<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities and Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c)
or Section 240.14a-12
SVI HOLDINGS, INC.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction
applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
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4) Proposed maximum aggregate value of transaction:
--------------------------------------------------------------
5) Total fee paid:
--------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement Number:
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3) Filing party:
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4) Date filed:
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October 23, 2000
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
on Thursday, November 16, 2000 at 9 a.m., Pacific Daylight Time. The meeting
will be held at 12707 High Bluff Drive, Suite 335, San Diego, California 92130.
The matters to be voted upon at the meeting will be:
o The election of directors;
o The approval of a plan of merger by which the Company will
change its state of incorporation from Nevada to Delaware;
o A change in the corporate name to "SVI Solutions, Inc.";
o An increase in the number of shares of common stock authorized
from 50,000,000 to 100,000,000;
o A reduction of the required quorum at meetings of stockholders
from a majority of the outstanding shares to one-third of the
outstanding shares;
o Amendments to the 1998 Incentive Stock Plan ("1998 Plan") to:
(i) increase the aggregate number of shares of common stock
authorized for issuance under the 1998 Plan to 4,000,000
shares; (ii) authorize an automatic annual increase in the
shares reserved for issuance under the 1998 Plan by an amount
equal to the lesser of 2% of the total number of shares
outstanding on the last trading day of the fiscal year or
600,000 shares (or a lesser amount as determined by the
Board); and (iii) prohibit the granting of stock awards under
the 1998 Plan to any one participant in excess of 500,000
shares in any calendar year.
o Ratification of the Company's continued engagement of Deloitte
& Touche LLP as the Company's independent auditors for the
fiscal year ending March 31, 2001.
Please complete and sign the enclosed proxy card and return it
promptly. This will ensure that your shares are represented at the meeting even
if you cannot attend. Returning your proxy card to us will not prevent you from
voting in person at the meeting if you are present and wish to do so.
Thank you for your cooperation in returning your proxy card as promptly
as possible. We hope to see many of you at our meeting in San Diego.
Very truly yours,
/S/ Barry M. Schechter
----------------------
Barry M. Schechter
Chairman of the Board
<PAGE>
SVI HOLDINGS, INC.
12707 High Bluff Drive, Suite 335
San Diego, CA 92130
(858) 481-4404
____________________________________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
____________________________________________
TO BE HELD ON NOVEMBER 16, 2000
____________________________________________
TO ALL STOCKHOLDERS:
An annual meeting of the stockholders of SVI Holdings, Inc. (the
"Company") will be held on November 16, 2000 at 9 a.m., Pacific Daylight Time.
The meeting will be held at 12707 High Bluff Drive, Suite 335, San Diego,
California 92130. The following items will be on the agenda:
1. The election of eight directors to serve until the next Annual
Meeting of Stockholders and until their successors are elected
and qualified;
2. The approval of a plan of merger by which the Company will
change its state of incorporation from Nevada to Delaware;
3. The approval of a change of the corporate name to "SVI
Solutions, Inc."
4. The approval of an increase in the authorized common stock
from 50,000,000 shares to 100,000,000 shares;
5. The approval of a change in the Articles of Incorporation and
the Bylaws reducing the required quorum at meetings of
stockholders from a majority of the outstanding shares to
one-third of the outstanding shares;
6. Amendments to the 1998 Incentive Stock Plan ("1998 Plan") to:
(i) increase the aggregate number of shares of common stock
authorized for issuance under the 1998 Plan to 4,000,000
shares; (ii) authorize an automatic annual increase in the
shares reserved for issuance under the 1998 Plan by an amount
equal to the lesser of 2% of the total number of shares
outstanding on the last trading day of the fiscal year or
600,000 shares (or a lesser amount as determined by the
Board); and (iii) prohibit the granting of stock awards under
the 1998 Plan to any one participant in excess of 500,000
shares in any calendar year.
7. The ratification of the Company's continued engagement of
Deloitte & Touche LLP as the Company's independent auditors
for the fiscal year ending March 31, 2001; and
8. The transaction of any other business which may properly come
before the meeting.
Only stockholders of record at the close of business on October 2, 2000
will be entitled to vote at this meeting.
<PAGE>
Please execute and return the accompanying proxy card as soon as
possible. Any Stockholder who signs and returns the accompanying proxy may
revoke it at any time before it is exercised.
By Order of the Board of Directors
/S/ David L. Reese
------------------
DAVID L. REESE
Secretary
San Diego, California
October 23, 2000
<PAGE>
SVI HOLDINGS, INC.
12707 High Bluff Drive, Suite 335
San Diego, CA 92130
(858) 481-4404
____________________________________________
PROXY STATEMENT
____________________________________________
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 16, 2000
____________________________________________
INFORMATION CONCERNING SOLICITATION AND VOTING
____________________________________________
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
SVI Holdings, Inc., a Nevada corporation (the "Company"), for use at the Annual
Meeting of Stockholders to be held on November 16, 2000, at 9 a.m. local time
(the "Annual Meeting"), or at any adjournment or postponement thereof, for the
purposes set forth herein and in the accompanying Notice of Annual Meeting. The
Annual Meeting will be held at 12707 High Bluff Drive, Suite 335, San Diego,
California 92130. The Company intends to mail this proxy statement and
accompanying proxy card on or about October 23, 2000, to all stockholders
entitled to vote at the Annual Meeting.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies,
including preparation, assembly, printing and mailing of this proxy statement,
the proxy card and any additional information furnished to stockholders. Copies
of solicitation materials will be furnished to banks, brokerage houses,
fiduciaries and custodians holding in their names shares of common stock
beneficially owned by others to forward to such beneficial owners. The Company
may reimburse persons representing beneficial owners of common stock for their
costs of forwarding solicitation materials to such beneficial owners. Original
solicitation of proxies by mail may be supplemented by telephone, telegram or
personal solicitation by directors, officers or other regular employees of the
Company. No additional compensation will be paid to directors, officers or other
regular employees for such services.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of common stock at the close of business on
October 2, 2000 will be entitled to notice of and to vote at the Annual Meeting.
As of that record date, the Company had outstanding and entitled to vote
33,955,605 shares of common stock.
Each holder of record of common stock on October 2, 2000 will be
entitled to one vote for each share held on all matters to be voted upon at the
Annual Meeting. If the proxy is signed and returned without any direction given,
shares will be voted in accordance with the Board of Directors' recommendations.
All votes will be tabulated by the inspector of election appointed for the
meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions will be counted towards the
tabulation of votes cast on proposals presented to the stockholders and will
have the same effect as negative votes. Except for Proposals 2, 3, 4 and 5,
broker non-votes are counted towards a quorum, but are not counted for any
purpose in determining whether a matter has been approved. With respect to
Proposals 2, 3, 4 and 5, abstentions and broker non-votes will have the same
effect as negative votes.
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REVOCABILITY OF PROXIES
Any stockholder granting a proxy pursuant to this solicitation has the
power to revoke it at any time before it is voted. A proxy may be revoked by
filing with the Company's Secretary at the Company's principal executive office,
12707 High Bluff Drive, Suite 335, San Diego, California 92130, a written
revocation or a duly executed proxy bearing a later date, or it may be revoked
by attending the Annual Meeting and voting in person. Attendance at the meeting
will not, by itself, revoke a proxy.
If a proxy is provided but no instructions are given, the proxy will be
voted FOR Proposal 1 relating to management's slate of directors, FOR Proposals
2 through 5 relating to the Company's reincorporation in Delaware from Nevada,
FOR Proposal 6 relating to the amendments to the 1998 Plan, and FOR Proposal 7
relating to ratification of the Company's continued engagement of Deloitte &
Touche LLP as the Company's independent auditors for the fiscal year ending
March 31, 2001.
STOCKHOLDER PROPOSALS
Stockholder proposals for inclusion in the Company's proxy statement
and form of proxy for the Company's 2001 Annual Meeting pursuant to Rule 14a-8
of the Securities and Exchange Commission must be received at the Company's
principal executive office, 12707 High Bluff Drive, Suite 335, San Diego,
California 92130, by June 25, 2001. Stockholders wishing to submit proposals or
director nominations that are not to be included in such proxy statement and
proxy must do so no later than the close of business on the 90th day nor earlier
than the close of business on the 120th day prior to the first anniversary of
the preceding year's annual meeting. Stockholders are also advised to review the
Company's Bylaws, which contain additional requirements with respect to advance
notice of stockholder proposals and director nominations.
PROPOSAL 1
ELECTION OF DIRECTORS
There are eight nominees for the eight Board of Director positions
presently authorized by the Company's Bylaws. Each director to be elected will
hold office until the next annual meeting of stockholders and until his
successor is elected and has qualified, or until such director's earlier death,
resignation or removal. Each nominee listed below is currently a director of the
Company.
Directors are elected by a plurality of the votes present in person or
represented by proxy and entitled to vote. Shares represented by executed
proxies will be voted, if authority to do so is not withheld, for the election
of the eight nominees named below. In the event that any nominee should be
unavailable for election as a result of an unexpected occurrence, such shares
will be voted for the election of such substitute nominee as management may
propose. Each person nominated for election has agreed to serve if elected and
management has no reason to believe that any nominee will be unable to serve.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF EACH NAMED NOMINEE.
NOMINEES
The names of the nominees and certain information about them are set
forth below:
NAME AGE POSITION
---- --- --------
Barry M. Schechter 46 Chairman , Chief Executive Officer
and Director
David L. Reese 55 Chief Financial Officer, Secretary
and Director
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Arthur S. Klitofsky 46 Vice President and Director
Donald S. Radcliffe 55 Director
Ivan M. Epstein 39 Director
Gerald Rubenstein 66 Director
Ian Bonner 45 Director
Steven Cohen 38 Director
Barry M. Schechter has been Chairman of the Board and Chief Executive
Officer of the Company from February 1994 to the present. He has been Chief
Executive Officer of the Company's predecessor and wholly-owned subsidiary,
Sabica Ventures, Inc., since its inception in February 1990. He also serves as
Chairman of the Board of each of the Company's other subsidiaries. Mr. Schechter
is a director of Softline Limited ("Softline"), which beneficially owns 56.1% of
the outstanding common stock of the Company, and which is listed on the
Johannesburg Stock Exchange. Mr. Schechter is also a director of Integrity
Software, Inc., for which the Company has an indirect equity interest (see
"Certain Relationships and Related Transactions").
David L. Reese became a director of the Company in July 1998. He joined
the Company in November 1997 and became Chief Financial Officer and Secretary in
February 1998. Prior to joining the Company, Mr. Reese served as Chief Financial
Officer for Pygmalion Asset Management Company from 1993 to 1997. Mr. Reese has
served in various financial and accounting capacities for a number of public
companies over the past twenty years. Mr. Reese received a B.S. and an M.S. from
the University of Southern California. He is a certified public accountant.
Arthur Klitofsky has been Vice President and a director of the Company
from February 1994 to the present. He has been President of the Company's SVI
Training Products, Inc. subsidiary since 1991. From 1985 to 1991, he was
Managing Director of Punch Line Columbia Training Ltd., which became the largest
computer education company in South Africa. Mr. Klitofsky has a Bachelor of
Science Degree in Electrical Engineering from the University of Witwatersrand,
Johannesburg, South Africa and a Bachelor in Accounting Science Degree from the
University of South Africa.
Donald S. Radcliffe became a director of the Company in May 1998. He
has been President of Radcliffe & Associates since 1990. Radcliffe & Associates
provides financial consulting services to public companies, and currently
provides financial advisory and public relations services to the Company. Since
1984 he has also been Executive Vice President and Chief Operating and Financial
Officer of World-Wide Business Centres, which is a privately held operator of
shared office space facilities. Mr. Radcliffe is a director of Complete Wellness
Centers, Inc. and Integrity Software, Inc. The Company has an indirect equity
interest in Integrity Software, Inc. (see "Certain Relationships and Related
Transactions"). Mr. Radcliffe received a B.S. from Lehigh University and an
M.B.A. from Dartmouth College. He is a certified public accountant.
Ivan M. Epstein became a director of the Company in May 1998. He is the
Chief Executive Officer and a director of Softline, which he co-founded in 1988.
Softline is listed in the Information Technology sector of the Johannesburg
Stock Exchange and is one of the largest accounting software vendors in the
world. Softline operates in 37 countries with products available in eight
languages, and targets mainly small to medium size enterprises. Softline
beneficially owns 56.1% of the outstanding common stock of the Company. Mr.
Epstein is also a director of Integrity Software, Inc., for which the Company
has an indirect equity interest (see "Certain Relationships and Related
Transactions").
Gerald Rubenstein became a director of the Company in May 1998. He is
an attorney in South Africa and is currently a consultant to the law firm of
Fluxman Rabinowitz-Raphaely Weiner. He specializes in corporate finance and
mergers and acquisitions. He is also the chairman of Protea Furnishers Limited
and Vestacor Limited. He currently serves as a director of seven public
companies in South Africa, including Softline, which beneficially owns 56.1% of
the outstanding common stock of the Company.
3
<PAGE>
Ian Bonner became a director of the Company in May 1998. Since 1993 he
has held various positions with IBM Corporation, and he currently serves as Vice
President of Partner Marketing and Programs for the IBM/Lotus/Tivoli Software
Group. His responsibilities include the development and implementation of
marketing campaigns and programs designed to serve the business partners of IBM,
Lotus and Tivoli, including major accounts, independent software vendors and
global systems integrators. He also oversees the IBM BESTeam and the Lotus
Business Partner programs which are designed to provide enhanced opportunities,
including education, marketing and training support, to qualified providers of
IBM's and Lotus's portfolio of network solutions. Mr. Bonner received a Bachelor
of Commerce from the University of the Witwatersrand in 1976 and a graduate
degree in Marketing Management and Market Research and Advertising from the
University of South Africa in 1978.
Steven Cohen became a director of the Company in June 2000. He is the
Chief Operating Officer and a director of Softline, which he joined in 1989 as
financial director. Mr. Cohen played a key role in the development of Softline's
"Brilliant Accounting" software package, and he was an active participant in the
growth of Softline to its current position as one of the largest international
providers of midrange accounting software. Softline beneficially owns 56.1% of
the outstanding common stock of the Company.
There are no family relationships among the directors. There are no
arrangements or understandings between any director and any other person
pursuant to which that director was or is to be elected.
COMMITTEES AND MEETINGS
During fiscal year 2000, the Board of Directors met seven times and
acted by unanimous written consent one time. No director attended less than 75%
of the total of Board and committee meetings held during the director's tenure
on the Board and its committees. The Board of Directors has a Compensation
Committee and an Audit Committee.
The Board of Directors formed a Compensation Committee in April 1998.
The Compensation Committee's primary function is to establish the Company's
compensation policies and recommend to the Board the compensation arrangements
for senior management and directors. Beginning April 1, 2000, the Compensation
Committee will recommend the adoption of compensation plans in which officers
and directors are eligible to participate and the granting of stock options or
other benefits to executive officers. The Board of Directors as a whole
previously approved all grants of stock options under the Company's stock option
plans. Current members of the Compensation Committee are Ian Bonner and Gerald
Rubenstein. The Compensation Committee met two times during the fiscal year.
The Board of Directors also formed an Audit Committee in April 1998.
The purpose of the Audit Committee is to assist the Board in fulfilling its
responsibilities for financial reporting by the Company. The Audit Committee
recommends the engagement and discharge of independent auditors, reviews with
independent auditors the audit plan and the results of the audit, reviews the
independence of the independent auditors, reviews internal accounting procedures
and discharges such other duties as may from time to time be assigned to it by
the Board of Directors. Current members of the Audit Committee are Ian Bonner
and Donald S. Radcliffe. The Audit Committee met two times during the fiscal
year.
DIRECTOR COMPENSATION
No direct or indirect remuneration has been paid or is payable by the
Company to the directors in their capacity as directors during the fiscal year
ended March 31, 2000. The Company does not anticipate paying during the fiscal
year ending March 31, 2001 any direct or indirect remuneration to any directors
of the Company in their capacity as directors other than reimbursement of
expenses for attending directors' or committee meetings and discretionary stock
option grants under the 1998 Plan. During the fiscal year ended March 31, 2000,
Ivan Epstein received an option to purchase 100,000 shares of the common stock
of the Company at an exercise price of $7.75. The option expires on October 20,
2009 and is fully vested.
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PROPOSALS 2 THROUGH 5
REINCORPORATION IN DELAWARE AND
RELATED CHANGES TO ORGANIZATIONAL DOCUMENTS
The following discussion summarizes certain aspects of the proposed
reincorporation in Delaware (the "Reincorporation") and changes to the Company's
organizational documents occurring simultaneously with the Reincorporation. It
is a summary only and is subject to:
o the Nevada Revised Statutes ("Nevada Law");
o the General Corporation Law of the State of Delaware
("Delaware Law");
o the Agreement and Plan of Merger (the "Merger Agreement"), a
copy of which is attached as Exhibit A;
o the current Articles of Incorporation of the Company (the
"Nevada Charter");
o the Restated Certificate of Incorporation of SVI Solutions,
Inc. (the "Delaware Charter"), a copy of which is attached as
Exhibit B;
o the current Amended and Restated Bylaws of the Company (the
"Nevada Bylaws"); and
o the Restated Bylaws of SVI Solutions, Inc. (the "Delaware
Bylaws"), a copy of which is attached as Exhibit C.
Copies of the Nevada Charter and the Nevada Bylaws are available from
the Company at no charge upon written request.
The Company requested and received the affirmative vote of a majority
of the stockholders at the Annual Meeting of Stockholders held on August 30,
1999 for Proposal 2 to change the state of incorporation from Nevada to
Delaware, for Proposal 4 to approve an increase in the authorized common stock
from 50,000,000 shares to 100,000,000 shares and for Proposal 5 to reduce the
required quorum at meetings of stockholders from a majority of the outstanding
Shares to one-third of the outstanding shares. However, the Company did not
consummate these proposals due to the unavailability in Delaware of the new name
of the Company approved by stockholders in 1999. The Company determined to ask
the stockholders to approve the name "SVI Solutions, Inc." at the 2000 annual
meeting, and, as a matter of good corporate governance, to seek reapproval for
the other proposals related to reincorporation in Delaware.
Stockholders are being asked to vote separately on the Reincorporation
as proposed herein and each of three material changes to the Company's
organizational documents. Stockholders are not being asked to vote separately on
non-material changes to the organizational documents or changes made solely to
conform to differences between Delaware Law and Nevada Law. These differences
are summarized in the discussions below. In the event some but not all of the
following proposals are adopted by the stockholders, the Board of Directors will
determine which if any of the approved proposals will be implemented.
The Board of Directors approved the Reincorporation as proposed herein
and the change of corporate name to "SVI Solutions, Inc." on February 14, 2000.
The Board approved the current form of the Delaware Charter and the Delaware
Bylaws as proposed herein on August 18, 2000.
Under Nevada Law, the merger which will effect the Reincorporation must
be approved by the affirmative vote of the holders of a majority of the
outstanding shares of Company common stock. Although all changes to the
Company's organizational documents could be approved by the same vote which
approves the Reincorporation, the Company will seek the vote of a majority of
the outstanding shares of Company common stock for each such separate proposal.
Softline Limited owns a sufficient number of shares of Company common stock in
order to approve the Reincorporation and each of the changes to the Company's
organizational documents. Softline has indicated that it intends to vote FOR the
Reincorporation and each of the changes to the Company's organizational
documents.
5
<PAGE>
NOTE ON PREVIOUSLY ANNOUNCED POSSIBLE BUSINESS COMBINATION WITH
SOFTLINE LIMITED
The Company announced in May 2000 that it was in preliminary
discussions with Softline concerning a possible business combination. In October
2000, the Company and Softline determined that a business combination between
the two companies was not compatible with the current strategic directions of
each company, and terminated further talks on the matter. See "Certain
Relationships and Related Transactions -- Transactions With Softline." Proposals
2 through 5 were not designed to facilitate a possible business combination
between the Company and Softline, and the Company does not believe they would
have that effect. The following information is provided to further stockholders'
understanding of the applicable rules which would have applied if the previously
contemplated business combination with Softline were to go forward. The Company
has no current intention of proceeding with a business combination with
Softline.
The provisions of Nevada Law and Delaware Law concerning requirements
for stockholder approval of business combinations of the type previously
contemplated between the Company and Softline are substantially identical. Under
the laws of both Nevada and Delaware, approval of the Company's stockholders
will be required if the Company merges with Softline, unless the Company is the
surviving corporation and all of the following conditions are met: (i) the
agreement of merger does not amend the articles or certificate of incorporation
of the Company; (ii) each share of the Company's stock outstanding prior to the
merger continues to be an identical outstanding share of the surviving
corporation; and (iii) the shares of common stock (plus those convertible into
common stock) to be delivered in the merger do not exceed 20 percent of the
shares of common stock of the Company outstanding immediately prior to the
merger. Approval of the Company's stockholders would not be required under
either Nevada Law or Delaware Law for a so-called triangular merger where
Softline merges into a wholly-owned subsidiary of the Company in exchange for
securities of the Company, or for a transaction where the Company acquires all
of the assets of Softline in exchange for securities of the Company. Where
stockholder approval is required for a merger between the Company and Softline,
neither Nevada Law nor Delaware Law would require the separate approval of a
majority of the Company's stockholders other than Softline. However, if a
stockholder were to challenge the fairness of a transaction with Softline,
courts in either state may afford a rebuttable presumption of fairness to the
Company if material facts concerning the transaction are fully disclosed and the
transaction is approved by a majority of the Company's stockholders other than
Softline.
The rules of the American Stock Exchange require the Company to seek
stockholder approval for certain transactions involving the issuance of the
Company's common stock. See "Proposal 4 -- Increase in Authorized
Capitalization." The Company has made no determination as to whether it would
seek stockholder approval, or separate approval of minority stockholders, in
situations where state corporation law or the rules of the American Stock
Exchange do not require such approval. Neither Nevada Law nor Delaware Law would
afford stockholders dissenters rights in a business combination with Softline
due to statutory exemptions for companies whose securities trade on a national
exchange.
PROPOSAL 2
REINCORPORATION IN DELAWARE
PURPOSE OF THE REINCORPORATION
The primary reason for the Board's recommendation of the
Reincorporation is the well-developed case law interpreting Delaware Law. The
Board believes the guidance of prior Delaware decisions will allow it to more
effectively perform its duties. Although the provisions of Nevada Law are
similar in a number of respects to those of Delaware Law, there is a lack of
predictability under Nevada Law resulting from the limited body of case law
interpreting Nevada Law. Delaware law and the court decisions construing it are
widely regarded as the most extensive and well-defined body of corporate law in
the United States.
Delaware has a long-established policy of encouraging companies to
incorporate in that state. In furtherance of that policy, Delaware has been a
leader in adopting comprehensive, modern and flexible corporate laws which are
periodically updated and revised to meet changing business needs. As a result,
many major corporations have initially chosen Delaware for their domicile or
have subsequently reincorporated in Delaware in a manner similar to that
proposed by the Company. Delaware's courts have therefore developed considerable
expertise in dealing with corporate issues
6
<PAGE>
and a substantial body of case law has developed construing Delaware Law and
establishing public policies with respect to corporate legal issues.
The Board therefore believes that the overall effect of the
Reincorporation will be to enhance the Board's ability to consider all
appropriate courses of action with respect to significant transactions, along
with more general corporate matters, for the benefit of all stockholders.
Moreover, the Board believes that enhanced certainty with respect to the duties
of directors could be an important factor in attracting and retaining quality
persons to serve on the Board of Directors.
