SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X] Filed by a Party other than the Registrant [ ] Check
the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
OBJECTIVE SYSTEMS INTEGRATORS, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction
applies:
N/A
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(2) Aggregate number of securities to which transaction applies:
N/A
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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):
N/A
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(4) Proposed maximum aggregate value of transaction:
N/A
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(5) Total fee paid:
N/A
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
N/A
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(2) Form, Schedule or Registration Statement no.:
N/A
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(3) Filing Party:
N/A
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(4) Date Filed:
N/A
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OBJECTIVE SYSTEMS INTEGRATORS, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 13, 2000
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders ("Meeting")
of Objective Systems Integrators, Inc., a Delaware corporation ("OSI"), will be
held on Thursday, December 13, 2000, at 10:00 a.m. local time, at 101 Parkshore
Drive, Folsom, California 95630, for the following purposes:
1. To elect five directors to serve until the next Annual Meeting and
until their successors are elected and qualified.
2. To approve an amendment to our 1995 Employee Stock Purchase Plan to
increase the number of shares of Common Stock reserved for issuance
by 1,000,000 shares.
3. To ratify the appointment of Deloitte & Touche LLP as our
independent auditors for the fiscal year ending June 30, 2001.
4. To transact such other business as may properly come before the
Meeting.
More detail about the stated purposes of the Meeting can be found in the
Proxy Statement that accompanies this Notice. The record date for the Meeting is
October 20, 2000. Only stockholders of record at the close of business on that
date will be given notice of the Meeting. Only stockholders of record at the
close of business on that date may vote at the Meeting and any adjournment or
postponement of the Meeting.
All stockholders are invited to attend the Meeting. We urge you to
complete, sign, date and return a proxy card as promptly as possible to ensure
your representation and the presence of a quorum at the Meeting. A
postage-prepaid envelope has been enclosed for that purpose. If you do attend
the Meeting, you may vote in person even if you have returned a proxy card. You
can withdraw your proxy at any time before it is voted.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Philip N. Cardman
--------------------------------------------
Philip N. Cardman
VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
Folsom, California
November 15, 2000
YOUR VOTE IS IMPORTANT.
TO ENSURE YOUR SHARES ARE REPRESENTED AT THE ANNUAL
MEETING, PLEASE COMPLETE, SIGN, DATE AND RETURN YOUR
PROXY CARD AS PROMPTLY AS POSSIBLE.
<PAGE>
OBJECTIVE SYSTEMS INTEGRATORS, INC.
PROXY STATEMENT FOR 2000
ANNUAL MEETING OF STOCKHOLDERS
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is being solicited on behalf of the Board of Directors
("Board") of OBJECTIVE SYSTEMS INTEGRATORS, INC., a Delaware corporation
("OSI"), for use at our Annual Meeting of Stockholders ("Meeting") that will be
held Wednesday, December 13, 2000, at 10:00 a.m. local time, or at any
adjournment of the Meeting, and for the purposes described in this Proxy
Statement. The Meeting will be held at 101 Parkshore Drive, Folsom, California
95630. OSI's principal executive offices are at 101 Parkshore Drive, Folsom,
California 95630, and our telephone number at that location is (916) 353-2400.
These proxy solicitation materials and the Annual Report to Stockholders
for the year ended June 30, 2000, were mailed on or about November 15, 2000,
to all stockholders entitled to vote at the Meeting.
RECORD DATE AND OUTSTANDING SHARES
Stockholders of record at the close of business on October 20, 2000
("Record Date"), will be given notice of the Meeting and are entitled to vote.
OSI has one series of Common Shares outstanding, designated Common Stock, $.001
par value per share ("Common Stock"). On the Record Date, 37,271,142 shares of
Common Stock were issued and outstanding. They were held of record by 133
stockholders.
REVOCABILITY OF PROXIES
Proxies can be revoked at any time before their use by (a) delivering a
written notice of revocation to our Secretary, (b) delivering a duly executed
proxy bearing a later date to our Secretary, or (c) attending the Meeting and
voting in person.
VOTING AND SOLICITATION
You have one vote for each share of Common Stock held on the Record Date.
In voting for the election of Directors (Proposal One) you may cumulate your
votes. For cumulative voting, the total number of votes that may be cast is five
times the number of shares that you are entitled to vote. One candidate may be
given all of your votes or they may be distributed among as many candidates as
you chose. However, (a) votes cannot be cast for more than five candidates or
for a candidate who has not been nominated before the voting, and (b) cumulative
voting will not apply unless at least one Stockholder has given notice, before
the voting, of the intention to cumulate. On all other matters, each share of
Common Stock has one vote.
This solicitation is being made by OSI, which will bear all related
costs. Chase Mellon Shareholder Services LLC has been employed to distribute
stockholder materials, both to stockholders of record and to organizations
representing beneficial owners, for which we will reimburse them. We anticipate
spending approximately $20,000 for this solicitation. We may also reimburse
brokerage firms and others representing beneficial owners for their expenses in
forwarding solicitation material to beneficial owners. Proxies may also be
solicited, without additional compensation, by our directors, officers and other
employees.
QUORUM, ABSTENTIONS AND BROKER NONVOTES
Votes cast at the Meeting will be counted by the Inspector of Elections
("Inspector"), who is a representative of our Transfer Agent. The Inspector will
also determine whether a quorum is present. For proposals to be approved,
Delaware law generally requires an affirmative vote by a majority of shares
present (in person or by proxy) at a duly held meeting where there is a quorum.
Delaware law also generally provides that a quorum for a meeting will exist only
if a majority of the shares entitled to vote at the meeting are present either
in person or by proxy.
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In determining whether a quorum is present, the Inspector will treat
shares that are voted "Withheld" or "Abstain" as being present and entitled to
vote. They will not be treated as votes in favor of any matter submitted.
Proxies which are returned using the form of proxy enclosed but which are not
marked as to a particular item, will be voted to elect the five nominated
directors, to approve amending the 1995 Employee Stock Purchase Plan, to ratify
the appointment of Deloitte & Touche LLP and, as the proxy holders deem
advisable, on any other matters that may properly come before the Annual
Meeting.
If a broker indicates that it has no discretionary authority for a
particular matter ("Broker Nonvotes"), the Inspector will consider the shares
held by the broker as being present in determining whether a quorum exists for
that matter. However, these shares will not be considered as shares entitled to
vote on such matters and will therefor not be counted in tabulating the votes.
We believe that these tabulation procedures for determining whether a
quorum exists and for the voting of shares are consistent with Delaware law and
our Bylaws.
DEADLINE FOR STOCKHOLDER PROPOSALS
For proposals to be included in our Proxy Statement and Proxy Card for
the Meeting under Exchange Act Rule 14a-8, they must be received by our
Secretary no later than July 19, 2001. Were we to decide to hold our 2001 Annual
Meeting at a different time of year than this Meeting, and the date of the 2001
Meeting changes by more than 30 days from the date of this Meeting, then
proposals must be received by our Secretary a reasonable time before we begin to
print and mail our proxy materials. However, for a proposal to be eligible to be
brought before the stockholders at the 2001 Annual Meeting, the stockholder
submitting the proposal must also comply with the procedures (including the
deadlines) required by our Bylaws. Stockholder nominations of directors are not
stockholder proposals within the meaning of Rule 14a-8 and are not eligible for
inclusion in our proxy statement. Any stockholder nominations must comply with
our Bylaws.
Under our Bylaws, stockholders who wish to present proposals for action,
or to nominate directors, at our 2001 Annual Meeting must give written notice to
the Secretary at the address on the cover page of this Proxy Statement. This
notice must be received at our principal executive offices on or before July 7,
2001.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table has information on the beneficial ownership of our
Common Stock as of October 20, 2000, for (a) each person that we know
beneficially owns more than 5% of the outstanding shares of our Common Stock,
(b) each of our directors, (c) each of our Named Executive Officers, and (d) all
of our directors and executive officers as a group. Except as otherwise
indicated, the address of each of the people in this table is as follows: c/o
Objective Systems Integrators, Inc., 101 Parkshore Drive, Folsom, California
95630.
<TABLE>
<CAPTION>
Five Percent Stockholders, Common Stock Approximate
Directors, and Certain Executive Officers Beneficially Owned Percentage Owned(1)
----------------------------------------- ------------------ -------------------
<S> <C> <C>
Richard G. Vento (2)............................. 10,180,27 27.31%
Tom L. Johnson (3)............................... 5,427,799 14.56%
William Bailey (4)............................... 4,752,474 12.75%
Dan D. Line (5).................................. 405,833 1.20%
Dr. Kornel Terplan (6) .......................... 399,421 1.07%
Philip N. Cardman (7) ........................... 202,136 *
George F. Schmitt (8)............................ 127,500 *
Jeffrey T. Boone (9)............................. 111,105 *
James K.R. Souders (10) ......................... 89,538 *
James T. Olsen (11).............................. 62,500 *
Gary D. Cuccio (12).............................. 28,750 *
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All directors and executive officers as a group
(13 persons) (13) 22,035,436 60.41%
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</TABLE>
*Less than 1% of the outstanding shares.
(1) Shares of Common Stock subject to options held by a person that are
currently exercisable or exercisable within 60 days of October 20, 2000,
are treated as being outstanding in computing both ownership and
percentage ownership for that person, but not in computing the percentage
of any other person. Percentage ownership is based on 37,271,142 shares of
Common Stock outstanding as of October 20, 2000, together with options
held by each person, as described in the footnotes below. Beneficial
ownership is determined according to SEC Rule 13d-3, and includes
voting and investment power.
(2) Includes (a) 2,500,000 shares held by DTDV L.L.C., (b) 2,500,000 held by
DTLV L.L.C., (c) 49,506 shares held by each of Mr. Vento and Mr. Vento's
spouse. (d) 328,789 shares held by Vento L.L.C., and (e) 1,584,157 shares
held by each of Gail Vento L.L.C., Nicole Vento L.L.C., and Renee Vento
L.L.C.
