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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-A
FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF THE
SECURITIES EXCHANGE ACT OF 1934
PRISM SOFTWARE CORPORATION
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(Exact name of registrant as specified in its charter)
DELAWARE 95-2621719
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(State of Incorporation or organization) (IRS Employer
Identification No.)
23696 BIRTCHER, LAKE FOREST, CALIFORNIA 92630
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(Address of principal executive offices) (Zip Code)
If this form relates to the If this Form relates to the
registration of a class of debt registration of a class of debt
securities and is effective upon securities and is to become
filing pursuant to General effective simultaneously with
Instruction A(c)(1) please check the effectiveness of a concurrent
the following box. [ ] registration statement under the
Securities Act of 1933 pursuant
to General Instruction A(c)(2)
please check the following box.
[ ]
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH
TO BE SO REGISTERED EACH CLASS IS TO BE REGISTERED
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NONE NONE
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SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, PAR VALUE $.01 PER SHARE
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(Title of Class)
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ITEM 1. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED.
The securities to be registered hereunder are the Common Stock, par
value $.01 per share, of Prism Software Corporation, a Delaware corporation
(the "Registrant"). Subject to any special voting rights of the holders of
Preferred Stock, if any, holders of Common Stock of the Registrant are entitled
to one vote per share on all matters to be voted upon by the Registrant's
stockholders. Subject to preferences that may be applicable to the holders of
the outstanding shares of Preferred Stock, if any, holders of Registrant's
Common Stock are entitled to receive such lawful dividends, if any, as may be
declared from time to time by Registrant's Board of Directors. In the event of
voluntary or involuntary liquidation, distribution or sale of assets,
dissolution or winding up of Registrant and subject to the rights of holders of
outstanding shares of Preferred Stock, if any, the holders of shares of Common
Stock of Registrant shall be entitled to receive pro rata all of the remaining
assets of Registrant, available for distribution to its stockholders. No
redemption or sinking fund provisions are applicable to Registrant's Common
Stock. Incorporated herein by reference is the description of the Common Stock
contained at page 62 in the disclosure set forth under the caption "DESCRIPTION
OF CAPITAL STOCK" on pages 62 through 68 of the Registrant's Registration
Statement on Form SB-2 , together with Exhibits thereto, filed with the
Securities and Exchange Commission (the "Commission") on August 15, 1996 (SEC
File No. 333-5450- LA), as amended by Amendment No. 1 to Form SB-2 Registration
Statement filed with the Commission on September 27, 1996 (the "SB-2
Registration Statement"). The pages of the SB-2 Registration Statement
referenced above are attached hereto as Exhibit 2.10 and incorporated herein by
reference.
ITEM 2. EXHIBITS.
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Exhibit Description Page No.
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1 Specimen of Certificate representing Registrant's Common
Stock (incorporated herein by reference to Exhibit 4.1 to
the SB-2 Registration Statement).
2.1 Registrant's Registration Statement on Form SB-2, together
with exhibits thereto, filed under the Securities Act of 1933,
as amended, as filed with the Commission on August 15,
1996 (File No. 333-5450-LA), as amended by Amendment
No. 1 to Form SB-2 Registration Statement filed with the
Commission on September 27, 1996 (the "SB-2 Registration
Statement").*
2.2 Certificate of Incorporation of Registrant, as amended to date
(incorporated herein by reference to Exhibit 3.1 to the SB-2
Registration Statement).
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Exhibit Description Page No.
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2.3 Bylaws of the Registrant, as currently in effect
(incorporated herein by reference to Exhibits 3.2
and 3.3 to the SB-2 Registration Statement).
2.4 Form of Warrant (incorporated herein by reference to
Exhibit 4.2 to the SB-2 Registration Statement).
2.5 Debt Restructuring Agreement dated December 18, 1995
between the Registrant and Threshold Technology
Partners, L.P. ("Threshold") (incorporated herein by
reference to Exhibit 10.9 to the SB-2 Registration
Statement).
2.6 Convertible Promissory Note dated July 14, 1995, made
to the order of Threshold in the principal amount of
$250,000 (incorporated herein by reference to Exhibit
10.13 to the SB-2 Registration Statement).
