<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
LITTLEFIELD, ADAMS & COMPANY
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
LITTLEFIELD, ADAMS & COMPANY
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
LITTLEFIELD, ADAMS & COMPANY
6262 Executive Boulevard
Huber Heights, Ohio 45424
Notice of Annual Meeting of Shareholders
June 11, 1999
April 30, 1999
To the Shareholders:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Littlefield, Adams & Company (the "Company") will be held at the Holiday Inn -
Dayton North, 2301 Wagner Ford Road, Dayton, Ohio 45414, on Friday, June 11,
1999, at 1:00 P.M. (local time) for the following purposes:
1. To elect one director to serve until the Annual Meeting of
Shareholders for 2002.
2. To consider and vote upon a proposal to merge the Company into
FunWear, Inc., a newly-formed Delaware subsidiary, which would be
the surviving entity in such merger, in order to change the
Company's state of incorporation New Jersey to Delaware.
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
April 23, 1999, has been fixed as the record date for the determination
of the shareholders entitled to notice of and to vote at such meeting or any
adjournment thereof, and only shareholders of record at the close of business on
that date are entitled to notice of and to vote at such meeting.
A copy of the Company's Annual Report on Form 10-K for 1998 is enclosed
herewith.
You are cordially invited to attend the meeting. Whether or not you
plan to attend the meeting, it is important that your shares be represented.
Accordingly, please complete, date and sign the enclosed proxy and return it
promptly.
By Order of the Board of Directors
WARREN L. RAWLS
Secretary
- --------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT
TO ENSURE A QUORUM, PLEASE COMPLETE AND RETURN THE PROXY IN THE ENCLOSED
ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF YOU ATTEND
THE MEETING, YOUR PROXY WILL BE RETURNED TO YOU UPON REQUEST TO THE SECRETARY OF
THE MEETING.
<PAGE> 3
L I T T L E F I E L D, A D A M S & C O M P A N Y
6262 EXECUTIVE BOULEVARD
HUBER HEIGHTS, OHIO 45424
--------------
P R O X Y S T A T E M E N T
--------------
ANNUAL MEETING OF SHAREHOLDERS
JUNE 11, 1999
--------------
This Proxy Statement and accompanying form of proxy are being furnished
in connection with the solicitation of proxies by the Board of Directors of
Littlefield, Adams & Company ("Littlefield" or the "Company"), for use at the
Annual Meeting of Shareholders to be held on Friday, June 11, 1999, at 1:00 P.M.
(local time) at the Holiday Inn - Dayton North, 2301 Wagner Ford Road, Dayton,
Ohio, or any adjournment thereof (the "Meeting"). Copies of this Proxy
Statement, the attached Notice of Annual Meeting of Shareholders, and the
enclosed form of proxy were first mailed to shareholders on or about April 30,
1999. The principal executive office of Littlefield is located at 6262 Executive
Boulevard, Huber Heights, Ohio 45424. The telephone number of Littlefield's
principal executive office is (937) 236-0660.
A proxy in the accompanying form, which is properly executed, duly
returned to the Board of Directors and not revoked, will be voted in accordance
with the instructions contained in the proxy. If no instructions are given with
respect to any matter specified in the Notice of Annual Meeting to be acted upon
at the Meeting, the proxy will vote the shares represented thereby FOR the
nominee for director set forth below, FOR the proposal to merge into FunWear,
Inc., the Company's newly formed Delaware subsidiary and in accordance with his
best judgment on any other matters which may properly come before the Meeting.
The Board of Directors currently knows of no other business that will be
presented for consideration at the Meeting. Each shareholder who has executed a
proxy and returned it to the Board of Directors may revoke the proxy by notice
in writing to the Secretary of the Company, or by attending the Meeting in
person and requesting the return of the proxy, in either case at any time prior
to the voting of the proxy. Presence at the Meeting does not itself revoke the
proxy. The cost of the solicitation of proxies will be paid by the Company. In
addition to the solicitation of proxies by the use of the mails, management and
regularly engaged employees of the Company may, without additional compensation
therefor, solicit proxies on behalf of the Company by personal interviews,
telephone or other means, as appropriate. The Company will, upon request,
reimburse brokers and others who are only record holders of the Company's Common
Stock for their reasonable expenses in forwarding proxy material to, and
obtaining voting instructions from, the beneficial owners of such stock.
The close of business on April 23, 1999, has been fixed as the record
date (the "Record Date") for determining the shareholders entitled to notice of
and to vote at the Meeting. As of the Record Date, there were 2,790,057 shares
of Common Stock, par value $1.00 per share ("Common Stock"), issued and
outstanding and entitled to vote.
Each share of Common Stock entitles the holder thereof to one vote. A
majority of the shares of Common Stock issued and outstanding constitutes a
quorum. Abstentions and broker non-votes are counted as present in determining
whether the quorum requirement is satisfied. With regard to the election of
directors, votes may be cast in favor of or withheld from the nominee. The
affirmative vote of a plurality of the votes cast
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<PAGE> 4
at the Meeting will be necessary for the election of directors. Votes that are
withheld will be excluded entirely from the vote for the election of directors
and will have no effect. The affirmative vote of two-thirds of the votes cast at
the Meeting on Proposal No. 2 will be required to approve the merger of the
Company into its newly formed Delaware subsidiary. Under New Jersey law,
abstentions and broker non-votes are not "votes" for purposes of determining
whether the requisite proportion of affirmative votes has been cast, so they
will have no effect on the outcome of the vote.
Brokers who hold shares in street name have the authority to vote on
certain "routine" matters when they have not received instructions from
beneficial owners. The Company believes that brokers that do not receive
instructions will be entitled to vote on the election of directors but may not
be entitled to vote shares held for customers on the proposal to merge into the
Company's FunWear, Inc. subsidiary. without specific instructions from such
customers.
Shareholders of the Company whose shares are not voted in favor of
Proposal No. 2 to merge the Company into the Company's FunWear, Inc. subsidiary
or who duly revoke their vote in favor of such proposal have a statutory right
to be paid, in cash, the fair market value of their shares, provided that
specific procedures are followed. See "Rights of Dissenting Shareholders,"
below.
To the best knowledge of the Company, none of the Company's executive
officers, directors or nominees for election as directors has any interest in
the matters to be acted upon at the Meeting, other than with respect to their
election as directors.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets, as of the Record Date, the beneficial
ownership of shares of Common Stock by (i) each person who is known by the
Company to own more than 5% of the outstanding shares of Common Stock, (ii) each
director of the Company and each executive officer of the Company listed in the
Summary Compensation Table and (iii) all of the Company's executive officers and
directors as a group:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER OF SHARES PERCENT OF
BENEFICIAL OWNER OF COMMON STOCK(1) CLASS (2)
---------------- ------------------ ---------
<S> <S> <S>
Paul S. Rosenblum 699,738 (3) 22.4%
R & L Equity Partners
P.O. Box 23568
Harahan, LA 70183
Estate of Stanley I. Halbreich 627,603 (4) 19.4%
c/o Ada Halbreich, Executrix
350 Fifth Avenue
New York, NY 10118
Ronald Weiner 451,471 (5) 15.4%
10460 W. Pico Boulevard
Los Angeles, CA 90064
L. Clarke Hill, Jr. 333,333 (6) 10.7%
c/o Wheat First Union
Two International Place
at International Place, 20th Floor
Boston, MA 02110
</TABLE>
3
<PAGE> 5
<TABLE>
<S> <C> <C>
Alphonse Stroobants 250,000 9.0%
c/o Northcote Farm & Land Company
Route 1, Box 1000
Forest, Virginia 24551
Warren L. Rawls 238,958 (7) 8.0%
c/o Littlefield, Adams & Company
6262 Executive Boulevard
Huber Heights, Ohio 45424
Michael B. Balber 178,333 (8) 6.0%
c/o Littlefield, Adams & Company
6262 Executive Boulevard
Huber Heights, Ohio 45424
Martin B. Shifrin 44,333 (9) 1.6%
c/o Littlefield, Adams & Company
6262 Executive Boulevard
Huber Heights, Ohio 45424
William Goettelman 19,500 (10) *
c/o Littlefield, Adams & Company
6262 Executive Boulevard
Huber Heights, Ohio 45424
ALL EXECUTIVE OFFICERS AND DIRECTORS
AS A GROUP (INCLUDES 4 PERSONS) 481,124 (11) 14.9%
- -------------------
* Less than 1%
</TABLE>
(1) Unless otherwise indicated, each of the parties listed has sole voting
and investment power over the shares of Common Stock owned, except that
the holders of Options and the Company's 7% Convertible Debentures are
not entitled to any vote with respect thereto prior to the exercise or
conversion thereof. The number of shares of Common Stock indicated
includes in each case the number of shares of Common Stock issuable
upon exercise of Options granted under the Company's Incentive Plan.
(2) Based on 2,790,057 shares of Common Stock issued and outstanding on the
Record Date (excluding 18,164 treasury shares). In addition, treated as
outstanding for the purpose of computing the percentage ownership of
each director or executive officer and of all executive officers and
directors as a group, as the case may be, are shares of Common Stock
issuable to such individual or group upon exercise of Options and/or
upon conversion of the Company's 7% Convertible Debentures.
(3) Consists of 237,805 shares held by Mr. Rosenblum and 128,600 shares
held by R & L Equity Partners, a Louisiana general partnership of which
Mr. Rosenblum is the sole managing general partner, and 333,333 shares
issuable upon conversion of the Company's 7% Convertible Debentures.
(4) Consists of 174,270 shares held by the Estate of Stanley I. Halbreich,
200,000 shares issuable upon the exercise of Options, and 253,333
shares issuable upon conversion of the Company's 7% Convertible
Debentures.
(5) Consists of 318,139 shares held by Ronald Weiner directly, in his IRA
account, and as Trustee of the Weiner Family Trust, and 133,332 shares
issuable upon conversion of the Company's 7% Convertible Debenture held
by Mr. Weiner indirectly, through corporations wholly-owned by Mr.
Weiner and his wife.
(6) Consists of shares issuable upon conversion of the Company's 7%
Convertible Debentures.
4
<PAGE> 6
(7) Consists of 6,792 shares held by Mr. Rawls, 20,500 shares held jointly
with his wife, 185,000 shares issuable upon the exercise of Options and
26,666 shares issuable upon conversion of the Company's 7% Convertible
Debentures. Mr. Rawls disclaims beneficial ownership of the shares
issuable upon the exercise of Options and upon conversion of the
Debentures.
(8) Consists of 165,000 shares issuable upon the exercise of Options and
13,333 shares issuable upon conversion of the Company's 7% Convertible
Debentures. Mr. Balber disclaims beneficial ownership of the shares
issuable upon the exercise of Options and upon conversion of the
Debentures.
(9) Includes 1,000 shares held directly by Mr. Shifrin, 5,000 shares held
indirectly by Mr. Shifrin in a trust, 5,000 shares issuable upon the
exercise of Options and 33,333 shares issuable upon conversion of the
Company's 7% Convertible Debentures. Mr. Shifrin disclaims beneficial
ownership of the shares issuable upon the exercise of Options and upon
conversion of the Debentures.
(10) Includes 15,000 shares issuable upon the exercise of Options. Mr.
Goettelman disclaims beneficial ownership of the shares issuable upon
the exercise of Options.
(11) Includes 370,000 shares issuable upon the exercise of Options and
73,332 shares issuable upon conversion of the Company's 7% Convertible
Debentures.
5
<PAGE> 7
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Company's Restated Certificate of Incorporation provides for the
Board of Directors to be divided into three classes, each class to contain as
nearly as possible one-third of the whole number of directors (Class I, Class II
and Class III). The term of office for each class of directors is three years.
The directors in Class I serve until the until the Annual Meeting of
Stockholders for 2001; the directors in Class II will serve until the Annual
Meeting of Stockholders for 1999 and the directors in Class III will serve until
the Annual Meeting of Stockholders for 2000. One director for Class II is to be
elected at the Annual Meeting and, when elected, will serve until the Annual
Meeting of Stockholders for 2002 and until the election and qualification of his
successor. The Company's officers, including the executive officers, all serve
at the pleasure of the Board of Directors.
Stanley I. Halbreich, who had served as President, Chairmen and Chief
Executive Officer of the Company and who had been re-elected as a Class II
director in 1996, passed away in August 1998. As Mr. Halbreich was the only
Class II director, currently, Class II is vacant. It is the intention of the
Board of Directors to nominate at the Annual Meeting Michael B. Balber (who was
elected as a Class I director in 1998) for re-election to the Board of Directors
as Class II. In the event that Mr. Balber should become unavailable for election
for any reason, at present unknown, it is intended that votes will be cast
pursuant to the accompanying proxy for such substitute nominee as the Board of
Directors may designate.
The following chart shows as to each director of the Company (i) his
name and age; (ii) his principal position with the Company; (iii) his principal
occupation or employment, if different; (iv) the month and year in which he
began to serve as a director; and (v) the class of director to which currently
he belongs.
CLASS I
(TO SERVE UNTIL THE ANNUAL MEETING OF STOCKHOLDERS FOR 2001)
NO DIRECTORS ARE TO BE ELECTED TO THIS CLASS
<TABLE>
<CAPTION>
PRESENT POSITION PRINCIPAL OCCUPATION OR
NAME (AGE) WITH LITTLEFIELD EMPLOYMENT, IF DIFFERENT DIRECTOR SINCE
- ---------- ---------------- ------------------------ --------------
<S> <C> <C> <C>
William E. Goettelman (50)(1) Director President and Chief August 1994
Executive Officer, Free
Lance Sales, Ltd.
</TABLE>
CLASS II
(TO SERVE UNTIL THE ANNUAL MEETING OF STOCKHOLDERS FOR 2002)
ONE DIRECTOR IS TO BE ELECTED TO THIS CLASS
<TABLE>
<CAPTION>
PRESENT POSITION PRINCIPAL OCCUPATION OR
NAME (AGE) WITH LITTLEFIELD EMPLOYMENT, IF DIFFERENT DIRECTOR SINCE
- ---------- ----------------- ------------------------ --------------
<S> <C> <C> <C>
Michael B. Balber (53)(2) President and Chief September 1997
Executive Officer and
Director
</TABLE>
6
<PAGE> 8
CLASS III
NO DIRECTORS ARE TO BE ELECTED TO THIS CLASS
(TO SERVE UNTIL THE ANNUAL MEETING OF STOCKHOLDERS FOR 2000)
<TABLE>
<CAPTION>
PRESENT POSITION PRINCIPAL OCCUPATION OR
NAME (AGE) WITH LITTLEFIELD EMPLOYMENT, IF DIFFERENT DIRECTOR SINCE
- ---------- ----------------- ------------------------ --------------
<S> <C> <C> <C>
Martin B. Shifrin (76)(1) Chairman of the Board and President, Martin B. August 1996
Director Shifrin and Associates
Warren L. Rawls (44)(3) Chief Financial Officer, September 1997
Secretary, Treasurer, and
Director
</TABLE>
- --------------------
(1) Member of the Audit Committee and the Incentive Compensation Committee.
(2) Mr. Balber became a director in September 1997, and at the 1998 Annual
Meeting was elected for a term expiring at the 2001 Annual Meeting. He
is standing for re-election as a Class II director at the 1999 Annual
Meeting in order for the three Classes of directors to contain as
nearly as possible the same number of directors.
(3) Mr. Rawls previously served as a director from August 1994 until May
1995.
BIOGRAPHICAL INFORMATION
The following information was furnished to the Board of Directors by
the individuals named:
Michael B. Balber was elected Director and Executive Vice President of
Littlefield in September 1997; he was elected President and Chief Executive
Officer on August 21, 1998. Prior to being elected as President of the Company,
Mr. Balber had served as President of the Company's Sports Imprints/FunWear
Division since April 1996, as Vice President - National Sales Manager from
December 1994 to April 1996, and as National Sales Manager from August 1994 to
December 1994. From 1991 to 1994, Mr. Balber was the President of M & M
Sportswear, Inc., a privately held sports apparel imprinter and embellisher.
William E. Goettelman has served as Director of Littlefield since
August 1994. Since 1988, Mr. Goettelman has been President and Chief Executive
Officer of Free Lance Sales, Ltd., a privately held company which produces
point-of-purchase and special event banners, specialty point-of-purchase
signage, and imprinted sportswear.
Warren L. Rawls, a Certified Public Accountant, was elected Director of
Littlefield on September 23, 1997, and Treasurer and Chief Financial Officer on
December 22, 1997. He has served as Secretary of the Company since August 1994.
