-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VDO3m/Cjet7xL0EI85OeIco+EebWEEXeFYdEexH/xQU7WG2dY+PksBg6bQ+R2GkE Xb41FhbKMPsMgGJJTCVRtg== 0000936392-96-000856.txt : 19961011 0000936392-96-000856.hdr.sgml : 19961011 ACCESSION NUMBER: 0000936392-96-000856 CONFORMED SUBMISSION TYPE: S-8 PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 19961010 EFFECTIVENESS DATE: 19961010 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: HOT TOPIC INC /CA/ CENTRAL INDEX KEY: 0001017712 STANDARD INDUSTRIAL CLASSIFICATION: OPTICAL INSTRUMENTS & LENSES [3827] IRS NUMBER: 770198182 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-8 SEC ACT: 1933 Act SEC FILE NUMBER: 333-13875 FILM NUMBER: 96641940 BUSINESS ADDRESS: STREET 1: 3410 POMONA BLVD CITY: POMONA STATE: CA ZIP: 91768 MAIL ADDRESS: STREET 1: 3410 POMONA BLVD CITY: POMONA STATE: CA ZIP: 91768 S-8 1 FORM S-8 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 10, 1996 REGISTRATION NO. 333- ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------- FORM S-8 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ---------------- HOT TOPIC, INC. (Exact name of Registrant as specified in its charter) ---------------- California 77-0198182 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification Number) 3410 Pomona Boulevard Pomona, California 91768 (909) 869-6373 (Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices) ---------------- NON-PLAN STOCK OPTIONS 1996 EQUITY INCENTIVE PLAN 1996 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN EMPLOYEE STOCK PURCHASE PLAN (Full title of the plan) ---------------- Jay A. Johnson Chief Financial Officer HOT TOPIC, INC. 3410 Pomona Boulevard Pomona, California 91768 (909) 869-6373 (Name, address, including zip code, and telephone number, including area code, of agent for service) ---------------- Copies to: M. Wainwright Fishburn, Esq. Lance W. Bridges, Esq. COOLEY GODWARD LLP 4365 Executive Drive, Suite 1100 San Diego, CA 92121 (619) 550-6000 ---------------- 2 CALCULATION OF REGISTRATION FEE
============================================================================================================================== PROPOSED PROPOSED MAXIMUM MAXIMUM TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF SECURITIES TO BE REGISTERED BE REGISTERED PER SHARE(1) OFFERING PRICE(1) REGISTRATION FEE - ------------------------------------------------------------------------------------------------------------------------------ Stock Options and Common Stock, no par value 931,795 $2.00-$23.375 $13,665,030.25 $4,140.92 ==============================================================================================================================
(1) Estimated solely for the purpose of calculating the amount of the registration fee pursuant to Rule 457. The price per share and aggregate offering price are based upon (a) the actual exercise price for shares subject to options granted outside of the 1996 Equity Incentive Plan (the "Equity Plan"); (b) the actual exercise price for shares subject to options previously granted under the Registrant's Equity Plan; (c) additional shares of Common Stock available for future grant under the Equity Plan calculated on the basis of the average of the high and low sales price of Registrant's Common Stock on October 3, 1996 as reported on the Nasdaq National Market System; (d) the actual exercise price for shares subject to options previously granted under the Registrant's 1996 Non-Employee Directors' Stock Option Plan (the "Directors' Plan"), (e) shares issuable under the Directors Plan calculated on the basis of the average of the high and low sales price of Registrant's Common Stock on October 3, 1996 as reported on the Nasdaq National Market System; and (f) shares issuable under the Employee Stock Purchase Plan calculated on the basis of the average of the high and low sales price of Registrant's Common Stock on October 3, 1996 as reported on the Nasdaq National Market System. The following chart shows the calculation of the registration fee.
