<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-b(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
Solectron Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Solectron Corporation
- --------------------------------------------------------------------------------
(Name of person(s) filing proxy statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] 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:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: $ (A)
(4) Proposed maximum aggregate value of transaction: $
- ---------------
(A) Set forth the amount on which the filing fee is calculated and state how it
was determined.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
LOGO
SOLECTRON CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of Solectron Corporation:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Solectron
Corporation (the "Company"), a California corporation, will be held on Thursday,
January 9, 1997, at 9:00 a.m., local time, at The Westin Hotel, Santa Clara,
5101 Great America Parkway, Santa Clara, California 95054, for the following
purposes:
1. To elect nine (9) directors to serve for the ensuing year and until
their successors are duly elected and qualified.
2. To approve a change in the Company's state of incorporation from
California to Delaware by means of a merger of the Company with and into a
wholly owned Delaware subsidiary of the Company.
3. To approve the form of indemnification agreement to be entered into
between the Company and its directors and officers when the change in the
Company's state of incorporation, proposed above, occurs.
4. To approve an amendment to the Company's 1992 Stock Option Plan to
increase the number of shares of Common Stock reserved for issuance
thereunder by two million five hundred thousand (2,500,000) shares to an
aggregate of eight million five hundred thousand (8,500,000) shares.
5. To ratify the appointment of KPMG Peat Marwick LLP as independent
accountants of the Company for the fiscal year ending August 31, 1997.
6. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice. Only shareholders of record at the close of
business on November 15, 1996 are entitled to notice of and to vote at the
meeting and any adjournment thereof.
All shareholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to mark,
sign and return the enclosed proxy card as promptly as possible in the
postage-paid envelope enclosed for that purpose. Any shareholder attending the
meeting may vote in person even if he or she has already returned a proxy.
Sincerely,
/s/ SUSAN WANG
SUSAN WANG
Secretary
Milpitas, California
December 2, 1996
<PAGE> 3
SOLECTRON CORPORATION
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited on behalf of Solectron Corporation (the
"Company"), for use at the Annual Meeting of Shareholders to be held on
Thursday, January 9, 1997, at 9:00 a.m., local time, or at any adjournment or
postponement thereof, for the purposes set forth herein and in the accompanying
Notice of Annual Meeting of Shareholders. The Annual Meeting will be held at The
Westin Hotel, Santa Clara, 5101 Great America Parkway, Santa Clara, California
95054. The Company's telephone number is (408) 957-8500.
These proxy solicitation materials were mailed on or about December 2, 1996
to all shareholders of record at the close of business on November 15, 1996 (the
"Record Date"). A copy of the Company's Annual Report to Shareholders for the
year ended August 31, 1996 ("fiscal 1996"), including financial statements, was
sent to the Shareholders prior to or concurrently with this Proxy Statement.
RECORD DATE; OUTSTANDING SHARES
Shareholders of record at the close of business on the Record Date are
entitled to notice of and to vote at the Annual Meeting and any adjournment
thereof. At the Record Date, 52,966,689 shares of the Company's Common Stock
were issued and outstanding.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Company (Attention:
Susan Wang, Secretary) a written notice of revocation or a duly executed proxy
bearing a later date, or by attending the meeting and voting in person.
VOTING AND SOLICITATION
On all matters other than the election of directors, each share has one
vote. See "Proposal One -- ELECTION OF DIRECTORS -- Required Vote."
The cost of soliciting proxies will be borne by the Company. In addition,
the Company may reimburse brokerage firms and other persons representing
beneficial owners of shares for expenses incurred in forwarding solicitation
materials to such beneficial owners. Proxies may be solicited by certain of the
Company's directors, officers and regular employees, without additional
compensation, personally or by telephone, telegraph or letter.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS FOR ANNUAL MEETING FOR FISCAL YEAR
1997
Proposals of shareholders of the Company which are to be presented by such
shareholders at the Company's Annual Meeting for the year ended August 31, 1997
("fiscal 1997") must be received by the Company no later than July 29, 1997 in
order that they may be included in the Proxy Statement and form of proxy
relating to that meeting.
PROPOSAL ONE
ELECTION OF DIRECTORS
NOMINEES
A Board of nine (9) directors is to be elected at this meeting. Unless
otherwise instructed, the proxyholders will vote the proxies received by them
for the Company's nominees named below. All of the nominees are presently
directors of the Company. In the event that any nominee of the Company is unable
or declines to serve as a director at the time of the Annual Meeting, the
proxies will be voted for any nominee who shall be designated by the present
Board of Directors to fill the vacancy. In the event that additional persons are
nominated for election as directors, the proxyholders intend to vote all proxies
received by them in
<PAGE> 4
such a manner in accordance with cumulative voting as will ensure the election
of as many of the nominees listed below as possible, and, in such event, the
specific nominees to be voted for will be determined by the proxyholders. The
Company is not aware of any nominee who will be unable or will decline to serve
as a director. The term of office of each person elected as a director will
continue until the next Annual Meeting of Shareholders or until his successor
has been elected and qualified.
The names of the nominees, and certain information about them, are set
forth below:
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION SINCE
- ----------------------------------- --- ---------------------------------- ---------
<S> <C> <C> <C>
Koichi Nishimura, Ph.D............. 58 President and Chief Executive 1991
Officer of the Company, Chairman
of the Board of the Company
Winston H. Chen, Ph.D.(1).......... 55 Chairman, Paramitas Foundation 1978
Richard A. D'Amore(2).............. 43 General Partner, North Bridge 1985
Venture Partners
Charles A. Dickinson(1)............ 73 Independent Consultant 1984
Heinz Fridrich(2).................. 63 Faculty Member, University of 1996
Florida
Kenneth E. Haughton, Ph.D.(3)...... 68 Independent Consultant 1985
Paul R. Low, Ph.D.(2).............. 63 President, PRL Associates 1993
W. Ferrell Sanders(3).............. 59 General Partner, Asset Management 1986
Company
Osamu Yamada(1).................... 67 Advisor, The Mitsubishi Bank, 1994
Limited
</TABLE>
- ---------------
(1) Member of the Nominating Committee.
(2) Member of the Audit Committee.
(3) Member of the Compensation Committee.
Except as set forth below, each of the nominees has been engaged in his
principal occupation set forth above during the past five (5) years. There is no
family relationship between any director or executive officer of the Company.
Dr. Koichi Nishimura has served as a director of the Company since 1991,
Chairman of the Board of Directors since September 1996, Chief Executive Officer
since 1992 and President since 1990. He was Co-Chief Executive Officer from 1991
to 1992 and Chief Operating Officer from 1988 to 1991. From 1964 to 1988, Dr.
Nishimura was employed by International Business Machines Corporation ("IBM") in
various technology and management positions. He also serves as a director of
Merix Corporation.
Dr. Winston H. Chen has served as a director of the Company since 1978,
Chairman of the Board of Directors from 1990 to 1994, President from 1979 to
1990, Chief Executive Officer from 1984 to 1991, and as Co-Chief Executive
Officer from 1991 to 1992. Dr. Chen is currently Chairman of Paramitas
Foundation. From 1970 to 1978, Dr. Chen served as Process Technology and
Development Manager of IBM. He also serves as a director of Intel Corporation
and Edison International.
Mr. Richard A. D'Amore has served as a director of the Company since 1985.
Mr. D'Amore has been a general partner of various venture capital funds
affiliated with Hambro International Venture Funds since 1982 and a general
partner of North Bridge Venture Partners since 1992. He also serves as a
director of Math Soft, Inc., VEECO, and Xionics Instruments.
Mr. Charles A. Dickinson has served as a director of the Company since
1984, and served as Chairman of the Board of Directors from 1986 to 1990 and
from 1994 to September 1996. He served as an independent consultant to the
Company from 1991 to 1993 and is currently serving in that capacity. He served
as President, Solectron Europe from 1993 to February 1996. From 1986 to 1990,
Mr. Dickinson was Chairman of the Board of Directors, President and Chief
Executive Officer of Vermont Micro Systems, Inc. He also serves as a director of
Trident Microsystems, Inc.
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Mr. Heinz Fridrich has served as a director of the Company since April
1996. He is currently a member of the faculty of the University of Florida. From
1950 to 1993, Mr. Fridrich held a number of manufacturing and operations
management positions in Europe and the United States with IBM. He also serves as
a director of Central Hudson Gas & Electric Company in Poughkeepsie, New York.
Dr. Kenneth E. Haughton has served as a director of the Company since 1985.
Dr. Haughton is currently an independent consultant. From 1990 to 1991, he was
Vice President of Engineering at Da Vinci Graphics. From 1989 to 1990, Dr.
Haughton was an independent consultant, and from 1982 to 1989, he served as Dean
of Engineering at Santa Clara University. He also serves as a director of
Seagate Technology.
Dr. Paul R. Low has served as a director of the Company since 1993. He is
currently President of PRL Associates. Prior to founding PRL Associates, Dr. Low
worked for IBM from 1957 to 1992. He held senior management and executive
positions with successively increasing responsibility, including President,
General Technology Division and IBM Corporate Vice President; President of
General Products Division; and General Manager, Technology Products business
line, also serving on IBM's corporate management board. He also serves as a
director of Applied Materials, Inc., VEECO, Number Nine, NCD, Xion, and IPAC.
Mr. W. Ferrell Sanders has served as a director of the Company since 1986.
Since 1987, Mr. Sanders has been a general partner of Asset Management Company,
a venture capital management firm. From 1981 to 1987, he was an independent
management consultant. He also serves as a director of Adaptec, Inc..
Mr. Osamu Yamada has served as a director of the Company since 1994. Mr.
Yamada is currently an advisor to The Mitsubishi Bank, Limited. From 1990 to
1991, he was Chairman and Chief Executive Officer of BankCal Tri-State
Corporation, a wholly owned subsidiary of The Mitsubishi Bank, Limited. From
1987 to 1990, he was Senior Managing Director of The Mitsubishi Bank, Limited,
and in an overlapping period from 1985 to 1990, he was also Chairman, President
and Chief Executive Officer of Bank of California. Prior to 1985, he held a
number of key management positions with The Mitsubishi Bank, Limited
organization. Mr. Yamada currently serves as a director of PictureTel and on a
number of boards of major universities and cultural centers.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of six (6) regular
meetings and six (6) telephonic meetings during fiscal 1996.
During fiscal 1996, each director attended at least seventy-five percent
(75%) of the meetings of the Board of Directors and meetings of committees upon
which such director served.
The Audit Committee of the Board of Directors currently consists of Richard
A. D'Amore, Heinz Fridrich and Dr. Paul R. Low. This committee oversees the
Company's internal financial control systems and procedures, reviews and
approves the Company's financial statements and coordinates and approves the
activities of the Company's auditors. The Audit Committee held one (1) meeting
during fiscal 1996.
The Compensation Committee of the Board of Directors is currently composed
of Dr. Kenneth E. Haughton and W. Ferrell Sanders. This committee is responsible
for establishing compensation guidelines for executives of the Company,
reviewing and approving executive bonus plans and providing guidance with
respect to other compensation issues, such as incentive stock option grants. The
Compensation Committee held a total of four (4) meetings during fiscal 1996.
The Nominating Committee of the Board of Directors currently consists of
Dr. Winston H. Chen, Charles A. Dickinson, and Osamu Yamada. This committee is
responsible for the development of general criteria regarding the qualifications
and selection of board members and recommends candidates for election to the
Board of Directors. The Nominating Committee held one (1) meeting during fiscal
1996.
3
<PAGE> 6
DIRECTOR COMPENSATION
Directors who are not employees of the Company ("Outside Directors")
receive annual retainers of $16,800. In addition, each Outside Director is paid
$2,200 for each Board meeting attended, as well as $500 for each telephonic
meeting attended in fiscal 1996. Outside Directors may also receive consulting
fees for projects completed at the request of management. Employee directors are
not compensated for their service on the Board of Directors or on committees of
the Board.
Options to purchase shares of the Company's common stock are granted to
Outside Directors under the 1992 Stock Option Plan (the "Option Plan") only in
accordance with an automatic, non-discretionary grant mechanism. The Option Plan
provides, with respect to Outside Directors, for an automatic grant on December
1 of each year of a nonstatutory option to purchase six thousand (6,000) shares
(pro rata for the portion of the first fiscal year of service as an Outside
Director) of the Company's Common Stock at a per share exercise price of 100% of
the fair market value on the date of grant. All Outside Directors, serving in
such capacity on December 1, 1995, received a grant of six thousand (6,000)
shares. Please see "Proposal Four -- Amendment of 1992 Stock Option
Plan -- Automatic Grants to Outside Directors."
REQUIRED VOTE
Each shareholder voting in the election of directors may cumulate such
shareholder's votes and give one candidate a number of votes equal to the number
of directors to be elected multiplied by the number of shares held by such
shareholder, or distribute such shareholder's votes on the same principle among
as many candidates as the shareholder may select, provided that votes cannot be
cast for more candidates than the number of directors to be elected. However, no
shareholder shall be entitled to cumulate votes unless the candidate's name has
been placed in nomination prior to the voting and the shareholder, and any other
shareholder, has given notice at the meeting, prior to the voting, of the
intention to cumulate the shareholder's votes. Votes withheld from any director
are counted for purposes of determining the presence or absence of a quorum but
have no legal effect under California law. Abstentions and shares held by
brokers that are present but not voted, because the brokers were prohibited from
exercising discretionary authority ("broker non-votes"), will be counted as
present for purposes of determining the presence or absence of a quorum.
MANAGEMENT RECOMMENDS A VOTE "FOR" THE NOMINEES LISTED ABOVE.
PROPOSAL TWO
REINCORPORATION IN DELAWARE
INTRODUCTION
For the reasons set forth below, the Board of Directors believes that the
best interests of the Company and its shareholders will be served by changing
the state of incorporation of the Company from California to Delaware (the
"Reincorporation Proposal" or the "Proposed Reincorporation"). SHAREHOLDERS ARE
URGED TO READ CAREFULLY THE FOLLOWING SECTIONS OF THIS PROXY STATEMENT,
INCLUDING THE RELATED EXHIBITS REFERENCED BELOW AND ATTACHED HERETO, BEFORE
VOTING ON THE REINCORPORATION PROPOSAL. Throughout the Proxy Statement, the term
"Solectron California" refers to the existing California corporation and the
term "Solectron Delaware" refers to the new Delaware corporation, a wholly owned
subsidiary of Solectron California, which is the proposed successor to Solectron
California.
As discussed below, the principal reasons for the proposed reincorporation
are the greater flexibility of Delaware corporate law, the substantial body of
case law interpreting that law, and the increased ability of the Company to
attract and retain qualified directors. The Company believes that its
shareholders will benefit from the well established principles of corporate
governance that Delaware law affords. Although Delaware law provides the
opportunity for the Board of Directors to adopt various mechanisms which may
enhance the Board's ability to negotiate favorable terms for the shareholders in
the event of an unsolicited takeover attempt, the proposed Delaware Certificate
of Incorporation and Bylaws are substantially similar to those currently in
effect in California, with the exception that the Board of Directors will be
divided into classes with
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staggered terms of office, certain shareholder rights to call special meetings
and to act by written consent will be eliminated, shareholder nominations for
director and for business to be presented at an Annual Meeting will be subject
to a ninety-day advance notice requirement, and the number of shares of Common
Stock authorized for issuance will be increased from eighty million (80,000,000)
to two hundred million (200,000,000). The Reincorporation Proposal is not being
proposed in order to prevent a nonsolicited takeover attempt, nor is it in
response to any present attempt known to the Board of Directors to acquire
control of the Company, obtain representation of the Board of Directors or take
significant action that affects the Company.
The Reincorporation Proposal will be effected by merging Solectron
California into Solectron Delaware. Upon completion of the merger, Solectron
California will cease to exist and Solectron Delaware will continue to operate
the business of the Company under the name Solectron Corporation.
Pursuant to the Agreement and Plan of Merger, a copy of which is attached
hereto as Exhibit A (the "Merger Agreement"), each outstanding share of
Solectron California Common Stock, no par value, will automatically be converted
into one share of Solectron Delaware Common Stock, $.001 par value, upon the
effective date of the merger. Each stock certificate representing issued and
outstanding shares of Solectron California Common Stock will continue to
represent the same number of shares of Common Stock of Solectron Delaware. IT
WILL NOT BE NECESSARY FOR SHAREHOLDERS TO EXCHANGE THEIR EXISTING STOCK
CERTIFICATES FOR STOCK CERTIFICATES OF SOLECTRON DELAWARE. However, shareholders
may exchange their certificates if they so choose. The Common Stock of Solectron
California is listed for trading on the New York Stock Exchange, and after the
merger Solectron Delaware's Common Stock will continue to be traded on the New
York Stock Exchange without interruption, under the same symbol ("SLR") as the
shares of Solectron California Common Stock are traded under such system prior
to the merger.
Under California law, the affirmative vote of a majority of the outstanding
shares of Common Stock of Solectron California is required for approval of the
Merger Agreement and the other terms of the Proposed Reincorporation. See "Vote
Required for the Reincorporation Proposal". The Proposed Reincorporation has
been unanimously approved by Solectron California's Board of Directors. If
approved by the shareholders, it is anticipated that the merger will become
effective as soon as practicable (the "Effective Date") following the Annual
Meeting of Shareholders. However, pursuant to the Merger Agreement, the merger
may be abandoned or the Merger Agreement may be amended by the Board of
Directors (except that the principal terms may not be amended without
shareholder approval) either before or after shareholder approval has been
obtained and prior to the Effective Date of the Proposed Reincorporation if, in
the opinion of the Board of Directors of either company, circumstances arise
which make it inadvisable to proceed under the original terms of the Merger
Agreement. Shareholders of Solectron California will have no dissenters' rights
of appraisal with respect to the merger.
The discussion set forth below is qualified in its entirety by reference to
the Merger Agreement, the Certificate of Incorporation of Solectron Delaware
(the "Certificate of Incorporation") and the Bylaws of Solectron Delaware,
copies of which are attached hereto as Exhibits 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 SOLECTRON DELAWARE AND ALL PROVISIONS THEREOF.
VOTE REQUIRED FOR THE REINCORPORATION PROPOSAL
Approval of the Reincorporation Proposal, which will also constitute
approval of (i) the Merger Agreement, (ii) the Certificate of Incorporation and
the Bylaws of Solectron Delaware, and (iii) the assumption of Solectron
California's employee benefit plans and stock option and employee stock purchase
plans by Solectron Delaware, will require the affirmative vote of the majority
of outstanding shares of the Company on the Record Date entitled to vote on the
proposal. In addition, the affirmative votes must constitute at least a majority
of the required quorum, which quorum is a majority of the shares outstanding on
the Record Date. Votes that are cast against the proposal will be counted for
purposes of determining (x) the presence or absence of a quorum and (y) the
total number of negative votes cast with respect to the proposal. While there is
no definitive statutory or case law authority in California as to the proper
treatment of
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abstentions in the counting of votes with respect to a proposal such as the
reincorporation in Delaware, the Company believes that abstentions should be
counted for purposes of determining both (A) the presence or absence of a quorum
for the transaction of business and (AA) the total number of votes cast with
respect to the proposal. In the absence of controlling precedent to the
contrary, the Company intends to treat abstentions in this manner. Accordingly,
abstentions will have the same effect as a vote against the proposal. The
Company further believes that broker non-votes should be counted for purposes of
determining the presence or absence of a quorum for the transaction of business,
but should not be counted for purposes of determining the number of votes cast
with respect to the proposal. In the absence of controlling precedent to the
contrary, the Company intends to treat broker non-votes in this manner.
THE BOARD RECOMMENDS A VOTE "FOR" THE PROPOSED REINCORPORATION IN DELAWARE.
THE EFFECT OF AN ABSTENTION IS THE SAME AS THAT OF A VOTE AGAINST THE
REINCORPORATION PROPOSAL.
PRINCIPAL REASONS FOR THE PROPOSED REINCORPORATION
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 shareholders will benefit from the responsiveness of Delaware corporate law
to their needs and to those of the corporation they own.
Prominence, Predictability and Flexibility of Delaware Law. For many years
Delaware has followed a policy of encouraging incorporation in that state and,
in furtherance of that policy, has been a leader in adopting, construing and
implementing comprehensive, flexible corporate laws responsive to the legal and
business needs of corporations organized under its laws. Many corporations have
chosen Delaware initially as a state of incorporation or have subsequently
changed corporate domicile to Delaware in a manner similar to that proposed by
the Company. Because of Delaware's prominence as the state of incorporation for
many major corporations, both the legislature and courts in Delaware have
demonstrated an ability and a willingness to act quickly and effectively to meet
changing business needs. The Delaware courts have developed considerable
expertise in dealing with corporate issues and a substantial body of case law
has developed construing Delaware law and establishing public policies with
respect to corporate legal affairs.
Increased Ability to Attract and Retain Qualified Directors. Both
California and Delaware law permit a corporation to include a provision in its
charter document which reduces or limits the monetary liability of directors for
breaches of fiduciary duty in certain circumstances. The increasing frequency of
claims and litigation directed against directors and officers has greatly
expanded the risks facing directors and officers of corporations in exercising
their respective duties. The amount of time and money required to respond to
such claims and to defend such litigation can be substantial. It is the
Company's desire to reduce these risks to its directors and officers and to
limit situations in which monetary damages can be recovered against directors so
that the Company may continue to attract and retain qualified directors who
otherwise might be unwilling to serve because of the risks involved. The Company
believes that, in general, Delaware law provides greater protection to directors
than California law and that Delaware case law regarding a corporation's ability
to limit director liability is more developed and provides more guidance than
California law.
Well Established Principles of Corporate Governance. There is substantial
judicial precedent in the Delaware courts as to the legal principles applicable
to measures that may be taken by a corporation and as to the conduct of the
Board of Directors under the business judgment rule. The Company believes that
its shareholders will benefit from the well established principles of corporate
governance that Delaware law affords.
NO CHANGE IN THE NAME, BOARD MEMBERS, BUSINESS, MANAGEMENT, EMPLOYEE PLANS OR
LOCATION OF PRINCIPAL FACILITIES OF THE COMPANY
The Reincorporation Proposal will effect a change only in the legal
domicile of the Company and certain other changes of a legal nature, certain of
which are described in this Proxy Statement. The Proposed Reincorporation will
NOT result in any change in the name, business, management, fiscal year, assets
or
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<PAGE> 9
liabilities (except to the extent of legal and other costs of effecting the
reincorporation) or location of the principal facilities of the Company. The
nine (9) directors who are elected at the Annual Meeting of Shareholders will
become the directors of Solectron Delaware. All employee benefit, stock option
and employee stock purchase plans of Solectron California will be assumed and
continued by Solectron Delaware, and each option or right issued pursuant to
such plans will automatically be converted into an option or right to purchase
the same number of shares of Solectron Delaware Common Stock, at the same price
per share, upon the same terms, and subject to the same conditions. Shareholders
should note that approval of the Reincorporation Proposal will also constitute
approval of the assumption of these plans by Solectron Delaware. Other employee
benefit arrangements of Solectron California will also be continued by Solectron
Delaware upon the terms and subject to the conditions currently in effect. As
noted above, after the merger the shares of Common Stock of Solectron Delaware
will continue to be traded, without interruption, in the same principal market
and under the same symbol ("SLR") as the shares of Common Stock of Solectron
California are traded under prior to the merger.
Prior to the Effective Date of the merger, the Company will obtain any
requisite consents to such merger from parties with whom it may have contractual
arrangements. As a result, Solectron California's rights and obligations under
such contractual arrangements will continue and be assumed by Solectron
Delaware.
ANTITAKEOVER IMPLICATIONS
Delaware, like many other states, permits a corporation to adopt a number
of measures through amendment of the corporate charter or bylaws or otherwise,
which measures are designed to reduce a corporation's vulnerability to
unsolicited takeover attempts. The Reincorporation Proposal is not being
proposed in order to prevent such a change in control, nor is it in response to
any present attempt known to the Board of Directors to acquire control of the
Company or to obtain representation on the Board of Directors.
