<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
Filed by a party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
ADOBE SYSTEMS INCORPORATED
345 PARK AVENUE
SAN JOSE, CALIFORNIA 95110-2704
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 9, 1997
TO THE SHAREHOLDERS OF ADOBE SYSTEMS INCORPORATED:
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Shareholders of Adobe
Systems Incorporated, a California corporation (the "Company"), will be held on
April 9, 1997, at 1:30 p.m., local time, at The Westin Hotel, 5101 Great America
Parkway, Santa Clara, California 95054.
1. To elect four (4) Class II directors of the Company to serve for a
two-year term.
2. To approve the reincorporation of the Company in the State of
Delaware in order to enable the Company to attract and retain highly
qualified officers and directors, and to take advantage of the flexibility
afforded by Delaware law to adopt measures designed to protect stockholders
in the face of hostile takeover attempts.
3. To approve an amendment to the Company's 1994 Stock Option Plan
increasing by 5,600,000 the number of shares reserved for issuance under the
Plan, and to further amend the Plan to decrease the option term from ten
years to eight years.
4. To approve the 1997 Employee Stock Purchase Plan. This plan is
intended to immediately replace the 1988 Employee Stock Purchase Plan, which
expires December 7, 1997, and increases the share reserve by 3,000,000
shares, from 4,000,000 shares to 7,000,000 shares.
5. To ratify the appointment of KPMG Peat Marwick LLP as the
independent public accountants of the Company for the fiscal year ending
November 28, 1997.
6. To transact such other business as may properly come before the
meeting.
Shareholders of record at the close of business on February 21, 1997 are
entitled to notice of and to vote at this Annual Meeting and at any adjournment
or postponement thereof.
By Order of the Board of Directors
Colleen M. Pouliot
VICE PRESIDENT, GENERAL COUNSEL &
SECRETARY
San Jose, California
February 27, 1997
IMPORTANT: PLEASE FILL-IN, DATE, SIGN AND MAIL PROMPTLY THE ENCLOSED PROXY IN
THE POST-PAID ENVELOPE TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH TO SO
EVEN THOUGH YOU HAVE SENT IN YOUR PROXY
<PAGE>
ADOBE SYSTEMS INCORPORATED
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 9, 1997
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
INFORMATION CONCERNING SOLICITATION AND VOTING............................................................. 3
PROPOSAL ONE--ELECTION OF DIRECTORS........................................................................ 4
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT................................................ 8
EXECUTIVE COMPENSATION AND OTHER INFORMATION............................................................... 9
REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE............................................................. 15
DIRECTOR COMPENSATION...................................................................................... 18
PERFORMANCE GRAPH.......................................................................................... 19
PROPOSAL TWO--APPROVAL OF THE REINCORPORATION OF THE COMPANY IN THE STATE OF DELAWARE...................... 20
PROPOSAL THREE--APPROVAL OF AN INCREASE IN THE SHARE RESERVE UNDER THE 1994 STOCK OPTION PLAN.............. 40
PROPOSAL FOUR--APPROVAL OF THE 1997 EMPLOYEE STOCK PURCHASE PLAN........................................... 43
PROPOSAL FIVE--RATIFICATION OF APPOINTMENT OF AUDITORS..................................................... 46
OTHER BUSINESS............................................................................................. 46
SHAREHOLDER PROPOSALS TO BE PRESENTED AT NEXT ANNUAL MEETING............................................... 47
</TABLE>
2
<PAGE>
PROXY STATEMENT
------------------------
ANNUAL MEETING OF SHAREHOLDERS
OF
ADOBE SYSTEMS INCORPORATED
------------------------
The accompanying proxy is solicited by the Management of Adobe Systems
Incorporated (the "Company") for use at its Annual Meeting of Shareholders to be
held on April 9, 1997, at [ ], [ ], California [ ] at 1:30 p.m.,
local time, or at any adjournment or postponement thereof, for the purposes set
forth herein and in the accompanying Notice of Annual Meeting.
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The principal executive offices of the Company are at 345 Park Avenue, P.O.
Box 2704, San Jose, California 95110-2704. The Company's telephone number at
that location is (408) 536-6000. The date of this Proxy Statement is February
27, 1997, the approximate date on which these proxy solicitation materials and
the Annual Report to Shareholders for the fiscal year ended November 29, 1996,
including financial statements, were first sent or given to shareholders
entitled to vote at the meeting.
This solicitation of proxies is made on behalf of the Management of the
Company and the associated cost will be borne by the Company. The Company has
engaged Georgeson & Company, Inc. ("Georgeson") to assist in the solicitation of
proxies for the meeting. The Company will pay $9,000 in fees for Georgeson's
services and will reimburse Georgeson for reasonable out-of-pocket expenses.
In addition to solicitation by mail and by Georgeson, Management may use the
services of its directors, officers and others to solicit proxies, personally or
by telephone, telegram [or electronic mail]. No additional compensation will be
paid to directors, officers or other regular employees for such services.
Arrangements may also be made with brokerage houses and other custodians,
nominees and fiduciaries to forward solicitation material to the beneficial
owners of the stock held of record by such persons, and the Company may
reimburse them for reasonable out-of-pocket and clerical expenses incurred by
them in so doing.
RECORD DATE, VOTING AND REVOCABILITY OF PROXIES
The Company had outstanding on February 21, 1997, (the "Record Date")
[ ] shares of Common Stock, without par value, all of which are entitled to
vote on all matters to be acted upon at the meeting. The Company's By-Laws
provide that a majority of the shares entitled to vote, represented in person or
by proxy, shall constitute a quorum for transaction of business. Each
shareholder is entitled to one vote for each share held on the Record Date. If
no instructions are given on the executed Proxy, the Proxy will be voted for all
nominees and in favor of all proposals described.
For the election of directors, a plurality of the votes cast is required for
approval if a quorum is present and voting. The affirmative vote of a majority
of the outstanding shares of the Company's voting stock is required for the
approval of the reincorporation (Proposal 2). The affirmative vote of a majority
of shares present and voting at the meeting is required for approval of
Proposals 3, 4, 5 and 6 being submitted to the shareholders for their
consideration. An automated system administered by the Company's transfer agent
tabulates the votes. Abstentions and broker non-votes are each included in the
determination of the number of shares present and voting for purposes of
determining the presence of a quorum. Each is tabulated separately. Abstentions
will be included in tabulations of the votes cast for purposes of
3
<PAGE>
determining whether a proposal has been approved. Broker non-votes will not be
counted for purposes of determining the number of votes cast for a proposal.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by filing with the Secretary of the Company
a written notice revoking it, by presenting at the meeting a duly executed proxy
bearing a later date, or by attending the meeting and voting in person.
Attendance at the meeting will not, by itself, revoke a proxy.
PROPOSAL ONE
ELECTION OF DIRECTORS
The Board has nominated Messrs. Warnock, Carter, Sedgewick and Spencer to
serve as Class II directors of the Company. Management knows of no reason why
any of these nominees would be unable or unwilling to serve, but if any nominee
should be unable or unwilling to serve, the Proxies will be voted for the
election of such other persons for the office of director as Management may
recommend in the place of such nominee.
THE BOARD RECOMMENDS VOTING "FOR" THE FOUR NOMINEES LISTED BELOW.
INFORMATION REGARDING NOMINEES
The number of directors authorized by the Company's By-Laws is a range from
six to eight, with the exact number to be fixed by the Board. The exact number
is currently fixed at seven. The Company's By-Laws provide that the directors
shall be divided into two classes, as nearly equal in number as reasonably
possible, with the classes of directors serving for staggered, two-year terms.
Vacancies on the Board not caused by removal may be filled by a majority of the
directors then in office. The shareholders may elect a director at any time to
fill any vacancy not filled, or which cannot be filled, by the Board. All
directors, including directors elected to fill vacancies, shall hold office
until the expiration of the term for which elected and until their successors
are elected and qualified, except in the case of death, resignation or removal
of any director.
Shares represented by executed proxies will be voted, if authority to do so
is not withheld, for the election of the four nominees named below. In the event
that any nominee should be unavailable for election as a result of an unexpected
occurrence, such shares will be voted for the election of such substitute
nominee as Management may propose. Each person nominated for election has agreed
to serve if elected and Management has no reason to believe that any nominee
will be unable to serve.
Each nominee for election to Class II director is currently a director of
the Company who was previously elected by the shareholders. The four Class II
directors to be elected at the 1997 Annual Meeting will hold office until the
1999 Annual Meeting and until their successors have been elected and qualified,
or until such director's earlier death, resignation or removal.
4
<PAGE>
The following table sets forth the name and age of each nominee, and each
director of the Company whose term of office continues after the Annual Meeting,
the principal occupation of each during the past five years, and the period
during which each has served as a director of the Company:
NOMINEES FOR ELECTION AS CLASS II DIRECTORS FOR A TERM EXPIRING IN 1999:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
NAME DURING THE PAST FIVE YEARS AGE YEAR
- ------------------------------ ------------------------------------------------------------------- --- ---------
<S> <C> <C> <C>
John E. Warnock Dr. Warnock was a founder of the Company and has been its Chairman 56 1982
of the Board since April 1989. He has been a director and Chief
Executive Officer since 1982. From April 1978 until founding the
Company, Dr. Warnock was Principal Scientist of the Imaging
Sciences Laboratory at Xerox Corporation's Palo Alto Research
Center. Dr. Warnock received a Ph.D. in electrical engineering
from the University of Utah. Dr. Warnock is a director of Evans &
Sutherland Computer Corporation, Netscape Communications
Corporation, and Redbrick Systems.
Gene P. Carter Mr. Carter has been a director of the Company since August 1994, 62 1994
and has been a private investor since 1984. Mr. Carter is a
director of Chips & Technologies, Inc., Portable Energy Products,
Inc., and is on the Board of Regents of the Milwaukee School of
Engineering.
Robert Sedgewick Dr. Sedgewick has been a director of the Company since January 50 1990
1990. Since 1985, he has been a Professor of Computer Science at
Princeton University, where he was the founding Chairman of the
Department of Computer Science from 1985 to 1994. He is the
author of a widely used series of textbooks on algorithms. Dr.
Sedgewick holds a Ph.D. in computer science from Stanford
University.
William J. Spencer Dr. Spencer has been a director of the Company since October 1992. 66 1992
Since October 1990, he has been President and Chief Executive
Officer of SEMATECH. He was appointed Chairman of the Board of
SEMATECH in August 1996. From May 1986 until October 1990, he was
Group Vice President and Senior Technical Officer of Xerox
Corporation. Dr. Spencer is a director of CNRI and SRI
International.
</TABLE>
5
<PAGE>
<TABLE>
<S> <C> <C> <C>
INCUMBENT CLASS I DIRECTORS FOR A TERM EXPIRING IN 1998:
<CAPTION>
PRINCIPAL OCCUPATION
NAME DURING THE PAST FIVE YEARS AGE YEAR
- ------------------------------ ------------------------------------------------------------------- --- ---------
<S> <C> <C> <C>
Charles M. Geschke Dr. Geschke was a founder of the Company and has been its President 57 1982
since April 1989. He has been a director since 1982, and was
Chief Operating Officer from December 1986 until July 1994. From
October 1972 until founding the Company, Dr. Geschke was the
Manager of the Imaging Sciences Laboratory at Xerox Corporation's
Palo Alto Research Center. Dr. Geschke received a Ph.D. in
computer science from Carnegie Mellon University.
William R. Hambrecht Mr. Hambrecht has been a director of the Company since December 60 1982
1982. He is Chairman of Hambrecht & Quist Group and its principal
subsidiary, Hambrecht & Quist LLC. He has continuously served as
an officer, director or principal of those entities or their
predecessors since he and the late George Quist co-founded
Hambrecht & Quist in 1968. He holds a B.A. degree from Princeton
University.
Delbert W. Yocam Mr. Yocam has been a director of the Company since February 1991. 53 1991
He is Chairman of the Board and Chief Executive Officer of
Borland International, Inc. Prior to joining Borland, Mr. Yocam
was an independent consultant from November 1994 through November
1996. From September 1992 until November 1994, he served as
President, Chief Operating Officer and a director of Tektronix,
Inc. Prior to joining Tektronix, Inc., Mr. Yocam was an
independent consultant. He was employed by Apple Computer, Inc.
from 1979 to 1989, serving as Executive Vice President and Chief
Operating Officer from 1986 to 1988, and as President of Apple
Pacific, a division of Apple Computer, Inc., from 1988 to 1989.
Mr. Yocam is a director of Boomtown, Inc., Oracle Corporation,
Raster Graphics, Inc., Xircom, Inc., and several privately-held
technology companies.
</TABLE>
BOARD MEETINGS AND COMMITTEES
During fiscal 1996, the Board of Directors held six meetings. The Board has
an Audit Committee, an Executive Compensation Committee, an Investment Committee
(all of the foregoing committees' members are non-employee directors), and an
Employee Grant Committee. All directors attended at least 75% of the aggregate
of the meetings of the Board and all committees of the Board of which they were
members. The Company does not have a nominating committee nor any committee
performing such functions.
Messrs. Carter and Spencer served as members of the Audit Committee
throughout fiscal 1996. Mr. Hambrecht served as an alternate member of the Audit
Committee and attended one meeting in that capacity. The Audit Committee meets
with the Company's independent auditors at least annually and reviews and
approves (i) the scope of the audit performed by the Company's independent
public accountants and (ii) the Company's accounting principles and internal
accounting controls. The Audit Committee held one meeting during fiscal 1996.
6
<PAGE>
Messrs. Hambrecht, Sedgewick and Yocam served as members of the Executive
Compensation Committee throughout fiscal 1996. The Executive Compensation
Committee held four meetings during fiscal 1996. The responsibilities of the
Executive Compensation Committee are set forth under "Report of the Executive
Compensation Committee."
Messrs. Carter, Sedgewick and Yocam served as members of the Investment
Committee throughout fiscal 1996. The Investment Committee held three meetings
and took action once by unanimous written consent during fiscal 1996. The
Investment Committee evaluated the advisability of the Company investing in an
outside-managed venture capital fund focused on startup companies in businesses
strategically related to the Company's markets and technology and continues to
monitor the performance of the fund.
Messrs. Warnock and Geschke served as members of the Employee Grant
Committee throughout fiscal 1996. The Employee Grant Committee (which reviews
and approves grants of options and restricted stock to non-officer employees
under the Company's 1994 Stock Option Plan and the 1994 Performance and
Restricted Stock Plan, respectively) acted forty-three times by written consent
during fiscal 1996.
7
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of January 28, 1997, there was outstanding [ ] shares of the
Company's Common Stock. Except as set forth in the footnotes to the table, the
following table sets forth information regarding the beneficial ownership of the
Company's Common Stock as of January 28, 1997: (a) by each person known by the
Company to own beneficially more than 5% of the Company's outstanding Common
Stock; (b) the Chief Executive Officer of the Company; (c) each of the four
other most highly compensated executive officers of the Company (and two former
executive officers); (d) by each director of the Company; and (e) by all
executive officers and directors of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF COMMON
NAME BENEFICIAL OWNERSHIP(1) (2) STOCK OUTSTANDING
- -------------------------------------------------------------------- --------------------------- -------------------
<S> <C> <C>
Capital Research & Management Company(3) ........................... -- --%
c/o Capital Group Companies, Inc.
333 South Hope Street
52nd floor
Los Angeles, CA 9007
John E. Warnock(6)..................................................
Charles M. Geschke(7)...............................................
David B. Pratt(8)...................................................
Derek Gray(9).......................................................
Robert Roblin(10)...................................................
Stephen A. MacDonald(11)............................................ [footnote former officer]
M. Bruce Nakao(12).................................................. [footnote former officer]
William R. Hambrecht(13)............................................
Robert Sedgewick(14)................................................
William J. Spencer(15)..............................................
Delbert W. Yocam(16)................................................
Gene P. Carter(17)..................................................
All directors and executive officers as a group (16 persons)(18)....
</TABLE>
- ------------------------
* Less than 1%.
(1) The persons named in the table above have sole voting and investment power
with respect to all shares of Common Stock shown as beneficially owned by
them, subject to community property laws where applicable and the
information contained in the footnotes to this table.
(2) As to any shares issuable upon exercise of outstanding options identified in
the footnotes to this table, those shares exercisable on January 28, 1997 or
within 60 days thereafter are included.
(3) Of the shares attributed to Capital Research & Management Company, it has
sole voting power for shares; shared dispositive power for
shares; and shared voting power for shares. This information was
provided to the Company pursuant to Schedule 13G and is current as of
December 31, 1996.
8
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table provides information concerning the compensation of the
Chief Executive Officer and each of the four other most highly compensated
executive officers of the Company, as well as two former executive officers of
the Company who left the Company during fiscal 1996 (the "Named Executive
Officers"), for the fiscal years ended November 25, 1994, December 1, 1995, and
November 29, 1996:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION AWARDS
---------------------------------
ANNUAL COMPENSATION RESTRICTED SECURITIES
------------------------- STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($)(1) AWARD(S) ($)(2) OPTION/SARS (#) COMPENSATION ($)(3)
- --------------------------------- --------- ----------- ------------ --------------- ---------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
John E. Warnock ................. 1996 428,592 209,519 -0- 27,800 26,335
Chairman of the Board and Chief 1995 375,014 293,308 -0- 42,000 44,572
Executive Officer 1994 318,762 268,069 -0- 100,000 45,754
Charles M. Geschke .............. 1996 428,592 209,519 -0- 27,800 26,765
President and Director 1995 375,014 293,308 -0- 42,000 45,530
1994 318,762 268,069 -0- 100,000 46,841
David B. Pratt .................. 1996 301,637 119,067 -0- 11,040 24,756
Executive Vice President and 1995 271,010 168,272 107,500 25,000 44,797
Chief Operating Officer 1994 239,209 160,264 -0- 50,000 43,733
Derek J. Gray ................... 1996 249,609 78,316 -0- 11,040 64,831
Senior Vice President and 1995 214,328 122,385 [ ] [ ] 62,618
General Manager, Adobe Systems 1994 204,295 42,831 [ ] [ ] 49,183
Europe(4)
Robert A. Roblin(5) ............. 1996 94,619 8,719 -0- 27,500 710
Senior Vice President,
Marketing
Stephen A. MacDonald(6) ......... 1996 125,682 44,264 -0- -0- 9,651
Former Senior Vice President 1995 271,010 168,272 107,500 25,000 37,887
and Chief Operating Officer 1994 251,010 169,425 -0- 50,000 37,532
M. Bruce Nakao(7) ............... 1996 175,812 53,834 -0- -0- 13,624
Former Senior Vice President, 1995 237,009 121,873 107,500 18,000 38,639
Finance and Administration, 1994 218,021 121,215 -0- 44,000 37,797
Chief Financial Officer
</TABLE>
- ------------------------
(1) Some of the amounts shown in this column reflect payments under the
Company's Profit Sharing Plan in which all employees of the Company
participate.
(2) For the Named Executive Officers, the aggregate number of restricted stock
holdings at the end of fiscal 1996 was 6,000 shares; the closing price of
the Company's Common Stock at November 29, 1996, the fiscal year-end, was
$39.50/share for an aggregate value of $237,000.00. For the Named Executive
Officers, there was a total of 6,000 restricted shares awarded. All awards
were granted on May 10, 1995 and fully vested on September 1, 1995.
9
<PAGE>
(3) The amounts disclosed in this column for fiscal 1996 include payment by the
Company on behalf of the Named Executive Officers as follows:
(a) Life insurance premiums in the following amounts: Dr. Warnock,
$[ ]; Dr. Geschke, $[ ]; Mr. Pratt, $[ ]; Mr. Nakao,
$[ ]; and Mr. MacDonald, $[ ].
(b) The dollar value of the remainder of the life insurance premiums as
follows: Dr. Warnock, $12,562; Dr. Geschke, $13,061; Mr. Pratt, $13,061; Mr.
Gray, $2,425 (combination life insurance and disability insurance); Mr.
Nakao, $6,729; and Mr. MacDonald, $3,618.
(c) Disability insurance premiums in the following amounts: Dr. Warnock,
$11,523; Dr. Geschke, $11,454; Mr. Pratt, $9,445; Mr. Nakao, $5,405; and Mr.
MacDonald, $9,445.
(d) Company contributions under the Company's 401(k) Plan in the
following amounts: Dr. Warnock, $2,250; Dr. Geschke, $2,250; Mr. Pratt,
$2,250; Mr. Roblin, $710; Mr. Nakao, $1,490; and Mr. MacDonald, $2,250.
(e) Relocation fees paid for Mr. Roblin in the amount of $[ ].
(f) Preventive health care program for Mr. Gray in the amount of $1,179.
(g) Motor vehicle and fuel allowance for Mr. Gray in the amount of
$13,469.
(h) Employer contribution to pension for Mr. Gray in the amount of
$14,977.
(i) Social Charges in the United Kingdom for Mr. Gray in the amount of
$32,780. "Social Charges" are the government mandated payment of National
Insurance contributions for the Company's United Kingdom employees. These
contributions cover social services to individuals such as state medical
care (National Health Service), state pension and unemloyment benefits.
(4) All amounts attributed to Mr. Gray have been converted into U.S. dollars
from pounds sterling currency in which he is paid, using the exchange rate
at the end of the fiscal years as follows: fiscal 1994 - $1.5630; fiscal
1995 - $1.5310; and fiscal 1996 - $1.6820.
(5) Mr. Roblin joined the Company on June 28, 1996.
(6) Mr. MacDonald resigned from the Company effective April 30, 1996. Pursuant
to his Confidential Resignation Agreement with the Company, Mr. MacDonald
was paid a lump sum in the amount of $241,300, which figure is equal to six
months of his base pay, plus six months' target bonus, less applicable
withholding.
(7) Mr. Nakao resigned from the Company effective August 3, 1996.
10
<PAGE>
STOCK OPTIONS
The following table provides details regarding stock options granted to the
Named Executive Officers in fiscal 1996 under the Company's 1994 Stock Option
Plan. In addition, in accordance with Securities and Exchange Commission ("SEC")
rules, there are shown the hypothetical gains or "option spreads" that would
exist for the respective options. These gains are based on assumed rates of
annual compound stock price appreciation of 5% and 10% from the date the options
were granted over the full option term. The actual value, if any, an executive
may realize will depend on the spread between the market price and the exercise
price on the date the option is exercised.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
-------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS/SARS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM(3)
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION ------------------------
NAME GRANTED(#)(1) FISCAL YEAR ($/SH)(2) DATE 5%($) 10%($)
- -------------------------------------- ------------- --------------- ----------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
John E. Warnock....................... 27,800 1.06% $ 33.38 9/18/06 $ 583,504 $ 1,478,714
Charles M. Geschke.................... 27,800 1.06 33.38 9/18/06 583,504 1,478,714
David B. Pratt........................ 15,180 .58 33.38 9/18/06 318,618 807,442
Derek J. Gray......................... 11,040 .42 33.38 9/18/06 150,000 349,564
Robert A. Roblin...................... 27,500 1.05 36.13 7/1/06 624,768 1,583,284
Stephen A. MacDonald.................. -0- -0- N/A N/A N/A N/A
M. Bruce Nakao........................ -0- -0- N/A N/A N/A N/A
</TABLE>
- ------------------------
(1) The options were granted September 18, 1996. The options vest in the amount
of 2.08% per month for the first 24 months beginning July 24, 1996, and
4.17% per month for the next 12 months. The options permit withholding of
shares to satisfy tax obligations upon exercise. The price of each option
share, paid at the time of exercise, is the fair market value of a share of
the Company's Common Stock on the date of grant, which was equal to the
closing price per share of the Company's Common Stock as quoted on the
National Association of Securities Dealers Automated Quotations. The option
term is for a period of ten years from the date of grant, unless the
optionee terminates employment with the Company as follows:
(a) if the termination is due to the optionee's normal retirement, death
or disability, the exercise period is twelve months from such date; or
(b) if the termination is due to the optionee's early retirement
pursuant to an early retirement program, the exercise period is three months
from the date of early retirement or such greater period as established
pursuant to the early retirement program; or
(c) if there is a transfer of control of the Company in which the
Company is not the surviving corporation, and termination occurs within
twelve months thereafter due to (i) constructive termination or (ii) any
reason other than termination for cause, the exercise period is twelve
months from the date on which the optionee's employment terminated, and
he/she will be given credit for an additional twelve months of vesting for
his/her option; or
(d) if the termination is for cause, the option shall terminate and
cease to be exercisable from the date of termination; or
(e) if the termination is for any reason other than stated above, the
exercise period is three months from the date of such termination.
11
<PAGE>
(2) The exercise price may be paid in cash, by delivery of already-owned shares
subject to certain conditions, or pursuant to a cashless exercise procedure
under which the optionee provides irrevocable instructions to a brokerage
firm to sell the purchased shares and to remit to the Company, out of the
sale proceeds, an amount equal to the exercise price plus all applicable
withholding taxes.
(3) The potential gain is calculated from the closing price of the Company's
Common Stock on September 18, 1996, the date of grant to the Named Executive
Officers. These amounts represent certain assumed rates of appreciation
only, as set by the SEC. Actual gains, if any, on stock option exercises and
Common Stock holdings are dependent upon the future performance of the
Company and overall stock market conditions. There can be no assurance that
the amounts reflected in this table will be achieved.
Using the same analysis, all holders of Common Stock as of the Company's
fiscal year-end would potentially gain approximately $1,778,678,543 billion at
5%, and $4,489,045,846 billion at 10% rates of stock price appreciation.
STOCK OPTION EXERCISES AND HOLDINGS
The following table shows stock options exercised by Named Executive
Officers during fiscal 1996, including the aggregate value of gains on the date
of exercise. In addition, this table includes the number of shares covered by
both exercisable and non-exercisable stock options as of fiscal year-end. Also
reported are the values for "in-the-money" options which represent the positive
spread between the exercise price of any such existing stock options and the
year-end price of the Company's Common Stock.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS
SHARES FY-END (#) AT FY-END ($)(1)
ACQUIRED ON VALUE -------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------- ----------- ------------ ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
John E. Warnock.................... 37,593 $ 2,030,022 412,007 82,948 $ 7,353,296 $ 564,541
Charles M. Geschke................. -0- -0- 356,852 82,948 5,681,984 564,541
David B. Pratt..................... -0- -0- 194,809 45,371 2,731,185 289,293
Derek J. Gray...................... -0- -0- 61,559 24,481 1,091,572 76,048
Robert A. Roblin................... -0- -0- -0- 27,500 -0- 92,813
Stephen A. MacDonald............... 411,682 6,436,565 -0- -0- -0- -0-
M. Bruce Nakao..................... 198,832 2,998,832 -0- -0- -0- -0-
</TABLE>
- ------------------------
(1) Fiscal year ended November 29, 1996. The closing market price on that date
for the Company's Common Stock was $39.50.
