<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
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[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
DENSE-PAC MICROSYSTEMS, INC.
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<PAGE> 2
DENSE-PAC MICROSYSTEMS, INC.
7321 LINCOLN WAY
GARDEN GROVE, CALIFORNIA 92841
JUNE 26, 2000
TO THE SHAREHOLDERS OF DENSE-PAC MICROSYSTEMS, INC.
The Annual Meeting of Shareholders of Dense-Pac Microsystems, Inc. (the
"Company") will be held at the Company's offices located at 7321 Lincoln Way,
Garden Grove, California on August 10, 2000 at 10:00 a.m., California time.
The Annual Report for the Fiscal Year ended February 29, 2000 is enclosed.
At the stockholders' meeting, we will discuss in more detail the subjects
covered in the Annual Report as well as other matters of interest to
stockholders.
The enclosed proxy statement explains the items of business to come
formally before the Annual Meeting. As a stockholder, it is in your best
interest to express your views regarding these matters by signing and returning
your proxy. This will ensure the voting of your shares if you do not attend the
Annual Meeting.
Your vote is important regardless of the number of shares of the Company's
Stock you own, and all stockholders are cordially invited to attend the Annual
Meeting. To ensure your representation at the Annual Meeting, please mark, sign,
date and mail the enclosed proxy card promptly in the return envelope provided,
which requires no postage if mailed in the United States. The giving of a proxy
will not affect your right to vote in person if you attend the Annual Meeting.
Please note, however, that if a broker, bank or other nominee holds your shares
of record and you wish to vote at the Annual Meeting, you must obtain from the
record holder a proxy issued in your name.
Sincerely yours,
Richard J. Dadamo
Chairman of the Board
<PAGE> 3
DENSE-PAC MICROSYSTEMS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 10, 2000
To The Shareholders of Dense-Pac Microsystems:
Notice is hereby given that the Annual Meeting of Shareholders of Dense-Pac
Microsystems, Inc. will be held on Thursday, August 10, 2000 at 10:00 a.m. at
the Company's offices located at 7321 Lincoln Way, Garden Grove, California for
the following purposes:
1. To elect six directors for the ensuing year to serve until the next
annual meeting of shareholders and until their successors are chosen.
2. To consider and act upon a proposal to approve the reincorporation of
the Company as a Delaware corporation, which will also be named
Dense-Pac Microsystems, Inc., pursuant to a merger of the Company into
a wholly-owned Delaware subsidiary and the conversion of the Common
Stock of the Company into the common stock, par value $ .01 per share,
of the surviving corporation.
3. To consider and act upon a proposal to approve an amendment to the
Company's 1996 Stock Option Plan to increase the number of shares of
Common Stock which may be issued subject to the plan by 1,000,000
shares.
4. To transact such other business as may properly come before the
Meeting and any adjournments thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business, June 14, 2000, as
the record date for determination of shareholders entitled to notice of and to
vote at the Annual Meeting.
EVEN THOUGH YOU MAY EXPECT TO BE PERSONALLY PRESENT AT THE MEETING, PLEASE BE
SURE THAT THE ENCLOSED PROXY CARD IS PROPERLY COMPLETED, DATED, SIGNED AND
RETURNED WITHOUT DELAY IN THE ACCOMPANYING ENVELOPE TO WHICH NO POSTAGE NEED BE
AFFIXED IF MAILED IN THE UNITED STATES.
WILLIAM M. STOWELL
Secretary
<PAGE> 4
DENSE-PAC MICROSYSTEMS, INC.
7321 Lincoln Way
Garden Grove, California 92841
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
AUGUST 10, 2000
GENERAL INFORMATION
SOLICITATION, REVOCATION AND VOTING OF PROXIES
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Dense-Pac Microsystems, Inc. (the
"Company"), for use at the Annual Meeting of Shareholders to be held at 10:00
a.m. on August 10, 2000, at the Company's offices located at 7321 Lincoln Way,
Garden Grove, California, and at any and all adjournments thereof (the "Annual
Meeting"). It is anticipated that this Proxy Statement and accompanying proxy
will first be mailed to shareholders on or about July 10, 2000. Such proxies
will be used for the following purposes:
To consider and vote upon the following matters described in this Proxy
Statement:
1. To elect six directors for the ensuing year to serve until the next
annual meeting of shareholders and until their successors are chosen.
2. To consider and act upon a proposal to approve the reincorporation of
the Company as a Delaware corporation, which will also be named
Dense-Pac Microsystems, Inc., pursuant to a merger of the Company into
a wholly-owned Delaware subsidiary and the conversion of each share of
the Common Stock of the Company into one share of the common stock,
par value $ .01 per share, of the surviving corporation.
3. To consider and act upon a proposal to approve an amendment to the
Company's 1996 Stock Option Plan to increase the number of shares of
Common Stock which may be issued subject to the plan by 1,000,000
shares.
4. To transact such other business as may properly come before the Annual
Meeting or any postponement or adjournment thereof.
In addition, as to any other matters or business which may be brought
before the Meeting, a vote may be cast pursuant to the accompany proxy in
accordance with the judgment of the persons voting the shares, but management
does not know of any such other matter or business to come before the meeting. A
shareholder may revoke his or her proxy at any time prior to the voting of
shares by voting in person at
<PAGE> 5
the Meeting or by filing with the Secretary of the Company a duly executed proxy
bearing a later date or an instrument revoking the proxy.
The Company will pay the costs of solicitation of proxies. In addition to
soliciting proxies by mail, the Company's officers, directors and other regular
employees, without additional compensation, may solicit proxies personally or by
other appropriate means. Banks, brokers, fiduciaries and other custodians and
nominees who forward proxy soliciting material to their principals will be
reimbursed their customary and reasonable out-of-pocket expenses.
RECORD DATE AND VOTING RIGHTS
Only shareholders of record of the Company's Common Stock as of the close
of business on June 14, 2000 will be entitled to vote at the Annual Meeting. On
June 14, 2000, there were outstanding 19,448,097 shares of Common Stock, which
constituted all of the outstanding voting securities of the Company, each of
which is entitled to one vote per share. A majority of the shares entitled to
vote, represented in person or by proxy, constitutes a quorum at the Annual
Meeting. Abstentions and broker non-votes are counted as present for purposes of
determining the existence of a quorum.
In the election of directors only, each shareholder has the right to
cumulate his or her votes and give one candidate a number of votes equal to the
number of directors to be elected multiplied by the number of shares he or she
is entitled to vote, or to distribute his or her votes on the same principle
among as many candidates as he or she sees fit. No shareholder is entitled to
cumulate votes unless the name of every candidate for whom such votes would be
cast has been placed in nomination prior to the voting and any shareholder has
given notice at the meeting prior to the voting of such shareholder's intention
to cumulate his or her votes. The candidates receiving the highest number of
votes, up to the number of directors to be elected, will be elected directors.
Broker non-votes and votes withheld have no legal effect.
If voting for directors is conducted by cumulative voting, the persons
named on the enclosed proxy will have discretionary authority to cumulate votes
among the nominees with respect to which authority was not withheld or, if the
proxy either was not marked or was marked for all nominees, among all nominees.
In any case, the proxies may be voted for less than the entire number of
nominees if any situation arises which, in the opinion of the proxy holders,
makes such action necessary or desirable.
<PAGE> 6
ELECTION OF DIRECTORS
(PROPOSAL 1)
The six directors to be elected at the Annual Meeting will hold office
until the next Annual Meeting of Shareholders and until the election and
qualification of their respective successors. All proxies received by the Board
of Directors will be voted for the nominees listed below if no direction to the
contrary is given. In the event that any nominee is unable or declines to serve,
an event that is not anticipated, the proxies will be voted for the election of
any replacement nominee who may be designated by the Board of Directors.
THE BOARD RECOMMENDS VOTING "FOR" THE SIX NOMINEES LISTED BELOW.
Set forth below is information concerning the nominees for director:
NAME AND YEAR FIRST PRINCIPAL OCCUPATION
BECAME A DIRECTOR AGE DURING THE PAST FIVE YEARS
----------------- --- --------------------------
Richard J. Dadamo 72 Mr. Dadamo has been the principal of RJD
1999 Associates, Inc., a management-consulting
firm, since 1981. Mr. Dadamo served as
interim CEO of the Company from August 11,
1998 to January 29, 1999 and is currently
Chairman of the Board. Mr. Dadamo had
previously held top-level positions at The
Earth Technology Corporation, American
International Devices, TRW, Inc. and
Electronic Memories and Magnetics. He has
written two books on management, holds
management seminars, has a monthly
newsletter and is currently on the board of
directors of three private companies.
Ted Bruce 42 Mr. Bruce joined the Company as its
1999 president in 1999 and was elected its CEO a
month later. Prior to joining Dense-Pac, Mr.
Bruce was with Toshiba America Electronic
Components from 1989, where he served as
Senior Manager of North America. He also
served as its Manager for the Card, SRAM and
Nonvolatile departments and as a Product
Marketing Engineer of the standard speed
SRAM. He is a 15-year veteran of
manufacturing, engineering, sales and
marketing within the semiconductor industry,
in both commercial and military markets.
Roger G. Claes 54 Mr. Claes has been a partner and managing
1989 director of Euroventures Benelux Team B.V.,
which manages Euroventures Benelux I B.V.
and Euroventures Benelux II B.V., European
venture capital funds, which are
shareholders of the Company, since 1987; and
he has been a Managing Director of
Euroventures Benelux I B.V. since 1988.
Samuel W. Tishler 62 Mr. Tishler is currently vice president of
2000 corporate development for Dynatech Inc., a
manufacturer of communications equipment,
and is an experienced strategic planning and
venture investment professional. He was
founder of Arthur D. Little Inc., and served
as vice president of Raytheon Ventures and
in that capacity was responsible for its
venture
<PAGE> 7
capital portfolio. Mr. Tishler has also
served on many of the Boards of the
venture-backed companies, including
Viewlogic Systems and Kloss Video
Corporation. Mr. Tishler's broad strategic
planning background includes the early
development of technology concepts from
planning to development and execution.
Gordon M. Watson 61 Mr. Watson is the founder of Watson
2000 Consulting, LLC, a management consultant
firm to small technology companies, based in
California. Mr. Watson most recently served
as Western Regional Director for Lotus
Development Corp. He was also vice president
of business development for Platinum
Technology, Inc., from 1988 until 1996.
Prior to joining Platinum Technology, he
served in various senior management
positions overseeing operations and sales
for technology equipment manufacturing
concerns. Mr. Watson also taught engineering
at the University of California, Irvine and
spent one year conducting national lectures
for Data Tech Institute. He holds a Bachelor
of Science degree in engineering from UCLA.
Richard H. Wheaton 64 Mr. Wheaton, a certified management
2000 consultant, spent the greater part of his
career with Price Waterhouse, LLP where he
also consulted to the Japanese, Asian and
European markets. Previously he worked for
TRW and IBM. He currently teaches classes as
an adjunct professor at the University of
California, Irvine, Graduate School of
Business. He was awarded a Bachelor of
Science degree in business administration
from UCLA and an MBA in industrial
management from the University of Southern
California.
DIRECTORS' COMPENSATION
The Company pays its non-employee directors $1,500 for each Board
meeting attended and $500 for the Committee Chairman, for a meeting held which
is not held on the same day as a Board meeting, and reimburses out-of-pocket
expenses for attending such meetings. New directors are awarded 40,000 stock
options, vesting over a three year period. Once the original options are vested,
an additional 30,000 options, with a three year vesting period are awarded. In
Fiscal Year 2000, the Company awarded stock options to a non-employee director
as follows:
<TABLE>
<CAPTION>
Number of Securities Exercise Expiration
Name Underlying Options Granted Date of Grant Price/Share Date
----- -------------------------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
Gordon Watson 20,000 1-07-00 $7.56 1-07-10
</TABLE>
INFORMATION CONCERNING BOARD AND COMMITTEE MEETINGS
The Company's Board of Directors held four meetings during the fiscal
year ended February 29, 2000. Each director attended or participated in at least
75% of the aggregate number of Board meetings and committee meetings (held
during the period when he was a member thereof). The members of the Audit
Committee in Fiscal Year 2000 were Gordon M. Watson and Trude C. Taylor. The
Audit Committee is responsible for, among other things, periodically reviewing
the financial condition and the results of audit examinations of the Company
with its independent accountants. The Audit Committee met twice during the last
Fiscal Year. A new audit committee was formed on May 17, 2000 with its members
being Richard Wheaton, Samuel Tishler and Gordon Watson. The members of the
Compensation Committee were Richard J. Dadamo and Trude C. Taylor. The
responsibilities of the
<PAGE> 8
Compensation Committee include reviewing and recommending to the Board the
compensation, bonuses and employee benefits of officers. The Compensation
Committee met twice during the last Fiscal Year. The Company also has a Stock
Option Committee, which is responsible for administering the Company's stock
option plans. The members of the Committee were Roger G. Claes and Trude C.
Taylor. The Stock Option Committee met two times during the last Fiscal Year. On
May 17, 2000 the Compensation Committee and Stock Option Committee were combined
into one committee, called the Compensation Committee. Members of this committee
are Gordon Watson and Richard Wheaton. The Company currently does not have a
nominating committee or any committee performing a similar function.
EXECUTIVE OFFICERS
The following information is provided with respect to the Company's current
executive officers.
TED BRUCE, age 42, was elected Chief Executive Officer in February 1999.
See "Election of Directors" for his background.
JOHN P. SPRINT, age 38, has served as Chief Operating Officer since March
2000. Mr. Sprint joined the Company in 1990, where he has served in several
management positions; including Vice President of Manufacturing, Vice President
of Operations from January 1998 until June 1999 and Executive Vice President of
Operations from June 1999 until March 2000. From 1986 until joining the Company,
Mr. Sprint was a manager in the test, manufacturing and thick film departments
at Northrop Electronics Division.
WILLIAM M. STOWELL, age 44, has served as Vice President, Finance and Chief
Financial Officer of the Company since 1987. Mr. Stowell is a CPA with a
Bachelor of Science degree in accounting from the University of Southern
California and has a teaching credential in accounting and management
information systems. Prior to joining the Company, he served as Chief Financial
Officer for Hughes Enterprises and prior to that he served as an audit manager
at Price Waterhouse & Co.
Officers serve at the discretion of the Board of Directors.
<PAGE> 9
REINCORPORATION OF THE COMPANY IN DELAWARE
(PROPOSAL 2)
GENERAL
The Board has unanimously approved a proposal to change the Company's state
of incorporation from California to Delaware ("Reincorporation"). The Board
believes the Reincorporation is in the best interests of the Company and its
shareholders.
The primary reason for the proposed change in domicile is to cause the
Company to be governed by Delaware law, which over the years has undertaken to
maintain a modern and flexible corporation law, which frequently is revised to
meet changing business conditions. As a result, Delaware has become a preferred
state of incorporation of major corporations, the Delaware judiciary has become
particularly familiar with matters of corporation law, and Delaware has a
well-developed body of court decisions interpreting its laws. As a consequence,
Delaware law is comparatively well known and understood.
A number of changes will be effected as a result of the Reincorporation.
Such changes are described below under the heading "Comparison of Rights of
Shareholders of the Company and Stockholders of the Delaware Company."
The Board estimates the aggregate costs to the Company of Reincorporation
to be approximately $30,000. Thereafter, we estimate the additional annual costs
at less than $10,000 per year for the foreseeable future.
In the event this proposal is not adopted, the Company will continue to
operate as a California corporation.
MERGER OF DENSE-PAC MICROSYSTEMS, INC. INTO NEWLY FORMED DELAWARE SUBSIDIARY.
The proposed Reincorporation would be accomplished by merging the Company
into a newly formed Delaware subsidiary, which will be named Dense-Pac
Microsystems, Inc. (the "Delaware Company"), pursuant to an Agreement and Plan
of Merger (the "Merger Agreement"), substantially in the form which is attached
as Appendix A to this Proxy Statement. The Delaware Company's principal
executive offices will be located at 7321 Lincoln Way, Garden Grove, California
92841, (714) 898-0007. The Reincorporation would not result in any change in the
Company's business, assets or liabilities and would not result in any relocation
of management or other employees.
