<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
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Alpha Microsystems
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<PAGE> 2
PRELIMINARY
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 Thursday, June 3, 1999, 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 as
AlphaServ.com, through the merger of Alpha Microsystems, a
California corporation, with and into a wholly-owned
Delaware subsidiary of Alpha Microsystems;
3. To approve an amendment to the Company's 1998 Stock Option
and Award Plan to increase the number of shares of Common
Stock authorized for issuance under such plan by 500,000
shares to an aggregate of 2,500,000 shares;
4. To ratify the appointment of Ernst & Young LLP as
independent auditors of the Company and its subsidiaries
for the year ending December 31, 1999; and
5. 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 April
9, 1999, 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,
Jeffrey J. Dunnigan, Secretary
Santa Ana, California
May 3, 1999
<PAGE> 3
PRELIMINARY
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 May 3, 1999, to shareholders of record on April 9, 1999, of Alpha
Microsystems (the "Company") in connection with the solicitation by its Board of
Directors of proxies for use at the 1999 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 WITH VOTING RIGHTS
The Board has fixed the close of business on April 9, 1999, as
the record date (the "Record Date") for the determination of the holders of
common stock (the "Common Stock") and voting preferred stock (the "Voting
Preferred Stock") entitled to notice of and to vote at the Annual Meeting, and
at any adjournment or postponement of such Annual Meeting. As of the Record Date
there were outstanding 11,588,882 shares of Common Stock and 1 share of Voting
Preferred Stock. Each share of Common Stock is entitled to one vote. Each share
of Voting Preferred Stock is entitled to cast an aggregate number of votes equal
to the number of votes that a holder of the shares of Common Stock issuable upon
exercise of the then unexercised portion of associated Warrants held by such
holder would be entitled to vote. As of the Record Date, the outstanding share
of Voting Preferred Stock was entitled to 5,844,826 votes
The holders of record of a majority of the votes entitled to be
cast is necessary to provide a quorum for the Annual Meeting. Abstentions and
"broker non-votes" are counted for purposes of determining whether the quorum
requirement is satisfied.
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
<PAGE> 4
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 seven.
On August 7, 1998, the Company entered into a Securities Purchase
Agreement (the "Purchase Agreement") with ING Equity Partners II, L.P., now
known as Hampshire Equity Partners II, L.P. ("ING"). As part of the transaction,
the Company agreed to nominate for election to the Board of Directors a total of
three individuals designated by ING. Benjamin P. Giess, Carlos D. De Mattos and
Sam Yau have been designated by ING for nomination to the Board. There are no
other 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. 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.
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.
INFORMATION CONCERNING NOMINEES FOR DIRECTOR
<TABLE>
<CAPTION>
Director
Since
<S> <C>
CARLOS D. DE MATTOS, 46, has served as a Director and the Chairman and Chief 1998
Executive Officer of Matthews Studio Equipment Group since January 1995,
and prior thereto as the Co-Chairman and Chief Executive Officer from
February 1989 to January 1995. Mr. De Mattos became Chief Financial
Officer of Matthews Studio Equipment Group in April, 1996. Mr. De Mattos
has also been Co-Chairman of the Board and Chief Financial Officer of
Matthews Studio Equipment, Inc. since 1976.
</TABLE>
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<PAGE> 5
<TABLE>
<S> <C>
BENJAMIN P. GIESS, 36, has been employed by Hampshire Equity Partners, formerly 1998
known as ING Equity Partners, and its predecessors and affiliates since
1992 and currently serves as a Partner responsible for originating,
structuring and managing equity and debt investments. From 1991 to 1992,
Mr. Giess worked in the Corporate Finance Group of ING Capital. From
1990 to 1991, Mr. Giess was employed by the Corporate Finance Group of
General Electric Capital Corporation. Mr. Giess serves as a director of
e.spire Communications, Inc. a Nasdaq company, which is a competitive
local exchange carrier ("CLEC"), as well as Matthews Studio Equipment
Group, a single source provider of production equipment to the
entertainment industry. In addition, Mr. Giess serves on the board of
several privately held companies.
ROCKELL N. HANKIN, 52, is chief executive of Hankin & Co. (founded June 1986) 1987
and its affiliate Hankin Investment Banking. The firms provide
management consulting and investment banking services. Mr. Hankin also
serves as Vice-Chairman of the Board of Semtech Corporation (NMS), a
manufacturer of electronic components, and a member of the boards of
Techniclone Corporation (NMS), a development stage pharmaceutical
company, and Sparta, Inc., a systems analysis and engineering company
serving primarily the military services and the department of defense.
Within the past year, he was Chairman of the Board of House of Fabrics
(NMS), a national retail chain, which was merged and a member of the
board of Quidel (NMS). In addition, Mr. Hankin serves on the Board of
several privately held companies.
RICHARD E. MAHMARIAN, 62, is currently President of REM Associates, a private 1995
investment and consulting service company. He was Chairman of the Board,
President, and Chief Executive Officer of Verification Systems
International, Incorporated, which designs, engineers and manufactures
bar code and two-dimensional symbology quality assurance instruments,
from 1997-1998. 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 Bell &
Howell Company, Northrop Corporation and NCR Corporation.
</TABLE>
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<TABLE>
<S> <C>
CLARKE E. REYNOLDS, 78, served as Chairman of the Board of Directors of the 1989
Company from 1991-1998, 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 was previously employed by NCR Corporation for over
47 years, during which time he 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, 56, appointed Chairman of the Board of Directors in July, 1991
1998, has served as President and Chief Executive Officer since May
1991. 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. Previously he served in various
management positions at Microdata, McDonnell Douglas and NCR Corporations.
SAM YAU, 50, has served as a director of the Company since 1998. Mr. Yau was 1998
Chief Executive Officer of National Education Corporation from May 1995
to May 1997. From 1993 through 1995 he was Chief Operating Officer of
Advacare, a medical services company.
</TABLE>
With respect to Proposal 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 nominees named herein or any substitute
person or persons nominated by the Board of Directors for election to the Board.
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<PAGE> 7
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF DIRECTORS TO THE
BOARD.
BOARD COMMITTEES
The Company has Audit and Compensation Committees, as well as a
Nominating Committee. The Audit Committee is currently composed of Messrs.
Carlos D. De Mattos, Benjamin P. Giess, Rockell N. Hankin and Richard E.
Mahmarian 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. Carlos D. De Mattos,
Benjamin P. Giess, Richard E. Mahmarian and Clarke E. Reynolds, and its
functions include making recommendations with respect to compensation of
officers and employees of the Company, reviewing annually the compensation
structure of the Company and administration of 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. Carlos D. De Mattos,
Benjamin P. Giess, Rockell N. Hankin, Clarke E. Reynolds and Douglas J. Tullio
and considers nominees for Director recommended by the shareholders.
MEETINGS OF BOARD
During the Transition Period ended December 31, 1998, there were
thirteen meetings of the Board of Directors of the Company, and the Board acted
once by unanimous written consent. The Audit Committee met once, the
Compensation Committee met three times and acted once by unanimous written
consent, and the Nominating Committee met once.
During the Transition Period ended December 31, 1998, each Board
member attended 100% 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.