12
<PAGE>
LONG-TERM INCENTIVE PLAN
In June 1994, the Company's Board of Directors adopted the 1994 Performance
and Restricted Stock Plan, the Company's form of Long-Term Incentive Plan, which
plan was subsequently approved by the Company's shareholders in August 1994 (the
"Performance Plan"). The Performance Plan is a compensation plan tied to
corporate performance and measured by the achievement of financial goals.
The Performance Plan has a three-year cycle. At the start of each three-year
performance cycle, each participant is given a contingent award of a number of
shares of the Company's Common Stock. The actual number of shares earned by the
participant is determined based upon the Company meeting pre-defined performance
objectives over the three-year performance period. The measures for each of the
two three-year performance periods to date consist of the Company's (i) compound
annual revenue growth and (ii) operating margin. If the minimum targets for the
first two measures are met, a third modifying measure based on the Company's
stock price performance relative to the Hambrecht & Quist ("H&Q") Technology
Index is used to modify the number of shares actually awarded, with the maximum
number of shares possible for award as noted in the last column of the following
chart.
Fiscal 1996 was the third year that Performance Plan contingent awards were
granted, with the three-year cycle to be fiscal 1996 through fiscal 1998. The
following table provides certain information with respect to awards during
fiscal 1996 to the Named Executive Officers under the Performance Plan:
LONG-TERM INCENTIVE PLAN--AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF
SHARES, UNITS PERFORMANCE OR ESTIMATED FUTURE PAYOUTS UNDER
OR OTHER PERIOD NON-STOCK PRICE-BASED PLANS
OTHER RIGHTS UNTIL MATURATION -----------------------------------------
NAME (#) OR PAYOUT THRESHOLD (#) TARGET (#) MAXIMUM (#)
- ---------------------------------- --------------- ------------------ ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
John E. Warnock................... 11,500 FY96-FY98 431 11,500 34,500
Charles M. Geschke................ 11,500 FY96-FY98 431 11,500 34,500
David B. Pratt.................... 6,900 FY96-FY98 259 6,900 20,700
Derek J. Gray..................... 4,600 FY96-FY98 173 4,600 13,800
Robert A. Roblin.................. -0- N/A -0- -0- -0-
Stephen A. MacDonald(1)........... 6,900 FY96-FY98 -0- -0- -0-
M. Bruce Nakao(1)................. 4,615 FY96-FY98 -0- -0- -0-
</TABLE>
- ------------------------
(1) Upon his resignation from the Company, the awards were automatically
cancelled under the terms of the plan.
SEVERANCE AND CHANGE-IN-CONTROL ARRANGEMENTS
In September 1995, the Company entered into retention agreements (the
"Agreements") with its executive officers, providing for certain cash payments
in the event of termination of his or her employment following a
change-in-control of the Company. Effective June 1996 and November 1996,
respectively, the Company entered into the Agreements with Robert A. Roblin,
Senior Vice President, Marketing, and P. Jackson Bell, Executive Vice President,
Chief Financial Officer and Chief Administrative Officer.
For purposes of these Agreements, a "change-in-control" is defined as: (i)
the sale or exchange by the shareholders of all or substantially all of the
stock of the Company; (ii) a merger or consolidation in which the Company is a
party; (iii) the sale, exchange or transfer of all or substantially all of the
assets of the Company (other than to a subsidiary); or (iv) a liquidation or
dissolution of the Company. If, within one year after a change-in-control (the
"Covered Period"), the executive's employment is terminated without cause or if
the executive resigns following a change in duties as defined in the Agreements,
such executive officer will receive a cash payment equal to one year's base
salary plus an annual target incentive bonus. In addition, the executive officer
would receive continued medical, dental, vision and life insurance coverage
13
<PAGE>
for himself or herself and dependents for one year after the date of
termination, unless the executive is covered by another employer's health plan.
Also, if the executive is terminated by the Company without cause at any time
other than during a Covered Period, the executive will receive the cash payment
and benefits described above.
For a description of the "transfer of control" terms under the Company's
Stock Option Plan, please
see "Proposal No. Three".
CERTAIN TRANSACTIONS
Derek J. Gray, Senior Vice President and General Manager of Adobe Systems
Europe, was a major shareholder of McQueen Holdings Limited, a U.K. company of
which the Company is also a 16% shareholder, and to which the Company in 1996
paid approximately $36.7 million for services for production of application
products distributed outside of the U.S. and Japan. In addition, the Company has
guaranteed a total payment over the next year to McQueen of $5.2 million for
additional services such as customer support and information systems. Also, the
Company guaranteed a total payment of approximately $1.8 million to McQueen for
rent of a building through 1999. However, the rent guarantee was provided only
until such time that McQueen achieved certain financial targets, at which time
the guarantee would lapse. During the course of fiscal 1996, these conditions
were met and the rent guarantee is no longer in effect. In January 1995, Mr.
Gray sold his shares back to McQueen in exchange for a promissory note for
approximately 2 million pounds sterling. The principal amount of the note is
payable in five annual installments, with interest at a rate of 8% payable
semi-annually. The current principal outstanding is 1.1 million pounds sterling.
Upon his resignation from the Company on April 30, 1996, Mr. MacDonald,
Senior Vice President and Co-Chief Operating Officer, received a lump sum
payment of $241,300, equal to six months' base salary plus six months of target
bonus, less applicable withholding.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "34
Act") requires the Company's officers and directors, and persons who own more
than ten percent of a registered class of the Company's equity securities, to
file with the SEC reports of ownership and changes in ownership of common stock
and other equity securities of the Company. Officers, directors and greater than
ten percent shareholders are required by SEC regulations to furnish the Company
with copies of all Section 16(a) forms they file. The Company does prepare
Section 16(a) forms on behalf of its officers and directors based on the
information provided by them.
Based solely on review of this information, including written
representations from its officers and directors that no other reports were
required, the Company believes that, during the 1996 fiscal year, all Section
16(a) filing requirements applicable to its officers, directors and greater than
ten percent beneficial owners were complied with.
14
<PAGE>
REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE
The Executive Compensation Committee of the Board of Directors (the
"Committee") is composed entirely of outside, non-management directors. No
member of the Committee is a former or current officer of the Company. The
Committee is responsible for setting and administering the policies governing
annual compensation of executive officers, including cash compensation and stock
ownership programs.
COMPENSATION POLICIES
The Company operates in the competitive and rapidly changing high technology
business environment. The goals of the Company's executive compensation program
are to motivate executives to achieve the Company's business objectives in this
environment and reward them for their achievement, foster teamwork, and attract
and retain executive officers who contribute to the long-term success of the
Company. During fiscal 1996, the Committee utilized salary, bonus, stock options
and performance units to meet these goals.
Guiding principles are to provide compensation levels which are comparable
to those offered by other leading high technology companies, and align the
interests of officers with the long-term interests of shareholders through stock
compensation. For example, in fiscal 1996 stock compensation included
performance units granted under the Performance Plan which cover a three-year
performance period and measure growth in revenue and operating margin. Another
principle is that a substantial portion of each executive's compensation be in
the form of an incentive bonus contingent upon the Company's revenue and
operating profit levels for the relevant fiscal year. For example, in 1996 each
of the Named Executive Officers' target bonus percentage equaled or exceeded 40%
of salary, payable quarterly. However, the Committee retains the authority to
alter the bonus amounts because qualitative factors and long-term results need
to be evaluated as well as the short-term operating results. In 1996, the
Committee considered factors such as market share increases, new product
development and return on equity.
The Committee has considered the potential impact of Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code") adopted under the Federal
Revenue Reconciliation Act of 1993. This section disallows a tax deduction for
any publicly-held corporation for individual compensation exceeding $1 million
in any taxable year for the Named Executive Officers, unless compensation is
performance-based. Since the targeted cash compensation of each of the Named
Executive Officers is well below the $1 million threshold and any options
granted under the 1994 Stock Option Plan or performance units or shares granted
under the Performance Plan will meet the requirement of being performance-based,
the Committee believes that this section will not reduce the tax deduction
available to the Company. The Company's policy is to qualify to the maximum
extent possible its executives' compensation for deductibility under applicable
tax laws.
COMPENSATION COMPONENTS
ANNUAL COMPENSATION. The salary portion of executive compensation,
including that of the Chief Executive Officer, is determined annually by
reference to the Radford Associates Management survey of high technology
companies. The executive officers are matched to each position by comparing
their responsibilities to the survey description most accurately representing
their position with the Company by content, organizational level and revenue.
Given the officers' levels of responsibility and the past performance of the
Company, the Committee targets a median or slightly higher percentile
competitive position as stated by the survey in determining salary for each
executive officer. As the executives mature in their respective positions for
the size of the Company, the Committee expects to target a high percentile
competitive position for salary compensation. The annual total cash compensation
(salary plus incentive bonus) for each executive is targeted at a very high
percentile competitive position as stated by the survey.
A substantial portion of the annual compensation of each executive officer
is in the form of an incentive bonus, which becomes a greater portion of an
officer's potential total compensation as the
15
<PAGE>
executive's level of responsibility increases. The bonus is computed as a
percentage of base salary and is established annually at the beginning of the
fiscal year. In fiscal 1996, the target level of bonus equaled or exceeded 40%
of salary for each of the Named Executive Officers. The actual amount of each
bonus was determined by reference to the management incentive bonus program,
which contains targets specifically tied to revenue and operating profit levels
on a quarterly basis. If the Company's performance exceeds the targets on an
annual basis, then an additional bonus up to twenty percent of the annual target
bonus is included in the program. The Committee has the authority to alter the
incentive payout based on other factors related to Company performance, such as
market share increases, new product development and return on equity. The
Committee did not assign weights to each of these factors but considered overall
profitability and operating results as measured against the annual budget as
updated more important than the other performance measures listed.
In 1996, the Committee awarded bonuses on a quarterly basis. The following
percentages of the target, consistent with the management incentive bonus
program, were paid for the quarters indicated: first quarter, 100%; second
quarter, 62%; third quarter, 68%; and fourth quarter, 21%. Executive officers
also participated with all Company employees in the Company's corporate profit
sharing plan, under which a bonus up to ten percent of each employee's base
salary, payable quarterly, is awarded depending upon the Company's overall
performance based on revenue, expenses and earnings. In addition, if the
Company's performance exceeds the targets on an annual basis, then an additional
bonus up to two percent of the base salary is paid in the form of a Company
contribution into the employee's 401(k) account. However, should the Company
fail to pay the full ten percent cash bonus in any quarter, and, if the
Company's performance meets or exceeds the targets on an annual basis, the
Company has the option to pay the difference between the quarterly cash bonus
shortage and the quarterly cash bonus maximum in the form of an extra Company
contribution into the employee's 401(k) account. Based on the Company's level of
revenue and operating profit versus budget for each quarter of fiscal 1996, this
bonus was paid in the following percentages for the relevant quarter: first
quarter, 87% second quarter, 91% third quarter, 75%; and fourth quarter, 71%.
LONG-TERM COMPENSATION. The Committee utilized stock options and
performance units to motivate and retain executive officers for the long-term.
The Committee believes that these forms of compensation closely align the
officers' interests with those of shareholders and provide a major incentive to
officers in building shareholder value. In addition, the Committee believes that
the performance awards further its objective of forging a closer link between
the executives' compensation and the Company's longer-term financial performance
since the awards are based upon a three-year performance cycle.
Options are granted annually and are subject to vesting provisions to
encourage officers to remain employed with the Company. Each executive officer
receives stock options based upon that officer's relative position,
responsibilities and performance by the individual over the previous fiscal year
and the officers' anticipated performance and responsibilities. Additionally,
the Committee considers a hypothetical return assuming a specific increased
market value for the size of the grant, and balances that against the size of
the performance unit award for the fiscal year. The Committee also reviews the
prior level of grants to the officers and to other members of senior management
including the number of shares which continue to be subject to vesting under
outstanding options, in setting the level of options to be granted to the
executive officers. The size of the option grants is not related to Company
performance. The Committee also utilizes data compiled by Ernst & Young,
Certified Public Accountants, on stock options granted in a group of select
software companies. These stock options are granted at the market price on the
date of grant and will provide value to the officers only when the price of the
Company's Common Stock increases over the exercise price.
The Committee granted performance units pursuant to the Performance Plan to
executive officers at the beginning of fiscal 1996 covering a three-year
performance period. The performance units will be payable in stock of the
Company at the end of the three-year performance cycle, but only if the Company
achieves targeted levels of revenue growth and operating margin. In addition,
the target number of shares that will be payable is modified depending upon the
Company's relative stock price performance to the
16
<PAGE>
H&Q Technology Index for the three-year performance period. The Committee
reduced the size of annual option grants in fiscal 1996 since performance units
were also granted.
CHIEF EXECUTIVE OFFICER COMPENSATION
The Committee established the Chief Executive Officer's salary and target
bonus levels at the beginning of fiscal 1996. Consistent with the analysis
described above, the Committee increased Dr. Warnock's base salary and
maintained his target bonus percentage. For the first quarter, the Committee
approved 100% payment of Dr. Warnock's target bonus; for the second quarter,
62%; for the third quarter, 68%; and for the fourth quarter, 21% of target was
paid.
For Dr. Warnock's long-term compensation, the Committee granted stock
options under the 1994 Stock Option Plan for 27,800 shares of Common Stock in
consideration of his individual performance in 1996 and expected performance in
1997. These options were not related to Company performance in 1996. Based on
Dr. Warnock's senior position, a hypothetical return assuming a specific
increased market value in the Company's Common Stock, and the number of shares
which continue to be subject to vesting under outstanding options, the Committee
determined that a grant of 27,800 shares subject to options was appropriate.
In addition, the Committee granted 11,500 performance units covering a
three-year performance period beginning in fiscal 1996. The performance units
will be payable in stock of the Company at the end of the three-year performance
cycle, but only if the Company achieves targeted levels of revenue growth and
operating margin. In addition, the target number of shares that will be payable
is modified depending upon the Company's relative stock price performance to the
H&Q Technology Index for the three-year performance period. The number of
performance units awarded was determined by the Committee based on Dr. Warnock's
senior position and a hypothetical return based on the closing market price for
the Company's Common Stock on the date of grant.
EXECUTIVE COMPENSATION COMMITTEE
William R. Hambrecht
Delbert W. Yocam
Robert Sedgewick
17
<PAGE>
DIRECTOR COMPENSATION
Directors who are not employees of the Company receive annual retainers of
$17,500, meeting fees of $1,000 for each Board of Directors and committee
meeting attended (other than telephonic meetings), and reimbursement for
reasonable travel expenses. In addition, each person who is a non-employee
director is automatically granted on the date following the annual meeting of
shareholders of the Company a restricted option to purchase 10,000 shares of the
Company's Common Stock under the Company's 1996 Outside Directors Stock Option
Plan ("Outside Directors Plan") at a price per share equal to the closing price
of the Company's Common Stock on that date. New non-employee directors joining
the Board receive an option to purchase 15,000 shares of the Company's Common
Stock under the Outside Directors Plan. However, the Outside Directors Plan also
provides that, pursuant to Rule 16b-3 of the 34 Act , the Board may exercise its
discretion with respect to the number of shares to be granted under any initial
option or under the annual option.
Each option has a term of ten years and a vesting schedule of (i) 25% at the
end of twelve months from the date of grant; (ii) 25% at the end of twenty-four
months from the date of grant; and (iii) the remaining 50% at the end of
thirty-six months from the date of grant. The options are immediately
exercisable subject to the Company's repurchase at cost of the unvested portion
of such stock. Options cease to be exercisable 30 days after termination of
director status, unless such an exercise would subject the resigning director to
a forfeiture of profits under Section 16(b) of the 34 Act. In such an event, the
timeframe for exercising vested options would be extended until the earlier of
(i) the 10th day following the date on which the resigning director would no
longer be subject to a forfeiture of profits under Section 16(b), or (ii) the
190th day after termination of services as director. In the event of a change of
control, any unexercisable portion of an option shall be fully exercisable prior
to the transaction resulting in a change of control. The option will terminate
to the extent it is not exercised effective as of the date of such a
transaction.
18
<PAGE>
PERFORMANCE GRAPH
FIVE-YEAR SHAREHOLDER RETURN COMPARISON
In accordance with SEC rules, the following table shows a line-graph
presentation comparing cumulative, five-year shareholder returns on an indexed
basis with a broad equity market index and either a nationally recognized
industry standard or an index of peer companies selected by the Company. The
Company has selected the Standard & Poor ("S&P 500") Index for the broad equity
index and the H&Q Technology Index as an industry standard for the five
fiscal-year period commencing December 1, 1991 and ending November 29, 1996. The
stock price information shown on the graph below is not necessarily indicative
of future price performance.
Although including a stock performance graph in this proxy statement may
suggest that executive compensation should be based on stock performance alone,
the Executive Compensation Committee considers many factors in determining
compensation. These factors include the Company's operating results, overall
profitability, new product development, increases in market share and growth in
shareholders' equity. See "Report of the Executive Compensation Committee."
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
1991 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C>
Adobe Systems 100.00 69.42 98.84 137.68 287.55 170.93
H & Q Technology Index 100.00 125.66 139.18 161.72 256.08 304.64
S & P 500 100.00 118.47 130.44 131.80 180.54 230.87
</TABLE>
- ------------------------
* Assumes $100 invested on December 1, 1991 in the Company's Common Stock, the
S&P 500 Index and the H&Q Technology Index, with reinvestment of dividends.
** For each reported year, the Company's reported dates are the last trading
dates of its fiscal year ending in November, and the S&P 500 and H&Q
Technology index dates are the last trading date in November.
19
<PAGE>
PROPOSAL TWO
APPROVAL OF REINCORPORATION IN THE
STATE OF DELAWARE
AND RELATED CHANGES TO THE RIGHTS OF SHAREHOLDERS
GENERAL
The Board of Directors has unanimously approved a proposal to change the
Company's state of incorporation from California to Delaware. The Board of
Directors believes the change in domicile to be in the best interests of the
Company and its shareholders for several reasons. Principally, the Board of
Directors believes that reincorporation will enhance the Company's ability to
attract and retain qualified members of the Company's Board of Directors as well
as encourage directors to continue to make independent decisions in good faith
on behalf of the Company. To date, the Company has not experienced difficulty in
retaining directors. However, although California Proposition 211, which would
have severely limited the ability of companies to indemnify directors and
officers, was not enacted in November 1996, it seems likely that initiatives and
legislation containing similar provisions will be proposed in California again
in the near future. As a result, the Company believes that the more favorable
corporate environment afforded by Delaware will enable it to compete more
effectively with other public companies, most of which are incorporated in
Delaware, to attract new directors and officers and to retain its current
directors and officers.
Reincorporation in Delaware will allow the Company the increased flexibility
and predictability afforded by Delaware law. Concurrent with the
reincorporation, the Company proposes to include certain measures designed to
protect shareholder interests in the event of hostile takeover attempts against
the Company. Most of these measures are already in place under the Company's
current California documents. The Board believes that these measures will enable
the Board to consider fully any proposed takeover attempt and to negotiate terms
that maximize the benefit to the Company and its shareholders.
In recent years, a number of major public companies have obtained the
approval of their shareholders to reincorporate in Delaware. For the reasons
explained below, the Company believes it is beneficial and important that the
Company likewise avail itself of Delaware law.
For many years Delaware has followed a policy of encouraging incorporation
in that state. Consequently, Delaware has adopted comprehensive corporate laws
which are revised regularly to meet changing business circumstances. The
Delaware Legislature is particularly sensitive to issues regarding corporate law
and is especially responsive to developments in modern corporate law. The
Delaware courts have developed considerable expertise in dealing with corporate
issues as well as a substantial body of case law construing Delaware's corporate
law. As a result of these factors, it is anticipated that Delaware law will
provide greater predictability in the Company's legal affairs than is presently
available under California law.
In 1986, Delaware amended its corporate law to allow corporations to limit
the personal monetary liability of its directors for their conduct as directors
under certain circumstances. It should be noted that Delaware law does not
permit a Delaware corporation to limit or eliminate the liability of its
directors for intentional misconduct, bad faith conduct or any transaction from
which the director derives an improper personal benefit or for violations of
federal laws such as the federal securities laws. In 1987, California amended
its corporate law in a manner similar to Delaware to permit a California
corporation to limit the personal monetary liability of its directors for their
conduct as directors under certain circumstances. The Company adopted articles
and bylaws and entered into indemnification agreements to take advantage of
these changes in California law. Nonetheless, the Board of Directors believes
that the protection from liability for directors is somewhat greater under the
Delaware law than under the California law and therefore that the Company's
objectives in adopting this type of provision can be better achieved by
reincorporation in Delaware. The directors have elected to adopt such a
provision in the Delaware certificate and bylaws. The Board believes that
Delaware incorporation will enhance the Company's ability
20
<PAGE>
to recruit and retain directors in the future, however, the shareholders should
be aware that such a provision inures to the benefit of the directors, and the
interest of the Board in recommending the reincorporation may therefore be in
conflict with the interests of the shareholders. See "Indemnification and
Limitation of Liability" for a more complete discussion of these issues.
The interests of the Board of Directors of the Company, management and
affiliated shareholders in voting on the reincorporation proposal may not be the
same as those of unaffiliated shareholders. Delaware law does not afford
minority shareholders some of the rights and protections available under
California law. Reincorporation of the Company in Delaware may make it more
difficult for minority shareholders to elect directors and influence Company
policies. A discussion of the principal differences between California and
Delaware law as they affect shareholders begins on page of this Proxy
Statement.
In addition, although the reincorporation proposal contains only a limited
number of changes to the Company's charter and Bylaws, portions of the
reincorporation proposal may have the effect of deterring hostile takeover
attempts. A hostile takeover attempt may have a positive or a negative effect on
the Company and its shareholders, depending on the circumstances surrounding a
particular takeover attempt. Takeover attempts that have not been negotiated or
approved by the board of directors of a corporation can seriously disrupt the
business and management of a corporation and generally present to the
shareholders the risk of terms which may be less than favorable to all of the
shareholders than would be available in a board-approved transaction.
Board-approved transactions may be carefully planned and undertaken at an
opportune time in order to obtain maximum value for the corporation and all of
its shareholders with due consideration to matters such as the recognition or
postponement of gain or loss for tax purposes, the management and business of
the acquiring corporation and maximum strategic deployment of corporate assets.
The Board of Directors recognizes that hostile takeover attempts do not
always have the unfavorable consequences or effects described above and may
frequently be beneficial to the shareholders, providing all of the shareholders
with considerable value for their shares. However, the Board of Directors
believes that the potential disadvantages of unapproved takeover attempts are
sufficiently great such that prudent steps to reduce the likelihood of such
takeover attempts are in the best interests of the Company and its shareholders.
Accordingly, the reincorporation plan includes certain proposals that may have
the effect of discouraging or deterring hostile takeover attempts.
Notwithstanding the belief of the Board as to the benefits to shareholders
of the changes, shareholders should recognize that one of the effects of such
changes may be to discourage a future attempt to acquire control of the Company
which is not presented to and approved by the Board of Directors, but which a
substantial number and perhaps even a majority of the Company's shareholders
might believe to be in their best interests or in which shareholders might
receive a substantial premium for their shares over the current market price. As
a result, shareholders who might desire to participate in such a transaction may
not have an opportunity to do so.
The Company's current Amended and Restated Articles of Incorporation, as
amended (the "California Articles") and Bylaws (the "California Bylaws") already
include certain provisions available to certain public companies under
California law that deter hostile takeover attempts, such as a classified board
of directors, elimination of cumulative voting, and an advance notice
requirement for shareholder proposals. These provisions will also be included in
the Delaware certificate and bylaws following the reincorporation. In addition,
the Delaware certificate and bylaws will contain provisions eliminating action
by written consent of shareholders and requiring vacancies on the board
resulting from an increase in number of directors to be filled by the majority
vote of the directors.
In considering the proposals, shareholders should be aware that the overall
effect of certain of the proposed provisions is to make it more difficult for
holders of a majority of the outstanding shares of Common Stock to change the
composition of the Board of Directors and to remove existing management
21
<PAGE>
in circumstances where a majority of the shareholders may be dissatisfied with
the performance of the incumbent directors or otherwise desire to make changes.
These provisions are balanced by the ability of the holders of a majority of the
outstanding voting stock to remove directors with or without cause and to amend
the Delaware certificate and the Delaware bylaws.
The provisions in the Company's new charter documents could make a proxy
contest a less effective means of removing or replacing existing directors or
could make it more difficult to make a change in control of the Company which is
opposed by the Board of Directors. This strengthened tenure and authority of the
Board of Directors could enable the Board of Directors to resist change and
otherwise thwart the desires of a majority of the shareholders. Because this
provision may have the effect of continuing the tenure of the current Board of
Directors, the Board has recognized that the individual directors have a
personal interest in this provision that may differ from those of the
shareholders. However, the Board believes that these provisions' primary purpose
is to ensure that the Board will have sufficient time to consider fully any
proposed takeover attempt in light of the short and long-term benefits and other
opportunities available to the Company and, to the extent the Board determines
to proceed with the takeover, to effectively negotiate terms that would maximize
the benefits to the Company and its shareholders.
The Board of Directors has considered the potential disadvantages and
believes that the potential benefits of the provisions included in the proposed
charter documents outweigh the possible disadvantages. In particular, the Board
believes that the benefits associated with attracting and retaining skilled and
experienced outside directors and with enabling the Board to fully consider and
negotiate proposed takeover attempts, as well as the greater sophistication,
breadth and certainty of Delaware law, make the reincorporation proposed
beneficial to the Company, its management and its shareholders.
The proposal to include these anti-takeover provisions in the proposed
reincorporation does not reflect knowledge on the part of the Board of Directors
or management of any proposed takeover or other attempt to acquire control of
the Company. Management may in the future propose other measures designed to
discourage takeovers apart from those proposed in this Proxy Statement, if
warranted from time to time in the judgment of the Board of Directors.
The proposed reincorporation would be accomplished by merging the Company
into a newly formed Delaware corporation which, just before the merger, will be
a wholly owned subsidiary of the Company (the "Delaware Company"), pursuant to
an Agreement and Plan of Merger (the "Merger Agreement"), in substantially the
form attached as Exhibit A to this Proxy Statement. Upon the effective date of
the merger, the Delaware Company's name will be Adobe Systems Incorporated. The
reincorporation will not result in any change in the Company's business, assets
or liabilities, will not cause its corporate headquarters to be moved and will
not result in any relocation of management or other employees.
On the effective date of the proposed reincorporation, each outstanding
share of Common Stock of the Company will automatically convert into one share
of Common Stock of the Delaware Company, and shareholders of the Company will
automatically become shareholders of the Delaware Company. On the effective date
of the reincorporation, the number of outstanding shares of Common Stock of the
Delaware Company will be equal to the number of shares of Common Stock of the
Company outstanding immediately prior to the effective date of the
reincorporation. In addition, each outstanding option or right to acquire shares
of Common Stock of the Company will be converted into an option or right to
acquire an equal number of shares of Common Stock of the Delaware Company, under
the same terms and conditions as the original options or rights. All of the
Company's employee benefit plans, including the Stock Option Plan, Restricted
Stock Option Plan, Outside Directors Plan, Performance and Restricted Stock
Option Plan, and Employee Stock Purchase Plan will be adopted and continued by
the Delaware Company following the reincorporation. Shareholders should
recognize that approval of the proposed reincorporation will constitute approval
of the adoption and assumption of those plans by the Delaware Company.
