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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
Tivoli Industries Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box)
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
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2. Aggregate number of securities to which transaction applies:
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3. Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
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4. Proposed maximum aggregate value of transaction:
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5. Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
6. Amount Previously Paid:
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7. Form, Schedule or Registration Statement No.:
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8. Filing Party:
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9. Date Filed:
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TIVOLI INDUSTRIES, INC.
1513 East St. Gertrude Place
Santa Ana, California 92705
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MARCH 17, 1999
TO THE SHAREHOLDERS OF TIVOLI INDUSTRIES, INC.:
Notice Is Hereby Given that the Annual Meeting of Shareholders of Tivoli
Industries Inc., a California corporation (the "Company"), will be held on
Wednesday, March 17, 1999, at 1:00 p.m. Pacific Standard Time at the Doubletree
Hotel, Seven Hulton Center Drive, Santa Ana, California for the following
purposes:
1. To elect five directors to serve for the ensuing year until the 2000 annual
meeting of shareholders and until their successors are elected.
2. To approve an amendment to the Company's Amended and Restated Articles of
Incorporation to effect, at any time prior to the 2000 annual meeting of
shareholders or no time in the sole discretion of the Board of Directors, a
reverse stock split whereby the Company would issue one (1) new share of
the Company's Common Stock in exchange for three (3) shares of the
Company's outstanding Common Stock.
3. To approve the reincorporation of the Company in the State of Delaware from
the State of California.
4. To ratify the selection of Corbin & Wertz as independent auditors of the
Company for its fiscal year ending September 30, 1999.
5. To transact such other business as may properly come before the meeting or
any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on January 25, 1999,
as the record date for the determination of shareholders entitled to notice of
and to vote at this Annual Meeting and at any adjournment or postponement
thereof.
By Order of the Board of Directors
Terrence C. Walsh
Chairman and Chief Executive Officer
Santa Ana, California
February 5, 1999
All shareholders are cordially invited to attend the meeting in person.
Whether or not you expect to attend the meeting, please complete, date, sign and
return the enclosed Proxy as promptly as possible in order to ensure your
representation at the meeting. A return envelope (which is postage prepaid if
mailed in the United States) is enclosed for that purpose. Even if you have
given your proxy, you may still vote in person if you attend the meeting.
Please note, however, that if your shares are held of record by a broker, bank
or other nominee and you wish to vote at the meeting, you must obtain from the
record holder a proxy issued in your name.
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TIVOLI INDUSTRIES, INC.
1513 East St. Gertrude Place
Santa Ana, California 92705
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
March 17, 1999
INFORMATION CONCERNING SOLICITATION AND VOTING
General
The enclosed Proxy is solicited on behalf of the Board of Directors of
Tivoli Industries, Inc., a California corporation (the "Company"), for use at
the annual meeting of shareholders to be held on March 17, 1999, at 1:00 p.m.
Pacific Standard Time (the "Annual Meeting"), or at any adjournment or
postponement thereof, for the purposes set forth herein and in the accompanying
Notice of Annual Meeting. The Annual Meeting will be held at the Doubletree
Hotel, Seven Hulton Center Drive, Santa Ana, California. The Company intends to
mail this Proxy Statement and accompanying Proxy Card on or about February 5,
1999, to all shareholders entitled to vote at the Annual Meeting.
Solicitation
The Company will bear the entire cost of solicitation of proxies, including
preparation, assembly, printing and mailing of this Proxy Statement, the Proxy
and any additional information furnished to shareholders. Copies of solicitation
materials will be furnished to banks, brokerage houses, fiduciaries and
custodians holding in their names shares of Common Stock beneficially owned by
others to forward to such beneficial owners. The Company may reimburse persons
representing beneficial owners of Common Stock for their costs of forwarding
solicitation materials to such beneficial owners. Original solicitation of
proxies by mail may be supplemented by telephone, telegram or personal
solicitation by directors, officers or other regular employees of the Company.
No additional compensation will be paid to directors, officers or other regular
employees for such services.
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VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of Common Stock at the close of business on January
25, 1999, will be entitled to notice of and to vote at the Annual Meeting. At
the close of business on January 25, 1999, the Company had outstanding and
entitled to vote 3,734,695 shares of Common Stock.
Each holder of record of Common Stock on such date will be entitled to one
vote for each share held on all matters to be voted upon. With respect to the
election of directors, shareholders may exercise cumulative voting rights. Under
cumulative voting, each holder of Common Stock will be entitled to five (5)
votes for each share held. Each shareholder may give one candidate, who has
been nominated prior to voting, all the votes such shareholder is entitled to
cast or may distribute such votes among as many such candidates as such
shareholder chooses. However, no shareholder will be entitled to cumulate votes
unless the candidate's name has been placed in nomination prior to the voting
and at least one shareholder has given notice at the meeting, prior to the
voting, of his or her intention to cumulate votes. Unless the proxyholders are
otherwise instructed, shareholders, by means of the accompanying proxy, will
grant the proxyholders discretionary authority to cumulate votes.
All votes will be tabulated by the inspector of election appointed for the
Annual Meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Under California law, abstentions and broker
non-votes are counted towards a quorum but, except for Proposals 2 and 3, are
not counted for any purpose in determining whether a matter is approved. With
respect to Proposals 2 and 3, abstentions and broker non-votes will have the
same effect as negative votes.
REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Secretary of the Company at the Company's principal executive office, 1513 East
St. Gertrude Place, Santa Ana, California 92705, a written notice of revocation
or a duly executed proxy bearing a later date, or it may be revoked by attending
the meeting and voting in person. Attendance at the meeting will not, by
itself, revoke a proxy.
SHAREHOLDER PROPOSALS
The deadline for submitting a shareholder proposal to the Company for
inclusion in the Company's proxy statement and form of proxy for the Company's
2000 annual meeting of shareholders is October 30, 1999.
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PROPOSAL 1
Election Of Directors
There are five nominees for the five Board positions presently authorized
in the Company's Bylaws. Each director to be elected will hold office until the
next annual meeting of shareholders and until his successor is elected and has
qualified, or until such director's earlier death, resignation or removal. Four
of the five nominees listed below are currently directors of the Company,
Terrence C. Walsh, Vincent F. Monte and Gerald E. Morris having been elected by
the shareholders at the last annual meeting, and Peter J. Shaw having been
appointed to the Board in July 1998. Gordon C. Westerling is not currently a
director of the Company.
Shares represented by executed proxies will be voted, if authority to do so
is not withheld, for the election of the five nominees named below, subject to
the discretionary power to cumulate votes. In the event that any nominee should
be unavailable for election as a result of an unexpected occurrence, such shares
will be voted for the election of such substitute nominee as management may
propose. Each person nominated for election has agreed to serve if elected and
management has no reason to believe that any nominee will be unable to serve.
The five candidates receiving the highest number of affirmative votes cast
at the meeting will be elected directors of the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF
EACH NAMED NOMINEE.
NOMINEES
The names of the nominees and certain information about them are set forth
below:
<TABLE>
<CAPTION>
Name Age Position Held With the Company
- ---- --- ------------------------------
<S> <C> <C>
Terrence C. Walsh 52 Chief Executive Officer and Chairman of the Board
Vincent F. Monte 71 Director
Gerald E. Morris 66 Director
Peter J. Shaw 52 Director
Gordon C. Westerling 66 Nominee for Director
</TABLE>
Terrence C. Walsh has served as Chairman of the Board and Chief Executive
Officer of the Company since June 1997 and, from July 1991 through June 1997, as
Chairman of the Board, President and Chief Executive Officer. In November 1997,
Mr. Walsh was named Chairman of the Board of Directors of Targetti USA LLC, a
joint venture which is 50% owned by the Company. From 1989 through 1991, Mr.
Walsh was President and Chief Executive Officer of Integrated Lighting
Industries, a specialty lighting company, and from 1986 to 1989, he served as
Executive Vice President and General Manager of Jacobsen Industries, a specialty
lighting company.
Vincent F. Monte, a director of the Company since July 1991, has over 30
years experience as a chief financial officer in the lighting industry involving
financial planning and activity based accounting systems. Mr. Monte served as
the Company's Chief Financial Officer from July 1991 to June 1997. From 1989 to
1991, he was the Vice President of Finance for Integrated Lighting Industries, a
specialty lighting company. From 1986 to 1989, Mr. Monte served as the Vice
President of Finance of DATA 3,
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Inc., a manufacturing application software developer, which was sold to a
publicly traded company. Previously, Mr. Monte was, for several years, Vice
President of Finance of Prescolite Inc., a lighting manufacturer and subsidiary
of U.S. Industries, Inc.
Gerald E. Morris, a director of the Company since February 1995, has for
over 30 years been President and Chief Executive Officer of Intalite
International N.V., a company engaged in the manufacture of metal ceilings for
commercial use. Mr. Morris, a certified public accountant, serves on the board
of several companies, including Rexel, Inc., an electrical products distributor,
and Beacon Trust Company, a company engaged in the trust and asset management
business. Mr. Morris is also chairman of the Board of Allmet Building Products,
Inc., a company engaged in the manufacture of home improvement products, and he
is President of Harrington Bros. Corporation, a company engaged in the
fabrication and installation of sheet metal and heating, ventilation and air-
conditioning products.
Peter J. Shaw, a director of the Company since July 1998, has over 25 years
experience in a variety of electronic and information technology companies.
Since July 1998, Mr. Shaw has been President and Chief Executive Officer and a
director of Sitematic Corporation, an internet web services and e-commerce
company. From June 1997 to June 1998, he headed Shaw Management Advisors, Int'l
LLC, a company that provided consultation services to information technology
companies and industry/community volunteer projects. From December 1995 to May
1997, Mr. Shaw was Senior Vice President of NetManage, Inc., a publicly-traded
software company. From 1989 to November 1995, Mr. Shaw was President, Chief
Executive Officer and a director of AGE Logic, Inc., a company he founded that
engaged in software development.
Gordon C. Westerling has over 50 years experience in the electrical
industry. Since 1974, Mr. Westerling has been Senior Vice President and a
Partner of SASCO Electric Company, a company engaged in electrical construction,
computer cabling and wireless systems. Since May 1998, he has been a director
of Applied Process Technology, Inc., a company engaged in the design and
manufacture of water treatment systems.
BACKGROUND OF EXECUTIVE OFFICERS NOT DESCRIBED ABOVE
Charles F. Kimmel, age 48, has been President, Chief Operating Officer and
Chief Financial Officer of the Company since June 1997. In November 1997, he
also became Chief Financial Officer of Targetti USA LLC. From December 1995 to
June 1997, Mr. Kimmel was the Director of Worldwide Operations for NetManage,
Inc. From 1990 to December 1995, he was Chief Financial Officer and a director
of AGE Logic, Inc., a software company. From 1988 to 1990, Mr. Kimmel was
Executive Vice President, Chief Financial Officer and a director of True Data
Corporation, a factory automation company, overseeing all financial,
administrative and manufacturing functions of the company. Earlier in his
career, Mr. Kimmel spent six years as a Division Controller and Operations
Manager with various divisions of US Industries, Inc., including Prescolite,
Inc.
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended September 30, 1998, the Board of Directors
held six meetings. During such period, each Board member attended all of the
meetings of the Board held during the period for which he was a director.
The Audit Committee meets with the Company's independent auditors at least
annually to review the results of the annual audit and discuss the financial
statements, recommends to the Board the independent auditors to be retained, and
receives and considers the accountants' comments as to controls,
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adequacy of staff and management performance and procedures in connection with
audit and financial controls. The Audit Committee, currently composed of
Messrs. Monte and Morris, met once during the fiscal year ended September 30,
1998.
The Compensation Committee makes recommendations to the Board concerning
salaries and incentive compensation for employees and consultants of the
Company. The Compensation Committee, currently composed of Messrs. Monte and
Morris, did not meet during the fiscal year ended September 30, 1998.
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PROPOSAL 2
Approval of a reverse stock split whereby the Company would issue one (1) new
share of the Company's Common Stock in exchange for three (3) shares of the
Company's outstanding Common Stock
BACKGROUND
The Board has approved, subject to shareholder approval, an amendment to
the Company's Amended and Restated Articles of Incorporation to effect, at any
time prior to the 2000 annual meeting of shareholders or no time in the sole
discretion of the Board of Directors, a reverse stock split whereby the Company
would issue one (1) new share of the common stock of the Company (the "Common
Stock") in exchange for three (3) shares of the Company's outstanding Common
Stock (the "Reverse Split") and has directed that the Reverse Split be submitted
to the shareholders of the Company for consideration and action. See "Reasons
for the Reverse Split" below.
The complete text of the form of amendment to the Company's Amended and
Restated Articles of Incorporation (the "Restated Articles") that would be filed
with the office of the Secretary of State of the State of California to effect
the Reverse Split is set forth in Appendix A (the "Certificate of Amendment") to
this Proxy Statement; provided, however, that the text of the Certificate of
Amendment is subject to modification to include such changes as may be required
by the office of the Secretary of State of the State of California and as the
Board deems necessary and advisable to effect the Reverse Split.
REASONS FOR THE REVERSE SPLIT
The Board believes that the Reverse Split is desirable for a number of
reasons. First, the Board believes that the Reverse Split will enhance the
Company's ability to maintain the listing of the Common Stock on the Nasdaq
SmallCap Market (the "Nasdaq-SmallCap"). Second, the Board believes that the
Reverse Split will improve the marketability and liquidity of the Common Stock.
The Company's shares of Common Stock have been listed and have traded on
the Nasdaq-SmallCap since September 1994 when the Company completed its initial
public offering. The rules of the Nasdaq-SmallCap require that as a condition
of the continued listing of a company's securities on the Nasdaq-SmallCap, a
company satisfy several listing requirements, which generally require that a
company meet certain minimum criteria relating to its financial condition,
results of operations and trading market for its listed securities. The listing
criteria applicable to the Company consist of maintaining: (i) a public float of
at least 500,000 shares; (ii) a market value of the public float of at least $1
million; (iii) a minimum bid price equal or greater than $1.00 per share; (iv)
at least 300 shareholders (round-lot holders); (v) net tangible assets of at
least $2 million or a market capitalization of at least $35 million or net
income in the latest fiscal year (or 2 of the last 3 fiscal years) of at least
$500,000; (vi) at least two (2) registered market makers; and (vii) compliance
with certain corporate governance requirements.
The bid price of the Company's shares of Common Stock is currently below
the $1.00 per share minimum bid price requirement. On September 17, 1998, the
Company received a letter from the Nasdaq Stock Market noting that the Common
Stock had failed to maintain a closing bid price greater than or equal to $1.00
for the last ten consecutive trading dates. The letter further noted that the
Company's securities would be subject to delisting if the Company was unable to
demonstrate compliance with the minimum bid price requirement or any other
listing criteria. In response to such letter, the Company
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requested a hearing before the Nasdaq Listing Qualifications Hearing Panel (the
"Panel"). The Panel granted the Company a hearing which is scheduled to take
place on February 12, 1999. At such hearing, the Company intends to explain its
strategy (a) to increase the bid price of its Common Stock by, among other
things, effecting (subject to shareholder approval) the Reverse Split, and (b)
to maintain the other listing criteria. Other than the minimum bid price
requirement, the Company believes that it satisfies all of the listing criteria.
There can be no assurance, however, that Nasdaq will not delist the Company from
the Nasdaq-SmallCap following such hearing.
The Company believes that if the Reverse Split is approved by the
shareholders at the Annual Meeting, and the Reverse Split is effectuated, the
shares of Common Stock will have a minimum bid price in excess of $1.00 per
share. The reduction in the number of outstanding shares of Common Stock caused
by the Reverse Split is anticipated initially to proportionally increase the per
share market price of the Common Stock. However, because some investors may
view the Reverse Split negatively in that it reduces the number of shares
available in the public market, there can be no assurance that the market price
of the Common Stock will proportionally reflect the Reverse Split, or that even
if the price of the Common Stock increases initially on a proportional basis, it
will not decline in the future. In addition to satisfying the minimum bid price
requirement, the Company would also need to continue to satisfy all other
listing criteria. There can be no assurance that the Company will be successful
in meeting these other maintenance criteria or, that, even if these listing
criteria are met, Nasdaq will continue to list the Common Stock on the Nasdaq-
SmallCap.
If the Reverse Split is not approved by the shareholders at the Annual
Meeting, then it is possible, depending on the volatility of the Common Stock
and the Company's ability to meet the listing criteria described alone, that the
Company will not meet the requirements for continued listing on the Nasdaq-
SmallCap and will be delisted from the Nasdaq-SmallCap. The delisting of the
Common Stock from the Nasdaq-SmallCap could adversely affect the liquidity of
the Common Stock and the ability of the Company to raise capital. In the event
of delisting, the shares of Common Stock would likely be quoted in the "pink
sheets" maintained by the National Quotation Bureau, Inc. or the NASD Electronic
Bulletin Board. The spread between the bid and ask price of the shares of
Common Stock is likely to be greater if such shares are quoted in the pink
sheets then the current spread on the Nasdaq-SmallCap and shareholders may
experience a greater difficulty in trading shares of the Common Stock.
The Board also believes that the increased market price of its Common Stock
which may occur as a result of the Reverse Split will improve the marketability
and liquidity of the Common Stock by appealing to a broader market than that
which currently exists and will encourage interest and trading in the Common
Stock. Many brokerage houses and institutional investors have internal policies
and practices that either prohibit them from investing in low-priced stocks or
tend to discourage individual brokers from recommending low-priced stocks to
their customers. Some of those policies and practices may function to make the
processing of trades in low-priced stocks economically unattractive to brokers.
Additionally, because broker's commissions on low-priced stocks generally
represent a higher percentage of the stock price than commissions on higher-
priced stocks, the current average price per share of the Common Stock can
result in individual shareholders paying transaction costs representing a higher
percentage of their total share value than would be the case if the share price
were substantially higher. An increase in the bid price of the Common Stock
may, therefore, improve the marketability and liquidity of the Common Stock by
encouraging institutional investors and brokers to trade in or recommend the
Common Stock. However, if the Reverse Split is implemented, holders of fewer
than 100 shares of Common Stock ("odd-lots") after the Reverse Split is effected
may be charged brokerage fees that are proportionately higher than holders of
more than 100 shares of Common Stock ("round-lots").
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The effect of the Reverse Split upon the market prices for the Common Stock
cannot be accurately predicted. In particular, there is no assurance that
prices for shares of the Common Stock after the Reverse Split will be three (3)
times the prices for shares of the Common Stock immediately prior to the Reverse
Split. Furthermore, there can be no assurance that the proposed Reverse Split
will achieve the desired results outlined above. In addition, there can be no
assurance that the Reverse Split will not adversely impact the market price of
the Common Stock or, alternatively, that any increased price per share of the
Common Stock immediately after the proposed Reverse Split will be sustained for
any prolonged period of time.
BOARD DISCRETION TO IMPLEMENT REVERSE SPLIT
If the Reverse Split is approved by the shareholders of the Company at the
Annual Meeting, the Reverse Split will be effected, if at all, only upon a
determination by the Board in its sole discretion, that the Reverse Split is in
the best interests of the Company and its shareholders. Such determination
shall be based upon certain factors, including but not limited to, existing and
expected marketability and liquidity of the Common Stock, Nasdaq continued
listing requirements, prevailing market conditions and the likely effect on the
market price of the Common Stock. Notwithstanding approval of the Reverse Split
by the shareholders, the Board may, in its sole discretion, determine not to
effect the Reverse Split prior to the 2000 annual meeting of shareholders. If
the Board does not implement the Reverse Split prior to such meeting,
shareholder approval again would be required prior to implementing any reverse
split.
EFFECTS OF THE REVERSE SPLIT ON REGISTRATION, VOTING RIGHTS AND PREFERRED STOCK
The Common Stock is currently registered under Section 12(g) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
Company is subject to the periodic reporting and other requirements of the
Exchange Act. The Reverse Split will not affect the registration of the Common
Stock under the Exchange Act. After the Reverse Split, the Common Stock will
continue to be reported on the Nasdaq-SmallCap under the symbol "TVLI" (although
Nasdaq will add the letter "D" to the end of the trading symbol for a period of
20 trading days to indicate the Reverse Split has occurred).
Proportionate voting rights and other rights of the holders of Common Stock
will not be affected by the Reverse Split (other than as a result of the payment
of cash in lieu of fractional shares as described below). For example, a holder
of 2% of the voting power of the outstanding shares of Common Stock immediately
prior to the effective time of the Reverse Split will continue to hold 2% of the
voting power of the outstanding shares of Common Stock after the Reverse Split.
Although the Reverse Split will not affect the rights of shareholders or any
shareholder's proportionate equity interest in the Company (subject to the
treatment of fractional shares), the number of authorized shares of Common Stock
will not be reduced and will increase the ability of the Board to issue such
authorized and unissued shares without further shareholder action. The
effective increase in the number of authorized but unissued shares of Common
Stock may be construed as having an anti-takeover effect by permitting the
issuance of shares to purchasers who might oppose a hostile takeover bid or
oppose any efforts to amend or repeal certain provisions of the Company's
Restated Articles or Bylaws. The number of shareholders of record will not be
affected by the Reverse Split (except to the extent that any shareholder holds
only a fractional share interest and receives cash for such interest after the
Reverse Split).
EFFECT ON STOCK OPTIONS AND WARRANTS
The Reverse Split will effect a reduction in the number of shares of Common
Stock available for issuance under the Company's 1994 Stock Option Plan, 1995
Stock Option Plan, 1997 Equity Incentive Plan and 1995 Non-Employee Directors'
Stock Option Plan (collectively, the "Plans") in proportion to
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the exchange ratio of the Reverse Split. The aggregate number of shares of
Common Stock currently authorized for issuance under the Plans is 1,110,000
(prior to giving effect to the Reverse Split). The number of shares of Common
Stock available for issuance under the Plans will effectively be increased by
the Reverse Split. The issuance of such additional authorized shares, if such
shares were issued, may have the effect of diluting the earnings per share and
book value per share, as well as the stock ownership and voting rights, of
outstanding Common Stock.