SHAREHOLDERS ARE URGED TO READ CAREFULLY THIS SECTION OF THIS PROXY STATEMENT,
INCLUDING THE RELATED EXHIBITS ATTACHED TO THIS PROXY STATEMENT, BEFORE VOTING
ON THE PROPOSED REINCORPORATION.
CERTAIN CONSEQUENCES OF THE MERGER
Effective Time. The merger will take effect at the time (the "Effective
Time") at which a certificate of merger or agreement of merger has been filed
with the Secretary of State of Delaware and similar documents have been filed
with the California Secretary of State, which filings are anticipated to be made
as soon as practicable after the Reincorporation proposal is approved by the
shareholders of the Company. At the Effective Time, the separate corporate
existence of the Company will cease and shareholders of the Company will become
stockholders of the Delaware Company.
<PAGE> 10
Management After the Merger. Immediately after the merger of the Company
into the Delaware Company (the "Merger"), the Board of Directors of the Delaware
Company (the "Delaware Board of Directors"), and its committees, will be
composed of the members of the Board of the Company, and the members of its
committees, respectively, as of immediately prior to the Merger. Likewise the
officers of the Company shall become the officers of the Delaware Company.
Shareholder Rights. Certain differences in the rights of shareholders exist
under California General Corporation Law (the "CGCL") as compared with Delaware
General Corporation Law (the "DGCL") and the organization documents of the
Company as compared with the organizational documents of the Delaware Company.
See "Comparison of Rights of Shareholders of the Company and Stockholders of the
Delaware Company" for a discussion of the effects of these and other differences
between the rights of stockholders under the CGCL and the DGCL.
Conversion of Common Stock. As a result of the Reincorporation, each
outstanding share of Common Stock will automatically be converted into one share
of Delaware Company Common Stock. Apart from changes due to the differences
between California and Delaware law and certain differences between the
Company's Articles of Incorporation and Bylaws and the Delaware Company's
Certificate of Incorporation and Bylaws (see "Comparison of Rights of
Shareholders of the Company and Stock holders of the Delaware Company"), there
will be no other material changes in the rights and obligations of holders of
the Common Stock as a result of the Reincorporation. The Delaware Common Stock
will be listed on the Nasdaq Stock Market under the same symbol ("DPAC") as the
Company's Common Stock.
Number of Shares of Common Stock Outstanding. The number of outstanding
shares of Delaware Common Stock immediately following the Reincorporation will
equal the number of shares of Common Stock of the Company outstanding
immediately prior to the Effective Time.
Employee Plans. The Company's employee benefit plans (the "Plans");
including the Company's 1985 and 1996 Employee Stock Option Plan will each be
continued by the Delaware Company following the Reincorporation. Approval of the
proposed Reincorporation will constitute approval of the adoption and assumption
of the Plans by the Delaware Company.
Outstanding Options and Rights to Acquire Shares. In addition to the
assumption by the Delaware Company of all options outstanding under the Plans,
any and all other outstanding options or other rights to acquire shares of
Common Stock will be converted into options or rights to acquire shares of
Delaware Company Common Stock on the same terms.
Federal Income Tax Consequences. The Reincorporation is intended to be tax
free under the Code. Accordingly, no gain or loss will be recognized by the
holders of shares of the Company's Common Stock as a result of the
Reincorporation, and the Company or the Delaware Company will recognize no gain
or loss. Each former holder of shares of the Company's Common Stock will have
the same tax basis in the Delaware Common Stock received by such holder pursuant
to the Reincorporation as such holder has in the shares of the Company's Common
Stock held by such holder at the Effective Time. Each stockholder's holding
period with respect to the Delaware Common Stock will include the period during
which such holder held the shares of Common Stock so long as the shares of
Common Stock were held by such holder as a capital asset at the Effective Time.
The Company has not obtained, and does not intend to obtain, a ruling from the
Internal Revenue Service with respect to the tax consequences of the
Reincorporation.
The Company believes no gain or loss should be recognized as a result of
the Reincorporation by the holders of outstanding options to purchase shares of
Common Stock.
<PAGE> 11
Possible Disadvantages of the Proposed Reincorporation. Despite the beliefs
of the Board as to the benefits of the Reincorporation to the Company and its
shareholders, the Reincorporation may have the effect of discouraging a future
takeover attempt that is not approved by the Board but is favored by individual
shareholders. This outcome could result even if a majority of the shareholders
deem such future takeover attempt to be in their best interests or if the
shareholders might receive a substantial premium for their shares over the then
current market value or over their cost basis in such shares. As a result of the
adoption of the Reincorporation, shareholders who wish to participate in an
unsolicited tender offer may not have an opportunity to do so if the Board does
not approve such tender offer. Furthermore, adoption of the Reincorporation will
not necessarily ensure or guarantee that shareholders will receive a price for
their shares in connection with an acquisition of control of the Company that
reflects the value of such shares or that is fair and equitable, although, in
the opinion of the Board, the likelihood that the price will reflect such value
and be fair and equitable will be increased by the Reincorporation. In addition,
the Reincorporation could make it more difficult to change the existing Board
and management of the Company.
The principal reasons for the Board's proposing the Reincorporation are:
- the greater predictability and flexibility provided by the General
Corporation Law of the State of Delaware (the "DGCL"), particularly as
construed by the Delaware courts;
- the belief that the Company's shareholders will benefit from the
well-established principles of corporate governance that the DGCL
affords;
- the increased ability of the Company to attract and retain qualified
directors and officers, especially in light of prior initiatives in
California to attempt to severely limit the ability of companies to
indemnify directors and officers; and
- the reduction of the Company's vulnerability to unsolicited or hostile
attempts to take over or to obtain control of the Company.
ACCOUNTING TREATMENT OF THE MERGER
Upon consummation of the merger, all assets and liabilities of the Company
will be transferred to the Delaware Company at book value because the
Reincorporation will be accounted for as a change in legal form of the entity
without a substantive change in the accounting entity. The Reincorporation will
not change the retained earnings or carrying value of assets and liabilities.
The only changes made to the Company's balance sheet will be the allocation of
"common stock" between paid-in capital, relating to the par value of the
Delaware Company's common stock, and surplus.
NO APPRAISAL RIGHTS IN THE REINCORPORATION
The CGCL provides that shareholders of a corporation involved in a
reorganization are not entitled to dissenters' rights if the corporation, or its
shareholders immediately before the reorganization, or both, own (immediately
after the reorganization) certain equity securities possessing more than
five-sixths of the voting power of the surviving or acquiring corporation or a
parent party. Consequently, because Reincorporation is a reorganization in which
the shareholders of the Company will own, immediately after the reorganization,
equity securities possessing more than five-sixths of the voting power of the
Delaware Company, appraisal rights are not available to shareholders of the
Company with respect to the Reincorporation.
<PAGE> 12
APPROVAL REQUIRED FOR REINCORPORATION
Under the CGCL, the affirmative vote of holders of a majority of the
outstanding shares of each class of the Company's capital stock entitled to vote
on the proposal is required for approval of the Reincorporation. The Common
Stock is the only class of the Company's capital stock of which shares are
outstanding and entitled to vote on the proposal to approve the Reincorporation.
Abstentions and broker non-votes will have the effect of votes against the
proposal to approve the Reincorporation. The Reincorporation may be abandoned or
the Merger Agreement may be amended or changed (with certain exceptions), either
before or after stockholder approval has been obtained if, in the opinion of the
Board, circumstances arise that make such action advisable.
COMPARISON OF RIGHTS OF SHAREHOLDERS OF THE COMPANY AND STOCKHOLERS OF THE
DELAWARE COMPANY
General. Upon consummation of the Merger, the shareholders of the Company
will become stockholders of the Delaware Company, and their rights, as
stockholders will be governed thereafter by the Delaware Company Certificate of
Incorporation ("Delaware Company Certificate"), Delaware Company Bylaws and the
Delaware General Corporation Law ("DGCL"). The Delaware Company Certificate and
Delaware Company Bylaws differ in certain respects from the Company Articles of
Incorporation ("Company Articles") and Company Bylaws, including changes
reflecting certain differences in the applicable governing law. The rights of
Delaware Company stockholders will be governed by the DGCL, while the rights of
the Company shareholders are governed by the California General Corporation Law
("CGCL"). The DGCL and the CGCL differ in many respects, and consequently it is
not practical to summarize all of such differences. It should be noted that
certain aspects of the DGCL have been publicly criticized because they do not
afford minority shareholders the same substantive rights and protections as are
available under the CGCL. The Reincorporation will have the effect of altering
the rights of shareholders and the powers of management, in some cases may
reduce shareholder participation in important corporate decisions and may have
"anti-takeover" implications.
The following is a summary of significant differences between the Company
Articles, Company Bylaws and applicable provisions of the CGCL, on the one hand,
and the Delaware Company Certificate, Delaware Company Bylaws and applicable
provisions of the DGCL, on the other. This discussion is not intended to be
complete and is qualified in its entirety by reference to Delaware Company
Certificate and Delaware Company Bylaws, attached as Appendices B and C hereto.
Copies of the Company Articles and the Company Bylaws are available for
inspection at the principal executive offices of the Company and copies will be
sent to holders of shares Common Stock upon request.
Directors: Number; Cumulative Voting. Under the Company Articles of
Incorporation, the Board consists of a minimum of four and maximum of seven
directors. The Delaware Company Certificate provides that the Delaware Board of
Directors shall consist of a minimum of six directors until changed by the vote
of a majority of the directors. The Board's ability to increase the size of the
Board of Directors may make it more difficult for an acquiror to obtain control
of the Delaware Company.
The DGCL permits, but does not require, the adoption of a classified Board
of Directors with staggered terms, with each class having a term of office
longer than one year, but not longer than three years. Under the CGCL,
corporations whose outstanding shares are listed on the New York Exchange or the
American Stock Exchange, and certain corporations whose outstanding shares are
authorized for quotation on the Nasdaq National Market, are permitted to have a
classified board.
Cumulative voting, which enhances the ability of minority stockholders to
elect directors, is not available under the DGCL unless otherwise provided in a
corporation's certificate of incorporation. Under cumulative voting, each
stockholder is entitled to the number of votes equal to the number of shares
owned by the stockholder multiplied by the number of directors to be elected.
All such votes may
<PAGE> 13
be cast for a single nominee or distributed among several nominees. In the
absence of cumulative voting, the holders of a plurality of the shares present
or represented at a meeting to elect directors may elect all directors, and no
director could be elected without the support of a plurality of the
stockholders. The Delaware Company Certificate does not provide for cumulative
voting. Under the CGCL, corporations whose outstanding shares are listed on the
New York Stock Exchange or the American Stock Exchange and certain corporations
whose outstanding shares are authorized for quotation on the Nasdaq National
Market are permitted to eliminate cumulative voting. The Company Articles do not
provide for the elimination of cumulative voting.
The absence of cumulative voting would make it more difficult for minority
shareholders adverse to a majority of the shareholders to obtain representation
on a corporation's board of directors. The Board has come to believe that,
especially in publicly-held companies, each director should represent the
interests of all of the shareholders rather than the interests of a special
constituency, and that the presence on the Board of one or more directors
representing such a constituency could disrupt and impair the efficient
management of the Delaware Company. The Board also believes that cumulative
voting in the election of directors can serve to encourage minority shareholders
to resort to expensive and disruptive proxy contests to advance their own
special interests, even if they are opposed by a majority of the shareholders.
Removal of Directors; Filling Vacancies on the Board of Directors. Under
the DGCL, the holders of a majority of voting shares generally may remove
directors, with or without cause. Under the CGCL, a director may be removed for
cause by the directors or by a court upon suit by holders of at least 10% or the
outstanding shares. The holders of a majority of voting shares also may remove a
director without cause, under the CGCL,, unless the number of shares voting
against removal would be sufficient to elect such director if voted
cumulatively.
Under the DGCL, any vacancies on the Board of Directors may be filled by a
majority of the directors then in office whether or not less than a quorum, or
by a sole remaining director. In addition, the DGCL provides that a director
elected to fill a vacancy on the Delaware Board of Directors will serve for the
unexpired portion of the term of the director whose place has been filled;
however, if at the time of filling any vacancy or newly created directorship,
the directors then in office constitute less than a majority of the entire board
of Directors (as constituted immediately prior to any increase in their number),
the Delaware Chancery Court may, under certain circumstances, 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.
Under the CGCL, a vacancy created by removal of a director may be filled by
the Board of Directors only if so authorized by a corporation's articles of
incorporation or by a Bylaw approved by the corporation's shareholders. Under
the Company Bylaws, vacancies on the Board, including those arising from the
removal of a director, may be filled by a majority of directors then in office,
or, if the number of directors then in office is less than a quorum, by (i) the
unanimous written consent of the directors then in office, (ii) the affirmative
vote of a majority of directors then in office at a meeting held pursuant to
notice or waiver of notice complying with California Corporations Code Section
307 or (iii) a sole remaining director. The CGCL provides that if, after the
filling of any vacancy by the directors, the directors then in office who have
been elected by the shareholders shall constitute less than a majority of the
directors then in office, (i) any holder or holders of 5% or more of the
outstanding voting shares may call a special meeting of the shareholders or (ii)
the California Superior Court of the proper county shall, upon application of
such shareholder or shareholders, summarily order a special meeting of
shareholders, to be held to elect the entire Board of Directors.
Stockholder Action by Written Consent; Special Meetings; Stockholder
Proposals. Unless otherwise provided in the certificate of incorporation,
stockholders of a Delaware corporation may take
<PAGE> 14
action without a meeting, without prior notice and without a vote, upon the
written consent of stockholders having not less than the minimum number of votes
that would be entitled to vote were present and voted. The Delaware Company
Certificate will not permit stockholder action without a meeting by written
consent. The Company Articles permit shareholder action by written consent.
Thus, shareholders will no longer have the ability to take action by written
consent.
The Delaware Company Bylaws provide that special meetings of stockholders
may be called by the President, or by the President or the Secretary at the
request in writing of a majority of the Delaware Board of Directors, or at the
request in writing of the stockholders owning a majority of the outstanding
voting shares. The Company Bylaws provide that the Board, the Chairman of the
Board, the President or one or more shareholders holding shares entitled to cast
not less than 10% of the votes at the meeting may call special meetings of the
shareholders. However, stockholders of the Delaware Company holding more than
10% of the voting stock will no longer be able to call special meetings of the
Delaware Company.
The elimination of shareholder action by written consent, coupled with the
elimination of the ability of shareholders to call special shareholder meetings,
means that shareholder proposals relating to amendments to the Delaware Company
Certificate or Delaware Bylaws, as well as other matters requiring a vote of the
shareholders, would be restricted to annual meetings. The Board believes these
changes are warranted as a prudent corporate governance measure to prevent an
inappropriately small number of shareholders from prematurely forcing
shareholder consideration of a proposal over the opposition of the Board by
calling a special shareholders' meeting or soliciting written consent before (i)
the time that the Board believes such consideration to be appropriate or (ii)
the next annual meeting. Such special meetings or solicitations would involve
substantial expense and diversion of Board and management time, results which
the Board believes to be inappropriate for an enterprise the size of the
Company. The elimination of the procedures for shareholders to call special
meetings or solicit written consents could discourage hostile takeover attempts
or tender offers for control of the Delaware Company. In addition, elimination
of the ability of shareholders to call a special meeting or solicit written
consent means that a shareholder proposal to replace the Board would be
restricted to only annual meetings, thereby making the removal of directors more
difficult.