Mr. Rawls had previously served as Chief Financial Officer of the Company from
January 1994 through June 1995 and as Treasurer from August 1994 until July
1995. Mr. Rawls was previously
7
<PAGE> 9
a Director of Littlefield from August 1994 until May 1995. From November 1991
until January 1994, Mr. Rawls was a Supervisory Accountant of the Resolution
Trust Corporation, a subsidiary of the Federal Deposit Insurance Corporation,
which was responsible for administration of failed savings and loan
institutions. In June 1995, without admitting or denying the findings or
conclusions, Mr. Rawls consented to an order of the United States Securities and
Exchange Commission finding that during Mr. Rawls' first four months of
employment with Littlefield in early 1994, he violated Sections 13(a),
13(b)(2)(A) and (B) of the Securities Exchange Act of 1934, as amended, and
Rules 12(b)-20, 13a-1, 13b2-1 and 13b2-2 thereunder.
Martin B. Shifrin was elected Director of Littlefield on August 28,
1996. Since 1986, Mr. Shifrin has been President of Windbreaker Licensing, Ltd.,
a privately held trademark licensing company. Since 1959, Mr. Shifrin has been
President of Martin B. Shifrin and Associates, a privately held apparel sales
concern selling to discounters and department stores. From 1974 to 1994, Mr.
Shifrin was also the chief financial officer of Khaki, Inc., a privately held
retailer of men's and women's apparel, luggage and camping goods.
MEETINGS AND COMMITTEES OF THE BOARD
The Board of Directors of the Company held fifteen meetings during
1998. All incumbent directors attended all Board and Committee meetings held
during their terms in office, either in person or by telephone conference,
during 1998.
The Board of Directors has established an Incentive Compensation
Committee and an Audit Committee. There is no formal nominating committee or
compensation committee; the Board of Directors performs the functions of these
committees (except regarding the administration of the Incentive Plan, which
function is performed by the Incentive Compensation Committee).
The members of the Audit Committee are William E. Goettelman and Martin
B. Shifrin, neither of whom is an employee or officer of the Company. The Audit
Committee consults with the auditors of the Company and such other persons as
the members deem appropriate, reviews the preparations for and scope of the
audit of the Company's annual financial statements, makes recommendations as to
the engagement and fees of the independent auditors, and performs such other
duties relating to the financial statements of the Company as the Board of
Directors may assign from time to time. The Audit Committee met four times
during 1998.
The Incentive Compensation Committee has all of the powers of the Board
of Directors in respect of any matters relating to the administration of the
Littlefield, Adams & Company Incentive Plan. The members of the Incentive
Compensation Committee are William E. Goettelman and Martin B. Shifrin. The
Incentive Compensation Committee did not meet during 1998.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires officers
and directors of the Company and holders of more than 10% of the Common Stock
(collectively, "Reporting Persons") to file reports of ownership and changes in
ownership of the Common Stock with the Securities and Exchange Commission and to
furnish the Company with copies of all such reports. Based solely on its review
of the copies of such reports furnished to the Company by such Reporting
Persons, the Company believes that during the year ended December 31, 1998, all
of the Reporting Persons complied with their Section 16(a) filing requirements
with respect to their ownership of the Company's Common Stock except that [TO BE
COMPLETED].
DIRECTORS' FEES
In 1998, the Company paid each director who is not an employee of the
Company a fee of $6,500, plus $1,000 per year for each committee served on.
Non-employee directors who have served as such for at least one full year as of
the Annual Meeting of
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<PAGE> 10
Shareholders receive, immediately following each Annual Meeting of Shareholders,
an annual grant of options covering 5,000 shares of Common Stock under the
Littlefield, Adams & Company Incentive Plan with an exercise price equal to the
fair market value of a share of Common Stock as of the date of grant. In
addition, non-employee directors are reimbursed for their out-of-pocket expenses
incurred in connection with service as a director, including travel expenses.
9
<PAGE> 11
MANAGEMENT COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information regarding
compensation paid during each of the Company's last three fiscal years to the
Company's, President and Chief Executive Officer, the person who served as the
Company's Chairman, President and Chief Executive Officer until August 11, 1998,
and the Company's other most highly compensated executive officer whose annual
cash compensation was $100,000 or more (collectively, the "Named Officers"),
based on salary and bonus earned during 1998.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
--------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
--------------------------------- ----------------------- -------
OTHER
ANNUAL RESTRICTED ALL OTHER
COMPEN- STOCK LTIP COMPEN-
NAME AND PRINCIPAL SATION AWARD(S) OPTIONS/ PAYOUTS SATION
POSITION YEAR SALARY ($) BONUS ($) ($)(1) ($) SARS (#) ($) ($)(1)
- -------------------------- ---- ---------- --------- ------ --- -------- --- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Michael B. Balber(2) 1998 $154,173 $77,250 -0- -0- -0- -0- -0-
President and 1997 $111,250 -0- -0- -0- 50,000 -0- -0-
Chief Executive Officer 1996 $115,192 -0- -0- -0- 105,000 -0- -0-
Stanley I. Halbreich (3) 1998 $ 60,574 -0- -0- -0- -0- -0- -0-
Former Chairman, 1997 $122,116 -0- -0- -0- 50,000 -0- -0-
President Chief Executive 1996 $147,693 -0- -0- -0- 150,000 -0- -0-
Officer
Warren L. Rawls (4) 1998 $117,962 $25,750 -0- -0- -0- -0- -0-
Chief Financial Officer, 1997 $ 91,846 -0- -0- -0- 50,000 -0- $18,400
Treasurer and Secretary 1996 $ 96,603 -0- -0- -0- 110,000 -0- -0-
</TABLE>
- --------------------
(1) Unless a dollar amount other then zero as shown, the dollar value of
perquisites and other personal benefits for each of the Named Officers
was less than established reporting thresholds.
(2) Mr. Balber was named President and Chief Executive Officer on August
21, 1998.
(3) Mr. Halbreich formerly the Chairman, President and Chief Executive
Officer of the Company, passed away on August 11, 1998.
(4) The amount listed in the column "All Other Compensation" represents
reimbursement of relocation expenses pertaining to Mr. Rawls' Company
requested move to Ohio in 1996.
10
<PAGE> 12
OPTION/SAR GRANTS DURING 1998
The following table sets forth, for each of the Named Officers,
information regarding individual grants of options made in the last fiscal year,
and their potential realizable values.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
RATES OF STOCK PRICE
APPRECIATION FOR OPTION
INDIVIDUAL GRANTS TERM
- ---------------------------------------------------------------------------------------------------- ---------------------------
% OF TOTAL
OPTIONS GRANTED
TO EMPLOYEES IN EXERCISE OR BASE EXPIRATION
NAME OPTION GRANTED FISCAL YEAR PRICE ($/SH) DATE 5% ($) 10% ($)
- ---- --------------- ---------------- ---------------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Michael B. Balber -0- N/A N/A N/A N/A N/A
Stanley I. Halbreich -0- N/A N/A N/A N/A N/A
Warren L. Rawls -0- N/A N/A N/A N/A N/A
</TABLE>
AGGREGATED OPTION/SAR EXERCISES DURING 1998 AND FISCAL YEAR END OPTION/SAR
VALUES
The following table provides information related to Options exercised
by the Named Officers during 1998 and the number and value of unexercised
Options held by the Named Officers at year-end. Littlefield does not have any
outstanding stock appreciation rights.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS
FISCAL YEAR-END (#) AT FiSCAL YEAR-END ($)
---------------------------- ---------------------------
SHARES ACQUIRED
NAME ON EXERCISE (#) VALUE REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------------- ------------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Michael B. Balber -0- -0- 165,000 -0- $455,938 N/A
Stanley I. Halbreich -0- -0- 200,000 -0- $581,251 N/A
Warren L. Rawls -0- -0- 185,000 -0- $448,751 N/A
</TABLE>
EMPLOYMENT AGREEMENTS WITH STANLEY I. HALBREICH
Sports Imprints, Inc., formerly a wholly-owned subsidiary of the
Company that has since been merged into the Company, had entered into an
Employment Agreement with Stanley I. Halbreich, formerly Chairman and Chief
Executive Officer of Sports Imprints, Inc. and President, Chairman and Chief
Executive Officer of the Company. The Employment Agreement was for an initial
term ending December 31, 1995, automatically renewing thereafter on a year to
year basis unless either party elects not to renew. The Employment Agreement
terminated automatically upon Mr. Halbreich's death on August 11, 1998. The
Employment Agreement provided for the payment of an annual base salary of
$100,000, plus an annual bonus equal to 9% of the first $500,000 of Sports
Imprints, Inc.'s calendar year pre-tax earnings, subject to non-refundable
monthly draws in anticipation thereof of $4,100.
EMPLOYMENT AGREEMENT WITH WARREN L. RAWLS
On June 21, 1996, the Company entered into an Employment Agreement with
Warren L. Rawls, then Secretary of the Company and currently the Chief Financial
Officer, Treasurer and Secretary of the Company. The Employment Agreement was
for a two year term, ending June 30, 1998. The Employment Agreement
11
<PAGE> 13
provided for the payment of an annual base salary of not less than $100,000. The
Employment Agreement also provided that Mr. Rawls would be eligible to
participate in any cash or stock bonus programs that may be established by the
Company. The Employment Agreement was terminable by the Company with or without
cause; however, if the Company had terminated the Employment Agreement without
cause, Mr. Rawls would have been entitled to a severance payment of $100,000 (if
terminated prior to June 30, 1997) or $50,000 (if terminated between July 1,
1997 and June 30, 1998). Although Mr. Rawls continues to be an employee of the
Company, the Employment Agreement, which expired on June 30, 1998, has not been
renewed.
REPORT ON EXECUTIVE COMPENSATION
The Board of Directors of Littlefield does not have a compensation
committee. Decisions regarding 1998 compensation of the Company's executives
were made by the Board of Directors, except that decisions regarding grants of
awards under the Littlefield, Adams & Company Incentive Plan were made by the
Incentive Compensation Committee of the Board of Directors.
Pursuant to rules adopted by the Securities and Exchange Commission,
set forth below is a report submitted by the Company's Board of Directors
addressing the Company's compensation policies for 1998 as they affected the
Company's executive officers generally and, in particular, as they affected
Stanley I. Halbreich, the Company's former President and Chief Executive
Officer, and Michael B. Balber, the Company's present President and Chief
Executive Officer.
COMPENSATION POLICIES REGARDING EXECUTIVE OFFICERS
The Company's executive compensation policies during 1998 were intended
to provide competitive levels of compensation in order to attract and retain
qualified executives, and to recognize individual contributions to the
successful achievement of the Company's business objectives. Compensation paid
the Company's executive officers for 1998 consisted primarily of base annual
salary and bonuses. In determining such compensation, the prevailing levels of
compensation paid by the Company's competitors, as well as the individual
contributions to the Company which each of the executives has made and would be
expected to make in the future are considered on an informal basis.
The Board of Directors intends that part of the cash compensation to
executive officers should be based on the annual profitability achieved.
Beginning with 1998, incentive bonuses for the Chief Executive Officer and Chief
Financial Officer are determined by multiplying Net Income, adjusted to remove
the effects of accruals for these bonuses, by a bonus percentage set by the
Board of Directors. For 1998, the bonus percentages for the Chief Executive
Officer and Chief Financial Officer were 3% and 1%, respectively. If annual
diluted earnings per share, adjusted to remove the effects of accruals for these
bonuses, should equal or exceed $1.55 per share, the bonus amounts will be
doubled. The Board believes such bonuses, which relate to annual profitability,
will motivate the executive officers to manage and direct the Company's
operations in an efficient and profitable manner. Since bonuses are based on an
executive officer's participation for an entire fiscal year, the Board believes
such bonuses will help retain qualified executives and complement the long-term
incentives provided by stock options granted under the Company's Incentive Plan.
The Board of Directors intends that the Company's Incentive Plan be
utilized to provide long-term incentives to executive officers by enabling them
to share in the future growth of the Company's business. The Board believes that
stock-based performance compensation arrangements are beneficial in aligning
management's' and shareholders' interests in the enhancement of shareholder
value over the long-term. Options granted pursuant to the Incentive Plan
generally have exercise prices equal to the market price of the Company's Common
Stock on the date the Options are granted, and with limited exceptions are
exercisable only during an executive officer's tenure with the Company and for
three months thereafter. Thus, values which may be realized by an executive
officer upon exercise of Options will generally result directly from
appreciation in the Company's stock price following the grant of the Option. The
Committee believes that by making infrequent Option grants potentially
exercisable for a significant number of shares, an optionee will be motivated to
generate potential gains by
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working to steadily increase the value of the Common Stock over the long term,
to a greater extent than if the same number of Options were granted over the
same period in smaller annual installments, because the exercise prices of the
annual grants would increase in tandem with increases in the Company's stock
price. Even though no Options were granted to executives in 1998, the Incentive
Plan still provides long-term incentives from the Options already granted and
the ability to grant more Options in the future.
1998 COMPENSATION OF CHIEF EXECUTIVE OFFICERS
Regulations of the Securities and Exchange Commission require
disclosure of the bases for compensation reported for Mr. Halbreich, who served
as President, Chief Executive Officer and Chairman of the Board and General
Counsel until his death on August 11, 1998, and for Mr. Balber, who has served
as President and Chief Executive Officer since August 21, 1998.
During 1998, Mr. Halbreich earned $60,574 as compensation for serving
as the Company's President and Chief Executive Officer. The amount of Mr.
Halbreich's 1998 compensation was determined by the Employment Agreement, except
that Mr. Halbreich voluntarily reduced the amount of his salary by 33.3%
commencing June 8, 1997 until July 31, 1998. In September 1997, Mr. Halbreich
voluntarily started deferring the payment of the majority of his salary. As of
December 31, 1998, all amounts of compensation deferred by Mr. Halbreich had
been paid.
Mr. Balber earned $231,423 during 1998, including an incentive bonus of
$77,250, for his service as an officer and employee of the Company. Mr. Balber's
compensation as President and Chief Executive Officer consists of a salary of
$165,000 per year, plus an incentive bonus equal to 3% of the Company's net
income, as adjusted to remove the effect of accruals for the bonus. The Company
provides Mr. Balber with a leased automobile at a cost of approximately $4,000
per year.
During the period from June 8, 1997 until July 31, 1998, Mr. Balber
voluntarily reduced his salary by 20%. In October 1998, the Board of Directors
authorized the Company to pay Mr. Balber additional compensation in the amount
of $28,846 to make up the shortfall created by the 20% voluntary reduction
described above. Such amount was paid to Mr. Balber in October 1998.
SUBMITTED BY THE BOARD OF DIRECTORS:
Michael B. Balber
William E. Goettelman
Warren L. Rawls
Martin B. Shifrin
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Board of Directors does not currently have a compensation
committee; however, the Board of Directors has established an Incentive
Compensation Committee. All executive compensation decisions, other than with
respect to the granting of awards under (and administering) the Incentive Plan,
were made by the Board of Directors. Stanley I. Halbreich, President, Chairman
and Chief Executive Officer of the Company until August 11, 1998, and Michael B.
Balber, President and Chief Executive Officer of the Company from August 21,
1998, are directors of the Company and participated in the Board's deliberations
on executive compensation.
None of the executive officers of the Company serves as a compensation
committee or board member of any other entity, one of whose executive officers
served on the Board of Directors of the Company.
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STOCK PERFORMANCE CHART
The line graph set forth below compares the cumulative total
shareholder return on Littlefield Common Stock with that of the Standard &
Poor's Composite Index ("S&P 500") and Standard & Poor's Textile Apparel
Manufacturers Index ("S&P Textile-Apparel Mfr") for the five years ended
December 31, 1998. The comparison assumes $100 was invested on December 31, 1993
in Littlefield Common Stock and in each of the foregoing indices and that all
dividends paid by companies included in each index were reinvested. Littlefield
Common Stock was suspended from trading on the American Stock Exchange from
March 31, 1994, until May 4, 1994. Because the Company did not fully satisfy all
of the guidelines of the American Stock Exchange for continued listing, the
Company consented to the removal of its Common Stock from such Exchange.
September 5, 1997, was the last day of trading for the Company's Common Stock on
the American Stock Exchange. The Company's Common Stock now trades on the NASD's
OTC Electronic Bulletin Board under the symbol FUNW.
Littlefield Adams & Co (FUNW)
CUMULATIVE TOTAL RETURN
--------------------------------------------
12/93 12/94 12/95 12/96 12/97 12/98
LITTLEFIELD, ADAMS & COMPANY 100 30 8 14 1 23
S & P 500 100 101 139 171 229 294
S & P TEXTILES (APPAREL) 100 98 110 125 135 117
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PROPOSAL NO. 2
PROPOSAL TO EFFECT A MERGER TO CHANGE THE STATE OF INCORPORATION
OF THE COMPANY TO DELAWARE, DECREASE THE PAR VALUE OF
THE COMPANY'S COMMON STOCK AND CHANGE THE NAME OF THE
COMPANY TO FUNWEAR, INC.