2.7 Convertible Promissory Note dated July 29, 1995, made
to the order of Peach Tree Capital Partners, Limited
Partnership in the principal amount of $60,000
(incorporated herein by reference to Exhibit 10.14 to
the SB-2 Registration Statement).
2.8 Convertible Promissory Note dated July 29, 1995, made
to the order of Northstar Capital Partners, Limited
Partnership in the principal amount of $40,000
(incorporated herein by reference to Exhibit 10.15 to
the SB-2 Registration Statement).
2.9 Letter Agreements dated March 13, 1996 and June 27,
1996, from the Registrant to Kennedy Capital
Management, Inc. and Third Century II, respectively,
obligating the Registrant to issue to each of
Monsanto Master Trust, Newell Co. and Third
Century II and additional 10% of their total common
stock and warrants then owned for each month past
October 1, 1996 that a registration of such securities
has not occurred (incorporated herein by reference to
Exhibit 10.19 to the SB-2 Registration Statement).
2.10 Pages 62 through 68 of the SB-2 Registration Statement. 6
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* Incorporated herein by reference to Registrant's Registration
Statement on Form SB-2, together with the Exhibits thereto,
filed under the Securities Act of 1933, as amended, as filed
with the Commission on August 15, 1996 (File No. 333-5450-LA),
as amended by Amendment No. 1 to Form SB-2 Registration
Statement filed with the Commission on September 27, 1996.
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SIGNATURE
Pursuant to the requirements of Section 12 of the Securities and
Exchange Act of 1934, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized.
PRISM SOFTWARE CORPORATION
(Registrant)
Dated: November 11, 1996 By: /s/ E. TED DANIELS
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E. Ted Daniels,
President
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EXHIBIT 2.10
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foregoing, the Selling Stockholders will be subject to applicable provisions of
the 1934 Act and the rules and regulations thereunder, including without
limitations Rules 10b-2, 10b-6, and 10b-7 thereof, which provisions may limit
the timing of purchases and sales of the Shares by the Selling Stockholders.
All of the foregoing may affect the marketability of the Shares and any
dealer's ability to engage in market making activities with respect to the
Shares.
In order to comply with the securities laws of certain states, if
applicable, the Shares may be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
Shares may not be sold unless the Shares have been registered or qualified for
sale in such state or an exemption from registration or qualification is
available and complied with. The Company intends, prior to sale in any state by
a Selling Stockholder, to register or qualify the Shares under such state laws
as necessary to permit their sale.
The Company will pay all of the expenses incident to the offering
and sale of the Shares to the public other than fees, commissions, and
discounts of underwriters, dealers, or agents.
DESCRIPTION OF CAPITAL STOCK
GENERAL
The Company's authorized capital stock consists of 50,000,000 shares
of Common Stock, par value $.01 per share, and 5,000,000 shares of Preferred
Stock, par value $.01 per share, of which 99,000 shares of Class A Preferred
Stock and 27,777 shares of Class B Preferred Stock are issued and outstanding.
As of September 18, 1996, there were 14,068,772 shares of Common Stock
outstanding, held of record by approximately 946 stockholders.
COMMON STOCK
Subject to the rights of holders of any preferred stock that may be
outstanding, the holders of outstanding shares of Common Stock are entitled to
receive dividends out of assets legally available therefor at such times and in
such amounts as the Board of Directors may, from time to time, determine. Each
stockholder is entitled to one vote for each share of Common Stock held. The
Company's stockholders are not entitled to cumulate their votes for the
election of directors. The Common Stock is not entitled to preemptive rights
and is not subject to redemption. In the event of liquidation, dissolution or
winding-up of the Company, subject to the rights of holders of any preferred
stock that may be outstanding, the holders of the Common Stock shall be
entitled to receive pro rata all of the remaining assets of the Company
available for distribution to its stockholders.
