real-Time System, Inc. 1986
</TABLE>
ISMAEL DUDHIA
Mr. Dudhia was elected a Director of the Company in July 1991 and became
Chairman in December 1993. Mr. Dudhia has been an independent consultant since
late 1991. From 1983 until October 1991, Mr. Dudhia was Chairman of the Board
and active in the management of Coolidge Bank and Trust Company, which Mr.
Dudhia owned from 1986 until 1991. In 1991, principally as a result of the local
and national recession and significant declines in the real estate market in the
Boston, Massachusetts area, Coolidge was declared insolvent and its assets were
sold by the Federal Deposit Insurance Corporation to another bank. Mr. Dudhia
obtained a degree of Barrister-at-Law from Lincolns Inn, an education
institution in England. From November 1993 until April 1994, Mr. Dudhia served
as a director of Northgate Computer Systems, Inc., a Minnesota based computer
company ("Northgate"). In late 1994, a liquidation of Northgate under Chapter 7
of the Federal Bankruptcy Act was converted to a reorganization under Chapter 11
of that Act.
RICHARD LOVE
Mr. Love has served as a Director of the Company since July 1993, and was
appointed Treasurer in January 1995. Mr. Love is currently a principal of RJL
Capital Management of Santa Barbara, an investment management firm. From 1973 to
1988, Mr. Love served as an investment counselor, then
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<PAGE>
senior partner, with Loomis, Sayles & Co. Before joining Loomis, Sayles & Co.,
Mr. Love held various positions with James Capel Investment Banking of San
Francisco from 1969 to 1973 and with Stein, Roe & Farnham from 1959 to 1969. Mr.
Love attended the Lawrenceville School and received a Bachelor's degree in
Metallurgical Engineering from Cornell University. He is an ICAA Chartered
Investment Counselor. From July 1992 to September 1993, Mr. Love served as a
director of Northgate. In late 1994, a liquidation of Northgate under Chapter 7
of the Federal Bankruptcy Act was converted to a reorganization under Chapter 11
of that Act.
STEPHEN MCKENZIE
Mr. McKenzie was appointed a Director of the Company in January 1995. Mr.
McKenzie is currently Chief Executive Officer of Resource Management, a
receivables financing company. From December 1989 to January 1991, he was Senior
Vice President of Sales and Marketing and co-founder of Reply Corporation, a
manufacturer of microchannel personal computers. From February 1987 to September
1989, Mr. McKenzie was President of Acer America, Inc., a computer clone
manufacturer. He currently serves as the Chairman of the Board of Microspeed
Corporation, a manufacturer of personal computer input devices. Mr. McKenzie
holds a Bachelors degree in Political Science from the University of Nebraska.
M. YAQUB MIRZA
Dr. Mirza has served as a Director of the Company since December 1988 and as
Secretary since February 1989. He is currently President and Chief Executive
Officer of Mar-Jac Investments, Inc., an investment and management consulting
firm that is one of the Company's shareholders. He currently serves as a Trustee
and Treasurer on the Board of Trustees of Amana Mutual Funds Trust, a mutual
fund. He is also Chairman of the Board of Jugos Concetrados, S.A., which is
traded on the Santiago, Chile Stock Exchange. He also serves as an officer of
Safa Trust. Dr. Mirza holds a Doctorate in Physics from the University of Texas.
From July 1992 until April 1994, Dr. Mirza served as a director of Northgate. In
late 1994, a liquidation of Northgate under Chapter 7 of the Federal Bankruptcy
Act was converted to a reorganization under Chapter 11 of that Act.
AL MONTROSS
Mr. Montross was appointed President and Chief Executive Officer of the
Company in April 1994, and became a Director in May 1994. In September 1993, Mr.
Montross joined the Company as Executive Vice President, and in December 1993
was appointed Acting President and Chief Operating Officer. From August 1992 to
September 1993 he held the position of Senior Vice President at Distributed
Processing Technology of Maitland, Florida, a computer peripherals manufacturer.
From 1989 to 1992, Mr. Montross held the position of President and Chief
Operating Officer at Inacomp Computer Centers, Inc., of Troy, Michigan, a
computer equipment and network reseller. He currently serves as a director of
American Speedy Printing Centers, Inc. Mr. Montross holds a Bachelor's degree in
Economics from Siena College in New York.
INDER M. SINGH
Dr. Singh has served as a Director of the Company since December 1986. Since
March 1988, Dr. Singh has been the President and Chief Executive Officer of Lynx
Real-Time System, Inc., a software company. From April 1985 to March 1988, he
was the owner and operator of Simran Associates, a computer consulting firm.
From March 1982 to March 1985, he served as President of Excelan, Inc. Before
forming Excelan, Inc., Dr. Singh held executive level positions with Zilog
Incorporated and Amdahl Corporation. Dr. Singh holds a Doctorate in Electrical
Engineering from Yale University.
VOTE REQUIRED
The six nominees for director receiving the highest number of affirmative
votes of the shares entitled to be voted for the election of directors shall be
elected as directors.
THE COMPANY'S MANAGEMENT RECOMMENDS A VOTE "FOR" ALL NOMINEES LISTED ABOVE.
3
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PROPOSAL TWO
INCREASE IN AUTHORIZED SHARES
The Board has approved, and has determined to ask the shareholders to
approve, an amendment to the Company's Articles of Incorporation to increase the
number of authorized shares of Common Stock of the Company from 25,000,000 to
40,000,000.
As of March 1, 1996, there were issued and outstanding 19,925,125 shares of
Common Stock. As of that date, there were 5,074,875 authorized but unissued
shares of Common Stock. An aggregate of 3,221,776 shares of Common Stock remain
reserved for issuance under the Company's 1993 Stock Option Plan and the 1990
Equity Incentive Plan assumed by the Company in its recent acquisition of
BusLogic Inc. The aggregate number of shares reserved for issuance under the
Company's employee benefit plans will increase to 4,371,776 shares if the
proposals to adopt the 1995 Employee Stock Purchase Plan covering 300,000 shares
of Common Stock, and increase the number of authorized shares under the 1993
Stock Option Plan by 850,000 shares of Common Stock, are approved as proposed in
this Proxy. Accordingly, upon such approvals occurring, there will be a balance
of approximately 700,000 shares of Common Stock available for future issuance.
The Board believes that it is advisable and in the best interests of the
Company and its shareholders to amend the Articles of Incorporation of the
Company to increase the authorized shares of Common Stock from 25,000,000 to
40,000,000 in order to have a sufficient number of additional shares of Common
Stock available for future financing transactions, acquisitions, stock
dividends, stock issuances pursuant to employee benefit plans and other
appropriate corporate opportunities and purposes. Having additional shares
available for issuance in the future would give the Company greater flexibility
and allow shares of Common Stock to be issued without the expense and delay of a
special shareholders meeting. However, the Company has no agreements,
commitments or understandings at this time with respect to the issuance of
additional shares of Common Stock, which would be made available by the proposed
amendment, in connection with any financial transactions, acquisitions, stock
dividends, employee benefit plans or other transactions.
No further shareholder vote may be required to issue any of the additional
shares. Such shares could be issued at such prices and under such circumstances
as would have a dilutive effect on the equity ownership of the present holders
of the Common Stock. Such shares also could be used to discourage or make more
difficult a change in control of the Company. Nevertheless, the Board believes
it is in the best interest of the Company to approve the amendment.
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
The affirmative vote of the majority of all outstanding shares of Common
Stock is required for approval of this proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" AMENDING
THE ARTICLES OF INCORPORATION OF THE COMPANY TO INCREASE THE NUMBER OF
AUTHORIZED SHARES OF COMMON STOCK FROM 25,000,000 TO 40,000,000.
PROPOSAL THREE
APPROVAL OF 1995 EMPLOYEE STOCK PURCHASE PLAN
GENERAL
On October 27, 1995, the Board adopted, subject to shareholder approval, the
Mylex Corporation 1995 Employee Stock Purchase Plan (the "Purchase Plan"), a
copy of which is included as Appendix A to this Proxy Statement. The Purchase
Plan, and the right of participants to make purchases thereunder, is intended to
qualify under the provisions of Section 423 of the Internal Revenue Code of
1986, as amended (the "Code"). A total of 300,000 shares of Common Stock are
reserved for issuance under the Purchase Plan.
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<PAGE>
No shares of the Common Stock have been sold pursuant to the Purchase Plan.
There are approximately 285 employees currently eligible to participate in the
Purchase Plan.
SUMMARY OF THE PURCHASE PLAN
A description of the principal features of the Purchase Plan is set forth
below.
PURPOSE. The purpose of the Purchase Plan is to maintain competitive equity
compensation programs and to provide employees of the Company an incentive in
the performance of their services for the Company by giving them an opportunity
to acquire a proprietary interest (or increase an existing proprietary interest)
in the Company through the purchase of Common Stock and to profit from increases
in the value of the Common Stock, thereby more closely aligning the interests of
the employees and the shareholders.
ADMINISTRATION. The Purchase Plan is to be administered by the Board or a
committee (the "Committee") appointed by the Board, consisting of not less than
two members of the Board who are not officers or employees of the Company or any
of its subsidiaries and who are disinterested persons within the meaning of Rule
16b-3 promulgated under the Securities and Exchange Act of 1934, as amended (the
"Exchange Act"). All questions of interpretation of the Purchase Plan are
determined by the Committee, whose decisions are final, conclusive and binding
upon all participants.
ELIGIBILITY. Subject to certain limitations imposed by Section 423 of the
Code, any person who is employed by the Company (or any of its majority-owned
subsidiaries) for at least 30 hours per week and more than five months in a
calendar year is eligible to participate in the Purchase Plan, provided that the
employee has been so employed on the first day of an offering period (as
described below) and 90 days prior to that date or such shorter period as the
Committee may determine from time to time. Eligible employees become
participants in the Purchase Plan by delivering to the Company an enrollment
agreement authorizing payroll deductions prior to the first day of an offering
period, unless another time for filing the enrollment agreement is set by the
Committee for all eligible employees.
OFFERING DATES. The Purchase Plan is implemented by a series of 12-month
offering periods, with a new offering period commencing on each June 1 and
December 1 during the term of the Purchase Plan. The first offering period
commenced on December 1, 1995. The last day of each six-month exercise period
during each offering period under the Purchase Plan (i.e., each May 31 and
November 30) is an exercise date under the plan. The Committee may alter the
duration of the offering periods and the exercise periods without shareholder
approval.
PURCHASE PRICE. The purchase price per share at which shares are sold under
the Purchase Plan is equal to the lower of (i) 85% of the fair market value of
the Common Stock on the first day of each offering period, or (ii) 85% of the
fair market value of the Common Stock on the applicable exercise date. The fair
market value of the Common Stock on a given date is the last sale price of the
Common Stock on the National Association of Securities Dealers, Inc. Automated
Quotation National Market System ("Nasdaq National Market") on such date.
PAYMENT OF PURCHASE PRICE; PAYROLL DEDUCTIONS. The purchase price of the
shares is accumulated by payroll deductions during an offering period. The
deductions may be any whole percentage amount is between 1% and 10% of a
participant's eligible compensation on each payroll date during the offering
period. For purposes of the Purchase Plan, eligible compensation is defined to
include each participant's full salary and wages, including commissions, bonuses
and overtime pay (at the election of the participant), any pension or other
profit sharing plan, any fringe benefits and certain other forms of
extraordinary pay. A participant may discontinue his or her participation in the
Purchase Plan at any time during an offering period. In addition, a participant
may, no more than one time in any calendar quarter, reduce or increase the rate
of his or her payroll deductions. Payroll deductions commence on the first
payday following the first day of each offering period, and continue at the same
rate until the end of the offering period, unless the participant terminates
participation in the Purchase Plan or reduces or increases the rate of the
payroll deductions.
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In the event that the purchase price per share of Common Stock at the
beginning of any offering period is less than the purchase price per share of
Common Stock at the beginning of any prior offering period which has not yet
ended, the Committee in its discretion may terminate the participation of all
participants in the prior offering period and enroll them in the new offering
period at the same payroll deduction rate.
GRANT OF OPTIONS. On the first day of each offering period, each eligible
employee is granted an option to purchase, on each exercise date during the
offering period, up to the number of shares of Common Stock determined by
dividing (i) the amount of the participant's total payroll deductions to be
accumulated during such exercise period during the offering period by (ii) the
exercise price, provided that the maximum number of shares that a participant
may purchase during any exercise period may not exceed 500.
