<PAGE> 1
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, For Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
ALPHA MICROSYSTEMS
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transactions applies:
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(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] 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
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
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(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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- 1 -
<PAGE> 2
ALPHA MICROSYSTEMS
2722 SOUTH FAIRVIEW STREET
SANTA ANA, CALIFORNIA 92704
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Dear Fellow Shareholder:
The annual meeting of shareholders (the "Annual Meeting") of Alpha
Microsystems (the "Company")
will be held at 2722 South Fairview Street, Santa Ana, California 92704 on
Wednesday, August 13, 1997, at 10:00 a.m., local time, for the following
purposes:
1. To elect directors of the Company;
2. To approve the Company's reincorporation in Delaware, through the
merger of Alpha Microsystems, a California corporation, with and into a
wholly-owned Delaware subsidiary of Alpha Microsystems.
3. To ratify the appointment of Ernst & Young as independent auditors
of the Company and its subsidiaries for the year ending February 22, 1998;
and
4. To transact such other business as may properly come before the
Annual Meeting or any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on June 16, 1997 as
the record date for the determination of shareholders who are entitled to notice
of and to vote at the Annual Meeting.
YOU ARE CORDIALLY INVITED TO ATTEND AND TO VOTE AT THIS MEETING IN PERSON.
PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED
POSTAGE-PAID ENVELOPE, WHETHER OR NOT YOU EXPECT TO ATTEND. IN THE EVENT A
SHAREHOLDER WHO HAS RETURNED A SIGNED PROXY CARD ELECTS TO ATTEND THE MEETING
AND VOTE IN PERSON, THE SHAREHOLDER WILL BE ENTITLED TO VOTE.
By Order of the Board of Directors,
[SIG]
John F. Glade, Secretary
Santa Ana, California
July 11, 1997
<PAGE> 3
ALPHA MICROSYSTEMS
2722 South Fairview Street
Santa Ana, California 92704
------------------------
PROXY STATEMENT
This proxy statement and the enclosed proxy card are being mailed on or
about July 11, 1997 to shareholders of record on June 16, 1997 of Alpha
Microsystems (the "Company") in connection with the solicitation by its Board of
Directors of proxies for use at the 1997 Annual Meeting of Shareholders, and at
any and all adjournments or postponements thereof (the "Annual Meeting"), notice
of which appears on the preceding page.
If a proxy card in the accompanying form is duly executed and returned, the
shares represented thereby will be voted in accordance with the instructions
contained on it. If no contrary instructions are given, the shares represented
by the proxy card will be voted FOR the Board's nominees for directors and FOR
the other proposals described herein. A shareholder giving a proxy has the power
to revoke it at any time before it is exercised. A proxy may be revoked (i) by
delivering to the Company an instrument revoking the proxy; (ii) by delivering
to the Company a duly executed proxy bearing a later date; or (iii) if the
shareholder executing the proxy is present at the Annual Meeting and votes in
person. If the proxy is not revoked it will be voted by one or more of those
persons named thereon.
OUTSTANDING SHARES AND VOTING RIGHTS
Only shareholders of record at the close of business on June 9, 1997 are
eligible to receive notice of and to vote at the Annual Meeting in person or by
proxy. The only class of voting stock of the Company is its common stock, no par
value (the "Common Stock"), and at June 16, 1997, 10,821,897 shares of Common
Stock were issued and outstanding. Each share is entitled to one vote.
A majority of the outstanding shares of common stock is necessary to
provide a quorum for the meeting. Abstentions and "broker non-votes" are counted
for purposes of determining whether the quorum requirement is satisfied. With
respect to Item 1, directors are elected by a plurality of the affirmative votes
cast. Thus abstentions and "broker non-votes" have no effect on the election of
directors. If one or more shareholders gives notice at the Annual Meeting prior
to the voting of their intention to cumulate their votes in the election of
directors, all shareholders entitled to vote shall have the right to so cumulate
their votes and to give one candidate, who has been nominated prior to voting, a
number of votes equal to the number of directors to be elected multiplied by the
number of votes to which his or her shares are entitled, or to distribute such
votes among two or more such candidates on the same principle in such
proportions as each shareholder may determine. The enclosed form of proxy
includes authority to cumulate votes, in the discretion of the proxies named
thereon, and each of them, for the election of directors and thereby to
distribute, in such proportion as the proxies see fit, the votes represented by
the proxy card among the five nominees named herein or any substitute person or
persons nominated by the Board of Directors for election to the Board.
Since the approval of the proposal to reincorporate the Company in Delaware
through the merger of Alpha Microsystems, a California corporation, with and
into a wholly-owned subsidiary of Alpha Microsystems requires the affirmative
votes of the outstanding shares, abstentions and "broker non-votes" on such
proposals have the effect of "no" votes.
In accordance with California law, the approval of the auditors (Proposal
3) requires the vote of a majority of the shares represented and voting; thus
neither abstentions nor "broker non-votes" are counted in determining whether
this proposal has been approved.
2
<PAGE> 4
PROPOSAL 1
ELECTION OF DIRECTORS
The directors of the Company are elected annually and serve until the next
Annual Meeting of Shareholders or until their successors are elected and
qualified. The Bylaws of the Company provide that the authorized number of
directors of the Company shall be not less than five nor more than nine, with
the exact number as determined by resolution of the Board of Directors. The
Board of Directors has established the number of directors as five. The Board of
Directors has nominated the individuals named in the table below to serve as
members of the Board of Directors of the Company, and, if the enclosed proxy
card is duly executed and returned, it will be voted in favor of those
individuals, unless otherwise specified. Management has been informed that all
nominees are willing to serve as directors, but if any of them should be unable
to serve, or will not serve, as a director, the proxy holders will vote for the
election of such other person or persons as they, in the exercise of their
discretionary authority, may choose. The Board of Directors has no reason to
believe that any nominee will be unable or unwilling to serve.
There are no family relationships between any director, director nominee or
executive officer and any other director, director nominee or executive officer
of the Company. There are no arrangements or understandings between any
director, director nominee or executive officer and any other person pursuant to
which he has been or will be selected as a director and/or executive officer of
the Company.
INFORMATION CONCERNING NOMINEES FOR DIRECTOR
<TABLE>
<CAPTION>
DIRECTOR
SINCE
--------
<S> <C>
John F. Glade, 54, has served as Secretary of the Company since January 1987 and 1996
Vice President, Engineering and Manufacturing since May 1988. Mr. Glade joined the
Company as Director of Engineering in September 1978, served as Vice President,
Engineering from February 1979 until June 1985 and served as Vice President,
Advanced Products Development from June 1985 until May 1988. He also served as
Secretary of the Company from February 1983 to August 1985 and a Director of the
Company from 1979 through 1994.
Rockell N. Hankin, 50, is a senior partner of Hankin & Co., which was established in 1987
June 1986 and provides consulting services. Mr. Hankin is also a Director of
Semtech Corporation (NMS), which manufactures electronic components, Chairman of
the Board of House of Fabrics, a national retail chain which markets sewing
supplies and crafts, a Director of Quidel (NMS), which manufactures and
distributes rapid diagnostic tests for medical applications, and a Director of
Sparta, Inc., which provides a wide range of scientific, engineering and technical
assistance services, primarily for the U.S. military services and the Department
of Defense.
Richard E. Mahmarian, 60, became in 1997 and is currently Chairman of the Board, 1995
President, and Chief Executive Officer of Verification Systems International,
Incorporated, which designs, engineers and manufactures bar code and
two-dimensional symbology quality assurance instruments. Prior to its sale in
1996, Mr. Mahmarian was Vice Chairman of the Board and Executive Vice President of
RJS, Inc., a manufacturer of bar code printers, verification scanners, software,
and consumable products. Mr. Mahmarian had been a principal of RJS, Inc. since
1987, when it was purchased in a leveraged buyout. Prior to joining RJS, Inc., he
held various management positions for Manx Engineering Corporation, Bell & Howell
Company, Northrop Corporation and NCR Corporation.
</TABLE>
3
<PAGE> 5
<TABLE>
<CAPTION>
DIRECTOR
SINCE
--------
<S> <C>
Clarke E. Reynolds, 76, has served as Chairman of the Board of Directors of the 1989
Company since May, 1991. Mr. Reynolds served as Chief Executive Officer of the
Company from January 1991 to August 1991, as President from November 1990 to May
1991, as Vice Chairman of the Board from October 1990 to May 1991, and as Chief
Operating Officer of the Company from November 1990 to May 1991. Mr. Reynolds
provided independent consulting services to the Company from 1984 through 1990,
was an employee of the Company from November 1990 through May 1993, and presently
provides independent consulting services to the Company. Mr. Reynolds was
previously employed by NCR Corporation for over 47 years, during which time Mr.
Reynolds held a variety of sales and marketing and general management positions
including Vice President Pacific Region, Managing Director and Chairman of the
Board NCR United Kingdom, Vice President NCR Europe and Vice President Executive
Office. Mr. Reynolds serves as a Director of Sparta, Inc., which provides a wide
range of scientific, engineering and technical assistance services, primarily for
the U.S. military services and the Department of Defense.
Douglas J. Tullio, 54, has served as President and Chief Executive Officer since May 1991
1991. Mr. Tullio also served as Chief Operating Officer from May 1991 to March
1994. Mr. Tullio joined the Company in January 1990 and served as Executive Vice
President of the Company and President of the Company's subsidiaries, Rexon
Business Machines and AMS Computers. (In April 1990, these subsidiaries were
merged into the Company.) From 1984 to 1989, he worked for General Automation,
Inc., in the positions of President and member of the Board of Directors,
Executive Vice President, Vice President, General Manager and Vice President of
Sales and Marketing.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THESE FIVE
DIRECTORS TO THE BOARD.
BOARD COMMITTEES
The Company has Audit, Compensation and Stock Option Committees, as well as
a Nominating Committee. The Audit Committee is currently composed of Messrs.
Rockell N. Hankin, Richard E. Mahmarian and Clarke E. Reynolds, and its
functions include recommending to the Board of Directors the engagement and
discharge of the independent auditors, reviewing the performance of the
independent auditors, reviewing the independent auditors' fees and reviewing the
adequacy of the Company's system of internal accounting controls. The
Compensation Committee is currently composed of Messrs. Rockell N. Hankin,
Richard E. Mahmarian and Clarke E. Reynolds, and its functions include making
recommendations with respect to compensation of officers and employees of the
Company and reviewing annually the compensation structure of the Company. The
Stock Option Committee is currently composed of Messrs. Rockell N. Hankin and
Richard E. Mahmarian, and administers the Company's stock incentive award plan
and the Company's incentive and non-qualified stock option plans. The Nominating
Committee is currently composed of Messrs. Rockell N. Hankin, Richard E.
Mahmarian, Douglas J. Tullio and Clarke E. Reynolds, and considers nominees for
Director recommended by the shareholders.
MEETINGS OF BOARD
During the fiscal year ended February 23, 1997, there were eight meetings
of the Board of Directors of the Company, and the Board acted twice by unanimous
written consent. The Audit Committee met twice, the Compensation Committee met
once, and the Stock Option Committee met twice and acted once by unanimous
written consent.
During the fiscal year ended February 23, 1997, each Board member attended
75% or more of the aggregate of the meetings of the Board and of the committees
on which he served, held during the period for which he was a director or
committee member, respectively.
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<PAGE> 6
PROPOSAL 2
REINCORPORATION OF THE COMPANY IN DELAWARE
AND RELATED CHANGES TO THE RIGHTS OF SHAREHOLDERS
GENERAL
The Board of Directors has unanimously approved a proposal to change the
Company's state of incorporation from California to Delaware. The Board of
Directors believes the change in domicile to be in the best interests of the
Company and its shareholders for several reasons. Principally, the Board of
Directors believes that reincorporation in Delaware, along with certain measures
the Board intends to concurrently adopt which are designed to make hostile
takeovers of the Company more difficult, will enable the Board to consider fully
any proposed takeover attempt and to negotiate terms that maximize the benefit
to the Company and its shareholders. The Board also believes that
reincorporation in Delaware will enhance the Company's ability to attract and
retain qualified members of the Company's Board of Directors as well as
encourage directors to continue to make independent decisions in good faith on
behalf of the Company. Finally, reincorporation in Delaware will allow the
Company the increased flexibility and predictability afforded by Delaware law.
In recent years, a number of major public companies have obtained the
approval of their shareholders to reincorporate in Delaware. For the reasons
explained below, the Company believes it is beneficial and important that the
Company likewise avail itself of Delaware law.
Predictability of Delaware Law. For many years Delaware has followed a
policy of encouraging incorporation in that state. In furtherance of that
policy, Delaware has adopted comprehensive corporate laws which are revised
regularly to meet changing business circumstances. The Delaware legislature is
particularly sensitive to issues regarding corporate law and is especially
responsive to developments in modern corporate law. The Delaware courts have
developed considerable expertise in dealing with corporate issues as well as a
substantial body of case law construing Delaware's corporate law. As a result of
these factors, it is anticipated that Delaware law will provide greater
predictability in the Company's legal affairs than is presently available under
California law.
Hostile Takeovers. The Company intends as part of the reincorporation to
adopt certain measures which may have the effect of deterring hostile takeover
attempts. A hostile takeover attempt may have a positive or a negative effect on
the Company and its shareholders, depending on the circumstances surrounding a
particular takeover attempt. Takeover attempts that have not been negotiated or
approved by the board of directors of a corporation can seriously disrupt the
business and management of a corporation and generally present to the
shareholders the risk of terms which may be less than favorable to all of the
shareholders than would be available in a board-approved transaction. Board
approved transactions may be carefully planned and undertaken at an opportune
time in order to obtain maximum value for the corporation and all of its
shareholders with due consideration to matters such as the recognition or
postponement of gain or loss for tax purposes, the management and business of
the acquiring corporation and maximum strategic deployment of corporate assets.
The Board of Directors recognizes that hostile takeover attempts do not
always have the unfavorable consequences or effects described above and may
frequently be beneficial to the shareholders, providing all of the shareholders
with considerable value for their shares. However, the Board of Directors
believes that the potential disadvantages of unapproved takeover attempts are
sufficiently great that prudent steps to reduce the likelihood of such takeover
attempts are in the best interests of the Company and its shareholders.
Accordingly, the reincorporation plan includes certain proposals that may have
the effect of discouraging or deterring hostile takeover attempts.
Notwithstanding the belief of the Board of Directors as to the benefits to
shareholders of the changes, shareholders should recognize that one of the
effects of such changes may be to discourage a future attempt to acquire control
of the Company which is not presented to and approved by the Board of Directors,
but which a substantial number and perhaps even a majority of the Company's
shareholders might believe to be in their best interests or in which
shareholders might receive a substantial premium for their shares over the
current
5
<PAGE> 7
market prices. As a result, shareholders who might desire to participate in such
a transaction may not have an opportunity to do so.
Director Liability: Ability to Attract and Retain Directors. In 1986,
Delaware amended its corporate law to allow corporations to limit the personal
monetary liability of its directors for their conduct as directors under certain
circumstances. The directors have elected to adopt such a provision in the
Delaware certificate and bylaws. It should be noted that Delaware law does not
permit a Delaware corporation to limit or eliminate the liability of its
directors for intentional misconduct, bad faith conduct or any transaction from
which the director derives an improper personal benefit or for violations of
federal laws. The Board of Directors believes that Delaware incorporation will
enhance the Company's ability to recruit and retain directors in the future,
however, the shareholders should be aware that such a provision inures to the
benefit of the directors, and the interest of the Board of Directors in
recommending the reincorporation may therefore be in conflict with the interests
of the shareholders. See "-- Indemnification and Limitation of Liability" for a
more complete discussion of these issues.
In 1987, California amended its corporate law in a manner similar to
Delaware to permit a California corporation to limit the personal monetary
liability of its directors for their conduct as directors under certain
circumstances. Nonetheless, the Board of Directors believes that the protection
from liability for directors is somewhat greater under the Delaware law than
under the California law and therefore that the Company's objectives in adopting
this type of provision can be better achieved by reincorporation in Delaware.
Rights of Shareholders. The interests of the Board of Directors of the
Company, management and affiliated shareholders in voting on the reincorporation
proposal may not be the same as those of unaffiliated shareholders. Delaware law
does not afford minority shareholders some of the rights and protections
available under California law. Reincorporation of the Company in Delaware may
make it more difficult for minority shareholders to elect directors and
influence Company policies. A discussion of the principal differences between
California and Delaware law as they affect shareholders begins on page 7 of this
Proxy Statement.
Method of Reincorporation. The proposed reincorporation would be
accomplished by merging the Company into a newly-formed Delaware corporation
which, just before the merger, will be a wholly-owned subsidiary of the Company
(the "Delaware Company"), pursuant to an Agreement and Plan of Merger (the
"Merger Agreement"), a copy of which is attached as Exhibit A to this Proxy
Statement. Upon the effective date of the merger, the Delaware Company's name
will be Alpha Microsystems. The reincorporation will not result in any change in
the Company's business, assets or liabilities, will not cause its corporate
headquarters to be moved and will not result in any relocation of management or
other employees.
On the effective date of the proposed reincorporation, each outstanding
share of Common Stock of the Company will automatically convert into one share
of Common Stock of the Delaware Company, and shareholders of the Company will
automatically become shareholders of the Delaware Company. On the effective date
of the reincorporation, the number of outstanding shares of Common Stock of the
Delaware Company will be equal to the number of shares of Common Stock of the
Company outstanding immediately prior to the effective date of the
reincorporation. In addition, each outstanding option or right to acquire shares
of Common Stock of the Company will be converted into an option or right to
acquire an equal number of shares of Common Stock of the Delaware Company, under
the same terms and conditions as the original options or rights. All of the
Company's employee benefit plans, including the 1993 Employee Stock Option Plan,
the 1996 Nonemployee Director Stock Compensation Plan, the Employee Stock
Purchase Plan, the Stock Incentive Award Plan and the 1993 Director Stock Option
Plan will be adopted and continued by the Delaware Company following the
reincorporation. Shareholders should recognize that approval of the proposed
reincorporation will constitute approval of the adoption and assumption of those
plans by the Delaware Company.
No action need be taken by shareholders to exchange their stock
certificates; this will be accomplished at the time of the next transfer by the
shareholder. Certificates for shares in the Company will automatically represent
an equal number of shares in the Delaware Company upon completion of the merger.
6
<PAGE> 8
If approved by the shareholders, it is anticipated that the reincorporation
would be completed as soon thereafter as practicable. However, the
reincorporation may be abandoned or the Merger Agreement may be amended (with
certain exceptions), either before or after shareholder approval has been
obtained, if in the opinion of the Board of Directors, circumstances arise that
make such action advisable; provided, that any amendment that would effect a
material change from the charter provisions discussed in this Proxy Statement
would require further approval by the holders of a majority of the outstanding
shares of the Common Stock.
SIGNIFICANT CHANGES CAUSED BY REINCORPORATION
In general, the Company's corporate affairs are governed at present by the
corporate law of California, the Company's state of incorporation, and by the
Company's Articles of Incorporation, as amended (the "California Articles") and
the Company's Restated bylaws (the "California Bylaws"), which have been adopted
pursuant to California law. The California Articles and California Bylaws are
available for inspection during business hours at the principal executive
offices of the Company. In addition, copies may be obtained by writing to the
Company at 2722 South Fairview Street, Santa Ana, California 92704, Attention:
Corporate Secretary.
If the reincorporation proposal is adopted, the Company will merge into,
and its business will be continued by, the Delaware Company. Following the
merger, issues of corporate governance and control would be controlled by
Delaware, rather than California law (however, see "-- Application of California
Law After Reincorporation"). The California Articles and California Bylaws,
will, in effect, be replaced by the Certificate of Incorporation of the Delaware
Company (the "Delaware Certificate") and the bylaws of the Delaware Company (the
"Delaware Bylaws"), copies of which are attached as Exhibits B and C to this
Proxy Statement. Accordingly, the differences among these documents and between
Delaware and California law are relevant to your decision whether to approve the
reincorporation proposal.
In particular, it should be noted that the Delaware Certificate provides
for a classified Board. If the reincorporation proposal is adopted, the
directors of the Delaware corporation will, in effect, become the directors of
the Company. Because the Board is classified into three classes, the terms of
Mr. Reynolds and Mr. Tullio as Class III directors will not expire for three
years, and the terms of Mr. Hankin and Mr. Mahmarian as Class II directors will
not expire for two years. Mr. Glade's term as a Class I director will expire in
one year.
A number of significant differences between California and Delaware law and
among the various charter documents are summarized in the chart below.
Shareholders are requested to read the following chart in conjunction with the
discussion following the chart and the Merger Agreement, the Delaware
Certificate and the Delaware Bylaws attached to this Proxy Statement. For each
item summarized in the chart, there is a reference to a page of this Proxy
Statement on which a more detailed discussion appears.
<TABLE>
<CAPTION>
ISSUE DELAWARE CALIFORNIA
- ------------------------ --------------------------------- ---------------------------------
<S> <C> <C>
Limitation of Liability Delaware law permits the California law contains
of Directors and limitation of liability of additional exceptions to the
Officers (see page 10). directors and officers to the liability limitations of
Company except in connection with directors and officers.
(i) breaches of the duty of
loyalty; (ii) acts or omissions
not in good faith or involving
intentional misconduct or knowing
violations of law; (iii) the
payment of unlawful dividends or
unlawful stock repurchases or
redemptions; or (iv) transactions
in which a director received an
improper personal benefit.
</TABLE>
7
<PAGE> 9
<TABLE>
<CAPTION>
ISSUE DELAWARE CALIFORNIA
- ------------------------ --------------------------------- ---------------------------------
<S> <C> <C>
Indemnification of Delaware law permits somewhat California law permits
Directors and Officers broader indemnification and could indemnification under certain
(see page 10). result in indemnification of circumstances, subject to certain
directors and officers in limitations.
circumstances where California
law would not permit
indemnification.
Cumulative Voting for Cumulative voting not available Cumulative voting is mandatory
Directors (see page 12). under Delaware law because not upon notice given by a
provided in the Delaware shareholder at a shareholders'
Certificate. meeting at which directors are to
be elected. California law
permits NASDAQ National Market
System ("NASDAQ") corporations
with over 800 equity security
holders to eliminate cumulative
voting. The California Articles
do not include such a provision.
Classified Board of Delaware Certificate divides the California Articles do not
Directors (see page 13). Board of Directors into three provide for classes of directors.
classes. Directors will serve for
three years, with one class being
elected each year.
Removal of Directors by Removal only for cause by Removal with or without cause by
Shareholders (see page affirmative vote of a majority of affirmative vote of a majority of
15). the outstanding shares. the outstanding shares, provided
that shares voting against
removal could not elect such
director under cumulative voting.
Filling Board Vacancies Delaware law provides for the California law permits (a) any
(see page 15). Delaware Court of Chancery to holder of 5% or more of the
order an election to fill corporation's voting stock
vacancies or newly created ("Voting Stock") or (b) the
directorships upon the superior court of the appropriate
application of the holders of 10% county to call a special meeting
of the outstanding shares having of shareholders to elect the
a right to vote for such entire board if, after filling
directors if, at the time of any vacancy, the directors then
filling such vacancies or in office who have been elected
directorships, the directors then by the shareholders constitute
in office constitute less than a less than a majority of the
majority of the entire board as directors then in office.
constituted immediately prior to
any increase.
Who May Call Special The Board of Directors, the The Board of Directors, the
Shareholder Meeting Chairman of the Board or the Chairman of the Board, the
(see page 16). President. President, or holders of 10% of
the shares entitled to vote at
the special meeting.
</TABLE>
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<PAGE> 10
<TABLE>
<CAPTION>
ISSUE DELAWARE CALIFORNIA
- ------------------------ --------------------------------- ---------------------------------
<S> <C> <C>
Action by Written Action by written consent not Action by written consent
Consent of Shareholders permitted by the Delaware permitted by California Articles.
in Lieu of a Shareholder Certificate. All shareholder
Vote at Shareholder action must take place by a
Meeting (see page 16). shareholder vote at a meeting of
shareholders.
Tender Offer Statute Restricts hostile two-step No comparable statute.
(see page 17). takeovers.
Amendment of Certificate Amendments of all provisions of Amendment of all provisions of
(see page 21). the Delaware Certificate (except the California Articles requires
anti-takeover provisions) approval by a majority of the
requires approval by a majority Voting Stock of the Company.
of the Voting Stock of the
Delaware Company, amendment of
anti-takeover provisions requires
approval of 80% of the Voting
Stock of the Company.
Loans to Officers and Board of Directors may authorize Loans must be approved or
Directors (see page 21). if expected to benefit the ratified by a majority of the
Company. outstanding shares.
Class Vote for Generally not required unless a A reorganization transaction must
Reorganizations (see reorganization adversely affects generally be approved by a
page 22). a specific class of shares. majority vote of each class of
shares outstanding.
Right of Shareholders to Permitted for any purpose Permitted for any purpose
Inspect Shareholder List reasonably related to such reasonably related to such
(see page 22). shareholder's interest as a shareholder's interest as a
shareholder. shareholder. Also, an absolute
right to 5% shareholders and
certain 1% shareholders.
Appraisal Rights (see Generally available if Available in certain
page 22). shareholders receive cash in circumstances if the holders of
exchange for the shares and in 5% of the class assert such
certain other circumstances. rights.
Dividends (see page 24). Paid from surplus (including Generally limited to the greater
paid-in and earned surplus or net of (i) retained earnings or (ii)
profits). an amount which would leave the
Company with assets of 125% of
liabilities and current assets of
100% of current liabilities.
Other Responsive legislature and larger
body of corporate case law in
Delaware provides more
predictable corporate legal
environment in Delaware.
</TABLE>
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<PAGE> 11
LIMITATION OF LIABILITY AND INDEMNIFICATION
LIMITATIONS ON DIRECTOR LIABILITY
Both California and Delaware permit a corporation to limit the personal
liability of a director to the corporation or its shareholders for monetary
damages for breach of certain duties as a director. The California and Delaware
laws adopt a self-governance approach by enabling a corporation to take
advantage of these provisions only if an amendment to the charter limiting such
liability is approved by a majority of the outstanding shares or such language
is included in the original charter.
The California Articles eliminate the liability of directors to the
corporation to the fullest extent permissible under California law. California
law does not permit the elimination of monetary liability where such liability
is based on: (a) intentional misconduct or knowing and culpable violation of
law; (b) acts or omissions that a director believes to be contrary to the best
interests of the corporation or its shareholders, or that involve the absence of
good faith on the part of the director; (c) receipt of an improper personal
benefit; (d) acts or omissions that show reckless disregard for the director's
duty to the corporation or its shareholders, where the director in the ordinary
course of performing a director's duties should be aware of a risk of serious
injury to the corporation or its shareholders; (e) acts or omissions that
constitute an unexcused pattern of inattention that amounts to an abdication of
the director's duty to the corporation and its shareholders; (f) interested
transactions between the corporation and a director in which a director has a
material financial interest; and (g) liability for improper distributions, loans
or guarantees.
The Delaware Certificate also eliminates the liability of directors to the
fullest extent permissible under Delaware law, as such law exists currently or
as it may be amended in the future. Under Delaware law, such provision may not
eliminate or limit director monetary liability for (a) breaches of the
director's duty of loyalty to the corporation or its shareholders; (b) acts or
omissions not in good faith or involving intentional misconduct or knowing
violations of law; (c) the payment of unlawful dividends or unlawful stock
repurchases or redemptions; or (d) transactions in which the director received
an improper personal benefit. Such limitation of liability provision also may
not limit director's liability for violation of, or otherwise relieve the
Delaware Company or its directors from the necessity of complying with, federal
or state securities laws or affect the availability of non-monetary remedies
such as injunctive relief or rescission.
Shareholders should recognize that the proposed reincorporation and
associated measures are designed to shield a director from suits by the Delaware
Company or its shareholders for monetary damages for negligence or gross
negligence by the director in failing to satisfy the director's duty of care. As
a result, an action for monetary damages against a director predicated on a
breach of the duty of care would be available only if the Delaware Company or
its shareholders were able to establish that the director was disloyal in his
conduct, failed to act in good faith, engaged in intentional misconduct,
knowingly violated the law, derived an improper personal benefit or approved an
illegal dividend or stock repurchase. Consequently, the effect of such measures
may be to limit or eliminate an effective remedy which might otherwise be
available to a shareholder who is dissatisfied with the Board of Directors'
decisions. Although an aggrieved shareholder could sue to enjoin or rescind an
action taken or proposed by the Board of Directors, such remedies may not be
timely or adequate to prevent or redress injury in all cases.
The Company believes that directors are motivated to exercise due care in
managing the Company's affairs primarily by concern for the best interests of
the Company and its shareholders rather than by the fear of potential monetary
damage awards. As a result, the Company believes that the reincorporation
proposal should sustain the Board of Directors' continued high standard of
corporate governance without any decrease in accountability by directors to the
Company and its shareholders.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
The California Bylaws and Delaware Bylaws relating to indemnification
similarly require that the Company and the Delaware Company, respectively,
indemnify its directors and officers to the fullest extent permitted by the
respective state law, provided, that the Company and the Delaware Company may
modify the extent of such indemnification by individual contracts with its
directors and executive officers, and,
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provided, further, that the Delaware Company will not be required to indemnify
any director or officer in connection with a proceeding initiated by such person
unless the proceeding was authorized by the Board of Directors. The California
Bylaws permit the Company to provide indemnification to its other officers,
employees and agents as set forth in California law. The Delaware Bylaws only
provide indemnification to directors, officers and anyone serving at the request
of the Company as a director, officer, employee or agent of another corporation.
California and Delaware have similar laws respecting indemnification by a
corporation of its officers, directors, employees and other agents. There are
nonetheless certain differences between the laws of the two states, as well as
the California and Delaware Bylaws.
California law permits indemnification of expenses incurred in derivative
or third-party actions, except that with respect to derivative actions (a) no
indemnification may be made without court approval when a person is adjudged
liable to the corporation in the performance of that person's duty to the
corporation and its shareholders, unless a court determines such person is
entitled to indemnity for expenses, and then such indemnification may be made
only to the extent that such court shall determine and (b) no indemnification
may be made under California law, without court approval in respect of amounts
paid or expenses incurred in settling or otherwise disposing of a threatened or
pending action or amounts incurred in defending a pending action which is
settled or otherwise disposed of without court approval. Delaware allows
indemnification of such expenses without court approval.
Indemnification is permitted by California law providing the requisite
standard of conduct is met, as determined by (1) a majority vote of a
disinterested quorum of the directors, (2) independent legal counsel (if a
quorum of independent directors is not obtainable), (3) a majority vote of a
quorum of the shareholders (excluding shares owned by the indemnified party) or
(4) the court handling the action.
Delaware law generally permits indemnification of expenses incurred in the
defense or settlement of a derivative or third-party action, provided there is a
determination (1) by a majority of the disinterested directors, even though less
than a quorum (2) by a committee of such directors designated by a majority vote
of such directors, even though less than a quorum, (3) by independent legal
counsel, regardless of whether a disinterested quorum of directors exists or (4)
by a majority vote of a quorum of the shareholders that the person seeking
indemnification acted in good faith and in a manner reasonably believed to be in
or (in contrast to California law as described above) not opposed to the best
interests of the corporation. Without court approval, however, no
indemnification may be made in respect of any derivative action in which such
person is adjudged liable for negligence or misconduct in the performance of his
or her duty to the corporation.
California law requires indemnification when the individual has
successfully defended the action on the merits as opposed to Delaware law which
requires indemnification relating to a successful defense on the merits or
otherwise, but only for directors and officers.
Both California law and the California Bylaws permit (as opposed to the
Delaware Bylaws, which require) the Company to advance expenses related to any
proceeding contingent on such persons' commitment to repay any advances unless
it is determined ultimately that such persons are entitled to be indemnified.
California corporations may include in their articles of incorporation a
provision which extends the scope of indemnification through agreements, bylaws
or other corporate action beyond that specifically authorized by the California
statute. The California Articles include such a provision.
A provision of Delaware law states that the indemnification provided by
statute shall not be deemed exclusive of any other rights under any bylaw,
agreement, vote of shareholders or disinterested directors or otherwise. Under
Delaware law, rights to indemnification and expenses are non-exclusive, in that
they need not be limited to those expressly provided by statute. California law
is similar in that it permits non-exclusive indemnification if authorized in the
Company's charter. The California Articles contain such an enabling provision.
Under Delaware law and the Delaware Bylaws, the Delaware Company is permitted to
indemnify its directors and officers within the limits established by law and
public policy, pursuant to an express contract, bylaw provision, shareholder
vote, vote of disinterested directors or otherwise, any or all of which could
provide
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indemnification rights broader than those currently available under the
California Bylaws or the California indemnification statutes.
