<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
OBJECTIVE SYSTEMS INTEGRATORS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[_] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
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[X] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
OBJECTIVE SYSTEMS INTEGRATORS, INC.
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 14, 1996
TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Objective
Systems Integrators, Inc., a California corporation (the "Company"), will be
held on Thursday, November 14, 1996, at 10:00 a.m. local time, at the Sheraton
Hotel, 11211 Point East Drive, Rancho Cordova, California 95670, for the
following purposes:
1. To elect six directors to serve until the next Annual Meeting of
Shareholders or until their successors are elected and qualified.
2. To approve an amendment to the 1994 Stock Option Plan to increase the
number of shares of Common Stock reserved for issuance thereunder by
810,330 shares.
3. To approve the reincorporation of the Company as a Delaware corporation.
4. To ratify the appointment of Deloitte & Touche LLP as independent
auditors of the Company for the fiscal year ending June 30, 1997.
5. To transact such other business as may properly come before the meeting,
including any motion to adjourn to a later date to permit further
solicitation of proxies, if necessary.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice. Only shareholders of record at the close
of business on September 27, 1996, are entitled to notice of and to vote at
the meeting.
All shareholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to mark,
sign, date and return the enclosed Proxy as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Shareholders attending the
meeting may vote in person even if they have returned a Proxy.
Sincerely,
Philip N. Cardman
Vice President, General Counsel and
Secretary
Folsom, California
October 18, 1996
YOUR VOTE IS IMPORTANT.
IN ORDER TO ASSURE 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.
<PAGE>
OBJECTIVE SYSTEMS INTEGRATORS, INC.
----------------
PROXY STATEMENT FOR 1996
ANNUAL MEETING OF SHAREHOLDERS
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited on behalf of the Board of Directors (the
"Board") of OBJECTIVE SYSTEMS INTEGRATORS, INC., a California corporation (the
"Company"), for use at the Annual Meeting of Shareholders (the "Annual
Meeting") to be held Thursday, November 14, 1996, at 10:00 a.m. local time, or
at any adjournment thereof, for the purposes set forth herein and in the
accompanying Notice of Annual Meeting of Shareholders. The Annual Meeting will
be held at the Sheraton Hotel, 11211 Point East Drive, Rancho Cordova,
California 95670. The Company's principal executive offices are located at 100
Blue Ravine Road, Folsom, California 95630, and its telephone number at that
location is (916) 353-2400.
These proxy solicitation materials and the Annual Report to Shareholders for
the year ended June 30, 1996, including financial statements, were first
mailed on or about October 18, 1996, to all shareholders entitled to vote at
the meeting.
RECORD DATE; OUTSTANDING SHARES
Shareholders of record at the close of business on September 27, 1996 (the
"Record Date") are entitled to notice of and to vote at the meeting. The
Company has one series of Common Shares outstanding, designated Common Stock,
no par value. At the Record Date, 31,831,815 shares of the Company's Common
Stock were issued and outstanding and held of record by 68 shareholders.
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 (a) delivering to the Secretary of the
Company a written notice of revocation or a duly executed proxy bearing a
later date or (b) attending the meeting and voting in person.
VOTING AND SOLICITATION
Each shareholder is entitled to one vote for each share of Common Stock held
on the Record Date. Every shareholder voting for the election of directors
(Proposal One) may cumulate votes and give one candidate a number of votes
equal to the number of directors to be elected multiplied by the number of
shares that the shareholder is entitled to vote, or distribute votes on the
same principle among as many candidates as the shareholder may select. Votes
cannot be cast for more than six candidates. However, no shareholder is
entitled to cumulate votes unless the candidate's name has been placed in
nomination prior to the voting and the shareholder, or any other shareholder,
has given notice at the meeting, before the voting, of his intention to
cumulate votes. On all other matters, each share of Common Stock has one vote.
A quorum, representing the holders of a majority of the outstanding shares of
Common Stock on the Record Date, must be present or represented for the
transaction of business at the Annual Meeting. Abstentions and broker nonvotes
will be counted in establishing the quorum.
This solicitation of proxies is made by the Company and all related costs
will be borne by the Company. The Company may reimburse brokerage firms and
other persons representing beneficial owners of shares for their expenses in
forwarding solicitation material to those beneficial owners. Proxies may also
be solicited by certain of the Company's directors, officers and regular
employees, without additional compensation, personally, by telephone or by
telegram.
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DEADLINE FOR SHAREHOLDER PROPOSALS
Shareholder proposals that are intended to be presented at the Company's
1997 Annual Meeting must be received by the Company no later than June 20,
1997, to be considered for inclusion in the proxy statement and form of proxy
relating to that Meeting.
ADJOURNMENT OF THE MEETING
In the event there are not sufficient votes to approve the reincorporation
of the Company as a Delaware corporation, such proposal could not be approved
unless the Annual Meeting were adjourned in order to permit further
solicitation of proxies from holders of the Company's Common Stock. Proxies
that are being solicited by the Company's Board grant the discretionary
authority to vote for any such adjournment, if necessary. If it is necessary
to adjourn the Meeting and the adjournment is for a period of less than 45
days, no notice of the time and place of the adjourned meeting is required to
be given to shareholders other than an announcement of such time and place at
the Annual Meeting. A majority of the shares present and voting at the Annual
Meeting is required to approve any such adjournment, regardless of whether a
quorum is present.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of September 27, 1996 as to (a)
each person who is known by the Company to own beneficially more than 5% of
the outstanding shares of Common Stock, (b) each director, (c) each officer
named in the Summary Compensation Table below, and (d) all directors and
executive officers as a group.
<TABLE>
<CAPTION>
COMMON STOCK
FIVE PERCENT SHAREHOLDERS, BENEFICIALLY APPROXIMATE PERCENTAGE
DIRECTORS AND CERTAIN EXECUTIVE OFFICERS OWNED OWNED(1)
---------------------------------------- ------------ ----------------------
<S> <C> <C>
Johnson L.L.C.(2).......................... 10,229,778 32.14%
2676 West Alamo Avenue
Littleton, Colorado 80120
Tom L. Johnson(2).......................... 10,229,778 32.14
Vento L.L.C.(3)............................ 10,229,778 32.14
2676 West Alamo Avenue
Littleton, Colorado 80120
Richard G. Vento(3)........................ 10,229,778 32.14
Amerindo Investment Advisers, Inc.(4)...... 2,403,300 7.6
One Embarcadero Center, Suite 2300
San Francisco, California 94111-3162
Jonathan B. Shantz(5)...................... 1,315,789 4.1
Tim J. Sebring(6).......................... 1,252,079 3.8
Kornel Terplan............................. 366,921 1.1
Dan Line(7)................................ 82,018 *
Joseph T. Ambrozy(8)....................... 48,702 *
George F. Schmitt(9)....................... 13,542 *
Gayety W. Hirahara(10)..................... 657 *
All directors and executive officers as a 23,539,264 71.1
group (11 persons)(11)....................
</TABLE>
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* Less than 1% of the outstanding shares.
(1) Applicable percentage ownership is based on 31,831,815 shares of Common
Stock outstanding as of September 27, 1996 together with applicable
options for the shareholder. Beneficial ownership is determined in
accordance with the rules of the Securities and Exchange Commission, and
includes voting and investment power with respect to shares. Shares of
Common Stock subject to options currently exercisable or exercisable
within 60 days after September 27, 1996, are deemed outstanding for
computing the percentage ownership of the person holding the options,
but are not deemed outstanding for computing the percentage of any other
person.
(2) Represents 10,229,778 shares owned by Johnson L.L.C., over which Tom L.
Johnson may be deemed to share voting and investment power.
(3) Represents 10,229,778 shares owned by Vento L.L.C., over which Richard
G. Vento may be deemed to share voting and investment power.
(4) Based on a Schedule 13D/A filed with the Securities and Exchange
Commission on August 16, 1996, Amerindo Investment Advisors, Inc., a
California corporation, whose principal executive offices are located at
One Embarcadero Center, Suite 2300, San Francisco, CA 94111
("Amerindo"), Amerindo Investment Advisors, Inc., a Panama corporation,
whose principal executive offices are located at Edificio
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Sucre, Calle 48 Este, Bella Vista, Apartado 6277, Panama 5, Panama
("Amerindo--Panama"), Amerindo Advisors (U.K.) Limited, a United Kingdom
corporation whose principal executive offices are located at 43 Upper
Grosvenor Street, London WIX 9PG, England ("Amerindo--UK"), the Amerindo
Investment Advisors Inc. Money Purchase Trust, the address of which is
Gables International Plaza, 2655 La Jeune Road, Suite 1112, Coral Gables,
FL 33134 (the "Plan"), the Amerindo Advisors (UK) Limited Retirement
Benefits Scheme, the address of which is 43 Upper Grosvenor Street, London
WIX 9PG England ("Retirement"), Alberto W. Vilar, Gary A. Tanaka, James P.
F. Stableford and Renata LePort have shared voting and dispositive power
with respect to 2,400,800 shares as of August 9, 1996, and Mr. Vilar has
sole voting and dispositive power over the 2,500 shares held by the Plan.
Amerindo is registered as an investment advisor pursuant to Section 203 of
the Investment Advisor Act of 1940, as amended, and Amerindo--UK is
registered with the Investment Management Regulatory Organization in the
United Kingdom. Messrs. Vilar and Tanaka are the sole shareholders and
directors of Amerindo, Amerindo UK and Amerindo--Panama. Messrs. Vilar,
Tanaka, and Stableford and Ms. LePort are the managing trustees of
Retirement. Each person expressly disaffirms membership in any group under
the Securities Exchange Act of 1934, as amended, or otherwise. The shares
are held for the discretionary accounts of certain clients. Amerindo,
Amerindo--Panama, Amerindo UK and Messrs. Vilar, Tanaka and Stableford and
Ms. LePort disclaim beneficial ownership of all such shares, except
insofar concerns their indirect interest in the Plan and Retirement by
reason of their Pro Rata interests in the Plan and Retirement.
(5) Represents 1,315,789 shares owned by Cisco Systems, Inc. Mr. Shantz is a
Vice President at Cisco Systems, Inc. Mr. Shantz disclaims any
beneficial ownership of these shares.
(6) Includes 1,251,422 shares of Common Stock which may be acquired upon
exercise of stock options which are presently exercisable or will become
exercisable within 60 days of September 27, 1996.
(7) Represents 82,018 shares of Common Stock which may be acquired upon
exercise of stock options which are presently exercisable or will become
exercisable within 60 days of September 27, 1996.
(8) Includes 15,625 shares of Common Stock which may be acquired upon
exercise of stock options which are presently exercisable or will become
exercisable within 60 days of September 27, 1996.
(9) Represents 13,542 shares of Common Stock which may be acquired upon
exercise of stock options which are presently exercisable or will become
exercisable within 60 days of September 27, 1996.
(10) Ms. Hirahara resigned as Chief Financial Officer, Chief Operating
Officer and Secretary of the Company on July 20, 1996.
(11) Includes 1,280,589 shares of Common Stock which may be acquired upon
exercise of stock options which are presently exercisable or will become
exercisable within 60 days of September 27, 1996.
4
<PAGE>
PROPOSAL ONE
ELECTION OF DIRECTORS
NOMINEES
A board of six 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 six nominees named below, all of whom are presently
directors of the Company. If any nominee of the Company is unable or declines
to serve as a director at the time of the Annual Meeting, the proxies will be
voted for any nominee who is designated by the present Board to fill the
vacancy. The Company is not aware of any nominee who will be unable or who
will decline to serve as a director. If additional individuals are nominated
for election as directors, the proxy holders intend to vote all proxies
received by them in such a manner (in accordance with cumulative voting) that
will assure the election of as many of the nominees listed below as possible.
In that event, the specific nominees to be voted for will be determined by the
proxy holders. The term of office for each person elected as a director will
continue until the next Annual Meeting of Shareholders or until a successor
has been duly elected and qualified.
VOTE REQUIRED
If a quorum is present and voting, the six nominees receiving the highest
number of affirmative votes will be elected to the Board. Abstentions and
broker nonvotes are not counted in the election of directors.
NOMINEES
The names of the nominees and certain information about them are set forth
below:
<TABLE>
<CAPTION>
NAME OF NOMINEE AGE POSITION WITH THE COMPANY
--------------- --- -------------------------
<S> <C> <C>
Tom L. Johnson............. 51 Co-Chairman of the Board of Directors
Richard G. Vento........... 56 Co-Chairman of the Board of Directors
Joseph T. Ambrozy.......... 57 Chief Executive Officer, President and Director
George F. Schmitt(1)(2).... 53 Director
Jonathan B. Shantz(1)(2)... 37 Director
Dr. Kornel Terplan(1)(2)... 52 Director
</TABLE>
- --------
(1) Member of Audit Committee
(2) Member of Compensation Committee
There is no family relationship between any director or executive officer of
the Company.
Tom L. Johnson co-founded Objective Systems Integrators, a partnership and
the predecessor to the Company, in January 1989. He has been Co-Chairman of
the Board since January 1996, and was Co-Chief Executive Officer and Chairman
of the Board from the Company's incorporation in June 1989 until
February 1996. Mr. Johnson also served as President from May 1991 to June
1994, as Chief Financial Officer from July 1989 to November 1993, and as Vice
President, Product Development from July 1990 to July 1995. From January 1987
to February 1989, he co-founded and served as Vice President, Product
Development of TelWatch, Inc., a telecommunications software and hardware
company. Prior to January 1987, he was for more than 22 years involved in a
number of software companies, including TelAccount, Inc., Schmidt Associates,
Computer Sciences Corporation, Control Data Service Bureau, University
Computing Company and MRI Systems, serving in a variety of management and
technical positions. Mr. Johnson received a B.S. degree in Abstract
Mathematics with a minor in Business Management from the University of
Houston.
Richard G. Vento co-founded Objective Systems Integrators, a partnership
and the predecessor to the Company, in January 1989, and has been a director
of the Company since its incorporation in June 1989. He became Co-Chairman of
the Board in January 1996. Mr. Vento also served as Co-Chief Executive Officer
from January 1989 to February 1996, as President from June 1994 to July 1995,
as Secretary from July 1989 to November 1993 and as Vice President, Sales and
Marketing, from July 1990 to June 1994. From January 1987 to February 1989, he
co-founded and served as Vice President, Business Development, of TelWatch,
Inc. Prior to January 1987, he was for more than 23 years involved in a number
of software companies, including TelAccount, Inc., Schmidt Associates,
Computer Sciences Corporation, ADP Network Services and
5
<PAGE>
TYMSHARE, Inc., serving in a variety of management positions. Mr. Vento
received a B.A. degree in Mathematics, a B.S. degree in Business and a B.S.
degree in Econometric Statistics from San Francisco State University and an
A.A. degree in Liberal Arts from Foothill College.
Joseph T. Ambrozy became Chief Executive Officer of the Company in February
1996. He has served as President of the Company since November 1995 and has
been a director of the Company since August 1995. From January 1993 to
November 1995, Mr. Ambrozy served as Vice President, Strategic Planning, of
Bell Atlantic, a telecommunications company. From May 1988 to January 1993, he
served as Vice President, Information Systems, of Bell Atlantic Network
Services, Inc. Prior to that time, Mr. Ambrozy served in a variety of
managerial positions for Bell Atlantic and AT&T. Mr. Ambrozy received a B.E.
degree in Mechanical Engineering and an M.S. degree in Industrial Management
from Stevens Institute of Technology.
George F. Schmitt has served as a director of the Company since October
1995. Mr. Schmitt has been President of Omnipoint Communications Inc. and
Executive Vice President of Omnipoint Corporation (collectively, "Omnipoint")
since October 1995. From November 1994 to September 1995, Mr. Schmitt was
President and Chief Executive Officer of PCS PrimeCo, a personal
communications service partnership formed by AirTouch Communications, NYNEX,
Bell Atlantic and US West. From November 1993 to November 1994, Mr. Schmitt
was Executive Vice President, International Operations, of AirTouch
Communications. From January 1990 to March 1994, he served as Vice President
of Pacific Telesis Group, a predecessor to AirTouch. Prior to January 1990,
Mr. Schmitt held various management positions with Pacific Telesis Group and
Pacific Bell. Mr. Schmitt is a director of Omnipoint Corporation. Mr. Schmitt
received a B.A. degree from St. Mary's College of California and an M.S.M.
degree from Stanford University.
Jonathan B. Shantz has served as a director of the Company since January
1996. Mr. Shantz has been Vice President, Service Provider Market, of Cisco
Systems, Inc. since November 1995. From April 1992 to October 1995, Mr. Shantz
was with British Telecom, where he was the Head of the Applications and
Information Markets area. Prior to April 1992, he held various managerial
positions at Bellcore and Bell Laboratories. Mr. Shantz received a B.A. degree
from UC Santa Barbara in Economics/Math, an M.S. degree from the University of
Arizona in Systems Engineering and an M.B.A. degree from Rutgers University.
Dr. Kornel Terplan has served as a director of the Company since August
1992. Since 1983, Dr. Terplan has served as President of Performance
Navigations, Inc., a telecommunications company. Prior to that time,
Dr. Terplan served as a consultant and systems engineer to Computer Sciences
Corporation and Tesdata, Inc., both telecommunications companies. For more
than 25 years, Dr. Terplan has served as a corporate consultant providing
consulting, training and product development services to various national and
multinational corporations in the telecommunications industry, including AT&T,
France Telecom and Siemens. He received a B.A. degree in Electronics, an M.S.
degree in Electronics and a Ph.D. degree in Operational Research from the
University of Dresden, Germany.
BOARD MEETINGS AND COMMITTEES
The Board held a total of two meetings during fiscal 1996. Prior to January
1996, all resolutions adopted by the Board were by unanimous written consents.
No director attended fewer than seventy-five percent (75%) of the meetings of
the Board and its committees, if any, upon which he served. The Board has an
Audit Committee and a Compensation Committee. The Board has no nominating
committee or any committee performing such functions.
The Audit Committee, which consisted of Messrs. Schmitt, Shantz and Terplan
during fiscal 1996, is responsible for overseeing the Company's independent
auditors and reviewing the Company's internal financial procedures and
controls. The Audit Committee met once during fiscal 1996.
The Compensation Committee, which consisted of Messrs. Schmitt, Shantz and
Terplan during fiscal 1996, is responsible for determining salaries,
incentives and other forms of compensation for directors, officers and other
employees of the Company. The Compensation Committee also administers various
of the Company's incentive compensation and benefit plans. The Compensation
Committee met once during fiscal 1996.
6
<PAGE>
PROPOSAL TWO
AMENDMENT OF 1994 STOCK OPTION PLAN
At the Annual Meeting, the shareholders are being asked to approve an
amendment of the Company's 1994 Stock Option Plan (the "Plan") to increase the
number of shares of Common Stock reserved for issuance by 810,330 shares for a
total of 4,434,830 shares. The Plan was adopted by the Board and approved by
the shareholders in November 1994. In August 1995, the shareholders approved
an amendment to the Plan to (a) increase the number of shares of Common Stock
reserved for issuance by 1,375,000 shares, (b) make certain changes so that
the Plan complied with developments in various laws applicable to such plans,
and (c) terminate the eligibility of nonemployee directors to participate in
the Plan after a public offering. As of September 27, 1996, options to
purchase an aggregate of 2,330,578 shares of the Company's Common Stock were
outstanding, with a weighted average exercise price of $17.49 per share, and
2,000,000 shares (including the 810,330 shares subject to shareholder approval
at this Annual Meeting) were available for future grant. In addition,
104,252 shares have been purchased following the exercise of options under the
Plan.
The Plan authorizes the Board to grant stock options to eligible employees
and consultants of the Company. The Plan is structured to allow the Board
broad discretion in creating equity incentives to assist the Company in
attracting and retaining the best available personnel for the successful
conduct of the Company's business. The Company has had a longstanding practice
of linking the compensation of key employees to corporate performance, because
it believes that doing so will help to maximize shareholder value. The Company
has, therefore, consistently included equity incentives as a significant
component of compensation for a broad range of the Company's employees. This
practice has enabled the Company to attract and retain the talent that it
continues to require.
The Board believes that the remaining shares available for grant under the
Plan are insufficient to accomplish the purposes described above. In order to
retain the services of valuable employees as the Company matures, it will be
necessary to grant additional options as outstanding options become fully
vested. In order to attract the highly qualified people that it needs, it will
also be necessary to grant options to new employees.
VOTE REQUIRED
The affirmative vote of a majority of the votes cast will be required to
approve the amendment to the Plan. In addition, the affirmative votes must
represent at least a majority of the required quorum for the Meeting, or a
majority of the shares outstanding at the Record Date. Votes that are cast
against the proposal will be counted for purposes of determining both (a) the
presence or absence of a quorum, and (b) the total number of votes cast on the
proposal. Abstentions will be counted for purposes of determining both (a) the
presence or absence of a quorum for the transaction of business, and (b) the
total number of votes cast on the proposal. Accordingly, abstentions will have
the same effect as a vote against the proposal. Broker nonvotes will be
counted for purposes of determining the presence or absence of a quorum for
the transaction of business, but will not be counted for purposes of
determining the number of votes cast with respect to this proposal.
THE BOARD RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR APPROVAL OF THE
AMENDMENT TO THE PLAN.
The essential terms of the Plan are as follows:
PURPOSES
The purposes of the Plan are to attract and retain the best available
personnel for positions of substantial responsibility, to provide additional
incentives to employees and consultants of the Company, and to promote the
success of the Company's business.
ADMINISTRATION
The Plan provides for administration by the Board or by a committee approved
by the Board. The Plan is currently being administered by the Board's
Compensation Committee, except that grants to executive officers are approved
by the entire Board. The Board, or the committee appointed to administer the
Plan, is referred to in
7
<PAGE>
this description as the "Administrator." The Administrator sets the terms of
options granted, including their exercise price, the number of shares subject
to the option and exercise restrictions. All questions of interpretation are
determined by the Administrator and its decisions are final. Members of the
Board receive no additional compensation for their services in connection with
the administration of the Plan.
ELIGIBILITY
The Plan provides that either incentive or nonstatutory stock options may be
granted to employees (including officers and employee directors) of the
Company or any of its designated subsidiaries. In addition, the Plan provides
that nonstatutory options may be granted to consultants of the Company or any
of its designated subsidiaries. The Administrator selects the optionees and
determines the number of shares to be subject to each option. In making this
determination, the Administrator takes into account the duties and
responsibilities of the optionee, the value of the optionee's services, the
optionee's present and potential contribution to the success of the Company
and other relevant factors. The Plan does not provide for a minimum number of
option shares which may be granted to any one employee. The Plan provides a
limit of $100,000 on the aggregate fair market value of shares subject to all
incentive options which are exercisable for the first time in any one calendar
year.
TERMS OF OPTIONS
Each option is evidenced by a stock option agreement between the Company and
the optionee and is subject to the following additional terms and conditions:
(1) Exercise of the Option: The Administrator determines when options
granted under the Plan may be exercised. An option is exercised by giving
written notice to the Company, specifying the number of shares of Common
Stock to be purchased and tendering payment of the purchase price. Payment
for shares issued on exercise of an option may consist of cash, check,
promissory note, delivery of already-owned shares of the Company's Common
Stock subject to certain conditions or such other consideration as
determined by the Administrator and as permitted by the California
Corporations Code. A cashless exercise procedure also exists. Under this
procedure, the optionee provides irrevocable instructions to a brokerage
firm to sell the purchased shares and remit to the Company, out of the sale
proceeds, an amount equal to the exercise price plus all applicable
withholding taxes.
Options may be exercised at any time on or after the date the options are
first exercisable. An option may not be exercised for a fraction of a
share.
(2) Option Price: The option price for all stock options under the Plan
is determined by the Administrator. In the case of incentive stock options,
the option price must always equal or exceed the fair market value of the
Common Stock on the date the option is granted. For purposes of the Plan,
fair market value is defined as the closing sales price per share of the
Common Stock on the date of grant as reported on the Nasdaq National
Market. For any option granted to an optionee who, at the time of grant,
owns stock representing more than 10% of the voting power of all classes of
stock of the Company, the option price must be not less than 110% of the
fair market value on the date of grant.
(3) Termination Of Employment: The Plan provides that if the optionee's
employment is terminated for any reason other than death or disability,
options must be exercised within 30 days (or such other period, not
exceeding three months in the case of incentive stock options, as is
determined by the Administrator) after termination, but only to the extent
the options were exercisable on the date of termination.
(4) Death: If an optionee dies while an employee or a consultant of the
Company, options may be exercised at any time within twelve months after
the date of death, but only to the extent that the options were exercisable
on the date of death and in no event later than the expiration of the
option term.
(5) Disability: If an optionee's employment is terminated due to a
disability, options may be exercised at any time within twelve months from
the date of termination, but only to the extent that the options were
exercisable on the date of termination and in no event later than the
expiration of the option term.
8
<PAGE>
(6) Termination of Options: Options granted under the Plan expire ten
years from the date of grant. However, incentive stock options granted to
an optionee who, immediately before the grant, owns more than 10% of the
Company's Common Stock, may not have a term of more than five years. No
option may be exercised after it expires.
(7) Nontransferability of Options: An option is not transferable by the
optionee other than by will or the laws of descent and distribution.
Options are exercisable only by the optionee during his lifetime or, if he
dies, by a person who acquires the right to exercise the option by bequest,
inheritance or otherwise.
CAPITAL CHANGES
If the capitalization of the Company is changed in any way without the
Company receiving consideration, such as a stock split or dividend, and the
result is a change in the number of shares of Common Stock, appropriate
adjustment will be made in the option price and in the number of shares
subject to each option. If dissolution or liquidation of the Company is
proposed, all outstanding options will automatically terminate. If the Company
merges with or into another corporation or substantially all of the Company's
assets are sold, (a) all outstanding options will be assumed or an equivalent
option substituted by the successor corporation, or (b) if the option is not
assumed or submitted, the outstanding options will terminate as of the date of
the closing of the merger.
AMENDMENT AND TERMINATION
The Board may amend, alter, suspend or terminate the Plan at any time or
from time to time. Any amendment, alteration, suspension or termination may
not adversely affect options then outstanding without the consent of the
optionee. The Plan will end in 2004.
In addition, to the extent necessary to comply with Rule 16b-3 or with
Section 422 of the Code (or any other applicable law or regulation), the
Company will obtain shareholder approval of any amendment of the Plan in such
a manner and to such a degree as required.
TAX INFORMATION
Options granted under the Plan may be either "incentive stock options," as
defined in Section 422 of the Code, or nonstatutory options.
An optionee who is granted an incentive stock option will not recognize
taxable income either at the time the option is granted or on its exercise,
although exercise may subject the optionee to the alternative minimum tax. On
the sale or exchange of the shares more than two years after grant and one
year after exercise, 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 at the time of sale or exchange equal to the
difference between the exercise price and the lower of (a) the fair market
value of the shares at the date of exercise, or (b) the sale price of the
shares. A different rule for measuring ordinary income on a premature
disposition may apply if the optionee is also an officer, director or 10%
shareholder of the Company. Generally, the Company will be entitled to a
deduction in the same amount as the ordinary income recognized by the
optionee. Any gain or loss recognized on a premature disposition in excess of
the amount treated as ordinary income will be characterized as long-term or
short-term capital gain or loss, depending on the holding period.