MECHANICS OF THE REINCORPORATION
The Reincorporation will be effected by merging the Company with and
into SVI Solutions, Inc. ("SVI Solutions"), a Delaware corporation. SVI
Solutions has been formed solely for the purpose of this merger (the "Merger")
and has no operations. At the effective time of the Merger, the corporate
existence of the Company will cease and each share of SVI Holdings common stock
issued and outstanding immediately prior to the Merger will be converted
automatically into one share of SVI Solutions common stock. If the Company
issues any shares of preferred stock prior to the Merger, each such share will
be converted automatically into one share of SVI Solutions preferred stock with
the same relative rights, preferences and limitations. Each outstanding option
to purchase SVI Holdings common stock will be converted into an option to
purchase the same number of shares of SVI Solutions common stock. Holders of SVI
Holdings common or preferred stock certificates may be asked to surrender such
certificates in exchange for an SVI Solutions common or preferred stock
certificate. Unless and until surrendered, each certificate representing SVI
Holdings common or preferred stock will be deemed to represent the same number
of shares of SVI Solutions common or preferred stock.
From and after the effective time of the Merger: (i) the name of the
surviving corporation will be "SVI Solutions, Inc."; (ii) SVI Solutions will
conduct business as presently conducted by the Company; (iii) the charter and
bylaws of SVI Solutions in effect immediately prior to the Merger will be the
charter and bylaws of the surviving corporation; and (iv) the directors and
officers of SVI Holdings immediately prior to the Merger will be the directors
and officers of SVI Solutions.
Following the consummation of the Merger and the resulting change of
the Company's name to "SVI Solutions, Inc.," the SVI Solutions common stock will
be identified by a new CUSIP number but will continue to trade on the American
Stock Exchange under the symbol "SVI." The Merger may be abandoned by the Boards
of Directors of the Company and SVI Solutions at any time prior to the effective
time of the Merger. If the Merger is abandoned, the Board of Directors of the
Company may in its discretion implement changes to the organizational documents
approved by the stockholders at the Annual Meeting, although such changes would
in that case be made to the Nevada Charter and the Nevada Bylaws, as
appropriate.
The Boards of Directors of the Company and SVI Solutions may amend the
Merger Agreement at any time prior to the effective time of the Merger. If the
amendment would alter or change the amount or nature of the securities of SVI
Solutions to be received in the merger, or would otherwise adversely affect the
holders of SVI Holdings common stock, the Company will seek shareholder approval
of such amendment. The Boards of Directors may also abandon the Merger and the
Merger Agreement at any time prior to the filing of the Merger Agreement with
the Delaware Secretary of State, notwithstanding the approval of the Merger by
the Company's stockholders.
NO DISSENTERS RIGHT IN RESPECT OF THE MERGER
The Company's stockholders will have no right of dissent in connection
with the Merger due to a Nevada statutory exemption for companies whose
securities trade on a national securities exchange. SVI Holdings common stock is
listed on the American Stock Exchange and after the Merger, the shares of SVI
Solutions common stock will be listed on the American Stock Exchange. The Board
of Directors of SVI Solutions has no present intention to take any action to
delist the SVI Solutions common stock from the American Stock Exchange.
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CONVERSION OF COMPANY COMMON STOCK
By virtue of the Merger, each share of SVI Holdings common stock will
be converted, without any action on the part of the holder thereof, into one
share of SVI Solutions common stock.
PLEASE DO NOT SEND IN ANY OF YOUR STOCK CERTIFICATES REPRESENTING
SHARES OF COMPANY COMMON STOCK. UNTIL SUCH TIME AS SURRENDER OF SVI HOLDINGS
COMMON STOCK IS REQUIRED, DELIVERY OF SVI HOLDINGS STOCK CERTIFICATES WILL
CONSTITUTE DELIVERY FOR TRANSACTIONS IN SHARES OF SVI SOLUTIONS COMMON STOCK
AFTER THE EFFECTIVE DATE OF THE MERGER. FOLLOWING CONSUMMATION OF THE MERGER,
POSITIONS IN SHARES OF SVI HOLDINGS COMMON STOCK HELD WITH THE DEPOSITORY TRUST
COMPANY WILL BE TRANSFERRED AUTOMATICALLY TO POSITIONS IN THE SAME NUMBER OF
SHARES OF SVI SOLUTIONS COMMON STOCK.
APPROVALS
A Certificate of Merger must be filed with the State of Delaware and
Articles of Merger must be filed with the State of Nevada to effect the Merger.
In addition, SVI Solutions will be required to file a Form 8-K with the
Securities and Exchange Commission, post-effective amendments to the Company's
effective registration statements which relate to ongoing offerings and a
substitution listing application with the American Stock Exchange. Except for
these filings, no federal or state regulatory requirements apply and no
approvals are required in connection with the Merger.
COMPARISON OF DELAWARE LAW TO NEVADA LAW
The corporation laws of Delaware and Nevada differ in some respects. It
is impracticable to summarize all of the differences in this Proxy Statement,
but certain differences between Nevada Law and Delaware Law that could affect
the rights of stockholders of the Company are as follows:
1. TENDER OFFER AND BUSINESS COMBINATION STATUTES. Delaware Law
regulates hostile takeovers by providing that an "interested stockholder,"
defined as a stockholder owning 15% or more of the corporation's voting stock or
an affiliate or associate thereof, may not engage in a "business combination"
transaction, defined to include a merger, consolidation or a variety of
self-dealing transactions, with the corporation for a period of three years from
the date on which such stockholder became an "interested stockholder" unless (i)
prior to such date the corporation's board of directors approved either the
"business combination" transaction or the transaction in which the stockholder
became an "interested stockholder", (ii) the stockholder, in a single
transaction in which he became an "interested stockholder," acquires at least
85% of the voting stock outstanding at the time the transaction commenced
(excluding shares owned by certain employee stock plans and persons who are
directors and also officers of the corporation) or (iii) on or subsequent to
such date, the "business combination" transaction is approved by the
corporation's board of directors and authorized at an annual or special meeting
of the corporation's stockholders, by the affirmative vote of at least
two-thirds of the outstanding voting stock not owned by the "interested
stockholder." A Delaware corporation may elect not to be governed by Section 203
of the Delaware Law by an express provision to that effect in its certificate of
incorporation, but SVI Solutions has not made such election. Accordingly, SVI
Solutions will be subject to Section 203.
Nevada Law regulates hostile takeovers of publicly traded corporations
by providing that an "interested stockholder," defined as a stockholder owning
10% or more of the corporation's voting stock or an affiliate or associate
thereof, may not engage in a "business combination" with the corporation for a
period of three years from the date on which such stockholder became an
"interested stockholder" unless (i) prior to such date the corporation's board
of directors approved either the "business combination" transaction or the
transaction in which the stockholder became an "interested stockholder" or (ii)
no earlier than three years after such stockholder became an "interested
stockholder" the majority of the outstanding voting power approves the "business
combination." Nevada Law further regulates tender offers and business
combinations involving certain Nevada corporations by providing that any
acquisition by a person, either directly or indirectly, of ownership of, or the
power to direct the voting of, 20% or more ("Control Shares") of the outstanding
voting securities of a corporation is a "Control Share Acquisition." These
provisions apply only to "issuing corporations," which are (i) corporations with
at least 200 stockholders, at least 100 or more of which are located in Nevada,
and (ii) which do business in Nevada. A Control Share Acquisition must be
approved by a majority of each class of outstanding voting securities of such
corporation excluding the shares held or controlled by the person seeking
approval before the Control Shares may be voted. A special meeting of
stockholders must be held by the corporation to approve a Control Share
Acquisition within 50 days after a request for such meeting
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is submitted by the person seeking to acquire control. If the Control Shares are
accorded full voting rights and the acquiring person has acquired Control Shares
with a majority or more of the voting power of the Corporation, all stockholders
who have not voted in favor of granting full voting rights to the Control Shares
would have dissenters rights. Nevada Law provides that a corporation may elect
out of the Control Share protections by expressly specifying so in its articles
or bylaws. SVI Holdings has not elected out of these provisions, but believes
that they have not applied because SVI Holdings has not met the definition of an
"issuing corporation."
3. REMOVAL OF DIRECTORS. Under Nevada Law, a vote of two-thirds of the
outstanding voting shares is required to remove a director. Under Delaware Law,
the holders of a majority of shares entitled to vote at a meeting may remove one
or more directors.
4. PERSONAL LIABILITY OF DIRECTORS. Under Delaware Law, directors are
jointly and severally liable to a corporation for violations of statutory
provisions relating to the purchase or redemption of a corporation's own shares
or the payment of dividends, for a period of six years from the date of such
unlawful act. A director who was either absent or dissented from the taking of
such action may exonerate himself from liability by causing his dissent to be
entered in the corporation's minutes. Under Nevada Law, directors are jointly
and severally liable to the corporation for violations of statutory provisions
relating to the purchase of a corporation's own shares, the payment of
dividends, the distribution of assets in liquidation or any loans or guarantees
made to a director, until the repayment thereof. Under Nevada Law, absent
directors are not liable as long as they did not vote for or assent to any of
the illegal acts and, unlike Delaware Law, Nevada Law allows a director who was
present at a meeting which approved an illegal act to avoid liability, even if
he did not register his dissent in the minutes of the meeting, by voting against
the illegal act and registering his dissent at a later time in a separate
writing filed with the secretary of the meeting.
5. LOANS TO OFFICERS. Under Nevada Law, there is no specific
restriction with respect to a loan or guaranty to or for the benefit of a
corporation's officers or employees and those of its subsidiaries. However, such
transactions may be void or voidable if the transaction at issue is not fair to
the corporation at the time it is authorized or approved by the board. Under
Delaware Law, a corporation may make loans to, guarantee the obligations of, or
otherwise assist, its officers or other employees and those of its subsidiaries
when such action, in the judgment of the Company's Board of Directors, may
reasonably be expected to benefit the Company.
6. INDEMNIFICATION. Delaware and Nevada have similar laws with respect
to indemnification by a corporation of its officers, directors, employees and
other agents. For example, the laws of both states permit corporations to adopt
a provision in the Certificate or Articles of Incorporation eliminating the
liability of a director (and also an officer in the case of Nevada) to the
corporation or its stockholders for monetary damages for breach of the
director's fiduciary duty of care (and the fiduciary duty of loyalty as well in
the case of Nevada). There are nonetheless certain differences between the laws
of the two states respecting indemnification and limitation of liability.
The Delaware Charter eliminates the liability of directors to the
fullest extent permissible under Delaware Law. The Nevada Charter likewise
eliminates the liability of directors and officers to the fullest extent
permissible under Nevada Law. Under Nevada Law, such provision may not eliminate
or limit director or officer liability for: (a) acts or omissions which involve
intentional misconduct, fraud or a knowing violation of law; or (b) the payment
of unlawful dividends or distributions. Under Delaware Law, such provision may
not eliminate or limit director monetary liability for: (a) breaches of the
director's duty of loyalty to the corporation or its stockholders; (b) acts or
omissions not in good faith or involving intentional misconduct or knowing
violations of law; (c) the payment of unlawful dividends or unlawful stock
repurchases or redemptions; or (d) transactions in which the director received
an improper personal benefit.
The limitations of liability provisions permissible under Delaware Law
and Nevada Law may not limit a director's liability for violation of, or
otherwise relieve a corporation or its directors from the necessity of complying
with, federal or state securities laws, or affect the availability of
non-monetary remedies such as injunctive relief or rescission.
Nevada Law and Delaware Law require indemnification when the individual
has successfully defended the action on the merits or otherwise. Nevada 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
indemnification is
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proper in the circumstances. Without court approval, however, no indemnification
may be made in respect of any derivative action in which such person is adjudged
liable for negligence or misconduct in the performance of his or her duty to the
corporation. Delaware Law 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 not opposed to the best interests of the
corporation. Without court approval, however, no indemnification may be made in
respect of any derivative action in which such person is adjudged liable for
negligence or misconduct in the performance of his or her duty to the
corporation.
7. INSPECTION OF STOCKHOLDERS' LIST. Nevada Law permits any person who
has been a stockholder of record for at least six months, or any person holding
at least 5% of all outstanding shares, to inspect the stockholders' list of a
corporation for a purpose reasonably related to such person's interest as a
stockholder. Delaware Law permits any stockholder to inspect a corporation's
stockholders' list for a purpose reasonably related to such person's interest as
a stockholder and, during the ten days preceding a stockholders' meeting, for
any purpose germane to that meeting.
8. PAYMENTS OF DIVIDENDS. Nevada Law permits the payment of dividends
if, after the dividends have been paid, the corporation is able to pay its debts
as they become due in the usual course of business (equity test for insolvency),
and the corporation's total assets are not less than the sum of its total
liabilities plus the amount that would be needed, if the corporation were to be
dissolved at the time of the dividend payment, to satisfy the preferential
rights upon dissolution of stockholders whose preferential rights are superior
to those receiving the dividend (balance sheet test for insolvency). In
addition, Nevada Law generally provides that a corporation may redeem or
repurchase its shares only if the same equity and balance sheet tests for
insolvency are satisfied.
Delaware Law permits the payment of dividends out of surplus or, if
there is no surplus, out of net profits for the current and preceding fiscal
years (provided that the amount of capital of the corporation 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).
Surplus is the excess, if any, of the stockholders' equity over stated capital
of a corporation. In addition, Delaware Law generally provides that a
corporation may redeem or repurchase its shares only if such redemption or
repurchase would not impair the capital of the corporation. The ability of a
Delaware corporation to pay dividends on, or to make repurchases or redemptions
of, its shares is dependent on the financial status of the corporation standing
alone and not on a consolidated basis. In determining the amount of surplus of a
Delaware corporation, the assets of the corporation, including stock of
subsidiaries owned by the corporation, must be valued at their fair market value
as determined by the Board of Directors, without regard to their historical book
value.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE REINCORPORATION
For federal income tax purposes (i) the Merger will constitute a
reorganization within the meaning of 368(a) of the Internal Revenue Code, (ii)
no gain or loss will be recognized by Company stockholders as a consequence of
the Merger, (iii) a stockholder's aggregate tax basis in SVI Solutions common
stock after the Merger will be the same as such holder's aggregate tax basis in
the shares of SVI Holdings common stock immediately prior to the Merger, (iv) a
stockholder's holding period in SVI Solutions common stock received in the
Merger will include the period in which the SVI Holdings common stock was held,
provided the SVI Holdings common stock was held as a capital asset at the time
of the Merger, and (v) no gain or loss will be recognized by SVI Holdings or SVI
Solutions as a consequence of the Merger.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the shares of
common stock will be required to approve the reincorporation into Delaware. As a
result, abstentions and broker non-votes will have the same effect as negative
votes.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 2.
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PROPOSAL 3
CHANGE OF THE CORPORATE NAME TO SVI SOLUTIONS, INC.
The Board of Directors has determined to change the name of the Company
to SVI Solutions, Inc. to better reflect the primary business of the Company.
The name change will be reflected in the Delaware Charter if this proposal is
approved by stockholders. The name change should not have any adverse effect on
stockholders.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the shares of
common stock will be required to approve the change of the corporate name to SVI
Solutions, Inc. As a result, abstentions and broker non-votes will have the same
effect as negative votes.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 3.
PROPOSAL 4
INCREASE IN AUTHORIZED CAPITALIZATION
If this proposal is approved by the stockholders, the Delaware Charter
will authorize 100,000,000 shares of $0.0001 par value common stock and
5,000,000 shares of $0.0001 par value preferred stock. The Nevada Charter
authorizes 50,000,000 shares of $0.0001 par value common stock and 5,000,000
shares of $0.0001 preferred stock. As of September 30, 2000, the Company has
issued and outstanding 33,955,605 shares of common stock. At September 30, 2000,
the Company also has reserved for issuance under currently outstanding options
and warrants, for options or other convertible securities authorized but not yet
issued under employee benefit plans, and for shares issuable pursuant to certain
investor rights a total of 6,415,024 shares of common stock.
Authorization of 50,000,000 additional shares of common stock in the
Delaware Charter will give the Company additional flexibility to raise capital
in public or private transactions through the issuance of common stock, and to
issue common stock in acquisitions of businesses or assets, without the time and
expense needed to obtain further stockholder approval. However, the rules of the
American Stock Exchange will require the Company to seek stockholder approval as
a prerequisite to listing additional shares issued in the following
circumstances:
o If the Company proposes to issue, as consideration for an
acquisition of the stock or assets of another company, shares
representing 5% or more of the total outstanding shares prior
to the transaction, if any director, officer or substantial
shareholder of the Company has a 5% or greater interest (or
such persons collectively have a 10% or greater interest) in
the company or assets to be acquired or in the consideration
to be paid in the transaction.
o If the Company proposes to issue, as consideration for an
acquisition of the stock or assets of another company, shares
representing 20% or more of the total outstanding shares prior
to the transaction.
o If the Company proposes to issue shares at a price less than
fair market value (or book value, if higher than fair market
value) which together with sales by officers, directors or
principal shareholders of the company, if any, equals 20% of
more of the total outstanding shares prior to the transaction.
Where such rules do not apply, the Company may issue or reserve shares
in merger or acquisition transactions, in capital raising transactions or
otherwise, without further stockholder approval. Any such issuances will have
the effect of diluting existing stockholders.
The Company is currently considering a number of capital raising
alternatives which might involve the issuance of common or preferred stock.
However, the Company does not anticipate issuing in any such transaction more
shares than are currently available for issuance. Accordingly, the adoption of
this proposal should not affect any current financing plans of the Company.
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VOTE REQUIRED
The affirmative vote of the holders of a majority of the shares of
common stock will be required to approve the increase in authorized
capitalization. As a result, abstentions and broker non-votes will have the same
effect as negative votes.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 4.
PROPOSAL 5
REDUCTION IN QUORUM
Under the Nevada Charter, a majority of the shares of common stock
entitled to vote must be represented in person or by proxy in order to
constitute a quorum for the conduct of business at a meeting of stockholders.
The Delaware Charter does not specify the required quorum for conduct of
business at stockholders meetings. The proposed Delaware Bylaws state that
one-third of the common stock entitled to vote, represented in person or by
proxy, will constitute a quorum at meetings of stockholders. This lower quorum
requirement is consistent with Delaware Law and with the rules of the American
Stock Exchange. The Company believes that reducing the required presence for a
quorum will make it easier for the Company to obtain the necessary approval for
important corporate actions which require stockholder approval without the
delays and costs associated with hiring proxy solicitors. The reduced quorum
requirement could however lead to the approval of important corporate actions by
stockholders representing significantly less than an absolute majority of the
outstanding shares.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the shares of
common stock will be required to approve the reduction in quorum. As a result,
abstentions and broker non-votes will have the same effect as negative votes.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 5.
PROPOSAL 6
APPROVAL OF AMENDMENTS TO 1998 INCENTIVE STOCK PLAN
On October 5, 1998 the Board of Directors adopted, and the stockholders
subsequently approved on November 2, 1998, the Company's 1998 Incentive Stock
Plan ("1998 Plan") authorizing the issuance of 3,500,000 shares of the Company's
common stock. As of July 31, 2000, options covering an aggregate of 934,500
shares of the Company's common stock had been granted under the 1998 Plan and
2,565,500 shares remain available for future stock awards.
On August 18, 2000, the Board of Directors approved amendments to the
1998 Plan. Three of the amendments require stockholder approval. The amendments
which require stockholder approval would: (i) increase the aggregate number of
shares of common stock authorized for issuance under the 1998 Plan to 4,000,000
shares; (ii) authorize an annual increase in the shares reserved for issuance
under the 1998 Plan by an amount equal to the lesser of 2% of the total number
of shares outstanding on the last trading day of the fiscal year or 600,000
shares (or a lesser amount as determined by the Board); and (iii) prohibit the
granting of stock awards under the 1998 Plan to any one participant in excess of
500,000 shares in any calendar year.
In the event this Proposal 6 is not approved by the stockholders, the
Company's management believes that it will negatively affect the Company's
ability to retain current personnel and attract additional highly qualified
personnel in the future, and could cause adverse income tax effects for the
Company with respect to future award grants.
The Board of Directors adopted these amendments to the 1998 Plan to
ensure that the Company can continue to grant equity incentives to employees,
directors and consultants by increasing the number of shares available for
issuance both initially and on an annual basis and, with respect to the per
person per calendar year limitation, to permit
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stock option awards to the CEO and the four most highly compensated executive
officers to qualify as performance-based compensation under Section 162(m) of
the Internal Revenue Code (the "Code").
VOTE REQUIRED
The affirmative vote of the holders of a majority of the shares present
in person or represented by proxy and entitled to vote at the meeting will be
required to approve the amendments to the 1998 Plan submitted for stockholder
approval. Abstentions will be counted toward the tabulation of votes cast in
proposals presented to the stockholders and will have the same effect as
negative votes. Broker non-votes are counted towards a quorum, but are not
counted for any purpose in determining whether this matter has been approved.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 6.
The essential features of the 1998 Plan, as amended, are outlined
below:
GENERAL
Employees, directors and consultants to the Company and its parents and
subsidiaries are eligible to participate in the 1998 Plan, as amended. The
purpose of the 1998 Plan, as amended, is to give employees, directors and
consultants of the Company and its subsidiaries an opportunity to benefit from
increases in the value of the Company's common stock. The Company believes that
the 1998 Plan, as amended, will help the Company to secure and retain the
services of highly qualified individuals, and to provide incentives to eligible
persons to exert maximum efforts toward the success of the Company.
The 1998 Plan provides for the granting of: (i) incentive stock options
("ISOs"), (ii) nonqualified stock options ("NSOs"), (iii) stock bonuses, (iv)
rights to purchase restricted stock, and (v) stock appreciation rights
(collectively, "Stock Awards"). Only employees are eligible to receive ISOs and
stock appreciation rights connected with ISOs. All other Stock Awards may be
awarded to employees, directors and consultants.
STOCK SUBJECT TO THE 1998 PLAN AND PER PERSON LIMITATIONS
Subject to stockholder approval of this Proposal 6, an aggregate of
4,000,000 shares of common stock are reserved for issuance under the 1998 Plan.
In addition, the 1998 Plan, as amended, provides for automatic annual increases
in the number of shares reserved for issuance thereunder equal to the least of
(i) 2% of the total number of shares outstanding on the last trading day of the
fiscal year; (ii) 600,000 shares; or (iii) the amount determined by the Board.
The 1998 Plan is also proposed to be amended to add a provision that in any
calendar year a single participant may not receive a grant of stock awards in
excess of 500,000 shares. This provision is designed to permit stock option
awards and stock appreciation rights to qualify as performance-based
compensation under Section 162(m) of the Code.
ADMINISTRATION
The Board of Directors administers the 1998 Plan, but the Board may, in
its discretion, delegate administration of the plan to one or more committees of
one or more members of the Board. Subject to the provisions of the 1998 Plan,
the Board or such committee will have complete discretion in determining the
recipients of, terms and conditions for and number of Stock Awards granted under
the plan.
INCENTIVE AND NONQUALIFIED STOCK OPTIONS
ISOs granted under the 1998 Plan must be granted with an exercise price
of at least the fair market value of the common stock on the date of grant. NSOs
must have an exercise price of at least 85% of the fair market value of the
common stock on the date of the grant. Options granted to recipients who own 10%
or more of the Company's outstanding common stock must have an exercise price of
at least 110% of the fair market value of the common stock.
Options must have a term of ten years or less, except options granted
to 10% or greater stockholders, which must have a term of five years or less.
