MAI SYSTEMS CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
May 20, 1997
TO ALL STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the 1997 Annual Meeting of Stockholders of MAI
Systems Corporation (the "Company" or "MAI"), a Delaware corporation, will be
held at The Century Plaza Hotel & Towers, 2025 Avenue of the Stars, Los Angeles,
California, on Tuesday, May 20, 1997 at 10:00 a.m., for the following purposes:
1. To electfour directors to serve for the ensuing year and until
their successors are elected.
2. To approve an amendment to the Company's Amended and Restated Certificate
of Incorporation to authorize the issuance of up to 1,000,000 shares of
$0.01 par value Preferred Stock.
3. To approve an amendment to the 1993 Employee Stock Option Plan (the
"Plan") in order to increase the number of shares of Common Stock reserved
for issuance thereunder by 1,250,000 shares to an aggregate of 1,250,000
shares, to permit the grant of options at less than fair market value on
the date of grant only when expressly granted in lieu of a reasonable
amount of salary or cash bonus and to limit the repricing of out-of-the
money stock options.
4. To transact such other business as may properly come before the meeting
and any adjournment(s) thereof.
Only stockholders of record at the close of business on April 8, 1997 are
entitled to notice of and to vote at the Annual Meeting.
All stockholders are cordially invited to attend the meeting in person.
However, to ensure your representation at the meeting, you are urged to mark,
sign and return the enclosed Proxy as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any stockholder attending
the meeting may vote in person, even though he or she has returned a Proxy.
Irvine, California
April __, 1997
Stanley P. Witkow
Secretary
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YOUR VOTE IS IMPORTANT
In order to ensure your representation at the meeting, you are requested to
complete, sign and date the enclosed proxy as promptly as possible and return it
in the enclosed envelope.
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<PAGE>
MAI SYSTEMS CORPORATION
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
General
The enclosed Proxy is solicited on behalf of MAI Systems Corporation ("MAI"
or the "Company") for use at the 1997 Annual Meeting of Stockholders ("Annual
Meeting") to be held Tuesday, May 20, 1997, at 10:00 a.m., local time, and at
any adjournment(s) or postponement(s) thereof, for the purposes set forth herein
and in the accompanying Notice of Annual Meeting of Stockholders. The Annual
Meeting will be held at The Century Plaza Hotel & Towers, 2025 Avenue of the
Stars, Los Angeles, California. The Company's principal executive offices are
located at 9601 Jeronimo Road, Irvine, California 92618 and its main telephone
number is (714) 598-6000. These proxy solicitation materials were mailed on or
about April ___, 1997, to all stockholders entitled to vote at the Annual
Meeting.
Record Date and Outstanding Shares
Stockholders of record at the close of business on April 8, 1997 (the "Record
Date"), are entitled to notice of and to vote at the Annual Meeting. At the
Record Date, 8,643,776 shares of the Company's $0.01 par value Common Stock
("Common Stock"), were outstanding. The closing price on the American Stock
Exchange for the Common Stock on the Record Date, as reported in The Wall Street
Journal, was $5.75 per share. The Company was aware of the following beneficial
owners of more than 5% of its Common Stock as of the Record Date:
Number of Percentage
Name and Address Shares Of Class
Richard S. Ressler 1,414,791(1) 14.1%
c/o Orchard Capital Corporation
1999 Avenue of the Stars
Suite 1910
Los Angeles, California 90067
CPI Securities LP group (2) 1,705,500 16.9
CSA (3) 517,319 5.1
(1)Includes 675,000 shares of Common Stock which Mr. Ressler may purchase
pursuant to warrants which are exercisable in full at this time. See "Certain
Transactions with Management".
(2)CPI Securities L.P., Canpartners Incorporated, The Value Realization
Fund L.P., The Canyon Value Realization Fund (Cayman), Ltd., GRS Partners II,
Mitchell R. Julis, Joshua S. Young, Douglas Claman and Michael McCarthy, as a
group, beneficially own 1,705,000 shares of Common Stock, including 750,000
shares issuable upon exercise of warrants held by CPI Securities LP group. The
address of all of the above-referenced entities other than The Canyon Value
Realization Fund (Cayman) , Ltd. and GRS Partners II is 9665 Wilshire Boulevard,
Suite 200, Beverly Hills, California 90212; the addresses for The Canyon Value
Realization Fund (Cayman), Ltd. and GRS Partners are c/o MeesPierson (Cayman)
Limited, British American Center, Phase 3, Dr. Roy's Drive, Grand Cayman, B.W.I.
and c/o Grosvenor Capital Management, L.P., 333 West Wacker Drive, Suite 1600,
Chicago, Illinois 60606.
(3) The shares are held by Computer Systems Advisors (Private) Limited and
CSA Pte Ltd (collectively, "CSA"). CSA's address is 221 Henderson Road, 08-01
Henderson Building, Singapore 0315
Revocability of Proxies
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Company before the
Annual Meeting a written notice of revocation or a duly executed proxy bearing a
later date, or by attending the Annual Meeting and voting in person.
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<PAGE>
Voting and Solicitation
On all matters other than the election of directors, each share has one vote.
The cost of soliciting proxies will be borne by the Company. The Company has
retained the services of Georgeson & Company Inc. ("Georgeson") to aid in the
solicitation of proxies from brokers, bank nominees and other institutional
owners. The Company estimates that it will pay Georgeson a fee not to exceed
$5,000 for its services and will reimburse Georgeson for certain out-of-pocket
expenses estimated to be not more than $10,000. In addition, the Company may
reimburse brokerage firms and other persons representing beneficial owners of
shares for their expenses in forwarding solicitation materials to such
beneficial owners. Proxies may be solicited by certain of the Company's
directors, officers and regular employees, without additional compensation,
personally or by telephone or telegram.
Deadline for receipt of Stockholder Proposals
Proposals of stockholders of the Company that are intended to be presented by
such stockholders at the Company's 1998 Annual Meeting of Stockholders must be
received by the Company no later than January 15, 1998, in order to be
considered for possible inclusion in the proxy statement and form of proxy
relating to that meeting.
PROPOSAL I
ELECTION OF DIRECTORS
General
A board of four directors is to be elected at the Annual Meeting. Unless
otherwise instructed, the proxy holders will vote the proxies received by them
for the Company's four nominees named below, all of whom are currently directors
of the Company. In the event that any nominee of the Company is unable or
declines to serve as a director at the time of the Annual Meeting (neither of
which events is expected), the proxies will be voted for such nominee as shall
be designated by the current Board of Directors to fill the vacancy.
Vote Required
A quorum comprising the holders of the majority of the outstanding shares of
Common Stock on the Record Date must be present or represented by proxy for the
transaction of business at the Annual Meeting. Each share may vote for up to
four director-nominees. Votes may not be cumulated. If a quorum is present, the
four nominees receiving the highest number of votes will be elected to the Board
of Directors, whether or not such number of votes for any individual represents
a majority of the votes cast. Votes withheld and broker non-votes will be
counted for purposes of determining the presence or absence of a quorum but have
no other effect under Delaware law in the election of directors.
The term of office of each person elected as a director will continue until
the next Annual Meeting or until his successor has been elected and qualified.
Management recommends a vote "FOR" each of the nominees listed below.
Nominees
The names of the nominees, their ages at the Record Date and certain other
information about them are set forth below.
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<PAGE>
Name of Nominee Age Principal Occupation Director
Since
Richard S. Ressler 38 Chairman of the Board, MAI 1995
Systems Corporation; President
and Chief Executive Officer,
Orchard Capital Corporation,
an investment and management
consulting firm
George G. Bayz 43 Director, President and Chief 1995
Executive Officer, MAI Systems
Corporation
Alan A. Gleicher 44 Senior Vice President, Sales, 1995
Intuit Inc., a financial management
products computer software
company
Morton O. Schapiro 43 Dean, College of Letters, Arts 1995
and Sciences, University of
Southern California
There is no family relationship between any director and any executive
officer of the Company.
Richard S. Ressler was named President and Chief Executive Officer of the
Company in October 1994 and was elected to the Company's Board of Directors in
February 1995. He served as President until May 1995 and as Chief Executive
Officer until February 1997. In May 1995 he became Chairman of the Board of
Directors. Mr. Ressler is President and Chief Executive Officer of Orchard
Capital Corporation ("Orchard"), an investment and consulting firm which he
formed in January 1994 for the purpose of providing financial and operational
consulting services. From July 1988 until January 1, 1994, Mr. Ressler held
various executive positions at Brooke Group, Ltd. ("BGL") and BGL's predecessor
company, Brooke Partners, LP, and their various respective subsidiaries and
affiliates including Liggett Group, Inc., a tobacco products producer. From July
1990 to April 1993, he was a director, and from November 1990 to April 1993, he
was Executive Vice President, of BGL. He has been a director of New Valley
Corporation since August 1990. In March 1997, Mr. Ressler became President and
Chief Executive Officer of JFAX Communications, Inc., a telecommunications firm.
He is also a managing member of CIM Group LLC, a real estate investment,
development and management company.
George G. Bayz was elected President and Chief Executive Officer of the
Company in February 1997 and had been its President and Chief Operating Officer
since May 1995. He became a director in July 1995. He joined the Company in July
1994 as vice president, sales and marketing. From April 1993 until July 1994,
Mr. Bayz was a senior vice president of the Corum Group, Ltd., an investment
banking firm specializing in mergers and acquisitions of information technology
companies. From January 1992 to March 1993, he was acting president of Blue
Sheet, Inc., a start-up on-line information services provider.
Alan A. Gleicher was appointed to the Company's Board of Directors in July
1995. Since December 1993, he has been Vice President, Sales, and since March
1997, he has been Senior Vice President, Sales, of Intuit Inc., a developer and
marketer of financial management computer software products. From September 1990
until its December 1993 acquisition by Intuit, Mr. Gleicher was president of the
personal products division of ChipSoft, Inc.
