SIERRA SEMICONDUCTOR CORPORATION
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
to be held June 5, 1997
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The 1997 Annual Meeting of Shareholders of Sierra Semiconductor
Corporation (the "Company"), will be held on Thursday, June 5, 1997 at 3:00 p.m.
local time, at the Clarion Hotel Villa located at 4331 Dominion Street, Burnaby,
British Columbia, Canada, to act on the following matters:
1. To elect directors of the Company to serve until the next
Annual Meeting or the election of their successors.
2. To approve a change in the Company's state of incorporation
from California to Delaware and to change the Company's name
to PMC-Sierra, Inc.
3. To approve an amendment to the Company's 1994 Incentive Stock
Plan to increase the number of shares reserved for issuance by
500,000 shares.
4. To approve the 1996 Stock Option Plan of PMC-Sierra, Inc.
(Portland), including a reserve of 450,000 shares of the
Company for issuance upon exercise of the options under the
plan.
5. To confirm the appointment of Deloitte & Touche LLP as the
Company's independent auditor for the 1997 fiscal year.
6. To transact such other business as may properly come befor
the meeting or any adjournment thereof.
These matters are more fully described in the Proxy Statement
accompanying this Notice.
Only shareholders of record at the close of business on April 9, 1997
are entitled to notice of and to vote at the Annual Meeting and any adjournments
thereof.
James V. Diller, Chief Executive Officer
San Jose, California
April 28, 1997
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IMPORTANT
To ensure your representation at the meeting, please mark, sign, date
and return the enclosed proxy card as soon as possible in the enclosed
postage-paid envelope. If you attend the meeting, you may vote in
person even if you returned a proxy.
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<PAGE>
SIERRA SEMICONDUCTOR CORPORATION
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PROXY STATEMENT
1997 ANNUAL MEETING OF SHAREHOLDERS
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INFORMATION CONCERNING SOLICITATION AND VOTING
General
The enclosed proxy is solicited on behalf of the Board of Directors of
Sierra Semiconductor Corporation (the "Company") for use at the Annual Meeting
of Shareholders of the Company to be held on Thursday, June 5, 1997 at 3:00
p.m., local time, or at any adjournments thereof. The Annual Meeting will be
held at the Clarion Hotel Villa, which is located at 4331 Dominion Street,
Burnaby, British Columbia, Canada. The Company's principal office is located at
2222 Qume Drive, San Jose, California 95131. Its telephone number at that
location is (408) 434-9300. The Company's principal subsidiary is a Canadian
corporation named PMC-Sierra, Inc. ("PMC"). The Company is changing its name to
PMC-Sierra, Inc. and PMC is changing its name to ___________. References in this
proxy statement to "Sierra" or the Company" mean Sierra Semiconductor
Corporation. References to "PMC" mean Sierra's principal Canadian subsidiary.
This proxy statement is being mailed to shareholders on or about April
28, 1997.
Record Date and Share Ownership
Only holders of Common Stock of record at the close of business on
April 9, 1997 (the "Record Date") are entitled to notice of and vote at the
Annual Meeting of Shareholders. At the Record Date, 29,152,950 shares of the
Company's Common Stock were issued and outstanding.
Shareholders Proposals for 1998 Annual Meeting
Proposals to be presented by shareholders of the Company at the 1998
Annual Meeting must be received by the Company no later than December 27, 1997
in order that they may be included in the proxy statement and form of proxy
relating to that meeting.
Revocability of Proxies
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before its use by (i) delivering to the Company's
Secretary at 2222 Qume Drive, San Jose, California 95131, a written notice of
revocation or a duly executed proxy bearing a later date or (ii) attending the
meeting and voting in person.
Voting and Solicitation
Each share of Common Stock outstanding on the Record Date is entitled
to one vote. In addition, every shareholder, or the shareholder's proxy, who is
entitled to vote upon the election of directors may cumulate such shareholder's
votes and give one candidate a number of votes equal to the number of directors
to be elected multiplied by the number of shares held by such shareholder, or
distribute the shareholder's votes on the same principle among as many
candidates as the shareholder may select, provided that votes cannot be cast for
more than six candidates. No shareholder or proxy, however, shall be entitled to
cumulate votes for a candidate unless such candidate's name has been placed in
nomination prior to the voting and the shareholder, or any other shareholder,
has given notice at the meeting, prior to the voting, of the shareholder's
intention to cumulate votes. If any shareholder gives such notice, all
shareholders may cumulate their votes for candidates in nomination.
<PAGE>
The six nominees receiving the highest number of affirmative votes of
the shares present or represented and entitled to vote shall be elected as
directors. Approval of each other matter requires the affirmative vote of a
majority of the Votes Cast. For this purpose, the "Votes Cast" are defined under
California law to be the shares of the Company's Common Stock represented and
voting in person or by proxy at the Annual Meeting. In addition, the affirmative
votes must constitute at least a majority of the required quorum, which is a
majority of the shares outstanding on the record date. Votes that are cast
against a proposal will be counted for purposes of determining (i) the presence
or absence of a quorum and (ii) the total number of Votes Cast with respect to
the proposal. While there is no definitive statutory or case law authority in
California as to the proper treatment of abstentions in the counting of votes
with respect to a proposal, the Company believes that abstentions should be
counted for purposes of determining both (i) the presence or absence of a quorum
and (ii) the total number of Votes Cast with respect to the proposal. In the
absence of controlling precedent to the contrary, the Company intends to treat
abstentions in this manner. Accordingly, abstentions will have the same effect
as a vote against the proposal. Broker non-votes will be counted for purposes of
determining the presence or absence of a quorum for the transaction of business,
but will not be counted for purposes of determining the number of Votes Cast
with respect to a proposal.
Votes cast by proxy or in person at the Annual Meeting will be
tabulated by the Inspector of Elections (the "Inspector") with the assistance of
the Company's transfer agent. The Inspector will also determine whether a quorum
is present.
The cost of soliciting proxies will be borne by the Company. The
Company may retain the services of Boston EquiServe, L.P. to solicit proxies,
for which the Company estimates that it would pay a fee not to exceed $5,000,
plus out-of-pocket expenses. The Company may reimburse brokerage firms and other
persons representing beneficial owners of shares for their expenses in
forwarding solicitation materials to such beneficial owners. Proxies may also be
solicited by certain of the Company's directors, officers and regular employees,
without additional compensation, in person or by telephone or facsimile.
Security Ownership of Certain Beneficial Owners And Management
The following table sets forth certain information known to the Company
regarding beneficial ownership of Common Stock of the Company as of March 15,
1997, by (i) all persons known to the Company to be the beneficial owners of
more than 5% of the Company's Common Stock, (ii) each executive officer named in
the Summary Compensation Table below, (iii) each of the Company's current
directors and nominees for election as directors and (iv) all directors and
executive officers as a group.
Company
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Name (1) Number of Shares of Approximate
the Company Percent of
Beneficially Owned Ownership
------------------ --------------
Gregory Aasen (2) 212,933 *
Robert L. Bailey (3) 527,222 1.77%
Alexandre Balkanski (4) 23,228 *
Colin Beaumont (5) 19,461 *
James V. Diller (6) 930,450 3.09%
Michael L. Dionne (7) 13,123 *
Glenn C. Jones (8) 249,764 *
Richard J. Koeltl (9) 116,312 *
Frank Marshall (10) 7,916 *
All directors and executive officers as
a group (9 persons) (11) 1,100,409 6.87%
- --------------------------
<PAGE>
* Less than 1%.
(1) The beneficial owners named in the table have sole voting and investment
power with respect to the shares, except as indicated. (2) Includes 17,708
shares subject to options exercisable within 60 days after March 15, 1997, 6,000
shares held by Mr. Aasen's
wife and an aggregate of 14,000 shares held by Mr. Aasen's two sons. Also
includes 92,981 shares issuable upon redemption of PMC-Sierra, Inc.
("PMC") Special Shares, 64,384 shares issuable upon redemption of PMC
Special Shares held by Mr. Aasen's wife and an aggregate of 16,554 shares
issuable upon redemption of PMC Special Shares held by Mr. Aasen's two
sons.
(3) Includes 16,666 shares subject to options exercisable within 60 days after
March 15, 1997. Also includes 402,350 shares issuable upon redemption of
PMC Special Shares, and 1,910 shares issuable upon redemption of PMC
Special Shares subject to options exercisable within 60 days after March
15, 1997.
(4) Includes 23,228 shares subject to options exercisable within 60 days after
March 15, 1997.
(5) Includes 19,461 shares issuable upon redemption of PMC Special Shares.
(6) Includes 381,666 shares subject to options exercisable within 60 days
after March 15, 1997 and 38,192 shares issuable upon redemption of PMC
Special Shares subject to options exercisable within 60 days after March
15, 1997.
(7) Includes 13,123 shares subject to options exercisable within 60 days afte
March 15, 1997.
(8) Includes 240,832 shares subject to options exercisabl e within 60 day
after March 15, 1997.
(9) Includes 99,998 shares subject to options exercisable within 60 days after
March 15, 1997. Also includes 5,333 shares held by
Mr. Koeltl's wife as custodian for their son and 8,577 shares held by Mr.
Koeltl's adult son and daughter as to which Mr.
Koeltl disclaims beneficial ownership.
(10) Includes 5,416 shares subject to options exercisable within 60 days o
March 15, 1997.
(11) Includes 798,637 shares subject to options exercisable within 60 days
after March 15, 1997 held by eight of the directors and executive officers
listed above. Also includes 40,102 shares issuable upon redemption of PMC
Special Shares subject to options exercisable within 60 days after March
15, 1997 held by two of the executive officers and directors listed above
and 596,732 shares issuable upon redemption of PMC Special Shares to one
executive officer and director, one executive officer and one nominee as a
director listed above. See notes (2) through (10) above.
PROPOSAL NO. 1:
ELECTION OF DIRECTORS
The Company's Bylaws provide for a variable board of four to seven
directors, with the number currently fixed at six. It is planned that a board of
six directors will be elected at the Annual Meeting. Unless otherwise
instructed, the proxy holders will vote the proxies received by them for the six
nominees of the Board of Directors named below, all of whom are presently
directors of the Company, except for Colin Beaumont, who is a director of PMC.
If any nominee is unable or declines to serve as a director at the time of the
Annual Meeting, the proxies will be voted for any nominee designated by the
proxy holders to fill the vacancy. It is not expected that any nominee will be
unable or will decline to serve as a director. If shareholders nominate persons
other than the Company's nominees for election as directors, the proxy holders
will vote all proxies received by them in accordance with cumulative voting to
assure the election of as many of the Company's nominees as possible. The term
of office of each person elected as a director will continue until the next
Annual Meeting of Shareholders or until the director's successor has been
elected.
<PAGE>
The Board of Directors recommends a vote FOR the nominees listed below:
<TABLE>
<CAPTION>
Director
Name of Nominee Age Principal Occupation Since
- ------------------------------------ ----- ----------------------------------------------------- --------
<S> <C> <C> <C>
Robert L. Bailey . . . . . . . . . . 39 President and Chief Executive Officer of PMC 1996
Alexandre Balkanski (1). . . . . . . 36 President and Chief Executive Officer, C-Cube 1993
Microsystems, Inc.
Colin Beaumont . . . . . . . . . . . 57 Management Consultant --
James V. Diller . . . . . . . . . . 61 Chairman of the Board of Directors and Chief Executive 1983
Officer of the Company
Michael L. Dionne (1)(2) . . . . . . 48 Management Consultant 1992
Frank J. Marshall (2). . . . . . . . 50 Vice President, General Manager of Cisco Systems, Inc. 1996
Core Products Business Unit
<FN>
- -----------------------------------
(1) Member of the Compensation Committee.
(2) Member of Audit Committee.
</FN>
</TABLE>
Mr. Bailey has been a director of the Company since October 1996. Mr.
Bailey has served as a president, Chief Executive Officer and Director of PMC
since December 1993. Prior to joining PMC, Mr. Bailey was employed by
AT&T-Microelectronics from August 1989 to November 1993 where he served as Vice
President of Integrated Microperipheral Products. He also serves on the Boards
of Directors of PMC and of Teltone Corporation, a designer and manufacturer of
telecom products.
Dr. Balkanski has been a director of the Company since August 1993. In
July 1988, Dr. Balkanski co-founded C-Cube Microsystems, Inc., a developer of
integrated circuits and software. Dr. Balkanski has held a variety of senior
management positions with C-Cube, and is currently its President, Chief
Executive Officer and a Director. He also serves as a member of the board of
directors of CKS Group, Inc.
Mr. Beaumont is a management consultant and is a board member of
Plaintree Systems, Incorporated. In 1995 Mr. Beaumont retired from Nortel where
he was the Chief Engineer of BNR, the largest commercial research and
development facility in Canada. Mr. Beaumont has served as a PMC director since
1992.
Mr. Diller, a founder of the Company, served as the Company's President
and Chief Executive Officer from 1983 to July 1993 and has served as a director
of the Company since the Company's formation in 1983. Mr. Diller was named as
the Chairman of the Company's Board of Directors in July 1993. Mr. Diller served
as Chief Financial Officer of the Company from its formation until July 1987. He
has served on PMC's Board since its formation. He also serves on the board of
directors of Elantec Semiconductor, Inc.
<PAGE>
Mr. Dionne has been a director of the Company since July 1992. Mr.
Dionne is currently a management consultant. From May 1983 until March 1997, Mr.
Dionne held a variety of senior management positions with Apple Computer, Inc.,
a computing products manufacturer, most recently as Senior Vice President and
General Manager, Apple Worldwide Service and Support.
Mr. Marshall has been a director of the Company since April 1996. Mr.
Marshall's title is Vice President, General Manager of Cisco Systems Inc.'s Core
Products Business Unit, which has responsibility for Cisco's traditional
high-end Cisco 7500 series backbone routers as well as ATM switches. Mr.
Marshall has also served as Vice President of Engineering for Cisco Systems Inc.
from April 1992 to July 1995. Prior to joining Cisco Systems Inc., Mr. Marshall
was the founding Vice President of Engineering of Convex Computer.
Vote Required
The six nominees for director receiving the highest number of
affirmative votes of the shares entitled to be voted for them shall be elected
as directors. Votes withheld from any director are counted for purposes of
determining the presence or absence of a quorum, but have no other legal effect
under California law.
Board Meetings and Committees
The Board of Directors of the Company held six meetings during the 1996
fiscal year. All nominees who were Board members in 1996 attended 75% or more of
the meetings of the Board of Directors and of the committees of the Board on
which the director served (held during their membership period) except Dr.
Balkanski, who attended two-thirds of the meetings. The Board of Directors has
an Audit Committee, Compensation Committee and Stock Option Committee. The Board
does not have a nominating committee.
The Audit Committee, which consists of Mr. Dionne and Mr. Marshall,
held one meeting in 1996. The Audit Committee recommends engagement of the
Company's independent auditors, approves the services performed by the Company's
independent auditors and reviews the Company's accounting principles and its
system of internal accounting controls.
The Compensation Committee, which consists of Mr. Dionne and Mr.
Balkanski, held one meeting in 1996. The Compensation Committee reviews and
makes recommendations to the Board concerning the Company's executive
compensation policy, bonus plans and equity incentive plans.
The Stock Option Committee, which consists of Mr. Diller and any other
one director, took action by written consent on several occasions but did not
hold any meetings in 1996. The Stock Option Committee has authority to grant
stock options to purchase up to 10,000 shares to individuals not subject to
Section 16 of the Securities Exchange Act 1934.
Board Compensation
Non-employee directors receive an annual retainer of $12,000 per year
plus $1,000 per board meeting attended for their services as members of the
Board of Directors. Non-employee directors are automatically granted options to
purchase shares of the Company's Common Stock pursuant to the provisions of the
Company's 1994 Incentive Stock Plan. Mr. Marshall received an option to purchase
20,000 shares of Common Stock at an exercise price of $15.9375 per share upon
being appointed to the Board of Directors in April 1996. In June 1996, Mr.
Balkanski and Mr. Dionne each received automatic annual grants of options to
purchase 5,000 shares of Common Stock at an exercise price of $14.50 per share.
These options become exercisable as to 1/4 of the shares subject to the option
after one year; thereafter, 1/48 of the shares subject to the option become
exercisable at the end of each calendar month.
<PAGE>
The Company has agreed to indemnify each director against certain
claims and expenses for which the director might be held liable in connection
with past or future service on the Board. In addition, the Company maintains an
insurance policy insuring its officers and directors against such liabilities.
Certain Transactions
During the year ended December 29, 1996, members of the Board of
Directors of the Company and executive officers of the Company received grants
of options as set forth under "Executive Compensation."
During 1996, the largest outstanding amount owned by Mr. Bailey to PMC
was approximately $344,198. This loan was pursuant to a September 1994 credit
facility established to pay certain tax expenses incurred in connection with the
transfer of PMC Special Shares to his wife. The maturity date of the loan is the
earlier of (i) August 1, 1999 or (ii) when certain designated shares of the
Company's Common Stock held by Mr. Bailey are disposed of in an arm's length
transaction. The interest rate of the loan is the higher of (i) the applicable
U.S. federal rate for a five-year loan or (ii) the prescribed rate for employee
loans pursuant to the Income Tax Act (Canada). During 1996 PMC reimbursed Mr.
Bailey for interest paid on the loan. This loan was paid in full in December
1996.
In January 1996, in connection with the sale of SiTel Sierra B.V.
("SiTel"), Mr. Diller received approximately $80,000 upon the sale of his SiTel
shares upon substantially the same terms as all other shareholders of SiTel.
Section 16(a) Reports
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than 10% of a registered class of the
Company's equity securities, to file certain reports regarding ownership of, and
transactions in, the Company's Securities with the Securities and Exchange
Commission (the "SEC"). Such officers, directors and 10% shareholders are also
required by SEC rules to furnish the Company with copies of all Section 16(a)
forms that they file.
Based solely on its review of the copies of such forms received by it,
or written representations from certain reporting persons, the Company believes
that during fiscal 1996 all the reporting persons complied with Section 16(a)
filing requirements except as follows: In December 1996 Mr. Bailey reported the
acquisition earlier in the year of Common Stock of the Company upon retraction
of PMC Series 1-A and Series 1-B Special Shares.
<PAGE>
PROPOSAL NO. 2:
REINCORPORATION IN DELAWARE
Introduction
The Board of Directors believes that the best interests of the Company
and its shareholders will be served by changing the state of incorporation of
the Company from California to Delaware (the "Reincorporation"). As discussed
below, the principal reasons for reincorporation are the reduction in the
Company's operations in California, the greater flexibility of Delaware
corporate law, the substantial body of case law interpreting that law and the
increased ability of the Company to attract and retain qualified directors. The
proposed Delaware certificate of incorporation and bylaws are substantially
similar to those currently in effect in California with the exception that
cumulative voting (permitted but never to date exercised by the Company's
shareholders) will be eliminated. The term "Sierra Delaware" refers to
PMC-Sierra, Inc., the new Delaware corporation which is the proposed successor
to the Company.
The Reincorporation will be effected by merging the Company into Sierra
Delaware (the "Merger"). Upon completion of the Merger, the Company will cease
to exist and Sierra Delaware will continue to operate the business of the
Company under the name PMC-Sierra, Inc. Pursuant to the Agreement and Plan of
Merger between the Company and Sierra Delaware, a copy of which is attached
hereto as Exhibit A (the "Merger Agreement"), each outstanding share of the
Company Common Stock, no par value, will automatically be converted into one
share of Sierra Delaware Common stock, no par value. IT IS NOT NECESSARY FOR
SHAREHOLDERS TO EXCHANGE THEIR EXISTING STOCK CERTIFICATES FOR STOCK
CERTIFICATES OF SIERRA DELAWARE.
Upon the date on which the Merger will become effective (the "Effective
Date"), Sierra Delaware will also assume and continue the outstanding stock
options and all other employee benefit plans of the Company. Each outstanding
and unexercised option or other right to purchase shares of the Company's Common
Stock will become an option or right to purchase the same number of shares of
Sierra Delaware Common Stock on the same terms and conditions and at the same
exercise price applicable to any such the Company option or right at the
Effective Date.