(3) Includes 2,549,505 shares held by Mr. Johnson's spouse and 328,789 shares
held by Johnson L.L.C.
(4) Includes 2,376,237 shares held by each of Kevin Johnson L.L.C. and Kari
Anne Johnson L.L.C., over which Mr. Bailey is deemed to have voting and
investment power.
(5) Includes 405,833 shares of Common Stock subject to options currently
exercisable or exercisable within 60 days of October 20, 2000.
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(6) Includes 37,500 shares of Common Stock subject to options currently
exercisable or exercisable within 60 days of October 20, 2000.
(7) Includes 202,136 shares of Common Stock subject to options currently
exercisable or exercisable within 60 days of October 20, 2000.
(8) Includes 87,500 shares of Common Stock subject to options currently
exercisable or exercisable within 60 days of October 20, 2000.
(9) Includes 111,105 shares of Common Stock subject to options currently
exercisable or exercisable within 60 days of October 20, 2000.
(10) Mr. James K.R. Souders resigned from OSI on November 4, 1999.
(11) Includes 62,500 shares of Common Stock subject to options currently
exercisable or exercisable within 60 days of October 20, 2000.
(12) Includes 18,750 shares of Common Stock subject to options currently
exercisable or exercisable within 60 days of October 20, 2000.
(13) Includes 1,215,139 shares of Common Stock subject to options currently
exercisable or exercisable within 60 days of October 20, 2000.
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PROPOSAL ONE
ELECTION OF DIRECTORS
NOMINEES
OSI's Bylaws provide for six directors. However, we expect that only five
directors will be elected at the Meeting, with one vacancy remaining
outstanding. We intend to appoint a director to fill the vacancy when a suitable
candidate is found. Unless otherwise instructed, proxy holders will vote the
proxies they receive for the five nominees listed below, all of who are
presently directors of OSI. If a nominee is unable or declines to serve as a
director at the time of the Meeting, proxies will be voted for any nominee
designated by the present Board to fill the vacancy. We are not aware of any
nominee who is unable or will decline to serve as a director. If additional
nominations are made, the proxy holders will vote the proxies they receive (in
accordance with cumulative voting) to elect as many of the nominees listed below
as is possible. If this occurs, the proxy holders will decide on the specific
nominees that will receive their votes. The term of office for each person
elected as a director will continue until the next Annual Meeting of
Stockholders and until a successor has been duly elected and qualified.
VOTE REQUIRED
If a quorum is present and voting, the five nominees receiving the
highest number of votes will be elected to the Board. Abstentions and Broker
Nonvotes are not counted in electing directors, and therefore have no effect on
the outcome of the election of directors.
NOMINEES
The names of the nominees, and some information about each, are as
follows:
<TABLE>
<CAPTION>
Name of Nominee Age Position(s) With OSI
--------------- --- --------------------
<S> <C> <C>
Tom L. Johnson ................... 55 Co-CEO and Co-Chairman of the
Board of Directors
Richard G. Vento ................. 60 Co-CEO and Co-Chairman of the
Board of Directors
George F. Schmitt (1)............. 57 Director
Gary D. Cuccio (1)............... 54 Director
Dr. Kornel Terplan (1)............ 56 Director
</TABLE>
(1) Member of Audit Committee
There are no family relationships among the directors or executive
officers.
TOM L. JOHNSON is OSI's Co-CEO and Co-Chairman of the Board of Directors.
Mr. Johnson has served as a Director of OSI since 1989. He co-founded Objective
Systems Integrators, a partnership and the predecessor to OSI, in January 1989.
He has been Co-Chairman of the Board since 1996 and Co-CEO since 1997. He served
as Co-CEO of OSI from 1989 through 1995. Mr. Johnson received a B.S. degree in
Abstract Mathematics with a minor in Business Management from the University of
Houston.
RICHARD G. VENTO is OSI's Co-CEO and Co-Chairman of the Board of
Directors. Mr. Vento has served as a Director of OSI since 1989. He co-founded
Objective Systems Integrators, a partnership and the predecessor to OSI in
January, 1989. He has been Co-Chairman of the Board since 1996 and Co-CEO since
1997. He served as Co-CEO of OSI from 1989 through 1995. Mr. Vento received a
B.A. degree in Mathematics and a B.S. degree in Business and Economic Statistics
from San Francisco State University and an A.A. degree in Liberal Arts from
Foothill College.
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GARY D. CUCCIO has been a director of OSI since July 1999. Mr. Cuccio has
been a director of Wired Business and Phaetheon Communications since September
2000. He was a director of L.H.S. Group, now SEMA Group PLC, from November 1999
to July 2000. He is currently President and CEO of Phaethon Communications.
Mr. Cuccio was President and CEO of LHS Group from November 1999 to August 2000
and President of AirTouch Paging from August 1998 to October 1999. From
September 1996 to July 1998, he was the Chief Operating Officer of Omnipoint
Communications, Inc. From 1994 to 1996, he held a number of senior operations
positions with AirTouch International in Europe and in Asia. Mr. Cuccio holds a
B.A. degree from California State University, Los Angeles, and an M.B.A. from
St. Mary's College. He is also a graduate of the Advanced Management Program at
Harvard.
GEORGE F. SCHMITT has been a director of OSI since October 1995. Mr
Schmitt has been a director of Telesoft Partners since September 1997, and has
been a director of L.H.S. Group, now SEMA Group PLC, since October 1996. Mr.
Schmitt is currently Sr. Advisor to the Chairman of VoiceStream and Chairman of
the Board, Director and Acting CEO at e.Spire Communications, Inc.. He was
President of Omnipoint Communications, Inc. and Executive Vice President of
Omnipoint Corporation (now, Voicestream) from October 1995 to February 2000. Mr.
Schmitt has a B.A. degree from St. Mary's College of California and an M.S.M.
degree from Stanford University School of Business.
DR. KORNEL TERPLAN has been a director of OSI since August 1992. Since
1983, Dr. Terplan has served as President of Performance Navigations, Inc., a
telecommunications consulting company. For more than 25 years, he 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. Dr.
Terplan has a B.A. degree in Electronics, an M.S. degree in Electronics and a
Ph.D. degree in Operational Research from the University of Dresden, Germany.
BOARD MEETINGS AND COMMITTEES
The Board held five meetings in fiscal 2000. No director attended fewer
than 75% of the Board meetings and the committee on which he served. The Board
has an Audit Committee. The Board does not have a nominating committee or any
committee that performs that function.
In fiscal 2000, the Audit Committee consisted of Messrs. Schmitt, Cuccio
and Terplan. The Audit Committee oversees our independent auditors and reviews
our internal financial procedures and controls. This Committee met three times
in fiscal 2000.
The Audit Committee recommends engagement of our independent auditors. It
is primarily responsible for reviewing (1) the scope of the independent
auditors' annual audit and their compensation, (2) our general policies and
procedures regarding accounting and financial controls, and (3) any change in
accounting principles, significant audit adjustments proposed by the auditors
and any recommendations that the auditors may have with respect to policies and
procedures.
The Board adopted and approved a charter for the Audit Committee on April
29, 2000, a copy of which is attached as Appendix A. The Board has determined
that all members of the Audit Committee are "independent" as that term is
defined in Rule 4200 of the listing standards of the National Association of
Securities Dealers.
AUDIT COMMITTEE REPORT
REVIEW WITH MANAGEMENT
The following is the report of our Audit Committee regarding our audited
financial statements for the fiscal year ended June 30, 2000. The information
contained in this report will not be deemed to be "soliciting material" or to be
"filed" with the SEC, nor will it be incorporated by reference into any future
filing under the Securities Act of 1933, as amended, or the 1934 Securities
Exchange Act, as amended, except to the extent that we specifically incorporate
it by reference.
The Audit Committee has reviewed and discussed our audited financial
statements with management.
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REVIEW AND DISCUSSIONS WITH INDEPENDENT ACCOUNTANTS
The Audit Committee has discussed with Deloitte & Touche, LLP, our
independent accountants, the matters required to be discussed under SAS 61
(Codification of Statements on Accounting Standards). This includes, among other
items, matters related to the conduct of their audit of our financial
statements.
The Audit Committee has also received written disclosures and the letter
from Deloitte & Touche, LLP required by Independence Standards Board Standard
No. 1, which relate to the auditors' independence from OSI and its related
entities. The Audit Committee has discussed with Deloitte & Touche, LLP their
independence from OSI.
CONCLUSION
Based on the review and discussions referred to above, the Audit
Committee recommended to the Board that our audited financial statements be
included in our Annual Report on Form 10-K for the fiscal year ended June 30,
2000.
SUBMITTED BY THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
George F. Schmitt
Gary D. Cuccio
Dr. Kornel Terplan
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<PAGE>
PROPOSAL TWO
AMENDMENT OF 1995 EMPLOYEE STOCK PURCHASE PLAN
In July, 2000, the Board amended the Plan to increase the number of
shares of Common Stock reserved for issuance by 1,000,000 shares, from 1,487,500
shares to 2,487,500 shares. At the Meeting, you are being asked to approve an
amendment of our 1995 Employee Stock Purchase Plan ("Plan") to increase the
number of shares that can be issued by 1,000,000 shares.
The Plan was adopted by the Board and approved by the stockholders in
August of 1995. A total of 2,487,500 shares of Common Stock can be issued under
the Plan. In July, 1999, the Board amended and restated the Plan to permit
employees to change their permitted contribution more than once during any given
offering period. As of the Record Date, a total of 549,803 shares had been
issued at an average purchase price of $ 2.125 per share. Excluding the
1,000,000 shares for which approval is being sought at the Meeting, 504,670
shares remain available for future issuance.
The fair market value of our Common Stock on the first day of the most
recent offering period was $14.0630 per share. See "Purchase Price."