PROPOSAL 2
APPROVE REINCORPORATION OF THE COMPANY IN DELAWARE AND RELATED CHANGES
TO THE RIGHTS OF SHAREHOLDERS AND TO CHANGE THE NAME OF
THE COMPANY TO "ALPHASERV.COM"
GENERAL
The Board of Directors has unanimously approved a proposal to
change the Company's state of incorporation from California to Delaware and to
change the name of the Company to "AlphaServ.com". 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
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<PAGE> 8
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 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
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<PAGE> 9
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 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 breach of their fiduciary duty
of care as directors under certain circumstances. The directors have elected to
include such a provision in the Delaware certificate. 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. 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 "--Limitation of Liability and Indemnification" 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 and
change of name 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 AlphaServ.com. 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.
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<PAGE> 10
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, each share of Class A1
Cumulative, Redeemable and Exchangeable Preferred Stock, will automatically
convert into one share of Class A1 Cumulative, Redeemable and Exchangeable
Preferred Stock of the Delaware Company, each share of Class A2 Cumulative,
Redeemable and Exchangeable Preferred Stock will automatically convert into one
share of Class A2 Cumulative, Redeemable and Exchangeable Preferred Stock of the
Delaware Company, each share of Class B1 Cumulative, Redeemable and Exchangeable
Preferred Stock will automatically convert into one share of Class B1
Cumulative, Redeemable and Exchangeable Preferred Stock of the Delaware Company
and each share of Voting Preferred Stock will automatically convert into one
share of Voting Preferred 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 and the number of outstanding shares of each class of
Preferred Stock of the Delaware Company will be equal to the number of shares of
such Preferred 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 Employee Stock Purchase Plan, the Stock Incentive Award
Plan and the 1998 Stock Option and Award 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.
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.
Required Vote. Since the approval of the proposal to
reincorporate the Company as AlphaServ.com in Delaware through the merger of
Alpha Microsystems, a California corporation, with and into a wholly-owned
subsidiary of Alpha Microsystems requires the affirmative vote of the
outstanding shares, abstentions and broker non-votes on such proposal have the
effect of "no" vote.
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
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<PAGE> 11
"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. Hankin and Mr. Mahmarian as Class III directors will not expire for three
years, and the terms of Mr. Giess, Mr. De Mattos and Mr. Yau as Class II
directors will not expire for two years. Mr. Tullio's and Mr. Reynolds' term as
Class I directors 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>
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 limitations
directors and officers in
circumstances where California
law would not permit
indemnification.
Cumulative Voting for Cumulative voting not available Cumulative voting is mandatory
Directors (see page 14). under Delaware law because not upon notice given by a
provided in the Delaware shareholder at shareholder's
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.
</TABLE>
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<TABLE>
<S> <C> <C>
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 affirmative vote of a majority of affirmative vote of a majority
page 15). the outstanding shares. of the outstanding shares,
provided that shares voting
against removal could not elect
such director under cumulative
voting.
Filling Board Vacancies Delaware law provides that California law permits (a) any
(see page 15). vacancies and newly created holder of 5% or more of the
directorships may be filled corporation's voting stock
by a majority of the directors or (b) the superior court of the
then in office, even if less appropriate county to call a
than a quorum. If there are special meeting of shareholders
no directors in office, the to elect the entire board if,
Delaware Court of Chancery may after filling any vacancy, the
order an election to fill directors then in office who
vacancies or newly created have been elected by the
directorships upon the shareholders constitute less
application of any stockholder. than a majority of the directors
then in office.
Who may Call Special The Board of Directors, the The Board of Directors, the
Shareholder Meeting (see Chairman of the Board or the Chairman of the Board, the
page 16). President. President, or holders of 10% of
the shares entitled to vote at
the special meeting.
Action by Written Consent Action by written consent Action by written consent
of Shareholders in Lieu prohibited by the Delaware permitted.
of a Shareholder Vote Certificate. All shareholder
at Shareholder Meeting action must take place by a
(see page 16). shareholder vote at a meeting of
shareholder.
Business Combination Offer Restrict business combinations No comparable statue.
Statute (see page 17). (mergers, sales of assets, and
similar transactions) between
the Company and a 15% stockholder
whose ownership was not approved
in advance by the board of
directors for 3 years.
Amendment of Certificate Amendments of all provisions of Amendment of all provisions of
(see page 19). 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 19). 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
Reorganizations (see page reorganization adversely affects must generally be approved by a
20). a specific class of shares. majority vote of each class of
shares outstanding.
</TABLE>
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<PAGE> 13
<TABLE>
<S> <C> <C>
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 20). 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 Available in certain mergers if Available in certain
page 20). 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 22). Paid from surplus (including Generally limited to the greater
paid-in and earned surplus) of (i) retained earnings or
or net profits for present or (ii) an amount which would leave
prior fiscal year. 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>
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.
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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 will not affect the Board of Directors' continued high
standard of corporate governance.
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, 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.
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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.
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<PAGE> 16
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 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
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<PAGE> 17
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.
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 seven. 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
five 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.
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<PAGE> 18
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 2000 annual meeting of
stockholders; Class II would hold office initially for a term expiring at the
2001 annual meeting of stockholders; and Class III would hold office initially
for a term expiring at the 2002 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.
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.
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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 of which 15,001 shares will be issued in exchange for existing 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 California Company or the
Delaware Company is aware to obtain control of the Delaware Company.
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.
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
equals 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
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<PAGE> 20
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.
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.
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 vacancies and newly created directorships may be filled by a
majority of directors then in office, even if less than a quorum. If there are
no directors in office the Delaware
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<PAGE> 21
Court of Chancery may, upon application of any shareholder or shareholders
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.
Consistent with the foregoing, 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 40,000,000
authorized shares of Common Stock, no par value, of which 11,588,882 shares were
issued and outstanding as of April 9, 1999, and 5,000,000 authorized shares of
Preferred Stock, no par value, of which 2,500 shares of Class A1 Cumulative,
Redeemable and Exchangeable Preferred Stock, 5,500 shares of Class A2
Cumulative, Redeemable and Exchangeable Preferred Stock, 7,000 shares of Class
B1 Cumulative, Redeemable and Exchangeable Preferred Stock and 1 share of Voting
Preferred Stock were issued and outstanding as of April 9, 1999.
Upon the effectiveness of the reincorporation, the Delaware
Company will have the same number of outstanding shares of Common Stock, Class
A1 Cumulative, Redeemable and Exchangeable Preferred Stock, Class A2 Cumulative,
Redeemable and Exchangeable Preferred Stock, Class B1 Cumulative, Redeemable and
Exchangeable Preferred Stock and Voting Preferred 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 40,000,000 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, Common and 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 seek shareholder approval prior to any issuance of Preferred Stock,
except as required by law or regulation. See "-- Anti-Takeover Measures."
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<PAGE> 22
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
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<PAGE> 23
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.
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
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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 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.
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.
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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
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
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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 a majority of the voting power of the Voting Stock of
the Company. The anti-takeover provisions may be amended by the affirmative vote
of 80% of the voting power of the Voting Stock.
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.
OTHER STATE LAW DIFFERENCES
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.
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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.
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 -- Shareholder 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
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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.