Nomination of Directors and Introduction of Business at Shareholder
Meetings. The Delaware Company Bylaws include advance notice procedures with
regard to the nomination of directors, other than by or at the direction of the
Board (the "Nomination Procedure "), and with regard to other matters to be
brought before an annual meeting by a shareholder of the Company (the "Proposal
Notice Requirement"). The Delaware Company Bylaws establish the deadline for
giving such notice to the Company at not less than 60 days nor more than 90 days
prior to the first anniversary of the preceding year's annual meeting. By
requiring advance notice of nominations by shareholders, the Nomination
Procedure affords the Board an opportunity to consider the qualifications of the
proposed nominees and, to the extent deemed necessary or desirable by the Board,
to inform the shareholders about such qualifications. By requiring advance
notice of proposed business, the Proposal Notice Requirement provides the Board
with an opportunity to inform shareholders of the nature of any business
proposed to be conducted at a meeting and the Board's position on any such
proposal, enabling shareholders to better determine how to vote their shares in
regard to such business. The Nomination Procedure and the Proposal Notice
Requirement may have the effect of precluding a nomination for the election of
directors or of precluding any other business at a particular meeting if the
proper procedures are not followed. In addition, the procedures may discourage
or deter a third party from conducting a solicitation of proxies to elect its
own slate of directors or otherwise attempting to obtain control of the Company,
even if such nominations for the election of directors or other business might
be deemed by the majority of shareholders to be beneficial to the Company and
its shareholders. The Company Articles and the Company Bylaws do not contain
corresponding requirements.
<PAGE> 15
Limitations on Directors Liability. The Delaware Company Certificate
contains certain provisions limiting the personal liability of directors. The
Company Articles also contain certain provisions limiting the personal liability
of directors, although in general, the DGCL permits a corporation to eliminate
liability of directors under a broader range of circumstances than does the
CGCL. The CGCL does not permit the elimination or limitation of monetary
liability where such liability is based on: (i) intentional misconduct or
knowing and culpable violation of law; (ii) 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; (iii) receipt of an improper personal benefit; (iv) 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; (v) 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; (vi) transactions between the corporation and
a director who has a material financial interest in such transaction or (vii)
liability for improper distributions, loans or guarantees. The DGCL does not
permit the elimination or limitation of director monetary liability for: (i)
breaches of the director's duty of loyalty to the corporation or its
shareholders; (ii) acts or omissions not in good faith or involving intentional
misconduct or knowing violations of law; (iii) the payment of unlawful dividends
or unlawful stock repurchases or redemptions or (iv) transactions in which the
director received an improper personal benefit. Such provision also may not
limit a director's liability for violation of, or otherwise relieve the Company
or its directors from the necessity of, complying with federal or state
securities laws, or affect the availability of non-monetary remedies such as
injunctive relief or rescission.
The Delaware Company Certificate provides for the elimination of personal
monetary liability of directors to the fullest extent permissible under the
DGCL. The Company Articles contains a comparable provision. Because the DGCL is
more permissive under certain circumstances than the CGCL with respect to
eliminating monetary liability of directors, the Delaware Company Charter is
potentially broader in application than the Company Articles' comparable charter
provision. The Delaware Company Certificate also incorporates any future
amendments to the DGCL that would further eliminate or limit such liability.
The Board believes that the elimination of liability of directors is in the
best interests of the Company in that it maintains its ability to attract and
retain qualified individuals to serve as directors, by providing assurance that
decisions made in good faith will not subject them to personal liability by a
court evaluating their decisions with the benefit of hindsight. However, this
provision will limit the remedies available to shareholders dissatisfied with a
Board decision, even if such decision involved gross negligence. In such case,
the shareholders' only remedy may be to file suit to stop the completion of the
Board's action, which remedy may not be effective if such action has already
been completed.
Indemnification of Directors and Officers. The DGCL permits a corporation
to indemnify it directors and officers to the maximum extent, subject to certain
limitations, provided under the DGCL. The CGCL permits a corporation to
indemnify its directors and officers to the maximum extent, subject to certain
limitations, provided in the CGCL only if the corporation so provided in its
articles. The Company Articles provide for the maximum indemnification; however,
the DGCL permits a corporation to indemnify directors and officers under a
broader range of circumstances than does the CGCL. The CGCL requires
indemnification when the individual has defended successfully the action on the
merits while the DGCL requires indemnification when there has been a successful
defense on the merits or otherwise. If the individual loses or settles, the laws
of both states, with some differences, provide for permissive indemnification
(i.e., it is not required, but the corporation may indemnify). The DGCL
generally permits indemnification of expenses, including attorneys' fees,
actually and reasonably incurred in the defense or settlement of a derivative or
third-party action, provided there is a determination that the person seeking
indemnification acted in good faith and in a manner reasonably believed to be in
or not opposed to the best interests of the corporation. Without court approval,
however, no indemnification
<PAGE> 16
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. The CGCL allows indemnification if, with respect to the matter
giving rise to the lawsuit, there is a determination that the individual acted
(i) in good faith and (ii) for the purpose or in a manner that he reasonably
believed to be in the best interests of the corporation. Although the CGCL is
similar to the DGCL in that it requires this determination to be made by the
majority vote of non-party directors or by the majority vote of a quorum of the
shareholders, the CGCL also provides for this determination to be made by the
court. However, only the DGCL allows for such determination to be made by an
independent counsel.
Authorized Capital Stock. The Company Articles authorize the issuance of up
to 40,000,000 shares of Company Common Stock and 8,000,000 shares of Preferred
Stock, of which, at February 29, 2000, 19,350,497 shares of Company Common Stock
were issued and 2,071,500 shares of Company Common Stock were reserved for
issuance upon exercise of outstanding options and warrants and the conversion of
outstanding convertible securities. No shares of Preferred Stock are
outstanding. The Delaware Company Certificate also will authorize the issuance
of up to 40,000,000 shares of Common Stock and 8,000,000 shares of Preferred
Stock. Authorized but unissued shares of Delaware Company Common tock and
Delaware Company Preferred Stock are available for issuance at the discretion of
the Delaware Board of Directors without stockholder approval. Such shares could
be issued in the future by the Board of Directors in ways that would make more
difficult a change in control of the Company or the Delaware Company, such as
through a private sale, diluting the stock ownership of the person seeking to
gain control of the Company or the Delaware Company, as the case may be. Any
such action could have the effect of deterring an offer for outstanding Company
Common Stock or Delaware Company Common Stock, which might otherwise enable the
holders thereof to earn a premium over the then current market price of such
securities.
Dissenters' Rights. Under the CGCL and DGCL, a dissenting shareholder may,
in certain corporate transactions and under varying circumstances, receive cash
in the amount of the fair market value of his shares (as determined by agreement
of the parties or by a court), in lieu of the consideration he or she would
otherwise receive in any such transaction. The DGCL generally requires such
dissenters' rights of appraisal with respect to mergers and consolidations, but
not a sale of assets, unless the corporation's certificate of incorporation
provides otherwise. The DGCL contains certain exclusions from dissenters' rights
requirements, including a merger or consolidation by a corporation, the shares
of which are either listed on a national securities exchange or held by more
than 2,000 stockholders, if the stockholders receive shares of the surviving
corporation or of such a listed or widely-held corporation. In contrast, the
CGCL generally affords dissenters' rights in a share-for-share exchange
reorganization, a sale-of-assets reorganization, or a merger. The exclusions
from dissenters' rights in mergers under the CGCL are somewhat different from
those under the DGCL. For example, in the case of a corporation whose shares are
listed on a national securities exchange, dissenters' rights would nevertheless
be available in certain transactions for any shares with respect to which there
are certain restrictions on transfer, and for any class with respect to which
there are certain restrictions on transfer, and for any class with respect of 5%
or more of such class claims dissenters' rights. Also, under the CGCL,
shareholders of a corporation involved in a reorganization are not entitled to
dissenters' rights if the corporation, or its shareholders immediately before
the reorganization, or both, own (immediately after the reorganization) certain
equity securities possessing more than five-sixths of the voting power of the
surviving or acquiring corporation or a parent party.
Loans to Directors, Officers and Employees. Under the DGCL, a corporation
may make loans or guarantee the obligations of its officers or other employees
and those of its subsidiaries when such action, in the judgment of the
directors, may reasonably be expected to benefit the corporation. Under the
CGCL, shareholders of a corporation with at least 100 shareholders may approve a
bylaw providing that a disinterested majority of the Board may approve loans and
guarantees to officers without shareholder
<PAGE> 17
approval if the Board determines that such loans may reasonably be expected to
benefit the corporation. There is no such bylaw in the Company Bylaws.
Dividends and Repurchases of Shares; Par Value, Capital and Surplus. The
CGCL dispenses with the concepts of par value of shares as well as statutory
definitions of capital, surplus and the like, while such concepts are retained
under the DGCL. A Delaware corporation may make repurchases or redemptions that
do not impair capital, and may pay dividends out of any surplus account
(generally the stockholders' equity of the corporation less the par value of the
capital stock outstanding) or, if there exists no surplus, out of net profits of
the current and preceding fiscal year (after provision for outstanding preferred
stock). To determine the surplus, assets and liabilities may be revalued at
their current fair market value, which may create greater surplus from which to
pay dividends than would the book valuation of assets and liabilities.
With certain limited exceptions, distributions to shareholders of a
California corporation (including redemptions, repurchases and dividends, other
than stock dividends) are generally limited either to the amount of the
corporation's retained earnings or to an amount which would leave the
corporation with (i) tangible assets of at least one and one quarter times its
liabilities other than certain deferred liabilities and (ii) current assets at
least equal to its current liabilities. In addition, the CGCL provides that a
corporation may not make any distribution that would render the corporation
unable to meet its liabilities, nor may such a distribution be made if, as a
result, the excess of the corporation's assets over its liabilities would be
less than the liquidation preference of all shares having a preference on
liquidation over the class or series to which the distribution is made. The CGCL
does not permit the revaluation of assets from book value to their current fair
market value.
Shareholder Approval of Mergers. Both the CGCL and DGCL generally require
that the holders of majority of the shares of both acquiring and target
corporations approve statutory mergers with differing exceptions to this general
requirement. The DGCL does not require a shareholder vote of the surviving
corporation in a merger (unless the corporation provides otherwise in its
charter) if: (i) the merger agreement does not amend the existing charter; (ii)
each share of stock of the surviving corporation outstanding immediately before
the effective date of the merger is an identical outstanding share after the
merger and (iii) either (a) 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 (b) the authorized
unissued shares or 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 twenty percent (20%) of the shares of
Common Stock of such constituent corporation outstanding immediately prior to
the effective date of the merger. The CGCL 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 83 1/3% (or
five-sixths) of the voting power of the surviving or acquiring corporation or
its parent entity.
Amendment of Bylaws. Under the CGCL law, a corporation's bylaws may be
adopted, amended or repealed either by the vote of a majority of the outstanding
shares or by the approval of the board of directors of such corporation. Neither
the Company Articles nor the Company Bylaws contain provisions restricting or
eliminating the rights to adopt, amend or repeal granted under the CGCL. The
DGCL provides that a corporation's bylaws may be amended by that corporation's
shareholders or, if so provided in the corporation's charter, by the
corporation's board of directors. The Delaware Company Certificate gives the
Board the power to alter, amend or repeal the Delaware Company Bylaws.
Shareholder Derivative Suits. The CGCL provides that a shareholder bringing
a derivative action on behalf of the Company need not have been a shareholder at
the time of the transaction in question, provided that certain tests are met.
Under the DGCL, a shareholder may bring a derivative action on
<PAGE> 18
behalf of the Company only if the he or she was a shareholder of the Company at
the time of the transaction in question or if his or her stock thereafter
devolved upon him or her by operation of law. The CGCL also provides that the
Company 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, while
the DGCL does not.
Dissolution. Under the CGCL, shareholders holding fifty percent (50%) or
more of the total voting power of the Company may authorize the Company's
dissolution, with or without the approval of the Board, and this right may not
be modified by the Company Articles or Company Bylaws. Under the DGCL, without
the Board's approval of a dissolution of the Company, a dissolution must be
unanimously approved by all the shareholders entitled to vote thereon, while a
dissolution that is approved by the Board only requires the approval of a simple
majority of such shareholders. In the event of such a Board-initiated
dissolution, the DGCL allows the Delaware Company to include in the Delaware
Company Certificate a supermajority (greater than a simple majority) voting
requirement in connection with dissolutions. The Delaware Company Certificate
does not contain a supermajority-voting requirement in connection with
dissolutions.
Inspection of Shareholder List. Both the CGCL and the DGCL allow any
shareholder to inspect the shareholder list for a purpose reasonably related to
such person's interest as a shareholder. However, in under the CGCL this right
of inspection is limited to record shareholders; whereas the Delaware courts
have extended that right under the DGCL to beneficial holders of shares. Like
the CGCL, the DGCL provides for inspection rights as to a list of shareholders
entitled to vote at a meeting for any purpose germane to the meeting, but limits
such inspection to the 10-day period preceding a shareholders' meeting. The
CGCL, unlike the DGCL, also provides that persons with record ownership of an
aggregate of five percent (5%) or more of the corporation's voting shares and
that persons with record ownership of an aggregate of one percent (1%) or more
of such shares who have contested the election of directors have the right to
inspect and copy the corporation's shareholder list without establishing the
purpose for such inspection.
Application of the California General Corporation Law to Delaware
Corporations. Under Section 2115 of the California General Corporation Law,
certain foreign corporations (i.e., corporations not organized under the CGCL)
that have significant contacts with California are subject to a number of key
provisions of the California General Corporation Law. However, an exemption from
Section 2115 is provided for a corporation whose shares are qualified as a
national market security on the Nasdaq Stock Exchange and if the corporation has
at least 800 holders of its equity securities as of the record date for its most
recent shareholder meeting. Following the Reincorporation, the Company's Common
Stock will continue to be qualified on the Nasdaq National Market and,
accordingly, the Delaware Company would be exempt from Section 2115 so long as
it had more than 800 holders of its equity securities.
ANTI-TAKEOVER MEASURES
The Board believes that hostile takeovers may present certain risks to a
corporation and its stockholders. Takeover attempts that have not been
negotiated or approved by the board of a corporation may seriously disrupt the
business and management of a corporation and may result in terms that are less
favorable to some or all of the stockholders than would be available in a
negotiated, board-approved transaction. For instance, a hostile takeover may
involve an offer to buy only a majority of the shares of a corporation, and
those shares not sold to the acquiror may not be purchased, or may be acquired
subsequently on less favorable terms. By contrast, board-approved transactions
can theoretically be carefully planned, undertaken at an opportune time in order
to obtain maximum value for the corporation and all of its stockholders, with
due consideration to matters such as capturing the value from longer term
strategies and the recognition or postponement of gain or loss for tax purposes.
<PAGE> 19
The Company Articles and Company Bylaws already include certain provisions
available to the Company under the CGCL to deter hostile takeover attempts and
to help provide adequate opportunity for the Board to consider and respond to a
takeover offer. These provisions include a classified board, elimination of
cumulative voting, and an advance notice requirement for stockholder proposals.
These provisions are also included in the Delaware Company Certificate and
Delaware Bylaws.
The Delaware Company would also retain the rights currently available to
the Company to issue shares of its authorized but unissued capital stock.
Following the effectiveness of the proposed Reincorporation, shares of
authorized and unissued common stock and preferred stock of the Delaware Company
could be issued, or preferred stock could be created and issued with terms,
provisions and rights, to make more difficult, and therefore less likely, a
takeover of the Delaware Company. Any such issuance of additional stock could
have the effect of diluting the earnings per share and book value per share of
existing shares of Common Stock and preferred stock, and such additional shares
could be used to dilute the stock ownership of persons seeking to obtain control
of the Delaware Company.
In addition to specific anti-takeover measures, a number of differences
between the CGCL and the DGCL, which are effective without action by the
Delaware Company, could have a bearing on unapproved takeover attempts. Under
Section 203 of the DGCL ("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 of the DGCL
prohibits certain mergers, consolidations, sales of assets and other
transactions ("business combinations") with a "interested stockholder"
(generally a 15% or more stockholder) for three years following the date the
stockholder became an interested stockholder. The prohibition on business
combinations is subject to certain exceptions, the most significant of which are
that the prohibition does not apply if: (i) the business combination or
transaction in which the interested stockholder becomes an interested
stockholder is approved by the board of directors prior to the stockholder
becoming an interested stockholder; (ii) the business combination is with an
interested stockholder who became an interested stockholder in a transaction
whereby he acquired at least 85% of the corporation's voting stock; (iii) the
business combination is approved by the board of directors and authorized by the
affirmative vote of at least 66 2/3% of the outstanding voting stock which is
not owned by the interested stockholder; or (iv) an exemption is available.