PREFERRED STOCK
The Board of Directors is authorized, subject to any limitations
prescribed by Delaware law, to provide for the issuance of the undesignated
preferred stock in one or more series, to establish from time to time the
number of shares to be included in each such series, to fix or alter the
rights, preferences, privileges and restrictions, including voting, conversion,
liquidation, dividend and redemption, of the shares of each wholly unissued
preferred stock and any restrictions thereon, and to increase or decrease the
number of shares of any such series (but not below the number of shares of such
series then outstanding) without any further vote or action by the
stockholders. Upon completion of this Offering, there will remain 4,872,223
shares of preferred stock authorized and available for issuance by the Company,
the terms of which (including, without limitation, dividend rates, conversion
rights, voting rights, terms of redemption and liquidation preferences) may be
fixed by the Board of Directors in its sole discretion as described above.
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Shares of preferred stock issued in the future could have conversion
rights which may result in the issuance of additional shares of Common Stock
which could dilute the interests of the holders of Preferred Stock and Common
Stock. Such shares could also have voting rights and liquidation preferences
which are senior to the rights and preferences of the Preferred Stock and
Common Stock. Additionally, such shares could have dividend rates and
redemption or other provisions which could adversely affect the Company's
ability to pay dividends on the Preferred Stock and Common Stock or prohibit
payment of such dividends. Such shares could also be issued, under certain
circumstances, in an attempt to prevent a takeover of the Company, and such
issuance could adversely impact holders of Preferred Stock and Common Stock who
might vote in favor of a proposed merger, tender offer or similar transaction.
Class A Preferred Stock
Between June 1, 1992 and November 15, 1992, the Company sold 100,000
shares of $5.00, 10% Class A Cumulative Convertible Preferred Stock ("Class A
Preferred Stock"). A summary of the preferences and relative rights of the
Class A Preferred Stock and the qualifications, limitations and restrictions
thereon is hereinafter set forth.
Class B Preferred Stock
On June 10, 1993, the Company sold 27,777 shares of $9.00, 8% Class
B Cumulative Convertible Preferred Stock ("Class B Preferred Stock"). A summary
of the preferences and relative rights of the Class B Preferred Stock and the
qualifications, limitations and restrictions thereon is hereinafter set forth.
Rights, Privileges and Preferences of Preferred Stock. The
following is a summary of the terms of the Preferred Stock.
Dividends. The holders of Class A Preferred Stock are entitled to
receive, when and as declared by the Board of Directors of the Company,
dividends at an annual rate of 10% ($.50) per share. Dividends are cumulative
from the date of issuance and are payable semi-annually on the Class A
Preferred Stock to holders of record on the stock records of the Company on
such record dates as shall be fixed by the Board of Directors of the Company.
Initial dividends will be calculated from the date of purchase of the Class A
Preferred Stock.
The holders of Class B Preferred Stock are entitled to receive, when
and as declared by the Board of Directors of the Company, dividends at an
annual rate of 8% ($.72) per share. Dividends are cumulative from the date of
issuance and are payable quarterly on the Class B Preferred Stock to holders of
record on the stock records of the Company on such record dates as shall be
fixed by the Board of Directors of the Company. Initial dividends will be
calculated from the date of purchase of the Class B Preferred Stock.
Preferred Stock redeemed or converted after the record date for a
dividend and before the payment thereof will be entitled to the dividend but no
adjustment will be made on account of dividends with respect to the period
after the last record date before the redemption or conversion, as the case may
be.
Unless all annual cumulative dividends on the Preferred Stock have
been paid, no cash dividends or other distributions may be paid or declared and
set apart for payment on the Common Stock or any other capital stock of the
Company ranking junior to the Preferred Stock as to dividends.
Delaware law provides that a corporation may pay dividends in cash
or shares of its stock. Such dividends may be paid from either surplus or net
profits for the fiscal year in which the dividend is declared and/or the
preceding fiscal year, provided, however, that if the capital of the
corporation shall have been
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diminished by depreciation in the value of its property, or by losses, or
otherwise, to an amount less than the aggregate amount of the capital
represented by the outstanding stock of all classes having a preference upon
the distribution of assets, the directors of such corporation shall not declare
and pay out of such net profits any dividends upon any shares of any classes of
its capital stock until the deficiency in the amount of capital represented by
the outstanding stock of all classes having a preference upon the distribution
of assets shall have been repaired. Surplus is defined as the excess of the net
assets of the Company over the amount determined to be capital. The capital of
the Company will be the aggregate amount of the par values of the shares of
Common Stock and Preferred Stock issued. Net assets means the amount by which
total assets exceed total liabilities. Neither capital nor surplus are
liabilities for this purpose.