The indemnification and limitation of liability provisions of California
law, and not Delaware law, will apply to actions of the directors and officers
of the Company made prior to the proposed reincorporation. Nevertheless, the
Board of Directors has recognized in considering this reincorporation proposal
that the individual directors have a personal interest in obtaining the
application of Delaware law to such indemnity and limitation of liability issues
affecting them and the Company in the event they arise from a potential future
case, and that the application of Delaware law, to the extent that any director
or officer is actually indemnified in circumstances where indemnification would
not be available under California law, would result in expense to the Company
which the Company would not incur if the Company were not reincorporated. The
Board of Directors believes, however, that the overall effect of reincorporation
is to provide a corporate legal environment that enhances the Company's ability
to attract and retain high quality outside directors and thus benefits the
interests of the Company and its shareholders.
There is no pending or, to the Company's knowledge, threatened litigation
to which any of its directors is a party in which the rights of the Company or
its shareholders would be affected if the Company currently were subject to the
provisions of Delaware law rather than California law.
INDEMNIFICATION AGREEMENTS
The Delaware Company intends to enter into indemnification agreements with
certain of its directors and officers. The indemnification agreements, among
other things, require the Delaware Company to indemnify such officers and
directors to the fullest extent permitted by Delaware law, and to advance to
such directors all related expenses, subject to reimbursement if it is
subsequently determined that indemnification is not permitted. The Delaware
Company is also required to indemnify and to advance all expenses incurred by
directors and officers seeking to enforce their rights under the indemnification
agreements.
Although the indemnification agreements offer substantially the same scope
of coverage afforded by provisions in the Delaware Certificate and Delaware
Bylaws, they provide greater assurance to officers and directors that
indemnification will be available, because, as a contract, they cannot be
modified unilaterally in the future by the Board of Directors of the Delaware
Company or by the stockholders to eliminate the rights that they provide, an
action that may be possible with respect to the relevant provisions of the
Delaware Bylaws, at least as to prospective elimination of such rights. If the
reincorporation is approved, the Company intends to enter into new
indemnification agreements with its officers and directors to replace those
indemnification agreements entered into under the California Articles and
California law.
CUMULATIVE VOTING FOR DIRECTORS
Cumulative voting permits the holder of each share of stock entitled to
vote in the election of directors to cast that number of votes which equal the
number of directors to be elected. The holder may allocate all votes represented
by a share to a single candidate or may allocate those votes among as many
candidates as he chooses. Thus, a shareholder with a significant minority
percentage of the outstanding shares may be able to elect one or more directors
if voting is cumulative. In contrast, under non-cumulative voting, the holder or
holders of a majority of the shares entitled to vote in an election of directors
will be able to elect all the directors of the Company.
Under California law, cumulative voting in the election of directors is
mandatory upon notice given by a shareholder at a shareholders' meeting at which
directors are to be elected. In order to cumulate votes a shareholder must give
notice at the meeting, prior to the voting, of the shareholder's intention to
vote cumulatively. If any one shareholder gives such a notice, all shareholders
may cumulate their votes. However, California law permits a company, by amending
its articles of incorporation or bylaws, to eliminate cumulative voting when the
Company's shares are listed on a national stock exchange or traded on NASDAQ and
are held by at least 800 equity security holders. The California Articles do not
include such a provision.
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Cumulative voting is not available under Delaware law unless so provided in
the corporation's certificate of incorporation. The Delaware Certificate does
not provide for cumulative voting.
The elimination of cumulative voting could deter investors from acquiring a
minority block in the Company with a view toward obtaining a board seat and
influencing Company policy. It is also conceivable that the absence of
cumulative voting might deter efforts to seek control of the Company, which some
shareholders might deem favorable.
OTHER MATTERS RELATING TO DIRECTORS
NUMBER OF DIRECTORS
California law allows the number of persons constituting the board of
directors of a corporation to be fixed by the bylaws or the articles of
incorporation, or permits the bylaws to provide that the number of directors may
vary within a specified range, the exact number to be determined by the board of
directors. California law further provides that, in the case of a variable
board, the maximum number of directors may not exceed two times the minimum
number minus one. The California Bylaws provide for a Board of Directors that
may vary between five and nine members, inclusive, and the Board of Directors
has fixed the exact number of directors at five. California law also requires
that any change in the range of a variable Board of Directors specified in the
articles and bylaws must be approved by a majority in interest of the
outstanding shares entitled to vote (or such greater proportion of the
outstanding shares as may be required by the articles of incorporation),
provided that a change reducing the minimum number of directors to less than
three cannot be adopted if votes cast against its adoption are equal to more
than 16 2/3% of the outstanding shares entitled to vote. The California Bylaws
require the vote of a majority of the outstanding shares to change the range of
the Company's variable Board of Directors; provided, any amendment reducing the
minimum number of directors to less than five (5) cannot be adopted if votes
cast against are equal to more than 16 2/3% of the outstanding shares entitled
to vote.
Delaware law permits a board of directors to change the authorized number
of directors by amendment to the bylaws unless the number of directors is fixed
in the certificate of incorporation or the manner of fixing the number of
directors is set forth in the certificate of incorporation, in which case the
number of directors may be changed only by amendment of the certificate of
incorporation or consistent with the manner specified in the certificate of
incorporation, as the case may be. The Delaware Certificate provides that the
number of directors shall be no less than five (5) and no more than nine (9)
directors. The Delaware Bylaws provide that the exact number of directors is to
be determined by resolution of the Board of Directors.
CLASSIFICATION OF THE BOARD OF DIRECTORS AND CERTAIN OTHER RELATED MATTERS
Under California law, California corporations meeting certain
qualifications may amend their articles of incorporation to provide for a
classified board, but for corporations not so qualified directors must be
elected annually and a classified board is not permitted. The California
Articles and California Bylaws now provide that all directors are to be elected
annually for a term of one year. Delaware law permits, but does not require,
provisions in a certificate of incorporation or bylaws that provide for a
classified board of directors. To enhance continuity and stability of the Board
of Directors and the policies formulated by the Board, the Delaware Certificate
provides for classification of the Board of Directors (the "Classified Board
Provision"). The Classified Board Provision provides that directors will be
classified into three classes, as nearly equal in number as possible. Class I
would hold office initially for a term expiring at the 1998 annual meeting of
stockholders; Class II would hold office initially for a term expiring at the
1999 annual meeting of stockholders; and Class III would hold office initially
for a term expiring at the 2000 annual meeting of stockholders. At each annual
meeting of stockholders following this initial classification and election, the
successors to the class of directors whose terms expire at that meeting would be
elected for a term of office to expire at the third succeeding annual meeting of
stockholders after their election and until their successors have been duly
elected and qualified.
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Under Delaware law, directors chosen to fill vacancies on a classified
board shall hold office until the next election of the class for which such
directors shall have been chosen, and until their successors are elected and
shall have qualified. Delaware law also provides that, unless the certificate of
incorporation provides otherwise, directors serving on a classified board of
directors may be removed only for cause. The Delaware Certificate will not
provide otherwise.
The Classified Board Provision will significantly extend the time required
to effect a change in control of the Board of Directors and may discourage
hostile takeover bids for the Delaware Company. Currently, a change in control
of the Board of Directors of the Company can be made by stockholders holding a
plurality of the votes cast at a single annual meeting of stockholders. If the
stockholders approve the Reincorporation, it will take at least two annual
meetings of stockholders for even a majority of stockholders to make a change in
control of the Board of Directors, because only a minority of the directors will
be elected at each meeting.
Because of the additional time required to change control of the Board of
Directors, the Classified Board Provision will tend to perpetuate present
management. Without the ability to obtain immediate control of the Board of
Directors, a takeover bidder will not be able to take action to remove other
impediments to its acquisition of the Delaware Company. Because the Classified
Board Provision will increase the amount of time required for a takeover bidder
to obtain control of the Delaware Company without the cooperation of the Board
of Directors, even if the takeover bidder were to acquire a majority of the
Delaware Company's outstanding stock, it will tend to discourage certain tender
offers, perhaps including some tender offers that stockholders may feel would be
in their best interests. The Classified Board Provision will also make it more
difficult for the stockholders to change the composition of the Board of
Directors even if the stockholders believe such a change would be desirable.
The Classified Board Provision is designed to assure continuity and
stability in the Board of Directors' leadership and policies. While management
has not experienced any problems with such continuity in the past, it wishes to
ensure that this experience will continue. The Board of Directors also believes
that the Classified Board Provision will assist the Board of Directors in
protecting the interests of the Delaware Company's stockholders in the event of
an unsolicited offer for the Delaware Company.
This Classified Board Provision is intended to encourage persons seeking to
acquire control of the Delaware Company, including through proxy fights or
hostile takeovers, to initiate such efforts through negotiations with the Board
of Directors. The Board of Directors believes that the Classified Board
Provision will help give the Board of Directors the time necessary to evaluate
unsolicited offers, as well as appropriate alternatives, in a manner which
assures fair treatment of the Delaware Company's stockholders. The Classified
Board Provision is also intended to increase the bargaining leverage of the
Board of Directors, on behalf of the Delaware Company's stockholders, in any
negotiations concerning a potential change of control of the Delaware Company.
The Classified Board Provision will, however, make more difficult or discourage
a proxy contest or the assumption of control by a substantial stockholder and
thus could increase the likelihood that incumbent directors will retain their
positions. The Classified Board Provision could also have the effect of
discouraging a third party from making a tender offer or otherwise attempting to
obtain control of the Delaware Company even though such attempt might be
beneficial to the Delaware Company's stockholders.
The Delaware Certificate contains certain provisions that could be
characterized as specific "anti-takeover" provisions. The Delaware Certificate
permits the Delaware Company to issue "blank check" preferred stock, with such
designations, rights and preferences as may be determined from time to time by
the Board of Directors, without stockholder approval. The Delaware Certificate
currently authorizes the issuance of 5,000,000 shares of preferred stock. The
authorized and available preferred stock could be issued by the Delaware Company
and used to discourage a change in the control of the Delaware Company.
The Classified Board Provision is permitted by Delaware law and is
consistent with the rules of NASDAQ on which the Delaware Company's Common Stock
will be traded. The Classified Board Provision is not being implemented as the
result of any specific efforts of which the Delaware Company is aware to obtain
control of the Delaware Company.
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The Classified Board Provision described herein is set forth in Exhibit B
to this Proxy Statement. The preceding description of the Classified Board
Provision is qualified in its entirety by reference to Exhibit B.
REMOVAL OF DIRECTORS
Under California law, a director may be removed with or without cause by
the affirmative vote of a majority of the outstanding shares, provided that the
shares voted against removal would not be sufficient to elect the director by
cumulative voting. Under Delaware law, unless the board is classified or
cumulative voting is permitted, a director can be removed from office during his
term by shareholders with or without cause by the holders of a majority of the
shares then entitled to vote at an election of directors. Since the Delaware
Certificate provides for a classified board, the Delaware Bylaws provide that
the Company's directors may be removed from office only for cause by the
affirmative vote of the holders of a majority of shares then entitled to vote at
the election of directors. The term "cause" with respect to the removal of
directors is not defined in the Delaware General Corporation Law and its meaning
has not been precisely delineated by the Delaware courts.
FILLING BOARD VACANCIES
Under California law, if, after the filling of any vacancy by the directors
of a corporation, the directors then in office who have been elected by the
corporation's shareholders constitute less than a majority of the directors then
in office, then: (i) any holder of more than 5% of the corporation's Voting
Stock may call a special meeting of shareholders, or (ii) the superior court of
the appropriate county may order a special meeting of the shareholders to elect
the entire board of directors of the corporation. Delaware law provides that if,
at the time of filling any vacancy or newly created directorship, the directors
then in office constitute less than a majority of the entire board of directors
as constituted immediately prior to any increase, the Delaware Court of Chancery
may, upon application of any shareholder or shareholders holding at least 10% of
the total number of shares at the time outstanding having the right to vote for
such directors, summarily order an election to be held to fill any such
vacancies or newly created directorships or to replace the directors chosen by
the directors then in office.
The proposed Delaware Bylaws provide that vacancies shall be filled by the
affirmative vote of a majority of directors then in office, even if such
directors comprise less than a quorum of the Board of Directors.
CAPITALIZATION
Currently, the Company's capital stock consists of 20,000,000 authorized
shares of Common Stock, no par value, of which 10,821,897 shares issued and
outstanding as of May 19, 1997, and 5,000,000 authorized shares of Preferred
Stock, no par value, none of which are issued and outstanding as of May 19,
1997.
Upon the effectiveness of the reincorporation, the Delaware Company will
have the same number of outstanding shares of Common Stock that the Company had
outstanding immediately prior to the reincorporation.
The capitalization of the Delaware Company is identical to the
capitalization of the Company with the addition of a per share par value, with
authorized capital stock of 20,000,000 shares of Common Stock, $.001 par value
and 5,000,000 shares of Preferred Stock, $.001 par value, consistent with
maintaining adequate capitalization for the current needs of the Company. The
Delaware Company's authorized but unissued shares of Preferred Stock will be
available for future issuance.
Under the Delaware Certificate, as under the California Articles, the Board
of Directors has the authority to determine or alter the rights, preferences,
privileges and restrictions to be granted to or imposed upon any wholly unissued
series of Preferred Stock and to fix the number of shares constituting any such
series and to determine the designation thereof.
The Board of Directors may authorize the issuance of Preferred Stock for
the purpose of adopting shareholder rights plans or in connection with various
corporate transactions, including corporate partnering arrangements. If the
reincorporation is approved, it is not the present intention of the Board of
Directors to
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seek shareholder approval prior to any issuance of Preferred Stock, except as
required by law or regulation. See "-- Anti-Takeover Measures."
SHAREHOLDER POWER TO CALL SPECIAL SHAREHOLDERS' MEETING
Under California law, a special meeting of shareholders may be called by
the Board of Directors, the Chairman of the Board of Directors, the President or
the holders of shares entitled to cast not less than 10% of the votes at such
meeting and such persons as are authorized by the articles of incorporation or
bylaws. Under Delaware law, a special meeting of shareholders may be called by
the Board of Directors or by any other person authorized to do so in the
certificate of incorporation or the bylaws. The Delaware Certificate and Bylaws
provide that such a meeting may be called only by the Board of Directors, the
Chairman of the Board of Directors or the President, and not by any other person
or persons.
ACTION BY WRITTEN CONSENT OF SHAREHOLDERS
Under California and Delaware law, shareholders may execute an action by
written consent in lieu of a shareholder meeting. Both California and Delaware
law permits a corporation to eliminate the ability of stockholders to act by
written consent in its charter. The Delaware Certificate, unlike the California
Articles, prohibits shareholders from acting by written consent in lieu of a
meeting.
Elimination of shareholder power to act by written consent may lengthen the
amount of time required to take shareholder actions because certain actions by
written consent are not subject to the minimum notice requirement of a
shareholders' meeting. The elimination of shareholder power to act by written
consent may deter hostile takeover attempts because of the lengthened
shareholder approval process. Without the ability to act by written consent, a
holder or group of holders controlling a majority in interest of the Delaware
Company's capital stock will not be able to amend the Delaware Bylaws or remove
directors pursuant to a written consent. Any such holder or group of holders
would have to wait until a shareholders' meeting is held to take any such
action. The Board of Directors believes this provision, like the other
provisions to be included in the Delaware Certificate and Delaware Bylaws, will
enhance the Board of Directors' opportunity to fully consider and effectively
negotiate in the context of a takeover attempt.
ADVANCE NOTICE REQUIREMENT FOR SHAREHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
There is no specific statutory requirement under either California or
Delaware law with regard to advance notice of director nominations and
shareholder proposals. Absent a bylaw restriction, director nominations and
shareholder proposals may be made without advance notice at the annual meeting.
However, federal securities laws generally provide that shareholder proposals
that the proponent wishes to include in the Company's proxy materials must be
received not less than 120 days in advance of the date stated in the proxy
statement released in connection with the previous year's annual meeting.
The Delaware Bylaws provide that, in order for director nominations or
shareholder proposals to be properly brought before the annual meeting, the
shareholder must have delivered timely notice to the Secretary of the
corporation. To be timely under the Delaware Bylaws, notice must be delivered
not less than 70 nor more than 90 days prior to the first anniversary of the
preceding year's annual meeting. If the date of the annual meeting has been
advanced by more than 20 days or delayed by more than 70 days from such
anniversary date, the Delaware Bylaws provide that notice must be given not more
than 90 days nor less than 70 days prior to the annual meeting or within the 10
days following the day on which public announcement of the meeting is made.
These notice requirements help ensure that shareholders are aware of all
proposals to be voted on at the annual meeting and have the opportunity to
consider each proposal in advance of the annual meeting.
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ANTI-TAKEOVER MEASURES
Delaware law has been widely viewed to permit a corporation greater
flexibility in governing its internal affairs and its relationships with
shareholders and other parties than do the laws of many other states, including
California. In particular, Delaware law permits a corporation to adopt a number
of measures designed to reduce a corporation's vulnerability to hostile takeover
attempts. Such measures are either not currently permitted or are more narrowly
drawn under California law. Among these measures are the elimination of the
right of shareholders to call special shareholders' meetings which is described
above. In addition, certain types of "poison pill" defenses (such as shareholder
rights plans) discussed below have been upheld by Delaware courts, while
California courts have yet to decide on the validity of such defenses, thus
rendering their effectiveness in California less certain.
SHAREHOLDER APPROVAL OF CERTAIN BUSINESS COMBINATIONS
In the last several years, a number of states (but not California) have
adopted special laws designed to make certain kinds of "unfriendly" corporate
takeovers, or other transactions involving a corporation and one or more of its
significant shareholders, more difficult. Under Section 203 of the Delaware
General Corporation Law ("Section 203"), certain "business combinations" by
Delaware corporations with "interested stockholders" are subject to a three-year
moratorium unless specified conditions are met. Under Section 1203 of the
California General Corporation Law, certain business combinations with a
majority shareholder are subject to specified conditions, but there is no
equivalent provision to Section 203, which addresses business combinations with
a significant but not majority shareholder.
Section 203 prohibits a Delaware corporation from engaging in a "business
combination" with an "interested shareholder" for three years following the date
that such person becomes an interested stockholder. With certain exceptions, an
interested stockholder is a person or group who or which owns 15% or more of the
corporation's outstanding voting stock (including any rights to acquire stock
pursuant to an option, warrant, agreement, arrangement or understanding, or upon
the exercise of conversion or exchange rights, and stock with respect to which
the person has voting rights only), or is an affiliate or associate of the
corporation and was the owner of 15% or more of such voting stock at any time
within the previous three years.
For purposes of Section 203, the term "business combination" is defined
broadly to include mergers with or caused by the interested stockholder; sales
or other dispositions to the interested stockholder (except proportionately with
the corporation's other stockholders) of assets of the corporation or a
subsidiary equal to ten percent or more of the aggregate market value of the
corporation's consolidated assets or its outstanding stock; the issuance or
transfer by the corporation or a subsidiary of stock of the corporation or such
subsidiary to the interested stockholder (except for transfers in a conversion
or exchange or a pro rata distribution or certain other transactions, none of
which increase the interested stockholder's proportionate ownership of any class
or series of the corporation's or such subsidiary's stock); or receipt by the
interested stockholder (except proportionately as a stockholder), directly or
indirectly, of any loans, advances, guarantees, pledges or other financial
benefits provided by or through the corporation or a subsidiary.
The three-year moratorium imposed on business combinations by Section 203
does not apply if: (i) prior to the date on which such stockholder becomes an
interested stockholder the board of directors approves either the business
combination or the transaction which resulted in the person becoming an
interested stockholder; (ii) the interested stockholder owns 85% of the
corporation's voting stock upon consummation of the transaction which made him
or her an interested stockholder (excluding from the 85% calculation shares
owned by directors who are also officers of the target corporation and shares
held by employee stock plans which do not permit employees to decide
confidentially whether to accept a tender or exchange offer); or (iii) on or
after the date such person becomes an interested stockholder, the board approves
the business combination and it is also approved at a stockholder meeting by
sixty-six and two-thirds percent (66 2/3%) of the voting stock not owned by the
interested stockholder.
Section 203 only applies to Delaware corporations which have a class of
voting stock that is (i) listed on a national securities exchange, (ii)
authorized for quotation on the NASDAQ Stock Market or (iii) held of record by
more than 2,000 stockholders. Since the Delaware Company will have a class of
voting stock
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authorized for quotation on NASDAQ, Section 203 will be immediately applicable
to the Delaware Company following the Reincorporation. A Delaware corporation
may elect not to be governed by Section 203 by a provision in its original
certificate of incorporation or an amendment thereto or to the bylaws, which
amendment must be approved by majority stockholder vote and may not be further
amended by the board of directors. The Delaware Company does not intend to elect
not to be governed by Section 203.
The constitutionality of Section 203 is challenged from time to time in
lawsuits arising out of ongoing takeover disputes, and it is not yet clear
whether and to what extent its constitutionality will be upheld by the courts.
Although the United States District Court for the District of Delaware has
consistently upheld the constitutionality of Section 203, the Delaware Supreme
Court has not yet considered the issue. The Company believes that so long as the
constitutionality of Section 203 is upheld, Section 203 will encourage any
potential acquiror to negotiate with the Company's Board of Directors. Section
203 also has the effect of limiting the ability of a potential Delaware acquiror
to make a two-tiered bid for the Delaware Company in which all stockholders
would not be treated equally. Shareholders should note that the application of
Section 203 to the Delaware Company will confer upon the Board the power to
reject a proposed business combination, even though a potential acquiror may be
offering a substantial premium for the Delaware Company's shares over the
then-current market price (assuming the stock is then publicly traded). Section
203 should also discourage certain potential acquirors unwilling to comply with
its provisions.
SHAREHOLDER RIGHTS PLAN
In connection with the Reincorporation, the Delaware Company Board of
Directors will declare a dividend of one right (a "Right") on each share of
Common Stock of the Delaware Company (the "Delaware Common Stock"), effective
immediately prior to the effective time of the Reincorporation. As part of the
Reincorporation, shareholders of the Company are being asked to ratify the
Preferred Share Purchase Rights Plan to be adopted by the Delaware Company and
pursuant to which the Rights will be issued. Each Right entitles the registered
holder to purchase from the Delaware Company one one-thousandth of a share of
Series A Junior Participating Preferred Stock, par value $.001 per share, of the
Delaware Company (the "Preferred Stock") at a price of $ per one
one-thousandth of a share of Preferred Stock (the "Purchase Price"), subject to
adjustment. The description and terms of the Rights will be set forth in a
Rights Agreement (the "Rights Agreement"), between the Company and ,
as Rights Agent (the "Rights Agent"), the form of which is attached hereto as
Exhibit D.
Until the earlier to occur of (i) 10 days following a public announcement
that a person or group of affiliated or associated persons (with certain
exceptions, an "Acquiring Person") has acquired beneficial ownership of 15% or
more of the outstanding shares of Delaware Common Stock or (ii) 10 business days
(or such later date as may be determined by action of the Board of Directors
prior to such time as any person or group of affiliated persons becomes an
Acquiring Person) following the commencement of, or announcement of an intention
to make, a tender offer or exchange offer the consummation of which would result
in the beneficial ownership by a person or group of 15% or more of the
outstanding shares of Delaware Common Stock (the earlier of such dates being
called the "Distribution Date"), the Rights will be evidenced, with respect to
any of the Delaware Common Stock certificates outstanding as of the Record Date,
by such Delaware Common Stock certificate together with a copy of this Summary
of Rights.
The Rights Agreement provides that, until the Distribution Date (or earlier
expiration of the Rights), the Rights will be transferred with and only with the
Delaware Common Stock. Until the Distribution Date (or earlier expiration of the
Rights), new Delaware Common Stock certificates issued after the Record Date
upon transfer or new issuances of Delaware Common Stock will contain a notation
incorporating the Rights Agreement by reference. Until the Distribution Date (or
earlier expiration of the Rights), the surrender for transfer of any
certificates for shares of Delaware Common Stock outstanding as of the Record
Date, even without such notation or a copy of this Summary of Rights, will also
constitute the transfer of the Rights associated with the shares of Delaware
Common Stock represented by such certificate. As soon as practicable following
the Distribution Date, separate certificates evidencing the Rights ("Right
Certificates") will be mailed to holders of record of the Delaware Common Stock
as of the close of business on the Distribution Date and such separate Right
Certificates alone will evidence the Rights.
18
<PAGE> 20
The Rights are not exercisable until the Distribution Date. The Rights will
expire on , 2007 (the "Final Expiration Date"), unless the Final
Expiration Date is advanced or extended or unless the Rights are earlier
redeemed or exchanged by the Delaware Company, in each case as described below.
The Purchase Price payable, and the number of shares of Preferred Stock or
other securities or property issuable, upon exercise of the Rights is subject to
adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Preferred
Stock, (ii) upon the grant to holders of the Preferred Stock of certain rights
or warrants to subscribe for or purchase Preferred Stock at a price, or
securities convertible into Preferred Stock with a conversion price, less than
the then-current market price of the Preferred Stock or (iii) upon the
distribution to holders of the Preferred Stock of evidences of indebtedness or
assets (excluding regular periodic cash dividends or dividends payable in
Preferred Stock) or of subscription rights or warrants (other than those
referred to above).
The number of outstanding Rights is subject to adjustment in the event of a
stock dividend on the Delaware Common Stock payable in shares of Delaware Common
Stock or subdivisions, consolidations or combinations of the Delaware Common
Stock occurring, in any such case, prior to the Distribution Date.
Shares of Preferred Stock purchasable upon exercise of the Rights will not
be redeemable. Each share of Preferred Stock will be entitled, when, as and if
declared, to a minimum preferential quarterly dividend payment of $10 per share
but will be entitled to an aggregate dividend of 1000 times the dividend
declared per share of Delaware Common Stock. In the event of liquidation,
dissolution or winding up of the Delaware Company, the holders of the Preferred
Stock will be entitled to a minimum preferential payment of $1000 per share
(plus any accrued but unpaid dividends) but will be entitled to an aggregate
payment of 1000 times the payment made per share of Delaware Common Stock. Each
share of Preferred Stock will have 1000 votes, voting together with the Delaware
Common Stock. Finally, in the event of any merger, consolidation or other
transaction in which outstanding shares of Delaware Common Stock are converted
or exchanged, each share of Preferred Stock will be entitled to receive 1000
times the amount received per share of Delaware Common Stock. These rights are
protected by customary antidilution provisions.
Because of the nature of the Preferred Stock's dividend, liquidation and
voting rights, the value of the one one-thousandth interest in a share of
Preferred Stock purchasable upon exercise of each Right should approximate the
value of one share of Delaware Common Stock.
In the event that any person or group of affiliated or associated persons
becomes an Acquiring Person, each holder of a Right, other than Rights
beneficially owned by the Acquiring Person (which will thereupon become void),
will thereafter have the right to receive upon exercise of a Right that number
of shares of Delaware Common Stock having a market value of two times the
exercise price of the Right.
In the event that, after a person or group has become an Acquiring Person,
the Delaware Company is acquired in a merger or other business combination
transaction or 50% or more of its consolidated assets or earning power are sold,
proper provisions will be made so that each holder of a Right (other than Rights
beneficially owned by an Acquiring Person which will have become void) will
thereafter have the right to receive upon the exercise of a Right that number of
shares of Delaware Common Stock of the person with whom the Delaware Company has
engaged in the foregoing transaction (or its parent) that at the time of such
transaction have a market value of two times the exercise price of the Right.
At any time after any person or group becomes an Acquiring Person and prior
to the earlier of one of the events described in the previous paragraph or the
acquisition by such Acquiring Person of 50% or more of the outstanding shares of
Delaware Common Stock, the Board of Directors of the Delaware Company may
exchange the Rights (other than Rights owned by such Acquiring Person which will
have become void), in whole or in part, for shares of Delaware Common Stock or
Preferred Stock (or a series of the Delaware Company's preferred stock having
equivalent rights, preferences and privileges), at an exchange ratio of one
share of Delaware Common Stock, or a fractional share of Preferred Stock (or
other preferred stock) equivalent in value thereto, per Right.
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional shares of Preferred
19
<PAGE> 21
Stock or Delaware Common Stock will be issued (other than fractions of Preferred
Stock which are integral multiples of one one-thousandth of a share of Preferred
Stock, which may, at the election of the Delaware Company, be evidenced by
depository receipts), and in lieu thereof an adjustment in cash will be made
based on the current market price of the Preferred Stock or the Delaware Common
Stock.
At any time prior to the time an Acquiring Person becomes such, the Board
of Directors of the Delaware Company may redeem the Rights in whole, but not in
part, at a price of $.01 per Right (the "Redemption Price"), payable, at the
option of the Delaware Company, in cash, shares of Delaware Common Stock or such
other form of consideration as the Board of Directors of the Delaware Company
shall determine. The redemption of the Rights may be made effective at such
time, on such basis and with such conditions as the Board of Directors in its
sole discretion may establish. Immediately upon any redemption of the Rights,
the right to exercise the Rights will terminate and the only right of the
holders of Rights will be to receive the Redemption Price.
For so long as the Rights are then redeemable, the Delaware Company may,
except with respect to the Redemption Price, amend the Rights Agreement in any
manner. After the Rights are no longer redeemable, the Delaware Company may,
except with respect to the Redemption Price, amend the Rights Agreement in any
manner that does not adversely affect the interests of holders of the Rights.
Until a Right is exercised or exchanged, the holder thereof, as such, will
have no rights as a stockholder of the Delaware Company, including, without
limitation, the right to vote or to receive dividends.
The foregoing summary of certain terms of the Rights Agreement is qualified
in its entirety by reference to the form of the Rights Agreement, a copy of
which is attached as Exhibit D. The Rights will be registered under the Exchange
Act pursuant to a Registration Statement on Form 8-A to be filed by the Delaware
Company. In the event the Rights become exercisable, the Delaware Company will
register the shares of Preferred Stock for which the Rights may become exercised
in accordance with applicable law.
ADDITIONAL ANTI-TAKEOVER MEASURES
There can be no assurance that the Board of Directors would not adopt any
further anti-takeover measures available under Delaware law (some of which may
not require shareholder approval). Moreover, the availability of such measures
under Delaware law, whether or not implemented, may have the effect of
discouraging a future takeover attempt which a majority of the Delaware
Company's shareholders may deem to be in their best interests or in which
shareholders may receive a premium for their shares over then current market
prices. As a result, shareholders who might desire to participate in such
transactions may not have the opportunity to do so. Shareholders should
recognize that, if adopted, the effect of such measures, along with the
possibility of discouraging takeover attempts, may be to limit in certain
respects the rights of shareholders of the Delaware Company compared with the
rights of shareholders of the Company.
The Board of Directors recognizes that hostile takeover attempts do not
always have the unfavorable consequences or effects described above and may
frequently be beneficial to the shareholders, providing all of the shareholders
with considerable value for their shares. However, the Board of Directors
believes that the potential disadvantages of unapproved takeover attempts (such
as disruption of the Company's business and the possibility of terms which may
be less than favorable to all of the shareholders than would be available in a
board-approved transaction) are sufficiently great such that prudent steps to
reduce the likelihood of such takeover attempts and to enable the Board of
Directors to fully consider the proposed takeover attempt and actively negotiate
its terms are in the best interests of the Company and its shareholders.
In addition to the various anti-takeover measures that would be available
to the Delaware Company after the reincorporation due to the application of
Delaware law, the Delaware Company would retain the rights currently available
to the Company under California law to issue shares of its authorized but
unissued capital stock. Following the effectiveness of the proposed
reincorporation, shares of authorized and unissued Delaware Common Stock and
preferred stock of the Delaware Company (the "Delaware Preferred Stock") could
(within the limits imposed by applicable law) be issued in one or more
transactions, or Delaware Preferred Stock could be issued with terms, provisions
and rights which would make more difficult and, therefore, less
20
<PAGE> 22
likely, a takeover of the Delaware Company. Any such issuance of additional
stock could have the effect of diluting the earnings per share and book value
per share of existing shares of Delaware Common Stock and Delaware Preferred
Stock, and such additional shares could be used to dilute the stock ownership of
persons seeking to obtain control of the Delaware Company.
It should be noted that the voting rights to be accorded to any unissued
series of Delaware Preferred Stock remain to be fixed by the Delaware Board of
Directors. Accordingly, if the Delaware Board of Directors so authorizes, the
holders of Delaware Preferred Stock may be entitled to vote separately as a
class in connection with approval of certain extraordinary corporate
transactions in circumstances where Delaware law does not ordinarily require
such a class vote, or might be given a disproportionately large number of votes.