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<PAGE>
No action need be taken by shareholders to exchange their stock certificates
now; this will be accomplished at the time of the next transfer by the
shareholder. Certificates for shares in the Company will automatically represent
an equal number of shares in the Delaware Company upon completion of the merger.
The Company intends to apply for the listing and registration of the Common
Stock of the Delaware Company on the Nasdaq National Market.
Under the California Bylaws, the affirmative vote of a majority of the
outstanding shares of the Company's voting stock is required for approval of the
reincorporation. If approved by the shareholders, it is anticipated that the
reincorporation would be completed as soon thereafter as practicable. The
reincorporation may be abandoned or the Merger Agreement may be amended (with
certain exceptions), either before or after shareholder approval has been
obtained, if in the opinion of the Board of Directors, circumstances arise that
make such action advisable; provided that any amendment that would effect a
material change from the charter provisions discussed in this Proxy Statement
would require further approval by the holders of a majority of the outstanding
voting shares.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
SIGNIFICANT CHANGES CAUSED BY REINCORPORATION
In general, the Company's corporate affairs are governed at present by the
corporate law of California, the Company's state of incorporation, and by the
California Articles and the California Bylaws, which have been adopted pursuant
to California law. The California Articles and California Bylaws are available
for inspection during business hours at the principal executive offices of the
Company. In addition, copies may be obtained by writing to the Company at Adobe
Systems Incorporated, 345 Park Avenue, San Jose, California 95110-1704.
Attention: Corporate Secretary.
If the reincorporation proposal is adopted, the Company will merge into, and
its business will be continued by, the Delaware Company. Following the merger,
issues of corporate governance and control would be controlled by Delaware,
rather than California law (however, see "Application of California Law, After
Reincorporation"). The California Articles and California Bylaws, will, in
effect, be replaced by the Certificate of Incorporation of the Delaware Company
(the "Delaware Certificate") and the bylaws of the Delaware Company (the
"Delaware Bylaws"), copies of which are attached as Exhibits B and C to this
Proxy. Accordingly, the differences among these documents and between Delaware
and California law are relevant to your decision whether to approve the
reincorporation proposal.
A number of differences between California and Delaware law and among the
various charter documents are summarized in the chart below. Shareholders are
requested to read the following chart in conjunction with the discussion
following the chart and the Merger Agreement, the Delaware Certificate and the
Delaware Bylaws attached to this Proxy Statement. For each item summarized in
the chart, there is a reference to a page of this Proxy Statement on which a
more detailed discussion appears.
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<PAGE>
<TABLE>
<CAPTION>
ISSUE DELAWARE CALIFORNIA
- ------------------------------------ ------------------------------------ ------------------------------------
<S> <C> <C>
Limitation of Liability of Directors Delaware law permits the limitation California law contains additional
and Officers of liability of directors and exceptions to the liability
(see page ). officers to the Company except in limitations of directors and
connection with (i) breaches of the officers. See "Indemnification and
duty of loyalty; (ii) acts or Limitations of Liability."
omissions not in good faith or
involving intentional misconduct or
knowing violations of law; (iii) the
payment of unlawful dividends or
unlawful stock repurchases or
redemptions; or (iv) transactions in
which a director received an
improper personal benefit.
Indemnification of Directors and Delaware law permits somewhat California law permits
Officers (see page ). broader indemnification and could indemnification under certain
result in indemnification of circumstances, subject to certain
directors and officers in limitations. See "Indemnification
circumstances where California law and Limitation of Liability."
would not permit indemnification.
See "Indemnification and Limitation
of Liability."
Cumulative Voting for Directors (see Cumulative voting is not available California law permits Nasdaq
page ). under Delaware law because it is not National Market corporations with
provided for in the Delaware over 800 equity security holders to
Certificate. eliminate cumulative voting; the
California Articles have eliminated
cumulative voting.
Number of Directors Determined solely by resolution of Determined by Board within range set
(see page ). the Board. in the California Bylaws. Changes in
the authorized range must be
approved by the shareholders.
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
ISSUE DELAWARE CALIFORNIA
- ------------------------------------ ------------------------------------ ------------------------------------
<S> <C> <C>
Filling Board Vacancies Delaware law provides for the California law permits (a) any
(see page ). Delaware Court of Chancery to order holder of 5% or more of the
an election to fill vacancies or corporation's Voting Stock or (b)
newly created directorships upon the the superior court of the
application of the holders of 10% of appropriate county to call a special
the outstanding shares having a meeting of shareholders to elect the
right to vote for such directors, if entire board if, after filling any
at the time of filling such vacancy, the directors then in
vacancies or directorships, the office who have been elected by the
directors then in office constitute shareholders constitute less than a
less than a majority of the entire majority of the directors then in
board as constituted immediately office.
prior to any increase.
Classified Board Delaware law permits the adoption of California law permits the adoption
(see page ). a classified board with staggered of a classified board with staggered
terms. The Delaware Certificate and terms. The California Bylaws provide
the Delaware Bylaws provide for a for a classified Board of Directors
classified Board of Directors with with two classes of directors.
two classes of directors.
Removal of Directors by Shareholders Delaware law permits the removal of California law permits the removal
(see page ). a director only with cause, unless of a director with or without cause
otherwise specified in the by affirmative vote of a majority of
Certificate of Incorporation. The the outstanding shares.
Delaware Certificate and Bylaws
expressly permit removal with for
without cause by affirmative vote of
a majority of the outstanding shares
of voting stock entitled to vote at
an election of directors.
Action by Written Consent of Actions by written consent not Actions by written consent permitted
Shareholders in Lieu of a permitted by Delaware Certificate. by California Bylaws.
Shareholder Vote at Shareholder All shareholder action must take
Meeting place by a shareholder vote at a
(see page ). meeting of shareholders.
Tender Offer Statute; Fair Price Restricts hostile two-step No comparable statute; the
Provision (see page ). takeovers; the Delaware Certificate California Articles do not contain a
does not contain a fair price fair price provision.
provision.
Amendment of Certificate Amendments of the Delaware Amendments of the California
(see page ). Certificate require approval by a Articles require approval by a
majority of the voting stock of the majority of the voting stock of the
Delaware Company. California Company.
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
ISSUE DELAWARE CALIFORNIA
- ------------------------------------ ------------------------------------ ------------------------------------
<S> <C> <C>
Amendment of Bylaws By the Board or the holders of a By the Board or the holders of a
(see page ). majority of the outstanding voting majority of the outstanding voting
shares. shares, except that the Board may
not amend the range of authorized
directors.
Loans to Officers and Directors (see Board may authorize if expected to Loans must be approved or ratified
page ). benefit the Company by a majority of the outstanding
shares.
Class Vote for Reorganization (see Generally not required unless a A reorganization transaction must
page ). reorganization adversely affects a generally be approved by a majority
specific class of shares. vote of each class of shares
outstanding.
Right of Shareholders to Inspect Permitted for any purpose reasonably Permitted for any purposes
Shareholder List related to a shareholder's interest reasonably related to a
(see page ). as a shareholder. shareholder's interest as a
shareholder. Also, an absolute right
to 5% shareholders and certain 1%
shareholders.
Appraisal Rights Generally available if shareholders Available in certain circumstances
(see page ). receive cash in exchange for the if the holders of 5% of the class
shares and in certain other assert such rights.
circumstances.
Dividends (see page ). Paid from surplus (including paid-in Generally limited to the greater of
and earned surplus or net profits). (i) retained earnings or (ii) an
amount which would leave the Company
with assets of 125% of liabilities
and current assets of 100% of
current liabilities.
Other Responsive legislature and larger
body of corporate case law in
Delaware provides more predictable
corporate legal environment in
Delaware.
</TABLE>
INDEMNIFICATION AND LIMITATION OF LIABILITY
LIMITATIONS ON DIRECTOR LIABILITY. Both California and Delaware permit a
corporation to limit the personal liability of a director to the corporation or
its shareholders for monetary damages for breach of certain duties as a
director. The California and Delaware laws adopt a self-governance approach by
enabling a corporation to take advantage of these provisions only if an
amendment to the charter limiting such liability is approved by a majority of
the outstanding shares or such language is included in the original charter.
The California Articles eliminate the liability of directors to the
corporation to the fullest extent permissible under California law. California
law does not permit the elimination of monetary liability where such liability
is based on: (a) intentional misconduct or knowing and culpable violation of
law; (b) acts or omissions that a director believes to be contrary to the best
interests of the corporation or its
26
<PAGE>
shareholders, or that involve the absence of good faith on the part of the
director; (c) receipt of an improper personal benefit: (d) acts or omissions
that show reckless disregard for the director's duty to the corporation or its
shareholders, where the director in the ordinary course of performing a
director's duties should be aware of a risk of serious injury to the corporation
or its shareholders: (e) acts or omissions that constitute an unexcused pattern
of inattention that amounts to an abdication of the director's duty to the
corporation and its shareholders; (f) interested transactions between the
corporation and a director in which a director has a material financial
interest: or (g) liability for improper distributions, loans or guarantees.
The Delaware Certificate also eliminates the liability of directors to the
fullest extent permissible under Delaware law, as such law exists currently or
as it may be amended in the future. Under Delaware law, such provision may not
eliminate or limit director monetary liability for (a) breaches of the
director's duty of loyalty to the corporation or its shareholders: (b) acts or
omissions not in good faith or involving intentional misconduct or knowing
violations of law: (c) the payment of unlawful dividends or unlawful stock
repurchases or redemptions: or (d) transactions in which the director received
an improper personal benefit. Such limitation of liability provision also may
not limit director's liability for violation of, or otherwise relieve the
Delaware Company or its directors from the necessity of complying with, federal
or state securities laws or affect the availability of non-monetary remedies
such as injunctive relief or rescission.
Shareholders should recognize that the proposed reincorporation and
associated measures are designed to shield a director from suits by the Delaware
Company or its stockholders for monetary, damages for negligence or gross
negligence by the director in failing to satisfy the director's duty of care. As
a result, an action for monetary damages against a director predicated on a
breach of the duty of care would be available only if the Delaware Company or
its shareholders were able to establish that the director was disloyal in his
conduct, failed to act in good faith, engaged in intentional misconduct,
knowingly violated the law, derived an improper personal benefit or approved an
illegal dividend or stock repurchase. Consequently, the effect of such measures
may be to limit or eliminate an effective remedy which might otherwise be
available to a shareholder who is dissatisfied with Board of Directors'
decisions. Although an aggrieved shareholder could sue to enjoin or rescind an
action taken or proposed by the Board of Directors, such remedies may not be
timely or adequate to prevent or redress injury in all cases.
The Company believes that directors are motivated to exercise due care in
managing the Company's affairs primarily by concern for the best interests of
the Company and its shareholders rather than by the fear of potential monetary
damage awards. As a result, the Company believes that the reincorporation
proposal should sustain the Board of Directors' continued high standard of
corporate governance without any decrease in accountability by directors to the
Company and its shareholders.
INDEMNIFICATION OF OFFICERS AND DIRECTORS. The California Articles and
Bylaws and the Delaware Certificate and Bylaws relating to indemnification
similarly require that the California Company and the Delaware Company,
respectively, indemnify its directors and its executive officers to the fullest
extent permitted by the respective state law, provided, that the Company may
modify the extent of such indemnification by individual contracts with its
directors and executive officers, and, provided, further, that the Company will
not be required to indemnify any director or executive officer in connection
with a proceeding initiated by such person, with certain exceptions. Such
charter documents and Bylaws permit the California Company and the Delaware
Company, respectively, to provide indemnification to its other officers,
employees and agents as set forth in the respective state law. Such
indemnification is intended to provide the full flexibility available under such
laws. The Delaware Bylaws contain provisions similar to the California Bylaws
with respect to advances in that the Company is required to advance expenses
related to any proceeding contingent on such persons' commitment to repay any
advances unless it is determined ultimately that such persons are entitled to be
indemnified.
27
<PAGE>
California and Delaware have similar laws respecting indemnification by a
corporation of its officers, directors, employees and other agents. There are
nonetheless certain differences between the laws of the two states.
California law permits indemnification of expenses incurred in derivative or
third-party actions, except that with respect to derivative actions (a) no
indemnification may be made without court approval when a person is adjudged
liable to the corporation in the performance of that person's duty to the
corporation and its shareholders, unless a court determines such person is
entitled to indemnity for expenses, and then such indemnification may be made
only to the extent that such court shall determine and (b) no indemnification
may be made under California law, without court approval in respect of amounts
paid or expenses incurred in settling or otherwise disposing of a threatened or
pending action or amounts incurred in defending a pending action which is
settled or otherwise disposed of without court approval. Delaware allows
indemnification of such expenses without court approval.
Indemnification is permitted by both California and Delaware law providing
the requisite standard of conduct is met, as determined by a majority vote of a
disinterested quorum of the directors, independent legal counsel (if a quorum of
independent directors is not obtainable), a majority vote of a quorum of the
shareholders (excluding shares owned by the indemnified party) or the court
handling the action.
California law requires indemnification when the individual has successfully
defended the action on the merits, as opposed to Delaware law which requires
indemnification relating to a successful defense on the merits or otherwise.
Delaware law generally permits indemnification of expenses incurred in the
defense or settlement of a derivative or third-party action, provided there is a
determination by a disinterested quorum of the directors, by independent legal
counsel or by a majority vote of a quorum of the shareholders that the person
seeking indemnification acted in good faith and in a manner reasonably believed
to be in or (in contrast to California law) not opposed to the best interests of
the corporation. Without court approval, however, no indemnification may be made
in respect of any derivative action in which such person is adjudged liable for
negligence or misconduct in the performance of his or her duty to the
corporation. Delaware law requires indemnification of expenses when the
individual being indemnified has successfully defended the action on the merits
or otherwise.
California corporations may include in their articles of incorporation a
provision which extends the scope of indemnification through agreements, bylaws
or other corporate action beyond that specifically authorized by statute. The
California Articles include such a provision. In addition, the Company,
following shareholder approval, entered into indemnification agreements with its
officers and directors providing for indemnification beyond that expressly
mandated by the California Corporations Code.
A provision of Delaware law states that the indemnification provided by
statute shall not be deemed exclusive of any other rights under any bylaw,
agreement, vote of shareholders or disinterested directors or otherwise. Under
Delaware law, rights to indemnification and expenses are non-exclusive, in that
they need not be limited to those expressly provided by statute. California law
is similar in that it permits non-exclusive indemnification if authorized in the
Company's charter. The California Articles contain such an enabling provision.
Under Delaware law and the Delaware Bylaws, the Delaware Company is permitted to
indemnify its directors, officers, employees and other agents, within the limits
established by law and public policy, pursuant to an express contract, bylaw
provision, shareholder vote or otherwise, any or all of which could provide
indemnification rights broader than those currently available under the
California Bylaws or the California indemnification statutes. The California
Company has entered into indemnification agreements with its officers and
directors. The Delaware Company plans to enter into similar agreements with its
officers and directors upon completion of the proposed reincorporation. The new
indemnification agreements contain certain additional limitations on
indemnification for expenses in suits against the Company not contained in the
indemnification agreements currently in effect. If the proposed reincorporation
is approved, the indemnification agreements will be approved by the Company's
shareholders. Thus a
28
<PAGE>
vote in favor of the proposed reincorporation will also approve the
indemnification agreements in substantially the form attached as Exhibit D to
this Proxy Statement. Although the law in this regard is not certain,
shareholders who vote in favor of the reincorporation proposal, and thereby
approve assumption of the indemnity contracts, may be prevented from challenging
the validity of the indemnity contracts in a subsequent court proceeding.
The indemnification and limitation of liability provisions of California
law, and not Delaware law, will apply to actions of the directors and officers
of the California Company made prior to the proposed reincorporation.
Nevertheless, the Board has recognized in considering this reincorporation
proposal that the individual directors have a personal interest in obtaining the
application of Delaware law to such indemnity and limitation of liability issues
affecting them and the Company in the event they arise from a potential future
case, and that the application of Delaware law, to the extent that any director
or officer is actually indemnified in circumstances where indemnification would
not be available under California law, would result in expense to the Company
which the Company would not incur if the Company were not reincorporated. The
Board believes, however, that the overall effect of reincorporation is to
provide a corporate legal environment that enhances the Company's ability to
attract and retain high quality outside directors and thus benefits the
interests of the Company and its shareholders.
There is no pending or, to the Company's knowledge, threatened litigation to
which any of its directors is a party in which the rights of the Company or its
shareholders would be affected if the Company currently were subject to the
provisions of Delaware law rather than California law.
California and Delaware corporate law, the bylaws of both the Company and of
the Delaware Company, as well as any indemnity agreements, may permit
indemnification for liabilities arising under the Securities Act of 1933, as
amended (the "Securities Act") or the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). The Board of Directors has been advised that, in
the opinion of the SEC, indemnification for liabilities arising under the
Securities Act is contrary to public policy and is therefore unenforceable,
absent a decision to the contrary by a court of appropriate jurisdiction.
CUMULATIVE VOTING FOR DIRECTORS
Cumulative voting permits the holder of each share of stock entitled to vote
in the election of directors to cast that number of votes which equal the number
of directors to be elected. The holder may allocate all votes represented by a
share to a single candidate or may allocate those votes among as many candidates
as he chooses. Thus, a shareholder with a significant minority percentage of the
outstanding shares may be able to elect one or more directors if voting is
cumulative. In contrast, the holder or holders of a majority of the shares
entitled to vote in an election of directors are able to elect all the directors
in the absence of cumulative voting.
Under California law, cumulative voting in the election of directors is
mandatory upon notice given by a shareholder at a shareholders' meeting at which
directors are to be elected. In order to cumulate votes a shareholder must give
notice at the meeting, prior to the voting, of the shareholder's intention to
vote cumulatively. If any one shareholder gives such a notice, all shareholders
may cumulate their votes. However, California law permits a company, by amending
its articles of incorporation or bylaws, to eliminate cumulative voting when the
Company's shares are listed on a national stock exchange or traded on the Nasdaq
National Market and are held by at least 800 equity security holders. On the
basis of this exception, cumulative voting was eliminated under the California
Bylaws.
Cumulative voting is not available under Delaware law unless so provided in
the corporation's certificate of incorporation. The Delaware Certificate does
not provide for cumulative voting.
The elimination of cumulative voting could deter investors from acquiring a
minority block in the Company, with a view toward obtaining a board seat and
influencing Company policy. It is also conceivable
29
<PAGE>
that the absence of cumulative voting might deter efforts to seek control of the
Company on a basis which some shareholders might deem favorable.
OTHER MATTERS RELATING TO DIRECTORS
NUMBER OF DIRECTORS. California law allows the number of persons
constituting the board of directors of a corporation to be fixed by the bylaws
or the articles of incorporation, or permits the bylaws to provide that the
number of directors may vary within a specified range. California law further
provides that, in the case of a variable board, the maximum number of directors
may not exceed two times the minimum number minus one. The California Bylaws
provide for a board of directors that may vary between six and eight members,
inclusive, and the exact number of directors has been fixed at seven. California
law also requires that any change in a fixed number of directors and any change
in the range of a variable board of directors specified in the articles and
bylaws must be approved by a majority in interest of the outstanding shares
entitled to vote (or such greater proportion of the outstanding shares as may be
required by the articles of incorporation), provided that a change reducing the
minimum number of directors to less than five cannot be adopted if votes cast
against its adoption are equal to more than 16 2/3% of the outstanding shares
entitled to vote. The California Bylaws require the vote of a majority in
interest of the voting power of all of the then outstanding shares to change the
range of the Company's variable Board of Directors.
Delaware law permits a board of directors to change the authorized number of
directors by amendment to the bylaws unless the number of directors is fixed in
the certificate of incorporation or the manner of fixing the number of directors
is set forth in the certificate of incorporation, in which case the number of
directors may be changed only by amendment of the certificate of incorporation
or consistent with the manner specified in the certificate of incorporation, as
the case may be. The Delaware Certificate provides that the exact number of
directors shall be fixed from time to time exclusively by the Board of Directors
by resolution.
ELECTIONS; CLASSIFIED BOARD OF DIRECTORS. California law generally requires
that directors be elected annually but does permit a "classified" Board of
Directors if (i) a corporation is listed on a national stock exchange or (ii)
the corporation's shares are traded in the Nasdaq National Market and are held
by at least 800 shareholders. California law also allows the election of one or
more directors by the holders of a particular class or series of shares. The
California Articles currently provide for a classified board of directors (the
"Classified Board Provision"). The directors of the California Company, who will
also be the directors of the Delaware Company if the reincorporation proposal is
approved, are set forth in Proposal One. Classification of the Board of
Directors might make it more difficult for a person acquiring shares to take
immediate control of the Board of Directors.
Delaware law permits, but does not require, the adoption of a classified
board of directors with staggered terms. A maximum of three classes of directors
is permitted by Delaware law, with members of one class to be elected each year
for a maximum term of three years. The Delaware Certificate and the Delaware
Bylaws contain a Classified Board Provision.
Under the Classified Board Provision, the Board of Directors has been
divided into two classes, designated Class I and Class II. As a result, only one
class of directors will be elected at each annual meeting of shareholders, with
the remaining class continuing its respective two-year term until the successors
are duly elected and qualified or until earlier resignation, removal from office
or death.
The Company believes that classification of directors provides the Board of
Directors with greater continuity and experience, since normally at least one
member of the Board of Directors would be in such member's second year of
service.
As is the case with the California Articles, with the Classified Board
Provision contained in the Delaware Certificate, unless directors are removed,
it will require at least two annual meetings of shareholders for a majority of
shareholders to make a change in control of the Board of Directors, since
30
<PAGE>
only a portion of the directors will be elected at each meeting. A significant
effect of a classified Board of Directors may be to deter hostile takeover
attempts because an acquirer would experience delay in replacing a majority of
the directors. However, a classified Board of Directors also makes it more
difficult for shareholders to effect a change in control of the Board of
Directors, even if such a change in control is sought due to dissatisfaction
with the performance of the Company's directors.
The existence of a classified Board may deter so-called "creeping
acquisitions" in which a person or group seeks to acquire: (i) a controlling
position without paying a normal control premium to the selling shareholders;
(ii) a position sufficient to exert control over the Company through a proxy
contest or otherwise; or (iii) a block of stock with a view toward attempting to
promote a sale or liquidation or a repurchase by the Company of the block at a
premium, or an exchange of the block for assets of the Company. Faced with a
classified Board of Directors, such a person or group would have to assess
carefully its ability to control or influence the Company. Furthermore, the
ability of the incumbent Board of Directors to respond appropriately to a
creeping acquisition will be strengthened. If free of the necessity to act in
response to an immediately threatened change in control, the Board of Directors
can act in a more careful and deliberative manner to make and implement
appropriate business judgments in response to a creeping acquisition. These
effects of a Classified Board Provision are significantly limited by the ability
of holders of a majority of the outstanding voting stock to remove directors and
to amend the Delaware Certificate and the Delaware Bylaws.
REMOVAL OF DIRECTORS. Under California law, a director may be removed with
or without cause by the affirmative vote of a majority of the outstanding
shares. Under Delaware law, a director on a classified board of directors can be
removed from office during his term by shareholders only for cause unless the
certificate of incorporation provides otherwise. The Delaware Certificate, like
the California Articles, provides that the Company's directors may be removed
from office at any time with or without cause by the affirmative vote of the
holders of a majority of the voting power of the then outstanding shares of
voting stock of the Company entitled to vote in the election of directors (the
"Voting Stock").
FILLING BOARD VACANCIES. Under California law, if, after the filling of any
vacancy by the directors of a corporation, the directors then in office who have
been elected by the corporation's shareholders constitute less than a majority
of the directors then in office, then: (i) any holder of more than 5% of the
corporation's Voting Stock may call a special meeting of shareholders, or (ii)
the superior court of the appropriate county may order a special meeting of the
shareholders to elect the entire board of directors of the corporation. Delaware
law provides that if, at the time of filling any vacancy or newly created
directorship, the directors then in office constitute less than a majority of
the entire board of directors as constituted immediately prior to any increase,
the Delaware Court of Chancery may, upon application of any shareholder or
shareholders holding at least 10% of the total number of shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorships or
to replace the directors chosen by the directors then in office.
The proposed Delaware Certificate and Bylaws provide that vacancies shall,
unless the Board of Directors determines by resolution that any such vacancies
be filled by the shareholders or as otherwise provided by law, be filled only by
the affirmative vote of a majority of directors then in office, even if such
directors comprise less than a quorum of the Board of Directors.
CAPITALIZATION; BLANK CHECK PREFERRED
The Company's capital stock consists of 200,000,000 authorized shares of
Common Stock, no par value, of which shares were issued and outstanding
as of January 28, 1997, and 2,000,000 authorized shares of Preferred Stock, no
par value, none of which are outstanding as of January 28, 1997.
Upon the effectiveness of the reincorporation, the Delaware Company will
have the same number of outstanding shares of Common Stock that the Company had
outstanding immediately prior to the reincorporation.
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The capitalization of the Delaware Company is identical to the
capitalization of the Company with authorized capital stock of 200,000,000
shares of Common Stock, $.001 par value, and 2,000,000 shares of Preferred
Stock, $0.001 par value, consistent with maintaining adequate capitalization for
the current needs of the Company. The Delaware Company's authorized but unissued
shares of Preferred Stock will be available for future issuance.
Under the Delaware Certificate, as under the California Articles, the Board
of Directors has the authority to determine or alter the rights, preferences,
privileges and restrictions to be granted to or imposed upon any wholly unissued
series of Preferred Stock and to fix the number of shares constituting any such
series and to determine the designation thereof.
The Board may authorize the issuance of Preferred Stock for the purpose of
adopting shareholder rights plans and in connection with various corporate
transactions, including corporate partnering arrangements. If the
reincorporation is approved, it is not the present intention of the Board of
Directors to seek shareholder approval prior to any issuance of Preferred Stock,
except as required by law or regulation. See "Anti-Takeover Measures."
ACTIONS BY WRITTEN CONSENT OF SHAREHOLDERS
Under California and Delaware law, shareholders may execute an action by
written consent in lieu of a shareholder meeting. Both California and Delaware
law permits a corporation to eliminate such actions by written consent in its
charter. The California Articles permits shareholders to act by written consent.
The Delaware Certificate eliminates actions by written consent of shareholders.
Elimination of such shareholders written consents may lengthen the amount of
time required to take shareholder actions because certain actions by written
consent are not subject to the minimum notice requirement of a shareholders'
meeting. The elimination of shareholders written consents may deter hostile
takeover attempts because of the lengthened shareholder approval process.