Conversion. Holders of the Class A Preferred Stock have the right,
at their option, to convert their shares into shares of Common Stock at any
time at the conversion rate then in effect, provided that, if any of the Class
A Preferred Stock is to be redeemed, the conversion rights pertaining thereto
will terminate on the third business day preceding the redemption date subject
to a thirty (30) day notice period immediately preceding the redemption date
during which such holders may convert their shares into shares of Common Stock.
Each share of Class A Preferred Stock is presently convertible into
3.3 shares of Common Stock. No fractional share or scrip will be issued upon
conversion of the Preferred Stock. Cash will be paid in lieu of any fractional
shares.
Holders of the Class B Preferred Stock have the right, at their
option, to convert their shares into shares of Common Stock at any time at the
conversion rate then in effect, provided that, if any of the Class B Preferred
Stock is to be redeemed, the conversion rights pertaining thereto will
terminate on the third business day preceding the redemption date subject to a
thirty (30) day notice period immediately preceding the redemption date during
which such holders may convert their shares into shares of Common Stock.
Each share of Class B Preferred Stock is presently convertible into
four shares of Common Stock. No fractional share or scrip will be issued upon
conversion of the Preferred Stock. Cash will be paid in lieu of any fractional
shares.
The conversion rates for Class A and Class B Preferred Stock will be
appropriately adjusted if the Company (a) pays a dividend or makes a
distribution on its shares of Common Stock (but not the Preferred Stock) which
is paid or made in shares of Common Stock, (b) subdivides or reclassifies its
outstanding shares of Common Stock, (c) combines its outstanding shares of
Common Stock into a smaller number of shares of Common Stock, (d) issues shares
of Common Stock, or issues rights or warrants to all holders of its Common
Stock entitling them to subscribe for or purchase shares of Common Stock (or
securities convertible into Common Stock) at a price per share less than $2.25
in the case of the Class B Preferred Stock, and $1.67 in the case of the Class
A Preferred Stock, or (e) distributes to all holders of its Common Stock
evidences of its indebtedness or assets (excluding any dividend paid in cash
out of legally available funds) subject to the limitation that adjustments by
reason of any of the foregoing need not be made until they result in a
cumulative change in the conversion rate of at least five percent (5%). The
conversion rate will not be adjusted upon the conversion of shares of Class A
or Class B Preferred Stock or exercise of presently outstanding stock options
or warrants.
In case of any consolidation or merger to which the Company is a
party other than a merger or consolidation in which the Company is the
surviving corporation, or in case of any sale or conveyance to another
corporation of the property of the Company as an entirety or substantially as
an entirety, or in case of any statutory exchange of securities with another
corporation, there will be no adjustment of the conversion
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price of any class of Preferred Stock, but each holder of shares of Preferred
Stock then outstanding will have the right thereafter to convert such shares
into the kind and amount of securities, cash or other property which he would
have owned or have been entitled to receive immediately after such
consolidation, merger, statutory exchange, sale or conveyance had such shares
been converted immediately prior to the effective date of such consolidation,
merger, statutory exchange, sale or conveyance. In the case of a cash merger of
the Company into another corporation or any other cash transaction of the type
mentioned above, the effect of these provisions would be that the conversion
features of the Preferred Stock would thereafter be limited to converting the
Preferred Stock at the conversion price in effect at such time into the same
amount of cash per share that such holder would have received had such holder
converted the Preferred Stock into Common Stock immediately prior to the
effective date of such cash merger or transaction. Depending upon the terms of
such cash merger or transaction, the aggregate amount of cash so received in
conversion could be more or less than the liquidation preference of the
Preferred Stock.