Section 203 of the DGCL applies to Delaware corporations which have a class
of voting stock that is listed on a national securities exchange, authorized for
quotation on an inter-dealer quotation system of a registered national
securities association, or are held of record by more than 2,000 stockholders.
However, a Delaware corporation may, through its certificate of incorporation or
bylaws, elect not to be governed by the statute. The Delaware Company
Certificate and Delaware Company Bylaws do not contain such an election;
consequently, the statute will apply to business combinations involving the
Delaware Company.
The Board believes that Section 203 will encourage any potential acquiror
to negotiate with the Board. Section 203 also might have the effect of limiting
the ability of a potential acquiror to make a two-tiered bid for the Delaware
Company, in which all stockholders would not be treated equally. Shareholders
should note, however, that the application of Section 203 to the Delaware
Company would 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 the Delaware Company's shares over the
then-current market price. Section 203 would also discourage certain potential
acquirors who are unwilling to negotiate with the Board.
The CGCL requires that holders of Common Stock receive Common Stock in a
merger of the corporation with the holder of more than fifty percent (50%) but
less than ninety percent (90%) of the target's Common Stock or its affiliate
unless all of the target company's shareholders consent to the
<PAGE> 20
transaction. This provision of the CGCL may have the effect of making a
"cash-out" merger by a majority shareholder more difficult to accomplish.
Although the DGCL does not parallel the CGCL in this respect, under some
circumstances Section 203 does provide similar protection to shareholders
against coercive two-tiered bids for a corporation in which the shareholders are
not treated equally.
The Board recognizes that hostile takeover attempts do not always have the
unfavorable consequences or effects described above and may frequently be
beneficial to the stockholders, providing all of the stockholders with
considerable value for their shares. To the extent that the Reincorporation may
provide greater deterrence to takeover offers and greater defenses against
takeovers, the Reincorporation may have the effect of discouraging or defeating
future takeover attempts which a substantial number or majority of the Delaware
Company's stockholders might wish to accept and which might provide a
substantial premium over market prices. However, the Board believes that the
potential suddenness and disadvantages of unapproved takeover attempts (such as
disruption of the Company's business and the possibility of terms which may be
less favorable to all of the stockholders than would be available in a
board-approved transaction) are sufficiently great that, on balance, steps to
reduce the likelihood of such takeover attempts and to help ensure that the
Board has adequate opportunity to fully consider and respond to any takeover
attempt and actively negotiate its terms, are in the best interest of the
Company and its stockholders. The Board also believes that any additional
defenses and deterrence provided by the Reincorporation are incremental in light
of the Company's existing takeover defenses.
REQUIRED VOTE
The affirmative vote of a majority of the outstanding shares of each class
of the Company's capital stock entitled to vote at the Annual meeting is
required to approve the Reincorporation proposal. Abstentions and broker
non-votes will have the effect of votes against the Reincorporation proposal.
The persons named as proxies in the accompanying form of proxy intend to vote in
favor of Reincorporation. A vote FOR the Reincorporation proposal will
constitute approval of (i) the change in the Company's state of incorporation
through a merger of the Company into the Delaware Company, (ii) the Delaware
Company Certificate, (iii) the Delaware Company bylaws, and (iv) all other
aspects of the Reincorporation proposal. If this proposal is approved, the
Delaware Company Certificate and Delaware Company Bylaws shall supersede the
Company Articles and Company Bylaws on the Effective Date.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF THE PROPOSAL TO
REINCORPORATE THE COMPANY IN THE STATE OF DELAWARE.
<PAGE> 21
PROPOSAL TO AMEND THE 1996 STOCK OPTION PLAN
TO INCREASE NUMBER OF SHARES
(PROPOSAL 3)
At the Annual Meeting, the shareholders will be asked to consider and act
upon a proposal to approve an amendment to the Company's 1996 Stock Option Plan
(the "Plan") to increase the number of shares of Common Stock reserved for
issuance thereunder from 3,000,000 shares to 4,000,000 shares and to establish
an annual limit of 500,000 shares subject to grants to any one participant in
any calendar year and an overall limit of 3,850,000 shares subject to grants of
Incentive Stock Options under the Plan. The Board of Directors approved the
proposed amendment on March 17, 2000, subject to shareholder approval.
Management believe that this amendment is in the best interests of the
Company because of the need to provide options to attract, motivate and retain
quality employees, directors, consultants and advisors to remain competitive in
the industry. As of March 20, 2000, of the 3,000,000 shares of Common Stock then
authorized for issuance under the Plan, the respective amounts of 709,970 shares
had been issued upon the exercise of options granted under the Plan, 1,912,600
shares were subject to outstanding options, and 376,680 shares were available
for future option grants. At March 20, 2000, the Company had outstanding options
to purchase 209,700 shares of Common Stock pursuant to options granted under the
Company's prior option plan (the "1985 Dense-Pac Stock Option Plan"). If this
proposal to increase the number of shares of Common Stock reserved for issuance
under the Plan is approved by the shareholders, the Company intends to cause the
additional shares of Common Stock that will become available for issuance under
the Plan to be registered on a Form S-8 Registration Statement to be filed with
the Securities and Exchange Commission at the Company's expense. The
registration statement will make the additional shares available under the Plan
available for future sale in the public trading market as and when options are
granted and subsequently exercised.
The following summary of the principal provisions of the Plan is subject to
the full text thereof. A copy of the Plan will be delivered to any shareholder
upon any written or oral request by first class mail or other equally prompt
means within one business day of receipt of such request. Request should be
directed to William M. Stowell, Chief Financial Officer, Dense-Pac Microsystems,
Inc. 7321 Lincoln Way, Garden Grove, California 92841, (714) 898-0007.
BACKGROUND AND PURPOSE OF THE PLAN
The Company's shareholders approved the Plan at the Annual Meeting of
Shareholders held in 1996. The underlying objective of the Plan is to further
the interests of the Company by strengthening the desire of employees,
directors, consultants, and advisors to continue their employment with or
service to the Company and by inducing individuals to become employees,
directors, consultants or advisors of the Company through the grant of stock
options, and to enable such persons to acquire an equity interest in the
Company. Options issued under the Plan may be either incentive stock options
("Incentive Stock Options") under Section 422 of the Internal Revenue Code of
1986 (the "Code"), or non-qualified stock options ("Non-Qualified Options").
SECURITIES SUBJECT TO THE PLAN
Currently, the Plan authorizes the issuance thereunder of 3,000,000 shares
of the Company's Common Stock. If the proposed amendment to the Plan is
approved, the number of shares of Common Stock reserved for issuance under the
Plan would increase from 3,000,000 shares to 4,000,000 shares. In the event of
any change in the number of outstanding shares of Common Stock by reason of
<PAGE> 22
reorganization, merger, recapitalization, reclassification, stock dividend,
stock split, exchange or combination of shares or other similar transactions,
appropriate and proportionate adjustment will be made in the number of shares to
which outstanding options relate and the exercise price per share.
ADMINISTRATION
The Plan may be administered either by a Committee consisting of at least
two directors appointed by the Board of Directors or by the Board of Directors.
The Committee has full authority, subject to the provisions of the Plan, to
grant options, to designate the optionees and terms of the options, to establish
rules and regulations which the Committee deems appropriate for the proper
administration of the Plan, and to interpret and make determinations under the
Plan. Members of the Committee serve at the discretion of the Board and are
eligible to receive options under the Plan, in which event such option grants
are approved by the disinterested members of the Board. At the present time, the
Compensation Committee administers the Plan.
ELIGIBILITY
Options may be granted to persons who are employees, directors,
consultants, and advisors of the Company or any subsidiary or parent company of
the Company. Incentive Options may be granted only to employees of the Company
or any subsidiary or parent of the Company. At March 20, 2000, the Company had
140 employees and six non-employee directors and advisors who were eligible to
receive options under the Plan. At March 20, 2000, executive officers as a group
held options (granted under the Plan or otherwise) to purchase 1,244,875 shares,
non-employees, directors and advisors as a group held options to purchase
114,000 shares, and all employees as a group (other than executive officers)
held options to purchase 813,425 shares of Common Stock. As of March 20, 2000,
the following executive officers named in the Summary Compensation Table and
director nominees have been granted options as indicated: Ted Bruce, 485,000
options; William M. Stowell, 324,500 options; John P. Sprint, 270,375 options;
Richard J. Dadamo, 165,000 options; Trude C. Taylor, 35,000 options; Robert
Southwick, 29,000; and Gordon Watson, 20,000 options. During Fiscal Year 2000,
options to purchase 784,000 shares were granted to 23 individuals. Exercise
prices for the options granted range from $1.56 to $7.56 per share. The fair
market value of the Company's common stock on March 20, 2000 was $8.63 per
share.
TERMS AND CONDITIONS
Options granted under the Plan expire no later than ten years after the
grant date (five years with respect to Incentive Options granted to an optionee
who owns, or would be considered to own by reason of Section 424 (d) of the
Internal Revenue Code, more than 10% of the outstanding Common Stock of the
Company or any subsidiary on the grant date). An option is exercisable in such
amounts and at such times as are determined by the Committee. The purchase price
for shares to be issued upon exercise of an option is determined by the
Committee at the time of grant, but with respect to an Incentive Option such
price may not be less than 100% of the fair market value of the Common Stock on
the grant date (110% of the fair market value in the case of Incentive Options
granted to a person who on the grant date owns or is considered to own more than
10% of the outstanding Common Stock).
If the aggregate fair market value of Common Stock (determined based on the
value the time each Incentive Option is granted) for which all Incentive Options
held by an optionee (whether granted under the Plan or any other plan of the
Company) are exercisable for the first time during any calendar year exceeds
$100,000, then the amount of such excess will be treated as a Non-Qualified
Option.
The exercise price of an option is payable in cash or, with the approval of
the Committee, in shares of the Company's Common Stock owned by the optionee, by
full recourse promissory note
<PAGE> 23
secured by the shares purchased, by cancellation or indebtedness of the Company
to the optionee, by waiver of compensation due or accrued for services rendered,
or through a same-day-sale arranged through a broker.
Options granted under the Plan are not transferable or assignable other
than by will or by the laws of descent and distribution. If an optionee ceases
to be employed or retained by the Company for any reason other than death or
permanent disability (as defined in the Plan), the option expires on the earlier
of three months from the date of such termination or expiration of the term of
the option. During the period between the optionee's termination and expiration
of the option, the option may only be exercised to the extent that it was
exercisable on the date of such termination. Upon the death or permanent
disability of an optionee while an employee, director, consultant or advisor,
the option expires on the earlier of one year from the date of death or
permanent disability or expiration of the term of the option, but can be
exercised only to the extent that it could have been exercised on the date of
death or permanent disability. The foregoing provisions regarding termination of
options upon termination of employment, permanent disability or death may be
varied by the Committee with respect to Non-Qualified Options.
An option agreement is entered into between the Company and the optionee at
the time at which an option is granted. Such agreement is on terms determined,
consistent with the Plan, by the Committee.
DURATION AND MODIFICATION OF THE PLAN AND OPTION
The Plan will remain in effect until all shares covered by options granted
under the Plan have been purchased or all rights to acquire the shares have
lapsed. No options may be granted under the Plan after February 13, 2007,
although the Board of Directors may terminate the granting of options under the
Plan at an earlier date or amend or otherwise modify the Plan. Except for
adjustments made necessary by changes in the Company's Common Stock the Board of
Directors may not, without shareholder approval, increase the total number of
shares to be offered under the Plan or materially modify the eligible class of
optionees.
The Committee may modify or amend the terms of outstanding options,
including to change or accelerate the vesting of an option or to change the
exercise price, with the consent of the optionee. The Committee approved option
re-pricings in September 1998, in August and September 1996 and in August 1994.
In the event of a proposed dissolution or liquidation of the Company, the
Committee shall notify the Optionee at least thirty (30) days prior to such
proposed action. To the extent it has not been previously exercised, the Option
will terminate immediately prior to the consummation of such proposed action. In
the event of a merger, sale of assets or change of control, the Committee shall
provide for the Optionee to have the right to exercise the Option as to all of
the Optioned Stock, including Shares as to which it would not otherwise be
exercisable. In such event, the Committee shall notify the Optionee that the
Option shall be exercisable for a period of not less than thirty (30) days form
the date of such notice.
FEDERAL INCOME TAX CONSEQUENCE
The following discussion is a summary of certain significant federal income
tax consequences of the Plan based on currently applicable provisions of the
Code and the regulations promulgated thereon.
GRANT OF STOCK OPTIONS. The grant of an Incentive Option or a Non-Qualified
Option under the Plan is not a taxable event to the optionee.
EXERCISE OF NON-QUALIFIED STOCK OPTIONS. An optionee will recognize
ordinary income for federal income tax purposes on the date a non-Qualified
Option is exercised. The amount of
<PAGE> 24
income recognized is equal to the excess of the fair market value of the shares
acquired on the date of exercise over the exercise price of such shares.
The optionee's tax basis in the shares acquired upon the exercise of a
Non-Qualified Option is equal to the fair market value of the shares on the
exercise date. Different rules apply if an optionee exercises a stock option by
surrendering previously owned shares of Common Stock. The optionee will
recognize capital gain or loss upon a sale or exchange of the option shares to
the extent of any difference between the amount realized and the optionee's tax
basis in the shares.
EXERCISE OF INCENTIVE STOCK OPTIONS. An optionee will not recognize income
upon the exercise of an Incentive Option. However, the "spread" between the fair
market value of the shares at the time of exercise and the exercise price is
includible in the calculation of alternative minimum taxable income for purposes
of the alternative minimum tax.
If the optionee does not dispose of the shares received upon exercise of
the option within the two-year period after the Incentive Option was granted and
the one-year period after the exercise of the Incentive Option (the "ISO holding
periods"), the optionee will recognize capital gain or loss when he disposes of
the shares. Such gain or loss will be measured by the difference between the
exercise price and the amount received for the shares at the time of
disposition. Different rules apply if an optionee exercises a stock option by
surrendering previously owned shares of Common Stock.
If the shares acquired upon exercise of an Incentive Option are disposed of
before the end of the ISO holding periods, the disposition is a "disqualifying
disposition" which results in the optionee recognizing ordinary income in an
amount generally equal to the lesser of (i) the excess of the value of the
shares on the option exercise date over the exercise price or (ii) the excess of
the amount received upon disposition of the shares over the exercise price. Any
excess of the amount received upon disposition of the shares over the value of
the shares on the exercise date will be taxed to the optionee as capital gain.
Different rules apply if an optionee exercises an option by surrendering shares
of Common Stock which were previously acquired upon the exercise of an incentive
stock option and with respect to which the optionee has not satisfied the ISO
holding periods
COMPANY DEDUCTIONS. The Company generally must collect and pay withholding
taxes upon the exercise by an employee of a Non-Qualified Option. The Company
(or its subsidiary) generally is entitled to a deduction for federal income tax
purposes at the same time and in the same amount that the optionee recognizes
ordinary income, to the extent that such income is considered reasonable
compensation under the Code. Deductions may be limited by Section 162 (m) of the
Code with respect to options granted to certain executive officers if the
options do not qualify as "performance-based compensation" under that section.
Ordinary income recognized by an optionee under the exercise of a Non-Qualified
Option or due to a disqualifying disposition of an Incentive Option does not
qualify as "performance-based compensation". The Company believes that adopting
this proposal, including the limits on annual grants, should qualify some or all
of the income recognized under the Plan as "performance-based compensation."
Neither the Company nor any subsidiary is entitled to a deduction with respect
to payments that constitute "excess parachute payments" pursuant to Section 280G
of the code and that do not qualify as reasonable compensation pursuant to that
section. Such payments also subject the recipients to a 20% excise tax.