The Reincorporation has been unanimously approved by the Company's
Board of Directors. If approved by the shareholders of the Company, it is
anticipated that the Effective Date of the Merger will be as soon as reasonably
practicable following the Annual Meeting of Shareholders. However, pursuant to
the Merger Agreement, the Merger may be abandoned or the Merger Agreement may be
amended by the Board of Directors (except that certain principal terms may not
be amended without shareholder approval) either before or after shareholder
approval has been obtained and prior to the Effective Date of the
Reincorporation if, in the opinion of the board of directors of either company,
circumstances arise that make it inadvisable to proceed.
Shareholders of the Company will have no dissenters' rights of
appraisal with respect to the Reincorporation. See "Significant Differences
Between the Corporation Laws of California and Delaware--Appraisal Rights." The
discussion set forth below is qualified in its entirety by reference to the
Merger Agreement, the Certificate of Incorporation and the Bylaws of Sierra
Delaware, copies of which are attached hereto as Exhibit A, B and C,
respectively.
Vote Required for the Reincorporation Proposal
Approval of the Reincorporation, which will also constitute approval of
the (i) Merger Agreement, and Certificate of Incorporation and Bylaws of Sierra
Delaware, (ii) the assumption of the Company's employee benefit plans and
outstanding stock options by Sierra Delaware and (iii) revisions in the
Company's indemnification agreements with its officers and directors to conform
those agreements to Delaware law, will require the affirmative vote of the
holders of a majority of the outstanding shares of the Company's Common Stock.
THE BOARD RECOMMENDS A VOTE "FOR" THE PROPOSED REINCORPORATION IN
DELAWARE. THE EFFECT OF AN ABSTENTION IS THE SAME AS THAT OF A VOTE AGAINST THE
REINCORPORATION.
<PAGE>
Principal Reasons for the Reincorporation
The Company has remained a California corporation since its inception
due in part to the large proportion of its operations in California. As a result
of the Company's exit from the modem chipset business and related restructuring
of its non-networking product businesses announced in September 1996
("Restructuring"), the Company's California operations will become a small
portion of its total operations. As a result, the Board of Directors believes it
is appropriate to take advantage of the following benefits of Delaware law.
Prominence, Predictability and Flexibility of Delaware Law. For many
years Delaware has followed a policy of encouraging incorporation in that sate
and, in furtherance of that policy, has been a leader in adopting, construing
and implementing comprehensive, flexible corporate laws responsive to the legal
and business needs of corporations organized under its laws. Because of
Delaware's prominence as the state of incorporation for many major corporations,
both the legislature and courts in Delaware have demonstrated an ability and a
willingness to act quickly and effectively to meet changing business needs. The
Delaware courts have developed considerable expertise in dealing with corporate
issues and a substantial body of case law has developed construing Delaware law
and establishing public policies with respect to corporate legal affairs.
Increased Ability to Attract and Retain Qualified Directors. Both
California and Delaware law permit a corporation to include a provision in its
certificate of incorporation which reduces or limits the monetary liability of
directors for breaches of fiduciary duty in certain circumstances. The
increasing frequency of claims and litigation directed against directors and
officers has greatly expanded the risks facing directors and officers of
corporations in exercising their respective duties. The amount of time and money
required to respond to such claims and to defend such litigation can be
substantial. Recent efforts to adopt legislation in California, if successful,
would have increased the liability of directors. It is the Company's desire to
reduce these risks to its directors and officers and to limit situations in
which monetary damages can be recovered against directors so that the Company
may continue to attract and retain qualified directors who otherwise might be
unwilling to serve because of the risks involved. The Company believes that, in
general, Delaware law provides greater protection to directors than California
law and that Delaware case law regarding a corporation's ability to limit
director liability is more developed and provides more guidance than California
law.
Well-Established Principles of Corporate Governance. There is
substantial judicial precedent in the Delaware courts as to the legal principle
applicable to measures that may be taken by a corporation and as to the conduct
of the Board of Directors under the business judgment rule. The Company believes
that its shareholders will benefit from the well-established principles of
corporate governance that Delaware law affords.
No Change in the Board Members, Business, Management, Employee Plans or Location
of Principal Facilities of the Company
The Reincorporation will result in a change of the Company's name to
PMC-Sierra, Inc. and will effect a change in the legal domicile of the Company,
but not its physical location. The Reincorporation will not result in any change
in the business, management, fiscal year, assets or liabilities or location of
the principal facilities of the Company. The Company's principal business
activities will be conducted in Canada as a result of the Restructuring and not
as a result of the Reincorporation. The Company's directors will become the
directors of Sierra Delaware. All employee benefit plans of the Company will be
assumed and continued by Sierra Delaware. All stock options or other rights to
acquire Common Stock of the Company will automatically be converted into an
option or right to purchase the same number of shares of Sierra Delaware Common
Stock at the same price per share, upon the same terms, and subject to the same
conditions. The Company's other employee benefit arrangements will also be
continued by Sierra Delaware upon the terms and subject to the conditions
currently in effect.
Antitakeover Implications
Delaware, like many other states, permits a corporation to adopt a
number of measures through amendment of the certificate of incorporation or
bylaws or otherwise, which measures are designed to reduce a corporation's
vulnerability to unsolicited takeover attempts. The Reincorporation is not being
proposed in order to prevent an unsolicited takeover attempt, nor is it in
response to any present attempt known to the Board of Directors to acquire
control of the Company, obtain representation on the Board of Directors or take
significant action that affects the Company.
<PAGE>
Certain effects of the Reincorporation may be considered to have
antitakeover implications. Section 203 of the Delaware General Corporation Law
("Section 203"), from which Sierra Delaware does not currently intend to opt
out, restricts certain "business combinations" with "interested stockholders"
for three years following the date that a person or entity becomes an interested
stockholder, unless the Board of Directors approves the business combination
and/or other requirements are met. The elimination of cumulative voting could be
viewed as having an antitakeover effect in that it can make it more difficult
for a minority shareholders to gain a seat on the Board. Other measures
permitted under Delaware law, which the Company does not presently intend to
implement, include the establishment of a staggered board of directors, and the
elimination of the right of stockholders controlling at least ten percent (10%)
of the voting shares to call a special meeting of stockholders. For a detailed
discussion of all of the changes that will be implemented as part of the
Proposed Reincorporation, see "The Charters and Bylaws of the Company and Sierra
Delaware." For a discussion of differences between the laws of California and
Delaware, see "Significant Differences Between the Corporation Laws of
California and Delaware."
In addition, Delaware Law permits a corporation to adopt such measures
as stockholder rights plan, designed to reduce a corporation's vulnerability to
unsolicited takeover attempts. There is substantial judicial precedent in the
Delaware courts as to the legal principles applicable to such defensive measures
and as to the conduct of a board of directors under the business judgment rule
with respect to unsolicited takeover attempts. The Board of Directors has no
present intention following the Reincorporation to amend the Certificate of
Incorporation or Bylaws to include provisions that might deter an unsolicited
takeover attempt. However, in the discharge of its fiduciary obligations to its
shareholders, the Board of Directors of the Company will continue to evaluate
the Company's vulnerability to potential unsolicited bids to acquire the Company
on unfavorable terms and to consider strategies to enhance the Board's ability
to negotiate with an unsolicited bidder.
The Charters and Bylaws of the Company and Sierra Delaware
The provisions of the Sierra Delaware Certificate of Incorporation and
Bylaws are similar to those of the Company's Articles of Incorporation and
Bylaws in many respects. However, the Reincorporation includes the
implementation of certain provisions in the Sierra Delaware Certificate of
Incorporation and Bylaws that alter the rights of shareholders and the powers of
management. In addition, Sierra Delaware could implement certain other changes
by amending its Certificate of Incorporation and Bylaws. For a discussion of
such changes, see below and "Significant Differences Between the Corporation
Laws of California and Delaware."
<PAGE>
The Articles of Incorporation of the Company currently authorize the
Company to issue up to 50,000,000 shares of Common Stock, no par value and
5,000,000 shares of undesignated Preferred Stock, no par value. The Certificate
of Incorporation of Sierra Delaware provides that such company will have
50,000,000 authorized shares of Common Stock, no par value, and 5,000,000 shares
of undesignated Preferred Stock, no par value. Like the Company's Articles of
Incorporation, Sierra Delaware's Certificate of Incorporation provides that the
Board of Directors is entitled to determine the powers, preferences and rights,
and the qualifications, limitations or restrictions, of the authorized and
unissued undesignated Preferred Stock. Thus, although it has no present
intention of doing so, the Board of Directors, without stockholder approval,
could authorize the issuance of Preferred Stock upon terms which could have the
effect of delaying or preventing a change in control of the Company or modifying
the rights of holders of the Company's Common Stock under either California or
Delaware law. The Board of Directors could also use shares for further
financings, possible acquisitions and other uses.
Monetary Liability of Directors. The Articles of Incorporation of the
Company and the Certificate of Incorporation of Sierra Delaware both provide for
the elimination of personal monetary liability of directors to the fullest
extent permissible under the applicable law. The provisions eliminating monetary
liability of directors set forth in the Sierra Delaware Certificate of
Incorporation is potentially broader than the corresponding provision in the
Company's Articles of Incorporation, in that the former incorporates future
amendments to Delaware law with respect to the elimination of such liability.
See "Significant Differences Between the Corporation Laws of California and
Delaware--Indemnification and Limitation of Liability."
Size of the Board of Directors. The Bylaws of Sierra Delaware provide
for a Board of Directors consisting of six directors. The Bylaws of the Company
provide for a Board of Directors of from four to seven members, with the exact
number currently set at six directors. Under California law, although changes in
the number of directors, in general, must be approved by a majority of the
outstanding shares, the Board may fix the exact number of directors within a
stated range set forth in the articles of incorporation or bylaws. Delaware law
permits the board of directors, acting alone, to change the authorized number of
directors by amendment to the bylaws, unless the directors are not authorized to
amend the bylaws or the number of directors is fixed in the certificate of
incorporation. After the Reincorporation, the Board of Directors of Sierra
Delaware could amend the Bylaws to change the size of the Board of Directors
from six directors without further stockholder approval.
Cumulative Voting for Directors. Under California law, if any
shareholder has given notice of an intention to cumulate votes for the election
of directors, any other shareholder of the corporation is also entitled to
cumulate his or her votes at such election. Cumulative voting provides that each
share of stock normally having one vote is entitled to a number of votes equal
to the number of directors to be elected. A shareholder may then cast all such
votes for a single candidate or may allocate them among as many candidates as
the shareholder may choose. In the absence of cumulative voting, the holders of
a majority of the shares present or represented at a meeting in which directors
are to be elected would have the power to elect all the directors to be elected
at such meeting, and no person could be elected without the support of holders
of a majority of the shares present or represented at such meeting. Elimination
of cumulative voting could make it more difficult for a minority shareholder
adverse to a majority of the shareholders to obtain representation on the
Company's Board of Directors. California corporations whose stock is listed on a
national stock exchange or whose stock is held by 800 shareholders of record and
included in the Nasdaq National Market System (a "Listed Company") can also
eliminate cumulative voting with shareholder approval. The Company qualifies as
a Listed Company but has not sought shareholder approval to eliminate cumulative
voting. Under Delaware law, cumulative voting in the election of directors is
not mandatory. The Sierra Delaware Certificate of Incorporation does not provide
for cumulative voting rights.
<PAGE>
Power to Call Special Shareholders' Meetings. Under California law, a
special meeting of shareholders may be called by the Board of Directors, the
Chairman of the Board, the President, the holders of shares entitled to cast not
less than 10% of the votes at such meeting and such additional persons as are
authorized by the articles of incorporation or the bylaws. Under Delaware law, a
special meeting of stockholders may be called by the Board of Directors or by
any other person authorized to do so in the Certificate of Incorporation or the
Bylaws. The Bylaws of Sierra Delaware currently authorize the Board of
Directors, the Chairman of the Board, the President and the holders of not less
than 10% of the shares entitled to vote to call a special meeting of
stockholders. Therefore, no substantive change is contemplated in this
provision, although the Board could in the future amend the Company's Bylaws
without stockholder approval.
Filling Vacancies on the Board of Directors. Under California law, any
vacancy on the board of directors other than one created by removal of a
director may be filled by the Board. If the number of directors is less than a
quorum, a vacancy may be filled by the unanimous written consent of the
directors then in office, by the affirmative vote of a majority of the directors
at a meeting held pursuant to notice or waivers of notice or by a sole remaining
director. A vacancy created by removal of a director may be filled by the board
only if so authorized by a corporation's articles of incorporation or by a bylaw
approved by the corporation's shareholders. The Company's current Articles of
Incorporation and Bylaws do not permit directors to fill vacancies created by
removal of a director. Under Delaware law, vacancies and newly created
directorships may be filled by a majority of the directors then in office (even
though less than a quorum) or by a sole remaining director, unless otherwise
provided in the certificate of incorporation or bylaws (or unless the
certificate of incorporation directs that a particular class of stock is to
elect such directors), in which case a majority of the directors elected by such
class, or a sole remaining director so elected, shall fill such vacancy or newly
created directorship). The Bylaws of Sierra Delaware provide, consistent with
the Company's Bylaws, that any vacancy created by the removal of a director by
the stockholders of Sierra Delaware may be filled only by the stockholders.
Following the Reincorporation, the Board of Directors of Sierra Delaware could
amend the Bylaws to provide that directors may fill any vacancy created by
removal of directors by the stockholders.
Loans to Officers and Employees. Under California law, any loan or
guaranty to or for the benefit of a director or officer of the corporation or
its parent requires approval of the shareholders unless such loan or guaranty is
provided under a plan approved by shareholders owning a majority of the
outstanding shares of the corporation. However, under California law,
shareholders of any corporation with 100 or more shareholders of record, such as
the Company, may approve a bylaw authorizing the board of directors alone to
approve loans or guaranties to or on behalf of officers (whether or not such
officers are directors) if the board determines that any such loan or guaranty
may reasonably be expected to benefit the corporation. Pursuant to the Sierra
Delaware Bylaws and in accordance with Delaware law, Sierra Delaware may make
loans to, guarantee the obligations of or otherwise assist its officers or other
employees and those of its subsidiaries (including directors who are also
officers or employees) when such action, in the judgment of the directors, may
reasonably be expected to benefit the corporation.
Voting by Ballot. California law provides that the election of
directors may proceed in the manner described in a corporation's bylaws. The
Company's current Bylaws provide that the election of directors at a
shareholders' meeting may be by voice vote or ballot, unless prior to such vote
a shareholder demands a vote by ballot, in which case such vote must be by
ballot. Under Delaware law, the right to vote by written ballot may be
restricted if so provided in the Certificate of Incorporation. The Bylaws of
Sierra Delaware do not address election by ballot, but the Certificate of
Incorporation of Sierra Delaware, consistent with the Company's current Bylaws,
provides that if a stockholder specifically demands election of directors by
ballot (or if the Bylaws provide that elections shall be by ballot) then
elections shall be held by ballot. Stockholders of Sierra Delaware may therefore
continue to demand election by ballot, unless and until the Certificate of
Incorporation is amended, which amendment would require a majority stockholder
vote. It may be more difficult for a stockholder to contest the outcome of a
vote that has not been conducted by written ballot.
<PAGE>
Compliance with Delaware and California Law
Following the Annual Meeting of Shareholders, if the Reincorporation is
approved, the Company will submit the Merger Agreement to the office of the
California Secretary of State and to the office of the Delaware Secretary of
State for filing.
Significant Differences Between the Corporation Laws of California and Delaware
The corporation laws of California and Delaware differ in many
respects. Although all the differences are not set forth in this Proxy
Statement, certain provisions, which could materially affect the rights of
shareholders, are discussed below.
Stockholder Approval of Certain Business Combinations. In recent years,
a number of states have adopted special laws designed to make certain kinds of
"unfriendly" corporate takeovers, or other transactions involving a corporation
and one or more of its significant shareholders, more difficult. Under Section
203, certain "business combinations" with "interested stockholders" of Delaware
corporations are subject to a three-year moratorium unless specified conditions
are met.
Section 203 prohibits a Delaware corporation from engaging in a
"business combination" with an "interested stockholder" for three years
following the date that such person or entity becomes an interested stockholder.
With certain exceptions, an interested stockholder is a person or entity who or
which owns, individually or with or through certain other persons or entities,
15% or more of the corporation's outstanding voting stock (including any rights
to acquire stock pursuant to an option, warrant, agreement, arrangement or
understanding, or upon the exercise of conversion or exchange rights, and stock
with respect to which the person has voting rights only), or is an affiliate or
associate of the corporation and was the owner, individually or with or through
certain other persons or entities, of 15% or more of such voting stock at any
time within the previous three years, or is an affiliate or associate of any of
the foregoing.
For purposes of Section 203, the term "business combination" is defined
broadly to include mergers with or caused by the interested stockholder; sales
or other dispositions to the interested stockholder (except proportionately with
the corporation's other stockholders) of assets of the corporation or a direct
or indirect majority-owned subsidiary equal in aggregate market value to 10% or
more of the aggregate market value of either the corporation's consolidated
assets or all of its outstanding stock; the issuance or transfer by the
corporation or a direct or indirect majority-owned subsidiary of stock of the
corporation or such subsidiary to the interested, stockholder (except for
certain transfers in a conversion or exchange or a pro rata distribution or
certain other transactions, none of which increase the interested stockholder's
proportionate ownership of any class or series of the corporation's or such
subsidiary's stock or of the corporation's voting stock); or receipt by the
interested stockholder (except proportionately as a stockholder), directly or
indirectly, of any loans, advances, guarantees, pledges or other financial
benefits provided by or through the corporation or a subsidiary.
The three-year moratorium imposed on business combinations by Section
203 does not apply if: (i) prior to the date on which such stockholder becomes
an interested stockholder the board of directors approves either the business
combination or the transaction that resulted in the person or entity becoming an
interested stockholder; (ii) upon consummation of the transaction that made him
or her an interested stockholder, the interested stockholder owns at least 85%
of the corporation's voting stock outstanding at the time the transaction
commenced (excluding from the 85% calculation shares owned by directors who are
also officers of the target corporation and shares held by employee stock plans
that do not give employee participants the right to decide confidentially
whether to accept a tender or exchange offer); or (iii) on or after the date
such person or entity becomes an interested stockholder, the board approves the
business combination and it is also approved at a stockholder meeting by 66-2/3%
of the outstanding voting stock not owned by the interested stockholder.
<PAGE>
Section 203 only applies to certain publicly held corporations that
have a class of voting stock that is (i) listed on a national securities
exchange, (ii) quoted on an interdealer quotation system of a registered
national securities association or (iii) held of record by more than 2,000
stockholders. Although a Delaware corporation to which Section 203 applies may
elect not to be governed by Section 203, Sierra Delaware does not intend to so
elect.
Section 203 will encourage any potential acquiror to negotiate with the
Company's Board of Directors. Section 203 also might have the effect of limiting
the ability of a potential acquiror to make a two-tiered bid for Sierra Delaware
in which all stockholders would not be treated equally. Shareholders should
note, however, that the application of Section 203 to Sierra Delaware will
confer upon the Board the power to reject a proposed business combination in
certain circumstances, even though a potential acquiror may be offering a
substantial premium for Sierra Delaware's shares over the then-current market
price. Section 203 would also discourage certain potential acquirers unwilling
to comply with its provisions. See "Shareholder Voting".
Removal of Directors. Under California law, any director or the entire
board of directors may be removed, with or without cause, with the approval of a
majority of the outstanding shares entitled to vote; however, no individual
director may be removed (unless the entire board is removed) if the number of
votes cast against such removal would be sufficient to elect the director under
cumulative voting. Under Delaware law, a director of a corporation that does not
have a classified board of directors or cumulative voting may be removed with or
without cause with the approval of a majority of the outstanding shares entitled
to vote at an election of directors. In the case of a Delaware corporation
having cumulative voting, if less than the entire board is to be removed, a
director may not be removed without cause if the number of shares voted against
such removal would be sufficient to elect the director under cumulative voting.
A director of a corporation with a classified board of directors may be removed
only for cause, unless the certificate of incorporation otherwise provides. The
Certificate of Incorporation of Sierra Delaware does not provide for a
classified board of directors or for cumulative voting.