- ---------------------------------------------------------------------------------------------------------- Offering Price Aggregate Type of Shares Number of Shares Per Share Offering Price - ---------------------------------------------------------------------------------------------------------- Common Stock issuable pursuant to outstanding options issued outside of the Equity Plan 13,420 $2.00 $26,840.00 - ---------------------------------------------------------------------------------------------------------- Common Stock issuable pursuant to outstanding options under the Equity Plan 2,000 $2.34 $4,680.00 - ---------------------------------------------------------------------------------------------------------- Common Stock issuable pursuant to outstanding options under the Equity Plan 114,875 $2.50 $287,187.50 - ---------------------------------------------------------------------------------------------------------- Common Stock issuable pursuant to outstanding options under the Equity Plan 91,000 $2.75 $250,250.00 - ---------------------------------------------------------------------------------------------------------- Common Stock issuable pursuant to outstanding options under the Equity Plan 53,000 $3.03 $160,590.00 - ---------------------------------------------------------------------------------------------------------- Common Stock issuable pursuant to outstanding options under the Equity Plan 37,500 $3.25 $121,875.00 - ---------------------------------------------------------------------------------------------------------- Common Stock issuable pursuant to outstanding options under the Equity Plan 68,500 $5.00 $342,500.00 - ---------------------------------------------------------------------------------------------------------- Common Stock issuable pursuant to outstanding options under the Equity Plan 25,000 $8.00 $200,000.00 - ---------------------------------------------------------------------------------------------------------- Common Stock available for grant under the Equity Plan 346,500 $23.375 $8,099,437.50 - ---------------------------------------------------------------------------------------------------------- Common Stock issuable under the Directors' Plan 6,666 $18.00 $119,988.00 - ---------------------------------------------------------------------------------------------------------- Common Stock issuable under the Directors' Plan 23,334 $23.375 $545,432.25 - ---------------------------------------------------------------------------------------------------------- Common Stock issuable under the Employee Stock Purchase Plan 150,000 $23.375 $3,506,250.00 - ----------------------------------------------------------------------------------------------------------
3 PART II INFORMATION REQUIRED IN THE REGISTRATION STATEMENT ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE The contents of the Registration Statement on Form SB-2, No. 333-5054-LA, filed by Hot Topic, Inc. (the "Registrant") with the Securities and Exchange Commission (the "Commission") on June 17, 1996, as amended through the date hereof (the "Form SB-2") are hereby incorporated by reference into this Registration Statement. The Registrant has not filed, and has not been required to file, an annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as of the date hereof. A description of the Registrant's Common Stock which is contained in the Form SB-2, including any amendment or reports filed for the purpose of updating such description, is hereby incorporated by reference into this Registration Statement. All documents filed by the Registrant with the Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Registration Statement and prior to the filing of a post-effective amendment which indicates that all securities offered have been sold or which deregisters all securities then remaining unsold shall be deemed to be incorporated by reference into this Registration Statement and to be a part hereof from the date of filing of such documents. Any statement contained in a document incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Registration Statement to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Registration Statement. ITEM 4. DESCRIPTION OF SECURITIES Not Applicable ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL The validity of the issuance of the Common Stock offered pursuant to the 1996 Equity Incentive Plan, the 1996 Non-Employee Directors' Stock Option Plan, the Employee Stock Purchase Plan and the options to purchase up to 13,420 shares of Common Stock granted outside the foregoing plans will be passed upon for the Company by its counsel, Cooley Godward LLP, San Diego, California. GC&H Investments, a general partnership formed by the partners of Cooley Godward LLP for investment purposes, holds 10,100 shares of Common Stock of the Registrant. 1. 4 ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS The Registrant's Amended and Restated Articles of Incorporation provide that to the fullest extent permitted by California law, the Registrant's directors will not be personally liable to the Registrant and its shareholders for monetary damages for any breach of a director's fiduciary duty. The Amended and Restated Articles of Incorporation do not, however, eliminate the duty of care, and in appropriate circumstances equitable remedies such as an injunction or other forms of non-monetary relief would remain available under California law. Each director will continue to be subject to liability for acts or omissions not in good faith or involving intentional misconduct or knowing violations of law, for acts or omissions that the director believes to be contrary to the best interests of the Registrant or its shareholders, for any transaction from which the director derived an improper personal benefit, for acts or omissions involving a reckless disregard for the director's duty to the Registrant or its shareholders when the director was aware or should have been aware of a risk of serious injury to the Registrant or its shareholders, for acts or omissions that constitute an unexcused pattern of inattention that amounts to an abdication of the director's duty to the Registrant or its shareholders, for improper transactions between the director and the Registrant and for improper distributions to shareholders and loans to directors and officers. This provision also does not affect a director's responsibilities under any other laws, such as the Federal securities laws or state or Federal environmental laws. In addition, the Registrant's Bylaws provide that the Registrant shall indemnify its directors and may indemnify its officers, employees and other agents to the fullest extent permitted by California law. The Registrant is also empowered under its Bylaws to enter into indemnification contracts with its directors and officers and to purchase insurance on behalf of any person whom it is required or permitted to indemnify. Pursuant to this provision, the Registrant has entered into indemnity agreements with each of its directors and officers. In addition, the Registrant is required, subject to certain exceptions, to advance all expenses incurred by any director or executive officer in connection with a completed, pending or threatened action, suit or proceeding upon receipt of an undertaking by such director or executive officer to repay all amounts advanced by the Registrant on such person's behalf if it is ultimately determined that such person is not entitled to be indemnified under the Bylaws or otherwise ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED. Not applicable. 2. 5 ITEM 8. EXHIBITS.