VOTE REQUIRED
Under California corporate law, the affirmative vote of a majority of the
shares represented and voting at the Meeting, which shares voting affirmatively
also constitute at least a majority of the required quorum, is necessary for the
approval of the proposed amendment to the Plan. Abstentions and broker
<PAGE> 25
non-votes are not counted in determining the shares voted, but abstentions and
broker non-votes, because they are counted towards a quorum, would have the
effect of a vote against the proposal if the shares voting in favor do not
constitute at least a majority of the required quorum.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL OF THE
PROPOSED AMENDMENT TO THE PLAN.
EXECUTIVE COMPENSATION
The following tables provide information concerning the compensation of each
person who served as chief executive officer during the last Fiscal Year and
other executive officers whose total salary and bonus exceeded $100,000 in
Fiscal Year 1999 (the "Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
----------------------- --------------------------------------
Name and Securities Underlying All Other
Principal Position Fiscal Year Salary Bonus Options(#) Compensation(1)
------------------ ----------- ------ -------- --------------------- --------------
<S> <C> <C> <C> <C> <C>
Ted Bruce 2000 $150,000 $253,500 240,000 $ 3,000
Chief Executive 1999 $ 12,500 $ 9,500 270,000
Officer, President
Richard J. Dadamo 2000 $ 72,000 $ 50,000 75,000 $ 3,000
Former Chief Executive 1999 $ 79,800 -0- 100,000
Officer
John P. Sprint 2000 $136,500 $127,000 80,000 $ 3,000
Chief Operating Officer 1999 $125,500 $ 27,500 213,600(2) $ 2,000
1998 $ 93,000 $ 15,000 50,000 $ 2,000
William M. Stowell 2000 $147,000 $113,000 48,000 $ 3,000
Chief Financial Officer 1999 $145,000 $ 26,125 194,200(2) $ 2,000
1998 $125,000 $ 26,250 25,000 $ 2,000
</TABLE>
--------
(1) In Fiscal Year 2000, includes Company contributions to the 401(k) Plan for
each of named officer with a maximum contribution of $ 3,000. Other
perquisites for each of the employees listed in the table were less than
$50,000 and 10% of the total of annual salary and bonus for such
individual.
(2) During Fiscal Year 1999, the Company repriced options, which were issued
during Fiscal Year 1999, as well as the previous two fiscal years. Pursuant
to rules of the Securities and Exchange Commission, such repriced options
are included in the number of options granted in Fiscal Year 1999 (the year
in which they were repriced) and in the previous fiscal years (the years
that they were issued). Of the total options issued to these individuals,
188,600 and 169,200 represents repriced options for Mr. Sprint and Mr.
Stowell, respectively.
The Company is party to an employment agreement with Mr. Bruce. The
principal features of the agreement are described below:
<PAGE> 26
Mr. Bruce was employed in January 1999 as president and chief executive
officer of the Company. An employment agreement was renewed in January 2000 and
provides for an annual base salary of $200,000. Included is a bonus program of
50% of the base salary, based on performance at target levels, and with a
maximum payment of 200% of annual base salary based on performance at
established levels above target levels. The bonuses are earned quarterly and
measured to target goals each quarter. If the Company terminates this agreement
at any time without cause, or if Mr. Bruce elects to terminate his employment
for good reason, the Company will pay Mr. Bruce severance pay equal to twelve
months of his then base monthly salary. Additionally, his options will continue
to vest for 12 months after termination and he will have the same 12 months to
exercise vested options.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
% of Total
Number of Securities Options Granted Exercise
Underlying Options to Employees in Price Per Expiration
Name Granted(1) Fiscal Year Share (2) Date
---- ------------ ----------- --------- -----------
<S> <C> <C> <C> <C>
Ted Bruce 240,000(3) 31.9% 7.31 1-11-10
Richard J. Dadamo 75,000(4) 9.6% 6.13 2-15-10
John P. Sprint 80,000 10.2% 2.25 6-1-09
William M. Stowell 48,000 6.1% 2.05 9-1-09
</TABLE>
--------
(1) Unless otherwise indicated, the options vest in 25% installments beginning
one year after the grant date and are subject to earlier termination in the
event of termination of employment, death and certain corporate events.
Under the terms of the Company's Stock Option Plans, the Stock Option
Committee may modify the terms of outstanding options, including the
exercise price and vesting schedule. See "Severance Arrangements."
(2) Fair market value of the Common Stock on the grant date.
(3) Vesting of the options are 80,000 shares at each of the first, second and
third anniversaries of the date of award.
(4) Vesting of the options are over a three-year period.
<PAGE> 27
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
Number of Securities
Underlying Value of Unexercised
Options at In-the-Money Options
Shares Fiscal Year-End at Fiscal Year-End(2)
Acquired Value --------------------------- ------------------------------
Name on Exercise Realized(1) Exercisable Unexercisable Exercisable Unexercisable
----- ----------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard J. Dadamo 10,000 $10,000 90,000 75,000 $ 648,000 $ 155,000
Ted Bruce 25,000 $20,250 105,000 380,000 $ 736,000 $1,195,000
John P. Sprint 73,000 $284,800 52,875 167,500 $ 377,000 $1,106,000
William M Stowell 36,500 $128,125 197,450 123,000 $1,317,000 $ 835,000
</TABLE>
--------
(1) Represents the difference between the aggregate market value on the date of
exercise and the aggregate exercise price.
(2) Represents the difference between the aggregate market value on February
29, 2000 ($8.20 share) and the aggregate exercise price.
REPORT OF THE STOCK OPTION COMMITTEE ON OPTION RE-PRICING
On September 23, 1998, the Stock Option Committee approved the re-pricing
of a total of 973,700 stock options held by all employees under the 1996 Stock
Option Plan. The stock options had been granted from November 1995 to June 1998
and at prices from $1.89 to $3.78, vested at 25% per year beginning one year
after the grant date, and expired after 10 years. The exercise price of the
options was changed to $1.00, representing 160% of the fair market value of the
Common Stock, which was $ .625 on September 23, 1998. No other terms of the
options were changed.
The Committee approved the option re-pricing because it believes that
providing an equity interest in the Company WAS an important factor in the
Company's ability to attract and retain key employees that are critical to the
Company's long-term success. In determining to approve the option repricing, the
committee also considered that the market price of the Common Stock had declined
significantly since the options had been awarded and that the Company's then
chief executive officer had resigned in July 1998. The committee also wanted to
provide an incentive in order to retain the key employees during a tough period
and maintain a good morale with the employees in order to reverse the trend of
the revenues at the Company. Based on the foregoing factors, the Committee
decided that the option re-pricing was appropriate to provide the employees with
a meaningful equity incentive in the Company.
CERTAIN TRANSACTIONS
Prior the amendment described below, the Company had outstanding loans in
the principal amount of $1.8 million payable to Euroventures Benelux II B.V., a
Netherlands corporation ("Euroventures"), and $100,000 payable to Trude C.
Taylor, a director of the Company. The principal amounts of the loans were due
in October/November 1999 and bore interest at the rate of 5% per annum with
respect to $1.8 million and 8% per annum with respect to $100,000.
<PAGE> 28
On April 8, 1999, the Company amended the terms of the loan agreement.
Under the terms of the amendment, $1,200,000 of the outstanding principal was
converted into 662,069 shares of common stock at $1.8125, representing the
current market price on the date of the amendment. The remaining outstanding
principal would accrue interest at 8.75% per annum, with interest payments due
quarterly and the principal due on December 31, 2000. On April 8, 1999 the
balance of the outstanding loans was converted into common stock at $1.8125.
In connection with certain amendments to the terms of its loan in October
1995, the Company issued Euroventures four-year warrants to purchase 375,000
shares of Common Stock at $7.00 per share. The warrants were redeemable by the
Company if the Company's stock price reached $9.00 per share for 20 consecutive
trading days. The warrant exercise price was subject to downward adjustment if
the Company sells Common Stock at a price less than $7.00 per share, excluding
issuances pursuant to warrants outstanding at April 1, 1996 and any issuance's
pursuant to the Company's stock option plans. In addition, Euroventures had the
right to require the Company to register the shares underlying the warrants
under the Securities Act of 1933, as amended. The warrants, none of which were
exercised, expired on November 14, 1999.
Euroventures is a major shareholder of the Company. See "Ownership of
Common Stock." Roger G. Claes, a director of the Company, is a partner and
managing director of Euroventures Benelux Team B.V., which manages Euroventures.
OWNERSHIP OF COMMON STOCK
The following table sets forth certain information as of March 20, 2000,
with respect to ownership of the Company's Common Stock by each person who is
known by the Company to own beneficially 5% or more of the Common Stock, each
Named Officer, each director of the Company, each nominee for director, and all
executive officers and directors of the Company as a group.
<TABLE>
<CAPTION>
Shares Beneficially Percentage
Name* Owned Ownership
----- ------------------- ---------
<S> <C> <C>
EBTB II B.V. 4,409,632(1-2) 22.3%
Euroventures Benelux Team B.V.
Julianaplein 10
NL-5211 BC's Hertogenbosch
The Netherlands
Euroventures Benelux I B.V. 1,493,750 7.6%
Julianaplein 10
NL-5211 BC's Hertogenbosch
The Netherlands
Euroventures Benelux II B.V. 2,915,882 14.7%
Julianaplein 10
NL-5211 BC's Hertogenbosch
The Netherlands
Current directors, director nominees, and executive officers:
-------------------------------------------------------------
Roger G. Claes 8,500(2) **
</TABLE>
<PAGE> 29
<TABLE>
<S> <C> <C>
Richard J. Dadamo 100,000(3) **
Ted Bruce 130,000(4) **
John P. Sprint 98,375(5) **
William M. Stowell 252,450(6) 1.3%
Robert Southwick 14,000(7) **
Trude C. Taylor 260,840(8) 1.3%
All executive officers and directors as a 866,665(9) 4.4%
group (eight)
</TABLE>
----------
* Includes addresses of 5% or more shareholders.
** Less than 1%.
1) Includes the shares owned by Euroventures Benelux I B.V. and Euroventures
Benelux II B.V., which are widely held venture capital funds. According to
filings made with the Securities and Exchange Commission pursuant to
Section 13(d) of the Securities Exchange Act of 1934, Euroventures Benelux
Team B.V. is the investment manager of both such funds and has voting and
dispositive power over their shares of the Company's Common Stock, and EBTB
II B.V. is an indirect beneficial owner of such shares. Under the rules set
forth pursuant to the Securities Exchange Act of 1934, more than one person
may be deemed to be a beneficial owner of the same securities.
2) Mr. Claes is managing director of Euroventures Benelux I B.V. and a partner
and managing director of Euroventures Benelux Team B.V. and EBTB II B.V.
See Note (1).
3) Includes 90,000 shares subject to options that are exercisable within 60
days.
4) Includes 105,000 shares subject to options that are exercisable within 60
days.
5) Includes 65,375 shares subject to options that are exercisable within 60
days.
6) Represents 209,950 shares subject to options that are exercisable within 60
days.
7) Includes 14,000 shares subject to options that are exercisable within 60
days.
8) Includes 30,000 shares subject to options that are exercisable within 60
days.
9) See Notes (2) through (8) above.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
During Fiscal Year 2000, to the Company's knowledge no persons filed late
reports under Section 16(a) of the Securities Exchange Act of 1934, except as
follows: Mr. Ted Bruce filed a Form 5 late.
In making these disclosures, the Company has relied solely on written
representations of its directors, executive officers and 10% shareholders and
copies of the reports that they have filed with the Securities and Exchange
Commission.
<PAGE> 30
SHAREHOLDER PROPOSALS
Any shareholder intending to submit to the Company a proposal for inclusion
in the Company's Proxy Statement and proxy for the 2001 Annual Meeting must
submit such proposal so that the Company receives it no later than March 12,
2001.
ANNUAL REPORT
A copy of the Annual Report on Form 10-KSB for the 2000 Fiscal Year,
including the financial statements and the financial statements schedules
required to be filed with the U.S. Securities and Exchange Commission, may be
obtained by each stockholder of record and each beneficial holder on the record
date, without charge. Copies of exhibits to the Form 10-KSB are available for a
reasonable fee. All such requests should be made in writing to the Company at
7321 Lincoln Way, Garden Grove, California 92841, attention William M. Stowell,
Chief Financial Officer.
DISCRETIONARY AUTHORITY
While the Notice of Annual Meeting of Shareholders calls for the
transaction of such other business as may properly come before the meeting, the
Board of Directors has no knowledge of any matters to be presented for action by
the shareholders other than as set forth above. The enclosed proxy gives
discretionary authority, however, to vote such proxy as the proxy holder
determines in the event any additional matters should be presented.
WILLIAM M. STOWELL
Secretary
Date: June 26, 2000
<PAGE> 31
APPENDIX A
AGREEMENT AND PLAN OF MERGER
OF
DENSE-PAC MICROSYSTEMS, INC., A DELAWARE CORPORATION,
AND
DENSE-PAC MICROSYSTEMS, INC., A CALIFORNIA CORPORATION
THIS AGREEMENT AND PLAN OF MERGER, dated as of , 2000 ("Merger Agreement")
is entered into by and between Dense-Pac Microsystems, Inc., a California
corporation ("Dense-Pac California"), and Dense-Pac Microsystems, Inc., a
Delaware corporation ("Dense-Pac Delaware"), which corporations are sometimes
referred to herein as the "Constituent Corporations."
R E C I T A L S
A. Dense-Pac California is a corporation duly organized and existing under
the laws of the State of California and has authorized capital of 40,000,000
shares of Common Stock, no par value (the "Dense-Pac California Common Stock")
and 8,000,000 shares of Preferred Stock, no par value (the "Dense-Pac California
Preferred Stock"). As of , 2000, shares of Dense-Pac California Common Stock
were issued and outstanding and no shares of Dense-Pac California Preferred
Stock were outstanding.
B. Dense-Pac Delaware is a corporation duly organized and existing under
the laws of the State of Delaware and has authorized capital of 40,000,000
shares of Common Stock, par value $.01 per share (the "Dense-Pac Delaware Common
Stock") and 8,000,000 shares of Preferred Stock, par value $.01 per share (the
"Dense-Pac Delaware Preferred Stock"). As of , 2000, 1,000 shares of Dense-Pac
Delaware Common Stock were issued and outstanding, all of which were held by
Dense-Pac California.
C. The Board of Directors of Dense-Pac California has determined that it is
advisable and in the best interests of Dense-Pac California and its shareholders
that Dense-Pac California merge with and into Dense-Pac Delaware upon the terms
and subject to the conditions of this Merger Agreement for the purpose of
effecting the reincorporation of Dense-Pac California in the State of Delaware.
D. The respective Boards of Directors of Dense-Pac California and Dense-Pac
Delaware have adopted and approved the terms and conditions of this Merger
Agreement.
E. The shareholders of Dense-Pac California and Dense-Pac Delaware have
adopted and approved the terms and conditions of this Merger Agreement.
F. The parties intend by this Merger Agreement to effect a reorganization
under Section 368 of the Internal Revenue Code of 1986, as amended.
NOW, THEREFORE, in consideration of the promises and the mutual covenants
and agreements contained herein, the parties hereto agree, subject to the terms
and conditions set forth herein, as follows:
I.
MERGER
1.1 Merger. In accordance with the provisions of this Merger Agreement, the
California General Corporation Law and the Delaware General Corporation Law,
Dense-Pac California
<PAGE> 32
shall be merged with and into Dense-Pac Delaware (the "Merger"), the separate
existence of Dense-Pac California shall cease and Dense-Pac Delaware shall be,
and is herein sometimes referred to as, the "Surviving Corporation," and, on
consummation of the Merger, the name of the Surviving Corporation shall become
and be "Dense-Pac Microsystems, Inc."