Classified Board of Directors. A classified board is one on which a
certain number, but not all, of the directors are elected on a rotating basis
each year. This method of electing directors makes changes in the composition of
the board of directors more difficult, and thus a potential change in control of
a corporation a lengthier and more difficult process. California law permits
certain qualifying corporations to provide for a classified board of directors
by adopting amendments to their articles of incorporation or bylaws, which
amendments must be approved by the shareholders. Although the Company qualifies
to adopt a classified board of directors, its Board of Directors has not done
so. Delaware law permits, but does not require, a classified board of directors,
pursuant to which the directors can be divided into as many as three classes
with staggered terms of office, with only one class of directors standing for
election each year. The Sierra Delaware Certificate of Incorporation and Bylaws
do not provide for a classified board and Sierra Delaware presently does not
intend to propose establishment of a classified board. The establishment of a
classified board following the Reincorporation would require the approval of the
stockholders of Sierra Delaware.
Indemnification and Limitation of Liability. California and Delaware
have similar laws respecting indemnification by a corporation of its officers,
directors, employees and other agents. The laws of both states also permit, with
certain exceptions, a corporation to adopt a provision in its articles of
incorporation or certificate of incorporation, as the case may be, eliminating
the liability of a director to the corporation or its shareholders for monetary
damages for breach of the director's fiduciary duty. There are nonetheless
certain differences between the laws of the two states respecting
indemnification and limitation of liability.
<PAGE>
The Articles of Incorporation of the Company eliminate the liability of
directors to the corporation to the fullest extent permissible under California
law. California law does not permit the elimination of monetary liability where
such liability is based on: (a) intentional misconduct or knowing and culpable
violation of law; (b) acts or omissions that a director believes to be contrary
to the best interests of the corporation or its shareholders, or that involve
the absence of good faith on the part of the director; (c) receipt of an
improper personal benefit; (d) acts or omissions that show reckless disregard
for the director's duty to the corporation or its shareholders, where the
director in the ordinary course of performing a director's duties should be
aware of a risk of serious injury to the corporation or its shareholders; (e)
acts or omissions that constitute an unexcused pattern of inattention that
amounts to an abdication of the director's duty to the corporation and its
shareholders; (f) interested transactions between the corporation and a director
in which a director has a material financial interest; and (g) liability for
improper distributions, loans or guarantees.
The Certificate of Incorporation of Sierra Delaware also eliminates the
liability of directors to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director to the fullest extent
permissible under Delaware law, as such law exists currently or as it may be
amended in the future. Under Delaware law, such provision may not eliminate or
limit director monetary liability for: (a) breaches of the director's duty of
loyalty to the corporation or its stockholders; (b) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law; (c)
the payment of unlawful dividends or unlawful stock repurchases or redemptions;
or (d) transactions in which the director received an improper personal benefit.
Such limitation of liability provisions also may not limit a director's
liability for violation of, or otherwise relieve Sierra Delaware or its
directors from the necessity of complying with federal or state securities laws,
or affect the availability of non-monetary remedies such as injunctive relief or
rescission.
California law permits indemnification of expenses incurred in
derivative or third-party actions, except that with respect to derivative
actions (a) no indemnification may be made when a person is adjudged liable to
the corporation in the performance of that person's duty to the corporation and
its shareholders unless a court determines such person is entitled to indemnity
for expenses, and then such indemnification may be made only to the extent that
such court shall determine, and (b) no indemnification may be made without court
approval in respect of amounts paid or expenses incurred in settling or
otherwise disposing of a threatened or pending action or amounts incurred in
defending a pending action that is settled or otherwise disposed of without
court approval.
California law requires indemnification when the individual has
defended successfully the action on the merits (as opposed to Delaware law,
which requires indemnification relating to a successful defense on the merits or
otherwise).
Delaware law generally permits indemnification of expenses, including
attorney's fees, actually and reasonably incurred in the defense or settlement
of a derivative or third-party action, provided there is a determination by a
majority vote of a disinterested quorum of the directors, by independent legal
counsel or by a majority vote of a quorum of the stockholders that the person
seeking indemnification acted in good faith and in a manner reasonably believed
to be in or (in contrast to California law) not opposed to the best interests of
the corporation. Without court approval, however, no indemnification may be made
in respect of any derivative action in which such person is adjudged liable for
negligence or misconduct in the performance of his or her duty to the
corporation. Delaware law requires indemnification of expenses when the
individual being indemnified has successfully defended any action, claim, issue,
or matter therein, on the merits or otherwise.
Expenses incurred by an officer or director in defending an action may
be paid in advance, under Delaware law and California law, if such director or
officer undertakes to repay such amounts if it is ultimately determined that he
or she is not entitled to indemnification. In addition, the laws of both states
authorize a corporation's purchase of indemnity insurance for the benefit of its
officers, directors, employees and agents whether or not the corporation would
have the power to indemnify against the liability covered by the policy.
<PAGE>
California law permits a California corporation to provide rights to
indemnification beyond those provided therein to the extent such additional
indemnification is authorized in the corporation's articles of incorporation.
Thus, if so authorized, rights to indemnification may be provided pursuant to
agreements or bylaw provisions which make mandatory the permissive
indemnification provided by California law. Under California law, there are two
limitations on such additional rights to indemnification: (i) such
indemnification is not permitted for acts, omissions or transactions from which
a director of a California corporation may not be relieved of personal
liability, as described above; and (ii) such indemnification is not permitted in
circumstances where California law expressly prohibits indemnification, as
described above. The Company's Articles of Incorporation permit indemnification
beyond that expressly mandated by the California Corporations Code and limit
director monetary liability to the extent permitted by California law. The
Company has entered into indemnification agreements with its officers and
directors.
Delaware law also permits a Delaware corporation to provide
indemnification in excess of that provided by statute. By contrast to California
law, Delaware law does not require authorizing provisions in the certificate of
incorporation and does not contain express prohibitions on indemnification in
certain circumstances; limitations on indemnification may be imposed by a court,
however, based on principles of public policy.
A provision of Delaware law states that the indemnification provided by
statute shall not be deemed exclusive of any other rights under any bylaw,
agreement, vote of stockholders or disinterested directors or otherwise. Under
Delaware law, therefore, the indemnification agreements entered into by the
Company with its officers and directors may be assumed by Sierra Delaware upon
completion of the Reincorporation. If the Reincorporation is approved, the
indemnification agreements will be amended to the extent necessary to conform
the agreements to Delaware law, and a vote in favor of the Reincorporation is
also approval of such amendments to the indemnification agreements. In
particular, the indemnification agreements will be amended to include within
their purview future changes in Delaware law that expand the permissible scope
of indemnification of directors and officers of Delaware corporations.
Inspection of Shareholder List. Both California and Delaware law allow
any shareholder to inspect the shareholder list for a purpose reasonably related
to such person's interest as a shareholder. California law provides, in
addition, for an absolute right to inspect and copy the corporation's
shareholder list by persons holding an aggregate of 5% or more of a
corporation's voting shares, or shareholders holding an aggregate of 1% or more
of such shares who have filed a Schedule 14B with the Securities and Exchange
Commission in connection with a contested election of directors. The latter
provision has not been amended in response to the elimination of Schedule 14B
under the revised proxy rules. Under California law, such absolute inspection
rights also apply to a corporation formed under the laws of any other state if
its principal executive offices are in California or if it customarily holds
meetings of its board in California. Delaware law also provides for inspection
rights as to a list of stockholders entitled to vote at a meeting within a ten
day period preceding a stockholders' meeting for any purpose germane to the
meeting. However, Delaware law contains no provisions comparable to the absolute
right of inspection provided by California law to certain shareholders.
Dividends and Repurchases of Shares. California law dispenses with the
concepts of par value of shares as well as statutory definitions of capital,
surplus and the like. The concepts of par value, capital and surplus are
retained under Delaware law.
<PAGE>
Under California law, a corporation may not make any distribution
(including dividends, whether in cash or other property, and repurchases of its
shares, other than repurchases of its shares issued under employee stock plans
contemplated by Section 408 of the California Corporations Code) unless either
(i) the corporation's retained earnings immediately prior to the proposed
distribution equal or exceed the amount of the proposed distribution or (ii)
immediately after giving effect to such distribution, the corporation's assets
(exclusive of goodwill, capitalized research and development expenses and
deferred charges) would be at least equal to 125% of its liabilities (not
including deferred taxes, deferred income and other deferred credits), and the
corporation's current assets would be at least equal to its current liabilities
(or 125% of its current liabilities if the average pre-tax and pre-interest
expense earnings for the preceding two fiscal years were less than the average
interest expense for such years). Such tests are applied to California
corporations on a consolidated basis.
Delaware law permits a corporation to declare and pay dividends out of
surplus or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of all classes having a preference upon the
distribution of assets. In addition, Delaware law generally provides that a
corporation may redeem or repurchase its shares only if the capital of the
corporation is not impaired and such redemption or repurchase would not impair
the capital of the corporation.
Shareholder Voting. Both California and Delaware law generally require
that a majority of the shareholders of both acquiring and target corporations
approve statutory mergers. Delaware law does not require a stockholder vote of
the surviving corporation in a merger (unless the corporation provides otherwise
in its certificate of incorporation) if (a) the merger agreement does not amend
the existing certificate of incorporation, (b) each share of the stock of the
surviving corporation outstanding immediately before the effective date of the
merger is an identical outstanding or treasury share after the merger, and (c)
either no shares of common stock of the surviving corporation and no shares,
securities or obligations convertible into such stock are to be issued or
delivered under the plan of merger, or the authorized unissued shares or the
treasury shares of common stock of the surviving corporation to be issued or
delivered under the plan of merger plus those initially issuable upon conversion
of any other shares, securities or obligations to be issued or delivered under
such plan do not exceed 20% of the shares of common stock of such constituent
corporation outstanding immediately prior to the effective date of the merger.
California law contains a similar exception to its voting requirements for
reorganizations where shareholders or the corporation itself, or both,
immediately prior to the reorganization will own immediately after the
reorganization equity securities constituting more than five-sixths of the
voting power of the surviving or acquiring corporation or its parent entity.
Both California law and Delaware law also require that a sale of all or
substantially all of the assets of a corporation be approved by a majority of
the outstanding voting shares of the corporation transferring such assets.
With certain exceptions, California law also requires that mergers,
reorganizations, certain sales of assets and similar transactions be approved by
a majority vote of each class of shares outstanding. In contrast, Delaware law
generally does not require class voting, except in certain transactions
involving an amendment to the certificate of incorporation that adversely
affects a specific class of shares. As a result, shareholder approval of such
transactions may be easier to obtain under Delaware law for companies which have
more than one class of shares outstanding.
California law also requires that holders of nonredeemable common stock
receive nonredeemable common stock in a merger of the corporation with the
holder of more than 50% but less than 90% of such common stock or its affiliate
unless all of the holders of such common stock consent to the transaction. This
provision of California law may have the effect of making a "cash-out" merger by
a majority shareholder more difficult to accomplish. Although Delaware law does
not parallel California law in this respect, under some circumstances Section
203 does provide similar protection against coercive two-tiered bids for a
corporation in which the stockholders are not treated equally. See "Significant
Differences Between the Corporation Laws of California and Delaware--Stockholder
Approval of Certain Business Combinations."
<PAGE>
California law provides that, except in certain circumstances, when a
tender offer or a proposal for a reorganization or for a sale of assets is made
by an interested party (generally a controlling or managing person of the target
corporation), an affirmative opinion in writing as to the fairness of the
consideration to be paid to the shareholders must be delivered to shareholders.
This fairness opinion requirement does not apply to a corporation that does not
have shares held of record by at least 100 persons, or to a transaction that has
been qualified under California state securities laws. Furthermore, if a tender
of shares or vote is sought pursuant to an interested party's proposal and a
later proposal is made by another party at least ten days prior to the date of
acceptance of the interested party proposal, the shareholders must be informed
of the later offer and be afforded a reasonable opportunity to withdraw any
vote, consent or proxy, or to withdraw any tendered shares. Delaware law has no
comparable provision.
Interested Director Transactions. Under both California and Delaware
law, certain contracts or transactions in which one or more of a corporation's
directors has an interest are not void or voidable because of such interest
provided that certain conditions, such as obtaining the required approval and
fulfilling the requirements of good faith and full disclosure, are met. With
certain exceptions, the conditions are similar under California and Delaware
law. Under California and Delaware law, (a) either the shareholders or the board
of directors must approve any such contract or transaction after full disclosure
of the material facts, and, in the case of board approval, the contract or
transaction must also be "just and reasonable" (in California) or "fair" (in
Delaware) to the corporation, or (b) the contract or transaction must have been
just and reasonable or fair as to the corporation at the time it was approved.
In the latter case, California law explicitly places the burden of proof on the
interested director. Under California law, if shareholder approval is sought,
the interested director is not entitled to vote his shares at a shareholder
meeting with respect to any action regarding such contract or transaction. If
board approval is sought, the contract or transaction must be approved by a
majority vote of a quorum of the directors, without counting the vote of any
interested directors (except that interested directors may be counted for
purposes of establishing a quorum). Under Delaware law, if board approval is
sought, the contract or transaction must be approved by a majority of the
disinterested directors (even if the disinterested directors are less than a
quorum). Therefore, certain transactions that the Board of Directors of the
Company might not be able to approve because of the number of interested
directors, could be approved by a majority of the disinterested directors of
Sierra Delaware, although less than a majority of a quorum. The Company is not
aware of any plans to propose any transaction involving directors of the Company
that could not be approved under California law but could be approved under
Delaware law.
Shareholder Derivative Suits. California law provides that a
shareholder bringing a derivative action on behalf of a corporation need not
have been a shareholder at the time of the transaction in question, provided
that certain tests are met. Under Delaware law, a stockholder may bring a
derivative action on behalf of the corporation only if the stockholder was a
stockholder of the corporation at the time of the transaction in question or if
his or her stock thereafter devolved upon him or her by operation of law.
California law also provides that the corporation or the defendant in a
derivative suit may make a motion to the court for an order requiring the
plaintiff shareholder to furnish a security bond. Delaware does not have a
similar bonding requirement.
<PAGE>
Appraisal Rights. Under both California and Delaware law, a shareholder
of a corporation participating in certain major corporate transactions may,
under varying circumstances, be entitled to appraisal rights pursuant to which
such shareholder may receive cash in the amount of the fair market value of his
or her shares in lieu of the consideration he or she would otherwise receive in
the transaction. Under Delaware law, such fair market value is determined
exclusive of any element of value arising from the accomplishment or expectation
of the merger or consolidation, and such appraisal rights are not available (a)
with respect to the sale, lease or exchange of all or substantially all of the
assets of a corporation, (b) with respect to a merger or consolidation by a
corporation the shares of which are either listed on a national securities
exchange or are held of record by more than 2,000 holders if such stockholders
receive only shares of the surviving corporation or shares of any other
corporation that are either listed on a national securities exchange or held of
record by more than 2,000 holders, plus cash in lieu of fractional shares of
such corporations, or (c) to stockholders of a corporation surviving a merger if
no vote of the stockholders of the surviving corporation is required to approve
the merger under certain provisions of Delaware law.
The limitations on the availability of appraisal rights under
California law are different from those under Delaware law. Shareholders of a
California corporation whose shares are listed on a national securities exchange
or on a list of over-the-counter margin stocks issued by the Board of Governors
of the Federal Reserve System generally do not have such appraisal rights unless
the holders of at least 5% of the class of outstanding shares claim the right or
the corporation or any law restricts the transfer of such shares. Appraisal
rights are also unavailable if the shareholders of a corporation or the
corporation itself, or both, immediately prior to the reorganization will own
immediately after the reorganization equity securities constituting more than
five-sixths of the voting power of the surviving or acquiring corporation or its
parent entity (as will be the case in the Reincorporation). Appraisal or
dissenters' rights are, therefore, not available to shareholders of the Company
with respect to the Reincorporation. California law generally affords appraisal
rights in sale of asset reorganizations.
Dissolution. Under California law, shareholders holding fifty percent (50%) or
more of the total voting power may authorize a corporation's dissolution, with
or without the approval of the corporations board of directors, and this right
may not be modified by the articles of incorporation. Under Delaware law, unless
the board of directors approves the proposal to dissolve, the dissolution must
be approved by all the stockholders entitled to vote thereon. Only if the
dissolution is initially approved by the board of directors may it be approved
by a simple majority of the outstanding shares of the corporation's stock
entitled to vote. In the event of such a board-initiated dissolution, Delaware
law allows a Delaware corporation to include in its certificate of incorporation
a supermajority (greater than a simple majority) voting requirement in
connection with dissolutions. Sierra Delaware's Certificate of incorporation
contains no such supermajority voting requirement, however, and a majority of
the outstanding shares entitled to vote, voting at a meeting at which a quorum
is present, would be sufficient to approve a dissolution of Sierra Delaware that
had previously been approved by its Board of Directors.
<PAGE>
Certain Federal Income Tax Considerations
The following is a discussion of certain federal income tax
considerations that may be relevant to holders of the Company's Common Stock who
receive Sierra Delaware Common Stock in exchange for their Company Common Stock
as a result of the Reincorporation. The discussion does not address all of the
tax consequences of the Reincorporation that may be relevant to particular
Company shareholders, such as dealers in securities, or those Company
shareholders who acquired their shares upon the exercise of stock options, nor
does it address the tax consequences to holders of options or other rights to
acquire Company Common Stock. Furthermore, no foreign, state, or local tax
considerations are addressed herein. IN VIEW OF THE VARYING NATURE OF SUCH TAX
CONSEQUENCES, EACH SHAREHOLDER IS URGED TO CONSULT HIS OR HER OWN TAX ADVISOR AS
TO THE SPECIFIC TAX CONSEQUENCES OF THE PROPOSED REINCORPORATION, INCLUDING THE
APPLICABILITY OF FEDERAL, STATE, LOCAL OR FOREIGN TAX LAWS.
Subject to the limitations, qualifications and exceptions described
herein, and assuming the Reincorporation qualifies as a reorganization within
the meaning of Section 368(a) of the Code, the following tax consequences
generally should result:
(a) No gain or loss should be recognized by holders of Company
Common Stock upon receipt of Sierra Delaware Common Stock pursuant to
the Reincorporation;
(b) The aggregate tax basis of the Sierra Delaware Common
Stock received by each shareholder in the Reincorporation should be
equal to the aggregate tax basis of the Company Common Stock
surrendered in exchange therefor; and
(c) The holding period of the Sierra Delaware Common Stock
received by each shareholder of the Company should include the period
for which such shareholder held the Company Common Stock surrendered in
exchange therefor, provided that such Company Common Stock was held by
the shareholder as a capital asset at the time of Reincorporation.
The Company has not requested a ruling from the Internal Revenue
Service (the "IRS") with respect to the federal income tax consequences of the
Proposed Reincorporation under the Code. The Company will, however, receive an
opinion from its legal counsel, Wilson Sonsini Goodrich & Rosati, Professional
Corporation, substantially to the effect that the Proposed Reincorporation will
qualify as a reorganization within the meaning of Section 368(a) of the Code
(the "Tax Opinion"). The Tax Opinion will neither bind the IRS nor preclude it
from asserting a contrary position. In addition, the Tax Opinion will be subject
to certain assumptions and qualifications and will be based upon the truth and
accuracy of representations made by the Company and Sierra Delaware. Of
particular importance will be assumptions and representations relating to the
requirement (the "continuity of interest" requirement) that the shareholders of
the Company retain, through ownership of Sierra Delaware stock, a significant
equity interest in the Company's business after the Reincorporation.
A successful IRS challenge to the reorganization status of the
Reincorporation (in consequence of a failure to satisfy the "continuity of
interest" requirement or otherwise) would result in a shareholder recognizing
gain or loss with respect to each share of the Company Common Stock exchanged in
the Reincorporation equal to the difference between the shareholder's basis in
such share and the fair market value, as of the time of the Reincorporation, of
the Sierra Delaware Common Stock received in exchange therefor. In such event, a
shareholder's aggregate basis in the shares of Sierra Delaware Common Stock
received in the exchange would equal their fair market value on such date, and
the shareholder's holding period for such shares would not include the period
during which the shareholder held the Company Common Stock. Even if the
Reincorporation qualifies as a reorganization under the Code, a shareholder
would recognize gain to the extent the shareholder received (actually or
constructively) consideration other than Sierra Delaware Common Stock in
exchange for the shareholder's Common Stock of the Company.