HOLDING COMPANY REORGANIZATION
Section 251(g) of the General Corporation Law permits 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
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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.
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
on its Common Stock 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
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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 more than 50% of the Delaware Company's outstanding
voting securities will not be held of record by persons having addresses in
California, 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. Provided 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.
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The foregoing is only a summary of certain federal income tax
consequences, and does not address all of the tax consequences of the
reincorporation which may be relevant to any particular group of Shareholders.
IN VIEW OF THE VARYING NATURE OF SUCH 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.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE
PROPOSAL TO APPROVE THE COMPANY'S REINCORPORATION IN DELAWARE AS ALPHASERV.COM,
THROUGH THE MERGER OF ALPHA MICROSYSTEMS, A CALIFORNIA CORPORATION, WITH AND
INTO A WHOLLY-OWNED DELAWARE SUBSIDIARY OF ALPHA MICROSYSTEMS.
PROPOSAL 3
APPROVAL OF AMENDMENT TO THE COMPANY'S 1998 STOCK OPTION AND AWARDS PLAN
GENERAL
The Company's 1998 Stock Option and Award Plan (the "1998 Plan")
was adopted by the Board of Directors in August 1998, and approved by the
shareholders in October 1998. The 1998 Plan provides for the grants of (i)
qualified incentive stock options ("ISOs") which meet the requirements of
Section 422 of the Code; (ii) stock options not so qualified ("NQSOs"); (iii)
deferred stock in which delivery of Common Stock occurs upon expiration of a
deferral period; (iv) restricted stock, in which Common Stock is granted to
participants subject to restrictions on transferability and other restrictions,
which lapse over time; (v) performance shares, consisting of a right to receive
Common Stock subject to restrictions based upon the attainment of specified
performance criteria; and (vi) stock appreciation rights, whether in conjunction
with the grant of stock options or independent of such grant, or stock
appreciation rights that are only exercisable in the event of a change in
control of the Company (as defined in the 1998 Plan) or upon other events
(collectively, items (iii) through (vi) are referred to herein as "Awards").
Only 321,422 options (plus any shares that might in the future be returned as a
result of cancellations or expiration of options) currently remain available for
grant under the 1998 Plan, and only 260,250 options remain available under the
Company's 1993 Employee Stock Option Plan.
In February 1999, the Board determined that the number of shares
available for grant as options was not sufficient to enable the Company to
attract and retain management and other personnel necessary to effect the
Company's service expansion plans or to incentivize existing and future
personnel and maintain ownership percentages represented by options held by
certain members of existing management so as to sufficiently align the interests
of management with that of the shareholders.
Consequently, the Board determined that it was in the interests
of the Company and its shareholders to increase the number of shares authorized
for issuance under the 1998 Plan from 2,000,000 to 2,500,000, an increase of
500,000 shares. At its February 1999 Board meeting, the Board approved the
amendment to the 1998 Plan, subject to shareholder approval.
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The shareholders are now being requested in this Proposal 3 to approve the
amendment to the 1998 Plan.
The essential features of the 1998 Plan are outlined below.
Copies of the 1998 Plan are available upon request to the Secretary of the
Company.
THE 1998 PLAN
Purpose. The purpose of the 1998 Plan is (a) to advance the
interests of the Company and its shareholders by improving the Company's ability
to attract and retain highly qualified personnel and to provide an incentive to
others whose job performance affects the Company, including Nonemployee
Directors of the Company, (b) to align Nonemployee Directors' personal interests
more closely with those of the shareholders of the Company, (c) to promote
ownership by Nonemployee Directors of a greater proprietary interest in the
Company, and to facilitate management of the Company's cashflow.
Eligibility. The Administrator has the authority under the 1998
Plan, among other things, to (i) select the employees of the Company, any
subsidiary, a parent corporation or the Manager who shall be eligible under the
1998 Plan; (ii) determine the form of awards, or combinations thereof, and
whether such awards are to operate on a tandem basis or in conjunction with
other awards; (iii) determine the number of shares of Common Stock or rights
covered by an award; and (iv) determine the terms and conditions of any awards
granted under the 1998 Plan. ISOs may be granted to the officers and key
employees of the Company and its subsidiaries. NQSOs and Awards may be granted
to the directors, officers, key employees and agents and consultants of the
Company and its subsidiaries.
Automatic Grants to Nonemployee Directors. In December 1995, the
Company had adopted the Nonemployee Director Stock Compensation Plan under which
each Director was entitled to elect to receive shares of Company Common Stock in
lieu of cash directors' fees, thereby aligning the interest of the Company's
Board more closely with its shareholders and preserving cash. Each Nonemployee
Director had elected to do so. However, no stock remained available under the
1996 Nonemployee Director Stock Compensation Plan for the months commencing
December 1, 1997, and the directors elected to accrue stock to be delivered
subject to and upon shareholder approval of an increase in the number of shares
available for such purpose, or if such Plan were not amended, to receive cash.
In lieu of cash compensation to the Nonemployee Directors for their services on
the Board for such period, the Nonemployee Directors agreed to accept options.
Accordingly, each Director of the Company who was not an employee of the Company
and served on the Board from December 1997 through September 1998 automatically
received upon shareholder approval of the Plan in October 1998 as compensation
for past services a NQSO to purchase 20,553 shares, at $1.96875 per share (the
Fair Market Value of a share of Common Stock on the date of grant), exercisable
immediately and continuing to be exercisable for ten (10) years after the date
of grant, provided that the Director continues to serve as a Director of the
Company, or as set forth in the 1998 Plan should the Director cease to be a
Director.
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Additionally, the 1998 Plan provides that in lieu of director
fees, each Nonemployee Director will receive NQSO's for services subsequent to
October 1, 1998. Each Nonemployee Director serving as of the date this Plan was
approved by the shareholders was automatically granted on such date as
compensation for his future services as a Director a Non-Qualified Stock Option
(the "Initial Grant") to purchase 137,143 shares, at $1.96875 per share (the
Fair Market Value of a share of Common Stock on the date of grant), exercisable
one third immediately, and additional one third on each of the first and second
anniversaries of the grant (provided the Director continues to serve as a
Director), and continuing to be exercisable for ten (10) years after the date of
grant, provided that the Director continues to serve as a Director of the
Company, or as set forth in the 1998 Plan should he cease to be a Director. New
Nonemployee Directors shall receive Initial Grants upon their first election or
appointment to the Board unless there are any changes in accounting requirements
which would result in such grants having a material adverse impact on the
Company's results of operations, in which case their Initial Grants shall be on
the terms set forth in Subparagraph (ii) below for Subsequent Grants.
Under the 1998 Plan, each Nonemployee Director then serving will
receive on the third anniversary of his or her Initial Grant and each
anniversary thereafter ("Subsequent Grants") an automatic grant of an NQSO to
purchase a number of shares calculated as follows: (i) $30,000 (the amount such
Director would otherwise have been paid for his services during such period)
shall be multiplied by 3 (a multiplier chosen to reflect that the Director will
have to purchase such shares); (ii) the product of (i) shall be divided by the
Fair Market Value of a share of Common Stock on the date of grant, which
quotient shall be the number of shares for which the Option is granted. The
purchase price of each share under such Non-Qualified Stock Option shall equal
the Fair Market Value of a share of Common Stock on the date of such grant. Each
Subsequent Grant to Nonemployee Directors in lieu of compensation shall be
exercisable immediately, and shall continue to be exercisable for ten (10) years
after the date of grant, provided that the Director continues to serve as a
Director of the Company, or as set forth in the 1998 Plan should be cease to be
a Director.