Vesting provisions for options granted under the 1998 Plan may vary but in each
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case will provide for the vesting of at least 20% of the total number of shares
subject to the option per year. Upon termination of the option holder's status
as an employee, consultant or director of the Company, the holder may exercise
his or her then vested options for a period after termination as determined by
the Board. The period must be at least three months, but will not extend beyond
the expiration date of the option. If the termination is due to the death or
disability of the option holder, the exercise period must be at least one year
following death or disability, but will not extend beyond the expiration date of
the option.
The option holder may pay the exercise price for options in cash, or in
the discretion of the Board, by any of the following methods:
o Delivery of other shares of common stock of the Company.
o According to a preferred payment schedule or other
arrangement.
o Surrender of a sufficient number of options which have "built
in gain" equal to the exercise price of the options exercised.
Built in gain means the difference between the fair market
value on the exercise date and the exercise price.
o Any other legal form of payment approved by the Board.
Tax rules applicable to ISOs may limit the availability of some of
these payment methods.
Options granted under the 1998 Plan are generally not transferable
except upon death or divorce, except that NSOs may be transferred by employees
pursuant to (i) a transfer under a domestic relations order in settlement of
marital property rights, (ii) a transfer to an entity in which more than fifty
percent of the voting interests are owned by family members (or the employee) in
exchange for an interest in that entity, or (iii) by gift to a family member.
The 1998 Plan allows option holders to satisfy tax withholding
obligations relating to the exercise of an option, to the extent permitted by
the option agreement, by paying the withholding tax in cash, by allowing the
Company to withhold shares issuable upon exercise, or by delivering other
unencumbered shares of common stock to the Company.
STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK
The 1998 Plan also provides for the granting of stock bonuses and
purchases of restricted stock. The Board or committee administering the 1998
Plan will establish the terms and conditions of these grants and purchases,
subject to the following conditions. The purchase price under each stock
purchase agreement must be at least 85% of the fair market value of the stock on
the date such award is made. Stock purchase agreements in favor of 10% or
greater stockholders must have a purchase price at least equal to 100% of the
fair market value of the stock on the date of the award. Stock bonuses may be
awarded pursuant to a stock bonus agreement in consideration for past services
rendered to the Company. Rights under a stock bonus or restricted stock purchase
agreement will not be transferable except by employees pursuant to (i) a
transfer under a domestic relations order in settlement of marital property
rights, (ii) a transfer to an entity in which more than fifty percent of the
voting interests are owned by family members (or the employee) in exchange for
an interest in that entity, or (iii) by gift to a family member. In the event of
the recipient's termination of status as an employee, director or consultant to
the Company, the Company may repurchase or otherwise reacquire all shares held
by such recipient which have not vested at the date of termination, pursuant to
the terms of the stock bonus or restricted stock purchase agreement.
STOCK APPRECIATION RIGHTS
The 1998 Plan also provides for the grant of stock appreciation rights
("SARs") to employees, directors or consultants of the Company. SARs entitle the
holder to a distribution based on the appreciation in the fair market value of a
designated amount of stock. Three types of SARs are authorized for issuance
under the 1998 Plan: tandem, concurrent and independent SARs.
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Tandem SARs are granted together with an option and require the holder
to elect between the exercise of the underlying option or receipt of the
distribution under the SAR. Tandem stock appreciation rights may be tied to
either ISOs or NSOs and will be subject to the same terms and conditions as the
option to which the SAR pertains.
Concurrent SARs are granted with an option and are automatically
exercised when the option is exercised, entitling the holder to the distribution
under the SAR. Concurrent rights may be tied to any or all shares subject to any
ISO or NSO and will be subject to the same terms and conditions as the option to
which the SAR pertains.
Independent SARs may be granted independently of any option.
Independent SARs will be denominated in share equivalents and will be subject to
the same terms and conditions applicable to NSOs.
CANCELLATION AND RESCISSION OF STOCK AWARDS
The 1998 Plan, as amended, provides that the Board of Directors or a
committee thereof has the authority to cancel, rescind, suspend, withhold or
otherwise limit or restrict any unexpired, unpaid or deferred stock awards at
any time if a participant is not in compliance with all applicable provisions of
the stock award agreement and the 1998 Plan or if the participant engages in any
detrimental activity. Detrimental activity includes without limitation,
competing with the Company; disclosing confidential information; failure to
disclose and assign inventions or ideas to the Company conceived during
employment; activities that result in termination for cause; and violations of
rules, policies or procedures of the Company. These provisions will only apply
to Stock Awards granted after August 18, 2000.
FEDERAL INCOME TAX INFORMATION
INCENTIVE STOCK OPTIONS. Incentive stock options under the 1998 Plan
are intended to be eligible for the favorable federal income tax treatment
accorded "incentive stock options" under the Code.
There generally are no federal income tax consequences to the
participant or the Company by reason of the grant or exercise of an incentive
stock option. However, the exercise of an incentive stock option may increase
the participant's alternative minimum tax liability, if any.
If a participant holds stock acquired through exercise of an incentive
stock option for at least two years from the date on which the option is granted
and at least one year from the date on which the shares are transferred to the
participant upon exercise of the option, any gain or loss on a disposition of
such stock will be a long-term capital gain or loss if the participant held the
stock for more than one year.
Generally, if the participant disposes of the stock before the
expiration of either of these holding periods (a "disqualifying disposition"),
then at the time of disposition the participant will realize taxable ordinary
income equal to the lesser of (i) the excess of the stock's fair market value on
the date of exercise over the exercise price, or (ii) the participant's actual
gain, if any, on the purchase and sale. The participant's additional gain or any
loss upon the disqualifying disposition will be a capital gain or loss, which
will be long-term or short-term depending on whether the stock was held for more
than one year.
To the extent the participant recognizes ordinary income by reason of a
disqualifying disposition, the Company will generally be entitled (subject to
the requirement of reasonableness, the provisions of Section 162(m) of the Code
and the satisfaction of a tax reporting obligation) to a corresponding business
expense deduction in the tax year in which the disqualifying disposition occurs.
NONQUALIFIED STOCK OPTIONS, RESTRICTED STOCK PURCHASE AWARDS AND STOCK
BONUSES. Nonqualified stock options, restricted stock purchase awards and stock
bonuses granted under the 1998 Plan generally have the following federal income
tax consequences.
There are no tax consequences to the participant or the Company by
reason of the grant. Upon acquisition of the stock, the participant normally
will recognize taxable ordinary income equal to the excess, if any, of the
stock's fair market value on the acquisition date over the purchase price.
However, to the extent the stock is subject to certain types of vesting
restrictions, the taxable event will be delayed until the vesting restrictions
lapse unless the participant elects to be taxed on receipt of the stock. With
respect to employees, the Company is generally required to withhold from
15
<PAGE>
regular wages or supplemental wage payments an amount based on the ordinary
income recognized. Subject to the requirement of reasonableness, the provisions
of Section 162(m) of the Code and the satisfaction of a tax reporting
obligation, the Company will generally be entitled to a business expense
deduction equal to the taxable ordinary income realized by the participant.
Upon disposition of the stock, the participant will recognize a capital
gain or loss equal to the difference between the selling price and the sum of
the amount paid for such stock plus any amount recognized as ordinary income
upon acquisition (or vesting) of the stock. Such gain or loss will be long-term
or short-term depending on whether the stock was held for more than one year.
Slightly different rules may apply to participants who acquire stock subject to
certain repurchase options or who are subject to Section 16(b) of the Securities
Exchange Act of 1934.
STOCK APPRECIATION RIGHTS. No taxable income is realized upon the
receipt of a stock appreciation right, but upon exercise of the stock
appreciation right the fair market value of the shares (or cash in lieu of
shares) received must be treated as compensation taxable as ordinary income to
the participant in the year of such exercise. Generally, with respect to
employees, the Company is required to withhold from the payment made on exercise
of the stock appreciation right or from regular wages or supplemental wage
payments an amount based on the ordinary income recognized. Subject to the
requirement of reasonableness, Section 162(m) of the Code and the satisfaction
of a reporting obligation, the Company will be entitled to a business expense
deduction equal to the taxable ordinary income recognized by the participant.
POTENTIAL LIMITATION ON COMPANY DEDUCTIONS. Section 162(m) of the Code
denies a deduction to any publicly-held corporation for compensation paid to
certain "covered employees" in a taxable year to the extent that compensation to
such covered employee exceeds $1 million. It is possible that compensation
attributable to stock awards, when combined with all other types of compensation
received by a covered employee from the Company, may cause this limitation to be
exceeded in any particular year.
Certain kinds of compensation, including qualified "performance-based
compensation," are disregarded for purposes of the deduction limitation. In
accordance with Treasury regulations issued under Section 162(m), compensation
attributable to stock options and stock appreciation rights will qualify as
performance-based compensation if the award is granted by a compensation
committee comprised solely of "outside directors" and either (i) the plan
contains a per-employee limitation on the number of shares for which such awards
may be granted during a specified period, the per-employee limitation is
approved by the stockholders, and the exercise price of the award is no less
than the fair market value of the stock on the date of grant, or (ii) the award
is granted (or exercisable) only upon the achievement (as certified in writing
by the compensation committee) of an objective performance goal established in
writing by the compensation committee while the outcome is substantially
uncertain, and the award is approved by stockholders.
Compensation attributable to restricted stock and stock bonuses will
qualify as performance-based compensation, provided that: (i) the award is
granted by a compensation committee comprised solely of "outside directors" and
(ii) the purchase price of the award is no less than the fair market value of
the stock on the date of grant. Stock bonuses qualify as performance-based
compensation under the Treasury regulations only if (i) the award is granted by
a compensation committee comprised solely of "outside directors," (ii) the award
is granted (or exercisable) only upon the achievement of an objective
performance goal established in writing by the compensation committee while the
outcome is substantially uncertain, (iii) the compensation committee certifies
in writing prior to the granting (or exercisability) of the award that the
performance goal has been satisfied and (iv) prior to the granting (or
exercisability) of the award, stockholders have approved the material terms of
the award (including the class of employees eligible for such award, the
business criteria in which the performance goal is based, and the maximum amount
or formula used to calculate the amount payable upon attainment of the
performance goal.)
PROPOSAL 7
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
Deloitte & Touche LLP served as the Company's independent public
accountants for the fiscal year ended March 31, 1999. The Company's Audit
Committee and the Board of Directors intend to continue the engagement of
Deloitte & Touche LLP for the fiscal year ending March 31, 2001.
16
<PAGE>
Although not required by law, management is asking the stockholders to
ratify the engagement of Deloitte & Touche LLP. The Company does not expect a
representative of Deloitte & Touche LLP to be present at the meeting.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the shares present
in person or represented by proxy and entitled to vote at the meeting will be
required to approve the ratification of the independent public accountants.
Abstentions will be counted towards the tabulation of votes cast on proposals
presented to the stockholders and will have the same effect as negative votes.
Broker non-votes are counted towards a quorum, but are not counted for any other
purpose in determining whether this matter has been approved.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 7.
17
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table shows beneficial ownership of shares of the
Company's outstanding common stock as of September 30, 2000 (i) by all persons
known by the Company to own more than 5% of such stock and (ii) by each
director, each of the Named Executive Officers, and all directors and executive
officers as a group. Except as otherwise specified, the address for each person
is 12707 High Bluff Drive, Suite 335, San Diego, California 92130. As of
September 30, 2000, there were 33,955,605 shares of common stock outstanding.
Each of the named persons has sole voting and investment power with respect to
the shares shown (subject to community property laws), except as stated below.
<TABLE>
<CAPTION>
Name and Address of Amount and Nature Percent
Beneficial Owner of Beneficial Ownership(1) of Class
---------------- -------------------------- --------
<S> <C> <C>
Softline Limited
16 Commerce Crescent
Eastgate Extension 13
Sandton 2148
South Africa 19,100,527(2) 56.1%
Claudav Holdings Ltd. B.V.
9 Rue Charles Humbert
1205 Geneva
Switzerland 5,511,925(3) 16.1%
The Ivanhoe Irrevocable Trust 5,511,925(3) 16.1%
Barry M. Schechter 5,511,925(3) 16.1%
David L. Reese 77,000(4) < 1%
Arthur S. Klitofsky 377,440(5) 1.1%
Donald S. Radcliffe
575 Madison Avenue
New York, NY 10022 665,800(6) 1.9%
Ivan M. Epstein
2 Victoria
Eastgate Extension 13
Sandton 2148
South Africa 105,000(7) < 1%
Gerald Rubenstein
16 Commerce Crescent
Eastgate Extension 13
Sandton 2148
South Africa 5,000(8) < 1%
Ian Bonner
5527 Inverrary Court
Dallas, Texas 75287 20,000(9) < 1%
18
<PAGE>
Name and Address of Amount and Nature Percent
Beneficial Owner of Beneficial Ownership(1) of Class
---------------- -------------------------- --------
Steven Cohen
16 Commerce Crescent
Eastgate Extension 13
Sandton 2148
South Africa 0 0%
Mark T. Wulff 0 0%
All directors and executive officers as
a group (9 persons) 6,747,165(10) 19.4%
</TABLE>
(1) This table is based on information supplied by officers, directors and
principal stockholders. The inclusion in this table of such shares does
not constitute an admission that the named stockholder is a direct or
indirect beneficial owner of, or receives the economic benefit of, such
shares.
(2) Includes 71,812 shares pursuant to outstanding options exercisable
within 60 days of September 30, 2000. The nine directors of Softline
are Marcel Golding, Ivan M. Epstein, Steven Cohen, Carlos de Santos,
Ivan Ferrer, Larry Nestadt, Gerald Rubenstein, John Copelyn and Barry
M. Schechter. Mr. Golding serves as Chairman of the Board, Mr. Epstein
serves as Chief Executive Officer, and Mr. Cohen serves as Director of
Operations. Mr. Schechter may also be deemed an executive officer of
Softline Limited due to his role as Chairman and Chief Executive
Officer of SVI Holdings, Inc. Each of the foregoing persons disclaims
beneficial ownership of the shares and options held by Softline.
(3) Claudav Holdings Ltd. B.V. ("Claudav"), the Ivanhoe Irrevocable Trust
("Ivanhoe") and Barry M. Schechter may be deemed a group pursuant to
Rule 13d-5 promulgated under the Securities Exchange Act of 1934.
Claudav holds 2,224,500 shares, for which it shares voting power with
Mr. Schechter pursuant to a proxy. Claudav is managed by Erwin Wachter,
Trustee. Mr. Wachter therefore shares beneficial ownership with Mr.
Schechter of the shares held by Claudav. Ivanhoe holds 3,100,000 shares
for which it shares voting and dispositive power with Mr. Schechter
pursuant to Mr. Schechter's position as a trustee. Includes 2,000
shares held by Mr. Schechter's minor children and 185,425 shares
pursuant to options of Mr. Schechter exercisable within 60 days of
September 30, 2000. Excludes 10,000 shares held by Mr. Schechter's
spouse, for which Mr. Schechter disclaims beneficial ownership.
(4) Consists of outstanding options exercisable within 60 days of September
30, 2000.
(5) Includes 114,540 shares pursuant to outstanding options exercisable
within 60 days of September 20, 2000.
(6) Includes 300,000 shares pursuant to outstanding options exercisable
within 60 days of September 30, 2000. Also includes 11,500 shares held
by an entity for which Mr. Radcliffe has sole voting and dispositive
power. Also includes an aggregate of 82,100 shares held by three
entities for which Mr. Radcliffe has shared voting and dispositive
power. Excludes 121,500 shares held by Mr. Radcliffe's spouse, for
which Mr. Radcliffe disclaims beneficial ownership.
(7) Consists of outstanding options exercisable within 60 days of September
30, 2000.
(8) Consists of outstanding options exercisable within 60 days of September
30, 2000.
(9) Consists of outstanding options exercisable within 60 days of September
30, 2000.
(10) Includes 801,965 shares pursuant to outstanding options exercisable
within 60 days of September 30, 2000.
19
<PAGE>
COMPLIANCE WITH SECTION 16(a) UNDER
THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange
Act") requires the Company's officers, directors and persons who own more than
10% of a class of the Company's securities registered under Section 12 of the
Exchange Act to file reports of ownership and changes in ownership with the
Securities and Exchange Commission ("SEC"). Officers, directors and greater than
10% stockholders are required by SEC regulations to furnish the Company with
copies of all Section 16(a) forms they file.
Based solely on a review of copies of such reports furnished to the
Company and written representations that no other reports were required during
the fiscal year ended March 31, 2000, the Company believes that all persons
subject to the reporting requirements pursuant to Section 16(a) filed the
required reports on a timely basis with the SEC, except Softline Limited (4
reports, 4 transactions), the Ivanhoe Irrevocable Trust (1 report, 1
transaction), Mark T. Wulff (1 report, no transactions), David L. Reese (1
report, 1 transaction) and Donald S. Radcliffe (6 reports, 14 transactions). In
addition, Barry M. Schechter disclosed on his Form 5 for the fiscal year ending
March 31, 2000 holdings of his spouse which should have been previously reported
as indirect holdings, and Softline Limited filed an amended report subsequent to
March 31, 2000 describing one transaction effective in the fiscal year ended
March 31, 1999 not previously reported.
EXECUTIVE OFFICERS
The executive officers of the Company, the positions held by them and
their ages as of September 30, 2000 are as follows:
NAME AGE POSITION
---- --- --------
Barry M. Schechter 46 Chairman , Chief Executive Officer
and Director
David L. Reese 55 Chief Financial Officer, Secretary
and Director
Arthur S. Klitofsky 46 Vice President and Director
Chief Executive Officer of SVI
Mark T. Wulff 39 Retail, Inc.
For the biographical summaries of Barry M. Schechter, David L. Reese,
and Arthur Klitofsky, see "Election of Directors."
Mark T. Wulff joined the Company as Chief Executive Officer of Island
Pacific Systems Corporation ("Island Pacific") in April 1999 upon the Company's
acquisition of Island Pacific. He became Chief Executive Officer of the
Company's retail division in January 2000. Mr. Wulff joined Island Pacific in
1986 and held various positions there prior to its acquisition by the Company,
including Vice President.
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the
compensation for services in all capacities to the Company for the full fiscal
years ended March 31, 2000 and 1999, the transitional six month fiscal year
ended March 31, 1998 and the fiscal year ended September 30, 1997, received by
the Company's Chief Executive Officer and the four other most highly compensated
executive officers of the Company during the last completed fiscal year (the
"Named Executive Officers").
20
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-term
Annual Compensation Compensation
------------------- ------------
Securities Underlying
Name and Principal Position Fiscal Year Salary ($) Options (#)
--------------------------- ----------- ---------- -----------
<S> <C> <C> <C>
Barry M. Schechter 2000 270,000 24,750
Chairman of the Board and Chief Executive 1999 198,000 110,675
Officer 1998(1) 86,000 50,000
1997(2) 156,000 --
Mark T. Wulff 2000 280,769 --
Chief Executive Officer of SVI Retail, Inc.
Arthur S. Klitofsky 2000 140,400 12,700
Vice President 1999 134,100 35,000
1998(1) 66,000 2,000
1997(2) 127,000 57,000
David L. Reese 2000 116,667 59,000
Chief Financial Officer 1999 90,248 51,000
1998(1) 32,378 10,000
Shaun Rosen 2000(3) 112,500 120,000
Former Chief Executive Officer, Retail 1999 165,000 80,000
Operations 1998(1) 82,500 --
1997(2) 165,000 --
</TABLE>
(1) Six month transitional fiscal year ended March 31, 1998.
(2) Twelve month fiscal year ended September 30, 1997.
(3) Mr. Rosen terminated his employment on December 31, 1999 and became a
consultant to the Company.
The Company also provides certain compensatory benefits and other
non-cash compensation to the Named Executive Officers. The incremental cost to
the Company of all such benefits and other compensation paid in the years
indicated to each such person was less than 10% of his reported compensation and
also less than $50,000.
The following table sets forth the information concerning individual
grants of stock options during the last fiscal year to the Named Executive
Officers. Except as otherwise indicated, the options are fully vested.
21
<PAGE>
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
Potential Realizable Value at
Assumed Annual Rates of Stock
Price Appreciation for OPTION
Individual Grants TERM
--------------------------------------------------------------
Percent of
Total Options
Granted to Exercise or
Employees in Base Price Expiration
Name Fiscal Year ($/Sh) Date 5% 10%
---- ----------- ------ ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Barry M. Schechter 24,750 3.4% $7.8125 10/11/2004 $53,423 $118,045
Arthur S. Klitofsky 12,700(1) 1.7% $7.8125 10/11/2009 $62,401 $158,134
David L. Reese 9,000 1.2% $7.8125 10/11/2004 $19,427 $42,926
50,000 6.8% $7.7500 10/20/2009 $243,700 $617,600
Shaun Rosen 20,000(1) 2.7% $7.8125 10/11/2009 $98,270 $249,030
100,000(1) 13.7% $7.7500 10/20/2009 $487,400 $1,235,200
</TABLE>
(1) Options vest 20% per year over five years beginning on the first
anniversary of the grant, subject to continuing service to the Company.
The potential realizable value is calculated based on the term of the
option at its time of grant. It is calculated based on assumed annualized rates
of total price appreciation from the exercise price at the date of grant of 5%
and 10% (compounded annually) over the full term of the grant with appreciation
determined as of the expiration date. The 5% and 10% assumed rates of
appreciation are mandated by SEC rules and do not represent the Company's
estimate or projections of future common stock prices. Actual gains, if any, on
stock option exercises are dependent on the future performance of the common
stock and overall stock market conditions. The amounts reflected in the table
may not be achieved.
The following table sets forth the information concerning each exercise
of stock options during the last fiscal year by each of the Named Executive
Officers and the fiscal year end value of unexercised options.
22
<PAGE>
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Shares Options at FY-End (#) In-The-Money Options At
Acquired on Value Realized Exercisable/ FY-End ($) Exercisable/
Name Exercise (#) ($)(1) Unexercisable Unexercisable(2)
---- ------------ -------------- ------------- ----------------
<S> <C> <C> <C> <C>
Barry M. Schechter 0 $0 185,425/0 $894,363/$0
Mark T. Wulff 0 $0 0/0 $0/$0
Arthur S. Klitofsky 0 $0 112,000/12,700 $830,625/$26,187
David L. Reese 3,000 $16,875 77,000/0 $192,308/$0
Shaun Rosen 0 $0 80,000/120,000 $550,000/$253,750
</TABLE>
(1) Based upon the market price of the purchased shares, determined on the
basis of the closing sale price per share of the Company's common stock
on the American Stock Exchange on the exercise date less the option
exercise price paid for the shares.
(2) Based upon the market price of $9.875 per share, determined on the
basis of the closing sale price per share of the Company's common stock
on the American Stock Exchange on the last day of the 2000 fiscal year,
less the option exercise price payable per share.
STOCK OPTION PLANS
The Company has two stock option plans. The Incentive Stock Option Plan
(the "1989 Plan") terminated in October 1999. It provided for issuance of
incentive stock options to purchase up to 1,500,000 shares of the Company's
common stock to employees of the Company. 698,535 of such shares remain subject
to option as of July 31, 2000. The 1989 Plan was administered by the Board of
Directors, which established the terms and conditions of each option grant.
The 1998 Incentive Stock Plan (the "1998 Plan") is proposed to be
amended, and is the subject of Proposal 6 herein, which includes a discussion of
the principal features of the 1998 Plan and the amendments proposed.
