SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only
(as Permitted by Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
SYMMETRICOM, INC.
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(Name Of Registrant As Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
SYMMETRICOM, INC.
2300 ORCHARD PARKWAY
SAN JOSE, CA 95131-1017
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD OCTOBER 26, 2001
Annual Meeting
The Annual Meeting of Shareholders of Symmetricom, Inc., a California
corporation (the "Company"), will be held on Monday, October 26, 2001 at 10:00
a.m. at the offices of the Company, at 2300 Orchard Parkway, San Jose,
California 95131-1017.
At the meeting (or, as applicable, any and all adjournments or
postponements thereof), shareholders will consider and vote upon the following
proposals:
1. ELECTION OF DIRECTORS. To elect nominees for the Board of Directors of
the Company.
2. APPROVAL OF THE COMPANY'S REINCORPORATING IN DELAWARE. To approve the
change of the state of incorporation of the Company from California to Delaware.
3. APPROVAL OF A CLASSIFIED BOARD OF DIRECTORS. To approve the adoption of
a provision in the proposed Delaware charter providing for a classified Board of
Directors consisting of three classes. Note: If approved, this proposal will be
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effectuated only if Proposal No. Two is approved and implemented.
4. ELIMINATION OF STOCKHOLDER ACTION BY WRITTEN CONSENT AND STOCKHOLDER
ABILITY TO CALL A SPECIAL MEETING OF THE STOCKHOLDERS. To approve a charter
provision in the proposed Delaware charter for the elimination of the
stockholders' ability to act by written consent and the elimination of
provisions in the proposed Delaware bylaws providing for stockholder ability to
call a special meeting of the stockholders. Note: If approved, this proposal
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will be effectuated only if Proposal No. Two is approved and implemented.
5. SUBJECT THE DELAWARE COMPANY TO THE PROTECTIONS AFFORDED BY SECTION 203
OF THE DELAWARE GENERAL CORPORATION LAW. To elect to subject the Company, if
reincorporated in Delaware, to the effect of Section 203 of the Delaware General
Corporation Law. Note: If approved, this proposal will be effectuated only if
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Proposal No. Two is approved and implemented.
6. INCREASE THE STOCKHOLDER VOTE REQUIRED TO AMEND THE PROPOSED DELAWARE
BYLAWS AND CERTAIN FEATURES OF THE PROPOSED DELAWARE CHARTER. To approve the
adoption of provisions in the proposed Delaware bylaws and proposed Delaware
charter increasing the stockholder vote required to adopt, amend or repeal the
proposed Delaware bylaws and certain features of the proposed Delaware charter
from a majority to 66 2/3%. Note: If approved, this proposal will be effectuated
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only if Proposal No. Two is approved and implemented.
7. RATIFICATION AND APPROVAL OF THE APPOINTMENT OF INDEPENDENT AUDITORS. To
ratify the appointment of Deloitte & Touche LLP as the Company's independent
auditors for the current fiscal year.
8. OTHER BUSINESS. To transact such other business as may properly come
before the meeting or any and all postponements or adjournments thereof.
The Board of Directors has fixed the close of business on September 5, 2001
as the record date for the determination of shareholders entitled to notice of
and to vote at the meeting. Accordingly, only shareholders of record at the
close of business on that day will be entitled to vote at the meeting,
notwithstanding any transfer of shares on the books of the Company after that
date.
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A Proxy Statement which contains information with respect to the matters to
be voted upon at the meeting and a Proxy card and return envelope are furnished
herewith. Management urges each shareholder to carefully read the Proxy
Statement.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ WILLIAM SLATER
William Slater
Corporate Secretary
San Jose, California
Dated: September ___, 2001
IT IS DESIRABLE THAT AS MANY OF THE SHAREHOLDERS AS POSSIBLE BE REPRESENTED AT
THE MEETING IN PERSON OR BY PROXY. YOU ARE CORDIALLY INVITED TO ATTEND IN
PERSON. REGARDLESS OF WHETHER YOU INTEND TO BE PRESENT AT THE MEETING, YOU ARE
URGED TO SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY SO THAT YOUR SHARES WILL BE
REPRESENTED IN THE EVENT YOU ARE UNABLE TO ATTEND. SIGNING A PROXY AT THIS TIME
WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON SHOULD YOU LATER DECIDE TO ATTEND
THE MEETING.
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SYMMETRICOM, INC.
2300 ORCHARD PARKWAY
SAN JOSE, CA 95131-1017
PROXY STATEMENT
GENERAL
Date, Time and Place
This Proxy Statement is furnished to the shareholders of Symmetricom, Inc.,
a California corporation (the "Company"), in connection with the solicitation of
proxies by the Board of Directors (the "Board") of the Company for use at the
Annual Meeting of Shareholders to be held at 10:00 a.m. on Monday, October 26,
2001, at the principal executive offices of the Company at the address set forth
above, and any and all postponements or adjournments thereof (the "Annual
Meeting"). It is anticipated that this Proxy Statement and the enclosed form of
proxy card (the "Proxy") will be sent to such shareholders on or about September
22, 2001.
Purposes of the Annual Meeting
The purposes of the Annual Meeting are to (1) elect nominees for the Board
of Directors of the Company, (2) approve the change of the state of
incorporation of the Company from California to Delaware, (3) approve a
classified Board of Directors (to be effectuated only upon the approval and
implementation of the reincorporation proposal), (4) eliminate stockholder
action by written consent and stockholder ability to call a special meeting of
the stockholders (to be effectuated only upon the approval and implementation of
the reincorporation proposal), (5) subject the Company, if reincorporated in
Delaware, to the protection afforded by Delaware's anti-takeover statute (to be
effectuated only upon the approval and implementation of the reincorporation
proposal), (6) increase the stockholder vote required to amend the proposed
Delaware bylaws and certain features of the proposed Delaware charter (to be
effectuated only upon the approval and implementation of the reincorporation
proposal), (7) ratify the appointment of Deloitte & Touche LLP as the Company's
independent auditors for the current fiscal year and (8) transact such other
business as may properly come before the Annual Meeting.
Proxy/Voting Instruction Cards and Revocability of Proxies
When the Proxy in the enclosed form is returned properly executed, the
shares represented thereby will be voted at the Annual Meeting in accordance
with the instructions given by the shareholder. If no contrary instructions are
given, the returned Proxy will be voted in favor of the election of the nominees
named herein as directors and in favor of each of the other proposals. Any
shareholder, including a shareholder personally attending the Annual Meeting,
may revoke his or her Proxy at any time prior to its use by filing with the
Secretary of the Company, at the corporate offices at 2300 Orchard Parkway, San
Jose, California 95131-1017, a written notice of revocation or a duly executed
Proxy bearing a later date or by voting in person at the Annual Meeting.
Record Date and Share Ownership
Shareholders of record at the close of business on September 5, 2001 (the
"Record Date") are entitled to notice of and to vote at the Annual Meeting. At
the Record Date, [________] shares of the Company's Common Stock were issued and
outstanding. For information regarding security ownership by management and by
5% shareholders, see "Other Information--Share Ownership by Principal
Shareholders and Management," below.
Voting and Solicitation
Every shareholder voting for the election of directors may cumulate such
shareholder's votes and give one candidate a number of votes equal to the number
of directors to be elected multiplied by the number of votes to which the
shareholder's shares are entitled, or distribute the shareholder's votes on the
same principle among as many candidates as the shareholder thinks fit, provided
that votes cannot be cast for more than the number of candidates to be elected.
However, no shareholder shall be entitled to cumulate votes for a candidate
unless such candidate's name has been placed in nomination prior to the voting
and the shareholder, or any other shareholder, has given notice at the meeting
prior to the voting of the intention to cumulate votes. The holders of Proxies
on behalf of the Board will cumulate votes in the event that additional persons
(in addition to those set forth herein) are nominated at the Annual Meeting for
election as directors. The director candidates who receive the most votes will
be elected to fill the seats on the Board.
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Approval of matters other than election of directors and ratification of
the Company's independent auditors (i.e., approval of the proposals regarding
the Company's reincorporation in Delaware, classified Board, elimination of
written consent and the stockholders' right to call special meetings of the
stockholders, subjecting the Company to Delaware's anti-takeover statute and
increasing the required stockholder vote to amend the bylaws) will require the
favorable vote of a majority of all outstanding shares entitled to vote
regardless of whether they are represented and voting at the Annual Meeting.
Ratification of the Company's independent auditors, and approval of other
proposals that may come before the Annual Meeting (in general), will require the
favorable vote of a majority of the votes "represented and voting" at the Annual
Meeting. An automated system administered by the Company's transfer agent
tabulates the proxies received prior to the date of the Annual Meeting.
The cost of this solicitation will be borne by the Company. The Company may
reimburse brokerage firms and other persons representing beneficial owners of
shares for their expenses in forwarding solicitation material to such beneficial
owners. Proxies may also be solicited by certain of the Company's directors,
officers and regular employees, without additional compensation, personally or
by telephone, telegram or facsimile. In addition, the Company has retained
Georgeson Shareholder Communications, Inc. to assist with the solicitation of
proxies for a fee not to exceed $10,000, plus reimbursement out-of-pocket
expenses. Such assistance may include the solicitation of proxies by telephone
or facsimile.
Quorum; Abstentions; Broker Non-Votes
The required quorum for the transaction of business at the Annual Meeting
is a majority of the shares of Common Stock issued and outstanding as of the
Record Date. Shares that are voted "FOR," "AGAINST" or "WITHHELD FROM" a
proposal are treated as being present at the meeting for purposes of
establishing a quorum and are also treated as shares "represented and voting" at
the Annual Meeting (the "Votes Cast") with respect to such matter.
While there is no definitive statutory or case law authority in California
as to the proper treatment of abstentions in the counting of votes with respect
to a proposal, the Company believes that in general, in the absence of contrary
controlling authority, abstentions should be counted for purposes of determining
the presence or absence of a quorum for the transaction of business, but should
not be counted as Votes Cast with respect to a proposal since the shareholder
has expressly declined to vote on such proposal. Similarly, broker non-votes
will be counted for purposes of determining the presence or absence of a quorum
for the transaction of business, but will not be counted for purposes of
determining the number of Votes Cast with respect to a proposal. A broker
"non-vote" occurs when a nominee holding shares for a beneficial owner does not
vote on a particular proposal because the nominee does not have discretionary
power with respect to that item and has received no instruction from the
beneficial owner.
Accordingly, in general, abstentions and broker "non-votes" will not affect
the outcome of the voting on a proposal that requires a majority of Votes Cast
(such as ratification of the Company's independent auditors for the current
fiscal year), provided, that the number of shares voting in favor of any matter
constitutes at least a majority of the required quorum for the Annual Meeting.
However, approval of the proposals regarding the Company's reincorporation in
Delaware, classified Board, elimination of written consent and the stockholders'
right to call special meetings of the stockholders, subjecting the Company to
Delaware's anti-takeover statute and increasing the required stockholder vote to
amend the bylaws each require that the number of shares voting in favor of that
proposal constitutes at least a majority of all outstanding shares entitled to
vote regardless of whether they are "represented and voting" at the Annual
Meeting. The effect of an abstention or broker "non-vote" for any of such
proposals is, accordingly, the same as a vote against that proposal.
Shareholder Proposals for the Next Annual Meeting
Any proposal to be presented at the Company's next Annual Meeting of
Shareholders must be received at the Company's principal office no later than
May 24, 2002, in order to be considered for inclusion in the Company's proxy
materials for such meeting. Any such proposals must be submitted in writing and
addressed to the attention of the Company's Corporate Secretary at 2300 Orchard
Parkway, San Jose, California 95131-1017.
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PROPOSAL NO. ONE
ELECTION OF DIRECTORS
Nominees
A Board of six directors is to be elected at the Annual Meeting. The Bylaws
of the Company presently provide for a Board of five to eight directors, and the
number of directors is presently set at six. Unless otherwise instructed, the
proxy holders will vote the proxies received by them for management's six
nominees named below, all of whom are presently directors of the Company. The
six nominees receiving the highest number of affirmative votes of the shares
entitled to be voted will be elected as directors of the Company. In the event
that any nominee of the Company is unable or declines to serve as a director at
the time of the Annual Meeting, the proxies will be voted for any nominee who
shall be designated by the present Board to fill the vacancy. It is not expected
that any nominee will be unable or will decline to serve as a director. The term
of office of each person elected as a director will continue until the next
Annual Meeting or until his successor has been elected and qualified.
In the event that the shareholders of the Company approve, at the Annual
Meeting, the proposals regarding the Company's reincorporation in Delaware and
the adoption of a classified board (see Proposals No. Two and Three of this
Proxy Statement - "Approval of the Company's Reincorporation in Delaware" and
"Approval of a Classified Board of Directors" pp. 6 through 27), the Company
will implement a classified Board of Directors. As more fully described below
(see "Classified Board of Directors" on page 27), in such an event the Board of
Directors would be divided into three classes with directors serving staggered
three-year terms, except for the first term of Class I and Class II directors,
who would initially serve one-year and two-year terms, respectively.
The names of the nominees, and certain information about them, are set
forth below:
Director
Name Age Since Principal Occupation or Employment
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Nominees
Richard W. Oliver (1) 54 1997 Chairman of the Board of the Company; Chief Executive Officer of
American Graduate School of Management and Professor of
Management, Vanderbilt University
Thomas W. Steipp (1) 51 1998 Chief Executive Officer and President of the Company
Robert T. Clarkson (1)(2)(3) 46 2000 Independent consultant and investor
Robert M. Neumeister (2)(3) 50 1998 Independent consultant to telecommunications companies
Krish A. Prabhu (3) 46 1998 Chief Operating Officer of Alcatel Telecom, a division of
Alcatel; President and Chief Executive Officer of Alcatel USA, a
division of Alcatel
Richard N. Snyder (2) 55 1999 President and Chief Executive Officer of Corum Cove Consulting
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(1) Member of the Nominating and Governance Committee.
(2) Member of the Audit Committee.
(3) Member of the Stock Option and Compensation Committee.
Mr. Oliver has been Chairman of the Board of the Company since June 1998,
and has been Chief Executive Officer of American Graduate School of Management
since June 2000 and a Professor of Management at the Owen Graduate School of
Management, Vanderbilt University, since September 1992. From 1977 to September
1992, Mr. Oliver served in various marketing and corporate positions, including
as Vice President of Business and Residential Services, Vice President of
Corporate Marketing and special assistant to the Chairman and Chief Executive
Officer for Northern Telecom Limited, a telecommunications company ("Northern
Telecom"). Mr. Oliver is also a director of Applied Innovation, Inc., a
manufacturer of data communication equipment in the telephone industry, as well
as several private companies.
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Mr. Steipp has served as Chief Executive Officer of the Company since
October 1999. Mr. Steipp served as Chief Executive Officer and Chief Financial
Officer of the Company from December 1998 to October 1999. Mr. Steipp served as
President and Chief Operating Officer of Telecom Solutions, a division of the
Company, from March 1998 to December 1998. Prior to joining the Company, from
February 1996 to February 1998, Mr. Steipp served as Vice President and General
Manager of Broadband Data Networks, a division of Scientific-Atlanta. From
January 1979 to January 1996, Mr. Steipp held various management positions in
operations and marketing with Hewlett-Packard. Mr. Steipp served as General
Manager of the Federal Computer Division of Hewlett-Packard from January 1991 to
January 1996 and Manager of Federal Sales & Marketing of Hewlett-Packard from
August 1990 to January 1991. From January 1989 to August 1990, Mr. Steipp was
Manager, Systems Integration Operations of Hewlett-Packard.
Mr. Clarkson is an independent consultant and investor. From March 2000
until September 2000, Mr. Clarkson served as Chief Operating Officer of
MarchFIRST, a professional services company. From December 1998 to February
2000, Mr. Clarkson served in various executive positions with US Web/CKS, a
professional services company that was a predecessor to MarchFIRST, the most
recent being Chief Operating Officer. From February 1997 to December 1998 Mr.
Clarkson served as Executive Vice President with CKS Group, a predecessor of US
Web/CKS and MarchFIRST. For the fourteen years prior to joining CKS Group, Mr.
Clarkson practiced law as an associate and partner at the law firm of Wilson,
Sonsini, Goodrich and Rosati.
Mr. Neumeister is an independent consultant to telecommunications
companies. From January 2000 until June 2001, he served as Chief Financial
Officer of Aerie Networks, a communications company. From December 1998 to
December 1999, Mr. Neumeister served as Vice President, Finance and Director of
Finance of Intel Corporation, a semiconductor manufacturer. From September 1995
to November 1998, Mr. Neumeister served as Chief Financial Officer of Sprint
PCS, a telecommunications company. Mr. Neumeister served in various positions
with Northern Telecom. Between 1991 and 1995, Mr. Neumeister served as Vice
President of Finance and Information Services for Northern Telecom--Canada/Latin
America, a division of Northern Telecom, Senior Vice President and Chief
Financial Officer of Motorola Nortel Communications Co., a joint venture between
Northern Telecom and Motorola, and Vice President of Finance--Americas, Vice
President Finance--Broadband Networks, Customer Network Solutions and Vice
President Finance, all with Northern Telecom.
Mr. Prabhu has served as Chief Operating Officer and Executive Vice
President of Alcatel Telecom, a division of Alcatel, a telecommunications
company, since August 1999 and March 1997, respectively, and as President and
Chief Executive Officer of Alcatel USA, a division of Alcatel, since 1997. Mr.
Prabhu joined Alcatel in 1991 when Rockwell International ("Rockwell"), where
Mr. Prabhu had served since 1984, was acquired by Alcatel. After Alcatel's
acquisition of Rockwell, Mr. Prabhu served as Vice President of Business
Development and Chief Technical Officer of Alcatel Network Systems, a division
of Alcatel, from 1994 to 1995. Mr. Prabhu also served Alcatel Telecom in Belgium
as President of the Broadband Products Division from 1995 to 1997. Prior to
Alcatel, Mr. Prabhu served as a member of the technical staff at AT&T Bell
Laboratories.
Mr. Snyder has served as President and Chief Executive Officer of Corum
Cove Consulting LLC, a consulting company which provides assistance to early
stage technology companies, since August 1997. From February 1996 to August
1997, Mr. Snyder served as Senior Vice President of Worldwide Sales, Marketing,
Service and Support at Compaq Computer Corporation. From February 1995 to
February 1996, Mr. Snyder served as Senior Vice President of Dell Computer
Corporation. Between September 1992 and February 1995, Mr. Snyder served as a
Group General Manager for Hewlett-Packard Company. Mr. Snyder is also a director
of VTEL Corporation, a manufacturer of multimedia digital visual communications
systems, as well as several private companies.
Vote Required; Recommendation of Board of Directors
The candidates receiving the highest number of affirmative votes of shares
entitled to vote for them, up to the number of directors to be elected, shall be
elected. Votes withheld from any director are counted for purposes of
determining the presence or absence of a quorum, but have no legal effect under
California law.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES SET FORTH HEREIN.
The Board of Directors and Its Committees
The Board of Directors has a Nominating and Governance Committee, an Audit
Committee, and a Stock Option and Compensation Committee. The Nominating and
Governance Committee assists the Board as a whole in meeting its responsibility
to represent shareholder interest in building long-term value, to consider and
review all candidates for service on the Board, to consider and recommend
director compensation, and to institute a process to
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formally evaluate the Board as a whole and the CEO. The Audit Committee monitors
the performance of the independent auditors, recommends their engagement or
dismissal to the Board of Directors and monitors the Company's internal
financial and accounting organization and financial reporting. The Stock Option
and Compensation Committee recommends executive compensation arrangements for
action by the Board as a whole, and administers the Company's stock option
plans. During the 2001 fiscal year, the Audit Committee held 6 meetings and the
Stock Option and Compensation Committee held 6 meetings.
During the 2001 fiscal year, there were 5 meetings of the Board of
Directors. Each of the Company's present directors attended at least 75% of the
aggregate of (i) the total number of meetings of the Board of Directors and (ii)
the total number of meetings of committees of the Board of Directors on which
such person served during the 2001 fiscal year.
Director Compensation
Under the terms of the 1999 Director Stock Option Plan, as amended, each
non-employee director automatically receives (i) a nonstatutory stock option to
purchase 10,000 shares of the Company's Common Stock on the date on which such
person first becomes an outside director, and (ii) on January 1 of each year,
either a nonstatutory stock option to purchase 10,000 shares of the Company's
Common Stock, or a pro rata share of the 10,000 shares based on the time period
between the Director's start date and January 1 as a percentage of twelve
months. The non-employee Chairman of the Board is paid $15,000 per quarter and
$500 for each teleconference Board meeting attended. Non-employee directors of
the Company are paid $2,500 for each Board meeting attended in person, $500 for
each teleconference Board meeting attended, and $250 for each Committee meeting
attended, unless such Committee meets on the same day as an in-person Board
meeting, in which case no additional payment is made for the Committee meeting.
The Company also reimburses its directors for certain expenses incurred by them
in their capacity as directors or in connection with attendance at Board
meetings.
The Company sponsors a deferred compensation plan under which non-employee
directors may elect to defer a portion of their current compensation on a
pre-tax basis, and to have such deferred compensation and any accrued earnings
distributed to them at a future date. The Company may also make discretionary
contributions to the accounts of one or more of the plan's participants. To
date, the Company has not made such discretionary contributions.
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PROPOSAL NO. TWO
APPROVAL OF THE COMPANY'S
REINCORPORATING IN DELAWARE
Introduction
The Board has unanimously approved a proposal to change the state of
incorporation of the Company from California to Delaware, as well as certain
other changes to the Company's corporate governance features and rights of the
Company's shareholders for implementation in connection with the reincorporation
(collectively, the "Proposed Reincorporation" or the "Reincorporation"). In
addition to soliciting the shareholders' vote for the Proposed Reincorporation,
the Board is soliciting the approval by the shareholders of certain fundamental
changes to the Company's proposed Delaware charter and proposed Delaware bylaws
(which would be effected only if the Proposed Reincorporation is approved and
implemented). Such fundamental changes are being submitted to the shareholders
for approval as separate and distinct items to be voted upon at the Annual
Meeting and are described in more detail under Proposal Nos. Three, Four, Five
and Six below (the "Related Proposals"). The vote for approval of the Proposed
Reincorporation under this Proposal No. Two is separate from, and shall be taken
independently of, the voting for each of the Related Proposals.
For the reasons set forth below, the Board of Directors believes that the
Proposed Reincorporation and the Related Proposals are in the best interests of
the Company and its shareholders. Shareholders are urged to carefully consider
this Proxy Statement, including the related exhibits referenced below and
attached hereto, before voting on the Proposed Reincorporation or any of the
Related Proposals.
Throughout this Proxy Statement, the term "Symmetricom California" refers
to Symmetricom, Inc., the existing California corporation, and the term
"Symmetricom Delaware" refers to the new Delaware corporation, a wholly owned
subsidiary of Symmetricom California, which is the proposed successor to
Symmetricom California under the Proposed Reincorporation. The discussion set
forth below is qualified in its entirety by reference to the Merger Agreement,
the Amended and Restated Certificate of Incorporation of Symmetricom Delaware
(as it may be modified pursuant to the approval of any of the Related Proposals)
and the Bylaws of Symmetricom Delaware (as they may be modified pursuant to the
approval of any of the Related Proposals), copies of which are attached to this
Proxy Statement as Appendices B, C and D.
Reasons For The Proposed Reincorporation
As the Company plans for the future, the Board of Directors and management
believe that it is essential to be able to rely upon well established principles
of corporate governance in making legal and business decisions. The prominence
and predictability of Delaware corporate law provides a reliable foundation on
which the Company's governance decisions can be based, and the Company believes
that shareholders will benefit from the responsiveness of Delaware corporate law
to their needs and to those of the corporation they own.
Prominence, Predictability and Flexibility of Delaware Law. For many years
Delaware has followed a policy of encouraging incorporation in that state and,
in furtherance of that policy, has been a leader in adopting, construing and
implementing comprehensive, flexible corporate laws responsive to the legal and
business needs of corporations organized under its laws. Many corporations have
chosen Delaware initially as a state of incorporation or have subsequently
changed corporate domicile to Delaware in a manner similar to that proposed by
the Company. Because of Delaware's prominence as the state of incorporation for
many major corporations, both the legislature and courts in Delaware have
demonstrated an ability and a willingness to act quickly and effectively to meet
changing business needs. The Delaware courts have developed 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 corporate legal affairs.
Well Established Principles of Corporate Governance. There is substantial
judicial precedent in the Delaware courts as to the legal principles applicable
to measures that may be taken by a corporation and to the conduct of a
corporation's board of directors, such as under the business judgment rule and
other standards. The Company believes that its shareholders will benefit from
the well established principles of corporate governance that Delaware law
affords.
Increased Ability to Attract and Retain Qualified Directors. Both
California law and Delaware law permit a corporation to include a provision in
its corporate charter that reduces or eliminates the monetary liability of
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directors for breaches of fiduciary duty in certain circumstances. The
increasing frequency of claims and litigation directed against directors and
officers has greatly expanded the risks facing directors and officers of
corporations in exercising their respective duties. The amount of time and money
required to respond to these claims and to defend this type of litigation can be
substantial. It is the Company's desire to reduce these risks to its directors
and officers and to limit situations in which monetary damages can be recovered
against directors so that the Company may continue to attract and retain
qualified directors who otherwise might be unwilling to serve because of the
risks involved. The Company believes that, in general, Delaware law provides
greater protection to directors than California law and that Delaware case law
regarding a corporation's ability to limit director liability is more developed
and provides more guidance than California law.
Mechanics Of Reincorporation
The Proposed Reincorporation will be effected by merging Symmetricom
California into Symmetricom Delaware. Upon completion of the merger, Symmetricom
California, as a corporate entity, will cease to exist and Symmetricom Delaware
will continue to operate the business of the Company under its current name,
Symmetricom, Inc.
Pursuant to an Agreement and Plan of Merger, in substantially the form
attached hereto as Appendix B (the "Merger Agreement"), each outstanding share
of Symmetricom California common stock, no par value, will be automatically
converted into one share of Symmetricom Delaware common stock, par value $0.0001
per share, upon the effective date of the merger. Each stock certificate
representing issued and outstanding shares of Symmetricom California common
stock will continue to represent the same number of shares of common stock of
Symmetricom Delaware. IT WILL NOT BE NECESSARY FOR SHAREHOLDERS TO EXCHANGE
THEIR EXISTING STOCK CERTIFICATES FOR STOCK CERTIFICATES OF SYMMETRICOM
DELAWARE. However, shareholders may exchange their certificates if they so
choose. The common stock of Symmetricom California is listed for trading on The
Nasdaq National Market and, after the Reincorporation, the common stock of
Symmetricom Delaware will continue to be traded on The Nasdaq National Market
without interruption. The common stock of Symmetricom Delaware will be traded
under the same symbol, "SYMM," as the shares of common stock of Symmetricom
California are currently traded.
The Proposed Reincorporation has been unanimously approved by the Company's
Board of Directors. If approved by the shareholders, it is anticipated that the
Reincorporation will become effective as soon as practicable (the "Effective
Date") following the Annual Meeting. However, pursuant to the Merger Agreement,
the Proposed Reincorporation may be abandoned or the Merger Agreement may be
amended by the Board of Directors (except that the principal terms may not be
amended without shareholder approval) either before or after shareholder
approval has been obtained and prior to the Effective Date if, in the opinion of
the Board of Directors, circumstances arise which make it inadvisable to proceed
under the original terms of the Merger Agreement. Shareholders of Symmetricom
California will have no appraisal rights with respect to the Proposed
Reincorporation.
Vote Required For The Proposed Reincorporation
Approval of the Proposed Reincorporation, which will also constitute
approval of (i) the Merger Agreement, the Amended and Restated Certificate of
Incorporation of Symmetricom Delaware and the Bylaws of Symmetricom Delaware,
which include the changes to the Company's corporate governance features and the
rights of the Company's shareholders as set forth in this Proposal Two (but
without incorporating any of the Related Proposals absent shareholder approval
of the same), (ii) the assumption of the employee benefit plans, equity based
incentive plans and shareholder rights plan of Symmetricom California by
Symmetricom Delaware and (iii) the restatement of the Company's indemnification
agreements with each of its officers and directors to afford such persons
indemnification by the Company to the fullest extent permitted by Delaware law,
will require the affirmative vote of the holders of a majority of the
outstanding shares of common stock of Symmetricom California entitled to vote.
The effect of an abstention or a broker non-vote is the same as that of a
vote against the Proposed Reincorporation.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE PROPOSED
REINCORPORATION.