VOTE REQUIRED
The affirmative vote of at least a majority of the Votes Cast is needed
to amend the Plan. The "Votes Cast" under Delaware law are the shares of Common
Stock present at the Meeting (in person or by proxy) and entitled to vote on a
matter. We will count abstentions in determining whether there is a quorum for
the Meeting and the number of Votes Cast. We will count Broker Nonvotes in
determining whether there is a quorum for the Meeting, but not in determining
the number of Votes Cast. Therefore, abstentions have the same effect as votes
cast against Proposal Two and Broker Nonvotes have no effect on approval of
Proposal Two.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" AMENDING THE 1995
EMPLOYEE STOCK PURCHASE PLAN.
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<PAGE>
PURPOSE
The purpose of the Plan is to provide our employees (and those of our
subsidiaries designated by the Board) with an opportunity to purchase our Common
Stock through accumulated payroll deductions. The Plan is intended to qualify
under Section 423 of the Internal Revenue Code of 1986, as amended ("Code").
We believe that the attraction and retention of high quality personnel
are essential to our growth and success. We also believe that an incentive plan,
such as the Plan, is necessary for us to remain competitive in our compensation
practices. Finally, we believe the Plan, which requires our employees to
contribute their own money to purchase our Common Stock, is a powerful vehicle
to align the interests of our employees with those of our stockholders. Without
an increase in the available shares, insufficient shares will be available for
purchase under the Plan for future planned Offering Periods.
The benefits to be received pursuant to the Plan by our employees (or of
Board designated subsidiaries) are not determinable at this time because those
benefits are based upon each individual's determination of whether or not to
participate in the Plan and to what extent.
The following summary is qualified in its entirety by the specific
language of the Plan. Copies of the Plan are available on request.
ADMINISTRATION
The Plan can be administered by the Board or by a committee appointed by
the Board. The Plan is presently administered by the Board. The Board determines
all questions of interpretation or application of the Plan. Its decisions are
final and binding on all participants. No charge for administrative or other
costs may be made against the payroll deductions of a participant. Board members
receive no additional compensation for their services in administering the Plan.
OFFERING PERIODS
The Plan has offering periods of approximately six months, beginning the
first trading day on or after May 1 and November 1 of each year. The Board may
change the length of the offering periods without stockholder approval.
ELIGIBILITY
Subject to certain limitations imposed by Section 423(b) of the Code,
anyone can participate in the Plan who (1) is a regular employee scheduled to
work at least twenty hours per week and five months per calendar year, and (2)
was employed by us (or a Board designated subsidiary) on the first day of the
offering period.
Eligible employees become participants by delivering a subscription
agreement to our payroll department. An employee who becomes eligible to
participate after an offering period starts may not participate until the next
offering period. The approximate number of employees eligible to participate in
the Plan on the Record Date was 399.
PURCHASE PRICE
Under the Plan, shares of our Common Stock are sold to a participant at
85% of the lower of fair market value on the first day and the last day of the
offering period. Fair market value is the closing price of our Common Stock as
reported on The Nasdaq Exchange. The closing price per share of our Common Stock
on the Record Date was $ 8.96875.
PAYMENT OF PURCHASE PRICE AND PAYROLL DEDUCTIONS
The purchase price for shares is accumulated by payroll deductions over
an offering period. Deductions cannot exceed 15% of an employee's compensation
on each pay day. Employees may stop their participation in the Plan at any time
during an offering period. An employee may also increase or decrease the rate of
deductions during an offering period, provided that the aggregate of all payroll
deductions during the offering period does not exceed 15% of the employee's
compensation during that offering period. Payroll deductions begin on the first
payday after an offering period starts and continue at the same rate until the
end of the offering period, unless terminated or changed as provided in the
Plan.
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PURCHASE OF STOCK AND EXERCISE OF OPTION
By executing a subscription agreement to participate in the Plan, an
employee is granted an option to purchase shares of our Common Stock. The number
of shares that an employee can purchase in an offering period is determined by
dividing the compensation that is withheld over the offering period by the lower
of (1) 85% of the fair market value of a share of Common Stock on the first day
of the offering period or (2) 85% of the fair market value of a share of Common
Stock on the last day of the offering period. Overriding this calculation is a
limitation on the maximum number of shares that can be issued to an employee in
an offering period. This maximum is determined by dividing $12,500 by the fair
market value of a share of Common Stock at the beginning of the offering period.
Unless an employee discontinues participation, the option will be exercised
automatically at the end of the offering period.
An employee is not permitted to subscribe for shares under the Plan if,
immediately after the grant of the option, he would own, or have outstanding
options to purchase, five percent or more of our Common Stock. In addition, no
subscription is permitted if, as a result, the employee could purchase more than
$25,000 worth of Common Stock during any calendar year. This is determined based
on the fair market value of the shares at the time of grant. Finally, if the
number of shares which would otherwise be under option at the beginning of an
offering period is greater than the number of shares then available under the
Plan, a pro rata allocation of the available shares will be made.
WITHDRAWAL
An employee can withdraw from an offering in whole, but not in part, by
signing and delivering to us a notice of withdrawal. Withdrawal may be made at
any time before the end of the offering period. Withdrawal automatically ends
the employee's interest in the offering. If an employee withdraws from an
offering period, payroll deductions will not resume at the beginning of the next
offering period (as they otherwise would) unless a new subscription agreement is
delivered.
TERMINATION OF EMPLOYMENT
Termination of employment for any reason, including retirement or death,
immediately ends participation in the Plan. Payroll deductions credited to the
employee's account are returned, without interest, either to the employee or, in
the case of death, the beneficiary specified by the employee in his subscription
agreement.
CAPITAL CHANGES
If our capitalization is changed in any way without our receiving
consideration (such as by a stock split or dividend) and the result is a change
in the number of shares of our Common Stock, appropriate adjustment will be made
in the number of shares that can be purchased and in the purchase price per
share. If our dissolution or liquidation is proposed, the current offering
period will end immediately before the transaction closes unless the Board
provides otherwise. If we merge with or into another corporation, or
substantially all of our assets are sold, options under the Plan will be assumed
or an equivalent option substituted by the successor corporation, its parent or
a subsidiary. This will happen unless the Board, in its discretion, decides to
shorten the offering period then in progress so that the option can be exercised
before the closing. Participants will be notified in writing at least 10 days
before the end of a shortened offering period.
NONASSIGNMENT
No rights or accumulated payroll deductions can be pledged, assigned,
transferred or otherwise disposed of by an employee other than by (1) will, (2)
the laws of descent and distribution, or (3) written designation of a
beneficiary who is to receive the employee's shares or cash on the employee's
death. We can treat any attempt to do so as an election to withdraw from the
offering period.
AMENDMENT AND TERMINATION
The Board can amend or end the Plan at any time and for any reason.
However, termination cannot affect granted options and an amendment cannot
change an outstanding option to adversely affect the participant's rights. To
the extent necessary to comply with Rule 16b-3 or with Section 423 of the Code,
or any other applicable law or regulation, we will obtain stockholder approval
of amendments to the Plan in the manner and to the degree required. In all
events, the Plan will end on July 31, 2005.
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<PAGE>
USE OF FUNDS
Payroll deductions under the Plan do not accrue interest and can be used
by us for any corporate purpose.
CERTAIN UNITED STATES FEDERAL INCOME TAX INFORMATION
The Plan is intended to qualify under Section 423 of the Code. Under
Section 423, no income is taxable to the employee until shares are sold or
otherwise transferred. On sale or transfer, the employee is generally taxed,
with the amount of the tax depending on how long the stock has been held. If the
sale or transfer takes place within two years after the first day of the
offering period, or within one year after the shares are purchased, ordinary
income will result. The amount of this income will be the lesser of (1) the
excess of the fair market value of the shares when they are sold or transferred
over their purchase price, or (2) 15% of the fair market value of the shares at
the start of the offering period. Additional gain will be treated as long-term
capital gain. If these holding periods are not met, the amount of ordinary
income will be the excess of fair market value over the purchase price of the
shares. Additional gains or losses will be long-term or short-term capital gain
or loss, depending on the holding period. Generally, we will have a deduction
for the ordinary income our employees recognize if they sell or transfer shares
before the end of these holding periods.
This is only a summary of the federal income tax effects on us and on
participants in the Plan. It is not complete and does not discuss the tax
consequences of a participant's death. It also does not discuss the income tax
laws of any municipality, state or country outside the U.S. in which a
participant may reside.
PARTICIPATION
Participation in the Plan is voluntary. Each eligible employee elects to
participate and sets the level of his payroll deductions. As a result, we cannot
determine future purchases under the Plan. Nonemployee directors are not
eligible to participate in the Plan.
-11-
<PAGE>
PROPOSAL THREE
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board has selected Deloitte & Touche LLP, independent auditors, to
audit our consolidated financial statements for the fiscal year ending June 30,
2001, and recommends that you ratify that appointment. Even if the appointment
is ratified, the Board may appoint new independent auditors at any time during
the year if it determines that the change would be in our best interests and
those of our stockholders. If there is a negative vote on ratification, the
Board will reconsider its selection.
Deloitte & Touche LLP has audited our financial statements annually since
1993. Representatives of Deloitte & Touche LLP have been invited to the Meeting
and will be given an opportunity to make a statement if they wish. We also
expect that they will be available to respond to appropriate questions.
VOTE REQUIRED
The affirmative vote of at least a majority of the Votes Cast is needed
to ratify the appointment of Deloitte & Touche LLP. The "Votes Cast" under
Delaware law are the shares of Common Stock present at the Meeting (in person or
by proxy) and entitled to vote on a matter. We will count abstentions in
determining whether there is a quorum for the Meeting and the number of Votes
Cast. We will count Broker Nonvotes in determining whether there is a quorum for
the Meeting, but not in determining the number of Votes Cast. Therefore,
abstentions have the same effect as votes cast against Proposal Three and Broker
Nonvotes have no effect on approval of Proposal Three.
THE BOARD RECOMMENDS A VOTE "FOR" RATIFYING DELOITTE & TOUCHE LLP AS OUR
INDEPENDENT AUDITORS FOR THE YEAR ENDING JUNE 30, 2001.
