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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(4) Date Filed:
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[LOGO]
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 17, 1998
------------------------
TO THE SHAREHOLDERS OF CENTURA SOFTWARE CORPORATION:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Centura
Software Corporation (the "Company") will be held on Wednesday, June 17, 1998,
at 9:00 a.m., local time, at the Hotel Sofitel, located at 223 Twin Dolphin
Drive, Redwood Shores, California 94065 for the following purposes:
1. To elect directors to serve for the ensuing year and until their
successors are elected and qualified;
2. To approve an amendment to the Company's 1995 Stock Option Plan to
increase the number of shares of Common Stock reserved for issuance
thereunder by 1,000,000 shares to an aggregate of 3,000,000 shares;
3. To approve amendments to the 1996 Directors' Stock Option Plan (i) to
increase the number of shares of Common Stock reserved for issuance
thereunder by 500,000 shares to an aggregate of 1,000,000 shares, (ii) to
increase the number of shares underlying stock options granted to each
nonemployee director from 50,000 to 100,000 shares, and (iii) to reduce
the number of years over which new options granted under the 1996
Director's Stock Option Plan will vest from four (4) years to three (3)
years;
4. To approve an amendment to the Company's 1992 Employee Stock Purchase
Plan to increase the number of shares of Common Stock reserved for
issuance thereunder by 1,000,000 shares to an aggregate of 1,400,000
shares;
5. To approve (i) a change in the Company's state of incorporation from
California to Delaware by means of a merger of the Company with and into
a wholly owned Delaware subsidiary of the Company, (ii) assumption of the
Company's employee benefit plans and stock option and purchase plans by
the Delaware subsidiary and (iii) revisions in the Company's
indemnification agreements with its officers and directors to conform
such agreements to Delaware law;
6. To ratify the appointment of Price Waterhouse LLP as the Company's
independent public accountants for the fiscal year ending December 31,
1998; and
7. To transact such other business as may properly come before the meeting
or any postponement or adjournment(s) thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
<PAGE>
Only shareholders of record at the close of business on April 20, 1998 are
entitled to notice of and to vote at the meeting and any adjournment(s) thereof.
All shareholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to mark,
sign, date and return the enclosed proxy card as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any shareholder attending
the meeting may vote in person even if such shareholder returned a proxy card.
BY ORDER OF THE BOARD OF DIRECTORS
[SIG]
CRAIG W. JOHNSON
SECRETARY
Menlo Park, California
April 30, 1998
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PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 17, 1998
------------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited on behalf of the Board of Directors of
Centura Software Corporation (the "Company"), a California corporation, for use
at the Annual Meeting of Shareholders to be held on Wednesday, June 17, 1998 at
9:00 a.m., local time, or at any postponement or adjournment(s) thereof, for the
purposes set forth herein and in the accompanying Notice of Annual Meeting of
Shareholders. The Annual Meeting will be held at the Hotel Sofitel, located at
223 Twin Dolphin Drive, Redwood Shores, California 94065. The telephone number
at that location is (650) 598-9000.
The Company's principal executive offices are located at 975 Island Drive,
Redwood Shores, California 94065. The Company's telephone number at that
location is (650) 596-3400.
This Proxy contains information that was also included in the Company's
Annual Report on Form 10-K filed with the Securities and Exchange Commission on
March 30, 1998.
SOLICITATION
These proxy solicitation materials were mailed on or about April 30, 1998 to
all shareholders entitled to vote at the meeting. The costs of soliciting these
proxies will be borne by the Company. These costs will include the expenses of
preparing and mailing proxy materials for the Annual Meeting and reimbursement
paid to brokerage firms and others for their expenses incurred in forwarding
solicitation material regarding the Annual Meeting to beneficial owners of the
Company's Common Stock. The Company may conduct further solicitation personally,
telephonically or by facsimile through its officers, directors and regular
employees, none of whom will receive additional compensation for assisting with
the solicitation.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Company (Attention:
Asa Drew, Inspector of Elections) a written notice of revocation or a duly
executed proxy bearing a later date or by attending the meeting of shareholders
and voting in person.
VOTING
Every shareholder voting for the election of directors may cumulate such
shareholder's votes and give one candidate a number of votes equal to the number
of directors to be elected multiplied by the number
<PAGE>
of shares held by such shareholder, or distribute the shareholder's votes on the
same principle among as many candidates as the shareholder thinks fit, provided
that votes cannot be cast for more than seven candidates. However, no
shareholder shall be entitled to cumulate votes unless the candidate's name has
been placed in nomination prior to the voting and the shareholder, or any other
shareholder, has given notice at the meeting prior to the voting of the
intention to cumulate the shareholder's votes. On all other matters, each share
has one vote.
Votes cast in person or by proxy at the Annual Meeting will be tabulated by
the Inspector of Elections with the assistance of ChaseMellon Shareholder
Services, the Company's transfer agent. The Inspector of Elections will also
determine whether or not a quorum is present. Except with respect to the
election of directors where cumulative voting is invoked and except in certain
other specific circumstances, the affirmative vote of a majority of shares
REPRESENTED AND VOTING at a duly held meeting at which a quorum is present is
required under California law for approval of proposals presented to
shareholders. In general, California law also provides that a quorum consists of
a majority of the shares ENTITLED TO VOTE, represented either in person or by
proxy. The Inspector of Elections will treat abstentions as shares that are
present and ENTITLED TO VOTE for purposes of determining the presence of a
quorum but as not VOTING for purposes of determining the approval of any matter
submitted to the shareholders for a vote. Any proxy which is returned using the
form of proxy enclosed and which is not marked as to a particular item will be
voted for the election of directors, for approval of the amendment to the
Company's 1995 Stock Option Plan to increase the number of shares of Common
Stock reserved for issuance thereunder by 1,000,000 shares to an aggregate of
3,000,000 shares, for approval of the amendments to the Company's 1996
Directors' Stock Option Plan (i) to increase the number of shares of Common
Stock reserved for issuance thereunder by 500,000 shares to an aggregate of
1,000,000 shares, (ii) to increase the number of shares underlying stock options
granted to nonemployee directors from 50,000 to 100,000 shares, and (iii) to
reduce the number of years over which new nonemployee director option grants
will vest from four (4) years to three (3) years, for approval of the amendment
to the Company's 1992 Employee Stock Purchase Plan to increase the number of
shares of Common Stock reserved for issuance thereunder by 1,000,000 shares to
an aggregate of 1,400,000 shares, for the change in the Company's state of
incorporation from California to Delaware and the related assumption of the
Company's stock plans by the surviving Delaware entity and modifications to
conform the Company's indemnification agreements with its officers and directors
to Delaware law, for ratification of the appointment of the designated
independent auditors and as the proxy holders deem advisable on other matters
that may come before the meeting, as the case may be, with respect to the item
not marked. If a broker indicates on the enclosed proxy or its substitute that
it does not have discretionary authority as to certain shares to vote on a
particular matter ("broker non-votes"), those shares will not be considered as
VOTING with respect to that matter. While there is no definitive specific
statutory or case law authority in California concerning the proper treatment of
abstentions and broker non-votes, the Company believes that the tabulation
procedures to be followed by the Inspector of Elections are consistent with the
general statutory requirements in California concerning voting of shares and
determination of a quorum.
RECORD DATE AND SHARE OWNERSHIP
Only shareholders of record at the close of business on April 20, 1998 are
entitled to notice of and to vote at the meeting. As of the record date,
29,533,558 shares of the Company's Common Stock, par value $0.01 per share, were
issued and outstanding.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
Proposals of shareholders of the Company that are intended to be presented
by such shareholders at the Company's 1999 Annual Meeting of Shareholders must
be received by the Company no later than March 15, 1999 in order that they may
be considered for inclusion in the proxy statement and form of proxy relating to
that meeting.
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PROPOSAL NO. 1
ELECTION OF DIRECTORS
NOMINEES
The Company's bylaws currently provide for seven directors. At the Annual
Meeting, the Board of Directors has nominated seven directors to be elected to
serve until the next Annual Meeting and until their successors are elected and
qualified at the meeting. Unless otherwise instructed, the proxy holders will
vote the proxies received by them for the Company's seven nominees named below,
all of whom are presently directors of the Company. In the event that any
nominee of the Company is unable or declines to serve as a director at the time
of the Annual Meeting, the proxies will be voted for any nominee who shall be
designated by the present Board of Directors to fill the vacancy. In the event
that additional persons are nominated for election as directors, the proxy
holders intend to vote all proxies received by them in such a manner in
accordance with cumulative voting as will assure the election of as many of the
nominees listed below as possible, and, in such event, the specific nominees to
be voted for will be determined by the proxy holders. Assuming a quorum is
present, the seven nominees for director receiving the greatest number of votes
cast at the Annual Meeting will be elected. The term of office of each person
elected as a director will continue until the next Annual Meeting of
Shareholders or until his or her successor has been elected and qualified.
The names of the nominees and certain other information about them as of
April 20, 1998 are set forth below:
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION SINCE
- -------------------------------------- --- --------------------------------------------------------- ---------
<S> <C> <C> <C>
Scott R. Broomfield................... 41 President and Chief Executive Officer (Principal 1997
Executive Officer), Chairman of the Board of Directors
Samuel M. Inman, III.................. 47 Consultant, Former President and Chief Executive Officer 1996
Jack King............................. 64 President and Chief Executive Officer of Zitel 1997
Corporation
Phillip Koen, Jr...................... 46 Senior Vice President, Finance and Chief Financial 1997
Officer of PointCast Corporation
Peter Micciche........................ 44 President and Chief Executive Officer of SceneWare 1998
Corporation
William D. Nicholas................... 49 Crossroads Capital Partners, LLC 1998
Earl M. Stahl......................... 43 Vice President of Engineering of DataMind Corporation 1997
</TABLE>
Mr. Broomfield has served as Chief Executive Officer and a director of the
Company since December 1997 and Chairman of the Board of Directors and Chief
Executive Officer since February 1998. Prior to joining the Company, Mr.
Broomfield was a principal with the firm of Hickey & Hill Incorporated ("Hickey
& Hill") from February 1993 to December 1997, advising companies needing
operational and financial restructuring. In this capacity, Mr. Broomfield
assisted companies with executive management, strategy, operational and
financial restructuring, business planning and business development. Prior to
joining Hickey & Hill, Mr. Broomfield held senior management positions at
Trilogy Systems, Inc. and Digital Equipment Corporation. Mr. Broomfield has a BS
in psychology from Azusa Pacific University and an MBA from Santa Clara
University.
3
<PAGE>
Mr. Inman served as Chairman of the Board of Directors from September 1996
until February 1998 and as President and Chief Executive Officer (Principal
Executive Officer) from December 1995 until December 1997, and President and
Chief Operating Officer from April 1995 until December 1995. Prior to joining
the Company, from March 1993 until April 1995, Mr. Inman served as President and
Chief Operating Officer of Ingram Micro Inc., where he was responsible for
overseeing and managing Ingram's U.S. operations. Prior to joining Ingram, Mr.
Inman, a 21-year veteran of IBM, served as President of IBM's Personal Computer
Company for the Americas. He is a graduate of Purdue University, where he earned
a B.S. degree in mathematics.
Mr. King has served on the Company's Board of Directors since December 1997.
Mr. King has been President and CEO of Zitel Corporation, a company specializing
in Year 2000 software conversion consulting, systems integration and
"intelligence-based" technology solutions, since November 1986. Prior to joining
Zitel, Mr. King held key executive and senior management positions at Dynamic
Disk, Data Electronics, Memorex and Xerox Corporation. Mr. King holds a B.S. in
Industrial Management from San Diego State University.
Mr. Koen has served on the Company's Board of Directors since December 1997.
Mr. Koen has served as Senior Vice President, Finance and Chief Financial
Officer of PointCast Corporation since June of 1997. Prior to this Mr. Koen
served as Chief Financial Officer of Etec Systems from December 1993 until June
1997. Prior to that he was Vice President of Finance, and then Chief Financial
Officer at Levelor Corporation from April 1989 to December 1993. Mr. Koen holds
a B.A. in Economics from Claremont Men's College and an M.B.A. in General
Management from the University of Virginia.
Mr. Micciche has served as a member of the Board of Directors since February
1998. Mr. Micciche has been President and CEO of SceneWare Corporation since
September 1994. Prior to that he was Vice President and General Manager, North
America at The ASK Group from December 1992 until May 1993, and was President of
Cognos Corporation from December 1989 through December 1992. Mr. Micciche
graduated from Boston College with a Bachelor of Science in Accounting and from
Suffolk University with an MBA in Finance.
Mr. Nicholas has served as a member of the Board of Directors since February
1998 and has been associated with Crossroads Capital Partners, LLC since June
1997. Prior to this he was President of Integrated Consulting Solutions, Inc.
from January 1994 through June 1997. From March 1981 until January 1994 Mr.
Nicholas served as a Partner in the Information & Technology Group of Ernst &
Young, LLP. Mr. Nicholas received a Bachelor of Arts in Mathematics from LaSalle
University, holds a Bachelor of Science in Accounting from St. Joseph's
University, and obtained an MBA from Villanova University. Mr. Nicholas is a
Certified Public Accountant (CPA) and a Certified Data Processor (CDP).
Mr. Stahl is currently Vice President of Engineering for DataMind
Corporation. He served as Chief Technology Officer and Senior Vice President for
the products organization at Centura Software Corporation from April 16, 1995
until November 1997. Mr. Stahl joined Centura in 1989 and has held various key
positions within the company's development organization, including spearheading
the Company's client/ server tools development effort. Mr. Stahl has more than
17 years of industry experience, which includes product development and support
on mainframe, minicomputers, and PC systems. He holds a B.S. in computer science
from San Diego State University and has previously managed development projects
at Bell Northern Research, Dest Corporation, and VisiCorp.
The Board of Directors elects the Company's officers and such officers serve
at the discretion of the Board of Directors of the Company. There are no family
relationships among the officers or directors of the Company.
4
<PAGE>
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
The Board of Directors held a total of eighteen meetings during the fiscal
year ended December 31, 1997. The Board of Directors has an Audit Committee and
a Compensation Committee. It does not have a nominating committee or a committee
performing the functions of a nominating committee.
The Audit Committee of the Board of Directors currently consists of
directors Inman, Koen and Nicholas, and held one meeting during 1997. The Audit
Committee recommends engagement of the Company's independent auditors, and is
primarily responsible for approving the services performed by the Company's
independent auditors and for reviewing and evaluating the Company's accounting
principles and its system of internal accounting controls.
The Compensation Committee of the Board of Directors currently consists of
directors King, Koen and Micciche, and acted four times by unanimous written
consent of its members during 1997. The Compensation Committee establishes the
compensation for the Company's executive officers, including the Company's Chief
Executive Officer.
No incumbent director attended fewer than 75% of the aggregate number of
meetings of the Board of Directors and meetings of the committees of the Board
of Directors that he was eligible to attend.
COMPENSATION OF DIRECTORS
Directors are reimbursed for out-of-pocket travel expenses associated with
their attendance at Board meetings. Directors received no cash compensation for
their services on the Board of Directors. Nonemployee directors of the Company
are automatically granted options to purchase shares of the Company's Common
Stock pursuant to the terms of the Company's 1996 Directors' Stock Option Plan
(the "Directors' Option Plan"). Under the Directors' Option Plan as currently
structured, each nonemployee director receives an option to purchase 50,000
shares of Common Stock on the date on which such person first becomes a
nonemployee director of the Company. Each option granted under the Directors'
Option Plan becomes exercisable in installments of 1/48th of the shares subject
to such option on each of the first forty-eight (48) monthly anniversaries of
the date of grant of the option. Options granted under the Directors' Option
Plan have an exercise price equal to the fair market value of the Company's
Common Stock on the date of grant, and a term of ten years. See "PROPOSAL NO.
3--APPROVAL OF AMENDMENTS TO THE 1996 DIRECTORS' STOCK OPTION PLAN" for a
description of certain amendments to the Directors' Option Plan for which
shareholder consent is being requested by this Proxy Statement.
REQUIRED VOTE
The seven nominees receiving the highest number of affirmative votes of
shares of the Company's Common Stock present at the Annual Meeting in person or
by proxy and entitled to vote shall be elected as directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF THE
NOMINEES LISTED ABOVE.
PROPOSAL NO. 2
APPROVAL OF THE AMENDMENT TO THE 1995 STOCK OPTION PLAN
At the Annual Meeting, shareholders are being asked to approve an amendment
to the 1995 Stock Option Plan (the "1995 Option Plan") to increase the number of
shares of Common Stock reserved for issuance thereunder by 1,000,000 shares to
an aggregate of 3,000,000 shares.
5
<PAGE>
GENERAL
The Company's 1995 Option Plan was adopted by the Board of Directors in
March 1995 to replace the 1986 Incentive Stock Option Plan which had 160,970
shares available for grant thereunder as of April 19, 1995 and which expired in
accordance with its terms in July 1996. The Board of Directors initially
reserved 1,000,000 shares of Common Stock for issuance under the 1995 Option
Plan and obtained shareholder approval on September 24, 1996 to a proposed
amendment to increase the number of shares reserved for issuance under the 1995
Option Plan by 1,000,000. On April 17, 1998, the Board of Directors approved a
further amendment to increase the number of shares reserved for issuance under
the 1995 Option Plan by 1,000,000 shares to a total of 3,000,000 shares, for
which shareholder approval is being requested.
The 1995 Option Plan provides for the granting to employees of incentive
stock options within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), and for the granting of nonstatutory options to
employees and consultants. See "United States Federal Income Tax Information"
below for information concerning the tax treatment of both incentive stock
options and nonstatutory stock options.
As of March 31, 1998, 58,063 shares had been issued upon exercise of options
granted under the 1995 Option Plan, options to purchase 1,758,698 shares were
outstanding and 183,239 shares remained available for future grant (not
including the additional 1,000,000 shares reserved by the Board of Directors,
for which shareholder approval is being requested). As of March 31, 1998, the
fair market value of all shares of Common Stock subject to outstanding options
was $2,968,682 based on the closing sale price of $1.688 for the Company's
Common Stock as reported on The Nasdaq SmallCap Market (a tier of the National
Association of Securities Dealers, Inc. Automated Quotation ("NASDAQ") National
Market System) on such date.
As of March 31, 1998, (i) options to purchase 652,000 shares of Common Stock
were outstanding under the 1995 Option Plan and held by all current executive
officers as a group (7 persons), (ii) options to purchase 547,999 shares were
outstanding under the 1995 Option Plan and held by current directors who are not
executive officers (6 persons) and (iii) options to purchase 558,699 shares of
Common Stock were outstanding and held by all employees, including current
officers who are not executive officers, as a group (188 persons as of March 31,
1998). The actual benefits, if any, to the holders of stock options issued under
the 1995 Option Plan are not determinable prior to exercise as the value, if
any, of such stock options to their holders is represented by the difference
between the market price of a share of the Company's Common Stock on the date of
exercise and the exercise price of a holder's stock option, as set forth below.
For information with respect to options to purchase Common Stock of the Company
granted in 1997 under the 1995 Option Plan and under the Company's 1986
Incentive Stock Option Plan to the Company's Chief Executive Officer and the
four most highly compensated executive officers of the Company whose annual
salary and bonus exceeded $100,000 for 1997, see "Compensation of Executive
Officers--Stock Option Grants in 1997" and "Report of the Compensation
Committee."
The 1995 Option Plan is not a qualified deferred compensation plan under
Section 401(a) of the Code, and is not subject to the provisions of the Employee
Retirement Income Security Act of 1974, as amended.
AMENDMENT TO INCREASE NUMBER OF RESERVED SHARES
The Board of Directors believes that in order for the Company to attract and
retain highly qualified employees and consultants and to provide such employees
and consultants with adequate incentive through their proprietary interest in
the Company, it is necessary to amend the 1995 Option Plan to reserve an
additional 1,000,000 shares of Common Stock for issuance thereunder. At the
Annual Meeting of Shareholders, the shareholders are being asked to approve the
above amendment to the 1995 Option Plan. Additional grants under the 1995 Option
Plan, however, that are not made pursuant to unanimous
6
<PAGE>
consent of the Board of Directors or the Compensation Committee of the Board
will trigger a right of first refusal for Newport Acquisition Company No. 2, LLC
("NAC"), one of the Company's shareholders, to purchase its pro rata share of
such new securities pursuant to the terms set forth in that certain Investor
Rights Agreement dated February 27, 1998 between NAC and the Company (the "NAC
Right of First Refusal").
PURPOSE
The purposes of the 1995 Option Plan are to attract and retain the best
available personnel for the Company, to give employees, officers, directors and
consultants of the Company or its subsidiary a greater personal stake in the
value of the business, and to provide such persons with added incentive to
continue and advance in their employment or services to the Company.
ADMINISTRATION
The 1995 Option Plan may be administered by the Board of Directors or a
committee designated by the Board (the "Administrator"). The 1995 Option Plan is
currently being administered by the Board of Directors and the Compensation
Committee of the Board. The Compensation Committee has the exclusive authority
to grant stock options and otherwise administer the 1995 Option Plan with
respect to the Company's directors and officers eligible to participate in the
1995 Option Plan. Members of the Board of Directors receive no additional
compensation for their services in connection with the administration of the
1995 Option Plan. All questions of interpretation of the 1995 Option Plan are
determined by the Administrator and decisions of the Administrator are final and
binding upon all participants.
ELIGIBILITY
The 1995 Option Plan provides that options may be granted to employees
(including officers and directors who are also employees) and consultants of the
Company. Incentive stock options may be granted only to employees. The
Administrator selects the optionees and determines the number of shares and the
exercise price to be associated with each option (except in the case of an
optionee-employee who is also a director, in which case the Compensation
Committee alone determines the number of shares and the exercise price to be
associated with each option). In making such determination, there are taken into
account the duties and responsibilities of the optionee, the value of the
optionee's services, the optionee's present and potential contribution to the
success of the Company, and other relevant factors. As of March 31, 1998 there
are approximately 197 employees eligible to participate in the 1995 Option Plan.
The 1995 Option Plan provides that the maximum number of shares of Common
Stock which may be granted under options to any one employee during any fiscal
year shall be 250,000, subject to adjustment as provided in the 1995 Option
Plan. There is also a limit on the aggregate market value of shares subject to
all incentive stock options that may be granted to an optionee during any
calendar year.
TERMS OF OPTIONS
The terms of options granted under the 1995 Option Plan are determined by
the Administrator. Each option is evidenced by a stock option agreement between
the Company and the optionee and is subject to the following additional terms
and conditions:
(a) EXERCISE OF THE OPTION The optionee must earn the right to exercise
the option by continuing to work for the Company. The Administrator determines
when options are exercisable. An option is exercised by giving written notice of
exercise to the Company specifying the number of full shares of Common Stock to
be purchased, and by tendering payment of the purchase price to the Company. The
method of payment of the exercise price of the shares purchased upon exercise of
an option is determined by the Administrator.
7
<PAGE>
(b) EXERCISE PRICE The exercise price of options granted under the 1995
Option Plan is determined by the Administrator, and must be at least equal to
the fair market value of the shares on the date of the first grant, in the case
of incentive stock options, and 85% of the fair market value of the shares on
the date of the grant, in the case of nonstatutory stock options, as determined
by the Administrator, based upon the closing price on the NASDAQ National Market
(including any tier thereof) on the date of grant. Options granted to
shareholders owning more than 10% of the Company's outstanding stock are subject
to the additional restriction that the exercise price on such options must be at
least 110% of the fair market value on the date of the grant. Nonstatutory stock
options granted to a covered employee under Section 162(m) of the Code are
subject to the additional restriction that the exercise price on such options
must be at least 100% of the fair market value on the date of grant.
(c) The consideration to be paid for shares issued on exercise of options
granted under the 1995 Option Plan, including the method of payment, is
determined by the Administrator (in the case of incentive stock options, such
determination shall be made at the time of grant) and may consist entirely of
cash; check; promissory note; shares of Common Stock which have been
beneficially owned by the optionee for at least six months or which were not
acquired directly or indirectly from the Company, with a fair market value on
the exercise date equal to the aggregate exercise price of the shares purchased;
authorization from the Company to retain from the total number of shares as to
which the option is exercised a number of shares having a fair market value on
the exercise date equal to the aggregate exercise price of the shares issued; or
delivery of a properly executed notice and irrevocable instructions to a broker
to deliver promptly to the Company the amount of sale or loan proceeds required
to pay the exercise price. The Administrator may also authorize payments by any
combination of the above methods or any other consideration and method of
payment permitted by law.
(d) TERMINATION OF EMPLOYMENT If the optionee's employment or consulting
relationship with the Company is terminated for any reason other than death or
total and permanent disability, options under the 1995 Option Plan may be
exercised not later than thirty days after the date of such termination to the
extent the option was exercisable on the date of such termination. In no event
may an option be exercised by any person after the expiration of its term.
(e) DISABILITY. If an optionee is unable to continue his or her employment
or consulting relationship with the Company as a result of his total and
permanent disability, options may be exercised within six months (or such other
period of time not exceeding twelve months as is determined by the
Administrator) after the date of termination and may be exercised only to the
extent the option was exercisable on the date of termination, but in no event
may the option be exercised after its termination date.
(f) DEATH. If an optionee should die while employed or retained by the
Company, and such optionee has been continuously employed or retained by the
Company since the date of grant of the option, the option may be exercised
within six months after the date of death (or such other period of time, not
exceeding six months, as is determined by the Administrator) by the optionee's
estate or by a person who acquired the right to exercise the option by bequest
or inheritance to the extent the optionee would have been entitled to exercise
the option had the optionee continued living and remained employed or retained
by the Company for three months after the date of death, but in no event may the
option be exercised after its termination date.
If an optionee should die within thirty days (or such other period of time
not exceeding three months as is determined by the Administrator) after the
optionee has ceased to be continuously employed or retained by the Company, the
option may be exercised within three months after the date of death by the
optionee's estate or by a person who acquired the right to exercise the option
by bequest or inheritance to the extent that the optionee was entitled to
exercise the option at the date of termination, but in no event may the option
be exercised after its termination date.
(g) TERMINATION OF OPTIONS: Incentive stock options granted under the 1995
Option Plan expire ten years from the date of grant unless a shorter period is
provided in the option agreement. Incentive stock
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options and nonstatutory stock options granted to shareholders owning more than
10% of the Company's outstanding stock may not have a term of more than five
years and five years and one day, respectively.
(h) NONTRANSFERABILITY OF OPTIONS: Options are nontransferable by the
optionee, other than by will or the laws of descent and distribution, and are
exercisable only by the optionee during his or her lifetime or, in the event of
death, by a person who acquires the right to exercise the option by bequest or
inheritance or by reason of the death of the optionee.
(i) ACCELERATION OF OPTION: In the event of a merger of the Company with
or into another corporation or sale of substantially all of the Company's
assets, the Administrator shall either accomplish a substitution or assumption
of options or give written notice of the acceleration of the optionee's right to
exercise his or her outstanding options in full at any time within thirty days
of such notice. The Administrator may, in its discretion, make provisions for
the acceleration of the optionee's right to exercise his or her outstanding
options in full.
Effective July 14, 1995, the Board adopted a resolution amending the Option
Plan such that each employee stock option issued under the Option Plan is to
accelerate by 50% of the unvested portion of such option upon an acquisition of
the Company in which the employee-optionee is not offered a comparable position
with the successor company.
(j) OTHER PROVISIONS. The option agreement may contain such other terms,
provisions and conditions not inconsistent with the 1995 Option Plan as may be
determined by the Administrator.
ADJUSTMENT UPON CHANGES IN CAPITALIZATION
In the event any change is made in the Company's capitalization, such as a
stock split or dividend, that results in an increase or decrease in the number
of outstanding shares of Common Stock without receipt of consideration by the
Company, appropriate adjustment shall be made in the option price, the number of
shares subject to each option, the annual limitation of grants to employees, as
well as the number of shares available for issuance under the 1995 Option Plan.
In the event of the proposed dissolution or liquidation of the Company, all
outstanding options automatically terminate unless otherwise provided by the
Administrator.
AMENDMENT AND TERMINATION
The Board of Directors may amend the 1995 Option Plan at any time or from
time to time or may terminate it without approval of the shareholders; provided,
however, that shareholder approval is required for any amendment to the 1995
Option Plan that: (i) increases the number of shares that may be issued under
the 1995 Option Plan, (ii) modifies the standards of eligibility, (iii) modifies
the limitation on grants to employees described in the 1995 Option Plan or
results in other changes which would require shareholder approval to qualify
options granted under the 1995 Option Plan as performance-based compensation
under Section 162(m) of the Code, or (iv) so long as the Company has a class of
equity securities registered under Section 12 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), materially increases the benefits to
participants that may accrue under the 1995 Option Plan. However, no action by
the Board of Directors or shareholders may alter or impair any option previously
granted under the 1995 Option Plan. The 1995 Option Plan shall terminate in
March 2005, provided that any options then outstanding under the 1995 Option
Plan shall remain outstanding until they expire by their terms.
