EXHIBIT 20.1
STOCKHOLDER RESOLUTION #2
REINCORPORATION IN DELAWARE
SUMMARY
Transaction: Reincorporation in Delaware.
Purpose: To provide greater flexibility and simplicity in
corporate transactions and reduce taxes and other
costs of doing business. For more information, see
"Background and Purpose of Reincorporation; Principal
Reasons for Reincorporation in Delaware."
The purpose of this Information Statement is to inform
holders of our common stock of this corporate action.
Record Date: December 9, 2003.
Method: Merger with and into our newly-formed, wholly-owned
subsidiary, DOBI Medical International, Inc. For more
information, see "Background and Purpose of
Reincorporation; Principal Features of the
Reincorporation."
Exchange Ratios: One share of DOBI Medical International common
stock will be issued for each share of our common
stock held as of the record date. For more
information, see "Background and Purpose of
Reincorporation; Principal Features of the
Reincorporation."
Effective Date: 20 days after mailing of this Information Statement.
Right to Dissent: Any stockholder is entitled to be paid the fair
value of his, her or its shares if the stockholder
timely dissents to the reincorporation or any of the
actions resulting from or in connection with the
reincorporation. For more information, see "Rights of
Dissenting Stockholders." QUESTIONS AND ANSWERS
This Information Statement is first being sent to stockholders on or about
January 9, 2004. The following questions and answers are intended to respond to
frequently asked questions concerning our reincorporation in Delaware. These
questions do not, and are not intended to, address all the questions that may be
important to you. You should carefully read the entire Information Statement, as
well as its exhibits.
Q: Why are we reincorporating in Delaware and changing our name?
A: We believe that the reincorporation in Delaware will give us more
flexibility and simplicity in various corporate transactions. Delaware has
adopted a General Corporation Law that includes by statute many concepts
created by judicial rulings in other jurisdictions. Therefore, we believe
that Delaware provides a recognized body of corporate law that is
consistently interpreted by Delaware courts, thus facilitating corporate
governance by our officers and directors. As part of the reincorporation,
Lion
Gate's name will be changed to that of its subsidiary, DOBI Medical
International, Inc. By changing our name, we will maintain the DOBI Medical
name through which our operating subsidiary, DOBI Medical Systems, Inc. has
conducted its business since it was acquired by Lions Gate in the reverse
merger transaction that was completed on December 9, 2003. In addition,
changing our name to DOBI Medical International will allow us to further
pursue our strategy of developing and offering medical device products
worldwide.
Q: Why are we not holding a meeting of stockholders to approve the
reincorporation?
A: The board of directors has already approved the reincorporation plan and
has received the written consent of officers, directors and affiliates that
represent a majority of our outstanding shares of common stock, without the
need to solicit votes. Under Nevada law and our Articles of Incorporation,
this transaction may be approved by the written consent of a majority of
the shares entitled to vote. Since we have already received written
consents representing the necessary number of shares, a meeting is not
necessary and represents a substantial and avoidable expense.
Q: What are the principal features of the reincorporation?
A: The reincorporation will be accomplished by merging with and into our
newly-formed, wholly-owned subsidiary, DOBI Medical International. One new
share of DOBI Medical International common stock will be issued for each
outstanding share of our common stock held by our stockholders on the
effective date for the reincorporation. Our shares will no longer be
eligible to trade on the over-the-counter bulletin board market. Shares of
DOBI Medical International will be eligible to trade in their place
beginning on or about the effective date of the reincorporation under a new
CUSIP number and trading symbol that have not yet been assigned.
Q: What are the differences between Delaware and Nevada law?
A: There are certain differences between the laws of the state of Nevada and
state of Delaware that impact your rights as a stockholder. For information
regarding the differences between the corporate laws of the state of
Delaware and the state of Nevada, please see "Background and Purpose of
Reincorporation; Differences Between the Corporate Laws and Charter
Documents Governing Lions Gate and DOBI Medical International."
Q: How will the reincorporation affect my ownership?
A: Your ownership interest will not be affected by the reincorporation.
Q: How will the reincorporation affect our officers, directors and employees?
A: Our officers, directors and employees will become the officers, directors
and employees of DOBI Medical International on the effective date of the
reincorporation.
Q: How will the reincorporation affect our business?
A: DOBI Medical International will continue our business at the same location
and with the same assets through Lions Gate's other wholly-owned
subsidiary, DOBI Medical
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Systems, Inc. Lions Gate will cease its corporate existence in the state of
Nevada on the effective date of the reincorporation.
Q: What do I do with my stock certificates?
A: Delivery of your certificates issued prior to the effective date of the
reincorporation will constitute "good delivery" of shares in transactions
subsequent to reincorporation. Certificates representing shares of DOBI
Medical International will be issued with respect to transfers completed
after the reincorporation. New certificates will also be issued upon the
request of any stockholder, subject to normal requirements as to proper
endorsement, signature guarantee, if required, and payment of applicable
taxes.
IT WILL NOT BE NECESSARY FOR OUR STOCKHOLDERS TO EXCHANGE THEIR EXISTING
STOCK CERTIFICATES FOR CERTIFICATES OF DOBI MEDICAL INTERNATIONAL.
OUTSTANDING STOCK CERTIFICATES OF LIONS GATE INVESTMENT LIMITED SHOULD NOT
BE DESTROYED OR SENT TO US.
Q: What if I have lost my certificate?
A: If you have lost your certificate, you can contact our transfer agent to
have a new certificate issued. You may be required to post a bond or other
security to reimburse us for any damages or costs if the certificate is
later delivered for sale of transfer. Our transfer agent may be reached at:
The Nevada Agency and Trust Company Limited
50 West Liberty Street, Suite 880
Reno, Nevada 89501
Telephone: (775) 322-0626
Q: Can I require Lions Gate to purchase my stock?