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<PAGE>
EXECUTIVE COMPENSATION AND OTHER MATTERS
EXECUTIVE COMPENSATION
The following Summary Compensation Table contains information regarding
the compensation of our Chief Executive Officers, and our other four most highly
compensated officers for the fiscal year ended June 30, 2000 (the "Named
Executive Officers"). It also includes information about a former officer, who
would have been among our four most highly compensated officers had he not left
OSI before the end of the fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation Awards
-------------------
Restricted Securities
Name and Fiscal Annual Compensation Stock Underlying All Other
Principal Position Year Salary($) Bonus($) Commission($) Awards($) Options(#) Compensation
------------------ ----- ------------------------------------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Tom L. Johnson(1) 2000 -- -- -- -- -- --
Co-Chairman of the Board, 1999 -- -- -- -- -- --
Co-CEO 1998 -- -- -- -- -- --
Richard G. Vento(1) 2000 -- -- -- -- -- --
Co-Chairman of the Board, 1999 -- -- -- -- -- --
Co-CEO 1998 -- -- -- -- -- --
Philip N.Cardman 2000 214,181 2,276 -- -- 40,000 3,979(2)
Vice President, General 1999 205,384 -- -- -- 65,000 4,041(2)
Counsel and Secretary 1998 203,750 155 -- -- -- 4,075(2)
Dan D. Line 2000 187,454 55,000 462,082 -- 150,000 3,482(2)
Sr.Vice President, 1999 107,500 -- 178,193 -- 25,000 2,895(2)
Worldwide Sales 1998 95,000 155 562,129 -- 40,000 4,399(2)
James T. Olsen(4) 2000 184,999 32,017 -- -- 40,000 3,950(2)
Executive Vice President 1999 115,625 -- -- -- 100,000 72,224(5)
1998 -- -- -- -- -- --
Jeffrey T. Boone(6) 2000 177,121 20,912 -- -- 25,000 3,430(2)
Vice President and Chief 1999 155,000 22,200 -- -- 50,000 3,247(2)
Information Officer 1998 -- -- -- -- -- --
James K.R. Souders(7) 2000 204,039 28,000 -- -- -- --
Exec. Vice President, 1999 175,000 193,750 -- -- 25,000 1,684(2)
Sales and Marketing 1998 132,500 3,179 180,695 -- 200,000 83,024(3)
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Messrs. Johnson and Vento resigned as our Co-CEO's in December 1995, but
resumed those offices in April 1997. Both serve without compensation.
(2) Includes matching and other contributions for the benefit of the named
individuals under our 401(k) savings plan.
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<PAGE>
(3) Includes a relocation expense reimbursement of $81,264 and a matching
contribution of $1,760 under our 401(k) savings plan.
(4) Mr. Olsen became Executive Vice President in May
2000.
(5) Includes a relocation expense reimbursement of $70,991 and a matching
contribution of $1,233 under our 401(k) savings plan.
(6) Mr. Boone became Vice President and Chief Information Officer
in July 2000.
(7) Mr. Souders resigned from his position as Executive Vice President, Sales
and Marketing, on November 4, 1999.
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<PAGE>
OPTION GRANTS IN FISCAL YEAR 2000
The following table has information about options that were granted to
the Named Executive Officers during our fiscal year ended June 30, 2000.
OPTION GRANTS IN FISCAL YEAR 2000
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
Percentage of Potential Realizable Value at
Number of Total Assumed Annual Rates of Stock
Securities Options Exercise Price Appreciation for
Underlying Granted to Price Per Option Term (1)
Options Employees in Share ------------------------------
Name Granted(2) Fiscal 2000(3) (4)(5) Expiration Date 5% 10%
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Tom L. Johnson................. -- -- -- -- -- --
Richard G. Vento............... -- -- -- -- -- --
Philip N. Cardman.............. 40,000 1.38% $ 2.5000 11/01/09 $ 62,889 $ 59,374
Dan D. Line.................... 150,000 5.18% $ 2.5000 11/01/09 $235,835 $597,653
Dan D. Line.................... 50,000 1.73% $12.3125 05/16/10 $387,163 $981,148
Jeffrey T. Boone............... 40,000 1.38% $ 2.5000 11/01/09 $ 62,889 $159,374
Jeffery T. Boone............... 25,000 0.86% $ 2.6250 10/25/09 $ 41,271 $104,589
James T. Olsen................. 40,000 1.38% $ 2.5000 11/01/09 $ 62,889 $159,374
James T. Olsen................. 75,000 2.59% $ 7.3130 04/14/10 $344,933 $874,128
James K.R. Souders............. -- -- -- -- -- --
</TABLE>
(1) Potential realizable value is based on the assumption that Common Stock
appreciates at the rate shown (compounded annually) from the date of
grant until the ten year option term expires. These numbers are
calculated based on SEC requirements and do not reflect our estimate of
future stock price growth.
(2) Except in the event of a change in control of OSI, options become
exercisable as to 1/4 of the option shares on the 12 month anniversary
of the vesting start date and as to 1/48 of the option shares each
month thereafter.
(3) Based on a total of 2,895,247 options granted to employees of OSI in
fiscal 2000, including the Named Executive Officers.
(4) Options have an exercise price equal to the fair market value of Common
Stock on the date the options were granted.
(5) The exercise price may be paid in cash, by promissory note, by delivery
of already-owned shares (subject to certain conditions) or under a
cashless exercise procedure. Under our cashless exercise procedure, the
option holder gives irrevocable instructions to his broker to sell the
purchased shares and to remit to us, out of the proceeds, the exercise
price plus applicable withholding taxes.
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<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table has information about the exercise of stock options
in the last fiscal year by the Named Executive Officers and the value of options
held by them as of June 30, 2000.
<TABLE>
<CAPTION>
Number of Securities Value of Enexercised In-
Shares Underlying Unexercised The-Money Options at
Acquired on Value Options at June 30, 2000 Fiscal Year End (2)
Name Exercise Realized(1) Exercisable Unexercisable Exercisable Unexercisable
------------------------------- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Tom L. Johnson................ -- $ -- -- -- $ -- $ --
Richard G. Vento............... -- $ -- -- -- $ -- $ --
Philip N. Cardman.............. -- $ -- 175,313 94,687 $ 893,317 $ 650,121
Dan D. Line.................... 15,000 $ 77,653 388,870 144,879 $2,224,177 $1,075,853
Jeffrey T. Boone............... -- $ -- 75,585 108,644 $ 440,551 $ 755,564
James T. Olsen................. -- $ -- 32,813 182,187 $ 221,976 $1,041,424
James K. R. Souders............ 425,000 $2,566,967 -- -- $ -- $ --
</TABLE>
------------------------
(1) Value represents the market value of Common Stock at the exercise date
minus the exercise price.
(2) Value represents the market value of Common Stock on June 30, 2000
($10.6875) minus the exercise price. An option is "in-the-money" if the
market value of the Common Stock exceeds the exercise price.
EMPLOYMENT CONTRACTS AND CHANGE-IN-CONTROL ARRANGEMENTS
Jeffrey T. Boone entered into a Severance Agreement with OSI in December
of 1999. This agreement provides, inter alia, the following terms: Payment of
severance compensation in an amount equal to his compensation for up to 12
months; 100% of OSI-paid benefits for up to 12 months and all options he holds
before termination as a result of a Change in Control, as defined in the
agreement, become fully vested. Options are exerciseable and will remain
exerciseable for 12 months after termination and for 24 months if the
termination results from disability, but in no event longer than the original
term of the option.
Philip N. Cardman entered into an employment agreement, as amended, with
OSI in May of 1996. This agreement includes, inter alia, payment of base salary
for two years from termination in the event of involuntary termination without
cause and payment of base salary for 18 months from termination in the event of
voluntary termination. Mr. Cardman also entered into a Severance Agreement with
OSI in December of 1999. This agreement provides, inter alia, the following
terms: Payment of severance compensation in an amount equal to his compensation
for 24 months; 100% of OSI-paid benefits for 24 months and all options he holds
before termination as a result of a Change in Control, as defined in the
agreement, become fully vested. Options are exerciseable and will remain
exerciseable for 12 months after termination and for 24 months if the
termination results from disability, but in no event longer than the original
term of the option.
Dan D. Line entered into a Severance Agreement with OSI in December of
1999. This agreement provides, inter alia, the following terms: Payment of
severance compensation in an amount equal to his compensation for 12 months;
100% of OSI-paid benefits for up to 12 months and all options he holds before
termination as a result of a Change in Control, as defined in the agreement,
become fully vested. Options are exerciseable and will remain exerciseable for
up to 12 months after termination and for 24 months if the termination results
from disability, but in no event longer than the original term of the option.
James T. Olsen entered into a Severance Agreement with OSI in December of
1999. This agreement provides, inter alia, the following terms: Payment of
severance compensation in an amount equal to his compensation for up to 12
months; 100% of OSI-paid benefits for up to 12 months and all options he holds
before termination as a result of a Change in Control, as defined in
-16-
<PAGE>
the agreement, become fully vested. Options are exerciseable and will remain
exerciseable for up to 12 months after termination and for up to 24 months if
the termination results from disability, but in no event longer than the
original term of the option.
James K.R. Souders entered into an employment agreement in January of
1998, accepting the position of Executive Vice President, Sales and Marketing.
OSI's agreement with Mr. Souders was a two year employment contract to be
renewed annually with annual target compensation to be determined by the Board.
It also included the following terms: base salary of $175,000 per annum; target
annual MBO bonus of $100,000, paid quarterly; target annual bookings bonus of
$90,000, paid quarterly; annual revenue commission at target sales of $135,000,
earned at billing but paid on receipt of cash; grant of an option to purchase
200,000 shares of stock vesting over 7 years; a maximum MBO bonus of $100,000
for calendar year 1998, subject to certain adjustments; reimbursement of certain
relocation expenses; payment of certain additional relocation expenses in the
event of involuntary termination before January 13, 2000; and, in the event of
termination or a failure to renew the contract within 30 days of its anniversary
date, payment of base salary for the then remaining term and acceleration of
option vesting for options that would have vested during the then remaining
term.