Consequences Of The Proposed Reincorporation
The Proposed Reincorporation will result in a change in the legal domicile
of the Company and certain other changes of a legal nature which are described
in this Proxy Statement. The Proposed Reincorporation will not result in any
change in the name, business management, fiscal year, assets or liabilities or
location of the principal
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facilities of the Company. The six directors who will be elected at the Annual
Meeting will become the directors of Symmetricom Delaware (and, in the event
that Proposal No. Three - "Approval of a Classified Board of Directors" - is
approved at the Annual Meeting, divided into classes with staggered terms as
noted in the discussion concerning Proposal No. Three below). All employee
benefits, all equity based incentive plans and the shareholder rights plan of
Symmetricom California will be assumed and continued by Symmetricom Delaware,
and each option or right issued pursuant to such plans will automatically be
converted into an option or right to purchase the same type and number of shares
of capital stock of Symmetricom Delaware at the same price per share, upon the
same terms and subject to the same conditions. Shareholders should note that
approval of the Proposed Reincorporation will also constitute approval of the
assumption of these plans by Symmetricom Delaware. Other employee benefit
arrangements of Symmetricom California will also be continued by Symmetricom
Delaware upon the terms and subject to the conditions currently in effect. As
noted above, after the merger, the shares of common stock of Symmetricom
Delaware will continue to be traded without interruption on The Nasdaq National
Market, and under the same symbol, "SYMM," as the shares of common stock of
Symmetricom California are currently traded. The Company believes that the
Proposed Reincorporation will not affect any of its material contracts with any
third parties and that Symmetricom California's rights and obligations under
such material contractual arrangements will continue and be assumed by
Symmetricom Delaware.
Anti-Takeover Implications
Delaware, like many other states, permits a corporation to adopt a number
of measures designed to reduce a corporation's vulnerability to an unsolicited
takeover attempt, change in control of the Company or other business combination
involving the Company through protective charter or bylaws provisions or
otherwise. The Reincorporation is not being proposed in order to prevent a
change in control, and the Board of Directors is not aware of any present
attempt to acquire control of the Company or to obtain representation on the
Board of Directors. Even so, the Board of Directors believes that unsolicited
takeover attempts may be unfair or disadvantageous to the Company and its
shareholders because, among other reasons:
o a non-negotiated takeover bid may be timed to take advantage of
temporarily depressed stock prices;
o a non-negotiated takeover bid may be designed to foreclose or minimize
the possibility of more favorable competing bids or alternative
transactions; and
o a non-negotiated takeover bid may involve the acquisition of only a
controlling interest in the Company's stock, without affording all
shareholders the opportunity to receive the same economic benefits.
The Board has further determined that hostile takeover attempts that have not
been negotiated or approved by the board of a corporation can seriously disrupt
the business and management of a corporation and generally present the risk of
terms that are less favorable to all the shareholders than would be available in
a negotiated, board-approved transaction.
By contrast, board-approved transactions can be carefully planned and
undertaken at an opportune time in order to obtain maximum value for the
corporation and all of its stockholders, with due consideration to matters such
as capturing the value from longer term strategies, the recognition or
postponement of gain or loss for tax purposes and the management and business of
the acquiring corporation. The Board believes, therefore, that any proposed
acquisition or change in control of the Company or proposed business combination
involving the Company should be thoroughly studied by the Board to assure that
any such transaction would be in the best interests of the Company and its
shareholders and that all of the Company's shareholders would be treated fairly
in any such transaction.
For these reasons, the Board has re-evaluated the Company's vulnerability
to potential attempts either to take over or to effectuate a change in control
of the Company, including the ability of special shareholder constituencies to
obtain representation on the Board through expensive and disruptive proxy
contests, and, in the course of such re-evaluation, the Board, in the discharge
of its fiduciary obligations to the Company's shareholders, has considered
certain defensive measures designed to enhance the Board's ability to negotiate
with an unsolicited bidder. Accordingly, two new measures, which could be
implemented under California law with shareholder approval, will be adopted as
part of the Proposed Reincorporation: (1) the elimination of cumulative voting;
and (2) the establishment of advance notice requirements relating to the
nomination of directors and of business to be conducted at stockholder meetings.
Also, as is presently provided in Symmetricom California's existing charter,
upon the consummation of the Reincorporation, preferred stock would be
authorized for issuance by, and with the rights and preferences as may be
determined by, the Board of Directors of Symmetricom Delaware, all without the
consent of stockholders.
-8-
In addition, the Board has determined that the adoption of other defensive
measures that are designed to reduce the Company's vulnerability to unsolicited
takeover attempts and contests for control and that are neither in effect under
the Company's existing charter and bylaws nor being implemented automatically
upon the adoption and consummation of the Proposed Reincorporation, would be
prudent, and the Board is, therefore, seeking separate shareholder approval of
the Related Proposals as follows:
o the establishment of a classified board of directors, together with
the elimination of the right to remove a director other than for cause
(as provided under Delaware law), to be voted upon at the Annual
Meeting as Proposal No. Three (described on page 27 below);
o the elimination of shareholder action by written consent and the
shareholders' right to call meetings, to be voted upon at the Annual
Meeting as Proposal No. Four (described on pages 28 and 29 below);
o the application to the Company of Delaware's anti-takeover statue
(i.e., Section 203 of the Delaware General Corporate Law), to be voted
----
upon at the Annual Meeting as Proposal No. Five (described on page 30
below); and
o the establishment of supermajority shareholder voting requirements
(I.E., the requirement of a vote of 66 2/3% of the outstanding shares)
to adopt, amend or repeal the bylaws of Symmetricom Delaware and
certain features of the charter of Symmetricom Delaware, to be voted
upon as Proposal No. Six (described on page 31 below).
Although certain of these measures, such as a classified board of
directors, may be implemented under California law if approved by the
shareholders, certain other of these defensive measures are not permitted to be
implemented, or are not available, under California law. By contrast, Delaware,
and a number of other states, permit a corporation to include in its charter and
bylaws measures designed to reduce a corporation's vulnerability to unsolicited
takeover attempts and contests for control or board representation.
Reincorporation in Delaware offers an added benefit in that there is also
substantial judicial precedent in Delaware courts as to the legal principles
applicable to such defensive measures and as to the conduct of a board of
directors under the business judgment rule with respect to unsolicited takeover
attempts and other contests for control. One of the purposes of the Proposed
Reincorporation is to enable the Company to implement some of these defensive
measures, subject to separate shareholder approval, pursuant to the Related
Proposals.
The Board of Directors recognizes that the Proposed Reincorporation and the
Related Proposals may be disadvantageous to the extent that they have the
collective effect of discouraging a future takeover attempt that is not approved
by the Board of Directors, but which a majority of the shareholders may deem to
be in their best interests or in which shareholders may receive a substantial
premium for their shares over the then current market value or over their cost
bases in such shares. As a result, shareholders who might wish to participate in
an unsolicited tender offer may not have an opportunity to do so. In addition,
to the extent that provisions of Delaware law enable the Board of Directors to
resist a takeover or a change in control of the Company, such provisions could
make it more difficult to change the existing Board of Directors and management.
However, the Board believes that the detriments of unapproved takeover attempts
outweigh the potential disadvantages of the Proposed Reincorporation and the
Related Proposals and that, on balance, prudent steps to reduce the likelihood
of such takeover attempts and to help ensure that the Board has adequate
opportunity to fully consider and respond to any takeover attempt and actively
negotiate its terms are in the best interests of the Company and its
shareholders.
-9-
Summary Of Differences Between Symmetricom California And Symmetricom Delaware
The provisions of the Symmetricom Delaware Amended and Restated Certificate
of Incorporation and Bylaws, including amendments made thereto in order to
affect each Related Proposal that is approved at the Annual Meeting, are more
comprehensive than those of the Symmetricom California Articles of Incorporation
and Bylaws. Material differences between Symmetricom Delaware's charter and
Bylaws (as in effect upon the approval of the Reincorporation and as they may be
amended (prior to consummation of the Reincorporation) pursuant to the adoption
of one or more of the Related Proposals) and Symmetricom California's charter
and Bylaws and between California and Delaware law, generally, are summarized in
the table below. The table also includes some similarities between California
law and Delaware law and among the charters and Bylaws of Symmetricom Delaware
and Symmetricom California. The table is only a summary and does not address all
of the differences discussed in this Proxy Statement. You should review the
table in conjunction with the discussion following the table in this Proposal
No. Two and the Related Proposals, as well as the text of the Merger Agreement,
the Amended and Restated Certificate of Incorporation of Symmetricom Delaware
and the Bylaws of Symmetricom Delaware attached to this Proxy Statement. For
most items summarized in the chart, there is a reference to the page of this
Proxy Statement on which a more detailed description appears.
Item Delaware California
Number of Directors The Board of Directors determines the The Board of Directors determines the
(see page 14). number of authorized directors. exact number of directors within the
range set by the Company's Bylaws.
Amendment of Bylaws; Supermajority The Bylaws of Symmetricom Delaware may Shareholders holding a majority of the
Requirement be adopted, altered, amended or outstanding shares of common stock may
(see pages 14, 21 and 31). repealed by an affirmative vote of a adopt, alter, amend or repeal the
majority of the then authorized number Bylaws of Symmetricom California.
of directors or by the vote of at Subject to the rights of the
least a majority of the outstanding shareholders to set the authorized
common stock; provided, however, that range of the number of directors, the
-------- ------- Board of Directors may adopt, alter,
if Proposal No. Six is approved, the amend or repeal the Bylaws of
Bylaws of Symmetricom Delaware may be Symmetricom California.
adopted, altered, amended or repealed
by the vote of at least 66 2/3% of the
then authorized number of directors or
by the vote of at least 66 2/3% of the
outstanding common stock.
Amendment of Charter; The Amended and Restated Certificate The Symmetricom California Articles of
Supermajority Requirement of Incorporation of Symmetricom Incorporation may be amended if the
(see pages 14, 21 and 31). Delaware may be amended if the amendment is approved by the Board of
amendment is approved by the Board of Directors and a majority of the outstanding
Directors and a majority of the outstanding common stock.
common stock; provided, however, that if
-------- -------
Proposal No. Six is approved, amendment
of certain provisions of the Amended and
Restated Certificate of Incorporation of
Symmetricom Delaware will require
approval by the vote of at least 66 2/3%
of the outstanding common stock.
Cumulative Voting for Directors The Amended and Restated Certificate Currently, cumulative voting is
(see page 15). of Incorporation of Symmetricom mandatory upon notice given by a
Delaware does not provide for shareholder at a shareholders' meeting
cumulative voting. at which directors are to be elected.
Under California law, cumulative voting
could be eliminated.
-10-
Item Delaware California
Classified Board of Directors Under Delaware law, a classified board Currently, the Company does not have a
(see pages 15 and 27). may be implemented. If Proposal No. Three classified Board of Directors; however,
is adopted, Symmetricom Delaware will it could, under California law, implement
implement a classified Board of Directors. a classified board with shareholder
Otherwise, Symmetricom Delaware will not approval.
have a classified Board of Directors.
Eliminating Personal Monetary Delaware law is potentially more California permits the elimination of
Liability of Directors expansive in regards to the personal monetary liability of
(see page 16). elimination of personal monetary directors to the extent of the law in
liability of directors, in that it its current state.
incorporates future amendments to
Delaware law with respect to the
elimination of such liability.
Removal of Directors by Removal with or without cause is Removal with or without cause is
Shareholders permitted by the affirmative vote of permitted by the affirmative vote of
(see pages 17 and 27). the majority of the shares entitled to the shareholders, provided that the
vote thereon; provided, however, that if shareholders voting against removal
-------- ------- could not elect such director under
Proposal No. Three is approved and a cumulative voting.
classified board of directors is
implemented, then under Delaware law, no
director may be removed without cause.
Who May Call Special Shareholder The Bylaws of Symmetricom Delaware The Bylaws of Symmetricom California
Meetings provide that a special meeting of provide that a special meeting of
(see pages 16 and 28). shareholders may be called by the shareholders may be called by the Board
Board of Directors, the Chief Executive of Directors, the Chairman of the Board,
Officer or the Secretary (upon a request the President or one or more holders of
by the Chairman, Chief Executive Officer shares entitled to cast not less than
or the President) or one or more holders 10% of the votes of such meeting.
of shares entitled to cast not less
than 10% of the votes at such meeting;
provided, however, that if Proposal No.
-------- -------
Four is adopted, the Bylaws of Symmetricom
Delaware will be modified to authorize only
the Board of Directors, the Chief Executive
Officer or the Secretary (upon a request by
the Chairman, Chief Executive Officer or
President) to call a special meeting of
stockholders.
Action by Written Consent of Delaware law permits the stockholders The Bylaws of Symmetricom California
Shareholders to act by written consent in lieu of a permit the shareholders to act by
(see pages 17 and 28). meeting; provided, however, that if written consent in lieu of a meeting.
-------- -------
Proposal No. Four is approved, the Amended
and Restated Certificate of Incorporation
of Symmetricom Delaware will prohibit
stockholders from acting by written consent
in lieu of a meeting (unless waived in any
particular instance by a vote of at least
66 2/3% of the authorized number of
directors).
-11-
Item Delaware California
Loans to Officers and Employees. Under Delaware law, Symmetricom The Company's Bylaws permit the Board
Delaware may make loans to, guarantee of Directors to make loans to,
the obligations of or otherwise assist guarantee the obligations of or
its officers or other employees if the otherwise assist its officers or other
Board determines that a loan or employees if the Board determines that
guaranty may reasonably be expected to a loan or guaranty may reasonably be
benefit the corporation. expected to benefit the corporation.
Voting by Ballot (see page 18). The Amended and Restated Certificate The Bylaws of the Company do not
of Incorporation of Symmetricom require a written ballot.
Delaware provides that a vote need not be
by written ballot.
Rights Plan (see page 18). The Company's existing Rights Plan Some uncertainty exists as to the
will be assumed by Symmetricom enforceability of shareholder rights
Delaware and is permitted under plans under California law.
Delaware law.
Indemnification of Directors Delaware law permits somewhat broader California law permits indemnification
and Officers (see page 19). indemnification and could result in subject to certain exceptions.
indemnification of directors and
officers in circumstances where
California law would not permit
indemnification.
Dividends (see page 20). Paid from surplus (including paid-in Generally, limited to the greater of
and earned surplus or net profits). (i) retained earnings or (ii) an
amount that would leave the Company
with assets of 125% of liabilities and
current assets of 100% of current
liabilities.
Business Combination Statute Symmetricom Delaware's Amended and No comparable statute.
(see pages 21 and 30). Restated Certificate of Incorporation
specifically declines application of
Delaware's anti-takeover statute (Section
203 of the Delaware General Corporation
Law) that restricts certain hostile
two-step takeovers; provided, however, that
-------- -------
if Proposal No. Five is approved, the
charter will be modified to cause such
anti-takeover statute to apply to the
Company.
Right of Shareholders to Inspect Permitted for any purpose reasonably Permitted for any purpose reasonably
Shareholder List related to a stockholder's interest as related to shareholder's interest as a
(see page 22). a stockholder. shareholder. Also, an absolute right
to 5% shareholders and, under some
circumstances, 1% shareholders.
Class Vote for Reorganizations Generally not required unless a A reorganization transaction must
(see page 22). reorganization adversely affects a generally be approved by a majority
specific class of shares. vote of each class of shares
outstanding.
-12-
Item Delaware California
Dissolution (see page 23). Unless a majority of the Board of Shareholders holding fifty percent
Directors approves a proposal to (50%) or more of the total voting
dissolve, the dissolution must be power may authorize the dissolution of
unanimously approved by all the Symmetricom California, with or
stockholders entitled to vote without the approval of the
thereon. If the dissolution is corporation's Board of Directors.
initially approved by the Board of
Directors, it may be approved by a
simple majority of the outstanding
shares of stock of Symmetricom
Delaware.
Shareholder Derivative Suits Generally, a stockholder may bring a Generally, a shareholder may bring a
(see page 23). derivative action on behalf of a derivative action on behalf of a
corporation only if the stockholder corporation even if the shareholder
was a stockholder of the corporation was not a shareholder at the time of
at the time of the transaction in the transaction in question, provided
question. that certain tests are met.
-13-
The Charters And Bylaws Of Symmetricom California And Symmetricom Delaware
The provisions of the Symmetricom Delaware Amended and Restated Certificate
of Incorporation and Bylaws, as in existence upon the approval and consummation
of the Proposed Reincorporation, vary in many respects from those of the
Articles of Incorporation and Bylaws of Symmetricom California. Further, each of
the Related Proposals, if approved at the Annual Meeting, would result in
broader variances between the Symmetricom Delaware Amended and Restated
Certificate of Incorporation and Bylaws and the Articles of Incorporation and
Bylaws of Symmetricom California. The following discussion of the Amended and
Restated Certificate of Incorporation and Bylaws of Symmetricom Delaware is
qualified by reference to Appendices C and D hereto and the Related Proposals,
which, if approved and implemented, would modify Appendices C and D and,
therefore, should be reviewed carefully.
Number of Authorized Shares. The Articles of Incorporation of Symmetricom
California currently authorize the Company to issue up to One Hundred Fifty
Million (150,000,000) shares of common stock, no par value, and Five Hundred
Thousand (500,000) shares of preferred stock, no par value. Under the Articles
of Incorporation of Symmetricom California, the Board of Directors is entitled
to designate new classes of preferred stock and determine the powers,
preferences and rights, and the qualifications and limitations or restrictions
of the authorized and unissued preferred stock without shareholder approval.
Pursuant to such authority, the Board of Directors has authorized the issuance
of Two Hundred Thousand (200,000) shares of Series A Participating Preferred
Stock in conjunction with the implementation of a shareholder rights plan (see
"Stockholder Rights Plan"). The Amended and Restated Certificate of
Incorporation of Symmetricom Delaware provides that it will have Seventy Million
(70,000,000) authorized shares of common stock, par value $0.0001 per share, and
Five Hundred Thousand (500,000) authorized shares of preferred stock, par value
$0.0001 per share. Unlike California, the amount of franchise taxes payable in
Delaware will be affected by the amount of shares authorized by the Amended and
Restated Certificate of Incorporation and, thus, the number of shares of
authorized Common Stock will be reduced as part of the Reincorporation (without
affecting the outstanding shares). Like the Articles of Incorporation of
Symmetricom California, the Amended and Restated Certificate of Incorporation of
Symmetricom Delaware provides that the Board of Directors is entitled to
determine the powers, preferences and rights, and the qualifications,
limitations or restrictions, of the authorized and unissued preferred stock
without further approval of the stockholders. Also, in order to effectuate the
assumption of the Company's existing shareholder rights plan by Symmetricom
Delaware, the Amended and Restated Certificate of Incorporation includes
provisions authorizing the issuance of Two Hundred Thousand (200,000) shares of
Symmetricom Delaware's Series A Participating Preferred Stock.
Size of Board of Directors; Bylaws. The Bylaws of Symmetricom California
provide for a board of directors consisting of not less than five nor more than
eight directors, within which the exact number is currently set at six members.
Under California law, although changes in the number of directors, in general,
must be approved by a majority of the outstanding shares, a board of directors
may fix the exact number of directors within a stated range set forth in the
articles of incorporation or bylaws, if the stated range has been approved by
the shareholders. Delaware law permits a board of directors, acting alone, to
change the authorized number of directors by amendment to the bylaws or the
adoption of a resolution, unless the directors (if applicable) are not
authorized to amend the bylaws or the number of directors is fixed in the
certificate of incorporation (in which case a change in the number of directors
may be made only by amendment to the certificate of incorporation following
approval of such change by stockholders). The Amended and Restated Certificate
of Incorporation of Symmetricom Delaware provides that the number of directors
will be determined by a resolution of the Board within any limits prescribed in
the Bylaws (there are none). Under the Symmetricom Delaware Bylaws, the initial
Symmetricom Delaware Board of Directors will be comprised of six members and the
six directors of Symmetricom California who are elected at the Annual Meeting
will continue as the six directors of Symmetricom Delaware after the Proposed
Reincorporation is consummated and until their successors have been duly elected
and qualified. The Bylaws of Symmetricom Delaware also authorize the Board of
Directors to adopt a resolution modifying the size of the Board of Directors.
Following the Proposed Reincorporation, therefore, the Board of Directors of
Symmetricom Delaware could change the size of the Board of Directors from six
directors without further stockholder approval.
Amendment of Bylaws and Charter; Supermajority Requirement. The Bylaws of
Symmetricom California currently permit the holders of the majority of
outstanding shares of common stock to adopt, alter, amend and repeal the Bylaws,
subject to any provisions of the Articles of Incorporation of Symmetricom
California regarding the number of authorized directors. Delaware law provides
that a corporation's bylaws may be amended by the corporation's stockholders or,
if so provided in the corporation's charter, by the corporation's board of
directors. The Amended and Restated Certificate of Incorporation of Symmetricom
Delaware expressly authorizes the Board to adopt, amend or repeal the Bylaws in
accordance with the provisions of the Bylaws. The Symmetricom Delaware
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Bylaws provide that the Board of Directors may, by the affirmative vote of a
majority of the total number of authorized directors, adopt, alter, amend and
repeal the Bylaws of Symmetricom Delaware, subject to the right of the
stockholders to adopt, alter, amend and repeal the Bylaws.
Under law (in both California and Delaware), unless the charter provides
otherwise, the approval of the Board of Directors and the approval of a majority
of the voting stock outstanding is typically required in order to amend the
charter. This is the case in the instance of Symmetricom California and
Symmetricom Delaware as neither the Symmetricom California Articles of
Incorporation nor the Symmetricom Delaware Amended and Restated Certificate of
Incorporation provide otherwise.
The Board is seeking the approval of the shareholders of Proposal No. Six
as a separate and distinct vote from the Proposed Reincorporation in order to
increase the vote of (i) the directors and the stockholders that will be
required to approve the adoption or any amendment or repeal of any provision of
the Bylaws of Symmetricom Delaware (in each case, to sixty-six and two-thirds
percent (66 2/3%) of the directors or outstanding shares entitled to vote on
such matters, as applicable) and (ii) the stockholders that will be required to
approve the amendment of certain provisions of the Amended and Restated
Certificate of Incorporation of Symmetricom Delaware. If Proposal No. Six is
approved by the shareholders at the Annual Meeting, this change will be
effectuated only if the Proposed Reincorporation is approved and implemented.
See Proposal No. Six at page 31 below. The provision requiring a 66 2/3% vote of
the stockholders is referred to as a "supermajority" voting requirement.
Currently, Symmetricom California has no supermajority voting requirements in
its Articles of Incorporation or Bylaws. The laws of the Sate of Delaware vary
in many respects from the laws of California in regards to supermajority voting
requirements. See "Significant Differences Between the Corporation Laws of
California and Delaware-Supermajority Voting Requirements" below.
Cumulative Voting for Directors. California law provides mandatory
cumulative voting for directors whereby each shareholder can cast a total number
of votes equal to the number of shares owned multiplied by the number of
directors to be elected. Under cumulative voting, if any shareholder has given
notice of an intention to cumulate votes for the election of directors, such
shareholder and any other shareholder of Symmetricom California would be
entitled to cumulate his or her votes at such election. A shareholder may then
cast all such votes for a single candidate or may allocate them among as many
candidates as the shareholder may choose. Under California law, a "listed
corporation" (NYSE, AMEX and Nasdaq National Market System companies) may amend
its articles of incorporation or by-laws, by approval of its board of directors
and a vote of the majority of all shares entitled to vote, to eliminate
cumulative voting for directors. Although Symmetricom California is entitled to
eliminate cumulative voting, it has not so amended its Articles of Incorporation
or Bylaws. Under Delaware law, cumulative voting in the election of directors is
not mandatory but is a permitted option. The Amended and Restated Certificate of
Incorporation of Symmetricom Delaware does not provide for cumulative voting
rights. In the absence of cumulative voting, the holders of the majority of the
shares present or represented at a meeting in which directors are to be elected
would have the power to elect all the directors to be elected at such meeting,
and no person could be elected without the support of holders of the majority of
shares present or represented at such meeting. Elimination of cumulative voting
could make it more difficult for a minority stockholder adverse to a majority of
the stockholders to obtain representation on the Board of Directors of
Symmetricom Delaware.
Classified Board of Directors. California law also provides that a "listed
corporation" may classify its board in two (six directors minimum) or three
(nine directors minimum) classes, with two or three-year terms, respectively.
The Board is not presently classified.
Under Delaware law, a classified board provision in a company's bylaws or
certificate of incorporation (a "Classified Board Provision") may provide that
directors will be classified into up to three classes, each having as nearly
equal a number of directors as possible. At each annual meeting of stockholders
following the initial classification and election of a three class board of
directors, the successors to the class of directors whose terms expire at that
meeting would be elected for a term expiring at the third succeeding annual
meeting of stockholders after their election. Delaware law does not require
classified boards to have a specific number of directors in each class.
Directors chosen to fill vacancies on a classified board hold office until the
next election of the class for which such directors have been chosen, and until
their successors are elected and have been qualified. Delaware law also provides
that, unless the certificate of incorporation provides otherwise, directors
serving on a classified board of directors may be removed only for cause (see
"Removal of Directors" below).
A Classified Board Provision may significantly extend the time required to
effect a change in control of a board of directors and may discourage hostile
takeover bids for companies which have Classified Board Provisions. For
companies without a Classified Board Provision, a change in control of the board
of directors can be made by stockholders holding a majority of the votes cast at
a single annual meeting of stockholders. By comparison, with a
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Classified Board Provision in place, it would take at least two annual meetings
of stockholders for even a majority of stockholders to effect a change in
control of the Board of Directors of Symmetricom Delaware absent resignations
because only a minority of the directors would be elected at each meeting.
A Classified Board Provision is intended to encourage persons seeking to
acquire control of a company, including through proxy fights or hostile
takeovers, to initiate such efforts through negotiations with the board of
directors. A Classified Board Provision also generally increases the bargaining
leverage of a board of directors, on behalf of its stockholders, in any
negotiations concerning a potential change of control of a company. Classified
Board Provisions, however, make more difficult or discourage a proxy contest or
the assumption of control by a substantial stockholder and thus could increase
the likelihood that incumbent directors retain their positions. A Classified
Board Provision could also have the effect of discouraging a third party from
making a tender offer or otherwise attempting to obtain control of a company
even though such attempt might be beneficial to the stockholders.
The Board is seeking the approval of Proposal No. Three at the Annual
Meeting as a separate and distinct vote from the Proposed Reincorporation in
order to modify the Symmetricom Delaware Amended and Restated Certificate of
Incorporation to provide for a Classified Board Provision, with three classes of
directors (initially two directors in each class) elected for a term of three
years expiring in successive years. If Proposal No. Three is approved by the
shareholders at the Annual Meeting, the classified Board will be effectuated
only if the Proposed Reincorporation is approved and implemented. See Proposal
No. Three at page 27 below. Accordingly, if the Proposed Reincorporation and
Proposal No. Three are approved, Symmetricom Delaware will have a classified
Board of Directors, which will be divided into three classes with directors
serving staggered three-year terms, except for the first term of Class I
directors, who initially will serve a one-year term, and Class II directors, who
initially will serve a two-year term.
Monetary Liability of Directors. The Articles of Incorporation of
Symmetricom California and the Amended and Restated Certificate of Incorporation
of Symmetricom Delaware both provide for the elimination of personal monetary
liability of directors to the fullest extent permissible under the laws of the
respective states. The provision eliminating monetary liability of directors set
forth in the Amended and Restated Certificate of Incorporation of Symmetricom
Delaware is potentially more expansive than the corresponding provision in the
Articles of Incorporation of Symmetricom California, in that the former
incorporates future amendments to Delaware law with respect to the elimination
of such liability. For a more detailed explanation of the foregoing, see
"Significant Differences Between the Corporation Laws of California and
Delaware--Indemnification and Limitation of Liability."
Indemnification. The Symmetricom California Articles of Incorporation
authorize the Company to indemnify its agents (as that term is defined in the
California General Corporation Law) for breach of duty to the Company and its
shareholders through bylaw provisions, agreements with such agents, vote of
shareholders or disinterested directors or otherwise, in any case in excess of
the indemnification otherwise expressly permitted by California law but subject
to the limits imposed by California law for such indemnification. The
Symmetricom California Bylaws require the Company to indemnify the company's
directors and officers and permit the Company to indemnify other corporate
agents, all to the maximum extent and in the manner permitted by California law.
The Amended and Restated Certificate of Incorporation and Bylaws of Symmetricom
Delaware are broader in this regard in that they require Symmetricom Delaware to
indemnify any person who is made a party or is threatened to be made a party to
or is involved in any action, suite or proceeding, by reason of the fact that
such person is or was a director, officer or employee of Symmetricom Delaware,
if such person acted in good faith and in a manner such person reasonably
believed to be in or not opposed to the best interest of Symmetricom Delaware,
and, with respect to any criminal proceeding, had no reasonable cause to believe
that such person's conduct was unlawful. For a more detailed explanation of the
foregoing, see "Significant Differences Between the Corporation Laws of
California and Delaware - Indemnification, Compared and Contrasted."
Power to Call Special Shareholders' Meetings. Under California law, a
special meeting of shareholders may be called by the Board of Directors, the
Chairman of the Board, the President, the holders of shares entitled to cast not
less than 10% of the votes at such meeting and such additional persons as are
authorized by the articles of incorporation or the bylaws. Under the Symmetricom
California Bylaws, a special meeting of shareholders may be called by the Board
of Directors, the Chairman of the Board, the President or by one or more holders
of shares entitled to cast not less than 10% of the votes at such meeting. Under
Delaware law, a special meeting of stockholders may be called by the board of
directors or any other person authorized to do so in the certificate of
incorporation or the bylaws. The Symmetricom Delaware Bylaws also provide that a
special meeting of stockholders may be called by the Board of Directors, the
Chairman of the Board, the President or by one or more holders of shares
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entitled to cast not less than 10% of the votes at such meeting; however, the
-------
Board is seeking the approval of Proposal No. Four as a separate and distinct
vote from the Proposed Reincorporation in order to, among other things, provide,
in Symmetricom Delaware's Bylaws, that a special meeting of the stockholders may
be called only by the Chief Executive Officer or Secretary (upon the request of
the Chairman of the Board, the Chief Executive Officer or President) or the
majority of the Board. If Proposal No. Four is approved by the shareholders at
the Annual Meeting, this measure will be effectuated only if the Proposed
Reincorporation is approved and implemented. See Proposal No. Four at page 28
below.