PRINCIPAL REASONS FOR THE REINCORPORATION PROPOSAL
The Board of Directors believes that the best interests of the Company
and its shareholders will be served by changing the Company's state of
incorporation from New Jersey to Delaware. At the time of the Company's
incorporation in New Jersey in 1949, the New Jersey Business Corporation Act
(the "New Jersey Law") was deemed to be adequate and appropriate for the conduct
of the Company's business, which at that time was based in the State of New
Jersey. The Company has not had offices in New Jersey for many years, and over
the years, the changes in the Company's business has increased its need for a
more sophisticated corporate structure and a more flexible and current
regulatory foundation.
For many years, Delaware has followed a policy of encouraging
incorporation in that state and, in furtherance of that policy, has adopted
comprehensive, modern and adaptable corporation laws which are periodically
updated and revised to meet changing business needs. Delaware courts have
developed considerable expertise in dealing with corporate legal issues and a
substantial body of case law has developed construing Delaware law and
establishing public policy with respect to Delaware corporations. The relative
clarity and predictability of Delaware corporate law presented in the numerous
precedents decided by the Delaware courts should be of great advantage to the
Company by allowing it to make corporate decisions and take actions with
increased confidence of what the outcome and consequences of those decisions and
actions will be under the General Corporation Law of the State of Delaware (the
"Delaware Law"). Further, the Delaware Secretary of State's office is staffed
with experienced regulators recognized for their efficient and
business-sensitive approach to administering the state's business laws and
regulations. As a result of these and other factors, many major corporations
have chosen Delaware for their initial domicile or have subsequently
reincorporated in Delaware in a manner similar to that proposed by the Company.
For the foregoing reasons, the Board of Directors believes that the
activities of the Company, both present and contemplated, can be better managed
if the Company were governed by the Delaware Law. It should be noted, however,
that shareholders in some instances have fewer rights and hence less protection
under the Delaware Law than under the New Jersey Law. See the discussion under
the heading "Comparison of Shareholders' Rights under New Jersey Law and
Delaware Law," below.
On February 16, 1999, the Company's Board of Directors approved,
subject to shareholder approval, a proposal (the "Reincorporation Proposal") to
change the Company's state of incorporation from New Jersey to Delaware by means
of a merger (the "Merger") of the Company with and into FunWear, Inc.
("FunWear"), a newly formed, wholly-owned subsidiary of the Company that has
been incorporated under the Delaware Law to effect the Reincorporation Proposal.
The principal office of FunWear is 6262 Executive Boulevard, Huber Heights, Ohio
45424. If the shareholders approve the Reincorporation Proposal, FunWear will be
the successor corporation of the Merger. A consequence of this Merger will be a
change in the law applicable to the Company's corporate affairs, from the New
Jersey Law to the Delaware Law, which will also result in certain differences in
shareholders' rights. See "Comparison of Shareholders' Rights under New Jersey
Law and Delaware Law," below. In addition, in connection with and as a
consequence of the Merger, the name of Company will be changed to "FunWear,
Inc." and the par value of the Company's Common Stock will be reduced from $1.00
per share to $0.01 per share.
The following discussion summarizes certain aspects of the
Reincorporation Proposal, including certain material differences between the New
Jersey Law and the Delaware Law. This summary does not purport to be a
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<PAGE> 17
complete description of the Reincorporation Proposal or the differences between
shareholders' rights under the New Jersey Law and the Delaware Law and is
qualified in its entirety by reference to (i) the Agreement of Merger dated as
of April , 1999 between the Company and FunWear (the "Merger Agreement")
attached hereto as Annex I, (ii) the Certificate of Incorporation of FunWear
(the "New Certificate") attached hereto as Annex II, and (iii) the Bylaws of
FunWear (the "New Bylaws") attached hereto as Annex III. Copies of the Company's
Amended and Restated Articles of Incorporation, as amended (the "Company
Articles"), and Bylaws (the "Company Bylaws") are available for inspection at
the Company's principal office, and copies will be sent to shareholders on
request, without charge.
Approval of the Reincorporation Proposal by the Company's shareholders
will also constitute approval of the Merger and the Merger Agreement, as well as
other matters included in the Reincorporation Proposal described in this Proxy
Statement. Pursuant to the terms of the Merger Agreement, the New Certificate
and New Bylaws will replace the Company Articles and Company Bylaws as the
charter documents affecting corporate governance and shareholders' rights. For a
description of the differences between the Company Articles and Company Bylaws
and the New Certificate and New Bylaws, see "Comparison of Certain Charter
Document Provisions," below.
The approval of the Reincorporation Proposal will affect certain rights
of the Company's shareholders. Accordingly, shareholders are urged to carefully
read this Proxy Statement and the Annexes hereto. Shareholders of the Company
whose shares are not voted in favor of the Reincorporation Proposal or duly
revoke their vote have a statutory right to be paid, in cash, the fair market
value of their shares, provided that specific procedures are followed. See
"Rights of Dissenting Shareholders," below.
Principal Features of the Reincorporation Proposal
At the Effective Time of the Merger (as defined in the Merger
Agreement), the separate existence of the Company will cease and FunWear, to the
extent permitted by law, will succeed to all business, properties, assets and
liabilities of the Company. Each share of Common Stock of the Company issued and
outstanding immediately prior to the Effective Time will, by virtue of the
Merger, be converted into one share of Common Stock, $.01 par value, of FunWear
("FunWear Common Stock"). At the Effective Time, certificates which immediately
prior to the Effective Time represented Common Stock of the Company, including
Common Stock held in the treasury of the Company, will be deemed for all
purposes to represent the same number of shares of FunWear Common Stock. IT WILL
NOT BE NECESSARY FOR SHAREHOLDERS TO EXCHANGE THEIR EXISTING STOCK CERTIFICATES
FOR STOCK CERTIFICATES OF FUNWEAR.
Approval of the Reincorporation Proposal will not result in any change
in the business, management, assets or liabilities of the Company. The Directors
and Officers of the Company, including those Directors elected at the Annual
Meeting, will be the Directors of FunWear following the Merger. Following the
consummation of the Merger, FunWear Common Stock will be listed on the NASD
Over-The-Counter Bulletin Board ("OTCBB"), where the Common Stock of the Company
is currently listed. The OTCBB will consider the delivery of existing stock
certificates representing Common Stock of the Company as constituting "good
delivery" of shares of FunWear Common Stock in transactions subsequent to the
Merger.
Pursuant to the terms of the Merger Agreement, each option and warrant
to purchase and debenture convertible into Common Stock of the Company
outstanding immediately prior to the Effective Time of the Merger will become an
option or warrant to purchase or debenture convertible into FunWear Common
Stock, subject to the same terms and conditions as set forth in the Incentive
Plan, or other agreement pursuant to which such option or warrant was granted or
debenture was issued, as the case may be. All employee benefit plans and other
agreements and arrangements of the Company will be continued by FunWear upon the
same terms and subject to the same conditions as currently in effect.
In accordance with generally accepted accounting principles, the
Company expects that the Merger will be accounted for as a reorganization of
entities under common control at historical cost in a manner similar to a
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<PAGE> 18
pooling of interests. Under this method, the assets and liabilities of the
combining entities will be carried forward at their recorded historical book
values.
It is anticipated that, if approved by the shareholders, the Merger
will become effective as soon as practicable after the Annual Meeting. However,
the Merger Agreement provides that the Merger may be abandoned by the Board of
Directors of either the Company or FunWear prior to the Effective Time, either
before or after shareholder approval. In addition, the Merger Agreement may be
amended prior to the Effective Time, either before or after shareholder
approval; provided, however, that the Merger Agreement may not be amended after
shareholder approval if such amendment would (1) alter or change the amount or
kind of shares to be received by shareholders in the Merger, (2) alter or change
any term of the New Certificate, (3) alter or change any of the terms and
conditions of the Merger Agreement if such alteration or change would adversely
affect the shareholders, or (4) violate applicable law.
Comparison of Certain Charter Document Provisions
The New Certificate and New Bylaws are similar to the Company Articles
and Company Bylaws with respect to most material provisions. Differences between
the New Certificate and New Bylaws and the Company Articles and Company Bylaws
are primarily the result of differences between the Delaware Law and the New
Jersey Law, as well as the decrease in the par value of the Company's common
stock. See "Comparison of Shareholders' Rights under the New Jersey Law and the
Delaware Law," below. Significant provisions of the New Certificate and New
Bylaws, and certain important similarities and differences between them and the
Company Articles and the Company Bylaws of the Company, are discussed below.
Capital Stock. The authorized capital stock of the Company currently
consists of 25,000,000 shares of Common Stock, $1.00 par value per share. As of
the record date, 2,790,057 shares of Common Stock were issued and outstanding
and, as of the effective date of the Merger Agreement, a total of 1,836,993
shares of Common Stock have been reserved for issuance.
Of the reserved shares of Common Stock, a total of 237,000 shares have
been reserved for issuance under the Company's Incentive Plan and 1,599,993
shares have been reserved for issuance upon conversion of the Company's
outstanding 7% Convertible Debentures.
The capitalization of FunWear will consist of 25,000,000 shares of
Common Stock, par value $.01 per share ("FunWear Common Stock"). Other than the
change in the par value of shares of FunWear Common Stock, the provisions of the
New Certificate setting forth the terms of FunWear Common Stock are unchanged
from the provisions of the Company Articles with regard to the Common Stock of
the Company.
Preemptive Rights. Under the New Jersey Law and the Delaware Law,
shareholders have preemptive rights to purchase shares only if the certificate
of incorporation so provides. The Company Articles and the New Certificate do
not provide shareholders with preemptive rights.
Compromises with Creditors and Shareholders. The Delaware Law provides
that a certificate of incorporation may contain a provision allowing for a
compromise or arrangement between a corporation and its creditors or
shareholders. Under such a provision, whenever such a compromise or arrangement
is proposed, a Delaware court may order a meeting for the purpose of eliciting
an agreement to the compromise or the arrangement which would be binding on all
such creditors and/or shareholders and the corporation. The New Certificate
contains such a provision.
Board of Directors; Committees.
Both the New Jersey Law and the Delaware Law permit, but do not
require, the adoption of a "classified" Board of Directors with staggered terms
under which a part of the Board of Directors is elected each year. Under the New
Jersey Law, the authorization for such as classified Board of Directors must be
included in the corporation's certificate of incorporation or an amendment
thereto. Additionally, under the New Jersey Law,
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the maximum term of each class of directors is five years. In contrast, the
Delaware Law permits the authorization of a classified Board of Directors to be
included in the certificate of incorporation or by-laws of a corporation or an
amendment to either document. The Delaware Law does not limit the term of any
director. The Board of Directors of FunWear will be classified in the same
manner as the Board of Directors of the Company.
Under the New Jersey Law, unless the certificate of incorporation or
by-laws provide otherwise, a vacancy, however caused, and newly created
directorships resulting from an increase in the authorized number of directors
may be filled by the affirmative vote of a majority of the remaining directors.
In addition, under the New Jersey Law, any directorship not filled by the board
may be filled by the shareholders. Under the Delaware Law, vacancies may be
filled by a majority of the directors then in office unless the certificate of
incorporation or by-laws provide otherwise. The By-Laws of FunWear provide that
the remaining directors may fill vacancies on the Board of Directors.
Under the Company Bylaws, a majority of the entire Board constitutes a
quorum for the transaction of business by the Board of Directors, and an act by
a majority of the quorum of Directors constitutes an act of the Board of
Directors. The New Bylaws will provide equivalent provisions.
The Delaware Law provides that a transaction between a corporation and
one or more of its directors or officers or an entity in which one or more of
its directors or officers has an interest may not be voided if: (1) the material
facts of the relationship or interest is disclosed or known to the board or
committee so deciding and the contract or transaction is authorized in good
faith by a majority vote of the disinterested shareholders, even if the number
of disinterested directors is less than a quorum; (2) the material facts of the
relationship or interest is disclosed to the shareholders and a majority of the
shareholders approve of the transaction; or (3) the contract or transaction is
fair and reasonable to the corporation. A similar provision exists under the New
Jersey Law.
Under both the Company Bylaws and the New Bylaws, special meetings of
the Board of Directors may be called by the Chairman of the Board of Directors,
the President or any Vice President, or by any two directors.
The New Jersey Law allows the Board of Directors, by resolution adopted
by a majority of the entire Board, to designate an Executive Committee or other
committee or committees, each consisting of one or more members, with the power
and authority (to the extent permitted by law) to act on behalf of the entire
Board if the certificate or bylaws so provides. The Company Articles provide for
this. The Delaware Law allows this designation without the need to so provide in
the certificate or the bylaws.
Cumulative Voting. The Company Articles and Company Bylaws do not
provide for cumulative voting in the election of directors, nor do the New
Certificate and New Bylaws. Therefore, subject to the limitations relating to
classified boards as discussed above the holders of a majority of the voting
power of the Company will be entitled to elect all of the directors of FunWear
Director Liability and Indemnification of Officers and Directors. Both
the New Jersey Law and the Delaware Law contain provisions and limitations
regarding directors' liability and regarding indemnification by a corporation of
its officers, directors and employees.
The New Jersey Law permits a New Jersey corporation to include a
provision in its certificate of incorporation which eliminates or limits the
personal liability of a director or officer to the corporation or its
shareholders for monetary damages for breach of fiduciary duties as a director
or officer. However, no such provision may eliminate or limit the liability of a
director or officer for any breach of duty based upon an act or omission (i) in
breach of the director's or officer's duty of loyalty to the corporation or its
shareholders, (ii) not in good faith or involving a knowing violation of law, or
(iii) resulting in receipt by such person of an improper personal benefit. Under
the New Jersey Law, corporations are also permitted to indemnify directors in
certain circumstances and required to indemnify directors under certain
circumstances. Under the New Jersey Law, a director, officer, employee or agent
may, in general, be indemnified by the corporation if he has acted in good faith
and in a manner he reasonably believed to be in, or not opposed to, the best
interests of the corporation and,
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with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. In addition, under the New Jersey Law,
corporations must indemnify a director to the extent the director has been
successful on the merits or otherwise. The Company Articles include such a
provision. The Company Articles do not have any effect on the availability of
equitable remedies (such as an injunction or rescissions) for breach of
fiduciary duty. However, as a practical matter, equitable remedies may not be
available in particular circumstances.
The Delaware Law permits a corporation to include a provision in its
certificate of incorporation which eliminates or limits the personal liability
of a director to the corporation or its shareholders for monetary damages in the
case of a breach of fiduciary duties by a director, including conduct which
could be characterized as negligence or gross negligence. However, no such
provision may eliminate or limit the liability of a director (i) in the case of
a breach of the director's duty of loyalty to the corporation or its
shareholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) for the unlawful
payment of dividends or unlawful stock purchase or redemption or other
violations of Section 174 of the Delaware Law, or (iv) for any transaction from
which the director derived an improper personal benefit. This provision may be
extended to persons other than directors if such persons exercise or perform any
of the powers or duties otherwise conferred or imposed upon the board of
directors. The Delaware Law further provides that no such provision can
eliminate or limit the liability of a director for any act or omission occurring
prior to the date when such provision becomes effective. Under the Delaware Law,
a corporation has the power to indemnify a director against judgments,
settlements and expenses in any litigation or other proceeding other than a
derivative suit, if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation, and,
with respect to a criminal proceeding, had no reasonable cause to believe his
conduct was unlawful. The indemnification provisions of the Delaware Law make
mandatory the indemnification of a director to the extent that the director has
been successful on the merits or otherwise, thus possibly requiring
indemnification of settlements in certain instances. The Delaware Law also
provides that a director may be indemnified by the corporation for expenses of a
derivative suit even if he is not successful on the merits, provided he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation, subject, in the case of an adverse judgment,
to court approval. The New Certificate includes such a provision.
Amendments to Bylaws. The New Jersey Law provides that a Board of
Directors has the power to make, alter and repeal a corporation's bylaws, unless
such power is reserved to the corporation's shareholders in the corporation's
certificate of incorporation. The Company Bylaws do not reserve such power to
the shareholders. Under the Delaware Law, the shareholders of a Delaware
corporation and, if the certificate of incorporation so provides, the Board of
Directors, have the power to adopt, amend or repeal a corporation's bylaws. The
New Certificate grants the Board of Directors the power to amend the New Bylaws.
Board of Directors. Under the New Jersey Law, a Board of Directors may
consist of one or more members as provided in the bylaws and subject to any
provision contained in the certificate of incorporation. Under the Delaware Law,
a Board of Directors of a corporation may consist of one or more members as
provided in the bylaws, unless the certificate of incorporation fixes the number
of directors. Both the Company Articles and the New Certificate fix the minimum
number of Directors at three and provide that the directors shall be divided
into three classes, with each class containing as nearly as possible one-third
of the total number of directors and with the directors of each class serving
staggered three-year terms.