Morton O. Schapiro was appointed to the Company's Board of Directors in July
1995. Since, July 1991, he has been a professor of Economics at the University
of Southern California, and since July 1994 he has served as the Dean of the
College of Letters, Arts and Sciences at the University of Southern California.
Since October 1992, Mr. Schapiro has been a director of The Griffin Funds
Incorporated, a management subsidiary of Home Savings of America.
Executive Officers
The name, age and title of each executive officer of the Company (other than
executive officers who are nominees for director set forth above), business
experience for at least the past five years and certain other information
concerning each such executive officer has been furnished by the executive
officer and is set forth below. Executive officers are elected by the Board of
Directors following the annual meeting of the Company's stockholders.
Name (Age) Title, Business Experience and Other Directorships
Lewis H. Stanton (42)
Executive Vice President, Chief Operating and Financial
Officer. Mr. Stanton joined the Company in February 1997. From
July 1996 until he joined the Company, Mr. Stanton was
president of Stanton & Associates, a consulting company and
from September 1996 to January 1997, he was chief executive
officer (acting) of Worldsite Networks, Inc., an internet
access provider. From September 1988 until July 1996, Mr.
Stanton was chief financial officer of Data Analysis, Inc.,
the parent company of Investor's Business Daily.
-3-
<PAGE>
Stanley P. Witkow (48)
Vice President, Corporate and Legal Affairs and Secretary. Mr.
Witkow has been Vice President, Corporate and Legal Affairs,
since September 1995. He joined the Company in July 1994 as
Vice President and General Counsel and Secretary. From March
1993 until its February 1994 sale to SoftKey International,
Inc., Mr. Witkow was General Counsel of WordStar International
Incorporated, a microcomputer software publisher. From
December 1991 to October 1992, Mr. Witkow was assistant to the
president of Communication Intelligence Corporation, a
developer of pen computer software including handwriting
recognition products.
Board Meetings and Committees
The Board of Directors held seven meetings during the year ended December
31, 1996 and conducted business by written consent. The Board of Directors has
an Audit Committee and a Compensation Committee. It does not have a Nominating
Committee.
The Audit Committee currently consists of Messrs. Schapiro (chairman),
Gleicher and Ressler. The Audit Committee held one meeting during 1996. The
Audit Committee recommends engagement of the Company's independent auditors and
is primarily responsible for approving the services performed by the Company's
independent auditors and reviewing and evaluating the Company's accounting
policies and its system of internal accounting controls.
The Compensation Committee currently consists of Messrs. Gleicher
(chairman), Ressler and Schapiro. The Compensation Committee met twice during
1996. The Compensation Committee reviews and approves the Company's executive
compensation policies.
During 1996, each incumbent director attended all of the meetings of the
Board of Directors and the committees of which they were members.
Director Compensation
The Company pays fees of $3,000 per calendar-year quarter to each
of its non-employee directors, and $1,000 for each Board or Committee meeting
which is attended in person or telephonically. Additionally, the Company
reimburses directors for their reasonable travel expenses to attend meetings.
The Company's Non-Employee Directors Stock Option Plan (the "Directors'
Plan") provides for the grant of nonstatutory stock options to non-employee
directors. Under the Directors' Plan, each non-employee director who is not the
holder of 5% or more of the outstanding shares of Common Stock is granted a
nonstatutory option to purchase 31,250 shares of Common Stock on the date of his
or her appointment to the Board. Thereafter, each non-employee director is
automatically granted a nonstatutory option to purchase 6,250 shares of Common
Stock on the date of each annual meeting of stockholders at which each such
non-employee director is re-elected, provided that on such date, he or she has
served on the Board of Directors for at least six months. Options granted
pursuant to the Directors' Option Plan vest as to 20% of the initial grant six
months following the date of grant and as to 20% on each successive term to
which the director is reelected to the Board. Subsequent grants vest, if at all,
on the director's reelection to the Board four years hence. The Directors Plan
provides that upon a change of control all options granted pursuant to the plan
shall become immediately exercisable in full. The Directors' Plan provides that
the exercise price of the options granted thereunder shall be equal to the fair
market value of the Common Stock on the date of grant of the option. Options
granted pursuant to the Directors' Plan have a term of ten years and options
granted pursuant to the Directors' Plan may be exercised only while the optionee
is a director of the Company or within one year after termination of service as
a director. No options were exercised pursuant to the Directors Option Plan in
1996.
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<PAGE>
Compensation Committee Interlocks and Insider Participation
The Compensation Committee currently consists of Messrs. Gleicher, Ressler
and Schapiro. The Company has no interlocking relationships or other
transactions involving any of its Compensation Committee members that are
required to be reported pursuant to applicable Securities and Exchange
Commission rules. One current officer of the Company, Richard S. Ressler, and no
former officers of the Company, serves on the Compensation Committee.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the beneficial ownership of Common Stock as of
the Record Date, by each director, by each of the executive officers named in
the Summary Compensation Table, and by all directors and executive officers as a
group.
<TABLE>
<CAPTION>
Number of Approximate
Name Shares Percentage
Beneficially Owned
Owned
<S> <C> <C> <C>
Richard S. Ressler (1).......... 1,414,791 14.1%
George G. Bayz (2).............. 77,583 *
Alan A. Gleicher (3)............ 18,750 *
Morton Schapiro (3)............. 18,750 *
Lewis H. Stanton ............... 0 *
W. Brian Kretzmer (4) 41,666 *
Stanley P. Witkow (4)........... 43,666 *
All current directors and
executive officers 1,615,206 16.0%
as a group (6 persons) (5)
</TABLE>
* Less than 1%
(1) Includes warrants to purchase 675,000 shares of Common Stock held by
Mr.Ressler which are exercisable by Mr. Ressler at or within 60 days of
the Record Date.
(2) Includes 74,583 shares issuable upon exercise of options held by Mr. Bayz
exercisable within 60 days of the Record Date.
(3) Includes 18,750 shares issuable upon exercise of options held by Messrs.
Gleicher and Schapiro within 60 days of the Record Date (assuming their
reelection to the Board of Directors).
(4) Includes 41,666 shares issuable upon exercise of options held by Messrs.
Kretzmer and Witkow within 60 days the Record Date.
(5) Includes 870,415 shares issuable upon exercise of options held by
directors and executive officers and warrants held by Mr. Ressler
exercisable at or within 60 days of the Record Date.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table shows, as to the Chief Executive Officer and as to each
of the other three executive officers during the last fiscal year, information
concerning all compensation paid for services to the Company in all capacities
during the last three fiscal years.
-5-
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term
Annual Compensation Compensation
Awards
Other
Annual Securities All Other
Compensation Underlying Compensation
Name and Principal Year Salary Bonus $)(1) ($) Options (#) ($)(2)
Position ($)
<S> <C> <C> <C> <C> <C> <C>
Richard S. Ressler(3) 1996 $258,000 $1,187,500(4) $0 $0 $0
Chairman of the 1995 240,000 0 0 0 0
Board 1994 94,601 N/A 0 625,000(5) 0
George G. Bayz 1996 216,346 0 0 78,750 0
President and 1995 172,000 44,200 0 93,750 180
Chief Operating 1994 76,923 0 0 0 0
Officer
Lewis H. Stanton 1996 N/A N/A N/A N/A N/A
Executive Vice 1995 N/A N/A N/A N/A N/A
President and 1994 N/A N/A N/A N/A N/A
Chief Operating
and Financial
Officer
W. Brian Kretzmer 1996 185,077 0 0 15,000 0
(Former) Vice 1995 172,000 23,580 0 62,500 0
President, Chief 1994 172,000 0 0 0 0
Financial Officer;
(current) Vice
President,
Business
Development
Stanley P. Witkow 1996 172,000 0 0 15,000 0
Vice President, 1995 172,000 24,000 0 62,500 180
Corp-orate and 1994 76,923 0 0 0 0
Legal Affairs
</TABLE>
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(1) Amounts stated include bonus amounts earned in fiscal 1995 by executive
officers and paid in fiscal 1996.
(2) Amounts stated reflect contributions made by the Company to such executive
officer's account under the Company's 401(k) Plan.
(3) Mr. Ressler is an employee of Orchard Capital Corporation, which provides
his services through a consulting agreement between it and the Company.
(4) A bonus in the amount of $1,187,500 which was earned January 2, 1996, when
the conditions precedent to the award of such bonus were satisfied.
(5) Warrant issued to Orchard Capital Corporation (and immediately transferred
to Mr. Ressler) in connection with the agreement pursuant to which it
supplies the services of Mr. Ressler. See "Certain Transactions with
Management".
Options Granted in Last Fiscal Year
The following table sets forth certain information regarding grants of stock
options made during the fiscal year ended December 31, 1996 to the Company's
executive officers named in the Summary Compensation Table:
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants
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% of
Number Total Potential
of Options Realizable Value
Securities Granted at Assumed Annual
Underlying to Rates of Stock
Options Employees Price Appreciation
in Exercise for Option Term(1)
Name Granted Fiscal Price Expiration 5%($) 10%($)
#(2) Year ($/sh)(3)(4) Date
<S> <C> <C> <C> <C> <C> <C>
Richard S. Ressler None N/A N/A N/A N/A N/A
George G. Bayz.... 78,750 20.7% $9.75 5/21/06 $482,873 $1,223,695
Lewis H. Stanton.. None N/A N/A N/A N/A N/A
W. Brian Kretzmer 15,000 3.9 9.75 5/21/06 91,975 233,085
Stanley P. Witkow. 15,000 3.9 9.75 5/21/06 91,975 233,085
----------
</TABLE>
(1)Potential realizable value is based on the assumption that the Common Stock
appreciates at the annual rate shown (compounded annually) from the date of
grant until the expiration of the option term. These numbers are calculated
based on the requirements promulgated by the Securities and Exchange
Commission and do not represent an estimate by the Company of future stock
price growth.