Power of Shareholders to Vote by Written Consent. Under California law and
Delaware law, shareholders (or stockholders) may execute an action by written
consent in lieu of a shareholders' (or stockholders') meeting. Both California
law and Delaware law permit a corporation to eliminate the ability of
shareholders (or stockholders) to act by written consent in its charter.
Symmetricom California's current Articles of Incorporation do not contain a
provisions limiting the shareholders' right to take action by written consent.
The Board is seeking the approval of Proposal No. Four as a separate and
distinct vote from the Proposed Reincorporation in order, among other things, to
prohibit stockholders from acting by written consent in lieu of a meeting. If
Proposal No. Four is approved by the shareholders at the Annual Meeting, this
measure will be effectuated only if the Proposed Reincorporation is approved and
implemented. See Proposal No. Four at page 28 below.
Removal of Directors. Under California law, directors may be removed
without cause by shareholder vote, provided that the shares voted against
removal would not be sufficient to elect the director under the cumulative
voting rules. In addition, a director may be removed under California law for
cause if the director committed a felony or if holders of 10% of the outstanding
shares petition the Superior Court to remove the director for fraudulent or
dishonest acts or gross abuse of authority. Under Delaware law, if a corporation
has a classified board, directors may only be removed for cause unless the
certificate of incorporation provides otherwise (see "Classified Board of
Directors" above). Accordingly, if the Proposed Reincorporation and Proposal No.
Three are approved, Symmetricom Delaware will have a classified Board of
Directors, its Amended and Restated Certificate of Incorporation will not
provide for removal of directors without cause and its Bylaws will provide that
any director may be removed, but only for cause, by the holders of a majority of
the shares then entitled to vote at an election of directors.
Filling Vacancies on the Board of Directors. Under California law, any
vacancy on a board of directors other than one created by removal of a director
may be filled by the board of directors. If the number of directors then in
office is less than a quorum, a vacancy may be filled by (i) the unanimous
written consent of the directors then in office, (ii) the affirmative vote of a
majority of the directors then in office at a meeting held pursuant to notice or
waivers of notice or (iii) a sole remaining director. A vacancy created by
removal of a director may be filled by the board of directors only if it is
authorized by a corporation's articles of incorporation or by a bylaw approved
by the corporation's shareholders. The Bylaws of Symmetricom California
currently permit directors to fill vacancies created by removal of a director.
Under Delaware law, vacancies and newly created directorships may be filled by a
majority of the directors then in office (even though less than a quorum) or by
a sole remaining director, unless otherwise provided in the certificate of
incorporation or bylaws (or unless the certificate of incorporation directs that
a particular class of stock is to elect such director(s), in which case a
majority of the directors elected by such class, or a sole remaining director so
elected, may fill the vacancy or newly created directorship). The Amended and
Restated Certificate of Incorporation of Symmetricom Delaware provides that any
vacancy in the Board of Directors may be filled by a majority of the directors
then in office (even though less than a quorum) or by a sole remaining director.
Nominations of Director Candidates and Introduction of Business at
Shareholder Meetings. The Bylaws of Symmetricom California do not include any
advance notice procedure with regard to the nomination, other than by or at the
direction of the Board of Directors, of candidates for election as directors or
with regard to matters to be brought before an annual meeting or special meeting
of shareholders.
The Bylaws of Symmetricom Delaware include advance notice procedures with
regard to the nomination of candidates for election as directors (the
"Nomination Procedure") and with regard to matters to be brought before an
annual meeting or special meeting of stockholders (the "Business Procedure"). By
requiring advance notice of nominations by stockholders, the Nomination
Procedure affords the Board of Directors an opportunity to consider the
qualifications of the proposed nominees and, to the extent deemed necessary or
desirable by the Board, to inform the stockholders about such qualifications. By
requiring advance notice of proposed business, the Business Procedure provides
the Board with an opportunity to inform stockholders of any business proposed to
be conducted at a meeting and the Board's position on such proposal, enabling
stockholders to decide better whether to attend the meeting or grant a proxy to
the Board of Directors as to the disposition of such business. Although the
Bylaws of
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Symmetricom Delaware do not give the Board of Directors any power to approve or
disapprove stockholder nominations for the election of directors or any other
business desired by stockholders to be conducted at a meeting, the Bylaws of
Symmetricom Delaware may have the effect of precluding nominations for the
election of directors or of precluding other business at a particular meeting if
the proper procedures are not followed. In addition, the procedures may
discourage or deter a third party from conducting a solicitation of proxies to
elect its own slate of directors or otherwise attempting to obtain control of
Symmetricom Delaware, even if the conduct of such business or such attempt might
be deemed to be beneficial to Symmetricom Delaware and its stockholders.
Under the Nomination Procedure, a stockholder's notice to the Company must
contain information about the nominee, including his or her name, principal
occupation, the class and number of shares owned by him or her and such other
information as would be required to be included in a proxy statement soliciting
proxies for the election of the proposed nominee, as well as information about
the shareholder nominating that person, including his or her name and address,
as they appear on the records of the Company, and the class and number of shares
beneficially owned by the nominating shareholder. Under the Business Procedure,
notice relating to the conduct of business at a meeting other than the
nomination of directors must contain certain information about the business and
about the shareholder who proposes to bring the business before the meeting. If
the Chairman or other officer presiding at the meeting determines that a person
was not nominated in accordance with the Nomination Procedure, such person will
not be eligible for election as a director, or if he or she determines that
other business was not properly brought before such meeting in accordance with
the Business Procedure, such business will not be conducted at such meeting.
Nothing in the Nomination Procedure or the Business Procedure will preclude
discussion by any shareholder of any nomination or business proposal properly
made or brought before an annual or special meeting in accordance with the
above-described procedures.
Voting by Ballot. California law provides that written ballots in the
election of directors are not required unless (i) a shareholder demands a
written ballot before the meeting or (ii) the bylaws require a written ballot.
The Bylaws of the Company do not require a written ballot. Under Delaware law,
written ballots are required in all elections of directors, unless otherwise
provided in the certificate of incorporation. The Amended and Restated
Certificate of Incorporation of Symmetricom Delaware provides that a vote need
not be by written ballot. It may be more difficult for a stockholder to contest
the outcome of a vote that has not been conducted by written ballot.
Stockholder Rights Plan
The Company currently has a rights plan which will be assumed by
Symmetricom Delaware upon the Proposed Reincorporation. Under the rights plan,
the Company declared a dividend of a right (a "Right") to purchase one
one-thousandth of a share of a new series of preferred stock of the Company on
each outstanding share of common stock of the Company. All subsequent issuances
(until the time at which the Rights become exercisable and, in certain cases,
issuances thereafter) of common stock include an issuance of a Right.
The Rights have been distributed as a non-taxable dividend and will expire
ten years from the date of adoption of the rights plan. The Rights will be
exercisable only if a person or group acquires 15 percent or more of, or
initiates a tender offer or exchange offer on, the Company's common stock. If a
person or group acquires 15 percent or more of the Company's common stock while
the rights plan remains in place, all Rights holders, except the acquiring or
offering person or group, will be entitled to buy the Company's common stock at
a discount. The effect is to discourage acquisitions of 15 percent or more of
the Company's common stock in the absence of negotiations with the Board.
The Rights trade with the Company's common stock unless and until they are
separated upon the occurrence of certain future events. The Company's Board of
Directors may terminate the rights plan at any time or redeem the Rights prior
to the time a person or group acquires 15 percent or more of the Company's
common stock. Additionally, the rights plan also provides that if the Company is
involved in a merger or other business combination transaction with another
company, after the acquisition or offer each Right becomes exercisable, at the
Right's then current exercise price, for shares of common stock of such other
company having a value of a multiple of the Right's exercise price.
The rights plan is intended to protect the Company's shareholders in the
event of an unfair or coercive offer to acquire, or the acquisition of, 15
percent or more of the common stock of the Company. The rights plan is not
intended to prevent takeovers and would not interfere with tender offers or
business combinations that are approved by the Company's Board of Directors. The
rights plan encourages persons seeking control of the Company to initiate an
acquisition or offer to acquire the Company through negotiations with the Board
of Directors.
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The rights plan will be assumed by Symmetricom Delaware as part of the
Proposed Reincorporation. Thus, Rights will continue to trade with shares of
Symmetricom Delaware's common stock unless and until they are separated upon the
occurrence of certain future events.
To date, the California courts have not considered the validity of rights
plans. While a rights plan may ultimately be upheld under California law, one of
the benefits of the Proposed Reincorporation would be to provide relative
certainty that the Company's rights plan is enforceable. Various Delaware courts
have considered, and upheld, the validity of rights plans and, therefore, the
Company's rights plan should survive a judicial challenge under Delaware law.
Significant Differences Between The Corporation Laws Of California And Delaware
In addition to the differences between the corporation laws of California
and Delaware described above, the following is a summary of additional major
substantive differences between the corporation laws of California and Delaware.
It is not an exhaustive description of all differences between the two states'
laws.
Indemnification And Limitation Of Liability.
California and Delaware have similar laws with respect to indemnification
by a corporation of its officers, directors, employees and other agents. The
laws of both states also permit, with certain exceptions, a corporation to adopt
charter provisions eliminating the liability of a director to the corporation or
its shareholders for monetary damages for breach of a director's fiduciary duty.
There are nonetheless differences between the laws of the two states with
respect to indemnification and limitation of liability of directors. The
differences are summarized below.
Elimination Of Personal Liability For Monetary Damages.
Delaware. The Amended and Restated Certificate of Incorporation of
Symmetricom Delaware would eliminate the liability of directors to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director to the fullest extent permissible under Delaware law, as such
law exists currently and as it may be amended in the future. Under Delaware law,
such provision may not eliminate or limit director monetary liability for: (i)
breaches of the director's duty of loyalty to the corporation or its
stockholders; (ii) acts or omissions not in good faith or involving intentional
misconduct or knowing violations of law; (iii) the payment of unlawful dividends
or unlawful stock repurchases or redemptions; or (iv) transactions in which the
director received an improper personal benefit. Such limitation of liability
provisions also may not limit a director's liability for violation of, or
otherwise relieve the corporation or its directors from the necessity of
complying with, federal or state securities laws or affect the availability of
nonmonetary remedies such as injunctive relief or rescission.
California. The Articles of Incorporation of Symmetricom California
eliminate the liability of directors to the Company to the fullest extent
permissible under California law. California law does not permit the elimination
of monetary liability where such liability is based on: (i) intentional
misconduct or knowing and culpable violation of law; (ii) acts or omissions that
a director believes to be contrary to the best interests of the corporation or
its shareholders or that involve the absence of good faith on the part of the
director; (iii) receipt of an improper personal benefit; (iv) acts or omissions
that show reckless disregard for the director's duty to the corporation or its
shareholders, where the director in the ordinary course of performing director's
duties was or should have been aware of a risk of serious injury to the
corporation or its shareholders; (v) acts or omissions that constitute an
unexcused pattern of inattention that amounts to an abdication of the director's
duty to the corporation and its shareholders; (vi) transactions between the
corporation and a director who has a material financial interest in such
transaction; or (vii) liability for improper distributions, loans or guarantees.
Indemnification; Compared And Contrasted. California law requires
indemnification when an individual has defended successfully an action on the
merits. Delaware law requires indemnification of expenses when the individual
being indemnified has successfully defended any action, claim, issue or matter
therein, on the merits or otherwise. Delaware law generally permits
indemnification of expenses, including attorneys' fees, actually and reasonably
incurred in the defense or settlement of a derivative or third-party action,
provided there is a determination by a majority vote of a disinterested quorum
of the directors, by independent legal counsel or by the stockholders that the
person seeking indemnification acted in good faith and in a manner reasonably
believed to be in the best interests of the corporation. Without court approval,
however, no indemnification may be made in respect of any derivative action in
which such person is adjudged liable to the corporation.
Expenses incurred by an officer or director in defending an action may be
paid in advance under Delaware law or California law, if the director or officer
undertakes to repay such amounts if it is ultimately determined that he or she
is not entitled to indemnification. In addition, the laws of both states
authorize a corporation to purchase
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indemnity insurance for the benefit of its officers, directors, employees and
agents whether or not the corporation would have the power to indemnify against
the liability covered by the policy.
California law permits a California corporation to provide rights to
indemnification beyond those required by law to the extent such additional
indemnification is authorized in the corporation's articles of incorporation.
Thus, if so authorized, rights to indemnification may be provided pursuant to
agreements or bylaw provisions which make mandatory the permissive
indemnification provided by California law. The Articles of Incorporation of
Symmetricom California authorize indemnification beyond that expressly mandated
by California law.
Delaware law also permits a Delaware corporation to provide indemnification
in excess of that permitted by statute. Delaware law does not require
authorizing provisions in the certificate of incorporation. The Amended and
Restated Certificate of Incorporation and Bylaws of Symmetricom Delaware require
Symmetricom Delaware to indemnify any person who is made a party or is
threatened to be made a party to or is involved in any action, suite or
proceeding, by reason of the fact that such person is or was a director, officer
or employee of Symmetricom Delaware, if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interest of Symmetricom Delaware, and, with respect to any criminal proceeding,
had no reasonable cause to believe that such person's conduct was unlawful;
provided, however, that, in an action by or in the right of Symmetricom Delaware
- -------- -------
to procure a judgment in its favor, no indemnification shall be made to a person
in respect of any action as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of such person's duty,
unless a court has determined that such person is fairly and reasonably entitled
to such indemnity.
Indemnification Agreements. A provision of Delaware law states that
indemnification provided by statute will not be deemed exclusive of any other
right under any bylaw, agreement, vote of stockholders or disinterested
directors or otherwise. Under Delaware law, therefore, the indemnification
agreements entered into by Symmetricom California with its officers and
directors may be assumed by Symmetricom Delaware as part of the Proposed
Reincorporation. If the Proposed Reincorporation is consummated, the
indemnification agreements will be amended to the extent necessary to conform
the agreements to Delaware law and to provide for indemnification of officers
and directors and advancement of expenses to the maximum extent permitted by
Delaware law. A vote in favor of the Proposed Reincorporation also acts as
approval of such amendments to the indemnification agreements. Among other
things, the indemnification agreements will be amended to include within their
purview future changes in Delaware law that expand the permissible scope of
indemnification of directors and officers of Delaware corporations.
As noted above, Delaware law also permits a Delaware corporation to provide
indemnification in excess of that required by statute. By contrast to California
law, Delaware law does not require authorizing provisions in the certificate of
incorporation and does not contain express prohibitions on indemnification in
certain circumstances; however, limitations on indemnification may be imposed by
a court based on principles of public policy.
Dividends And Repurchases Of Shares.
California law dispenses with the concepts of par value of shares as well
as statutory definitions of capital, surplus and the like. The concepts of par
value, capital and surplus exist under Delaware law.
Delaware. Delaware law permits a corporation to declare and pay dividends
out of the excess, if any, at any given time, of the net assets of the
corporation over the amount of capital of the corporation ("surplus"), or, if
there is no surplus, out of net profits for the fiscal year in which the
dividend is declared and/or for the preceding fiscal year as long as the amount
of capital of the corporation following the declaration and payment of the
dividend 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. With respect to capital, a board of directors may
determine that capital is equal to the aggregate par value of the corporation's
shares of capital stock. In addition, Delaware law generally 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.
California. Under California law, a corporation may not make any
distribution (including dividends, whether in cash or other property, and
repurchases of its shares, other than repurchases of its shares issued under
employee stock plans contemplated by Section 408 of the California Corporations
Code) to its shareholders unless either: (i) the corporation's retained earnings
immediately prior to the proposed distribution equal or exceed the amount of the
proposed distribution, or (ii) immediately after giving effect to such
distribution, the corporation's assets (exclusive of goodwill, capitalized
research and development expenses and deferred charges) would be at least equal
to 1.25 times its liabilities (not including deferred taxes, deferred income and
other deferred credits) and the corporation's current assets would be at least
equal to its current liabilities (or 1.25 times its current liabilities if
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the average pre-tax and pre-interest expense earnings for the preceding two
fiscal years were less than the average interest expense for such years). Such
tests are applied to California corporations on a consolidated basis.
Stockholder Approval Of Certain Business Combinations.
Delaware. Under Section 203 of the Delaware General Corporation Law, unless
otherwise provided in a corporation's charter, a Delaware corporation is
prohibited from engaging in a "business combination" with an "interested
stockholder" for three years following the date that such person or entity
becomes an interested stockholder. With certain exceptions, an interested
stockholder is a person or entity who or which owns, individually or with or
through certain other persons or entities, 15% or more of the corporation's
outstanding voting stock (including any rights to acquire stock pursuant to an
option, warrant, agreement, arrangement or understanding, or upon the exercise
of conversion or exchange rights, and stock with respect to which the person has
voting rights only). The three-year moratorium imposed by Section 203 on
business combinations does not apply if (i) prior to the date on which such
stockholder becomes an interested stockholder the board of directors of the
subject corporation approves either the business combination or the transaction
that resulted in the person or entity becoming an interested stockholder; (ii)
upon consummation of the transaction that made the person or entity an
interested stockholder, the interested stockholder owns at least 85% of the
corporation's voting stock outstanding at the time the transaction commenced
(excluding from the 85% calculation shares owned by directors who are also
officers of the subject corporation and shares held by employee stock plans that
do not give employee participants the right to decide confidentially whether to
accept a tender or exchange offer); or (iii) on or after the date such person or
entity becomes an interested stockholder, the board of directors approves the
business combination and it is also approved at a stockholder meeting by 66 2/3%
of the outstanding voting stock not owned by the interested stockholder.
A Delaware corporation to which Section 203 applies may elect not to be
governed by Section 203. In this regard, the Symmetricom Delaware Amended and
Restated Certificate of Incorporation provides that Section 203 will not apply
to Symmetricom Delaware. However, the Board of Directors is seeking the approval
of Proposal No. Five as a vote separate and distinct from the Proposed
Reincorporation in order to provide that Symmetricom Delaware will be subject to
Section 203. Accordingly, if the Proposed Reincorporation and Proposal No. Five
are both approved, Symmetricom Delaware will be subject to Section 203. However,
if the Proposed Reincorporation is approved but Proposal No. Five is not,
Symmetricom Delaware will, by the provision in its Amended and Restated
Certificate of Incorporation, continue not to be governed by Section 203. See
Proposal No. Five at page 30 below.
California. There is no comparable provision in the California General
Corporation Law.
Supermajority Voting Requirement.
A supermajority voting requirement is one that requires greater than a
simple majority of the outstanding shares of common stock of a company to
approve an act or action. The differences between California and Delaware law
are discussed below.
Delaware. Under Delaware law, a certificate of incorporation may include a
provision requiring a vote greater than a simple majority. A supermajority
provision in a certificate of incorporation may not be amended or removed from
the certificate of incorporation except by the supermajority vote called for in
the provision. If Proposal No. Six is approved, and subject to the approval and
implementation of the Proposed Reincorporation, the vote of holders of 66 2/3%
or more of the common stock of Symmetricom Delaware would be required (i) to
amend or repeal the Bylaws of Symmetricom Delaware or certain features of the
Amended and Restated Certificate of Incorporation (including, as applicable
based upon the approval of the Related Proposals, classification of the Board of
Directors, provisions permitting the Board to fill vacancies, the elimination of
stockholder action by written consent and provisions regarding the limitation of
directors' liability and indemnification) and (ii) to remove the supermajority
voting provisions regarding the stockholders ability to amend or repeal the
Bylaws of Symmetricom Delaware or such features of the Amended and Restated
Certificate of Incorporation. In addition, if Proposal No. Six is approved, the
vote of 66 2/3% of the directors would be needed to amend the Bylaws of
Symmetricom Delaware.
California. Similar to Delaware law, articles of incorporation may include
a provision requiring a vote greater than a simple majority. An amendment of the
articles of incorporation that includes a supermajority vote requirement must be
approved by at least the percentage of the outstanding shares as is required
pursuant to that amendment for the approval of the corporate act or action.
Unlike in Delaware, where a supermajority voting requirement remains until it is
removed by required vote of the stockholders, California law provides that all
supermajority voting requirements cease to be effective two years after their
adoption. Thus, the supermajority voting requirement must be periodically
renewed by the shareholders. If not renewed, the act or action that
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previously required the supermajority vote may be taken by shareholders upon the
approval of a simple majority of the outstanding common stock.
Inspection Of Shareholder List.
Both California and Delaware law allow any shareholder to inspect the
shareholder list for a purpose reasonably related to such person's interest as a
shareholder. California law provides, in addition, for an absolute right to
inspect and copy the corporation's shareholder list by persons holding an
aggregate of 5% or more of the corporation's voting shares, or shareholders
holding an aggregate of 1% or more of such shares who have filed a Schedule 14A
with the Securities and Exchange Commission in connection with a contested
election of directors. Such absolute inspection rights also apply to a
corporation formed under the laws of any other state if its principal executive
offices are in California or if it customarily holds meetings of its board of
directors in California. Delaware law also provides for inspection rights as to
a list of stockholders entitled to vote at a meeting within a ten day period
preceding a stockholders' meeting for any purpose germane to the meeting.
However, Delaware law contains no provisions comparable to the absolute right of
inspection provided by California law to certain shareholders.
Shareholder Voting.
Both California and Delaware law generally require that shareholders owning
a majority of the outstanding stock of both acquiring and target corporations
approve statutory mergers.
Delaware. Delaware law does not require a stockholder vote of the surviving
corporation in a merger (unless the corporation provides otherwise in its
certificate of incorporation) if (i) the merger agreement does not amend the
existing certificate of incorporation; (ii) 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 (iii) 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.
California. California law contains a similar exception to its voting
requirements for reorganizations where shareholders or the corporation itself,
or both, immediately prior to the reorganization will own immediately after the
reorganization equity securities constituting more than five sixths of the
voting power of the surviving or acquiring corporation or its parent entity.
Other Comparisons. Both California law and Delaware law also require that a
sale of all or substantially all of the assets of a corporation be approved by a
majority of the outstanding voting shares of the corporation transferring such
assets. With certain exceptions, California law also requires that mergers,
reorganizations, certain sales of assets and similar transactions be approved by
a majority vote of each class of shares outstanding. In contrast, Delaware law
generally does not require class voting, except in certain transactions
involving an amendment to the certificate of incorporation that adversely
affects a specific class of shares. As a result, shareholder approval of such
transactions may be easier to obtain under Delaware law for companies that have
more than one class of shares outstanding.
California law also requires that holders of nonredeemable common stock
receive nonredeemable common stock in a merger of the corporation with the
holder of more than fifty percent (50%) but less than ninety percent (90%) of
such common stock or its affiliate unless all of the holders of such common
stock consent to the transaction. This provision of California law may have the
effect of making a "cash-out" merger by a majority shareholder more difficult to
accomplish.
Appraisal Rights.
Under both California and Delaware law, a shareholder of a corporation
participating in certain major corporate transactions may, under varying
circumstances, be entitled to dissenters' rights of appraisal pursuant to which
such shareholder may receive cash in the amount of the fair market value of his
or her shares in lieu of the consideration he or she would otherwise receive in
the transaction.
Delaware. Under Delaware law, such fair market value is determined
exclusive of any element of value arising from the accomplishment or expectation
of the merger or consolidation, and such appraisal rights are not available: (i)
with respect to the sale, lease or exchange of all or substantially all of the
assets of a corporation;
-22-
(ii) with respect to a merger or consolidation by a corporation the shares of
which are either listed on a national securities exchange or are held of record
by more than 2,000 holders if such stockholders receive only shares of the
surviving corporation or shares of any other corporation that are either listed
on a national securities exchange or held of record by more than 2,000 holders,
plus cash in lieu of fractional shares of such corporations; or (iii) to
stockholders of a corporation surviving a merger if no vote of the stockholders
of the surviving corporation is required to approve the merger under Delaware
law.
California. The limitations on the availability of appraisal rights under
California law are different from those under Delaware law. Shareholders of a
California corporation whose shares are listed on a national securities exchange
generally do not have such appraisal rights unless the holders of at least 5% of
the class of outstanding shares claim the right or the corporation or any law
restricts the transfer of such shares. Appraisal rights are also unavailable if
the shareholders of a corporation or the corporation itself, or both,
immediately prior to the reorganization will own immediately after the
reorganization equity securities constituting more than five-sixths of the
voting power of the surviving or acquiring corporation or its parent entity (as
will be the case in the Proposed Reincorporation). Appraisal or dissenters'
rights are, therefore, not available to shareholders of Symmetricom California
with respect to the Proposed Reincorporation. California law generally affords
appraisal rights in sale of assets reorganizations.
Dissolution.
Under California law, shareholders holding fifty percent (50%) or more of
the total voting power may authorize a corporation's dissolution, with or
without the approval of the corporation's board of directors, and this right may
not be modified by the articles of incorporation.
Under Delaware law, unless a majority of the board of directors approves
the proposal to dissolve, the dissolution must be unanimously approved by the
stockholders entitled to vote thereon. Only if the dissolution is initially
approved by a board of directors may it be approved by a simple majority of the
outstanding shares of the corporation's stock entitled to vote. In the event of
such a board-initiated dissolution, Delaware law allows a Delaware corporation
to include in its certificate of incorporation a supermajority (greater than a
simple majority) voting requirement in connection with dissolutions. Symmetricom
Delaware's Amended and Restated Certificate of Incorporation contains no such
supermajority voting requirement, and a majority of the outstanding shares
entitled to vote, voting at a meeting at which a quorum is present, would be
sufficient to approve a dissolution of Symmetricom Delaware that had previously
been approved by its Board of Directors.
Interested Director Transactions.
Under both California and Delaware law, certain contracts or transactions
in which one or more of a corporation's directors has an interest are not void
or voidable simply because of such interest, provided that certain conditions,
such as obtaining required disinterested approval and fulfilling the
requirements of good faith and full disclosure, are met. With certain minor
exceptions, the conditions are similar under California and Delaware law.
Under California and Delaware law (i) either the shareholders or the board
of directors must approve any such contract or transaction after full disclosure
of the material facts, and, in the case of board approval, the contract or
transaction also must be "just and reasonable" (in California) or "fair" (in
Delaware) to the corporation or (ii) the contract or transaction must have been
just and reasonable or fair as to the corporation at the time it was approved.
In the latter case, California law explicitly places the burden of proof on
the interested director. Under California law, if shareholder approval is
sought, the interested director is not entitled to vote his shares at a
shareholder meeting with respect to any action regarding such contract or
transaction. If board approval is sought, the contract or transaction must be
approved by a majority vote of a quorum of the directors, without counting the
vote of any interested directors (except that interested directors may be
counted for purposes of establishing a quorum). Under Delaware law, if board
approval is sought, the contract or transaction must be approved by a majority
of the disinterested directors (even if the disinterested directors are less
than a quorum). Therefore, certain transactions that the Board of Directors of
Symmetricom California might not be able to approve because of the number of
interested directors could be approved by a majority of the disinterested
directors of Symmetricom Delaware, although less than a majority of a quorum.
The Company is not aware of any plans to propose any transaction involving
directors of the Company that could not be so approved under California law but
could be so approved under Delaware law.
Shareholder Derivative Suits.
California law provides that a shareholder bringing a derivative action on
behalf of a corporation need not have been a shareholder at the time of the
transaction in question, provided that certain tests are met. Under
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Delaware law, a stockholder may bring a derivative action on behalf of the
corporation only if the stockholder was a stockholder of the corporation at the
time of the transaction in question or if his or her stock thereafter devolved
upon him or her by operation of law. California law also provides that the
corporation or the defendant in a derivative suit may make a motion to the court
for an order requiring the plaintiff shareholder to furnish a security bond.
Delaware does not have a similar bonding requirement.
Certain Federal Income Tax Consequences
The following is a discussion of certain federal income tax considerations
that may be relevant to holders of common stock of Symmetricom California who
receive common stock of Symmetricom Delaware in exchange for their shares of
common stock of Symmetricom California as a result of the Proposed
Reincorporation. The discussion does not address all of the tax consequences of
the Proposed Reincorporation that may be relevant to particular Symmetricom
California shareholders, such as dealers in securities, or those Symmetricom
California shareholders who acquired their shares upon the exercise of stock
options, nor does it address the tax consequences to holders of options or
warrants to acquire Symmetricom California common stock. Furthermore, no
foreign, state, or local tax considerations are addressed herein. In view of the
varying nature of such tax consequences, each shareholder is urged to consult
his or her own tax advisor as to the specific tax consequences of the proposed
reincorporation, including the applicability of federal, state, local or foreign
tax laws.