Under the New Jersey Law, the Board has the power to make, alter and
repeal bylaws unless such power is reserved to the shareholders in a
corporation's certificate of incorporation. A Delaware corporation may, in its
certificate of incorporation, confer the power to adopt, amend or repeal bylaws
upon the directors. Under the New Certificate, the Board of Directors is
expressly authorized to adopt, amend or repeal the Bylaws of FunWear without the
assent or vote of the stockholders. The grant of such authority does not divest
or otherwise affect the power of the shareholders to adopt, amend or repeal the
Bylaws.
In general, under the New Jersey Law, any or all of the directors of a
corporation may be removed for cause, or, unless otherwise provided in the
certificate of incorporation, without cause by the vote of a majority of
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<PAGE> 21
the votes cast by the holders of the shares then entitled to vote at an election
of directors; however, if the Board of Directors is classified, shareholders are
not entitled to remove directors without cause. Under the Delaware Law, any or
all of the directors of a corporation may be removed with or without cause, by
the vote of a majority of the shares then entitled to vote at an election of
directors; however, if the Board of Directors is classified, directors may be
removed only for cause, unless the certificate of incorporation provides
otherwise. The Certificate of Incorporation of FunWear does not so provide.
Dividends. The New Jersey Law prohibits a corporation from making a
distribution to its shareholders if, after giving effect to such distribution,
the corporation would be unable to pay its debts as they become due in the usual
course of business or the corporation's total assets would be less than its
total liabilities. The Delaware Law permits a corporation to pay dividends out
of any surplus. If it does not have a surplus, a dividend may be paid out of any
net profits for the fiscal year in which the dividend is paid or for the
preceding fiscal year (provided that such payment will not reduce capital below
the amount of capital represented by all classes of shares having a preference
upon the distribution of assets).
Comparison of Shareholders' Rights under New Jersey Law and Delaware
Law
Although it is impracticable to compare all of the aspects in which the
New Jersey Law and the Delaware Law differ with respect to shareholders' rights,
the following is a summary of certain significant differences. See also
"Comparison of Certain Charter Document Provisions," above.
Amendment of Articles/Certificate of Incorporation. To amend certain
terms of a corporation's articles of incorporation, the New Jersey Law allows an
amendment to be made by Board action alone (for example, an amendment to effect
a share dividend). Other, general amendments under the New Jersey Law require
the action of the Board with the approval of shareholders holding a majority of
the voting stock entitled to vote thereon (and, if applicable, a majority of the
outstanding stock of each class entitled to vote thereon) unless the
corporation's articles of incorporation require a greater percentage. The
Company Articles do not require such a percentage. The Delaware Law requires the
approval of shareholders holding a majority of the voting power of the
outstanding stock of the corporation (and, if applicable, a majority of the
outstanding stock of each class entitled to vote thereon) in order to amend the
corporation's certificate of incorporation, unless a greater number or
proportion is specified in the certificate of incorporation. The New Certificate
does not specify such greater number or other proportion of holders of
securities having power to vote.
Right to Call a Special Meeting of Shareholders. The New Jersey Law
provides that a special meeting of shareholders may be called by the president,
the board of directors, any shareholder, director, officer or other person as
may be provided in the bylaws. Upon application of the holder or holders of not
less than ten (10) percent of all the shares entitled to vote at a meeting, the
Superior Court of New Jersey, for good cause shown, may order that a special
meeting be called. The Delaware Law provides that only the board of directors or
such person or persons as may be authorized by the certificate of incorporation
or bylaws may call special meetings of the shareholders. The New Bylaws provide
that special meetings of shareholders may be called by the Board or by the
President. Special shareholder meetings must be called by the President or the
Secretary upon the written request of a majority of the Board of Directors or
the written request of shareholders owning a majority of the shares, provided
that such request must state the purpose(s) of the proposed meeting.
Anti-Takeover Provisions. The New Jersey Law provides, among other
things, that any person making an offer to purchase in excess of ten (10)
percent (or such amount which, when aggregated with such person's present
holdings, exceeds ten (10) percent of any class of equity securities) of any
corporation or other issuer of securities organized under the laws of New Jersey
must, twenty (20) days before the offer is made, file a disclosure statement
with the target company and with the Bureau of Securities of the Division of
Consumer Affairs of the New Jersey Department of Law and Public Safety (the
"Bureau").
Such a takeover bid may not proceed until after the receipt by the
filing party of the Bureau's permission. Such permission may not be denied
unless the Bureau, after a public hearing, finds that (i) the financial
condition of the offeror is such as to jeopardize the financial stability of the
target company or prejudice the interests of any
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<PAGE> 22
employees or security holders who are unaffiliated with the offeror, (ii) the
terms of the offer are unfair or inequitable to the security holders of the
target company, (iii) the plans and proposals which the offeror has to make any
material change in the target company's, business, corporate structure, or
management are not in the interest of the target company's remaining security
holders or employees, (iv) the competence, experience and integrity of those
persons who would control the operation of the target company are such that it
would not be in the interest of the target company's remaining security holders
or employees to permit the takeover, or (v) the terms of the takeover bid do not
comply with the provisions of Chapter 10A of the New Jersey Law.
Shareholder Protection Act. Chapter 10A was added to the New Jersey law
in 1986 to protect shareholders and other corporate "constituents." It generally
provides that no resident domestic corporation shall engage in any business
combination with any interested stockholder for a period of 5 years following
that interested stockholder's stock acquisition date unless the business
combination is approved by the Board of Directors prior to that stock
acquisition date. An "interested stockholder" is any person (other than the
resident domestic corporation or its subsidiary) that (i) is the beneficial
owner directly or indirectly, of ten (10) percent or more of the voting power of
the outstanding voting stock of the resident domestic corporation, or (ii) is an
affiliate or associate of that resident domestic corporation who, at any time
within the five year period immediately prior to the date in question, was a
beneficial owner. A "beneficial owner" of stock is a person that, individually
or with or through any of its affiliates or associates (i) beneficially owns
that stock directly or indirectly, (ii) has the right to acquire or vote that
stock, or (iii) has any agreement, arrangement or understanding for the purpose
of acquiring, holding, voting or disposing of that stock with any other
beneficial owner thereof. An "affiliate" of a beneficial owner is a person that
directly or indirectly through one or more intermediaries controls, or is
controlled by or under common control with, the beneficial owner.
Accordingly, the New Jersey law gives the Company's Board of Directors
a veto power over any business combination proposed by one who directly or
indirectly acquires 10% or more of the Company's voting stock. The "business
combinations" at which these provisions are directed include any merger or
consolidation.
Unless it falls under certain excluded categories of transactions, a
business combination is prohibited unless any one of the following three
conditions are satisfied:
(1) the board of directors must approve the business combination prior
to the stock acquisition date of the interested stockholder;
(2) the holders of two-thirds of the voting stock of the resident
domestic corporation not beneficially owned by the interested stockholder must
approve the business combination by affirmative vote at a meeting called for
that purpose; or
(3) (a) the shareholders of the resident domestic corporation must
receive the higher of (i) the maximum price paid by the interested stockholder
during the five years preceding the announcement date or the date the interested
stockholder became such, whichever is higher, or (ii) the market value of the
resident domestic corporation's common stock on the announcement date or the
interested stockholder's stock acquisition date, whichever yields a higher
price,
(b) the holder of stock other than common stock receives a
similarly determined price, taking into account the highest preferential amount
per share to which the holders of such shares are entitled in the event of any
liquidation, dissolution or winding up of the resident domestic corporation,
plus any preferential dividends to which they would be entitled that is not
included in the preferential amount,
(c) the consideration to the stockholders is paid in cash or in
the same form that the interested stockholder used to acquire the largest block
of stock that he acquired,
(d) the holders of all outstanding stock not owned by the
interested stockholder received the consideration required by the preceding
paragraphs in the business combination, and
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<PAGE> 23
(e) the interested stockholder did not become the beneficial owner
of any additional shares of stock of the resident domestic corporation between
his stock acquisition date and the date of consummation of the business
combination, except as part of the transaction that resulted in his becoming an
interested stockholder by virtue of proportionate stock splits, dividends or
distributions not themselves constituting a business combination, to a business
combination meeting the conditions of paragraph (c) bought to purchase at a
price that would have satisfied the requirements of paragraphs (a), (b) and (c).
Delaware's anti-takeover provision, embodied in Section 203 of the
Delaware Law, provides that if a person acquires fifteen (15) percent or more of
a corporation's voting stock (thereby becoming an "interested stockholder") that
person may not engage in a wide range of transactions ("business combinations")
with the corporation for a period of three (3) years following the date the
person became an interested stockholder unless (i) the board of directors
approved either the business combination or the transaction which resulted in
the person acquiring such voting stock prior to that acquisition date, (ii) upon
consummation of the transaction which resulted in the person becoming an
interested stockholder, that person owned at least 85 percent of the
corporation's voting stock outstanding at the time the transaction commenced
(excluding shares owned by officers and directors and shares owned by employee
stock plans in which participants do not have the right to confidentially
determine whether shares will be tendered in a tender or exchange offer), or
(iii) the business combination is approved by the board of directors and
authorized by the affirmative vote (at an annual or special meeting and not by
written consent) of at least 66-2/3 percent of the outstanding voting stock not
owned by the interested stockholder.
For the purpose of determining whether a stockholder is the "owner" of
fifteen (15) percent or more of a corporation's voting stock for purposes of
Section 203, ownership is defined broadly to include beneficial ownership and
other indicia of control. A "business combination" is also defined broadly as
including (i) mergers and sales or other dispositions of ten (10) percent or
more of the assets of a corporation with or to an interested stockholder, (ii)
certain transactions resulting in the issuance or transfer to the interested
stockholder of any stock of the corporation or its subsidiaries, (iii) certain
transactions which would result in increasing the proportionate share of the
stock of the corporation or its subsidiaries owned by the interested
stockholder, and (iv) receipt in certain instances by the interested stockholder
of the benefit (except proportionately as a stockholder) of any loans, advances,
guarantees, pledges or other financial benefits.
The restrictions placed on interested stockholders under the Delaware
law do not apply under certain circumstances, including, but not limited to, the
following: (i) if the corporation's original certificate of incorporation
contains a provision by which it expressly elects not to be governed by the
statute, (ii) if the corporation, by action of its shareholders, adopts an
amendment to its bylaws or certificate of incorporation expressly electing not
to be governed by Section 203, provided that such an amendment is approved by
the affirmative vote of not less than a majority of the outstanding shares
entitled to vote and that such an amendment will not be effective until twelve
(12) months after its adoption and will not apply to any business combination
with a person who became an interested stockholder at or prior to such adoption,
or (iii) if the business combination is proposed prior to the consummation or
abandonment of and subsequent to the earlier of the public announcement or the
required notice of the proposed transaction which (a) constitutes one of the
transactions described in the following paragraph; (b) is with or by a person
who either was not an interested stockholder during the previous three years or
who became an interested stockholder with the approval of the corporation's
board of directors; and (c) is approved or not opposed by a majority of the
members of the board of directors then in office (but not less than one) who
were directors prior to any person becoming an interested stockholder during the
previous three years or were recommended for election or elected to succeed such
directors by a majority of such directors.
The proposed transactions referred to in clause (a) of the preceding
sentence are limited to (i) a merger or consolidation of the corporation (except
for a merger in which a vote of the stockholders of the corporation is not
required); (ii) a sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions), whether as part of
a dissolution or otherwise, of assets of the corporation or of any direct or
indirect majority-owned subsidiary of the corporation (other than to any direct
or indirect wholly-owned subsidiary or to the corporation) having an aggregate
market value equal to fifty (50) percent or more of either the aggregate market
value of all of the assets of the corporation determined on a consolidated basis
or the aggregate
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<PAGE> 24
market value of all the outstanding stock of the corporation; or (iii) a
proposed tender or exchange offer for 50 percent or more of the outstanding
voting stock of the corporation. The corporation is required to give not less
than twenty (20) days notice to all interested stockholders prior to the
consummation of any of the transactions described above.
As permitted by the Delaware Law, the New Certificate contains a
provision electing not to be governed by Section 203. The Board of Directors
reviewed the merits of electing to be governed by Section 203 and determined
that its protections are not necessary at the present time. This election does
not preclude the subsequent amendment of the certificate of incorporation to
include the protections of Section 203 if there is a change in circumstances
involving the Company. This change would require the approval of the Board of
Directors and the Company's stockholders.
Management of the Company is not aware of any attempt to acquire the
Company by a third party and does not have any plans to propose any other
changes to the charter documents or corporate structure of the Company which
would have an anti-takeover purpose or effect.
Mergers, Acquisitions and Other Transactions. In addition to the
anti-takeover provisions discussed above, the New Jersey Law provides that the
sale of substantially all of a corporation's assets, mergers, consolidations,
and any acquisitions which involve the issuance of additional voting shares,
such that the number of additional voting shares issued exceeds forty (40)
percent of the voting shares outstanding prior to the transaction, must be
approved by a majority of the shares (or, if applicable, a majority of each
class or series of shares) entitled to vote thereon.
Under the Delaware Law, mergers and consolidations require the approval
of a majority of the shares entitled to vote thereon. A sale of substantially
all of a Delaware corporation's assets must be approved by a majority of the
shares outstanding. However, Delaware Law does not require shareholder approval
for acquisitions, whether or not additional shares are issued to effectuate the
transaction. The Delaware Law allows a board of directors to issue additional
shares of stock, up to the amount authorized in a corporation's certificate of
incorporation, unless the certificate of incorporation otherwise provides, which
the New Certificate does not.
Dissolution. The New Jersey Law and the Delaware Law each provide that
a corporation may be voluntarily dissolved by (i) the written consent of all its
shareholders or (ii) the adoption by the corporation's board of directors of a
resolution recommending that the corporation be dissolved and submission of the
resolution to a meeting of shareholders, at which meeting the resolution is
adopted. The New Jersey Law requires that to effect a dissolution by consent of
shareholders, all shareholders entitled to vote thereon must sign and file a
certificate of dissolution. If dissolution is pursuant to the action of the
Board and shareholders, the affirmative vote of the majority of votes cast
(assuming that the number of votes cast constitutes a quorum) by the
shareholders entitled to vote thereon, while the Delaware Law requires the
affirmative vote of a majority of the outstanding stock entitled to vote
thereon.
Action Without a Meeting. Under the New Jersey Law any action which may
be taken by shareholders at a meeting may be taken without a meeting if all the
shareholders entitled to vote thereon give their written consent. However, if
shareholder approval is required to effectuate a merger, consolidation,
acquisition or sale of assets, the transaction may also be effectuated if all of
the shares entitled to vote thereon provide written consent and all other
shareholders are provided with appropriate notice. The Delaware Law provides
that, unless limited by the certificate of incorporation, any action which may
be taken at a meeting of stockholders may be taken without a meeting, without
prior notice and without a vote, if the holders of stock having not less than
the minimum number of votes otherwise required to approve such action consent in
writing.
Loans to Directors/Officers/Employees. The New Jersey Law allows a
corporation to lend money to, or guaranty an obligation of, any director,
officer or employee of the corporation or any subsidiary whenever the directors
determine that such an action may reasonably be expected to benefit the
corporation. However, a director who votes for such an action may be held
jointly and severally liable if the loan or guaranty is made contrary to the
provisions of the New Jersey Law. The Delaware Law permits a corporation to lend
money to, or
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to guarantee an obligation of, an officer or other employee of the corporation
or any subsidiary thereof, including an officer or employee who is also a
director of the corporation or of its subsidiaries, whenever such loan or
guarantee may, in the judgment of the directors, reasonably be expected to
benefit the corporation. In contrast to the New Jersey Law, the Delaware Law
generally does not impose liability on the directors who vote for or assent to
the making of a loan to, or guaranteeing an obligation of an officer, director
or shareholder.
Appraisal Rights. Under the New Jersey Law, dissenting shareholders who
comply with certain procedures are entitled to appraisal rights in connection
with the merger, consolidation or sale, lease, exchange or other disposition of
all or substantially all of the assets of a corporation not in the usual or
regular course of business, unless the certificate of incorporation otherwise
provides. However, appraisal rights are not provided when (i) the shares to vote
on such transaction are listed on a national securities exchange or held of
record by not less than 1,000 holders (or shareholders receive in such
transaction cash and/or securities which are listed on a national securities
exchange or held of record by not less than 1,000 shareholders) or (ii) no vote
of the corporation's shareholders is required for the proposed transaction. See
"Rights of Dissenting Shareholders," below.
