[ACTEL LOGO OMITTED]
ACTEL CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held on May 22, 1998
TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Actel
Corporation, a California corporation (the "Company"), will be held on May 22,
1998, at 9:00 a.m., local time, at the principal executive offices of the
Company, located at 955 East Arques Avenue, Sunnyvale, California 94086, for the
following purposes:
1. To elect directors to serve until the next Annual Meeting of
Shareholders and until their successors are elected.
2. To approve a change in the Company's state of incorporation from
California to Nevada by means of a merger of the Company into a
wholly-owned Nevada subsidiary.
3. To approve amendments to the Company's Articles of Incorporation
increasing the number of authorized shares of Common Stock by 25,000,000,
bringing the total number of authorized shares of capital stock to
60,000,000.
4. To approve amendments to the Company's 1993 Employee Stock
Purchase Plan ("ESPP") increasing the number of shares of Common Stock
reserved for issuance under the ESPP by 1,869,680, bringing the total
number of shares available for issuance under the ESPP to 2,124,329 (which
is equal to 10% of the shares of the Company's Common Stock that were
issued and outstanding at the close of business on March 23, 1998).
5. To approve amendments to the Company's 1993 Directors' Stock
Option Plan ("Director Plan") increasing the number of shares of Common
Stock reserved for issuance under the Director Plan (i) in 1998 by 30,000,
bringing the total number of shares available for issuance under the
Director Plan to 100,000, and (ii) on the first day of each subsequent
fiscal year during the term of the Director Plan by (x) 100,000 less (y)
the number of shares available for issuance under the Director Plan on the
last day of the immediately preceding fiscal year.
6. To ratify the appointment of Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending January 3, 1999.
7. To transact such other business as may properly come before the
Annual Meeting or any adjournments thereof.
Only shareholders of record at the close of business on March 23, 1998, are
entitled to notice of and to vote at the Annual Meeting.
All shareholders are cordially invited to attend the Annual Meeting in
person. However, to assure your representation at the Annual Meeting, you are
urged to sign and return the enclosed Proxy as promptly as possible in the
postage-prepaid, self-addressed envelope enclosed for that purpose. Any
shareholder attending the Annual Meeting may vote in person even if such
shareholder has returned a proxy.
BY ORDER OF THE BOARD OF DIRECTORS
David L. Van De Hey
Secretary
Sunnyvale, California
March 27, 1998
ACTEL CORPORATION
--------------------------------------
PROXY STATEMENT FOR
1998 ANNUAL MEETING OF SHAREHOLDERS
The enclosed Proxy is solicited on behalf of the Board of Directors of
Actel Corporation, a California corporation (the "Company"), for use at the
Annual Meeting of Shareholders to be held on Friday, May 22, 1998, at 9:00 a.m.,
local time, and at any adjournments 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 principal executive offices of the Company, which
are located at 955 East Arques Avenue, Sunnyvale, California 94086. The
Company's telephone number at that address is (408) 739-1010.
These proxy solicitation materials were mailed on or about April 11, 1998,
to all shareholders entitled to vote at the Annual Meeting.
INFORMATION CONCERNING SOLICITATION AND VOTING
Record Date
Holders of record of the Company's Common Stock at the close of business on
March 23, 1998 (the "Record Date"), are entitled to notice of and to vote at the
Annual Meeting. At the Record Date, 21,243,290 shares of the Company's Common
Stock were issued and outstanding.
Revocability of Proxies
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by (i) delivering to the Secretary of the
Company a written notice of revocation or a duly executed proxy bearing a later
date or (ii) attending the Annual Meeting and voting in person.
Voting and Solicitation
On all matters, each shareholder is entitled to one vote for each share
held.
This solicitation of proxies is made by the Company, and all related costs
will be borne by the Company. In addition, the Company may reimburse brokerage
firms and other persons representing beneficial owners of shares for their
expenses in forwarding solicitation material to such beneficial owners. Original
solicitation of proxies by mail may be supplemented by telephone, telefacsimile,
or personal solicitation, without payment of additional compensation, by
directors, officers, or regular employees of the Company.
Required Vote
The quorum required to conduct business at the Annual Meeting or any
adjournments thereof is a majority of the shares of Common Stock issued and
outstanding on the Record Date. If a quorum is present, the five candidates
receiving the highest number of affirmative votes shall be elected directors;
votes against any candidate and votes withheld shall have no legal effect. The
affirmative vote of a majority of the shares "entitled to vote" (whether or not
represented at the Annual Meeting) shall be required to approve Proposal No. 2
(Nevada Reincorporation) and Proposal No. 3 (Approval of Amendments to Articles
of Incorporation). The affirmative vote of a majority of the shares represented
at the Annual Meeting and "entitled to vote" shall be required to approve
Proposals No. 4 (Approval of Amendments to 1993 Employee Stock Purchase Plan)
and No. 5 (Approval of Amendments to 1993 Directors' Stock Option Plan). On all
other proposals set forth herein, the affirmative vote of the majority of the
shares represented at the Annual Meeting and "voting" shall be the act of the
shareholders.
Although there is no definitive statutory or case law in California as to
the proper treatment of abstentions and broker nonvotes, the Company believes
that both abstentions and broker nonvotes should be counted for purposes of
determining the presence or absence of a quorum for the transaction of business.
The Company also believes that neither abstentions nor broker nonvotes should be
counted for purposes of determining the total number of shares represented and
"voting" on each matter submitted to a vote of the shareholders. The Company
further believes that abstentions should be counted, but that broker nonvotes
should not be counted, for purposes of determining the total number of shares
represented and "entitled to vote" on any matter. In the absence of controlling
precedent to the contrary, the Company intends to treat abstentions and broker
nonvotes in the manner described in this paragraph.
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 December 14, 1998, in order to be
considered for inclusion in the proxy statement and form of proxy relating to
that meeting.
Share Ownership
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock by each person who is known to the
Company to have owned beneficially more than five percent of the outstanding
shares of the Company's Common Stock as of the Record Date:
<TABLE>
<CAPTION>
Amount and
Nature of
Beneficial Percent of
Name and Address of Beneficial Owner Ownership Class (1)
- ---------------------------------------------------------------------------------- ---------------- ----------------
<S> <C> <C>
FMR Corp........................................................................ 1,381,800 (2) 6.5%
80 Devonshire Street
Boston, Massachusetts 02109
Mutual Management Corp.......................................................... 1,075,100 (3) 5.1%
388 Greenwich Street
New York, New York 10013
Texas Instruments Incorporated.................................................. 1,376,578 (4) 6.5%
13500 North Central Expressway
Dallas, Texas 75265
The Crabbe Huson Group, Inc..................................................... 2,674,400 (5) 12.6%
121 SW Morrison, Suite 1400
Portland, Oregon 97204
- ---------------------------------------
<FN>
(1) Calculated as a percentage of shares of Common Stock outstanding as of
the Record Date.
(2) As reported by the beneficial owner as of December 31, 1997, in a
Schedule 13G filed with the Securities and Exchange Commission ("SEC")
and dated February 14, 1998, Fidelity Management & Research Corporation
("Fidelity Management"), a wholly-owned subsidiary of FMR Corp. and an
investment adviser registered under Section 203 of the Investment
Advisers Act of 1940, was the beneficial owner of 1,381,800 shares of
Common Stock as a result of acting as an investment adviser to various
investment companies registered under Section 8 of the Investment
Company Act of 1940 (the "Funds"). Edward C. Johnson 3d, FMR Corp.,
through its control of Fidelity Management, and the Funds each has sole
power to dispose of the 1,381,800 shares owned by the Funds. Neither
FMR Corp. nor Edward C. Johnson 3d, Chairman of FMR Corp., has the sole
power to vote or direct the voting the shares owned directly by the
Funds, which power resides in the Funds' Boards of Trustees. Fidelity
Management carries out the voting of shares under written guidelines
established by the Funds' Boards of Trustees. Members of the Edward C.
Johnson 3d family and trusts for their benefit are the predominant
owners of Class B shares of common stock of FMR Corp., representing
approximately 49% of the voting power of FMR Corp. Mr. Johnson 3d owns
12.0% and Abigail Johnson owns 24.5% of the aggregate outstanding
voting stock of FMR Corp. Mr. Johnson 3d is Chairman of FMR Corp. and
Abigail P. Johnson is a Director of FMR Corp. The Johnson family group
and all other Class B shareholders have entered into a shareholders'
voting agreement under which all Class B shares will be voted in
accordance with the majority vote of Class B shares. Accordingly,
through their ownership of voting common stock and the execution of the
shareholders' voting agreement, members of the Johnson family may be
deemed, under the Investment Company Act of 1940, to form a controlling
group with respect to FMR Corp.
(3) As reported by the beneficial owner as of December 31, 1997, in a
Schedule 13G filed with the SEC and dated February 6, 1998, Mutual
Management Corp. ("MMC"), Salomon Smith Barney Holdings Inc. ("SSB
Holdings"), and Travelers Group Inc. ("TRV") had shared voting power
and shared dispositive power with respect to all of the shares of
Common Stock beneficially owned. SSB Holdings is the sole stockholder
of MMC, an investment adviser registered under Section 203 of the
Investment Advisers Act of 1940. TRV is the sole stockholder of SSB
Holdings. TRV and SSB Holdings disclaim beneficial ownership of all
such shares for purposes of Sections 13(d) and 13(g) of the Securities
Exchange Act of 1934, as amended.
(4) As reported by the beneficial owner as of September 3, 1997, in a
Schedule 13D filed with the SEC and dated September 11, 1997, the
beneficial owner has sole voting power and sole dispositive power with
respect to all of the shares of Common Stock beneficially owned.
(5) As reported by the beneficial owner as of December 31, 1997, in a
Schedule 13G filed with the SEC and dated February 2, 1997, the
beneficial owner, which is an investment adviser registered under
Section 203 of the Investment Advisers Act of 1940, has shared voting
power and shared dispositive power with respect to the 2,674,400 shares
of Common Stock owned by approximately 59 of its clients.
</FN>
</TABLE>
PROPOSAL NO. 1 -- ELECTION OF DIRECTORS
Nominees
A board of five directors is to be elected at the Annual Meeting. Unless
otherwise instructed, the proxy holders will vote the proxies received by them
for the Company's nominees named below. If 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. The Company is not aware of any nominee
who will be unable or will decline to serve as a director. The term of office of
each person elected as a director will continue until the next Annual Meeting
and until a successor has been elected. Mr. Keith B. Geeslin, who has been a
director of the Company since March 1990, chose not to stand for re-election.
The Board of Directors recommends that shareholders vote "FOR" the nominees
listed below:
<TABLE>
<CAPTION>
Director
Name of Nominee Age Principal Occupation Since
- ------------------------------------------------------- ----- ----------------------------------------- -----------
<S> <C> <C> <C>
John C. East........................................ 53 President and Chief Executive Officer 1988
Actel Corporation
Jos C. Henkens (1)(2)............................... 45 General Partner 1988
Advanced Technology Ventures
Jacob S. Jacobsson.................................. 44 President and Chief Executive Officer --
SCS Corporation
Frederic N. Schwettmann (2)......................... 58 Retired 1990
Robert G. Spencer (2)............................... 54 Principal 1989
The Spencer Group
- ---------------------------------------
<FN>
(1) Member of Audit Committee.
(2) Member of Compensation Committee.
</FN>
</TABLE>
Mr. East has served as President, Chief Executive Officer, and a director
of the Company since December 1988. Mr. East also serves, at the Company's
request, as a director of Adaptec, Inc. and SCS Corporation, a private company
located in San Diego.
Mr. Henkens has been a director of the Company since April 1988. He also
served as a director of the Company from October 1985 to July 1986. Mr. Henkens
has been a general partner of Advanced Technology Ventures, a venture capital
firm, for the past ten years. Mr. Henkens also serves as a director of Accel
Graphics, Inc., Credence Systems Corporation, Objectshare, Inc., and various
private companies.
Mr. Jacobsson has been nominated to serve as a director of the Company for
the first time. He has been President, Chief Executive Officer, and a director
of SCS Corporation, a privately-held, fabless semiconductor company in the Radio
Frequency Identification area. Mr. Jacobsson also serves as a director of
another private company.
Mr. Schwettmann has been a director of the Company since April 1990. He is
retired. Mr. Schwettmann was President, Chief Operating Officer, and a director
of Read-Rite Corporation, the leading independent supplier of thin-film magnetic
recording heads for Winchester disk drives, from May 1993 until September 1997.
From June 1990 to May 1993, Mr. Schwettmann served on the Company's Board of
Directors as the representative of Hewlett-Packard Company, where he was Vice
President and General Manager of the Circuit Technologies Group. Mr. Schwettmann
also serves as a director of SDL Incorporated.
Mr. Spencer has been a director of the Company since February 1989. He has
been the principal of The Spencer Group, a consulting firm, for the past five
years.
There is no family relationship between any director or executive officer
of the Company and any other director or executive officer of the Company.
Board Meetings and Committees
During the Company's 1997 fiscal year, which ended December 28, 1997, the
Board of Directors held five meetings, the Board's Audit Committee held five
meetings, and the Board's Compensation Committee held three meetings. No
director attended fewer than 75% of the aggregate of (i) the number of meetings
of regularly scheduled and special meetings of the Board of Directors and (ii)
the total number of meetings held by all committees of the Board of Directors on
which he served.
The Audit Committee, which currently consists of Messrs. Geeslin and
Henkens, reviews the results and scope of the audit and other services provided
by the Company's independent auditors. The Compensation Committee, which
currently consists of Messrs. Henkens, Schwettmann, and Spencer, approves
salary, benefit, and incentive compensation matters. The Board of Directors does
not have a nominating committee or a committee performing the functions of a
nominating committee.
Director Compensation
Cash Compensation
Directors who are not employees of the Company receive compensation for
their services as directors at the rate of $1,500 per Board meeting attended and
$1,000 per committee meeting attended. In addition, nonemployee directors
receive an annual retainer of $12,000. Directors are reimbursed for reasonable
out-of-pocket expenses incurred in the performance of their duties.
1993 Directors' Stock Option Plan
The Company's 1993 Directors' Stock Option Plan (the "Director Plan")
provides for the grant of nonstatutory stock options to nonemployee directors of
the Company. If the Company's nominees are elected, four of the Company's
directors (Messrs. Henkens, Jacobsson, Schwettmann, and Spencer) will be
eligible to receive option grants under the Director Plan. For a summary of the
material terms of the Director Plan, as well as disclosure regarding the
approximate dollar value and number of options to purchase shares that were
allocated to directors under the Director Plan in the last fiscal year, see
"PROPOSAL NO. 5 -- APPROVAL OF AMENDMENTS TO 1993 DIRECTORS' STOCK OPTION PLAN."