(2)All stock options granted have ten year terms and are generally exercisable
(a) with respect to 33-1/3% of the shares covered thereby on the anniversary
of the date of grant, with full vesting occurring three years following the
date of grant, or (b) as to 100% of the grant on the third anniversary of the
date of grant. See "--Employment Contracts and Change of Control Agreements"
for provisions regarding acceleration of the vesting of options under certain
circumstances.
(3)Options were granted at an exercise price equal to the fair market value of
the NASDAQ Electronic Bulletin Board and, after the Common Stock was listed
on the American Stock Exchange (the "AMEX"), on the AMEX.
(4)The exercise price and tax withholding obligations may be paid in cash and,
subject to certain conditions or restrictions, by delivery of already-owned
shares or pursuant to a cashless exercise procedure under which the optionee
provides irrevocable instructions to a brokerage firm to sell the purchased
shares and to remit to the Company, out of the sale proceeds, an amount equal
to the exercise price plus all applicable withholding taxes.
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<PAGE>
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option
Values
No options were exercised by any of the executive officers during the year
ended December 31, 1996. The value of the options held at the end of the year
are set forth in the following table:
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED STOCK OPTIONS AT END OF YEAR
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Name Options at Fiscal Year-End at Fiscal Year-End
(#) ($)(1)
Exercisable/Unexercisable Exercisable/Unexercisable
<S> <C> <C> <C> <C>
Richard S. Ressler (2).. 625,000 0 $2,914,063 N/A
George G. Bayz.......... 31,249 141,251 143,615 $ 287,244
Lewis H. Stanton........ N/A N/A N/A N/A
W. Brian Kretzmer....... 20,833 56,667 102,342 204,689
Stanley P. Witkow....... 20,833 56,667 102,342 204,689
</TABLE>
(1) Market value of underlying securities at fiscal year end ($6.52 per share),
minus the exercise price.
(2) Represents Mr. Ressler's warrant to purchase up to 625,000 shares of
Common Stock at $1.90 per share
Employment Contracts and Change of Control Arrangements
The Company currently has no employment contracts with any of the Company's
executive officers named in the Summary Compensation Table above (but it does
have a consulting agreement with Orchard Capital Corporation which supplies the
services of Richard S. Ressler, its Chairman and Chief Executive Officer. See
"--Certain Transactions with Management"). The Company's 1993 Employee Stock
Option Plan provides that upon a change of control all options granted pursuant
to the plan shall become immediately exercisable in full.
Certain Transactions with Management
The services of Richard S. Ressler, Chairman of the Company, are provided
pursuant to an agreement with Orchard Capital Corporation ("Orchard"), which is
his employer. Pursuant to that agreement (which expires in August 1997), Orchard
agreed to provide Mr. Ressler's services on a non-exclusive basis. Orchard is
paid $24,000 per month during the term of the agreement. Additionally, Orchard
has been granted warrants (which Orchard immediately transferred to Mr. Ressler)
to purchase up to 625,000 and 50,000 shares of the Company's Common Stock at
$1.90 and $7.50 per share, respectively. The warrants are currently exercisable
as to all shares. The Warrant to purchase 625,000 shares expires August 14, 1999
and the Warrant to purchase 50,000 shares expires March 5, 2002.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON
EXECUTIVE COMPENSATION
General
From April 12, 1993 to January 27, 1994, the Company conducted its
corporate governance and business affairs, including matters relating to
executive compensation, subject to the supervision and approval of the United
States Bankruptcy Court in connection with the Company's bankruptcy proceedings
under Chapter 11 of the Bankruptcy Act. The policy of the Company regarding the
compensation of its executive officers, which was disclosed in the First Amended
Disclosure Statement dated as of October 19, 1993, was to maintain a total
compensation program which would retain the services of key executives and (a)
assure the availability of their skills for the benefit of the Company, (b)
secure to the Company freedom from competition by such persons within reasonable
and lawful limits and (c) provide appropriate base compensation, benefits and
financial incentives through bonus, severance and other employment-related
programs.
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<PAGE>
Since emerging from bankruptcy proceedings, the Compensation Committee of the
Board of Directors recommends, subject to the Board's approval, executive
compensation, including the compensation of the Chairman and the Chief Executive
Officer. The Compensation Committee or the Board of Directors determines and
approves stock option grants for all employees, including the Chief Executive
Officer. The Committee currently comprises two independent, non-employee
directors, and one director, whose services are provided pursuant to a
consulting agreement with his employer (see "Executive Compensation--Certain
Transactions with Management").
Compensation Philosophy
The Company operates in the highly competitive and rapidly changing high
technology industry. The goals of the Company's compensation program are to
align compensation with the Company's overall business objectives and
performance, to foster teamwork and to enable the Company to attract, retain and
reward employees who contribute to its long-term success. The Committee also
seeks to establish compensation policies that allow the Company flexibility to
respond to changes in its business environment.
Compensation Components
Compensation for the Company's executive officers generally consists of
salary, annual incentive and stock option awards. The Committee assesses past
performance and anticipated future contribution of each executive officer in
establishing the total amount and mix of each element of compensation.
Salary. The salaries of the executive officers, other than the Chairman,
are determined annually by the Compensation Committee with reference to salaries
paid to executives with similar responsibilities at comparable companies,
primarily in the high technology industry. The peer group for each executive
officer is composed of executives whose responsibilities are similar in scope
and content. The Company seeks to set executive compensation levels that are
competitive with the average levels of peer group compensation.
Annual Incentive. The Committee annually reviews and approves an executive
compensation plan. A target, expressed as a percentage of salary, is established
for each officer, based on the scope of his or her responsibility. For 1996, the
targets for executive officers ranged from 30% to 50% of salary. The actual
payment is computed as a percentage of that target based on the Company's
performance in achieving specified objectives, and the individual performance of
executives. No incentive compensation was paid (or accrued) pursuant to the plan
based on 1996 performance.
Stock Options. Stock option awards are designed to align the interests of
executives with the long-term interests of the stockholders. The Committee
approves option grants subject to vesting periods (usually over a three-year
period or as to 100% of the grant on the third anniversary of the grant) to
retain executives and encourage sustained contributions. The exercise price of
options is the market price on the date of grant.
The Company is subject to Section 162(m) of the Internal Revenue Code,
adopted in 1993, which limits the deductibility of certain compensation payments
to its officers. The Company does not have a policy requiring the Committee to
qualify all compensation for deductibility under this provision. The Company
does not currently have any non-deductible compensation plans. The Company
believes that any compensation expense incurred in connection with the exercise
of stock options granted under its 1993 Employee Stock Option Plan will continue
to be deductible as performance-based compensation.
Compensation of Chairman and Former Chief Executive Officer
Mr. Ressler's services as Chairman (and formerly as Chief Executive
Officer) have been provided pursuant to a consulting agreement dated August 15,
1994 (amended as of August 16, 1996 with Orchard Capital Corporation, Mr.
Ressler's employer. Pursuant to that agreement, Orchard was paid $20,000 per
month up through and including August 15, 1996 and is currently paid $24,000 per
month, for Mr. Ressler's services. Finally, in March 1997, Orchard was issued a
warrant to purchase up to 50,000 shares of Common Stock at $7.50 (which it
immediately transferred to Mr. Ressler). The warrant is fully exercisable.
-8-
<PAGE>
In evaluating the compensation paid to Orchard pursuant to the consulting
agreement and the amendment thereto, the Compensation Committee commissioned an
independent compensation consulting organization which considered, among other
things, compensation for senior executives in turn-around companies and
concluded that the compensation arrangements were fair and reasonable and in the
best interests of the Company.
Other than reimbursement for reasonable expenses incurred in connection
with the services it renders to the Company, neither Orchard nor Mr. Ressler
receive any other compensation from the Company and Mr. Ressler does not
participate in the Company's stock option plans.
Respectfully submitted,
Alan A. Gleicher, Chairman
Richard S. Ressler
Morton O. Schapiro
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 as amended (the
"Exchange Act") requires the Company's officers (as defined in Rule 16a-1(f),
directors and persons who own more than ten percent of a registered class of the
Company's equity securities to file reports of ownership and changes in
ownership with the Securities and Exchange Commission ("SEC"). Such persons are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file. Based solely on its review of the copies of such forms
received by it and written representations from certain reporting persons that
they have complied with the relevant filing requirements, the Company believes
that all filing requirements applicable to its officers, directors and 10%
stockholders were complied with during the fiscal year ended December 31, 1996.
PERFORMANCE GRAPH
Set forth below is a line graph comparing the annual percentage change in the
cumulative return to the stockholders of the Company's Common Stock with the
cumulative return of the S&P 500 Index and the S&P Computer Systems Index for
the period commencing April 1, 1994 (the month during which the Company first
issued shares of its new Common Stock pursuant to its Chapter 11 Plan of
Reorganization) and ending December 31, 1996. The information contained in the
performance graph shall not be deemed "soliciting material" or to be "filed"
with the Securities and Exchange Commission, nor shall such information be
incorporated by reference into any future filing under the Securities Act of
1933 as amended (the "Securities Act") or Exchange Act, except to the extent
that the Company specifically incorporates it by reference into such filing. The
stock price performance on the following graph is not necessarily indicative of
future stock price performance.
Cumulative Total Return
---------------------------------
4/08/94 12/94 12/95 12/96
---------------------------------
MAI SYSTEMS CORPORATION NOW 100 1176 3971 3860
S & P 500 I500 100 105 145 178
S&P COMPUTERS ICSF 100 120 169 262
(Software & Services)
-9-
<PAGE>
* Assumes $100 invested on April 8, 1994 in stock or on March 31, 1994 in
the respective index--including reinvestment of dividends. Fiscal year ending
December 31.