In the discharge of its fiduciary obligations to its shareholders, the
Board of Directors has evaluated the Company's vulnerability to potential
unsolicited bidders. In the course of such evaluation, the Board of Directors of
the Company has considered or may consider in the future certain defensive
strategies designed to enhance the Board's ability to negotiate with an
unsolicited bidder. These strategies include, but are not limited to, the
adoption of a shareholder rights plan and severance agreements for its
management and key employees which become effective upon the occurrence of a
change in control of the Company. None of these measures has been implemented by
Solectron California under California law and none has been provided for by
Solectron Delaware under Delaware law.
Certain effects of the Reincorporation Proposal may be considered to have
antitakeover implications. Section 203 of the Delaware General Corporation Law,
from which Solectron Delaware does NOT intend to opt out, restricts certain
"business combinations" with "interested stockholders" for three (3) years
following the date that a person becomes an interested stockholder, unless the
Board of Directors approves the business combination. See "Significant
Differences Between the Corporation Laws of California and Delaware --
Shareholder Approval of Certain Business Combinations". Furthermore, the
establishment of a staggered Board of Directors similarly could be viewed as
having an antitakeover effect in that it permits only one-third of the Board to
be elected in any given year. Likewise, the elimination of the right of
shareholders controlling at least ten percent (10%) of the voting shares to call
a special meeting of the shareholders could be seen as promoting an antitakeover
effect by allowing shareholder action only at a meeting properly called by the
Board of Directors or an annual meeting. The elimination of the ability of a
majority of shareholders to act by written consent also could be viewed as
having an antitakeover effect in that it can make it more difficult for
shareholders to coordinate action outside a duly called annual or special
meeting. Moreover, the increased number of authorized but unissued shares may be
used by the Board of Directors to create impediments to a takeover attempt. It
should be noted that a classified board of directors can also be established
under California law in certain circumstances. For a detailed discussion of all
of the changes which will be implemented as part of the Proposed
Reincorporation, see "The Charters and Bylaws of Solectron California and
Solectron Delaware" and "Restatement of Indemnification Agreements." For a
discussion of these and other differences between the laws of California and
Delaware, see "Significant Differences Between the Corporation Laws of
California and Delaware."
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The Board of Directors believes that unsolicited takeover attempts may be
unfair or disadvantageous to the Company and its shareholders because: (i) a
non-negotiated takeover bid may be timed to take advantage of temporarily
depressed stock prices; (ii) a non-negotiated takeover bid may be designed to
foreclose or minimize the possibility of more favorable competing bids or
alternative transactions; (iii) a non-negotiated takeover bid may involve the
acquisition of only a controlling interest in the corporation's stock, without
affording all shareholders the opportunity to receive the same economic
benefits; and (iv) certain of the Company's contractual arrangements provide
that they may not be assigned pursuant to a transaction which results in a
"change of control" of the Company without the prior written consent of the
licensor or other contracting party.
By contrast, in a transaction in which an 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, technology 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 the stock price and
equality of treatment of all shareholders.
Despite the belief of the Board of Directors 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 of Directors, 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 or over
their cost basis in such shares. As a result of such effects of the
Reincorporation Proposal, shareholders who might wish to participate in a tender
offer may not have an opportunity to do so. In addition, to the extent that such
provisions enable the Board of Directors to resist a takeover or a change in
control of the Company, they could make it more difficult to change the existing
Board of Directors and management.
THE CHARTERS AND BYLAWS OF SOLECTRON CALIFORNIA AND SOLECTRON DELAWARE
The provisions of the Solectron Delaware Certificate of Incorporation and
Bylaws are similar to those of the Solectron California Articles of
Incorporation and Bylaws in many respects. However, the Reincorporation Proposal
includes the implementation of certain provisions in the Solectron Delaware
Certificate of Incorporation and Bylaws which alter the rights of shareholders
and the powers of management. These provisions have antitakeover implications as
described in this Proxy Statement. Approval by shareholders of the Proposed
Reincorporation will constitute an approval of the inclusion in the Solectron
Delaware Certificate of Incorporation and Bylaws of each of the provisions
described below. In addition, Solectron Delaware could implement certain other
changes by amendment of its Certificate of Incorporation or Bylaws. For a
discussion of such changes, see "Significant Differences Between the Corporation
Laws of California and Delaware." This discussion of the Certificate of
Incorporation and Bylaws of Solectron Delaware is qualified by reference to
Exhibits B and C hereto, respectively.
The Articles of Incorporation of Solectron California currently authorize
the Company to issue up to eighty million (80,000,000) shares of Common Stock,
no par value, and one million two hundred thousand (1,200,000) shares of
Preferred Stock, no par value. The Certificate of Incorporation of Solectron
Delaware provides that such company will have two hundred million (200,000,000)
authorized shares of Common Stock, $.001 par value, and one million two hundred
thousand (1,200,000) shares of Preferred Stock, $.001 par value.
Capitalization. The Certificate of Incorporation of Solectron Delaware
authorizes two hundred million (200,000,000) shares of Common Stock, whereas the
Articles of Incorporation of Solectron California authorize only eighty million
(80,000,000) shares of Common Stock. The Board of Directors believes that it is
prudent to increase the authorized number of shares of Common Stock to the
proposed level in order to provide a reserve of shares available for issuance to
meet business needs as they arise. Like most companies, the Company has
historically maintained a substantial reserve of authorized but unissued shares
in order to avoid the time and expense of seeking shareholder approval each time
it needs to make a new issuance of Common Stock in light of possible future
activities which the Board of Directors deem to be in the best interests of the
shareholders. Such future activities may include, without limitation,
financings, establishing strategic relationships with corporate partners,
providing equity incentives to employees, officers or directors,
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or effecting stock splits or dividends. The additional shares of Common Stock
authorized may also be used to acquire or invest in complementary businesses or
products or to obtain the right to use complementary technologies. Although the
Company has no present obligation to issue additional shares of Common Stock
(except pursuant to employee stock incentive plans), the Company continues to
evaluate and conduct discussions with third parties with respect to potential
acquisitions or investments. However, the probability that the Company will
enter into any such transaction is presently uncertain.
Adoption of the Proposed Reincorporation would not affect the rights,
privileges, and preferences of the holders of currently outstanding Common Stock
of the Company, except for effects incidental to increasing the number of shares
of the Company's Common Stock outstanding.
If the stockholders approve the Proposed Reincorporation, the Board of
Directors may cause the issuance of additional shares of Common Stock without
further vote of the stockholders of the Company, except as provided under
Delaware corporate law or under the rules of any national securities exchange on
which shares of Common Stock of the Company are then listed. Current holders of
Common Stock have no preemptive or like rights, which means that current
stockholders do not have a prior right to purchase any new issue of capital
stock of the Company in order to maintain their ownership interest therein. The
issuance of additional shares of Common Stock would decrease the proportionate
equity interest of the Company's current stockholders and, depending upon the
price paid for such additional shares, could result in dilution to the Company's
current stockholders.
In addition, the Board of Directors could use authorized but unissued
shares to create impediments to a takeover or a transfer of control of the
Company. Accordingly, the increase in the number of authorized shares of Common
Stock may deter a future takeover attempt which holders of Common Stock may deem
to be in their best interest or in which holders of Common Stock may be offered
a premium for their shares over the market price. The Board of Directors is not
currently aware of any attempt to take over or acquire the Company. While it may
be deemed to have potential anti-takeover effects, the proposed amendment to
increase the authorized Common Stock is not prompted by any specific effort or
takeover threat currently perceived by management.
Monetary Liability of Directors and Officers. The Articles of
Incorporation of Solectron California and the Certificate of Incorporation of
Solectron Delaware both provide for the elimination of personal monetary
liability of directors and officers to the fullest extent permissible under law.
The provision eliminating monetary liability of directors and officers set forth
in the Solectron Delaware Certificate of Incorporation is potentially more
expansive than the corresponding provision in the Solectron California Articles
of Incorporation, in that the former incorporates future amendments to Delaware
law with respect to the elimination of such liability. Solectron Delaware
proposes to enter into new indemnification arrangements with all directors after
the Proposed Reincorporation. For a more detailed explanation of the new
indemnification arrangements after the Proposed Reincorporation, see "PROPOSAL
THREE -- DELAWARE FORM OF INDEMNIFICATION AGREEMENTS" and "Significant
Differences Between the Corporation Laws of California and
Delaware -- Indemnification and Limitation of Liability."
Size of the Board of Directors. The Bylaws of Solectron Delaware provide
for a Board of Directors consisting of nine (9) members, until changed by a duly
adopted amendment to the Bylaws. The Bylaws of Solectron California provide for
a Board of Directors consisting of not less than seven (7) nor more than
thirteen (13) directors, within which the exact number is set at nine (9)
members. Under California law, although changes in the number of directors, in
general, must be approved by a majority of the outstanding shares, the Board of
Directors may fix the exact number of directors within a stated range set forth
in the articles of incorporation or bylaws, if the stated ranges have been
approved by the shareholders. Delaware law permits the board of directors acting
alone, to change the authorized number of directors by amendment to the bylaws,
unless the directors are not authorized to amend the bylaws or the number of
directors is fixed in the certificate of incorporation (in which case a change
in the number of directors may be made only by amendment to the certificate of
incorporation following approval of such change by the stockholders). The
Solectron Delaware Certificate of Incorporation provides that the number of
directors will be as specified in the Bylaws and authorizes the Board of
Directors to adopt, alter, amend or repeal the Bylaws. Following the
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Proposed Reincorporation, the Board of Directors of Solectron Delaware could
amend the Bylaws to change the size of the Board of Directors from nine
directors without further stockholder approval. If the Reincorporation Proposal
is approved, the nine directors of Solectron California who are elected at the
Annual Meeting of Shareholders will continue as the nine directors of Solectron
Delaware after the Proposed Reincorporation is consummated and until their
successors have been duly elected and qualified.
Cumulative Voting for Directors. Under California law, if any shareholder
has given notice of an intention to cumulate votes for the election of
directors, any other shareholder of the corporation is also entitled to cumulate
his or her votes at such election. Cumulative voting provides that each share of
stock normally having one vote is entitled to a number of votes equal to the
number of directors to be elected. A shareholder may then cast all such votes
for a single candidate or may allocate them among as many candidates as the
shareholder may choose. In the absence of cumulative voting, the holders of the
majority of the shares present or represented at a meeting in which directors
are to be elected would have the power to elect all the directors to be elected
at such meeting, and no person could be elected without the support of holders
of the majority of shares present or represented at such meeting. Elimination of
cumulative voting could make it more difficult for a minority shareholder
adverse to a majority of the shareholders to obtain representation on the
Company's Board of Directors. California corporations whose stock is listed on a
national stock exchange can also eliminate cumulative voting with shareholder
approval. The Company qualifies as such a listed company but has not sought
shareholder approval to eliminate cumulative voting. Under Delaware law,
cumulative voting in the election of directors is not mandatory, but is a
permitted option. The Solectron Delaware Certificate of Incorporation, like the
Solectron California Article of Incorporation provides for cumulative voting
rights. Therefore, after the Proposed Reincorporation, stockholders will retain
their cumulative voting rights, and such rights cannot be eliminated without
subsequent stockholder approval.
Power to Call Special Shareholders' Meetings. Under California law, a
special meeting of shareholders may be called by the Board of Directors, the
Chairman of the Board, the President, the holders of shares entitled to cast not
less than ten percent (10%) of the votes at such meeting and such additional
persons as are authorized by the Articles of Incorporation or the Bylaws.
Solectron California's Bylaws permit a special meeting of shareholders to be
called by the Board of Directors, the Chairman of the Board, the President, a
Vice-President, the Secretary, or a shareholder holding not less than ten
percent (10%) of the voting power of the Company. Under Delaware law, a special
meeting of stockholders may be called by the Board of Directors or any other
person authorized to do so in the Certificate of Incorporation or the Bylaws.
The Bylaws of Solectron Delaware currently authorize the Board of Directors, the
Chairman of the Board, the President, and the Secretary to call a special
meeting of stockholders. Therefore, after the Proposed Reincorporation, neither
a Vice-President nor any stockholder (regardless of percentage holding) will be
entitled to call special meetings.
Filling Vacancies on the Board of Directors. Under California law, any
vacancy on the board of directors other than one created by removal of a
director may be filled by the Board. If the number of directors is less than a
quorum, a vacancy may be filled by the unanimous written consent of the
directors then in office, by the affirmative vote of a majority of the directors
at a meeting held pursuant to notice or waivers of notice or by a sole remaining
director. A vacancy created by removal of a director may be filled by the board
only if so authorized by a corporation's articles of incorporation or by a bylaw
approved by the corporation's shareholders. Solectron California's Articles of
Incorporation and Bylaws do not permit directors to fill vacancies created by
removal of a director, although vacancies for any other reason may be filled by
the directors. Under Delaware law, vacancies and newly created directorships may
be filled by a majority of the directors then in office (even though less than a
quorum) or by a sole remaining director, unless otherwise provided in the
certificate of incorporation or bylaws (or unless the certificate of
incorporation directs that a particular class of stock is to elect such
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 or newly created
directorship). The Bylaws of Solectron Delaware, like those of Solectron
California, provide that any vacancy created by the removal of a director by the
stockholders of Solectron Delaware may be filled only by the approval of the
shareholders. A vacancy created by any reason other than removal, however, may
be filled by the directors, and the person so elected to fill the vacancy shall
hold office until the next succeeding annual meeting of stockholders at which
the class to which the directorship belongs is to be elected.
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Nominations of Director Candidates and Introduction of Business at
Shareholder Meetings. The Bylaws of Solectron Delaware establish an advance
notice procedure with regard to the nomination, other than by or at the
direction of the Board of Directors, of candidates for election as directors
(the "Nomination Procedure") and with regard to certain matters to be brought
before an annual meeting or special meeting of stockholders (the "Business
Procedure").
The Nomination Procedure provides that only persons nominated by or at the
direction of the Board of Directors or by a stockholder who has given timely
written notice to the Secretary of the Company prior to the meeting, will be
eligible for election as directors. The Business Procedure provides that at an
annual or special meeting, and subject to any other applicable requirements,
only such business may be conducted as has been brought before the meeting by or
at the direction of the Board of Directors or by a stockholder who has given
timely written notice to the Secretary of the Company of such stockholder's
intention to bring such business before the meeting. In all cases, to be timely,
notice must be received by the Company not less than ninety (90) days prior to
the meeting (or if fewer than one hundred (100) days notice or prior public
disclosure of the meeting date is given or made to stockholders, not later than
the tenth day following the day on which such notice was mailed or such public
disclosure was made).
Under the Nomination Procedure, a stockholder's notice to the Company must
contain certain information about the nominee, including name, address, the
consent of the nominee to be nominated and such other information as would be
required to be included in a proxy statement soliciting proxies for the election
of the proposed nominee, and certain information about the stockholder proposing
to nominate that person, including name, address, a representation that the
stockholder is a holder of record of stock entitled to vote at the meeting and a
description of all arrangements or understandings between the stockholder and
each nominee. Under the Business Procedure, notice relating to the conduct of
business at a meeting other than the nomination of directors must contain
certain information about the business and about the stockholder who proposes to
bring the business before the meeting. If the chairman or other officer
presiding at the meeting determines that a person was not nominated in
accordance with the Nomination Procedure, such person will not be eligible for
election as a director, or if he or she determines that other business was not
properly brought before such meeting in accordance with the Business Procedure,
such business will not be conducted at such meeting. Nothing in the Nomination
Procedure or the Business Procedure will preclude discussion by any stockholder
of any nomination or business properly made or brought before an annual or
special meeting in accordance with the above-described procedures.
By requiring advance notice of nominations by stockholders, the Nomination
Procedure affords the Board of Directors an opportunity to consider the
qualifications of the proposed nominees and, to the extent deemed necessary or
desirable by the Board, to inform the stockholders about such qualifications. By
requiring advance notice of proposed business, the Business Procedure provides
the Board with an opportunity to inform stockholders of any business proposed to
be conducted at a meeting and the Board's position on any such proposal,
enabling stockholders to better determine whether they desire to attend the
meeting or grant a proxy to the Board of Directors as to the disposition of such
business. Although the Solectron Delaware Bylaws do not give the Board any power
to approve or disapprove stockholder nominations for the election of directors
or any other business desired by stockholders to be conducted at a meeting, the
Solectron Delaware Bylaws may have the effect of precluding a nomination for the
election of directors or of precluding any other business at a particular
meeting if the proper procedures are not followed. In addition, the procedures
may discourage or deter a third party from conducting a solicitation of proxies
to elect its own slate of directors or otherwise attempting to obtain control of
the Company, even if the conduct of such business or such attempt might be
beneficial to the Company and its stockholders.
Classified Board. The Certificate of Incorporation and the Bylaws of
Solectron Delaware provide for a Board of Directors which is divided into three
classes, each of which serves for three-year terms once the classified board is
fully implemented. California law permits a corporation whose stock is traded on
a national stock exchange to adopt a classified Board of Directors. Although
Solectron California qualifies to do so, it has not chosen to establish a
classified Board of Directors. Under the Bylaws of Solectron Delaware, the board
will be divided into three (3) classes of three (3) directors each. At the first
Annual Meeting of shareholders following the Proposed Reincorporation, directors
for Class I would be elected to one-year terms, Class II to
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two-year terms, and Class III to three-year terms. Thereafter, when each class
comes up for election at the end of the initial terms, the directors of a class
will be elected to serve until the third succeeding Annual Meeting of
stockholders. Thus, after the Proposed Reincorporation, only one-third of the
Board of Directors will be elected in any given year, and each director will
serve a three-year term once the classified board is fully implemented.
The Board of Directors believes that dividing the directors into three
classes is advantageous to the Company and its stockholders because by providing
that directors will serve three-year terms rather than one-year terms, the
likelihood of continuity and stability in the policies formulated by the Board
will be enhanced. It also believes that the staggered election of directors will
promote continuity because, at any given time one (1) year after the first
annual shareholder's meeting constituting a classified, at least two-thirds of
the directors will have at least one (1) year of experience as directors of the
Company.
The Board of Directors also believes that a classified board would, if
adopted, effectively reduce the possibility that a third party could effect a
sudden or surprise change in control of the Company's Board of Directors. A
classified board would serve to ensure that the Board and management, if
confronted by a surprise proposal from a third party who has acquired a block of
the Company's Common Stock, will have sufficient time to review the proposal and
appropriate alternatives to the proposal and to attempt to negotiate a better
transaction, if possible, for the stockholders.
The Board of Directors of the Company believes that if a potential acquiror
were to purchase a significant or controlling interest in the Company, such
potential acquiror's ability to remove the Company's directors and obtain
control of the Board and thereby remove the Company's management would severely
curtail the Company's ability to negotiate effectively with such potential
acquiror. The threat of obtaining control of the Board would deprive the Board
of the time and information necessary to evaluate the proposal, to study
alternative proposals and to help ensure that the best price is obtained in any
transaction involving the Company which may ultimately be undertaken. A
classified board is designed to reduce the vulnerability of the Company to an
unsolicited takeover proposal, particularly a proposal that does not contemplate
the acquisition of all of the Company's outstanding shares, or an unsolicited
proposal for the restructuring or sale of all or part of the Company.
Since the creation of a classified Board will increase the amount of time
required for a takeover bidder to obtain control of the Company without the
cooperation of the Board, even if the takeover bidder were to acquire a majority
of the Company's outstanding Common Stock, the existence of a classified board
could tend to discourage certain tender offers which stockholders might feel
would be in their best interests. Because tender offers for control usually
involve a purchase price higher than the current market price, the creation of a
classified board could also discourage open market purchases by a potential
takeover bidder. Such tender offers or open market purchases could increase the
market price of the Company's stock, enabling stockholders to sell their shares
at a price higher than that which otherwise would prevail. In addition, the
creation of a classified board could make the Company's Common Stock less
attractive to persons who invest in securities in anticipation of an increase in
price if a takeover attempt develops. Since these provisions will make the
removal of directors more difficult, it will increase the directors' security in
their positions and, since the Board has the power to retain and discharge
management, could perpetuate incumbent management.
Action by Written Consent of the Shareholders. Any action by the
stockholders must be taken at a duly called annual or special meeting, according
to the Bylaws of Solectron Delaware. Thus, although the Bylaws of Solectron
California allow shareholder action by written consent, such action by written
consent will no longer be authorized after the Proposed Reincorporation.
Removal of Directors. The Bylaws of Solectron Delaware permit a director
to be removed solely for cause by a majority of the outstanding shares then
entitled to vote in an election of directors; provided, however, that, so long
as stockholders are entitled to cumulative voting, no individual director may be
removed (unless the entire board is removed) if the number of votes cast against
such removal would be sufficient to elect the director if then cumulatively
voted at an election of the class of directors of which the director is a part.
California law permits the removal of directors, with or without cause, by a
majority of the outstanding shares then entitled to vote; provided, however,
that no individual director may be removed (unless the entire
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board is removed) if the number of votes cast against such removal would be
sufficient to elect the director under cumulative voting. Under Delaware law, a
director of a corporation with a classified board of directors may be removed
only for cause, unless the Certificate of Incorporation otherwise provides.
Thus, because Solectron Delaware will have a classified board and because its
Certificate of Incorporation does not alter the applicability of Delaware law,
stockholders after the Proposed Reincorporation will no longer be able to remove
directors without cause, although removal will still be subject to approval by
more votes than sufficient to elect a director under cumulative voting.
SIGNIFICANT DIFFERENCES BETWEEN THE CORPORATION LAWS OF CALIFORNIA AND DELAWARE
The corporation laws of California and Delaware differ in many respects.
Although all the differences are not set forth in this Proxy Statement, certain
provisions, which could materially affect the rights of shareholders, are
discussed below.
Shareholder Approval of Certain Business Combinations. In recent years, a
number of states have adopted special laws designed to make certain kinds of
"unfriendly" corporate takeovers, or other transactions involving a corporation
and one or more of its significant shareholders, more difficult. Under Section
203 of the Delaware General Corporation Law, certain "business combinations"
with "interested stockholders" of Delaware corporations are subject to a
three-year moratorium unless specified conditions are met.
Section 203 prohibits a Delaware corporation from engaging in a "business
combination" with an "interested stockholder" for three (3) years following the
date that such person or entity becomes an interested stockholder. With certain
exceptions, an interested stockholder is a person or entity who or which owns,
individually or with or through certain other persons or entities, fifteen
percent (15%) or more of the corporation's outstanding voting stock (including
any rights to acquire stock pursuant to an option, warrant, agreement,
arrangement or understanding, or upon the exercise of conversion or exchange
rights, and stock with respect to which the person has voting rights only), or
is an affiliate or associate of the corporation and was the owner, individually
or with or through certain other persons or entities, of fifteen percent (15%)
or more of such voting stock at any time within the previous three (3) years, or
is an affiliate or associate of any of the foregoing.
For purposes of Section 203, the term "business combination" is defined
broadly to include mergers with or caused by the interested stockholder; sales
or other dispositions to the interested stockholder (except proportionately with
the corporation's other stockholders) of assets of the corporation or a direct
or indirect majority-owned subsidiary equal in aggregate market value to ten
percent (10%) or more of the aggregate market value of either the corporation's
consolidated assets or all of its outstanding stock; the issuance or transfer by
the corporation or a direct or indirect majority-owned subsidiary of stock of
the corporation or such subsidiary to the interested stockholder (except for
certain transfers in a conversion or exchange or a pro rata distribution or
certain other transactions, none of which increase the interested stockholder's
proportionate ownership of any class or series of the corporation's or such
subsidiary's stock or of the corporation's voting stock); or receipt by the
interested stockholder (except proportionately as a stockholder), directly or
indirectly, of any loans, advances, guarantees, pledges or other financial
benefits provided by or through the corporation or a subsidiary.
The three-year moratorium imposed on business combinations of Section 203
does not apply if: (i) prior to the date on which such stockholder becomes an
interested stockholder the board of directors approves either the business
combination or the transaction that resulted in the person or entity becoming an
interested stockholder; (ii) upon consummation of the transaction that made him
or her an interested stockholder, the interested stockholder owns at least
eighty-five percent (85%) of the corporation's voting stock outstanding at the
time the transaction commenced (excluding from the eighty-five percent (85%)
calculation shares owned by directors who are also officers of the target
corporation and shares held by employee stock plans that do not give employee
participants the right to decide confidentially whether to accept a tender or
exchange offer); or (iii) on or after the date such person or entity becomes an
interested stockholder, the board approves the business combination and it is
also approved at a stockholder meeting by sixty-six and two-thirds percent
(66 2/3%) of the outstanding voting stock not owned by the interested
stockholder.