PROPOSAL NO. 2 -- NEVADA REINCORPORATION
Introduction
For the reasons set forth below, the Board of Directors believe 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 Nevada (the
"Proposed Reincorporation"). Shareholders are urged to read carefully the
following sections of this Proxy Statement, including the exhibit, before voting
on the Proposed Reincorporation. In this discussion of the Proposed
Reincorporation, the term "Actel California" refers to the existing California
corporation and the term "Actel Nevada" refers to the new Nevada corporation
that is the proposed successor to Actel California.
If approved, the change in the state of incorporation of the Company from
California to Nevada will be effected by the Agreement and Plan of Merger by and
between Actel California and Actel Nevada, a copy of which is attached hereto as
Exhibit A (the "Merger Agreement"). Pursuant to the Merger Agreement, Actel
California will merge with and in Actel Nevada, and Actel Nevada, under its
current Articles of Incorporation, will continue as the surviving corporation.
Each outstanding share of Actel California Common Stock will automatically be
converted into one share of Actel Nevada Common Stock upon the effective date of
the merger. Shareholders of Actel California will have no dissenters' rights of
appraisal with respect to the Proposed Reincorporation. See "Significant
Differences Between the Corporation Laws of California and Nevada - Appraisal
Rights."
Principal Reasons for the Proposed Reincorporation
Nevada follows a policy of encouraging incorporation in that state and, in
furtherance of that policy, has adopted comprehensive, flexible corporate laws
responsive to the legal and business needs of corporations organized under its
laws. In the judgment of the Company's Board of Directors, the corporate laws of
Nevada are less subject to volatility, and should be interpreted more
predictably, than the corporate laws of California, which from time to time have
been the subject of voter initiatives. The Company believes it can better
protect the interests of its shareholders if the corporate law governing its
activities is both more stable and predictable, on one hand, and permits greater
flexibility, on the other hand. In addition, although many California
corporations have in recent years reincorporated in Delaware, the cost of
maintaining a corporation as a Nevada corporation is significantly less than for
a Delaware corporation, and Nevada law provides much of the same stability,
predictability, and flexibility as Delaware. Other corporations have also
initially chosen Nevada for their state of incorporation or have subsequently
changed their corporate domicile to Nevada in a manner similar to that proposed
by the Company.
Antitakeover Implications
Nevada, like many other states, permits a corporation to adopt a number of
measures through amendment of the corporate charter or bylaws or otherwise, and
provides default legal provisions that apply unless the corporation has
affirmatively chosen to opt out, designed to reduce a corporation's
vulnerability to unsolicited takeover attempts. For example, Sections 78.411 to
78.444 of the Nevada General Corporation Law restrict certain "combinations"
with "interested stockholders" for three years following the date that a person
becomes an interested stockholder, unless the Board of Directors has approved
either the business combination or the transaction by which the interested
stockholder became an interested stockholder prior to the time such person
became an interested person. Even after the three-year period, such combinations
are restricted unless certain tests are satisfied.
The Proposed Reincorporation 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 that affects the Company.
Actel Nevada intends to affirmatively "opt out" of those default legal
provisions, such as Sections 78.411 to 78.444 of the Nevada General Corporation
Law, that in its judgment are designed to have an antitakeover effect.
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 again in the future, certain
defensive strategies designed to enhance the Board's ability to negotiate with
an unsolicited bidder. These strategies include, but are not limited to, the
adoption of a shareholder rights plan; severance agreements for its management
and key employees that become effective upon the occurrence of a change in
control of the Company; and the authorization of preferred stock, the rights and
preferences of which are determined by the Board of Directors.
Certain effects of the Proposed Reincorporation may be considered to have
antitakeover implications simply by virtue of the Company being subject to
Nevada law. For example, in responding to an unsolicited bidder, the Nevada
General Corporation Law authorizes directors to consider not only the interests
of stockholders, but also the interests of employees, suppliers, creditors,
customers, the economy of the state and nation, the interests of the community
and society in general, and the long-term as well as short-term interests of the
corporation and its stockholders, including the possibility that these interests
may be best served by the continued independence of the corporation. For a
discussion of these and other differences between the laws of California and
Nevada, see "Significant Differences Between the Corporation Laws of California
and Nevada" below.
Despite the belief of the Board of Directors as to the benefits to
shareholders of the Proposed Reincorporation, such proposal may be
disadvantageous to the extent that it has the effect of discouraging a future
takeover attempt that 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. In addition,
to the extent that the provisions of Nevada law 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.
No Change in the Board Members, Business, Management, or Location of Principal
Facilities of the Company; Certain Changes to Name and to Employee Plans
The Proposed Reincorporation will effect 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 business, management, fiscal year, assets or liabilities, or
location of the principal facilities of the Company. The five directors who are
the directors of Actel California will continue as the directors of Actel
Nevada. All employee benefit and stock option plans of Actel California,
including the 1986 Incentive Stock Option Plan, the 1993 Employee Stock Purchase
Plan, the 1993 Directors' Stock Option Plan, and the 1995 Employee and
Consultant Stock Plan, will be continued by Actel Nevada and each outstanding
option to purchase shares of Actel California stock will automatically be
converted into an option to purchase an equivalent number of shares of Actel
Nevada stock on the same terms and subject to the same conditions. The name of
the Company will remain Actel Corporation.
The Charter and Bylaws of Actel California and Actel Nevada
The provisions of the Actel Nevada Articles of Incorporation are similar to
those of the Actel California Articles of Incorporation in most respects. The
material changes that have been made in the Actel Nevada Articles of
Incorporation as compared with the Actel California Articles of Incorporation
are described below in this section or under "Significant Differences Between
the Corporation Laws of California and Nevada."
Authorized Stock
The Articles of Incorporation of Actel California authorize 35,000,000
shares of capital stock, $.001 par value, of which 30,000,000 shares are
designated Common Stock and 5,000,000 shares are designated Preferred Stock. The
Articles of Incorporation of Actel Nevada authorize 35,000,000 shares of capital
stock, $.001 par value, of which 30,000,000 shares are designated Common Stock
and 5,000,000 shares are designated Preferred Stock. If "PROPOSAL NO. 2 --
APPROVAL OF AMENDMENTS TO ARTICLES OF INCORPORATION" is approved, the Articles
of Incorporation of Actel Nevada will be amended to authorize 60,000,000 shares
of capital stock, $.001 par value, of which 55,000,000 shares will be designated
Common Stock and 5,000,000 shares will be designated Preferred Stock.
Indemnification
The indemnification provisions of Actel California's Articles of
Incorporation and Bylaws are substantially similar to those of the Articles of
Incorporation and Bylaws of Actel Nevada, though Actel Nevada has placed certain
of these provisions in the Articles of Incorporation rather than in the Bylaws.
These provisions in Actel Nevada's Articles of Incorporation state that the
Company shall indemnify directors and officers in connection with any action,
suit, or proceeding to the fullest extent permitted by law for acts as directors
or officers (of Actel Nevada or of a predecessor to Actel Nevada, or as a
director, officer, employee, or agent of another enterprise at the request of
the Company), and that the Company shall advance the expenses of directors and
officers in advance of the final disposition of any action, suit, or proceeding
upon receipt of an undertaking by the director or officer to repay the amount
advanced if a court ultimately determines that the director or officer is not
entitled to indemnification. Similar provisions also appear in the Bylaws of
both Actel California and Actel Nevada.
While the Bylaws of both Actel California and Actel Nevada permit the
Company to obtain insurance on behalf of directors, officers, employees, and
agents, Actel Nevada's Bylaws also permit the Company to make other financial
arrangements on behalf of any such person for any liabilities or expenses
incurred in such capacity. See "Significant Differences Between the Corporation
Laws of California and Nevada" below.
Monetary Liability of Directors
The Articles of Incorporation of Actel California and Actel Nevada both
provide for the elimination or limitation of personal monetary liability of
directors to the fullest extent permissible under the laws of each corporation's
respective state of incorporation. The laws of Nevada and Actel Nevada's
Articles of Incorporation also permit the elimination or limitation of the
liability of officers of the Company. Nevada permits liability to be limited to
a greater extent than does California law. See "Significant Differences Between
the Corporation Laws of California and Nevada" below.
Significant Differences Between the Corporation Laws of California and Nevada
The General Corporation Laws of California and Nevada differ in many
respects. It is not practical to summarize all differences in this Proxy
Statement, but the principal differences that could materially affect the rights
of shareholders are discussed below.
Appraisal Rights
Under both California and Nevada 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 Nevada law, dissenters' (or appraisal) rights are not available in a
merger or share exchange if the shares held by the stockholders prior to the
share exchange or merger were either listed on a national securities exchange or
held by at least 2,000 stockholders of record, unless the articles of
incorporation of the corporation provide for dissenters' rights or the
stockholders are required to accept under the plan of merger or share exchange
anything other than cash, shares of the surviving corporation, shares of a
publicly traded or widely held corporation, or a combination of these.
The limitations on the availability of appraisal rights under California
law are different from those under Nevada law. Shareholders of a California
corporation whose shares are listed on a national securities exchange or on a
list of over-the-counter margin stocks issued by the Board of Governors of the
Federal Reserve System generally do not have such appraisal rights unless the
holders of at least five percent of the class of outstanding shares claim the
right or unless the corporation or any law restricts the transfer of such
shares. Appraisal rights are also unavailable if the shareholders of a
corporation or the corporation itself, or both, immediately prior to the
reorganization will own immediately after the reorganization equity securities
constituting more than five-sixths of the voting power of the surviving or
acquiring corporation or its parent entity (as will be the case under the
Proposed Reincorporation). Appraisal or dissenters' rights are, therefore, not
available to shareholders of Actel California with respect to the Proposed
Reincorporation.
Business Combinations
In the last several years, a number of states, including Nevada, 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 stockholders, more difficult.
Sections 78.411 to 78.444 of the Nevada General Corporation Law prohibit a
Nevada corporation from engaging in a "combination" with an "interested
stockholder" for three years following the date that such person becomes an
interested stockholder and place certain restrictions on such combinations even
after the expiration of the three-year period. With certain exceptions, an
interested stockholder is a person or group that owns 10% or more of the
corporation's outstanding voting power (including stock with respect to which
the person has voting rights and any rights to acquire stock pursuant to an
option, warrant, agreement, arrangement, or understanding or upon the exercise
of conversion or exchange rights) or is an affiliate or associate of the
corporation and was the owner of 10% or more of such voting stock at any time
within the previous three years.
For purposes of Sections 78.411 to 78.444, the term "combination" is
defined broadly to include mergers of the corporation or its subsidiaries with
the interested stockholder; sales or other dispositions to the interested
stockholder of assets of the corporation or a subsidiary equal to 5% of the
aggregate value of all assets of the corporation, equal to 5% of the value of
all outstanding shares of the corporation, or representing 10% of the
corporation's earning power or net income; the issuance or transfer by the
corporation or a subsidiary of shares equal to 5% of the value of all
outstanding shares of the corporation to the interested stockholder (except
under the exercise of warrants or rights to purchase shares offered or in a pro
rata distribution); the adoption of any plan of liquidation of the corporation
proposed by or under any agreement, arrangement, or understanding with the
interested stockholder; any reclassification, recapitalization, merger of the
corporation with any of its subsidiaries, or other transaction that has the
effect of increasing the proportionate ownership of the interested stockholder;
or receipt by the interested stockholder (except proportionately as a
stockholder), directly or indirectly, of any loans, advances, guarantees,
pledges, or other financial assistance or tax advantages provided by or through
the corporation. These prohibitions also apply to affiliates and associates of
the interested stockholders.
The three-year moratorium imposed on business combinations by Sections
78.411 to 78.444 does not apply if, prior to the date on which such stockholder
becomes an interested stockholder, the board of directors approves either the
business combination or the transaction that resulted in the person becoming an
interested stockholder.
Even after expiration of the three-year period, the moratorium on
combinations continues to apply unless one of the following requirements is met:
(i) prior to the date on which such stockholder becomes an interested
stockholder the board of directors approves either the business combination or
the transaction that resulted in the person becoming an interested stockholder;
(ii) the combination is approved by a majority of the voting power not
beneficially owned by the interested stockholder or its affiliates or associates
at a meeting called for that purpose; or (iii) the combination satisfies certain
provisions concerning fair price.
Sections 78.411 to 78.444 only apply to Nevada corporations that have 200
or more stockholders and, unless the articles of incorporation provide
otherwise, have a class of voting shares registered under Section 12 of the
Securities Exchange Act of 1934 (as the Common Stock of Actel Nevada would be
upon consummation of the Reincorporation). A Nevada corporation may elect not to
be governed by Sections 78.411 to 78.444 by a provision in its original
certificate of incorporation or an amendment thereto, which amendment must be
approved by a majority of the outstanding voting power, although such amendment
is not effective until 18 months after the vote.
Actel Nevada has elected not to be governed by Sections 78.411 to 78.444;
therefore, these Sections will not apply to Actel Nevada.
Control Shares
Nevada law further seeks to impede "unfriendly" corporate takeovers by
providing in Sections 78.378 to 78.3793 of the Nevada General Corporation Law
that an "acquiring person" shall only obtain voting rights in the "control
shares" purchased by such person to the extent approved by the other
stockholders at a meeting. With certain exceptions, an acquiring person is one
who acquires or offers to acquire a "controlling interest" in the corporation,
defined as one-fifth or more of the voting power. Control shares include not
only shares acquired or offered to be acquired in connection with the
acquisition of a controlling interest, but also all shares acquired by the
acquiring person within the preceding 90 days. The statute covers not only the
acquiring person but also any persons acting in association with the acquiring
person. California does not have a control shares statute.
Under Sections 78.378 to 78.3793, a Nevada corporation may, if so provided
in the articles of incorporation or bylaws of the corporation in effect on the
tenth day following acquisition of a controlling interest, call for redemption
of not less than all of the control shares at the average price paid for the
control shares if (i) the acquiring person has not delivered an offeror's
statement to the corporation within ten days after acquisition of the control
shares or (ii) the other stockholders do not accord full voting rights to the
control shares.
Unless otherwise provided in the articles of incorporation or bylaws in
effect on the tenth day following acquisition of a controlling interest, if the
control shares are accorded full voting rights and the acquiring person has
acquired a majority of the voting power, then any stockholder of record who did
not vote in favor of authorizing such voting rights is entitled to demand
payment for the fair value of such stockholder's shares.
Sections 78.378 to 78.3793 apply only to Nevada corporations that (i) have
200 or more stockholders, at least 100 of whom are stockholders of record and
are resident in Nevada, and (ii) do business in Nevada directly or through an
affiliated corporation. A corporation may elect to opt out of the provisions of
Sections 78.378 to 78.3793 if, before an acquisition of a controlling interest
is made, the articles of incorporation or bylaws in effect on the tenth day
following the acquisition of a controlling interest by an acquiring person
provide that these Sections do not apply. The Company does not currently and
will not as a result of the Proposed Reincorporation have 100 or more record
stockholders resident in Nevada.
Actel Nevada has elected not to be governed by Sections 78.378 to 78.3793;
therefore, these Sections will not apply to Actel Nevada, even if the Company
hereafter has 100 or more record stockholders resident in Nevada.