UNITED STATES FEDERAL INCOME TAX INFORMATION
The following is a brief summary of the U.S. federal income tax consequences
of transactions under the 1995 Option Plan based on federal income tax laws in
effect on the date of this Proxy Statement. This summary is not intended to be
exhaustive and does not address all matters which may be relevant to a
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particular optionee based on his or her specific circumstances. The summary
addresses only current U.S. federal income tax law and expressly does not
discuss the income tax laws of any state, municipality, non-U.S. taxing
jurisdiction or gift, estate or other tax laws other than federal income tax
law. The Company advises all optionees to consult their own tax advisor
concerning tax implication of option grants and exercises and the disposition of
stock acquired upon such exercises, under the 1995 Stock Option Plan.
Options granted under the 1995 Option Plan may be either incentive stock
options ("ISOs"), which are intended to qualify for the special tax treatment
provided by Section 422 of the Code, or nonstatutory options ("NSOs"), which
will not so qualify. If an option granted under the 1995 Option Plan is an
incentive stock option, the optionee will recognize no income upon grant of the
incentive stock option and will incur no tax liability due to the exercise
except to the extent that such exercise causes the optionee to incur alternative
minimum tax. (See discussion below). The Company will not be allowed a deduction
for federal income tax purposes as a result of the exercise of an incentive
stock option regardless of the applicability of the alternative minimum tax.
Upon the sale or exchange of the shares more than two years after grant of the
option and one year after exercise of the option by the optionee, any gain will
be treated as a long-term capital gain. If both of these holding periods are not
satisfied, the optionee will recognize ordinary income equal to the difference
between the exercise price and the lower of the fair market value of the Common
Stock at the date of the option exercise or the sale price of the Common Stock.
The Company will be entitled to a deduction in the same amount as the ordinary
income recognized by the optionee. Any gain or loss recognized on a disposition
of the shares prior to completion of both of the above holding periods in excess
of the amount treated as ordinary income will be characterized as long-term
capital gain if the sale occurs more than one year after exercise of the option
or as short-term capital gain if the sale is made earlier. For individual
taxpayers, the current U.S. federal income tax rate on long-term capital gains
is alternatively 28% (in the case of shares held more than one year but less
than 18 months after exercise) or 20% (in the case of shares held more than 18
months after exercise), whereas the maximum rate on other income is 39.6%.
Capital losses for individual taxpayers are allowed in full against capital
gains plus $3,000 of other income.
All other options which do not qualify as incentive stock options are
referred to as nonstatutory options. An optionee will not recognize any taxable
income at the time he or she is granted a nonstatutory option. However, upon its
exercise, the optionee will recognize ordinary income for tax purposes measured
by the excess of the fair market value of the shares over the exercise price.
The income recognized by an optionee who is also an employee of the Company will
be subject to income and employment tax withholding by the Company by payment in
cash by the optionee or out of the optionee's current earnings. Upon the sale of
such shares by the optionee, any difference between the sale price and the fair
market value of the shares as of the date of exercise of the option will be
treated as capital gain or loss, and will qualify for long-term capital gain or
loss treatment if the shares have been held for more than one year after
exercise.
ALTERNATIVE MINIMUM TAX
The exercise of an incentive stock option may subject the optionee to the
alternative minimum tax under Section 55 of the Code. The alternative minimum
tax is calculated by applying a tax rate of 26% to alternative minimum taxable
income of joint filers up to $175,000 ($87,500 for married taxpayers filing
separately) and 28% to alternative minimum taxable income above that amount.
Alternative minimum taxable income is equal to (i) taxable income adjusted for
certain items, plus (ii) items of tax preference less (iii) an exemption amount
of $45,000 for joint returns, $33,750 for unmarried individual returns and
$22,500 in the case of married taxpayers filing separately (which exemption
amounts are phased out for upper income taxpayers). Alternative minimum tax will
be due if the tax determined under the foregoing formula exceeds the regular tax
of the taxpayer for the year.
In computing alternative minimum taxable income, shares purchased upon
exercise of an incentive stock option are treated as if they had been acquired
by the optionee pursuant to exercise of a nonstatutory stock option. As a
result, the optionee recognizes alternative minimum taxable income equal to the
excess
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of the fair market value of the Common Stock on the date of exercise over the
option exercise price. Because the alternative minimum tax calculation may be
complex, optionees should consult their own tax advisors prior to exercising
incentive stock options.
If an optionee pays alternative minimum tax, the amount of such tax may be
carried forward as a credit against any subsequent year's regular tax in excess
of the alternative minimum tax for such year.
REQUIRED VOTE
The affirmative vote of the holders of a majority of the shares of the
Company's Common Stock present at the Annual Meeting in person or by proxy and
entitled to vote is required to approve the amendment to the 1995 Option Plan
and the reservation of an additional 1,000,000 shares of Common Stock for
issuance thereunder.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE AMENDMENT
TO THE 1995 OPTION PLAN AND THE RESERVATION OF AN ADDITIONAL 1,000,000 SHARES OF
COMMON STOCK FOR ISSUANCE THEREUNDER.
PROPOSAL NO. 3
APPROVAL OF AMENDMENTS TO THE 1996 DIRECTORS' STOCK OPTION PLAN
At the Annual Meeting, shareholders are being asked to approve amendments to
the 1996 Directors' Stock Option Plan (the "Directors' Option Plan") (i) to
increase the number of shares of Common Stock reserved for issuance thereunder
by 500,000 shares to an aggregate of 1,000,000 shares, (ii) to increase the
number of shares underlying stock options granted to each nonemployee director
from 50,000 to 100,000 shares, and (iii) to reduce the number of years over
which new nonemployee director option grants will vest from four (4) years to
three (3) years.
GENERAL AND PURPOSE
The Directors' Option Plan was adopted by the Board of Directors in January
1996 to replace the 1995 Directors Stock Option Plan which was terminated at
that time and the Board initially reserved a total of 500,000 shares of Common
Stock for issuance thereunder. The Company obtained shareholder approval for the
Directors' Option Plan on September 24, 1996. On April 17, 1998, the Board of
Directors approved an amendment (i) to increase the number of shares reserved
for issuance under the Directors' Option Plan by 500,000 shares to a total of
1,000,000 shares, (ii) to increase the number of shares underlying stock options
granted to nonemployee directors from 50,000 to 100,000 shares, and (iii) to
reduce the number of years over which new nonemployee director option grants
will vest from four (4) years to three (3) years, for all of which shareholder
approval is being requested.
The Directors' Option Plan provides for the grant of nonstatutory stock
options to nonemployee directors of the Company. The Directors' Option Plan is
designed to work automatically and not to require administration; however, to
the extent administration is necessary, it will be provided by the Board of
Directors.
The purpose of the Directors' Option Plan is to provide an incentive for
directors to continue to serve the Company as directors and to assist the
Company in recruiting highly qualified individuals when vacancies occur on the
Board of Directors.
PROPOSED AMENDMENT
The Company believes that in order to attract and retain highly qualified
nonemployee directors and to provide such directors with adequate incentive
through their proprietary interest in the Company, it is necessary to amend the
Directors' Option Plan to reserve an additional 500,000 shares of Common Stock
for issuance thereunder. Additional grants under the Directors' Option Plan,
however, that are not made pursuant to unanimous consent of the Board of
Directors or the Compensation Committee of the Board will trigger the NAC Right
of First Refusal.
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The Directors' Option Plan currently provides that each person who is a
nonemployee director shall be automatically granted an option to purchase 50,000
shares of Common Stock on the date on which such person first becomes a
nonemployee director, whether through election by the shareholders of the
Company or appointment by the Board of Directors to fill a vacancy. The proposed
amendment to the Directors' Option Plan will increase this automatic option
grant from 50,000 to 100,000 shares for new nonemployee directors. The amendment
further provides that each currently existing nonemployee director who has
already received an option to purchase 50,000 shares of the Company's common
stock will receive an additional option grant to purchase an additional 50,000
shares of the Company's common stock on the date that shareholder approval is
obtained for this amendment. The Directors' Option Plan provides for neither a
maximum nor a minimum number of shares subject to options that may be granted to
any one nonemployee director, but does provide for the number of shares that may
be included in any grant and the method of making a grant. No option granted
under the Directors' Option Plan is transferable by the optionee other than by
will or the laws of descent or distribution, and each option is exercisable,
during the lifetime of the optionee, only by such optionee.
The Directors' Option Plan currently provides that each option granted
thereunder becomes exercisable in installments cumulatively as to 1/48th of the
shares on each of the first forty-eight (48) monthly anniversaries of the date
of grant of the option. The amendment to the Directors' Option Plan provides
that additional option grants of 50,000 shares to existing nonemployee directors
and option grants of 100,000 shares to new nonemployee directors shall become
exercisable in installments cumulatively as to 1/36th of the shares on each of
the first thirty-six (36) monthly anniversaries of the date of grant of the
option. The options will remain exercisable for up to ninety days following the
optionee's termination of service as a director of the Company, unless such
termination is a result of death, in which case the options will remain
exercisable for up to a six-month period (or such lesser period as is determined
by the Board), or disability, in which case the options will remain exercisable
for up to a six-month period (or such other period not exceeding twelve months
as is determined by the Board).
At the Annual Meeting of Shareholders, the shareholders are being asked to
approve the above amendments to the Directors' Option Plan, including each and
every sub-part of the amendment.
EXERCISE PRICE AND TERM OF OPTIONS
The exercise price of all stock options granted under the Directors' Option
Plan shall be equal to the fair market value of a share of the Company's Common
Stock on the date of grant of the option, which is defined to be the closing
sale price of the Company's Common Stock on the NASDAQ National Market
(including any tier thereof) on the immediately preceding trading date. Options
granted under the Directors' Option Plan have a term of ten years.
MERGER OR SALE OF ASSETS
In the event of the dissolution or liquidation of the Company, a sale of all
or substantially all of the assets of the Company, the merger of the Company
with or into another corporation in which the Company is not the surviving
corporation or any other capital reorganization in which more than 50% of the
shares of the Company entitled to vote are exchanged, each nonemployee director
shall have a reasonable time within which to exercise the option, including any
part of the option that would not otherwise be exercisable, prior to the
effectiveness of such dissolution, liquidation, sale, merger or reorganization,
at the end of which time the option shall terminate, or the right to exercise
the option, including any part of the option that would not otherwise be
exercisable, or receive a substitute option with comparable terms, as to an
equivalent number of shares of stock of the corporation succeeding the Company
or acquiring its business by reason of such dissolution, liquidation, sale,
merger or reorganization.
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AMENDMENT AND TERMINATION
The Board of Directors may at any time amend or terminate the Director's
Option Plan, except that such termination cannot affect options previously
granted without the agreement of any optionee so affected. Notwithstanding the
foregoing, the provisions regarding the grant of options under the Directors'
Option Plan may be amended only once in any six-month period, other than to
comport with changes in the Code, the Employee Retirement Income Security Act of
1974, as amended, or the rules thereunder.
If not terminated earlier, the Directors' Option Plan will expire in 2006.
U.S. FEDERAL INCOME TAX INFORMATION
Options granted under the Directors' Option Plan are nonstatutory stock
options. An optionee will not recognize any taxable income at the time he or she
is granted a nonstatutory option. However upon its exercise, the optionee will
recognize ordinary income for tax purposes measured by the excess of the then
fair market value of the shares over the option price. Because the optionee is a
director of the Company, the date of taxation (and the date of measurement of
taxable ordinary income) may be deferred unless the optionee files an election
with the Internal Revenue Service under Section 83(b) of the Code. Upon resale
of such shares by the optionee, any difference between the sale price and the
exercise price, to the extent not recognized as ordinary income as provided
above will be treated as capital gain (or loss), and will be long-term capital
gain if the optionee has held the shares more than one year. For individual
taxpayers, the current U.S. federal income tax rate on long-term capital gains
is alternatively 28% (in the case of shares held more than one year but less
than 18 months after exercise) or 20% (in the case of shares held more than 18
months after exercise), whereas the maximum rate on other income is 39.6%.
Capital losses for individual taxpayers are allowed under U.S. tax laws in full
against capital gains plus $3,000 of other income. The Company will be entitled
to a tax deduction in the amount and at the time that the optionee recognizes
ordinary income with respect to shares acquired upon exercise of a nonstatutory
option.
The foregoing is only a summary of the effect of federal income taxation
upon the optionee and the Company with respect to the grant and exercise of
options under the Directors' Option Plan, does not purport to be complete, and
does not discuss the income tax laws of any municipality, state or foreign
country in which an optionee may reside. The Company advises all eligible
directors to consult their own tax advisors concerning tax implications of
option grants and exercises and the disposition of stock acquired upon such
exercises under the Directors' Option Plan.
REQUIRED VOTE
The affirmative vote of the holders of a majority of the Company's Common
Stock present at the Annual Meeting in person or by proxy and entitled to vote
is required to approve adoption of the amendments to the Directors' Option Plan,
which include the reservation of an additional 500,000 shares of Common Stock
for issuance thereunder, additional option grants exercisable for 50,000 shares
of Common Stock to existing nonemployee directors, new option grants exercisable
for 100,000 shares of Common Stock to new nonemployee directors, and the
reduction in required vesting for new option grants under the Directors' Option
Plan from four (4) years to three (3) years.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE AMENDMENTS TO
THE DIRECTORS' OPTION PLAN, INCLUDING (i) THE RESERVATION OF AN ADDITIONAL
500,000 SHARES OF COMMON STOCK FOR ISSUANCE THEREUNDER, (ii) THE INCREASE IN THE
NUMBER OF SHARES UNDERLYING STOCK OPTIONS GRANTED TO EACH NONEMPLOYEE DIRECTOR
THEREUNDER FROM 50,000 TO 100,000 SHARES, AND (iii) THE REDUCTION IN THE NUMBER
OF YEARS OVER WHICH NEW OPTION GRANTS TO NONEMPLOYEE DIRECTORS SHALL VEST FROM
FOUR (4) YEARS TO THREE (3) YEARS.
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PROPOSAL NO. 4
APPROVAL OF THE AMENDMENT
TO THE 1992 EMPLOYEE STOCK PURCHASE PLAN
At the Annual Meeting, shareholders are being asked to approve an amendment
to the 1992 Employee Stock Purchase Plan (the "Purchase Plan") to increase the
number of shares of Common Stock reserved for issuance thereunder by 1,000,000
shares to an aggregate of 1,400,000 shares. The Purchase Plan provides for
employee purchases of the Company's Common Stock through accumulated payroll
deductions. Employees make such purchases by participation in regular offering
periods from which they may withdraw at any time. The amendment will provide
sufficient additional stock to continue the Company's policy of equity ownership
by employees as an incentive for employees to exert maximum efforts for the
success of the Company. Additional grants under the Purchase Plan, however, that
are not made pursuant to unanimous consent of the Board of Directors or the
Compensation Committee of the Board will trigger the NAC Right of First Refusal.
GENERAL AND PURPOSE
The Purchase Plan was adopted by the Board of Directors in October 1992 and
was approved by the shareholders in January 1993. A total of 300,000 shares of
Common Stock were initially reserved for issuance thereunder and an amendment to
increase the number of shares reserved for issuance under the Purchase Plan by
100,000 shares, subsequently adopted by the Board of Directors, was approved by
the shareholders on September 24, 1996. The Purchase Plan, and the right of
participants to make purchases thereunder, is intended to qualify under the
provisions of Section 423 of the Code. The Purchase Plan is not a qualified
deferred compensation plan under Section 401(a) of the Code, and is not subject
to the provisions of ERISA.
As of March 31, 1998, a total of 394,028 shares had been issued to the
Company's employees under the Purchase Plan and no shares remain available for
future issuance. The average per share issuance price for shares purchased by
employees under the Purchase Plan to date was approximately $6.00 and the total
net value realized by employees as a group from the purchase of such shares was
$626,262. As of March 31, 1998, approximately 197 employees were eligible to
participate in the Purchase Plan, of which none were participating since there
are no shares available under the Purchase Plan.
PURPOSE
The purpose of the Purchase Plan is to provide employees of the Company (and
any of its subsidiaries designated by the Board of Directors) who participate in
the Purchase Plan with an opportunity to purchase Common Stock of the Company
through payroll deductions.
ADMINISTRATION
The Purchase Plan may be administered by the Board of Directors or a
committee appointed by the Board of Directors. The Purchase Plan is currently
being administered by a committee appointed by Board. All questions of
interpretation of the Purchase Plan are determined by the Board of Directors or
its committee, and its decisions are final and binding upon all participants.
Members of the Board of Directors or its committee who are eligible employees
are permitted to participate in the Purchase Plan, provided that any such
eligible member may not vote on any matter affecting the administration of the
Purchase Plan or the grant of any option pursuant to it, or serve on a committee
appointed to administer the Purchase Plan. No charges for administrative or
other costs may be made against the payroll deductions of a participant in the
Purchase Plan. Members of the Board of Directors receive no additional
compensation for their services in connection with the administration of the
Purchase Plan.
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ELIGIBILITY
Any person (including officers and employee directors) who is customarily
employed by the Company (or any of its designated subsidiaries) for at least 20
hours per week and more than five months in any calendar year is eligible to
participate in the Purchase Plan provided that the employee was not eligible to
participate during the offering period on any prior offering date and subject to
certain limitations imposed by Section 5(a) and 423(b) of the Code and
limitations on stock ownership as set forth in the Purchase Plan. See "Purchase
of Stock; Exercise of Option."
OFFERING DATES
In general, the Purchase Plan is implemented by four three-month offering
periods commencing on or about January 1, April 1, July 1 and October 1 of each
year. The Board of Directors has the power to change the duration and/or
frequency of the offering periods with respect to future offerings without
shareholder approval if such change is announced at least fifteen (15) days
prior to the scheduled beginning of the first offering period to be affected.
PARTICIPATION IN THE PLAN
Eligible employees may participate in the Plan by completing a subscription
agreement on the form provided by the Company and filing it with the Company
prior to the applicable offering date, unless a later time for filing the
subscription agreement is set by the Board for all eligible employees with
respect to a given offering. The subscription agreement currently authorizes
payroll deductions of up to ten percent of the participant's eligible
compensation on the date of the purchase.
PURCHASE PRICE
The purchase price per share at which shares are sold under the Purchase
Plan is 85 percent of the lower of the fair market value of the Common Stock on
the first day of an offering period (the offering date) or on the last day of an
offering period when the purchase option is exercised. The fair market value
shall be the closing price of the Common Stock on The Nasdaq SmallCap Market as
of such date or, if such price is not reported, the mean of the bid and asked
prices per share reported by NASDAQ, or if listed on a stock exchange, the
closing price on such exchange as reported in THE WALL STREET JOURNAL.
PAYMENT OF PURCHASE PRICE; PAYROLL DEDUCTIONS
The purchase price of the shares is accumulated by payroll deductions during
the three-month offering period. The deductions may be up to ten percent of a
participant's eligible compensation received on each payday during the offering
period. Eligible compensation is defined in the Purchase Plan to include the
regular straight time gross earnings excluding payments for overtime, shift
premium, incentive compensation, bonuses and commissions. A participant may
discontinue his or her participation in the Purchase Plan at any time during the
offering period prior to an exercise date, and may decrease or increase the rate
of his or her payroll deductions once during the offering period by completing
and filing a new subscription agreement. Payroll deductions shall commence on
the first payroll following the offering date and shall continue until his or
her participation is terminated as provided in the Purchase Plan. No interest
accrues on the payroll deductions of a participant in the Purchase Plan.
PURCHASE OF STOCK; EXERCISE OF OPTION
By executing a subscription agreement to participate in the Purchase Plan,
the participant is entitled to have shares placed under option. The maximum
number of shares placed under option to a participant in an offering period is
the number determined by dividing $6,250 by the fair market value of one share
of the Company's Common Stock on the offering date. Within this limit, the
number of shares purchased by a participant will be determined by dividing the
amount of the participant's total payroll deductions
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accumulated during each offering period by the lower of (i) 85% of the fair
market value of the Common Stock on the offering date, or (ii) 85% of the fair
market value of the Common Stock on the applicable exercise date. See "Payment
of Purchase Price; Payroll Deductions" for additional limitations on payroll
deductions. Unless the participant's participation is discontinued, each
participant's option for the purchase of shares will be exercised automatically
at the end of each exercise period at the applicable price. See "Withdrawal."
Notwithstanding the foregoing, no participant shall be permitted to subscribe
for shares under the Purchase Plan if immediately after the grant of the option
he or she would own 5% or more of the voting power or value of all classes of
stock of the Company or of any of its subsidiaries (including stock which may be
purchased under the Purchase Plan or pursuant to any other options), nor shall
any participant be granted an option which would permit the participant to buy
pursuant to all employee stock purchase plans of the Company more than $25,000
worth of stock (determined at the fair market value of the shares at the time
the option is granted) in any calendar year. Furthermore, if the number of
shares which would otherwise be placed under option at the beginning of an
offering period exceeds the number of shares then available under the Purchase
Plan, a pro rata allocation of the available shares shall be made in as
equitable a manner as is practicable.
WITHDRAWAL
While each participant in the Purchase Plan is required to sign a
subscription agreement authorizing payroll deductions, the participant's
interest may be increased or decreased once during any given offering period by
completing and filing a new subscription agreement with the Company. In
addition, a participant's interest may be terminated in whole, but not in part,
by delivering written notice of such withdrawal to the Company. Such withdrawal
may be elected at any time prior to the end of the applicable three-month period
prior to an exercise date under the Purchase Plan. Any withdrawal by the
participant of accumulated payroll deductions for a given offering period
automatically terminates the participant's interest in that offering period.
A participant's withdrawal from an offering period does not have an effect
upon such participant's eligibility to participate in subsequent offering
periods under the Purchase Plan; however, the participant may not re-enroll in
the same offering period after withdrawal.
TERMINATION OF EMPLOYMENT
Upon termination of the participant's continuous status as an employee prior
to the exercise date of an offering period for any reason, including retirement
or death, the contributions credited to his or her account will be returned to
him or her, without interest, or, in the case of his or her death, to the person
or persons entitled thereto, and his or her option will be automatically
terminated.
In the event an employee fails to remain in continuous status as an employee
of the Company for at least twenty (20) hours per week during the offering
period in which the employee is a participant, he or she will be deemed to have
elected to withdraw from the Purchase Plan and the contributions credited to his
or her account will be returned to him or her, without interest, and his or her
option terminated.
ADJUSTMENT UPON CHANGES IN CAPITALIZATION
In the event any change, such as a stock split or stock dividend, is made in
the Company's capitalization which results in an increase or decrease in the
number of outstanding shares of Common Stock without receipt of consideration by
the Company, appropriate adjustments will be made in the shares subject to
purchase and in the purchase price per share, as well as in the number of shares
available for issuance under the Purchase Plan. In the event of the proposed
dissolution or liquidation of the Company, the offering period will terminate
immediately prior to the consummation of such proposed action, unless otherwise
provided by the Board of Directors or its committee. In the event of a proposed
sale of all or substantially all of the assets of the Company, or the merger of
the Company with or into
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another corporation, each option under the Purchase Plan shall be assumed or an
equivalent substitute option shall be substituted by such successor corporation
or a parent or subsidiary of such successor corporation, unless the
Administrator elects to shorten the offering period then in progress by setting
a new purchase date and notifying the optionees of the change in their purchase
date.
NONTRANSFERABILITY
No rights or accumulated payroll deductions of a participant under the
Purchase Plan may be pledged, assigned or transferred for any reason and any
such attempt may be treated by the Company as an election to withdraw from the
Purchase Plan.
REPORTS
Individual accounts will be maintained for each participant in the Purchase
Plan. Each participant shall receive promptly after each exercise date a report
of such participant's account setting forth the total amount of the
participant's contributions, the per share purchase price and the number of
shares purchased and the remaining cash balance, if any, to be returned or
carried over to the next offering period.
AMENDMENT AND TERMINATION OF THE PLAN
The Board of Directors may at any time amend or terminate the Purchase Plan,
except that such termination shall not affect options previously granted nor may
any amendment make any change in any option granted prior thereto which
adversely affects the rights of any participant. No amendment may be made to the
Purchase Plan without approval of the shareholders of the Company if such
amendment would increase the number of shares reserved under the Purchase Plan,
change the standards of eligibility for participation in the Purchase Plan or
materially increase the benefits accruing to participants in the Purchase Plan.
The Purchase Plan shall expire in 2012 unless sooner terminated by the
Administrator, provided that any options then outstanding under the Purchase
Plan shall remain outstanding until they expire by their terms.
FEDERAL INCOME TAX ASPECTS OF THE PURCHASE PLAN
The following is a brief summary of the U.S. federal income tax consequences
of transactions under the 1992 Employee Stock Purchase Plan based on federal
income tax laws in effect on the date of this Proxy Statement. This summary is
not intended to be exhaustive and does not address all matters which may be
relevant to a particular participant based on his or her specific circumstances.
The summary addresses only current U.S. federal income tax law and expressly
does not discuss the income tax laws of any state, municipality, non-U.S. taxing
jurisdiction or gift, estate or other tax laws other than federal income tax
laws. The Company advises all participants to consult their own tax advisor
concerning tax implication of purchases and the disposition of stock acquired
pursuant to the 1992 Employee Stock Purchase Plan.
GENERAL TAX INFORMATION. The Purchase Plan, and the right of participants
to make purchases thereunder, is intended to qualify for the federal income tax
treatment provided to employee stock purchase plans and their participants under
the provisions of Sections 421 and 423 of the Code. Under these provisions, no
income will be taxable to a participant until the shares purchased under the
Purchase Plan are sold or otherwise disposed of. Upon sale or other disposition
of the shares, the participant will generally be subject to tax in an amount
which depends upon the holding period of the shares. If the shares are sold or
otherwise disposed of more than two years from the first day of the offering
period and one year from the date the shares are purchased, the participant will
recognize ordinary income measured as the lesser of (a) the excess of the fair
market value of the shares at the time of such sale or disposition over
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the purchase price, or (b) an amount equal to 15 percent of the fair market
value of the shares as of the first day of the offering period. Any additional
gain will be treated as long-term capital gain. If the shares are sold or
otherwise disposed of before the expiration of either of these holding periods,
the participant will recognize ordinary income generally measured as the excess
of the fair market value of the shares on the date the shares are purchased over
the purchase price. Any additional gain or loss on such sale or disposition will
be long-term or short-term capital gain or loss, depending on whether or not the
disposition occurs more than one year after the date the shares are purchased.
For individual taxpayers, the current U.S. federal income tax rate on long-term
capital gains is alternatively 28% (if the shares are held for more than one
year, but not more than 18 months after exercise), and 20% (if the shares are
held for more than 18 months after exercise). The Company is not entitled to a
deduction for amounts taxed as ordinary income or capital gain to a participant
except to the extent of ordinary income recognized by a participant upon a sale
or disposition of shares prior to the expiration of the holding periods
described above. Capital losses are allowed in full against capital gains plus
$3,000 of other income.
The ordinary income reported under the rules described above, added to the
actual purchase price of the shares, determines the tax basis of the shares for
the purpose of determining capital gain or loss on a sale or exchange of the
shares.
The foregoing is only a summary of the effect of federal income taxation
upon the optionee and the Company with respect to the grant and exercise of
options under the Purchase Plan, does not purport to be complete, and does not
discuss the income tax laws of any municipality, state or foreign country in
which an optionee may reside.
REQUIRED VOTE
The affirmative vote of the holders of a majority of the shares of the
Company's Common Stock present at the Annual Meeting in person or by proxy and
entitled to vote is required to approve the amendment to the 1992 Purchase Plan
and the reservation of an additional 1,000,000 shares of Common Stock for
issuance thereunder.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE 'FOR" THE APPROVAL OF THE AMENDMENT
TO THE 1992 PURCHASE PLAN AND THE RESERVATION OF AN ADDITIONAL 1,000,000 SHARES
OF COMMON STOCK FOR ISSUANCE THEREUNDER.
PROPOSAL NO. 5
REINCORPORATION IN DELAWARE
INTRODUCTION
For the reasons set forth below, the Board of Directors believes that the
best interests of the Company and its shareholders will be served by changing
the state of incorporation of the Company from California to Delaware (the
"Reincorporation Proposal" or the "Proposed Reincorporation"). SHAREHOLDERS ARE
URGED TO READ CAREFULLY THE FOLLOWING SECTIONS OF THIS PROXY STATEMENT,
INCLUDING THE RELATED EXHIBITS, BEFORE VOTING ON THE REINCORPORATION
PROPOSAL.Throughout the Proxy Statement, the term "Centura California" refers to
the existing California corporation and the term "Centura Delaware" refers to
the new Delaware corporation, a wholly owned subsidiary of Centura California,
which is the proposed successor to Centura California.
The Reincorporation Proposal will be effected by merging Centura California
into Centura Delaware. Upon completion of the merger, Centura California will
cease to exist and Centura Delaware will continue to operate the business of the
Company under the name Centura Software Corporation.
Pursuant to the Agreement and Plan of Merger, a copy of which is attached
hereto as Exhibit A (the "Merger Agreement"), each outstanding share of Centura
California Common Stock, par value $0.01 per share, will automatically be
converted into one share of Centura Delaware Common Stock, $0.01 par
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value, upon the effective date of the merger. Each stock certificate
representing issued and outstanding shares of Centura California Common Stock
will continue to represent the same number of shares of Common Stock of Centura
Delaware. IT WILL NOT BE NECESSARY FOR SHAREHOLDERS TO EXCHANGE THEIR EXISTING
STOCK CERTIFICATES FOR STOCK CERTIFICATES OF CENTURA DELAWARE. However,
shareholders may exchange their certificates if they so choose. The Common Stock
of Centura California is listed for trading on The Nasdaq SmallCap Market, and
after the merger Centura Delaware's Common Stock will continue to be traded on
The Nasdaq SmallCap Market without interruption, under the same symbol ("CNTR")
employed by the Company prior to the merger. As of the date the Board resolved
to undertake the Proposed Reincorporation, the closing price of the Company's
Common Stock on The Nasdaq SmallCap Market was $1.81 per share.