All options which do not qualify as incentive stock options are referred to
as nonstatutory options. An optionee will not recognize taxable income at the
time the nonstatutory option is granted. However, on exercise, the optionee
will recognize ordinary income generally measured as the excess of the then
fair market value of the shares purchased over their purchase price. Taxable
income recognized in connection with an exercise by an optionee who is also an
employee of the Company will be subject to tax withholding. On resale of the
shares by the optionee, the difference between the sales price and the
optionee's purchase price, to the extent not recognized as taxable income,
will be treated as long-term or short-term capital gain or loss, depending on
the holding period. Generally, 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 on exercise of a nonstatutory option.
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PARTICIPATION IN THE PLAN
The grant of options under the Plan to executive officers, including the
officers named in the Summary Compensation Table below, is subject to the
discretion of the Administrator. As of the date of this proxy statement, there
has been no determination by the Administrator with respect to future awards
under the Plan. The table of option grants under "Executive Compensation and
Other Matters--Option Grants in Last Fiscal Year" provides information
concerning the grant of options to the officers named in the Summary
Compensation Table during fiscal 1996. Information regarding options granted
to nonemployee Directors during fiscal 1996 is set forth under the heading
"Executive Compensation and Other Matters--Compensation of Directors." During
fiscal 1996, all current officers, as a group, and all non officer employees,
as a group, received options to purchase 485,000 shares and 958,525 shares,
respectively, under the Plan.
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PROPOSAL THREE
REINCORPORATION IN DELAWARE
INTRODUCTION
The Board of Directors believes that the best interests of the Company and
its shareholders will be served by changing the Company's state of
incorporation from California to Delaware (the "Reincorporation Proposal" or
the "Proposed Reincorporation"). As discussed below, the principal reasons for
reincorporation are the greater flexibility of Delaware corporate law, the
substantial body of case law interpreting Delaware corporate law and the
increased ability of the Company to attract and retain qualified directors.
The Company believes that its shareholders will benefit from the well
established principles of corporate governance that Delaware law affords.
Although Delaware law provides the opportunity for the Board of Directors to
adopt various mechanisms which may enhance the Board's ability to negotiate
favorable terms for the shareholders in the event of an unsolicited takeover
attempt, the proposed Delaware certificate of incorporation and bylaws are
substantially similar to those currently in effect in California. However,
changes proposed in connection with the Reincorporation Proposal include the
following: (a) shareholder action by written consent will be eliminated,
(b) the remaining directors will be able to appoint a director to replace
another removed by the shareholders, (c) special meetings of the shareholders
may only be called by the Board of Directors, and (d) shareholders intending
to nominate candidates for election as directors or to propose items of
business for consideration at shareholder meetings must meet certain advance
notice requirements. In addition, in connection with the Reincorporation
Proposal the authorized shares of Common Stock of the Company are being
increased from 50,000,000 shares to 100,000,000 shares. See "The Charters and
Bylaws of OSI California and OSI Delaware."
The Reincorporation Proposal is not being put forward to prevent an
unsolicited takeover attempt, nor is it in response to any present attempt
known to the Board to acquire control of the Company, obtain representation on
the Board or take significant action that affects the Company. SHAREHOLDERS
ARE URGED TO READ CAREFULLY THE FOLLOWING SECTIONS OF THIS PROXY STATEMENT,
INCLUDING THE RELATED EXHIBITS, BEFORE VOTING ON THE REINCORPORATION PROPOSAL.
Throughout the Proxy Statement, the term "OSI California" refers to the
existing California corporation and the term "OSI Delaware" refers to the new
proposed Delaware corporation, a wholly-owned subsidiary of OSI California,
which is the proposed successor to OSI California.
The Reincorporation Proposal will be effected by merging OSI California into
OSI Delaware (the "Merger"). On completion of the Merger, OSI California will
cease to exist and OSI Delaware will continue to operate the business of the
Company under the name Objective Systems Integrators, Inc. Pursuant to the
Agreement and Plan of Merger between OSI California and OSI Delaware, a copy
of which is attached as Appendix A (the "Merger Agreement"), each outstanding
share of OSI California Common Stock, no par value, will automatically be
converted into one share of OSI Delaware Common Stock, $.001 par value. IT IS
NOT NECESSARY FOR SHAREHOLDERS TO EXCHANGE THEIR EXISTING STOCK CERTIFICATES
FOR STOCK CERTIFICATES OF OSI DELAWARE.
On the date when the Merger becomes effective (the "Effective Date"), OSI
Delaware will also assume and continue the outstanding stock options and all
other employee benefit plans of OSI California. Each outstanding and
unexercised option, warrant or other right to purchase shares of OSI
California Common Stock will become an option, warrant or right to purchase
the same number of shares of OSI Delaware Common Stock on the same terms and
conditions and at the same exercise price applicable to the OSI California
option, warrant or right.
The Proposed Reincorporation has been unanimously approved by OSI
California's Board. If approved by the shareholders, it is anticipated that
the Effective Date of the Merger will be as soon as practicable following the
Annual Meeting of Shareholders. However, pursuant to the Merger Agreement, the
Merger may be abandoned or the Merger Agreement may be amended by the Board
(except that certain principal terms may not be amended without shareholder
approval) either before or after shareholder approval has been obtained and
prior to the Effective Date if, in the opinion of the Board of either company,
circumstances arise that make it inadvisable to proceed.
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Shareholders of OSI California will have no dissenters' rights of appraisal
with respect to the Reincorporation Proposal. See "Significant Differences
Between the Corporation Laws of California and Delaware--Appraisal Rights."
The discussion set forth below is qualified in its entirety by reference to
the Merger Agreement, the Certificate of Incorporation and the Bylaws of OSI
Delaware, the copies of which are attached hereto as Appendix A, Appendix B
and Appendix C, respectively.
VOTE REQUIRED FOR THE REINCORPORATION PROPOSAL
The affirmative vote of the holders of a majority of the outstanding shares
of OSI California Common Stock will be required for approval of the
Reincorporation Proposal which will also constitute approval of (a) the Merger
Agreement, the Certificate of Incorporation and the Bylaws of OSI Delaware,
(b) the assumption of OSI California's employee benefit plans and outstanding
stock options by OSI Delaware and (c) the adoption of the Company's new
indemnification agreements with its officers and directors to conform those
agreements to Delaware law a form of which is attached hereto as Appendix D.
The effect of an abstention or a broker nonvote is the same as that of a vote
against the Reincorporation Proposal.
THE BOARD RECOMMENDS A VOTE "FOR" THE PROPOSED REINCORPORATION IN DELAWARE.
PRINCIPAL REASONS FOR THE PROPOSED REINCORPORATION
As the Company plans for the future, the Board and management believe that
it is essential to be able to draw upon well-established principles of
corporate governance in making legal and business decisions. The prominence
and predictability of Delaware corporate law provide a reliable foundation on
which the Company's governance decisions can be based. The Company believes
that shareholders will benefit from the responsiveness of Delaware corporate
law to their needs and to those of the corporation they own.
Prominence, Predictability and Flexibility of Delaware Law. For many years
Delaware has followed a policy of encouraging incorporation in that state and,
in furtherance of that policy, has been a leader in adopting, construing and
implementing comprehensive, flexible corporate laws responsive to the legal
and business needs of corporations organized under its laws. Many corporations
have chosen Delaware initially as a state of incorporation or have
subsequently changed corporate domicile to Delaware in a manner similar to
that proposed by the Company. Because of Delaware's prominence as the state of
incorporation for many major corporations, both the legislature and the courts
in Delaware have demonstrated an ability and a willingness to act quickly and
effectively to meet changing business needs. The Delaware courts have
developed considerable expertise in dealing with corporate issues and a
substantial body of case law has developed construing Delaware law and
establishing public policies with respect to corporate legal affairs.
Increased Ability to Attract and Retain Qualified Directors. Both California
and Delaware law permit a corporation to include a provision in its
certificate of incorporation which reduces or limits the monetary liability of
directors in certain circumstances for breaches of fiduciary duty. The
increasing frequency of claims and litigation has greatly expanded the risks
facing corporate directors and officers in exercising their respective duties.
The amount of time and money required to respond to these claims and to defend
the litigation can be substantial. It is the Company's wishes to reduce these
risks to its directors and officers and to limit situations in which monetary
damages can be recovered against directors so that the Company may continue to
attract and retain qualified individuals who otherwise might be unwilling to
serve because of the risks involved. The Company believes that, in general,
Delaware law provides greater protection to directors than California law. It
also believes that Delaware case law regarding a corporation's ability to
limit director liability is more developed and provides more guidance than
California law. In addition, the Company believes that the passage of
Proposition 211, a California ballot initiative to be voted upon by the
citizens of California in November 1996, could make it more difficult for the
Company to attract and retain qualified directors due to the ballot
initiative's reduction in the scope and nature of indemnification available
for directors and officers. See "The Charters and Bylaws of OSI California and
OSI Delaware--Monetary Liability of Directors."
Well Established Principles of Corporate Governance. There is substantial
judicial precedent in the Delaware courts as to the legal principles
applicable to measures that may be taken by a corporation and the conduct of
the Board under the business judgment rule. The Company believes that its
shareholders will benefit from the well established principles of corporate
governance that Delaware law affords.
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NO CHANGE IN THE NAME, BOARD MEMBERS, BUSINESS, MANAGEMENT, EMPLOYEE PLANS OR
LOCATION OF PRINCIPAL FACILITIES OF THE COMPANY
The Reincorporation Proposal will effect a change in the legal domicile of
the Company, but not its physical location. The Proposed Reincorporation will
not result in any change in the name, business, management, fiscal year,
assets or liabilities (except to the extent of legal and other costs of
effecting the reincorporation) or location of the principal facilities of the
Company. The six directors who are elected at the Annual Meeting of
Shareholders will become the directors of OSI Delaware. All employee benefit
plans of OSI California will be assumed and continued by OSI Delaware. All
stock options, warrants or other rights to acquire Common Stock of OSI
California will automatically be converted into an option, warrant or right to
purchase the same number of shares of OSI Delaware Common Stock at the same
price per share, on the same terms and subject to the same conditions. OSI
California's other employee benefit arrangements will also be continued by OSI
Delaware on the terms and subject to the conditions currently in effect.
ANTITAKEOVER IMPLICATIONS
Delaware, like many other states, permits a corporation to adopt a number of
measures through amendment of its certificate of incorporation or bylaws or
otherwise, which are designed to reduce a corporation's vulnerability to
unsolicited takeover attempts. The Reincorporation Proposal is not being put
forward to prevent an unsolicited takeover attempt, nor is it in response to
any present attempt known to the Board to acquire control of the Company,
obtain representation on the Board or take significant action that affects the
Company.
Nevertheless, certain effects of the Reincorporation Proposal may be
considered to have antitakeover implications. Section 203 of the Delaware
General Corporation Law ("Section 203"), from which OSI Delaware does not
intend to opt out, restricts certain "business combinations" with "interested
shareholders" for three years after the date that a person or entity becomes
an interested shareholder, unless the Board approves the business combination
and/or other requirements are met. See "Significant Differences Between the
Corporation Laws of California and Delaware--Shareholder Approval of Certain
Business Combinations." The Certificate of Incorporation of OSI Delaware
permits cumulative voting, and cumulative voting may make it more difficult to
remove a given board member. Removing the right of 10% shareholders to call a
special meeting has an antitakeover impact because a hostile acquiror could
not act before the annual meeting to establish a majority on the Board without
making a tender offer. Other measures permitted under Delaware law, which the
Company does not intend to implement include the establishment of a staggered
board of directors. The elimination of cumulative voting and the establishment
of a classified board of directors can also be undertaken under California law
in certain circumstances. For a detailed discussion of all of the changes that
will be implemented as part of the Proposed Reincorporation, see "The Charters
and Bylaws of OSI California and OSI Delaware." For a discussion of
differences between the laws of California and Delaware, see "Significant
Differences Between the Corporation Laws of California and Delaware."
In addition, Delaware law permits a corporation to adopt such measures as
shareholder rights plans designed to reduce a corporation's vulnerability to
unsolicited takeover attempts. There is substantial judicial precedent in the
Delaware courts as to the legal principles applicable to these defensive
measures and as to the conduct of a board of directors under the business
judgment rule with respect to unsolicited takeover attempts. The Board has no
present intention after the Proposed Reincorporation to amend the Certificate
of Incorporation or Bylaws to include additional provisions which might deter
an unsolicited takeover attempt. However, in the discharge of its fiduciary
obligations to its shareholders, the Board will continue to evaluate the
Company's vulnerability to potential unsolicited acquisition bids and to
consider strategies to enhance the Board's ability to negotiate with an
unsolicited bidder.
THE CHARTERS AND BYLAWS OF OSI CALIFORNIA AND OSI DELAWARE
The provisions of the OSI Delaware Certificate of Incorporation and Bylaws
are similar to those of OSI California in many respects. However, the
Reincorporation Proposal includes the implementation of certain
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provisions in the OSI Delaware Certificate of Incorporation and Bylaws that
alter the rights of shareholders and the powers of management. In addition,
OSI Delaware could implement certain other changes by amending its Certificate
of Incorporation and Bylaws in the future. For a discussion of these changes,
see "Significant Differences Between the Corporation Laws of California and
Delaware."
The Articles of Incorporation of OSI California currently authorize the
Company to issue up to 50,000,000 shares of Common Stock, no par value, and
5,000,000 shares of Preferred Stock, no par value. The Certificate of
Incorporation of OSI Delaware provides that OSI Delaware will have 100,000,000
authorized shares of Common Stock, $.001 par value, and 5,000,000 shares of
Preferred Stock, $.001 par value. Like OSI California's Articles of
Incorporation, OSI Delaware's Certificate of Incorporation provides that the
Board is entitled to determine the powers, preferences and rights, and the
qualifications, limitations or restrictions, of the authorized and unissued
preferred stock. Thus, although it has no present intention of doing so, the
Board, without shareholder approval, could authorize the issuance of Preferred
Stock on terms which could have the effect of delaying or preventing a change
in control of the Company or modifying the rights of holders of the Company's
Common Stock under either California or Delaware law. The Board could also use
these shares for further financings, possible acquisitions and other uses.
Increase in Authorized Shares of Common Stock. In connection with the
Proposed Reincorporation the Board authorized a provision in OSI Delaware's
Certificate of Incorporation providing for authorized shares of Common Stock
of 100,000,000 shares. Approval of the Reincorporation Proposal will
constitute approval of the increase in the authorized shares of Common Stock.
The authorized but unissued shares of Common Stock would be available for
issuance from time to time for such purposes and for such consideration as the
Board determines to be appropriate without further action by the shareholders,
except for those instances in which applicable law or stock exchange rules
require shareholder approval.
Of the 50,000,000 currently authorized shares of Common Stock, 31,831,815
shares were issued and outstanding as of September 27, 1996, and an aggregate
of approximately 11,200,000 shares of Common Stock were reserved for issuance
under the Company's stock option and employee benefit plans.
The Board believes that it is in the Company's best interests to increase
the number of authorized shares of Common Stock in order to have additional
authorized but unissued shares available without the expense and delay of a
special meeting of shareholders. The Board believes that the availability of
such shares will provide the Company with the flexibility to issue Common
Stock for proper corporate purposes which may be identified by the Board in
the future. For example, shares may be issued if the Board determines that it
is necessary or appropriate to permit a future stock dividend or stock split,
to raise additional capital, to acquire another corporation or another
corporation's business or assets, or to establish a strategic relationship
with a corporate partner. The Board does not intend to authorize the issuance
of any such shares except on terms the Board deems to be in the best interests
of the Company.
If the Reincorporation Proposal is approved by the shareholders, the Board
does not intend to solicit further shareholder approval before issuing any
additional shares of Common Stock, except as may be required by applicable law
or stock exchange rules. The increase in authorized Common Stock will not have
any immediate effect on the rights of existing shareholders. To the extent
that the additional authorized shares are issued in the future, they will
decrease the existing shareholders' percentage equity ownership and, depending
on the price at which they are issued, could be dilutive to the existing
shareholders. Holders of the Company's securities have no statutory preemptive
rights with respect to issuances of Common Stock.
The Company intends to apply to Nasdaq for the listing of any additional
shares of Common Stock if and when such shares are issued.
The increase in the authorized number of shares of Common Stock and the
subsequent issuance of these shares could have the effect of delaying or
preventing a change-in-control of the Company without further action
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by the shareholders. Shares of authorized and unissued Common Stock could
(within the limits imposed by applicable law) be issued in one or more
transactions that would make a change-in-control of the Company more difficult
and, therefore, less likely. Any such issuance of additional stock could have
the effect of diluting the earnings per share and book value per share of
outstanding shares of Common Stock. Additional shares could be used to dilute
the stock ownership or voting rights of a person seeking to obtain control of
the Company.
Monetary Liability of Directors. The Articles of Incorporation of OSI
California and the Certificate of Incorporation of OSI Delaware both provide
for the elimination of personal monetary liability of directors to the fullest
extent permissible under law. The provision eliminating monetary liability of
directors set forth in the OSI Delaware Certificate of Incorporation is
potentially more expansive than the corresponding provision in the OSI
California Articles of Incorporation, in that the former incorporates future
amendments to Delaware law with respect to eliminating of this liability. In
connection with the Proposed Reincorporation, the Company will enter into new
indemnification agreements with its officers and directors that conform to
Delaware law. For a more detailed explanation of the foregoing, see
"Significant Differences Between the Corporation Laws of California and
Delaware--Indemnification and Limitation of Liability." A form of the OSI
Delaware Indemnification Agreement is attached as Appendix D.
In addition, the California electorate will consider Proposition 211 on
November 5, 1996. If adopted, Proposition 211 would amend the California
General Corporation Law to prohibit the Company from indemnifying its officers
and directors for defense costs or amounts paid in settlement or judgment for
causes of action alleging securities fraud. The limitation on indemnification
that could be imposed by Proposition 211 contrasts with the current California
law that permits indemnification if the corporation finds that the directors
and officers acted in good faith and in a manner that they believed to be in
the best interests of the Company. Delaware does not have limitations on
indemnification similar to those contemplated by Proposition 211. See
"Significant Differences Between the Corporation Laws of California and
Delaware--Indemnification and Limitation of Liability."
Size of the Board of Directors. The Bylaws of OSI Delaware provide for a
board of directors consisting of six directors. The Bylaws of OSI California
provide for a Board of from four to seven members, with the exact number
currently set at six directors. Under California law, although changes in the
number of directors must generally be approved by a majority of the
outstanding shares, the Board may fix the exact number of directors within a
stated range set forth in the articles of incorporation or bylaws, if the
stated range has been approved by the shareholders. Delaware law permits the
board of directors acting alone, to change the authorized number of directors
by amending the bylaws, unless the directors are not authorized to amend the
bylaws or the number of directors is fixed in the certificate of incorporation
(in which case a change in the number of directors may be made only by
amendment to the certificate of incorporation after approval of the change by
the shareholders). The OSI Delaware Certificate of Incorporation provides that
the number of directors will be as specified in the Bylaws and authorizes the
Board to adopt, alter, amend or repeal the Bylaws. Following the Proposed
Reincorporation, the Board of OSI Delaware could amend the Bylaws to change
the size of the Board from six directors without further shareholder approval.
If the Reincorporation Proposal is approved, the six directors of OSI
California who are elected at the Annual Meeting of Shareholders will continue
as the six directors of OSI Delaware after the Proposed Reincorporation is
consummated.
Cumulative Voting for Directors. Under California law, if any shareholder
has given notice of an intention to cumulate votes for the election of
directors, any other shareholder is also entitled to cumulate votes at the
election. Under Delaware law, cumulative voting in the election of directors
is not mandatory, but is a permitted option. The OSI Delaware Certificate of
Incorporation provides for cumulative voting rights and thus the voting rights
are unchanged from those of the OSI California Articles.
Cumulative voting provides that each share of stock normally having one vote
is entitled to a number of votes equal to the number of directors to be
elected. A shareholder may then cast all votes for a single candidate
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or may allocate them among as many candidates as the shareholder chooses. In
the absence of cumulative voting, the holders of a majority of the shares
present or represented at a meeting in which directors are to be elected would
have the power to elect all of the directors to be elected at the meeting. No
person could be elected without the support of holders of a majority of the
shares present or represented at the meeting. Elimination of cumulative voting
would make it more difficult for a minority shareholder to obtain
representation on the Board.
Power to Call Special Shareholders' Meetings. Under California law, a
special meeting of shareholders may be called by the Board of Directors, the
Chairman of the Board, the President, the holders of shares entitled to cast
not less than ten percent (10%) of the votes at the meeting and such
additional persons as are authorized by the articles of incorporation or the
bylaws. Under Delaware law, a special meeting of shareholders may be called by
the board of directors or by any other person authorized to do so in the
Certificate of Incorporation or the Bylaws. The Bylaws of OSI Delaware
authorize only the Board to call a special meeting of shareholders. The
elimination of shareholders' right to call a special meeting would mean that a
shareholder could not force consideration of a proposal over the opposition of
the board of directors by calling a special meeting before the Board believed
consideration to be appropriate or until the next annual meeting. The
restriction has the effect of making it more difficult for shareholders to
remove directors.
Removal of Directors. The Bylaws of OSI Delaware provide that directors may
be removed from office by shareholders only for cause. For purposes of these
provisions, "cause" means (a) continued willful failure to perform the
obligations of a director, (b) gross negligence by the director, (c) engaging
in transactions that defraud the Company, (d) fraud or intentional
misrepresentation including falsifying use of funds and intentional
misstatements made in financial statements, books, records or reports to
shareholders or governmental agencies, (e) material violation of any agreement
between the director and the Company, (f) knowingly causing the Company to
commit violations of applicable law (including by failure to act), (g) acts of
moral turpitude, or (h) conviction of a felony.
The provisions relating to removal of directors preclude the removal of any
particular director or group of directors unless removal is warranted for
cause. One method employed by takeover bidders to obtain control of a company
is to acquire a significant percentage of the outstanding shares and to use
that voting power to replace the existing directors with individuals chosen by
the takeover bidder. Requiring cause in order to remove a director defeats
this strategy, thereby encouraging potential takeover bidders to obtain the
cooperation of the existing Board before attempting a takeover.
Filling Vacancies on the Board. Under California law, any vacancy on the
Board other than one created by removal of a director may be filled by the
Board. If the number of directors is less than a quorum, a vacancy may be
filled by the unanimous written consent of the directors then in office, by
the affirmative vote of a majority of the directors at a duly noticed meeting
(or by waivers of notice) or by a sole remaining director. A vacancy created
by removal of a director may be filled by the Board only if so authorized by a
corporation's articles of incorporation or by a bylaw approved by the
corporation's shareholders. OSI California's Articles of Incorporation and
Bylaws do not permit directors to fill vacancies created by removal of a
director unless the director has been convicted of a felony or found to be of
unsound mind. Under Delaware law, vacancies and newly created directorships
may be filled by a majority of the directors then in office (even though less
than a quorum) or by a sole remaining director, unless otherwise provided in
the certificate of incorporation or bylaws (or unless the certificate of
incorporation directs that a particular class of stock is to elect the
director(s), in which case a majority of the directors elected by the class,
or a sole remaining director so elected, will fill the vacancy or newly
created directorship). In connection with the Proposed Reincorporation, the
Board of Directors of OSI Delaware will adopt a provision in OSI Delaware's
Bylaws that permit the remaining directors to fill any vacancy created by
removal of directors by the shareholders.
Authorization of a Requirement of Advance Notice. Effective with the
Proposed Reincorporation, the Company proposes to establish an advance notice
procedure for to the nomination, other than by or at the direction of the
Board, of candidates for election as directors (the "Nomination Procedure")
and certain matters to be brought before an annual meeting of shareholders
(the "Business Procedure").
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The Nomination Procedure provides that only individuals nominated by or at
the direction of the Board or by a shareholder who has given timely written
notice to the Secretary of the Company before the meeting, will be eligible
for election as directors. The Business Procedure provides that at an annual
meeting of shareholders, and subject to any other applicable requirements,
only such business may be conducted as has been brought before the meeting by
or at the direction of the Board of Directors or by a shareholder who has
given timely written notice to the Secretary of the Company of the
shareholder's intention to bring such business before the meeting. In all
cases, to be timely, notice must be received by the Company prior to the date
specified in the Company's proxy statement released to stockholders in
connection with the previous year's annual meeting of stockholders
(approximately 150 days prior to the meeting). If no annual meeting was held
in the previous year or the date of the annual meeting has been changed by
more than 30 days from the date contemplated at the time of the previous
year's proxy statement, notice by the shareholder must be received by the
Company a reasonable time before the solicitation is made to be timely.
Under the Nomination Procedure, a shareholder's notice to the Company must
contain certain information about the nominee, including name, address, the
consent to be nominated and such other information as would be required to be
included in a proxy statement soliciting proxies for the election of the
nominee, and certain information about the shareholder, including name,
address, a representation that the shareholder is a holder of record of stock
entitled to vote at the meeting and a description of all arrangements or
understandings between the shareholder and each nominee. Under the Business
Procedure, notice relating to the conduct of business at an annual meeting of
shareholders other than the nomination of directors must contain certain
information about the business and about the shareholder who is proposing the
business. If the Chairman or other officer presiding at the meeting determines
that a person was not nominated in accordance with the Nomination Procedure,
the person will not be eligible for election as a director, or if it is
determined that other business was not properly brought before the meeting in
accordance with the Business Procedure, the business will not be conducted at
the meeting. Nothing in the Nomination Procedure or the Business Procedure
will preclude discussion by any shareholder of any nomination or business
properly made or brought before the annual meeting of shareholders in
accordance with these procedures.
By requiring advance notice of nominations by shareholders, the Nomination
Procedure affords the Board an opportunity to consider the qualification of
the proposed nominees and, to the extent deemed necessary or desirable by the
Board, to inform the shareholders about these qualifications. By requiring
advance notice of proposed business, the Business Procedure provides the Board
with an opportunity to inform shareholders of any business proposed to be
conducted at a meeting and the Board's position on that business, enabling
shareholders to better determine whether they desire to attend the meeting or
grant a proxy to the Board for the disposition of the business. In addition,
the Business Procedure provides for a more orderly procedure for conducting
the annual meeting of shareholders. Although the OSI Delaware Bylaws do not
give the Board any power to approve or disapprove shareholder nominations for
the election of directors or any other business desired by shareholders to be
conducted at an annual meeting, the OSI Delaware Bylaws may have the effect of
precluding a nomination for the election of directors or any other business at
a particular annual meeting if the proper procedures are not followed. In
addition, the procedures may discourage or deter a third party from conducting
a solicitation of proxies to elect its own slate of directors or otherwise
attempting to obtain control of the Company, even if the conduct of the
business or the attempt might be beneficial to the Company and its
shareholders.
Loans to Officers and Employees. Under California law, any loan or guaranty
to or for the benefit of a director or officer of the corporation or its
parent requires approval of the shareholders unless it is provided under a
plan approved by shareholders owning a majority of the outstanding shares of
the corporation. However, under California law, shareholders of corporations
with 100 or more shareholders of record, such as the Company, may approve a
bylaw authorizing the board of directors alone to approve loans or guaranties
to or on behalf of officers (whether or not the officers are directors) if the
board determines that the loan or guaranty may reasonably be expected to
benefit the corporation. The Bylaws of OSI California also contain such a
provision. Under the OSI
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Delaware Bylaws and in accordance with Delaware law, OSI Delaware may make
loans to, guarantee the obligations of or otherwise assist its officers or
other employees and those of its subsidiaries (including directors who are
also officers or employees) when doing so, in the judgment of the Board, may
reasonably be expected to benefit the corporation.