Without the ability to act by written consent, a holder or group of holders
controlling a majority in interest of the Delaware Company's capital stock will
not be able to amend the Delaware Bylaws or remove directors pursuant to a
written consent. Any such holder or group of holders would have to wait until a
shareholders' meeting was held to take any such action. The Board believes this
provision, like the other provisions to be included in the Delaware Certificate
and Bylaws, will enhance the Board's opportunity to fully consider and
effectively negotiate in the context of a takeover attempt.
ADVANCE NOTICE REQUIREMENT FOR SHAREHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
There is no specific statutory requirement under either California or
Delaware law with regard to advance notice of director nominations and
shareholder proposals. Absent a bylaw restriction, director nominations and
shareholder proposals may be made without advance notice at the annual meeting.
However, federal securities laws generally provide that shareholder proposals
that the proponent wishes to include in the Company's proxy materials must be
received not less than 120 days in advance of the date of the proxy statement
released in connection with the previous year's annual meeting.
Both the California Bylaws and the Delaware Bylaws provide that in order for
director nominations or shareholder proposals to be properly brought before the
meeting, the shareholder must have delivered timely notice to the Secretary of
the corporation. To be timely, notice must be delivered not less than 120 days
prior to the anniversary of the mailing date for the previous year's annual
meeting under the California Bylaws, and not less than 60 nor more than 90 days
prior to the date of the Company's proxy statement released to stockholders in
connection with the previous year's annual meeting under the Delaware Bylaws. If
no annual meeting was held in the previous year or the date of the annual
meeting has been changed by more than 30 days from the date contemplated at the
time of the previous year's proxy statement, the California Bylaws provide that
notice must be provided a reasonable time before the solicitation is made and
the Delaware Bylaws will provide that notice must be given not more than 90 days
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nor less than 60 days prior to the annual meeting. Proper notice under the
federal securities laws for a proposal to be included in the Company's proxy
materials will constitute proper notice under the Delaware Bylaws. These notice
requirements help ensure that shareholders are aware of all proposals to be
voted on at the meeting and have the opportunity to consider each proposal in
advance of the meeting.
ANTI-TAKEOVER MEASURES
Delaware law has been widely viewed to permit a corporation greater
flexibility in governing its internal affairs and its relationships with
shareholders and other parties than do the laws of many other states, including
California. In particular, Delaware law permits a corporation to adopt a number
of measures designed to reduce a corporation's vulnerability to hostile takeover
attempts. Certain of such measures are either not currently permitted or are
more narrowly drawn under California law. Among these measures are the
elimination of the ability of the stockholders to remove directors without cause
and the elimination of the right of shareholders to call special shareholders'
meetings. The Board of Directors has not eliminated those rights of the
shareholders in the Delaware Certificate and the Delaware Bylaws as described
above. In addition, certain types of "poison pill" defenses (such as shareholder
rights plans) have been upheld by Delaware courts, while California courts have
yet to decide on the validity of such defenses, thus rendering their
effectiveness in California less certain.
As discussed herein, certain provisions of the Delaware Certificate and
Delaware Bylaws could be considered to be anti-takeover measures. The California
Company currently has a common share purchase rights plan (the "Rights Plan"),
which plan will be assumed by the Delaware Company upon completion of the Merger
if the shareholders vote to approve this Proposal Two. The Company does not have
any present intention of adopting any further anti-takeover measures, nor does
the Board of Directors have knowledge that any attempt to gain control of the
Company is being contemplated. As discussed above, numerous differences between
California and Delaware law, effective without additional action by the Delaware
Company, could have a bearing on unapproved takeover attempts. See "Common Share
Purchase Rights Plan."
One such difference is the existence of a Delaware statute regulating tender
offers, which statute is intended to limit coercive takeovers of companies
incorporated in that state. California has no comparable statute. The Delaware
law provides that a corporation may not engage in any business combination with
any interested shareholder for a period of three years following the date that
such shareholder became an interested shareholder, unless (i) prior to the date
the shareholder became an interested shareholder the Board of Directors approved
the business combination or the transaction which resulted in the shareholder
becoming an interested shareholder, or (ii) upon consummation of the transaction
which resulted in the shareholder becoming an interested shareholder, the
interested shareholder owned at least 85% of the Voting Stock, or (iii) the
business combination is approved by the Board of Directors and authorized by 66%
of the outstanding Voting Stock which is not owned by the interested
shareholder. An interested shareholder means any person that is the owner of 15%
or more of the outstanding Voting Stock; however, the statute provides for
certain exceptions to parties who otherwise would be designated interested
shareholders, including an exception for parties that held 15% or more of the
outstanding Voting Stock as of December 23, 1987. Any corporation may decide to
opt out of the statute in its original certificate of incorporation or, at any
time, by action of its shareholders. The Company has no present intention of
opting out of the statute.
There can be no assurance that the Board of Directors would not adopt any
further anti-takeover measures available under Delaware law (some of which may
not require shareholder approval). Moreover, the availability of such measures
under Delaware law, whether or not implemented, may have the effect of
discouraging a future takeover attempt which a majority of the Delaware
Company's shareholders may deem to be in their best interests or in which
shareholders may receive a premium for their shares over the then current market
price. As a result, shareholders who might desire to participate in such
transactions may not have the opportunity to do so. Shareholders should
recognize that, if adopted, the effect of such
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measures, along with the possibility of discouraging takeover attempts, may be
to limit in certain respects the rights of shareholders of the Delaware Company
compared with the rights of shareholders of the Company.
The Board of Directors recognizes that hostile takeover attempts do not
always have the unfavorable consequences or effects described above and may
frequently be beneficial to the shareholders, providing all of the shareholders
with considerable value for their shares. However, the Board of Directors
believes that the potential disadvantages of unapproved takeover attempts (such
as disruption of the Company's business and the possibility of terms which may
be less than favorable to all of the shareholders than would be available in a
board-approved transaction) are sufficiently great such that prudent steps to
reduce the likelihood of such takeover attempts and to enable the Board to fully
consider the proposed takeover attempt and actively negotiate its terms are in
the best interests of the Company and its shareholders.
In addition to the various anti-takeover measures that would be available to
the Delaware Company after the reincorporation due to the application of
Delaware law, the Delaware Company would retain the rights currently available
to the Company under California law to issue shares of its authorized but
unissued capital stock. Following the effectiveness of the proposed
reincorporation, shares of authorized and unissued Common Stock and Preferred
Stock of the Delaware Company could (within the limits imposed by applicable
law) be issued in one or more transactions, or Preferred Stock could be issued
with terms, provisions and rights which would make more difficult and,
therefore, less likely, a takeover of the Delaware Company. Any such issuance of
additional stock could have the effect of diluting the earnings per share and
book value per share of existing shares of 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.
It should be noted that the voting rights to be accorded to any unissued
series of Preferred Stock of the Delaware Company ("Delaware Preferred Stock")
remain to be fixed by the Delaware Board. Accordingly, if the Delaware Board so
authorizes, the holders of Delaware Preferred Stock may be entitled to vote
separately as a class in connection with approval of certain extraordinary
corporate transactions in circumstances where Delaware law does not ordinarily
require such a class vote, or might be given a disproportionately large number
of votes. Such Delaware Preferred Stock could also be convertible into a large
number of shares of Common Stock of the Delaware Company under certain
circumstances or have other terms which might make acquisition of a controlling
interest in the Delaware Company more difficult or more costly, including the
right to elect additional directors to the Delaware Board. Potentially, the
Delaware Preferred Stock could be used to create voting impediments or to
frustrate persons seeking to effect a merger or otherwise to gain control of the
Delaware Company. Also, the Delaware Preferred Stock could be privately placed
with purchasers who might side with the management of the Delaware Company in
opposing a hostile tender offer or other attempt to obtain control.
Future issuances of Delaware Preferred Stock as an anti-takeover device
might preclude shareholders from taking advantage of a situation which might
otherwise be favorable to their interests. In addition (subject to the
considerations referred to above as to applicable law), the Delaware Board could
authorize issuance of shares of Common Stock of the Delaware Company ("Delaware
Common Stock") or Delaware Preferred Stock to a holder who might thereby obtain
sufficient voting power to ensure that any proposal to alter, amend or repeal
provisions of the Delaware Certificate unfavorable to a suitor would not receive
the necessary vote of a majority of the Voting Stock required for certain of the
proposed amendments (as described below).
If the reincorporation is approved it is not the present intention of the
Board of Directors to seek shareholder approval prior to any issuance of the
Delaware Preferred Stock or Delaware Common Stock, except as required by law or
regulation. Frequently, opportunities arise that require prompt action, and it
is the belief of the Board of Directors that the delay necessary for shareholder
approval of a specific issuance would be a detriment to the Delaware Company and
its shareholders. The Board of Directors does not
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intend to issue any Preferred Stock except on terms which the Board of Directors
deems to be in the best interests of the Delaware Company and its then existing
shareholders.
COMMON SHARE PURCHASE RIGHTS PLAN
Terms of the Rights Plan provide for a dividend distribution of one common
share purchase right (a "Right") for each outstanding share of Common Stock of
the Company. The dividend was paid on July 24, 1990 (the "Record Date") to the
shareholders of record on that date. Each Right entitles the registered holder
to purchase from the Company one share of Common Stock, at an exercise price of
$115 per share (the "Purchase Price"), subject to adjustment, and a redemption
price of $.01 per Right. The principal terms of the Rights Plan are set forth in
the Amended and Restated Rights Agreement, dated as of July 11, 1990 amended and
restated as of April 10, 1996, between the Company and Harris Trust Company of
California, as Rights Agent (the "Rights Agreement").
Initially, the Rights are and will be evidenced by stock certificates
representing the Common Stock then outstanding, and no separate Rights
Certificates will be distributed. Until the earlier to occur of (i) 10 days
following a public announcement that a person, entity or group of affiliated or
associated persons (other than (a) the Company, (b) a majority-owned subsidiary
of the Company, (c) any employee benefit plan of the Company or any
majority-owned subsidiary of the Company, or (d) any entity holding Common Stock
for or pursuant to the terms of any such plan and each of the persons listed in
(a) through (d) above, (an "Exempt Person.")) (an "Acquiring Person") has
acquired beneficial ownership of 20% or more of the outstanding Common Stock or
(ii) 10 business days (or such later date as may be determined by action of the
Board of Directors prior to such time as any person, entity or group of
affiliated or associated persons becomes an Acquiring Person) following the
commencement of, or announcement of an intention to make, a tender offer or
exchange offer the consummation of which would result in the beneficial
ownership by a person or group of 20% or more of such outstanding Common Stock
(the earlier of such dates being called the "Distribution Date"), the Rights
will be evidenced, with respect to any of the Common Stock certificates
outstanding as of the Record Date, by such Common Share certificate, with a copy
of the Summary of Rights which is included in the Rights Agreement as Exhibit B
thereof (the "Summary of Rights"), attached thereto. So long as the Rights are
attached to the Common Stock as provided in the Rights Agreement, one additional
Right shall be delivered with each share of Common Stock issued after July 24,
1990, including but not limited to Common Stock issued upon conversion of any
convertible securities of the Company and exercise of options to purchase Common
Stock granted by the Company.
Under the Rights Plan, until the Distribution Date (or earlier redemption or
expiration of the Rights), the Rights are transferred with and only with the
Common Stock. Until the Distribution Date (or earlier redemption or expiration
of the Rights), new Common Stock certificates issued after the Record Date, upon
transfer or new issuance of Common Stock, will contain a notation incorporating
the Rights Agreement by reference. Until the Distribution Date (or earlier
redemption or expiration of the Rights), the surrender or transfer of any
certificates for Common Stock outstanding as of the Record Date, even without
such notation or a copy of the Summary of Rights being attached thereto, will
also constitute the transfer of the Rights associated with the Common Stock
represented by such certificate. As soon as practicable following the
Distribution Date, separate certificates evidencing the Rights ("Right
Certificates") will be mailed to holders of record of the Common Stock as of the
close of business on the Distribution Date and such separate Right Certificates
alone will evidence the Rights.
Under the Rights Plan, the Rights are not exercisable until the Distribution
Date. The Rights will expire on July 23, 2000 (the "Final Expiration Date"),
unless the Final Expiration Date is extended or unless the Rights are earlier
redeemed, exchanged or terminated by the Company, in each case, as described
below.
The Purchase Price payable, and the number of shares of Common Stock or
other securities or property issuable, upon exercise of the Rights are subject
to adjustment from time to time to prevent
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dilution (i) in the event of a stock dividend on, or a subdivision, combination
or reclassification of, the Common Stock, (ii) upon the grant to holders of the
Common Share of certain rights or warrants to subscribe for or purchase Common
Stock at a price, or securities convertible into Common Stock with a conversion
price, less than the then current market price of the Common Stock, or (iii)
upon the distribution to holders of the Common Stock of evidences of
indebtedness or assets (excluding regular periodic cash dividends paid out of
earnings or retained earnings or dividends payable in Common Stock) or of
subscription rights or warrants (other than those referred to above). The
exercise of Rights for Common Stock is at all times subject to the availability
of a sufficient number of authorized but unissued Common Stock.
The number of outstanding Rights and the number of shares of Common Stock
issuable upon exercise of each Right are also subject to adjustment in the event
of a stock split of the Common Stock or a stock dividend on the Common Stock
payable in Common Stock or subdivisions, consolidation or combinations of the
Common Stock occurring, in any such case, prior to the Distribution Date.
In the event that any person, entity or group of affiliated or associated
persons becomes an Acquiring Person, proper provision shall be made so that each
holder of a Right, other than Rights beneficially owned by the Acquiring Person
(which will thereafter be void), will have the right to receive upon exercise
that number of Common Stock having a market value of two times the exercise
price of the Right (or, if such number of shares is not and cannot be
authorized, the Company may issue Preferred Stock, cash, debt, stock or a
combination thereof in exchange for the Rights).
In the event that the Company is acquired by any person or entity in a
merger or other business combination transaction, or 50% or more of its
consolidated assets or earning power are sold to any person or entity, other
than in the case of a transaction (such as the Merger) that results in no change
in the voting power of the Company, proper provision will be made so that each
holder of a Right will thereafter have the right to receive, upon the exercise
thereof at the then current exercise price of the Right, that number of shares
of common stock of the acquiring company which at the time of such transaction
will have a market value of two times the exercise price of the Right.
At any time after the acquisition by a person, entity or group of affiliated
or associated persons, the Board of Directors of the Company may exchange the
Rights (other than Rights owned by such person, entity or group which have
become void), in whole or in part, at an exchange ratio of one share of Common
Stock per Right (or, if the number of shares is not and cannot be authorized,
the Company may issue cash, debt, stock or a combination thereof in exchange for
the Rights), subject to adjustment.
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional Common Stock will be issued, and in lieu
thereof, an adjustment in cash will be made based on the market price of the
Common Stock on the last trading day prior to the date of exercise.
At any time prior to the earliest (i) the close of business on the tenth day
following the first public announcement that a person has become an Acquiring
Person (subject to extension pursuant to the Rights Agreement), or (ii) the
Final Expiration Date, the Board of Directors of the Company may redeem the
Rights in whole, but not in part, at a price of $.01 per Right (the "Redemption
Price"). Following the expiration of the above periods, the Rights become
nonredeemable. Immediately upon any redemption of the Rights, the right to
exercise the Rights will terminate and the only right of the holders of Rights
will be to receive the Redemption Price.
The terms of the Rights may be amended by the Board of Directors of the
Company without the consent of the holders of the Rights, except that from and
after such time as the Board's ability to redeem the Rights has expired, no such
amendment may adversely affect the interest of the holders of the Rights.
Until a Right is exercised, the holder thereof, as such, has no rights as a
shareholder of the Company, including, without limitation, the right to vote or
to receive dividends.
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The Rights have certain anti-takeover effects. The Rights granted under the
Rights Plan will cause substantial dilution to a person or group that attempts
to acquire the Company on terms not approved by the Company's Board of
Directors. The Rights should not interfere with any merger or other business
combination approved by the Board of Directors, since the Rights may be redeemed
by the Company at $.01 per Right prior to the earliest of (i) the tenth day
following the time that a person or group has acquired beneficial ownership of
20% or more of the Common Stock subject to extension pursuant to the Rights
Agreement, or (ii) the Final Expiration Date of the Rights.
The Rights Plan will be assumed by the Delaware Company and the Rights will
be converted into rights to purchase shares of the Delaware Company upon
consummation of the Merger if the reincorporation is approved. A vote in favor
of the proposed reincorporation described in this Proposal Two will result in
the assumption of the Rights Plan by the Delaware Company. See "Anti-Takeover
Measures."
AMENDMENT OF CERTIFICATE
The California Articles may be amended by the approval of a majority of the
members of the Board of Directors and by a majority of the outstanding shares.
The Delaware Certificate may also be amended by the approval of a majority of
the members of the Board of Directors and by a majority of the outstanding
shares.
AMENDMENT OF BYLAWS
The California Bylaws may be amended or repealed either by the Board of
Directors or by the holders of a majority in interest of the outstanding stock
of the Company, except that the Board of Directors may not change the authorized
range of directors. Upon the effectiveness of the proposed reincorporation, the
Delaware Bylaws may be adopted, amended or repealed by the Delaware Board or by
the holders of at least a majority of the voting power of the outstanding
capital stock of the Delaware Company.
LOANS TO OFFICERS, DIRECTORS AND EMPLOYEES
California law provides that any loan or guaranty (other than loans to
permit the purchase of shares under certain stock purchase plans) for the
benefit of any officer or director, or any employee benefit plan authorizing
such loan or guaranty (except certain employee stock purchase plans), must be
approved by the shareholders of a California corporation.
Under Delaware law, a corporation may make loans to, or guarantee the
obligations of, officers or other employees when, in the judgment of the board
of directors, the loan or guaranty may reasonably be expected to benefit the
corporation. Both California law and Delaware law permit such loans or
guaranties to be unsecured and without interest.
CLASS VOTE FOR CERTAIN REORGANIZATIONS
With certain exceptions, California law requires that mergers,
reorganizations, certain sales of assets and similar transactions be approved by
a majority vote of each class of shares outstanding. Delaware law generally does
not require class voting for such transactions, except in certain situations
involving an amendment to the certificate of incorporation which adversely
affects a specific class of shares.
California law also requires that holders of a California corporation's
Common Stock receive nonredeemable Common Stock in a merger of the corporation
with the holder (or an affiliate of the holder) of more than 50% but less than
90% of its Common Stock, unless all of the holders of its Common Stock consent
to the merger or the merger has been approved by the California Commissioner of
Corporations at a "fairness-hearing." This provision of California law may have
the effect of making a cash "freezeout" merger by a majority shareholder more
difficult to accomplish. A cash freezeout merger is a transaction whereby a
minority shareholder is forced to relinquish his share ownership in a
corporation in
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exchange for cash, subject in certain instances to dissenters rights. Delaware
law has no comparable provision.
INSPECTION OF SHAREHOLDER LISTS
California law provides for an absolute right of inspection of the
shareholder list for shareholders holding 5% or more of a corporation's
outstanding voting shares or shareholders holding 1% or more of such shares who
have filed a Schedule 14B with the Securities and Exchange Commission (the
"SEC"). Delaware law provides no such absolute right of shareholder inspection.
However, both California and Delaware law permit any shareholder of record to
inspect the shareholder list for any purpose reasonably related to that person's
interest as a shareholder.
APPRAISAL RIGHTS
Under both California law and Delaware law, a shareholder of a corporation
participating in certain mergers and reorganizations may be entitled to receive
cash in the amount of the "fair value" (Delaware) or "fair market value"
(California) of its shares, as determined by a court, in lieu of the
consideration it would otherwise receive in the transaction. The limitations on
such dissenters' appraisal rights are somewhat different in California and
Delaware.
Shareholders of a California corporation, the shares of which are listed on
a national securities exchange or on the OTC margin stock list, generally do not
have appraisal rights unless the holders of at least 5% of the class of
outstanding shares assert the appraisal right. In any reorganization in which
one corporation or the shareholders of one corporation own more than 5/6 of the
voting power of the surviving or acquiring corporation, shareholders are denied
dissenters' rights under California law. For this reason, appraisal rights will
not be available to shareholders in connection with the reincorporation
proposal.
Under Delaware law appraisal rights are not available to shareholders with
respect to a merger or consolidation by a corporation, the shares of which are
either listed on a national securities exchange or designated as a national
market system security or an interdealer quotation system security by the
National Association of Securities Dealers, Inc., or are held of record by more
than 2,000 holders if the shareholders receive shares of the surviving
corporation or shares of any other corporation which are similarly listed or
dispersed, and the shareholders do not receive any other property in exchange
for their shares except cash for fractional shares. Appraisal rights are also
unavailable under Delaware law to shareholders of a corporation surviving a
merger if no vote of those shareholders is required to approve the merger
because, among other things, the number of shares to be issued in the merger
does not exceed 20% of the shares of the surviving corporation outstanding
immediately before the merger and certain other conditions are met.
VOTING APPRAISAL RIGHTS IN CERTAIN TRANSACTIONS
Delaware law does not provide shareholders with voting or appraisal rights
when a corporation acquires another business through the issuance of its stock,
whether in exchange for assets or stock or in a merger with a subsidiary.
California law treats these kinds of acquisitions in the same manner as a merger
of the corporation directly with the business to be acquired and provides
appraisal rights in the circumstances described in the preceding section.
DIVIDENDS
Under California law, any dividends or other distributions to shareholders,
such as redemptions, are limited to the greater of (i) retained earnings or (ii)
an amount which would leave the corporation with assets (excluding certain
intangible assets) equal to at least 125% of its liabilities (excluding certain
deferred items) and current assets equal to at least 100% (or, in certain
circumstances, 125%) of its current liabilities. Delaware law allows the payment
of dividends and redemption of stock out of surplus (including paid-in and
earned surplus) or out of net profits for the current and immediately preceding
fiscal years.
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The Company has paid cash dividends on a quarterly basis since 1988, and it is
anticipated that the Delaware Company will continue to do so for the foreseeable
future.
APPLICATION OF CALIFORNIA LAW AFTER REINCORPORATION
California law provides that if (i) the average of certain property, payroll
and sales factors results in a finding that more than 50% of the Delaware
Company's business is conducted in California, and in a particular fiscal year
more than 50% of the Delaware Company's outstanding voting securities are held
of record by persons having addresses in California, and (ii) the Company's
shares are traded in the Nasdaq National Market and are held by fewer than 800
equity security holders, as of its most recent annual meeting of shareholders,
then the Delaware Company would become subject to certain provisions of
California law regardless of its state of incorporation. The Company does not
currently meet all of the above requirements.
Because the Company's Common Stock is traded in the Nasdaq National Market
and the Company's shares are held by at least 800 equity security holders, as of
its most recent annual meeting of shareholders, California law will not
initially apply to the Delaware Company if the reincorporation is approved. The
Company would not be subject to California law as long as it continued to meet
both of these requirements.
If the Delaware Company were to become subject to the provisions of
California law referred to above, and such provisions were enforced by
California courts in a particular case, many of the Delaware laws described in
this Proxy Statement would not apply to the Delaware Company. Instead, the
Delaware Company could be governed by certain California laws, including those
regarding liability of directors for breaches of the duty of care,
indemnification of directors, dissenters' rights of appraisal, removal of
directors as well as certain other provisions discussed above, to the exclusion
of Delaware law. The effects of applying both Delaware and California laws to a
Delaware corporation whose principal operations are based in California have not
yet been determined.
FEDERAL INCOME TAX CONSEQUENCES OF THE REINCORPORATION
The reincorporation provided for in the Merger Agreement is intended to be a
tax free reorganization under the Internal Revenue Code of 1986, as amended.
Assuming the reincorporation qualifies as a reorganization, no gain or loss will
be recognized to the holders of capital stock of the Company as a result of
consummation of the reincorporation, and no gain or loss will be recognized by
the Company or the Delaware Company. Each former holder of capital stock of the
Company will have the same basis in the capital stock of the Delaware Company
received by such holder pursuant to the reincorporation as such holder has in
the capital stock of the Company held by such holder at the time of consummation
of the reincorporation. Each shareholder's holding period with respect to the
Delaware Company's capital stock will include the period during which such
holder held the corresponding Company capital stock, provided the latter was
held by such holder as a capital asset at the time of consummation of the
reincorporation. The Company has not obtained a ruling from the Internal Revenue
Service or an opinion of legal or tax counsel with respect to the consequences
of the reincorporation.
The foregoing is only a summary of certain federal income tax consequences.
SHAREHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISERS REGARDING THE SPECIFIC TAX
CONSEQUENCES TO THEM OF THE MERGER, INCLUDING THE APPLICABILITY OF THE LAWS OF
ANY STATE OR OTHER JURISDICTION.
BOARD RECOMMENDATION
The foregoing discussion is an attempt to summarize the more important
differences in the corporation laws of Delaware and California and does not
purport to be an exhaustive discussion of all of the differences. Such
differences can be determined in full by reference to the California
Corporations Code
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and to the Delaware General Corporation Law. In addition, both California and
Delaware law provide that some of the statutory provisions as they affect
various rights of holders of shares may be modified by provisions in the charter
or bylaws of the corporation.
A vote FOR the reincorporation proposal will constitute approval of the
merger, the Delaware Certificate, the Delaware Bylaws, the form of the
indemnification agreements, the adoption and assumption by the Delaware Company
of each of the Company's stock option, stock purchase and employee benefit plans
and all other aspects of this Proposal Two.
PROPOSAL THREE
APPROVAL OF AN
INCREASE IN THE SHARE RESERVE AND
A DECREASE IN THE OPTION TERM
UNDER THE 1994 STOCK OPTION PLAN
The Board of Directors and the shareholders approved the adoption of the
1994 Stock Option Plan (the "Option Plan") in December 1993 and April 1994,
respectively.
An aggregate of 23,600,000 shares of the Company's Common Stock is currently
reserved for issuance under the Option Plan. The Board believes that the
availability of an adequate number of shares in the share reserve of the Option
Plan is an important factor in attracting, retaining and motivating qualified
employees essential to the success of the Company.
ON DECEMBER 18, 1996, SUBJECT TO SHAREHOLDER APPROVAL, THE BOARD INCREASED
THE SHARE RESERVE UNDER THE OPTION PLAN BY 5,600,000 SHARES TO A TOTAL OF
29,200,000 SHARES IN CONTEMPLATION OF USING THESE SHARES TO GRANT OPTIONS OVER A
TWO-YEAR PERIOD. IN LIGHT OF HISTORICAL USAGE AND EXPECTED FUTURE GRANTS, THE
COMPANY EXPECTS THAT THE 5,600,000 SHARE INCREASE WILL BE ADEQUATE TO MEET THESE
FORESEEABLE REQUIREMENTS. THE BOARD BELIEVES THAT THE POTENTIAL DILUTIVE EFFECT
OF THE SALE OF ADDITIONAL SHARES UNDER THE OPTION PLAN IS MITIGATED BY THE STOCK
REPURCHASE PROGRAM CURRENTLY IN EFFECT.
The Company intends to register the 5,600,000 share increase on Form S-8
under the Securities Act of 1933 as soon as is practicable after receiving
shareholder approval.