COMPENSATION OF DIRECTORS
Members of our Board do not receive compensation for their services as a
director. Our 1995 Director Option Plan, which was terminated on July 24, 1999,
provided stock options to be granted to nonemployee directors ("Outside
Directors"). Each Outside Director automatically received an option to purchase
50,000 shares ("First Option") on the date he became an Outside Director.
Thereafter, if he had then served on the Board for at least six months, he was
automatically granted an option to purchase 12,500 shares at the first meeting
of the Board after each year's Annual Meeting of Stockholders. The options could
be exercised only while the Outside Director remained a director. The First
Option vested as to 25% of the shares on the first anniversary of the grant date
and at the rate of 1/48th of the shares per month thereafter. Subsequent option
grants vested as to 50% of the shares six months after the date of grant and as
to 1/12th of the shares per month thereafter. On July 24, 1999, our 1994 Stock
Option Plan was amended to permit option grants to Outside Directors. All grants
under our 1994 Stock Option Plan are discretionary.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In fiscal 2000, our full Board performed the functions of a Compensation
Committee. Tom L. Johnson and Richard G. Vento, our Co-CEO's, serve on our
Board. Neither received any compensation from OSI in fiscal 2000. No
interlocking relationship exists between any member of the Board and any member
of the Board of Directors or compensation committee of any other company, nor
has such interlocking relationship existed in the past.
REPORT OF THE BOARD REGARDING EXECUTIVE COMPENSATION POLICIES
The Board reviews and approves our executive compensation policies. It
administers our various incentive plans, including our 1994 Stock Option Plan
and our 1995 Employee Stock Purchase Plan. It also sets compensation policies
that apply to our executive officers and evaluates their performance.
Compensation for our executive officers, including base salary levels, potential
bonuses and stock option grants are determined by the Board at the beginning of
each fiscal year. The following is a description of the policies and rationale
it applied in setting compensation during the fiscal year ended June 30, 2000.
COMPENSATION PHILOSOPHY
The underlying philosophy of our executive compensation is to maximize
stockholder value over time. The primary goal of our program is, therefore, to
align closely the interests of our executive officers with those of our
stockholders. To achieve this, we attempt to (1) offer compensation
opportunities that attract and retain executives whose abilities are critical to
our long-term success, (2) motivate individuals to perform at their highest
level and reward outstanding achievement, (3) maintain a portion of an
executive's total compensation at risk, tied to achieving financial,
organizational and management performance goals, and (4) encourage executives to
manage from the perspective of owners. We currently use base salary, cash
incentives and stock options to meet these goals.
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<PAGE>
BASE SALARY AND COMMISSIONS
We use base salary primarily as a device to attract, motivate, reward and
retain highly skilled executives. The Board reviewed and approved fiscal 2000
base salaries for the executive officers at the beginning of the fiscal year.
Salaries were set based on the officer's job responsibilities, level of
experience, individual performance, contribution to our business, our financial
performance for the past year and recommendations from management. They also
took into account the salaries for similar positions at comparable companies,
based on their industry experience and validated, published industry
compensation survey data. In reviewing base salaries, they focused significantly
on each officer's prior performance and expected contribution to our future
success. They also focused on a group of comparable companies in the high
technology sector. In making its decisions, the Board exercised its discretion
and judgment using the factors described above. No specific formula was applied
to determine the weight of any given factor. Our Co-CEO's each waived his right
to receive compensation for his services.
Commissions are paid only to those of our officers who have a direct
responsibility for sales. In setting commission rates for sales executives, the
Board evaluated both what we had done in the past and the approach taken by
comparable high technology companies. Here again, comparable companies were
identified based on the industry experience of each individual Board member and
on information published by validated consulting organizations specializing in
executive compensation research.
ANNUAL CASH INCENTIVES
Bonuses for executive officers are currently based on quantitative
factors. They are intended to motivate and reward executive officers by directly
linking the amount of their bonus to specific OSI-based performance targets. The
factors are also intended to reflect the Board's belief that a portion of each
executive's compensation should be contingent on our performance. To carry out
this philosophy, at the beginning of the fiscal year the Board reviewed and
approved the financial budget for the year and established performance targets.
The Board then set target bonuses for each executive officer as a percentage of
the officer's base salary. Bonuses are dependent on the achievement of
performance targets that are tied to overall profitability. The Board believes
that this bonus structure provides an excellent link between our earnings
performance and the incentives that are received by our executives. Our Co-CEO's
each waived his eligibility to receive bonuses.
STOCK OPTIONS
The Board provides executive officers with long-term incentive
compensation through grants of stock options under our 1994 Stock Option Plan.
Stock options provide an opportunity to share in any appreciation in the value
of our Common Stock. The Board believes that stock options directly motivate an
executive to maximize long-term stockholder value. In addition, vesting periods
are set to encourage the retention of key executives. To date, all options have
been at fair market value on the date of the option grant. Option grants are
subjective, but are based on factors such as the executive's relative position,
responsibilities, individual performance over the previous fiscal year and
anticipated contribution to the attainment of our long-term strategic goals.
Stock options granted in prior years are also taken into consideration. The
Board views stock option grants as an important component of its long-term,
performance-based compensation philosophy. Our Co-CEO's received no stock
options during fiscal year 2000.
-18-
<PAGE>
SECTION 162(m)
The Board has considered the potential future effects of Section 162(m)
of the Code on the compensation paid to our executive officers. Section 162(m)
disallows us from taking a tax deduction for compensation paid to an executive
officer who is named in the Proxy Statement to the extent the compensation
exceeds $1 million in any taxable year. The only exception is if the
compensation is performance-based. We have adopted a policy that, where
reasonably practicable, we will seek to qualify the variable compensation we pay
to our executive officers for an exemption from the deductibility limitations of
Section 162(m).
Respectfully submitted by:
Tom L. Johnson
Richard G. Vento
George F. Schmitt
Gary D. Cuccio
Dr. Kornel Terplan
-19-
<PAGE>
PERFORMANCE GRAPH
The following graph compares the annual percentage change in the
cumulative return to the stockholders of our Common Stock with the cumulative
return of The Nasdaq Stock Market - US Index and of the Chase H & Q
Communications Index. The period shown begins December 1, 1995, the date we
began reporting under the Securities Exchange Act of 1934, as amended and,
ending on June 30, 2000. Returns are weighted based on market capitalization at
the beginning of each fiscal year.
COMPARISON OF 55 MONTH CUMULATIVE TOTAL RETURN*
AMONG OBJECTIVE SYSTEMS INTEGRATORS, INC. THE NASDAQ STOCK
MARKET (US) INDEX, AND THE CHASE H & Q COMMUNICATIONS INDEX
<TABLE>
<CAPTION>
OBJECTIVE SYS INTEGRATORS INC
Cumulative Total Return
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
12/1/1995 6/96 6/97 6/98 6/99 6/00
OBJECTIVE SYSTEMS INTEGRATORS, INC. 100.00 192.11 45.39 38.82 14.47 56.25
NASDAQ STOCK MARKET (U.S.) 100.00 113.03 137.47 180.99 260.60 384.98
CHASE H & Q COMMUNICATIONS 100.00 110.00 109.94 133.14 250.14 492.50
</TABLE>
* $100 Invested on 12/1/95 in stock or index-including reinvestment of
dividends. Fiscal year ending June 30.
The graph assumes that on December 1, 1995, $100 was invested in each of
our Common Stock, The Nasdaq Stock Market - US Index and the Chase H & Q
Communications Index. It also assumes that all dividends were reinvested. No
dividends have been declared or paid on our Common Stock. Stockholder returns
over the indicated period should not be considered indicative of future
stockholder returns.
The information under the headings "Executive Compensation and Other
Matters" and "Performance Graph" will not be deemed to be "soliciting material"
or to be "filed" with the SEC, nor will it be incorporated by reference into any
future filing under the Securities Act of 1933, as amended, or the 1934
Securities Exchange Act, as amended, except to the extent that we specifically
incorporate it by reference.
-20-
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our executive officers and
directors, and people who own more than ten percent of a registered class of our
equity securities, to file reports of ownership and changes in ownership with
the SEC and the National Association of Securities Dealers, Inc. Executive
officers, directors and greater-than-ten-percent stockholders are required by
SEC regulation to furnish us with copies of all Section 16(a) forms that they
file. Based solely on our review of the forms we have received, or written
representations from various of our reporting persons, we believe that all of
our executive officers and directors complied with applicable filing
requirements in fiscal 2000.
FORM 10-K ANNUAL REPORT
ON WRITTEN REQUEST TO OUR SECRETARY, AT OBJECTIVE SYSTEMS INTEGRATORS, INC., 101
PARKSHORE DRIVE, FOLSOM, CALIFORNIA, 95630, WE WILL PROVIDE WITHOUT CHARGE TO
EACH PERSON SOLICITED A COPY OF OUR 2000 ANNUAL REPORT ON FORM 10-K, INCLUDING
THE FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES FILED WITH THAT
REPORT. WE WILL ALSO FURNISH ANY EXHIBIT NOT CONTAINED IN THAT REPORT ON PAYMENT
OF A REASONABLE FEE.
OTHER MATTERS
We know 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 people
named in the enclosed form of Proxy to vote the shares they represent as the
Board recommends.
BY ORDER OF THE BOARD OF DIRECTORS
Dated: November 15, 2000
------------------- /s/ Philip N. Cardman
----------------------------------
Folsom, California Philip N. Cardman
Vice President, General Counsel
and Secretary
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<PAGE>
OBJECTIVE SYSTEMS INTEGRATORS, INC.
1995 EMPLOYEE STOCK PURCHASE PLAN
(AS AMENDED THROUGH JULY 28, 2000)
(AS PROPOSED TO BE AMENDED AT ANNUAL MEETING - 2000)
The following is the 1995 Employee Stock Purchase Plan of Objective Systems
Integrators, Inc.
1. PURPOSE. The purpose of the Plan is to provide employees of
Objective Systems Integrators, Inc. and its Designated
Subsidiaries with an opportunity to purchase OSI's Common Stock
through accumulated payroll deductions. It is intended that
this Plan qualify as an "Employee Stock Purchase Plan" under
Section 423 of the Internal Revenue Code of 1986, as amended.
