<PAGE>
================================================================================
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Leasing Solutions, Inc.
- --------------------------------------------------------------------------------
(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)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
[LOGO OF LEASING SOLUTIONS, INC. APPEARS HERE]
Ten Almaden Boulevard, Suite 1500
San Jose, California 95113
April 9, 1998
Dear Fellow Shareholder:
The Board of Directors and officers of Leasing Solutions, Inc. (the
"Company") are pleased to invite you to attend the Company's 1998 Annual
Meeting of Shareholders to be held at The Silicon Valley Capital Club at
Fairmont Plaza, 50 West San Fernando Street, 17th Floor, San Jose, California
95113, on Thursday, May 21, 1998, at 1:00 p.m., local time.
As described in the accompanying Notice of Annual Meeting of Shareholders
and Proxy Statement, shareholders of the Company will be asked to vote: (i) on
the election of directors for the Company; (ii) to approve an amendment to the
Company's 1995 Stock Option and Incentive Plan to increase the number of
shares of Common Stock authorized for issuance thereunder by 600,000 shares;
(iii) to approve an increase in the number of authorized shares of Common
Stock from 20,000,000 to 60,000,000; and (iv) to approve a change in the state
of incorporation of the Company from the State of California to the State of
Delaware by means of a merger of the Company with and into a wholly-owned
Delaware subsidiary. Executive officers of the Company will be present at the
Annual Meeting and will be available to talk with shareholders. We hope you
will be able to attend.
I URGE YOU TO VOTE YOUR PROXY AS SOON AS POSSIBLE. Your vote is very
important, regardless of the number of shares you own. Please mark, sign and
date each proxy card you receive and return it, at your earliest convenience,
in the postage-paid envelope provided, even if you currently plan to attend
the Annual Meeting. Returning your proxy card will not prevent you from voting
in person, but will assure that your vote is counted if you are unable to
attend. I encourage you to vote "FOR" each of the Board's nominees for
directors and "FOR" each of the proposals referenced above.
PLEASE VOTE AND PROMPTLY RETURN YOUR PROXY CARD.
Sincerely,
/s/ Hal J Krauter
Hal J Krauter
President
<PAGE>
[LOGO OF LEASING SOLUTIONS, INC. APPEARS HERE]
Ten Almaden Boulevard, Suite 1500
San Jose, California 95113
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 21, 1998
To the Shareholders of
LEASING SOLUTIONS, INC.
The 1998 Annual Meeting of Shareholders of Leasing Solutions, Inc., a
California corporation (the "Company"), will be held at The Silicon Valley
Capital Club at Fairmont Plaza, 50 West San Fernando Street, 17th Floor, San
Jose, California 95113, on Thursday, May 21, 1998, at 1:00 p.m., local time,
for the following purposes:
1. To elect five directors to serve until the next annual meeting of
shareholders of the Company and until their successors are elected and
qualified. The five nominees for director are Hal J Krauter, Louis R.
Adimare, George L. Bragg, James C. Castle and Peter K. Nevitt;
2. To approve an amendment to the Company's 1995 Stock Option and
Incentive Plan to increase the number of shares of Common Stock authorized
for issuance thereunder by 600,000 shares;
3. To approve an increase in the number of authorized shares of Common
Stock from 20,000,000 to 60,000,000;
4. To approve a change in the state of incorporation of the Company from
the State of California to the State of Delaware by means of a merger of
the Company with and into a wholly-owned Delaware subsidiary; and
5. To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on March 23, 1998, as
the record date for the determination of shareholders entitled to notice of
and to vote at the meeting.
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING. YOU ARE URGED
TO SIGN, DATE AND OTHERWISE COMPLETE THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE, WHETHER OR NOT YOU PLAN TO ATTEND THE
MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE YOUR SHARES IN PERSON EVEN IF
YOU HAVE SIGNED AND RETURNED YOUR PROXY CARD.
By Order of the Board of Directors
/s/ Hal J Krauter
Hal J Krauter
President
San Jose, California
April 9, 1998
<PAGE>
[LOGO OF LEASING SOLUTIONS, INC. APPEARS HERE]
Ten Almaden Boulevard, Suite 1500
San Jose, CA 95113
----------------
PROXY STATEMENT
----------------
ANNUAL MEETING OF SHAREHOLDERS
MAY 21, 1998
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors (the "Board") of Leasing Solutions, Inc., a
California corporation (the "Company"), for use at the Company's 1998 Annual
Meeting of Shareholders (the "Meeting") to be held on Thursday, May 21, 1998,
at 1:00 p.m., local time, and at any and all adjournments and postponements of
the Meeting. The Meeting will be held at The Silicon Valley Capital Club at
Fairmont Plaza, 50 West San Fernando Street, 17th Floor, San Jose, California
95113. This Proxy Statement and the accompanying form of proxy will be first
mailed to shareholders on or about April 9, 1998.
The cost of preparing, assembling and mailing the Notice of Annual Meeting
of Shareholders, Proxy Statement and form of proxy and the solicitation of
proxies will be paid by the Company. The Company has contracted with an
investor communications firm, Georgeson & Company Inc., to solicit proxies by
telephone, mail or facsimile. Proxies also may be solicited in person or by
telephone or facsimile by personnel of the Company who will not receive any
additional compensation for such solicitation. The Company will pay brokers or
other persons holding stock in their names or the names of their nominees for
the expenses of forwarding soliciting material to their principals.
VOTING
The close of business on March 23, 1998 has been fixed as the record date
for the determination of shareholders entitled to notice of and to vote at the
Meeting. On March 1, 1998, there were 8,202,101 shares of the Company's Common
Stock (the "Common Stock") outstanding. Each share is entitled to one vote on
any matter that may be presented for consideration and action by the
shareholders at the Meeting, except that shareholders have cumulative voting
rights with respect to the election of directors. Cumulative voting rights
entitle each shareholder to cast as many votes as is equal to the number of
directors to be elected multiplied by the number of shares owned by such
shareholder, which votes may be cast for one candidate or distributed among
two or more candidates as such shareholder determines. For cumulative voting
rights to be applicable, one or more shareholders must give notice at the
Meeting, prior to the voting, of the intention to cumulate votes. The five
nominees for director receiving the highest number of votes at the Meeting
will be elected.
The holders of a majority of the shares of Common Stock outstanding on the
record date and entitled to be voted at the Meeting, whether present in person
or by proxy, will constitute a quorum for the transaction of business at the
Meeting and any adjournments and postponements thereof. For the election of
directors, the five candidates receiving the highest number of affirmative
votes will be elected. The proposal to change the Company's state of
incorporation to Delaware and the proposal to increase the number of
authorized shares of
<PAGE>
Common Stock each require for approval the affirmative vote of holders of a
majority of the outstanding shares entitled to vote. Each other matter
submitted at the Meeting for shareholder approval will require the affirmative
vote of a majority of those shares present, in person or by proxy, and voting
at the meeting. Abstentions and broker non-votes are counted for the purpose
of determining the presence or absence of a quorum for the transaction of
business. Abstentions are counted in tabulations of the votes cast on
proposals presented to shareholders, whereas broker non-votes are not counted
for purposes of determining whether a proposal has been approved.
Each proxy will be voted "FOR" the election of the five director nominees
named herein, unless the shareholder otherwise directs in his or her proxy. If
the shareholder directs how the proxy is to be voted, it will be voted
according to the shareholder's direction. If cumulative voting is in effect at
the Meeting, the shares represented by each proxy will be voted in the
discretion of management so as to elect the maximum number of the director
nominees named herein that may be elected by cumulative voting, unless the
shareholder otherwise directs in his or her proxy. Any shareholder has the
power to revoke his or her proxy at any time before it is voted at the Meeting
by submitting a written notice of revocation to the Secretary of the Company
or by filing a duly executed proxy bearing a later date. A proxy will not be
voted if the shareholder who executed it is present at the Meeting and elects
to vote the shares represented by the proxy in person.
2
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL SHAREHOLDERS
The following table sets forth certain information, as of March 1, 1998,
regarding the beneficial ownership of the Common Stock of the Company, by (i)
each person who is known by the Company to own beneficially 5% or more of the
Common Stock, (ii) each of the other present directors and executive officers
of the Company and (iii) all directors and executive officers of the Company
as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OF
BENEFICIALLY OUTSTANDING
NAME AND ADDRESS OF BENEFICIAL OWNER(1) OWNED(2)(3) SHARES
- --------------------------------------- ---------------- -------------
<S> <C> <C>
Hal J Krauter................................... 1,091,850(4) 13.15%
Glenda B. Allen................................. 9,729 *
Sandra Bowman................................... 0 *
Dorian Jay DiMarco.............................. 19,873(5) *
Victor L. Fischer............................... 0 *
Ian Harrison.................................... 15,100 *
Robert J. Kearns, III........................... 38,659 *
Terence W. Murphy............................... 5,963 *
Steven J. Pressler.............................. 0 *
Bruce M. Sherk.................................. 15,000 *
Steven L. Yeffa................................. 22,948 *
Lisa M. Zane.................................... 306 *
Louis R. Adimare................................ 756,916 9.13%
George L. Bragg................................. 67,799 *
James C. Castle................................. 16,649 *
Peter K. Nevitt................................. 1,000 *
AMVESCAP PLC (6)(7)............................. 411,800(8) 5.02%
Ardsley Advisory Partners(6)(9)................. 530,000 6.46%
Neumeier Investment Counsel LLC (6)(10)......... 446,200 5.44%
T. Rowe Price Associates, Inc.(6)(11)........... 596,067(12) 7.27%
All directors and executive officers as a group
(16 persons)................................... 2,061,792 24.24%
</TABLE>
- --------
* Less than 1%
(1) Unless otherwise noted, all addresses are 10 Almaden Boulevard, Suite
1500, San Jose, California 95113.
(2) The number of shares beneficially owned is deemed to include shares as to
which the persons named have or share either investment or voting power.
Unless otherwise noted, and except for voting powers held jointly with a
person's spouse, each person identified possesses sole voting and
investment power with respect to the shares shown.
(3) Includes an aggregate of 304,953 shares which the officers and directors
of the Company have a right to acquire on or before May 1, 1998, upon
exercise of outstanding stock options granted under the Company's stock
option plans. The amount of such shares for each such person named above
is as follows: Mr. Krauter-100,000; Ms. Allen-1,938; Ms. Bowman-0; Mr.
DiMarco-17,275; Mr. Fischer-0; Mr. Harrison-15,000; Mr. Kearns-38,000;
Mr. Murphy-5,625; Mr. Pressler-0; Mr. Sherk-15,000; Mr. Yeffa-11,812; Ms.
Zane-306; Mr. Adimare-91,666; Mr. Bragg-4,999; Dr. Castle-3,332; and Mr.
Nevitt-0.
(4) Includes 72,500 shares held of record by certain members of Mr. Krauter's
family, with respect to which he disclaims beneficial ownership.
(5) Includes 2,598 shares held of record by a trust, and owned beneficially
by Mr. DiMarco, a trustee of the trust.
(6) Based on a Schedule 13G filed with the Securities and Exchange Commission
("SEC") by the shareholder between January 30, 1998 and February 12,
1998. The actual number of shares beneficially owned may have changed
since the date of such filing.
(7) The shareholder's address is 11 Devonshire Square, London EC2M 4YR,
England.
(8) The shareholder claims shared voting and dispositive power over these
shares with five of its subsidiaries.
(9) The shareholder's address is 646 Steamboat Road, Greenwich, Connecticut
06836.
(10) The shareholder's address is 26435 Carmel Rancho Boulevard, Carmel,
California 93923.
(11) The shareholder's address is 100 East Pratt Street, Baltimore, Maryland
21202.
(12) These securities are owned by various individual and institutional
investors, including T. Rowe Price Small Cap Value Fund, Inc. (which owns
500,107 shares, representing 6.12% of the shares outstanding), for which
T. Rowe Price Associates, Inc. serves as investment adviser with power to
direct investments and/or sole power to vote the securities. The
shareholder disclaims beneficial ownership of these shares.
3
<PAGE>
ELECTION OF DIRECTORS
NOMINEES FOR ELECTION
The Company's directors are elected at each annual meeting of shareholders.
The Bylaws of the Company authorize not less than four nor more than seven
directors. Currently, there are five directors. On February 27, 1998, the
Board approved the expansion of the Board to five members, and filled the
vacancy with Peter K. Nevitt. At the Meeting, five directors will be elected
to serve until the next annual meeting of shareholders and until their
successors are elected and qualified.
The nominees for election as directors at the Meeting set forth in the table
below are all incumbent directors of the Company. Each of the nominees has
consented to serve as a director if elected. Unless authority to vote for any
director is withheld in a proxy, it is intended that each proxy will be voted
"FOR" each such nominee. In the event that any of the nominees for director
should become unable to serve if elected, it is intended that shares
represented by proxies which are executed and returned will be voted for such
substitute nominees as may be recommended by the Company's existing Board of
Directors, unless other directions are given in the proxies. To the best of
the Company's knowledge, all the nominees will be available to serve.
The following biographical information is furnished with respect to each of
the five nominees for election as a director at the Meeting.
<TABLE>
<CAPTION>
NOMINEE AGE PRINCIPAL OCCUPATION DIRECTOR SINCE
- ------- --- -------------------- --------------
<S> <C> <C> <C>
Hal J Krauter........... 60 President and Chief Executive Officer 1986
Louis R. Adimare........ 51 Private Investor 1986
George L. Bragg......... 65 Chairman of White River Concepts 1989
James C. Castle......... 61 Chief Executive Officer of USCS International 1993
Peter K. Nevitt......... 70 Private Investor 1998
</TABLE>
Hal J Krauter co-founded the Company in 1986. He has been President and
Chief Executive Officer of the Company since its inception, and served as
Chief Financial Officer from March 1994 to January 1995. Prior to founding the
Company, he served as President of Drivetech, Inc., a manufacturer of disk
drives, from 1983 to 1984, and as President of MAD Computer Systems, Inc., a
manufacturer of personal computers, from 1984 until 1986. Earlier, he was the
founder and first President of Memorex Finance Company, the equipment leasing
affiliate of Memorex Corporation, from 1979 to 1983. Prior to founding Memorex
Finance Company, Mr. Krauter held various financial and management positions
with Memorex Corporation, a supplier of IBM plug compatible products, and IBM
Corporation, from June 1960 to 1979, including Vice President and Chief
Financial Officer of Memorex.
Louis R. Adimare co-founded the Company in 1986. From August 1987 until
March 1996, he served as the Company's Executive Vice President, concentrating
on leasing activities and strategic relations. He was the Company's Chief
Operating Officer from September 1992 to March 1996. Mr. Adimare retired as an
officer of the Company in March 1996. Prior to founding the Company, he had
been a Regional Leasing Manager for Memorex Finance Company from 1984 to 1986,
and a District Manager for Memorex Corporation from 1982 to 1984. From 1969
until 1982, Mr. Adimare held sales and sales management positions at Honeywell
Information Systems, which was in the computer systems business.
George L. Bragg has been Chairman of White River Concepts, a health products
and health education company, since September 1995, and Chairman of Markwood
Capital Alliance, which provides management consulting and financing services
to high technology and special situation companies, since September 1994. From
October 1993 to September 1994, he was President and a director of Nichols
Institute, which provides clinical testing services to hospitals, laboratories
and physicians on a nationwide basis. From July 1991 to March 1993, Mr. Bragg
served in various executive capacities, including Vice Chairman, with Western
Digital Corporation, which is in the business of manufacturing and selling
disk drives for the personal computer market. He served as a director of
Western Digital from October 1990 until November 1995. He served as Chairman
and
4
<PAGE>
President of Boston Street Capital, a management and investment consulting
firm, from 1990 to 1991. From 1989 until 1990, he served as Chairman of the
Board, Chief Executive Officer and President of Sooner Federal Savings
Association. He became President and Chief Operating Officer of Telex
Corporation, which was in the computer networking and terminal workstation
business, in 1986. When Telex merged with Memorex Corporation in 1988, he
became Managing Director and Executive Vice President of Memorex Telex N.V.,
which positions he held until 1989. Mr. Bragg is a director of public company
Eltron International, Inc., and several privately held companies.
James C. Castle, Ph.D., has been, since August 1992, the Chairman and Chief
Executive Officer of USCS International, which is in the business of providing
subscriber management and billing services. Prior to joining USCS
International, he served as President and Chief Executive Officer, from 1991
to 1992, of Teradata Corporation, a public company purchased by NCR in 1992,
which developed and sold high performance systems and related products and
services for relational database management. He was the Chairman and Chief
Executive Officer of Infotron Systems Corporation, a communications network
systems company, from 1987 to 1991, and President of TBG Information Systems,
Inc., which is engaged in the information systems and services businesses,
from 1984 to 1987. He also served as the Executive Vice President of Memorex
Corporation from 1982 to 1984. Dr. Castle is a director of PAR Technology
Corporation, ADC Telecommunications and the PMI Group, Inc.
Peter K. Nevitt was the founder and President of Mitsui Nevitt Capital
Corporation, a subsidiary of Mitsui & Co., which was in the corporate finance
business originating and participating in syndicated loans and equipment lease
transactions, from 1988 through December 1996. He also co-founded and, from
1993 through December 1996, served as Chairman of Mitsui Vendor Leasing, which
was primarily engaged in leasing machine tools and industrial equipment. From
1977 through 1988, Mr. Nevitt was President and later Chairman of
BankAmeriLease Companies, which consisted of subsidiaries of Bank of America
engaged in equipment leasing. Mr. Nevitt was the founder and, from June 1972
until 1977, President of First Chicago Leasing Corporation, which was
primarily engaged in facility, ship and aircraft leasing. He was one of the
founders and, from 1968 to 1972, President of GATX Leasing Corporation, which
was engaged in aircraft, railroad and ship leasing. Mr. Nevitt is a director
of The Greenbrier Companies and Isosceles PLC.
VOTE REQUIRED
The nominees receiving the greatest number of votes at the Meeting, up to
the number of authorized directors, will be elected. Shareholders are entitled
to cumulate their votes with respect to the election of directors. See
"Voting," above.
BOARD RECOMMENDATION
THE COMPANY'S MANAGEMENT RECOMMENDS A VOTE FOR ALL THE NOMINEES LISTED
ABOVE.
OTHER EXECUTIVE OFFICERS
The following biographical information is furnished with respect to each of
the executive officers of the Company, as of March 1, 1998, who are not
nominees for election as a director at the Meeting.
Robert J. Kearns, III, age 57, joined the Company in January 1995 as its
Vice President, Finance and Chief Financial Officer. He became Executive Vice
President in January 1996, and was appointed Chief Operating Officer in April
1997, at which point he was succeeded in these finance capacities. He served
as Vice President-Capital Markets Group for GECAS, a GE Capital affiliate in
the structured finance and lease finance businesses, from 1989 to June 1994.
From 1984 to 1989, he served as a Senior Vice President of Manufacturers
Hanover Leasing International/The CIT Group, with lease financing
responsibilities in the Far East and Europe. From 1980 to 1984, he acted as
President of Arab Leasing Company, headquartered in Bahrain, which provided
equipment financing in the Middle East. From 1969 to 1980, Mr. Kearns served
in a variety of management and lending positions, focusing on both
international and U.S. investment and commercial banking, with three major
U.S. banks and a private investment banking company.
5
<PAGE>
Steven L. Yeffa, age 40, joined the Company in 1991 as Director, Funding and
was promoted to Treasurer in January 1995. In April 1996, he was appointed
Vice President, Finance--International. Mr. Yeffa was promoted to Vice
President, Finance and Chief Financial Officer in April 1997. From 1989 to
1991, he served as Vice President, Funding at Matsco Financial Corporation, an
equipment leasing company. From 1984 to 1989, he served as Asset Manager at CP
National Corporation, a regional public utility, for which Mr. Yeffa directed
the operations of their wholly-owned leasing company, CPN Leasco.
Glenda B. Allen, age 55, joined the Company in 1986 as Director, Contract
Administration. In November 1995, she became the Company's Vice President,
Contract Administration. In January 1996, she became Secretary of the Company.
From 1982 through 1985, she served as an account executive in the receivables
financial group of Westinghouse Credit Corporation, a financial services
company. From 1985 through 1986 and 1979 through 1982, she served as Director,
Contract Administration for Memorex Finance Company. She also served in
various administrative capacities with Memorex Corporation from 1974 through
1979. From 1968 through 1972, she served as a Credit Manager for GE Credit
Corporation.
Sandra Bowman, age 46, joined the Company in July 1997 as Senior Director of
Remarketing. She was appointed Vice President, Remarketing in December 1997.
Prior to joining the Company, Ms. Bowman was employed by G. E. Capital
Computer Leasing, a computer leasing company, serving as Manager, Distributed
Systems Product Team, from January 1993 to November 1994, and as Director,
Desktop Services, from November 1994 to July 1997. From 1989 to 1992, Ms.
Bowman served as Senior Industry Analyst and Technologist at Dataquest, Inc.,
an information technology market research and consulting firm.