The Option Plan is being further amended to decrease the option term period
to eight years from ten years for all options granted after approval of this
proposal.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
SUMMARY OF OPTION PLAN TERMS
The following summary of the Option Plan is qualified in its entirety by the
specific language of the Option Plan, a copy of which will be available to any
shareholder upon written request.
ELIGIBILITY. All employees of the Company (including officers and directors
who are employees), as well as consultants, advisors, or other independent
contractors to the Company, and prospective employees of the Company to whom
options are granted in connection with written offers of employment with the
Company, may, in the discretion of the Board of Directors or the Committees (as
defined below) be granted options under the Option Plan. As of January 28, 1997,
[ ] non-executive officer employees and eleven executive officers were
eligible to participate in the Option Plan. As of January 28, 1997, [ ]
options have been granted and are outstanding under the Option Plan; [ ]
options have been granted and exercised under the Option Plan; and options for
[ ] shares remain available for grant. The closing market price for the
Company's Common Stock on January 28, 1997 was $[ ].
During the fiscal year ended November 29, 1996, the Named Executive Officers
as a group were granted options under the Option Plan to purchase a total of
109,320 shares of Common Stock of the
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Company as follows: Dr. Warnock, 27,800; Dr. Geschke, 27,800; David B. Pratt,
15,180; Derek J. Gray 11,040; Robert A. Roblin 27,500; Steve MacDonald, zero;
and M. Bruce Nakao, zero. Non-employee directors of the Company are not eligible
to participate in the Option Plan, and did not, therefore, receive any options
under the Option Plan.
ADMINISTRATION. The Executive Compensation Committee of the Board will
administer the Option Plan for executive officers, including those persons
subject to Section 16 of the 34 Act who are not corporate officers. The Employee
Grant Committee will administer the Option Plan for all other eligible persons
(collectively, the "Committees"). In addition, the Company's Chief Financial
Officer ("CFO") pursuant to Board delegation has the authority to grant options,
without further approval of the Board or the Committees, to any person eligible
under the Option Plan other than a person who, at the time of the grant, is
subject to Section 16 under the 34 Act; provided (i) the CFO shall not grant
options to any one person for more than 20,000 shares, (ii) the exercise price
per share of each such option shall be equal to the closing price per share of
the Company's Common Stock as quoted on the National Association of Securities
Dealers Automated Quotations ("Nasdaq") system on the date of grant, and (iii)
each option granted by the CFO shall be subject to the terms and conditions of
the appropriate standard form of stock option agreement previously approved by
the Board and shall conform to the provisions of the Option Plan and any
guidelines established by the Board. In any event, the maximum number of option
shares granted to any eligible person in any one twelve month period shall not
exceed two percent of the then outstanding shares of the Company's Common Stock.
Furthermore, to the extent allowed under SEC Rule 16b-3 (exempting certain
transactions by corporate insiders from Section 16 "short-swing" profit
liability) and the terms of the Option Plan, the Option Plan permits the Board
to amend options granted to Section 16 insiders without the need to obtain
shareholder approval.
PRICE AND EXERCISABILITY. Option agreements specify the number of shares
covered thereby and the option exercise price, which shall not be less than the
fair market value of the shares as of the date of grant of the option, which
shall be equal to the closing price per share of the Company's Common Stock as
quoted on Nasdaq on the date of grant. Options may be granted which are either
(i) exercisable over time, or (ii) immediately exercisable but subject to
repurchase by the Company in a decreasing amount over time upon the employee's
termination of employment. The Committees have the power to set the time within
which each option may be exercisable or the events upon which all or a portion
of each option shall be exercisable and the term of each option. Options granted
under the Option Plan may be either incentive stock options as defined in
Section 422 of the Code, or nonqualified stock options. Unless otherwise
specified by the Committees, shares subject to an option granted to an existing
employee become exercisable at a rate of 2.08% per month for the first two years
after the date of grant and at a rate of 4.17% per month for the third year
after the date of grant. Unless otherwise specified by the Committees, shares
subject to an option granted to a new employee become exercisable at a rate of
25% upon completion of the first year after the date of grant, at a rate of
2.08% per month for the second year, and at a rate of 4.17% per month for the
third year.
Options may be exercised by payment of the option price (i) in cash or cash
equivalent, (ii) by tender to the Company of shares of the Company's Common
Stock owned by the optionee having a value, as determined by the Board, not less
than the exercise price, and which either have been owned by the optionee for
more than six months or which were not acquired, directly or indirectly, from
the Company, (iii) by the assignment of the proceeds of a sale of some or all of
the shares being acquired upon the exercise of the option ("Same Day Sale"),
(iv) by the optionee's recourse promissory note, (v) by the withholding of
shares being acquired upon exercise of the option having a value, as determined
by the Board, not less than the exercise price, or (vi) by such other
consideration and method of payment as the Board, in its sole discretion, may
allow. The Board or Committees may restrict the forms of payment permitted in
connection with any option grant. Any permitted promissory note shall be due and
payable not more than five years after the option is granted, and interest shall
be payable at least annually and be at least equal to the minimum interest rate
necessary to avoid imputed interest under the Code. The Board
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has the authority to permit or require the optionee to secure any promissory
note used to exercise an option with the shares of stock acquired on exercise of
the option and/or with other collateral acceptable to the Company. Optionees may
elect to have shares withheld upon exercise to satisfy tax withholding
obligations.
TRANSFER OF CONTROL. The following corporate transactions may be deemed a
"Transfer of Control" of the Company, if, after such corporate transaction, the
shareholders of the Company before the corporate transaction do not retain,
directly or indirectly, at least a majority of the beneficial interest in the
voting stock of the Company after such corporate transaction or in which the
Company is not the surviving corporation: (i) the direct or indirect sale or
exchange by the shareholders of the Company of all or substantially all of the
stock of the Company; (ii) a merger or consolidation in which the Company is a
party, (iii) the sale, exchange or transfer of all or substantially all of the
assets of the Company (other than a sale, exchange or transfer to one or more
subsidiary corporations of the Company); or (iv) a liquidation or dissolution of
the Company. Upon a Transfer of Control, if an employee is terminated within
twelve months thereafter due to (i) constructive termination, or (ii) any reason
other than termination for cause, the exercise period will be extended to twelve
months from termination and he/she will be given credit for an additional twelve
months of vesting.
CHANGE IN CAPITALIZATION. In the event any change is made to the Common
Stock issuable under the Option Plan by reason of any stock split, stock
dividend, combination of shares or recapitalization, appropriate adjustment will
be made to the share reserve of the Option Plan and the number of shares and
price per share of the Common Stock subject to outstanding options.
AMENDMENTS. The Committees have the authority, at any time and from time to
time, with the consent of the affected optionees, to amend, terminate, or cancel
any outstanding option. The Board of Directors may terminate or amend the Option
Plan at any time, but, without the approval of the Company's shareholders, the
Board of Directors may not amend the Option Plan to increase the number of
shares available for grant, or to change the class of persons eligible to
receive incentive stock options under the Option Plan. Unless subsequently
modified, the Option Plan will terminate on December 17, 2004.
SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES OF THE OPTION PLAN
The following summary is intended only as a general guide as to the federal
income tax consequences under current law of options granted pursuant to the
Option Plan and does not attempt to describe all potential tax consequences.
Furthermore, the tax consequences are complex and subject to change, and a
taxpayer's particular situation may be such that some variation of the described
rules is applicable. For example, special tax rules apply to affiliates of the
Company, or if shares acquired on the exercise of the option are subject to
repurchase rights in favor of the Company.
INCENTIVE STOCK OPTIONS. Options designated as incentive stock options are
intended to satisfy the requirements of the provisions of Section 422 of the
Code. An optionee recognizes no taxable income as the result of the grant or
exercise of such an option.
For optionees who do not dispose of their shares within two years following
the date the option was granted and within one year following the transfer of
the shares acquired upon exercise of the option, the gain on sale of the shares
(which is the difference between the sale price and the purchase price of the
shares) will be taxed as capital gain. If an optionee disposes of shares within
two years from the date of grant or within one year from the date of exercise (a
"disqualifying disposition"), the difference between the option exercise price
and the fair market value of the shares on the date of exercise, or the option
exercise price and the sale price, whichever is less, will be taxed as ordinary
income at the time of disposition. Any additional gain and any loss upon the
disqualifying disposition will constitute a capital gain or loss. A capital gain
or loss will be long-term if the optionee's holding period is more than twelve
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months. Long-term capital gains currently are generally subject to lower tax
rates than ordinary income. In the event of a Same Day Sale of the option, the
difference between the option exercise price and sale price will be taxed as
ordinary income. Any ordinary income recognized by the optionee upon a
disqualifying disposition of stock should be deductible by the Company for
federal income tax purposes.
Any excess of the fair market value of the shares acquired on the exercise
of an incentive stock option over the option exercise price is an adjustment in
computing the optionee's alternative minimum taxable income and may be subject
to an alternative minimum tax which is paid if such tax exceeds the regular tax
for the year. Such excess is measured on the determination date (which is
generally the date of exercise). Special rules may apply with respect to certain
subsequent sales of the shares in a disqualifying disposition, certain basis
adjustments for purposes of computing the alternative minimum taxable income on
a subsequent sale of the shares, and certain tax credits which may arise with
respect to optionees subject to the alternative minimum tax.
NONQUALIFIED STOCK OPTIONS. Nonqualified stock options have no special tax
status. An optionee generally recognizes no taxable income as the result of the
grant of such an option. Upon exercise of a nonqualified stock option, the
optionee normally recognizes ordinary income on the excess of the fair market
value on the date of exercise over the option exercise price. If the optionee is
an employee, such ordinary income generally is subject to withholding of income
and employment taxes. Upon the sale of stock acquired by the exercise of a
nonqualified stock option, any gain or loss, based on the difference between the
sale price and the fair market value on the date of recognition of income, will
be taxed as a capital gain or loss. A capital gain or loss will be long-term if
the optionee's holding period is more than twelve months. In the event of a Same
Day Sale of the option, the optionee recognizes ordinary income on the
difference between the option exercise price and the sale price. No tax
deduction is available to the Company with respect to the grant of the option or
the sale of stock acquired upon exercise of the option. The Company should be
entitled to a deduction equal to the amount of ordinary income recognized by the
optionee as a result of the exercise of the nonqualified stock option.
PROPOSAL FOUR
APPROVAL OF THE
1997 EMPLOYEE STOCK PURCHASE PLAN
The Board of Directors and the shareholders approved the adoption of the
1988 Employee Stock Purchase Plan (the "Old Plan") in December 1987 and April
1988, respectively. The Old Plan qualifies as an "employee stock purchase plan"
under Section 423 of the Code.
The Old Plan will terminate December 1997. Thereafter, no further offers may
be made under the Old Plan. An aggregate of 4,000,000 shares of the Company's
Common Stock is currently reserved for issuance under the Old Plan. On December
18, 1996, subject to shareholder approval, the Company's Board of Directors
adopted the 1997 Employee Stock Purchase Plan (the "New Plan") and related
purchase plan agreements, in contemplation of the Old Plan terminating December
1997. The New Plan includes an increase in the share reserve by 3,000,000
shares, from 4,000,000 shares to 7,000,000 shares. The Board of Directors
believes that the availability of an adequate number of shares in the share
reserve of the New Plan is an important factor in attracting, motivating and
retaining qualified officers and employees essential to the success of the
Company.
THE BOARD ADOPTED THE NEW PLAN AND INCREASED THE SHARES RESERVE UNDER THE
NEW PLAN, SUBJECT TO SHAREHOLDER APPROVAL, IN CONTEMPLATION OF USING THESE
SHARES FOR PARTICIPANT STOCK PURCHASES OVER A THREE-YEAR PERIOD. IN LIGHT OF
HISTORICAL USAGE AND EXPECTED FUTURE PARTICIPANT PURCHASES, THE COMPANY EXPECTS
THAT THE 3,000,000 SHARES INCREASE WILL BE ADEQUATE TO MEET THESE FORESEEABLE
REQUIREMENTS.
The Company intends to register the 3,000,000 shares increase on Form S-8
under the Securities Act of 1933 as soon as is practicable after receiving
shareholder approval.
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The following summary of the New Plan is qualified in its entirety by the
specific language of the New Plan, a copy of which will be made available to any
shareholder upon written request.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
SUMMARY OF 1997 EMPLOYEE STOCK PURCHASE PLAN TERMS
GENERAL. The balance of the 4,000,000 shares of the Company's Common Stock
currently reserved for issuance under the Old Plan will be carried over to the
New Plan. The aggregate number of shares authorized for issuance will be
7,000,000, i.e., the sum of the 4,000,000 shares currently authorized under the
Old Plan and the additional 3,000,000 shares as approved by the Board of
Directors and the shareholders. This aggregate shares reserve will be available
for purchases under the Old Plan offerings that commenced prior to the effect
date of the New Plan, as well as offerings under the New Plan. The provisions of
the Old Plan will continue to govern the terms of offerings that commence prior
to the effective date of the New Plan.
Pursuant to the Code, the New Plan does not have a termination date, and
will remain in effect until the earlier of its termination by the Board of
Directors or the date on which all of the shares of stock available for issuance
under the New Plan have been issued.
ELIGIBILITY. Any employee of the Company, or any of its subsidiaries, is
eligible to participate in the New Plan as long as the employee (i) has been
continuously employed by the Company from the first business day of the third
month immediately preceding the offering date of the offering period in which
the employee seeks to participate until such offering date, (ii) is customarily
employed by the Company for at least five months in any calendar year, and (iii)
for at least twenty hours per week. No employee shall be granted a right to
purchase shares under the New Plan if, immediately after such grant, such
employee would own or hold options to purchase stock of the Company or of any
parent corporation or subsidiary corporation possessing five percent or more of
the total combined voting power or value of all classes of stock of such
corporation. As of December 31, 1996, 2,134 non-executive officer employees and
eleven executive officers were eligible to participate in the Old Pan.
PURCHASE OF SHARES. The New Plan permits eligible employees to purchase
shares of Common Stock of the Company through payroll withholding. Each offering
period under the New Plan is 24 months and is divided into four consecutive six
month purchase periods. At the end of each purchase period, shares are issued
based on payroll deductions accumulated during that period not to exceed 25% of
the employee's compensation. The purchase price per share at which the shares of
the Company's Common Stock are sold under the New Plan generally will be equal
to 85% of the lesser of the fair market value of the Common Stock on (i) the
first day of the offering, or (ii) the last day of the purchase period. No
participant may purchase more than 5,000 shares of the Company's Common Stock in
any offering, or shares having a fair market value exceeding $25,000 in any
calendar year. A participant may withdraw from an offering at any time without
affecting his/her eligibility to participate in future offerings. If the fair
market value of the shares at the end of a purchase period of an offering (other
than the final purchase period of any offering) is less than the fair market
value of the shares on the first day of such offering, then every participant in
the offering will automatically (i) be withdrawn from the offering at the close
of such purchase period and after the acquisition of shares, and (ii) be
enrolled in the offering commencing on the first business day subsequent to such
purchase period.
ADMINISTRATION. The New Plan is administered by the Board of Directors or a
committee appointed by the Board of Directors. As of December 31, 1996, a total
of 3,300,904 shares had been purchased under the Old Plan and 699,096 shares
remained available for purchase. The closing market price for the Company Common
Stock on January 28, 1997 was [ ].
AMENDMENTS. The Board may at any time amend or terminate the New Plan,
except that shareholder approval is required to increase the number of shares
authorized for issuance under the New Plan. As in
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the Old Plan, the New Plan does permit the Board to designate certain affiliated
corporations whose employees may participate without shareholder approval. In
addition, except as required by law or regulation, no amendment to the New Plan
may adversely affect the purchase rights previously granted a participant under
the Old Plan or the New Plan without such participant's consent.
SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES OF THE NEW PLAN
The following summary is intended only as a general guide as to the federal
income tax consequences under current law of options granted pursuant to the New
Plan and does not attempt to describe all potential tax consequences.
Furthermore, the tax consequences are complex and subject to change, and a
taxpayer's particular situation may be such that some variation of the described
rules is applicable.
A participant recognizes no taxable income either as a result of commencing
to participate in the New Plan or purchasing shares of the Company's Common
Stock under the terms of the New Plan.
If a participant disposes of shares purchased under the New Plan within two
years from the first day of the applicable offering period or within one year
from the date of purchase (which is the last day of a purchase period) (a
"disqualifying disposition"), the participant will recognize ordinary income in
the year of such disposition equal to the amount by which the fair market value
of the shares on the date the shares were purchased exceeds the purchase price.
The amount of ordinary income will be added to the participant's basis in the
shares, and any additional gain or resulting loss recognized on the disposition
of the shares will be a capital gain or loss. A capital gain or loss will be
long-term if the participant's holding period is more than twelve months,
otherwise it will be short-term.
If the participant disposes of shares purchased under the New Plan at least
two years after the first day of the applicable offering period and at least one
year after the date of purchase, the participant will recognize ordinary income
in the year of disposition equal to the lesser of (i) the excess of the fair
market value of the shares on the date of disposition over the purchase price or
(ii) 15% of the fair market value of the shares on the first day of the
applicable offering period. The amount of any ordinary income will be added to
the participant's basis in the shares, and any additional gain recognized upon
the disposition after such basis adjustment will be long-term capital gain. If
the fair market value of the shares on the date of disposition is less than the
purchase price, there will be no ordinary income and any loss recognized will be
a long-term capital loss.
The Company will be entitled to a deduction in the year of the disqualifying
disposition equal to the amount of ordinary income recognized by the participant
as a result of the disposition. In all other cases, no deduction is allowed to
the Company.
As the number of shares to be purchased under the New Plan are not
determinable, the following table shows the number of shares purchased under the
Old Plan for the offering period which ended December 31, 1996. Other than the
December 31, 1996 purchases, there are no purchases to report from the date of
Board approval of the New Plan to date under the Old Plan. Future purchases
under the New Plan are not determinable at this time.
45
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PLAN BENEFITS
<TABLE>
<CAPTION>
DOLLAR VALUE NUMBER OF SHARES
NAME AND POSITION ($) PURCHASED UNDER OLD PLAN
- ----------------------------------------------------------------------- --------------- ------------------------
<S> <C> <C>
John E. Warnock ....................................................... $ 30,314 845
Chairman of the Board and Chief Executive Officer
Charles M. Geschke .................................................... $ 30,314 845
President and Director
David B. Pratt ........................................................ $ 30,314 845
Executive Vice President and Chief Operating Officer
Robert A. Roblin ...................................................... -0- -0-
Senior Vice President Marketing
Derek J. Gray ......................................................... -0- -0-
Senior Vice President and General Manager, Adobe Systems Europe
Stephen A. MacDonald .................................................. -0- -0-
former Senior Vice President and Chief Operating Officer
M. Bruce Nakao ........................................................ $ 27,983 780
former Senior Vice President, Finance and Administration, Chief
Financial Officer
Executive Officer Group................................................ $ 216,834 6,016
Non-Employee Director Group............................................ $ -0- -0-
Non-Executive Officer Employee Group................................... $ 20,030,376 548,652
</TABLE>
PROPOSAL FIVE
RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors has selected KPMG Peat Marwick LLP ("KPMG") as the
independent public accountants for the Company for fiscal 1997, and recommends
that the shareholders vote for ratification of such appointment. Shareholder
ratification of the selection of KPMG as the Company's independent auditors is
not required by the Company's By-Laws or otherwise. However, the Board is
submitting the selection of KPMG for shareholder ratification as a matter of
good corporate practice. KPMG has audited the Company's financial statements
since 1983. Notwithstanding the selection, the Board, in its discretion, may
direct the appointment of a new independent accounting firm at any time during
the year if the Board feels that such a change would be in the best interests of
the Company and its shareholders. A representative of KPMG is expected to be
present at the Annual Meeting with the opportunity to make a statement if he or
she so desires and be available to respond to appropriate questions.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
OTHER BUSINESS
The Company knows of no other matters to be submitted at the Annual Meeting.
If any other matters are properly brought before the meeting, it is the
intention of the persons named in the enclosed proxy to vote the shares they
represent in accordance with their judgment.
46
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SHAREHOLDER PROPOSALS TO BE PRESENTED AT NEXT ANNUAL MEETING
Proposals of shareholders that are intended to be presented at the Company's
1998 Annual Meeting of Shareholders must be received by the Company not later
than November 3, 1997 in order to be included in the proxy statement and proxy
relating to that annual meeting. Shareholders are also advised to review the
Company's By-Laws, which contain additional requirements with respect to advance
notice of shareholder proposals.
By Order of the Board of Directors
Colleen M. Pouliot
VICE PRESIDENT, GENERAL COUNSEL &
SECRETARY
San Jose, California
February 27, 1997
47
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EXHIBIT A
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (hereinafter called the "Merger
Agreement") is made as of , 1997, by and between ADOBE SYSTEMS
INCORPORATED, a California corporation ("Adobe California"), and ADOBE
(DELAWARE) INCORPORATED, a Delaware corporation ("Adobe Delaware"). Adobe
California and Adobe Delaware are sometimes referred to as the "Constituent
Corporations."
The authorized capital stock of Adobe California consists of two hundred
million (200,000,000) shares of Common Stock, no par value, and two million
(2,000,000) shares of Preferred Stock, no par value. The authorized capital
stock of Adobe Delaware, upon effectuation of the transactions set forth in this
Merger Agreement, will consist of two hundred million (200,000,000) shares of
Common Stock, no par value, and two million (2,000,000) shares of Preferred
Stock, no par value.
The directors of the Constituent Corporations deem it advisable and to the
advantage of the Constituent Corporations that Adobe California merge into Adobe
Delaware upon the terms and conditions herein provided.
NOW, THEREFORE, the parties do hereby adopt the plan of reorganization
encompassed by this Merger Agreement and do hereby agree that Adobe California
shall merge into Adobe Delaware on the following terms, conditions and other
provisions:
I. TERMS AND CONDITIONS.
1.1 MERGER. Adobe California shall be merged with and into Adobe Delaware
(the "Merger"), and Adobe Delaware shall be the surviving corporation (the
"Surviving Corporation") effective upon the date when this Merger Agreement is
filed with the Secretary of State of Delaware (the "Effective Date").
1.2 NAME CHANGE. On the Effective Date, the name of Adobe Delaware shall
be Adobe Systems Incorporated.
1.3 SUCCESSION. On the Effective Date, Adobe Delaware shall continue its
corporate existence under the laws of the State of Delaware, and the separate
existence and corporate organization of Adobe California, except insofar as it
may be continued by operation of law, shall be terminated and cease.
1.4 TRANSFER OF ASSETS AND LIABILITIES. On the Effective Date, the rights,
privileges, powers and franchises, both of a public as well as of a private
nature, of each of the Constituent Corporations shall be vested in and possessed
by the Surviving Corporation, subject to all of the disabilities, duties and
restrictions of or upon each of the Constituent Corporations; and all and
singular rights, privileges, powers and franchises of each of the Constituent
Corporations, and all property, real, personal and mixed, of each of the
Constituent Corporations, and all debts due to each of the Constituent
Corporations on whatever account, and all things in action or belonging to each
of the Constituent Corporations shall be transferred to and vested in the
Surviving Corporation; and all property, rights, privileges, powers and
franchises, and all and every other interest, shall be thereafter the property
of the Surviving Corporation as they were of the Constituent Corporations, and
the title to any real estate vested by deed or otherwise in either of the
Constituent Corporations shall not revert or be in any way impaired by reason of
the Merger; provided, however, that the liabilities of the Constituent
Corporations and of their shareholders, directors and officers shall not be
affected and all rights of creditors and all liens upon any property of either
of the Constituent Corporations shall be preserved unimpaired, and any claim
existing or action or proceeding pending by or against either of the Constituent
Corporations may be prosecuted to judgment as if the Merger had not taken place
except as they may be modified with the consent of such creditors and all debts,
liabilities and duties of or upon each of the Constituent Corporations shall
attach to the Surviving
A-1
<PAGE>
Corporation, and may be enforced against it to the same extent as if such debts,
liabilities and duties had
been incurred or contracted by it.
1.5 COMMON STOCK OF ADOBE CALIFORNIA AND ADOBE DELAWARE. On the Effective
Date, by virtue of the Merger and without any further action on the part of the
Constituent Corporations or their shareholders, each share of Common Stock of
Adobe California issued and outstanding immediately prior thereto shall be
converted into one (1) fully paid and nonassessable share of the Common Stock of
Adobe Delaware and each share of Common Stock of Adobe Delaware issued and
outstanding immediately prior thereto shall be canceled and returned to the
status of authorized but unissued shares.
1.6 STOCK CERTIFICATES. On and after the Effective Date, all of the
outstanding certificates which prior to that time represented shares of the
Common Stock or of the Preferred Stock of Adobe California shall be deemed for
all purposes to evidence ownership of and to represent the shares of Adobe
Delaware into which the shares of Adobe California represented by such
certificates have been converted as herein provided and shall be so registered
on the books and records of the Surviving Corporation or its transfer agents.
The registered owner of any such outstanding stock certificate shall, until such
certificate shall have been surrendered for transfer or conversion or otherwise
accounted for to the Surviving Corporation or its transfer agent, have and be
entitled to exercise any voting and other rights with respect to and to receive
any dividend and other distributions upon the shares of Adobe Delaware evidenced
by such outstanding certificate as above provided.
1.7 OPTIONS. On the Effective Date, the Surviving Corporation will assume
and continue Adobe California's [Stock Option Plan, Restricted Stock Option Plan
and 1996 Outside Directors Stock Option Plan] and the outstanding and
unexercised portions of all options to purchase Common Stock of Adobe
California, including without limitation all options outstanding under such
stock plans and any other outstanding options, shall be converted into options
of Adobe Delaware, such that an option for one (1) share of Adobe California
shall be converted into an option for one (1) share of Adobe Delaware, with no
change in the exercise price of the Adobe Delaware option. No other changes in
the terms and conditions of such options will occur. Effective on the Effective
Date, Adobe Delaware hereby assumes the outstanding and unexercised portions of
such options and the obligations of Adobe California with respect thereto.
1.8 EMPLOYEE BENEFIT PLANS. On the Effective Date, the Surviving
Corporation shall assume all obligations of Adobe California under any and all
employee benefit plans in effect as of such date. On the Effective Date, the
Surviving Corporation shall adopt and continue in effect all such employee
benefit plans upon the same terms and conditions as were in effect immediately
prior to the Merger and shall reserve that number of shares of Adobe Delaware
Common Stock with respect to each such employee benefit plan as is proportional
to the number of shares of Adobe California Common Stock (if any) so reserved on
the Effective Date.
II. CHARTER DOCUMENTS, DIRECTORS AND OFFICERS.
2.1 CERTIFICATE OF INCORPORATION AND BYLAWS. The Certificate of
Incorporation and Bylaws of Adobe Delaware in effect on the Effective Date shall
continue to be the Certificate of Incorporation and Bylaws of the Surviving
Corporation, except that Article I of the Certificate of Incorporation and
Bylaws of the Surviving Corporation shall, effective upon the filing of this
Merger Agreement with the Secretary of State of the State of Delaware, be
amended to read in its entirety as follows: "The name of this corporation is
Adobe Systems Incorporated."