Voting by Ballot. California law provides that the election of directors may
proceed in the manner described in a corporation's bylaws. OSI California's
Bylaws provide that the election of directors at a shareholders' meeting may
be by voice vote or ballot, unless before the vote a shareholder demands a
vote by ballot, in which case the vote must be by ballot. Under Delaware law,
the right to vote by written ballot may be restricted if so provided in the
Certificate of Incorporation. The Bylaws of OSI Delaware do not address
election by ballot, but the Certificate of Incorporation of OSI Delaware,
consistent with OSI California's Bylaws, provides that if a shareholder
specifically demands election of directors by ballot (or if the Bylaws provide
that elections will be by ballot) then elections will be held by ballot.
Shareholders of OSI Delaware may therefore continue to demand election by
ballot, unless and until the Certificate of Incorporation is amended, which
would require a majority shareholder vote. It may be more difficult for a
shareholder to contest the outcome of a vote that has not been conducted by
written ballot.
Elimination of Actions by Written Consent of Shareholders. Under California
and Delaware law, shareholders may execute an action by written consent in
lieu of a shareholder meeting. Delaware law permits a corporation to eliminate
actions by written consent in its charter or bylaws. Elimination of written
consents could lengthen the amount of time required to take shareholder
actions since certain actions by written consent are not subject to the
minimum notice requirement of a shareholders' meeting. The elimination of
shareholders' written consents, however, would also deter hostile takeover
attempts. Without the shareholder's written consent, a holder or group of
holders controlling a majority of OSI Delaware's capital stock would not be
able to amend OSI Delaware's Bylaws or remove directors by a shareholder's
written consent. Any such holder or group of holders would have to call a
shareholders' meeting and wait the notice periods determined by the Board
under OSI Delaware's Bylaws before taking the action. The Bylaws of OSI
Delaware will provide for the elimination of actions by written consent of
shareholders.
COMPLIANCE WITH DELAWARE AND CALIFORNIA LAW
If the Reincorporation Proposal is approved, the Company will submit the
Merger Agreement to the office of the California Secretary of State and to the
office of the Delaware Secretary of State for filing after the Annual Meeting
of Shareholders.
SIGNIFICANT DIFFERENCES BETWEEN THE CORPORATION LAWS OF CALIFORNIA AND
DELAWARE
The corporation laws of California and Delaware differ in many respects.
Although all the differences are not set forth in this Proxy Statement,
certain provisions which could materially affect the rights of shareholders
are discussed below.
Shareholder Approval of Certain Business Combinations.
In recent years, a number of states have adopted special laws designed to
make more difficult certain kinds of "unfriendly" corporate takeovers, or
other transactions involving a corporation and one or more of its significant
shareholders. Under Section 203, certain "business combinations" with
"interested shareholders" of Delaware corporations are subject to a three-year
moratorium unless specified conditions are met.
Section 203 prohibits a Delaware corporation from engaging in a "business
combination" with an "interested shareholder" for three years after the date
that the person or entity becomes an interested shareholder. With certain
exceptions, an interested shareholder is a person or entity owing,
individually or collectively, fifteen
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percent (15%) or more of the corporation's outstanding voting stock (including
any rights to acquire stock under an option, warrant, agreement, arrangement
or understanding, or upon the exercise of conversion or exchange rights, and
stock with respect to which the person has voting rights only), or is an
affiliate or associate of the corporation and was the owner, individually or
collectively of fifteen percent (15%) or more of the voting stock at any time
within the previous three years, or is an affiliate or associate of any of the
foregoing.
For purposes of Section 203, the term "business combination" is defined
broadly to include mergers with or caused by the interested shareholder, sales
or other dispositions to the interested shareholder (except proportionately
with the corporation's other shareholders) of assets of the corporation or a
direct or indirect majority-owned subsidiary equal in aggregate market value
to ten percent (10%) or more of the aggregate market value of either the
corporation's consolidated assets or all of its outstanding stock, the
issuance or transfer by the corporation or a direct or indirect majority-owned
subsidiary of stock of the corporation, the subsidiary to the interested
shareholder (except for certain transfers in a conversion or exchange or a pro
rata distribution or certain other transactions, none of which increase the
interested shareholder's proportionate ownership of any class or series of the
corporation's or the subsidiary's stock or of the corporation's voting stock),
or receipt by the interested shareholder (except proportionately as a
shareholder), directly or indirectly, of any loans, advances, guarantees,
pledges or other financial benefits provided by or through the corporation or
a subsidiary.
The three-year moratorium imposed on business combinations by Section 203
does not apply if (a) before the date on which the shareholder becomes an
interested shareholder the board of directors approves either the business
combination or the transaction that resulted in the person or entity becoming
an interested shareholder, (b) upon consummation of the transaction that made
the person an interested shareholder, the interested shareholder owns at least
eighty-five percent (85%) of the corporation's voting stock outstanding at the
time the transaction commenced (excluding from the eighty-five percent (85%)
calculation shares owned by directors who are also officers of the target
corporation and shares held by employee stock plans that do not give employee
participants the right to decide confidentially whether to accept a tender or
exchange offer), or (c) on or after the date the person or entity becomes an
interested shareholder, the board of directors approves the business
combination and it is also approved at a shareholder meeting by sixty-six and
two-thirds percent (66 2/3%) of the outstanding voting stock not owned by the
interested shareholder.
Section 203 only applies to certain publicly held corporations that have a
class of voting stock that is (a) listed on a national securities exchange,
(b) quoted on an interdealer quotation system of a registered national
securities association or (c) held of record by more than 2,000 shareholders.
Although a Delaware corporation to which Section 203 applies may elect not to
be governed by Section 203, OSI Delaware does not intend to do so.
Section 203 will encourage any potential acquiror to negotiate with the
Company's Board. Section 203 may also have the effect of limiting the ability
of a potential acquiror to make a two-tiered bid for OSI Delaware in which all
shareholders would not be treated equally. Shareholders should note, however,
that the application of Section 203 to OSI Delaware will confer upon the Board
the power to reject a proposed business combination in certain circumstances,
even though a potential acquiror may be offering a substantial premium for OSI
Delaware's shares over the then-current market price. Section 203 would also
discourage certain potential acquirors unwilling to comply with its
provisions. See "Shareholder Voting."
Removal of Directors.
Under California law, any director or the entire board of directors may be
removed, with or without cause, with the approval of a majority of the
outstanding shares entitled to vote. However, no individual director may be
removed (unless the entire board is removed) if the number of votes cast
against removal would be sufficient to elect the director under cumulative
voting. In the case of a Delaware corporation having cumulative voting, if
less than the entire board is to be removed, a director may not be removed
without cause if the number of shares voted against removal would be
sufficient to elect the director.
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Classified Board of Directors.
A classified board is one on which a certain number, but not all, of the
directors are elected on a rotating basis each year. This method of electing
directors makes changes in the composition of the board of directors more
difficult. California law permits certain qualifying corporations to provide
for a classified board of directors by adopting amendments to their articles
of incorporation or bylaws. These amendments must be approved by the
shareholders. Although OSI California qualifies to adopt a classified board of
directors, the Board has no present intention of doing so. Delaware law
permits, but does not require, a classified board of directors. Under Delaware
law the directors can be divided into as many as three classes with staggered
terms of office, with only one class of directors standing for election each
year. The OSI Delaware Certificate of Incorporation and Bylaws do not provide
for a classified board. OSI Delaware presently does not intend to propose
establishment of a classified board. The establishment of a classified board
after the Proposed Reincorporation would require the approval of the
shareholders of OSI Delaware.
Indemnification and Limitation of Liability.
California and Delaware have similar laws respecting indemnification by a
corporation of its officers, directors, employees and other agents. The laws
of both states also permit, with certain exceptions, a corporation to adopt a
provision in its articles of incorporation or certificate of incorporation, as
the case may be, eliminating a director's liability for monetary damages if
the director breaches his fiduciary duty. There are nonetheless certain
differences between the laws of the two states in this area.
California law does not permit the elimination of monetary liability where
the liability is based on (a) intentional misconduct or knowing and culpable
violation of law, (b) acts or omissions that a director believes to be
contrary to the best interests of the corporation or its shareholders, or that
involve the absence of good faith on the part of the director, (c) receipt of
an improper personal benefit, (d) acts or omissions that show reckless
disregard for the director's duty to the corporation or its shareholders,
where the director in the ordinary course of performing his duties should be
aware of a risk of serious injury to the corporation or its shareholders, (e)
acts or omissions that constitute an unexcused pattern of inattention that
amounts to an abdication of the director's duty to the corporation and its
shareholders, (f) interested transactions between the corporation and the
director in which a director has a material financial interest, and (g)
liability for improper distributions, loans or guarantees.
Delaware law permits a corporation to eliminate the liability of directors
to the corporation or its shareholders for breach of fiduciary duty as a
director to the fullest extent permissible under Delaware law, as that law
exists currently or as it is amended in the future. However, such a provision
may not eliminate or limit director monetary liability for (a) breaches of the
director's duty of loyalty to the corporation or its shareholders, (b) acts or
omissions not in good faith or involving intentional misconduct or knowing
violations of law, (c) the payment of unlawful dividends or unlawful stock
repurchases or redemptions, or (d) transactions in which the director received
an improper personal benefit. Limitation of liability provisions may also not
limit a director's liability for violation of, or otherwise relieve a
corporation or its directors from the necessity of complying with, federal or
state securities laws, or affect the availability of non-monetary remedies
such as injunctive relief or rescission.
California law permits indemnification of expenses incurred in derivative or
third-party actions, except that with respect to derivative actions (a) no
indemnification may be made when a person is adjudged liable to the
corporation in the performance of no duty to the corporation and its
shareholders, unless a court determines the person is entitled to indemnity
for expenses, and then such indemnification may be made only to the extent
that the court determines, and (b) no indemnification may be made without
court approval in respect of amounts paid or expenses incurred in settling or
otherwise disposing of a threatened or pending action, or amounts incurred in
defending a pending action that is settled or otherwise disposed of, without
court approval.
California law requires indemnification when the individual has successfully
defended the action on the merits (as opposed to Delaware law, which requires
indemnification relating to a successful defense on the merits or otherwise).
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Delaware law generally permits indemnification of expenses, including
attorneys' fees, actually and reasonably incurred in the defense or settlement
of a derivative or third-party action. However, there must first be a
determination by a majority vote of a disinterested quorum of the directors,
by independent legal counsel or by a majority vote of a quorum of the
shareholders that the person seeking indemnification acted in good faith and
in a manner reasonably believed to be in or (in contrast to California law)
not opposed to the best interests of the corporation. Without court approval
no indemnification may be made in respect of a derivative action in which the
person is adjudged liable for negligence or misconduct in the performance of
his or her duty to the corporation. Delaware law requires indemnification of
expenses when the individual being indemnified has successfully defended any
action, claim, issue, or matter therein, on the merits or otherwise.
Expenses incurred by an officer or director in defending an action may be
paid in advance, under Delaware law and California law, if the director or
officer undertakes to repay the amounts if it is ultimately determined that he
is not entitled to indemnification. In addition, the laws of both states
authorize a corporation's purchase of indemnity insurance for the benefit of
its officers, directors, employees and agents, whether or not the corporation
would have the power to indemnify against the liability covered by the policy.
California law permits a California corporation to make mandatory the
permissive indemnification provided by California law to the extent doing so
is authorized in the corporation's articles of incorporation. If so
authorized, rights to this additional indemnification may be provided by
agreements or bylaw provisions. Under California law, there are two
limitations on such additional rights to indemnification (a) such
indemnification is not permitted for acts, omissions or transactions from
which a director of a California corporation may not be relieved of personal
liability, as described above, and (b) such indemnification is not permitted
in circumstances where California law expressly prohibits indemnification, as
described above.
Delaware law also permits a Delaware corporation to provide indemnification
in excess of that provided by statute. By contrast to California, Delaware law
does not require authorizing provisions in the certificate of incorporation
and does not contain express prohibitions on indemnification in certain
circumstances. However, limitations on indemnification may be imposed by a
court based on principles of public policy. A provision of Delaware law
provides that the indemnification allowed by statute is not exclusive of any
other rights under any bylaw, agreement, vote of shareholders or disinterested
directors or otherwise.
Inspection of Shareholder List.
Both California and Delaware law allow any shareholder to inspect the
shareholder list for a purpose reasonably related to their interest as a
shareholder. California law provides, in addition, for an absolute right to
inspect and copy the corporation's shareholder list by individuals holding an
aggregate of five percent (5%) or more of a corporation's voting shares, or
shareholders holding an aggregate of one percent (1%) or more of these shares
who have filed a Schedule 14B with the Securities and Exchange Commission in
connection with a contested election of directors. The latter provision has
not been amended in response to the elimination of Schedule 14B under the
revised proxy rules. Under California law, absolute inspection rights also
apply to a corporation formed under the laws of any other state if its
principal executive offices are in California or if it customarily holds
meetings of its board in California. Delaware law also provides for inspection
rights as to a list of shareholders entitled to vote at a meeting within a ten
day period before a shareholders' meeting for any purpose germane to the
meeting. However, Delaware law contains no provisions comparable to the
absolute right of inspection provided by California law to certain
shareholders.
Dividends and Repurchases of Shares.
California law dispenses with the concepts of par value of shares as well as
statutory definitions of capital, surplus and the like. The concepts of par
value, capital and surplus are retained under Delaware law.
Under California law, a corporation may not make any distribution (including
dividends, whether in cash or other property, and repurchases of its shares,
other than repurchases of its shares issued under employee stock
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plans contemplated by Section 408 of the California Corporations Code) unless
either (a) the corporation's retained earnings immediately before the proposed
distribution equal or exceed the amount of the proposed distribution, or (b)
immediately after giving effect to the distribution, the corporation's assets
(exclusive of goodwill, capitalized research and development expenses and
deferred charges) would be at least equal to 1.25 times its liabilities (not
including deferred taxes, deferred income and other deferred credits), and the
corporation's current assets would be at least equal to its current
liabilities (or 1.25 times its current liabilities if the average pre-tax and
pre-interest expense earnings for the preceding two fiscal years were less
than the average interest expense for these years). These tests are applied to
California corporations on a consolidated basis.
Delaware law permits a corporation to declare and pay dividends out of
surplus or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year, as long
as the amount of capital of the corporation after the declaration and payment
of the dividend is not less than the aggregate amount of the capital
represented by the issued and outstanding stock of all classes having a
preference on the distribution of assets. In addition, Delaware law generally
provides that a corporation may redeem or repurchase its shares only if its
capital is not impaired and the redemption or repurchase would not impair
capital.
To date, the Company has not declared or paid cash dividends on its capital
stock. The Company currently expects it will retain its future earnings for
use in the operation and expansion of its business and does not anticipate
paying any cash dividends in the foreseeable future.
Shareholder Voting.
Both California and Delaware law generally require that a majority of the
shareholders of both acquiring and target corporations approve statutory
mergers. Delaware law does not require a shareholder vote of the surviving
corporation in a merger (unless the corporation provides otherwise in its
certificate of incorporation) if (a) the merger agreement does not amend the
existing certificate of incorporation, (b) each share of the stock of the
surviving corporation outstanding immediately before the effective date of the
merger is an identical outstanding or treasury share after the merger, and (c)
either no shares of common stock of the surviving corporation and no shares,
securities or obligations convertible into such stock are to be issued or
delivered under the plan of merger, or the authorized unissued shares or the
treasury shares of common stock of the surviving corporation to be issued or
delivered under the plan of merger, plus those initially issuable upon
conversion of any other shares, securities or obligations to be issued or
delivered under the plan, do not exceed twenty percent (20%) of the shares of
common stock of the constituent corporation outstanding immediately before the
effective date of the merger. California law contains a similar exception to
its voting requirements for reorganizations where shareholders, the
corporation, or both, immediately before the reorganization will own,
immediately after the reorganization, equity securities constituting more than
five sixths of the voting power of the surviving or acquiring corporation or
its parent entity.
Both California law and Delaware law also require that a sale of all or
substantially all of the assets of a corporation be approved by a majority of
the outstanding voting shares of the corporation transferring such assets.
With certain exceptions, California law also requires that mergers,
reorganizations, certain sales of assets and similar transactions be approved
by a majority vote of each class of shares outstanding. In contrast, Delaware
law generally does not require class voting, except in certain transactions
involving an amendment to the certificate of incorporation that adversely
affects a specific class of shares. As a result, shareholder approval of such
transactions may be easier to obtain under Delaware law for companies which
have more than one class of shares outstanding.
California law also requires that holders of nonredeemable common stock
receive nonredeemable common stock in a merger of the corporation with the
holder of more than fifty percent (50%) but less than ninety percent (90%) of
the common stock or its affiliate unless all of the holders of the common
stock consent to the transaction. This provision of California law may have
the effect of making a "cash-out" merger by a majority
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shareholder more difficult to accomplish. Although Delaware law does not
parallel California law in this respect, under some circumstances Section 203
does provide similar protection against coercive two-tiered bids for a
corporation in which the shareholders are not treated equally. See
"Significant Differences Between the Corporation Laws of California and
Delaware -- Shareholder Approval of Certain Business Combinations."
California law provides that, except in certain circumstances, when a tender
offer or a proposal for a reorganization or for a sale of assets is made by an
interested party (generally a controlling or managing person of the target
corporation), an affirmative opinion in writing as to the fairness of the
consideration to be paid to the shareholders must be delivered to
shareholders. This fairness opinion requirement does not apply to a
corporation that has less than 100 shareholders, or to a transaction that has
been qualified under California state securities laws. Furthermore, if a
tender of shares or vote is sought following a proposal by an interested party
and a later proposal is made by another party at least ten days before the
interested party's proposal is accepted, the shareholders must be informed of
the later offer and be afforded a reasonable opportunity to withdraw any vote,
consent or proxy, or to withdraw any tendered shares. Delaware law has no
comparable provision.
Interested Director Transactions.
Under both California and Delaware law, contracts or transactions in which
one or more of a corporation's directors has an interest are not void or
voidable because of that interest provided that certain conditions, such as
obtaining the required approval and fulfilling the requirements of good faith
and full disclosure, are met. With certain exceptions, the conditions are
similar under California and Delaware law. Under California and Delaware law
(a) either the shareholders or the board of directors must approve the
contract or transaction after full disclosure of the material facts, and, in
the case of board approval, the contract or transaction must also be "just and
reasonable" (in California) or "fair" (in Delaware) to the corporation or (b)
the contract or transaction must have been just and reasonable or fair as to
the corporation at the time it was approved. In the latter case, California
law explicitly places the burden of proof on the interested director. Under
California law, if shareholder approval is sought, the interested director is
not entitled to vote his shares at a shareholder meeting regarding the
contract or transaction. If board approval is sought, the contract or
transaction must be approved by a majority vote of a quorum of the directors,
without counting the vote of any interested directors (except that interested
directors may be counted for purposes of establishing a quorum). Under
Delaware law, if board approval is sought, the contract or transaction must be
approved by a majority of the disinterested directors (even if the
disinterested directors are less than a quorum). Therefore, certain
transactions that the Board of OSI California might not be able to approve
because of the number of interested directors, could be approved by a majority
of the disinterested directors of OSI Delaware, although less than a majority
of a quorum. The Company is not aware of any plans to propose any transaction
involving directors of the Company that could not be so approved under
California law but could be so approved under Delaware law.
Shareholder Derivative Suits.
California law provides that a shareholder bringing a derivative action on
behalf of a corporation need not have been a shareholder at the time of the
transaction in question, provided that certain tests are met. Under Delaware
law, a shareholder may bring a derivative action on behalf of the corporation
only if the shareholder was a shareholder at the time of the transaction in
question or if his shares thereafter devolved upon him by operation of law.
California law also provides that the corporation or the defendant in a
derivative suit may make a motion to the court for an order requiring the
plaintiff shareholder to furnish a security bond. Delaware does not have a
similar bonding requirement.
Appraisal Rights.
Under both California and Delaware law, a shareholder participating in
certain major corporate transactions may, under varying circumstances, be
entitled to appraisal rights under which the shareholder receives cash in the
amount of the fair market value of his shares in lieu of the consideration he
or she would otherwise receive in the transaction. Under Delaware law, fair
market value is determined exclusive of any element of value arising
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from the accomplishment or expectation of the merger or consolidation, and
appraisal rights are not available (a) with respect to the sale, lease or
exchange of all or substantially all of the assets of a corporation, (b) with
respect to a merger or consolidation by a corporation the shares of which are
either listed on a national securities exchange or are held of record by more
than 2,000 holders if the shareholders receive only shares of the surviving
corporation or shares of another corporation that are either listed on a
national securities exchange or held of record by more than 2,000 holders,
plus cash in lieu of fractional shares, or (c) to shareholders of a
corporation surviving a merger if no vote of the shareholders of the surviving
corporation is required to approve the merger under certain provisions of
Delaware law.
The limitations on the availability of appraisal rights under California law
are different from those under Delaware law. Shareholders of a California
corporation whose shares are listed on a national securities exchange, or on a
list of over-the-counter margin stocks issued by the Board of Governors of the
Federal Reserve System, generally do not have appraisal rights unless the
holders of at least five percent (5%) of the class of outstanding shares claim
the right or the corporation or any law restricts the transfer of the shares.
Appraisal rights are also unavailable if the shareholders or the corporation
itself, or both, immediately before the reorganization will own immediately
after the reorganization equity securities constituting more than five-sixths
of the voting power of the surviving or acquiring corporation or its parent
entity (as will be the case in the Reincorporation Proposal). Appraisal or
dissenters' rights are, therefore, not available to shareholders of OSI
California with respect to the Reincorporation Proposal. California law
generally affords appraisal rights in sale of asset reorganizations.
Dissolution.
Under California law, shareholders holding fifty percent (50%) or more of
the total voting power may authorize a corporation's dissolution, with or
without the approval of the corporation's board of directors, and this right
may not be modified by the articles of incorporation. Under Delaware law,
unless the board of directors approves the proposal to dissolve, the
dissolution must be approved by all the shareholders entitled to vote thereon.
Only if the dissolution is initially approved by the board of directors may it
be approved by a simple majority of the outstanding shares of the
corporation's stock. If such a board-initiated dissolution, Delaware law
allows a Delaware corporation to include in its certificate of incorporation a
super majority (greater than a simple majority) voting requirement in
connection with dissolutions. However, OSI Delaware's Certificate of
Incorporation contains no such super majority voting requirement. A majority
of the outstanding shares entitled to vote and voting at a meeting at which a
quorum is present would be sufficient to approve a dissolution of OSI Delaware
that had previously been approved by its Board.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a discussion of certain federal income tax considerations
that may be relevant to holders of OSI California Common Stock who receive OSI
Delaware Common Stock as a result of the Proposed Reincorporation. The
discussion does not address all of the tax consequences of the Proposed
Reincorporation that may be relevant to particular OSI California
shareholders, such as dealers in securities, or those OSI California
shareholders who acquired their shares upon the exercise of stock options. It
also does not address the tax consequences to holders of options or warrants
to acquire OSI California Common Stock. Furthermore, no foreign, state or
local tax considerations are addressed herein. IN VIEW OF THE VARYING NATURE
OF THOSE TAX CONSEQUENCES, EACH SHAREHOLDER IS URGED TO CONSULT HIS OR HER OWN
TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES OF THE PROPOSED
REINCORPORATION, INCLUDING THE APPLICABILITY OF FEDERAL, STATE, LOCAL OR
FOREIGN TAX LAWS. This discussion is based on the Internal Revenue Code of
1986, as amended (the "Code"), the applicable Treasury Regulations promulgated
thereunder, judicial authority and current administrative rulings and
practices in effect on the date of this Proxy Statement.
The Proposed Reincorporation is expected to qualify as a reorganization
within the meaning of Section 368(a) of the Code, with the following tax
consequences:
(a) No gain or loss should be recognized by holders of OSI California
Common Stock upon receipt of OSI Delaware Common Stock under the Proposed
Reincorporation;
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(b) The aggregate tax basis of the OSI Delaware Common Stock received by
each shareholder in the Proposed Reincorporation should be equal to the
aggregate tax basis of the OSI California Common Stock surrendered in
exchange therefor; and
(c) The holding period of the OSI Delaware Common Stock received by each
shareholder of OSI California should include the period for which the
shareholder held the OSI California Common Stock surrendered in exchange
therefor, provided that the OSI California Common Stock was held by the
shareholder as a capital asset at the time of Proposed Reincorporation.
The Company has not requested a ruling from the Internal Revenue Service
(the "IRS") or an opinion of counsel with respect to the federal income tax
consequences of the Proposed Reincorporation. A successful IRS challenge to
the reorganization status of the Proposed Reincorporation (in the consequence
of a failure to satisfy the "continuity of interest" requirement or otherwise)
would result in a shareholder recognizing gain or loss with respect to each
share of OSI California Common Stock exchanged in the Proposed Reincorporation
equal to the difference between the shareholder's basis and the fair market
value, as of the time of the Proposed Reincorporation, of the OSI Delaware
Common Stock received in exchange therefor. In that event, a shareholder's
aggregate basis in the shares of OSI Delaware Common Stock received in the
exchange would equal their fair market value on such date, and the
shareholder's holding period for the shares would not include the period
during which the shareholder held OSI California Common Stock.
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PROPOSAL FOUR
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board has selected Deloitte & Touche LLP, independent auditors, to audit
the consolidated financial statements of the Company for the fiscal year
ending June 30, 1997, and recommends that shareholders vote for ratification
of that appointment. Notwithstanding this selection, the Board, in its
discretion, may direct the appointment of new independent auditors at any time
during the year, if the Board feels that such a change would be in the best
interest of the Company and its shareholders. If there is a negative vote on
ratification, the Board will reconsider its selection.
Deloitte & Touche LLP has audited the Company's financial statements
annually since 1993. Representatives of Deloitte & Touche LLP are expected to
be present at the meeting with the opportunity to make a statement if they
desire to do so. They are also expected to be available to respond to
appropriate questions.
THE BOARD RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE APPOINTMENT OF
DELOITTE & TOUCHE LLP AS INDEPENDENT AUDITORS.
26
<PAGE>
EXECUTIVE COMPENSATION AND OTHER MATTERS
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth information regarding
the compensation of the Chief Executive Officer and the other most highly
compensated officers of the Company for services rendered in all capacities to
the Company for the fiscal years ended June 30, 1996 and June 30, 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
-----------------------
ANNUAL COMPENSATION RESTRICTED SECURITIES
FISCAL --------------------- STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) AWARDS($) OPTIONS(#) COMPENSATION
- --------------------------- ------ ---------- --------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Joseph T. Ambrozy(1).... 1996 $ 223,637 $ -- $430,001(4) 290,000 $233,971(5)
Chief Executive 1995 -- -- -- -- --
Officer, President
and Director
Tom L. Johnson(2).......
Co-Chairman of the 1996 350,004 -- -- -- 4,091(6)
Board 1995 300,002 133,253 -- -- 5,655(7)
Richard G. Vento(2)..... 1996
Co-Chairman of the 1995 350,004 -- -- -- 7,515(8)
Board 300,002 133,253 -- -- 5,655(7)
Gayety W. Hirahara(3)... 1996 175,000 60,609 -- -- 6,468(7)
Chief Financial 1995 166,971 60,000 -- -- 4,580(7)
Officer, Chief
Operating Officer and
Secretary
Tim J. Sebring.......... 1996 65,913 299,873 -- 100,000 2,993(7)
Vice President, Sales 1995 65,000 421,639 -- 445,500 2,655(7)
and Marketing
Dan Line................ 1996 74,157 185,343 -- 100,000 2,673(9)
Vice President Global 1995 61,579 307,423 -- 41,250 5,655(7)
Accounts and Managing
Director, European
Operations
</TABLE>
- --------
(1) Mr. Ambrozy joined the Company as President in November 1995 and became
Chief Executive Officer in February 1996.