The provisions of the Plan, accordingly, will be construed to
extend and limit participation in a manner consistent with the
requirements of that Section of the Code.
2. DEFINITIONS.
(A) BOARD. The Board of Directors of Objective Systems Integrators,
Inc.
(B) CODE. The Internal Revenue Code of 1986, as amended.
(C) COMMON STOCK. The Common Stock of Objective Systems Integrators,
Inc.
(D) OSI. Objective Systems Integrators, Inc. and any of its Designated
Subsidiaries.
(E) COMPENSATION. All of a Participant's W-2 compensation.
(F) DESIGNATED SUBSIDIARIES. Each Subsidiary which has been designated
by the Board, from time to time and in its sole discretion, as
eligible to participate in the Plan.
(G) EMPLOYEE. An individual who is employed by OSI for tax purposes
and whose customary employment with OSI is at least 20 hours per
week and at least five months in any calendar year. For purposes
of the Plan, the employment relationship will be treated as
continuing intact while an individual is on sick leave or other
leave of absence approved by OSI. If the period of leave exceeds
90 days and the individual's right to reemployment is not
guaranteed either by statute or by contract, the employment
relationship will be deemed to have ended on the 91st day of the
leave.
(H) ENROLLMENT DATE. The first day of each Offering Period.
(I) EXERCISE DATE. The last day of each Purchase Period.
(J) FAIR MARKET VALUE. As of any date, the value of Common Stock
determined as follows:
(1) If the Common Stock is listed on an established stock
exchange or a national market system, Fair Market Value will
be the closing sale price (or the mean of the closing bid
and asked prices, if no sales were reported), as quoted on
the exchange (or the exchange with the greatest volume of
trading in Common Stock) or system on the date of the
determination, as reported in THE WALL STREET JOURNAL or
such other source as the Board deems reliable, or;
(2) If the Common Stock is quoted on the Nasdaq National Market
of the National Association of Securities Dealers, Inc.
Automated Quotation System (but not on the Nasdaq National
Market thereof) or is regularly quoted by a recognized
securities dealer but selling prices are not reported, Fair
Market Value will be the mean of the closing bid and asked
prices for the Common Stock on the date of the
determination, as reported in THE WALL STREET JOURNAL or
such other source as the Board deems reliable, or;
OSI 1995 EMPLOYEE STOCK PURCHASE PLAN
JULY 28, 2000
PAGE 1
<PAGE>
(3) In the absence of an established market for the Common
Stock, Fair Market Value will be determined in good faith by
the Board.
(4) For purposes of the Enrollment Date for the first Offering
Period, Fair Market Value will be the price to the public as
set forth in the final Prospectus included in the
Registration Statement (Form S-1) filed with the Securities
and Exchange Commission for the initial public offering of
OSI's Common Stock.
(K) OFFERING PERIOD. The period of approximately 6 months during which
an option granted under the Plan may be exercised, beginning on
the first Trading Day on or after May 1 and November 1 of each
year and ending on the last Trading Day of the period six months
later. The first Offering Period will begin on the effective date
of OSI's initial public offering of Common Stock registered with
the Securities and Exchange Commission and will end on the last
Trading Day on or before October 31, 1997. The duration and timing
of Offering Periods may be changed under Section 4.
(L) PLAN. This Employee Stock Purchase Plan.
(M) PURCHASE PRICE. An amount equal to 85% of the Fair Market Value of
a share of Common Stock on the Enrollment Date or on the Exercise
Date, whichever is lower.
(N) PURCHASE PERIOD. The approximately six-month period beginning
after one Exercise Date and ending with the next Exercise Date,
except that the first Purchase Period of an Offering Period will
begin on the Enrollment Date and end with the next Exercise Date.
(O) RESERVES. The number of shares of Common Stock covered by each
option under the Plan which have not yet been exercised plus the
number of shares of Common Stock which have been authorized for
issuance under the Plan but not yet placed under option.
(P) SUBSIDIARY. A corporation, domestic or foreign, of which not less
than 50% of the voting shares are held by OSI or a Subsidiary,
whether or not that corporation now exists or is later organized
or acquired by OSI or a Subsidiary.
(Q) TRADING DAY. A day on which national stock exchanges and the
Nasdaq System are open for trading.
3. ELIGIBILITY.
(A) Any Employee who is employed by OSI on a given Enrollment Date is
eligible to participate in the Plan.
(B) Any provisions of the Plan to the contrary notwithstanding, no
Employee will be granted an option under the Plan (1) if,
immediately after the grant, the Employee (or any other person
whose stock would be attributed to the Employee under Section
424(d) of the Code) would own capital stock of OSI and/or hold
outstanding options to purchase such stock possessing five percent
or more of the total combined voting power or value of all classes
of OSI's capital stock or that of any Subsidiary, or (2) which
permits the Employee's rights to purchase stock under all employee
stock purchase plans of OSI and its subsidiaries to accrue at a
rate which exceeds $25,000 worth of stock (determined at the fair
market value of the shares at the time the option is granted) for
each calendar year in which the option is outstanding at any time.
4. OFFERING PERIODS. The Plan will be implemented by consecutive Offering
Periods, with a new Offering Period beginning on the first Trading Day on
or after May 1 and November 1 each year, or on such other date as the
Board determines, and continuing thereafter until terminated in
accordance with Section 19. The first
OSI 1995 EMPLOYEE STOCK PURCHASE PLAN
JULY 28, 2000
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<PAGE>
Offering Period will begin on the Effective Date of OSI's initial public
offering of Common Stock registered with the Securities and Exchange
Commission. The Board may change the duration of Offering Periods
(including their commencement dates) for future offerings without
shareholder approval if the change is announced at least five days before
the scheduled beginning of the first Offering Period to be affected.
5. PARTICIPATION.
(A) An eligible Employee may become a Participant in the Plan (a
"Participant") by completing a subscription agreement in the form
of Exhibit A to this Plan and filing it with OSI's payroll office
before the applicable Enrollment Date.
(B) Payroll deductions for Participants will begin on the first
payroll after the Enrollment Date and will end on the last payroll
in the Offering Period to which the authorization is applicable,
unless sooner terminated by a Participant under Section 10.
6. PAYROLL DEDUCTIONS.
(A) At the time a Participant files a subscription agreement,
the Participant will elect to have payroll deductions
made on each pay day during the Offering Period.
Deductions may not exceed 15% of the Compensation which
the Participant receives on each pay day. The aggregate
of all payroll deductions during an Offering Period may
not exceed 15% of the Participant's Compensation during
the Offering Period.
(B) Payroll deductions will be credited to a Participant's account
under the Plan and will be withheld in whole percentages only.
Participants may not make any additional payments into their
accounts.
(C) Participants may stop participating in the Plan as
provided in Section 10. They may also increase or
decrease their rate of payroll deductions at any time
during a Purchase Period by filing a new subscription
agreement with OSI authorizing the change. The Board
may, in its discretion, limit the number of rate changes
during any Purchase Period. Rate changes will be
effective with the first full payroll period that begins
at least five business days after OSI receives the new
subscription agreement unless OSI elects to process a
given change more quickly. Subscription agreements will
remain in effect for successive Offering Periods unless
terminated under Section 10.
(D) Notwithstanding the foregoing, to the extent necessary to
comply with Section 423(b)(8) of the Code and Section
3(b) of this Plan, a Participant's payroll deductions may
be decreased to 0% during a Purchase Period ("Current
Purchase Period") if the sum of all payroll deductions
previously used to purchase stock under the Plan in an
earlier Purchase Period ending during the same calendar
year, plus all payroll deductions accumulated for the
Current Purchase Period, equals $21,250. Thereafter,
payroll deductions will recommence at the beginning of
the first Purchase Period which ends in the next calendar
year and at the rate in the Participant's subscription
agreement, unless terminated by the Participant under
Section 10.
(E) At the time the option is exercised, in whole or in part,
or at the time some or all of the Common Stock issued
under the Plan is disposed of, Participants must make
adequate provision for OSI's federal, state, or other tax
withholding obligations, if any, which arise on the
exercise of the option or the disposition of the Common
Stock. OSI may, but will not be obligated to, withhold
from a Participant's compensation at any time the amount
necessary for it to meet applicable withholding
obligations, including withholding required to make
available to OSI any tax deductions or benefits
attributable to the Participant's sale or early
disposition of Common Stock.
7. GRANT OF OPTION. On the Enrollment Date of each Offering
Period, eligible Employees participating in the Offering Period
will be granted an option to purchase on each Exercise Date
during the Offering Period (and at the applicable Purchase
Price) up to a whole number of shares of Common Stock determined
by dividing the payroll deductions accumulated by the Employee
before the Exercise Date and retained in the Employee's account
as of the Exercise Date, by the applicable Purchase Price. The
preceding sentence notwithstanding, (a) no Participant can
purchase during a Purchase Period more than a number of shares
determined by dividing $12,500 by the Fair Market Value of a
share of Common Stock on the Enrollment Date, and (b) all
purchases will be subject to the limitations in Sections 3(b)
and 12. Exercise of the option will occur as
OSI 1995 EMPLOYEE STOCK PURCHASE PLAN
JULY 28, 2000
PAGE 3
<PAGE>
provided in Section 8 (unless the Participant has withdrawn under Section
10) and will expire on the last day of the Offering Period.
8. EXERCISE OF OPTION. Unless a Participant withdraws from the Plan under
Section 10, the option to purchase shares will be exercised automatically
on the Exercise Date. The maximum number of whole shares subject to
option will be purchased for each Participant at the applicable Purchase
Price with the accumulated payroll deductions in the Participant's
account. No fractional shares will be purchased. Any payroll deductions
accumulated in the Participant's account which are insufficient to
purchase a whole share will be retained for the subsequent Purchase
Period or Offering Period, subject to earlier withdrawal under Section
10. Any other money left over in a Participant's account after the
Exercise Date will be returned. During a Participant's lifetime, only the
Participant can exercise the option to purchase shares under the Plan.