<PAGE>
Description of Securities of Sierra Delaware
The authorized capital stock of the Sierra Delaware consists of
50,000,000 shares of Common Stock, no par value, 405,916 shares of Series D
Preferred Stock, no par value, and 5,000,000 shares of undesignated Preferred
Stock, no par value. The following summary of certain provisions of the Common
Stock and Preferred Stock does not purport to be complete and is subject to, and
qualified in its entirety by the provisions of Sierra Delaware's Certificate of
Incorporation and by the provisions of applicable law.
Common Stock. The Common Stock Shares of Sierra Delaware have no par
value. Subject to preferences that may be applicable to any Preferred Stock
which may be issued in the future, the holders of Common Stock of Sierra
Delaware are entitled to receive ratably such non-cumulative dividends, if any,
as may be declared from time to time by the Board of Directors out of funds
legally available therefor. The Common Stock of Sierra Delaware has no
preemptive or conversion rights or other subscription rights. There are no
redemption or sinking fund provisions applicable to the Common Stock. The
holders of Common Stock of Sierra Delaware are entitled to one vote per share on
all matters to be voted upon by the stockholders. In the event of liquidation,
dissolution or winding up of Sierra Delaware, the holders of Common Stock of
Sierra Delaware are entitled to share ratably in all assets remaining after
payment of liabilities, subject to liquidation preferences, if any, of Preferred
Stock which may be issued in the future. All outstanding shares of Common Stock
are fully paid and non-assessable.
Preferred Stock. The Board of Directors of Sierra Delaware has the
authority to issue up to 5,000,000 additional shares of Preferred Stock in one
or more series, to fix the rights, preferences, privileges and restrictions
granted to or imposed upon any wholly unissued series of Preferred Stock, and to
fix the number of shares constituting any series and the designations of such
series, without any further vote or action by the stockholders. The Board of
Directors, without Common Stock stockholder approval, can issue Preferred Stock
with voting and conversion rights which could adversely affect the voting power
of the holders of Common Stock. The issuance of Preferred Stock may have the
effect of delaying, deferring or preventing a change in control of Sierra
Delaware.
Rights of Holders of Special Shares of PMC. The Special Shares, no par
value, of PMC are redeemable for Common Stock of Sierra California. Special
Shares do not have voting rights in Sierra California, but in all other respects
they represent the economic and functional equivalent of the Common Stock of
Sierra California for which they can be redeemed. Under applicable law, each
class of Special Shares will have class voting rights in certain circumstances
with respect to transactions that effect the rights of the class and for certain
extraordinary corporate transactions. Two kinds of Special Shares are
outstanding: A Special Shares and B Special Shares. Upon the Effective Date, all
of Sierra California's obligations towards holders of PMC Special Shares will be
assumed by Sierra Delaware.
<PAGE>
PROPOSAL NO. 3:
APPROVAL OF AMENDMENT TO THE
1994 INCENTIVE STOCK PLAN
The 1994 Incentive Stock Plan (the "1994 Plan") was adopted by the
Board of Directors in January 1994 and approved by the shareholders in May 1994.
Prior to April 1997, 3,600,000 shares were reserved for issuance under the 1994
Plan. In February 1997, the Board of Directors approved an amendment to the 1994
Plan to increase the number of shares reserved for issuance by 500,000 shares to
a new total of 4,100,000 shares. Proposal No. 3 seeks shareholder approval of
the amendments made by the Board of Directors in February 1997.
The essential features of the 1994 Plan are set forth below:
General: The 1994 Plan provides for the granting to employees of
"incentive stock options" within the meaning of Section 422 of the Internal
Revenue Code of 1986 (the "Code"), and for the granting of nonstatutory options,
stock bonuses and stock purchase rights to employees, consultants, sales
representatives and distributors. As of March 30, 1997, options to purchase
2,462,563 were outstanding, 859,053 shares were available for future grant,
options to purchase 278,394 shares had been exercised and 20,000 shares had been
issued as a stock bonus. As of March 30, 1997, approximately 234 persons were
eligible to participate in the 1994 Plan and the closing price of the Company's
Common Stock as last reported on the Nasdaq National Market was $16.50.
Administration and Eligibility: The 1994 Plan is currently administered
by the Board of Directors. The Stock Option Committee (comprised of Mr. Diller
and any other director) has authority to grant options to purchase up to 20,000
shares for each individual, but has no authority to grant options to persons
subject to Section 16 of the Exchange Act. The administrator determines the
terms of options granted, including the exercise price, number of shares subject
to the option and the exercisability thereof, and the terms of stock purchase
rights and stock bonuses.
The 1994 Plan provides that no officer or employee may be granted in
any one fiscal year stock options or purchase rights with respect to more than
800,000 shares of Common Stock. There is also a limit on the aggregate market
value of shares subject to all incentive stock options which may be granted to
an optionee during any calendar year. See "Tax Information Regarding Stock
Options" below.
Consideration to be Paid: The consideration to be paid for shares may
consist of cash, check, promissory note, shares of Common Stock of the Company,
a reduction in the amount of any indebtedness of the Company to the optionee, or
such other consideration as permitted under applicable law. The Company may
issue stock bonuses in exchange for past or future services as permitted by
applicable law.
Additional Terms of Options:
Options are not transferable by the optionee other than by will or the
laws of descent and distribution, and each option is exercisable during the
lifetime of the optionee only by such optionee. The exercise price of all
incentive stock options must be at least equal to the fair market value of the
shares of Common Stock on the date of grant. The exercise price of all
nonstatutory stock options must be at least 85% of the fair market value of the
Common Stock on the date of grant. Options generally have not been granted at
exercise prices less than 100% of the fair market value on the date of grant.
The term of each option may not exceed ten years. With respect to any
participant who owns stock possessing more than 10% of the voting rights of the
Company's outstanding capital stock, the exercise price of any incentive stock
option granted must equal at least 110% of the fair market value on the grant
date and the maximum term of the option must not exceed five years.
<PAGE>
The administrators of the 1994 Plan determine when options granted
thereunder will become exercisable. Options granted before March 1, 1996
generally vest at the rate of 1/48th of the shares subject to the option at the
end of each calendar month. Options granted after March 1, 1996 generally become
exercisable as to 1/4 of total shares subject to the option after one year;
thereafter, 1/48 of the shares subject to the option vest at the end of each
calendar month.
If a participant's services to the Company terminate for any reason
other than death or disability, the participants option may be exercised only
during a specified period of time after termination and only to the extent the
option was exercisable on the date of termination. If a participant's status
changes from that of an employee to a consultant, the participant's options will
automatically convert from incentive stock options to nonstatutory stock options
on the 91st day after such change of status.
In the event of a merger of the Company with or into another
corporation or a sale of substantially all of the Company's assets, the Board of
Directors must accelerate the exercisability of all outstanding options unless
the outstanding options are assumed or equivalent options are substituted by the
successor corporation.
Additional Terms of Stock Bonuses and Stock Purchase Rights: Shares
issued pursuant to stock bonuses and stock purchase rights can be subject to
repurchase by the Company at the original purchase price of the shares or, in
the case of stock bonuses, at the fair market price of the shares on the date of
grant in the event that the person acquiring the shares ceases to be employed by
the Company or ceases to be a distributor for or representative of the Company.
The repurchase option lapses at a rate determined by the administrator.
Terms of Options to Non-Officer Directors: Option grants to members of
the Board of Directors who are not employees or consultants of the Company
("non-officer directors") are automatic and non-discretionary. Upon initial
election, each non-officer director of the Company automatically receives an
option to purchase 20,000 shares of Common Stock. On June 1 in each calendar
year, each continuing non-officer director of the Company who first served as a
non-officer director prior to September 1, 1995 automatically receives an option
to purchase 5,000 shares of Common Stock, provided in each case that such person
has served in such capacity for the prior 12 months. Each non-officer director
of the Company who first served as a non-officer director after September 1,
1995, shall automatically be granted an option to purchase 5,000 shares on each
anniversary date of each such person's election to the board, provided each such
person continues to serve as a non-officer director on such dates. Additionally,
in September 1996 the Board granted to each non-officer director an option to
purchase 5,000 shares. Options granted before March 1, 1996 become exercisable
at the rate of 1/48th of the shares subject to the option at the end of each
calendar month. Options granted after March 1, 1996, become exercisable at the
rate of 1/4 of the total shares subject to the option after one year;
thereafter, 1/48 of the shares subject to the option vest at the end of each
calendar month.
Amendments to the Plan: The Board of Directors may amend or terminate
the plan from time to time in such respect as the board may deem advisable. To
the extent necessary and desirable to comply with Rule 16b-3 under the Exchange
Act (or any other applicable law or regulation), the Company will obtain
approval of the shareholders of the Company to the extent and in the manner
required by such law or regulation.
Tax Information Regarding Stock Options: Options granted under the 1994
Plan may be either "incentive stock options," as defined in Section 422 of the
Code, or nonstatutory options.
<PAGE>
An optionee who is granted an incentive stock option will not recognize
taxable income either at the time the option is granted or upon its exercise,
although the exercise may subject the optionee to the alternative minimum tax.
Upon the sale or exchange of the shares more than two years after grant of the
option and one year after exercising the option, any gain or loss will be
treated as long-term capital gain or loss. If these holding periods are not
satisfied, the optionee will recognize ordinary income at the time of sale or
exchange equal to the difference between the exercise price and the lower of (i)
the fair market value of the shares at the date of the option exercise or (ii)
the sale price of the shares. A different rule for measuring ordinary income
upon such a premature disposition may apply if the optionee is also an officer,
director, or 10% shareholder of the Company. The Company will be entitled to a
deduction in the same amount as the ordinary income recognized by the optionee.
Any gain or loss recognized on such a premature disposition of the shares in
excess of the amount treated as ordinary income will be characterized as
long-term or short-term capital gain or loss, depending on the holding period.
All other options which do not qualify as incentive stock options are
referred to as nonstatutory options. An optionee will not recognize any taxable
income at the time he is granted a nonstatutory option. However, upon its
exercise, the optionee will recognize taxable income generally measured as the
excess of the then fair market value of the shares purchased over the purchase
price. Any taxable income recognized in connection with an option exercise by an
optionee who is also an employee of the Company will be subject to tax
withholding by the Company. Upon resale of such shares by the optionee, any
difference between the sales price and the optionee's tax basis (purchase price
plus the income recognized on exercise), will be treated as long-term or
short-term capital gain or loss, depending on the holding period.
The Company will be entitled to a tax deduction in the same amount as
the ordinary income recognized by the Optionee with respect to shares acquired
upon exercise of a nonstatutory option.
The foregoing is only a summary of the effect of federal income
taxation upon the optionee and the Company with respect to the grant and
exercise of options under the 1994 Plan, does not purport to be complete, and
does not discuss the tax consequences of the optionee's death or the income tax
laws of any municipality, state or foreign country in which an optionee may
reside.
Tax Information Regarding Stock Purchase and Stock Bonus Rights: The
shares of Common Stock acquired upon exercise of a stock purchase right or
pursuant to a stock bonus will be deemed "property subject to substantial risk
of forfeiture" within the meaning of Section 83 of the Internal Revenue Code by
reason of the repurchase option in favor of the Company described above. Unless
an election is filed with the Internal Revenue Service under Section 83(b) of
the Code within 30 days after the date of purchase or bonus, the participant
will not be taxed at the time of purchase or bonus on any difference between the
fair market value of the shares at the time of purchase or bonus and the amount
(if any) paid for the shares, nor will the participant's long-term capital gain
holding period begin to run at the time of purchase or bonus. Rather, at such
time or times as the repurchase option expires, the participant will recognize
ordinary income in an amount equal to the difference between the amount (if any)
paid for the shares and the fair market value of the shares at such time or
times, whether or not the shares are sold at such tune, and the long-term
capital gain holding period will begin to run at such time or times. If an
election is timely made under Section 83(b), the participant will recognize
ordinary income at the time of purchase or bonus in the amount of any difference
between the fair market value of the stock at such time and the amount (if any)
paid for the shares. The income recognized by a participant who is also an
employee will be treated as wages and will be subject to tax withholding by the
Company. The Company will be entitled to a tax deduction in the amount and at
the time that the participant recognizes ordinary income with respect to shares
acquired upon exercise of a stock purchase right or pursuant to a stock bonus.
<PAGE>
Participation in the Option Plan: The grant of options and stock
purchase rights under the 1994 Plan to executive officers is subject to the
discretion of the Board or the Plan Committee. Options to purchase a total of
315,000 shares were granted during fiscal 1996 to executive officers under the
1994 Plan. There has been no determination by the Board or the Plan Committee
with respect to future awards under the 1994 Plan.
The grant of options under the 1994 Plan to non-officer directors is
described under "Terms of Options to Non-Officer Directors." Options to purchase
a total of 35,000 shares were granted during fiscal 1996 to non-officer
directors under the 1994 Plan. Assuming that each of the Company's current
non-officer directors remains a director through June 5, 1997 and if Mr.
Beaumont is elected to the Board, options to purchase 35,000 shares will be
granted to non-officer directors in fiscal 1997. Each of these options will be
exercisable at a price equal to the fair market value of the Company's Common
Stock on the date of grant.
It is not possible at this time to determine the value of these option grants.
The following table sets forth information regarding grants made under
the 1994 Plan for the last fiscal year ended December 29, 1996 to (i) each
executive officer named in the Summary Compensation Table, (ii) all current
executive officers as a group, (iii) all non-officer directors and nominees for
election as directors as a group and (iv) all employees as a group.
Future option grants to the individuals listed below are not presently
determinable.
Weighted Average
Options Exercise Price
Identity of Person or Group Granted(#) Per Share
- --------------------------------------------- --------- ---------------
James V. Diller . . . . . . . . . . . . . . . 120,000 $17.00
Robert L. Bailey . . . . . . . . . . . . . . 50,000 $17.00
Colin Beaumont . . . . . . . . . . . . . . . -- --
Glenn C. Jones . . . . . . . . . . . . . . . 75,000 $14.583
Richard J. Koeltl . . . . . . . . . . . . . . 70,000 $17.00
Gregory Aasen . . . . . . . . . . . . . . . . -- --
Alexandre Balkanski . . . . . . . . . . . . . 5,000 $14.50
Michael L. Dionne . . . . . . . . . . . . . . 5,000 $14.50
Frank Marshall . . . . . . . . . . . . . . . 20,000 $15.9375
All current executive officers as a group . . 315,000 $16.4246
All non-officer directors as a group . . . . 35,000 $15.3214
All employees as a group . . . . . . . . . . 1,063,624 $13.6178
Vote Required
The affirmative vote of a majority of the Votes Cast will be required
to approve the amendment to the 1994 Plan.
Recommendations
The Company's Board of Directors recommends a vote FOR Proposal No. 3.
<PAGE>
PROPOSAL NO. 4:
APPROVAL OF THE 1996 PMC-SIERRA, INC. (PORTLAND) STOCK OPTION PLAN
The Company has agreed to issue up to 450,000 shares of Common Stock
upon exercise of options held by employees of PMC-Sierra, Inc. (Portland) ("PMC
Portland") under the PMC Portland Stock Option Plan ("Portland Plan"). The
principal features of the Portland Plan are outlined below:
General: The Portland Plan provides PMC Portland employees with an
opportunity to purchase Common Stock of the Company.
The Portland Plan provides for the grant to PMC Portland employees of
"incentive stock options" within the meaning of Section 422 of the Internal
Revenue Code of 1986 (the "Code"), and for the grant of nonstatutory options to
PMC Portland employees and consultants. As of March 29, 1997, options to
purchase 385,938 shares were outstanding, 40,058 shares were available for
future grant, and 24,004 had been exercised. As of March 30, 1997, approximately
[16] persons were eligible to participate in the Portland Plan and the closing
price of the Company's Common Stock as last reported on the Nasdaq National
Market was $16.50.
Administration and Eligibility: The Portland Plan is currently
administered by the PMC Portland Board of Directors. The administrator
determines the terms of options granted, including the exercise price, number of
shares subject to the option and the exercisability thereof.
The Portland Plan provides that no officer or employee may be granted
in any one fiscal year stock options or purchase rights with respect to more
than 450,000 shares of Common Stock. There is also a limit on the aggregate
market value of shares subject to all incentive stock options which may be
granted to an optionee during any calendar year. See "Tax Information Regarding
Stock Options" below.
Consideration to be Paid: The consideration to be paid for shares may
consist of cash, check, promissory note, shares of Common Stock of the Company,
a reduction in the amount of any indebtedness of the Company to the optionee, or
other consideration as permitted under state and corporate securities laws and
the Internal Revenue Code.
Additional Terms of Options: Options are not transferable by the
optionee other than by will or the laws of descent and distribution, and each
option is exercisable during the lifetime of the optionee only by such optionee.
The exercise price of all incentive stock options must be at least equal to the
fair market value of the shares of Common Stock of Sierra on the date of grant.
The exercise price of all nonstatutory stock options must be at least 85% of the
fair market value of Sierra's Common Stock on the date of grant. Options
generally have not been granted at exercise prices less than 100% of the fair
market value on the date of grant. The term of each option may not exceed ten
years. With respect to any participant who owns stock possessing more than 10%
of the voting rights of the Sierra outstanding capital stock, the exercise price
of any incentive stock option granted must equal at least 110% of the fair
market value on the grant date and the maximum term of the option must not
exceed five years.
The administrator of the Portland Plan determines when options granted
thereunder will become exercisable. Options generally become exercisable as to
1/4 of the total shares subject to the option after one year; thereafter, 1/48
of the shares subject to the option vest at the end of each calendar month.
<PAGE>
If a participant's services to the Company terminate for any reason
other than death or disability, the participant's option may be exercised only
during a specified period of time after termination and only to the extent the
option was exercisable on the date of termination. Upon such termination the
participant's option will continue to vest according to the vesting schedule
unless the termination is by the Company for cause, as defined in the Portland
Plan. If a participant's status changes from that of an employee to a
consultant, the participant's options automatically convert from incentive stock
options to nonstatutory stock options on the 91st day after such change of
status.
In the event of a merger of the Company with or into another
corporation or a sale of substantially all of the Company's assets, the Board of
Directors must accelerate the exercisability of all outstanding options unless
the outstanding options are assumed or equivalent options are substituted by the
successor corporation.
Amendments to the Plan: The Board of Directors may amend or terminate
the plan from time to time in such respect as the board may deem advisable. To
the extent necessary and desirable to comply with Rule 16b-3 under the Exchange
Act (or any other applicable law or regulation), the Company will obtain
approval of the shareholders of the Company to the extent and in the manner
required by such law or regulation.
Tax Information Regarding Stock Options: Options granted under the
Portland Plan may be either "incentive stock options," as defined in Section 422
of the Code, or nonstatutory options.
An optionee who is granted an incentive stock option will not recognize
taxable income either at the time the option is granted or upon its exercise,
although the exercise may subject the optionee to the alternative minimum tax.
Upon the sale or exchange of the shares more than two years after grant of the
option and one year after exercising the option, any gain or loss will be
treated as long-term capital gain or loss. If these holding periods are not
satisfied, the optionee will recognize ordinary income at the time of sale or
exchange equal to the difference between the exercise price and the lower of (i)
the fair market value of the shares at the date of the option exercise or (ii)
the sale price of the shares. A different rule for measuring ordinary income
upon such a premature disposition may apply if the optionee is also an officer,
director, or 10% shareholder of the Company. The Company will be entitled to a
deduction in the same amount as the ordinary income recognized by the optionee.
Any gain or loss recognized on such a premature disposition of the shares in
excess of the amount treated as ordinary income will be characterized as
long-term or short-term capital gain or loss, depending on the holding period.
All other options which do not qualify as incentive stock options are
referred to as nonstatutory options. An optionee will not recognize any taxable
income at the time he is granted a nonstatutory option. However, upon its
exercise, the optionee will recognize taxable income generally measured as the
excess of the then fair market value of the shares purchased over the purchase
price. Any taxable income recognized in connection with an option exercise by an
optionee who is also an employee of the Company will be subject to tax
withholding by the Company. Upon resale of such shares by the optionee, any
difference between the sales price and the optionee's tax basis (purchase price
plus the income recognized on exercise), will be treated as long-term or
short-term capital gain or loss, depending on the holding period.