1.2 Filing and Effectiveness. The Merger shall become effective when the
following actions have been completed:
(a) All of the conditions precedent to the consummation of the Merger
specified in this Merger Agreement and required under the California
General Corporation Law and the Delaware General Corporation Law shall have
been satisfied or duly waived by the party entitled to satisfaction
thereof, which conditions shall include, without limitation, obtaining all
necessary regulatory approvals;
(b) An executed Certificate of Merger or an executed counterpart of
this Merger Agreement meeting the requirements of the California General
Corporation Law shall have been filed with the Secretary of State of the
State of California; and
(c) An executed Certificate of Merger or an executed counterpart of
this Merger Agreement meeting the requirements of the Delaware General
Corporation Law shall have been filed with the Secretary of State of the
State of Delaware.
The date and time when the Merger shall become effective is herein called
the "Effective Time of the Merger."
1.3 Effect of the Merger. At the Effective Time of the Merger, the separate
existence and corporate organization of Dense-Pac California shall cease and
Dense-Pac Delaware, as the Surviving Corporation, (i) shall continue to possess
all of its assets, rights, powers and property as constituted immediately before
the Effective Time of the Merger, (ii) shall be subject to all actions
previously taken by its and Dense-Pac California's Board of Directors, (iii)
shall succeed, without other transfer, to all of the assets, rights, powers and
property of Dense-Pac California in the manner more fully set forth in Section
259(a) of the Delaware General Corporation Law, (iv) shall continue to be
subject to all of its debts, liabilities and obligations as constituted
immediately before the Effective Time of the Merger and (v) shall succeed,
without other transfer, to all of the debts, liabilities and obligations of
Dense-Pac California in the same manner as if Dense-Pac Delaware had itself
incurred them, all as more fully provided under the applicable provisions of the
Delaware General Corporation Law and the California General Corporation Law.
II.
CHARTER DOCUMENTS, DIRECTORS AND OFFICERS
2.1 Certificate of Incorporation. The Certificate of Incorporation of
Dense-Pac Delaware as in effect immediately before the Effective Time of the
Merger shall continue in full force and effect as the Certificate of
Incorporation of the Surviving Corporation until duly amended or repealed in
accordance with the provisions thereof and applicable law.
2.2 Bylaws. The Bylaws of Dense-Pac Delaware as in effect immediately
before the Effective Time of the Merger shall continue in full force and effect
as the Bylaws of the Surviving Corporation until duly amended or repealed in
accordance with the provisions thereof and applicable law.
<PAGE> 33
2.3 Officers and Directors. The persons who are officers and directors of
Dense-Pac California immediately prior to the Effective Time of the Merger
shall, after the Effective Time of the Merger, be the officers and directors of
the Surviving Corporation, without change until their successors have been duly
elected or appointed and qualified or until their earlier death, resignation or
removal in accordance with the Surviving Corporation's Certificate of
Incorporation, Bylaws and applicable law.
III.
MANNER OF CONVERSION OF STOCK
3.1 Dense-Pac California Shares. Upon the Effective Time of the Merger,
each share of Dense-Pac California Common Stock, no par value, issued and
outstanding immediately before the Effective Time of the Merger 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 become one
fully paid and nonassessable share of Common Stock, $.01 par value per share, of
the Surviving Corporation.
3.2 Dense-Pac California Options, Warrants and Convertible Securities. At
the Effective Time of the Merger, the Surviving Corporation shall assume and
continue the deferred compensation, stock option and stock purchase plans of
Dense-Pac California, and all other options, warrants and rights to purchase or
acquire shares of Dense-Pac California Common Stock. At the Effective Time of
the Merger, each outstanding and unexercised option, warrant and right to
purchase or acquire shares of Dense-Pac California Common Stock shall, by virtue
of the Merger and without any action on the part of the holder thereof, be
converted into and become an option, warrant or right to purchase or acquire
shares of the Surviving Corporation's Common Stock on the basis of one share of
the Surviving Corporation's Common Stock for each share of Dense-Pac California
Common Stock issuable pursuant to any such option, warrant or right, and under
the same terms and conditions and at an exercise price per share equal to the
exercise price per share applicable to any such Dense-Pac California option,
warrant or right.
A number of shares of the Surviving Corporation's Common Stock shall be
reserved for issuance upon the exercise of options, warrants and other
securities equal to the number of shares of Dense-Pac California Common Stock so
reserved immediately before the Effective Time of the Merger.
3.3 Dense-Pac Delaware Common Stock. Upon the Effective Time of the Merger,
each share of Dense-Pac Delaware Common Stock, $.01 par value per share, issued
and outstanding immediately before the Effective Time of the Merger shall, by
virtue of the Merger and without any action by Dense-Pac 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 Time of the Merger, each
holder of an outstanding certificate representing shares of Dense-Pac California
Common Stock may, at such shareholder's option, surrender the same for
cancellation to , as transfer agent (the "Transfer Agent"), and each such holder
shall be entitled to receive in exchange therefor a certificate or certificates
representing the number of shares of the Surviving Corporation's Common Stock
into which the surrendered shares were converted as herein provided. Until so
surrendered, each outstanding certificate theretofore representing shares of
Dense-Pac California Common Stock shall be deemed for all purposes to represent
the number of whole shares of the Surviving Corporation's Common Stock into
which the shares of Dense-Pac California Common Stock were converted in the
Merger.
The registered owner on the books and records of the Surviving Corporation
or the Transfer Agent of any such outstanding certificate shall, until such
certificate has been surrendered for transfer or conversion or otherwise
accounted for to the Surviving Corporation or the Transfer Agent, have and be
<PAGE> 34
entitled to exercise any voting or 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
restrictions on transferability as the certificates of Dense-Pac California so
converted and given in exchange therefor, unless otherwise determined by the
Board of Directors of the Surviving Corporation in compliance with applicable
laws.
IV.
GENERAL
5.1 Covenants of Dense-Pac Delaware. Dense-Pac Delaware covenants and
agrees that it will, on or before the Effective Time of the Merger:
(a) Qualify to do business as a foreign corporation in the State of
California and, in connection therewith, appoint an agent for service of
process as required under the provisions of Section 2105 of the California
General Corporation Law.
(b) Take such other actions as may be required by the California
General Corporation Law in or to effectuate the Merger.
5.2 Further Assurances. From time to time, as and when required by
Dense-Pac Delaware or by its successors or assigns, there shall be executed and
delivered on behalf of Dense-Pac 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 Dense-Pac Delaware the title to and possession
of all the property, interests, assets, rights, privileges, immunities, powers,
franchises and authority of Dense-Pac California and otherwise to carry out the
purposes of this Merger Agreement, and the officers and directors of Dense-Pac
Delaware are fully authorized in the name and on behalf of Dense-Pac California
or otherwise to take all such actions and to execute and deliver all such deeds
and other instruments.
5.3 Deferral. Consummation of the Merger may be deferred by the Board of
Directors of Dense-Pac California for a reasonable period of time if the Board
of Directors determines that deferral would be in the best interests of
Dense-Pac California and its shareholders.
5.4 Amendment. The parties hereto, by mutual consent of their respective
Boards of Directors, may amend, modify or supplement this Merger Agreement in
such manner as may be agreed upon by them in writing at any time before or after
approval of this Merger Agreement by the shareholders of Dense-Pac California
and Dense-Pac Delaware, but not later than the Effective Time of the Merger;
provided, however, that no such amendment, modification or supplement not
approved by the shareholders of Dense-Pac California and Dense-Pac Delaware
shall adversely affect the rights of such shareholders or change any of the
principal terms of this Merger Agreement.
5.5 Abandonment. At any time before the Effective Time of the Merger, this
Merger Agreement may be terminated and the Merger may be abandoned for any
reason whatsoever by the Board of Directors of either Dense-Pac California or of
Dense-Pac Delaware, or of both, notwithstanding the approval of this Merger
Agreement by the shareholders of Dense-Pac California or Dense-Pac Delaware, or
by both, if circumstances arise which make the Merger inadvisable. In the event
of abandonment of this Merger Agreement, as above provided, this Merger
Agreement shall become wholly void and of no
<PAGE> 35
effect, and no liability on the part of the Board of Directors or shareholders
of Dense-Pac California or Dense-Pac Delaware shall arise by virtue of such
termination.
5.6 Expenses. If the Merger becomes effective, the Surviving Corporation
shall assume and pay all expenses in connection therewith not theretofore paid
by the respective parties. If for any reason the Merger shall not become
effective, Dense-Pac California shall pay all expenses incurred in connection
with all the proceedings taken in respect of this Merger Agreement or relating
thereto.
5.7 Registered Office. The registered office of the Surviving Corporation
in the State of Delaware is located at 1013 Centre Road, Wilmington, Delaware
19805, and Corporation Service Company is the registered agent of the Surviving
Corporation at such address.
5.8 Agreement. An executed copy of this Merger Agreement will be on file at
the principal place of business of the Surviving Corporation at 7321 Lincoln
Way, Garden Grove, California 92841, and, upon request and without cost, a copy
thereof will be furnished to any shareholder.
5.9 Governing Law. This Merger 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.
5.10 Counterparts. This Merger 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.
(BALANCE OF PAGE INTENTIONALLY LEFT BLANK.
SIGNATURES FOLLOW ON NEXT PAGE)
<PAGE> 36
IN WITNESS WHEREOF, Dense-Pac California and Dense-Pac Delaware have caused
this Merger Agreement to be signed by their respective duly authorized officers.
DENSE-PAC MICROSYSTEMS, INC.,
a California corporation
By:
---------------------------
ATTEST:
----------------------------
DENSE-PAC MICROSYSTEMS, INC.
a Delaware corporation
By:
---------------------------
ATTEST:
----------------------------
<PAGE> 37
APPENDIX B
CERTIFICATE OF INCORPORATION
OF
DENSE-PAC MICROSYSTEMS, INC.
ARTICLE I - NAME
The name of this Corporation is Dense-Pac Microsystems, Inc.
ARTICLE II - REGISTERED OFFICE AND AGENT
The registered office of the Corporation in the State of Delaware is
located 1013 Centre Road, Wilmington, Delaware 19805, County of New Castle, and
Corporation Service Company is the registered agent of the Corporation.
ARTICLE III - PURPOSE
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the Delaware General Corporation
Law, as amended from time to time.
ARTICLE IV - AUTHORIZED CAPITAL
The aggregate number of shares of all classes of stock that the Corporation
shall have authority to issue is 48,000,000 shares, consisting of (a) 40,000,000
shares of Common Stock, $.01 par value per share (the "Common Stock"), and (b)
8,000,000 shares of Preferred Stock, $.01 par value per share (the "Preferred
Stock").
The Board of Directors is authorized, subject to limitations prescribed by
law, to provide for the issuance of the shares of Preferred Stock in one or more
series, and by filing a certificate as required by the General Corporation Law
of the State of Delaware, to establish from time to time the number of shares to
be included in each such series, and to fix the designation, powers, preferences
and relative, participating, optional or other special rights of the shares of
each such series and any qualifications, limitations or restrictions thereof.
The authority of the Board with respect to each series shall include, but
not limited to, determination of the following:
(a) The number of shares constituting that series and the distinctive
designation of that series;
(b) The dividend rate on the shares of that series, whether dividends shall
be cumulative and, if so, from which date or dates, and the relative rights of
priority, if any, of payment of dividends on shares of that series;
(c) Whether that series shall have voting rights, in addition to the voting
rights provided by law and, if so, the terms of such voting rights;
(d) Whether that series shall have conversion privileges and, if so, the
terms and conditions of such conversion including provision for adjustment of
the conversion rate in such events as the Board of Directors shall determine;
<PAGE> 38
(e) Whether or not the shares of that series shall be redeemable and, if
so, the terms and conditions of such redemption, including the date or dates
upon or after which they shall be redeemable and the amount per share payable in
case of redemption, which amount May vary under different conditions and at
different redemption dates;
(f) Whether that series shall have a sinking fund for the redemption or
purchase of shares of that series and, if so, the terms and amount of such
sinking fund; and
(g) The rights of the shares of that series in the event if voluntary or
involuntary liquidation, dissolution or winding up of the Corporation, and the
relative rights of priority, if any, of payment of shares of that series.
ARTICLE V - LIMITATION OF DIRECTORS' LIABILITY
A director of this Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, provided that this provision shall not eliminate or limit
the liability of a director: (i) for any breach of his duty of loyalty to the
Corporation or its stockholders; (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of the law; (iii)
under Section 174 of the Delaware General Corporation Law; or (iv) for any
transaction from which the director derives an improper personal benefit. If the
Delaware General Corporation Law is hereafter amended to authorize corporate
action further limiting or eliminating the personal liability of directors, then
the liability of the directors of the Corporation shall be limited or eliminated
to the fullest extent permitted by the Delaware General Corporation Law, as so
amended from time to time. Any repeal or modification of this Article (V) by the
stockholders of the Corporation shall be prospective only, and shall not
adversely affect any limitation on the personal liability of a director of the
Corporation existing at the time of such repeal or modification.
ARTICLE VI - NUMBER AND REMOVAL DIRECTORS
The number of directors that constitute the whole Board of Directors of the
Corporation, the manner in which they shall be elected, their respective terms
of office and their removal from office shall be as provided in the Bylaws of
the Corporation.
ARTICLE VII - AMENDMENT OF BYLAWS
In furtherance and not in limitation of the powers conferred by the laws of
the State of Delaware, the Board of Directors of the Corporation shall have the
power and authority to make, alter, amend, change, add to or repeal the Bylaws
of the Corporation. The Bylaws of the Corporation May also be altered, amended,
changed, added to or repealed by the affirmative vote of a majority of the
outstanding voting stock of the Corporation entitled to vote on such matters,
voting together as a single class.
ARTICLE VIII - SPECIAL MEETING AND ACTION BY STOCKHOLDERS
The only persons entitled to call a special meeting of the Corporation's
stockholders are those persons named in the Corporation's Bylaws.
No action that is required or permitted to be taken by the stockholders of
the Corporation at any annual or special meeting of the stockholders may be
taken by written consent of the stockholders in lieu of a meeting of the
stockholders, unless the action to be effectuated by written consent of
stockholders, and also the taking of such action by such written consent, shall
have expressly been approved in advance by the Board of Directors of the
Corporation
Notwithstanding anything contained in this Certificate of Incorporation to
the contrary, the affirmative vote of not less than a majority of the voting
shares of this Corporation, voting together as a single class, shall be required
to amend, repeal or adopt any provision inconsistent with this Article VIII.
<PAGE> 39
ARTICLE IX - INCORPORATOR
The name and address of the Incorporator of the Corporation is as follows:
William Stowell
7321 Lincoln Way
Garden Grove, California 92841
I, THE UNDERSIGNED, being the Incorporator, for the purpose of forming a
corporation under the laws of the State of Delaware, do make, file and record
this Certificate of Incorporation, do certify that the facts herein stated are
true, and accordingly, have hereunto set my hand this ____ day of __________,
2000.