2.2 DIRECTORS. The directors of Adobe California immediately preceding the
Effective Date shall become the directors of the Surviving Corporation on and
after the Effective Date to serve until the expiration of their terms and until
their successors are elected and qualified.
A-2
<PAGE>
2.3 OFFICERS. The officers of Adobe California immediately preceding the
Effective Date shall become the officers of the Surviving Corporation on and
after the Effective Date to serve at the pleasure of its Board of Directors.
III. MISCELLANEOUS.
3.1 FURTHER ASSURANCES. From time to time, and when required by the
Surviving Corporation or by its successors and assigns, there shall be executed
and delivered on behalf of Adobe California such deeds and other instruments,
and there shall be taken or caused to be taken by it such further and other
action, as shall be appropriate or necessary in order to vest or perfect in or
to conform of record or otherwise, in the Surviving Corporation the title to and
possession of all the property, interests, assets, rights, privileges,
immunities, powers, franchises and authority of Adobe California and otherwise
to carry out the purposes of this Merger Agreement, and the officers and
directors of the Surviving Corporation are fully authorized in the name and on
behalf of Adobe California or otherwise to take any and all such action and to
execute and deliver any and all such deeds and other instruments.
3.2 AMENDMENT. At any time before or after approval by the shareholders of
Adobe California, this Merger Agreement may be amended in any manner (except
that, after the approval of the Merger Agreement by the shareholders of Adobe
California, the principal terms may not be amended without the further approval
of the shareholders of Adobe California) as may be determined in the judgment of
the respective Board of Directors of Adobe Delaware and Adobe California to be
necessary, desirable, or expedient in order to clarify the intention of the
parties hereto or to effect or facilitate the purpose and intent of this Merger
Agreement.
3.3 CONDITIONS TO MERGER. The obligations of the Constituent Corporations
to effect the transactions contemplated hereby is subject to satisfaction of the
following conditions (any or all of which may be waived by either of the
Constituent Corporations in its sole discretion to the extent permitted by law):
(a) the Merger shall have been approved by the shareholders of Adobe
California in accordance with applicable provisions of the General
Corporation Law of the State of California; and
(b) Adobe California, as sole stockholder of Adobe Delaware, shall have
approved the Merger in accordance with the General Corporation Law of the
State of Delaware; and
(c) any and all consents, permits, authorizations, approvals, and orders
deemed in the sole discretion of Adobe California to be material to
consummation of the Merger shall have been obtained.
3.4 ABANDONMENT OR DEFERRAL. At any time before the Effective Date, this
Merger Agreement may be terminated and the Merger may be abandoned by the Board
of Directors of either Adobe California or Adobe Delaware or both,
notwithstanding the approval of this Merger Agreement by the shareholders of
Adobe California or Adobe Delaware, or the consummation of the Merger may be
deferred for a reasonable period of time if, in the opinion of the Boards of
Directors of Adobe California and Adobe Delaware, such action would be in the
best interest of such corporations. In the event of termination of this Merger
Agreement, this Merger Agreement shall become void and of no effect and there
shall be no liability on the part of either Constituent Corporation or its Board
of Directors or shareholders with respect thereto, except that Adobe California
shall pay all expenses incurred in connection with the Merger or in respect of
this Merger Agreement or relating thereto.
3.5 COUNTERPARTS. In order to facilitate the filing and recording of this
Merger Agreement, the same may be executed in any number of counterparts, each
of which shall be deemed to be an original.
A-3
<PAGE>
IN WITNESS WHEREOF, this Merger Agreement, having first been duly approved
by the Board of Directors of Adobe California and Adobe Delaware, is hereby
executed on behalf of each said corporation and attested by their respective
officers thereunto duly authorized.
ADOBE SYSTEMS INCORPORATED
A California corporation
By ___________________________________
John E. Warnock
CHAIRMAN OF THE BOARD
AND CHIEF EXECUTIVE OFFICER
ATTEST:
______________________________________
Colleen M. Pouliot
VICE PRESIDENT, GENERAL COUNSEL
& SECRETARY
ADOBE (DELAWARE) INCORPORATED
A Delaware corporation
By ___________________________________
John E. Warnock
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
ATTEST:
______________________________________
Colleen M. Pouliot
VICE PRESIDENT, GENERAL COUNSEL
& SECRETARY
A-4
<PAGE>
EXHIBIT B
CERTIFICATE OF INCORPORATION
OF
ADOBE (DELAWARE) INCORPORATED
The undersigned, a natural person (the "Sole Incorporator"), for the purpose
of organizing a corporation to conduct the business and promote the purposes
hereinafter stated, under the provisions and subject to the requirements of the
laws of the State of Delaware hereby certifies that:
I.
The name of this corporation is Adobe (Delaware) Incorporated.
II.
The address of the registered office of the corporation in the State of
Delaware is , City of , County of ,
and the name of the registered agent of the corporation in the State of Delaware
at such address is the .
III.
The purpose of this corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
the State of Delaware.
IV.
A. This corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total number
of shares which the corporation is authorized to issue is two hundred two
million (202,000,000) shares. Two hundred million (200,000,000) shares shall be
Common Stock and two million (2,000,000) shares shall be Preferred Stock. All
the shares of Common Stock and Preferred Stock shall be without par value.
B. The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized, by filing a certificate (a
"Preferred Stock Designation") pursuant to the Delaware General Corporation Law,
to fix or alter from time to time the designation, powers, preferences and
rights of the shares of each such series and the qualifications, limitations or
restrictions of any wholly unissued series of Preferred Stock, and to establish
from time to time the number of shares constituting any such series or any of
them; and to increase or decrease the number of shares of any series subsequent
to the issuance of shares of that series, but not below the number of shares of
such series then outstanding. In case the number of shares of any series shall
be decreased in accordance with the foregoing sentence, the shares constituting
such decrease shall resume the status that they had prior to the adoption of the
resolution originally fixing the number of shares of such series.
V.
For the management of the business and for the conduct of the affairs of the
corporation, and in further definition, limitation and regulation of the powers
of the corporation, of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided that:
A.
(1) The management of the business and the conduct of the affairs of the
corporation shall be vested in its Board of Directors. The number of directors
which shall constitute the whole Board of Directors shall be fixed exclusively
by one or more resolutions adopted by the Board of Directors.
B-1
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(2) Subject to the rights of the holders of any series of Preferred Stock to
elect additional directors under specified circumstances, the directors shall be
divided into two classes designated as Class I and Class II, respectively.
Directors shall be assigned to each class in accordance with a resolution or
resolutions adopted by the Board of Directors. At the first annual meeting of
stockholders following November 30, 1997, the term of office of the Class I
directors shall expire and Class I directors shall be elected for a full term of
two years. At the second annual meeting of stockholders following November 30,
1997, the term of office of the Class II directors shall expire and Class II
directors shall be elected for a full term of two years. At each succeeding
annual meeting of stockholders, directors shall be elected for a full term of
two years to succeed the directors of the class whose terms expire at such
annual meeting.
Notwithstanding the foregoing provisions of this Article, each director
shall serve until his successor is duly elected and qualified or until his
death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
(3) Subject to the rights of the holders of any series of Preferred Stock,
the Board of Directors or any individual director may be removed from office at
any time with or without cause by the affirmative vote of the holders of a
majority of the voting power of all the then-outstanding shares of voting stock
of the corporation, entitled to vote at an election of directors (the "Voting
Stock").
(4) Subject to the rights of the holders of any series of Preferred Stock,
any vacancies on the Board of Directors resulting from death, resignation,
disqualification, removal or other causes and any newly created directorships
resulting from any increase in the number of directors, shall, unless the Board
of Directors determines by resolution that any such vacancies or newly created
directorships shall be filled by the stockholders, except as otherwise provided
by law, be filled only by the affirmative vote of a majority of the directors
then in office, even though less than a quorum of the Board of Directors, and
not by the stockholders. Any director elected in accordance with the preceding
sentence shall hold office for the remainder of the full term of the director
for which the vacancy was created or occurred and until such director's
successor shall have been elected and qualified.
B.
(1) Subject to paragraph (h) of Section 43 of the Bylaws, the Bylaws may be
altered or amended or new Bylaws adopted by the affirmative vote of a majority
of the voting power of all of the then outstanding shares of the Voting Stock.
The Board of Directors shall also have the power to adopt, amend or repeal the
Bylaws.
(2) The directors of the corporation need not be elected by written ballot
unless the Bylaws so provide.
(3) No action shall be taken by the stockholders of the corporation except
at an annual or special meeting of stockholders called in accordance with the
Bylaws.
(4) Special meetings of the stockholders of the corporation may be called,
for any purpose or purposes, by (i) the Chairman of the Board of Directors, (ii)
the President, (iii) the Board of Directors pursuant to a resolution adopted by
a majority of the total number of authorized directors (whether or not there
exist any vacancies in previously authorized directorships at the time any such
resolution is presented to the Board of Directors for adoption) or (iv) by the
holders of the shares entitled to cast not less that ten percent (10%) of the
votes at the meeting, and shall be held at such place, on such date, and at such
time as the Board of Directors shall fix.
(5) Advance notice of stockholder nominations for the election of directors
and of business to be brought by stockholders before any meeting of the
stockholders of the corporation shall be given in the manner provided in the
Bylaws of the corporation.
B-2
<PAGE>
VI.
A. A director of the corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for any breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
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 law (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit. If the Delaware General Corporation Law is amended after
approval by the stockholders of this Article to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director shall be eliminated or limited to the fullest extent
permitted by the Delaware General Corporation Law, as so amended.
B. Any repeal or modification of this Article VI shall be prospective and
shall not affect the rights under this Article VI in effect at the time of the
alleged occurrence of any act or omission to act giving rise to liability or
indemnification.
VII.
A. The corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, except as provided in paragraph B. of this
Article VII, and all rights conferred upon the stockholders herein are granted
subject to this reservation.
B. Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the Voting Stock required by law, this Certificate
of Incorporation or any Preferred Stock Designation, the affirmative vote of the
holders of a majority of the voting power of all of the then-outstanding shares
of the Voting Stock, voting together as a single class, shall be required to
alter, amend or repeal Articles V, VI, and VII.
VIII.
The name and the mailing address of the Sole Incorporator are as follows:
<TABLE>
<S> <C>
NAME MAILING ADDRESS
A. PAUL RIMAS Cooley Godward LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306-2155
</TABLE>
IN WITNESS WHEREOF, this Certificate has been subscribed this day of
, 199 by the undersigned who affirms that the statements made herein
are true and correct.
______________________________________
A. PAUL RIMAS
Sole Incorporator
B-3
<PAGE>
EXHIBIT C
BYLAWS
OF
ADOBE (DELAWARE) INCORPORATED
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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<S> <C> <C>
ARTICLE I OFFICES.................................................................................. 1
Section 1. Registered Office........................................................................ 1
Section 2. Other Offices............................................................................ 1
ARTICLE II CORPORATE SEAL........................................................................... 1
Section 3. Corporate Seal........................................................................... 1
ARTICLE III STOCKHOLDERS' MEETINGS................................................................... 1
Section 4. Place of Meetings........................................................................ 1
Section 5. Annual Meeting........................................................................... 1
Section 6. Special Meetings......................................................................... 3
Section 7. Notice of Meetings....................................................................... 3
Section 8. Quorum................................................................................... 3
Section 9. Adjournment and Notice of Adjourned Meetings............................................. 4
Section 10. Voting Rights............................................................................ 4
Section 11. Joint Owners of Stock.................................................................... 4
Section 12. List of Stockholders..................................................................... 4
Section 13. Action Without Meeting................................................................... 4
Section 14. Organization............................................................................. 4
ARTICLE IV DIRECTORS................................................................................ 5
Section 15. Number and Term of Office................................................................ 5
Section 16. Powers................................................................................... 5
Section 17. Classes of Directors..................................................................... 5
Section 18. Vacancies................................................................................ 5
Section 19. Resignation.............................................................................. 6
Section 20. Removal.................................................................................. 6
Section 21. Meetings................................................................................. 6
(a) Annual Meetings.......................................................................... 6
(b) Regular Meetings......................................................................... 6
(c) Special Meetings......................................................................... 6
(d) Telephone Meetings....................................................................... 6
(e) Notice of Meetings....................................................................... 6
(f) Waiver of Notice......................................................................... 6
Section 22. Quorum and Voting........................................................................ 7
Section 23. Action Without Meeting................................................................... 7
Section 24. Fees and Compensation.................................................................... 7
Section 25. Committees............................................................................... 7
(a) Executive Committee...................................................................... 7
(b) Other Committees......................................................................... 7
(c) Term..................................................................................... 8
(d) Meetings................................................................................. 8
Section 26. Organization............................................................................. 8
</TABLE>
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<TABLE>
<CAPTION>
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<S> <C> <C>
ARTICLE V OFFICERS................................................................................. 8
Section 27. Officers Designated...................................................................... 8
Section 28. Tenure and Duties of Officers............................................................ 9
(a) General.................................................................................. 9
(b) Duties of Chairman of the Board of Directors............................................. 9
(c) Duties of Chief Executive Officer........................................................ 9
(d) Duties of President...................................................................... 9
(e) Duties of Vice Presidents................................................................ 9
(f) Duties of Secretary...................................................................... 9
(g) Duties of Chief Financial Officer........................................................ 9
Section 29. Delegation of Authority.................................................................. 10
Section 30. Resignations............................................................................. 10
Section 31. Removal.................................................................................. 10
ARTICLE VI EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES OWNED BY THE CORPORATION..... 10
Section 32. Execution of Corporate Instruments....................................................... 10
Section 33. Voting of Securities Owned by the Corporation............................................ 10
ARTICLE VII SHARES OF STOCK.......................................................................... 11
Section 34. Form and Execution of Certificates....................................................... 11
Section 35. Lost Certificates........................................................................ 11
Section 36. Transfers................................................................................ 11
Section 37. Fixing Record Dates...................................................................... 11
Section 38. Registered Stockholders.................................................................. 12
ARTICLE VIII OTHER SECURITIES OF THE CORPORATION...................................................... 12
Section 39. Execution of Other Securities............................................................ 12
ARTICLE IX DIVIDENDS................................................................................ 12
Section 40. Declaration of Dividends................................................................. 12
Section 41. Dividend Reserve......................................................................... 12
ARTICLE X FISCAL YEAR.............................................................................. 13
Section 42. Fiscal Year.............................................................................. 13
ARTICLE XI INDEMNIFICATION.......................................................................... 13
Section 43. Indemnification of Directors, Executive Officers, Other Officers, Employees and Other 13
Agents.................................................................................
(a) Directors and Executive Officers......................................................... 13
(b) Other Officers, Employees and Other Agents............................................... 13
(c) Expenses................................................................................. 13
(d) Enforcement.............................................................................. 13
(e) Non-Exclusivity of Rights................................................................ 14
(f) Survival of Rights....................................................................... 14
(g) Insurance................................................................................ 14
(h) Amendments............................................................................... 14
(i) Saving Clause............................................................................ 14
(j) Certain Definitions...................................................................... 14
</TABLE>
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<TABLE>
<CAPTION>
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<S> <C> <C>
ARTICLE XII NOTICES.................................................................................. 15
Section 44. Notices.................................................................................. 15
(a) Notice to Stockholders................................................................... 15
(b) Notice to Directors...................................................................... 15
(c) Affidavit of Mailing..................................................................... 15
(d) Time Notices Deemed Given................................................................ 15
(e) Methods of Notice........................................................................ 15
(f) Failure to Receive Notice................................................................ 16
(g) Notice to Person with Whom Communication Is Unlawful..................................... 16
(h) Notice to Person with Undeliverable Address.............................................. 16
ARTICLE XIII AMENDMENTS............................................................................... 16
Section 45. Amendments............................................................................... 16
ARTICLE XIV LOANS TO OFFICERS........................................................................ 16
Section 46. Loans to Officers........................................................................ 16
ARTICLE XV MISCELLANEOUS............................................................................ 17
Section 47. Annual Report............................................................................ 17
</TABLE>
iii
<PAGE>
BYLAWS
OF
ADOBE SYSTEMS INCORPORATED
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of the corporation in
the State of Delaware shall be in the City of , County of
.
SECTION 2. OTHER OFFICES. The corporation shall also have and maintain an
office or principal place of business at such place as may be fixed by the Board
of Directors, and 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.
ARTICLE II
CORPORATE SEAL
SECTION 3. CORPORATE SEAL. The corporate seal shall consist of a die
bearing the name of the corporation and the inscription, "Corporate
Seal-Delaware." Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE III
STOCKHOLDERS' MEETINGS
SECTION 4. PLACE OF MEETINGS. Meetings of the stockholders of the
corporation shall be held at such place, either within or without the State of
Delaware, as may be designated from time to time by the Board of Directors, or,
if not so designated, then at the office of the corporation required to be
maintained pursuant to Section 2 hereof.
SECTION 5. ANNUAL MEETING.
(a) The annual meeting of the stockholders of the corporation, for the
purpose of election of directors and for such other business as may lawfully
come before it, shall be held on such date and at such time as may be designated
from time to time by the Board of Directors.
(b) At an annual meeting of the stockholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be properly
brought before an annual meeting, business must be: (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. For business to be properly brought before an
annual meeting by a stockholder, the stockholder must have given timely notice
thereof in writing to the Secretary of the corporation. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the corporation not later than the close of
business on the sixtieth (60th) day nor earlier than the close of business on
the ninetieth (90th) day prior to the first anniversary of the preceding year's
annual meeting; PROVIDED, HOWEVER, that in the event that no annual meeting was
held in the previous year or the date of the annual meeting has been changed by
more than thirty (30) days from the date contemplated at the time of the
previous year's proxy statement, notice by the stockholder to be timely must be
so received not earlier than the close of business on the ninetieth (90th) day
prior to such annual meeting and not later than the close of business on the
later of the sixtieth (60th) day prior to such annual meeting or, in the event
public announcement of the
C-1
<PAGE>
date of such annual meeting is first made by the corporation fewer than seventy
(70) days prior to the date of such annual meeting, the close of business on the
tenth (10th) day following the day on which public announcement of the date of
such meeting is first made by the corporation. A stockholder's notice to the
Secretary shall set forth as to each matter the stockholder proposes to bring
before the annual meeting: (i) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting, (ii) the name and address, as they appear on the
corporation's books, of the stockholder proposing such business, (iii) the class
and number of shares of the corporation which are beneficially owned by the
stockholder, (iv) any material interest of the stockholder in such business and
(v) any other information that is required to be provided by the stockholder
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(the "1934 Act"), in his capacity as a proponent to a stockholder proposal.
Notwithstanding the foregoing, in order to include information with respect to a
stockholder proposal in the proxy statement and form of proxy for a
stockholder's meeting, stockholders must provide notice as required by the
regulations promulgated under the 1934 Act. Notwithstanding anything in these
Bylaws to the contrary, no business shall be conducted at any annual meeting
except in accordance with the procedures set forth in this paragraph (b). The
chairman of the annual meeting shall, if the facts warrant, determine and
declare at the meeting that business was not properly brought before the meeting
and in accordance with the provisions of this paragraph (b), and, if he should
so determine, he shall so declare at the meeting that any such business not
properly brought before the meeting shall not be transacted.
(c) Only persons who are nominated in accordance with the procedures set
forth in this paragraph (c) shall be eligible for election as directors.
Nominations of persons for election to the Board of Directors of the corporation
may be made at a meeting of stockholders by or at the direction of the Board of
Directors or by any stockholder of the corporation entitled to vote in the
election of directors at the meeting who complies with the notice procedures set
forth in this paragraph (c). Such nominations, other than those made by or at
the direction of the Board of Directors, shall be made pursuant to timely notice
in writing to the Secretary of the corporation in accordance with the provisions
of paragraph (b) of this Section 5. Such stockholder's notice shall set forth
(i) as to each person, if any, whom the stockholder proposes to nominate for
election or re-election as a director: (A) the name, age, business address and
residence address of such person, (B) the principal occupation or employment of
such person, (C) the class and number of shares of the corporation which are
beneficially owned by such person, (D) a description of all arrangements or
understandings between the stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nominations are to
be made by the stockholder, and (E) any other information relating to such
person that is required to be disclosed in solicitations of proxies for election
of directors, or is otherwise required, in each case pursuant to Regulation 14A
under the 1934 Act (including without limitation such person's written consent
to being named in the proxy statement, if any, as a nominee and to serving as a
director if elected); and (ii) as to such stockholder giving notice, the
information required to be provided pursuant to paragraph (b) of this Section 5.
At the request of the Board of Directors, any person nominated by a stockholder
for election as a director shall furnish to the Secretary of the corporation
that information required to be set forth in the stockholder's notice of
nomination which pertains to the nominee. No person shall be eligible for
election as a director of the corporation unless nominated in accordance with
the procedures set forth in this paragraph (c). The chairman of the meeting
shall, if the facts warrant, determine and declare at the meeting that a
nomination was not made in accordance with the procedures prescribed by these
Bylaws, and if he should so determine, he shall so declare at the meeting, and
the defective nomination shall be disregarded.
(d) For purposes of this Section 5, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press, Business Wire or comparable national news service or in a document
publicly filed by the corporation with the Securities and Exchange Commission
pursuant to Section 13, 14 or 15(d) of the Exchange Act.
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<PAGE>
SECTION 6. SPECIAL MEETINGS.
(a) Special meetings of the stockholders of the corporation may be called,
for any purpose or purposes, by (i) the Chairman of the Board of Directors, (ii)
the President, (iii) the Board of Directors pursuant to a resolution adopted by
a majority of the total number of authorized directors (whether or not there
exist any vacancies in previously authorized directorships at the time any such
resolution is presented to the Board of Directors for adoption) or (iv) by the
holders of shares entitled to cast not less than ten percent (10%) of the votes
at the meeting, and shall be held at such place, on such date, and at such time
as the Board of Directors, shall fix.
(b) If a special meeting is called by any person or persons other than the
Board of Directors, the request shall be in writing, specifying the general
nature of the business proposed to be transacted, and shall be delivered
personally or sent by registered mail or by telegraphic or other facsimile
transmission to the Chairman of the Board of Directors, the Chief Executive
Officer, or the Secretary of the corporation. No business may be transacted at
such special meeting otherwise than specified in such notice. The Board of
Directors shall determine the time and place of such special meeting, which
shall be held not less than thirty-five (35) nor more than one hundred twenty
(120) days after the date of the receipt of the request. Upon determination of
the time and place of the meeting, the officer receiving the request shall cause
notice to be given to the stockholders entitled to vote, in accordance with the
provisions of Section 7 of these Bylaws. If the notice is not given within sixty
(60) days after the receipt of the request, the person or persons requesting the
meeting may set the time and place of the meeting and give the notice. Nothing
contained in this paragraph (b) shall be construed as limiting, fixing, or
affecting the time when a meeting of stockholders called by action of the Board
of Directors may be held.
SECTION 7. NOTICE OF MEETINGS. Except as otherwise provided by law or the
Certificate of Incorporation, written notice of each meeting of stockholders
shall be given not less than ten (10) days nor more than sixty (60) days before
the date of the meeting to each stockholder entitled to vote at such meeting,
such notice to specify the place, date and hour and purpose or purposes of the
meeting. Notice of the time, place and purpose of any meeting of stockholders
may be waived in writing, signed by the person entitled to notice thereof,
either before or after such meeting, and will be waived by any stockholder by
his attendance thereat in person or by proxy, except when the stockholder
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Any stockholder so waiving notice of such meeting shall be
bound by the proceedings of any such meeting in all respects as if due notice
thereof had been given.
SECTION 8. QUORUM. At all meetings of stockholders, except where otherwise
provided by statute or by the Certificate of Incorporation, or by these Bylaws,
the presence, in person or by proxy duly authorized, of the holders of a
majority of the outstanding shares of stock entitled to vote shall constitute a
quorum for the transaction of business. In the absence of a quorum, any meeting
of stockholders may be adjourned, from time to time, either by the chairman of
the meeting or by vote of the holders of a majority of the shares represented
thereat, but no other business shall be transacted at such meeting. The
stockholders present at a duly called or convened meeting, at which a quorum is
present, may continue to transact business until adjournment, notwithstanding
the withdrawal of enough stockholders to leave less than a quorum. Except as
otherwise provided by law, the Certificate of Incorporation or these Bylaws, all
action taken by the holders of a majority of the vote cast, excluding
abstentions, at any meeting at which a quorum is present shall be valid and
binding upon the corporation; PROVIDED, HOWEVER, that directors shall be elected
by a plurality of the votes of the shares present in person or represented by
proxy at the meeting and entitled to vote on the election of directors. Where a
separate vote by a class or classes or series is required, except where
otherwise provided by the statute or by the Certificate of Incorporation or
these Bylaws, a majority of the outstanding shares of such class or classes or
series, present in person or represented by proxy, shall constitute a quorum
entitled to take action with respect to that vote on that matter and, except
where otherwise provided by the statute or by the Certificate of Incorporation
or these Bylaws, the affirmative vote of the majority (plurality, in the case of
the election of directors) of the votes
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cast, including abstentions, by the holders of shares of such class or classes
or series shall be the act of such class or classes or series.
SECTION 9. ADJOURNMENT AND NOTICE OF ADJOURNED MEETINGS. Any meeting of
stockholders, whether annual or special, may be adjourned from time to time
either by the chairman of the meeting or by the vote of a majority of the shares
casting votes, excluding abstentions. When a meeting is adjourned to another
time or place, notice need not be given of the adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken. At
the adjourned meeting, the corporation may transact any business which might
have been transacted at the original meeting. If the adjournment is for more
than thirty (30) days or if after the adjournment a new record date is fixed for
the adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
SECTION 10. VOTING RIGHTS. For the purpose of determining those
stockholders entitled to vote at any meeting of the stockholders, except as
otherwise provided by law, only persons in whose names shares stand on the stock
records of the corporation on the record date, as provided in Section 12 of
these Bylaws, shall be entitled to vote at any meeting of stockholders. Every
person entitled to vote shall have the right to do so either in person or by an
agent or agents authorized by a proxy granted in accordance with Delaware law.
An agent so appointed need not be a stockholder. No proxy shall be voted after
three (3) years from its date of creation unless the proxy provides for a longer
period.
SECTION 11. JOINT OWNERS OF STOCK. If shares or other securities having
voting power stand of record in the names of two (2) or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in common, tenants
by the entirety, or otherwise, or if two (2) or more persons have the same
fiduciary relationship respecting the same shares, unless the Secretary is given
written notice to the contrary and is furnished with a copy of the instrument or
order appointing them or creating the relationship wherein it is so provided,
their acts with respect to voting shall have the following effect: (a) if only
one (1) votes, his or her act binds all; (b) if more than one (1) votes, the act
of the majority so voting binds all; (c) if more than one (1) votes, but the
vote is evenly split on any particular matter, each faction may vote the
securities in question proportionally, or may apply to the Delaware Court of
Chancery for relief as provided in the General Corporation Law of Delaware,
Section 217(b). If the instrument filed with the Secretary shows that any such
tenancy is held in unequal interests, a majority or even-split for the purpose
of subsection (c) shall be a majority or even-split in interest.