Under the Delaware Law, dissenting stockholders who follow prescribed
statutory procedures are entitled to appraisal rights in connection with certain
mergers or consolidations, unless otherwise provided in the corporation's
certificate of incorporation. Such appraisal rights are not provided when (i)
the shares of the corporation are listed on a national securities exchange or
designated as a national market system security by the NASD or held of record by
more than 2,000 shareholders and stockholders receive in the merger shares of
the surviving corporation or of any other corporation the shares of which are
listed on a national securities exchange or designated as a national market
system security by the NASD, or held of record by more than 2,000 shareholders
or (ii) the corporation is the surviving corporation and no vote of its
stockholders is required for the merger.
Repurchases of Stock. The New Jersey Law prohibits a corporation from
repurchasing or redeeming its shares if (i) after giving effect to such
repurchase or redemption, the corporation would be unable to pay its debts as
they become due in the usual course of business or the corporation's total
assets would be less than its total liabilities, (ii) after giving effect to
such repurchase or redemption, the corporation would have no equity outstanding,
(iii) the redemption or repurchase price exceeded that specified in the
securities acquired, or (iv) such repurchase or redemption is contrary to any
restrictions contained in the corporation's certificate of incorporation. Under
the Delaware Law, a corporation may repurchase or redeem its shares only out of
surplus and only if such purchase does not impair its capital. However, a
corporation may redeem preferred stock out of capital if such shares will be
retired upon redemption and the stated capital of the corporation is thereupon
reduced in accordance with the Delaware Law.
Federal Income Tax Consequences of the Merger
The Company will not request a ruling from the United States Internal
Revenue Service regarding the federal income tax consequences of the Merger.
However, the Company believes the Merger will constitute a reorganization under
Section 368 of the Code. Consequently, holders of Common Stock will not
recognize any gain or loss for federal income tax purposes as a result of the
conversion of their Common Stock into shares of FunWear Common Stock. For
federal income tax purposes, a holder's aggregate basis in the shares of FunWear
Stock received in the Merger will equal such holder's aggregate basis in the
Common Stock converted therefor and such holder's holding period for FunWear
Common Stock received in the Merger will include his holding period in the
Common Stock converted therefor.
Likewise, the Company will not recognize any gain or loss for federal
income tax purposes upon the transfer of its property to FunWear pursuant to the
Merger. In addition, FunWear will succeed to and take into account the earnings
and profits, accounting methods, and other tax attributes of the Company
specified in Section 381(c) of the Code.
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Holders of Common Stock should consult their own tax advisors as to the
application and effect of state, local and foreign income and other tax laws to
the conversion of their Common Stock into shares of Common Stock of FunWear
pursuant to the Merger.
Rights of Dissenting Shareholders
Chapter 11 of the New Jersey Law sets forth the rights of shareholders
of the Company who object to the Plan of Merger and the adoption of the Merger
Agreement. Any shareholder of the Company who does NOT vote in favor of the
Reincorporation Proposal or who duly revokes his vote in favor of such
transaction may be paid, in cash, the fair market value of his shares, provided
each and every one of the following actions is strictly complied with, within
the time provided therefor:
1. Prior to the taking of the vote of the shareholders of the Company,
a dissenting shareholder must file with the Company, addressed to the attention
of Warren L. Rawls, the Secretary of the Company, a written Notice of Dissent
therefrom, stating that the shareholder intends to demand payment for his shares
if the Merger occurs.
2. Within ten (10) days after the reincorporation has taken effect,
FunWear must give written notice of the effective date of such action, by
certified mail, to each shareholder who filed a written Notice of Dissent.
3. Within twenty (20) days after the mailing of the notice of the
effective date of the reincorporation, any shareholder to whom FunWear was
required to give such notice and who has filed a written Notice of Dissent, may
make written demand on FunWear for the payment of the fair value of his shares.
4. Not later than twenty (20) days after making such written demand for
payment, the dissenting shareholder must submit the certificate or certificates
representing his or her shares to FunWear, addressed to the attention of Warren
L. Rawls for notation thereon that such demand has been made, whereupon such
certificate or certificates will be returned to the shareholder.
5. Not later than ten (10) days following such twenty (20) day written
demand period, if the dissenting shareholder has made such written demand,
FunWear must mail the dissenting shareholder the balance sheet and the surplus
statement of FunWear as of the last available date (which shall not be earlier
than twelve (12) months prior to the date of the Merger and a profit and loss
statement or statements for not less than a twelve (12) month period ending on
the date of such balance sheet. This mailing may be accompanied by a written
offer from FunWear to pay each dissenting shareholder his shares at a specified
price deemed by FunWear to be the fair value thereof.
6. If the fair value of the shares is not agreed upon between the
dissenting shareholder and FunWear within thirty (30) days following the ten
(10) day mailing period, the shareholder is entitled to serve upon FunWear, not
later than thirty (30) days after the expiration of the thirty (30) day period
available (after the ten (10) day mailing period) for reaching agreement on the
fair value, a demand that FunWear commence an action in the Superior Court of
New Jersey for the determination of the fair value of the shareholder's FunWear
shares.
7. If FunWear fails to commence such action within thirty (30) days
following receipt of the dissenting shareholder's demand that it do so, the
shareholder will be entitled to commence such an action in the name of FunWear
not later than ninety (90) days following his or her demand that FunWear
commence such action. The FunWear intends to commence such a proceeding in the
event of such a disagreement.
A negative vote on the Reincorporation Proposal does not constitute a
"written objection" required to be filed by an objecting stockholder. Failure by
a stockholder to vote against the Reincorporation Proposal will not, however,
constitute a waiver of rights under Chapter 11 of the New Jersey Law provided
that a written objection is properly filed and such stockholder has not voted in
favor of the Reincorporation Proposal.
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The foregoing does not purport to be a complete statement of the
provisions of Chapter 11 of the New Jersey Law and is qualified in its entirety
by reference to the Chapter, a copy of which is reproduced in full as Annex IV.
Each stockholder intending to exercise dissenters' rights should review Annex IV
carefully and consult his counsel for a more complete and definitive statement
of the rights of dissenting stockholders and the proper procedure in order to
exercise such rights.
Under the Merger Agreement, the Board of Directors may abandon the
Reincorporation Proposal, even after stockholder approval, if for any reason the
Board determines that it is inadvisable to proceed, including considering the
number of shares for which appraisal rights have been exercised and the cost to
the Company thereof.
Vote Required
The affirmative vote of holders of two-thirds of the shares of Common
Stock of the Company present, or represented by proxy, and entitled to vote
thereon at the Annual Meeting, is required for approval of the Reincorporation
Proposal. A vote for the Reincorporation Proposal will constitute specific
stockholder approval for the adoption of the Merger Agreement and all other
transactions related to the Reincorporation Proposal.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Company's Board of Directors recommends a vote FOR Proposal No. 2.
AUDITORS
Arthur Andersen LLP has audited the Company's financial statements for
the years ending December 31, 1994 through 1998. Representatives of Arthur
Andersen LLP are expected to be available at the Meeting and will have the
opportunity to make a statement if they desire. They will also be available to
respond to appropriate questions.
DEADLINE FOR SHAREHOLDER PROPOSALS
Shareholder proposals intended to be presented at the next annual
meeting of shareholders, to be held in 2000, must be received by the Company at
6262 Executive Boulevard, Huber Heights, Ohio 45424 by December 31, 1999 (as
determined in accordance with SEC Rules 14a-5 and 14a-8(e)(2)) to be included in
the proxy statement and form of proxy relating to that meeting.
ANNUAL REPORT ON FORM 10-K
The Company's Annual Report on Form 10-K, as filed with the Securities
and Exchange Commission, is available to shareholders on request and may be
obtained by writing to: Littlefield, Adams & Company, 6262 Executive Boulevard,
Huber Heights, Ohio 45424, Attention: Corporate Secretary.
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OTHER BUSINESS
The Board of Directors does not know of any matter to be brought before
the Meeting other than the matters specified in the Notice of Annual Meeting
accompanying this Proxy Statement. The persons named in the form of proxy by the
Board of Directors will vote all proxies which have been properly executed. If
any matters set forth in the Notice of Annual Meeting are properly brought
before the Meeting, such persons will vote thereon in accordance with their best
judgment.
By Order of the Board of Directors
WARREN L. RAWLS
Secretary
27
<PAGE> 29
ANNEX I
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of April __, 1999, by and
between FunWear, Inc., a Delaware corporation, and Littlefield, Adams & Company,
a New Jersey corporation ("Littlefield") and the sole shareholder of FunWear
"FunWear").
WHEREAS, the Board of Directors and the shareholders of each of FunWear
and Littlefield have each approved the merger of Littlefield with and into
FunWear in accordance with the General Corporation Law of the State of Delaware
(the "GCL") and the New Jersey Business Corporation Act (the "NJBCA") upon the
terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, FunWear and Littlefield hereby agree as follows:
1. The Merger. Upon the terms and conditions hereof, and in accordance
with the GCL and the NJBCA, at the Effective Time (as defined below),
Littlefield shall be merged (the "Merger") with and into FunWear.
2. Effective Time. As soon as practicable following the execution
hereof Littlefield and FunWear shall file with the Secretary of State of the
State of Delaware a certificate of ownership and merger executed in accordance
with the relevant provisions of the GCL, and FunWear and Littlefield shall file
with the Secretary of State of the State of New Jersey a certificate of merger
executed in accordance with the relevant provisions of the NJBCA. The Merger
shall become effective at the time each such filing is completed (the "Effective
Time").
3. Effects of the Merger. The Merger shall have the effects set forth
in the GCL and the NJBCA. Without limiting the generality of the foregoing, at
the Effective Time: (a) the separate existence of Littlefield shall cease; (b)
FunWear as the surviving corporation (the "Surviving Corporation") shall possess
all of the rights, privileges, powers, immunities, purposes and franchises, both
public and private, of each of Littlefield and FunWear; (c) all real and
personal property, tangible and intangible of every kind and description
belonging to Littlefield and FunWear shall be vested in the Surviving
Corporation without further act or deed, and the title to any real estate or any
interest therein vested in either Littlefield or FunWear shall not revert or in
any way be impaired by reason of the Merger; and (d) the Surviving Corporation
shall assume all the obligations of Littlefield.
4. Certificate of Incorporation and Bylaws. The Certificate of
Incorporation and Bylaws of FunWear shall be the Certificate of Incorporation
and Bylaws of the Surviving Corporation.
5. Directors. The directors of Littlefield at the Effective Time shall
be the initial directors of the Surviving Corporation, until their successors
shall have been duly elected or appointed and qualified.
6. Officers. The officers of Littlefield at the Effective Time shall be
the initial officers of the Surviving Corporation, until their successors shall
have been duly appointed.
7. Conversion of Stock of FunWear and Littlefield.
(a) At the Effective Time, each share of common stock, $1.00
par value per share, of Littlefield (the "Littlefield Common Stock") issued
and outstanding immediately prior to the Effective Time shall, by virtue of
the Merger and without any action on the part of the holder thereof, be
converted into and become one fully paid and nonassessable share of common
stock, par value $.01 per share, of FunWear (the "FunWear Common Stock").
Upon the surrender to FunWear of any certificates evidencing shares of
Littlefield Common Stock by any holder thereof, FunWear agrees to issue to
such holder certificates evidencing an equal number of shares of FunWear
Common Stock.
(b) Each share of capital stock of FunWear issued and
immediately prior to the Effective Time shall, by virtue of the Merger and
without any action on the part of the holder thereof, be cancelled and
retired and cease to exist.
<PAGE> 30
8. Warrants, Options and Debentures. At the Effective Time, any
warrants or options to purchase shares of Littlefield Common Stock, and any
rights to receive Littlefield Common Stock upon conversion of any debentures or
other instruments (collectively, the "Rights") issued by Littlefield and
outstanding at the Effective Time shall, by virtue of the Merger and without any
action on the part of the holders of the Rights, be converted into and become
warrants, options or rights to purchase or receive, as the case may be (the "New
Rights"), an equal number of shares of FunWear Common Stock upon substantially
the same terms and conditions as the Rights and any other rights and obligations
contained in the certificates evidencing the Rights shall be deemed to be and
shall become the rights and obligations of FunWear. At the Effective Time, by
its signature below, FunWear assumes absolutely, unconditionally and irrevocably
the obligations of Littlefield under the certificates and other instruments
evidencing the Rights. At the Effective Time, FunWear agrees to reserve for
issuance shares of FunWear Common Stock equal in number to the number of shares
of Littlefield Common Stock for which the New Rights may be exercised. Upon the
surrender to FunWear of any certificate or other instrument evidencing Rights by
any holder of Rights, FunWear agrees to issue to any such holder a certificate
or other instrument, as the case may be, evidencing New Rights to purchase that
number of shares of FunWear Common Stock equal to the number of shares of
Littlefield Common Stock for which the Rights so surrendered were exercisable.
9. Other Actions. From and after the Effective Time, the parties hereto
shall take such other and further actions, in addition to the filings described
in paragraph 1, as may be required by law to make the Merger effective.
10. Governing Law. This Agreement shall be governed by, and construed
and interpreted in accordance with, the laws of the State of Delaware,
regardless of the laws that might otherwise govern under applicable principles
of conflicts of laws; provided, however, that the consummation and effectiveness
of the Merger shall be governed by and construed in accordance with the laws of
the State of Delaware and the laws of the State of New Jersey.
11. Descriptive Headings. The descriptive headings herein are inserted
for convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
12. Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person any
rights, benefits or remedies of any nature whatsoever under or by reason of this
Agreement except for Sections 7, and 8 hereof (which are intended to be for the
benefit of the persons referred to therein, and may be enforced by such
persons).
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed on its behalf by its duly authorized officers, all as
of the day and year first above written.
LITTLEFIELD, ADAMS & COMPANY,
a New Jersey corporation
By:
---------------------------------
FUNWEAR, INC.
a Delaware corporation
By:
---------------------------------
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<PAGE> 31
ANNEX II
CERTIFICATE OF INCORPORATION
OF
FUNWEAR, INC.
The undersigned, for the purpose of organizing a corporation (the
"Corporation") pursuant to the provisions of the General Corporation Law of the
State of Delaware ("General Corporation Law"), does make and file this
Certificate of Incorporation and does hereby certify as follows:
FIRST: Name: The name of the corporation is FunWear, Inc.
SECOND: Registered Office: The registered office of the Corporation is
to be located at 1209 Orange Street, City of Wilmington, County of New Castle,
State of Delaware 19801. The name of its registered agent is The Corporation
Trust Company, whose address is Corporation Trust Center, 1209 Orange Street,
Wilmington, Delaware 19801.
THIRD: Purposes: 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.
FOURTH. The total number of shares of all classes of stock that the
Corporation shall have authority to issue is 25,000,000 shares of Common Stock,
$.01 par value per share ("Common Stock"). No holder of shares of capital stock
of the Corporation shall, by reason of holding such shares, possess any
preemptive or preferential right to purchase or subscribe to additional,
unissued or treasury shares, or rights to purchase shares, of any class or
series of capital stock of the Corporation, now or hereafter to be authorized,
or any notes, debentures, bonds or other securities convertible into or carrying
rights to purchase shares of any class or series, now or hereafter to be
authorized; provided, however, that in connection with the issuance of any such
shares or securities, the Board of Directors of the Corporation may, in its sole
discretion, offer such shares or securities, or any part thereof, for purchase
or subscription by the holders of shares of the Corporation, except as may
otherwise be provided by this Certificate of Incorporation, as amended from time
to time.
FIFTH: Indemnity: The Corporation shall, to the fullest extent legally
permissible, indemnify (fully or, if not possible, partially) each of its
directors and officers, and persons who serve at its request as directors or
officers of another organization in which it owns shares or of which it is a
creditor, against all liabilities (including expenses) imposed upon or
reasonably incurred by him in connection with any action, suit or other
proceeding, civil or criminal (including investigations, audits, the activities
of, or service upon special committees of the board) in which he may be involved
or with which he may be threatened, while in office or thereafter, by reason of
his acts or omissions as such director or officer, unless in any proceeding he
shall be finally adjudged not to have acted in good faith in the reasonable
belief that his action was in the best interest of the Corporation; provided,
however, that such indemnification shall not cover liabilities in connection
with any matter which shall be disposed of through a compromise payment by such
director or officer, pursuant to a consent decree or otherwise, unless such
compromise shall be approved as in the best interest of the Corporation, after
notice that it involved such indemnification, (a) by a vote of the directors in
which no interested director participates, or (b) by a vote or the written
approval of the holders of a majority of the outstanding stock at the time
having the right to vote for directors, not counting as outstanding any stock
owned by any interested director or officer. Such indemnification may include
payment by the Corporation of expenses incurred in defending a civil or criminal
action or proceeding in advance of the final disposition of such action or
proceeding, upon receipt of an undertaking by the person indemnified to repay
such payment if he shall be adjudicated to be not entitled to indemnification
under these provisions. The rights of indemnification hereby provided shall not
be exclusive of or affect other rights to which any director or officer may be
entitled. As used in this paragraph, the terms "director" and "officer" include
their respective heirs, executors and administrators, and an "interested"
director or officer is one against whom as such the proceedings in question or
another proceeding on the same or similar grounds is then pending.