PROPOSAL II
AMENDMENT TO AMENDED AND RESTATED CERTIFIFICATE OF INCORPORATION
General
The Company's Amended and Restated Certificate of Incorporation (the
"Certificate of Incorporation") does not currently authorize the issuance by
the Company of any shares of preferred stock. On March 6, 1997, the Board of
Directors approved a proposed amendment to the Company's Certificate of
Incorporation which, if approved by the stockholders, would create and
authorize 1,000,000 shares of preferred stock, $0.01 par value ("Preferred
Stock"), of the Company. The text of the proposed Articles Fourth and Fifth
to the Certificate of Incorporation is set out in Appendix A.
The proposed creation and authorization of Preferred Stock has been
recommended by the Board to assure that an adequate supply of authorized and
unissued shares of Preferred Stock is available for general corporate needs.
The availability of shares of Preferred Stock for issue without the delay and
expense of obtaining the approval of stockholders at a special meeting will
afford the Company greater flexibility in taking corporate action.
The newly authorized Preferred Stock may be used by the Company for any
proper corporate purpose. Such purposes might include, without limitation,
issuance as part or all of the consideration required to be paid by the
Company in the acquisition of other businesses or properties, or issuance in
public or private sales for cash as a means of obtaining additional capital
for use in the Company's business and operations. There are no transactions
presently under review by the Board which contemplate the issuance of
Preferred Stock by the Company.
If approved by the stockholders, the Preferred Stock will be available for
issue from time to time for such purposes and consideration as the Board may
approve and no further vote of the stockholders of the Company will be required,
except as required under the Delaware General Corporation Law or the rules of
any national securities exchange or quotation system, such as the American Stock
Exchange, on which shares of the Company are at the time listed or quoted.
-10-
<PAGE>
The Board would authorize the Company's Certificate of Incorporation, as
amended, without the necessity of further action or authorization by the
Company's stockholders, except as provided under the Delaware General
Corporation Law or the rules of any national securities exchange or quotation
system on which the shares of the Company are at the time listed or quoted, to
issue Preferred Stock from time to time in one or more series or classes, and to
fix by resolution the designations, relative rights, preferences and limitations
of each such series or class. Each series or class of Preferred Stock could, as
determined by the Board at the time of issuance, rank with respect to dividends,
sinking fund provisions and conversion, voting, redemption and liquidation
rights, senior to the Common Stock.
It is not possible to state the precise effects of the authorization of
shares of Preferred Stock upon the rights of the holders of the Company's Common
Stock until the Board determines the respective preferences, limitations and
relative rights of the holders of each class or series of the Preferred Stock.
However, such effects might include: (a) reduction of the amount otherwise
available for payment of dividends on the Common Stock; (b) restrictions on
dividends on the Common Stock; (c) dilution of the voting power of the Common
Stock to the extent that the Preferred Stock had voting rights; (d) conversion
rights of the Preferred Stock into Common Stock at such prices as the Board
determines, which could include issuance at below the fair market value or
original issue price of the Common Stock; and (e) the holders of Common Stock
not being entitled to share in the Company's assets upon liquidation or until
satisfaction of any liquidation preference granted to holders of the Preferred
Stock.
Although the Board would authorize the issuance of Preferred Stock based on
its judgment as to the best interests of the Company and its stockholders, the
issuance of authorized Preferred Stock could have the effect of diluting the
voting power per share and could have the effect of diluting the book value per
share of the outstanding Common Stock. In addition, the issuance of shares of
Preferred Stock could, in certain instances, render more difficult or discourage
a merger, tender offer or proxy contest and thus potentially have an
"anti-takeover" effect, especially if Preferred Stock were issued in response to
a potential takeover. In addition, additional issuances of authorized Preferred
Stock can be implemented, and have been implemented by some companies in recent
years, with voting or conversion privileges, intended to make acquisition of the
Company more difficult or more costly. Such an issuance would deter the types of
transactions that may be proposed or could discourage or limit the stockholders'
participation in certain types of transactions that might be proposed (such as a
tender offer), whether or not such transactions were favored by the majority of
the stockholders, and could enhance the ability of officers and directors to
retain their positions.
The affirmative vote of holders of a majority of the shares of Common Stock
outstanding and entitled to vote at the meeting is required to adopt the
proposed amendment to the Company's Certificate of Incorporation creating and
authorizing a class of Preferred Stock of the Company. If the amendment is not
approved by the stockholders, the Company will have no Preferred Stock
authorized. With respect to the proposal to amend the Company's Certificate of
Incorporation to create shares of Preferred Stock, all shares will be voted FOR
or AGAINST, or not voted, as specified on each proxy. If no choice is indicated,
a proxy will be voted FOR the proposal to amend the Company's Certificate of
Incorporation to create shares of Preferred Stock.
MANAGEMENT RECOMMENDS A VOTE "FOR" THE AMENDMENT OF THE AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION.
PROPOSAL III
AMENDMENTS TO 1993 EMPLOYEE STOCK OPTION PLAN
GENERAL
At the Annual Meeting, the stockholders are being asked to approve
an amendment to the Company's 1993 Employee Stock Option Plan (the "1993 Option
Plan"), in order to increase the number of shares reserved for issuance
thereunder to 1,250,000 shares of Common Stock, to limit the issuance of
non-qualified stock options at less than fair market value only in consideration
of reasonable reduction regular or bonus compensation and to limit the authority
of the Board of Directors or its committees to reprice out-of-the money options.
Currently the 1993 Option Plan provides for the reservation of 1,000,000 shares
for issuance pursuant to options granted under the 1993 Stock Option Plan. The
text of the proposed amendments is set out in Appendix B.
-11-
<PAGE>
At the Record Date, 25,214 shares of Common Stock were available for
issuance under the 1993 Option Plan (exclusive of the increase in shares subject
to stockholder approval at this Annual Meeting). In addition, at the Record
Date, options to purchase 859,625 were outstanding and 115,161 had been
purchased pursuant to the exercise of options granted under the 1993 Option Plan
at an average exercise price per share of $1.84.
The 1993 Option Plan is structured to allow the Board of Directors, the
Compensation Committee or other authorized committee designated by the Board of
Directors broad discretion in determining the participants and the extent of
their participation in the 1993 Option Plan for the purposes of attracting,
retaining and motivating the best available talent for the successful conduct of
the Company's business. The Board of Directors believes the remaining shares
under the 1993 Option Plan may be insufficient to accomplish these purposes.
Therefore, the Board is proposing the increase to the shares reserved under the
1993 Option Plan discussed herein.
SUMMARY OF THE 1993 OPTION PLAN
The essential features of the 1993 Option Plan are outlined below.
PURPOSE
The purposes of the 1993 Option Plan are to advance the interests of the
Company and its stockholders by providing significant incentives to selected
officers and key employees of the Company who contribute and are expected to
contribute to the success of the Company.
ELIGIBILITY
Key employees whom the Board of Directors, the Compensation Committee or
other committee designated by the Board of Directors to administer the 1993
Option Plan deems to be of special importance to the growth and success of the
Company are eligible participants in the plan. Non-employees may not participate
in the 1993 Option Plan.
ADMINISTRATION
The 1993 Option Plan is administered by the Board of Directors, the
Compensation Committee or such other committee (which are collectively referred
to herein as the "Committee") as may be appointed by the Board of Directors of
the Company, which committee shall consist of not less than two members, all of
whom are members of the Board of Directors and "disinterested persons" within
the meaning of Rule 16b-3 under the Securities Exchange Act of 1994, as amended.
Members of the Committee shall not be eligible to participate in the Plan. The
Committee shall have full and final authority (i) to interpret the 1993 Option
Plan and option agreements promulgated thereunder; (ii) establish rules and
regulations concerning the 1993 Option Plan, (iii) make all determinations
necessary or advisable for the administration of the 1993 Option Plan; and (iv)
correct defects or inconsistencies between any option agreements and the 1993
Option Plan. Committee members receive no additional compensation for their
services in connection with the 1993 Option Plan, but do receive the fee of
$1,000 for every Compensation Committee meeting they attend. See "Election of
Directors--Director Compensation."
OPTIONS
The 1993 Option Plan permits the granting of non-transferable options that
either are intended to qualify as incentive stock options ("ISOs") or are not
intended to so qualify ("NSOs").
The exercise price of each ISO may not be less than the higher of the par
value or 100% of the fair market value of the shares of Common Stock subject to
the option on the date the option is granted. The exercise price of each NSO
shall be the amount determined by the Committee, provided that such amount shall
not be less than the higher of par value or 85% of the fair market value of the
shares of Common Stock subject to the option on the date the option is granted.
-12-
<PAGE>
If the proposed amendment to the 1993 Option Plan is adopted, no options will be
granted at less than 100% of the fair market value of the shares on the date of
grant unless price reduction is specifically in consideration for a reasonable
reduction in such optionee's regular or bonus compensation. To date the Company
has granted only NSO's and the Company has not granted Options at exercise
prices less than fair market value on the date of grant.
No ISO may be granted to any holder of ten percent or more of the total
combined voting power of all classes of stock of the Company unless at the time
of the grant of such option, the exercise price is equal to or greater than 110%
of the fair market value of the shares of Common Stock subject to the option.
To the extent that the aggregate fair market value of the Common Stock with
respect to which ISOs are exercisable for the first time by an optionee during
any calendar year exceeds $100,000, such options shall be treated as NSOs.
The term of each option will be fixed by the Committee but may not exceed ten
years from the date of grant (or five years in the case of optionees who own 10%
or more of the Common Stock).