9. DELIVERY. As promptly as practicable after each Exercise Date on which a
purchase of shares occurs, OSI will arrange for the delivery to each
Participant, as appropriate, of a certificate representing the shares
purchased on exercise of the option.
10. WITHDRAWAL AND TERMINATION OF EMPLOYMENT.
(A) At any time, Participants may withdraw all but not less than all
of the payroll deductions credited to their account and not yet
used to exercise an option under the Plan. Withdrawal will be
effected by giving OSI notice in the form of Exhibit B. All of the
payroll deductions credited to a Participant's account will be
paid to the Participant promptly after OSI receives notice of
withdrawal, the Participant's option for the Offering Period will
automatically be terminated and no further payroll deductions for
the purchase of shares will be made for the Offering Period. If a
Participant withdraws from an Offering Period, payroll deductions
will not resume at the beginning of the next Offering Period
unless the Participant has delivered a new subscription agreement
to OSI.
(B) On ceasing to be an Employee for any reason, Participants are
deemed to have withdrawn from the Plan. The payroll deductions
credited to the Participant's account during the Offering Period
but not yet used to exercise the option will be returned to the
Participant (or, in the case of the Participant's death, to the
person entitled to them under Section 14) and the Participant's
option will automatically be terminated. The preceding sentences
notwithstanding, Participants who receive payment in lieu of
termination notice will be treated as continuing to be Employees
for their customary number of hours per week of employment during
the period in which they are subject to the payment in lieu of
notice.
11. INTEREST. No interest will accrue on the payroll deductions of
Participants.
12. COMMON STOCK.
(A) The maximum number of shares of Common Stock that will be made
available for sale under the Plan is 2,487,500, subject to
adjustment on changes in OSI's capitalization as provided in
Section 18. If, on any Exercise Date, the number of shares for
which options are to be exercised exceeds the number of shares
then available under the Plan, OSI will make a pro rata allocation
of the shares remaining available for purchase in as uniform a
manner as practicable and as it determines to be equitable.
(B) Participants will have no interest or voting right in shares
covered by their options until the options have been exercised.
(C) Shares to be delivered to Participants under the Plan will be
registered in the name of each Participant or in the name of each
Participant and his or her spouse.
13. ADMINISTRATION. The Plan will be administered by the Board or a
committee of the Board duly appointed by the Board (either, as
applicable, being referred to as the "Board"). The Board will
have full and exclusive discretionary authority to construe,
interpret and apply the terms of the Plan, to determine
eligibility and to
OSI 1995 EMPLOYEE STOCK PURCHASE PLAN
JULY 28, 2000
PAGE 4
<PAGE>
adjudicate all disputed claims filed under the Plan. Every finding,
decision or determination made by the Board will, to the fullest extent
permitted by law, be final and binding on all parties.
14. DESIGNATION OF BENEFICIARIES.
(A) A Participant may file a written designation of a beneficiary who
is to receive the shares and cash, if any, from the Participant's
account if the Participant dies after an Exercise Date but before
the shares and cash have been delivered to the Participant. A
Participant may also file a written designation of a beneficiary
who is to receive any cash from the Participant's account if the
Participant dies before the option is exercised. If a Participant
is married and the designated beneficiary is not his or her
spouse, spousal consent will be required for these designations to
be effective.
(B) Participants may change their designated beneficiary at any time
by notice to OSI. If a Participant dies and there is no validly
designated beneficiary who is living at that time, OSI will
deliver the shares and/or cash to the executor or administrator of
the Participant's estate. If no executor or administrator has been
appointed to OSI's knowledge, then OSI, in its discretion, may
deliver the shares and/or cash to the spouse or to any one or more
of the Participant's dependents or relatives. If no spouse,
dependent or relative is known to OSI, then OSI, in its
discretion, may deliver the shares and/or cash to such other
person as OSI designates.
15. TRANSFER. Participants may not assign, transfer, pledge or otherwise
disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 14) either payroll deductions
credited to their account or any rights with regard to the exercise of
options or the receipt of shares under the Plan. Any attempt at
assignment, transfer, pledge or other disposition will be without effect,
except that OSI may treat the attempt as an election to withdraw from an
Offering Period under Section 10.
16. USE OF FUNDS. All payroll deductions received or held by OSI under the
Plan may be used by OSI for any corporate purpose. OSI will not be
obligated to segregate payroll deductions.
17. REPORTS. Individual accounts will be maintained for each Participant.
Statements of account will be given to each Participant at least once per
year. These statements will set forth the amounts of payroll deductions,
the Purchase Price, the number of shares purchased and the remaining cash
balance, if any.
18. ADJUSTMENTS ON CHANGES IN CAPITALIZATION, DISSOLUTION, LIQUIDATION,
MERGER OR ASSET SALE.
(A) Subject to any required action by OSI's stockholders, the Reserves
and the price per share of Common Stock covered by unexercised
options under the Plan will be proportionately adjusted for any
change in the number of issued shares of Common Stock as a result
of a stock split, reverse stock split, stock dividend, combination
or reclassification of the Common Stock, or any other change in
the number of shares of Common Stock effected without OSI
receiving consideration. For purposes of the Plan, however, the
conversion of any convertible securities of OSI will not be deemed
to have been "effected without receipt of consideration". This
adjustment will be made by the Board, whose determination will be
final and binding. Except as provided in the Plan, no issuance by
OSI of any class of stock or securities convertible into shares of
any class of stock, will affect (and no adjustment by reason of
such an issuance will be made with respect to) the number or price
of Common Stock under option.
(B) Unless otherwise provided by the Board, if dissolution or
liquidation of OSI is proposed, the Offering Periods will end
immediately before the proposed action is consummated.
(C) If a sale of all or substantially all of OSI's assets or a merger
of OSI with or into another corporation is proposed, each option
under the Plan will be assumed (or an equivalent option will be
substituted by) the successor corporation, its parent or one of
its subsidiaries, unless the Board determines, in its sole
discretion and in lieu of the assumption or substitution, to
shorten the Offering Periods then in progress by setting a new
Exercise Date (the "New Exercise Date"). If the Board sets a New
Exercise Date, it
OSI 1995 EMPLOYEE STOCK PURCHASE PLAN
JULY 28, 2000
PAGE 5
<PAGE>
will notify each Participant in writing, at least 10 business days
before the New Exercise Date. This notice will set forth that the
Exercise Date has been changed to the New Exercise Date and that
options will be exercised automatically on the New Exercise Date,
unless before that date the Participant has withdrawn from the
Offering Period as provided in Section 10. For purposes of this
Subsection, an option will be deemed to have been assumed if,
after the sale or merger, the option confers the right to
purchase, for each share of Common Stock subject to the option
immediately before the transaction, the same consideration
(whether stock, cash or other securities or property) received in
the transaction by holders of Common Stock for each share of their
Common Stock. In making this determination, if the holders of
Common Stock were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the
outstanding shares of Common Stock will apply. Notwithstanding the
preceding sentences, if the consideration received in the
transaction was not solely common stock of the successor
corporation or its parent (as defined in Section 424(e) of the
Code), the Board may, with the consent of the successor
corporation, provide for the consideration to be received on
exercise of the option to be solely common stock of the successor
corporation or its parent equal in fair market value to the per
share consideration received by holders of Common Stock in the
transaction.
19. AMENDMENT OR TERMINATION.
(A) The Board may, at any time and for any reason, amend or terminate
the Plan. Except as provided in Section 18, (1) no amendment may
make any change in an option previously granted which adversely
affects the rights of a Participant, and (b) no termination can
affect options previously granted, except that the Board may
terminate an Offering Period on any Exercise Date if it determines
that termination of the Offering Period is in the best interests
of OSI and its stockholders. To the extent necessary to comply
with any applicable law, rule or regulation, OSI will obtain all
required stockholder approvals for amendments to the Plan.
(B) Without stockholder consent and without regard to whether any
Participant rights have been "adversely affected," the Board may
change the Offering Periods, limit the frequency and/or number of
changes in the amount withheld during an Offering Period,
establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, permit payroll withholding in
excess of the amount designated by a Participant in order to
adjust for delays or mistakes in OSI's processing of properly
completed withholding elections, establish reasonable waiting and
adjustment periods and/or accounting and crediting procedures to
ensure that amounts applied toward the purchase of Common Stock
for each Participant properly correspond with amounts withheld
from the Participant's Compensation, and establish such other
limitations or procedures as the Board determines, in its sole
discretion, to be advisable and consistent with the Plan.
20. NOTICES. All notices or other communications by a Participant to OSI in
connection with the Plan will be in writing and will be deemed to have
been duly given when received in the form specified by OSI and at the
location, or by the person, designated by OSI to receive it.
21. CONDITIONS ON ISSUANCE OF SHARES.
(A) Shares will not be issued with respect to an option unless the
exercise of the option and the issuance and delivery of the shares
complies with all applicable provisions of law, domestic or
foreign, and has been approved in respect of that compliance by
counsel to OSI. This includes, without limitation, the Securities
Act of 1933, as amended, the Exchange Act, the rules and
regulations promulgated under both, and the requirements of any
stock exchange on which the Common Stock may then be listed.
(B) If a representation is required in the opinion of OSI's counsel,
then OSI may require the person exercising an option to represent
and warrant, as a condition of exercise and at the time of
exercise, that the Common Stock is being purchased only for
investment and without any present intention to sell or distribute
it.
OSI 1995 EMPLOYEE STOCK PURCHASE PLAN
JULY 28, 2000
PAGE 6
<PAGE>
22. TERM OF PLAN. The Plan will become effective on the earlier of its
adoption by the Board or its approval by the stockholders of OSI. It will
continue in effect for a term of 10 years unless sooner terminated under
Section 19.