Cumulative Voting
California law generally provides that 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.
Under Nevada law, cumulative voting is not mandatory, and cumulative voting
rights must be provided in a corporation's articles of incorporation if
stockholders are to be entitled to cumulative voting rights. The Articles of
Incorporation of Actel Nevada do not provide for cumulative voting.
California law permits a corporation that is listed on a national
securities exchange, or that is listed on the Nasdaq National Market and has at
least 800 stockholders as of the record date for the corporation's most recent
annual meeting of shareholders, to amend its articles or bylaws to eliminate
cumulative voting by approval of the board of directors and of the outstanding
shares voting together as a class. Actel California's current Articles of
Incorporation have eliminated cumulative voting.
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. Under Nevada law, a corporation generally
may dissolve only upon the passing of a resolution by the corporation's board of
directors and upon approval by the stockholders.
Dividends and Repurchases of Shares
Under California law, a corporation may not make any distribution
(including dividends, whether in cash or other property, and repurchases of its
shares) unless, immediately prior to the proposed distribution, the
corporation's retained earnings 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 125% of
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 125% of 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). California also
prohibits any distribution if the corporation or subsidiary making the
distribution is or would be likely to be unable to meet its liabilities.
California also prohibits making any distribution to a class or series of shares
junior to another class or series with respect to a liquidation preference
unless after giving effect to the distribution the excess of assets over
liabilities is at least equal to the liquidation preference of all such shares
or, in the case of a dividend preference, retained earnings prior to the
distribution at least equal the proposed distribution plus cumulative dividends
in arrears on all such shares.
Nevada law prohibits a distribution (including dividends, purchases,
redemptions or other acquisition of shares, distributions of indebtedness, or
otherwise) if, after giving effect to the distribution, (i) the corporation
would not be able to pay its debts as they become due in the usual course of
business or (ii) except as provided in the articles of incorporation, the
corporation's total assets would be less than the sum of its total liabilities
plus the amount that would be needed, if the corporation were to be dissolved at
the time of distribution, to satisfy the preferential rights upon dissolution of
stockholders whose preferential rights are superior to those receiving the
distribution.
To date, the Company has not paid cash dividends on its capital stock. In
addition, the Company's bank line of credit prohibits the payment of cash
dividends without the bank's consent. It is the present policy of the Board of
Directors to retain earnings for use in the Company's business, and the Company
does not anticipate paying cash dividends on its capital stock in the
foreseeable future.
Elimination of Actions by Written Consent of Shareholders
Under California and Nevada law, shareholders may execute an action by
written consent in lieu of a shareholder meeting. While Nevada law permits a
corporation to eliminate such actions by written consent in its articles of
incorporation or bylaws, the Articles and Bylaws of Actel Nevada do not
currently prohibit actions by written consent of the stockholders, although the
Board of Directors could amend the Bylaws in this respect. The ability of the
Board of Directors under Nevada law to limit or eliminate the right of
stockholders to initiate action by written consent may make it more difficult to
change the existing Board of Directors and management.
Filling Vacancies on the Board of Directors
Under California law, unless the articles of incorporation or bylaws
provide otherwise, any vacancy on the board of directors not 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. Unless the articles of incorporation or bylaws otherwise
provide, a vacancy created by removal of a director may be filled only by
approval of the shareholders. Actel California's Articles of Incorporation and
Bylaws permit directors to fill vacancies; however, if the vacancy was created
by the removal of a director by the vote or written consent of the shareholders
or by court order, the vacancy may be filled only by the affirmative vote of a
majority of shares represented and voting at a duly held meeting at which a
quorum is present, or by the unanimous written consent of all the shares
entitled to vote thereon. Under Nevada law, unless a corporation's articles of
incorporation provide otherwise, any vacancy on the board of directors,
including one created by removal of a director or an increase in the number of
authorized directors, may be filled by the majority of the remaining directors,
even if such number constitutes less than a quorum. The Articles of
Incorporation of Actel Nevada provide that a vacancy created by the removal of a
director by the vote or written consent of the shareholders or by court order
may only be filled by the affirmative vote of a majority of shares represented
and voting at a duly held meeting at which a quorum is present, or by the
unanimous written consent of all the shares entitled to vote thereon, unless the
number of remaining directors is less than a quorum, in which case the 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.
Inspection of Shareholder List
California law allows any shareholder to inspect the shareholder list, the
accounting books and records, and the minutes of board and shareholder
proceedings for a purpose reasonably related to such person's interest as a
shareholder. California law provides, in addition, for an absolute right to
inspect and copy the corporation's shareholder list by persons who hold an
aggregate of five percent or more of a corporation's voting shares or who hold
one percent or more of such shares and have filed a Schedule 14A with the
Securities and Exchange Commission.
Nevada law allows inspection of a stockholder list only upon five days'
notice by either a person who has been a stockholder of record at least six
months or a person holding, or authorized in writing by the holder of, five
percent of the corporation's outstanding shares. In addition, the corporation
may deny such inspection rights if the stockholder requesting disclosure refuses
to sign an affidavit to the effect that (i) the inspection is not desired for a
purpose that is in the interest of a business or object other than the business
of the corporation and (ii) the stockholder has not at any time sold or offered
for sale any list of stockholders of any corporation or aided and abetted any
other person for such purpose. To inspect the accounting and financial books and
records of a corporation, a stockholder must hold or have the written
authorization of the holders of at least 15% of all issued and outstanding
shares, and a corporation may demand an affidavit to the effect that such
inspection is not desired for any purpose not related to such person's interest
in the corporation as a stockholder. No right to inspect the accounting and
financial books and records applies to any corporation listed and traded on a
recognized stock exchange or which furnishes detailed annual financial
statements to its stockholders.
Lack of access to stockholder records, even though unrelated to the
stockholder's interests as a stockholder, could result in impairment of the
stockholder's ability to coordinate opposition to management proposals,
including proposals with respect to a change in control of the Company. However,
California law provides that California provisions concerning the inspection of
shareholder lists apply not only to California corporations but also to
corporations organized under the laws of other states that have their principal
executive offices in California or customarily hold meetings of the board in
California, and that the California provisions concerning accounting books and
records and the minutes of board and shareholder proceedings apply to any such
foreign corporation that has its principal executive offices in California. For
so long as the Company continues to have its principal executive offices in
California and to hold board of directors meetings in California, and to the
extent such provisions applicable to foreign corporations are enforceable, the
Company must comply with California law concerning shareholder inspections. In
any event, the Company intends to continue complying with California law
concerning shareholder inspections even if it is not required to do so.
Interested Director Transactions
Under both California and Nevada law, certain contracts or transactions in
which one or more of a corporation's directors have 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 Nevada law. Under California and Nevada law, either
(i) 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) to the corporation or (ii) the contract or transaction must have
been "just and reasonable" (in California) or "fair" (in Nevada) 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. 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 California law, if shareholder approval is sought,
the interested director is not entitled to vote such director's shares at a
shareholder meeting with respect to any action regarding such contract or
transaction, whereas Nevada law requires that such director's votes be counted
for such purpose. Nevada law also provides that the transaction is not void or
voidable if the fact of the common directorship, office, or financial interest
at issue is not disclosed or known to the director at the time the transaction
is brought before the board for action. Nevada law addresses not only interested
directors but also transactions with interested officers.
Limitation of Liability and Indemnification
California and Nevada 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 Actel California eliminate the liability
of directors to the fullest extent permissible under California law. California
law permits eliminating or limiting the personal liability of a director for
monetary damages in an action brought by or in the right of the corporation (a
"derivative suit") for breach of a director's duties to the corporation and its
shareholders; provided, however, that the corporation may not eliminate or limit
liability for (i) intentional misconduct or knowing and culpable violation of
law; (ii) 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; (iii) receipt of an improper personal
benefit; (iv) 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; (v) acts or omissions that
constitute an unexcused pattern of inattention that amounts to an abdication of
the director's duty to the corporation or its shareholders; (vi) interested
transactions between the corporation and a director in which a director has a
material financial interest; and (vii) liability for improper distributions,
loans, or guarantees.
The Articles of Incorporation of Actel Nevada eliminate the liability of
both directors and officers to the fullest extent permissible under Nevada law,
as such law exists currently or as it may be amended in the future. Under Nevada
law, such provision may not eliminate or limit director or officer monetary
liability for (i) acts or omissions involving intentional misconduct, fraud, or
a knowing violation of law or (ii) the payment of certain prohibited
distributions. Such limitation of liability provision also may not limit a
director's or officer's liability for violation of, or otherwise relieve Actel
Nevada or its directors or officers from the necessity of complying with,
federal or state securities laws, or affect the availability of nonmonetary
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 when a person is adjudged liable to the corporation
in the performance of that person's duty to the corporation and its shareholders
unless a court determines such person is entitled to indemnity for expenses, and
then such indemnification may be made only to the extent that such court shall
determine, and (b) no indemnification may be made in respect of amounts paid in
settling or otherwise disposing of a pending action, or expenses incurred in
defending a pending action that 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 Nevada law, which
requires indemnification relating to a successful defense on the merits or
otherwise).
Nevada law generally permits indemnification of expenses incurred in the
defense or settlement of a derivative or third-party action, provided that,
unless a court orders indemnification or the corporation is bound to advance
expenses as they are incurred, there is a determination by a disinterested
quorum of the directors, by independent legal counsel, or by the stockholders
that the person seeking indemnification acted in good faith and in a manner
reasonably believed to be in or (in contrast to California law) not opposed to
the best interests of the corporation. Without court approval, however, no
indemnification may be made in respect of any derivative action in which such
person is adjudged liable to the corporation. Nevada law requires
indemnification of expenses when the individual being indemnified has
successfully defended any action, claim, issue, or matter therein, whether on
the merits or otherwise.
Nevada law states that the indemnification provided by statute shall not be
deemed exclusive of any other rights under the articles of incorporation, any
bylaw, agreement, vote of stockholders or disinterested directors, or otherwise.
Each current officer and director of the Company has entered into or will enter
into an indemnification agreement with Actel Nevada that conforms to Nevada law
and includes within its purview future changes in Nevada law that expand the
permissible scope of indemnification of directors and officers of Nevada
corporations.
Nevada law provides that the articles of incorporation or bylaws or an
agreement made by a corporation may provide that the expenses of directors and
officers incurred in defending an action must be paid by the corporation as they
are incurred and in advance of the final disposition of the action upon receipt
of an undertaking by or on behalf of the director or officer to repay the amount
if the court ultimately determines that such person is not entitled to
indemnification. The Articles of Incorporation and the Bylaws of Actel Nevada
provide that the Company shall indemnify directors and officers to the fullest
extent permitted under Nevada law, and that the Company shall pay all expenses
incurred in defending an action in advance. The Bylaws of Actel Nevada also
permit such indemnification of and advancement of expenses to employees and
agents of the Company.
Nevada law further provides that a corporation may purchase and maintain
insurance or make other financial arrangements on behalf of any director,
officer, employee, or agent of the corporation (or person who is serving in such
capacity with another enterprise at the request of the corporation), whether or
not the corporation has the authority to indemnify such person. These other
financial arrangements may include a trust fund, self-insurance, securing the
corporation's obligation by granting a security interest or other lien, or
establishing a letter of credit, guaranty, or surety, although no financial
arrangement may provide protection for intentional misconduct, fraud, or a
knowing violation of law except with respect to the advancement of expenses or
unless ordered by a court. In the absence of fraud, the decision of the board of
directors as to the propriety of any insurance or other financial arrangement is
conclusive, and the insurance or other financial arrangement is not void or
voidable and does not subject any director approving it to personal liability
even if such director is a beneficiary of the insurance or other financial
arrangement. The Bylaws of Actel Nevada permit the Company to purchase and
maintain insurance and make such other financial arrangements.
Loans to Officers and Employees
Under California law, any loan to or guarantee for the benefit of a
director or officer of a corporation or its parent requires approval of the
shareholders, not counting any shares owned by the relevant director or officer,
unless such loan or guaranty is provided under an employee benefit 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, not counting the vote of any interested director, to approve
loans or guarantees 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 Actel
California authorize such loans or guarantees. These specific provisions of
California law dealing with loans and guarantees would no longer apply after the
Proposed Reincorporation.
Power to Call Special Shareholders' Meetings
Under California law, a special meeting of shareholders may be called by
(a) the board of directors, (b) the chairman of the board, (c) the president,
(d) the holders of shares entitled to cast not less than ten percent of the
votes at such meeting, or (e) such additional persons as are authorized by the
articles of incorporation or the bylaws. Under Nevada law, a special meeting of
stockholders may be called as set forth in the articles of incorporation or
bylaws. The Articles of Incorporation of Actel Nevada authorize the Board of
Directors, the President, or the holders of at least ten percent of the
outstanding capital stock to call a special meeting of stockholders. Since the
right of the stockholders to call a special meeting is set forth in the Articles
of Incorporation of Actel Nevada, it may be amended only by stockholder vote or
written consent, and therefore such right may not be limited or eliminated by
the Board of Directors.
Removal of Directors
Under California law, any director or the entire board of directors may be
removed, with or without cause, by the affirmative vote 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, or not consenting in writing to removal, would be sufficient to
elect the director under cumulative voting. Under Nevada law, any director may
be removed from office, with or without cause, by the vote of stockholders
representing not less than two-thirds of the voting power of the class or series
of stock of the Company entitled to elect such director, unless the articles of
incorporation provide for cumulative voting or a different percentage of voting
stock. If a Nevada corporation's articles of incorporation provide for
cumulative voting, a director may not be removed except upon the vote of
stockholders owning sufficient voting power to have prevented such director's
election in the first instance. The Articles of Incorporation of Actel Nevada do
not provide for cumulative voting, but do specify that any director or the
entire board of directors may be removed, with or without cause, by the
affirmative vote of a majority of the outstanding shares entitled to vote.
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 Nevada law,
a stockholder may only bring a derivative action on behalf of the corporation if
the stockholder was a stockholder 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. Nevada law also provides that a derivative action may not
be maintained if it appears that the plaintiff does not fairly and adequately
represent the interests of the stockholders similarly situated in enforcing the
right of the corporation.
Shareholder Voting
Both California and Nevada law generally require that a majority of
shareholders of both the acquiring and target corporations approve statutory
mergers. Nevada law does not require a stockholder vote of the surviving
corporation in a merger (unless the corporation provides otherwise in its
articles of incorporation) if (i) the merger agreement does not amend the
existing articles of incorporation of the surviving corporation, (ii) each
stockholder of the surviving corporation whose shares were outstanding before
the merger will hold the same number of shares with identical designations,
preferences, limitations, and relative rights after the merger, and (iii) the
number of shares outstanding after the merger plus the number of shares issued
as a result of the merger, either by conversion or exercise of securities issued
pursuant to the merger, will not exceed by more than 10% the number of shares of
the surviving corporation 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 Nevada 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. By contrast, Nevada law
generally does not require class voting, except in certain transactions
involving an amendment to the articles of incorporation that differentially
affects a specific class of shares. As a result, stockholder approval of such
transactions may be easier to obtain under Nevada law for companies that have
more than one class of shares outstanding.