Such Delaware Preferred Stock could also be convertible into a large number of
shares of Delaware Common Stock of the Delaware Company under certain
circumstances or have other terms which might make acquisition of a controlling
interest in the Delaware Company more difficult or more costly, including the
right to elect additional directors to the Delaware Board of Directors.
Potentially, the Delaware Preferred Stock could be used to create voting
impediments or to frustrate persons seeking to effect a merger or otherwise to
gain control of the Delaware Company. Also, the Delaware Preferred Stock could
be privately placed with purchasers who might side with the management of the
Delaware Company in opposing a hostile tender offer or other attempt to obtain
control.
If the reincorporation is approved it is not the present intention of the
Board of Directors to seek shareholder approval prior to any issuance of the
Delaware Preferred Stock or Delaware Common Stock of the Delaware Company,
except as required by law or regulation. Frequently, opportunities arise that
require prompt action, and it is the belief of the Board of Directors that the
delay necessary for shareholder approval of a specific issuance would be a
detriment to the Delaware Company and its shareholders. The Board of Directors
does not intend to issue any Preferred Stock except on terms which the Board of
Directors deems to be in the best interests of the Delaware Company and its then
existing shareholders.
AMENDMENT OF CERTIFICATE
The California Articles provide that the provisions thereof may be amended
by the affirmative vote of a simple majority of the holders of the outstanding
Voting Stock of the Company. The Delaware Certificate provides that all
provisions thereof other than certain anti-takeover provisions (i.e., the
classified board, elimination of the ability to act by written consent and
limitation on ability to call special meetings of stockholders) may be amended
by the affirmative vote of 80% of the voting power of the Voting Stock of the
Company.
AMENDMENT OF BYLAWS
The California Bylaws provide that the provisions can be amended by the
affirmative vote of the holders of a majority of the voting power of the Voting
Stock of the Company. The Delaware Certificate provides that the Delaware Bylaws
may be amended by the affirmative vote of 80% of the voting power of the Voting
Stock of the Company.
LOANS TO OFFICERS, DIRECTORS AND EMPLOYEES
California law provides that any loan or guaranty (other than loans to
permit the purchase of shares under certain stock purchase plans) for the
benefit of any officer or director, or any employee benefit plan authorizing
such loan or guaranty (except certain employee stock purchase plans), must be
approved by the shareholders of a California corporation.
Under Delaware law, a corporation may make loans to, or guarantee the
obligations of, officers or other employees when, in the judgment of the board
of directors, the loan or guaranty may reasonably be expected to benefit the
corporation. Both California law and Delaware law permit such loans or
guaranties to be unsecured and without interest.
21
<PAGE> 23
CLASS VOTE FOR CERTAIN REORGANIZATIONS
With certain exceptions, California law requires that mergers,
reorganizations, certain sales of assets and similar transactions be approved by
a majority vote of each class of shares outstanding. Delaware law generally does
not require class voting for such transactions, except in certain situations
involving an amendment to the certificate of incorporation which adversely
affects a specific class of shares.
California law also requires that holders of a California corporation's
Common Stock receive nonredeemable Common Stock in a merger of the corporation
with the holder (or an affiliate of the holder) of more than 50% but less than
90% of its Common Stock, unless all of the holders of its Common Stock consent
to the merger or the merger has been approved by the California Commissioner of
Corporations at a "fairness" hearing. This provision of California law may have
the effect of making a cash "freezeout" merger by a majority shareholder more
difficult to accomplish. A cash freezeout merger is a transaction whereby a
minority shareholder is forced to relinquish his share ownership in a
corporation in exchange for cash, subject in certain instances to dissenters'
rights. Although Delaware law does not parallel California law in this respect,
under some circumstances Section 203 does provide similar protection against
coercive two-tiered bids for a corporation in which the stockholders are not
treated equally. See "Significant Changes Caused By Reincorporation --
Stockholder Approval of Certain Business Combinations".
INSPECTION OF SHAREHOLDER LISTS
California law provides for an absolute right of inspection of the
shareholder list for shareholders holding 5% or more of a corporation's Voting
Stock or shareholders holding 1% or more of such shares who have filed a
Schedule 14B with the SEC. Delaware law provides no such absolute right of
shareholder inspection. However, both California and Delaware law permit any
shareholder of record to inspect the shareholder list for any purpose reasonably
related to that person's interest as a shareholder.
APPRAISAL RIGHTS
Under both California law and Delaware law, a shareholder of a corporation
participating in certain mergers and reorganizations may be entitled to receive
cash in the amount of the "fair value" (Delaware) or "fair market value"
(California) of its shares, as determined by a court, in lieu of the
consideration it would otherwise receive in the transaction. The limitations on
such dissenters' appraisal rights are somewhat different in California and
Delaware.
Shareholders of a California corporation, the shares of which are listed on
a national securities exchange or on the OTC margin stock list, generally do not
have appraisal rights unless the holders of at least 5% of the class of
outstanding shares assert the appraisal right. In any reorganization in which
one corporation or the shareholders of one corporation own more than 5/6 of the
voting power of the surviving or acquiring corporation, shareholders are denied
dissenters' rights under California law. For this reason, appraisal rights will
not be available to shareholders in connection with the reincorporation
proposal.
Under Delaware law appraisal rights are not available to shareholders with
respect to a merger or consolidation by a corporation, the shares of which are
either listed on a national securities exchange or designated as a national
market system security or an interdealer quotation system security by the
National Association of Securities Dealers, Inc., or are held of record by more
than 2,000 holders if the shareholders receive shares of the surviving
corporation or shares of any other corporation which are similarly listed or
dispersed, and the shareholders do not receive any other property in exchange
for their shares except cash for fractional shares. Appraisal rights are also
unavailable under Delaware law to shareholders of a corporation surviving a
merger if no vote of those shareholders is required to approve the merger
because, among other things, the number of shares to be issued in the merger
does not exceed 20% of the shares of the surviving corporation outstanding
immediately before the merger and certain other conditions are met.
22
<PAGE> 24
HOLDING COMPANY REORGANIZATION
A new Section 251(g) has been added to the General Corporation Law
permitting a Delaware corporation to reorganize as a holding company without
stockholder approval. The reorganization contemplated by the statute is
accomplished by merging the subject corporation with or into a direct or
indirect wholly owned subsidiary of the corporation and converting the stock of
the corporation into stock of another direct or indirect wholly owned subsidiary
of the corporation, which would be the new holding company. The statute
eliminates the requirement for a stockholder vote on such a merger but contains
several provisions designed to ensure that the rights of stockholders are not
changed by or as a result of the merger, except and to the extent that such
rights could be changed without such a stockholder approval under existing law.
Thus, the resulting holding company must be a Delaware corporation and have
the same certificate of incorporation (except for provisions that could have
been amended or deleted without stockholder approval), bylaws, and directors
that the corporation had prior to the reorganization. The corporation or its
successor must, as a result of the reorganization, become a direct or indirect
wholly owned subsidiary of the holding company and must retain the same
certificate of incorporation and bylaws that the corporation had prior to the
reorganization (except that the capitalization may be reduced and except for the
addition of the provision described in the next sentence). To ensure that the
voting rights of the stockholders of the corporation are not changed or evaded
as a result of the reorganization, the statute requires that the certificate of
incorporation of the corporation provide that any extraordinary transactions
involving the corporation be approved by the stockholders of the holding company
by the same vote required of the stockholders of the corporation under the
General Corporation Law and/or by the corporation's certificate of
incorporation. To ensure that any restrictions on stockholders of the
corporation imposed by Section 203 or any exemption from such restrictions,
remains unaffected by a holding company reorganization, the statute further
provides that the provisions of Section 203 will apply to persons who are
stockholders of the holding company immediately after the effectiveness of a
holding company reorganization to the same extent that they applied to
stockholders of the corporation immediately prior to the reorganization. In
order for no stockholder vote to be required, a holding company reorganization
must be tax-free for federal income tax purposes to stockholders of the
corporation. Appraisal rights are not available to stockholders in a merger that
qualifies as a holding company reorganization.
FAIRNESS OPINION REQUIREMENT
California law also provides that, except in certain circumstances, when a
tender offer or a proposal for a reorganization or for a sale of assets is made
by an interested party (generally a controlling or managing party of the target
corporation), an affirmative opinion in writing as to the fairness of the
consideration to be paid to the shareholders must be delivered to the
shareholders. This fairness opinion requirement does not apply to a corporation
which does not have shares held of record by at least 100 persons, or to a
transaction which has been qualified under California state securities laws.
Furthermore, if a tender of shares or vote is sought pursuant to an interested
party's proposal and a later proposal is made by another party at least ten days
prior to the date of acceptance of the interested party proposal, the
shareholders must be informed of the later offer and be afforded a reasonable
opportunity to withdraw any vote, consent or proxy, or to withdraw any tendered
shares. Delaware law has no comparable provision, and the stockholders of the
Delaware Company might, therefore, be deprived of an opportunity to consider
such other proposal.
VOTING AND APPRAISAL RIGHTS IN CERTAIN TRANSACTIONS
Delaware law does not provide shareholders with voting or appraisal rights
when a corporation acquires another business through the issuance of its stock,
whether in exchange for assets or stock or in a merger with a subsidiary.
California law treats these kinds of acquisitions in the same manner as a merger
of the corporation directly with the business to be acquired and provides
appraisal rights in the circumstances described in the preceding section.
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<PAGE> 25
DIVIDENDS
Under California law, any dividends or other distributions to shareholders,
such as redemptions, are limited to the greater of (i) retained earnings or (ii)
an amount which would leave the corporation with assets (excluding certain
intangible assets) equal to at least 125% of its liabilities (excluding certain
deferred items) and current assets equal to at least 100% (or, in certain
circumstances, 125%) of its current liabilities. Delaware law allows the payment
of dividends and redemption of stock out of surplus (including paid-in and
earned surplus) or out of net profits for the current and immediately preceding
fiscal years. The Company has never paid cash dividends and has no present plans
to do so.
APPLICATION OF CALIFORNIA LAW AFTER REINCORPORATION
California law provides that if (i) the average of certain property,
payroll and sales factors results in a finding that more than 50% of the
Delaware Company's business is conducted in California, and in a particular
fiscal year more than 50% of the Delaware Company's outstanding voting
securities are held of record by persons having addresses in California, and
(ii) the Company's shares are traded in the NASDAQ and are held by fewer than
800 equity security holders, as of its most recent annual meeting of
shareholders, then the Delaware Company would become subject to certain
provisions of California law regardless of its state of incorporation. The
Company does not currently meet all of the above requirements.
Because the Company's Delaware Common Stock is traded in the NASDAQ and the
Company's shares are held by at least 800 equity security holders, as of its
most recent annual meeting of shareholders, California law will not initially
apply to the Delaware Company if the reincorporation is approved. The Company
would not be subject to California law as long as it continued to not satisfy at
least one of the above stated requirements.
If the Delaware Company were to become subject to the provisions of
California law referred to above, and such provisions were enforced by
California courts in a particular case, many of the Delaware laws described in
this Proxy Statement would not apply to the Delaware Company. Instead, the
Delaware Company could be governed by certain California laws, including those
regarding liability of directors for breaches of the duty of care,
indemnification of directors, dissenters' rights of appraisal, removal of
directors as well as certain other provisions discussed above, to the exclusion
of Delaware law. The effects of applying both Delaware and California laws to a
Delaware corporation whose principal operations are based in California have not
yet been determined.
FEDERAL INCOME TAX CONSEQUENCES OF THE REINCORPORATION
The reincorporation provided for in the Merger Agreement is intended to be
a tax-free reorganization under the Internal Revenue Code of 1986, as amended.
Assuming the reincorporation qualifies as a reorganization, no gain or loss will
be recognized to the holders of capital stock of the Company as a result of
consummation of the reincorporation, and no gain or loss will be recognized by
the Company or the Delaware Company. Each former holder of capital stock of the
Company will have the same basis in the capital stock of the Delaware Company
received by such holder pursuant to the reincorporation as such holder has in
the capital stock of the Company held by such holder at the time of consummation
of the reincorporation. Each shareholder's holding period with respect to the
Delaware Company's capital stock will include the period during which such
holder held the corresponding Company capital stock, provided the latter was
held by such holder as a capital asset at the time of consummation of the
reincorporation. The Company has not obtained a ruling from the Internal Revenue
Service or an opinion of legal or tax counsel with respect to the consequences
of the reincorporation.
A successful IRS challenge to the reorganization status of the proposed
reincorporation (in consequence of a failure to satisfy the "continuity of
interest" requirement or otherwise) would result in a shareholder recognizing
gain or loss with respect to each share of the Company's Common Stock exchanged
in the proposed reincorporation equal to the difference between the
shareholder's basis in such share and the fair market value, as of the time of
exchange therefor. In such event, a shareholder's aggregate basis in the shares
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<PAGE> 26
of the Common Stock received in the exchange would equal their fair market value
on such date, and the shareholder's holding period for such Common Stock would
commence anew.
The foregoing is only a summary of certain federal income tax consequences.
SHAREHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISERS REGARDING THE SPECIFIC TAX
CONSEQUENCES TO THEM OF THE PROPOSED REINCORPORATION, INCLUDING THE
APPLICABILITY OF THE LAWS OF ANY STATE OR OTHER JURISDICTION.
PROPOSAL 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors of the Company has appointed Ernst & Young,
certified public accountants, as independent auditors of the Company for the
year ending February 22, 1998.
Arthur Young & Company, the predecessor to Ernst & Young, began serving the
Company in 1981. Ernst & Young has no direct financial interest or any material
indirect financial interest in the Company or its subsidiaries, and has had no
connection with the Company or its subsidiaries in the capacity of promoter,
underwriter, voting trustee, director, officer or employee.
The Company anticipates that a representative of Ernst & Young will be
present at the Annual Meeting. Such representative will have an opportunity to
make a statement, if such representative desires to do so, and will be available
to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE APPOINTMENT OF
ERNST & YOUNG AS INDEPENDENT AUDITORS OF THE COMPANY AND ITS SUBSIDIARIES FOR
THE FISCAL YEAR ENDING FEBRUARY 22, 1998.
SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS AND MANAGEMENT
The following table contains certain information as of June 15, 1997 as to
each director, each individual included in the Summary Compensation Table, all
officers and directors as a group and each person who, to the knowledge of the
Company, was the beneficial owner of 5% or more of the outstanding shares of
Common Stock. Persons named in the following table have sole voting and
investment powers with respect to all shares shown as beneficially owned by
them, subject to community property laws where applicable, and other information
contained in the footnotes to the table. Information with respect to beneficial
ownership is based on the Company's Common Stock records and data supplied to
the Company by its shareholders.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF
NAME OR IDENTITY OF GROUP BENEFICIALLY OWNED(1) CLASS
------------------------------------------------- ---------------------- ----------
<S> <C> <C>
John F. Glade.................................... 216,200(2) 2.0
Rockell N. Hankin................................ 39,572 *
Richard E. Mahmarian............................. 34,197 *
Clarke E. Reynolds............................... 51,572 *
Douglas J. Tullio................................ 441,939 3.9
All directors and officers as a group (8
persons)....................................... 805,980 7.1
</TABLE>
- ---------------
* Does not exceed 1% of the outstanding shares of Common Stock of the Company.
(1) Includes shares issuable upon exercise of options and warrants which are
presently exercisable or will become exercisable on or before August 15,
1997, in the following amounts: Glade: 27,500; Hankin: 13,125; Mahmarian:
8,750; Reynolds: 13,125; Tullio: 396,939; and by all officers and directors
as a group: 481,939.
(2) Includes 156,200 shares held in a revocable trust of which Mr. Glade and his
wife, Alana L. Glade, are sole trustees. Mr. and Mrs. Glade, acting jointly,
have the power to vote and dispose of such shares.
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<PAGE> 27
MANAGEMENT COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth for each of the Company's executive officers
earning in excess of $100,000 during the fiscal year ended February 23, 1997,
compensation allocated or paid on or before July 1, 1997, for services in all
capacities with the Company and its subsidiaries during the fiscal year ended
February 23, 1997.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION AWARDS
----------------------------
SECURITIES
ANNUAL COMPENSATION UNDERLYING
-------------------------------------- RESTRICTED OPTIONS/
NAME AND OTHER ANNUAL STOCK AWARD(S) SARS ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) ($)(1) (#)(2) COMPENSATION(3)
- ------------------------ ---- --------- -------- --------------- --------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Douglas J. Tullio....... 1997 225,004 90,000 * -- 180,000 --
President and CEO 1996 217,713 28,894 * -- 15,000 --
1995 206,400 28,359(4) * 5,859 514
John F. Glade........... 1997 120,016 12,500 * -- 20,000 --
Vice President, 1996 131,211 7,500 * -- 7,500 --
Engineering and 1995 133,262 17,430(4) * 2,930 -- 365
Manufacturing, and
Secretary
Philip D. Smith(5)...... 1997 110,000 -- * -- -- --
President, 1996 131,993(6) -- * -- 40,000 --
Alpha Health Care 1995 114,821 -- * -- -- 321
Michael J. Lowell(5).... 1997 106,698 -- * -- -- --
Vice President, Chief 1996 114,014 16,686 * -- 40,000 --
Financial Officer 1995 -- -- * -- -- --
</TABLE>
- ---------------
* Aggregate amount does not exceed 10% of the total of annual salary and bonus
reported for the named executive officer.
(1) The number of aggregate restricted unvested stock holdings outstanding as of
February 23, 1997 was 5,625 and the aggregate value of such restricted stock
was $11,953. Stock awards to Mr. Tullio and Mr. Glade as additional
compensation for fiscal 1995 vested 50% on May 5, 1996, and 50% vesting on
May 5, 1997. Although the Company has not paid and does not anticipate
paying dividends, any dividends paid would accrue to the benefit of the
grantees.
(2) All options were granted under the 1993 Alpha Microsystems Employee Stock
Option Plan.
(3) Consists solely of Company contributions to the Employee Profit Sharing and
Savings Plan.
(4) Includes awards of stock valued at the following amounts as of the date of
the award: for fiscal 1995: Tullio: $5,859, and Glade: $2,930.
(5) Mr. Smith resigned as President of AlphaHealthCare, the Company's subsidiary
(the assets of which were sold in fiscal 1997), effective August 30, 1996.
Mr. Lowell resigned as Vice President, Chief Financial Officer, effective
November 15, 1996.
(6) Includes commissions of $3,039 paid to Mr. Smith.
26
<PAGE> 28
STOCK OPTION GRANTS
The following table provides information on stock options granted under the
1993 Alpha Microsystems Employee Stock Option Plan to the executive officers
named in the Summary Compensation Table.
OPTION/SAR GRANTS IN LAST FISCAL YEAR (1)
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT ASSUMED
PERCENT OF INDIVIDUAL GRANTS ANNUAL RATES OF
NUMBER OF TOTAL ---------------------- STOCK
SECURITIES OPTIONS/SARS MARKET PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE OF PRICE ON FOR OPTION TERM
OPTIONS/SARS EMPLOYEES IN BASE PRICE DATE OF EXPIRATION -------------------
NAME GRANTED (#) FISCAL YEAR ($/SH) GRANT DATE 5% ($) 10% ($)
- --------------------------- ------------ ------------ ----------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Douglas J. Tullio.......... 180,000 29% $3.00 $ 3.00 6/16/2001 149,192 $329,675
President and CEO
John F. Glade.............. 20,000 3% $3.00 $ 3.00 6/16/2001 16,577 $ 36,631
Philip D. Smith............ -- -- -- -- -- -- --
Michael J. Lowell(2)....... 125,000 20% $3.00 $ 3.00 6/16/2001 103,606 $228,941
</TABLE>
- ---------------
(1) All options were granted under the 1993 Alpha Microsystems Employee Stock
Option Plan. Options granted to Mr. Tullio and Mr. Glade become exercisable
as follows: 25% on August 13, 1996, 25% on June 16, 1997, 25% on June 16,
1998 and 25% on June 16, 1999. In the event that the employment of optionee
shall be terminated, otherwise than by reason of death or permanent
disability or misconduct, the option and all rights terminate on the 30th
day after termination of employment.
(2) Options granted to Mr. Lowell (which were not exercised and expired in
fiscal 1997 as a result of his resignation) became exercisable as follows:
25% on August 13, 1996, 25% on June 16, 1997, 25% on June 16, 1998, and 25%
on June 16, 1999.
FISCAL YEAR-END VALUES OF OUTSTANDING STOCK OPTIONS
The following table provides information with respect to the executive
officers named in the Summary Compensation Table concerning unexercised stock
options held as of the end of the Company's 1997 fiscal year.
FISCAL YEAR-END OPTION/VALUES
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
ACQUIRED ON VALUE OPTIONS AT FY-END (#) AT FY-END ($)
EXERCISE REALIZED --------------------------- ---------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------ ----------- ------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Douglas J. Tullio............. -- -- 348,189 138,750 121,702 5,039
John F. Glade................. -- -- 20,625 16,875 9,409 2,520
Philip D. Smith............... 10,000 $10,625 -- -- -- --
Michael J. Lowell............. 10,000 0 -- -- -- --
</TABLE>
COMPENSATION OF DIRECTORS
Directors who are employees of the Company do not receive additional
compensation for acting as a member of the Board of Directors or any committee
thereof. Outside directors receive a monthly retainer of $2,000, and a fee of
$1,000 for each Board meeting and committee meeting (excluding telephonic
meetings) attended in excess of 12 each year, with all Board and committee
meetings held in a single day to be deemed as one meeting. In addition,
directors are reimbursed for their reasonable travel expenses incurred for
attendance at such meetings. Under the 1996 Nonemployee Director Stock
Compensation Plan, directors may accept directors' fees in stock in lieu of
cash. In accordance with the terms of the 1996 Nonemployee Director
27
<PAGE> 29
Stock Compensation Plan, the number of shares of Common Stock received by the
nonemployee directors is based upon the fair market value of a share of Common
Stock at the date on which the cash compensation was otherwise payable to the
nonemployee director. Each of the Company's outside directors elected to receive
his director fees in fiscal year 1997 in the form of Company stock.
In June 1993, the Company entered into a Consulting Agreement with Mr.
Reynolds whereby Mr. Reynolds agrees to provide consulting services to the
Company. Under the agreement, the Company pays to Mr. Reynolds a retainer of
$2,000 per month. The agreement may be terminated by either party upon 30 days'
written notice.
EMPLOYMENT AGREEMENTS AND GUARANTEED SEVERANCE PAYMENTS
The Company has entered into employment agreements with Messrs. Tullio and
Glade. The agreements establish each employee's base salary and entitle each
employee to receive benefits, vacation and sick leave in accordance with the
Company's policies. The agreements are not for any specified term as either
party may terminate the employment relationship at any time in accordance with
the terms of the agreements. The agreements also contain provisions concerning
the non-disclosure by the employee of Company proprietary information and the
ownership of inventions conceived or made by the employee during the period of
employment with the Company. Pursuant to such employment agreements, under
certain circumstances, if an officer is terminated, voluntarily or
involuntarily, as a result of a "change in control" of the Company during the
term of his employment, the officer shall be entitled to monthly severance
payments for a period ranging under the individual agreements from 90 days to as
much as eighteen (18) months (the "Severance Period") following the effective
date of such termination. The term "change in control" means any of the
following: (a) merger or consolidation of the Company; (b) sale of all or
substantially all of the assets of the Company; (c) sale of more than 50% of the
outstanding common stock of the Company by any person or persons; or (d) change
of identity of at least a majority of the Board of Directors within a
twelve-month period. The severance payments are based upon the average total
compensation paid to such officer during the previous fiscal year (excluding any
non-cash compensation). The severance payments shall be reduced by any
compensation, fees or remuneration received by such officer during the Severance
Period. The Company is also obligated to continue to provide medical and dental
benefits to the officer during the Severance Period. Additionally, any rights
the officer may have in connection with Company's stock options and stock awards
and the Company's profit sharing plan shall continue uninterrupted during the
Severance Period, to the extent permitted by applicable tax law, other laws and
the Company plans. The severance payments to the executive officers are
required, under certain circumstances, to be placed in a trust to ensure
payment.
In addition to the foregoing, Mr. Tullio is entitled to receive severance
payments and a continuation of employee benefits following termination if
termination is for any reason other than for causes arising out of breach of
Company policy or illegal acts. Such severance payments and benefits are for up
to six (6) months for Mr. Tullio.
The Company has also entered into an agreement with James A. Sorensen, its
Vice President and Chief Financial Officer, pursuant to which Mr. Sorensen is
entitled to receive six (6) months termination pay at his base rate of pay in
effect at the time of termination if his employment is terminated by the Company
for any reason other than misconduct, fraud, or other unlawful acts.
INDEMNIFICATION AGREEMENTS
The Company has entered into indemnification agreements with its directors
and certain key officers which provide such individuals with contractual
indemnification rights. Such indemnification agreements apply retroactively as
well as prospectively to any actions taken by the indemnified parties while
serving as officers or directors of the Company. Such indemnification agreements
also provide that the Company shall indemnify such persons to the fullest extent
permitted by law, notwithstanding that such indemnification is not specifically
authorized by the indemnification agreement, the Company's Articles of
Incorporation, the Company's Bylaws or by statute.
28
<PAGE> 30
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee for fiscal 1997 was composed of
Messrs. Hankin, Mahmarian and Reynolds. Mr. Reynolds is Chairman of the Board
and has served the Company in the past in numerous executive positions,
including Chief Executive Officer.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee"), is
responsible for setting the salaries of executive officers and administering the
policies and programs that govern annual compensation. The Committee works in
conjunction with the Company's Stock Option Committee which administers employee
stock option and award programs.
The Company operates in a highly competitive and rapidly changing high
technology industry. The goal of the Committee with respect to the CEO and other
executive officers is to provide compensation sufficient to attract, motivate
and retain executives of outstanding ability. Recognizing the difficulties of
the Company's transition from a product international dealer-based organization
to a completely new identity as an Internet provider/service/networking company,
as well as the necessity for continually adjusting to the rapidly evolving
marketplace, the Committee seeks to set compensation policies that promote the
Company's flexibility to respond to changes in its business environment.
Base Salary. The Committee historically established the base salary of the
Chief Executive Officer (the "CEO") and other executive officers based primarily
upon a review of readily available salary surveys of similarly sized companies
in the Company's industry segment. The Committee annually evaluates the
performance of and determines adjustments to base salary of the chief executive
officer ("CEO") and the Company's other executive officers based upon a mix of
the achievement of the corporate goals, individual performance and contributions
and comparisons with other similarly sized companies in the Company's industry
segment.
Bonuses. Bonuses for executive officers are established by the Committee
based upon achievement of corporate objectives as well as individual
performance. While the Company's primary goal continues to be a return to
profitability, the Committee recognized that the costs of divesting
nonprofitable operations and the need for investment in new products could not
overshadow the progress made by the Company as a result of the successes of its
management team in moving towards this goal, even if the goal had not yet been
achieved. Bonuses awarded to executive officers for fiscal 1997 reflect the
successful implementation by the executive officers of a business plan to divest
the Company's foreign and nonprofitable operations while launching a new line of
Internet products.
Stock Plans. The long term incentive element of the Company's management
compensation program is provided through the award of stock options. Amounts
awarded are discretionary with the Stock Option Committee. The Company believes
that providing management with a substantial economic interest in the long-term
appreciation of the Company's Common Stock further aligns the interest of
stockholders and management. When granting stock options to executive officers
in fiscal 1997, the Stock Option Committee considered each officers' current
stock and stock option holdings.
Section 162(m) of the Internal Revenue Code (the "Code"), as amended,
limits the Company to a deduction of no more than $1 million paid to certain
executive officers in a taxable year. Compensation above $1 million may be
deducted if it is "performance-based compensation" within the meaning of the
Code. The Compensation Committee believes at the present time it is unlikely
that the compensation paid to any executive officer in a taxable year which is
subject to the deduction limit will exceed $1 million. Therefore, the Committee
has not yet established a policy for determining which forms of incentive
compensation awarded to executive officers will qualify as performance-based
compensation.
CEO COMPENSATION.
The evolution of the Company from a historic product international
dealer-based organization to a completely new identity as an Internet
provider/service/networking company has required unique manage-
29
<PAGE> 31
ment talent. Setting specific financial goals and realistic timeframes in which
to achieve those goals during this transition period has been difficult, but
movement towards profitability has been the ultimate goal.
The business plan towards achieving the goal of profitability has included
the divestiture of foreign and nonprofitable operations and related downsizing
as well as substantial investment in the initial start up of the Company's new
line of Internet products. As revenue from the divested operations was
eliminated, the CEO and management were successful in reducing expenses and
establishing improved management structures, while launching the new Internet
product line. Taking into account the costs of the divestitures and the expenses
associated with the new product line, remaining operations made substantial
progress towards profitability.
During recent years as revenues declined and the Company invested in its
future, the base salary of the chief executive officer ("CEO"), has not been
increased. Over the approximately seven years the CEO has been employed by the
Company his salary has increased only twelve and a half percent in the
aggregate, and he has voluntarily given up salary during various times when the
Company experienced cash flow problems. Information reviewed by the Committee
supplied by the Economic Research Institute for companies in similar industries
with similar revenues indicated that compensation levels for CEO's have
increased substantially and that the base salary of the CEO was significantly
below market.
The Committee in determining the CEO's compensation for fiscal 1997
considered the CEO's performance in (i) divesting the Company's foreign and
nonprofitable operations, (ii) directing the call of the Company's outstanding
warrants which generated over $10,000,000 in cash and enabled the Company to
invest in its new Internet products, (iii) the launch of the new Internet
product line, and (iv) the Company's progress, taking into account the costs of
launching the new Internet business, towards profitability. Based upon the CEO's
performance and accomplishments in these areas, it was the decision of the
Committee that while the mean of industry comparable salaries could not, in
light of the Company's lack of profitability in fiscal 1997, be paid, the
disparity between industry comparable salaries should be significantly reduced.
The Committee accordingly awarded Mr. Tullio a cash bonus of $90,000 for fiscal
year 1997.
Mr. Tullio was granted stock options in fiscal 1997 representing the right
to purchase 180,000 shares of Common Stock, which together with prior options
resulted in Mr. Tullio having the right to purchase 486,939 shares of Common
Stock (approximately 4.8% of the Company), consistent with prior Board
recommendation and Committee decision that the CEO should, in order to ensure
appropriate incentive to maximize shareholder value, have the right to purchase
approximately 5% of the outstanding shares of the Company.
Members of the Compensation Committee for fiscal 1997 were Clarke E.
Reynolds, Chairman, Rockell N. Hankin and Richard E. Mahmarian. Messrs. Hankin
and Mahmarian also constituted the Stock Option Committee.
30
<PAGE> 32
COMMON STOCK PERFORMANCE(1)
The following graph compares the percentage change in the Company's
cumulative total shareholder return on common stock over the last five-year
period with the performances of the Nasdaq Market Index and the Media General
Financial Services Industry Group 071 (Computers, Subsystems and Peripherals)
Index over the same period. The returns were calculated assuming the value of
the investment in the Company's stock and each index were $100 on February 23,
1991, and that all dividends were reinvested.
<TABLE>
<CAPTION>
Measurement Period Alpha Industry
(Fiscal Year Covered) Microsystems Index Broad Market
<S> <C> <C> <C>
1992 100 100 100
1993 138.89 81.80 100.16
1994 106.95 98.28 127.62
1995 41.67 110.26 121.85
1996 33.33 180.63 168.25
1997 94.44 206.78 201.94
</TABLE>
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended ("Section
16(a)"), requires the Company's directors and executive officers, and persons
who own more than ten percent of the Company's common stock, to file with the
Securities and Exchange Commission and the National Association of Securities
Dealers, Inc. initial reports of ownership and reports of changes in ownership
of Common Stock. Officers, directors and greater than ten-percent shareholders
are required by SEC regulations to furnish the Company with copies of all
Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended February 23, 1997 all such
reports required pursuant to Section 16(a) by the Company's officers, directors
and greater than ten-percent beneficial owners were timely filed, other than
reports on Form 5 required to reflect director fees paid pursuant to the
Company's 1996 Nonemployee Director Stock Compensation Plan and automatic stock
grants to directors pursuant to the Company's 1993 Director Stock Option Plan.
- ---------------
(1) This Section, including the Stock Performance Graph, shall not be deemed
incorporated by reference by any general statement incorporating by
reference this Proxy Statement into any filing under the Securities Act of
1933 or under the Securities Exchange Act of 1934, and shall not otherwise
be deemed filed under such Acts.