The exercise price of options granted under the 1993 Option Plan, including
applicable withholding, must be paid in full by cash, certified check or Common
Stock with a fair market value on the exercise date equal to the aggregate
exercise price of the options. The Committee has authorized as payment the
delivery of a properly executed exercise notice and irrevocable instructions to
a broker to promptly deliver to the Company the amount of sale or loan proceeds
required to pay the exercise price. The Committee may also authorize payment by
any combination of the foregoing methods.
Under the 1993 Option Plan, in the event of termination of an optionee's
employment other than for cause, an option must be exercised within three months
following termination of employment or the date of expiration of the option,
whichever occurs first, unless the option agreement provides otherwise. In the
event an optionee dies while he is an employee of the Company or during the
three-month period following his termination, the period within which the option
must be exercised is one year from the date of death, unless the option
agreement provides otherwise. In the event of termination for cause, any option
theretofor granted to such employee shall expire and cease to be exercisable on
the date notice of such termination is delivered to the optionee.
Options granted pursuant to the 1993 Stock Option Plan become immediately
exercisable without any further action upon the occurrence of a "change of
control" as that term is defined in the plan.
The granting of options under the 1993 Option Plan by the Committee is
subjective and is dependent upon, among other things, an employee's individual
performance. Therefore, future option grants to executive officers or employees
under the 1993 Option Plan are not determinable. See"--Participation in the 1993
Option Plan."
ADJUSTMENTS FOR STOCK DIVIDENDS, MERGERS AND OTHER EVENTS
The Committee is authorized to make appropriate adjustments in connection
with outstanding awards under the 1993 Option Plan to reflect stock dividends,
stock splits and similar events.
AMENDMENT AND TERMINATION
The Board may amend, alter, or discontinue the 1993 Option Plan at any time,
but such amendment, alteration or discontinuation shall not adversely affect any
option then outstanding without the participant's consent. Subject to the
specific terms of the 1993 Option Plan described above, the Committee may
accelerate any award or option or waive any conditions or restrictions
pertaining to such award or option at any time.
In addition, to the extent necessary to comply with Rule 16b-3 under the
Exchange Act or Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code") (or any other applicable law or regulation), the Company shall
obtain stockholder approval of any 1993 Option Plan amendment in such a manner
and to such a degree as required.
CERTAIN UNITED STATES FEDERAL INCOME TAX INFORMATION
The following is only a brief summary of the effect of federal income
taxation upon the recipient and the Company under the 1993 Option Plan based
upon the Code. This summary does not purport to be complete and does not discuss
the income tax laws of any municipality, state or country outside the United
States in which an optionee may reside.
-13-
<PAGE>
INCENTIVE STOCK OPTIONS
If an option granted under the 1993 Option plan is an ISO, the optionee will
recognize no income upon grant of the ISO and will 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 ISO regardless of the applicability of the
alternative minimum tax. Upon the sale or exchange of the shares at least two
years after the grant of the ISO and one year after the exercise by the
optionee, any gain (or loss) will be treated as long-term capital gain (or
loss). 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
sale price of the stock. The Company will be entitled to a deduction in the same
amount as the ordinary income recognized by the optionee subject to
reasonableness. Any gain (or loss) recognized on such a premature disposition of
the shares in excess of the amount treated as ordinary income will be
characterized as a capital gain (or loss).
NON-STATUTORY STOCK OPTIONS
All options that do not qualify as ISOs are taxed as NSOs. An optionee will
not recognize any taxable income at the time he or she is granted an NSO.
However, upon the exercise of an NSO, the optionee will recognize ordinary
income measured by the excess of the then fair market value of the shares over
the option price. The income recognized by an optionee who is also an employee
of the Company will be subject to 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 same amount as the ordinary income recognized by the optionee
with respect to shares acquired upon exercise of an NSO, subject to
reasonableness.
PARTICIPATION IN THE 1993 OPTION PLAN
The grant of options under the 1993 Option Plan to employees is subject to
the discretion of the Committee. As of the date of this proxy statement, there
has been no determination by the Board with respect to future awards under the
1993 Option Plan. Accordingly, future awards are not determinable. Non-employee
directors are not eligible to participate in the 1993 Option Plan. The following
table sets forth information with respect to the grant of options to the Named
Officers, to all current executive officers as a group and to all other
employees as a group during the last fiscal year:
<TABLE>
<CAPTION>
PLAN BENEFITS
1993 OPTION PLAN
SECURITIES WEIGHTED AVERAGE
NAME OF INDIVIDUAL UNDERLYING EXERCISE PRICE
OPTIONS GRANTED (#) PER SHARE ($/SH)
<S> <C> <C>
Richard S. Ressler N/A N/A
Chairman and Chief
Executive Officer
George G. Bayz 172,500 $5.52
President and Chief
Operating Officer
Lewis H. Stanton N/A N/A
Executive Vice President
and Chief Operating and
Financial Officer
W. Brian Kretzmer 77,500 3.22
(Former) Vice President
and Chief Financial
Officer, (current) Vice
President, Business
Development
Stanley P. Witkow 77,500 3.22
Vice President, Corporate
and Legal Affairs
All current executive 327,500 3.99
officers as a group (4
officers)
All other employees as a 603,793 4.90
group
</TABLE>
-14-
<PAGE>
REQUIRED VOTE AND RECOMMENDATION
Amendment of the 1993 Option Plan, as described above, requires the
affirmative vote of the holders of not less than a majority of the Votes Cast
under Delaware Law. Votes against the proposal will be counted only for the
purposes of determining (i) the presence or absence of a quorum for the
transaction of business and (ii) the total number of Votes Cast with respect to
the proposal. An abstention will have the same effect as a vote against Proposal
III. Broker non-votes will be counted for purposes of determining whether a
quorum is present, but will not be counted as a Vote Cast.
MANAGEMENT RECOMMENDS A VOTE "FOR" THE AMENDMENT TO THE 1993 STOCK OPTION
PLAN.
NOTICE OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected KPMG Peat Marwick , LLP, independent
auditors, to audit the consolidated financial statements for the fiscal year
ending December 31, 1997. KPMG Peat Marwick has served as the Company's
independent auditors since the Company's inception. Notwithstanding the
selection, the Board, in its discretion, may direct appointment of new
independent auditors at any time during the year, if the Board feels that such a
change would be in the best interests of the Company and its stockholders.
Representatives of KPMG Peat Marwick, LLP are expected to be present at the
Annual Meeting and are expected to be available to respond to appropriate
questions.
OTHER MATTERS
The Company knows of no other matters to be submitted to the Annual Meeting.
If any other matters properly come before the Annual Meeting, it is the
intention of the persons named in the enclosed form of Proxy to vote the shares
they represent as the Board of Directors may recommend.
THE BOARD OF DIRECTORS
Dated: April __, 1997
MAI Systems Corporation
9601 Jeronimo Road, Irvine, California 92618
-15-
Appendix A
Amendment No 2.
to the
Amended and Restated
Certificate of Incorporation
Pursuant to Sections 245 and 303 of the
General Corporation Law of the State of Delaware
By and on behalf of
MAI Systems Corporation
MAI Systems Corporation, a Delaware corporation organized and
existing under and by virtue of the laws of the General Corporation Law of
the State of Delaware (the "Corporation"), does hereby certify that:
1. The Board of Directors of the Corporation duly adopted a
resolution setting forth and declaring advisable the amendment of Articles
FOURTH and FIFTH of the Corporation's Certificate of Incorporation so
that, as amended, said Articles shall read in their entirety as follows:
FOURTH: In accordance with the provisions of Section 303 of the
General Corporation Law of the State of Delaware, the authorized capital
stock of all classes of the Corporation shall consist of 26,000,000 shares
at a par value of $0.01 per share.
FIFTH: The shares of capital stock which the Corporation shall have
authority to issue shall be divided into 1,000,000 shares of Preferred
Stock, at a par value of $0.01 each, and 25,000,000 shares of Common
Stock, at a par value of $0.01 each.
Shares of Preferred Stock may be issued in one or more series from
time to time by the Board of Directors, and the Board of Directors is
expressly authorized to fix by resolution or resolutions the designations
and the powers, preferences and rights, and the qualifications,
limitations and restrictions thereof, of the shares of each series of
Preferred Stock, including without limitation the following:
(a) the distinctive serial designation of such series which
shall distinguish it from other series;
(b) the number of shares included in such series;
(c) the dividend rate (or method of determining such rate) payable
to the holders of the shares of such series, any conditions upon which
such dividends shall be paid and the date or dates upon which such
dividends shall be payable;
(d) whether dividends on the shares of such series shall be
cumulative and, in the case of shares of any series having cumulative
dividend rights, the date or dates or method of determining the date or
dates from which dividends on the shares of such series shall be
cumulative;
(e) the amount or amounts which shall be payable out of the assets
of the Corporation to the holders of the shares of such series upon
voluntary or involuntary liquidation, dissolution or winding up the
Corporation, and the relative rights of priority, if any, of payment of
the shares of such series;
(f) the price or prices at which, the period or periods within which
and the terms and conditions upon which the shares of such series may be
redeemed, in whole or in part, at the option of the Corporation or at the
option of the holder or holders thereof or upon the happening of a
specified event or events;
A - 1
<PAGE>
Appendix A
(g) the obligation, if any, of the Corporation to purchase or redeem
shares of such series pursuant to a sinking fund or otherwise and the
price of prices at which, the period or periods within which and the terms
and conditions upon which the shares of such series shall be redeemed or
purchased in whole of in part, pursuant to such obligation;
(h) whether or not the shares of such series shall be convertible or
exchangeable, at any time or times at the option of the holder or holders
thereof or at the -option of the Corporation or upon the happening of a
specified event or events, into shares of any other class or classes or
any other series of the same of any other class or classes of stock of the
Corporation, and the price or prices or rate or rates of exchange or
conversion and any adjustments applicable thereto; and
(i) whether or not the holders of the shares of such series shall
have voting rights, in addition to the voting rights provided by law, and
if so the terms of such voting rights.