Dorian Jay DiMarco, age 38, joined the Company in 1992 as Director of Vendor
Programs, was appointed Vice President, Vendor Programs in January 1995, and
was appointed to the position of Vice President, Corporate Marketing and
Business Development in August 1997. Prior to joining the Company, Mr. DiMarco
was employed by GE Capital Computer Leasing, serving as a Director of
Portfolio Acquisition and Vendor Programs from 1991 to 1992, and as the
Eastern Regional Sales Manager from 1989 to 1991. From 1986 to 1989, Mr.
DiMarco was the Western Regional Sales Manager for General Electric Calma
Company, a manufacturer of computer-aided design and manufacturing (CAD/CAM)
systems.
Victor L. Fischer, age 48, joined the Company in October 1997 as Vice
President, Information Systems. From September 1996 to October 1997, Mr.
Fischer served as Vice President of Operations at Connect, Inc., a provider of
electronic commerce software for web-based business transactions. Prior to
Connect, he was Director of Information Systems at Xilinx, a supplier of CMOS
programmable logic and related development system software, from 1992 to
September 1996. Before joining Xilinx, Mr. Fischer was Director of Information
Systems at MIPS Computer Systems, Inc., a designer of high performance CPU
architectures for workstations, servers, and supercomputers, from 1989 to
1992. Mr. Fischer also held management positions at Unisyn, NCA Corporation,
ASK Computer Systems and Apple Computer from 1979 to 1988.
Ian Harrison, age 44, joined the Company in August 1996 as the Managing
Director of Leasing Solutions International, Ltd., the Company's wholly-owned
European subsidiary. He became a Vice President of the Company in September
1996. From 1992 until joining the Company, he served as Director -- Northern
Europe and Sale and Marketing Director-Europe of AT&T Capital Europe Limited,
a financial services company. From 1985 through 1991, he acted as the Managing
Director of Wang Equipment Services, the finance company of Wang Laboratories.
Before joining Wang, he served as Special Projects Manager and Sales and
Marketing Director, from 1983 to 1985, of Armco Europe Finance, a financial
services company. Earlier, from 1982 to 1983, Mr. Harrison was a funding
manager for International Brokerage and Leasing, a computer leasing and lease
brokerage company.
Terence W. Murphy, age 37, joined the Company in August 1995 as its
Controller. He became Chief Accounting Officer in January 1996. In February
1997, Mr. Murphy became Vice President and Controller. In
6
<PAGE>
August 1997, he was promoted to Vice President and Treasurer. From January
1994 until he joined the Company, he was the principal and sole owner of a
firm providing tax, accounting and financial consulting services to
businesses. From 1989 to December 1993, he was Controller of LB Credit
Corporation, an equipment finance company. Prior to joining LB Credit, he
served as an Assistant Controller of Wells Fargo Leasing from 1987 to 1989.
Wells Fargo Leasing was acquired by LB Credit in December 1989. Mr. Murphy is
a licensed CPA.
Steven J. Pressler, age 45, joined the Company in January 1996 as Vice
President, Leasing and subsequently was appointed to the position of Vice
President, National Director of Leasing. Mr. Pressler served as a Vice
President and Western Regional Sales Manager for Heller Financial, Inc., an
integrated financial services company, from October 1994 until joining the
Company. In that capacity, he managed the lease financing and vendor program
activities for his region. From 1983 to October 1994, he served in various
capacities, including, most recently, Senior Vice President, of Tucker
Leasing-Capital Corporation, which was in the lease financing business on a
national basis. From 1974 until he joined Tucker, he served in a variety of
leasing and credit positions with Chemical Bank, Industrial Credit Corporation
(a subsidiary of Litton Industries) and Equitable Life Insurance.
Bruce M. Sherk, age 35, was appointed as a Vice President of the Company in
May 1997. In May 1997, Mr. Sherk also became a Director and the Managing
Director of Leasing Solutions (Canada) Inc., a wholly-owned subsidiary of the
Company. Mr. Sherk served as a Vice President for Scott Capital Group Inc.
("Scott Capital"), a Canadian lease financing company, from 1989 to May 1994.
From June 1994 to June 1996 he was the principal of a Canadian firm providing
strategy and implementation consulting services to businesses. In July 1996,
Mr. Sherk returned to Scott Capital as Chief Operating Officer and, in that
capacity, he managed lease financing and vendor program activities nationwide.
Leasing Solutions (Canada) Inc. acquired substantially all of the assets of
Scott Capital in April 1997.
Lisa M. Zane, age 34, joined the Company in 1988, where she has served in a
variety of personnel and administration positions, including, beginning in
November 1996, the position of Director, Human Resources and Office
Administration. In December 1997, Ms. Zane was appointed as Vice President,
Human Resources and Administration. Prior to joining the Company, from 1985 to
1988, she served in various capacities with the San Jose, California, office
of Gibson, Dunn & Crutcher, a law firm.
COMMITTEES AND MEETINGS
The audit committee of the Board of Directors of the Company (the "Board")
currently consists of Mr. Bragg and Dr. Castle, two of the Company's non-
employee directors. Hal J Krauter, as Chairman of the Board of the Company,
intends to recommend that Mr. Nevitt, a new non-employee director, be
appointed to the audit committee at the Board's April 1998 meeting. The audit
committee reviews, and discusses with management and with the Company's
independent accountants, the Company's financial reporting and accounting
practices. It also reports to the Board concerning such reporting and such
practices.
The Company does not have a compensation committee or any other Board
committee performing equivalent functions. Instead, decisions regarding
executive officer compensation, except as described below in "Compensation
Report of the Board of Directors", have been made by the Board as a whole.
During 1997, the members of the Board were Messrs. Krauter, Adimare, Bragg and
Castle. Mr. Krauter also expects to recommend that a compensation committee be
established, and one non-employee director and Mr. Krauter be appointed as its
members, at the Board's April 1998 meeting. However, despite the establishment
of this committee, the entire Board will continue to deal with compensation
matters relating to Mr. Krauter, who is the Company's Chief Executive Officer.
The Company does not have a standing nominating committee of the Board.
A committee of the Board, composed of the Company's non-employee directors
(the "Independent Committee"), has the right to administer, and approve grants
under, the Company's 1995 Stock Option and Incentive Plan and 1994 Employee
Stock Purchase Plan.
In November 1995, the Board formed a Corporate Development Committee of two
directors and appointed Mr. Krauter and Mr. Bragg as its members. The
committee's charter is to assist in the Company's efforts to
7
<PAGE>
identify, and consider the purchase of, businesses and portfolios of leases
and equipment that may be suitable for acquisition by the Company, to screen
acquisition candidates and, as appropriate, to negotiate the principal terms
and conditions of any such acquisition.
During 1997, there were four in-person regular meetings of the Board, one
special, in-person meeting of the Board, two special, telephonic meetings of
the Board and four meetings of the audit committee. Each of the current Board
members attended all of the meetings of the Board, and of any committee on
which he served, during that period, with the exception of the October 1997
meeting of the Board, which one director was unable to attend.
DIRECTOR COMPENSATION
As of April 1, 1998, the Company pays each of its non-employee directors an
annual director's fee of $15,000 and a fee of $2,000 for each meeting of the
Board, and a fee of $1,000 for each meeting of any committee thereof that is
held on a day other than a day on which a meeting of the Board is held, that
he attends in person. The Company also pays a fee of $500 for lengthy
telephonic Board meetings. The annual director's fee will be pro-rated, if
necessary, by taking into consideration the portion of the year during which a
director serves in that capacity. The Company also reimburses all directors
for their reasonable out-of-pocket expenses incurred in connection with their
attendance at Board or committee meetings. No director who is an employee of
the Company receives compensation for services rendered as a director. The
1995 Plan provides for an automatic option grant of 15,000 shares for each new
non-employee director and automatic annual grants of 5,000 shares for each
other non-employee director. See "Stock Option and Stock Purchase Plans"
below.
The Company pays Mr. Bragg a consulting fee of $1,000 per day (appropriately
pro-rated) for his services in providing consulting, at the Company's request,
with respect to prospective acquisitions by the Company of businesses and
significant portfolios of leases and equipment. The Company also reimburses
Mr. Bragg for the reasonable out-of-pocket expenses he incurs in performing
consulting services for the Company. The Company paid Mr. Adimare a consulting
fee, during the period of April 1996 through March 1997, of $3,000 per month
in consideration of Mr. Adimare being available to provide the Company
consulting services, from time to time, at the Company's request.
8
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table shows, for the fiscal years ended December 31, 1997,
1996 and 1995, the cash compensation paid by the Company, as well as certain
other compensation paid or accrued for those years, to each of the Company's
Chief Executive Officer and the four other most highly compensated executive
officers ("Named Officers") in all capacities in which they served:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM
-------------------------- COMPENSATION
OTHER ANNUAL AWARDS OF ALL OTHER
NAME AND POSITION YEAR SALARY BONUS(1) COMPENSATION OPTIONS(#) COMPENSATION(2)
----------------- ---- -------- -------- ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Hal J Krauter........... 1997 $300,000 $150,000 $ 6,137(3) -- $101,608
President and Chief 1996 $300,000 $125,000 $ 5,447(3) -- $110,686
Executive Officer 1995 $250,000 $125,000 -- 100,000 $110,686
Robert J. Kearns, III... 1997 $195,420 $ 82,500 -- -- $ 20,065
Executive Vice 1996 $165,000 $ 76,260 $ 2,586(3) 15,000 $ 1,000
President, and Chief 1995 $152,519 --(4) -- -- $ 1,000
Operating Officer
Steven L. Yeffa......... 1997 $141,249 $ 33,304 $ 14,860(5) 50,000 $ 16,105
Vice President, Finance 1996 $111,014 $ 21,000 $ 14,328(6) 10,000 $ 11,011
and Chief Financial 1995 $ 98,000 $ 8,420 $ 309(3) 750 $ 8,906
Officer
Dorian Jay DiMarco...... 1997 $113,875 $ 17,640 $602,084(7) 60,000 $ 12,033
Vice President, 1996 $ 88,200 $ 17,640 $662,736(8) -- $ 7,623
Corporate Marketing and 1995 $ 88,200 $ 17,640 $216,339(9) 1,050 $ 7,623
Business Development
Steven J. Pressler...... 1997 $122,082 $ 38,262 $166,128(9) -- --
Vice President, 1996 $109,320 -- $ 63,138(10) 50,000 --
National Director 1995(11) -- -- -- -- --
of Leasing
</TABLE>
- --------
(1) Paid under the Company's Employee Bonus Plan described below.
(2) Includes a $1,000 matching contribution made by the Company for each
eligible employee under the Company's 401(k) Plan. All other compensation
reflected relates to amounts paid to the respective officer in the
respective year from the officer's "phantom" account pursuant to the
Company's Deferred Income Plan. See discussions below regarding the
Company's 401(k) Plan and Deferred Income Plan.
(3) Amount represents life insurance premiums paid on behalf of the Named
Officer.
(4) Mr. Kearns joined the Company in 1995, and his 1995 bonus was paid in
1996.
(5) Amount represents life insurance premiums totaling $309 paid on behalf of
Mr. Yeffa, and accrued vacation pay-down in the amount of $7,214 and an
ex-patriate housing allowance in the amount of $7,337 paid to Mr. Yeffa.
(6) Amount represents an ex-patriate housing allowance in the amount of
$14,019 paid to Mr. Yeffa and life insurance premiums totaling $309 paid
on behalf of Mr. Yeffa.
(7) Amount represents commissions of $598,320 and accrued vacation pay-down
in the amount of $3,764 paid to Mr. DiMarco.
(8) Amount represents commissions of $662,304 paid to Mr. DiMarco and life
insurance premiums totaling $396 paid on behalf of Mr. DiMarco.
(9) Amount represents commissions paid to the Named Officer.
(10) Amount represents commissions of $62,620 paid to Mr. Pressler and life
insurance premiums totaling $518 paid on behalf of Mr. Pressler.
(11) Mr. Pressler joined the Company in 1996, and his 1996 bonus was paid in
1997.
9
<PAGE>
BONUS PLAN AND DEFERRED INCOME PLAN
Under the Company's Employee Bonus Plan, all full-time employees (other than
field sales employees receiving commissions) are eligible to receive an annual
cash performance bonus. Bonus payments to employees are typically made
annually and the amount of each bonus payment is determined based on the
Company's financial performance, the employee's salary range and the
employee's personal performance. An employee must be employed at the time the
bonus is paid by the Company in order to receive his or her annual bonus.
Bonuses with respect to a year are typically paid during the first calendar
quarter of the next year.
Under the Company's Deferred Income Plan, an amount equal to each employee's
annual bonus under the Employee Bonus Plan is credited to a phantom account.
The employee vests in each year's contribution to the account over a four-year
period at the rate of 25% per annum. Vested amounts have generally been paid
annually, in cash, to the employee. The Company does not have an obligation to
pay any vested amount if the Board determines that the Company's financial
performance or cash requirements do not warrant such payment being made.
However, vesting of the amounts in the phantom accounts will accelerate, and
be paid, if a change of control of the Company occurs. An employee must be
employed by the Company at the time such payments are made in order to receive
his or her annual Deferred Income Plan payment. Deferred Income Plan payments
with respect to a year are typically paid when annual bonuses for that year
are paid.
STOCK OPTION AND STOCK PURCHASE PLANS
Stock Option Plans. The Company has two stock option plans, the 1986 Stock
Option Plan (the "1986 Plan"), and the 1995 Stock Option and Incentive Plan
(the "1995 Plan"), both of which provide for the granting of options
("Options") to executive officers, directors, and other employees and
consultants of the Company and its subsidiaries. The 1986 Plan covers
1,440,000 shares of the Common Stock and terminated in August 1996. The 1995
Plan covers 800,000 shares of Common Stock and terminates in 2004. As of March
1, 1998, Options with respect to 240,858 shares and 878,621 shares of Common
Stock were outstanding, and Options with respect to 110,018 shares and 236,648
shares were exercisable, under the 1986 Plan and 1995 Plan, respectively. All
shares of Common Stock, subject to Options granted under the 1995 Plan, in
excess of the shares reserved for issuance under the 1995 Plan have been
granted subject to shareholder approval of the proposal described at
"Amendments to the 1995 Stock Option and Incentive Plan" below.
Options granted under the 1986 Plan or the 1995 Plan (collectively, the
"Plans") may be either options that qualify as "incentive stock options"
("Incentive Options"), within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), or options that do not qualify
as "incentive stock options" ("Non-Statutory Options"). Incentive Options may
only be granted to persons who are employees of the Company, while Non-
Statutory Options may also be granted to directors and consultants who are not
employees. The 1995 Plan may be administered by the Independent Committee or
the Board. Subject to the terms of the 1995 Plan, the Independent Committee or
the Board determines the persons to whom Options are granted (the
"Optionees"), the terms and the number of shares subject to each Option, and
whether an Option will be an Incentive Option or a Non-Statutory Option.
Under the 1986 Plan, Options could not be granted at an exercise price less
than the fair market value of the Common Stock on the date of grant. Under the
1995 Plan, the Options may be granted at an exercise price less than the fair
market value of the Common Stock on the date of grant. However, to date, all
Options granted under the 1995 Plan have exercise prices equal to such fair
market value. Options may not be transferred other than by will or the laws of
descent and distribution, and during the lifetime of an Optionee may be
exercised only by the Optionee. The term of each Option may not exceed ten
years from the date the option is granted. All Options granted to date under
the Plans have terms of either five or ten years. Options may become
exercisable, or vest, in whole at the grant date or in installments over time,
as determined by the Board or the Independent Committee. To date,
substantially all of the Options granted, other than those Options described
below granted to Messrs. Krauter, Adimare and DiMarco under the 1995 Plan and
the non-employee director options granted under the 1995 Plan, vest
cumulatively, in four equal installments, on each of the first four
anniversary dates of the grant of the Option. Each of the Plans permits the
Company to include in Options or other awards a provision
10
<PAGE>
conditioning or accelerating the receipt of benefits, either automatically or
in its discretion, upon the occurrence of certain events, such as a change of
control of the Company, sale of substantially all of the assets of the
Company, acquisition of specified percentage of voting power of the Company,
dissolution or liquidation of the Company, or other significant corporate
transaction involving the Company (an "Acceleration Event"). Upon the
occurrence of an Acceleration Event, all presently outstanding Options will
automatically accelerate to permit the exercise of the then unvested portions.
Under the 1995 Plan, the Company may authorize any type of arrangement with
an eligible participant that involves the issuance of Common Stock or any
security that is exercisable for, convertible into or exchangeable for Common
Stock, including awards in the form of sales and bonuses of stock, restricted
stock, warrants, stock appreciation rights, phantom stock, dividend
equivalents, performance units or performance shares. The 1995 Plan also
provides for the automatic grant of Options to non-employee directors in the
amount of 15,000 shares per year for new non-employee directors and 5,000
shares per year for each other non-employee director. Each of these non-
employee director Options vest cumulatively, in three equal installments, on
each of the first three anniversary dates of the grant, with such vesting to
accelerate upon the occurrence of an Acceleration Event and upon the non-
employee director's termination of service due to death or total disability.
The Board may at any time amend or terminate each of the Plans, except that
it may not increase the total number of shares subject to the Plan, reduce the
minimum permissible exercise price under the Plan, extend the termination date
of the Plan, or alter the class of persons eligible to receive Options under
the Plan without shareholder approval, if, in the case of the 1995 Plan, such
approval is required to comply with certain applicable Securities and Exchange
Commission regulations or Internal Revenue Code provisions. In addition, the
Board may not amend the 1995 Plan to materially increase the benefits
thereunder available to its executive officers or adversely affect the plan's
compliance with Rule 16b-3 under the Securities Exchange Act of 1934 (the
"1934 Act") without shareholder approval, if such approval is required to
ensure such compliance. Furthermore, the principal terms of the non-employee
director Options may not be amended more than once every six months other than
to comply with applicable law.
In January 1995, Options for 100,000 and 90,000 shares were granted to Hal J
Krauter and Louis R. Adimare, respectively. These Options vest cumulatively at
a rate of 12.5% per quarter on each of the first eight quarterly anniversaries
of the grant date. These Options were the first Options granted to Messrs.
Krauter and Adimare, President and former Executive Vice President of the
Company, respectively, and are the only Options granted to Mr. Adimare. In
January 1998, an Option grant for 100,000 shares was made to Mr. Krauter,
subject to the approval by the shareholders of an increase in the number of
shares authorized for issuance under the 1995 Plan described in this Proxy
Statement. That Option becomes exercisable cumulatively at a rate of 25% per
year on each of the four anniversaries of the grant date. In August 1997, Mr.
DiMarco received an Option grant for 60,000 shares, the first 25% of which
vest on December 31, 1997, with the balance vesting cumulatively on each of
the first three anniversary dates of the grant date.
Employee Stock Purchase Plan. The Company's 1994 Employee Stock Purchase
Plan (the "Purchase Plan") is intended to qualify under the provisions of
Sections 421 and 423 of the Code and gives employees of the Company an
opportunity to acquire shares of Common Stock at a discount from fair market
value by means of payroll deductions. The Purchase Plan, which is administered
by the Independent Committee of the Board, covers an aggregate of 200,000
shares of Common Stock and terminates in April 2004. Through March 1, 1998, a
total of 40,543 shares have been sold under the Purchase Plan, and 159,457
shares are reserved for issuance.
The Purchase Plan is implemented by a series of 12-month offering periods,
with a new offering period commencing on each May 1 and November 1. The last
day of each of the two six-month exercise periods during each offering period
is an exercise date under the Purchase Plan. The purchase price for the shares
is accumulated by voluntary employee payroll deductions of between 1% and 10%
of an employee's eligible compensation during each offering period. The
purchase price per share at which shares are sold under the Purchase Plan is
equal to 85% of the fair market value of the Common Stock on the first day or
last day of each offering period, whichever price is lower. In the event that
the purchase price per share at the beginning of any offering period is
11
<PAGE>
less than the purchase price per share at the beginning of any prior offering
period which has not then ended, the Independent Committee in its discretion
may terminate the participation of all participants in the prior offering
period and enroll them in the new offering period at the same payroll
deduction rate.
The maximum number of shares that a participant may purchase during any
exercise period may not exceed 1,250. No employee will be permitted to
purchase, pursuant to the Purchase Plan and any other similar purchase plans
of the Company, more than $25,000 worth of stock in any calendar year. In
addition, no employee who owns 5% or more of the voting power or value of all
classes of stock of the Company will be permitted to purchase shares under the
Purchase Plan. Any participant may withdraw from the Purchase Plan at any time
prior to the end of the applicable offering period.