Under California law, the affirmative vote of a majority of the outstanding
shares of Common Stock of Centura California is required for approval of the
Merger Agreement and the other terms of the Proposed Reincorporation. See "Vote
Required for the Reincorporation Proposal." The Proposed Reincorporation has
been unanimously approved by Centura California's Board of Directors. If
approved by the shareholders, it is anticipated that the merger will become
effective as soon as practicable (the "Effective Date") following the Annual
Meeting of Shareholders. However, pursuant to the Merger Agreement, the merger
may be abandoned or the Merger Agreement may be amended by the Board of
Directors (except that the principal terms may not be amended without
shareholder approval) either before or after shareholder approval has been
obtained and prior to the Effective Date of the Proposed Reincorporation if, in
the opinion of the Board of Directors of either company, circumstances exist
which make it inadvisable to proceed under the original terms of the Merger
Agreement.
Shareholders of Centura California will have no dissenters' rights of
appraisal with respect to the Reincorporation Proposal. See "Significant
Differences Between the Corporation Laws of California and Delaware--Appraisal
Rights."
The discussion set forth below is qualified in its entirety by reference to
the Merger Agreement, the Certificate of Incorporation of Centura Delaware (the
"Certificate of Incorporation") and the Bylaws of Centura Delaware, copies of
which are attached hereto as Exhibits A, B and C, respectively.
APPROVAL BY SHAREHOLDERS OF THE PROPOSED REINCORPORATION WILL CONSTITUTE
APPROVAL OF THE MERGER AGREEMENT, THE CERTIFICATE OF INCORPORATION, THE BYLAWS
OF CENTURA DELAWARE AND ALL PROVISIONS THEREOF, ASSUMPTION OF CENTURA
CALIFORNIA'S EMPLOYEE BENEFIT PLANS AND STOCK OPTION AND PURCHASE PLANS BY
CENTURA DELAWARE AND REVISIONS IN THE COMPANY'S INDEMNIFICATION AGREEMENTS WITH
ITS OFFICERS AND DIRECTORS TO CONFORM SUCH AGREEMENTS TO DELAWARE LAW.
VOTE REQUIRED FOR THE REINCORPORATION PROPOSAL
Approval of the Reincorporation Proposal, which will also constitute
approval of (i) the Merger Agreement, the Certificate of Incorporation and the
Bylaws of Centura Delaware, (ii) the assumption of Centura California's employee
benefit plans and stock option and purchase plans by Centura Delaware and (iii)
revisions in the Company's indemnification agreements with its officers and
directors to conform such agreements to Delaware law, will require the
affirmative vote of the holders of a majority of the outstanding shares of
Centura California entitled to vote.
THE BOARD RECOMMENDS A VOTE "FOR" THE PROPOSED REINCORPORATION IN DELAWARE.
THE EFFECT OF AN ABSTENTION IS THE SAME AS THAT OF A VOTE AGAINST THE
REINCORPORATION PROPOSAL.
PRINCIPAL REASONS FOR THE PROPOSED REINCORPORATION
For many years Delaware has followed a policy of encouraging incorporation
in that state and, in furtherance of that policy has been a leader in adopting,
construing and implementing comprehensive,
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flexible corporate laws responsive to the legal and business needs of
corporations organized under its laws. Many corporations have initially chosen
Delaware for their state of incorporation or have subsequently changed their
corporate domicile to Delaware in a manner similar to that proposed by the
Company. Because of Delaware's prominence as the state of incorporation for many
major corporations, both the legislature and courts in Delaware have
demonstrated an ability and a willingness to act quickly and effectively to meet
changing business needs. The Delaware courts have developed considerable
expertise in dealing with corporate issues and a substantial body of case law
has developed construing Delaware law and establishing public policies with
respect to corporate legal affairs.
ANTITAKEOVER IMPLICATIONS
Delaware, like many other states, permits a corporation to adopt a number of
measures through amendment of the corporate charter or bylaws or otherwise,
which measures are designed to reduce a corporation's vulnerability to
unsolicited takeover attempts. The Reincorporation Proposal is not being
proposed in order to prevent such a change in control, nor is it in response to
any present attempt known to the Board of Directors to acquire control of the
Company, obtain representation on the Board of Directors or take significant
action which affects the Company.
In the discharge of its fiduciary obligations to its shareholders, the Board
of Directors has evaluated the Company's vulnerability to potential unsolicited
bidders. In the course of such evaluation, the Board of Directors of the Company
has considered or may consider in the future certain defensive strategies
designed to enhance the Board's ability to negotiate with an unsolicited bidder.
These strategies include, but are not limited to, enforcement of the Company's
Preferred Shares Rights Plan dated August 3, 1994, adoption of severance
agreements for its management and key employees which become effective upon the
occurrence of a change in control of the Company and the designation and
issuance of preferred stock, the rights and preferences of which are determined
by the Board of Directors. Some of these measures may be implemented under
California law. There is nonetheless substantial judicial precedent in the
Delaware courts as to the legal principles applicable to such defensive measures
and as to the conduct of the Board of Directors under the business judgment rule
with respect to unsolicited takeover attempts.
Certain effects of the Reincorporation Proposal may be considered to have
antitakeover implications. Section 203 of the Delaware General Corporation Law,
from which Centura Delaware does NOT intend to opt out, restricts certain
"business combinations" with "interested shareholders" for three years following
the date that a person becomes an interested shareholder, unless the Board of
Directors approves the business combination. See "Significant Differences
Between the Corporation Laws of California and Delaware--Shareholder Approval of
Certain Business Combinations." Furthermore, certain changes to the relative
rights of shareholders and management which have antitakeover implications may
be implemented under Delaware law. Certain of these changes, including the
elimination of the right of shareholders controlling at least ten percent (10%)
of the voting shares to call a special meeting of shareholders and the
elimination of the right of shareholders to remove a director other than for
cause, will be implemented as part of the Proposed Reincorporation. In addition,
certain changes which reduce shareholder participation in important corporate
decisions and which could be instituted in California without reincorporating in
Delaware will also be implemented as part of the Proposed Reincorporation. These
changes include the elimination of the right of shareholders to act by written
consent and the establishment of procedural requirements for shareholders
wishing to nominate directors or present proposals for shareholder
consideration. For a detailed discussion of all of the changes which will be
implemented as part of the Proposed Reincorporation, see "The Charters and
Bylaws of Centura California and Centura Delaware." For a discussion of these
and other differences between the laws of California and Delaware, see
"Significant Differences Between the Corporation Laws of California and
Delaware."
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The Board of Directors believes that unsolicited takeover attempts may be
unfair or disadvantageous to the Company and its shareholders because:
a. a non-negotiated takeover bid may be timed to take advantage of
temporarily depressed stock prices;
b. a non-negotiated takeover bid may be designed to foreclose or
minimize the possibility of more favorable competing bids; and
c. a non-negotiated takeover bid may involve the acquisition of
only a controlling interest in the corporation's stock, without
affording all shareholders the opportunity to receive the same economic
benefits.
By contrast, in a transaction in which an acquiror must negotiate with an
independent board of directors, the board can and should take account of the
underlying and long-term values of assets, the possibilities for alternative
transactions on more favorable terms, possible advantages from a tax-free
reorganization, anticipated favorable developments in the Company's business not
yet reflected in the stock price and equality of treatment of all shareholders.
Despite the belief of the Board of Directors as to the benefits to
shareholders of the Reincorporation Proposal, it may be disadvantageous to the
extent that it has the effect of discouraging a future takeover attempt which is
not approved by the Board of Directors, but which a majority of the shareholders
may deem to be in their best interests or in which shareholders may receive a
substantial premium for their shares over the then current market value or over
their cost basis in such shares. As a result of such effects of the
Reincorporation Proposal, shareholders who might wish to participate in a tender
offer may not have an opportunity to do so. In addition, to the extent that such
provisions enable the Board of Directors to resist a takeover or a change in
control of the Company, they could make it more difficult to change the existing
Board of Directors and management.
POSSIBLE DISADVANTAGES
Despite the unanimous belief of the Board of Directors that the
Reincorporation Proposal is in the best interests of Centura California and its
shareholders, it should be noted that Delaware law has been criticized by some
commentators on the grounds that it does not afford minority shareholders the
same substantive rights and protections as are available in a number of other
states. For a comparison of shareholders' rights and the powers of management
under Delaware and California law, see "Significant Differences Between the
Corporation Laws of California and Delaware." In addition, the Reincorporation
Proposal includes certain permitted changes to the Articles of Incorporation or
Bylaws of the Company which alter the relative rights of shareholders and
management and which reduce shareholder participation in important corporate
decisions. See "The Charters and Bylaws of Centura California and Centura
Delaware."
NO CHANGE IN THE NAME, BOARD MEMBERS, BUSINESS, MANAGEMENT, EMPLOYEE PLANS OR
LOCATION OF PRINCIPAL FACILITIES OF THE COMPANY
The Reincorporation Proposal will effect only a change in the legal domicile
of the Company and other changes of a legal nature, certain of which are
described in this Proxy Statement. The Proposed Reincorporation will NOT result
in any change in the name, business, management, fiscal year, assets or
liabilities or location of the principal facilities of the Company. The seven
directors who are elected at the Annual Meeting of Shareholders will become the
directors of Centura Delaware. All employee benefit, stock option and purchase
plans of Centura California (including the 1995 Stock Option Plan, the 1996
Directors' Stock Option Plan and the 1998 Employee Stock Option Plan) will be
continued by Centura Delaware, and each option or right issued pursuant to such
plans will automatically be converted into an option or right to purchase the
same number of shares of Centura Delaware Common Stock, at the same
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price per share, upon the same terms, and subject to the same conditions, as set
forth in such plans. Shareholders should note that approval of the
Reincorporation Proposal will also constitute approval of the assumption of
these plans by Centura Delaware. Other employee benefit arrangements of Centura
California will also be continued by Centura Delaware upon the terms and subject
to the conditions currently in effect. As noted above, after the merger the
shares of Common Stock of Centura Delaware will continue to be traded, without
interruption, in the same principal market and under the same symbol ("CNTR") as
the shares of Common Stock of Centura California are traded under prior to the
merger.
THE CHARTERS AND BYLAWS OF CENTURA CALIFORNIA AND CENTURA DELAWARE
The provisions of the Centura Delaware Certificate of Incorporation and
Bylaws are similar to those of the Centura California Articles of Incorporation
and Bylaws in many respects. However, the Reincorporation Proposal includes the
implementation of certain provisions in the Centura Delaware Certificate of
Incorporation and Bylaws which alter the rights of shareholders and the powers
of management and which reduce shareholder participation in important corporate
decisions. These provisions have antitakeover implications and are described in
detail below.
Approval by shareholders of the Proposed Reincorporation will constitute an
approval of the inclusion in the Centura Delaware Certificate of Incorporation
and Bylaws of each of the provisions described below. In addition, certain other
changes altering the rights of shareholders and powers of management could be
implemented in the future by amendment of the Certificate of Incorporation
following shareholder approval and certain such changes could be implemented by
amendment of the Bylaws of Centura Delaware without shareholder approval. For a
discussion of such changes, see "Significant Differences Between the Corporation
Laws of California and Delaware." This discussion of the Certificate of
Incorporation and Bylaws of Centura Delaware is qualified by reference to
Exhibits B and C hereto, respectively.
ELIMINATION OF SHAREHOLDER ACTIONS BY WRITTEN CONSENT; SPECIAL MEETINGS.
The Certificate of Incorporation and Bylaws of Centura Delaware will provide
that shareholders may act only at an annual or special meeting of shareholders
and not by written consent. Although the Bylaws of Centura California provide
for shareholder actions by written consent, the Company has not used this method
of obtaining shareholder approval since becoming a public company in 1993, and,
because of the large number of shareholders of the Company and its current
practice of soliciting proxies and holding meetings, the Company does not expect
to use this procedure in the future. In addition, the Bylaws of Centura Delaware
provide that special meetings of shareholders can be called only by the Board of
Directors, the Chairman of the Board or the President. Shareholders are not
permitted to call a special meeting or to require that the Board call a special
meeting of shareholders. Moreover, the business permitted to be conducted at any
special meeting of shareholders is limited to the business brought before the
meeting by or at the direction of the Board of Directors.
REASONS FOR ELIMINATION OF SHAREHOLDER ACTION BY WRITTEN CONSENT AND RIGHT
TO CALL SPECIAL MEETINGS. The provisions prohibiting shareholder action by
written consent would give all shareholders of the Company the opportunity to
participate in determining any proposed shareholder action and would prevent the
holders of a majority of the voting power of the Company from using the written
consent procedure to take shareholder action. Persons attempting unfriendly
takeovers of corporations have attempted to use written consent procedures in
order to deal directly with shareholders and avoid negotiations with the boards
of directors of such companies. The provisions regarding the elimination of the
right of shareholders to call a special meeting would mean that a shareholder
could not force shareholder consideration of a proposal over the opposition of
the Board of Directors by calling a special meeting of shareholders prior to
such time as the Board believed such consideration to be appropriate. By
eliminating the use of the written consent procedure and the ability of
shareholders to call a special meeting, the Company intends to encourage persons
seeking to acquire control of the Company to initiate
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such an acquisition through arm's-length negotiations with the Company's
management and Board of Directors.
POSSIBLE DISADVANTAGES OF ELIMINATION OF SHAREHOLDER ACTIONS BY WRITTEN
CONSENT AND RIGHT TO CALL SPECIAL MEETINGS. The provisions restricting
shareholder action by written consent and the elimination of the shareholders'
ability to call special meetings may have the effect of delaying consideration
of a shareholder proposal until the next annual meeting unless a special meeting
is called by the Board of Directors. Because elimination of the procedures for
shareholders to act by written consent or to call special meetings could make
more difficult an attempt to obtain control of the Company, such action could
have the effect of discouraging a third party from making a tender offer or
otherwise attempting to obtain control of the Company. Because tender offers for
control usually involve a purchase price higher than the prevailing market
price, the provisions restricting shareholder action by written consent and the
elimination of the shareholders' ability to call special meetings may have the
effect of preventing or delaying a bid for the Company's shares which could be
beneficial to the Company and its shareholders. Elimination of the written
consent procedure also means that a meeting of shareholders would be required in
order for the Company's shareholders to replace the Board. The restriction on
the ability of shareholders to call a special meeting means that a proposal to
replace the Board could be delayed until the next annual meeting. These
provisions thus will make the removal of directors more difficult.
TWO-THIRDS VOTING PROVISION REGARDING CERTAIN ACTIONS.
The Centura Delaware Certificate of Incorporation contains a requirement of
approval of two-thirds of the shareholders to alter, amend or repeal certain
articles of the Centura Delaware Certificate of Incorporation. The articles of
the Certificate of Incorporation subject to the greater percentage vote
requirement are Article 13, concerning shareholder actions by written consent,
and Article 14 concerning this two-thirds voting requirement. Under Delaware
law, the power, to amend, alter or repeal provisions of a corporation's
certificate of incorporation requires only a majority vote of shareholders. A
corporation may provide in its certificate of incorporation, however, for a
higher percentage vote of outstanding shares than is otherwise required.
Similarly, a corporation may provide in its bylaws for a supermajority vote in
order to amend bylaw provisions. A corresponding two-thirds vote requirement is
contained in the Bylaws of Centura Delaware with respect to amending the
corresponding provisions concerning shareholder actions by written consent and
ability to call special meetings contained therein.
These provisions in the Centura Delaware Certificate of Incorporation and
Bylaws prevent a shareholder or group of shareholders with less than two-thirds
of the outstanding voting stock from amending the Certificate of Incorporation
or Bylaws to delete the provision which requires shareholders to act only at
annual or special meetings and not by written consent. This provision is an
essential part of the overall structure being proposed to encourage individuals
or groups who desire to propose takeover bids or similar transactions to
negotiate with the Board of Directors. This provision prevents a shareholder
with a majority of the voting power of the Company from avoiding the
requirements of the provision by simply repealing it. To the extent that this
proposal adds to the effectiveness of the elimination of shareholder written
consent provision, it would also incorporate the possible disadvantages
discussed above regarding such provision.
ELIMINATION OF CUMULATIVE VOTING.
Unlike the Bylaws of Centura California, the Certificate of Incorporation
and Bylaws of Centura Delaware do not provide for cumulative voting. Cumulative
voting entitles each shareholder to cast a number of votes that is equal to the
number of voting shares held by such shareholder multiplied by the total number
of directors to be elected, and to cast all such votes for one nominee or
distribute such votes among up to as many candidates as there are positions to
be filled. (For a further description of the mechanics of cumulative voting, see
the section entitled "Voting and Solicitation" on page one of this Proxy
Statement.) Without cumulative voting, a shareholder or group of shareholders
must hold a majority
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of the voting shares to cause the election of one or more nominees. Cumulative
voting may enable a minority shareholder or group of shareholders to elect at
least one representative to the Board. For example, in each election of
directors, under cumulative voting rules where seven directors are to be
elected, a shareholder or group holding greater than twelve and one-half percent
(12.5%) of the voting shares is guaranteed the ability to elect one director. If
the Reincorporation Proposal is adopted, in all future elections of the Board of
Directors, commencing with the Annual Meeting to be held in 1999, the holders of
a majority of the shares actually voted (assuming that a quorum is present) will
be guaranteed the right to elect all of the directors being elected at that
time.
REASONS FOR ELIMINATION OF CUMULATIVE VOTING. The Board of Directors
believes that each director elected to the Board should represent the interests
of all shareholders. The elimination of cumulative voting should help ensure
that each director acts in the best interests of all shareholders, because
shareholders holding a majority of the voting shares will have the power to
elect every director to be elected at any annual meeting. The election of the
Board by holders of a majority of the voting stock is not a departure from the
manner in which the Company's directors have been elected in the past. Even
though the Company has always permitted cumulative voting, such voting has never
been used in the election of a director to the Company's Board.
POSSIBLE DISADVANTAGES OF ELIMINATION OF CUMULATIVE VOTING. The elimination
of cumulative voting will make it more difficult for a minority shareholder or
group of shareholders to elect a representative to the Board of Directors. In
addition, it should be noted that the elimination of cumulative voting may also
have certain antitakeover effects. It may under certain circumstances discourage
or render more difficult a merger, tender offer or proxy contest; discourage the
acquisition of large blocks of the Company's shares by persons who would not
make such acquisition without assurance of the ability to place a representative
on the Board of Directors; deter or delay the assumption of control by a holder
of a large block of the Company's shares; or render more difficult the
replacement of incumbent directors and management.
NOMINATIONS OF DIRECTOR CANDIDATES AND INTRODUCTION OF BUSINESS AT
SHAREHOLDER MEETINGS.
The Bylaws of Centura Delaware establish an advance notice procedure with
regard to the nomination, other than by or at the direction of the Board of
Directors, of candidates for election as directors (the "Nomination Procedure")
and with regard to certain matters to be brought before an annual meeting of
shareholders (the "Business Procedure").
The Nomination Procedure provides that only persons nominated by or at the
direction of the Board of Directors or by a shareholder who has given timely
written notice to the Secretary of the Company prior to the meeting, will be
eligible for election as directors. The Business Procedure provides that at an
annual meeting, and subject to any other applicable requirements, only such
business may be conducted as has been brought before the meeting by or at the
direction of the Board of Directors or by a shareholder who has given timely
written notice to the Secretary of the Company of such shareholder's intention
to bring such business before the meeting. In all cases, to be timely, notice
must be received by the Company not less than 90 days prior to the meeting (or
if fewer than 100 days' notice or prior public disclosure of the meeting date is
given or made to shareholders, not later than the tenth day following the day on
which such notice was mailed or such public disclosure was made).
Under the Nomination Procedure, a shareholder's notice to the Company must
contain certain information about the nominee, including name, address, the
consent to be nominated and such other information as would be required to be
included in a proxy statement soliciting proxies for the election of the
proposed nominee, and certain information about the shareholder proposing to
nominate that person, including name, address, a representation that the
shareholder is a holder of record of stock entitled to vote at the meeting and a
description of all arrangements or understandings between the shareholder and
each nominee. Under the Business Procedure, notice relating to the conduct of
business at an annual meeting other than the nomination of directors must
contain certain information about the business and
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about the shareholder who proposes to bring the business before the meeting. If
the Chairman or other officer presiding at the meeting determines that a person
was not nominated in accordance with the Nomination Procedure, such person will
not be eligible for election as a director, or if he or she determines that
other business was not properly brought before such meeting in accordance with
the Business Procedure, such business will not be conducted at such meeting.
Nothing in the Nomination Procedure or the Business Procedure will preclude
discussion by any shareholder of any nomination or business properly made or
brought before the annual meeting in accordance with the above-described
procedures.
By requiring advance notice of nominations by shareholders, the Nomination
Procedure affords the Board of Directors an opportunity to consider the
qualifications of the proposed nominees and, to the extent deemed necessary or
desirable by the Board, to inform the shareholders about such qualifications. By
requiring advance notice of proposed business, the Business Procedure provides
the Board with an opportunity to inform shareholders of any business proposed to
be conducted at a meeting and the Board's position on any such proposal,
enabling shareholders to better determine whether they desire to attend the
meeting or grant a proxy to the Board of Directors as to the disposition of such
business. In addition, the Business Procedure provides for a more orderly
procedure for conducting the annual meeting of shareholders. Although the
Centura Delaware Bylaws do not give the Board any power to approve or disapprove
shareholder nominations for the election of directors or any other business
desired by shareholders to be conducted at an annual meeting, the Centura
Delaware Bylaws may have the effect of precluding a nomination for the election
of directors or of precluding any other business at a particular annual meeting
if the proper procedures are not followed. In addition, the procedures may
discourage or deter a third party from conducting a solicitation of proxies to
elect its own slate of directors or otherwise attempting to obtain control of
the Company, even if the conduct of such business or such attempt might be
beneficial to the Company and its shareholders.
AUTHORIZED STOCK.
The Articles of Incorporation of Centura California authorize 62,000,000
shares of capital stock, $0.01 par value per share, which consists of 60,000,000
shares of Common Stock and 2,000,000 shares of Preferred Stock. The Certificate
of Incorporation of Centura Delaware will provide for the same number of shares
of Common and Preferred Stock, each with a par value of $0.01. The Articles of
Incorporation of Centura California and the Certificate of Incorporation of
Centura Delaware each authorize the Board of Directors to fix the rights,
preferences, privileges and restrictions of one or more series out of the
authorized shares of Preferred stock, including dividend rights, conversion
rights, voting rights, terms of redemption and liquidation preferences without
further vote or action by the Shareholder. Although the Board has no present
intention of doing so, issuance of the authorized Preferred Stock with terms
giving it substantial voting power, conversion or other rights could have the
effect of (i) delaying, deferring or preventing a change in control of the
Company or (ii) otherwise modifying the rights of holders of the Company's
Common Stock under either California or Delaware law.
MONETARY LIABILITY OF DIRECTORS.
The Articles of Incorporation of Centura California and the Certificate of
Incorporation of Centura Delaware both provide for the elimination of personal
monetary liability of directors to the fullest extent permissible under the laws
of each corporation's respective state of incorporation. The provision
eliminating monetary liability of directors set forth in the Certificate of
Incorporation of Centura Delaware is potentially more expansive, in that it
incorporates future amendments to Delaware law with respect to the elimination
of such liability.
COMPLIANCE WITH DELAWARE AND CALIFORNIA LAW
CALIFORNIA. Following the Annual Meeting of Shareholders, if this Proposal
is approved, the Company will submit the Merger Agreement to the office of the
California Secretary of State for filing.
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DELAWARE. Following the Annual Meeting of Shareholders, if this Proposal is
approved, the Company will submit the Merger Agreement to the office of the
Delaware Secretary of State for filing.
SIGNIFICANT DIFFERENCES BETWEEN THE CORPORATION LAWS OF CALIFORNIA AND DELAWARE
The General Corporation Laws of California and Delaware differ in many
respects. It is not practical to summarize all of such differences in this Proxy
Statement, but some of the principal differences which could materially affect
the rights of shareholders are discussed below.
SIZE OF THE BOARD OF DIRECTORS. The Bylaws of Centura Delaware, like the
Bylaws of Centura California, provide for a Board of Directors of from five to
nine members, with the exact number currently set at seven directors. Under
California law, although changes in the number of directors must in general be
approved by a majority of the outstanding shares, the Board of Directors may fix
the exact number of directors within a stated range set forth in the articles of
incorporation or bylaws, if that stated range has been approved by the
shareholders. Delaware law permits the Board of Directors alone to change the
authorized number, or the range, of directors by amendment to the bylaws, unless
the directors are not authorized to amend the bylaws or the number of directors
is fixed in the certificate of incorporation (in which case a change in the
number of directors may be made only by amendment to the certificate of
incorporation following approval of such change by the shareholders). The
Certificate of Incorporation of Centura Delaware provides that the number of
directors shall be as specified in the Bylaws and authorizes the Board of
Directors to make, alter, amend or repeal the Bylaws. Although Delaware law
permits a change in the authorized range, as well as the exact number, of
directors by a majority vote of the entire Board of Directors, and although
under its Certificate of Incorporation the directors of Centura Delaware are
authorized to change both the range and the exact number of directors by
amending the Bylaws, the Bylaws of Centura Delaware provide, consistent with the
Bylaws of Centura California, that the range of the number of members of the
Board may be changed or a definite number fixed only with the approval of a
majority of Centura Delaware's shareholders. Following the Proposed
Reincorporation, the Board of Directors of Centura Delaware could (although it
has no current intention to do so) amend the Bylaws to provide that such changes
may be implemented by the directors alone. If the Reincorporation Proposal is
approved, the seven directors of Centura California who are elected at the
Annual Meeting of Shareholders will continue as the seven directors of Centura
Delaware after the Proposed Reincorporation is consummated.
CUMULATIVE VOTING. Under California law, if any shareholder has given
notice of his or her intention to cumulate votes for the election of directors,
any other shareholder of the corporation is also entitled to cumulate his or her
votes at such election. Beginning in 1990 under California law, corporations
such as Centura California that have 800 or more shareholders of record and have
their stock listed on the Nasdaq National Market System may eliminate such
cumulative voting rights by adopting amendments to their articles and bylaws,
which amendments must be approved by the shareholders. Under Delaware law,
cumulative voting in the election of directors is not mandatory. The Certificate
of Incorporation and Bylaws of Centura Delaware do not provide for cumulative
voting and, therefore, the shareholders of Centura Delaware will no longer have
cumulative voting rights. The elimination of cumulative voting limits the
ability of minority shareholders to obtain representation on the Board of
Directors. See "The Charters and Bylaws of Centura California and Centura
Delaware."
CLASSIFIED BOARD OF DIRECTORS. A classified board is one on which a certain
number, but not all, of the directors are elected on a rotating basis each year.
Under California law, directors generally are elected annually; however,
beginning in 1990 corporations such as Centura California that have 800 or more
shareholders of record and have their stock listed on the Nasdaq National Market
System may designate a classified board by adopting amendments to their articles
and bylaws which amendments must be approved by the shareholders. Delaware law
permits, but does not require, a classified board of directors, with staggered
terms under which one-half or one-third of the directors are elected for terms
of two or three
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years, respectively. This method of electing directors makes a change in the
composition of the board of directors, and a potential change in control of a
corporation, a lengthier and more difficult process. The Certificate of
Incorporation and Bylaws of Centura Delaware do not provide for a classified
board of directors.
WRITTEN CONSENT OF SHAREHOLDERS. Both the California and Delaware General
Corporation Laws provide that the shareholders of a corporation may take action
by written consent without a meeting, unless the corporation's charter documents
provide otherwise. The Articles of Incorporation of Centura California do not
contain any provisions prohibiting actions by written consent and, accordingly,
the shareholders of Centura California may take action by written consent
without a meeting. The Certificate of Incorporation of Centura Delaware
explicitly prohibits shareholder actions by written consent. As a result, the
shareholders of Centura Delaware can take action only at a duly called meeting
of the shareholders. See "The Charters and Bylaws of Centura California and
Centura Delaware."
POWER TO CALL SPECIAL SHAREHOLDERS' MEETINGS. Under California law, a
special meeting of shareholders may be called by the board of directors, the
chairman of the board, the president, the holders of shares entitled to cast not
less than ten percent of the votes at such meeting and such additional persons
as are authorized by the articles of incorporation or the bylaws. Under Delaware
law, a special meeting of shareholders may be called by the board of directors
or by any other person authorized to do so in the certificate of incorporation
or the bylaws. The Certificate of Incorporation and Bylaws of Centura Delaware
do not contain provisions granting shareholders the right to call a special
meeting of shareholders. Because the right of shareholders to call a special
meeting is not set forth in the Certificate of Incorporation or Bylaws of
Centura Delaware, shareholders will no longer be able to call a special meeting
of shareholders to vote on a transaction that is opposed by the Board of
Directors. See "The Charters and Bylaws of Centura California and Centura
Delaware."