SECTION 12. LIST OF STOCKHOLDERS. The Secretary shall prepare and make, at
least ten (10) days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at said meeting, arranged in alphabetical order,
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 specified, at the place where
the meeting is to be held. The list shall be produced and kept at the time and
place of meeting during the whole time thereof and may be inspected by any
stockholder who is present.
SECTION 13. ACTION WITHOUT MEETING. No action shall be taken by the
stockholders except at an annual or special meeting of stockholders called in
accordance with these Bylaws, and no action shall be taken by the stockholders
by written consent.
SECTION 14. ORGANIZATION.
(a) At every meeting of stockholders, the Chairman of the Board of
Directors, or, if a Chairman has not been appointed or is absent, the Chief
Executive Officer, or if the Chief Executive has not been appointed or is
absent, the President, or, if the President is absent, a chairman of the meeting
chosen by a majority in interest of the stockholders entitled to vote, present
in person or by proxy, shall act as
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chairman. The Secretary, or, in his or her absence, an Assistant Secretary
directed to do so by the President, shall act as secretary of the meeting.
(b) The Board of Directors of the corporation shall be entitled to make such
rules or regulations for the conduct of meetings of stockholders as it shall
deem necessary, appropriate or convenient. Subject to such rules and regulations
of the Board of Directors, if any, the chairman of the meeting shall have the
right and authority to prescribe such rules, regulations and procedures and to
do all such acts as, in the judgment of such chairman, are necessary,
appropriate or convenient for the proper conduct of the meeting, including,
without limitation, establishing an agenda or order of business for the meeting,
rules and procedures for maintaining order at the meeting and the safety of
those present, limitations on participation in such meeting to stockholders of
record of the corporation and their duly authorized and constituted proxies and
such other persons as the chairman shall permit, restrictions on entry to the
meeting after the time fixed for the commencement thereof, limitations on the
time allotted to questions or comments by participants and regulation of the
opening and closing of the polls for balloting on matters which are to be voted
on by ballot. Unless and to the extent determined by the Board of Directors or
the chairman of the meeting, meetings of stockholders shall not be required to
be held in accordance with rules of parliamentary procedure.
ARTICLE IV
DIRECTORS
SECTION 15. NUMBER AND TERM OF OFFICE. The authorized number of directors
of the corporation shall be fixed in accordance with the Certificate of
Incorporation. Directors need not be stockholders unless so required by the
Certificate of Incorporation. If for any cause, the directors shall not have
been elected at an annual meeting, they may be elected as soon thereafter as
convenient at a special meeting of the stockholders called for that purpose in
the manner provided in these Bylaws.
SECTION 16. POWERS. The powers of the corporation shall be exercised, its
business conducted and its property controlled by the Board of Directors, except
as may be otherwise provided by statute or by the Certificate of Incorporation.
SECTION 17. CLASSES OF DIRECTORS. Subject to the rights of the holders of
any series of Preferred Stock to elect additional directors under specified
circumstances, the directors shall be divided into two classes designated as
Class I and Class II, respectively. Directors shall be assigned to each class in
accordance with a resolution or resolutions adopted by the Board of Directors.
At the first annual meeting of stockholders following November 30, 1997, the
term of office of the Class I directors shall expire and Class I directors shall
be elected for a full term of two years. At the second annual meeting of
stockholders following November 30, 19997, the term of office of the Class II
directors shall expire and Class II directors shall be elected for a full term
of two years. At each succeeding annual meeting of stockholders, directors shall
be elected for a full term of two years to succeed the directors of the class
whose terms expire at such annual meeting.
Notwithstanding the foregoing provisions of this Section, each director
shall serve until his successor is duly elected and qualified or until his
death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
SECTION 18. VACANCIES. Unless otherwise provided in the Certificate of
Incorporation, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors, shall
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by stockholders, be filled only
by the affirmative vote of a majority of the directors then in office, even
though less than a quorum of the Board of Directors. Any director elected in
accordance with the preceding sentence shall hold office for the remainder of
the full term of the director for which the vacancy
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was created or occurred and until such director's successor shall have been
elected and qualified. A vacancy in the Board of Directors shall be deemed to
exist under this Bylaw in the case of the death, removal or resignation of any
director.
SECTION 19. RESIGNATION. Any director may resign at any time by delivering
his written resignation to the Secretary, such resignation to specify whether it
will be effective at a particular time, upon receipt by the Secretary or at the
pleasure of the Board of Directors. If no such specification is made, it shall
be deemed effective at the pleasure of the Board of Directors. When one or more
directors shall resign from the Board of Directors, effective at a future date,
a majority of the directors then in office, including those who have so
resigned, shall have power to fill such vacancy or vacancies, the vote thereon
to take effect when such resignation or resignations shall become effective, and
each Director so chosen shall hold office for the unexpired portion of the term
of the Director whose place shall be vacated and until his successor shall have
been duly elected and qualified.
SECTION 20. REMOVAL. Subject to the rights of the holders of any series of
Preferred Stock, the Board of Directors or any individual director may be
removed from office at any time with or without cause by the affirmative vote of
the holders of a majority of the voting power of all the then-outstanding shares
of voting stock of the corporation, entitled to vote at an election of directors
(the "Voting Stock").
SECTION 21. MEETINGS.
(A) ANNUAL MEETINGS. The annual meeting of the Board of Directors shall be
held immediately before or after the annual meeting of stockholders and may be
at the place where such meeting is held. No notice of an annual meeting of the
Board of Directors shall be necessary and such meeting shall be held for the
purpose of electing officers and transacting such other business as may lawfully
come before it.
(B) REGULAR MEETINGS. Except as hereinafter otherwise provided, regular
meetings of the Board of Directors shall be held in the office of the
corporation required to be maintained pursuant to Section 2 hereof. Unless
otherwise restricted by the Certificate of Incorporation, regular meetings of
the Board of Directors may also be held at any place within or without the State
of Delaware which has been designated by resolution of the Board of Directors or
the written consent of all directors.
(C) SPECIAL MEETINGS. Unless otherwise restricted by the Certificate of
Incorporation, special meetings of the Board of Directors may be held at any
time and place within or without the State of Delaware whenever called by the
Chairman of the Board, the President or any two of the directors.
(D) TELEPHONE MEETINGS. Any member of the Board of Directors, or of any
committee thereof, may participate in a meeting by means of conference telephone
or similar communications equipment by means of which all persons participating
in the meeting can hear each other, and participation in a meeting by such means
shall constitute presence in person at such meeting.
(E) NOTICE OF MEETINGS. Notice of the time and place of all special
meetings of the Board of Directors shall be orally or in writing, by telephone,
facsimile, electronic mail, telegraph or telex, during normal business hours, at
least twenty-four (24) hours before the date and time of the meeting, or sent in
writing to each director by first class mail, charges prepaid, at least three
(3) days before the date of the meeting. Notice of any meeting may be waived in
writing at any time before or after the meeting and will be waived by any
director by attendance thereat, except when the director 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.
(F) WAIVER OF NOTICE. The transaction of all business at any meeting of the
Board of Directors, or any committee thereof, however called or noticed, or
wherever held, shall be as valid as though had at a meeting duly held after
regular call and notice, if a quorum be present and if, either before or after
the meeting, each of the directors not present shall sign a written waiver of
notice. All such waivers shall be filed with the corporate records or made a
part of the minutes of the meeting.
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SECTION 22. QUORUM AND VOTING.
(A) Unless the Certificate of Incorporation requires a greater number and
except with respect to indemnification questions arising under Section 43
hereof, for which a quorum shall be one-third of the exact number of directors
fixed from time to time in accordance with the Certificate of Incorporation, a
quorum of the Board of Directors shall consist of a majority of the exact number
of directors fixed from time to time by the Board of Directors in accordance
with the Certificate of Incorporation; PROVIDED, HOWEVER, at any meeting whether
a quorum be present or otherwise, a majority of the directors present may
adjourn from time to time until the time fixed for the next regular meeting of
the Board of Directors, without notice other than by announcement at the
meeting.
(B) At each meeting of the Board of Directors at which a quorum is present,
all questions and business shall be determined by the affirmative vote of a
majority of the directors present, unless a different vote be required by law,
the Certificate of Incorporation or these Bylaws.
SECTION 23. ACTION WITHOUT MEETING. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and such writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
SECTION 24. FEES AND COMPENSATION. Directors shall be entitled to such
compensation for their services as may be approved by the Board of Directors,
including, if so approved, by resolution of the Board of Directors, a fixed sum
and expenses of attendance, if any, for attendance at each regular or special
meeting of the Board of Directors and at any meeting of a committee of the Board
of Directors. Nothing herein contained shall be construed to preclude any
director from serving the corporation in any other capacity as an officer,
agent, employee, or otherwise and receiving compensation therefor.
SECTION 25. COMMITTEES.
(A) EXECUTIVE COMMITTEE. The Board of Directors may by resolution passed by
a majority of the whole Board of Directors appoint an Executive Committee to
consist of one (1) or more members of the Board of Directors. The Executive
Committee, to the extent permitted by law and provided in the resolution of the
Board of Directors shall have and may exercise all the powers and authority of
the Board of Directors in the management of the business and affairs of the
corporation, including without limitation the power or authority to declare a
dividend, to authorize the issuance of stock and to adopt a certificate of
ownership and merger, and may authorize the seal of the corporation to be
affixed to all papers which may require it; but no such committee shall have the
power or authority in reference to amending the Certificate of Incorporation
(except that a committee may, to the extent authorized in the resolution or
resolutions providing for the issuance of shares of stock adopted by the Board
of Directors fix the designations and any of the preferences or rights of such
shares relating to dividends, redemption, dissolution, any distribution of
assets of the corporation or the conversion into, or the exchange of such shares
for, shares of any other class or classes or any other series of the same or any
other class or classes of stock of the corporation or fix the number of shares
of any series of stock or authorize the increase or decrease of the shares of
any series), 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.
(B) OTHER COMMITTEES. The Board of Directors may, by resolution passed by a
majority of the whole Board of Directors, from time to time appoint such other
committees as may be permitted by law. Such other committees appointed by the
Board of Directors shall consist of one (1) or more members of the Board of
Directors and shall have such powers and perform such duties as may be
prescribed by the resolution or resolutions creating such committees, but in no
event shall such committee have the powers denied to the Executive Committee in
these Bylaws.
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(C) TERM. Each member of a committee of the Board of Directors shall serve
at the pleasure of the Board of Directors and until his or her successors shall
have been duly elected, unless sooner removed. The Board of Directors, subject
to the provisions of subsections (a) or (b) of this Bylaw may at any time
increase or decrease the number of members of a committee or terminate the
existence of a committee. The membership of a committee member shall terminate
on the date of his death or voluntary resignation from the committee or from the
Board of Directors. The Board of Directors may at any time for any reason remove
any individual committee member and the Board of Directors may fill any
committee vacancy created by death, resignation, removal or increase in the
number of members of the committee. The Board of Directors may designate one or
more directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee, and, in addition, in the
absence or disqualification of any member of a committee, the member or members
thereof present at any meeting and not disqualified from voting, whether or not
he or they constitute a quorum, may unanimously appoint another member of the
Board of Directors to act at the meeting in the place of any such absent or
disqualified member.
(D) MEETINGS. Unless the Board of Directors shall otherwise provide,
regular meetings of the Executive Committee or any other committee appointed
pursuant to this Section 25 shall be held at such times and places as are
determined by the Board of Directors, or by any such committee, and when notice
thereof has been given to each member of such committee, no further notice of
such regular meetings need be given thereafter. Special meetings of any such
committee may be held at any place which has been determined from time to time
by such committee, and may be called by any director who is a member of such
committee, upon written notice to the members of such committee of the time and
place of such special meeting given in the manner provided for the giving of
written notice to members of the Board of Directors of the time and place of
special meetings of the Board of Directors. Notice of any special meeting of any
committee may be waived in writing at any time before or after the meeting and
will be waived by any director by attendance thereat, except when the director
attends such special 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. A majority of the authorized number of
members of any such committee shall constitute a quorum for the transaction of
business, and the act of a majority of those present at any meeting at which a
quorum is present shall be the act of such committee.
SECTION 26. ORGANIZATION. At every meeting of the directors, the Chairman
of the Board of Directors, or, if a Chairman has not been appointed or is
absent, the Chief Executive Officer, or if the Chief Executive Officer is
absent, the President, or if the President is absent, the most senior Vice
President, or, in the absence of any such officer, a chairman of the meeting
chosen by a majority of the directors present, shall preside over the meeting.
The Secretary, or in his or her absence, an Assistant Secretary directed to do
so by the President, shall act as secretary of the meeting.
ARTICLE V
OFFICERS
SECTION 27. OFFICERS DESIGNATED. The officers of the corporation shall
include, if and when designated by the Board of Directors, the Chairman of the
Board of Directors, the Chief Executive Officer, the President, one or more Vice
Presidents, the Secretary, and the Chief Financial Officer, all of whom shall be
appointed at the annual organizational meeting of the Board of Directors. The
Board of Directors (or if so empowered in accordance with this Section 27) may
also appoint other officers and agents with such powers and duties as it shall
deem necessary. Notwithstanding the foregoing, the Board of Directors may
empower the Chief Executive Officer of the corporation to appoint such officers,
other than Chairman of the Board, President, Secretary or Chief Financial
Officer, as the business of the corporation may require. The Board of Directors
may assign such additional titles to one or more of the officers as it shall
deem appropriate. Any one person may hold any number of offices of the
corporation at any one time unless specifically prohibited therefrom by law. The
salaries and other compensation of the officers of the
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corporation shall be fixed by or in the manner designated by the Board of
Directors or a designated committee of the Board of Directors.
SECTION 28. TENURE AND DUTIES OF OFFICERS.
(A) GENERAL. All officers shall hold office at the pleasure of the Board of
Directors and until their successors shall have been duly elected and qualified,
unless sooner removed. Any officer elected or appointed by the Board of
Directors may be removed at any time by the Board of Directors. If the office of
any officer becomes vacant for any reason, the vacancy may be filled by the
Board of Directors.
(B) DUTIES OF CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of the Board
of Directors, when present, shall preside at all meetings of the stockholders
and the Board of Directors. The Chairman of the Board of Directors shall perform
other duties commonly incident to his office and shall also perform such other
duties and have such other powers as the Board of Directors shall designate from
time to time. If there is no Chief Executive Officer or President, then the
Chairman of the Board of Directors shall also serve as the Chief Executive
Officer of the corporation and shall have the powers and duties prescribed in
paragraph (c) of this Section 28.
(C) DUTIES OF CHIEF EXECUTIVE OFFICER. Subject to such supervisory powers,
if any, as may be given by the Board of Directors to the Chairman of the Board,
if there by such an officer, the Chief Executive Officer shall be the general
manager and chief executive officer of the corporation and shall, subject to the
control of the Board of Directors, have general supervision, direction, and
control of the business and officers of the corporation. He or she shall preside
at all meetings of the stockholders and shall have the general powers and duties
of management usually vested in the office of chief executive officer of a
corporation, and shall have other powers and duties as may be prescribed by the
Board of Directors.
(D) DUTIES OF PRESIDENT. In the absence or disability of the Chief
Executive Officer, the President shall perform the duties of the Chief Executive
Officer and, when so acting, shall have all the powers of, and be subject to all
of the restrictions upon, the Chief Executive Officer. The President shall have
such other powers and perform such other duties as from time to time may be
prescribed for the President by the board of Directors or the Chief Executive
Officer.
(E) DUTIES OF VICE PRESIDENTS. In the absence or disability of the
President, the Vice Presidents in order of their rank as fixed by the Board of
Directors, or if not ranked, the Vice President designated by the Board of
Directors, shall perform the duties of the President, and when so acting shall
have all the powers of, and be subject to all the restrictions upon, the
President. The Vice Presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by the
Board of Directors, the Chief Executive Officer or the President.
(F) DUTIES OF SECRETARY. The Secretary shall keep, or cause to be kept, a
book of minutes in written form of the proceedings of the Board of Directors,
committees of the Board, and stockholders. Such minutes shall include all
waivers of notice, consents to the holding of meetings, or approvals of the
minutes of meetings executed pursuant to these Bylaws or the Delaware General
Corporation Law. 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, a record of its stockholders, giving the name and addresses of all
stockholders and the number and class of shares held by each. The Secretary
shall give or cause to be given, notice of all meetings of the stockholders and
of the Board of Directors required by these Bylaws or by law to be given, and
shall keep the seal of the corporation in safe custody, and shall have such
other powers and perform such other duties as may be prescribed by the Board of
Directors, the Chief Executive Officer or the President.
(G) DUTIES OF 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 account in written form or any other form capable of being
converted into written form. The Chief Financial Officer shall deposit all
monies and other valuables in the name and to the credit of the corporation with
such depositories as may
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be designated by the Board of Directors. He or she shall disburse all funds of
the corporation as may be ordered by the Board of Directors, shall render to the
President, Chief Executive Officer and Directors, whenever they request it, an
account of all of his or her transactions as Chief Financial Officer and of the
financial condition of the corporation, and shall have such other powers and
perform such other duties as may be prescribed by the Board of Directors, the
Chief Executive Officer or the President.
SECTION 29. DELEGATION OF AUTHORITY. The Board of Directors may from time
to time delegate the powers or duties of any officer to any other officer or
agent, notwithstanding any provision hereof.
SECTION 30. RESIGNATIONS. Any officer may resign at any time by giving
written notice to the Board of Directors or to the President or to the
Secretary. Any such resignation shall be effective when received by the person
or persons to whom such notice is given, unless a later time is specified
therein, in which event the resignation shall become effective at such later
time. Unless otherwise specified in such notice, the acceptance of any such
resignation shall not be necessary to make it effective. Any resignation shall
be without prejudice to the rights, if any, of the corporation under any
contract with the resigning officer.
SECTION 31. REMOVAL. Any officer may be removed from office at any time,
either with or without cause, by the affirmative vote of a majority of the
directors in office at the time, or by the unanimous written consent of the
directors in office at the time, or by any committee or superior officers upon
whom such power of removal may have been conferred by the Board of Directors.
ARTICLE VI
EXECUTION OF CORPORATE INSTRUMENTS AND VOTING
OF SECURITIES OWNED BY THE CORPORATION
SECTION 32. EXECUTION OF CORPORATE INSTRUMENTS. The Board of Directors
may, in its discretion, determine the method and designate the signatory officer
or officers, or other person or persons, to execute on behalf of the corporation
any corporate instrument or document, or to sign on behalf of the corporation
the corporate name without limitation, or to enter into contracts on behalf of
the corporation, except where otherwise provided by law or these Bylaws, and
such execution or signature shall be binding upon the corporation.
Unless otherwise specifically determined by the Board of Directors or
otherwise required by law, promissory notes, deeds of trust, mortgages and other
evidences of indebtedness of the corporation, and other corporate instruments or
documents requiring the corporate seal, and certificates of shares of stock
owned by the corporation, shall be executed, signed or endorsed by the Chairman
of the Board of Directors, the Chief Executive Officer, or the President, Chief
Financial Officer or any Vice President. All other instruments and documents
requiring the corporate signature, but not requiring the corporate seal, may be
executed as aforesaid or in such other manner as may be directed by the Board of
Directors.
All checks and drafts drawn on banks or other depositaries on funds to the
credit of the corporation or in special accounts of the corporation shall be
signed by such person or persons as the Board of Directors shall authorize so to
do.
Unless authorized or ratified by the Board of Directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
SECTION 33. VOTING OF SECURITIES OWNED BY THE CORPORATION. All stock and
other securities of other corporations owned or held by the corporation for
itself, or for other parties in any capacity, shall be voted, and all proxies
with respect thereto shall be executed, by the person authorized so to do by
resolution of the Board of Directors, or, in the absence of such authorization,
by the Chairman of the Board of Directors, the Chief Executive Officer, the
President, or any Vice President.
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ARTICLE VII
SHARES OF STOCK
SECTION 34. FORM AND EXECUTION OF CERTIFICATES. Certificates for the
shares of stock of the corporation shall be in such form as is consistent with
the Certificate of Incorporation and applicable law. Every holder of stock in
the corporation shall be entitled to have a certificate signed by or in the name
of the corporation by the Chairman of the Board of Directors, the Chief
Executive Officer, or the President or any Vice President and by the Treasurer
or Assistant Treasurer or the Secretary or Assistant Secretary, certifying the
number of shares owned by him in the corporation. Any or all of the signatures
on the certificate may be facsimiles. 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 with the same effect as if
he were such officer, transfer agent, or registrar at the date of issue. Each
certificate shall state upon the face or back thereof, in full or in summary,
all of the powers, designations, preferences, and rights, and the limitations or
restrictions of the shares authorized to be issued or shall, except as otherwise
required by law, set forth on the face or back a statement that the corporation
will furnish without charge to each stockholder who so requests the powers,
designations, preferences and relative, participating, optional, or other
special rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights. Within a
reasonable time after the issuance or transfer of uncertificated stock, the
corporation shall send to the registered owner thereof a written notice
containing the information required to be set forth or stated on certificates
pursuant to this section or otherwise required by law or with respect to this
section a statement that the corporation will furnish without charge to each
stockholder who so requests the powers, designations, preferences and relative
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights. Except as otherwise expressly provided by law, the rights and
obligations of the holders of certificates representing stock of the same class
and series shall be identical.
SECTION 35. LOST CERTIFICATES. A new certificate or certificates shall be
issued in place of any certificate or certificates 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 of stock to be
lost, stolen, or destroyed. The corporation may require, as a condition
precedent to the issuance of a new certificate or certificates, the owner of
such lost, stolen, or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as it shall require or to
give the corporation a surety bond in such form and amount as it may direct as
indemnity against any claim that may be made against the corporation with
respect to the certificate alleged to have been lost, stolen, or destroyed.
SECTION 36. TRANSFERS.
(A) Transfers of record of shares of stock of the corporation shall be made
only upon its books by the holders thereof, in person or by attorney duly
authorized, and upon the surrender of a properly endorsed certificate or
certificates for a like number of shares.
(B) The corporation shall have power to enter into and perform any agreement
with any number of stockholders of any one or more classes of stock of the
corporation to restrict the transfer of shares of stock of the corporation of
any one or more classes owned by such stockholders in any manner not prohibited
by the General Corporation Law of Delaware.
SECTION 37. FIXING RECORD DATES.
(A) 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,
the Board of Directors may fix, in advance, a record date, which record date
shall not precede the date upon which the resolution fixing the record date is
adopted by the Board of Directors, and which record date shall not be more than
sixty (60) nor less than ten (10) days before the date of such meeting. If no
record date is fixed by the Board of Directors, the
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record date for determining stockholders entitled to notice of or to vote at a
meeting of stockholders shall be at the close of business on the day next
preceding the day on which notice is given, or if notice is waived, at the close
of business on the day next preceding the day on which the meeting is held. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; PROVIDED,
HOWEVER, that the Board of Directors may fix a new record date for the adjourned
meeting.
SECTION 38. REGISTERED STOCKHOLDERS. The corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and shall not be
bound to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of Delaware.
ARTICLE VIII
OTHER SECURITIES OF THE CORPORATION
SECTION 39. EXECUTION OF OTHER SECURITIES. All bonds, debentures and other
corporate securities of the corporation, other than stock certificates (covered
in Section 34), may be signed by the Chairman of the Board of Directors, the
Chief Executive Officer, the President or any Vice President, or such other
person as may be authorized by the Board of Directors, and the corporate seal
impressed thereon or a facsimile of such seal imprinted thereon and attested by
the signature of the Secretary or an Assistant Secretary, or the Chief Financial
Officer or Treasurer or an Assistant Treasurer; PROVIDED, HOWEVER, that where
any such bond, debenture or other corporate security shall be authenticated by
the manual signature, or where permissible facsimile signature, of a trustee
under an indenture pursuant to which such bond, debenture or other corporate
security shall be issued, the signatures of the persons signing and attesting
the corporate seal on such bond, debenture or other corporate security may be
the imprinted facsimile of the signatures of such persons. Interest coupons
appertaining to any such bond, debenture or other corporate security,
authenticated by a trustee as aforesaid, shall be signed by the Chief Financial
Officer, Treasurer or an Assistant Treasurer of the corporation or such other
person as may be authorized by the Board of Directors, or bear imprinted thereon
the facsimile signature of such person. In case any officer who shall have
signed or attested any bond, debenture or other corporate security, or whose
facsimile signature shall appear thereon or on any such interest coupon, shall
have ceased to be such officer before the bond, debenture or other corporate
security so signed or attested shall have been delivered, such bond, debenture
or other corporate security nevertheless may be adopted by the corporation and
issued and delivered as though the person who signed the same or whose facsimile
signature shall have been used thereon had not ceased to be such officer of the
corporation.
ARTICLE IX
DIVIDENDS
SECTION 40. DECLARATION OF DIVIDENDS. Dividends upon the capital stock of
the corporation, subject to the provisions of the Certificate of Incorporation,
if any, may be declared by the Board of Directors pursuant to law at any regular
or special meeting. Dividends may be paid in cash, in property, or in shares of
the capital stock, subject to the provisions of the Certificate of
Incorporation.
SECTION 41. DIVIDEND RESERVE. Before payment of any dividend, there may be
set aside out of any funds of the corporation available for dividends such sum
or sums as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the Board of Directors shall think
conducive to the interests of the corporation, and the Board of Directors may
modify or abolish any such reserve in the manner in which it was created.
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ARTICLE X
FISCAL YEAR
SECTION 42. FISCAL YEAR. The fiscal year of the corporation shall be fixed
by resolution of the Board of Directors.
ARTICLE XI
INDEMNIFICATION
SECTION 43. INDEMNIFICATION OF DIRECTORS, EXECUTIVE OFFICERS, OTHER
OFFICERS, EMPLOYEES AND OTHER AGENTS.
(A) DIRECTORS AND EXECUTIVE OFFICERS. The corporation shall indemnify its
directors and executive officers (for the purposes of this Article XI,
"executive officers shall have the meaning defined in Rule 3b-7 promulgated
under the 1934 Act) to the fullest extent not prohibited by the Delaware General
Corporation Law; PROVIDED, HOWEVER, that the corporation may modify the extent
of such indemnification by individual contracts with its directors and executive
officers; and, PROVIDED, FURTHER, that the corporation shall not be required to
indemnify any director or executive officer in connection with any proceeding
(or part thereof) initiated by such person unless (i) such indemnification is
expressly required to be made by law, (ii) the proceeding was authorized by the
Board of Directors of the corporation, (iii) such indemnification is provided by
the corporation, in its sole discretion, pursuant to the powers vested in the
corporation under the Delaware General Corporation Law or (iv) such
indemnification is required to be made under subsection (d).
