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PROPOSAL NO. 3
APPROVAL OF AN AMENDMENT TO THE COMPANY'S AMENDED AND RESTATED CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK INTRODUCTION
The Company's Restated Certificate of Incorporation, as amended, currently authorizes the issuance of one hundred forty-one million (141,000,000) shares of capital stock of which one hundred forty million (140,000,000) shares have been designated as Common Stock, with a par value of $.001 per share, and one million (1,000,000) shares have been designated Preferred Stock, with a par value of $.001 per share, of which two hundred seventy-one thousand six hundred twenty-eight (271,628) shares have been denominated as Series A Preferred Stock and three hundred thousand (300,000) shares are denominated as Series B Preferred Stock. The Board of Directors on March 23, 2000, adopted a resolution proposing that the Restated Certificate of Incorporation be amended to increase the authorized number of shares of capital stock to two hundred eighty-one million (281,000,000) shares of which two hundred eighty million (280,000,000) shares shall be Common Stock and one million (1,000,000) shares shall be Preferred Stock, subject to stockholder approval of the amendment.
PROPOSED AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION
The principal purpose of the proposed amendment is to authorize additional shares of Common Stock which will be available in the event that the Board of Directors determines that it is necessary or appropriate, among other things, to effect future stock dividends or stock splits, to raise additional capital through the sale of securities, to acquire another company or its business or assets through the issuance of securities.
If the proposed amendment were to be adopted, the aggregate number of authorized shares of Common Stock would be increased from one hundred forty million (140,000,000 shares to two hundred eighty million (280,000,000) shares and, based on the balance of authorized but unissued shares of Common Stock as of March 23, 2000, approximately 191,708,058 shares of Common Stock would be available for future issuance by the Board of Directors without any stockholder approval, except in accordance with the requirements of the Nasdaq Stock Market or the Delaware General Corporation Law. If the proposed amendment is not approved, the number of authorized shares will remain the same and management will have more limited flexibility to do the things described above. The Board has no immediate plans, understandings, agreements or commitments to issue any of the additional shares of Common Stock. The Board, depending on market and other business conditions, may in the future give consideration to additional stock dividends or splits.
There will be no change in the voting rights, liquidation rights, preemptive rights or any other stockholder rights as a result of the proposed amendment. The additional shares might be issued at such times and under such circumstances as to have a dilutive effect on earnings per share and on the equity ownership of the present holders of Common Stock.
Under the Company's Restated Certificate of Incorporation, as amended, the Company's stockholders do not have preemptive rights with respect to sales or issuances of the Common Stock. Thus, should the Board of Directors elect to issue additional shares of Common Stock, existing stockholders would not have any preferential rights to purchase such shares. In addition, if the Board of Directors elects to issue additional shares of Common Stock, such issuance could have a dilutive effect on the earnings per share, voting power, and shareholdings of current stockholders.
POTENTIAL ANTI-TAKEOVER EFFECT
The proposed amendment could, under certain circumstances, have an anti-takeover effect, although this is not the intent of the proposal. The increased number of authorized shares of Common Stock could discourage, or be used to impede, an attempt to acquire or otherwise change control of the Company. The private placement of shares of Common Stock into "friendly" hands, for example, could dilute the voting strength of a party seeking control of the Company. Furthermore, certain companies have issued warrants or other rights to acquire additional shares of Common Stock to the holders of its Common Stock to discourage or defeat unsolicited share accumulation programs and acquisition proposals, which programs or proposals may be viewed by the Board of Directors as not in the best interest of the Company and its stockholders. Although the Company has no present intent to use the additional authorized shares of Common Stock for such purposes, if the proposed amendment is adopted, more capital stock of the Company would be available for such purposes than is currently available.
VOTE NECESSARY TO APPROVE THE AMENDMENT
The affirmative vote of the holders of a majority of the outstanding shares of Common Stock entitled to vote at the Annual Meeting, assuming a quorum is present, is necessary for approval of the amendment. Therefore, abstentions and broker non-votes (which may occur if a beneficial owner of stock where shares are held in a brokerage or bank account fails to provide the broker or the bank voting instructions as to such shares) effectively count as votes against the amendment.
The Board of Directors recommends a vote FOR the amendment to the Company's Restated Certificate of Incorporation to increase the number of authorized shares of capital stock from one hundred forty-one million (141,000,000) shares to two hundred eighty-one million (281,000,000) shares of which two hundred eighty million (280,000,000) shares shall be Common Stock.
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