Options under the Purchase Plan may not be transferred by a participant
other than by will or under the laws of descent and distribution, and may be
exercised during a participant's lifetime only by the participant. In the
event of a sale, merger, dissolution or liquidation of the Company or a sale
of all or substantially all of the Company's assets, any then current offering
periods and exercise periods will terminate immediately prior to the date on
which such proposed action is to be consummated, unless otherwise determined
by the Independent Committee. Upon any such termination, unless otherwise
determined by the Independent Committee, all options to purchase shares will
be exercised automatically, on such date, to purchase the maximum number of
full shares that may be purchased at the applicable exercise price with each
participant's accumulated payroll deductions. Although the Board may at any
time amend or terminate the Purchase Plan, no amendment may be made that would
cause the Purchase Plan to fail to meet the requirements for employee stock
purchase plans in Section 423 of the Code.
401(K) PROFIT SHARING PLAN
In 1993, the Company adopted its 401(k) Profit Sharing Plan (the "401(k)
Plan"), pursuant to Section 401(k) of the Code. Employees may participate in
the 401(k) Plan if they have been employed by the Company for at least six
months and if they work more than 500 hours per year. Pursuant to the 401(k)
Plan, each eligible participant may contribute up to 15% of his or her
eligible compensation up to the maximum amount permitted under the Code. The
Company makes an additional matching contribution each year equal to 100% of
an employee's contribution, up to a maximum of $1,000 per employee. The
Company also may contribute such additional discretionary amount as it may
determine. Matching amounts contributed by the Company in 1995, 1996 and 1997
for the benefit of its executive officers are included in the Summary
Compensation Table set forth above.
12
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
Shown below is information with respect to grants of Options to Named
Officers during 1997.
OPTION GRANTS IN 1997
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE AT
ASSUMED ANNUAL
PERCENTAGE OF RATES OF STOCK
TOTAL OPTIONS PRICE APPRECIATION
OPTIONS GRANTED TO EXERCISE FOR OPTION TERM
GRANTED EMPLOYEES PRICE EXPIRATION -------------------
NAME # IN 1997 ($ PER SHARE) DATE 5% 10%
---- ------- ------------- ------------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Steven L. Yeffa......... 25,000(1) 5.10% $ 9.75 4/23/07 $153,250 $ 388,500
25,000(2) 5.10% $19.50 10/22/07 $306,250 $ 777,000
Dorian Jay DiMarco...... 60,000(3) 12.24% $16.25 8/19/07 $692,400 $1,806,600
</TABLE>
- --------
(1) These Options were granted on April 23, 1997, and become exercisable
cumulatively at a rate of 25% per year on each of the first four
anniversaries of the grant date.
(2) These Options were granted on October 22, 1997, and become exercisable
cumulatively at a rate of 25% per year on each of the first four
anniversaries of the grant date.
(3) These Options were granted on August 19, 1997, and became exercisable at a
rate of 25% on December 31, 1997 and on each of the first three
anniversaries of the grant date.
OPTION EXERCISES AND YEAR-END VALUES
Shown below is information with respect to Options exercised during 1997,
and unexercised Options held as of December 31, 1997, by Named Officers.
AGGREGATE OPTIONS EXERCISES IN 1997 AND
1997 YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS HELD AT IN-THE-MONEY OPTIONS AT
SHARES 12/31/97 12/31/97(1)
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Hal J Krauter........... -- -- 100,000 0 $1,612,500 --
Robert J. Kearns, III... 22,000 $387,938(2) 38,000 30,000 $ 630,250 $431,250
Steven L. Yeffa......... -- -- 5,374 59,126 $ 65,407 $556,845
Dorian Jay DiMarco...... -- -- 17,012 47,276 $ 143,756 $376,747
Steven J. Pressler...... 12,500 $171,250(3) 0 37,500 -- $370,313
</TABLE>
- --------
(1) Based on a value of $23.875 per share, the closing price of the Company's
Common Stock on the New York Stock Exchange on December 31, 1997, less the
applicable exercise price of the Options.
(2) Based on an exercise price of $6.50 per share and a sale price of $25.00
per share with respect to 12,000 shares, $23.75 per share with respect to
5,000 shares, $22.25 per share with respect to 2,500 shares, and $22.625
per share with respect to 2,500 shares.
(3) Based on an exercise price of $14.00 per share and a sale price of $29.50
per share with respect to 7,500 shares and $25.00 per share with respect
to 5,000 shares.
13
<PAGE>
SALARY CONTINUATION PROGRAM
In January 1998, the Board approved a salary continuation program pursuant
to which, upon the occurrence of a change in control of the Company, the
salaries of each of the Company's executive officers will continue to be paid
for twelve months beyond such change in control, whether or not the officer
remains as an employee of the Company after such change in control. Each of
such payments to an Officer will be reduced by 50% of the compensation
received by such officer from another source during the period with respect to
which the payment is being made.
COMPENSATION REPORT OF THE BOARD OF DIRECTORS
COMPENSATION DECISIONS
As discussed in "Committees and Meetings" above, significant decisions,
including all policy decisions, regarding executive officer compensation are
made by the Board of Directors (the "Board") as a whole. Hal J Krauter, as
Chairman of the Board and Chief Executive Officer of the Company, does intend
to recommend to the Board, at its April 1998 meeting, that the Board establish
a Compensation Committee composed of a non-employee director, and Mr. Krauter
(the "Compensation Committee"). However, even if a Compensation Committee is
formed, the Board would continue to make such significant decisions regarding
executive officer compensation, including all decisions with respect to Mr.
Krauter's compensation.
If the Compensation Committee is formed, Mr. Krauter also intends to
recommend to the Board that compensation recommendations relating to Mr.
Krauter be prepared by the non-employee director member of the Compensation
Committee and proposed to the Board. The Board would then consider, modify as
necessary, and approve compensation arrangements for Mr. Krauter. It is
expected that compensation arrangements relating to executive officers
directly reporting to Mr. Krauter would be reviewed by the Compensation
Committee and then modified as necessary and proposed to the Board by the
Compensation Committee. The Board then would consider, modify as necessary,
and approve the compensation arrangements for those executive officers. The
Compensation Committee would review, consider, modify as necessary, and
approve the compensation of all executive officers of the Company who do not
directly report to Mr. Krauter.
FUNCTIONS
The Board is responsible for assuring that all of the executive compensation
programs of the Company are developed, implemented, and administered in a way
that supports the Company's fundamental philosophy that a significant
proportion of executive compensation should be effectively linked to the
financial performance of the Company.
The Board generally meets on a quarterly basis. As necessary, it addresses
executive compensation issues for new or continuing executive officers at its
meetings. The Board or George Bragg, a non-employee director of the Company,
considers, modifies as necessary, and approves individual executive officer
compensation arrangements recommended by the Company's President and Chief
Executive Officer, Mr. Krauter. All compensation arrangements with Mr. Krauter
have been reviewed and proposed to the Board by the non-employee director, and
considered, modified as necessary and approved by the Board. The entire Board
also similarly reviews and approves significant changes to the Company's
overall compensation policies and program.
EXECUTIVE COMPENSATION PHILOSOPHY
The Board believes that the Company's executive compensation program is
designed to achieve several goals, all of which are intended to closely align
the financial interest of the Company's executive officers with those of the
Company's shareholders. These goals include:
. attracting, retaining and motivating executive officers key to the
success of the Company;
. rewarding executive officers for the financial success of the Company and
the enhancement of shareholder value, as well as for their individual
performance; and
. integrating executive compensation with both annual and long-term
financial results of the Company.
14
<PAGE>
The Board believes that, to accomplish these goals, the executive
compensation program should be based on three distinct components: base pay,
annual incentives, and long-term incentives. The Company obtains and
participates in an industry association survey and gathers other data
concerning executive compensation in other public companies in the Company's
industry. The information in that survey and such other data are used by the
President to evaluate the Company's executive compensation program, with
respect to each of those components, in comparison with those offered by
comparable companies, and to assist in the development of his recommendations
for executive compensation. Such information and data is also used by the
Board and the non-employee director in its functions described above.
COMPENSATION PLANS
The principal components of, and policies with respect to, executive
compensation are described below:
Base Compensation. The Company generally adheres to a policy of paying base
salaries to executive officers that are near the mid-range of compensation
levels of comparable executives in comparable companies. The Board and the
non-employee director, as the case may be, reviews the recommendations for
executive officers' salaries provided to them, which recommendations, as
noted, are based in part on an industry survey and on data with respect to
compensation of executives with similar responsibilities in other public
companies in the Company's industry. Other factors considered by the Board and
the non-employee director, as the case may be, include the competitive
environment, Company performance and experience level, position and
responsibilities and individual performance of each executive officer.
Annual Incentive Compensation Plan. The Company maintains an annual Employee
Bonus Plan pursuant to which all of the Company's full-time employees (other
than field sales employees receiving commissions), including executive
officers, are eligible to receive a cash bonus. The plan is reviewed and
approved annually by the Board. The amount of each bonus payable under the
plan is determined based on the Company's financial performance (as specified
in the plan), the employee's salary range and the employee's personal
performance. The plan affords the executive officers the opportunity to earn a
bonus which is a substantial percentage of their annual base compensation (up
to 50% for most of the executive officers). The percentage for each of the
executive officers (other than the President and Chief Executive Officer) is
determined by the President, based on guidelines reviewed and approved by the
Board. The percentage for the President and Chief Executive Officer is
reviewed and approved by the Board. The Board believes that tying the payment
of an annual bonus to the financial performance of the Company has had the
desired effect of closely aligning the financial interests of the Company's
executive officers with those of the Company's shareholders and is consistent
with each of the executive compensation goals described above. The Company
also pays bonuses, in the form of commissions, to its executive officers
involved in sales activities based on their individual performance in such
activities, usually against predetermined sales targets.
Deferred Income Plan. The Company also maintains a Deferred Income Plan for
its employees, including its executive officers. Under this plan, an amount
equal to each employee's annual bonus is credited to a phantom account. The
employee vests in each year's credited amount over a four year period at the
rate of 25% per annum. Vested amounts have generally been paid annually, in
cash, to the employee. The Company does not have an obligation to pay any
vested amount if the Board determines that the Company's financial performance
or cash requirements do not warrant such payment being made. However, vesting
of the amounts in the phantom accounts will accelerate, and be paid, if a
change of control of the Company occurs. This vesting arrangement creates a
substantial incentive for executive officers to remain with the Company over
the long-term and, in any event, not to leave the Company in anticipation of a
change of control.
Stock Options and Other Incentive Arrangements. The Board and the
Independent Committee administer the Company's 1995 Stock Option and Incentive
Plan (the "95 Plan"), under which options to purchase
Common Stock and other equity based incentives are granted to employees of the
Company, including its executive officers. This plan is designed to attract,
retain and motivate executive officers, as well as other employees, to
increase the market value of the Common Stock.
15
<PAGE>
Subject to the provisions of the 1995 Plan and taking into account the
recommendations of the President, the Independent Committee or the Board
determines the employees to whom options will be granted and the number of
shares subject to, and the terms of, each option. The number of options
granted to an employee is related to his or her base salary and level of
responsibility. All options have been granted with an exercise price equal to
the fair market value of the Common Stock on the date of the grant.
To date, all options have been granted for a term of five or ten years, with
vesting being cumulative, generally in four equal installments on each of the
first four anniversary dates of the grant of the option. Vesting of options
will accelerate if a change of control of the Company occurs. Because an
option will provide compensation to an executive officer only if, and to the
extent, the market price of the Common Stock increases over the exercise price
of the option, the use of options, as part of the compensation packages of the
executive officers, further closely aligns the financial interest of the
Company's executive officers with those of the Company's shareholders. In
addition, as a result of the vesting arrangements in each option grant, the
participation of each executive officer in the option plan also fosters the
executive's long-term interest in the financial performance of the Company and
the Common Stock, as well as provides an incentive for the executive to remain
with the Company, even in the face of a prospective change of control.
Other Benefits. Executive officers also participate in other employee
benefit programs, including health insurance, group life insurance and the
401(k) Plan. Under the 401(k) Plan, the Company makes matching contributions
of 100% of a participant's contribution up to $1,000 per year per participant.
In addition, executive officers, other than Mr. Krauter, are entitled to
participate in the Company's Employee Stock Purchase Plan. Under that plan,
each employee, including executive officers, subject to certain limits, may
purchase Common Stock of the Company at a 15% discount from its fair market
value in an amount up to 10% of his or her annual compensation.
CHIEF EXECUTIVE OFFICER COMPENSATION
The process of determining the compensation for Mr. Krauter, the Company's
President and Chief Executive Officer, and the factors taken into
consideration in such determination are generally the same as the process and
factors used in determining the compensation of each of the Company's other
executive officers. In particular, the Board considers the Company's financial
performance, as well as the Chief Executive Officer's individual performance,
in establishing his compensation. As much as approximately 50% (when taking
into account the Employee Bonus Plan and Deferred Income Plan) of the Chief
Executive Officer's potential aggregate annual cash compensation is based
principally on the Company's financial performance.
February 1, 1998 BOARD OF DIRECTORS
Hal J Krauter, Chairman
Louis R. Adimare
George L. Bragg
James C. Castle
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AMENDMENTS TO THE 1995 STOCK OPTION AND INCENTIVE PLAN
The 1995 Stock Option and Incentive Plan (the "1995 Plan") was approved by
the Board in January 1995, and by the shareholders in May 1995. As of March 1,
1998, options to purchase 878,621 shares had been granted and were
outstanding, and no shares remain available for future grants, under the 1995
Plan. The outstanding, options include a grant made in January 1998 to the
Company's President, which grant is subject to the approval by the
shareholders of the proposal to increase the number of shares authorized for
issuance under the 1995 Plan.
PROPOSED AMENDMENT
In January 1998, the Board approved an amendment to the 1995 Plan,
increasing the number of shares reserved for issuance under the 1995 Plan by
an additional 600,000 shares, subject to approval of the Company's
shareholders. If this proposal is approved by the shareholders, an aggregate
of 1,400,000 shares of Common Stock will be reserved for issuance under the
1995 Plan.
The Board believes that the proposed amendment is appropriate in order to
ensure that the Company has available for option grants that number of shares
of Common Stock as may be necessary to attract, retain and motivate
experienced and qualified executive officers and other key employees. If the
proposed amendment were not approved, the Company would have no shares
available for future grants under the 1995 Plan. For that reason, the Board
recommends that the shareholders approve the proposed amendment.
GENERAL
The purpose of the 1995 Plan is to enable the Company and its subsidiaries
to attract, retain and motivate their employees by providing for, or
increasing, the proprietary interests of such employees in the Company. Every
employee of, and consultant to, the Company of any of its subsidiaries is
eligible to be considered for a grant of awards, including options, under the
1995 Plan. The maximum number of shares of Common Stock that presently may be
issued pursuant to awards granted under the 1995 Plan is 800,000, subject to
certain adjustments to prevent dilution. The maximum number of shares of
Common Stock that may be issued to any one employee during any calendar year
is 100,000.
The 1995 Plan is administered by the Independent Committee of the Board and
the Board. Subject to the provisions of the 1995 Plan, the Independent
Committee and the Board have full and final authority to select the
participants to whom such awards will be granted thereunder, to grant such
awards, and to determine the terms and conditions of such awards, and the
number of shares to be issued pursuant thereto.
AWARDS
The 1995 Plan authorizes the Independent Committee to enter into any type of
arrangement with an eligible participant that, by its terms, involves or might
involve the issuance of (1) Common Stock, or (2) a Derivative Security (as
such term is defined in Rule 16a-1 promulgated under the 1934 Act) or a
similar right or interest, with an exercise or conversion privilege at a price
either above, equal to, or below the fair market value of the Common Stock on
the date of grant or with a value derived from the value of the Common Stock.
The exercise or conversion price of any award that is intended to qualify as
"performance based compensation" for purposes of Section 162(m) of the Code
will not be less than fair market value of the Common Stock on the date of
grant. To date, all awards under the 1995 Plan have been stock options with an
exercise price equal to the fair market value of the Common Stock on the date
of grant.
Awards under the 1995 Plan are not restricted to any specified form or
structure and may include arrangements such as sales and bonuses of stock,
stock appreciation rights, phantom stock, dividend equivalents, performance
units or performance shares. An award may consist of one such arrangement or
two or more such arrangements in tandem or in the alternative.
An award granted under the 1995 Plan may include a provision conditioning or
accelerating the receipt of benefits, either automatically or in the
discretion of the Independent Committee or the Board, upon the occurrence of
specified events, such as change of control of the Company or a dissolution,
liquidation, merger, reclassification, sale of substantially all of the
property and assets of the Company or other significant corporate
17
<PAGE>
transaction. To date, all option grants under the 1995 Plan have provided for
an acceleration of vesting upon the occurrence of an Acceleration Event, as
defined below. Any stock option granted to an employee may be an incentive
stock option or a non-qualified stock option.
An award under the 1995 Plan may permit the recipient to pay all or part of
the purchase price of the shares or other property issuable pursuant thereto,
and/or to pay all or part of such recipients' tax withholding obligations with
respect to such issuance, by delivering cash, by delivering previously owned
shares of capital stock of the Company or other property deemed acceptable by
the Independent Committee or the Board, by reducing the amount of shares or
other property otherwise issuable pursuant to the award, or by delivering a
promissory note, the terms and conditions of which shall be determined by the
Independent Committee or the Board. If an option granted under the 1995 Plan
permitted the recipient to pay for the shares issuable pursuant thereto with
previously owned shares, the recipient would be able to exercise the option in
successive transactions, starting with a relatively small number of shares
and, by a series of exercises using shares acquired from each such
transaction, to exercise an option for a larger number of shares with no more
investment than the original shares delivered.
NON-EMPLOYEE DIRECTOR OPTIONS
The 1995 Plan also provides for the automatic grant of stock options to non-
employee directors ("Non-employee Director Options"). Each new non-employee
director will automatically be granted, upon his or her election to the Board,
an option for 15,000 shares of Common Stock. In addition, each year, on the
first business day after the date of the annual meeting of shareholders of the
Company (if the non-employee director has been a director of the Company since
the prior annual meeting of shareholders), each non-employee director will
automatically be granted an option to purchase 5,000 shares of Common Stock.
The exercise price for each option is the Fair Market Value (as defined in the
1995 Plan) of the shares on the date of grant.
One third of the shares of Common Stock subject to each Non-employee
Director Option will become exercisable, cumulatively, on each of the first
three anniversaries of the grant date; provided, however, that a Non-employee
Director Option shall become fully exercisable on the date upon which the
optionee shall cease to be a non-employee director as a result of death or
total disability. In addition, all outstanding Non-employee Director Options
will become exercisable in full on the first to occur of the following (an
"Acceleration Event"):
(1) immediately prior to the consummation of a reorganization, merger or
consolidation of the Company as a result of which the outstanding
securities of the class then subject to the 1995 Plan are exchanged for or
converted into cash, property and/or securities not issued by the Company;
(2) the dissolution or liquidation of the Company;
(3) the sale of all or substantially all of the property and assets of
the Company; or
(4) the date of dissemination to the shareholders of a proxy statement or
information statement disclosing a change in control of the Company.
Each Non-employee Director Option granted under the 1995 Plan will expire
upon the first to occur of the following:
(1) the first anniversary of the date upon which the optionee ceases to
be a non-employee director as a result of death or total disability;
(2) the 90th day after the date upon which the optionee ceases to be a
non-employee director for any reason other than death or total disability;
or
(3) the tenth anniversary of the date of grant of such option.
PLAN DURATION
The 1995 Plan became effective upon its adoption by the Board in January
1995. Awards may not be granted under the 1995 Plan after December 31, 2004.
Although any award that was duly granted on or prior to such date may
thereafter be exercised or settled in accordance with its terms, no shares of
Common Stock may be issued pursuant to any award after December 31, 2014.
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<PAGE>
AMENDMENTS
The Board may amend or terminate the 1995 Plan at any time and in any
manner, except as follows:
(1) the recipient of any award may not be deprived of such award or any
of his or her rights thereunder or with respect thereto, without his or her
consent, as a result of any such amendment or termination; and
(2) the principal terms and conditions relating to the Non-employee
Director Options may not be amended more than every six months other than
to comply with changes in the Code, the Employee Retirement Income Security
Act, or the rules under either, all as amended from time to time.
FEDERAL INCOME TAX TREATMENT
The following is a brief description of the federal income tax treatment
which will generally apply to awards made under the 1995 Plan, based on
federal income tax laws on the date hereof. The exact federal income tax
treatment of awards will depend on the specific nature of the reward. Such an
award may, depending on the conditions applicable to the award, be taxable as
an option, as restricted or unrestricted stock, as a cash payment, or
otherwise.
Incentive Options. Pursuant to the 1995 Plan, employees may be granted
options which are intended to qualify as incentive stock options ("Incentive
Options") under the provisions of Section 422 of the Code. Non-employee
Director Options are not intended to qualify as Incentive Options. Generally,
the optionee is not taxed and the Company is not entitled to a deduction on
the grant or the exercise of an Incentive Option. Subject to the holding
period requirements described below, the optionee generally recognizes capital
gain or loss on the sale of the shares acquired upon the exercise of an
Incentive Option equal to the difference between the sales price and the
exercise price of such Incentive Option and the Company is not entitled to a
deduction. However, if the optionee sells the shares acquired upon the
exercise of an Incentive Option at any time within (1) one year after the date
of transfer of shares to the optionee pursuant to the exercise of such
Incentive Option or (2) two years after the date of grant of such Incentive
Option, then the optionee will recognize ordinary income in an amount equal to
the excess, if any, of the lesser of the sale price of the shares of Common
Stock or the fair market value of the shares of Common Stock on the date of
exercise over the exercise price of such Incentive Option. In such case, the
Company will generally be entitled to a tax deduction in an amount equal to
the amount of ordinary income recognized by such Optionee.