/s/ William Stowell
-----------------------------------
William Stowell
<PAGE> 40
APPENDIX C
BYLAWS
OF
DENSE-PAC MICROSYSTEMS, INC.,
A DELAWARE CORPORATION
AS ADOPTED ___, 2000
<PAGE> 41
TABLE OF CONTENTS
PAGE
----
ARTICLE I OFFICES 1
SECTION 1. REGISTERED OFFICE 1
SECTION 2. OTHER OFFICES 1
SECTION 3. BOOKS 1
ARTICLE II MEETINGS OF STOCKHOLDERS 1
SECTION 1. PLACE OF MEETINGS 1
SECTION 2. ANNUAL MEETINGS 1
SECTION 3. SPECIAL MEETINGS 1
SECTION 4. NOTIFICATION OF BUSINESS TO BE TRANSACTED AT MEETING 2
SECTION 5. NOTICE; WAIVER OF NOTICE 2
SECTION 6. QUORUM; ADJOURNMENT 2
SECTION 7. VOTING 2
SECTION 8. STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING 3
SECTION 9. LIST OF STOCKHOLDERS ENTITLED TO VOTE 3
SECTION 10. STOCK LEDGER 3
SECTION 11. INSPECTORS OF ELECTION 3
SECTION 12. ORGANIZATION 3
SECTION 13. ORDER OF BUSINESS 4
ARTICLE III DIRECTORS 4
SECTION 1. POWERS 4
SECTION 2. NUMBER AND ELECTION OF DIRECTORS 4
SECTION 3. VACANCIES 4
SECTION 4. TIME AND PLACE OF MEETINGS 4
SECTION 5. ANNUAL MEETING 4
SECTION 6. REGULAR MEETINGS 5
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<PAGE> 42
SECTION 7. SPECIAL MEETINGS 5
SECTION 8. QUORUM; VOTE REQUIRED FOR ACTION; ADJOURNMENT 5
SECTION 9. ACTION BY WRITTEN CONSENT 5
SECTION 10. TELEPHONE MEETINGS 5
SECTION 11. COMMITTEES 6
SECTION 12. COMPENSATION 6
SECTION 13. INTERESTED DIRECTORS 6
ARTICLE IV OFFICERS 6
SECTION 1. OFFICERS 6
SECTION 2. APPOINTMENT OF OFFICERS 7
SECTION 3. SUBORDINATE OFFICERS 7
SECTION 4. REMOVAL AND RESIGNATION OF OFFICERS 7
SECTION 5. VACANCIES IN OFFICES 7
SECTION 6. CHAIRMAN OF THE BOARD 7
SECTION 7. VICE CHAIRMAN OF THE BOARD 7
SECTION 8. CHIEF EXECUTIVE OFFICER 7
SECTION 9. PRESIDENT 8
SECTION 10. VICE PRESIDENT 8
SECTION 11. SECRETARY 8
SECTION 12. CHIEF FINANCIAL OFFICER 8
ARTICLE V STOCK 9
SECTION 1. FORM OF CERTIFICATES 9
SECTION 2. SIGNATURES 9
SECTION 3. LOST CERTIFICATES 9
SECTION 4. TRANSFERS 9
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<PAGE> 43
SECTION 5. RECORD HOLDERS 9
ARTICLE VI INDEMNIFICATION 9
SECTION 1. RIGHT TO INDEMNIFICATION 9
SECTION 2. RIGHT OF INDEMNITEE TO BRING SUIT 10
SECTION 3. NON-EXCLUSIVITY OF RIGHTS 11
SECTION 4. INSURANCE 11
SECTION 5. INDEMNIFICATION OF EMPLOYEES OR AGENTS OF THE CORPORATION 11
SECTION 6. INDEMNIFICATION CONTRACTS 11
SECTION 7. EFFECT OF AMENDMENT 11
ARTICLE VII GENERAL PROVISIONS 11
SECTION 1. DIVIDENDS 11
SECTION 2. DISBURSEMENTS 11
SECTION 3. FISCAL YEAR 11
SECTION 4. CORPORATE SEAL 12
SECTION 5. RECORD DATE 12
SECTION 6. VOTING OF STOCK OWNED BY THE CORPORATION 12
SECTION 7. CONSTRUCTION AND DEFINITIONS 12
SECTION 8. AMENDMENTS 12
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<PAGE> 44
BYLAWS
OF
DENSE-PAC MICROSYSTEMS, INC.,
A DELAWARE CORPORATION
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of the Corporation in
the State of Delaware shall be in the City of Wilmington, County of New Castle.
SECTION 2. OTHER OFFICES. The Corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
SECTION 3. BOOKS. The books of the Corporation may be kept within or
without the State of Delaware as the Board of Directors may from time to time
determine or the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. PLACE OF MEETINGS. All meetings of stockholders for the election
of directors shall be held at such place either within or without the State of
Delaware as may be fixed from time to time by the Board of Directors, or at such
other place either within or without the State of Delaware as shall be
designated from time to time by the Board of Directors and stated in the notice
of the meeting. Meetings of stockholders for any other purpose may be held at
such time and place, within or without the State of Delaware, as shall be stated
in the notice of the meeting or in a duly executed waiver of notice thereof.
SECTION 2. ANNUAL MEETINGS. Annual meetings of stockholders shall be held
at a time and date designated by the Board of Directors for the purpose of
electing directors and transacting such other business as may properly be
brought before the meeting.
SECTION 3. SPECIAL MEETINGS. Special meetings of stockholders, for any
purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation, may be called by the President and shall be called
by the President or Secretary at the request in writing of a majority of the
Board of Directors, or at the request in writing of a stockholder or
stockholders owning stock of the Corporation possessing ten percent (10%) of the
voting power possessed by all of the then outstanding capital stock of any class
of the Corporation entitled to vote. Such request shall state the purpose or
purposes of the proposed meeting.
SECTION 4. NOTIFICATION OF BUSINESS TO BE TRANSACTED AT MEETING. To be
properly brought before a meeting, business must be (a) specified in the notice
of meeting (or any supplement thereto) given by or at the direction of the Board
of Directors, (b) otherwise properly brought before the meeting by or at the
direction of the Board of Directors, or (c) otherwise properly brought before
the meeting by a stockholder entitled to vote at the meeting.
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<PAGE> 45
SECTION 5. NOTICE; WAIVER OF NOTICE. Whenever stockholders are required or
permitted to take any action at a meeting, a written notice of the meeting shall
be given which shall state the place, date and hour of the meeting, and, in the
case of a special meeting, the purpose or purposes for which the meeting is
called. Unless otherwise required by law, such notice shall be given not less
than ten (10) nor more than sixty (60) days before the date of the meeting to
each stockholder of record entitled to vote at such meeting. If mailed, such
notice shall be deemed to be given when deposited in the mail, postage prepaid,
directed to the stockholder at his address as it appears on the records of the
Corporation. A written waiver of any such notice signed by the person entitled
thereto, 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 the 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.
SECTION 6. QUORUM; ADJOURNMENT. Except as otherwise required by law, or
provided by the Certificate of Incorporation or these Bylaws, the holders of a
majority of the capital stock issued and outstanding and entitled to vote
thereat, present in person or represented by proxy, shall constitute a quorum
for the transaction of business at all meetings of the stockholders. A meeting
at which a quorum is initially present may continue to transact business,
notwithstanding the withdrawal of enough votes to leave less than a quorum, if
any action taken is approved by at least a majority of the required quorum to
conduct that meeting. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting of the time and place of the adjourned meeting, until a quorum shall
be present or represented. At such adjourned meeting at which a quorum shall be
present or represented, any business may be transacted which might have been
transacted at the meeting as originally noticed. 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 entitled to vote at the meeting.
SECTION 7. VOTING. Except as otherwise required by law, or provided by the
Certificate of Incorporation or these Bylaws, any question brought before any
meeting of stockholders at which a quorum is present shall be decided by the
vote of the holders of a majority of the stock represented and entitled to vote
thereat. Unless otherwise provided in the Certificate of Incorporation, each
stockholder represented at a meeting of stockholders shall be entitled to cast
one vote for each share of the capital stock entitled to vote thereat held by
such stockholder. Such votes may be cast in person or by proxy, but no proxy
shall be voted on or after three (3) years from its date, unless such proxy
provides for a longer period. Elections of directors need not be by ballot
unless the Chairman of the meeting so directs or unless a stockholder demands
election by ballot at the meeting and before the voting begins.
SECTION 8. STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING. Except
as otherwise provided in the Certificate of Incorporation, any action which may
be taken at any annual or special meeting of stockholders, may be taken without
a meeting and without prior notice, if a consent in writing, setting forth the
action so taken, is signed by the holders of outstanding shares having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to vote thereon were
present and voted. All such consents shall be filed with the Secretary of the
Corporation and shall be maintained in the corporate records. Prompt notice of
the taking of corporate action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not consented in writing.
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<PAGE> 46
SECTION 9. 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 of the Corporation who is present.
SECTION 10. STOCK LEDGER. The stock ledger of the Corporation shall be the
only evidence as to who are the stockholders entitled to examine the stock
ledger, the list required by Section 9 of this Article II or the books of the
Corporation, or to vote in person or by proxy at any meeting of stockholders.
SECTION 11. INSPECTORS OF ELECTION. In advance of any meeting of
stockholders, the Board of Directors may appoint one or more persons (who shall
not be candidates for office) as inspectors of election to act at the meeting or
any adjournment thereof. If an inspector or inspectors are not so appointed, or
if an appointed inspector fails to appear or fails or refuses to act at a
meeting, the Chairman of any meeting of stockholders may, and on the request of
any stockholder or his proxy shall, appoint an inspector or inspectors of
election at the meeting. The duties of such inspector(s) shall include:
determining the number of shares outstanding and the voting power of each; the
shares represented at the meeting; the existence of a quorum; the authenticity,
validity and effect of proxies; receiving votes, ballots or consents; hearing
and determining all challenges and questions in any way arising in connection
with the right to vote; counting and tabulating all votes or consents;
determining the result; and such acts as may be proper to conduct the election
or vote with fairness to all stockholders. In the event of any dispute between
or among the inspectors, the determination of the majority of the inspectors
shall be binding.
SECTION 12. ORGANIZATION. At each meeting of stockholders the Chairman of
the Board of Directors, if one shall have been elected, (or in his absence or if
one shall not have been elected, the President) shall act as Chairman of the
meeting. The Secretary (or in his absence or inability to act, the person whom
the Chairman of the meeting shall appoint secretary of the meeting) shall act as
secretary of the meeting and keep the minutes thereof.
SECTION 13. ORDER OF BUSINESS. The Chairman of the meeting shall determine
the order and manner of transacting business at all meetings of stockholders.
ARTICLE III
DIRECTORS
SECTION 1. POWERS. Except as otherwise required by law or provided by the
Certificate of Incorporation, the business and affairs of the Corporation shall
be managed by or under the direction of the Board of Directors.
SECTION 2. NUMBER AND ELECTION OF DIRECTORS. Subject to any limitations in
the Certificate of Incorporation, the authorized number of directors of the
Corporation shall be six (6) until changed by an amendment to this Bylaw adopted
by the affirmative vote of a majority of the
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<PAGE> 47
entire Board of Directors. Directors shall be elected at each annual meeting of
stockholders to replace directors whose terms then expire, and each director
elected shall hold office until his successor is duly elected and qualified, or
until his earlier death, resignation or removal. Any director may resign at any
time effective upon giving written notice to the Board of Directors, unless the
notice specifies a later time for such resignation to become effective. Unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective. If the resignation of a director is effective at
a future time, the Board of Directors may elect a successor prior to such
effective time to take office when such resignation becomes effective. Directors
need not be stockholders.
SECTION 3. VACANCIES. Subject to the limitations in the Certificate of
Incorporation, vacancies in the Board of Directors resulting from death,
resignation, removal or otherwise and newly created directorships resulting from
any increase in the authorized number of directors may be filled by a majority
of the directors then in office, although less than a quorum, or by a sole
remaining director. Each director so selected shall hold office for the
remainder of the full term of office of the former director which such director
replaces and until his successor is duly elected and qualified, or until his
earlier death, resignation or removal. No decrease in the authorized number of
directors constituting the Board of Directors shall shorten the term of any
incumbent directors.
SECTION 4. TIME AND PLACE OF MEETINGS. The Board of Director shall hold its
meetings at such place, either within or without the State of Delaware, and at
such time as may be determined from time to time by the Board of Directors.
SECTION 5. ANNUAL MEETING. The Board of Directors shall meet for the
purpose of organization, the election of officers and the transaction of other
business, as soon as practicable after each annual meeting of stockholders, on
the same day and at the same place where such annual meeting shall be held.
Notice of such meeting need not be given. In the event such annual meeting is
not so held, the annual meeting of the Board of Directors may be held at such
place, either within or without the State of Delaware, on such date and at such
time as shall be specified in a notice thereof given as hereinafter provided in
Section 7 of this Article III or in a waiver of notice thereof.
SECTION 6. REGULAR MEETINGS. Regular meetings of the Board of Directors may
be held at such places within or without the State of Delaware at such date and
time as the Board of Directors may from time to time determine and, if so
determined by the Board of Directors, notices thereof need not be given.
SECTION 7. SPECIAL MEETINGS. Special meetings of the Board of Directors may
be called by the Chairman of the Board, the President, the Secretary or by any
director. Notice of the date, 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 the director's
address as it is shown on the records of the Corporation. In case 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. In case 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. The notice need not specify the purpose of
the meeting. A written waiver of any such notice signed by the person entitled
thereto, 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 the 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.
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SECTION 8. QUORUM; VOTE REQUIRED FOR ACTION; ADJOURNMENT. Except as
otherwise required by law, or provided in the Certificate of Incorporation or
these Bylaws, a majority of the directors shall constitute a quorum for the
transaction of business at all meetings of the Board of Directors and the
affirmative vote of not less than a majority of the directors present at any
meeting at which there is a quorum shall be the act of the Board of Directors.
If a quorum shall not be present at any meeting of the Board of Directors, the
directors present thereat may adjourn the meeting, from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
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 to conduct that meeting.
When a meeting is adjourned to another time or place (whether or not a quorum is
present), 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 Board of Directors may transact any business that
might have been transacted at the original meeting.
SECTION 9. ACTION BY WRITTEN CONSENT. Unless otherwise restricted by the
Certificate of Incorporation, any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting if all the members of the Board of Directors or committee, as
the case may be, consent thereto in writing, and the writing or writings are
filed with the minutes of proceedings of the Board of Directors or committee.
SECTION 10. TELEPHONE MEETINGS. Unless otherwise restricted by the
Certificate of Incorporation, members of the Board of Directors of the
Corporation, or any committee designated by the Board of Directors, may
participate in a meeting of the Board of Directors or such committee, as the
case may be, by conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each other.
Participation in a meeting pursuant to this Section 10 shall constitute presence
in person at such meeting.
SECTION 11. COMMITTEES. The Board of Directors may, by resolution passed
unanimously by the entire Board, designate one or more committees, each
committee to consist of one or more of the directors of the Corporation. The
Board of Directors may designate one or more directors as alternate members of
any such committee, who may replace any absent or disqualified member at any
meeting of the committee. In the event of absence or disqualification of a
member of a committee, and in the absence of a designation by the Board of
Directors of an alternate member to replace the absent or disqualified member,
the committee member or members present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
the absent or disqualified member. Any committee, to the extent allowed by law
and as provided in the resolution establishing such committee, shall have and
may exercise all the power and authority of the Board of Directors in the
management of the business and affairs of the Corporation, but no such committee
shall have the power or authority in reference to amending the Certificate of
Incorporation, adopting an agreement of merger or consolidation, recommending to
the stockholders the sale, lease or exchange of all or substantially all of the
Corporation's property and assets, recommending to the stockholders a
dissolution of the Corporation or a revocation of a dissolution, or amending the
Bylaws of the Corporation; and, unless the resolution or the Certificate of
Incorporation expressly so provides, no such committee shall have the power or
authority to declare a dividend or to authorize the issuance of stock. Each
committee shall keep regular minutes of its meetings and report to the Board of
Directors when required.
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SECTION 12. COMPENSATION. The directors may be paid such compensation for
their services as the Board of Directors shall from time to time determine.
SECTION 13. INTERESTED DIRECTORS. No contract or transaction between the
Corporation and one or more of its directors or officers, or between the
Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or the committee thereof
which authorizes the contract or transaction, or solely because his of their
votes are counted for such purpose if: (i) the material facts as to his or their
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or the committee, and the Board of Directors
or committee in good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum; or (ii) the material facts as to
his or their relationship or interest and as to the contract or transaction are
disclosed or are known to the stockholders entitled to vote thereon, and the
contract or transaction is specifically approved in good faith by vote of the
stockholders; or (iii) the contract or transaction is fair as to the Corporation
as of the time it is authorized, approved or ratified, by the Board of
Directors, a committee thereof, or the stockholders. Common or interested
directors may be counted in determining the presence of a quorum at a meeting of
the Board of Directors or of a committee that authorizes the contract or
transaction.
ARTICLE IV
OFFICERS
SECTION 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, a Vice Chairman
of the Board, a Chief Executive Officer, one or more Vice Presidents, one or
more Assistant Financial Officers and Treasurers, one or more Assistant
Secretaries and such other officers as may be appointed in accordance with the
provisions of Section 3 of this Article IV.