SHAREHOLDER APPROVAL OF CERTAIN BUSINESS COMBINATIONS. In the last several
years, a number of states (but not California) have adopted special laws
designed to make certain kinds of "unfriendly" corporate takeovers, or other
transactions involving a corporation and one or more of its significant
shareholders, more difficult. Under Section 203 of the Delaware General
Corporation Law ("Section 203"), certain "business combinations" with
"interested shareholders" of Delaware corporations are subject to a three-year
moratorium unless specified conditions are met.
Section 203 prohibits a Delaware corporation from engaging in a "business
combination" with an "interested shareholder" for three years following the date
that such person becomes an interested shareholder. With certain exceptions, an
interested shareholder is a person or group who or which owns 15% or more of the
corporation's outstanding voting stock (including any rights to acquire stock
pursuant to an option, warrant, agreement, arrangement or understanding, or upon
the exercise of conversion or exchange rights, and stock with respect to which
the person has voting rights only), or is an affiliate or associate of the
corporation and was the owner of 15% or more of such voting stock at any time
within the previous three years.
For purposes of Section 203, the term "business combination" is defined
broadly to include mergers with or caused by the interested shareholder; sales
or other dispositions to the interested shareholder (except proportionately with
the corporation's other shareholders) of assets of the corporation or a
subsidiary equal to ten percent or more of the aggregate market value of the
corporation's consolidated assets or its outstanding stock; the issuance or
transfer by the corporation or a subsidiary of stock of the corporation or such
subsidiary to the interested shareholder (except for transfers in a conversion
or exchange or a pro rata distribution or certain other transactions, none of
which increase the interested shareholder's proportionate ownership of any class
or series of the corporation's or such subsidiary's stock); or receipt by the
interested shareholder (except proportionately as a shareholder), directly or
indirectly, of any loans, advances, guarantees, pledges or other financial
benefits provided by or through the corporation or a subsidiary.
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The three-year moratorium imposed on business combinations by Section 203
does not apply if: (i) prior to the date on which such shareholder becomes an
interested shareholder the board of directors approves either the business
combination or the transaction which resulted in the person becoming an
interested shareholder; (ii) the interested shareholder owns 85% of the
corporation's voting stock upon consummation of the transaction which made him
or her an interested shareholder (excluding from the 85% calculation shares
owned by directors who are also officers of the target corporation and shares
held by employee stock plans which do not permit employees to decide
confidentially whether to accept a tender or exchange offer); or (iii) on or
after the date such person becomes an interested shareholder, the board approves
the business combination and it is also approved at a shareholder meeting by
sixty-six and two-thirds percent (66 2/3%) of the voting stock not owned by the
interested shareholder.
Section 203 only applies to Delaware corporations which have a class of
voting stock that is authorized for quotation on The Nasdaq Stock Market,
including any tier thereof, (as is Centura California and as Centura Delaware
would be) or are held of record by more than 2,000 shareholders. However, a
Delaware corporation may elect not to be governed by Section 203 by a provision
in its original certificate of incorporation or an amendment thereto or to the
bylaws, which amendment must be approved by majority shareholder vote and may
not be further amended by the board of directors. Centura Delaware does not
intend to opt out of Section 203; therefore, Section 203 will apply to Centura
Delaware.
Section 203 has been challenged in lawsuits arising out of ongoing takeover
disputes, and it is not yet clear whether and to what extent its
constitutionality will be upheld by the courts. Although the United States
District Court for the District of Delaware has consistently upheld the
constitutionality of Section 203, the Delaware Supreme Court has not yet
considered the issue. The Company believes that so long as the constitutionality
of Section 203 is upheld, Section 203 will encourage any potential acquiror to
negotiate with the Company's Board of Directors. Section 203 also has the effect
of limiting the ability of a potential acquiror to make a two-tiered bid for
Centura Delaware in which all shareholders would not be treated equally. Section
203 should also discourage certain potential acquirors unwilling to comply with
its provisions.
REMOVAL OF DIRECTORS. Under California Law, any director or the entire
board of directors may be removed, with or without cause, with the approval of a
majority of the outstanding shares entitled to vote; however, no individual
director may be removed (unless the entire board is removed) if the number of
votes cast against such removal would be sufficient to elect the director under
cumulative voting. Under Delaware law, a director of a corporation that does not
have a classified board of directors or cumulative voting may be removed with or
without cause with the approval of a majority of the outstanding shares entitled
to vote. In the case of a Delaware corporation having cumulative voting, if less
than the entire board is to be removed, a director may not be removed without
cause unless the number of shares voted against such removal would not be
sufficient to elect the director under cumulative voting. A director of a
corporation with a classified board of directors may be removed only for cause,
unless the certificate of incorporation otherwise provides. The Certificate of
Incorporation of Centura Delaware does not provide for a classified board of
directors. However, the Certificate of Incorporation of Centura Delaware
specifically provides that directors of Centura Delaware may be removed from
office by shareholders only for cause.
FILLING VACANCIES ON THE BOARD OF DIRECTORS. Under California law, any
vacancy on the board of directors other than one created by removal of a
director may be filled by the board. If the number of directors is less than a
quorum, a vacancy may be filled by the unanimous written consent of the
directors then in office, by the affirmative vote of a majority of the directors
at a meeting held pursuant to notice or waivers of notice or by a sole remaining
director. A vacancy created by removal of a director may be filled by the board
only if so authorized by a corporation's articles of incorporation or by a bylaw
approved by the corporation's shareholders. Centura California's Bylaws do not
permit directors to fill vacancies created by removal of a director. Under
Delaware law, vacancies and newly created directorships may be filled by a
majority of the directors then in office (even though less than a quorum) unless
otherwise
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provided in the certificate of incorporation or bylaws (and unless the
certificate of incorporation directs that a particular class is to elect such
director, in which case any other directors elected by such class, or a sole
remaining director, shall fill such vacancy). The Bylaws of Centura Delaware
provide, consistent with the Bylaws of Centura California, that any vacancy
created by the removal of a director by the stockholders of Centura Delaware or
otherwise may be filled only by the stockholders.
LOANS TO OFFICERS AND EMPLOYEES. Under California law, any loan or guaranty
to or for the benefit of a director or officer of the corporation or its parent
requires approval of the shareholders unless such loan or guaranty is provided
under a plan approved by shareholders owning a majority of the outstanding
shares of the corporation. In addition, under California law, shareholders of
any corporation with 100 or more shareholders of record may approve a bylaw
authorizing the board of directors alone to approve loans or guaranties to or on
behalf of officers (whether or not such officers are directors) if the board
determines that any such loan or guaranty may reasonably be expected to benefit
the corporation. The Bylaws of Centura California authorize such loans or
guaranties. 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 (including directors who are also officers or employees) when
such action, in the judgment of the directors, may reasonably be expected to
benefit the corporation.
INDEMNIFICATION AND LIMITATION OF LIABILITY. California and Delaware have
similar laws respecting indemnification by a corporation of its officers,
directors, employees and other agents. The laws of both states also permit
corporations to adopt a provision in their articles of incorporation eliminating
the liability of a director to the corporation or its shareholders for monetary
damages for breach of the director's fiduciary duty of care. There are
nonetheless certain differences between the laws of the two states respecting
indemnification and limitation of liability.
The Articles of Incorporation of Centura California eliminate the liability
of directors to the corporation to the fullest extent permissible under
California law. California law does not permit the elimination of monetary
liability where such liability is based on: (a) intentional misconduct or
knowing and culpable violation of law; (b) acts or omissions that a director
believes to be contrary to the best interests of the corporation or its
shareholders, or that involve the absence of good faith on the part of the
director; (c) receipt of an improper personal benefit; (d) acts or omissions
that show reckless disregard for the director's duty to the corporation or its
shareholders, where the director in the ordinary course of performing a
director's duties should be aware of a risk of serious injury to the corporation
or its shareholders; (e) acts or omissions that constitute an unexcused pattern
of inattention that amounts to an abdication of the director's duty to the
corporation and its shareholders; (f) interested transactions between the
corporation and a director in which a director has a material financial
interest; and (g) liability for improper distributions, loans or guarantees.
The Certificate of Incorporation of Centura Delaware also eliminates the
liability of directors to the fullest extent permissible under Delaware law, as
such law exists currently or as it may be amended in the future. Under Delaware
law, such provision may not eliminate or limit director monetary liability for
(a) breaches of the director's duty of loyalty to the corporation or its
shareholders; (b) acts or omissions not in good faith or involving intentional
misconduct or knowing violations of law; (c) the payment of unlawful dividends
or unlawful stock repurchases or redemptions; or (d) transactions in which the
director received an improper personal benefit. Such limitation of liability
provision also may not limit a director's liability for violation of, or
otherwise relieve Centura Delaware 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.
California law permits indemnification of expenses incurred in derivative or
third-party actions, except that with respect to derivative actions (a) no
indemnification may be made without court approval when a person is adjudged
liable to the corporation in the performance of that person's duty to the
corporation and its shareholders, unless a court determines such person is
entitled to indemnity for expenses, and then
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such indemnification may be made only to the extent that such court shall
determine, and (b) no indemnification may be made without court approval in
respect of amounts paid or expenses incurred in settling or otherwise disposing
of a threatened or pending action or amounts incurred in defending a pending
action which is settled or otherwise disposed of without court approval.
Indemnification is permitted by California law only for acts taken in good
faith and believed to be in the best interests of the corporation and its
shareholders, as determined by a majority vote of a disinterested quorum of the
directors, independent legal counsel (if a quorum of independent directors is
not obtainable), a majority vote of a quorum of the shareholders (excluding
shares owned by the indemnified party), or the court handling the action.
California law requires indemnification when the individual has successfully
defended the action on the merits (as opposed to Delaware law which requires
indemnification relating to a successful defense on the merits or otherwise).
Delaware law generally permits indemnification of expenses incurred in the
defense or settlement of a derivative or third-party action, provided there is a
determination by a disinterested quorum of the directors, by independent legal
counsel or by a majority vote of a quorum of the shareholders that the person
seeking indemnification acted in good faith and in a manner reasonably believed
to be in or (in contrast to California law) not opposed to the best interests of
the corporation. Without court approval, however, no indemnification may be made
in respect of any derivative action in which such person is adjudged liable for
negligence or misconduct in the performance of his or her duty to the
corporation. Delaware law requires indemnification of expenses when the
individual being indemnified has successfully defended the action on the merits
or otherwise.
California corporations may include in their articles of incorporation a
provision which extends the scope of indemnification through agreements, bylaws
or other corporate action beyond that specifically authorized by statute. The
Articles of Incorporation of Centura California include such a provision.
In February 1993, following shareholder approval, Centura California amended
its Articles of Incorporation to permit indemnification beyond that expressly
mandated by the California Corporations Code and to limit director monetary
liability to the extent permitted by California law. Centura California has also
entered into indemnification agreements with its officers and directors.
Delaware law states that the indemnification provided by statute shall not
be deemed exclusive of any other rights under any bylaw, agreement, vote of
shareholders or disinterested directors or otherwise. Under Delaware law,
therefore, the indemnification agreements entered into by Centura California
with its officers and directors may be assumed by Centura Delaware upon
completion of the Proposed Reincorporation. If the Proposed Reincorporation is
approved, the indemnification agreements will be amended to the extent necessary
to conform the agreements to Delaware law, and a vote in favor of the Proposed
Reincorporation is also approval of such amendments to the indemnification
agreements. In particular, the indemnification agreements will be amended to
include within their purview future changes in Delaware law which expand the
permissible scope of indemnification of directors and officers of Delaware
corporations.
Currently, there are no actions pending against officers or directors of the
Company in their capacities as such.
The indemnification and limitation of liability provisions of California
law, and not Delaware law, will apply to actions of the directors and officers
of Centura California made prior to the Proposed Reincorporation.
INSPECTION OF SHAREHOLDERS LIST. Both California and Delaware law allow any
shareholder to inspect the shareholders' list for a purpose reasonably related
to such person's interest as a shareholder. California law provides, in
addition, for an absolute right to inspect and copy the corporation's
shareholder list by
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persons holding an aggregate of five or more of a corporation's voting shares,
or shareholders holding an aggregate of 1% or more of such shares who have filed
a Schedule 14B with the Securities and Exchange Commission relating to the
election of directors. Delaware law does not provide for any such absolute right
of inspection, and no such right is granted under the Certificate of
Incorporation or Bylaws of Centura Delaware. Lack of access to shareholder
records even though unrelated to the shareholder's interest as a shareholder,
could result in impairment of the shareholder's ability to coordinate opposition
to management proposals, including proposals with respect to a change in control
of the Company.
DIVIDENDS AND REPURCHASES OF SHARES. California law dispenses with the
concepts of par value of shares as well as statutory definitions of capital,
surplus and the like. The concepts of par value, capital and surplus are
retained under Delaware law.
Under California law, a corporation may not make any distribution (including
dividends, whether in cash or other property, and repurchases of its shares)
unless either the corporation's retained earnings immediately prior to the
proposed distribution equal or exceed the amount of the proposed distribution
or, immediately after giving effect to such distribution, the corporation's
assets (exclusive of goodwill, capitalized research and development expenses and
deferred charges) would be at least equal to 1.25 times its liabilities (not
including deferred taxes, deferred income and other deferred credits), and the
corporation's current assets would be at least equal to its current liabilities
(or 1.25 times its current liabilities if the average pre-tax and pre-interest
expense earnings for the preceding two fiscal years were less than the average
interest expense for such years). Such tests are applied to California
corporations on a consolidated basis.
Delaware law permits a corporation to declare and pay dividends out of
surplus or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of all classes having a preference upon the
distribution of assets. In addition, Delaware law generally provides that a
corporation may redeem or repurchase its shares only if such redemption or
repurchase would not impair the capital of the corporation.
To date, the Company has not paid cash dividends on its capital stock. It is
the present policy of the Board of Directors to retain earnings for use in the
Company's business, and therefore, the Company does not anticipate paying cash
dividends on its Common Stock in the foreseeable future.
SHAREHOLDER VOTING. Both California and Delaware law generally require that
a majority of the shareholders of both acquiring and target corporations approve
statutory mergers. Delaware law does not require a shareholder vote of the
surviving corporation in a merger (unless the corporation provides otherwise in
its certificate of incorporation) if (a) the merger agreement does not amend the
existing certificate of incorporation, (b) each share of the surviving
corporation outstanding before the merger is an identical outstanding or
treasury share after the merger, and (c) the number of shares to be issued by
the surviving corporation in the merger does not exceed 20% of the shares
outstanding immediately prior to the merger. California law contains a similar
exception to its voting requirements for reorganizations where shareholders or
the corporation itself, or both, immediately prior to the reorganization will
own immediately after the reorganization equity securities constituting more
than five-sixths of the voting power of the surviving or acquiring corporation
or its parent entity.
Both California and Delaware law also require that a sale of all or
substantially all of the assets of a corporation be approved by a majority of
the voting shares of the corporation transferring such assets.
With certain exceptions, California law also requires that mergers,
reorganizations, certain sales of assets and similar transactions be approved by
a majority vote of each class of shares outstanding. In contrast, Delaware law
generally does not require class voting, except in certain transactions
involving an amendment to the certificate of incorporation which adversely
affects a specific class of shares. Should the
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Company authorize and issue shares of a new class of capital stock, the holders
thereof would vote with the holders of the Common Stock on proposals not
adversely affecting the Common Stock. In such event the holders of Common Stock,
if in the minority, would be unable to control the outcome of a vote, and, if in
the majority, would be able to control the outcome of such a vote.
California law also requires that holders of nonredeemable common stock
receive nonredeemable common stock in a merger of the corporation with the
holder of more than 50% but less than 90% of such common stock or its affiliate
unless all of the holders of such common stock consent to the transaction. This
provision of California law may have the effect of making a "cash-out" merger by
a majority shareholder more difficult to accomplish. Although Delaware law does
not parallel California law in this respect, under some circumstances Section
203 of the Delaware General Corporation Law does provide similar protection
against coercive two-tiered bids for a corporation in which the shareholders are
not treated equally. See "Shareholder Approval of Certain Business
Combinations."
California law also provides that, except in certain circumstances, when a
tender offer or a proposal for a reorganization or for a sale of assets is made
by an interested party (generally a controlling or managing party of the target
corporation), an affirmative opinion in writing as to the fairness of the
consideration to be paid to the shareholders must be delivered to shareholders.
This fairness opinion requirement does not apply to a corporation which does not
have shares held of record by at least 100 persons, or to a transaction which
has been qualified under California state securities laws. Furthermore, if a
tender of shares or vote is sought pursuant to an interested party's proposal
and a later proposal is made by another party at least ten days prior to the
date of acceptance of the interested party proposal, the shareholders must be
informed of the later offer and be afforded a reasonable opportunity to withdraw
any vote, consent or proxy, or to withdraw any tendered shares. Delaware law has
no comparable provision, and the shareholders of Centura Delaware might,
therefore, be deprived of an opportunity to consider such other proposal.
INTERESTED DIRECTOR TRANSACTIONS. Under both California and Delaware law,
certain contracts or transactions in which one or more of a corporation's
directors has an interest are not void or voidable because of such interest
provided that certain conditions, such as obtaining the required approval and
fulfilling the requirements of good faith and full disclosure, are met. With
certain exceptions, the conditions are similar under California and Delaware
law. Under California and Delaware law, (a) either the shareholders or the board
of directors must approve any such contract or transaction after full disclosure
of the material facts, and in the case of board approval the contract or
transaction must also be "just and reasonable" (in California) or "fair" (in
Delaware) to the corporation, or (b) the contract or transaction must have been
just and reasonable or fair as to the corporation at the time it was approved.
In the latter case, California law explicitly places the burden of proof on the
interested director. Under California law, if shareholder approval is sought,
the interested director is not entitled to vote his shares at a shareholder
meeting with respect to any action regarding such contract or transaction. If
board approval is sought, the contract or transaction must be approved by a
majority vote of a quorum of the directors, without counting the vote of any
interested directors (except that interested directors may be counted for
purposes of establishing a quorum). Under Delaware law, if board approval is
sought, the contract or transaction must be approved by a majority of the
disinterested directors (even though less than a majority of a quorum).
Therefore, certain transactions that the Board of Directors of Centura
California might not be able to approve because of the number of interested
directors, could be approved by a majority of the disinterested directors of
Centura Delaware, although less than a majority of a quorum. The Company is not
aware of any plans to propose any transaction involving directors of the Company
which could not be so approved under California law but could be so approved
under Delaware law.
VOTING BY BALLOT. California law provides that the election of directors
may proceed in the manner described in a corporation's bylaws. Centura
California's Bylaws provide that the election of directors at a shareholders'
meeting may be by voice vote or ballot, unless prior to such vote a shareholder
demands a vote by ballot, in which case such vote must be by ballot. Under
Delaware law, the right to vote by written
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ballot may be restricted if so provided in the certificate of incorporation. The
Certificate of Incorporation of Centura Delaware, consistent with Centura
California's Bylaws, provides that if a shareholder specifically demands
election of directors by ballot (or if the Bylaws provide that elections shall
be by ballot) then elections shall be held by ballot. Shareholders of Centura
Delaware may therefore continue to demand election by ballot, unless and until
the Certificate of Incorporation is amended, which would require a majority
shareholder vote. It may be more difficult for a shareholder to contest the
outcome of a vote which has not been conducted by written ballot.
SHAREHOLDER DERIVATIVE SUITS. California law provides that a shareholder
bringing a derivative action on behalf of a corporation need not have been a
shareholder at the time of the transaction in question, provided that certain
tests are met. Under Delaware law, a shareholder may only bring a derivative
action on behalf of the corporation if the shareholder was a shareholder of the
corporation at the time of the transaction in question or his or her stock
thereafter devolved upon him or her by operation of law. California law also
provides that the corporation or the defendant in a derivative suit may make a
motion to the court for an order requiring the plaintiff shareholder to furnish
a security bond. Delaware does not have a similar bonding requirement.
APPRAISAL RIGHTS. Under both California and Delaware law, a shareholder of
a corporation participating in certain major corporate transactions may, under
varying circumstances, be entitled to appraisal rights pursuant to which such
shareholder may receive cash in the amount of the fair market value of his or
her shares in lieu of the consideration he or she would otherwise receive in the
transaction. Under Delaware law, such appraisal rights are not available (a)
with respect to the sale, lease or exchange of all or substantially all of the
assets of a corporation, (b) with respect to a merger or consolidation by a
corporation the shares of which are either listed on a national securities
exchange or are held of record by more than 2,000 holders if such shareholders
receive only shares of the surviving corporation or shares of any other
corporation which are either listed on a national securities exchange or held of
record by more than 2,000 holders, plus cash in lieu of fractional shares, or
(c) to shareholders of a corporation surviving a merger if no vote of the
shareholders of the surviving corporation is required to approve the merger
because the merger agreement does not amend the existing certificate of
incorporation, each share of the surviving corporation outstanding prior to the
merger is an identical outstanding or treasury share after the merger, and the
number of shares to be issued in the merger does not exceed 20% of the shares of
the surviving corporation outstanding immediately prior to the merger and if
certain other conditions are met.
The limitations on the availability of appraisal rights under California law
are different from those under Delaware law. Shareholders of a California
corporation whose shares are listed on a national securities exchange or on a
list of over-the-counter margin stocks issued by the Board of Governors of the
Federal Reserve System (as are the shares of Centura California) generally do
not have such appraisal rights unless the holders of at least 5% of the class of
outstanding shares claim the right or the corporation or any law restricts the
transfer of such shares. Appraisal rights are unavailable, however, if the
shareholders of a corporation or the corporation itself, or both, immediately
prior to the reorganization will own immediately after the reorganization equity
securities constituting of more than five sixths of the voting power of the
surviving or acquiring corporation or its parent entity (as will be the case in
the Reincorporation Proposal). California law does in general afford appraisal
rights in sale of asset reorganizations.
Appraisal or dissenters' rights are, therefore, not available to
shareholders of Centura California with respect to the Proposed Reincorporation.
DISSOLUTION. Under California law, shareholders holding 50% or more of the
total voting power may authorize a corporation's dissolution, with or without
the approval of the corporation's board of directors, and this right may not be
modified by the articles of incorporation. Under Delaware law, unless the board
of directors approves the proposal to dissolve, the dissolution must be approved
by shareholders holding 100% of the total voting power of the corporation. Only
if the dissolution is initiated by the board of directors may it be approved by
a simple majority of the corporation's shareholders. In the event of such a
33
<PAGE>
board-initiated dissolution, Delaware law allows a Delaware corporation to
include in its certificate of incorporation a supermajority voting requirement
in connection with dissolutions. Centura Delaware's Certificate of Incorporation
contains no such supermajority voting requirement, however, and a majority of
shares voting at a meeting at which a quorum is present would be sufficient to
approve a dissolution of Centura Delaware which had previously been approved by
its Board of Directors.
APPLICATION OF THE GENERAL CORPORATION LAW OF CALIFORNIA TO DELAWARE
CORPORATIONS
Under Section 2115 of the California General Corporation Law, certain
foreign corporations (i.e., corporations not organized under California law) are
placed in a special category if they have characteristics of ownership and
operation which indicate that they have significant contacts with California. So
long as a Delaware or other foreign corporation is in this special category, and
it does not qualify for one of the statutory exemptions, it is subject to a
number of key provisions of the California General Corporation Law applicable to
corporations incorporated in California. Among the more important provisions are
those relating to the election and removal of directors, cumulative voting,
classified boards of directors, standards of liability and indemnification of
directors, distributions, dividends and repurchases of shares, shareholder
meetings, approval of certain corporate transactions, dissenters and appraisal
rights and inspection of corporate records. See "Significant Differences Between
the Corporation Laws of California and Delaware" above.
Exemptions from Section 2115 are provided for corporations whose shares are
designated as qualified for trading as a national market security on the
National Association of Securities Dealers Automatic Quotation System (or any
successor national market system including The Nasdaq SmallCap Market) and which
have 800 or more shareholders of record. Centura Delaware will be exempt from
Section 2115 following the Proposed Reincorporation because the Common Stock of
Centura Delaware will be traded on The Nasdaq SmallCap Market and owned by more
than 800 holders.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a discussion of certain federal income tax considerations
that may be relevant to holders of Centura California Common Stock who receive
Centura Delaware Common Stock in exchange for their Centura California Common
Stock as a result of the Proposed Reincorporation. The discussion does not
address all the tax consequences of the Proposed Reincorporation that may be
relevant to particular Centura California Common Stock shareholders, (such as
dealers in securities, holders of stock options or those Centura shareholders
who acquired their shares upon the exercise of compensatory stock options) or
holders of warrants to purchase shares of the Company's Common Stock.
Furthermore, no foreign, state or local tax considerations are addressed herein.
IN VIEW OF THE VARYING NATURE OF SUCH TAX CONSEQUENCES, EACH SHAREHOLDER AND
WARRANTHOLDER IS URGED TO CONSULT HIS OR HER OWN TAX ADVISOR AS TO THE SPECIFIC
TAX CONSEQUENCES OF THE PROPOSED REINCORPORATION, INCLUDING THE APPLICABILITY OF
FEDERAL, STATE, LOCAL OR FOREIGN TAX LAWS.
Subject to the limitations, qualifications, and exceptions described herein,
and assuming the Proposed Reincorporation qualities as a reorganization within
the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code"), the following tax consequences generally should result:
(a) No gain or loss should be recognized by holders of Centura
California Common Stock upon receipt solely of Common Stock of Centura
Delaware pursuant to the Proposed Reincorporation;
(b) The aggregate tax basis of the Common Stock of Centura Delaware
received by each shareholder in the Proposed Reincorporation should be
equal to the aggregate tax basis of the Common Stock of Centura
California surrendered in exchange therefor; and
34
<PAGE>
(c) The holding period of the Common Stock of Centura Delaware
received by each shareholder of Centura California should include the
period for which such shareholder held the Common Stock of Centura
California surrendered in exchange therefor, provided that such Centura
California stock was held by such shareholder as a capital asset at the
time of the Proposed Reincorporation.
The Company has not requested a ruling from the Internal Revenue Service
(the "IRS") with respect to the federal income tax consequences of the Proposed
Reincorporation under the Code. The Company will, however, as a condition to
closing of the Proposed Reincorporation receive an opinion from legal counsel
substantially to the effect that the Proposed Reincorporation will qualify as a
reorganization within the meaning of Section 368(a) of the Code (the "Tax
Opinion"). The Tax Opinion will neither bind the IRS nor preclude it from
asserting a contrary position. In addition, the Tax Opinion will be subject to
certain assumptions and qualifications and will be based upon the truth and
accuracy of representations made by Centura Delaware, Centura California and
certain shareholders of Centura California.
A successful IRS challenge to the reorganization status of the Proposed
Reincorporation would result in a shareholder recognizing gain or loss with
respect to each share of Centura California Common Stock exchanged in the
Proposed Reincorporation equal to the difference between that shareholder's
basis in such share and the fair market value, as of the time of the Proposed
Reincorporation, of the Centura Delaware Common Stock, received in exchange
therefor. In such event, a shareholder's aggregate basis in the shares of
Centura Delaware Common Stock received in the exchange would equal such fair
market value, and such shareholder's holding period for such shares would not
include the period during which such shareholder held Centura California Common
Stock.
Even if the Proposed Reincorporation qualifies as a reorganization, a
shareholder that exchanges Centura California Common Stock for Centura Delaware
Common Stock in the Proposed Reincorporation would recognize gain to the extent
the shareholder was treated as receiving (actually or constructively)
consideration other than Centura Delaware Common Stock in exchange for such
shareholder's Centura California Common Stock. In that event, the basis of the
Centura Delaware Common Stock received by such a shareholder would be reduced by
an amount equal to the fair market value of any such consideration received in
the Proposed Reincorporation and increased to the extent of any gain recognized
in connection therewith. Further, a recipient of Centura Delaware Common Stock
would recognize gain to the extent such shares were received in exchange for
services or property other than Centura California Common Stock. All or a
portion of such gain may be taxable as ordinary income.
PROPOSAL NO. 6
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed the firm of Price Waterhouse LLP,
independent public accountants, to audit the financial statements of the Company
for the fiscal year ending December 31, 1998, and recommends that the
shareholders vote for ratification of this appointment. In the event the
shareholders do not ratify such appointment, the Board of Directors will
reconsider its selection. Price Waterhouse LLP has also audited the Company's
financial statements for the fiscal year ending December 31, 1997.
Representatives of Price Waterhouse LLP are expected to be present at the
meeting with the opportunity to make a statement if they desire to do so, and
are expected to be available to respond to appropriate questions.
On October 4, 1995, Arthur Andersen LLP resigned as independent accountants
to audit the financial statements of the Company for the 1995 fiscal year.
Subsequent to such resignation, the Company received a letter dated January 2,
1996 from Arthur Andersen advising the Company that it had withdrawn its reports
issued with respect to its audits of the Company's December 31, 1993 and 1994
financial statements. Disagreement between the Company and Arthur Andersen
regarding restatement of the Company's financial results for its quarter ended
March 31, 1994 and the timing of revenue recognition for
35
<PAGE>
certain transactions reported in that quarter are described in detail in the
Company's report on Form 8-K filed with the Securities and Exchange Commission
(the "Commission") on October 11, 1995, as amended by Form 8-K/A (Amendment No.
1) filed with the Commission on October 26, 1995 (the "Form 8-K/A").