(2) Messrs. Johnson and Vento resigned as Co-Chief Executive Officers of the
Company in January 1996.
(3) Ms. Hirahara resigned as Chief Financial Officer, Chief Operating Officer
and Secretary of the Company in July 1996.
(4) Pursuant to a Restricted Stock Award Agreement dated November 29, 1995,
the Company granted to Mr. Ambrozy a stock award of 33,077 shares of the
Company's Common Stock. The amount shown on the table represents the
dollar value of the award of restricted stock calculated by multiplying
the closing market price of the Company's Common Stock on the date of
grant or the last trading day prior thereto ($13.00) by the number of
shares awarded. As of June 28, 1996, all of such 33,077 shares were
unvested and had a value of $1,207,311 based upon the fair market value of
the Common Stock on June 30, 1996 of $36.50. All of such unvested shares
were subject to forfeiture by Mr. Ambrozy in the event his employment with
the Company is terminated. The shares are released from the Company's
forfeiture option to the extent of 1/3 of the restricted shares on the
first anniversary of the date of grant and 1/36th of the restricted shares
each month thereafter, with all shares released from the forfeiture option
after three years from the date of grant. See "Employment Contracts and
Change-in-Control Arrangements" for further information on vesting
provisions. Mr. Ambrozy will receive the same dividends on all shares of
restricted stock as all other shareholders. However, the Company does not
anticipate paying any cash dividends in the foreseeable future.
27
<PAGE>
(5) Represents relocation allowance of $226,256 (including temporary living
and costs associated with home residence) and premium for term life
insurance of $7,715.
(6) Represents matching or other contributions made by Company pursuant to the
Company's 401(k) savings plan of $3,875 and premium for term life
insurance of $216.
(7) Represents matching and other contributions made by the Company for the
benefit of the named individuals pursuant to the Company's 401(k) savings
plan.
(8) Represents matching or other contributions made by Company pursuant to
Company's 401(k) savings plan of $7,299 and premium for term life
insurance of $216.
(9) Represents matching or other contributions made by Company pursuant to the
Company's 401(k) savings plan of $2,581 and premium on life insurance of
$92.00.
28
<PAGE>
OPTION GRANTS IN FISCAL YEAR 1996
The following table sets forth information regarding the grant of options to
purchase the Company's Common Stock to the persons named in the Summary
Compensation Table during the fiscal year ended June 30, 1996.
OPTION GRANTS IN FISCAL YEAR 1996
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
NUMBER OF PERCENTAGE OF OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION FOR OPTION
UNDERLYING GRANTED TO TERM(1)
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION ---------------------------
NAME GRANTED FISCAL 1996 PER SHARE (2)(3) DATE 5% 10%
---- ---------- ------------- ---------------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Joseph T. Ambrozy....... 50,000(4) 4.7% $10.20 08/24/05 $ 408,850 $ 1,036,100
240,000(4) 22.7% 13.00 11/29/05 1,962,480 4,973,280
Tom L. Johnson.......... -- -- -- -- -- --
Richard G. Vento........ -- -- -- -- -- --
Gayety W. Hirahara...... -- -- -- -- -- --
Tim J. Sebring.......... 100,000(5) 9.4% 11.00 10/27/05 817,563 2,071,865
Dan Line................ 100,000(5) 9.4% 11.00 10/27/05 817,563 2,071,865
</TABLE>
- --------
(1) Potential realizable value is based on the assumption that the Common
Stock of the Company appreciates at the annual rate shown (compounded
annually) from the date of grant until the expiration of the ten year
option term. These numbers are calculated based on the requirements
promulgated by the Securities and Exchange Commission and do not reflect
the Company's estimate of future stock price growth.
(2) Options were granted at an exercise price equal to the fair market value
of the Company's Common Stock, as determined by the Board on the date of
grant.
(3) Exercise price may be paid in cash, promissory note, by delivery of
already-owned shares subject to certain conditions, 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 of proceeds, an amount equal to the
exercise price plus all applicable withholding taxes.
(4) Options become exercisable as to 25% of the option shares on the first
anniversary of the date of grant and as to 1/48th of the option shares
each month thereafter, with full vesting occurring on the fourth
anniversary of the date of grant.
(5) Options become exercisable as to 20% of the option shares on each one year
anniversary of the date of grant, with full vesting occurring on the fifth
anniversary.
29
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information regarding the exercise of
stock options in the last fiscal year by the persons named in the Summary
Compensation Table and the value of options held by such individuals as of
June 30, 1996.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES VALUE JUNE 30, 1996(#) JUNE 30, 1996($)(2)
ACQUIRED REALIZED ------------------------- -------------------------
NAME ON EXERCISE (1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Joseph T. Ambrozy(3).... 0 $ N/A -- 290,000 $ -- $ 6,955,000
Tom L. Johnson.......... 0 N/A -- -- -- --
Richard G. Vento........ 0 N/A -- -- -- --
Gayety W. Hirahara (4).. 196,904 6,426,912 490,596 -- 17,867,506 --
Tim J. Sebring.......... 46,162 1,942,855 1,053,838 375,000 38,101,297 12,006,535
Dan Line................ 8,817 372,333 56,497 213,436 1,953,432 6,368,830
</TABLE>
- --------
(1) Market value of the Company's Common Stock at the exercise date minus the
exercise price.
(2) Market value of the Company's Common Stock at fiscal year-end minus the
exercise price.
(3) Mr. Ambrozy joined the Company as President in November 1995 and became
Chief Executive Officer in February 1996.
(4) Ms. Hirahara resigned as Chief Financial Officer, Chief Operating Officer
and Secretary of the Company in July 1996.
EMPLOYMENT CONTRACTS AND CHANGE-IN-CONTROL ARRANGEMENTS
In November 1995, Joseph T. Ambrozy, Chief Executive Officer, President and
a director of the Company, entered into an employment agreement with the
Company under which he is to receive an annual base salary of $350,000 and is
eligible to receive bonus payments on the attainment of certain profitability
levels by the Company. This agreement also provides for the grant of an option
to purchase a total of 240,000 shares of Company Common Stock at $13.00 per
share, which was the fair market value of the Company's Common Stock on the
date of grant as determined by the Board, and a restricted stock award for
33,077 shares of Company Common Stock. The stock option vests over a period of
four years. The restricted stock award is released from the Company's
forfeiture option over a three year period, with 1/3 of the restricted shares
being released in November 1996 and 1/36th of the restricted shares being
released monthly thereafter, provided Mr. Ambrozy is an employee of the
Company on any such release dates. If Mr. Ambrozy's employment with the
Company terminates other than voluntarily or for cause, he will be entitled to
receive severance pay equal to his base salary for two years and the 33,077
share restricted stock award will become 100% vested.
In July 1996, Gayety W. Hirahara, former Chief Financial Officer, Chief
Operating Officer and Secretary of the Company, entered into an Employment
Transition Agreement with the Company establishing her ongoing employment
duties and her compensation for performance of such duties. From its effective
date until the date six weeks after the employment commencement date of a
successor Chief Financial Officer (the "Transition Period"), Ms. Hirahara
received as compensation for her services a base salary at the annualized rate
of $175,000. The Transition Period ended on August 9, 1996, with the Company's
appointment of David Allen as the successor Chief Financial Officer. On August
10, 1996, under the term of the agreement, Ms. Hirahara became a part-time
consultant to the company providing consulting services as requested by Mr.
Allen. From the end of the Transition Period until the earlier of the
termination of Ms. Hirahara's consulting relationship or December 31, 1997,
Ms. Hirahara will receive a fee of $125.00 per hour for up to 10 hours per
month for performing consulting services for the Company.
30
<PAGE>
In February 1996, under the terms of his employment, A.J. Germek, Vice
President, Planning and Development, entered into a letter agreement with the
Company under which he is to receive an annual base salary of $145,000. If Mr.
Germek's employment is terminated other than for cause, Mr. Germek will be
entitled to receive a severance pay equal to his base salary rate for one
year.
In March 1996, under the terms of his employment, Kevin C. McCoy, Vice
President, Research and Development, entered into a letter agreement with the
Company under which he is to receive an annual base salary of $155,000. If Mr.
McCoy's employment is terminated other than for cause, Mr. McCoy will be
entitled to receive a severance pay equal to his base salary rate for one
year.
In May 1996, under the terms of his employment, Philip N. Cardman, Vice
President, General Counsel and Secretary, entered into a letter agreement with
the Company under which he is to receive an annual base salary of $155,000. If
Mr. Cardman's employment is terminated other than for cause, Mr. Cardman will
be entitled to receive a severance pay equal to his base salary rate for two
years. In addition, if his employment is voluntarily terminated at any time
during the first 24 months of his employment due to a change in the Company's
Chief Executive Officer, Mr. Cardman will receive his annual base salary for a
period of 6 months to 24 months.
COMPENSATION OF DIRECTORS
Members of the Board do not receive compensation for their services as
directors. The Company's 1995 Director Option Plan provides that options will
be granted to nonemployee directors under an automatic nondiscretionary grant
mechanism. Each nonemployee director ("Outside Director") is automatically
granted an option to purchase 50,000 shares (the "First Option") on the date
on which he first becomes an Outside Director. After the First Option has been
granted, the Outside Director is thereafter automatically granted an option to
purchase 12,500 shares at the next meeting of the Board following the Annual
Meeting of shareholders in each year, if, on that date, he has served on the
Board for at least six months. The First Option is exercisable only while the
Outside Director remains a director of the Company, and vests in installments
cumulatively as to 25% of the shares on the first anniversary of its date of
grant and at a rate of 1/48th of the shares per month thereafter. Subsequent
option grants are exercisable only while the Outside Director remains a
director, and become exercisable as to 50% of the shares six months after the
date of grant and as to 1/12th of the shares per month thereafter.
In August 1995, Mr. Ambrozy was granted an option under the 1994 Stock
Option Plan to purchase 50,000 shares of Common Stock at an exercise price of
$10.20 per share. In November 1995, he was also granted an option to purchase
240,000 shares of Common Stock at an exercise price of $13.00 per share. In
October 1995, Mr. Schmitt was granted an option to purchase 50,000 shares of
Common Stock at an exercise price of $11.00 per share. Each of these options
becomes exercisable starting one year after the date of grant, with 25% of the
shares becoming exercisable at that time and an additional 1/48th of the
shares becoming exercisable each month thereafter. In July 1996, the Company
and Mr. Ambrozy entered into an agreement whereby Mr. Ambrozy will be granted
options to purchase up to 100,000 shares, 150,000 shares and 150,000 shares on
the first, second and third anniversary dates, respectively, of the agreement.
The options will be granted at 100% of the fair market value of the Company's
Common Stock on their respective grant dates. Each option will be subject to a
four year vesting schedule, whereby 25% of the shares will become exercisable
one year after the date of grant and 1/48th of the shares will become
exercisable each month thereafter.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of Messrs. Schmitt, Shantz and Terplan.
There are no interlocking relationships, as described by the Securities and
Exchange Commission, among the Compensation Committee members.
31
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Compensation Committee (the "Committee") of the Board reviews and
approves the Company's executive compensation policies. The Committee
administers the Company's various incentive plans, including the 1994 Stock
Option Plan and the 1995 Employee Stock Purchase Plan, sets compensation
policies applicable to the Company's executive officers and evaluates the
performance of the Company's executive officers. The compensation levels of
the Company's executive officers for the fiscal year ended June 30, 1996,
including base salary levels, potential bonuses and stock option grants were
determined by the Committee at the beginning of the fiscal year. The following
is a report of the Committee describing the compensation policies and
rationale applicable with respect to the compensation paid to the Company's
executive officers for the fiscal year ended June 30, 1996.
Compensation Philosophy
The Company's philosophy in setting its compensation policies for executive
officers is to maximize shareholder value over time. The primary goal of the
Company's executive compensation program is therefore to closely align the
interests of the executive officers with those of the Company's shareholders.
To achieve this goal the Company attempts to (a) offer compensation
opportunities that attract and retain executives whose abilities are critical
to the long-term success of the Company, motivate individuals to perform at
their highest level and reward outstanding achievement, (b) maintain a portion
of the executive's total compensation at risk, tied to achievement of
financial, organizational and management performance goals, and (c) encourage
executives to manage from the perspective of owners with an equity stake in
the Company. The Committee currently uses base salary, annual cash incentives
and stock options to meet these goals.
Base Salary
Base salary is primarily used by the Company as a device to attract,
motivate, reward and retain highly skilled executives. The Committee reviewed
and approved fiscal 1996 base salaries for the Chief Executive Officer and
other executive officers at the beginning of the fiscal year. Base salaries
were established by the Committee based on an executive officer's job
responsibilities, level of experience, individual performance, contribution to
the business, the Company's financial performance for the past year and
recommendations from management. The Committee also took into account the
salaries for similar positions at comparable companies, based on each
individual Committee member's industry experience. In reviewing base salaries,
the Committee focused significantly on each executive officer's prior
performance with the Company and expected contribution to the Company's future
success. In making base salary decisions, the Committee exercised its
discretion and judgment using these factors. No specific formula was applied
to determine the weight of each factor.
Annual Cash Incentives
Each executive officer's bonus is based on qualitative and quantitative
factors. Bonuses are intended to motivate and reward executive officers by
directly linking the amount of the bonus to specific Company-based performance
targets. Annual incentive bonuses for executive officers are intended to
reflect the Committee's belief that a portion of the compensation of each
executive officer should be contingent upon the performance of the Company. To
carry out this philosophy, the Board reviews and approves the financial budget
for the fiscal year. The Committee then establishes target bonuses for each
executive officer as a percentage of the officer's base salary. The executive
officers, including Mr. Ambrozy, must successfully achieve these performance
targets, which are submitted by management to the Committee for its evaluation
and approval at the beginning of the fiscal year. Company-based performance
goals are tied to different indicators of Company performance, such as the
operating results of the Company. The Committee evaluates the completion of
the Company-based performance targets and approves a performance rating
relative to the goals completed. This scoring is influenced by the Committee's
perception of the importance of the various corporate goals. The Committee
believes that the bonus arrangement provides an excellent link between the
Company's earnings performance and the incentives paid to executives.
32
<PAGE>
Stock Options
The Committee provides the Company's executive officers with long-term
incentive compensation through grants of stock options under the Company's
1994 Stock Option Plan. The Committee believes that stock options provide the
Company's executive officers with the opportunity to purchase and maintain an
equity interest in the Company and to share in the appreciation of the value
of the Company's Common Stock. The Committee believes that stock options
directly motivate an executive to maximize long-term shareholder value. The
options also use vesting periods that encourage key executives to continue in
the employ of the Company. All options granted to executive officers to date
have been granted at the fair market value of the Company's Common Stock on
the date of grant. The Committee considers the grant of each option
subjectively, considering factors such as the executive officer's relative
position and responsibilities with the Company, the individual performance of
the executive officer over the previous fiscal year and the anticipated
contribution of the executive officer to the attainment of the Company's long-
term strategic performance goals. Stock options granted in prior years are
also taken into consideration. The Committee views stock option grants as an
important component of its long-term, performance-based compensation
philosophy.
SECTION 162(M)
The Board has considered the potential future effects of Section 162(m) of
the Code on the compensation paid to the Company's executive officers. Section
162(m) disallows a tax deduction for any publicly held corporation for
individual compensation exceeding $1 million in any taxable year for any of
the executive officers named in the proxy statement, unless compensation is
performance-based. The Company has adopted a policy that, where reasonably
practicable, the Company will seek to qualify the variable compensation paid
to its executive officers for an exemption from the deductibility limitations
of Section 162(m).
Respectfully submitted by:
George F. Schmitt
Jonathan B. Shantz
Dr. Kornel Terplan
33
<PAGE>
PERFORMANCE GRAPH
Set forth below is a line graph comparing the annual percentage change in
the cumulative return to the shareholders of the Company's Common Stock with
the cumulative return of the Nasdeq Stock Market-US Index and of the Hambrecht
& Quist Communications Index for the period commencing December 1, 1995 (the
date the Company became subject to the reporting requirements of the
Securities Exchange Act of 1934, as amended) and ending on June 30, 1996.
Returns for the indices are weighted based on market capitalization at the
beginning of each fiscal year.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG OBJECTIVE SYSTEMS INTEGRATORS, INC., NASDAQ STOCK MARKET (US) AND
HAMBRECHT & QUIST COMMUNICATIONS
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION> OBJECTIVE NASDAQ HAMBRECHT
Measurement Period SYSTEMS STOCK & QUIST
(Fiscal Year Covered) INTEGRATORS, INC. MARKET (US) COMMUNICATIONS
- --------------------- ----------------- ----------- --------------
<S> <C> <C> <C>
Measurement Pt- 12/01/95 $100 $100 $100
FYE 12/31/95 $288 $100 $ 96
FYE 01/31/96 $211 $100 $ 97
FYE 02/29/96 $216 $106 $104
FYE 03/31/96 $239 $104 $ 98
FYE 04/30/96 $234 $113 $111
FYE 05/31/96 $237 $118 $114
FYE 06/30/96 $192 $113 $110
</TABLE>
- --------
(1) The graph assumes that $100 was invested on December 1, 1995 (the date the
Company first became subject to the reporting requirements of the
Securities Exchange Act of 1934, as amended) in the Company's Common Stock
and in the Nasdaq Stock Market-US Index and in the Hambrecht & Quist
Communications Index and that all dividends were reinvested. No dividends
have been declared or paid on the Company's Common Stock. Shareholder
returns over the indicated period should not be considered indicative of
future shareholder returns.
The information contained above under the captions "Report of the Board of
Directors on Executive Compensation" and "Performance Graph" will not be
deemed to be "soliciting material" or to be "filed" with the Securities and
Exchange Commission, nor will that information be incorporated by reference
into any future filing under the Securities Act or Exchange Act, except to the
extent that the Company specifically incorporates it by reference into such
filing.
34
<PAGE>
CERTAIN TRANSACTIONS
In December 1994, each of Mr. Vento and Mr. Johnson borrowed $2,100,000 from
the Company pursuant to a full recourse three year Promissory Note. Each
Promissory Note provided that the principal amount of the Promissory Note
accrued interest at a rate of 6.66% per annum; provided, however, that
interest accrued at a per annum rate equal to the lesser of (a) 8.55%, or (b)
the maximum interest allowed by law, on all past due principal and, to the
extent permitted by law, on all past-due interest. In addition, the
indebtedness under the Promissory Notes was secured by certain real property
located in Incline Village, Nevada as evidenced by Deeds of Trust and
Assignments of Rents executed by Messrs. Vento and Johnson for the benefit of
the Company. In September 1995, prior to maturity of each Promissory Note,
Messrs. Vento and Johnson repaid all principal and accrued interest due
thereunder.
In January 1994, the Company and Strategic Solutions International
Corporation ("SSIC"), of which Messrs. Vento and Johnson are shareholders,
entered into a Non-Exclusive License to Sublicense Agreement (the "SSIC
License Agreement"). The SSIC License Agreement provides that SSIC will grant
to the Company a nontransferable and nonexclusive license to market,
sublicense, modify and use certain computer programs developed by SSIC. In
consideration for the licenses granted under the SSIC License Agreement, the
Company agreed to pay SSIC certain license fees plus training fees and
maintenance support fees. In March 1994, the Company and SSIC entered into a
Loan Development Copy Software License Agreement (the "SSIC Software
Agreement"). The SSIC Software Agreement provides that the Company will grant
a nonexclusive and nontransferable license to SSIC to use certain of the
Company's software for demonstration purposes to prospective customers of SSIC
or for development of conjoined software. In fiscal 1996, the Company paid no
amounts for software development costs or for software licenses to SSIC.
In September 1995, the Company entered into a business relationship with (a)
Japan Associated Finance Co., Ltd. ("JAFCO") and (b) Quantum Industrial
Partners LDC, the principal operating subsidiary of Quantum Industrial
Holdings Ltd., an investment fund advised by Soros Fund Management, a private
investment firm owned by George Soros, and S-C Phoenix Holdings, L.L.C., an
investment vehicle owned by affiliates of Mr. Soros and Dr. Purnendu
Chatterjee ("Chatterjee/Soros") (JAFCO and Chatterjee/Soros being collectively
referred to as "Investors") principally for the development of the Company's
business in Japan, India and Southeast Asia. In conjunction with this
relationship, the Company's principal shareholders, Mr. Vento and Mr. Johnson,
each sold an aggregate of 909,091 shares of Common Stock to JAFCO and
Chatterjee/Soros at a per-share price of $11.00. Under the terms of the
Shareholder Rights Agreement among the Company, Tom L. Johnson, Richard G.
Vento and the Investors dated September 27, 1995 (the "Shareholder Rights
Agreement"), the Investors have certain Board observer rights. Messrs. Vento
and Johnson also entered into a voting agreement with the Investors to elect
one Investor representative reasonably acceptable to the Company, to the Board
until the first to occur of August 31, 1998 or such time as the Investors hold
in aggregate less than 600,000 shares of Common Stock, at which time the
voting agreement and Board observer rights will terminate. Pursuant to this
voting agreement, George Schmitt was nominated a member of the Board in
October 1995. Under the registration rights provisions of the Shareholder
Rights Agreement, the Company will, at the Investors' request register for
resale to the public the shares of Common Stock held by the Investors. In
addition, under the Shareholder Rights Agreement, if the Company proposes to
register shares of its Common Stock for sale to the public, the Investors and
Messrs. Vento and Johnson have the right (subject to quantity limitations
determined by the underwriters if the offering involves an underwriting) to
request that the Company register for resale to the public their shares of
Common Stock. The Investors together may include shares in the registration
totaling at least one-third of the aggregate shares included by the Investors
and Messrs. Vento and Johnson. All fees and expenses incurred in connection
with any registration will be borne by the Company, except for all
underwriting discounts and commissions relating to shares sold, which will be
borne by the seller. The Company and sellers have agreed to indemnify each
other against certain liabilities in connection with any registration related
to the foregoing registration rights, including liabilities under the
Securities Act of 1933, as amended.
The Company believes that all of the transactions set forth above were made
on terms no less favorable to the Company than could have been obtained from
unaffiliated third parties. All future transactions, including
35
<PAGE>
loans, between the Company and its officers, directors, principal shareholders
and their affiliates will be approved by a majority of the Board of Directors,
including a majority of the independent and disinterested outside directors,
and will continue to be on terms no less favorable to the Company than could
be obtained from unaffiliated third parties.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's executive officers and 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") and the National Association of Securities
Dealers, Inc. Executive officers, directors and greater-than-ten-percent
shareholders are required by SEC regulation to furnish the Company with copies
of all Section 16(a) forms they file. Based solely in its review of the copies
of such forms, or written representations from certain reporting persons, the
Company believes that, with the exception of Tom L. Johnson, Richard G. Vento,
Gayety W. Hirahara, Johnson LLC and Vento LLC, who each filed late the Initial
Statement of Beneficial Ownership of Securities on Form 3, during fiscal 1996,
all executive officers and directors of the Company complied with all
applicable filing requirements.
OTHER MATTERS
The Company knows of no other matters to be submitted at the meeting. If any
other matters properly come before the meeting, it is the intention of the
persons named in the enclosed form of Proxy to vote the shares they represent
as the Board of Directors may recommend.
THE BOARD OF DIRECTORS
Dated: October 18, 1996
36
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER
OF OBJECTIVE SYSTEMS INTEGRATORS, INC.,
A DELAWARE CORPORATION,
AND
OBJECTIVE SYSTEMS INTEGRATORS, INC.,
A CALIFORNIA CORPORATION
THIS AGREEMENT AND PLAN OF MERGER dated as of November , 1996 (the
"Agreement") is between Objective Systems Integrators, Inc., a Delaware
corporation ("OSI Delaware"), and Objective Systems Integrators, Inc., a
California corporation ("OSI California"). OSI Delaware and OSI California are
sometimes referred to herein as the "Constituent Corporations."
RECITALS
A. OSI Delaware is a corporation duly organized and existing under the laws
of the State of Delaware and has an authorized capital of 105,000,000 shares,
$.001 par value, of which 100,000,000 shares are designated "Common Stock,"
and 5,000,000 shares are designated "Preferred Stock." The Preferred Stock of
OSI Delaware is undesignated as to series, rights, preferences, privileges or
restrictions. As of November , 1996, 100 shares of Common Stock were issued
and outstanding, all of which are held by OSI California, and no shares of
Preferred Stock were issued and outstanding.
B. OSI California is a corporation duly organized and existing under the
laws of the State of California and has an authorized capital of 55,000,000
shares, no par value, of which 50,000,000 are designated "Common Stock," and
5,000,000 shares are designated "Preferred Stock." The Preferred Stock of OSI
California is undesignated as to series, rights, preferences, privileges or
restrictions. As of September 27, 1996, 31,831,815 shares of Common Stock were
issued and outstanding, and no shares of Preferred Stock were issued and
outstanding.
C. The Board of Directors of OSI California has determined that, for the
purpose of effecting the reincorporation of OSI California in the State of
Delaware, it is advisable and in the best interests of OSI California and its
shareholders that OSI California merge with and into OSI Delaware upon the
terms and conditions herein provided.
D. The respective Boards of Directors of OSI Delaware and OSI California
have approved this Agreement and have directed that this Agreement be
submitted to a vote of their respective shareholders and executed by the
undersigned officers.
NOW, THEREFORE, in consideration of the mutual agreements and covenants set
forth herein, OSI Delaware and OSI California hereby agree, subject to the
terms and conditions hereinafter set forth, as follows:
I
MERGER
1.1 Merger. In accordance with the provisions of this Agreement, the
Delaware General Corporation Law and the California General Corporation Law,
OSI California shall be merged with and into OSI Delaware (the "Merger"), the
separate existence of OSI California shall cease and OSI Delaware shall
survive the Merger and shall continue to be governed by the laws of the State
of Delaware, and OSI Delaware shall be, and is herein sometimes referred to
as, the "Surviving Corporation," and the name of the Surviving Corporation
shall be Objective Systems Integrators, Inc.
A-1
<PAGE>
1.2 Filing and Effectiveness. The Merger shall become effective when the
following actions shall have been completed:
(a) This Agreement and the Merger shall have been adopted and approved by
the shareholders of each Constituent Corporation in accordance with the
requirements of the Delaware General Corporation Law and the California
General Corporation Law;
(b) All of the conditions precedent to the consummation of the Merger
specified in this Agreement shall have been satisfied or duly waived by the
party entitled to satisfaction thereof;
(c) An executed Certificate of Merger or an executed, acknowledged and
certified counterpart of this Agreement meeting the requirements of the
Delaware General Corporation Law shall have been filed with the Secretary
of State of the State of Delaware; and
(d) An executed Certificate of Merger or an executed counterpart of this
Agreement meeting the requirements of the California General Corporation
Law shall have been filed with the Secretary of State of the State of
California.
The date and time when the Merger shall become effective, as aforesaid, is
herein called the "Effective Date of the Merger."
1.3 Effect of the Merger. Upon the Effective Date of the Merger, the
separate existence of OSI California shall cease and OSI Delaware, as the
Surviving Corporation, (i) shall continue to possess all of its assets,
rights, powers and property as constituted immediately prior to the Effective
Date of the Merger, (ii) shall be subject to all actions previously taken by
its and OSI California's Boards of Directors, (iii) shall succeed, without
other transfer, to all of the assets, rights, powers and property of OSI
California in the manner as more fully set forth in Section 259 of the
Delaware General Corporation Law, (iv) shall continue to be subject to all of
its debts, liabilities and obligations as constituted immediately prior to the
Effective Date of the Merger, and (v) shall succeed, without other transfer,
to all of the debts, liabilities and obligations of OSI California in the same
manner as if OSI Delaware had itself incurred them, all as more fully provided
under the applicable provisions of the Delaware General Corporation Law and
the California General Corporation Law.