The Company also has outstanding certain stock options and warrants to
purchase shares of the Common Stock. Under the terms of the outstanding stock
options and warrants, the Reverse Split will effect a reduction in the number of
shares of Company Common Stock issuable upon exercise of such stock options and
warrants in proportion to the exchange ratio of the Reverse Split and will
effect a proportionate increase in the exercise price of such outstanding stock
options and warrants. For example, an option or warrant to purchase 100 shares
of Common Stock at $0.60 per share would become an option to purchase 33 shares
of Common Stock at an exercise price of $1.80 per share (plus, the holder would
be entitled to cash for the fractional share; see "Payment for Fractional
Shares" below). In connection with the Reverse Split, the number of shares of
Common Stock issuable upon exercise of outstanding stock options and warrants
will be rounded down to the nearest whole share, and no cash payment will be
made in respect of such rounding.
EFFECTIVE DATE
The Reverse Split would become effective as of the close of business on the
date of filing (the "Effective Date") the Certificate of Amendment with the
office of the Secretary of State of the State of California. Except as
explained below with respect to fractional shares, on the Effective Date, each
share of Common Stock issued and outstanding immediately prior thereto (the "Old
Common Stock") will be, automatically and without any action on the part of the
shareholders, converted into one-third (1/3) of a share of the Common Stock,
proposed to be issued in connection with the Reverse Split (the "New Common
Stock").
PAYMENT FOR FRACTIONAL SHARES
No fractional shares of New Common Stock will be issued as a result of the
Reverse Split. In lieu of any such fractional share interest, each holder of
Old Common Stock who as a result of the Reverse Split would otherwise receive a
fractional share of New Common Stock will be entitled to receive cash in an
amount equal to the product obtained by multiplying (i) the closing sales price
of the Common Stock on the Effective Date as reported on the Nasdaq-SmallCap by
(ii) the number of shares of Old Common Stock held by such holder that would
otherwise have been exchanged for such fractional share interest. Such amount
will be issued to such holder in the form of a check in accordance with the
exchange procedures outlined under "Exchange of Stock Certificates" below.
EXCHANGE OF STOCK CERTIFICATES
Shortly after the Effective Date, each holder of an outstanding certificate
theretofore representing shares of Old Common Stock will receive from US Stock
Transfer Corporation, the Company's exchange agent (the "Exchange Agent") for
the Reverse Split, instructions for the surrender of such certificate to the
Exchange Agent. Such instructions will include a form of Transmittal Letter to
be completed and returned to the Exchange Agent. As soon as practicable after
the surrender to the Exchange Agent of any certificate which prior to the
Reverse Split represented shares of Old Common Stock, together with a duly
executed Transmittal Letter and any other documents the Exchange Agent may
specify, the Exchange Agent shall deliver to the person in whose name such
certificate had been issued certificates registered in
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the name of such person representing the number of full shares of New Common
Stock into which the shares of Old Common Stock previously represented by the
surrendered certificate shall have been reclassified and a check for any amounts
to be paid in cash in lieu of any fractional share interest. Each certificate
representing shares of New Common Stock issued in connection with the Reverse
Split will continue to bear any legends restricting the transfer of such shares
that were borne by the surrendered certificates representing the shares of Old
Common Stock. Until surrendered as contemplated herein, each certificate which
immediately prior to the Reverse Split represented any shares of Old Common
Stock shall be deemed at and after the Reverse Split to represent the number of
full shares of New Common Stock contemplated by the preceding sentence.
No service charges, brokerage commissions or transfer taxes shall be
payable by any holder of any certificate which prior to approval of the Reverse
Split represented any shares of Old Common Stock, except that if any
certificates of New Common Stock are to be issued in a name other than that in
which the certificates for shares of Old Common Stock surrendered are
registered, it shall be a condition of such issuance that (i) the person
requesting such issuance shall pay to the Company any transfer taxes payable by
reason thereof (or prior to transfer of such certificate, if any) or establish
to the satisfaction of the Company that such taxes have been paid or are not
payable, (ii) such transfer shall comply with all applicable federal and state
securities laws, and (iii) such surrendered certificate shall be properly
endorsed and otherwise be in proper form for transfer.
NO DISSENTERS' RIGHTS
Under California law, shareholders of the Company are not entitled to
dissenters' rights with respect to the proposed Reverse Split.
FEDERAL INCOME TAX CONSEQUENCES OF THE REVERSE SPLIT
A summary of the federal income tax consequences of the proposed Reverse
Split to the Company and to individual shareholders is set forth below. The
following discussion is based upon present federal income tax law. The
discussion is not intended to be, nor should it be relied on as, a comprehensive
analysis of the tax issues arising from or relating to the proposed Reverse
Split. In addition, the Company has not and will not seek an opinion of counsel
or a ruling from the Internal Revenue Service regarding the federal income tax
consequences of the proposed Reverse Split. Accordingly, shareholders are
advised to consult their own tax advisors for more detailed information
regarding the effects of the proposed Reverse Split on them under applicable
federal, state, local and foreign income tax laws.
It is intended that the Reverse Split will constitute a reorganization (a
"Reorganization") within the meaning of Section 368(a)(1)(E) of the Internal
Revenue Code of 1986, as amended. Assuming that the Reverse Split qualifies as
a Reorganization, the following federal income tax consequences should result:
(a) A shareholder will not recognize any gain or loss as a result of the
Reverse Split except to the extent a shareholder receives cash in lieu of a
fractional share. To the extent a shareholder receives cash in lieu of a
fractional share, for tax purposes the shareholder will be deemed to have sold
the fractional share to the Company. Although it is impossible to predict with
certainty the tax consequences to any individual shareholder, such shareholder
will likely recognize a gain or loss as a result of the repurchase of a
fractional share equal to the difference between (i) the shareholder's
proportionate adjusted basis in such fractional share, and (ii) the cash amount
received for such fractional share. Any gain will be treated as short-term
capital gain taxable at a maximum federal income tax rate of 39.6% to a
10
<PAGE>
non-corporate shareholder if the shareholder has held his shares for one year or
less prior to the Effective Date or long-term capital gain taxable at a maximum
federal income tax rate of 20% to a non-corporate shareholder if the shareholder
has held his shares for more than one year prior to the Effective Date;
(b) The aggregate tax basis of the shares of New Common Stock
received by the shareholder pursuant to the Reverse Split will equal the
aggregate tax basis of the shares of Old Common Stock held by the shareholder
immediately prior to the Effective Date of the Reverse Split reduced by any
basis allocated to a fractional share for which the shareholder receives cash.
The shareholder will be able to "tack" the holding period of the Old Common
Stock prior to the Reverse Split to the holding period of the New Common Stock
received by the shareholder as a result of the Reverse Split, provided that the
shares of Old Common Stock were capital assets in the hands of the shareholder;
and
(c) The Company will not recognize gain or loss as a result of the
Reverse Split.
REQUIRED VOTE
The affirmative vote of the holders of a majority of the shares of Common
Stock outstanding and entitled to vote is necessary to approve the Reverse Split
and the Certificate of Amendment. Abstentions and broker non-votes will have
the same effect as negative votes.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 2.
11
<PAGE>
PROPOSAL 3
Reincorporation of the Company in Delaware
and related changes to the rights of shareholders
GENERAL
The Board of Directors has unanimously approved a proposal to change the
Company's state of incorporation from California to Delaware. The Board of
Directors believes the change in domicile to be in the best interests of the
Company and its shareholders for several reasons. Principally, the Board of
Directors believes that reincorporation will enhance the Company's ability to
attract and retain qualified members of the Company's Board of Directors as well
as encourage directors to continue to make independent decisions in good faith
on behalf of the Company. To date, the Company has not experienced difficulty
in retaining directors. The Company believes that the more favorable corporate
environment afforded by Delaware will enable it to compete more effectively with
other public companies, most of which are incorporated in Delaware, to attract
new directors and to retain its current directors. Reincorporation in Delaware
will allow the Company the increased flexibility and predictability afforded by
Delaware law. Concurrent with the reincorporation, the Company proposes to
adopt or maintain certain measures designed to make hostile takeovers of the
Company more difficult. The Board believes that adoption of these measures will
enable the Board to consider fully any proposed takeover attempt and to
negotiate terms that maximize the benefit to the Company and its shareholders.
In recent years, a number of major public companies have obtained the
approval of their shareholders to reincorporate in Delaware. For the reasons
explained below, the Company believes it is beneficial and important that the
Company likewise avail itself of Delaware law.
For many years Delaware has followed a policy of encouraging incorporation
in that state. In furtherance of that policy, Delaware has adopted
comprehensive corporate laws which are revised regularly to meet changing
business circumstances. The Delaware Legislature is particularly sensitive to
issues regarding corporate law and is especially responsive to developments in
modern corporate law. The Delaware courts have developed considerable expertise
in dealing with corporate issues as well as a substantial body of case law
construing Delaware's corporate law. As a result of these factors, it is
anticipated that Delaware law will provide greater predictability in the
Company's legal affairs than is presently available under California law.
The interests of the Board of Directors of the Company, management and
affiliated shareholders in voting on the reincorporation proposal may not be the
same as those of unaffiliated shareholders. Delaware law does not afford
minority shareholders some of the rights and protections available under
California law. Reincorporation of the Company in Delaware may make it more
difficult for minority shareholders to elect directors and influence Company
policies. A discussion of the principal differences between California and
Delaware law as they affect shareholders begins on page 15 of this Proxy
Statement.
In addition, portions of the reincorporation proposal may have the effect
of deterring hostile takeover attempts. A hostile takeover attempt may have a
positive or a negative effect on the Company and its shareholders, depending on
the circumstances surrounding a particular takeover attempt. Takeover attempts
that have not been negotiated or approved by the board of directors of a
corporation can seriously disrupt the business and management of a corporation
and generally present to the shareholders the risk of terms which may be less
favorable to all of the shareholders than would be available in a board-approved
transaction. Board-approved transactions may be carefully planned and
12
<PAGE>
undertaken at an opportune time in order to obtain maximum value for the
corporation and all of its shareholders with due consideration to matters such
as the recognition or postponement of gain or loss for tax purposes, the
management and business of the acquiring corporation and maximum strategic
deployment of corporate assets.
The Board of Directors recognizes that hostile takeover attempts do not
always have the unfavorable consequences or effects described above and may
frequently be beneficial to the shareholders, providing all of the shareholders
with considerable value for their shares. However, the Board of Directors
believes that the potential disadvantages of unapproved takeover attempts are
sufficiently great such that prudent steps to reduce the likelihood of such
takeover attempts are in the best interests of the Company and its shareholders.
Accordingly, the reincorporation plan includes certain proposals that may have
the effect of discouraging or deterring hostile takeover attempts.
Notwithstanding the belief of the Board as to the benefits to shareholders
of the changes, shareholders should recognize that one of the effects of such
changes may be to discourage a future attempt to acquire control of the Company
which is not presented to and approved by the Board of Directors, but which a
substantial number and perhaps even a majority, of the Company's shareholders
might believe to be in their best interests or in which shareholders might
receive a substantial premium for their shares over the current market price.
As a result, shareholders who might desire to participate in such a transaction
may not have an opportunity to do so.
The Company's current Amended and Restated Articles of Incorporation (the
"California Articles") and current Bylaws (the "California Bylaws") do not
contain certain provisions available to certain public companies under
California law that deter hostile takeover attempts, such as elimination of
cumulative voting, elimination of action by written consent of shareholders,
supermajority voting requirements for amendment of certain provisions of the
Company's charter documents and an advance notice requirement for shareholder
proposals. These provisions will be provided for in the Company's new
Certificate of Incorporation (the "Delaware Certificate") and Bylaws (the
"Delaware Bylaws") for the Delaware Company, copies of which are attached as
Appendices C and D, respectively, to this Proxy Statement. In addition, the
Delaware Certificate and Delaware Bylaws will contain, among other things,
provisions (i) classifying the Board into three classes, each elected for three-
year terms, (ii) limiting the ability of the shareholders to remove any director
without cause, and (iii) requiring a vacancy on the board resulting from an
increase in the number of directors to be filled by the majority vote of the
directors.
In considering the proposals, shareholders should be aware that the overall
effect of certain of the proposed changes is to make it more difficult for
holders of a majority of the outstanding shares of Common Stock to change the
composition of the Board of Directors and to remove existing management in
circumstances where a majority of the shareholders may be dissatisfied with the
performance of the incumbent directors or otherwise desire to make changes.
The new provisions in the Company's charter documents could make a proxy
contest a less effective means of removing or replacing existing directors or
could make it more difficult to make a change in control of the Company which is
opposed by the Board of Directors. This strengthened tenure and authority of
the Board of Directors could enable the Board of Directors to resist change and
otherwise thwart the desires of a majority of the shareholders. Because this
provision may have the effect of continuing the tenure of the current Board of
Directors, the Board has recognized that the individual directors have a
personal interest in this provision that may differ from those of the
shareholders. However, the Board believes that these provisions' primary
purpose is to ensure that the Board will have sufficient time to consider fully
any proposed takeover attempt in light of the short and long-term benefits
13
<PAGE>
and other opportunities available to the Company and, to the extent the Board
determines to proceed with the takeover, to effectively negotiate terms that
would maximize the benefits to the Company and its shareholders.
The Board of Directors has considered the potential disadvantages and
believes that the potential benefits of the provisions included in the proposed
charter documents outweigh the possible disadvantages. In particular, the Board
believes that the benefits associated with attracting and retaining skilled and
experienced outside directors and with enabling the Board to fully consider and
negotiate proposed takeover attempts, as well as the greater sophistication,
breadth and certainty of Delaware law, make the proposed reincorporation
beneficial to the Company, its management and its shareholders.
The proposal to include these anti-takeover provisions in the proposed
reincorporation does not reflect knowledge on the part of the Board of Directors
or management of any proposed takeover or other attempt to acquire control of
the Company. Management may in the future propose other measures designed to
discourage takeovers apart from those proposed in this Proxy Statement, if
warranted from time to time in the judgment of the Board of Directors.
The proposed reincorporation would be accomplished by merging the Company
into a newly formed Delaware corporation which, just before the merger, will be
a wholly owned subsidiary of the Company (the "Delaware Company"), pursuant to
an Agreement and Plan of Merger, a copy of which is attached as Appendix B (the
"Merger Agreement") to this Proxy Statement. The Delaware Company's name will
also be Tivoli Industries, Inc. The reincorporation will not result in any
change in the Company's business, assets or liabilities, will not cause its
corporate headquarters to be moved and will not result in any relocation of
management or other employees.
Following the effectiveness of the proposed reincorporation, each
outstanding share of Common Stock of the Company will automatically convert into
one (1) of Common Stock of the Delaware Company, and the shareholders of the
Company will automatically become shareholders of the Delaware Company. In
addition, each outstanding option, right or warrant to acquire shares of Common
Stock of the Company will be converted into an option, right or warrant to
acquire the identical number of shares of Common Stock of the Delaware Company,
under the same terms and conditions as the original options or rights. All of
the Company's employee benefit plans and director plans, including the Company's
1994 Stock Option Plan, 1995 Stock Option Plan, 1997 Equity Incentive Plan, and
1995 Non-Employee Directors' Stock Option Plan will be continued by the Delaware
Company following the reincorporation. Shareholders should recognize that
approval of the proposed reincorporation will constitute approval of the
adoption and assumption of those plans by the Delaware Company.
No action need be taken by shareholders to exchange their stock
certificates now; this will be accomplished at the time of the next transfer by
the shareholder. Certificates for shares in the Company will automatically
represent an equal number of shares in the Delaware Company upon completion of
the merger.
If approved by the shareholders, it is anticipated that the reincorporation
would be completed as soon thereafter as practicable. The reincorporation may
be abandoned or the Merger Agreement may be amended (with certain exceptions),
either before or after shareholder approval has been obtained, if in the opinion
of the Board of Directors, circumstances arise that make such action advisable;
provided, that any amendment that would effect a material change from the
charter provisions discussed in this Proxy Statement would require further
approval by the holders of a majority of the outstanding voting shares entitled
to vote.
14
<PAGE>
SIGNIFICANT CHANGES CAUSED BY REINCORPORATION
In general, the Company's corporate affairs are governed at present by the
corporate law of California, the Company's state of incorporation, and by the
California Articles and the California Bylaws, which have been adopted pursuant
to California law. The California Articles and California Bylaws are available
for inspection during business hours at the principal executive office of the
Company. In addition, copies may be obtained by writing to Tivoli Industries,
Inc., 1513 East St. Gertrude Place, Santa Ana, California 92705, Attention:
Corporate Secretary.
If the reincorporation proposal is adopted, the Company will merge into,
and its business will be continued by, the Delaware Company. Following the
merger, issues of corporate governance and control would be controlled by
Delaware law, rather than California law (however, see "Application of
California Law After Reincorporation"). The California Articles and California
Bylaws, will, in effect, be replaced by the Delaware Certificate and the
Delaware Bylaws. Accordingly, the differences among these documents and between
Delaware and California law are relevant to your decision whether to approve the
reincorporation proposal.
A number of differences between California and Delaware law and among the
various charter documents are summarized in the chart below. Shareholders are
requested to read the following chart in conjunction with the discussion
following the chart and the Merger Agreement, the Delaware Certificate and the
Delaware Bylaws attached to this Proxy Statement. For each item summarized in
the chart, there is a reference to a page of this Proxy Statement on which a
more detailed discussion appears.
<TABLE>
<CAPTION>
Issue Delaware California
- ---------------------- ----------------------------------------------- -------------------------------------------
<S> <C> <C>
Limitation of Delaware law permits the limitation of California law contains additional
Liability of liability of directors and officers to the exceptions to the liability limitations of
Directors and Company except in connection with (i) breaches directors and officers.
Officers of the duty of loyalty; (ii) acts or omissions
(see page 17). not in good faith or involving intentional
misconduct or knowing violations of law; (iii)
the payment of unlawful dividends or unlawful
stock repurchases or redemptions; or (iv)
transactions in which a director received an
improper personal benefit.
Indemnification of Delaware law permits somewhat broader California law permits indemnification
Directors and indemnification and could result in under certain circumstances, subject to
Officers indemnification of directors and officers in certain limitations.
(see page 17). circumstances where California law would not
permit indemnification.
Cumulative Voting for Cumulative voting is permitted under Delaware California law permits Nasdaq National
Directors law if allowed under the certificate. The Market corporations (which does not
(see page 19). Delaware Certificate does not allow for include Nasdaq-SmallCap corporations) with
cumulative voting. over 800 equity security holders to
eliminate cumulative voting. The Company
is currently subject to cumulative voting.
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
Issue Delaware California
- ---------------------- ----------------------------------------------- -------------------------------------------
<S> <C> <C>
Number of Directors Determined solely by resolution of the Board. Determined by Board within range set in
(see page 19). the California Bylaws. Changes in the authorized
range must be approved by a majority of the
outstanding shares, and if the change decreases the
number of directors below 5, it cannot be adopted if
holders of 16-2/3% (or more) of the outstanding
shares entitled to vote oppose such change.
Classified Board The Delaware Certificate designates three California law permits Nasdaq National
(see page 20). classes of directors. Market corporations (which does not
include Nasdaq-SmallCap corporations) with
over 800 equity holders to adopt a
classified board. The California Company
presently has a Board consisting of a
single class of directors.
Removal of Directors Removal with cause by the affirmative vote of Removal with or without cause by the
by Shareholders a majority of the outstanding voting stock affirmative vote of a majority of the
(see page 21). entitled to vote at an election of directors; outstanding voting stock, provided that
removal without cause by the affirmative vote shares voting against removal could not
of the holders of at least 66-2/3% of the elect such director under cumulative
outstanding shares of voting stock entitled to voting.
vote at an election of directors.
Who May Call Special The Board, the Chairman of the Board, the The Board, the Chairman of the Board, the
Shareholder Meeting Chief Executive Officer, or holders of at President or holders of 10% of the shares
(see page 22). least 50% of the shares entitled to vote entitled to vote at the special meeting.
at the special meeting.
Action by Written Action by written consent not permitted by Actions by written consent are permitted
Consent of Delaware Certificate. All stockholder action by California Articles and California
Shareholders in Lieu must take place by a stockholder vote at a Bylaws.
of a Shareholder meeting of stockholders.
Vote at Shareholder
Meeting (see page 22).
Tender Offer Statute Restricts hostile two-step takeovers. No comparable state law.
(see page 23).
Amendment of Amendments to provisions relating to director Amendments to the California Articles
Certificate indemnification, management of the Delaware require approval by a majority of the
(see page 25). Company and certain other provisions of the outstanding voting stock of the Company.
Delaware Certificate require approval by
66-2/3% of the outstanding voting stock.
Amendment of Bylaws By the Board or the holders of 66-2/3% of the By the Board or the holders of a majority
(see page 25). outstanding voting stock. of the outstanding voting stock (other
than changing the authorized range of
directors, see "Number of Directors"
above).
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
Issue Delaware California
- ---------------------- ----------------------------------------------- -------------------------------------------
<S> <C> <C>
Loans to Officers and Board may authorize if expected to benefit the If the Company has outstanding shares of
Directors Company. record by 100 or more persons on the date
(see page 25). of approval by the Board, the Board may
authorize to officers, whether or not a
director, and may adopt an employee plan
authorizing such loans, if expected to
benefit the Company.
Class Vote for Generally not required unless a reorganization A reorganization transaction must
Reorganizations adversely affects a specific class of stock. generally be approved by a majority vote
(see page 26). of each class of stock outstanding.
Right of Shareholders Permitted for any purpose reasonably related Permitted for any purpose reasonably
to Inspect to such shareholder's interest as a related to such shareholder's interest as
Shareholder List shareholder. a shareholder. Also, an absolute right to
(see page 26). 5% shareholders and certain 1%
shareholders.
Appraisal Rights Generally available if shareholders receive Available in certain circumstances if the
(see page 26). cash in exchange for the shares and in certain holders of 5% of the class assert such
other circumstances. rights.
Dividends Paid from surplus (including paid-in and Generally limited to the greater of (i)
(see page 27). earned surplus or net profits). retained earnings or (ii) an amount which
would leave the Company with assets of
125% of liabilities and current assets of
100% of current liabilities.
Other Responsive legislature and larger body of
corporate case law in Delaware provides more
predictable corporate legal environment in
Delaware.
</TABLE>
INDEMNIFICATION AND LIMITATION OF LIABILITY
California and Delaware have similar laws respecting indemnification by a
corporation of its officers, directors, employees and other agents. The laws of
both states also permit corporations to adopt a provision in their charter
documents eliminating the liability of a director to the corporation or its
shareholders for monetary damage for breach of the director's fiduciary duty of
care. Nevertheless, there are certain differences between the laws of the two
states respecting indemnification and limitation of liability.