During the two most recent fiscal years and subsequent interim periods prior
to October 4, 1995, there were no disagreements with Arthur Andersen LLP on any
matter of accounting principles or practices, financial statement disclosure,
auditing scope or procedure, or any reportable events, except the Company's
disagreement with Arthur Andersen regarding the Company's restatement of its
financial results for the quarter ended March 31, 1994, as described in the Form
8K/A. The reports of Arthur Andersen LLP on the financial statements of the
Registrant for the years ended December 31, 1993 and December 31, 1994 contained
no adverse opinion or other disclaimer of opinion and was not qualified or
modified as to uncertainty, audit scope or accounting principles.
Effective January 2, 1996, the Board of Directors of the Company engaged the
accounting firm of Price Waterhouse LLP ("Price Waterhouse") as independent
accountants to audit the Company's financial statements for the fiscal years
ended December 31, 1993, December 31, 1994, and December 31, 1995. The Company's
audit committee of its Board of Directors approved these actions.
The Company has not consulted with the independent accounting and audit
group at Price Waterhouse LLP responsible for performing future independent
accounting work during the preceding two years or subsequent interim periods
through September 31, 1995 on (i) either the application of accounting
principles or type of opinion Price Waterhouse might issue on the Company's
financial statements or (ii) the Company's disagreement with Arthur Andersen
regarding the Company's restatement of its financial results for its quarter
ended March 31, 1994 as described in the Form 8-K/A. Through its outside
litigation counsel the Company previously engaged the Dispute Analysis and
Corporate Recovery Consulting Unit of Price Waterhouse as litigation consultants
to provide expert witness testimony in connection with the securities class
action litigation filed against the Company and various of its officers and
directors in May 1994, as described in the Company's report on the Form 8-K
filed with the Commission on January 11, 1996.
The Company requested that Arthur Andersen furnish a letter addressed to the
SEC stating whether Arthur Andersen LLP agrees with the above statements.
REQUIRED VOTE
The ratification of the appointment of Price Waterhouse LLP as the Company's
independent public accountants requires the affirmative vote of the holders of a
majority of the shares of the Company's Common Stock present at the Annual
Meeting in person or by proxy and entitled to vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF PRICE
WATERHOUSE LLP AS THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS FOR THE YEAR
ENDING DECEMBER 31, 1998.
36
<PAGE>
COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of the Company's
Common Stock as of March 31, 1998 as to (i) each person who is known by the
Company to beneficially own more than five percent of the Company's Common
Stock, (ii) each of the Company's directors, (iii) each of the executive
officers named in the Summary Compensation Table beginning on page 41 and (iv)
all directors and executive officers as a group. The number of shares of the
Company Common Stock outstanding as of March 31, 1998 was 29,532,901.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED(1)
5% SHAREHOLDERS, DIRECTORS, -------------------------
NAMED EXECUTIVE OFFICERS, PERCENT OF
AND DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP NUMBER(2) TOTAL
- ------------------------------------------------------------------------------------- ------------ -----------
<S> <C> <C>
Newport Acquisition Company No. 2, LLC (3)........................................... 11,415,094 38.65
1600 Dove Street, Suite 300
Newport Beach, CA 92660
Scott R. Broomfield.................................................................. 669,811 2.24
Jack King............................................................................ 5,208 *
Phillip Koen, Jr..................................................................... 5,208 *
Peter Micciche....................................................................... 3,125 *
William D. Nicholas.................................................................. 3,125 *
Samuel M. Inman III (4).............................................................. 374,166 1.25
John Griffin......................................................................... 164,073 *
Earl Stahl........................................................................... 105,730 *
Michael K. Keddington................................................................ 0 *
Michael Moore........................................................................ 26,667 *
Ann Bontatibus....................................................................... 47,375 *
All directors and executive officers as group (13 persons) (5)....................... 2,223,143 7.20
</TABLE>
- ------------------------
* Less than one percent.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person,
shares of common stock subject to options or warrants held by that person
that are exercisable on or before May 30, 1998, are deemed outstanding. Such
shares, however, are not deemed outstanding for purposes of computing the
ownership of each other person. Except as indicated in the footnotes to this
table and pursuant to applicable community property laws, the shareholder
named in the table has sole voting and investment power with respect to the
shares set forth opposite such shareholder's name.
(2) Includes with respect to each named person the following shares subject to
stock options and/or warrants exercisable within 60 days of March 31, 1998:
Mr. Broomfield-433,962; Mr. King-5,208; Mr. Koen-5,208; Mr. Micciche-3,125;
Mr. Nicholas-3,125; Mr. Inman-369,166; Mr. Griffin-16,667; Mr.
Stahl-105,730; Mr. Moore-26,667; and Ms. Bontatibus-42,083.
(3) In February 1998, Newport Acquisition Company No. 2 LLC ("NAC") purchased
from Computer Associates International, Inc. ("CA") a Floating Rate
Convertible Subordinated Note Due 1998 (the "Note") issued in 1995 to CA by
the Company pursuant to which the Company owed approximately $12,251,000 in
principal and accrued interest. NAC converted the Note into 11,415,094
shares of Common Stock of the Company and in so doing gained voting power
and control over 38.65% of the outstanding capital stock of the Company.
(4) Mr. Inman served as Chairman of the Board from September 1996 to February
1998, President and Chief Executive Officer from December 1995 to December
1997, and he served as President and Chief Operating Officer from April 1995
to December 1995.
37
<PAGE>
(5) Includes 1,328,417 shares subject to options held by directors and officers
that are exercisable within 60 days of March 31, 1998.
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
PREVIOUS FILINGS UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, THAT MIGHT INCORPORATE FUTURE FILINGS,
INCLUDING THIS PROXY STATEMENT, IN WHOLE OR IN PART, THE FOLLOWING REPORT AND
THE PERFORMANCE GRAPH ON PAGE 46 SHALL NOT BE INCORPORATED BY REFERENCE INTO ANY
SUCH FILINGS.
REPORT OF THE COMPENSATION COMMITTEE
GENERAL
The Company's executive compensation policies are determined by the
Compensation Committee of the Board of Directors. The Compensation Committee
(the "Committee") is composed of three nonemployee directors.
The objective of the Company's executive compensation program is to align
executive compensation with the Company's business objectives and performance,
and to enable the Company to attract, retain and reward executives who
contribute to the long-term business success of the Company. The Company's
executive compensation program is based on the same four basic principles that
guide compensation decisions for all employees of the Company:
- The Company compensates for demonstrated and sustained performance.
- The Company compensates competitively.
- The Company strives for equity and fairness in the administration of
compensation.
- The Company believes that each employee should understand how his or her
compensation is determined.
The Company believes in compensating its executives for demonstrated and
sustained levels of performance in their individual jobs. The achievement of
higher levels of performance and contribution are rewarded by higher levels of
compensation. In order to ensure that it compensates its executives
competitively, the Company regularly compares its compensation practices to
those of other companies of comparable size within similar industries. Through
the use of independent compensation surveys and analysis, employee compensation
training, and periodic pay reviews, the Company strives to ensure that
compensation is administered equitably and fairly and that a balance is
maintained between how executives are paid relative to other employees and
relative to executives with similar responsibilities in comparable companies.
The Committee typically meets at least twice annually: once late in the year
to establish the compensation program for the next fiscal year and once,
mid-year, to evaluate how effectively the program is meeting its objectives.
Additionally, the Committee may hold special meetings to approve the
compensation program of a newly hired executive or an executive whose scope of
responsibility has significantly changed. Each year, the Committee meets with
the CEO and the Director, Human Resources regarding executive compensation
projections for the next three years and proposals for executive compensation
for the next operating year. Compensation plans are based on compensation
surveys and assessments as to the demonstrated and sustained performance of the
individual executives. The Committee then independently reviews the performance
of the CEO and the Company, and develops the annual compensation plan for the
CEO based on competitive compensation data and the Committee's evaluation of the
CEO's demonstrated and sustained performance and its expectation as to his
future contributions in leading the Company. The Committee presents for adoption
its findings on the compensation of each individual executive at a subsequent
meeting of the full Board of Directors.
38
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
During 1997, the Company's executive compensation program was comprised of
the following key components:
BASE SALARY. The Company sets the base salaries of its executives at the
levels of comparably sized companies engaged in similar industries.
CASH-BASED INCENTIVES. The Company's executives participate in a cash
incentive program. The program includes all of the Company's executives and is
contingent on the achievement of specific Company-wide goals in the areas of
customer satisfaction, operating profit, revenue performance, asset management
and the achievement of specific individual performance goals that are measured
objectively, as well as individual performance goals that are measured
subjectively. Participants in this program include the CEO and vice presidents.
The Company's cash incentives are structured so that the total of base salary
and cash incentives when taken together, will compensate executives at market
levels when company-wide and individual goals are achieved. The cash incentive
elements are sensitive to performance achievement versus plan, and payment of
these cash bonuses ranges from no bonus payment when performance is below
established targets, to bonus amounts somewhat above market levels when
performance targets are exceeded. In March 1997, the Compensation Committee
approved a bonus of $150,000 to be paid to Samuel Inman, the Company's CEO,
based on Mr. Inman's achievement of specified performance objectives.
EQUITY-BASED INCENTIVES. Stock options are an important component of the
total compensation of executives, and are designed to align the interests of
each executive with those of the shareholders. Each year the Committee considers
the grant to executives of stock option awards under the Company's 1995 Stock
Option Plan. The Committee believes that stock options provide added incentive
for the executives to influence the strategic direction of the Company, and to
create and increase value for customers, shareholders and employees. The option
grants typically utilize three or four-year vesting periods to encourage
executives to continue contributing to the Company. The number of stock option
shares that are granted to individual executives is, in part, based on
independent survey data reflecting competitive stock option practices.
COMPENSATION OF CHIEF EXECUTIVE OFFICER. The base salary for Samuel M.
Inman who served as CEO until December 1997 was established by the Committee at
levels to be comparable to the base salaries of comparably sized companies
engaged in similar industries. In December 1997, the Board of Directors accepted
the resignation of the Company's CEO, CFO and Senior Vice President, Engineering
and CTO, and approved the installation of a new management team provided by
Hickey and Hill Incorporated ("H&H"), corporate restructuring specialists,
pursuant to a letter agreement between the Company and H&H dated November 5,
1997 and approved by the full Board, including members of the Compensation
Committee of the Board, on November 6, 1997. Under the terms of the letter
agreement H&H would provide the services of a new CEO, CFO and principal
marketing officer at a rate of $70,000 per month for the first two months and
$50,000 per month thereafter (which rates include compensation to all three
officers) and the new officers would also receive non-statuary stock options
exercisable at a price of $1.906 per share for a total of 1,500,000 shares of
the Company's Common Stock.
REPORT ON REPRICED OPTIONS
In May 1997, January 1996, July 1995 and June 1994, the Committee determined
that it was in the best interests of the Company to reprice the then-existing
stock option grants under the Company's 1986 Incentive Stock Option Plan and
1995 Stock Option Plan with exercise prices in excess of the then-current fair
market value of the Company's common stock. Excluded from the repricing actions
in July 1995 and June 1994 (the "Prior Repricings") were the CEO and two senior
vice presidents.
39
<PAGE>
The objectives of the Company's Stock Option Plans (the "Stock Option
Plans") are to promote the interests of the Company by providing employees and
certain consultants or independent contractors an incentive to acquire a
proprietary interest in the Company and to continue to render services to the
Company. It was the view of the Committee that stock options with exercise
prices substantially above the current market price of the Company's common
stock were viewed negatively by most employees of the Company, and provided
little, if any, equity incentive to the optionees. The Committee thus concluded
that such option grants seriously undermined the specific objectives of the
Stock Option Plans and should properly be repriced. In making this decision, the
Committee also considered the fairness of such a determination in relation to
other shareholders. In the opinion of the Committee, the shareholders' long-term
best interests were clearly served by the retention and motivation of optionees.
In this context, the Committee decided that effective June 14, 1994, July
27, 1995, January 5, 1996 and May 13, 1997 (the "Grant Dates") all Company
employees (except with respect to the Prior Repricings the executive officers)
holding stock options with exercise prices in excess of the fair market value of
the Company's common stock could receive a one-for-one repricing of their
then-existing unexercised stock options. The first repricing allowed employees
to receive a one-for-one repricing of their then-existing unexercised stock
options with a new exercise price set at $10.75 per share, the fair market value
of the Company's common stock on the first Grant Date (June 14, 1994). The
second repricing allowed employees to receive a one-for-one repricing of their
then-existing unexercised stock options with a new exercise price set at $9.00
per share, the fair market value of the Company's common stock on the second
Grant Date (July 27, 1995). The third repricing allowed employees to receive a
one-for-one repricing of their then-existing unexercised stock options with a
new exercise price set at $5.9375 per share, the fair market value of the
Company's common stock on the third Grant Date (January 5, 1996). The fourth
repricing allowed employees to receive a one-for-one repricing of their
then-existing unexercised stock options with a new exercise price set at $1.50
per share, the fair market value of the Company's common stock on the fourth
Grant Date (May 13, 1997).
Former executive officers of the Company, Samuel Inman and Earl Stahl, who
are currently non-employee members of the Board of Directors received repriced
stock options as set forth in the Ten Year Option Repricings table included on
page 44 of this Proxy Statement. Repriced options for all other executive
officers of the Company are included as well. It is the opinion of the Committee
that this program succeeded in its objectives of building employee morale and
providing new incentives for the Company's employees and management.
COMPENSATION COMMITTEE
Jack King
Phillip Koen, Jr.
Peter Micciche
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Former Directors William Grabe and Anthony Sun comprised the Compensation
Committee of the Board of Directors from January 1, 1997 until April 17, 1997,
at which time former director Max Hopper replaced Mr. Sun as a member of the
Compensation Committee. Messrs. Grabe and Hopper resigned their positions on the
Board effective December 8, 1997, at which time they were replaced by newly
elected directors Jack King and Phillip Koen, Jr. as members of the Compensation
Committee. On March 17, 1998, newly appointed director Peter Micciche was named
as an additional member of the Compensation Committee of the Board. None of
these persons has ever been an officer or employee of the Company or any of its
subsidiaries, nor were there any compensation committee interlocks or other
relationships during 1997 requiring disclosure under item 402(j) of Regulation
S-K of the Securities and Exchange Commission.
40
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows the compensation received by (a) the individuals
who served as the Company's Chief Executive Officer ("CEO") during 1997; (b) the
three most highly compensated executive officers other than the CEO who were
serving as executive officers of the Company at December 31, 1997 and whose
total compensation for the year exceeded $100,000, (c) the two most highly
compensated individuals who would have been included under item (b) above but
for the fact that they were no longer serving as executive officers of the
Company at December 31, 1997, and (d) the compensation received by each such
individual for the Company's two preceding fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
OTHER ANNUAL SECURITIES ALL OTHER
SALARY BONUS COMPENSATION UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($)(1)(3) ($)(2) ($) OPTIONS (4)
- ----------------------------------------- --------- ----------- --------- ----------------- ------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Scott R. Broomfield (5).................. 1997 51,667 -- -- 750,000 --
President and Chief Executive 1996 -- -- -- -- --
Officer (Principal Executive Officer) 1995 -- -- -- -- --
Samuel M. Inman III (6).................. 1997 375,000 175,000 -- 120,000 --
1996 400,000 190,000 -- 240,000 468
1995 182,693 112,500 -- 239,999 --
John Griffin............................. 1997 260,000 -- -- 50,000 --
Vice President, European 1996 -- -- -- -- --
Operations 1995 -- -- -- -- --
Earl M. Stahl (7)........................ 1997 234,731 20,000 -- 30,000 --
1996 160,000 60,000 -- -- 281
1995 154,167 9,000 -- 85,000 205
Michael K. Keddington (8)................ 1997 158,027 88,387 -- 40,000 --
1996 200,600 17,375 -- 10,000 412
1995 68,750 16,250 -- 90,000 --
Michael Moore............................ 1997 192,897 10,000 -- 150,000 --
Senior Vice President, World 1996 -- -- -- -- --
Wide Sales 1995 -- -- -- -- --
Ann Bontatibus........................... 1997 133,000 16,000 -- 40,000 --
Vice President, Technical Services 1996 132,891 20,000 -- -- --
and Support 1995 118,433 20,000 -- 35,000 --
</TABLE>
- ------------------------------
(1) Includes amounts deferred under the Company's 401(k) plan.
(2) Includes bonus earned in the indicated year. Excludes bonuses earned in the
indicated year but paid in the subsequent year except for Sam Inman in 1996.
Sam Inman's 1996 bonus includes $150,000 bonus approved on March 3, 1997, by
the Compensation Committee of the Board of Directors and paid March 6, 1997
plus a $40,000 moving allowance paid in 1996.
(3) Includes commissions paid in the indicated year. Michael Keddington received
commissions of $16,730 and $39,600 in 1997 and 1996, respectively, and
Michael Moore received a commission of $48,897 in 1997.
(4) Comprised of premiums paid by the Company under the Company's group term
life insurance policy.
(5) Mr. Broomfield became President and Chief Executive Officer of the Company
effective December 8, 1997, pursuant to the terms of a letter agreement
between the Company and Hickey & Hill Incorporated dated November 5, 1997.
Terms of the Hickey and Hill letter agreement are set forth more fully in
the REPORT OF THE COMPENSATION COMMITTEE (page 38) and CERTAIN RELATIONSHIPS
AND RELATED TRANSACTIONS (page 47) of this Proxy Statement.
(6) Mr. Inman resigned as the Company's President and Chief Executive Officer
effective December 8, 1997.
(7) Mr. Stahl resigned as the Company's Senior Vice President, Engineering and
Chief Technical Officer effective December 8, 1997.
(8) Mr. Keddington resigned as the Company's Vice President of Sales and
Marketing, North American effective August 8, 1997.
41
<PAGE>
STOCK OPTION GRANTS IN 1997
The following table sets forth information for the executive officers named
in the Summary Compensation Table with respect to grants of options to purchase
common stock of the Company made in 1997 and the value of all options held by
such executive officers on December 31, 1997.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------------------------------------
POTENTIAL REALIZABLE VALUE
AT
% OF TOTAL ASSUMED ANNUAL RATES OF
NUMBER OF OPTIONS STOCK PRICE APPRECIATION
SECURITIES GRANTED TO FOR
UNDERLYING EMPLOYEES EXERCISE OPTION TERM(2)
OPTIONS IN FISCAL PRICE EXPIRATION --------------------------
NAME GRANTED(#) YEAR(1) ($/SHARE) DATE 5% ($) 10% ($)
- -------------------------------- ----------- ------------- ------------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Scott R. Broomfield (3)......... 750,000 -- $ 1.906 11/05/07 $ 163,683 $ 196,573
Samuel M. Inman III............. 120,000 -- $ 1.50 02/03/07 $ 1,328,791 $ 1,683,294
John Griffin.................... 50,000 -- $ 1.50 01/30/07 $ 552,726 $ 699,975
Earl M. Stahl................... 30,000 -- $ 1.50 02/04/07 $ 332,338 $ 421,033
Michael K. Keddington........... 20,000 -- $ 1.50 01/30/07 $ 221,090 $ 279,990
20,000 -- $ 1.50 02/04/07 $ 221,559 $ 280,689
Michael Moore................... 70,000 -- $ 1.50 01/30/07 $ 773,816 $ 979,965
80,000 -- $ 2.3125 10/16/07 $ 918,151 $ 1,204,694
Ann Bontatibus.................. 40,000 -- $ 1.50 05/13/07 $ 461,619 $ 589,148
</TABLE>
- ------------------------
(1) Options to purchase a total of 2,181,899 shares of common stock were granted
under the Company's 1995 Stock Option Plan during the fiscal year ended
December 31, 1997, including 1,255,999 options issued in connection with a
repricing upon which an equivalent number of previously issued options were
canceled. These options vest over a period of four years, provided however,
that the stock options of the officers listed vest automatically in the
event of any sale of all or substantially all of the Company's assets or
upon the effective date of any merger, consolidation or stock sale which
results in the holders of the Company's common stock immediately prior to
such transaction owning less than 50% of the voting power of the Company's
common stock immediately after such transaction and such officer is not
offered a comparable position with the surviving entity. The figures
reported above do not include repriced options under the 1986 Incentive
Stock Option Plan (which expired in accordance with its terms in July 1996)
because such repricings were deemed to be amendments to the outstanding
options rather than new issuances.
(2) Potential realizable values are reported net of the option exercise price
but before taxes associated with exercise. These amounts represent certain
assumed rates of appreciation only. Actual realized gains, if any, on stock
option exercises are dependent on future performance of the Company's common
stock, as well as the optionee's continued employment through the vesting
period.
(3) Mr. Broomfield was granted a nonstatutory stock option which vests over two
years, is not subject to any of the Company's employee stock plans, and is
exercisable until the later of (a) five years after Mr. Broomfield's
employment with Company is terminated other than for cause or (b) ten years
after the date of grant. Mr. Broomfield's option shall vest in full
automatically upon the occurrence of any Change of Control events set forth
under "Certain Relationships and Related Transactions" hereinafter.
42
<PAGE>
AGGREGATED OPTION EXERCISES IN 1997 AND YEAR-END OPTION VALUES
The following table sets forth information for the executive officers named
in the Summary Compensation Table with respect to options to purchase common
stock of the Company held as of December 31, 1997.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
VALUE OPTIONS AT 12/31/97 IN-THE-MONEY OPTIONS
SHARES ACQUIRED REALIZED (#)(2) AT 12/31/97 ($)(3)
NAME ON EXERCISE (#) ($)(1) (EXERCISABLE/UNEXERCISABLE (EXERCISABLE/UNEXERCISABLE
- ----------------------------- --------------- ------------- ------------------------ ---------------------------
<S> <C> <C> <C> <C>
Scott R. Broomfield.......... -- -- -/750,000 -/-
Samuel M. Inman III.......... -- -- 279,999/320,000 -/-
John Griffin................. -- -- -/75,000 -/-
Earl M. Stahl................ 32,500 $ 34,960 87,500/70,000 -/-
Michael K. Keddington........ 46,458 $ 56,425 -/- -/-
Michael Moore................ -- -- -/150,000 -/-
Ann Bontatibus............... -- -- 28,230/56,770 -/-
</TABLE>
- ------------------------
(1) Value realized is calculated based on the closing price of the Company's
common stock as reported in the NASDAQ National Market (or a tier thereof)
on the date of exercise minus the exercise price of the option, and does not
necessarily indicate that the optionee sold such stock.
(2) No stock appreciation rights (SARs) were outstanding during 1997.
(3) The fair market value of the Company's common stock at the close of business
on December 31, 1997 was $1.1250 per share.
43
<PAGE>
REPRICING OF OPTIONS
The following table provides information regarding the repricing of certain
options held by the executive officers of the Company during the last ten years.
More detailed terms of the repricings are set forth in the REPORT OF THE
COMPENSATION COMMITTEE (page 38) of this Proxy Statement.
TEN YEAR OPTION REPRICINGS
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES MARKET PRICE EXERCISE EXPIRATION
UNDERLYING OF STOCK AT PRICE DATE OF
DATE OF OPTIONS TIME OF AT TIME OF NEW EXERCISE ORIGINAL
NAME REPRICING REPRICED (#) REPRICING ($) REPRICING ($) PRICE ($) OPTION
- ---------------------------------------------- ----------- ------------- ------------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Scott R. Broomfield .......................... N/A
President and Chief Executive Officer
(Principal Executive Officer)
Samuel M. Inman III (1) ...................... 5/13/97 120,000 1.50 4.2500 1.50 2/3/07
5/13/97 240,000 1.50 5.9375 1.50 12/14/05
5/13/97 239,999 1.50 5.9375 1.50 4/10/05
1/5/96 240,000 5.9375 10.7500 5.9375 12/14/05
1/5/96 239,999 5.9375 6.6250 5.9375 4/3/05
John Griffin ................................. 5/13/97 50,000 1.50 5.00 1.50 1/30/07
Vice President, European Operations
Earl M. Stahl (2) ............................ 5/13/97 30,000 1.50 4.5000 1.50 2/4/07
5/13/97 45,000 1.50 5.9375 1.50 12/14/05
5/13/97 40,000 1.50 5.9375 1.50 3/14/05
5/13/97 25,000 1.50 5.9375 1.50 6/14/04
5/13/97 22,500 1.50 3.0000 1.50 9/25/02
1/5/96 45,000 5.9375 6.6250 5.9375 12/14/05
1/5/96 40,000 5.9375 10.7500 5.9375 3/14/05
1/5/96 25,000 5.9375 10.7500 5.9375 6/14/04
Michael K. Keddington (3) .................... 5/13/97 20,000 1.50 4.5000 1.50 2/4/07
5/13/97 20,000 1.50 5.0000 1.50 1/30/07
5/13/97 10,000 1.50 4.3750 1.50 7/23/06
5/13/97 10,000 1.50 5.9375 1.50 12/14/05
5/13/97 80,000 1.50 5.9375 1.50 7/14/05
1/5/96 10,000 5.9375 6.6250 5.9375 12/14/05
1/5/96 80,000 5.9375 9.0000 5.9375 7/14/05
7/27/95 80,000 9.0000 9.7500 9.0000 7/14/05
Michael Moore ................................ 5/13/97 80,000 1.50 5.0000 1.50 1/30/07
Senior Vice President, World Wide Sales
Ann Bontatibus ............................... 5/13/97 30,000 1.50 5.9375 1.50 12/14/05
Vice President, Technical Services and 5/13/97 5,000 1.50 5.9375 1.50 3/14/05
Support 5/13/97 10,000 1.50 5.9375 1.50 6/14/04
1/5/96 30,000 5.9375 10.7500 5.9375 12/14/05
1/5/96 5,000 5.9375 9.00 5.9375 3/14/05
1/5/96 10,000 5.9375 9.00 5.9375 6/14/04
7/27/95 10,000 9.00 10.7500 9.00 6/14/04
6/14/94 10,000 10.7500 23.7500 10.7500 1/28/04
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES MARKET PRICE EXERCISE EXPIRATION
UNDERLYING OF STOCK AT PRICE DATE OF
DATE OF OPTIONS TIME OF AT TIME OF NEW EXERCISE ORIGINAL
NAME REPRICING REPRICED (#) REPRICING ($) REPRICING ($) PRICE ($) OPTION
- ---------------------------------------------- ----------- ------------- ------------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Richard J. Heaps (4) ......................... 5/13/97 65,000 1.50 5.9375 1.50 12/14/05
5/13/97 20,000 1.50 5.9375 1.50 7/14/05
5/13/97 40,000 1.50 5.9375 1.50 6/14/04
1/5/96 65,000 5.9375 6.6250 5.9375 12/14/05
1/5/96 20,000 5.9375 9.7500 5.9375 7/14/05
1/5/96 40,000 5.9375 9.0000 5.9375 6/14/04
7/27/95 40,000 9.0000 10.7500 9.0000 6/14/04
Helmut G. Wilke (5) .......................... 5/13/97 40,000 1.50 5.9375 1.50 7/14/05
5/13/97 20,000 1.50 5.9375 1.50 12/14/05
5/13/97 2,292 1.50 5.9375 1.50 12/1/02
5/13/97 25,000 1.50 5.9375 1.50 6/14/04
5/13/97 10,000 1.50 5.9375 1.50 12/17/03
1/5/96 20,000 5.9375 6.6250 5.9375 12/14/05
1/5/96 40,000 5.9375 9.7500 5.9375 7/14/05
1/5/96 25,000 5.9375 9.0000 5.9375 6/14/04
1/5/96 10,000 5.9375 9.0000 5.9375 12/17/03
1/5/96 2,292 5.9375 8.8000 5.9375 12/1/02
7/27/95 40,000 9.0000 10.7500 9.0000 6/14/04
7/27/95 10,000 9.0000 10.7500 9.0000 12/17/03
6/14/94 10,000 10.7500 16.8750 10.7500 12/17/03
Richard Gelhaus (6) .......................... 5/13/97 30,000 1.50 4.5000 1.50 2/4/07
5/13/97 120,000 1.50 5.9375 1.50 1/5/06
Robert Bramley (7) ........................... 1/5/96 40,000 5.9375 6.6250 5.9375 12/14/05
1/5/96 5,000 5.9375 10.7500 5.9375 3/14/05
1/5/96 5,000 5.9375 9.0000 5.9375 12/17/03
7/27/95 10,000 9.0000 10.7500 9.0000 12/17/03
6/14/96 10,000 10.7500 16.8750 10.7500 12/17/03
John G. McAughtry (8) ........................ 1/5/96 50,000 5,000 5.9375 6.6250 5.9375 12/14/05
1/5/96 11,875 5.9375 9.0000 5.9375 12/17/03
1/5/96 10,000 5.9375 9.0000 5.9375 7/21/03
7/27/95 30,000 9.0000 10.7500 9.0000 12/17/03
7/27/95 10,000 9.0000 10.7500 9.0000 7/21/03
6/14/94 30,000 10.7500 16.8750 10.7500 12/17/03
6/14/94 10.7500 20.0000 10.7500 7/21/03
</TABLE>
- ------------------------------
(1) Mr. Inman resigned as the Company's President and Chief Executive Officer
effective December 8, 1997.
(2) Mr. Stahl resigned as the Company's Senior Vice President, Engineering and
Chief Technical Officer effective December 8, 1997.
(3) Mr. Keddington resigned as the Company's Vice President of Sales and
Marketing, North American effective August 8, 1997.