The Company will be entitled to a tax deduction in the same amount as
the ordinary income recognized by the Optionee with respect to shares acquired
upon exercise of a nonstatutory option.
The foregoing is only a summary of the effect of federal income
taxation upon the optionee and the Company with respect to the grant and
exercise of options under the Portland Plan, does not purport to be complete,
and does not discuss the tax consequences of the optionee's death or the income
tax laws of any municipality, state or foreign country in which an optionee may
reside.
<PAGE>
Participation in the Portland Plan: The grant of options under the
Portland Plan to executive officers, is subject to the discretion of the Board
of PMC Portland. No options were granted during fiscal 1996 to executive
officers or non-officer directors of the Company under the Portland Plan. There
has been no determination by the Board of PMC Portland with respect to future
awards under the Portland Plan.
Vote Required
The affirmative vote of a majority of the Votes Cast will be required
to approve the Portland Plan.
Recommendations
The Company's Board of Directors recommends a vote FOR Proposal No. 4.
PROPOSAL NO. 5:
CONFIRMATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Company's Board of Directors selected Deloitte & Touche LLP as the
Company's independent auditor for the 1997 fiscal year in April 1997. There were
no disagreements with the Ernst & Young LLP, the Company's independent auditor
for fiscal 1996, regarding accounting principles or practices, financial
statement disclosure, or auditing scope or procedure. Ernst & Young LLP's
reports for either of the past two completed fiscal years and the following
interim period did not contain an adverse opinion or a disclaimer of opinion,
and was not qualified as to uncertainty, audit scope or accounting principles.
Prior to selecting Deloitte & Touche LLP, the Company had not consulted with
Deloitte & Touche LLP regarding the application of accounting principles, the
type of audit opinion that might be rendered on the Company's financial
statements, or any event that was either a reportable event or the subject of a
disagreement.
The Company's Board of Directors recommends that the shareholders
ratify such selection. In the event of a negative vote, the Board of Directors
will reconsider its selection. Representatives of Deloitte & Touche LLP are
expected to be present at the meeting with the opportunity to make a statement
if they desire to do so, and are expected to be available to respond to
appropriate questions.
Vote Required
The affirmative vote of a majority of the Votes Cast will be required
confirm the appointment of Deloitte & Touche LLP as independent auditors of the
Company for the 1997 fiscal year.
Recommendation
The Company's Board of Directors recommends a vote FOR Proposal No. 5.
<PAGE>
EXECUTIVE COMPENSATION
Compensation Tables
Summary Compensation Table. The following table sets forth the
compensation paid by any person for all services rendered in all capacities to
the Company and its subsidiaries, for each of the three fiscal years in the
period ended December 29, 1996, to the Chief Executive Officer and each of the
other four most highly compensated executive officers of the Company in 1996:
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation(1)
------------------------- ---------------
Securities All Other
Underlying Compensation
Name and Principal Position Year Salary ($) Bonus ($) Options (#) ($)(2)
- ------------------------------------- ------ ----------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Gregory Aasen . . . . . . . . . . . . 1996 135,055 72,013 -- 63
Chief Operating Officer and Secretary 1995 116,801 35,460 50,000 174
of PMC 1994 88,490 -- -- 162
James V. Diller . . . . . . . . . . . 1996 300,019 311,068 120,000 683
Chairman and Chief Executive Officer 1995 281,683 265,781 100,000 683
1994 257,193 37,877 138,192 (3) 683
Robert L. Bailey(4) . . . . . . . . . 1996 209,438 125,200 50,000 25,569 (5)
President and Chief Executive Officer 1995 200,868 124,861 -- 26,407 (6)
of PMC 1994 175,432 53,129 18,332 (7) 173
Richard J. Koeltl(8). . . . . . . . . 1996 230,004 193,986 70,000 683
President and Chief Operating Officer 1995 214,474 172,757 100,000 683
1994 191,565 24,620 50,000 683
Glenn C. Jones. . . . . . . . . . . . 1996 182,021 143,808 75,000 683
Senior Vice President, Finance and 1995 167,632 132,890 50,000 683
Chief Financial Officer 1994 (9) 134,733 15,073 240,000 580
<FN>
(1) The Company made no restricted stock awards during the periods presented.
(2) Life insurance premiums, except as indicated in Notes 5 and 6.
(3) Includes 38,192 shares issuable upon redemption of PMC Special Shares
subject to an option.
(4) Mr. Bailey became an officer of the Company in September 1994.
(5) Includes $96 for life insurance premium and $25,473 to reimburse interest
paid to PMC. See "Certain Transactions."
(6) Includes $170 for life insurance premium and $26,237 to reimburse interest
paid to PMC. See "Certain Transactions."
(7) Includes 18,332 shares issuable upon redemption of PMC Special Shares
subject to an option.
(8) Mr. Koeltl joined the Company in July 1993 and was employed by the Company
until September 1996. During the remainder of 1996, he provided consulting
services to the Company.
(9) Mr. Jones joined the Company in February 1994.
</FN>
</TABLE>
<PAGE>
Option Grants in Last Fiscal Year. The following table sets forth each
grant of stock options made during the fiscal year ended December 29, 1996 to
each of the executive officers named in the Summary Compensation Table above:
<TABLE>
<CAPTION>
Individual Grants Potential Realizable Value
--------------------------------------------------------------- at Assumed Annual
% of Total Options Rates of Stock
Granted to Exercise or Price Appreciation
Options Employees Base Price Expiration for Option Term(5)
Name Granted(1)(2) in Fiscal Year(3) ($/sh)(4) Date 5%($) 10%($)
- ------------------------ ------------ ------------------- ----------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Gregory Aasen -- -- -- -- -- --
Robert L. Bailey 50,000 3.7 17.00 01/23/2006 530,310 1,341,480
James V. Diller 120,000 8.9 17.00 01/23/2006 1,282,945 3,251,235
Glenn C. Jones 50,000 3.7 17.00 01/23/2006 534,560 1,354,681
25,000 1.9 9.75 09/09/2006 153,293 388,475
Richard J. Koeltl 70,000 5.2 17.00 09/23/2006 748,385 1,896,554
<FN>
(1) The listed options become exercisable as to 1/48th of the shares subject
to the option at the end of each month after the date of grant with full
vesting occurring on the fourth anniversary of the date of grant, except
for the 25,000 shares granted to Mr. Jones which become exercisable as to
1/4 of the shares subject to the option one year after the date of grant
and thereafter monthly as to 1/48 of the shares subject to the option.
(2) Under the terms of the Company's 1994 Incentive Stock Plan, the Board of
Directors retains discretion, subject to plan limits, to modify the terms
of outstanding options and to reprice the options.
(3) The Company granted options to purchase 1,348,574 shares of Common Stock
to employees in fiscal 1996.
(4) The exercise price and tax withholding obligations related to exercise may
in some cases be paid by delivery of other shares or by offset of the
shares subject to the options.
(5) The 5% and 10% assumed annualized rates of compound stock price
appreciation are mandated by rules of the Securities and Exchange
Commission and do not represent the Company's estimate or a projection by
the Company of future Common Stock prices.
</FN>
</TABLE>
<PAGE>
Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-End
Values. The following table sets forth, for each of the executive officers named
in the Summary Compensation Table above, stock options exercised during the
fiscal year ended December 29, 1996 and the fiscal year-end value of unexercised
options:
<TABLE>
<CAPTION>
Number of Securities Value(1) of Unexercised
Shares Underlying Unexercised In-the-Money Options at
Acquired on Value Options at Fiscal Year-End: Fiscal Year-End:
Name Exercise Realized(1)(2)($) Exercisable/Unexercisable(3) Exercisable/Unexercisable($)
- ------------------------- ----------- ---------------- --------------------------- ---------------------------
<S> <C> <C> <C> <C>
Gregory Aasen 646 1,127 12,500/37,500 1,563/4,688
Robert L. Bailey 14,243 112,812 11,840/42,743(4) 3,722/40,922
James V. Diller 20,795 168,887 384,440/173,752(5) 3,672,471/736,999
Glenn C. Jones 2,470 20,118 205,416/159,584 2,240,935/1,203,440
Richard J. Koeltl 125,795 1,233,887 214,373/170,627 2,235,586/1,197,539
- -------------------------
<FN>
(1) Shares acquired includes shares purchased pursuant to the Company's
Employee Stock Purchase Plan. Value realized includes the difference
between the closing market price of the Common Stock on the purchase date
and the purchase price of the shares purchased.
(2) Market value of underlying securities at exercise date (for value
realized) or year-end (for value at year-end), minus the exercise price.
At December 29, 1996 the closing market price for the Company's stock was
$16.125.
(3) Does not include outstanding PMC Special Shares redeemable for shares of
Common Stock of the Company. (4) Includes 4,583 shares issuable upon
redemption of PMC Special Shares subject to options. (5) Includes 38,192
shares issuable upon redemption of PMC Special Shares subject to options.
</FN>
</TABLE>
Compensation Committee Report on Executive Compensation
Compensation Philosophy.
Under the supervision of the Compensation Committee of the Board of
Directors, the Corporation has developed and implemented compensation policies,
plans and programs which seek to enhance the profitability of the Company, and
thus shareholder value, by aligning closely the financial interests of the
Company's senior managers with those of its shareholders. In furtherance of
these goals, annual base salaries are generally set below competitive levels to
emphasize annual and longer-term incentive compensation. This is meant to
attract, motivate and retain corporate officers and other key employees to
perform to the full extent of their abilities. Both types of incentive
compensation are variable and closely tied to corporate performance in a manner
that encourages continuing focus on profitability and shareholder value.
Compensation for the Company's executive officers consists of a base
salary and annual and longer-term incentive compensation. The Committee
considers the total compensation (earned or potentially available) of each
executive officer in establishing each element of compensation.
Cash-Based Compensation.
Each fiscal year the Committee reviews with the Chief Executive Officer
and approves, with appropriate modifications, an annual base salary plan for the
Company's senior executives. This base salary plan is based on industry, peer
group, and national surveys and performance judgements as to the past and
expected future contributions of the individual senior executives. The base
salaries are fixed at a level below the competitive amounts paid to senior
managers with comparable qualifications, experience and responsibilities at
other similarly sized high-technology companies. The Committee reviews and fixes
the base salary of the Chief Executive Officer based on similar competitive
compensation data and the Committee's assessment of his past performance and its
expectation as to his future contributions in leading the Company.
Each executive officer, including the Chief Executive Officer, is
eligible to receive a quarterly cash bonus equal to a percentage of the
Company's operating group's pre-tax profits for the quarter. The percentages of
profits for each participant are determined annually by the Compensation
Committee based upon performance judgments as to the past and expected future
contributions of the individual senior executives.
<PAGE>
Stock Options.
During each fiscal year, the Committee considers the desirability of
granting to executive officers awards under the Company's Incentive Stock Plan,
which provides the flexibility to grant longer-term incentives in a variety of
forms, including stock options and restricted stock. In fixing the grants of
stock options to executive officers (other than the Chief Executive Officer),
the Committee reviewed with the Chief Executive Officer the recommended
individual award, taking into account scope of accountability, strategic and
operational goals, and anticipated performance requirements and contributions of
the senior management group. The award to the Chief Executive Officer was fixed
separately and was based, among other things, on a review of competitive
compensation data from several surveys, data from selected peer companies,
information regarding long-term compensation awards as well as the Committee's
perception of past and expected future contributions to the Company's
achievement of its long-term performance goals. In addition, when hiring new
executive officers, the Committee may recommended a grant of options upon
acceptance of employment. These grants are made in order to retain qualified
personnel and take into account the compensation policies of the Company's
competitors and the unique qualifications of the new executives.
Respectfully submitted by:
Alexandre Balkanski
Michael L. Dionne
Compensation Committee Interlocks and Insider Participation
During fiscal 1996, the Company sold $18,936,000 of products to Apple
Computer, Inc., with which Mr. Dionne, a director of the Company, was
affiliated.
<PAGE>
PERFORMANCE GRAPH
The following graph shows a comparison of cumulative total shareholder
returns for the Company, the Nasdaq National Market, and the line-of-business
index for semiconductors and related devices (SIC code 3674) published by Media
General Financial Services. The graph assumes the investment of $100 on March
31, 1992. The performance shown is not necessarily indicative of future
performance.
Comparison of 60-Month Cumulative Total Return*
Among Sierra Semiconductor Corporation,
Nasdaq National Market Index and SIC Code Index
[GRAPH OMITTED]
- -------------------------
* The total return on each of these investments assumes the reinvestment
of dividends, although dividends have never been paid on the Company's
Common Stock.
<PAGE>
OTHER MATTERS
The Company knows of no other matters to be submitted to the meeting.
If any other matters properly come before the meeting, the persons named in the
accompanying form of proxy will vote the shares represented by proxy as the
Board of Directors may recommend or as the proxy holders, acting in their sole
discretion, may determine.
THE COMPANY WILL MAIL WITHOUT CHARGE TO ANY SHAREHOLDER, UPON WRITTEN
REQUEST, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1996, INCLUDING, IF SO REQUESTED, THE FINANCIAL STATEMENTS,
SCHEDULES AND A LIST OF EXHIBITS. REQUESTS SHOULD BE SENT TO: INVESTOR
RELATIONS, SIERRA SEMICONDUCTOR CORPORATION, 2222 QUME DRIVE, SAN JOSE,
CALIFORNIA 95131.
FOR THE BOARD OF DIRECTORS
Dated: April 28, 1997
<PAGE>
APPENDIX: FORM OF PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
SIERRA SEMICONDUCTOR CORPORATION
ANNUAL MEETING OF SHAREHOLDERS JUNE 5, 1997
The undersigned shareholder of SIERRA SEMICONDUCTOR CORPORATION (the
"Company") acknowledges receipt of the Notice of Annual Meeting of Shareholders
and the Proxy Statement each dated June 5, 1997, and the undersigned revokes all
prior proxies and appoints James V. Diller and Glenn C. Jones and each of them,
proxies and attorneys-in-fact, with full power to each of substitution, on
behalf and in the name of the undersigned to represent the undersigned and to
vote all shares of Common Stock of the Company which the undersigned would be
entitled to vote at the Annual Meeting of Shareholders to be held at the Clarion
Hotel Villa located at 4331 Dominion Street, Burnaby, British Columbia V5G 1C7,
on June 5, 1997 at 3:00 p.m., and at any adjournment thereof, and instructs said
proxies to vote as follows:
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE PROPOSAL.
1. TO ELECT DIRECTORS OF THE COMPANY TO SERVE UNTIL THE NEXT ANNUAL
MEETING OR THE ELECTION OF THEIR SUCCESSORS.
FOR all nominees listed below (except as indicated) WITHHOLD
--- ---
If you wish to withhold authority to vote for any individual nominee,
strike a line through that nominee's name in the list below:
James V. Diller Michael L. Dionne Frank Marshall
Robert L. Bailey Alexandre Balkanski Colin Beaumont
2. TO APPROVE THE 1996 STOCK OPTION PLAN OF PMC-SIERRA, INC.(PORTLAND)
INCLUDING A RESERVE OF 450,000 SHARES OF THE COMPANY FOR ISSUANCE
UPON EXERCISE OF THE OPTIONS.
FOR AGAINST ABSTAIN
--- --- ---
3. TO APPROVE AN AMENDMENT TO THE 1994 INCENTIVE STOCK PLAN TO INCREASE
THE NUMBER OF SHARES RESERVED FOR ISSUANCE BY 500,000 SHARES.
FOR AGAINST ABSTAIN
--- --- ---
4. TO APPROVE A CHANGE IN THE COMPANY'S STATE OF INCORPORATION FROM
DELAWARE AND TO CHANGE THE COMPANY'S NAME TO PMC-SIERRA, INC.
FOR AGAINST ABSTAIN
--- --- ---
5. TO CONFIRM THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE COMPANY'S
INDEPENDENT AUDITORS FOR THE 1997 FISCALYEAR.
FOR AGAINST ABSTAIN
--- --- ---
6. TO TRANSACT SUCH OTHER BUSINESS, IN THEIR DISCRETION AS MAY PROPERLY
COME BEFORE THE MEETING OR ANY ADJOURNMENTS THEREOF.
FOR AGAINST ABSTAIN
--- --- ---
Dated: , 1997
----------------------------------------------------
Signature
----------------------------------------------------
Signature
(Note: This Proxy should be marked, dated and signed
by the shareholder exactly as his/her name is
printed at the left and returned promptly in the
enclosed envelope. A person signing as an executor,
administrator, trustee or guardian should so
indicate and specify his/her title. If a
corporation, please sign in full corporate name by
President or other authorized officer. If a
partnership, please sign in partnership name by
authorized person. If shares are held by joint
tenants or a community property, all joint owners
should sign.)
EXHIBIT A
---------
AGREEMENT AND PLAN OF MERGER BETWEEN
PMC-SIERRA, INC., A DELAWARE CORPORATION
AND
SIERRA SEMICONDUCTOR CORPORATION, A CALIFORNIA CORPORATION
THIS AGREEMENT AND PLAN OF MERGER dated as of ________ __, 1997, (the
"Agreement") is between PMC-SIERRA, INC., a Delaware corporation
("Sierra-Delaware") and SIERRA SEMICONDUCTOR CORPORATION, a California
corporation ("Sierra-California"). Sierra-Delaware and Sierra-California are
sometimes referred to herein as the "Constituent Corporations."
R E C I T A L S
---------------
A. Sierra-Delaware is a corporation duly organized and existing under
the laws of the State of Delaware and has an authorized capital of 55,000,000
shares, 50,000,000 of which are designated "Common Stock," no par value, and
5,000,000 of which are designated "Preferred Stock", no par value. As of the
date of this Agreement, 1,000 shares of Common Stock were issued and
outstanding, all of which were held by Sierra-California. No shares of Preferred
Stock were issued and outstanding.
B. Sierra-California is a corporation duly organized and existing under
the laws of the State of California and has an authorized capital of 55,500,000
shares, 50,000,000 of which are designated "Common Stock", no par value,
5,000,000 of which are designated "Preferred Stock", no par value, and 500,000
of which are designated "Series D Preferred Stock," no par value. As of the date
of this Agreement, ___________ shares of Common Stock were issued and
outstanding. No shares of Preferred Stock or Series D Preferred Stock were
issued and outstanding.
C. The Board of Directors of Sierra-California has determined that, for
the purpose of effecting the reincorporation of Sierra-California in the State
of Delaware, it is advisable and in the best interests of Sierra-California that
Sierra-California merge with and into Sierra-Delaware upon the terms and
conditions herein provided.
D. The respective Boards of Directors of Sierra-Delaware and
Sierra-California have approved this Agreement and have directed that this
Agreement be submitted to a vote of their respective shareholders and executed
by the undersigned officers.
NOW, THEREFORE, in consideration of the mutual agreements and covenants
set forth herein, Sierra-Delaware and Sierra-California hereby agree, subject to
the terms and conditions hereinafter set forth, as follows:
<PAGE>
1. MERGER
1.1. Merger. In accordance with the provisions of this Agreement, the
------
Delaware General Corporation Law and the California Corporations Code,
Sierra-California shall be merged with and into Sierra-Delaware (the "Merger"),
the separate existence of Sierra-California shall cease and Sierra-Delaware
shall be, and is herein sometimes referred as, the "Surviving Corporation", and
the name of the Surviving Corporation shall be PMC-Sierra, Inc.
1.2. Filing and Effectiveness. The Merger shall become effective when
------------------------
the following actions shall ave been completed:
1.2.1. This Agreement and Merger shall have been adopted and
approved by the shareholders of each Constituent Corporation in accordance with
the requirements of the Delaware General Corporation Law and the California
General Corporation Law;
1.2.2. All of the conditions precedent to the consummation of
the Merger shall have been satisfied or duly waived by the party entitled to
satisfaction thereof;
1.2.3. Executed documents evidencing the Merger and meeting the
requirements of the Delaware General Corporation Law and the California
Corporations Code, shall have been filed with the Secretary of State of the
State of Delaware and with the Secretary of State of the State of California.