The amount by which the fair market value of the shares of Common Stock
received upon exercise of an Incentive Option exceeds the exercise price will
be included as a positive adjustment in the calculation of an optionee's
"alternative minimum taxable income" ("AMTI") in the year of exercise. The
"alternative minimum tax rate" is equal to 26% on AMTI (reduced by certain
exemption amounts) less than or equal to $175,000 in any year and 28% on the
amount of AMTI in excess of $175,000.
Nonqualified Options. The grant of an option or other similar right to
acquire stock which does not qualify for treatment as an Incentive Option (a
"Nonqualified Option") is generally not a taxable event for the optionee. Upon
exercise of the option, the optionee will generally recognize ordinary income
in an amount equal to the excess of the fair market value of the stock
acquired upon exercise (determined as of the date of the exercise) over the
exercise price of such option, and the Company will be entitled to a tax
deduction equal to such amount. See "Special Rules for Awards Granted to
Insiders, including Non-employee Directors," below.
Special Rules for Awards Granted to Insiders, including Non-employee
Directors. If an optionee is a director, officer or shareholder subject to
Section 16 of the 1934 Act (an "Insider") and exercises an option within six
months of the date of grant, the timing of the recognition of any ordinary
income generally should be deferred until (and the amount of ordinary income
should be determined, based on the fair market value (or the sales price in
the case of a disposition) of the shares acquired by such exercise, upon) the
earlier of the following two dates (the "16(b) Date"): (1) six months after
the date of grant; or (2) the date upon which a disposition of the shares of
Common Stock occurs, unless the Insider makes an election under Section 83(b)
of the Code (an "83(b) Election") within 30 days after exercise to recognize
ordinary income based on the value of the Common Stock on the date of
exercise.
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<PAGE>
Restricted Shares. Awards under the 1995 Plan may also include stock sales,
stock bonuses or other grants involving "restricted shares". Unless the
recipient makes an 83(b) Election, as discussed above, within 30 days after
the receipt of the restricted shares, the recipient generally will not be
taxed on the receipt of restricted shares until the restrictions on such
shares expire or are removed. When the restrictions expire or are removed, the
recipient will recognize ordinary income (and the Company will be entitled to
a deduction) in an amount equal to the excess of the fair market value of the
shares at that time over the purchase price. However, if the recipient makes
an 83(b) Election within 30 days of the receipt of restricted shares, he or
she will recognize ordinary income (and the Company will be entitled to a
deduction) equal to the excess of the fair market value of the shares on the
date of receipt over the purchase price. In the case of an Insider, the timing
of income recognition (including the date used to compute the fair market
value of shares) with respect to restricted shares may be deferred until the
16(b) Date, as described above in "Special Rules for Awards Granted to
Insiders, including Non-employee Directors", unless the Insider makes a valid
83(b) Election.
Miscellaneous Tax Issues. Awards may be granted under the 1995 Plan which do
not fall clearly into the categories described above. The federal income tax
treatment of these awards will depend upon the specific terms of such awards.
The Company may be required to make arrangements for withholding applicable
taxes with respect to any ordinary income recognized by a participant in
connection with awards made under the 1995 Plan.
With certain exceptions, an individual may not deduct investment-related
interest to the extent such interest exceeds the individual's net investment
income for the year. Investment interest generally includes interest paid on
indebtedness incurred to purchase shares of Common Stock. Interest disallowed
under this rule may be carried forward to and deducted in later years, subject
to the same limitations.
Special rules apply in cases where a recipient of an award pays the exercise
or purchase price of the award or applicable withholding tax obligations under
the 1995 Plan by delivering previously owned shares of Common Stock or by
reducing the amount of shares otherwise issuable pursuant to the award. The
surrender or withholding of such shares will in certain circumstances result
in the recognition of income with respect to such shares.
The terms of the agreements pursuant to which specific awards are made to
employees under the 1995 Plan may provide for accelerated vesting or payment
of an award in connection with a change in ownership or control of the
Company. In that event and depending upon the individual circumstances of the
recipient, certain amounts with respect to such awards may constitute "excess
parachute payments" under the "golden parachute" provisions of the Code.
Pursuant to these provisions, a recipient will be subject to a 20% excise tax
on any "excess parachute payments" and the Company will be denied any
deduction with respect to such payment. Furthermore, in certain instances, the
Company may be denied a deduction for compensation (including compensation
attributable to awards made under the 1995 Plan) to certain officers of the
Company to the extent their compensation exceeds $1 million in a given year.
The foregoing brief summary of the effect of federal income taxation upon
the participants and the Company with respect to the award and exercise of
options and other equity-based incentive arrangements under the 1995 Plan and
the disposition of shares so acquired does not purport to be complete.
Reference should made to the applicable provisions of the Code and the related
regulations for detailed information concerning the tax effects of each such
transaction. In addition, this summary does not discuss the provisions of the
income tax laws of any municipality, state or foreign country in which a
participant may reside or the Company is located.
PARTICIPATION IN THE 1995 PLAN BY EXECUTIVE OFFICERS, OTHER EMPLOYEES AND NON-
EMPLOYEE DIRECTORS
Although, pursuant to the terms of the 1995 Plan, all employees and non-
employee directors of the Company and its subsidiaries, are eligible to
receive option or other incentive grants under the plan, the Company, as a
matter of compensation policy, has limited grants under the plan to its key
employees, including executive officers and non-employee directors.
Accordingly, as of March 1, 1998, a total of 48 persons were eligible to
receive grants under the 1995 Plan. Grants will be made only with the approval
of the Independent Committee or the Board. Because all grants under the 1995
Plan to executive officers and other employees are discretionary, future
grants to eligible participants are not determinable. As described above, the
grant of options to non-employee directors is non-discretionary and will be
made automatically as provided in the 1995 Plan.
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Certain executive officers of the Company have been granted stock options
under the 1995 Plan. The following able sets forth the options granted under
the 1995 Plan as of March 1, 1998.
PLAN BENEFITS
1995 STOCK OPTION AND INCENTIVE PLAN
<TABLE>
<CAPTION>
NUMBER
DOLLAR OF
NAME AND POSITION VALUE($)(1) UNITS(2)
----------------- ----------- --------
<S> <C> <C>
Hal J Krauter........................................... -- 200,000(3)
President and
Chief Executive Officer
Robert J. Kearns, III................................... -- 0
Executive Vice President and
Chief Operating Officer
Steven L. Yeffa......................................... -- 50,750(4)
Vice President, Finance
and Chief Financial Officer
Dorian Jay DiMarco...................................... -- 61,050(5)
Vice President, Corporate Marketing
and New Vendor Programs
Steven L. Pressler...................................... -- 50,000(6)
Vice President, National
Director of Leasing
Executive Group......................................... -- 519,300
Non-Executive Director Group............................ -- 145,000(7)
Non-Executive Employee Group............................ -- 387,750
</TABLE>
- --------
(1) The value of the Common Stock, as of March 1, 1998, is $26.125 per share.
(2) Except as specified to the contrary below, these options are generally
exercisable cumulatively at a rate of 25% per year on each of the first
four anniversaries of its grant date.
(3) Stock option granted with respect to 100,000 shares on January 25, 1995,
with an exercise price of $7.75 and expiration on January 25, 2005. The
option is exercisable cumulatively over eight quarters, at 12.5% per
quarter, on each April 25, July 25, October 25 and January 25. Stock
option granted with respect to 100,000 shares on January 21, 1998, with
an exercise price of $25.4375 and an expiration on January 21, 2008,
subject to shareholder approval of the amendment to the 1995 Plan
described in this Proxy Statement.
(4) Stock option granted with respect to 750 shares on January 25, 1995, with
an exercise price of $7.75 and an expiration on January 25, 2005. Stock
option granted with respect to 25,000 shares on April 23, 1997, with an
exercise price of $9.75 and an expiration on April 23, 2007. Stock option
granted with respect to 25,000 shares on October 22, 1997, with an
exercise price of $19.50 and an expiration date of October 22, 2007.
(5) Stock option granted with respect to 1,050 shares on January 25, 1995,
with an exercise price of $7.75 and an expiration on January 25, 2005.
Stock option granted with respect to 60,000 shares on August 19, 1997,
with an exercise price of $16.25 and an expiration on August 19, 2007,
exercisable cumulatively at a rate of 25% on December 31, 1997 and on
each of the first three anniversaries of the grant date.
(6) Stock option granted on January 23, 1996, with an exercise price of
$14.00 and an expiration on January 23, 2006.
(7) Mr. Adimare holds a stock option for 90,000 shares granted to him while
he was an officer of the Company, on January 25, 1995, with an exercise
price of $7.75, expiring on January 25, 2005, and exercisable
cumulatively over eight quarters, at 12.5% per quarter, on each April 25,
July 25, October 25 and January 25. Stock options for 10,000 shares
granted to each of Messrs. Adimare, Bragg and Castle: (i) 5,000 shares on
May 31, 1996, with an exercise price of $16.50, expiring on May 31, 2006;
and (ii) 5,000 shares on May 29, 1997, with an exercise price of $14.50,
expiring on May 29, 2007. Stock options for 5,000 shares granted to each
of Messrs. Bragg and Castle on May 4, 1995, with an exercise price of
$10.00, expiring on May 4, 2005. Stock option for 15,000 shares granted
to Mr. Nevitt on February 27, 1998, with an exercise price of $26.125,
expiring on February 27, 2008.
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VOTE REQUIRED
The affirmative vote of a majority of the shares of Common Stock present, in
person or by proxy, and entitled to vote at the Meeting, at which a quorum
representing a majority of all outstanding shares of Common Stock is present,
is required for approval of this proposal.
BOARD RECOMMENDATION
The shareholders of the Company are being asked to approve an amendment to
the 1995 Plan to increase the number of shares of Common Stock reserved for
issuance thereunder from 800,000 to 1,400,000 shares. For the reasons noted
above, the Board believes that it is in the best interests of the Company and
its shareholders to approve this amendment of the 1995 Plan.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR AMENDING THE 1995 STOCK OPTION
AND INCENTIVE PLAN TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK RESERVED
FOR ISSUANCE THEREUNDER FROM 800,000 TO 1,400,000.
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INCREASE IN AUTHORIZED SHARES
The Board has adopted, and declared it to be advisable that the shareholders
of the Company approve, an amendment to the Company's Articles of
Incorporation to increase the number of shares of Common Stock authorized for
issuance from 20,000,000 shares to 60,000,000 shares, and has directed that
such proposed amendment be submitted to the shareholders of the Company for
their approval at the Meeting.
As of March 1, 1998, there were 8,202,101 shares of Common Stock issued and
outstanding. An aggregate of 3,859,771 shares of Common Stock remain reserved
for issuance in connection with the 6 7/8% Convertible Subordinated Notes Due
2003 issued by the Company in October 1996 (convertible into shares of the
Common Stock of the Company at any time through maturity, unless previously
redeemed or repurchased), and under the Company's stock option plans and 1994
Employee Stock Purchase Plan (including 600,000 shares of Common Stock with
respect to the 1995 Plan subject to shareholder approval, as described at
"Amendments to the 1995 Stock Option and Incentive Plan" below). Accordingly,
if such shareholder approval is obtained, there will be 7,938,128 authorized,
unissued shares of Common Stock not reserved for issuance. The Company has
authorized 5,000,000 shares of Preferred Stock, none of which are issued and
outstanding.
The Board believes that it is prudent and in the best interest of the
Company and its shareholders to have additional authorized shares of Common
Stock readily available for issuance in connection with future financing
transactions, acquisitions, stock splits, stock dividends, and stock issuances
pursuant to employee benefit plans and the Company's Rights Plan (see
"Reincorporation in Delaware--Preferred Stock Rights Plan" below), and other
appropriate corporate opportunities and purposes. Having such shares available
for issuance in the future would give the Company greater flexibility and
allow shares of Common Stock to be issued without the expense and delay of a
special shareholders meeting. However, the Company has no agreements,
commitments or understandings at this time with respect to the issuance of
additional shares of Common Stock, which would be made possible by the
proposed amendment, in connection with any financing transaction, acquisition,
stock dividends, employee benefit plan, the Rights Plan or other transaction.
No further shareholder vote may be required to issue any of the additional
shares subject to the proposed amendment. Such shares could be issued at such
prices and under such circumstances as would have a dilutive effect on the
equity ownership of the present holders of the Common Stock. The additional
shares also could be used to discourage or make more difficult an acquisition
or change of control of the Company. See "Reincorporation in Delaware--
Preferred Stock Rights Plan" below. Nevertheless, for the reasons noted above,
the Board believes it is in the best interest of the Company to approve the
amendment.
If the Reincorporation Proposal, described in "Reincorporation in Delaware"
below, is approved, the increase in capital proposed herein will likewise be
deemed authorized for the Company as a Delaware corporation (the "Delaware
Company"), and the Delaware Company's Certificate of Incorporation will be
amended to provide authorized capitalization of 60,000,000 shares of Common
Stock, $.01 par value, and 5,000,000 shares of Preferred Stock, $.01 par
value. If the Reincorporation Proposal is approved, but this proposal to
increase the authorized shares of Common Stock of the Company is not approved,
the current capitalization of the Company will carry over to the Delaware
Company, which will, as a result, have authorized capitalization of 20,000,000
shares of Common Stock, and 5,000,000 shares of Preferred Stock.
Under the proposed Certificate of Incorporation for the Delaware Company, as
under the Company's present Articles of Incorporation, the Board 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, including the number of shares of Common Stock that may be
issued upon the conversion of any such shares, and to fix the number of shares
constituting any such series and to determine the designation thereof.
23
<PAGE>
VOTE REQUIRED
The affirmative vote of a majority of the outstanding shares of Common Stock
entitled to vote at the Meeting, at which a quorum representing a majority of
all outstanding shares of Common Stock is present, is required for approval of
this proposal.
BOARD RECOMMENDATION
The shareholders of the Company are being asked to approve an amendment to
the Company's Articles of Incorporation to increase the number of shares
authorized for issuance thereunder from 20,000,000 to 60,000,000. For the
reasons noted above, the Board believes that it is in the best interests of
the Company and its shareholders to approve this amendment to the Company's
Articles of Incorporation.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR AMENDING THE
ARTICLES OF INCORPORATION OF THE COMPANY TO INCREASE THE NUMBER OF AUTHORIZED
SHARES OF COMMON STOCK OF THE COMPANY FROM 20,000,000 TO 60,000,000.
24
<PAGE>
REINCORPORATION IN DELAWARE
GENERAL
The Board of Directors of the Company (the "Board") has unanimously approved
a proposal to change the Company's state of incorporation from California to
Delaware (the "Reincorporation Proposal" or the "Proposed Reincorporation").
For the reasons set forth below, the Board of Directors believes that it is in
the best interests of the Company and its shareholders to change the Company's
corporate domicile. As discussed below, through the implementation of the
Reincorporation Proposal, the Company will gain the greater flexibility
afforded by Delaware corporate law and the increased predictability offered by
the substantial body of case law interpreting that law. The Proposed
Reincorporation should also enhance the Company's ability to retain and, if
necessary, attract qualified directors, although, to date, the Company has not
experienced difficulty in retaining directors.
The Proposed Reincorporation would be effected by merging the Company
(hereinafter sometimes referred to as the "California Company") into a newly-
formed Delaware corporation which, before the merger (the "Merger"), will be a
wholly-owned subsidiary of the California Company (the "Delaware Company").
Upon completion of the Merger, the California Company will cease to exist and
the Delaware Company will continue to operate the business of the Company
under the name Leasing Solutions, Inc. The Proposed 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.
Pursuant to the Agreement and Plan of Merger (the "Merger Agreement"),
attached as Appendice A to this Proxy Statement, on the effective date of the
Proposed Reincorporation, each outstanding share of Common Stock of the
California Company will automatically convert into one share of Common Stock
of the Delaware Company, and shareholders of the California Company will
automatically become shareholders of the Delaware Company. On the effective
date of the Proposed 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 California 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 California Company will be
assumed by the Delaware Company and thereby become 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 provided in the original options or
rights. All of the Company's employee benefit plans, including the 401(k)
Profit Sharing Plan, the 1994 Employer Stock Purchase Plan, the 1986 Stock
Option Plan and the 1995 Stock Option and Incentive Plan, will be assumed and
continued by the Delaware Company following the reincorporation. Shareholders
should recognize that approval of the Proposed Reincorporation will constitute
approval of the assumption of those plans by the Delaware Company.
Certificates for shares in the Company will automatically represent an equal
number of shares in the Delaware Company upon completion of the merger. IT
WILL NOT BE NECESSARY FOR SHAREHOLDERS TO EXCHANGE THEIR EXISTING STOCK
CERTIFICATES FOR STOCK CERTIFICATES OF THE DELAWARE COMPANY. However,
shareholders may exchange their certificates if they so choose. The Common
Stock of the Company is listed for trading on the New York Stock Exchange and,
after the Merger, the Company's Delaware Common Stock will continue to be
traded on the New York Stock Exchange without interruption, under the same
symbol ("LSN").
The Company proposes to retain as a part of the Proposed Reincorporation
certain measures already in place under the Company's current California
charter and other documents, which measures are designed to protect
shareholder interests in the event of hostile takeover attempts against the
Company. 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. The Reincorporation
Proposal is not being proposed in order to prevent such a change in control,
and the Board is not aware of any attempt to acquire control of the Company or
to obtain representation on the Board. Nevertheless, certain effects of the
Reincorporation Proposal may be considered to have anti-takeover implications.
See "Anti-Takeover Measures" below.
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If the Reincorporation Proposal is approved by the shareholders, it is
anticipated that the reincorporation would be completed in the near future
and, in any event, during 1998. The Proposed 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, and the Board of Directors of the Delaware Company, in the case of
an amendment, circumstances arise that make such action advisable; provided,
that any amendment that would effect a material change from the charter
provisions discussed in this Proxy Statement would require further approval by
the holders of a majority of the outstanding shares of the Common Stock.
The discussion set forth below is qualified in its entirety by reference to
the Merger Agreement, the Certificate of Incorporation of the Delaware Company
and the Bylaws of the Delaware Company, copies of which are attached hereto as
Appendices A, B and C, respectively.
APPROVAL BY SHAREHOLDERS OF THE PROPOSED REINCORPORATION WILL CONSTITUTE
APPROVAL OF THE MERGER AGREEMENT, THE CERTIFICATE OF INCORPORATION AND THE
BYLAWS OF THE DELAWARE COMPANY AND ALL PROVISIONS THEREOF.
PRINCIPAL REASONS FOR THE PROPOSED REINCORPORATION
In recent years, a number of major public companies have obtained the
approval of their shareholders to reincorporate in Delaware. As the Company
plans for the future, the Board of Directors and management believe that it is
essential to be able to draw upon well established principles of corporate
governance in making legal and business decisions. The prominence and
predictability of Delaware corporate law provide a reliable foundation on
which the Company's governance decisions can be based, and the Company
believes that the shareholders will benefit from the responsiveness of
Delaware corporate law to their needs and to those of the corporation they
own.
For many years Delaware has followed a policy of encouraging incorporation
in that state. In furtherance of that policy, Delaware has been a leader in
adopting, construing and implementing comprehensive, flexible corporate laws
responsive to the legal and business needs of corporations organized under its
laws. The Delaware legislature is particularly sensitive to issues regarding
corporate law and is especially responsive to changing business needs and to
developments in modern corporate law. The Delaware courts have developed
considerable expertise in dealing with corporate issues, and a substantial
body of case law has developed construing Delaware law and establishing public
policies with respect to corporate legal affairs. 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.
The increasing frequency of claims and litigation directed against directors
and officers has greatly expanded the risks facing directors and officers of
corporations in exercising their respective duties. The amount of time and
money required to respond to such claims and to defend such litigation can be
substantial. It is the Company's desire to reduce these risks to its directors
and officers and to limit situations in which monetary damages can be
recovered against directors so that the Company may continue to attract and
retain qualified directors who otherwise might be unwilling to serve because
of the risks involved. Both California and Delaware law permit a corporation
to include a provision in its certificate of incorporation which reduces or
limits the monetary liability of directors for breaches of fiduciary duty in
certain circumstances. The Company believes that, in general, Delaware law
provides greater protection to directors than California law and that Delaware
case law regarding a corporation's ability to limit director liability is more
developed and provides more guidance than California law.
In November 1996, Proposition 211 was rejected by the California electorate.