The Preferred Stock may be converted at any time upon surrender of
the stock certificate or, in the case of a redemption by the Company, at least
three (3) days prior to the redemption date at the offices of the Company,
23696 Birtcher, Lake Forest, California. Shares of Common Stock issued upon
conversion will be fully paid and non-assessable.
Redemption. The Class A Preferred Stock may be redeemed by the
Company upon thirty (30) days written notice at a redemption price of $5.50 per
share. Class A Preferred Stock stockholders shall have the right to convert
their shares into Common Stock during this thirty (30) day period. The
redemption price shall be payable together with accumulated and unpaid
dividends to the date fixed for redemption. If full cumulative dividends on the
Class A Preferred Stock through the most recent dividend payment date have not
been paid, then such Class A Preferred Stock may not be redeemed in part unless
approved by the holders of a majority of shares of the Class A Preferred Stock
then outstanding and the Company may not purchase or acquire any shares of
Class A Preferred Stock other than pursuant to a purchase or exchange offer
made on the same terms to all holders of the Class A Preferred Stock. If less
than all the outstanding shares of Class A Preferred Stock are to be redeemed,
the Company will select those to be redeemed by lot or a substantially
equivalent method.
The Class B Preferred Stock may be redeemed by the Company upon
thirty (30) days written notice, commencing June 7, 1994, at a redemption price
of $10.00 per share. Class B Preferred Stock stockholders shall have the right
to convert their shares into Common Stock during this thirty (30) day period.
The redemption price shall be payable together with accumulated and unpaid
dividends to the date fixed for redemption. If full cumulative dividends on the
Class B Preferred Stock through the most recent dividend payment date have not
been paid, then such Class B Preferred Stock may not be redeemed in part unless
approved by the holders of a majority of shares of the Class B Preferred Stock
then outstanding and the Company may not purchase or acquire any shares of
Class B Preferred Stock other than pursuant to a purchase or exchange offer
made on the same terms to all holders of the Class B Preferred Stock. If less
than all the outstanding shares of Class B Preferred Stock are to be redeemed,
the Company will select those to be redeemed by lot or a substantially
equivalent method.
The shares of Class A and Class B Preferred Stock are not subject to
any sinking fund or any other similar provision.
The redemption by the Company of all or any part of the Class A and
Class B Preferred Stock is subject to the legal availability of cash. Moreover,
under Delaware law, shares of capital stock shall not be redeemed when the
capital of the Company is impaired or when the redemption would cause any
impairment of capital.
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Liquidation Rights. In the event of any liquidation, dissolution
or winding up of the Company, holders of the Class A and Class B Preferred
Stock are entitled to receive $5.00 and $9.00, respectively, in cash per share
plus accumulated and unpaid dividends out of assets available for distribution
to stockholders, prior to any distribution to holders of Common Stock or any
other stock ranking junior to the Preferred Stock. If, upon any liquidation,
dissolution or winding up of the Company, the amounts payable with respect to
the Preferred Stock (and with respect to any other Common Stock ranking on a
parity with respect to the Preferred Stock in any such distribution) are not
paid in full, the holders of the Preferred Stock (and of such other Common
Stock) will share ratably in any such distribution of assets in proportion to
the full preferential amounts to which such shares are entitled. After payment
of the full amount of the liquidating distribution to which they are entitled,
the holders of shares of Preferred Stock will not be entitled to any further
participation in any distribution of assets by the Company.
A consolidation or merger of the Company with or into any other
corporation or a sale of all or any part of the assets of the Company (which
shall not in fact result in the liquidation of the Company and the distribution
of assets to stockholders) shall not be deemed to be a liquidation, dissolution
or winding up of the Company.
Voting Rights. Shares of Common Stock and of the Class A and Class
B Preferred Stock have one non-cumulative vote each (subject to cumulative
voting rights which may be available under California law). Shares of Common
Stock and Preferred Stock vote as a single class on all matters presented to
the stockholders for action. Without the affirmative vote of the holders of a
majority of the then outstanding shares of the particular class affected,
voting as a separate class, the Company may not (i) amend, alter or repeal any
of the preferences or rights of that particular Class, (ii) authorize any
reclassification of that particular Class, (iii) increase the authorized number
of shares of that particular Class or (iv) create any class or series of shares
ranking prior to that particular Class as to dividends or upon liquidation.