SECTION 2. APPOINTMENT OF OFFICERS. The officers of the Corporation, except
such officers as may be appointed in accordance with the provisions of Section 3
or Section 5 of this Article IV, shall be appointed by the Board of Directors,
and each shall serve at the pleasure of the Board, subject to the rights, if
any, of an officer under any contract of employment.
SECTION 3. SUBORDINATE OFFICERS. The Board of Directors may appoint, and
may empower the Chief Executive Officer or 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 the Bylaws or as the Board of Directors may from time to time
determine.
SECTION 4. REMOVAL AND RESIGNATION OF OFFICERS. Subject to the rights of an
officer under any contract, any officer may be removed at any time, with or
without cause, by the Board of Directors 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
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be necessary to make it effective. Any resignation shall be without prejudice to
the rights of the Corporation under any contract to which the officer is a
party.
SECTION 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.
SECTION 6. CHAIRMAN OF THE BOARD. The Chairman of the Board, if such an
officer is elected, shall, if present, preside at meetings of the stockholders
and of the Board of Directors. He shall, in addition, perform such other
functions (if any) as may be prescribed by the Bylaws or the Board of Directors.
SECTION 7. VICE CHAIRMAN OF THE BOARD. The Vice Chairman of the Board, if
such an officer is elected, shall, in the absence or disability of the Chairman
of the Board, perform all duties of the Chairman of the Board and when so acting
shall have all the powers of and be subject to all of the restrictions upon the
Chairman of the Board. The Vice Chairman of the Board shall have such other
powers and duties as may be prescribed by the Board of Directors or the Bylaws.
SECTION 8. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer of the
Corporation 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 exercise the duties usually vested in the chief
executive officer of a corporation and perform such other powers and duties as
may be assigned to him from time to time by the Board of Directors or prescribed
by the Bylaws. In the absence of the Chairman of the Board and any Vice Chairman
of the Board, the Chief Executive Officer shall preside at all meetings of the
stockholders and of the Board of Directors.
SECTION 9. PRESIDENT. The President of the Corporation shall, subject to
the control of the Board of Directors and the Chief Executive Officer of the
Corporation, if there be such an officer, have 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 the Bylaws or the Chief Executive Officer of the Corporation. In the absence
of the Chairman of the Board, Vice Chairman of the Board and Chief Executive
Officer, the President shall preside at all meetings of the Board of Directors
and stockholders.
SECTION 10. VICE PRESIDENT. 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 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 or the Bylaws, and the President, or the Chairman of the
Board.
SECTION 11. SECRETARY. The Secretary shall keep or cause to be kept, at the
principal executive office 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, with the time and place of holding, whether
regular or special, and, if special, how authorized, the notice given, the names
of those present at Directors' meetings or committee meetings, the number of
shares present or represented at stockholders' meetings, and a summary of the
proceedings.
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The Secretary shall keep, or cause to be kept, at the principal executive
office 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 issued for the same, 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 by the Bylaws or by law
to be given, and he shall keep or cause to be kept the seal of the Corporation
if one be adopted, in safe custody, and shall have such powers and perform such
other duties as may be prescribed by the Board of Directors or by the Bylaws.
SECTION 12. 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. The Chief Financial Officer shall deposit all moneys and other
valuables in the name and to the credit of the Corporation with such
depositories as may be designated by the Board of Directors. He shall make such
disbursements of the funds of the Corporation as are authorized and shall render
from time to time an account of all of his transactions as Chief Financial
Officer and of the financial condition of the Corporation. The Chief Financial
Officer shall also have such other powers and perform such other duties as may
be prescribed by the Board of Directors or the Bylaws.
ARTICLE V
STOCK
SECTION 1. FORM OF CERTIFICATES. Every holder of stock in the Corporation
shall be entitled to have a certificate signed by, or in the name of the
Corporation (i) by the Chairman or Vice Chairman of the Board of Directors, or
the President or a Vice President and (ii) by the Chief Financial Officer or the
Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary
of the Corporation, certifying the number of shares owned by such stockholder in
the Corporation.
SECTION 2. SIGNATURES. 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 shall have
ceased to be such officer, transfer agent or registrar before such certificate
is issued, it may be issued by the Corporation with the same effect as if he
were such officer, transfer agent or registrar at the date of issue.
SECTION 3. LOST CERTIFICATES. The Corporation may issue a new certificate
to be issued in place of any certificate theretofore issued by the Corporation,
alleged to have been lost, stolen or destroyed, upon the making of an affidavit
of that fact by the person claiming the certificate to be lost, stolen or
destroyed. The Corporation may, in the discretion of the Board of Directors and
as a condition precedent to the issuance of such new certificate, require the
owner of such lost, stolen, or destroyed certificate, or his legal
representative, to give the Corporation a bond (or other security) sufficient to
indemnify it against any claim that may be made against the Corporation
(including any expense or liability) on account of the alleged loss, theft or
destruction of any such certificate or the issuance of such new certificate.
SECTION 4. TRANSFERS. Stock of the Corporation shall be transferable in the
manner prescribed by law and in these Bylaws or in any agreement with the
stockholder making the transfer.
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Transfers of stock shall be made on the books of the Corporation only by the
person named in the certificate or by his attorney lawfully constituted in
writing and upon the surrender of the certificate therefor, which shall be
canceled before a new certificate shall be issued.
SECTION 5. RECORD HOLDERS. The Corporation shall be entitled to recognize
the exclusive right of a person registered on its books as the record holder of
shares to receive dividends, and to vote as such record holder, and to hold
liable for calls and assessments a person registered on its books as the record
holder of shares, and shall not be bound to recognize any equitable or other
claim to or interest in such share or shares on the part of any other person,
whether or not it shall have express or other notice thereof, except as
otherwise required by law.
ARTICLE VI
INDEMNIFICATION
SECTION 1. RIGHT TO INDEMNIFICATION. Each person who was or is made a party
or is threatened to be made a party to or is otherwise involved in any action,
suit or proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she is or was a
director or officer of the Corporation or is or was serving at the request of
the Corporation as a director or officer of another corporation or of a
partnership, joint venture, trust or other enterprise, including service with
respect to employee benefit plans (hereinafter an "indemnitee"), whether the
basis of such proceeding is alleged action in an official capacity as a director
or officer or in any other capacity while serving as a director or officer,
shall be indemnified and held harmless by the Corporation to the fullest extent
authorized by the Delaware General Corporation Law, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the Corporation to provide broader indemnification
rights than such law permitted the Corporation to provide prior to such
amendment), against all expense, liability and loss (including attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid in
settlement) reasonably incurred or suffered by such indemnitee in connection
therewith and such indemnification shall continue as to an indemnitee who has
ceased to be a director or officer and shall inure to the benefit of the
indemnitee's heirs, executors and administrators; provided, however, that,
except as provided in Section 2 of this Article VI with respect to proceedings
to enforce rights to indemnification, the Corporation shall indemnify any such
indemnitee in connection with a proceeding (or part thereof) initiated by such
indemnitee only if such proceeding (or part thereof) was authorized by the Board
of Directors of the Corporation. The right to indemnification conferred in this
Section shall be a contract right and shall include the right to be paid by the
Corporation the expenses incurred in defending any such proceeding in advance of
its final disposition (hereinafter an "advancement of expenses"); provided,
however, that, if the Delaware General Corporation Law requires, an advancement
of expenses incurred by an indemnitee in his or her capacity as a director or
officer (and not in any other capacity in which service was or is rendered by
such indemnitee, including without limitation, service to an employee benefit
plan) shall be made only upon delivery to the Corporation of an undertaking, by
or on behalf of such indemnitee, to repay all amounts so advanced if it shall
ultimately be determined by final judicial decision from which there is no
further right to appeal that such indemnitee is not entitled to be indemnified
for such expenses under this Article VI or otherwise (hereinafter an
"undertaking").
SECTION 2. RIGHT OF INDEMNITEE TO BRING SUIT. If the Corporation does not
pay a claim under Section 1 of this Article VI in full within forty-five (45)
days after the Corporation has received a written claim, the indemnitee may at
any time thereafter bring suit against the Corporation to recover the unpaid
amount of the claim. If successful in whole or part in any such suit or in a
suit brought by the Corporation to recover an advancement of expenses pursuant
to the terms of an
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undertaking, the indemnitee shall be entitled to be paid also the expense of
prosecuting or defending such suit. In (i) any suit brought by the indemnitee to
enforce a right to indemnification hereunder (but not in a suit brought by the
indemnitee to enforce a right to an advancement of expenses) it shall be a
defense that, and (ii) any suit by the Corporation to recover an advancement of
expenses pursuant to the terms of an undertaking the Corporation shall be
entitled to recover such expenses upon a final adjudication that, the indemnitee
has not met the applicable standard of conduct set forth in the Delaware General
Corporation Law. Neither the failure of the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such suit that indemnification of the
indemnitee is proper in the circumstances because the indemnitee has met the
applicable standard of conduct set forth in the Delaware General Corporation
Law, nor an actual determination by the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) that the indemnitee
has not met such applicable standard of conduct, shall create a presumption that
the indemnitee has not met the applicable standard of conduct or, in the case of
such a suit brought by indemnitee, be a defense to such suit. In any suit
brought by the indemnitee to enforce a right hereunder, or by the Corporation to
recover an advancement of expenses pursuant to the terms of an undertaking, the
burden of proving that the indemnitee is not entitled to be indemnified or to
such advancement of expenses under this Article VI or otherwise shall be on the
Corporation.
SECTION 3. NON-EXCLUSIVITY OF RIGHTS. The rights of indemnification and to
the advancement of expenses conferred in this Article VI shall not be exclusive
of any other right which any person may have or hereafter acquire under any
statute, provision of the Certificate of Incorporation, bylaw, agreement, vote
of stockholders or disinterested directors or otherwise.
SECTION 4. INSURANCE. The Corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law.
SECTION 5. INDEMNIFICATION OF EMPLOYEES OR AGENTS OF THE CORPORATION. The
Corporation may, to the extent authorized from time to time by the Board of
Directors, grant rights to indemnification and to the advancement of expenses,
to any employee or agent of the Corporation to the fullest extent of the
provisions of this Article VI with respect to the indemnification and
advancement of expenses of directors or officers of the Corporation.
SECTION 6. INDEMNIFICATION CONTRACTS. The Board of Directors is authorized
to enter into a contract with any director, officer, employee or agent of the
Corporation, or any person serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, including employee benefit plans, providing
for indemnification rights equivalent to or, if the Board of Directors so
determines, greater than, those provided for in this Article VI.
SECTION 7. EFFECT OF AMENDMENT. Any amendment, repeal or modification of
any provision of this Article VI by the stockholders or the directors of the
Corporation shall not adversely affect any right or protection of a director or
officer of the Corporation existing at the time of such amendment, repeal or
modification.
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ARTICLE VII
GENERAL PROVISIONS
SECTION 1. DIVIDENDS. Subject to limitations contained in the General
Corporation Law of the State of Delaware and the Certificate of Incorporation,
the Board of Directors may declare and pay dividends upon the shares of capital
stock of the Corporation, which dividends may be paid either in cash, securities
of the Corporation or other property.
SECTION 2. DISBURSEMENTS. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
SECTION 3. FISCAL YEAR. The fiscal year of the Corporation shall be fixed
by resolution of the Board of Directors.
SECTION 4. CORPORATE SEAL. The Corporation shall have a corporate seal in
such form as shall be prescribed by the Board of Directors.
SECTION 5. RECORD DATE. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock, or for the purpose of
any other lawful action, the Board of Directors may fix, in advance, a record
date, which shall not be more than sixty (60) days nor less than ten (10) days
before the date of such meeting, nor more than sixty (60) days prior to any
other action. A determination of stockholders of record entitled to notice of or
to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting. Stockholders on the record date are entitled to
notice and to vote or to receive the dividend, distribution or allotment of
rights or to exercise the rights, as the case may be, notwithstanding any
transfer of any shares on the books of the Corporation after the record date,
except as otherwise provided by agreement or by applicable law.
SECTION 6. VOTING OF STOCK OWNED BY THE CORPORATION. The Chairman of the
Board, the Chief Executive Officer, the President and any other officer of the
Corporation authorized by the Board of Directors shall have power, on behalf of
the Corporation, to attend, vote and grant proxies to be used at any meeting of
stockholders of any corporation (except this Corporation) in which the
Corporation may hold stock.
SECTION 7. CONSTRUCTION AND DEFINITIONS. Unless the context requires
otherwise, the general provisions, rules of construction and definitions in the
General Corporation Law of the State of Delaware shall govern the construction
of these Bylaws.
SECTION 8. AMENDMENTS. Subject to the General Corporation Law of the State
of Delaware, the Certificate of Incorporation and these Bylaws, the Board of
Directors may by the affirmative vote of a majority of the entire Board of
Directors amend or repeal these Bylaws, or adopt other Bylaws as in their
judgment may be advisable for the regulation of the conduct of the affairs of
the Corporation. Unless otherwise restricted by the Certificate of
Incorporation, these Bylaws may be altered, amended or repealed, and new Bylaws
may be adopted, at any annual meeting of the stockholders (or at any special
meeting thereof duly called for that purpose) by a majority of the combined
voting power of the then outstanding shares of capital stock of all classes and
series of the Corporation entitled to vote generally in the election of
directors, voting as a single class, provided that, in the notice of any such
special meeting, notice of such purpose shall be given.
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DENSE-PAC MICROSYSTEMS, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
ANNUAL MEETING OF THE SHAREHOLDERS
AUGUST 10, 2000
The undersigned hereby nominates, constitutes and appoints Richard J.
Dadamo, Ted Bruce and William Stowell, and each of them individually, the
attorney, agent and proxy of the undersigned, with full power of substitution,
to vote all stock of DENSE-PAC MICROSYSTEMS, INC. which the undersigned is
entitled to represent and vote at the Annual Meeting of Shareholders of the
Company to be held at 7321 Lincoln Way, Garden Grove, California on August 10,
2000 at 10:00 a.m., California time, and at any and all adjournments or
postponements thereof, as fully as if the undersigned were present and voting at
the Special Meeting, as follows:
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, YOU ARE URGED TO
COMPLETE, SIGN, DATE AND RETURN THIS PROXY, WHICH MAY BE REVOKED AT ANY TIME
PRIOR TO ITS USE.
IMPORTANT -- PLEASE SIGN AND DATE ON OTHER SIDE AND RETURN PROMPTLY
[X] Please mark your votes as indicated in this example
THE DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1, PROPOSAL 2 AND PROPOSAL 3
1. PROPOSAL 1 ELECTION OF DIRECTORS:
[ ] FOR all nominees listed below (except as indicated to the contrary
below).
[ ] WITHHOLD AUTHORITY to vote for all nominees listed below.
Richard J. Dadamo, Ted Bruce, Roger Claes, Samuel W. Tishler, Gordon M. Watson,
Richard H. Wheaton
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in space provided below.)
--------------------------------------------------------------------------------
2. PROPOSAL 2 A CHANGE IN THE STATE OF INCORPORATION OF THE COMPANY FROM
CALIFORNIA TO DELAWARE
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued and to be signed on the other side)
<PAGE> 56
(Continued from reverse side)
3. PROPOSAL 3 AMENDMENTS TO THE COMPANY'S 1996 STOCK OPTION PLAN TO INCREASE THE
NUMBER SHARES OF COMMON STOCK SUBJECT TO THE PLAN FROM 3,000,000 TO
4,000,000, AMONG OTHER THINGS
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
SHAREHOLDER ON THIS PROXY. WHERE NO DIRECTION IS GIVEN, SUCH SHARES WILL BE
VOTED FOR THE PROPOSALS DESCRIBED ABOVE IN THIS PROXY. IN THEIR DISCRETION, THE
PROXIES ARE AUTHORIZED TO VOTE ON SUCH OTHER BUSINESS AS MAY PROPERLY COME
BEFORE THE MEETING OR ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
Date:____________________
-------------------------
Signature(s)
Please sign your name
exactly as it appears
hereon. Executors,
administrators,
guardians, officers of
corporations, and others
signing in a fiduciary
capacity should state
their full titles as
such.