California law also requires that, except in a short-form merger or a
merger of a parent corporation into its subsidiary in which it owns at least 90%
of the outstanding shares, if a constituent corporation in the merger or its
parent owns at least 50% of another constituent corporation in the merger, the
nonredeemable common shares of a constituent corporation may be converted only
into nonredeemable common shares of the surviving corporation or a parent party
unless all shareholders of the class consent. This provision of California law
may have the effect of making a "cash-out" merger by a majority shareholder more
difficult to accomplish. Although Nevada law does not parallel California law in
this respect, under some circumstances Sections 78.411 to 78.444 (business
combinations with interested stockholders) and Sections 78.378 to 78.3793
(voting rights of acquiring person's control shares) of the Nevada General
Corporation Law do provide similar protection against coercive two-tiered bids
for a corporation in which the stockholders are not treated equally.
California law provides that, except in certain circumstances, when a
tender offer or a proposal for a reorganization or for a sale of assets is made
by an interested party (generally a controlling or managing 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 the
shareholders. This fairness opinion requirement does not apply to a corporation
that does not have shares held of record by at least 100 persons or to a
transaction that has been qualified under California state securities laws.
Furthermore, if a tender of shares or vote is sought pursuant to an interested
party's proposal and a later proposal is made by another party at least ten 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. Nevada law has no comparable provision.
Size of the Board of Directors
Under California law, changes in the number of directors or, if set forth
in the articles of incorporation or bylaws, the range in the number of directors
must in general be approved by a majority of the outstanding shares, but the
board of directors may fix the exact number of directors within a stated range,
if authorized. Nevada law permits not only the stockholders but also the board
of directors acting independently of the stockholders 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 articles of incorporation (in which case a change in the number of
directors may be made only by amendment to the articles of incorporation
following approval of such change by the stockholders). The Articles of
Incorporation of Actel Nevada provide that the number of Directors shall be
within the range specified in the Articles, and that the Board of Directors may
fix the exact number of directors within the stated range by amendment to the
Bylaws. If the Proposed Reincorporation is approved, the five directors of Actel
California will continue as directors of Actel Nevada and the Bylaws of Actel
Nevada will initially provide for a five-member Board of Directors.
Application of the General Corporation Law of California to Nevada 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 indicating that they have certain significant business contacts with
California and more than one half of their voting securities are held of record
by persons having addresses in California. So long as a Nevada 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, prohibition of classified
boards of directors in privately held corporations, 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 Nevada"
above. An exemption from Section 2115 is provided for a corporation whose shares
are listed on a major national securities exchange, or are traded on the Nasdaq
National Market and has 800 or more shareholders as of the record date for its
most recent annual meeting of shareholders. As Actel Nevada will have its shares
listed and publicly traded on the Nasdaq National Market, the Company will
qualify for the exemption from 2115 described above.
Certain Federal Income Tax Consequences
The following is a discussion of certain federal income tax consequences to
holders of Actel California capital stock who receive Actel Nevada capital stock
in exchange for their Actel California capital stock as a result of the Proposed
Reincorporation. No state, local, or foreign tax consequences are addressed
herein.
This discussion does not address all the tax consequences of the Proposed
Reincorporation that may be relevant to particular Actel California
shareholders, including without limitation dealers in securities, holders of
stock options, and those Actel California shareholders who acquired their shares
upon the exercise of stock options. In view of the varying nature of such tax
consequences, shareholders are urged to consult their own tax advisors as to the
specific tax consequences to them of the Proposed Reincorporation, including the
applicability of federal, state, local, or foreign tax laws.
The Company has not requested a ruling from the Internal Revenue Service
(the "IRS") or an opinion of counsel with respect to the federal income tax
consequences of the Proposed Reincorporation under the Internal Revenue Code of
1986, as amended (the "Code"). The Company believes, however, that: (a) the
Proposed Reincorporation will constitute a tax-free reorganization under Section
368(a) of the Code; (b) no gain or loss will be recognized by holders of capital
stock of Actel California upon receipt of capital stock of Actel Nevada pursuant
to the Proposed Reincorporation; (c) the aggregate tax basis of the capital
stock of Actel Nevada received by each shareholder will be the same as the
aggregate tax basis of the capital stock of Actel California held by such
shareholder as a capital asset at the time of the Proposed Reincorporation; and
(d) the holding period of the capital stock of Actel Nevada received by each
shareholder of Actel California will include the period for which such
shareholder held the capital stock of Actel California surrendered in exchange
therefor, provided that such Actel California capital stock was held by such
shareholder as a capital asset at the time of the Proposed Reincorporation.
A successful IRS challenge to the tax-free status of the Proposed
Reincorporation would result in a shareholder recognizing gain or loss with
respect to each share of Actel California capital stock surrendered 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 Actel Nevada
capital stock received in exchange therefor. In such event, a shareholder's
aggregate basis in the shares of Actel Nevada capital 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 Actel California capital stock.
State, local, or foreign income tax consequences to shareholders may vary
from the federal tax consequences described above. Shareholders should consult
their own tax advisors as to the effect of the Proposed Reincorporation under
applicable federal, state, local, or foreign income tax laws.
The Company should not recognize gain or loss for federal income tax
purposes as a result of the Proposed Reincorporation, and Actel Nevada should
succeed without adjustment to the federal income tax attributes of Actel
California.
Vote Required for the Proposed Reincorporation
Approval of the Proposed Reincorporation, which includes approval of the
Merger Agreement, requires the affirmative vote of the holders of a majority of
the outstanding shares of Actel California Common Stock.
The Board of Directors recommends that shareholders vote "FOR" the Proposed
Reincorporation. An abstention or a failure to vote will have the same effect as
a vote "AGAINST" the Proposed Reincorporation.
PROPOSAL NO. 3 -- APPROVAL OF AMENDMENTS TO
ARTICLES OF INCORPORATION
The Articles of Incorporation of Actel California authorize 35,000,000
shares of capital stock, $.001 par value, of which 30,000,000 shares are
designated Common Stock and 5,000,000 shares are designated Preferred Stock. The
Articles of Incorporation of Actel Nevada authorize 35,000,000 shares of capital
stock, $.001 par value, of which 30,000,000 shares are designated Common Stock
and 5,000,000 shares are designated Preferred Stock. On January 23, 1998, the
Board of Directors authorized amendments to the Articles of Incorporation of
Actel California and Actel Nevada to increase the authorized number of shares of
Common Stock to 55,000,000.
If the proposed amendments and "PROPOSAL NO. 1 -- REINCORPORATION IN
NEVADA" are approved, the Articles of Incorporation of Actel Nevada will be
amended to authorize 60,000,000 shares of capital stock, $.001 par value, of
which 55,000,000 shares will be designated Common Stock and 5,000,000 shares
will be designated Preferred Stock. If the proposed amendments are approved but
"PROPOSAL NO. 1 -- REINCORPORATION IN NEVADA" is not approved, the Articles of
Incorporation of Actel California will be amended to authorize 60,000,000 shares
of capital stock, $.001 par value, of which 55,000,000 shares will be designated
Common Stock and 5,000,000 shares will be designated Preferred Stock.
Purpose and Effect of Proposed Amendments
The principal purpose of the proposed amendments to the Company's Articles
of Incorporation is to authorize additional shares of Common Stock that will be
available in the event that the Board of Directors determines that it is
necessary or appropriate to effect future stock dividends or stock splits, to
raise additional capital through the sale of securities, to acquire another
company or its business or assets through the issuance of securities, or to
establish a strategic relationship with a corporate partner through the exchange
of securities. The Board of Directors has no immediate plans, understandings,
agreements, or commitments to issue the additional shares of Common Stock for
any of these purposes, except as permitted or required by outstanding options
and additional options that may be granted from time to time under the Company's
ESPP and stock option plans. The flexibility inherent in having the authority to
issue shares of Common Stock will, in the opinion of the Board of Directors, be
advantageous to the Company in any negotiations involving the issuance of such
stock. If the shareholders failed to approve the proposed amendments and
authorization of the additional shares of Common Stock were deferred until a
specific need existed, the time and expense required in connection with
obtaining the necessary shareholder action for each proposed issuance could
deprive the Company of flexibility that the Board of Directors believes will
result in the most efficient use of such shares.
If the proposed amendments are adopted, 25,000,000 additional shares of
Common Stock will be available for issuance by the Board of Directors without
any further shareholder approval, although certain issuances of shares may
require shareholder approval in accordance with the Nasdaq National Market or
the General Corporation Laws of California or Nevada, as applicable. The holders
of Common Stock have no preemptive rights to purchase any stock of the Company.
The additional shares might be issued at such times and under such circumstances
as to have a dilutive effect on earnings per share and on the equity ownership
of the then-current holders of Common Stock.
Although the Board of Directors is proposing these amendments to the
Company's Articles of Incorporation for the reasons stated above, the
flexibility to issue additional shares of stock could enhance the Board's
ability to negotiate on behalf of the Company's shareholders in a takeover
situation. Although it is not the purpose of the proposed amendments, the
authorized but unissued shares of Common Stock (as well as the authorized but
unissued shares of Preferred Stock) also could be used by the Board of Directors
to discourage, delay, or make more difficult a change in the control of the
Company. For example, such shares could be privately placed with purchasers who
might align themselves with the Board in opposing a hostile takeover bid. The
issuance of additional shares might serve to dilute the stock ownership of
persons seeking to obtain control and thereby increase the cost of acquiring a
given percentage of the outstanding stock. The Company has previously adopted
certain measures that may have the effect of helping resist an unsolicited
takeover attempt, including provisions in the 1986 Incentive Stock Option Plan
providing for the acceleration of exercisability of outstanding options in the
event of a sale of assets or merger if such options are not assumed or
substituted by the successor corporation, and provisions of the Articles of
Incorporation authorizing the Board of issue up to 5,000,000 shares of Preferred
Stock with terms, provisions, and rights fixed by the Board. The Board of
Directors is not aware of any pending effort to acquire control of the Company.
Vote Required for the Proposed Amendments to Articles of Incorporation
Approval of the proposed amendments to Articles of Incorporation requires
the affirmative vote of the holders of a majority of the outstanding shares of
Common Stock.
The Board of Directors recommends that shareholders vote "FOR" approval of
the proposed amendments to Articles of Incorporation. An abstention or a failure
to vote will have the same effect as a vote "AGAINST" approval of the proposed
amendments to Articles of Incorporation.
PROPOSAL NO. 4 -- APPROVAL OF AMENDMENT TO
1993 EMPLOYEE STOCK PURCHASE PLAN
General
On January 23, 1998, the Board of Directors amended the Company's 1993
Employee Stock Purchase Plan (the "ESPP") to increase the number of shares of
Common Stock reserved for issuance under the ESPP by 1,869,680, bringing the
total number of shares available for issuance under the ESPP to 2,124,329 (which
is equal to 10% of the shares of the Company's Common Stock that were issued and
outstanding at the close of business on March 23, 1998).
The total number of shares of Common Stock reserved for issuance under the
ESPP is 1,150,000. If the proposed amendments are approved, the total number of
shares of Common Stock reserved for issuance under the ESPP will be 3,019,680.
If approved, the number of shares of Common Stock reserved for issuance under
the ESPP, as amended by the proposed amendments, should be sufficient to meet
the Company's requirements for all offering periods commencing after the date of
approval if the Company continues to issue shares under the ESPP at rates
approximating historical levels.
Purpose and Effect of Proposed Amendments
The principal purpose of the proposed amendments to the ESPP is to assure
there will be a sufficient number of shares of Common Stock authorized for
issuance under the ESPP to meet employee demand in future offering periods. The
ESPP is an example of a noncompensatory plan that qualifies under Section 423 of
the Code. As a qualified Section 423 plan, the ESPP permits employees to buy the
Company's stock at 85% of the market price on the date of grant over a period of
two years. A company's shareholders must, by statute, approve the Section 423
plan by authorizing the number of shares eligible for grant and the employees
eligible to receive the stock. In some cases, the original share authorization
may be insufficient to meet employee demand during the offering period, and the
shareholders could be asked to approve an increase to the plan's authorized
shares. Private letter rulings issued by the Internal Revenue Service in recent
years allow a Section 423 plan to grant additional shares at 85 percent of the
market price of the original grant, subject to certain restrictions. Thus, for
example, if the market price at the date of authorization for the original
shares was $10 per share, the exercise price for the subsequently-approved
additional shares for those employees who participated in the offering period
since inception would be $8.50 per share, even if the market price were $20 per
share on the date shareholders approved the additional shares.
In EITF 97-12, the Financial Accounting Standards Board ("FASB") recently
addressed whether the addition of newly-authorized shares to satisfy
participation levels for outstanding offering periods is compensatory. The FASB
determined that such newly-authorized shares purchased at the original exercise
price should be accounted for as a compensatory award, resulting in the
recognition of compensation expense to the extent that the original exercise
price is less than the fair market value of the stock on the date of
authorization. In other words, if the number of shares sold to the Company's
employees in an offering period exceed the number of shares reserved for
issuance under the ESPP at the beginning of that offering period, the Company
may incur a compensation charge, which could be significant. The Board of
Directors believes the recognition of compensation expense by the Company in
connection with the ESPP is contrary to the best interests of the Company and
its shareholders, and therefore has adopted the proposed amendments to increase
the number of shares of Common Stock reserved for issuance under the ESPP to a
level that should avoid the adverse accounting effects described above for the
duration of the ESPP. The Board further believes that the reservation of shares
in excess of that actually required for issuance under the ESPP is not adverse
to interests of the Company or its shareholders because the number of shares
that may actually be issued under the ESPP is limited by the provisions of the
Code.
The Board of Directors recommends that shareholders vote "FOR" approval of
the amendments to the ESPP. An abstention will have the same effect as a vote
"AGAINST" approval of the amendments.
Summary of the ESPP
The ESPP and the right of participants to make purchases thereunder are
intended to qualify under the provisions of Section 423 of the Code. The ESPP is
not a qualified deferred compensation plan under Section 401(a) of the Code and
it is not subject to ERISA. The essential features of the ESPP are summarized
below.
Purpose
The purpose of the ESPP is to provide employees of the Company with an
opportunity to purchase Common Stock of the Company through accumulated payroll
deductions.
Administration
The ESPP may be administered by the Board of Directors or a committee
appointed by the Board. All questions of interpretation or application of the
ESPP are determined by the Board or its committee, whose decisions are final and
binding upon all participants. Members of the Board who are eligible employees
are permitted to participate in the ESPP but may not vote on any matter
affecting the administration thereof or the grant of any option pursuant
thereto. No director who is eligible to participate in the ESPP may be a member
of the committee appointed to administer it. No charges for administrative or
other costs may be made against the payroll deductions of a participant in the
ESPP. Members of the Board receive no additional compensation for their services
in connection with the administration of the ESPP.
