<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:
[X] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to 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):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[X] 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: 125.00
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(2) Form, Schedule or Registration Statement No.:
Form 10-K
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(3) Filing Party:
Registrant
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(4) Date Filed: September 27, 1996.
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Notes:
<PAGE>
Preliminary Copy
Filed October 3, 1996
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, or any adjournment
thereof.
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
Secretary
Folsom, California
October 18, 1996
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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.
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<PAGE>
Preliminary Copy
Filed October 3, 1996
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. However, 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
<PAGE>
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.
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 18, 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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<PAGE>
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
Vento L.L.C. (3)................................. 10,229,778 32.14
2676 West Alamo Avenue
Littleton, Colorado 80120
Tom L. Johnson (2)............................... 10,229,778 32.14
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 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 group
(11 persons) (11).............................. 25,942,564 78.4
</TABLE>
- - - -------------------------------
* 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 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 2,403,300 shares as of
August 9, 1996, except that 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 Amerindo, Amerindo UK
and Amerindo - Panama. Messrs. Vilar, Tanaka, and Stableford and Ms.
LePort are the managing trustees of Retirement. Each person expressly
-4-
<PAGE>
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 interest 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) Includes 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) Includes 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.
-5-
<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 January 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 BS degree
in Abstract Mathematics with a minor in Business Management from the University
of Houston.
-6-
<PAGE>
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 January 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 TYMSHARE, Inc., serving in a
variety of management positions. Mr. Vento received a BA degree in Mathematics,
a BS degree in Business and a BS degree in Econometric Statistics from San
Francisco State University and an AA 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 BE
degree in Mechanical Engineering and an MS 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 BA degree from St. Mary's College
of California and a MSM 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 BA degree
from UC Santa Barbara in Economics/Math, an MS degree from the University of
Arizona in Systems Engineering and an MBA 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 BA degree in Electronics, an MS degree in Electronics and a PhD
degree in Operational Research from the University of Dresden, Germany.
-7-
<PAGE>
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 one time 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 one time during fiscal 1996.
-8-
<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 older 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.
-9-
<PAGE>
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 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.
-10-
<PAGE>
(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.
(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 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.
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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.
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.
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
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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.
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 the (a) 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) adoption of the Company's new indemnification
agreements with its officers and directors to conform those agreements to
Delaware law. The effect of an abstention or a broker non-vote 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.
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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.
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 the method of 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
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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 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.
On September __, 1996, the Board authorized in connection with the Proposed
Reincorporation a provision in OSI Delaware's Certificate of Incorporation
(subject to shareholder approval) to increase OSI Delaware's authorized shares
of Common Stock by 50,000,000 shares to a total of 100,000,000 shares. After the
Reincorporation, the provision will read as follows:
"The Corporation is authorized to issue two classes of shares to be
designated, respectively, Preferred Stock and Common Stock. The total
number of shares of all classes of stock which the Corporation shall have
the 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 shareholders are being asked to approve the increase in the number of
authorized shares to take effect on the Reincorporation. 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
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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, its 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 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 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
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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.
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 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 could
make it more difficult for a minority shareholder to obtain representation on
the Board. California corporations whose stock is listed on a national stock
exchange or whose stock is held by 800 shareholders of record and included in
the Nasdaq National Market System (a "Listed Company") can also eliminate
cumulative voting with shareholder approval. The Company qualifies as a Listed
Company but has not sought shareholder approval to eliminate cumulative voting.
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.
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
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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").
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 not less than 120 days before the meeting (or 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
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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 of Directors 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 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
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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 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
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(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
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 of Directors. 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.
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.
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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).
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.
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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 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
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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 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
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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 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.
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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;
(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
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(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.
-28-
<PAGE>
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.
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<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 Officer, 1995 -- -- -- -- --
President and Director
Tom L. Johnson (2)............ 1996 350,004 -- -- -- 4,091(6)
Co-Chairman of the Board 1995 300,002 133,253 -- -- 5,655(7)
Richard G. Vento (2).......... 1996 350,004 -- -- -- 7,515(8)
Co-Chairman of the Board 1995 300,002 133,253 -- -- 5,655(7)
Gayety W. Hirahara (3)........ 1996 175,000 60,609 -- -- 6,468(7)
Chief Financial Officer, 1995 166,971 60,000 -- -- 4,580(7)
Chief Operating Officer
and Secretary
Tim J. Sebring................ 1996 65,000 421,639 -- 100,000 2,993(7)
Vice President, Sales and 1995 65,913 299,873 -- 445,500 2,655(7)
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.
(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 another 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.
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<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.