II
CHARTER DOCUMENTS, DIRECTORS AND OFFICERS
2.1 Certificate of Incorporation. The Certificate of Incorporation of OSI
Delaware as in effect immediately prior to the Effective Date of the Merger, a
copy of which is attached hereto as Appendix B, shall continue in full force
and effect as the Certificate of Incorporation of the Surviving Corporation
until duly amended in accordance with the provisions thereof and applicable
law.
2.2 Bylaws. The Bylaws of OSI Delaware as in effect immediately prior to the
Effective Date of the Merger shall continue in full force and effect as the
Bylaws of the Surviving Corporation until duly amended in accordance with the
provisions thereof and applicable law.
2.3 Directors and Officers. The directors and officers of OSI California
immediately prior to the Effective Date of the Merger shall be the directors
and officers of the Surviving Corporation until their respective successors
shall have been duly elected and qualified or until as otherwise provided by
law, or the Certificate of Incorporation of the Surviving Corporation or the
Bylaws of the Surviving Corporation.
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<PAGE>
III
MANNER OF CONVERSION OF STOCK
3.1 OSI California Common Stock. Upon the Effective Date of the Merger, each
share of OSI California Common Stock, no par value, issued and outstanding
immediately prior thereto shall, by virtue of the Merger and without any
action by the Constituent Corporations, the holder of such shares or any other
person, be changed and converted into and exchanged for one fully paid and
nonassessable share of Common Stock, $.001 par value, of the Surviving
Corporation.
3.2 OSI California Options and Stock Purchase Rights. Upon the Effective
Date of the Merger, the Surviving Corporation shall assume and continue the
stock option plans (including without limitation the Stock Option Plan, the
1994 Stock Option Plan, and the 1995 Directors Option Plan) and all other
employee benefit plans (including without limitation the 1995 Employee Stock
Purchase Plan) of OSI California. Each outstanding and unexercised option or
other right to purchase or security convertible into OSI California Common
Stock shall become an option or right to purchase or a security convertible
into the Surviving Corporation's Common Stock on the basis of one share of the
Surviving Corporation's Common Stock for each share of OSI California Common
Stock issuable pursuant to any such option, stock purchase right or
convertible security, on the same terms and conditions and at an exercise
price per share equal to the exercise price applicable to any such OSI
California option, stock purchase right or convertible security at the
Effective Date of the Merger. There are no options, purchase rights for or
securities convertible into Preferred Stock of OSI California.
A number of shares of the Surviving Corporation's Common Stock shall be
reserved for issuance upon the exercise of options, stock purchase rights or
convertible securities equal to the number of shares of OSI California Common
Stock so reserved immediately prior to the Effective Date of the Merger.
3.3 OSI Delaware Common Stock. Upon the Effective Date of the Merger, each
share of Common Stock, $.001 par value, of OSI Delaware issued and outstanding
immediately prior thereto shall, by virtue of the Merger and without any
action by OSI Delaware, the holder of such shares or any other person, be
canceled and returned to the status of authorized but unissued shares.
3.4 Exchange of Certificates. After the Effective Date of the Merger, each
holder of an outstanding certificate representing shares of OSI California
Common Stock may, at such stockholder's option, surrender the same for
cancellation to Chase Mellon Shareholder Services, LLP as exchange agent (the
"Exchange Agent"), and each such holder shall be entitled to receive in
exchange therefor a certificate or certificates representing the number of
shares of the Surviving Corporation's Common Stock into which such holders'
shares of OSI California Common Stock were converted as herein provided.
Unless and until so surrendered, each outstanding certificate theretofore
representing shares of OSI California Common Stock shall be deemed for all
purposes to represent the number of whole shares of the Surviving
Corporation's Common Stock into which such shares of OSI California Common
Stock were converted in the Merger.
The registered owner on the books and records of the Surviving Corporation
or the Exchange Agent of any shares of stock represented by such outstanding
certificate shall, until such certificate shall have been surrendered for
transfer or conversion or otherwise accounted for to the Surviving Corporation
or the Exchange Agent, have and be entitled to exercise any voting and other
rights with respect to and to receive dividends and other distributions upon
the shares of Common Stock of the Surviving Corporation represented by such
outstanding certificate as provided above.
Each certificate representing Common Stock of the Surviving Corporation so
issued in the Merger shall bear the same legends, if any, with respect to the
restrictions on transferability as the certificates of OSI California so
converted and given in exchange therefor, unless otherwise determined by the
Board of Directors of the Surviving Corporation in compliance with applicable
laws.
A-3
<PAGE>
If any certificate for shares of OSI Delaware stock is to be issued in a
name other than that in which the certificate surrendered in exchange therefor
is registered, it shall be a condition of issuance thereof that the
certificate so surrendered shall be properly endorsed and otherwise in proper
form for transfer, that such transfer otherwise be proper and that the person
requesting such transfer pay to OSI Delaware or the Exchange Agent any
transfer or other taxes payable by reason of the issuance of such new
certificate in a name other than that of the registered holder of the
certificate surrendered or establish to the satisfaction of OSI Delaware that
such tax has been paid or is not payable.
IV
GENERAL
4.1 Covenants of OSI Delaware. OSI Delaware covenants and agrees that it
will, on or before the Effective Date of the Merger:
(a) Qualify to do business as a foreign corporation in the State of
California and in connection therewith irrevocably appoint an agent for
service of process as required under the provisions of Section 2105 of the
California General Corporation Law;
(b) File any and all documents with the California Franchise Tax Board
necessary for the assumption by OSI Delaware of all of the franchise tax
liabilities of OSI California; and
(c) Take such other actions as may be required by the California General
Corporation Law.
4.2 Further Assurances. From time to time, as and when required by OSI
Delaware or by its successors or assigns, there shall be executed and
delivered on behalf of OSI California such deeds and other instruments, and
there shall be taken or caused to be taken by OSI Delaware and OSI California
such further and other actions, as shall be appropriate or necessary in order
to vest or perfect in or conform of record or otherwise by OSI Delaware the
title to and possession of all the property, interests, assets, rights,
privileges, immunities, powers, franchises and authority of OSI California and
otherwise to carry out the purposes of this Agreement, and the officers and
directors of OSI Delaware are fully authorized in the name and on behalf of
OSI California or otherwise to take any and all such action and to execute and
deliver any and all such deeds and other instruments.
4.3 Abandonment. At any time before the filing of this Agreement with the
Secretary of State of the State of Delaware, this Agreement may be terminated
and the Merger may be abandoned for any reason whatsoever by the Board of
Directors of either OSI California or OSI Delaware, or both, notwithstanding
the approval of this Agreement by the shareholders of OSI California or by the
sole stockholder of OSI Delaware, or by both.
4.4 Amendment. The Boards of Directors of the Constituent Corporations may
amend this Agreement at any time prior to the filing of this Agreement (or
certificate in lieu thereof) with the Secretaries of State of the States of
California and Delaware, provided that an amendment made subsequent to the
adoption of this Agreement by the shareholders of either Constituent
Corporation shall not: (1) alter or change the amount or kind of shares,
securities, cash, property and/or rights to be received in exchange for or on
conversion of all or any of the shares of any class or series thereof of such
Constituent Corporation, (2) alter or change any term of the Certificate of
Incorporation of the Surviving Corporation to be effected by the Merger, or
(3) alter or change any of the terms and conditions of this Agreement if such
alteration or change would adversely affect the holders of any class of shares
or series thereof of such Constituent Corporation.
4.5 Registered Office. The registered office of the Surviving Corporation in
the State of Delaware is located at Corporation Trust Center, 1209 Orange
Street, in the City of Wilmington, Delaware 19801, County of New Castle, and
The Corporation Trust Company is the registered agent of the Surviving
Corporation at such address.
4.6 Agreement. Executed copies of this Agreement will be on file at the
principal place of business of the Surviving Corporation at 100 Blue Ravine
Road, Folsom, California 95630 and copies thereof will be furnished to any
shareholder of either Constituent Corporation, upon request and without cost.
A-4
<PAGE>
4.7 Governing Law. This Agreement shall in all respects be construed,
interpreted and enforced in accordance with and governed by the laws of the
State of Delaware and, so far as applicable, the merger provisions of the
California General Corporation Law.
4.8 Counterparts. In order to facilitate the filing and recording of this
Agreement, the same may be executed in any number of counterparts, each of
which shall be deemed to be an original and all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, this Agreement, having first been approved by
resolutions of the Boards of Directors of OSI Delaware and OSI California, is
hereby executed on behalf of each of such two corporations and attested by
their respective officers thereunto duly authorized.
Objective Systems Integrators, Inc.
a Delaware corporation
By: _________________________________
Joseph T. Ambrozy,
President and Chief Executive
Officer
ATTEST:
_____________________________________
Philip N. Cardman, Vice President,
General Counsel and Secretary
Objective Systems Integrators, Inc.
a California corporation
By: _________________________________
Joseph T. Ambrozy,
President and Chief
Executive Officer
ATTEST:
_____________________________________
Philip N. Cardman, Vice President,
General Counsel and Secretary
A-5
<PAGE>
OBJECTIVE SYSTEMS INTEGRATORS, INC.
(CALIFORNIA CORPORATION)
OFFICERS' CERTIFICATE
Joseph T. Ambrozy and Philip N. Cardman certify that:
1. They are the President and the Secretary, respectively, of Objective
Systems Integrators, Inc., a corporation organized under the laws of the
State of California.
2. The corporation has authorized two classes of stock, designated
"Common Stock" and "Preferred Stock". There are authorized 50,000,000
shares of Common Stock and 5,000,000 shares of Preferred Stock. The
Preferred Stock is undesignated as to series, rights, preferences or
restrictions.
3. There were 31,831,815 shares of Common Stock, and no shares of
Preferred Stock, outstanding as of the record date (the "Record Date") of
the shareholders' meeting at which the Agreement and Plan of Merger
attached hereto (the "Merger Agreement") was approved. All shares of Common
stock outstanding were entitled to vote on the merger.
4. The principal terms of the Merger Agreement were approved by the Board
of Directors and by the vote of a number of shares of each class of stock
which equaled or exceeded the vote required.
5. The percentage vote required was more than 50% of the votes entitled
to be cast by holders of Common Stock outstanding as of the Record Date,
voting as a single class.
6. Joseph T. Ambrozy and Philip N. Cardman further declare under penalty
of perjury under the laws of the State of California that each has read the
foregoing certificate and knows the contents thereof and that the same is
true of their own knowledge.
Executed in Folsom, California on November , 1996.
_____________________________________
Joseph T. Ambrozy, President
andChief Executive Officer
_____________________________________
Philip N. Cardman, Vice President,
General Counsel and Secretary
A-6
<PAGE>
OBJECTIVE SYSTEMS INTEGRATORS, INC.
(SURVIVING CORPORATION)
OFFICERS' CERTIFICATE
Joseph T. Ambrozy and Philip N. Cardman certify that:
1. They are the President and the Secretary, respectively, of Objective
Systems Integrators, Inc., a corporation organized under the laws of the
State of Delaware.
2. The corporation has authorized two classes of stock, designated
"Common Stock" and "Preferred Stock". There are authorized 100,000,000
shares of Common Stock and 5,000,000 shares of Preferred Stock. The
Preferred Stock is undesignated as to series, rights, preferences or
restrictions.
3. There were 100 shares of Common Stock outstanding and entitled to vote
on the Agreement and Plan of Merger attached hereto (the "Merger
Agreement"). There were no shares of Preferred Stock outstanding.
4. The principal terms of the Merger Agreement were approved by the Board
of Directors and by the vote of a number of shares of each class of stock
which equaled or exceeded the vote required.
5. The percentage vote required was more than 50% of the votes entitled
to be cast by holders of outstanding shares of Common Stock.
6. Joseph T. Ambrozy and Philip N. Cardman further declare under penalty
of perjury under the laws of the State of Delaware that each has read the
foregoing certificate and knows the contents thereof and that the same is
true of their own knowledge.
Executed in Folsom, California on November , 1996.
_____________________________________
Joseph T. Ambrozy, President and
Chief Executive Officer
_____________________________________
Philip N. Cardman, Vice President,
General Counsel and Secretary
A-7
<PAGE>
APPENDIX B
CERTIFICATE OF INCORPORATION
OF
OBJECTIVE SYSTEMS INTEGRATORS, INC.
FIRST: The name of the Corporation is Objective Systems Integrators,
Inc. (the "Corporation").
SECOND: The address of the Corporation's registered office in the State
of Delaware is Corporation Trust Center, 1209 Orange Street, in
the City of Wilmington, County of New Castle, zip code 19801.
The name of its registered agent at such address is The
Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the
General Corporation Law of Delaware.
FOURTH: The Corporation is authorized to issue two classes of stock to
be designated respectively Common Stock and Preferred Stock. The
total number of shares of all classes of stock which the
Corporation has authority to issue is One Hundred Five Million
(105,000,000), consisting of One Hundred Million (100,000,000)
shares of Common Stock, $0.001 par value (the "Common Stock"),
and Five Million (5,000,000) shares of Preferred Stock, $0.001
par value (the "Preferred Stock").
The Preferred Stock may be issued from time to time in one or
more series. The Board of Directors is hereby authorized subject
to limitations prescribed by law, to fix by resolution or
resolutions the designations, powers, preferences and rights,
and the qualifications, limitations or restrictions thereof, of
each such series of Preferred Stock, including without
limitation authority to fix by resolution or resolutions, the
dividend rights, dividend rate, conversion rights, voting
rights, rights and terms of redemption (including sinking fund
provisions), redemption price or prices, and liquidation
preferences of any wholly unissued series of Preferred Stock,
and the number of shares constituting any such series and the
designation thereof, or any of the foregoing.
The Board of Directors is further authorized to increase (but
not above the total number of authorized shares of the class) or
decrease (but not below the number of shares of any such series
then outstanding) the number of shares of any series, the number
of which was fixed by it, subsequent to the issue of shares of
such series then outstanding, subject to the powers, preferences
and rights, and the qualifications, limitations and restrictions
thereof stated in the resolution of the Board of Directors
originally fixing the number of shares of such series. If the
number of shares of any series is so decreased, then the shares
constituting such decrease shall resume the status which they
had prior to the adoption of the resolution originally fixing
the number of shares of such series.
FIFTH: The name and mailing address of the incorporator are as follows:
Carmine J. Broccole
Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, California 94304
SIXTH: The Corporation is to have perpetual existence.
B-1
<PAGE>
SEVENTH: The election of directors need not be by written ballot unless a
stockholder demands election by written ballot at a meeting of
stockholders and before voting begins or unless the Bylaws of
the Corporation shall so provide.
EIGHTH: The number of directors which constitute the whole Board of
Directors of the Corporation shall be designated in the Bylaws
of the Corporation.
NINTH: In furtherance and not in limitation of the powers conferred by
the laws of the State of Delaware, the Board of Directors is
expressly authorized to adopt, alter, amend or repeal the Bylaws
of the Corporation.
TENTH: To the fullest extent permitted by the Delaware General
Corporation Law as the same exists or may hereafter be amended,
no director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director.
Neither any amendment nor repeal of this Article, nor the
adoption of any provision of this Certificate of Incorporation
inconsistent with this Article, shall eliminate or reduce the
effect of this Article in respect of any matter occurring, or
any cause of action, suit or claim that, but for this Article,
would accrue or arise, prior to such amendment, repeal or
adoption of an inconsistent provision.
ELEVENTH: At the election of directors of the Corporation, each holder of
stock or of any class or series of stock shall be entitled to as
many votes as shall equal the number of votes which such
stockholder would be entitled to cast for the election of
directors with respect to his or her shares of stock multiplied
by the number of directors to be elected and may cast all such
votes for any director or for any two or more of them as such
stockholder may see fit.
TWELFTH: Meetings of stockholders may be held within or without the State
of Delaware, as the Bylaws may provide. The books of the
Corporation may be kept (subject to any provision contained in
the laws of the State of Delaware) outside of the State of
Delaware at such place or places as may be designated from time
to time by the Board of Directors or in the Bylaws of the
Corporation.
THIRTEENTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of
Incorporation, in the manner now or hereafter prescribed by the
laws of the State of Delaware, and all rights conferred herein
are granted subject to this reservation.
The undersigned incorporator hereby acknowledges that the foregoing
Certificate of Incorporation is his act and deed and that the facts stated
herein are true.
Dated: October 9, 1996
/s/ Carmine J. Broccole
Carmine J. Broccole
Incorporator
B-2
<PAGE>
APPENDIX C
BYLAWS
OF
OBJECTIVE SYSTEMS INTEGRATORS, INC.
(A DELAWARE CORPORATION)
C-1
<PAGE>
BYLAWS OF
OBJECTIVE SYSTEMS INTEGRATORS, INC.
(A DELAWARE CORPORATION)
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
ARTICLE I--CORPORATE OFFICES........................................... C-4
1.1 Registered Office............................................ C-4
1.2 Other Offices................................................ C-4
ARTICLE II--MEETINGS OF STOCKHOLDERS................................... C-4
2.1 Place of Meetings............................................ C-4
2.2 Annual Meeting............................................... C-4
2.3 Special Meeting.............................................. C-5
2.4 Notice of Stockholders' Meetings............................. C-5
Advance Notice of Stockholder Nominees and Stockholder
2.5 Business..................................................... C-5
2.6 Manner of Giving Notice; Affidavit of Notice................. C-6
2.7 Quorum....................................................... C-6
2.8 Adjourned Meeting, Notice.................................... C-6
2.9 Voting....................................................... C-6
2.10 Stockholder Action by Written Consent........................ C-7
2.11 Record Date for Stockholder Notice; Voting................... C-7
2.12 Proxies...................................................... C-7
2.13 Organization................................................. C-7
2.14 List of Stockholders Entitled to Vote........................ C-7
ARTICLE III--DIRECTORS................................................. C-8
3.1 Powers....................................................... C-8
3.2 Number of Directors.......................................... C-8
3.3 Election and Term of Office of Directors..................... C-8
3.4 Resignation and Vacancies.................................... C-8
3.5 Removal of Directors......................................... C-9
3.6 Place of Meetings; Meetings by Telephone..................... C-9
3.7 First Meetings............................................... C-9
3.8 Regular Meetings............................................. C-10
3.9 Special Meetings; Notice..................................... C-10
3.10 Quorum....................................................... C-10
3.11 Waiver of Notice............................................. C-10
3.12 Adjournment.................................................. C-10
3.13 Notice of Adjournment........................................ C-10
3.14 Board Action by Written Consent Without a Meeting............ C-11
3.15 Fees and Compensation of Directors........................... C-11
3.16 Approval of Loans to Officers................................ C-11
3.17 Sole Director Provided by Certificate of Incorporation....... C-11
ARTICLE IV--COMMITTEES................................................. C-11
4.1 Committees of Directors...................................... C-11
4.2 Meetings and Actions of Committees........................... C-12
4.3 Committee Minutes............................................ C-12
</TABLE>
C-2
<PAGE>
<TABLE>
<CAPTION>
PAGE
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<C> <S> <C>
ARTICLE V--OFFICERS....................................................... C-12
5.1 Officers........................................................ C-12
5.2 Election of Officers............................................ C-12
5.3 Subordinate Officers............................................ C-12
5.4 Removal and Resignation of Officers............................. C-13
5.5 Vacancies in Offices............................................ C-13
5.6 Chairman of the Board........................................... C-13
5.7 Chief Executive Officer and President........................... C-13
5.8 Vice Presidents................................................. C-13
5.9 Secretary....................................................... C-13
5.10 Chief Financial Officer......................................... C-14
5.11 Assistant Secretary............................................. C-14
5.12 Administrative Officers......................................... C-14
5.13 Authority and Duties of Officers................................ C-15
ARTICLE VI--INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND OTHER
AGENTS........................................................ C-15
6.1 Indemnification of Directors and Officers....................... C-15
6.2 Indemnification of Others....................................... C-15
6.3 Insurance....................................................... C-16
ARTICLE VII--RECORDS AND REPORTS.......................................... C-16
7.1 Maintenance and Inspection of Records........................... C-16
7.2 Inspection by Directors......................................... C-16
7.3 Annual Statement to Stockholders................................ C-16
7.4 Representation of Shares of Other Corporations.................. C-16
7.5 Certification and Inspection of Bylaws.......................... C-17
ARTICLE VIII--GENERAL MATTERS............................................. C-17
8.1 Record Date for Purposes Other Than Notice and Voting........... C-17
8.2 Checks; Drafts; Evidences of Indebtedness....................... C-17
8.3 Corporate Contracts and Instruments: How Executed............... C-17
8.4 Stock Certificates; Transfer; Partly Paid Shares................ C-17
8.5 Special Designation on Certificates............................. C-18
8.6 Lost Certificates............................................... C-18
8.7 Transfer Agents and Registrars.................................. C-18
8.8 Construction; Definitions....................................... C-19
ARTICLE IX--AMENDMENTS.................................................... C-19
</TABLE>
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<PAGE>
BYLAWS OF
OBJECTIVE SYSTEMS INTEGRATORS, INC.
(A DELAWARE CORPORATION)
ARTICLE I
CORPORATE OFFICES
1.1 Registered Office
The registered office of the corporation shall be fixed in the certificate
of incorporation of the corporation.
1.2 Other Offices
The board of directors may at any time establish branch or subordinate
offices at any place or places where the corporation is qualified to do
business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 Place of Meetings
Meetings of stockholders shall be held at any place within or outside the
State of Delaware designated by the board of directors. In the absence of any
such designation, stockholders' meetings shall be held at the principal
executive office of the corporation.
2.2 Annual Meeting
The annual meeting of stockholders shall be held each year on a date and at
a time designated by the board of directors. At the meeting, directors shall
be elected, and any other proper business may be transacted.
At an annual meeting of the stockholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be
properly brought before an annual meeting, business must be: (A) specified in
the notice of meeting (or any supplement thereto) given by or at the direction
of the Board of Directors, (B) otherwise properly brought before the meeting
by or at the direction of the Board of Directors, or (C) otherwise properly
brought before the meeting by a stockholder. For business to be properly
brought before an annual meeting by a stockholder, the stockholder must have
given timely notice thereof in writing to the Secretary of the corporation. To
be timely, a stockholder's notice must be delivered to or mailed and received
at the principal executive offices of the corporation not less than one
hundred twenty (120) calendar days in advance of the estimated mailing date
for the proxy statement relating to the corporation's next annual meeting as
specified in the corporation's proxy statement released to stockholders in
connection with the previous year's annual meeting of stockholders; provided,
however, that in the event that no annual meeting was held in the previous
year or the date of the annual meeting has been changed by more than thirty
(30) days from the date contemplated at the time of the previous year's proxy
statement, notice by the stockholder to be timely must be so received a
reasonable time before the solicitation is made. A stockholder's notice to the
Secretary shall set forth as to each matter the stockholder proposes to bring
before the annual meeting: (i) a brief description of the business desired to
be brought before the annual meeting and the reasons for conducting such
business at the annual meeting, (ii) the name and address, as they appear on
the corporation's books, of the stockholder proposing such business, (iii) the
class and number of shares of the corporation which are beneficially owned by
the stockholder, (iv) any material interest of the stockholder in such
business and (v) any other information that is required to be provided by the
stockholder pursuant to Regulation 14A under the Securities Exchange Act of
1934, as amended (the "1934 Act"), in his capacity as a proponent to a
stockholder proposal. Notwithstanding the foregoing, in order to include
information with respect to a stockholder proposal in the proxy statement and
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form of proxy for a stockholder's meeting, stockholders must provide notice as
required by the regulations promulgated under the 1934 Act. Notwithstanding
anything in these Bylaws to the contrary, no business shall be conducted at
any annual meeting except in accordance with the procedures set forth in this
paragraph. The chairman of the annual meeting shall, if the facts warrant,
determine and declare at the meeting that business was not properly brought
before the meeting and in accordance with the provisions of this paragraph,
and, if he should so determine, he shall so declare at the meeting that any
such business not properly brought before the meeting shall not be transacted.
Only persons who are nominated in accordance with the procedures set forth
in this paragraph shall be eligible for election as Directors. Nominations of
persons for election to the Board of Directors of the corporation may be made
at a meeting of stockholders by or at the direction of the Board of Directors
or by any stockholder of the corporation entitled to vote in the election of
Directors at the meeting who complies with the notice procedures set forth in
this paragraph. Such nominations, other than those made by or at the direction
of the Board of Directors, shall be made pursuant to timely notice in writing
to the Secretary of the corporation in accordance with the provisions of the
prior paragraph of this Section 2.2. Such stockholder's notice shall set forth
(i) as to each person, if any, whom the stockholder proposes to nominate for
election or re-election as a Director: (A) the name, age, business address and
residence address of such person, (B) the principal occupation or employment
of such person, (C) the class and number of shares of the corporation which
are beneficially owned by such person, (D) a description of all arrangements
or understandings between the stockholder and each nominee and any other
person or persons (naming such person or persons) pursuant to which the
nominations are to be made by the stockholder, and (E) any other information
relating to such person that is required to be disclosed in solicitations of
proxies for elections of Directors, or is otherwise required, in each case
pursuant to Regulation 14A under the 1934 Act (including without limitation
such person's written consent to being named in the proxy statement, if any,
as a nominee and to serving as a Director if elected); and (ii) as to such
stockholder giving notice, the information required to be provided pursuant to
the preceding paragraph of this Section 2.2. At the request of the Board of
Directors, any person nominated by a stockholder for election as a Director
shall furnish to the Secretary of the corporation that information required to
be set forth in the stockholder's notice of nomination which pertains to the
nominee. No person shall be eligible for election as a Director of the
corporation unless nominated in accordance with the procedures set forth in
this paragraph (c). The chairman of the meeting shall, if the facts warrants,
determine and declare at the meeting that a nomination was not made in
accordance with the procedures prescribed by these Bylaws, and if he should so
determine, he shall so declare at the meeting, and the defective nomination
shall be disregarded.
2.3 Special Meeting
A special meeting of the stockholders may be called at any time by the board
of directors.
2.4 Notice of Stockholders' Meetings
All notices of meetings of stockholders shall be sent or otherwise given in
accordance with Section 2.5 of these bylaws not less than ten (10) nor more
than sixty (60) days before the date of the meeting. The notice shall specify
the place, date and hour of the meeting and (i) in the case of a special
meeting, the purpose or purposes for which the meeting is called (no business
other than that specified in the notice may be transacted) or (ii) in the case
of the annual meeting, those matters which the board of directors, at the time
of giving the notice, intends to present for action by the stockholders (but
any proper matter may be presented at the meeting for such action). The notice
of any meeting at which directors are to be elected shall include the name of
any nominee or nominees who, at the time of the notice, the board intends to
present for election.
2.5 Advance Notice of Stockholder Nominees and Stockholder Business
To be properly brought before an annual meeting or special meeting,
nominations for the election of directors or other business must be (a)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the board of directors, (b) otherwise properly brought before
the meeting by or at the direction of the board of directors or (c) otherwise
properly brought before the meeting by a stockholder.
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2.6 Manner of Giving Notice; Affidavit of Notice
Written notice of any meeting of stockholders shall be given either
personally or by first-class mail or by telegraphic or other written
communication. Notices not personally delivered shall be sent charges prepaid
and shall be addressed to the stockholder at the address of that stockholder
appearing on the books of the corporation or given by the stockholder to the
corporation for the purpose of notice. Notice shall be deemed to have been
given at the time when delivered personally or deposited in the mail or sent
by telegram or other means of written communication.