LONG-TERM INCENTIVE PLANS
The Company does not have any stock appreciation rights in effect and
has no long-term incentive plans, as those terms are defined in Securities and
Exchange Commission regulations. During the fiscal year ended March 31, 2000,
the Company did not adjust or amend the exercise price of stock options awarded
to the Named Executive Officers. The Company has no defined benefit or actuarial
plans covering any Named Executive Officer.
EMPLOYMENT AGREEMENTS
The Company entered into an employment agreement with Barry M.
Schechter effective October 1, 1997. This agreement expired by its terms on
September 30, 2000. Under the agreement, Mr. Schechter had the right to annual
compensation of $180,000 for the first year of the agreement, $240,000 for the
second year of the agreement and $300,000 for the third year of the agreement.
In addition, Mr. Schechter was entitled to receive options on each anniversary
of the agreement to purchase the number of shares equal to 150% of his annual
compensation for the prior year divided by the average price per share for the
30 day period preceding such anniversary. This average price per share was also
the exercise price of the options. The agreement stated that options would be
fully vested when issued,
23
<PAGE>
assignable, and exercisable for five years after the date of the grant. Mr.
Schechter agreed to receive non-assignable options so that these options could
be issued under the 1989 Plan. The Company expects to enter into a new
three-year employment agreement with Mr. Schechter on terms similar to the
recently expired agreement, but the terms of the new agreement have not yet been
approved by the Board.
Shaun Rosen entered into an employment agreement with the Company's SVI
Retail Pty. Ltd. (Australia) subsidiary ("SVI Australia") dated November 5,
1996. The agreement was to continue in effect until November 4, 2001, unless
earlier terminated by SVI Australia or Mr. Rosen. Mr. Rosen's employment
agreement was terminated by mutual agreement on December 31, 1999; however, he
continues as an employee of SVI Australia. Mr. Rosen's employment agreement
provided for an initial annual salary of $147,500. The salary was subject to
annual increases to reflect inflation and discretionary annual increases. The
employment agreement further provides that Mr. Rosen will not compete with SVI
Australia for three years after the termination of the agreement, which was
deemed to occur on December 31, 1999.
Island Pacific, which merged into the Company's wholly-owned SVI
Retail, Inc. subsidiary ("SVI Retail") on April 1, 1999, entered into a
three-year employment agreement with Mark T. Wulff effective June 3, 1999
whereby he is employed as Island Pacific's Chief Executive Officer. The
agreement provides that Mr. Wulff cannot compete with Island Pacific's business
in the U.S. during the term of the agreement and for three years after
termination of the agreement unless SVI Retail terminates the agreement without
cause or Mr. Wulff terminates the agreement due to a relocation out of Orange
County, California. Mr. Wulff's annual compensation under the agreement is
$300,000. The agreement may be terminated at will by either party upon six
months prior written notice. SVI Retail may also terminate the agreement for
cause on three days' written notice for cause.
DIRECTOR COMPENSATION
No direct or indirect remuneration has been paid or is payable by the
Company to the directors in their capacity as directors during the fiscal year
ended March 31, 2000. The Company does not anticipate paying during the fiscal
year ending March 31, 2001 any direct or indirect remuneration to any directors
of the Company in their capacity as directors other than reimbursement of
expenses for attending directors' or committee meetings and discretionary stock
option grants under the 1998 Plan. During the fiscal year ended March 31, 2000,
Ivan M. Epstein received an option to purchase 100,000 shares of the common
stock of the Company at an exercise price of $7.75. The option expires on
October 20, 2009 and is fully vested.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON
EXECUTIVE COMPENSATION (1)
It is the duty of the Compensation Committee to review and determine
the salaries and bonuses of executive officers of the Company, including the
Chief Executive Officer, and to establish general compensation policies for such
individuals. The Compensation Committee was formed in April 1998. During the
2000 fiscal year, the Compensation Committee consisted of Ian Bonner and Donald
S. Radcliffe. Subsequent to March 31, 2000, Gerald Rubenstein was appointed to
the Compensation Committee in place of Mr. Radcliffe.
The primary compensation philosophy of the Company is to offer
competitive compensation packages that reflect the technical requirements of the
software development business sector and reward employees for their direct
contribution to the Company's overall financial performance and growth during
the previous fiscal year.
The Company measures individual and group performance on the basis of
both qualitative and quantitative factors. The Company believes that the general
components of compensation should include a competitive base salary, performance
based bonuses where applicable and stock option grants tied to specific and
group performance.
EXECUTIVE COMPENSATION:
Base salaries are intended to be competitive with the software
development market and include an internal evaluation of the responsibilities of
each position. Salaries for executive officers are reviewed annually. This
annual review includes a detailed review of all compensation elements in
relationship to the competitive market for similar
24
<PAGE>
executives, the Company's historic financial performance and growth and the
executive's direct contribution to this performance. Other matters considered
include any changes in responsibility or any exceptional contribution.
The compensation policies for executives are designed to align salaries
and bonus compensation to the individual's performance in the short term and to
emphasize compensation from equity, primarily employee stock options, for
long-term incentives.
The Company's long-term incentive programs consist solely of stock
option programs under which all executives and other employees are periodically
granted stock options at the stock closing price on the date of the grant. The
option programs are designed to provide employees with significant compensation
based on overall Company performance as reflected in the stock price. Options
are typically issued with ten-year lives and a five-year vesting schedule to
create an incentive for long-term employment. Options are typically granted at
the time of hire for new key employees, at the time of promotion for certain
employees and at least annually to a broad group of existing employees and
executive officers.
CHIEF EXECUTIVE OFFICER COMPENSATION:
Barry M. Schechter, the Company's founder and Chief Executive Officer,
has been employed under a three-year employment agreement which expired on
September 30, 2000. Under that agreement, Mr. Schechter received a base annual
salary of $240,000 from April 1, 1999 to September 30, which increased to
$300,000 on October 1, 1999. Additional compensation was provided in the form of
stock options to be granted on each employment anniversary date equal to 150% of
base salary for the preceding year divided by the average price per share of the
Company's common stock for the 30 day period immediately preceding the
anniversary date. All compensation to Mr. Schechter was paid pursuant to this
agreement.
Compensation payments in excess of $1 million to each of the Chief
Executive Officer or four other most highly compensated executive officers are
subject to a limitation on deductibility for the Company under Section 162(m) of
the Internal Revenue Code. Certain performance-based compensation is not subject
to the limitation on deductibility. Cash compensation for the fiscal year ended
March 31, 2000 to the Chief Executive Officer and the four other most highly
compensated executive officers was below $1 million. The Company has issued
stock options to its Chief Executive Officer and certain other of its most
highly compensated executive officers. To the extent these options are
non-qualified stock options, or to the extent any of these executive officers
makes a disqualifying disposition of an incentive stock option, the amount of
the deduction which the Company will be entitled may be limited to the extent
the ordinary income recognized by the executive together with all other
compensation in a given year exceeds the $1 million limitation in Section
162(m).
Compensation Committee
Ian Bonner
Gerald Rubenstein
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Ian Bonner and Donald S. Radcliffe served as the members of the
Compensation Committee during the fiscal year ended March 31, 2000. No member of
the Company's Compensation Committee during the last completed fiscal year has
ever been an officer of the Company or any of its subsidiaries. During the last
completed fiscal year, no executive officer of the Company served as a member of
a compensation committee or board of directors of any entity that had one or
more of its executive officers serving as a member of the Company's Compensation
Committee.
25
<PAGE>
STOCK PERFORMANCE GRAPH (1)
The following graph shows a comparison of total stockholder return of
an investment of $100 cash on March 31, 1995 through March 31, 2000 for (i) the
Company's common stock, (ii) the S&P Computer Software Small Capitalization
Group and (iii) the Russell 2000 Index.
All values assume reinvestment of the full amount of all dividends. No
cash dividends have been declared on the Company's common stock. Stockholder
returns over the indicated period should not be considered indicative of future
stockholder returns.
<TABLE>
<CAPTION>
31-Mar-95 29-Mar-96 31-Mar-97 31-Mar-98 31-Mar-99 31-Mar-00
<S> <C> <C> <C> <C> <C> <C>
SVI HOLDINGS, INC 100.00 2162.81 557.14 1147.05 3637.80 2589.06
COMPUTER(SOFTWARE&SVC)-SMALL 100.00 153.92 118.85 189.45 178.95 347.50
RUSSELL 2000 INDEX 100.00 129.04 135.64 192.62 161.32 221.74
</TABLE>
[Total Return Index graph represented above here]
(1) This Section is not deemed "soliciting material," is not deemed
"filed" with the SEC and is not to be incorporated by reference in any filing of
the Company under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, whether made before or after the date hereof
and irrespective of any general incorporation language in any such filing.
26
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Set forth below is a description of transactions entered into between
the Company and certain of its executive officers, directors and stockholders
holding more than 5% of the outstanding common stock during the fiscal year.
Certain of these transactions will continue in effect and may result in
conflicts of interest between the Company and such individuals. Although these
persons may owe fiduciary duties to the Company and its stockholders, there is a
risk that such conflicts of interest may not be resolved in favor of the
Company.
TRANSACTIONS WITH SOFTLINE LIMITED
Softline Limited beneficially owns approximately 56.1% of the
outstanding common stock of the Company, and is therefore a parent corporation
to the Company. Softline is a South African company listed on the Johannesburg
Stock Exchange. Barry M. Schechter, Ivan M. Epstein, Gerald Rubenstein and
Steven Cohen are each directors of Softline. Mr. Epstein is Chief Executive
Officer and Mr. Cohen is Chief Operating Officer of Softline.
During the fiscal year ended March 31, 2000, Softline exercised
outstanding options to purchase 2,376,188 shares of common stock of the Company
at $2.00 per share.
In June 1999, the Company granted Softline an option to purchase 10,000
shares of common stock of the Company at an exercise price of $11.75 per share,
exercisable for four years, as consideration for services performed by Softline
personnel on behalf of the Company.
In October 1999, the Company sold its South African retail software
subsidiary doing business under the name Triple-S Computers ("Triple-S") to
Softline. The purchase price was the Company's historical book basis in Triple-S
of $665,000. This amount was paid through Softline's surrender of 78,241 shares
of Company common stock valued at the $8.50 per share closing price of such
shares on the American Stock Exchange on October 1, 1999. Softline entered into
an acquisition agreement as of April 1, 1998 (the "Acquisition Agreement") to
acquire Triple-S and designated a subsidiary of the Company as nominee purchaser
to complete the acquisition. The Company in turn agreed to reimburse Softline
for all of its costs associated with the acquisition of Triple-S. On May 27,
1998, Softline agreed to accept shares of the Company's common stock valued at
the $4.5625 market price on that date for reimbursement of such costs.
Softline's initial acquisition costs totaled $760,000, and the Company
issued a total of 166,643 shares to Softline pursuant to such agreement. A
dispute subsequently arose between the seller of Triple-S on the one hand and
the Company and Softline on the other hand concerning an earn-out provision in
the acquisition agreement. This dispute was settled during the quarter ended
June 30, 1999, through payment by Softline of $113,000 to such seller. That
amount was credited against the exercise price of 56,718 outstanding options to
purchase common stock of the Company exercised by Softline in March 2000.
In July 2000, Softline loaned the Company $10,000,000 pursuant to a
promissory note bearing interest at 10% per annum and due August 1, 2001. The
proceeds from this loan were used for a required principal payment on bank
indebtedness of the Company bearing interest at a higher rate. The note is
subordinated to the remaining bank indebtedness of the Company.
In May 2000, the Company announced that it was in discussions with
Softline concerning a possible business combination between the two companies.
Softline and the Company were exploring the possibility of the Company acquiring
some or all of the assets or outstanding shares of Softline in exchange for the
issuance of Company common stock, but no preliminary terms for such a
transaction were determined. A transaction of this nature requires preliminary
approval from the South African Reserve Bank, and Softline filed an application
for such approval in May 2000. Pending comments and approval from the Reserve
Bank, the Company and Softline could not effectively discuss terms for a
possible transaction, determine the impact of such a transaction on the
Company's financial statements, or decide whether to proceed with a transaction.
Softline has not received a response from the Reserve Bank on its initial
application, and it anticipates that ultimate approval would involve significant
challenges and difficulties.
In October 2000, the Company and Softline determined that a business
combination between the two companies was not compatible with the current
strategic directions of each company. Further talks on the matter have therefore
been
27
<PAGE>
terminated. See "Proposals 2 through 5 -- Reincorporation in Delaware and
Related Changes to Organizational Documents -- Note on Previously Announced
Possible Business Combination with Softline Limited."
OTHER TRANSACTIONS
In May 1999, the Company closed the sale of its IBIS Systems Limited
subsidiary ("IBIS") to a company affiliated with Peter Nagle and other members
of IBIS management with effect from January 1999. The sale price for IBIS was
(a) $2,250,000 cash, (b) 141,000 shares of Company common stock, (c) the
surrender by Mr. Nagle of the net shares issuable upon exercise of an option to
purchase 50,000 shares of Company common stock at $3.00 per share; and (d) a
promissory note (the "IBIS Note") in the stated principal amount of $18,108,000,
due October 1, 1999, bearing interest from May 1, 1999 at 2% over the base prime
rate for U.S. dollar deposits quoted by HSBC Plc. The promissory note was
secured by a pledge in favor of the Company of all of the common stock of IBIS.
As part of the transaction, the Company agreed to pay to an entity affiliated
with Mr. Nagle the $4,500,000 which is last payable under the IBIS Note, in
settlement of certain obligations assumed by the Company from Softline in
connection with the acquisition of IBIS. For this reason, the Company recorded a
net receivable on the IBIS Note of $13,608,000.
The purchaser did not repay the IBIS Note on the original due date
because it had not yet completed a reorganization that was intended to serve as
the source of funds to repay the note. The Company agreed to extend the due date
of the IBIS Note to November 15, 2000. The Company also agreed to permit the
purchaser to proceed with its reorganization with a wholly-owned subsidiary of
Integrity Software, Inc. ("Integrity"), a publicly traded company with prices
quoted on the National Quotation Bureau Pink Sheets. The purchaser exchanged all
of the outstanding IBIS stock for 1,536,000 common shares of Integrity,
representing approximately 11% of Integrity's outstanding shares at March 20,
2000. The Company agreed to substitute its security interest in the IBIS shares
for a security interest in the purchaser's Integrity shares. The Company also
obtained the right to convert all or any portion of the unpaid indebtedness
under the IBIS Note to Integrity shares valued at $12.50 per share and limited
rights to require Integrity to register such shares for resale under the
Securities Act of 1933. Three of our directors, Barry M. Schechter, Ivan M.
Epstein and Donald S. Radcliffe now serve on Integrity's board. The amount of
the receivable on the IBIS Note including accrued interest was $14,367,000 at
June 30, 2000.
In June 1999, Claudav Holdings Ltd. B.V., which may be deemed the
beneficial owner of 16% of the Company's outstanding common stock, loaned the
Company $1,500,000. The Company used the proceeds of this loan to pay a portion
of the purchase price for Island Pacific. The loan bears interest at the prime
rate with no stated maturity. The balance outstanding on this loan at June 30,
2000 was $756,000.
The office space for the Company's Sydney, Australia office is leased
from a company affiliated with Shaun Rosen, a former executive officer of the
Company. During the year ended March 31, 2000, the Company paid $163,000 in rent
for this office.
OTHER MATTERS TO BE PRESENTED AT MEETING
Management does not know of any other matters to be brought before the
Annual Meeting. If any other matters not mentioned in this proxy statement are
properly brought before the meeting, the individuals named in the enclosed proxy
intend to vote such proxy in accordance with their best judgment on such
matters.
28
<PAGE>
Financial information for the Company's fiscal year ended March 31,
2000 is available in the Company's March 31, 2000 Report on Form 10-K. The
Company will provide a copy of the latest Form 10-K or a Form 10-K for a prior
fiscal year without charge, to each record or beneficial owner of its common
stock on the record date, if so requested. If the stockholder asks the Company
to provide copies of exhibits to the Form 10-K, there will be a reasonable
charge for copies of the exhibits to the report. Requests for these copies
should be directed to the Company at 12707 High Bluff Drive, Suite 335, San
Diego, California 92130, attention: David L. Reese, Secretary.
By Order of the Board of Directors
/S/ David L. Reese
------------------
DAVID L. REESE
Secretary
October 23, 2000
29
<PAGE>
SVI HOLDINGS, INC.
12707 High Bluff Drive, Suite 335
San Diego, CA 92130
(858) 481-4404
____________________________________________
PROXY
____________________________________________
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 16, 2000
____________________________________________
THIS PROXY IS SOLICITED BY
THE BOARD OF DIRECTORS OF
SVI HOLDINGS, INC.
____________________________________________
The undersigned stockholder of SVI Holdings, Inc., a Nevada
corporation, hereby appoints Barry M. Schechter, Chief Executive Officer and
Chairman of the Board, or in his absence, David L. Reese, Chief Financial
Officer and Secretary, my proxy to attend and represent me at the annual meeting
of the stockholders of the corporation to be held on November 16, 2000 at 9 A.M.
(PDT), and at any adjournment thereof, and to vote my shares on any matter or
resolution which may come before the meeting and to take any other action which
I could personally take if present at the meeting.
1. ELECTION OF DIRECTORS
Management has nominated the following eight persons to stand for election. You
may vote "for" or you may withhold your vote from any of those persons
nominated.
a. Barry M. Schechter For _____
Withhold _____
b. Arthur S. Klitofsky For _____
Withhold _____
c. David L. Reese For _____
Withhold _____
d. Donald S. Radcliffe For _____
Withhold _____
e. Ivan M. Epstein For _____
Withhold _____
f. Gerald Rubenstein For _____
Withhold _____
g. Ian Bonner For _____
Withhold _____
h. Steven Cohen For _____
Withhold _____
<PAGE>
MANAGEMENT RECOMMENDS A VOTE IN FAVOR OF PROPOSALS 2 THROUGH 7.
2. REINCORPORATION IN DELAWARE
To approve the plan of merger of the Company with and into its wholly
owned Delaware subsidiary, which merger will cause a change in the Company's
state of incorporation from Nevada to Delaware, including changes to the
organizational documents of the Company to conform to Delaware law and certain
other non-material changes.
For _______________ Against _______________ Abstain _______________
3. CHANGE OF CORPORATION NAME
To approve a change of the corporate name to "SVI Solutions, Inc."
For _______________ Against _______________ Abstain _______________
4. INCREASE IN AUTHORIZED CAPITALIZATION
To approve an increase in the authorized common stock from 50,000,000
shares to 100,000,000 shares.
For _______________ Against _______________ Abstain _______________
5. REDUCTION IN QUORUM
To approve a reduction in the required quorum for meetings of
stockholders from a majority of outstanding shares to one-third of the
outstanding shares.
For _______________ Against _______________ Abstain _______________
6. APPROVE AMENDMENTS TO 1998 INCENTIVE STOCK PLAN
Approve the proposed amendments to the 1998 Incentive Stock Plan ("1998
Plan") to: (i) increase the aggregate number of shares of common stock
authorized for issuance under the 1998 Plan to 4,000,000 shares; (ii) authorize
an automatic annual increase in the shares reserved for issuance under the 1998
Plan by an amount equal to the lesser of 2% of the total number of shares
outstanding on the last trading day of the fiscal year or 600,000 shares (or a
lesser amount determined by the Board); and (iii) prohibit the granting of stock
awards under the 1998 Plan to any one participant in excess of 500,000 shares in
any calendar year.
For _______________ Against _______________ Abstain _______________
7. ENGAGEMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
Ratification of the continued engagement of Deloitte & Touche LLP as
the Company's independent public accountants and auditors for the fiscal year
ending March 31, 2001.
For _______________ Against _______________ Abstain _______________
<PAGE>
Failure to check any of these boxes for each proposal will give Barry M.
Schechter or David L. Reese the authority to vote the proxy at his discretion.
This Proxy gives discretionary authority to my proxy to vote for me on such
other matters as may properly come before this meeting.
Number of Shares Owned:____________
Dated:_____________________________
---------------------------------------
---------------------------------------
SIGNATURE(S)
Please sign exactly as your name appears
hereon. If the stock is registered in the
names of two or more persons, each should
sign. Executors, administrators, trustees,
guardians and attorneys-in-fact should add
their titles. If signer is a corporation,
please give full corporate name and have a
duly authorized officer sign, stating title.
If signer is a partnership, please sign in
partnership name by authorized person.
Please vote, date and promptly return this proxy in the enclosed return envelope
which is postage prepaid if mailed in the United States.
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
OF SVI SOLUTIONS, INC.,
A DELAWARE CORPORATION,
AND
SVI HOLDINGS, INC.,
A NEVADA CORPORATION
THIS AGREEMENT AND PLAN OF MERGER dated as of ___________, 2000 (the
"Agreement") is between SVI Solutions Inc., a Delaware corporation ("SVI
Delaware"), and SVI Holdings, Inc., a Nevada corporation ("SVI Nevada"). SVI
Delaware and SVI Nevada are sometimes referred to herein as the "Constituent
Corporations."
RECITALS
A. SVI Delaware is a corporation duly organized and existing under the
laws of the State of Delaware and has an authorized capital of 105,000,000
shares, $0.0001 par value, of which 100,000,000 shares are designated "Common
Stock," and 5,000,000 shares are designated "Preferred Stock." The Preferred
Stock of SVI Delaware is undesignated as to series, rights, preferences,
privileges or restrictions. As of ___________, 2000, 100 shares of Common Stock
were issued and outstanding, all of which are held by SVI Nevada, and no shares
of Preferred Stock were issued and outstanding.
B. SVI Nevada is a corporation duly organized and existing under the
laws of the State of Nevada and has an authorized capital of 55,000,000 shares,
$0.0001 par value, of which 50,000,000 are designated "Common Stock," and
5,000,000 shares are designated "Preferred Stock." As of ____________, 2000,
_________ shares of Common Stock were issued and outstanding, and ______ shares
of Preferred Stock were issued and outstanding.
C. The Board of Directors of SVI Nevada has determined that, for the
purpose of effecting the reincorporation of SVI Nevada in the State of Delaware,
it is advisable and in the best interests of SVI Nevada and its shareholders
that SVI Nevada merge with and into SVI Delaware upon the terms and conditions
herein provided.
D. The respective Boards of Directors of SVI Delaware and SVI Nevada
have approved this Agreement and have directed that this Agreement be submitted
to a vote of their respective shareholders and executed by the undersigned
officers.
NOW, THEREFORE, in consideration of the mutual agreements and covenants
set forth herein, SVI Delaware and SVI Nevada hereby agree, subject to the terms
and conditions hereinafter set forth, as follows:
A-1
<PAGE>
I. MERGER
1.1 MERGER. In accordance with the provisions of this Agreement, the
Delaware General Corporation Law and the Nevada Corporation Law, SVI Nevada
shall be merged with and into SVI Delaware (the "Merger"), the separate
existence of SVI Nevada shall cease and SVI Delaware shall survive the Merger
and shall continue to be governed by the laws of the State of Delaware, and SVI
Delaware shall be, and is herein sometimes referred to as, the "Surviving
Corporation," and the name of the Surviving Corporation shall be SVI Solutions,
Inc.