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Section 203 only applies to certain publicly held corporations that have a
class of voting stock that is (i) listed on a national securities exchange, (ii)
quoted on an interdealer quotation system of a registered national securities
association or (iii) held of record by more than 2,000 stockholders. Although a
Delaware corporation to which Section 203 applies may elect not to be governed
by Section 203, Solectron Delaware does not intend to so elect and thus will be
governed by Section 203.
Section 203 will encourage any potential acquiror to negotiate with the
Company's Board of Directors. Section 203 also might have the effect of limiting
the ability of a potential acquiror to make a two-tiered bid for Solectron
Delaware in which all stockholders would not be treated equally. Shareholders
should note, however, that the application of Section 203 to Solectron Delaware
will confer upon the Board the power to reject a proposed business combination
in certain circumstances, even though a potential acquiror may be offering a
substantial premium for Solectron Delaware's shares over the then current market
price. Section 203 would also discourage certain potential acquirors unwilling
to comply with its provisions. See "Shareholder Voting" herein.
Removal of Directors. Under California law, any director or the entire
board of directors may be removed, with or without cause, with the approval of a
majority of the outstanding shares entitled to vote; however, no individual
director may be removed (unless the entire board is removed) if the number of
votes cast against such removal would be sufficient to elect the director under
cumulative voting. Under Delaware law, a director of a corporation with a
classified board of directors may be removed only for cause, unless the
certificate of incorporation otherwise provides. The Bylaws of Solectron
Delaware allow any director or the entire board of directors to be removed, with
cause, by the majority of shares then entitled to vote in an election of
directors; however, so long as stockholders are entitled to cumulative voting,
no individual director may be removed (unless the entire board is removed) if
the number of votes cast against such removal would be sufficient to elect the
director if then cumulatively voted at an election of the class of directors of
which the director is a part. The Certificate of Incorporation of Solectron
Delaware after the proposed reincorporation provides for a classified board and
for cumulative voting rights.
Classified Board of Directors. A classified board is one on which a
certain number, but not all, of the directors are elected on a rotating basis
each year. This method of electing directors makes changes in the composition of
the board of directors more difficult, and thus a potential change in control of
a corporation a lengthier and more difficult process. Under California law, a
Company whose shares are listed on a national exchange may also provide for a
classified board of directors by adopting amendments to its articles of
incorporation or bylaws, which amendments must be approved by the shareholders.
Although Solectron California qualifies to adopt a classified board of
directors, its Board of Directors has not previously done so. Delaware law
permits, but does not require, a classified board of directors, pursuant to
which the directors can be divided into as many as three classes with staggered
terms of office, with only one class of directors standing for election each
year. Delaware corporate law provides that the Certificate of Incorporation of a
corporation may provide that the directors be divided into up to three classes.
After reincorporation in Delaware, the Board of Directors will adopt a
classified Board, dividing the directors into three equal classes. The directors
of each class will serve three-year terms and the term of one class will expire
each year after the board is fully implemented.
To implement a classified Board, the Board would be divided in the
following way: 3 directors will be designed as holding Class I positions; 3
directors would be designated as holding Class II positions; and 3 directors
would be designated as holding Class III positions. At the first Annual Meeting
of Stockholders after the Proposed Reincorporation, the directors in Class I,
Class II, and Class III will be elected. The term of office of the initial Class
I directors shall expire at the next succeeding annual meeting of stockholders,
the term of office of the initial Class II directors shall expire at the second
succeeding annual meeting of stockholders and the term of office of the initial
Class III directors shall expire at the third succeeding annual meeting of
stockholders. At each annual meeting scheduled to be held after the first Annual
Meeting of Stockholders after the Proposed Reincorporation, directors to replace
those of a Class office whose terms expire at such annual meeting shall be
elected to hold office until the third succeeding annual meeting and until their
respective successors shall have been duly elected and qualified. If the number
of directors is later changed, any newly created directorships or decrease in
directorships shall be so apportioned among the
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classes as to make all classes as nearly equal in number as is practicable.
Thus, after the Proposed Reincorporation, shareholders will elect only one-third
of the directors at each Annual Meeting of Stockholders.
Indemnification and Limitation of Liability. California and Delaware have
similar laws respecting indemnification by a corporation of its officers,
directors, employees and other agents. The laws of both states also permit
corporations to adopt a provision in their articles of incorporation eliminating
the liability of a director to the corporation or its shareholders for monetary
damages for breach of the director's fiduciary duty of care. There are
nonetheless certain differences between the laws of the two states respecting
indemnification and limitation of liability. In general, Delaware law is
somewhat broader in allowing corporations to indemnify and limit the liability
of corporate agents, which, among other things, support Delaware corporations in
attracting and retaining outside directors.
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; or (g) liability for
improper distributions, loans or guarantees.
Delaware law does not permit the elimination of 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.
California law permits indemnification of expenses incurred in derivative
or third-party actions, except that with respect to derivative actions (a) no
indemnification may be made without court approval when a person is adjudged
liable to the corporation in the performance of that person's duty to the
corporation and its shareholders, unless a court determines such person is
entitled to indemnity for expenses, and then such indemnification may be made
only to the extent that such court shall determine, and (b) no indemnification
may be made without court approval in respect of amounts paid or expenses
incurred in settling or otherwise disposing of a threatened or pending action or
amounts incurred in defending a pending action which is settled or otherwise
disposed of without court approval.
Indemnification is permitted by California law only for acts taken in good
faith and believed to be in the best interests of the corporation and its
shareholders, as determined by a majority vote of a disinterested quorum of the
directors, independent legal counsel (if a quorum of independent directors is
not obtainable), a majority vote of a quorum of the shareholders (excluding
shares owned by the indemnified party), or the court handling the action.
California law requires indemnification when the individual has
successfully defended the action on the merits as opposed to Delaware law which
requires indemnification where there has been a successful defense, whether on
the merits or otherwise.
Delaware law generally permits indemnification of expenses incurred in the
defense or settlement of a derivative or third-party action, provided there is a
determination by a disinterested quorum of the directors, by independent legal
counsel or by a majority vote of a quorum of the stockholders that the person
seeking indemnification acted in good faith and in a manner reasonably believed
to be in, or (in contrast to California law) not opposed to, the best interests
of the corporation. Without court approval, however, no indemnification may be
made in respect of any derivative action in which such person is adjudged liable
for negligence or misconduct in the performance of his duty to the corporation.
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Each of California and Delaware law allow for the entering of
indemnification agreements which may provide for indemnification arrangements
beyond those specifically authorized by applicable statute as long as they are
not contrary to the policies underlying such statute. In this connection, the
Company entered into indemnification agreements with its officers and directors
providing for indemnification in line with California law, including certain
procedures for such indemnification as well as for the advancement of expenses
(other than actual amounts paid in settlement) in connection with the
investigation, defense, settlement or appeal of any proceeding subject to such
indemnification agreement. Such advances are repayable by the officer or
director to the extent the subject conduct is later determined not to be
indemnifiable. Similar indemnification agreements are allowed under Delaware law
and the broader indemnification allowed in Delaware could also result in the
greater allowance of expenses advancement.
After the Proposed Reincorporation, the Company proposes to adopt the
indemnification agreement described in "PROPOSAL THREE -- DELAWARE FORM OF
INDEMNIFICATION AGREEMENT."
Inspection of Shareholder List. Both California and Delaware law allow any
shareholder to inspect the shareholder list for a purpose reasonably related to
such person's interest as a shareholder. California law provides, in addition,
for an absolute right to inspect and copy the corporation's shareholder list by
persons holding an aggregate of five percent (5%) or more of the corporation's
voting shares, or shareholders holding an aggregate of one percent (1%) or more
of such shares who have filed a Schedule 14B with the Securities and Exchange
Commission in connection with a contested election of directors. The latter
provision has not been amended in response to the elimination of Schedule 14B
under the revised proxy rules. Under California law, such absolute inspection
rights also apply to a corporation formed under the laws of any other state if
its principal executive offices are in California or if it customarily holds
meetings of its board in California. Delaware law also provides for inspection
rights as to a list of stockholders entitled to vote at a meeting within a
ten-day period preceding a stockholders' meeting for any purpose germane to the
meeting. However, Delaware law contains no provisions comparable to the absolute
right of inspection provided by California law to certain shareholders.
Dividends and Repurchases of Shares. California law dispenses with the
concepts of par value of shares as well as statutory definitions of capital,
surplus and the like. The concepts of par value, capital and surplus exist under
Delaware law.
Under California law, a corporation may not make any distribution
(including dividends, whether in cash or other property, and repurchases of its
shares, other than repurchases of its shares issued under employee stock plans
contemplated by Section 408 of the California Corporations Code) unless either
(i) the corporation's retained earnings immediately prior to the proposed
distribution equal or exceed the amount of the proposed distribution or (ii)
immediately after giving effect to such distribution, the corporation's assets
(exclusive of goodwill, capitalized research and development expenses and
deferred charges) would be at least equal to 1 1/4 times its liabilities (not
including deferred taxes, deferred income and other deferred credits), and the
corporation's current assets would be at least equal to its current liabilities
(or 1 1/4 times its current liabilities if the average pre-tax and pre-interest
expense earnings for the preceding two (2) fiscal years were less than the
average interest expense for such years). Such tests are applied to California
corporations on a consolidated basis.
Delaware law permits a corporation to declare and pay dividends out of
surplus or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of all classes having a preference upon the
distribution of assets. In addition, Delaware law generally provides that a
corporation may redeem or repurchase its shares only if the capital of the
corporation is not impaired and such redemption or repurchase would not impair
the capital of the corporation.
To date, the Company has not paid any cash dividends on its outstanding
shares and does not anticipate doing so for the foreseeable future.
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Shareholder Voting. Both California and Delaware law generally require
that a majority of the shareholders of both acquiring and target corporations
approve statutory mergers. Delaware law does not require a stockholder vote of
the surviving corporation in a merger (unless the corporation provides otherwise
in its certificate of incorporation) if (a) the merger agreement does not amend
the existing certificate of incorporation, (b) each share of the stock of the
surviving corporation outstanding immediately before the effective date of the
merger is an identical outstanding or treasury share after the merger and (c)
either no shares of common stock of the surviving corporation and no shares,
securities or obligations convertible into such stock are to be issued or
delivered under the plan of merger, or the authorized unissued shares or the
treasury shares of common stock of the surviving corporation to be issued or
delivered under the plan of merger plus those initially issuable upon conversion
of any other shares, securities or obligations to be issued or delivered under
such plan do not exceed twenty percent (20%) of the shares of common stock of
such constituent corporation outstanding immediately prior to the effective date
of the merger. California law contains a similar exception to its voting
requirements for reorganizations where shareholders or the corporation itself,
or both, immediately prior to the reorganization will own immediately after the
reorganization equity securities constituting more than five-sixths of the
voting power of the surviving or acquiring corporation or its parent entity.
Both California law and Delaware law also require that a sale of all or
substantially all of the assets of a corporation be approved by a majority of
the outstanding voting shares of the corporation transferring such assets.
With certain exceptions, California law also requires that mergers,
reorganizations, certain sales of assets and similar transactions be approved by
a majority vote of each class of shares outstanding. In contrast, Delaware law
generally does not require class voting, except in certain transactions
involving an amendment to the certificate of incorporation that adversely
affects a specific class of shares. As a result, shareholder approval of such
transactions may be easier to obtain under Delaware law for companies which have
more than one class of shares outstanding.
California law also requires that holders of nonredeemable common stock
receive nonredeemable common stock in a merger of the corporation with the
holder of more than fifty percent (50%) but less than ninety percent (90%) of
such common stock or its affiliate unless all of the holders of such common
stock consent to the transaction. This provision of California law may have the
effect of making a "cash-out" merger by a majority shareholder more difficult to
accomplish. Although Delaware law does not parallel California law in this
respect, under some circumstances Section 203 does provide similar protection
against coercive two-tiered bids for a corporation in which the stockholders are
not treated equally. See "Significant Differences Between the Corporation Laws
of California and Delaware -- Shareholder Approval of Certain Business
Combinations."
California law provides that, except in certain circumstances, when a
tender offer or a proposal for a reorganization or for a sale of assets is made
by an interested party (generally a controlling or managing person of the target
corporation), an affirmative opinion in writing as to the fairness of the
consideration to be paid to the shareholders must be delivered to shareholders.
This fairness opinion requirement does not apply to a corporation that does not
have shares held of record by at least 100 persons, or to a transaction that has
been qualified under California state securities laws. Furthermore, if a tender
of shares or vote is sought pursuant to an interested party's proposal and a
later proposal is made by another party at least ten (10) days prior to the date
of acceptance of the interested party proposal, the shareholders must be
informed of the later offer and be afforded a reasonable opportunity to withdraw
any vote, consent or proxy, or to withdraw any tendered shares. Delaware law has
no comparable provision.
Interested Director Transactions. Under both California and Delaware law,
certain contracts or transactions in which one or more of a corporation's
directors has an interest are not void or voidable because of such interest
provided that certain conditions, such as obtaining the required approval and
fulfilling the requirements of good faith and full disclosure, are met. With
certain exceptions, the conditions are similar under California and Delaware
law. Under California and Delaware law, (a) either the shareholders or the board
of directors must approve any such contract or transaction after full disclosure
of the material facts, and,
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in the case of board approval, the contract or transaction must also be "just
and reasonable" (in California) or "fair" (in Delaware) to the corporation or
(b) the contract or transaction must have been just and reasonable or fair as to
the corporation at the time it was approved. In the latter case, California law
explicitly places the burden of proof on the interested director. Under
California law, if shareholder approval is sought, the interested director is
not entitled to vote his shares at a shareholder meeting with respect to any
action regarding such contract or transaction. If board approval is sought, the
contract or transaction must be approved by a majority vote of a quorum of the
directors, without counting the vote of any interested directors (except that
interested directors may be counted for purposes of establishing a quorum).
Under Delaware law, if board approval is sought, the contract or transaction
must be approved by a majority of the disinterested directors (even if the
disinterested directors are less than a quorum). Therefore, certain transactions
that the Board of Directors of Solectron California might not be able to approve
because of the number of interested directors, could be approved by a majority
of the disinterested directors of Solectron Delaware, although less than a
majority of a quorum.
Shareholder Derivative Suits. California law provides that a shareholder
bringing a derivative action on behalf of a corporation need not have been a
shareholder at the time of the transaction in question, provided that certain
tests are met. Under Delaware law, a stockholder may bring a derivative action
on behalf of the corporation only if the stockholder was a stockholder of the
corporation at the time of the transaction in question or if his or her stock
thereafter devolved upon him or her by operation of law. California law also
provides that the corporation or the defendant in a derivative suit may make a
motion to the court for an order requiring the plaintiff shareholder to furnish
a security bond. Delaware does not have a similar bonding requirement.
Appraisal Rights. Under both California and Delaware law, a shareholder of
a corporation participating in certain major corporate transactions may, under
varying circumstances, be entitled to appraisal rights pursuant to which such
shareholder may receive cash in the amount of the fair market value of his or
her shares in lieu of the consideration he or she would otherwise receive in the
transaction. Under Delaware law, such fair market value is determined exclusive
of any element of value arising from the accomplishment or expectation of the
merger or consolidation, and such appraisal rights are not available (a) with
respect to the sale, lease or exchange of all or substantially all of the assets
of a corporation, (b) with respect to a merger or consolidation by a corporation
the shares of which are either listed on a national securities exchange or are
held of record by more than 2,000 holders if such stockholders receive only
shares of the surviving corporation or shares of any other corporation that are
either listed on a national securities exchange or held of record by more than
2,000 holders, plus cash in lieu of fractional shares of such corporations or
(c) to stockholders of a corporation surviving a merger if no vote of the
stockholders of the surviving corporation is required to approve the merger
under certain provisions of Delaware law.
The limitations on the availability of appraisal rights under California
law are different from those under Delaware law. Shareholders of a California
corporation whose shares are listed on a national securities exchange or on a
list of over-the-counter margin stocks issued by the Board of Governors of the
Federal Reserve System generally do not have such appraisal rights unless the
holders of at least five percent (5%) of the class of outstanding shares claim
the right or the corporation or any law restricts the transfer of such shares.
Appraisal rights are also unavailable if the shareholders of a corporation or
the corporation itself, or both, immediately prior to the reorganization will
own immediately after the reorganization equity securities constituting more
than five-sixths of the voting power of the surviving or acquiring corporation
or its parent entity (as will be the case in the Reincorporation Proposal).
Appraisal or dissenters' rights are, therefore, not available to shareholders of
Solectron California with respect to the Reincorporation Proposal. California
law generally affords appraisal rights in sale of asset reorganizations.
Dissolution. Under California law, shareholders holding fifty percent
(50%) or more of the total voting power may authorize a corporation's
dissolution, with or without the approval of the corporation's board of
directors, and this right may not be modified by the Articles of Incorporation.
Under Delaware law, unless the board of directors approves the proposal to
dissolve, the dissolution must be approved by all the stockholders entitled to
vote thereon. Only if the dissolution is initially approved by the board of
directors may it be approved by a simple majority of the outstanding shares of
the corporation's stock entitled to vote. In the event
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of such a board-initiated dissolution, Delaware law allows a Delaware
corporation to include in its certificate of incorporation a supermajority
(greater than a simple majority) voting requirement in connection with
dissolutions. Solectron Delaware's Certificate of Incorporation contains no such
supermajority voting requirement, however, and a majority of the outstanding
shares entitled to vote, voting at a meeting at which a quorum is present, would
be sufficient to approve a dissolution of Solectron Delaware that had previously
been approved by its Board of Directors.
APPLICATION OF THE GENERAL CORPORATION LAW OF CALIFORNIA TO DELAWARE
CORPORATIONS
Under Section 2115 of the California General Corporation Law, certain
foreign corporations (i.e., corporations not organized under California law) are
placed in a special category if they have characteristics of ownership and
operation which indicate that they have significant contacts with California. So
long as a Delaware or other foreign corporation is in this special category, and
it does not qualify for one of the statutory exemptions, it is subject to a
number of key provisions of the California General Corporation Law applicable to
corporations incorporated in California. Among the more important provisions are
those relating to the election and removal of directors, cumulative voting,
classified boards of directors, standards of liability and indemnification of
directors, distributions, dividends and repurchases of shares, shareholder
meetings, approval of certain corporate transactions, dissenters and appraisal
rights and inspection of corporate records. See "Significant Differences Between
the Corporation Laws of California and Delaware" above.
Exemptions from Section 2115 are provided for corporations whose shares are
listed on a major national securities exchange or are traded in the Nasdaq
National Market and which have 800 or more shareholders as of the record date of
its most recent annual meeting of shareholders. The Common Stock of Solectron
Delaware will continue to be traded on the New York Stock Exchange and are owned
by more than 800 holders, and accordingly, Solectron Delaware will be exempt
from Section 2115.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a discussion of certain federal income tax considerations
that may be relevant to holders of Solectron California Common Stock who receive
Solectron Delaware Common Stock in exchange for their Solectron California
Common Stock as a result of the Proposed Reincorporation. The discussion does
not address all of the tax consequences of the Proposed Reincorporation that may
be relevant to particular Solectron California shareholders, such as dealers in
securities, or those Solectron California shareholders who acquired their shares
upon the exercise of stock options, nor does it address the tax consequences to
holders of options or warrants to acquire Solectron California Common Stock.
Furthermore, no foreign, state, or local tax considerations are addressed
herein. IN VIEW OF THE VARYING NATURE OF SUCH TAX CONSEQUENCES, EACH SHAREHOLDER
IS URGED TO CONSULT HIS OR HER OWN TAX ADVISOR AS TO THE SPECIFIC TAX
CONSEQUENCES OF THE PROPOSED REINCORPORATION, INCLUDING THE APPLICABILITY OF
FEDERAL, STATE, LOCAL OR FOREIGN TAX LAWS.
Subject to the limitations, qualifications and exceptions described herein,
and assuming the Proposed Reincorporation qualifies as a reorganization within
the meaning of Section 368(a) of the Code, the following tax consequences
generally should result:
(a) No gain or loss should be recognized by holders of Solectron
California Common Stock upon receipt of Solectron Delaware Common Stock
pursuant to the Proposed Reincorporation;
(b) The aggregate tax basis of the Solectron Delaware Common Stock
received by each shareholder in the Proposed Reincorporation should be
equal to the aggregate tax basis of the Solectron California Common Stock
surrendered in exchange therefor; and
(c) The holding period of the Solectron Delaware Common Stock received
by each shareholder of Solectron California should include the period for
which such shareholder held the Solectron California Common Stock
surrendered in exchange therefor, provided that such Solectron California
Common Stock was held by the shareholder as a capital asset at the time of
Proposed Reincorporation.
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(d) The Company should not recognize gain or loss for federal income
tax purposes as a result of the Proposed Reincorporation, and Solectron
Delaware should succeed, without adjustment, to the federal income tax
attributes of Solectron California.
The Company has not requested a ruling from the Internal Revenue Service
(the "IRS") with respect to the federal income tax consequences of the Proposed
Reincorporation under the Code. The Company will, however, receive an opinion
from legal counsel substantially to the effect that the Proposed Reincorporation
will qualify as a reorganization within the meaning of Section 368(a) of the
Code (the "Tax Opinion"). The Tax Opinion will neither bind the IRS nor preclude
it from asserting a contrary position. In addition, the Tax Opinion will be
subject to certain assumptions and qualifications and will be based upon the
truth and accuracy of representations made by Solectron Delaware and Solectron
California.
A successful IRS challenge to the reorganization status of the Proposed
Reincorporation would result in a shareholder recognizing gain or loss with
respect to each share of Solectron California Common Stock exchanged in the
Proposed Reincorporation equal to the difference between the shareholder's basis
in such share and the fair market value, as of the time of the Proposed
Reincorporation, of the Solectron Delaware Common Stock received in exchange
therefor. In such event, a shareholder's aggregate basis in the shares of
Solectron Delaware Common Stock received in the exchange would equal their fair
market value on such date, and the shareholder's holding period for such shares
would not include the period during which the shareholder held Solectron
California Common Stock.
PROPOSAL THREE
APPROVAL OF FORM OF INDEMNIFICATION AGREEMENT
GENERAL
The Company currently holds agreements with its directors and officers that
eliminate the liability of directors and officers to the fullest extent
permissible under California law. In the event that the Company's Proposed
Reincorporation in Delaware (see PROPOSAL TWO -- REINCORPORATION IN DELAWARE)
receives the requisite votes for shareholder approval and that the mergers
described therein is effected. The Company proposes to enter into new
indemnification agreements in substantially the form attached hereto as, Exhibit
D (the "Indemnification Agreements") to provide for the maximum indemnification
allowed under applicable Delaware law and under Solectron Delaware's Certificate
of Incorporation. Although California and Delaware indemnification laws are
similar, Delaware law provides a somewhat broader scope of protection for
directors and officers. (See PROPOSAL TWO -- REINCORPORATION IN
DELAWARE -- Significant Differences Between the Corporation Law of California
and Delaware, for a fuller explanation of the material differences between
Delaware and California law.)
The Board of Directors believes that the Indemnification Agreements serve
the best interest of the Company and its stockholders by strengthening the
Company's ability to attract and retain over time the services of knowledgeable
and experienced persons to serve as directors, officers and key employees who,
through their efforts and expertise, can make a significant contribution to the
success of the Company.
The Indemnification Agreements are intended to complement the indemnity and
other protection available under applicable law, Solectron Delaware's
Certificate of Incorporation and Bylaws, and to provide for indemnification of
indemnitees to the fullest extent permitted by applicable law.
INDEMNIFICATION AGREEMENTS
The Indemnification Agreements provide the indemnitees with the maximum
indemnification allowed under applicable law. Since the Delaware statute is
non-exclusive, it is possible that certain claims beyond the scope of the
statute may be indemnifiable. The Indemnification Agreements provide a scheme of
indemnification which may be broader than that specifically provided by Delaware
Law. It has not yet been determined, however, to what extent the indemnification
expressly permitted by Delaware Law may be expanded, and
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therefore the scope of indemnification provided by the Indemnification
Agreements may be subject to future judicial interpretation.