An affidavit of the mailing or other means of giving any notice of any
stockholders' meeting, executed by the secretary, assistant secretary or any
transfer agent of the corporation giving the notice, shall be prima facie
evidence of the giving of such notice.
2.7 Quorum
The holders of a majority in voting power of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum is not present or
represented at any meeting of the stockholders, then either (i) the chairman
of the meeting or (ii) the stockholders entitled to vote thereat, present in
person or represented by proxy, shall have power to adjourn the meeting in
accordance with Section 2.7 of these bylaws.
When a quorum is present at any meeting, the vote of the holders of a
majority of the stock having voting power present in person or represented by
proxy shall decide any question brought before such meeting, unless the
question is one upon which, by express provision of the laws of the State of
Delaware or of the certificate of incorporation or these bylaws, a different
vote is required, in which case such express provision shall govern and
control the decision of the question.
If a quorum be initially present, the stockholders may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum, if any action taken is approved by a
majority of the stockholders initially constituting the quorum.
2.8 Adjourned Meeting; Notice
When a meeting is adjourned to another time and place, unless these bylaws
otherwise require, notice need not be given of the adjourned meeting if the
time and place thereof are announced at the meeting at which the adjournment
is taken. At the adjourned meeting the corporation may transact any business
that might have been transacted at the original meeting. If the adjournment is
for more than thirty (30) days, or if after the adjournment a new record date
is fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
2.9 Voting
The stockholders entitled to vote at any meeting of stockholders shall be
determined in accordance with the provisions of Section 2.11 of these bylaws,
subject to the provisions of Sections 217 and 218 of the General Corporation
Law of Delaware (relating to voting rights of fiduciaries, pledgors and joint
owners, and to voting trusts and other voting agreements).
Except as may be otherwise provided in the certificate of incorporation or
these bylaws, each stockholder shall be entitled to as many votes as shall
equal the number of votes which such stockholder would be entitled to cast for
the election of directors with respect to his or her shares of stock
multiplied by the number of directors to be elected and may cast all such
votes for any director or for any two or more of them as such stockholder may
see fit.
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2.10 Stockholder Action by Written Consent
The stockholders of the corporation may not take action by written consent
without a meeting. Any such actions must be taken at a duly called annual or
special meeting.
2.11 Record Date for Stockholder Notice; Voting
For purposes of determining the stockholders entitled to notice of any
meeting or to vote thereat, the board of directors may fix, in advance, a
record date, which shall not precede the date upon which the resolution fixing
the record date is adopted by the board of directors and which shall not be
more than sixty (60) days nor less than ten (10) days before the date of any
such meeting, and in such event only stockholders of record on the date so
fixed are entitled to notice and to vote, notwithstanding any transfer of any
shares on the books of the corporation after the record date.
If the board of directors does not so fix a record date, the record date for
determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the business day next
preceding the day on which notice is given, or, if notice is waived, at the
close of business on the business day next preceding the day on which the
meeting is held.
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting
unless the board of directors fixes a new record date for the adjourned
meeting, but the board of directors shall fix a new record date if the meeting
is adjourned for more than thirty (30) days from the date set for the original
meeting.
The record date for any other purpose shall be as provided in Section 8.1 of
these bylaws.
2.12 Proxies
Every person entitled to vote for directors, or on any other matter, shall
have the right to do so either in person or by one or more agents authorized
by a written proxy signed by the person and filed with the secretary of the
corporation, but no such proxy shall be voted or acted upon after 11 months
from its date, unless the proxy provides for a longer period. A proxy shall be
deemed signed if the stockholder's name is placed on the proxy (whether by
manual signature, typewriting, telegraphic transmission, telefacsimile or
otherwise) by the stockholder or the stockholder's attorney-in-fact. The
revocability of a proxy that states on its face that it is irrevocable shall
be governed by the provisions of Section 212(e) of the General Corporation Law
of Delaware.
2.13 Organization
The president, or in the absence of the president, the chairman of the
board, shall call the meeting of the stockholders to order, and shall act as
chairman of the meeting. In the absence of the president, the chairman of the
board, and all of the vice presidents, the stockholders shall appoint a
chairman for such meeting. The chairman of any meeting of stockholders shall
determine the order of business and the procedures at the meeting, including
such matters as the regulation of the manner of voting and the conduct of
business. The secretary of the corporation shall act as secretary of all
meetings of the stockholders, but in the absence of the secretary at any
meeting of the stockholders, the chairman of the meeting may appoint any
person to act as secretary of the meeting.
2.14 List of Stockholders Entitled to Vote
The officer who has charge of the stock ledger of the corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders,
a complete list of the stockholders entitled to vote at the meeting, arranged
in alphabetical order, and showing the address of each stockholder and the
number of shares registered in the name of each stockholder. Such list shall
be open to the examination of any stockholder, for any purpose germane to the
meeting, during ordinary business hours, for a period of at least ten (10)
days prior to the meeting,
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either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or, if not so specified, at
the place where the meeting is to be held. The list shall also be produced and
kept at the time and place of the meeting during the whole time thereof, and
may be inspected by any stockholder who is present.
ARTICLE III
DIRECTORS
3.1 Powers
Subject to the provisions of the General Corporation Law of Delaware and to
any limitations in the certificate of incorporation or these bylaws relating
to action required to be approved by the stockholders or by the outstanding
shares, the business and affairs of the corporation shall be managed and all
corporate powers shall be exercised by or under the direction of the board of
directors.
3.2 Number of Directors
The board of directors shall consist of six (6) members. The number of
directors may be changed by an amendment to this bylaw, duly adopted by the
board of directors or by the stockholders, or by a duly adopted amendment to
the certificate of incorporation.
3.3 Election and Term of Office of Directors
Except as provided in Section 3.4 of these bylaws, directors shall be
elected at each annual meeting of stockholders to hold office until the next
annual meeting. Each director, including a director elected or appointed to
fill a vacancy, shall hold office until the expiration of the term for which
elected and until a successor has been elected and qualified.
3.4 Resignation and Vacancies
Any director may resign effective on giving written notice to the chairman
of the board, the president, the secretary or the board of directors, unless
the notice specifies a later time for that resignation to become effective. If
the resignation of a director is effective at a future time, the board of
directors may elect a successor to take office when the resignation becomes
effective.
Vacancies in the board of directors may be filled by a majority of the
remaining directors, even if less than a quorum, or by a sole remaining
director. Each director so elected shall hold office until the next annual
meeting of the stockholders and until a successor has been elected and
qualified.
Unless otherwise provided in the certificate of incorporation or these
bylaws:
(i) Vacancies and newly created directorships resulting from any increase
in the authorized number of directors elected by all of the stockholders
having the right to vote as a single class may be filled by a majority of
the directors then in office, although less than a quorum, or by a sole
remaining director.
(ii) Whenever the holders of any class or classes of stock or series
thereof are entitled to elect one or more directors by the provisions of
the certificate of incorporation, vacancies and newly created directorships
of such class or classes or series may be filled by a majority of the
directors elected by such class or classes or series thereof then in
office, or by a sole remaining director so elected.
(iii) A vacancy created by the removal of a director may be filled by a
majority of directors then in office or the shareholders.
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a
stockholder, or
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other fiduciary entrusted with like responsibility for the person or estate of
a stockholder, may call a special meeting of stockholders in accordance with
the provisions of the certificate of incorporation or these bylaws, or may
apply to the Court of Chancery for a decree summarily ordering an election as
provided in Section 211 of the General Corporation Law of Delaware.
If, at the time of filling any vacancy or any newly created directorship,
the directors then in office constitute less than a majority of the whole
board (as constituted immediately prior to any such increase), then the Court
of Chancery may, upon application of any stockholder or stockholders holding
at least ten (10) percent of the total number of the shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorships,
or to replace the directors chosen by the directors then in office as
aforesaid, which election shall be governed by the provisions of Section 211
of the General Corporation Law of Delaware as far as applicable.
3.5 Removal of Directors
Unless otherwise restricted by statute, by the certificate of incorporation
or by these bylaws, any director or the entire board of directors may be
removed, with cause, by the holders of a majority of the shares then entitled
to vote at an election of directors; provided, however, that, if and so long
as stockholders of the corporation are entitled to cumulative voting, if less
than the entire board is to be removed, no director may be removed without
cause if the votes cast against his removal would be sufficient to elect him
if then cumulatively voted at an election of the entire board of directors.
For purposes of the foregoing paragraph, "cause" shall mean (i) continued
willful failure to perform the obligations of a director, (ii) gross
negligence by the director, (iii) engaging in transactions that defraud the
corporation, (iv) fraud or intentional misrepresentation, including falsifying
use of funds and intentional misstatements made in financial statements,
books, records or reports to stockholders or governmental agencies, (v)
material violation of any agreement between the director and the corporation,
(vi) knowingly causing the corporation to commit violations of applicable law
(including by failure to act), (vii) acts of moral turpitude or (viii)
conviction of a felony.
No reduction of the authorized number of directors shall have the effect of
removing any director prior to the expiration of such director's term of
office.
3.6 Place of Meetings; Meetings by Telephone
Regular meetings of the board of directors may be held at any place within
or outside the State of Delaware that has been designated from time to time by
resolution of the board. In the absence of such a designation, regular
meetings shall be held at the principal executive office of the corporation.
Special meetings of the board may be held at any place within or outside the
State of Delaware that has been designated in the notice of the meeting or, if
not stated in the notice or if there is no notice, at the principal executive
office of the corporation.
Any meeting of the board, regular or special, may be held by conference
telephone or similar communication equipment, so long as all directors
participating in the meeting can hear one another; and all such participating
directors shall be deemed to be present in person at the meeting.
3.7 First Meetings
The first meeting of each newly elected board of directors shall be held at
such time and place as shall be fixed by the vote of the stockholders at the
annual meeting. In the event of the failure of the stockholders to fix the
time or place of such first meeting of the newly elected board of directors,
or in the event such meeting is not held at the time and place so fixed by the
stockholders, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of
the board of directors, or as shall be specified in a written waiver signed by
all of the directors.
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3.8 Regular Meetings
Regular meetings of the board of directors may be held without notice at
such time as shall from time to time be determined by the board of directors.
If any regular meeting day shall fall on a legal holiday, then the meeting
shall be held at the same time and place on the next succeeding full business
day.
3.9 Special Meetings; Notice
Special meetings of the board of directors for any purpose or purposes may
be called at any time by the chairman of the board, the president, any vice
president, the secretary or any two directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail,
telecopy or telegram, charges prepaid, addressed to each director at that
director's address as it is shown on the records of the corporation. If the
notice is mailed, it shall be deposited in the United States mail at least
four (4) days before the time of the holding of the meeting. If the notice is
delivered personally or by telephone, telecopy or telegram, it shall be
delivered personally or by telephone or to the telegraph company at least
forty-eight (48) hours before the time of the holding of the meeting. Any oral
notice given personally or by telephone may be communicated either to the
director or to a person at the office of the director who the person giving
the notice has reason to believe will promptly communicate it to the director.
The notice need not specify the purpose or the place of the meeting, if the
meeting is to be held at the principal executive office of the corporation.
3.10 Quorum
A majority of the authorized number of directors shall constitute a quorum
for the transaction of business, except to adjourn as provided in Section 3.12
of these bylaws. Every act or decision done or made by a majority of the
directors present at a duly held meeting at which a quorum is present shall be
regarded as the act of the board of directors, subject to the provisions of
the certificate of incorporation and applicable law.
A meeting at which a quorum is initially present may continue to transact
business notwithstanding the withdrawal of directors, if any action taken is
approved by at least a majority of the quorum for that meeting.
3.11 Waiver of Notice
Notice of a meeting need not be given to any director (i) who signs a waiver
of notice, whether before or after the meeting, or (ii) who attends the
meeting other than for the express purposed of objecting at the beginning of
the meeting to the transaction of any business because the meeting is not
lawfully called or convened. All such waivers shall be filed with the
corporate records or made part of the minutes of the meeting. A waiver of
notice need not specify the purpose of any regular or special meeting of the
board of directors.
3.12 Adjournment
A majority of the directors present, whether or not constituting a quorum,
may adjourn any meeting of the board to another time and place.
3.13 Notice of Adjournment
Notice of the time and place of holding an adjourned meeting of the board
need not be given unless the meeting is adjourned for more than twenty-four
(24) hours. If the meeting is adjourned for more than twenty-four (24) hours,
then notice of the time and place of the adjourned meeting shall be given
before the adjourned meeting takes place, in the manner specified in Section
3.9 of these bylaws, to the directors who were not present at the time of the
adjournment.
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3.14 Board Action by Written Consent Without a Meeting
Any action required or permitted to be taken by the board of directors may
be taken without a meeting, provided that all members of the board
individually or collectively consent in writing to that action. Such action by
written consent shall have the same force and effect as a unanimous vote of
the board of directors. Such written consent and any counterparts thereof
shall be filed with the minutes of the proceedings of the board of directors.
3.15 Fees and Compensation of Directors
Directors and members of committees may receive such compensation, if any,
for their services and such reimbursement of expenses as may be fixed or
determined by resolution of the board of directors. This Section 3.15 shall
not be construed to preclude any director from serving the corporation in any
other capacity as an officer, agent, employee or otherwise and receiving
compensation for those services.
3.16 Approval of Loans to Officers
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or any of
its subsidiaries, including any officer or employee who is a director of the
corporation or any of its subsidiaries, whenever, in the judgment of the
directors, such loan, guaranty or assistance may reasonably be expected to
benefit the corporation. The loan, guaranty or other assistance may be with or
without interest and may be unsecured, or secured in such manner as the board
of directors shall approve, including, without limitation, a pledge of shares
of stock of the corporation. Nothing contained in this section shall be deemed
to deny, limit or restrict the powers of guaranty or warranty of the
corporation at common law or under any statute.
3.17 Sole Director Provided by Certificate of Incorporation
In the event only one director is required by these bylaws or the
certificate of incorporation, then any reference herein to notices, waivers,
consents, meetings or other actions by a majority or quorum of the directors
shall be deemed to refer to such notice, waiver, etc., by such sole director,
who shall have all the rights and duties and shall be entitled to exercise all
of the powers and shall assume all the responsibilities otherwise herein
described as given to the board of directors.
ARTICLE IV
COMMITTEES
4.1 Committees of Directors
The board of directors may, by resolution adopted by a majority of the
authorized number of directors, designate one (1) or more committees, each
consisting of two or more directors, to serve at the pleasure of the board.
The board may designate one (1) or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. The appointment of members or alternate members of a committee
requires the vote of a majority of the authorized number of directors. Any
committee, to the extent provided in the resolution of the board, shall have
and may exercise all the powers and authority of the board, but no such
committee shall have the power or authority to (i) amend the certificate of
incorporation (except that a committee may, to the extent authorized in the
resolution or resolutions providing for the issuance of shares of stock
adopted by the board of directors as provided in Section 151(a) of the General
Corporation Law of Delaware, fix the designations and any of the preferences
or rights of such shares relating to dividends, redemption, dissolution, any
distribution of assets of the corporation or the conversion into, or the
exchange of such shares for, shares of any other class or classes or any other
series of the same or any other class or classes of stock of the corporation),
(ii) adopt an agreement of merger or consolidation under Sections 251 or 252
of the General Corporation Law of Delaware, (iii) recommend to the
stockholders the sale, lease or exchange of all or substantially all of the
corporation's property and assets, (iv) recommend to the stockholders a
dissolution of the corporation or a revocation of a dissolution or (v) amend
the bylaws of the corporation; and,
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unless the board resolution establishing the committee, the bylaws or the
certificate of incorporation expressly so provide, no such committee shall
have the power or authority to declare a dividend, to authorize the issuance
of stock, or to adopt a certificate of ownership and merger pursuant to
Section 253 of the General Corporation Law of Delaware.
4.2 Meetings and Action Committees
Meetings and actions of committees shall be governed by, and held and taken
in accordance with, the following provisions of Article III of these bylaws:
Section 3.6 (place of meetings; meetings by telephone), Section 3.8 (regular
meetings), Section 3.9 (special meetings; notice), Section 3.10 (quorum),
Section 3.11 (waiver of notice), Section 3.12 (adjournment), Section 3.13
(notice of adjournment) and Section 3.14 (board action by written consent
without meeting), with such changes in the context of those bylaws as are
necessary to substitute the committee and its members for the board of
directors and its members; provided, however, that the time of regular
meetings of committees may be determined either by resolution of the board of
directors or by resolution of the committee, that special meetings of
committees may also be called by resolution of the board of directors, and
that notice of special meetings of committees shall also be given to all
alternate members, who shall have the right to attend all meetings of the
committee. The board of directors may adopt rules for the government of any
committee not inconsistent with the provisions of these bylaws.
4.3 Committee Minutes
Each committee shall keep regular minutes of its meetings and report the
same to the board of directors when required.
ARTICLE V
OFFICERS
5.1 Officers
The Corporate Officers of the corporation shall be a chief executive officer
and president, a secretary and a chief financial officer. The corporation may
also have, at the discretion of the board of directors, a chairman of the
board, one or more vice presidents (however denominated), one or more
assistant secretaries, one or more assistant treasurers, and such other
officers as may be appointed in accordance with the provisions of Section 5.3
of these bylaws. Any number of offices may be held by the same person.
In addition to the Corporate Officers of the Company described above, there
may also be such Administrative Officers of the corporation as may be
designated and appointed from time to time by the president of the corporation
in accordance with the provisions of Section 5.12 of these bylaws.
5.2 Election of Officers
The Corporate Officers of the corporation, except such officers as may be
appointed in accordance with the provisions of Section 5.3 or Section 5.5 of
these bylaws, shall be chosen by the board of directors, subject to the
rights, if any, of an officer under any contract of employment, and shall hold
their respective offices for such terms as the board of directors may from
time to time determine.
5.3 Subordinate Officers
The board of directors may appoint, or may empower the president to appoint,
such other Corporate Officers as the business of the corporation may require,
each of whom shall hold office for such period, have such power and authority,
and perform such duties as are provided in these bylaws or as the board of
directors may from time to time determine.
The president may from time to time designate and appoint Administrative
Officers of the corporation in accordance with the provisions of Section 5.12
of these bylaws.
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5.4 Removal and Resignation of Officers
Subject to the rights, if any, of a Corporate Officer under any contract of
employment, any Corporate Officer may be removed, either with or without
cause, by the board of directors at any regular or special meeting of the
board or, except in case of a Corporate Officer chosen by the board of
directors, by any Corporate Officer upon whom such power of removal may be
conferred by the board of directors.
Any Corporate Officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless
otherwise specified in that notice, the acceptance of the resignation shall
not be necessary to make it effective. Any resignation is without prejudice to
the rights, if any, of the corporation under any contract to which the
Corporate Officer is a party.
Any Administrative Officer designated and appointed by the president may be
removed, either with or without cause, at any time by the president. Any
Administrative Officer may resign at any time by giving written notice to the
president or to the secretary of the corporation.
5.5 Vacancies in Offices
A vacancy in any office because of death, resignation, removal,
disqualification or any other cause shall be filled in the manner prescribed
in these bylaws for regular appointments to that office.
5.6 Chairman of the Board
The chairman of the board, if such an officer be elected, shall, if present,
preside at meetings of the board of directors and exercise such other powers
and perform such other duties as may from time to time be assigned to him by
the board of directors or as may be prescribed by these bylaws. If there is no
president, then the chairman of the board shall also be the chief executive
officer of the corporation and shall have the powers and duties prescribed in
Section 5.7 of these bylaws.
5.7 Chief Executive Officer and President
Subject to such supervisory powers, if any, as may be given by the board of
directors to the chairman of the board, if there be such an officer, the
president shall be the chief executive officer of the corporation and shall,
subject to the control of the board of directors, have general supervision,
direction and control of the business and the officers of the corporation. He
or she shall preside at all meetings of the stockholders and, in the absence
or nonexistence of a chairman of the board, at all meetings of the board of
directors. He or she shall have the general powers and duties of management
usually vested in the office of president of a corporation, and shall have
such other powers and perform such other duties as may be prescribed by the
board of directors or these bylaws.
5.8 Vice Presidents
In the absence or disability of the president, and if there is no chairman
of the board, the vice presidents, if any, in order of their rank as fixed by
the board of directors or, if not ranked, a vice president designated by the
board of directors, shall perform all the duties of the president and when so
acting shall have all the powers of, and be subject to all the restrictions
upon, the president. The vice presidents shall have such other powers and
perform such other duties as from time to time may be prescribed for them
respectively by the board of directors, these bylaws, the president or the
chairman of the board.
5.9 Secretary
The secretary shall keep or cause to be kept, at the principal executive
office of the corporation or such other place as the board of directors may
direct, a book of minutes of all meetings and actions of the board of
directors, committees of directors and stockholders. The minutes shall show
the time and place of each meeting,
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whether regular or special (and, if special, how authorized and the notice
given), the names of those present at directors' meetings or committee
meetings, the number of shares present or represented at stockholders'
meetings and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal executive
office of the corporation or at the office of the corporation's transfer agent
or registrar, as determined by resolution of the board of directors, a share
register or a duplicate share register, showing the names of all stockholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates evidencing such shares and the number and date of
cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings of
the stockholders and of the board of directors required to be given by law or
by these bylaws. He or she shall keep the seal of the corporation, if one be
adopted, in safe custody and shall have such other powers and perform such
other duties as may be prescribed by the board of directors or by these
bylaws.
5.10 Chief Financial Officer
The chief financial officer shall keep and maintain, or cause to be kept and
maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings and shares. The books of account shall at all reasonable
times be open to inspection by any director for a purpose reasonably related
to his position as a director.
The chief financial officer shall deposit all money and other valuables in
the name and to the credit of the corporation with such depositaries as may be
designated by the board of directors. He or she shall disburse the funds of
the corporation as may be ordered by the board of directors, shall render to
the president and directors, whenever they request it, an account of all of
his or her transactions as chief financial officer and of the financial
condition of the corporation, and shall have such other powers and perform
such other duties as may be prescribed by the board of directors or these
bylaws.
5.11 Assistant Secretary
The assistant secretary, if any, or, if there is more than one, the
assistant secretaries in the order determined by the board of directors (or if
there be no such determination, then in the order of their election) shall, in
the absence of the secretary or in the event of his or her inability or
refusal to act, perform the duties and exercise the powers of the secretary
and shall perform such other duties and have such other powers as the board of
directors may from time to time prescribe.
5.12 Administrative Officers
In addition to the Corporate Officers of the corporation as provided in
Section 5.1 of these bylaws and such subordinate Corporate Officers as may be
appointed in accordance with Section 5.3 of these bylaws, there may also be
such Administrative Officers of the corporation as may be designated and
appointed from time to time by the president of the corporation.
Administrative Officers shall perform such duties and have such powers as from
time to time may be determined by the president or the board of directors in
order to assist the Corporate Officers in the furtherance of their duties. In
the performance of such duties and the exercise of such powers, however, such
Administrative Officers shall have limited authority to act on behalf of the
corporation as the board of directors shall establish, including but not
limited to limitations on the dollar amount and on the scope of agreements or
commitments that may be made by such Administrative Officers on behalf of the
corporation, which limitations may not be exceeded by such individuals or
altered by the president without further approval by the board of directors.
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5.13 Authority and Duties of Officers
In addition to the foregoing powers, authority and duties, all officers of
the corporation shall respectively have such authority and powers and perform
such duties in the management of the business of the corporation as may be
designated from time to time by the board of directors.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES
AND OTHER AGENTS
6.1 Indemnification of Directors and Officers
The corporation shall, to the maximum extent and in the manner permitted by
the General Corporation Law of Delaware as the same now exists or may
hereafter be amended, indemnify any person against expenses (including
attorneys' fees), judgments, fines, and amounts paid in settlement actually
and reasonably incurred in connection with any threatened, pending or
completed action, suit, or proceeding in which such person was or is a party
or is threatened to be made a party by reason of the fact that such person is
or was a director or officer of the corporation. For purposes of this Section
6.1, a "director" or "officer" of the corporation shall mean any person (i)
who is or was a director or officer of the corporation, (ii) who is or was
serving at the request of the corporation as a director or officer of another
corporation, partnership, joint venture, trust or other enterprise, or (iii)
who was a director or officer of a corporation which was a predecessor
corporation of the corporation or of another enterprise at the request of such
predecessor corporation.
The corporation shall be required to indemnify a director or officer in
connection with an action, suit, or proceeding (or part thereof) initiated by
such director or officer only if the initiation of such action, suit, or
proceeding (or part thereof) by the director or officer was authorized by the
board of directors of the corporation.
The corporation shall pay the expenses (including attorney's fees) incurred
by a director or officer of the corporation entitled to indemnification
hereunder in defending any action, suit or proceeding referred to in this
Section 6.1 in advance of its final disposition; provided, however, that
payment of expenses incurred by a director or officer of the corporation in
advance of the final disposition of such action, suit or proceeding shall be
made only upon receipt of an undertaking by the director or officer to repay
all amounts advanced if it should ultimately be determined that the director
or officer is not entitled to be indemnified under this Section 6.1 or
otherwise.
The rights conferred on any person by this Article shall not be exclusive of
any other rights which such person may have or hereafter acquire under any
statute, provision of the corporation's Certificate of Incorporation, these
bylaws, agreement, vote of the stockholders or disinterested directors or
otherwise.
Any repeal or modification of the foregoing provisions of this Article shall
not adversely affect any right or protection hereunder of any person in
respect of any act or omission occurring prior to the time of such repeal or
modification.
6.2 Indemnification of Others
The corporation shall have the power, to the maximum extent and in the
manner permitted by the General Corporation Law of Delaware as the same now
exists or may hereafter be amended, to indemnify any person (other than
directors and officers) against expenses (including attorneys' fees),
judgments, fines, and amounts paid in settlement actually and reasonably
incurred in connection with any threatened, pending or completed action, suit,
or proceeding, in which such person was or is a party or is threatened to be
made a party by reason of the fact that such person is or was an employee or
agent of the corporation. For purposes of this Section 6.2, an "employee" or
"agent" of the corporation (other than a director or officer) shall mean any
person (i) who is
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or was an employee or agent of the corporation, (ii) who is or was serving at
the request of the corporation as an employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, or (iii) who was an
employee or agent of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
6.3 Insurance
The corporation may purchase and maintain insurance on behalf of any person
who is or was a director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him or her and
incurred by him or her in any such capacity, or arising out of his or her
status as such, whether or not the corporation would have the power to
indemnify him or her against such liability under the provisions of the
General Corporation Law of Delaware.
ARTICLE VII
RECORDS AND REPORTS
7.1 Maintenance and Inspection of Records
The corporation shall, either at its principal executive office or at such
place or places as designated by the board of directors, keep a record of its
stockholders listing their names and addresses and the number and class of
shares held by each stockholder, a copy of these bylaws as amended to date,
accounting books and other records of its business and properties.
Any stockholder of record, in person or by attorney or other agent, shall,
upon written demand under oath stating the purpose thereof, have the right
during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books
and records and to make copies or extracts therefrom. A proper purpose shall
mean a purpose reasonably related to such person's interest as a stockholder.
In every instance where an attorney or other agent is the person who seeks the
right to inspection, the demand under oath shall be accompanied by a power of
attorney or such other writing that authorizes the attorney or other agent to
so act on behalf of the stockholder. The demand under oath shall be directed
to the corporation at its registered office in Delaware or at its principal
place of business.