The date and time when the Merger shall become effective, as aforesaid,
is herein called the "Effective Date."
1.3. Effect of the Merger. Upon the Effective Date, the separate
---------------------
existence of Sierra-California shall cease and Sierra-Delaware, as the Surviving
Corporation, (i) shall continue to possess all of its assets, rights, powers and
property as constituted immediately prior to the Effective Date, (ii) shall be
subject to all actions previously taken by its and by Sierra-California's Boards
of Directors, (iii) shall succeed, without other transfer, to all of the assets,
rights, powers and property of Sierra-California in the manner set forth in
Section 259 of the Delaware General Corporation Law, (iv) shall continue to be
subject to all of its debts, liabilities and obligations as constituted
immediately prior to the Effective Date, and (v) shall succeed, without other
transfer, to all of the debts, liabilities and obligations of Sierra-California
in the same manner as if Sierra-Delaware had itself incurred them, all as
provided under the applicable provisions of the Delaware General Corporation Law
and the California Corporations Code.
<PAGE>
2. CHARTER DOCUMENTS, DIRECTORS AND OFFICERS
2.1. Certificate of Incorporation and Bylaws. The Certificate of
------------------------------------------
Incorporation and Bylaws of Sierra-Delaware as in effect immediately prior to
the Effective Date shall continue in full force and effect as the Certificate of
Incorporation and Bylaws of the Surviving Corporation until duly amended in
accordance with the provisions thereof and applicable law.
2.2. Directors and Officers. The directors and officers of
--------------------------
Sierra-California immediately prior to the Effective Date shall be the directors
and officers of the Surviving Corporation until their successors shall have been
duly elected and qualified or as otherwise provided by law, or by the
Certificate of Incorporation or Bylaws of the Surviving Corporation.
3. MANNER OF CONVERSION OF STOCK
3.1. Sierra-California Common Stock Shares. Upon the Effective Date,
--------------------------------------
each share of Sierra-California Common Stock, no par value, issued and
outstanding immediately prior thereto shall by virtue of the Merger and without
any action by the Constituent Corporations, by the holder of such shares or by
any other person, be converted into and exchanged for one fully paid and
nonassessable share of Common Stock, no par value, of the Surviving Corporation.
No fractional share interests of Surviving Corporation Common Stock shall be
issued. In lieu thereof, any fractional share interests to which a holder would
otherwise be entitled shall be aggregated.
3.2. Sierra-California Options, Stock Purchase Rights and Convertible
-----------------------------------------------------------------
Securities.
-----------
(a) Upon the Effective Date, the Surviving Corporation shall
assume the obligations of Sierra-California under, and continue, the option
plans (including without limitation, the 1987 Incentive Stock Plan, the 1991
Employee Stock Purchase Plan, and the 1994 Incentive Stock Plan) and all other
employee benefit plans of Sierra-California, and the Exchange Agreement between
PMC-Sierra, Inc., the Canadian subsidiary of Sierra-California, and
Sierra-California, as amended. Each outstanding and unexercised option, other
right to purchase (including without limitation, the rights of holders of
special shares of PMC-Sierra, Inc., the Canadian subsidiary of
Sierra-California, and of options to purchase such special shares, and the
rights of the holders of options of PMC-Sierra, Inc. (Portland)), or security
convertible into, Sierra-California Common Stock (a "Right") shall become,
subject to the provisions in paragraph (c) hereof, an option, right to purchase
or a security convertible into the Surviving Corporation's Common Stock on the
basis of one share of the Surviving Corporation's Common Stock for each one
share of Sierra-California Common Stock issuable pursuant to any such Right, on
the same terms and conditions and at an exercise price equal to the exercise
price applicable to any such Sierra-California Right at the Effective Date. This
paragraph 3.2(a) shall not apply to Sierra-California Common Stock. Such Common
Stock is subject to paragraph 3.1.
(b) A number of shares of the Surviving Corporation's Common
Stock shall be reserved for issuance upon the exercise of options, stock
purchase rights and convertible securities equal to the number of shares of
Sierra-California Common Stock so reserved immediately prior to the Effective
Date.
<PAGE>
(c) With the exception of rights assumed pursuant to the
Exchange Agreement, the assumed Rights shall not entitle any holder thereof to a
fractional share upon exercise or conversion. In addition, no "additional
benefits" (within the meaning of Section 424(a)(2) of the Internal Revenue Code
of 1986, as amended) shall be accorded to the optionees pursuant to the
assumption of their options.
3.3. Sierra-Delaware Common Stock Shares. Upon the Effective Date,
-------------------------------------
each share of Common Stock of Sierra-Delaware issued and outstanding immediately
prior thereto shall, by virtue of the Merger and without any action by
Sierra-Delaware, the holder of such shares or by any other person, be canceled
and returned to the status of authorized but unissued shares.
3.4. Exchange of Certificates. After the Effective Date, each holder
------------------------
of an outstanding certificate representing shares of Sierra-California Common
Stock may be asked to surrender the same for cancellation to (the "Exchange
Agent"), and each such holder shall be entitled to receive in exchange therefor
a certificate or certificates representing the number of shares of the Surviving
Corporation's Common Stock, as the case may be, into which the surrendered
shares were converted as herein provided. Until so surrendered, each outstanding
certificate theretofore representing shares of Sierra-California Common Stock
shall be deemed for all purposes to represent the number of shares of the
Surviving Corporation's Common Stock, respectively, into which such shares of
Sierra-California Common Stock, as the case may be, were converted in the
Merger.
The registered owner on the books and records of the Surviving
Corporation or the Exchange Agent of any such outstanding certificate shall,
until such certificate shall have been surrendered for transfer or conversion or
otherwise accounted for to the Surviving Corporation or the Exchange Agent, have
and be entitled to exercise any voting and other rights with respect to and to
receive dividends and other distributions upon the shares of Common Stock of the
Surviving Corporation represented by such outstanding certificate as provided
above.
Each certificate representing Common Stock of the Surviving Corporation
so issued in the Merger shall bear the same legends, if any, with respect to the
restrictions on transferability as the certificates of Sierra-California so
converted and given in exchange therefore, unless otherwise determined by the
Board of Directors of the Surviving Corporation in compliance with applicable
laws.
If any certificate for shares of the Surviving Corporation's stock is
to be issued in a name other than that in which the certificate surrendered in
exchange therefor is registered, it shall be a condition of issuance thereof
that the certificate so surrendered shall be properly endorsed and otherwise in
proper form for transfer, that such transfer otherwise be proper and comply with
applicable securities laws and that the person requesting such transfer pay to
the Exchange Agent any transfer or other taxes payable by reason of issuance of
such new certificate in a name other than that of the registered holder of the
certificate surrendered or establish to the satisfaction of the Surviving
Corporation that such tax has been paid or is not payable.
<PAGE>
4. GENERAL
4.1. Covenants of Sierra-Delaware. Sierra-Delaware covenants and
-------------------------------
agrees that it will, on or before the Effective Date:
4.1.1. Qualify to do business as a foreign corporation in the
State of California and in connection therewith irrevocably appoint an agent for
service of process as required under the provisions of Section 2105 of the
California General Corporation Law.
4.1.2. File any and all documents with the California Franchise
Tax Board necessary for the assumption by Sierra-Delaware of all of the
franchise tax liabilities of Sierra-California.
4.1.3. Take such other actions as may be required by the
California General Corporation Law.
4.2. Further Assurances. From time to time, as and when required by
-------------------
Sierra-Delaware or by its successors or assigns, there shall be executed and
delivered on behalf of Sierra-California such deeds and other instruments, and
there shall be taken or caused to be taken by it such further and other actions
as shall be appropriate or necessary in order to vest or perfect in or conform
of record or otherwise by Sierra-Delaware the title to and possession of all the
property, interests, assets, rights, privileges, immunities, powers, franchises
and authority of Sierra-California and otherwise to carry out the purposes of
this Agreement, and the officers and directors of Sierra-Delaware are fully
authorized in the name and on behalf of Sierra-California or otherwise to take
any and all such action and to execute and deliver any and all such deeds and
other instruments.
4.3. Abandonment. At any time before the Effective Date, this
----------
Agreement may be terminated and the Merger may be abandoned for any reason
whatsoever by the Board of Directors of either Sierra-California or of
Sierra-Delaware, or of both, notwithstanding the approval of this Agreement by
the shareholders of Sierra-California or by the sole stockholder of
Sierra-Delaware, or by both.
4.4. Amendment. The Boards of Directors of the Constituent
---------
Corporations may amend this Agreement at any time prior to the filing of this
Agreement (or certificate in lieu thereof) with the Secretary of State of the
States of California and Delaware, provided that an amendment made subsequent to
the adoption of this Agreement by the shareholders of either Constituent
Corporation shall not: (1) alter or change the amount or kind of shares,
securities, cash, property and/or rights to be received in exchange for or on
conversion of all or any of the shares of any class or series thereof of such
Constituent Corporation, (2) alter or change any term of the Certificate of
Incorporation of the Surviving Corporation to be effected by the Merger, or (3)
alter or change any of the terms and conditions of this Agreement if such
alteration or change would adversely affect the holders of any class or series
of capital stock of any Constituent Corporation.
<PAGE>
4.4.1. Registered Office. The registered office of the Surviving
Corporation in the State of Delaware is 1209 Orange Street, Wilmington, County
of New Castle, DE 19801, and The Corporation Trust Company is the registered
agent of the Surviving Corporation at such address.
4.5. Agreement. Executed copies of this Agreement will be on file at
---------
the principal place of business of the Surviving Corporation at 2222 Qume Drive,
San Jose, California 95131 and copies thereof will be furnished to any
stockholder of either Constituent Corporation, upon request and without cost.
4.6. Governing Law. This Agreement shall in all respects be construed,
-------------
interpreted and enforced in accordance with and governed by the laws of the
State of Delaware and, so far as applicable, the merger provisions of the
California General Corporation Law.
4.7. FIRPTA Notification. (a) On the Effective Date, Sierra-California
-------------------
shall deliver to Sierra-Delaware, as agent for the shareholders of
Sierra-California, a properly executed statement (the "Statement") substantially
in the form attached hereto as Attachment A. Sierra-Delaware shall retain the
Statement for a period of not less than seven years and shall, upon request,
provide a copy thereof to any person that was a shareholder of Sierra-California
immediately prior to the Merger. In consequence of the approval of the Merger by
the shareholders of Sierra-California, (i) such shareholders shall be considered
to have requested that the Statement be delivered to Sierra-Delaware as their
agent and (ii) Sierra-Delaware shall be considered to have received a copy of
the Statement at the request of the Sierra-California shareholders for purposes
of satisfying Sierra-Delaware's obligations under Treasury Regulation Section
1.1445-2(c)(3).
(b) Sierra-California shall deliver to the Internal Revenue Service a
notice regarding the Statement in accordance with the requirements of Treasury
Regulation Section 1.897-2(h)(2).
4.8. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, this Agreement having first been approved by the
resolutions of the Board of Directors of Sierra-Delaware and Sierra-California,
is hereby executed on behalf of each of such two corporations and attested by
their respective officers thereunto duly authorized.
SIERRA SEMICONDUCTOR CORPORATION
a California corporation
By: -----------------------------------------
James V. Diller, Chairman of the Board of
Directors and Chief Executive Officer
ATTEST:
- ------------------------------
Mario M. Rosati, Secretary
PMC-SIERRA, INC.
a Delaware corporation
By: -----------------------------------------
James V. Diller, Chairman of the Board of
Directors and Chief Executive Officer
ATTEST:
- ------------------------------
Mario M. Rosati, Secretary
<PAGE>
ATTACHMENT A
MMMMM DD, 1997
TO THE SHAREHOLDERS OF SIERRA SEMICONDUCTOR CORPORATION:
In connection with the reincorporation (the "Reincorporation") into
Delaware of Sierra Semiconductor Corporation, a California corporation (the
"Company"), pursuant to the Agreement and Plan of Merger (the "Agreement") dated
as of MMMMM DD, 1997 between the Company and PMC-Sierra, Inc., a Delaware
corporation and wholly-owned subsidiary of the Company ("Sierra-Delaware"), your
shares of the Company's stock will be replaced by shares of Sierra-Delaware's
stock.
In order to establish that (i) you will not be subject to tax under
Section 897 of the Internal Revenue Code of 1986, as amended (the "Code"), in
consequence of the Reincorporation and (ii) Sierra-Delaware will not be required
under Section 1445 of the Code to withhold taxes from the Sierra-Delaware stock
that you will receive in connection therewith, the Company hereby represents to
you that, as of the date of this letter, shares of Company stock do not
constitute a "United States real property interest" within the meaning of
Section 897(c) of the Code and the regulations issued thereunder.
A copy of this letter will be delivered to Sierra-Delaware pursuant to
Section 4.8 of the Agreement.
Under penalties of perjury, the undersigned officer of the Company
hereby declares that, to the best knowledge and belief of the undersigned, the
facts set forth herein are true and correct.
Sincerely,
-----------------------------------------
James V. Diller, Chairman of the Board of
Directors and Chief Executive Officer
EXHIBIT B
---------
CERTIFICATE OF INCORPORATION
OF
PMC-SIERRA, INC.
ARTICLE I
The name of this corporation is PMC-Sierra, Inc. (the "Corporation").
ARTICLE II
The address of the Corporation's registered office in the State of
Delaware is 1209 Orange Street, City of Wilmington, County of New Castle,
Delaware 19801. The name of its registered agent at such address is The
Corporation Trust Company.
ARTICLE III
The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of Delaware.
ARTICLE IV
This corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The corporation
is authorized to issue a total of 55,000,000 shares. 50,000,000 shares shall be
Common Stock and 5,000,000 shares shall be Preferred Stock.
The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is authorized to determine or alter the rights,
preferences, privileges and restrictions granted to or imposed upon any wholly
unissued series of Preferred Stock; and to fix the number of shares of any
series of Preferred Stock; and to increase, or to decrease (within the limits
and restrictions stated in any resolution or resolutions of the Board of
Directors originally fixing the number of shares constituting any series of
Preferred Stock, but not below the number of shares of any such series then
outstanding) the number of shares of any such series subsequent to the issue of
shares of that series. In case the number of shares of any series of Preferred
Stock shall be so decreased, the shares constituting the decrease shall resume
the status which they had prior to the adoption of the resolution originally
fixing the number of shares of such series.
The authority of the board of directors with respect to each such class
or series shall include, without limitation of the foregoing, the right to
determine and fix:
1. the distinctive designation of such class or
series and the number of shares to constitute such class or series;
<PAGE>
2. the rate at which dividends on the shares of
such class or series shall be declared and paid, or set aside for payment,
whether dividends at the rate so determined shall be cumulative or accruing, and
whether the shares of such class or series shall be entitled to any
participating or other dividends in addition to dividends at the rate so
determined, and if so, on what terms;
3. the right or obligation, if any, of the
corporation to redeem shares of the particular class or series of Preferred
Stock and, if redeemable, the price, terms and manner of such redemption;
4. the special and relative rights and
preferences, if any, and the amount or amounts per share, which the shares of
such class or series of Preferred Stock shall be entitled to receive upon any
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation;
5. the terms and conditions, if any, upon which
shares of such class or series shall be convertible into, or exchangeable for,
shares of capital stock of any other class or series, including the price or
prices or the rate or rates of conversion or exchange and the terms of
adjustment, if any;
6. the obligation, if any, of the corporation
to retire, redeem or purchase shares of such class or series pursuant to a
sinking fund or fund of a similar nature or otherwise, and the terms and
conditions of such obligation;
7. voting rights, if any, on the issuance of
additional shares of such class or series or any shares of any other class or
series of Preferred Stock;
8. limitations, if any, on the issuance of
additional shares of such class or series or any shares of any other class or
series of Preferred Stock; and
9. such other preferences, powers,
qualifications, special or relative rights and privileges thereof as the board
of directors of the corporation, acting in accordance with this Restated
Certificate of Incorporation, may deem advisable and are not inconsistent with
law and the provisions of this Restated Certificate of Incorporation.
ARTICLE V
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 statute, and all rights conferred upon the
stockholders herein are granted subject to this right.
ARTICLE VI
The Corporation is to have perpetual existence.
<PAGE>
ARTICLE VII
A. Limitation of Liability. To the fullest extent permitted by
-----------------------
the General Corporation Law of the State of Delaware as the same exists or as
may hereafter be amended, a director of the Corporation shall not be personally
liable to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director.
B. Indemnification. The Corporation may indemnify to the fullest
---------------
extent permitted by law any person made or threatened to be made a party to an
action or proceeding, whether criminal, civil, administrative or investigative,
by reason of the fact that such person or his or her testator or intestate is or
was a director, officer or employee of the Corporation, or any predecessor of
the Corporation, or serves or served at any other enterprise as a director,
officer or employee at the request of the Corporation or any predecessor to the
Corporation.
C. Amendments. Neither any amendment nor repeal of this Article
----------
VII, nor the adoption of any provision of the Corporation's Certificate of
Incorporation inconsistent with this Article VII, shall eliminate or reduce the
effect of this Article VII, in respect of any matter occurring, or any action or
proceeding accruing or arising or that, but for this Article VII, would accrue
or arise, prior to such amendment, repeal, or adoption of an inconsistent
provision.
ARTICLE VIII
In the event any shares of Preferred Stock shall be redeemed or
converted pursuant to the terms hereof, the shares so converted or redeemed
shall not revert to the status of authorized but unissued shares, but instead
shall be canceled and shall not be re-issuable by the Corporation.
ARTICLE IX.
Holders of stock of any class or series of this corporation shall not
be entitled to cumulate their votes for the election of directors or any other
matter submitted to a vote of the stockholders, unless such cumulative voting is
required pursuant to Sections 2115 and/or 301.5 of the California Corporations
Code, in which event each such holder shall be entitled to as many votes as
shall equal the number of votes which (except for this provision as to
cumulative voting) such holder would be entitled to cast for the election of
directors with respect to his shares of stock multiplied by the number of
directors to be elected by him, and the holder may cast all of such votes for a
single director or may distribute them among the number of directors to be voted
for, or for any two or more of them as such holder may see fit, so long as the
name of the candidate for director shall have been placed in nomination prior to
the voting and the stockholder, or any other holder of the same class or series
of stock, has given notice at the meeting prior to the voting of the intention
to cumulate votes.
<PAGE>
ARTICLE X
A. Number of Directors. The number of directors which
-------------------
constitutes the whole Board of Directors of the corporation shall be designated
in the Bylaws of the corporation.
B. Election of Directors. Elections of directors need not be by
---------------------
written ballot unless the Bylaws of the corporation shall so provide.
ARTICLE XI
In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, alter, amend or
repeal the Bylaws of the corporation.
ARTICLE XII
No action shall be taken by the stockholders of the corporation except
at an annual or special meeting of the stockholders called in accordance with
the Bylaws of the corporation, and no action shall be taken by the stockholders
by written consent.
ARTICLE XIII
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the statutes) outside of the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of the Corporation.
ARTICLE XIV
The name and mailing address of the incorporator are:
Noga D. Spira, Esq.
Wilson, Sonsini, Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304-1050
<PAGE>
* * *
The undersigned incorporator hereby acknowledges that the above
Certificate of Incorporation of PMC-Sierra, Inc. is her act and deed and that
the facts stated therein are true.
--------------------------
Dated:MMMMM DD, 1997 Noga D. Spira
EXHIBIT C
---------
BYLAWS
OF
PMC-SIERRA, INC.
(a Delaware Corporation)
<PAGE>
BYLAWS OF
PMC-SIERRA, INC.