31
<PAGE> 33
DEADLINE FOR SUBMITTING PROPOSALS FOR
NEXT YEAR'S ANNUAL MEETING
Any proposal intended to be presented by a shareholder at the 1998 Annual
Meeting of Shareholders must be received by the Secretary of the Company at the
Company's principal office not later than March 11, 1998 in order to be
considered for inclusion in the Company's proxy statement and form of proxy for
that meeting. Pursuant to the Company's By-laws, any shareholder wishing to make
nominations for director, or bring other business to any meeting of the
shareholders of the Company, must give written notice to the Secretary of the
Company not less than 90 days in advance of such meeting or, if later, the tenth
day following the first public announcement of the date of such meeting. The
required content of such notice is set forth in the Company's Bylaws, a copy of
which may be obtained by writing to the Secretary of the Company at the address
set forth below.
EXPENSES OF SOLICITATION
The total cost of this solicitation will be borne by the Company. In
addition to use of the mails, proxies may be solicited by officers, directors
and regular employees of the Company personally by telephone or telegraph. In
addition, the Company has retained Chase Mellon Shareholder Services, L.L.C. to
assist it in connection with the Annual Meeting. The Company has agreed to pay
Chase Mellon Shareholder Services, L.L.C. approximately $6,500 plus
reimbursement of certain expenses. The Company may reimburse persons holding
shares in their own names or in the names of their nominees for expenses they
incur in obtaining instructions from beneficial owners of such shares.
OTHER MATTERS
The Board of Directors knows of no other business to be presented at the
meeting, but if other matters are properly presented at the meeting, the persons
named in the proxy will exercise their discretionary authority to vote on such
matters as well as other matters incident to the conduct of the meeting.
The Company has filed its Annual Report on Form 10-K for the year ended
February 23, 1997, with the Securities and Exchange Commission. This report
contains detailed information concerning the Company and its operations,
supplementary financial information and certain schedules which may not be
included in the Annual Report to Shareholders. A COPY OF THIS REPORT, EXCLUDING
EXHIBITS, WILL BE FURNISHED TO SHAREHOLDERS WITHOUT CHARGE UPON WRITTEN REQUEST
TO JAMES A. SORENSEN, VICE PRESIDENT AND CHIEF FINANCIAL OFFICER, 2722 SOUTH
FAIRVIEW STREET, SANTA ANA, CALIFORNIA 92704. A COPY OF ANY EXHIBIT WILL BE
FURNISHED TO ANY SHAREHOLDER UPON WRITTEN REQUEST AND PAYMENT TO THE COMPANY OF
A COPYING CHARGE OF 25 CENTS PER PAGE. REQUESTS FOR COPIES OF EXHIBITS SHOULD
ALSO BE DIRECTED TO JAMES A. SORENSEN AT THE ABOVE ADDRESS.
By Order of the Board of Directors,
[SIG]
John F. Glade,
Secretary
July 11, 1997
32
<PAGE> 34
EXHIBIT A
FORM OF
AGREEMENT AND PLAN OF MERGER
OF
ALPHA MICROSYSTEMS
(A DELAWARE CORPORATION)
AND
ALPHA MICROSYSTEMS
(A CALIFORNIA CORPORATION)
THIS AGREEMENT AND PLAN OF MERGER, dated as of , 1997 (this
"Agreement") is between Alpha Microsystems, a Delaware corporation ("AMS
Delaware"), and Alpha Microsystems, a California corporation ("AMS California").
AMS Delaware and AMS California are sometimes referred to herein as the
"Constituent Corporations."
RECITALS
A. AMS Delaware is a corporation duly organized and existing under the laws
of the State of Delaware and has a total authorized capital stock of 25,000,000
shares. The number of shares of Preferred Stock authorized to be issued is
5,000,000, par value $.001. No shares of Preferred Stock were outstanding as of
the date hereof and prior to giving effect to the transactions contemplated
hereby. The number of shares of Common Stock authorized to be issued is
20,000,000, par value $.001. As of the date hereof, and before giving effect to
the transactions contemplated hereby, 1,000 shares of Common Stock were issued
and outstanding, all of which were held by AMS California.
B. AMS California is a corporation duly organized and existing under the
laws of the State of California and has an authorized capital stock of
25,000,000 shares. The number of shares of Preferred Stock authorized to be
issued is 5,000,000, no par value, none of which are currently outstanding. The
number of shares of Common Stock authorized to be issued is 20,000,000, no par
value.
C. The Board of Directors of AMS California has determined that, for the
purpose of effecting the reincorporation of AMS California in the State of
Delaware, it is advisable and in the best interests of AMS California that AMS
California merge with and into AMS Delaware upon the terms and conditions herein
provided.
D. The respective Boards of Directors of AMS Delaware and AMS California
have approved this Agreement and have directed that this Agreement be submitted
to a vote of their respective stockholders and executed by the undersigned
officers.
E. AMS Delaware is a wholly-owned subsidiary of AMS California.
NOW, THEREFORE, in consideration of the mutual agreements and covenants set
forth herein, AMS Delaware and AMS California hereby agree, subject to the terms
and conditions hereinafter set forth, as follows:
I. MERGER
1.1 Merger. In accordance with the provisions of this Agreement, the
Delaware General Corporation Law and the General Corporation Law of the State of
California, AMS California shall be merged with and into AMS Delaware (the
"Merger"), the separate existence of AMS California shall cease and AMS Delaware
shall be, and is herein sometimes referred to as, the "Surviving Corporation,"
and the name of the Surviving Corporation shall be Alpha Microsystems.
A-1
<PAGE> 35
1.2 Filing and Effectiveness. The Merger shall not become effective until
the following actions shall be completed:
(a) This Agreement and the Merger shall have been adopted and approved
by the stockholders of AMS California and the sole stockholder of AMS
Delaware in accordance with the requirements of the Delaware General
Corporation Law and the General Corporation Law of the State of California;
(b) All of the conditions precedent to the consummation of the Merger
specified in this Agreement shall have been satisfied or duly waived by the
party entitled to satisfaction thereof;
(c) An executed Certificate of Merger or an executed counterpart of
this Agreement meeting the requirements of the Delaware General Corporation
Law shall have been filed with the Secretary of State of the State of
Delaware; and
(d) An executed counterpart of this Agreement, a Certificate of Merger
or any other document filed with the Secretary of State of the State of
Delaware pursuant to section (c) above, shall have been filed with the
Secretary of State of the State of California.
The date and time when the Merger shall become effective as aforesaid, is
herein called the "Effective Date of the Merger."
1.3 Effect of the Merger. Upon the Effective Date of the Merger, the
separate existence of AMS California shall cease and AMS Delaware, as the
Surviving Corporation (i) shall continue to possess all of its assets, rights,
powers and property as constituted immediately prior to the Effective Date of
the Merger, (ii) shall be subject to all actions previously taken by its and AMS
California's Board of Directors, (iii) shall succeed, without other transfer, to
all of the assets, rights, powers and property of AMS California in the manner
more fully set forth in Section 259 of the General Corporation Law of the State
of Delaware, (iv) shall continue to be subject to all of the debts, liabilities
and obligations of AMS Delaware as constituted immediately prior to the
Effective Date of the Merger, and (v) shall succeed, without other transfer, to
all of the debts, liabilities and obligations of AMS California in the same
manner as if AMS Delaware had itself incurred them, all as more fully provided
under the applicable provisions of the General Corporation Law of the State of
Delaware and the General Corporation Law of the State of California.
II. CHARTER DOCUMENTS, DIRECTORS AND OFFICERS
2.1 Certificate of Incorporation. The Certificate of Incorporation of AMS
Delaware as in effect immediately prior to the Effective Date of the Merger
shall continue in full force and effect as the Certificate of Incorporation of
the Surviving Corporation until duly amended in accordance with the provisions
thereof and applicable law.
2.2 Bylaws. The Bylaws of AMS Delaware as in effect immediately prior to
the Effective Date of the Merger shall continue in full force and effect as the
Bylaws of the Surviving Corporation until duly amended in accordance with the
provisions thereof and applicable law.
2.3 Directors and Officers. The directors and officers of AMS Delaware
immediately prior to the Effective Date of the Merger shall be the directors and
officers of the Surviving Corporation until their successors shall have been
duly elected and qualified or until as otherwise provided by law, the
Certificate of Incorporation of the Surviving Corporation or the Bylaws of the
Surviving Corporation.
III. MANNER OF CONVERSION OF STOCK
3.1 AMS California Common Shares. Upon the Effective Date of the Merger,
each share of AMS California Common Stock, no par value, issued and outstanding
immediately prior thereto shall by virtue of the Merger and without any action
by the Constituent Corporations, the holder of such share or any other person,
be converted into and exchanged for one (1) fully paid and nonassessable share
of Common Stock, par value $.001 per share, of the Surviving Corporation.
A-2
<PAGE> 36
3.2 AMS California Options and Stock Purchase Rights. Upon the Effective
Date of the Merger, the Surviving Corporation shall assume and continue the
stock option plans (including the 1993 Employee Stock Option Plan, the 1993
Director Stock Option Plan, the 1996 Nonemployee Director Compensation Plan and
the Employee Stock Purchase Plan) and all other employee benefit plans of AMS
California. Each outstanding and unexercised option, or other right to purchase
AMS California Common Stock shall become an option, or right to purchase the
Surviving Corporation's Common Stock on the basis of one (1) share of the
Surviving Corporation's Common Stock for each share of AMS California Common
Stock issuable pursuant to any such option, or stock purchase right on the same
terms and conditions and at an exercise price per share equal to the exercise
price per share applicable to any such AMS California option or stock purchase
right at the Effective Date of the Merger. There are no options or purchase
rights for Preferred Stock of AMS California.
A number of shares of the Surviving Corporation's Common Stock shall be
reserved for issuance upon the exercise of options and stock purchase rights
equal to the number of shares of AMS California Common Stock so reserved
immediately prior to the Effective Date of the Merger.
3.3 AMS Delaware Common Stock. Upon the Effective Date of the Merger,
each share of Common Stock, par value $.001 per share, of AMS Delaware issued
and outstanding immediately prior thereto shall, by virtue of the Merger and
without any action by AMS Delaware, the holder of such shares or any other
person, be canceled and returned to the status of authorized but unissued
shares.
3.4 Exchange of Certificates. After the Effective Date of the Merger,
each holder of an outstanding certificate representing shares of AMS California
Common Stock may be asked to surrender the same for cancellation to an exchange
agent, whose name will be delivered to such holders prior to any requested
exchange (the "Exchange Agent"), and each such holder shall be entitled to
receive in exchange therefor a certificate or certificates representing the
number of shares of the Surviving Corporation's Common Stock into which the
surrendered shares were converted as herein provided. Until so surrendered, each
outstanding certificate theretofore representing shares of AMS California Common
Stock shall be deemed for all purposes to represent the number of shares of the
Surviving Corporation's Common Stock into which shares of AMS California Common
Stock were converted in the Merger.
The registered owner on the books and records of the Surviving Corporation
or the Exchange Agent of any such outstanding certificate shall, until such
certificate shall have been surrendered for transfer or conversion or otherwise
accounted for to the Surviving Corporation or the Exchange Agent, have and be
entitled to exercise any voting and other rights with respect to and to receive
dividends and other distributions upon the shares of Common Stock of the
Surviving Corporation represented by such outstanding certificate as provided
above.
Each certificate representing Common Stock of the Surviving Corporation so
issued in the Merger shall bear the same legends, if any, with respect to the
restrictions on transferability as the certificates of AMS California so
converted and given in exchange therefore, unless otherwise determined by the
Board of Directors of the Surviving Corporation in compliance with applicable
laws, or other such additional legends as agreed upon by the holder and the
Surviving Corporation.
If any certificate for shares of AMS Delaware stock is to be issued in a
name other than that in which the certificate surrendered in exchange therefor
is registered, it shall be a condition of issuance thereof that the certificate
so surrendered shall be properly endorsed and otherwise in proper form for
transfer, that such transfer otherwise be proper and comply with applicable
securities laws and that the person requesting such transfer pay to the Exchange
Agent any transfer or other taxes payable by reason of issuance of such new
certificate in a name other than that of the registered holder of the
certificate surrendered or establish to the satisfaction of AMS Delaware that
such tax has been paid or is not payable.
A-3
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IV. GENERAL
4.1 Covenants of AMS Delaware. AMS Delaware covenants and agrees that it
will, on or before the Effective Date of the Merger:
4.1.1 Qualify to do business as a foreign corporation in the State of
California.
4.1.2 File any and all documents with the California Franchise Tax
Board necessary for the assumption by AMS Delaware of all of the franchise
tax liabilities of AMS California.
4.1.3 Take such other actions as may be required by the General
Corporation Law of the State of California.
4.2 Further Assurances. From time to time, as and when required by AMS
Delaware or by its successors or assigns, there shall be executed and delivered
on behalf of AMS California such deeds and other instruments, and there shall be
taken or caused to be taken by it such further and other actions as shall be
appropriate or necessary in order to vest or perfect in or conform of record or
otherwise by AMS Delaware the title to and possession of all the property,
interests, assets, rights, privileges, immunities, powers, franchises and
authority of AMS California and otherwise to carry out the purposes of this
Agreement, and the officers and directors of AMS Delaware are fully authorized
in the name and on behalf of AMS California or otherwise to take any and all
such action and to execute and deliver any and all such deeds and other
instruments.
4.3 Abandonment. At any time before the Effective Date of the Merger,
this Agreement may be terminated and the Merger may be abandoned for any reason
whatsoever by the Board of Directors of either AMS California or of AMS
Delaware, or of both, notwithstanding the approval of this Agreement by the
shareholders of AMS California.
4.4 Amendment. The Boards of Directors of the Constituent Corporations
may amend this Agreement at any time prior to the filing of this Agreement (or
certificate in lieu thereof) with the Secretary of State of the State of
Delaware, provided that an amendment made subsequent to the adoption of this
Agreement by the stockholder or shareholders of either Constituent Corporation
shall not: (1) alter or change the amount or kind of shares, securities, cash,
property and/or rights to be received in exchange for or on conversion of all or
any of the shares of any class or series thereof of such Constituent
Corporation, (2) alter or change any term of the Certificate of Incorporation of
the Surviving Corporation to be effected by the Merger or (3) alter or change
any of the terms and conditions of this Agreement if such alteration or change
would adversely affect the holders of any class or series of capital stock or
any Constituent Corporation.
4.5 Registered Office. The registered office of the Surviving Corporation
in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the
City of Wilmington, County of New Castle, 19801. The name of its registered
agent at such address is The Corporation Trust Company.
4.6 Agreement. Executed copies of this Agreement will be on file at the
principal place of business of the Surviving Corporation at 2722 South Fairview
Street, Santa Ana, CA 92704, and copies thereof will be furnished to any
stockholder or shareholder of either Constituent Corporation, upon request and
without cost.
4.7 Governing Law. This Agreement shall in all respects be construed,
interpreted and enforced in accordance with and governed by the laws of the
State of Delaware and, so far as applicable, the merger provisions of the
General Corporation Law of the State of California.
4.8 Counterparts. In order to facilitate the filing and recording of this
Agreement, the same may be executed in any number of counterparts, each of which
shall be deemed to be an original and all of which together shall constitute one
and the same instrument.
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IN WITNESS WHEREOF, this Agreement having first been approved by the
resolutions of the Boards of Directors of Alpha Microsystems, a Delaware
corporation, and Alpha Microsystems, a California corporation, is hereby
executed on behalf of each of such two corporations and attested by their
respective officers thereunto duly authorized.
ALPHA MICROSYSTEMS, INC.,
a Delaware corporation
By:
-----------------------------
Douglas J. Tullio
President and Chief Executive
Officer
ATTEST:
- --------------------------
John F. Glade
Secretary
ALPHA MICROSYSTEMS,
a California corporation
By:
-----------------------------
Douglas J. Tullio
President and Chief Executive
Officer
ATTEST:
- --------------------------
John F. Glade
Secretary
[COUNTERPART SIGNATURE PAGE
TO AGREEMENT AND PLAN OF MERGER]
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<PAGE> 39
EXHIBIT B
FORM OF
CERTIFICATE OF INCORPORATION
OF
ALPHA MICROSYSTEMS
I, the undersigned, for the purposes of incorporating and organizing a
corporation under the General Corporation Law of the State of Delaware, do
execute this Certificate of Incorporation and do hereby certify as follows:
FIRST. The name of the corporation is Alpha Microsystems (the
"Corporation").
SECOND. The address of the Corporation's registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle, 19801. The name of its registered agent at
such address is The Corporation Trust Company.
THIRD. The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH. (a) The total number of shares of stock which the Corporation shall
have authority to issue is 25 million (25,000,000), consisting of 20 million
(20,000,000) shares of Common Stock, par value $.001 per share ("Common Stock")
and five million shares (5,000,000) of Preferred Stock, par value $.001 per
share ("Preferred Stock").
(b) Shares of Preferred Stock may be issued in one or more series, from
time to time, with each such series to consist of such number of shares and to
have such voting powers, full or limited, or no voting powers, and such
designations, preferences and relative, participating, optional or other special
rights, and the qualifications, limitations or restrictions thereof, as shall be
stated in the resolution or resolutions providing for the issuance of such
series adopted by the Board of Directors of the Corporation (the "Board of
Directors"), and the Board of Directors is hereby expressly vested with
authority, to the full extent now or hereafter provided by law, to adopt any
such resolution or resolutions.
The authority of the Board of Directors with respect to each series shall
include, but not be limited to, determination of the following:
(i) The number of shares constituting that series and the distinctive
designation of that series;
(ii) The dividend rate on the shares of that series, whether dividends
shall be cumulative, and, if so, from which date or dates, and the relative
rights of priority, if any, of payment of dividends on shares of that
series;
(iii) Whether that series shall have voting rights, in addition to the
voting rights provided by law, and, if so, the terms of such voting rights;
(iv) Whether that series shall have conversion privileges, and, if so,
the terms and conditions of such conversion, including provision for
adjustment of the conversion rate in such events as the Board of Directors
shall determine;
(v) Whether or not the shares of that series shall be redeemable, and,
if so, the terms and conditions of such redemption, including the date or
date upon or after which they shall be redeemable, and the amount per share
payable in case of redemption, which amount may vary under different
conditions and at different redemption dates;
(vi) Whether that series shall have a sinking fund for the redemption
or purchase of shares of that series, and, if so, the terms and amount of
such sinking fund;
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(vii) The rights of the shares of that series in the event of
voluntary or involuntary liquidation, dissolution or winding-up of the
Corporation, and the relative rights of priority, if any, of payment of
shares of that series; and
(viii) Any other relative rights, preferences and limitations of that
series.
FIFTH. The Incorporator of the Corporation is [Name], [address].
SIXTH. Unless and except to the extent that the By-laws of the Corporation
shall so require, the election of directors of the Corporation need not be by
written ballot.
SEVENTH. In furtherance and not in limitation of the powers conferred by
the laws of the State of Delaware, the Board of Directors is expressly
authorized to adopt, alter, amend and repeal the By-laws of the Corporation,
subject to the power of the stockholders of the Corporation to alter or repeal
any by-law whether adopted by them or otherwise; provided, however, that the
affirmative vote of 80% of the voting power of the capital stock of the
Corporation entitled to vote thereon shall be required for stockholders to
adopt, amend, alter or repeal any provision of the By-laws.
EIGHTH. A director of the Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except to the extent such exemption from liability or
limitation thereof is not permitted under the General Corporation Law of the
State of Delaware as the same exists or may hereafter be amended. Any amendment,
modification or repeal of the foregoing sentence shall not adversely affect any
right or protection of a director of the Corporation hereunder in respect of any
act or omission occurring prior to the time of such amendment, modification or
repeal.
NINTH. (a) From and after the effective time of the merger (the "Merger")
between the Corporation and Alpha Microsystems, a California corporation,
pursuant to the Agreement and Plan of Merger, dated , 1997, between
the Corporation and Alpha Microsystems, a California corporation, no action that
is required or permitted to be taken by the stockholders of the Corporation at
any annual or special meeting of stockholders may be effected by written consent
of stockholders in lieu of a meeting of stockholders.
(b) Special meetings of stockholders may be called only by the Board of
Directors, the Chairman of the Board of Directors or the President, and may not
be called by any other person or persons.
TENTH. (a) Except as otherwise provided for or fixed by or pursuant to the
provisions of Article FOURTH of this Certificate of Incorporation or any
resolution or resolutions of the Board of Directors providing for the issuance
of any class or series of stock having a preference over the Common Stock as to
dividends or upon liquidation to elect additional directors under specified
circumstances, the Board of Directors shall consist of not fewer than five (5)
nor more than nine (9) directors, the exact number of directors within such
limits to be determined solely by the Board of Directors in the manner set forth
in the By-laws of the Corporation. The directors, other than those who may be
elected by the holders of Preferred Stock or any other class or series of stock
having a preference over the Common Stock as to dividends or upon liquidation
pursuant to the terms of this Certificate of Incorporation or any resolution or
resolutions providing for the issuance of such class or series of stock adopted
by the Board of Directors, shall be divided into three classes, as nearly equal
in number as possible. The initial Class I Directors shall be those persons
named as such in Article ELEVENTH of this Certificate of Incorporation, who
shall serve for a term expiring at the first annual meeting of stockholders of
the Corporation following the effective time of the Merger; the initial Class II
Directors shall be those person named as such in Article ELEVENTH of this
Certificate of Incorporation, who shall serve for a term expiring at the second
annual meeting of stockholders following the effective time of the Merger; and
the initial Class III Directors shall be those persons named as such in Article
ELEVENTH of this Certificate of Incorporation, who shall serve for a term
expiring at the third annual meeting of stockholders following the effective
time of the Merger. Each director in each such class shall hold office until his
or her successor is duly elected and qualified. At each annual meeting of
stockholders beginning with the first annual meeting of stockholders following
the filing of this Certificate of Incorporation, the successors of the class of
directors whose term expires at that meeting shall be elected to hold office for
a term expiring at the annual meeting of stockholders to be held in the third
year following the year of their
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election, with each director in each such class to hold office until his or her
successor is duly elected and qualified.
ELEVENTH. The powers of the Incorporator shall terminate upon the filing of
this Certificate of Incorporation with the Secretary of State of the State of
Delaware. The names, mailing addresses and classes of the persons who are to
serve as the initial directors of the Corporation until their successors are
duly elected and qualified, are:
<TABLE>
<S> <C>
John F. Glade c/o Alpha Microsystems
(Class I) 2722 South Fairview St.
Santa Ana, CA 92704
Rockell N. Hankin c/o Alpha Microsystems
(Class II) 2722 South Fairview St.
Santa Ana, CA 92704
Richard E. Mahmarian c/o Alpha Microsystems
(Class II) 2722 South Fairview St.
Santa Ana, CA 92704
Clarke E. Reynolds c/o Alpha Microsystems
(Class III) 2722 South Fairview St.
Santa Ana, CA 92704
Douglas J. Tullio c/o Alpha Microsystems
(Class III) 2722 South Fairview St.
Santa Ana, CA 92704
</TABLE>
TWELFTH. The Corporation reserves the right at any time, and from time to
time, to amend, alter, change or repeal any provision contained in this
Certificate of Incorporation, and other provisions authorized by the laws of the
State of Delaware at the time in force may be added or inserted, in the manner
now or hereafter prescribed by law; and all rights, preferences and privileges
of whatsoever nature conferred upon stockholders, directors or any other persons
whomsoever by and pursuant to this Certificate of Incorporation in its present
form or as hereafter amended are granted subject to the rights reserved in this
article; provided, however, that the affirmative vote of 80% of the voting power
of the capital stock of the Corporation entitled to vote thereon shall be
required to amend, alter or repeal, or adopt any provision inconsistent with,
whether by amendment, merger or otherwise, the provisions of Articles SEVENTH,
EIGHTH, NINTH, TENTH or TWELFTH.
The undersigned Incorporator hereby acknowledges that the foregoing
Certificate of Incorporation is his act and deed on , 1997.
--------------------------------------
[Name]
Incorporator
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<PAGE> 42
EXHIBIT C
FORM OF
BY-LAWS
OF
ALPHA MICROSYSTEMS, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
ARTICLE I
OFFICES AND RECORDS
SECTION 1.1 Registered Office. The registered office of the Corporation in
the State of Delaware shall be located in the City of Wilmington, County of New
Castle, and the name and address of its registered agent is The Corporation
Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington,
Delaware 19801.
SECTION 1.2 Other Offices. The Corporation may have such other offices,
either within or without the State of Delaware, as the Board of Directors may
designate or as the business of the Corporation may from time to time require.
SECTION 1.3. Books and Records. The books and records of the Corporation
may be kept at the Corporation's principal executive office or at such other
locations outside the State of Delaware as may from time to time be designated
by the Board of Directors.
SECTION 1.4. Form of Records. Any records maintained by the Corporation in
the regular course of its business, including its stock ledger, books of
account, and minute books, may be kept on, or be in the form of, punch cards,
magnetic tape, photographs, microphotographs, or any other information storage
device, provided that the records so kept can be converted into clearly legible
form within a reasonable time.
ARTICLE II
STOCKHOLDERS
SECTION 2.1. Annual Meetings.
(A) An annual meeting of stockholders shall be held for the election of
directors at such date, time and place, either within or without the State of
Delaware, as may be designated by resolution of the Board of Directors from time
to time. Any other proper business may be transacted at the annual meeting.
(B)(1) Nominations of persons for election to the Board of Directors of the
Corporation and the proposal of business to be considered by the stockholders
may be made at an annual meeting of stockholders (a) pursuant to the
Corporation's notice of meeting delivered pursuant to Section 2.3 of these
By-laws, (b) by or at the direction of the Chairman of the Board or the Board of
Directors or (c) by any stockholder of the Corporation who is entitled to vote
at the meeting, who complied with the notice procedures set forth in clauses (2)
and (3) of this paragraph (B) of this By-law and who was a stockholder of record
at the time such notice is delivered to the Secretary of the Corporation.
(2) For nominations or other business to be properly brought before an
annual meeting by a stockholder pursuant to clause (c) of paragraph (B)(1) of
this By-law, the stockholder must have given timely notice thereof in writing to
the Secretary of the Corporation and such other business must otherwise be a
proper matter for stockholder action. To be timely, a stockholder's notice shall
be delivered to the Secretary at the principal executive offices of the
Corporation not less than seventy days nor more than ninety days prior to the
first anniversary of the preceding year's annual meeting; provided, however,
that in the event that the date of the annual meeting is advanced by more than
twenty days, or delayed by more than seventy days, from such
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anniversary date, notice by the stockholder to be timely must be so delivered
not earlier than the ninetieth day prior to such annual meeting and not later
than the close of business on the later of the seventieth day prior to such
annual meeting or the tenth day following the day on which public announcement
of the date of such meeting is first made. Such stockholder's notice shall set
forth (a) as to each person whom the stockholder proposes to nominate for
election or reelection as a director all information relating to such person
that is required to be disclosed in solicitations of proxies for election of
directors in an election contest, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and Rule 14a-11 thereunder, including such person's written
consent to being named in the proxy statement as a nominee and to serving as a
director if elected; (b) as to any other business that the stockholder proposes
to bring before the meeting, a brief description of the business desired to be
brought before the meeting, the reasons for conducting such business at the
meeting and any material interest in such business of such stockholder and the
beneficial owner, if any, on whose behalf the proposal is made; and (c) as to
the stockholder giving the notice and the beneficial owner, if any, on whose
behalf the nomination or proposal is made (i) the name and address of such
stockholder, as they appear on the Corporation's books, and of such beneficial
owner, (ii) the class and number of shares of the Corporation which are owned
beneficially and of record by such stockholder and such beneficial owner and
(iii) whether the proponent intends or is part of a group which intends to
solicit proxies from other stockholders in support of such nomination or
proposal. In no event shall the public announcement of an adjournment of an
annual meeting commence a new time period for the giving of a stockholder's
notice as described above.
(3) Notwithstanding anything in the second sentence of paragraph (B)(2) of
this By-law to the contrary, in the event that the number of directors to be
elected to the Board of Directors of the Corporation is increased and there is
no public announcement naming all of the nominees for director or specifying the
size of the increased Board of Directors made by the Corporation at least eighty
days prior to the first anniversary of the preceding year's annual meeting, a
stockholder's notice required by this By-law shall also be considered timely,
but only with respect to nominees for any new positions created by such
increase, if it shall be delivered to the Secretary at the principal executive
offices of the Corporation not later than the close of business on the tenth day
following the day on which such public announcement is first made by the
Corporation.
SECTION 2.2. Special Meetings. Special meetings of stockholders for any
purpose or purposes may be called at any time by the Board of Directors, or by
the Chairman of the Board, or by the President, but such special meetings may
not be called by any other person or persons. Business transacted at any special
meeting of stockholders shall be limited to the purpose or purposes stated in
the notice.
SECTION 2.3. Notice of Meetings. Whenever stockholders are required or
permitted to take any action at a meeting, a written notice of the meeting shall
be given that shall state the place, date and hour of the meeting and, in the
case of a special meeting, the purpose or purposes for which the meeting is
called. Unless otherwise provided by law, the Certificate of Incorporation or
these By-laws, the written notice of any meeting shall be given not less than
ten nor more than sixty days before the date of the meeting to each stockholder
entitled to vote at such meeting. If mailed, such notice shall be deemed to be
given when deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the Corporation.
SECTION 2.4. Adjournments. Any meeting of stockholders, annual or special,
may adjourn from time to time to reconvene at the same or some other place, and
notice need not be given of any such adjourned meeting if the time and place
thereof are announced at the meeting at which the adjournment is taken. At the
adjourned meeting the Corporation may transact any business which might have
been transacted at the original meeting. If the adjournment is for more than
thirty days, or if after the adjournment a new record date is fixed for the
adjourned meeting, notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
SECTION 2.5. Quorum. Except as otherwise provided by law, the Certificate
of Incorporation or these By-laws, at each meeting of stockholders the presence
in person or by proxy of the holders of shares of stock having a majority of the
votes which could be cast by the holders of all outstanding shares of stock
entitled to vote at the meeting shall be necessary and sufficient to constitute
a quorum. In the absence of a quorum, the
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stockholders so present and entitled to vote may, by majority vote, adjourn the
meeting from time to time in the manner provided in Section 2.4 of these By-laws
until a quorum shall attend. Shares of its own stock belonging to the
Corporation or to another corporation, if a majority of the shares entitled to
vote in the election of directors of such other corporation is held, directly or
indirectly, by the Corporation, shall neither be entitled to vote nor be counted
for quorum purposes; provided, however, that the foregoing shall not limit the
right of the Corporation to vote stock, including but not limited to its own
stock, held by it in a fiduciary capacity.
SECTION 2.6. Organization. Meetings of stockholders shall be presided over
by the Chairman of the Board, if any, or in his absence by the Vice Chairman of
the Board, if any, or in his absence by the President, or in his absence by a
Vice President, or in the absence of the foregoing persons by a chairman
designated by the Board of Directors, or in the absence of such designation by a
chairman chosen at the meeting. The Secretary shall act as secretary of the
meeting, but in his absence the chairman of the meeting may appoint any person
to act as secretary of the meeting.
SECTION 2.7. Voting; Proxies. Except as otherwise provided by the
Certificate of Incorporation, each stockholder entitled to vote at any meeting
of stockholders shall be entitled to one vote for each share of stock held by
him which has voting power upon the matter in question. Each stockholder
entitled to vote at a meeting of stockholders may authorize another person or
persons to act for him by proxy, but no such proxy shall be voted or acted upon
after three years from its date, unless the proxy provides for a longer period.
A proxy shall be irrevocable if it states that it is irrevocable and if, and
only as long as, it is coupled with an interest sufficient in law to support an
irrevocable power. A stockholder may revoke any proxy which is not irrevocable
by attending the meeting and voting in person or by filing an instrument in
writing revoking the proxy or by delivering a proxy in accordance with
applicable law bearing a later date to the Secretary of the Corporation. Voting
at meetings of stockholders need not be by written ballot; provided, however,
that any election for directors must be by ballot if demanded by any stockholder
at the meeting before the election has begun. At all meetings of stockholders
for the election of directors a plurality of the votes cast shall be sufficient
to elect directors. All other elections and questions shall, unless otherwise
provided by law, the Certificate of Incorporation or these By-laws, be decided
by the vote of the holders of shares of stock having a majority of the votes
which could be cast by the holders of all shares of stock outstanding and
entitled to vote thereon.