The Indemnification Agreements provide that Solectron Delaware shall
indemnify an indemnitee who is or was a party or is threatened to be made a
party to any threatened, pending or completed action or proceeding whether
civil, criminal, administrative or investigative by reason of the fact that the
indemnitee is or was a director, officer, key employee or agent of Solectron
Delaware or any subsidiary of Solectron Delaware. Solectron Delaware shall
advance all expenses, judgments, fines, penalties and amounts paid in settlement
(including taxes imposed on the indemnitee on account of receipt of such
payouts) incurred by the indemnitee in connection with the investigation,
defense, settlement or appeal of any civil or criminal action or proceeding as
described above. The indemnitee shall repay such amounts advanced only if it
shall be ultimately determined that he or she is not entitled to be indemnified
by Solectron Delaware. The advances paid to the indemnitee by Solectron Delaware
shall be delivered within twenty (20) days following a written request by the
indemnitee. Any award of indemnification to an indemnitee, if not covered by
insurance, would come directly from the assets of Solectron Delaware, thereby
affecting a stockholder's investment.
The Indemnification Agreements set forth a number of procedural and
substantive matters which are not addressed or are addressed in less detail in
Delaware Law, including the following:
First, in the event an action is instituted by the indemnitee under the
Indemnification Agreements to enforce or interpret any of the terms therein,
indemnitee shall be entitled to be paid all costs and expenses, including
reasonable attorneys' fees, incurred by the indemnitee with respect to such
action, unless as a part of such action, a court of competent jurisdiction
determines that each of the material assertions made by the indemnitee were not
made in good faith or were frivolous. In the event of an action instituted by or
in the name of Solectron Delaware under the Indemnification Agreements or to
enforce or interpret any of the terms therein, the indemnitee shall be entitled
to be paid all costs and expenses, including reasonable attorneys' fees,
incurred by the indemnitee in the defense of such action, unless as a part of
such action the court determines that each of the indemnitee's material defenses
to such action were made in bad faith or were frivolous. Delaware Law does not
set forth any procedure for contesting a corporation's determination of a
party's right to indemnification.
Second, the Indemnification Agreements explicitly provide for partial
indemnification of costs and expenses in the event that an indemnitee is not
entitled to full indemnification under the terms of the Indemnification
Agreements. Delaware Law does not specifically address this issue. It does,
however, provide that to the extent that an indemnitee has been successful on
the merits, he or she shall be entitled to such indemnification.
Third, in the event Solectron Delaware shall be obligated to pay the
expenses of any proceeding against the indemnitee, Solectron Delaware shall be
entitled to assume the defense of such proceeding, with counsel approved by the
indemnified party, which approval shall not be unreasonably withheld, upon the
delivery to the indemnitee of written notice of its election to do so. Solectron
Delaware shall have the right to conduct such defense as it sees fit in its sole
discretion, including the right to settle any claim against indemnitee without
the consent of the indemnitee.
Fourth, indemnification provided by the Indemnification Agreements is not
exclusive of any rights to which the indemnitee may be entitled under Solectron
Delaware's Certificate of Incorporation, its Bylaws, any agreement, any vote of
stockholders or disinterested directors, Delaware Law, or otherwise. The
indemnification provided under the Indemnification Agreements continues for any
action taken or not taken while serving in an indemnified capacity even though
the indemnitee may have ceased to serve in such capacity at the time of the
action, suit or other covered proceeding.
Finally, the Indemnification Agreements provide for certain exceptions to
indemnification which include the following: (a) indemnification for liabilities
where the law prohibits indemnification; (b) indemnification or advancement of
expenses with respect to proceedings or claims initiated or brought voluntarily
by an indemnitee and not by way of defense, except with respect to proceedings
brought to establish or enforce a right to indemnification under the
Indemnification Agreements or any other statute or law or otherwise as
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required under Section 145 of the Delaware General Corporation Law; and (c)
indemnification for expenses in the payment of profits arising from the purchase
and sale by the indemnitee of securities in violation of Section 16(b) of the
Securities Exchange Act of 1934, as amended, or any similar or successor
statute.
The proposed Indemnification Agreements, together with the limitations on
the directors' liability provided by Solectron Delaware's Certificate of
Incorporation and Bylaws, reduce significantly the number of instances in which
directors might be held liable to Solectron Delaware for monetary damages for
breach of their fiduciary duties. Therefore, the current directors of Solectron
Delaware have a direct personal interest in the approval of the Indemnification
Agreements.
THE FOREGOING DISCUSSION OF THE INDEMNIFICATION AGREEMENTS IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO THE FORM OF INDEMNIFICATION AGREEMENT ATTACHED TO
THIS PROXY STATEMENT AS EXHIBIT D, WHICH YOU ARE URGED TO READ AND CONSIDER
CAREFULLY
At present there is no pending litigation or proceeding involving an
indemnitee where indemnification would be required or permitted under the
Indemnification Agreements. The Company is not aware of any threatened
litigation or proceeding which may result in a claim for indemnification under
the Indemnification Agreements by an Indemnitee.
INDEMNIFICATION OF LIABILITIES UNDER THE SECURITIES ACT OF 1933
The Securities and Exchange Commission has expressed its opinion that
indemnification of directors, officers and controlling persons of the Company
against liabilities arising under the Securities Act of 1933 (the "Act") is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Company of expenses incurred or paid by an indemnitee of
Solectron Delaware in the successful defense of any such act or proceeding) is
asserted by such indemnitee in connection with securities which have been
registered by Solectron Delaware, Solectron Delaware will, unless in the opinion
of its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
REQUIRED VOTE
The affirmative vote of a majority of the votes cast and held by
disinterested shareholders will be required under California law to approve the
form of the Indemnification Agreement. Since each director and officer is an
interested party with respect to the Indemnification Agreements, shares owned
directly or indirectly by any director or officer may not be voted on this
proposal, although they will be counted for purposes of determining whether a
quorum is present. For this purpose, the "Votes Cast" are defined under
California law to be the shares of the Company's Common Stock represented and
"voting" at the Annual Meeting. In addition, the affirmative votes must
constitute at least a majority of the required quorum, which quorum is a
majority of the shares outstanding on the Record Date. Votes that are cast
against the proposal will be counted for purposes of determining (i) the
presence or absence of a quorum and (ii) the total number of Votes Cast with
respect to the proposal. While there is no definitive statutory or case law
authority in California as to the proper treatment of abstentions in the
counting of votes with respect to a proposal such as the adoption of the
Indemnification Agreements, the Company believes that abstentions and broker
non-votes should be counted for purposes of determining the presence or absence
of a quorum for the transaction of business. The Company further believes that
neither abstentions nor broker non-votes should be counted as having been
"voted" with respect to the proposal for purposes of determining whether the
requisite majority of votes cast has been obtained. In the absence of
controlling precedent to the contrary, the Company intends to treat abstentions
and broker non-votes in this manner.
MANAGEMENT RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE APPROVAL OF THE FORM
OF INDEMNIFICATION AGREEMENTS.
22
<PAGE> 25
PROPOSAL FOUR
AMENDMENT OF 1992 STOCK OPTION PLAN
GENERAL
The Company's 1992 Stock Option Plan (the "Option Plan") was adopted by the
Board of Directors in October 1992 and approved by the shareholders in January
1993, and a total of one million six hundred thousand (1,600,000) shares of
Common Stock were initially reserved for issuance thereunder. In September 1993,
the Board of Directors amended the Option Plan to increase the number of shares
reserved for issuance thereunder to an aggregate of four million (4,000,000)
shares, and such amendment was approved by the shareholders in January 1994. In
November 1994, the Board of Directors approved an amendment to the Option Plan
increasing the number of shares reserved for issuance thereunder by two million
(2,000,000) shares to an aggregate of six million (6,000,000) shares, and such
amendment was approved by the shareholders in January 1995. On September 25,
1996, the Board of Directors approved an amendment to the Option Plan increasing
the number of shares reserved for issuance thereunder by two million, five
hundred thousand (2,500,000) shares to an aggregate of eight million, five
hundred thousand (8,500,000) shares.
The Board of Directors believes that it is in the Company's best interest
to amend the Option Plan and increase the number of shares reserved for issuance
thereunder so that the Company may attract high quality employees necessary to
build the Company's infrastructure and continue to provide ongoing incentives to
the Company's employees in the form of options to purchase the Company's Common
Stock.
The Option Plan provides for the granting to employees of "incentive stock
options" within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"), and for the granting of nonstatutory options to
employees, directors and consultants.
PURPOSE
The principal purpose of the Option Plan is to provide equity incentives to
the Company's employees, consultants and members of the Board of Directors who
are neither employees of nor consultants to the Company ("Outside Directors") by
enabling them to participate in the Company's success and to encourage the
participants' continued service to the Company.
ADMINISTRATION
The Option Plan may be administered by the Board of Directors of the
Company or by a committee, and is currently being administered by the
Compensation Committee of the Board of Directors (the "Administrator"). Grants
of options under the Plan shall be made by the Board or a committee. No member
of the Board or committee may vote on any option to be granted him or take part
in any consideration of the Plan as it may apply to him. The interpretation and
construction of any provision of the Option Plan is within the sole discretion
of the Board or committee, whose determination is final and conclusive. Members
of the Board or committee receive no additional compensation for their services
in connection with the administration of the Option Plan. Copies of the Option
Plan are available upon request at the Company's principal executive offices.
ELIGIBILITY
The Option Plan provides that options may be granted to employees
(including officers and directors who are also employees), consultants of the
Company or any parent or majority-owned subsidiary and Outside Directors.
Incentive stock options may be granted only to employees. The Administrator
selects the optionees and determines the number of shares to be subject to each
option and the time or times at which shares become exercisable under the
option. In making such determination, the duties and responsibilities of the
employee or consultant, the value of his or her services, his or her present and
potential contribution to the success of the Company, the anticipated number of
years of future service and other relevant factors are taken into account.
Generally, such options become exercisable or "vest" at the rate of one
forty-eighth ( 1/48) of the
23
<PAGE> 26
shares subject to the option per month. Each option may be exercised only to the
extent it is vested. As of November 15, 1996, there were options to purchase
4,964,290 shares outstanding under the Option Plan, and there were approximately
eight hundred eighteen (818) individuals eligible to participate in the Option
Plan.
AUTOMATIC GRANTS TO OUTSIDE DIRECTORS
The Option Plan provides that nonstatutory options are automatically
granted to Outside Directors on a yearly basis on December 1, in order to
provide an incentive to Outside Directors of the Company (the "Automatic Grant
Program"). The initial grant of six thousand (6,000) shares is pro rated for the
portion of the first fiscal year of service as an Outside Director. The exercise
price of options granted under the Automatic Grant Program is the fair market
value of the Company's Common Stock on the date of the automatic grant.
Automatic Grant Program options become exercisable cumulatively with respect to
one-twelfth ( 1/12) of the underlying shares on the first day of each month
following the date of grant of such option. Automatic Grant Program options have
a term of five (5) years from the date of grant.
TERMS OF OPTIONS
The terms of options granted under the Option Plan are determined by the
Administrator. Each option granted under the Option Plan is evidenced by a
written stock option agreement between the Company and the optionee and is
subject to the following additional terms and conditions:
(a) Exercise of Option. Options under the Option Plan generally
become exercisable as to one forty-eighth ( 1/48) of the underlying shares
after each month from the date of grant.
An option granted under the Option Plan is exercised by giving written
notice of exercise to the Company, specifying the number of full shares of
Common Stock to be purchased and tendering payment of the purchase price to
the Company. Payment for shares issued upon exercise of an option may
consist of cash, check, promissory note, other shares of the Company's
Common Stock or any combination of such methods of payment, or such other
consideration and method of payment as is permitted under the California
General Corporation Law.
(b) Exercise Price. The per share exercise price of options granted
under the Option Plan (other than those to Outside Directors) is determined
by the Administrator and, in the case of incentive stock options, may not
be less than one hundred percent (100%) of the fair market value on the
date of grant. However, in the case of incentive stock options granted to
an optionee who owns more than ten percent (10%) of the voting power or
value of all classes of stock of the Company, the per share exercise price
must not be less than one hundred ten percent (110%) of the fair market
value on the date of grant. The exercise price of non-statutory stock
options may be less than one hundred percent (100%), but shall be no less
than eighty-five percent (85%), of the fair market value of the Company's
Common Stock on the date of grant, if the Administrator determines that a
discount from the fair market value is appropriate in lieu of the payment
of a reasonable amount of salary or cash bonus to the optionee. For so long
as the Company's Common Stock is listed on any established stock exchange
or a national market system, including without limitation the New York
Stock Exchange (the "NYSE"), the fair market value of a share of Common
Stock shall be the closing sales price for such stock (or the closing bid,
if no sales were reported) as quoted on such system or exchange (or the
exchange with the greatest volume of trading in Common Stock) on the date
of grant of the Option, as reported in The Wall Street journal or such
other source as the Administrator deems reliable.
(c) Termination of Status as an Employee, Consultant or Outside
Director. If the optionee's employment or consulting relationship with the
Company or status as an Outside Director is terminated for any reason
(other than death or disability), options may be exercised within thirty
(30) days (or such other period of time not exceeding three (3) months as
is determined by the Administrator) after such termination as to all or
part of the shares as to which the optionee was entitled to exercise at the
date of such termination.
24
<PAGE> 27
(d) Death or Disability of Optionee. Options may be exercised within
no more than six (6) months following termination because of a permanent
and total disability or by the employee's estate after his or her death.
(e) Term and Termination of Options. Options granted under the Option
Plan may have a term of ten (10) years and generally have a term of seven
(7) years from the date of grant. No option may be exercised by any person
after the expiration of its term. In the case of an incentive stock option
granted to an optionee who, immediately before the grant of such option,
owns more than ten percent (10%) of the voting power or value of all
classes of stock of the Company, the term of such incentive stock option
may not exceed five (5) years.
(f) Non-Transferability of Options. An option is not transferable by
the optionee, other than by will or the laws of descent or distribution,
and is exercisable during the optionee's lifetime only by the optionee. In
the event of the optionee's death, options may be exercised by a person who
acquires the right to exercise the option by bequest or inheritance.
(g) Other Provisions. The option agreement may contain such other
terms, provisions and conditions not inconsistent with the Option Plan as
may be determined by the Administrator.
CHANGES IN CAPITALIZATION
In the event a change, such as a stock split or stock dividend payable in
Common Stock, is made in the Company's capitalization, which results in an
exchange of Common Stock for a greater or lesser number of shares without
receipt of consideration by the Company, appropriate adjustment shall be made in
the option price and number of shares subject to outstanding options.
Appropriate adjustment will also be made in the number of shares of Common Stock
which have been authorized for issuance under the Option Plan but as to which no
options have yet been granted or which have been returned to the Option Plan
upon cancellation of an option. Such adjustments shall be made by the Board of
Directors, whose determination shall be final and conclusive, subject to any
required action by the shareholders of the Company.
In the event of the proposed dissolution or liquidation of the Company,
options outstanding under the Option Plan will terminate immediately prior to
the consummation of such proposed action, unless otherwise provided by the
Board. The Board may in the exercise of its discretion, declare that any
outstanding option shall terminate as of a date fixed by the Board and give each
optionee the right to exercise his or her option as to all or any part of the
optioned stock, including shares as to which the option would not otherwise be
exercisable. In the event of a proposed sale of all or substantially all of the
assets of the Company, or the merger of the Company with or into another
corporation, outstanding options shall be assumed or an equivalent option shall
be substituted by such successor corporation (or a parent or subsidiary of such
successor corporation), unless such successor corporation does not agree to
assume the options or to substitute an equivalent option, in which case the
optionee shall have the right to exercise all outstanding options as to all of
the optioned stock, including shares as to which the option would not otherwise
be exercisable. If the Board makes an outstanding option fully exercisable in
lieu of assumption or substitution in the event of a merger or sale of assets,
the Board shall notify the optionee that his or her outstanding options shall be
fully exercisable for a period of thirty (30) days from the date of such notice,
and the option will terminate upon the expiration of such period.
AMENDMENT AND TERMINATION OF THE OPTION PLAN
Except with respect to the Automatic Grant Program, the Board may amend or
terminate the Option Plan from time to time in such respects as the Board may
deem advisable; provided that, to the extent necessary and desirable to comply
with Section 422 of the Code or any other successor or applicable law or
regulation, the Company shall obtain shareholder approval of any Option Plan
amendment in such a manner and to such a degree as is required by the applicable
law, rule or regulation. Any amendment or termination of the Option Plan shall
not affect options already granted and such options shall remain in full force
and effect as if the Option Plan had not been amended or terminated, unless
mutually agreed otherwise between the
25
<PAGE> 28
optionee and the Administrator, which agreement must be in writing and signed by
the optionee and the Company.
The Option Plan will continue to require shareholder approval of amendments
in accordance with federal tax laws and regulations applicable to incentive
stock option plans, to the extent the Company desires that the Option Plan
continue to qualify for the grant of incentive stock options thereunder. The
Code and the rules and regulations thereunder governing incentive stock option
plans currently require shareholder approval for any increase in the number of
shares issuable under a plan and for certain changes in the eligibility
standards under a plan.
In any event, the Option Plan shall terminate in 2002. Any options
outstanding under the Option Plan at the time of termination shall remain
outstanding until they expire by their terms.
TAX INFORMATION
Options granted under the Option Plan may be either "incentive stock
options," as defined in Section 422 of the Code or nonstatutory options.
Incentive Stock Options. If an option granted under the Option Plan is an
incentive stock option, the optionee will recognize no income upon grant of the
incentive stock option and incur no tax liability due to the exercise unless the
optionee is subject to the alternative minimum tax. The Company will not be
allowed a deduction for federal income tax purposes as a result of the exercise
of an incentive stock option regardless of the applicability of the alternative
minimum tax. Upon the sale or exchange of the shares at least two (2) years
after grant of the option and one (1) year after receipt of the shares by the
optionee, any gain will be treated as long-term capital gain. If these holding
periods are not satisfied, the optionee will recognize ordinary income equal to
the difference between the exercise price and the lower of the fair market value
of the stock at the date of the option exercise or the sale price of the stock.
A different rule for measuring ordinary income upon such a premature disposition
may apply if the optionee is also an officer, director or ten percent (10%)
shareholder of the Company. The Company will be entitled to a deduction in the
same amount as the ordinary income recognized by the optionee. Any gain
recognized by the optionee on such a premature disposition of the shares in
excess of the amount treated as ordinary income will be characterized as capital
gain or loss.
Nonstatutory Options. All other options which do not qualify as incentive
stock options are referred to as nonstatutory options. An optionee will not
recognize any taxable income at the time he or she is granted a nonstatutory
option. However upon its exercise, the optionee will recognize ordinary income
for tax purposes measured by the excess of the then fair market value of the
shares over the option price. In certain circumstances, where the shares are
subject to a substantial risk of forfeiture when acquired or where the optionee
is an officer, director or ten percent (10%) shareholder of the Company, the
date of taxation may be deferred unless the optionee files an election with the
Internal Revenue Service under Section 83(b) of the Code. The income recognized
by an optionee who is also an employee of the Company will be subject to tax
withholding by the Company. Upon resale of such shares by the optionee, any
difference between the sales price and the exercise price, to the extent not
recognized as ordinary income as provided above, will be treated as capital gain
or loss. The Company will be entitled to a tax deduction in the amount and at
the time that the Optionee recognizes ordinary income with respect to shares
acquired upon exercise of a nonstatutory option.
The foregoing is only a summary of the effect of federal income taxation
upon the optionee and the Company, with respect to the grant and exercise of
options under the Option Plan, does not purport to be complete and does not
discuss the income tax laws of any municipality, state or foreign country in
which an optionee may reside.
STOCK PRICE
The closing price of a share of Common Stock on the NYSE on November 15,
1996 was $58.375.
26
<PAGE> 29
PLAN BENEFITS
The Company cannot now determine the exact number of options to be granted
in the future to the executive officers named under "EXECUTIVE OFFICER
COMPENSATION -- Summary Compensation Table," all current executive officers as a
group or all other employees (including current officers who are not executive
officers) as a group. See "EXECUTIVE OFFICER COMPENSATION -- Stock Option Grants
and Exercises" for the number of stock options granted to the executive officers
named in the Summary Compensation Table in fiscal 1996. In fiscal 1996, options
to purchase 166,000 shares of Common Stock of the Company were granted to all
current executive officers as a group and options to purchase 576,250 shares of
Common Stock of the Company were granted to all other employees as a group.
REQUIRED VOTE
The affirmative vote of a majority of the votes cast will be required under
California law to approve the amendment to the Company's Option Plan. (For a
description of the method of determining the number of Votes Cast, please see
the "Required Vote" paragraph relating to the proposed adoption of the
Indemnification Agreement (PROPOSAL THREE) above).
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE AMENDMENT OF THE 1992
STOCK OPTION PLAN.
PROPOSAL FIVE
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected KPMG Peat Marwick LLP ("KPMG"),
independent public accountants, to audit the financial statements of the Company
for fiscal 1997. KPMG has audited the Company's financial statements since
fiscal 1985. Representatives of KPMG are expected to be present at the meeting
with the opportunity to make a statement if they desire to do so, and are
expected to be available to respond to appropriate questions. Ratification,
under California law, of the appointment of KPMG requires the affirmative vote
of a majority of the Votes Cast. (For a description of the method of determining
the number of Votes Cast, please see the "Required Vote" paragraph relating to
the proposed adoption of the Indemnification Agreement (PROPOSAL THREE) above.)
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR"
RATIFICATION OF THE APPOINTMENT OF KPMG AS INDEPENDENT ACCOUNTANTS.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires the Company's executive
officers, directors, and persons who own more than ten percent (10%) of a
registered class of the Company's equity securities to file reports of ownership
and changes in ownership with the Securities and Exchange Commission.
Based solely on its review of the copies of such forms received by the
Company, or on written representations from certain reporting persons that no
other reports were required for such persons, the Company believes that, during
fiscal 1996, all filing requirements applicable to its executive officers and
directors were complied with.
27
<PAGE> 30
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has entered into indemnification agreements with its executive
officers, directors and certain significant employees containing provisions
which are in some respects broader than the specific indemnification provisions
contained in the California General Corporation Law. These agreements provide,
among other things, for indemnification of the executive officers, directors and
certain significant employees in proceedings brought by third parties and in
shareholder derivative suits. Each agreement also provides for advancement of
expenses to the indemnified party. The agreements have been approved by the
majority vote of the disinterested shareholders of the Company.
The Company engaged Mr. Charles A. Dickinson, a member of the Board of
Directors, as an independent consultant for a term that began in February 1996.
Mr. Dickinson receives $10,000 per month and is reimbursed for reasonable
expenses when he performs management services. In fiscal year 1996, Mr.
Dickinson received a total of $70,000 as a consultant for the Company.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of November 15, 1996 information relating
to the beneficial ownership of the Company's Common Stock by each person known
by the Company to be the beneficial owner of more than five percent (5%) of the
outstanding shares of Common Stock, by each director, by each of the executive
officers named in the Summary Compensation Table, and by all directors and
executive officers as a group.
<TABLE>
<CAPTION>
APPROXIMATE
AMOUNT PERCENTAGE
NAME OWNED(1) OWNED
- --------------------------------------------------------------------- --------- -----------
<S> <C> <C>
FMR Corporation...................................................... 7,512,998(2) 14.2%
82 Devonshire Street
Boston, MA 02109-3614
The Equitable Companies Incorporated................................. 4,197,850(2) 7.9%
787 Seventh Avenue
New York, NY 10019
Capital Research & Management........................................ 4,025,200(3) 7.6%
333 So. Hope Street
Los Angeles, CA 90071
Montag & Caldwell.................................................... 3,065,774(2) 5.8%
3343 Peachtree Road N.E.
Atlanta, GA 30326
Winston H. Chen, Ph.D................................................ 859,500(4) 1.6%
Susan Wang........................................................... 262,233(5) *
Koichi Nishimura, Ph.D............................................... 230,531(6) *
Walter W. Wilson..................................................... 136,483(7) *
Charles A. Dickinson................................................. 83,552(8) *
Ken Tsai............................................................. 81,974(9) *
W. Ferrell Sanders................................................... 61,530(10) *
Kenneth E. Haughton, Ph.D............................................ 53,016(11) *
Saeed Zohouri, Ph.D.................................................. 50,600(12) *
Richard A. D'Amore................................................... 31,818(13) *
Paul R. Low, Ph.D.................................................... 15,500(14) *
Osamu Yamada......................................................... 7,625(15) *
Heinz Fridrich....................................................... 208(16) *
All directors and executive officers as a group (16 persons)......... 2,017,350(17) 3.8%
</TABLE>
- ---------------
* Less than one percent (1%).