A: Yes. Under Nevada law you are entitled to appraisal and purchase of your
stock as a result of the reincorporation.
Q: Who will pay the costs of reincorporation?
A: We will pay all of the costs of reincorporation in Delaware, including
distributing this Information Statement. We may also pay brokerage firms
and other custodians for their reasonable expenses for forwarding
information materials to the beneficial owners of our common stock. We do
not anticipate contracting for other services in connection with the
reincorporation.
Q: Will I have to pay taxes on the new certificates?
A: We believe that the reincorporation is not a taxable event and that you
will be entitled to the same basis in the shares of DOBI Medical
International that you had in our common stock. Everyone's tax situation is
different and you should consult with your personal tax advisor regarding
the tax effect of the reincorporation.
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BACKGROUND AND PURPOSE OF REINCORPORATION
Introduction
The following discussion summarizes the important aspects of our
reincorporation in Delaware. This summary does not include all of the provisions
of the Certificate of Incorporation or By-laws of DOBI Medical International,
copies of which are attached as Exhibits 2 and 3 to this Information Statement.
Copies of the Articles of Incorporation and the By-laws of Lions Gate and the
By-laws of DOBI Medical International are available for inspection at our
principal offices, and we will send copies to stockholders upon request.
Principal Reasons for Reincorporation in Delaware
We believe that the reincorporation in Delaware will provide a greater
measure of flexibility and simplicity in corporate transactions and reduce taxes
and other costs of doing business. We also believe Delaware provides a
recognized body of corporate law that will facilitate corporate governance by
our officers and directors. Delaware is a favorable legal and regulatory
environment in which to operate and where a substantial number of Fortune 500
companies and New York and American Stock Exchange listed firms are incorporated
today. For many years, Delaware has followed a policy of encouraging
incorporation in that state and, in furtherance of that policy, has adopted
comprehensive, modern and flexible corporate laws that are periodically updated
and revised to meet changing business needs. As a result, many major
corporations have initially chosen Delaware for their domicile or have
subsequently reincorporated in Delaware in a manner similar to that which we
proposed. Because of Delaware's longstanding policy of encouraging incorporation
in that state, and consequently its preeminence as the state of incorporation
for many major corporations, the Delaware courts have developed a considerable
expertise in dealing with corporate issues and a substantial body of case law
has developed construing Delaware law and establishing public policies with
respect to Delaware corporations. It is anticipated that Delaware corporate law
will continue to be interpreted and explained in a number of significant court
decisions that may provide greater predictability with respect to our corporate
legal affairs. Certain aspects of Delaware corporate law have, however, been
criticized on the ground that they do not afford minority shareholders the same
substantive rights and protection as are available in a number of other states.
For a discussion of certain differences in stockholders' rights and the powers
of management under Delaware law and Nevada law, see "Differences Between the
Corporate Laws and Charter Documents Governing Lions Gate and DOBI Medical
International."
Principal Features of the Reincorporation
The reincorporation in Delaware will be effected by our merger with and
into DOBI Medical International, Inc., a newly-formed, wholly-owned subsidiary
of Lions Gate incorporated in Delaware for this purpose. DOBI Medical
International has not engaged in any activities except in connection with the
reincorporation. The mailing address of its principal offices and its telephone
number are the same as those of Lions Gate. As part of its approval and
recommendation of the reincorporation, the board of directors of Lions Gate has
approved, and recommended to our stockholders, and the holders of a majority of
our outstanding shares of common stock have adopted and approved, an Agreement
and Plan of Merger pursuant to which Lions Gate will be merged with and into
DOBI Medical International. The full texts of the Agreement and Plan of Merger
and the Certificate of Incorporation and By-laws of DOBI Medical International,
the successor Delaware company under which Lions Gate's business will be
conducted after the reincorporation, are set forth as Exhibits 1, 2 and 3,
respectively. The
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discussion contained in this Information Statement is qualified in its
entirety by reference to such Exhibits.
Upon the receipt by Lions Gate of any required third party consents to the
reincorporation, and upon the filing of appropriate certificates of merger by
the Secretaries of State of the states of Nevada and Delaware, Lions Gate will
be merged with and into DOBI Medical International pursuant to the Agreement and
Plan of Merger, resulting in a change in Lions Gate's state of incorporation
from Nevada to Delaware, and a change in our company's name from Lions Gate
Investment Limited to DOBI Medical International, Inc. We will then be subject
to the Delaware General Corporation Law and the Certificate of Incorporation and
By-laws of DOBI Medical International, which will replace Lions Gate's current
Articles of Incorporation and By-laws. These changes may alter the rights of
stockholders of Lions Gate. See "Differences Between the Corporate Laws and
Charter Documents Governing Lions Gate and DOBI Medical International." The text
of the certificate of Incorporation and By-laws of DOBI Medical International
are attached hereto as Exhibits 2 and 3, respectively. The effectiveness of the
reincorporation and the merger is conditioned upon the filing by both Lions Gate
and DOBI Medical International of a Certificate of Merger with the state of
Nevada and a Certificate of Merger with the state of Delaware. We anticipate
that the reincorporation will become effective 20 days after the date of this
Information Statement. As a result of the reincorporation, Lions Gate will cease
its corporate existence in the state of Nevada.
Upon completion of the reincorporation, each of our stockholders will be
entitled to receive one share of DOBI Medical International common stock for
each share of our common stock he, she or it owns. Each share of DOBI Medical
International common stock owned by us will be canceled and resume the status of
authorized and unissued DOBI Medical International common stock. In addition,
outstanding stock options and warrants to purchase shares of common stock will
be converted automatically into stock options and warrants to purchase the same
number of shares of common stock of DOBI Medical International. Each employee
stock plan and any other employee benefit plan to which Lions Gate is a party,
whether or not such plan relates to Lions Gate's common stock, will be assumed
by DOBI Medical International and, to the extent any such plan provides for the
issuance or purchase of Lions Gate common stock, it will be deemed to provide
for the issuance or purchase of shares of common stock of DOBI Medical
International.