Notwithstanding the foregoing, no employee will be permitted to subscribe
for shares under the Purchase Plan if, immediately after the grant of the
option, the employee would own 5% or more of the voting power or value of all
classes of stock of the Company or of a parent or of any of its subsidiaries
(including stock which may be purchased under the Purchase Plan or pursuant to
any other options). Nor may any employee be granted an option which would permit
the employee to purchase pursuant to the Purchase Plan and any other future
stock purchase plan of the Company more than $25,000 worth of stock (determined
based on the fair market value of the shares at the time the option is granted)
in any calendar year. In the event an employee sells any share of Common Stock
acquired under the Purchase Plan within 180 days of acquiring such shares, such
employee shall be ineligible to participate in the Purchase Plan during the
exercise period commencing immediately following such sale.
EXERCISE OF OPTIONS. Unless a participant withdraws from the Purchase Plan,
such participant's option for the purchase of shares will be exercised
automatically, on each exercise date of each offering period, to purchase the
maximum number of full shares (subject to the limitations described above) that
may be purchased at the applicable exercise price with the accumulated payroll
deductions in such participant's account.
WITHDRAWAL. A participant's interest in any offering may be terminated in
whole, but not in part, by the participant signing and delivering to the Company
a notice of withdrawal from the Purchase Plan. Such withdrawal may be elected at
any time prior to the end of the applicable offering period. The failure to
remain in the continuous employ of the Company or its majority-owned
subsidiaries for at least 30 hours per week during an offering period will be
deemed to constitute a withdrawal from that offering.
CAPITAL CHANGES. In the event any change is made in the Company's
capitalization, such as a reorganization, restructuring, reclassification, stock
split or stock dividend, which results in an increase or decrease in the number
of outstanding shares of Common Stock or a change of Common Stock into, or an
exchange of Common Stock for, a different number or kind of shares, the
Committee may authorize appropriate adjustments to be made to the shares subject
to purchase under the Purchase Plan and to the purchase price per share. In the
event of a sale, merger, dissolution or liquidation of the Company or a sale of
all or substantially all of the Company's assets, any then current offering
periods and exercise periods will terminate immediately prior to the date on
which such proposed action is to be consummated, unless otherwise determined by
the Committee. Upon any such termination, unless otherwise determined by the
Committee, all options to purchase shares will be exercised automatically, on
such date (which shall thus be deemed to constitute an exercise date), to
purchase the maximum number of full shares that may be purchased at the
applicable exercise price with each participant's accumulated payroll
deductions.
NONTRANSFERABILITY. Options to purchase Common Stock under the Purchase
Plan may not be transferred by a participant other than by will or under the
laws of descent and distribution, and may be exercised during a participant's
lifetime only by the participant.
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AMENDMENT AND TERMINATION OF THE PLAN. The Board may at any time amend or
terminate the Purchase Plan, except that no amendment may be made that would
cause the Purchase Plan to fail to meet the requirements for employee stock
purchase plans in Section 423 of the Code.
TAX INFORMATION
The Purchase Plan, and the right of participants to make purchases
thereunder, is intended to qualify under the provisions of Section 423 of the
Code. Under these provisions, no income will be taxable to a participant at the
time of the grant of the option or purchase of the shares. Upon any disposition
of the shares, the participant will be subject to tax, and the amount of the tax
will depend upon the participant's holding period. If the shares have been held
by the participant for more than two years after the date of option grant and
more than one year after the date of exercise of the option, gain on disposition
will be treated as ordinary income to the extent of the excess of the fair
market value of the shares on the grant date over the purchase price for the
shares, determined as of the grant date, and any further gain will generally be
taxed as long-term capital gain. If the shares are disposed of before the
expiration of these holding periods, the excess of the fair market value of the
shares on the purchase date over the purchase price will be treated as ordinary
income, and any further gain or loss on such disposition will generally be taxed
as long-term or short-term capital gain or loss, depending on the holding
period. The Company is not entitled to a deduction for amounts taxed as ordinary
income or capital gain to a participant, except to the extent of ordinary income
reported by participants upon disposition of shares within two years from the
date of grant or within one year from the date of exercise.
The foregoing brief summary of the effect of federal income taxation upon
the participants and the Company with respect to the grant and exercise of
options under the Purchase Plan and the disposition of the shares so acquired
does not purport to be complete, and reference should be made to the applicable
provisions of the Code and the related regulations for detailed information
concerning the tax effects of each such transaction. In addition, this summary
does not discuss the provisions of the income tax laws of any municipality,
state or foreign country in which a participant may reside.
PARTICIPATION IN PURCHASE PLAN BY EXECUTIVE OFFICERS AND OTHER EMPLOYEES
Participation in the Purchase Plan is voluntary and is dependent on each
eligible employee's election to participate and his or her determination as to
the level of participation through payroll deductions. Accordingly, future
purchases by executive officers and other employees under the Purchase Plan are
not determinable. To date, no purchases have been made under the Purchase Plan.
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
The affirmative vote of a majority of the votes present or represented by
proxy and entitled to vote at the Meeting, at which a quorum representing a
majority of all outstanding shares of Common Stock is present and voting, is
required for approval of this proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" APPROVAL
OF THE 1995 EMPLOYEE STOCK PURCHASE PLAN.
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PROPOSAL FOUR
REINCORPORATION
The Board has unanimously approved, and for the reasons described below,
unanimously recommends that the Company's shareholders approve, a proposal that
provides, among other things, for the change of the Company's state of
incorporation from Florida to Delaware. This change of domicile (the
"Reincorporation") will be accomplished through a merger of the Company into a
recently formed Delaware corporation which is a wholly-owned subsidiary of the
Company (the "Merger Subsidiary"). The Reincorporation will change the law
applicable to the Company's corporate affairs from Florida and the Florida
Business Corporation Act ("Florida BCA") to Delaware and the Delaware General
Corporation Law ("Delaware GCL"). The Reincorporation will also result in the
replacement of the Company's Articles of Incorporation and Bylaws with the
Certificate of Incorporation and Bylaws of the Merger Subsidiary. As a result of
these changes, the rights of shareholders of the Company will be altered (see
"Certain Significant Differences Between the Corporation Laws of Florida and
Delaware" below). However, there will be no change in the percentage ownership
in the Company of any shareholder of the Company as a result of the Merger.
Copies of the Merger Subsidiary's Certificate of Incorporation and Bylaws may be
obtained by written request to the Secretary of the Company at 34551 Ardenwood
Boulevard, Fremont, California 94555.
The proposed Reincorporation will be effected by merging the Company with
and into Merger Subsidiary (the "Merger") pursuant to the terms of an Agreement
and Plan of Merger between the Company and Merger Subsidiary dated as of March
20, 1996 (the "Merger Agreement"). Upon the filing of the Merger Agreement with
the Secretary of State of Florida and of Delaware (the "Effective Time"), the
separate corporate existence of the Company will cease. Merger Subsidiary will,
to the extent permitted by law, succeed to all business, properties, assets, and
liabilities of the Company and to the Company's name. The directors, officers,
and employees of the Company will become the directors, officers, and employees
of Merger Subsidiary. A copy of the Merger Agreement may be obtained by written
request to the Secretary of the Company at 34551 Ardenwood Boulevard, Fremont,
California 94555.
Stock certificates of the Company will be deemed to represent the same
number of shares of Merger Subsidiary as were represented by such stock
certificates of the Company prior to the Reincorporation. IT WILL NOT BE
NECESSARY FOR SHAREHOLDERS TO EXCHANGE THEIR EXISTING STOCK CERTIFICATES FOR
STOCK CERTIFICATES OF MERGER SUBSIDIARY. Each certificate will have the same
terms as shares of the Company's Common Stock, subject to the differences
arising by virtue of the differences between the Delaware GCL and Florida BCA.
Delivery of existing stock certificates representing Common Stock of the Company
will constitute "good delivery" of shares of Merger Subsidiary common stock in
transactions subsequent to the Merger. The Common Stock of the Merger Subsidiary
will be listed for trading on the NASDAQ National Market. Appraisal rights will
not be available to holders of the Company's Common Stock if they dissent to the
Reincorporation proposal.
Pursuant to the terms of the Merger Agreement, each option to purchase
Common Stock of the Company outstanding immediately prior to the Effective Time
of the Merger will become an option to purchase Merger Subsidiary Common Stock,
subject to the same terms and conditions as set forth in the applicable option
plan or other agreement pursuant to which such option was granted. All other
employee benefit plans and other agreements and arrangements with the Company
will be continued by Merger Subsidiary upon the same terms and subject to the
same conditions.
It is anticipated that the Merger, if approved by the Company's
shareholders, will become effective as soon as practicable after the Meeting.
However, the Merger Agreement provides that the Merger may be abandoned by the
Board at any time prior to the Effective Time. In addition, the Merger Agreement
may be amended prior to the Effective Time, either before or after shareholder
approval; provided, however, that the Merger Agreement may not be amended after
shareholder
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approval if such amendment would (i) alter or change the amount or kind of
shares to be received by the shareholders in the Merger, (ii) alter or change
any term of the Certificate of Incorporation of Merger Subsidiary, or (iii)
effect any alteration or change that would adversely affect the shareholders.
REASONS FOR REINCORPORATION
The Company's executive offices are located in California. The Company has
no relationship to the State of Florida other than the fact that it is
incorporated under Florida law and its internal corporate affairs are governed
by the provisions of Florida law and the Florida BCA. The Company believes that
the laws of Delaware provide substantially more benefits and protections than
those provided under Florida law.
The Reincorporation will allow the Company to be governed by Delaware's
comprehensive and flexible corporation law, which is periodically updated. The
Delaware courts have considerable expertise in dealing with corporate issues and
have developed a substantial body of case law construing Delaware law and
establishing public policies with respect to Delaware corporations. As a result,
in Delaware, there is much greater predictability with respect to corporate
legal affairs. Consequently, many corporations throughout the United States have
initially chosen Delaware or have subsequently reincorporated in Delaware in a
manner similar to the Company's proposal for Reincorporation. The Board of
Directors of the Company believes that flexibility and predictability provided
by Delaware Law and the Delaware Courts to its actions is not currently
available under the Florida Business Corporation Act ("Florida BCA") and other
Florida law. For those reasons, the Board of Directors of the Company believes
that the Reincorporation may be in the best interests of the Company and its
shareholders and recommends that the shareholders approve the Reincorporation.
If the Reincorporation in Delaware is effected, shareholders may, in some
instances, have fewer rights and therefore less protection than is provided
under the laws of Florida. See "Certain Significant Differences Between the
Corporation Laws of Delaware and Florida."
CERTAIN SIGNIFICANT DIFFERENCES BETWEEN THE CORPORATION LAWS OF DELAWARE AND
FLORIDA
The following summary does not purport to be a complete statement of the
rights of holders of the Company's shares, and upon the consummation of the
Reincorporation, the Merger Subsidiary shares. The summary is qualified in its
entirety by reference to the relevant provisions of the Delaware GCL, Florida
BCA, the current Articles of Incorporation and Bylaws of the Company and the new
Certificate of Incorporation and Bylaws of the Merger Subsidiary and other
applicable laws. However, the Company believes that the summary does include a
description of all the material differences between the Delaware GCL and the
Florida BCA.
PROXY REQUIREMENTS. Under Florida BCA, proxies are valid for an
eleven-month period unless a longer period is expressly specified in the proxy.
Under the Delaware GCL, proxies are valid for up to three years unless a longer
period is expressly specified in the proxy. The Florida BCA also provides that a
proxy granted to a creditor or an employee of the Company (pursuant to an
employment contract), becomes revocable three years after the date of the proxy
even if it is an irrevocable proxy, though the proxy may be renewed for
successive three year periods. Under the Delaware GCL and Florida BCA, a proxy
is irrevocable if it specifically states that it is irrevocable and it is
coupled with an interest sufficient in law to support an irrevocable power.
CONTROL SHARE ACT. A provision of the Florida BCA prohibits the voting of
shares in a publicly-held Florida corporation that are acquired in a "control
share acquisition" unless the holders of a majority of the corporation's voting
shares (exclusive of shares held by officers of the company, inside directors,
or the acquiring party) approve the granting of voting rights as to the shares
acquired in the control share acquisition or the acquisition is otherwise
approved by the corporation's board of directors. A "control share acquisition"
is defined as an acquisition that immediately after its consummation entitles
the acquiring party to vote in the election of directors within one of the
following ranges of voting power (if it did not have such voting power prior to
the acquisition): (i) one-fifth or more but less than one-third of such voting
power, (ii) one-third or more but less than a majority of such voting power, and
(iii) more than a majority of such voting power. A corporation may opt out of
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the coverage of the control share provision through adopting a specific
provision in its articles of incorporation or bylaws. The Company has not
elected to opt out of this provision. The Delaware GCL does not contain a
similar provision.