28
<PAGE> 31
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to the securities. In computing the number of
shares beneficially owned by a person and the percentage ownership of that
person, shares of Solectron Common Stock subject to options held by that
person that will be exercisable on or before January 15, 1997, are deemed
outstanding. Such shares, however, are not deemed outstanding for the
purpose of computing the percentage ownership of any other person.
(2) Calculated as of October 31, 1996.
(3) Calculated as of September 30, 1996.
(4) Includes 9,500 shares issuable upon the exercise of stock options that are
exercisable on or before January 15, 1997.
(5) Includes 75,434 shares issuable upon the exercise of stock options that are
exercisable on or before January 15, 1997.
(6) Includes 178,497 shares issuable upon the exercise of stock options that
are exercisable on or before January 15, 1997.
(7) Includes 75,312 shares issuable upon the exercise of stock options that are
exercisable on or before January 15, 1997.
(8) Includes 73,209 shares issuable upon the exercise of stock options that are
exercisable on or before January 15, 1997.
(9) Includes 45,041 shares issuable upon the exercise of stock options that are
exercisable on or before January 15, 1997.
(10) Includes 28,500 shares issuable upon the exercise of stock options that are
exercisable on or before January 15, 1997.
(11) Includes 46,921 shares issuable upon the exercise of stock options that are
exercisable on or before January 15, 1997.
(12) Includes 28,500 shares issuable upon the exercise of stock options that are
exercisable on or before January 15, 1997.
(13) Includes 28,500 shares issuable upon the exercise of stock options that are
exercisable on or before January 15, 1997.
(14) Represents 15,500 shares issuable upon the exercise of stock options that
are exercisable on or before January 15, 1997.
(15) Represents 7,625 shares issuable upon the exercise of stock options that
are exercisable on or before January 15, 1997.
(16) Represents 208 shares issuable upon the exercise of stock options that are
exercisable on or before January 15, 1997.
(17) Includes 725,231 shares issuable upon the exercise of stock options on or
before January 15, 1997.
29
<PAGE> 32
EXECUTIVE OFFICER COMPENSATION
SUMMARY COMPENSATION TABLE
The following table shows, as to the Chief Executive Officer and each of
the four other most highly compensated executive officers, information
concerning compensation for services to the Company in all capacities.
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION(1) ALL OTHER
-------------------- OPTIONS/SARS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) (#)(2) ($)(3)
- ------------------------------------------- ---- --------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Koichi Nishimura, Ph.D..................... 1996 $ 464,483 $360,000 40,000 $5,410
President and Chief Executive 1995 375,000 412,500 20,000 1,744
Officer, Chairman of the Board of Directors 1994 247,706 292,851 50,000 1,010
Walter W. Wilson........................... 1996 256,913 265,391 15,000 3,053
Senior Vice President and 1995 177,323 308,668 10,000 880
President, Solectron North America 1994 165,712 160,022 60,000 788
Ken Tsai................................... 1996 155,767 303,224 15,000 755
Senior Vice President and 1995 140,203 263,528 15,000 985
President, Solectron Asia 1994 116,171 82,551 70,000 600
Saeed Zohouri, Ph.D........................ 1996 177,694 269,917 30,000 2,477
Senior Vice President, Chief 1995 115,397 199,533 15,000 648
Technology Officer and President, 1994 102,908 116,735 10,000 630
Solectron California Corporation
Susan Wang................................. 1996 207,691 227,071 15,000 2,795
Senior Vice President, Chief 1995 169,243 231,757 10,000 665
Financial Officer and Secretary 1994 147,711 147,379 60,000 593
</TABLE>
- ---------------
(1) Perquisites are not included since the aggregate amount is less than the
lesser of $50,000 or 10% of salary and bonus, in accordance with regulations
promulgated by the Securities and Exchange Commission (the "SEC");
therefore, the Other Annual Compensation has not been included in this
table.
(2) The Company has not granted any stock appreciation rights or restricted
stock awards and does not have any Long-Term Incentive Plans as that term is
defined in regulations promulgated by the SEC.
(3) Amounts represent the Company's contributions to a 401(k) plan and the
taxable benefit of premium payments under split dollar life insurance
policies.
30
<PAGE> 33
STOCK OPTION GRANTS AND EXERCISES
The following tables set forth, for the executive officers named in the
Summary Compensation Table, the stock options granted under the Company's stock
option plans and the options exercised by such executive officers during fiscal
1996.
STOCK OPTION GRANTS IN FISCAL 1996
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- ------------------------------------------------------------------------------------------------
PERCENT POTENTIAL REALIZABLE
OF VALUE AT
TOTAL ASSUMED ANNUAL
OPTIONS RATES OF
GRANTED STOCK PRICE
TO APPRECIATION FOR
OPTIONS EMPLOYEES EXERCISE OR OPTION TERM(2)
GRANTED IN FISCAL BASE PRICE EXPIRATION -----------------------
NAME (#)(1) YEAR ($/SHARE) DATE 5%($) 10%($)
- ----------------------------------------- ------- --------- ------------ ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Koichi Nishimura, Ph.D................... 40,000 2.50% $38.00 9/26/02 $618,792 $1,442,050
Walter W. Wilson......................... 15,000 .94% 38.00 9/26/02 232,047 540,769
Ken Tsai................................. 15,000 .94% 38.00 9/26/02 232,047 540,769
Saeed Zohouri, Ph.D...................... 15,000 .94% 38.00 9/26/02 232,047 540,769
15,000 .94% 44.63 3/20/03 272,503 635,048
Susan Wang............................... 15,000 .94% 38.00 9/26/02 232,047 540,769
</TABLE>
- ---------------
(1) These options become exercisable as to one forty-eighth of the shares after
each month from the date of grant.
(2) Potential realizable value is based on an assumption that the stock price of
the Common Stock appreciates at the annual rate shown (compounded annually)
from the date of grant until the end of the seven (7) year option term.
Potential realizable value is shown net of exercise price. These amounts are
calculated based on the regulations promulgated by the SEC and do not
reflect the Company's estimate of future stock price growth.
AGGREGATED OPTION EXERCISES IN FISCAL 1996 AND YEAR-END VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED,
TOTAL NUMBER OF IN-THE-MONEY
SHARES UNEXERCISED OPTIONS HELD AT OPTIONS HELD AT
ACQUIRED FISCAL YEAR END(#) FISCAL YEAR END($)(2)
ON VALUE ----------------------------- -----------------------------
NAME EXERCISE(#) REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------- ----------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Koichi Nishimura, Ph.D.... 0 $ 0 178,125 61,875 $3,466,776 $ 345,724
Walter W Wilson........... 20,000 663,750 64,479 40,521 695,865 248,510
Ken Tsai.................. 9,500 355,656 61,658 48,342 536,118 278,882
Saeed Zohouri, Ph.D....... 5,000 92,188 42,243 32,757 636,085 26,103
Susan Wang................ 40,000 1,482,500 64,475 40,525 695,846 248,529
</TABLE>
- ---------------
(1) Fair market value of underlying securities at exercise minus the exercise
price.
(2) Calculated based upon the August 30, 1996 fair market value share price of
$37.375 less the share price to be paid upon exercise. There is no guarantee
that if and when these options are exercised they will have this value.
31
<PAGE> 34
COMPENSATION COMMITTEE REPORT
INTRODUCTION
The Compensation Committee of the Board of Directors (the "Committee") is
made up of two members who are also members of the Company's full Board of
Directors. The Committee meets at the beginning of each fiscal year to establish
target base compensation levels for the Company's executive officers for the
following fiscal year and to finalize bonuses for the previous fiscal year.
COMPENSATION PHILOSOPHY
The Company's executive compensation policies are designed to attract and
retain qualified personnel by providing competitive compensation and to
reinforce strategic performance objectives through the use of incentive
compensation programs. In order to provide incentive to executive officers, a
large percentage of their annual compensation is paid as a bonus. The amount of
the bonus for each person is determined on the basis of several indicators of
corporate performance as outlined below.
COMPENSATION PLANS
The following are the key components of the Company's executive officer
compensation:
Base Compensation. The Committee establishes base salaries for executive
officers based on its review of base salaries of executive officers in companies
of comparable size and in similar industries. A majority of the companies used
by the Committee in its review of salaries of other companies are a part of the
H&Q Technology Index used in the "Performance Graph" below.
Bonuses. The Company's executive bonus plan provides for incentive
compensation to the Company's executive officers and other key employees and is
determined cumulatively on a quarterly basis based principally on certain
performance measures. The performance measures include worldwide corporate
performance, site performance and individual performance. Worldwide and site
performance are measured based on targets with respect to profit before taxes,
inventory turns, days sales outstanding and return on assets. The Committee
believes that these factors are indicative of overall corporate performance and
shareholder value. Individual performance is measured based on goals related to
each person's function within the organization. Employees accrue bonuses each
quarter based on performance against year-to-date profit and asset utilization
targets. However, only approximately 33% of such accrued bonuses vest and are
payable quarterly. The remaining accrued bonus balances vest at fiscal year end
and are payable upon final determination of earned bonuses.
Long-Term Incentive Compensation. The Company's Option Plan provides for
long-term incentive compensation for employees of the Company, including
executive officers. A significant portion of the total compensation package for
the Company's executive officers is in the form of stock option awards. These
awards give employees an equity interest in the Company, thereby aligning the
interests of executive officers and shareholders and providing incentive to
maximize shareholder value.
COMPANY PERFORMANCE AND CEO COMPENSATION
The compensation for the Company's CEO for fiscal 1996 was comprised of a
base salary component and a bonus component. The Committee met at the beginning
of fiscal 1996 and reviewed CEO compensation for companies of comparable size
and similar industries in order to establish a base salary for the Company's
CEO. The Committee established a close tie between Company performance and CEO
compensation by designating a large portion of total annual compensation as
bonus. The Committee established corporate performance goals including profit
before taxes, inventory turns, days sales outstanding and return on assets. At
the end of fiscal 1996, the Committee evaluated the Company's performance in
light of the goals
32
<PAGE> 35
established in the previous year. The Committee concluded that it was
appropriate to award the Company's CEO a total cash bonus amount which equates
to eighty percent (80%) of the target bonus.
MEMBERS OF THE COMPENSATION COMMITTEE
Dr. Kenneth E. Haughton
W. Ferrell Sanders
PERFORMANCE GRAPH
The following graph shows a comparison of cumulative total shareholder
return, calculated on a dividend reinvested basis, from August 31, 1991 through
August 30, 1996 for Solectron, the S&P 500 Index and the H&Q Technology Index.
The graph assumes that $100 was invested in each of these three on August 31,
1991.
CUMULATIVE TOTAL RETURN
<TABLE>
<CAPTION>
MEASUREMENT PERIOD SOLECTRON H&Q TECHNOLOGY
(FISCAL YEAR COVERED) CORPORATION S&P 500 INDEX INDEX
<S> <C> <C> <C>
8/30/91 100 100 100
8/28/92 202.06 108.77 103.75
8/27/93 329.90 123.50 124.24
8/26/94 507.22 130.62 146.48
8/25/95 589.69 158.66 236.58
8/30/96 616.49 189.07 241.56
</TABLE>
OTHER MATTERS
The Company knows of no other matters to be submitted at the meeting. If
any other matters properly come before the meeting, it is the intention of the
persons named in the enclosed form of Proxy to vote the shares they represent as
the Company may recommend.
THE BOARD OF DIRECTORS
Dated: December 2, 1996
33
<PAGE> 36
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
OF SOLECTRON CORPORATION,
A DELAWARE CORPORATION,
AND
SOLECTRON CORPORATION,
A CALIFORNIA CORPORATION
THIS AGREEMENT AND PLAN OF MERGER dated as of , 199 (the
"Agreement") is between Solectron Corporation, a Delaware corporation
("Solectron Delaware") and Solectron Corporation, a California corporation
("Solectron California"). Solectron Delaware and Solectron California are
sometimes referred to herein as the "Constituent Corporations."
RECITALS
A. Solectron Delaware is a corporation duly organized and existing under
the laws of the State of Delaware and has an authorized capital of 201,200,000
shares, 200,000,000 of which are designated "Common Stock," $0.001 par value,
and 1,200,000 of which are designated "Preferred Stock," $0.001 par value. As of
the date hereof, shares of Common Stock were issued and outstanding, all
of which were held by Solectron California, and no shares of Preferred Stock
were issued and outstanding.
B. Solectron California is a corporation duly organized and existing under
the laws of the State of California and has an authorized capital of 81,200,000
shares, 80,000,000 of which are designated "Common Stock," no par value, and
1,200,000 of which are designated "Preferred Stock," no par value. As of
November 15, 1996, 52,966,689 shares of Common Stock and no shares of Preferred
Stock were issued and outstanding.
C. The Board of Directors of Solectron California has determined that, for
the purpose of effecting the reincorporation of Solectron California in the
State of Delaware, it is advisable and in the best interests of Solectron
California and its shareholders that Solectron California merge with and into
Solectron Delaware upon the terms and conditions herein provided.
D. The respective Boards of Directors of Solectron Delaware and Solectron
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, Solectron Delaware and Solectron California hereby agree, subject
to the terms and conditions hereinafter set forth, as follows:
I. MERGER
1.1 MERGER. In accordance with the provisions of this Agreement, the
Delaware General Corporation Law and the California General Corporation Law,
Solectron California shall be merged with and into Solectron Delaware (the
"Merger"), the separate existence of Solectron California shall cease and
Solectron Delaware shall survive the Merger and shall continue to be governed by
the laws of the State of Delaware, and Solectron Delaware shall be, and is
herein sometimes referred as, the "Surviving Corporation," and the name of the
Surviving Corporation shall be Solectron Corporation.
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;
1
<PAGE> 37
(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; and
(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.
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. Upon the Effective Date of the Merger, the
separate existence of Solectron California shall cease and Solectron 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 be subject to all actions previously taken by its
and Solectron California's Board of Directors, (iii) shall succeed, without
other transfer, to all of the assets, rights, powers and property of Solectron
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 Solectron 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 Solectron
California in the same manner as if Solectron Delaware had itself incurred them,
all as more fully provided under the applicable provisions of the Delaware
General Corporation Law and the California Corporations Code.
II. CHARTER DOCUMENTS, DIRECTORS AND OFFICERS
2.1 CERTIFICATE OF INCORPORATION. The Certificate of Incorporation of
Solectron 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 Solectron 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.
2.3 DIRECTORS AND OFFICERS. The directors and officers of Solectron
California immediately prior to the Effective Date of the Merger shall be 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 SOLECTRON CALIFORNIA COMMON STOCK. Upon the Effective Date of the
Merger, each share of Solectron 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,
be converted into and exchanged for one (1) fully paid and nonassessable share
of Common Stock, $0.001 par value, of the Surviving Corporation.
3.2 SOLECTRON CALIFORNIA OPTIONS, STOCK PURCHASE RIGHTS AND CONVERTIBLE
SECURITIES.
(a) Upon the Effective Date of the Merger, the Surviving Corporation shall
assume the obligations of Solectron California under the option plans and all
other employee benefit plans of Solectron California. Each outstanding and
unexercised option of Solectron California Common Stock (an "Option") shall
become an option for the Surviving Corporation's Common Stock on the basis of
one (1) share of the Surviving Corporation's Common Stock for each share of
Solectron California Common Stock, on the same terms and conditions and at an
exercise price per share equal to the exercise price applicable to any such
Solectron California Option at the Effective Date of the Merger. This Section
3.2(a) shall not apply to outstanding shares of Solectron California Common
Stock. Such Common Stock is subject to Section 3.1 hereof.
2
<PAGE> 38
(b) A number of shares of the Surviving Corporation's Common Stock shall be
reserved for issuance upon the exercise of options equal to the number of shares
of Solectron California Common Stock so reserved immediately prior to the
Effective Date of the Merger.
3.3 SOLECTRON DELAWARE COMMON STOCK. Upon the Effective Date of the
Merger, each share of Common Stock, $0.001 par value, of Solectron Delaware
issued and outstanding immediately prior thereto shall, by virtue of the Merger
and without any action by Solectron 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 Solectron California
Common Stock may, at such stockholder's option, surrender the same for
cancellation to First National Bank of Boston, Dorchester, Massachusetts, 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
Solectron 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 Solectron California Common Stock were converted in the Merger.
The registered owner on the books and records of the Surviving Corporation
or the Exchange Agent of any such outstanding certificate shall, until such
certificate shall have been surrendered for transfer or conversion or otherwise
accounted for to the Surviving Corporation or the Exchange Agent, have and be
entitled to exercise any voting and other rights with respect to and to receive
dividends and other distributions upon the shares of Common Stock of the
Surviving Corporation represented by such outstanding certificate as provided
above.
Each certificate representing Common Stock of the Surviving Corporation so
issued in the Merger shall bear the same legends, if any, with respect to the
restrictions on transferability as the certificates of Solectron California so
converted and given in exchange therefore, unless otherwise determined by the
Board of Directors of the Surviving Corporation in compliance with applicable
laws, or other such additional legends as agreed upon by the holder and the
Surviving Corporation.
If any certificate for shares of Solectron 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
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 Solectron Delaware
that such tax has been paid or is not payable.
IV. GENERAL
4.1 COVENANTS OF SOLECTRON DELAWARE. Solectron 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 Solectron Delaware of all of the franchise
tax liabilities of Solectron 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
Solectron Delaware or by its successors or assigns, there shall be executed and
delivered on behalf of Solectron California such deeds and other instruments,
and there shall be taken or caused to be taken by it such further and other
actions as shall
3
<PAGE> 39
be appropriate or necessary in order to vest or perfect in or conform of record
or otherwise by Solectron Delaware the title to and possession of all the
property, interests, assets, rights, privileges, immunities, powers, franchises
and authority of Solectron California and otherwise to carry out the purposes of
this Agreement, and the officers and directors of Solectron Delaware are fully
authorized in the name and on behalf of Solectron 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 Solectron California or of
Solectron Delaware, or of both, notwithstanding the approval of this Agreement
by the shareholders of Solectron California or by the sole stockholder of
Solectron 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.
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 777 Gibraltar Drive,
Milpitas, California 95035 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
<PAGE> 40
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 Solectron Corporation, a Delaware
corporation, and Solectron Corporation, a California corporation, is hereby
executed on behalf of each of such two corporations and attested by their
respective officers thereunto duly authorized.
SOLECTRON CORPORATION,
a Delaware corporation
By:
-------------------------------------
Koichi Nishimura
President, Chief Executive Officer
and Chairman of the Board
ATTEST:
- -------------------------------------------------------
Susan Wang
Senior Vice President, Chief Financial
Officer and Secretary
SOLECTRON CORPORATION,
a California corporation
By:
-------------------------------------
Koichi Nishimura
President, Chief Executive Officer
and Chairman of the Board
ATTEST:
- -------------------------------------------------------
Susan Wang
Senior Vice President, Chief Financial
Officer and Secretary
5
<PAGE> 41
SOLECTRON CORPORATION
A CALIFORNIA CORPORATION
OFFICERS' CERTIFICATE
Koichi Nishimura and Susan Wang certify that:
1. They are the President, Chief Executive Officer and Chairman of the
Board and the Senior Vice President, Chief Financial Officer and Secretary,
respectively, of Solectron Corporation, a corporation organized under the laws
of the State of California.
2. The corporation has authorized two classes of stock, designated "Common
Stock" and "Preferred Stock," respectively.
3. There were 52,966,689 shares of Common Stock outstanding as of the
record date (the "Record Date") and entitled to vote at the shareholders'
meeting at which the Agreement and Plan of Merger attached hereto was approved.
There are no shares of Preferred Stock outstanding.
4. The principal terms of the Agreement and Plan of Merger were approved by
the Board of Directors and by the vote of a number of shares of each class and
series of stock which equaled or exceeded the vote required.
5. The percentage vote required was more than 50% of the votes entitled to
be cast by holders of Common Stock outstanding as of the Record Date, voting as
a single class.
6. Koichi Nishimura and Susan Wang further declare under penalty of perjury
under the laws of the State of California that they have read the foregoing
certificate and know the contents thereof and that the same is true of their own
knowledge.
Executed in Milpitas, California on , 199 .
--------------------------------------
Koichi Nishimura, President,
Chief Executive Officer and Chairman
of the Board
--------------------------------------
Susan Wang, Senior Vice President,
Chief Financial Officer and Secretary
<PAGE> 42
SOLECTRON CORPORATION
A DELAWARE CORPORATION
OFFICERS' CERTIFICATE
Koichi Nishimura and Susan Wang certify that:
1. They are the President, Chief Executive Officer and Chairman of the
Board and the Senior Vice President, Chief Financial Officer and Secretary,
respectively, of Solectron Corporation, a corporation organized under the laws
of the State of Delaware.
2. The corporation has authorized two classes of stock, designated "Common
Stock" and "Preferred Stock," respectively.
3. There are shares of Common Stock outstanding and entitled to
vote on the Agreement and Plan of Merger attached hereto. There are no shares of
Preferred Stock outstanding.
4. The principal terms of the Agreement and Plan of Merger were approved by
the Board of Directors and by the vote of a number of shares of each class and
series of stock which equaled or exceeded the vote required.
5. The percentage vote required was more than 50% of the votes entitled to
be cast by holders of outstanding shares of Common Stock.
6. Koichi Nishimura and Susan Wang further declare under penalty of perjury
under the laws of the State of Delaware that they have read the foregoing
certificate and know the contents thereof and that the same is true of their own
knowledge.
Executed in Milpitas, California on , 199 .
--------------------------------------
Koichi Nishimura, President,
Chief Executive Officer and Chairman
of the Board
--------------------------------------
Susan Wang, Senior Vice President,
Chief Financial Officer and Secretary
<PAGE> 43
EXHIBIT B
CERTIFICATE OF INCORPORATION
OF
SOLECTRON CORPORATION
Solectron Corporation, a corporation organized and existing under the laws
of the State of Delaware, does hereby certify:
FIRST: The name of the Corporation is Solectron Corporation (the
"Corporation").
SECOND: The address of the Corporation's registered office in the
State of Delaware is 1209 Orange Street, Wilmington, County
of New Castle, Delaware 19801. The name of its registered
agent at such address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful
act or activity for which corporations may be organized
under the General Corporation Law of Delaware.
FOURTH: This corporation is authorized to issue two classes of
shares: Common Stock and Preferred Stock. The total number
of shares which this corporation is authorized to issue is
two hundred one million two hundred thousand (201,200,000)
shares. The number of shares of Common Stock authorized is
two hundred million (200,000,000) shares, $.001 par value.
The number of shares of Preferred Stock authorized is one
million two hundred thousand (1,200,000) shares, $.001 par
value.
The shares of Preferred Stock authorized by this Certificate
of Incorporation may be issued from time to time in one or
more series. For any wholly unissued series of Preferred
Stock, the Board of Directors is hereby authorized to fix
and alter the dividend rights, dividend rates, conversion
rights, voting rights, rights and terms of redemption
(including sinking fund provisions), redemption prices,
liquidation preferences, the number of shares constituting
any such series and the designation thereof, or any of them.
For any series of Preferred Stock having issued and
outstanding shares, the Board of Directors is hereby
authorized to increase or decrease the number of shares of
such series when the number of shares of such series was
originally fixed by the Board of Directors, but such
increase or decrease shall be subject to the limitations and
restrictions stated in the resolution of the Board of
Directors originally fixing the number of shares of such
series.
If the number of shares of any series is so decreased, then
the shares constituting such decrease shall resume the
status that they had prior to the adoption of the resolution
originally fixing the number of shares of such series.
FIFTH: The name and mailing address of the incorporator are as
follows:
<TABLE>
<CAPTION>
NAME MAILING ADDRESS
-------------- --------------------------------
<S> <C>
Susan Wang Solectron Corporation
847 Gibraltar Drive, Building 5
Milpitas, CA 95035
</TABLE>
SIXTH: The Corporation is to have perpetual existence.