-31-
<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 IN-THE-
OPTIONS AT MONEY OPTIONS AT JUNE 30,
SHARES VALUE JUNE 30, 1996(#) 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 covering 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 June 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. The agreement is operative
from its effective date until the six weeks following the employment
commencement date of a successor Chief Financial Officer (the "Transition
Period") and from the end of the Transition Period until the earlier of the
termination of Ms. Hirahara's consulting relationship or December 31, 1997 (the
"Consulting Period"). 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. During the Transition Period, Ms. Hirahara received as compensation
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<PAGE>
for her services a base salary at the annualized rate of $175,000. During the
Consulting Period, 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.
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 from 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.
-33-
<PAGE>
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.
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.
-34-
<PAGE>
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.
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 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
-35-
<PAGE>
PERFORMANCE GRAPH
COMPARISON OF 7 MONTH CUMULATIVE TOTAL RETURN*
AMONG OBJECTIVE SYSTEMS INTEGRATORS, INC. THE NASDAQ STOCK
MARKET-US INDEX AND THE HAMBRECHT & QUIST COMMUNICATIONS INDEX
[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 $100.00 $100.00 $100.00
FYE 12/95 $288.00 $100.00 $ 96.00
FYE 1/96 $211.00 $100.00 $ 97.00
FYE 2/96 $216.00 $106.00 $104.00
FYE 3/96 $239.00 $104.00 $ 98.00
FYE 4/96 $234.00 $113.00 $111.00
FYE 5/96 $237.00 $118.00 $114.00
FYE 6/96 $192.00 $113.00 $110.00
</TABLE>
* $100 INVESTED ON 12/01/95 IN STOCK OR INDEX - INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDING JUNE 30.
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.
-36-
<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 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. Principal and accrued interest under each Promissory Note was due
in December 1997. 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. Messrs. Vento and Johnson repaid all principal
and accrued interest due under these Promissory Notes in September 1995.
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 no amounts were paid 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
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<PAGE>
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 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.
BOARD OF DIRECTORS
Dated: October 18, 1996
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<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 October __, 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:
<PAGE>
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.
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.
-2-
<PAGE>
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 A, 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.
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.
-3-
<PAGE>
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, Inc. 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.
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.
-4-
<PAGE>
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.
-5-
<PAGE>
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.
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.
-6-
<PAGE>
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
-7-
<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
----------------------------------
Philip N. Cardman, Vice President,
General Counsel and Secretary
<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
----------------------------------
Philip N. Cardman, Vice President,
General Counsel and Secretary
<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
<PAGE>
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:
Philip N. Cardman
Objective Systems Integrators, Inc.
100 Blue Ravine Road
Folsom, California 95630
SIXTH: The Corporation is to have perpetual existence.
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
-2-
<PAGE>
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 ___, 1996
-------------------------------
Philip N. Cardman
Incorporator
-3-
<PAGE>
APPENDIX C
BYLAWS
OF
OBJECTIVE SYSTEMS INTEGRATORS, INC.
(A DELAWARE CORPORATION)
<PAGE>
BYLAWS OF
OBJECTIVE SYSTEMS INTEGRATORS, INC.
(a Delaware corporation)
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I - CORPORATE OFFICES............................................ 1
1.1 REGISTERED OFFICE............................................ 1
1.2 OTHER OFFICES................................................ 1
ARTICLE II - MEETINGS OF STOCKHOLDERS..................................... 1
2.1 PLACE OF MEETINGS............................................ 1
2.2 ANNUAL MEETING............................................... 1
2.3 SPECIAL MEETING.............................................. 3
2.4 NOTICE OF STOCKHOLDERS' MEETINGS............................. 3
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER
BUSINESS..................................................... 3
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE................. 3
2.7 QUORUM....................................................... 4
2.8 ADJOURNED MEETING; NOTICE.................................... 4
2.9 VOTING....................................................... 4
2.10 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING................... 5
2.11 PROXIES...................................................... 5
2.12 ORGANIZATION................................................. 6
2.13 LIST OF STOCKHOLDERS ENTITLED TO VOTE........................ 6
ARTICLE III - DIRECTORS.................................................... 6
3.1 POWERS....................................................... 6
3.2 NUMBER OF DIRECTORS.......................................... 6
3.3 ELECTION AND TERM OF OFFICE OF DIRECTORS..................... 7
3.4 RESIGNATION AND VACANCIES.................................... 7
3.5 REMOVAL OF DIRECTORS......................................... 8
3.6 PLACE OF MEETINGS; MEETINGS BY TELEPHONE..................... 8
3.7 FIRST MEETINGS............................................... 8
3.8 REGULAR MEETINGS............................................. 9
3.9 SPECIAL MEETINGS; NOTICE..................................... 9
</TABLE>
-i-
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
Page
----
<S> <C>
3.10 QUORUM....................................................... 9
3.11 WAIVER OF NOTICE............................................. 10
3.12 ADJOURNMENT.................................................. 10
3.13 NOTICE OF ADJOURNMENT........................................ 10
3.14 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING............ 10
3.15 FEES AND COMPENSATION OF DIRECTORS........................... 10
3.16 APPROVAL OF LOANS TO OFFICERS................................ 10
3.17 SOLE DIRECTOR PROVIDED BY CERTIFICATE OF INCORPORATION....... 11
ARTICLE IV - COMMITTEES................................................... 11
4.1 COMMITTEES OF DIRECTORS...................................... 11
4.2 MEETINGS AND ACTION OF COMMITTEES............................ 12
4.3 COMMITTEE MINUTES............................................ 12
ARTICLE V - OFFICERS..................................................... 12
5.1 OFFICERS..................................................... 12
5.2 ELECTION OF OFFICERS......................................... 12
5.3 SUBORDINATE OFFICERS......................................... 13
5.4 REMOVAL AND RESIGNATION OF OFFICERS.......................... 13
5.5 VACANCIES IN OFFICES......................................... 13
5.6 CHAIRMAN OF THE BOARD........................................ 13
5.7 CHIEF EXECUTIVE OFFICER AND PRESIDENT........................ 14
5.8 VICE PRESIDENTS.............................................. 14