Administration of the 1998 Plan. The 1998 Plan is administered by
the Board of Directors, or by a Committee appointed by the Board of Directors
(the "Administrator").
Shares Subject to the 1998 Plan. The 1998 Plan, as amended,
provides that a total of 2,500,000 shares will be reserved and available for
issuance under the 1998 Plan.
There is no limit to the amount of Stock Options that may be
granted to any individual. If an option granted under the 1998 Plan expires or
terminates, or an Award is forfeited, the shares subject to any unexercised
portion of such option or Award will again become available for the issuance of
further options or Award under the 1998 Plan.
Terms of Options. Options granted under the 1998 Plan will become
exercisable in accordance with the terms of the grant made by the Administrator.
Each Award will be subject to the terms and restrictions of the Award made by
the Administrator. The Administrator has discretionary authority to select
participants from among eligible persons and to determine at the time an option
or Award is granted when and in what increments shares covered by the option may
be purchased and, in the case of options, whether it is intended to be an ISO or
a
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NQSO; provided, however, that certain restrictions applicable to ISOs are
mandatory, including a requirement that ISOs not be issued for less than 100% of
the then Fair Market Value of the Common Stock (110% in the case of a grantee
who holds more than 10% of the outstanding Common Stock) and a maximum term of
ten (10) years (five (5) years in the case of a grantee who holds more than 10%
of the outstanding Common Stock).
Under current law, ISOs may not be granted to any director of the
Company who is not also an employee or to directors, officers and other
employees of entities unrelated to the Company.
Each option must terminate no more than ten (10) years from the
date it is granted (or five (5) years in the case of ISOs granted to an employee
who is deemed to own in excess of 10% of the combined voting power of the
Company's outstanding equity stock). Options may be granted on terms providing
for exercise either in whole or in any part at any time or times during their
respective terms, or only in specified percentages at stated time periods or
intervals during the term of the option.
The exercise price of any option granted under the 1998 Plan is
payable in full in cash or its equivalent (including the withholding of shares)
as determined by the Administrator. The Company may make loans available to
option holders to exercise options evidenced by a promissory note executed by
the optionholder and secured by a pledge of Common Stock with Fair Market Value
at least equal to the principal of the promissory note unless otherwise
determined by the Administrator.
Adjustment Provisions. The 1998 Plan is subject to anti-dilution
provisions for stock splits, stock dividends and similar events. In the event of
a corporate transaction or event which affects the Common Stock, such that the
Committee determines that an adjustment is appropriate in order to prevent
dilution or enlargement of each Participant's rights under the 1998 Plan, the
Committee may then make an adjustment in the number and/or kind of securities
issuable under the 1998 Plan in a manner that is proportionate to the change to
the Common Stock and otherwise equitable in the number and kind of shares of
Common Stock remaining available for issuance under the 1998 Plan.
Amendment and Termination. The Board of Directors may from time
to time revise or amend the 1998 Plan, and may suspend or discontinue it at any
time. However, no such revision or amendment may impair the rights of any
participant under any outstanding Award without his consent or may, without
shareholder approval increase the number of shares subject to the 1998 Plan or
decrease the exercise price of a stock option to less than 100% of Fair Market
Value on the date of grant (with the exception of adjustments resulting from
changes in capitalization), materially modify the class of participants eligible
to receive options or Award under the 1998 Plan, materially increase the
benefits accruing to participation under the 1998 Plan or extend the maximum
option term under the 1998 Plan.
Tax Consequences. The following is a brief summary of the United
States federal income tax consequences of transactions under the 1998 Plan based
on federal tax laws in effect as of this date. This summary is not intended to
be exhaustive and does not discuss the
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<PAGE> 35
tax consequences of a participant's death or provisions of the income tax laws
of any municipality, state or other country in which an optionee may reside.
This summary does not purport to be complete. The Company advises all optionees
to consult their own tax advisors concerning tax implications of options grants
and exercises, and the disposition of shares acquired upon such exercise, under
the 1998 Plan.
Options granted under the 1998 Plan may be either "incentive
stock options", as defined in Section 422 of the Code, or nonstatutory stock
options.
If an option granted under the 1998 Plan is an incentive stock
option, under U.S. tax laws the optionee will recognize no income upon grant of
the incentive stock option and generally incur no tax liability upon its
exercise (provided certain employment requirements are met), although the
exercise may give rise to alternative minimum tax. The Company will not be
allowed a deduction for federal income tax purposes as a result of the exercise
of an incentive stock option regardless of the applicability of the alternative
minimum tax. Upon the sale or exchange of the shares at least two years after
grant of the option and one year after transfer of the shares to the optionee
(and satisfaction of certain employment requirements), any gain will be treated
as long-term capital gain under U.S. tax laws (measured by the proceeds of any
sale over the amount paid for the shares). If these holding periods are not
satisfied, the optionee will recognize ordinary income at the time of
disposition equal to the difference between the exercise price and the lower of
the Fair Market Value of the stock at the date of the option exercise or the
sale price of the stock. The Company will generally be entitled to a deduction
in the same amount as the ordinary income recognized by the optionee, provided
that the compensation is an ordinary and necessary business expense and is
reasonable and the deduction limitations of Section 162(m) do not apply. Any
gain recognized on such a premature disposition of the shares in excess of the
amount treated as ordinary income will be characterized under U.S. tax laws as
long-term capital gain if the sale occurs more than one year after exercise of
the option or as short-term capital gain if the sale is made earlier. Generally,
the current tax rate on net capital gain (net long-term capital gain minus
short-term capital loss) under current U.S. tax laws is capped at 20% for shares
held more than one year. Capital losses are allowed under U.S. tax laws in full
against capital gains plus $3,000 of other income.
All other options which do not qualify as incentive stock options
are referred to as nonstatutory stock options. An optionee will generally not
recognize any taxable income under U.S. tax laws at the time he or she is
granted a nonstatutory option. However, upon its exercise, under U.S. tax laws
the optionee will generally recognize ordinary income for tax purposes measured
by the excess of the then Fair Market Value of the shares over the exercise
price. In certain circumstances, for example, where the shares are subject to a
substantial risk of forfeiture when acquired, the date of taxation may be
deferred unless the optionee files an election with the Internal Revenue Service
under Section 83(b) of the Code. The income recognized by an optionee who is
also an employee of the Company will be subject to employment tax and
withholding by the Company by payment in cash or out of the current earnings
paid to the optionee. The Company will generally be entitled to a deduction in
the same amount as the ordinary income recognized by the optionee, provided that
the compensation is an ordinary and necessary business expense and is reasonable
and the deduction limitations of Section 162(m) do not apply. Upon resale of
such shares by the optionee, any difference between the sales price and
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<PAGE> 36
the exercise price, to the extent not recognized as ordinary income as provided
above, will be treated under U.S. tax laws as capital gain or loss, and will
qualify for long-term capital gain or loss treatment if the shares have been
held for more than one year.