Proposition 211 would have severely limited the ability of California
companies to indemnify their directors and officers. While Proposition 211 was
defeated, similar initiatives or legislation containing similar provisions may
be proposed in California in the future. As a result, the Company believes
that the more favorable corporate environment afforded by
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Delaware will enable it to retain existing directors and to compete more
effectively with other public companies in attracting new directors.
SIGNIFICANT CHANGES CAUSED BY REINCORPORATION
In general, the Company's corporate affairs are governed at present by the
corporate law of California, the Company's state of incorporation, and by the
Company's Articles of Incorporation, as amended (the "California Articles")
and the Company's Bylaws (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 Leasing Solutions, Inc., 10 Almaden Boulevard, Suite 1500, San
Jose, California 95113, 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,
respectively, to this Proxy Statement. Accordingly, the differences among
these documents and between Delaware and California law are relevant to your
decision whether to approve the Reincorporation Proposal.
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.
Limitations on Delaware law permits the California law contains
Director Liability limitation of liability additional exceptions to
(see page 29). of directors to the the liability
Company except in limitations of
connection with: (i) directors. See
breaches of the duty of "Indemnification and
loyalty; (ii) acts or Limitation of
omissions not in good Liability--Limitations
faith or involving on Director Liability."
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 Delaware law permits California law permits
Directors and somewhat broader indemnification under
Officers (see page indemnification and certain circumstances,
30). could result in subject to certain
indemnification of limitations. See
directors and officers "Indemnification and
in circumstances where Limitation of
California law would not Liability--
permit indemnification. Indemnification of
Directors and Officers."
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<PAGE>
Cumulative Voting Cumulative voting is not Cumulative voting is
for Directors (see available under Delaware mandatory upon notice
page 32). law because it is not given by a shareholder
provided for in the at a shareholders'
Delaware Certificate. meeting at which
directors are to be
elected. California law
permits corporations
whose stock is listed on
a national exchange to
eliminate cumulative
voting.
Number of Directors Pursuant to the Delaware Determined by the Board
(see page 32). Certificate, determined within a range set in
solely by resolution of the California Bylaws.
the Board. Changes in the
authorized range must be
approved by the
shareholders.
Removal of Directors Delaware law and the California law permits
by Shareholders (see Delaware Certificate and the removal of a
page 33). Bylaws permit removal of director with or without
directors with or cause by affirmative
without cause by vote of a majority of
affirmative vote of a the outstanding shares,
majority of the provided that shares
outstanding shares of voting against removal
voting stock entitled to could not elect such
vote at an election of director under
directors. cumulative voting.
Filling Board Delaware law provides California law permits
Vacancies (see page for the Delaware Court (i) any holder of 5% or
33). of Chancery to order an more of the
election to fill a corporation's voting
vacancy on the Board stock, or (ii) the
upon the application of superior court of the
the holders of 10% of appropriate county, to
the outstanding shares call a special meeting
having a right to vote of shareholders to elect
for such directors if, the entire board if,
at the time of filling after filling any
such vacancy, the vacancy, the directors
directors then in office then in office who have
constitute less than a been elected by the
majority of the entire shareholders constitute
board as constituted less than a majority of
immediately prior to any the directors then in
increase. Otherwise, the office. Otherwise, the
Board may fill such Board may fill such
vacancy. vacancy.
Action by Written Action by written Action by written
Consent of consent is not permitted consent is permitted by
Shareholders in Lieu by the Delaware California law provided
of a Shareholder Certificate unless that such action is
Vote at Shareholder shareholders holding no taken by no less than
Meeting (see page less than 75% of the the minimum number of
33). total voting power of votes necessary, if
the outstanding shares taken at a meeting,
entitled to vote (the provided that directors
"Voting Stock") on such may be elected only by
action, if taken at a unanimous written
meeting, approve the consent.
action. Otherwise, all
shareholder actions must
take place by a
shareholder vote at a
meeting of shareholders.
Tender Offer Statute Restricts hostile two- No comparable statute.
(see page 34). step takeovers.
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Amendment of Amendments to the Amendments to provisions
Certificate (see Delaware Certificate relating to the
page 38). require approval by a establishment of the
simple majority of the number of directors,
Voting Stock of the advance notice of
Company. shareholder proposals
and nominations,
shareholder action
without a meeting, and
cumulative voting
require approval by a
simple majority of the
Voting Stock of the
Company.
Loans to Officers Board may authorize, if Loans must be approved
and Directors (see reasonably expected to or ratified by a
page 39). benefit the Company. majority of the
outstanding shares.
Class Vote for Generally not required A reorganization must
Reorganizations (see unless a reorganization generally be approved by
page 39). is effected by amendment a majority vote of each
to the certificate of class of shares
incorporation and outstanding.
adversely affects a
specific class of
shares.
Right of Permitted for any Permitted for any
Shareholders to purpose reasonably purpose reasonably
Inspect Shareholder related to such related to such
List (see page 39.) shareholder's interest shareholder's interest
as a shareholder. as a shareholder. Also,
such inspection is an
absolute right for 5%
shareholders and certain
1% shareholders.
Appraisal Rights Generally available if Available in certain
(see page 39). shareholders receive circumstances if the
cash in exchange for the holders of 5% of the
shares and in certain class assert such
other circumstances, but rights.
only in mergers.
Dividends (see page Payable only out of Generally limited to the
40). surplus (as defined greater of (i) retained
under Delaware law) and, earnings, or (ii) an
in certain amount which would leave
circumstances, net the Company with assets
profits. 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.
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.
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<PAGE>
The California Articles eliminate the liability of directors to the
corporation to the fullest extent permissible under California law. California
law does not permit the elimination of monetary liability where such liability
is based on: (a) intentional misconduct or knowing and culpable violation of
law; (b) acts or omissions that a director believes to be contrary to the best
interests of the corporation or its shareholders, or that involve the absence
of good faith on the part of the director; (c) receipt of an improper personal
benefit; (d) acts or omissions that show reckless disregard for the director's
duty to the corporation or its shareholders, where the director in the
ordinary course of performing a director's duties should be aware of a risk of
serious injury to the corporation or its shareholders; (e) acts or omissions
that constitute an unexcused pattern of inattention that amounts to an
abdication of the director's duty to the corporation and its shareholders; (f)
interested transactions between the corporation and a director in which a
director has a material financial interest; and (g) liability for improper
distributions, loans or guarantees.
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 Delaware Certificate effected by the
Proposed Reincorporation is designed, in part, to shield a director from suits
by the Delaware Company or its shareholders for monetary damages for
negligence or gross negligence if a director fails to satisfy the director's
fiduciary duty. As a result, an action for monetary damages against a director
for breach of fiduciary duty would be available only if the Delaware Company
or its shareholders were able to establish that the director was disloyal in
his or her conduct, failed to act in good faith, engaged in intentional
misconduct, knowingly violated the law, derived an improper personal benefit
or approved an illegal dividend or stock repurchase. Consequently, the effect
of such measures may be to limit or eliminate an effective remedy which might
otherwise be available to a shareholder who is dissatisfied with the Board's
decisions. Although an aggrieved shareholder could sue to enjoin or rescind an
action taken or proposed by the Board, 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's continued high standard of corporate
governance without any decrease in accountability by directors to the Company
and its shareholders.
Indemnification of Directors and Officers.
The California Bylaws and Delaware Bylaws relating to indemnification
similarly require that the Company and the Delaware Company, respectively,
indemnify its directors and its 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 Bylaws permit the
Company and the Delaware Company to provide indemnification to their 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 Delaware Company is required to
advance expenses to a person with respect to any proceeding contingent on such
person's commitment to repay such advances if it is determined ultimately that
such person is not entitled to be indemnified.
30
<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 to a person when such person is adjudged liable to
the corporation in the performance of such 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 so determine, and (b) no indemnification may be
made to a person, without court approval, in respect of amounts paid or
expenses incurred by such person in settling or otherwise disposing of a
threatened or pending action or amounts incurred by such person in defending a
pending action which is settled or otherwise disposed of without court
approval. Delaware allows indemnification of such expenses (including
judgments and amounts paid in settlement) without court approval in third-
party actions, but limits indemnification in derivative actions to expenses
(but not judgments and amounts paid in settlement) and requires court approval
for such indemnification in derivative actions if the person is adjudged
liable to the corporation.
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 majority vote of the disinterested directors or a
committee thereof, independent legal counsel (if selected by such directors or
if there are no such directors) or by a vote 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 to the corporation. Delaware law requires
indemnification of expenses when the individual being indemnified has
successfully defended the action on the merits or otherwise.
Indemnification is permitted by both California and Delaware law only if a
requisite standard of good faith conduct is met, as determined by a majority
vote of the disinterested directors, or a committee thereof, independent legal
counsel (if selected by such directors or, if there are no such directors, by
vote of the shareholders).
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).
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 are non-exclusive, in that they need
not be limited to those expressly provided by statute. California law is
similar in that it permits such non-exclusive indemnification not prohibited
by statute, if authorized in the Company's charter. The California Articles
contain such an enabling provision, and the Company has entered into an
Indemnification Agreement with each of its officers providing for such
extended indemnification not otherwise prohibited by statute. 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 Articles or the California indemnification statutes. If the
Reincorporation Proposal is approved, the Company intends to enter into
indemnification agreements with its officers and directors providing for such
broader rights.
The indemnification and limitation of liability provisions of California
law, and not Delaware law, will apply to actions of the directors and officers
of the Company made prior to the Proposed Reincorporation. Nevertheless, the
Board has recognized, in considering this Reincorporation Proposal, that (a)
the individual directors have a personal interest in having Delaware law apply
to such indemnity and limitation of liability issues affecting them and the
Company in the event they arise from a matter which occurs after the
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<PAGE>
reincorporation, and (b) 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 it would not incur if it 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, thus benefitting 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 differently affected if the Company currently were
subject to the provisions of Delaware law rather than California law.
California and Delaware law, the California Bylaws and the Delaware Bylaws,
as well as any indemnification 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 has been advised that, in the opinion of the
Securities and Exchange Commission (the "SEC"), indemnification for
liabilities arising under the Securities Act and the Exchange 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 each shareholder entitled to vote in the election
of directors to cast that number of votes which equal the number of directors
to be elected, multiplied by the number of shares of such stock he or she
holds. The holder may allocate all votes to a single candidate or may allocate
those votes among as many candidates as he or she 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, under
non-cumulative voting, the holder or holders of a majority of the shares
entitled to vote in an election of directors will be able to elect all the
directors of the Company. The elimination of cumulative voting could make it
more difficult for a minority shareholder adverse to a majority of the
shareholders to obtain representation on the Board.
Under California law, cumulative voting in the election of directors is
mandatory upon notice of intent to vote cumulatively being given, prior to the
voting, by a shareholder at a shareholders' meeting at which directors are to
be elected. If any one shareholder gives such a notice, all shareholders may
cumulate their votes. However, California law permits a corporation, by
amending its articles of incorporation or bylaws, to eliminate cumulative
voting when the corporation's shares are listed on a national stock exchange
or traded on the NASDAQ National Market and are held by at least 800
shareholders. The Company has not amended its articles or bylaws to eliminate
cumulative voting.
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.
NUMBER OF DIRECTORS
California law allows the number of persons constituting the board of
directors of a corporation to be fixed by the bylaws or the articles of
incorporation, or permits the bylaws to provide that the number of directors
may vary within a specified range, the exact number to be determined by the
board of directors. California law further provides that, in the case of a
variable board, the maximum number of directors may not exceed two times the
minimum number minus one. The California Bylaws provide for a board of
directors that may vary between four and seven members, inclusive, and the
Board has fixed the exact number of directors at five. California law also
requires that any change in the range of a variable board of directors
specified in the articles and bylaws must be approved by a majority in
interest of the outstanding shares entitled to vote (or such greater
proportion of the outstanding shares as may be required by the articles of
incorporation), provided that a change reducing the minimum number of
directors to less than three 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 that any
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<PAGE>
amendment reducing the minimum number of directors cannot be adopted if votes
cast against are equal to more than 16 2/3% of the outstanding shares entitled
to vote.
Delaware law allows the number of persons constituting the board of
directors to be fixed by the bylaws or the certificate of incorporation or in
such manner as is directed by either document. The Delaware Certificate
provides that the exact number of directors shall be fixed from time to time
exclusively by the Board by resolution; there is no minimum or maximum number
of directors and no shareholder vote required to change the number.
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, unless the shares
voted against removal would be sufficient to elect the director under
cumulative voting. Under Delaware law, unless the board is classified or
cumulative voting is permitted, a director can be removed from office with or
without cause during his term by the holders of a majority of the shares then
entitled to vote at an election of directors.
FILLING BOARD VACANCIES
Under California law, any vacancy on a board of directors, including those
created by an increase in the number of authorized directors, other than one
created by removal of a director, may be filled by the Board. If the number of
directors is less than a quorum, a vacancy may be filled by the unanimous
written consent of the directors then in office, by the affirmative vote of a
majority of the directors at a meeting held pursuant to notice or waivers of
notice or by a sole remaining director. A vacancy created by removal of a
director may be filled by the Board only if so authorized by a corporation's
articles of incorporation or by a bylaw approved by the corporation's
shareholders. The California Articles and Bylaws do not permit directors to
fill vacancies created by removal of a director.
Under Delaware law, any vacancy on a board of directors, including such
newly created directorships, may be filled by a majority of the directors then
in office (even though less than a quorum) or by a sole remaining director,
unless otherwise provided in the Certificate of Incorporation or Bylaws or
unless the Certificate of Incorporation directs that a particular class of
stock is to elect such director(s), in which case a majority of the directors
elected by such class, or a sole remaining director so elected, shall fill
such vacancy.
The proposed Delaware Bylaws provide that each vacancy shall, unless the
Board determines by resolution that such vacancy be filled by the
shareholders, 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.
ACTION BY WRITTEN CONSENT OF SHAREHOLDERS
Under California and Delaware law, shareholders may take action by written
consent in lieu of a shareholder meeting. Both California and Delaware law
permit a corporation to eliminate such actions by written consent in its
charter. The Delaware Certificate provides that any action by written consent
of shareholders must be approved by shareholders holding at least 75% of the
total number of votes entitled to act upon such matter.
Requiring such supermajority approval for shareholder action by written
consent may make taking such action more difficult and will effectively
require shareholders holding more than a majority in interest, but less than
75%, of the Company's outstanding voting power to wait until the next
shareholders' meeting to take action, rather than do so immediately by written
consent. This, in turn, may deter hostile takeover activities that a holder or
group of holders controlling a majority in interest of the Delaware Company's
stock may attempt, including, for example, amending the Delaware Bylaws or
removing directors. Unless such holder or group could gather the 75% super-
majority necessary to take action by written consent, such holder or group
would have to wait until a shareholders' meeting was held to take any such
action. The Board believes this provision, like the other
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<PAGE>
provisions to be included in the Delaware Certificate and Delaware Bylaws,
will enhance the Board's opportunity to fully consider, and effectively
negotiate, 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.
The Delaware Bylaws provide that, in order for director nominations or
shareholder proposals to be properly brought before the annual meeting, the
shareholder must have delivered timely notice of such nomination or proposal
to the Secretary of the Delaware Company. To be timely under the Delaware
Bylaws, the stockholder's notice must be delivered not less than 120 days
prior to the anniversary of the mailing date of the Company's proxy statement
released to shareholders in connection with the previous year's annual
meeting. If no annual meeting was held in the previous year or the date of
such annual meeting has been changed by more than 30 days from the date
contemplated at the time of the previous year's proxy statement, notice by a
stockholder to be timely must be given not less than 90 days prior to the
upcoming annual meeting (or within 10 days following public announcement of
the meeting date). Proper notice under the federal securities laws with
respect to 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
annual meeting and have the opportunity to consider each proposal in advance
of the annual meeting.
ANTI-TAKEOVER MEASURES
Delaware law has been widely viewed to permit a corporation greater
flexibility in governing its internal affairs and its relationships with
shareholders and other parties than do the laws of many other states,
including California. In particular, Delaware law permits a corporation to
adopt a number of measures designed to reduce a corporation's vulnerability to
unsolicited takeover attempts. Certain of such measures are either not
currently permitted, or must be more narrowly drawn, under California law.
Among these measures are the elimination of the ability of the shareholders to
remove directors without cause and the elimination of the right of
shareholders to call special shareholders' meetings. The Board has not
eliminated those rights of the shareholders in the Delaware Certificate and
the Delaware Bylaws. In addition, shareholder rights plans ("poison pills")
similar to the Company's plan described below have been upheld by Delaware
courts, while California courts have yet to decide on the validity of such
defenses, thus rendering their effectiveness in California less certain.
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 preferred stock shareholder rights plan
(the "Rights Plan") which will be assumed by the Delaware Company upon
completion of the Merger if the shareholders vote to approve the
Reincorporation Proposal. See "Preferred Stock Rights Plan." The Company does
not have any present intention of adopting any further anti-takeover measures,
nor does the Board 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 unsolicited takeover attempts of
the Company.
One such difference is the existence of a Delaware statute regulating tender
offers, which statute is intended to limit coercive takeovers of Delaware
corporations. 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
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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 generally is
any person that is the owner of 15% or more of the outstanding Voting Stock.
Any corporation may decide to opt out of the statute in its original
certificate of incorporation or by a shareholder-approved amendment to the
certificate or the by-laws (provided that such amendment generally will not be
effective for 12 months and will not apply to an interested shareholder who
became such prior to the amendment's adoption). The Company has no present
intention of opting out of the statute.
The Board believes that unsolicited takeover attempts may be unfair or
disadvantageous to the Company and its shareholders because, among other
reasons: (i) a non-negotiated takeover bid may be timed to take advantage of a
temporarily depressed price for the Company's stock; (ii) a non-negotiated
takeover bid may be designed to foreclose or minimize the possibility of more
favorable competing bids or alternative transactions; and (iii) a non-
negotiated takeover bid may involve the acquisition of only a controlling
interest in the Company's stock, without affording all shareholders the
opportunity to receive the same economic benefits. Furthermore, 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 may present terms less favorable to all of the shareholders
than would be available in a board-approved transaction. Board approved
transactions may be carefully planned and undertaken at an opportune time in
order to obtain maximum value for the Company and all of its shareholders. In
a transaction in which a potential acquiror must negotiate with an independent
board of directors, the Board can and should take account of the underlying
and long-term values of the Company's business relationships and other assets,
the possibilities for alternative transactions on more favorable terms,
possible advantages from a tax-free reorganization, anticipated favorable
developments in the Company's business not yet reflected in its stock price
and equality of treatment of all shareholders.
Despite the belief of the Board as to the benefits to shareholders of the
Reincorporation Proposal, it may be disadvantageous to the extent that it has
the effect of discouraging a future takeover attempt which is not approved by
the Board, but which a majority of the shareholders may deem to be in their
best interests or in which shareholders may receive a substantial premium for
their shares over the then current market value. For example, as a result of
such effects of the Reincorporation Proposal, an unsolicited tender offer for
the Company's stock may be deterred. However, such anti-takeover effects
already exist to some extent because of the California Company's Rights Plan.
In addition, to the extent that provisions of Delaware law enable the Board of
Directors to resist a takeover or a change in control of the Company, such
provisions could make it more difficult to change the existing Board and
management.
Although the Company has no present intention of adopting any further anti-
takeover measures, there can be no assurance that the Board would not adopt in
the future any further anti-takeover measures available under Delaware law
(some of which may not require shareholder approval). Moreover, the
availability of such measures under Delaware law, whether or not implemented,
may have the effect of discouraging a future takeover attempt which a majority
of the Delaware Company's shareholders may deem to be in their best interests
or in which shareholders may receive a premium for their shares over then
current market prices. As a result, shareholders who might desire to
participate in such transactions, if they were not deterred, may not have the
opportunity to do so. Shareholders should recognize that, if adopted, the
effect of such measures, along with the possibility of discouraging takeover
attempts, may be to limit in certain respects the rights of shareholders of
the Delaware Company compared with the rights of shareholders of the Company.
The Board recognizes that hostile takeover attempts do not always have the
unfavorable consequences or effects described above and may be beneficial to
the shareholders by providing all of the shareholders with considerable value
for their shares. However, the Board 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 favorable to all of the
shareholders than would be available in a board-approved transaction) are
sufficiently great that prudent steps to reduce the likelihood of such
takeover attempts, and to enable the Board to fully consider
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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, an unapproved 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, as is the case presently with the California
Company, 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 Board of the Delaware Company. Accordingly, if the Board of the
Delaware Company 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, including
the right to elect additional directors to the Board of the Delaware Company,
which might make acquisition of a controlling interest in the Delaware Company
more difficult or more costly. 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. Accordingly, 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.
Whether or not the Reincorporation Proposal is approved, it is not the
present intention of the Board to seek shareholder approval prior to any
issuance of Preferred Stock or Common Stock of the Company, except as required
by law or regulation. Frequently, opportunities arise that require prompt
action, and it is the belief of the Board that the delay necessary for
shareholder approval of a specific issuance would be a detriment to the
Company and its shareholders. The Board does not intend to issue any Preferred
Stock except on terms which the Board deems to be in the best interests of the
Company and its then existing shareholders.