23. AUTOMATIC TRANSFER TO LOWER PRICE OFFERING PERIOD. To the extent
permitted by applicable law, if the Fair Market Value of the Common Stock
on an Exercise Date in an Offering Period is lower than the Fair Market
Value of the Common Stock on the Enrollment Date of the Offering Period,
then all Participants in the Offering Period will be automatically
withdrawn from that Offering Period immediately after the exercise of
their options on the Exercise Date and automatically re-enrolled in the
immediately following Offering Period as of its first day.
OSI 1995 EMPLOYEE STOCK PURCHASE PLAN
JULY 28, 2000
PAGE 7
<PAGE>
EXHIBIT A
OBJECTIVE SYSTEMS INTEGRATORS, INC.
1995 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
_____ Original Application Enrollment Date: ___________
_____ Change in Payroll Deduction Rate
_____ Change of Beneficiary(ies)
1. ___________________________ elects to participate in the Objective
Systems Integrators, Inc. 1995 Employee Stock Purchase Plan (the
"Plan") and subscribes to purchase shares of OSI's Common Stock in
accordance with this Subscription Agreement and the Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount
of _____ of my Compensation on each payday (1-15%) during the Offering
Period in accordance with the Plan. (Please note that no fractional
percentages are permitted.)
3. I understand that these payroll deductions will be accumulated for the
purchase of OSI Common Stock at the applicable Purchase Price
determined in accordance with the Plan. I understand that if I do not
withdraw from an Offering Period, any accumulated payroll deductions
will be used to automatically exercise my option.
4. I have received a copy of the complete Plan. I understand that my
participation in the Plan is in all respects subject to the terms of
the Plan. I understand that my ability to exercise the option under
this Subscription Agreement is subject to obtaining shareholder
approval of the Plan.
5. Shares purchased for me under the Plan should be issued in the
name(s) of (Employee or Employee and spouse only): ___________________
______________________
6. I understand that if I dispose of any shares received by me under the
Plan within 2 years after the Enrollment Date (the first day of the
Offering Period during which I purchased the shares) or one year after
the Exercise Date, I will be treated for federal income tax purposes as
having received ordinary income at the time of disposition in an amount
equal to the excess of the fair market value of the shares at the time
such shares were purchased over the price which I paid for them. I
AGREE TO NOTIFY OSI IN WRITING WITHIN 30 DAYS AFTER THE DATE OF ANY
DISPOSITION OF MY SHARES AND I WILL MAKE ADEQUATE PROVISION FOR
FEDERAL, STATE OR OTHER TAX WITHHOLDING OBLIGATIONS, IF ANY, WHICH
ARISE ON THE DISPOSITION OF THE COMMON
OSI 1995 EMPLOYEE STOCK PURCHASE PLAN
JULY 28, 2000
PAGE 8
<PAGE>
STOCK. OSI may, but will not be obligated to, withhold from my
compensation the amount necessary to meet any applicable withholding
obligation including any withholding necessary to make available to OSI
any tax deductions or benefits attributable to my sale or early
disposition of Common Stock. If I dispose of shares at any time after
the expiration of the 2-year and 1-year holding periods, I understand
that I will be treated for federal income tax purposes as having
received income only at the time of disposition, and this such income
will be taxed as ordinary income only to the extent of an amount equal
to the lesser of (a) the excess of the fair market value of the shares
at the time of disposition over my purchase price, or (b) 15% of the
fair market value of the shares on the first day of the Offering
Period. The remainder of the gain, if any, recognized on disposition
will be taxed as capital gain.
7. I agree to be bound by the terms of the Plan. The effectiveness of this
Subscription Agreement depends on my eligibility to participate in the
Plan.
OSI 1995 EMPLOYEE STOCK PURCHASE PLAN
JULY 28, 2000
PAGE 9
<PAGE>
8. If I die, I designate the following as my beneficiary(ies) to receive
all payments and shares due me under the Plan:
NAME: (Please print)
---------------------------------------------
(First) (Middle) (Last)
-------------------------------
Relationship
---------------------------------------------
---------------------------------------------
---------------------------------------------
Address
Employee's Social
Security Number:
--------------------------------------------
Employee's Address:
------------------------------------
------------------------------------
------------------------------------
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT WILL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS I TERMINATE IT.
Dated:
------------------------------ ---------------------------------
Signature of Employee
----------------------------------
Spouse's Signature (If beneficiary
other than spouse)
OSI 1995 EMPLOYEE STOCK PURCHASE PLAN
JULY 28, 2000
PAGE 10
<PAGE>
EXHIBIT B
OBJECTIVE SYSTEMS INTEGRATORS, INC.
1995 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant ("Participant") in the Offering Period of
the Objective Systems Integrators, Inc.("OSI") 1995 Employee Stock Purchase Plan
that began on ____________, 20__ ("Offering Period") gives notice to OSI of his
or her election to withdraw from the Offering Period. OSI is directed to pay
Participant, as promptly as practicable, all payroll deductions credited to
Participant's account with respect to the Offering Period. Participant
understands that their option for the Offering Period will automatically
terminate. Participant also understands that no further payroll deductions will
be made for the purchase of shares in the Offering Period and that they will be
eligible to participate in succeeding Offering Periods only by delivering a new
Subscription Agreement to OSI.
Name and Address of Participant:
--------------------------------
--------------------------------
--------------------------------
--------------------------------
Social Security Number:
--------------------------------
PLEASE CHECK THE APPROPRIATE STATEMENT
_______ I DO want to participate in the upcoming Purchase. I hereby
withdraw from ESPP immediately after the upcoming Purchase.
_______ I DO NOT want to participate in the upcoming Purchase. I
hereby withdraw from the ESPP effective immediately.
----------------------------------------------
Signature/Date
OSI 1995 EMPLOYEE STOCK PURCHASE PLAN
JULY 28, 2000
PAGE 11
<PAGE>
OBJECTIVE SYSTEMS INTEGRATORS, INC.
AUDIT COMMITTEE CHARTER
PURPOSE
The Audit Committee ("Audit Committee") of Objective Systems Integrators, Inc.
("OSI") is a standing committee of OSI's Board of Directors ("Board") and is
appointed by the Board. Its purpose is to monitor OSI's systems of internal
controls, its corporate financial reporting and its external audits. The Audit
Committee also provides the Board with the results of its examinations and
recommendations, outlines to the Board the improvements made, or to be made, in
OSI's accounting controls, nominates the independent auditors, and provides the
Board with any additional information or materials necessary to make the Board
aware of any significant financial matters that may require the Board's
attention.
In discharging its responsibilities, the Audit Committee may investigate any
matter brought to its attention, with full power to retain counsel or other
experts for this purpose.
The Charter of the Audit Committee will be reviewed annually, and updated as
appropriate.
QUALIFICATIONS
The Audit Committee will consist of at least three directors, at least one of
whom will have past employment experience in finance or accounting, requisite
professional certification in accounting, or other comparable experience or
background, including a current or past position as a chief executive or
financial officer or other senior officer with financial oversight
responsibilities. In addition, each member of the Audit Committee will:
1. Be able to read and understand fundamental financial
statements, in accordance with the NASDAQ National Market Audit
Committee requirements.
2. Be free of any relationship that, in the opinion of the Board,
would interfere with his or her individual exercise of independent
judgement.
3. Not have been employed by OSI or its affiliates in the current
or in any of the past three years.
4. Not have accepted any compensation from OSI or its affiliates in
excess of $60,000 during the previous fiscal year (except for
Board service, retirement plan benefits, or non-discretionary
compensation).
5. Not have an immediate family member who is, or has in the past
three years been, employed by OSI or its affiliates as one of its
Executive Officers.
6. Not have been a partner, controlling shareholder or an executive
officer of any for-profit business to which OSI has made, or from
which it has received, payments (other than those which arise
solely from investments in OSI's securities) that exceed in any of
the past three years the greater of $200,000 or five percent of
OSI's consolidated gross revenues.
7. Not have been employed as an executive of another entity where
any of OSI's executives serve on that entity's compensation
committee.
However, if the Board determines it to be in the best interests of OSI and its
stockholders to have one "non-independent" director on the Audit Committee, and
discloses its reasons in OSI's next annual proxy statement, then one
non-independent director may be appointed so long as the director is not a
current employee or officer of OSI, or an immediate family member of a current
employee or officer.
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<PAGE>
RESPONSIBILITIES
The responsibilities of the Audit Committee will be to:
1. Review the adequacy of OSI's systems of internal controls.
2. Subject to ratification of the Board and OSI's stockholders,
select and employ independent, certified public accountants
("Auditors") on OSI's behalf.
3. Review the Auditors' proposed audit scope, approach, and
independence.
4. Conduct post-audit reviews of the financial statements and
audit findings, including any significant suggestions for
improvements provided to management by the Auditors.
5. Review the performance of the Auditors, who will be accountable
to the Board and the Audit Committee, and review the fee
arrangements with the Auditors.
6. Before the earnings release, review the quarterly and annual
operating results with Management and the Auditors.
7. Before its release, review the audited financial statements and
Management's Discussion and Analysis in OSI's annual report on
Form 10-K.
8. Oversee compliance with the requirements of the SEC concerning
disclosures of the services of the Auditors, the membership on the
Audit Committee and the activities of the Audit Committee.
9. Review management's monitoring of compliance with OSI's
Standards of Business Conduct and with the Foreign Corrupt
Practices Act.
10. Review, in conjunction with counsel, any legal matters that
could have a material impact on OSI's financial statements.
11. Provide oversight and review of OSI's asset management policies,
including an annual review of its investment policies, its foreign
exchange policies and the performance of its short-term
investments.
12. Review related-party transactions for potential conflicts of
interest.
13. Provide a report in OSI's proxy statement in accordance with the
requirements of Item 306 of Regulations S-K and S-B and Item
7(e)(3) of Schedule 14A.
14. Perform such other oversight functions as may be requested by
the Board.
MEETINGS
The Audit Committee will meet at least four times per year. The Audit Committee
will keep minutes of its meetings and report its activities to the entire Board.
Members of management, such as the Chief Executive Officer(s) or Chief Financial
Officer, may be invited to join the meeting. However, the Audit Committee will,
from time to time, meet with the outside auditors without management present.
Page 2