REQUIRED VOTE
The adoption of the Amendment to the 1998 Stock Option and Award
Plan (Proposal 3) requires the affirmative votes of the holders of a majority of
the securities present or represented and entitled to vote. Abstentions on such
proposals have the effect of "no" votes, but "broker non-votes" are not counted
for purposes of determining whether the proposal has been approved.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENT TO THE
1998 STOCK OPTION AND AWARD PLAN.
PROPOSAL 4
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 December 31, 1999.
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 approval of the auditors (Proposal 4) 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.
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 DECEMBER 31, 1999.
SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS AND MANAGEMENT
The following table contains certain information as of April 1,
1999, as to each
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<PAGE> 37
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 voting
securities. 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 records and data supplied to the Company by its
shareholders.
<TABLE>
<CAPTION>
Amount and Nature of Percent
Title of Class Name of Beneficial Owner Beneficial Ownership(1) of Class
- -------------- ------------------------ ----------------------- --------
<S> <C> <C> <C>
Voting Preferred Stock Hampshire Equity Partners II, L.P. 1(2) 100.0
Common Stock Hampshire Equity Partners II, L.P. 5,890,540(2) 33.7
Common Stock Carlos D. De Mattos 49,314 *
Common Stock Jeffrey J. Dunnigan 26,657
Common Stock Benjamin P. Giess 5,890,540(2)(3) 33.7
Common Stock John F. Glade 211,200(4)
Common Stock Rockell N. Hankin 131,911 *
Common Stock Richard E. Mahmarian 163,411 *
Common Stock Dennis E. Michael 38,883 *
Common Stock Clarke E. Reynolds 147,911 *
Common Stock Douglas J. Tullio 537,367 4.5
Common Stock Sam Yau 43,636
Common Stock All directors and officers as
a group (11 persons) 7,245,830 39.4
</TABLE>
- ------------
* Does not exceed 1% of the outstanding shares of the voting securities of
the Company.
(1) Includes shares issuable upon exercise of options and warrants which are
presently exercisable or will become exercisable on or before June 1, 1999,
in the following amounts: Hampshire Equity Partners II, L.P.: 5,890,540; De
Mattos: 45,714; Dunnigan, 25,000; Giess(3): 5,890,540, Glade, 22,500;
Hankin: 87,578; Mahmarian: 95,078; Michael, 37,500; Reynolds: 87,578;
Tullio: 470,998; Yau: 43,636; and by all officers and directors as a group:
6,806,122.
(2) Hampshire Equity Partners II, L.P.'s (formerly known as ING Equity Partners
II, L.P). ownership of one (1) share of Voting Preferred Stock entitles it
to cast votes equivalent to the number of shares it has the right to
acquire pursuant to outstanding warrants which as of June 1, 1999 is
5,844,826 shares of Common Stock. Pursuant to the Securities Purchase
Agreement dated August 7, 1998, ING acquired 8,000 shares of Class A
Preferred Stock as of September 1, 1998 and 7,000 shares of Class B
Preferred Stock as of October 9, 1998. The address of Hampshire Equity
Partners II, L.P. is 520 Madison Avenue, New York, New York 10022-4213.
(3) Mr. Giess disclaims beneficial ownership of the shares which are held by
Hampshire Equity Partners II, L.P. and described in footnote (2) as well as
shares for which he has been granted options as a director. Mr. Giess is
prohibited from realizing any direct benefit from the option shares and
holds the option shares for the benefit of Hampshire Equity Partners II,
L.P. Mr. Giess is an executive officer of Lexington Equity Partners II,
Inc., which is the general partner of Lexington Equity Partners II, L.P.,
the general partner of Hampshire Equity Partners II, L.P.; however, the
Company has been advised that Mr. Giess does not exercise sole or shared
voting or dispositive power with respect to the share of Voting Preferred
Stock, the Preferred Stock or the outstanding warrants held by Hampshire
Equity Partners II, L.P. described in footnote (2).
(4) 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> 38
MANAGEMENT COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth for each of the Company's
executive officers earning in excess of $100,000 during the Transition Period
ended December 31, 1998, compensation allocated or paid on or before April 1,
1999, for services in all capacities with the Company and its subsidiaries
during the Transition Period ended December 31, 1998.
<TABLE>
<CAPTION>
Annual Compensation All Other Compensation
------------------------------------------- ------------------------
Securities
Name and Other Annual Underlying
Principal Position Year* Salary($) Bonus($) Compensation Options/(#)(1)
------------------ ----- --------- -------- ------------ --------------
<S> <C> <C> <C> <C> <C>
Douglas J. Tullio 1998* 290,001 110,000 ** 436,237
President, CEO and FY98 267,310 100,000 ** 100,000
Chairman of the FY97 225,004 90,000 ** 180,000
Board of Directors
Jeffrey J. Dunnigan(2) 1998* 122,091 39,600 ** 75,000
Vice President FY98
Finance and CFO and FY97
Secretary
John F. Glade 1998* 120,016 15,000 ** 20,000
Vice President, FY98 120,016 5,000 ** --
Engineering and FY97 120,016 12,500 ** 20,000
Manufacturing,
Randy S. Parks(3) 1998* 94,988 46,405 ** --
Vice President, AM FY98 85,932 23,678 40,000
Services Operation FY97
Dennis E. Michael(3) 1998* 99,532 31,500 ** 30,000
Vice President of FY98 92,092 20,000 ** 50,000
Marketing FY97
</TABLE>
- ----------------
* Historically the Company's fiscal year ended in February. In December
1998 the Company adopted a calendar fiscal year. Information for the
1998 period reflects the period from January 1, 1998, through December
31, 1998 and includes the Transition Period from February 23, 1998 to
December 31, 1998. Information for FY 1998 and FY 1997 reflects the
Company's prior fiscal year periods from February 24, 1997 to February
22, 1998, and February 26, 1996 to February 23, 1997, respectively.
** Aggregate amount does not exceed 10% of the total of annual salary and
bonus reported for the named executive officer.
(1) All options were granted under the 1993 Alpha Microsystems Employee
Stock Option Plan and the 1998 Stock Option and Awards Plan.
(2) Mr. Dunnigan's employment with the Company did not commence until late
in fiscal 1998, and his total compensation in fiscal 1998 was less than
$100,000. Mr. Dunnigan was not an officer in fiscal 1997.
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<PAGE> 39
(3) Mr. Parks' and Mr. Michael's total compensation in fiscal 1997 was less
than $100,000. Mr. Parks has resigned and is no longer an officer of the
Company.
STOCK OPTION GRANTS
The following table provides information on stock options granted
under the 1998 Alpha Microsystems Employee Stock Option Plan to the executive
officers named in the Summary Compensation Table.