IT WILL NOT BE NECESSARY FOR STOCKHOLDERS OF LIONS GATE TO EXCHANGE THEIR
EXISTING STOCK CERTIFICATES FOR CERTIFICATES OF DOBI MEDICAL INTERNATIONAL;
OUTSTANDING STOCK CERTIFICATES OF LIONS GATE SHOULD NOT BE DESTROYED OR SENT TO
LIONS GATE. The common stock of DOBI Medical International will continue to be
traded on the OTC Bulletin Board, which will consider the existing stock
certificates as constituting "good delivery" in transactions subsequent to the
reincorporation.
The Certificate of Incorporation and By-laws of DOBI Medical International
are different from our Articles of Incorporation and By-laws. Your rights as
stockholders may be affected by the reincorporation by, among other things, the
differences between the laws of the state of Nevada, which govern Lions Gate,
and the laws of the state of Delaware, which govern DOBI Medical International.
See the information under "Differences between the Corporate Laws and Charter
Documents Governing Lions Gate and DOBI Medical International" for a summary of
the differences between the corporate laws of the state of Nevada and the state
of Delaware.
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The reincorporation will not result in any changes in our business,
management, assets, liabilities or net worth. DOBI Medical International is
currently our wholly-owned subsidiary and, upon completion of the
reincorporation, will succeed by operation of law to all of our business, assets
and liabilities. The board of directors and officers of DOBI Medical
International will consist of the same persons who are our directors and
officers prior to the reincorporation. Our daily business operations will
continue at our principal offices at 1200 MacArthur Boulevard, Mahwah, New
Jersey 07430.
Change in Capitalization
Our authorized capital on the date of this Information Statement consisted
of 100,000,000 shares of common stock, par value $.0001 per share. As of the
date of this Information Statement, there were 37,537,712 shares of our common
stock issued and outstanding. Upon the completion of the reincorporation, the
Certificate of Incorporation of DOBI Medical International will become the
certificate of incorporation of the surviving corporation. The authorized
capital of DOBI Medical International consists of 150,000,000 shares of capital
stock divided into 140,000,000 shares of common stock, par value $.0001 per
share, and 10,000,000 shares of preferred stock, par value $.0001 per share,
with the right conferred upon the board of directors to set the dividend,
voting, conversion, liquidation and other rights, as well as the qualifications,
limitations and restrictions, with respect to such preferred stock as the board
of directors may determine from time to time. As a result of the reincorporation
and exchange of the common stock, DOBI Medical International will have
outstanding 37,537,712 shares of common stock and no shares of preferred stock
outstanding. Accordingly, the board of directors will have available 102,462,288
shares of common stock and 10,000,000 shares of preferred stock which are
authorized but unissued and unreserved. The reincorporation will not affect our
total stockholders' equity or total capitalization.
The additional shares of common stock authorized under DOBI Medical
International's Certificate of Incorporation would be identical to the shares of
common stock now authorized. Holders of common stock do not have preemptive
rights under DOBI Medical International's Certificate of Incorporation to
subscribe for additional securities which may be issued by DOBI Medical
International. The issuance of additional shares of common stock may, among
other things, have a dilutive effect on the earnings per share and on the equity
and voting power of existing holders of common stock and may adversely affect
the market price of the common stock.
The board of directors of DOBI Medical International has not adopted any
designations, rights or preferences for the preferred stock. The board of
directors of DOBI Medical International may authorize, without further
stockholder approval, the issuance of such shares of preferred stock to such
persons, for such consideration, and upon such terms as the board of directors
determines. This issuance could result in a significant dilution of the voting
rights and the stockholders' equity of then existing stockholders.
There are no present plans, understandings or agreements, and we are not
engaged in any negotiations, that will involve the issuance of preferred stock.
However, the board of directors believes it prudent to have shares of preferred
stock available for such corporate purposes as the board of directors may from
time to time deem necessary and advisable including for acquisitions and the
raising of additional capital, for which there are no present agreements or
understandings.
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Issuance of additional authorized common stock or preferred stock may have
the effect of:
o deterring or thwarting persons seeking to take control of DOBI
Medical International through a tender offer, proxy fight or
otherwise;
o prohibiting the removal of incumbent management; or
o impeding a corporate transaction such as a merger. For example,
the issuance of common stock or preferred stock could be used to
deter or prevent such a change of control through dilution of
stock ownership of persons seeking to take control or by
rendering a transaction proposed by such persons more costly.
The increase in the authorized shares of common stock and the creation of
preferred stock is not part of any plan by Lions Gate to adopt a series of
amendments to its Articles of Incorporation or By-laws so as to render the
takeover of Lions Gate more difficult. Moreover, Lions Gate is not implementing
these changes to enable it to frustrate any efforts by another party to acquire
a controlling interest or seek representation on the board of directors.
The increase in the authorized common stock was recommended by the board of
directors of Lions Gate to assure that an adequate supply of authorized,
unissued shares of common stock is available for general corporate needs and to
provide the board of directors of DOBI Medical International with the necessary
flexibility to issue stock in connection with acquisitions, merger transactions
or financings without the delay incidental to obtaining stockholder approval of
an amendment to the certificate of incorporation at the time of such action,
except as may be required for a particular issuance by applicable law or by the
rules of any stock exchange on which the DOBI Medical International's securities
may then be listed. The additional authorized shares of common stock may be used
for such purposes as raising additional capital or the financing of an
acquisition or business combination. Such shares would, however, be available
for issuance without further action by the stockholders, unless required by
applicable law. The ability to issue shares, as the board of directors
determines from time to time to be in DOBI Medical International's best
interests, will also permit us to avoid the extra expenses that would be
incurred in holding special stockholders meetings solely to approve an increase
in the number of shares which DOBI Medical International has the authority to
issue.