Subject to the limitations, qualifications and exceptions described herein,
and assuming the Proposed Reincorporation qualifies as a reorganization within
the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Internal Revenue Code"), the following federal income tax consequences
generally should result:
o No gain or loss should be recognized by holders of common stock of
Symmetricom California upon receipt of shares of common stock of
Symmetricom Delaware pursuant to the Proposed Reincorporation;
o The aggregate tax basis of the shares of common stock of Symmetricom
Delaware received by each shareholder in the Proposed Reincorporation
should be equal to the aggregate tax basis of the Symmetricom
California common stock surrendered in exchange therefor; and
o The holding period of the shares of common stock of Symmetricom
Delaware received by each shareholder of Symmetricom California should
include the period for which such shareholder held the Symmetricom
California common stock surrendered in exchange therefor, provided
that such Symmetricom California common stock was held by the
shareholder as a capital asset at the time of the Proposed
Reincorporation.
The Company has not requested a ruling from the Internal Revenue Service
(the "IRS"), nor an opinion from its outside legal counsel, with respect to the
federal income tax consequences of the Proposed Reincorporation under the
Internal Revenue Code. In any case, such an opinion would neither bind the IRS
nor preclude it from asserting a contrary position. State, local or foreign
income tax consequences to shareholders may vary from the federal income tax
consequences described above.
The Company should not recognize gain or loss for federal income tax
purposes as a result of the Proposed Reincorporation, and Symmetricom Delaware
should succeed, without adjustment, to the federal income tax attributes of
Symmetricom California.
Application Of The General Corporation Law Of California To Delaware
Corporations
Under Section 2115 of the California General Corporation Law, corporations
not organized under California law that have significant contacts with
California are subject to a number of key provisions of California law if (i)
the average of certain property, payroll and sales factors results in a finding
that more than 50% of the foreign corporation's business is conducted in
California and (ii) more than one-half of the foreign corporation's outstanding
voting securities are held of record by persons having addresses in California.
The application of this statute would not occur until the first day of the first
income year of the corporation commencing on or after the 135th day of the
income year immediately following the latest income year in which the
corporation meets both of these tests. This law does not apply to corporations
with securities that are designated as qualified for trading on The Nasdaq
National Market. Because the common stock of Symmetricom Delaware will continue
to be traded on The Nasdaq National Market upon the Reincorporation, Symmetricom
Delaware may avail itself of the foregoing exception, but there is a risk that
California law may someday be applied to the operation of Symmetricom Delaware
if Symmetricom Delaware fails to maintain its listing status with Nasdaq.
-24-
If Symmetricom Delaware were to become subject to the provisions of
California law referred to above, and such provisions were enforced by
California courts in a particular case, Symmetricom Delaware could be governed
by certain California laws, including those regarding liability of directors for
breaches of the duty of care, indemnification of directors, dissenters' rights
and removal of directors as well as certain other provisions discussed above, to
the potential exclusion of Delaware law. The effects of applying both Delaware
and California laws to a Delaware corporation whose principal operations are
based in California have not yet been determined.
Vote Required And Board Recommendation
Approval of the Reincorporation Proposal also will constitute approval of
the (i) Merger Agreement, the Amended and Restated Certificate of Incorporation
of Symmetricom Delaware and the Bylaws of Symmetricom Delaware, which include
the changes to the Company's corporate governance features and the rights of the
Company's shareholders as described in this Proposal Two (but without
incorporating any of the Related Proposals absent shareholder approval of the
same), (ii) the assumption of the Company's employee benefit plans, equity based
incentive plans and shareholder rights plan by Symmetricom Delaware and (iii)
the restatement of the Company's indemnification agreements with each of its
officers and directors to afford such persons indemnification by the Company to
the fullest extent permitted by Delaware law. Approval will require the
affirmative vote of the holders of a majority of the outstanding shares of
Common Stock of the Company entitled to vote on the matter. The effect of an
abstention or a broker non-vote is the same as that of a vote against the
Reincorporation Proposal.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE PROPOSED REINCORPORATION AND
RECOMMENDS THAT YOU VOTE FOR PROPOSAL NO. TWO.
-25-
CHARTER AND BYLAW PROPOSALS TO REDUCE THE COMPANY'S VULNERABILITY TO
UNSOLICITED TAKEOVER ATTEMPTS AND CONTESTS FOR CONTROL
(Proposal Nos. Three, Four, Five and Six - the Related Proposals)
Note: Implementation of each of the Related Proposals is contingent upon
----
approval and implementation of the Proposed Reincorporation (in addition to
approval of the Related Proposal at issue).
As noted above (see "Anti-Takeover Implications" set forth in Proposal No.
Two), the Board believes that, for the protection of the Company's shareholders,
any proposed acquisition of control of the Company or proposed business
combination in which the Company might be involved should be thoroughly studied
by the Board to assure that any such transaction would be in the best interests
of the Company and its shareholders and that the Company's shareholders would be
treated fairly.
Similarly, the Board believes that the Company's shareholders should have
the opportunity to consider both the qualifications of any new candidates
proposed for election to the Board and the interests that such candidates will
be representing if nominated and elected to the Board. The Board believes that
the deliberative process involved in the selection of candidates for nomination
and election to the Board to serve for an extended term results in a more
effective and stable Board of Directors and insures that a proper balance can be
maintained between the continuity and stability of management that incumbent
directors provide and the new perspectives and added strengths that new
directors can offer the Company.
Proposal No. Three, to classify the Symmetricom Delaware Board into three
classes, is designed to encourage this deliberative process in the selection of
candidates for election to the Board and to deter special stockholder
constituencies seeking to further their own interests from engaging in expensive
and wasteful proxy contests for control.
Proposal No. Four would prohibit the Symmetricom Delaware stockholders from
taking action by written consent and prohibit Symmetricom Delaware stockholders
from calling a special stockholder meeting. Proposal No. Six would increase the
stockholder vote required to approve amendments to Symmetricom Delaware's Bylaws
and certain features of Symmetricom Delaware's Amended and Restated Certificate
of Incorporation (as well as increasing the director vote required to amend
Symmetricom Delaware's Bylaws). These Proposals are designed to discourage
tactics sometimes employed by hostile bidders or dissident stockholders seeking
to further their own special interests over the interests of the stockholders as
a whole. These tactics include the solicitation of stockholder consents and the
calling of special stockholder meetings to seek approval of changes in a
corporation's charter or bylaws to make it easier to gain control of the
corporation or to force stockholder consideration of proposals before (i) the
time that the Board believes such consideration to be appropriate or (ii) the
next annual stockholder meeting. Moreover, these types of actions often are
timed to take advantage of short term declines in the stock price of a
corporation as an attempt to attract support from stockholders of their
proposals that might not otherwise garner such support. Finally, tactics such as
these can be disruptive and expensive for a corporation and a wasteful diversion
of Board and management time and energies from the business operations of the
Company. Additionally, if these Proposals are adopted, their effect will be to
require such stockholders to wait only until the next annual meeting to present
their proposals for a vote of the stockholders (unless the Chairman, Chief
Executive Officer, President or Board acts to call a meeting sooner) - a
requirement which the Board believes a stockholder with the genuine best
interests of the Company and the other stockholders in mind should be willing to
fulfill.
Approval of Proposal No. Five would result in Symmetricom Delaware being
subject to Delaware's anti-takeover statute (i.e., Section 203 of the Delaware
----
General Corporation Law). The application of Section 203 would provide
stockholders with certain protections in the event that a person acquires 15% or
more of the Company's stock.
The Board recognizes that the Related Proposals, which are described in
more detail below and will be voted on separately at the Annual Meeting, could
discourage hostile takeover attempts or tender offers for control of the Company
which might otherwise be attractive to many, or indeed by a majority, of the
Company's stockholders. However, the Board sincerely believes that the benefits
of discouraging the use of coercive takeover tactics and the initiation of
potentially expensive and disruptive consent solicitations and special meetings
by hostile bidders or dissident shareholders seeking to further their own
special interests, outweigh these disadvantages. THEREFORE THE BOARD OF
DIRECTORS IS RECOMMENDING THAT SHAREHOLDERS VOTE FOR APPROVAL OF EACH OF
PROPOSAL NOS. THREE, FOUR, FIVE AND SIX.
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PROPOSAL NO. THREE
APPROVAL OF A CLASSIFIED BOARD OF DIRECTORS
The Symmetricom California Articles of Incorporation currently do not
provide for a classified Board of Directors. The Board is recommending that
shareholders approve the inclusion in the Symmetricom Delaware Amended and
Restated Certificate of Incorporation of a provision that would classify the
Board into three classes of directors, with the members of each class to be
elected for a term of three years. The proposed provision would be implemented
by amending Symmetricom Delaware's Amended and Restated Certificate of
Incorporation as set forth in Appendix C-1 attached hereto (prior to
consummation of the Proposed Reincorporation). In addition, as noted below, a
related modification would be made to Symmetricom Delaware's Bylaws as set forth
in Appendix D-1 attached hereto (prior to consummation of the Proposed
Reincorporation).
The Board believes that staggered three-year terms, with the election of
approximately one-third of the directors each year, will help to assure the
continuity and stability of the Company's long-term policies in the future and
permit the Board to more effectively represent the interests of all stockholders
(since, for example, at least two-thirds of the directors at any given time will
have prior experience as directors of the Company). The division of the
directors into three classes will have the effect of making it more difficult to
change the overall composition of the Board of Directors. The Board, however,
believes that the benefits of maintaining continuity and stability on the Board
outweigh this disadvantage. See "Proposal No. Two - Approval of the Company's
Reincorporating in Delaware - The Charters and Bylaws of Symmetricom California
and Symmetricom Delaware - Classified Board of Directors" at page 15 above.
If the Proposed Reincorporation and this Proposal No. Three are approved
and implemented, Symmetricom Delaware will have a classified Board of Directors,
which will be divided into three classes with directors serving staggered
three-year terms, except for the first term of Class I directors, who initially
will serve a one-year term, and Class II directors, who initially will serve a
two-year term. Messrs. [______________] and [____________] will be Class I
directors with a term expiring at the Company's annual stockholders' meeting in
2002; Messrs. [___________] and [____________] will be Class II directors with a
term expiring at the Company's annual stockholders' meeting in 2003; and Messrs.
[___________] and [____________] will be Class III directors with a term
expiring at the Company's annual stockholders' meeting in 2004. Any additional
directorships resulting from an increase in the number of directors will be
distributed among the three classes so that, as nearly as possible, each class
will consist of one-third of the total number of directors. Directors chosen to
fill vacancies on the Board will hold office until the next election of the
class for which such directors have been chosen, and until a successor for such
directors are elected and have been qualified.
In addition, if Proposal No. Three is approved, then prior to the
consummation of the Proposed Reincorporation, the Symmetricom Delaware charter
and Delaware law regarding classified boards, acting in concert, will provide
that no director may be removed without cause, and Symmetricom Delaware's Bylaws
will be amended as set forth in Appendix D-1 attached hereto. See "Proposal No.
Two - Approval of the Company's Reincorporating in Delaware - The Charters and
Bylaws of Symmetricom California and Symmetricom Delaware - Removal of
Directors" at page 17 above.
Note: Implementation of this Proposal, if approved, is subject to the
----
approval and implementation of the Proposed Reincorporation.
Vote Required for Proposal No. Three
To be adopted, this Proposal requires the affirmative vote of a majority of
the outstanding shares of Symmetricom California's common stock. An abstention
or the failure of a broker or other nominee holder of shares to vote the shares
they hold of record will have the same effect as a vote against this Proposal.
This Proposal will be effectuated only if the Proposed Reincorporation is
approved and implemented.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL NO. THREE.
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PROPOSAL NO. FOUR
ELIMINATION OF STOCKHOLDER ACTION BY WRITTEN CONSENT
AND STOCKHOLDER ABILITY TO CALL A SPECIAL MEETING OF THE STOCKHOLDERS
Two common tactics sometimes taken by hostile bidders or dissident
stockholders seeking to further their own special interests are (i) to engage in
a solicitation of written consents from stockholders or (ii) to call a special
meeting of the stockholders, in each case forcing stockholder consideration of a
proposal over opposition of the Board to obtain approval of the stockholders of
changes in a corporation's bylaws that, if approved, would make it easier for
such hostile bidders or dissident stockholders to gain control of the
corporation. Therefore, the Board believes that modifying the provisions of
Symmetricom Delaware's Amended and Restated Certificate of Incorporation and
Bylaws to eliminate stockholder action by written consent and the ability of
stockholders to call a special meeting of the stockholders are prudent corporate
governance measures to prevent an inappropriately small number of shareholders
from prematurely forcing shareholder consideration of a proposal over the
opposition of the Board by unilaterally soliciting the consent of shareholders
(either in writing or at a special meeting called therefor) for such a proposal
before the time that the Board believes such consideration to be appropriate, or
the next annual shareholders meeting. The Proposed provisions would be
implemented by amending Symmetricom Delaware's Amended and Restated Certificate
of Incorporation as set forth in Appendix C-2 and by amending Symmetricom
Delaware's Bylaws as set forth in Appendix D-2.
Both California and Delaware laws permit a corporation to include a
provision in its charter or bylaws that would prohibit the taking of any action
by the shareholders by way of a shareholder written consent. Approval of this
Proposal in conjunction with the approval and consummation of the Proposed
Reincorporation will result in the prohibition under Symmetricom Delaware's
Amended and Restated Certificate of Incorporation of stockholders acting by
written consent (unless 66 2/3% of the directors waive such prohibition in any
instance).
California law provides that any shareholder or group of shareholders that
owns 10% or more of a corporation's voting shares are entitled to call a special
meeting of shareholders to seek their approval of any matter which, under
California law, may be approved by a shareholder vote. Delaware law permits a
corporation to include a provision in its charter or bylaws that limits the
persons that may call a special meeting to officers or directors of the
corporation. In that event, stockholders are not entitled to call special
stockholders meetings for any purpose, but must instead wait until the next
annual stockholders meeting to bring the matter to a vote. If this Proposal is
approved and the Proposed Reincorporation also is approved and effectuated, the
Bylaws of Symmetricom Delaware will contain provisions that limit the persons
that may call special stockholder meetings to the Board of Directors, the Chief
Executive Officer and the Secretary (upon the request of the Chairman, Chief
Executive Officer or President) of Symmetricom Delaware.
Elimination of stockholder power to act by written consent and to call a
special meeting may lengthen the amount of time required to take stockholder
actions because certain actions by written consent are not subject to the
minimum notice requirement of a stockholders' meeting. The elimination of
stockholder power to act by written consent and to call a special stockholder
meeting may also deter hostile takeover attempts because of the lengthened
stockholder approval process. Without the ability to act by written consent or
to call a special meeting of the stockholders, a holder or group of holders
controlling a majority in interest of the capital stock of Symmetricom Delaware
will not be able to amend the Bylaws of Symmetricom Delaware except as voted
upon at an annual stockholders' meeting where such action is duly proposed or at
a special meeting of the stockholders, held to take any such action and duly
called for by Symmetricom Delaware's Board, the Chief Executive Officer or
Secretary (at the request of the Chairman, Chief Executive Officer or
President). The Board of Directors believes these provisions, like other
provisions to be included in the Amended and Restated Certificate of
Incorporation and Bylaws of Symmetricom Delaware upon the approval of the
Proposed Reincorporation and the other Related Proposals, will enhance the
Board's opportunity to fully consider and effectively negotiate on behalf of the
interests of all stockholders in the context of a takeover attempt.
The Board recognizes that such provisions could discourage hostile takeover
attempts or tender offers for control of Symmetricom Delaware which might be
approved by many, or indeed by a majority, of Symmetricom Delaware's
stockholders. However, the Board believes that the benefits of discouraging
hostile bidders and dissident shareholders seeking to further their own special
interests from conducting potentially expensive and disruptive consent
solicitations and special meetings of the stockholders outweigh these
disadvantages.
Note: Implementation of this Proposal, if approved, is subject to the
----
approval and implementation of the Proposed Reincorporation.
-28-
Vote Required for Proposal No. Four
To be adopted, this Proposal requires the affirmative vote of a majority of
the outstanding shares of Symmetricom California's common stock. An abstention
or the failure of a broker or other nominee holder of shares to vote the shares
they hold of record will have the same effect as a vote against this Proposal.
This Proposal will be effectuated only if the Proposed Reincorporation is
approved and implemented.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL NO. FOUR.
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PROPOSAL NO. FIVE
AVAILING TO THE COMPANY THE PROTECTIONS AFFORDED
BY SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
As noted above (See "Proposal No. Two - Approval of the Company's
Reincorporating in Delaware - Significant Differences Between The Corporation
Laws of California and Delaware - Shareholder Approval of Certain Business
Combinations"), Section 203 of the Delaware General Corporation Law is designed
to provide stockholders of a Delaware corporation with certain protections in
the event that a person acquires 15% or more of the Delaware corporation's stock
without the approval of the Board. Unless the acquiring person obtains at least
85% of the outstanding shares in the same transaction in which the acquiring
person reaches the 15% threshold, such as by way of a successful tender offer
for any and all shares, then the acquiring person would be precluded from
effecting certain business combinations involving the company for a three-year
period unless at least two-thirds of the disinterested stockholders approve of
the combination. Precluded transactions include mergers with an entity
controlled by the acquiring person, or the sale or other disposition of a
substantial portion of the corporation's assets to the acquiring person, or the
issuance by the corporation of additional shares to the acquiring person for the
purpose of increasing the acquiring person's equity ownership. The Board
believes that Section 203 will serve to protect the interests of the
stockholders of Symmetricom Delaware and is seeking the approval of this
Proposal in order to cause Symmetricom Delaware to elect to be subject to
Section 203 in the event the Proposed Reincorporation is approved. This Proposal
would be implemented by amending Symmetricom Delaware's Amended and Restated
Certificate of Incorporation as set forth in Appendix C-3 attached hereto.
The Board believes that most Delaware corporations have availed themselves
of Section 203 and have not "opted out" of the application of Section 203.
Furthermore, the Board believes that Section 203 will encourage any potential
acquiror to negotiate with the Board of Directors of Symmetricom Delaware.
Section 203 also might have the effect of limiting the ability of a potential
acquiror to make a two-tiered bid for Symmetricom Delaware in which all
stockholders would not be treated equally. The application of Section 203 to
Symmetricom Delaware will also (i) confer upon the Board the power to reject a
proposed business combination in certain circumstances, even though a potential
acquiror may be offering a substantial premium for the shares of Symmetricom
Delaware over the then-current market price and (ii) discourage certain
potential acquirors unwilling to comply with its provisions.
Note: Section 203 is not applicable to California corporations and would
----
only apply to Symmetricom Delaware upon the effectuation of the Proposed
Reincorporation if this Proposal No. Five is approved at the Annual Meeting.
Vote Required for Proposal No. Five
To be adopted, this Proposal requires the affirmative vote of a majority of
the outstanding shares of Symmetricom California's common stock. An abstention
or the failure of a broker or other nominee holder of shares to vote the shares
they hold of record will have the same effect as a vote against this Proposal.
This Proposal will be effectuated only if the Proposed Reincorporation is
approved and implemented.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL NO. FIVE.
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PROPOSAL NO. SIX
INCREASE THE STOCKHOLDER VOTE REQUIRED TO AMEND THE BYLAWS AND
CERTAIN FEATURES OF THE PROPOSED DELAWARE CHARTER
Both California and Delaware laws permit a corporation to include a
provision in its charter and/or bylaws that would require the vote of more than
a majority of the outstanding shares to adopt, amend or repeal its bylaws as
well as to amend its charter. See, "Proposal No. Two - Approval of the Company's
Reincorporating in Delaware - Significant differences Between the Corporation
Laws of California and Delaware - Supermajority Voting Requirements" at page 21
above. The Board of Directors is recommending that shareholders approve (i)
provisions in Symmetricom Delaware's Bylaws and Amended and Restated Certificate
of Incorporation that would require the affirmative vote of the holders of
sixty-six and two-thirds percent (66 2/3%) of the outstanding shares to adopt,
amend, alter or repeal the Bylaws, (ii) provisions in Symmetricom Delaware's
Bylaws and Amended and Restated Certificate of Incorporation that would require
approval by sixty-six and two-thirds percent (66 2/3%) of the authorized number
of directors to amend the Bylaws and (iii) a provision in Symmetricom Delaware's
Amended and Restated Certificate of Incorporation that would require approval by
sixty-six and two-thirds percent (66 2/3%) of the outstanding shares to amend or
repeal certain provisions of such Amended and Restated Certificate of
Incorporation (including, as applicable based upon the approval of one or more
of the Related Proposals, classification of the Board of Directors, provisions
permitting the Board to fill vacancies on the Board, the elimination of
stockholder action by written consent and provisions regarding the limitation of
directors' liability and indemnification). See also, "Proposal No. Two -
Approval of the Company's Reincorporating in Delaware - The Charters and Bylaws
of Symmetricom California and Symmetricom Delaware - Amendment of
Bylaws-Supermajority Requirement" at page 21 above. The proposed provisions
would be implemented by amending Symmetricom Delaware's Amended and Restated
Certificate of Incorporation as set forth in Appendix C-4 and Symmetricom
Delaware's Bylaws as set forth in Appendix D-3.
A tactic sometimes used by hostile bidders seeking control of a public
company is to attempt to obtain stockholder approval of changes in a
corporation's bylaws, such as a change in the number of directors or in the
manner in which directors are elected, that would make it easier for the hostile
bidder to gain control of the corporation. To discourage such attempts, which
can be disruptive and a wasteful diversion of management's time and energies
from the operation of the Company's business, the Board of Directors believes
that it would be prudent and in the best interests of stockholders to approve
the proposed increase in the percentage vote of (i) the stockholders and
directors required to effect changes in the Symmetricom Delaware Bylaws and (ii)
the stockholders required to approve certain changes in the Symmetricom Delaware
Amended and Restated Certificate of Incorporation. In particular, the Board
believes that a two-thirds vote will have this intended deterrent effect, but at
the same time is not so high a percentage as will prevent stockholders from
approving amendments or changes that are supported by a substantial majority of
the stockholders. In tandem with this modification to the vote required by
stockholders, the Board is also proposing an increase in the percentage vote of
authorized directors required to amend the Symmetricom Delaware Bylaws.
Note: Implementation of this Proposal, if approved, is subject to the
----
approval of the Proposed Reincorporation.
Vote Required for Proposal No. Six
To be adopted, this Proposal requires the affirmative vote of a majority of
the outstanding shares of Symmetricom California's common stock. An abstention
or the failure of a broker or other nominee holder of shares to vote the shares
they hold of record will have the same effect as a vote against this Proposal.
This Proposal will be effectuated only if the Proposed Reincorporation is
approved and implemented.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL NO. SIX.
-31-
PROPOSAL NO. SEVEN
RATIFICATION OF APPOINTMENT OF
INDEPENDENT AUDITORS OF THE COMPANY
Deloitte & Touche LLP, Certified Public Accountants, have been the
independent auditors for the Company since 1976 and, upon recommendation of the
Audit Committee of the Board of Directors, their reappointment as independent
auditors for the 2002 fiscal year has been approved by the Board of Directors,
subject to ratification by the shareholders.
The Company has been advised by Deloitte & Touche LLP that neither it nor
any of its members has had any relationship with the Company or any of its
affiliates during the past three years other than as independent auditors
[Company to confirm]. The Company has been advised that a representative of
Deloitte & Touche LLP will be present at the Annual Meeting, will be available
to respond to appropriate questions, and will be given an opportunity to make a
statement if he or she so desires.
The following table sets forth the aggregate fees billed or to be billed by
Deloitte & Touche LLP for the following services during fiscal 2001:
Description of Services Fees
----------------------- ----
Audit fees(1) $ 320,000
Financial information system design and implementation fees(2) $ --
All other fees(3) $ 119,121
Total $ 439,121
==============
(1) Audit Fees: represents the aggregate fees billed or to be billed for
professional services rendered for the audit of our 2001 annual financial
statements and for the review of the financial statements included in our
quarterly reports during such period.
(2) Financial Information System Design and Implementation Fees: represents the
aggregate fees billed for operating or supervising the operation of our
information system or managing our local area network and/or designing or
implementing a hardware or software system that aggregates data or generates
information that is significant to the generation of our financial statements.
(3) Other Fees: represents the aggregate fees billed in fiscal 2001 for services
other than audit and other than financial information system design and
implementation including, for example, fees for tax services and registration.
Vote Required; Recommendation of the Board of Directors
Although not required to be submitted for shareholder approval, the Board
of Directors has conditioned its appointment of its independent auditors upon
receiving the affirmative vote of a majority of the shares represented, in
person or by proxy, and voting at the Annual Meeting. In the event the
shareholders do not approve the selection of Deloitte & Touche LLP, the
appointment of independent auditors will be reconsidered by the Board of
Directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR RATIFICATION OF
APPOINTMENT OF DELOITTE & TOUCHE LLP AS INDEPENDENT AUDITORS OF THE COMPANY FOR
THE 2002 FISCAL YEAR.
OTHER INFORMATION
Section 16(A) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company's officers and
directors and persons who own more than 10% of a registered class of the
Company's equity securities to file certain reports regarding ownership of, and
transactions in, the Company's securities with the Securities and Exchange
Commission (the "SEC"). Such officers, directors and 10% shareholders are also
required by SEC rules to furnish the Company with copies of all Section 16(a)
forms that they file.
Based solely on its review of such forms furnished to the Company and
written representations from certain reporting persons, the Company believes
that all filing requirements applicable to the Company's executive officers,
directors and more than 10% shareholders were complied with.
-32-
Share Ownership By Principal Shareholders and Management
The following table sets forth the beneficial ownership of Common Stock of
the Company as of June 30, 2001 by:
o all persons known to the Company to be the beneficial owners of more
than 5% of the Company's Common Stock,
o each of the officers named in the Summary Compensation Table (the
"Named Executive Officers"),
o each director and
o all directors and executive officers as a group.
A total of 23,583,382 shares of the Company's Common Stock were issued and
outstanding as of July 31, 2001.
Shares Approximate
Beneficially Percent
Name and Address Owned Owned
- -------------------------------------------------------------------------- ------------ -----------
Dimensional Fund Advisors Inc. (1)
1055 Washington Blvd.
Stamford, CT 06901 ................................................. 1,450,000 6.15
Thomas W. Steipp (2).................................................... 433,780 1.8
Frederick B. Stroupe (3)................................................ 100,778 *
Dale A. Pelletier (4)................................................... 83,440 *
William D. Rasdal (11).................................................. 75,000 *
William Slater (5)...................................................... 39,800 *
Richard W. Oliver (6)................................................... 34,100 *
Robert T. Clarkson (7).................................................. 28,750 *
Robert M. Neumeister (8)................................................ 12,750 *
Krish A. Prabhu (9)..................................................... 11,250 *
Richard N. Snyder (10).................................................. 11,250 *
All current directors and executive officers as a group (9 persons) 830,898 3.4
- ----------
* Less than one percent (1%)
(1) Based on information received from Dimensional Fund Advisors Inc.
("Dimensional"). Dimensional, an investment advisor registered under
Section 203 of the Investment Advisors Act of 1940, furnishes investment
advice to four investment companies registered under the Investment Company
Act of 1940, and serves as investment manager to certain other investment
vehicles, including commingled group trusts. These investment companies and
investment vehicles own 1,450,000 shares, and Dimensional disclaims
beneficial ownership of such securities.
(2) Includes 411,128 shares subject to options exercisable within 60 days of
July 31, 2001
(3) Includes 98,868 shares subject to options exercisable within 60 days of
July 31, 2001.
(4) Includes 67,385 shares subject to options exercisable within 60 days of
July 31, 2001.
(5) Includes 37,500 shares subject to options exercisable within 60 days of
July 31, 2001.
(6) Includes 31,250 shares subject to options exercisable within 60 days of
July 31, 2001.
(7) Includes 3,750 shares subject to options exercisable within 60 days of July
31, 2001.
(8) Includes 11,250 shares subject to options exercisable within 60 days of
July 31, 2001.
(9) Includes 11,250 shares subject to options exercisable within 60 days of
July 31, 2001.
(10) Includes 11,250 shares subject to options exercisable within 60 days of
July 31, 2001.
(11) Mr. Rasdal resigned in October 2000 and has no options exercisable within
60 days of July 31, 2001.
-33-
EXECUTIVE OFFICER COMPENSATION
Summary Compensation Table
The following table sets forth compensation earned in the last three
fiscal years by (i) the Company's Chief Executive Officer and (ii) the four most
highly compensated executive officers, other than the Chief Executive Officer,
who were serving as executive officers at the end of the fiscal year ended June
30, 2001.
Long-Term
Compensation Awards
Annual Compensation --------------------
---------------------------------- Securities
Other Annual Underlying All Other
Salary Bonus Compensation Options Compensation
-------- --------- ------------ --------------------- ------------
Name and Principal Position Year ($) ($) ($)(1) (#) (*) ($)(2)
- ---------------------------------- ------ -------- --------- ------------ --------------------- ------------
Current Executive Officers
Thomas W. Steipp 2001 343,846 440,538 112,000 (5) 200,000 500
Chief Executive Officer 2000 309,186 347,418 112,000 (5) 150,000 500
1999 257,407 208,848 170,926 (3) -- 500
Frederick B. Stroupe 2001 230,192 154,558 69,477 (4) 45,000 500
Executive Vice President and 2000 110,000 -- 173,763 (4) 75,000 500
General Manager 1999 109,998 500 168,594 (4) 20,000 500
William Slater 2001 206,731 139,423 -- 150,000 500
Chief Financial Officer and 2000 -- -- -- -- --
Secretary 1999 -- -- -- -- --
Dale A. Pelletier 2001 204,615 138,577 -- 40,001 500
Senior Vice President, 2000 194,065 113,794 -- 30,000 500
Operations 1999 184,408 33,381 -- 15,000 500
Former Executive Officers
Maurice Austin (6) 2001 158,654 17,760 -- -- 500
Chief Financial Officer and 2000 177,884 136,394 -- 300,000 500
Secretary 1999 -- -- -- -- --
Murli M. Thirumale (7) 2001 51,346 17,334 -- -- 500
Executive Vice President and 2000 149,279 275,515 -- 270,000 500
General Manager AccessMax 1999 -- -- -- -- --
Division
- ----------
* Number of shares reflects a three-for-two forward stock dividend effected
as of August 18, 2000.
(1) Excludes certain perquisites and other personal benefits, securities or
property that, for any executive officer, in the aggregate did not exceed
the lesser of $50,000 or 10% of the total annual salary and bonus for such
executive officer.
(2) Represents Company matching 401(k) Plan contributions.
(3) Represents note forgiven, interest forgiven and other compensation,
$100,000, $18,000 and $52,926, respectively.
(4) Represents primarily commissions.
(5) Represents debt forgiven and interest forgiven, $100,000 and $12,000,
respectively.
(6) Mr. Austin resigned as an executive officer during fiscal year 2001.
(7) Mr. Thirumale resigned as an executive officer during fiscal year 2001.
-34-
Employment Agreement with Thomas W. Steipp
We have entered into an employment agreement with Thomas W. Steipp dated
July 1, 2001 (the "Employment Agreement").
The Employment Agreement ratifies Mr. Steipp's initial yearly base salary
of $345,000 for the fiscal year ending June 30, 2001, and through December 31,
2001, subject to annual increases thereafter of no less than the percentage
increase during the preceding calendar year as determined with reference to the
United States Department of Labor and Bureau of Labor Statistics' Consumer Price
Index for the San Francisco Metropolitan Area. Mr. Steipp is also entitled to
participate in any medical, dental, long-term disability, life insurance,
retirement, stock option or deferred compensation plans available to other
employees or executives. The Employment Agreement also provides that Mr. Steipp
shall participate in our Management Incentive Plan, the terms of which are
determined each fiscal year by our Board of Directors. This makes Mr. Steipp
eligible to earn up to 130% of his base salary as Incentive Compensation.
The Employment Agreement renews annually and continues until the earlier of
(1) election by Mr. Steipp not to renew at least 60 days before December 31,
2001, and each anniversary thereof, or (2) termination of his employment by (i)
the Board of Directors for cause following failure to cure after 30 days notice,
(ii) by the Board of Directors without cause, (iii) by Mr. Steipp for good
reason, or (iv) upon Mr. Steipp's death or disability. Upon termination of
employment without cause, or for good reason by Mr. Steipp, we are to pay Mr.
Steipp the lump sum of an amount equal to his then annual base salary plus the
amount of his target bonus for the prior year, to provide him with up to 18
months of Company paid medical, dental, and life insurance benefits, to
immediately vest 1/3 of any of his unvested stock options or restricted stock,
and to forgive any amounts due to us under loans outstanding to Mr. Steipp. The
Employment Agreement further provides for a lump sum "gross-up" payment to Mr.
Steipp equal to the total of federal and state taxes imposed upon the
forgiveness of any such loans. In the event of a termination for cause or good
reason, the Employment Agreement also provides that Mr. Steipp will not
directly, or indirectly, attempt to recruit, induce or solicit any of our
employees to leave his or her employment with us.
Option Grants In Last Fiscal Year
The following table sets forth, as to the Named Executive Officers and
certain information relating to stock options granted during fiscal year 2001.
The number of shares reflects a three-for-two forward stock split effective as
of August 18, 2000.
Individual Grants Potential Realizable
--------------------------------------------------------- Value at Assumed Annual
Number of % of Total Rates of Stock Price
Securities Options Exercise Appreciation for Option
Underlying Granted to or Base Term (3)
Options Employees in Price Expiration -----------------------
Name Granted (#) Fiscal Year (1) ($/SH) (2) Date 5% ($) 10% ($)
- ---------------------------------- ----------- --------------- ---------- ---------- ---------- ----------
Current Executive Officers
Thomas W. Steipp 200,000 14.88 10.9167 8/07/10 1,373,091 3,479,682
William Slater 150,000 11.61 11.8750 8/21/10 1,120,219 2,838,854
Dale A. Pelletier 40,001 2.98 10.9167 8/07/10 274,625 695,954
Frederick B. Stroupe 45,000 3.35 10.9167 8/07/10 308,945 782,928
- ----------
(1) The total number of shares subject to options granted to employees of the
Company in fiscal 2001 was 1,343,957.
(2) The exercise price per share is equal to the closing price of the Company's
Common Stock on the date of grant.
(3) The Potential Realizable Value is calculated based on the fair market value
on the date of grant, which is equal to the exercise price of options
granted in fiscal 2001, assuming that the stock appreciates in value from
the date of grant until the end of the option term at the annual rate
specified (5% and 10%). Potential Realizable Value is net of the option
exercise price. The assumed rates of appreciation are specified in rules of
the SEC, and do not represent the Company's estimate or projection of
future stock price. Actual gains, if any, resulting from stock option
exercises and Common Stock holdings are dependent on the future performance
of the Common Stock, overall stock market conditions, as well as the option
holders' continued employment through the exercise/ vesting period. There
can be no assurance that the amounts reflected in this table will be
achieved.
-35-
Aggregated Option Exercises In Last Fiscal Year and Fiscal Year End Option
Values
The following table provides information with respect to option exercises
in fiscal 2001 by the Named Executive Officers and the value of such officers'
unexercised options at the close of business on June 30, 2001. The table
reflects a three-for-two forward stock dividend effected as of August 18, 2000.
Shares Number of Securities Value of Unexercised
Acquired Underlying Unexercised Options In-the-Money Options
on at Fiscal Year End (#) at Fiscal Year End ($) (1)
Exercise Value ------------------------------ -----------------------------
Name (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- --------------------------- -------- ------------ ------------ -------------- ----------- -------------
Current Executive Officers
Thomas W. Steipp 92,000 1,251,813 351,751 281,250 3,404,341 1,460,204
William Slater -- -- -- 150,000 -- 414,750
Dale A. Pelletier 37,263 500,050 54,105 62,373 544,892 375,639
Frederick B. Stroupe 38,200 517,532 81,056 93,748 792,081 612,430
Former Executive Officer
Maurice Austin (2) 100,002 1,106,536 -- -- -- --
Murli M. Thirumale (3) 67,500 629,471 -- -- -- --
- ----------
(1) Market value of the underlying securities is based on the closing price of
$14.6400 of the Company's Common Stock on June 30, 2001.
(2) Mr. Austin resigned August 2000
(3) Mr. Thirumale resigned September 2000.
Change of Control Agreement of Thomas W. Steipp
Effective July 1, 2001, we have entered into a change of control agreement
with Thomas W. Steipp. This agreement provides in pertinent part that if Mr.
Steipp's employment terminates under specified circumstances within 24 months
following a change of control of the Company, then we, or the company with which
we merge, must (1) pay Mr. Steipp a lump sum equal to three times the sum of his
base salary then in effect and 100% of his target bonus for the prior year, (2)
immediately and fully vest his outstanding stock options or shares of stock
subject to a restricted stock purchase agreement, and (3) cover his medical,
dental, and life insurance for up to 18 months. The above rights are triggered
by a termination of Mr. Steipp within 24 months following a change of control of
the Company where such termination results from: (i) an involuntary termination
by the Company without cause, (ii) death or disability, or (iii) a voluntary
termination by Mr. Steipp for good reason. Good reason includes a significant
reduction in authority or duties, the relocation of Mr. Steipp's principal place
of employment more than 30 miles from his current residence, or a reduction in
the base salary, incentive compensation, equity compensation, or other benefits
received prior to the change of control.
The change of control agreement further provides for "gross up" payments to
Mr. Steipp in the event he is subject to the tax code's excise tax on so-called
"excess parachute payments." For purposes of this agreement, a change of control
includes (1) the sale or disposition of all, or substantially all, of our
assets; (2) any transaction or series of transactions by which a person or
entity comes to hold 45% or more of our common stock, unless such entity is one
of our subsidiaries, an entity formed by us to hold such securities, or one of
our employee stock ownership plans; (3) certain changes in the composition of
our Board of Directors occurring within a two-year period; or (4) a merger or
consolidation in which Symmetricom shareholders immediately before the
transaction own less then 55% of the outstanding voting securities of the
surviving entity, or its parent, immediately after the transaction.
CERTAIN TRANSACTIONS
Relocation Loans to and Agreement with Thomas W. Steipp. In March 1998, in
connection with his acceptance of employment with the Company and the related
relocation of his personal residence, Mr. Steipp borrowed $400,000 from the
Company pursuant to a Promissory Note Secured by Deed of Trust bearing interest
at the rate of 6% per year (the "Interest Bearing Note") and $500,000 pursuant
to a separate Promissory Note Secured by Deed of Trust that is interest free
(the "Interest Free Note"). By their terms both the Interest Bearing Note and
-36-
the Interest Free Note become fully due and payable upon the earliest to occur
of: (i) five days after Mr. Steipp's voluntary resignation or termination for
good cause; (ii) 360 days after Mr. Steipp's termination by the Company without
good cause; (iii) the date of transfer of Mr. Steipp's principal residence,
under certain circumstances; or (iv) March 25, 2008. The Interest Free Note is
secured by a first deed of trust on Mr. Steipp's principal residence, and the
Interest Bearing Note is secured by a second deed of trust on Mr. Steipp's
principal residence.
The principal and interest on the Interest Bearing Loan has been forgiven
at the end of June 2001. The Interest Free Note does not provide for such
forgiveness.
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
The Compensation Committee is currently comprised of three independent,
non-employee directors who have no interlocking relationships, as defined by the
Securities and Exchange Commission. As part of its duties, the Compensation
Committee reviews compensation levels of the executive officers and evaluates
their performance. The Compensation Committee also administers the Company's
stock option plans. In connection with such duties, the Compensation Committee
determines base salary levels and short-term incentive bonus programs for the
Company's executive officers at or about the start of the fiscal year, and
determines actual bonuses after the end of such fiscal year based upon the
achievement of Company or subsidiary profit levels. The Compensation Committee
also determines stock option awards to executives throughout the year.
The Company's executive pay programs are designed to attract and retain
executives who will contribute to the Company's long-term success, to reward
executives for achieving both short and long-term strategic Company goals, to
link executive and shareholder interest through equity-based plans, and to
provide a compensation package that recognizes individual contributions and
Company performance. A substantial portion of each executive's total
compensation is intended to be variable and to relate to and be contingent upon
the achievement of Company or subsidiary profit levels.
The three key components of the Company's executive compensation program in
fiscal 2001 were base salary, short-term incentives, represented by the
Company's annual bonus program, and long-term incentives, represented by the
Company's stock programs. The Company also provides benefits to its executives
to provide for health, welfare and security needs, as well as for executive
efficiency. The Company's policies with respect to the three principal elements
of its executive compensation program, as well as the basis for the compensation
awarded to Thomas W. Steipp, the Company's present Chief Executive Officer is
discussed below.
Base Salary
Base salaries of executive officers are initially determined by evaluating
the responsibilities of the position held and the experience and performance of
the individual, with reference to the competitive marketplace for executive
talent, including a comparison to base salaries for comparable positions for
high technology companies. The Compensation Committee considers not only the
achievement of corporate and business unit financial and strategic goals, but
also individual performance, including managerial effectiveness, teamwork and
customer satisfaction. Base salaries of executive officers in fiscal 2001 were
set at levels comparable to levels at other companies in the technology sector
to help the Company attract and retain highly talented individuals in an
increasingly competitive market, and in a period in which the Company has
experienced substantial fluctuations in its stock price.
Annual Bonus Program
At the beginning of the fiscal year, the Compensation Committee determined
maximum annual incentive bonus payments based on profit targets compared to
fiscal 2001. Following the end of the 2001 fiscal year, the Compensation
Committee determined the amount of the annual incentive payments for each
executive officer based on its evaluation of the achievement of the profit
target set for the Company. The Compensation Committee's philosophy is to set
high profit targets, and to make each executive officer's maximum incentive
bonus payout target high in relation to such executive officer's salary and in
comparison with other high technology companies, in order to obtain significant
linkage between overall executive compensation and the achievement of the
applicable profit.
-37-
Equity-Based Compensation
Under the Company's Employee Stock Plan, stock options may be granted to
executive officers and other key employees of the Company. The size of stock
option awards is based primarily on an individual's performance and the
individual's responsibilities and position with the Company, as well as on the
individual's present outstanding vested and unvested options. Options are
designed to align the interests of executive officers with those of
shareholders. Stock options are granted with an exercise price equal to the fair
market value of the Company's Common Stock on the date of grant, and current
grants generally vest over three years, subject to the Compensation Committee's
discretion to vary the vesting schedule. This approach is designed to encourage
the creation of shareholder value over the long term since no benefit is
realized from the stock option grant unless the price of the Common Stock rises
over a number of years.
In addition to the Employee Stock Plan, all eligible employees of the
Company, including executive officers, may participate in a payroll deduction
Employee Stock Purchase Plan pursuant to which Common Stock of the Company may
be purchased at the end of each six-month offering period, at a purchase price
equal to 85% of its fair market value at the beginning or ending of such
offering period, whichever is lower.
Compensation of the Chief Executive Officer
The Compensation Committee meets without the Chief Executive Officer
present to evaluate his performance. The Chief Executive Officer's base salary
and annual incentive bonus were determined based on a number of factors,
including comparative salaries of chief executive officers of similar
performance high technology companies, and the Company's performance in fiscal
2001, as well as targets for fiscal 2001. Mr. Steipp's base salary for fiscal
2001 was set at levels competitive with industry standards consistent with the
Compensation Committee's philosophy set forth above in "Base Salary." Mr. Steipp
received an incentive bonus of $440,538 for fiscal 2001. Mr. Steipp received
options to purchase 200,000 shares of Common Stock during fiscal year 2001.
By the Members of the Stock Option and
Compensation Committee
Robert T. Clarkson
Robert M. Neumeister
Krish A. Prabhu
-38-
REPORT OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
The following is the report of the Audit Committee with respect to the
Company's audited financial statements for the fiscal year ended June 30, 2001,
which include the consolidated balance sheets of the Company as of June 30, 2001
and 2000, and the related consolidated statements of operations, stockholders'
equity (deficit) and cash flows for each of the three years for the period ended
June 30, 2001, 2000 and 1999 and the notes thereto. The information contained in
this report shall not be deemed to be "soliciting material" or to be "filed"
with the Securities and Exchange Commission, nor shall such information be
incorporated by reference into any future filing under the Securities Act of
1933, as amended, or the 1934 Securities Exchange Act, as amended, except to the
extent that the Company specifically incorporates it by reference in such
filing.
Review with Management
The Audit Committee oversees the Company's financial reporting process on
behalf of the Board of Directors. Management has the primary responsibility for
the financial statements and the reporting process including the systems of
internal controls. In fulfilling its oversight responsibilities, the Audit
Committee reviewed the Company's audited financial statements with management,
including a discussion of the quality, not just the acceptability, of the
accounting principles, the reasonableness of significant judgments, and the
clarity of disclosures in the financial statements.
Review and Discussion with Independent Auditors
The Audit Committee has discussed with Deloitte and Touche LLP, the
Company's independent accountants, the matters required to be discussed by SAS
61 (Codification of Statements on Accounting Standards) which includes, among
other items, matters related to the conduct of the audit of the Company's
financial statements.
The Audit Committee reviewed with the independent auditors, who are
responsible for expressing an opinion on the conformity of audited financial
statements with generally accepted accounting principles, their judgments as to
the quality, not just the acceptability, of the Company's accounting principles
and such other matters as are required to be discussed with the Audit Committee
under generally accepted auditing standards. In addition, the Audit Committee
has discussed with the independent auditors the auditors' independence from
management and the Company including the matters in the written disclosures
required by the Independence Standards Board and considered the compatibility of
non-audit services with the auditors' independence.
The Audit Committee discussed with the independent auditors the overall
scope and plans for their audits. The Audit Committee met with the independent
auditors, with and without management present, to discuss the results of their
examinations, their evaluations of the Company's internal controls, and the
overall quality of the Company's financial reporting.
Conclusion
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors (and the Board has approved)
that the audited financial statements be included in the Annual Report on Form
10-K for the year ended June 30, 2001 for filing with the Securities and
Exchange Commission. The Audit Committee and the Board have also recommended,
subject to stockholder approval, the selection of the Company's independent
auditors.
By the Members of the Audit Committee
Robert T. Clarkson
Robert M. Neumeister
Richard N. Snyder
-39-
COMPARATIVE STOCK PERFORMANCE
The graph below compares the cumulative total shareholders' return on the
Company's Common Stock for the last five fiscal years with the total return on
the S&P 500 Index and the S&P Technology Sector over the same period (assuming
the investment of $100 in the Company's Common Stock, the S&P 500 Index and the
S&P High Technology--Composite Index, and reinvestment of all dividends).
PERFORMANCE GRAPH
SYMMETRICOM, INC.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG SYMMETRICOM, INC., THE S&P 500 INDEX
AND THE S&P TECHNOLOGY INDEX
[GRAPHIC APPEARS HERE]
-40-
OTHER MATTERS
The Company knows of no other matters to be submitted to the Annual
Meeting. If any other matters properly come before the Annual Meeting, it is the
intention of the persons named in the enclosed form of Proxy to vote the shares
they represent as the Board of Directors may recommend.
It is important that your stock be represented at the Annual Meeting,
regardless of the number of shares which you hold. You are, therefore, urged to
mark, sign, date and return the accompanying Proxy as promptly as possible in
the postage-paid envelope enclosed for that purpose.
Any person who was a beneficial owner of common stock on the record date
for the 2001 Annual Meeting may obtain a copy of the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 2001, filed with the Securities and
Exchange Commission without charge (except for exhibits to such annual report
which will be furnished upon payment of the Company's reasonable expenses in
furnishing such exhibits). The request for such materials should identify the
person making the request as a shareholder of the Company as of the record date
and should be directed to Investor Relations, Symmetricom, Inc., 2300 Orchard
Parkway, San Jose, CA 95131-1017.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ WILLIAM SLATER
William Slater
Corporate Secretary
Dated: September ___, 2001
-41-
APPENDIX A
SYMMETRICOM, INC.
AUDIT COMMITTEE CHARTER
-----------------------
I. PURPOSE
The primary function of the Audit Committee is to assist the Board of
Directors in fulfilling its oversight responsibilities by reviewing the
Company's financial information, the system of internal controls and the
Company's audit process. The Audit Committee's primary duties and
responsibilities shall be:
. Overseeing that management has maintained the reliability and
integrity of the accounting policies and financial reporting and
disclosure practices of the Company;
. Overseeing that management has established and maintained
processes to assure that an adequate system of internal control
is functioning within the Company;
. Overseeing that management has established and maintained
processes to assure compliance by the Company with Company
policy;
. Reviewing and appraising the audit efforts of the Company's
independent accountants and the internal audit function;
. Providing an open avenue of communication among the independent
accountants, financial and senior management, the internal audit
function and the Board of Directors.
II. COMPOSITION
The Audit Committee shall be comprised of two or more directors as
determined by the Board, each of whom shall be an independent director. A third
director shall be elected to the Audit Committee by June 14, 2000. All members
of the Committee shall have a working familiarity with basic finance and
accounting practices and at least one member of the Committee shall have
accounting or related financial management expertise.
III. RESPONSIBILITIES AND DUTIES
The Audit Committee shall have the following specific powers and
duties:
1. Holding such regular meetings as may be necessary and such
special meetings as may be called by the Chairman of the Audit
Committee or at the request of the independent accountants;
2. Creating an agenda for the ensuing year;
3. Reviewing the performance of the independent accountants, making
recommendations to the Board of Directors regarding the
appointment or termination of the independent accountants and
overseeing the independence of the accountants;
4. Conferring with the independent accountants and the internal
audit function concerning the scope of their examinations of the
books and records of the Company and its subsidiaries; reviewing
and approving the independent accountants' annual engagement
letter; reviewing and approving the Company's internal audit
charter, annual audit plans and budget; directing the special
attention of the audit function to specific matters or areas
deemed by the Committee or the audit function to be of special
significance; and authorizing the audit function to perform such
supplemental reviews or audits as the Committee may deem
desirable;
A-1
5. Reviewing with management, the independent accountants and
internal audit function significant risks and exposures, audit
activities and significant audit findings;
6. Reviewing the range and cost of audit and non-audit services
performed by the independent accountants;
7. Reviewing the nature and extent of any significant changes in
accounting principles or the application therein;
8. Reviewing the adequacy of the Company's systems of internal
control;
9. Obtaining from the independent accountants and the internal audit
function their recommendations regarding internal controls and
other matters relating to the accounting procedures and the books
and records of the Company and its subsidiaries and reviewing the
correction of controls deemed to be deficient;
10. Providing an independent, direct communication between the Board
of Directors, the internal audit function and independent
accountants;
11. Reviewing the programs of the Company designed to ensure
compliance with Company policy and monitoring the results of
these compliance efforts;
12. Reporting through its Chairman to the Board of Directors
following the meetings of the Audit Committee;
13. Maintaining minutes or other records of meetings and activities
of the Audit Committee;
14. Reviewing the powers of the Committee annually and reporting and
making recommendations to the Board of Directors on these
responsibilities;
15. Conducting or authorizing investigations into any matters with
the Audit Committee's scope of responsibilities. The Audit
Committee shall be empowered to retain independent counsel,
accountants, or others to assist it in the conduct of any
investigation;
16. Considering such matters in relation to the financial affairs of
the Company and its accounts, and in relation to the internal and
external audit of the Company as the Audit Committee may, in its
discretion, determine to be advisable.
A-2
APPENDIX B
AGREEMENT AND PLAN OF MERGER
----------------------------
This Agreement and Plan of Merger (this "Agreement"), dated as of October
---------
[XX], 2001, by and between Symmetricom, Inc., a California corporation (the
--
"California Company"), and Symmetricom, Inc., a Delaware corporation (the
------------------
"Delaware Company"), is made with reference to the following facts:
----------------
A. The California Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of California and, on the date
of this Agreement, has authority to issue One Hundred Fifty Million
-------------------------
(150,000,000) shares of common stock, no par value ("California Common Stock"),
----------- -----------------------
and Five Hundred Thousand (500,000) shares of preferred stock, no par value, of
--------------------- -------
which Two Hundred Thousand (200,000) shares have been designated Series A
-------------------- -------
Participating Preferred Stock.
B. On the date of this Agreement, the California Company had issued and
outstanding [X,XXX,XXX] shares of California Common Stock, options to acquire
---------
[X,XXX,XXX] shares of California Common Stock, and no shares of preferred stock.
---------
C. The Delaware Company is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Delaware and, on the date of
this Agreement, has authority to issue Seventy Million (70,000,000) shares of
--------------- ----------
common stock, $0.0001 par value per share ("Delaware Common Stock"), and Five
--------------------- ----
Hundred Thousand (500,000) shares of preferred stock, $0.0001 par value per
- ---------------- -------
share ("Delaware Preferred"), of which Two Hundred Thousand (200,000) shares
------------------ -------------------- -------
have been designated Series A Participating Preferred Stock.
D. The Delaware Company currently has One Hundred (100) shares of Delaware
----------- ---
Common Stock issued and outstanding, all of which are owned by the California
Company.
E. The respective Boards of Directors of the California Company and the
Delaware Company have determined that it is advisable and in the best interests
of each such corporation that the California Company be merged with and into the
Delaware Company upon the terms and subject to the conditions provided in this
Agreement for the purpose of effecting a reincorporation of the California
Company in the State of Delaware and have, by resolutions duly adopted, approved
this Agreement and directed that it be submitted to a vote of their respective
shareholders and executed by the undersigned officers.
NOW, THEREFORE, the parties agree as follows:
ARTICLE 1
---------
Definitions
-----------
When used in this Agreement, the following terms shall have the following
meanings, respectively:
1.1 "California Law" shall mean the California Corporations Code as
--------------
currently in effect on the date of this Agreement.
1.2 "Delaware Law" shall mean the Delaware General Corporation Law as
------------
currently in effect on the date of this Agreement.
1.3 "Effective Time" shall mean the date and time when the Merger shall
--------------
have become effective, in accordance with Section 2.2 below.
1.4 "Merger" shall mean the merger of the California Company with and into
------
the Delaware Company.
1.5 "Rights Plan" shall mean the shareholder rights plan implemented by the
-----------
California Company pursuant to the terms of that certain Rights Agreement, dated
as of August 9, 2001, by and between the California Company and Mellon Investor
Services LLC.
1.6 "Surviving Corporation" shall mean the Delaware Company from and after
---------------------
the Effective Time.
B-1
ARTICLE 2
---------
Merger
------
2.1 Filings. The Merger shall become effective when the following actions
-------
shall have been completed:
(a) This Agreement and the Merger shall have been adopted and approved by
the sole stockholder of the Delaware Company and the shareholders of the
California Company;
(b) All of the conditions precedent to the consummation of the Merger
specified in this Agreement shall have been satisfied or duly waived by the
party entitled to satisfaction thereof; and
(c) An executed Certificate of Merger (in the form attached hereto as
Exhibit A, the "Certificate of Merger") shall have been filed with the Secretary
- --------- ---------------------
of State of the State of Delaware. Following the filing with the Secretary of
State of the State of Delaware, an executed counterpart of this Agreement, along
with a certificate (substantially in the form attached hereto as Exhibit B-1 or
--------------
B-2, as applicable) of a duly authorized officer of both the California Company
- ---
and the Delaware Company, each meeting the requirements of California Law, shall
be submitted for filing with the Secretary of State of the State of California.
2.2 Merger Effectiveness. The Merger shall become effective for all
--------------------
purposes under Delaware Law when proper documentation has been filed with the
Secretary of State of the State of Delaware in accordance with Section 2.1
above. The Merger shall become effective for purposes under California Law as of
the time the Merger becomes effective in Delaware (although proper documentation
will promptly be filed with the Secretary of State of the State of California in
accordance with Section 2.1 above).
2.3 Effects. At the Effective Time:
-------
(a) the California Company shall be merged with and into the Delaware
Company and the separate existence of the California Company shall cease;
(b) the Amended and Restated Certificate of Incorporation of the Delaware
Company (a current draft of which is attached hereto as Exhibit C, the
---------
"Certificate of Incorporation") in effect at the Effective Time shall continue
----------------------------
as the Certificate of Incorporation of the Surviving Corporation;
(c) the Bylaws of the Delaware Company (a current draft of which is
attached hereto as Exhibit D, the "Bylaws") in effect at the Effective Time
--------- ------
shall continue as the Bylaws of the Surviving Corporation;
(d) the Board of Directors of the Surviving Corporation shall be comprised
of: Thomas W. Steipp [(Class __)], Richard W. Oliver [(Class __)], Robert T.
Clarkson [(Class __)], Robert M. Neumeister, Jr. [(Class __)], Krish A. Prabhu
[(Class __)] and Richard N. Snyder [(Class __)];
(e) each officer of the California Company in office immediately prior to
the Effective Time shall become an officer in the same capacity of the Surviving
Corporation;
(f) the shares of California Common Stock outstanding immediately prior to
the Effective Time shall be converted into shares of Delaware Common Stock
pursuant to Article 3 below, with an amount equal to the par value of the
Delaware Common Stock to be allocated to the stated capital account of the
Delaware Company, and all amounts in excess of such amount shown on the books of
the California Company to be allocated to retained earnings or the capital
surplus account, in accordance with good accounting practice; and
(g) without further transfer, act or deed, the separate existence of the
California Company shall cease and the Surviving Corporation shall possess all
of the rights, privileges, powers and franchises of a public as well as of a
private nature, and shall be subject to all the restrictions, disabilities and
duties of the California Company; and each and all of the rights, privileges,
powers and franchises of the California Company, and all property, real,
personal and mixed, and all debts due to the California Company on whatever
account, stock subscriptions and other things in action or belonging to the
California Company shall be vested in the Surviving Corporation; and all
property, rights, privileges, powers and franchises, and each and every other
interest of the California Company
B-2
shall be thereafter as effectually the property of the Surviving Corporation as
they were of the California Company; and the title to any real estate vested by
deed or otherwise, under the laws of the State of Delaware, in the California
Company shall not revert or be in any way impaired by reason of the Merger; and
all rights of creditors of the California Company and all liens upon any
property of the California Company shall be preserved unimpaired; and all debts,
liabilities and duties of the California Company shall thenceforth attach to the
Surviving Corporation and may be enforced against it to the same extent as if
such debts, liabilities and duties had been incurred or contracted by it.
2.4 Further Assurances. The California Company agrees that if, at any time
------------------
after the Effective Time, the Surviving Corporation shall consider or be advised
that any further deeds, assignments or assurances are necessary or desirable to
vest, perfect or confirm in the Surviving Corporation title to any property or
rights of the California Company, the Surviving Corporation and its proper
officers and directors may execute and deliver all such proper deeds,
assignments and assurances and do all other things necessary or desirable to
vest, perfect or confirm title to such property or rights in the Surviving
Corporation and otherwise to carry out the purposes of this Agreement, in the
name of the California Company or otherwise.
ARTICLE 3
---------
Conversion of Shares
--------------------
3.1 Conversion of Shares. At the Effective Time:
--------------------
(a) each share of California Common Stock issued and outstanding
immediately prior to the Effective Time shall, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into one (1)
share of Delaware Common Stock; and
(b) each share of Delaware Common Stock issued and outstanding immediately
prior to the Effective Time shall be canceled and retired and no shares shall be
issued in the Merger in respect thereof.
3.2 Stock Certificates. At and after the Effective Time, all of the
------------------
outstanding certificates which immediately prior to the Effective Time represent
shares of California Common Stock shall be deemed for all purposes to evidence
ownership of, and to represent, the shares of Delaware Common Stock into which
such shares formerly represented by such certificates have been converted as
provided in this Agreement. The registered owner on the books and records of the
Delaware Company or its transfer agents of any such outstanding stock
certificate shall, until such certificate shall have been surrendered for
transfer or otherwise accounted for to the Delaware Company or its transfer
agents, have and be entitled to exercise any voting and other rights with
respect to, and to receive any dividends and other distributions upon, the
shares of stock evidenced by such outstanding certificate as above provided.
3.3 Stock Purchase Option Plans. Each right or option to purchase shares of
---------------------------
capital stock of the California Company granted under the California Company's
Amended and Restated Non-Qualified Stock Option Plan (1982), 1990 Director
Option Plan, 1990 Employee Stock Plan, 1994 Employee Stock Purchase Plan, and
any other equity incentive plan of the California Company (the "Stock Plans"),
-----------
or granted irrespective of and not in connection with the Plans, which is
outstanding immediately prior to the Effective Time, shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into and become a right or option to purchase the same number of shares of
Delaware Common Stock at the same price per share. The same number of shares of
Delaware Common Stock shall be reserved for purposes of the Plans as are equal
to the number of shares of California Common Stock so reserved as of the
Effective Time.
3.4 Rights Plan. Without limiting and in furtherance of Section 2.3 above,
-----------
the Rights Plan shall, upon the Effective Time, be assumed by the Delaware
Company. Each right issued in connection with the Rights Plan which is attached
to each share of California Common Stock immediately prior to the Effective Time
shall, by virtue of the Merger and without any action on the part of the holder
thereof, be converted into and become a right, with the same powers and
privileges, attached to each share of Delaware Common Stock. The same number of
shares of Series A Participating Preferred Stock, par value $0.0001 per share,
of the Delaware Company shall be reserved for issuance under the Rights Plan (as
assumed) as the number of shares of the California Company's Series A
Participating Preferred Stock, no par value, so reserved by the California
Company as of the Effective Time.
B-3
3.5 Validity of Delaware Stock. All shares of Delaware Common Stock into
--------------------------
which California Common Stock is to be converted pursuant to the Merger shall
not be subject to any statutory preemptive rights, shall be validly issued,
fully paid and nonassessable and shall be issued in full satisfaction of all
rights pertaining to such California Common Stock.
3.6 Rights of Former Holders. From and after the Effective Time, no holder
------------------------
of certificates which evidenced California Common Stock immediately prior to the
Effective Time shall have any rights with respect to the shares formerly
evidenced by those certificates, other than to receive the shares of Delaware
Common Stock into which such shares shall have been converted pursuant to the
Merger.
ARTICLE 4
---------
Covenants To Be Performed Prior to Closing Date
-----------------------------------------------
4.1 Consents. Each of the California Company and the Delaware Company shall
--------
use its best efforts to obtain the consent and approval of each person whose
consent or approval shall be required in order to permit consummation of the
Merger.
4.2 Governmental Authorizations. Each of the California Company and the
---------------------------
Delaware Company shall cooperate in filing any necessary reports or other
documents with any federal, state, local or foreign authorities having
jurisdiction with respect to the Merger.
ARTICLE 5
---------
Conditions
----------
The obligations of the California Company and the Delaware Company to
consummate the Merger are subject to satisfaction of the following conditions:
5.1 Authorization. The holders of a majority of the California Common Stock
-------------
shall have approved and adopted this Agreement and the Merger in accordance with
California Law. All necessary action shall have been taken to authorize the
execution, delivery and performance of this Agreement by the California Company
and the Delaware Company. The California Company and the Delaware Company shall
have full power and authority to consummate the Merger.
5.2 Consents and Approvals. All authorizations, consents and approvals
----------------------
(contractual or otherwise) of any state, federal, local or foreign government
agency, regulatory body or official or any person (other than the California
Company or the Delaware Company) necessary for the valid consummation of the
Merger in accordance with this Agreement shall have been obtained and shall be
in full force and effect.
ARTICLE 6
---------
Miscellaneous
-------------
6.1 Waiver and Amendment. This Agreement may be amended by action of the
--------------------
respective Boards of Directors of the California Company and the Delaware
Company without action by the respective shareholders and stockholder of the
parties, except that (i) any amendments to Section 3.1 above, (ii) any amendment
changing the terms, rights, powers or preferences of Delaware Common Stock or
(iii) any amendment altering any terms of this Agreement, if such alteration
would adversely affect the holders of any class or series of the capital stock
of the California Company or the Delaware Company, must be approved by the
holders of a majority of the California Common Stock.
6.2 Termination; Abandonment. This Agreement may be terminated and the
------------------------
Merger and other transactions provided for by this Agreement abandoned at any
time prior to the Effective Time, whether before or after adoption and approval
of this Agreement by the shareholders of the California Company, by action of
the Board of Directors of the California Company if the Board determines that
the consummation of the transactions contemplated by this Agreement would not,
for any reason, be in the best interests of the California Company and its
shareholders.
6.3 Entire Agreement. This Agreement contains the entire agreement among
----------------
the parties with respect to the Merger and supersedes all prior and concurrent
arrangements, letters of intent or understandings relating to the Merger.
B-4
6.4 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be an original, but all of which when taken
together shall constitute one and the same agreement. This Agreement shall
become effective when one or more counterparts have been signed by each of the
parties and delivered to each of the parties.
6.5 Headings. The article, section and paragraph headings in this Agreement
--------
are intended principally for convenience and shall not, by themselves, determine
rights and obligations of the parties to this Agreement.
6.6 No Waiver. No waiver by any party of any condition, or the breach of
---------
any term or covenant contained in this Agreement, whether by conduct or
otherwise, in any one or more instances, shall be deemed to be a further or
continuing waiver of any such condition or breach or a waiver of any other
condition or breach of any other term or covenant contained in this Agreement.
6.7 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Delaware, and so far as applicable, the
merger provisions of the California Corporations Code.
6.8 Approval of the California Company as the Sole Stockholder of the
-----------------------------------------------------------------
Delaware Company. By its execution and delivery of this Agreement, the
- ----------------
California Company, as the sole stockholder of the Delaware Company, consents
to, approves and adopts this Agreement and approves the Merger, subject to the
approval and adoption of this Agreement by the holders of a majority of the
shares of the California Common Stock, pursuant to Section 5.1. The California
Company agrees to execute such instruments as may be necessary or desirable to
evidence its approval and adoption of this Agreement and the Merger as the sole
stockholder of the Delaware Company.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the date first above written.
SYMMETRICOM, INC.,
a California corporation
By:
Its:
SYMMETRICOM, INC.,
a Delaware corporation
By:
Its:
B-5
EXHIBIT A
---------
CERTIFICATE OF MERGER OF
SYMMETRICOM, INC. WITH AND INTO SYMMETRICOM, INC.
(a California corporation) (a Delaware corporation)
The undersigned corporation, organized and existing under and by virtue of
the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY THAT:
FIRST: The name and state of incorporation of each of the constituent
corporations in the merger (the "Constituent Corporations") are as follows:
------------------------
Name State of Incorporation
---- ----------------------
Symmetricom, Inc. California
Symmetricom, Inc. Delaware
SECOND: An Agreement and Plan of Merger dated as of [XXXXX XX], 2001 (the
--
"Merger Agreement") among Symmetricom, Inc., a California corporation
----------------
("California Company"), and Symmetricom, Inc., a Delaware corporation and a
------------------
wholly owned subsidiary of California Company ("Delaware Company"), has been
----------------
approved, adopted, certified, executed and acknowledged by each of the
Constituent Corporations in accordance with the requirements of Section 252 of
the General Corporation Law of the State of Delaware.
THIRD: Delaware Company shall be the surviving corporation of the merger
(the "Surviving Corporation").
---------------------
FOURTH: The Amended and Restated Certificate of Incorporation of Delaware
Company shall be the certificate of incorporation of the Surviving Corporation.
FIFTH: The executed Merger Agreement is on file at an office of the
Surviving Corporation located at 2300 Orchard Parkway, San Jose, California
95131-1017, a copy of which will be furnished by the Surviving Corporation, upon
request and without cost, to any stockholder of either Constituent Corporation.
IN WITNESS WHEREOF, this Certificate of Merger has been executed on this
[____] day of [__________], 2001.
SYMMETRICOM, INC.
(a Delaware corporation)
By: Thomas W. Steipp
Its:Chief Executive Officer
ATTEST:
By: William Slater
Its: Secretary
B-6
EXHIBIT B-1
-----------
SYMMETRICOM, INC.,
a California corporation
OFFICERS' CERTIFICATE OF APPROVAL
OF
AGREEMENT OF MERGER
Thomas W. Steipp and William Slater hereby certify that:
1. They are the Chief Executive Officer and Secretary, respectively, of
Symmetricom, Inc., a California corporation (the "Corporation").
-----------
2. The Agreement and Plan of Merger in the form attached was duly approved by
the board of directors of the Corporation.
3. The Corporation is authorized to issue two classes of stock designated
"Preferred Stock" and "Common Stock," respectively. The total number of
outstanding shares of the Corporation is [X,XXX,XXX] shares of Common
Stock.
4. The shareholder approval was by the vote of a number of shares which
equaled or exceeded the vote required. The percentage vote required was
more than 50% of the outstanding shares of Common Stock.
We hereby declare under penalty of perjury under the laws of the State of
California that the matters set forth in this certificate are true and correct
of our own knowledge.
Dated: [________ __, 2001]
Thomas W. Steipp
Chief Executive Officer
William Slater
Secretary
B-7
EXHIBIT B-2
-----------
SYMMETRICOM, INC.,
a Delaware corporation
OFFICERS' CERTIFICATE OF APPROVAL
OF
AGREEMENT OF MERGER
Thomas W. Steipp and William Slater hereby certify that:
1. They are the Chief Executive Officer and Secretary, respectively, of
Symmetricom, Inc., a Delaware corporation (the "Corporation").
-----------
2. The Agreement and Plan of Merger in the form attached was duly approved by
the board of directors and shareholders of the Corporation.
3. The total number of outstanding shares of the Corporation is 100 shares of
Common Stock.
4. The shareholder approval was by the vote of a number of shares which
equaled or exceeded the vote required. The percentage vote required was
more than 50% of the outstanding shares of Common Stock.
We hereby declare under penalty of perjury under the laws of the State
of California that the matters set forth in this certificate are true and
correct of our own knowledge.
Dated: [___________ __, 2001]
______________________________________
Thomas W. Steipp
Chief Executive Officer
______________________________________
William Slater
Secretary
B-8
APPENDIX C
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
-------------------------------------------------
OF
SYMMETRICOM, INC.
Symmetricom, Inc., a corporation organized and existing under the laws of
the State of Delaware, hereby certifies as follows:
A. The corporation was originally incorporated as Symmetricom, Inc.
pursuant to a Certificate of Incorporation of the corporation filed with the
Secretary of State of the State of Delaware on August 1, 2001.
B. This Amended and Restated Certificate of Incorporation (i) has been duly
adopted in accordance with the provisions of Sections 228, 242 and 245 of the
Delaware General Corporation Law by the Board of Directors and stockholders of
the corporation and (ii) restates, integrates and further amends the provisions
of the Certificate of Incorporation of the corporation.
C. The text of the Certificate of Incorporation as heretofore amended or
supplemented is hereby amended and restated in its entirety, effective as of the
effective date of this filing, to read as follows:
ARTICLE I
The name of the corporation is Symmetricom, Inc.
ARTICLE II
The address of the registered office of the corporation in the State of
Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle.
The name of its registered agent at such address is The Corporation Trust
Company.
ARTICLE III
The nature of the business or purposes to be conducted or promoted by the
corporation is to engage in any lawful act or activity for which corporations
may be organized under the General Corporation Law of the State of Delaware as
the same exists or hereafter may be amended.
ARTICLE IV
A. Classes of Stock. The total number of shares of all classes of capital
stock that the corporation shall have authority to issue is Seventy Million Five
--------------------
Hundred Thousand (70,500,000), of which Seventy Million (70,000,000) shares with
- ---------------- ---------- --------------- ----------
par value of one hundredth of one cent ($.0001) each shall be Common Stock (the
"Common Stock") and Five Hundred Thousand (500,000) shares with a par value of
------------ --------------------- -------
one hundredth of one cent ($.0001) each shall be Preferred Stock (the "Preferred
---------
Stock"). The number of authorized shares of Common Stock or Preferred Stock may
- -----
be increased or decreased (but not below the number of shares thereof then
outstanding) by the affirmative vote of the holders of a majority of the then
outstanding shares of Common Stock, without a vote of the holders of the
Preferred Stock, or of any series thereof, unless a vote of any such Preferred
Stock holders is required pursuant to the provisions established by the Board of
Directors of the corporation (the "Board of Directors").
------------------
B. Preferred Stock. The Preferred Stock may be issued in any number of
---------------
series, as determined by the Board of Directors. The rights, preferences,
privileges and restrictions granted to and imposed on the "Series A
Participating Preferred Stock" (the "Series A Participating Preferred Stock"),
--------------------------------------
which series shall consist of Two Hundred Thousand (200,000) shares, are as set
-------------------- -------
forth on Annex A attached hereto. The Board of Directors is expressly authorized
-------
to provide for the issue, in one or more series, of all or any of the remaining
shares of Preferred Stock and, in the resolution or resolutions providing for
such issue, to establish for each such series the number of its shares, the
voting powers, full or limited, of the shares of such series, or that such
shares shall have no voting powers, and the designations, preferences and
relative, participating, optional or other special rights of the shares of
C-1
such series, and the qualifications, limitations or restrictions thereof. The
Board of Directors is also expressly authorized (unless forbidden in the
resolution or resolutions providing for such issue) to increase or decrease (but
not below the number of shares of the series then outstanding) the number of
shares of any series of Preferred Stock (including, without limitation, the
Series A Participating Preferred Stock) at any time including after the issuance
of shares of that series and, at any time prior to the issuance of shares of
that series (including, without limitation, the Series A Participating Preferred
Stock), to amend by resolution the voting powers, designation, preferences and
relative, participating, optional or other special rights of the shares of such
series, and the qualifications, limitations or restrictions thereof. In case the
number of shares of any such series shall be so decreased, the shares
constituting such decrease shall resume the status of authorized but unissued
shares of Preferred Stock.
C. Common Stock.
-------------
1. Relative Rights of Preferred Stock and Common Stock. All preferences,
---------------------------------------------------
voting powers, relative, participating, optional or other special rights and
privileges, and all qualifications, limitations, or restrictions, of the Common
Stock are expressly made subject and subordinate to those that may be fixed with
respect to any shares of the Preferred Stock.
2. Voting Rights. Except as otherwise required by law or this Amended and
-------------
Restated Certificate of Incorporation, each holder of Common Stock shall have
one vote in respect of each share of stock held by such holder of record on the
books of the corporation for the election of directors and on all matters
submitted to a vote of stockholders of the corporation.
3. Dividends. Subject to the preferential rights of the Preferred Stock,
---------
the holders of shares of Common Stock shall be entitled to receive, when and if
declared by the Board of Directors, out of the assets of the corporation which
are by law available therefor, dividends payable either in cash, in property or
in shares of capital stock.
4. Dissolution, Liquidation or Winding Up. In the event of any dissolution,
--------------------------------------
liquidation or winding up of the affairs of the corporation, after distribution
in full of the preferential amounts, if any, to be distributed to the holders of
shares of the Preferred Stock, holders of Common Stock shall be entitled, unless
otherwise provided by law or this Amended and Restated Certificate of
Incorporation, to receive all of the remaining assets of the corporation of
whatever kind available for distribution to stockholders ratably in proportion
to the number of shares of Common Stock held by them respectively.
ARTICLE V
In furtherance and not in limitation of the powers conferred by the laws of
the State of Delaware:
A. Elections of directors need not be by written ballot unless the by-laws
of the corporation shall so provide.
B. The books of the corporation may be kept at such place within or without
the State of Delaware as the by-laws of the corporation may provide or as may be
designated from time to time by the Board of Directors.
ARTICLE VI
A. Number of Directors. The authorized number of directors of the
-------------------
corporation shall be determined from time to time by resolution adopted by the
affirmative vote of a majority of the entire Board of Directors at any regular
or special meeting of such Board, within any limits prescribed in the by-laws of
the corporation.
B. Vacancies. Except as otherwise provided for or fixed pursuant to the
---------
provisions of Article IV of this Amended and Restated Certificate of
Incorporation relating to the rights of the holders of any series of Preferred
Stock to elect directors, and subject to the provisions hereof, newly created
directorships resulting from any increase in the authorized number of directors
or any vacancies on the Board of Directors resulting from death, resignation,
disqualification, removal or another cause may be filled only by the affirmative
vote of a majority of the remaining directors then in office, even though less
than a quorum of the Board of Directors. Any director elected in accordance with
the preceding sentence shall, if applicable, hold office for the remainder of
the full term of the class of directors in which the new directorship was
created or in which the vacancy occurred, and in any event until such
C-2
director's successor shall have been duly elected and qualified or until his or
her earlier resignation, removal from office, death or incapacity. Subject to
the provisions of this Amended and Restated Certificate of Incorporation, no
decrease in the number of directors constituting the Board of Directors shall
shorten the term of any incumbent director.
ARTICLE VII
A. Limitation on Liability. A director of the corporation shall not be
-----------------------
personally liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability (1) for any
breach of the director's duty of loyalty to the corporation or its stockholders;
(2) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law; (3) under Section 174 of the Delaware
General Corporation Law; or (4) for any transaction from which the director
derived an improper personal benefit.
If the Delaware General Corporation Law hereafter is amended to further
eliminate or limit the liability of directors, then the liability of a director
of the corporation, in addition to the limitation on personal liability provided
herein, shall be limited to the fullest extent permitted by the amended Delaware
General Corporation Law.
B. Indemnification. Each person who is or is made a party or is threatened
---------------
to be made a party to or is involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (hereinafter a "proceeding"),
by reason of the fact that he or she, or a person of whom he or she is the legal
representative, is or was a director or officer of the corporation or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, whether
the basis of such proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity while serving as a
director, officer, employee or agent, shall be indemnified and held harmless by
the corporation to the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
corporation to provide broader indemnification rights than said law permitted
the corporation to provide prior to such amendment), against all expense,
liability and loss (including attorneys' fees, judgments, fines, ERISA excise
taxes or penalties and amounts paid or to be paid in settlement) reasonably
incurred or suffered by such person in connection therewith and such
indemnification shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of his or her heirs,
executors and administrators; provided, however, that, except as provided in the
second paragraph of this section, the corporation shall indemnify any such
person seeking indemnification in connection with a proceeding (or part thereof)
initiated by such person only if such proceeding (or part thereof) was
authorized by the Board of Directors. The right to indemnification conferred in
this section shall be a contract right and shall include the right to be paid by
the corporation for any expenses incurred in defending any such proceeding in
advance of its final disposition; provided, however, that, if the Delaware
General Corporation Law requires, the payment of such expenses incurred by a
director or officer in his or her capacity as a director or officer (and not in
any other capacity in which service was or is rendered by such person while a
director or officer, including, without limitation, service to an employee
benefit plan) in advance of the final disposition of a proceeding, shall be made
only upon delivery to the corporation of an undertaking, by or on behalf of such
director or officer, to repay all amounts so advanced if it shall ultimately be
determined that such director or officer is not entitled to be indemnified under
this section or otherwise. The corporation may, by action of its Board of
Directors, provide indemnification to employees and agents of the corporation
with the same scope and effect as the foregoing indemnification of directors and
officers.
If a claim under the first paragraph of this section is not paid in full by
the corporation within thirty (30) days after a written claim has been received
by the corporation, the claimant may at any time thereafter bring suit against
the corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled to be paid also the expense of
prosecuting such claim. It shall be a defense to any such action (other than an
action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any is required, has been tendered to the corporation) that the claimant has
not met the standards of conduct which make it permissible under the Delaware
General Corporation Law for the corporation to indemnify the claimant for the
amount claimed, but the burden of proving such defense shall be on the
corporation. Neither the failure of the corporation (including its Board of
Directors, independent legal counsel or stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the Delaware General Corporation
Law, nor an actual determination by
C-3
the corporation (including its Board of Directors, independent legal counsel or
stockholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that the claimant has
not met the applicable standard of conduct.
The right to indemnification and the payment of expenses incurred in
defending a proceeding in advance of its final disposition conferred in this
section shall not be exclusive of any other right which any person may have or
hereafter acquire under any statute, provision of this Amended and Restated
Certificate of Incorporation, by-law, agreement, vote of stockholders or
disinterested directors or otherwise.
C. Insurance. The corporation may maintain insurance, at its expense, to
---------
protect itself and any director, officer, employee or agent of the corporation
or another corporation, partnership, joint venture, trust or other enterprise
against any such expense, liability or loss, whether or not the corporation
would have the power to indemnify such person against such expense, liability or
loss under the Delaware General Corporation Law.
D. Repeal and Modification. Any repeal or modification of the foregoing
-----------------------
provisions of this Article shall not adversely affect any right or protection of
any director, officer, employee or agent of the corporation existing at the time
of such repeal or modification.
E. Other Indemnification. To the fullest extent permitted by applicable
---------------------
law, the corporation is authorized to provide indemnification of (and
advancement of expenses to) agents of the corporation (and any other persons to
which Delaware law permits the corporation to provide indemnification) through
bylaw provisions, agreements with such directors, officers, employees and agents
or other persons, vote of stockholders or disinterested directors or otherwise,
in excess of the indemnification and advancement otherwise permitted by Section
145 of the Delaware General Corporation Law, subject only to limits created by
applicable Delaware law (statutory or non-statutory) with respect to actions for
breach of duty to the corporation, its stockholders and others.
ARTICLE VIII
In furtherance and not in limitation of the powers conferred by the laws of
the State of Delaware, the Board of Directors is expressly empowered to adopt,
amend or repeal the by-laws of the corporation.
ARTICLE IX
The corporation shall not be subject to the provisions of Section 203 of
the Delaware General Corporation Law.
IN WITNESS WHEREOF, the undersigned has executed this Amended and Restated
Certificate of Incorporation, constituting the acknowledgement of the
undersigned, under the penalties of perjury, that this Amended and Restated
Certificate of Incorporation is the act and deed of the corporation and that the
facts stated herein are true, as of this __th day of ______, 2001.
SYMMETRICOM, INC.
By:
William Slater
Chief Financial Officer and Secretary
C-4
ANNEX A
-------
THE RIGHTS, PREFERENCES AND RESTRICTIONS
OF
SERIES A PARTICIPATING PREFERRED STOCK
1. Designation and Amount. The number of shares constituting the Series A
----------------------
Participating Preferred Stock shall be Two Hundred Thousand (200,000). Such
-------------------- -------
number of shares may be increased or decreased by resolution of the Board of
Directors; provided, that no decrease shall reduce the number of shares of
Series A Participating Preferred Stock to a number less than that of the shares
then outstanding plus the number of shares issuable upon exercise of outstanding
rights, options or warrants or upon conversion of outstanding securities issued
by the corporation.
2. Dividends and Distributions.
---------------------------
(A) Subject to the prior and superior rights of the holders of any shares
of any series of Preferred Stock ranking prior and superior to the shares of
Series A Participating Preferred Stock with respect to dividends, the holders of
shares of Series A Participating Preferred Stock in preference to the holders of
shares of Common Stock and any other junior stock, shall be entitled to receive,
when, as and if declared by the Board of Directors out of funds legally
available for the purpose, quarterly dividends payable in cash on the first day
of March, June, September and December in each year (each such date being
referred to herein as a "Quarterly Dividend Payment Date"), commencing on the
first Quarterly Dividend Payment Date after the first issuance of a share or
fraction of a share of Series A Participating Preferred Stock in an amount per
share (rounded to the nearest cent) equal to the greater of (a) $25.00 or, (b)
subject to the provision for adjustment hereinafter set forth, 1,000 times the
aggregate per share amount of all cash dividends, and 1,000 times the aggregate
per share amount (payable in kind) of all non-cash dividends or other
distributions other than a dividend payable in shares of Common Stock or a
subdivision of the outstanding shares of Common Stock (by reclassification or
otherwise), declared on the Common Stock, since the immediately preceding
Quarterly Dividend Payment Date, or, with respect to the first Quarterly
Dividend Payment Date, since the first issuance of any share or fraction of a
share of Series A Participating Preferred Stock. In the event the corporation
shall at any time (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock or (iii) combine the
outstanding Common Stock into a smaller number of shares, by reclassification or
otherwise, then in each such case the amount to which holders of shares of
Series A Participating Preferred Stock were entitled immediately prior to such
event under clause (b) of the preceding sentence shall be adjusted by
multiplying such amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) The corporation shall declare a dividend or distribution on the Series
A Participating Preferred Stock as provided in paragraph (A) above immediately
after it declares a dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock); provided that, in the event no
dividend or distribution shall have been declared on the Common Stock during the
period between any Quarterly Dividend Payment Date and the next subsequent
Quarterly Dividend Payment Date, a dividend of $25.00 per share on the Series A
Participating Preferred Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding shares
of Series A Participating Preferred Stock from the Quarterly Dividend Payment
Date next preceding the date of issue of such shares of Series A Participating
Preferred Stock unless the date of issue of such shares is prior to the record
date for the first Quarterly Dividend Payment Date, in which case dividends on
such shares shall begin to accrue from the date of issue of such shares, or
unless the date of issue is a Quarterly Dividend Payment Date or is a date after
the record date for the determination of holders of shares of Series A
Participating Preferred Stock entitled to receive a quarterly dividend and
before such Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative from such Quarterly Dividend
Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends
paid on the shares of Series A Participating Preferred Stock in an amount less
than the total amount of such dividends at the time accrued and payable on such
shares shall be allocated pro rata on a
C-5
share-by-share basis among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders of shares of
Series A Participating Preferred Stock entitled to receive payment of a dividend
or distribution declared thereon, which record date shall be no more than 30
days prior to the date fixed for the payment thereof.
3. Voting Rights. The holders of shares of Series A Participating Preferred
-------------
Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth, each
share of Series A Participating Preferred Stock shall entitle the holder thereof
to 1,000 votes on all matters submitted to a vote of the shareholders of the
corporation. In the event the corporation shall at any time (i) declare any
dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock into a greater number of shares or (iii) combine the
outstanding Common Stock into a smaller number of shares, by reclassification or
otherwise, then in each such case the number of votes per share to which holders
of shares of Series A Participating Preferred Stock were entitled immediately
prior to such event shall be adjusted by multiplying such number by a fraction
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock outstanding immediately prior to such event.
(B) Except as otherwise provided herein, in the certificate of
incorporation or by-laws of the corporation, the holders of shares of Series A
Participating Preferred Stock and the holders of shares of Common Stock and any
other capital stock of the corporation having general voting rights shall vote
together as one class on all matters submitted to a vote of shareholders of the
corporation.
(C) (i) If at any time dividends on any Series A Participating Preferred
Stock shall be in arrears in an amount equal to six quarterly dividends thereon,
the holders of the Series A Participating Preferred Stock, voting as a separate
series from all other series of Preferred Stock and classes of capital stock,
shall be entitled to elect two members of the Board of Directors in addition to
any Directors elected by any other series, class or classes of securities and
the authorized number of Directors will automatically be increased by two.
Promptly thereafter, the Board of Directors of this corporation shall, as soon
as may be practicable, call a special meeting of holders of Series A
Participating Preferred Stock for the purpose of electing such members of the
Board of Directors. Said special meeting shall in any event be held within 45
days of the occurrence of such arrearage.
(ii) During any period when the holders of Series A Participating
Preferred Stock, voting as a separate series, shall be entitled and shall have
exercised their right to elect two Directors, then and during such time as such
right continues (a) the then authorized number of Directors shall remain
increased by two, and the holders of Series A Participating Preferred Stock,
voting as a separate series, shall remain entitled to elect the additional
Directors so provided for, and (b) each such additional Director shall not be a
member of any existing class of the Board of Directors, but shall serve until
the next annual meeting of shareholders for the election of Directors, or until
his or her successor shall be elected and shall qualify, or until his or her
right to hold such office terminates pursuant to the provisions of this Section
3(C).
(iii) A Director elected pursuant to the terms hereof may be removed
with or without cause by the holders of Series A Participating Preferred Stock
entitled to vote in an election of such Director.
(iv) If, during any interval between annual meetings of shareholders
for the election of Directors and while the holders of Series A Participating
Preferred Stock shall be entitled to elect two Directors, there are fewer than
two such Directors in office by reason of resignation, death or removal, then,
promptly thereafter, the Board of Directors shall call a special meeting of the
holders of Series A Participating Preferred Stock for the purpose of filling
such vacancy(ies) and such vacancy(ies) shall be filled at such special meeting.
Such special meeting shall in any event be held within 45 days of the occurrence
of any such vacancy(ies).
(v) At such time as the arrearage is fully cured, and all dividends
accumulated and unpaid on any shares of Series A Participating Preferred Stock
outstanding are paid, and, in addition thereto, at least one regular dividend
has been paid subsequent to curing such arrearage, the term of office of any
Director elected pursuant to this Section 3(C), or his or her successor, shall
automatically terminate, and the authorized number of Directors shall
automatically decrease by two, and the rights of the holders of the shares of
the Series A Participating Preferred Stock to vote as provided in this Section
3(C) shall cease, subject to renewal from time to time upon the same terms and
conditions.
C-6
(D) Except as set forth herein or as otherwise provided by law, holders of
Series A Participating Preferred Stock shall have no special voting rights and
their consent shall not be required (except to the extent they are entitled to
vote with holders of Common Stock and any other capital stock of the corporation
having general voting rights as set forth herein) for taking any corporate
action.
4. Certain Restrictions.
--------------------
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Participating Preferred Stock as provided in Section 2
are in arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series A Participating
Preferred Stock outstanding shall have been paid in full, the corporation shall
not:
(i) declare or pay dividends on, make any other distributions on, or
redeem or purchase or otherwise acquire for consideration any shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Participating Preferred Stock;
(ii) declare or pay dividends on or make any other distributions on any
shares of stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Participating Preferred Stock
except dividends paid ratably on the Series A Participating Preferred Stock and
all such parity stock on which dividends are payable or in arrears in proportion
to the total amounts to which the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration shares
of any stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Participating Preferred Stock,
provided that the corporation may at any time redeem, purchase or otherwise
acquire shares of any such parity stock in exchange for shares of any stock of
the corporation ranking junior (either as to dividends or upon dissolution,
liquidation or winding up) to the Series A Participating Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any shares of
Series A Participating Preferred Stock or any shares of stock ranking on a
parity with the Series A Participating Preferred Stock except in accordance with
a purchase offer made in writing or by publication (as determined by the Board
of Directors) to all holders of such shares upon such terms as the Board of
Directors, after consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable treatment among the
respective series or classes.
(B) The corporation shall not permit any subsidiary of the corporation to
purchase or otherwise acquire for consideration any shares of stock of the
corporation unless the corporation could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.
5. Reacquired Shares. Any shares of Series A Participating Preferred Stock
-----------------
purchased or otherwise acquired by the corporation in any manner whatsoever
shall be retired and canceled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
to be created by resolution or resolutions of the Board of Directors, subject to
the conditions and restrictions on issuance set forth herein.
6. Liquidation, Dissolution or Winding Up.
--------------------------------------
(A) Upon any liquidation (voluntary or otherwise), dissolution or winding
up of the corporation, no distribution shall be made to the holders of shares of
stock ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Participating Preferred Stock unless, prior thereto,
the holders of shares of Series A Participating Preferred Stock shall have
received per share, the greater of $1,000.00 or 1,000 times the payment made per
share of Common Stock, plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such payment (the
"Series A Liquidation Preference"). Following the payment of the full amount of
the Series A Liquidation Preference, no additional distributions shall be made
to the holders of shares of Series A Participating Preferred Stock unless, prior
thereto, the holders of shares of Common Stock shall have received an amount per
share (the "Common Adjustment") equal to the quotient obtained by dividing (i)
the Series A Liquidation Preference by (ii) 1,000 (as appropriately adjusted as
set forth in subparagraph (C) below to reflect such events as stock splits,
stock dividends and recapitalization with respect to the
C-7
(Common Stock) (such number in clause (ii), the "Adjustment Number"). Following
the payment of the full amount of the Series A Liquidation Preference and the
Common Adjustment in respect of all outstanding shares of Series A Participating
Preferred Stock and Common Stock, respectively, holders of Series A
Participating Preferred Stock and holders of shares of Common Stock shall
receive their ratable and proportionate share of the remaining assets to be
distributed in the ratio of the Adjustment Number to 1 with respect to such
Preferred Stock and Common Stock, on a per share basis, respectively.
(B) In the event there are not sufficient assets available to permit
payment in full of the Series A Liquidation Preference and the liquidation
preferences of all other series of Preferred Stock, if any, which rank on a
parity with the Series A Participating Preferred Stock, then such remaining
assets shall be distributed ratably to the holders of such parity shares in
proportion to their respective liquidation preferences. In the event, following
payment in full of all liquidation preferences of all shares senior to Common
Stock (including the Series A Participating Preferred Stock), there are not
sufficient assets available to permit payment in full of the Common Adjustment,
then the remaining assets shall be distributed ratably to the holders of Common
Stock.
(C) In the event the corporation shall at any time (i) declare any dividend
on Common Stock payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock or (iii) combine the outstanding Common Stock into a
smaller number of shares, by reclassification or otherwise, then in each such
case the Adjustment Number in effect immediately prior to such event shall be
adjusted by multiplying such Adjustment Number by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
7. Consolidation, Merger, etc. In case the corporation shall enter into any
--------------------------
consolidation, merger, combination or other transaction in which the shares of
Common Stock are exchanged for or changed into other stock or securities, cash
and/or any other property, then in any such case the shares of Series A
Participating Preferred Stock shall at the same time be similarly exchanged or
changed in an amount per share (subject to the provision for adjustment
hereinafter set forth) equal to 1,000 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the corporation shall at any time (i) declare any dividend on
Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding
Common Stock or (iii) combine the outstanding Common Stock into a smaller number
of shares, then in each such case the amount set forth in the preceding sentence
with respect to the exchange or change of shares of Series A Participating
Preferred Stock shall be adjusted by multiplying such amount by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that are outstanding immediately prior to such event.
8. Redemption. The shares of Series A Participating Preferred Stock shall
----------
not be redeemable.
9. Ranking. The Series A Participating Preferred Stock shall rank junior to
-------
all other series of the corporation's Preferred Stock as to the payment of
dividends and the distribution of assets, unless the terms of any such series
shall provide otherwise.
10. Amendment. The Certificate of Incorporation and the By-laws of the
---------
corporation shall not be further amended in any manner which would materially
alter or change the powers, preferences or special rights of the Series A
Participating Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of at least 662/3% of the outstanding shares of
Series A Participating Preferred Stock voting separately as a class.
11. Fractional Shares. Series A Participating Preferred Stock may be issued
-----------------
in fractions of a share which shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series A Participating Preferred Stock.
C-8
APPENDIX C-1
AMENDMENT TO THE
----------------
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
-------------------------------------------------
TO EFFECT PROPOSAL NO. THREE
----------------------------
In the event that the Proposed Reincorporation is approved and implemented
and Proposal No. Three is also approved, Article VI of the Symmetricom Delaware
Amended and Restated Certificate of Incorporation will be amended (prior to
consummation of the Proposed Reincorporation) to read in its entirety
substantially as follows:
"ARTICLE VI
A. Number of Directors. The authorized number of directors of the
-------------------
corporation shall be determined from time to time by resolution
adopted by the affirmative vote of a majority of the entire Board of
Directors at any regular or special meeting of such Board, within any
limits prescribed in the by-laws of the corporation.
B. Classes of Directors. The Board of Directors, other than those
--------------------
directors elected by the holders of any series of Preferred Stock as
provided for or fixed pursuant to the provisions of Article IV of this
Amended and Restated Certificate of Incorporation, shall be divided
into three classes, designated Class I, Class II and Class III, as
nearly equal in number as possible, and the term of office of
directors of one class shall expire at each annual meeting of
stockholders, and in all cases as to each director such term shall
extend until his or her successor shall be elected and shall qualify
or until his or her earlier resignation, removal from office, death or
incapacity. Additional directorships resulting from an increase in
number of directors shall be apportioned among the classes as equally
as possible. The initial term of office of directors of Class I shall
expire at the annual meeting of stockholders in 2002, the initial term
of office of directors of Class II shall expire at the annual meeting
of stockholders in 2003 and the initial term of office of directors of
Class III shall expire at the annual meeting of stockholders in 2004.
At each annual meeting of stockholders a number of directors equal to
the number of directors of the class whose term expires at the time of
such meeting (or, if less, the number of directors properly nominated
and qualified for election) shall be elected to hold office until the
third succeeding annual meeting of stockholders after their election.
C. Vacancies. Except as otherwise provided for or fixed pursuant to
---------
the provisions of Article IV of this Amended and Restated Certificate
of Incorporation relating to the rights of the holders of any series
of Preferred Stock to elect directors, and subject to the provisions
hereof, newly created directorships resulting from any increase in the
authorized number of directors or any vacancies on the Board of
Directors resulting from death, resignation, disqualification, removal
or another cause may be filled only by the affirmative vote of a
majority of the remaining directors then in office, even though less
than a quorum of the Board of Directors. Any director elected in
accordance with the preceding sentence shall, if applicable, hold
office for the remainder of the full term of the class of directors in
which the new directorship was created or in which the vacancy
occurred, and in any event until such director's successor shall have
been duly elected and qualified or until his or her earlier
resignation, removal from office, death or incapacity. Subject to the
provisions of this Amended and Restated Certificate of Incorporation,
no decrease in the number of directors constituting the Board of
Directors shall shorten the term of any incumbent director."
C-9
APPENDIX C-2
AMENDMENT TO THE
----------------
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
-------------------------------------------------
TO EFFECT PROPOSAL NO. FOUR
---------------------------
In the event that the Proposed Reincorporation is approved and implemented
and Proposal No. Four is also approved, the Symmetricom Delaware Amended and
Restated Certificate of Incorporation will be amended (prior to consummation of
the Proposed Reincorporation) as follows:
(i) A new Article VII will be inserted immediately following Article VI to read
in its entirety substantially as follows:
"ARTICLE VII
A. No action required or permitted to be taken at any annual or
special meeting of the stockholders may be taken without a meeting,
and the power of stockholders to consent in writing, without a
meeting, to the taking of any action is specifically denied.
B. The provisions of Section A. of this Article may be waived in any
particular instance by the approval of at least sixty-six and
two-thirds percent (66 2/3%) of the total number of authorized
directors (whether or not there exist any vacancies in previously
authorized directorships at the time any such waiver is presented to
the Board of Directors)."
(ii) The other Articles shall be renumbered (and references thereto
modified) as appropriate.
C-10
APPENDIX C-3
AMENDMENT TO THE
----------------
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
-------------------------------------------------
TO EFFECT PROPOSAL NO. FIVE
---------------------------
In the event that the Proposed Reincorporation is approved and implemented
and Proposal No. Five is also approved, Article [IX or X - depending upon
adoption of other Related Proposals] of the Symmetricom Delaware Amended and
Restated Certificate of Incorporation (regarding the inapplicability of Section
203 of the Delaware General Corporation Law) will be struck in its entirety
(prior to consummation of the Reincorporation).
C-11
APPENDIX C-4
AMENDMENT TO THE
----------------
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
-------------------------------------------------
TO EFFECT PROPOSAL NO. SIX
--------------------------
In the event that the Proposed Reincorporation is approved and implemented
and Proposal No. Six is also approved, the Symmetricom Delaware Amended and
Restated Certificate of Incorporation will be amended (prior to consummation of
the Reincorporation) as follows:
(i) Article VIII (as numbered prior to giving effect to any of the other
Related Proposal) will be amended to read in its entirety as follows:
"In furtherance and not in limitation of the powers conferred by the
laws of the State of Delaware, the Board of Directors is expressly
empowered to adopt, amend or repeal the by-laws of the corporation;
provided, however, that any adoption, amendment or repeal of the
-------- -------
by-laws of the corporation by the Board of Directors shall require the
approval of at least sixty-six and two-thirds percent (66-2/3%) of the
total number of authorized directors (whether or not there exist any
vacancies in previously authorized directorships at the time any
resolution providing for adoption, amendment or repeal is presented to
the Board of Directors). The stockholders shall also have the power to
adopt, amend or repeal the by-laws of the corporation; provided,
--------
however, that in addition to any vote of the holders of any class or
-------
series of stock of the corporation required by law or by this Amended
and Restated Certificate of Incorporation, the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the
voting power of all of the then outstanding shares of the stock of the
corporation entitled to vote generally in the election of directors,
voting together as a single class, shall be required for such
adoption, amendment or repeal by the stockholders of any provisions of
the by-laws of the corporation."
(ii) A new Article (the numbering will be dependent upon the approval of
other Related Proposals) will be added which will read in its entirety as
follows (with the variations, if noted, depending upon whether one or more
other Related Proposals are approved):
"Notwithstanding any other provision of this Amended and Restated
Certificate of Incorporation, the affirmative vote of the holders of at
least sixty-six and two-thirds percent (66-2/3%) of the voting power of
all of the then outstanding shares of the stock of the corporation
entitled to vote generally in the election of directors, voting
together as a single class, shall be required to amend in any respect
or repeal any provisions of this Article, or any provision of Articles
[VI - relating to number of directors, vacancies and classification of
the Board (if applicable)], ["new" VII - relating to the prohibition on
action by written consent (if applicable)], [VII or VIII - relating to
director liability and indemnification] and [VIII or IX - relating to
director and stockholder amendment of the by-laws]."
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APPENDIX D
BYLAWS OF SYMMETRICOM DELAWARE
------------------------------
BY - LAWS
OF
SYMMETRICOM, INC.
(a Delaware corporation)
ARTICLE 1
Meeting of Stockholders
1.1. Place of Meeting. Meetings of stockholders may be held at such place,
----------------
either within or without of the State of Delaware, as may be designated by or in
the manner provided in these by-laws, or, if not so designated, at the
registered office of the corporation or the principal executive offices of the
corporation.
1.2. Annual Meeting. Annual meetings of stockholders shall be held each
--------------
year at such date and time as shall be designated from time to time by the Board
of Directors. In the absence of such designation, the annual meeting of
shareholders shall be held on the third Thursday of October in each year at
10:00 a.m. (Pacific Standard Time). However, if such day falls on a legal
holiday, then the meeting shall be held at the same time and place on the next
succeeding full business day. At such annual meeting, the stockholders shall
elect by a plurality vote the number of directors equal to the number of
directors to be elected at such meeting (or, if fewer, the number of directors
properly nominated and qualified for election). The stockholders shall also
transact such other business as may properly be brought before the meetings.
To be properly brought before the annual meeting, business must be (a)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the Board of Directors or the Chief Executive Officer, (b)
otherwise properly brought before the meeting by or at the direction of the
Board of Directors or the Chief Executive Officer or (c) otherwise properly
brought before the meeting by a stockholder of record. In addition to any other
applicable requirements, for business to be properly brought before the annual
meeting by a stockholder, the stockholder must have given timely notice thereof
in writing to the Secretary of the corporation. To be timely, a stockholder's
notice must be delivered by a nationally recognized courier service or mailed by
first-class United States mail, postage or delivery charges prepaid, and
received at the principal executive offices of the corporation, addressed to the
attention of the Secretary of the corporation, not less than 60 days nor more
than 90 days prior to the scheduled date of the meeting (regardless of any
postponements, deferrals or adjournments of that meeting to a later date);
provided, however, that in the event that less than 75 days' notice or prior
public disclosure of the date of the scheduled meeting is given or made to
stockholders, notice by the stockholder to be timely must be so received not
later than the earlier of (a) the close of business on the 15th day following
the day on which such notice of the date of the scheduled annual meeting was
mailed or such public disclosure was made, whichever first occurs, and (b) two
days prior to the date of the scheduled meeting. A stockholder's notice to the
Secretary shall set forth as to each matter the stockholder proposes to bring
before the annual meeting (i) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting, (ii) the name and record address of the stockholder
proposing such business, (iii) the class, series and number of shares of the
corporation that are owned beneficially by the stockholder and (iv) any material
interest of the stockholder in such business.
Notwithstanding anything in these by-laws to the contrary, no business
shall be conducted at the annual meeting except in accordance with the
procedures set forth in this Section; provided, however, that nothing in this
Section shall be deemed to preclude discussion by any stockholder of any
business properly brought before the annual meeting.
D-1
The Chairman of the Board of Directors of the corporation (or such other
person presiding at the meeting in accordance with these by-laws) shall, if the
facts warrant, determine and declare to the meeting that business was not
properly brought before the meeting in accordance with the provisions of this
Section, and if he or she should so determine, he or she shall so declare to the
meeting and any such business not properly brought before the meeting shall not
be transacted.
1.3. Special Meetings. Special meetings of the stockholders may be called
----------------
for any purpose or purposes, unless otherwise prescribed by statute or by the
certificate of incorporation, by the Chief Executive Officer or Secretary only
at the request of the Chairman of the Board, the Chief Executive Officer or
President of the corporation or by a resolution duly adopted by the affirmative
vote of a majority of the Board of Directors or by the holders of shares
entitled to cast not less than 10% of the votes at such a meeting. Any such
request or resolution shall state the purpose or purposes of the proposed
meeting. Business transacted at any special meeting shall be limited to matters
relating to the purpose or purposes stated in the notice of meeting.
1.4. Notice of Meetings. Written notice of stockholders' meetings, stating
------------------
the place, date and time of the meeting and, in the case of a special meeting,
the purpose or purposes for which such special meeting is called, shall be given
to each stockholder entitled to vote at such meeting not less than 10 nor more
than 60 days prior to the meeting.
When a meeting is adjourned to another place, date or time, written notice
need not be given of the adjourned meeting if the place, date and time thereof
are announced at the meeting at which the adjournment is taken; provided,
however, that if the date of any adjourned meeting is more than 30 days after
the date for which the meeting was originally noticed, or if a new record date
is fixed for the adjourned meeting, written notice of the place, date and time
of the adjourned meeting shall be given in conformity herewith.
1.5. List of Stockholders. The officer in charge of the stock ledger of the
--------------------
corporation or the transfer agent shall prepare and make, at least 10 days
before every meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting arranged in alphabetical order, and showing the
address of each stockholder and the number of shares registered in the name of
each stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least 10 days prior to the meeting, at a place within the city
where the meeting is to be held, which place, if other than the place of the
meeting, shall be specified in the notice of the meeting. The list shall also be
produced and kept at the place of the meeting during the whole time thereof, and
may be inspected by any stockholder who is present in person thereat.
1.6. Organization and Conduct of Business. The Chairman of the Board of
------------------------------------
Directors or, in his or her absence, the Chief Executive Officer or President of
the corporation or, in their absence, such person as the Board of Directors may
have designated or, in the absence of such a person, such person as may be
chosen by the holders of a majority of the shares entitled to vote who are
present, in person or by proxy, shall call to order any meeting of the
stockholders and act as Chairman of the meeting. In the absence of the Secretary
of the corporation, the secretary of the meeting shall be such person as the
Chairman appoints.
The Chairman of any meeting of stockholders shall determine the order of
business and the procedure at the meeting, including such regulation of the
manner of voting and the conduct of discussion as seems to him or her in order.
1.7. Quorum and Adjournments. Except where otherwise provided by law or the
-----------------------
certificate of incorporation or these by-laws, the holders of a majority of the
stock issued and outstanding and entitled to vote, present in person or
represented in proxy, shall constitute a quorum at all meetings of the
stockholders. The stockholders present at a duly called or held meeting at which
a quorum is present may continue to do business until adjournment,
notwithstanding the withdrawal of enough stockholders to have less than a quorum
if any action taken (other than adjournment) is approved by at least a majority
of the shares required to constitute a quorum. At such adjourned meeting at
which a quorum is present or represented, any business may be transacted which
might have been transacted at the meeting as originally notified. If, however, a
quorum shall not be present or represented at any meeting of the stockholders,
the stockholders entitled to vote thereat who are present in person or
represented by proxy or, if no stockholder is present or represented by proxy,
by any officer entitled to preside at or to act as secretary of such meeting,
shall have the power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall be present or
represented.
D-2
1.8. Voting Rights. Unless otherwise provided in the certificate of
-------------
incorporation, each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder.
1.9. Majority Vote. When a quorum is present at any meeting, the vote of
-------------
the holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which, by express provision of the statutes or
of the certificate of incorporation or of these by-laws, a different vote is
required, in which case such express provision shall govern and control the
decision of such question.
1.10. Record Date for Stockholder Notice and Voting. For purposes of
---------------------------------------------
determining the stockholders entitled to notice of any meeting of stockholders
or any adjournment thereof, or to vote, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any right in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix, in
advance, a record date, which shall not be more than 60 days nor less than 10
days before the date of any such meeting nor more than 60 days before any other
action to which such record date relates. A determination of stockholders of
record entitled to notice of or to vote at a meeting of stockholders shall apply
to any adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting. If the Board of
Directors does not so fix a record date, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the business day next preceding the day on which
notice is given or, if notice is waived, at the close of business on the
business day next preceding the day on which the meeting is held. The record
date for determining stockholders for any other purpose shall be at the close of
business on the day on which the Board of Directors adopts the resolution
relating to such purpose.
1.11. Proxies. To the extent permitted by law, any stockholder of record
-------
may appoint a person or persons to act as the stockholder's proxy or proxies at
any stockholder meeting for the purpose of representing and voting the
stockholder's shares. The stockholder may make this appointment by any means the
General Corporation Law of the State of Delaware specifically authorizes, and by
any other means the Secretary of the corporation may permit. Prior to any vote,
and subject to any contract rights of the proxy holder, the stockholder may
revoke the proxy appointment either directly or by the creation of a new
appointment, which will automatically revoke the former one. The inspector of
elections appointed for the meeting may establish requirements concerning such
proxy appointments or revocations that the inspector considers necessary or
appropriate to assure the integrity of the vote and to comply with law.
1.12. Inspectors of Election. The corporation shall, in advance of any
----------------------
meeting of stockholders, appoint one or more inspectors of election to act at
the meeting and make a written report thereof. The corporation may designate one
or more persons to act as alternate inspectors to replace any inspector who
fails to act. If no inspector or alternate is able to act at a meeting of
stockholders, the person presiding at the meeting shall appoint one or more
inspectors to act at the meeting. Each inspector, before entering upon the
discharge of his or her duties, shall take and sign an oath faithfully to
execute the duties of inspector with strict impartiality and according to the
best of his or her ability.
ARTICLE 2
Directors
---------
2.1. Number, Election, Tenure and Qualifications. The number of directors
-------------------------------------------
which shall constitute the whole Board of Directors shall initially be six (6);
provided, however, that the number of directors that shall constitute the whole
Board of Directors shall be fixed from time to time by resolution adopted by a
majority of the entire Board of Directors. The classes of directors that shall
constitute the whole Board of Directors, if any, shall be as provided in the
certificate of incorporation of the corporation.
At each annual meeting of the stockholders, directors shall be elected to
replace those directors whose terms are then expiring, and each director so
elected shall hold office until such director's successor is duly elected and
qualified or until such director's earlier resignation, removal, death or
incapacity.
Subject to the rights of holders of any class or series of stock having a
preference over the common stock as to dividends or upon liquidation,
nominations of persons for election to the Board of Directors at the annual
meeting, by or at the direction of the Board of Directors, may be made by any
nominating committee or person
D-3
appointed by the Board of Directors; nominations may also be made by any
stockholder of record of the corporation entitled to vote for the election of
directors at the meeting who complies with the notice procedures set forth in
this Section. Such nominations, other than those made by or at the direction of
the Board of Directors, shall be made pursuant to timely notice in writing to
the Secretary of the corporation. To be timely, a stockholder's notice shall be
delivered by a nationally recognized courier service or mailed by first-class
United States mail postage or delivery charges prepaid, and received at the
principal executive offices of the corporation addressed to the attention of the
Secretary of the corporation not less than 60 days nor more than 90 days prior
to the scheduled date of the meeting (regardless of any postponements, deferrals
or adjournments of that meeting to a later date); provided, however, that in the
event that less than 75 days' notice or prior public disclosure of the date of
the scheduled meeting is given or made to stockholders, notice by the
stockholder to be timely must be so received not later than the earlier of (x)
the close of business on the 15th day following the day on which such notice of
the date of the scheduled annual meeting was mailed or such public disclosure
was made, whichever first occurs, and (y) two days prior to the date of the
scheduled meeting. Such stockholder's notice to the Secretary shall set forth
(a) as to each person whom the stockholder proposes to nominate for election or
reelection as a director, (i) the name, age, business address and residence
address of the person, (ii) the principal occupation or employment of the
person, (iii) the class, series and number of shares of capital stock of the
corporation that are owned beneficially by the person, (iv) a statement as to
the person's citizenship and (v) any other information relating to the person
that is required to be disclosed in solicitations for proxies for election of
directors pursuant to Section 14 of the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder; and (b) as to the
stockholder giving the notice, (i) the name and record address of the
stockholder and (ii) the class, series and number of shares of capital stock of
the corporation that are owned beneficially by the stockholder. The corporation
may require any proposed nominee to furnish such other information as may
reasonably be required by the corporation to determine the eligibility of such
proposed nominee to serve as director of the corporation. No person shall be
eligible for election as a director of the corporation unless nominated in
accordance with the procedures set forth herein.
In connection with any annual meeting, the Chairman of the Board of
Directors (or such other person presiding at such meeting in accordance with
these by-laws) shall, if the facts warrant, determine and declare to the meeting
that a nomination was not made in accordance with the foregoing procedure, and
if he or she should so determine, he or she shall so declare to the meeting and
the defective nomination shall be disregarded.
Directors need not be stockholders.
2.2. Enlargement and Vacancies. The number of members of the Board of
-------------------------
Directors may be increased at any time by vote of a majority of the directors
then in office. Sole power to fill vacancies and newly created directorships
resulting from any increase in the authorized number of directors shall be
vested in the Board of Directors as provided in the certificate of incorporation
of the corporation, and each director so chosen shall hold office until the next
annual election at which, if applicable, the term of the class to which they
have been elected expires and in any event until such director's successor is
duly elected and qualified or until such director's earlier resignation, removal
from office, death or incapacity. If there are no directors in office, then an
election of directors may be held in the manner provided by statute. In the
event of a vacancy in the Board of Directors, the remaining directors, except as
otherwise provided by law or these by-laws, may exercise the powers of the full
board until the vacancy is filled.
2.3. Resignation and Removal. Any director may resign at any time upon
-----------------------
written notice to the corporation at its principal place of business or to the
Chief Executive Officer or the Secretary. Such resignation shall be effective
upon receipt of such notice unless the notice specifies such resignation to be
effective at some other time or upon the happening of some other event. Any
director or the entire Board of Directors may be removed, with or without cause,
by the holders of a majority of the shares then entitled to vote at an election
of directors, unless otherwise specified by law or the certificate of
incorporation of the corporation.
2.4. Powers. The business of the corporation shall be managed by or under
------
the direction of the Board of Directors which may exercise all such powers of
the corporation and do all such lawful acts and things which are not by statute
or by the certificate of incorporation or by these by-laws directed or required
to be exercised or done by the stockholders.
2.5. Chairman of the Board. If the Board of Directors appoints a Chairman
---------------------
of the Board, such Chairman shall, when present, preside at all meetings of the
stockholders and the Board of Directors. The Chairman shall perform such duties
and possess such powers as are customarily vested in the office of the Chairman
of the Board or as may be vested in the Chairman by the Board of Directors.
D-4
2.6. Place of Meetings. The Board of Directors may hold meetings, both
-----------------
regular and special, either within or without the State of Delaware.
2.7. Annual Meetings. The annual meetings of the Board of Directors shall
---------------
be held immediately following the annual meeting of stockholders, and no notice
of such meeting shall be necessary to the Board of Directors, provided a quorum
shall be present. The annual meetings shall be for the purposes of organization,
and an election of officers and the transaction of other business.
2.8. Regular Meetings. Regular meetings of the Board of Directors may be
----------------
held without notice at such time and place as may be determined from time to
time by the Board of Directors; provided that any director who is absent when
such a determination is made shall be given prompt notice of such determination.
A regular meeting may be held immediately following the annual meeting of
stockholders, and at the same place as the annual meeting of stockholders.
2.9. Special Meetings. Special meetings of the Board of Directors may be
----------------
called by the Chairman of the Board, the Chief Executive Officer, the President,
the Secretary on the written request of two or more directors, or by one
director in the event that there is only one director in office. Notice of the
time and place of special meetings shall be delivered personally or by telephone
to each director, or sent by first-class mail or telegram, cable, commercial
delivery service, telex, facsimile transmission or electronic means, charges
prepaid, sent to such director's business or home address as they appear upon
the records of the corporation. In case such notice is mailed, it shall be
deposited in the United States mail at least four days prior to the time of
holding of the meeting. In case such notice is delivered personally or by
telegram, cable, commercial delivery service, telex, facsimile transmission or
electronic means, it shall be so delivered at least twenty-four hours prior to
the time of the holding of the meeting. A notice or waiver of notice of a
meeting of the Board of Directors need not specify the purposes of the meeting.