1.2 FILING AND EFFECTIVENESS. The Merger shall become effective when
the following actions shall have been completed:
(a) This Agreement and the Merger shall have been adopted and approved
by the shareholders of each Constituent Corporation in accordance with the
requirements of the Delaware General Corporation Law and the Nevada Corporation
Law;
(b) All of the conditions precedent to the consummation of the Merger
specified in this Agreement shall have been satisfied or duly waived by the
party entitled to satisfaction thereof;
(c) An executed Certificate of Merger or an executed, acknowledged and
certified counterpart of this Agreement meeting the requirements of the Delaware
General Corporation Law shall have been filed with the Secretary of State of the
State of Delaware; and
(d) An executed Certificate of Merger or an executed counterpart of
this Agreement meeting the requirements of the Nevada Corporation Law shall have
been filed with the Secretary of State of the State of Nevada.
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 SVI Nevada shall cease and SVI 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 SVI Nevada's
Boards of Directors, (iii) shall succeed, without other transfer, to all of the
assets, rights, powers and property of SVI Nevada in the manner as more fully
set forth in Section 259 of the Delaware General Corporation Law, (iv) shall
continue to be subject to all of its debts, liabilities and obligations as
constituted immediately prior to the Effective Date of the Merger, and (v) shall
succeed, without other transfer, to all of the debts, liabilities and
obligations of SVI Nevada in the same manner as if SVI Delaware had itself
incurred them, all as more fully provided under the applicable provisions of the
Delaware General Corporation Law and the Nevada General Corporation Law.
A-2
<PAGE>
II. CHARTER DOCUMENTS, DIRECTORS AND OFFICERS
2.1 CERTIFICATE OF INCORPORATION. The Restated Certificate of
Incorporation of SVI 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 Restated Bylaws of SVI 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 SVI Nevada
immediately prior to the Effective Date of the Merger shall be the directors and
officers of the Surviving Corporation until their respective 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 SVI NEVADA COMMON STOCK. Upon the Effective Date of the Merger,
each share of SVI Nevada Common Stock, $0.0001 par value, 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 changed and converted into and exchanged for one fully paid and nonassessable
share of Common Stock, $0.0001 par value, of the Surviving Corporation.
3.2 SVI NEVADA PREFERRED STOCK. Upon the Effective Date of the Merger,
each share of SVI Nevada Preferred 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
changed and converted into and exchanged for one fully paid and non-assessable
share of Preferred Stock of the Surviving Corporation, of the same series and
with the same relative rights, preferences and limitations as the SVI Nevada
Preferred Stock so converted. If required by the Delaware General Corporation
Law, the Surviving Corporation shall file a certificate of designation with the
Secretary of State of Delaware upon the Effective Date of the Merger to reflect
the relative rights, preferences and limitations of the Preferred Stock of the
Surviving Corporation so issued.
3.3 SVI NEVADA OPTIONS AND STOCK PURCHASE RIGHTS. Upon the Effective
Date of the Merger, the Surviving Corporation shall assume and continue the
stock option plans (including without limitation the Incentive Stock Option Plan
and the 1998 Incentive Stock Plan) and all other employee benefit plans
(including without limitation the 401(k) Plan) of SVI Nevada. Each outstanding
and unexercised option or other right to purchase or security convertible into
SVI Nevada Common Stock shall become an option or right to purchase or a
security convertible into the Surviving Corporation's Common Stock on the basis
of one share of the Surviving Corporation's Common Stock for each share of SVI
Nevada Common Stock issuable pursuant to any such option, stock purchase right
or convertible security, on the same terms and conditions and at an exercise
price per share equal to the exercise price applicable to any such SVI Nevada
option, stock purchase right or convertible security at the Effective Date of
the Merger. There are no options, purchase rights for or securities convertible
into Preferred Stock of SVI Nevada.
A-3
<PAGE>
A number of shares of the Surviving Corporation's Common Stock shall be
reserved for issuance upon the exercise of options, stock purchase rights or
convertible securities equal to the number of shares of SVI Nevada Common Stock
so reserved immediately prior to the Effective Date of the Merger.
3.4 SVI DELAWARE COMMON STOCK. Upon the Effective Date of the Merger,
each share of Common Stock, $0.0001 par value, of SVI Delaware issued and
outstanding immediately prior thereto shall, by virtue of the Merger and without
any action by SVI Delaware, the holder of such shares or any other person, be
canceled and returned to the status of authorized but unissued shares.
3.5 EXCHANGE OF CERTIFICATES. After the Effective Date of the Merger,
each holder of an outstanding certificate representing shares of SVI Nevada
Common Stock or Preferred Stock may be asked to surrender the same for
cancellation to an exchange agent, whose name will be delivered to such holders
prior to any requested exchange (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 or
Preferred Stock, as the case may be, into which such holders' shares of SVI
Nevada Common Stock or Preferred Stock were converted as herein provided. Unless
and until so surrendered, each outstanding certificate theretofore representing
shares of SVI Nevada Common Stock or Preferred Stock shall be deemed for all
purposes to represent the number of whole shares of the Surviving Corporation's
Common Stock or Preferred Stock, as the case may be, into which such shares of
SVI Nevada Common Stock or Preferred Stock were converted in the Merger.
The registered owner on the books and records of the Surviving
Corporation or the Exchange Agent of any shares of stock represented by 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 or Preferred Stock of the
Surviving Corporation represented by such outstanding certificate as provided
above.
Each certificate representing Common Stock or Preferred 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
SVI Nevada so converted and given in exchange therefor, unless otherwise
determined by the Board of Directors of the Surviving Corporation in compliance
with applicable laws.
If any certificate for shares of SVI 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 that the person requesting
such transfer pay to SVI Delaware or the Exchange Agent any transfer or other
taxes payable by reason of the 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 SVI Delaware that such tax has been paid or is not
payable.
A-4
<PAGE>
IV. GENERAL
4.1 COVENANTS OF SVI DELAWARE. SVI 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 SVI Delaware of all of the franchise tax
liabilities of SVI Nevada; and
(c) Take such other actions as may be required by the California
General Corporation Law or the Nevada Corporation Law.
4.2 FURTHER ASSURANCES. From time to time, as and when required by SVI
Delaware or by its successors or assigns, there shall be executed and delivered
on behalf of SVI Nevada such deeds and other instruments, and there shall be
taken or caused to be taken by SVI Delaware and SVI Nevada such further and
other actions, as shall be appropriate or necessary in order to vest or perfect
in or conform of record or otherwise by SVI Delaware the title to and possession
of all the property, interests, assets, rights, privileges, immunities, powers,
franchises and authority of SVI Nevada and otherwise to carry out the purposes
of this Agreement, and the officers and directors of SVI Delaware are fully
authorized in the name and on behalf of SVI Nevada 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 filing of this Agreement with
the Secretary of State of the State of Delaware, this Agreement may be
terminated and the Merger may be abandoned for any reason whatsoever by the
Board of Directors of either SVI Nevada or SVI Delaware, or both,
notwithstanding the approval of this Agreement by the shareholders of SVI Nevada
or by the sole stockholder of SVI 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
Nevada and Delaware, provided that an amendment made subsequent to the adoption
and approval of this Agreement and the Merger by the shareholders of either
Constituent Corporation shall not: (1) alter or change the amount or kind of
shares, securities, cash, property and/or rights to be received in exchange for
or on conversion of all or any of the shares of any class or series thereof of
such Constituent Corporation, (2) alter or change any term of the Certificate of
Incorporation of the Surviving Corporation to be effected by the Merger, or (3)
alter or change any of the terms and conditions of this Agreement, if in the
case of clause (2) or (3) such alteration or change would adversely affect the
holders of any class of shares or series thereof of such Constituent
Corporation.
A-5
<PAGE>
4.5 REGISTERED OFFICE. The registered office of the Surviving
Corporation in the State of Delaware is located at Corporation Trust Center,
1209 Orange Street, in the City of 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 12707 High Bluff
Drive, Suite 335, San Diego, California 92130, and copies thereof will be
furnished to any shareholder 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 Nevada
General Corporation Law.
4.8 COUNTERPARTS. In order to facilitate the filing and recording of
this Agreement, the same may be executed in any number of counterparts, each of
which shall be deemed to be an original and all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, this Agreement, having first been approved by
resolutions of the Boards of Directors of SVI Delaware and SVI Nevada, is hereby
executed on behalf of each of such two corporations and attested by their
respective officers thereunto duly authorized.
SVI SOLUTIONS, INC.,
a Delaware corporation
By:__________________________
Name:________________________
Title:_______________________
ATTEST:
By:__________________________
Name:________________________
Title:_______________________
SVI HOLDINGS, INC.,
a Nevada corporation
By:__________________________
Name:________________________
Title:_______________________
ATTEST:
By:__________________________
Name:________________________
Title:_______________________
A-6
<PAGE>
EXHIBIT B
RESTATED CERTIFICATE OF INCORPORATION
OF
SVI SOLUTIONS, INC.
(ORIGINALLY INCORPORATED FEBRUARY 24, 2000 UNDER THE NAME SVI SOLUTIONS, INC.)
ARTICLE I
The name of this corporation is SVI Solutions, Inc. (the
"Corporation").
ARTICLE II
The address of this Corporation's registered office in the State of
Delaware is 1209 Orange Street, City of Wilmington, County of New Castle. The
name of its registered agent at such address is The Corporation Trust Company.
ARTICLE III
The purpose of this Corporation is to engage in any lawful act or
activity for which a corporation may now or hereafter be organized under the
Delaware General Corporation Law (the "Law").
ARTICLE IV
(A) CLASSES OF STOCK. This Corporation is authorized to issue two
classes of stock to be designated, respectively, "Common Stock" and "Preferred
Stock." The Corporation is authorized to issue One Hundred Million (100,000,000)
shares of Common Stock, par value $.0001 and Five Million (5,000,000) shares of
Preferred Stock, par value $.0001.
(B) RIGHTS, PREFERENCES AND RESTRICTIONS OF PREFERRED STOCK. The Board
of Directors ("Board") is authorized, subject to limitations prescribed by the
Law, and by the provisions of this Article, to provide for the issuance of
shares of Preferred Stock in series, to establish from time to time the number
of shares to be included in each series and to determine the designations,
relative rights, preferences and limitations of the shares of each series. The
authority of the Board with respect to each series includes determination of the
following:
(1) The number of shares in and the distinguishing designation
of that series;
(2) Whether shares of that series shall have full, special,
conditional, limited or no voting rights, except to the extent
otherwise provided by the Law;
B-1
<PAGE>
(3) Whether shares of that series shall be convertible and the
terms and conditions of the conversion, including provision for
adjustment of the conversion rate in circumstances determined by the
Board;
(4) Whether shares of that series shall be redeemable and the
terms and conditions of redemption, including the date or dates upon or
after which they shall be redeemable and the amount per share payable
in case of redemption, which amount may vary under different conditions
or at different redemption dates;
(5) The dividend rate, if any, on shares of that series, the
manner of calculating any dividends and the preferences of any
dividends;
(6) The rights of shares of that series in the event of
voluntary or involuntary dissolution of the Corporation and the rights
of priority of that series relative to the Common Stock and any other
series of Preferred Stock on the distribution of assets on dissolution;
and
(7) Any other rights, preferences and limitations of that
series that are permitted by law.
ARTICLE V
No director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for conduct as a director,
provided that this Article shall not eliminate the liability of a director for
any act or omission for which such elimination of liability is not permitted
under the Law. No amendment to the Law that further limits the acts or omissions
for which elimination of liability is permitted shall affect the liability of a
director for any act or omission which occurs prior to the effective date of the
amendment. Any repeal or modification of this Article V shall be prospective and
shall not adversely affect any right or protection of a director, officer, agent
or other person existing at the time of, or increase the liability of any
director of the Corporation with respect to any acts or omissions of such
director occurring prior to, such repeal or modification.
ARTICLE VI
The Corporation shall indemnify any current or former director or
officer and may indemnify any current or former employee or agent of the
Corporation to the fullest extent not prohibited by law, who is made, or
threatened to be made, a party to an action, suit or proceeding, whether civil,
criminal, administrative, investigative or other (including an action, suit or
proceeding by or in the right of the Corporation), by reason of the fact that
such person is or was a director, officer, employee or agent of the Corporation
or a fiduciary within the meaning of the Employee Retirement Income Security Act
of 1974 with respect to any employee benefit plan of the Corporation, or serves
or served at the request of the Corporation as a director, officer, employee or
agent, or as a fiduciary of an employee benefit plan, of another corporation,
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partnership, joint venture, trust or other enterprise, if he acted in good faith
and, with respect to any criminal action or proceeding, had no reasonable cause
to believe his conduct was unlawful. The Corporation shall pay for or reimburse
the reasonable expenses incurred by any such current or former director or
officer and may pay for or reimburse the reasonable expenses incurred by any
such current or former employee or agent, in any such proceeding in advance of
the final disposition of the proceeding upon receipt of an undertaking by the
person to repay all amounts advanced if it should ultimately be determined that
the person is not entitled to be indemnified under this Article VI or otherwise.
No amendment to this Article that limits the Corporation's obligation to
indemnify any person shall have any effect on such obligation for any act or
omission that occurs prior to the later of the effective date of the amendment
or the date notice of the amendment is given to the person. This Article shall
not be deemed exclusive of any other provisions for indemnification or
advancement of expenses of directors, officers, employees, agents and
fiduciaries that may be included in any statute, bylaw, agreement, general or
specific action of the Board, vote of shareholders or other document or
arrangement.
ARTICLE VII
Elections of directors need not be by written ballot except and to the
extent provided in the Bylaws of the Corporation.
ARTICLE VIII
The Corporation is to have a perpetual existence.
ARTICLE IX
The Corporation reserves the right to repeal, alter, amend or rescind
any provision contained in this Certificate of Incorporation and/or any
provision contained in any amendment to or restatement of this Certificate of
Incorporation, in the manner now or hereafter prescribed by statute, and all
rights conferred on stockholders herein are granted subject to this reservation.
ARTICLE X
No holder of shares of stock of the Corporation shall have any
preemptive or other right, except as such rights are expressly provided by
contract, to purchase or subscribe for or receive any shares of any class, or
series thereof, of stock of the Corporation, whether now or hereafter
authorized, or any warrants, options, bonds, debentures or other securities
convertible into, exchangeable for or carrying any right to purchase any share
of any class, or series thereof, of stock; but such additional shares of stock
and such warrants, options, bonds, debentures or other securities convertible
into, exchangeable for or carrying any right to purchase any shares of any
class, or series thereof, of stock may be issued or disposed of by the Board to
such persons, and on such terms and for such lawful consideration as in its
discretion it shall deem advisable or as the Corporation shall have by contract
agreed.
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ARTICLE XI
The Board may from time to time make, amend, supplement or repeal the
Bylaws by the requisite affirmative vote of directors as set forth in the
Bylaws; provided, however, that the stockholders may change or repeal any bylaw
adopted by the Board by the requisite affirmative vote of stockholders as set
forth in the Bylaws; and, provided further, that no amendment or supplement to
the Bylaws adopted by the Board shall vary or conflict with any amendment or
supplement thus adopted by the stockholders.
ARTICLE XII
All actions of the stockholders shall be taken at an annual or special
meeting of the stockholders called in the manner set forth in the Bylaws. No
action shall be taken by the stockholders by written consent.
IN WITNESS WHEREOF, this Restated Certificate of Incorporation, which
restates and integrates and does further amend the provisions of the
corporation's Certificate of Incorporation and having been duly adopted by the
board of directors and the stockholders of the corporation in accordance with
the provisions of Sections 242 and 245 of the General Corporation Laws of the
State of Delaware, has been executed this _____ day of ______, 2000, by David L.
Reese, its authorized officer.
________________________
David L. Reese
Secretary
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EXHIBIT C
RESTATED
BYLAWS
OF
SVI SOLUTIONS, INC.
A DELAWARE CORPORATION
ARTICLE I
OFFICES
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Section 1. OFFICES. The principal office of the corporation shall be
located 12707 High Bluff Drive, Suite 335, San Diego California, County of San
Diego. The name of its registered agent is The Corporation Trust Company, 1209
Orange Street, Wilmington, Delaware, County of New Castle. The corporation may
have such other offices, either within or outside Delaware, as the board of
directors may designate or as the business of the corporation may require from
time to time.
Section 2. REGISTERED OFFICE AND AGENT. The registered office of the
corporation required by the General Corporation Law of the State of Delaware to
be maintained in Delaware may be, but need not be, identical with the principal
office if in Delaware. The registered agent or the address of the registered
office, or both, may be changed from time to time by the board of directors.
ARTICLE II
STOCKHOLDERS
------------
Section 1. ANNUAL MEETING.
(a) The annual meeting of the stockholders of the corporation, for the
purpose of election of directors and for such other business as may lawfully
come before it, shall be held on such date and at such time as may be designated
from time to time by the board of directors. Nominations of persons for election
to the board of directors of the corporation and the proposal of business to be
considered by the stockholders may be made at an annual meeting of stockholders:
(i) pursuant to the corporation's notice of meeting of stockholders; (ii) by or
at the direction of the board of directors; or (iii) by any stockholder of the
corporation who was a stockholder of record at the time of giving of notice
provided for in the following paragraph, who is entitled to vote at the meeting
and who complied with the notice procedures set forth in this Section 1.
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(b) At an annual meeting of the stockholders, only such business shall
be conducted as shall have been properly brought before the meeting. For
nominations or other business to be properly brought before an annual meeting by
a stockholder pursuant to clause (iii) of Article II, Section 1(a) of these
bylaws, (i) the stockholder must have given timely notice thereof in writing to
the secretary of the corporation, (ii) such other business must be a proper
matter for stockholder action under the General Corporation Law of Delaware,
(iii) if the stockholder, or the beneficial owner on whose behalf any such
proposal or nomination is made, has provided the corporation with a Solicitation
Notice (as defined in this Section 1(b)), such stockholder or beneficial owner
must, in the case of a proposal, have delivered a proxy statement and form of
proxy to holders of at least the percentage of the corporation's voting shares
required under applicable law to carry any such proposal, or, in the case of a
nomination or nominations, have delivered a proxy statement and form of proxy to
holders of a percentage of the corporation's voting shares reasonably believed
by such stockholder or beneficial owner to be sufficient to elect the nominee or
nominees proposed to be nominated by such stockholder, and must, in either case,
have included in such materials the Solicitation Notice, and (iv) if no
Solicitation Notice relating thereto has been timely provided pursuant to this
section, the stockholder or beneficial owner proposing such business or
nomination must not have solicited a number of proxies sufficient to have
required the delivery of such a Solicitation Notice under this Section 1. To be
timely, a stockholder's notice shall be delivered to the secretary at the
principal executive offices of the corporation not later than the close of
business on the ninetieth (90th) day nor earlier than the close of business on
the one hundred twentieth (120th) day prior to the first anniversary of the
preceding year's annual meeting; provided, however, that in the event that the
date of the annual meeting is advanced more than thirty (30) days prior to or
delayed by more than thirty (30) days after the anniversary of the preceding
year's annual meeting, notice by the stockholder to be timely must be so
delivered not earlier than the close of business on the one hundred twentieth
(120th) day prior to such annual meeting and not later than the close of
business on the later of the ninetieth (90th) day prior to such annual meeting
or the tenth (10th) day following the day on which public announcement of the
date of such meeting is first made. In no event shall the public announcement of
an adjournment of an annual meeting commence a new time period for the giving of
a stockholder's notice as described above. Such stockholder's notice shall set
forth: (A) as to each person whom the stockholder proposes to nominate for
election or reelection as a director all information relating to such person
that is required to be disclosed in solicitations of proxies for election of
directors in an election contest, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(the "1934 Act") and Rule 14a-11 thereunder (including such person's written
consent to being named in the proxy statement as a nominee and to serving as a
director if elected); (B) as to any other business that the stockholder proposes
to bring before the meeting, a brief description of the business desired to be
brought before the meeting, the reasons for conducting such business at the
meeting and any material interest in such business of such stockholder and the
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beneficial owner, if any, on whose behalf the proposal is made; and (C) as to
the stockholder giving the notice and the beneficial owner, if any, on whose
behalf the nomination or proposal is made (i) the name and address of such
stockholder, as they appear on the corporation's books, and of such beneficial
owner, (ii) the class and number of shares of the corporation which are owned
beneficially and of record by such stockholder and such beneficial owner, and
(iii) whether either such stockholder or beneficial owner intends to deliver a
proxy statement and form of proxy to holders of, in the case of the proposal, at
least the percentage of the corporation's voting shares required under
applicable law to carry the proposal or, in the case of a nomination or
nominations, a sufficient number of holders of the corporation's voting shares
to elect such nominee or nominees (an affirmative statement of such intent, a
"Solicitation Notice").
(c) Notwithstanding anything in the second sentence of Article II,
Section 1(b) of these bylaws to the contrary, in the event that the number of
directors to be elected to the board of directors of the corporation is
increased and there is no public announcement naming all of the nominees for
director or specifying the size of the increased board of directors made by the
corporation at least one hundred (100) days prior to the first anniversary of
the preceding year's annual meeting, a stockholder's notice required by this
Section 1 shall also be considered timely, but only with respect to nominees for
any new positions created by such increase, if it shall be delivered to the
secretary at the principal executive offices of the corporation not later than
the close of business on the tenth (10th) day following the day on which such
public announcement is first made by the corporation.
(d) Only such persons who are nominated in accordance with the
procedures set forth in this Section 1 shall be eligible to serve as directors
and only such business shall be conducted at a meeting of stockholders as shall
have been brought before the meeting in accordance with the procedures set forth
in this Section 1. Except as otherwise provided by law, the chairman of the
meeting shall have the power and duty to determine whether a nomination or any
business proposed to be brought before the meeting was made, or proposed, as the
case may be, in accordance with the procedures set forth in these bylaws and, if
any proposed nomination or business is not in compliance with these bylaws, to
declare that such defective proposal or nomination shall not be presented for
stockholder action at the meeting and shall be disregarded.
(e) Notwithstanding the foregoing provisions of this Section 1, in
order to include information with respect to a stockholder proposal in the proxy
statement and form of proxy for a stockholder's meeting, stockholders must
provide notice as required by the regulations promulgated under the 1934 Act.
Nothing in these bylaws shall be deemed to affect any rights of stockholders to
request inclusion of proposals in the corporation proxy statement pursuant to
Rule 14a-8 under the 1934 Act.
(f) For purposes of this Section 1, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service or in a document publicly filed by the
corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the 1934 Act.
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Section 2. SPECIAL MEETINGS.
(a) Special meetings of the stockholders of the corporation may be
called, for any purpose or purposes, by (i) the Chairman, (ii) the Chief
Executive Officer, or (iii) the board of directors pursuant to a resolution
adopted by a majority of the total number of authorized directors (whether or
not there exist any vacancies in previously authorized directorships at the time
any such resolution is presented to the board of directors for adoption).
(b) If a special meeting is properly called by any person or persons
other than the board of directors, the request shall be in writing, specifying
the general nature of the business proposed to be transacted, and shall be
delivered personally or sent by registered mail or by telegraphic or other
facsimile transmission to the Chairman, the Chief Executive Officer, or the
secretary of the corporation. No business may be transacted at such special
meeting otherwise than specified in such notice. The board of directors shall
determine the time and place of such special meeting, which shall be held not
less than thirty-five (35) nor more than one hundred twenty (120) days after the
date of the receipt of the request. Upon determination of the time and place of
the meeting, the officer receiving the request shall cause notice to be given to
the stockholders entitled to vote, in accordance with the provisions of Article
II, Section 4 of these bylaws. If the notice is not given within one hundred
(100) days after the receipt of the request, the person or persons properly
requesting the meeting may set the time and place of the meeting and give the
notice. Nothing contained in this paragraph (b) shall be construed as limiting,
fixing, or affecting the time when a meeting of stockholders called by action of
the board of directors may be held.