OPTION GRANTS DURING TRANSITION PERIOD ENDED DECEMBER 31, 1998 (1)
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
----------------- VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION
PERCENT OF TOTAL FOR OPTION TERM
OPTIONS/SARS -------------------------
GRANTED TO
NUMBER OF EMPLOYEES IN
SECURITIES TRANSITION MARKET
UNDERLYING PERIOD ENDED EXERCISE OF PRICE ON
OPTIONS/SARS DECEMBER 31, BASE PRICE DATE OF EXPIRATION
NAME GRANTED(#) 1998 ($/SH) GRANT DATE 5%($) 10%($)
- ---- ---------- -------------- ------------ -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Douglas J. Tullio 330,998 23% $1.96875 $1.96875 10/14/2008 $ 410,438 $1,039,334
Chairman, President 55,239 4% $ 3.9375 $3.9375 12/16/2008 136,993 346,235
and CEO
Jeffrey J. Dunnigan 25,000 2% $1.96875 $1.968 10/14/2008 $ 31,000 $ 78,500
John F. Glade -- -- -- -- -- -- --
Randy S. Parks -- -- -- -- -- -- --
Dennis E. Michael -- -- -- -- -- -- --
</TABLE>
- --------------------
(1) All options were granted under the 1998 Stock Option and Award Plan.
Options granted to Mr. Tullio become exercisable as follows: 72,381 shares
on October 15, 1998, 223,617 shares on January 1, 1999, 40,239 shares on
January 1, 2000 and 50,000 shares on January 1, 2001. Options granted to
Mr. Dunnigan become exercisable as follows: 25% on each anniversary date of
the grant beginning October 15, 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
three months from
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<PAGE> 40
the date of termination of employment except for 258,617 of Mr. Tullio's
option shares which become immediately exercisable if his employment is
terminated by the Company.
TRANSITION PERIOD 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 Transition Period
ended December 31, 1998.
TRANSITION PERIOD ENDED DECEMBER 31, 1998 OPTION/VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
NUMBER UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-THE
OF OPTIONS AT DECEMBER 31, MONEY OPTIONS AT DECEMBER
SHARES 1998(#) 31, 1998($)
ACQUIRED --------------------------- ------------------------------
ON VALUE
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Douglas J. Tullio -- -- 247,381 433,856 $442,438 $852,208
Jeffrey J. Dunnigan -- -- 25,000 100,000 $ 78,919 $292,238
John F. Glade -- -- 22,500 5,000 $ 43,371 $ 5,940
Randy S. Parks -- -- 40,000 57,500 $ 77,989 $130,654
Dennis E. Michael -- -- 37,500 62,500 $ 79,003 $153,859
</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 do not receive cash compensation for acting
as a member of the Board of Directors or any committee thereof; however, each
outside director has agreed to accept his director fees in the form of stock
options pursuant to nonemployee director provisions under the 1998 Stock Option
and Awards Plan. In addition, directors are reimbursed for their reasonable
travel expenses incurred for attendance at such meetings.
EMPLOYMENT AGREEMENTS AND GUARANTEED SEVERANCE PAYMENTS
The Company entered into an Amended and Restated Employment
Agreement effective September 1, 1998 with Mr. Tullio as a condition to the
Initial Closing of the ING Securities Purchase Agreement dated August 7, 1998.
Such employment agreement is for a term of four years and establishes an annual
base salary for Mr. Tullio of $300,000, to be adjusted on each anniversary date
to be an amount greater than the average salary but less than the maximum salary
for chief executive officers of comparable companies. Additionally, the
agreement provides that Mr. Tullio shall be considered for a bonus at the end of
each fiscal year in the form of cash, stock options, stock grants or other
non-cash compensation of up to 40% of his base salary based upon performance and
in the sole discretion of the Board. Pursuant to such employment agreement, if
Mr. Tullio's agreement terminates prior to the end of the term as a result of
his death or disability, he or his estate shall be entitled to continuing
payment of his base
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<PAGE> 41
salary then in effect for 365 days following his termination, or through the
last day of the term of the agreement if earlier. Further, if the Company
terminates Mr. Tullio's employment other than for cause, he shall be entitled to
receive an amount equal to his base salary for the immediately preceding fiscal
year plus the average of his bonus compensation over the Company's two
immediately preceding fiscal years. If Mr. Tullio's employment terminates,
voluntarily or involuntarily, as a result of a "change in control" of the
Company during the term of his employment, he shall be entitled to a lump sum
severance payment equal to his base salary for the Company's immediately
preceding eighteen months plus the average of his bonus compensation over the
Company's two immediately preceding fiscal years, and to the extent not
prohibited by the terms of the applicable plan and applicable law, all of his
stock options shall become fully vested and be exercisable on a cashless
exercise basis. 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; or (c) sale of more than 50% of the outstanding
Common Stock of the Company by any person or persons. In the event of Mr.
Tullio's termination, under certain circumstances the Company is also obligated
to continue to provide medical and dental benefits for periods ranging from
twelve to 18 months.
The Company has also entered into employment agreement with Mr.
Glade. The agreement is not for any specified term as either party may terminate
the employment relationship at any time in accordance with the terms of the
agreement. Pursuant to such employment agreement, under certain circumstances,
if Mr. Glade is terminated, voluntarily or involuntarily, as a result of a
"change in control" of the Company during the term of his employment, he shall
be entitled to monthly severance payments for 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 Mr. Glade during the previous fiscal year
(excluding any non-cash compensation). The severance payments shall be reduced
by any compensation, fees or remuneration received by Mr. Glade during the
Severance Period. The Company is also obligated to continue to provide medical
and dental benefits to Mr. Glade during the Severance Period. Additionally, any
rights Mr. Glade may have in connection with the 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 Mr. Glade are
required, under certain circumstances, to be placed in a trust to ensure
payment.
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
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<PAGE> 42
authorized by the indemnification agreement, the Company's Articles of
Incorporation, the Company's Bylaws or by statute.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee for the Transition Period
ended December 31 1998, was composed of Messrs. Mahmarian, Reynolds, Giess and
De Mattos. Mr. Mahmarian serves as Chairman of the Compensation Committee.
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 and
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 Chief
Executive Officer (the "CEO") and other executive officers is to provide
compensation sufficient to attract, motivate and retain executives of
outstanding ability. Recognizing 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 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 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. During the Transition Period,
the CEO's annual base salary was set by contract at $300,000, subject to
increases by the Board of Directors.
BONUSES. Bonuses for executive officers are established by the
Committee based upon achievement of corporate objectives as well as individual
performance. Target bonuses (which generally range from 10%-40% of salary) and
goals and objectives are established each year for each of the executive
officers. Individual goals and objectives are modified during the year to
reflect changes in market conditions and opportunities.
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 shareholders and management. When granting stock options to executive
officers in the ten-months ended December 31, 1998, the Stock Option Committee
considered each officer's current stock and stock option holdings.
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<PAGE> 43
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 Committee in determining the CEO's
compensation for the Transition Period ended December 31, 1998 considered the
CEO's performance in achieving goals set by the Committee, the Company's
performance, and the position of the Company on a go-forward basis. Goals which
had been set by the Committee included (1) identifying and closing acquisitions
that would be individually profitable and that would move the Company towards
annual revenues of $50 million or more; (2) completing financing arrangements to
provide funds for future growth; (3) continuing to increase shareholder's equity
and shareholder value; (4) continuing to promote Alpha CONNECT technology; and
(5) returning the Company to profitability.