(4) Mr. Heaps resigned as the Company's Senior Vice President, Business
Development and General Counsel effective November 5, 1997.
(5) Mr. Wilke resigned as the Company's Vice President, European Division
effective May 15, 1997.
(6) Mr. Gelhaus resigned as the Company's Senior Vice President, Finance and
Operations and Chief Financial Officer effective December 8, 1997.
(7) Mr. Bramley resigned as the Company's Vice President Technical Services
effective April 1, 1997.
(8) Mr. McAughtry resigned as the Company's Vice President, Asia Pacific and
Latin America effective September 3, 1996.
45
<PAGE>
PERFORMANCE GRAPH
The following graph and table summarizes cumulative total shareholder return
data (assuming reinvestment of dividends) for the period since the Company's
common stock was first registered under Section 12 of the Securities Exchange
Act of 1934 (February 4, 1993). The graph assumes that $100 was invested (i) on
February 4, 1993 in the Company's common stock at a price of $18.00 per share,
the price at which such stock was first offered to the public on that date, (ii)
on January 31, 1993 in the Standard & Poor's 500 Stock Index and (iii) on
January 31, 1993 in the Nasdaq Computer and Data Processing Services Composite
Index. The stock price performance on the following graph and table is not
necessarily indicative of future stock price performance.
COMPARISON OF 58 MONTH CUMULATIVE TOTAL RETURN*
AMONG CENTURA SOFTWARE CORPORATION, THE S & P 500 INDEX
AND S & P HIGH TECH COMPOSITE INDEX
[GRAPH]
- ------------------------
* $100 invested on 2/4/93 in stock or on 1/31/93 in indices including
reinvestment of dividends. Fiscal year ending December 31.
<TABLE>
<CAPTION>
2/4/93 12/31/93 12/31/94 12/31/95 12/31/96
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Centura Software Corporation............................ 100 109 63 28 15
Standard & Poor's 500 Stock Index....................... 100 109 111 152 187
Nasdaq Computer and Data Processing Services Composite
Index................................................. 100 101 122 186 230
<CAPTION>
12/31/97
-----------
<S> <C>
Centura Software Corporation............................ 6
Standard & Poor's 500 Stock Index....................... 249
Nasdaq Computer and Data Processing Services Composite
Index................................................. 282
</TABLE>
46
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In December 1997, the Company entered into a Settlement Agreement and Mutual
Release with Samuel M. Inman, who was then the President, Chief Executive
Officer and Chairman of the Board of Directors of the Company, pursuant to which
Mr. Inman resigned his position as an officer of the Company as of December 8,
1997, but remained a full-time employee of the Company through December 31, 1997
and agreed to perform consulting services for the Company thereafter through
July 31, 1998 (the "Service Period"). During the Service Period, he shall
continue to vest in connection with stock options previously granted to him by
the Company, provided that he performs required consulting services for the
Company during such period and continues to serve as a member of the Company's
Board of Directors. The Company paid $233,333 as severance to Mr. Inman in
connection with his termination.
In December 1997, the Company entered into a Settlement Agreement and Mutual
Release with Richard A. Gelhaus, who was then Senior Vice President, Finance and
Operations and Chief Financial Officer of the Company, pursuant to which Mr.
Gelhaus resigned his position as an officer of the Company as of December 8,
1997, remained a full-time employee of the Company through December 31, 1997 and
agreed to perform consulting services for the Company thereafter through July
31, 1998. During the Service Period he shall continue to vest in connection with
stock options previously granted to him by the Company, provided that he
performs required consulting services for the Company during such period.
In December 1997, the Company entered into a Settlement Agreement and Mutual
Release with Earl M. Stahl, who was then Senior Vice President, Engineering and
Chief Technical Officer and a director of the Company, pursuant to which Mr.
Stahl resigned his position as an officer of the Company as of December 8, 1997,
and agreed to perform consulting services for the Company thereafter and to
remain on the Board of Directors. In August 1995 the Company and Mr. Stahl
entered into a loan agreement pursuant to which Mr. Stahl borrowed $300,000 in
connection with his purchase of a new home. Prior to Mr. Stahl's termination,
this loan was being forgiven at the rate of $40,000 of principal on each yearly
anniversary of the loan. Pursuant to Mr. Stahl's severance arrangements, the
Company will continue to forgive outstanding principal and interest under the
loan each month in an amount equal to Mr. Stahl's monthly salary immediately
prior to his termination (less applicable withholding) for as long as Mr. Stahl
continues to perform consulting services required by the Company. As of March
31, 1998, principal and interest totaling $227,000.00 was outstanding under this
loan and the largest aggregate amount outstanding under this loan in 1997 was
$278,000.00. The loan is due in August, 1999, or earlier, within six months
after Mr. Stahl ceases to perform consulting services for the Company.
In December 1997, the Board of Directors approved the installation of a new
management team provided by Hickey and Hill Incorporated ("H&H"), corporate
restructuring specialists, pursuant to a letter agreement between the Company
and H&H dated November 5, 1997 and approved by the Board of Directors on
November 6, 1997 (the "H&H Agreement"). The H&H Agreement, as amended on
February 26, 1998 and again on March 17, 1998, provided that the three executive
officers provided by H&H to fill the positions of President and Chief Executive
Officer, Chief Financial Officer and the Company's principal marketing officer,
Scott R. Broomfield, John Bowman and Kathy Lane, respectively, (collectively,
the "New Officers") became full-time employees of the Company effective February
26, 1998, each at a compensation level of $16,667.67 per month. Also pursuant to
the H&H Agreement, the New Officers were granted nonstatutory stock options (the
"First Options") to purchase a total of 1,500,000 shares of the Company's Common
Stock at an exercise price of $1.906 per share. Additional options to purchase
125,000 shares of the Company's Common Stock at an exercise price of $1.81 per
share ("Additional Options") were granted to Mr. Bowman and Ms. Lane on March
17, 1998. The First Options vest with respect to the underlying shares of Common
Stock at the rate of 25% every six months from the date of grant. The Additional
Options vest with respect to one-third of the underlying shares of Common Stock
at the end of one year from the date of grant, and monthly thereafter with
respect to 1/36 of the total shares comprising the grant. The First Options and
Additional Options are subject to full acceleration of vesting in the event of a
"Change of Control," defined as the occurrence of any of the following: (i) all
or
47
<PAGE>
substantially all of the assets of the Company are sold, exchanged or otherwise
transferred in one or more transactions; (ii) the Company is merged or
consolidated with or into another corporation with the effect that the common
shareholders immediately prior to such merger or consolidation hold less than
75% of the ordinary voting power of the outstanding securities of the surviving
corporation of such merger or the corporation resulting from such consolidation;
(iii) a person or group (such as that term is used in Rule 13d-5 of the
Securities and Exchange Act of 1934, as amended (the "Exchange Act") shall, as a
result of a tender or exchange offer, open market purchases, merger, private
placement or otherwise, have become, directly or indirectly, the beneficial
owner (within the meaning of Rule 13d-5 under the Exchange Act) of securities
having 15% or more of the voting power of then outstanding securities of the
Company, excluding the issuance of securities in connection with the conversion
of that certain Floating Rate Convertible Subordinated Note Due 1998 dated as of
April 3, 1995 issued by the Company to Computer Associates International, Inc.
and any transactions related thereto; (iv) the Board elects to expand its
membership from 7 to 9, or if 3 of its existing members resign or are in some
way removed from the Board; (v) the 2 board designees of Newport Acquisition
Company No 2, LLC ("NAC") vote the NAC shares; or (vi) termination of the
optionee by the Company for any reason without cause.
Each option is exercisable by the officer to which it was granted for five
years following such officer's termination of employment with the Company other
than for cause.
The Company has entered into indemnification agreements with each of its
directors and executive officers, which may require the Company, among other
things, to indemnify them against certain liabilities that may arise by reason
of their status or service as directors or officers, to advance their expenses
incurred as a result of any proceeding against them as to which they could be
indemnified, and to obtain directors' and officers' liability insurance if
available on reasonable terms.
The Company has the option to acquire 100% of the outstanding stock of one
of its foreign distributors, using a purchase price formula based on net profits
and revenues. At December 31, 1997, 1996 and 1995 the Company had no outstanding
receivables from this distributor. The Company recognized revenue of $489,000,
$1,783,000 and $2,007,000 for the years ended December 31, 1997, 1996 and 1995,
respectively, from this distributor.
COMPLIANCE WITH SECTION 16(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's directors and executive officers, and persons who own
more than ten percent of a registered class of the Company's equity securities
to file with the Securities and Exchange Commission (the "SEC") initial reports
of ownership and reports of changes in ownership of Common Stock and other
equity securities of the Company. Officers, directors and holders of more than
ten percent of the Company's Common Stock are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely upon review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 1997 all
Section 16(a) filing requirements applicable to the Company's officers,
directors and holders of more than ten percent of the Company's Common Stock
were complied with, except that Mr. Koen filed one Form-3 late, Mr. Inman failed
to file one Form-4 for the sale of 10,000 shares, Mr. Stahl failed to report one
option grant for 30,000 shares on his Form-5, Mr. Inman and Mr. Moore failed to
file Form-5's, and Messrs. Gelhaus, Heaps, Keddington and Wilke (all of whom
terminated their employment with the Company in 1997) did not, to the Company's
knowledge, file Form-5's.
48
<PAGE>
OTHER MATTERS
The Board of Directors knows of no other matters to be submitted to the
meeting. If any other matters properly come before the meeting, then the persons
named in the enclosed form of proxy will vote the shares they represent in such
manner as the Board may recommend.
BY ORDER OF THE BOARD OF DIRECTORS
[SIG]
CRAIG W. JOHNSON
SECRETARY
Dated: April 30, 1998
49
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
OF CENTURA SOFTWARE CORPORATION.
A DELAWARE CORPORATION
AND
CENTURA SOFTWARE CORPORATION
A CALIFORNIA CORPORATION
THIS AGREEMENT AND PLAN OF MERGER dated as of , 1998, (the
"Agreement") is between Centura Software Corporation, a Delaware corporation
("Centura-Delaware") and Centura Software Corporation, a California corporation
("Centura-California"). Centura-Delaware and Centura-California are sometimes
referred to herein as the "Constituent Corporations."
RECITALS
A. Centura-Delaware is a corporation duly organized and existing under the
laws of the State of Delaware and has an authorized capital of 62,000,000
shares, 60,000,000 of which are designated "Common Stock", $.01 par value, and
2,000,000 of which are designated "Preferred Stock", $.01 par value. As of
, 1998, [1,000] shares of Common Stock were issued and outstanding,
all of which were held by Centura-California. No shares of Preferred Stock were
outstanding.
B. Centura-California is a corporation duly organized and existing under
the laws of the State of California and has an authorized capital of 62,000,000
shares, 60,000,000 of which are designated "Common Stock", $.01 par value, and
2,000,000 of which are designated "Preferred Stock", $.01 par value. As of
, 1998 shares of Common Stock were issued and outstanding
and no shares Preferred Stock were issued and outstanding.
C. The Board of Directors of Centura-California has determined that, for
the purpose of effecting the reincorporation of Centura-California in the State
of Delaware, it is advisable and in the best interests of Centura-California
that Centura-California merge with and into Centura-Delaware upon the terms and
conditions herein provided.
D. The respective Boards of Directors of Centura-Delaware and
Centura-California have approved this Agreement and have directed that this
Agreement be submitted to a vote of their respective stockholders and executed
by the undersigned officers.
NOW, THEREFORE, in consideration of the mutual agreements and covenants set
forth herein, Centura-Delaware and Centura-California hereby agree, subject to
the terms and conditions hereinafter set forth, as follows:
I. MERGER
1.1 MERGER. In accordance with the provisions of this Agreement, the
Delaware General Corporation Law and the California General Corporation Law,
Centura-California shall be merged with and into Centura-Delaware (the
"Merger"), the separate existence of Centura-California shall cease and Centura-
Delaware shall be, and is herein sometimes referred to as, the "Surviving
Corporation", and the name of the Surviving Corporation shall be Centura
Software Corporation
1.2 FILING AND EFFECTIVENESS. The Merger shall become effective when the
following actions shall have been completed:
(a) This Agreement and Merger shall have been adopted and approved by
the stockholders of each Constituent Corporation in accordance with the
requirements of the Delaware General Corporation Law and the California
General Corporation Law;
A-1
<PAGE>
(b) All of the conditions precedent to the consummation of the Merger
specified in this Agreement shall have been satisfied or duly waived by the
party entitled to satisfaction thereof; and
(c) An executed Agreement and Plan of Merger meeting the requirements of
the Delaware General Corporation Law shall have been filed with the
Secretary of State of the State of Delaware.
The date and time when the Merger shall become effective, as aforesaid, is
herein called the "Effective Date of the Merger."
1.3 EFFECT OF THE MERGER. Upon the Effective Date of the Merger, the
separate existence of Centura-California shall cease and Centura-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 Centura-California's Board of Directors, (iii) shall succeed, without other
transfer, to all of the assets, rights, powers and property of
Centura-California in the manner more fully set forth in Section 259 of the
Delaware General Corporation Law, (iv) shall continue to be subject to all of
the debts, liabilities and obligations of Centura-Delaware as constituted
immediately prior to the Effective Date of the Merger, and (v) shall succeed,
without other transfer, to all of the debts, liabilities and obligations of
Centura-California in the same manner as if Centura-Delaware had itself incurred
them, all as more fully provided under the applicable provisions of the Delaware
General Corporation Law and the California General Corporation Law.
II. CHARTER DOCUMENTS, DIRECTORS AND OFFICERS
2.1 CERTIFICATE OF INCORPORATION. The Certificate of Incorporation of
Centura-Delaware as in effect immediately prior to the Effective Date of the
Merger shall continue in full force and effect as the Certificate of
Incorporation of the Surviving Corporation until duly amended in accordance with
the provisions thereof and applicable law.
2.2 BYLAWS. The Bylaws of Centura-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
Centura-California immediately prior to the Effective Date of the Merger shall
be the directors and officers of the Surviving Corporation until their
successors shall have been duly elected and qualified or until as otherwise
provided by law, the Certificate of Incorporation of the Surviving Corporation
or the Bylaws of the Surviving Corporation.
III. MANNER OF CONVERSION OF STOCK
3.1 CENTURA-CALIFORNIA COMMON SHARES. Upon the Effective Date of the
Merger, each share of Centura-California Common Stock, $.01 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 converted into and exchanged for one fully paid and
nonassessable share of Common Stock, $.01 par value, of the Surviving
Corporation. No fractional share interests of Surviving Corporation Common Stock
shall be issued. In lieu thereof, any fractional share interests to which a
holder would otherwise be entitled shall be aggregated.
3.2 CENTURA-CALIFORNIA OPTIONS, STOCK PURCHASE RIGHTS AND CONVERTIBLE
SECURITIES.
(a) Upon the Effective Date of the Merger, the Surviving Corporation
shall assume the obligations of Centura-California under, and continue, the
Preferred Shares Rights Agreement and the option plans (including without
limitation the 1995 Stock Option Plan, the 1996 Directors' Stock Option
Plan, the 1992 Employee Stock Purchase Plan, the 1998 Employee Stock Option
Plan and options issued under the 1986 Incentive Stock Option Plan that
expired in July 1996) and all other employee benefit plans of
Centura-California. Each outstanding and unexercised option, other right
A-2
<PAGE>
to purchase, or security convertible into, Centura-California Common Stock
or Centura-California Preferred Stock (a "Right") shall become, subject to
the provisions in paragraph (c) hereof, an option, right to purchase or a
security convertible into the Surviving Corporation's Common Stock or
Preferred Stock, respectively, on the basis of one share of the Surviving
Corporation's Common Stock or Preferred Stock, as the case may be, for each
one share of Centura-California Common Stock or Preferred Stock, as the case
may be, issuable pursuant to any such Right, on the same terms and
conditions and at an exercise price equal to the exercise price applicable
to any such Centura-California Right at the Effective Date of the Merger.
This paragraph 3.2(a) shall not apply to Centura-California Common Stock.
Such Common Stock is subject to paragraph 3.1 hereof.
(b) A number of shares of the Surviving Corporation's Common Stock and
Preferred Stock shall be reserved for issuance upon the exercise of options,
stock purchase rights and convertible securities equal to the number of
shares of Centura-California Common Stock and Centura-California Preferred
Stock so reserved immediately prior to the Effective Date of the Merger.
(c) The assumed Rights shall not entitle any holder thereof to a
fractional share upon exercise or conversion (unless the holder was entitled
to a fractional interest immediately prior to the Merger). In lieu thereof,
any fractional share interests to which a holder of an assumed Right (other
than an option issued pursuant to Centura-Delaware's 1995 Stock Option Plan,
1996 Directors' Stock Option Plan, 1992 Employee Stock Purchase Plan, 1998
Employee Stock Option Plan and 1986 Incentive Stock Option Plan) would
otherwise be entitled upon exercise or conversion shall be aggregated (but
only with other similar Rights which have the same per share terms). To the
extent that after such aggregation, the holder would still be entitled to a
fractional share with respect thereto upon exercise or conversion, the
holder shall be entitled upon the exercise or conversion of all such assumed
Rights pursuant to their terms (as modified herein), to one full share of
Common Stock or Preferred Stock in lieu of such fractional share. With
respect to each class of such similar Rights, no holder will be entitled to
more than one full share in lieu of a fractional share upon exercise or
conversion.
Notwithstanding the foregoing, with respect to options issued under the
Centura-California 1995 Stock Option Plan, 1996 Directors' Stock Option
Plan, 1992 Employee Stock Purchase Plan, 1998 Employee Stock Plan and 1986
Incentive Stock Option Plan that are assumed in the Merger, the number of
shares of Common Stock to which the holder would be otherwise entitled upon
exercise of each such assumed option following the Merger shall be rounded
down to the nearest whole number and the exercise price shall be rounded up
to the nearest whole cent. In addition, no "additional benefits" (within the
meaning of Section 424(a)(2) of the Internal Revenue Code of 1986, as
amended) shall be accorded to the optionees pursuant to the assumption of
their options.
3.3 CENTURA-DELAWARE COMMON STOCK. Upon the Effective Date of the Merger,
each share of Common Stock, $.001 par value, of Centura-Delaware issued and
outstanding immediately prior thereto shall, by virtue of the Merger and without
any action by Centura-Delaware, the holder of such shares or any other person,
be canceled and returned to the status of authorized but unissued shares.
3.4 EXCHANGE OF CERTIFICATES. After the Effective Date of the Merger, each
holder of an outstanding certificate representing shares of Centura-California
Common Stock may be asked to surrender the same for cancellation to an exchange
agent, whose name will be delivered to 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 into which the surrendered
shares were converted as herein provided. Until so surrendered, each outstanding
certificate theretofore representing shares of Centura-California Common Stock
shall be deemed for all purposes to represent the number of shares of the
Surviving Corporation's Common Stock into which such shares of
Centura-California Common Stock were converted in the Merger.
The registered owner on the books and records of the Surviving Corporation
or the Exchange Agent of any such outstanding certificate shall, until such
certificate shall have been surrendered for transfer or
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<PAGE>
conversion or otherwise accounted for to the Surviving Corporation or the
Exchange Agent, have and be entitled to exercise any voting and other rights
with respect to and to receive dividends and other distributions upon the shares
of Common Stock of the Surviving Corporation represented by such outstanding
certificate as provided above. Each certificate representing Common Stock of the
Surviving Corporation so issued in the Merger shall bear the same legends, if
any, with respect to the restrictions on transferability as the certificates of
Centura-California so converted and given in exchange therefore, unless
otherwise determined by the Board of Directors of the Surviving Corporation in
compliance with applicable laws.
If any certificate for shares of the Surviving Corporation's stock is to be
issued in a name other than that in which the certificate surrendered in
exchange therefor is registered, it shall be a condition of issuance thereof
that the certificate so surrendered shall be properly endorsed and otherwise in
proper form for transfer, that such transfer otherwise be proper and comply with
applicable securities laws and that the person requesting such transfer pay to
the Exchange Agent any transfer or other taxes payable by reason of issuance of
such new certificate in a name other than that of the registered holder of the
certificate surrendered or establish to the satisfaction of the Surviving
Corporation that such tax has been paid or is not payable.
IV. GENERAL
4.1 COVENANTS OF CENTURA-DELAWARE. Centura-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 Centura-Delaware of all of the franchise tax
liabilities of Centura-California.
(c) Take such other actions as may be required by the California General
Corporation Law.
4.2 FURTHER ASSURANCES. From time to time, as and when required by
Centura-Delaware or by its successors or assigns, there shall be executed and
delivered on behalf of Centura-California such deeds and other instruments, and
there shall be taken or caused to be taken by it such further and other actions
as shall be appropriate or necessary in order to vest or perfect in or conform
of record or otherwise by Centura-Delaware the title to and possession of all
the property, interests, assets, rights, privileges, immunities, powers,
franchises and authority of Centura-California and otherwise to carry out the
purposes of this Agreement, and the officers and directors of Centura-Delaware
are fully authorized in the name and on behalf of Centura-California or
otherwise to take any and all such action and to execute and deliver any and all
such deeds and other instruments.
4.3 ABANDONMENT. At any time before the Effective Date of the Merger, this
Agreement may be terminated and the Merger may be abandoned for any reason
whatsoever by the Board of Directors of either Centura-California or of
Centura-Delaware, or of both, notwithstanding the approval of this Agreement by
the shareholders of Centura-California or by the sole stockholder of
Centura-Delaware, or by both.
4.4 AMENDMENT. The Boards of Directors of the Constituent Corporations may
amend this Agreement at any time prior to the filing of this Agreement (or
certificate in lieu thereof) with the Secretaries of State of the States of
Delaware and California, provided that an amendment made subsequent to the
adoption of this Agreement by the stockholders of either Constituent Corporation
shall not: (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
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<PAGE>
by the Merger, or (3) alter or change any of the terms and conditions of this
Agreement if such alteration or change would adversely affect the holders of any
class or series of capital stock of any Constituent Corporation.
4.5 REGISTERED OFFICE. The registered office of the Surviving Corporation
in the State of Delaware is [1209 ORANGE STREET, WILMINGTON, COUNTY OF NEW
CASTLE, DE 19801] 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 975 Island Drive,
Redwood Chores, California 94065, and copies thereof will be furnished to any
stockholder of either Constituent Corporation, upon request and without cost.
4.7 GOVERNING LAW. This Agreement shall in all respects be construed,
interpreted and enforced in accordance with and governed by the laws of the
State of Delaware and, so far as applicable, the merger provisions of the
California General Corporation Law.
4.8 COUNTERPARTS. In order to facilitate the filing and recording of this
Agreement, the same may be executed in any number of counterparts, each of which
shall be deemed to be an original and all of which together shall constitute one
and the same instrument.
IN WITNESS WHEREOF, this Agreement, having first been approved by the
resolutions of the Boards of Directors and stockholders of Centura-California
and Centura-Delaware, is hereby executed on behalf of each of such two
corporations and attested by their respective officers thereunto duly
authorized.
CENTURA SOFTWARE CORPORATION
a Delaware corporation
By: __________________________________
Scott R. Broomfield,
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
ATTEST:
______________________________________
Craig W. Johnson,
SECRETARY
CENTURA SOFTWARE CORPORATION
A California corporation
By: __________________________________
Scott R. Broomfield,
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
ATTEST:
______________________________________
Craig W. Johnson,
SECRETARY
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<PAGE>
CENTURA SOFTWARE CORPORATION
OFFICERS' CERTIFICATE OF APPROVAL OF MERGER
The undersigned, Scott R. Broomfield, and Craig W. Johnson, and each of
them, do hereby certify that:
1. They are the President and Secretary, respectively, of Centura
Software Corporation, a California corporation.
2. The Agreement and Plan of Merger attached to this Certificate
providing for the merger of this corporation with and into Centura Software
Corporation, a Delaware corporation, was duly approved by the Board of
Directors and by the shareholders of this corporation.
3. This corporation has an authorized capital of 62,000,000 shares,
60,000,000 of which are designated "Common Stock", $.01 par value, and
2,000,000 of which are designated "Preferred Stock", $.01 par value.
4. The terms of the Agreement and Plan of Merger were approved by this
corporation by the vote of the shareholders. The total number of shares
entitled to vote with respect to the merger as of the record date of April
20, 1998, was shares of Common Stock. No Preferred Stock was
outstanding. The number of shares voting in favor of the merger equaled or
exceeded the vote required. The percentage vote required was more than 50%
of the outstanding shares of Common Stock.
IN WITNESS WHEREOF, the undersigned have executed this Certificate this
day of , 1998.
_______________________________________
Scott R. Broomfield,
PRESIDENT
Attest:
______________________________________
Craig W. Johnson,
SECRETARY
Each of the undersigned declares under penalty of perjury that he has read
the foregoing Certificate and knows the contents thereof and that the same is
true of his own knowledge.
Executed at Redwood Shores, California, on , 1998.
_______________________________________
Scott R. Broomfield,
PRESIDENT
Attest:
______________________________________
Craig W. Johnson,
SECRETARY
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<PAGE>
CENTURA SOFTWARE CORPORATION
OFFICERS' CERTIFICATE OF APPROVAL OF MERGER
The undersigned, Scott R. Broomfield and Craig W. Johnson, and each of them,
do hereby certify that:
1. They are the President and Secretary, respectively, of Centura
Software Corporation, a Delaware corporation.
2. The Agreement and Plan of Merger attached to this Certificate
providing for the merger of Centura Software Corporation, a California
corporation, with and into this corporation, was duly approved by the Board
of Directors and sole stockholder of this corporation.
3. This corporation has an authorized capital of 62,000,000 shares,
60,000,000 of which are designated "Common Stock", $.01 par value, and
2,000,000 of which are designated "Preferred Stock", $.01 par value. No
shares of Preferred Stock were outstanding.
4. The terms of the Agreement and Plan of Merger were approved by this
corporation by the vote of Centura Software Corporation, the sole
stockholder owning 100% of the outstanding shares of Common Stock of the
corporation. The percentage vote required for such approval was more than
50% of the Common Stock.
IN WITNESS WHEREOF, the undersigned have executed this Certificate this
day of , 1998.
_______________________________________
Scott R. Broomfield,
PRESIDENT
ATTEST:
______________________________________
Craig W. Johnson,
SECRETARY
Each of the undersigned declares under penalty of perjury that he has read
the foregoing Certificate and knows the contents thereof and that the same is
true of his own knowledge.
Executed at Redwood Shores, California, on , 1998.
_______________________________________
Scott R. Broomfield,
PRESIDENT
ATTEST:
______________________________________
Craig W. Johnson,
SECRETARY
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<PAGE>
EXHIBIT B
CERTIFICATE OF INCORPORATION
OF
CENTURA SOFTWARE CORPORATION
FIRST: The name of the corporation is Centura Software Corporation (the
"Corporation").
SECOND: The address of the Corporation's registered office in the State of
Delaware is [CORPORATION TRUST CENTER, 1209 ORANGE STREET, IN THE CITY OF
WILMINGTON, COUNTY OF NEW CASTLE, ZIP CODE 19801.] The name of its registered
agent at such address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
FOURTH: The Corporation is authorized to issue two classes of shares to be
designated respectively Common Stock and Preferred Stock. The total number of
shares of all classes of stock which the Corporation has authority to issue is
Sixty-Two Million (62,000,000) shares, consisting of Sixty Million (60,000,000)
shares of Common Stock, $0.01 par value, (the "Common Stock") and Two Million
(2,000,000) shares of Preferred Stock, $0.01 par value (the "Preferred Stock").
The Preferred Stock may be issued from time to time in one or more series.
The Board of Directors is hereby authorized to fix or alter the dividend rights,
dividend rate, conversion rights, voting rights, rights and terms of redemption
(including sinking fund provisions), redemption price prices, and liquidation
preferences of any wholly unissued series of Preferred Stock, and the number of
shares constituting any such series and the designation thereof, or any of them.
The Board of Directors is further authorized to increase or decrease (but
not below the number of shares of any such series then outstanding) the number
of shares of any series, the number of which was fixed by it, subsequent to the
issue of shares of such series then outstanding, subject to the limitations and
restrictions stated in the resolution of the Board of Directors originally
fixing the number of shares of such series. If the number of shares of any
series is so decreased, then the shares constituting such decrease shall resume
the status which they had prior to the adoption of the resolution originally
fixing the number of shares of such series.
FIFTH: The name and mailing address of the incorporator are as follows:
[NAME]
Venture Law Group
2800 Sand Hill Road
Menlo Park, CA 94025
SIXTH: The corporation is to have perpetual existence.
SEVENTH: The election of directors need not be by written ballot unless a
stockholder demands election by written ballot at a meeting of stockholders and
before voting begins or unless the Bylaws of the Corporation shall so provide.
EIGHTH: The number of directors which constitute the whole Board of
Directors of the Corporation shall be designated in the Bylaws of the
Corporation. Any director may be removed from office by the stockholders of the
corporation only for cause.
NINTH: In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, alter, amend or
repeal the Bylaws of the Corporation.
TENTH: To the fullest extent permitted by the Delaware General Corporation
Law as the same exists or as may hereafter be amended, no director of the
Corporation shall be personally liable to the
B-1
<PAGE>
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director. Neither any amendment nor repeal of this Article, nor the
adoption of any provision of this Certificate of Incorporation inconsistent with
this Article, shall eliminate or reduce the effect of this Article in respect of
any matter occurring, or any cause of action, suit or claim that, but for this
Article, would accrue or arise, prior to such amendment, repeal or adoption of
an inconsistent provision.