<PAGE> 32
Indemnification of employees and other agents of the Corporation
(including persons who serve at its request as employees or other agents of
another organization in which it owns shares or of which it is a creditor) may
be provided by the Corporation to whatever extent shall be authorized by the
directors before or after the occurrence of any event as to or in consequence of
which indemnification may be sought. Any indemnification to which a person is
entitled under these provisions may be provided although the person to be
indemnified is no longer a director, officer, employee or agent of the
Corporation or of such other organization. It is the intent of these provisions
to indemnify director and officers to the fullest extent not specifically
prohibited by law, including indemnification against claims brought
derivatively, in the name of the Corporation, and that such directors and
officers need not exhaust any other remedies.
SIXTH: Meetings: Elections: Meetings of the stockholders may be held
within or without the State of Delaware, as the Bylaws may provide. Subject to
the provisions of any law or regulation, the books of the Corporation may be
kept outside the State of Delaware at such place or places as may be designated
from time to time by the Board of Directors or in the Bylaws of the Corporation.
The election of directors need not be by written ballot unless the Bylaws so
provide.
SEVENTH: Bylaws: The board of directors of the Corporation is
authorized and empowered from time to time in its discretion to make, alter,
amend or repeal Bylaws of the Corporation, except as such power may be
restricted or limited by the General Corporation Law.
EIGHTH: Compromise or Arrangement: Whenever a compromise or arrangement
is proposed between the Corporation and its creditors or any class of them
and/or between the Corporation and its stockholders or any class of them, any
court of equitable jurisdiction within the State of Delaware may, on the
application in a summary way of the Corporation or of any creditor or
stockholder thereof, or on the application of any receiver or receivers
appointed for the Corporation under the provision of Section 291 of the General
Corporation Law, or on the application of trustees in dissolution or of any
receiver or receivers appointed for the Corporation under Section 279 of the
General Corporation Law, order a meeting of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of the Corporation, as the
case may be, to be summoned in such manner as the said court directs. If a
majority in number representing three-fourths in value of the creditors or class
of creditors, and/or of the stockholders or class of stockholders of the
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of the Corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which said application has been made, be
binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders of the Corporation, as the case may be,
and also on the Corporation.
NINTH: Exculpation: No director shall be personally liable to the
Corporation or its stockholders for monetary damages for any breach of fiduciary
duty by such director as a director. Notwithstanding the foregoing sentence, a
director shall be liable to the extent provided by applicable law (i) for any
breach of the director's Duty of Loyalty (as herein defined) to the Corporation
or its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the General Corporation Law, or (iv) for any transaction from
which the director derived an improper personal benefit. For purposes of this
provision, Duty of Loyalty means, and only means, the duty not to profit
personally at the expense of the Corporation and does not include conduct,
whether deemed violation of fiduciary duty or otherwise, which does not involve
personal monetary profit.
TENTH: Reservation of Amendment Power: Subject to the limitations set
forth herein, the Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by law, and all rights and powers conferred
herein on stockholders, directors and officers are subject to this reserved
power.
ELEVENTH: Management: Except as otherwise required by law, by the
Certificate of Incorporation or by the Bylaws of the Corporation, as from time
to time amended, the business of the Corporation shall be managed by its board
of directors, which shall have and may exercise all the powers of the
Corporation. The board of directors of the Corporation is hereby specifically
authorized and empowered from time to time in its discretion to determine
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<PAGE> 33
the extent, if any, to which and the time and place at which, and the conditions
under which any stockholder of the Corporation may examine books and records of
the Corporation, other than the books and records now or hereafter required by
statute to be kept open for inspection of stockholders of the Corporation.
TWELFTH: Staggered Board: The Board of Directors shall consist of not
less than three (3) nor more than (9) directors and the number of directors to
serve on the Board at any one time, within the foregoing limits, shall be fixed
by action of the Board of Directors. The directors shall be divided into three
classes, each class to contain as near as possible to one-third (1/3) of the
whole number of directors of the Board of Directors so fixed and, except as
otherwise provided by statute, in the case of any increase in the number of
directors so fixed, such increase shall be apportioned among the classes of
directors so as to maintain each class as near as possible to one-third (1/3) of
the whole number of directors as so increased. The initial term of office for
members of the first class shall expire at the annual meeting of stockholders
next following; the initial term of office for members of the second class shall
expire at the annual meeting of stockholders one year thereafter; and the
initial term of office for the third class shall expire at the annual meeting of
stockholders two years thereafter. At the expiration of the initial term, and of
each succeeding term of each class, the directors of each class shall be elected
to serve for a term of three years. Directors elected or appointed to a vacancy
in a class shall serve the remaining unexpired term of the director replaced.
The bylaws may contain any provision regarding classification of directors not
inconsistent with the terms hereof.
THIRTEENTH: Liquidation: Any vote or votes authorizing liquidation of
the Corporation or proceedings for its dissolution may provide, subject to the
rights of creditors and rights expressly provided for particular classes or
series of stock, for the distribution pro rata among the stockholders of the
Corporation of the assets of the Corporation, wholly or in part in kind, whether
such assets be in cash or other property, and may authorize the board of
directors of the Corporation to determine the value of the different assets of
the Corporation for the purpose of such liquidation and may authorize the board
of directors of the Corporation to divide such assets or any part thereof among
the stockholders of the Corporation, in such manner that every stockholder will
receive a proportionate amount in value (determined as aforesaid) of cash or
property of the Corporation upon such liquidation or dissolution even though
each stockholder may not receive a strictly proportionate part of each such
asset.
FOURTEENTH: Purchase of Shares: The Corporation may purchase directly
or indirectly its own shares to the extent the money or other property paid or
the indebtedness issued therefore does not (i) render the Corporation unable to
pay its debts as they become due in the usual course of business or (ii) exceed
the surplus of the Corporation, as defined in the General Corporation Law.
Notwithstanding the limitations contained in the preceding sentence, the
Corporation may purchase any of its own shares for the following purposes,
provided that the net assets of the Corporation, as defined in the General
Corporation Law, are not less than the amount of money or other property paid or
the indebtedness issued therefor: (i) to eliminate fractional shares; (ii) to
collect or compromise indebtedness owed by or to the Corporation; (iii) to pay
dissenting shareholders entitled to payment for their shares under the General
Corporation Law; and (iv) to effect the purchase or redemption of redeemable
shares in accordance with the General Corporation Law.
FIFTEENTH: Section 203 Opt Out
The Corporation hereby elects not to be governed by Section 203 of the
General Corporation Law of the State of Delaware as from time to time in effect
or any successor provision thereto.
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SIXTEENTH: The name and address of the Incorporator is:
Charles B. Friedman, Esq.
c/o Morrison & Foerster LLP
1290 Avenue of the Americas
New York, New York 10104
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
day of April, 1999.
INCORPORATOR:
--------------------------------
Charles B. Friedman
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<PAGE> 35
ANNEX III
BY-LAWS
OF
FUNWEAR, INC.
April __, 1999
ARTICLE I
CORPORATE OFFICES
SECTION 1. Location of Office. The registered office of the
Corporation is to be located at 1209 Orange Street, City of Wilmington, County
of New Castle, State of Delaware 19801. The name of its registered agent is The
Corporation Trust Company, whose address is Corporation Trust Center, 1209
Orange Street, Wilmington, Delaware 19801.
SECTION 2. Additional Offices. The corporation shall have such
other offices, within or without the State of Delaware and within or without the
United States, as may be fixed by the Board of Directors from time to time.
ARTICLE II
STOCKHOLDERS
SECTION 1. Place of Meeting of Stockholders. All meetings, regular
and special, of the stockholders shall be held at the principal office of the
corporation in the State of Delaware or at such other place, within or without
the State of Delaware, as may be determined by the Board of Directors and as may
be designated in the notice of such meeting.
SECTION 2. Annual Meeting of Stockholders. The annual meeting of
the stockholders for the election of directors, and the transaction of such
other business as may properly come before such meeting, shall be held on a date
selected by the Board of Directors.
SECTION 3. Special Meetings of the Stockholders. Special meetings
of the stockholders may be called by the President, a majority of the members of
the Board, the Chairman of the Board or persons holding one-third of the stock
of the corporation. Notice of such special meetings shall specify the purpose
thereof.
SECTION 4. Record Date. For the purpose of determining the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, to give a written consent to any action without a
meeting or to receive payment of any dividend or allotment of any right, the
Board may fix a date as the record date for such determination. The record date
shall not be more than sixty (60) days before the stockholders' meeting or other
corporate action or event to which it relates. The record date for a
stockholders' meeting shall not be less than ten (10) days before the date of
the meeting. In the event dividends are declared, stock transfer books will not
be closed but a record date will be set by the Corporation, upon which the
transfer agent will take a record of all stockholders entitled to the dividend
without actually closing the books for transfers of stock.
SECTION 5. Notice of Meetings of Stockholders. Except as otherwise
provided by law, written notice of every stockholders' meeting shall be given,
personally or by mail, not less than ten
<PAGE> 36
(10) nor more than sixty (60) days before the date of such meeting to each
stockholder of record entitled to vote at the meeting. If notice is given by
mail, the notice shall be deemed to be given when deposited in the mail
addressed to the stockholder to whom it is directed at his or her last address
as it appears on the records of the corporation, with postage prepaid thereon.
Such notice shall state the time, place and purpose of the meeting.
SECTION 6. Waiver of Notice of Stockholders Meetings. Notice of a
meeting need not be given to any stockholder who signs a waiver of such notice,
in person or by proxy, whether before or after the meeting. The attendance of
any stockholder at a meeting, in person or by proxy, without protesting prior to
the conclusion of the meeting the lack of notice of such meeting, shall
constitute a waiver of notice.
SECTION 7. Quorum of Stockholders. The holders of shares entitled
to cast a majority of the votes at a meeting shall constitute a quorum at such
meeting. The stockholders present in person or by proxy at a duly organized
meeting may continue to do business until adjournment, notwithstanding the
withdrawal of enough stockholders to leave less than a quorum. Less than a
quorum may adjourn.
SECTION 8. Proxies. Every stockholder entitled to vote at a
meeting of stockholders or to express consent without a meeting may authorize
another person or persons to act for him or her by proxy. Each proxy shall be
executed in writing by the stockholder or his or her agent, except that a proxy
may be given by a stockholder or agent by telegram or cable or its equivalent,
provided that any such telegram, cablegram or its equivalent must either set
forth or be submitted with information from which it can be determined that the
telegram, cablegram or its equivalent was authorized by the stockholder. Such
authorization can be established by the signature of the stockholder on the
proxy, either in writing or by a signature stamp or facsimile signature, or by a
number or symbol from which the identity of the stockholder can be determined,
or by any other procedure deemed appropriate by the inspectors or other persons
making the determination as to due authorization. No proxy shall be valid for
more than eleven (11) months unless a longer time is expressly provided therein,
but in no event shall a proxy be valid after three (3) years from the date of
execution. Unless it is coupled with an interest, a proxy shall be revocable at
will. A proxy shall not be revoked by the death or incapacity of the stockholder
but such proxy shall continue to force until revoked by the personal
representative or guardian of the stockholder. The presence at any meeting of
any stockholder who has given a proxy shall not revoke such proxy unless the
stockholder shall file written notice of such revocation with the secretary of
the meeting prior to the voting of such proxy. A person named in a proxy as the
attorney or agent of a stockholder may, if the proxy so provides, substitute
another person to act in his or her place, including any other person named as
an attorney or agent in the same proxy. The substitution shall not be effective
until an instrument effecting it is filed with the secretary of the
corporations.
SECTION 9. Voting Lists. The officer or agent having charge of the
stock transfer books for shares of the corporation shall make and certify a
complete list of the stockholders entitled to vote at a stockholders' meeting or
any adjournment. Such list shall (a) be arranged alphabetically with the address
of and number of shares held by each stockholder; (b) be produced at the time
and place of the meeting; (c) be subject to the inspection of any stockholder
during the whole time of the meeting; and (d) be prima facie evidence as to who
are the stockholders entitled to examine such list or to vote at any meeting.
Unless otherwise required by law, failure to comply with the requirements of
this Section 9 shall not affect the validity of any action taken at such
meeting.
SECTION 10. Voting of Shares. Each outstanding share shall be
entitled to one vote on each matter submitted to a vote at a meeting of
stockholders.
SECTION 11. Inspectors of Elections. At each annual meeting the
chairman of the meeting may appoint one or more persons to act as inspectors of
election at that meeting. No person shall be elected a director in an election
for which he or she has served as inspector. Each inspector, before entering
upon the discharge of his or her duties, shall take and sign an oath to
faithfully execute the duties of inspector.
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SECTION 12. Stockholder Proposals at Annual Meetings. At an annual
meeting of the stockholders, only such business shall be conducted as shall have
been properly brought before the meeting. To be properly brought before an
annual meeting, business must be specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors,
otherwise properly brought before the meeting by or at the direction of the
Board of Directors or otherwise properly brought before the meeting by a
stockholder. In addition to any other applicable requirements, for business to
be properly brought before an annual meeting by a stockholder, the stockholder
must have given timely notice thereof in writing to the Secretary of the
corporation. To be timely, a stockholder's notice must be delivered to or mailed
and received at the principal executive offices of the corporation, not less
than 120 days prior to the date on which the corporation first mailed its proxy
materials for the previous year's annual meeting of stockholders (or the date on
which the corporation mails its proxy materials for the current year if during
the prior year the corporation did not hold an annual meeting or if the date of
the annual meeting was changed more than 30 days from the prior year). A
stockholder's notice to the Secretary shall set forth as to each matter the
stockholder proposes to bring before the annual meeting (i) a brief description
of the business desired to be brought before the annual meeting and the reasons
for conducting such business at the annual meeting, (ii) the name and record
address of the stockholder proposing such business, (iii) the class and number
of shares of the corporation which are beneficially owned by the stockholder,
and (iv) any material interest of the stockholder in such business.
Notwithstanding anything in the by-laws to the contrary, no business
shall be conducted at the annual meeting except in accordance with the
procedures set forth in this Section 12, provided, however, that nothing in this
Section 12 shall be deemed to preclude discussion by any stockholder of any
business properly brought before the annual meeting in accordance with said
procedure.
The Chairman of an annual meeting shall, if the facts warrant,
determine and declare to the meeting that business was not properly brought
before the meeting in accordance with the provisions of this Section 12, and if
he should so determine he shall so declare to the meeting, and any such business
not properly brought before the meeting shall not be transacted.
ARTICLE III
DIRECTORS
SECTION 1. Board of Directors. Except as otherwise provided by
law, the business and affairs of the corporation shall be managed by its Board
of Directors, each of whom shall be at least 18 years of age.
SECTION 2. Number of Directors. The number of directors which
shall constitute the whole Board of Directors shall be fixed as a maximum of
nine (9)Directors.
SECTION 3. Election, Term and Removal of Directors. At each annual
meeting the stockholders shall elect by plurality vote of the shares represented
in person or in proxy directors to hold office until the next succeeding annual
meeting. Each director shall hold office for the term of the election and until
his or her successor shall have been elected and qualified.
SECTION 4. Powers. The powers of the corporation shall be
exercised, its business conducted and its property controlled by or under the
direction of the Board of Directors.
SECTION 5. Vacancies. The Board of Directors may fill a vacancy
occurring in the Board of Directors by the affirmative vote of the remaining
directors, even though less than a quorum of the Board of Directors, or by a
sole remaining director. A director so elected shall hold office until the next
succeeding annual meeting of stockholders and until his or her successor shall
have been elected and qualified.
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SECTION 6. Resignation. A director may resign by written notice to
the corporation. The resignation shall be effective upon receipt thereof by the
corporation or at such subsequent time as shall be specified in the notice.
SECTION 7. Quorum. A majority of the entire Board of Directors, or
of any committee thereof, shall constitute a quorum for the transaction of
business; provided, however, at any meeting whether a quorum be present or
otherwise, a majority of the directors present may adjourn from time to time
until the time fixed for the next regular meeting of the Board of Directors,
without notice other than by announcement at the meeting. At each meeting of the
Board at which a quorum is present all questions and business shall be
determined by a vote of a majority of the directors present, unless a different
vote be required by law, the Certificate of Incorporation, or these by-laws. Any
member of the Board of Directors, or of any committee thereof, may participate
in a meeting by means of conference telephone or similar communication equipment
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting by such means shall constitute presence in person
at such meeting. The transactions of any meeting of the Board of Directors, or
any committee thereof, however called or noticed, or wherever held, shall be as
valid as though had at a meeting duly held after regular call and notice, if a
quorum be present and if, either before or after the meeting, each of the
directors not present shall sign a written waiver of notice, or a consent to
holding such meeting, or an approval of the minutes thereof. All such waivers,
consents or approvals shall be filed with the corporate records or made a part
of the minutes of the meeting.