The number of authorized shares of any class or series of Preferred Stock
may be increased or decreased (but not below the number of shares thereof
then outstanding) by the affirmative vote of the holders of a majority of
the stock of the Corporation entitled to vote thereon, irrespective of the
provisions of Section 242(b)(2) of the General Law of the State of
Delaware or any corresponding provision hereafter enacted.
2. The foregoing amendment has been duly adopted by the favorable
vote of the holders of a majority of the outstanding stock entitled to
vote thereon in accordance with the provisions of Section 242 of the
General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, MAI systems Corporation has caused this certificate to
be signed by [name[, its [title], on the [day] day of [month], 1997.
MAI Systems Corporation
By:
Name:
Title:
A - 2
Appendix B
MAI SYSTEMS CORPORATION
1993 STOCK OPTION PLAN
ARTICLE I PURPOSES
1. PURPOSE OF PLAN. The purpose of the MAI Systems Corporation 1993 Stock Option
Plan (the "Plan") are to advance the interests of MAI Systems Corporation (the
"Company") and its shareholders by providing significant incentives to selected
officers and key employees of the Company who contribute and are expected to
contribute to the success of the Company, and to enhance the interest of such
officers and employees in the Company's success and progress by providing them
with an opportunity to become shareholders of the Company. Further, the Plan is
designed to enhance the Company's ability to attract and retain qualified
employees necessary for the success and progress of the Company.
ARTICLE II
DEFINITIONS
2. DEFINITIONS. Certain terms used herein shall have the meaning below
stated, subject to the provisions of Section 7.1 hereof:
"Board" or "Board of Directors" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Committee" means the Compensation Committee of the Board of Directors or
such other committee of the Board as shall be appointed by the Board to
administer the Plan pursuant to Article VII hereof.
(d) "Common Stock" means, subject to the provisions of Section 9.3, the
authorized common stock of the Company, par value $.01 per share.
(e) "Company" means MAI Systems Corporation.
(f) "Effective Date" means the date on which the Company's plan of
reorganization is confirmed by the Bankruptcy Court.
(g) "Employee" means an officer or other common law employee of the Company or a
Subsidiary, including a member of the Board who is also a common law employee.
(h) "Fair Market Value" means, in respect of a share of Common Stock on any
date, the last reported sales price regular way on such date or, in case no such
reported sale takes place on such date, the last reported sales price regular
way on the day preceding such date on which a reported sale occurred, in either
case on the New York Stock Exchange or, if at the time the Common Stock is not
listed or admitted to trading on such Exchange, on the principal national
securities exchange on which the Common Stock is listed or admitted to trading
or, if at the time the Common Stock is not listed or admitted to trading on any
national securities exchange, in the National Association of Securities Dealers
Automated Quotations National Market System or, if at the time the Common Stock
is not listed or admitted to trading on any national securities exchange or
quoted on such National Market System, the average of the closing bid and asked
prices in the over-the-counter market as furnished by any New York Stock
Exchange member firm selected from time to time by the Company for that purpose
or, if the Common Stock is not traded over-the-counter, as determined by the
Committee using any reasonable valuation method.
B - 1
<PAGE>
Appendix B
(i) "Incentive Stock Option" means an Option to purchase Common Stock, granted
by the Company to an Employee pursuant to Section 5.1 hereof, which meets the
requirements of Section 422 of the Code.
(j) "Nonstatutory Stock Option" means and Option to purchase Common Stock,
granted by the Company to an Employee pursuant to Section 5.1 hereof, which does
not meet the requirements of Section 422 of the Code or which provides, as of
the time the Option is granted, that it will not be treated as an Incentive
Stock Option.
(k) "Option" means an Incentive Stock Option or a Nonstatutory Stock Option.
(l) "Option Agreement" means an agreement between the Company and an Optionee
evidencing the terms of an Option Granted under the Plan.
(m) "Optionee" means an Employee to whom an Option has been granted under the
Plan.
(n) "Plan" means the MAI Systems Corporation 1993 Stock Option Plan, as set
forth herein and as from time to time amended.
(o) "Subsidiary" means a subsidiary of the Company within the meaning of
Section 424(f) of the Code.
ARTICLE IIIEFFECTIVE DATE OF THE PLAN; RESERVATION OF SHARES
3.1 EFFECTIVE DATE. The Plan shall become effective as of the Effective
Date.
3.2 SHARES RESERVED UNDER PLAN. The aggregate number of shares of Common Stock
which may be issued upon the exercise of Options granted under the Plan shall
not exceed 1,250,000 of the authorized shares of Common Stock on the Effective
Date, all or any part of which may be issued pursuant to Incentive Stock Options
or Nonstatutory Stock Options or any combination thereof. Shares of Common Stock
issued upon the exercise of Options granted under the Plan may consist of either
authorized but unissued shares or shares which have been issued and which shall
have been reacquired by the Company. The total number of shares authorized under
the Plan shall be subject to increase or decrease in order to give effect to the
provisions of Section 9.3 and to give effect to any amendment adopted pursuant
to Article VIII. If any Option granted under the Plan shall expire, terminate or
be cancelled for any reason without having been exercised in full, the number of
shares as to which such Option was not exercised shall again be available for
purposes of the Plan. The Company shall at all times while the Plan is in effect
reserve such number of shares of Common Stock as will be sufficient to satisfy
the requirements of the Plan.
B - 2
<PAGE>
Appendix B
ARTICLE IV
PARTICIPATION IN PLAN
4.1 ELIGIBILITY. Options under the Plan may be granted to any key Employee of
the Company or a Subsidiary who performs services for the Company or a
Subsidiary that the Committee deems to be of special importance to the growth
and success of the Company. The Committee shall determine those Employees to
whom Options shall be granted, the type of Option to be granted to each such
person, and, subject to Sections 3.2 hereof, the number of shares of Common
Stock subject to each such Option.
4.2 PARTICIPATION NOT GUARANTEE OF EMPLOYMENT OR RETENTION. Nothing in this Plan
or in any Option Agreement shall in any manner be construed to limit in any way
the right of the Company or any Subsidiary to terminate an Employee's employment
at any time, without regard to the effect of such termination on any rights such
Employee would otherwise have under this Plan, or give any right to an Employee
to remain employed by the Company or a Subsidiary thereof in any particular
position or at any particular rate of compensation.
ARTICLE V
GRANT AND EXERCISE OF OPTIONS
5.1 GRANT OF OPTIONS. The Committee may from time to time in its discretion
grant Incentive Stock Options and/or Nonstatutory Stock Options to Employees at
any time after the Effective Date. All Options under the Plan shall be granted
within ten (10) years from the date the Plan is adopted by the Board or the date
the Plan is approved by the stockholders of the Company, whichever is earlier.
5.2 OPTION TERMS. Options granted under the Plan shall be subject to the
following requirements:
(a) Option Price. The exercise price of each Incentive Stock Option shall not be
less than the higher of the par value or 100% of the Fair Market Value of the
shares of Common Stock subject to the Option on the date the Option is granted.
The exercise price of each Nonstatutory Stock Option shall be the amount
determined by the Committee as set forth in the applicable Option Agreement,
provided that such amount shall not be less than the higher of the par value or
85% of the Fair Market Value of the shares of Common Stock subject to the Option
on the date the Option is granted, provided further that options may only be
granted at less than 100% of the Fair Market Value of the shares of Common Stock
subject to the Option on the date of grant if the discount is expressly in lieu
of a reasonable amount of salary or cash bonus, as determined by the Board of
Directors of the Committee in its sole discretion. The exercise price of an
Option may be subject to adjustment pursuant to Section 9.3 hereof.
(b) Term of Option. The term during which an Option is exercisable shall be that
period determined by the Committee as set forth in the applicable Option
Agreement, provided that no Option shall have a term that exceeds a period of 10
years from the date of its grant.
(c) Nontransferability of Option. No Option granted under the Plan shall be
transferable by the Optionee otherwise than by will or the laws of descent and
distribution, and each such Option shall be exercisable during the Optionee's
lifetime only by him. No transfer of an Option by an Optionee by will or by the
laws of descent and distribution shall be effective to bind the Company unless
the Company shall have been furnished with written notice thereof and a copy of
the will and/or such other evidence as the Committee may determine necessary to
establish the validity of the transfer.
B - 3
<PAGE>
Appendix B
(d) Exercise of Option. Unless the Option Agreement pursuant to which an Option
is granted provides otherwise, each Option shall become exercisable, on a
cumulative basis, with respect to 20% of the aggregate number of the shares of
Common Stock covered thereby on the first anniversary of the date of grant and
with respect to an additional 20% of the shares of Common Stock covered thereby
on each of the next four succeeding anniversaries of the date of grant. Any
portion of an Option which has become exercisable shall remain exercisable until
it is exercised in full or terminates pursuant to the terms of the Plan or the
Option Agreement pursuant to which it is granted.