Change in By-laws
Upon the completion of the reincorporation, the By-laws of DOBI Medical
International will become the by-laws of the surviving corporation. While the
By-laws of DOBI Medical International are similar to the By-laws of Lions Gate,
there are differences which may affect your rights as a stockholder.
Differences Between the Corporate Laws and Charter Documents Governing
Lions Gate and DOBI Medical International
Lions Gate is incorporated under the laws of the state of Nevada and DOBI
Medical International is incorporated under the laws of the state of Delaware.
On consummation of the reincorporation, the stockholders of Lions Gate, whose
rights currently are governed by Nevada law and Lions Gate's Articles of
Incorporation and By-laws, which were created pursuant to Nevada law, will
become stockholders of a Delaware company, DOBI Medical International, and
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their rights as stockholders will then be governed by Delaware law and DOBI
Medical International's Certificate of Incorporation and By-laws, which were
created under Delaware law.
Although the corporate statutes of Nevada and Delaware are similar, certain
differences exist. The most significant differences, in the judgment of the
management of Lions Gate, are summarized below. Stockholders should refer to the
Delaware General Corporation Law and the Nevada Business Corporation Act to
understand how these laws apply to Lions Gate and DOBI Medical International.
Classified Board of Directors. Delaware law permits any Delaware
corporation to classify its board of directors into as many as three classes as
equally as possible with staggered terms of office. After initial implementation
of a classified board, one class will be elected at each annual meeting of the
stockholders to serve for a term of one, two or three years (depending upon the
number of classes into which directors are classified) or until their successors
are elected and take office. Nevada law also permits corporations to classify
boards of directors provided that at least one-fourth of the total number of
directors is elected annually. Lions Gate does not have a classified board, and
it is not currently expected that DOBI Medical International's board of
directors will be classified in the near future.
Removal of Directors. With respect to removal of directors, under the
Nevada law, any one or all of the directors of a corporation may be removed by
the holders of not less than two-thirds of the voting power of a corporation's
issued and outstanding stock. Nevada does not distinguish between removal of
directors with or without cause. Under Delaware law, directors of a corporation
without a classified board may be removed with or without cause, by the holders
of a majority of shares then entitled to vote in an election of directors.
Special Meetings of Stockholders. Delaware law permits special meetings of
stockholders to be called by the board of directors or by any other person
authorized in the certificate of incorporation or by-laws to call a special
stockholder meeting. Nevada law does not address the manner in which special
meetings of stockholders may be called. Lions Gate's By-laws provide that
special meetings of the stockholders may be called by the company's board of
directors, Chairman of the board of directors, President, any Vice President, or
by one or more stockholders holding not less than 10% of the issued and
outstanding shares of capital stock of Lions Gate. The By-laws of DOBI Medical
International provide that the company's board of directors, Chairman of the
board of directors, Chief Executive Officer or President may call a special
meeting of the stockholders, but do not provide that the Stockholders themselves
may call a special meeting nor does it provide that the Chief Executive Officer
must call a special meeting of the stockholders if not less than 10% of the
issued and outstanding shares of capital stock of DOBI Medial International
request as special meeting in writing.
Delaware law also provides that if a corporation fails to hold an annual
meeting for the election of directors or there is no written consent to elect
directors in lieu of an annual meeting taken, in both cases for a period of 30
days after the date designated for the annual meeting, a director or stockholder
of the corporation may apply to the Court of Chancery of the State of Delaware
to order an annual meeting for the election of directors.
Cumulative Voting. Cumulative voting for directors entitles stockholders to
cast a number of votes that is equal to the number of voting shares held
multiplied by the number of directors to be elected. Stockholders may cast all
such votes either for one nominee or distribute such votes among up to as many
candidates as there are positions to be filled. Cumulative voting
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may enable a minority stockholder or group of stockholders to elect at
least one representative to the board of directors where such stockholders would
not otherwise be able to elect any directors.
Nevada law permits cumulative voting in the election of directors as long
as the articles of incorporation provide for cumulative voting and certain
procedures for the exercise of cumulative voting are followed. A Delaware
corporation may provide for cumulative voting in the corporation's certificate
of incorporation. Lions Gate opted out of cumulative voting by not including a
provision granting cumulative voting rights in its Articles of Incorporation.
DOBI Medical International also did not adopt cumulative voting in that its
Certificate of Incorporation will not provide for cumulative voting in the
election of directors.
Because neither Lions Gate nor DOBI Medical International utilizes
cumulative voting, there will be no difference in stockholders' rights with
respect to this issue.
Vacancies. Under Delaware law, subject to the rights, if any, of any series
of preferred stock to elect directors and to fill vacancies on the board of
directors, vacancies on the board of directors may be filled by the affirmative
vote of a majority of the remaining directors then in office, even if less than
a quorum. Any director so appointed will hold office for the remainder of the
full term of the class of directors in which the vacancy occurred.
Similarly, Nevada law provides that vacancies may be filled by a majority
of the remaining directors, though less than a quorum, unless the articles of
incorporation provide otherwise. Lions Gate's By-laws and the DOBI Medical
International By-laws address the issue of director vacancies in substantially
the same manner. Therefore, the change from Nevada law to Delaware law will not
alter stockholders' rights with respect to filling vacancies.
Indemnification of Officers and Directors and Advancement of Expenses.