ELEVENTH: At the election of directors of the corporation, each holder of
stock or of any class or classes or of a series or series thereof shall be
entitled to one vote for each share held. No stockholder will be permitted to
cumulate votes at any election of directors.
TWELFTH: Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the statutes) outside of the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of the Corporation.
THIRTEENTH: Stockholders of the Corporation may not take action by written
consent in lieu of a meeting. Any actions contemplated by the stockholders must
be taken at a duly called annual or special meeting.
FOURTEENTH: Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of the
capital stock required by law or this Certificate of Incorporation, the
affirmative vote of the holders of at least two-thirds (2/3) of the combined
voting power of all of the then-outstanding shares of the Corporation entitled
to vote shall be required to alter, amend or repeal Articles THIRTEENTH or
FOURTEENTH or any provision thereof, unless such amendment shall be approved by
a majority of the directors of the Corporation not affiliated or associated with
any person or entity holding (or which has announced an intention to obtain) 10%
or more of the voting power of the Corporation's outstanding capital stock.
FIFTEENTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
The undersigned incorporator hereby acknowledges that the foregoing
Certificate of Incorporation is her act and deed and that the facts stated
herein are true.
--------------------------------------
[NAME]
Dated: , 1998
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<PAGE>
EXHIBIT C
BYLAWS
OF
CENTURA SOFTWARE CORPORATION
(A DELAWARE CORPORATION)
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<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<C> <S> <C>
ARTICLE I--CORPORATE OFFICES.............................................................................. C-4
1.1 Registered Office.............................................................................. C-4
1.2 Other Offices.................................................................................. C-4
ARTICLE II--MEETINGS OF STOCKHOLDERS................................................................... C-4
2.1 Place of Meetings.............................................................................. C-4
2.2 Annual Meeting................................................................................. C-4
2.3 Special Meeting................................................................................ C-4
2.4 Notice of Stockholders' Meetings............................................................... C-4
2.5 Advance Notice of Stockholder Nominees and Stockholder Business................................ C-4
2.6 Manner of Giving Notice; Affidavit of Notice................................................... C-5
2.7 Quorum......................................................................................... C-5
2.8 Adjourned Meeting; Notice...................................................................... C-6
2.9 Voting......................................................................................... C-6
2.10 Validation of Meetings; Waiver of Notice; Consent.............................................. C-6
2.11 Stockholder Action by Written Consent Without a Meeting........................................ C-6
2.12 Record Date for Stockholder Notice; Voting; Giving Consents.................................... C-6
2.13 Proxies........................................................................................ C-7
2.14 Inspectors of Election......................................................................... C-7
2.15 Organization................................................................................... C-7
2.16 List of Stockholders Entitled to Vote.......................................................... C-8
ARTICLE III--DIRECTORS.................................................................................... C-8
3.1 Powers......................................................................................... C-8
3.2 Number of Directors............................................................................ C-8
3.3 Election and Term of Office of Directors....................................................... C-8
3.4 Resignation and Vacancies...................................................................... C-8
3.5 Removal of Directors........................................................................... C-9
3.6 Place of Meetings.............................................................................. C-9
3.7 First Meetings................................................................................. C-9
3.8 Regular Meetings............................................................................... C-9
3.9 Special Meetings; Notice....................................................................... C-10
3.10 Quorum......................................................................................... C-10
3.11 Waiver of Notice............................................................................... C-10
3.12 Adjournment.................................................................................... C-10
3.13 Notice of Adjournment.......................................................................... C-10
3.14 Board Action by Written Consent Without a Meeting.............................................. C-10
3.15 Fees and Compensation of Directors............................................................. C-10
3.16 Approval of Loans to Officers.................................................................. C-11
3.17 Sole Director Provided by Certificate of Incorporation......................................... C-11
3.18 Advisory Directors............................................................................. C-11
3.19 Super Majority Vote of Directors............................................................... C-11
ARTICLE IV--COMMITTEES.................................................................................... C-11
4.1 Committees of Directors........................................................................ C-11
4.2 Meetings and Actions of Committees............................................................. C-12
4.3 Committee Minutes.............................................................................. C-12
</TABLE>
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<TABLE>
<CAPTION>
PAGE
---------
<C> <S> <C>
ARTICLE V--OFFICERS....................................................................................... C-12
5.1 Officers....................................................................................... C-12
5.2 Election of Officers........................................................................... C-12
5.3 Subordinate Officers; Etc...................................................................... C-12
5.4 Removal and Resignation of Officers............................................................ C-12
5.5 Vacancies in Offices........................................................................... C-13
5.6 Chairman of the Board.......................................................................... C-13
5.7 President...................................................................................... C-13
5.8 Vice Presidents................................................................................ C-13
5.9 Secretary...................................................................................... C-13
5.10 Chief Financial Officer........................................................................ C-14
5.11 Assistant Secretary............................................................................ C-14
5.12 Administrative Officers........................................................................ C-14
5.13 Authority and Duties of Officers............................................................... C-14
ARTICLE VI--INDEMNIFICATIONS OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS.......................
C-14
6.1 Indemnification Directors and Officers......................................................... C-14
6.2 Indemnification of Others...................................................................... C-14
6.3 Insurance...................................................................................... C-15
ARTICLE VII--RECORDS AND REPORTS.......................................................................... C-15
7.1 Maintenance and Inspection of Records.......................................................... C-15
7.2 Inspection by Directors........................................................................ C-15
7.3 Annual Statement to Stockholders............................................................... C-15
7.4 Representation of Shares of Other Corporations................................................. C-15
7.5 Certification and Inspection of Bylaws......................................................... C-16
ARTICLE VIII--GENERAL MATTERS............................................................................. C-16
8.1 Record Date for Purposes Other than Notice and Voting.......................................... C-16
8.2 Checks; Drafts; Evidences of Indebtedness...................................................... C-16
8.3 Corporate Contracts and Instruments; How Executed.............................................. C-16
8.4 Stock Certificates; Transfer; Partly Paid Shares............................................... C-16
8.5 Special Designation on Certificates............................................................ C-17
8.6 Lost Certificates.............................................................................. C-17
8.7 Transfer Agents and Registrars................................................................. C-17
8.8 Legend Condition............................................................................... C-17
8.9 Subsidiary Corporations........................................................................ C-18
8.10 Construction; Definitions...................................................................... C-18
ARTICLE IX--AMENDMENTS.................................................................................... C-18
ARTICLE X--DISSOLUTION.................................................................................... C-18
ARTICLE XI--CUSTODIAN..................................................................................... C-19
11.1 Appointment of a Custodian in Certain Cases.................................................... C-19
11.2 Duties of Custodian............................................................................ C-19
</TABLE>
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<PAGE>
BYLAWS
OF
CENTURA SOFTWARE CORPORATION
(A DELAWARE CORPORATION)
ARTICLE I
CORPORATE OFFICES
1.1 REGISTERED OFFICE. The registered office of the corporation shall be
fixed in the certificate of incorporation of the corporation.
1.2 OTHER OFFICES. The board of directors may at any time establish branch
or subordinate offices at any place or places where the corporation is qualified
to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS. Meetings of stockholders shall be held at any place
within or outside the State of Delaware designated by the board of directors. In
the absence of any such designation, stockholders' meetings shall be held at the
principal executive office of the corporation.
2.2 ANNUAL MEETING. The annual meeting of stockholders shall be held each
year on a date and at a time designated by the board of directors. In the
absence of such designation, the annual meeting of stockholders shall be held on
the fifteenth day of December in each year at 10:00 a.m. However, if such day
falls on a legal holiday, then the meeting shall be held at the same time and
place on the next succeeding full business day. At the meeting, directors shall
be elected, and any other proper business may be transacted.
2.3 SPECIAL MEETING. A special meeting of the stockholders may be called
at any time by the board of directors or by the chairman of the board or by the
president.
2.4 NOTICE OF STOCKHOLDERS' MEETINGS. All notices of meetings of
stockholders shall be sent or otherwise given in accordance with Section 2.7 of
these bylaws not less than ten (10) nor more than sixty (60) days before the
date of the meeting. The notice shall specify the place, date, and hour of the
meeting and (i) in the case of a special meeting, the general nature of the
business to be transacted (no business other than that specified in the notice
may be transacted) or (ii) in the case of the annual meeting, those matters
which the board of directors, at the time of giving the notice, intends to
present for action by the stockholders (but any proper matter may be presented
at the meeting for such action). The notice of any meeting at which directors
are to be elected shall include the name of any nominee or nominees who, at the
time of the notice, the board intends to present for election.
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS. To be
properly brought before an annual meeting, nominations for the election of
director or other business must be (a) specified in the notice of meeting (or
any supplement thereto) given by or at the direction of the board of directors,
(b) otherwise properly brought before the meeting by or at the direction of the
board of directors, or (c) otherwise properly brought before the meeting by a
stockholder. For such nominations or other business to be considered properly
brought before the meeting by a stockholder such stockholder must have given
timely notice and in proper form of his intent to bring such business before
such meeting. To be timely, such stockholder's notice must be delivered to or
mailed and received by the secretary of the corporation not less than ninety
(90) days prior to the meeting; provided, however, that in the event that less
than one-hundred (100) days notice or prior public disclosure of the date of the
meeting is given or made to stockholders, notice by the stockholder to be timely
must be so received not later than the close of business on the tenth day
following the day on which such notice of the date of the meeting was mailed or
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<PAGE>
such public disclosure was made. To be in proper form, a stockholder's notice to
the secretary shall set forth:
(i) the name and address of the stockholder who intends to make the
nominations or propose the business and, as the case may be, of the person
or persons to be nominated or of the business to be proposed;
(ii) a representation that the stockholder is a holder of record of
stock of the corporation entitled to vote at such meeting and, if
applicable, intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice;
(iii) if applicable, a description of all arrangements or understandings
between the stockholder and each nominee and any other person or persons
pursuant to which the nomination or nominations are to be made by the
stockholder;
(iv) such other information regarding each nominee or each matter of
business to be proposed by such stockholder as would be required to be
included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission had the nominee been nominated, or
intended to be nominated, or the matter been proposed, or intended to be
proposed by the board of directors; and
(v) if applicable, the consent of each nominee to serve as director of
the corporation if so elected.
The chairman of the meeting may refuse to acknowledge the nomination of any
person or the proposal of any business not made in compliance with the foregoing
procedure.
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE. Written notice of any
meeting of stockholders shall be given either personally or by first-class mail
or by telegraphic or other written communication. Notices not personally
delivered shall be sent charges prepaid and shall be addressed to the
stockholder at the address of that stockholder appearing on the books of the
corporation or given by the stockholder to the corporation for the purpose of
notice. If no such address appears on the corporation's books or is given,
notice shall be deemed to have been given if sent to that stockholder by mail or
telegraphic or other written communication to the corporation's principal
executive office, or if published at least once in a newspaper of general
circulation in the county where that office is located. Notice shall be deemed
to have been given at the time when delivered personally or deposited in the
mail or sent by telegram or other means of written communication.
If any notice addressed to a stockholder at the address of that stockholder
appearing on the books of the corporation is returned to the corporation by the
United States Postal Service marked to indicate that the United States Postal
Service is unable to deliver the notice to the stockholder at that address, then
all future notices or reports shall be deemed to have been duly given without
further mailing if the same shall be available to the stockholder on written
demand of the stockholder at the principal executive office of the corporation
for a period of one (1) year from the date of the giving of the notice.
An affidavit of the mailing or other means of giving any notice of any
stockholders' meeting, executed by the secretary, assistant secretary or any
transfer agent of the corporation giving the notice, shall be prima facie
evidence of the giving of such notice.
2.7 QUORUM. The holders of a majority of the stock issued and outstanding
and entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business, except as otherwise provided by statute or by the certificate of
incorporation. If, however, such quorum is not present or represented at any
meeting of the stockholders, then either (i) the chairman of the meeting or (ii)
the stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting in accordance with Section 2.8 of
these bylaws.
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When a quorum is present at any meeting, the vote of the holders of a
majority of the stock having voting power present in person or represented by
proxy shall decide any question brought before such meeting, unless the question
is one upon which, by express provision of the statutes or of the certificate of
incorporation, a different vote is required, in which case such express
provision shall govern and control the decision of the question.
If a quorum be initially present, the stockholders may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum, if any action taken is approved by a
majority of the stockholders required to initially constitute a quorum.
2.8 ADJOURNED MEETING; NOTICE. When a meeting is adjourned to another time
and place, unless these bylaws otherwise require, notice need not be given of
the adjourned meeting if the time and place thereof are announced at the meeting
at which the adjournment is taken. At the adjourned meeting the corporation may
transact any business that might have been transacted at the original meeting.
If the adjournment is for more than thirty (30) days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
2.9 VOTING. The stockholders entitled to vote at any meeting of
stockholders shall be determined in accordance with the provisions of Section
2.12 of these bylaws, subject to the provisions of Sections 217 and 218 of the
General Corporation Law of Delaware (relating to voting rights of fiduciaries,
pledgors and joint owners, and to voting trusts and other voting agreements).
Except as may otherwise be provided in the certificate of incorporation,
each stockholder shall be entitled to one vote for each share of capital stock
held by such stockholder. No stockholder will be permitted to cumulate votes at
any election of directors.
2.10 VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT. The transactions
of any meeting of stockholders, either annual or special, however called and
noticed, and wherever held, shall be as valid as though they had been taken at a
meeting duly held after regular call and notice, if a quorum be present either
in person or by proxy, and if, either before or after the meeting, each person
entitled to vote, who was not present in person or by proxy, signs a written
waiver of notice or a consent to the holding of the meeting or an approval of
the minutes thereof. The waiver of notice or consent or approval need not
specify either the business to be transacted or the purpose of any annual or
special meeting of stockholders. All such waivers, consents, and approvals shall
be filed with the corporate records or made a part of the minutes of the
meeting.
Attendance by a person at a meeting shall also constitute a waiver of notice
of and presence at that meeting, except when the person objects at the beginning
of the meeting to the transaction of any business because the meeting is not
lawfully called or convened. Attendance at a meeting is not a waiver of any
right to object to the consideration of matters required by law to be included
in the notice of the meeting but not so included, if that objection is expressly
made at the meeting.
2.11 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING. The
stockholders of the corporation may not take action by written consent without a
meeting. Any such actions must be taken at a duly called annual or special
meeting.
2.12 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS. For
purposes of determining the stockholders entitled to notice of any meeting or to
vote thereat, the board of directors may fix, in advance, a record date, which
shall not be more than sixty (60) days nor less than ten (10) days before the
date of any such meeting, and in such event only stockholders of record on the
date so fixed are entitled to notice and to vote, notwithstanding any transfer
of any shares on the books of the corporation after the record date.
If the board of directors does not so fix a record date, the record date for
determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the business
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day next preceding the day on which notice is given, or, if notice is waived, at
the close of business on the business day next preceding the day on which the
meeting is held.
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting
unless the board of directors fixes a new record date for the adjourned meeting,
but the board of directors shall fix a new record date if the meeting is
adjourned for more than thirty (30) days from the date set for the original
meeting.
The record date for any other purpose shall be as provided in Section 8.1 of
these bylaws.
2.13 PROXIES. Every person entitled to vote for directors, or on any other
matter, shall have the right to do so either in person or by one or more agents
authorized by a written proxy signed by the person and filed with the secretary
of the corporation, but no such proxy shall be voted or acted upon after three
(3) years from its date, unless the proxy provides for a longer period. A proxy
shall be deemed signed if the stockholder's name is placed on the proxy (whether
by manual signature, typewriting, telegraphic transmission or otherwise) by the
stockholder or the stockholder's attorney-in-fact. The revocability of a proxy
that states on its face that it is irrevocable shall be governed by the
provisions of Section 212(c) of the General Corporation Law of Delaware.
2.14 INSPECTORS OF ELECTION. Before any meeting of stockholders, the board
of directors may appoint an inspector or inspectors of election to act at the
meeting or its adjournment. If no inspector of election is so appointed, then
the chairman of the meeting may, and on the request of any stockholder or a
stockholder's proxy shall, appoint an inspector or inspectors of election to act
at the meeting. The number of inspectors shall be either one (1) or three (3).
If inspectors are appointed at a meeting pursuant to the request of one (1) or
more stockholders or proxies, then the holders of a majority of shares or their
proxies present at the meeting shall determine whether one (1) or three (3)
inspectors are to be appointed. If any person appointed as inspector fails to
appear or fails or refuses to act, then the chairman of the meeting may, and
upon the request of any stockholder or a stockholder's proxy shall, appoint a
person to fill that vacancy.
Such inspectors shall:
(a) determine the number of shares outstanding and the voting power of
each, the number of shares represented at the meeting, the existence of a
quorum, and the authenticity, validity, and effect of proxies;
(b) receive votes, ballots or consents;
(c) hear and determine all challenges and questions in any way arising
in connection with the right to vote;
(d) count and tabulate all votes or consents;
(e) determine when the polls shall close;
(f) determine the result; and
(g) do any other acts that may be proper to conduct the election or vote
with fairness to all stockholders.
2.15 ORGANIZATION. The president, or in the absence of the president, the
chairman of the board, shall call the meeting of the stockholders to order, and
shall act as chairman of the meeting. In the absence of the president, the
chairman of the board, and all of the vice presidents, the stockholders shall
appoint a chairman for such meeting. The chairman of any meeting of stockholders
shall determine the order of business and the procedures at the meeting,
including such matters as the regulation of the manner of voting and the conduct
of business. The secretary of the corporation shall act as secretary of all
meetings of the stockholders, but in the absence of the secretary at any meeting
of the stockholders, the presiding officer may appoint any person to act as
secretary of the meeting.
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2.16 LIST OF STOCKHOLDERS ENTITLED TO VOTE. The officer who has charge of
the stock ledger of the corporation shall prepare and make, at least ten (10)
days before every meeting of stockholders, a list of the stockholders entitled
to vote at the meeting, arranged in alphabetical order, and showing the address
of each stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder, for
any purpose germane to the meeting, during ordinary business hours, for a period
of at least ten (10) days prior to the meeting, either at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place of
the meeting during the whole time thereof, and may be inspected by any
stockholder who is present. Such list shall presumptively determine the identity
of the stockholders entitled to vote at the meeting and the number of shares
held by each of them.
ARTICLE III
DIRECTORS
3.1 POWERS. Subject to the provisions of the General Corporation Law of
Delaware and to any limitations in the certificate of incorporation or these
bylaws relating to action required to be approved by the stockholders or by the
outstanding shares, the business and affairs of the corporation shall be managed
and all corporate powers shall be exercised by or under the direction of the
board of directors.
Each director shall exercise such powers and otherwise perform such duties
in good faith, in the manner such director believes to be in the best interests
of the corporation, and with such care, including reasonable inquiry, as an
ordinarily prudent person in a like position would use under similar
circumstances.
3.2 NUMBER OF DIRECTORS. The authorized number of directors shall be not
less than five (5) nor more than nine (9). The exact number of directors shall
be seven (7) until changed, within the limits specified above, by a bylaw
amending this Section 3.2, duly adopted by the board of directors or by the
stockholders. The indefinite number of directors may be changed, or a definite
number may be fixed without provision for an indefinite number, by an amendment
to this bylaw duly adopted by the vote or written consent of the holders of a
majority of the stock issued and outstanding and entitled to vote, or by a duly
adopted amendment to the certificate of incorporation.
No reduction of the authorized number of directors shall have the effect of
removing any director before that director's term of office expires.
3.3 ELECTION AND TERM OF OFFICE OF DIRECTORS. Except as provided in
Section 3.4 of these bylaws, directors shall be elected at each annual meeting
of stockholders to hold office until the next annual meeting. Each director,
including a director elected or appointed to fill a vacancy, shall hold office
until the expiration of the term for which elected and until a successor has
been elected and qualified.
3.4 RESIGNATION AND VACANCIES. Any director may resign effective on giving
written notice to the chairman of the board, the president, the secretary or the
board of directors, unless the notice specifies a later time for that
resignation to become effective.
If the resignation of a director is effective at a future time, the board of
directors may elect a successor to take office when the resignation becomes
effective. Vacancies in the board of directors may be filled by a majority of
the remaining directors, even if less than a quorum, or by a sole remaining
director; however, a vacancy created by the removal of a director by the vote of
the stockholders or by court order may be filled only by the affirmative vote of
a majority of the shares represented and voting at a duly held meeting at which
a quorum is present (which shares voting affirmatively also constitute a
majority of the required quorum). Each director so elected shall hold office
until the next annual meeting of the stockholders and until a successor has been
elected and qualified.
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Unless otherwise provided in the certificate of incorporation or these
bylaws:
(i) Vacancies and newly created directorships resulting from any
increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled by a
majority of the directors then in office, although less than a quorum, or by
a sole remaining director:
(ii) Whenever the holders of any class or classes of stock or series
thereof are entitled to elect one or more directors by the provisions of the
certificate of incorporation, vacancies and newly created directorships of
such class or classes or series may be filled by a majority of the directors
elected by such class or classes or series thereof then in office, or by a
sole remaining director so elected.
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may call a special meeting of stockholders in accordance with
the provisions of the certificate of incorporation or these bylaws, or may apply
to the Court of Chancery for a decree summarily ordering an election as provided
in Section 211 of the General Corporation Law of Delaware.
If, at the time of filling any vacancy or any newly created directorship,
the directors then in office constitute less than a majority of the whole board
(as constituted immediately prior to any such increase), then the Court of
Chancery may, upon application of any stockholder or stockholders holding at
least ten percent (10%) of the total number of the shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorships,
or to replace the directors chosen by the directors then in office as aforesaid,
which election shall be governed by the provisions of Section 211 of the General
Corporation Law of Delaware as far as applicable.
3.5 REMOVAL OF DIRECTORS. Unless otherwise restricted by statute, by the
certificate of incorporation or by these bylaws, any director or the entire
board of directors may be removed, with or without cause, by the holders of a
majority of the shares then entitled to vote at an election of directors.
3.6 PLACE OF MEETINGS; MEETINGS BY TELEPHONE. Regular meetings of the
board of directors may be held at any place within or outside the State of
Delaware that has been designated from time to time by resolution of the board.
In the absence of such a designation, regular meetings shall be held at the
principal executive office of the corporation. Special meetings of the board may
be held at any place within or outside the State of Delaware that has been
designated in the notice of the meeting or, if not stated in the notice or if
there is no notice, at the principal executive office of the corporation.
Any meeting, regular or special, may be held by conference telephone or
similar communication equipment, so long as all directors participating in the
meeting can hear one another; and all such directors shall be deemed to be
present in person at the meeting.
3.7 FIRST MEETINGS. The first meeting of each newly elected board of
directors shall be held at such time and place as shall be fixed by the vote of
the stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of the failure of the
stockholders to fix the time or place of such first meeting of the newly elected
board of directors, or in the event such meeting is not held at the time and
place so fixed by the stockholders, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for
special meetings of the board of directors, or as shall be specified in a
written waiver signed by all of the directors.
3.8 REGULAR MEETINGS. Regular meetings of the board of directors may be
held without notice at such time as shall from time to time be determined by the
board of directors. If any regular meeting day
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shall fall on a legal holiday, then the meeting shall be held at the same time
and place on the next succeeding full business day.
3.9 SPECIAL MEETINGS; NOTICE. Special meetings of the board of directors
for any purpose or purposes may be called at any time by the chairman of the
board, the president, any vice president, the secretary or any two directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail,
reputable courier service, or telegram, charges prepaid, addressed to each
director at that director's address as it is shown on the records of the
corporation. If the notice is mailed, it shall be deposited in the United States
mail at least four (4) days before the time of the holding of the meeting. If
the notice is delivered personally, by reputable courier service, or by
telephone or telegram, it shall be delivered personally, by courier, or by
telephone or to the telegraph company at least forty-eight (48) hours before the
time of the holding of the meeting. Any oral notice given personally or by
telephone may be communicated either to the director or to a person at the
office of the director who the person giving the notice has reason to believe
will promptly communicate it to the director. The notice need not specify the
purpose or the place of the meeting, if the meeting is to be held at the
principal executive office of the corporation.
3.10 QUORUM. A majority of the authorized number of directors shall
constitute a quorum for the transaction of business, except to adjourn as
provided in Section 3.19 of these bylaws. Every act or decision done or made by
a majority of the directors present at a duly held meeting at which a quorum is
present shall be regarded as the act of the board of directors, subject to the
provisions of the certificate of incorporation and applicable law.
A meeting at which a quorum is initially present may continue to transact
business notwithstanding the withdrawal of directors, if any action taken is
approved by at least a majority of the required quorum for that meeting.
3.11 WAIVER OF NOTICE. Notice of a meeting need not be given to any
director (i) who signs a waiver of notice or a consent to holding the meeting or
an approval of the minutes thereof, whether before or after the meeting, or (ii)
who attends the meeting without protesting, prior thereto or at its
commencement, the lack of notice to such directors. All such waivers, consents,
and approvals shall be filed with the corporate records or made part of the
minutes of the meeting. A waiver of notice need not specify the purpose of any
regular or special meeting of the board of directors.
3.12 ADJOURNMENT. A majority of the directors present, whether or not
constituting a quorum, may adjourn any meeting to another time and place.
3.13 NOTICE OF ADJOURNMENT. Notice of the time and place of holding an
adjourned meeting need not be given unless the meeting is adjourned for more
than twenty-four (24) hours. If the meeting is adjourned for more than
twenty-four (24) hours, then notice of the time and place of the adjourned
meeting shall be given before the adjourned meeting takes place, in the manner
specified in Section 3.9 of these bylaws, to the directors who were not present
at the time of the adjournment.
3.14 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING. Any action
required or permitted to be taken by the board of directors may be taken without
a meeting, provided that all members of the board individually or collectively
consent in writing to that action. Such action by written consent shall have the
same force and effect as a unanimous vote of the board of directors. Such
written consent and any counterparts thereof shall be filed with the minutes of
the proceedings of the board of directors.
3.15 FEES AND COMPENSATION OF DIRECTORS. Directors and members of
committees may receive such compensation, if any, for their services and such
reimbursement of expenses as may be fixed or determined by resolution of the
board of directors. This Section 3.15 shall not be construed to preclude any
director
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from serving the corporation in any other capacity as an officer, agent,
employee or otherwise and receiving compensation for those services.
3.16 APPROVAL OF LOANS TO OFFICERS. The corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other employee
of the corporation or of its subsidiary, including any officer or employee who
is a director of the corporation or its subsidiary, whenever, in the judgment of
the directors, such loan, guaranty or assistance may reasonably be expected to
benefit the corporation. The loan, guaranty or other assistance may be with or
without interest and may be unsecured, or secured in such manner as the board of
directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing contained in this section shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
3.17 SOLE DIRECTOR PROVIDED BY CERTIFICATE OF INCORPORATION. In the event
only one (1) director is required by these bylaws or the certificate of
incorporation, then any reference herein to notices, waivers, consents, meetings
or other actions by a majority or quorum of the directors shall be deemed to
refer to such notice, waiver, etc., by such sole director, who shall have all
the rights and duties and shall be entitled to exercise all of the powers and
shall assume all the responsibilities otherwise herein described as given to the
board of directors.
3.18 ADVISORY DIRECTORS. The board of directors from time to time may
elect one or more persons to be advisory directors who shall not by such
appointment be members of the board of directors. Advisory directors shall be
available from time to time to perform special assignments specified by the
president, to attend meetings of the board of directors upon invitation and to
furnish consultation to the board of directors. The period during which the
title shall be held may be prescribed by the board of directors. If no period is
prescribed, the title shall be held at the pleasure of the board of directors.
3.19 SUPER MAJORITY VOTE OF DIRECTORS. A two-thirds super majority vote of
directors shall be required to approve any of the following actions:
(a) consolidation or merger of the corporation with or into any other
corporation in which securities possessing more than fifty percent (50%) of
the total combined voting power of the Company's outstanding securities are
transferred to a person or persons different from the persons holding those
securities immediately prior to such transaction (other than a consolidation
or merger in which the surviving entity is the corporation or one of its
wholly-owned subsidiaries) or transfer or sale of all or substantially all
of the assets of the corporation; or
(b) an increase in the corporation's secured indebtedness to an
aggregate amount in excess of $15 million.
ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS. The board of directors may, by resolution
adopted by a majority of the authorized number of directors, designate one (1)
or more committees, each consisting of one or more directors, to serve at the
pleasure of the board. The board may designate one (1) or more directors as
alternate members of any committee, who may replace any absent member at any
meeting of the committee. The appointment of members or alternate members of a
committee requires the vote of a majority of the authorized number of directors.