7.2 Inspection by Directors
Any director shall have the right to examine the corporation's stock ledger,
a list of its stockholders and its other books and records for a purpose
reasonably related to his or her position as a director.
7.3 Annual Statement to Stockholders
The board of directors shall present at each annual meeting, and at any
special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
corporation.
7.4 Representation of Shares of Other Corporations
The chairman of the board, if any, the president, any vice president, the
chief financial officer, the secretary or any assistant secretary of this
corporation, or any other person authorized by the board of directors or the
president or a vice president, is authorized to vote, represent and exercise
on behalf of this corporation all rights incident to any and all shares of the
stock of any other corporation or corporations standing in the name of this
corporation. The authority herein granted may be exercised either by such
person directly or by any other person authorized to do so by proxy or power
of attorney duly executed by such person having the authority.
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7.5 Certification and Inspection of Bylaws
The original or a copy of these bylaws, as amended or otherwise altered to
date, certified by the secretary, shall be kept at the corporation's principal
executive office and shall be open to inspection by the stockholders of the
corporation, at all reasonable times during office hours.
ARTICLE VIII
GENERAL MATTERS
8.1 Record Date for Purposes Other Than Notice and Voting
For purposes of determining the stockholders entitled to receive payment of
any dividend or other distribution or allotment of any rights or the
stockholders entitled to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purpose of any other lawful
action, the board of directors may fix, in advance, a record date, which shall
not precede the date upon which the resolution fixing the record date is
adopted and which shall not be more than sixty (60) days before any such
action. In that case, only stockholders of record at the close of business on
the date so fixed are entitled to receive the dividend, distribution or
allotment of rights, or to exercise such rights, as the case may be,
notwithstanding any transfer of any shares on the books of the corporation
after the record date so fixed, except as otherwise provided by law.
If the board of directors does not so fix a record date, then the record
date for determining stockholders for any such purpose shall be at the close
of business on the day on which the board of directors adopts the applicable
resolution.
8.2 Checks; Drafts; Evidences of Indebtedness
From time to time, the board of directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders
for payment of money, notes or other evidences of indebtedness that are issued
in the name of or payable to the corporation, and only the persons so
authorized shall sign or endorse those instruments.
8.3 Corporate Contracts and Instruments: How Executed
The board of directors, except as otherwise provided in these bylaws, may
authorize and empower any officer or officers, or agent or agents, to enter
into any contract or execute any instrument in the name of and on behalf of
the corporation; such power and authority may be general or confined to
specific instances. Unless so authorized or ratified by the board of directors
or within the agency power of an officer, no officer, agent or employee shall
have any power or authority to bind the corporation by any contract or
engagement or to pledge its credit or to render it liable for any purpose or
for any amount.
8.4 Stock Certificates; Transfer; Partly Paid Shares
The shares of the corporation shall be represented by certificates, provided
that the board of directors of the corporation may provide by resolution or
resolutions that some or all of any or all classes or series of its stock
shall be uncertificated shares. Any such resolution shall not apply to shares
represented by a certificate until such certificate is surrendered to the
corporation. Notwithstanding the adoption of such a resolution by the board of
directors, every holder of stock represented by certificates and, upon
request, every holder of uncertificated shares, shall be entitled to have a
certificate signed by, or in the name of the corporation by, the chairman or
vice-chairman of the board of directors, or the president or vice-president,
and by the treasurer or an assistant treasurer, or the secretary or an
assistant secretary of such corporation representing the number of shares
registered in certificate form. Any or all of the signatures on the
certificate may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate has ceased to be such officer, transfer agent or registrar before
such certificate is issued, it may be issued by the corporation with the same
effect as if he or she were such officer, transfer agent or registrar at the
date of issue.
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Certificates for shares shall be of such form and device as the board of
directors may designate and shall state the name of the record holder of the
shares represented thereby; its number; date of issuance; the number of shares
for which it is issued; a summary statement or reference to the powers,
designations, preferences or other special rights of such stock and the
qualifications, limitations or restrictions of such preferences and/or rights,
if any; a statement or summary of liens, if any; a conspicuous notice of
restrictions upon transfer or registration of transfer, if any; a statement as
to any applicable voting trust agreement; if the shares be assessable, or, if
assessments are collectible by personal action, a plain statement of such
facts.
Upon surrender to the secretary or transfer agent of the corporation of a
certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books.
The corporation may issue the whole or any part of its shares as partly paid
and subject to call for the remainder of the consideration to be paid
therefor. Upon the face or back of each stock certificate issued to represent
any such partly paid shares, or upon the books and records of the corporation
in the case of uncertificated partly paid shares, the total amount of the
consideration to be paid therefor and the amount paid thereon shall be stated.
Upon the declaration of any dividend on fully paid shares, the corporation
shall declare a dividend upon partly paid shares of the same class, but only
upon the basis of the percentage of the consideration actually paid thereon.
8.5 Special Designation on Certificates
If the corporation is authorized to issue more than one class of stock or
more than one series of any class, then the powers, the designations, the
preferences and the relative, participating, optional or other special rights
of each class of stock or series thereof and the qualifications, limitations
or restrictions of such preferences and/or rights shall be set forth in full
or summarized on the face or back of the certificate that the corporation
shall issue to represent such class or series of stock; provided, however,
that, except as otherwise provided in Section 202 of the General Corporation
Law of Delaware, in lieu of the foregoing requirements there may be set forth
on the face or back of the certificate that the corporation shall issue to
represent such class or series of stock a statement that the corporation will
furnish without charge to each stockholder who so requests the powers, the
designations, the preferences and the relative, participating, optional or
other special rights of each class of stock or series thereof and the
qualifications, limitations or restrictions of such preferences and/or rights.
8.6 Lost Certificates
Except as provided in this Section 8.6, no new certificates for shares shall
be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and cancelled at the same time. The board of
directors may, in case any share certificate or certificate for any other
security is lost, stolen or destroyed, authorize the issuance of replacement
certificates on such terms and conditions as the board may require; the board
may require indemnification of the corporation secured by a bond or other
adequate security sufficient to protect the corporation against any claim that
may be made against it, including any expense or liability, on account of the
alleged loss, theft or destruction of the certificate or the issuance of the
replacement certificate.
8.7 Transfer Agents and Registrars
The board of directors may appoint one or more transfer agents or transfer
clerks, and one or more registrars, each of which shall be an incorporated
bank or trust company--either domestic or foreign, who shall be appointed at
such times and places as the requirements of the corporation may necessitate
and the board of directors may designate.
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8.8 Construction; Definitions
Unless the context requires otherwise, the general provisions, rules of
construction and definitions in the General Corporation Law of Delaware shall
govern the construction of these bylaws. Without limiting the generality of
this provision, as used in these bylaws, the singular number includes the
plural, the plural number includes the singular, and the term "person"
includes both an entity and a natural person.
ARTICLE IX
AMENDMENTS
The original or other bylaws of the corporation may be adopted, amended or
repealed by the stockholders entitled to vote; provided, however, that the
corporation may, in its certificate of incorporation, confer the power to
adopt, amend or repeal bylaws upon the directors. The fact that such power has
been so conferred upon the directors shall not divest the stockholders of the
power, nor limit their power to adopt, amend or repeal bylaws.
Whenever an amendment or new bylaw is adopted, it shall be copied in the
book of bylaws with the original bylaws, in the appropriate place. If any
bylaw is repealed, the fact of repeal with the date of the meeting at which
the repeal was enacted or the filing of the operative written consent(s) shall
be stated in said book.
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APPENDIX D
OBJECTIVE SYSTEMS INTEGRATORS, INC.
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is effective as of , 1996
by and between Objective Systems Integrators, Inc., a Delaware corporation
(the "Company"), and ("Indemnitee").
WHEREAS, effective as of the date hereof, Objective Systems Integrators,
Inc., a California corporation, is reincorporating into Delaware;
WHEREAS, the Company desires to attract and retain the services of highly
qualified individuals, such as Indemnitee, to serve the Company and its
related entities;
WHEREAS, in order to induce Indemnitee to continue to provide services to
the Company, the Company wishes to provide for the indemnification of, and the
advancement of expenses to, Indemnitee to the maximum extent permitted by law;
WHEREAS, the Company and Indemnitee recognize the continued difficulty in
obtaining liability insurance for the Company's directors, officers,
employees, agents and fiduciaries, the significant increases in the cost of
such insurance and the general reductions in the coverage of such insurance;
WHEREAS, the Company and Indemnitee further recognize the substantial
increase in corporate litigation in general, subjecting directors, officers,
employees, agents and fiduciaries to expensive litigation risks at the same
time as the availability and coverage of liability insurance has been severely
limited; and
WHEREAS, in connection with the Company's reincorporation, the Company and
Indemnitee desire to continue to have in place the additional protection
provided by an indemnification agreement to provide indemnification and
advancement of expenses to the Indemnitee to the maximum extent permitted by
Delaware law;
WHEREAS, in view of the considerations set forth above, the Company desires
that Indemnitee shall be indemnified and advanced expenses by the Company as
set forth herein;
NOW, THEREFORE, the Company and Indemnitee hereby agree as set forth below.
1. Certain Definitions.
(a) "Change in Control" shall mean, and shall be deemed to have occurred if,
on or after the date of this Agreement, (i) any "person" (as such term is used
in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended) or group acting in concert, other than a trustee or other fiduciary
holding securities under an employee benefit plan of the Company acting in
such capacity or a corporation owned directly or indirectly by the
stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company, becomes the "beneficial owner" (as defined
in Rule 13d-3 under said Act), directly or indirectly, of securities of the
Company representing more than 50% of the total voting power represented by
the Company's then outstanding Voting Securities, (ii) during any period of
two consecutive years, individuals who at the beginning of such period
constitute the Board of Directors of the Company and any new director whose
election by the Board of Directors 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 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
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being converted into Voting Securities of the surviving entity) at least 80%
of the total voting power represented by the Voting Securities of the Company
or such surviving entity outstanding immediately after such merger or
consolidation, or (iv) 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 (in one transaction or a series of related
transactions) all or substantially all of the Company's assets.
(b) "Claim" shall mean with respect to a Covered Event: any threatened,
pending or completed action, suit, proceeding or alternative dispute
resolution mechanism, or any hearing, inquiry or investigation that Indemnitee
in good faith believes might lead to the institution of any such action, suit,
proceeding or alternative dispute resolution mechanism, whether civil,
criminal, administrative, investigative or other.
(c) References to the "Company" shall include, in addition to Objective
Systems Integrators, Inc., any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or merger to which
Objective Systems Integrators, Inc. (or any of its wholly owned subsidiaries)
is a party which, if its separate existence had continued, would have had
power and authority to indemnify its directors, officers, employees, agents or
fiduciaries, so that if Indemnitee is or was a director, officer, employee,
agent or fiduciary of such constituent corporation, or is or was serving at
the request of such constituent corporation as a director, officer, employee,
agent or fiduciary of another corporation, partnership, joint venture,
employee benefit plan, trust or other enterprise, Indemnitee shall stand in
the same position under the provisions of this Agreement with respect to the
resulting or surviving corporation as Indemnitee would have with respect to
such constituent corporation if its separate existence had continued.
(d) "Covered Event" shall mean any event or occurrence related to the fact
that Indemnitee is or was a director, officer, employee, agent or fiduciary of
the Company, or any subsidiary of the Company, or is or was serving at the
request of the Company as a director, officer, employee, agent or fiduciary of
another corporation, partnership, joint venture, trust or other enterprise, or
by reason of any action or inaction on the part of Indemnitee while serving in
such capacity.
(e) "Expenses" shall mean any and all expenses (including attorneys' fees
and all other costs, expenses and obligations incurred in connection with
investigating, defending, being a witness in or participating in (including on
appeal), or preparing to defend, to be a witness in or to participate in, any
action, suit, proceeding, alternative dispute resolution mechanism, hearing,
inquiry or investigation), judgments, fines, penalties and amounts paid in
settlement (if such settlement is approved in advance by the Company, which
approval shall not be unreasonably withheld) of any Claim and any federal,
state, local or foreign taxes imposed on the Indemnitee as a result of the
actual or deemed receipt of any payments under this Agreement.
(f) "Expense Advance" shall mean a payment to Indemnitee pursuant to Section
3 of Expenses in advance of the settlement of or final judgement in any
action, suit, proceeding or alternative dispute resolution mechanism, hearing,
inquiry or investigation which constitutes a Claim.
(g) "Independent Legal Counsel" shall mean an attorney or firm of attorneys,
selected in accordance with the provisions of Section 2(d) hereof, who shall
not have otherwise performed services for the Company or Indemnitee within the
last three years (other than with respect to matters concerning the rights of
Indemnitee under this Agreement, or of other Indemnitees under similar
indemnity agreements).
(h) References to "other enterprises" shall include employee benefit plans;
references to "fines" shall include any excise taxes assessed on Indemnitee
with respect to an employee benefit plan; and references to "serving at the
request of the Company" shall include any service as a director, officer,
employee, agent or fiduciary of the Company which imposes duties on, or
involves services by, such director, officer, employee, agent or fiduciary
with respect to an employee benefit plan, its participants or its
beneficiaries; and if Indemnitee acted in good faith and in a manner
Indemnitee reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan, Indemnitee shall be deemed to have
acted in a manner "not opposed to the best interests of the Company" as
referred to in this Agreement.
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(i) "Reviewing Party" shall mean, subject to the provisions of Section 2(d),
any person or body appointed by the Board of Directors in accordance with
applicable law to review the Company's obligations hereunder and under
applicable law, which may include a member or members of the Company's Board
of Directors, Independent Legal Counsel or any other person or body not a
party to the particular Claim for which Indemnitee is seeking indemnification.
(j) "Section" refers to a section of this Agreement unless otherwise
indicated.
(k) "Voting Securities" shall mean any securities of the Company that vote
generally in the election of directors.
2. Indemnification.
(a) Indemnification of Expenses. Subject to the provisions of Section 2(b)
below, the Company shall indemnify Indemnitee for Expenses to the fullest
extent permitted by law if Indemnitee was or is or becomes a party to or
witness or other participant in, or is threatened to be made a party to or
witness or other participant in, any Claim (whether by reason of or arising in
part out of a Covered Event), including all interest, assessments and other
charges paid or payable in connection with or in respect of such Expenses.
(b) Review of Indemnification Obligations. Notwithstanding the foregoing, in
the event any Reviewing Party shall have determined (in a written opinion, in
any case in which Independent Legal Counsel is the Reviewing Party) that
Indemnitee is not entitled to be indemnified hereunder under applicable law,
(i) the Company shall have no further obligation under Section 2(a) to make
any payments to Indemnitee not made prior to such determination by such
Reviewing Party, and (ii) the Company shall be entitled to be reimbursed by
Indemnitee (who hereby agrees to reimburse the Company) for all Expenses
theretofore paid to Indemnitee to which Indemnitee is not entitled hereunder
under applicable law; provided, however, that if Indemnitee has commenced or
thereafter commences legal proceedings in a court of competent jurisdiction to
secure a determination that Indemnitee is entitled to be indemnified hereunder
under applicable law, any determination made by any Reviewing Party that
Indemnitee is not entitled to be indemnified hereunder under applicable law
shall not be binding and Indemnitee shall not be required to reimburse the
Company for any Expenses theretofore paid in indemnifying Indemnitee until a
final judicial determination is made with respect thereto (as to which all
rights of appeal therefrom have been exhausted or lapsed). Indemnitee's
obligation to reimburse the Company for any Expenses shall be unsecured and no
interest shall be charged thereon.
(c) Indemnitee Rights on Unfavorable Determination; Binding Effect. If any
Reviewing Party determines that Indemnitee substantively is not entitled to be
indemnified hereunder in whole or in part under applicable law, Indemnitee
shall have the right to commence litigation seeking an initial determination
by the court or challenging any such determination by such Reviewing Party or
any aspect thereof, including the legal or factual bases therefor, and,
subject to the provisions of Section 15, the Company hereby consents to
service of process and to appear in any such proceeding. Absent such
litigation, any determination by any Reviewing Party shall be conclusive and
binding on the Company and Indemnitee.
(d) Selection of Reviewing Party; Change in Control. If there has not been a
Change in Control, any Reviewing Party shall be selected by the Board of
Directors, and if there has been such a Change in Control (other than a Change
in Control which has been approved by a majority of the Company's Board of
Directors who were directors immediately prior to such Change in Control), any
Reviewing Party with respect to all matters thereafter arising concerning the
rights of Indemnitee to indemnification of Expenses under this Agreement or
any other agreement or under the Company's Certificate of Incorporation or
Bylaws as now or hereafter in effect, or under any other applicable law, if
desired by Indemnitee, shall be Independent Legal Counsel selected by
Indemnitee and approved by the Company (which approval shall not be
unreasonably withheld). Such counsel, among other things, shall render its
written opinion to the Company and Indemnitee as to whether and to what extent
Indemnitee would be entitled to be indemnified hereunder under applicable law
and the Company agrees to abide by such opinion. The Company agrees to pay the
reasonable fees of the
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Independent Legal Counsel referred to above and to indemnify fully such
counsel against any and all expenses (including attorneys' fees), claims,
liabilities and damages arising out of or relating to this Agreement or its
engagement pursuant hereto. Notwithstanding any other provision of this
Agreement, the Company shall not be required to pay Expenses of more than one
Independent Legal Counsel in connection with all matters concerning a single
Indemnitee, and such Independent Legal Counsel shall be the Independent Legal
Counsel for any or all other Indemnitees unless (i) the employment of separate
counsel by one or more Indemnitees has been previously authorized by the
Company in writing, or (ii) an Indemnitee shall have provided to the Company a
written statement that such Indemnitee has reasonably concluded that there may
be a conflict of interest between such Indemnitee and the other Indemnitees
with respect to the matters arising under this Agreement.
(e) Mandatory Payment of Expenses. Notwithstanding any other provision of
this Agreement other than Section 10 hereof, to the extent that Indemnitee has
been successful on the merits or otherwise, including, without limitation, the
dismissal of an action without prejudice, in defense of any Claim, Indemnitee
shall be indemnified against all Expenses incurred by Indemnitee in connection
therewith.
3. Expense Advances.
(a) Obligation to Make Expense Advances. Upon receipt of a written
undertaking by or on behalf of the Indemnitee to repay such amounts if it
shall ultimately be determined that the Indemnitee is not entitled to be
indemnified therefore by the Company hereunder under applicable law, the
Company shall make Expense Advances to Indemnitee.
(b) Form of Undertaking. Any obligation to repay any Expense Advances
hereunder pursuant to a written undertaking by the Indemnitee shall be
unsecured and no interest shall be charged thereon.
(c) Determination of Reasonable Expense Advances. The parties agree that for
the purposes of any Expense Advance for which Indemnitee has made written
demand to the Company in accordance with this Agreement, all Expenses included
in such Expense Advance that are certified by affidavit of Indemnitee's
counsel as being reasonable shall be presumed conclusively to be reasonable.
4. Procedures for Indemnification and Expense Advances.
(a) Timing of Payments. All payments of Expenses (including without
limitation Expense Advances) by the Company to the Indemnitee pursuant to this
Agreement shall be made to the fullest extent permitted by law as soon as
practicable after written demand by Indemnitee therefor is presented to the
Company, but in no event later than thirty (30) business days after such
written demand by Indemnitee is presented to the Company, except in the case
of Expense Advances, which shall be made no later than ten (10) business days
after such written demand by Indemnitee is presented to the Company.
(b) Notice/Cooperation by Indemnitee. Indemnitee shall, as a condition
precedent to Indemnitee's right to be indemnified or Indemnitee's right to
receive Expense Advances under this Agreement, give the Company notice in
writing as soon as practicable of any Claim made against Indemnitee for which
indemnification will or could be sought under this Agreement. Notice to the
Company shall be directed to the Chief Executive Officer of the Company at the
address shown on the signature page of this Agreement (or such other address
as the Company shall designate in writing to Indemnitee). In addition,
Indemnitee shall give the Company such information and cooperation as it may
reasonably require and as shall be within Indemnitee's power.
(c) No Presumptions; Burden of Proof. For purposes of this Agreement, the
termination of any Claim by judgment, order, settlement (whether with or
without court approval) or conviction, or upon a plea of nolo contendere, or
its equivalent, shall not create a presumption that Indemnitee did not meet
any particular standard of conduct or have any particular belief or that a
court has determined that indemnification is not permitted by this Agreement
or applicable law. In addition, neither the failure of any Reviewing Party to
have made a determination as to whether Indemnitee has met any particular
standard of conduct or had any particular belief,
D-4
<PAGE>
nor an actual determination by any Reviewing Party that Indemnitee has not met
such standard of conduct or did not have such belief, prior to the
commencement of legal proceedings by Indemnitee to secure a judicial
determination that Indemnitee should be indemnified under this Agreement under
applicable law, shall be a defense to Indemnitee's claim or create a
presumption that Indemnitee has not met any particular standard of conduct or
did not have any particular belief. In connection with any determination by
any Reviewing Party or otherwise as to whether the Indemnitee is entitled to
be indemnified hereunder under applicable law, the burden of proof shall be on
the Company to establish that Indemnitee is not so entitled.
(d) Notice to Insurers. If, at the time of the receipt by the Company of a
notice of a Claim pursuant to Section 4(b) hereof, the Company has liability
insurance in effect which may cover such Claim, the Company shall give prompt
notice of the commencement of such Claim to the insurers in accordance with
the procedures set forth in the respective policies. The Company shall
thereafter take all necessary or desirable action to cause such insurers to
pay, on behalf of the Indemnitee, all amounts payable as a result of such
Claim in accordance with the terms of such policies.
(e) Selection of Counsel. In the event the Company shall be obligated
hereunder to provide indemnification for or make any Expense Advances with
respect to the Expenses of any Claim, the Company, if appropriate, shall be
entitled to assume the defense of such Claim with counsel approved by
Indemnitee (which approval shall not be unreasonably withheld) upon the
delivery to Indemnitee of written notice of the Company's election to do so.
After delivery of such notice, approval of such counsel by Indemnitee and the
retention of such counsel by the Company, the Company will not be liable to
Indemnitee under this Agreement for any fees or expenses of separate counsel
subsequently retained by or on behalf of Indemnitee with respect to the same
Claim; provided that, (i) Indemnitee shall have the right to employ
Indemnitee's separate counsel in any such Claim at Indemnitee's expense and
(ii) if (A) the employment of separate counsel by Indemnitee has been
previously authorized by the Company, (B) Indemnitee shall have reasonably
concluded that there may be a conflict of interest between the Company and
Indemnitee in the conduct of any such defense, or (C) the Company shall not
continue to retain such counsel to defend such Claim, then the fees and
expenses of Indemnitee's separate counsel shall be Expenses for which
Indemnitee may receive indemnification or Expense Advances hereunder.
5. Additional Indemnification Rights; Nonexclusivity.
(a) Scope. The Company hereby agrees to indemnify the Indemnitee to the
fullest extent permitted by law, notwithstanding that such indemnification is
not specifically authorized by the other provisions of this Agreement, the
Company's Certificate of Incorporation, the Company's Bylaws or by statute. In
the event of any change after the date of this Agreement in any applicable
law, statute or rule which expands the right of a Delaware corporation to
indemnify a member of its board of directors or an officer, employee, agent or
fiduciary, it is the intent of the parties hereto that Indemnitee shall enjoy
by this Agreement the greater benefits afforded by such change. In the event
of any change in any applicable law, statute or rule which narrows the right
of a Delaware corporation to indemnify a member of its board of directors or
an officer, employee, agent or fiduciary, such change, to the extent not
otherwise required by such law, statute or rule to be applied to this
Agreement, shall have no effect on this Agreement or the parties' rights and
obligations hereunder except as set forth in Section 10(a) hereof.
(b) Nonexclusivity. The indemnification and the payment of Expense Advances
provided by this Agreement shall be in addition to any rights to which
Indemnitee may be entitled under the Company's Certificate of Incorporation,
its Bylaws, any other agreement, any vote of stockholders or disinterested
directors, the General Corporation Law of the State of Delaware, or otherwise.
The indemnification and the payment of Expense Advances provided under this
Agreement shall continue as to Indemnitee for any action taken or not taken
while serving in an indemnified capacity even though subsequent thereto
Indemnitee may have ceased to serve in such capacity.
D-5
<PAGE>
6. No Duplication of Payments. The Company shall not be liable under this
Agreement to make any payment in connection with any Claim made against
Indemnitee to the extent Indemnitee has otherwise actually received payment
(under any insurance policy, provision of the Company's Certificate of
Incorporation, Bylaws or otherwise) of the amounts otherwise payable
hereunder.
7. Partial Indemnification. If Indemnitee is entitled under any provision of
this Agreement to indemnification by the Company for some or a portion of
Expenses incurred in connection with any Claim, but not, however, for all of
the total amount thereof, the Company shall nevertheless indemnify Indemnitee
for the portion of such Expenses to which Indemnitee is entitled.
8. Mutual Acknowledgment. Both the Company and Indemnitee acknowledge that
in certain instances, federal law or applicable public policy may prohibit the
Company from indemnifying its directors, officers, employees, agents or
fiduciaries under this Agreement or otherwise. Indemnitee understands and
acknowledges that the Company has undertaken or may be required in the future
to undertake with the Securities and Exchange Commission to submit the
question of indemnification to a court in certain circumstances for a
determination of the Company's right under public policy to indemnify
Indemnitee.
9. Liability Insurance. To the extent the Company maintains liability
insurance applicable to directors, officers, employees, agents or fiduciaries,
Indemnitee shall be covered by such policies in such a manner as to provide
Indemnitee the same rights and benefits as are provided to the most favorably
insured of the Company's directors, if Indemnitee is a director; or of the
Company's officers, if Indemnitee is not a director of the Company but is an
officer; or of the Company's key employees, agents or fiduciaries, if
Indemnitee is not an officer or director but is a key employee, agent or
fiduciary.
10. Exceptions. Notwithstanding any other provision of this Agreement, the
Company shall not be obligated pursuant to the terms of this Agreement:
(a) Excluded Action or Omissions. To indemnify or make Expense Advances
to Indemnitee with respect to Claims arising out of acts, omissions or
transactions for which Indemnitee is prohibited from receiving
indemnification under applicable law.
(b) Claims Initiated by Indemnitee. To indemnify or make Expense Advances
to Indemnitee with respect to Claims initiated or brought voluntarily by
Indemnitee and not by way of defense, counterclaim or crossclaim, except
(i) with respect to actions or proceedings brought to establish or enforce
a right to indemnification under this Agreement or any other agreement or
insurance policy or under the Company's Certificate of Incorporation or
Bylaws now or hereafter in effect relating to Claims for Covered Events,
(ii) in specific cases if the Board of Directors has approved the
initiation or bringing of such Claim, or (iii) as otherwise required under
Section 145 of the Delaware General Corporation Law, regardless of whether
Indemnitee ultimately is determined to be entitled to such indemnification,
Expense Advances, or insurance recovery, as the case may be.
(c) Lack of Good Faith. To indemnify Indemnitee for any Expenses incurred
by the Indemnitee with respect to any action instituted (i) by Indemnitee
to enforce or interpret this Agreement, if a court having jurisdiction over
such action determines as provided in Section 13 that each of the material
assertions made by the Indemnitee as a basis for such action was not made
in good faith or was frivolous, or (ii) by or in the name of the Company to
enforce or interpret this Agreement, if a court having jurisdiction over
such action determines as provided in Section 13 that each of the material
defenses asserted by Indemnitee in such action was made in bad faith or was
frivolous.