SEVENTH: Elections of directors need not be by written ballot unless
a stockholder demands election by written ballot at the
meeting and before voting begins.
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<PAGE> 44
EIGHTH: A. At each annual meeting of stockholders, directors of the
Corporation shall be elected to hold office until the
expiration of the term for which they are elected, and until
their successors have been duly elected and qualified;
except that if any such election shall not be so held, such
election shall take place at a stockholders' meeting called
and held in accordance with the Delaware General Corporation
Law. Commencing with the first annual meeting of
stockholders held after calendar 1997 (the "First Annual
Meeting"), the directors of the Corporation shall be divided
into three classes as nearly equal in size as is
practicable, hereby designated Class I, Class II and Class
III. For the purposes hereof, the initial Class I, Class II
and Class III directors shall be those directors so
designated and elected at the First Annual Meeting. The term
of office of the initial Class I directors shall expire at
the next succeeding annual meeting of stockholders, the term
of office of the initial Class II directors shall expire at
the second succeeding annual meeting of stockholders and the
term of office of the initial Class III directors shall
expire at the third succeeding annual meeting of the
stockholders. At each annual meeting after the First Annual
Meeting, directors to replace those of a Class whose terms
expire at such annual meeting shall be elected to hold
office until the third succeeding annual meeting and until
their respective successors shall have been duly elected and
qualified. If the number of directors is hereafter changed,
any newly created directorships or decrease in directorships
shall be so apportioned among the classes as to make all
classes as nearly equal in number as is practicable.
B. Vacancies occurring on the Board of Directors may be
filled by vote of a majority of the remaining members of the
Board of Directors, although less than a quorum, at a
meeting of the Board of Directors. A person so elected by
the Board of Directors to fill a vacancy shall hold office
until the next succeeding annual meeting of stockholders of
the Corporation at which the class to which the directorship
belongs is to be elected and until his or her successor
shall have been duly elected and qualified.
NINTH: The number of directors which constitute the whole Board of
Directors of the Corporation shall be designated in the
Bylaws of the Corporation.
TENTH: In furtherance and not in limitation of the powers conferred
by statute, the Board of Directors is expressly authorized
to make, alter, amend or repeal the Bylaws of the
Corporation.
ELEVENTH: A. To the fullest extent permitted by the Delaware General
Corporation Law as the same exists or as it may hereafter be
amended, no director of the Corporation shall be personally
liable to the Corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director.
B. Neither any amendment nor repeal of this Article, nor the
adoption of any provision of this Certificate of
Incorporation inconsistent with this Article, shall
eliminate or reduce the effect of this Article in respect of
any matter occurring, or any cause of action, suit or claim
that, but for this Article, would accrue or arise, prior to
such amendment, repeal or adoption of an inconsistent
provision.
TWELFTH: At the election of directors of the Corporation, each holder
of stock of any class of series shall be entitled to as many
votes as shall equal the number of votes which (except for
such provision as to cumulative voting) he would be entitled
to cast for the election of directors with respect to his
shares of stock multiplied by the number of directors to be
elected by him, and he may cast all of such votes for a
single director or may distribute them among the number to
be voted for, or for any two or more of them as he may see
fit, so long as the name of the candidate for director shall
have been placed in nomination prior to the voting and the
stockholder, or any
2
<PAGE> 45
other holder of the same class or series of stock, has given
notice at the meeting prior to the voting of the intention
to cumulate votes.
THIRTEENTH: Meetings of stockholders may be held within or without the
State of Delaware, as the Bylaws may provide. The books of
the Corporation may be kept (subject to any provision
contained in the statutes) outside of the State of Delaware
at such place or places as may be designated from time to
time by the Board of Directors or in the Bylaws of the
Corporation.
FOURTEENTH: Stockholders of the Corporation may not take action by
written consent in lieu of a meeting but must take any
actions at a duly called annual or special meeting.
FIFTEENTH: Advance notice of stockholder nomination for the election of
directors and of business to be brought by stockholders
before any meeting of the stockholders of the Corporation
shall be given in the manner provided in the Bylaws of the
Corporation.
SIXTEENTH: The Corporation reserves the right to amend, alter, change
or repeal any provision contained in this Certificate of
Incorporation, in the manner now or hereafter prescribed by
statute, and all rights conferred upon stockholders herein
are granted subject to this reservation.
THE UNDERSIGNED, being the incorporator hereinbefore named, for the purpose
of forming a corporation pursuant to the General Corporation Law of the State of
Delaware, does make this certificate, hereby declaring and certifying that this
is her act and deed and the facts herein stated are true, and accordingly, has
hereunto set her hand this day of , 199 .
--------------------------------------
Susan Wang
3
<PAGE> 46
EXHIBIT C
BYLAWS
OF
SOLECTRON CORPORATION
<PAGE> 47
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I -- CORPORATE OFFICES.......................................................... 1
1.1 REGISTERED OFFICE........................................................... 1
1.2 OTHER OFFICES............................................................... 1
ARTICLE II -- MEETINGS OF STOCKHOLDERS.................................................. 1
2.1 PLACE OF MEETINGS........................................................... 1
2.2 ANNUAL MEETING.............................................................. 1
2.3 SPECIAL MEETINGS............................................................ 1
2.4 NOTICE OF STOCKHOLDERS' MEETINGS............................................ 1
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS............. 2
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE................................ 3
2.7 QUORUM...................................................................... 3
2.8 ADJOURNED MEETING; NOTICE................................................... 3
2.9 VOTING...................................................................... 3
2.10 WAIVER OF NOTICE............................................................ 4
2.11 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING..................... 4
2.12 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS................. 4
2.13 PROXIES..................................................................... 4
2.14 LIST OF STOCKHOLDERS ENTITLED TO VOTE....................................... 4
2.15 CONDUCT OF BUSINESS......................................................... 5
ARTICLE III -- DIRECTORS................................................................ 5
3.1 POWERS...................................................................... 5
3.2 NUMBER OF DIRECTORS......................................................... 5
3.3 ELECTION QUALIFICATION AND TERM OF OFFICE OF DIRECTORS...................... 5
3.4 RESIGNATION AND VACANCIES................................................... 6
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE.................................... 6
3.6 FIRST MEETINGS.............................................................. 7
3.7 REGULAR MEETINGS............................................................ 7
3.8 SPECIAL MEETINGS; NOTICE.................................................... 7
3.9 QUORUM...................................................................... 7
3.10 WAIVER OF NOTICE............................................................ 7
3.11 ADJOURNED MEETING; NOTICE................................................... 8
3.12 CONDUCT OF BUSINESS......................................................... 8
3.13 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING........................... 8
3.14 FEES AND COMPENSATION OF DIRECTORS.......................................... 8
3.15 APPROVAL OF LOANS TO OFFICERS............................................... 8
3.16 REMOVAL OF DIRECTORS........................................................ 8
3.17 ADVISORY DIRECTORS.......................................................... 8
ARTICLE IV -- COMMITTEES................................................................ 9
4.1 COMMITTEES OF DIRECTORS..................................................... 9
4.2 COMMITTEE MINUTES........................................................... 9
4.3 MEETINGS AND ACTION OF COMMITTEES........................................... 9
</TABLE>
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TABLE OF CONTENTS -- (CONTINUED)
<TABLE>
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<S> <C> <C>
ARTICLE V -- OFFICERS................................................................... 10
5.1 OFFICERS.................................................................... 10
5.2 ELECTION OF OFFICERS........................................................ 10
5.3 REMOVAL AND RESIGNATION OF OFFICERS......................................... 10
5.4 CHAIRMAN OF THE BOARD....................................................... 10
5.5 PRESIDENT................................................................... 10
5.6 VICE PRESIDENTS............................................................. 10
5.7 SECRETARY................................................................... 11
5.8 CHIEF FINANCIAL OFFICER..................................................... 11
ARTICLE VI -- INDEMNITY................................................................. 11
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS................................... 11
6.2 INDEMNIFICATION OF OTHERS................................................... 12
6.3 INSURANCE................................................................... 12
6.4 PAYMENT OF EXPENSES IN ADVANCE.............................................. 12
6.5 INDEMNITY NOT EXCLUSIVE..................................................... 12
6.6 CONFLICTS................................................................... 12
ARTICLE VII -- RECORDS AND REPORTS...................................................... 13
7.1 MAINTENANCE AND INSPECTION OF RECORDS....................................... 13
7.2 INSPECTION BY DIRECTORS..................................................... 13
7.3 REPRESENTATION OF SHARES OF OTHER CORPORATIONS.............................. 13
7.4 SUBSIDIARY CORPORATIONS..................................................... 13
ARTICLE VIII -- GENERAL MATTERS......................................................... 13
8.1 STOCK CERTIFICATES; PARTLY PAID SHARES...................................... 13
8.2 LOST CERTIFICATES........................................................... 14
8.3 CONSTRUCTION; DEFINITIONS................................................... 14
8.4 DIVIDENDS................................................................... 14
8.5 FISCAL YEAR................................................................. 14
8.6 SEAL........................................................................ 14
8.7 TRANSFER OF STOCK........................................................... 14
8.8 STOCK TRANSFER AGREEMENTS................................................... 15
8.9 REGISTERED.................................................................. 15
8.10 EXECUTION OF CONTRACTS...................................................... 15
ARTICLE IX -- AMENDMENTS................................................................ 15
ARTICLE X -- DISSOLUTION................................................................ 15
ARTICLE XI -- CUSTODIAN................................................................. 16
11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES................................. 16
11.2 DUTIES OF CUSTODIAN......................................................... 16
</TABLE>
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BYLAWS
OF
SOLECTRON CORPORATION
ARTICLE I
CORPORATE OFFICES
1.1 REGISTERED OFFICE
The registered office of the corporation in the State of Delaware shall be
in the City of Wilmington, County of New Castle, State of Delaware. The name of
the registered agent of the corporation at such location is The Corporation
Trust Company.
1.2 OTHER OFFICES
The Board of Directors may at any time establish other offices at any place
or places where the corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS
Meetings of stockholders shall be held at the principal executive office of
the corporation, within or outside the State of Delaware, unless some other
appropriate and convenient location be designated for that purpose from time to
time by the Board of Directors.
2.2 ANNUAL MEETING
Annual meetings of the stockholders shall be held, each year, at the time
and on the day so designated by resolution of the Board of Directors.
At the annual meeting, the stockholders shall elect a Board of Directors,
consider reports of the affairs of the corporation and transact such other
business as may be properly brought before the meeting.
2.3 SPECIAL MEETINGS
A special meeting of the stockholders may be called at any time by the
Board of Directors, the Chairman of the Board, the President, or the Secretary.
Except as next provided, notice shall be given as for the annual meeting.
Upon receipt of a written request addressed to the Chairman, President, or
Secretary, mailed or delivered personally to such officer by any person (other
than the Board) entitled to call a special meeting of stockholders, such officer
shall cause notice to be given, to the stockholders entitled to vote, that a
meeting will be held at a time requested by the person or persons calling the
meeting, not less than twenty five nor more than sixty days after the receipt of
such request.
2.4 NOTICE OF STOCKHOLDERS' MEETINGS
All notices of meetings with stockholders shall be in writing and shall be
sent or otherwise given in accordance with Section 2.6 of these bylaws not less
than ten (10) nor more than sixty (60) days before the date of the meeting to
each stockholder entitled to vote at such meeting. The notice shall specify the
place,
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date, and hour of the meeting, and, in the case of a special meeting, the
purpose or purposes for which the meeting is called.
Notice of meetings, annual or special, shall be given in writing not less
than ten (10) nor more than sixty (60) days before the date of the meeting, to
stockholders entitled to vote thereat by the Secretary or an assistant
secretary, or if there be no such officer, or in the case of his neglect or
refusal, by any director or stockholder.
Such notices or any reports shall be given personally or by mail or other
means of written communication and shall be sent to the stockholder's address
appearing on the books of the corporation, or supplied by him to the corporation
for the purpose of notice.
Notice of any meeting of stockholders shall specify the place, the day and
the hour of meeting, and (1) in case of a special meeting, the general nature of
the business to be transacted and no other business may be transacted, or (2) in
the case of an annual meeting, those matters which the Board at date of mailing,
intends to present for action by the stockholders. At any meetings where
directors are to be elected, notice shall include the names of the nominees, if
any, intended at date of Notice to be presented by management for election.
If a shareholder supplies no address, notice shall be deemed to have been
given to him if mailed to the place where the principal executive office of the
Company, inside or outside the State of Delaware, is situated, or published at
least once in some newspaper of general circulation in the County of said
principal office.
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS
To be properly brought before an annual meeting or special meeting,
nominations for the election of director or other 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 such nominations or
other business to be considered properly brought before the meeting by a
stockholder such stockholder must have given timely notice and in proper form of
his intent to bring such business before such meeting. To be timely, such
stockholder's notice must be delivered to or mailed and received by the
Secretary of the corporation not less than ninety (90) days prior to the
meeting; provided, however, that in the event that less than one-hundred (100)
days notice or prior public disclosure of the date of the meeting is given or
made to stockholders, notice by the stockholder to be timely must be so received
not later than the close of business on the tenth day following the day on which
such notice of the date of the meeting was mailed or such public disclosure was
made. To be in proper form, a stockholder's notice to the secretary shall set
forth:
(i) the name and address of the stockholder who intends to make the
nominations or propose the business and, as the case may be, the name and
address of the person or persons to be nominated or the nature of the
business to be proposed;
(ii) a representation that the stockholder is a holder of record of
stock of the corporation entitled to vote at such meeting and, if
applicable, intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice or introduce the
business specified in the notice;
(iii) if applicable, a description of all arrangements or
understandings between the stockholder and each nominee and any other
person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the stockholder;
(iv) such other information regarding each nominee or each matter of
business to be proposed by such stockholder as would be required to be
included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission had the nominee been nominated, or
intended to be nominated, or the matter been proposed, or intended to be
proposed by the Board of Directors; and
(v) if applicable, the consent of each nominee to serve as director of
the corporation if so elected.
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The chairman of the meeting may refuse to acknowledge the nomination of any
person or the proposal of any business not made in compliance with the foregoing
procedure.
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Written notice of any meeting of stockholders, if mailed, is given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the corporation. An
affidavit of the Secretary or an assistant secretary or of the transfer agent of
the corporation that the notice has been given shall, in the absence of fraud,
be prima facie evidence of the facts stated therein.
2.7 QUORUM
The holders of a majority of the stock issued and outstanding and entitled
to vote thereat, present in person or represented by proxy, shall constitute a
quorum at all meetings of the stockholders for the transaction of business
except as otherwise provided by statute or by the certificate of incorporation.
If, however, such quorum is not present or represented at any meeting of the
stockholders, then the stockholders entitled to vote thereat, present in person
or represented by proxy, shall have power to adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum is
present or represented. At such adjourned meeting at which a quorum is present
or represented, any business may be transacted that might have been transacted
at the meeting as originally noticed.
If a quorum be initially present, the stockholders may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum, if any action taken is approved by a
majority of the stockholders required initially to constitute a quorum.
When a quorum is present or represented at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which, by express provisions of the statutes or
of the certificate of incorporation, a different vote is required, in which case
such express provision shall govern and control the decision of the question.
2.8 ADJOURNED MEETING; NOTICE
When a meeting is adjourned to another time or place, unless these bylaws
otherwise require, notice need not be given of the adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the corporation may transact any business that
might have been transacted at the original meeting. If the adjournment is for
more than forty-five (45) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
2.9 VOTING
The stockholders entitled to vote at any meeting of stockholders shall be
determined in accordance with the provisions of Section 2.12 and Section 2.14 of
these bylaws, subject to the provisions of Sections 217 and 218 of the General
Corporation Law of Delaware (relating to voting rights of fiduciaries, pledgers
and joint owners of stock and to voting trusts and other voting agreements).
Except as may otherwise be provided in the certificate of incorporation or
the last paragraph of this Section 2.9, each stockholder shall be entitled to
one vote for each share of capital stock held by such stockholder.
At a stockholders' meeting at which directors are to be elected, or at
elections held under special circumstances, a stockholder shall be entitled to
cumulate votes (i.e., cast for any candidate a number of votes greater than the
number of votes which such stockholder normally is entitled to cast). Each
holder of stock of any class or series who elects to cumulate votes shall be
entitled to as many votes as equals the number of votes which (absent this
provision as to cumulative voting) he would be entitled to cast for the election
of directors with respect to his shares of stock multiplied by the number of
directors to be elected by him, and he
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may cast all of such votes for a single director or may distribute them among
the number to be voted for, or for any two or more of them, as he may see fit,
so long as the name of the candidate for director shall have been placed in
nomination prior to the voting and the stockholder, or any other holder of the
same class or series of stock, has given notice at the meeting prior to the
voting of the intention to cumulate votes.
2.10 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the General
Corporation Law of Delaware or of the certificate of incorporation or these
bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the stockholders need be specified in any written waiver of notice unless so
required by the certificate of incorporation or these bylaws.
2.11 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
The stockholders of the corporation may not take action by written consent
without a meeting but must take any such actions at a duly called annual or
special meeting.
2.12 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS
In order that the corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof
or entitled to express consent or dissent to corporate action in writing without
a meeting (if otherwise permitted by these bylaws and the corporation's
certificate of incorporation), or entitled to receive payment of any dividend or
other distribution or allotment of any rights or entitled to exercise any rights
in respect of any change, conversion or exchange of stock or for the purpose of
any other lawful action, the Board of Directors may fix, in advance, a record
date, which shall be not more than sixty (60) nor less than ten (10) days before
the date of such meeting, nor more than sixty (60) days prior to any other
action.
If the Board of Directors does not so fix a record date, the fixing of such
record date shall be governed by the provisions of Section 213 of the General
Corporation Law of Delaware.
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.
2.13 PROXIES
Each stockholder entitled to vote at a meeting of stockholders may
authorize another person or persons to act for him by a written proxy, signed by
the stockholder and filed with the Secretary, but no such proxy shall be voted
or acted upon after three (3) years from its date, unless the proxy provides for
a longer period. A proxy shall be deemed signed if the stockholder's name is
placed on the proxy (whether by manual signature, typewriting, telegraphic
transmission or otherwise) by the stockholder or the stockholder's
attorney-in-fact. The revocability of a proxy that states on its face that it is
irrevocable shall be governed by the provisions of Section 212(e) of the General
Corporation Law of Delaware.
2.14 LIST OF STOCKHOLDERS ENTITLED TO VOTE
The officer who has charge of the stock ledger of the corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least
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ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present. The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list of stockholders or
the books of the corporation, or to vote in person or by proxy at any meeting of
stockholders and of the number of shares held by each such stockholder.
2.15 CONDUCT OF BUSINESS
Meetings of stockholders shall be presided over by the Chairman of the
Board, if any, or in his absence by the President, or in his absence by a Vice
President, or in the absence of the foregoing persons by a chairman designated
by the Board of Directors, or in the absence of such designation by a chairman
chosen at the meeting. The Secretary shall act as secretary of the meeting, but
in his absence the chairman of the meeting may appoint any person to act as
secretary of the meeting. The chairman of any meeting of stockholders shall
determine the order of business and the procedures at the meeting, including
such matters as the regulation of the manner of voting and conduct of business.
ARTICLE III
DIRECTORS
3.1 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.
Each director shall exercise such powers and otherwise perform such duties
in good faith, in the manner such director believes to be in the best interests
of the corporation, and with such care, including reasonable inquiry, using
ordinary prudence, as a person in a like position would use under similar
circumstances.
3.2 NUMBER OF DIRECTORS
The Board of Directors shall consist of nine (9) members. The number of
directors may be changed by an amendment to this bylaw, duly adopted by the
Board of Directors or by the stockholders, or by a duly adopted amendment to the
certificate of incorporation.
3.3 ELECTION QUALIFICATION AND TERM OF OFFICE OF DIRECTORS
Except as provided in Section 3.4 of these bylaws, at each annual meeting
of stockholders, directors of the corporation shall be elected to hold office
until the expiration of the term for which they are elected, and until their
successors have been duly elected and qualified; except that if any such
election shall not be so held, such election shall take place at a stockholders'
meeting called and held in accordance with the Delaware General Corporation Law.
The term of office of a director shall begin immediately after election.
Commencing with the first annual meeting of stockholders after calendar year
1997 (the "First Annual Meeting"), the directors of the corporation shall be
divided into three classes as nearly equal in size as is practicable, hereby
designated Class I, Class II and Class III. For the purposes hereof, the initial
Class I, Class II and Class III directors shall be those directors so designated
and elected at the First Annual Meeting. The term of office of the initial Class
I directors shall expire at the next succeeding annual meeting of stockholders,
the term of office of the initial Class II directors shall expire at the second
succeeding annual meeting of stockholders and the term of office of the initial
Class III directors shall expire at the third succeeding annual meeting of
stockholders. At each annual meeting after the annual meeting of stockholders
scheduled to be held thereafter, directors to replace those of a Class office
whose terms expire at such annual meeting shall be elected to hold office until
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the third succeeding annual meeting and until their respective successors shall
have been duly elected and qualified. If the number of directors is hereafter
changed, any newly created directorships or decrease in directorships shall be
so apportioned among the classes as to make all classes as nearly equal in
number as is practicable.
Directors need not be stockholders unless so required by the certificate of
incorporation or these bylaws, wherein other qualifications for directors may be
prescribed. Election of directors need not be by written ballot unless a
stockholder demands election by written ballot at the meeting and before voting
begins.
3.4 RESIGNATION AND VACANCIES
Any director may resign at any time upon written notice to the corporation.
Stockholders may remove directors with cause. Any vacancy occurring in the Board
of Directors because of resignation or death of a director may be filled by a
majority of the remaining members of the Board of Directors, although such
majority is less than a quorum, or by a sole remaining director, and each
director so elected shall hold office until his successor is elected at the next
succeeding annual meeting of stockholders at which the class to which the
directorship belongs is to be elected or at a special meeting called for that
purpose.
Unless otherwise provided in the certificate of incorporation or these
bylaws:
(i) Vacancies and newly created directorships resulting from any
increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled by a
majority of the directors then in office, although less than a quorum, or
by a sole remaining director.
(ii) Whenever the holders of any class or classes of stock or series
thereof are entitled to elect one or more directors by the provisions of
the certificate of incorporation, vacancies and newly created directorships
of such class or classes or series may be filled by a majority of the
directors elected by such class or classes or series thereof then in
office, or by a sole remaining director so elected.
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder may apply to the Court of Chancery for a decree summarily
ordering an election as provided in Section 211 of the General Corporation Law
of Delaware.
If, at the time of filling any vacancy or any newly created directorship,
the directors then in office constitute less than a majority of the whole board
(as constituted immediately prior to any such increase), then the Court of
Chancery may, upon application of any stockholder or stockholders holding at
least ten (10) percent of the total number of the shares at the time outstanding
having the right to vote for such directors, summarily order an election to be
held to fill any such vacancies or newly created directorships, or to replace
the directors chosen by the directors then in office as aforesaid, which
election shall be governed by the provisions of Section 211 of the General
Corporation Law of Delaware as far as applicable.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
The Board of Directors of the corporation may hold meetings, both regular
and special, either within or outside the State of Delaware, at such place as is
designated in the notice of the meeting.
Unless otherwise restricted by the certificate of incorporation or these
bylaws, members of the Board of Directors, or any committee designated by the
Board of Directors, may participate in a meeting of the Board of Directors, or
any committee, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.
Accurate minutes of any meeting of the Board of Directors or any committee
thereof shall be maintained by the Secretary or other office designated for that
purpose.
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3.6 FIRST MEETINGS
The first meeting of each newly elected Board of Directors shall be held
immediately following the adjournment of the annual meetings of the
stockholders.
3.7 REGULAR MEETINGS
Regular meetings of the Board of Directors may be held without notice at
the corporate offices or such other place, within or without the State of
Delaware, at such time and place as the Board designates.
3.8 SPECIAL MEETINGS; NOTICE
Special meetings of the Board may be called at any time by the President
or, if he is absent or unable or refuses to act, by any vice president or the
Secretary or by any two directors, or by one director if only one is provided.