AFFILIATED TRANSACTION. The Florida BCA contains an "affiliated
transaction" provision that prohibits a Florida company from engaging in a broad
range of business combinations or other extraordinary corporate transactions
with an "interested shareholder" without receiving the affirmative vote by the
holders of 2/3 of the voting shares, other than those owned by the interested
shareholder, unless one or more of the following conditions apply: (i) the
affiliated transaction has been approved by a majority of disinterested
directors, (ii) the corporation has not had more than 300 shareholders of record
at any time during the three year period preceding the transaction, (iii) the
interested shareholder has been the beneficial owner of at least 80% of the
corporation's outstanding voting shares for at least five years, (iv) the
interested shareholder is the beneficial owner of at least 90% of the
outstanding voting shares of the corporation, or (v) consideration in such
transaction is paid (in an amount determined by the requirements of the Florida
BCA) to the holders of each class or series of voting shares. An interested
shareholder is defined as a person who, together with affiliates and associates,
beneficially owns more than 10% of the corporation's outstanding voting shares.
The Florida BCA allows the corporation to opt out of the affiliated transaction
provisions; however, the Company has not elected to opt out of the requirements
of such provisions.
The Delaware GCL generally prohibits a stockholder owning 15% or more of a
Delaware corporation's outstanding voting stock (an "interested stockholder")
from engaging in certain business combinations involving the corporation during
the three year period after the date the person became an interested stockholder
unless: (i) prior to such date, the board of directors approves either the
business combination or the transaction which resulted in the stockholder
becoming an interested stockholder, (ii) upon the consummation of the
transaction which resulted in the stockholder becoming an interested
stockholder, the stockholder owns at least 85% of the voting stock outstanding
at the time the transaction commenced, (iii) on or subsequent to such date, the
transaction is approved by the board of directors and by the stockholders by a
vote of two-thirds of the disinterested outstanding voting stock, (iv) the
corporation's original certificate of incorporation provides that the
corporation shall not be governed by the statute, or (v) a majority of the
shares entitled to vote approve an amendment to the corporation's certificate of
incorporation or bylaws expressly electing not to be governed by the statute
(but such amendment may not be effective until one year after it was adopted and
may not apply to any business combination between the corporation and any person
who became an interested stockholder on or prior to such adoption). Merger
Subsidiary's Certificate of Incorporation does not contain a provision opting
out of the coverage of this statute.
DIRECTOR EXCULPATION. The Florida BCA eliminates a director's monetary
liability to a corporation or any other person for any statement, vote,
decision, or failure to act, regarding corporate management or policy, unless
the director breached or failed to perform his duties as a director and the
breach or failure constitutes: (i) a violation of criminal law, unless the
director had reasonable cause to believe his conduct was lawful, (ii) a
transaction from which the director, either directly or indirectly, derived an
improper personal benefit, (iii) a circumstance where the director voted or
assented to an unlawful declaration of dividends or distribution of corporate
assets, (iv) a circumstance as established in any action by or in the right of
the corporation in which the director was found to have conscious disregard for
the best interests of the corporation or engaged in willful misconduct, or (v) a
situation whereby the director's conduct (as determined in a proceeding brought
by someone other than the corporation or a shareholder) is found to constitute
recklessness, or an act or omission which was committed in bad faith or with
malicious purpose, or exhibits wanton and willful disregard of human rights,
safety, or property. This provision of the Florida BCA is self-implementing in
that a corporation need not take any action to avail its directors of these
protections.
The Delaware GCL provides that a corporation may adopt a provision in its
certificate of incorporation either limiting or eliminating the personal
liability of directors for monetary damages to the corporation or its
stockholders for breach of their fiduciary duties as directors. The Delaware GCL
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provides, however, that such provision shall not limit or eliminate the
liability of a director for (i) any breach of the director's duty of loyalty to
the corporation or its stockholders, (ii) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) an
unlawful declaration and payment of dividends or unlawful purchase or redemption
of the corporation's stock, or (iv) any transaction from which the director
derived an improper personal benefit. The Certificate of Incorporation of the
Merger Subsidiary contains a provision eliminating the personal liability of
directors to the fullest extent permitted by Delaware law.
INDEMNIFICATION. Under both the Delaware GCL and Florida BCA, a corporation
may indemnify its officers, directors, employees and agents against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement of
any proceedings (other than derivative actions), if they acted in good faith and
in a manner they reasonably believed to be in or not opposed to the best
interests of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe their conduct was unlawful. A
similar standard is applicable in derivative actions, except that
indemnification may be made only for (i) expenses (including attorneys' fees)
and certain amounts paid in settlement, and (ii) if the person seeking
indemnification has been adjudicated liable, then for amounts deemed proper,
fair and reasonable by the court making such determination. The Delaware GCL and
Florida BCA both provide that to the extent that such persons have been
successful in defense of any proceeding, they must be indemnified by the
corporation against expenses actually and reasonably incurred in connection
therewith. The Bylaws of both the Company and Merger Subsidiary provide that
directors and officers will be indemnified to the fullest extent permitted by
law.
DECLARATION OF DIVIDENDS. Delaware and Florida law differ concerning the
sources from which dividends may be paid. The Florida BCA permits dividends to
be paid only from a corporation's surplus. The Delaware GCL, however, allows
dividends to be paid from a corporation's net profits or surplus. This
difference becomes relevant if a corporation operates at a loss for several
years and then begins to accumulate profits. In such a circumstance
(disregarding the possible revaluation of assets or other creation of capital
surplus), the Florida BCA would not permit a dividend until earnings have
eradicated any existing capital deficiency and a surplus exists. The Delaware
GCL, by allowing dividends from either surplus or net profits, would permit a
dividend from net profits if the dividend does not itself exceed the net profits
or impair the capital represented by preferred stock, if any.
SHAREHOLDER INSPECTION OF BOOKS AND RECORDS. Under the Florida BCA, a
shareholder in entitled to inspect and copy the articles of incorporation,
bylaws, certain board and shareholder resolutions, certain written
communications to shareholders, a list of the names and business addressees of
the corporation's directors and officers, and the corporation's most recent
annual report, during regular business hours if the shareholder gives at least
five business days' prior written notice to the corporation. In addition, a
shareholder of a Florida corporation is entitled to inspect and copy other books
and records of the corporation during regular business hours if the shareholder
gives at least five business days' prior written notice to the corporation and
(i) the shareholder's demand is made in good faith and for a proper purpose,
(ii) the demand describes with particularity its purpose and the records to be
inspected or copied, and (iii) the requested records are directly connected with
such purpose. The Florida BCA provides that a corporation may deny any demand
for inspection if the demand was made for an improper purpose or if the
demanding shareholder has, within two years preceding such demand, sold or
offered for sale any list of shareholders of the corporation or any other
corporation, has aided or abetted any person in procuring a list of shareholders
for such purpose or has improperly used any information secured through any
prior examination of the records of the corporation or any other corporation.
The provisions of the Delaware GCL governing the inspection and copying of a
corporation's books and records are generally less restrictive than those of the
Florida BCA. Specifically, the Delaware GCL permits any stockholder the right,
during usual business hours, to inspect and copy the corporation's stock ledger,
stockholders list and other books and records for any proper purpose upon
written demand under oath stating the purpose thereof. The Delaware GCL defines
proper purpose to mean a purpose reasonably related to such person's interest as
a stockholder.
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DISSENTERS' AND APPRAISAL RIGHTS. Both the Delaware GCL and Florida BCA
grant rights of dissent and appraisal, with certain exceptions, to stockholders
of companies that are parties to a merger or consolidation. However, the Florida
BCA extends the right of dissent and appraisal to a shareholder of a Florida
corporation, with certain exceptions, and provides a right to dissent from, and
obtain payment of the fair value of his shares in the event of: (i) a sale or
exchange of all or substantially all of the corporation's property other than in
the usual and regular course of business, (ii) the approval of a control share
acquisition, (iii) a statutory share exchange (unless the corporation's shares
are not being acquired in the share exchange), (iv) an amendment to the articles
of incorporation if the amendment would adversely affect the rights or
preferences of a particular class of shares as to those shareholders whose
shares are affected, and (v) any corporate action taken to the extent that the
articles of incorporation provide for dissenters' rights with respect to such
action. The Florida BCA provides that unless a corporation's articles of
incorporation provide otherwise, which the Company's Articles of Incorporation
do not, a shareholder does not have dissenters' rights with respect to a plan of
merger, share exchange or proposed sale or exchange of property if the shares
held by the shareholder are either registered on a national securities exchange
or designated as a national market system security or an interdealer quotation
system by the NASD, or held of record by 2,000 or more shareholders.
A stockholder of a Delaware corporation generally is entitled to dissenters'
rights in the event that the corporation is a party to certain mergers or
consolidations to which the stockholder did not consent. A Delaware
corporation's certificate of incorporation may also provide that dissenters'
rights are available with respect to any amendment to the certificate of
incorporation or any sale of all or substantially all of the corporation's
assets. Merger Subsidiary's Certificate of Incorporation does not contain such a
provision. Similar to the Florida BCA, dissenters' rights do not apply to a
stockholder of a Delaware corporation if his shares were (i) listed on a
national securities exchange or designated as a national market system security
on an interdealer quotation system by the NASD or (ii) held of record by more
than 2,000 stockholders. Notwithstanding the foregoing, however, under the
Delaware GCL a stockholder does have dissenters' rights with respect to such
shares if the stockholder is required by the terms of the agreement of merger or
consolidation to accept anything for his shares other than (i) shares of stock
of the corporation surviving or resulting from the merger or consolidation, (ii)
shares of stock of any other corporation which is so listed or designated or
held of record by more than 2,000 stockholders, (iii) cash in lieu of fractional
shares, or (iv) any combination of the foregoing.
QUORUM FOR SHAREHOLDER MEETINGS. Under the Florida BCA, unless otherwise
provided in a corporation's articles of incorporation, a majority of shares
entitled to vote on a matter constitutes a quorum at a meeting of shareholders,
but in no event may a quorum consist of less than one-third of the shares
entitled to vote on such matter. The Company's Articles of Incorporation do not
include a provision altering the shareholder quorum requirement. The Delaware
GCL is similar to the Florida BCA, except that under the Delaware GCL a
corporation's certificate of incorporation or bylaws may specify the percentage
of votes which constitutes a quorum at a meeting of stockholders, but in no
event may a quorum consist of less than one-third of the shares entitled to
vote. Merger Subsidiary's Bylaws provide that a quorum exists if a majority of
the voting power entitled to vote is present at a meeting. Thus, the applicable
quorum provisions will not be changed by the Reincorporation.
SHAREHOLDER VOTING REQUIREMENTS. Under both the Florida BCA and the
Delaware GCL, directors are generally elected by a plurality of the votes cast
by the shareholders entitled to vote at a shareholders' meeting at which a
quorum is present. With respect to matters other than the election of directors,
unless a greater number of affirmative votes is required by the Florida BCA or a
Florida corporation's articles of incorporation, if a quorum exists, action on
any matter generally is approved by the shareholders if the votes cast by the
holders of the shares represented at the meeting and entitled to vote on the
matter favoring the action exceed the votes cast opposing the action.
Accordingly, under the Florida BCA, abstentions have no impact on the outcome of
a vote. The Company's Articles of Incorporation do not include a provision
requiring a greater vote on any matter than is required by the Florida BCA.
Under the Delaware GCL, unless otherwise provided by the corporation's
certificate of incorporation or bylaws, if a quorum exists, action on a matter
is approved by the
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affirmative vote of a majority of the shares represented at a meeting and
entitled to vote on the matter. Under the Delaware GCL, abstentions have the
same effect as votes against a matter. Neither the Merger Subsidiary's
Certificate of Incorporation nor Bylaws contains a provision requiring a greater
vote on any matter than is required by the Delaware GCL.
CHARTER CREDITOR PROVISION. The Delaware GCL permits a corporation to
include in its certificate of incorporation a provision to the effect that
whenever a compromise or arrangement is proposed between the corporation and its
creditors and stockholders, any court of equitable jurisdiction in Delaware may,
upon application of the corporation, creditor, stockholder, or certain receivers
or trustees in dissolution, order a meeting of the creditors or stockholders. If
a majority in number representing three-fourths in value of the creditors and of
the stockholders agree to any compromise or arrangement, such compromise or
arrangement will, if sanctioned by the court, be binding on all creditors and
stockholders and on the corporation. Merger Subsidiary's Certificate of
Incorporation contains such a provision. The Florida BCA does not contain an
equivalent provision and the Articles of Incorporation of the Company do not
contain such a provision.
TREASURY STOCK. A Delaware corporation may reacquire its own issued and
outstanding capital stock, and such capital stock is deemed treasury stock which
is issued but not outstanding. A Florida corporation may also reacquire its own
issued and outstanding capital stock. Under the Florida BCA, however, all
capital stock reacquired by a Florida corporation is automatically returned to
the status of authorized but not issued or outstanding, and is not deemed
treasury stock.