PREFERRED STOCK RIGHTS PLAN
In September 1997, the Board declared a dividend, payable to shareholders of
record at the close of business on October 3, 1997 (the "Record Date"), of one
preferred stock purchase right (a "Right") for each outstanding share of
Common Stock of the Company. Each Right, when exercisable, entitles the holder
to purchase from the Company one one-hundredth of a share of Series A Junior
Participating Preferred Stock of the Company (the "Preferred Shares") at a
price of $95.00 per one one-hundredth of a Preferred Share (the "Purchase
Price"), subject to adjustment as described below. The description and terms
of the Rights are set forth in a Rights Agreement (the "Rights Agreement")
between the Company and BankBoston, N.A., as Rights Agent.
Initially, the Rights will not be exercisable and will be evidenced only by
the Common Stock certificates representing the shares of Common Stock then
outstanding. The Rights will become exercisable and will become transferable
apart from the Common Stock on a date (the "Distribution Date") that is the
earlier of the close of business on the tenth business day following (i) a
public announcement that a person or group of affiliated or associated persons
(an "Acquiring Person") has acquired or obtained the right to acquire, in a
transaction or series of transactions not approved by the Board, beneficial
ownership of 20% or more of then outstanding shares of Common Stock (the
"Shares Acquisition Date"), or (ii) the commencement of a tender or exchange
offer by
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any person (other than the Company or an employee benefit plan of the Company
or any of its subsidiaries) for 20% or more of the outstanding shares of
Common Stock.
Until the Distribution Date (or earlier redemption, exchange or expiration
of the Rights), the Rights will be transferred only with the Common Stock
certificates to which the Rights relate. 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, and the
surrender for transfer of any certificates for Common Stock outstanding on or
after the Record Date, with or without such notation, will also constitute the
transfer of the Rights related to the shares of Common Stock represented by
such certificate. As soon as practicable following the Distribution Date,
separate certificates evidencing the Rights (the "Rights Certificates") will
be mailed to holders of record of the Common Stock as of the close of business
on the Distribution Date and, thereafter, the separate Rights Certificates
alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date. The Rights will
expire in September 2007 (the "Final Expiration Date"), unless the Rights are
earlier redeemed or exchanged by the Company, in each case, as described
below.
The Purchase Price payable, and the number of shares of Preferred Stock (or
the number and kind of other securities or property, as the case may be)
issuable, upon exercise of the Rights are subject to adjustment from time to
time to prevent dilution (i) in the event of a stock dividend on, or a
subdivision, combination or reclassification of, the Preferred Stock, (ii)
upon the grant to holders of the Preferred Stock of certain rights or warrants
to subscribe for or purchase Preferred Stock at a price, or securities
convertible into Preferred Stock, with a conversion price, less than the
current market price of the Preferred Stock, or (iii) upon the distribution to
holders of the Preferred Stock of evidences of indebtedness or assets
(excluding regular quarterly cash dividends paid out of earnings or retained
earnings or dividends payable in Preferred Stock) or of subscription rights or
warrants (other than those referred to above). The number of outstanding
Rights and the number of one one-hundredths of a Preferred Share issuable upon
exercise of each Right are also subject to adjustment in the event of a stock
split of the shares of Common Stock or a stock dividend on the shares of
Common Stock payable in shares of Common Stock or subdivisions,
consolidations, or combinations of the shares of Common Stock occurring, in
any such case, prior to the Distribution Date.
Preferred Shares purchasable upon exercise of the Rights will not be
redeemable. Each Preferred Share will be entitled to an aggregate dividend of
100 times the dividend declared per share of Common Stock. In the event of
liquidation, the holders of the Preferred Stock will be entitled to a minimum
preferential liquidation payment of $100.00 per share but will be entitled to
an aggregate payment of 100 times the payment made per share of Common Stock.
Each Preferred Share will have 100 votes, voting together with the Common
Stock. Finally, in the event of any merger, consolidation or other transaction
in which Common Stock is exchanged, each Preferred Share will be entitled to
receive 100 times the amount received per share of Common Stock. These rights
are protected by customary antidilution provisions.
In the event that a person becomes an Acquiring Person (except pursuant to
an offer for outstanding shares of Common Stock which the Continuing Directors
(as defined below) determine to be fair to, and otherwise in the best interest
of, the Company and its shareholders), each holder of a Right (other than
Rights beneficially owned by the Acquiring Person) will thereafter have the
right to receive upon exercise of the Right at the then current Purchase Price
of the Right, that number of shares of Common Stock (or in certain
circumstances, cash or other securities or property) having a market value of
two times the Purchase Price of the Right. Notwithstanding the foregoing, all
Rights that are, or under certain circumstances specified in the Rights
Agreement were, beneficially owned by an Acquiring Person (or any of its
affiliates or associates, as defined) will be null and void. The Rights are,
however, not exercisable until such time as the Rights are no longer
redeemable by the Company.
In the event that, after the Rights become exercisable, (i) the Company is
acquired in a merger or other business combination transaction in which the
Company is not the surviving corporation, or (ii) 50% or more of
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the Company's assets or earning power is sold or transferred, each holder of a
Right (except Rights which previously have been voided as set forth above)
shall thereafter have the right to receive, upon exercise thereof and payment
of the then current Purchase Price, the number of shares of Common Stock of
the acquiring company having a market value equal to two times the Purchase
Price of the Right.
At any time after a person or group of affiliated or associated person
becomes an Acquiring Person, and until the beneficial ownership level of such
Acquiring Person, together with all affiliates and associates of such
Acquiring Person, reaches 50%, the Board may exchange the Rights (other than
the Rights held by the Acquiring Person, affiliates or associates of the
Acquiring Person and certain other persons whose Rights can be traced to an
Acquiring Person), in whole or in part, at an exchange ratio of one share of
Common Stock per Right. The exchange must also be approved by a majority of
the Continuing Directors.
At any time prior to the close of business on the tenth business day
following the Shares Acquisition Date, the Company may redeem the Rights, in
whole but not in part, at a redemption price of $0.01 per Right. Under certain
circumstances, the redemption must also be approved by a majority of the
Continuing Directors. Immediately upon the action of the Board to redeem the
Rights, with, where required, the concurrence of the Continuing Directors, the
Rights will terminate and the only right of the holders of Rights will be to
receive the redemption price. With certain exceptions, no adjustment in the
Purchase Price will be required until cumulative adjustments amount to at
least 1% of the Purchase Price. No fractional shares will be issued (other
than fractions which are integral multiples of one one-hundredth of a
Preferred Share), and, in lieu thereof, an adjustment in cash will be made
based on the market price of the Preferred Stock or Common Stock on the last
trading day prior to the date of exercise.
The term "Continuing Directors" means any member of the Board of Directors
of the Company who was a member of the Board prior to the date of the Rights
Agreement, and any person who is subsequently elected to the Board if such
person is recommended or approved by a majority of the Continuing Directors,
but shall not include an Acquiring Person or an affiliate or associate of an
Acquiring Person or any representative of the foregoing entities.
Until the Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including, without limitation, the
right to vote or to receive dividends.
At any time prior to the Distribution Date, the Board may amend any
provision of the Rights Agreement in any manner, including to change the
Purchase Price, without the approval of the holders of the Common Stock.
Thereafter, subject to certain limitations, the Board (with the concurrence of
the Continuing Directors) may amend the Rights Agreement without the approval
of the holders of the Common Stock in order to cure any ambiguity, to make
changes which do not adversely affect the interest of holders of Rights
(excluding the interest of any acquiring person), or to shorten or lengthen
any time period under the Rights Agreement.
AMENDMENT OF CERTIFICATE
Under both California law and Delaware law and the California Articles and
the Delaware Certificate, amendments to the articles of incorporation or
certificate of incorporation require both Board approval and, generally, the
affirmative vote of the holders of a majority of the Voting Stock of the
Company. However, any amendment to the Delaware Certificate with respect to
required super-majority votes for shareholder action by written consent
requires the approval of holders of 75% of the Voting Stock of the Company.
AMENDMENT OF BYLAWS
The California Bylaws may be amended or repealed by the Board or by the
holders of a majority of the outstanding stock of the Company entitled to
vote, except that the Board may not change the authorized range of directors.
Upon the effectiveness of the Reincorporation Proposal, the Delaware Bylaws
may be adopted, amended or repealed by the Delaware Board, or by the holders
of a majority of the voting power of the outstanding stock of the Delaware
Company.
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LOANS TO OFFICERS, DIRECTORS AND EMPLOYEES
California law provides that any loan or guaranty by a California
corporation (other than loans to permit the purchase of shares under certain
stock purchase plans) for the benefit of any of its officers or directors, or
any employee benefit plan of a California corporation authorizing such loan or
guaranty (except certain employee stock purchase plans), must be approved by
the shareholders of such corporation. Under Delaware law, a Delaware
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 or changes the par value or
authorized number of such shares.
California law also requires that holders of a California corporation's
common stock receive nonredeemable common stock in a merger of the corporation
with the holder (or an affiliate of the holder) of more than 50%, but less
than 90%, of its common stock, unless all of the holders of its common stock
consent to the merger or the merger has been approved by the California
Commissioner of Corporations at a "fairness" hearing. This provision of
California law may have the effect of making a cash "freezeout" merger by a
majority shareholder more difficult to accomplish. A cash freezeout merger is
a transaction whereby a minority shareholder is forced to relinquish his share
ownership in a corporation in exchange for cash, subject in certain instances
to dissenters rights. 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 Voting
Stock or shareholders holding 1% or more of such shares who have filed a
Schedule 14B with the SEC. Delaware law provides no such absolute right of
shareholder inspection. However, both California and Delaware law permit any
shareholder of record to inspect the shareholder list for any purpose
reasonably related to that person's interest as a shareholder.
APPRAISAL RIGHTS
Under both California law and Delaware law, a shareholder of a corporation
participating in certain mergers and consolidations (and, under California
law, certain other 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.
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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 AND APPRAISAL RIGHTS IN CERTAIN TRANSACTIONS
Delaware law does not provide shareholders with voting or appraisal rights
when a corporation acquires another business through the issuance of its
authorized and unissued stock, whether in exchange for assets or stock, or in
a merger of the target with a subsidiary of the corporation. California law
treats these types 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 (as
defined under Delaware law) or, in certain circumstances, out of net profits
for the current and/or immediately preceding fiscal years. The Company has
never paid cash dividends and has no present plans to do so.
APPLICATION OF CALIFORNIA LAW AFTER REINCORPORATION
Under Section 2115 of the California General Corporation Law, certain
foreign corporations (i.e., corporations not organized under California law)
which have significant contacts with California are subject to a number of key
provisions of the California General Corporation Law. However, an exemption
from Section 2115 is provided for corporations whose shares are listed on a
major national securities exchange, such as the New York Stock Exchange.
Following the Proposed Reincorporation, the Common Stock of the Delaware
Company will continue to be traded on the New York Stock Exchange and,
accordingly, the Delaware Company will be exempt from Section 2115.
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.
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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 PROPOSED REINCORPORATION, INCLUDING THE
APPLICABILITY OF THE LAWS OF ANY STATE OR OTHER JURISDICTION.
VOTE REQUIRED
The affirmative vote of the outstanding shares of Common Stock entitled to
vote at the Meeting, at which a quorum representing a majority of all
outstanding shares of Common Stock is present, is required for approval of
this proposal.
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 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, assumption of the
indemnification agreements as amended to conform to Delaware law, the adoption
and assumption by the Delaware Company of each of the Company's stock option
and employee benefit plans and all other aspects of this Reincorporation
Proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE REINCORPORATION
OF THE COMPANY IN DELAWARE AND RELATED CHANGES TO THE RIGHTS OF SHAREHOLDERS.
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STOCK PERFORMANCE GRAPH
Set forth below is a graph comparing the cumulative return to the Company's
shareholders of an investment in the Common Stock with the cumulative return
of the NASDAQ National Market Index (U.S. only) and the NASDAQ Financial
Stocks Index for the period commencing March 30, 1993 (the Company's initial
public offering date) and ending December 31, 1997 (the last day of the
Company's 1997 fiscal year). Although the Common Stock was listed on the New
York Stock Exchange on November 14, 1997, the cumulative return to the
Company's shareholders is compared to the performance of NASDAQ stocks because
the Company's Common Stock was listed on the NASDAQ National Market for over
85% of the trading days in 1997. No assurances can be given that the return to
the Company's shareholders on the Common Stock over the specified period will
be indicative of future returns to its shareholders on the Common Stock.
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
NASDAQ NASDAQ
NATIONAL FINANCIAL
DATE LSN MARKET STOCKS
---- --- -------- ---------
<S> <C> <C> <C>
03/30/93.............................................. 100 100 100
12/31/93.............................................. 200 113 106
12/30/94.............................................. 138 111 107
12/29/95.............................................. 300 157 155
12/31/96.............................................. 515 193 199
12/31/97.............................................. 478 237 305
</TABLE>
- --------
* Assumes $100 was invested on March 30, 1993 (the date of the Company's
initial public offering of its Common Stock) in the Common Stock and in
each index, and that any dividends were reinvested. The Company has not
paid any dividends on the Common Stock.
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COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Pursuant to Section 16(a) of the Securities Exchange Act of 1934, as
amended, (the "1934 Act") and the rules promulgated thereunder, executive
officers and directors of the Company and persons who beneficially own more
than 10% of the Common Stock are required to file with the Securities and
Exchange Commission and furnish to the Company reports of ownership and
changes in ownership of the Common Stock. Based solely on its review of the
copies of such reports received by it with respect to the year ended December
31, 1997, the Company believes that, except as described below, all reports
required to be filed by such reporting persons during or with respect to the
year ended December 31, 1997, were timely filed. Louis Adimare filed a Form 4
in December 1997, reporting the disposition of 50,000 shares of Common Stock,
which disposition should have been reported in a Form 4 filed in November
1997. Hal J Krauter and Steven L. Yeffa each filed a Form 5 in February 1998,
reporting the acquisition of 100 shares of Common Stock, which acquisitions
should have been reported in a Form 4 filed in December 1997. Mr. Yeffa filed
a Form 5 in February 1998, reporting the exercise of an option to purchase
5,000 shares of Common Stock, and the same-day sale of 5,000 shares of Common
Stock, which exercise of options and disposition of shares should have been
reported in a Form 4 filed in December 1996. Glenda Allen filed a Form 4 in
March 1998, reporting the disposition of 2,375 shares of Common Stock in
November 1997, which disposition of shares should have been reported in a Form
4 filed in December 1997. Ian Harrison filed a Form 4 in March 1998, reporting
the acquisition of 100 shares of Common Stock in November 1997, which
transaction should have been reported in a Form 4 filed in December 1997.
Bruce Sherk filed a Form 3, reporting his initial statement of beneficial
ownership of options, in December 1997, which Form 3 should have been filed in
August 1997. Lisa Zane timely filed a Form 5 in February 1998, reporting the
acquisitions of options, which acquisitions should have been reported in a
Form 3 filed in December 1997.
INDEPENDENT PUBLIC ACCOUNTANTS
At the determination of the Board, the accounting firm of Deloitte & Touche
LLP, certified public accountants, has served as the Company's auditors since
1986. The Board has again selected Deloitte & Touche LLP to serve as the
Company's independent accountants for the fiscal year ending December 31,
1998. One or more representatives of Deloitte & Touche LLP are expected to be
present at the Meeting and will have an opportunity to make a statement if
they so desire and will be available to respond to appropriate questions.
SHAREHOLDER PROPOSALS
Shareholders who wish to include proposals in the proxy statement for the
Company's 1999 Annual Meeting of Shareholders, for action at that meeting,
must cause their proposals to be received in writing by the Company, at its
address set forth on the first page of this Proxy Statement, no later than
December 1, 1998. Such proposals should be addressed to the Company's
Secretary, and may be included in next year's proxy statement if they comply
with certain rules and regulations promulgated by the Securities and Exchange
Commission.
OTHER MATTERS
The Board does not know of any other matters that are to be presented for
action at the Meeting. Should any other matters come before the Meeting or any
adjournment or postponement thereof, the persons named in the enclosed proxy
will have the discretionary authority to vote all proxies received with
respect to such matters in accordance with their respective judgments.
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ANNUAL REPORT
The Company's 1998 Annual Report to Shareholders has been mailed to
shareholders concurrently with the mailing of this Proxy Statement, but such
report is not incorporated herein and is not deemed to be a part of the
Company's proxy solicitation materials.
UPON THE WRITTEN REQUEST OF ANY SHAREHOLDER, THE COMPANY WILL PROVIDE TO
SUCH SHAREHOLDER, WITHOUT CHARGE, A COPY OF THE COMPANY'S ANNUAL REPORT ON
FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1997, WITHOUT EXHIBITS, AS FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION. SUCH REQUESTS SHOULD BE DIRECTED
IN WRITING TO THE COMPANY AT TEN ALMADEN BOULEVARD, SUITE 1500, SAN JOSE,
CALIFORNIA 95113, ATTENTION: INVESTOR RELATIONS.
San Jose, California
March 31, 1998
SHAREHOLDERS ARE URGED TO SPECIFY THEIR VOTES FOR EACH OF THE PROPOSALS
DESCRIBED HEREIN, AND SIGN, DATE AND RETURN, THE ENCLOSED PROXY IN THE
ENCLOSED ENVELOPE. YOUR PROMPT RETURN OF THE ENCLOSED PROXY WOULD BE GREATLY
APPRECIATED.
44
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER
OF LEASING SOLUTIONS, INC.
(A DELAWARE CORPORATION)
AND
LEASING SOLUTIONS, INC.
(A CALIFORNIA CORPORATION)
THIS AGREEMENT AND PLAN OF MERGER dated as of , 1998 (the
"Agreement") is between Leasing Solutions, Inc., a Delaware corporation
("Leasing Solutions Delaware") and Leasing Solutions, Inc., a California
corporation ("Leasing Solutions California"). Leasing Solutions Delaware and
Leasing Solutions California are sometimes referred to herein as the
"Constituent Corporations."
RECITALS
A. Leasing Solutions California is a corporation duly organized and existing
under the laws of the State of California and has an authorized capital stock
of 25,000,000 shares, 20,000,000 of which are designated "Common Stock," and
5,000,000 of which are designated "Preferred Stock." One series of 1,000,000
shares of Preferred Stock, "the Series A Junior Participating Preferred
Stock," has been designated by a Certificate of Determination of Rights,
Preferences, Privileges and Restrictions for purposes of the Company's Rights
Plan, and otherwise the Preferred Stock of Leasing Solutions California is
undesignated as to series, rights, preferences, privileges or restrictions. As
of , 1998, [ ] shares of Common Stock, and no shares of Preferred
Stock, were issued and outstanding.
B. Leasing Solutions Delaware is a corporation duly organized and existing
under the laws of the State of Delaware and has an authorized capital stock of
[65,000,000] shares, [60,000,000] of which are designated "Common Stock," par
value $0.01 per share, and 5,000,000 of which are designated "Preferred
Stock," par value $0.01 per share. As of the date hereof, [ ] shares of
Common Stock are issued and outstanding, all of which are held by Leasing
Solutions California. No shares of Preferred Stock are issued and outstanding.
As of the date hereof, one series of 1,000,000 shares of Preferred Stock has
been designated the "Series A Junior Participating Preferred Stock" by a
Preferred Stock Designation filed pursuant to Delaware law for purposes of
establishing Leasing Solutions Delaware's Rights Plan, which contains the same
terms and conditions as the Rights Plan of Leasing Solutions California.
C. The Board of Directors of Leasing Solutions California has determined
that, for the purpose of effecting the reincorporation of Leasing Solutions
California in the State of Delaware, it is advisable and in the best interests
of Leasing Solutions California and its shareholders that Leasing Solutions
California merge with and into Leasing Solutions Delaware upon the terms and
conditions herein provided.
D. The respective Boards of Directors of Leasing Solutions Delaware and
Leasing Solutions California have approved this Agreement and have directed
that this Agreement be submitted to a vote of their respective sole
stockholder and shareholders and executed by the undersigned officers.
NOW, THEREFORE, in consideration of the mutual agreements and covenants set
forth herein, Leasing Solutions Delaware and Leasing Solutions California
hereby agree, subject to the terms and conditions hereinafter set forth, as
follows:
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I. MERGER
1.1 MERGER. In accordance with the provisions of this Agreement, the
Delaware General Corporation Law and the California General Corporation Law,
Leasing Solutions California shall be merged with and into Leasing Solutions
Delaware (the "Merger"), the separate existence of Leasing Solutions
California shall cease and Leasing Solutions Delaware shall survive the Merger
and shall continue to be governed by the laws of the State of Delaware.
Leasing Solutions Delaware shall be, and is herein sometimes referred to as,
the "Surviving Corporation." The name of the Surviving Corporation shall be
Leasing Solutions, Inc.