The California Articles eliminate the liability of directors to the
corporation to the fullest extent permissible under California law. California
law does not permit the elimination of monetary liability where such liability
is based on: (a) intentional misconduct or knowing and culpable violation of
law; (b) acts or omissions that a director believes to be contrary to the best
interests of the corporation or its shareholders, or that involve the absence of
good faith on the part of the director; (c) receipt of an improper personal
benefit; (d) acts or omissions that show reckless disregard for the director's
duty to the corporation or its shareholders, where the director in the ordinary
course of performing a director's duties should be aware of a risk of serious
injury to the corporation or its shareholders; (e) acts or omissions that
17
<PAGE>
constitute an unexcused pattern of inattention that amounts to an abdication of
the director's duty to the corporation and its shareholders; (f) interested
transactions between the corporation and a director in which a director has a
material financial interest; and (g) liability for improper distributions, loans
or guarantees.
The Delaware Certificate also eliminates the liability of directors to the
fullest extent permissible under Delaware law, as such law exists currently or
as it may be amended in the future. Under Delaware law, such provision may not
eliminate or limit director monetary liability for: (a) breaches of the
director's duty of loyalty to the corporation or its shareholders; (b) acts or
omissions not in good faith or involving intentional misconduct or knowing
violations of law; (c) the payment of unlawful dividends or unlawful stock
repurchases or redemptions; or (d) transactions in which the director received
an improper personal benefit. Such limitation of liability provision also may
not limit a director's liability for violation of, or otherwise relieve the
Delaware Company or its directors from the necessity of complying with, federal
or state securities laws or affect the availability of non-monetary remedies
such as injunctive relief or rescission.
California law permits indemnification of expenses incurred in derivative
or third-party actions, except that with respect to derivative actions (a) no
indemnification may be made without court approval when a person is adjudged
liable to the corporation in the performance of that person's duty to the
corporation and its shareholders, unless a court determines such person is
entitled to indemnity for expenses, and then such indemnification may be made
only to the extent that such court shall determine, and (b) no indemnification
may be made under California law without court approval in respect of amounts
paid or expenses incurred in settling or otherwise disposing of a threatened or
pending action or amounts incurred in defending a pending action which is
settled or otherwise disposed of without court approval. Delaware allows
indemnification of such expenses without court approval.
Indemnification is permitted by both California and Delaware law providing
the requisite standard of conduct is met, as determined by a majority vote of a
disinterested quorum of the directors, independent legal counsel (if a quorum of
independent directors is not obtainable), a majority vote of a quorum of the
shareholders (excluding shares owned by the indemnified party) or the court
handling the action.
California law requires indemnification when the individual has
successfully defended the action on the merits (as opposed to Delaware law which
requires indemnification relating to a successful defense on the merits or
otherwise). Delaware law generally permits indemnification of expenses incurred
in the defense or settlement of a derivative or third-party action, provided
there is a determination by a disinterested quorum of the directors, by
independent legal counsel or by a majority vote of a quorum of the shareholders
that the person seeking indemnification acted in good faith and in a manner
reasonably believed to be in or (in contrast to California law) not opposed to
the best interests of the corporation. Without court approval, however, no
indemnification may be made in respect of any derivative action in which such
person is adjudged liable for negligence or misconduct in the performance of his
or her duty to the corporation. Delaware law requires indemnification of
expenses when the individual being indemnified has successfully defended the
action on the merits or otherwise.
The indemnification and limitation of liability provisions of California
law, and not Delaware law, will apply to actions of the directors and officers
of the California Company made prior to the proposed reincorporation.
Nevertheless, the Board has recognized in considering this reincorporation
proposal that the individual directors have a personal interest in obtaining the
application of Delaware law to such indemnity and limitation of liability issues
affecting them and the Company in the event they arise from a potential future
case, and that the application of Delaware law, to the extent that any director
or
18
<PAGE>
officer is actually indemnified in circumstances where indemnification would not
be available under California law, would result in expense to the Company which
the Company would not incur if the Company were not reincorporated. The Board
believes, however, that the overall effect of reincorporation is to provide a
corporate legal environment that enhances the Company's ability to attract and
retain high quality outside directors and thus benefits the interests of the
Company and its shareholders.
CUMULATIVE VOTING FOR DIRECTORS
Cumulative voting permits the holder of each share of stock entitled to
vote in the election of directors to cast that number of votes which equal the
number of directors to be elected. The holder may allocate all votes
represented by a share to a single candidate or may allocate those votes among
as many candidates as he chooses. Thus, a shareholder with a significant
minority percentage of the outstanding shares may be able to elect one or more
directors if voting is cumulative.
Under California law cumulative voting in the election of directors is
mandatory upon notice given by a shareholder at a shareholders' meeting at which
directors are to be elected. In order to cumulate votes a shareholder must give
notice at the meeting, prior to the voting, of the shareholder's intention to
vote cumulatively. If any one shareholder gives such a notice, all shareholders
may cumulate their votes.
Cumulative voting is not available under Delaware law unless so provided in
the corporation's certificate of incorporation. The Delaware Certificate does
not provide for cumulative voting.
OTHER MATTERS RELATING TO DIRECTORS
Number of Directors. California law allows the number of persons
constituting the board of directors of a corporation to be fixed by the bylaws
or the articles of incorporation, or permits the bylaws to provide that the
number of directors may vary within a specified range, the exact number to be
determined by the Board of Directors. California law further provides that, in
the case of a variable board, the maximum number of directors may not exceed two
times the minimum number minus one. The California Articles and Bylaws provide
for a board of directors that may vary between three (3) and five (5) members,
inclusive, and the Board of Directors has fixed the exact number of directors at
five (5). California law also requires that any change in a fixed number of
directors and any change in the range of a variable Board of Directors specified
in the charter documents must be approved by a majority in interest of the
outstanding shares entitled to vote (or such greater proportion of the
outstanding shares as may be required by the charter documents). The California
Bylaws require the vote of a majority of the outstanding shares to change the
range of the Company's variable Board of Directors, provided that an amendment
reducing the minimum number of directors to less than five cannot be adopted if
votes cast against its adoption at a meeting or the shares not consenting to it
in the case of action by written consent, are equal to more than 16-2/3 percent
of the outstanding shares entitled to vote.
Delaware law permits a board of directors to change the authorized number
of directors by amendment to the bylaws unless the number of directors is fixed
in the certificate of incorporation or the manner of fixing the number of
directors is set forth in the certificate of incorporation, in which case the
number of directors may be changed only by amendment of the certificate of
incorporation or consistent with the manner specified in the certificate of
incorporation, as the case may be. The Delaware Certificate provides that the
exact number of directors shall be fixed from time to time exclusively by the
Board of Directors by resolution.
19
<PAGE>
Elections; Classified Board of Directors. California law generally
provides that directors be elected annually but does permit a classified board
when and if (i) a corporation is listed on the New York Stock Exchange or the
American Stock Exchange, or (ii) the corporation's shares are traded on the
Nasdaq National Market (which does not include the Nasdaq-SmallCap Market) and
the corporation's securities are held by at least 800 shareholders (a "Listed
Corporation"). The California Articles currently provide that directors be
elected annually but also provide for a "classified" Board of Directors when and
if the Company becomes a listed corporation. The directors of the California
Company, who will also be the directors of the Delaware Company if the
reincorporation proposal is approved, are set forth in Proposal 1.
Delaware law permits, but does not require, the adoption of a classified
board of directors with staggered terms. A maximum of three classes of
directors is permitted by Delaware law, with members of one class to be elected
each year for a maximum term of three years. The Delaware Certificate and the
Delaware Bylaws provide for a classified Board of Directors with three classes
of directors (the "Classified Board Provision").
Under the Classified Board Provision, the Board of Directors would be
divided into three classes, designated Class I, Class II and Class III. All
directors in Class I would hold office until the first annual meeting of
stockholders following the implementation of the Classified Board Provision upon
the filing of the Certificate of Incorporation; all directors in Class II would
hold office until the second annual meeting of stockholders following such
implementation of the Classified Board Provision; and all directors in Class III
would hold office until the third annual meeting of the stockholders following
such implementation of the Classified Board Provision and, in each case, until
their successors are duly elected and qualified or until their earlier
resignation, removal from office or death. As a result, only one class of
directors will be elected at each annual meeting of stockholders, with the
remaining classes continuing their respective two-year and three-year terms
until the successors are duly elected and qualified or until earlier
resignation, removal from office or death.
If the reincorporation proposal is adopted, the directors of the Delaware
Company, who are also the current directors of the Company, will be divided into
classes as follows:
<TABLE>
<CAPTION>
Class Name
----- ----
<S> <C>
I Peter J. Shaw
II Vincent F. Monte
II Gordon C. Westerling
III Terrence C. Walsh
III Gerald E. Morris
</TABLE>
By approving Proposal 3, shareholders will be approving the Classified
Board Provision, the election of the same directors as would be elected to the
Board of Directors of the Company in the event Proposal 1 is approved by the
shareholders, and the initial classification of directors set forth above.
Classification of directors is likely to provide the Board of Directors
with greater continuity and experience, since normally at least one member of
the Board of Directors would be in such member's second year of service and at
least one member of the Board of Directors would be in such member's third year
of service. Although the Board of Directors is not aware of any problems
experienced by the Company in the past with respect to continuity and stability
of leadership and policy, the Board of Directors believes that a classified
Board of Directors could decrease the likelihood of such problems arising in the
future.
20
<PAGE>
Adoption of the Classified Board Provision may significantly extend the
time required to elect a new majority to the Board of Directors. Presently, the
California Articles allows a change in control of the Board of Directors by a
majority of the Company's shareholders at a single annual meeting or special
meeting of shareholders. With the Classified Board Provision, unless directors
are removed, it will require at least two annual meetings of shareholders for a
majority of shareholders that is less than a two-thirds majority to make a
change in control of the Board of Directors, since only a minority of the
directors will be elected at each meeting. A significant effect of a classified
Board of Directors may be to deter hostile takeover attempts because an acquirer
would experience delay in replacing a majority of the directors. However, a
classified Board of Directors will also make it more difficult for shareholders
to effect a change in control of the Board of Directors, even if such a change
in control is sought due to dissatisfaction with the performance of the
Company's directors.
The existence of a classified Board may deter so-called "creeping
acquisitions" in which a person or group seeks to acquire: (i) a controlling
position without paying a normal control premium to the selling shareholders;
(ii) a position sufficient to exert control over the Company through a proxy
contest or otherwise; or (iii) a block of stock with a view toward attempting to
promote a sale or liquidation or a repurchase by the Company of the block at a
premium, or an exchange of the block for assets of the Company. Faced with a
classified Board of Directors, such a person or group would have to assess
carefully its ability to control or influence the Company. If free of the
necessity to act in response to an immediately threatened change in control, the
Board of Directors can act in a more careful and deliberative manner to make and
implement appropriate business judgments in response to a creeping acquisition.
Removal of Directors. Under California law, a director may be removed with
or without cause by the affirmative vote of a majority of the outstanding
shares, provided that the shares voted against removal would not be sufficient
to elect the director by cumulative voting. The Delaware Certificate provides
that the Company's directors can be removed (i) for cause by the affirmative
vote of the holders of a majority of the outstanding shares of capital stock of
the Company entitled to vote, and (ii) without cause by the affirmative vote of
the holders of at least sixty-six and two-thirds percent (66 2/3%) of the
outstanding shares of capital stock entitled to vote. The term "cause" with
respect to the removal of directors is not defined in the Delaware General
Corporation Law and its meaning has not been precisely delineated by the
Delaware courts.
CAPITALIZATION; BLANK CHECK PREFERRED
The Company's capital stock consists of 10,000,000 authorized shares of
Common Stock, par value $0.001 per share, of which 3,734,695 shares were
issued and outstanding as of January 25, 1999, and 1,000,000 authorized shares
of Preferred Stock, par value $0.001 per share, of which no shares were issued
and outstanding as of January 25, 1999.
The Board has provided that the capital structure for the Delaware Company
will be identical to the current capital structure of the Company. Accordingly,
the capitalization of the Delaware Company has authorized capital stock of
10,000,000 shares of Common Stock, $0.001 par value, and 1,000,000 shares of
Preferred Stock, $0.001 par value. The Delaware Company's authorized but
unissued shares of Preferred Stock will be available for future issuance.
The authorized but unissued shares of Common Stock and Preferred Stock
could be used by the Delaware Company to oppose a hostile takeover attempt or
delay or prevent changes in control or management of the Delaware Company. For
example, without further stockholder approval, the Board could (i) adopt a
"poison pill" which would, under certain circumstances related to an acquisition
not
21
<PAGE>
approved by the Board of Directors, give certain holders the right to acquire
additional shares of Common Stock at a low price, or (ii) sell shares of Common
Stock or Preferred Stock in a private transaction to purchasers who would oppose
a takeover or favor the current Board. Although this proposal to increase the
authorized Common Stock has been prompted by business and financial
considerations and not by the threat of any known or threatened hostile takeover
attempt, shareholders should be aware that approval of this proposal could
facilitate future efforts by the Delaware Company to deter or prevent changes in
control of the Delaware Company, including transactions in which the
shareholders might otherwise receive a premium for their shares over then
current market prices. If the reincorporation is approved, it is not the
present intention of the Board of Directors to seek shareholder approval prior
to any issuance of Common Stock or Preferred Stock, except as required by law or
regulation.
Under the Delaware Certificate, as under the California Articles, the Board
of Directors has the authority to determine or alter the rights, preferences,
privileges and restrictions to be granted to or imposed upon any wholly unissued
series of Preferred Stock and to fix the number of shares constituting any such
series and to determine the designation thereof. See "Anti-Takeover Measures"
below.
SHAREHOLDER POWER TO CALL SPECIAL SHAREHOLDERS' MEETING
Under California law, a special meeting of shareholders may be called by
the Board of Directors, the Chairman of the Board, the President or the holders
of shares entitled to cast not less than 10% of the votes at such meeting and
such persons as are authorized by the articles of incorporation or bylaws.
Under Delaware law, a special meeting of shareholders may be called by the Board
of Directors or by any other person authorized to do so in the certificate of
incorporation or the bylaws. The Delaware Certificate and Delaware Bylaws
provide that such a meeting may be called by the Board of Directors, the
Chairman of the Board, the Chief Executive Officer or the holders of at least
50% of the outstanding shares entitled to vote at such meeting. Pursuant to the
Delaware Certificate and Delaware Bylaws, if the meeting is called by a person
or persons other than the Board of Directors (i.e., by the Chairman of the Board
or the Chief Executive Officer), the Board of Directors shall determine the time
and the place of such meeting which shall be from 35 to 120 days after the
receipt of the request of the meeting.
ACTIONS BY WRITTEN CONSENT OF SHAREHOLDERS
Under California and Delaware law, shareholders may execute an action by
written consent in lieu of a shareholder meeting. Both California and Delaware
law permit a corporation to eliminate such actions by written consent in its
charter. The California Articles and California Bylaws permit shareholders to
act by written consent. The Delaware Certificate and Delaware Bylaws eliminate
actions by written consent of shareholders.
Elimination of the provision for shareholder written consent may lengthen
the amount of time required to take shareholder actions because certain actions
by written consent are not subject to the minimum notice requirement of a
shareholders' meeting. The elimination of the ability of shareholders to act by
written consent will deter hostile takeover attempts because of the lengthened
shareholder approval process. The Board believes this provision, like the other
provisions to be included in the Delaware Certificate and Delaware Bylaws, will
enhance the Board's opportunity to fully consider and effectively negotiate in
the context of a takeover attempt.
ADVANCE NOTICE REQUIREMENT FOR SHAREHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
There is no specific statutory requirement under either California or
Delaware law with regard to advance notice of director nominations and
shareholder proposals. Absent a bylaw restriction, director
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<PAGE>
nominations and shareholder proposals may be made without advance notice at the
annual meeting. However, federal securities laws generally provide that
shareholder proposals that the proponent wishes to include in the Company's
proxy materials must be received not less than 120 days in advance of the date
of the proxy statement released in connection with the previous year's annual
meeting. Currently, the California Bylaws do not provide for any advance notice
requirement.
The Delaware Bylaws provide that in order for director nominations or
stockholder proposals to be properly brought before the meeting, the stockholder
must have delivered timely notice to the Secretary of the corporation. To be
timely under the Delaware Bylaws, a stockholder's notice shall be delivered to
the Secretary at the principal executive offices of the Corporation not later
than the close of business on the ninetieth (90th) day nor earlier than the
close of business on the one hundred twentieth (120th) day prior to the first
anniversary of the preceding year's annual meeting; provided, however, that in
the event that the date of the annual meeting is advanced more than thirty (30)
days prior to or delayed by more than thirty (30) days after the anniversary of
the preceding year's annual meeting, notice by the stockholder to be timely must
be so delivered not earlier than the close of business on the one hundred
twentieth (120th) day prior to such annual meeting and not later than the close
of business on the later of the ninetieth (90th) day prior to such annual
meeting or the tenth (10th) day following the day on which public announcement
of the date of such meeting is first made. Proper notice under the federal
securities laws for a proposal to be included in the Company's proxy materials
will constitute proper notice under the Delaware Bylaws. These notice
requirements help ensure that stockholders are aware of all proposals to be
voted on at the meeting and have the opportunity to consider each proposal in
advance of the meeting.
ANTI-TAKEOVER MEASURES
Delaware law has been widely viewed to permit a corporation greater
flexibility in governing its internal affairs and its relationships with
stockholders and other parties than do the laws of many other states, including
California. In particular, Delaware law permits a corporation to adopt a number
of measures designed to reduce a corporation's vulnerability to hostile takeover
attempts. Such measures are either not currently permitted or are more narrowly
drawn under California law. Among these measures are the establishment of a
classified board of directors and the elimination of the right of shareholders
to call special shareholders' meetings, each of which is described above. In
addition, certain types of "poison pill" defenses (such as shareholder rights
plans) have been upheld by Delaware courts, while California courts have yet to
decide on the validity of such defenses, thus rendering their effectiveness in
California less certain.
As discussed herein, certain provisions of the Delaware Certificate could
be considered to be anti-takeover measures. The Company does not have any
present intention of adopting any further anti-takeover measures (such as a
shareholder rights plan), nor does the Board of Directors have knowledge that
any attempt to gain control of the Company is being contemplated. However, as
discussed above, numerous differences between California and Delaware law,
effective without additional action by the Delaware Company, could have a
bearing on unapproved takeover attempts.
One such difference is the existence of a Delaware statute regulating
tender offers, which statute is intended to limit coercive takeovers of
companies incorporated in that state. California has no comparable statute.
The Delaware law provides that a corporation may not engage in any business
combination with any interested shareholder for a period of three years
following the date that such shareholder became an interested shareholder,
unless (i) prior to the date the shareholder became an interested shareholder
the Board of Directors approved the business combination or the transaction
which resulted in the shareholder becoming an interested shareholder, or (ii)
upon consummation of the
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<PAGE>
transaction which resulted in the shareholder becoming an interested
shareholder, the interested shareholder owned at least 85% of the Voting Stock,
or (iii) the business combination is approved by the Board of Directors and
authorized by 66-2/3% of the outstanding Voting Stock which is not owned by the
interested shareholder. An interested shareholder means any person that is the
owner of 15% or more of the outstanding Voting Stock, however, the statute
provides for certain exceptions to parties who otherwise would be designated
interested shareholders. Any corporation may decide to opt out of the statute
in its original certificate of incorporation or, at any time, by action of its
shareholders. The Company has no present intention of opting out of the
statute.
There can be no assurance that the Board of Directors would not adopt any
further anti-takeover measures available under Delaware law (some of which may
not require shareholder approval). Moreover, the availability of such measures
under Delaware law, whether or not implemented, may have the effect of
discouraging a future takeover attempt which a majority of the Delaware
Company's shareholders may deem to be in their best interests or in which
shareholders may receive a premium for their shares over then current market
prices. As a result, shareholders who might desire to participate in such
transactions may not have the opportunity to do so. Shareholders should
recognize that, if adopted, the effect of such measures, along with the
possibility of discouraging takeover attempts, may be to limit in certain
respects the rights of shareholders of the Delaware Company compared with the
rights of shareholders of the Company.
The Board of Directors recognizes that hostile takeover attempts do not
always have the unfavorable consequences or effects described above and may
frequently be beneficial to the shareholders, providing all of the shareholders
with considerable value for their shares. However, the Board of Directors
believes that the potential disadvantages of unapproved takeover attempts,
including without limitation, the disruption of the Company's business and the
possibility of terms which may be less than favorable to all of the shareholders
than would be available in a board-approved transaction, are sufficiently great
such that prudent steps to reduce the likelihood of such takeover attempts and
to enable the Board to fully consider the proposed takeover attempt and actively
negotiate its terms are in the best interests of the Company and its
shareholders.
In addition to the various anti-takeover measures that would be available
to the Delaware Company after the reincorporation due to the application of
Delaware law, the Delaware Company would retain the rights currently available
to the Company under California law to issue shares of its authorized but
unissued capital stock. Following the effectiveness of the proposed
reincorporation, shares of authorized and unissued Common Stock and Preferred
Stock of the Delaware Company could (within the limits imposed by applicable
law) be issued in one or more transactions, or Preferred Stock could be issued
with terms, provisions and rights which would make more difficult and,
therefore, less likely, a takeover of the Delaware Company. Any such issuance
of additional stock could have the effect of diluting the earnings per share and
book value per share of existing shares of Common Stock and Preferred Stock, and
such additional shares could be used to dilute the stock ownership of persons
seeking to obtain control of the Delaware Company.
It should be noted that the voting rights to be accorded to any unissued
series of Preferred Stock of the Delaware Company ("Delaware Preferred Stock")
remain to be fixed by the Board of Directors of the Delaware Company (the
"Delaware Board"). Accordingly, if the Delaware Board so authorizes, the
holders of Delaware Preferred Stock may be entitled to vote separately as a
class in connection with approval of certain extraordinary corporate
transactions in circumstances where Delaware law does not ordinarily require
such a class vote, or might be given a disproportionately large number of votes.
Such Delaware Preferred Stock could also be convertible into a large number of
shares of Common Stock of the Delaware Company under certain circumstances or
have other terms which might make acquisition of
24
<PAGE>
a controlling interest in the Delaware Company more difficult or more costly,
including the right to elect additional directors to the Delaware Board.