5.9 SECRETARY.................................................... 14
5.10 CHIEF FINANCIAL OFFICER...................................... 15
5.11 ASSISTANT SECRETARY.......................................... 15
5.12 ADMINISTRATIVE OFFICERS...................................... 15
5.13 AUTHORITY AND DUTIES OF OFFICERS............................. 15
ARTICLE VI - INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND
OTHER AGENTS............................................... 16
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS.................... 16
6.2 INDEMNIFICATION OF OTHERS.................................... 17
6.3 INSURANCE.................................................... 17
</TABLE>
-ii-
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
Page
----
<S> <C>
ARTICLE VII - RECORDS AND REPORTS.......................................... 17
7.1 MAINTENANCE AND INSPECTION OF RECORDS........................ 17
7.2 INSPECTION BY DIRECTORS...................................... 18
7.3 ANNUAL STATEMENT TO STOCKHOLDERS............................. 18
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS............... 18
7.5 CERTIFICATION AND INSPECTION OF BYLAWS....................... 18
ARTICLE VIII - GENERAL MATTERS............................................. 18
8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING........ 18
8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS.................... 19
8.3 CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED........... 19
8.4 STOCK CERTIFICATES; TRANSFER; PARTLY PAID SHARES............. 19
8.5 SPECIAL DESIGNATION ON CERTIFICATES.......................... 20
8.6 LOST CERTIFICATES............................................ 20
8.7 TRANSFER AGENTS AND REGISTRARS............................... 21
8.8 CONSTRUCTION; DEFINITIONS.................................... 21
ARTICLE IX - AMENDMENTS................................................... 21
</TABLE>
-iii-
<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
<PAGE>
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 date 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 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
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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 preceeding
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.
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
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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).
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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 vote 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.
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.
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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, 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.
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<PAGE>
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 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
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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.
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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.
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.
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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.
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.
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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
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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, 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 OF 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 mem bers, 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.
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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.
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.
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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, 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 resolu tion 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
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<PAGE>
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
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corporation, which limitations may not be exceeded by such individuals or
altered by the president without further approval by the board of directors.
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.
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<PAGE>
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 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
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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.
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.
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<PAGE>
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.
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<PAGE>
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.
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
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<PAGE>
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.
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
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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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<PAGE>
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.
<PAGE>
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 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 disposi tion 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 subsidi aries)
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.
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<PAGE>
(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 ser vices 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.
(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.
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<PAGE>
(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
-4-
<PAGE>
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 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
-5-
<PAGE>
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 con viction, 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, 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
-6-
<PAGE>
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.
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 direc tors, 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
-7-
<PAGE>
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 fidu ciaries, 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.
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
-8-
<PAGE>
(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.
-9-
<PAGE>
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 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.
-10-
<PAGE>
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:_____________________________________
-11-
<PAGE>
Preliminary Copies
Filed October 3, 1996
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:
1. ELECTION OF DIRECTORS:
[_] FOR all nominees listed below [_] WITHHOLD
(except as indicated)
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 THE NUMBER OF SHARES
RESERVED FOR GRANT THEREUNDER:
[_] FOR [_] AGAINST [_] ABSTAIN
3. REINCORPORATION OF THE COMPANY AS A DELAWARE CORPORATION:
[_] FOR [_] AGAINST [_] ABSTAIN
4. PROPOSAL TO RATIFY THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE
INDEPENDENT AUDITORS OF THE COMPANY FOR THE FISCAL PERIOD ENDING JUNE
30, 1997:
[_] FOR [_] AGAINST [_] ABSTAIN
and, in their discretion, upon such other matter or matters which may properly
come before the meeting or any adjournment or adjournments thereof.
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).
Dated: __________________, 1996
-------------------------------
Signature
-------------------------------
Signature
(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.)