BOARD VACANCIES. The Florida BCA provides that a vacancy on the board of
directors generally may be filled by the affirmative vote of a majority of the
remaining directors or by the shareholders, unless the articles of incorporation
provide otherwise. The Company's Articles of Incorporation do not alter this
provision. Under the Delaware GCL, a vacancy on the board of directors generally
may be filled by a majority of the remaining directors or in the manner
specified in a corporation's certificate of incorporation or bylaws. Merger
Subsidiary's Bylaws provide that a vacancy on the board may be filled by the
remaining directors or by the stockholders at any meeting called for that
purpose.
REMOVAL OF DIRECTORS. The Florida BCA provides that shareholders may remove
one or more directors with or without cause unless the articles of incorporation
provide that directors may be removed only for cause. The Company's Articles of
Incorporation do not include such a provision. Under the Florida BCA, a director
generally may be removed only if the number of votes cast to remove him exceed
the number of votes cast not to remove him. The Delaware GCL provides that,
except with respect to corporations with classified boards or cumulative voting
(neither of which are applicable to Merger Subsidiary), a director may be
removed, with or without cause, by the holders of the majority of the shares
entitled to vote at an election of directors.
AMENDMENTS TO CHARTER. An amendment to a Florida corporation's articles of
incorporation must be approved by the corporation's shareholders, except that
certain amendments not affecting the rights of shareholders (as specified in the
Florida BCA) may be made by the board of directors. Unless a specific section of
the Florida BCA or a Florida corporation's articles of incorporation require a
greater vote, an amendment to a Florida corporation's articles of incorporation
generally must be approved by a majority of the votes entitled to be cast on the
amendment. The Company's Articles of Incorporation do not include any provision
requiring greater than a majority of votes to amend its Articles of
Incorporation. A Delaware corporation's certificate of incorporation generally
may be amended only if approved by a majority of the outstanding stock entitled
to vote thereon.
SPECIAL MEETINGS OF SHAREHOLDERS. Special meetings of a Florida
corporation's shareholders may be called by its board of directors, by the
persons authorized to do so in its articles of incorporation or bylaws or by the
holders of not less than 10% of all votes entitled to be cast on any issue
proposed to be considered at the special meeting, unless a greater percentage,
not to exceed 50%, is required by the articles of incorporation. The Company's
Articles of Incorporation do not alter this requirement. Under the Company's
Bylaws, special meetings may be called by the board of directors or the holders
of 10% of all shares entitled to be cast on any matter at the special meeting.
Special meetings of the
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stockholders of a Delaware corporation may be called by the board of directors
or by the persons authorized in the corporation's certificate of incorporation
or bylaws. Merger Subsidiary's Bylaws provide that a special meeting may be
called by the chairman, the president, the directors by action at a meeting, a
majority of directors acting without a meeting or the holders of a majority of
shares entitled to vote at the special meeting.
OTHER CONSTITUENCIES. The Florida BCA provides that directors of a Florida
corporation, in discharging their duties to the corporation and in determining
what they believe to be in the best interests of the corporation, may, in
addition to considering the effects of any corporate action on the shareholders
and the corporation, consider the effects of the corporate action on employees,
suppliers and customers of the corporation or its subsidiaries and the
communities in which the corporation and its subsidiaries operate. Delaware does
not have a comparable statutory provision.
TAX INFORMATION
GENERAL. It is intended that the Reincorporation qualify, and the Company
believes that it does qualify, as a reorganization within the meaning of Section
368(a) of the Code. The Company has not sought and will not seek an opinion of
counsel or a ruling from the Internal Revenue Service regarding the federal
income tax consequences of the Reincorporation.
The discussion below summarizes material federal income tax consequences of
the Reincorporation to a shareholder, assuming that the Reincorporation will
qualify as a reorganization within the meaning of Section 368(a) of the Code.
RECOGNITION OF GAIN ON THE EXCHANGE. No gain or loss will be recognized,
for federal income tax purposes, by the Company or Merger Subsidiary as a result
of the Reincorporation. Although no new certificates will be issued, each holder
of Common Stock of the Company will be considered for tax purposes to have
exchanged, pursuant to the Reincorporation, all of the Common Stock that each
such holder owns solely for Merger Subsidiary Common Stock, but no Company
shareholder will recognize gain or loss as a result of such exchange.
BASIS AND HOLDING PERIOD. A holder's aggregate tax basis in the Merger
Subsidiary Common Stock received pursuant to the Reincorporation will equal such
holder's aggregate tax basis in the shares of Common Stock exchanged therefor.
The holding period of the Merger Subsidiary Common Stock received will include
the holding period of the Common Stock exchanged therefor, provided that such
Common Stock was held as a capital asset at the time of the Merger. Holders who
acquired Common Stock at different times or with different tax bases should
consult their own tax advisors concerning the determination of their tax basis
and holding period in any particular share of Merger Subsidiary Common Stock,
since several methods of determination may be available.
SPECIAL TYPES OF SHAREHOLDERS; STATE, LOCAL AND FOREIGN TAXES. The above
general discussion of material federal income tax aspects of the Reincorporation
does not address the federal income tax consequences that may be applicable to
particular types of taxpayers, including, without limitation, foreign entities,
tax exempt entities, non-resident alien individuals, insurance companies,
securities dealers, broker-dealers, financial institutions and persons who
acquired their Common Stock pursuant to the exercise of employee stock options
or otherwise as compensation. This discussion does not address the effect of any
applicable foreign, state, local or other tax laws. This summary is based on the
Code, regulations promulgated thereunder, court decisions and administrative
rulings and practice as of the date hereof. Future legislative, judicial or
administrative changes that might or might not have retroactive application
could modify significantly the statements and conclusions expressed in this
summary. EACH SHAREHOLDER SHOULD CONSIDER CONSULTING WITH SUCH SHAREHOLDER'S OWN
TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES TO SUCH HOLDER OF THE
REINCORPORATION, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR
FOREIGN TAX LAWS, AND OF ANY CHANGE IN APPLICABLE TAX LAWS.
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VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
The affirmative vote of a majority of the outstanding shares of Common Stock
of the Company is required for approval of this proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" APPROVAL
OF THE REINCORPORATION OF THE COMPANY FROM FLORIDA TO DELAWARE.
PROPOSAL FIVE
AMENDMENTS TO THE 1993 STOCK OPTION PLAN
The Company's 1993 Employee Stock Option Plan (the "Option Plan") was
approved by the Board of Directors on May 9, 1993 and by the shareholders on
July 26, 1993. As of December 31, 1995, options to purchase 2,001,000 shares
have been granted and were outstanding and 351,000 shares remained available for
future grants.
PROPOSED AMENDMENTS
On January 29, 1996, the Board, subject to shareholder approval, approved an
amendment increasing the number of shares reserved for issuance under the Option
Plan by an additional 850,000, for an aggregate of 2,925,000 shares reserved for
issuance under the Option Plan.
SUMMARY OF THE OPTION PLAN
PURPOSE. The principal purpose of the Option Plan is to provide equity
incentives to the Company's employees, consultants, and outside directors by
enabling them to participate in the Company's success and to encourage the
participants continued service to the Company.
ADMINISTRATION. The Option Plan is administered by the Board of Directors
of the Company or a committee that is intended to comply with Rule 16b-3 under
the 1934 Act and other applicable laws (the "Administrator"). The Administrator
has the power to determine eligibility to receive an option, the terms of
options granted, including the exercise or purchase price, number of shares
subject to the option, the vesting schedule and the term of the option.
ELIGIBILITY. The Option Plan provides that options may be granted to
employees (including officers and directors who are also employees), of the
company or any parent or majority-owned subsidiary, and members of the Board of
Directors of the Company who are not officers or employees of the Company
("Outside Directors"). As of the Record Date, there were 285 employees, two
consultants and five Outside Directors eligible to be granted Options under the
Option Plan. Incentive stock options may be granted only to employees. Except
with respect to Outside Directors, the Administrator selects the optionees and
determines the number of shares to be subject to each option and the time or
times at which shares become exercisable under the option. In making such
determination, the duties and responsibilities of the employee or consultant,
the value of his or her services, his or her present and potential contribution
to the success of the Company, the anticipated number of years of future
service, and other relevant factors are taken into account. Generally, such
options become exercisable or "vest" over a three to four year period. Each
option may be exercised only to the extent it is vested.
OUTSIDE DIRECTORS OPTIONS. The Option Plan provides that a nonstatutory
option to purchase 50,000 share of the Company's Common Stock (the "First
Option") shall be automatically granted (the "Automatic Grant Program") to
Outside Directors who are elected or appointed to the Board subsequent to May 9,
1993. An additional option to purchase 50,000 share of the Company's Common
Stock shall be automatically grated to Outside Directors who receive the First
Option, and who remain on the Board of Directors of the Company three years
following the grant of the First Option. This additional Option shall be the
"Second Option." The exercise price of options granted under the Automatic Grant
Program is the fair market value of the Company's Common Stock on the date of
the automatic grant. Outside Directors may not be granted options under the
Option Plan except under the Automatic Grant Program. The First Option becomes
exercisable cumulatively with respect to
15
<PAGE>
1/36 of the underlying shares on the first day of each month following the date
of grant of such option. The Second Option becomes exercisable cumulatively with
respect to 1/60 of the underlying shares on the first day of each month
following the date of grant of such option.
TERMS OF OPTIONS. The terms of options granted under the Option Plan,
(other than options granted to Outside Directors pursuant to the Automatic Grant
Program, (the "Outside Director Options"), are determined by the Administrator.
Each option granted under the Option Plan is evidenced by a written stock option
agreement between the Company and the optionee and is subject to the following
additional terms and conditions:
(a) EXERCISE OF OPTION. an option granted under the Option Plan is
exercised by giving written notice of exercise to the Company, specifying
the number of full shares of Common Stock to be purchased and tendering
payment of the purchase price to the Company. Payment for shares issued upon
exercise of an option may consist of cash, check, promissory note, other
shares of the Company's Common Stock or any combination of such methods of
payment, or such other consideration and method of payment as is permitted
under the law.
(b) EXERCISE PRICE. The per share exercise price of options under the
Option Plan (other than Outside Director Options) is determined by the
Administrator and, in the case of incentive stock options, may not be less
than 100% of the fair market value on the date of grant. The Administrator
may grant non-statutory stock options at less than fair market value. For so
long as the Company's Common Stock is listed on any established stock
exchange or a national market system, including, without limitation, the
Nasdaq National Market, the fair market value of a share of Common Stock
shall be the closing sale price for such stock (or the closing bid, if no
sales were reported) as quoted on such system or exchange (or the exchange
with the greatest volume of trading in Common Stock) on the date of grant of
the Option, as reported in THE WALL STREET JOURNAL or such other source as
the Administrator deems reliable.
(c) TERMINATION OF STATUS AS AN EMPLOYEE, CONSULTANT, OR OUTSIDE
DIRECTOR. If the optionee s employment or consulting relationship with the
Company or status as an Outside Director is terminated for any reason (other
than death or disability), options may be exercised within six months (or
such other period of time not exceeding six (6) months as is determined by
the Administrator) after such termination as to all or part of the shares as
to which the optionee was entitled to exercise at the date of such
termination.
(d) DEATH OR DISABILITY OF OPTIONEE. Options may be exercised within
no more than twelve months following termination because of a permanent and
total disability or by the employee s estate after his or her death.
(e) TERMS AND TERMINATION OF OPTIONS. Options granted under the Option
Plan may have a term of up to ten years. No option may be exercised by any
person after the expiration of its term. In the case of an incentive stock
option granted to an optionee who, immediately before the grant of such
option, owns more than 10% of the voting power or value of all classes of
stock of the Company, the term of such incentive stock option may not exceed
five years.
(f) TRANSFERABILITY OF OPTIONS. an option is not transferable by the
optionee, other than by will or the laws of descent or distribution, and is
exercisable during the optionee s life time only by the optionee. In the
event of the optionee s death, options may be exercised by a person who
acquires the right to exercise the option by bequest or inheritance.
(g) OTHER PROVISIONS. The option agreement may contain such other
terms, provisions, and conditions not inconsistent with the Option Plan as
may be determined by the Administrator.
CHANGES IN CAPITALIZATION. In the event a change, such as a stock split or
stock dividend payable in Common Stock, is made in the Company's capitalization
that results in an exchange of Common Stock for a greater or lesser number of
shares without receipt of consideration by the Company, appropriate adjustment
shall be made in the option price and number of shares subject to outstanding
16
<PAGE>
options. Appropriate adjustment will also be made in the number of shares of
Common Stock that have been authorized for issuance under the Option Plan but as
to which no options have yet been granted or which have been returned to the
Option Plan upon cancellation of an option. Such adjustments shall be made by
the Board of Directors, whose determination shall be final and conclusive,
subject to any required action by the shareholders of the Company.