Potentially, the Delaware Preferred Stock could be used to create voting
impediments or to frustrate persons seeking to effect a merger or otherwise to
gain control of the Delaware Company. Also, the Delaware Preferred Stock could
be privately placed with purchasers who might side with the management of the
Delaware Company in opposing a hostile tender offer or other attempt to obtain
control.
The Board may also authorize the issuance of Preferred Stock for the
purpose of adopting a shareholder rights plan. Future issuances of Delaware
Preferred Stock as an anti-takeover device might preclude shareholders from
taking advantage of a situation which might otherwise be favorable to their
interests. In addition (subject to the considerations referred to above as to
applicable law), the Delaware Board could authorize issuance of shares of Common
Stock of the Delaware Company ("Delaware Common Stock") or Delaware Preferred
Stock to a holder who might thereby obtain sufficient voting power to ensure
that any proposal to alter, amend or repeal provisions of the Delaware
Certificate unfavorable to a suitor would not receive the necessary vote of 66-
2/3% of the Voting Stock required for certain of the proposed amendments (as
described below).
If the reincorporation is approved it is not the present intention of the
Board of Directors to seek shareholder approval prior to any issuance of the
Delaware Preferred Stock or Delaware Common Stock, except as required by law or
regulation. Frequently, opportunities arise that require prompt action, and it
is the belief of the Board of Directors that the delay necessary for shareholder
approval of a specific issuance would be a detriment to the Delaware Company and
its shareholders. The Board of Directors does not intend to issue any Preferred
Stock except on terms which the Board of Directors deems to be in the best
interests of the Delaware Company and its then existing shareholders.
AMENDMENT OF CERTIFICATE
The California Articles may be amended by the approval of a majority of the
members of the Board of Directors and by the holders of a majority of the
outstanding shares of the Company. The Delaware Certificate provides that the
provisions relating to: (i) indemnification of officers and directors; (ii) the
number, election and removal of directors; (iii) the amendment of the Delaware
Bylaws; and (iv) certain other provisions, can only be amended by the
affirmative vote of the holders of at least 66-2/3% of the outstanding shares of
the Delaware Company.
AMENDMENT OF BYLAWS
The California Bylaws may be amended or repealed either by the Board of
Directors or by the holders of a majority of the outstanding shares of the
Company, except that a change in the authorized number of directors must be
approved by the holders of a majority of the outstanding shares entitled to
vote, and if the number of directors is decreased below five (5), such change
may not be effected if votes cast against its adoption at a meeting, or the
shares not consenting to it in the case of an action by written consent, are
equal to more than 16-2/3% of the outstanding shares entitled to vote.
Upon the effectiveness of the proposed reincorporation, the Delaware Board
will be able to adopt, amend or repeal any of the Delaware Bylaws. The Delaware
Bylaws may also be adopted, amended or repealed by the holders of at least 66-
2/3% of the voting power of the outstanding capital stock of the Delaware
Company.
LOANS TO OFFICERS, DIRECTORS AND EMPLOYEES
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<PAGE>
California law provides that any loan or guaranty (other than loans to
permit the purchase of shares under certain stock purchase plans) for the
benefit of any officer or director, or any employee benefit plan authorizing
such loan or guaranty (except certain employee stock purchase plans), must be
approved by a majority of the shareholders of a California corporation;
provided, however, that if the Company has outstanding shares held of record by
100 or more persons on the date of approval by the Board of Directors, the
Company may make loans to any officer, whether or not a director, or adopt an
employee benefit plan authorizing such loans with approval of the Board of
Directors alone, if the Board of Directors determines that such a loan may
reasonably be expected to benefit the Company.
Under Delaware law, a corporation may make loans to, or guarantee the
obligations of, officers or other employees when, in the judgment of the board
of directors, the loan or guaranty may reasonably be expected to benefit the
corporation. Both California law and Delaware law permit such loans or
guaranties to be unsecured and without interest.
CLASS VOTE FOR CERTAIN REORGANIZATIONS
With certain exceptions, California law requires that mergers,
reorganizations, certain sales of assets and similar transactions be approved by
a majority vote of each class of shares outstanding. Delaware law generally
does not require class voting for such transactions, except in certain
situations involving an amendment to the certificate of incorporation which
adversely affects a specific class of shares.
California law also requires that holders of a California corporation's
Common Stock receive nonredeemable Common Stock in a merger of the corporation
with the holder (or an affiliate of the holder) of more than 50% but less than
90% of its Common Stock, unless all of the holders of its Common Stock consent
to the merger or the merger has been approved by the California Commissioner of
Corporations at a "fairness" hearing. This provision of California law may have
the effect of making a cash "freezeout" merger by a majority shareholder more
difficult to accomplish. A cash freezeout merger is a transaction whereby a
minority shareholder is forced to relinquish his share ownership in a
corporation in exchange for cash, subject in certain instances to dissenters
rights. Delaware law has no comparable provision.
INSPECTION OF SHAREHOLDER LISTS
California law provides for an absolute right of inspection of the
shareholder list for shareholders holding five percent (5%) or more of a
corporation's outstanding voting shares or shareholders holding one percent (1%)
or more of such shares who have filed a Schedule 14B with the Securities and
Exchange Commission (the "SEC"). Delaware law provides no such absolute right
of shareholder inspection. However, both California and Delaware law permit any
shareholder of record to inspect the shareholder list for any purpose reasonably
related to that person's interest as a shareholder.
APPRAISAL RIGHTS
Under both California law and Delaware law, a shareholder of a corporation
participating in certain mergers and reorganizations may be entitled to receive
cash in the amount of the "fair value" (Delaware) or "fair market value"
(California) of his shares, as determined by a court, in lieu of the
consideration he would otherwise receive in the transaction. The limitations on
such dissenters' appraisal rights are somewhat different in California and
Delaware.
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<PAGE>
Shareholders of a California corporation, the shares of which are listed on
a national securities exchange or on the OTC margin stock list, generally do not
have appraisal rights unless the holders of at least five percent (5%) of the
class of outstanding shares assert the appraisal right. In any reorganization
in which one corporation or the shareholders of one corporation own more than
83-1/3% of the voting power of the surviving or acquiring corporation,
shareholders are denied dissenters' rights under California law. For this
reason, appraisal rights will not be available to shareholders in connection
with the reincorporation proposal.
Under Delaware law appraisal rights are not available to shareholders with
respect to a merger or consolidation by a corporation, the shares of which are
either listed on a national securities exchange or designated as a national
market system security or an interdealer quotation system security by the
National Association of Securities Dealers, Inc., or are held of record by more
than 2,000 holders if the shareholders receive shares of the surviving
corporation or shares of any other corporation which are similarly listed or
dispersed, and the shareholders do not receive any other property in exchange
for their shares except cash for fractional shares. Appraisal rights are also
unavailable under Delaware law to shareholders of a corporation surviving a
merger if no vote of those shareholders is required to approve the merger
because, among other things, the number of shares to be issued in the merger
does not exceed 20% of the shares of the surviving corporation outstanding
immediately before the merger and certain other conditions are met.
VOTING AND APPRAISAL RIGHTS IN CERTAIN TRANSACTIONS
Delaware law does not provide shareholders with voting or appraisal rights
when a corporation acquires another business through the issuance of its stock
in exchange for assets or stock or in a merger with a subsidiary. California
law treats these kinds of acquisitions in the same manner as a merger of the
corporation directly with the business to be acquired and provides appraisal
rights in the circumstances described in the preceding section.
DIVIDENDS
Under California law, any dividends or other distributions to shareholders,
such as redemptions, are limited to the greater of (i) retained earnings or (ii)
an amount which would leave the corporation with assets (excluding certain
intangible assets) equal to at least 125% of its liabilities (excluding certain
deferred items) and current assets equal to at least 100% (or, in certain
circumstances, 125%) of its current liabilities. Delaware law allows the
payment of dividends and redemption of stock out of surplus (including paid-in
and earned surplus) or out of net profits for the current and immediately
preceding fiscal years.
DISSOLUTION
Under California law, shareholders holding 50% or more of the outstanding
voting power may dissolve the corporation without the approval of the Board of
Directors. Under Delaware law, dissolution requires either the approval of the
Board of Directors and a majority of the outstanding shares, or unanimous
approval of the stockholders.
APPLICATION OF CALIFORNIA LAW AFTER REINCORPORATION
California law provides that if (i) the average of certain property,
payroll and sales factors (the "Factor Test") results in a finding that more
than 50% of the Delaware Company's business is conducted in California, (ii)
more than 50% of the Delaware Company's outstanding voting securities are held
of
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record by persons having addresses in California for the Company's last fiscal
year, and (iii) the Company does not qualify for any exemptions (discussed
below), then the Delaware Company would become subject to certain provisions of
California law regardless of its state of incorporation. Exempted companies
include companies with its outstanding securities listed on the Nasdaq National
Market (which does not include the Nasdaq-SmallCap Market) if the company has at
least 800 shareholders as of the record date of its most recent annual meeting
of shareholders, or companies with its outstanding securities listed on the New
York Stock Exchange or the American Stock Exchange. Because 50% or less of the
Company's business is conducted in California, the Company does not satisfy the
Factor Test and, therefore, California law will not initially apply to the
Delaware Company if the reincorporation is approved.
If the Delaware Company were to become subject to the provisions of
California law referred to above, and such provisions were enforced by
California courts in a particular case, many of the Delaware laws described in
this Proxy Statement would not apply to the Delaware Company. Instead, the
Delaware Company could be governed by certain California laws, including those
regarding liability of directors for breaches of the duty of care,
indemnification of directors, dissenters' rights of appraisal, removal of
directors as well as certain other provisions discussed above, to the exclusion
of Delaware law. The effects of applying both Delaware and California laws to a
Delaware corporation whose principal operations are based in California have not
yet been determined.
FEDERAL INCOME TAX CONSEQUENCES OF THE REINCORPORATION
The reincorporation provided for in the Merger Agreement is intended to be
a tax-free reorganization under the Internal Revenue Code of 1986, as amended.
Assuming the reincorporation qualifies as a reorganization, no gain or loss will
be recognized by the holders of capital stock of the Company as a result of
consummation of the reincorporation, and no gain or loss will be recognized by
the Company or the Delaware Company. Each former holder of capital stock of the
Company will have the same aggregate tax basis in the capital stock of the
Delaware Company received by such holder pursuant to the reincorporation as such
holder has in the capital stock of the Company held by such holder at the time
of consummation of the reincorporation. Each shareholder's holding period with
respect to the Delaware Company's capital stock will include the period during
which such holder held the corresponding Company capital stock, provided the
latter was held by such holder as a capital asset at the time of consummation of
the reincorporation. The Delaware Company capital stock received in exchange
for stock of the Company which was Qualified Small Business Stock (as defined in
Section 1202(c) of the Internal Revenue Code) will continue to constitute
Qualified Small Business Stock. The Company has not obtained and will not
obtain a ruling from the Internal Revenue Service or an opinion of legal or tax
counsel with respect to the tax consequences of the reincorporation.
The foregoing is only a summary of certain federal income tax consequences
of the reincorporation. Shareholders should consult their own tax advisers
regarding the specific tax consequences to them of the reincorporation,
including the applicability of the laws of any state or other jurisdiction.
BOARD RECOMMENDATION
The foregoing discussion is an attempt to summarize the more important
differences in the corporation laws of Delaware and California and does not
purport to be an exhaustive discussion of all of the differences. Such
differences can be determined in full by reference to the California
Corporations Code and to the Delaware General Corporation Law. In addition,
both California and Delaware law
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<PAGE>
provide that some of the statutory provisions as they affect various rights of
holders of shares may be modified by provisions in the charter or bylaws of the
corporation.
A vote FOR the reincorporation proposal will constitute approval of the
merger, the Delaware Certificate, the Delaware Bylaws, the adoption and
assumption by the Delaware Company of each of the Company's stock option, stock
purchase and employee benefit plans and all other aspects of this Proposal 3.
REQUIRED VOTE
The affirmative vote of at least a majority of the outstanding shares of
the Company's voting stock entitled to vote is required for approval of the
reincorporation. Abstentions and broker non-votes will have the same effect as
negative votes.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 3.
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PROPOSAL 4
Ratification of Selection of Independent Auditors
The Board of Directors has selected Corbin & Wertz as the Company's
independent auditors for the fiscal year ending September 30, 1999, and has
further directed that management submit the selection of independent auditors
for ratification by the shareholders at the Annual Meeting. Corbin & Wertz has
audited the Company's financial statements since September 1993.
Representatives of Corbin & Wertz are expected to be present at the Annual
Meeting. They will have an opportunity to make a statement if they so desire
and are expected to be available to respond to appropriate questions.
Shareholder ratification of the selection of Corbin & Wertz as the
Company's independent auditors is not required by the Company's Bylaws or
otherwise. However, the Board is submitting the selection of Corbin & Wertz to
the shareholders for ratification as a matter of good corporate practice. If
the shareholders fail to ratify the selection, the Board will reconsider whether
or not to retain that firm. Even if the selection is ratified, the Board in
their discretion may direct the appointment of different independent auditors at
any time during the year if they determine that such a change would be in the
best interests of the Company and its shareholders.
REQUIRED VOTE
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and voting at the Annual Meeting will be required
to ratify the selection of Corbin & Wertz.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 4.
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SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of December 31, 1998, by: (i) each nominee for
director; (ii) each of the executive officers named in the Summary Compensation
Table; (iii) all executive officers and directors of the Company as a group; and
(iv) all those known by the Company to be beneficial owners of more than five
percent (5%) of its Common Stock.
<TABLE>
<CAPTION>
Beneficial Ownership (1)
Number of Percent of
Beneficial Owner and Address Shares Total
- ---------------------------- ------ -----
<S> <C> <C>
Terrence C. Walsh.......................................... 1,116,000 29.5%
1513 East St. Gertrude Place
Santa Ana, CA 92705
Charles F. Kimmel (2)...................................... 124,666 3.2%
Alva L. Stevens (3)........................................ 257,033 6.8%
250 Tim Ct.
Danville, CA 94526
Vincent F. Monte (4)....................................... 136,100 3.5%
Gerald E. Morris (5)....................................... 59,426 1.6%
Peter J. Shaw.............................................. 2,000 *
Gordon C. Westerling....................................... 75,000 2.0%
All executive officers and directors....................... 1,438,192 36.0%
as a group (6 persons) (6)
</TABLE>
- --------------------------
* Less than one percent.
(1) This table is based upon information supplied by officers, directors and
principal shareholders and Schedules 13D and 13G filed with the Securities
and Exchange Commission (the "SEC"). Unless otherwise indicated in the
footnotes to this table and subject to community property laws where
applicable, the Company believes that each of the shareholders named in
this table has sole voting and investment power with respect to the shares
indicated as beneficially owned. Applicable percentages are based on
3,778,671 shares outstanding on December 31, 1998, adjusted as required by
rules promulgated by the SEC.
(2) Includes 104,166 shares subject to stock options exercisable within 60 days
of December 31, 1998.
(3) Represents 209,300 shares held by A. L. Stevens, Inc. Money Purchase Plan
and Trust and 26,900 held by Mr. Stevens individually. Includes 20,833
shares subject to stock options exercisable within 60 days of December 31,
1998.
(4) Includes 49,000 shares subject to stock options exercisable within 60 days
of December 31, 1998, and 25,000 shares subject to warrants exercisable
within 60 days of December 31, 1998.
31
<PAGE>
(5) Includes 10,000 shares held by Intalite International N.V., a corporation
of which Mr. Morris is President and Chief Executive Officer, a director
and controlling shareholder, and, as such, he may be deemed to have sole
voting and investment power over all of such shares and therefore may be
deemed a beneficial owner of such shares. Includes 15,000 shares subject to
stock options exercisable within 60 days of December 31, 1998, and 25,000
shares subject to warrants exercisable within 60 days of December 31, 1998.
(6) Includes 168,166 shares subject to stock options exercisable within 60 days
of December 31, 1998 and 50,000 shares subject to warrants exercisable
within 60 days of December 31, 1998.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers, and persons who own more than
ten percent (10%) of a registered class of the Company's equity securities, to
file with the SEC initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. Officers,
directors and greater than ten percent (10%) shareholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended September 30, 1998, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten percent (10%) beneficial owners were complied with, except that
Mr. Shaw inadvertently filed his initial statement of beneficial ownership on
Form 3 late upon joining the Company.
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
Each non-employee director of the Company receives a per-meeting fee of
$250.00. In the fiscal year ended September 30, 1998, the total compensation
paid to non-employee directors was $1,250.00 in the aggregate. The members of
the Board of Directors are also eligible for reimbursement for their expenses
incurred in connection with attendance at Board meetings in accordance with
Company policy.
Each non-employee director also receives stock option grants under the 1995
Non-Employee Directors' Stock Option Plan (the "Directors' Plan"). Only non-
employee directors of the Company or an affiliate of such directors, as defined
in the Internal Revenue Code of 1986, as amended (the "Code"), are eligible to
receive options under the Directors' Plan. Options granted under the Directors'
Plan are intended by the Company not to qualify as "incentive stock options"
within the meaning of the Code. Option grants under the Directors' Plan are
non-discretionary. Each person who is elected for the first time after February
1995 to be a non-employee director, is automatically granted, without further
action by the Company, an option to purchase 25,000 shares of Common Stock upon
the date of his or her initial election. No other options may be granted at any
time under the Directors' Plan. The exercise price of options granted under the
Directors' Plan is 100% of the fair market value of the Common Stock on the date
of the option grant. The options generally vest at a rate of 20% per year,
beginning one year from the date of grant, and expire ten years from the date of
grant. In the event of a merger, consolidation, reverse merger or any other
capital reorganization in which more than 50% of the shares of the Company
entitled to vote are exchanged, the time during which options outstanding under
the Directors' Plan may be exercised shall be accelerated and the options
terminated if not exercised prior to such reorganization.
32
<PAGE>
In connection with his election to the Company's Board of Directors, on
July 8, 1998, the Company granted Mr. Shaw an option to purchase 25,000 shares
of the Company's Common Stock at an exercise price of $1.188 per share. As of
December 31, 1998, no options had been exercised under the Directors' Plan.
COMPENSATION OF EXECUTIVE OFFICERS
The following table shows for the fiscal years ended September 30, 1996,
1997 and 1998, compensation awarded or paid to, or earned by, the Company's
Chief Executive Officer and the other executive officer of the Company who
received compensation of more than $100,000 in fiscal 1998 (the "Named Executive
Officers"):
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Annual Compensation Awards
Other Securities
Name and Principal Annual Underlying
Position Year Salary Bonus Compensation Options
<S> <C> <C> <C> <C> <C>
Terrence C. Walsh, 1996 $103,788 -- $11,143/1/ --
Chief Executive Officer 1997 124,647 -- 11,143/1/ --
1998 140,539 -- 20,256/2/ --
Charles F. Kimmel,/3/ 1996 -- -- -- --
President and Chief 1997 $ 34,423 -- -- 250,000
Operating Officer 1998 115,826 -- $11,470/4/ --
</TABLE>
- ------------------
/1/ Represents automobile allowance and reimbursements.
/2/ Represents automobile allowance of $11,143 and other benefits of $9,113.
/3/ Mr. Kimmel joined the Company in June 1997.
/4/ Represents automobile allowance of $6,000 and COBRA reimbursement of
$5,470.
33
<PAGE>
STOCK OPTION GRANTS AND EXERCISES
The Company grants options to its executive officers under its 1994 Stock
Option Plan (the "1994 Plan"), its 1995 Stock Option Plan (the "1995 Plan"), and
its 1997 Equity Incentive Plan (the "1997 Plan"). As of December 31, 1998,
options to purchase a total of 355,000 shares of the Company's Common Stock were
outstanding under the 1994 Plan, and options to purchase 15,000 shares remained
available for grant thereunder. Options were granted at an exercise price equal
to the fair market value of the Company's Common Stock at the date of each
grant. The options generally vest at a rate of 20% per year, beginning one year
from the date of grant, and expire ten years from the date of grant.
As of December 31, 1998, options to purchase a total of 187,000 shares of
the Company's Common Stock were outstanding under the 1995 Plan, and options to
purchase 63,000 shares remained available for grant thereunder. Options were
granted at an exercise price equal to the fair market value of the Company's
Common Stock at the date of grant. The options generally vest at a rate of 20%
per year, beginning one year from the date of grant, and expire ten years from
the date of grant. In the event of a merger, consolidation, reverse merger or
any other capital reorganization in which more than 50% of the shares of the
Company entitled to vote are exchanged, any surviving corporation shall assume
any options outstanding under the 1995 Plan, or substitute equivalent options;
in the event any surviving corporation refuses to assume or substitute options,
then such options shall be terminated if not exercised prior to such
reorganization.
As of December 31, 1998, options to purchase a total of 275,000 shares of
the Company's Common Stock were outstanding under the 1997 Plan, and options to
purchase 115,000 shares remained available for grant thereunder. Options were
granted at an exercise price equal to the fair market value of the of the
Company's Common Stock at the date of each grant. The options generally vest at
a rate of 25% per year, beginning one year from the date of grant, and expire
ten years from the date of grant.
During the fiscal year ended September 30, 1998, there were no stock
options granted to the Named Executive Officers. No stock options were
exercised by the Named Executive Officers during the fiscal year ended September
30, 1998.
The Company has not adopted any long-term incentive plan. During the
fiscal year ended September 30, 1998, the Company did not amend or adjust the
exercise price of stock options awarded to any of the Named Executive Officers.
34
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information regarding exercised stock
options and the number and value of securities underlying unexercised options
held by the Named Executive Officers at September 30, 1998.
<TABLE>
<S> <C> <C> <C> <C>
Number of Securities
Shares Underlying Unexercised Value of Unexercised
Acquired Value Options at Fiscal In-the-Money Options at
on Exercise Realized Year-End Fiscal Year-End
Name (#) ($) (#) (1) ($)
Exercisable/Unexercisable Exercisable/Unexercisable
<S> <C> <C> <C> <C>
Terrence C. Walsh -- -- -- / -- -- / --
Charles F. Kimmel -- -- 78,125 / 171,875 -- / --
</TABLE>
___________________
(1) Includes both "in-the-money" and "out-of-the-money" options. "In-the-
money" options are options with an exercise price below the fair market
value of the Company's Common Stock; "out-of-the-money" options are options
with an exercise price equal to or above the fair market value of the
Company's Common Stock.