SECTION 8. Place of Meetings of Directors. The Board of Directors
may hold meetings at such place or places as the Board of Directors may from
time to time determine. Any or all directors may participate in a meeting of the
Board by means of conference telephone or any means of communication by which
all persons participating in the meeting are able to hear each other.
SECTION 9. Meetings of Directors. Meetings of the Board of
Directors maybe held either within or without the State of Delaware. Regular
meetings of the Board of Directors shall be held at such times as are fixed from
time to time by resolution of the Board. Special meetings may be held at any
time upon call of the Chairman of the Board, if there be a Chairman, the
President, a Vice President or any two (2) Directors.
SECTION 10. Notice of Meetings of Directors. A meeting of the
Board of Directors may be held without notice immediately following the annual
meeting of the stockholders. Notice need not be given of regular meetings of the
Board of Directors held at times fixed by resolution of the Board of Directors.
Special meetings of the Board of Directors may be held upon written or
telegraphic notice deposited in the United States mail or delivered to the
telegraph company at least two (2) days prior to the day of the meeting.
Notice of a meeting need not be given to any director who submits
a signed waiver of notice whether before or after the meeting, or who attends
the meeting without protesting, prior to its conclusion, the lack of notice.
Neither the business to be transacted at, nor the purpose or, any
meeting of the board need be specified in the notice or waiver of notice of such
meeting.
Notice of an adjourned meeting need not be given if the time and
place are fixed at the meeting adjourning and if the period of adjournment does
not exceed ten (10) days in any one adjournment.
SECTION 11. Committees. The Board of Directors, by resolution
adopted by a majority of the entire Board of Directors, may appoint from among
its members a committee, each of which shall have one or more members. To the
extent provided in such resolution, each such committee shall have and may
exercise all the authority of the Board of Directors, except that no such
committee shall: (a) make, alter or repeal any by-laws of the corporation; (b)
elect or appoint any director, or remove any officer or director; (c) submit to
stockholders any action that requires stockholders' approval; or (d) amend or
repeal any resolution theretofore adopted by the Board of Directors. Unless
otherwise determined by
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resolutions of the Board of Directors (either at the time a committee is
appointed or any time thereafter), the members of all committees of the Board of
Directors shall serve a term coexistent with that of the Board of Directors
which shall have appointed such committee.
The Board of Directors, by resolution adopted by a majority of the
entire Board of Directors, may: (a) fill any vacancy in any such committee; (b)
appoint one or more directors to serve as alternate members of any such
committee, to act in the absence or disability of members of any such committee
with all the powers of such absent or disabled members; (c) abolish any such
committee at its pleasure; and (d) remove any director from membership on such
committee at any time, with or without cause.
Actions taken at a meeting of any such committee shall be reported
to the Board of Directors at its next meeting following such committee meeting;
except that, when the meeting of the Board of Directors is held within two (2)
days after the committee meeting, such report shall, if not made at the first
meeting, be made to the Board of Directors at its second meeting following such
committee meeting.
The designation of any such committee and the delegation thereto
of authority shall not operate to relieve the Board of Directors or any member
thereof of any responsibility imposed by law.
The provisions of this Section 11 shall not apply to any committee
which acts solely in an advisory capacity to the Board of Directors. Such
committee may be appointed by the President.
SECTION 12. Action of Directors Without Meeting. Any action
required or permitted to be taken pursuant to authorization voted at a meeting
of the board, or any committee thereof, may be taken without a meeting if, prior
or subsequent to such action, all members of the Board of Directors or of the
committee, as the case may be, consent thereto in writing and such written
consents are filed with the minutes of the proceedings of the Board of Directors
or the committee.
SECTION 13. Director Emeritus. The corporation shall have
directors emeriti as shall be elected by the Board of Directors from time to
time. The directors emeriti shall have no responsibilities and shall not be
entitled to vote at any meeting but may attend any meeting. The qualifications
and the compensation for this position shall be set by the Board of Directors
from time to time.
ARTICLE IV
OFFICERS
SECTION 1. Offices, Term, Election, Removal. The officers of the
corporation shall be elected by the Board of Directors and shall be a President,
one or more Vice Presidents, a Secretary, a Treasurer, such Assistant
Secretaries and Assistant Treasurers as may be elected, and a Controller. The
Board of Directors may also, elect a Chairman of the Board. Any two offices may
be held by the same person but no officer shall execute, acknowledge or verify
any instrument in more than one capacity if such instrument is required by law
or by the by-laws to be executed, acknowledged or verified by two officers. Any
officer shall hold office for the term for which he or she is elected and until
a successor is elected and has qualified, subject to earlier termination by
removal as provided in these by-laws or the certificate of incorporation or
resignation. Nothing herein shall prevent the corporation from entering into
contracts with any officers employing them as such for life or any lesser period
of time.
An officer elected to fill a vacancy shall hold office for the
balance of the unexpired term for which elected.
Any officer may be removed from office, with or without cause, at
any time by the affirmative vote by the majority of the Board of Directors.
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SECTION 2. Duties of Officers:
A. Chief Executive Officer(s). The office of Chief Executive
Officer of the corporation may be held by one or two persons, at the discretion
of the Board of Directors. In the event the office of Chief Executive Officer
shall be held by two persons, they shall each be the Co-Chief Executive Officer
of the corporation, one to be designated by the Board as the Chairman of the
Board and the other as the President of the corporation. The Chief Executive
Officer(s) shall, subject to the authority of the Board of Directors, have
responsibility for the general and active management of the business of the
corporation. Notwithstanding anything contained in these by-laws to the
contrary, if there be Co-Chief Executive Officers, the Chairman of the Board, in
addition to the duties and authority set forth in these by-laws for the
Chairman, shall have the duties and authority set forth in these by-laws for the
President and, likewise, the President, in addition to the duties and authority
set forth in these by-laws for the President, shall have the duties and
authority set forth in these by-laws for the Chairman.
B. Chairman of the Board. The Chairman of the Board, if there be a
Chairman of the Board, shall preside at all meetings of the stockholders and the
Board of Directors and shall perform such other duties as the Board of Directors
shall specify. Except as otherwise provided by law, the Chairman shall possess
the power to sign all certificates, contracts or other instruments of the
corporation which may be approved from time to time by the Board of Directors or
which may be in the ordinary course of business.
C. President. The President shall be the Chief Executive Officer
of the corporation and shall, in the absence of the Chairman of the Board or if
there be no Chairman of the Board, preside at all meetings of the stockholders
and Board of Directors. The President shall make reports to the Board of
Directors and stockholders and shall perform such other duties as are incident
to this or are required by the Board of Directors, one person may occupy both
the office of Chairman of the Board and President if the Board shall so
designate.
D. Vice Presidents. In the order designated by the Board of
Directors, Vice Presidents shall exercise the function of the President during
the absence or disability of the President and shall perform such other duties
as are assigned from time to time by the Board of Directors.
E. Secretary. The Secretary shall give the requisite notices of
meetings of the stockholders and directors and shall record the proceedings of
such meetings. In addition to the powers and duties prescribed by, law the
Secretary shall have such other powers and perform such other duties as shall at
any time be required by the Board of Directors.
F. Treasurer. The Treasurer shall be the Chief Financial Officer
of the Company and shall have charge of all the funds of the corporation and
shall keep and deposit them as required by the Board of Directors and shall keep
proper accounts of the receipts and disbursements and financial transactions of
the corporation. The treasurer shall render to the Board of Directors an annual
statement of the financial affairs of the corporation and such other financial
statements as shall at any time be required by the directors. The Treasurer
shall perform such other duties as shall be required by the Board of Directors.
The Treasurer/Chief Financial Officer shall report directly to the Company's
Board of Directors.
G. Other Officers. Any other officers elected by the Board of
Directors shall have such duties as the Board shall designate.
SECTION 3. Compensation. The compensation of officers shall be
fixed by the Board of Directors.
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ARTICLE V
SHARES, SHARE CERTIFICATES AND TRANSFER OF SHARES
SECTION 1. Form of Certificates and Issuance. The shares of the
corporation shall be represented by certificates signed by, or in the name of
the corporation by, the Chairman of the Board 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 and may be sealed with the seal of the
corporation or a facsimile thereof. If the certificate is countersigned by a
transfer agent or registrar who is not an officer or employee of the
corporation, any and all other signatures may be facsimiles. In case any
officer, transfer agent or registrar who has signed or whose facsimile signature
has been placed upon such certificate shall have ceased to be such officer,
transfer agent, or registrar before such certificate is issued, it may be issued
by the corporation with the same effect as if he or she were such officer,
transfer agent or registrar at the date of its issue.
SECTION 2. Transfers. Transfer of shares shall be made only on the
books of the corporation by the registered owner thereof or the registered
owner's duly authorized attorney, with a transfer clerk or transfer agent
appointed by the Board of Directors and on surrender of the certificate or
certificates for such shares properly endorsed and with all taxes paid thereon.
The person in whose name shares of stock stand in the books of the
corporation shall be deemed by the corporation to be the owner thereof for all
purposes.
SECTION 3. Lost, Destroyed or Stolen Certificates. No certificate
for shares of stock of the corporation shall be issued in place of any
certificate alleged to have been lost, destroyed or stolen except on production
of evidence, satisfactory to the principal officers of the corporation, of such
loss, destruction or theft and, if said officers so require, upon the furnishing
of an indemnity bond in such amount (but not to exceed twice the value of the
shares represented by the certificate) and with such terms and such surety as
the Board of Directors may in its discretion require.
SECTION 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 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
Delaware.
SECTION 5. Transfer Agent and Registrar. The Board of Directors
may appoint one or more transfer agents or transfer clerks or one or more
registrars and may require all certificates for shares to bear the signature of
any of them.
ARTICLE VI
CORPORATE SEAL
The corporation shall have a seal which will provide an impression
showing the name of the corporation, the State of Delaware and the year of its
incorporation.
ARTICLE VII
CORPORATE ACTIONS
SECTION 1. Deposits, Checks, Notes, Etc. The Board of Directors
may select banks, trust companies or other depositories in which the funds of
the corporation not otherwise employed may be deposited to the credit of the
corporation. All notes, checks, drafts or other negotiable instruments
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of the corporation shall be signed by such officer or officers as may be
designated by the Board of Directors from time to time.
SECTION 2. Voting Securities Held by the Corporation. Unless
otherwise ordered by the Board of Directors, the President shall have full power
and authority on behalf of the corporation to attend and to act and to vote at
any meeting of security holders of other corporations in which the corporation
may hold securities. At such meeting he or she shall possess and may exercise
any and all rights and powers incident to the ownership of such securities which
the corporation might have possessed and exercised if it had been present. The
Board of Directors may from time to time confer like powers upon any other
person or persons.
ARTICLE VIII
FISCAL YEAR
The fiscal year of the corporation shall begin on January 1 of each year.
ARTICLE IX
DIVIDENDS
The Board of Directors may from time to time declare a dividend of
the whole or any part of its accumulated profits and may fix the date or dates
upon which such dividend is paid. The Board of Directors may declare dividends
in the form of shares of stock of the corporation.
ARTICLE X
INDEMNIFICATION OF OFFICERS AND DIRECTORS
SECTION 1. Right to Indemnification. Each person who was or is a
party or is threatened to be made a party to or is involved (as a party,
witness, or otherwise), in any threatened, pending, or completed action, suit,
or proceeding, whether civil, criminal, administrative, or investigative
(hereinafter a "Proceeding"), by reason of the fact that he, or a person of whom
he is the legal representative, is or was a director or officer of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee, or agent of another corporation or of a
partnership, joint venture, trust, or other enterprise, including service with
respect to employee benefit plans, whether the basis of the Proceeding is
alleged action in an official capacity as a director, officer, employee, or
agent or in any other capacity while serving as a director, officer, employee,
or agent (hereafter an "Agent"), shall be indemnified and held harmless by the
corporation to the fullest extent authorized by the Delaware General Corporation
Law, as the same exists or may hereafter be amended or interpreted (but, in the
case of any such amendment or interpretation, only to the extent that such
amendment or interpretation permits the corporation to provide broader
indemnification rights than were permitted prior thereto) against all expenses,
liability, and loss (including attorneys' fees, judgments, fines, ERISA excise
taxes or penalties, and amounts paid or to be paid in settlement, and any
interest, assessments, or other charges imposed thereon, and any federal, state,
local, or foreign taxes imposed on any Agent as a result of the actual or deemed
receipt of any payments under this Article) reasonably incurred or suffered by
such person in connection with investigating, defending, being a witness in, or
participating in (including on appeal), or preparing for any of the foregoing
in, any Proceeding (hereinafter "Expenses"); provided, however, that except as
to actions to enforce indemnification rights pursuant to Section 3 of this
Article, the corporation shall indemnify any Agent seeking indemnification 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. The right to indemnification conferred in this Article shall be a
contract right.
SECTION 2. Authority to Advance Expenses. Expenses incurred by an
officer or director (acting in his capacity as such) in defending a Proceeding
shall be paid by the corporation in
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advance of the final disposition of such Proceeding, provided, however, that if
required by the Delaware General Corporation Law, as amended, such Expenses
shall be advanced only upon delivery to the corporation of an undertaking by or
on behalf of such director or officer to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the
corporation as authorized in this Article or otherwise. Expenses incurred by
other Agents of the corporation (or by the directors or officers not acting in
their capacity as such, including service with respect to employee benefit
plans) may be advanced upon such terms and conditions as the Board of Directors
deems appropriate. Any obligation to reimburse the corporation for Expense
advances shall be unsecured and no interest shall be charged thereon.
SECTION 3. Right of Claimant to Bring Suit. If a claim under
Section 1 or 2 of this Article is not paid in full by the corporation within 90
days after a written claim has been received by the corporation, the claimant
may at any time thereafter bring suit against the corporation to recover the
unpaid amount of the claim and, if successful in whole or in part, the claimant
shall be entitled to be paid also the expense (including attorneys' fees) of
prosecuting such claim. It shall be a defense to any such action (other than an
action brought to enforce a claim for expenses incurred in defending a
Proceeding in advance of its final disposition where the required undertaking
has been tendered to the corporation) that the claimant has not met the
standards of conduct that make it permissible under the Delaware General
Corporation Law for the corporation to indemnify the claimant for the amount
claimed. The burden of proving such a defense shall be on the corporation.
Neither the failure of the corporation (including its Board of Directors,
independent legal counsel, or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of the claimant is
proper under the circumstances because he has met the applicable standard of
conduct set forth in the Delaware General Corporation Law, nor an actual
determination by the corporation (including its Board of Directors, independent
legal counsel, or its stockholders) that the claimant had not met such
applicable standard of conduct, shall be a defense to the action or create a
presumption that claimant has not met the applicable standard of conduct.
SECTION 4. Provisions Nonexclusive. The rights conferred on any
person by this Article shall not be exclusive of any other rights that such
person may have or hereafter acquire under any statute, provision of the
Certificate of Incorporation, agreement, vote of stockholders or disinterested
directors, or otherwise, both as to action in an official capacity and as to
action in another capacity while holding such office. To the extent that any
provision of the Certificate, agreement, or vote of the stockholders or
disinterested directors is inconsistent with these by-laws, the provision,
agreement, or vote shall take precedence.
SECTION 5. Authority to Insure. The corporation may purchase and
maintain insurance to protect itself and any Agent against any Expense, whether
or not the corporation would have the power to indemnify the Agent against such
Expense under applicable law or the provisions of this Article.
SECTION 6. Survival of Rights. The rights provided by this Article
shall continue as to a person who has ceased to be an Agent and shall inure to
the benefit of the heirs, executors, and administrators of such a person.
SECTION 7. Settlement of Claims. The corporation shall not be
liable to indemnify any Agent under this Article (a) for any amounts paid in
settlement of any action or claim effected without the corporation's written
consent; or (b) for any judicial award if the corporation was not given a
reasonable and timely opportunity, at its expense, to participate in the defense
of such action.
SECTION 8. Effect of Amendment. Any amendment, repeal, or
modification of this Article shall not adversely affect any right or protection
of any Agent with respect to claims arising prior to the time of such amendment,
repeal, or modification.
SECTION 9. Subrogation. In the event of payment under this
Article, the corporation shall be subrogated to the extent of such payment to
all of the rights of recovery of the Agent, who shall, at the corporation's
request, execute all papers required and shall do everything that may be
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necessary to secure such rights, including the execution of such documents
necessary to enable the corporation effectively to bring suit to enforce such
rights. Payments under this Article may be conditioned on the Agent's executing
such papers and taking such actions, or on the Agent's agreeing in writing to do
so.