(a Delaware Corporation)
TABLE OF CONTENTS
Page
----
ARTICLE I - CORPORATE OFFICES 1
1.1 REGISTERED OFFICE 1
1.2 OTHER OFFICES 1
ARTICLE II - MEETINGS OF STOCKHOLDERS 1
2.1 PLACE OF MEETINGS 1
2.2 ANNUAL MEETING 1
2.3 SPECIAL MEETING 2
2.4 NOTICE OF STOCKHOLDERS' MEETINGS 2
2.5 NOTIFICATIONS OF NOMINATIONS AND PROPOSED BUSINESS. 2
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE 3
2.7 QUORUM 4
2.8 ADJOURNED MEETING; NOTICE 4
2.9 VOTING 4
2.10 WAIVER OF NOTICE 5
2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING5
2.12 PROXIES 6
2.13 ORGANIZATION 6
2.14 LIST OF STOCKHOLDERS ENTITLED TO VOTE 6
ARTICLE III - DIRECTORS 7
3.1 POWERS 7
3.2 NUMBER OF DIRECTORS 7
3.3 ELECTION AND TERM OF OFFICE OF DIRECTORS 7
3.4 RESIGNATION AND VACANCIES 7
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE 8
3.6 REGULAR MEETINGS 9
3.7 SPECIAL MEETINGS; NOTICE 9
3.8 QUORUM 9
3.9 WAIVER OF NOTICE 9
3.10 ADJOURNMENT 10
3.11 NOTICE OF ADJOURNMENT 10
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING 10
<PAGE>
TABLE OF CONTENTS
(Continued)
Page
----
3.13 FEES AND COMPENSATION OF DIRECTORS 10
3.14 APPROVAL OF LOANS TO OFFICERS 10
ARTICLE IV - COMMITTEES 11
4.1 COMMITTEES OF DIRECTORS 11
4.2 MEETINGS AND ACTION OF COMMITTEES 11
4.3 COMMITTEE MINUTES. 12
ARTICLE V - OFFICERS 12
5.1 OFFICERS 12
5.2 ELECTION OF OFFICERS 12
5.3 SUBORDINATE OFFICERS 12
5.4 REMOVAL AND RESIGNATION OF OFFICERS 12
5.5 VACANCIES IN OFFICES 13
5.6 CHAIRMAN OF THE BOARD 13
5.7 PRESIDENT 13
5.8 VICE PRESIDENTS 13
5.9 SECRETARY 14
5.10 CHIEF FINANCIAL OFFICER 14
ARTICLE VI - INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND
OTHER AGENTS 14
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS 14
6.2 INDEMNIFICATION OF OTHERS 15
6.3 INSURANCE 16
ARTICLE VII - RECORDS AND REPORTS 16
7.1 MAINTENANCE AND INSPECTION OF RECORDS 16
7.2 INSPECTION BY DIRECTORS 16
7.3 ANNUAL STATEMENT TO STOCKHOLDERS 17
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS 17
7.5 CERTIFICATION AND INSPECTION OF BYLAWS 17
<PAGE>
TABLE OF CONTENTS
(Continued)
Page
----
ARTICLE VIII - GENERAL MATTERS 17
8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING 17
8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS 18
8.3 CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED 18
8.4 STOCK CERTIFICATES; TRANSFER; PARTLY PAID SHARES 18
8.5 SPECIAL DESIGNATION ON CERTIFICATES 19
8.6 LOST CERTIFICATES 19
8.7 TRANSFER AGENTS AND REGISTRARS 19
8.8 CONSTRUCTION; DEFINITIONS 20
ARTICLE IX - AMENDMENTS 20
<PAGE>
BYLAWS
------
OF
--
PMC-SIERRA, INC.
----------------
(a Delaware Corporation)
ARTICLE 1.
CORPORATE OFFICES
-----------------
1.1. REGISTERED OFFICE
-----------------
The registered office of the corporation shall be fixed in the certificate
of incorporation of the corporation.
1.2. OTHER OFFICES
-------------
The board of directors may at any time establish branch or subordinate
offices at any place or places where the corporation is qualified to do
business.
ARTICLE 2.
MEETINGS OF STOCKHOLDERS
------------------------
2.1. PLACE OF MEETINGS
-----------------
Meetings of stockholders shall be held at any place within or outside the
State of Delaware designated by the board of directors. In the absence of any
such designation, stockholders' meetings shall be held at the principal
executive office of the corporation.
2.2. ANNUAL MEETING
--------------
The annual meeting of stockholders shall be held each year on a date and at
a time designated by the board of directors. In the absence of such designation,
the annual meeting of stockholders shall be held on the third Tuesday of May in
each year at 10:00 a.m. However, if such day falls on a legal holiday, then the
meeting shall be held at the same time and place on the next succeeding full
business day. At the meeting, directors shall be elected, and any other proper
business may be transacted.
<PAGE>
2.3. SPECIAL MEETING
---------------
A special meeting of the stockholders may be called at any time by the
board of directors, or by the chairman of the board, or by the president, or by
one or more stockholders holding shares in the aggregate entitled to cast not
less than ten percent (10%) of the votes at that meeting.
If a special meeting is called by any person or persons other than the
board of directors or the president or the chairman of the board, then the
request shall be in writing, specifying the time of such meeting and the general
nature of the business proposed to be transacted, and shall be delivered
personally or sent by registered mail or by telegraphic or other facsimile
transmission to the chairman of the board, the president, any vice president or
the secretary of the corporation. The officer receiving the request shall cause
notice to be promptly given to the stockholders entitled to vote, in accordance
with the provisions of Sections 2.4 and 2.5 of these bylaws, that a meeting will
be held at the time requested by the person or persons calling the meeting, so
long as that time is not less than thirty-five (35) nor more than sixty (60)
days after the receipt of the request. If the notice is not given within twenty
(20) days after receipt of the request, then the person or persons requesting
the meeting may give the notice. Nothing contained in this paragraph of this
Section 2.3 shall be construed as limiting, fixing or affecting the time when a
meeting of stockholders called by action of the board of directors may be held.
2.4. NOTICE OF STOCKHOLDERS' MEETINGS
--------------------------------
All notices of meetings of stockholders shall be sent or otherwise given in
accordance with Section 2.6 of these bylaws not less than ten (10) (or, if sent
by third-class mail pursuant to Section 2.6 of these bylaws, thirty (30)) nor
more than sixty (60) days before the date of the meeting. The notice shall
specify the place, date, and hour of the meeting and (i) in the case of a
special meeting, the general nature of the business to be transacted (no
business other than that specified in the notice may be transacted) or (ii) in
the case of the annual meeting, those matters which the board of directors, at
the time of giving the notice, intends to present for action by the stockholders
(but subject to the provisions of the next paragraph of this Section 2.4 any
proper matter may be presented at the meeting for such action). The notice of
any meeting at which directors are to be elected shall include the name of any
nominee or nominees who, at the time of the notice, the board intends to present
for election.
2.5. NOTIFICATIONS OF NOMINATIONS AND PROPOSED BUSINESS.
---------------------------------------------------
Subject to the rights of holders of any class or series of stock having a
preference over the Common Stock as to dividends or upon liquidation,
2.5.1. nominations for the election of directors, and
2.5.2. business proposed to be brought before any stockholder
meeting
may be made by the Board of Directors or proxy committee appointed by the Board
of Directors or by any stockholder entitled to vote in the election of directors
generally if such nomination or business proposed is otherwise proper business
before such meeting. However, any such stockholder may nominate one or more
<PAGE>
persons for election as directors at a meeting or propose business to be brought
before a meeting, or both, only if such stockholder has given timely notice in
proper written form of his intent to make such nomination or nominations or to
propose such business. To be timely, such stockholder's notice must be delivered
to or mailed and received by the Secretary of the corporation not less than
thirty-five (35) days nor more than sixty (60) days prior to the meeting;
provided, however, that in the event that less than forty-five (45) days notice
or prior public disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder to be timely must be so received not
later than the close of business on the tenth day following the day on which
such notice of the date of the meeting was mailed or such public disclosure was
made. To be in proper form, a stockholder's notice to the Secretary shall set
forth:
2.5.2.1. the name and address of the stockholder who intends to
make the nominations or propose the business and, as the case may
be, of the person or persons to be nominated or of the business to
be proposed;
2.5.2.2. a representation that the stockholder is a holder of
record of stock of the corporation entitled to vote at such
meeting and, if applicable, intends to appear in person or by
proxy at the meeting to nominate the person or persons specified
in the notice;
2.5.2.3. if applicable, a description of all arrangements or
understandings between the stockholder and each nominee and any
other person or persons (naming such person or persons) pursuant
to which the nomination or nominations are to be made by the
stockholder;
2.5.2.4. such other information regarding each nominee or each
matter of business to be proposed by such stockholder as would be
required to be included in a proxy statement filed pursuant to the
proxy rules of the Securities and Exchange Commission had the
nominee been nominated, or intended to be nominated, or the matter
been proposed, or intended to be proposed by the Board of
Directors; and
2.5.2.5. if applicable, the consent of each nominee to serve as
director of the corporation if so elected.
The Chairman of the meeting shall refuse to acknowledge the nomination of
any person or the proposal of any business not made in compliance with the
foregoing procedure.
2.6. MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
--------------------------------------------
Written notice of any meeting of stockholders shall be given either
personally or by first-class mail or by telegraphic or other written
communication. Notices not personally delivered shall be sent charges prepaid
and shall be addressed to the stockholder at the address of that stockholder
appearing on the books of the corporation or given by the stockholder to the
corporation for the purpose of notice. Notice shall be deemed to have been given
at the time when delivered personally or deposited in the mail or sent by
telegram or other means of written communication.
<PAGE>
An affidavit of the mailing or other means of giving any notice of any
stockholders' meeting, executed by the secretary, assistant secretary or any
transfer agent of the corporation giving the notice, shall be prima facie
evidence of the giving of such notice.
2.7. QUORUM
-------
The holders of a majority in voting power of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum is not present or
represented at any meeting of the stockholders, then either (i) the chairman of
the meeting or (ii) the stockholders entitled to vote thereat, present in person
or represented by proxy, shall have power to adjourn the meeting in accordance
with Section 2.7 of these bylaws.
When a quorum is present at any meeting, the vote of the holders of a
majority of the stock having voting power present in person or represented by
proxy shall decide any question brought before such meeting, unless the question
is one upon which, by express provision of the laws of the State of Delaware or
of the certificate of incorporation or these bylaws, a different vote is
required, in which case such express provision shall govern and control the
decision of the question.
If a quorum be initially present, the stockholders may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum, if any action taken is approved by a
majority of the stockholders initially constituting the quorum.
2.8. ADJOURNED MEETING; NOTICE
-------------------------
When a meeting is adjourned to another time and place, unless these bylaws
otherwise require, notice need not be given of the adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the corporation may transact any business that
might have been transacted at the original meeting. If the adjournment is for
more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
2.9. VOTING
------
The stockholders entitled to vote at any meeting of stockholders shall be
determined in accordance with the provisions of Section 2.11 of these bylaws,
subject to the provisions of Sections 217 and 218 of the General Corporation Law
of Delaware (relating to voting rights of fiduciaries, pledgors and joint
owners, and to voting trusts and other voting agreements).
<PAGE>
Except as may be otherwise provided in the articles of incorporation or
these bylaws, each stockholder shall be entitled to one vote for each share of
capital stock held by such stockholder and stockholders shall not be entitled to
cumulate their votes in the election of directors of with respect to any matter
submitted to a vote of the stockholders.
Notwithstanding the foregoing, if the stockholders of the corporation are
entitled, pursuant to Sections 2115 and 301.5 of the California Corporations
Code, to cumulate their votes in the election of directors, each such
stockholder shall be entitled to cumulate votes (i.e., cast for any candidate a
number of votes greater than the number of votes that such stockholder normally
is entitled to cast) only if the candidates' names have been properly placed in
nomination (in accordance with these bylaws) prior to commencement of the
voting, and the stockholder requesting cumulative voting has given notice prior
to commencement of the voting of the stockholder's intention to cumulate votes.
If cumulative voting is properly requested, each holder of stock, or of any
class or classes or of a series or series thereof, who elects to cumulate votes
shall be entitled to as many votes as equals the number of votes that (absent
this provision as to cumulative voting) he or she would be entitled to cast for
the election of directors with respect to his or her shares of stock multiplied
by the number of directors to be elected by him, and he or she may cast all of
such votes for a single director or may distribute them among the number to be
voted for, or for any two or more of them, as he or she may see fit.
2.10. WAIVER OF NOTICE
----------------
Whenever notice is required to be given under any provision of the General
Corporation Law of Delaware or of the certificate of incorporation or these
bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the stockholders need be specified in any written waiver of notice unless so
required by the certificate of incorporation or these bylaws.
2.11. RECORD DATE FOR STOCKHOLDER NOTICE; VOTING
------------------------------------------
For purposes of determining the stockholders entitled to notice of any
meeting or to vote thereat, the board of directors may fix, in advance, a record
date, which shall not precede the date upon which the resolution fixing the
record date is adopted by the board of directors and which shall not be more
than sixty (60) days nor less than ten (10) days before the date of any such
meeting, and in such event only stockholders of record on the date so fixed are
entitled to notice and to vote, notwithstanding any transfer of any shares on
the books of the corporation after the record date.
If the board of directors does not so fix a record date, the record date
for determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the business day next
preceding the day on which notice is given, or, if notice is waived, at the
close of business on the business day next preceding the day on which the
meeting is held.
<PAGE>
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting
unless the board of directors fixes a new record date for the adjourned meeting,
but the board of directors shall fix a new record date if the meeting is
adjourned for more than thirty (30) days from the date set for the original
meeting.
The record date for any other purpose shall be as provided in Section 8.1
of these bylaws.
2.12. PROXIES
-------
Every person entitled to vote for directors, or on any other matter, shall
have the right to do so either in person or by one or more agents authorized by
a written proxy signed by the person and filed with the secretary of the
corporation, but no such proxy shall be voted or acted upon after three (3)
years from its date unless the proxy provides for a longer period. A proxy shall
be deemed signed if the stockholder's name is placed on the proxy (whether by
manual signature, typewriting, telegraphic transmission, telefacsimile or
otherwise) by the stockholder or the stockholder's attorney-in-fact. The
revocability of a proxy that states on its face that it is irrevocable shall be
governed by the provisions of Section 212(e) of the General Corporation Law of
Delaware.
2.13. ORGANIZATION
------------
The president, or in the absence of the president, the chairman of the
board, or, in the absence of the president and the chairman of the board, one of
the corporation's vice presidents, shall call the meeting of the stockholders to
order, and shall act as chairman of the meeting. In the absence of the
president, the chairman of the board, and all of the vice presidents, the
stockholders shall appoint a chairman for such meeting. The chairman of any
meeting of stockholders shall determine the order of business and the procedures
at the meeting, including such matters as the regulation of the manner of voting
and the conduct of business. The secretary of the corporation shall act as
secretary of all meetings of the stockholders, but in the absence of the
secretary at any meeting of the stockholders, the chairman of the meeting may
appoint any person to act as secretary of the meeting.
2.14. LIST OF STOCKHOLDERS ENTITLED TO VOTE
-------------------------------------
The officer who has charge of the stock ledger of the corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
<PAGE>
ARTICLE 3.
DIRECTORS
---------
3.1. POWERS
------
Subject to the provisions of the General Corporation Law of Delaware and
any limitations in the certificate of incorporation and these bylaws relating to
action required to be approved by the stockholders or by the outstanding shares,
the business and affairs of the corporation shall be managed and all corporate
powers shall be exercised by or under the direction of the board of directors.
3.2. NUMBER OF DIRECTORS
-------------------
The board of directors shall be not less than four (4) nor more than seven
(7) members. The exact number of directors shall be five (5) until changed,
within the limits specified above by a bylaw amending this Section 3.2 duly
adopted by the board of directors or by the stockholders. The indefinite number
of directors may be changed, or a definite number may be fixed without provision
for an indefinite number, by an amendment to this bylaw, duly adopted by the
board of directors or by the stockholders, or by a duly adopted amendment to the
certificate of incorporation.
No reduction of the authorized number of directors shall have the effect of
removing any director before that director's term of office expires.
3.3. ELECTION AND TERM OF OFFICE OF DIRECTORS
----------------------------------------
Except as provided in Section 3.4 of these bylaws, directors shall be
elected at each annual meeting of stockholders to hold office until the next
annual meeting. Each director, including a director elected or appointed to fill
a vacancy, shall hold office until the expiration of the term for which elected
and until a successor has been elected and qualified.
3.4. RESIGNATION AND VACANCIES
-------------------------
Any director may resign effective on giving written notice to the chairman
of the board, the president, the secretary or the board of directors, unless the
notice specifies a later time for that resignation to become effective. If the
resignation of a director is effective at a future time, the board of directors
may elect a successor to take office when the resignation becomes effective.
<PAGE>
Vacancies in the board of directors may be filled by a majority of the
remaining directors, even if less than a quorum, or by a sole remaining
director; however, a vacancy created by the removal of a director by the vote of
the stockholders or by court order may be filled only by the affirmative vote of
a majority of the shares represented and voting at a duly held meeting at which
a quorum is present (which shares voting affirmatively also constitute a
majority of the required quorum). Each director so elected shall hold office
until the next annual meeting of the stockholders and until a successor has been
elected and qualified.
Unless otherwise provided in the certificate of incorporation or these
bylaws:
3.4.2.1. Vacancies and newly created directorships resulting from
any increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
3.4.2.2. Whenever the holders of any class or classes of stock or
series thereof are entitled to elect one or more directors by the provisions of
the certificate of incorporation, vacancies and newly created directorships of
such class or classes or series may be filled by a majority of the directors
elected by such class or classes or series thereof then in office, or by a sole
remaining director so elected.
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may call a special meeting of stockholders in accordance with
the provisions of the certificate of incorporation or these bylaws, or may apply
to the Court of Chancery for a decree summarily ordering an election as provided
in Section 211 of the General Corporation Law of Delaware.
If, at the time of filling any vacancy or any newly created directorship,
the directors then in office constitute less than a majority of the whole board
(as constituted immediately prior to any such increase), then the Court of
Chancery may, upon application of any stockholder or stockholders holding at
least ten (10) percent of the total number of the shares at the time outstanding
having the right to vote for such directors, summarily order an election to be
held to fill any such vacancies or newly created directorships, or to replace
the directors chosen by the directors then in office as aforesaid, which
election shall be governed by the provisions of Section 211 of the General
Corporation Law of Delaware as far as applicable.
3.5. PLACE OF MEETINGS; MEETINGS BY TELEPHONE
----------------------------------------
Regular meetings of the board of directors may be held at any place within
or outside the State of Delaware that has been designated from time to time by
resolution of the board. In the absence of such a designation, regular meetings
shall be held at the principal executive office of the corporation. Special
meetings of the board may be held at any place within or outside the State of
Delaware that has been designated in the notice of the meeting or, if not stated
in the notice or if there is no notice, at the principal executive office of the
corporation.
<PAGE>
Any meeting, regular or special, may be held by conference telephone or
similar communication equipment, so long as all directors participating in the
meeting can hear one another; and all such directors shall be deemed to be
present in person at the meeting.
3.6. REGULAR MEETINGS
----------------
Regular meetings of the board of directors may be held without notice if
the times of such meetings are fixed by the board of directors. If any regular
meeting day shall fall on a legal holiday, then the meeting shall be held next
succeeding full business day.
3.7. SPECIAL MEETINGS; NOTICE
------------------------
Special meetings of the board of directors for any purpose or purposes
may be called at any time by the chairman of the board, the president, any vice
president, the secretary or any two directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's address
as it is shown on the records of the corporation. If the notice is mailed, it
shall be deposited in the United States mail at least four (4) days before the
time of the holding of the meeting. If the notice is delivered personally or by
telephone or telegram, it shall be delivered personally or by telephone or to
the telegraph company at least forty-eight (48) hours before the time of the
holding of the meeting. Any oral notice given personally or by telephone may be
communicated either to the director or to a person at the office of the director
who the person giving the notice has reason to believe will promptly communicate
it to the director. The notice need not specify the purpose or the place of the
meeting, if the meeting is to be held at the principal executive office of the
corporation.
3.8. QUORUM
------
A majority of the authorized number of directors shall constitute a quorum
for the transaction of business, except to adjourn as provided in Section 3.10
of these bylaws. Every act or decision done or made by a majority of the
directors present at a duly held meeting at which a quorum is present shall be
regarded as the act of the board of directors, subject to the provisions of the
certificate of incorporation and other applicable law.
A meeting at which a quorum is initially present may continue to transact
business notwithstanding the withdrawal of directors, if any action taken is
approved by at least a majority of the required quorum for that meeting.