EMPLOYMENT AGREEMENTS
The Company entered into an employment agreement with Terrence C. Walsh on
May 1, 1997 (which replaced in its entirety a previous employment agreement
between the Company and Mr. Walsh), for a term of three (3) years. Under the
employment agreement, the annual base salary of Mr. Walsh is $140,000. The base
salary is to be increased by not less than 5% a year, and Mr. Walsh is entitled
to receive such bonuses, if any, as are determined each year by the Company's
Compensation Committee. Mr. Walsh's employment agreement provides that in the
event of a voluntary termination of employment for "good reason" (defined as
constructive termination of employment by the Company due to a substantial,
detrimental alteration in the officer's duties, a failure to pay or maintain
agreed upon compensation or benefits, or requiring the officer to relocate to a
location more than fifty miles from the Company's current headquarters), or an
involuntary termination of employment without cause, such officer will receive a
lump sum in cash equal to (a) the amount of the base salary that would have been
payable over the remainder of the term of the agreement had such officer not
been terminated (subject to minimum amount equal to twenty four months' base
salary; such twenty four month period being a "Minimum Severance Period"), and
(b) the amount of annual bonus that would have been payable for the Minimum
Severance Period for such officer, which is deemed to be equal to the average
annual bonus received by such officer during the three years preceding the date
of termination in which a bonus was paid.
35
<PAGE>
CERTAIN TRANSACTIONS
In September 1996, the Company extended a loan of $50,000 to Terrence C.
Walsh, the Chief Executive Officer and then President of the Company. The loan
bears interest at a 6% annualized rate and is due and payable in September 1999.
The loan is collateralized by 70,000 shares of the Company's Common Stock owned
by Mr. Walsh.
In March 1997, the Company entered into an agreement with Hill Thompson
Capital Markets Inc. ("Hill Thompson") under which Hill Thompson would provide
certain investment banking services to the Company. In exchange for providing
such services, during the fiscal year ended September 30, 1997, the Company
granted Hill Thompson warrants to purchase an aggregate of 100,000 shares of the
Company's Common Stock, and, during the fiscal year ended September 30, 1998,
the Company granted Hill Thompson warrants to purchase an aggregate of 75,000
shares of the Company's Common Stock (collectively, the "Hill Thompson
Warrants"). The agreement also provides that Hill Thompson will pay Gerald E.
Morris, a director of the Company, a finder's fee in the amount of 20% of all
consideration paid to Hill Thompson by the Company. Accordingly, Mr. Morris is
entitled to receive from Hill Thompson 20% of the Hill Thompson Warrants.
36
<PAGE>
OTHER MATTERS
The Board of Directors knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters are properly brought
before the meeting, it is the intention of the persons named in the accompanying
proxy to vote on such matters in accordance with their best judgment.
By Order of the Board of Directors
Terrence C. Walsh
Chairman and Chief Executive Officer
February 5, 1999
A copy of the Company's Annual Report to the Securities and Exchange
Commission on Form 10-KSB for the fiscal year ended September 30, 1998, is
available without charge upon written request to: Corporate Secretary, Tivoli
Industries, Inc., 1513 St. Gertrude Place, Santa Ana, CA 92705.
37
<PAGE>
APPENDIX A
CERTIFICATE OF AMENDMENT OF
RESTATED ARTICLES OF INCORPORATION OF
TIVOLI INDUSTRIES, INC.
The undersigned certify that:
1. They are the Chief Executive Officer and the Secretary, respectively,
of Tivoli Industries, Inc., a California corporation.
2. Article Three of the Restated Articles of Incorporation of this
corporation is amended to read in full as follows:
"Three: This corporation is authorized to issue two classes of shares
designated "Common Stock" and "Preferred Stock," respectively. The number
of shares of Common Stock authorized to be issued is 10,000,000, par value
$0.001 per share, and the number of shares of Preferred Stock authorized to
be issued is 1,000,000, par value $0.001. The Board of Directors of this
corporation is authorized to determine the number of series into which
shares of the Preferred Stock may be divided, to determine the rights,
preferences, privileges and restrictions granted to or imposed upon the
Preferred Stock or any series thereof or any holders thereof, to determine
and alter the rights, preferences, privileges and restrictions granted to
or imposed upon any wholly unissued series of Preferred Stock or the
holders thereof, to fix the number of shares constituting any series prior
to the issuance of shares of that series, and to increase or decrease,
within the limits stated in any resolution or resolutions of the board
originally fixing the number of shares constituting any series (but not
below the number of shares of such series then outstanding), the number of
shares of any such series subsequent to the issue of shares of that series.
Upon the filing of this Certificate of Amendment of the Restated Articles
of Incorporation, every three (3) outstanding shares of Common Stock shall
be combined into, and reconstituted as, one (1) share of Common Stock.
No fractional shares shall issue, and cash at "fair market value" shall be
paid in lieu of fractional shares. "Fair market value" shall be determined
as the average of the last reported sale prices of the Common Stock on the
SmallCap Market of the Nasdaq Association of Securities Dealers Automated
Quotations System or other such exchange over the twenty (20) consecutive
business days immediately preceding the date of filing of this Certificate
of Amendment of the Restated Articles of Incorporation."
3. The foregoing amendment of the Restarted Articles of Incorporation has
been duly approved by the Board of Directors.
4. The foregoing amendment of the Restated Articles of Incorporation has
been duly approved by the required vote of shareholders in accordance with
Section 902 of the California Corporations Code. The total number of
outstanding shares of the corporation is 3,778,671
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<PAGE>
shares of Common Stock. The percentage vote required is more than 50% of the
outstanding shares of Common Stock. The number of shares voting in favor of the
amendment equaled or exceeded the vote required.
We further declare under penalty of perjury under the laws of the State of
California that the matters set forth in this certificate are true and correct
of our own knowledge.
Date: ____________, 1999
_________________________________________
Terrence C. Walsh
Chairman and Chief Executive Officer
_________________________________________
Charles F. Kimmel
Secretary
A-2
<PAGE>
APPENDIX B
AGREEMENT AND PLAN OF MERGER
This Agreement And Plan Of Merger (hereinafter called the "Merger
Agreement") is made as of ______________, 19___, by and between Tivoli
Industries, Inc., a California corporation ("Tivoli California"), and Tivoli
Merger Sub Corp., a Delaware corporation ("Tivoli Delaware"). Tivoli California
and Tivoli Delaware are sometimes referred to herein as the "Constituent
Corporations."
The authorized capital stock of Tivoli California consists of Ten Million
(10,000,000) shares of Common Stock, par value $0.001, and One Million
(1,000,000) shares of Preferred Stock, par value $0.001. The authorized capital
stock of Tivoli Delaware, upon effectuation of the transactions set forth in
this Merger Agreement, will consist of Ten Million (10,000,000) of Common Stock,
par value $0.001, and One Million (1,000,000) shares of Preferred Stock, par
value $0.001.
The directors of the Constituent Corporations deem it advisable and to the
advantage of the Constituent Corporations that Tivoli California merge with and
into Tivoli Delaware upon the terms and conditions herein provided.
Now, Therefore, the parties do hereby adopt the plan of reorganization
encompassed by this Merger Agreement and do hereby agree that Tivoli California
shall merge with and into Tivoli Delaware on the following terms, conditions and
other provisions:
I. Terms And Conditions.
1.1 Merger. Tivoli California shall be merged with and into Tivoli
Delaware (the "Merger"), and Tivoli Delaware shall be the surviving corporation
(the "Surviving Corporation") effective upon the date when this Merger Agreement
is filed with the Secretary of State of the State of Delaware (the "Effective
Date").
1.2 Name Change. On the Effective Date, the name of Tivoli Delaware shall
be Tivoli Industries, Inc.
1.3 Succession. On the Effective Date, Tivoli Delaware shall continue its
corporate existence under the laws of the State of Delaware, and the separate
existence and corporate organization of Tivoli California, except insofar as it
may be continued by operation of law, shall be terminated and cease.
1.4 Transfer of Assets and Liabilities. On the Effective Date, the
rights, privileges, powers and franchises, both of a public as well as of a
private nature, of each of the Constituent Corporations shall be vested in and
possessed by the Surviving Corporation, subject to all of the disabilities,
duties and restrictions of or upon each of the Constituent Corporations; and all
and singular rights, privileges, powers and franchises of each of the
Constituent Corporations, and all property, real, personal and mixed, of each of
the Constituent Corporations, and all debts due to each of the Constituent
Corporations on any and all accounts, and all things in action or belonging to
each of the Constituent Corporations shall be transferred to and vested in the
Surviving
B-1
<PAGE>
Corporation; and all property, rights, privileges, powers and franchises, and
all and every other interest, shall be thereafter the property of the Surviving
Corporation as they were of the Constituent Corporations, and the title to any
real estate vested by deed or otherwise in either of the Constituent
Corporations shall not revert or be in any way impaired by reason of the Merger;
provided, however, that the liabilities of the Constituent Corporations and of
their respective shareholders, directors and officers shall not be affected and
all rights of creditors and all liens upon any property of either of the
Constituent Corporations shall be preserved unimpaired, and any claim existing
or action or proceeding pending by or against either of the Constituent
Corporations may be prosecuted to judgment as if the Merger had not taken place
except as they may be modified with the consent of such creditors, and all
debts, liabilities and duties of or upon each of the Constituent Corporations
shall attach to the Surviving Corporation, and may be enforced against it to the
same extent as if such debts, liabilities and duties had been incurred or
contracted by it.
1.5 Common Stock of Tivoli California and Tivoli Delaware. On the
Effective Date, by virtue of the Merger and without any further action on the
part of the Constituent Corporations or their respective shareholders, each
share of Common Stock of Tivoli California issued and outstanding immediately
prior thereto shall be converted into one (1) fully paid and nonassessable share
of the Common Stock of Tivoli Delaware and each share of Common Stock of Tivoli
Delaware issued and outstanding immediately prior thereto shall be cancelled and
returned to the status of authorized but unissued shares.
1.6 Preferred Stock of Tivoli California and Tivoli Delaware. Tivoli
California has no issued and outstanding shares of Preferred Stock to be
converted into fully paid and nonassessable shares of Preferred Stock of Tivoli
Delaware.
1.7 Stock Certificates. On and after the Effective Date, all of the
outstanding certificates which prior to that time represented shares of the
Common Stock of Tivoli California shall be deemed for all purposes to evidence
ownership of and to represent the shares of Tivoli Delaware into which the
shares of Tivoli California represented by such certificates have been converted
as herein provided and shall be so registered on the books and records of the
Surviving Corporation or its transfer agents. The registered owner of any such
outstanding stock certificate shall, until such certificate shall have been
surrendered for transfer or conversion or otherwise accounted for to the
Surviving Corporation or its transfer agent, have and be entitled to exercise
any voting and other rights with respect to and to receive any dividend and
other distributions upon the shares of Tivoli Delaware evidenced by such
outstanding certificate as above provided.
1.8 Options. On the Effective Date, the Surviving Corporation will assume
and continue Tivoli California's 1994 Stock Option Plan, 1995 Stock Option Plan,
1995 Non-Employee Directors' Stock Option Plan and 1997 Equity Incentive Plan,
in each case as amended, and the outstanding and unexercised portions of all
options to purchase Common Stock of Tivoli California, including without
limitation, all options outstanding under such stock plans and any other
outstanding options, shall be converted into options of Tivoli Delaware, such
that an option for one (1) share of Tivoli California shall be converted into an
option for one (1) share of Tivoli Delaware, with no change in the exercise
price of the Tivoli Delaware option. No other changes in the terms and
conditions of such options will occur. Effective on the Effective Date, Tivoli
Delaware hereby
B-2
<PAGE>
assumes the outstanding and unexercised portions of such options and the
obligations of Tivoli California with respect thereto.
1.9 Warrants. On the Effective Date, the Surviving Corporation will
assume and continue warrants of Tivoli California and the outstanding and
unexercised portions of all warrants, including without limitation all warrants
to purchase shares of Common Stock outstanding and any other outstanding
warrants, shall be converted into warrants of Tivoli Delaware, such that a
warrant for one (1) share of Tivoli California shall be converted into a warrant
for one (1) share of Tivoli Delaware, with no change in the exercise price of
the Tivoli Delaware warrant. No other changes in the terms and conditions of
such warrants will occur. Effective on the Effective Date, Tivoli Delaware
hereby assumes the outstanding and unexercised portions of such warrants and the
obligations of Tivoli California with respect thereto.
1.10 Employee Benefit Plans. On the Effective Date, the Surviving
Corporation shall assume all obligations of Tivoli California under any and all
employee benefit plans in effect as of such date. On the Effective Date, the
Surviving Corporation shall adopt and continue in effect all such employee
benefit plans upon the same terms and conditions as were in effect immediately
prior to the Merger and shall reserve that number of shares of Tivoli Delaware
Common Stock with respect to each such employee benefit plan as is proportional
to the number of shares of Tivoli California Common Stock (if any) so reserved
on the Effective Date.
II. Charter Documents, Directors And Officers.
2.1 Certificate of Incorporation and Bylaws. The Certificate of
Incorporation and Bylaws of Tivoli Delaware in effect on the Effective Date
shall continue to be the Certificate of Incorporation and Bylaws of the
Surviving Corporation, except that Article I of the Certificate of Incorporation
and Bylaws of the Surviving Corporation shall, effective upon the filing of this
Merger Agreement with the Secretary of State of the State of Delaware, be
amended to read in its entirety as follows: "The name of this corporation is
Tivoli Industries, Inc."
2.2 Directors. The directors of Tivoli California immediately preceding
the Effective Date shall become the directors of the Surviving Corporation on
and after the Effective Date to serve until the expiration of their terms and
until their successors are elected and qualified.
2.3 Officers. The officers of Tivoli California immediately preceding the
Effective Date shall become the officers of the Surviving Corporation on and
after the Effective Date to serve at the pleasure of its Board of Directors.
III. Miscellaneous.
3.1 Further Assurances. From time to time, and when required by the
Surviving Corporation or by its successors and assigns, there shall be executed
and delivered on behalf of Tivoli California such deeds and other instruments,
and there shall be taken or caused to be taken by it such further and other
action, as shall be appropriate or necessary in order to vest or perfect in or
to conform of record or otherwise, in the Surviving Corporation the title to and
possession of all the property, interests, assets, rights, privileges,
immunities, powers, franchises and authority of Tivoli
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<PAGE>
California and otherwise to carry out the purposes of this Merger Agreement, and
the officers and directors of the Surviving Corporation are fully authorized in
the name and on behalf of Tivoli California or otherwise to take any and all
such action and to execute and deliver any and all such deeds and other
instruments.
3.2 Amendment. At any time before or after approval by the shareholders
of Tivoli California, this Merger Agreement may be amended in any manner (except
that, after the approval of the Merger Agreement by the shareholders of Tivoli
California, the principal terms may not be amended without the further approval
of the shareholders of Tivoli California) as may be determined in the judgment
of the respective Board of Directors of Tivoli Delaware and Tivoli California to
be necessary, desirable, or expedient in order to clarify the intention of the
parties hereto or to effect or facilitate the purpose and intent of this Merger
Agreement.
3.3 Conditions to Merger. The obligations of the Constituent Corporations
to effect the transactions contemplated hereby is subject to satisfaction of the
following conditions (any or all of which may be waived by either of the
Constituent Corporations in its sole discretion to the extent permitted by law):
(a) the Merger shall have been approved by the shareholders of Tivoli
California in accordance with applicable provisions of the General Corporation
Law of the State of California; and
(b) Tivoli California, as sole stockholder of Tivoli Delaware, shall have
approved the Merger in accordance with the General Corporation Law of the State
of Delaware; and
(c) any and all consents, permits, authorizations, approvals, and orders
deemed in the sole discretion of Tivoli California to be material to
consummation of the Merger shall have been obtained.
3.4 Abandonment or Deferral. At any time before the Effective Date, this
Merger Agreement may be terminated and the Merger may be abandoned by the Board
of Directors of either Tivoli California or Tivoli Delaware or both,
notwithstanding the approval of this Merger Agreement by the shareholders of
Tivoli California or Tivoli Delaware, or the consummation of the Merger may be
deferred for a reasonable period of time if, in the opinion of the Boards of
Directors of Tivoli California and Tivoli Delaware, such action would be in the
best interest of such corporations. In the event of termination of this Merger
Agreement, this Merger Agreement shall become void and of no effect and there
shall be no liability on the part of either Constituent Corporation or its Board
of Directors or shareholders with respect thereto, except that Tivoli California
shall pay all expenses incurred in connection with the Merger or in respect of
this Merger Agreement.
3.5 Counterparts. In order to facilitate the filing and recording of this
Merger Agreement, the same may be executed in any number of counterparts, each
of which shall be deemed to be an original.
B-4
<PAGE>
In Witness Whereof, this Merger Agreement, having first been duly approved
by the Board of Directors of Tivoli California and Tivoli Delaware, is hereby
executed on behalf of each said corporation and attested by their respective
officers thereunto duly authorized.
Tivoli Industries, Inc.
a California corporation
By________________________________________
TERRENCE C. WALSH
Chairman and Chief Executive Officer
Attest:
______________________________
CHARLES F. KIMMEL
Secretary
Tivoli Merger Sub
a Delaware corporation
By________________________________________
TERRENCE C. WALSH
Chairman and Chief Executive Officer
Attest:
______________________________
CHARLES F. KIMMEL
Secretary
B-5
<PAGE>
APPENDIX C
CERTIFICATE OF INCORPORATION
OF
TIVOLI MERGER SUB CORP.
The undersigned, a natural person (the "Sole Incorporator"), for the
purpose of organizing a corporation to conduct the business and promote the
purposes hereinafter stated, under the provisions and subject to the
requirements of the laws of the State of Delaware hereby certifies that:
I.
The name of this corporation is TIVOLI MERGER SUB CORP.
II.
The address of the registered office of the corporation in the State of
Delaware is 1013 Centre Road, City of Wilmington, County of New Castle, and the
name of the registered agent of the corporation in the State of Delaware at such
address is Corporation Service Company.
III.
The purpose of this corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
the State of Delaware.
IV.
A. This corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total
number of shares which the corporation is authorized to issue is Eleven Million
(11,000,000) shares. Ten Million (10,000,000) shares shall be Common Stock,
each having a par value of one-tenth of one cent ($0.001). One Million
(1,000,000) shares shall be Preferred Stock, each having a par value of one-
tenth of one cent ($0.001).
B. The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized, by filing a certificate (a
"Preferred Stock Designation") pursuant to the Delaware General Corporation Law
("DGCL"), to fix or alter from time to time the designation, powers, preferences
and rights of the shares of each such series and the qualifications, limitations
or restrictions of any wholly unissued series of Preferred Stock, and to
establish from time to time the number of shares constituting any such series or
any of them; and to increase or decrease the number of shares of any series
subsequent to the issuance of shares of that series, but not below the number of
shares of such series then outstanding. In case the number of shares of any
series shall be decreased in accordance with the foregoing sentence, the shares
constituting such decrease shall resume the status that they had prior to the
adoption of the resolution originally fixing the number of shares of such
series.
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V.
For the management of the business and for the conduct of the affairs of
the corporation, and in further definition, limitation and regulation of the
powers of the corporation, of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided that:
A.
1. The management of the business and the conduct of the affairs of
the corporation shall be vested in its Board of Directors. The number of
directors which shall constitute the whole Board of Directors shall be fixed
exclusively by one or more resolutions adopted by the Board of Directors.
2. Board of Directors.
a. Subject to the rights of the holders of any series of
Preferred Stock to elect additional directors under specified circumstances, the
directors shall be divided into three classes designated as Class I, Class II
and Class III, respectively. Directors shall be assigned to each class in
accordance with a resolution or resolutions adopted by the Board of Directors.
At the first annual meeting of stockholders following the adoption and filing of
this Certificate of Incorporation, the term of office of the Class I directors
shall expire and Class I directors shall be elected for a full term of three
years. At the second annual meeting of stockholders following the adoption and
filing of this Certificate of Incorporation, the term of office of the Class II
directors shall expire and Class II directors shall be elected for a full term
of three years. At the third annual meeting of stockholders following the
adoption and filing of this Certificate of Incorporation, the term of office of
the Class III directors shall expire and Class III directors shall be elected
for a full term of three years. At each succeeding annual meeting of
stockholders, directors shall be elected for a full term of three years to
succeed the directors of the class whose terms expire at such annual meeting.
During such time or times that the corporation is subject to Section 2115(b) of
the California General Corporation Law ("CGCL"), this Section A.2.a of this
Article V shall become effective and be applicable only when the corporation is
a "listed" corporation within the meaning of Section 301.5 of the CGCL.
b. In the event that the corporation is subject to Section
2115(b) of the CGCL and is not a "listed" corporation or ceases to be a "listed"
corporation under Section 301.5 of the CGCL, Section A.2.a. of this Article V
shall not apply and all directors shall be shall be elected at each annual
meeting of stockholders to hold office until the next annual meeting.
c. No person entitled to vote at an election for directors may
cumulate votes to which such person is entitled, unless, at the time of such
election, the corporation is subject to Section 2115(b) of the CGCL and is not a
"listed" corporation or ceases to be a "listed" corporation under Section 301.5
of the CGCL. During this time, every stockholder entitled to vote at an
election for directors may cumulate such stockholder's votes and give one
candidate a number of votes equal to the number of directors to be elected
multiplied by the number of votes to which such stockholder's shares are
otherwise entitled, or distribute the
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<PAGE>
stockholder's votes on the same principle among as many candidates as such
stockholder thinks fit. No stockholder, however, shall be entitled to so
cumulate such stockholder's votes unless (i) the names of such candidate or
candidates have been placed in nomination prior to the voting, and (ii) the
stockholder has given notice at the meeting, prior to the voting, of such
stockholder's intention to cumulate such stockholder's votes. If any
stockholder has given proper notice to cumulate votes, all stockholders may
cumulate their votes for any candidates who have been properly placed in
nomination. Under cumulative voting, the candidates receiving the highest
number of votes, up to the number of directors to be elected, are elected.