SECTION 10. No Duplication of Payments. The corporation shall not
be liable under this Article to make any payment in connection with any claim
made against the Agent to the extent the Agent has otherwise actually received
payment (under any insurance policy, agreement, vote, or otherwise) of the
amounts otherwise indemnifiable hereunder.
ARTICLE XI
NOTICES
Whenever, under any provisions of these by-laws, notice is
required to be given to any stockholder or director, the same may be given by
depositing such notice in the United States Mail, postage prepaid, and addressed
to the stockholder's or director's last known address as shown by the stock
record of the corporation or its transfer agent. Any notice required to be given
to any director may be given by the method hereinabove stated, or by telegram,
personal delivery, courier service or other means. An affidavit of mailing,
executed by a duly authorized and competent employee of the corporation or its
transfer agent appointed with respect to the class of stock affected, specifying
the name and address or the names and addresses of the stockholder or
stockholders, director or directors, to whom any such notice or notices was or
were given, and the time and method of giving the same, shall be conclusive
evidence of the statements therein contained. All notices given by mail, as
above provided, shall be deemed to have been given as at the time of mailing and
all notices given by telegram or other means shall be deemed to have been given
as at the sending time recorded by the telegraph company or other operator or
service company transmitting the same. It shall not be necessary that the same
method of giving be employed in respect of all directors. The period or
limitation of time within which any stockholder may exercise any option or
right, or enjoy any privilege or benefit, or be required to act, or within which
any director may exercise any power or right, or enjoy any privilege, pursuant
to any notice sent him in the manner above provided, shall not be affected or
extended in any manner by the failure of such a stockholder or such director to
receive such notice. Whenever any notice is required to be given under the
provisions of the statutes or of the Certificate of Incorporation, or of these
by-laws, a waiver thereof in writing signed by the person or persons entitled to
said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE XII
AMENDMENTS
These by-laws may be repealed, altered or amended or new by-laws
adopted by written consent of stockholders in the manner authorized by Section
228 of the Delaware General Corporation Law, or at any meeting of the
stockholders, either annual or special, by the affirmative vote of a majority of
the stock entitled to vote at such meeting, unless a larger vote is required by
these by-laws or the Certificate of Incorporation. The Board of Directors shall
also have the authority to repeal, alter or amend these by-laws or adopt new
by-laws (including, without limitation, the amendment of any by-laws setting
forth the number of directors who shall constitute the whole Board of Directors)
by unanimous written consent or at any annual, regular, or special meeting by
the affirmative vote of a majority of the whole number of directors, subject to
the power of the stockholders to change or repeal such by-laws and provided that
the Board of Directors shall not make or alter any by-laws fixing the
qualifications, classifications, or term of office of directors.
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ANNEX IV
NEW JERSEY BUSINESS CORPORATION ACT
TITLE 14A. CORPORATIONS, GENERAL
CHAPTER 11. RIGHTS OF DISSENTING SHAREHOLDERS
14A:11-1.Right Of Shareholders To Dissent.
(1) Any shareholder of a domestic corporation shall have the right to
dissent from any of the following corporate actions
(a) Any plan of merger or consolidation to which the
corporation is a party, provided that, unless the certificate of
incorporation otherwise provides
(i) a shareholder shall not have the right to
dissent From any plan of merger or consolidation with
respect to shares
(A) of a class or series which is listed
on a national securities exchange or is held of
record by not less than 1,000 holders on the record
date fixed to determine the shareholders entitled
to vote upon the plan of merger or consolidation;
or
(B) for which, pursuant to the plan of
merger or consolidation, he will receive (x) cash,
(y) shares, obligations or other securities which,
upon consummation of the merger or consolidation,
will either be listed on a national securities
exchange or held of record by not less than 1,000
holders, or (z) cash and such securities;
(ii) a shareholder of a surviving corporation shall
not have the right to dissent from a plan of merger, if the
merger did not require for its approval the vote of such
shareholders as provided in section 14A:10-5.1 or in
subsection 14A:10-3(4), 14A:10-7(2) or 14A:10-7(4); or
(b) Any sale, lease, exchange or other disposition of all or
substantially all of the assets of a corporation not in the usual or
regular course of business as conducted by such corporation, other than
a transfer pursuant to subsection (4) of N.J.S.14A:10-11, provided
that, unless the certificate of incorporation otherwise provides, the
shareholder shall not have the right to dissent
(i) with respect to shares of a class or series
which, at the record date fixed to determine the shareholders
entitled to vote upon such transaction, is listed on a
national securities exchange or is held of record by not less
than 1,000 holders; or
(ii) from a transaction pursuant to a plan of
dissolution of the corporation which provides for
distribution of substantially all of its net assets to
shareholders in accordance with their respective interests
within one year after the date of such transaction, where
such transaction is wholly for
(A) cash; or
(B) shares, obligations or other
securities which, upon consummation of the plan of
dissolution will either be listed on a national
securities exchange or held of record by not less
than 1,000 holders; or
(C) cash and such securities; or
(iii) from a sale pursuant to an order of a court
having jurisdiction.
<PAGE> 46
(2) Any shareholder of a domestic corporation shall have the right to
dissent with respect to any shares owned by him which are to be acquired
pursuant to section 14A:10-9.
(3) A shareholder may not dissent as to less than all of the shares
owned beneficially by him and with respect to which a right of dissent exists. A
nominee or fiduciary may not dissent on behalf of any beneficial owner as to
less than all of the shares of such owner with respect to which the right of
dissent exists.
(4) A corporation may provide in its certificate of incorporation that
holders of all its shares, or of a particular class or series thereof, shall
have the right to dissent from specified corporate actions in addition to those
enumerated in subsection 14A:11-1(1), in which case the exercise of such right
of dissent shall be governed by the provisions of this Chapter.
14A:11-2. Notice of dissent; demand for payment; endorsement of certificates.
(1) Whenever a vote is to be taken, either at a meeting of shareholders
or upon written consents in lieu of a meeting pursuant to section 14A:5-6, upon
a proposed corporate action from which a shareholder may dissent under section
14A:11-1, any shareholder electing to dissent from such action shall file with
the corporation before the taking of the vote of the shareholders on such
corporate action, or within the time specified in paragraph 14A:5-6(2)(b) or
14A:5-6(2)(c), as the case may be, if no meeting of shareholders is to be held,
a written notice of such dissent stating that he intends to demand payment for
his shares if the action is taken.
(2) Within 10 days after the date on which such corporate action takes
effect, the corporation, or, in the case of a merger or consolidation, the
surviving or new corporation, shall give written notice of the effective date of
such corporate action, by certified mail to each shareholder who filed written
notice of dissent pursuant to subsection 14A:11-2(1), except any who voted for
or consented in writing to the proposed action.
(3) Within 20 days after the mailing of such notice, any shareholder to
whom the corporation was required to give such notice and who has filed a
written notice of dissent pursuant to this section may make written demand on
the corporation, or, in the case of a merger or consolidation, on the surviving
or new corporation, for the payment of the fair value of his shares.
(4) Whenever a corporation is to be merged pursuant to section
14A:10-5.1 or subsection 14A:10-7(4) and shareholder approval is not required
under subsections 14A:10-5.1(5) and 14A:10-5.1(6), a shareholder who has the
right to dissent pursuant to section 14A:11-1 may, not later than 20 days after
a copy or summary of the plan of such merger and the statement required by
subsection 14A:10-5.1(2) is mailed to such shareholder, make written demand on
the corporation or on the surviving corporation, for the payment of the fair
value of his shares.
(5) Whenever all the shares, or all the shares of a class or series,
are to be acquired by another corporation pursuant to section 14A:10-9, a
shareholder of the corporation whose shares are to be acquired may, not later
than 20 days after the mailing of notice by the acquiring corporation pursuant
to paragraph 14A:10-9(3)(b), make written demand on the acquiring corporation
for the payment of the fair value of his shares.
(6) Not later than 20 days after demanding payment for his shares
pursuant to this section, the shareholder shall submit the certificate or
certificates representing his shares to the corporation upon which such demand
has been made for notation thereon that such demand has been made, whereupon
such certificate or certificates shall be returned to him. If shares represented
by a certificate on which notation has been made shall be transferred, each new
certificate issued therefor shall bear similar notation, together with the name
of the original dissenting holder of such shares, and a transferee of such
shares shall acquire by such transfer no rights in the corporation other than
those which the original dissenting shareholder had after making a demand for
payment of the fair value thereof.
(7) Every notice or other communication required to be given or made by
a corporation to any shareholder pursuant to this Chapter shall inform such
shareholder of all dates prior to which action must be taken by such shareholder
in order to perfect his rights as a dissenting shareholder under this Chapter.
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14A:11-3. "Dissenting shareholder" defined; date for determination of fair
value.
(1) A shareholder who has made demand for the payment of his shares in
the manner prescribed by subsection 14A:11-2(3), 14A:11-2(4) or 14A:11-2(5) is
hereafter in this Chapter referred to as a "dissenting shareholder."
(2) Upon making such demand, the dissenting shareholder shall cease to
have any of the rights of a shareholder except the right to be paid the fair
value of his shares and any other rights of a dissenting shareholder under this
Chapter.
(3) "Fair value" as used in this Chapter shall be determined
(a) As of the day prior to the day of the meeting of
shareholders at which the proposed action was approved or as of the day
prior to the day specified by the corporation for the tabulation of
consents to such action if no meeting of shareholders was held; or
(b) In the case of a merger pursuant to section 14A:10-5.1 or
subsection 14A:10-7(4) in which shareholder approval is not required,
as of the day prior to the day on which the board of directors approved
the plan of merger; or
(c) In the case of an acquisition of all the shares or all
the shares of a class or series by another corporation pursuant to
section 14A:10-9, as of the day prior to the day on which the board of
directors of the acquiring corporation authorized the acquisition, or,
if a shareholder vote was taken pursuant to section 14A:10-12, as of
the day provided in paragraph 14A:11-3(3)(a).
In all cases, "fair value" shall exclude any appreciation or
depreciation resulting from the proposed action.
14A:11-4. Termination of right of shareholder to be paid the fair value of his
shares.
(1) The right of a dissenting shareholder to be paid the fair value of
his shares under this Chapter shall cease if
(a) he has failed to present his certificates for notation as
provided by subsection 14A:11-2(6), unless a court having jurisdiction,
for good and sufficient cause shown, shall otherwise direct;
(b) his demand for payment is withdrawn with the written
consent of the corporation;
(c) the fair value of the shares is not agreed upon as
provided in this Chapter and no action for the determination of fair
value by the Superior Court is commenced within the time provided in
this Chapter;
(d) the Superior Court determines that the shareholder is not
entitled to payment for his shares;
(e) the proposed corporate action is abandoned or rescinded;
or
(of) a court having jurisdiction permanently enjoins or sets
aside the corporate action.
(2) In any case provided for in subsection 14A:11-4(1), the rights of
the dissenting shareholder as a shareholder shall be reinstated as of the date
of the making of a demand for payment pursuant to subsections 14A:11-2(3),
14A:11-2(4) or 14A:11-2(5) without prejudice to any corporate action which has
taken place during the interim period. In such event, he shall be entitled to
any intervening preemptive rights and the right to payment of any intervening
dividend or other distribution, or, if any such rights have expired or any such
dividend or distribution other than in cash has been completed, in lieu thereof,
at the election of the board, the fair value thereof in cash as of the time of
such expiration or completion.
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14A:11-5. Rights of dissenting shareholder.
(1) A dissenting shareholder may not withdraw his demand for payment of
the fair value of his shares without the written consent of the corporation.
(2) The enforcement by a dissenting shareholder of his right to receive
payment for his shares shall exclude the enforcement by such dissenting
shareholder of any other right to which he might otherwise be entitled by virtue
of share ownership, except as provided in subsection 14A:11-4(2) and except that
this subsection shall not exclude the right of such dissenting shareholder to
bring or maintain an appropriate action to obtain relief on the ground that such
corporate action will be or is ultra vires, unlawful or fraudulent as to such
dissenting shareholder.
14A:11-6. Determination of fair value by agreement.
(1) Not later than 10 days after the expiration of the period within
which shareholders may make written demand to be paid the fair value of their
shares, the corporation upon which such demand has been made pursuant to
subsections 14A:11-2(3), 14A:11-2(4) or 14A:11-2(5) shall mail to each
dissenting shareholder the balance sheet and the surplus statement of the
corporation whose shares he holds, as of the latest available date which shall
not be earlier than 12 months prior to the making of such offer and a profit and
loss statement or statements for not less than a 12-month period ended on the
date of such balance sheet or, if the corporation was not in existence for such
12-month period, for the portion thereof during which it was in existence. The
corporation may accompany such mailing with a written offer to pay each
dissenting shareholder for his shares at a specified price deemed by such
corporation to be the fair value thereof. Such offer shall be made at the same
price per share to all dissenting shareholders of the same class, or, if divided
into series, of the same series.
(2) If, not later than 30 days after the expiration of the 10-day
period limited by subsection 14A:11-6(1), the fair value of the shares is agreed
upon between any dissenting shareholder and the corporation, payment therefor
shall be made upon surrender of the certificate or certificates representing
such shares.
14A:11-7. Procedure on failure to agree upon fair value; commencement of action
to determine fair value.
(1) If the fair value of the shares is not agreed upon within the
30-day period limited by subsection 14A:11-6(2), the dissenting shareholder may
serve upon the corporation upon which such demand has been made pursuant to
subsections 14A:11-2(3), 14A:11-2(4) or 14A:11-2(5) a written demand that it
commence an action in the Superior Court for the determination of the fair value
of the shares. Such demand shall be served not later than 30 days after the
expiration of the 30-day period so limited and such action shall be commenced by
the corporation not later than 30 days after receipt by the corporation of such
demand, but nothing herein shall prevent the corporation from commencing such
action at any earlier time.
(2) If a corporation fails to commence the action as provided in
subsection 14A:11-7(1), a dissenting shareholder may do so in the name of the
corporation, not later than 60 days after the expiration of the time limited by
subsection 14A:11-7(1) in which the corporation may commence such an action.
14A:11-8. Action to determine fair value; jurisdiction of court; appointment of
appraiser.
In any action to determine the fair value of shares pursuant to this
Chapter:
(a) The Superior Court shall have jurisdiction and may
proceed in the action in a summary manner or otherwise;
(b) All dissenting shareholders, wherever residing, except
those who have agreed with the corporation upon the price to be paid
for their shares, shall be made parties thereto as an action against
their shares quasi in rem;
(c) The court in its discretion may appoint an appraiser to
receive evidence and report to the court on the question of fair value,
who shall have such power and authority as shall be specified in the
order of his appointment; and
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(d) The court shall render judgment against the corporation
and in favor of each shareholder who is a party to the action for the
amount of the fair value of his shares.
14A:11-9. Judgment in action to determine fair value.
(1) A judgment for the payment of the fair value of shares shall be
payable upon surrender to the corporation of the certificate or certificates
representing such shares.
(2) The judgment shall include an allowance for interest at such rate
as the court finds to be equitable, from the date of the dissenting
shareholder's demand for payment under subsections 14A:11-2(3), 14A:11-2(4) or
14A:11-2(5) to the day of payment. If the court finds that the refusal of any
dissenting shareholder to accept any offer of payment, made by the corporation
under section 14A:11-6, was arbitrary, vexatious or otherwise not in good faith,
no interest shall be allowed to him.
14A:11-10. Costs and expenses of action.
The costs and expenses of bringing an action pursuant to section
14A:11-8 shall be determined by the court and shall be apportioned and assessed
as the court may find equitable upon the parties or any of them. Such expenses
shall include reasonable compensation for and reasonable expenses of the
appraiser, if any, but shall exclude the fees and expenses of counsel for and
experts employed by any party; but if the court finds that the offer of payment
made by the corporation under section 14A:11-6 was not made in good faith, or if
no such offer was made, the court in its discretion may award to any dissenting
shareholder who is a party to the action reasonable fees and expenses of his
counsel and of any experts employed by the dissenting shareholder.
14A:11-11.Disposition of shares acquired by corporation.
(1) The shares of a dissenting shareholder in a transaction described
in subsection 14A:11-1(1) shall become reacquired by the corporation which
issued them or by the surviving corporation, as the case may be, upon the
payment of the fair value of shares.
(2) (Deleted by amendment, P.L.1995, c.279.)
(3) In an acquisition of shares pursuant to section 14A:10-9 or section
14A:10-13, the shares of a dissenting shareholder shall become the property of
the acquiring corporation upon the payment by the acquiring corporation of the
fair value of such shares. Such payment may be made, with the consent of the
acquiring corporation, by the corporation which issued the shares, in which case
the shares so paid for shall become reacquired by the corporation which issued
them and shall be cancelled.
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