(e) Acceleration of Exercise on Change of Control. Notwithstanding the
provisions of paragraph (d) of this Section or any other restrictions limiting
the number of shares of Common Stock as to which an Option may be exercised,
each Option shall become immediately exercisable in full upon and simultaneously
with any "Change of Control" of the Company. For purposes of this Plan, a
"Change of Control" shall be deemed to have occurred if:
(i) any "person," as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") (other than the
Company, any employee benefit plan sponsored by the Company, any trustee or
other fiduciary holding securities under an employee benefit plan of the
Company, or any corporation owned, directly or indirectly, by the stockholders
of the Company in substantially the same proportions as their ownership of stock
of the Company), is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the Company's then
outstanding securities;
(ii) during any period of two consecutive years individuals who at the
beginning of such period constitute the Board, and any new director (other than
a director designated by a person who has entered into an agreement with the
Company to effect a transaction described in clause (i), (iii) or (iv) of this
Section) whose election by the Board of or nomination for election by the
Company's stockholders was approved by a vote of at least two- thirds (2/3) of
the directors then still in office who either were directors at the beginning of
the period or whose election or nomination for election was previously so
approved, cease for any reason to constitute at least a majority thereof;
(iii) the stockholders of the Company approve a merger or consolidation of
the Company with any other corporation, other than a merger or consolidation
which would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) more than 50% of the combined voting power of the voting securities of
the Company or such surviving entity outstanding immediately after such merger
or consolidation; or
B - 4
<PAGE>
Appendix B
the stockholders of the Company approve a plan of complete liquidation of
the Company or an agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets. For the purposes of this subsection
(iv), "substantially all" of the Company's assets shall mean any of the
following:
(A) assets for which the price or consideration upon sale or disposition
equals or exceeds fifty percent (50%) or more of the book value of the
total assets of the Company;
(B) assets for which the price or consideration upon sale or disposition
equals or exceeds fifty percent (50%) or more of the fair market value of
the Company (which for purposes of this subsection (iv) shall be the
number of shares of voting securities outstanding on the date on which the
change of control of the Company is deemed to occur multiplied by the Fair
Market Value of said securities); or
(C) assets that generated fifty percent (50%) or more of the Company's
reported net sales or net income in either of the two (2) taxable years
ended prior to the date on which the change of control of the Company is
deemed to occur.
Notwithstanding the foregoing provisions of this Section 5.3(e), as long as
Brooke Group, Ltd. (BGL) and/or any affiliate thereof shall own stock of the
Company representing 50% or more of the combined voting power for the election
of directors, (x) the beneficial ownership of such stock by BGL and/or any
affiliate, and (y) any acquisition of additional voting stock by BGL and/or any
affiliate shall not constitute a Change of Control.
(f) Incentive Stock Options Granted to Ten Percent Shareholders. No Incentive
Stock Options shall be granted to any Employee who owns, directly or indirectly
within the mean of Section 424(d) of the Code, stock possessing more than 10% of
the total combined voting power of all classes of stock of the Company or any
Subsidiary, unless at the time the Incentive Stock Option is granted, the
exercise price of the Incentive Stock Option is at least 110% of the Fair Market
Value of the Common Stock subject to such Incentive Stock Option and such
Incentive Stock Option, by its terms, is not exercisable after the expiration of
five years from the date such Incentive Stock Option is granted.
(g) Limitation on Incentive Stock Options. To the extent that the aggregate Fair
Market Value of the Common Stock with respect to which Incentive Stock Options
are exercisable for the first time by an Optionee during any calendar year
(under all plans of the Company and its parent and subsidiary corporations)
exceeds $100,000, such Options shall be treated as Nonstatutory Options. For
this purpose, Options shall be taken into account in the order in which they
were granted and the Fair Market Value of the Common Stock shall be determined
as of the time the Option with respect to such Common Stock is granted.
5.4. PAYMENT OF EXERCISE PRICE AND DELIVERY OF SHARES.
(a) Notice and Payment for Shares. Each Option shall be exercised by delivery of
a written notice to the Company in such form as the Committee shall approve
stating the number of the whole shares of Common Stock as to which the Option is
being exercised and accompanied by payment therefor. No Option shall be deemed
exercised in the event that payment therefor is not received and shares of
Common Stock shall not be issued upon the exercise of an Option unless the
exercise price is paid in full. Payment for shares of Common Stock purchased
upon the exercise of an Option shall be made by (i) cash, (ii) certified check
payable to the order of the Company, (iii) outstanding shares of Common Stock
duly endorsed to the Company (which shares of Common Stock shall be valued at
their Fair Market Value as of the day preceding the date of such exercise), (iv)
any combination of the foregoing, or (v) such other method of payment as may be
provided in the applicable Option Agreement.
(b) Rights of Optionee in Stock. Neither any Optionee nor the legal
representatives, heirs, legatees or distributees of any Optionee, shall be
deemed to be the holder of, or to have any of the rights of a holder with
respect to, any shares of Common Stock issuable upon exercise of an Option
granted hereunder unless and until such shares are issued to him or them and
such person or persons have received a certificate or certificates therefor.
Upon the issuance and receipt of such certificate or certificates, such Optionee
or the legal representatives, heirs, legatees or distributees of such Optionee
shall have absolute ownership of the shares of Common Stock evidenced thereby,
including the right to vote such shares, to the same extent as any other owner
of shares of Common Stock, and to receive dividends thereon, subject, however,
to the terms, conditions and restrictions of this Plan.
B - 5
<PAGE>
Appendix B
ARTICLE VI TERMINATION AND DEATH
6.1 TERMINATION OTHER THAN BY DEATH OR FOR CAUSE.
If an Optionee's position as an Employee of the Company or a Subsidiary
terminates for any reason other than death or for Cause (as defined in Section
6.2) he may, unless the applicable Option Agreement provides otherwise, exercise
an Option previously granted within three months after the date of such
termination, but in no event later than the date on which the Option would have
expired in accordance with its terms. To the extent the Option is not so
exercised, it shall expire at the end of such three-month period.
6.2 TERMINATION FOR CAUSE.
If an Optionee's position as an Employee of the Company or a Subsidiary is
terminated for Cause, any Option theretofore granted to him shall expire and
cease to be exercisable on the date notice of such termination is delivered to
the Optionee. "Cause" shall mean (a) the willful and continued failure by an
Optionee to substantially perform his duties with the Company (other than any
such failure resulting from his incapacity due to physical or mental illness),
after a written demand for substantial performance is delivered to the Optionee
by the Board, which demand specifically identifies the manner in which the Board
believes that the Optionee has not substantially performed his duties, or (b)
the willful engaging by the Optionee in conduct which is demonstrably and
materially injurious to the Company, monetarily or otherwise. For purposes of
this Section 6.2, no act, or failure to act, shall be deemed "willful" unless
done, or omitted to be done, not in good faith and without reasonable belief
that such action or omission was in the best interest of the Company.
6.3 DEATH.
If an Optionee dies (i) while he is an Employee of the Company or a
Subsidiary or (ii) during the three-month period after the termination of his
position as an Employee of the Company or a Subsidiary, and at the time of his
death the Optionee was entitled to exercise an Option theretofore granted to
him, such Option shall, unless the applicable Option Agreement provides
otherwise, expire one year after the date of his death, but in no event later
than the date on which the Option would have expired if the Optionee had lived.
During such one-year period the Option may be exercised by the Optionee's
executor or administrator or by any person or persons who shall have acquired
the Option directly from the Optionee by bequest or inheritance, but only to the
extent that the Optionee was entitled to exercise the Option at the date of his
death and, to the extent the Option is not so exercised, it shall expire at the
end of such one-year period.
ARTICLE VII ADMINISTRATION OF PLAN
7.1 ADMINISTRATION.
The Plan shall be administered by the Board of Directors, Compensation
Committee of the Board of Directors, or such other committee as may be appointed
by the Board of Directors of the Company, which Committee shall consist of not
less than two members, all of whom are members of the Board of Directors and
"disinterested persons" within the meaning of Rule 16b-3 under the Securities
Exchange Act of 1934, as amended. Members of the Committee shall not be eligible
to participate in the Plan. A majority of the Committee shall constitute a
quorum thereof and the actions of a majority of the Committee at a meeting at
which a quorum is present, or actions unanimously approved in writing by all
members of the Committee, shall be the actions of the Committee. Vacancies
occurring on the Committee shall be filled by the Board. The Committee shall
have full and final authority (i) to interpret the Plan and each of the Option
Agreements, (ii) to prescribe, amend and rescind rules and regulations, if any,
relating to the Plan, (iii) to make all determinations necessary or advisable
for the administration of the Plan and (iv) to correct any defect, supply any
omission and reconcile any inconsistency in the Plan and any Option Agreement.
The Committee's determination in all matters referred to herein shall be
conclusive and binding for all purposes and upon all persons including, but
without limitation, the Company, the shareholders of the Company, the Committee,
and each of the members thereof, Employees and their respective successors in
interest.
B - 6
<PAGE>
Appendix B
7.2 LIABILITY.
No member of the Committee shall be liable for anything done or omitted to
be done by him or by any other member of the Committee in connection with the
Plan, except for his own willful misconduct or gross negligence. The Committee
shall have power to engage outside consultants, auditors or other professional
help to assist in the fulfillment of the Committee's duties under the Plan at
the Company's expense.
7.3 DETERMINATIONS.
In making its determinations concerning the key Employees who shall receive
Options as well as the number of shares to be covered thereby and the time or
times at which they shall be granted, the Committee shall take into account the
nature of the services rendered by such key Employees, their past, present and
potential contribution to the Company's success and such other factors as the
Committee may deem relevant. The Committee shall determine the form of Option
Agreements under the Plan and the terms and conditions to be included therein,
provided such terms and conditions are not inconsistent with the terms of the
Plan. The Committee may waive any provisions of any Option Agreement, provided
such waiver is not inconsistent with the terms of the Plan as then in effect.
The Committee's determinations under the Plan need not be uniform and may be
made by it selectively among persons who receive, or are eligible to receive,
Options under the Plan, whether or not such persons are similarly situated.