Notwithstanding the foregoing provisions of this section, each
director shall serve until his successor is duly elected and qualified or until
his death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
3. Removal of Directors.
a. During such time or times that the corporation is subject to
Section 2115(b) of the CGCL, the Board of Directors or any individual director
may be removed from office at any time without cause by the affirmative vote of
the holders of at least a majority of the outstanding shares entitled to vote on
such removal; provided, however, that unless the entire Board is removed, no
individual director may be removed when the votes cast against such director's
removal, or not consenting in writing to such removal, would be sufficient to
elect that director if voted cumulatively at an election which the same total
number of votes were cast (or, if such action is taken by written consent, all
shares entitled to vote were voted) and the entire number of directors
authorized at the time of such director's most recent election were then being
elected.
b. At any time or times that the corporation is not subject to
Section 2115(b) of the CGCL and subject to any limitations imposed by law,
Section A.3.a. above shall no longer apply and removal shall be as provided in
Section 141(k) of the DGCL.
4. Vacancies.
a. Subject to the rights of the holders of any series of
Preferred Stock, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors, shall,
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by the stockholders, except as
otherwise provided by law, be filled only by the affirmative vote of a majority
of the directors then in office, even though less than a quorum of the Board of
Directors, and not by the stockholders. Any director elected in accordance with
the preceding sentence shall hold office for the remainder of the full term of
the director for which the vacancy was created or occurred and until such
director's successor shall have been elected and qualified.
b. If at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
of the whole board
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(as constituted immediately prior to any such increase), the Delaware Court of
Chancery may, upon application of any stockholder or stockholders holding at
least ten percent (10%) of the total number of the shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorships,
or to replace the directors chosen by the directors then in offices as
aforesaid, which election shall be governed by Section 211 of the DGCL.
c. At any time or times that the corporation is subject to
Section 2115(b) of the CGCL, if, after the filling of any vacancy by the
directors then in office who have been elected by stockholders shall constitute
less than a majority of the directors then in office, then
(i) Any holder or holders of an aggregate of five percent
(5%) or more of the total number of shares at the time outstanding having the
right to vote for those directors may call a special meeting of stockholders; or
(ii) The Superior Court of the proper county shall, upon
application of such stockholder or stockholders, summarily order a special
meeting of stockholders, to be held to elect the entire board, all in accordance
with Section 305(c) of the CGCL. The term of office of any director shall
terminate upon that election of a successor.
B.
1. Bylaw Amendments. Subject to paragraph (h) of Section 43 of the
Bylaws, the Bylaws may be altered or amended or new Bylaws adopted by the
affirmative vote of at least sixty-six and two-thirds percent (66-2/3%) of the
voting power of all of the then-outstanding shares of the voting stock of the
corporation entitled to vote. The Board of Directors shall also have the power
to adopt, amend, or repeal Bylaws.
2. The directors of the corporation need not be elected by written
ballot unless the Bylaws so provide.
3. No action shall be taken by the stockholders of the corporation
except at an annual or special meeting of stockholders called in accordance with
the Bylaws.
4. Advance notice of stockholder nominations for the election of
directors and of business to be brought by stockholders before any meeting of
the stockholders of the corporation shall be given in the manner provided in the
Bylaws of the corporation.
VI.
A. The liability of the directors for monetary damages shall be
eliminated to the fullest extent under applicable law.
B. This corporation is authorized to provide indemnification of agents
(as defined in Section 317 of the CGCL) for breach of duty to the corporation
and its shareholders through
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bylaw provisions or through agreements with the agents, or through shareholder
resolutions, or otherwise, in excess of the indemnification otherwise permitted
by Section 317 of the CGCL, subject, at any time or times the corporation is
subject to Section 2115(b) to the limits on such excess indemnification set
forth in Section 204 of the CGCL.
C. Any repeal or modification of this Article VI shall be prospective and
shall not affect the rights under this Article VI in effect at the time of the
alleged occurrence of any act or omission to act giving rise to liability or
indemnification.
VII.
A. The corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, except as provided in paragraph B. of this
Article VII, and all rights conferred upon the stockholders herein are granted
subject to this reservation.
B. Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the Voting Stock required by law, this Certificate
of Incorporation or any Preferred Stock Designation, the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting
power of all of the then-outstanding shares of the voting stock, voting together
as a single class, shall be required to alter, amend or repeal Articles V, VI,
and VII.
VIII.
The name and the mailing address of the Sole Incorporator is as follows:
Name Mailing Address
Thomas L. MacMitchell Cooley Godward llp
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306
In Witness Whereof, this Certificate has been subscribed this ____ day of
________________, ______, by the undersigned who affirms that the statements
made herein are true and correct.
-----------------------------------
Thomas L. MacMitchell
Sole Incorporator
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APPENDIX D
BYLAWS
OF
TIVOLI MERGER SUB CORP.
(A DELAWARE CORPORATION)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I OFFICES..................................................................................... 1
Section 1 Registered Office........................................................................... 1
Section 2 Other Offices............................................................................... 1
ARTICLE II CORPORATE SEAL.............................................................................. 1
Section 3 Corporate Seal.............................................................................. 1
ARTICLE III STOCKHOLDERS' MEETINGS...................................................................... 1
Section 4 Place Of Meetings........................................................................... 1
Section 5 Annual Meetings............................................................................. 1
Section 6 Special Meetings............................................................................ 4
Section 7 Notice Of Meetings.......................................................................... 5
Section 8 Quorum...................................................................................... 5
Section 9 Adjournment And Notice Of Adjourned Meetings................................................ 6
Section 10 Voting Rights............................................................................... 6
Section 11 Joint Owners Of Stock....................................................................... 6
Section 12 List Of Stockholders........................................................................ 6
Section 13 Action Without Meeting...................................................................... 7
Section 14 Organization................................................................................ 7
ARTICLE IV DIRECTORS................................................................................... 7
Section 15 Number And Term Of Office................................................................... 7
Section 16 Powers...................................................................................... 8
Section 17 Classes of Directors........................................................................ 8
Section 18 Vacancies................................................................................... 9
Section 19 Resignation................................................................................. 9
Section 20 Removal..................................................................................... 10
Section 21 Meetings.................................................................................... 10
Section 22 Quorum And Voting........................................................................... 11
Section 23 Action Without Meeting...................................................................... 11
Section 24 Fees And Compensation....................................................................... 11
Section 25 Committees.................................................................................. 12
</TABLE>
I
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<S> <C>
Section 26 Organization................................................................................ 13
ARTICLE V OFFICERS.................................................................................... 13
Section 27 Officers Designated......................................................................... 13
Section 28 Tenure And Duties Of Officers............................................................... 13
Section 29 Delegation Of Authority..................................................................... 15
Section 30 Resignations................................................................................ 15
Section 31 Removal..................................................................................... 15
ARTICLE VI EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES OWNED BY THE CORPORATION........ 15
Section 32 Execution Of Corporate Instruments.......................................................... 15
Section 33 Voting Of Securities Owned By The Corporation............................................... 16
ARTICLE VII SHARES OF STOCK............................................................................. 16
Section 34 Form And Execution Of Certificates.......................................................... 16
Section 35 Lost Certificates........................................................................... 16
Section 36 Transfers................................................................................... 17
Section 37 Fixing Record Dates......................................................................... 17
Section 38 Registered Stockholders..................................................................... 17
ARTICLE VIII OTHER SECURITIES OF THE CORPORATION......................................................... 18
Section 39 Execution Of Other Securities............................................................... 18
ARTICLE IX DIVIDENDS................................................................................... 18
Section 40 Declaration Of Dividends.................................................................... 18
Section 41 Dividend Reserve............................................................................ 18
ARTICLE X FISCAL YEAR................................................................................. 19
Section 42 Fiscal Year................................................................................. 19
ARTICLE XI INDEMNIFICATION............................................................................. 19
Section 43 Indemnification Of Directors, Executive Officers, Other Officers, Employees And Other Agents 19
ARTICLE XII Notices..................................................................................... 22
Section 44 Notices..................................................................................... 22
ARTICLE XIII AMENDMENTS.................................................................................. 24
</TABLE>
II
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<S> <C>
Section 45 Amendments.................................................................................. 24
ARTICLE XIV LOANS TO OFFICERS........................................................................... 24
Section 46 Loans To Officers........................................................................... 24
</TABLE>
III
<PAGE>
BYLAWS
OF
TIVOLI MERGER SUB CORP.
(A DELAWARE CORPORATION)
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the corporation in
the State of Delaware shall be in the City of Wilmington, County of New Castle.
(Del. Code Ann., tit. 8, (S) 131)
Section 2. Other Offices. The corporation shall also have and maintain an
office or principal place of business at such place as may be fixed by the Board
of Directors, and may also have offices at such other places, both within and
without the State of Delaware as the Board of Directors may from time to time
determine or the business of the corporation may require. (Del. Code Ann., tit.
8, (S) 122(8))
ARTICLE II
CORPORATE SEAL
Section 3. Corporate Seal. The corporate seal shall consist of a die
bearing the name of the corporation and the inscription, "Corporate Seal-
Delaware." Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise. (Del. Code Ann., tit. 8, (S)
122(3))
ARTICLE III
STOCKHOLDERS' MEETINGS
Section 4. Place Of Meetings. Meetings of the stockholders of the
corporation shall be held at such place, either within or without the State of
Delaware, as may be designated from time to time by the Board of Directors, or,
if not so designated, then at the office of the corporation required to be
maintained pursuant to Section 2 hereof. (Del. Code Ann., tit. 8, (S) 211(a))
Section 5. Annual Meetings.
(a) The annual meeting of the stockholders of the corporation, for the
purpose of election of directors and for such other business as may lawfully
come before it, shall be held
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on such date and at such time as may be designated from time to time by the
Board of Directors. Nominations of persons for election to the Board of
Directors of the corporation and the proposal of business to be considered by
the stockholders may be made at an annual meeting of stockholders: (i) pursuant
to the corporation's notice of meeting of stockholders; (ii) by or at the
direction of the Board of Directors; or (iii) by any stockholder of the
corporation who was a stockholder of record at the time of giving of notice
provided for in the following paragraph, who is entitled to vote at the meeting
and who complied with the notice procedures set forth in Section 5. (Del. Code
Ann., tit. 8, (S) 211(b)).
(b) At an annual meeting of the stockholders, only such business shall
be conducted as shall have been properly brought before the meeting. For
nominations or other business to be properly brought before an annual meeting by
a stockholder pursuant to clause (c) of Section 5(a) of these Bylaws, (i) the
stockholder must have given timely notice thereof in writing to the Secretary of
the corporation, (ii) such other business must be a proper matter for
stockholder action under the General Corporation Law of Delaware, (iii) if the
stockholder, or the beneficial owner on whose behalf any such proposal or
nomination is made, has provided the corporation with a Solicitation Notice (as
defined in this Section 5(b)), such stockholder or beneficial owner must, in the
case of a proposal, have delivered a proxy statement and form of proxy to
holders of at least the percentage of the corporation's voting shares required
under applicable law to carry any such proposal, or, in the case of a nomination
or nominations, have delivered a proxy statement and form of proxy to holders of
a percentage of the corporation's voting shares reasonably believed by such
stockholder or beneficial owner to be sufficient to elect the nominee or
nominees proposed to be nominated by such stockholder, and must, in either case,
have included in such materials the Solicitation Notice, and (iv) if no
Solicitation Notice relating thereto has been timely provided pursuant to this
section, the stockholder or beneficial owner proposing such business or
nomination must not have solicited a number of proxies sufficient to have
required the delivery of such a Solicitation Notice under this Section 5. To be
timely, a stockholder's notice shall be delivered to the Secretary at the
principal executive offices of the Corporation not later than the close of
business on the ninetieth (90th) day nor earlier than the close of business on
the one hundred twentieth (120th) day prior to the first anniversary of the
preceding year's annual meeting; provided, however, that in the event that the
date of the annual meeting is advanced more than thirty (30) days prior to or
delayed by more than thirty (30) days after the anniversary of the preceding
year's annual meeting, notice by the stockholder to be timely must be so
delivered not earlier than the close of business on the one hundred twentieth
(120th) day prior to such annual meeting and not later than the close of
business on the later of the ninetieth (90th) day prior to such annual meeting
or the tenth (10th) day following the day on which public announcement of the
date of such meeting is first made. In no event shall the public announcement of
an adjournment of an annual meeting commence a new time period for the giving of
a stockholder's notice as described above. Such stockholder's notice shall set
forth: (A) as to each person whom the stockholder proposed to nominate for
election or reelection as a director all information relating to such person
that is required to be disclosed in solicitations of proxies for election of
directors in an election contest, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(the "1934 Act") and Rule 14a-11 thereunder (including such person's written
consent to being named in the proxy statement as a nominee and to serving as a
director if elected); (B) as to any other business
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that the stockholder proposes to bring before the meeting, a brief description
of the business desired to be brought before the meeting, the reasons for
conducting such business at the meeting and any material interest in such
business of such stockholder and the beneficial owner, if any, on whose behalf
the proposal is made; and (C) as to the stockholder giving the notice and the
beneficial owner, if any, on whose behalf the nomination or proposal is made (i)
the name and address of such stockholder, as they appear on the corporation's
books, and of such beneficial owner, (ii) the class and number of shares of the
corporation which are owned beneficially and of record by such stockholder and
such beneficial owner, and (iii) whether either such stockholder or beneficial
owner intends to deliver a proxy statement and form of proxy to holders of, in
the case of the proposal, at least the percentage of the corporation's voting
shares required under applicable law to carry the proposal or, in the case of a
nomination or nominations, a sufficient number of holders of the corporation's
voting shares to elect such nominee or nominees (an affirmative statement of
such intent, a "Solicitation Notice").
(c) Notwithstanding anything in the second sentence of Section 5(b) of
these Bylaws to the contrary, in the event that the number of directors to be
elected to the Board of Directors of the Corporation is increased and there is
no public announcement naming all of the nominees for director or specifying the
size of the increased Board of Directors made by the corporation at least one
hundred (100) days prior to the first anniversary of the preceding year's annual
meeting, a stockholder's notice required by this Section 5 shall also be
considered timely, but only with respect to nominees for any new positions
created by such increase, if it shall be delivered to the Secretary at the
principal executive offices of the corporation not later than the close of
business on the tenth (10th) day following the day on which such public
announcement is first made by the corporation.
(d) Only such persons who are nominated in accordance with the
procedures set forth in this Section 5 shall be eligible to serve as directors
and only such business shall be conducted at a meeting of stockholders as shall
have been brought before the meeting in accordance with the procedures set forth
in this Section 5. Except as otherwise provided by law, the Chairman of the
meeting shall have the power and duty to determine whether a nomination or any
business proposed to be brought before the meeting was made, or proposed, as the
case may be, in accordance with the procedures set forth in these Bylaws and, if
any proposed nomination or business is not in compliance with these Bylaws, to
declare that such defective proposal or nomination shall not be presented for
stockholder action at the meeting and shall be disregarded.
(e) Notwithstanding the foregoing provisions of this Section 5, in
order to include information with respect to a stockholder proposal in the proxy
statement and form of proxy for a stockholder's meeting, stockholders must
provide notice as required by the regulations promulgated under the 1934 Act.
Nothing in these Bylaws shall be deemed to affect any rights of stockholders to
request inclusion of proposals in the corporation proxy statement pursuant to
Rule 14a-8 under the 1934 Act.
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(f) For purposes of this Section 5, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service or in a document publicly filed by the
corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the 1934 Act.
Section 6. Special Meetings.
(a) Special meetings of the stockholders of the corporation may be
called, for any purpose or purposes, by (i) the Chairman of the Board of
Directors, (ii) the Chief Executive Officer, (iii) the Board of Directors
pursuant to a resolution adopted by a majority of the total number of authorized
directors (whether or not there exist any vacancies in previously authorized
directorships at the time any such resolution is presented to the Board of
Directors for adoption), or (iv) by the holders of shares entitled to cast not
less than fifty percent (50%) of the votes at the meeting, and shall be held at
such place, on such date, and at such time as the Board of Directors, shall fix.
At any time or times that the corporation is subject to Section 2115(b) of the
California General Corporation Law ("CGCL"), stockholders holding five percent
(5%) or more of the outstanding shares shall have the right to call a special
meeting of stockholders as set forth in Section 18(c) herein.
(b) If a special meeting is properly called by any person or persons
other than the Board of Directors, the request shall be in writing, specifying
the general nature of the business proposed to be transacted, and shall be
delivered personally or sent by registered mail or by telegraphic or other
facsimile transmission to the Chairman of the Board of Directors, the Chief
Executive Officer, or the Secretary of the corporation. No business may be
transacted at such special meeting otherwise than specified in such notice. The
Board of Directors shall determine the time and place of such special meeting,
which shall be held not less than thirty-five (35) nor more than one hundred
twenty (120) days after the date of the receipt of the request. Upon
determination of the time and place of the meeting, the officer receiving the
request shall cause notice to be given to the stockholders entitled to vote, in
accordance with the provisions of Section 7 of these Bylaws. If the notice is
not given within one hundred (100) days after the receipt of the request, the
person or persons properly requesting the meeting may set the time and place of
the meeting and give the notice. Nothing contained in this paragraph (b) shall
be construed as limiting, fixing, or affecting the time when a meeting of
stockholders called by action of the Board of Directors may be held.
(c) Nominations of persons for election to the Board of Directors may
be made at a special meeting of stockholders at which directors are to be
elected pursuant to the corporation's notice of meeting (i) by or at the
direction of the Board of Directors or (ii) by any stockholder of the
corporation who is a stockholder of record at the time of giving notice provided
for in these Bylaws who shall be entitled to vote at the meeting and who
complies with the notice procedures set forth in this Section 6(c). In the event
the corporation calls a special meeting of stockholders for the purpose of
electing one or more directors to the Board of Directors, any such stockholder
may nominate a person or persons (as the case may be), for election to such
position(s) as specified in the corporation's notice of meeting, if the
stockholder's notice required by Section 5(b) of these Bylaws shall be delivered
to the Secretary
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at the principal executive offices of the corporation not earlier than the close
of business on the one hundred twentieth (120th) day prior to such special
meeting and not later than the close of business on the later of the ninetieth
(90th) day prior to such meeting or the tenth (10th) day following the day on
which public announcement is first made of the date of the special meeting and
of the nominees proposed by the Board of Directors to be elected at such
meeting. In no event shall the public announcement of an adjournment of a
special meeting commence a new time period for the giving of a stockholder's
notice as described above.
Section 7. Notice Of Meetings. Except as otherwise provided by law or the
Certificate of Incorporation, written notice of each meeting of stockholders
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder entitled to vote at such meeting, such
notice to specify the place, date and hour and purpose or purposes of the
meeting. Notice of the time, place and purpose of any meeting of stockholders
may be waived in writing, signed by the person entitled to notice thereof,
either before or after such meeting, and will be waived by any stockholder by
his attendance thereat in person or by proxy, except when the stockholder
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Any stockholder so waiving notice of such meeting shall be
bound by the proceedings of any such meeting in all respects as if due notice
thereof had been given. (Del. Code Ann., tit. 8, (S)(S) 222, 229)
Section 8. Quorum. At all meetings of stockholders, except where otherwise
provided by statute or by the Certificate of Incorporation, or by these Bylaws,
the presence, in person or by proxy duly authorized, of the holders of a
majority of the outstanding shares of stock entitled to vote shall constitute a
quorum for the transaction of business. In the absence of a quorum, any m eeting
of stockholders may be adjourned, from time to time, either by the chairman of
the meeting or by vote of the holders of a majority of the shares represented
thereat, but no other business shall be transacted at such meeting. The
stockholders present at a duly called or convened meeting, at which a quorum is
present, may continue to transact business until adjournment, notwithstanding
the withdrawal of enough stockholders to leave less than a quorum. Except as
otherwise provided by statute, the Certificate of Incorporation or these Bylaws,
in all matters other than the election of directors, the affirmative vote of the
majority of shares present in person or represented by proxy at the meeting and
entitled to vote on the subject matter shall be the act of the stockholders.
Except as otherwise provided by statute, the Certificate of Incorporation or
these Bylaws, directors shall be elected by a plurality of the votes of the
shares present in person or represented by proxy at the meeting and entitled to
vote on the election of directors. Where a separate vote by a class or classes
or series is required, except where otherwise provided by the statute or by the
Certificate of Incorporation or these Bylaws, a majority of the outstanding
shares of such class or classes or series, present in person or represented by
proxy, shall constitute a quorum entitled to take action with respect to that
vote on that matter and, except where otherwise provided by the statute or by
the Certificate of Incorporation or these Bylaws, the affirmative vote of the
majority (plurality, in the case of the election of directors) of the votes cast
by the holders of shares of such class or classes or series shall be the act of
such class or classes or series. (Del. Code Ann., tit. 8, (S) 216)
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Section 9. Adjournment And Notice Of Adjourned Meetings. Any meeting of
stockholders, whether annual or special, may be adjourned from time to time
either by the chairman of the meeting or by the vote of a majority of the shares
casting votes. When a meeting is adjourned to another time or place, notice need
not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the adjourned
meeting, the corporation may transact any business which might have been
transacted at the original meeting. If the adjournment is for more than thirty
(30) days or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting. (Del. Code Ann., tit. 8,
(S) 222(c))
Section 10. Voting Rights. For the purpose of determining those
stockholders entitled to vote at any meeting of the stockholders, except as
otherwise provided by law, only persons in whose names shares stand on the stock
records of the corporation on the record date, as provided in Section 12 of
these Bylaws, shall be entitled to vote at any meeting of stockholders. Every
person entitled to vote shall have the right to do so either in person or by an
agent or agents authorized by a proxy granted in accordance with Delaware law.
An agent so appointed need not be a stockholder. No proxy shall be voted after
three (3) years from its date of creation unless the proxy provides for a longer
period. (Del. Code Ann., tit. 8, (S)(S) 211(e), 212(b))
Section 11. Joint Owners Of Stock. If shares or other securities having
voting power stand of record in the names of two (2) or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in common, tenants
by the entirety, or otherwise, or if two (2) or more persons have the same
fiduciary relationship respecting the same shares, unless the Secretary is given
written notice to the contrary and is furnished with a copy of the instrument or
order appointing them or creating the relationship wherein it is so provided,
their acts with respect to voting shall have the following effect: (a) if only
one (1) votes, his act binds all; (b) if more than one (1) votes, the act of the
majority so voting binds all; (c) if more than one (1) votes, but the vote is
evenly split on any particular matter, each faction may vote the securities in
question proportionally, or may apply to the Delaware Court of Chancery for
relief as provided in the Delaware General Corporation Law, Section 217(b). If
the instrument filed with the Secretary shows that any such tenancy is held in
unequal interests, a majority or even-split for the purpose of subsection (c)
shall be a majority or even-split in interest. (Del. Code Ann., tit. 8, (S)
217(b))
Section 12. List Of Stockholders. The Secretary shall prepare and make, at
least ten (10) days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at said meeting, arranged in alphabetical order,
showing the address of each stockholder and the number of shares registered in
the name of each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten (10) days prior to the meeting, either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not specified, at the place where
the meeting is to be held. The list shall be
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produced and kept at the time and place of meeting during the whole time thereof
and may be inspected by any stockholder who is present. (Del. Code Ann., tit. 8,
(S) 219(a))
Section 13. Action Without Meeting.