Delaware and Nevada law have substantially similar provisions regarding
indemnification by a corporation of its officers, directors, employees and
agents. Delaware and Nevada law differ in their provisions for advancement of
expenses incurred by an officer or director in defending a civil or criminal
action, suit or proceeding. Delaware law provides that expenses incurred by an
officer or director in defending any civil, criminal, administrative or
investigative action, suit or proceeding may be paid by the corporation in
advance of the final disposition of the action, suit or proceeding upon receipt
of an undertaking by or on behalf of the director or officer to repay the amount
if it is ultimately determined that he or she is not entitled to be indemnified
by the corporation. A Delaware corporation has the discretion to decide whether
or not to advance expenses, unless its certificate of incorporation or by-laws
provides for mandatory advancement. Under Nevada law, the articles of
incorporation, by-laws or an agreement made by the corporation may provide that
the corporation must pay advancements of expenses in advance of the final
disposition of the action, suit or proceedings upon receipt of an undertaking by
or on behalf of the director or officer to repay the amount if it is ultimately
determined that he or she is not entitled to be indemnified by the corporation.
Lions Gate's By-laws do not provide for the mandatory advancement of expenses to
directors and officers. In contrast, the Certificate of Incorporation and
by-laws of DOBI Medical International each provide for the mandatory advancement
of expenses to directors and officers. As a result, there is a difference in
stockholders' rights with respect to issue of mandatory advancement of expenses
to directors and officers. In addition, the board of directors of DOBI Medical
International will be required to indemnify directors and officers. The board of
directors of DOBI Medical International will retain the discretionary authority
to authorize the indemnification of employees and agents, subject to certain
conditions under its By-laws and Delaware law.
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Limitation on Personal Liability of Directors. A Delaware corporation is
permitted to adopt provisions in its certificate of incorporation limiting or
eliminating the liability of a director to a company and its stockholders for
monetary damages for breach of fiduciary duty as a director, provided that such
liability does not arise from certain proscribed conduct, including breach of
the duty of loyalty, acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law or liability to the
corporation based on unlawful dividends or distributions or improper personal
benefit. DOBI Medical International's Certificate of Incorporation will limit
the liability of directors to DOBI Medical International to the fullest extent
permitted by law.
While Nevada law has a similar provision permitting the adoption of
provisions in the articles of incorporation limiting personal liability, the
Nevada provision differs in two respects. First, the Nevada provision applies to
both directors and officers. Second, while the Delaware provision excepts from
limitation on liability of breach of the duty of loyalty, the Nevada counterpart
does not contain this exception. Thus, the Nevada provision expressly permits a
corporation to limit the liability of officers, as well as directors, and
permits limitation of liability arising from a breach of the duty of loyalty.
Lions Gate's Articles of Incorporation limit the personal liability to Lions
Gate of directors, officers and stockholders. DOBI Medical International's
Certificate of Incorporation adopts a narrower limitation on liability, and
officers will therefore remain potentially liable to DOBI Medical International.
DOBI Medical International, however, may determine to indemnify these persons in
its discretion subject to the conditions of the Delaware law and its Certificate
of Incorporation and By-laws.
Dividends. Delaware law is more restrictive than Nevada law with respect to
when dividends may be paid. Under Delaware law, unless further restricted in the
certificate of incorporation, a corporation may declare and pay dividends, out
of surplus, or if no surplus exists, out of net profits for the fiscal year in
which the dividend is declared and/or the preceding fiscal year (provided that
the amount of capital of the corporation is not less than the aggregate amount
of the capital represented by the issued and outstanding stock of all classes
having a preference upon the distribution of assets). In addition, Delaware law
provides that a corporation may redeem or repurchase its shares only if the
capital of the corporation is not impaired and such redemption or repurchase
would not impair the capital of the corporation.
Nevada law provides that no distribution (including dividends on, or
redemption or repurchases of, shares of capital stock) may be made if, after
giving effect to such distribution, the corporation would not be able to pay its
debts as they become due in the usual course of business, or, except as
specifically permitted by the articles of incorporation, the corporation's total
assets would be less than the sum of its total liabilities plus the amount that
would be needed at the time of a dissolution to satisfy the preferential rights
of preferred stockholders.
Restrictions on Business Combinations. Both Delaware law and Nevada law
contain provisions restricting the ability of a corporation to engage in
business combinations with an interested stockholder. Under Delaware law, a
corporation which is listed on a national securities exchange, included for
quotation on the Nasdaq Stock Market or held of record by more than 2,000
stockholders is not permitted to engage in a business combination with any
interested stockholder for a three-year period following the time such
stockholder became an interested stockholder, unless (i) the transaction
resulting in a person becoming an interested stockholder, or the business
combination, is approved by the board of directors of the corporation before the
person becomes an interested stockholder; (ii) the interested stockholder
acquires 85% or more of the outstanding voting stock of the corporation in the
same transaction that makes it an interested stockholder (excluding shares owned
by persons who are both officers and directors of the
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corporation, and shares held by certain employee stock ownership plans); or
(iii) on or after the date the person becomes an interested stockholder, the
business combination is approved by the corporation's board of directors and by
the holders of at least 66-2/3% of the corporation's outstanding voting stock at
an annual or special meeting (and not by written consent), excluding shares
owned by the interested stockholder. Delaware law defines "interested
stockholder" generally as a person who owns 15% or more of the outstanding
shares of a corporation's voting stock.
Nevada law regulates business combinations more stringently. First, an
"interested stockholder" is defined as a beneficial owner (directly or
indirectly) of 10% or more of the voting power of the outstanding shares of the
corporation. Second, the three-year moratorium can be lifted only by advance
approval by a corporation's board of directors. Finally, after the three-year
period, combinations with "interested stockholders" remain prohibited unless (i)
they are approved by the board of directors, the disinterested stockholders or a
majority of the outstanding voting power not beneficially owned by the
interested party, or (ii) the interested stockholders satisfy certain fair value
requirements. As in Delaware, a Nevada corporation may opt out of the statute
with appropriate provisions in its articles of incorporation.