SECTION 2.8. Fixing Date for Determination of Stockholders of Record. In
order that the Corporation may determine the stockholders entitled to notice of
or to vote at any meeting of stockholders or any adjournment thereof, or
entitled to receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other lawful action,
the Board of Directors may fix, in advance, a record date, which record date
shall not precede the date upon which the resolution fixing the record date is
adopted by the Board of Directors and which record date: (1) in the case of
determination of stockholders entitled to vote at any meeting of stockholders or
adjournment thereof, shall, unless otherwise required by law, not be more than
sixty nor less than ten days before the date of such meeting and (2) in the case
of any other action, shall not be more than sixty days prior to such other
action. If no record date is fixed: (1) the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day next preceding the day on which notice is
given, or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held and (2) the record date for
determining stockholders for any other purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
SECTION 2.9. List of Stockholders Entitled to Vote. The Secretary shall
prepare and make, at least ten days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to
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the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof and may be inspected by any stockholder who is present. Upon the willful
neglect or refusal of the directors to produce such a list at any meeting for
the election of directors, they shall be ineligible for election to any office
at such meeting. The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list of stockholders or
the books of the Corporation, or to vote in person or by proxy at any meeting of
stockholders.
SECTION 2.10. Inspection of Books and Records By Stockholders. Any
stockholder of record, in person or by attorney or other agent, shall, upon
written demand under oath stating the purpose thereof, have the right during the
usual hours for business to inspect for any proper purpose the Corporation's
stock ledger, a list of its stockholders, and its other books and records, and
to make copies or extracts therefrom. A proper purpose shall mean a purpose
reasonably related to such person's interest as a stockholder. In every instance
where an attorney or other agent shall be the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing which authorizes the attorney or other agent to so act on
behalf of the stockholder. The demand under oath shall be directed to the
Corporation at its registered office in the state of Delaware or at its
principal executive office.
SECTION 2.11. No Action By Consent of Stockholders. No action that is
required to be taken by the stockholders of the Corporation at any annual or
special meeting of stockholders may be effected by written consent of
stockholders in lieu of a meeting.
SECTION 2.12. Conduct of Meetings. The Board of Directors of the
Corporation may adopt by resolution such rules and regulations for the conduct
of the meeting of stockholders as it shall deem appropriate. Except to the
extent inconsistent with such rules and regulations as adopted by the Board of
Directors, the chairman of any meeting of stockholders shall have the right and
authority to prescribe such rules, regulations and procedures and to do all such
acts as, in the judgment of such chairman, are appropriate for the proper
conduct of the meeting. Such rules, regulations or procedures, whether adopted
by the Board of Directors or prescribed by the chairman of the meeting, may
include, without limitation, the following: (i) the establishment of an agenda
or order of business for the meeting; (ii) rules and procedures for maintaining
order at the meeting and the safety of those present; (iii) limitations on
attendance at or participation in the meeting to stockholders of record of the
Corporation, their duly authorized and constituted proxies or such other persons
as the chairman of the meeting shall determine; (iv) restrictions on entry to
the meeting after the time fixed for the commencement thereof; and (v)
limitations on the time allotted to questions or comments by participants.
Unless and to the extent determined by the Board of Directors or the chairman of
the meeting, meetings of stockholders shall not be required to be held in
accordance with the rules of parliamentary procedure.
SECTION 2.13. Inspectors of Elections; Opening and Closing the Polls. The
Board of Directors by resolution shall appoint one or more inspectors, which
inspector or inspectors may include individuals who serve the Corporation in
other capacities, including, without limitation, as officers, employees, agents
or representatives of the Corporation, to act at the meeting and make a written
report thereof. One or more persons may be designated by the Board of Directors
as alternate inspectors to replace any inspector who fails to act. If no
inspector or alternate has been appointed to act, or if all inspectors or
alternates who have been appointed are unable to act at a meeting of
stockholders, the chairman of the meeting shall appoint one or more inspectors
to act at the meeting. Each inspector, before discharging his or her duties,
shall take and sign an oath faithfully to execute the duties of inspector with
strict impartiality and according to the best of his or her ability. The
inspectors shall have the duties prescribed by the General Corporation Law of
the State of Delaware. The chairman of the meeting shall fix and announce at the
meeting the date and time of the opening and the closing of the polls for each
matter upon which the stockholders will vote at a meeting.
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ARTICLE III
BOARD OF DIRECTORS
SECTION 3.1. General Powers. The business and affairs of the Corporation
shall be managed by or under the direction of its Board of Directors. In
addition to the powers and authorities by these By-laws expressly conferred upon
them, the Board of Directors may exercise all such powers of the Corporation and
do all such lawful acts and things as are not by law, by the Certificate of
Incorporation or by these By-laws required to be exercised or done by the
stockholders.
SECTION 3.2. Number; Qualifications. The Board of Directors shall consist
of not less than five (5) nor more than nine (9) members, the exact number to be
determined from time to time by resolution of the Board of Directors. Directors
need not be stockholders.
SECTION 3.3. Election; Resignation; Removal. At each annual meeting of
stockholders beginning with the first annual meeting of stockholders, the
successors of the class of directors whose term expires at that meeting shall be
elected to hold office for a term expiring at the annual meeting of stockholders
to be held in the third year following the year of their election, with each
director in each such class to hold office until his or her successor is duly
elected and qualified or until his earlier death, resignation or removal. Any
director, or the entire Board of Directors, may be removed only for cause, by
the affirmative vote of the holders of a majority of shares then entitled to
vote at the election of directors. Any director may resign at any time upon
written notice to the Corporation. Such resignation shall be effective upon
receipt unless the notice specifies a later time for that resignation to become
effective.
SECTION 3.4. Vacancies. Any newly created directorship resulting from an
increase in the authorized number of directors or any vacancy occurring in the
Board of Directors by reason of death, resignation, retirement,
disqualification, removal from office or any other cause may be filled by the
affirmative vote of the remaining members of the Board of Directors, though less
than a quorum of the Board of Directors, and each director so elected shall hold
office until the expiration of the term of office of the director whom he has
replaced or until his successor is elected and qualified. If there are no
directors in office, then an election of directors may be held in the manner
provided by statute. No decrease in the number of directors constituting the
whole Board shall shorten the term of any incumbent director.
SECTION 3.5. Annual Meeting. The annual meeting for each newly elected
Board of Directors shall be held without notice other than this By-law
immediately after, and at the same place as, the annual meeting of stockholders
for the purpose of organization, any desired election of officers, and the
transaction of any other proper business. In the event the annual meeting of any
newly elected Board of Directors shall not be held immediately after, and at the
same place as, the annual meeting of stockholders, the meeting may be held at
such time and place as shall be specified in a notice given as hereinafter
provided in Section 3.7 of these By-laws.
SECTION 3.6. Regular Meetings. Regular meetings of the Board of Directors
may be held at such places within or without the State of Delaware and at such
times as the Board of Directors may from time to time determine, and if so
determined notices thereof need not be given.
SECTION 3.7. Special Meetings. Special meetings of the Board of Directors
may be held at any time or place within or without the State of Delaware
whenever called by the Chairman of the Board, the President, any Vice President,
the Secretary, or by any two members of the Board of Directors. Notice of the
time and place of a special meeting of the Board of Directors shall be delivered
by the person or persons calling the meeting personally, by facsimile or by
telephone to each director or sent by first-class mail, telegram, charges
prepaid, addressed to each director at that director's address as it is shown on
the records of the Corporation. If the notice is mailed, it shall be deposited
in the United States mail at least four (4) days before the time of the holding
of the meeting. If the notice is delivered personally, or by telephone, or by
telegraph, or by facsimile, it shall be delivered personally, or by telephone,
or to the telegraph company, or by facsimile at least forty-eight (48) hours
before the time of the holding of the meeting. Any oral notice given personally
or by telephone may be communicated either to the director or to a person at the
office of the director who the person giving the notice has reason to believe
will promptly communicate it to the director. The notice need
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not specify the purpose or purposes of the special meeting, or the place of the
special meeting if the meeting is to be held at the principal executive office
of the Corporation.
SECTION 3.8. Telephonic Meetings Permitted. Unless otherwise restricted by
the Certificate of Incorporation or these By-laws, members of the Board of
Directors, or any committee designated by the Board of Directors, may
participate in a meeting thereof by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
Bylaw shall constitute presence in person at such meeting.
SECTION 3.9. Quorum; Vote Required for Action; Adjournment. At all
meetings of the Board of Directors a majority of the whole Board of Directors
shall constitute a quorum for the transaction of business. Except in cases in
which the Certificate of Incorporation or these By-laws otherwise provide, the
vote of a majority of the directors present at a meeting at which a quorum is
present shall be the act of the Board of Directors. A majority of the directors
present, whether or not a quorum, may adjourn any meeting to another time and
place. Notice of the time and place of holding an adjourned meeting need not be
given unless the meeting is adjourned for more than twenty-four (24) hours. If
the meeting is adjourned for more than twenty-four (24) hours, then notice of
the time and place of the adjourned meeting shall be given to the directors who
were not present at the time of the adjournment in the manner specified in
Section 3.7 of these By-laws.
SECTION 3.10. Organization. Meetings of the Board of Directors shall be
presided over by the Chairman of the Board, if any, or in his absence by the
Vice Chairman of the Board, if any, or in his absence by the President, or in
their absence by a chairman chosen at the meeting. The Secretary shall act as
secretary of the meeting, but in his absence the chairman of the meeting may
appoint any person to act as secretary of the meeting.
SECTION 3.11. Informal Action by Directors. Unless otherwise restricted by
the Certificate of Incorporation or these By-laws, any action required or
permitted to be taken at any meeting of the Board of Directors, or of any
committee thereof, may be taken without a meeting if all members of the Board of
Directors or such committee, as the case may be, consent thereto in writing, and
the writing or writings are filed with the minutes of proceedings of the Board
of Directors or such committee.
SECTION 3.12. Fees and Compensation of Directors. Directors and members of
committees may receive such compensation, if any, for their services and such
reimbursement of expenses as may be fixed or determined by resolution of the
Board of Directors. This Section 3.12 shall not be construed to preclude any
director from serving the Corporation in any other capacity as an officer,
agent, employee or otherwise and receiving compensation for those services.
SECTION 3.13. Approval of Loans to Officers. The Corporation may lend
money to, or guarantee any obligation of, or otherwise assist any officer or
other employee of the Corporation or of its subsidiaries, including any officer
or employee who is a director of the Corporation or its subsidiaries, whenever,
in the judgment of the Board of Directors, such loan, guaranty or assistance may
reasonably be expected to benefit the Corporation. The loan, guaranty or other
assistance may be with or without interest and may be unsecured, or secured in
such manner as the Board of Directors shall approve, including without
limitation, a pledge of shares of stock of the Corporation. Nothing in this
By-law contained shall be deemed to deny, limit or restrict the powers of
guaranty or warranty of the Corporation at common law or under any statutes.
SECTION 3.14. Inspection of Books and Records By Directors. Any director
shall have the right to examine the Corporation's stock ledger, a list of its
stockholders and its other books and records for a purpose reasonably related to
his position as a director.
ARTICLE IV
COMMITTEES
SECTION 4.1. Committees. The Board of Directors may, by resolution passed
by a majority of the whole Board of Directors, designate one or more committees,
each committee to consist of one or more of the directors of the Corporation.
The Board of Directors may designate one or more directors as alternate
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members of any committee, who may replace any absent or disqualified member at
any meeting of the committee. In the absence or disqualification of a member of
the committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in place of any such absent or disqualified member. Any such committee,
to the extent permitted by law and to the extent provided in the resolution of
the Board of Directors, shall have and may exercise all the powers and authority
of the Board of Directors in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be affixed to all
papers which may require it. Such committee or committees shall have such name
or names as may be determined from time to time by resolution adopted by the
Board of Directors. Each committee shall keep regular minutes of its meetings
and report the same to the Board of Directors when required.
SECTION 4.2. Committee Rules. Unless the Board of Directors otherwise
provides, each committee designated by the Board of Directors may make, alter
and repeal rules for the conduct of its business. In the absence of such rules
each committee shall conduct its business in the same manner as the Board of
Directors conducts its business pursuant to Article III of these By-laws.
ARTICLE V
OFFICERS
SECTION 5.1. Officers. The officers of the Corporation shall be a
President, a Secretary, and a Chief Financial Officer. The Corporation may also
have, at the discretion of the Board of Directors, a Chairman of the Board, one
or more Vice Presidents, one or more Assistant Secretaries, one or more
Assistant Treasurers, and such other officers as may be appointed in accordance
with the provisions of Section 5.3 of these By-laws. Any number of offices may
be held by the same person. The compensation of all officers shall be fixed by
the Board of Directors, and no officer shall be prevented from receiving such
compensation by virtue of his also being a director of the Corporation.
SECTION 5.2. Election of Officers. The officers of the Corporation, except
such officers as may be appointed in accordance with the provisions of Section
5.3 or Section 5.5 of these By-laws, shall be chosen by the Board of Directors,
and each shall serve at the pleasure of the Board of Directors, subject to the
rights, if any, of an officer under any contract of employment.
SECTION 5.3. Subordinate Officers. The Board of Directors may appoint, and
may empower the President to appoint, such other officers as the business of the
Corporation may require, each of whom shall hold office for such period, have
such authority, and perform such duties as are provided in these By-laws or as
the Board of Directors may from time to time determine.
SECTION 5.4. Removal and Resignation of Officers. Subject to the rights,
if any, of an officer under any contract of employment, any officer may be
removed, either with or without cause, by the Board of Directors at any regular
or special meeting of the Board, or, except in case of an officer chosen by the
Board of Directors, by any officer upon whom such power of removal may be
conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to the
Corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the Corporation under any contract to which the officer is a
party.
SECTION 5.5. Vacancies in Offices. A vacancy in any office because of
death, resignation, removal, disqualification or any other cause shall be filled
in the manner prescribed in these By-laws for regular appointments to that
office.
SECTION 5.6. Chairman of the Board. The Chairman of the Board, if such an
officer be elected, shall, if present, preside at meetings of the Board of
Directors and exercise and perform such other powers and duties as may from time
to time be assigned to him by the Board of Directors or as may be prescribed by
these
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By-laws. If there is no President, then the Chairman of the Board shall also be
the chief executive officer of the Corporation and shall have the powers and
duties prescribed in Section 5.7 of these By-laws.
SECTION 5.7. President. Subject to such supervisory powers, if any, as may
be given by the Board of Directors to the Chairman of the Board, if there be
such an officer, the President shall be the chief executive officer of the
Corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction, and control of the business and the officers of
the Corporation. He shall preside at all meetings of the shareholders and, in
the absence of the Chairman of the Board, or if there be none, at all meetings
of the Board of Directors. He shall have the general powers and duties of
management usually vested in the office of President of a corporation, and shall
have such other powers and duties as may be prescribed by the Board of Directors
or these By-laws.
SECTION 5.8. Vice Presidents. In the absence or disability of the
President, the Vice Presidents, if any, in order of their rank as fixed by the
Board of Directors or, if not ranked, a Vice President designated by the Board
of Directors, shall perform all the duties of the President and when so acting
shall have all the powers of, and be subject to all the restrictions upon, the
President. The Vice Presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by the
Board of Directors, these By-laws, the President or the Chairman of the Board.
SECTION 5.9. Secretary. The Secretary shall keep or cause to be kept, at
the principal executive office of the Corporation or such other place as the
Board of Directors may direct, a book of minutes of all meetings and actions of
directors, committees of directors and shareholders. The minutes shall show the
time and place of each meeting, whether regular or special, and, if special, how
authorized, the notice given, the names of those present at directors' meetings
or committee meetings, the number of shares present or represented at
shareholders' meetings, and the proceedings thereof.
The Secretary shall keep, or cause to be kept, at the principal executive
office of the Corporation or at the office of the Corporation's transfer agent
or registrar, as determined by resolution of the Board of Directors, a share
register, or a duplicate share register, showing the names of all shareholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates evidencing such shares, and the number and date of
cancellation of every certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all meetings of
the shareholders and of the Board of Directors required to be given by law or by
these By-laws. He shall keep the seal of the Corporation, if one be adopted, in
safe custody and shall have such other powers and perform such other duties as
may be prescribed by the Board of Directors or by these By-laws.
SECTION 5.10. Chief Financial Officer. The Chief Financial Officer shall
keep and maintain, or cause to be kept and maintained, adequate and correct
books and records of accounts of the properties and business transactions of the
Corporation, including accounts of its assets, liabilities, receipts,
disbursements, gains, losses, capital, retained earnings, and shares.
The Chief Financial Officer shall deposit all moneys and other valuables in
the name and to the credit of the Corporation with such depositories as may be
designated by the Board of Directors. He shall disburse the funds of the
Corporation as may be ordered by the Board of Directors, shall render to the
President and directors, whenever they request it, an account of all of his
transactions as Chief Financial Officer and of the financial condition of the
Corporation, and shall have such other powers and perform such other duties as
may be prescribed by the Board of Directors or these By-laws.
SECTION 5.11. Absence or Disability of Officers. In the case of the
absence or disability of any officer of the Corporation and of any person hereby
authorized to act in such officer's place during such officer's absence or
disability, the Board of Directors may delegate the powers and duties of such
officer to any officer or to any director, or to any other person who it may
select.
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ARTICLE VI
STOCK
SECTION 6.1. Certificates. Every holder of stock shall be entitled to have
a certificate signed by or in the name of the Corporation by the Chairman or
Vice Chairman of the Board of Directors, if any, or the President or a Vice
President, and by the Treasurer or an Assistant Treasurer, or the Secretary or
an Assistant Secretary, of the Corporation certifying the number of shares owned
by him in the Corporation. Any of or all the signatures on the certificate may
be a facsimile. In case any officer, transfer agent or registrar who has signed
or whose facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent, or registrar before such certificate
is issued, it may be issued by the Corporation with the same effect as if he
were such officer, transfer agent, or registrar at the date of issue. If the
Corporation shall be authorized to issue more than one class of stock or more
than one series of any class, the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights shall be set forth in full or summarized on the face
or back of the certificate which the Corporation shall issue to represent such
class or series of stock, provided that, except as otherwise provided in Section
202 of the General Corporation Law of the State of Delaware, in lieu of the
foregoing requirements, there may be set forth on the face or back of the
certificate which the Corporation shall issue to represent such class or series
of stock, a statement that the Corporation will furnish without charge to each
stockholder who so requests the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights.
SECTION 6.2. Lost, Stolen or Destroyed Stock Certificates; Issuance of New
Certificates. The Corporation may issue a new certificate of stock in the place
of any certificate theretofore issued by it, alleged to have been lost, stolen
or destroyed, and the Corporation may require the owner of the lost, stolen or
destroyed certificate, or his legal representative, to give the Corporation a
bond sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate.
SECTION 6.3. Transfer of Stock. Upon surrender to the Corporation or the
transfer agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignation or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
SECTION 6.4. Registered Stockholders. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
the laws of the State of Delaware.
ARTICLE VII
INDEMNIFICATION
SECTION 7.1. Right to Indemnification. The Corporation shall indemnify and
hold harmless, to the fullest extent permitted by applicable law as it presently
exists or may hereafter be amended, any person who was or is made or is
threatened to be made a party or is otherwise involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative (a
"proceeding") by reason of the fact that he, or a person for whom he is the
legal representative, is or was a director or officer of the Corporation or is
or was serving at the request of the Corporation as a director, officer,
employee or agent of another Corporation or of a partnership, joint venture,
trust, enterprise or nonprofit entity, including service with respect to
employee benefit plans, against all liability and loss suffered and expenses
(including attorneys' fees) reasonably incurred by such person. Notwithstanding
the preceding sentence, the Corporation shall be required to
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indemnify a person in connection with a proceeding (or part thereof) initiated
by such person only if the proceeding (or part thereof) was authorized by the
Board of Directors of the Corporation.
SECTION 7.2. Prepayment of Expenses. The Corporation shall pay the
expenses (including attorneys' fees) incurred in defending any proceeding in
advance of its final disposition, provided, however, that the payment of
expenses incurred by a director or officer in advance of the final disposition
of the proceeding shall be made only upon receipt of an undertaking by the
director or officer to repay all amounts advanced if it should be ultimately
determined that the director or officer is not entitled to be indemnified under
this Article VII or otherwise.
SECTION 7.3. Claims. If a claim for indemnification or payment of expenses
under this Article VII is not paid in full within sixty days after a written
claim therefor has been received by the Corporation, the claimant may file suit
to recover the unpaid amount of such claim and, if successful in whole or in
part, shall be entitled to be paid the expense of prosecuting such claim. In any
such action the Corporation shall have the burden of proving that the claimant
was not entitled to the requested indemnification or payment of expenses under
applicable law.
SECTION 7.4. Non-Exclusivity of Rights. The rights conferred on any person
by this Article VII shall not be exclusive of any other rights which such person
may have or hereafter acquire under any statute, provision of the Certificate of
Incorporation, these By-laws, agreement, vote of stockholders or disinterested
directors or otherwise.
SECTION 7.5. Other Indemnification. The Corporation's obligation, if any,
to indemnify any person who was or is serving at its request as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust, enterprise or nonprofit entity shall be reduced by any amount such person
may collect as indemnification from such other corporation, partnership, joint
venture, trust, enterprise or nonprofit enterprise.
SECTION 7.6. Amendment or Repeal. Any repeal or modification of the
foregoing provisions of this Article VII shall not adversely affect any right or
protection hereunder of any person in respect of any act or omission occurring
prior to the time of such repeal or modification.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. Fiscal Year. The fiscal year of the Corporation shall be
determined by resolution of the Board of Directors.
SECTION 8.2. Seal. The corporate seal shall have the name of the
Corporation inscribed thereon and shall be in such form as may be approved from
time to time by the Board of Directors.
SECTION 8.3. Waiver of Notice of Meetings of Stockholders, Directors and
Committees. Any written waiver of notice, signed by the person entitled to
notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at nor the purpose of any
regular or special meeting of the stockholders, directors, or members of a
committee of directors need be specified in any written waiver of notice.
SECTION 8.4. Interested Directors; Quorum. No contract or transaction
between the Corporation and one or more of its directors or officers, or between
the Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof which
authorizes the contract or transaction, or solely because his or their votes are
counted for such purpose, if: (1) the material facts as to his relationship or
interest and as to the contract or transaction are disclosed or are known to the
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Board of Directors or the committee, and the Board of Directors or committee in
good faith authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the disinterested directors
be less than a quorum; or (2) the material facts as to his relationship or
interest and as to the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or (3) the
contract or transaction is fair as to the Corporation as of the time it is
authorized, approved or ratified by the Board of Directors, a committee thereof,
or the stockholders. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the Board of Directors or
of a committee which authorizes the contract or transaction.
SECTION 8.5. Declaration of Dividends. Dividends upon the capital stock of
the Corporation, subject to the provisions of the Certificate of Incorporation,
as amended, if any, may be declared by the Board of Directors at any regular or
special meeting, pursuant to law. Dividends may be paid in cash, in property, or
in shares of the capital stock, subject to the provisions of the Certificate of
Incorporation, as amended.
SECTION 8.6. Dividend Reserve. Before payment of any dividend, there may
be set aside out of any funds of the Corporation available for dividends such
sum or sums as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
Corporation, or for such other purposes as the Board of Directors shall think
conducive to the interest of the Corporation, and the Board of Directors may
modify or abolish any such reserve in the manner in which it was created.
SECTION 8.7. Execution of Corporate Instruments. All checks, drafts, or
other orders for payment of money, notes, or other evidences of indebtedness,
issued in the name of or payable to the Corporation, shall be signed or endorsed
by such person or persons and in such manner as from time to time shall be
determined by resolution of the Board of Directors.
SECTION 8.8. Corporate Contracts and Instruments; How Executed. The Board
of Directors, except as otherwise provided in these By-laws, may authorize any
officer or officers, agent or agents, to enter into any contract or execute any
instrument in the name of and on behalf of the Corporation, and this authority
may be general or confined to specific instances; and, unless so authorized or
ratified by the Board of Directors or within the agency power of an officer, no
officer, agent, or employee shall have any power or authority to bind the
Corporation by any contract or engagement or to pledge its credit or to render
it liable for any purpose or for any amount.
SECTION 8.9. Representation of Shares of Other Corporations. The Chairman
of the Board, the President, or any Vice President, or any other person
authorized by resolution of the Board of Directors or by any of the foregoing
designated officers, is authorized to vote on behalf of the Corporation any and
all shares of any other corporation or corporations, foreign or domestic,
standing in the name of the Corporation. The authority granted to these officers
to vote or represent on behalf of the Corporation any and all shares held by the
Corporation in any other corporation or corporations may be exercised by any of
these officers in person or by any person authorized to do so by a proxy duly
executed by these officers.
SECTION 8.10. Requirement For Certain Litigation. This Corporation is
prohibited from instituting or joining any action, claim, or proceeding against
any party to that certain Transition and Settlement Agreement dated December 22,
1986, effective as of January 5, 1987, by and between Robert B. Hitchcock,
Richard C. Wilcox, Richard A. Cortese, Neil L. Diver, Fred Krimm, Mary K.
Carrington and Alpha Microsystems unless (i) such institution or joinder is
approved in advance by a majority of the authorized number of directors of the
Corporation, which majority must include all of the disinterested directors of
the Corporation, (ii) the number of disinterested directors approving such
institution or joinder is at least three (3), and (iii) such action has been
undertaken on the advice of independent counsel of recognized good standing in
corporate law matters which is not the regular outside counsel to the
Corporation and which, after investigation of the legal and factual basis of
such action, claim, or proceeding, has advised the Board of Directors that in
its opinion it is more likely than not that a cause of action exists which, if
not pursued, could result in a material loss to this Corporation. A person shall
be deemed not to be a disinterested director if he or she is an employee,
officer or greater than five percent (5%) shareholder of the Corporation or any
subsidiary of the Corporation or is a
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person controlled by, or is an associate of, such employee, officer or
shareholder. The term "associate" means (1) any person who is an officer or
director or greater than five percent (5%) shareholder of any corporation or
organization of which such employee, officer, or shareholder is an officer or
director or is, directly or indirectly, the beneficial owner of five percent
(5%) or more of any class of equity securities, (2) any person who is a partner
of such employee, officer or shareholder, and (3) any person who is a trustee or
other fiduciary or beneficiary of a trust in which such employee, officer or
shareholder has a substantial beneficial interest or serves as trustee or in a
similar fiduciary capacity, and (4) any relative or spouse of such employee,
officer or shareholder, or any relative of such spouse, who either is an
ancestor or descendent of such person or spouse or who has the same home as such
person or spouse. Any defendant party in any action, claim or proceeding
prohibited by this Section 8.10 shall be automatically entitled to have such
action, claim, or proceeding dismissed with prejudice.
SECTION 8.11. Amendment of By-laws. These By-laws may be altered or
repealed, and new By-laws made, by the Board of Directors, but the stockholders
may make additional By-laws and may alter and repeal any By-laws whether adopted
by them or otherwise.
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EXHIBIT D
------------------------
ALPHA MICROSYSTEMS
and
, as Rights Agent
------------------------
RIGHTS AGREEMENT
Dated as of , 1997
------------------------
<PAGE> 55
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
Section 1. Certain Definitions...................................................... D-1
Section 2. Appointment of Rights Agent.............................................. D-4
Section 3. Issue of Right Certificates.............................................. D-4
Section 4. Form of Right Certificates............................................... D-5
Section 5. Countersignature and Registration........................................ D-5
Section 6. Transfer, Split Up, Combination and Exchange of Right Certificates;
Mutilated, Destroyed, Lost or Stolen Right Certificates................ D-5
Section 7. Exercise of Rights, Purchase Price; Expiration Date of Rights............ D-6
Section 8. Cancellation and Destruction of Right Certificates....................... D-7
Section 9. Availability of Shares of Preferred Stock................................ D-7
Section 10. Preferred Stock Record Date.............................................. D-8
Section 11. Adjustment of Purchase Price, Number of Shares and Number of Rights...... D-8
Section 12. Certificate of Adjusted Purchase Price or Number of Shares............... D-13
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power..... D-13
Section 14. Fractional Rights and Fractional Shares.................................. D-16
Section 15. Rights of Action......................................................... D-17
Section 16. Agreement of Right Holders............................................... D-17
Section 17. Right Certificate Holder Not Deemed a Stockholder........................ D-17
Section 18. Concerning the Rights Agent.............................................. D-17
Section 19. Merger or Consolidation or Change of Name of Rights Agent................ D-18
Section 20. Duties of Rights Agent................................................... D-18
Section 21. Change of Rights Agent................................................... D-20
Section 22. Issuance of New Right Certificates....................................... D-20
Section 23. Redemption............................................................... D-20
Section 24. Exchange................................................................. D-21
Section 25. Notice of Certain Events................................................. D-21
Section 26. Notices.................................................................. D-22
Section 27. Supplements and Amendments............................................... D-22
Section 28. Successors............................................................... D-23
Section 29. Benefits of this Agreement............................................... D-23
Section 30. Determinations and Actions by the Board of Directors..................... D-23
Section 31. Severability............................................................. D-23
Section 32. Governing Law............................................................ D-23
Section 33. Counterparts............................................................. D-23
Section 34. Descriptive Headings..................................................... D-23
</TABLE>
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<PAGE> 56
RIGHTS AGREEMENT
Rights Agreement, dated as of , 1997 ("Agreement"), between Alpha
Microsystems, a Delaware corporation (the "Company"), and , as Rights
Agent (the "Rights Agent").
The Board of Directors of the Company has authorized and declared a
dividend of one preferred share purchase right (a "Right") for each share of
Common Stock (as hereinafter defined) of the Company outstanding immediately
prior to the effective time of the Merger (as hereinafter defined) (the "Record
Date"), each Right representing the right to purchase one one-thousandth
(subject to adjustment) of a share of Preferred Stock (as hereinafter defined),
upon the terms and subject to the conditions herein set forth, and has further
authorized and directed the issuance of one Right (subject to adjustment as
provided herein) with respect to each share of Common Stock that shall become
outstanding between the Record Date and the earlier of the Distribution Date and
the Expiration Date (as such terms are hereinafter defined); provided, however,
that Rights may be issued with respect to shares of Common Stock that shall
become outstanding after the Distribution Date and prior to the Expiration Date
in accordance with Section 22.
Accordingly, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
SECTION 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meaning indicated:
(a) "Acquiring Person" shall mean any Person (as such term is hereinafter
defined) who or which shall be the Beneficial Owner (as such term is hereinafter
defined) of 15% or more of the shares of Common Stock then outstanding, but
shall not include an Exempt Person (as such term is hereinafter defined);
provided, however, that (i) if the Board of Directors of the Company determines
in good faith that a Person who would otherwise be an "Acquiring Person" became
such inadvertently (including, without limitation, because (A) such Person was
unaware that it beneficially owned a percentage of Common Stock that would
otherwise cause such Person to be an "Acquiring Person" or (B) such Person was
aware of the extent of its Beneficial Ownership of Common Stock but had no
actual knowledge of the consequences of such Beneficial Ownership under this
Agreement) and without any intention of changing or influencing control of the
Company, and if such Person as promptly as practicable divested or divests
itself of Beneficial Ownership of a sufficient number of shares of Common Stock
so that such Person would no longer be an "Acquiring Person," then such Person
shall not be deemed to be or to have become an "Acquiring Person" for any
purposes of this Agreement; (ii) if, as of the date hereof, any Person is the
Beneficial Owner of 15% or more of the shares of Common Stock outstanding, such
Person shall not be or become an "Acquiring Person" unless and until such time
as such Person shall become the Beneficial Owner of additional shares of Common
Stock (other than pursuant to a dividend or distribution paid or made by the
Company on the outstanding Common Stock in shares of Common Stock or pursuant to
a split or subdivision of the outstanding Common Stock), unless, upon becoming
the Beneficial Owner of such additional shares of Common Stock, such Person is
not then the Beneficial Owner of 15% or more of the shares of Common Stock then
outstanding; and (iii) no Person shall become an "Acquiring Person" as the
result of an acquisition of shares of Common Stock by the Company which, by
reducing the number of shares outstanding, increases the proportionate number of
shares of Common Stock beneficially owned by such Person to 15% or more of the
shares of Common Stock then outstanding, provided, however, that if a Person
shall become the Beneficial Owner of 15% or more of the shares of Common Stock
then outstanding by reason of such share acquisitions by the Company and shall
thereafter become the Beneficial Owner of any additional shares of Common Stock
(other than pursuant to a dividend or distribution paid or made by the Company
on the outstanding Common Stock in shares of Common Stock or pursuant to a split
or subdivision of the outstanding Common Stock), then such Person shall be
deemed to be an "Acquiring Person" unless upon becoming the Beneficial Owner of
such additional shares of Common Stock such Person does not beneficially own 15%
or more of the shares of Common Stock then outstanding. For all purposes of this
Agreement, any calculation of the number of shares of Common Stock outstanding
at any particular time, including for purposes of determining the particular
percentage of such outstanding shares of Common Stock of which any Person is the
Beneficial Owner, shall be made in
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<PAGE> 57
accordance with the last sentence of Rule 13d-3(d)(1)(i) of the General Rules
and Regulations under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as in effect on the date hereof.