2.10. Quorum, Action at Meeting, Adjournments. At all meetings of the Board
---------------------------------------
of Directors, a majority of directors then in office, but in no event less than
one third of the entire Board of Directors, shall constitute a quorum for the
transaction of business and the act of a majority of the directors present at
any meeting at which there is a quorum shall be the act of the Board of
Directors, except as may be otherwise specifically provided by law or by the
certificate of incorporation. For purposes of this Section, the term "entire"
shall mean the number of directors last fixed by the stockholders or directors,
as the case may be, in accordance with law and these by-laws; provided, however,
that if less than all the number so fixed of directors were elected, the "entire
Board" shall mean the greatest number of directors so elected to hold office at
any one time pursuant to such authorization. If a quorum shall not be present at
any meeting of the Board of Directors, a majority of the directors present
thereat may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
2.11. Action Without Meeting. Unless otherwise restricted by the
----------------------
certificate of incorporation of the corporation or these by-laws, any action
required or permitted to be taken at any meeting of the Board of Directors or of
any committee thereof may be taken without a meeting, if all members of the
Board of Directors or committee, as the case may be, consent thereto in writing,
and the writing or writings are filed with the minutes of proceedings of the
Board of Directors or committee.
2.12. Telephone Meetings. Unless otherwise restricted by the certificate of
------------------
incorporation of the corporation or these by-laws, any member of the Board of
Directors or any committee thereof may participate in a meeting of the Board of
Directors or of any committee, as the case may be, by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and such participation in a
meeting shall constitute presence in person at the meeting.
2.13. Committees. The Board of Directors may, by resolution passed by a
----------
majority of the whole Board of Directors, designate one or more committees, each
committee to consist of one or more of the directors of the corporation. The
Board of Directors may designate one or more directors as alternate members of
any committee, who may replace any absent or disqualified member at any meeting
of the committee. Any such committee, to the extent provided in the resolution
of the Board of Directors, shall have and may exercise all the powers and
authority of the Board of Directors in the management of the business and
affairs of the corporation, and may authorize the seal of the corporation to be
affixed to all papers which may require it; but no such committee shall have the
power or authority in reference to amending the certificate of incorporation of
the corporation, adopting an agreement of merger or consolidation, recommending
to the stockholders the sale, lease or exchange of all or substantially all of
D-5
the corporation's property and assets, recommending to the stockholders a
dissolution of the corporation or a revocation of a dissolution, or amending
these by-laws of the corporation; and, unless the resolution designating such
committee or the certificate of incorporation of the corporation expressly so
provides, no such committee shall have the power or authority to declare a
dividend or to authorize the issuance of stock. Such committee or committees
shall have such name or names as may be determined from time to time by
resolution adopted by the Board of Directors. Each committee shall keep regular
minutes of its meetings and make such reports to the Board of Directors as the
Board of Directors may request. Except as the Board of Directors may otherwise
determine, any committee may make rules for the conduct of its business, but
unless otherwise provided by the directors or in such rules, its business shall
be conducted as nearly as possible in the same manner as is provided in these
by-laws for the conduct of its business by the Board of Directors.
2.14. Fees and Compensation of Directors. Unless otherwise restricted by
----------------------------------
the certificate of incorporation of the corporation or these by-laws, the Board
of Directors shall have the authority to fix the compensation of directors. The
directors may be paid their expenses, if any, of attendance at each meeting of
the Board of Directors and may be paid a fixed sum for attendance at each
meeting of the Board of Directors and/or a stated salary as director. No such
payment shall preclude any director from serving the corporation in any other
capacity and receiving compensation therefor. Members of special or standing
committees may be allowed like compensation for attending committee meetings.
ARTICLE 3
Officers
--------
3.1. Officers Designated. The officers of the corporation shall be chosen
-------------------
by the Board of Directors and shall be a Chief Executive Officer, a President, a
Secretary and a Chief Financial Officer or Treasurer. The Board of Directors may
also choose a Chief Operating Officer, one or more Vice Presidents and one or
more assistant Secretaries or assistant Treasurers. Any number of offices may be
held by the same person, unless the certificate of incorporation of the
corporation or these by-laws otherwise provide.
3.2. Election. The Board of Directors at its first meeting after each
--------
annual meeting of stockholders shall choose a Chief Executive Officer, a
President, a Secretary and a Chief Financial Officer or Treasurer. Other
officers may be appointed by the Board of Directors at such meeting, at any
other meeting or by written consent, or may be appointed by the Chief Executive
Officer pursuant to a delegation of authority from the Board of Directors.
3.3. Tenure. The officers of the corporation shall hold office until their
------
successors are chosen and qualify, unless a different term is specified in the
vote choosing or appointing such officer, or until such officer's earlier death,
resignation or removal. Any officer elected or appointed by the Board of
Directors or by the Chief Executive Officer may be removed with or without cause
at any time by the affirmative vote of a majority of the Board of Directors or a
committee duly authorized to do so, except that any officer appointed by the
Chief Executive Officer may also be removed at any time by the Chief Executive
Officer. Any vacancy occurring in any office of the corporation may be filled by
the Board of Directors, at its discretion. Any officer may resign by delivering
such officer's written resignation to the corporation at its principal place of
business or to the Chief Executive Officer or the Secretary. Such resignation
shall be effective upon receipt unless it is specified to be effective at some
other time or upon the happening of some other event.
3.4. The Chief Executive Officer. Subject to such supervisory powers, if
---------------------------
any, as may be given by the Board of Directors to the Chairman of the Board, the
Chief Executive Officer shall preside at all meetings of the stockholders and in
the absence of the Chairman of the Board, or if there be none, at all meetings
of the Board of Directors, shall have general and active management of the
business of the corporation and shall see that all orders and resolutions of the
Board of Directors are carried into effect. He or she shall execute bonds,
mortgages and other contracts requiring a seal, under the seal of the
corporation, except where required or permitted by law to be otherwise signed
and executed and except where the signing and execution thereof shall be
expressly delegated by the Board of Directors to some other officer or agent of
the corporation.
3.5. The President. The President shall, in the event there shall be no
-------------
Chief Executive Officer or in the absence of the Chief Executive Officer or in
the event of his or her disability or refusal to act, perform the duties of the
Chief Executive Officer, and when so acting, shall have the powers of and
subject to all the restrictions upon the Chief Executive Officer. The President
shall perform such other duties and have such other powers as may from time to
time be prescribed for such person by the Board of Directors or the Chief
Executive Officer.
D-6
3.6. The Vice President. The Vice President (or in the event there be more
------------------
than one, the Vice Presidents in the order designated by the directors, or in
the absence of any designation, in the order determined by their tenure in
office) shall, in the absence of the President or in the event of his or her
disability or refusal to act, perform the duties of the President, and when so
acting, shall have the powers of and be subject to all the restrictions upon the
President. The Vice President(s) shall perform such other duties and have such
other powers as may from time to time be prescribed for them by the Board of
Directors or the Chief Executive Officer.
3.7. The Secretary. The Secretary shall attend all meetings of the Board of
-------------
Directors and the stockholders and record all votes and the proceedings of the
meetings in a book to be kept for that purpose and shall perform like duties for
the standing committees, when required. The Secretary shall give, or cause to be
given, notice of all meetings of stockholders and special meetings of the Board
of Directors, and shall perform such other duties as may from time to time be
prescribed by the Board of Directors or the Chief Executive Officer, under whose
supervision he or she shall act. The Secretary shall have custody of the seal of
the corporation, and the Secretary, or an Assistant Secretary, shall have
authority to affix the same to any instrument requiring it, and, when so
affixed, the seal may be attested by his or her signature or by the signature of
such Assistant Secretary. The Board of Directors may give general authority to
any other officer to affix the seal of the corporation and to attest the
affixing thereof by his or her signature. The Secretary shall keep, or cause to
be kept, at the principal executive office or at the office of the corporation's
transfer agent or registrar, as determined by resolution of the Board of
Directors, a share register, or a duplicate share register, showing the names of
all stockholders and their addresses, the number and classes of shares held by
each, the number and date of certificates issued for the same and the number and
date of cancellation of every certificate surrendered for cancellation.
3.8. The Assistant Secretary. The Assistant Secretary, or if there be more
-----------------------
than one, the Assistant Secretaries in the order designated by the Board of
Directors (or in the absence of any designation, in the order determined by
their tenure in office) shall assist the Secretary in the performance of his or
her duties and, in the absence of the Secretary or in the event of his or her
inability or refusal to act, perform the duties and exercise the powers of the
Secretary and shall perform such other duties and have such other powers as may
from time to time be prescribed by the Board of Directors or the Chief Executive
Officer.
3.9. The Chief Financial Officer. The Chief Financial Officer shall have
---------------------------
the custody of the Corporate funds and securities and shall keep full and
accurate accounts of receipts and disbursements in books belonging to the
corporation and shall deposit all moneys and other valuable effects in the name
and to the credit of the corporation in such depositories as may be designated
by the Board of Directors. The Chief Financial Officer shall disburse the funds
of the corporation as may be ordered by the Board of Directors, taking proper
vouchers for such disbursements, and shall render to the Chief Executive Officer
and the Board of Directors, at its regular meetings, or when the Board of
Directors so requires, an account of all his or her transactions as Chief
Financial Officer and of the financial condition of the corporation. The Chief
Financial Officer shall perform such other duties and have other powers as may
from time to time be prescribed by the Board of Directors or the Chief Executive
Officer.
3.10. Treasurer and Assistant Treasurers. The Treasurer shall have such
----------------------------------
duties as may be specified by the Chief Financial Officer to assist the Chief
Financial Officer in the performance of his or her duties and to perform such
other duties and have other powers as may from time to time be prescribed by the
Board of Directors or the Chief Executive Officer. It shall be the duty of the
Assistant Treasurers to assist the Treasurer in the performance of his or her
duties and to perform such other duties and have other powers as may from time
to time be prescribed by the Board of Directors or the Chief Executive Officer.
3.11. Bond. If required by the Board of Directors, any officer shall give
----
the corporation a bond in such sum and with such surety or sureties and upon
such terms and conditions as shall be satisfactory to the Board of Directors,
including without limitation a bond for the faithful performance of the duties
of such officer's office and for the restoration to the corporation of all
books, papers, vouchers, money and other property of whatever kind in such
officer's possession or under such officer's control and belonging to the
corporation.
3.12. Delegation of Authority. The Board of Directors may from time to time
-----------------------
delegate the powers or duties of any officer to any other officers or agents,
notwithstanding any provision hereof.
D-7
ARTICLE 4
Notices
-------
4.1. Delivery. Whenever, under the provisions of law, or of the certificate
--------
of incorporation of the corporation or these by-laws, written notice is required
to be given to any director or stockholder, such notice may be given by mail,
addressed to such director or stockholder, at such person's address as it
appears on the records of the corporation, with postage thereon prepaid, and
such notice shall be deemed to be given at the time when the same shall be
deposited in the United States mail or delivered to a nationally recognized
courier service. Unless written notice by mail is required by law, written
notice may also be given by telegram, cable, telex, commercial delivery
services, facsimile or electronic means, addressed to such director or
stockholder at such person's address as it appears on the records of the
corporation, in which case such notice shall be deemed to be given when
delivered into the control of the persons charged with effecting such
transmission, the transmission charge to be paid by the corporation or the
person sending such notice and not by the addressee. Oral notice or other
in-hand delivery, in person or by telephone, shall be deemed given at the time
it is actually given.
4.2. Waiver of Notice. Whenever any notice is required to be given under
----------------
the provisions of law or of the certificate of incorporation of the corporation
or of these by-laws, a waiver thereof in writing, signed by the person or
persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent thereto. In addition to the foregoing,
notice of a meeting need not be given to any director who signs a waiver of
notice or a consent to holding the meeting or an approval of the minutes
thereof, whether before or after the meeting, or who attends the meeting without
protesting, prior thereto or at its commencement, the lack of notice to such
director. All such waivers, consents and approvals executed under this Section
shall be filed with the corporate records or made a part of the minutes of the
meeting.
ARTICLE 5
Indemnification
---------------
5.1. Actions Other Than By or in the Right of the Corporation. Subject to
--------------------------------------------------------
Section 5.4 of this Article 5, the corporation shall indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the corporation to
procure a judgment in its favor) by reason of the fact that such person is or
was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding if such person acted in good
faith and in a manner such person reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceedings, had no reasonable cause to believe such person's conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its equivalent shall
not, of itself, create a presumption that the person did not act in good faith
and in a manner which such person reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had reasonable cause to believe that such person's conduct was
unlawful.
5.2. Actions By or in the Right of the Corporation. Subject to Section 5.4
---------------------------------------------
of this Article 5, the corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that such person is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees) actually and reasonably incurred by
such person in connection with the defense or settlement of such action or suit
if such person acted in good faith and in a manner such person reasonably
believed to be in or not opposed to the best interests of the corporation;
provided, however, that no indemnification shall be made under this Section 5.2
of this Article 5 in respect of any claim, issue or matter as to which such
person shall have been adjudged to be liable for negligence or misconduct in the
performance of such person's duty to the corporation unless and only to the
extent that the Court of Chancery of the State of Delaware or the court in which
such action or suit was brought shall determine upon application that,
D-8
despite the adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery of the State of Delaware or such other
court shall deem proper.
5.3. Success on the Merits. To the extent that any person described in
---------------------
Sections 5.1 or 5.2 of this Article 5 has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in said
Sections, or in defense of any claim, issue or matter therein, such person shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection therewith.
5.4. Specific Authorization. Any indemnification under Sections 5.1 or 5.2
----------------------
of this Article 5 (unless ordered by a court) shall be made by the corporation
only as authorized in the specific case upon a determination that
indemnification of any person described in said Sections is proper in the
circumstances because such person has met the applicable standard of conduct set
forth in said Sections. Such determination shall be made (1) by the Board of
Directors by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding, or (2) if such a quorum is not
obtainable, or even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (3) by the
stockholders of the corporation.
5.5. Advance Payment. Expenses incurred in defending a civil or criminal
---------------
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding as authorized by the Board
of Directors in the manner provided for in Section 5.4 of this Article 5 upon
receipt of an undertaking by or on behalf of any person described in said
Section to repay such amount unless it shall ultimately be determined that such
person is entitled to indemnification by the corporation as authorized in this
Article 5.
5.6. Non-Exclusivity. The indemnification provided by this Article 5 shall
---------------
not be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any bylaw,
provision of the certificate of incorporation of the corporation, agreement,
vote of stockholders or disinterested directors or otherwise, both as to action
in such person's official capacity and as to action in another capacity while
holding such office, and shall continue as to a person who has ceased to be a
director, officer, employee or agent of the corporation and shall inure to the
benefit of the heirs, executors and administrators of such a person. Any repeal
or amendment of any of the provisions of this Article 5 shall not adversely
affect any right or potential of any indemnitee existing at the time of such
repeal or amendment.
5.7. Insurance. The Board of Directors may authorize, by a vote of the
---------
majority of the full Board of Directors, the corporation to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against any liability
asserted against such person and incurred by such person in any such capacity,
or arising out of such person's status as such, whether or not the corporation
would have the power to indemnify such person against such liability under the
provisions of this Article 5.
5.8. Severability. If any word, clause or provision of this Article 5 or
------------
any award made hereunder shall for any reason be determined to be invalid, the
provisions hereof shall not otherwise be affected thereby but shall remain in
full force and effect.
5.9. Intent of Article. The intent of this Article 5 is to provide for
-----------------
indemnification to the fullest extent permitted by Section 145 of the General
Corporation Law of the State of Delaware. To the extent that such Section or any
successor Section may be amended or supplemented from time to time, this Article
5 shall be amended automatically and construed so as to permit indemnification
to the fullest extent from time to time permitted by law.
ARTICLE 6
Capital Stock
-------------
6.1. Certificates for Shares. The shares of the corporation shall be
-----------------------
represented by certificates or shall be uncertificated. Certificates shall be
signed by, or in the name of the corporation by, the Chairman of the Board, the
Chief Executive Officer, the President or a Vice President and by the Chief
Financial Officer, the Secretary or an Assistant Secretary of the corporation.
Any or all of the signatures on the certificate may be a facsimile. In case any
officer, transfer agent or registrar who has signed or whose facsimile signature
has been placed upon a certificate shall have ceased to be such officer,
transfer agent or registrar before such certificate is issued, it may be issued
by the corporation with the same effect as if such person were such officer,
transfer agent or registrar at the date of
D-9
issue. Certificates may be issued for partly paid shares and in such case upon
the face or back of the certificates issued to represent any such partly paid
shares, the total amount of the consideration to be paid therefor, and the
amount paid thereon shall be specified.
Within a reasonable time after the issuance or transfer of uncertificated
stock, the corporation shall send to the registered owner thereof a written
notice containing the information required by the General Corporation Law of the
State of Delaware or a statement that the corporation will furnish without
charge to each stockholder who so requests the powers, designations, preferences
and relative participating, optional or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions of
such preferences and/or rights.
6.2. Transfer of Stock. Upon surrender to the corporation or the transfer
-----------------
agent of the corporation of a certificate of shares duly endorsed or accompanied
by proper evidence of succession, assignation or authority to transfer, and
proper evidence of compliance of other conditions to rightful transfer, it shall
be the duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
Upon receipt of proper transfer instructions and proper evidence of compliance
of other conditions to rightful transfer from the registered owner of
uncertificated shares, such uncertificated shares shall be canceled and issuance
of new equivalent uncertificated shares or certificated shares shall be made to
the person entitled thereto and the transaction shall be recorded upon the books
of the corporation.
6.3. Registered Stockholders. The corporation shall be entitled to
-----------------------
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
the laws of Delaware.
6.4. Lost, Stolen or Destroyed Certificates. The Board of Directors may
--------------------------------------
direct that a new certificate or certificates be issued to replace any
certificate or certificates theretofore issued by the corporation alleged to
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming the certificate of stock to be lost, stolen or
destroyed. When authorizing the issue of a new certificate or certificates, the
Board of Directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of the lost, stolen or destroyed certificate
or certificates, or his or her legal representative, to give reasonable evidence
of such loss, theft or destruction, to advertise the same in such manner as it
shall require, and/or to give the corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the corporation
with respect to the certificate alleged to have been lost, stolen or destroyed
or the issuance of such new certificate.
ARTICLE 7
Certain Transactions
--------------------
7.1. Transactions with Interested Parties. No contract or transaction
------------------------------------
between the corporation and one or more of its directors or officers, or between
the corporation and any other corporation, partnership, association or other
organization in which one or more of its directors or officers are directors or
have a financial interest, shall be void or voidable solely for this reason, or
solely because the director or officer is present at or participates in the
meeting of the Board of Directors or committee thereof which authorizes the
contract or transaction or solely because the vote or votes of such director or
officer are counted for such purpose, if:
(a) the material facts as to such person's relationship or interest and as
to the contract or transaction are disclosed or are known to the Board of
Directors or the committee, and the Board of Directors or committee in good
faith authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the disinterested directors
be less than a quorum; or
(b) the material facts as to such person's relationship or interest and as
to the contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or
(c) the contract or transaction is fair as to the corporation as of the
time it is authorized, approved or ratified by the Board of Directors or a
committee thereof or the stockholders.
7.2. Quorum. Common or interested directors may be counted in determining
------
the presence of a quorum at a meeting of the Board of Directors or of a
committee which authorizes the contract or transaction.
D-10
ARTICLE 8
General Provisions
------------------
8.1. Dividends. Dividends upon the capital stock of the corporation,
---------
subject to any restrictions contained in the General Corporation Law of the
State of Delaware or the provisions of the certificate of incorporation of the
corporation, if any, may be declared by the Board of Directors at any regular or
special meeting or by written consent. Dividends may be paid in cash, in
property or in shares of the capital stock, subject to the provisions of the
certificate of incorporation of the corporation.
8.2. Reserves. The Board of Directors may set apart out of any funds of the
--------
corporation available for dividends a reserve or reserves for any proper purpose
and may abolish any such reserve.
8.3. Checks. All checks or demands for money and notes of the corporation
------
shall be signed by such officer or officers or such other person or persons as
the Board of Directors may from time to time designate.
8.4. Corporate Seal. The Board of Directors may, by resolution, adopt a
--------------
corporate seal. The corporate seal shall have inscribed thereon the name of the
corporation, the year of its organization and the word "Delaware." The seal may
be used by causing it or a facsimile thereof to be impressed or affixed or
otherwise reproduced. The seal may be altered from time to time by the Board of
Directors.
8.5. Fiscal Year. The fiscal year of the corporation shall be fixed by
-----------
resolution of the Board of Directors.
8.6. Execution of Corporate Contracts and Instruments. The Board of
------------------------------------------------
Directors, except as otherwise provided in these by-laws, may authorize any
officer or officers, or agent or agents, to enter into any contract or execute
any instrument in the name of and on behalf of the corporation; such authority
may be general or confined to specific instances. Unless so authorized or
ratified by the Board of Directors or within the agency power of an officer, no
officer, agent or employee shall have any power or authority to bind the
corporation by any contract or engagement or to pledge its credit or to render
it liable for any purpose or for any amount.
8.7. Representation of Shares of Other Corporations. Any of the Chief
----------------------------------------------
Executive Officer, the President or any Vice President, the Chief Financial
Officer or the Treasurer or any Assistant Treasurer, or the Secretary or any
Assistant Secretary of the corporation is authorized to vote, represent and
exercise on behalf of the corporation all rights incident to any and all shares
of any corporation or corporations standing in the name of this corporation. The
authority herein granted to said officers to vote or represent on behalf of the
corporation any and all shares held by the corporation in any other corporation
or corporations may be exercised either by such officers in person or by any
other person authorized so to do by proxy or power of attorney duly executed by
any of said officers.
ARTICLE 9
Amendments
----------
Except as provided in the certificate of incorporation of the corporation,
the Board of Directors is expressly empowered to adopt, amend or repeal these
by-laws; provided, however, that any adoption, amendment or repeal of these
by-laws by the Board of Directors shall require the approval of at least a
majority of the total number of authorized directors (whether or not there exist
any vacancies in previously authorized directorships at the time any resolution
providing for adoption, amendment or repeal is presented to the Board of
Directors). Except as provided in the certificate of incorporation of the
corporation, the stockholders shall also have power to adopt, amend or repeal
these by-laws at any regular or special meeting of stockholders; provided,
however, that in addition to any vote of the holders of any class or series of
stock of this corporation required by law or by the certificate of incorporation
of this corporation, the affirmative vote of the holders of at least a majority
of the voting power of all of the then outstanding shares of the stock of the
corporation entitled to vote generally in the election of directors, voting
together as a single class, shall be required for such adoption, amendment or
repeal by the stockholders of any provisions of these by-laws and notice of such
adoption, amendment or repeal shall be contained in the notice of such meeting.
D-11
APPENDIX D-1
AMENDMENT TO THE
----------------
BYLAWS
------
TO EFFECT PROPOSAL NO. THREE
----------------------------
In the event that the Proposed Reincorporation is approved and implemented
and Proposal No. Three is also approved, Section 2.3 of the Symmetricom Delaware
Bylaws will be amended (prior to consummation of the Proposed Reincorporation)
to read in its entirety substantially as follows:
"2.3 Resignation and Removal. Any director may resign at any time upon
-----------------------
written notice to the corporation at its principal place of business or to
the Chief Executive Officer or the Secretary. Such resignation shall be
effective upon receipt of such notice unless the notice specifies such
resignation to be effective at some other time or upon the happening of
some other event. Any director or the entire Board of Directors may be
removed, but only for cause, by the holders of a majority of the shares
then entitled to vote at an election of directors, unless otherwise
specified by law or the certificate of incorporation of the corporation."
D-12
APPENDIX D-2
AMENDMENT TO THE
----------------
BYLAWS
------
TO EFFECT PROPOSAL NO. FOUR
---------------------------
In the event that the Proposed Reincorporation is approved and implemented
and Proposal No. Four is also approved, Section 1.3 of the Symmetricom Delaware
Bylaws will be amended (prior to consummation of the Proposed Reincorporation)
to read in its entirety substantially as follows:
"1.3 Special Meetings. Special meetings of the stockholders may be called
----------------
for any purpose or purposes, unless otherwise prescribed by statute or by
the certificate of incorporation, by the Chief Executive Officer or
Secretary only at the request of the Chairman of the Board, the Chief
Executive Officer or President of the corporation or by a resolution duly
adopted by the affirmative vote of a majority of the Board of Directors.
Any such request or resolution shall state the purpose or purposes of the
proposed meeting. Business transacted at any special meeting shall be
limited to matters relating to the purpose or purposes stated in the notice
of meeting."
D-13
APPENDIX D-3
AMENDMENT TO THE
----------------
BYLAWS
------
TO EFFECT PROPOSAL NO. SIX
--------------------------
In the event that the Proposed Reincorporation is approved and implemented
and Proposal No. Six is also approved, Article 9 of the Symmetricom Delaware
Bylaws will be amended (prior to consummation of the Proposed Reincorporation)
to read in its entirety substantially as follows:
"ARTICLE 9
Amendments
----------
Except as provided in the certificate of incorporation of the corporation,
the Board of Directors is expressly empowered to adopt, amend or repeal
these by-laws; provided, however, that any adoption, amendment or repeal of
these by-laws by the Board of Directors shall require the approval of at
least sixty-six and two-thirds percent (66 2/3%) of the total number of
authorized directors (whether or not there exist any vacancies in
previously authorized directorships at the time any resolution providing
for adoption, amendment or repeal is presented to the Board of Directors).
Except as provided in the certificate of incorporation of the corporation,
the stockholders shall also have power to adopt, amend or repeal these
by-laws at any regular or special meeting of stockholders; provided,
however, that in addition to any vote of the holders of any class or series
of stock of this corporation required by law or by the certificate of
incorporation of this corporation, the affirmative vote of the holders of
at least sixty-six and two-thirds percent (66 2/3%) of the voting power of
all of the then outstanding shares of the stock of the corporation entitled
to vote generally in the election of directors, voting together as a single
class, shall be required for such adoption, amendment or repeal by the
stockholders of any provisions of these by-laws and notice of such
adoption, amendment or repeal shall be contained in the notice of such
meeting."
D-14
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
SYMMETRICOM, INC.
2001 ANNUAL MEETING OF SHAREHOLDERS
The undersigned shareholder of Symmetricom, Inc., a California corporation,
hereby acknowledges receipt of the Notice of Annual Meeting of Shareholders and
Proxy Statement, each dated September 22, 2001, and hereby appoints Thomas W.
Steipp and William Slater, and each of them, proxies and attorneys-in-fact, with
full power to each of substitution, on behalf and in the name of the
undersigned, to represent the undersigned at the 2001 Annual Meeting of
Shareholders of Symmetricom, Inc. to be held on October 26, 2001, at 10:00 a.m.,
at the offices of the Company, at 2300 Orchard Parkway, San Jose, California
95131-1017, and at any adjournments or postponements thereof, and to vote all
shares of Common Stock which the undersigned would be entitled to vote if then
and there personally present on the matters set forth below.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS INDICATED, WILL
BE VOTED "FOR" THE ELECTION OF DIRECTORS NAMED HEREIN, "FOR" EACH PROPOSAL
LISTED, AND AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY COME
BEFORE THE MEETING. EITHER OF SUCH ATTORNEYS-IN-FACT OR THEIR SUBSTITUTES SHALL
HAVE AND MAY EXERCISE ALL OF THE POWERS OF SAID ATTORNEYS-IN-FACT HEREUNDER.
(Continued, and to be marked, dated and signed, on the other side)
Please mark
your votes
as indicated in [X]
this example
FOR all nominees
listed below WITHHOLD Authority
(except as to vote for all
indicated) nominees listed
1. Election of Directors [_] [_]
If you wish to withhold authority to vote for any individual nominee, strike a
line through that nominee's name in the list below:
Robert T. Clarkson
Robert M. Neumeister
Richard W. Oliver
Krish A. Prabhu
Richard N. Snyder
Thomas W. Steipp
FOR AGAINST ABSTAIN
2. Proposal to approve the change of [_] [_] [_]
the Company's state of
incorporation from California to
Delaware.
3. Proposal to approve a classified [_] [_] [_]
Board of Directors.*
4. Proposal to eliminate stockholder
action by written consent and
stockholder ability to call a
special meeting of the
stockholders.*
5. Proposal to subject the Company to [_] [_] [_]
the protections afforded by
Section 203 of the Delaware
General Corporation Law.*
6. Proposal to increase the
stockholder vote required to amend [_] [_] [_]
the bylaws and certain provisions
of the charter.*
7. Proposal to ratify the appointment [_] [_] [_]
of Deloitte & Touche LLP as the
independent auditors of the
Company for the 2002 fiscal year.
8. Such other matters that may [_] [_] [_]
properly come before the meeting
and any adjournments or
postponements thereof.
* To become effective, if approved, upon the approval and implementation of
Proposal No. Two.
Signature ___________________________ Signature ________________________ Dated:
______________, 2001 (This Proxy should be dated, signed by the shareholder(s)
exactly as his or her name appears hereon, and returned promptly in the enclosed
envelope. Persons signing in a fiduciary capacity should so indicate. If shares
are held by joint tenants or as community property, both should sign.)