Neither Lions Gate nor DOBI Medical International have opted out of the
applicable statutes with appropriate provisions in their respective Articles and
Certificate of Incorporation.
Amendment to Certificate of Incorporation/Articles of Incorporation or
By-laws. In general, both Delaware law and Nevada law require the approval of
the holders of a majority of all outstanding shares entitled to vote to approve
proposed amendments to a corporation's certificate/articles of incorporation.
Both Delaware law and Nevada law also provide that in addition to the vote
described above, the vote of a majority of the outstanding shares of a class may
be required to amend the certificate/articles of incorporation. Neither state
requires stockholder approval for the board of directors of a corporation to fix
the voting powers, designation, preferences, limitations, restrictions and
rights of a class of stock provided that the corporation's organizational
documents grant such power to its board of directors. Both Nevada law and
Delaware law permit, in general, the number of authorized shares of any such
class of stock to be increased or decreased (but not below the number of shares
then outstanding) by the board of directors unless otherwise provided in the
articles of incorporation or resolution adopted pursuant to the certificate of
incorporation, respectively.
Actions by Written Consent of Stockholders. Nevada law and Delaware law
each provide that, unless the articles/certificate of incorporation provides
otherwise, any action required or permitted to be taken at a meeting of the
stockholders may be taken without a meeting if the holders of outstanding stock
having at least the minimum number of votes that would be necessary to authorize
or take such action at a meeting consents to the action in writing. In addition,
Delaware law requires the corporation to give prompt notice of the taking of
corporate action without a meeting by less than unanimous written consent to
those stockholders who did not consent in writing. There will be no difference
in stockholders' rights with respect to stockholder action by written consent,
as both Lions Gate's Articles of Incorporation and By-laws and DOBI Medical
International's Certificate of Incorporation and By-laws do not limit
stockholder action by written consent.
Stockholder Vote for Mergers and Other Corporation Reorganizations. In
general, both jurisdictions require authorization by an absolute majority of
outstanding shares entitled to vote, as well as approval by the board of
directors, with respect to the terms of a merger or a sale of substantially all
of the assets of the corporation. Delaware law does not require a stockholder
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vote of the surviving corporation in a merger (unless the corporation provides
otherwise in its certificate of incorporation) if: (a) the merger agreement does
not amend the existing certificate of incorporation; (b) each share of stock of
the surviving corporation outstanding immediately before the effective date of
the merger is an identical outstanding share after the merger; and (c) either no
shares of common stock of the surviving corporation and no shares, securities or
obligations convertible into such stock are to be issued or delivered under the
plan of merger, or the authorized unissued shares or shares of common stock of
the surviving corporation to be issued or delivered under the plan of merger
plus those initially issuable upon conversion of any other shares, securities or
obligations to be issued or delivered under such plan do not exceed 20% of the
shares of common stock of such constituent corporation outstanding immediately
prior to the effective date of the merger. Nevada law does not require a
stockholder vote of the surviving corporation in a merger under substantially
similar circumstances.
Defenses Against Hostile Takeovers
Introduction. While the following discussion summarizes the reasons for,
and the operation and effects of, the principal provisions of DOBI Medical
International's Certificate of Incorporation which management has identified as
potentially having an anti-takeover effect, it is not intended to be a complete
description of all potential anti-takeover effects, and it is qualified in its
entirety by reference to the full texts of DOBI Medical International's
Certificate of Incorporation and By-laws.
In general, the anti-takeover provisions of DOBI Medical International's
Certificate of Incorporation are designed to minimize susceptibility to sudden
acquisitions of control which have not been negotiated with and approved by DOBI
Medical International's board of directors. As a result, these provisions may
tend to make it more difficult to remove the incumbent members of the board of
directors. The provisions would not prohibit an acquisition of control of DOBI
Medical International or a tender offer for all of DOBI Medical International's
capital stock. The provisions are designed to discourage any tender offer or
other attempt to gain control of DOBI Medical International in a transaction
that is not approved by the board of directors, by making it more difficult for
a person or group to obtain control of DOBI Medical International in a short
time and then impose its will on the remaining stockholders. However, to the
extent these provisions successfully discourage the acquisition of control of
DOBI Medical International or tender offers for all or part of DOBI Medical
International's capital stock without approval of the board of directors, they
may have the effect of preventing an acquisition or tender offer which might be
viewed by stockholders to be in their best interests.
Tender offers or other non-open market acquisitions of stock will generally
be made at prices above the prevailing market price of DOBI Medical
International's stock. In addition, acquisitions of stock by persons attempting
to acquire control through market purchases may cause the market price of the
stock to reach levels which are higher than would otherwise be the case.
Anti-takeover provisions may discourage such purchases, particularly those of
less than all of DOBI Medical International's stock, and may thereby deprive
stockholders of an opportunity to sell their stock at a temporarily higher
price. These provisions may therefore decrease the likelihood that a tender
offer will be made, and, if made, will be successful. As a result, the
provisions may adversely affect those stockholders who would desire to
participate in a tender offer. These provisions may also serve to insulate
incumbent management from change and to discourage not only sudden or hostile
takeover attempts, but any attempts to acquire control which are not approved by
the board of directors, whether or not stockholders deem such transactions to be
in their best interests.