(b) "Affiliate" and "Associate" shall have the respective meanings ascribed
to such terms in Rule 12b-2 of the General Rules and Regulations under the
Exchange Act, as in effect on the date hereof.
(c) A Person shall be deemed the "Beneficial Owner" of, shall be deemed to
have "Beneficial Ownership" of and shall be deemed to "beneficially own" any
securities:
(i) which such Person or any of such Person's Affiliates or Associates
is deemed to beneficially own, directly or indirectly, within the meaning
of Rule 13d-3 of the General Rules and Regulations under the Exchange Act
as in effect on the date hereof;
(ii) which such Person or any of such Person's Affiliates or
Associates has (A) the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding (other than customary agreements with and
between underwriters and selling group members with respect to a bona fide
public offering of securities), or upon the exercise of conversion rights,
exchange rights, rights, warrants or options, or otherwise; provided,
however, that a Person shall not be deemed the Beneficial Owner of, or to
beneficially own, (x) securities tendered pursuant to a tender or exchange
offer made by or on behalf of such Person or any of such Person's
Affiliates or Associates until such tendered securities are accepted for
purchase, (y) securities which such Person has a right to acquire upon the
exercise of Rights at any time prior to the time that any Person becomes an
Acquiring Person or (z) securities issuable upon the exercise of Rights
from and after the time that any Person becomes an Acquiring Person if such
Rights were acquired by such Person or any of such Person's Affiliates or
Associates prior to the Distribution Date or pursuant to Section 3(a) or
Section 22 hereof ("Original Rights") or pursuant to Section 11(i) or
Section 11(n) with respect to an adjustment to Original Rights; or (B) the
right to vote pursuant to any agreement, arrangement or understanding;
provided, however, that a Person shall not be deemed the Beneficial Owner
of, or to beneficially own, any security by reason of such agreement,
arrangement or understanding if the agreement, arrangement or understanding
to vote such security (1) arises solely from a revocable proxy or consent
given to such Person in response to a public proxy or consent solicitation
made pursuant to, and in accordance with, the applicable rules and
regulations promulgated under the Exchange Act and (2) is not also then
reportable on Schedule 13D under the Exchange Act (or any comparable or
successor report); or
(iii) which are beneficially owned, directly or indirectly, by any
other Person and with respect to which such Person or any of such Person's
Affiliates or Associates has any agreement, arrangement or understanding
(other than customary agreements with and between underwriters and selling
group members with respect to a bona fide public offering of securities)
for the purpose of acquiring, holding, voting (except to the extent
contemplated by the proviso to Section 1(c)(ii)(B)) or disposing of such
securities of the Company;
provided, however, that no Person who is an officer, director or employee of an
Exempt Person shall be deemed, solely by reason of such Person's status or
authority as such, to be the "Beneficial Owner" of, to have "Beneficial
Ownership" of or to "beneficially own" any securities that are "beneficially
owned" (as defined in this Section l(c)), including, without limitation, in a
fiduciary capacity, by an Exempt Person or by any other such officer, director
or employee of an Exempt Person.
(d) "Business Day" shall mean any day other than a Saturday, a Sunday or a
day on which banking institutions in the State of California or the city in
which the principal office of the Rights Agent is located are authorized or
obligated by law or executive order to close.
(e) "Close of Business" on any given date shall mean 5:00 P.M., Los Angeles
California time, on such date; provided, however, that if such date is not a
Business Day it shall mean 5:00 P.M., Los Angeles, California time, on the next
succeeding Business Day.
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(f) "Common Stock" when used with reference to the Company shall mean the
Common Stock, presently par value $.001 per share, of the Company. "Common
Stock" when used with reference to any Person other than the Company shall mean
the common stock (or, in the case of an unincorporated entity, the equivalent
equity interest) with the greatest voting power of such other Person or, if such
other Person is a subsidiary of another Person, the Person or Persons which
ultimately control such first-mentioned Person.
(g) "Common Stock Equivalents" shall have the meaning set forth in Section
11(a)(iii) hereof.
(h) "Current Value" shall have the meaning set forth in Section 11(a)(iii)
hereof.
(i) "Distribution Date" shall have the meaning set forth in Section 3
hereof.
(j) "Equivalent Preferred Shares" shall have the meaning set forth in
Section 11(b) hereof.
(k) "Exempt Person" shall mean (i) until immediately following the
effective time of the Merger, the corporation known as of the date hereof as
Alpha Microsystems, a California Corporation, and (ii) the Company or any
Subsidiary (as such term is hereinafter defined) of the Company, in each case
including, without limitation, in its fiduciary capacity, or any employee
benefit plan of the Company or of any Subsidiary of the Company, or any entity
or trustee holding Common Stock for or pursuant to the terms of any such plan or
for the purpose of funding any such plan or funding other employee benefits for
employees of the Company or of any Subsidiary of the Company.
(l) "Exchange Ratio" shall have the meaning set forth in Section 24 hereof.
(m) "Expiration Date" shall have the meaning set forth in Section 7 hereof.
(n) "Flip-In Event" shall have the meaning set forth in Section 11(a)(ii)
hereof.
(o) "Final Expiration Date" shall have the meaning set forth in Section 7
hereof.
(p) "Merger" shall mean the merger of Alpha Microsystems, a California
corporation, with and into the Company pursuant to the Agreement and Plan of
Merger, dated as of , 1997 among the Alpha Microsystems, a
California corporation and the Company.
(q) "NASDAQ" shall mean The Nasdaq Stock Market.
(r) "New York Stock Exchange" shall mean the New York Stock Exchange, Inc.
(s) "Person" shall mean any individual, firm, corporation, partnership,
limited liability company, trust or other entity, and shall include any
successor (by merger or otherwise) to such entity.
(t) "Preferred Stock" shall mean the Series A Junior Participating
Preferred Stock, par value $.001 per share, of the Company having the rights and
preferences set forth in the Form of Certificate of Designation attached to this
Agreement as Exhibit A.
(u) "Principal Party" shall have the meaning set forth in Section 13(b)
hereof.
(v) "Redemption Date" shall have the meaning set forth in Section 7 hereof.
(w) "Redemption Price" shall have the meaning set forth in Section 23
hereof.
(x) "Right Certificate" shall have the meaning set forth in Section 3
hereof.
(y) "Securities Act" shall mean the Securities Act of 1933, as amended.
(z) "Section 11(a)(ii) Trigger Date" shall have the meaning set forth in
Section 11(a)(iii) hereof.
(aa) "Spread" shall have the meaning set forth in Section 11(a)(iii)
hereof.
(bb) "Stock Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition, shall include,
without limitation, a report filed pursuant to Section 13(d) of the
Exchange Act) by the Company or an Acquiring Person that an Acquiring
Person has become such, or such earlier date as a majority of the Board of
Directors shall become aware of the existence of an Acquiring Person.
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<PAGE> 59
(cc) "Subsidiary" of any Person shall mean any corporation or other
entity of which securities or other ownership interests having ordinary
voting power sufficient to elect a majority of the board of directors or
other persons performing similar functions are beneficially owned, directly
or indirectly, by such Person, and any corporation or other entity that is
otherwise controlled by such Person.
(dd) "Substitution Period" shall have the meaning set forth in Section
11(a)(iii) hereof.
(ee) "Trading Day" shall have the meaning set forth in Section
11(d)(i) hereof.
SECTION 2. Appointment of Rights Agent. The Company hereby appoints the
Rights Agent to act as agent for the Company and the holders of the Rights (who,
in accordance with Section 3 hereof, shall prior to the Distribution Date be the
holders of Common Stock) in accordance with the terms and conditions hereof, and
the Rights Agent hereby accepts such appointment. The Company may from time to
time appoint such co-Rights Agents as it may deem necessary or desirable.
SECTION 3. Issue of Right Certificates.
(a) Until the Close of Business on the earlier of (i) the tenth day after
the Stock Acquisition Date or (ii) the tenth Business Day (or such later date as
may be determined by action of the Board of Directors prior to such time as any
Person becomes an Acquiring Person) after the date of the commencement by any
Person (other than an Exempt Person) of, or of the first public announcement of
the intention of such Person (other than an Exempt Person) to commence, a tender
or exchange offer the consummation of which would result in any Person (other
than an Exempt Person) becoming the Beneficial Owner of shares of Common Stock
aggregating 15% or more of the Common Stock then outstanding (the earlier of
such dates being herein referred to as the "Distribution Date", provided,
however, that if either of such dates occurs after the date of this Agreement
and on or prior to the Record Date, then the Distribution Date shall be the
Record Date), (x) the Rights will be evidenced (subject to the provisions of
Section 3(b) hereof) by the certificates for Common Stock registered in the
names of the holders thereof and not by separate Right Certificates, and (y) the
Rights will be transferable only in connection with the transfer of Common
Stock. As soon as practicable after the Distribution Date, the Company will
prepare and execute, the Rights Agent will countersign and the Company will send
or cause to be sent (and the Rights Agent will, if requested, send) by
first-class, insured, postage-prepaid mail, to each record holder of Common
Stock as of the close of business on the Distribution Date (other than any
Acquiring Person or any Associate or Affiliate of an Acquiring Person), at the
address of such holder shown on the records of the Company, a Right Certificate,
in substantially the form of Exhibit B hereto (a "Right Certificate"),
evidencing one Right (subject to adjustment as provided herein) for each share
of Common Stock so held. As of the Distribution Date, the Rights will be
evidenced solely by such Right Certificates.
(b) Certificates issued for Common Stock (including, without limitation,
upon transfer of outstanding Common Stock, disposition of Common Stock out of
treasury stock or issuance or reissuance of Common Stock out of authorized but
unissued shares) after the Record Date but prior to the earlier of the
Distribution Date and the Expiration Date shall have impressed on, printed on,
written on or otherwise affixed to them the following legend:
This certificate also evidences and entitles the holder hereof to
certain rights as set forth in a Rights Agreement between Alpha
Microsystems (the "Company") and , as Rights Agent, dated as of
, 1997 and as amended from time to time (the "Rights Agreement"),
the terms of which are hereby incorporated herein by reference and a copy
of which is on file at the principal executive offices of the Company.
Under certain circumstances, as set forth in the Rights Agreement, such
Rights will be evidenced by separate certificates and will no longer be
evidenced by this certificate. The Company will mail to the holder of this
certificate a copy of the Rights Agreement without charge after receipt of
a written request therefor. Under certain circumstances, as set forth in
the Rights Agreement, Rights owned by or transferred to any Person who is
or becomes an Acquiring Person (as defined in the Rights Agreement) and
certain transferees thereof will become null and void and will no longer be
transferable.
With respect to such certificates containing the foregoing legend, until the
Distribution Date the Rights associated with the Common Stock represented by
such certificates shall be evidenced by such certificates
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<PAGE> 60
alone, and the surrender for transfer of any such certificate, except as
otherwise provided herein, shall also constitute the transfer of the Rights
associated with the Common Stock represented thereby. In the event that the
Company purchases or otherwise acquires any Common Stock after the Record Date
but prior to the Distribution Date, any Rights associated with such Common Stock
shall be deemed canceled and retired so that the Company shall not be entitled
to exercise any Rights associated with the Common Stock which are no longer
outstanding.
Notwithstanding this paragraph (b), the omission of a legend shall not
affect the enforceability of any part of this Agreement or the rights of any
holder of the Rights.
SECTION 4. Form of Right Certificates. The Right Certificates (and the
forms of election to purchase shares and of assignment to be printed on the
reverse thereof) shall be substantially in the form set forth in Exhibit B
hereto and may have such marks of identification or designation and such
legends, summaries or endorsements printed thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of this Agreement,
or as may be required to comply with any applicable law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any stock
exchange or interdealer quotation system on which the Rights may from time to
time be listed or quoted, or to conform to usage. Subject to the provisions of
this Agreement, the Right Certificates shall entitle the holders thereof to
purchase such number of one one-thousandths of a share of Preferred Stock as
shall be set forth therein at the price per one one-thousandth of a share of
Preferred Stock set forth therein (the "Purchase Price"), but the number of such
one one-thousandths of a share of Preferred Stock and the Purchase Price shall
be subject to adjustment as provided herein.
SECTION 5. Countersignature and Registration.
(a) The Right Certificates shall be executed on behalf of the Company by
the President of the Company, either manually or by facsimile signature, shall
have affixed thereto the Company's seal or a facsimile thereof and shall be
attested by the Secretary of the Company, either manually or by facsimile
signature. The Right Certificates shall be manually countersigned by the Rights
Agent and shall not be valid for any purpose unless countersigned. In case any
officer of the Company who shall have signed any of the Right Certificates shall
cease to be such officer of the Company before countersignature by the Rights
Agent and issuance and delivery by the Company, such Right Certificates,
nevertheless, may be countersigned by the Rights Agent and issued and delivered
by the Company with the same force and effect as though the Person who signed
such Right Certificates had not ceased to be such officer of the Company; and
any Right Certificate may be signed on behalf of the Company by any Person who,
at the actual date of the execution of such Right Certificate, shall be a proper
officer of the Company to sign such Right Certificate, although at the date of
the execution of this Agreement any such Person was not such an officer.
(b) Following the Distribution Date, the Rights Agent will keep or cause to
be kept, at an office or agency designated for such purpose, books for
registration and transfer of the Right Certificates issued hereunder. Such books
shall show the names and addresses of the respective holders of the Right
Certificates, the number of Rights evidenced on its face by each of the Right
Certificates and the date of each of the Right Certificates.
SECTION 6.Transfer, Split Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed,
Lost or Stolen Right Certificates.
(a) Subject to the provisions of this Agreement, at any time after the
Distribution Date and prior to the Expiration Date, any Right Certificate or
Right Certificates may be transferred, split up, combined or exchanged for
another Right Certificate or Right Certificates, entitling the registered holder
to purchase a like number of one one-thousandths of a share of Preferred Stock
as the Right Certificate or Right Certificates surrendered then entitled such
holder to purchase. Any registered holder desiring to transfer, split up,
combine or exchange any Right Certificate or Right Certificates shall make such
request in writing delivered to the Rights Agent, and shall surrender the Right
Certificate or Right Certificates to be transferred, split up, combined or
exchanged at the office or agency of the Rights Agent designated for such
purpose. Thereupon the Rights Agent shall countersign and deliver to the Person
entitled thereto a Right Certificate or Right
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<PAGE> 61
Certificates, as the case may be, as so requested. The Company may require
payment of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any transfer, split up, combination or exchange of
Right Certificates.
(b) Subject to the provisions of this Agreement, at any time after the
Distribution Date and prior to the Expiration Date, upon receipt by the Company
and the Rights Agent of evidence reasonably satisfactory to them of the loss,
theft, destruction or mutilation of a Right Certificate, and, in case of loss,
theft or destruction, of indemnity or security reasonably satisfactory to them,
and, at the Company's request, reimbursement to the Company and the Rights Agent
of all reasonable expenses incidental thereto, and upon surrender to the Rights
Agent and cancellation of the Right Certificate if mutilated, the Company will
make and deliver a new Right Certificate of like tenor to the Rights Agent for
delivery to the registered holder in lieu of the Right Certificate so lost,
stolen, destroyed or mutilated.
SECTION 7. Exercise of Rights, Purchase Price; Expiration Date of Rights.
(a) Except as otherwise provided herein, the Rights shall become
exercisable on the Distribution Date, and thereafter the registered holder of
any Right Certificate may, subject to Section 11(a)(ii) hereof and except as
otherwise provided herein, exercise the Rights evidenced thereby in whole or in
part upon surrender of the Right Certificate, with the form of election to
purchase on the reverse side thereof duly executed, to the Rights Agent at the
office or agency of the Rights Agent designated for such purpose, together with
payment of the aggregate Purchase Price with respect to the total number of one
one-thousandths of a share of Preferred Stock (or other securities, cash or
other assets, as the case may be) as to which the Rights are exercised, at any
time which is both after the Distribution Date and prior to the time (the
"Expiration Date") that is the earliest of (i) the Close of Business on
, 2007 (the "Final Expiration Date"), (ii) the time at which the
Rights are redeemed as provided in Section 23 hereof (the "Redemption Date") or
(iii) the time at which such Rights are exchanged as provided in Section 24
hereof.
(b) The Purchase Price shall be initially $ for each one
one-thousandth of a share of Preferred Stock purchasable upon the exercise of a
Right. The Purchase Price and the number of one one-thousandths of a share of
Preferred Stock or other securities or property to be acquired upon exercise of
a Right shall be subject to adjustment from time to time as provided in Sections
11 and 13 hereof and shall be payable in lawful money of the United States of
America in accordance with paragraph (c) of this Section 7.
(c) Except as otherwise provided herein, upon receipt of a Right
Certificate representing exercisable Rights, with the form of election to
purchase duly executed, accompanied by payment of the aggregate Purchase Price
for the shares of Preferred Stock to be purchased and an amount equal to any
applicable transfer tax required to be paid by the holder of such Right
Certificate in accordance with Section 9 hereof, in cash or by certified check,
cashier's check or money order payable to the order of the Company, the Rights
Agent shall thereupon promptly (i) (A) requisition from any transfer agent of
the Preferred Stock certificates for the number of shares of Preferred Stock to
be purchased and the Company hereby irrevocably authorizes its transfer agent to
comply with all such requests, or (B) requisition from a depositary agent
appointed by the Company depositary receipts representing interests in such
number of one one-thousandths of a share of Preferred Stock as are to be
purchased (in which case certificates for the Preferred Stock represented by
such receipts shall be deposited by the transfer agent with the depositary
agent) and the Company hereby directs any such depositary agent to comply with
such request, (ii) when appropriate, requisition from the Company the amount of
cash to be paid in lieu of issuance of fractional shares in accordance with
Section 14 hereof, (iii) promptly after receipt of such certificates or
depositary receipts, cause the same to be delivered to or upon the order of the
registered holder of such Right Certificate, registered in such name or names as
may be designated by such holder and (iv) when appropriate, after receipt,
promptly deliver such cash to or upon the order of the registered holder of such
Right Certificate.
(d) Except as otherwise provided herein, in case the registered holder of
any Right Certificate shall exercise less than all of the Rights evidenced
thereby, a new Right Certificate evidencing Rights equivalent to the exercisable
Rights remaining unexercised shall be issued by the Rights Agent to the
registered holder of such Right Certificate or to his duly authorized assigns,
subject to the provisions of Section 14 hereof.
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<PAGE> 62
(e) Notwithstanding anything in this Agreement to the contrary, neither the
Rights Agent nor the Company shall be obligated to undertake any action with
respect to a registered holder of Rights upon the occurrence of any purported
transfer or exercise of Rights pursuant to Section 6 hereof or this Section 7
unless such registered holder shall have (i) completed and signed the
certificate contained in the form of assignment or form of election to purchase
set forth on the reverse side of the Rights Certificate surrendered for such
transfer or exercise and (ii) provided such additional evidence of the identity
of the Beneficial Owner (or former Beneficial Owner) thereof as the Company
shall reasonably request.
SECTION 8. Cancellation and Destruction of Right Certificates. All Right
Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or to any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or, if surrendered to the Rights Agent, shall be canceled by it, and no Right
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any other Right Certificate purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
canceled Right Certificates to the Company, or shall, at the written request of
the Company, destroy such canceled Right Certificates, and in such case shall
deliver a certificate of destruction thereof to the Company.
SECTION 9. Availability of Shares of Preferred Stock.
(a) The Company covenants and agrees that it will cause to be reserved and
kept available out of its authorized and unissued shares of Preferred Stock or
any shares of Preferred Stock held in its treasury, the number of shares of
Preferred Stock that will be sufficient to permit the exercise in full of all
outstanding Rights.
(b) So long as the shares of Preferred Stock issuable upon the exercise of
Rights may be listed or admitted to trading on any national securities exchange,
or quoted on NASDAQ, the Company shall use its best efforts to cause, from and
after such time as the Rights become exercisable, all shares reserved for such
issuance to be listed or admitted to trading on such exchange, or quoted on
NASDAQ, upon official notice of issuance upon such exercise.
(c) From and after such time as the Rights become exercisable, the Company
shall use its best efforts, if then necessary to permit the issuance of shares
of Preferred Stock upon the exercise of Rights, to register and qualify such
shares of Preferred Stock under the Securities Act and any applicable state
securities or "Blue Sky" laws (to the extent exemptions therefrom are not
available), cause such registration statement and qualifications to become
effective as soon as possible after such filing and keep such registration and
qualifications effective until the earlier of the date as of which the Rights
are no longer exercisable for such securities and the Expiration Date. The
Company may temporarily suspend, for a period of time not to exceed 90 days, the
exercisability of the Rights in order to prepare and file a registration
statement under the Securities Act and permit it to become effective. Upon any
such suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a public
announcement at such time as the suspension is no longer in effect.
Notwithstanding any provision of this Agreement to the contrary, the Rights
shall not be exercisable in any jurisdiction unless the requisite qualification
in such jurisdiction shall have been obtained and until a registration statement
under the Securities Act (if required) shall have been declared effective.
(d) The Company covenants and agrees that it will take all such action as
may be necessary to ensure that all shares of Preferred Stock delivered upon
exercise of Rights shall, at the time of delivery of the certificates therefor
(subject to payment of the Purchase Price), be duly and validly authorized and
issued and fully paid and nonassessable shares.
(e) The Company further covenants and agrees that it will pay when due and
payable any and all federal and state transfer taxes and charges which may be
payable in respect of the issuance or delivery of the Right Certificates or of
any shares of Preferred Stock upon the exercise of Rights. The Company shall
not, however, be required to pay any transfer tax which may be payable in
respect of any transfer or delivery of Right
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Certificates to a Person other than, or the issuance or delivery of certificates
or depositary receipts for the Preferred Stock in a name other than that of, the
registered holder of the Right Certificate evidencing Rights surrendered for
exercise or to issue or deliver any certificates or depositary receipts for
Preferred Stock upon the exercise of any Rights until any such tax shall have
been paid (any such tax being payable by that holder of such Right Certificate
at the time of surrender) or until it has been established to the Company's
reasonable satisfaction that no such tax is due.
SECTION 10. Preferred Stock Record Date. Each Person in whose name any
certificate for Preferred Stock is issued upon the exercise of Rights shall for
all purposes be deemed to have become the holder of record of the shares of
Preferred Stock represented thereby on, and such certificate shall be dated, the
date upon which the Right Certificate evidencing such Rights was duly
surrendered and payment of the Purchase Price (and any applicable transfer
taxes) was made; provided, however, that if the date of such surrender and
payment is a date upon which the Preferred Stock transfer books of the Company
are closed, such Person shall be deemed to have become the record holder of such
shares on, and such certificate shall be dated, the next succeeding Business Day
on which the Preferred Stock transfer books of the Company are open. Prior to
the exercise of the Rights evidenced thereby, the holder of a Right Certificate
shall not be entitled to any rights of a holder of Preferred Stock for which the
Rights shall be exercisable, including, without limitation, the right to vote or
to receive dividends or other distributions, and shall not be entitled to
receive any notice of any proceedings of the Company, except as provided herein.
SECTION 11. Adjustment of Purchase Price, Number and Kind of Shares and
Number of Rights. The Purchase Price, the number of shares of Preferred Stock
or other securities or property purchasable upon exercise of each Right and the
number of Rights outstanding are subject to adjustment from time to time as
provided in this Section 11.
(a)(i) In the event the Company shall at any time after the date of this
Agreement (A) declare and pay a dividend on the Preferred Stock payable in
shares of Preferred Stock, (B) subdivide the outstanding Preferred Stock, (C)
combine the outstanding Preferred Stock into a smaller number of shares of
Preferred Stock or (D) issue any shares of its capital stock in a
reclassification of the Preferred Stock (including any such reclassification in
connection with a consolidation or merger in which the Company is the continuing
or surviving corporation), except as otherwise provided in this Section 11(a),
the Purchase Price in effect at the time of the record date for such dividend or
of the effective date of such subdivision, combination or reclassification, and
the number and kind of shares of capital stock issuable on such date, shall be
proportionately adjusted so that the holder of any Right exercised after such
time shall be entitled to receive the aggregate number and kind of shares of
capital stock which, if such Right had been exercised immediately prior to such
date and at a time when the Preferred Stock transfer books of the Company were
open, the holder would have owned upon such exercise and been entitled to
receive by virtue of such dividend, subdivision, combination or
reclassification; provided, however, that in no event shall the consideration to
be paid upon the exercise of one Right be less than the aggregate par value of
the shares of capital stock of the Company issuable upon exercise of one Right.
(ii) Subject to Section 24 of this Agreement, in the event any Person
becomes an Acquiring Person (the first occurrence of such event being referred
to hereinafter as the "Flip-In Event"), then (A) the Purchase Price shall be
adjusted to be the Purchase Price in effect immediately prior to the Flip-In
Event multiplied by the number of one one-thousandths of a share of Preferred
Stock for which a Right was exercisable immediately prior to such Flip-In Event,
whether or not such Right was then exercisable, and (B) each holder of a Right,
except as otherwise provided in this Section 11(a)(ii) and Section 11(a)(iii)
hereof, shall thereafter have the right to receive, upon exercise thereof at a
price equal to the Purchase Price (as so adjusted), in accordance with the terms
of this Agreement and in lieu of shares of Preferred Stock, such number of
shares of Common Stock as shall equal the result obtained by dividing the
Purchase Price (as so adjusted) by 50% of the current per share market price of
the Common Stock (determined pursuant to Section 11(d) hereof) on the date of
such Flip-In Event; provided, however, that the Purchase Price (as so adjusted)
and the number of shares of Common Stock so receivable upon exercise of a Right
shall, following the Flip-In Event, be subject to further adjustment as
appropriate in accordance with Section 11(f) hereof. Notwithstanding anything in
this Agreement to the contrary, however, from and after the Flip-In Event, any
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Rights that are beneficially owned by (x) any Acquiring Person (or any Affiliate
or Associate of any Acquiring Person), (y) a transferee of any Acquiring Person
(or any such Affiliate or Associate) who becomes a transferee after the Flip-In
Event or (z) a transferee of any Acquiring Person (or any such Affiliate or
Associate) who became a transferee prior to or concurrently with the Flip-In
Event pursuant to either (I) a transfer from the Acquiring Person to holders of
its equity securities or to any Person with whom it has any continuing
agreement, arrangement or understanding regarding the transferred Rights or (II)
a transfer which the Board of Directors has determined is part of a plan,
arrangement or understanding which has the purpose or effect of avoiding the
provisions of this paragraph, and subsequent transferees of such Persons, shall
be void without any further action and any holder of such Rights shall
thereafter have no rights whatsoever with respect to such Rights under any
provision of this Agreement. The Company shall use all reasonable efforts to
ensure that the provisions of this Section 11(a)(ii) are complied with, but
shall have no liability to any holder of Right Certificates or other Person as a
result of its failure to make any determinations with respect to an Acquiring
Person or its Affiliates, Associates or transferees hereunder. From and after
the Flip-In Event, no Right Certificate shall be issued pursuant to Section 3 or
Section 6 hereof that represents Rights that are or have become void pursuant to
the provisions of this paragraph, and any Right Certificate delivered to the
Rights Agent that represents Rights that are or have become void pursuant to the
provisions of this paragraph shall be canceled. From and after the occurrence of
an event specified in Section 13(a) hereof, any Rights that theretofore have not
been exercised pursuant to this Section 11(a)(ii) shall thereafter be
exercisable only in accordance with Section 13 and not pursuant to this Section
11(a)(ii).
(iii) The Company may at its option substitute for a share of Common Stock
issuable upon the exercise of Rights in accordance with the foregoing
subparagraph (ii) a number of shares of Preferred Stock or fraction thereof such
that the current per share market price of one share of Preferred Stock
multiplied by such number or fraction is equal to the current per share market
price of one share of Common Stock. In the event that there shall not be
sufficient shares of Common Stock issued but not outstanding or authorized but
unissued to permit the exercise in full of the Rights in accordance with the
foregoing subparagraph (ii), the Board of Directors shall, to the extent
permitted by applicable law and any material agreements then in effect to which
the Company is a party (A) determine the excess (such excess, the "Spread") of
(1) the value of the shares of Common Stock issuable upon the exercise of a
Right in accordance with the foregoing subparagraph (ii) (the "Current Value")
over (2) the Purchase Price (as adjusted in accordance with the foregoing
subparagraph (ii)), and (B) with respect to each Right (other than Rights which
have become void pursuant to the foregoing subparagraph (ii)), make adequate
provision to substitute for the shares of Common Stock issuable in accordance
with the foregoing subparagraph (ii) upon exercise of the Right and payment of
the Purchase Price (as adjusted in accordance therewith), (1) cash, (2) a
reduction in such Purchase Price, (3) shares of Preferred Stock or other equity
securities of the Company (including, without limitation, shares or fractions of
shares of preferred stock which, by virtue of having dividend, voting and
liquidation rights substantially comparable to those of the shares of Common
Stock, are deemed in good faith by the Board of Directors to have substantially
the same value as the shares of Common Stock (such shares of Preferred Stock and
shares or fractions of shares of preferred stock are hereinafter referred to as
"Common Stock Equivalents")), (4) debt securities of the Company, (5) other
assets, or (6) any combination of the foregoing, having a value which, when
added to the value of the shares of Common Stock issued upon exercise of such
Right, shall have an aggregate value equal to the Current Value (less the amount
of any reduction in such Purchase Price), where such aggregate value has been
determined by the Board of Directors upon the advice of a nationally recognized
investment banking firm selected in good faith by the Board of Directors;
provided, however, that if the Company shall not make adequate provision to
deliver value pursuant to clause (B) above within thirty (30) days following the
Flip-In Event (the "Section 11(a) (ii) Trigger Date"), then the Company shall be
obligated to deliver, to the extent permitted by applicable law and any material
agreements then in effect to which the Company is a party, upon the surrender
for exercise of a Right and without requiring payment of such Purchase Price,
shares of Common Stock (to the extent available), and then, if necessary, such
number or fractions of shares of Preferred Stock (to the extent available) and
then, if necessary, cash, which shares and/or cash have an aggregate value equal
to the Spread. If, upon the occurrence of the Flip-In Event, the Board of
Directors shall determine in good faith that it is likely that sufficient
additional shares of Common Stock could be authorized for issuance upon exercise
in full of the
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Rights, then, if the Board of Directors so elects, the thirty (30) day period
set forth above may be extended to the extent necessary, but not more than
ninety (90) days after the Section 11(a) (ii) Trigger Date, in order that the
Company may seek stockholder approval for the authorization of such additional
shares (such thirty (30) day period, as it may be extended, is herein called the
"Substitution Period"). To the extent that the Company determines that some
action need be taken pursuant to the second and/or third sentence of this
Section 11(a)(iii), the Company (x) shall provide, subject to Section 11(a)(ii)
hereof and the last sentence of this Section 11(a)(iii) hereof, that such action
shall apply uniformly to all outstanding Rights and (y) may suspend the
exercisability of the Rights until the expiration of the Substitution Period in
order to seek any authorization of additional shares and/or to decide the
appropriate form of distribution to be made pursuant to such second sentence and
to determine the value thereof. In the event of any such suspension, the Company
shall issue a public announcement stating that the exercisability of the Rights
has been temporarily suspended, as well as a public announcement at such time as
the suspension is no longer in effect. For purposes of this Section 11(a)(iii),
the value of the shares of Common Stock shall be the current per share market
price (as determined pursuant to Section 11(d)(i)) on the Section 11(a)(ii)
Trigger Date and the per share or fractional value of any "Common Stock
Equivalent" shall be deemed to equal the current per share market price of the
Common Stock. The Board of Directors of the Company may, but shall not be
required to, establish procedures to allocate the right to receive shares of
Common Stock upon the exercise of the Rights among holders of Rights pursuant to
this Section 11(a)(iii).
