EXHIBIT (F)(1)
APPRAISAL RIGHTS AND DISSENTERS' RIGHTS
In the event that BEI Technologies, Inc. ("BEI Technologies") acquires, the
required amount of outstanding OpticNet, Inc. ("OpticNet") stock to consummate
the merger or after any required stockholder vote and upon the conclusion of the
Merger, certain rights of dissenting OpticNet stockholders will arise.
Information regarding the exercise of these rights that arise under the
California General Corporation Law ("CGCL"), dissenters' rights, and Delaware
General Corporation Law ("DGCL"), appraisal rights, are set forth below.
OpticNet stockholders have rights under both Delaware law and California law
because OpticNet is incorporated in Delaware and operates in California.
DISSENTERS' RIGHTS AND APPRAISAL RIGHTS UNDER APPLICABLE CALIFORNIA LAW AND
DELAWARE LAW ARE AVAILABLE TO OPTICNET STOCKHOLDERS IF THE MERGER IS
CONSUMMATED. THE VOTE BY AN OPTICNET STOCKHOLDER AGAINST APPROVAL OF THE MERGER
IS NOT SUFFICIENT TO PRESERVE A STOCKHOLDER'S RIGHT TO DISSENT FROM THE
TRANSACTION OR RECEIVE SUCH APPRAISAL RIGHTS. AN OPTICNET STOCKHOLDER MUST
AFFIRMATIVELY COMPLETE CERTAIN PROCEDURES INCLUDING GIVING NOTICE TO OPTICNET
WITHIN CERTAIN STATUTORY TIME FRAMES IN ORDER TO PRESERVE THE STOCKHOLDER'S
RIGHTS TO DISSENT FROM THE TRANSACTION OR EXERCISE APPRAISAL RIGHTS. IMPORTANT
DETAILS CONCERNING THESE REQUIREMENTS ARE SET FORTH BELOW; FAILURE TO TAKE THESE
ACTIONS IN A TIMELY PROPER FASHION WILL RESULT IN THE LOSS OF DISSENTERS' RIGHTS
AND/OR APPRAISAL RIGHTS. ALTHOUGH A DISSENTING STOCKHOLDER MAY PERFECT HIS OR
HER RIGHT TO DISSENT FROM THE TRANSACTION AND PERFECT APPRAISAL RIGHTS UNDER
BOTH THE CGCL AND THE DGCL, OPTICNET WILL MAKE A "FAIR MARKET VALUE" PAYMENT
UNDER ONLY ONE SUCH STATE COURT REMEDY.
RIGHTS OF DISSENTING STOCKHOLDERS UNDER CALIFORNIA LAW
Exercise of Rights. The rights of OpticNet stockholders who dissent in
connection with the Merger are governed by specific legal provisions contained
in Chapter 13 (Sections 1300-1313) of the CGCL ("Chapter 13"). The description
of dissenters' rights contained in this statement is qualified in its entirety
by reference to Chapter 13, a copy of which is attached as Annex A to this
statement.
If the Merger is consummated, those stockholders of OpticNet who have fully
complied with all of the applicable provisions of Chapter 13 may have the right
to require OpticNet to purchase their shares of OpticNet Common Stock for cash
at the fair market value of those shares (as determined by mutual agreement or
by court order) as of June 30, 2003 (the day before the terms of the Merger were
first announced), excluding any appreciation or depreciation because of the
Merger. Persons who are beneficial owners of shares of OpticNet Common Stock but
whose shares are held by another person, such as a trustee, broker or nominee,
must instruct the record holder to follow the procedures outlined below if such
persons wish to dissent with respect to any or all of their shares. Under
Chapter 13, provided OpticNet correctly complies with its responsibilities under
Chapter 13, statutory appraisal rights are the sole remedy available to
dissenting stockholders. A stockholder possessing appraisal rights has no right
to attack the validity of the Merger or to have the Merger set aside or
rescinded, except in an action to test whether the number of shares required to
authorize or approve the Merger have been legally voted in favor of the Merger,
in the case of fraud in connection with the transaction, or if the transaction
was not at arm's length.
The procedures to be followed in order for a stockholder to exercise and
perfect dissenter's rights under Chapter 13 include compliance with all of the
following:
(i) The stockholder of record must not vote all of his or her shares of
OpticNet Common Stock in favor of the Merger. The stockholder may vote part
of his or her shares for the Merger without losing the right to have OpticNet
purchase the shares that were voted against the Merger.
(ii) Any OpticNet stockholder who voted against the Merger, and who wishes
to have OpticNet purchase those shares that were voted against the Merger
must make a written demand to have OpticNet purchase such shares for cash at
their fair market value (a "Demand for Purchase"). The Demand for Purchase
must include the information specified below under "Demand for Purchase" and
must be received by OpticNet no later than 30 days after the Approval Notice
(defined below) is mailed to such stockholder by OpticNet.