3.9. WAIVER OF NOTICE
----------------
Notice of a meeting need not be given to any director (i) who signs a
waiver of notice or a consent to holding the meeting or an approval of the
minutes thereof, whether before or after the meeting, or (ii) who attends the
meeting without protesting, prior thereto or at its commencement, the lack of
notice to such directors. All such waivers, consents, and approvals shall be
filed with the corporate records or made part of the minutes of the meeting. A
waiver of notice need not specify the purpose of any regular or special meeting
of the board of directors.
<PAGE>
3.10. ADJOURNMENT
-----------
A majority of the directors present, whether or not constituting a quorum,
may adjourn any meeting to another time and place.
3.11. NOTICE OF ADJOURNMENT
---------------------
Notice of the time and place of holding an adjourned meeting need not be
given unless the meeting is adjourned for more than twenty-four (24) hours. If
the meeting is adjourned for more than twenty-four (24) hours, then notice of
the time and place of the adjourned meeting shall be given before the adjourned
meeting takes place, in the manner specified in Section 3.7 of these bylaws, to
the directors who were not present at the time of the adjournment.
3.12. BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
-------------------------------------------------
Any action required or permitted to be taken by the board of directors may
be taken without a meeting, provided that all members of the board individually
or collectively consent in writing to that action. Such action by written
consent shall have the same force and effect as a unanimous vote of the board of
directors. Such written consent and any counterparts thereof shall be filed with
the minutes of the proceedings of the board.
3.13. FEES AND COMPENSATION OF DIRECTORS
----------------------------------
Directors and members of committees may receive such compensation, if any,
for their services and such reimbursement of expenses as may be fixed or
determined by resolution of the board of directors. This Section 3.13 shall not
be construed to preclude any director from serving the corporation in any other
capacity as an officer, agent, employee or otherwise and receiving compensation
for those services.
3.14. APPROVAL OF LOANS TO OFFICERS
-----------------------------
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or any of its
subsidiaries, including any officer or employee who is a director of the
corporation or any of its subsidiaries, whenever, in the judgment of the
directors, such loan, guaranty or assistance may reasonably be expected to
benefit the corporation. The loan, guaranty or other assistance may be with or
without interest and may be unsecured, or secured in such manner as the board of
directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing contained in this section shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
<PAGE>
ARTICLE 4.
COMMITTEES
----------
4.1. COMMITTEES OF DIRECTORS
-----------------------
The board of directors may, by resolution adopted by a majority of the
authorized number of directors, designate one (1) or more committees, each
consisting of two or more directors, to serve at the pleasure of the board. The
board may designate one (1) or more directors as alternate members of any
committee, who may replace any absent member at any meeting of the committee.
The appointment of members or alternate members of a committee requires the vote
of a majority of the authorized number of directors. Any committee, to the
extent provided in the resolution of the board, shall have and may exercise all
the powers and authority of the board, but no such committee shall have the
power of authority to:
4.1.1. amend the certificate of incorporation (except that a
committee may, to the extent authorized in the resolution or resolutions
providing for the issuance of shares of stock adopted by the board of directors
as provided in Section 151(a) of the General Corporation Law of Delaware, fix
the designations and any of the preferences or rights of such shares relating to
dividends, redemption, dissolution, any distribution of assets of the
corporation or the conversion into, or the exchange of such shares for, shares
of any other class or classes or any other series of the same or any other class
or classes of stock of the corporation);
4.1.2. adopt an agreement of merger or consolidation under
Sections 251 or 252 of the General Corporation Law of Delaware;
4.1.3. recommend to the stockholders the sale, lease or exchange
of all or substantially all of the corporation's property and assets;
4.1.4. recommend to the stockholders a dissolution of the
corporation or a revocation of a dissolution; or
4.1.5. amend the bylaws of the corporation; and, unless the board
resolution establishing the committee, the bylaws or the certificate of
incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock, or to adopt
a certificate of ownership and merger pursuant to Section 253 of the General
Corporation Law of Delaware.
<PAGE>
4.2. MEETINGS AND ACTION OF COMMITTEES
---------------------------------
Meetings and actions of committees shall be governed by, and held and taken
in accordance with, the provisions of Article III of these bylaws, Section 3.5
(place of meetings), Section 3.6 (regular meetings), Section 3.7 (special
meetings and notice), Section 3.8 (quorum), Section 3.9 (waiver of notice),
Section 3.10 (adjournment), Section 3.11 (notice of adjournment), and Section
3.12 (action without meeting), with such changes in the context of those bylaws
as are necessary to substitute the committee and its members for the board of
directors and its members; provided, however, that the time of regular meetings
of committees may be determined either by resolution of the board of directors
or by resolution of the committee, that special meetings of committees may also
be called by resolution of the board of directors, and that notice of special
meetings of committees shall also be given to all alternate members, who shall
have the right to attend all meetings of the committee. The board of directors
may adopt rules for the government of any committee not inconsistent with the
provisions of these bylaws.
4.3. COMMITTEE MINUTES
-----------------
Each committee shall keep regular minutes of its meetings and report the
same to the board of directors when required.
ARTICLE 5.
OFFICERS
--------
5.1. OFFICERS
--------
The officers of the corporation shall be a president, a secretary, and a
chief financial officer. The corporation may also have, at the discretion of the
board of directors, a chairman of the board, one or more vice presidents, one or
more assistant secretaries, one or more assistant treasurers, and such other
officers as may be appointed in accordance with the provisions of Section 5.3 of
these bylaws. Any number of offices may be held by the same person.
5.2. ELECTION OF OFFICERS
--------------------
The officers of the corporation, except such officers as may be appointed
in accordance with the provisions of Section 5.3 or Section 5.5 of these bylaws,
shall be chosen by the board, subject to the rights, if any, of an officer under
any contract of employment.
5.3. SUBORDINATE OFFICERS
--------------------
The board of directors may appoint, or may empower the president to
appoint, such other officers as the business of the corporation may require,
each of whom shall hold office for such period, have such authority, and perform
such duties as are provided in these bylaws or as the board of directors may
from time to time determine.
<PAGE>
5.4. REMOVAL AND RESIGNATION OF OFFICERS
-----------------------------------
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by the
board of directors at any regular or special meeting of the board or, except in
case of an officer chosen by the board of directors, by any officer upon whom
such power of removal may be conferred by the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
5.5. VACANCIES IN OFFICES
--------------------
A vacancy in any office because of death, resignation, removal,
disqualification or any other cause shall be filled in the manner prescribed in
these bylaws for regular appointments to that office.
5.6. CHAIRMAN OF THE BOARD
---------------------
The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the board of directors and exercise and perform
such other powers and duties as may from time to time be assigned to him by the
board of directors or as may be prescribed by these bylaws. If there is no
president, then the chairman of the board shall also be the chief executive
officer of the corporation and shall have the powers and duties prescribed in
Section 5.7 of these bylaws.
5.7. PRESIDENT
---------
Subject to such supervisory powers, if any, as may be given by the board of
directors to the chairman of the board, if there be such an officer, the
president shall be the chief executive officer of the corporation and shall,
subject to the control of the board of directors, have general supervision,
direction, and control of the business and the officers of the corporation. He
shall preside at all meetings of the stockholders and, in the absence or
nonexistence of a chairman of the board, at all meetings of the board of
directors. He shall have the general powers and duties of management usually
vested in the office of president of a corporation, and shall have such other
powers and duties as may be prescribed by the board of directors or these
bylaws.
5.8. VICE PRESIDENTS
---------------
In the absence or disability of the president, the vice presidents, if any,
in order of their rank as fixed by the board of directors or, if not ranked, a
vice president designated by the board of directors, shall perform all the
duties of the president and when so acting shall have all the powers of, and be
subject to all the restrictions upon, the president. The vice presidents shall
have such other powers and perform such other duties as from time to time may be
prescribed for them respectively by the board of directors, these bylaws, the
president or the chairman of the board.
<PAGE>
5.9. SECRETARY
---------
The secretary shall keep or cause to be kept, at the principal executive
office of the corporation or such other place as the board of directors may
direct, a book of minutes of all meetings and actions of directors, committees
of directors and stockholders. The minutes shall show the time and place of each
meeting, whether regular or special (and, if special, how authorized and the
notice given), the names of those present at directors' meetings or committee
meetings, the number of shares present or represented at stockholders' meetings,
and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal executive
office of the corporation or at the office of the corporation's transfer agent
or registrar, as determined by resolution of the board of directors, a share
register, or a duplicate share register, showing the names of all stockholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates evidencing such shares, and the number and date of
cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings of
the stockholders and of the board of directors required to be given by law or by
these bylaws. He shall keep the seal of the corporation, if one be adopted, in
safe custody and shall have such other powers and perform such other duties as
may be prescribed by the board of directors or by these bylaws.
5.10. CHIEF FINANCIAL OFFICER
-----------------------
The chief financial officer shall keep and maintain, or cause to be kept
and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings, and shares. The books of account shall at all reasonable
times be open to inspection by any director.
The chief financial officer shall deposit all money and other valuables in
the name and to the credit of the corporation with such depositaries as may be
designated by the board of directors. He shall disburse the funds of the
corporation as may be ordered by the board of directors, shall render to the
president and directors, whenever they request it, an account of all of his
transactions as chief financial officer and of the financial condition of the
corporation, and shall have such other powers and perform such other duties as
may be prescribed by the board of directors or these bylaws.
<PAGE>
ARTICLE 6.
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES,
--------------------------------------------------
AND OTHER AGENTS
----------------
6.1. INDEMNIFICATION OF DIRECTORS AND OFFICERS
-----------------------------------------
The corporation shall, to the maximum extent and in the manner permitted by
the General Corporation Law of Delaware as the same now exists or may hereafter
be amended, indemnify any person against expenses (including attorneys' fees),
judgments, fines, and amounts paid in settlement actually and reasonably
incurred in connection with any threatened, pending or completed action, suit,
or proceeding in which such person was or is a party or is threatened to be made
a party by reason of the fact that such person is or was a director or officer
of the corporation. For purposes of this Section 6.1, a "director" or "officer"
of the corporation shall mean any person (i) who is or was a director or officer
of the corporation, (ii) who is or was serving at the request of the corporation
as a director or officer of another corporation, partnership, joint venture,
trust or other enterprise, or (iii) who was a director or officer of a
corporation which was a predecessor corporation of the corporation or of another
enterprise at the request of such predecessor corporation.
The corporation shall be required to indemnify a director or officer in
connection with an action, suit, or proceeding (or part thereof) initiated by
such director or officer only if the initiation of such action, suit, or
proceeding (or part thereof) by the director or officer was authorized by the
Board of Directors of the corporation.
The corporation shall pay the expenses (including attorney's fees) incurred
by a director or officer of the corporation entitled to indemnification
hereunder in defending any action, suit or proceeding referred to in this
Section 6.1 in advance of its final disposition; provided, however, that payment
of expenses incurred by a director or officer of the corporation in advance of
the final disposition of such action, suit or proceeding shall be made only upon
receipt of an undertaking by the director or officer to repay all amounts
advanced if it should ultimately be determined that the director of officer is
not entitled to be indemnified under this Section 6.1 or otherwise.
The rights conferred on any person by this Article shall not be exclusive
of any other rights which such person may have or hereafter acquire under any
statute, provision of the corporation's Certificate of Incorporation, these
bylaws, agreement, vote of the stockholders or disinterested directors or
otherwise.
Any repeal or modification of the foregoing provisions of this Article
shall not adversely affect any right or protection hereunder of any person in
respect of any act or omission occurring prior to the time of such repeal or
modification.
<PAGE>
6.2. INDEMNIFICATION OF OTHERS
-------------------------
The corporation shall have the power, to the maximum extent and in the
manner permitted by the General Corporation Law of Delaware as the same now
exists or may hereafter be amended, to indemnify any person (other than
directors and officers) against expenses (including attorneys' fees), judgments,
fines, and amounts paid in settlement actually and reasonably incurred in
connection with any threatened, pending or completed action, suit, or
proceeding, in which such person was or is a party or is threatened to be made a
party by reason of the fact that such person is or was an employee or agent of
the corporation. For purposes of this Section 6.2, an "employee" or "agent" of
the corporation (other than a director or officer) shall mean any person (i) who
is or was an employee or agent of the corporation, (ii) who is or was serving at
the request of the corporation as an employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, or (iii) who was an
employee or agent of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
6.3. INSURANCE
---------
The corporation may purchase and maintain insurance on behalf of any person
who is or was a director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him or her and incurred
by him or her in any such capacity, or arising out of his or her status as such,
whether or not the corporation would have the power to indemnify him or her
against such liability under the provisions of the General Corporation Law of
Delaware.
ARTICLE 7.
RECORDS AND REPORTS
-------------------
7.1. MAINTENANCE AND INSPECTION OF RECORDS
-------------------------------------
The corporation shall, either at its principal executive office or at such
place or places as designated by the board of directors, keep a record of its
stockholders listing their names and addresses and the number and class of
shares held by each stockholder, a copy of these bylaws as amended to date,
accounting books and other records of its business and properties.
Any stockholder of record, in person or by attorney or other agent, shall,
upon written demand under oath stating the purpose thereof, have the right
during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent to so act on
behalf of the stockholder. The demand under oath shall be directed to the
corporation at its registered office in Delaware or at its principal place of
business.
<PAGE>
7.2. INSPECTION BY DIRECTORS
-----------------------
Any director shall have the right to examine (and to make copies of) the
corporation's stock ledger, a list of its stockholders and its other books and
records for a purpose reasonably related to his or her position as a director.
7.3. ANNUAL STATEMENT TO STOCKHOLDERS
--------------------------------
The board of directors shall present at each annual meeting, and at any
special meeting of the stockholders when called for by vote of the stockholders,
a full and clear statement of the business and condition of the corporation.
7.4. REPRESENTATION OF SHARES OF OTHER CORPORATIONS
----------------------------------------------
The chairman of the board, if any, the president, any vice president, the
chief financial officer, the secretary or any assistant secretary of this
corporation, or any other person authorized by the board of directors or the
president or a vice president, is authorized to vote, represent and exercise on
behalf of this corporation all rights incident to any and all shares of the
stock of any other corporation or corporations standing in the name of this
corporation. The authority herein granted may be exercised either by such person
directly or by any other person authorized to do so by proxy or power of
attorney duly executed by such person having the authority.
7.5. CERTIFICATION AND INSPECTION OF BYLAWS
--------------------------------------
The original or a copy of these bylaws, as amended or otherwise altered to
date, certified by the secretary, shall be kept at the corporation's principal
executive office and shall be open to inspection by the stockholders of the
corporation, at all reasonable times during office hours.
ARTICLE 8.
GENERAL MATTERS
---------------
8.1. RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING
-----------------------------------------------------
For purposes of determining the stockholders entitled to receive payment of
any dividend or other distribution or allotment of any rights or the
stockholders entitled to exercise any rights in respect of any other lawful
action (other than action by stockholders by written consent without a meeting),
the board of directors may fix, in advance, a record date, which shall not be
more than sixty (60) days before any such action. In that case, only
stockholders of record at the close of business on the date so fixed are
entitled to receive the dividend, distribution or allotment of rights, or to
exercise such rights, as the case may be, notwithstanding any transfer of any
shares on the books of the corporation after the record date so fixed, except as
otherwise provided in the General Corporation Law of Delaware.
<PAGE>
If the board of directors does not so fix a record date, then the record
date for determining stockholders for any such purpose shall be at the close of
business on the day on which the board adopts the applicable resolution.
8.2. CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS
-----------------------------------------
From time to time, the board of directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the corporation, and only the persons so authorized
shall sign or endorse those instruments.
8.3. CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED
--------------------------------------------------
The board of directors, except as otherwise provided in these bylaws, may
authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the board of directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
8.4. STOCK CERTIFICATES; TRANSFER; PARTLY PAID SHARES
------------------------------------------------
The shares of the corporation shall be represented by certificates,
provided that the board of directors of the corporation may provide by
resolution or resolutions that some or all of any or all classes or series of
its stock shall be uncertificated shares. Any such resolution shall not apply to
shares represented by a certificate until such certificate is surrendered to the
corporation. Notwithstanding the adoption of such a resolution by the board of
directors, every holder of stock represented by certificates and, upon request,
every holder of uncertificated shares, shall be entitled to have a certificate
signed by, or in the name of the corporation by, the chairman or vice-chairman
of the board of directors, or the president or vice-president, and by the
treasurer or an assistant treasurer, or the secretary or an assistant secretary
of such corporation representing the number of shares registered in certificate
form. Any or all of the signatures on the certificate may be a facsimile. In
case any officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate has ceased to be such officer,
transfer agent or registrar before such certificate is issued, it may be issued
by the corporation with the same effect as if he or she were such officer,
transfer agent or registrar at the date of issue.
Certificates for shares shall be of such form and device as the board of
directors may designate and shall state the name of the record holder of the
shares represented thereby; its number; date of issuance; the number of shares
for which it is issued; a summary statement or reference to the powers,
designations, preferences or other special rights of such stock and the
qualifications, limitations or restrictions of such preferences and/or rights,
if any; a statement or summary of liens, if any; a conspicuous notice of
restrictions upon transfer or registration of transfer, if any; a statement as
to any applicable voting trust agreement; if the shares be assessable, or, if
assessments are collectible by personal action, a plain statement of such facts.
<PAGE>
Upon surrender to the secretary or transfer agent of the corporation of a
certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books.
The corporation may issue the whole or any part of its shares as partly
paid and subject to call for the remainder of the consideration to be paid
therefor. Upon the face or back of each stock certificate issued to represent
any such partly paid shares, or upon the books and records of the corporation in
the case of uncertificated partly paid shares, the total amount of the
consideration to be paid therefor and the amount paid thereon shall be stated.
Upon the declaration of any dividend on fully paid shares, the corporation shall
declare a dividend upon partly paid shares of the same class, but only upon the
basis of the percentage of the consideration actually paid thereon.
8.5. SPECIAL DESIGNATION ON CERTIFICATES
-----------------------------------
If the corporation is authorized to issue more than one class of stock or
more than one series of any class, then the powers, the designations, the
preferences and the relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock; provided, however, that,
except as otherwise provided in Section 202 of the General Corporation Law of
Delaware, in lieu of the foregoing requirements there may be set forth on the
face or back of the certificate that the corporation shall issue to represent
such class or series of stock a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, the designations,
the preferences and the relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
8.6. LOST CERTIFICATES
-----------------
Except as provided in this Section 8.6, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and cancelled at the same time. The board of
directors may, in case any share certificate or certificate for any other
security is lost, stolen or destroyed, authorize the issuance of replacement
certificates on such terms and conditions as the board may require; the board
may require indemnification of the corporation secured by a bond or other
adequate security sufficient to protect the corporation against any claim that
may be made against it, including any expense or liability, on account of the
alleged loss, theft or destruction of the certificate or the issuance of the
replacement certificate.
<PAGE>
8.7. TRANSFER AGENTS AND REGISTRARS
------------------------------
The board of directors may appoint one or more transfer agents or transfer
clerks, and one or more registrars, each of which shall be an incorporated bank
or trust company -- either domestic or foreign, who shall be appointed at such
times and places as the requirements of the corporation may necessitate and the
board of directors may designate.
8.8. CONSTRUCTION; DEFINITIONS
-------------------------
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the General Corporation Law of Delaware shall
govern the construction of these bylaws. Without limiting the generality of this
provision, the singular number includes the plural, the plural number includes
the singular, and the term "person" includes both a corporation and a natural
person.
ARTICLE 9.
AMENDMENTS
----------
The original or other bylaws of the corporation may be adopted, amended or
repealed by the stockholders entitled to vote or by the board of directors of
the corporation. The fact that such power has been so conferred upon the
directors shall not divest the stockholders of the power, nor limit their power
to adopt, amend or repeal bylaws.
Whenever an amendment or new bylaw is adopted, it shall be copied in the
book of bylaws with the original bylaws, in the appropriate place. If any bylaw
is repealed, the fact of repeal with the date of the meeting at which the repeal
was enacted or the filing of the operative written consent(s) shall be stated in
said book.