(d) Claims Under Section 16(b). To indemnify Indemnitee for Expenses and
the payment of profits arising from the purchase and sale by Indemnitee of
securities in violation of Section 16(b) of the Securities Exchange Act of
1934, as amended, or any similar successor statute.
11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.
D-6
<PAGE>
12. Binding Effect; Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of and be enforceable by the parties hereto and
their respective successors, assigns (including any direct or indirect
successor by purchase, merger, consolidation or otherwise to all or
substantially all of the business or assets of the Company), spouses, heirs
and personal and legal representatives. The Company shall require and cause
any successor (whether direct or indirect, and whether by purchase, merger,
consolidation or otherwise) to all, substantially all, or a substantial part,
of the business or assets of the Company, by written agreement in form and
substance satisfactory to Indemnitee, expressly to assume and agree to perform
this Agreement in the same manner and to the same extent that the Company
would be required to perform if no such succession had taken place. This
Agreement shall continue in effect regardless of whether Indemnitee continues
to serve as a director, officer, employee, agent or fiduciary (as applicable)
of the Company or of any other enterprise at the Company's request.
13. Expenses Incurred in Action Relating to Enforcement or
Interpretation. In the event that any action is instituted by Indemnitee under
this Agreement or under any liability insurance policies maintained by the
Company to enforce or interpret any of the terms hereof or thereof, Indemnitee
shall be entitled to be indemnified for all Expenses incurred by Indemnitee
with respect to such action (including without limitation attorneys' fees),
regardless of whether Indemnitee is ultimately successful in such action,
unless as a part of such action a court having jurisdiction over such action
makes a final judicial determination (as to which all rights of appeal
therefrom have been exhausted or lapsed) that each of the material assertions
made by Indemnitee as a basis for such action was not made in good faith or
was frivolous; provided, however, that until such final judicial determination
is made, Indemnitee shall be entitled under Section 3 to receive payment of
Expense Advances hereunder with respect to such action. In the event of an
action instituted by or in the name of the Company under this Agreement to
enforce or interpret any of the terms of this Agreement, Indemnitee shall be
entitled to be indemnified for all Expenses incurred by Indemnitee in defense
of such action (including without limitation costs and expenses incurred with
respect to Indemnitee's counterclaims and cross-claims made in such action),
unless as a part of such action a court having jurisdiction over such action
makes a final judicial determination (as to which all rights of appeal
therefrom have been exhausted or lapsed) that each of the material defenses
asserted by Indemnitee in such action was made in bad faith or was frivolous;
provided, however, that until such final judicial determination is made,
Indemnitee shall be entitled under Section 3 to receive payment of Expense
Advances hereunder with respect to such action.
14. Period of Limitations. No legal action shall be brought and no cause of
action shall be asserted by or in the right of the Company against Indemnitee,
Indemnitee's estate, spouse, heirs, executors or personal or legal
representatives after the expiration of two years from the date of accrual of
such cause of action, and any claim or cause of action of the Company shall be
extinguished and deemed released unless asserted by the timely filing of a
legal action within such two year period; provided, however, that if any
shorter period of limitations is otherwise applicable to any such cause of
action, such shorter period shall govern.
15. Notice. All notices, requests, demands and other communications under
this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and signed for by the party addressed, on the date of such
delivery, or (ii) if mailed by domestic certified or registered mail with
postage prepaid, on the third business day after the date postmarked.
Addresses for notice to either party are as shown on the signature page of
this Agreement, or as subsequently modified by written notice.
16. Consent to Jurisdiction. The Company and Indemnitee each hereby
irrevocably consent to the jurisdiction of the courts of the State of Delaware
for all purposes in connection with any action or proceeding which arises out
of or relates to this Agreement and agree that any action instituted under
this Agreement shall be commenced, prosecuted and continued only in the Court
of Chancery of the State of Delaware in and for New Castle County, which shall
be the exclusive and only proper forum for adjudicating such a claim.
17. Severability. The provisions of this Agreement shall be severable in the
event that any of the provisions hereof (including any provision within a
single section, paragraph or sentence) are held by a court of competent
jurisdiction to be invalid, void or otherwise unenforceable, and the remaining
provisions shall remain
D-7
<PAGE>
enforceable to the fullest extent permitted by law. Furthermore, to the
fullest extent possible, the provisions of this Agreement (including without
limitation each portion of this Agreement containing any provision held to be
invalid, void or otherwise unenforceable, that is not itself invalid, void or
unenforceable) shall be construed so as to give effect to the intent
manifested by the provision held invalid, illegal or unenforceable.
18. Choice of Law. This Agreement, and all rights, remedies, liabilities,
powers and duties of the parties to this Agreement, shall be governed by and
construed in accordance with the laws of the State of Delaware as applied to
contracts between Delaware residents entered into and to be performed entirely
in the State of Delaware without regard to principles of conflicts of laws.
19. Subrogation. In the event of payment under this Agreement, the Company
shall be subrogated to the extent of such payment to all of the rights of
recovery of Indemnitee, who shall execute all documents required and shall do
all acts that may be necessary to secure such rights and to enable the Company
effectively to bring suit to enforce such rights.
20. Amendment and Termination. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless it is in writing
signed by both the parties hereto. No waiver of any of the provisions of this
Agreement shall be deemed to be or shall constitute a waiver of any other
provisions hereof (whether or not similar), nor shall such waiver constitute a
continuing waiver.
21. Integration and Entire Agreement. This Agreement sets forth the entire
understanding between the parties hereto and supersedes and merges all
previous written and oral negotiations, commitments, understandings and
agreements relating to the subject matter hereof between the parties hereto.
22. No Construction as Employment Agreement. Nothing contained in this
Agreement shall be construed as giving Indemnitee any right to be retained in
the employ of the Company or any of its subsidiaries or affiliated entities.
IN WITNESS WHEREOF, the parties hereto have executed this Indemnification
Agreement as of the date first above written.
Objective Systems Integrators, Inc.
By: _________________________________
Print Name: _________________________
Title: ______________________________
Address:
100 Blue Ravine Rd.
Folsom, California 95630
Agreed to and Accepted
Indemnitee:
_____________________________________
(signature)
Print Name: _________________________
Address: ____________________________
D-8
<PAGE>
EXHIBIT A
OBJECTIVE SYSTEMS INTEGRATORS, INC.
1994 STOCK OPTION PLAN
(AS AMENDED THROUGH NOVEMBER 14, 1996)
1. Purposes of the Plan. The purposes of this Stock Option Plan are to
--------------------
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries and to promote the success of the Company's
business. Options granted under the Plan may be incentive stock options (as
defined under Section 422 of the Code) or nonstatutory stock options, as
determined by the Administrator at the time of grant of an option and subject to
the applicable provisions of Section 422 of the Code, as amended, and the
regulations promulgated thereunder.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Administrator" means the Board or any of its Committees
-------------
appointed pursuant to Section 4 of the Plan.
(b) "Board" means the Board of Directors of the Company.
-----
(c) "Code" means the Internal Revenue Code of 1986, as amended.
----
(d) "Committee" means a Committee appointed by the Board of
---------
Directors in accordance with Section 4 of the Plan.
(e) "Common Stock" means the Common Stock of the Company.
------------
(f) "Company" means Objective Systems Integrators, Inc., a California
-------
corporation.
(g) "Consultant" means any person who is engaged by the Company or any
----------
Parent or Subsidiary to render consulting or advisory services and is
compensated for such services, and any director of the Company whether
compensated for such services or not. If and in the event the Company registers
any class of any equity security pursuant to the Exchange Act, the term
Consultant shall thereafter not include directors who are not compensated for
their services or are paid only a director's fee by the Company.
(h) "Continuous Status as an Employee or Consultant" means that the
----------------------------------------------
employment or consulting relationship with the Company, any Parent, or
Subsidiary, is not interrupted or terminated. Continuous Status as an Employee
or Consultant shall not be considered interrupted in the case of (i) any leave
of absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor. A
leave of absence approved by the Company shall include sick leave, military
leave, or any other personal leave approved by an authorized representative of
the Company. For purposes of Incentive Stock Options, no such leave may exceed
90 days, unless reemployment upon expiration of such leave is guaranteed by
statute or contract, including Company policies. If reemployment upon
expiration of a leave of absence approved by the Company is
<PAGE>
not so guaranteed, on the 91st day of such leave any Incentive Stock Option
held by the Optionee shall cease to be treated as an Incentive Stock Option and
shall be treated for tax purposes as a Nonstatutory Stock Option.
(i) "Employee" means any person, including Officers and directors,
--------
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a director's fee by the Company shall not be sufficient to constitute
"employment" by the Company.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
(k) "Fair Market Value" means, as of any date, the value of Common
-----------------
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market of the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") System, its Fair Market Value shall be the
closing sales price for such stock (or the closing bid, if no sales were
reported) as quoted on such exchange or system for the last market trading day
prior to the time of determination, as reported in The Wall Street Journal or
-----------------------
such other source as the Administrator deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ System (but not
on the Nasdaq National Market thereof) or regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high bid and low asked prices for the Common Stock
on the last market trading day prior to the day of determination, or;
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(l) "Incentive Stock Option" means an Option intended to qualify as an
----------------------
incentive stock option within the meaning of Section 422 of the Code.
(m) "Nonstatutory Stock Option" means an Option not intended to
-------------------------
qualify as an Incentive Stock Option.
(n) "Officer" means a person who is an officer of the Company within
-------
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(o) "Option" means a stock option granted pursuant to the Plan.
------
(p) "Optioned Stock" means the Common Stock subject to an Option.
--------------
(q) "Optionee" means an Employee or Consultant who receives an Option.
--------
-2-
<PAGE>
(r) "Parent" means a "parent corporation", whether now or hereafter
------
existing, as defined in Section 424(e) of the Code.
(s) "Plan" means this 1994 Stock Option Plan.
----
(t) "Share" means a share of the Common Stock, as adjusted in
-----
accordance with Section 11 below.
(u) "Subsidiary" means a "subsidiary corporation", whether now or
----------
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 11 of
-------------------------
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 4,434,830 Shares. The Shares may be authorized, but unissued,
or reacquired Common Stock.
If an Option expires or becomes unexercisable without having been
exercised in full, or is surrendered pursuant to an Option Exchange Program, the
unpurchased Shares which were subject thereto shall become available for future
grant or sale under the Plan (unless the Plan has terminated); provided,
--------
however, that Shares that have actually been issued under the Plan shall not be
returned to the Plan and shall not become available for future distribution
under the Plan, except that if unvested Shares are repurchased by the Company at
their original purchase price, and the original purchaser of such Shares did not
receive any benefits of ownership of such Shares, such Shares shall become
available for future grant under the Plan. For purposes of the preceding
sentence, voting rights shall not be considered a benefit of Share ownership.
4. Administration of the Plan.
--------------------------
(a) Initial Plan Procedure. Prior to the date, if any, upon which the
----------------------
Company becomes subject to the Exchange Act, the Plan shall be administered by
the Board or a committee appointed by the Board.
(b) Plan Procedure after the Date, if any, upon Which the Company
-------------------------------------------------------------
becomes Subject to the Exchange Act.
- -----------------------------------
(i) Administration with Respect to Directors and Officers.
-----------------------------------------------------
With respect to grants of Options to Employees who are also Officers or
directors of the Company, the Plan shall be administered by (A) the Board if the
Board may administer the Plan in compliance with Rule 16b-3 promulgated under
the Exchange Act or any successor thereto ("Rule 16b-3") with respect to a plan
intended to qualify thereunder as a discretionary plan, or (B) a Committee
designated by the Board to administer the Plan, which Committee shall be
constituted in such a manner as to permit the Plan to comply with Rule 16b-3
with respect to a plan intended to qualify thereunder as a discretionary plan.
Once appointed, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. From time to time the Board may
increase the size of the Committee and appoint
-3-
<PAGE>
additional members thereof, remove members (with or without cause) and appoint
new members in substitution therefor, fill vacancies, however caused, and remove
all members of the Committee and thereafter directly administer the Plan, all to
the extent permitted by Rule 16b-3 with respect to a plan intended to qualify
thereunder as a discretionary plan.
(ii) Multiple Administrative Bodies. If permitted by Rule
------------------------------
16b-3, the Plan may be administered by different bodies with respect to
directors, non-director Officers and Employees who are neither directors nor
Officers.
(iii) Administration With Respect to Consultants and Other
----------------------------------------------------
Employees. With respect to grants of Options to Employees or Consultants who are
- ---------
neither directors nor Officers of the Company, the Plan shall be administered by
(A) the Board or (B) a committee designated by the Board, which committee shall
be constituted in such a manner as to satisfy the legal requirements relating to
the administration of incentive stock option plans, if any, of California
corporate and securities laws, of the Code, and of any applicable stock exchange
(the "Applicable Laws"). Once appointed, such Committee shall continue to serve
in its designated capacity until otherwise directed by the Board. From time to
time the Board may increase the size of the Committee and appoint additional
members thereof, remove members (with or without cause) and appoint new members
in substitution therefor, fill vacancies, however caused, and remove all members
of the Committee and thereafter directly administer the Plan, all to the extent
permitted by the Applicable Laws.
(c) Powers of the Administrator. Subject to the provisions of the
---------------------------
Plan and, in the case of a Committee, the specific duties delegated by the Board
to such Committee, and subject to the approval of any relevant authorities,
including the approval, if required, of any stock exchange upon which the Common
Stock is listed, the Administrator shall have the authority, in its discretion:
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(k) of the Plan;
(ii) to select the Consultants and Employees to whom Options may
from time to time be granted hereunder;
(iii) to determine whether and to what extent Options are granted
hereunder;
(iv) to determine the number of shares of Common Stock to be
covered by each such award granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions of any award granted
hereunder;
(vii) to determine whether and under what circumstances an
Option may be settled in cash under subsection 9(f) instead of Common Stock;
-4-
<PAGE>
(viii) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock covered
by such Option has declined since the date the Option was granted; and
(ix) to construe and interpret the terms of the Plan and
awards granted pursuant to the Plan.
(d) Effect of Administrator's Decision. All decisions,
----------------------------------
determinations and interpretations of the Administrator shall be final and
binding on all Optionees and any other holders of any Options.
5. Eligibility.
-----------
(a) Nonstatutory Stock Options may be granted to Employees and
Consultants. Incentive Stock Options may be granted only to Employees. An
Employee or Consultant who has been granted an Option may, if otherwise
eligible, be granted additional Options.
(b) Each Option shall be designated in the written option agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designations, to the extent that the aggregate Fair Market
Value:
(i) of Shares subject to an Optionee's Incentive Stock Options
granted by the Company, any Parent or Subsidiary, which
(ii) become exercisable for the first time during any calendar
year (under all plans of the Company or any Parent or Subsidiary) exceeds
$100,000, such excess Options shall be treated as Nonstatutory Stock Options.
For purposes of this Section 5(b), Incentive Stock Options shall be taken into
account in the order in which they were granted, and the Fair Market Value of
the Shares shall be determined as of the time the Option with respect to such
Shares is granted.
(c) The Plan shall not confer upon any Optionee any right with
respect to continuation of employment or consulting relationship with the
Company, nor shall it interfere in any way with his or her right or the
Company's right to terminate his or her employment or consulting relationship at
any time, with or without cause.
(d) Upon the Company or a successor corporation issuing any class of
common equity securities required to be registered under Section 12 of the
Exchange Act or upon the Plan being assumed by a corporation having a class of
common equity securities required to be registered under Section 12 of the
Exchange Act, the following limitations shall apply to grants of Options to
Employees:
(i) No Employee shall be granted, in any fiscal year of the
Company, Options to purchase more than 1,375,000 Shares.
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(ii) The foregoing limitations shall be adjusted proportionately
in connection with any change in the Company's capitalization as described in
Section 11.
(iii) If an Option is canceled in the same fiscal year of the
Company in which it was granted (other than in connection with a transaction
described in Section 11), the cancelled Option will be counted against the limit
set forth in Section 5. For this purpose, if the exercise price of an Option is
reduced, the transaction will be treated as a cancellation of the Option and the
grant of a new Option.
6. Term of Plan. The Plan shall become effective upon the earlier to
------------
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company, as described in Section 17 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 13 of the Plan.
7. Term of Option. The term of each Option shall be the term stated in
--------------
the Option Agreement; provided, however, that the term shall be no more than ten
(10) years from the date of grant thereof. However, in the case of an Incentive
Stock Option granted to an Optionee who, at the time the Option is granted, owns
stock representing more than ten percent (10%) of the voting power of all
classes of stock of the Company or any Parent or Subsidiary, the term of the
Option shall be five (5) years from the date of grant thereof or such shorter
term as may be provided in the Option Agreement.
8. Option Exercise Price and Consideration.
---------------------------------------
(a) The per share exercise price for the Shares to be issued pursuant
to exercise of an Option shall be such price as is determined by the Board, but
shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of the grant of
such Incentive Stock Option, owns stock representing more than ten percent (10%)
of the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of grant.
(B) granted to any Employee other than an Employee
described in the preceding paragraph, the per Share exercise price shall be no
less than 100% of the Fair Market Value per Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option
(A) granted to a person who, at the time of the grant of
such Option, owns stock representing more than ten percent (10%) of the voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
per Share exercise price shall be no less than 110% of the Fair Market Value per
Share on the date of the grant.
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(B) granted to any person, the per Share exercise price
shall be no less than 85% of the Fair Market Value per Share on the date of
grant.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option have been owned by the Optionee for more
than six months on the date of surrender and (y) have a Fair Market Value on the
date of surrender equal to the aggregate exercise price of the Shares as to
which said Option shall be exercised, (5) delivery of a properly executed
exercise notice together with such other documentation as the Administrator and
the broker, if applicable, shall require to effect an exercise of the Option and
delivery to the Company of the sale or loan proceeds required to pay the
exercise price, or (6) any combination of the foregoing methods of payment. In
making its determination as to the type of consideration to accept, the Board
shall consider if acceptance of such consideration may be reasonably expected to
benefit the Company.
9. Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
-----------------------------------------------
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Board, including performance criteria with respect to the
Company and/or the Optionee, and as shall be permissible under the terms of the
Plan, but in no case at a rate of less than 20% per year over five (5) years
from the date the Option is granted.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Board, consist of any
consideration and method of payment allowable under Section 8(b) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause
to be issued) such stock certificate promptly upon exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 11 of the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
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(b) Termination of Employment or Consulting Relationship. In the
----------------------------------------------------
event of termination of an Optionee's Continuous Status as an Employee or
Consultant with the Company (but not in the event of an Optionee's change of
status from Employee to Consultant (in which case an Employee's Incentive Stock
Option shall automatically convert to a Nonstatutory Stock Option on the ninety-
first (91st) day following such change of status) or from Consultant to
Employee), such Optionee may, but only within such period of time as is
determined by the Administrator, of at least thirty (30) days, with such
determination in the case of an Incentive Stock Option not exceeding three (3)
months after the date of such termination (but in no event later than the
expiration date of the term of such Option as set forth in the Option
Agreement), exercise his or her Option to the extent that Optionee was entitled
to exercise it at the date of such termination. To the extent that Optionee was
not entitled to exercise the Option at the date of such termination, or if
Optionee does not exercise such Option to the extent so entitled within the time
specified herein, the Option shall terminate.
(c) Disability of Optionee. In the event of termination of an
----------------------
Optionee's consulting relationship or Continuous Status as an Employee as a
result of his or her disability, Optionee may, but only within twelve (12)
months from the date of such termination (and in no event later than the
expiration date of the term of such Option as set forth in the Option
Agreement), exercise the Option to the extent otherwise entitled to exercise it
at the date of such termination; provided, however, that if such disability is
not a "disability" as such term is defined in Section 22(e)(3) of the Code, in
the case of an Incentive Stock Option such Incentive Stock Option shall
automatically convert to a Nonstatutory Stock Option on the day three months and
one day following such termination. To the extent that Optionee is not entitled
to exercise the Option at the date of termination, or if Optionee does not
exercise such Option to the extent so entitled within the time specified herein,
the Option shall terminate, and the Shares covered by such Option shall revert
to the Plan.
(d) Death of Optionee. In the event of the death of an Optionee, the
-----------------
Option may be exercised at any time within twelve (12) months following the date
of death (but in no event later than the expiration of the term of such Option
as set forth in the Notice of Grant), by the Optionee's estate or by a person
who acquired the right to exercise the Option by bequest or inheritance, but
only to the extent that the Optionee was entitled to exercise the Option at the
date of death. If, at the time of death, the Optionee was not entitled to
exercise his or her entire Option, the Shares covered by the unexercisable
portion of the Option shall immediately revert to the Plan. If, after death,
the Optionee's estate or a person who acquired the right to exercise the Option
by bequest or inheritance does not exercise the Option within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
(e) Rule 16b-3. Options granted to persons subject to Section 16(b)
----------
of the Exchange Act must comply with Rule 16b-3 and shall contain such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
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<PAGE>
(f) Buyout Provisions. The Administrator may at any time offer to
-----------------
buy out for a payment in cash or Shares, an Option previously granted, based on
such terms and conditions as the Administrator shall establish and communicate
to the Optionee at the time that such offer is made.
10. Non-Transferability of Options. Options may not be sold, pledged,
------------------------------
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
11. Adjustments Upon Changes in Capitalization or Merger.
----------------------------------------------------
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock which have
been authorized for issuance under the Plan but as to which no Options have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, as well as the price per share of Common Stock covered
by each such outstanding Option, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, the Board shall notify the Optionee
at least fifteen (15) days prior to such proposed action. To the extent it has
not been previously exercised, the Option will terminate immediately prior to
the consummation of such proposed action.
(c) Merger. In the event of a merger of the Company with or into
------
another corporation, the Option may be assumed or an equivalent option may be
substituted by such successor corporation or a parent or subsidiary of such
successor corporation. If, in such event, the Option is not assumed or
substituted, the Option shall terminate as of the date of the closing of the
merger. For the purposes of this paragraph, the Option shall be considered
assumed if, following the merger, the option confers the right to purchase, for
each Share of Optioned Stock subject to the Option immediately prior to the
merger, the consideration (whether stock, cash, or other securities or property)
received in the merger by holders of Common Stock for each Share held on the
effective date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding Shares); provided, however, that if such consideration received
in the merger was not solely common stock of the successor corporation or its
Parent, the Administrator may, with the consent of the successor corporation,
provide for the consideration to be received upon the exercise of
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<PAGE>
the Option for each Share of Optioned Stock subject to the Option to be solely
common stock of the successor corporation or its Parent equal in fair market
value to the per share consideration received by holders of Common Stock in the
merger.
12. Time of Granting Options. The date of grant of an Option shall, for
------------------------
all purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Board. Notice
of the determination shall be given to each Employee or Consultant to whom an
Option is so granted within a reasonable time after the date of such grant.
13. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Board may at any time amend,
-------------------------
alter, suspend or discontinue the Plan, but no amendment, alteration, suspension
or discontinuation shall be made which would impair the rights of any Optionee
under any grant theretofore made, without his or her consent. In addition, to
the extent necessary and desirable to comply with Rule 16b-3 under the Exchange
Act or with Section 422 of the Code (or any other applicable law or regulation,
including the requirements of the NASD or an established stock exchange), the
Company shall obtain shareholder approval of any Plan amendment in such a manner
and to such a degree as required.
(b) Effect of Amendment or Termination. Any such amendment or
----------------------------------
termination of the Plan shall not affect Options already granted, and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Board, which agreement must be in writing and signed by the Optionee and the
Company.
14. Conditions Upon Issuance of Shares. Shares shall not be issued
----------------------------------
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the Shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
15. Reservation of Shares. The Company, during the term of this Plan,
---------------------
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
The inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's counsel to
be necessary to the lawful issuance
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<PAGE>
and sale of any Shares hereunder, shall relieve the Company of any liability in
respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.
16. Agreements. Options shall be evidenced by written agreements in such
----------
form as the Board shall approve from time to time.
17. Shareholder Approval. Continuance of the Plan shall be subject to
--------------------
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the degree and manner required under applicable state and federal law and the
rules of any stock exchange upon which the Common Stock is listed.
18. Information to Optionees and Purchasers. The Company shall provide to
---------------------------------------
each Optionee, not less frequently than annually, copies of annual financial
statements. The Company shall also provide such statements to each individual
who acquires Shares pursuant to the Plan while such individual owns such Shares.
The Company shall not be required to provide such statements to key employees
whose duties in connection with the Company assure their access to equivalent
information.
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<PAGE>
PRELIMINARY COPIES
FILED OCTOBER 3, 1996
- --------------------------------------------------------------------------------
PROXY PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OBJECTIVE SYSTEMS INTEGRATORS, INC.
1996 ANNUAL MEETING OF SHAREHOLDERS
NOVEMBER 14, 1996
The undersigned shareholder of OBJECTIVE SYSTEMS INTEGRATORS, INC., a
California corporation, hereby acknowledges receipt of the Notice of Annual
Meeting of Shareholders and Proxy Statement, each dated October 18, 1996, and
hereby appoints Joseph T. Ambrozy and David M. Allen, and each of them,
proxies and attorneys-in-fact, with full power to each of substitution, on
behalf and in the name of the undersigned, to represent the undersigned at the
1996 Annual Meeting of Shareholders of OBJECTIVE SYSTEMS INTEGRATORS, INC. to
be held on November 14, 1996, at 10:00 a.m. local time, at the Sheraton Hotel,
11211 Point East Drive, Rancho Cordova, California 95670, and at any
adjournment or adjournments thereof, and to vote all shares of Common Stock
which the undersigned would be entitled to vote if then and there personally
present, on the matters set forth below:
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED FOR THE ELECTION OF DIRECTORS, FOR THE AMENDMENT TO
THE 1994 STOCK OPTION PLAN, FOR THE REINCORPORATION OF THE COMPANY INTO
DELAWARE, FOR THE RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS
INDEPENDENT AUDITORS AND AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS
AS MAY PROPERLY COME BEFORE THE MEETING, INCLUDING AMONG OTHER THINGS,
CONSIDERATION OF ANY MOTION MADE FOR ADJOURNMENT OF THE MEETING (INCLUDING
WITHOUT LIMITATION, FOR SOLICITING ADDITIONAL VOTES TO APPROVE THE
REINCORPORATION).
(Continued and to be signed on other side)
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FOLD AND DETACH HERE
<PAGE>
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Please mark
[ X ] your votes
as indicated
WITHHELD
1. Election of Directors: FOR FOR ALL
[ ] [ ]
IF YOU WISH TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THAT NOMINEE'S NAME IN THE LIST BELOW:
Tom L. Johnson, Richard G. Vento,
Joseph T. Ambrozy, George F. Schmitt,
Jonathan B. Shantz, Kornel Terplan.
2. Amendment of 1994 Stock Option Plan to increase FOR AGAINST ABSTAIN
the number of shares reserved for grant thereunder: [ ] [ ] [ ]
3. Reincorporation of the Company as a Delaware FOR AGAINST ABSTAIN
corporation: [ ] [ ] [ ]
4. Proposal to ratify the appointment of FOR AGAINST ABSTAIN
Deloitte & Touche llp as the [ ] [ ] [ ]
independent auditors of the Company for the
fiscal period ending June 30, 1997:
and, in their discretion, upon such
other matter or matters which may
properly come before the meeting
or any adjournment or adjournments
thereof.
Signature(s) ___________________________ Date _______________________________
(This Proxy should be marked, dated and signed by the shareholder(s) exactly as
his or her name appears hereon, and returned promptly in the enclosed envelope.
Persons signing in a fiduciary capacity should so indicate. If shares are held
by joint tenants or as community property, both should sign.)
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FOLD AND DETACH HERE