In the event of the proposed dissolution or liquidation of the Company,
options outstanding under the Option Plan will terminate immediately prior to
the consummation of such proposed action, unless otherwise provided by the
Board. The Board may, in the exercise of its discretion, declare that any
outstanding option (except an Outside Director Option) shall terminate as of a
date fixed by the Board and give each optionee the right to exercise his or her
option as to all or any part of the optioned stock, including shares as to which
the option would not otherwise be exercisable. In the event of a proposed sale
of all or substantially all of the assets of the Company, or the merger of the
Company with or into another corporation, outstanding options shall be assumed
or an equivalent option shall be substituted by such successor corporation (or a
parent or subsidiary of such successor corporation), unless such successor
corporation does not agree to assume the options or to substitute an equivalent
option, in which case the optionee shall have the right to exercise all
outstanding options as to all of the optioned stock, including shares as to
which the option would not otherwise be exercisable. If the Board makes an
outstanding option fully exercisable in lieu of assumption or substitution in
the event of a merger or sale of assets, the Board shall notify the optionee
that his or her outstanding options shall be fully exercisable for a period of
15 days from the date of such notice, and the option will terminate upon the
expiration of such period.
AMENDMENT AND TERMINATION OF THE OPTION PLAN. Except with respect to the
Automatic Grant Program, the Board may amend or terminate the Option Plan from
time to time in such respects as the Board may deem advisable; provided that, to
the extent necessary and desirable to comply with Rule 16b-3 promulgated under
the Exchange Act, or with Section 422 of the Code or any other successor or
applicable law or regulation, the Company shall obtain shareholder approval of
any Option Plan amendment in such a manner and to such a degree as is required
by the applicable law, rule, or regulation. The automatic Grant Program may not
be amended more than once every six months. Any amendment or termination of the
Option Plan shall not affect options already granted and such options shall
remain in full force and effect as if the Option Plan had not been amended or
terminated, unless mutually agreed otherwise between the optionee and the Board,
which agreement must be in writing and signed by the optionee and the Company.
In any event, the Option Plan shall terminate in 2003. Any options
outstanding under the Option Plan at the time of its termination shall remain
outstanding until they expire by their terms.
TAX INFORMATION. Options granted under the Option Plan may be either
"incentive stock options," as defined in Section 422 of the Code, or
nonstatutory options.
INCENTIVE STOCK OPTIONS. If an option granted under the Option Plan is an
incentive stock option, the optionee will recognize no income upon grant of the
incentive stock option and incur no tax liability due to the exercise unless the
optionee is subject to the alternative minimum tax. The Company will not be
allowed a deduction for federal income tax purposes as a result of the exercise
of an incentive stock option, regardless of the applicability of the alternative
minimum tax. Upon the sale or exchange of the shares at least two (2) years
after grant of the option and one (1) year after receipt of the shares by the
optionee, any gain will be treated as a long-term capital gain. If these holding
periods are not satisfied, the optionee will recognize ordinary income equal to
the difference between the exercise price and the lower of the fair market value
of the stock at the date of the option exercise or the price of the stock. The
Company will be entitled to a deduction in the same amount as the ordinary
income recognized by the optionee. Any gain recognized on such a premature
disposition of the shares in excess of the amount treated as ordinary income
will be characterized as long-term
17
<PAGE>
capital gain. Currently, tax on net capital gain (net long-term capital gain
minus net short-term capital loss) is capped at 28%. Capital losses are allowed
in full against capital gains plus $3,000 of individuals' other income.
NONSTATUTORY OPTIONS. All options that do not qualify as incentive stock
options are referred to as nonstatutory options. An optionee will not recognize
any taxable income at the time he is granted a nonstatutory option. However,
upon its exercise, the optionee will recognize ordinary income for tax purposes
measured by the excess of the then fair market value of the shares over the
option price. In certain circumstances, where the shares are subject to a
substantial risk or forfeiture when acquired or where the optionee is an
officer, director, or 10% shareholder of the Company, the date of taxation and
of measuring the tax may be deferred unless the optionee files an election with
the Internal Revenue Service under Section 83(b) of the Code. The income
recognized by an optionee who is also an employee of the Company will be subject
to tax withholding by the Company by payment in cash or out of the current
earnings paid to the optionee. Upon resale of such shares by the optionee, any
difference between the sales price and the exercise price, to the extent not
recognized as ordinary income as provided above, will be treated as capital gain
or loss.
The Company will be entitled to a tax deduction in the amount and at the
time that the optionee recognizes ordinary income with respect to shares
acquired upon exercise of a nonstatutory option.
The foregoing is only a summary of the effect of federal income taxation
upon the optionee and the Company with respect to the grant and exercise of
options under the Option Plan, does not purport to be complete, and does not
discuss the income tax laws of any municipality, state, or foreign country in
which an optionee may reside.
STOCK PRICE. The closing price of a share of Common Stock on the Nasdaq
National Market on March 1, 1996 was $22.13.
PLAN BENEFITS. The Company cannot now determine the number of options to be
received in the future by the executive officers named under "EXECUTIVE OFFICER
COMPENSATION -- Summary Compensation Table," all current executive officers as a
group or all employees (including current officers who are not executive
officers) as a group. See "EXECUTIVE COMPENSATION -- Option Grants in the Last
Fiscal Year" for the number of stock options granted to the executive officers
named in the Summary Compensation Table in the fiscal year ended December 31,
1995. In the fiscal year ended December 31, 1995, options to purchase 217,000
shares of the Common Stock of the Company were granted to all current executive
officers as a group and options to purchase 551,000 shares of Common Stock of
the Company were granted to all employees.
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
The affirmative vote of the holders of a majority of the shares represented,
in person or by proxy, and voting at the Meeting (which shares voting
affirmatively also constitute at least a majority of the required quorum) will
be required to approve the amendment to the Option Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" APPROVAL
OF THE AMENDMENT TO THE 1993 STOCK OPTION PLAN.
18
<PAGE>
PROPOSAL SIX
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
Management has selected KPMG Peat Marwick LLP, independent public
accountants, to audit the books, records and accounts of the Company for the
current fiscal year ending December 31, 1996. KPMG Peat Marwick LLP has audited
the Company's financial statements since the fiscal year ended December 31,
1987.
The affirmative vote of the holders of a majority of the Common Stock
represented and voting at the Meeting will be required to approve and ratify the
Board's selection of KPMG Peat Marwick LLP. In the event of a negative vote on
such ratification, the Board will reconsider its selection.
A representative of KPMG Peat Marwick LLP is expected to be available at the
Meeting to make a statement if such representative desires to do so and to
respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
APPOINTMENT OF KPMG PEAT MARWICK LLP AS THE INDEPENDENT AUDITORS FOR THE 1996
FISCAL YEAR.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
The Board held a total of twelve meetings during 1995. During the year, no
director attended fewer than seventy-five percent (75%) of the meetings of the
Board and committees thereof, if any, upon which such director served. The Board
had an Audit Committee, a Compensation Committee and a Stock Option Plan
Committee in 1995.
During 1995, the Audit Committee, which met once, consisted of Messrs. Love,
McKenzie, Mirza and Singh. The Audit Committee approves the engagement of, and
the services to be performed by, the Company's independent auditors and reviews
the Company's accounting principles and its system of internal accounting
controls.
The Stock Option Plan Committee, which met four times in 1995, consisted of
Messrs. Dudhia, Mirza and Montross. The charter of the Stock Option Plan
Committee is to review and approve grants of stock options to employees,
including officers, of the Company. The Compensation Committee, which met once
in 1995, consisted of Messrs. Dudhia, Love and Singh. The Compensation
Committee's role is to review and approve the Company's executive compensation
policy and distributions to officers under the Executive Bonus Plan.
The Board does not have a Nominating Committee or any committee performing
similar functions.
COMPENSATION OF DIRECTORS
Each of the Company's Outside Directors is remunerated for each Board
meeting he attends. In 1995, the Outside Directors were paid a fee of $2,000 for
each meeting, other than telephonic meetings, and a $1,000 fee for each
telephonic meeting. In addition, Outside Directors are entitled to participate
in the Company's Option Plan. See "PROPOSAL FIVE -- AMENDMENTS TO THE 1993 STOCK
OPTION PLAN -- Summary of the Option Plan."
19
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The following table set forth the beneficial ownership of Common Stock as of
the Record Date, (i) by each director, (ii) by each executive officer named in
the Summary Compensation Table, (iii) by all directors and executive officers as
a group and (iv) by each person known to the Company to be a beneficial owner of
more than five percent of the Company's Common Stock:
<TABLE>
<CAPTION>
NUMBER OF PERCENT
NAME AND ADDRESS (1) SHARES OF CLASS
- ------------------------------------------------------------ ------------- ---------
<S> <C> <C>
Mr. Al Montross............................................. 150,000(2) 0.85%
Ms. Colleen Gray............................................ 37,000(3) 0.21%
Mr. Peter Shambora.......................................... 26,750(4) 0.15%
Mr. KK Rao Surugucchi....................................... 95,000(5) 0.54%
Mr. Ismael Dudhia........................................... 78,322(6) 0.44%
Dr. Inder M. Singh.......................................... 265,822(7) 1.51%
Dr. M. Yaqub Mirza.......................................... 795,081(8) 4.51%
Mr. Richard Love............................................ 404,965(9) 2.30%
Mr. Stephen McKenzie........................................ 22,224(10) 0.13%
All current directors and executive officers as a group
(10 persons)............................................... 1,878,414(11) 10.66%
</TABLE>
- ------------------------
(1) All addresses are at the Company, 34551 Ardenwood Boulevard, Fremont,
California 94555.
(2) Includes options for 150,000 shares exercisable within sixty days of the
Record Date.
(3) Includes options for 37,000 shares exercisable within sixty days of the
Record Date.
(4) Includes options for 26,750 shares exercisable within sixty days of the
Record Date.
(5) Includes options for 95,000 shares exercisable within sixty days of the
Record Date.
(6) Includes options for 78,322 shares exercisable within sixty days of the
Record Date.
(7) Includes options for 28,322 shares exercisable within sixty days of the
Record Date.
(8) Includes options for 78,322 shares exercisable within sixty days of the
Record Date and 655,957 shares held in the following names: Dr. Mirza,
130,000; SAFA Trust, 231,759; and Mar-Jac Investments, 355,000. Dr. Mirza
is an officer of SAFA Trust. Dr. Mirza is an officer and director of
Mar-Jac Investments and, therefore, may be deemed to beneficially own the
shares held by that shareholder. However, Dr. Mirza disclaims beneficial
ownership of all such shares.
(9) Includes options for 47,226 shares exercisable within sixty days of the
Record Date.
(10) Includes options for 22,224 shares exercisable within sixty days of the
Record Date.
(11) Includes options for an aggregate of 566,416 shares of Common Stock
exercisable within sixty days of the Record Date.
20
<PAGE>
EXECUTIVE OFFICER COMPENSATION
The Summary Compensation Table sets forth information with respect to
compensation earned for services rendered to the Company during each of the last
three fiscal years for the Chief Executive Officer and the Company's four other
most highly compensated executive officers whose cash compensation exceeded
$100,000 in 1995.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------------- -------------
OTHER SECURITIES ALL
ANNUAL UNDERLYING OTHER
SALARY BONUS COMPENSATION OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) (5) ($) (#) ($)
- ---------------------------------------- ----- -------- -------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mr. Al Montross (1)..................... 1995 249,038 664,184 (6) 11,604 500,000 0
President and Chief 1994 200,000 398,771 6,480 430,000 0
Executive Officer 1993 56,968 14,633 35,000 0 0
Dr. Parveen Gupta....................... 1995 344,160 0 2,115 253,000 0
Sr. Vice President and General 1994 289,303 0 2,618 265,000 0
Manager Disk Array Division 1993 162,635 0 1,800 0 0
Ms. Colleen Gray (2).................... 1995 140,922 70,847 557 78,000 0
Vice President Finance and 1994 110,832 20,040 329 60,000 0
Chief Financial Officer 1993 67,685 10,000 0 0 0
Mr. Peter Shambora (3).................. 1995 144,000 60,523 2,288 69,000 0
Vice President, Sales 1994 137,638 41,741 1,743 50,000 0
and Marketing 1993 22,069 6,660 0 0 0
Mr. KK Rao Surugucchi (4)............... 1995 144,999 45,379 1,941 125,000 0
Vice President, Engineering 1994 118,274 6,292 1,970 115,000 0
1993 83,962 10,000 0 0 0
</TABLE>
- ------------------------
(1) Mr. Montross joined the Company in September 1993 as Executive Vice
President, was appointed Acting President and Chief Operating Officer in
December 1993, and was appointed President and Chief Executive Officer in
April 1994.
(2) Ms. Gray was promoted to Chief Financial Officer in December 1993. In
December 1994, she became Vice President Finance.
(3) Mr. Shambora joined the Company in October 1993 as Vice President, Sales
and Marketing.
(4) Mr. Surugucchi joined the Company in February 1992 and was promoted to Vice
President of Engineering in July 1994.