1.2 FILING AND EFFECTIVENESS. The Merger shall become effective when the
following actions shall have been completed:
(a) This Agreement and Merger shall have been adopted and approved by the
stockholders of each Constituent Corporation in accordance with the
requirements of the Delaware General Corporation Law and the California
Corporations Code;
(b) All of the conditions precedent to the consummation of the Merger
specified in this Agreement shall have been satisfied or duly waived by the
party entitled to satisfaction thereof;
(c) An executed Certificate of Merger or an executed counterpart of this
Agreement meeting the requirements of the Delaware General Corporation Law
shall have been filed with the Secretary of State of the State of Delaware;
and
(d) An executed Certificate of Merger or an executed counterpart of this
Agreement meeting the requirements of the California General Corporation
Law shall have been filed with the Secretary of State of the State of
California.
The date and time when the Merger shall become effective, as aforesaid, is
herein called the "Effective Date of the Merger."
1.3 EFFECT OF THE MERGER. On the Effective Date of the Merger, the separate
existence of Leasing Solutions California shall cease and Leasing Solutions
Delaware, as the Surviving Corporation, (i) shall continue to possess all of
its assets, rights, powers and property as constituted immediately prior to
the Effective Date of the Merger, (ii) shall assume, accept, adopt, ratify and
confirm, as if taken by the Surviving Corporation, and thereby shall become
subject to, all actions previously taken by its and Leasing Solutions
California's Board of Directors, (iii) shall succeed, without other transfer,
to all of the assets, rights, powers and property of Leasing Solutions
California in the manner more fully set forth in Section 259 of the Delaware
General Corporation Law, (iv) shall continue to be subject to all of the
debts, liabilities and obligations of Leasing Solutions Delaware as
constituted immediately prior to the Effective Date of the Merger, and (v)
shall succeed, without other transfer, to all of the debts, liabilities and
obligations of Leasing Solutions California in the same manner as if Leasing
Solutions Delaware had itself incurred them, all as more fully provided under
the applicable provisions of the Delaware General Corporation Law and the
California General Corporation Law.
II. CHARTER DOCUMENTS, DIRECTORS AND OFFICERS
2.1 CERTIFICATE OF INCORPORATION. The Certificate of Incorporation of
Leasing Solutions Delaware as in effect immediately prior to the Effective
Date of the Merger shall continue in full force and effect as the Certificate
of Incorporation of the Surviving Corporation until duly amended in accordance
with the provisions thereof and applicable law.
2.2 BYLAWS. The Bylaws of Leasing Solutions Delaware as in effect
immediately prior to the Effective Date of the Merger shall continue in full
force and effect as the Bylaws of the Surviving Corporation until duly amended
in accordance with the provisions thereof and applicable law.
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<PAGE>
2.3 DIRECTORS AND OFFICERS. The directors and officers of Leasing Solutions
California immediately prior to the Effective Date of the Merger shall become
the directors and officers of the Surviving Corporation until their successors
shall have been duly elected and qualified or until as otherwise provided by
law, or the Certificate of Incorporation of the Surviving Corporation or the
Bylaws of the Surviving Corporation.
III. MANNER OF CONVERSION OF STOCK
3.1 LEASING SOLUTIONS CALIFORNIA COMMON STOCK. On the Effective Date of the
Merger, each share of Leasing Solutions California Common Stock issued and
outstanding immediately prior thereto shall, by virtue of the Merger and
without any action by the Constituent Corporations, the holder of such shares
or any other person, automatically become and convert to one (1) fully paid
and nonassessable share of Common Stock, par value $0.01 per share, of the
Surviving Corporation.
3.2 LEASING SOLUTIONS CALIFORNIA OPTIONS, STOCK PURCHASE RIGHTS AND
CONVERTIBLE SECURITIES.
(a) On the Effective Date of the Merger, the Surviving Corporation shall
assume and continue the stock option plans and all other employee benefit
plans of Leasing Solutions California. Each outstanding and unexercised
option or other right to purchase, including the preferred stock purchase
rights authorized by the Company's Rights Agreement dated as of September
18, 1997, or security convertible into, Leasing Solutions California Common
Stock shall be assumed by the Surviving Corporation and converted to an
option or right to purchase or a security convertible into, the Surviving
Corporation's Common Stock on the basis of one share of the Surviving
Corporation's Common Stock for each share of Leasing Solutions California
Common Stock issuable pursuant to any such option, stock purchase right or
convertible security, on the same terms and conditions and at an exercise
price per share equal to the exercise price applicable to any such Leasing
Solutions California option, stock purchase right or convertible security
at the Effective Date of the Merger. Other than the preferred stock
purchase rights authorized by the Company's Rights Agreement dated as of
September 18, 1997, there are no options, purchase rights for or securities
convertible into Preferred Stock of Leasing Solutions California.
(b) A number of shares of the Surviving Corporation's Common Stock and
Preferred Stock shall be reserved for issuance upon the exercise of
options, stock purchase rights and convertible securities equal to the
number of shares of Leasing Solutions California Common Stock and Preferred
Stock so reserved immediately prior to the Effective Date of the Merger.
3.3 LEASING SOLUTIONS DELAWARE COMMON STOCK. On the Effective Date of the
Merger, each share of Common Stock, par value $0.01 per share, of Leasing
Solutions Delaware issued and outstanding immediately prior thereto shall, by
virtue of the Merger and without any action by Leasing Solutions Delaware, the
holder of such shares or any other person, be canceled and returned to the
status of authorized but unissued shares.
3.4 EXCHANGE OF CERTIFICATES. After the Effective Date of the Merger, each
holder of an outstanding certificate representing shares of Leasing Solutions
California Common Stock may, at such stockholder's option, surrender the same
for cancellation to BankBoston, as exchange agent (the "Exchange Agent"), and
each such holder shall be entitled to receive in exchange therefor a
certificate or certificates representing the number of shares of the Surviving
Corporation's Common Stock into which the surrendered shares were converted as
herein provided. Unless and until so surrendered, each outstanding certificate
theretofore representing shares of Leasing Solutions California Common Stock
shall be deemed for all purposes to represent the number of shares of the
Surviving Corporation's Common Stock into which such shares of Leasing
Solutions California Common Stock were converted in the Merger.
The registered owner on the books and records of the Surviving Corporation
of any shares of stock represented by such outstanding certificate theretofore
representing shares of Leasing Solutions California Common Stock shall, until
such certificate shall have been surrendered for transfer or conversion or
otherwise accounted for to the Surviving Corporation or the Exchange Agent,
have and be entitled to exercise any voting and other rights with respect to
and to receive dividends and other distributions upon the shares of Common
Stock of the Surviving Corporation represented by such outstanding certificate
as provided above.
A-3
<PAGE>
Each certificate representing Common Stock of the Surviving Corporation so
issued in the Merger shall bear the same legends, if any, with respect to the
restrictions on transferability as the certificates of Leasing Solutions
California so converted and given in exchange therefor, unless otherwise
determined by the Board of Directors of the Surviving Corporation in
compliance with applicable laws, or other such additional legends as agreed
upon by the holder and the Surviving Corporation.
If any certificate for shares of Leasing Solutions Delaware stock is to be
issued in a name other than that in which the certificate surrendered in
exchange therefor is registered, it shall be a condition of issuance thereof
that the certificate so surrendered shall be properly endorsed and otherwise
in proper form for transfer, that such transfer otherwise be proper and comply
with applicable securities laws and that the person requesting such transfer
pay to Leasing Solutions Delaware or the Exchange Agent any transfer or other
taxes payable by reason of issuance of such new certificate in a name other
than that of the registered holder of the certificate surrendered or establish
to the satisfaction of Leasing Solutions Delaware that such tax has been paid
or is not payable.
IV. GENERAL
4.1 COVENANTS OF LEASING SOLUTIONS DELAWARE. Leasing Solutions Delaware
covenants and agrees that it will, on or before the Effective Date of the
Merger:
(a) qualify to do business as a foreign corporation in the State of
California and in connection therewith irrevocably appoint an agent for
service of process as required under the provisions of Section 2105 of the
California General Corporation Law;
(b) file any and all documents with the California Franchise Tax Board
necessary for the assumption by Leasing Solutions Delaware of all of the
franchise tax liabilities of Leasing Solutions California; and
(c) take such other actions as may be required by the California General
Corporation Law.
4.2 FURTHER ASSURANCES. From time to time, as and when required by Leasing
Solutions Delaware or by its successors or assigns, there shall be executed
and delivered on behalf of Leasing Solutions California such deeds and other
instruments, and there shall be taken or caused to be taken by Leasing
Solutions Delaware and Leasing Solutions California such further and other
actions as shall be appropriate or necessary in order to vest or perfect in or
conform of record or otherwise by Leasing Solutions Delaware the title to and
possession of all the property, interests, assets, rights, privileges,
immunities, powers, franchises and authority of Leasing Solutions California
and otherwise to carry out the purposes of this Agreement, and the officers
and directors of Leasing Solutions Delaware are fully authorized in the name
and on behalf of Leasing Solutions California or otherwise to take any and all
such action and to execute and deliver any and all such deeds and other
instruments.
4.3 ABANDONMENT. At any time before the Effective Date of the Merger, this
Agreement may be terminated and the Merger may be abandoned for any reason
whatsoever by the Board of Directors of either Leasing Solutions California or
of Leasing Solutions Delaware, or of both, notwithstanding the approval of
this Agreement by the shareholders of Leasing Solutions California or by the
sole stockholder of Leasing Solutions Delaware, or by both.
4.4 AMENDMENT. The Boards of Directors of the Constituent Corporations may
amend this Agreement at any time prior to the filing of this Agreement (or
certificate in lieu thereof) with the Secretaries of State of the States of
Delaware and California, provided that an amendment made subsequent to the
adoption of this Agreement by the stockholders of either Constituent
Corporation shall not: (a) alter or change the amount or kind of shares,
securities, cash, property and/or rights to be received in exchange for or on
conversion of all or any of the shares of any class or series thereof of such
Constituent Corporation; (b) alter or change any term of the Certificate of
Incorporation of the Surviving Corporation to be effected by the Merger; or
(c) alter or change any of the terms and conditions of this Agreement if such
alteration or change would adversely affect the holders of any class or series
of capital stock of any Constituent Corporation.
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<PAGE>
4.5 REGISTERED OFFICE. The registered office of the Surviving Corporation in
the State of Delaware is 1209 Orange Street, Wilmington, Delaware 19801,
County of New Castle and The Corporation Trust Company is the registered agent
of the Surviving Corporation at such address.
4.6 AGREEMENT. Executed copies of this Agreement will be on file at the
principal place of business of the Surviving Corporation at 10 Almaden
Boulevard, Suite 1500, San Jose, California 95113 and copies thereof will be
furnished to any stockholder of either Constituent Corporation, upon request
and without cost.
4.7 GOVERNING LAW. This Agreement shall in all respects be construed,
interpreted and enforced in accordance with and governed by the laws of the
State of Delaware and, so far as applicable, the merger provisions of the
California General Corporation Law.
4.8 COUNTERPARTS. In order to facilitate the filing and recording of this
Agreement, the same may be executed in any number of counterparts, each of
which shall be deemed to be an original and all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, this Agreement having first been approved by the
resolutions of the Board of Directors of Leasing Solutions, Inc., a Delaware
corporation, and Leasing Solutions, Inc., a California corporation, is hereby
executed on behalf of each of such corporations and attested by their
respective officers thereunto duly authorized.
LEASING SOLUTIONS, INC.
a Delaware corporation
By:
-----------------------------------
--------------------------------------
Chairman, President and
Chief Executive Officer
ATTEST:
- -------------------------------
- -------------------------------
Secretary
LEASING SOLUTIONS, INC.
a California corporation
By:
-----------------------------------
--------------------------------------
Chairman, President and
Chief Executive Officer
ATTEST:
- -------------------------------
- -------------------------------
Secretary
A-5
<PAGE>
APPENDIX B
CERTIFICATE OF INCORPORATION
OF
LEASING SOLUTIONS, INC.
ARTICLE I
The name of this corporation is Leasing Solutions, Inc. (the "Corporation").
ARTICLE II
The address of the Corporation's registered office in the State of Delaware
is 1209 Orange Street, Wilmington, Delaware 19801, County of New Castle. The
name of its registered agent at such address is The Corporation Trust Company.
ARTICLE III
The nature of the business or purposes to be conducted or promoted by the
Corporation is to engage in any lawful act or activity for which corporations
may be organized under the General Corporation Law of Delaware.
ARTICLE IV
The Corporation is authorized to issue two classes of stock to be
designated, respectively, Common Stock, par value $0.01 per share ("Common")
and Preferred Stock, par value $0.01 per share ("Preferred"). The total number
of shares of Common that the Corporation shall have authority to issue is
[60,000,000]. The total number of shares of Preferred that the Corporation
shall have authority to issue is 5,000,000.
The Board of Directors is authorized, subject to any limitations prescribed
by law, to provide for the issuance of shares of Preferred Stock in series,
and by filing a certificate pursuant to the applicable law of the State of
Delaware (such certificate being hereinafter referred to as a "Preferred Stock
Designation"), to establish from time to time the number of shares to be
included in each such series, and to fix the designation, powers, preferences,
and rights of the shares of each such series and any qualifications,
limitations or restrictions thereof.
The Board of Directors is hereby authorized, subject to limitations
prescribed by law and the provisions of this Article IV, by resolution to
provide for the issuance of the shares of Preferred in one or more series, and
to establish from time to time the number of shares to be included in each
such series, and to fix the designation, powers, privileges, preferences, and
relative participating, optional or other rights, if any, of the shares of
each such series and the qualifications, limitations or restrictions thereof.
The authority of the Board with respect to each series shall include, but not
be limited to, determination of the following:
A. The number of shares constituting that series (including an increase
or decrease in the number of shares of any such series (but not below the
number of shares in any such series then outstanding)) and the distinctive
designation of that series;
B. Whether that series shall have dividend rights, and, if so, the
dividend rate on the shares of that series, whether dividends shall be
cumulative, and, if so, from which date or dates, and the relative rights
of priority, if any, of payment of dividends on shares of that series;
C. Whether that series shall have the voting rights (including multiple
or fractional votes per share) in addition to the voting rights provided by
law, and, if so, the terms of such voting rights;
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<PAGE>
D.Whether that series shall have conversion privileges, and, if so, the
terms and conditions of such privileges, including provision for adjustment
of the conversion rate in such events as the Board of Directors shall
determine;
E.Whether or not the shares of that series shall be redeemable, and, if
so, the terms and conditions of such redemption, including the date or
dates upon or after which they shall be redeemable, and the amount per
share payable in case of redemption, which amount may vary under different
conditions and at different redemption rates;
F.Whether that series shall have a sinking fund for the redemption or
purchase of shares of that series, and, if so, the terms and the amount of
such sinking fund;
G.The rights of the shares of that series in the event of voluntary or
involuntary liquidation, dissolution or winding up of the Corporation, and
the relative rights of priority, if any, of payment of shares of that
series; and
H.Any other relative rights, preferences and limitations of that series.
The number of authorized shares of Preferred Stock may be increased or
decreased (but not below the number of shares thereof then outstanding) by the
affirmative vote of the holders of a majority of the Common Stock, without a
vote of the holders of the Preferred Stock, or of any series thereof, unless a
vote of any such holders is required pursuant to the terms of any Preferred
Stock Designation creating such stock.
ARTICLE 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.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.In furtherance and not in limitation of the powers conferred by the
laws of the State of Delaware, the Board of Directors is expressly
authorized to make, alter, amend, or repeal the Bylaws of the Corporation.
C.The directors of the Corporation need not be elected by written ballot
unless the Bylaws of the Corporation so provide.
D.Advance notice of stockholder nominations for the election of directors
and of any other 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.
E.No action shall be taken by the stockholders of the Corporation except
at an annual or special meeting of the stockholders called in accordance
with the Bylaws and no action shall be taken by the stockholders by written
consent unless the action is approved in writing by holders of not less
than 75% of the total voting power of the outstanding shares entitled to
vote on such action if taken at a meeting.
ARTICLE VI
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 the laws of the State of Delaware, and all rights
conferred herein are granted subject to this reservation.
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<PAGE>
ARTICLE VII
A. A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, 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 to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the Delaware General Corporation Law, as so amended.
Any repeal or modification of the foregoing paragraph by the stockholders of
the Corporation shall not adversely affect any right or protection of a
director of the Corporation existing at the time of such repeal or
modification.
B. The Corporation may indemnify to the fullest extent permitted by law any
person made or threatened to be made a party to an action or proceeding,
whether criminal, civil, administrative or investigative, by reason of the
fact that he is or was a director, officer or employee of the Corporation or
any predecessor of the Corporation or serves or served at any other enterprise
as a director, officer or employee at the request of the Corporation or any
predecessor to the Corporation.
C. Neither any amendment nor repeal of this Article VII, nor the adoption of
any provision of the Corporation's Certificate of Incorporation inconsistent
with this Article VII, shall eliminate or reduce the effect of this Article
VII, with respect of any matter occurring, or any action or proceeding
accruing or arising or that, but for this Article VII, would accrue or arise,
prior to such amendment, repeal, or adoption of an inconsistent provision.
ARTICLE VIII
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the laws of the State of Delaware)
outside of the State of Delaware at such place or places as may be designated
from time to time by the Board of Directors or in the Bylaws of the
Corporation.
ARTICLE IX
The name and mailing address of the incorporator are as follows:
Richard M. Harvey
Brown & Bain
1755 Embarcadero Road, Suite 200
Palo Alto, California 94303
IN WITNESS WHEREOF, the undersigned incorporator hereby acknowledges that
the foregoing Certificate of Incorporation is his act and deed and that the
facts stated herein are true.
Richard M. Harvey
Incorporator
Dated: , 1998
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<PAGE>
APPENDIX C
BYLAWS
OF
LEASING SOLUTIONS, INC.,
A DELAWARE CORPORATION
ARTICLE I
OFFICES
SECTION 1.1. REGISTERED OFFICE. The registered office of the corporation in
the State of Delaware shall be as fixed in the Certificate of Incorporation of
the Corporation.
SECTION 1.2. OTHER OFFICES. The corporation shall also have and maintain a
principal executive office 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
STOCKHOLDERS' MEETINGS
SECTION 2.1. PLACE OF MEETINGS. Meetings of the stockholders of the
corporation shall be held at any 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 principal executive office of the
corporation required to be maintained pursuant to Section 1.2 hereof.
SECTION 2.2. 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,
and such business must be a proper matter for stockholder actions under the
General Corporation Law of the State of Delaware. 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 one-hundred twentieth (120th) day prior to the anniversary of
the mailing date of the Company's proxy statement released to stockholders in
connection with the previous 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 delivered not later than the close
of business on the ninetieth (90th) day prior to such annual meeting or, in
the event public announcement of the date of such annual meeting is first made
by the corporation, the close of business on the tenth (10th) day following
the day of such public announcement. 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
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<PAGE>
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 2.2. 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 2.2. 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 2.2, "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.
Notwithstanding the foregoing provisions of this By-law, a stockholder shall
also comply with all applicable requirements of the Exchange Act and the rules
and regulations thereunder with respect to matters set forth in this By-law.
Nothing in this section shall be deemed to affect any rights of stockholders
to request inclusion of proposals in the corporation's proxy statement
pursuant to Rule 14a-3 under the Exchange Act.
SECTION 2.3. SPECIAL MEETINGS.
Special meetings of the stockholders of the corporation may be called, for
any purpose or purposes, only by (i) the Chairman of the Board of Directors,
(ii) the President, or (iii) the Board of Directors pursuant to a resolution
adopted by a majority of the directors then in office and shall be held at
such place, on such date, and
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at such time as the Board of Directors, shall fix. No business may be
transacted at such special meeting otherwise than specified in such notice.
SECTION 2.4. 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 2.5. 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
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 2.6. ADJOURNMENT AND NOTICE OF ADJOURNED MEETINGS. Any meeting of
stockholders, whether annual or special, whether or not a quorum is present,
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 2.7. 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
2.9 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 2.8. 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
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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 2.9. 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, on the record date as
provided in Section 7.4 of these Bylaws, 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 2.10. 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, unless the action shall be approved in writing by holders
of not less than 75% of the total voting power of the outstanding shares
entitled to vote on such action if taken at a meeting.
SECTION 2.11. 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 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 and keep a record of the proceedings
thereof.
(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.
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ARTICLE III
DIRECTORS
SECTION 3.1. NUMBER AND TERM OF OFFICE. The authorized number of directors
of the corporation shall be fixed by resolution of a majority of the Board of
Directors.
No reduction of the authorized number of directors shall have the effect of
removing any director before that director's term of office expires.
SECTION 3.2. POWERS. Subject to the provisions of the General Corporation
Law of Delaware and any limitations in the Certificate of Incorporation or
these Bylaws relating to action required to be approved by the stockholders or
by the outstanding shares, the business and affairs of the corporation shall
be managed and all corporate powers shall be exercised by or under the
direction of the Board of Directors.