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Authorized Shares of Capital Stock. DOBI Medical International's
Certificate of Incorporation authorizes the issuance of up to 10,000,000 shares
of preferred stock, with the right conferred upon the board of directors to set
the dividend, voting, conversion, liquidation and other rights, as well as the
qualifications, limitations and restrictions with respect to such preferred
stock as the board of directors may determine from time to time. Shares of DOBI
Medical International's preferred stock with voting rights could be issued and
would then represent an additional class of stock required to approve any
proposed acquisition. This preferred stock, together with authorized but
unissued shares of common stock (the Certificate of Incorporation authorizes the
issuance of up to 150,000,000 shares), could represent additional capital stock
required to be purchased by an acquiror. Issuance of such additional shares may
dilute the voting interest of DOBI Medical International's stockholders. If the
board of directors of DOBI Medical International determined to issue an
additional class of voting preferred stock to a person opposed to a proposed
acquisition, such person might be able to prevent the acquisition
single-handedly.
Stockholder Meetings. Delaware law provides that the annual stockholder
meeting may be called by a corporation's board of directors or by such person or
persons as may be authorized by a corporation's certificate of incorporation or
by-laws. DOBI Medical International's By-laws provide that annual stockholder
meetings may be called only by DOBI Medical International `s board of directors.
Although DOBI Medical International believes that this provision will discourage
stockholder attempts to disrupt the business of DOBI Medical International
between annual meetings, its effect may be to deter hostile takeovers by making
it more difficult for a person or entity to obtain immediate control of DOBI
Medical International between one annual meeting as a forum to address certain
other matters and discourage takeovers which are desired by the stockholders.
Restriction of Maximum Number of Directors and Filling Vacancies on the
Board of Directors. Delaware law requires that the board of directors of a
corporation consist of one or more members and that the number of directors
shall be set by the corporation's by-laws, unless it is set by the corporation's
certificate of incorporation. DOBI Medical International's By-laws provide that
the number of directors shall not be less than one or more than nine. The power
to determine the number of directors within these numerical limitations is
vested in the board of directors. The power to fill vacancies, whether occurring
by reason of an increase in the number of directors or by resignation, is vested
primarily in the board of directors. The stockholders also may fill vacancies at
annual or special meetings of stockholders called for that purpose, but the
ability of the stockholders to fill any vacancy on the board will in most cases
be limited to filling vacancies created by the resignation or removal of a
director. The overall effect of these provisions may be to prevent a person or
entity from quickly acquiring control of DOBI Medical International through an
increase in the number of the directors and election of nominees to fill the
newly-created vacancies and thus allow existing management to continue in
office.
Approval of Business Combinations with Related Persons. DOBI Medical
International's Certificate of Incorporation generally permits the company to
enter into a business combination regardless of whether the interested director
is present at or participates in the meeting of the board of directors or the
board committee authorizing the transaction or votes to approve the transaction,
as long as any of the following three conditions are met: (i) the board of
directors or a board committee in good faith authorizes the transaction by the
affirmative vote of a majority of the disinterested directors, even if the
disinterested directors is less than a quorum; (ii) the transaction is approved
in good faith by the holders of a majority of the outstanding voting stock (and
any class or series entitled to vote separately), at any annual or special
meeting of the stockholders called for that purpose; or (iii) the transaction is
fair to the company at the time it is
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authorized, approved or ratified by the board of directors or a committee
of the board, or the stockholders. Under Delaware law, absent these provisions,
business combinations generally, including mergers, consolidations and sales of
substantially all of the assets must, subject to certain exceptions, be approved
by the vote of the holders of a majority of the outstanding voting stock. One
exception under Delaware law to the majority approval requirement applies to
business combinations (as defined) involving stockholders owning 15% of the
outstanding voting stock of a corporation for less than three years. In order to
obtain stockholder approval of a business combination with such a related
person, the holders of two-thirds of the outstanding voting stock, excluding the
stock owned by the 15% stockholder, must approve the transaction. Alternatively,
the 15% stockholder must satisfy other requirements under Delaware law relating
to (i) the percentage of stock acquired by such person in the transaction which
resulted in such person's ownership becoming subject to the law, or (ii)
approval of the board of directors of such person's acquisition of the stock of
the Delaware corporation. Delaware law does not contain price criteria. The
supermajority stockholder vote requirements under Delaware law may have the
effect of foreclosing mergers and other business combinations which the holders
of a majority of the stock deem desirable and place the power to prevent such a
transaction in the hands of a minority of the stockholders
Under Delaware law, there is no cumulative voting by stockholders for the
election of the directors. The absence of cumulative voting rights effectively
means that the holders of a majority of the stock voted at a stockholders
meeting may, if they so choose, elect all directors of DOBI Medical
International, thus precluding a small group of stockholders from controlling
the election of one or more representatives to the board of directors.
Advance Notice Requirements for Nomination of Directors and Proposal of New
Business at Annual Stockholder Meetings. DOBI Medical International's
Certificate of Incorporation generally provides that any stockholder desiring to
make a proposal for new business at a stockholder meeting must submit written
notice not less than 90 or more than 180 days in advance of the meeting, and in
the case of a nomination for the election of directors, not less than 90 or more
than 180 days prior to the earlier of the date of the meeting or the
corresponding date on which the preceding year's annual meeting of stockholders
was held. This advance notice requirement may give management time to solicit
its own proxies in an attempt to defeat any dissident slate of nominations,
should management determine that doing so is in the best interests of
stockholders generally. Similarly, adequate advance notice of stockholder
proposals will give management time to study such proposals and to determine
whether to recommend to the stockholders that such proposals be adopted. In
certain instances, such provisions could make it more difficult to oppose
management's nominees or proposals, even if the stockholders believe such
nominees or proposals are in their interests. Making the period for nomination
of directors and introducing new business a period not less than 10 days prior
to notice of a stockholder meeting may tend to discourage persons from bringing
up matters disclosed in the proxy materials furnished to the stockholders and
could inhibit the ability of stockholders to bring up new business in response
to recent developments.