Exhibit No. Description - ----------- ----------- 4.1 Registrant's Amended and Restated Articles of Incorporation. 4.2 Registrant's Bylaws. 4.3 Specimen Stock Certificate. (1) 5.1 Opinion of Cooley Godward LLP. 23.1 Consent of Ernst & Young LLP. 23.2 Consent of Cooley Godward LLP. Reference is made to Exhibit 5.1. 24.1 Power of Attorney. Reference is made to page 6. 99.1 1996 Equity Incentive Plan (the "Equity Plan"). (1) 99.2 Form of Incentive Stock Option Agreement under the Equity Plan. (1) 99.3 Form of Nonstatutory Stock Option Agreement under the Equity Plan. (1) 99.4 1996 Non-Employee Directors' Stock Option Plan. (1) 99.5 Employee Stock Purchase Plan. (1) 99.6 Form of Nonstatutory Stock Option Agreement outside of the Equity Plan.
- --------------- (1) Filed as an exhibit to Amendment No. 1 to the Registration Statement on Form SB-2 (No. 333-5054-LA), and incorporated herein by reference. 3. 6 ITEM 9. UNDERTAKINGS (a) Rule 415 Offering. The undersigned Registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) (Section 230.424(b) of this chapter) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in this Registration Statement or any material change to such information in the Registration Statement; Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if this Registration Statement is on Form S-3 or Form S-8 and the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by the Registrant pursuant to Section 13 or Section 15(d) of the Exchange Act that are incorporated by reference in this Registration Statement. (2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered herein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; and (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. 4. 7 (b) Filings Incorporating Subsequent Exchange Act Documents By Reference. The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Exchange Act of 1934) that is incorporated by reference in the Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (c) Request for Acceleration of Effective Date or Filing of Registration Statement on Form S-8. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions or otherwise, the Registrant has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act of 1933, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue. 5. 8 SIGNATURES The Registrant. Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-8 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Pomona, State of California, on October 9, 1996. HOT TOPIC, INC. By /s/ ORVAL D. MADDEN -------------------------------------- Orval D. Madden President, Chief Executive Officer and Director POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Orval D. Madden and Jay A. Johnson and each of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or any of them, or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- /s/ ROBERT M. JAFFE Chairman of the Board October 2, 1996 - -------------------------------- Robert M. Jaffe /s/ ORVAL D. MADDEN President, Chief Executive Officer October 9, 1996 - -------------------------------- and Director(Principal Executive Officer) Orval D. Madden /s/ JAY A. JOHNSON Chief Financial Officer and Assistant October 9, 1996 - -------------------------------- Secretary (Principal Financial and Jay A. Johnson Accounting Officer) /s/ EDGAR F. BERNER Director October 9, 1996 - -------------------------------- Edgar F. Berner /s/ STANLEY E. FOSTER Director October 9, 1996 - -------------------------------- Stanley E. Foster /s/ JESS MARZAK Director October 9, 1996 - -------------------------------- Jess Marzak /s/ GEORGE PEYSER Director October 9, 1996 - -------------------------------- George Peyser /s/ CECE SMITH Director October 9, 1996 - -------------------------------- Cece Smith
6. 9 EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION - ----------- ----------- 4.1 Registrant's Amended and Restated Articles of Incorporation. 4.2 Registrant's Bylaws. 4.3 Specimen Stock Certificate. * 5.1 Opinion of Cooley Godward LLP. 23.1 Consent of Ernst & Young LLP. 23.2 Consent of Cooley Godward LLP. Reference is made to Exhibit 5.1. 24.1 Power of Attorney. Reference is made to Page 6. 99.1 1996 Equity Incentive Plan (the "Equity Plan"). * 99.2 Form of Incentive Stock Option Agreement under the Equity Plan. * 99.3 Form of Nonstatutory Stock Option Agreement under the Equity Plan. * 99.4 1996 Non-Employee Directors' Stock Option Plan. * 99.5 Employee Stock Purchase Plan. * 99.6 Form of Nonstatutory Stock Option Agreement outside of the Equity Plan.