SECTION 3.3. 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 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 3.4. 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 3.5. 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 3.6. 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 principal executive
office of the corporation required to be maintained pursuant to Section 1.2
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.
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(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 special meetings of
the Board of Directors shall be delivered personally or by telephone to each
director or sent by mail, overnight (next-day) courier, telecopy, telegram or
other electronic or wireless means, charges prepaid, addressed to each
director at that director's address as it is shown on the records of the
corporation. If the notice is mailed, it shall be deposited in the United
States mail at least four (4) days before the time of the holding of the
meeting. If the notice is sent via overnight courier, it shall be delivered to
the courier at least two (2) days before the time of the holding of the
meeting. If the notice is delivered personally or by telephone, telecopy,
telegram or other electronic or wireless means, it shall be delivered
personally or by telephone or other electronic or wireless means or to the
telegraph company at least twenty-four (24) hours before the time of the
holding of the meeting. Any oral notice given personally or by telephone may
be communicated either to the director or to a person at the office of the
director who the person giving the notice has reason to believe will promptly
communicate it to the director. If the meeting is to be held at the principal
executive office of the corporation, the notice need not specify the place of
the meeting. Moreover, a notice of special meeting need not state the purpose
of such meeting, and, unless indicated in the notice thereof, any and all
business may be transacted at a special meeting.
(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.
SECTION 3.7. QUORUM AND VOTING.
(A) Except as otherwise provided in 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 3.8. 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 3.9. 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 3.10. 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.
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ARTICLE IV
COMMITTEES
SECTION 4.1. COMMITTEES OF DIRECTORS. The Board of Directors may, by
resolution adopted by a majority of the authorized number of directors,
designate one (1) or more committees, each consisting of two (2) or more
directors, to serve at the pleasure of the board. The board may designate one
(1) or more directors as alternate members of any committee, who may replace
any absent member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members present at
any meeting and not disqualified from voting, whether or not such member or
members 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. Any committee, to the extent provided in the resolution
of the board, shall have all the authority of the board to the fullest extent
permitted by Delaware law.
SECTION 4.2. COMMITTEE MINUTES. Each committee shall keep regular minutes of
its meetings and report the same to the Board of Directors when required.
SECTION 4.3. MEETINGS AND ACTION OF COMMITTEES. Meetings and actions of
committees shall be governed by, and held and taken in accordance with, the
provisions of Article III of these bylaws, Section 3.6 concerning the place of
meetings and meetings by telephone, regular meetings, special meetings and
notice, and waiver of notice, Section 3.7 concerning quorum and voting, and
Section 3.8 concerning action without a meeting, with such changes in the
context of those bylaws as are necessary to substitute the committee and its
members for the Board of Directors and its members; provided, however, that
the time of regular meetings of committees may also be called by resolution of
the Board of Directors and that notice of special meetings of committees shall
also be given to all alternate members, who shall have the right to attend all
meetings of the committee. The Board of Directors may adopt rules for the
government of any committee not inconsistent with the provisions of these
bylaws.
ARTICLE V
OFFICERS
SECTION 5.1. 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 5.1) 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
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 5.2. 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.
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(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 5.2.
(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 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 5.3. 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.
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SECTION 5.4. 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 5.5. 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 6.1. 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 depositories 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 6.2. 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.
ARTICLE VII
SHARES OF STOCK
SECTION 7.1. FORM AND EXECUTION OF CERTIFICATES. The shares of stock of the
corporation shall be represented by certificates. 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
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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 7.2. 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 7.3. 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 7.4. 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 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.
(B) In order that the corporation may determine the stockholders entitled to
consent to corporate action in writing without a meeting, the Board of
Directors may fix 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 date shall not be more than 10 days after the date upon
which the resolution fixing the record date is adopted by the Board of
Directors. Any stockholder of record seeking to have the stockholders
authorize or take corporate action by
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written consent shall, by written notice to the Secretary, request the Board
of Directors to fix a record date. The Board of Directors shall promptly, but
in all events within 10 days after the date on which such a request is
received, adopt a resolution fixing the record date. If no record date has
been fixed by the Board of Directors within 10 days of the date on which such
a request is received, the record date for determining stockholders entitled
to consent to corporate action in writing without a meeting, when no prior
action by the Board of Directors is required by applicable law, shall be the
first date on which a signed written consent setting forth the action taken or
proposed to be taken is delivered to the corporation by delivery to its
registered office in the State of Delaware, its principal place of business,
or any officer or agent of the corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to the
corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested. If no record date has been fixed by the Board
of Directors and prior action by the Board of Directors is required by
applicable law, the record date for determining stockholders entitled to
consent to corporate action in writing without a meeting shall be at the close
of business on the date on which the Board of Directors adopts the resolution
taking such prior action.
SECTION 7.5. 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 8.1. EXECUTION OF OTHER SECURITIES. All bonds, debentures and other
corporate securities of the corporation, other than stock certificates
(covered in Section 7.1), 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 9.1. 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.
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SECTION 9.2. DIVIDEND RESERVE. 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.
ARTICLE X
FISCAL YEAR
SECTION 10.1. FISCAL YEAR. The fiscal year of the corporation shall be fixed
by resolution of the Board of Directors.
ARTICLE XI
INDEMNIFICATION OF DIRECTORS AND OFFICERS
SECTION 11.1. RIGHT TO INDEMNIFICATION. Each person who was or is made a
party or is threatened to be made a party to or is otherwise involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact that he or
she is or was a director or an officer of the Corporation or is or was serving
at the request of the Corporation as a director, officer, employee or agent of
another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to an employee benefit plan
(hereinafter an "indemnitee"), whether the basis of such proceeding is alleged
action in an official capacity as a director, officer, employee or agent or in
any other capacity while serving as a director, officer, employee or agent,
shall be indemnified and held harmless by the corporation to the fullest
extent authorized by the Delaware General Corporation Law, as the same exists
or may hereafter be amended (but, in the case of any such amendment, only to
the extent that such amendment permits the Corporation to provide broader
indemnification rights than such law permitted the Corporation to provide
prior to such amendment), against all expense, liability and loss (including
attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts
paid in settlement) reasonably incurred or suffered by such indemnitee in
connection therewith; provided, however, that, except as provided in Section
11.3 of this Article XI with respect to proceedings to enforce rights to
indemnification, the Corporation shall indemnify any such indemnitee in
connection with a proceeding (or part thereof) initiated by such indemnitee
only if such proceeding (or part thereof) was authorized by the Board of
Directors of the Corporation.
SECTION 11.2. RIGHT TO ADVANCEMENT OF EXPENSES. The right to indemnification
conferred in Section 11.1 of this Article XI shall include the right to be
paid by the Corporation the expenses (including attorney's fees) incurred in
defending any such proceeding in advance of its final disposition (hereinafter
an "advancement of expenses"); provided, however, that, if the Delaware
General Corporation Law requires, an advancement of expenses incurred by an
indemnitee in his or her capacity as a director or officer (and not in any
other capacity in which service was or is rendered by such indemnitee,
including, without limitation, service to an employee benefit plan) shall be
made only upon delivery to the Corporation of an undertaking (hereinafter an
"undertaking"), by or on behalf of such indemnitee, to repay all amounts so
advanced if it shall ultimately be determined by final judicial decision from
which there is no further right to appeal (hereinafter a "final adjudication")
that such indemnitee is not entitled to be indemnified for such expenses under
this Section 11.2 or otherwise. The rights to indemnification and to the
advancement of expenses conferred in Sections 11.1 and 11.2 of this Article XI
shall be contract rights and such rights shall continue as to an indemnitee
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the indemnitee's heirs, executors and administrators.
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SECTION 11.3. RIGHT OF INDEMNITEE TO BRING SUIT. If a claim under Section 11.1
or 11.2 of this Article XI is not paid in full by the Corporation within sixty
(60) days after a written claim has been received by the Corporation, except
in the case of a claim for an advancement of expenses, in which case the
applicable period shall be twenty (20) days, the indemnitee may at any time
thereafter bring suit against the Corporation to recover the unpaid amount of
the claim. If successful in whole or in part in any such suit, or in a suit
brought by the Corporation to recover an advancement of expenses pursuant to
the terms of an undertaking, the indemnitee shall be entitled to be paid also
the expense of prosecuting or defending such suit. In (i) any suit brought by
the indemnitee to enforce a right to indemnification hereunder (but not in a
suit brought by the indemnitee to enforce a right to an advancement of
expenses) it shall be a defense that, and (ii) in any suit brought by the
Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking, the Corporation shall be entitled to recover such expenses upon a
final adjudication that, the indemnitee has not met any applicable standard
for indemnification set forth in the Delaware General Corporation Law. Neither
the failure of the Corporation (including its Board of Directors, independent
legal counsel, or its stockholders) to have made a determination prior to the
commencement of such suit that indemnification of the indemnitee is proper in
the circumstances because the indemnitee has met the applicable standard of
conduct set forth in the Delaware General Corporation Law, nor an actual
determination by the Corporation (including its Board of Directors,
independent legal counsel, or its stockholders) that the indemnitee has not
met such applicable standard of conduct, shall create a presumption that the
indemnitee has not met the applicable standard of conduct or, in the case of
such a suit brought by the indemnitee, be a defense to such suit. In any suit
brought by the indemnitee to enforce a right to indemnification or to an
advancement of expenses hereunder, or brought by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the burden of
proving that the indemnitee is not entitled to be indemnified, or to such
advancement of expenses, under this Article XI or otherwise shall be on the
Corporation.
SECTION 11.4. NON-EXCLUSIVITY OF RIGHTS. The rights to indemnification and
to the advancement of expenses conferred in this Article XI shall not be
exclusive of any other right which any person may have or hereafter acquire
under any statute, the Corporation's Certificate of Incorporation, By-laws,
agreement, vote of stockholders or disinterested directors or otherwise.
SECTION 11.5. INSURANCE. The corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such
expense, liability or loss under the Delaware General Corporation Law.
SECTION 11.6. INDEMNIFICATION OF EMPLOYEES AND AGENTS OF THE
CORPORATION. The Corporation may, to the extent authorized from time to time
by the Board of Directors, grant rights to indemnification and to the
advancement of expenses to any employee or agent of the Corporation to the
fullest extent of the provisions of this Article XI with respect to the
indemnification and advancement of expenses of directors and officers of the
Corporation.
SECTION 11.7. 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.
ARTICLE XII
RECORDS AND REPORTS
SECTION 12.1. MAINTENANCE AND INSPECTION OF RECORDS. The corporation shall,
either at its principal executive office or at such place or places as
designated by the board of directors, keep a record of its stockholders
listing their names and addresses and the number and class of shares held by
each stockholder, a copy of these Bylaws as amended to date, accounting books
and other records.
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Any stockholder of record, in person or by attorney or other agent, shall,
upon written demand under oath stating the purpose thereof, have the right
during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books
and records and to make copies or extracts therefrom. A proper purpose shall
mean a purpose reasonably related to such person's interest as a stockholder.
In every instance where an attorney or other agent is the person who seeks the
fight to inspection, the demand under oath shall be accompanied by a power of
attorney or such other writing that authorizes the attorney or other agent to
so act on behalf of the stockholder. The demand under oath shall be directed
to the corporation at its registered office in Delaware or at its principal
place of business.
SECTION 12.2. INSPECTION BY DIRECTOR. Any director shall have the right to
examine the corporation's stock ledger,a list of its stockholders and its
other books and records for a purpose reasonably related to his or her
position as a director. The Court of Chancery is hereby vested with the
exclusive jurisdiction to determine whether a director is entitled to the
inspection sought. The Court may summarily order the corporation to permit the
director to inspect any and all books and records, the stock ledger and the
stock list and to make copies or extracts therefrom. The Court may, in its
discretion, prescribe any limitations or conditions with reference to the
inspection, or award such other and further relief as the Court may deem just
and proper.
SECTION 12.3. REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The president
or any other officer of this corporation authorized by the board of directors
is authorized to vote, represent, and exercise on behalf of this corporation
all rights incident to any and all shares of any other corporation or
corporations standing in the name of this corporation. The authority herein
granted may be exercised either by such person directly or by any other person
authorized to do so by proxy or power of attorney duly executed by such person
having the authority.
ARTICLE XIII
GENERAL MATTERS
SECTION 13.1. RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING. For
purposes of determining the stockholders entitled to receive payment of any
dividend or other distribution or allotment of any rights or the stockholders
entitled to exercise any rights in respect of any other lawful action, the
board of directors may fix, in advance, a record date, which shall not be more
than sixty (60) days before any such action. In that case, only stockholders
of record at the close of business on the date so fixed are entitled to
receive the dividend, distribution or allotment of rights, or to exercise such
rights, as the case may be, notwithstanding any transfer of any shares on the
books of the corporation after the record date so fixed, except as otherwise
provided in the Certificate of Incorporation, by these Bylaws, by agreement or
by law.
If the board of directors does not so fix a record date, then the record
date for determining stockholders for any such purpose shall be at the close
of business on the day on which the board adopts the applicable resolution or
the sixtieth (60th) day before the date of that action, whichever is later.
SECTION 13.2. CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS. From time to time,
the board of directors shall determine by resolution which person or persons
may sign or endorse all checks, drafts, other orders for payment of money,
notes or other evidences of indebtedness that are issued in the name of or
payable to the corporation, and only the persons so authorized shall sign or
endorse those instruments.
SECTION 13.3. CORPORATE CONTRACTS AND INSTRUMENTS; HOW EXECUTED. The board
of directors, except as otherwise provided in these Bylaws, may authorize any
officer or officers, or agent or agents, to enter into any contract or execute
any instrument in the name of and on behalf of the corporation; such authority
may be general or confined to specific instances. Unless so authorized or
ratified by the board of directors or within the agency power of an officer,
no officer, agent or employee shall have any power or authority to bind the
corporation by any contract or engagement or to pledge its credit or to render
it liable for any purpose or for any amount.
SECTION 13.4. FISCAL YEAR. The fiscal year of this corporation shall begin
on the first day of January of each year and end on the last day of December
of that year.
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SECTION 13.5. STOCK CERTIFICATES. There shall be issued to each holder of
fully paid shares of the capital stock of the corporation a certificate or
certificates for such shares. Every holder of shares of the corporation shall
be entitled to have a certificate signed by, or in the name of the corporation
by, the chairman or vice chairman of the board of directors, or the president
or a vice president, and by the treasurer or an assistant treasurer, or the
secretary or an assistant secretary of such corporation representing the
number of shares registered in certificate form. Any or all of the signatures
on the certificate may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate has ceased to be such officer, transfer agent or registrar before
such certificate is issued, it may be issued by the corporation with the same
effect as if he or she were such officer, transfer agent or registrar at the
date of issue.
SECTION 13.6. SPECIAL DESIGNATION ON CERTIFICATES. If the corporation is
authorized to issue more than one class of stock or more than one series of
any class, then the powers, the designations, the preferences, and the
relative, participating, optional or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions of
such preferences and/or rights shall be set forth in full or summarized on the
face or back of the certificate that the corporation shall issue to represent
such class or series of stock; provided, however, that, except as otherwise
provided in Section 202 of the General Corporation Law of Delaware, in lieu of
the foregoing requirements there may be set forth on the face or back of the
certificate that the corporation shall issue to represent such class or series
of stock a statement that the corporation will furnish without charge to each
stockholder who so requests the powers, the designations, the preferences, and
the relative, participating, optional or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions of
such preferences and/or rights.
SECTION 13.7. LOST CERTIFICATES. The corporation may issue a new share
certificate or new certificate for any other security in the place of any
certificate theretofore issued by it, alleged to have been lost, stolen or
destroyed, and the corporation may require the owner of the lost, stolen or
destroyed certificate or the owner's legal representative to give the
corporation a bond (or other adequate security) sufficient to indemnify it
against any claim that may be made against it (including any expense or
liability) on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate. The board of directors
may adopt such other provisions and restrictions with reference to lost
certificates, not inconsistent with applicable law, as it shall in its
discretion deem appropriate.
SECTION 13.8. CONSTRUCTION; DEFINITIONS. Unless the context requires
otherwise, the general provisions, rules of construction, and definitions in
the General Corporation Law of Delaware shall govern the construction of these
Bylaws. Without limiting the generality of this provision, the singular number
includes the plural, the plural number,includes the singular, and the term
"person" includes both a corporation and a natural person.
SECTION 13.9. PROVISIONS ADDITIONAL TO PROVISIONS OF LAW. All restrictions,
limitations, requirements and other provisions of these Bylaws shall be
construed, insofar as possible, as supplemental and additional to all
provisions of law applicable to the subject matter thereof and shall be fully
complied with in addition to the said provisions of law unless such compliance
shall be illegal.
SECTION 13.10. PROVISIONS CONTRARY TO PROVISIONS OF LAW. Any article,
section, subsection, subdivision, sentence, clause or phrase of these Bylaws
which upon being construed in the manner provided in Section 55 hereof, shall
be contrary to or inconsistent with any applicable provisions of law, shall
not apply so long as said provisions of law shall remain in effect, but such
result shall not affect the validity or applicability of any other portions of
these Bylaws, it being hereby declared that these Bylaws would have been
adopted and each article, section, subsection, subdivision, sentence, clause
or phrase thereof, irrespective of the fact that any one or more articles,
sections, subsections, subdivisions, sentences, clauses or phrases is or are
illegal.
SECTION 13.11. NOTICES. Any reference in these Bylaws to the time a notice
is given or sent means, unless otherwise expressly provided, the time a
written notice by mail is deposited in the United States mails, postage
prepaid; or the time any other written notice is personally delivered to the
recipient or is delivered to a common carrier for transmission, or actually
transmitted by the person giving the notice by electronic means, to the
recipient; or the time any oral notice is communicated, in person or by
telephone or wireless, to the recipient or to a person at the office of the
recipient who the person giving the notice has reason to believe will promptly
communicate it to the recipient.
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ARTICLE XIV
AMENDMENTS
SECTION 14.1 AMENDMENTS. Subject to Article XI hereof, the original or other
bylaws of the corporation may be adopted, amended or repealed by the
stockholders entitled to vote; provided, however, that the corporation may, in
its certificate of incorporation, confer the power to adopt, amend or repeal
bylaws upon the directors. The fact that such power has been so conferred upon
the directors shall not divest the stockholders of the power, nor limit their
power to adopt, amend or repeal bylaws.
Whenever an amendment or new bylaw is adopted, it shall be copied in the
book of bylaws with the original bylaws, in the appropriate place. If any
bylaw is repealed, the fact of repeal with the date of the meeting at which
the repeal was enacted or the filing of the operative written consent(s) shall
be stated in said book.
ARTICLE XV
LOANS TO OFFICERS
SECTION 15.1. 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 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.
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1177 PS 98
<PAGE>
LEASING SOLUTIONS, INC.
Ten Almaden Boulevard, Suite 1500
San Jose, California 95113
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Hal J Krauter and Robert J. Kearns III,
or either of them acting alone, as Proxies, each with the power to appoint his
substitute, and hereby authorizes them to represent, and to vote as designated
on the reverse side, all of the shares of Common Stock of Leasing Solutions,
Inc. (the "Company") held of record by the undersigned on March 23, 1998, at
the Annual Meeting of Shareholders to be held at The Silicon Valley Capital
Club at Fairmont Plaza, 50 West San Fernando Street, 17th Floor, San Jose,
California 95113, on Thursday, May 21, 1998, at 1:00 p.m., local time, and any
adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
EACH OF THE PROPOSALS REFERENCED ON THE REVERSE SIDE.
IMPORTANT - PLEASE SIGN AND DATE THIS PROXY AND RETURN IT PROMPTLY.
--------------
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE
--------------
<PAGE>
[X] PLEASE MARK
VOTES AS IN
THIS EXAMPLE.
The Board of Directors recommends a vote FOR each of the proposals referenced
below.
1. Election of five Directors (or if any nominee is not available for
election, such substitute as the Board of Directors may designate):
Nominees: Hal J Krauter, Louis R. Adimare, George L. Bragg, James C. Castle
and Peter K. Nevitt
FOR WITHHELD
[_] [_]
[_] ______________________________________________________________________
For all nominees except as noted above
2. Amendment of the Company's 1995 Stock Option and Incentive Plan to
increase the number of shares of Common Stock authorized for issuance
thereunder by 600,000 shares:
FOR WITHHELD
[_] [_]
3. Increase in the number of authorized shares of Common Stock from
20,000,000 to 60,000,000:
FOR WITHHELD
[_] [_]
4. Change in the state of incorporation of the Company from the State of
California to the State of Delaware by means of a merger of the Company
with and into a wholly-owned Delaware subsidiary:
FOR WITHHELD
[_] [_]
MARK HERE
FOR ADDRESS [_]
CHANGE AND
NOTE AT LEFT
This Proxy is being solicited by the Board of
Directors of Leasing Solutions, Inc.
Please sign exactly as name appears hereon.
Joint owners should each sign. When signing as
attorney, executor, administrator, trustee or
guardian, please give full title as such.
Signature:_______________ Date:_______ Signature:_______________ Date:_______