Any committee, to the extent provided in the resolution of the board, shall have
all the authority of the board, but no such committee shall have the power or
authority to (i) amend the certificate of incorporation (except that a committee
may, to the extent authorized in the resolution or resolutions providing for the
issuance of shares of stock adopted by the board of directors as provided in
Section 151(a) of the General Corporation Law of Delaware, fix any of the
preferences or rights of such shares relating to dividends, redemption,
dissolution, any distribution of assets of the corporation or the conversion
into, or the exchange of such shares for, shares of any other
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class or classes or any other series of the same or any other class or classes
of stock of the corporation), (ii) adopt an agreement of merger or consolidation
under Sections 251 or 252 of the General Corporation Law of Delaware, (iii)
recommend to the stockholders the sale, lease or exchange of all or
substantially all of the corporation's property and assets, (iv) recommend to
the stockholders a dissolution of the corporation or a revocation of a
dissolution, or (v) amend the bylaws of the corporation; and, unless the board
resolution establishing the committee, the bylaws or the certificate of
incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock, or to adopt
a certificate of ownership and merger pursuant to Section 253 of the General
Corporation Law of Delaware.
4.2 MEETINGS AND ACTIONS OF COMMITTEES. Meetings and actions of committees
shall be governed by, and held and taken in accordance with, the provisions of
Article III of these bylaws, Section 3.6 (place of meetings; meetings by
telephone), Section 3.8 (regular meetings), Section 3.9 (special meetings;
notice), Section 3.10 (quorum), Section 3.11 (waiver of notice), Section 3.12
(adjournment), Section 3.13 (notice of adjournment), and Section 3.14 (board
action by written consent without meeting), with such changes in the context of
those bylaws as are necessary to substitute the committee and its members for
the board of directors and its members; provided, however, that the time of
regular meetings of committees may be determined either by resolution of the
board of directors or by resolution of the committee, that special meetings of
committees may also be called by resolution of the board of directors, and that
notice of special meetings of committees shall also be given to all alternate
members, who shall have the right to attend all meetings of the committee. The
board of directors may adopt rules for the government of any committee not
inconsistent with the provisions of these bylaws.
4.3 COMMITTEE MINUTES. Each committee shall keep regular minutes of its
meetings and report the same to the board of directors when required.
ARTICLE V
OFFICERS
5.1 OFFICERS. The Corporate Officers of the corporation shall be a
president, a secretary and a chief financial officer. The corporation may also
have, at the discretion of the board of directors, a chairman of the board, one
or more vice presidents, one or more assistant secretaries, one or more
assistant treasurers, and such other officers as may be appointed in accordance
with the provisions of Section 5.3 of these bylaws. Any number of offices may be
held by the same person. In addition to the Corporate Officers of the
corporation described above, there may also be such Administrative Officers of
the corporation as may be designated and appointed from time to time by the
president of the corporation in accordance with the provisions of Section 5.12
of these bylaws.
5.2 ELECTION OF OFFICERS. The Corporate Officers of the corporation,
except such officers as may be appointed in accordance with the provisions of
Section 5.3 or Section 5.5 of these bylaws, shall be chosen by the board of
directors, subject to the rights, if any, of an officer under any contract of
employment.
5.3 SUBORDINATE OFFICERS; ETC. The board of directors may appoint, or may
empower the president to appoint, such other Corporate Officers as the business
of the corporation may require, each of whom shall hold office for such period,
have such authority, and perform such duties as are provided in these bylaws or
as the board of directors may from time to time determine.
The president may from time to time designate and appoint Administrative
Officers of the corporation in accordance with the provisions of Section 5.12 of
these bylaws.
5.4 REMOVAL AND RESIGNATION OF OFFICERS. Subject to the rights, if any, of
a Corporate Officer under any contract of employment, any Corporate Officer may
be removed, either with or without cause, by the board of directors at any
regular or special meeting of the board or, except in case of a Corporate
Officer chosen by the board of directors, by any Corporate Officer upon whom
such power of removal may be
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conferred by the board of directors. Any Corporate Officer may resign at any
time by giving written notice to the corporation.
Any resignation shall take effect at the date of the receipt of that notice
or at any later time specified in that notice; and, unless otherwise specified
in that notice, the acceptance of the resignation shall not be necessary to make
it effective. Any resignation is without prejudice to the rights, if any, of the
corporation under any contract to which the Corporate Officer is a party. Any
Administrative Officer designated and appointed by the president may be removed,
either with or without cause, at any time by the president. Any Administrative
Officer may resign at any time by giving written notice to the president or to
the secretary of the corporation.
5.5 VACANCIES IN OFFICES. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled in the
manner prescribed in these bylaws for regular appointments to that office.
5.6 CHAIRMAN OF THE BOARD. The chairman of the board, if such an officer
be elected, shall, if present, preside at meetings of the board of directors and
exercise and perform such other powers and duties as may from time to time be
assigned to him by the board of directors or as may be prescribed by these
bylaws. The chairman of the board shall also be the chief executive officer of
the corporation and shall have the powers and duties prescribed in Section 5.7
of these bylaws.
5.7 PRESIDENT. Subject to such supervisory powers, if any, as may be given
by the board of directors to the chairman of the board, if there be such an
officer, the president shall be the chief executive officer of the corporation
and shall, subject to the control of the board of directors, have general
supervision, direction, and control of the business and the officers of the
corporation. He or she shall preside at all meetings of the stockholders and, in
the absence or nonexistence of a chairman of the board, at all meetings of the
board of directors. He or she shall have the general powers and duties of
management usually vested in the office of president of a corporation, and shall
have such other powers and duties as may be prescribed by the board of directors
or these bylaws.
5.8 VICE PRESIDENTS. In the absence or disability of the president, the
vice presidents, if any, in order of their rank as fixed by the board of
directors or, if not ranked, a vice president designated by the board of
directors, shall perform all the duties of the president and when so acting
shall have all the powers of, and be subject to all the restrictions upon, the
president. The vice presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by the
board of directors, these bylaws, the president or the chairman of the board.
5.9 SECRETARY. The secretary shall keep or cause to be kept, at the
principal executive office of the corporation or such other place as the board
of directors may direct, a book of minutes of all meetings and actions of the
board of directors, committees of directors and stockholders. The minutes shall
show the time and place of each meeting, whether regular or special (and, if
special, how authorized and the notice given), the names of those present at
directors' meetings or committee meetings, the number of shares present or
represented at stockholders' meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal executive
office of the corporation or at the office of the corporation's transfer agent
or registrar, as determined by resolution of the board of directors, a share
register, or a duplicate share register, showing the names of all stockholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates evidencing such shares, and the number and date of
cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings of
the stockholders and of the board of directors required to be given by law or by
these bylaws. He or she shall keep the seal of the corporation, if one is
adopted, in safe custody and shall have such other powers and perform such other
duties as may be prescribed by the board of directors or by these bylaws.
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5.10 CHIEF FINANCIAL OFFICER. The chief financial officer shall keep and
maintain, or cause to be kept and maintained, adequate and correct books and
records of accounts of the properties and business transactions of the
corporation, including accounts of its assets, liabilities, receipts,
disbursements, gains, losses, capital, retained earnings and shares. The books
of account shall at all reasonable times be open to inspection by any director.
The chief financial officer shall deposit all money and other valuables in
the name and to the credit of the corporation with such depositories as may be
designated by the board of directors. He or she shall disburse the funds of the
corporation as may be ordered by the board of directors, shall render to the
president and directors, whenever they request it, an account of all of his or
her transactions as chief financial officer and of the financial condition of
the corporation, and shall have such other powers and perform such other duties
as may be prescribed by the board of directors or these bylaws.
5.11 ASSISTANT SECRETARY. The assistant secretary, or, if there is more
than one, the assistant secretaries in the order determined by the stockholders
or board of directors (or if there be no such determination, then in the order
of their election) shall, in the absence of the secretary or in the event of his
or her inability or refusal to act, perform the duties and exercise the powers
of the secretary and shall perform such other duties and have such other powers
as the board of directors or the stockholders may from time to time prescribe.
5.12 ADMINISTRATIVE OFFICERS. In addition to the Corporate Officers of the
corporation as provided in Section 5.1 of these bylaws and such subordinate
Corporate Officers as may be appointed in accordance with Section 53 of these
bylaws, there may also be such Administrative Officers of the corporation as may
be designated and appointed from time to time by the president of the
corporation. Administrative Officers shall perform such duties as from time to
time may be determined by the president or the board of directors in order to
assist the Corporate Officers in the furtherance of their duties. In the
performance of such duties, however, such Administrative Officers shall have
limited authority to act on behalf of the corporation as the board of directors
shall establish, including but not limited to limitations on the dollar amount
and on the scope of agreements or commitments that may be made by such
Administrative Officers on behalf of the corporation, which limitations may not
be exceeded by such individuals or altered by the president without further
approval by the board of directors.
5.13 AUTHORITY AND DUTIES OF OFFICERS. In addition to the foregoing
authority and duties, all officers of the corporation shall respectively have
such authority and perform such duties in the management of the business of the
corporation as may be designated from time to time by the board of directors or
the stockholders.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS. The corporation shall, to
the maximum extent and in the manner permitted by the General Corporation Law of
Delaware, indemnify each of its directors and officers against expenses
(including attorneys' fees), judgments, fines, settlements and other amounts
actually and reasonably incurred in connection with any proceeding arising by
reason of the fact that such person is or was an agent of the corporation. For
purposes of this Section 6.1, a "director" or "officer" of the corporation
includes any person (i) who is or was a director or officer of the corporation,
(ii) who is or was serving at the request of the corporation as a director or
officer of another corporation, partnership, joint venture, trust or other
enterprise, 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.
6.2 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, to indemnify each of its employees
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and agents (other than directors and officers) against expenses (including
attorneys' Fees), judgments, fines, settlements and other amounts actually and
reasonably incurred in connection with any proceeding arising by reason of the
fact that such person is or was an agent of the corporation. For purposes of
this Section 6.9, an "employee" or "agent" of the corporation (other than a
director or officer) includes any person (i) who is or was an employee or agent
of the corporation, (ii) who is or was serving at the request of the corporation
as an employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, or (iii) who was an employee or agent of a
corporation which was a predecessor corporation of the corporation or of another
enterprise at the request of such predecessor corporation.
6.3 INSURANCE. The corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him or
her and incurred by him or her in any such capacity, or arising out of his or
her status as such, whether or not the corporation would have the power to
indemnify him or her against such liability under the provisions of the General
Corporation Law of Delaware.
ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF RECORDS. The corporation shall, either
at its principal executive office or at such place or places as designated by
the board of directors, keep a record of its stockholders listing their names
and addresses and the number and class of shares held by each stockholder, a
copy of these bylaws as amended to date, accounting books and other records of
its business and properties.
Any stockholder of record, in person or by attorney or other agent, shall,
upon written demand under oath stating the purpose thereof, have the right
during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent to so act on
behalf of the stockholder. The demand under oath shall be directed to the
corporation at its registered office in Delaware or at its principal place of
business.
7.2 INSPECTION BY DIRECTORS. Any director shall have the right to examine
the corporation's stock ledger, a list of its stockholders and its other books
and records for a purpose reasonably related to his or her position as a
director. The Court of Chancery is hereby vested with the exclusive jurisdiction
to determine whether a director is entitled to the inspection sought. The Court
may summarily order the corporation to permit the director to inspect any and
all books and records, the stock ledger, and the stock list and to make copies
or extracts therefrom. The Court may, in its discretion, prescribe any
limitations or conditions with reference to the inspection, or award such other
and further relief as the Court may deem just and proper.
7.3 ANNUAL STATEMENT TO STOCKHOLDERS. The board of directors shall present
at each annual meeting, and at any special meeting of the stockholders when
called for by vote of the stockholders, a full and clear statement of the
business and condition of the corporation.
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The chairman of the
board, the president, any vice president, the chief financial officer, the
secretary or assistant secretary of this corporation, or any other person
authorized by the board of directors or the president or a vice president, is
authorized to vote, represent, and exercise on behalf of this corporation all
rights incident to any and all shares of any other corporation or corporations
standing in the name of this corporation. The authority herein granted may be
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exercised either by such person directly or by any other person authorized to do
so by proxy or power of attorney duly executed by such person having the
authority.
7.5 CERTIFICATION AND INSPECTION OF BYLAWS. The original or a copy of
these bylaws, as amended or otherwise altered to date, certified by the
secretary, shall be kept at the corporation's principal executive office and
shall be open to inspection by the stockholders of the corporation, at all
reasonable times during office hours.
ARTICLE VIII
GENERAL MATTERS
8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING. For purposes of
determining the stockholders entitled to receive payment of any dividend or
other distribution or allotment of any rights or the stockholders entitled to
exercise any rights in respect of any other lawful action, the board of
directors may fix, in advance, a record date, which shall not be more than sixty
(60) days before any such action. In that case, only stockholders of record at
the close of business on the date so fixed are entitled to receive the dividend,
distribution or allotment of rights, or to exercise such rights, as the case may
be, notwithstanding any transfer of any shares on the books of the corporation
after the record date so fixed, except as otherwise provided by law.
If the board of directors does not so fix a record date, then the record
date for determining stockholders for any such purpose shall be at the close of
business on the day on which the board of directors adopts the applicable
resolution or the sixtieth (60th) day before the date of that action, whichever
is later.
8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS. From time to time, the
board of directors shall determine by resolution which person or persons may
sign or endorse all checks, drafts, other orders for payment of money, notes or
other evidences of indebtedness that are issued in the name of or payable to the
corporation, and only the persons so authorized shall sign or endorse those
instruments.
8.3 CORPORATE CONTRACTS AND INSTRUMENTS; HOW EXECUTED. The board of
directors, except as otherwise provided in these bylaws, may authorize any
officer or officers, or agent or agents, to enter into any contract or execute
any instrument in the name of and on behalf of the corporation; such authority
may be general or confined to specific instances. Unless so authorized or
ratified by the board of directors or within the agency power of an officer, no
officer, agent or employee shall have any power or authority to bind the
corporation by any contract or engagement or to pledge its credit or to render
it liable for any purpose or for any amount.
8.4 STOCK CERTIFICATES; TRANSFER; PARTLY PAID SHARES. The shares of the
corporation shall be represented by certificates, provided that the board of
directors of the corporation may provide by resolution or resolutions that some
or all of any or all classes or series of its stock shall be uncertificated
shares. Any such resolution shall not apply to shares represented by a
certificate until such certificate is surrendered to the corporation.
Notwithstanding the adoption of such a resolution by the board of directors,
every holder of stock represented by certificates and upon request every holder
of uncertificated shares shall be entitled to have a certificate signed by, or
in the name of the corporation by, the chairman of the board of directors or the
president or a vice-president, and by the chief financial officer, the secretary
or an assistant secretary of such corporation representing the number of shares
registered in certificate form. Any or all of the signatures on the certificate
may be a facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate has
ceased to be such officer, transfer agent or registrar before such certificate
is issued, it may be issued by the corporation with the same effect as if he or
she were such officer, transfer agent or registrar at the date of issue.
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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 statement summary or reference to the rights,
privileges, preferences and restrictions, if any; a statement or summary as to
the redemption or conversion, if any; a statement or summary of liens or
restrictions upon transfer or voting, if any; if the shares by assessable or, if
assessments are collectible by personal action, a plain statement of such facts.
Upon surrender to the secretary or transfer agent of the corporation of a
certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books.
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, upon the books and records of the corporation in the case of
uncertificated partly paid shares, the total amount of the consideration to be
paid therefor and the amount paid thereon shall be stated. Upon the declaration
of any dividend on fully paid shares, the corporation shall declare a dividend
upon partly paid shares of the same class, but only upon the basis of the
percentage of the consideration actually paid thereon.
8.5 SPECIAL DESIGNATION ON CERTIFICATES. If the corporation is authorized
to issue more than one class of stock or more than one series of any class, then
the powers, the designations, the preferences, and the relative, participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights shall be set forth in full or summarized on the face or back of the
certificate that the corporation shall issue to represent such class or series
of stock; provided, however, that, except as otherwise provided in Section 202
of the General Corporation Law of Delaware, in lieu of the foregoing
requirements there may be set forth on the face or back of the certificate that
the corporation shall issue to represent such class or series of stock a
statement that the corporation will furnish without charge to each stockholder
who so requests the powers, the designations, the preferences, and the relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights.
8.6 LOST CERTIFICATES. Except as provided in this Section 8.6, no new
certificates for shares shall be issued to replace a previously issued
certificate unless the latter is surrendered to the corporation or its duly
authorized transfer agent 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.
8.7 TRANSFER AGENTS AND REGISTRARS. The board of directors may appoint one
or more transfer agents or transfer clerks, and one or more registrars, which
shall be an incorporated bank or trust company-either domestic or foreign, who
shall be appointed at such times and places as the requirements of the
corporation may necessitate and the board of directors may designate.
8.8 LEGEND CONDITION. In the event any shares of this corporation are
issued pursuant to a permit or exemption therefrom requiring the imposition of a
legend condition the person or persons issuing or transferring said shares shall
make sure said legend appears on the certificate and on the stub relating
thereto in the stock record book and shall not be required to transfer any
shares free of such legend unless an amendment to such permit or a new permit be
first issued so authorizing such a deletion.
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8.9 SUBSIDIARY CORPORATIONS. Shares of this corporation owned by a
subsidiary shall not be entitled to vote on any matter. A subsidiary for these
purposes is defined as a corporation, the shares of which possessing more than
twenty-five percent (25%) of the total combined voting power of all classes of
shares entitled to vote, are owned directly or indirectly through one or more
subsidiaries.
8.10 CONSTRUCTION; DEFINITIONS. Unless the context requires otherwise, the
general provisions, rules of construction, and definitions in the General
Corporation Law of Delaware shall govern the construction of these bylaws.
Without limiting the generality of this provision, the singular number includes
the plural, the plural number includes the singular, and the term "person"
includes both a corporation and a natural person.
ARTICLE IX
AMENDMENTS
The original or other bylaws of the corporation may be adopted, amended or
repealed by the stockholders entitled to vote; provided, however, that the
corporation may, in its certificate of incorporation, confer the power to adopt,
amend or repeal bylaws upon the directors. The fact that such power has been so
conferred upon the directors shall not divest the stockholders of the power, nor
limit their power to adopt, amend or repeal bylaws.
Notwithstanding any other provision of these bylaws or any provision of law
which might otherwise permit a lesser vote or no vote, but in addition to any
affirmative vote of the holders of the capital stock required by law or by these
bylaws, the affirmative vote of two-thirds (2/3) of the then-outstanding shares
of the corporation entitled to vote shall be required to alter, amend or repeal
Article II, Section 2.11 or this Article IX hereof or any provision thereof, or
to add or amend any other bylaw in order to change or nullify the effect of such
provisions, unless such amendment shall be approved by a majority of the
directors of the corporation not affiliated or associated with any person or
entity holding (or which has announced an intent to obtain) 10% or more of the
voting power of the corporation's outstanding capital stock.
Whenever an amendment or new bylaw is adopted, it shall be copied in the
book of bylaws with the original bylaws, in the appropriate place. If any bylaw
is repealed, the fact of repeal with the date of the meeting at which the repeal
was enacted or written consent was filed shall be stated in said book.
ARTICLE X
DISSOLUTION
If it should be deemed advisable in the judgment of the board of directors
of the corporation that the corporation should be dissolved, the board, after
the adoption of a resolution to that effect by a majority of the whole board at
any meeting called for that purpose, shall cause notice to be mailed to each
stockholder entitled to vote thereon of the adoption of the resolution and of a
meeting of stockholders to take action upon the resolution.
At the meeting a vote shall be taken for and against the proposed
dissolution. If a majority of the outstanding stock of the corporation entitled
to vote thereon votes for the proposed dissolution, then a certificate stating
that the dissolution has been authorized in accordance with the provisions of
Section 275 of the General Corporation Law of Delaware and setting forth the
names and residences of the directors and officers shall be executed,
acknowledged, and filed and shall become effective in accordance with Section
103 of the General Corporation Law of Delaware. Upon such certificate's becoming
effective in accordance with Section 103 of the General Corporation Law of
Delaware, the corporation shall be dissolved.
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Whenever all the stockholders entitled to vote on a dissolution consent in
writing, either in person or by duly authorized attorney, to a dissolution, no
meeting of directors or stockholders shall be necessary. The consent shall be
filed and shall become effective in accordance with Section 103 of the General
Corporation Law of Delaware. Upon such consent becoming effective in accordance
with Section 103 of the General Corporation Law of Delaware, the corporation
shall be dissolved. If the consent is signed by an attorney, then the original
power of attorney or s photocopy thereof shall be attached to and filed with the
consent. The consent filed with the Secretary of State shall have attached to it
the affidavit of the secretary or some other officer of the corporation stating
that the consent has been signed by or on behalf of all the stockholders
entitled to vote on a dissolution; in addition, there shall be attached to the
consent a certification by the secretary or some other officer of the
corporation setting forth the names and residences of the directors and officers
of the corporation.
ARTICLE XI
CUSTODIAN
11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES. The Court of Chancery,
upon application of any stockholder, may appoint one or more persons to be
custodians and, if the corporation is insolvent, to be receivers, of and for the
corporation when:
(i) at any meeting held for the election of directors the stockholders
are so divided that they have failed to elect successors to directors whose
terms have expired or would have expired upon qualification of their
successors;
(ii) the business of the corporation is suffering or is threatened with
irreparable injury because the directors are so divided respecting the
management of the affairs of the corporation that the required vote for
action by the board of directors cannot be obtained and the stockholders are
unable to terminate this division; or
(iii) the corporation has abandoned its business and has failed within a
reasonable time to take steps to dissolve, liquidate or distribute its
assets.
11.2 DUTIES OF CUSTODIAN. The custodian shall have all the powers and
title of a receiver appointed under Section 291 of the General Corporation Law
of Delaware, but the authority of the custodian shall be to continue the
business of the corporation and not to liquidate its affairs and distribute its
assets, except when the Court of Chancery otherwise orders and except in cases
arising under Sections 226(a)(3) or 352(a)(2) of the General Corporation Law of
Delaware.
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CERTIFICATE OF ADOPTION OF BYLAWS
OF
CENTURA SOFTWARE CORPORATION
ADOPTION BY INCORPORATOR
The undersigned person appointed in the certificate of incorporation to act
as the Incorporator of Centura Software Corporation hereby adopts the foregoing
bylaws, comprising twenty (20) pages, as the bylaws of the corporation.
Executed this th day of , 1998.
______________________________________
[Name]
Incorporator
Certificate by Secretary of Adoption by Incorporator
The undersigned hereby certifies that he is the duly elected, qualified, and
acting Secretary of Centura Software Corporation and that the foregoing bylaws,
comprising twenty (20) pages, were adopted as the bylaws of the corporation on
__________, 1998, by the person appointed in the certificate of incorporation to
act as the Incorporator of the corporation.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and affixed
the corporate seal this th day of , 1998.
______________________________________
Craig W. Johnson
Secretary
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF CENTURA SOFTWARE CORPORATION FOR THE
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD JUNE 17, 1998
The undersigned shareholder of Centura Software Corporation, a
California corporation, hereby acknowledges receipt of the Notice of Annual
Meeting of Shareholders and Proxy Statement, each dated April 30, 1998, and
hereby appoints Scott R. Broomfield and John Bowman or either of them,
proxies and attorneys-in-fact, with full power to each of substitution, on
behalf and in the name of the undersigned, to represent the undersigned at
the Annual Meeting of Shareholders of Centura Software Corporation to be held
on Wednesday, June 17, 1998 at 9:00 a.m., local time, at Hotel Sofitel,
located at 223 Twin Dolphin Drive, Redwood Shores, California 94065 and at
any adjournment or postponement thereof, and to vote all shares of Common
Stock which the undersigned would be entitled to vote if then and there
personally present, on the matters set forth below:
PLEASE SIGN ON REVERSE SIDE AND RETURN IMMEDIATELY
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<PAGE>
/X/ Please mark your votes as indicated in this example
1. ELECTION OF DIRECTORS:
___ FOR all nominees listed below (except as indicated).
___ WITHHOLD authority to vote for all nominees listed below.
If you wish to withhold authority to vote for any individual nominee,
strike a line through that nominee's name in the list below:
Scott R. Broomfield, Samuel M. Inman III, Jack King, Phillip Koen, Jr.,
Peter Micciche, William D. Nicholas, Earl M. Stahl
2. PROPOSAL TO APPROVE THE AMENDMENT TO THE COMPANY'S 1995 STOCK OPTION
PLAN TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK FOR ISSUANCE THEREUNDER
BY 1,000,000 SHARES TO AN AGGREGATE OF 3,000,000 SHARES:
____FOR ____AGAINST ____ABSTAIN
3. PROPOSAL TO APPROVE THE AMENDMENT TO THE COMPANY'S 1996 DIRECTORS'
STOCK OPTION PLAN (i) TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK FOR
ISSUANCE THEREUNDER BY 500,000 SHARES TO AN AGGREGATE OF 1,000,000 SHARES,
(ii) TO INCREASE THE NUMBER OF SHARES UNDERLYING STOCK OPTIONS GRANTED TO
EACH NONEMPLOYEE DIRECTOR FROM 50,000 TO 100,000 SHARES, AND (iii) TO REDUCE
THE NUMBER OF YEARS OVER WHICH NEW OPTIONS GRANTED TO NONEMPLOYEE DIRECTORS
WILL VEST FROM FOUR (4) YEARS TO THREE (3) YEARS:
____FOR ____AGAINST ____ABSTAIN
4. PROPOSAL TO APPROVE THE AMENDMENT TO THE COMPANY'S 1992 EMPLOYEE
STOCK PURCHASE PLAN TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK FOR
ISSUANCE THEREUNDER BY 1,000,000 SHARES TO AN AGGREGATE OF 1,400,000 SHARES:
____FOR ____AGAINST ____ABSTAIN
5. PROPOSAL TO APPROVE (i) A CHANGE IN THE COMPANY'S STATE OF
INCORPORATION FROM CALIFORNIA TO DELAWARE BY MEANS OF A MERGER OF THE COMPANY
WITH AND INTO A WHOLLY OWNED DELAWARE SUBSIDIARY OF THE COMPANY, (ii)
ASSUMPTION OF THE COMPANY'S EMPLOYEE BENEFIT PLANS AND STOCK OPTION AND
PURCHASE PLANS BY THE DELAWARE SUBSIDIARY AND (iii) REVISIONS TO THE
COMPANY'S INDEMNIFICATION AGREEMENTS WITH ITS OFFICERS AND DIRECTORS TO
CONFORM SUCH AGREEMENTS TO DELAWARE LAW:
____FOR ____AGAINST ____ABSTAIN
6. PROPOSAL TO RATIFY THE APPOINTMENT OF PRICE WATERHOUSE LLP AS THE
INDEPENDENT PUBLIC ACCOUNTANTS OF THE COMPANY FOR THE FISCAL YEAR ENDING
DECEMBER 31, 1998:
____FOR ____AGAINST ____ABSTAIN
and, in their discretion, upon such other matter or matters that may properly
come before the meeting and any postponement(s) or adjournment(s) thereof.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED AS FOLLOWS: (1) FOR THE ELECTION OF DIRECTORS; (2)
FOR APPROVAL OF THE AMENDMENT TO THE COMPANY'S 1995 STOCK OPTION PLAN TO
INCREASE THE NUMBER OF SHARES OF COMMON STOCK RESERVED FOR ISSUANCE
THEREUNDER BY 1,000,000 SHARES TO AN AGGREGATE OF 3,000,000 SHARES; (3) FOR
APPROVAL OF THE AMENDMENT TO THE COMPANY'S 1996 DIRECTORS' STOCK OPTION PLAN
(i) TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK FOR ISSUANCE THEREUNDER
BY 500,000 SHARES TO AN AGGREGATE OF 1,000,000 SHARES, (ii) TO INCREASE THE
NUMBER OF SHARES UNDERLYING STOCK OPTIONS GRANTED TO EACH NONEMPLOYEE
DIRECTOR FROM 50,000 TO 100,000 SHARES, AND (iii) TO REDUCE THE NUMBER OF
YEARS OVER WHICH NEW OPTIONS GRANTED TO NONEMPLOYEE DIRECTORS WILL VEST FROM
FOUR (4) YEARS TO THREE (3) YEARS; (4) FOR APPROVAL OF THE AMENDMENT TO THE
COMPANY'S 1992 EMPLOYEE STOCK PURCHASE PLAN TO INCREASE THE NUMBER OF SHARES
OF COMMON STOCK RESERVED FOR ISSUANCE THEREUNDER BY 1,000,000 SHARES TO AN
AGGREGATE OF 1,400,000 SHARES; (5) FOR (i) THE CHANGE IN THE COMPANY'S STATE
OF INCORPORATION FROM CALIFORNIA TO DELAWARE, (ii) ASSUMPTION OF THE
COMPANY'S EMPLOYEE BENEFIT PLANS AND STOCK OPTION AND PURCHASE PLANS BY THE
DELAWARE SUBSIDIARY AND (iii) REVISIONS TO THE COMPANY'S INDEMNIFICATION
AGREEMENTS WITH ITS OFFICERS AND DIRECTORS TO CONFORM SUCH AGREEMENTS TO
DELAWARE LAW; (6) FOR RATIFICATION OF THE APPOINTMENT OF PRICE WATERHOUSE LLP
AS THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS, AND AS SAID PROXIES DEEM
ADVISABLE ON SUCH OTHER MATTERS AS MAY COME BEFORE THE MEETING.
_______________________________________ Date:__________________________
Signature(s)
(This Proxy should be marked, dated, signed by the shareholder(s) exactly as
his or her name appears hereon, and returned promptly in the enclosed
envelope. Persons signing in a fiduciary capacity should so indicate. If
shares are held by joint tenants or as community property, both should sign.)
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