FEDERAL INCOME TAX CONSEQUENCES OF THE REINCORPORATION
Lions Gate believes that, for federal income tax purposes, no gain or loss
will be recognized by Lions Gate, DOBI Medical International or the stockholders
of Lions Gate who receive DOBI Medical International common stock for their
Lions Gate common stock in connection with the reincorporation. The adjusted tax
basis of each whole share of DOBI Medical International common stock received by
a stockholder of Lions Gate as a result of the reincorporation will be the same
as the stockholder's aggregate adjusted tax basis in the shares of
14
Lions Gate common stock converted into such shares of DOBI Medical
International common stock. A stockholder who holds Lions Gate common stock will
include in his holding period for the DOBI Medical International common stock
that he receives as a result of the reincorporation his holding period for Lions
Gate common stock converted into such DOBI Medical International common stock.
Because of the complexity of the capital gains and loss provisions of the
Internal Revenue Code of 1986 and the uniqueness of each individual's capital
gain or loss situation, stockholders contemplating exercising statutory
dissenters' rights should consult their own tax advisor regarding the federal
income tax consequences of exercising such rights. State, local or foreign
income tax consequences to stockholders may vary from the federal income tax
consequences described above, and STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN
TAX ADVISOR AS TO THE CONSEQUENCES TO THEM OF THE REINCORPORATION UNDER ALL
APPLICABLE TAX LAWS.
RIGHTS OF DISSENTING STOCKHOLDERS
Stockholders of Lions Gate common stock that follow the appropriate
procedures are entitled to dissent from the consummation of the reincorporation
and receive payment of the fair value of their shares under Sections 92A.300
through 92A.500 of the Nevada General Corporation Law.
The following discussion summarizes the material applicable provisions of
the Nevada dissenters' rights statute. You are urged to read the full text of
the Nevada dissenters' rights statute, which is reprinted in its entirety and
attached as Exhibit 4 to this document. A person having a beneficial interest in
shares of our common stock that are held of record in the name of another
person, such as a bank, broker or other nominee, must act promptly to cause the
record holder to follow the steps summarized below properly and in a timely
manner if such person wishes to perfect any dissenters' rights such person may
have.
This discussion and Exhibit 4 should be reviewed carefully by you if you
wish to exercise statutory dissenters' rights or wish to preserve the right to
do so, because failure to strictly comply with any of the procedural
requirements of the Nevada dissenters' rights statute may result in a
termination or waiver of dissenters' rights under the Nevada dissenters' rights
statute.
Under the Nevada dissenters' rights statute, you have the right to dissent
from the reincorporation and demand payment of the fair value of your shares of
common stock. If you elect to dissent, you must file with Lions Gate a written
notice of dissent stating that you intend to demand payment for your shares of
common stock if the reincorporation is consummated. Such written notice of
dissent must be filed with Lions Gate within 20 days of receipt of this
Information Statement. If you fail to comply with this notice requirement, you
will not be entitled to dissenters' rights. The "fair value" of the shares as
used in the Nevada dissenters' rights statute is the value of the shares
immediately before the effectuation of the proposed reincorporation, including
an appreciation or depreciation in anticipation of the reincorporation unless
exclusion would be inequitable.
Within 10 days after the effective time of the reincorporation, Lions Gate
will give written notice of the effective time of the reincorporation by
certified mail to each stockholder who filed a written notice of dissent. The
notice must also state where demand for payment must be sent and where share
certificates shall be deposited, among other information. Within the time period
set forth in the notice, which may not be less than 30 days nor more than 60
days
16
following the date notice is delivered, the dissenting stockholder must
make a written demand on Lions Gate for payment of the fair value of his or her
shares and deposit his or her share certificates in accordance with the notice.
Within 30 days after the receipt of demand for the fair value of the
dissenters' shares, Lions Gate will pay each dissenter who complied with the
required procedures the amount it estimates to be the fair value of the
dissenters' shares, plus accrued interest. Additionally, Lions Gate shall mail
to each dissenting stockholder a statement as to how fair value was calculated,
a statement as to how interest was calculated, a statement of the dissenters'
right to demand payment of fair value under Nevada law, and a copy of the
relevant provisions of Nevada law.
A dissenting stockholder, within 30 days following receipt of payment for
the shares, may send Lions Gate a notice containing such stockholder's own
estimate of fair value and accrued interest, and demand payment for that amount
less the amount received pursuant to Lions Gate's payment of fair value to such
stockholder.
If a demand for payment remains unsettled, Lions Gate will petition the
court to determine fair value and accrued interest. If Lions Gate fails to
commence an action within 60 days following the receipt of the stockholder's
demand, Lions Gate will pay to the stockholder the amount demanded by the
stockholder in the stockholder's notice containing the stockholder's estimate of
fair value and accrued interest.
All dissenting stockholders, whether residents of Nevada or not, must be
made parties to the action and the court will render judgment for the fair value
of their shares. Each party must be served with the petition. The judgment shall
include payment for the amount, if any, by which the court finds the fair value
of such shares, plus interest, exceeds the amount already paid. If the court
finds that the demand of any dissenting stockholder for payment was arbitrary,
vexatious or otherwise not in good faith, the court may assess costs, including
reasonable fees of counsel and experts, against such stockholder. Otherwise the
costs and expenses of bringing the action will be determined by the court. In
addition, reasonable fees and expenses of counsel and experts may be assessed
against Lions Gate if the court finds that it did not substantially comply with
the requirements of the Nevada dissenters' rights statute or that it acted
arbitrarily, vexatiously, or not in good faith with respect to the rights
granted to dissenters under Nevada law.
If you wish to seek dissenters' rights, you are urged to review the
applicable Nevada statutes attached to this Information Statement as Exhibit 4.