(b) In case the Company shall fix a record date for the issuance of rights,
options or warrants to all holders of Preferred Stock entitling them (for a
period expiring within 45 calendar days after such record date) to subscribe for
or purchase Preferred Stock (or shares having the same rights, privileges and
preferences as the Preferred Stock ("equivalent preferred shares")) or
securities convertible into Preferred Stock or equivalent preferred shares at a
price per share of Preferred Stock or equivalent preferred shares (or having a
conversion price per share, if a security convertible into shares of Preferred
Stock or equivalent preferred shares) less than the then current per share
market price of the Preferred Stock (determined pursuant to Section 11(d)
hereof) on such record date, the Purchase Price to be in effect after such
record date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the number of shares of Preferred Stock and equivalent preferred shares
outstanding on such record date plus the number of shares of Preferred Stock and
equivalent preferred shares which the aggregate offering price of the total
number of shares of Preferred Stock and/or equivalent preferred shares so to be
offered (and/or the aggregate initial conversion price of the convertible
securities so to be offered) would purchase at such current market price, and
the denominator of which shall be the number of shares of Preferred Stock and
equivalent preferred shares outstanding on such record date plus the number of
additional shares of Preferred Stock and/or equivalent preferred shares to be
offered for subscription or purchase (or into which the convertible securities
so to be offered are initially convertible); provided, however, that in no event
shall the consideration to be paid upon the exercise of one Right be less than
the aggregate par value of the shares of capital stock of the Company issuable
upon exercise of one Right. In case such subscription price may be paid in a
consideration part or all of which shall be in a form other than cash, the value
of such consideration shall be as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent. Shares of Preferred Stock and equivalent preferred
shares owned by or held for the account of the Company shall not be deemed
outstanding for the purpose of any such computation. Such adjustment shall be
made successively whenever such a record date is fixed; and in the event that
such rights, options or warrants are not so issued, the Purchase Price shall be
adjusted to be the Purchase Price which would then be in effect if such record
date had not been fixed.
(c) In case the Company shall fix a record date for the making of a
distribution to all holders of the Preferred Stock (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation) of evidences of indebtedness
or assets (other than a regular quarterly cash dividend or a dividend payable in
Preferred Stock) or subscription rights or warrants (excluding those referred to
in Section 11(b) hereof), the Purchase Price to be in effect after such record
date shall be determined by multiplying the Purchase Price in effect immediately
prior to such record date by a fraction, the numerator of which shall be the
then current per share market price of the Preferred Stock
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(determined pursuant to Section 11(d) hereof) on such record date, less the fair
market value (as determined in good faith by the Board of Directors of the
Company whose determination shall be described in a statement filed with the
Rights Agent) of the portion of the assets or evidences of indebtedness so to be
distributed or of such subscription rights or warrants applicable to one share
of Preferred Stock, and the denominator of which shall be such current per share
market price (determined pursuant to Section 11(d) hereof) of the Preferred
Stock; provided, however, that in no event shall the consideration to be paid
upon the exercise of one Right be less than the aggregate par value of the
shares of capital stock of the Company to be issued upon exercise of one Right.
Such adjustments shall be made successively whenever such a record date is
fixed; and in the event that such distribution is not so made, the Purchase
Price shall again be adjusted to be the Purchase Price which would then be in
effect if such record date had not been fixed.
(d)(i) Except as otherwise provided herein, for the purpose of any
computation hereunder, the "current per share market price" of any security (a
"Security" for the purpose of this Section 11(d)(i)) on any date shall be deemed
to be the average of the daily closing prices per share of such Security for the
30 consecutive Trading Days (as such term is hereinafter defined) immediately
prior to such date; provided, however, that in the event that the current per
share market price of the Security is determined during a period following the
announcement by the issuer of such Security of (A) a dividend or distribution on
such Security payable in shares of such Security or securities convertible into
such shares, or (B) any subdivision, combination or reclassification of such
Security, and prior to the expiration of 30 Trading Days after the ex-dividend
date for such dividend or distribution, or the record date for such subdivision,
combination or reclassification, then, and in each such case, the current per
share market price shall be appropriately adjusted to reflect the current market
price per share equivalent of such Security. The closing price for each day
shall be the last sale price, regular way, or, in case no such sale takes place
on such day, the average of the closing bid and asked prices, regular way, in
either case as reported by the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the New York
Stock Exchange or, if the Security is not listed or admitted to trading on the
New York Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which the Security is listed or admitted to trading or,
if the Security is not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported by NASDAQ
or such other system then in use, or, if on any such date the Security is not
quoted by any such organization, the average of the closing bid and asked prices
as furnished by a professional market maker making a market in the Security
selected by the Board of Directors of the Company. The term "Trading Day" shall
mean a day on which the principal national securities exchange on which the
Security is listed or admitted to trading is open for the transaction of
business or, if the Security is not listed or admitted to trading on any
national securities exchange, a Business Day.
(ii) For the purpose of any computation hereunder, if the Preferred Stock
is publicly traded, the "current per share market price" of the Preferred Stock
shall be determined in accordance with the method set forth in Section 11(d)(i).
If the Preferred Stock is not publicly traded but the Common Stock is publicly
traded, the "current per share market price" of the Preferred Stock shall be
conclusively deemed to be the current per share market price of the Common Stock
as determined pursuant to Section 11(d)(i) multiplied by the then applicable
Adjustment Number (as defined in and determined in accordance with the
Certificate of Designation for the Preferred Stock). If neither the Common Stock
nor the Preferred Stock is publicly traded, "current per share market price"
shall mean the fair value per share as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent.
(e) No adjustment in the Purchase Price shall be required unless such
adjustment would require an increase or decrease of at least 1% in the Purchase
Price; provided, however, that any adjustments which by reason of this Section
11(e) are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this Section 11
shall be made to the nearest cent or to the nearest one hundredthousandth of a
share of Preferred Stock or one-hundredth of a share of Common Stock or other
share or security as the case may be. Notwithstanding the first sentence of this
Section 11(e), any
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adjustment required by this Section 11 shall be made no later than the earlier
of (i) three years from the date of the transaction which requires such
adjustment or (ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to Section 11(a) hereof,
the holder of any Right thereafter exercised shall become entitled to receive
any shares of capital stock of the Company other than the Preferred Stock,
thereafter the Purchase Price and the number of such other shares so receivable
upon exercise of a Right shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Preferred Stock contained in Sections 11(a), 11(b), 11(c), 11(e),
11(h), 11(i) and 11(m) hereof, as applicable, and the provisions of Sections 7,
9, 10, 13 and 14 hereof with respect to the Preferred Stock shall apply on like
terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-thousandths of a
share of Preferred Stock purchasable from time to time hereunder upon exercise
of the Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided in
Section 11(i), upon each adjustment of the Purchase Price as a result of the
calculations made in Sections 11(b) and 11(c), each Right outstanding
immediately prior to the making of such adjustment shall thereafter evidence the
right to purchase, at the adjusted Purchase Price, that number of one
one-thousandths of a share of Preferred Stock (calculated to the nearest one
hundredthousandth of a share of Preferred Stock) obtained by (i) multiplying (x)
the number of one one-thousandths of a share purchasable upon the exercise of a
Right immediately prior to such adjustment by (y) the Purchase Price in effect
immediately prior to such adjustment and (ii) dividing the product so obtained
by the Purchase Price in effect immediately after such adjustment.
(i) The Company may elect on or after the date of any adjustment of the
Purchase Price pursuant to Sections 11(b) or 11(c) hereof to adjust the number
of Rights, in substitution for any adjustment in the number of one
one-thousandths of a share of Preferred Stock purchasable upon the exercise of a
Right. Each of the Rights outstanding after such adjustment of the number of
Rights shall be exercisable for the number of one one-thousandths of a share of
Preferred Stock for which a Right was exercisable immediately prior to such
adjustment. Each Right held of record prior to such adjustment of the number of
Rights shall become that number of Rights (calculated to the nearest
one-hundredth) obtained by dividing the Purchase Price in effect immediately
prior to adjustment of the Purchase Price by the Purchase Price in effect
immediately after adjustment of the Purchase Price. The Company shall make a
public announcement of its election to adjust the number of Rights, indicating
the record date for the adjustment, and, if known at the time, the amount of the
adjustment to be made. Such record date may be the date on which the Purchase
Price is adjusted or any day thereafter, but, if the Right Certificates have
been issued, shall be at least 10 days later than the date of the public
announcement. If Right Certificates have been issued, upon each adjustment of
the number of Rights pursuant to this Section 11(i), the Company may, as
promptly as practicable, cause to be distributed to holders of record of Right
Certificates on such record date Right Certificates evidencing, subject to
Section 14 hereof, the additional Rights to which such holders shall be entitled
as a result of such adjustment, or, at the option of the Company, shall cause to
be distributed to such holders of record in substitution and replacement for the
Right Certificates held by such holders prior to the date of adjustment, and
upon surrender thereof, if required by the Company, new Right Certificates
evidencing all the Rights to which such holders shall be entitled after such
adjustment. Right Certificates so to be distributed shall be issued, executed
and countersigned in the manner provided for herein and shall be registered in
the names of the holders of record of Right Certificates on the record date
specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or the
number of one onethousandths of a share of Preferred Stock issuable upon the
exercise of a Right, the Right Certificates theretofore and thereafter issued
may continue to express the Purchase Price and the number of one one-thousandths
of a share of Preferred Stock which were expressed in the initial Right
Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing the
Purchase Price below the then par value, if any, of the fraction of Preferred
Stock or other shares of capital stock issuable upon exercise of a Right, the
Company shall take any corporate action which may, in the opinion of its
counsel, be necessary in
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order that the Company may validly and legally issue fully paid and
nonassessable shares of Preferred Stock or other such shares at such adjusted
Purchase Price.
(l) In any case in which this Section 11 shall require that an adjustment
in the Purchase Price be made effective as of a record date for a specified
event, the Company may elect to defer until the occurrence of such event issuing
to the holder of any Right exercised after such record date the Preferred Stock
and other capital stock or securities of the Company, if any, issuable upon such
exercise over and above the Preferred Stock and other capital stock or
securities of the Company, if any, issuable upon such exercise on the basis of
the Purchase Price in effect prior to such adjustment; provided, however, that
the Company shall deliver to such holder a due bill or other appropriate
instrument evidencing such holder's right to receive such additional shares upon
the occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such adjustments in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that it in its sole discretion shall determine to be advisable in
order that any consolidation or subdivision of the Preferred Stock, issuance
wholly for cash of any shares of Preferred Stock at less than the current market
price, issuance wholly for cash of Preferred Stock or securities which by their
terms are convertible into or exchangeable for Preferred Stock, dividends on
Preferred Stock payable in shares of Preferred Stock or issuance of rights,
options or warrants referred to hereinabove in Section 11(b), hereafter made by
the Company to holders of its Preferred Stock shall not be taxable to such
stockholders.
(n) Anything in this Agreement to the contrary notwithstanding, in the
event that at any time after the date of this Rights Agreement and prior to the
Distribution Date, the Company shall (i) declare and pay any dividend on the
Common Stock payable in Common Stock or (ii) effect a subdivision, combination
or consolidation of the Common Stock (by reclassification or otherwise than by
payment of a dividend payable in Common Stock) into a greater or lesser number
of shares of Common Stock, then, in each such case, the number of Rights
associated with each share of Common Stock then outstanding, or issued or
delivered thereafter, shall be proportionately adjusted so that the number of
Rights thereafter associated with each share of Common Stock following any such
event shall equal the result obtained by multiplying the number of Rights
associated with each share of Common Stock immediately prior to such event by a
fraction the numerator of which shall be the total number of shares of Common
Stock outstanding immediately prior to the occurrence of the event and the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately following the occurrence of such event.
(o) The Company agrees that, after the earlier of the Distribution Date or
the Stock Acquisition Date, it will not, except as permitted by Sections 23, 24
or 27 hereof, take (or permit any Subsidiary to take) any action if at the time
such action is taken it is reasonably foreseeable that such action will diminish
substantially or eliminate the benefits intended to be afforded by the Rights.
SECTION 12. Certificate of Adjusted Purchase Price or Number of
Shares. Whenever an adjustment is made as provided in Section 11 or 13 hereof,
the Company shall promptly (a) prepare a certificate setting forth such
adjustment, and a brief statement of the facts accounting for such adjustment,
(b) file with the Rights Agent and with each transfer agent for the Common Stock
and the Preferred Stock a copy of such certificate and (c) mail a brief summary
thereof to each holder of a Right Certificate in accordance with Section 25
hereof (if so required under Section 25 hereof). The Rights Agent shall be fully
protected in relying on any such certificate and on any adjustment therein
contained and shall not be deemed to have knowledge of any such adjustment
unless and until it shall have received such certificate.
SECTION 13. Consolidation, Merger or Sale or Transfer of Assets or Earning
Power.
(a) In the event, directly or indirectly, at any time after the Flip-In
Event (i) the Company shall consolidate with or shall merge into any other
Person, (ii) any Person shall merge with and into the Company and the Company
shall be the continuing or surviving corporation of such merger and, in
connection with such merger, all or part of the Common Stock shall be changed
into or exchanged for stock or other securities of any other Person (or of the
Company) or cash or any other property, or (iii) the Company shall sell or
otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise
transfer), in one or more
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transactions, assets or earning power aggregating 50% or more of the assets or
earning power of the Company and its Subsidiaries (taken as a whole) to any
other Person (other than the Company or one or more wholly-owned Subsidiaries of
the Company), then upon the first occurrence of such event, proper provision
shall be made so that: (A) each holder of a Right (other than Rights which have
become void pursuant to Section 11(a)(ii) hereof) shall thereafter have the
right to receive, upon the exercise thereof at the Purchase Price (as
theretofore adjusted in accordance with Section 11(a)(ii) hereof), in accordance
with the terms of this Agreement and in lieu of shares of Preferred Stock or
Common Stock of the Company, such number of validly authorized and issued, fully
paid, non-assessable and freely tradeable shares of Common Stock of the
Principal Party (as such term is hereinafter defined), not subject to any liens,
encumbrances, rights of first refusal or other adverse claims, as shall equal
the result obtained by dividing the Purchase Price (as theretofore adjusted in
accordance with Section 11(a)(ii) hereof) by 50% of the current per share market
price of the Common Stock of such Principal Party (determined pursuant to
Section 11(d) hereof) on the date of consummation of such consolidation, merger,
sale or transfer; provided, however, that the Purchase Price (as theretofore
adjusted in accordance with Section 11(a)(ii) hereof) and the number of shares
of Common Stock of such Principal Party so receivable upon exercise of a Right
shall be subject to further adjustment as appropriate in accordance with Section
11(f) hereof to reflect any events occurring in respect of the Common Stock of
such Principal Party after the occurrence of such consolidation, merger, sale or
transfer; (B) such Principal Party shall thereafter be liable for, and shall
assume, by virtue of such consolidation, merger, sale or transfer, all the
obligations and duties of the Company pursuant to this Rights Agreement; (C) the
term "Company" shall thereafter be deemed to refer to such Principal Party; and
(D) such Principal Party shall take such steps (including, but not limited to,
the reservation of a sufficient number of its shares of Common Stock in
accordance with Section 9 hereof) in connection with such consummation of any
such transaction as may be necessary to assure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may be, in relation to the
shares of its Common Stock thereafter deliverable upon the exercise of the
Rights; provided that, upon the subsequent occurrence of any consolidation,
merger, sale or transfer of assets or other extraordinary transaction in respect
of such Principal Party, each holder of a Right shall thereupon be entitled to
receive, upon exercise of a Right and payment of the Purchase Price as provided
in this Section 13(a), such cash, shares, rights, warrants and other property
which such holder would have been entitled to receive had such holder, at the
time of such transaction, owned the Common Stock of the Principal Party
receivable upon the exercise of a Right pursuant to this Section 13(a), and such
Principal Party shall take such steps (including, but not limited to,
reservation of shares of stock) as may be necessary to permit the subsequent
exercise of the Rights in accordance with the terms hereof for such cash,
shares, rights, warrants and other property.
(b) "Principal Party" shall mean:
(i) in the case of any transaction described in (i) or (ii) of the
first sentence of Section 13(a) hereof: (A) the Person that is the issuer
of the securities into which the shares of Common Stock are converted in
such merger or consolidation, or, if there is more than one such issuer,
the issuer the shares of Common Stock of which have the greatest aggregate
market value of shares outstanding, or (B) if no securities are so issued,
(x) the Person that is the other party to the merger, if such Person
survives said merger, or, if there is more than one such Person, the Person
the shares of Common Stock of which have the greatest aggregate market
value of shares outstanding or (y) if the Person that is the other party to
the merger does not survive the merger, the Person that does survive the
merger (including the Company if it survives) or (z) the Person resulting
from the consolidation; and
(ii) in the case of any transaction described in (iii) of the first
sentence of Section 13(a) hereof, the Person that is the party receiving
the greatest portion of the assets or earning power transferred pursuant to
such transaction or transactions, or, if each Person that is a party to
such transaction or transactions receives the same portion of the assets or
earning power so transferred or if the Person receiving the greatest
portion of the assets or earning power cannot be determined, whichever of
such Persons is the issuer of Common Stock having the greatest aggregate
market value of shares outstanding;
provided, however, that in any such case described in the foregoing clause
(b)(i) or (b)(ii), if the Common Stock of such Person is not at such time or has
not been continuously over the preceding 12-month period
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registered under Section 12 of the Exchange Act, then (1) if such Person is a
direct or indirect Subsidiary of another Person the Common Stock of which is and
has been so registered, the term "Principal Party" shall refer to such other
Person, or (2) if such Person is a Subsidiary, directly or indirectly, of more
than one Person, the Common Stock of all of which is and has been so registered,
the term "Principal Party" shall refer to whichever of such Persons is the
issuer of Common Stock having the greatest aggregate market value of shares
outstanding, or (3) if such Person is owned, directly or indirectly, by a joint
venture formed by two or more Persons that are not owned, directly or
indirectly, by the same Person, the rules set forth in clauses (1) and (2) above
shall apply to each of the owners having an interest in the venture as if the
Person owned by the joint venture was a Subsidiary of both or all of such joint
venturers, and the Principal Party in each such case shall bear the obligations
set forth in this Section 13 in the same ratio as its interest in such Person
bears to the total of such interests.
(c) The Company shall not consummate any consolidation, merger, sale or
transfer referred to in Section 13(a) hereof unless prior thereto the Company
and the Principal Party involved therein shall have executed and delivered to
the Rights Agent an agreement confirming that the requirements of Sections 13(a)
and (b) hereof shall promptly be performed in accordance with their terms and
that such consolidation, merger, sale or transfer of assets shall not result in
a default by the Principal Party under this Agreement as the same shall have
been assumed by the Principal Party pursuant to Sections 13(a) and (b) hereof
and providing that, as soon as practicable after executing such agreement
pursuant to this Section 13, the Principal Party will:
(i) prepare and file a registration statement under the Securities
Act, if necessary, with respect to the Rights and the securities
purchasable upon exercise of the Rights on an appropriate form, use its
best efforts to cause such registration statement to become effective as
soon as practicable after such filing and use its best efforts to cause
such registration statement to remain effective (with a prospectus at all
times meeting the requirements of the Securities Act) until the Expiration
Date and similarly comply with applicable state securities laws;
(ii) use its best efforts, if the Common Stock of the Principal Party
shall be listed or admitted to trading on the New York Stock Exchange or on
another national securities exchange, to list or admit to trading (or
continue the listing of) the Rights and the securities purchasable upon
exercise of the Rights on the New York Stock Exchange or such securities
exchange, or, if the Common Stock of the Principal Party shall not be
listed or admitted to trading on the New York Stock Exchange or a national
securities exchange, to cause the Rights and the securities receivable upon
exercise of the Rights to be authorized for quotation on NASDAQ or on such
other system then in use;
(iii) deliver to holders of the Rights historical financial statements
for the Principal Party which comply in all respects with the requirements
for registration on Form 10 (or any successor form) under the Exchange Act;
and
(iv) obtain waivers of any rights of first refusal or preemptive
rights in respect of the Common Stock of the Principal Party subject to
purchase upon exercise of outstanding Rights.
(d) In case the Principal Party has provision in any of its authorized
securities or in its certificate of incorporation or by-laws or other instrument
governing its affairs, which provision would have the effect of (i) causing such
Principal Party to issue (other than to holders of Rights pursuant to this
Section 13), in connection with, or as a consequence of, the consummation of a
transaction referred to in this Section 13, shares of Common Stock or Common
Stock Equivalents of such Principal Party at less than the then current market
price per share thereof (determined pursuant to Section 11(d) hereof) or
securities exercisable for, or convertible into, Common Stock or Common Stock
Equivalents of such Principal Party at less than such then current market price,
or (ii) providing for any special payment, tax or similar provision in
connection with the issuance of the Common Stock of such Principal Party
pursuant to the provisions of Section 13, then, in such event, the Company
hereby agrees with each holder of Rights that it shall not consummate any such
transaction unless prior thereto the Company and such Principal Party shall have
executed and delivered to the Rights Agent a supplemental agreement providing
that the provision in question of such Principal Party shall have been canceled,
waived or amended, or that the authorized securities shall be redeemed, so that
the
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applicable provision will have no effect in connection with, or as a consequence
of, the consummation of the proposed transaction.
(e) The Company covenants and agrees that it shall not, at any time after
the Flip-In Event, enter into any transaction of the type described in clauses
(i) through (iii) of Section 13(a) hereof if (i) at the time of or immediately
after such consolidation, merger, sale, transfer or other transaction there are
any rights, warrants or other instruments or securities outstanding or
agreements in effect which would substantially diminish or otherwise eliminate
the benefits intended to be afforded by the Rights, (ii) prior to,
simultaneously with or immediately after such consolidation, merger, sale,
transfer or other transaction, the stockholders of the Person who constitutes,
or would constitute, the Principal Party for purposes of Section 13(b) hereof
shall have received a distribution of Rights previously owned by such Person or
any of its Affiliates or Associates or (iii) the form or nature of organization
of the Principal Party would preclude or limit the exercisability of the Rights.
SECTION 14. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue fractions of Rights or to
distribute Right Certificates which evidence fractional Rights (except prior to
the Distribution Date in accordance with Section 11(n) hereof). In lieu of such
fractional Rights, there shall be paid to the registered holders of the Right
Certificates with regard to which such fractional Rights would otherwise be
issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right. For the purposes of this Section 14(a), the current
market value of a whole Right shall be the closing price of the Rights for the
Trading Day immediately prior to the date on which such fractional Rights would
have been otherwise issuable. The closing price for any day shall be the last
sale price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if the Rights are not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the Rights are listed or admitted to trading or, if the Rights are not
listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by NASDAQ or such other
system then in use or, if on any such date the Rights are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Rights selected by the Board of
Directors of the Company. If on any such date no such market maker is making a
market in the Rights, the fair value of the Rights on such date as determined in
good faith by the Board of Directors of the Company shall be used.
(b) The Company shall not be required to issue fractions of Preferred Stock
(other than fractions which are integral multiples of one one-thousandth of a
share of Preferred Stock) or to distribute certificates which evidence
fractional shares of Preferred Stock (other than fractions which are integral
multiples of one one-thousandth of a share of Preferred Stock) upon the exercise
or exchange of Rights. Interests in fractions of Preferred Stock in integral
multiples of one one-thousandth of a share of Preferred Stock may, at the
election of the Company, be evidenced by depositary receipts, pursuant to an
appropriate agreement between the Company and a depositary selected by it;
provided, that such agreement shall provide that the holders of such depositary
receipts shall have all the rights, privileges and preferences to which they are
entitled as beneficial owners of the Preferred Stock represented by such
depositary receipts. In lieu of fractional shares of Preferred Stock that are
not integral multiples of one onethousandth of a share of Preferred Stock, the
Company shall pay to the registered holders of Right Certificates at the time
such Rights are exercised or exchanged as herein provided an amount in cash
equal to the same fraction of the current market value of a whole share of
Preferred Stock (as determined in accordance with Section 14(a) hereof) for the
Trading Day immediately prior to the date of such exercise or exchange.
(c) The Company shall not be required to issue fractions of shares of
Common Stock or to distribute certificates which evidence fractional shares of
Common Stock upon the exercise or exchange of Rights. In lieu of such fractional
shares of Common Stock, the Company shall pay to the registered holders of the
Right
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Certificates with regard to which such fractional shares of Common Stock would
otherwise be issuable an amount in cash equal to the same fraction of the
current market value of a whole share of Common Stock (as determined in
accordance with Section 14(a) hereof) for the Trading Day immediately prior to
the date of such exercise or exchange.
(d) The holder of a Right by the acceptance of the Right expressly waives
his right to receive any fractional Rights or any fractional shares upon
exercise or exchange of a Right (except as provided above).
SECTION 15. Rights of Action. all rights of action in respect of this
Agreement, excepting the rights of action given to the Rights Agent under
Section 18 hereof, are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Stock); and any registered holder of any Right Certificate (or, prior to
the Distribution Date, of the Common Stock), without the consent of the Rights
Agent or of the holder of any other Right Certificate (or, prior to the
Distribution Date, of the Common Stock), on his own behalf and for his own
benefit, may enforce, and may institute and maintain any suit, action or
proceeding against the Company to enforce, or otherwise act in respect of, his
right to exercise the Rights evidenced by such Right Certificate (or, prior to
the Distribution Date, such Common Stock) in the manner provided therein and in
this Agreement. Without limiting the foregoing or any remedies available to the
holders of Rights, it is specifically acknowledged that the holders of Rights
would not have an adequate remedy at law for any breach of this Agreement and
will be entitled to specific performance of the obligations under, and
injunctive relief against actual or threatened violations of, the obligations of
any Person subject to this Agreement.
SECTION 16. Agreement of Right Holders. Every holder of a Right, by
accepting the same, consents and agrees with the Company and the Rights Agent
and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable only in
connection with the transfer of the Common Stock;
(b) after the Distribution Date, the Right Certificates are transferable
only on the registry books of the Rights Agent if surrendered at the office or
agency of the Rights Agent designated for such purpose, duly endorsed or
accompanied by a proper instrument of transfer; and
(c) the Company and the Rights Agent may deem and treat the Person in whose
name the Right Certificate (or, prior to the Distribution Date, the Common Stock
certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on the
Right Certificates or the Common Stock certificate made by anyone other than the
Company or the Rights Agent) for all purposes whatsoever, and neither the
Company nor the Rights Agent shall be affected by any notice to the contrary.
SECTION 17. Right Certificate Holder Not Deemed a Stockholder. No holder,
as such, of any Right Certificate shall be entitled to vote, receive dividends
or be deemed for any purpose the holder of the Preferred Stock or any other
securities of the Company which may at any time be issuable on the exercise or
exchange of the Rights represented thereby, nor shall anything contained herein
or in any Right Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in this Agreement), or to receive dividends or
subscription rights, or otherwise, until the Rights evidenced by such Right
Certificate shall have been exercised or exchanged in accordance with the
provisions hereof.
SECTION 18. Concerning the Rights Agent.
(a) The Company agrees to pay to the Rights Agent reasonable compensation
for all services rendered by it hereunder and, from time to time, on demand of
the Rights Agent, its reasonable expenses and counsel fees and other
disbursements incurred in the administration and execution of this Agreement and
the exercise and performance of its duties hereunder. The Company also agrees to
indemnify the Rights Agent for, and to hold it harmless against, any loss,
liability or expense, incurred without negligence, bad faith or willful
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misconduct on the part of the Rights Agent, for anything done or omitted by the
Rights Agent in connection with the acceptance and administration of this
Agreement, including the costs and expenses of defending against any claim of
liability arising therefrom, directly or indirectly.
(b) The Rights Agent shall be protected and shall incur no liability for,
or in respect of any action taken, suffered or omitted by it in connection with,
its administration of this Agreement in reliance upon any Right Certificate or
certificate for the Preferred Stock or Common Stock or for other securities of
the Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement or other paper or document believed by it to be genuine and to be
signed, executed and, where necessary, verified or acknowledged, by the proper
Person or Persons, or otherwise upon the advice of counsel as set forth in
Section 20 hereof.
SECTION 19. Merger or Consolidation or Change of Name of Rights Agent.
(a) Any corporation into which the Rights Agent or any successor Rights
Agent may be merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any corporation succeeding to the
stock transfer or corporate trust powers of the Rights Agent or any successor
Rights Agent, shall be the successor to the Rights Agent under this Agreement
without the execution or filing of any paper or any further act on the part of
any of the parties hereto; provided, that such corporation would be eligible for
appointment as a successor Rights Agent under the provisions of Section 21
hereof. In case at the time such successor Rights Agent shall succeed to the
agency created by this Agreement, any of the Right Certificates shall have been
countersigned but not delivered, any such successor Rights Agent may adopt the
countersignature of the predecessor Rights Agent and deliver such Right
Certificates so countersigned; and in case at that time any of the Right
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Right Certificates either in the name of the predecessor Rights
Agent or in the name of the successor Rights Agent; and in all such cases such
Right Certificates shall have the full force provided in the Right Certificates
and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be changed and
at such time any of the Right Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver Right Certificates so countersigned; and in case at that time any of
the Right Certificates shall not have been countersigned, the Rights Agent may
countersign such Right Certificates either in its prior name or in its changed
name and in all such cases such Right Certificates shall have the full force
provided in the Right Certificates and in this Agreement.
SECTION 20. Duties of Rights Agent. The Rights Agent undertakes the duties
and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Right Certificates,
by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any action taken
or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter be
proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by the President and the Secretary of the
Company and delivered to the Rights Agent; and such certificate shall be full
authorization to the Rights Agent for any action taken or suffered in good faith
by it under the provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder to the Company and any other
Person only for its own negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Right
Certificates (except its countersignature thereof) or be required
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to verify the same, but all such statements and recitals are and shall be deemed
to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect of
the validity of this Agreement or the execution and delivery hereof (except the
due execution hereof by the Rights Agent) or in respect of the validity or
execution of any Right Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Right Certificate; nor shall it
be responsible for any change in the exercisability of the Rights (including the
Rights becoming void pursuant to Section 11(a)(ii) hereof) or any adjustment in
the terms of the Rights provided for in Sections 3, 11, 13, 23 and 24, or the
ascertaining of the existence of facts that would require any such change or
adjustment (except with respect to the exercise of Rights evidenced by Right
Certificates after receipt of a certificate furnished pursuant to Section 12,
describing such change or adjustment); nor shall it by any act hereunder be
deemed to make any representation or warranty as to the authorization or
reservation of any shares of Preferred Stock or other securities to be issued
pursuant to this Agreement or any Right Certificate or as to whether any shares
of Preferred Stock or other securities will, when issued, be validly authorized
and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
person reasonably believed by the Rights Agent to be one of the President or the
Secretary of the Company, and to apply to such officers for advice or
instructions in connection with its duties, and it shall not be liable for any
action taken or suffered by it in good faith in accordance with instructions of
any such officer or for any delay in acting while waiting for those
instructions. Any application by the Rights Agent for written instructions from
the Company may, at the option of the Rights Agent, set forth in writing any
action proposed to be taken or omitted by the Rights Agent under this Agreement
and the date on and/or after which such action shall be taken or such omission
shall be effective. The Rights Agent shall not be liable for any action taken
by, or omission of, the Rights Agent in accordance with a proposal included in
any such application on or after the date specified in such application (which
date shall not be less than five Business Days after the date any officer of the
Company actually receives such application unless any such officer shall have
consented in writing to an earlier date) unless, prior to taking any such action
(or the effective date in the case of an omission), the Rights Agent shall have
received written instructions in response to such application specifying the
action to be taken or omitted.
(h) The Rights Agent and any stockholder, director, officer or employee of
the Rights Agent may buy, sell or deal in any of the Rights or other securities
of the Company or become pecuniarily interested in any transaction in which the
Company may be interested, or contract with or lend money to the Company or
otherwise act as fully and freely as though it were not Rights Agent under this
Agreement. Nothing herein shall preclude the Rights Agent from acting in any
other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself or by or through
its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct, provided reasonable care was exercised in the selection
and continued employment thereof.
(j) If, with respect to any Rights Certificate surrendered to the Rights
Agent for exercise or transfer, the certificate contained in the form of
assignment or the form of election to purchase set forth on the reverse thereof,
as the case may be, has not been completed to certify the holder is not an
Acquiring Person (or an Affiliate or Associate thereof), the Rights Agent shall
not take any further action with respect to such requested exercise or transfer
without first consulting with the Company.