Eligibility and Participation
Any person who is employed by the Company (or any of its majority-owned
subsidiaries) at least 20 hours per week for at least five months in a calendar
year is eligible to participate in the ESPP, provided that the employee is
employed on the first day of an offering period. Eligible employees become
participants in the ESPP by delivering to the Company a subscription agreement
authorizing payroll deductions prior to the applicable enrollment date. An
employee who becomes eligible to participate in the ESPP after the commencement
of an offering period may not participate in the ESPP until the commencement of
the next offering period.
Offering and Purchase Periods
The ESPP is generally implemented during consecutive and overlapping
24-month offering periods, each of which is divided into four six-month purchase
periods. Generally, offering and purchase periods commence on February 1 and
August 1 of each year. Shares are purchased for participating employees on the
last day of each purchase period, referred to herein as the "Exercise Date." The
Board may alter the duration of the offering periods without shareholder
approval if such change is announced five days prior to the scheduled beginning
of the first offering period to be affected.
Purchase Price
The purchase price per share at which shares will be sold under the ESPP is
the lower of 85% of the fair market value of the Common Stock on the first day
of each offering period or 85% of the fair market value of the Common Stock on
the Exercise Date. The fair market value of a share of Common Stock is the
closing sales price for such stock (or the closing bid, if no sales were
reported) as quoted on the Nasdaq National Market.
The purchase price of the shares is accumulated through payroll deductions
during the offering period. The deductions may not exceed 15% of a participant's
compensation, which is defined in the ESPP to mean all base straight time gross
earnings, including overtime and shift premium, and all incentive compensation,
incentive payments, bonuses, and other compensation. A participant may at any
time discontinue his or her participation in the ESPP or may increase or
decrease the rate of payroll deductions. Payroll deductions commence on the
first payday in the offering period and continue at the same rate in the current
and consecutive offering periods until amended or as provided in the ESPP. All
payroll deductions are credited to the participant's account under the ESPP and
are deposited with the general funds of the Company. All payroll deductions
received or held by the Company may be used by the Company for any corporate
purpose.
Purchase of Stock
At the beginning of each offering period, each participant, by executing a
subscription agreement to participate in the ESPP, is in effect granted an
option to purchase shares of Common Stock on each Exercise Date. The maximum
number of shares placed under option to a participant in a purchase period is
that number determined by dividing the amount of participant's total payroll
deductions to be accumulated during the purchase period by the applicable
purchase price; provided, however, that no participant may purchase more than
10,000 shares in any offering period. Unless a participant withdraws from the
ESPP, such participant's option for the purchase of shares will be exercised
automatically at the end of the purchase period for the maximum number of shares
at the applicable price.
Notwithstanding the foregoing, no employee will be permitted to subscribe
for shares under the ESPP if, immediately after the grant of the option, the
employee would own 5% or more of the voting power or value of all classes of
stock of the Company or of a parent or of any of its subsidiaries (including
stock that may be purchased under the ESPP or pursuant to any other options),
nor shall any employee be granted an option that would permit the employee to
buy more than $25,000 worth of stock (determined at the fair market value of the
shares at the time the option is granted) pursuant to all Company stock purchase
plans in any calendar year.
Withdrawal
A participant's interest in a given offering may be terminated in whole,
but not in part, by signing and delivering to the Company a notice of withdrawal
from the ESPP. Any withdrawal by the participant of accumulated payroll
deductions for a given offering period automatically terminates the
participant's interest in that offering period. The failure to maintain
continuous status as an employee of the Company for at least 20 hours per week
during an offering period will be deemed to be a withdrawal from that offering
period. The ESPP also provides that participants will be deemed to have
withdrawn from an offering during certain leaves of absence. In addition, if the
fair market value of the Common Stock on any Exercise Date in an offering period
is lower than the fair market value of the Common Stock on the enrollment date
of such offering period, then all participants in such offering period shall be
automatically withdrawn from such offering period immediately after the exercise
of their options on such Exercise Date and automatically re-enrolled in the
immediately following offering period. Generally, a participant's withdrawal
from an offering period does not affect such participant's eligibility to
participate in subsequent offering periods.
Termination of Employment
Termination of a participant's employment for any reason, including
retirement or death, cancels his or her participation in the ESPP immediately.
In such event, the payroll deductions credited to the participant's account will
be returned to such participant or, in the case of death, to the person or
persons entitled thereto as specified by the employee in the subscription
agreement.
Capital Changes
In the event any change is made in the Company's capitalization, such as a
stock split or stock 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 adjustments will be made in the shares subject to
purchase under the ESPP and in the purchase price per share, subject to any
required action by shareholders of the Company. In the event of liquidation or
dissolution of the Company, the offering periods then in progress will terminate
immediately prior to the consummation of such event, unless otherwise provided
by the Board. In the event of a sale of all or substantially all of the assets
of the Company, or the merger of the Company with or into another corporation,
each option under the ESPP shall be assumed or an equivalent option shall be
submitted by such successor corporation or a parent or subsidiary of such
successor corporation. If the successor corporation refuses to assume or
substitute for the outstanding options, the offering period then in progress
will be shortened and a new exercise date will be set.
Nonassignability
No rights or accumulated payroll deductions of a participant under the ESPP
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 ESPP.
Amendment and Termination
The Board may at any time amend or terminate the ESPP, provided that such
termination shall not affect options previously granted, and provided further
that an offering period may be terminated if the Board determines that such
termination is in the best interests of the Company and its shareholders. On
January 23, 1998, the Board of Directors amended the ESPP to provide
specifically that termination of an offering period is in the best interests of
the Company and its shareholders if the number of shares sold in the offering
period would, but for such termination, exceed the number of shares available
for issuance at the beginning of the offering period. The amendments also
clarified that all options are granted subject to this condition. No amendment
may be made to the ESPP without prior approval of the shareholders of the
Company if such amendment would constitute an amendment for which shareholder
approval is required under the federal securities laws or the Code. By its
terms, the ESPP will terminate in May 2003.
Certain Federal Income Tax Information
The ESPP, and the right of participants to make purchases thereunder, is
intended to qualify under the provisions of Sections 421 and 423 of the Code.
Under these provisions, no income will be taxable to a participant until the
sale or other disposition of the shares purchased under the ESPP. Upon such sale
or disposition, the participant will generally be subject to tax in an amount
that depends upon the holding period. If the shares are sold or disposed of more
than two years from the first day of the offering period and one year from the
date of purchase, the participant will recognize ordinary income measured as the
les ser of (a) the excess of the fair market value of the shares at the time of
such sale or disposition over the purchase price or (b) an amount equal to 15%
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 this holding
period, 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
the holding period. 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 upon a sale or disposition of shares prior to the
expiration of the holding periods described above.
The foregoing summary of the federal income tax consequences of Purchase
Plan transactions is based upon federal income tax laws in effect on the date of
this Proxy Statement. This summary does not purport to be comprehensive, and
does not describe foreign, state, or local tax consequences.
The following table summarizes the approximate dollar value and number of
shares purchased with contributions made under the ESPP in 1997 by (i) the
executive officers named in the Summary Compensation Table, (ii) all executive
officers as a group, and (iii) all employees who are not executive officers as a
group. Only directors who are also executive officers of the Company are
eligible to purchase shares under the ESPP.
<TABLE>
<CAPTION>
Amended Plan Benefits
1993 Employee Stock Purchase
Plan (1)
---------------------------------
Number of
Dollar Value Shares
Name and Position (2) Purchased (3)
- ---------------------------------------------------------------------------------- --------------- -----------------
<S> <C> <C>
John C. East.................................................................... $ 0 0
President and Chief Executive Officer
Douglas D. Goodyear............................................................. (500) 2,398
Vice President of Worldwide Sales
Esmat Z. Hamdy.................................................................. 5,757 3,004
Senior Vice President of Technology & Operations
Dennis F. Nye................................................................... 5,187 2,795
Vice President of Strategic Accounts
Jeffrey M. Schlageter........................................................... 6,668 1,188
Senior Vice President of Engineering and Corporate Programs
Executive Officer Group (11 Persons)............................................ 33,069 21,086
Non-Executive Officer Employee Group............................................ 312,574 241,920
- ---------------------------------------
<FN>
(1) Future benefits under the ESPP are not determinable because
participation in the ESPP is voluntary.
(2) Indicates the difference between the price at which shares were
purchased under the ESPP with contributions made in 1997 and $12.625,
the closing price of the Company's Common Stock on December 26, 1997,
the last business day in fiscal 1997.
(3) Indicates the number of shares that were purchased with contributions
made in 1997 under the ESPP. More specifically, the number in the table
indicates shares of Common Stock purchased on January 31, 1997, July
31, 1997, and January 31, 1998, with contributions made under the ESPP
in 1997, and excludes shares purchased on January 31, 1997, with
contributions made under the ESPP in 1996 and shares purchased on
January 31, 1998, with contributions made under the ESPP in January
1998.
</FN>
</TABLE>
PROPOSAL NO. 5 -- APPROVAL OF AMENDMENT TO
1993 DIRECTORS' STOCK OPTION PLAN
General
On January 23, 1998, the Board of Directors amended the Director Plan to
increase the number of shares of Common Stock reserved for issuance under the
Director Plan (i) in 1998 by 30,000, bringing the total number of shares
available for issuance under the Director Plan to 100,000, and (ii) on the first
day of each subsequent fiscal year during the term of the Director Plan by (x)
100,000 less (y) the number of shares available for issuance under the Director
Plan on the last day of the immediately preceding fiscal year.
The total number of shares of Common Stock reserved for issuance under the
Director Plan is 200,000. If the proposed amendments are approved, the total
number of shares of Common Stock reserved for issuance under the Director Plan
will be 230,000. In addition, that number will increase automatically on the
first day of each subsequent fiscal year during the term of the Director Plan by
an amount equal to (x) 100,000 shares of Common Stock minus (y) the number of
shares of Common Stock available for issuance under the Director Plan on the
last day of the immediately preceding fiscal year. Thus, after each annual
replenishment, there will be 100,000 shares available for grant under the
Director Plan. The number of shares of Common Stock reserved for issuance under
the Director Plan, as amended by the proposed amendments, should be sufficient
to meet all of the Company's requirements for option grants under the Director
Plan.
The Board of Directors recommends that shareholders vote "FOR" the
amendments to the Director Plan. An abstention will have the same effect as a
vote "AGAINST" approval of the amendments.
Summary of the Director Plan
The Director Plan is not a qualified deferred compensation plan under
Section 401(a) of the Code, and it is not subject to ERISA. The essential
features of the Director Plan, as amended, are summarized below.
Purposes
The purposes of the Director Plan are to attract and retain the best
available personnel for service as outside directors of the Company, to provide
additional incentive to such nonemployee directors, and to encourage their
continued service on the Board.
Administration
The Director Plan is designed to operate automatically without requiring
administration. However, to the extent administration is necessary, it is
provided by the Board. The interpretation and construction of any provision of
the Director Plan by the Board shall be final and conclusive. Members of the
Board receive no additional compensation for their services in connection with
the administration of the Director Plan.
Terms of Options
The Director Plan provides for the grant of nonstatutory stock options to
nonemployee directors of the Company. The Director Plan provides that each
eligible director shall be granted an initial option to purchase 15,000 shares
of the Company's Common Stock on the date on which such person first becomes an
eligible director (an "Initial Option"). Thereafter, each eligible director
shall be granted an option to purchase 5,000 additional shares of Common Stock
on August 1 of each year if, on such date, the eligible director shall have
served on the Company's Board of Directors for at least six months (a
"Subsequent Option"). Four of the Company's directors are currently eligible to
receive option grants under the Director Plan. Options granted under the
Director Plan expire 10 years after the date of grant. Each option is evidenced
by a stock option agreement between the Company and the director to whom such
option is granted.
Rule 16b-3
The Director Plan requires that options granted thereunder must comply, to
the extent required, with the applicable provisions of Rule 16b-3 promulgated
under the Exchange Act or any successor thereto and shall contain such
additional conditions or restrictions as may be required thereunder from time to
time to qualify for the maximum exemption from Section 16 of the Exchange Act
with respect to the Director Plan transactions.
Exercise of the Options
The Initial Option becomes exercisable as to 25% of the shares subject to
the Initial Option on the date of the Company's annual shareholder meeting
occurring in each of the first, second, third, and fourth calendar year
following the calendar year in which the Initial Option was granted, subject to
the optionee remaining a director. Each Subsequent Option becomes exercisable in
full on the date of the Company's annual shareholder meeting occurring in the
fourth calendar year following the calendar year in which the Subsequent Option
was granted, subject to the optionee remaining a director. 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 tendering payment of
the purchase price to the Company. The consideration to be paid for shares
issued upon exercise of options granted under the Directors' Plan, including the
method of payment, shall be determined by the administrators and may consist
entirely of (i) cash, (ii) check, (iii) shares of Common Stock, (iv) the
delivery of a properly executed exercise notice together with such other
documentation as the Board and the broker, if applicable, shall require to
effect an exercise of the option and delivery to the Company of the amount of
sale or loan proceeds required to pay the exercise price, or (v) any combination
of the foregoing methods.
Option Price
The exercise price for options granted under the Director Plan is the fair
market value of the Company's Common Stock on the date of grant. The fair market
value of a share of Common Stock is the closing sales price for such stock (or
the closing bid, if no sales were reported) as quoted on the Nasdaq National
Market (or the exchange with the greatest volume of trading in Common Stock) on
the date of grant.
Termination of Status as a Director
The Director Plan provides that, if the optionee ceases to serve as a
director of the Company, the optionee may, but only within 90 days after the
date he or she ceases to be a director, exercise his or her option to the extent
that the optionee was entitled to exercise it at the date of such termination,
provided that the option is exercised no later than its expiration date.
Disability
If an optionee is unable to continue service as a director of the Company
as a result of his or her total and permanent disability, the optionee may, but
only within six months after the date of the optionee's termination, exercise
his or her option to the extent that the optionee was entitled to exercise it at
the date of such termination, provided that the option is exercised no later
than its expiration date.
Death
In the event of the death of an optionee, the entire option may be
exercised at any time within twelve months after death, provided that the option
is exercised no later than its expiration date.
Nontransferability of Options
An option is nontransferable by the optionee, other than by will or the
laws of descent and distribution, and is exercisable during the optionee's
lifetime only by the optionee.
Adjustments; Dissolution; Mergers and Asset Sales
In the event any change, such as a stock split or dividend, is made in the
Company's capitalization that results in an increase or decrease in the number
of outstanding shares of Common Stock without receipt of consideration by the
Company, an appropriate adjustment shall be made in the number of shares under
the Director Plan and the price per share covered by each outstanding option. In
the event of the proposed dissolution or liquidation of the Company, all
outstanding options will terminate immediately prior to the consummation of such
proposed action. In the event of the merger of the Company with or into another
corporation or a proposed sale of all or substantially all of the assets of the
Company, each outstanding option shall be assumed or substituted by such
successor corporation. In the event that such successor corporation refuses to
assume such options or to substitute an equivalent options, each outstanding
option shall become fully vested and exercisable.