(c) Nominations of persons for election to the board of directors may
be made at a special meeting of stockholders at which directors are to be
elected pursuant to the corporation's notice of meeting (i) by or at the
direction of the board of directors or (ii) by any stockholder of the
corporation who is a stockholder of record at the time of giving notice provided
for in these bylaws who shall be entitled to vote at the meeting and who
complies with the notice procedures set forth in this Section 2(c). In the event
the corporation calls a special meeting of stockholders for the purpose of
electing one or more directors to the board of directors, any such stockholder
may nominate a person or persons (as the case may be), for election to such
position(s) as specified in the corporation's notice of meeting, if the
stockholder's notice required by Article II, Section 1(b) of these bylaws shall
be delivered to the secretary at the principal executive offices of the
corporation not earlier than the close of business on the one hundred twentieth
(120th) day prior to such special meeting and not later than the close of
business on the later of the ninetieth (90th) day prior to such meeting or the
tenth (10th) day following the day on which public announcement is first made of
the date of the special meeting and of the nominees proposed by the board of
directors to be elected at such meeting. In no event shall the public
announcement of an adjournment of a special meeting commence a new time period
for the giving of a stockholder's notice as described above.
Section 3. PLACE OF MEETING. The board of directors may designate any
place as the place for any annual meeting or for any special meeting called by
the board of directors. A waiver of notice signed by all stockholders entitled
to vote at a meeting may designate any place as the place for such meeting. If
no designation is made, or if a special meeting shall be called otherwise than
by the board, the place of meeting shall be the principal business office of the
corporation.
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Section 4. NOTICE OF MEETING. Written or printed notice stating the
place, day and hour of the meeting, and, in case of a special meeting or as
otherwise required by the General Corporation Law of Delaware, the purposes for
which the meeting is called, shall be delivered not less than ten nor more than
sixty days before the date of the meeting, either personally or by mail, private
carrier, telegraph, teletype, electronically transmitted facsimile or other form
of wire or wireless communication, by or at the direction of the president, the
secretary or the officer or persons calling the meeting, to each stockholder of
record entitled to vote at such meeting, except to the extent that a longer
notice period is required by the General Corporation Law of Delaware. If mailed
and in comprehensible form, such notice shall be deemed to be given and
effective when deposited in the United States mail, addressed to the stockholder
at his address as it appears on the stock transfer books of the corporation,
with postage thereon prepaid. If notice is given other than by mail, and
provided that such notice is in comprehensible form, the notice is given and
effective on the date received by the stockholder. If requested by the person or
persons lawfully calling such meeting, the secretary shall give notice thereof
at corporate expense. No notice need be sent to any stockholder of record if
three successive letters mailed to the last known address of such stockholder
have been returned as undeliverable until such time as another address for such
stockholder is made known to the corporation. In order to be entitled to receive
notice of any meeting, a stockholder shall advise the corporation in writing of
any change in such stockholder's mailing address as shown on the corporation's
books and records.
Section 5. WAIVER OF NOTICE. Whenever any notice is required to be
given to any stockholder of the corporation, a waiver thereof in writing, signed
by the person or persons entitled to such notice, whether before or after the
time stated therein, shall be deemed equivalent to the giving of such notice.
The attendance of a stockholder at a meeting shall constitute a waiver of notice
of such meeting, except where a stockholder attends a meeting for the express
purpose of objecting to the transaction of any business because the meeting is
not lawfully called or convened.
Section 6. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. For the
purpose of determining stockholders entitled to (i) notice of or vote at any
meeting of stockholders or any adjournment thereof, (ii) receive distributions
or share dividends, or (iii) exercise any rights of a stockholder pursuant to
these bylaws, or to make a determination of stockholders for any other proper
purpose, the board of directors may fix a future date as the record date for any
such determination of stockholders, such date in any case to be not more than
sixty days, and, in case of a meeting of stockholders, not less than ten days,
prior to the date on which the particular action requiring such determination of
stockholders is to be taken. If no record date is fixed by the directors, the
record date shall be the date on which notice of the meeting is given to
stockholders, or the date on which the resolution of the board of directors
providing for a distribution is adopted, as the case may be. When a
determination of stockholders entitled to vote at any meeting of stockholders
has been made as provided in this section, such determination shall apply to any
adjournment thereof unless the board of directors fixes a new record date.
Notwithstanding the above, the record date for determining the
stockholders entitled to take action without a meeting or entitled to be given
notice of action so taken shall be the date a writing upon which the action is
taken is first received by the corporation.
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Section 7. STOCKHOLDERS' LISTS. The officer or agent having charge of
the stock transfer books for shares of the corporation shall make, at least ten
days before each meeting of stockholders, a complete list of the stockholders
entitled to be given notice of such meeting, or any adjournment thereof,
arranged by voting groups and within each voting group by class of series of
shares, in alphabetical order within each class or series, with the address of
and the number of shares of each class or series held by each stockholder. The
stockholders' list shall be available for inspection by any stockholder,
beginning the earlier of ten days before the meeting for which the list was
prepared and continuing through the meeting, and any adjournment thereof, at the
principal office of the corporation, whether within or outside Delaware, at any
time during usual business hours. Such list shall also be produced and kept open
at the time and place of the meeting and shall be subject to the inspection of
any stockholder or his agent or attorney during the whole time of the meeting or
any adjournment thereof. The original stock transfer books shall be prima facie
evidence as to who are the stockholders entitled to examine such list or
transfer books or to vote at any meeting of stockholders.
Section 8. CHAIRMAN OF MEETINGS. The president shall call meetings of
stockholders to order and act as chairman of such meetings. In the absence of
the president, an appropriate officer may call the meeting to order and a
chairman shall be elected. In the absence of the secretary and any assistant
secretary of the corporation, any person appointed by the chairman shall act as
secretary of such meetings.
Section 9. QUORUM AND ADJOURNMENT. One-third of the outstanding shares
of the corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of stockholders. If less than one-third of the
outstanding shares are represented at a meeting, a majority of the shares so
represented may adjourn the meeting from time to time without further notice,
for a period not to exceed thirty days for any one adjournment. At such
adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally notified. The stockholders present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough stockholders to leave less than a quorum, unless the meeting is
adjourned and a new record date is set for the adjourned meeting.
Section 10. MAJORITY VOTE. If a quorum exists, action on a matter is
approved if the votes cast within the voting group favoring the action exceed
the votes cast within the voting group opposing the action, unless a greater
number of affirmative votes is required by law, the Certificate of Incorporation
or these bylaws.
Section 11. PROXIES. At all meetings of stockholders, a stockholder may
vote by proxy executed in writing by the stockholder or his duly authorized
attorney in fact. Such proxy shall be filed with the secretary of the
corporation before or at the time of the meeting. No proxy shall be valid after
three years from the date of its execution, unless otherwise provided in the
proxy.
Section 12. VOTING OF SHARES. Unless otherwise provided in the
Certificate of Incorporation, each outstanding share, regardless of class, shall
be entitled to one vote on each matter submitted to a vote at a meeting of
stockholders, except to the extent that the voting rights of the shares of any
class or classes are limited or denied by the Certificate of Incorporation as
permitted by the Delaware General Corporation Law. Cumulative voting shall not
be allowed.
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Section 13. VOTING OF SHARES BY CERTAIN HOLDERS.
(a) Persons other than the corporation holding stock in a fiduciary
capacity shall be entitled to vote the shares so held. Persons whose stock is
pledged shall be entitled to vote, unless in the transfer by the pledgor on the
books of the corporation he or she has expressly empowered the pledgee to vote
thereon, in which case only the pledgee, or his or her proxy, may represent such
stock and vote thereon.
(b) If shares or other securities having voting power stand of record
in the names of two or more persons, or if two or more persons have the same
fiduciary relationship respecting the same shares, unless the Secretary is given
written notice to the contrary and is furnished with a copy of the instrument or
order appointing them or creating the relationship wherein it is so provided,
their acts with respect to voting shall have the following effect:
(1) If only one votes, the act of such person binds all;
(2) If more than one vote, the act of the majority so voting
binds all;
(3) If more than one vote and if the vote is evenly split on
any particular matter, each faction may vote the securities in question
proportionally, or any person voting the shares, or a beneficiary, if any, may
apply to the Court of Chancery of the State of Delaware or such other court as
may have jurisdiction to appoint an additional person to act with the person so
voting the shares, which shall then be voted as determined by a majority of such
persons and the person appointed by the court. If the instrument so filed shows
that any such tenancy is held in unequal interests, a majority or even split for
the purpose of this subsection shall be a majority or even split in interest.
ARTICLE III
BOARD OF DIRECTORS
------------------
Section 1. GENERAL POWERS. The business and affairs of the corporation
shall be managed by its board of directors, except as otherwise provided in the
Delaware General Corporation Law or the Certificate of Incorporation.
Section 2. NUMBER, TENURE AND QUALIFICATIONS. The number of directors
of the corporation shall be not less than five (5) nor more than eight (8), with
the exact number of directors to be fixed by the board of directors by
resolution from time to time. Directors shall be elected at each annual meeting
of stockholders. Each director shall hold office until his successor shall have
been elected and qualified. Directors need not be residents of Delaware or
stockholders of the corporation. Directors shall be removable in the manner
provided by the statutes of Delaware.
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Section 3. VACANCIES. Except as otherwise provided by law, vacancies
and newly created directorships resulting from any increase in the authorized
number of directors may be filled by affirmative vote of a majority of the
remaining directors though less than a quorum of the Board of Directors, or by a
sole remaining director. Any such directorship not so filled by the directors
shall be filled by election at the next annual meeting of stockholders or at a
special meeting of stockholders called for that purpose.
Section 4. REGULAR MEETINGS. A regular meeting of the board of
directors shall be held without other notice than this bylaw immediately after
and at the same place as the annual meeting of stockholders. The board of
directors may provide by resolution the time and place for the holding of
additional regular meetings without other notice than such resolution.
Section 5. SPECIAL MEETINGS. Special meetings of the board of directors
may be called by or at the request of the president or any two directors. The
person or persons authorized to call special meetings of the board of directors
may fix any place as the place for holding any special meeting of the board of
directors called by them.
Section 6. NOTICE. Notice of any special meeting shall be given at
least two days previously thereto by written notice either delivered personally
or mailed to each director at his business address, or by notice transmitted by
telegraph, telex, electronically transmitted facsimile or other form of wire or
wireless communication. If mailed, such notice shall be deemed to be delivered
three days after such notice is deposited in the United States mail so
addressed, with postage thereon prepaid. If notice be given by telegram, such
notice shall be deemed to be delivered when the telegram is delivered to the
telegraph company. If notice be given by telex, electronically transmitted
facsimile or similar form of wire or wireless communication, such notice shall
be deemed to be given and to be effective when sent. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the board
of directors need be specified in the notice or waiver of notice of such
meeting.
Section 7. WAIVER OF NOTICE. Any director may waive notice of any
meeting. The attendance of a director at a meeting shall constitute a waiver of
notice of such meeting unless at the beginning of the meeting, or promptly upon
his later arrival, the director objects to holding the meeting or transacting
business at the meeting because of lack of notice or defective notice and does
not thereafter vote for or assent to action taken at the meeting.
Section 8. QUORUM. A majority of the number of directors fixed by
Section 2 of this Article II, or such lesser number of directors as shall then
be in office, shall constitute a quorum for the transaction of business at any
meeting of the board of directors, but if less than such majority is present at
a meeting, a majority of the directors present may adjourn the meeting from time
to time without further notice.
Section 9. MANNER OF ACTING. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the board
of directors, unless a different number is provided by law, the Certificate of
Incorporation or these bylaws.
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Section 10. COMPENSATION. By resolution of the board of directors, any
director may be paid any one or more of the following: his expenses, if any, of
attendance at meetings; a fixed sum for attendance at each meeting; a stated
salary as director; or such other compensation as the corporation and the
director may reasonably agree upon. No such payment shall preclude any director
from serving the corporation in any other capacity and receiving compensation
therefor.
Section 11. PRESUMPTION OF ASSENT. A director of the corporation who is
present at a meeting of the board of directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless
(i) the director objects at the beginning of the meeting, or promptly upon his
arrival, to the holding of the meeting or the transaction of business at the
meeting and does not thereafter vote for or assent to any action taken at the
meeting, (ii) the director contemporaneously requests that his or her dissent or
abstention as to any specific action taken be entered in the minutes of the
meeting or (iii) the director shall cause written notice of his or her dissent
or abstention as to any specific action to be received by the presiding officer
of the meeting or by the corporation promptly after adjournment of the meeting.
Such right to dissent shall not apply to a director who voted in favor of such
action.
Section 12. TRANSACTIONS WITH DIRECTORS.
(a) Any contract or other transaction or determination between the
corporation and one or more of its directors, or between the corporation and
another party in which one or more of its directors are interested, shall be
valid notwithstanding the relationship or interest or the presence or
participation of such director or directors in a meeting of the board of
directors or a committee thereof which acts upon or in reference to such
contract, transaction or determination, if:
(1) The material facts as to such relationship or interest and
as to the contract or transaction are disclosed or are known to the board of
directors or committee and it authorizes the contract or transaction by the
affirmative vote of a majority of the disinterested directors, even though the
disinterested directors are less than a quorum; or
(2) The material facts as to such relationship or interest and
as to the contract or transaction are disclosed or are known to the stockholders
entitled to vote, and the contract or transaction is specifically approved in
good faith by vote of the stockholders; or
(3) The contract or transaction is fair as to the corporation
as of the time it is authorized, approved or ratified, by the board of
directors, a committee thereof or the stockholders.
(b) None of the provisions of this section shall invalidate any
contract, transaction or determination which would otherwise be valid under
applicable law.
Section 13. RESIGNATION. Any director may resign at any time by giving
written notice to the president or to the secretary of the corporation. Such
resignation shall take effect at the time the notice is received by the
corporation unless the notice specifies a later effective date; and, unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
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Section 14. REMOVAL. The stockholders may, at a meeting called for the
express purpose of removing directors, by a majority vote of the shares entitled
to vote at an election of directors, remove the entire board of directors or any
lesser number, with or without cause.
Section 15. INFORMAL ACTION BY DIRECTORS. Any action required or
permitted to be taken at a meeting of the directors or any committee designated
by the board may be taken without a meeting if a consent (or counterparts
thereof) in writing, setting forth the action so taken, shall be signed by all
of the directors entitled to vote with respect to the subject matter thereof.
Such consent shall have the same force and effect as a unanimous vote of the
directors and shall be filed with the minutes of the corporation. Unless the
consent specifies a different effective date, action taken under this Section is
effective at the time the last director signs a writing describing the action
taken, unless before such time any director has revoked his consent by a writing
signed by the director and received by the president or secretary of the
corporation.
Section 16. TELEPHONIC MEETINGS. Members of the board of directors or
any committee designated by the board may participate in a meeting of the board
of directors or committee by means of conference telephone or similar
communications equipment by which all persons participating in the meeting can
hear one another at the same time. Such participation shall constitute presence
in person at the meeting.
ARTICLE IV
COMMITTEES
----------
Section 1. DESIGNATION. The Board of Directors may designate from among
its members an executive committee and/or one or more other committees, each
consisting of one or more directors. The designation of a committee, and the
delegation of authority to it, shall not operate to relieve the Board of
Directors, or any member thereof, of any responsibility imposed by law. No
member of any committee shall continue to be a member thereof after ceasing to
be a director of the corporation. The Board of Directors shall have the power at
any time to increase or decrease the number of members of any committee, to fill
vacancies thereon, to change any member thereof and to change the functions or
terminate the existence thereof.
Section 2. POWERS. Any such committee, to the extent provided by
resolution of the Board of Directors, shall have and may exercise all the powers
and authority of the Board of Directors in the management of the business and
affairs of the corporation, and may authorize the seal of the corporation to be
affixed to all papers which may require it; but no such committee shall have the
power or authority in reference to amending the Certificate of Incorporation;
adopting an agreement of merger or consolidation; recommending to the
stockholders the sale, lease or exchange of all or substantially all of the
corporation's property and assets; recommending to the stockholders a
dissolution of the corporation or a revocation of a dissolution; or amending the
Bylaws of the corporation; and, unless the resolution expressly so provides, 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 with respect to the merger into the corporation of a subsidiary of which
at least 90 percent of the outstanding shares of each class are owned by the
corporation.
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Section 3. PROCEDURES; MEETINGS; QUORUM.
(a) The Board of Directors shall appoint Chairman and the committee
shall appoint a secretary who may, but need not, be a member of the committee.
The chairman shall preside at all committee meetings and the secretary of the
committee shall keep a record of its acts and proceedings.
(b) Regular meetings of a committee, of which no notice shall be
necessary, shall be held on such days and at such places as shall be fixed by
resolution adopted by the committee. Special meetings of a committee shall be
called at the request of the Chairman or the President or of any member of the
committee, and shall be held upon such notice as is required by these Bylaws for
special meetings of the Board of Directors, provided that notice by word of
mouth or telephone shall be sufficient if received in the city where the meeting
is to be held not later than the day immediately preceding the day of the
meeting. A waiver of notice of a meeting, signed by the person or persons
entitled to such notice, whether before or after the event stated therein, shall
be deemed equivalent to the giving of such notice.
(c) Attendance of any member of a committee at a meeting shall
constitute a waiver of notice of the meeting. A majority of a committee, from
time to time, shall be necessary to constitute a quorum for the transaction of
any business, and the act of a majority of the members present at a meeting at
which a quorum is present shall be the act of the committee. Members of a
committee may hold a meeting of such 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 participation in such a meeting shall
constitute presence in person at the meeting.
(d) Any action which may be taken at a meeting of a committee may be
taken without a meeting if a consent in writing setting forth the actions so
taken shall be signed by all members of the committee entitled to vote with
respect to the subject matter thereof. The consent shall have the same effect as
a unanimous vote of the committee.
(e) The Board of Directors may vote to the members of any committee a
reasonable fee as compensation for attendance at meetings of the committee.
ARTICLE V
OFFICERS AND AGENTS
-------------------
Section 1. GENERAL. The officers of the corporation shall be a
chairman, chief executive officer, president, one or more vice presidents, a
secretary and a chief financial officer. The board of directors may appoint such
other officers, assistant officers, committees and agents, including a chairman
of the board, assistant secretaries and assistant treasurers, as they may
consider necessary, who shall be chosen in such manner and hold their offices
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for such terms and have such authority and duties as from time to time may be
determined by the board of directors. The salaries of all the officers of the
corporation shall be fixed by the board of directors. One person may hold two or
more offices. In all cases where the duties of any officer, agent or employee
are not prescribed by the bylaws or by the board of directors, such officer,
agent or employee shall follow the orders and instructions of the president.
Section 2. ELECTION AND TERM OF OFFICE. The officers of the corporation
shall be elected by the board of directors annually at the first meeting of the
board held after each annual meeting of the stockholders. If the election of
officers shall not be held at such meeting, such election shall be held as soon
thereafter as conveniently may be. Each officer shall hold office until the
first of the following to occur: until his successor shall have been duly
elected and shall have qualified; or until his death; or until he shall resign;
or until he shall have been removed in the manner hereinafter provided.
Section 3. REMOVAL. Any officer or agent may be removed by the board of
directors or by the executive committee whenever in its judgment the best
interests of the corporation will be served thereby, but such removal shall be
without prejudice to the contract rights, if any, of the person so removed.
Election or appointment of an officer or agent shall not in itself create
contract rights.
Section 4. RESIGNATION. Any officer may resign at any time by giving
written notice thereof to the corporation. Such resignation is effective when
the notice is received by the corporation unless the notice specifies a later
effective date. Unless otherwise stated in the notice, no acceptance of the
resignation shall be necessary to render such resignation effective.
Section 5. VACANCIES. A vacancy in any office, however occurring, may
be filled by the board of directors for the unexpired portion of the term.
Section 6. CHAIRMAN. The Chairman, if any, shall preside at all
meetings of the board of directors and of the stockholders at which he or she
shall be present. He or she shall have and may exercise such powers as are, from
time to time, assigned to him or her by the board of directors and as may be
provided by law.
Section 7. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer of the
corporation shall, subject to the control of the board of directors, have
general supervision, direction and control of the business and the officers of
the corporation. He or she shall preside at all meetings of the stockholders
and, in the absence or nonexistence of a Chairman at all meetings of the board
of directors. He or she shall have the general powers and duties of management
usually vested in the Chief Executive Officer of a corporation, including
general supervision, direction and control of the business and supervision of
other officers of the corporation, and shall have such other powers and duties
as may be prescribed by the Board of Directors or these By-laws. The Chief
Executive Officer shall, without limitation, have the authority to execute
bonds, mortgages and other contracts requiring a seal, under the seal of the
corporation, except where required or permitted by law to be otherwise signed
and executed and except where the signing and execution thereof shall be
expressly delegated by the Board of Directors to some other officer or agent of
the corporation.
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Section 8. PRESIDENT. Subject to such supervisory powers as may be
given by these By-laws or the Board of Directors to the Chairman of the Board or
the Chief Executive Officer, if there be such officers, the President shall have
general supervision, direction and control of the business and supervision of
other officers of the corporation, and shall have such other powers and duties
as may be prescribed by the Board of Directors or these By-laws. In the event a
Chief Executive Officer shall not be appointed, the President shall have the
duties of such office.
Section 9. VICE PRESIDENTS. The vice presidents shall assist the
president and shall perform such duties as may be assigned to them by the
president or by the board of directors. In the absence of the president, the
vice president, if any (or, if there be more than one, the vice presidents in
the order designated by the board of directors, or if the board makes no such
designation, then the vice president designated by the president, or if neither
the board nor the president makes any such designation, the senior vice
president as determined by first election to that office), shall have the powers
and perform the duties of the president.
Section 10. SECRETARY. The secretary shall: (a) keep the minutes of the
proceedings of the stockholders, executive committee and the board of directors;
(b) see that all notices are duly given in accordance with the provisions of
these bylaws or as required by law; (c) be custodian of the corporate records
and of the seal of the corporation and affix the seal to all documents when
authorized by the board of directors; (d) keep at its registered office or
principal place of business within or outside Delaware a record containing the
names and addresses of all stockholders and the number and class of shares held
by each, unless such a record shall be kept at the office of the corporation's
transfer agent or registrar; (e) sign with the president, or a vice president,
certificates for shares of the corporation, the issuance of which shall have
been authorized by resolution of the board of directors; (f) have general charge
of the stock transfer books of the corporation, unless the corporation has a
transfer agent; and (g) in general, perform all duties incident to the office of
secretary and such other duties as from time to time may be assigned to him by
the president or by the board of directors. Assistant secretaries, if any, shall
have the same duties and powers, subject to supervision by the secretary.
Section 11. CHIEF FINANCIAL OFFICER. The chief financial officer shall
be the principal financial officer of the corporation, shall have the care and
custody of all funds, securities, evidences of indebtedness and other personal
property of the corporation and shall deposit the same in accordance with the
instructions of the board of directors. He shall receive and give receipts and
acquittances for money paid in on account of the corporation, and shall pay out
of the funds on hand all bills, payrolls and other just debts of the corporation
of whatever nature upon maturity. He shall perform all other duties incident to
the office of the chief financial officer and, upon request of the board, shall
make such reports to it as may be required at any time. He shall, if required by
the board, give the corporation a bond in such sums and with such sureties as
shall be satisfactory to the board, conditioned upon the faithful performance of
his duties and for the restoration to the corporation of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the corporation. He shall have such other powers and
perform such other duties as may from time to time be prescribed by the board of
directors or the president. The assistant treasurers, if any, shall have the
same powers and duties, subject to the supervision of the chief financial
officer.