ARTICLE VIII AMENDMENT AND TERMINATION OF PLAN
8.1 AMENDMENT OF PLAN
(a) Generally. The Plan may be amended at any time and from time to time by the
Board, but, except as provided by Section 9.3, no amendment which (i) increases
the aggregate number of shares of Common Stock which may be issued pursuant to
Options granted under the Plan, (ii) decreases the minimum Incentive Stock
Option exercise price provided in the Plan, (iii) extends the period during
which Options may be granted pursuant to the Plan, (iv) changes the class of
individuals eligible to the granted Options, (v) materially increases the
benefits provided by the Plan, or (vi) has the effect of any of the above shall
be effective unless and until the same is approved by the affirmative vote of
the holders of a majority of the outstanding shares of the Company's voting
stock, either in person or by proxy, in accordance with the applicable
provisions of the charter and bylaws of the Company and applicable State law. No
amendment to the Plan shall, without the consent of an Optionee, affect such
Optionee's rights under an Option previously granted.
(b) Amendments Relating to Incentive Stock Options. To the extent applicable,
the Plan is intended to permit the issuance of Incentive Stock Options to
Employees in accordance with the provisions of Section 422 of the Code. Subject
to paragraph 8.1(a) above, the Plan and Option Agreements may be modified or
amended at any time, both prospectively and retroactively, and in a manner that
may affect Incentive Stock Options previously granted, if such amendment or
modification is necessary for the Plan and Incentive Stock Options granted
hereunder to qualify under said provisions of the Code.
B - 7
<PAGE>
Appendix B
8.2 TERMINATION.
The Board may at any time terminate the Plan as of any date specified in a
resolution adopted by the Board. If not earlier terminated, the Plan shall
terminate on June 27, 2003. No Options may be granted after the Plan has
terminated, but the Committee shall continue to supervise the administration of
Options previously granted.
ARTICLE IX MISCELLANEOUS PROVISIONS
9.1 RESTRICTIONS UPON GRANT OF OPTIONS.
If the listing upon any stock exchange or the registration or qualification
under any federal or state law of any shares of Common Stock to be issued on the
exercise of Options granted under this Plan (whether to permit the grant of
Options or the resale or other disposition of any such shares of Common Stock by
or on behalf of Optionees receiving such shares) should be or become necessary
or desirable, the Board in its sole discretion may determine that delivery of
the certificates for such shares of Common Stock shall not be made until such
listing, registration or qualification shall have been completed. The Company
agrees that it will use its best efforts to effect any such listing,
registration or qualification, provided, however, that the Company shall not be
required to use its best efforts to effect such registration under the
Securities Act of 1933 other than on Form S-8 or such other forms as may be in
effect from time to time calling for information comparable to that presently
required to be furnished under Form S-8.
9.2 RESTRICTIONS UPON RESALE OF UNREGISTERED STOCK.
Each Optionee shall, if the Company deems it advisable, represent and agree
in writing (i) that any shares of Common Stock acquired by such Optionee
pursuant to this Plan will not be sold except pursuant to an effective
registration statement under the Securities Act of 1933 or pursuant to an
exemption from registration under said Act, (ii) that such Optionee is acquiring
such shares of Common Stock for his own account and not with a view to the
distribution thereof, and (iii) to such other customary matters as the Company
may request. In such case, no shares of Common Stock shall be issued to such
Optionee unless such Optionee provides such representations and agreements and
the Company is reasonably satisfied that such representations and agreements are
correct.
9.3 ADJUSTMENTS.
The number of shares of Common Stock of the Company authorized for issuance
under the Plan, as well as the price to be paid and the number of shares issued
upon exercise of outstanding Options, shall be subject to adjustment by the
Committee, in its sole discretion, to reflect any stock split, stock dividend,
recapitalization, merger, consolidation, reorganization, combination or exchange
of shares or other similar event.
9.4 WITHHOLDING OF TAXES.
(a) Each Optionee who exercises a Nonstatutory Stock Option shall agree that no
later than the date of such exercise or receipt of shares of Common Stock
pursuant thereto he will pay to the Company, or make arrangements satisfactory
to the Committee regarding payment of, any Federal, state or local taxes of any
kind required by law to be withheld with respect to the transfer to him of such
shares of Common Stock.
(b) The applicable Option Agreement may provide that an Optionee may satisfy, in
whole or in part, the requirements of paragraph (a):
(i) by delivery of shares of Common Stock owned by the Optionee for at
least six months (or such shorter or longer period as the Committee may approve)
having a Fair Market Value (determined as of the date of such delivery) equal to
all or part of the amount to be so withheld, or
B - 8
<PAGE>
Appendix B
(ii) by electing to have the Company withhold the requisite number of
shares from shares otherwise deliverable pursuant to the exercise of the Option
giving rise to the tax withholding obligation provided, however, that
(A) the Optionee's election and the withholding pursuant thereto take
effect during the period beginning on the third business day following the date
of release for publication of the quarterly and annual summary statements of the
Company's sales and earning's and ending on the twelfth business day following
such date, and six months have elapsed since the date the Option was granted, or
(B) such election was irrevocably made by the Optionee and filed with the
Committee in writing at least six months in advance of the date on which such
withholding occurs.
The Committee may require, as a condition of accepting any such delivery of
Common Stock or any such election by the Optionee, that the Optionee furnish to
the Company an opinion of counsel to the effect that such delivery or election
will not result in the Optionee incurring any liability under Section 16(b) of
the Securities Exchange Act of 1934, as amended.
9.5 USE OF PROCEEDS. The proceeds from the sale of Common Stock pursuant to
Options granted under the Plan shall constitute general funds of the Company and
may be used for such corporate purposes as the Company may determine.
9.6 SUBSTITUTION OF OPTIONS.
(a) The Committee may, with the consent of the holder of any Option granted
under the Plan, cancel such Option and grant a new Option in substitution
therefor, provided that the Option as so substituted shall satisfy all of the
requirements of the Plan as of the date such new Option is granted.
(b) Options may be granted under this Plan in substitution for options held by
individuals who are employees of another corporation and who become Employees of
the Company or any Subsidiary of the Company eligible to receive Options
pursuant to the Plan as a result of a merger, consolidation, reorganization or
similar event. The terms and conditions of any Options so granted may vary from
those set forth in the Plan to the extent deemed appropriate by the Committee in
order to conform the provisions of Options granted pursuant to the Plan to the
provisions of the options in substitution for which they are granted.
(c) Notwithstanding the foregoing, Options granted under this Plan may not
be replaced or repriced unless all of the following conditions are met: The
substitution or repricing is authorized by a compensation committee composed
entirely of independent directors to fulfill a legitimate corporate purpose such
as retention of a key employee; (ii) The substitution or repricing is not
utilized more often than once every two (2) years and then only to maintain
option value due to extreme circumstances beyond management's control; and The
substitution or repricing is limited to no more than five percent (5%) of the
shares authorized for issuance under the Plan.
9.7 NOTICES. Any notice required or permitted hereunder shall be sufficiently
given only if sent by registered or certified mail, return receipt requested,
postage prepaid, addressed to the Company at its principal place of business,
and to the Optionee at the address on file with the Company at the time of grant
hereunder, or to such other address as either party may hereafter designate in
writing by notice similarly given by one party to the other.
9.8 GOVERNING LAW. The Plan and all determinations made and actions taken
hereunder, to the extent not otherwise governed by the Code or the laws of the
Untied States of America, shall be governed by the laws of the State of
California and construed accordingly.
B - 9
Appendix C
[GRAPHIC OMITTED]
MAI SYSTEMS CORPORATION
This proxy is solicited by the Board of
Directors for the Annual Meeting of
Stockholders--May 20, 1997
The undersigned hereby appoints Lewis H. Stanton and Stanley P. Witkow and
each of them, attorneys and proxies, with power of substitution in each of them,
to vote for and on behalf of the undersigned at the Annual Meeting of
Stockholders of the Company to be held on May 20, 1997, and any adjournment
thereof, upon matters properly coming before the meeting, as set forth in the
Notice of Meeting and Proxy Statement, both of which have been received by the
undersigned and upon all such other matters that may properly be brought before
the meeting, as to which the undersigned hereby confers discretionary authority
to vote upon said proxies. Without otherwise limiting the general authorization
given hereby, said attorneys and proxies are instructed to vote as follows:
(THIS PROXY CARD CONTINUES AND MUST BE SIGNED ON THE RESERVE SIDE)
<PAGE>
This proxy when properly executed will be voted in the manner directed
herein. If no direction is made, this proxy will be voted FOR the election of
directors and Items 2 and 3 below.
1. Election of four THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
directors ELECTION OF THE DIRECTORS BELOW.
FOR all WITHHOLD NOMINEES: George G. Bayz, Alan A. Gleicher, Richard S.
nominees AUTHORITY Ressler, Morton O. Schapiro
listed to to vote (INSTRUCTION: TO WITHHOLD AUTHORITY FOR ANY PARTICULAR
the right for the NOMINEE, WRITE SUCH NOMINEE(S) NAME ON THE LINE BELOW.)
(except nominees
as marked listed
to the
contrary)
/ / / / -------------------------------------------------------
2. Amendment to Amended and Restated Certificate of Incorporation to permit
the issuance of up to 1,000,000 shares of Preferred Stock.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
FOR AGAINST ABSTAIN
/ / / / / /
3. Amendments to the 1993 Employee Stock Option Plan to increase number of
shares reserved for issuance and to limit the issuance of options to purchase
shares for less than the fair market value of the shares on the date of grant
and to limit the repricing of under water stock options.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL. FOR AGAINST
ABSTAIN
FOR AGAINST ABSTAIN
/ / / / / /
Dated: , 1996
(signed)
----------------------
(signed)
----------------------
Please sign exactly as your name appears below. Give full title if an
Attorney, Executor, Administrator, Trustee, Guardian, etc. For an account in the
name of two or more persons, each should sign. If a Corporation, please sign in
full corporate name by President or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
PLEASE SIGN THIS PROXY AND RETURN IT PROMPTLY WHETHER OR NOT YOU EXPECT TO
ATTEND THIS MEETING. YOU MAY NEVERTHELESS VOTE IN PERSON IF YOU DO ATTEND.