Amendment and Termination
The Board may amend or terminate the Director Plan at any time, but any
such action shall not adversely affect any stock option then outstanding under
the Director Plan without the consent of the holder thereof. To the extent
necessary and desirable to comply with Rule 16b-3 (or any other applicable law
or regulation), the Company shall obtain shareholder approval of any amendment
to the Director Plan in such a manner and to such a degree as required. The
Director Plan will terminate automatically in August 2003. Any options
outstanding under the Director Plan at the time of its termination shall remain
outstanding until they expire by their terms.
Certain Federal Income Tax Information
Options granted under the Director Plan are nonstatutory options. An
optionee will not recognize any taxable income at the time of grant of 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 on the date of exercise over the exercise price. Because the
optionee is a director of the Company and therefore subject to Section 16 of the
Exchange Act, the date of taxation (and the date of measurement of taxable
ordinary income) may be deferred unless the optionee files an election under
Section 83(b) of the Code. Upon resale of such shares by the optionee, any
difference between the sales price and the exercise price, to the extent not
recognized as ordinary income as provided above, will be treated as capital gain
or loss. The Company will be entitled to a tax deduction in the amount and at
the time that the optionee recognizes ordinary income with respect to shares
acquired upon exercise of an option.
The foregoing summary of the federal income tax consequences of Director
Plan transactions is based on federal income tax laws in effect on the date of
this Proxy Statement. This summary is not intended to be complete, and does not
describe foreign, state, or local tax consequences.
The following table summarizes the approximate dollar value and number of
option shares granted under the Director Plan in 1997 by (i) each director who
is not an executive officer and (ii) all directors who are not executive
officers as a group. Only directors who are not also executive officers of the
Company are eligible to receive options under the Director Plan.
<TABLE>
<CAPTION>
Amended Plan Benefits
1993 Directors' Stock Option
Plan (1)
---------------------------------
Number of
Dollar Value Option Shares
Name and Position (2) Granted
- ---------------------------------------------------------------------------------- --------------- -----------------
<S> <C> <C>
Keith B. Geeslin (3)............................................................ $ (34,375) 5,000
Director
Jos C. Henkens (3).............................................................. (34,375) 5,000
Director
Frederic N. Schwettmann (3)..................................................... (34,375) 5,000
Director
Robert G. Spencer (3)........................................................... (34,375) 5,000
Director
Non-Executive Officer Director Group (4 persons)................................ $ (137,500) 20,000
- ---------------------------------------
<FN>
(1) Future benefits under the Director Plan are not determinable because
the value of options depends on the market price of the Company's
Common Stock on the date of grant.
(2) Indicates the difference between the exercise price at which shares
were granted under the Director Plan and $12.625, the closing price of
the Company's Common Stock on December 26, 1997, the last business day
in fiscal 1997. However, none of the options were exercisable in 1997.
(3) Option vests on the date of the Company's annual shareholder meeting in
2001.
</FN>
</TABLE>
PROPOSAL NO. 6 -- RATIFICATION OF APPOINTMENT OF
INDEPENDENT AUDITORS
The Board of Directors has selected Ernst & Young LLP to audit the
financial statements of the Company for the current fiscal year, which ends
January 3, 1999. The Board of Directors recommends that shareholders vote "FOR"
ratification of the selection of Ernst & Young LLP as the Company's independent
auditors. In the event of a negative vote, the Board will reconsider its
selection.
Representatives of Ernst & Young LLP are expected to be present at the
Annual Meeting, will have the opportunity to make a statement if they so desire,
and are expected to be available to respond to appropriate questions.
OTHER INFORMATION
Security Ownership of Management
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of the Record Date by (i) each
director, (ii) each officer named in the Summary Compensation Table, and (iii)
all directors and officers as a group:
<TABLE>
<CAPTION>
Shares Percentage
Beneficially Beneficially
Name Owned (1) Owned (2)
- ---------------------------------------------------------------------------------- --------------- -----------------
<S> <C> <C>
John C. East (3)................................................................ 261,660 1.2%
Keith B. Geeslin (4)............................................................ 16,617 *
Douglas D. Goodyear (5)......................................................... 35,148 *
Esmat Z. Hamdy (6).............................................................. 51,779 *
Jos C. Henkens (7).............................................................. 6,922 *
Dennis F. Nye (8)............................................................... 56,128 *
Jeffrey M. Schlageter (9)....................................................... 72,058 *
Frederic N. Schwettmann (4)..................................................... 12,500 *
Robert G. Spencer (4)........................................................... 25,166 *
All Directors and Executive Officers as a Group (15 persons) (10)............... 686,799 3.2
- ---------------------------------------
<FN>
* Less than one percent.
(1) Except as indicated in the footnotes to this table and pursuant to
applicable community property laws, the persons and entities named in
the table have sole voting and sole investment power with respect to
all shares of Common Stock beneficially owned.
(2) Calculated as a percentage of shares of Common Stock outstanding as of
the Record Date.
(3) Includes 143,000 shares issuable pursuant to stock options that are
exercisable within 60 days after the Record Date.
(4) Includes 12,500 shares issuable pursuant to stock options that are
exercisable within 60 days after the Record Date.
(5) Includes 34,998 shares issuable pursuant to stock options that are
exercisable within 60 days after the Record Date.
(6) Includes 12,724 shares issuable pursuant to stock options that are
exercisable within 60 days after the Record Date.
(7) Includes 3,125 shares issuable pursuant to stock options that are
exercisable within 60 days after the Record Date.
(8) Includes 50,937 shares issuable pursuant to stock options that are
exercisable within 60 days after the Record Date.
(9) Includes 10,875 shares issuable pursuant to stock options that are
exercisable within 60 days after the Record Date.
(10) Includes 421,404 shares issuable pursuant to stock options that are
exercisable within 60 days after the Record Date.
</FN>
</TABLE>
Certain Transactions
On July 24, 1997, the Company lent $349,000.00 to Robert J. Smith II and
his spouse in connection with Mr. Smith's employment by Actel as Vice President
of Software and the consequent relocation to California of Mr. and Mrs. Smith,
who jointly and severally executed and delivered a full recourse promissory note
to the Company. Under the terms of the promissory note, interest accrues every
six months and upon any payment, whether at the stated maturity date or upon
prepayment, at the rate of 5.98% per annum, and all accrued interest is added to
the principal every six months. The principal, including all compounded
interest, and all accrued interest thereon is due and payable on the earlier of
(i) thirty (30) days after the sale of the Smiths' Austin, Texas residence and
(ii) July 24, 2000. The largest aggregate indebtedness outstanding at any time
during 1997 was $349,000.00, and the level of indebtedness currently outstanding
is $359,435.10.
Executive Compensation
Summary of Officer Compensation
The following table sets forth information concerning the compensation of
the Company's five mostly highly compensated executive officers for each of the
last three completed fiscal years:
<TABLE>
<CAPTION>
Summary Compensation Table (1)
Long Term
Compensation
Annual Compensation Awards
---------------------------------------------- -----------------
Securities
Other Annual Underlying
Name and Principal Position Year Salary Bonus (2) Compensation Options
- ----------------------------------------- ------- ------------ ------------ ------------------ -----------------
<S> <C> <C> <C> <C> <C>
John C. East........................... 1997 $ 319,731 $ 36,323 $ 0 90,000
President and 1996 278,609 237,375 0 60,000
Chief Executive Officer 1995 253,279 67,412 0 122,000
Douglas D. Goodyear.................... 1997 199,987 18,888 71,608 (3) 31,250
Vice President of 1996 176,250 113,560 80,972 (4) 95,000
Worldwide Sales
Esmat Z. Hamdy......................... 1997 212,908 21,517 23,700
Senior Vice President of 1996 192,167 129,765 0 49,613 (5)
Technology & Operations 1995 174,481 32,970 0 42,766
Dennis F. Nye.......................... 1997 195,417 18,550 46,366 (6) 16,000
Vice President of 1996 178,333 120,270 79,877 (6) 71,188 (7)
Strategic Accounts 1995 148,583 32,640 71,227 (6) 42,000
Jeffrey M. Schlageter.................. 1997 202,500 18,824 9,000
Senior Vice President of 1996 194,167 126,600 0 51,188 (5)
Engineering and Corporate Programs 1995 179,300 36,480 0 42,000
- ---------------------------------------
<FN>
(1) Except as set forth in this table, there was no reportable compensation
awarded to, earned by, or paid to the named executive officers in 1997.
(2) The Company paid bonuses in the year following that in which the
bonuses were earned.
(3) Other compensation in 1997 related to expenses incurred in relocating
to California, tax protection on non-deductible relocation expenses,
and car allowance.
(4) Other compensation related to expenses incurred in relocating to
California, tax protection on non-deductible relocation expenses, a
hire bonus, and car allowance.
(5) Includes 21,750 options granted in 1995 that were repriced in 1996.
(6) Other compensation in 1997, 1996, and 1995 related to expenses incurred
in relocating from the U.K. to the U.S. and living in the U.S.,
relocation bonuses, and tax protection on most of such compensation.
(7) Includes 41,750 options granted in 1995 that were repriced in 1996.
</FN>
</TABLE>
Option Grants
The following table sets forth certain information with respect to stock
options granted during 1997 to each of the executive officers named in the
Summary Compensation Table:
<TABLE>
<CAPTION>
Option Grants in Last Fiscal Year
Potential Realizable Value at Assumed
Annual Rates of Stock Price Appreciation
Individual Grants (1) for Option Term (2)
------------------------------------------------------- ------------------------------------------
% of Total
Number of Granted to
Securities Employees Per Share
Name Underlying in Fiscal Exercise Expiration
Options (3) Year Price Date 0% 5% 10%
- ------------------------------- ------------- ------------ ------------- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
John C. East................. 90,000 (4) 7.33% $ 16.375 07/03/07 $ 0 $ 926,833 $ 2,348,778
Douglas D. Goodyear.......... 31,250 (5) 2.55 16.375 07/03/07 0 321,817 815,548
Esmat Z. Hamdy............... 23,700 (6) 1.93 16.375 07/03/07 0 244,066 618,512
Dennis F. Nye................ 16,000 (7) 1.30 16.375 07/03/07 0 164,770 417,561
Jeffrey M. Schlageter........ 9,000 (7) 0.73 16.375 07/03/07 0 92,683 234,878
- --------------------------------------------
<FN>
(1) The exercise price of these options is equal to the fair market value
of the Company's Common Stock on the date of grant, as determined by
the Company's Board of Directors. The options expire 10 years from the
date of grant, are not transferable by the optionee (other than by will
or the laws of descent and distribution), and are exercisable during
the optionee's lifetime only by the optionee. To the extent exercisable
at the time of termination, options may be exercised within 30 days
following termination of the optionee's employment with the Company,
unless termination is the result of total and permanent disability, in
which case the options may be exercised at any time within six months
following termination, or unless termination is the result of death, in
which case the options become fully vested and may be exercised at any
time within 12 months following death by the optionee's estate or a
person who acquired the right to exercise the option by bequest or
inheritance.
(2) The 0%, 5%, and 10% assumed annual rates of appreciation are mandated
by the rules of the SEC and do not represent the Company's estimate or
projection of future Common Stock prices. The "potential realizable
value" at the assumed rates of appreciation were calculated using the
applicable exercise price as the base.
(3) Options vest and are fully exercisable upon an involuntary termination
"for cause," or a voluntary termination "for good reason," following a
"change of control" of the Company.
(4) Option begins vesting as to 30,000 shares on January 1, 1998, at the
rate of 3,750 shares per quarter in 1998 and 1999. The remaining 60,000
shares vest 100% on August 1, 2001.
(5) Option begins vesting as to 11,250 shares on January 1, 1998, at the
rate of 937.5 shares per quarter in 1998, 1999, and 2000. The remaining
20,000 shares vest 100% on August 1, 2001.
(6) Option begins vesting as to 3,700 shares on January 1, 1998, at the
rate of 325 shares per quarter in 1998, 250 shares per quarter in 1999,
and 350 shares per quarter in 2000. The remaining 20,000 shares vest
100% on August 1, 2001.
(7) Option vests 100% on August 1, 2001.
</FN>
</TABLE>
Option Values
The following table sets forth certain information concerning the number of
options exercised during 1997 by the executive officers named in the Summary
Compensation Table, as well as the number and aggregate value of shares covered
by both exercisable and unexercisable stock options held by such executive
officers as of December 28, 1997, the end of the fiscal year.
<TABLE>
<CAPTION>
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year End Option Values
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options at
Options at Fiscal Year-End Fiscal Year-End (1)
-------------------------- ----------------------------
Shares
Acquired Value Not Not
Name On Exercise Realized (2) Exercisable Exercisable Exercisable Exercisable
- ---------------------------------------------- ------------ ------------- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
John C. East................................ 0 $ 0 136,750 301,250 $ 628,670 $ 393,300
Douglas D. Goodyear......................... 0 0 26,250 100,000 0 0
Esmat Z. Hamdy.............................. 14,200 161,560 8,700 103,792 17,875 186,831
Dennis F. Nye............................... 0 0 46,546 95,954 162,636 163,478
Jeffrey M. Schlageter....................... 0 0 45,624 88,189 231,066 180,315
- --------------------------------------------
<FN>
(1) Calculated on the basis of the difference between the closing market
price as of the fiscal year end ($12.625) and the exercise price.
(2) Calculated on the basis of the difference between the closing market
price as of the exercise date and the exercise price.
</FN>
</TABLE>
Change-in-Control Arrangements
The Company and its executive officers have entered into Management
Continuity Agreements, which are designed to ensure continued service in the
event of a "change of control." The Agreements provide for accelerated vesting
of an officer's stock options if following a change of control the officer's
employment is terminated other than for "cause" or the officer voluntarily
terminates his or her employment "for good reason."
The Board of Director's Compensation Committee has granted to the Company's
executive officers options that vest six months after a "change of control."
These options are intended to approximate the benefit that the executive
officers would receive if they were eligible under the Company's Employee
Retention Plan. The Employee Retention Plan provides that all Company employees
other than executive officers who hold unvested stock options under the Option
Plan as of the date of any "change of control" of the Company shall receive,
upon remaining in the employ of the Company for six months following the date of
such change of control (or earlier, if terminated other than for "cause" prior
to the end of such six month period), an amount equal to one-third of the
aggregate "spread" on their unvested options as of the date of such change of
control. Payment shall be made in common stock of the acquirer. For this
purpose, the "spread" is defined as the difference between the change-of-control
price and the option exercise price.
"Change of control" is defined as (i) acquisition by any person of
beneficial ownership of more than 30% of the combined voting power of the
Company's then-outstanding securities; (ii) a change of the majority of the
Board of Directors within a two-year period; (iii) the consummation of a merger
or consolidation of the Company with any other corporation that has been
approved by the shareholders of the Company, other than a merger or
consolidation that would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent at least 50% of
the total voting power represented by the voting securities of the Company or
the surviving entity outstanding immediately after such merger or consolidation;
or (iv) approval by the shareholders of the Company of a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets.