(5) With the exception of the bonus paid to Mr. Montross with respect to 1995,
the bonus payments were made pursuant to the Company's Executive Bonus Plan
described below.
(6) Mr. Montross' bonus with respect to 1995 was paid pursuant to his
employmemt agreement described below.
All executive officers other than the President and Chief Executive Officer
are eligible to receive a quarterly cash bonus under the Company's Executive
Bonus Plan. The amount of the cash bonus payable to each executive officer is a
percentage of the officer's salary and is typically determined based 50% on the
Company's financial performance, and 50% on the officer's personal performance,
during the applicable quarter.
21
<PAGE>
OPTIONS GRANTED IN THE LAST FISCAL YEAR
The following table discloses, for each executive named in the Summary
Compensation Table (the "Named Executives"), options granted during the last
fiscal year and the gain or "spread" that would be realized if the options were
exercised on the expiration date, assuming that the Company's stock had
appreciated at the level indicated, compounded annually over the life of the
options.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
---------------------------- VALUE OF ASSUMED ANNUAL
NUMBER OF % OF TOTAL RATES OF STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR OPTION
UNDERLYING GRANTED TO EXERCISE TERMS (1)
OPTIONS EMPLOYEES IN PRICE EXPIRATION -----------------------
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
- ----------------------------------- ----------- ------------- -------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Al Montrose........................ 130,000 23.6 10.50 1/23/05 858,441 2,175,458
Parveen Gupta...................... 13,000 2.4 10.50 1/23/05 85,844 217,546
Peter Shambora..................... 23,000 4.2 10.50 1/23/05 151,878 384,899
Colleen Gray....................... 18,000 3.3 10.50 1/23/05 118,861 301,217
KK Rao Surugucchi.................. 20,000 3.8 10.50 1/23/05 132,068 334,686
</TABLE>
- ------------------------
(1) Potential realizable value less exercise price.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
This table discloses the aggregate dollar value realized upon exercise of
stock options in the last fiscal year by each Named Executive, as well as the
total number of unexercised options and the aggregate dollar value of
unexercised options held at the end of the last fiscal year.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT 1995 IN-THE-MONEY OPTIONS AT 1995
SHARES FISCAL YEAR-END (#) FISCAL YEAR-END ($)(1)
ACQUIRED ON VALUE ------------------------------- ----------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------- ------------ ------------- -------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Al Montrose........................ 60,000 $ 446,250 92,500 407,500 $ 1,293,438 $ 5,001,563
Parveen Gupta...................... 25,000 232,775 190,000 63,000 2,810,000 874,625
Peter Shambora..................... 4,000 25,000 21,000 48,000 296,730 551,740
Colleen Gray....................... -- -- 25,000 53,000 350,646 612,494
KK Rao Surugucchi.................. 10,000 92,188 65,000 60,000 967,825 755,925
</TABLE>
- ------------------------
(1) Total value of options based on fair market value of the Company's Common
Stock of $19.13 as of December 31, 1995.
EMPLOYMENT AGREEMENT
The Company and Mr. Montross, the Company's President, entered into an
employment agreement, dated January 1, 1995. The agreement will extend for a
term of four years. The basic terms provide for an annual salary of $250,000 and
a bonus based upon the Company's performance against operating income and net
sales objectives. The terms also provide that Mr. Montross be granted options to
purchase shares of Common Stock as follows: 130,000 shares in January 1995;
130,000 shares in January 1996; and 110,000 shares in January 1997. Pursuant to
the agreement, Mr. Montross was paid a special bonus of $75,000 in recognition
of his prior contributions to the Company.
EXECUTIVE OFFICERS
The following provides information about the Company's executive officers
who do not also serve as directors:
COLLEEN M. GRAY
Ms. Gray, age 42, joined the Company in April 1992 as Controller and in
December 1993 she was appointed Chief Financial Officer. She was appointed Vice
President Finance in December 1994. From
22
<PAGE>
November 1989 until August 1991, she served as Controller of Voicemail
International, Inc., a voice messaging equipment manufacturer. From March 1987
through June 1989, she was Assistant Controller for Alcatel Business Systems,
Inc. From 1978 to 1987, Ms. Gray held a series of financial management positions
with ITT Courier Terminal Systems. She received a Bachelor of Science degree in
Accounting from Arizona State University.
JOSEPH A. SCHMIDT
Mr. Schmidt, age 52, joined the Company in March 1995 as Vice President,
Human Resources. Mr. Schmidt served as Vice President, Human Resources and
Corporate Officer to Power Up Software Corp., a utility software developer, from
January 1991 to May 1993 and as Director of Corporate Human Resources Planning
for Diasonics, Inc., a medical equipment manufacturer, from May 1986 through
December 1990. Mr. Schmidt holds a bachelor's degree from the University of
Waterloo, and a master's degree in Human Resources and Manpower Development from
the New School for Social Research.
PETER SHAMBORA
Mr. Shambora, age 52, joined the Company in October 1993, as Vice President,
Sales and Marketing. From February 1992 to October 1993, he served as Vice
President, Sales and Marketing of Mass Microsystems, a storage subsystem
manufacturer. From January 1987 to February 1992, he served as Vice President,
Worldwide Sales of Storage Dimensions. Prior to these positions, Mr. Shambora
held positions at various technology companies, including Atasi, Four Phase
Systems and Ampex. Mr. Shambora received his undergraduate degree from San Jose
State University in Industrial Management and a Masters degree from the
University of Southern California in Systems Management.
KRISHNAKUMAR RAO SURUGUCCHI
Mr. Surugucchi, age 40, joined the Company in February 1992, as Director of
Hardware Engineering. He was promoted to Vice President of Engineering in July
1994. Prior to joining the Company, Mr. Surugucchi was Director of Engineering
for the Company's subsidiary, Mylex, India from April 1991 to February 1992.
Prior to these positions, Mr. Surugucchi was Deputy General Manager for PSI,
India from November 1979 to March 1991. Mr. Surgucchi received his undergraduate
degree and Masters degree in Electrical Engineering from The Indian Institute of
Technology, Bombay, India.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company and Mr. Montross, the Company's President, entered into an
employment agreement, dated January 1, 1995. The agreement will extend for a
term of four years. The basic terms provide for an annual salary of $250,000 and
a bonus based upon the Company's performance against operating income and net
sales objectives. The terms also provide that Mr. Montross be granted options to
purchase shares of Common Stock as follows: 130,000 shares in January 1995;
130,000 shares in January 1996; and 110,000 shares in January 1997. Pursuant to
the agreement, Mr. Montross was paid a special bonus of $75,000 in recognition
of his prior contributions to the Company.
In January 1996, the Company loaned Colleen Gray, the Company's Vice
President-Finance, $100,000 in connection with her purchase of a home. The loan
is due one year from funding and will not bear interest. The obligation to repay
the loan is secured by shares of Common Stock of the Company subject to vested
options granted to Mrs. Gray.
23
<PAGE>
COMPENSATION COMMITTEE REPORT
The Compensation Committee (the "Committee") of the Board of Directors (the
"Board") establishes the general compensation policies of the Company, as well
as the compensation plans and specific compensation levels for executive
officers. In addition, it advises with respect to the administration of the
Company's employee stock option plans. The Committee is currently composed of
three independent, non-employee directors.
The Committee believes that the compensation of the Company's executive
officers, including that of the Chief Executive Officer, (collectively, the
"Executive Officers") should be influenced by the Company's performance. The
Committee establishes the salaries of all the Executive Officers by considering
(1) the salaries of executive officers in similar positions of comparably-sized
companies, (2) the Company's financial performance, and (3) the achievement of
certain objectives related to the particular Executive Officer's area of
responsibility. Key target performance objectives used in determining executive
compensation include the attainment of certain levels of revenue and operating
income, as specified by the Committee. Base salaries for Executive Officers
other than the Chief Executive Officer are set by the Committee, in consultation
with the Chief Executive Officer.
The Company has adopted an Executive Bonus Plan. The purposes of the
Executive Bonus Plan are to tie compensation to achievement of performance
measures that influence the creation of shareholder value, and to ensure
payments are targeted to provide a competitive level of compensation, taking
into account the Company's performance against its revenue and operating income
objectives, which are set annually by the Committee. The Company achieved its
financial performance objectives in 1995, and as a result paid a bonus to the
Chief Executive Officer of $664,184 and a total of $190,774 to its other
Executive Officers.
The Company's 1993 Stock Option Plan provides for long-term incentive
compensation for employees of the Company, including Executive Officers. An
important objective of the plan is to provide additional incentives to employees
to work to maximize shareholder value. The Company's option program utilizes
vesting periods to encourage retention of employees and Executive Officers and
reward long-term commitment to employment with the Company. The Stock Option
Plan Committee of the Board, in consultation with the Committee and the Chief
Executive Officer, is responsible for determining, subject to the terms of the
Option Plan, the individuals to whom grants should be made, the timing of
grants, the exercise price per share, and the number of shares subject to each
grant.
The terms of the President and Chief Executive Officer's compensation plan,
which is set forth in an Employment Agreement with the Company with a four year
term commencing January 1, 1995, provides for (1) a base salary of $250,000,
which may be increased annually by the Board, (2) a cash bonus payable on the
achievement of certain objectives based on the Company's operating income and
net sales, and (3) grants of options to purchase shares of Common Stock of the
Company, vesting at a stated percentage per year. The factors taken into
consideration in determining his compensation are generally the same factors
used in determining the compensation of each of the Company's other executive
officers.
Mr. Ismael Dudhia
Mr. Richard Love
Dr. Inder Singh
24
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Dudhia, Mr. Love and Dr. Singh comprise the Compensation Committee of
the Board. Mr. Love is the current Treasurer of the Company and was appointed in
January 1995. Dr. Singh was Treasurer of the Company from February 1989 to
November 1989.
PERFORMANCE GRAPH FOR MYLEX CORPORATION
FIVE YEAR CUMULATIVE TOTAL RETURN
MYLEX CORPORATION, NASDAQ NATIONAL MARKET
AND NASDAQ COMPUTER MANUFACTURER STOCK (#357)*
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
MYLEX NASDAQ NATIONAL MARKET NASDAQ COMPUTER MANUFACTURER
<S> <C> <C> <C>
1990 100.00 100.00 100.00
1991 146.67 160.56 139.86
1992 326.67 186.86 188.06
1993 353.33 214.51 178.23
1994 596.69 209.68 195.75
1995 1,020.00 296.30 308.18
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR END
----------------------------------------------------------
1990 1991 1992 1993 1994 1995
------ ------ ------ ------ ------ --------
<S> <C> <C> <C> <C> <C> <C>
Mylex.............................. 100.00 146.67 326.67 353.33 596.69 1,020.00
NASDAQ National Market............. 100.00 160.56 186.86 214.51 209.68 296.30
NASDAQ Computer Manufacturer....... 100.00 139.86 188.06 178.23 195.75 308.18
</TABLE>
- ------------------------
*Assumes $100 invested on December 31, 1990 in the Company's Common Stock and in
the NASDAQ National Market Index and NASDAQ Computer Manufacturer Stock Index.
Also assumes reinvestment of dividends on a daily basis.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than ten percent of registered class or the
Company's equity securities, to file certain reports of ownership with the
Securities and Exchange Commission (the "SEC"). Such officers, directors and
shareholders are also required by SEC rules to furnish the Company with copies
of all Section 16(a) forms that they file. Based solely on its review of the
copies of such forms received by it, or written representations from certain
reporting persons, the Company believes that all such reports required to be
filed have been filed in a timely manner.
25
<PAGE>
ANNUAL REPORT
The Company's Annual Report to Shareholders for its fiscal year ended
December 31, 1995 has been mailed to shareholders concurrently with the mailing
of this Proxy Statement, but such report is not incorporated herein and is not
deemed to be a part of the Company's proxy solicitation materials.
UPON THE WRITTEN REQUEST OF ANY SHAREHOLDER, THE COMPANY WILL PROVIDE TO
SUCH SHAREHOLDER, WITHOUT CHARGE, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM
10-K FOR THE YEAR ENDED DECEMBER 31, 1995, WITHOUT EXHIBITS, AS FILED WITH THE
SEC. SUCH REQUESTS SHOULD BE DIRECTED IN WRITING TO THE SECRETARY OF THE COMPANY
AT 34551 ARDENWOOD BOULEVARD, FREMONT, CALIFORNIA 94555.
OTHER MATTERS
Management does not intend to bring before the meeting any matters other
than those set forth herein, and has no present knowledge that any other matters
will or may be brought before the Meeting by others. However, if any other
matters properly come before the Meeting, it is the intention of the persons
named in the enclosed form of Proxy to vote the proxies in accordance with their
judgment.