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SECTION 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon 30 days' notice in writing mailed to the Company and to each transfer agent
of the Common Stock or Preferred Stock by registered or certified mail, and,
following the Distribution Date, to the holders of the Right Certificates by
first-class mail. The Company may remove the Rights Agent or any successor
Rights Agent upon 30 days' notice in writing, mailed to the Rights Agent or
successor Rights Agent, as the case may be, and to each transfer agent of the
Common Stock or Preferred Stock by registered or certified mail, and, following
the Distribution Date, to the holders of the Right Certificates by first-class
mail. If the Rights Agent shall resign or be removed or shall otherwise become
incapable of acting, the Company shall appoint a successor to the Rights Agent.
If the Company shall fail to make such appointment within a period of 30 days
after giving notice of such removal or after it has been notified in writing of
such resignation or incapacity by the resigning or incapacitated Rights Agent or
by the holder of a Right Certificate (who shall, with such notice, submit his
Right Certificate for inspection by the Company), then the registered holder of
any Right Certificate may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether appointed
by the Company or by such a court, shall be a corporation organized and doing
business under the laws of the United States or the laws of any state of the
United States or the District of Columbia, in good standing, having an office in
the State of California or the State of New York, which is authorized under such
laws to exercise corporate trust or stock transfer powers and is subject to
supervision or examination by federal or state authority and which has at the
time of its appointment as Rights Agent a combined capital and surplus of at
least $50 million. After appointment, the successor Rights Agent shall be vested
with the same powers, rights, duties and responsibilities as if it had been
originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Stock or Preferred Stock, and, following the Distribution Date, mail
a notice thereof in writing to the registered holders of the Right Certificates.
Failure to give any notice provided for in this Section 21, however, or any
defect therein, shall not affect the legality or validity of the resignation or
removal of the Rights Agent or the appointment of the successor Rights Agent, as
the case may be.
SECTION 22. Issuance of New Right Certificates. Notwithstanding any of the
provisions of this Agreement or of the Rights to the contrary, the Company may,
at its option, issue new Right Certificates evidencing Rights in such forms as
may be approved by its Board of Directors to reflect any adjustment or change in
the Purchase Price and the number or kind or class of shares or other securities
or property purchasable under the Right Certificates made in accordance with the
provisions of this Agreement. In addition, in connection with the issuance or
sale of Common Stock following the Distribution Date and prior to the Expiration
Date, the Company may with respect to shares of Common Stock so issued or sold
pursuant to (i) the exercise of stock options, (ii) under any employee plan or
arrangement, (iii) upon the exercise, conversion or exchange of securities,
notes or debentures issued by the Company or (iv) a contractual obligation of
the Company, in each case existing prior to the Distribution Date, issue Rights
Certificates representing the appropriate number of Rights in connection with
such issuance or sale.
SECTION 23. Redemption.
(a) The Board of Directors of the Company may, at any time prior to the
Flip-In Event, redeem all but not less than all the then outstanding Rights at a
redemption price of $.01 per Right, appropriately adjusted to reflect any stock
split, stock dividend or similar transaction occurring after the date hereof
(the redemption price being hereinafter referred to as the "Redemption Price").
The redemption of the Rights may be made effective at such time, on such basis
and with such conditions as the Board of Directors in its sole discretion may
establish. The Redemption Price shall be payable, at the option of the Company,
in cash, shares of Common Stock, or such other form of consideration as the
Board of Directors shall determine.
(b) Immediately upon the action of the Board of Directors ordering the
redemption of the Rights pursuant to paragraph (a) of this Section 23 (or at
such later time as the Board of Directors may establish for the effectiveness of
such redemption), and without any further action and without any notice, the
right to
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exercise the Rights will terminate and the only right thereafter of the holders
of Rights shall be to receive the Redemption Price. The Company shall promptly
give public notice of any such redemption; provided, however, that the failure
to give, or any defect in, any such notice shall not affect the validity of such
redemption. Within 10 days after such action of the Board of Directors ordering
the redemption of the Rights (or such later time as the Board of Directors may
establish for the effectiveness of such redemption), the Company shall mail a
notice of redemption to all the holders of the then outstanding Rights at their
last addresses as they appear upon the registry books of the Rights Agent or,
prior to the Distribution Date, on the registry books of the transfer agent for
the Common Stock. Any notice which is mailed in the manner herein provided shall
be deemed given, whether or not the holder receives the notice. Each such notice
of redemption shall state the method by which the payment of the Redemption
Price will be made.
SECTION 24. Exchange.
(a) The Board of Directors of the Company may, at its option, at any time
after the Flip-In Event, exchange all or part of the then outstanding and
exercisable Rights (which shall not include Rights that have become void
pursuant to the provisions of Section 11(a)(ii) hereof) for Common Stock at an
exchange ratio of one share of Common Stock per Right, appropriately adjusted to
reflect any stock split, stock dividend or similar transaction occurring after
the date hereof (such amount per Right being hereinafter referred to as the
"Exchange Ratio"). Notwithstanding the foregoing, the Board of Directors shall
not be empowered to effect such exchange at any time after an Acquiring Person
shall have become the Beneficial Owner of shares of Common Stock aggregating 50%
or more of the shares of Common Stock then outstanding. From and after the
occurrence of an event specified in Section 13(a) hereof, any Rights that
theretofore have not been exchanged pursuant to this Section 24(a) shall
thereafter be exercisable only in accordance with Section 13 and may not be
exchanged pursuant to this Section 24(a). The exchange of the Rights by the
Board of Directors may be made effective at such time, on such basis and with
such conditions as the Board of Directors in its sole discretion may establish.
(b) Immediately upon the effectiveness of the action of the Board of
Directors of the Company ordering the exchange of any Rights pursuant to
paragraph (a) of this Section 24 and without any further action and without any
notice, the right to exercise such Rights shall terminate and the only right
thereafter of a holder of such Rights shall be to receive that number of shares
of Common Stock equal to the number of such Rights held by such holder
multiplied by the Exchange Ratio. The Company shall promptly give public notice
of any such exchange; provided, however, that the failure to give, or any defect
in, such notice shall not affect the validity of such exchange. The Company
shall promptly mail a notice of any such exchange to all of the holders of the
Rights so exchanged at their last addresses as they appear upon the registry
books of the Rights Agent. Any notice which is mailed in the manner herein
provided shall be deemed given, whether or not the holder receives the notice.
Each such notice of exchange will state the method by which the exchange of the
shares of Common Stock for Rights will be effected and, in the event of any
partial exchange, the number of Rights which will be exchanged. Any partial
exchange shall be effected pro rata based on the number of Rights (other than
Rights which have become void pursuant to the provisions of Section 11(a)(ii)
hereof) held by each holder of Rights.
(c) The Company may at its option substitute, and, in the event that there
shall not be sufficient shares of Common Stock issued but not outstanding or
authorized but unissued to permit an exchange of Rights for Common Stock as
contemplated in accordance with this Section 24, the Company shall substitute to
the extent of such insufficiency, for each share of Common Stock that would
otherwise be issuable upon exchange of a Right, a number of shares of Preferred
Stock or fraction thereof (or equivalent preferred shares, as such term is
defined in Section 11(b)) such that the current per share market price
(determined pursuant to Section 11(d) hereof) of one share of Preferred Stock
(or equivalent preferred share) multiplied by such number or fraction is equal
to the current per share market price of one share of Common Stock (determined
pursuant to Section 11(d) hereof) as of the date of such exchange.
SECTION 25. Notice of Certain Events.
(a) In case the Company shall at any time after the earlier of the
Distribution Date or the Stock Acquisition Date propose (i) to pay any dividend
payable in stock of any class to the holders of its Preferred
D-21
<PAGE> 77
Stock or to make any other distribution to the holders of its Preferred Stock
(other than a regular quarterly cash dividend), (ii) to offer to the holders of
its Preferred Stock rights or warrants to subscribe for or to purchase any
additional shares of Preferred Stock or shares of stock of any class or any
other securities, rights or options, (iii) to effect any reclassification of its
Preferred Stock (other than a reclassification involving only the subdivision or
combination of outstanding Preferred Stock), (iv) to effect the liquidation,
dissolution or winding up of the Company, or (v) to pay any dividend on the
Common Stock payable in Common Stock or to effect a subdivision, combination or
consolidation of the Common Stock (by reclassification or otherwise than by
payment of dividends in Common Stock), then, in each such case, the Company
shall give to each holder of a Right Certificate, in accordance with Section 26
hereof, a notice of such proposed action, which shall specify the record date
for the purposes of such stock dividend, or distribution of rights or warrants,
or the date on which such liquidation, dissolution or winding up is to take
place and the date of participation therein by the holders of the Common Stock
and/or Preferred Stock, if any such date is to be fixed, and such notice shall
be so given in the case of any action covered by clause (i) or (ii) above at
least 10 days prior to the record date for determining holders of the Preferred
Stock for purposes of such action, and in the case of any such other action, at
least 10 days prior to the date of the taking of such proposed action or the
date of participation therein by the holders of the Common Stock and/or
Preferred Stock, whichever shall be the earlier.
(b) In case any event described in Section 11(a)(ii) or Section 13 shall
occur then the Company shall as soon as practicable thereafter give to each
holder of a Right Certificate (or if occurring prior to the Distribution Date,
the holders of the Common Stock) in accordance with Section 26 hereof, a notice
of the occurrence of such event, which notice shall describe such event and the
consequences of such event to holders of Rights under Section 11(a)(ii) and
Section 13 hereof.
SECTION 26. Notices. Notices or demands authorized by this Agreement to be
given or made by the Rights Agent or by the holder of any Right Certificate to
or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:
Alpha Microsystems
, California
Attention: Secretary
Subject to the provisions of Section 21 hereof, any notice or demand authorized
by this Agreement to be given or made by the Company or by the holder of any
Right Certificate to or on the Rights Agent shall be sufficiently given or made
if sent by first-class mail, postage prepaid, addressed (until another address
is filed in writing with the Company) as follows:
Attention: Shareholder Services
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Right Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
SECTION 27. Supplements and Amendments. Except as provided in the
penultimate sentence of this Section 27, for so long as the Rights are then
redeemable, the Company may in its sole and absolute discretion, and the Rights
Agent shall if the Company so directs, supplement or amend any provision of this
Agreement in any respect without the approval of any holders of the Rights. At
any time when the Rights are no longer redeemable, except as provided in the
penultimate sentence of this Section 27, the Company may, and the Rights Agent
shall, if the Company so directs, supplement or amend this Agreement without the
approval of any holders of Rights in order to (i) cure any ambiguity, (ii)
correct or supplement any provision contained herein which may be defective or
inconsistent with any other provision herein, (iii) shorten or lengthen any time
period hereunder, or (iv) change or supplement the provisions hereunder in any
manner
D-22
<PAGE> 78
which the Company may deem necessary or desirable; provided that no such
supplement or amendment shall adversely affect the interests of the holders of
Rights as such (other than an Acquiring Person or an Affiliate or Associate of
an Acquiring Person), and no such amendment may cause the Rights again to become
redeemable or cause the Agreement again to become amendable other than in
accordance with this sentence. Notwithstanding anything contained in this
Agreement to the contrary, no supplement or amendment shall be made which
changes the Redemption Price. Upon the delivery of a certificate from an
appropriate officer of the Company which states that the proposed supplement or
amendment is in compliance with the terms of this Section 27, the Rights Agent
shall execute such supplement or amendment.
SECTION 28. Successors. All the covenants and provisions of this Agreement
by or for the benefit of the Company or the Rights Agent shall bind and inure to
the benefit of their respective successors and assigns hereunder.
SECTION 29. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any Person other than the Company, the Rights Agent and the
registered holders of the Right Certificates (and, prior to the Distribution
Date, the Common Stock) any legal or equitable right, remedy or claim under this
Agreement; but this Agreement shall be for the sole and exclusive benefit of the
Company, the Rights Agent and the registered holders of the Right Certificates
(and, prior to the Distribution Date, the Common Stock).
SECTION 30. Determinations and Actions by the Board of Directors. The
Board of Directors of the Company shall have the exclusive power and authority
to administer this Agreement and to exercise the rights and powers specifically
granted to the Board of Directors of the Company or to the Company, or as may be
necessary or advisable in the administration of this Agreement, including,
without limitation, the right and power to (i) interpret the provisions of this
Agreement and (ii) make all determinations deemed necessary or advisable for the
administration of this Agreement (including, without limitation, a determination
to redeem or not redeem the Rights or to amend this Agreement). All such
actions, calculations, interpretations and determinations (including, for
purposes of clause (y) below, all omissions with respect to the foregoing) that
are done or made by the Board of Directors of the Company in good faith, shall
(x) be final, conclusive and binding on the Company, the Rights Agent, the
holders of the Rights, as such, and all other parties, and (y) not subject the
Board of Directors to any liability to the holders of the Rights.
SECTION 31. Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated.
SECTION 32. Governing Law. This Agreement and each Right Certificate
issued hereunder shall be deemed to be a contract made under the laws of the
State of Delaware and for all purposes shall be governed by and construed in
accordance with the laws of such State applicable to contracts to be made and
performed entirely within such State.
SECTION 33. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
SECTION 34. Descriptive Headings. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
D-23
<PAGE> 79
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, all as of the day and year first above written.
ALPHA MICROSYSTEMS
By:
-----------------------------
Name:
---------------------------
Title:
---------------------------
as Rights Agent
By:
-----------------------------
Name:
---------------------------
Title:
---------------------------
D-24
<PAGE> 80
EXHIBIT A
FORM OF
CERTIFICATE OF DESIGNATION
OF
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
OF
ALPHA MICROSYSTEMS, INC.
PURSUANT TO SECTION 151 OF THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE
Alpha Microsystems, a corporation organized and existing under the General
Corporation Law of the State of Delaware, in accordance with the provisions of
Section 103 thereof, DOES HEREBY CERTIFY:
That pursuant to the authority vested in the Board of Directors in
accordance with the provisions of the Certificate of Incorporation of the said
Corporation, the said Board of Directors on , 1997 adopted the
following resolution creating a series of shares of Preferred Stock
designated as "Series A Junior Participating Preferred Stock":
RESOLVED, that pursuant to the authority vested in the Board of
Directors of this Corporation in accordance with the provisions of the
Certificate of Incorporation, a series of Preferred Stock, par value $.01
per share, of the Corporation be and hereby is created, and that the
designation and number of shares thereof and the voting and other powers,
preferences and relative, participating, optional or other rights of the
shares of such series and the qualifications, limitations and restrictions
thereof are as follows:
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
1. Designation and Amount. There shall be a series of Preferred Stock that
shall be designated as "Series A Junior Participating Preferred Stock," and the
number of shares constituting such series shall be . Such number of
shares may be increased or decreased by resolution of the Board of Directors;
provided, however, that no decrease shall reduce the number of shares of Series
A Junior Participating Preferred Stock to less than the number of shares then
issued and outstanding plus the number of shares issuable upon exercise of
outstanding rights, options or warrants or upon conversion of outstanding
securities issued by the Corporation.
2. Dividends and Distribution.
(A) Subject to the prior and superior rights of the holders of any shares
of any class or series of stock of the Corporation ranking prior and superior to
the shares of Series A Junior Participating Preferred Stock with respect to
dividends, the holders of shares of Series A Junior Participating Preferred
Stock, in preference to the holders of shares of any class or series of stock of
the Corporation ranking junior to the Series A Junior Participating Preferred
Stock in respect thereof, shall be entitled to receive, when, as and if declared
by the Board of Directors out of funds legally available for the purpose,
quarterly dividends payable in cash on the last day of March, June, September
and December, in each year (each such date being referred to herein as a
"Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share or fraction of a share of
Series A Junior Participating Preferred Stock, in an amount per share (rounded
to the nearest cent) equal to the greater of (a) $10 or (b) the Adjustment
Number (as defined below) times the aggregate per share amount of all cash
dividends, and the Adjustment Number times the aggregate per share amount
(payable in kind) of all non-cash dividends or other distributions other than a
dividend payable in shares of Common Stock or a subdivision of the outstanding
shares of Common Stock (by reclassification or otherwise), declared on the
Common Stock, par value $.01 per share, of the Corporation (the "Common Stock")
since the immediately preceding Quarterly Dividend Payment Date, or, with
respect
D-25
<PAGE> 81
to the first Quarterly Dividend Payment Date, since the first issuance of any
share or fraction of a share of Series A Junior Participating Preferred Stock.
The "Adjustment Number" shall initially be 1000. In the event the Corporation
shall at any time after , 1997 (i) declare and pay any dividend on
Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding
Common Stock or (iii) combine the outstanding Common Stock into a smaller number
of shares, then in each such case the Adjustment Number in effect immediately
prior to such event shall be adjusted by multiplying such Adjustment Number by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
(B) The Corporation shall declare a dividend or distribution on the Series
A Junior Participating Preferred Stock as provided in paragraph (A) above
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock).
(C) Dividends shall begin to accrue and be cumulative on outstanding shares
of Series A Junior Participating Preferred Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares of Series A Junior
Participating Preferred Stock, unless the date of issue of such shares is prior
to the record date for the first Quarterly Dividend Payment Date, in which case
dividends on such shares shall begin to accrue from the date of issue of such
shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a
date after the record date for the determination of holders of shares of Series
A Junior Participating Preferred Stock entitled to receive a quarterly dividend
and before such Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative from such Quarterly Dividend
Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends
paid on the shares of Series A Junior Participating Preferred Stock in an amount
less than the total amount of such dividends at the time accrued and payable on
such shares shall be allocated pro rata on a share-by-share basis among all such
shares at the time outstanding. The Board of Directors may fix a record date for
the determination of holders of shares of Series A Junior Participating
Preferred Stock entitled to receive payment of a dividend or distribution
declared thereon, which record date shall be no more than 60 days prior to the
date fixed for the payment thereof.
3. Voting Rights. The holders of shares of Series A Junior Participating
Preferred Stock shall have the following voting rights:
(A) Each share of Series A Junior Participating Preferred Stock shall
entitle the holder thereof to a number of votes equal to the Adjustment Number
on all matters submitted to a vote of the stockholders of the Corporation.
(B) Except as required by law and by Section 10 hereof, holders of Series A
Junior Participating Preferred Stock shall have no special voting rights and
their consent shall not be required (except to the extent they are entitled to
vote with holders of Common Stock as set forth herein) for taking any corporate
action.
4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Junior Participating Preferred Stock as provided in
Section 2 are in arrears, thereafter and until all accrued and unpaid dividends
and distributions, whether or not declared, on shares of Series A Junior
Participating Preferred Stock outstanding shall have been paid in full, the
Corporation shall not:
(i) declare or pay dividends on, make any other distributions on, or
redeem or purchase or otherwise acquire for consideration any shares of
stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Junior Participating Preferred
Stock;
(ii) declare or pay dividends on or make any other distributions on
any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Junior
Participating Preferred Stock, except dividends paid ratably on the Series
A Junior Participating Preferred Stock and all such parity stock on which
dividends are payable or in arrears in proportion to the total amounts to
which the holders of all such shares are then entitled; or
D-26
<PAGE> 82
(iii) purchase or otherwise acquire for consideration any shares of
Series A Junior Participating Preferred Stock, or any shares of stock
ranking on a parity with the Series A Junior Participating Preferred Stock,
except in accordance with a purchase offer made in writing or by
publication (as determined by the Board of Directors) to all holders of
Series A Junior Participating Preferred Stock, or to such holders and
holders of any such shares ranking on a parity therewith, upon such terms
as the Board of Directors, after consideration of the respective annual
dividend rates and other relative rights and preferences of the respective
series and classes, shall determine in good faith will result in fair and
equitable treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
5. Reacquired Shares. Any shares of Series A Junior Participating
Preferred Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired promptly after the acquisition thereof. All such
shares shall upon their retirement become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
to be created by resolution or resolutions of the Board of Directors, subject to
any conditions and restrictions on issuance set forth herein.
6. Liquidation, Dissolution or Winding Up. (A) Upon any liquidation,
dissolution or winding up of the Corporation, voluntary or otherwise, no
distribution shall be made to the holders of shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution or winding up) to the
Series A Junior Participating Preferred Stock unless, prior thereto, the holders
of shares of Series A Junior Participating Preferred Stock shall have received
an amount per share (the "Series A Liquidation Preference") equal to the greater
of (i) $1000 plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such payment, or
(ii) the Adjustment Number times the per share amount of all cash and other
property to be distributed in respect of the Common Stock upon such liquidation,
dissolution or winding up of the Corporation.
(B) In the event, however, that there are not sufficient assets available
to permit payment in full of the Series A Liquidation Preference and the
liquidation preferences of all other classes and series of stock of the
Corporation, if any, that rank on a parity with the Series A Junior
Participating Preferred Stock in respect thereof, then the assets available for
such distribution shall be distributed ratably to the holders of the Series A
Junior Participating Preferred Stock and the holders of such parity shares in
proportion to their respective liquidation preferences.
(C) Neither the merger or consolidation of the Corporation into or with
another corporation nor the merger or consolidation of any other corporation
into or with the Corporation shall be deemed to be a liquidation, dissolution or
winding up of the Corporation within the meaning of this Section 6.
7. Consolidation, Merger, Etc. In case the Corporation shall enter into
any consolidation, merger, combination or other transaction in which the
outstanding shares of Common Stock are exchanged for or changed into other stock
or securities, cash and/or any other property, then in any such case each share
of Series A Junior Participating Preferred Stock shall at the same time be
similarly exchanged or changed in an amount per share equal to the Adjustment
Number times the aggregate amount of stock, securities, cash and/or any other
property (payable in kind), as the case may be, into which or for which each
share of Common Stock is changed or exchanged.
8. No Redemption. Shares of Series A Junior Participating Preferred Stock
shall not be subject to redemption by the Company.
9. Ranking. The Series A Junior Participating Preferred Stock shall rank
junior to all other series of the Preferred Stock as to the payment of dividends
and as to the distribution of assets upon liquidation, dissolution or winding
up, unless the terms of any such series shall provide otherwise, and shall rank
senior to the Common Stock as to such matters.
D-27
<PAGE> 83
10. Amendment. At any time that any shares of Series A Junior
Participating Preferred Stock are outstanding, the Amended and Restated
Certificate of Incorporation of the Corporation shall not be amended in any
manner which would materially alter or change the powers, preferences or special
rights of the Series A Junior Participating Preferred Stock so as to affect them
adversely without the affirmative vote of the holders of two-thirds of the
outstanding shares of Series A Junior Participating Preferred Stock, voting
separately as a class.
11. Fractional Shares. Series A Junior Participating Preferred Stock may
be issued in fractions of a share that shall entitle the holder, in proportion
to such holder's fractional shares, to exercise voting rights, receive
dividends, participate in distributions and to have the benefit of all other
rights of holders of Series A Junior Participating Preferred Stock.
IN WITNESS WHEREOF, the undersigned has executed this Certificate this
day of May , 1997.
ALPHA MICROSYSTEMS
By:
Name:
Title:
D-28
<PAGE> 84
EXHIBIT B
FORM OF RIGHT CERTIFICATE
CERTIFICATE NO. R-
NOT EXERCISABLE AFTER , 2007 OR EARLIER IF
REDEMPTION OR EXCHANGE OCCURS. THE RIGHTS ARE SUBJECT TO
REDEMPTION AT $.01 PER RIGHT AND TO EXCHANGE ON THE TERMS SET
FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, AS
SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS OWNED BY OR
TRANSFERRED TO ANY PERSON WHO IS OR BECOMES AN ACQUIRING
PERSON (AS DEFINED IN THE RIGHTS AGREEMENT) AND CERTAIN
TRANSFEREES THEREOF WILL BECOME NULL AND VOID AND WILL NO
LONGER BE TRANSFERABLE.
RIGHT CERTIFICATE
ALPHA MICROSYSTEMS
This certifies that or registered assigns, is the registered
owner of the number of Rights set forth above, each of which entitles the owner
thereof, subject to the terms, provisions and conditions of the Rights
Agreement, dated as of , 1997, as the same may be amended from time
to time (the "Rights Agreement"), between Alpha Microsystems, a Delaware
corporation (the "Company"), and , as Rights Agent (the "Rights
Agent"), to purchase from the Company at any time after the Distribution Date
(as such term is defined in the Rights Agreement) and prior to 5:00 P.M., Los
Angeles, California time, on , 2007 at the office or agency of the
Rights Agent designated for such purpose, or of its successor as Rights Agent,
one one-thousandth of a fully paid non-assessable share of Series A Junior
Participating Preferred Stock, par value $.01 per share (the "Preferred Stock"),
of the Company at a purchase price of $ per one one-thousandth of a
share of Preferred Stock (the "Purchase Price"), upon presentation and surrender
of this Right Certificate with the Form of Election to Purchase duly executed.
The number of Rights evidenced by this Rights Certificate (and the number of one
one-thousandths of a share of Preferred Stock which may be purchased upon
exercise hereof) set forth above, and the Purchase Price set forth above, are
the number and Purchase Price as of , 1997, based on the Preferred
Stock as constituted at such date. As provided in the Rights Agreement, the
Purchase Price, the number of one one-thousandths of a share of Preferred Stock
(or other securities or property) which may be purchased upon the exercise of
the Rights and the number of Rights evidenced by this Right Certificate are
subject to modification and adjustment upon the happening of certain events.
This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Right Certificates. Copies of
the Rights Agreement are on file at the principal executive offices of the
Company and the above-mentioned office or agency of the Rights Agent. The
Company will mail to the holder of this Right Certificate a copy of the Rights
Agreement without charge after receipt of a written request therefor.
This Right Certificate, with or without other Right Certificates, upon
surrender at the office or agency of the Rights Agent designated for such
purpose, may be exchanged for another Right Certificate or Right Certificates of
like tenor and date evidencing Rights entitling the holder to purchase a like
aggregate number of shares of Preferred Stock as the Rights evidenced by the
Right Certificate or Right Certificates surrendered shall have entitled such
holder to purchase. If this Right Certificate shall be exercised in part, the
holder shall be entitled to receive upon surrender hereof another Right
Certificate or Right Certificates for the number of whole Rights not exercised.
D-29
<PAGE> 85
Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Certificate (i) may be redeemed by the Company at a redemption price of
$.01 per Right or (ii) may be exchanged in whole or in part for shares of the
Company's Common Stock, par value $.01 per share, or shares of Preferred Stock.
No fractional shares of Preferred Stock or Common Stock will be issued upon
the exercise or exchange of any Right or Rights evidenced hereby (other than
fractions of Preferred Stock which are integral multiples of one one-thousandth
of a share of Preferred Stock, which may, at the election of the Company, be
evidenced by depository receipts), but in lieu thereof a cash payment will be
made, as provided in the Rights Agreement.
No holder of this Right Certificate, as such, shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of the Preferred Stock
or of any other securities of the Company which may at any time be issuable on
the exercise or exchange hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement) or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Right
Certificate shall have been exercised or exchanged as provided in the Rights
Agreement.
This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company and
its corporate seal. Dated as of , 1997.
ALPHA MICROSYSTEMS
By:
[Title]
ATTEST:
- ---------------------------------------------------------
[Title]
Countersigned:
_____________________________________________ , as Rights Agent
By __________________________________________
[Title]
D-30
<PAGE> 86
FORM OF REVERSE SIDE OF RIGHT CERTIFICATE
FORM OF ASSIGNMENT
(TO BE EXECUTED BY THE REGISTERED HOLDER IF SUCH HOLDER DESIRES TO TRANSFER THE
RIGHT CERTIFICATE)
FOR VALUE RECEIVED hereby sells, assigns and transfers unto________________
________________________________________________________________________________
________________________________________________________________________________
(Please print name and address of transferee)
Rights represented by this Right Certificate, together with all
right, title and interest therein, and does hereby irrevocably constitute and
appoint_________________________________________________________________________
Attorney, to transfer said Rights on the books of the within-named Company, with
full power of substitution.
Dated:_________________________
______________________________________
Signature
Signature Guaranteed:
Signatures must be guaranteed by a bank, trust company, broker, dealer or
other eligible institution participating in a recognized signature guarantee
medallion program.
............................................................
(To be completed)
The undersigned hereby certifies that the Rights evidenced by this Right
Certificate are not beneficially owned by, were not acquired by the undersigned
from, and are not being assigned to an Acquiring Person or an Affiliate or
Associate thereof (as defined in the Rights Agreement).
______________________________________
Signature
FORM OF ELECTION TO PURCHASE
(TO BE EXECUTED IF HOLDER DESIRES TO EXERCISE RIGHTS REPRESENTED BY THE RIGHTS
CERTIFICATE)
To ALPHA MICROSYSTEMS:
The undersigned hereby irrevocably elects to exercise Rights
represented by this Right Certificate to purchase the shares of Preferred Stock
(or other securities or property) issuable upon the exercise of such Rights and
requests that certificates for such shares of Preferred Stock (or such other
securities) be issued in the name of:
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
If such number of Rights shall not be all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social security or other identifying number
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
Dated:____________________
_____________________________________
Signature
(Signature must conform to holder specified on Right Certificate)
Signature Guaranteed:
Signature must be guaranteed by a bank, trust company, broker, dealer or
other eligible institution participating in a recognized signature guarantee
medallion program.
________________________________________________________________________________
(To be completed)
D-31
<PAGE> 87
The undersigned certifies that the Rights evidenced by this Right
Certificate are not beneficially owned by, and were not acquired by the
undersigned from, an Acquiring Person or an Affiliate or Associate thereof (as
defined in the Rights Agreement).
--------------------------------------
Signature
NOTICE
The signature in the Form of Assignment or Form of Election to Purchase, as
the case may be, must conform to the name as written upon the face of this Right
Certificate in every particular, without alteration or enlargement or any change
whatsoever.
In the event the certification set forth above in the Form of Assignment or
the Form of Election to Purchase, as the case may be, is not completed, such
Assignment or Election to Purchase will not be honored.
D-32
<PAGE> 88
ALPHA MICROSYSTEMS
Proxy Solicited on Behalf of the Board of Directors
of Alpha Microsystems for the 1997 Annual Meeting of Shareholders
The undersigned shareholder(s) of Alpha Microsystems (the "Company")
hereby appoints Clarke E. Reynolds, Douglas J. Tullio, or either of them,
proxies, each with full power of substitution, for and in the name of the
undersigned at the annual meeting of shareholders of the Company to be held on
August 13, 1997, at 2722 South Fairview Street, Santa Ana, California, at 10:00
a.m. and at any and all adjournments or postponements thereof (the "Annual
Meeting"), to vote all shares of the capital stock of the Company held by the
undersigned as if the undersigned were present and voting the shares.
Such proxies are directed to vote as specified on the reverse side or,
if no specification is made, FOR election of the directors named in the
Company's proxy statement (a copy of which the undersigned hereby acknowledges
receiving), FOR approval of the proposal to reincorporate the Company in
Delaware, through the merger of Alpha Microsystems, a California corporation,
with and into a wholly-owned Delaware subsidiary of Alpha Microsystems, FOR the
ratification of Ernst & Young as independent auditors of the Company and its
subsidiaries for the fiscal year ending February 22, 1998, and to vote in
accordance with their discretion on such other matters that may properly come
before the meeting. Such authority includes the right, in the discretion of the
proxies, and each of them, to cumulate votes for the election of directors and
thereby to distribute, in such proportion as the proxies see fit, the votes
represented by the proxy among the five nominees named on the reverse side or
any substitute person or persons nominated by the Board of Directors for
election to the Board. To vote in accordance with the Board of Directors'
recommendations, merely sign on the reverse side; no boxes need to be checked.
Continued and to be Voted, Signed and Dated on the Reverse Side
<PAGE> 89
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The Board of Directors recommends a vote FOR
Proposals 1, 2 and 3.
No. 1: Election of John F. Glade, Rockell N. Hankin,
Richard E. Mahmarian, Clarke E. Reynolds and
Douglas J. Tullio to serve until the next annual _______________________________________________
meeting SIGNATURE(S) OF SHAREHOLDER(S)
FOR ALL nominees (with exceptions noted) [ ] Please sign exactly as your name appears on this Proxy.
If signing as executor, administrator, trustee, guardian,
WITHHOLD authority for all nominees [ ] attorney or for a corporation, please give full title as
such. For joint accounts or co-fiduciaries, all joint
(To withhold authority to vote for any individual owners or co-fiduciaries should sign.
nominee, write that nominee's name on the space
provided below)
_______________________________________________
_______________________________________________
No. 2: Approval of the proposed reincorporation of the
Company in Delaware, through the merger of Alpha
Microsystems, a California corporation, with and into a
wholly-owned Delaware subsidiary of Alpha
Microsystems.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
No. 3: Approval of the appointment by the Board of
Directors of Ernst & Young as independent auditors of
the Company and its subsidiaries for the year ending
February 22, 1998.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
PLEASE MARK NOTES [ X ] or [ ]
DATED: _______________________, 1997
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