(B) OTHER OFFICERS, EMPLOYEES AND OTHER AGENTS. The corporation shall have
power to indemnify its other officers, employees and other agents as set forth
in the Delaware General Corporation Law.
(C) EXPENSES. The corporation shall advance to any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director or executive
officer of the corporation, or is or was serving at the request of the
corporation as a director or executive officer of another corporation,
partnership, joint venture, trust or other enterprise, prior to the final
disposition of the proceeding, promptly following request therefor, all expenses
incurred by any director or executive officer in connection with such proceeding
upon receipt of an undertaking by or on behalf of such person to repay said
amounts if it should be determined ultimately that such person is not entitled
to be indemnified under this Bylaw or otherwise.
Notwithstanding the foregoing, unless otherwise determined pursuant to
paragraph (e) of this Bylaw, no advance shall be made by the corporation to an
executive officer of the corporation (except by reason of the fact that such
executive officer is or was a director of the corporation in which event this
paragraph shall not apply) in any action, suit or proceeding, whether civil,
criminal, administrative or investigative, if a determination is reasonably and
promptly made (i) by the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to the proceeding, or (ii) if such
quorum is not obtainable, or, even if obtainable, a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, that
the facts known to the decision-making party at the time such determination is
made demonstrate clearly and convincingly that such person acted in bad faith or
in a manner that such person did not believe to be in or not opposed to the best
interests of the corporation.
(D) ENFORCEMENT. Without the necessity of entering into an express
contract, all rights to indemnification and advances to directors and executive
officers under this Bylaw shall be deemed to be contractual rights and be
effective to the same extent and as if provided for in a contract between the
corporation and the director or executive officer. Any right to indemnification
or advances granted by this Bylaw to a director or executive officer shall be
enforceable by or on behalf of the person holding such right in any
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court of competent jurisdiction if (i) the claim for indemnification or advances
is denied, in whole or in part, or (ii) no disposition of such claim is made
within ninety (90) days of request therefor. The claimant in such enforcement
action, if successful in whole or in part, shall be entitled to be paid also the
expense of prosecuting his claim. In connection with any claim for
indemnification, the corporation shall be entitled to raise as a defense to any
such action that the claimant has not met the standards of conduct that make it
permissible under the Delaware General Corporation Law for the corporation to
indemnify the claimant for the amount claimed. In connection with any claim by
an executive officer of the corporation (except in any action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that such executive officer is or was a director of the corporation)
for advances, the corporation shall be entitled to raise a defense as to any
such action clear and convincing evidence that such person acted in bad faith or
in a manner that such person did not believe to be in or not opposed to the best
interests of the corporation, or with respect to any criminal action or
proceeding that such person acted without reasonable cause to believe that his
conduct was lawful. Neither the failure of the corporation (including its Board
of Directors, independent legal counsel or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he has met the applicable
standard of conduct set forth in the Delaware General Corporation Law, nor an
actual determination by the corporation (including its Board of Directors,
independent legal counsel or its stockholders) that the claimant has not met
such applicable standard of conduct, shall be a defense to the action or create
a presumption that claimant has not met the applicable standard of conduct. In
any suit brought by a director or executive officer to enforce a right to
indemnification or to an advancement of expenses hereunder, the burden of
proving that the director or executive officer is not entitled to be
indemnified, or to such advancement of expenses, under this Article XI or
otherwise shall be on the corporation.
(E) NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any person by this
Bylaw shall not be exclusive of any other right which such person may have or
hereafter acquire under any statute, provision of the Certificate of
Incorporation, Bylaws, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding office. The corporation is specifically
authorized to enter into individual contracts with any or all of its directors,
officers, employees or agents respecting indemnification and advances, to the
fullest extent not prohibited by the Delaware General Corporation Law.
(F) SURVIVAL OF RIGHTS. The rights conferred on any person by this Bylaw
shall continue as to a person who has ceased to be a director, officer, employee
or other agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
(G) INSURANCE. To the fullest extent permitted by the Delaware General
Corporation Law, the corporation, upon approval by the Board of Directors, may
purchase insurance on behalf of any person required or permitted to be
indemnified pursuant to this Bylaw.
(H) AMENDMENTS. Any repeal or modification of this Bylaw shall only be
prospective and shall not affect the rights under this Bylaw in effect at the
time of the alleged occurrence of any action or omission to act that is the
cause of any proceeding against any agent of the corporation.
(I) SAVING CLAUSE. If this Bylaw or any portion hereof shall be invalidated
on any ground by any court of competent jurisdiction, then the corporation shall
nevertheless indemnify each director and executive officer to the full extent
not prohibited by any applicable portion of this Bylaw that shall not have been
invalidated, or by any other applicable law.
(J) CERTAIN DEFINITIONS. For the purposes of this Bylaw, the following
definitions shall apply:
(I) The term "proceeding" shall be broadly construed and shall include,
without limitation, the investigation, preparation, prosecution, defense,
settle-ment, arbitration and appeal of, and the giving
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of testimony in, any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative.
(II) The term "expenses" shall be broadly construed and shall include,
without limitation, court costs, attorneys' fees, witness fees, fines,
amounts paid in settlement or judgment and any other costs and expenses of
any nature or kind incurred in connection with any proceeding.
(III) The term the "corporation" shall include, in addition to the
resulting corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or merger which,
if its separate existence had continued, would have had power and authority
to indemnify its directors, officers, and employees or agents, so that any
person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, shall
stand in the same position under the provisions of this Bylaw with respect
to the resulting or surviving corporation as he would have with respect to
such constituent corporation if its separate existence had continued.
(IV) References to a "director," "executive officer," "officer,"
"employee," or "agent" of the corporation shall include, without limitation,
situations where such person is serving at the request of the corporation
as, respectively, a director, executive officer, officer, employee, trustee
or agent of another corporation, partnership, joint venture, trust or other
enterprise.
(V) References to "other enterprises" shall include employee benefit
plans; references to "fines" shall include any excise taxes assessed on a
person with respect to an employee benefit plan; and references to "serving
at the request of the corporation" shall include any service as a director,
officer, employee or agent of the corporation which imposes duties on, or
involves services by, such director, officer, employee, or agent with
respect to an employee benefit plan, its participants, or beneficiaries; and
a person who acted in good faith and in a manner he reasonably believed to
be in the interest of the participants and beneficiaries of an employee
benefit plan shall be deemed to have acted in a manner "not opposed to the
best interests of the corporation" as referred to in this Bylaw.
ARTICLE XII
NOTICES
SECTION 44. NOTICES.
(A) NOTICE TO STOCKHOLDERS. Whenever, under any provisions of these Bylaws,
notice is required to be given to any stockholder, it shall be given in writing,
timely and duly deposited in the United States mail, postage prepaid, and
addressed to his last known post office address as shown by the stock record of
the corporation or its transfer agent.
(B) NOTICE TO DIRECTORS. Any notice required to be given to any director
may be given by the method stated in subsection (a), or by facsimile, telex or
telegram, except that such notice other than one which is delivered personally
shall be sent to such address as such director shall have filed in writing with
the Secretary, or, in the absence of such filing, to the last known post office
address of such director.
(C) AFFIDAVIT OF MAILING. An affidavit of mailing, executed by a duly
authorized and competent employee of the corporation or its transfer agent
appointed with respect to the class of stock affected, specifying the name and
address or the names and addresses of the stockholder or stockholders, or
director or directors, to whom any such notice or notices was or were given, and
the time and method of giving the same, shall in the absence of fraud, be prima
facie evidence of the facts therein contained.
(D) TIME NOTICES DEEMED GIVEN. All notices given by mail, as above
provided, shall be deemed to have been given as at the time of mailing, and all
notices given by facsimile, telex or telegram shall be deemed to have been given
as of the sending time recorded at time of transmission.
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(E) METHODS OF NOTICE. It shall not be necessary that the same method of
giving notice be employed in respect of all directors, but one permissible
method may be employed in respect of any one or more, and any other permissible
method or methods may be employed in respect of any other or others.
(F) FAILURE TO RECEIVE NOTICE. The period or limitation of time within
which any stockholder may exercise any option or right, or enjoy any privilege
or benefit, or be required to act, or within which any director may exercise any
power or right, or enjoy any privilege, pursuant to any notice sent him in the
manner above provided, shall not be affected or extended in any manner by the
failure of such stockholder or such director to receive such notice.
(G) NOTICE TO PERSON WITH WHOM COMMUNICATION IS UNLAWFUL. Whenever notice
is required to be given, under any provision of law or of the Certificate of
Incorporation or Bylaws of the corporation, to any person with whom
communication is unlawful, the giving of such notice to such person shall not be
required and there shall be no duty to apply to any governmental authority or
agency for a license or permit to give such notice to such person. Any action or
meeting which shall be taken or held without notice to any such person with whom
communication is unlawful shall have the same force and effect as if such notice
had been duly given. In the event that the action taken by the corporation is
such as to require the filing of a certificate under any provision of the
Delaware General Corporation Law, the certificate shall state, if such is the
fact and if notice is required, that notice was given to all persons entitled to
receive notice except such persons with whom communication is unlawful.
(H) NOTICE TO PERSON WITH UNDELIVERABLE ADDRESS. Whenever notice is
required to be given, under any provision of law or the Certificate of
Incorporation or Bylaws of the corporation, to any stockholder to whom (i)
notice of two consecutive annual meetings, and all notices of meetings or of the
taking of action by written consent without a meeting to such person during the
period between such two consecutive annual meetings, or (ii) all, and at least
two, payments (if sent by first class mail) of dividends or interest on
securities during a twelve-month period, have been mailed addressed to such
person at his address as shown on the records of the corporation and have been
returned undeliverable, the giving of such notice to such person shall not be
required. Any action or meeting which shall be taken or held without notice to
such person shall have the same force and effect as if such notice had been duly
given. If any such person shall deliver to the corporation a written notice
setting forth his then current address, the requirement that notice be given to
such person shall be reinstated. In the event that the action taken by the
corporation is such as to require the filing of a certificate under any
provision of the Delaware General Corporation Law, the certificate need not
state that notice was not given to persons to whom notice was not required to be
given pursuant to this paragraph.
ARTICLE XIII
AMENDMENTS
SECTION 45. AMENDMENTS. Subject to paragraph (h) of Section 43 of the
Bylaws, the Bylaws may be altered or amended or new Bylaws adopted by the
affirmative vote of a majority of the voting power of all of the
then-outstanding shares of the Voting Stock. The Board of Directors shall also
have the power to adopt, amend, or repeal the Bylaws.
ARTICLE XIV
LOANS TO OFFICERS
SECTION 46. LOANS TO OFFICERS. The corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other employee
of the corporation or of its subsidiaries, including any officer or employee who
is a Director of the corporation or its subsidiaries, whenever, in the judgment
of the Board of Directors, such loan, guarantee or assistance may reasonably be
expected to benefit the corporation. The loan, guarantee or other assistance may
be with or without interest and may be
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unsecured, or secured in such manner as the Board of Directors shall approve,
including, without limitation, a pledge of shares of stock of the corporation.
Nothing in these Bylaws shall be deemed to deny, limit or restrict the powers of
guaranty or warranty of the corporation at common law or under any statute.
ARTICLE XV
MISCELLANEOUS
SECTION 47. ANNUAL REPORT.
(A) Subject to the provisions of paragraph (b) of this Bylaw, the Board of
Directors shall cause an annual report to be sent to each stockholder of the
corporation not later than one hundred twenty (120) days after the close of the
corporation's fiscal year. Such report shall include a balance sheet as of the
end of such fiscal year and an income statement and statement of changes in
financial position for such fiscal year, accompanied by any report thereon of
independent accountants, or if there is no such report, the certificate of an
authorized officer of the corporation that such statements were prepared without
audit from the books and records of the corporation.
When there are more than one hundred (100) stockholders of record of the
corporation's shares, as determined by Section 605 of the California
Corporations Code, additional information as required by Section 1501(b) of the
California Corporations Code shall also be contained in such report, provided
that if the corporation has a class of securities registered under Section 12 of
the 1934 Act, that Act shall take precedence. Such report shall be sent to
stockholders at least fifteen (15) days prior to the next annual meeting of
stockholders after the end of the fiscal year to which it relates.
(B) If and so long as there are fewer than 100 holders of record of the
corporation's shares, the requirement of sending of an annual report to the
stockholders of the corporation is hereby expressly waived.
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EXHIBIT D
INDEMNITY AGREEMENT
THIS AGREEMENT is made and entered into this day of , 1996 by
and between ADOBE (DELAWARE) INCORPORATED, a Delaware corporation (the
"Corporation"), and ("Agent").
RECITALS
WHEREAS, Agent performs a valuable service to the Corporation in his/her
capacity as of the Corporation;
WHEREAS, the stockholders of the Corporation have adopted bylaws (the
"Bylaws") providing for the indemnification of the directors, officers,
employees and other agents of the Corporation, including persons serving at the
request of the Corporation in such capacities with other corporations or
enterprises, as authorized by the Delaware General Corporation Law, as amended
(the "Code");
WHEREAS, the Bylaws and the Code, by their non-exclusive nature, permit
contracts between the Corporation and its agents, officers, employees and other
agents with respect to indemnification of such persons; and
WHEREAS, in order to induce Agent to continue to serve as of the
Corporation, the Corporation has determined and agreed to enter into this
Agreement with Agent;
NOW, THEREFORE, in consideration of Agent's continued service as
after the date hereof, the parties hereto agree as follows:
AGREEMENT
1. SERVICES TO THE CORPORATION. Agent will serve, at the will of the
Corporation or under separate contract, if any such contract exists, as
of the Corporation or as a director, officer or other fiduciary of
an affiliate of the Corporation (including any employee benefit plan of the
Corporation) faithfully and to the best of his ability so long as he is duly
elected and qualified in accordance with the provisions of the Bylaws or other
applicable charter documents of the Corporation or such affiliate; provided,
however, that Agent may at any time and for any reason resign from such position
(subject to any contractual obligation that Agent may have assumed apart from
this Agreement) and that the Corporation or any affiliate shall have no
obligation under this Agreement to continue Agent in any such position.
2. INDEMNITY OF AGENT. The Corporation hereby agrees to hold harmless and
indemnify Agent to the fullest extent authorized or permitted by the provisions
of the Bylaws and the Code, as the same may be amended from time to time (but,
only to the extent that such amendment permits the Corporation to provide
broader indemnification rights than the Bylaws or the Code permitted prior to
adoption of such amendment).
3. ADDITIONAL INDEMNITY. In addition to and not in limitation of the
indemnification otherwise provided for herein, and subject only to the
exclusions set forth in Section 4 hereof, the Corporation hereby further agrees
to hold harmless and indemnify Agent:
(A) against any and all expenses (including attorneys' fees), witness
fees, damages, judgments, fines and amounts paid in settlement and any other
amounts that Agent becomes legally obligated to pay because of any claim or
claims made against or by him in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
arbitrational, administrative or investigative (including an action by or in
the right of the Corporation) to which Agent is, was or at any time becomes
a party, or is threatened to be made a party, by reason of the fact that
Agent is, was or at any time becomes a director, officer, employee or other
agent of Corporation, or is or was serving or at any time serves at the
request of the Corporation as a director, officer, employee or other
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agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise; and
(B) otherwise to the fullest extent as may be provided to Agent by the
Corporation under the non-exclusivity provisions of the Code and Section 43
of the Bylaws.
4. LIMITATIONS ON ADDITIONAL INDEMNITY. No indemnity pursuant to Section 3
hereof shall be paid by the Corporation:
(A) on account of any claim against Agent for an accounting of profits
made from the purchase or sale by Agent of securities of the Corporation
pursuant to the provisions of Section 16(b) of the Securities Exchange Act
of 1934 and amendments thereto or similar provisions of any federal, state
or local statutory law;
(B) on account of Agent's conduct that was knowingly fraudulent or
deliberately dishonest or that constituted willful misconduct;
(C) on account of Agent's conduct that constituted a breach of Agent's
duty of loyalty to the Corporation or resulted in any personal profit or
advantage to which Agent was not legally entitled;
(D) for which payment is actually made to Agent under a valid and
collectible insurance policy or under a valid and enforceable indemnity
clause, bylaw or agreement, except in respect of any excess beyond payment
under such insurance, clause, bylaw or agreement;
(E) if indemnification is not lawful (and, in this respect, both the
Corporation and Agent have been advised that the Securities and Exchange
Commission believes that indemnification for liabilities arising under the
federal securities laws is against public policy and is, therefore,
unenforceable and that claims for indemnification should be submitted to
appropriate courts for adjudication); or
(F) in connection with any proceeding (or part thereof) initiated by
Agent, or any proceeding by Agent against the Corporation or its directors,
officers, employees or other agents, unless (i) such indemnification is
expressly required to be made by law, (ii) the proceeding was authorized by
the Board of Directors of the Corporation, (iii) such indemnification is
provided by the Corporation, in its sole discretion, pursuant to the powers
vested in the Corporation under the Code, or (iv) the proceeding is
initiated pursuant to Section 9 hereof.
5. CONTINUATION OF INDEMNITY. All agreements and obligations of the
Corporation contained herein shall continue during the period Agent is a
director, officer, employee or other agent of the Corporation (or is or was
serving at the request of the Corporation as a director, officer, employee or
other agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise) and shall continue thereafter so long as Agent
shall be subject to any possible claim or threatened, pending or completed
action, suit or proceeding, whether civil, criminal, arbitrational,
administrative or investigative, by reason of the fact that Agent was serving in
the capacity referred to herein.
6. PARTIAL INDEMNIFICATION. Agent shall be entitled under this Agreement
to indemnification by the Corporation for a portion of the expenses (including
attorneys' fees), witness fees, damages, judgments, fines and amounts paid in
settlement and any other amounts that Agent becomes legally obligated to pay in
connection with any action, suit or proceeding referred to in Section 3 hereof
even if not entitled hereunder to indemnification for the total amount thereof,
and the Corporation shall indemnify Agent for the portion thereof to which Agent
is entitled.
7. NOTIFICATION AND DEFENSE OF CLAIM. Not later than thirty (30) days
after receipt by Agent of notice of the commencement of any action, suit or
proceeding, Agent will, if a claim in respect thereof is to be made against the
Corporation under this Agreement, notify the Corporation of the commencement
thereof; but the omission so to notify the Corporation will not relieve it from
any liability which it may have
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to Agent otherwise than under this Agreement. With respect to any such action,
suit or proceeding as to which Agent notifies the Corporation of the
commencement thereof:
(A) the Corporation will be entitled to participate therein at its own
expense;
(B) except as otherwise provided below, the Corporation may, at its
option and jointly with any other indemnifying party similarly notified and
electing to assume such defense, assume the defense thereof, with counsel
reasonably satisfactory to Agent. After notice from the Corporation to Agent
of its election to assume the defense thereof, the Corporation will not be
liable to Agent under this Agreement for any legal or other expenses
subsequently incurred by Agent in connection with the defense thereof except
for reasonable costs of investigation or otherwise as provided below. Agent
shall have the right to employ separate counsel in such action, suit or
proceeding but the fees and expenses of such counsel incurred after notice
from the Corporation of its assumption of the defense thereof shall be at
the expense of Agent unless (i) the employment of counsel by Agent has been
authorized by the Corporation, (ii) Agent shall have reasonably concluded
that there is a conflict of interest between the Corporation and Agent in
the conduct of the defense of such action or (iii) the Corporation shall not
in fact have employed counsel to assume the defense of such action, in each
of which cases the fees and expenses of Agent's separate counsel shall be at
the expense of the Corporation. The Corporation shall not be entitled to
assume the defense of any action, suit or proceeding brought by or on behalf
of the Corporation or as to which Agent shall have made the conclusion
provided for in clause (ii) above; and
(C) the Corporation shall not be liable to indemnify Agent under this
Agreement for any amounts paid in settlement of any action or claim effected
without its written consent, which shall not be unreasonably withheld. The
Corporation shall be permitted to settle any action except that it shall not
settle any action or claim in any manner which would impose any penalty or
limitation on Agent without Agent's written consent, which may be given or
withheld in Agent's sole discretion.
8. EXPENSES. The Corporation shall advance, prior to the final disposition
of any proceeding, promptly following request therefor, all expenses incurred by
Agent in connection with such proceeding upon receipt of an undertaking by or on
behalf of Agent to repay said amounts if it shall be determined ultimately that
Agent is not entitled to be indemnified under the provisions of this Agreement,
the Bylaws, the Code or otherwise.
9. ENFORCEMENT. Any right to indemnification or advances granted by this
Agreement to Agent shall be enforceable by or on behalf of Agent in any court of
competent jurisdiction if (i) the claim for indemnification or advances is
denied, in whole or in part, or (ii) no disposition of such claim is made within
ninety (90) days of request therefor. Agent, in such enforcement action, if
successful in whole or in part, shall be entitled to be paid also the expense of
prosecuting his claim. It shall be a defense to any action for which a claim for
indemnification is made under Section 3 hereof (other than an action brought to
enforce a claim for expenses pursuant to Section 8 hereof, provided that the
required undertaking has been tendered to the Corporation) that Agent is not
entitled to indemnification because of the limitations set forth in Section 4
hereof. Neither the failure of the Corporation (including its Board of Directors
or its stockholders) to have made a determination prior to the commencement of
such enforcement action that indemnification of Agent is proper in the
circumstances, nor an actual determination by the Corporation (including its
Board of Directors or its stockholders) that such indemnification is improper
shall be a defense to the action or create a presumption that Agent is not
entitled to indemnification under this Agreement or otherwise.
10. SUBROGATION. In the event of payment under this Agreement, the
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Agent, who shall execute all documents required and shall
do all acts that may be necessary to secure such rights and to enable the
Corporation effectively to bring suit to enforce such rights.
D-3
<PAGE>
11. NON-EXCLUSIVITY OF RIGHTS. The rights conferred on Agent by this
Agreement shall not be exclusive of any other right which Agent may have or
hereafter acquire under any statute, provision of the Corporation's Certificate
of Incorporation or Bylaws, agreement, vote of stockholders or directors, or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding office.
12. SURVIVAL OF RIGHTS.
(A) The rights conferred on Agent by this Agreement shall continue after
Agent has ceased to be a director, officer, employee or other agent of the
Corporation or to serve at the request of the Corporation as a director,
officer, employee or other agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise and shall inure to the
benefit of Agent's heirs, executors and administrators.
(B) The Corporation shall require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business or assets of the Corporation, expressly to assume and agree to
perform this Agreement in the same manner and to the same extent that the
Corporation would be required to perform if no such succession had taken place.
13. SEPARABILITY. Each of the provisions of this Agreement is a separate
and distinct agreement and independent of the others, so that if any provision
hereof shall be held to be invalid for any reason, such invalidity or
unenforceability shall not affect the validity or enforceability of the other
provisions hereof. Furthermore, if this Agreement shall be invalidated in its
entirety on any ground, then the Corporation shall nevertheless indemnify Agent
to the fullest extent provided by the Bylaws, the Code or any other applicable
law.
14. GOVERNING LAW. This Agreement shall be interpreted and enforced in
accordance with the laws of the State of Delaware.
15. AMENDMENT AND TERMINATION. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless in writing signed by
both parties hereto.
16. IDENTICAL COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
but all of which together shall constitute but one and the same Agreement. Only
one such counterpart need be produced to evidence the existence of this
Agreement.
17. HEADINGS. The headings of the sections of this Agreement are inserted
for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction hereof.
18. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given (i)
upon delivery if delivered by hand to the party to whom such communication was
directed or (ii) upon the third business day after the date on which such
communication was mailed if mailed by certified or registered mail with postage
prepaid:
(A) If to Agent, at the address indicated on the signature page hereof.
(B)If to the Corporation, to
Adobe
345 Park Avenue
San Jose, CA 9
or to such other address as may have been furnished to Agent by the Corporation.
D-4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and
as of the day and year first above written.
ADOBE (DELAWARE) INCORPORATED
By: __________________________________
Title: _______________________________
AGENT
______________________________________
Address:
______________________________________
______________________________________
D-5
<PAGE>
PROXY PROXY
ADOBE SYSTEMS INCORPORATED
Proxy for Annual Meeting of Shareholders
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints John Warnock and Charles Geschke, and each
of them, with full power of substitution to represent the undersigned and to
vote all of the shares of stock in Adobe Systems Incorporated (the "Company")
which the undersigned is entitled to vote at the Annual Meeting of
Shareholders of the Company to be held at [_________________],
[______________], California [_________] on Wednesday, April 9, 1997 at 1:30
p.m., local time, and at any adjournment or postponement thereof (1) as
hereinafter specified upon the proposals listed below and as more
particularly described in the Company's Proxy Statement, receipt of which is
hereby acknowledged, and (2) in their discretion upon such other matters as
may properly come before the meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY.
The shares represented hereby shall be voted as specified. If no
specification is made, such shares shall be voted FOR proposals 1 through 6.
Whether or not you are able to attend the meeting, you are urged to sign and
mail the Proxy in the return envelope so that your stock may be represented
at the meeting.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY
(Continued and to be signed on reverse side)
<PAGE>
A vote FOR the following proposals is recommended by the Board of Directors:
1. Election of the four (4) Class II directors proposed in the accompanying
Proxy Statement to serve for a two-year term. (INSTRUCTION: to withhold
authority to vote for any individual nominee, strike a line through the
nominee s name in the list below.)
John E. Warnock; Gene P. Carter;
Robert Sedgewick; William J. Spencer
For Withheld For All Except
2. Approval of the reincorporation of the Company in the State of Delaware.
For Against Abstain
- -------------------------------------------------------------------------------
THIS AREA IS AVAILABLE FOR
ADDITIONAL COPY
- -------------------------------------------------------------------------------
3. Approval of an increase in the share reserve of the 1994 Stock Option Plan
by 5,600,000 shares, and to further amend the Plan to decrease the option
term from ten years to eight years.
For Against Abstain
4. Approval of the 1997 Employee Stock Purchase Plan.
For Against Abstain
5. Ratification of the appointment of KPMG Peat Marwick as the Company's
independent public accountants for the next fiscal year.
For Against Abstain
6. Transacting of such other business as may properly come before the meeting
or any adjournment or postponement thereof.
For Against Abstain
Dated , 1997
- ------------------------------------------------------------------
- -------------------------------------------------------------------------------
Signature
Sign exactly as your name(s) appears on your stock certificate. If shares of
stock stand of record in the names of two or more persons, or in the name of
husband and wife, whether as joint tenants or otherwise, both or all of such
persons should sign the above Proxy. If shares of stock are held of record by
a corporation, the Proxy should be executed by the President or Vice
President and the Secretary or Assistant Secretary, and the corporate seal
should be affixed thereto. Executors or administrators or other fiduciaries
who execute the above Proxy for a deceased shareholder should give their full
title. Please date the Proxy.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY