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Within ten (10) days after approval of the Merger by OpticNet stockholders,
the stockholders of OpticNet Common Stock who voted against the Merger, must be
notified by OpticNet of such approval (the "Approval Notice") and OpticNet must
state the cash price determined to be the fair market value of such dissenting
shares, excluding any appreciation or depreciation because of the proposed
Merger. The statement of price will constitute an offer by OpticNet to purchase
any dissenting shares at the price stated, unless such shares have lost their
status as dissenting shares. The Approval Notice must also contain a brief
description of the procedures to be followed under Chapter 13 in order for the
stockholder to exercise the right to have OpticNet purchase his or her shares of
OpticNet Common Stock and must include a copy of the relevant provisions of
Chapter 13.
Demand for Purchase. Merely voting against or delivering a proxy directing a
vote against the approval of the Merger or failing to deliver a proxy does not
constitute a Demand for Purchase. A written Demand for Purchase is required and
must be delivered to OpticNet within thirty (30) days after the date on which
the Approval Notice was mailed by OpticNet to the stockholder. In all cases, the
Demand for Purchase must:
(i) Be made by the person who was the stockholder of record on the Record
Date, or the stockholder's duly authorized representative, and not by someone
who was merely a beneficial owner of the shares of OpticNet Common Stock or a
stockholder who acquired the shares of OpticNet Common Stock after the Record
Date;
(ii) State the number and class of such of dissenting shares so held
of record; and
(iii) Include a demand that OpticNet purchase the shares of OpticNet Common
Stock at what the stockholder claims to be the fair market value of such
dissenting shares, excluding any appreciation or depreciation because of the
proposed Merger. The dissenting stockholder's statement of fair market value
constitutes an irrevocable offer by such dissenting stockholder to sell his
or her shares of OpticNet Common Stock to OpticNet at such price. A
stockholder may not withdraw such demand unless OpticNet consents. If
OpticNet agrees that the shares are "dissenting shares", and agrees to the
stated price, the dissenting stockholder is entitled to the requested price
with interest from the date of an agreement, and is to be paid within 30
days, subject to certain exceptions and conditions.
(iv) Include delivery to OpticNet by a stockholder of their share
certificate(s) for endorsement as dissenting shares.
In addition, it is recommended that the following be complied with to ensure
that the Demand for Purchase is properly executed and delivered:
(i) The Demand for Purchase should be sent by registered or certified mail,
return receipt requested. OpticNet shall not be responsible for Demands for
Purchase that are not received. The dissenting stockholder bears the risk of
loss prior to such receipt.
(ii) The Demand for Purchase should be signed by the stockholder of record
or his or her duly authorized representative exactly as his or her name
appears on the stock certificate(s) evidencing the shares of OpticNet Common
Stock.
(iii) A Demand for Purchase with respect to shares of OpticNet Common Stock
that are owned jointly by more than one person should identify and be signed
by all such holders.
(iv) Any person signing a Demand for Purchase in any representative
capacity (such as attorney-in-fact, executor, administrator, trustees or
guardian) should indicate his or her title and, if OpticNet requests, furnish
written proof of his or her capacity and authority to sign the Demand for
Purchase.
Determination of Fair Market Value. If OpticNet and a dissenting stockholder
agree that the shares held by such stockholder are eligible for dissenters'
rights and agree upon the price of such shares, the dissenting stockholder is
entitled to receive from OpticNet the agreed price with interest thereon at the
legal rate on judgments from the date of such agreement. Any agreement between
OpticNet and the holders of dissenting shares fixing the fair market value of
such shares must be filed with the Corporate Secretary of OpticNet at the
address set forth below. Subject to certain provisions of the CGCL, payment of
the fair market value of the dissenting shares must be made within thirty (30)
days after the purchase price has been agreed upon or within thirty (30) days
after the statutory or contractual conditions to the Merger are satisfied,
whichever is later.
If OpticNet and a dissenting stockholder fail to agree on either the fair
market value of the shares or on the eligibility of the shares to be purchased,
the stockholder or OpticNet may file a complaint for judicial resolution of the
dispute in the Superior Court of San
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Francisco County. The complaint must be filed within six months after the date
on which the approval notice was mailed by OpticNet to the stockholder. If such
a complaint is not filed within six months, the shares will lose their status as
dissenting shares. Two or more dissenting stockholders may join as plaintiffs or
be joined as defendants in such an action. If the eligibility of the shares as
dissenting shares is at issue, the court will first decide that issue. If the
fair market value of the shares is in dispute, the court will determine, or will
appoint one or more impartial appraisers to assist in the determination of, the
fair market value. The costs of the action, including reasonable compensation to
the appraisers to be fixed by the court, shall be assessed or apportioned as the
court considers equitable, but, if the appraisal exceeds the price offered by
OpticNet, OpticNet shall pay the costs (including in the discretion of the court
attorneys' fees, fees of expert witnesses and interest if the value awarded by
the court for the shares is more than 125% of the price offered by OpticNet).
Prior to the Effective Date, any demands, notices, certificates or other
documents required to be delivered to OpticNet may be sent to OpticNet, Inc.,
One Post Street, Suite 2500, San Francisco, California 94104, Attention: Gary D.
Wrench, Chief Financial Officer, or delivered in person to the attention of the
Chief Financial Officer at such address. After the Effective Date, all demands,
notices, certificates or other documents required to be delivered to OpticNet
should be sent to OpticNet, Inc., c/o BEI Technologies, Inc., One Post Street,
Suite 2500, San Francisco, California 94104, Attention: Secretary and Treasurer.
If the Closing of the Merger occurs prior to the purchase of any dissenting
shares by OpticNet, the purchase of such dissenting shares shall be the
responsibility of OpticNet as the Surviving Corporation under the Merger
Agreement.
APPRAISAL RIGHTS UNDER DELAWARE LAW
Exercise of Rights. The rights of OpticNet stockholders who dissent in
connection with the Merger are governed by specific legal provisions contained
in Section 262 of DGCL ("Section 262"). The description of appraisal rights
contained in this statement is qualified in its entirety by reference to Section
262, a copy of which is attached as Annex B to this statement.
OpticNet Stockholders' Appraisal Rights Under Section 262. Under the DGCL,
holders of record of OpticNet Common Stock who comply with the applicable
statutory procedures summarized herein will be entitled to appraisal rights
under Section 262 of the DGCL as the OpticNet Common Stock is not listed on a
national securities exchange. A person having a beneficial interest in shares of
OpticNet Common Stock held of record in the name of another person, such as a
broker or nominee, must act promptly to cause the record holder to follow the
steps summarized below properly and in a timely manner to perfect appraisal
rights.
Under the DGCL, holders of shares of OpticNet Common Stock ("Appraisal
Shares") who follow the procedures set forth in Section 262 will be entitled to
have their Appraisal Shares appraised by the Delaware Chancery court and to
receive payment in cash of the "fair value" of such Appraisal Shares, exclusive
of any element of value arising from the accomplishment or expectation of the
Merger, together with a fair rate of interest, if any, as determined by such
court.
Under Section 262, where a proposed merger is to be submitted for approval at
a meeting of stockholders, the corporation, not less than 20 days prior to the
meeting, must notify each of its stockholders who was such on the record date
for such meeting with respect to shares for which appraisal rights are
available, that appraisal rights are so available, and must include in such
notice a copy of Section 262.
Under Section 262, where a proposed merger is consummated via a short-form
merger or consolidation the surviving corporation within 10 days thereafter
shall notify each of stockholders who are entitled to appraisal rights of the
approval of the merger or consolidation and that appraisal rights are available
for the stock of such constituent corporation, and shall include in such notice
a copy of Section 262. Such notice shall also notify the stockholders of the
effective date of the merger or consolidation.
This statement constitutes such notice to the holders of Appraisal Shares and
the applicable statutory provisions of the DGCL are attached to this statement
as Annex B. Any stockholder who wishes to exercise such appraisal rights or who
wishes to preserve his right to do so should review the following discussion and
Annex B carefully, because failure to timely and properly comply with the
procedures specified will result in the loss of appraisal rights under the DGCL.
Where a proposed merger is to be submitted for approval at a meeting of
stockholders, a holder of Appraisal Shares wishing to exercise such holder's
appraisal rights must deliver to OpticNet prior to a vote on the Merger
Agreement at the stockholders' Meeting called for that purpose a written demand
for appraisal of such holder's Appraisal Shares, a holder of
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Appraisal Shares wishing to exercise such holder's appraisal rights must be the
record holder of such Appraisal Shares on the date the written demand for
appraisal is made and must continue to hold such Appraisal Shares of record
through the effective date of the Merger. Accordingly, a holder of Appraisal
Shares who is the record holder of Appraisal Shares on the date the written
demand for appraisal is made, but who thereafter transfers such Appraisal Shares
prior to the consummation of the Merger, will lose any right to appraisal in
respect of such Appraisal Shares.
Where a proposed merger is consummated via a short-form merger or
consolidation, any stockholder entitled to appraisal rights may, within 20 days
after the date of mailing of notice of the merger or consolidation, demand in
writing from the surviving corporation the appraisal of such stockholder's
shares. Such demand will be sufficient if it reasonably informs the corporation
of the identity of the stockholder and that the stockholder intends to demand
the appraisal of such stockholder's shares.
Only a holder of record of Appraisal Shares is entitled to assert appraisal
rights for the Appraisal Shares registered in that holder's name. A demand for
appraisal should be executed by or on behalf of the holder of record, fully and
correctly, as such holder's name appears on such holder's stock certificates. If
the Appraisal Shares are owned of record in a fiduciary capacity, such as by a
trustee, guardian or custodian, execution of the demand should be made in that
capacity, and if the Appraisal Shares are owned of record by more than one
person as in a joint tenancy or tenancy in Common Stock, the demand should be
executed by or on behalf of all joint owners. An authorized agent, including one
or more joint owners, may execute a demand for appraisal on behalf of a holder
of record; however, the agent must identify the record owner or owners and
expressly disclose the fact that, in executing the demand, the agent is agent
for such owner or owners. A record holder such as a broker who holds Appraisal
Shares as nominee for several beneficial owners may exercise appraisal rights
with respect to the Appraisal Shares held for one or more beneficial owners
while not exercising such rights with respect to the Appraisal Shares held for
other beneficial owners; in such case, the written demand should set forth the
number of Appraisal Shares as to which appraisal is sought. When no number of
Appraisal Shares is expressly mentioned the demand will be presumed to cover all
Appraisal Shares held in the name of the record. owner. If a stockholder holds
Appraisal Shares through a broker who in turn holds the shares through a central
securities depositary nominee, a demand for appraisal of shares must be made by
or on behalf of the depositary nominee and must identify the depositary nominee
as record holder. Stockholders who hold their Appraisal Shares in brokerage
accounts or other nominee forms and who wish to exercise appraisal rights are
urged to consult with their brokers to determine the appropriate procedures for
the making of a demand for appraisal by such a nominee.
All written demands for appraisal should be sent or delivered to OpticNet,
Inc., One Post Street, Suite 2500, San Francisco, California 94104,
Attention: Gary D. Wrench, Chief Financial Officer.
Within 10 days after the consummation of the Merger, OpticNet will notify
each stockholder who has properly asserted appraisal rights under Section 262 of
the date the Merger became effective.
Within 120 days after the consummation of the Merger, but not thereafter, the
surviving corporation or any stockholder who has complied with the statutory
requirements of the fair value of the Appraisal petition in the Delaware
Chancery Court demanding a determination of the fair value of the Appraisal
Shares. The surviving corporation is under no obligation to and has no present
intention to file a petition of shares or a petition with respect to the
appraisal of the fair value of the Appraisal Shares. Accordingly, it is the
obligation of the stockholders to initiate all necessary action to perfect their
appraisal rights with the time prescribed in Section 262.
Within 120 days after the consummation of the Merger, any stockholder who has
complied with the requirements for exercise of appraisal rights will be
entitled, upon written request, to receive from OpticNet a statement setting
forth the aggregate number of Appraisal Shares with respect to which demands for
appraisal have been received and the aggregate number of holders of such
Appraisal Shares. Such statements must be mailed within ten days after a written
request therefor has been received by OpticNet.
If a petition for an appraisal is timely filed, after a hearing on such
petition, the Delaware Chancery Court will determine the stockholders entitled
to appraisal rights and will appraise the "fair value" of their Appraisal
Shares, exclusive of any element of value arising from the accomplishment or
expectation of the Merger, together with a fair rate of interest, if any, to be
paid upon the amount determined to be the fair value. Stockholders considering
seeking appraisal should be aware that the fair value of their Appraisal Shares
as determined under Section 262 could be more than, the same as or less than the
value of the consideration they would receive pursuant to the Merger Agreement
if they did not seek appraisal of their Appraisal Shares and that investment
banking opinions as to fairness from a financial point of view are not
necessarily opinions as to fair value under Section 262, The Delaware Supreme
Court has stated that "proof of value by any techniques or methods which are
generally considered acceptable in the financial community and otherwise
admissible in court" should be considered in the appraisal proceedings.
If a petition for an appraisal is timely filed, at the hearing on such
petition the Delaware Court will determine which stockholders are entitled to
appraisal rights. The Delaware Court may require the stockholders who have
demanded an appraisal for their shares and
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who hold stock represented by certificates to submit their certificates of stock
to the Register in Chancery for notation thereon of the pendency of the
appraisal proceedings. If any stockholder fails to comply with such direction,
the Delaware Court may dismiss the proceedings as to such stockholder.
The Delaware Chancery Court will determine the amount of interest, if any, to
be paid upon the amounts to be received by persons whose Appraisal Shares have
been appraised. The costs of the action may be determined by the Delaware
Chancery Court and taxed upon the parties as the Delaware Chancery Court deems
equitable. The Delaware Chancery Court may also order that all or a portion of
the expenses incurred by any stockholder in connection with an appraisal,
including, without limitation, reasonable attorneys' fees and the fees and
expenses of experts utilized in the appraisal proceeding, be charged pro rata
against the value of the all of the Appraisal Shares entitled to appraisal.
Any holder of Appraisal Shares who has duly demanded an appraisal in
compliance with Section 262 will not, after the consummation of the Merger, be
entitled to vote the Appraisal Shares subject to such demand for any purpose or
be entitled to the payment or dividends or other distributions on those
Appraisal Shares (except dividends or other distributions payable to holders of
record of Appraisal Shares as of a record date prior to the consummation of the
Merger).
If any stockholder who properly demands appraisal of his Appraisal Shares
under Section 262 fails to perfect, or effectively withdraws or loses, his right
to appraisal, as provided in the DGCL the Appraisal Shares of such stockholder
will be converted in the right to receive the consideration receivable with
respect to such Appraisal Shares in accordance with the Merger Agreement. A
stockholder will fail to perfect, or effectively lose or withdraw, his right to
appraisal if, among other things, no petition for appraisal is filed within 120
days after the effective date of the Merger, or if the stockholder withdraws his
demand for appraisal. Any withdrawal attempted more than 60 days after such
effective date will require the written approval of the surviving corporation.
Notwithstanding the foregoing, no appraisal proceeding pending in the Court of
Chancery shall be dismissed as to any stockholder without the approval of the
Court, and any such approval may be conditioned upon such terms as the Court
deems just.
Failure to follow the steps required by Section 262 for perfecting appraisal
rights may result in the loss of such rights (in which event a stockholder will
be entitled to receive the consideration receivable with respect to such
Appraisal Shares in accordance with the Merger Agreement).
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ANNEX A
CHAPTER 13 OF THE CALIFORNIA GENERAL CORPORATION LAW
Section 1300. Reorganization or short-form merger; dissenting shares; corporate
purchase at fair market value; definitions
(a) If the approval of the outstanding shares (Section 152) of a corporation
is required for a reorganization under subdivisions (a) and (b) or subdivision
(e) or (f) of Section 1201, each stockholder of the corporation entitled to vote
on the transaction and each stockholder of a subsidiary corporation in a
short-form merger may, by complying with this chapter, require the corporation
in which the stockholder holds shares to purchase for cash at their fair market
value the shares owned by the stockholder which are dissenting shares as defined
in subdivision (b). The fair market value shall be determined as of the day
before the first announcement of the terms of the proposed reorganization or
short-form merger, excluding any appreciation or depreciation in consequence of
the proposed action, but adjusted for any stock split, reverse stock split, or
share dividend which becomes effective thereafter.
(b) As used in this chapter, "dissenting shares" means shares which come
within all of the following descriptions:
(1) Which were not immediately prior to the reorganization or short-form
merger either (A) listed on any national securities exchange certified by the
Commissioner of Corporations under subdivision (o) of Section 25100 or (B)
listed on the National Market System of the NASDAQ Stock Market, and the
notice of meeting of stockholders to act upon the reorganization summarizes
this section and Sections 1301, 1302, 1303 and 1304; provided, however, that
this provision does not apply to any shares with respect to which there
exists any restriction on transfer imposed by the corporation or by any law
or regulation; and provided, further, that this provision does not apply to
any class of shares described in subparagraph (A) or (B) if demands for
payment are filed with respect to 5 percent or more of the outstanding shares
of that class.
(2) Which were outstanding on the date for the determination of
stockholders entitled to vote on the reorganization and (A) were not voted in
favor of the reorganization or, (B) if described in subparagraph (A) or (B)
of paragraph (1) (without regard to the provisos in that paragraph), were
voted against the reorganization, or which were held of record on the
effective date of a short-form merger; provided, however, that subparagraph
(A) rather than subparagraph (B) of this paragraph applies in any case where
the approval required by Section 1201 is sought by written consent rather
than at a meeting.
(3) Which the dissenting stockholder has demanded that the corporation
purchase at their fair market value, in accordance with Section 1301.
(4) Which the dissenting stockholder has submitted for endorsement, in
accordance with Section 1302.
(c) As used in this chapter, "dissenting stockholder" means the recordholder
of dissenting shares and includes a transferee of record.
Section 1301. Notice to holders of dissenting shares in reorganizations; demand
for purchase; time; contents
(a) If, in the case of a reorganization, any stockholders of a corporation
have a right under Section 1300, subject to compliance with paragraphs (3) and
(4) of subdivision (b) thereof, to require the corporation to purchase their
shares for cash, such corporation shall mail to each such stockholder a notice
of the approval of the reorganization by its outstanding shares (Section 152)
within 10 days after the date of such approval, accompanied by a copy of
Sections 1300, 1302, 1303, 1304 and this section, a statement of the price
determined by the corporation to represent the fair market value of the
dissenting shares, and a brief description of the procedure to be followed if
the stockholder desires to exercise the stockholder's right under such sections.
The statement of price constitutes an offer by the corporation to purchase at
the price stated any dissenting shares as defined in subdivision (b) of Section
1300, unless they lose their status as dissenting shares under Section 1309.
(b) Any stockholder who has a right to require the corporation to purchase
the stockholder's shares for cash under Section 1300, subject to compliance with
paragraphs (3) and (4) of subdivision (b) thereof, and who desires the
corporation to purchase such shares shall make written demand upon the
corporation for the purchase of such shares and payment to the stockholder in
cash of their fair market value. The demand is not effective for any purpose
unless it is received by the corporation or any transfer agent thereof (1) in
the case of shares described in clause (i) or (ii) of paragraph (1) of
subdivision (b) of Section 1300 (without regard to the provisos in that
paragraph), not later than the date of the stockholders' meeting to vote upon
the reorganization, or (2) in any other case within 30
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days after the date on which the notice of the approval by the outstanding
shares pursuant to subdivision (a) or the notice pursuant to subdivision (i) of
Section 1110 was mailed to the stockholder.
(c) The demand shall state the number and class of the shares held of record
by the stockholder which the stockholder demands that the corporation purchase
and shall contain a statement of what such stockholder claims to be the fair
market value of those shares as of the day before the announcement of the
proposed reorganization or short-form merger. The statement of fair market value
constitutes an offer by the stockholder to sell the shares at such price.
Section 1302. Submission of share certificates for endorsement;
uncertificated securities
Within 30 days after the date on which notice of the approval by the
outstanding shares or the notice pursuant to subdivision (i) of Section 1110 was
mailed to the stockholder, the stockholder shall submit to the corporation at
its principal office or at the office of any transfer agent thereof, (a) if the
shares are certificated securities, the stockholder's certificates representing
any shares which the stockholder demands that the corporation purchase, to be
stamped or endorsed with a statement that the shares are dissenting shares or to
be exchanged for certificates of appropriate denomination so stamped or endorsed
or (b) if the shares are uncertificated securities, written notice of the number
of shares which the stockholder demands that the corporation purchase. Upon
subsequent transfers of the dissenting shares on the books of the corporation,
the new certificates, initial transaction statement, and other written
statements issued therefor shall bear a like statement, together with the name
of the original dissenting holder of the shares.
Section 1303. Payment of agreed price with interest; agreement fixing fair
marKEt value; filing; time of payment
(a) If the corporation and the stockholder agree that the shares are
dissenting shares and agree upon the price of the shares, the dissenting
stockholder is entitled to the agreed price with interest thereon at the legal
rate on judgments from the date of the agreement. Any agreements fixing the fair
market value of any dissenting shares as between the corporation and the holders
thereof shall be filed with the secretary of the corporation.
(b) Subject to the provisions of Section 1306, payment of the fair market
value of dissenting shares shall be made within 30 days after the amount thereof
has been agreed or within 30 days after any statutory or contractual conditions
to the reorganization are satisfied, whichever is later, and in the case of
certificated securities, subject to surrender of the certificates therefor,
unless provided otherwise by agreement.
Section 1304. Action to determine whether shares are dissenting shares or
fair market value; limitation; joinder; consolidation; determination of issues;
appointment of appraisers
(a) If the corporation denies that the shares are dissenting shares, or the
corporation and the stockholder fail to agree upon the fair market value of the
shares, then the stockholder demanding purchase of such shares as dissenting
shares or any interested corporation, within six months after the date on which
notice of the approval by the outstanding shares (Section 152) or notice
pursuant to subdivision (i) of Section 1110 was mailed to the stockholder, but
not thereafter, may file a complaint in the superior court of the proper county
praying the court to determine whether the shares are dissenting shares or the
fair market value of the dissenting shares or both or may intervene in any
action pending on such a complaint.
(b) Two or more dissenting stockholders may join as plaintiffs or be joined
as defendants in any such action and two or more such actions may be
consolidated.
(c) On the trial of the action, the court shall determine the issues. If the
status of the shares as dissenting shares is in issue, the court shall first
determine that issue. If the fair market value of the dissenting shares is in
issue, the court shall determine, or shall appoint one or more impartial
appraisers to determine, the fair market value of the shares.
Section 1305. Report of appraisers; confirmation; determination by court;
judgment; payment; appeal; costs
(a) If the court appoints an appraiser or appraisers, they shall proceed
forthwith to determine the fair market value per share. Within the time fixed by
the court, the appraisers, or a majority of them, shall make and file a report
in the office of the clerk of the court. Thereupon, on the motion of any party,
the report shall be submitted to the court and considered on such evidence as
the court considers relevant. If the court finds the report reasonable, the
court may confirm it.
(b) If a majority of the appraisers appointed fail to make and file a report
within 10 days from the date of their appointment or
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within such further time as may be allowed by the court or the report is not
confirmed by the court, the court shall determine the fair market value of the
dissenting shares.
(c) Subject to the provisions of Section 1306, judgment shall be rendered
against the corporation for payment of an amount equal to the fair market value
of each dissenting share multiplied by the number of dissenting shares which any
dissenting stockholder who is a party, or who has intervened, is entitled to
require the corporation to purchase, with interest thereon at the legal rate
from the date on which judgment was entered.
(d) Any such judgment shall be payable forthwith with respect to
uncertificated securities and, with respect to certificated securities, only
upon the endorsement and delivery to the corporation of the certificates for the
shares described in the judgment. Any party may appeal from the judgment.
(e) The costs of the action, including reasonable compensation to the
appraisers to be fixed by the court, shall be assessed or apportioned as the
court considers equitable, but, if the appraisal exceeds the price offered by
the corporation, the corporation shall pay the costs (including in the
discretion of the court attorneys' fees, fees of expert witnesses and interest
at the legal rate on judgments from the date of compliance with Sections 1300,
1301 and 1302 if the value awarded by the court for the shares is more than 125
percent of the price offered by the corporation under subdivision (a) of Section
1301).
Section 1306. Prevention of immediate payment; status as creditors; interest
To the extent that the provisions of Chapter 5 prevent the payment to any
holders of dissenting shares of their fair market value, they shall become
creditors of the corporation for the amount thereof together with interest at
the legal rate on judgments until the date of payment, but subordinate to all
other creditors in any liquidation proceeding, such debt to be payable when
permissible under the provisions of Chapter 5.
Section 1307. Dividends on dissenting shares
Cash dividends declared and paid by the corporation upon the dissenting
shares after the date of approval of the reorganization by the outstanding
shares (Section 152) and prior to payment for the shares by the corporation
shall be credited against the total amount to be paid by the corporation
therefor.
Section 1308. Rights of dissenting stockholders pending valuation; withdrawal
of demand for payment
Except as expressly limited in this chapter, holders of dissenting shares
continue to have all the rights and privileges incident to their shares, until
the fair market value of their shares is agreed upon or determined. A dissenting
stockholder may not withdraw a demand for payment unless the corporation
consents thereto.
Section 1309. Termination of dissenting share and stockholder status
Dissenting shares lose their status as dissenting shares and the holders
thereof cease to be dissenting stockholders and cease to be entitled to require
the corporation to purchase their shares upon the happening of any of the
following:
(a) The corporation abandons the reorganization. Upon abandonment of the
reorganization, the corporation shall pay on demand to any dissenting
stockholder who has initiated proceedings in good faith under this chapter all
necessary expenses incurred in such proceedings and reasonable attorneys' fees.
(b) The shares are transferred prior to their submission for endorsement in
accordance with Section 1302 or are surrendered for conversion into shares of
another class in accordance with the articles.
(c) The dissenting stockholder and the corporation do not agree upon the
status of the shares as dissenting shares or upon the purchase price of the
shares, and neither files a complaint or intervenes in a pending action as
provided in Section 1304, within six months after the date on which notice of
the approval by the outstanding shares or notice pursuant to subdivision (i) of
Section 1110 was mailed to the stockholder.
(d) The dissenting stockholder, with the consent of the corporation,
withdraws the stockholder's demand for purchase of the dissenting shares.
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Section 1310. Suspension of right to compensation or valuation proceedings;
litigation of stockholders' approval
If litigation is instituted to test the sufficiency or regularity of the
votes of the stockholders in authorizing a reorganization, any proceedings under
Sections 1304 and 1305 shall be suspended until final determination of such
litigation.
Section 1311. Exempt shares
This chapter, except Section 1312, does not apply to classes of shares whose
terms and provisions specifically set forth the amount to be paid in respect to
such shares in the event of a reorganization or merger.
Section 1312. Right of dissenting stockholder to attack, set aside or rescind
merger or reorganization; restraining order or injunction; conditions
(a) No stockholder of a corporation who has a right under this chapter to
demand payment of cash for the shares held by the stockholder shall have any
right at law or in equity to attack the validity of the reorganization or
short-form merger, or to have the reorganization or short-form merger set aside
or rescinded, except in an action to test whether the number of shares required
to authorize or approve the reorganization have been legally voted in favor
thereof; but any holder of shares of a class whose terms and provisions
specifically set forth the amount to be paid in respect to them in the event of
a reorganization or short-form merger is entitled to payment in accordance with
those terms and provisions or, if the principal terms of the reorganization are
approved pursuant to subdivision (b) of Section 1202, is entitled to payment in
accordance with the terms and provisions of the approved reorganization.
(b) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, subdivision (a) shall not
apply to any stockholder of such party who has not demanded payment of cash for
such stockholder's shares pursuant to this chapter; but if the stockholder
institutes any action to attack the validity of the reorganization or short-form
merger or to have the reorganization or short-form merger set aside or
rescinded, the stockholder shall not thereafter have any right to demand payment
of cash for the stockholder's shares pursuant to this chapter. The court in any
action attacking the validity of the reorganization or short-form merger or to
have the reorganization or short-form merger set aside or rescinded shall not
restrain or enjoin the consummation of the transaction except upon 10 days'
prior notice to the corporation and upon a determination by the court that
clearly no other remedy will adequately protect the complaining stockholder or
the class of stockholders of which such stockholder is a member.
(c) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, in any action to attack the
validity of the reorganization or short-form merger or to have the
reorganization or short- form merger set aside or rescinded, (1) a party to a
reorganization or short- form merger which controls another party to the
reorganization or short-form merger shall have the burden of proving that the
transaction is just and reasonable as to the stockholders of the controlled
party, and (2) a person who controls two or more parties to a reorganization
shall have the burden of proving that the transaction is just and reasonable as
to the stockholders of any party so controlled.
Section 1313. Conversions deemed to constitute a reorganization; application
of chapter
A conversion pursuant to Chapter 11.5 (commencing with Section 1150) shall be
deemed to constitute a reorganization for purposes of applying the provisions of
this chapter, in accordance with and to the extent provided in Section 1159.
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ANNEX B
SECTION 262 OF THE DELAWARE GENERAL CORPORATE LAW
Section 262 Appraisal rights.
(a) Any stockholder of a corporation of this State who holds shares of stock
on the date of the making of a demand pursuant to subsection (d) of this section
with respect to such shares, who continuously holds such shares through the
effective date of the merger or consolidation, who has otherwise complied with
subsection (d) of this section and who has neither voted in favor of the merger
or consolidation nor consented thereto in writing pursuant to Section 228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or series
of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section 251 (other than a merger effected pursuant to
Section 251(g) of this title), Section 252, Section 254, Section 257, Section
258, Section 263 Or Section 264 of this title:
(1) Provided, however, that no appraisal rights under this section shall be
available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to determine
the stockholders entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or consolidation, were
either (i) listed on a national securities exchange or designated as a
national market system security on an interdealer quotation system by the
National Association of Securities Dealers, Inc. or (ii) held of record by
more than 2,000 holders; and further provided that no appraisal rights shall
be available for any shares of stock of the constituent corporation surviving
a merger if the merger did not require for its approval the vote of the
stockholders of the surviving corporation as provided in subsection (f) of
Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required by
the terms of an agreement of merger or consolidation pursuant to
Sections 251, 252, 254, 257, 258, 263 and 264 of this title to accept
for such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect
thereof;
b. Shares of stock of any other corporation, or depository receipts in
respect thereof, which shares of stock (or depository receipts in respect
thereof) or depository receipts at the effective date of the merger or
consolidation will be either listed on a national securities exchange or
designated as a national market system security on an interdealer
quotation system by the National Association of Securities Dealers, Inc.
or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section 253 of this title is not owned by
the parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this
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section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for
such meeting with respect to shares for which appraisal rights are available
pursuant to subsection (b) or (c) hereof that appraisal rights are available
for any or all of the shares of the constituent corporations, and shall
include in such notice a copy of this section. Each stockholder electing to
demand the appraisal of such stockholder's shares shall deliver to the
corporation, before the taking of the vote on the merger or consolidation, a
written demand for appraisal of such stockholder's shares. Such demand will
be sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the appraisal
of such stockholder's shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein provided.
Within 10 days after the effective date of such merger or consolidation, the
surviving or resulting corporation shall notify each stockholder of each
constituent corporation who has complied with this subsection and has not
voted in favor of or consented to the merger or consolidation of the date
that the merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to Section 228 oR
SectION 253 of this title, then either a constituent corporation before the
effective date of the merger or consolidation or the surviving or resulting
corporation within 10 days thereafter shall notify each of the holders of any
class or series of stock of such constituent corporation who are entitled to
appraisal rights of the approval of the merger or consolidation and that
appraisal rights are available for any or all shares of such class or series
of stock of such constituent corporation, and shall include in such notice a
copy of this section. Such notice may, and, if given on or after the
effective date of the merger or consolidation, shall, also notify such
stockholders of the effective date of the merger or consolidation. Any
stockholder entitled to appraisal rights may, within 20 days after the date
of mailing of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the appraisal
of such holder's shares. If such notice did not notify stockholders of the
effective date of the merger or consolidation, either (i) each such
constituent corporation shall send a second notice before the effective date
of the merger or consolidation notifying each of the holders of any class or
series of stock of such constituent corporation that are entitled to
appraisal rights of the effective date of the merger or consolidation or (ii)
the surviving or resulting corporation shall send such a second notice to all
such holders on or within 10 days after such effective date; provided,
however, that if such second notice is sent more than 20 days following the
sending of the first notice, such second notice need only be sent to each
stockholder who is entitled to appraisal rights and who has demanded
appraisal of such holder's shares in accordance with this subsection. An
affidavit of the secretary or assistant secretary or of the transfer agent of
the corporation that is required to give either notice that such notice has
been given shall, in the absence of fraud, be prima facie evidence of the
facts stated therein. For purposes of determining the stockholders entitled
to receive either notice, each constituent corporation may fix, in advance, a
record date that shall be not more than 10 days prior to the date the notice
is given, provided, that if the notice is given on or after the effective
date of the merger or consolidation, the record date shall be such effective
date. If no record date is fixed and the notice is given prior to the
effective date, the record date shall be the close of business on the day
next preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw such
stockholder's demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in Chancery
in which the petition was filed
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a duly verified list containing the names and addresses of all stockholders who
have demanded payment for their shares and with whom agreements as to the value
of their shares have not been reached by the surviving or resulting corporation.
If the petition shall be filed by the surviving or resulting corporation, the
petition shall be accompanied by such a duly verified list. The Register in
Chancery, if so ordered by the Court, shall give notice of the time and place
fixed for the hearing of such petition by registered or certified mail to the
surviving or resulting corporation and to the stockholders shown on the list at
the addresses therein stated. Such notice shall also be given by 1 or more
publications at least 1 week before the day of the hearing, in a newspaper of
general circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by mail and
by publication shall be approved by the Court, and the costs thereof shall be
borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
such stockholder's certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under this
section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed upon
the parties as the Court deems equitable in the circumstances. Upon application
of a stockholder, the Court may order all or a portion of the expenses incurred
by any stockholder in connection with the appraisal proceeding, including,
without limitation, reasonable attorney's fees and the fees and expenses of
experts, to be charged pro rata against the value of all the shares entitled to
an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court
of Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation.
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