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The chief financial officer shall also be the principal accounting
officer of the corporation. He shall prescribe and maintain the methods and
systems of accounting to be followed, keep complete books and records of
account, prepare and file all local, state and federal tax returns, prescribe
and maintain an adequate system of internal audit and prepare and furnish to the
president and the board of directors statements of account showing the financial
position of the company and the results of its operations.
Section 12. ABSENCE OR DISABILITY OF OFFICERS. In the case of the
absence or disability of any officer of the corporation and of any person hereby
authorized to act in such officer's place during such officer's absence or
disability, the Board of Directors may delegate the powers and duties of such
officer to any officer or to any director, or to any other person who it may
select.
ARTICLE VI
STOCK AND TRANSFER THEREOF
--------------------------
Section 1. CERTIFICATES.
(a) The board of directors shall be authorized to issue any of its
classes of shares with or without certificates. The fact that the shares are not
represented by certificates shall have no effect on the rights and obligations
of stockholders.
(b) If the shares are represented by certificates, such certificates
shall be consecutively numbered and signed, either manually or by facsimile, in
the name of the corporation by one or more persons designated by the board of
directors. Certificates for shares shall be of such form and device as the board
of directors may designate and shall state the name of the record holder of the
shares represented thereby; its number; date of issuance; the number of shares
for which it is issued; a summary statement or reference to the powers,
designations, preferences or other special rights of such stock and the
qualifications, limitations or restrictions of such preferences and/or rights,
if any; a statement or summary of liens, if any, a conspicuous notice of
restrictions upon transfer or registration of transfer, if any, a statement as
to any applicable voting trust agreement; and, if the shares be assessable, or,
if assessments are collectible by personal action, a plain statement of such
facts.
(c) In case any officer who has signed or whose facsimile signature has
been placed upon such certificate shall have ceased to be such officer before
such certificate is issued, it may be issued by the corporation with the same
effect as if he were such officer at the date of its issue. Certificates of
stock shall be in such form consistent with law as shall be prescribed by the
board of directors.
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(d) If shares are not represented by certificates, within a reasonable
time following the issue or transfer of such shares, the corporation shall send
the stockholder a complete written statement of all information required to be
provided to holders of uncertificated shares by the Delaware General Corporation
Law.
Section 2. CONSIDERATION FOR SHARES. Shares shall be issued for such
consideration, expressed in dollars as shall be fixed from time to time by the
board of directors. Such consideration may consist in whole or in part of money,
other property, tangible or intangible, negotiable, recourse promissory notes
secured by collateral other than the shares being purchased, or labor or
services actually performed for the corporation. Future services shall not
constitute payment or part payment for shares. 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.
Section 3. SPECIAL DESIGNATION ON CERTIFICATES. If the corporation is
authorized to issue more than one class of stock or more than one series of any
class, then the powers, the designations, the preferences and the relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights shall be set forth in full or summarized on the face or back of
the certificate that the corporation shall issue to represent such class or
series of stock; provided, however, that, except as otherwise provided in
Section 202 of the General Corporation Law of Delaware (relating to transfers of
stock, stock certificates and undercertificated stock), in lieu of the foregoing
requirements there may be set forth on the face or back of the certificate that
the corporation shall issue to represent such class or series of stock a
statement that the corporation will furnish without charge to each stockholder
who so requests the powers, the designations, the preferences and the relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights.
Section 4. LOST CERTIFICATES. Except as provided in this Section 4, no
new certificates for shares shall be issued to replace a previously issued
certificate unless the latter is surrendered to the corporation and canceled at
the same time. The board of directors may, in case any share certificate or
certificate for any other security is lost, stolen or destroyed, authorize the
issuance of replacement certificates on such terms and conditions as the board
may require; the board may require indemnification of the corporation secured by
a bond or other adequate security sufficient to protect the corporation against
any claim that may be made against it, including any expense or liability, on
account of the alleged loss, theft or destruction of the certificate or the
issuance of the replacement certificate.
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Section 5. TRANSFER OF SHARES. Upon surrender to the corporation or to
a transfer agent of the corporation of a certificate of stock duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, and such documentary stamps as may be required by law and evidence of
compliance with applicable securities laws and other restrictions, the
corporation shall issue a new certificate to the person entitled thereto and
cancel the old certificate. Every such transfer of stock shall be entered on the
stock book of the corporation which shall be kept at its principal office or by
its registrar duly appointed.
Section 6. REGISTERED STOCKHOLDERS. The corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a 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 any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
the laws of Delaware.
Section 7. TRANSFER AGENT, REGISTRARS AND PAYING AGENTS. The board may
at its discretion appoint one or more transfer agents, registrars and agents for
making payment upon any class of stock, bond, debenture or other security of the
corporation. Such agents and registrars may be located either within or outside
Delaware. They shall have such rights and duties and shall be entitled to such
compensation as may be agreed.
ARTICLE VII
INDEMNIFICATION OF CERTAIN PERSONS
----------------------------------
Section 1. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The corporation
shall, to the maximum extent and in the manner permitted by the General
Corporation Law of Delaware as the same now exists or may hereafter be amended,
indemnify any person against expenses (including attorneys' fees), judgments,
fines, and amounts paid in settlement actually and reasonably incurred in
connection with any threatened, pending or completed action, suit, or proceeding
in which such person was or is a party or is threatened to be made a party by
reason of the fact that such person is or was a director or officer of the
corporation, if he acted in good faith and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. For
purposes of this Section 1, a "director" or "officer" of the corporation shall
mean any person (i) who is or was a director or officer of the corporation, (ii)
who is or was serving at the request of the corporation as a director or officer
of another corporation, partnership, joint venture, trust or other enterprise,
or (iii) who was a director or officer of a corporation which was a predecessor
corporation of the corporation or of another enterprise at the request of such
predecessor corporation.
The corporation shall be required to indemnify a director or officer in
connection with an action, suit, or proceeding (or part thereof) initiated by
such director or officer only if the initiation of such action, suit, or
proceeding (or part thereof) by the director or officer was authorized by the
board of directors of the corporation.
Any repeal or modification of the foregoing provisions of this Article
shall not adversely affect any right or protection hereunder of any person in
respect of any act or omission occurring prior to the time of such repeal or
modification.
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Section 2. INDEMNIFICATION OF OTHERS. The corporation shall have the
power, to the maximum extent and in the manner permitted by the General
Corporation Law of Delaware as the same now exists or may hereafter be amended,
to indemnify any person (other than directors and officers) against expenses
(including attorneys' fees), judgments, fines, and amounts paid in settlement
actually and reasonably incurred in connection with any threatened, pending or
completed action, suit, or proceeding, in which such person was or is a party or
is threatened to be made a party by reason of the fact that such person is or
was an employee or agent of the corporation. For purposes of this Section 2, an
"employee" or "agent" of the corporation (other than a director or officer)
shall mean any person (i) who is or was an employee or agent of the corporation,
(ii) who is or was serving at the request of the corporation as an employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, or (iii) who was an employee or agent of a corporation which was a
predecessor corporation of the corporation or of another enterprise at the
request of such predecessor corporation.
Section 3. PAYMENT OF EXPENSES IN ADVANCE. The corporation shall pay
the expenses (including attorney's fees) incurred by a director or officer of
the corporation entitled to indemnification hereunder in defending any action,
suit or proceeding referred to in this Article VII in advance of its final
disposition; provided, however, that payment of expenses incurred by a director
or officer of the corporation in advance of the final disposition of such
action, suit or proceeding shall be made only upon receipt of an undertaking by
the director or officer to repay all amounts advanced if it should ultimately be
determined that the director or officer is not entitled to be indemnified under
this Article VII or otherwise.
Section 4. INDEMNITY NOT EXCLUSIVE. The rights conferred on any person
by this Article shall not be exclusive of any other rights which such person may
have or hereafter acquire under any statute, provision of the corporation's
Certificate of Incorporation, these bylaws, agreement, vote of the stockholders
or disinterested directors or otherwise.
Section 5. INSURANCE INDEMNIFICATION. By action of the board of
directors, notwithstanding any interest of the directors in the action, the
corporation may purchase and maintain insurance, in such amounts as the board of
directors deems appropriate, on behalf of any person who is or was a director,
officer, employee, fiduciary or agent of the corporation or who is or was
serving at the request of the corporation as a director, officer, partner,
trustee, employee, fiduciary or agent of another domestic or foreign
corporation, partnership, joint venture, trust, employee benefit plan 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 this Article. Any such insurance may be procured from any
insurance company designated by the board of directors, whether such insurance
company is formed under the laws of Delaware or any other jurisdiction of the
United States or elsewhere, including any insurance company in which the
corporation has an equity or any other interest through stock ownership or
otherwise.
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ARTICLE VIII
MISCELLANEOUS
-------------
Section 1. WAIVERS OF NOTICE. Whenever notice is required by law, by
the Articles of Certificate or by these bylaws, a waiver thereof in writing
signed by the director, stockholder or other person entitled to said notice,
whether before or after the time stated therein, or his appearance at such
meeting in person or (in the case of a stockholders' meeting) by proxy, shall be
equivalent to such notice.
Section 2. SEAL. The corporate seal of the corporation shall be
circular in form and shall contain the name of the corporation and the words
"Seal, Delaware."
Section 3. FISCAL YEAR. The fiscal year of the corporation shall be as
established by the board of directors.
Section 4. AMENDMENTS. The board of directors shall have power, to the
maximum extent permitted by the Delaware General Corporation Law, to make, amend
and repeal the bylaws of the corporation at any regular or special meeting of
the board unless the stockholders, in making, amending or repealing a particular
bylaw, expressly provide that the directors may not amend or repeal such bylaw.
The stockholders shall also have the power to make, amend or repeal the bylaws
of the corporation at any annual meeting or any special meeting called for that
purpose.
_________________________
David L. Reese, Secretary
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ANNEX A
SVI Holdings, Inc.
1998 INCENTIVE STOCK PLAN
AMENDED AS OF AUGUST 18, 2000
1. PURPOSES.
---------
(a) The purpose of this 1998 Incentive Stock Plan is to
provide a means by which Employees, Directors and Consultants of the Company,
and its Affiliates, may be given an opportunity to benefit from increases in
value of the common stock of the Company through the granting of (i) incentive
stock options, (ii) non-statutory stock options, (iii) stock bonuses, (iv)
rights to purchase stock, and (v) stock appreciation rights.
(b) The Company, by means of this 1998 Incentive Stock Plan,
seeks to retain the services of persons who are now Employees, Directors, or
Consultants of the Company, to secure and retain the services of new Employees,
Directors and Consultants, and to provide incentives for such persons to exert
maximum efforts for the success of the Company.
(c) The Company intends that the Stock Awards issued under
this Plan shall, in the discretion of the Board or any Committee to which
responsibility for administration of the Plan has been delegated pursuant to
subsection 3(c), be either (i) Options granted pursuant to Section 6, including
Incentive Stock Options and Non-statutory Stock Options, (ii) Stock bonuses or
rights to purchase Stock granted pursuant to Section 7, or (iii) Stock
appreciation rights granted pursuant to Section 8. All Options shall be
separately designated Incentive Stock Options or Non-statutory Stock Options at
the time of grant, and in such form as issued pursuant to Section 6, and a
separate certificate or certificates will be issued for shares purchased on
exercise of each type of Option.
(d) This 1998 Incentive Stock Plan was adopted by the Board of
Directors on October 5, 1998 and approved by the shareholders on November 2,
1998. The Board of Directors approved the amended Plan on August 18, 2000, and
the stockholders approved the amendments to Section 4 submitted for shareholder
approval on September 21, 2000.
2. DEFINITIONS.
-----------
(a) "AFFILIATE" means any parent corporation or subsidiary
corporation, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f) respectively, of the Code.
(b) "BOARD" means the Board of Directors of the Company.
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(c) "CODE" means the Internal Revenue Code of 1986, as
amended.
(d) "COMMITTEE" means a Committee appointed by the Board in
accordance with subsection 3(c) of the Plan.
(e) "COMPANY" means: SVI Holdings, Inc. a Nevada corporation.
(f) "CONCURRENT STOCK APPRECIATION RIGHT" or "CONCURRENT
RIGHT" means a right granted pursuant to subsection 8(b)(ii) of the Plan.
(g) "CONSULTANT" means any person, including an advisor,
engaged by the Company or an Affiliate to render services and who is compensated
for such services; provided that the term "Consultant" shall not include
Directors who are paid only a director's fee by the Company or who are not
compensated by the Company for their services as Directors.
(h) "CONTINUOUS STATUS OF EMPLOYEE, DIRECTOR OR CONSULTANT"
means the employment or relationship as a Director or Consultant is not
interrupted or terminated by the Company or any Affiliate. The Board in its sole
discretion, may determine whether Continuous Status as an Employee, Director or
Consultant shall be considered interrupted in the case of: (i) any leave of
absence approved by the Board, including sick leave, military leave, or any
other personal leave. For purposes of Incentive Stock Options and Stock
Appreciation Rights appurtenant thereto, any such leave may not exceed ninety
(90) days, unless re-employment upon the expiration of such leave is guaranteed
by contract (including certain Company policies) or statute; or (ii) transfers
between locations of the Company or between the Company, its Affiliates or its
successor.
(i) "COVERED EMPLOYEE" means the chief executive officer and
the four (4) other highest compensated Officers of the Company for whom total
compensation is required to be reported to stockholders under the Exchange Act,
as determined for purposes of Section 162(m) of the Code.
(j) "DIRECTOR" means a member of the Company's Board of
Directors.
(k) "DISABILITY" means total and permanent disability as
defined in Section 22(e)(3) of the Code.
(l) "EMPLOYEE" means any person, including Officers and
Directors, employed by the Company or any Affiliate of the Company. Neither
service as a Director nor payment of a director's fee by the Company shall be
sufficient to constitute "employment" by the Company.
(m) "EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended.
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(n) "FAIR MARKET VALUE" means the average of the high and low
sale prices per share of Stock on the American Stock Exchange, composite tape or
other recognized market source, as determined by the Board, on the applicable
date of reference hereunder, or if there is no sale on such date, the average
high and low sale prices on the last previous day on which a sale is reported.
(o) "FAMILY MEMBER" means any child, stepchild, grandchild,
parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in- law, or
sister-in-law, including adoptive relationships, any person sharing the
Employee's or Consultant's household (other than a tenant or employee), a trust
in which these persons have more than fifty percent of the beneficial interest,
a foundation in which these persons (or the Employee or Consultant) control the
management of assets, and any other entity in which these persons (or the
Employee or Consultant) own more than fifty percent of the voting interests,
including any changes as may be made from time to time to the definition of
"Family Member" as promulgated by the Securities and Exchange Commission in
connection with the general instructions for Form S-8 promulgated under the
Securities Act of 1933, as amended, or any successor form.
(p) "INCENTIVE STOCK OPTION" means an Option granted pursuant
to the Plan which is designated as an incentive stock option by the Board, and
qualifies as an incentive stock option within the meaning of Section 422 of the
Code and the regulations promulgated thereunder.
(q) "INDEPENDENT STOCK APPRECIATION RIGHT" means a right
granted under subsection 8(b)(iii) of the Plan.
(r) "NON-EMPLOYEE DIRECTOR" means a Director of the Company
who either (i) is not a current Employee or Officer of the Company or its parent
or a subsidiary, does not receive compensation (directly or indirectly) from the
Company or its parent or a subsidiary for services rendered as a Consultant or
in any capacity other than as a Director (except for an amount as to which
disclosure would not be required under Item 404(a) of Regulation S-K promulgated
pursuant to the Securities Act of 1933, as amended ("Regulation S-K")), does not
possess an interest in any other transaction as to which disclosure would be
required under Item 404(a) of Regulation S-K, and is not engaged in a business
relationship as to which disclosure would be required under Item 404(b) of
Regulation S-K; or (ii) is otherwise considered a "non- employee director" for
purposes of Rule 16b-3.
(s) "NON-STATUTORY STOCK OPTION" means an Option granted
pursuant to the Plan which is not an Incentive Stock Option.
(t) "OFFICER" means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
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(u) "OPTION" means an option to purchase Stock granted
pursuant to the Plan.
(v) "OPTION AGREEMENT" means a written agreement between the
Company and an Optionee evidencing the terms and conditions of an individual
Option grant. The Option Agreement is subject to the terms and conditions of the
Plan.
(w) "OPTION PRICE" shall mean the price per share of Stock to
be paid by the Optionee upon exercise of the Option and as set forth in the
Option Agreement.
(x) "OPTIONEE" means an Employee, Director or Consultant who
holds an outstanding Option.
(y) "OUTSIDE DIRECTOR" means a Director of the Company who
either (i) is not a current employee of the Company or an "affiliated
corporation" (within the meaning of Treasury Regulations promulgated under
Section 162(m) of the Code), is not a former employee of the Company or an
"affiliated corporation" receiving compensation for prior services (other than
benefits under a tax qualified pension plan), was not an officer of the Company
or an "affiliated corporation" at any time, and is not currently receiving
direct or indirect remuneration from the Company or an "affiliated corporation"
for services in any capacity other than as a Director or (ii) is otherwise
considered an "outside director" for purposes of Section 162(m) of the Code.
(z) "PARTICIPANT" means an Employee, Director or Consultant
who receives a Stock Award.
(aa) "PLAN" means this 1998 Incentive Stock Plan, as may be
amended from time to time.
(bb) "RULE 16B-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
(cc) "STOCK" shall mean the $0.0001 par value common stock of
the Company.
(dd) "STOCK APPRECIATION RIGHT" means any of the various types
of rights which may be granted under Section 8 of the Plan.
(ee) "STOCK AWARD" means any right granted under the Plan,
including any Option, any Stock Bonus, any Stock Purchase Right, and any Stock
Appreciation Right.
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(ff) "STOCK AWARD AGREEMENT" means a written agreement between
the Company and a Participant evidencing the terms and conditions of an
individual Stock Award grant. The Stock Award Agreement is subject to the terms
and conditions of the Plan.
(gg) "TANDEM STOCK APPRECIATION RIGHT" or "TANDEM RIGHT" means
a right granted under subsection 8(b)(i) of the Plan.
3. ADMINISTRATION.
---------------
(a) The Plan shall be administered by the Board unless and
until the Board delegates administration to a Committee or Committees, as
provided in subsection 3(c).
(b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(1) To determine from time to time which of the
persons eligible under the Plan shall be granted Stock Awards; when and how
Stock Awards shall be granted; whether a Stock Award will be an Incentive Stock
Option, a Non-statutory Stock Option, a Stock Bonus, a Stock Purchase Right, a
Stock Appreciation Right, or a combination of the foregoing; the provisions of
each Stock Award granted (which need not be identical), including the time or
times when a person shall be permitted to receive Stock pursuant to a Stock
Award, whether a person shall be permitted to receive Stock upon exercise of an
Independent Stock Appreciation Right; and, subject to subsection 4(d), the
number of shares with respect to which Stock Awards shall be granted to each
such person.
(2) To construe and interpret the Plan and Stock
Awards granted under it, and to establish, amend and revoke rules and
regulations for its administration. The Board, in the exercise of this power,
may correct any defect, omission or inconsistency in the Plan or in any Stock
Award Agreement, in a manner and to the extent it shall deem necessary or
expedient to make the Plan fully effective.
(3) To amend the Plan as provided in Section 14.
(4) Generally, to exercise such powers and to perform
such acts as the Board deems necessary or expedient to promote the best
interests of the Company.
(c) The Board may delegate administration of the Plan to a
Committee or Committees of one (1) or more members of the Board, and the term
"Committee" shall apply to any person or persons to whom such authority has been
delegated. If administration is delegated to a Committee, the Committee shall
have, in connection with the administration of the Plan, the powers theretofore
possessed by the Board, including the power to delegate to a subcommittee any of
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the administrative powers the Committee is authorized to exercise (and
references in this Plan to the Board shall thereafter be to the Committee or
subcommittee), subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan. A Committee may consist solely of two (2) or more
Outside Directors, and/or solely of two or more Non- Employee Directors. Within
the scope of such authority, the Board or the Committee may (i) delegate to a
committee of one (1) or more members of the Board who are not Outside Directors,
the authority to grant Stock Awards to eligible persons who are either (a) not
then Covered Employees and are not expected to be Covered Employees at the time
of recognition of income resulting from such Stock Award or (b) not persons with
respect to whom the Company wishes to comply with Section 162(m) of the Code
and/or (ii) delegate to a committee of one (1) or more members of the Board who
are not Non- Employee Directors the authority to grant Stock Awards to eligible
persons who are not then subject to Section 16 of the Exchange Act.
4. SHARES SUBJECT TO THE PLAN.
---------------------------
(a) Subject to the provisions of Section 13 relating to
adjustments upon changes in Stock, the Stock that may be issued pursuant to
Stock Awards shall not exceed in the aggregate four million (4,000,000) shares.
The number of shares available shall be adjusted as provided in Section 13.
Stock issued under any other stock option plan of the Company shall not be
counted against the maximum number of shares that can be issued under the Plan.
If any Stock Award shall for any reason expire or otherwise terminate without
having been exercised in full, the Stock not purchased under such Stock Award
shall again become available for issuance under the Plan. Shares subject to
Stock Appreciation Rights exercised in accordance with Section 8 of the Plan
shall not be available for subsequent issuance under the Plan.
(b) The Stock subject to the Plan may be unissued shares or
reacquired shares.
(c) The number of shares of Stock available for issuance under
the Plan shall automatically increase on the first trading day in each fiscal
year during the term of the Plan, beginning with the fiscal year ending March
31, 2001, by an amount equal to the least of (i) 2% of the total number of
shares of Stock outstanding on the last trading day of the immediately preceding
fiscal year; (ii) 600,000 shares of Stock; or (iii) an amount determined by the
Board.
(d) No one person participating in the Plan may receive Stock
Awards for more than 500,000 shares of Stock in the aggregate per calendar year.
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5. ELIGIBILITY.
------------
(a) Incentive Stock Options and Stock Appreciation Rights
appurtenant thereto may be granted only to Employees. Stock Awards other than
Incentive Stock Options and Stock Appreciation Rights appurtenant thereto may be
granted only to Employees, Directors or Consultants.
(b) A Director or Officer shall in no event be eligible for
the benefits of the Plan unless at the time discretion is exercised in the
selection of the Director or Officer as a person to whom Stock Awards may be
granted, or in the determination of the number of shares which may be covered by
Stock Awards granted to the Director or Officer: (i) the Board has approved the
grant of the Stock Awards; (ii) the Board has delegated its discretionary
authority over the Plan to a Committee which consists solely of two or more
Non-Employee Directors; or (iii) the grant otherwise complies with the
requirements of Rule 16b-3.
(c) No person shall be eligible for the grant of an Option if,
at the time of grant, such person owns (or is deemed to own pursuant to Code
Section 424(d)) Stock possessing more than ten (10%) percent of the total
combined voting power of all classes of capital stock of the Company or of any
of its Affiliates unless the exercise price of such Option is at least one
hundred ten (110%) percent of the Fair Market Value of the Stock at the date of
grant and the Option is not exercisable after the expiration of five (5) years
from the grant date.
6. OPTION PROVISIONS.
------------------
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions of the Plan by reference in the Option or otherwise)
the substance of each of the following provisions:
(a) TERM. No Option shall be exercisable after the expiration
of ten (10) years from the date it was granted; provided that an Option granted
to a person possessing ten (10%) percent or more of the combined voting power of
all classes of capital stock of the Company or its Affiliates shall have a term
not exceeding five (5) years.
(b) PRICE. The exercise price of each Incentive Stock Option
shall be not less than one hundred percent (100%) of the Fair Market Value of
the Stock subject to the Option on the date the Option is granted. The exercise
price of each Non-statutory Stock Option shall be not less than eighty-five
(85%) of the Fair Market Value of the Stock subject to the Option on the date
the Option is granted. Despite the previous two sentences, the purchase price
for Options granted to a person who possesses more than ten percent (10%) of the
total combined voting power of all classes of capital stock of the Company or
its Affiliates shall be at least one hundred ten percent (110%) of the Fair
Market Value of the Stock at the date of grant.
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(c) CONSIDERATION. The Option Price of Stock acquired pursuant
to an Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (1) in cash at the time the Option is exercised, or (2) at
the discretion of the Board, either at the time of the grant or exercise of the
Option, (A) by delivery to the Company of other Stock of the Company, (B)
according to a deferred payment or other arrangement (which may include, without
limiting the generality of the foregoing, the use of other Stock of the Company
valued at Fair Market Value as provided herein) with the person to whom the
Option is granted or to whom the Option is transferred pursuant to subsection
6(d), or (C) an agreement with the Company whereby a portion of the Optionee's
Options are terminated, and where the Built in Gain on any Options which are
terminated as part of the agreement equals the aggregate Option Price of the
Option being exercised.
The Board may permit deemed or constructive transfer of shares in lieu of actual
transfer and physical delivery of certificates. Except to the extent prohibited
by applicable law, the Board may take any necessary or appropriate steps in
order to facilitate the payment of the Option Price. The Board, in its sole and
exclusive discretion, may require satisfaction of any rules or conditions in
connection with paying the Option Price at any particular time, in any
particular form, or with the Company's assistance.
In the event the Board determines in its sole discretion to provide an Optionee
with a deferred payment arrangement, interest shall be payable at least annually
and shall be charged at the minimum rate of interest necessary to avoid the
treatment as interest, under any applicable provisions of the Internal Revenue
Code of 1986, of any amounts other than amounts stated to be interest under the
deferred payment arrangement. "Built in Gain" means the excess of the aggregate
Fair Market Value of Stock subject to an Option otherwise issuable on exercise
of a terminated Option over the aggregate Option Price otherwise due the Company
on such exercise. If Stock used to pay any Option Price is subject to any prior
restrictions imposed in connection with any stock option or stock purchase plan
or agreement of the Company (including this Plan), an equal number of the shares
of Stock acquired on exercise shall be made subject to such prior restrictions
in addition to any further restrictions imposed on the Stock by the terms of the
particular Agreement or by the Plan.
(d) TRANSFERABILITY. To the extent required by Code Section
422, Options, (or the rights of Optionees pursuant to the Agreement), shall not
be transferable in any manner, whether voluntary or involuntary, except by will
or the law of descent and distribution. A Non-Qualified Stock Option may be
transferred: (i) by gift to a Family Member; (ii) under a domestic relations
order in settlement of marital property rights; and (iii) to any entity in which
more than fifty percent of the voting interests are owned by Family Members (or
the Employee or Consultant) in exchange for an interest in that entity. An
attempted non-permitted transfer shall be void and shall immediately terminate
the Option.
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(e) VESTING. The total number of shares of Stock subject to an
Option may, but need not, be allotted in periodic installments (which may, but
need not, be equal). The Option Agreement may provide that from time to time
during each of such installment periods, the Option may become exercisable
("vest") with respect to some or all of the shares allotted to that period, and
may be exercised with respect to some or all of the shares allotted to such
period and/or any prior period as to which the Option became vested but was not
fully exercised. The vesting provisions of individual Options may vary but in
each case will provide for vesting of at least twenty percent (20%) of the total
number of shares subject to the Option per year. During the remainder of the
term of the Option (if its term extends beyond the end of the installment
periods), the Option may be exercised from time to time with respect to any
shares then remaining subject to the Option. The provisions of this subsection
6(e) are subject to any Option provisions governing the minimum number of shares
as to which an Option may be exercised.
(f) SECURITIES LAW COMPLIANCE. The Company may require any
Optionee, or any person to whom an Option is transferred under subsection 6(d),
as a condition of exercising any such Option, to give written assurances
satisfactory to the Company, if any, that are necessary to ensure compliance
with federal securities laws. These requirements, and any assurances given
pursuant to such requirements, shall be inoperative if (i) the issuance of the
shares upon the exercise of the Option has been registered under a then
currently effective registration statement under the Securities Act of 1933, as
amended, or (ii) as to any particular requirement, a determination is made by
counsel for the Company that such requirement need not be met in the
circumstances under the then applicable securities laws.
(g) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR
CONSULTANT. If an Optionee's Continuous Status as an Employee, Director or
Consultant terminates (other than "for cause", or upon the Optionee's death or
Disability), the Optionee may exercise his or her Option, but only within such
period of time as is determined by the Board (which period shall not be less
than three (3) months from the date of such termination), and only to the extent
that the Optionee was entitled to exercise it at the date of termination (but in
no event later than the expiration of the term of such Option as set forth in
the Option Agreement). If, at the date of termination, the Optionee is not
entitled to exercise his or her entire Option, the shares covered by the
unexercisable portion of the Option shall revert to the Plan. If, after
termination, the Optionee does not exercise his or her Option within the time
specified in the Option Agreement, the Option shall terminate, and the shares
covered by such Option shall revert to the Plan. If an Optionee's Continuous
Status as an Employee, Director or Consultant terminates "for cause", the right
to exercise the Option shall immediately cease.
(h) DISABILITY OF OPTIONEE. If an Optionee's Continuous Status
as an Employee, Director or Consultant terminates as a result of the Optionee's
Disability, the Optionee may exercise his or her Option, but only within such
period of time as is determined by the Board (which period from the date of
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such termination shall not be less than one (1) year, and only to the extent
that the Optionee was entitled to exercise it at the date of such termination
(but in no event later than the expiration of the term of such Option as set
forth in the Option Agreement). If, at the date of termination, the Optionee is
not entitled to exercise his or her entire Option, the shares covered by the
unexercisable portion of the Option shall revert to the Plan. If, after
termination, the Optionee does not exercise his or her Option within the time
specified herein, the Option shall terminate, and the shares covered by the
Option shall revert to the Plan.
(i) DEATH OF OPTIONEE. In the event of the death of an
Optionee, the Option may be exercised, at any time within such period as is
determined by the Board (which period shall not be less than twelve (12) months
following the date of death) by the personal representative of the Optionee's
estate or by a person who acquired the right to exercise the Option by bequest
or inheritance, and only to the extent the Optionee was entitled to exercise the
Option at the date of death (but in no event later than the expiration of the
term of such Option as set forth in the Option Agreement). If, at the time of
death, the Optionee was not entitled to exercise his or her entire Option, the
shares covered by the unexercisable portion of the Option shall revert to the
Plan. If, after death, the Optionee's estate or a person who acquired the right
to exercise the Option by bequest or inheritance does not exercise the Option
within the time specified herein, the Option shall terminate, and the shares
covered by such Option shall revert to the Plan.
(j) WITHHOLDING. To the extent provided by the terms of an
Option Agreement, the Optionee may satisfy any federal, state or local tax
withholding obligation relating to the exercise of such Option by any of the
following means or by a combination of such means: (1) tendering a cash payment;
(2) authorizing the Company to withhold shares from the shares of the Stock
otherwise issuable to the Optionee as a result of the exercise of the Option; or
(3) delivering to the Company unencumbered shares of Stock owned by Optionee.
7. TERMS OF STOCK BONUSES AND STOCK PURCHASES.
------------------------------------------
Each Stock Bonus or Stock Purchase agreement shall be in such form and
shall contain such terms and conditions as the Board shall deem appropriate. The
terms and conditions of Stock Bonus or Stock Purchase agreements may change from
time to time, and the terms and conditions of separate agreements need not be
identical, but each Stock Bonus or Stock Purchase agreement shall include
(through incorporation of provisions hereof by reference in the agreement or
otherwise) the substance of each of the following provisions as appropriate:
(a) PURCHASE PRICE. The purchase price under each Stock
Purchase agreement shall be such amount as the Board shall determine and
designate in such agreement (which purchase price shall in any event be not less
than eighty-five (85%) percent of the Fair Market Value of the Stock on the
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date such award is made), provided that the purchase price shall be one hundred
(100%) percent of the Fair Market Value of the Stock on the date the award is
made, in the case of any person who owns Stock possessing more than ten (10%)
percent of the total combined voting power of all classes of capital stock of
the Company or its Affiliates.
(b) TRANSFERABILITY. Rights under a Stock Bonus or Stock
Purchase agreement shall not be transferable in any manner, whether voluntary or
involuntary, except by will or the law of descent and distribution. Rights under
a Stock Bonus or Stock Purchase agreement may be transferred: (i) by gift to a
Family Member; (ii) under a domestic relations order in settlement of marital
property rights; and (iii) to any entity in which more than fifty percent of the
voting interests are owned by Family Members (or the Employee or Consultant) in
exchange for an interest in that entity. An attempted non-permitted transfer
shall be void and shall immediately terminate the rights.
(c) CONSIDERATION. The purchase price of Stock acquired
pursuant to a Stock Purchase agreement shall be paid either: (i) in cash at the
time of purchase; (ii) at the discretion of the Board, according to a deferred
payment or other arrangement with the person to whom the Stock is sold; or (iii)
in any other form of legal consideration (including shares of previously owned
Stock) that may be acceptable to the Board in its discretion.
(d) VESTING. Shares of Stock sold or awarded under the Plan
may, but need not, be subject to a repurchase option in favor of the Company in
accordance with a vesting schedule to be determined by the Board.
(e) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR
CONSULTANT. In the event a Participant's Continuous Status as an Employee,
Director or Consultant terminates, the Company may repurchase or otherwise
reacquire any or all of the shares of Stock held by that person which have not
vested as of the date of termination under the terms of the Stock bonus or Stock
purchase agreement between the Company and such person.
8. STOCK APPRECIATION RIGHTS.
--------------------------
(a) The Board shall have full power and authority, exercisable
in its sole discretion, to grant Stock Appreciation Rights to Employees,
Directors or Consultants of the Company or its Affiliates under the Plan. Each
such right shall entitle the holder to a distribution based on the appreciation
in the Fair Market Value per share of a designated amount of Stock.
(b) three types of Stock Appreciation Rights shall be
authorized for issuance under the Plan:
(i) TANDEM STOCK APPRECIATION RIGHTS. Tandem Rights
will be granted appurtenant to an Option and will require the holder to elect
between the exercise of the underlying Option for shares of Stock and the
surrender, in whole or in part, of the Option for an appreciation distribution
equal to the excess of (A) the Fair Market Value (on the date of Option
surrender) of vested shares of Stock purchasable under the surrendered Option
over (B) the aggregate exercise price payable for those shares.
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(ii) CONCURRENT STOCK APPRECIATION RIGHTS. Concurrent
Rights will be granted appurtenant to an Option and may apply to all or any
portion of the shares of Stock subject to the underlying Option and will be
exercised automatically at the same time the Option is exercised for those
shares. The appreciation distribution to which the holder of such Concurrent
Right shall be entitled upon exercise of the underlying Option shall be in an
amount equal to the excess of (A) the aggregate Fair Market Value (at date of
exercise) of the vested shares purchased under the underlying Option with such
Concurrent Rights over (B) the aggregate exercise price paid for those shares.
(iii) INDEPENDENT STOCK APPRECIATION RIGHTS.
Independent Rights may be granted independently of any Option and will entitle
the holder upon exercise to an appreciation distribution equal in amount to the
excess of (A) the aggregate Fair Market Value (at the date of exercise) of a
number of shares of Stock equal to the number of vested share equivalents
exercised at such time (as described in subsection 8(c)(iii)(B)) over (B) the
aggregate Fair Market Value of such number of shares of Stock at the date of
grant.
(c) The terms and conditions applicable to each Tandem Right,
Concurrent Right and Independent Right shall be as follows:
(i) TANDEM RIGHTS.
(A) Tandem Rights may be tied to either Incentive
Stock Options or Non-statutory Stock Options. Each Tandem Right shall, except as
specifically set forth below, be subject to the same terms and conditions
applicable to the particular Option to which it pertains. If Tandem Rights are
granted appurtenant to an Incentive Stock Option, they shall satisfy any
applicable Treasury Regulations so as not to disqualify the Option as an
Incentive Stock Option under the Code.
(B) The appreciation distribution payable on the
exercised Tandem Right shall be in cash in an amount equal to the excess of (I)
the Fair Market Value (on the date of the Option surrender) of the number of
shares of Stock covered by that portion of the surrendered Option in which the
Optionee is vested over (II) the aggregate exercise price payable for those
vested shares.
(ii) CONCURRENT RIGHTS.
(A) Concurrent Rights may be tied to any or all
of the shares of Stock subject to any Incentive Stock Option or Non-statutory
Stock Option grant made under the Plan. A Concurrent Right shall, except as
specifically set forth below, be subject to the same terms and conditions
applicable to the particular Option grant to which it pertains.
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(B) A Concurrent Right shall be automatically
exercised at the same time the underlying Option is exercised with respect to
the particular shares of Stock to which the Concurrent Right pertains.
(C) The appreciation distribution payable on an
exercised Concurrent Right shall be in cash in an amount equal to such portion
as shall be determined by the Board at the time of the grant of the excess of
(I) the aggregate Fair Market Value (on the Exercise Date) of the vested shares
of Stock purchased under the underlying Option which have Concurrent Rights
appurtenant to them over (II) the aggregate exercise price paid for those
shares.
(iii) INDEPENDENT RIGHTS.
(A) Independent Rights shall, except as
specifically set forth below, be subject to the same terms and conditions
applicable to Non- statutory Stock Options as set forth in Section 6. They shall
be denominated in share equivalents.
(B) The appreciation distribution payable on the
exercised independent Right shall be in an amount equal to the excess of (I) the
aggregate Fair Market Value (on the date of the exercise of the Independent
Right) of a number of shares of Company Stock equal to the number of share
equivalents in which the holder is vested under such Independent Right, and with
respect to which the holder is exercising the Independent Right on such date,
over (II) the aggregate Fair Market Value (on the date of the grant of the
Independent Right) of such number of shares of Company Stock.
(C) The appreciation distribution payable on the
exercised Independent Right may be paid, in the discretion of the Board, in
cash, in shares of Stock or in a combination of cash and Stock. Any shares of
Stock so distributed shall be valued at Fair Market Value on the date the
Independent Right is exercised.
(iv) TERMS APPLICABLE TO TANDEM RIGHTS, CONCURRENT
RIGHTS AND INDEPENDENT RIGHTS.
(A) To exercise any outstanding Tandem,
Concurrent or Independent Right, the holder must provide written notice of
exercise to the Company in compliance with the provisions of the instrument
evidencing the right.
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(B) If a Tandem, Concurrent, or Independent Right
is granted to an individual who is at the time subject to Section 16(b) of the
Exchange Act (a "Section 16(b) Insider"), then the instrument of grant shall
incorporate all the terms and conditions at the time necessary to assure that
the subsequent exercise of the right shall qualify for the safe-harbor exemption
from short-swing profit liability provided by Rule 16b-3.
(C) No limitation shall exist on the aggregate
amount of cash payments the Company may make under the Plan in connection with
the exercise of Tandem, Concurrent or Independent Rights.
9. CANCELLATION AND RE-GRANT OPTIONS AND CANCELLATION AND
------------------------------------------------------
RESCISSION OF AWARDS.
---------------------
(a) The Board shall have the authority to effect, at any time
and from time to time, with the consent of the affected holders of Options
and/or Stock Appreciation Rights, (i) the re-pricing of any outstanding Options
and/or any Stock Appreciation Rights under the Plan and/or (ii) the cancellation
of any outstanding Options and/or any Stock Appreciation Rights under the Plan
and the grant in substitution therefor of new Options and/or Stock Appreciation
Rights under the Plan covering the same or different numbers of shares of Stock,
but having an exercise price per share not less than eighty-five (85%) percent
of the Fair Market Value (one hundred (100%) percent of the Fair Market Value in
the case of an Option or, in the case of a ten (10%) percent shareholder (as
described in subsection 5(c)), not less than one hundred ten (110%) percent of
the Fair Market Value) per share of Stock on the new grant date.
(b) Unless the Stock Award Agreement specifies otherwise, the
Board may cancel, rescind, suspend, withhold or otherwise limit or restrict any
unexpired, unpaid, or deferred Stock Award at any time if the Participant is not
in compliance with all applicable provisions of the Stock Award Agreement and
the Plan, or if the Participant engages in any "Detrimental Activity." For
purposes of this subsection 9(b), "Detrimental Activity" shall include: (i) the
rendering of services for any organization or engaging directly or indirectly in
any business which is or becomes competitive with the Company, or which
organization or business, or the rendering of services to such organization or
business, is or becomes otherwise prejudicial to or in conflict with the
interests of the Company; (ii) the disclosure to anyone outside the Company, or
the use in other than the Company's business, without prior written
authorization from the Company, of any confidential information or material, as
defined in the Company's confidential information or similar agreement, relating
to the business of the Company, acquired by the Participant either during or
after employment with the Company; (iii) the failure or refusal to disclose
promptly and to assign to the Company, pursuant to the Company's confidential
information or similar agreement, all right, title and interest in any invention
or idea, patentable or not, made or conceived by the Participant during
employment by the Company, relating in any manner to the actual or anticipated
business, research or development work of the Company or the failure or refusal
to do anything reasonably necessary to enable the Company to secure a patent
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where appropriate in the United States and in other countries; (iv) activity
that results in termination of the Participant's employment for cause; (v) a
violation of any rules, policies, procedures or guidelines of the Company,
including but not limited to the Company's business conduct or similar
guidelines; (vi) any attempt directly or indirectly to induce any employee of
the Company to be employed or perform services elsewhere or any attempt directly
or indirectly to solicit the trade or business of any current or prospective
customer, supplier or partner of the Company; (vii) the Participant being
convicted of, or entering a guilty plea with respect to, a crime, whether or not
connected with the Company; or (viii) any other conduct or act determined to be
injurious, detrimental or prejudicial to any interest of the Company.
(c) In connection with subsection 9(b) herein, upon exercise,
payment or delivery pursuant to a Stock Award, the Participant shall certify in
a manner acceptable to the Company that he or she is in compliance with the
terms and conditions of the Plan. In the event a Participant engages in a
Detrimental Activity prior to, or during the six months after, any exercise,
payment or delivery pursuant to a Stock Award, such exercise, payment or
delivery may be rescinded within two years thereafter. In the event of any such
rescission, the Participant shall pay to the Company the amount of any gain
realized or payment received as a result of the rescinded exercise, payment or
delivery, in such manner and on such terms and conditions as may be required,
and the Company shall be entitled to set-off against the amount of any such gain
any amount owed to the Participant by the Company.
10. COVENANT OF THE COMPANY.
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During the terms of the Stock Awards, the Company shall keep available
at all times the number of shares of Stock required to satisfy such Stock Awards
up to the number of shares of Stock authorized under the Plan
11. USE OF PROCEEDS FROM STOCK.
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Proceeds from the sale of Stock pursuant to Stock Awards shall
constitute general funds of the Company.
12. MISCELLANEOUS.
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(a) Neither an Optionee nor any person to whom an Option is
transferred under subsection 6(d) shall be deemed to be the holder of, or to
have any of the rights of a holder with respect to, any shares subject to such
Option unless and until such person has satisfied all requirements for exercise
of the Option pursuant to its terms.
(b) Throughout the term of any Option granted pursuant to the
Plan, the Company shall make available to the holder of such Option, not later
than one hundred twenty (120) days after the close of each of the Company's
fiscal years during the Option term, such financial and other information
regarding the Company as comprises the annual report to the stockholders of the
Company provided for in the bylaws of the Company.
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(c) Nothing in the Plan or any instrument executed or Stock
Award granted pursuant thereto shall confer upon any Participant any right to
continue in the employ of the Company or any Affiliate (or to continue acting as
a Director or Consultant) or shall affect the right of the Company or any
Affiliate to terminate the employment of any Employee, or the relationship as a
Director or Consultant of any Director or Consultant with or without cause.
(d) To the extent that the aggregate Fair Market Value
(determined at the time of grant) of Stock with respect to which Incentive Stock
Options are exercisable for the first time by any Optionee during any calendar
year under all plans of the Company and its Affiliates exceeds one hundred
thousand dollars ($100,000), the Options or portions thereof which exceed such
limit (according to the order in which they were granted) shall be treated as
Non-statutory Stock Options.
13. ADJUSTMENTS UPON CHANGES IN STOCK.
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(a) If any change is made in the Stock subject to the Plan, or
subject to any Stock Award (through merger, consolidation, reorganization,
recapitalization, stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of shares, change
in corporate structure or otherwise), the Plan and outstanding Stock Awards will
be appropriately adjusted in the class(es) and maximum number of shares subject
to the Plan and the class(es) and number of shares and price per share of Stock
subject to outstanding Stock Awards.
(b) In the event of: (1) a merger or consolidation in which
the Company is not the surviving corporation or (2) a reverse merger in which
the Company is the surviving corporation but the shares of Stock outstanding
immediately preceding the merger are converted by virtue of the merger into
other property, whether in the form of securities, cash or otherwise, then, at
the sole discretion of the Board and to the extent permitted by applicable law:
(i) any surviving corporation shall assume any Stock Awards outstanding under
the Plan or shall substitute similar Stock Awards for those outstanding under
the Plan, or (ii) such Stock Awards shall continue in full force and effect. In
the event any surviving corporation refuses to assume or continue such Stock
Awards, or to substitute similar awards for those outstanding under the Plan,
the Stock Awards shall be terminated if not exercised prior to such event. In
the event of a dissolution or liquidation of the Company, any Stock Awards
outstanding under the Plan shall terminate if not exercised prior to such event.
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14. AMENDMENT OF THE PLAN.
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(a) The Board at any time, and from time to time, may amend
the Plan. However, except as provided in Section 13 relating to adjustments upon
changes in Stock, any amendments shall be approved by the shareholders of the
Company where required by law.
(b) It is expressly contemplated that the Board may amend the
Plan in any respect the Board deems necessary or advisable to provide Optionees
with the maximum benefits provided or to be provided under the provisions of the
Code and the regulations promulgated thereunder relating to Incentive Stock
Options and/or to bring the Plan and/or Incentive Stock Options granted under it
into compliance with the Code.
(c) Rights and obligations under any Stock Award granted
before amendment of the Plan shall not be altered or impaired by any amendment
of the Plan unless (i) the Company requests the consent of the person to whom
the Stock Award was granted and (ii) such person consents in writing.
15. TERMINATION OR SUSPENSION OF THE PLAN.
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(a) The Plan shall terminate ten (10) years following its
effective date. Despite the preceding sentence, the Board may suspend or
terminate the Plan at any time. No Stock Awards may be granted under the Plan
while the Plan is suspended or after it is terminated.
(b) Rights and obligations under any Stock Award granted while
the Plan is in effect shall not be altered or impaired by suspension or
termination of the Plan, except with the consent of the person to whom the Stock
Award was granted.
16. EFFECTIVE DATE OF PLAN.
-----------------------
The Plan shall become effective upon the later of the date it is first
adopted by the Board or approved by the Company's shareholders.
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