Compensation Committee Report
The following report is provided to shareholders by the members of the
Compensation Committee of the Board of Directors.
Background
Since the Company's incorporation in 1986, the Compensation Committee,
which is a standing committee of the Board of Directors, has been primarily
responsible for establishing and reviewing the Company's management compensation
policies. Since the Company's initial public offering in August 1993, the
Compensation Committee has formally administered the Company's management
compensation policies and plans, including the 1986 Incentive Stock Option Plan
and the 1993 Employee Stock Purchase Plan. The Compensation Committee has the
same authority as the Board to act on all compensation matters, except for
actions requiring shareholder approval or related to the compensation of
directors.
No member of the Compensation Committee is a former or current officer or
employee of the Company. The current members of the Compensation Committee are
Jos C. Henkens, Frederic N. Schwettmann, and Robert G. Spencer. Mr. Henkens has
been a member of the Compensation Committee since 1986, Mr. Schwettmann since
1993, and Mr. Spencer since 1989. Meetings of the Compensation Committee are
attended by Michelle A. Begun, the Company's Vice President of Human Resources,
who provides background and market information and makes executive compensation
recommendations but does not vote on any matters before the Compensation
Committee.
Compensation Policy
There are three major elements of the Company's executive compensation
program. The first element is annual cash compensation in the form of base
salary and incentive bonuses. The second element is long-term incentive stock
options, which are designed to align compensation incentives with shareholder
goals. The third element is compensation and employee benefits generally
available to all employees of the Company, such as the 1993 Employee Stock
Purchase Plan, health insurance, and a 401(k) plan.
The Compensation Committee establishes the compensation of each officer
principally by considering the average compensation for officers in similar
positions with 20 companies in the semiconductor Software, and CAE industries
that have annual revenues between $100 million and $999 million (the "Reference
Group"). The purpose of monitoring the Reference Group is to provide a stable
and continuing frame of reference for compensation decisions. Most of the
companies in the Reference Group are included in the Nasdaq Electronic Component
Stocks index (see "Company Stock Performance" below). The composition of the
Reference Group is subject to change from year to year based on the Committee's
assessment of comparability, including the extent to which the Reference Group
reflects changes occurring within the Company and in the industry as a whole.
The Company's policy is to have officer compensation near the average of the
Reference Group.
After analyzing Reference Group base salaries as compared with salaries of
the Company's officers, the Compensation Committee determines an annual salary
increase budget. In August 1997, the Committee approved base salary increases
averaging approximately 6% for the Company's officers. The salary increase
budget is then allocated among officers on the basis of individual performance
(during the preceding 12 months) against objectives related to their respective
areas of responsibility. Performance objectives are proposed by individual
officers, negotiated by the executive staff, and approved by the Compensation
Committee with the advice of the Chief Executive Officer.
Under the Company's Executive Bonus Plan for 1997, incentive cash payments
were based strictly on the Company's revenues and profits and the growth of the
Company relative to its principal competitors. The revenue and profitability
objectives and the "competitive adjustment" multiple were established in the
Plan on a sliding scale, so that the percentage achievement of each, which could
be higher or lower than 100%, was determinable objectively at the end of the
year. For example, the "competitive adjustment" multiple would have been 150% if
the Company had outgrown all of its principal competitors in 1997. The target
bonus for an officer (other than the Chief Executive Officer) under the Plan was
40% of his or her base salary. The percentage achievement of the revenue and
profitability objectives in 1997 together totaled approximately 68%. This sum
was then multiplied by 20% to normalize the aggregate percentage achievement to
the 40% bonus target. The product of these two percentages, which was
approximately 13.6%, was then multiplied by the "competitive adjustment"
multiple, which was 67% since the Company's growth was less than that of its
three principal competitors in 1997. The result for 1997 was bonus payments to
officers (other than the Chief Executive Officer) that averaged approximately
9.1% of base salary. Bonuses were paid under the Executive Bonus Plan in January
of 1998. The Committee believes the bonus amount for 1997 was reasonable in
light of the Company's operating results in 1997.
The Company believes that executive officers should hold substantial,
long-term equity stakes in the Company so that the interests of executive
officers will coincide with the interests of the shareholders. As a result,
stock or stock options constitute a significant portion of the compensation paid
by the Company to its officers. After analyzing the practices of the Reference
Group, the Compensation Committee determines an annual budget for option grants
to the Company's employees and officers. In granting stock options to officers,
the Compensation Committee considers a number of factors, such as the officer's
position, responsibility, and equity interest in the Company, and evaluates the
officer's past performance and future potential to influence the long-term
growth and profitability of the Company. After taking these considerations into
account, the Compensation Committee in 1997 granted options to purchase 90,000,
31,250, 23,700, 16,000, and 9,000 shares of Common Stock to Messrs. East,
Goodyear, Hamdy, Nye, and Schlageter, respectively. All of such options were
granted at an exercise price of $16.375 per share, which was the value of the
Company's Common Stock on the date of grant.
Compensation of Chief Executive Officer
The Compensation Committee generally uses the same factors and criteria
described above in making compensation decisions regarding the Chief Executive
Officer. In 1997, Mr. East's annual base salary was adjusted from $300,000 to
$318,000, an increase of 6%. The Compensation Committee believes this is an
appropriate amount considering Mr. East's leadership and resulting influence
over the Company's performance. Mr. East's 1997 bonus was determined under the
Company's Executive Bonus Plan in the manner described above (except that his
target bonus is equal to 50% of his base salary) and resulted in a payment of
$36,323, or approximately 11% of his base salary.
Deductibility of Executive Compensation
Beginning in 1994, the Code limited the federal income tax deductibility of
compensation paid to the Company's chief executive and to each of the other four
most highly compensated executive officers. For this purpose, compensation can
include, in addition to cash compensation, the difference between the exercise
price of stock options and the value of the underlying stock on the date of
exercise. The Company may deduct compensation with respect to any of these
individuals only to the extent that during any fiscal year such compensation
does not exceed $1 million or meets certain other conditions (such as
shareholder approval). Considering the Company's current compensation plans and
policy, the Company and the Compensation Committee believe that, for the near
future, there is little risk that the Company will lose any significant tax
deduction relating to executive compensation. If the deductibility of executive
compensation becomes a significant issue, the Company's compensation plans and
policy will be modified to maximize deductibility if the Company and the
Compensation Committee determine that such action is in the best interests of
the Company.
Jos C. Henkens
Frederic N. Schwettmann
Robert G. Spencer
Compensation Committee Interlocks and Insider Participation
No member of the Compensation Committee is an officer or employee of the
Company or any of its subsidiaries, and no officer or employee of the Company or
any of its subsidiaries has served as a member of the Compensation Committee
since the Company's initial public offering.
Company Stock Performance
The following graph shows a comparison of cumulative total return for the
Company's Common Stock, The Nasdaq Stock Market (US), and Nasdaq Electronic
Component Stocks. In preparing the graph, it was assumed that (i) $100 was
invested on July 31, 1993, in the Company's Common Stock (at the initial public
offering price of $9.50 per share), The Nasdaq Stock Market (US), and Nasdaq
Electronic Component Stocks and (ii) all dividends were reinvested.
Comparison of Cumulative Total Return
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
7/31/93 12/31/93 12/31/94 12/31/35 12/31/96 12/31/97
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Nasdaq Stock Market.................. $100 $110 $108 $153 $188 $230
Nasdaq Electronic Components Stocks.. $100 $117 $130 $215 $371 $389
Actel Corporation.................... $100 $121 $87 $113 $250 $133
</TABLE>
The closing price of the Company's Common Stock on December 31, 1997, was
$12.625. The closing price of the Company's Common Stock on March 23, 1998, was
$14.125.
COMPLIANCE WITH SECTION 16(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no additional
reports were required, all directors and officers of the Company filed with the
SEC on a timely basis all reports required by Section 16(a) of the Exchange Act
during the Company's most recent fiscal year. To the Company's knowledge, the
only beneficial owner of more than 10% of the Company's Common Stock during the
Company's most recent fiscal year was Texas Instruments Incorporated (see
"INFORMATION CONCERNING SOLICITATION AND VOTING -- Share Ownership" above).
OTHER MATTERS
The Company knows of no other matters to be submitted to the Annual
Meeting. If any other matters properly come before the Annual Meeting, it is the
intention of the persons named in the enclosed proxy card to vote the shares
they represent as the Board of Directors may recommend.
BY ORDER OF THE BOARD OF DIRECTORS
David L. Van De Hey
Secretary
Dated: March 27, 1998
THE COMPANY WILL MAIL WITHOUT CHARGE TO ANY SHAREHOLDER UPON WRITTEN REQUEST A
COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 28,
1997, INCLUDING THE FINANCIAL STATEMENTS AND SCHEDULE AND A LIST OF EXHIBITS.
REQUESTS SHOULD BE SENT TO INVESTOR RELATIONS, ACTEL CORPORATION, 955 EAST
ARQUES AVENUE, SUNNYVALE, CALIFORNIA 94086-4533.
Exhibit A
AGREEMENT AND PLAN OF MERGER
OF
ACTEL CORPORATION
a Nevada corporation
AND
ACTEL CORPORATION
a California corporation
THIS AGREEMENT AND PLAN OF MERGER dated as of ____________, 1998 (the
"Agreement") is between Actel Corporation, a Nevada corporation having its
principal place of business at 955 E. Arques, Sunnyvale, CA 94086 ("Actel
Nevada"), and Actel Corporation, a California corporation having its principal
place of business at 955 E. Arques, Sunnyvale, CA 94086 ("Actel California").
Actel Nevada and Actel California are sometimes referred to herein as the
"Constituent Corporations."
RECITALS
a. Actel Nevada is a corporation duly organized and existing under the
laws of the State of Nevada and has an authorized capital of 65,000,000 shares,
$0.001 par value, 60,000,000 of which are designated "Common Stock," and
5,000,000 of which are designated "Preferred Stock." As of __________, 1998, 100
shares of Common Stock were issued and outstanding, all of which were held by
Actel California, and no shares of Preferred stock were issued and outstanding.
b. Actel California is a corporation duly organized and existing under
the laws of the State of California and has an authorized capital of 35,000,000
shares, 30,000,000 of which are designated "Common Stock," and 5,000,000 of
which are designated "Preferred Stock." One series of preferred stock of Actel
California has been designated, namely, Series A Preferred Stock (the "Series A
Preferred Stock"), consisting of 1,000,000 shares. As of March 23, 1998,
21,243,290 shares of Common Stock and no shares of Series A Preferred Stock were
issued and outstanding.
c. The Board of Directors of Actel California has determined that, for
the purpose of effecting the reincorporation of Actel California into the State
of Nevada, it is advisable and in the best interests of Actel California and its
shareholders that Actel California merge with and into Actel Nevada upon the
terms and conditions herein provided.
d. The respective Boards of Directors of Actel Nevada and Actel
California have approved this Agreement and have directed that this Agreement be
submitted to a vote of their respective shareholders and executed by the
undersigned officers.
NOW, THEREFORE, in consideration of the mutual agreements and covenants
set forth herein, Actel Nevada and Actel California hereby agree, subject to the
terms and conditions hereinafter set forth, as follows:
I. MERGER
A. Merger. In accordance with the provisions of this Agreement, the
Nevada General Corporation Law and the California General Corporation Law, Actel
California shall be merged with and into Actel Nevada (the "Merger"), the
separate existence of Actel California shall cease and Actel Nevada shall be,
and is herein sometimes referred to as, the "Surviving Corporation," and the
name of the Surviving Corporation shall be Actel Corporation, and the surviving
corporation shall be a Nevada corporation under the Nevada General Corporation
Law.
B. Filing and Effectiveness. The Merger shall become effective when the
following actions shall have been completed:
1. This Agreement and the Merger shall have been adopted and
approved by the shareholders of each Constituent Corporation in accordance
with the requirements of the Nevada General Corporation Law and the
California General Corporation Law;
2. 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;
3. Executed Articles of Merger meeting the requirements of the
Nevada General Corporation Law shall have been filed with the Secretary of
State of the State of Nevada; and
4. An executed Agreement of Merger meeting the requirements of the
California General Corporation Law shall have been filed with the Secretary
of State of the State of California.
The date and time when the Merger shall become effective, as
aforesaid, is herein called the "Effective Date of the Merger."
C. Effect of the Merger. Upon the Effective Date of the Merger, the
separate existence of Actel California shall cease and Actel Nevada, 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
Actel California's Boards of Directors, (iii) shall succeed, without other
transfer, to all of the assets, rights, powers and property of Actel California
in the manner as more fully set forth in Section 92A.250 of the Nevada General
Corporation Law, (iv) shall continue to be subject to all of its debts,
liabilities and obligations as constituted immediately prior to the Effective
Date of the Merger, and (v) shall succeed, without other transfer, to all of the
debts, liabilities and obligations of Actel California in the same manner as if
Actel Nevada had itself incurred them, all as more fully provided under the
applicable provisions of the Nevada General Corporation Law and the California
General Corporation Law.
II. CHARTER DOCUMENTS; DIRECTORS AND OFFICERS
A. Articles of Incorporation. The Articles of Incorporation of Actel
Nevada 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.
B. Bylaws. The Bylaws of Actel Nevada 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.
C. Directors and Officers. The directors and officers of Actel 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
A. Actel California Common Stock. Upon the Effective Date of the Merger,
each share of Actel California Common Stock issued and outstanding immediately
prior thereto shall, by virtue of the Merger and without any action by the
Constituent Corporations, the holder of such shares or any other person, be
converted into and exchanged for one fully paid and nonassessable share of
Common Stock, $0.001 par value, of the Surviving Corporation.
B. Actel California Options, Stock Purchase Rights and Convertible
Securities. Upon the Effective Date of the Merger, the Surviving Corporation
shall assume and continue any stock option plans and all other employee benefit
plans of Actel California. As of the date hereof there are options outstanding
under Actel California's stock option plans to purchase a total of _______
shares of Common Stock of Actel California. As of the date hereof, there are no
other options, purchase rights for or securities convertible into either Common
Stock or Preferred Stock of Actel California. Each outstanding and unexercised
option to purchase Actel California Common Stock shall become an option to
purchase the Surviving Corporation's Common Stock on the basis of one share of
the Surviving Corporation's Common Stock for each share of Actel California
Common Stock issuable pursuant to any such option on the same terms and
conditions and at an exercise price per share equal to the exercise price
applicable to any such Actel California option at the Effective Date of the
Merger.
A number of shares of the Surviving Corporation's Common Stock shall
be reserved for issuance upon the exercise of options equal to the number of
shares of Actel California Common Stock so reserved immediately prior to the
Effective Date of the Merger.