ON BEHALF OF THE BOARD OF DIRECTORS
Al Montross
PRESIDENT AND CHIEF EXECUTIVE OFFICER
26
<PAGE>
APPENDIX A
MYLEX CORPORATION
1995 EMPLOYEE STOCK PURCHASE PLAN
The Mylex Corporation 1995 Employee Stock Purchase Plan (the "Plan") shall
be established and operated in accordance with the following terms and
conditions.
1. DEFINITIONS:
As used in the Plan, the following terms shall have the meanings set forth
below:
"BOARD" means the Board of Directors of the Company.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMITTEE" means the committee appointed by the Board to administer the
Plan, as described in Section 4 below.
"COMMON STOCK" means the Common Stock of the Company.
"COMPANY" means Mylex Corporation, a Florida corporation.
"CONTINUOUS EMPLOYMENT" means the absence of any interruption or
termination of service as an Employee with the Company and/or its
Participating Subsidiaries. Continuous Employment shall not be
considered interrupted in the case of a leave of absence agreed to in
writing by the Company, provided that such leave is for a period of not
more than sixty (60) days or reemployment upon the expiration of such
leave is guaranteed by contract or statute.
"ELIGIBLE COMPENSATION" means, with respect to each Participant for each
pay period, the full salary and wages paid to such Participant by the
Company or a Participating Subsidiary, including commissions, bonuses
and overtime pay. Except as otherwise determined by the Committee,
"Eligible Compensation" does not include:
(i) any amounts contributed by the Company or a Participating Subsidiary to
any pension plan or plan of deferred compensation;
(ii) any automobile or relocation allowance (or reimbursement for any such
expenses);
(iii) any amounts paid as a starting bonus or finder's fee;
(iv) any amounts realized from the exercise of qualified or non-qualified
stock options;
(v) any amounts paid by the Company or a Participating Subsidiary for other
fringe benefits, such as health care, hospitalization and group life
insurance benefits, or perquisites, or paid in lieu of such benefits or
perquisites, such as cash-out of credit generated under a plan qualified
under Code Section 125;
(vi) other similar forms of extraordinary compensation; or
(vii) any Participant's commissions, bonus or overtime pay to the extent such
Participant has elected to exclude, in a writing acceptable to the
Committee, such compensation from his or her Eligible Compensation.
"ELIGIBLE EMPLOYEE" means an Employee who is eligible to participate in
the Plan, as described in Section 5 below.
"EMPLOYEE" means any person, including an officer, who is customarily
employed for at least thirty (30) hours per week and more than five (5)
months in a calendar year by the Company or one of its Participating
Subsidiaries.
"ENROLLMENT DATE" means the first day of each Offering Period.
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<PAGE>
"EXERCISE DATE" means each May 31 and November 30 during each Offering
Period.
"EXERCISE PERIOD" means each period commencing on June 1 and terminating
on the immediately succeeding November 30 or commencing on December 1
and terminating on the immediately succeeding May 31.
"EXERCISE PRICE" means the price per share of shares offered in a given
Offering Period determined as provided in Section 10 below.
"FAIR MARKET VALUE" means, with respect to a share of Common Stock as of
any date, the last sale price of such Common Stock on the NASDAQ-NMS on
such date, as reported in the Wall Street Journal. In the event that
such price is not available for an Enrollment Date or an Exercise Date,
the Fair Market Value of a share of Common Stock on such date shall be
the last sale price of a share of the Common Stock on the NASDAQ-NMS on
the last business day prior to such date or such other amount as may be
determined by the Committee by any fair and reasonable means.
"NASDAQ-NMS" means the National Association of Securities Dealers, Inc.
Automated Quotation National Market System.
"OFFERING PERIOD" means a period of twelve (12) months during which an
option granted pursuant to the Plan may be exercised. A new Offering
Period shall begin on each June 1 and December 1.
"PARTICIPANT" means an Eligible Employee who has elected to participate
in the Plan by filing an enrollment agreement with the Company, as
provided in Section 7 below.
"PARTICIPATING SUBSIDIARY" means any Subsidiary other than a Subsidiary
excluded from participating in the Plan by the Committee, in its sole
discretion.
"PLAN" means this Mylex Corporation 1995 Employee Stock Purchase Plan.
"SUBSIDIARY" means any corporation, domestic or foreign, of which the
Company owns, directly or indirectly, not less than 50% of the total
combined voting power of all classes of stock or other equity interests
and that otherwise qualifies as a "subsidiary corporation" within the
meaning of Section 424(f) of the Code or any successor thereto.
"1934 ACT" means the Securities Exchange Act of 1934, as amended.
2. PURPOSE OF THE PLAN
The purpose of the Plan is to provide present and future employees of the
Company and its Participating Subsidiaries an incentive in the performance of
their services by giving them an opportunity to acquire a proprietary interest
(or increase an existing proprietary interest) in the Company through the
purchase of Common Stock and to profit from increases in the value of the Common
Stock. It is the intention of the Company that the Plan qualify as an "employee
stock purchase plan" under Section 423 of the Code. Accordingly, the provisions
of the Plan shall be administered, interpreted and construed in a manner
consistent with the requirements of that section of the Code.
3. SHARES RESERVED FOR THE PLAN
There shall be reserved for issuance and purchase by Employees under the
Plan an aggregate of 300,000 shares of Common Stock, subject to adjustment as
provided in Section 15 below. Shares of Common Stock, subject to the Plan may be
newly issued shares or shares reacquired in private transactions or open market
purchases. If and to the extent that any right to purchase reserved shares shall
not be exercised by any Employee for any reason or if such right to purchase
shall terminate as provided herein, shares that have not been so purchased
hereunder shall again become available for the purposes of the Plan unless the
Plan shall have been terminated, but all shares sold under the Plan, regardless
of source, shall be counted against the limitation set forth above.
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<PAGE>
4. ADMINISTRATION OF THE PLAN
(a) The Plan shall be administered by a Committee appointed by, and which
shall serve at the pleasure of, the Board. However, the Board may elect to
function as the Committee. The Committee shall consist of not less than two
members of the Board who are not officers or employees of the Company or of any
of its Subsidiaries and who are disinterested persons within the terms of Rule
16b-3 promulgated under the 1934 Act. The Committee shall have authority to
interpret the Plan, to prescribe, amend and rescind rules and regulations
relating to the Plan, and to make all determinations necessary or advisable for
the administration of the Plan, all of which actions and determinations shall be
final, conclusive and binding on all persons.
(b) The Committee may request advice or assistance or employ such other
persons as it in its absolute discretion deems necessary or appropriate for the
proper administration of the Plan, including, without limitation, employing a
brokerage firm, bank or other financial institution to assist in the purchase of
shares hereunder, delivery of reports or other administrative aspects of the
Plan.
5. ELIGIBILITY TO PARTICIPATE IN THE PLAN
Subject to the provisions of the Plan and any limitations imposed by any
future amendments to Section 423(b) of the Code (or successor provisions), any
Employee who, as of an Enrollment Date, has had ninety (90) days of Continuous
Employment (or such lesser period as may be approved by the Committee from time
to time) with the Company or a Participating Subsidiary (after it becomes a
Participating Subsidiary) shall be eligible to participate in the Plan for the
Offering Period beginning on that Enrollment Date. In the event a Participant
sells any shares of Common Stock acquired under the Plan within one hundred and
eighty (180) days of acquiring such shares, such Participant shall be ineligible
to participate in the Plan during the Exercise Period immediately succeeding
such sale.
6. OFFERING PERIODS
Shares shall be available for purchase under the Plan during consecutive
Offering Periods, with a new Offering Period commencing on each June 1 and
December 1 during the term of the Plan. The first such Offering Period shall
commence on December 1, 1995, or as otherwise determined by the Committee. The
Committee shall have the power to change the duration of the Offering Periods,
after the first Offering Period, from time to time, without shareholder approval
if such change is announced to all Eligible Employees at least fifteen (15) days
prior to the scheduled beginning of the first Offering Period to be so affected.
7. ELECTION TO PARTICIPATE IN THE PLAN
Each Eligible Employee may elect to participate in the Plan with respect to
an Offering Period by completing an enrollment agreement in the form provided by
the Company and filing such enrollment agreement with the Company prior to the
applicable Enrollment Date, unless another time for filing the enrollment form
with respect to a given Offering Period is set by the Committee. An Eligible
Employee may participate with respect to an Offering Period only if, as of the
Enrollment Date of such Offering Period, such Employee is not participating in
any prior Offering Period which is continuing at the time of such proposed
enrollment.
All Participant purchases pursuant to the Plan shall be made only by the
proceeds of payroll deductions. Payroll deductions for a Participant shall
commence on the first payroll date following his or her Enrollment Date and
shall end on the last payroll date in the applicable Offering Period, unless
sooner terminated by the Participant as provided in Section 12 below.
Unless an Eligible Employee elects otherwise prior to the Enrollment Date
for any Offering Period by submitting to the Company a form provided by the
Company for such purpose, such Eligible Employee, if he or she is participating
in the immediately preceding Offering Period (the "Prior Offering Period") as of
such Enrollment Date, shall be deemed to have (i) elected to participate in such
Offering Period, and (ii) authorized the same payroll deduction for such
Offering Period as was in effect for such Eligible Employee, as of such
Enrollment Date, for the Prior Offering Period.
A-3
<PAGE>
The Committee, in its discretion, may terminate the participation of all
Participants in any Offering Period as of the last day of any Exercise Period (a
"Termination Date") and, upon the occurrence of such a termination, such
Participant shall be automatically enrolled, as described below, in the new
Offering Period commencing immediately following such Termination Date if the
Exercise Price determined as of the Enrollment Date for such new Offering Period
is lower than the Exercise Price determined as of the Enrollment Date of the
Offering Period for which the Participants' participation is being terminated.
In such event, each of such Participants shall be deemed for purposes of this
Plan to have (i) elected to participate in such new Offering Period, and (ii)
authorized the same payroll deduction for such new Offering Period as was in
effect for such Participant immediately prior to the Termination Date.
8. PAYROLL DEDUCTIONS
At the time a Participant files the enrollment agreement with respect to an
Offering Period, the Participant shall authorize payroll deductions to be made
on each payroll date during the Offering Period in an amount of from 1% to 10%
of the Eligible Compensation which the Participant receives on such payroll
date. The amount of such payroll deductions shall be a whole percentage (i.e.,
1%, 2%, 3%, etc.) of the Participant's Eligible Compensation.
All payroll deductions made for a Participant shall be deposited in the
Company's general corporate account and shall be credited to the Participant's
account under the Plan. No interest shall accrue or be credited with respect to
the payroll deductions of a Participant under the Plan. A Participant may not
make any additional payments into such account. All payroll deductions received
or held by the Company under the Plan may be used by the Company for any
corporate purpose, and the Company shall not be obligated to segregate such
payroll deductions.
A Participant may discontinue participation in the Plan as provided in
Section 12 below. A Participant may at any time during an Offering Period (but
no more than one time during any calendar quarter) reduce or increase (subject
to the limitations of Section 8(a) above) the rate of his or her payroll
deductions by completing and filing with the Company a change notice in the form
provided by the Company. Any such reduction in the rate of a Participant's
payroll deductions shall be effective as of the pay period specified by the
Participant in the Participant's change notice, but in no event sooner than the
first pay period ending at least ten (10) days after the Participant files the
change notice with the Company. Any such increase in the rate of Participant's
payroll deductions shall be effective as of the first date of the next Exercise
Period within such Offering Period.
9. GRANT OF OPTIONS
On the Enrollment Date of each Offering Period, subject to the limitations
set forth in Sections 3 and 9(b) hereof, each Eligible Employee shall be granted
an option to purchase on each Exercise Date during such Offering Period (at the
Exercise Price as of such Exercise Date determined as provided in Section 10
below) up to a number of shares of the Common Stock determined by dividing such
Employee's payroll deductions accumulated during the Exercise Period ending on
such Exercise Date by the Exercise Price (as determined in accordance with
Section 10 below), provided that the number of shares subject to the option for
each Exercise Period shall not exceed 500 (subject to the adjustment as provided
in Section 15 below).
Notwithstanding any provision of the Plan to the contrary, no Employee shall
be granted an option under the Plan (i) if, immediately after the grant, such
Employee (or any other person whose stock would be attributed to such Employee
pursuant to Section 424(d) of the Code) would own stock and/or hold outstanding
options to purchase stock possessing 5% or more of the total combined voting
power or value of all classes of stock of the Company or of any Subsidiary of
the Company, or (ii) which permits such Employee's rights to purchase Common
Stock under all employee stock purchase plans of the Company and its
Subsidiaries, including, without limitation, this Plan, to accrue at a rate
which exceeds $25,000 of the Fair Market Value of such stock (determined at the
time such option is granted) for each calendar year in which such option is
outstanding at any time.
