SHOR » Topics » Our charter documents and Delaware law may inhibit a takeover that stockholders consider favorable and could also limit the market price of our stock.

This excerpt taken from the SHOR 10-K filed Sep 12, 2008.

Our charter documents and Delaware law may inhibit a takeover that stockholders consider favorable and could also limit the market price of our stock.

Our restated certificate of incorporation and bylaws and applicable provisions of Delaware law may make it more difficult for or prevent a third party from acquiring control of us without the approval of our board of directors. These provisions:

 

   

prohibit stockholder action by written consent, thereby requiring all stockholder actions to be taken at a meeting of our stockholders;

 

   

limit who may call a special meeting of stockholders;

 

   

establish a classified board of directors, so that not all members of our board of directors may be elected at one time;

 

   

provide our board of directors with the ability to designate the terms of and issue a new series of preferred stock without stockholder approval;

 

   

require the approval of two-thirds of the shares entitled to vote at an election of directors to adopt, amend or repeal our bylaws or repeal certain provisions of our certificate of incorporation;

 

   

allow a majority of the authorized number of directors to adopt, amend or repeal our bylaws without stockholder approval;

 

   

do not permit cumulative voting in the election of our directors, which would otherwise permit less than a majority of stockholders to elect directors; and

 

   

set limitations on the removal of directors.

In addition, Section 203 of the Delaware General Corporation Law generally limits our ability to engage in any business combination with certain persons who own 15% or more of our outstanding voting stock or any of our associates or affiliates who at any time in the past three years have owned 15% or more of our outstanding voting stock. These provisions may have the effect of entrenching our management team and may deprive you of the opportunity to sell your shares to potential acquirers at a premium over prevailing prices. This potential inability to obtain a control premium could reduce the price of our common stock.

 

ITEM 1B.     UNRESOLVED STAFF COMMENTS

None.

 

ITEM 2. PROPERTIES

Our headquarters is located in Sunnyvale, California in a 63,781 square foot facility that we lease through October 2009. In June 2008, we entered into an office space lease for 10,683 square foot in Austin, Texas which commences in September 2008. We also maintain leased sales offices in Europe and Australia.

 

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We do not maintain a dedicated warehouse facility for our inventory, rather we rent space as needed at a third-party warehouse. In May 2007, we entered into a lease for a shipping and receiving facility with warehouse capacity and occupied it in July 2007. The lease expires in September 2009. Our inventory is expected to be kept at our facility and at the third party facility.

We believe that our current facilities are suitable and adequate to meet our current needs, and we intend to add new facilities or expand existing facilities as we add employees. We believe that suitable additional or substitute space will be available on commercially reasonable terms as needed to accommodate our operations.

 

ITEM 3. LEGAL PROCEEDINGS

Information with respect to this item may be found in Note 11 to the Consolidated Financial Statements in Item 8, which is incorporated herein by reference.

 

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

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This excerpt taken from the SHOR 10-K filed Sep 27, 2007.
Our charter documents and Delaware law may inhibit a takeover that stockholders consider favorable and could also limit the market price of our stock.
 
Our restated certificate of incorporation and bylaws and applicable provisions of Delaware law may make it more difficult for or prevent a third party from acquiring control of us without the approval of our board of directors. These provisions:
 
  •  prohibit stockholder action by written consent, thereby requiring all stockholder actions to be taken at a meeting of our stockholders;
 
  •  limit who may call a special meeting of stockholders;
 
  •  establish a classified board of directors, so that not all members of our board of directors may be elected at one time;
 
  •  provide our board of directors with the ability to designate the terms of and issue a new series of preferred stock without stockholder approval;
 
  •  require the approval of two-thirds of the shares entitled to vote at an election of directors to adopt, amend or repeal our bylaws or repeal certain provisions of our certificate of incorporation;
 
  •  allow a majority of the authorized number of directors to adopt, amend or repeal our bylaws without stockholder approval;
 
  •  do not permit cumulative voting in the election of our directors, which would otherwise permit less than a majority of stockholders to elect directors; and
 
  •  set limitations on the removal of directors.
 
In addition, Section 203 of the Delaware General Corporation Law generally limits our ability to engage in any business combination with certain persons who own 15% or more of our outstanding voting stock or any of our associates or affiliates who at any time in the past three years have owned 15% or more of our outstanding voting stock. These provisions may have the effect of entrenching our management team and may deprive you of the opportunity to sell your shares to potential acquirers at a premium over prevailing prices. This potential inability to obtain a control premium could reduce the price of our common stock.
 