At least twenty-four (24) hours notice of the time and place of special
meetings shall be delivered personally to the directors or personally
communicated to them by a corporate officer by telephone or telegraph. If the
notice is sent to a director by letter, it shall be addressed to him at his
address as it is shown upon the records of the corporation (or if it is not so
shown on such records or is not readily ascertainable, at the place in which the
meetings of the directors are regularly held). In case such notice is sent by
letter, it shall be sent by courier at least two (2) days prior to the time of
the holding of the meeting. Such mailing, telegraphing, telephoning or delivery
as above provided shall be due, legal and personal notice to such director.
When all of the directors are present at any directors' meeting, however
called or noticed, and either (i) sign a written consent thereto on the records
of such meeting, or (ii) if a majority of the directors is present and if those
not present sign a waiver of notice of such meeting or a consent to holding the
meeting or an approval of the minutes thereof, whether prior to or after the
holding of such meeting, which said waiver, consent or approval shall be filed
with the Secretary of the corporation or (iii) if a director attends a meeting
without notice, but without protesting, prior thereto or at its commencement,
the lack of notice to him, then the transactions thereof are as valid as if had
at a meeting regularly called and noticed.
3.9 QUORUM
A majority of the number of directors as fixed by the certificate of
incorporation or bylaws, shall be necessary to constitute a quorum for the
transaction of business, and the action of a majority of the directors present
at any meeting at which there is a quorum, when duly assembled, is valid as a
corporate act; provided that a minority of the directors, in the absence of a
quorum, may adjourn from time to time, but may not transact any business. A
meeting at which a quorum is initially present may continue to transact
business, notwithstanding the withdrawal of directors, if any action taken is
approved by a majority of the required quorum for such meeting.
3.10 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the General
Corporation Law of Delaware or of the certificate of incorporation or these
bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the directors, or members of a committee of directors, need be specified in
any written waiver of notice unless so required by the certificate of
incorporation or these bylaws.
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3.11 ADJOURNED MEETING; NOTICE
Notice of the time and place of holding an adjourned meeting need not be
given to absent directors if the time and place be fixed at the meeting
adjourned and held within twenty-four (24) hours, but if adjourned more than
twenty-four (24) hours, notice shall be given to all directors not present at
the time of the adjournment.
3.12 CONDUCT OF BUSINESS
Meetings of the Board of Directors shall be presided over by the Chairman
of the Board, if any, or in his absence by the President, or in their absence by
a chairman chosen at the meeting. The Secretary shall act as secretary of the
meeting, but in his absence the chairman of the meeting may appoint any person
to act as secretary of the meeting. The chairman of any meeting shall determine
the order of business and the procedures at the meeting.
3.13 BOARD ACTION BY WRITTEN CONSENT WITHOUT A 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 or committee, as the case may be, consent thereto in
writing and the writing or writings are filed with the minutes of proceedings of
the Board or committee.
3.14 FEES AND COMPENSATION OF DIRECTORS
Directors, as such, shall not receive any stated salary for their services,
but by resolution of the Board, a fixed sum and expense of attendance, if any,
may be allowed for attendance at each regular and special meeting of the Board;
provided that nothing herein contained shall be construed to preclude any
director from serving the Company in any other capacity and receiving
compensation therefor.
3.15 APPROVAL OF LOANS TO OFFICERS
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or of its
subsidiary, including any officer or employee who is a director of the
corporation or its subsidiary, whenever, in the judgment of the directors, such
loan, guaranty or assistance may reasonably be expected to benefit the
corporation. The loan, guaranty or other assistance may be with or without
interest and may be unsecured, or secured in such manner as the Board of
Directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing in this section shall be deemed to deny, limit
or restrict the powers of guaranty or warranty of the corporation at common law
or under any statute.
3.16 REMOVAL OF DIRECTORS
Unless otherwise restricted by statute, by the certificate of incorporation
or by these bylaws, any director or the entire Board of Directors may be removed
with cause by the holders of a majority of the shares then entitled to vote at
an election of directors; provided, however, that, so long as stockholders of
the corporation are entitled to cumulative voting, no individual director may be
removed (unless the entire board is removed) if the number of votes cast against
such removal would be sufficient to elect the director if then cumulatively
voted at an election of the class of directors of which the director is a part.
A vacancy created by the removal of a director may be filled only by the
approval of the stockholders.
No reduction of the authorized number of directors shall have the effect of
removing any director prior to the expiration of such director's term of office.
3.17 ADVISORY DIRECTORS
The Board of Directors from time to time may elect one or more persons to
be Advisory Directors who shall not by such appointment be members of the Board
of Directors. Advisory Directors shall be available
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from time to time to perform special assignments specified by the President, to
attend meetings of the Board of Directors upon invitation and to furnish
consultation to the Board. The period during which the title shall be held may
be prescribed by the Board of Directors. If no period is prescribed, the title
shall be held at the pleasure of the Board.
ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS
The Board of Directors may, by resolution passed by a majority of the whole
Board, designate one or more committees, with each committee to consist of two
or more of the directors of the corporation. The Board may designate one or more
directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or disqualified
member. Any such committee, to the extent provided in the resolution of the
Board of Directors or in the bylaws of the corporation, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the corporation, and may authorize the
seal of the corporation to be affixed to all papers that may require it; but no
such committee shall have the power or authority to (i) amend the certificate of
incorporation (except that a committee may, to the extent authorized in the
resolution or resolutions providing for the issuance of shares of stock adopted
by the Board of Directors as provided in Section 151(a) of the General
Corporation Law of Delaware, fix any of the preferences or rights of such shares
relating to dividends, redemption, dissolution, any distribution of assets of
the corporation or the conversion into, or the exchange of such shares for,
shares of any other class or classes or any other series of the same or any
other class or classes of stock of the corporation), (ii) adopt an agreement of
merger or consolidation under Sections 251 or 252 of the General Corporation Law
of Delaware, (iii) recommend to the stockholders the sale, lease or exchange of
all or substantially all of the corporation's property and assets (iv) recommend
to the stockholders a dissolution of the corporation or a revocation of a
dissolution, or (v) amend the bylaws of the corporation; and, unless the board
resolution establishing the committee, the bylaws or the certificate of
incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock, or to adopt
a certificate of ownership and merger pursuant to Section 253 of the General
Corporation Law of Delaware.
4.2 COMMITTEE MINUTES
Each committee shall keep regular minutes of its meetings and report the
same to the Board of Directors when required.
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 3.5
(place of meetings and meetings by telephone), Section 3.7 (regular meetings),
Section 3.8 (special meetings and notice), Section 3.9 (quorum), Section 3.10
(waiver of notice), Section 3.11 (adjournment and notice of adjournment),
Section 3.12 (conduct of business) and Section 3.13 (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.
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ARTICLE V
OFFICERS
5.1 OFFICERS
The officers of the corporation shall be chairman of the board or a
president or both, a secretary, and a chief financial officer. The corporation
may also have, at the discretion of the Board of Directors, one or more vice
presidents, one or more assistant secretaries, and any such other officers as
may be appointed in accordance with the provisions of Section 5.2 of these
bylaws. Any number of offices may be held by the same person.
5.2 ELECTION OF OFFICERS
Except as otherwise provided in this Section 5.2, the officers of the
corporation shall be chosen annually by the Board of Directors, and each shall
hold his office until he shall resign or shall be removed or otherwise
disqualified to serve, or his successor shall be elected and qualified.
The Board of Directors may appoint such officers and agents of the business
as the corporation may require, each of whom shall hold office for such period,
have such authority, and perform such duties as are provided in these bylaws or
as the Board of Directors may from time to time determine. Any vacancy occurring
in any office of the corporation shall be filled in the manner prescribed in the
Bylaws for regular appointments to such office.
5.3 REMOVAL AND RESIGNATION OF OFFICERS
Any officer may be removed, either with or without cause, by an affirmative
vote of the majority of the Board of Directors at any regular or special meeting
of the Board or, except in the case of an officer chosen by the Board of
Directors, by any officer upon whom such power of removal may be conferred by
the Board of Directors or, in the case of an officer appointed by the President,
by the President.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective.
5.4 CHAIRMAN OF THE BOARD
The Chairman of the Board, if such an officer be elected, shall, if
present, preside at meetings of the Board of Directors and exercise and perform
such other powers and duties as may from time to time be assigned to him by the
Board of Directors or as may be prescribed by these bylaws.
5.5 PRESIDENT
Subject to such supervisory powers, if any, as may be given by the Board of
Directors to the Chairman of the Board, if there be such an officer, the
President, unless otherwise determined by the Board of Directors, shall be the
chief executive officer of the corporation and shall, subject to the control of
the Board of Directors, have general supervision, direction, and control of the
business and the officers of the corporation. He shall preside at all meetings
of the stockholders and, in the absence or nonexistence of a chairman of the
board, at all meetings of the Board of Directors. He shall have the general
powers and duties of management usually vested in the office of president of a
corporation and shall have such other powers and duties as may be prescribed by
the Board of Directors or these bylaws.
5.6 VICE PRESIDENTS
In the absence or disability of the President, the Vice Presidents, if any,
in order of their rank as fixed by the Board of Directors or, if not ranked, a
Vice President designated by the Board of Directors, shall perform all the
duties of the President and when so acting shall have all the powers of, and be
subject to all the
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restrictions upon, the President. The Vice Presidents shall have such other
powers and perform such other duties as from time to time may be prescribed for
them respectively by the Board of Directors, these bylaws, the President or the
Chairman of the Board.
5.7 SECRETARY
The Secretary shall keep or cause to be kept, at the principal executive
office of the corporation or such other place as the Board of Directors may
direct, a book of minutes of all meetings and actions of directors, committees
of directors, and stockholders. The minutes shall show the time and place of
each meeting, whether regular or special (and, if special, how authorized and
the notice given), the names of those present at directors' meetings or
committee meetings, the number of shares present or represented at stockholders'
meetings, and the proceedings thereof.
The Secretary shall keep, or cause to be kept, at the principal executive
office of the corporation or at the office of the corporation's transfer agent
or registrar, as determined by resolution of the Board of Directors, a share
register, or a duplicate share register, showing the names of all stockholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates evidencing such shares, and the number and date of
cancellation of every certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all meetings of
the stockholders and of the Board of Directors required to be given by law or by
these bylaws. He shall keep the seal of the corporation, if one be adopted, in
safe custody and shall have such other powers and perform such other duties as
may be prescribed by the Board of Directors or by these bylaws.
5.8 CHIEF FINANCIAL OFFICER
The Chief Financial Officer shall keep and maintain, or cause to be kept
and maintained in accordance with generally accepted accounting principles,
adequate and correct books and records of accounts of the properties and
business transactions of the corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital, retained earnings
and shares. The books of account shall at all reasonable times be open to
inspection by any director.
The Chief Financial Officer shall deposit all monies and other valuables in
the name and to the credit of the corporation with such depositaries as may be
designated by the Board of Directors. He shall disburse the funds of the
corporation as may be ordered by the Board of Directors, shall render to the
President and directors, whenever they request it, an account of all of his
transactions as Chief Financial Officer and of the financial condition of the
corporation, and shall have such other powers and perform such other duties as
may be prescribed by the Board of Directors or these bylaws.
ARTICLE VI
INDEMNITY
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS
The corporation shall, to the maximum extent and in the manner permitted by
the General Corporation Law of Delaware, indemnify each of its directors and
officers against expenses (including attorneys' fees), judgments, fines,
settlements, and other amounts actually and reasonably incurred in connection
with any proceeding, arising by reason of the fact that such person is or was an
agent of the corporation. For purposes of this Section 6.1, a "director" or
"officer" of the corporation includes any person (i) who is or was a director or
officer of the corporation, (ii) who is or was serving at the request of the
corporation as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise, including, without limitation, any direct or
indirect subsidiary of the corporation, or (iii) who was a director or officer
of a corporation which was a predecessor corporation of the corporation or of
another enterprise at the request of such predecessor corporation.
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6.2 INDEMNIFICATION OF OTHERS
The corporation shall have the power, to the extent and in the manner
permitted by the General Corporation Law of Delaware, to indemnify each of its
employees and agents (other than directors and officers) against expenses
(including attorneys' fees), judgments, fines, settlements, and other amounts
actually and reasonably incurred in connection with any proceeding, arising by
reason of the fact that such person is or was an agent of the corporation. For
purposes of this Section 6.2, an "employee" or "agent" of the corporation (other
than a director or officer) includes any person (i) who is or was an employee or
agent of the corporation, (ii) who is or was serving at the request of the
corporation as an employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, including, without limitation, any direct or
indirect subsidiary of the corporation, or (iii) who was an employee or agent of
a corporation which was a predecessor corporation of the corporation or of
another enterprise at the request of such predecessor corporation.
6.3 INSURANCE
The corporation may purchase and maintain insurance on behalf of any person
who is or was a director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability under
the provisions of the General Corporation Law of Delaware and this Section 6.
6.4 PAYMENT OF EXPENSES IN ADVANCE
Expenses incurred in defending any civil or criminal action or proceeding
for which indemnification is required pursuant to Section 6.1, or for which
indemnification is permitted pursuant to Section 6.2 following authorization
thereof by the Board of Directors, may be paid by the corporation in advance of
the final disposition of such action or proceeding upon receipt of an
undertaking by or on behalf of the indemnified party to repay such amount if it
shall ultimately be determined that the indemnified party is not entitled to be
indemnified as authorized in this Section 6.
6.5 INDEMNITY NOT EXCLUSIVE
The indemnification provided by this Section 6 shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under any bylaw, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in an official capacity and as to
action in another capacity while holding such office, to the extent that such
additional rights to indemnification are authorized in the certificate of
incorporation.
6.6 CONFLICTS
No indemnification or advance shall be made under this Section 6, except
where such indemnification or advance is mandated by law or the order, judgment
or decree of any court of competent jurisdiction, in any circumstance where it
appears:
(a) That it would be inconsistent with a provision of the certificate
of incorporation, these bylaws, a resolution of the stockholders or an
agreement in effect at the time of the accrual of the alleged cause of the
action asserted in the proceeding in which the expenses were incurred or
other amounts were paid, which prohibits or otherwise limits
indemnification; or
(b) That it would be inconsistent with any condition expressly imposed
by a court in approving a settlement.
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ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF RECORDS
The corporation shall, either at its principal executive office or at such
place or places as designated by the Board of Directors, keep a record of its
stockholders listing their names and addresses and the number and class of
shares held by each stockholder, a copy of these bylaws as amended to date,
accounting books, and other records.
Any stockholder of record, in person or by attorney or other agent, shall,
upon written demand under oath stating the purpose thereof, have the right
during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent to so act on
behalf of the stockholder. The demand under oath shall be directed to the
corporation at its registered office in Delaware or at its principal place of
business.
7.2 INSPECTION BY DIRECTORS
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 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.
7.3 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The Chairman of the Board, the President, any Vice President, the Chief
Financial Officer, the Secretary, or any other person authorized by the Board of
Directors or the President or a Vice President, is authorized to vote,
represent, and exercise on behalf of this corporation all rights incident to any
and all shares of any other corporation or corporations standing in the name of
this corporation. The authority granted herein may be exercised either by such
person directly or by any other person authorized to do so by proxy or power of
attorney duly executed by such person having the authority.
7.4 SUBSIDIARY CORPORATIONS
Shares of this corporation owned by a subsidiary shall not be entitled to
vote on any matter. A subsidiary for these purposes is defined as a corporation,
the shares of which possessing more than 25% of the total combined voting power
of all classes of shares entitled to vote, are owned directly or indirectly
through one or more subsidiaries.
ARTICLE VIII
GENERAL MATTERS
8.1 STOCK CERTIFICATES; PARTLY PAID SHARES
The shares of a corporation shall be represented by certificates, provided
that the Board of Directors of the corporation may provide by resolution or
resolutions that some or all of any or all classes or series of its stock shall
be uncertificated shares. Any such resolution shall not apply to shares
represented by a certificate until such certificate is surrendered to the
corporation. Notwithstanding the adoption of such a resolution by
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the Board of Directors, every holder of stock represented by certificates and,
upon request, every holder of uncertificated shares, shall be entitled to have a
certificate signed by, or in the name of the corporation by the Chairman of the
Board of Directors, or the President or Vice President, and by the Chief
Financial Officer or the 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 were such officer, transfer agent or registrar at the date of issue.
The corporation may issue the whole or any part of its shares as partly
paid and subject to call for the remainder of the consideration to be paid
therefor. Upon the face or back of each stock certificate issued to represent
any such partly paid shares, or upon the books and records of the corporation in
the case of uncertificated partly paid shares, the total amount of the
consideration to be paid therefor and the amount paid thereon shall be stated.
Upon the declaration of any dividend on fully paid shares, the corporation shall
declare a dividend upon partly paid shares of the same class, but only upon the
basis of the percentage of the consideration actually paid thereon.
8.2 LOST CERTIFICATES
Except as provided in this Section 8.2, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and cancelled at the same time. The corporation
may issue a new certificate of stock or uncertificated shares 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 his legal representative, to give the corporation a
bond sufficient to indemnity it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate or uncertificated shares.
8.3 CONSTRUCTION; DEFINITIONS
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the Delaware General Corporation Law 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.
8.4 DIVIDENDS
The directors of the corporation, subject to any restrictions contained in
the certificate of incorporation, may declare and pay dividends upon the shares
of its capital stock pursuant to the General Corporation Law of Delaware.
Dividends may be paid in cash, in property, or in shares of the corporation's
capital stock.
The directors of the corporation may set apart out of any of the funds of
the corporation available for dividends a reserve or reserves for any proper
purpose and may abolish any such reserve.
8.5 FISCAL YEAR
The fiscal year of the corporation shall be fixed by resolution of the
Board of Directors and may be changed by the Board of Directors.
8.6 SEAL
The corporation may adopt a corporate seal, which may be altered at
pleasure, and may use the same by causing it or a facsimile thereof to be
impressed or affixed or in any other manner reproduced.
8.7 TRANSFER OF STOCK
Upon surrender to the corporation or the transfer agent of the corporation
of a certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignation or authority to transfer, it shall be the
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duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate, and record the transaction in its books.
8.8 STOCK TRANSFER AGREEMENTS
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.
8.9 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, shall be entitled to hold liable for calls and
assessments the person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of another person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
8.10 EXECUTION OF CONTRACTS
The Board of Directors, except as in the Bylaws otherwise provided, may
authorize any officer or officers, agent or agents, to enter into any contract
or execute and instrument in the name of and on behalf of the corporation. Such
authority may be general or confined to specific instances. Unless so authorized
by the Board of Directors, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or agreement, or to pledge its
credit, or to render it liable for any purpose or to any amount, except as
provided in Sec. 142 of Delaware General Corporation Law.
ARTICLE IX
AMENDMENTS
The original or other bylaws of the corporation may be adopted, amended or
repealed by a majority of 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 written assent was filed shall be stated in said book.
ARTICLE X
DISSOLUTION
If it should be deemed advisable in the judgment of the Board of Directors
of the corporation that the corporation should be dissolved, the Board, after
the adoption of a resolution to that effect by a majority of the whole Board at
any meeting called for that purpose, shall cause notice to be mailed to each
stockholder entitled to vote thereon of the adoption of the resolution and of a
meeting of stockholders to take action upon the resolution.
At the meeting a vote shall be taken for and against the proposed
dissolution. If a majority of the outstanding stock of the corporation entitled
to vote thereon votes for the proposed dissolution, then a certificate stating
that the dissolution has been authorized in accordance with the provisions of
Section 275 of the General Corporation Law of Delaware and setting forth the
names and residences of the directors and officers shall be executed,
acknowledged, and filed and shall become effective in accordance with Section
103
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of the General Corporation Law of Delaware. Upon such certificate's becoming
effective in accordance with Section 103 of the General Corporation Law of
Delaware, the corporation shall be dissolved.
ARTICLE XI
CUSTODIAN
11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES
The Court of Chancery, upon application of any stockholder, may appoint one
or more persons to be custodians and, if the corporation is insolvent, to be
receivers, of and for the corporation when:
(i) at any meeting held for the election of directors the stockholders
are so divided that they have failed to elect successors to directors whose
terms have expired or would have expired upon qualification of their
successors; or
(ii) the business of the corporation is suffering or is threatened
with irreparable injury because the directors are so divided respecting the
management of the affairs of the corporation that the required vote for
action by the Board of Directors cannot be obtained and the stockholders
are unable to terminate this division; or
(iii) the corporation has abandoned its business and has failed within
a reasonable time to take steps to dissolve, liquidate or distribute its
assets.
11.2 DUTIES OF CUSTODIAN
The custodian shall have all the powers and title of a receiver appointed
under Section 291 of the General Corporation Law of Delaware, but the authority
of the custodian shall be to continue the business of the corporation and not to
liquidate its affairs and distribute its assets, except when the Court of
Chancery otherwise orders and except in cases arising under Sections 226(a)(3)
or 352(a)(2) of the General Corporation Law of Delaware.
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EXHIBIT D
SOLECTRON CORPORATION
FORM OF INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("AGREEMENT") is entered into as of the
day of , 1996 by and between Solectron Corporation, a Delaware
corporation (the "COMPANY") and ("INDEMNITEE").
RECITALS
A. The Company and Indemnitee recognize the continued difficulty in
obtaining liability insurance for its directors, officers, employees, agents and
fiduciaries, the significant increases in the cost of such insurance and the
general reductions in the coverage of such insurance.
B. The Company and Indemnitee further recognize the substantial increase in
corporate litigation in general, subjecting directors, officers, employees,
agents and fiduciaries to expensive litigation risks at the same time as the
availability and coverage of liability insurance has been severely limited.
C. Indemnitee does not regard the current protection available as adequate
under the present circumstances, and Indemnitee and other directors, officers,
employees, agents and fiduciaries of the Company may not be willing to continue
to serve in such capacities without additional protection.
D. The Company desires to attract and retain the services of highly
qualified individuals, such as Indemnitee, to serve the Company and, in part, in
order to induce Indemnitee to continue to provide services to the Company,
wishes to provide for the indemnification and advancing of expenses to
Indemnitees to the maximum extent permitted by law.
E. In view of the considerations set forth above, the Company desires that
Indemnitee be indemnified by the Company as set forth herein.
NOW, THEREFORE, the Company and Indemnitee hereby agree as follows:
1. Indemnification.
(a) Indemnification of Expenses. The Company shall indemnify to the
fullest extent permitted by law if Indemnitee was or is or becomes a party
to or witness or other participant in, or are threatened to be made a party
to or witness or other participant in, any threatened, pending or completed
action, suit, proceeding or alternative dispute resolution mechanism, or
any hearing, inquiry or investigation that Indemnitee in good faith believe
might lead to the institution of any such action, suit, proceeding or
alternative dispute resolution mechanism, whether civil, criminal,
administrative, investigative or other (hereinafter a "CLAIM") by reason of
(or arising in part out of) any event or occurrence related to the fact
that Indemnitee is or was a director, officer, employee, agent or fiduciary
of the Company, or any subsidiary of the Company, or is or was serving at
the request of the Company as a director, officer, employee, agent or
fiduciary of another corporation, partnership, joint venture, trust or
other enterprise, or by reason of any action or inaction on the part of
Indemnitee while serving in such capacity (hereinafter an "INDEMNIFIABLE
EVENT") against any and all expenses (including attorneys' fees and all
other costs, expenses and obligations incurred in connection with
investigating, defending, being a witness in or participating in (including
on appeal), or preparing to defend, be a witness in or participate in, any
such action, suit, proceeding, alternative dispute resolution mechanism,
hearing, inquiry or investigation), judgments, fines, penalties and amounts
paid in settlement (if such settlement is approved in advance by the
Company, which approval shall not be unreasonably withheld) of such Claim
and any federal, state, local or foreign taxes imposed on Indemnitees as a
result of the actual or deemed receipt of any payments under this Agreement
(collectively, hereinafter "EXPENSES"), including all interest, assessments
and other charges paid or payable in connection with or in respect of such
Expenses. Such payment of Expenses shall be made by the Company as soon as
practicable but in any event no later than twenty days after written demand
by Indemnitees therefor is presented to the Company.