D. Actel Nevada Common Stock. Upon the Effective Date of the Merger, each
share of Common Stock, $0.001 par value, of Actel Nevada issued and outstanding
immediately prior thereto shall, by virtue of the Merger and without any action
by Actel Nevada, the holder of such shares or any other person, be canceled and
returned to the status of authorized but unissued shares.
E. Exchange of Certificates. After the Effective Date of the Merger, each
holder of an outstanding certificate representing shares of Actel California
Common Stock may, at such shareholder's option, surrender the same for
cancellation to the transfer agent and registrar for the Common Stock of the
Surviving Corporation, as exchange agent (the "Exchange Agent"), and each such
holder shall be entitled to receive in exchange therefor a certificate or
certificates representing the number of shares of Common Stock of the Surviving
Corporation's into which the surrendered shares were converted as herein
provided. Until so surrendered, each outstanding certificate theretofore
representing shares of Actel California Common Stock shall be deemed for all
purposes to represent the number of shares of Common Stock of the Surviving
Corporation's Common Stock into which such shares of Actel California Common
Stock were converted in the Merger.
The registered owner on the books and records of the Surviving
Corporation or the Exchange Agent of any such outstanding certificate shall,
until such certificate shall have been surrendered for transfer or conversion or
otherwise accounted for to the surviving Corporation or the Exchange Agent, have
and be entitled to exercise any voting and other rights with respect to and to
receive dividends and other distributions upon the shares of capital 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 Actel
California so converted and given in exchange therefor, unless otherwise
determined by the Board of Directors of the Surviving Corporation in compliance
with applicable laws.
If any certificate for shares of Actel Nevada stock is to be issued in
a name other than that in which the certificate surrendered in exchange therefor
is registered, it shall be a condition of issuance thereof that the certificate
so surrendered shall be properly endorsed and otherwise in proper form for
transfer, that such transfer otherwise be proper and that the person requesting
such transfer pay to the Exchange Agent any transfer or other taxes payable by
reason of the issuance of such new certificate in a name other than that of the
registered holder of the certificate surrendered or establish to the
satisfaction of Actel Nevada that such tax has been paid or is not payable.
IV. GENERAL
A. Covenants of Actel Nevada. Actel Nevada covenants and agrees that it
will, on or before the Effective Date of the Merger:
1. Qualify to do business as a foreign corporation in the State of
California and in connection therewith irrevocably consent to service of
process directed to it upon its designated agent as required under the
provisions of Section 2105 of the California General Corporation Law;
2. File any and all documents with the California Franchise Tax
Board necessary for the assumption by Actel Nevada of all of the franchise
tax liabilities of Actel California; and
3. Take such other actions as may be required by the California
General Corporation Law.
B. Further Assurances. From time to time, as and when required by Actel
Nevada or by its successors or assigns, there shall be executed and delivered on
behalf of Actel California such deeds and other instruments, and there shall be
taken or caused to be taken by Actel Nevada and Actel California such further
and other actions, as shall be appropriate or necessary in order to vest or
perfect in or conform of record or otherwise by Actel Nevada the title to and
possession of all the property, interests, assets, rights, privileges,
immunities, powers, franchises and authority of Actel California and otherwise
to carry out the purposes of this Agreement, and the officers and directors of
Actel Nevada are fully authorized in the name and on behalf of Actel California
or otherwise to take any and all such action and to execute and deliver any and
all such deeds and other instruments.
C. 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 Actel California or Actel Nevada,
or both, notwithstanding the approval of this Agreement by the shareholders of
Actel California or by the sole stockholder of Actel Nevada, or by both.
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 California and
Nevada, provided that an amendment made subsequent to the adoption of this
Agreement by the shareholders of either Constituent Corporation shall not: (1)
alter or change the amount or kind of shares, securities, cash, property and/or
rights to be received in exchange for or on conversion of all or any of the
shares of any class or series thereof of such Constituent Corporation, (2) alter
or change any term of the Certificate of Incorporation of the Surviving
Corporation to be effected by the Merger, or (3) alter or change any of the
terms and conditions of this Agreement if such alteration or change would
adversely affect the holders of any class of shares or series thereof of such
Constituent Corporation.
D. Registered Office. The registered office of the Surviving Corporation
in the State of Nevada is located at 402 N. Division Street, Carson City, Nevada
89703, and Roy L. Farrow is the registered agent of the Surviving Corporation at
such address.
E. Expenses. Each party to the transactions contemplated by this
Agreement (including, without limitation, Actel California, Actel Nevada and
their respective shareholders) shall pay its own expenses, if any, incurred in
connection with such transactions.
F. Agreement. Executed copies of this Agreement will be on file at the
principal place of business of the Surviving Corporation at 955 E. Arques,
Sunnyvale, CA 94086 and copies thereof will be furnished to any shareholder of
either Constituent Corporation, upon request and without cost.
G. 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 Nevada and, so far as applicable, the merger provisions of the
California General Corporation Law.
H. Counterparts. In order to facilitate the filing and recording of this
Agreement, the same may be executed in any number of counterparts, each of which
shall be deemed to be an original and all of which together shall constitute one
and the same instrument.
IN WITNESS WHEREOF, this Agreement, having first been approved by
resolutions of the Boards of Directors of Actel Nevada and Actel California, is
hereby executed on behalf of each of such two corporations and attested by their
respective officers thereunto duly authorized.
ACTEL CORPORATION
a Nevada corporation
By:__________________________________
John C. East
President and Chief Executive Officer
ATTEST:
_____________________________________
David L. Van De Hey
Secretary
ACTEL CORPORATION
a California corporation
By:__________________________________
John C. East
President
ATTEST:
_____________________________________
David L. Van De Hey
Secretary
ACTEL CORPORATION
(California Corporation)
OFFICERS' CERTIFICATE
John C. East and David L. Van De Hey certify that:
1. They are the President and the Secretary, respectively, of Actel
Corporation, a corporation organized under the laws of the State of California.
2. The corporation has authorized two classes of stock, one designated
"Common Stock" and the other designated "Preferred Stock." One series of
Preferred Stock, designated Series A Preferred Stock (the "Series A Preferred
Stock"), has been authorized.
3. There were 21,243,290 shares of Common Stock and no shares of Series A
Preferred outstanding as of the record date for the meeting of shareholders at
which the Agreement and Plan of Merger attached hereto (the "Merger Agreement")
was approved.
4. The principal terms of the Merger Agreement were approved by the Board
of Directors and by the vote of a number of shares of each class and series of
stock that equaled or exceeded the vote required.
5. The vote received was greater than a majority of the outstanding
shares of Common Stock.
6. John C. East and David L. Van De Hey further declare under penalty of
perjury under the laws of the State of California that each has read the
foregoing certificate and knows the contents thereof and that the same is true
of their own knowledge.
Executed in ____________, California on ___________, 1998.
_____________________________________
John C. East
President and Chief Executive Officer
_____________________________________
David L. Van De Hey
Secretary
ACTEL CORPORATION
(Surviving Corporation)
OFFICERS' CERTIFICATE
John C. East and David L. Van De Hey certify that:
1. They are the President and the Secretary, respectively, of Actel
Corporation, a corporation organized under the laws of the State of Nevada.
2. The corporation has authorized two classes of stock, one designated
"Common Stock" and the other designated "Preferred Stock."
3. There were 100 shares of Common Stock outstanding and entitled to vote
on the Agreement and Plan of Merger attached hereto (the "Merger Agreement").
There are no shares of Preferred Stock outstanding.
4. The principal terms of the Merger Agreement were approved by the Board
of Directors and by the vote of a number of shares of each class and series of
stock that equaled or exceeded the vote required.
5. The percentage vote received was greater than a majority of the votes
entitled to be cast by holders of outstanding shares of Common Stock.
6. John C. East and David L. Van De Hey further declare under penalty of
perjury under the laws of the State of Nevada that each has read the foregoing
certificate and knows the contents thereof and that the same is true of their
own knowledge.
Executed in ______________, California on ____________, 1998.
_____________________________________
John C. East
President
_____________________________________
David L. Van De Hey
Secretary
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS OF
ACTEL CORPORATION
To Be Held On May 22, 1998
PROXY SOLICIITED BY THE BOARD OF DIRECTORS
The undersigned holder of Common Stock of Actel Corporation (the "Company")
acknowledges receipt of the Company's "Notice of Annual Meeting of Shareholders"
to be held May 22, 1998, and the accompanying Proxy Statement dated March 27,
1998 (the "Proxy Statement"), and, revoking any proxy heretofore given, hereby
constitutes and appoints John C. East and Jos C. Henkens, and each of them
individually, with full power of substitution, attorney and proxy to appear and
vote all of the shares of Common Stock of the Company standing in the name of
the undersigned at the 1998 Annual Meeting of Shareholders, and any adjournment
thereof, as follows:
1. To elect the following named persons as directors of the Company: John
C. East, Jos C. Henkens, Jacob S. Jacobsson, Frederic N. Schwettmann,
and Robert G. Spencer.
FOR ALL NOMINEES (except as AUTHORITY WITHHELD TO VOTE
indicated below FOR ALL NOMINEES
To vote against or to withhold authority to vote for any nominee(s) for
election, write the name(s) of such nominee(s) in the following space:
-----------------------------------------------------------------------
If an "against" vote is cast for any nominee, or if authority is
withheld to vote for any nominee, indicated whether the proxy may vote
for another nominee, in his discretion; or such vote(s) are cast for the
following person(s):
-----------------------------------------------------------------------
2. To approve a change in the FOR AGAINST ABSTAIN
Company's state of incorporation
from California to Nevada.
3. To approve amendments increasing FOR AGAINST ABSTAIN
the number of shares Common Stock
authorized for issuance under the
Company's Articles of Incorporation.
4. To approve amendments increasing FOR AGAINST ABSTAIN
the number of shares of Common
Stock reserved for issuance under
the Company's 1993 Emloyee Stock
Purchase Plan.
5. To approve an amendment increasing FOR AGAINST ABSTAIN
the number of shares of Common
Stock reserved for issuance under
the Company's 1993 Directors' Stock
Option Plan.
6. To ratify the selection of Ernst & FOR AGAINST ABSTAIN
Young LLP as the Company's independent
auditors.
THIS PROXY IS SOLICITED BY AND ON BEHALF OF THE BOARD OF DIRECTORS OF THE
COMPANY AND MAY REVOKED PRIOR TO ITS EXERCISE. This Proxy will be voted as
directed, but if no direction is indicated, it will be voted for all nominees
for director as set forth in Proposal 1 and for Proposals 2, 3, 4, 5, and 6. If
any other business is presented to the 1998 Annual Meeting of Shareholders, this
Proxy will be voted by those named in this Proxy in their best judgment.
Dated____________________________, 1997
----------------------------------
----------------------------------
Please sign EXACTLY as your
name(s) appear(s) on the address
label used to mail your Proxy
Statement. When shares are held by
joint tenants or as community
property, both should sign. If
signing as attorney, executor,
administrator, trustee, or
guardian, please give full title
as such. If a corporation, please
sign in full corporate name by
president or other authorized
officer. If a partnership, please
sign in partnership name by an
authorized person.
PLEASE SIGN AND DATE YOUR PROXY AND RETURN
IT PROMPTLY IN THE ENCLOSED BUSINESS
REPLY ENVELOPE.
March 27, 1998
Dear Shareholder,
While I'd appreciate your support for all of the proposals to be made by
Actel at its 1998 Annual Meeting of Shareholders, there are two in particular
I'd like to discuss with you.
The first is a proposed reincorporation of Actel from California to Nevada.
In the wake of Proposition 211 (which was rejected by California voters in
1996), Actel was one of many corporations headquartered in California that
decided to reincorporate. In 1997, we proposed a "plain vanilla"
reincorporation, but that proposal was rejected by shareholders, principally
because some of Actel's institutional investors believed it would make Actel a
less attractive target for unsolicited takeover attempts.
As you will see in the enclosed proxy statement, we are again requesting
shareholder approval to reincorporate. However, in consultation with
Institutional Shareholder Services (ISS), we have attempted to make our
reincorporation proposal "neutral" from an "antitakeover" point of view.
Modifications to the proposal include the following:
- We "opted-out" of Nevada's "business combination" statutes, which
prohibit a Nevada corporation from engaging in a "combination" with an
"interested stockholder" for three years following the date that such
person becomes an interested stockholder.
- We "opted-out" of Nevada's "control share" statutes, which provide
that an "acquiring person" shall only obtain voting rights in "control
shares" purchased by such person to the extent approved by the other
stockholders at a meeting.
- We added a number of provisions to the Articles of Incorporation of
Actel Nevada, which may be amended only with stockholder approval and
may not be limited or eliminated by the Board of Directors acting
alone. The new provisions:
- authorize the holders of at least ten percent of the outstanding
capital stock to call a special meeting of stockholders.
- specify that any Director or the entire Board of Directors may be
removed, with or without cause, by the affirmative vote of a
majority of the outstanding shares entitled to vote.
- provide that the number of Directors shall be within the range
specified in the Articles (five to nine).
- provide that a vacancy created by the removal of a director by
the vote or written consent of the shareholders or by court order
may be filled (with certain exceptions) only by the affirmative
vote of a majority of shares represented and voting at a duly
held meeting at which a quorum is present.
In each case, these new provisions make the Articles of Incorporation
of Actel Nevada conform with the provisions of California law under
which Actel's corporate affairs are currently governed, making the
proposed reincorporation "neutral" as to these matters.
- We have indicated our intention to continue complying with California
law concerning shareholder inspections.
- We have "broken-out" as a separate proposal our request to increase
the number of authorized shares of Common Stock.
With the help of ISS, we have taken great care to address potential concerns
that you may have about the proposed reincorporation. It's my hope that you
will, in turn, accept the Board of Director's judgment that the proposed
reincorporation is in the best interest of Actel and support the proposal.
The other proposal I'd like to discuss with you is our request to increase
the shares authorized for issuance under our Employee Stock Purchase Plan (ESPP)
by approximately 1.9 million. This is a large number, but one that I believe is
justified by a recent change in the accounting rules. Under the new rules, if
the number of shares sold to Actel employees in an offering period exceeds the
number of shares reserved for issuance under the ESPP at the beginning of that
offering period, Actel may incur a substantial compensation charge. To avoid
this result, which would reduce Actel's profitability, all we have to do is
ensure there are enough authorized shares.
While 1.9 million shares is probably more than we'll ever need, I don't
believe that presents any risk to shareholders because an excess number of
authorized shares doesn't change the number of shares that can actually be
issued under the ESPP. In accordance with IRS regulations, the ESPP is "formula"
driven and has caps on participation levels. In other words, my deeply held
conviction is that the ESPP is not subject to abuse. In light of this, I think
it's prudent to reserve a surplus number of shares for issuance under the ESPP,
since the potential consequence of not having enough authorized shares is so
bad. Accordingly, I request your support for our proposal to increase
significantly the number of shares authorized for issuance under the ESPP.
Thank you for your consideration and support.
Sincerely yours,
John C. East
President and CEO