A-4
<PAGE>
10. EXERCISE PRICE
The Exercise Price of each of the shares in each Offering Period shall be
the lower of (a) 85% of the Fair Market Value of a share of the Common Stock on
the applicable Enrollment Date, or (b) 85% of the Fair Market Value of a share
of the Common Stock on the applicable Exercise Date.
11. EXERCISE OF OPTIONS
Unless a Participant withdraws from the Plan as provided in Section 12
below, the Participant's option for the purchase of shares of Common Stock will
be exercised automatically on each Exercise Date of each Offering Period, and
the maximum number of full shares of Common Stock subject to such option will be
purchased for the Participant, at the applicable Exercise Price, with the
accumulated payroll deductions in the Participant's account. Any amount
remaining in the Participant's account after an Exercise Date shall be held in
the account until the next Exercise Date in such Offering Period, unless (a) the
Exercise Date is the last day of such Offering Period, in which event any such
amount remaining after the end of the Offering Period shall be refunded to the
Participant within fifteen (15) days after such Exercise Date, or (b) the Plan
has terminated with such Exercise Date as provided in Section 17 below, in which
event any such amount remaining after the pro rata allocation contemplated by
Section 17 below shall be refunded to the Participant within fifteen (15) days
after such termination or Exercise Date.
12. WITHDRAWAL AND TERMINATION OF EMPLOYMENT
A Participant may withdraw all, but not less than all, of the payroll
deductions credited to the Participant's account under the Plan at any time by
giving written notice to the Company on a form provided by the Company for such
purpose. Upon the receipt of such notice of withdrawal from a Participant, all
of such Participant's payroll deductions credited to such Participant's account
will be paid to him or her within fifteen (15) days after receipt of such notice
of withdrawal, such Participant's participation in the Plan will be
automatically terminated, and no further payroll deductions for the purchase of
shares by such Participant will be made. Payroll deductions will not resume on
behalf of a Participant who has withdrawn from the Plan unless a new enrollment
agreement is delivered to the Company in accordance with Section 7(a) above and,
in any event, may not resume during the Offering Period in which such withdrawal
occurs.
Upon termination of a Participant's employment with the Company and/or its
Participating Subsidiaries for any reason, including, without limitation,
retirement or death, prior to the Exercise Date of an Offering Period, the
payroll deductions credited to such Participant's account will be returned to
such Participant or, in the case of death, to such Participant's estate, within
fifteen (15) days after the date of such termination, and such Participant's
options to purchase shares under the Plan will be automatically terminated as of
such date.
In the event an Employee fails to maintain Continuous Employment for at
least thirty (30) hours per week during an Offering Period in which such
Employee is a Participant, such Employee will be deemed to have elected to
withdraw from the Plan, the payroll deductions credited to such Employee's
account will be returned to the Employee within thirty (30) days after the last
day of the week in which such Employee failed to work at least thirty (30)
hours, and the Employee's options to purchase shares under the Plan will be
terminated as of such date.
A Participant's withdrawal from an Offering Period will not have any effect
upon such Participant's eligibility to participate in any succeeding Offering
Period or in any other stock purchase or other benefit plan adopted by the
Company.
A Participant who is also an officer or director of the Company subject to
Section 16 of the 1934 Act, and who is deemed to "cease participation" in the
Plan within the meaning of Rule 16b-3 promulgated under the 1934 Act, as amended
from time to time, or any successor rule or regulation, as a consequence of his
or her withdrawal from the Plan pursuant to Section 12(a) above, shall not again
participate in the Plan for at least six (6) months after the date of such
withdrawal, subject to the requirements of Section 7 above.
A-5
<PAGE>
13. TRANSFERABILITY
Options to purchase Common Stock granted under the Plan are not transferable
by a Participant other than by will or the laws of descent and distribution and
are exercisable during a Participant's lifetime only by the Participant.
14. REPORTS
Individual accounts will be maintained for each Participant in the Plan.
Statements of account, as of each Exercise Date, will be given to participating
Employees semi-annually within thirty (30) days after such Exercise Date. Each
statement will set forth the amounts of payroll deductions, the per share
purchase price, the number of shares purchased and the remaining cash balance,
if any, as of the applicable Exercise Date.
15. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
If the outstanding shares of Common Stock are increased or decreased, or are
changed into or are exchanged for a different number or kind of shares, as a
result of one or more reorganizations, restructurings, recapitalizations,
reclassifications, stock splits, reverse stock splits, stock dividends or the
like, upon authorization of the Committee, appropriate adjustments shall be made
in the number and/or kind of shares, and the per-share option price thereof,
which may be issued to any Participant upon exercise of options granted under
the Plan. No fractional share of stock shall be issued under the Plan pursuant
to any adjustment authorized under the provisions of this Section 15.
In the event of the sale, merger, dissolution or liquidation of the Company
or a sale of all or substantially all of the Company's assets, any then current
Offering Periods and Exercise Periods will terminate immediately prior to the
date on which such proposed action is to be consummated, unless otherwise
determined by the Committee. Upon any such termination, unless otherwise
determined by the Committee, all options to purchase shares will be exercised
automatically, on such date (which shall thus be deemed to constitute an
Exercise Date), to purchase the maximum number of full shares that may be
purchased at the applicable Exercise Price with each Participant's accumulated
payroll deductions.
16. AMENDMENT OF THE PLAN
The Board may at any time, or from time to time, amend the Plan in any
respect; provided, however, that the Plan may not be amended in any way that
will cause rights issued under the Plan to fail to meet the requirements for
employee stock purchase plans provided in Section 423 of the Code or any
successor thereto, including, without limitation, as result of the failure to
obtain shareholder approval of such amendment, if required.
17. TERMINATION OF THE PLAN
The Plan and all rights of Participants hereunder shall terminate on the
earlier of:
the Exercise Date that Participants become entitled to purchase a number
of shares greater than the number of reserved shares remaining available for
purchase under the Plan; or
November 30, 2005, unless sooner terminated by the Board at any time in
its discretion.
In the event that the Plan terminates under circumstances described in
Section 17(a) above, reserved shares remaining as of the termination date shall
be sold to Participants pro rata, based on the number of shares that each of the
Participants is entitled to purchase as of such termination.
18. NOTICES
All notices or other communications by a Participant to the Company under or
in connection with the Plan shall be deemed to have been duly given when
received in the form specified by the Company at the location, and by the
person, designated by the Company for the receipt thereof. All notices or other
communications by the Company to a Participant under or in connection with the
Plan shall be
A-6
<PAGE>
deemed to have been duly given when delivered personally to such Participant or
two (2) business days after deposit in the U.S. mail, addressed to such
Participant at the last address for such Participant provided in writing to the
Company.
19. SHAREHOLDER APPROVAL
Continuance of the Plan shall be subject to approval by the Company within
twelve (12) months before or after the date the Plan is adopted by the Board. If
such shareholder approval is obtained at a duly held shareholders' meeting, it
may be obtained by the affirmative vote of the holders of a majority of the
outstanding shares of the Company present, or represented by proxy, at such
meeting and entitled to vote thereon.
20. CONDITIONS UPON ISSUANCE OF SHARES
The Plan, the grant and exercise of options to purchase shares of Common
Stock under the Plan, and the Company's obligation to sell and deliver shares
upon the exercise of options to purchase shares shall be subject to all
applicable federal, state and foreign laws, rules and regulations, and to such
approvals by any regulatory or governmental agency as may, in the opinion of
counsel for the Company, be required. In addition, no option may be exercised
unless (i) a registration statement under the Securities Act of 1933, as
amended, shall at the time of exercise of the option be in effect with respect
to the shares issuable under exercise of the option, or (ii) in the opinion of
counsel to the Company, the shares issuable upon exercise of the option may be
issued in accordance with the terms of an applicable exemption from the
registration requirements of such act. As a condition to the exercise of an
option, the Company may require the Participant to satisfy any qualifications
that may be necessary or appropriate, to evidence compliance with any applicable
law or regulation, and to make any representations and warranties with respect
thereto as may be requested by the Company.
The Company may make such provisions as it deems appropriate for withholding
by the Company pursuant to federal or state income tax laws of such amounts as
the Company determines it is required to withhold in connection with the
purchase or sale by a Participant of any Common Stock acquired pursuant to the
Plan. The Company may require a Participant to satisfy any relevant tax
requirements before authorizing any issuance of Common Stock to such
Participant.
21. EXPENSES OF THE PLAN
All costs and expenses incurred in administering the Plan shall be paid by
the Company, except that any stamp duties or transfer taxes applicable to
participation in the Plan may be charged to the account of such Participant by
the Company. Any brokerage fees for the purchase or sale of shares by a
Participant shall be borne by the Participant.
22. NO EMPLOYMENT RIGHTS
The Plan does not, directly or indirectly, create any right for the benefit
of any employee or class of employees to purchase any shares under the Plan
except pursuant to the terms of the Plan, or create in any employee or class of
employees any right with respect to continuation of employment by the Company.
The Plan shall not be deemed to interfere in any way with the Company's right to
terminate, or otherwise modify, an employee's employment at any time.
23. EFFECT OF THE PLAN
The provisions of the Plan shall, in accordance with its terms, be binding
upon, and inure to the benefit of, all successors of each Participant,
including, without limitation, such Participant's estate and the executors,
administrators or trustees thereof, heirs and legatees, and any receiver,
trustee in bankruptcy or representative of creditors of such employee.
24. APPLICABLE LAW
The laws of the State of California shall govern all matters relating to
this Plan except to the extent (if any) superseded by the laws of the United
States.
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<PAGE>
MYLEX CORPORATION
PROXY FOR 1996 ANNUAL MEETING OF SHAREHOLDERS
------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of MYLEX CORPORATION, a Florida corporation,
hereby acknowledges receipt of the Notice of Annual Meeting of Shareholders and
Proxy Statement, each dated March 22, 1996, and hereby appoints Al Montross and
Colleen Gray, or either of them, with full power of substitution to vote and
otherwise represent all of the shares registered in the name of the undersigned
at the 1996 Annual Meeting of Shareholders of MYLEX CORPORATION to be held on
April 30, 1996, at 2:00 p.m., local time, at 34551 Ardenwood Blvd., Fremont,
California, 94555, and at any adjournment or adjournments thereof, with the same
effect as if the undersigned were present and voting such shares, on the matters
set forth below:
<TABLE>
<S> <C> <C>
1. Election of directors. FOR all nominees listed below WITHHOLD AUTHORITY to vote
(except as marked to the for all nominees listed below
contrary below) / / / /
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(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A
LINE THROUGH THAT NOMINEE'S NAME IN THE LIST BELOW.)
Al Montross, Dr. Inder M. Singh, Dr. M. Yaqub Mirza, Ismael Dudhia, Richard
Love, Stephen McKenzie
2. To amend the Company's Articles of Incorporation to increase its authorized
shares of Common Stock from 25,000,000 to 40,000,000 shares.
FOR / / AGAINST / / ABSTAIN / /
3. To adopt the Company's 1995 Employee Stock Purchase Plan covering 300,000
shares of Common Stock.
FOR / / AGAINST / / ABSTAIN / /
4. To change the Company's state of incorporation from Florida to Delaware by
merging the Company with and into its wholly-owned subsidiary.
FOR / / AGAINST / / ABSTAIN / /
5. To amend the Company's 1993 Stock Option Plan to increase the number of
shares of Common Stock available thereunder by 850,000 shares.
FOR / / AGAINST / / ABSTAIN / /
6. To ratify the appointment of KPMG Peat Marwick LLP as independent public
accountants of the Company for the fiscal year ending December 31, 1996.
FOR / / AGAINST / / ABSTAIN / /
7. To transact such other business as may properly come before the meeting or
any adjournments thereof.
FOR / / AGAINST / / ABSTAIN / /
(CONTINUED AND TO BE SIGNED ON OTHER SIDE)
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(CONTINUED FROM OTHER SIDE)
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE
SPECIFICATION MADE. IF NO SPECIFICATION IS MADE, THE SHARES REPRESENTED BY THIS
PROXY WILL BE VOTED FOR EACH OF THE ABOVE NOMINEES AND PROPOSALS, AND FOR SUCH
OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING, AS THE PROXY HOLDERS DEEM
ADVISABLE.
_______________________________
(Name typed or printed)
_______________________________
(Signature)
_______________________________
(Title, if appropriate)
Date: ___________________, 1996
I plan to attend the
meeting: Yes / / No / /
Please sign exactly as your
name appears on your stock
certificate. If such stock is
held by joint tenants, both
persons should sign. When
signing as attorney, executor,
administrator, trustee or
guardian, please note your
title as such. If the stock is
registered in the name of a
corporation, please sign in the
corporation's name by the
president or any other
authorized officer. If the
stock is registered in the name
of a partnership, please sign
in the partnership's name by an
authorized person.
TO ASSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, PLEASE MARK, SIGN AND DATE
THIS PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