Miscellaneous. The Company is not subject to any mandatory
redemption or sinking fund provisions with respect to its Preferred Stock. The
holders of Preferred Stock are not entitled to preemptive rights to subscribe
for or to purchase any shares or securities of any class which may at any time
be issued, sold or offered for sale by the Company. Shares of Preferred Stock
redeemed or otherwise reacquired by the Company shall be retired by the Company
and shall be unavailable for subsequent issuance.
CONVERTIBLE NOTES
The Company has issued three Convertible Promissory Notes
("Convertible Promissory Notes") in the aggregate principal amount of $350,000.
The Convertible Promissory Notes bear interest at the rate of 8% per annum,
which accrues until maturity. $100,000 in principal amount of such Convertible
Promissory Notes were due and payable in full on December 1, 1995. The
remaining $250,000 in principal amount of such Convertible Promissory Notes are
due and payable in full on December 31, 1996. The Convertible Promissory Notes
are convertible into shares of Common Stock at the rate of $.25 per share (for
a total of 1,400,000 shares) at any time at the option of the holders or
automatically at the close of this Offering. The conversion rate is subject to
adjustment in the event of stock splits, stock dividends, capital
reorganizations or similar occurrences.
The Company is currently in default under these Convertible
Promissory Notes. As a result of these defaults, the holders of the
Convertible Promissory Notes have the right to demand payment in full of such
obligations. As of the date of this Prospectus, the Company has not received
any presentment or demand for payment by any of the holders thereof. However,
there can be no assurance that any or all of such holders will not make a
presentment or demand for payment in the future or otherwise exercise any
rights or remedies available to them under the Convertible Promissory Notes.
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WARRANTS
The Company has outstanding warrants to purchase up to 1,567,671
shares of Common Stock for an exercise price of $.25 per share, warrants to
purchase up to 4,500,000 shares of Common Stock for an exercise price of $.50
per share and warrants to purchase up to 175,000 shares of Common Stock for an
exercise price of $.55 per share. The warrants are held by 22 investors. Third
Century II possesses warrants to purchase up to 670,000 shares and Threshold
Technology Partners, L.P. possesses warrants to purchase up to 725,000 shares,
and these and certain other warrants contain "cashless" exercise provisions
whereby the holder may, if it chooses, exercise the warrants by using the
"spread" between the exercise price and the fair market value of the underlying
shares of Common Stock and proportionately reducing the number of shares of
Common Stock for which the warrant is exercisable. The exercise price of all
the warrants is subject to adjustment in the event of stock splits, stock
dividends, capital reorganizations or similar occurrences. The warrants expire
at various times from 1997 through 2001.
OPTIONS
As of the date of this Prospectus, the Company had outstanding
options to purchase up to 2,420,763 shares of Common Stock. Exercise prices
range from $.25 to $3.00 per share (other than with respect to 1,150,430 shares
issuable upon exercise of options held by Mr. Ted Daniels, the President of the
Company, payment of the exercise price for which has been waived by the Board
of Directors), with a weighted average exercise price of $1.33 per share. The
options expire at various times between 1998 and 2006.
Of the 2,420,763 shares issuable upon exercise of outstanding
options of the Company, 447,800 shares of Common Stock have been reserved for
issuance upon exercise of outstanding options under the 1993 Plan. The 1993
Plan authorizes the granting of options to purchase up to a maximum 630,000
shares of Common Stock to qualified officers, key employees, consultants and
business advisors. The Plan is administered by the Board of Directors unless
the Board of Directors appoints a Committee consisting of two or more members
of the Board of Directors. The Board of Directors or the Committee determines
the number of shares to be covered by an option, the term and exercise price,
if any, of the option and other terms and provisions of options. The Board of
Directors may, at any time, terminate, amend, or suspend the Plan. As of the
date of this Prospectus, none of the options available for grant under the 1993
Plan have been exercised, approximately 447,800 shares of Common Stock have
been reserved for issuance upon exercise of options under the 1993 Plan which
remain outstanding and options to acquire approximately 182,200 shares of
Common Stock remain available for grant.