(a) No action shall be taken by the stockholders except at an annual
or special meeting of stockholders called in accordance with these Bylaws, and
no action shall be taken by the stockholders by written consent.
Section 14. Organization.
(a) At every meeting of stockholders, the Chairman of the Board of
Directors, or, if a Chairman has not been appointed or is absent, the President,
or, if the President is absent, a chairman of the meeting chosen by a majority
in interest of the stockholders entitled to vote, present in person or by proxy,
shall act as chairman. The Secretary, or, in his absence, an Assistant Secretary
directed to do so by the President, shall act as secretary of the meeting.
(b) The Board of Directors of the corporation shall be entitled to make
such rules or regulations for the conduct of meetings of stockholders as it
shall deem necessary, appropriate or convenient. Subject to such rules and
regulations of the Board of Directors, if any, the chairman of the meeting shall
have the right and authority to prescribe such rules, regulations and procedures
and to do all such acts as, in the judgment of such chairman, are necessary,
appropriate or convenient for the proper conduct of the meeting, including,
without limitation, establishing an agenda or order of business for the meeting,
rules and procedures for maintaining order at the meeting and the safety of
those present, limitations on participation in such meeting to stockholders of
record of the corporation and their duly authorized and constituted proxies and
such other persons as the chairman shall permit, restrictions on entry to the
meeting after the time fixed for the commencement thereof, limitations on the
time allotted to questions or comments by participants and regulation of the
opening and closing of the polls for balloting on matters which are to be voted
on by ballot. Unless and to the extent determined by the Board of Directors or
the chairman of the meeting, meetings of stockholders shall not be required to
be held in accordance with rules of parliamentary procedure.
ARTICLE IV
DIRECTORS
Section 15. Number And Term Of Office. The authorized number of directors
of the corporation shall be fixed in accordance with the Certificate of
Incorporation. Directors need not be stockholders unless so required by the
Certificate of Incorporation. If for any cause, the directors shall not have
been elected at an annual meeting, they may be elected as soon thereafter as
convenient at a special meeting of the stockholders called for that purpose in
the manner provided in these Bylaws. (Del. Code Ann., tit. 8, (S)(S) 141(b),
211(b), (c))
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Section 16. Powers. The powers of the corporation shall be exercised, its
business conducted and its property controlled by the Board of Directors, except
as may be otherwise provided by statute or by the Certificate of Incorporation.
(Del. Code Ann., tit. 8, (S) 141(a))
Section 17. Classes of Directors.
(a) Subject to the rights of the holders of any series of Preferred
Stock to elect additional directors under specified circumstances, during such
time or times that the corporation is not subject to (S)2115(b) of the CGCL, the
directors shall be divided into three classes designated as Class I, Class II
and Class III, respectively. Directors shall be assigned to each class in
accordance with a resolution or resolutions adopted by the Board of Directors.
At the first annual meeting of every three annual meetings of stockholders
(assuming the corporation is not subject to (S)2115(b) of the CGCL), the term of
office of the Class I directors shall expire and Class I directors shall be
elected for a full term of three years. At the second annual meeting of every
three annual meetings of stockholders (assuming the corporation is not subject
to (S)2115(b) of the CGCL), the term of office of the Class II directors shall
expire and Class II directors shall be elected for a full term of three years.
At the third annual meeting of every three annual meetings of stockholders
(assuming the corporation is not subject to (S)2115(b) of the CGCL), the term of
office of the Class III directors shall expire and Class III directors shall be
elected for a full term of three years.
(b) In the event that the corporation is subject to (S)2115(b) of the
CGCL at any time, or from time to time, Section 17(a) of these Bylaws shall not
apply and all directors shall be elected at each annual meeting of stockholders
to hold office until the next annual meeting.
(c) No person entitled to vote at an election for directors may
cumulate votes to which such person is entitled, unless, at the time of such
election, the corporation is subject to (S)2115(b) of the CGCL. During such time
or times that the corporation is subject to (S)2115(b) of the CGCL, every
stockholder entitled to vote at an election for directors may cumulate such
stockholder's votes and give one candidate a number of votes equal to the number
of directors to be elected multiplied by the number of votes to which such
stockholder's shares are otherwise entitled, or distribute the stockholder's
votes on the same principle among as many candidates as such stockholder thinks
fit. No stockholder, however, shall be entitled to so cumulate such
stockholder's votes unless (i) the names of such candidate or candidates have
been placed in nomination prior to the voting and (ii) the stockholder has given
notice at the meeting, prior to the voting, of such stockholder's intention to
cumulate such stockholder's votes. If any stockholder has given proper notice to
cumulate votes, all stockholders may cumulate their votes for any candidates who
have been properly placed in nomination. Under cumulative voting, the candidates
receiving the highest number of votes, up to the number of directors to be
elected, are elected.
Notwithstanding the foregoing provisions of this section, each director
shall serve until his successor is duly elected and qualified or until his
death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
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Section 18. Vacancies.
(a) Unless otherwise provided in the Certificate of Incorporation, any
vacancies on the Board of Directors resulting from death, resignation,
disqualification, removal or other causes and any newly created directorships
resulting from any increase in the number of directors shall, unless the Board
of Directors determines by resolution that any such vacancies or newly created
directorships shall be filled by stockholders, be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum of the Board of Directors. Any director elected in accordance with the
preceding sentence shall hold office for the remainder of the full term of the
director for which the vacancy was created or occurred and until such director's
successor shall have been elected and qualified. A vacancy in the Board of
Directors shall be deemed to exist under this Bylaw in the case of the death,
removal or resignation of any director. (Del. Code Ann., tit. 8, (S) 223(a),
(b))
(b) If at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
of the whole board (as constituted immediately prior to any such increase), the
Delaware Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten percent (10%) of the total number of the
shares at the time outstanding having the right to vote for such directors,
summarily order an election to be held to fill any such vacancies or newly
created directorships, or to replace the directors chosen by the directors then
in offices as aforesaid, which election shall be governed by Section 211 of the
Delaware General Corporation Law. (Del. Code Ann., tit. 8, (S) 223(c))
(c) At any time or times that the corporation is subject to Section
2115(b) of the CGCL, if, after the filling of any vacancy, the directors then in
office who have been elected by stockholders shall constitute less than a
majority of the directors then in office, then
(1) Any holder or holders of an aggregate of five percent (5%) or
more of the total number of shares at the time outstanding having the right to
vote for those directors may call a special meeting of stockholders; or
(2) The Superior Court of the proper county shall, upon
application of such stockholder or stockholders, summarily order a special
meeting of stockholders, to be held to elect the entire board, all in accordance
with Section 305(c) of the CGCL. The term of office of any director shall
terminate upon that election of a successor.
Section 19. Resignation. Any director may resign at any time by delivering
his written resignation to the Secretary, such resignation to specify whether it
will be effective at a particular time, upon receipt by the Secretary or at the
pleasure of the Board of Directors. If no such specification is made, it shall
be deemed effective at the pleasure of the Board of Directors. When one or more
directors shall resign from the Board of Directors, effective at a future date,
a majority of the directors then in office, including those who have so
resigned, shall have power to fill such vacancy or vacancies, the vote thereon
to take effect when such resignation or resignations shall become effective, and
each Director so chosen shall hold office for the unexpired portion of the term
of the Director whose place shall be vacated and until his successor shall have
been duly elected and qualified. (Del. Code Ann., tit. 8, (S)(S) 141(b), 223(d))
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Section 20. Removal.
(a) During such time or times that the corporation is subject to
Section 2115(b) of the CGCL, the Board of Directors or any individual director
may be removed from office at any time without cause by the affirmative vote of
the holders of at least a majority of the outstanding shares entitled to vote on
such removal; provided, however, that unless the entire Board is removed, no
individual director may be removed when the votes cast against such director's
removal, or not consenting in writing to such removal, would be sufficient to
elect that director if voted cumulatively at an election which the same total
number of votes were cast (or, if such action is taken by written consent, all
shares entitled to vote were voted) and the entire number of directors
authorized at the time of such director's most recent election were then being
elected.
(b) Following any date on which the corporation is no longer subject
to Section 2115(b) of the CGCL and subject to any limitations imposed by law,
Section 20(a) above shall no longer apply and removal shall be as provided in
Section 141(k) of the Delaware General Corporation Law.
Section 21. Meetings.
(a) Annual Meetings. The annual meeting of the Board of Directors
shall be held immediately before or after the annual meeting of stockholders and
at the place where such meeting is held. No notice of an annual meeting of the
Board of Directors shall be necessary and such meeting shall be held for the
purpose of electing officers and transacting such other business as may lawfully
come before it.
(b) Regular Meetings. Unless otherwise restricted by the Certificate
of Incorporation, regular meetings of the Board of Directors may be held at any
time or date and at any place within or without the State of Delaware which has
been designated by the Board of Directors and publicized among all directors. No
formal notice shall be required for regular meetings of the Board of Directors.
(Del. Code Ann., tit. 8, (S) 141(g))
(c) Special Meetings. Unless otherwise restricted by the Certificate
of Incorporation, special meetings of the Board of Directors may be held at any
time and place within or without the State of Delaware whenever called by the
Chairman of the Board, the President or any two of the directors (Del. Code
Ann., tit. 8, (S) 141(g))
(d) Telephone Meetings. Any member of the Board of Directors, or of
any committee thereof, may participate in a meeting by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
by such means shall constitute presence in person at such meeting. (Del. Code
Ann., tit. 8, (S) 141(I))
(e) Notice of Meetings. Notice of the time and place of all special
meetings of the Board of Directors shall be orally or in writing, by telephone,
including a voice messaging system or other system or technology designed to
record and communicate messages, facsimile,
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telegraph or telex, or by electronic mail or other electronic means, during
normal business hours, at least twenty-four (24) hours before the date and time
of the meeting, or sent in writing to each director by first class mail, charges
prepaid, at least three (3) days before the date of the meeting. Notice of any
meeting may be waived in writing at any time before or after the meeting and
will be waived by any director by attendance thereat, except when the director
attends the meeting for the express purpose of objecting, at the beginning of
the meeting, to the transaction of any business because the meeting is not
lawfully called or convened. (Del. Code Ann., tit. 8, (S) 229)
(f) Waiver of Notice. The transaction of all business at any meeting
of the Board of Directors, or any committee thereof, however called or noticed,
or wherever held, shall be as valid as though had at a meeting duly held after
regular call and notice, if a quorum be present and if, either before or after
the meeting, each of the directors not present shall sign a written waiver of
notice. All such waivers shall be filed with the corporate records or made a
part of the minutes of the meeting. (Del. Code Ann., tit. 8, (S) 229)
Section 22. Quorum And Voting.
(a) Unless the Certificate of Incorporation requires a greater number
and except with respect to indemnification questions arising under Section 43
hereof, for which a quorum shall be one-third of the exact number of directors
fixed from time to time in accordance with the Certificate of Incorporation, a
quorum of the Board of Directors shall consist of a majority of the exact number
of directors fixed from time to time by the Board of Directors in accordance
with the Certificate of Incorporation; provided, however, at any meeting whether
a quorum be present or otherwise, a majority of the directors present may
adjourn from time to time until the time fixed for the next regular meeting of
the Board of Directors, without notice other than by announcement at the
meeting. (Del. Code Ann., tit. 8, (S) 141(b))
(b) At each meeting of the Board of Directors at which a quorum is
present, all questions and business shall be determined by the affirmative vote
of a majority of the directors present, unless a different vote be required by
law, the Certificate of Incorporation or these Bylaws. (Del. Code Ann., tit. 8,
(S) 141(b))
Section 23. Action Without Meeting. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and such writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee. (Del. Code Ann., tit. 8, (S) 141(f))
Section 24. Fees And Compensation. Directors shall be entitled to such
compensation for their services as may be approved by the Board of Directors,
including, if so approved, by resolution of the Board of Directors, a fixed sum
and expenses of attendance, if any, for attendance at each regular or special
meeting of the Board of Directors and at any meeting of a committee of the Board
of Directors. Nothing herein contained shall be construed to preclude any
director from serving the corporation in any other capacity as an officer,
agent, employee, or otherwise and receiving compensation therefor. (Del. Code
Ann., tit. 8, (S) 141(h))
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Section 25. Committees.
(a) Executive Committee. The Board of Directors may appoint an
Executive Committee to consist of one (1) or more members of the Board of
Directors. The Executive Committee, to the extent permitted by law and provided
in the resolution of the Board of Directors shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and affairs of the corporation, and may authorize the seal of the corporation to
be affixed to all papers which may require it; but no such committee shall have
the power or authority in reference to (i) approving or adopting, or
recommending to the stockholders, any action or matter expressly required by the
Delaware General Corporation Law to be submitted to stockholders for approval,
or (ii) adopting, amending or repealing any bylaw of the corporation. (Del. Code
Ann., tit. 8, (S) 141(c))
(b) Other Committees. The Board of Directors may, from time to time,
appoint such other committees as may be permitted by law. Such other committees
appointed by the Board of Directors shall consist of one (1) or more members of
the Board of Directors and shall have such powers and perform such duties as may
be prescribed by the resolution or resolutions creating such committees, but in
no event shall any such committee have the powers denied to the Executive
Committee in these Bylaws. (Del. Code Ann., tit. 8, (S) 141(c))
(c) Term. Each member of a committee of the Board of Directors shall
serve a term on the committee coexistent with such member's term on the Board of
Directors. The Board of Directors, subject to any requirements of any
outstanding series of preferred Stock and the provisions of subsections (a) or
(b) of this Bylaw, may at any time increase or decrease the number of members of
a committee or terminate the existence of a committee. The membership of a
committee member shall terminate on the date of his death or voluntary
resignation from the committee or from the Board of Directors. The Board of
Directors may at any time for any reason remove any individual committee member
and the Board of Directors may fill any committee vacancy created by death,
resignation, removal or increase in the number of members of the committee. The
Board of Directors may designate one or more directors as alternate members of
any committee, who may replace any absent or disqualified member at any meeting
of the committee, and, in addition, in the absence or disqualification of any
member of a committee, the member or members thereof present at any meeting and
not disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. (Del. Code Ann.,
tit. 8, (S)141(c))
(d) Meetings. Unless the Board of Directors shall otherwise provide,
regular meetings of the Executive Committee or any other committee appointed
pursuant to this Section 25 shall be held at such times and places as are
determined by the Board of Directors, or by any such committee, and when notice
thereof has been given to each member of such committee, no further notice of
such regular meetings need be given thereafter. Special meetings of any such
committee may be held at any place which has been determined from time to time
by such committee, and may be called by any director who is a member of such
committee, upon written notice to the members of such committee of the time and
place of such special meeting
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given in the manner provided for the giving of written notice to members of the
Board of Directors of the time and place of special meetings of the Board of
Directors. Notice of any special meeting of any committee may be waived in
writing at any time before or after the meeting and will be waived by any
director by attendance thereat, except when the director attends such special
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened. A majority of the authorized number of members of any such committee
shall constitute a quorum for the transaction of business, and the act of a
majority of those present at any meeting at which a quorum is present shall be
the act of such committee. (Del. Code Ann., tit. 8, (S)(S) 141(c), 229)
Section 26. Organization. At every meeting of the directors, the Chairman
of the Board of Directors, or, if a Chairman has not been appointed or is
absent, the President (if a director), or if the President is absent, the most
senior Vice President (if a director), or, in the absence of any such person, a
chairman of the meeting chosen by a majority of the directors present, shall
preside over the meeting. The Secretary, or in his absence, any Assistant
Secretary directed to do so by the President, shall act as secretary of the
meeting.
ARTICLE V
OFFICERS
Section 27. Officers Designated. The officers of the corporation shall
include, if and when designated by the Board of Directors, the Chairman of the
Board of Directors, the Chief Executive Officer, the President, one or more Vice
Presidents, the Secretary, the Chief Financial Officer, the Treasurer and the
Controller, all of whom shall be elected at the annual organizational meeting of
the Board of Directors. The Board of Directors may also appoint one or more
Assistant Secretaries, Assistant Treasurers, Assistant Controllers and such
other officers and agents with such powers and duties as it shall deem
necessary. The Board of Directors may assign such additional titles to one or
more of the officers as it shall deem appropriate. Any one person may hold any
number of offices of the corporation at any one time unless specifically
prohibited therefrom by law. The salaries and other compensation of the
officers of the corporation shall be fixed by or in the manner designated by the
Board of Directors. (Del. Code Ann., tit. 8, (S)(S) 122(5), 142(a), (b))
Section 28. Tenure And Duties Of Officers.
(a) General. All officers shall hold office at the pleasure of the
Board of Directors and until their successors shall have been duly elected and
qualified, unless sooner removed. Any officer elected or appointed by the Board
of Directors may be removed at any time by the Board of Directors. If the office
of any officer becomes vacant for any reason, the vacancy may be filled by the
Board of Directors. (Del. Code Ann., tit. 8, (S) 141(b), (e))
(b) Duties of Chairman of the Board of Directors. The Chairman of the
Board of Directors, when present, shall preside at all meetings of the
stockholders and the Board of Directors. The Chairman of the Board of Directors
shall perform other duties commonly
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incident to his office and shall also perform such other duties and have such
other powers, as the Board of Directors shall designate from time to time. If
there is no President, then the Chairman of the Board of Directors shall also
serve as the Chief Executive Officer of the corporation and shall have the
powers and duties prescribed in paragraph (c) of this Section 28. (Del. Code
Ann., tit. 8, (S) 142(a))
(c) Duties of President. The President shall preside at all meetings
of the stockholders and at all meetings of the Board of Directors, unless the
Chairman of the Board of Directors has been appointed and is present. Unless
some other officer has been elected Chief Executive Officer of the corporation,
the President shall be the chief executive officer of the corporation and shall,
subject to the control of the Board of Directors, have general supervision,
direction and control of the business and officers of the corporation. The
President shall perform other duties commonly incident to his office and shall
also perform such other duties and have such other powers, as the Board of
Directors shall designate from time to time. (Del. Code Ann., tit. 8, (S)
142(a))
(d) Duties of Vice Presidents. The Vice Presidents may assume and
perform the duties of the President in the absence or disability of the
President or whenever the office of President is vacant. The Vice Presidents
shall perform other duties commonly incident to their office and shall also
perform such other duties and have such other powers as the Board of Directors
or the President shall designate from time to time. (Del. Code Ann., tit. 8, (S)
142(a))
(e) Duties of Secretary. The Secretary shall attend all meetings of
the stockholders and of the Board of Directors and shall record all acts and
proceedings thereof in the minute book of the corporation. The Secretary shall
give notice in conformity with these Bylaws of all meetings of the stockholders
and of all meetings of the Board of Directors and any committee thereof
requiring notice. The Secretary shall perform all other duties given him in
these Bylaws and other duties commonly incident to his office and shall also
perform such other duties and have such other powers, as the Board of Directors
shall designate from time to time. The President may direct any Assistant
Secretary to assume and perform the duties of the Secretary in the absence or
disability of the Secretary, and each Assistant Secretary shall perform other
duties commonly incident to his office and shall also perform such other duties
and have such other powers as the Board of Directors or the President shall
designate from time to time. (Del. Code Ann., tit. 8, (S) 142(a))
(f) Duties of Chief Financial Officer. The Chief Financial Officer
shall keep or cause to be kept the books of account of the corporation in a
thorough and proper manner and shall render statements of the financial affairs
of the corporation in such form and as often as required by the Board of
Directors or the President. The Chief Financial Officer, subject to the order of
the Board of Directors, shall have the custody of all funds and securities of
the corporation. The Chief Financial Officer shall perform other duties commonly
incident to his office and shall also perform such other duties and have such
other powers as the Board of Directors or the President shall designate from
time to time. The President may direct the Treasurer or any Assistant Treasurer,
or the Controller or any Assistant Controller to assume and perform the duties
of the Chief Financial Officer in the absence or disability of the Chief
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Financial Officer, and each Treasurer and Assistant Treasurer and each
Controller and Assistant Controller shall perform other duties commonly incident
to his office and shall also perform such other duties and have such other
powers as the Board of Directors or the President shall designate from time to
time. (Del. Code Ann., tit. 8, (S) 142(a))
Section 29. Delegation Of Authority. The Board of Directors may from time
to time delegate the powers or duties of any officer to any other officer or
agent, notwithstanding any provision hereof.
Section 30. Resignations. Any officer may resign at any time by giving
written notice to the Board of Directors or to the President or to the
Secretary. Any such resignation shall be effective when received by the person
or persons to whom such notice is given, unless a later time is specified
therein, in which event the resignation shall become effective at such later
time. Unless otherwise specified in such notice, the acceptance of any such
resignation shall not be necessary to make it effective. Any resignation shall
be without prejudice to the rights, if any, of the corporation under any
contract with the resigning officer. (Del. Code Ann., tit. 8, (S) 142(b))
Section 31. Removal. Any officer may be removed from office at any time,
either with or without cause, by the affirmative vote of a majority of the
directors in office at the time, or by the unanimous written consent of the
directors in office at the time, or by any committee or superior officers upon
whom such power of removal may have been conferred by the Board of Directors.
ARTICLE VI
EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES OWNED BY THE
CORPORATION
Section 32. Execution Of Corporate Instruments. The Board of Directors may,
in its discretion, determine the method and designate the signatory officer or
officers, or other person or persons, to execute on behalf of the corporation
any corporate instrument or document, or to sign on behalf of the corporation
the corporate name without limitation, or to enter into contracts on behalf of
the corporation, except where otherwise provided by law or these Bylaws, and
such execution or signature shall be binding upon the corporation. (Del. Code
Ann., tit. 8, (S)(S) 103(a), 142(a), 158)
All checks and drafts drawn on banks or other depositaries on funds to the
credit of the corporation or in special accounts of the corporation shall be
signed by such person or persons as the Board of Directors shall authorize so to
do.