The Committee reviewed information supplied by the Economic
Research Institute for companies in similar industries at revenue levels
presently comparable to the Company and anticipated as a result of the Company's
acquisition strategy. Based upon the CEO's performance with respect to the
established objectives and the CEO's overall performance, and based upon
competitive salary information, the Committee awarded Mr. Tullio a bonus of
$110,000 for the Transition Period ended December 31, 1998, bringing his total
compensation for such period near the mean for companies with revenues similar
to the annualized revenues of the Company after taking into account growth
achieved during the Transition Period.
Mr. Tullio was granted stock options in the ten-months ended
December 31, 1998, representing the right to purchase 386,237 shares of Common
Stock. These grants, together with prior options granted which have not expired,
result in Mr. Tullio having the right to purchase 681,237 shares of Common Stock
(approximately 5.9% of the outstanding shares of Common Stock of the Company),
consistent with prior Board recommendation and Committee decisions 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 the Transition Period
ended December 31, 1998, were Richard E. Mahmarian, Chairman, Clarke E.
Reynolds, Carlos D. De Mattos and Benjamin P. Giess.
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<PAGE> 44
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 Stock Market Index, the S&P
Computers (Software & Services) Index and the Media General Financial Services
Industry Group 071 (Computers, Subsystems and Peripherals over the same period.
As a result of a restructuring of its industry group classification system in
1998, Media General Financial services no longer supports the MGFS Industry
Group 071. Accordingly, the Company has chosen to compare itself to the S&P
Computers (Software and Services) Index. The returns were calculated assuming
the value of the investment in the Company's stock and each index were $100 on
February 27, 1994, and that all dividends were reinvested.
- --------
(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.
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<PAGE> 45
COMPARISON OF CUMULATIVE TOTAL RETURN OF COMPANY,
INDUSTRY INDEX AND BROAD MARKET
<TABLE>
<CAPTION>
2/27/94 2/26/95 2/25/96 2/23/97 2/22/98 12/31/98
<S> <C> <C> <C> <C> <C> <C>
Alpha Microsystems $ 100 $ 39 $ 31 $ 88 $ 70 $ 174
S&P Computers (Software & Services) $ 100 $ 116 $ 181 $ 260 $ 384 $ 604
Nasdaq US $ 100 $ 102 $ 145 $ 174 $ 233 $ 290
Media General Financial Services Industry Group 071' $ 100 $ 112 $ 184 $ 210 $ 304 $ 0
</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 (10%) 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
(10%) 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 Transition Period ended December 31,
1998, all such reports required pursuant to Section 16(a) by the Company's
officers, directors and greater than ten-percent (10%) beneficial owners were
timely filed except that Mr. DeVito did not timely file a Form 4 to report the
acquisition of 5,000 shares of the Company's Common Stock in October 1998. A
Form 4 was subsequently filed by Mr. DeVito.
DEADLINE FOR SUBMITTING PROPOSALS FOR NEXT YEAR'S ANNUAL MEETING
Any proposal intended to be presented by a shareholder at the
2000 Annual Meeting of Shareholders must be received by the Secretary of the
Company at the Company's principal office not later than January 3, 2000, 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
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<PAGE> 46
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 Georgeson & Company Inc. to assist it in
connection with soliciting proxies for the Annual Meeting. The Company has
agreed to pay Georgeson & Company Inc. approximately $8,500 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 Transition Report on Form 10-K for the
year ended December 31, 1998 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 JEFFREY J. DUNNIGAN, 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 JEFFREY J. DUNNIGAN AT THE ABOVE ADDRESS.
By Order of the Board of Directors,
Jeffrey J. Dunnigan, Secretary
May 3, 1999
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<PAGE> 47
Exhibit A
FORM OF
AGREEMENT AND PLAN OF MERGER
OF
ALPHASERV.COM, INC.
(A DELAWARE CORPORATION)
AND
ALPHA MICROSYSTEMS
(A CALIFORNIA CORPORATION)
THIS AGREEMENT AND PLAN OF MERGER, dated as of _____________, 1999 (this
"Agreement") is between AlphaServ.com, 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
45,000,000 shares. The number of shares of Preferred Stock authorized to be
issued is 5,000,000, par value $.001, of which 2,500 shares have been designated
as Class A1 Cumulative, Redeemable and Exchangeable Preferred Stock, 5,500
shares have been designated as Class A2 Cumulative, Redeemable and Exchangeable
Preferred Stock, 7000 shares have been designated as Class B1 Cumulative,
Redeemable and Exchangeable Preferred Stock, 5,000 shares have been designated
as Class C1 Cumulative, Redeemable and Exchangeable Preferred Stock, 17,500
shares have been designated as Class D1 Cumulative, Redeemable and Exchangeable
Preferred Stock and 100 shares have been designated as Voting Preferred Stock.
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 40,000,000, 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
45,000,000 shares. The number of shares of Preferred Stock authorized to be
issued is 5,000,000, no par value, of which 2,500 shares have been designated as
Class A1 Cumulative, Redeemable and Exchangeable Preferred Stock, 5,500 shares
have been designated as Class A2 Cumulative, Redeemable and Exchangeable
Preferred Stock, 7,000 shares have been designated as Class B1 Cumulative,
Redeemable and Exchangeable Preferred Stock, 5,000 shares have been designated
as Class C1 Cumulative, Redeemable and Exchangeable Preferred Stock, 17,500
shares have been designated as Class D1 Cumulative, Redeemable and Exchangeable
Preferred Stock and 100 shares have been designated as Voting Preferred Stock.
Of these designated shares of Preferred Stock, 2,500 shares of Class A1
Cumulative, Redeemable and Exchangeable Preferred Stock, 5,500 shares of Class
A2 Cumulative, Redeemable and Exchangeable Preferred Stock, 7,000 shares of
Class B1 Cumulative, Redeemable and Exchangeable Preferred Stock and 1 share of
Voting Preferred Stock are presently outstanding. The
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<PAGE> 48
number of shares of Common Stock authorized to be issued is 40,000,000, no par
value, of which ______ are presently outstanding.
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 AlphaServ.com, a
Delaware corporation.
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
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<PAGE> 49
(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 AND PREFERRED SHARES. Upon the
Effective Date of the Merger, (a) 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, (b) each share of AMS California Class A1
Cumulative,
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<PAGE> 50
Redeemable and Exchangeable Preferred 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 Class A1 Cumulative, Redeemable and Exchangeable
Preferred Stock of the Surviving Corporation, (c) each share of AMS California
Class A2 Cumulative, Redeemable and Exchangeable Preferred 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 Class A2 Cumulative, Redeemable and Exchangeable
Preferred Stock of the Surviving Corporation, (d) each share of AMS California
Class B1 Cumulative, Redeemable and Exchangeable Preferred 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 Class B1 Cumulative, Redeemable and Exchangeable
Preferred Stock of the Surviving Corporation, (e) each share of AMS California
Class C1 Cumulative, Redeemable and Exchangeable Preferred 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 Class C1 Cumulative, Redeemable and Exchangeable
Preferred Stock of the Surviving Corporation, (f) each share of AMS California
Class D Cumulative, Redeemable and Exchangeable Preferred 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 Class D Cumulative, Redeemable and Exchangeable Preferred
Stock of the Surviving Corporation, and (g) each share of AMS California Voting
Preferred Stock, no par value, issued and outstanding immediately prior thereto
shall by virtue of the Merger and without any action by the Constituent
Corporation, the holder of such share or any other person, be converted into and
exchanged for one (1) fully paid and nonassessable share of Voting Preferred
Stock of the Surviving Corporation.