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(b) Reviewing Party. Notwithstanding the foregoing, (i) the
obligations of the Company under Section 1(a) shall be subject to the
condition that the Reviewing Party (as described in Section 10(e) hereof)
shall not have determined (in a written opinion, in any case in which the
Independent Legal Counsel referred to in Section 1(c) hereof is involved)
that Indemnitee would not be permitted to be indemnified under applicable
law, and (ii) the obligation of the Company to make an advance payment of
Expenses to Indemnitee pursuant to Section 2(a) (an "EXPENSE ADVANCE")
shall be subject to the condition that, if, when and to the extent that the
Reviewing Party determines that Indemnitee would not be permitted to be so
indemnified under applicable law, the Company shall be entitled to be
reimbursed by Indemnitee (who hereby agree to reimburse the Company) for
all such amounts theretofore paid; provided, however, that if Indemnitee
has commenced or thereafter commence legal proceedings in a court of
competent jurisdiction to secure a determination that Indemnitee should be
indemnified under applicable law, any determination made by the Reviewing
Party that Indemnitee would not be permitted to be indemnified under
applicable law shall not be binding and Indemnitee shall not be required to
reimburse the Company for any Expense Advance until a final judicial
determination is made with respect thereto (as to which all rights of
appeal therefrom have been exhausted or lapsed). The Indemnitee's
obligation to reimburse the Company for any Expense Advance shall be
unsecured and no interest shall be charged thereon. If there has not been a
Change in Control (as defined in Section 10(c) hereof), the Reviewing Party
shall be selected by the Board of Directors, and if there has been such a
Change in Control (other than a Change in Control which has been approved
by a majority of the Company's Board of Directors who were directors
immediately prior to such Change in Control), the Reviewing Party shall be
the Independent Legal Counsel referred to in Section 1(c) hereof. If there
has been no determination by the Reviewing Party or if the Reviewing Party
determines that Indemnitee substantively would not be permitted to be
indemnified in whole or in part under applicable law, Indemnitee shall have
the right to commence litigation seeking an initial determination by the
court or challenging any such determination by the Reviewing Party or any
aspect thereof, including the legal or factual bases therefor, and the
Company hereby consents to service of process and to appear in any such
proceeding. Any determination by the Reviewing Party otherwise shall be
conclusive and binding on the Company and Indemnitee.
(c) Change in Control. The Company agrees that if there is a Change
in Control of the Company (other than a Change in Control which has been
approved by a majority of the Company's Board of Directors who were
directors immediately prior to such Change in Control) then, with respect
to all matters thereafter arising concerning the rights of Indemnitees to
payments of Expenses and Expense Advances under this Agreement or any other
agreement or under the Company's Certificate of Incorporation or Bylaws as
now or hereafter in effect, Independent Legal Counsel (as defined in
Section 10(d) hereof) shall be selected by Indemnitees and approved by the
Company (which approval shall not be unreasonably withheld). Such counsel,
among other things, shall render its written opinion to the Company and
Indemnitee as to whether and to what extent Indemnitee would be permitted
to be indemnified under applicable law and the Company agrees to abide by
such opinion. The Company agrees to pay the reasonable fees of the
Independent Legal Counsel referred to above and to fully indemnify such
counsel against any and all expenses (including attorneys' fees), claims,
liabilities and damages arising out of or relating to this Agreement or its
engagement pursuant hereto.
(d) Mandatory Payment of Expenses. Notwithstanding any other
provision of this Agreement other than Section 8 hereof, to the extent that
Indemnitee has been successful on the merits or otherwise, including,
without limitation, the dismissal of an action without prejudice, in
defense of any action, suit, proceeding, inquiry or investigation referred
to in Section (1)(a) hereof or in the defense of any claim, issue or matter
therein, Indemnitee shall be indemnified against all Expenses incurred by
Indemnitee in connection therewith.
2. Expenses; Indemnification Procedure.
(a) Advancement of Expenses. The Company shall advance all Expenses
incurred by Indemnitee. The advances to be made hereunder shall be paid by
the Company to Indemnitee as soon as practicable but in any event no later
than twenty days after written demand by Indemnitee therefor to the
Company.
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(b) Notice/Cooperation by Indemnitee. Indemnitee shall, as a
condition precedent to Indemnitee's right to be indemnified under this
Agreement, give the Company notice in writing as soon as practicable of any
Claim made against Indemnitee for which indemnification will or could be
sought under this Agreement. Notice to the Company shall be directed to the
Chief Executive Officer of the Company at the address shown on the
signature page of this Agreement (or such other address as the Company
shall designate in writing to Indemnitee). In addition, Indemnitee shall
give the Company such information and cooperation as it may reasonably
require and as shall be within Indemnitee's power.
(c) No Presumptions; Burden of Proof. For purposes of this Agreement,
the termination of any Claim by judgment, order, settlement (whether with
or without court approval) or conviction, or upon a plea of nolo
contendere, or its equivalent, shall not create a presumption that
Indemnitee did not meet any particular standard of conduct or have any
particular belief or that a court has determined that indemnification is
not permitted by applicable law. In addition, neither the failure of the
Reviewing Party to have made a determination as to whether Indemnitee has
met any particular standard of conduct or had any particular belief, nor an
actual determination by the Reviewing Party that Indemnitee has not met
such standard of conduct or did not have such belief, prior to the
commencement of legal proceedings by Indemnitee to secure a judicial
determination that Indemnitee should be indemnified under applicable law,
shall be a defense to Indemnitee's claim or create a presumption that
Indemnitee has not met any particular standard of conduct or did not have
any particular belief. In connection with any determination by the
Reviewing Party or otherwise as to whether Indemnitee is entitled to be
indemnified hereunder, the burden of proof shall be on the Company to
establish that Indemnitee is not so entitled.
(d) Notice to Insurers. If, at the time of the receipt by the Company
of a notice of a Claim pursuant to Section 2(b) hereof, the Company has
liability insurance in effect which may cover such Claim, the Company shall
give prompt notice of the commencement of such Claim to the insurers in
accordance with the procedures set forth in the respective policies. The
Company shall thereafter take all necessary or desirable action to cause
such insurers to pay, on behalf of Indemnitee, all amounts payable as a
result of such action, suit, proceeding, inquiry or investigation in
accordance with the terms of such policies.
(e) Selection of Counsel. In the event the Company shall be obligated
hereunder to pay the Expenses of any Claim, the Company shall be entitled
to assume the defense of such Claim with counsel approved by Indemnitee,
which approval shall not be unreasonably withheld, upon the delivery to
Indemnitee of written notice of its election so to do. After delivery of
such notice, approval of such counsel by Indemnitee and the retention of
such counsel by the Company, the Company will not be liable to Indemnitee
under this Agreement for any fees of counsel subsequently incurred by
Indemnitee with respect to the same Claim; provided that, (i) Indemnitee
shall have the right to employ Indemnitee's counsel in any such Claim at
Indemnitee's expense and (ii) if (A) the employment of counsel by
Indemnitee has been previously authorized by the Company, (B) Indemnitee
shall have reasonably concluded that there is a conflict of interest
between the Company and Indemnitee in the conduct of any such defense, or
(C) the Company shall not continue to retain such counsel to defend such
Claim, then the fees and expenses of Indemnitee's counsel shall be at the
expense of the Company. The Company shall have the right to conduct such
defense as it sees fit in its sole discretion, including the right to
settle any claim against Indemnitee without the consent of the Indemnitee.
3. Additional Indemnification Rights; Nonexclusivity.
(a) Scope. The Company hereby agrees to indemnify Indemnitee to the
fullest extent permitted by law, notwithstanding that such indemnification
is not specifically authorized by the other provisions of this Agreement,
the Company's Certificate of Incorporation, the Company's Bylaws or by
statute. In the event of any change after the date of this Agreement in any
applicable law, statute or rule which expands the right of a Delaware
corporation to indemnify a member of its Board of Directors or an officer,
employee, agent or fiduciary, it is the intent of the parties hereto that
Indemnitee shall enjoy by this Agreement the greater benefits afforded by
such change. In the event of any change in any applicable law,
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<PAGE> 68
statute or rule which narrows the right of a Delaware corporation to
indemnify a member of its Board of Directors or an officer, employee, agent
or fiduciary, such change, to the extent not otherwise required by such
law, statute or rule to be applied to this Agreement, shall have no effect
on this Agreement or the parties' rights and obligations hereunder except
as set forth in Section 8(a) hereof.
(b) Nonexclusivity. The indemnification provided by this Agreement
shall be in addition to any rights to which Indemnitee may be entitled
under the Company's Certificate of Incorporation, its Bylaws, any
agreement, any vote of stockholders or disinterested directors, the General
Corporation Law of the State of Delaware, or otherwise. The indemnification
provided under this Agreement shall continue as to Indemnitee for any
action Indemnitee took or did not take while serving in an indemnified
capacity even though Indemnitee may have ceased to serve in such capacity.
4. No Duplication of Payments. The Company shall not be liable under this
Agreement to make any payment in connection with any Claim made against
Indemnitee to the extent Indemnitee has otherwise actually received payment
(under any insurance policy, Certificate of Incorporation, Bylaw or otherwise)
of the amounts otherwise indemnifiable hereunder.
5. Partial Indemnification. If Indemnitee is entitled under any provision
of this Agreement to indemnification by the Company for some or a portion of
Expenses incurred in connection with any Claim, but not, however, for all of the
total amount thereof, the Company shall nevertheless indemnify Indemnitee for
the portion of such Expenses to which Indemnitee is entitled.
6. Mutual Acknowledgment. Both the Company and Indemnitee acknowledge that
in certain instances, Federal law or applicable public policy may prohibit the
Company from indemnifying its directors, officers, employees, agents or
fiduciaries under this Agreement or otherwise. Indemnitee understands and
acknowledges that the Company has undertaken or may be required in the future to
undertake with the Securities and Exchange Commission to submit the question of
indemnification to a court in certain circumstances for a determination of the
Company's right under public policy to indemnify Indemnitee.
7. Liability Insurance. The Company shall, from time to time, make the
good faith determination whether or not it is practicable for the Company to
obtain and maintain a policy or policies of insurance with reputable insurance
companies providing the officers and directors of the Company with coverage for
losses from wrongful acts, or to ensure the Company's performance of its
indemnification obligations under this Agreement. Among other considerations,
the Company will weigh the costs of obtaining such insurance coverage against
the protection afforded by such coverage. In all policies of directors' and
officers' liability insurance, Indemnitee shall be named as an insured in such a
manner as to provide Indemnitee the same rights and benefits as are accorded to
the most favorably insured of the Company's directors, if Indemnitee is a
director; or of the Company's officers, if Indemnitee is not a director of the
Company but is an officer; or of the Company's key employees, if Indemnitee is
not an officer or director but is a key employee. Notwithstanding the foregoing,
the Company shall have no obligation to obtain or maintain such insurance if the
Company determines in good faith that such insurance is not reasonably
available, if the premium costs for such insurance are disproportionate to the
amount of coverage provided, if the coverage provided by such insurance is
limited by exclusions so as to provide an insufficient benefit, or if Indemnitee
is covered by similar insurance maintained by a subsidiary or parent of the
Company.
8. Exceptions. Any other provision herein to the contrary notwithstanding,
the Company shall not be obligated pursuant to the terms of this Agreement:
(a) Excluded Action or Omissions. To indemnify Indemnitee for
Expenses resulting from acts, omissions or transactions for which
Indemnitee is prohibited from receiving indemnification under this
Agreement or applicable law;
(b) Claims Initiated by Indemnitee. To indemnify or advance expenses
to Indemnitee with respect to Claims initiated or brought voluntarily by
Indemnitee and not by way of defense, except (i) with respect to actions or
proceedings brought to establish or enforce a right to indemnification
under this Agreement or any other agreement or insurance policy or under
the Company's Certificate of Incorporation or Bylaws now or hereafter in
effect relating to Claims for Indemnifiable Events, (ii) in
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<PAGE> 69
specific cases if the Board of Directors has approved the initiation or
bringing of such Claim, or (iii) as otherwise required under Section 145 of
the Delaware General Corporation Law, regardless of whether Indemnitee
ultimately is determined to be entitled to such indemnification, advance
expense payment or insurance recovery, as the case may be;
(c) Lack of Good Faith. To indemnify Indemnitee for any expenses
incurred by Indemnitee with respect to any proceeding instituted by
Indemnitee to enforce or interpret this Agreement, if a court of competent
jurisdiction determines that each of the material assertions made by
Indemnitee in such proceeding was not made in good faith or was frivolous;
or
(d) Claims Under Section 16(b). To indemnify Indemnitee for expenses
and the payment of profits arising from the purchase and sale by Indemnitee
of securities in violation of Section 16(b) of the Securities Exchange Act
of 1934, as amended, or any similar successor statute.
9. Period of Limitations. No legal action shall be brought and no cause of
action shall be asserted by or in the right of the Company against Indemnitee,
Indemnitee's estate, spouse, heirs, executors or personal or legal
representatives after the expiration of two years from the date of accrual of
such cause of action, and any claim or cause of action of the Company shall be
extinguished and deemed released unless asserted by the timely filing of a legal
action within such two-year period; provided, however, that if any shorter
period of limitations is otherwise applicable to any such cause of action, such
shorter period shall govern.
10. Construction of Certain Phrases.
(a) For purposes of this Agreement, references to the "Company" shall
include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers,
employees, agents or fiduciaries, so that if Indemnitee is or was a
director, officer, employee, agent or fiduciary of such constituent
corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee, agent or fiduciary of another
corporation, partnership, joint venture, employee benefit plan, trust or
other enterprise, Indemnitee shall stand in the same position under the
provisions of this Agreement with respect to the resulting or surviving
corporation as Indemnitee would have with respect to such constituent
corporation if its separate existence had continued.
(b) For purposes of this Agreement, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include
any excise taxes assessed on Indemnitee with respect to an employee benefit
plan; and references to "serving at the request of the Company" shall
include any service as a director, officer, employee, agent or fiduciary of
the Company which imposes duties on, or involves services by, such
director, officer, employee, agent or fiduciary with respect to an employee
benefit plan, its participants or its beneficiaries; and if Indemnitee
acted in good faith and in a manner Indemnitee reasonably believed to be in
the interest of the participants and beneficiaries of an employee benefit
plan, Indemnitee shall be deemed to have acted in a manner "not opposed to
the best interests of the Company" as referred to in this Agreement.
(c) For purposes of this Agreement a "Change in Control" shall be
deemed to have occurred if, on or after the date of this Agreement, (i) any
"person" (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended), other than a trustee or other
fiduciary holding securities under an employee benefit plan of the Company
acting in such capacity or a corporation owned directly or indirectly by
the stockholders of the Company in substantially the same proportions as
their ownership of stock of the Company, becomes the "beneficial owner" (as
defined in Rule 13d-3 under said Act), directly or indirectly, of
securities of the Company representing more than 50% of the total voting
power represented by the Company's then outstanding Voting Securities, (ii)
during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board of Directors of the Company
and any new director whose election by the Board of Directors or nomination
for election by the Company's stockholders was approved by a vote of at
least two thirds ( 2/3) of the directors then still in office who either
were directors at the beginning of the period or whose election or
nomination for
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election was previously so approved, cease for any reason to constitute a
majority thereof, or (iii) the stockholders of the Company approve a merger
or consolidation of the Company with any other corporation other than a
merger or consolidation which would result in the Voting Securities of the
Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into Voting
Securities of the surviving entity) at least 80% of the total voting power
represented by the Voting Securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation, or the
stockholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of (in
one transaction or a series of related transactions) all or substantially
all of the Company's assets.
(d) For purposes of this Agreement, "Independent Legal Counsel" shall
mean an attorney or firm of attorneys, selected in accordance with the
provisions of Section 1(c) hereof, who shall not have otherwise performed
services for the Company or Indemnitees within the last three years (other
than with respect to matters concerning the rights of Indemnitees under
this Agreement, or of other indemnitees under similar indemnity
agreements).
(e) For purposes of this Agreement, a "Reviewing Party" shall mean any
appropriate person or body consisting of a member or members of the
Company's Board of Directors or any other person or body appointed by the
Board of Directors who is not a party to the particular Claim for which
Indemnitee are seeking indemnification, or Independent Legal Counsel.
(f) For purposes of this Agreement, "Voting Securities" shall mean any
securities of the Company that vote generally in the election of directors.
11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.
12. Binding Effect; Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the parties
hereto and their respective successors, assigns, including any direct or
indirect successor by purchase, merger, consolidation or otherwise to all or
substantially all of the business and/or assets of the Company, spouses, heirs,
and personal and legal representatives. The Company shall require and cause any
successor (whether direct or indirect by purchase, merger, consolidation or
otherwise) to all, substantially all, or a substantial part, of the business
and/or assets of the Company, by written agreement in form and substance
satisfactory to Indemnitee, expressly to assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform if no such succession had taken place. This Agreement shall
continue in effect with respect to Claims relating to Indemnifiable Events
regardless of whether Indemnitee continues to serve as a director, officer,
employee, agent or fiduciary of the Company or of any other enterprise at the
Company's request.
13. Attorneys' Fees. In the event that any action is instituted by
Indemnitee under this Agreement or under any liability insurance policies
maintained by the Company to enforce or interpret any of the terms hereof or
thereof, Indemnitee shall be entitled to be paid all Expenses incurred by
Indemnitee with respect to such action, regardless of whether Indemnitee is
ultimately successful in such action, and shall be entitled to the advancement
of Expenses with respect to such action, unless, as a part of such action, a
court of competent jurisdiction over such action determines that each of the
material assertions made by Indemnitee as a basis for such action was not made
in good faith or was frivolous. In the event of an action instituted by or in
the name of the Company under this Agreement to enforce or interpret any of the
terms of this Agreement, Indemnitee shall be entitled to be paid all Expenses
incurred by Indemnitee in defense of such action (including costs and expenses
incurred with respect to Indemnitee's counterclaims and crossclaims made in such
action), and shall be entitled to the advancement of Expenses with respect to
such action, unless, as a part of such action, a court having jurisdiction over
such action determines that each of Indemnitee's material defenses to such
action was made in bad faith or was frivolous.
14. Notice. All notices and other communications required or permitted
hereunder shall be in writing, shall be effective when given, and shall in any
event be deemed to be given (a) five (5) days after deposit with the U.S. Postal
Service or other applicable postal service, if delivered by first class mail,
postage prepaid,
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(b) upon delivery, if delivered by hand, (c) one business day after the business
day of deposit with Federal Express or similar overnight courier, freight
prepaid, or (d) one day after the business day of delivery by facsimile
transmission, if delivered by facsimile transmission, with copy by first class
mail, postage prepaid, and shall be addressed if to Indemnitee, at the
Indemnitee's address as set forth beneath Indemnitee's signature to this
Agreement and if to the Company at the address of its principal corporate
offices (attention: Secretary) or at such other address as such party may
designate by ten days' advance written notice to the other party hereto.
15. Consent to Jurisdiction. The Company and Indemnitee each hereby
irrevocably consent to the jurisdiction of the courts of the State of Delaware
for all purposes in connection with any action or proceeding which arises out of
or relates to this Agreement and agree that any action instituted under this
Agreement shall be commenced, prosecuted and continued only in the Court of
Chancery of the State of Delaware in and for New Castle County, which shall be
the exclusive and only proper forum for adjudicating such a claim.
16. Severability. The provisions of this Agreement shall be severable in
the event that any of the provisions hereof (including any provision within a
single section, paragraph or sentence) are held by a court of competent
jurisdiction to be invalid, void or otherwise unenforceable, and the remaining
provisions shall remain enforceable to the fullest extent permitted by law.
Furthermore, to the fullest extent possible, the provisions of this Agreement
(including, without limitations, each portion of this Agreement containing any
provision held to be invalid, void or otherwise unenforceable, that is not
itself invalid, void or unenforceable) shall be construed so as to give effect
to the intent manifested by the provision held invalid, illegal or
unenforceable.
17. Choice of Law. This Agreement shall be governed by and its provisions
construed and enforced in accordance with the laws of the State of Delaware, as
applied to contracts between Delaware residents, entered into and to be
performed entirely within the State of Delaware, without regard to the conflict
of laws principles thereof.
18. Subrogation. In the event of payment under this Agreement, the Company
shall be subrogated to the extent of such payment to all of the rights of
recovery of Indemnitee who shall execute all documents required and shall do all
acts that may be necessary to secure such rights and to enable the Company
effectively to bring suit to enforce such rights.
19. Amendment and Termination. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless it is in writing signed
by both the parties hereto. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provisions hereof
(whether or not similar) nor shall such waiver constitute a continuing waiver.
20. Integration and Entire Agreement. This Agreement sets forth the entire
understanding between the parties hereto and supersedes and merges all previous
written and oral negotiations, commitments, understandings and agreements
relating to the subject matter hereof between the parties hereto.
21. No Construction as Employment Agreement. Nothing contained in this
Agreement shall be construed as giving Indemnitee any right to be retained in
the employ of the Company or any of its subsidiaries.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
SOLECTRON CORPORATION,
a Delaware corporation
By:
--------------------------------------
Title:
--------------------------------------
Address:
--------------------------------------
--------------------------------------
--------------------------------------
AGREED TO AND ACCEPTED BY:
- --------------------------------------
[Signature of Indemnitee]
Address:
- --------------------------------------
- --------------------------------------
- --------------------------------------
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PROXY SOLECTRON CORPORATION
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Koichi Nishimura and Susan Wang, and each
of them, with full power of substitution, to represent the undersigned and to
vote all of the shares of stock in Solectron Corporation (the "Company") which
the undersigned is entitled to vote at the Annual Meeting of the Stockholders of
the Company to be held at The Westin Hotel, Santa Clara, 5101 Great America
Parkway, Santa Clara, California 95054 on Thursday, January 9, 1997 at 9:00 a.m.
Pacific Time, and at any adjournment thereof (1) as hereinafter specified upon
the proposals listed on the reverse side and as more particularly described in
the Proxy Statement of the Company dated December 2, 1996 (the "Proxy
Statement"), receipt of which is hereby acknowledged, and (2) in their
discretion, upon such other matters as may properly come before the meeting. The
undersigned hereby acknowledges receipt of the Company's Annual Report for the
year ended August 31, 1996.
THE SHARES REPRESENTED HEREBY SHALL BE VOTED AS SPECIFIED. IF NO
SPECIFICATION IS MADE, SUCH SHARES SHALL BE VOTED FOR PROPOSALS 1 THROUGH 5.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE.
/ X / PLEASE MARK VOTES AS IN THIS EXAMPLE
<PAGE> 74
1. ELECTION OF DIRECTORS.
Nominees:
FOR WITHHELD
Koichi Nishimura, Ph.D. / / / /
Winston H. Chen, Ph.D. / / / /
Richard A. D'Amore / / / /
Charles A. Dickinson / / / /
Heinz Fridrich / / / /
Kenneth E. Haughton, Ph.D. / / / /
Paul R. Low, Ph.D. / / / /
W. Ferrell Sanders / / / /
Osamu Yamada / / / /
MARK HERE IF YOU PLAN TO ATTEND THE MEETING / /
MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW / /
2. PROPOSAL TO APPROVE A CHANGE IN THE COMPANY'S STATE OF INCORPORATION
FROM CALIFORNIA TO DELAWARE.
FOR AGAINST ABSTAIN
/ / / / / /
3. PROPOSAL TO APPROVE THE FORM OF INDEMNIFICATION AGREEMENT BETWEEN THE
COMPANY AND ITS DIRECTORS AND OFFICERS. (TO BE IMPLEMENTED IF APPROVED AND IF
PROPOSAL TWO ABOVE IS APPROVED AND AFTER THE PROPOSED REINCORPORATION IN
DELAWARE.)
FOR AGAINST ABSTAIN
/ / / / / /
4. PROPOSAL TO APPROVE AN AMENDMENT TO THE COMPANY'S 1992 STOCK OPTION PLAN TO
INCREASE THE AGGREGATE MAXIMUM NUMBER OF SHARES ISSUABLE THEREUNDER TO
8,500,000.
FOR AGAINST ABSTAIN
/ / / / / /
5. PROPOSAL TO RATIFY THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS THE COMPANY'S
INDEPENDENT ACCOUNTANTS FOR THE FISCAL YEAR ENDING AUGUST 31, 1997.
FOR AGAINST ABSTAIN
/ / / / / /
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO SIGN
AND PROMPTLY MAIL THIS PROXY IN THE RETURN ENVELOPE SO THAT YOUR STOCK MAY BE
REPRESENTED AT THE MEETING.
Signature: _____________________________________________ Date ____________
Signature: _____________________________________________ Date ____________