The Board of Directors recently adopted the 1996 Plan. It
authorizes the granting of options to purchase up to a maximum of 600,000
shares of Common Stock to qualified officers, key employees, consultants and
business advisors. The Plan is administered by the Board of Directors unless
the Board of Directors appoints a Committee, consisting of two or more members
of the Board of Directors. The Board of Directors or the Committee determines
the number of shares to be covered by an option, the term and exercise price,
if any, of the option and other terms and provisions of options. The Board of
Directors may, at any time, terminate, amend, or suspend the Plan. As of the
date of this Prospectus, none of the options under the 1996 Plan have been
granted.
An option under the Plans may be an incentive stock option ("ISO")
or a non-qualified option. The exercise price for options is to be the fair
market value on the date the option is granted (110% of fair market value in
the case of an ISO granted to any person who owns more than 10% of the
Company's Common Stock). The purchase price is payable in any combination of
cash, shares of Common Stock already owned by the participant for at least six
months or, if authorized by the Committee, a promissory note secured by the
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Common Stock issuable upon exercise. In addition, the option agreement may
provide for "cashless" exercise and payment. Subject to certain early
termination acceleration provisions, an option is exercisable, in whole or in
part, from the date specified in the related option agreement (which may be
after the date of grant) until the expiration date determined by the Board of
Directors or the Committee, not to exceed ten years from date of grant.
CERTAIN CHARTER PROVISIONS
Pursuant to provisions of the Delaware General Corporation Law
("DGCL"), the Company has included in its Certificate of Incorporation a
provision that, to the fullest extent permitted by the DGCL, the Company's
directors will not be liable for monetary damages for breach of their fiduciary
duty of care to the Company and its stockholders. The DGCL provides that
directors of a company will not be personally liable for monetary damages for
breach of their fiduciary duties as directors, except for liability (i) for any
breach of their duty of loyalty to the Company or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law, (iii) under Section 174 of the DGCL (unlawful
payments of dividends or unlawful stock repurchases or redemptions), or (iv)
for any transaction from which the director derived an improper personal
benefit. This provision also does not affect a director's responsibilities
under any other laws, such as the federal securities laws or state or federal
environmental laws.
The Certificate of Incorporation and Bylaws also contain provisions
that require the company to indemnify its directors and officers to the fullest
extent permitted by the DGCL, and to advance expenses to its officers and
directors as incurred. The Certificate of Incorporation further provides that
the Company may, to the fullest extent authorized by the Board of Directors,
indemnify any employee or agent of the Company. At present, there is no pending
litigation or proceeding involving a director or officer of the Company where
indemnification will be required or permitted. The Company is not aware of any
threatened litigation or proceeding that may result in a claim for
indemnification by any director or officer.
The Company believes the foregoing provisions are necessary to
attract and retain qualified persons as directors and officers.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
The Company is subject to Section 203 of the Delaware General
Corporation Law ("Section 203"), which restricts certain transactions and
business combinations between a corporation and an "Interested Stockholder"
owning 15% or more of the corporation's outstanding voting stock for a period
of three years from the date the stockholder becomes an Interested Stockholder.
Subject to certain exceptions, unless the transaction is approved by the Board
of Directors and the holders of at least 66 2/3% of the outstanding voting
stock of the corporation (excluding shares held by the Interested Stockholder),
Section 203 prohibits significant business transactions such as a merger with,
disposition of assets to, or receipt of disproportionate financial benefits by
the Interested Stockholder, or any other transaction that would increase the
Interested Stockholder's proportionate ownership of any class or series of the
corporation's stock. The statutory ban does not apply if, upon consummation of
the transaction in which any person becomes an Interested Stockholder, the
Interested Stockholder owns at least 85% of the outstanding voting stock of the
corporation (excluding shares held by persons who are both directors and
officers or by certain stock plans).
TRANSFER AGENT AND REGISTRAR
U.S. Stock Transfer Corporation has been appointed as the transfer
agent and registrar for the Company's Common Stock. Its telephone number is
(818) 502-1404.
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