ITEM 1B.   UNRESOLVED STAFF COMMENTS
 
None.


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ITEM 2.   PROPERTIES
 
Our headquarters is located in Sunnyvale, California in a 63,781 square foot facility that we lease through October 2009. We also maintain leased sales offices in Europe and Australia.
 
We do not maintain a dedicated warehouse facility for our inventory, rather we rent space as needed at a third-party warehouse. In May 2007, we entered into a lease for a shipping and receiving facility with warehouse capacity and occupied it in July 2007. The lease expires in September 2009. Our inventory is expected to be kept at our facility and at the third party facility.
 
We believe that our current facilities are suitable and adequate to meet our current needs, and we intend to add new facilities or expand existing facilities as we add employees. We believe that suitable additional or substitute space will be available on commercially reasonable terms as needed to accommodate our operations.
 
ITEM 3.   LEGAL PROCEEDINGS
 
On June 27, 2007, a lawsuit was filed against us by Mitel Networks Corporation in the United States District Court for the Eastern District of Texas. Mitel alleges that we infringe four of its U.S. patents: U.S. Patent No. 5,940,834, entitled “Automatic Web Page Generator,” U.S. Patent No. 5,703,942 entitled “Portable Telephone User Profiles Using Central Computer,” U.S. Patent No. 5,541,983 entitled “Automatic Telephone Feature Selector” and U.S. Patent No. 5,657,446 entitled “Local Area Communications Server.” On August 21, 2007, Mitel filed an amended complaint, which alleges that we infringe two additional U.S. patents held by Mitel: U.S. Patent No. 5,007,080, entitled “Communications System Supporting Remote Operations,” and U.S. Patent No. 5,657,377, entitled “Portable Telephone User Profiles.” The lawsuit includes claims that relate to components or features that are material to our products. In relation to its claims under each patent, Mitel seeks a permanent injunction against infringement, attorney’s fees and compensatory damages.
 
On July 31, 2007, we filed counterclaims in the Eastern District of Texas. In addition to denying all of Mitel’s claims of patent infringement, our counterclaim alleged that Mitel’s IP phone systems, including the Mitel 3300 IP Communications Platform, infringes ShoreTel’s U.S. Patent No. 7,167,486 B2 entitled “Voice Traffic Through a Firewall.” We also filed claims for approximately $10 million in damages to our initial public offering and an injunction against Mitel in Ontario Superior Court for making false or misleading statements about ShoreTel’s alleged infringement.
 
This litigation is causing us to incur significant expenses and costs. Negative developments with respect to the lawsuit could cause our stock price to decline, and an unfavorable resolution of this lawsuit could have an adverse and possibly material effect on our business and results of operations. If we do not prevail, we may be required to pay substantial damages, an injunction may be entered against us that prevents us from manufacturing, using, selling and importing our products; and a license to continue selling our products may not be available to us at all or may require us to pay substantial ongoing royalties and comply with unfavorable terms, any of which could materially harm our business. Even if we were to prevail, this litigation could be costly and time-consuming, divert the attention of our management and key personnel from our business operations and deter distributors from selling our products and dissuade potential enterprise customers from purchasing our products. We believe we have meritorious defenses to Mitel’s claims. We intend to vigorously defend the lawsuit.
 
We could become involved in litigation from time to time relating to claims arising out of our ordinary course of business or otherwise.
 
ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
In April 2007, we submitted the following matters to our stockholders for their approval by written consent pursuant to Section 228 of the Delaware General Corporation Law. As of the record date for taking such action, we had approximately 33.4 million shares of our common stock outstanding (on an as-if-converted to common stock basis). The following actions were approved:
 
  •  The approval of our reincorporation in Delaware.
 
  •  The approval of the amendment and restatement of our certificate of incorporation to effect a 1-for-10 reverse stock split of our capital stock (including all outstanding warrants and options exercisable for shares of our capital stock).


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  •  The approval of the amendment and restatement of our certificate of incorporation and bylaws that became effective upon the completion of our initial public offering.
 
  •  The approval of the election of the incumbent board members.
 
  •  The approval and adoption of our 2007 employee stock purchase plan.
 
  •  The approval of a form of indemnification agreement to be entered into by us with each of our directors and officers.
 
The results of the voting from stockholders that returned written consents for the actions listed above were approximately 32.6 million for and none against.
 

EXCERPTS ON THIS PAGE:

10-K
Sep 12, 2008
10-K
Sep 27, 2007
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