Unless authorized or ratified by the Board of Directors or within the
agency power of an officer, no officer, agent or employee shall have any power
or authority to bind the corporation by any contract or engagement or to pledge
its credit or to render it liable for any purpose or for any amount. (Del. Code
Ann., tit. 8, (S)(S) 103(a), 142(a), 158).
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Section 33. Voting Of Securities Owned By The Corporation. All stock and
other securities of other corporations owned or held by the corporation for
itself, or for other parties in any capacity, shall be voted, and all proxies
with respect thereto shall be executed, by the person authorized so to do by
resolution of the Board of Directors, or, in the absence of such authorization,
by the Chairman of the Board of Directors, the Chief Executive Officer, the
President, or any Vice President. (Del. Code Ann., tit. 8, (S) 123)
ARTICLE VII
SHARES OF STOCK
Section 34. Form And Execution Of Certificates. Certificates for the shares
of stock of the corporation shall be in such form as is consistent with the
Certificate of Incorporation and applicable law. Every holder of stock in the
corporation shall be entitled to have a certificate signed by or in the name of
the corporation by the Chairman of the Board of Directors, or the President or
any Vice President and by the Treasurer or Assistant Treasurer or the Secretary
or Assistant Secretary, certifying the number of shares owned by him in the
corporation. Any or all of the signatures on the certificate may be facsimiles.
In case any officer, transfer agent, or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer, transfer agent, or registrar before such certificate is issued, it
may be issued with the same effect as if he were such officer, transfer agent,
or registrar at the date of issue. Each certificate shall state upon the face or
back thereof, in full or in summary, all of the powers, designations,
preferences, and rights, and the limitations or restrictions of the shares
authorized to be issued or shall, except as otherwise required by law, set forth
on the face or back a statement that the corporation will furnish without charge
to each stockholder who so requests the powers, designations, preferences and
relative, participating, optional, or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions of
such preferences and/or rights. Within a reasonable time after the issuance or
transfer of uncertificated stock, the corporation shall send to the registered
owner thereof a written notice containing the information required to be set
forth or stated on certificates pursuant to this section or otherwise required
by law or with respect to this section a statement that the corporation will
furnish without charge to each stockholder who so requests the powers,
designations, preferences and relative participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights. Except as
otherwise expressly provided by law, the rights and obligations of the holders
of certificates representing stock of the same class and series shall be
identical. (Del. Code Ann., tit. 8, (S) 158)
Section 35. Lost Certificates. A new certificate or certificates shall be
issued in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen, or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen, or destroyed. The corporation may require, as a condition
precedent to the issuance of a new certificate or certificates, the owner of
such lost, stolen, or destroyed certificate or certificates, or his legal
representative, to agree to indemnify the corporation in such manner as it shall
require or to give the corporation a surety bond in such
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form and amount as it may direct as indemnity against any claim that may be made
against the corporation with respect to the certificate alleged to have been
lost, stolen, or destroyed. (Del. Code Ann., tit. 8, (S) 167)
Section 36. Transfers.
(a) Transfers of record of shares of stock of the corporation shall be
made only upon its books by the holders thereof, in person or by attorney duly
authorized, and upon the surrender of a properly endorsed certificate or
certificates for a like number of shares. (Del. Code Ann., tit. 8, (S) 201, tit.
6, (S) 8-401(1))
(b) The corporation shall have power to enter into and perform any
agreement with any number of stockholders of any one or more classes of stock of
the corporation to restrict the transfer of shares of stock of the corporation
of any one or more classes owned by such stockholders in any manner not
prohibited by the Delaware General Corporation Law. (Del. Code Ann., tit. 8, (S)
160 (a))
Section 37. Fixing Record Dates.
(a) In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix, in advance, a record date,
which record date shall not precede the date upon which the resolution fixing
the record date is adopted by the Board of Directors, and which record date
shall, subject to applicable law, not be more than sixty (60) nor less than ten
(10) days before the date of such meeting. If no record date is fixed by the
Board of Directors, the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any adjournment
of the meeting; provided, however, that the Board of Directors may fix a new
record date for the adjourned meeting.
(b) In order that the corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix, in advance, a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted, and which record date shall be not more than sixty (60)
days prior to such action. If no record date is fixed, the record date for
determining stockholders for any such purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto. (Del. Code Ann., tit. 8, (S) 213)
Section 38. Registered Stockholders. The corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and shall not be
bound to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person whether or not it shall have
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express or other notice thereof, except as otherwise provided by the laws of
Delaware. (Del. Code Ann., tit. 8, (S)(S) 213(a), 219)
ARTICLE VIII
OTHER SECURITIES OF THE CORPORATION
Section 39. Execution Of Other Securities. All bonds, debentures and other
corporate securities of the corporation, other than stock certificates (covered
in Section 34), may be signed by the Chairman of the Board of Directors, the
President or any Vice President, or such other person as may be authorized by
the Board of Directors, and the corporate seal impressed thereon or a facsimile
of such seal imprinted thereon and attested by the signature of the Secretary or
an Assistant Secretary, or the Chief Financial Officer or Treasurer or an
Assistant Treasurer; provided, however, that where any such bond, debenture or
other corporate security shall be authenticated by the manual signature, or
where permissible facsimile signature, of a trustee under an indenture pursuant
to which such bond, debenture or other corporate security shall be issued, the
signatures of the persons signing and attesting the corporate seal on such bond,
debenture or other corporate security may be the imprinted facsimile of the
signatures of such persons. Interest coupons appertaining to any such bond,
debenture or other corporate security, authenticated by a trustee as aforesaid,
shall be signed by the Treasurer or an Assistant Treasurer of the corporation or
such other person as may be authorized by the Board of Directors, or bear
imprinted thereon the facsimile signature of such person. In case any officer
who shall have signed or attested any bond, debenture or other corporate
security, or whose facsimile signature shall appear thereon or on any such
interest coupon, shall have ceased to be such officer before the bond, debenture
or other corporate security so signed or attested shall have been delivered,
such bond, debenture or other corporate security nevertheless may be adopted by
the corporation and issued and delivered as though the person who signed the
same or whose facsimile signature shall have been used thereon had not ceased to
be such officer of the corporation.
ARTICLE IX
DIVIDENDS
Section 40. Declaration Of Dividends. Dividends upon the capital stock of
the corporation, subject to the provisions of the Certificate of Incorporation
and applicable law, if any, may be declared by the Board of Directors pursuant
to law at any regular or special meeting. Dividends may be paid in cash, in
property, or in shares of the capital stock, subject to the provisions of the
Certificate of Incorporation and applicable law. (Del. Code Ann., tit. 8,
(S)(S) 170, 173)
Section 41. Dividend Reserve. Before payment of any dividend, there may be
set aside out of any funds of the corporation available for dividends such sum
or sums as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property
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of the corporation, or for such other purpose as the Board of Directors shall
think conducive to the interests of the corporation, and the Board of Directors
may modify or abolish any such reserve in the manner in which it was created.
(Del. Code Ann., tit. 8, (S) 171)
ARTICLE X
FISCAL YEAR
Section 42. Fiscal Year. The fiscal year of the corporation shall be fixed
by resolution of the Board of Directors.
ARTICLE XI
INDEMNIFICATION
Section 43. Indemnification Of Directors, Executive Officers, Other
Officers, Employees And Other Agents.
(a) Directors And Executive Officers. The corporation shall indemnify
its directors and executive officers (for the purposes of this Article XI,
"executive officers" shall have the meaning defined in Rule 3b-7 promulgated
under the 1934 Act) to the fullest extent not prohibited by the Delaware General
Corporation Law or any other applicable law; provided, however, that the
corporation may modify the extent of such indemnification by individual
contracts with its directors and executive officers; and, provided, further,
that the corporation shall not be required to indemnify any director or
executive officer in connection with any proceeding (or part thereof) initiated
by such person unless (i) such indemnification is expressly required to be made
by law, (ii) the proceeding was authorized by the Board of Directors of the
corporation, (iii) such indemnification is provided by the corporation, in its
sole discretion, pursuant to the powers vested in the corporation under the
Delaware General Corporation Law or any other applicable law or (iv) such
indemnification is required to be made under subsection (d).
(b) Other Officers, Employees and Other Agents. The corporation shall
have power to indemnify its other officers, employees and other agents as set
forth in the Delaware General Corporation Law or any other applicable law. The
Board of Directors shall have the power to delegate the determination of whether
indemnification shall be given to any such person except executive officers to
such officers or other persons as the Board of Directors shall determine.
(c) Expenses. The corporation shall advance to any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director or executive
officer, of the corporation, or is or was serving at the request of the
corporation as a director or executive officer of another corporation,
partnership, joint venture, trust or other enterprise, prior to the final
disposition of the proceeding, promptly following request therefor, all expenses
incurred by any director or executive officer in connection with such proceeding
upon receipt of an undertaking by or on behalf of such person
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to repay said amounts if it should be determined ultimately that such person is
not entitled to be indemnified under this Bylaw or otherwise.
Notwithstanding the foregoing, unless otherwise determined pursuant to
paragraph (e) of this Bylaw, no advance shall be made by the corporation to an
executive officer of the corporation (except by reason of the fact that such
executive officer is or was a director of the corporation in which event this
paragraph shall not apply) in any action, suit or proceeding, whether civil,
criminal, administrative or investigative, if a determination is reasonably and
promptly made (i) by the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to the proceeding, or (ii) if such
quorum is not obtainable, or, even if obtainable, a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, that
the facts known to the decision-making party at the time such determination is
made demonstrate clearly and convincingly that such person acted in bad faith or
in a manner that such person did not believe to be in or not opposed to the best
interests of the corporation.
(d) Enforcement. Without the necessity of entering into an express
contract, all rights to indemnification and advances to directors and executive
officers under this Bylaw shall be deemed to be contractual rights and be
effective to the same extent and as if provided for in a contract between the
corporation and the director or executive officer. Any right to indemnification
or advances granted by this Bylaw to a director or executive officer shall be
enforceable by or on behalf of the person holding such right in any court of
competent jurisdiction if (i) the claim for indemnification or advances is
denied, in whole or in part, or (ii) no disposition of such claim is made within
ninety (90) days of request therefor. The claimant in such enforcement action,
if successful in whole or in part, shall be entitled to be paid also the expense
of prosecuting his claim. In connection with any claim for indemnification, the
corporation shall be entitled to raise as a defense to any such action that the
claimant has not met the standards of conduct that make it permissible under the
Delaware General Corporation Law or any other applicable law for the corporation
to indemnify the claimant for the amount claimed. In connection with any claim
by an executive officer of the corporation (except in any action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that such executive officer is or was a director of the corporation)
for advances, the corporation shall be entitled to raise a defense as to any
such action clear and convincing evidence that such person acted in bad faith or
in a manner that such person did not believe to be in or not opposed to the best
interests of the corporation, or with respect to any criminal action or
proceeding that such person acted without reasonable cause to believe that his
conduct was lawful. Neither the failure of the corporation (including its Board
of Directors, independent legal counsel or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he has met the applicable
standard of conduct set forth in the Delaware General Corporation Law or any
other applicable law, nor an actual determination by the corporation (including
its Board of Directors, independent legal counsel or its stockholders) that the
claimant has not met such applicable standard of conduct, shall be a defense to
the action or create a presumption that claimant has not met the applicable
standard of conduct.
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(e) Non-Exclusivity of Rights. The rights conferred on any person by
this Bylaw shall not be exclusive of any other right which such person may have
or hereafter acquire under any applicable statute, provision of the Certificate
of Incorporation, Bylaws, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding office. The corporation is specifically
authorized to enter into individual contracts with any or all of its directors,
officers, employees or agents respecting indemnification and advances, to the
fullest extent not prohibited by the Delaware General Corporation Law, or by any
other applicable law.
(f) Survival of Rights. The rights conferred on any person by this
Bylaw shall continue as to a person who has ceased to be a director, officer,
employee or other agent and shall inure to the benefit of the heirs, executors
and administrators of such a person.
(g) Insurance. To the fullest extent permitted by the Delaware General
Corporation Law or any other applicable law, the corporation, upon approval by
the Board of Directors, may purchase insurance on behalf of any person required
or permitted to be indemnified pursuant to this Bylaw.
(h) Amendments. Any repeal or modification of this Bylaw shall only be
prospective and shall not affect the rights under this Bylaw in effect at the
time of the alleged occurrence of any action or omission to act that is the
cause of any proceeding against any agent of the corporation.
(i) Saving Clause. If this Bylaw or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each director and executive officer to
the full extent not prohibited by any applicable portion of this Bylaw that
shall not have been invalidated, or by any other applicable law. If this Section
43 shall be invalid due to the application of the indemnification provisions of
another jurisdiction, then the corporation shall indemnify each director and
executive officer to the full to the full extent under any other applicable law.
(j) Certain Definitions. For the purposes of this Bylaw, the following
definitions shall apply:
(1) The term "proceeding" shall be broadly construed and shall
include, without limitation, the investigation, preparation, prosecution,
defense, settlement, arbitration and appeal of, and the giving of testimony in,
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative.
(2) The term "expenses" shall be broadly construed and shall
include, without limitation, court costs, attorneys' fees, witness fees, fines,
amounts paid in settlement or judgment and any other costs and expenses of any
nature or kind incurred in connection with any proceeding.
(3) The term the "corporation" shall include, in addition to the
resulting corporation, any constituent corporation (including any constituent of
a constituent)
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absorbed in a consolidation or merger which, if its separate existence had
continued, would have had power and authority to indemnify its directors,
officers, and employees or agents, so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is or was serving
at the request of such constituent corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under the provisions of this Bylaw
with respect to the resulting or surviving corporation as he would have with
respect to such constituent corporation if its separate existence had continued.
(4) References to a "director," "executive officer," "officer,"
"employee," or "agent" of the corporation shall include, without limitation,
situations where such person is serving at the request of the corporation as,
respectively, a director, executive officer, officer, employee, trustee or agent
of another corporation, partnership, joint venture, trust or other enterprise.
(5) References to "other enterprises" shall include employee
benefit plans; references to "fines" shall include any excise taxes assessed on
a person with respect to an employee benefit plan; and references to "serving at
the request of the corporation" shall include any service as a director,
officer, employee or agent of the corporation which imposes duties on, or
involves services by, such director, officer, employee, or agent with respect to
an employee benefit plan, its participants, or beneficiaries; and a person who
acted in good faith and in a manner he reasonably believed to be in the interest
of the participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this Bylaw.
ARTICLE XII
NOTICES
Section 44. Notices.
(a) Notice To Stockholders. Whenever, under any provisions of these
Bylaws, notice is required to be given to any stockholder, it shall be given in
writing, timely and duly deposited in the United States mail, postage prepaid,
and addressed to his last known post office address as shown by the stock record
of the corporation or its transfer agent. (Del. Code Ann., tit. 8, (S) 222)
(b) Notice To Directors. Any notice required to be given to any
director may be given by the method stated in subsection (a), or by overnight
delivery service, facsimile, telex or telegram, except that such notice other
than one which is delivered personally shall be sent to such address as such
director shall have filed in writing with the Secretary, or, in the absence of
such filing, to the last known post office address of such director.
(c) Affidavit Of Mailing. An affidavit of mailing, executed by a duly
authorized and competent employee of the corporation or its transfer agent
appointed with respect to the class of stock affected, specifying the name and
address or the names and addresses
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of the stockholder or stockholders, or director or directors, to whom any such
notice or notices was or were given, and the time and method of giving the same,
shall in the absence of fraud, be prima facie evidence of the facts therein
contained. (Del. Code Ann., tit. 8, (S) 222)
(d) Time Notices Deemed Given. All notices given by mail or by
overnight delivery service, as above provided, shall be deemed to have been
given as at the time of mailing, and all notices given by facsimile, telex or
telegram shall be deemed to have been given as of the sending time recorded at
time of transmission.
(e) Methods of Notice. It shall not be necessary that the same method
of giving notice be employed in respect of all directors, but one permissible
method may be employed in respect of any one or more, and any other permissible
method or methods may be employed in respect of any other or others.
(f) Failure To Receive Notice. The period or limitation of time within
which any stockholder may exercise any option or right, or enjoy any privilege
or benefit, or be required to act, or within which any director may exercise any
power or right, or enjoy any privilege, pursuant to any notice sent him in the
manner above provided, shall not be affected or extended in any manner by the
failure of such stockholder or such director to receive such notice.
(g) Notice To Person With Whom Communication Is Unlawful. Whenever
notice is required to be given, under any provision of law or of the Certificate
of Incorporation or Bylaws of the corporation, to any person with whom
communication is unlawful, the giving of such notice to such person shall not be
required and there shall be no duty to apply to any governmental authority or
agency for a license or permit to give such notice to such person. Any action or
meeting which shall be taken or held without notice to any such person with whom
communication is unlawful shall have the same force and effect as if such notice
had been duly given. In the event that the action taken by the corporation is
such as to require the filing of a certificate under any provision of the
Delaware General Corporation Law, the certificate shall state, if such is the
fact and if notice is required, that notice was given to all persons entitled to
receive notice except such persons with whom communication is unlawful.
(h) Notice To Person With Undeliverable Address. Whenever notice is
required to be given, under any provision of law or the Certificate of
Incorporation or Bylaws of the corporation, to any stockholder to whom (i)
notice of two consecutive annual meetings, and all notices of meetings or of the
taking of action by written consent without a meeting to such person during the
period between such two consecutive annual meetings, or (ii) all, and at least
two, payments (if sent by first class mail) of dividends or interest on
securities during a twelve-month period, have been mailed addressed to such
person at his address as shown on the records of the corporation and have been
returned undeliverable, the giving of such notice to such person shall not be
required. Any action or meeting which shall be taken or held without notice to
such person shall have the same force and effect as if such notice had been duly
given. If any such person shall deliver to the corporation a written notice
setting forth his then current address, the requirement that notice be given to
such person shall be reinstated. In the event that the action taken by the
corporation is such as to require the filing of a certificate under any
provision of the
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Delaware General Corporation Law, the certificate need not state that notice was
not given to persons to whom notice was not required to be given pursuant to
this paragraph. (Del. Code Ann, tit. 8, (S) 230)
ARTICLE XIII
AMENDMENTS
Section 45. Amendments. Subject to paragraph (h) of Section 43 of the
Bylaws, the Bylaws may be altered or amended or new Bylaws adopted by the
affirmative vote of at least sixty-six and two-thirds percent (66-2/3%) of the
voting power of all of the then-outstanding shares of the voting stock of the
corporation entitled to vote. The Board of Directors shall also have the power
to adopt, amend, or repeal Bylaws.
ARTICLE XIV
LOANS TO OFFICERS
Section 46. Loans To Officers. The corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other employee
of the corporation or of its subsidiaries, including any officer or employee who
is a Director of the corporation or its subsidiaries, whenever, in the judgment
of the Board of Directors, such loan, guarantee or assistance may reasonably be
expected to benefit the corporation. The loan, guarantee or other assistance may
be with or without interest and may be unsecured, or secured in such manner as
the Board of Directors shall approve, including, without limitation, a pledge of
shares of stock of the corporation. Nothing in these Bylaws shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute. (Del. Code Ann., tit. 8, (S)143)
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TIVOLI INDUSTRIES, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MARCH 17, 1999
The undersigned hereby appoints Terrence C. Walsh and Charles F. Kimmel, or
either of them, as attorneys and proxies of the undersigned, with full power of
substitution, to vote all of the shares of stock of Tivoli Industries, Inc.
which the undersigned may be entitled to vote at the Annual Meeting of
Shareholders of Tivoli Industries, Inc. to be held at the Doubletree Hotel,
Seven Hulton Center Drive, Santa Ana, California, on Wednesday, March 17, 1999,
at 1:00 p.m. (local time), and at any and all postponements, continuations and
adjournments thereof, with all powers that the undersigned would possess if
personally present, upon and in respect of the following matters and in
accordance with the following instructions, with discretionary authority as to
any and all other matters that may properly come before the meeting.
Unless a contrary instruction is indicated, this Proxy will be voted for all
nominees listed in Proposal 1 and for Proposals 2, 3, and 4, as more
specifically described in the Proxy Statement. If specific instructions are
indicated, this Proxy will be voted in accordance therewith.
Management recommends a vote FOR the nominees for director listed below.
Proposal 1: To elect directors whether by cumulative voting or otherwise, to
hold office until the next Annual Meeting of Shareholders and until
their successors are elected.
<TABLE>
<S> <C>
[_] For all nominees listed below [_] Withhold authority to vote for
(except as marked to the all nominees listed below.
contrary below).
</TABLE>
Nominees: Terrence C. Walsh, Vincent F. Monte, Gerald E. Morris, Peter J. Shaw,
Gordon C. Westerling
To withhold authority to vote for any nominee(s), write such nominee(s)'
name(s) below:
-----------------------------------------------------------
(Continued on other side)
(Continued from other side)
Management recommends a vote FOR Proposals 2, 3 and 4.
Proposal 2: To approve an amendment to the Company's Amended and Restated
Articles of Incorporation to effect, at any time prior to the 2000
annual meeting of shareholders or at no time in the sole discretion
of the Board of Directors, a reverse stock split whereby the Company
would issue one (1) new share of the Company's Common Stock in
exchange for three (3) shares of the Company's outstanding Common
Stock.
FOR [_] AGAINST [_] ABSTAIN [_]
Proposal 3: To approve the reincorporation of the Company in Delaware and
related changes to the rights of shareholders.
FOR [_] AGAINST [_] ABSTAIN [_]
Proposal 4: To ratify selection of Corbin & Wertz as independent auditors of
the Company for its fiscal year ending September 30, 1999.
FOR [_] AGAINST [_] ABSTAIN [_]
Dated: _______________
----------------------
----------------------
Signature(s)
Please sign exactly
as your name appears
hereon. If the stock
is registered in the
names of two or more
persons, each should
sign. Executors,
administrators,
trustees, guardians
and attorneys-in-fact
should add their
titles. If signer is
a corporation, please
give full corporate
name and have a duly
authorized officer
sign, stating title.
If signer is a
partnership, please
sign in partnership
name by authorized
person.
Please vote, date and promptly return this proxy in the enclosed return
envelope which is postage prepaid if mailed in the United States.