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 Employee
Stock Purchase Plan and the 1998 Stock Option and Award 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.
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
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<PAGE> 51
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 and AMS Preferred 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 or AMS California Preferred Stock, as the case may be,
shall be deemed for all purposes to represent the number of shares of the
Surviving Corporation's Common Stock or Preferred Stock, as the case may be,
into which shares of AMS California Common Stock and AMS Preferred 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 and
Preferred Stock of the Surviving Corporation represented by such outstanding
certificate as provided above.
Each certificate representing Common Stock and Preferred 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.
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.
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<PAGE> 52
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 1013 Centre Road, in the City of
Wilmington, County of New Castle, 19805. The name of its registered agent at
such address is Corporation Service 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.
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<PAGE> 53
4.8 COUNTERPARTS. In order to facilitate the filing and recording of
this Agreement, the same may be executed in any number of counterparts, each of
which shall be deemed to be an original and all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, this Agreement having first been approved by the
resolutions of the Boards of Directors of AlphaServe.com, Inc., 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.
ALPHASERV.COM, INC.,
a Delaware corporation
By: _____________________________________
Douglas J. Tullio
President and Chief Executive Officer
ATTEST:
__________________________________
Jeffrey J. Dunnigan
Secretary
ALPHA MICROSYSTEMS,
a California corporation
By: _____________________________________
Douglas J. Tullio
President and Chief Executive Officer
ATTEST:
__________________________________
Jeffrey J. Dunnigan
Secretary
[COUNTERPART SIGNATURE PAGE
TO AGREEMENT AND PLAN OF MERGER]
A-7
<PAGE> 54
EXHIBIT B
FORM OF
CERTIFICATE OF INCORPORATION
OF
ALPHASERV.COM
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 AlphaServ.com (the
"Corporation").
SECOND. The address of the Corporation's registered office in the
State of Delaware is 1013 Centre Road, in the City of Wilmington, County of New
Castle, 19805. The name of its registered agent at such address is Corporation
Service 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 45 million (45,000,000), consisting
of 40 million (40,000,000) 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;
B-1
<PAGE> 55
(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;
(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 RL&F Service Corp.,
10th Floor, One Rodney Square, 10th and King Streets, Wilmington, DE 19801.
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 Bylaws.
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 AlphaServ.com, a California corporation,
pursuant to the Agreement and Plan of Merger, dated ________ __, 1999, between
the Corporation and AlphaServ.com, a California corporation, no action that is
required or permitted to be taken by the stockholders of the Corporation
B-2
<PAGE> 56
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
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:
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<PAGE> 57
Clarke E. Reynolds c/o AlphaServ.com, Inc.
(Class I) 2722 South Fairview St.
Santa Ana, CA 92704
Douglas J. Tullio c/o AlphaServ.com, Inc.
(Class I) 2722 South Fairview St.
Santa Ana, CA 92704
Rockell N. Hankin c/o AlphaServ.com, Inc.
(Class III) 2722 South Fairview St.
Santa Ana, CA 92704
Richard E. Mahmarian c/o AlphaServ.com, Inc.
(Class III) 2722 South Fairview St.
Santa Ana, CA 92704
Carlos D. DeMattos c/o AlphaServ.com, Inc.
(Class II) 2722 South Fairview St.
Santa Ana, CA 92704
Benjamin P. Gress c/o AlphaServ.com, Inc.
(Class II) 2722 South Fairview St.
Santa Ana, CA 92704
Sam Yau c/o AlphaServ.com, Inc.
(Class II) 2722 South Fairview St.
Santa Ana, CA 92704
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 _______ ____,
1999.
____________________________________
RL&F Service Corp.
by: ______________________
______________________
Incorporator
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<PAGE> 58
EXHIBIT C
FORM OF
BY-LAWS
OF
ALPHASERV.COM
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
Corporation Service Company, 1013 Centre Road, Wilmington, Delaware 19805.
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
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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 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
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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 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
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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 stock holders 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
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entitled to vote at the meeting, arranged in alphabetical order, and showing the
address of each stock holder 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 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.
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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.
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
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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 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
By-law 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 Bylaws 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,
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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.
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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 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
Bylaws.
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.
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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 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
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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.
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
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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
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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 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.
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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
relation ship or interest and as to the contract or transaction are disclosed or
are known to the 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.
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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. 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 Bylaws and may alter and repeal any By-laws
whether adopted by them or otherwise.
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PROXY ALPHA MICROSYSTEMS
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF ALPHA MICROSYSTEMS FOR THE 1999 ANNUAL MEETING OF SHAREHOLDERS
The undersigned shareholder(s) of Alpha Microsystems (the
"Company") hereby appoints Douglas J. Tullio, Jeffrey J. Dunnigan, 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
Thursday, June 3, 1999, 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 on the
reverse side and 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 as AlphaServ.com, through the merger of
Alpha Microsystems, a California corporation, with and into a wholly-owned
Delaware subsidiary of Alpha Microsystems, FOR approval of the proposal to amend
the Company's 1998 Stock Option and Award Plan to increase the number of shares
of Common Stock authorized for issuance under such plan by 500,000 shares to an
aggregate of 2,500,000 shares, FOR approval of the appointment by the Board of
Directors of Ernst & Young LLP as independent auditors of the Company and its
subsidiaries for the fiscal year ending December 31, 1999, 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 seven 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> 74
Please mark
[X] your votes as
indicated in
this sample
1. Election of Carlos D. DeMattos, Benjamin P. Giess, Rockell N. Hankin,
Richard E. Mahmarian, Clarke E. Reynolds, Douglas J. Tullio and Sam Yau
to serve until the next annual meeting
FOR ALL WITHHOLD
nominees AUTHORITY
(with exceptions for all
noted) nominees
[ ] [ ]
(To withhold authority to vote for any individual nominee, write that nominee's
name on the space provided below)
________________________________________________________________________________
2. Approval of the proposed reincorporation of the Company in Delaware as
AlphaServ.com, through the merger of Alpha Microsystems, a California
corporation, with and into a wholly-owned Delaware subsidiary of Alpha
Microsystems.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. Approval of the proposed amendment to the Company's 1998 Stock Option
and Award Plan to increase the number of shares of Common Stock
authorized for issuance under such plan by 500,000 shares to an
aggregate of 2,500,000 shares.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. Approval of the appointment by the Board of Directors of Ernst & Young
LLP as independent auditors of the Company and its subsidiaries for the
year ending December 31, 1999.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
SIGNATURE(S) OF SHAREHOLDER(S)________________________DATED:_____________, 1999.
Please sign exactly as your name(s) appears on this Proxy. If signing as
executor, administrator, trustee, guardian, attorney or for a corporation,
please give full title as such. For joint accounts or co-fiduciaries, all joint
owners or co-fiduciaries should sign.