- ----------------- * Filed as an exhibit to Amendment No. 1 to the Registration Statement on Form SB-2 (No. 333-5054-LA), and incorporated herein by reference. EX-4.1 2 EXHIBIT 4.1 1 EXHIBIT 4.1 AMENDED AND RESTATED ARTICLES OF INCORPORATION OF HOT TOPIC, INC. Orval D. Madden and Jay A. Johnson certify that: 1. They are the Chief Executive Officer and the Assistant Secretary, respectively, of Hot Topic, Inc., a California corporation (the "Corporation"). 2. The articles of incorporation of the Corporation are amended and restated in their entirety to provide as follows: I The name of the Corporation is HOT TOPIC, INC. II The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of California other than the banking business, the trust company business or the practice of a profession permitted to be incorporated by the California Corporations Code. III The Corporation is authorized to issue two classes of shares designated "Common Stock" and "Preferred Stock," respectively. The number of shares of Common Stock authorized to be issued is fifty million (50,000,000) and the number of shares of Preferred Stock authorized to be issued is ten million (10,000,000). The Preferred Stock may be issued from time to time in one or more series. The Board of Directors is hereby authorized, by filing a certificate of determination pursuant to the California Corporations Code, to fix or alter from time to time the powers, preferences and rights of the shares of each such series and the qualifications, limitations or restrictions thereof, including without limitation, the dividend rights, dividend rate, conversion rights, voting rights, rights and terms of redemption (including sinking fund provisions), redemption price or prices, and the liquidation preferences of any wholly unissued series of Preferred Stock, and to establish from time to time the number of shares constituting any such series and the designation thereof, or any of them; and to increase or decrease the number of shares of any series subsequent to the issuance of shares of that series, but not below the number of shares of such series then outstanding. In case the number of shares of any series shall be so decreased, the shares constituting 1. 2 such decrease shall resume the status that they had prior to the adoption of the resolution originally fixing the number of shares of such series. IV The liability of the directors of the Corporation for monetary damages shall be eliminated to the fullest extent permissible under California law. V The Corporation is authorized to provide indemnification of agents (as defined in Section 317 of the Corporations Code) for breach of duty to the Corporation and its shareholders through bylaw provisions or through agreements with the agents, or both, in excess of the indemnification otherwise permitted by Section 317 of the Corporations Code, subject to the limits on such excess indemnification set forth in Section 204 of the Corporations Code. VI 1. For the management of the business and for the conduct of the affairs of the Corporation, and in further definition, limitation and regulation of the powers of the Corporation, of its directors and of its shareholders or any class thereof, as the case may be, it is further provided that: 1.1. No action shall be taken by the shareholders of the Corporation, except at an annual or special meeting of the shareholders called in accordance with the bylaws of the Corporation. 1.2. Article II, Sections 2, 3, 8 and 10, Article III, Sections 2 and 4 and Article VIII, Section I of the bylaws may be altered, amended or repealed by the shareholders, only by the affirmative vote of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of all of the then-outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors (the "Voting Stock"). Subject to California law, all other sections of the bylaws may be altered, amended or repealed by the affirmative vote of a majority of the Voting Stock. In furtherance and not in limitation of the power conferred by statute, the board of directors is expressly authorized to adopt, amend, supplement or repeal the bylaws, except as otherwise provided by the Corporations Code. 1.3. Vacancies in the board of directors caused by any reason, including the removal of a director or directors, may be filled by a majority of the remaining directors, though less than a quorum, or by a sole remaining director. 2. 3 1.4. Notwithstanding any other provisions of these Amended and Restated Articles of Incorporation, each director shall serve until his successor is duly elected and qualified or until his death, resignation or removal. 1.5. The number of authorized directors shall be as set forth in the bylaws of the Corporation. The maximum or minimum number of directors may be changed, or a definite number fixed without provision for a variable number, only by an amendment to the articles of incorporation or bylaws of the Corporation duly adopted by the vote of holders of sixty-six and two-thirds percent (66-2/3%) of the Voting Stock. No amendment may change the stated maximum number of authorized directors to a number greater than two (2) times the stated minimum number of directors minus one (1). 1.6. The ability of shareholders to cumulate votes in the election of directors shall be eliminated; provided this provision shall become effective only when the Corporation becomes a listed corporation within the meaning of Section 301.5 of the Corporations Code. VII 1. In addition to any affirmative vote required by law, by these Amended and Restated Articles of Incorporation or by any preferred stock designation, and except as otherwise expressly provided in Section 3 of this Article VII: 1.1. any merger or consolidation of the Corporation or any Subsidiary (as hereinafter defined) with (a) any Interested Shareholder (as hereinafter defined) or (b) any other corporation (whether or not itself an Interested Shareholder) which is, or after such merger or consolidation would be, an Affiliate (as hereinafter defined) of an Interested Shareholder; or 1.2. any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) to or with any Interested Shareholder or any Affiliate of any Interested Shareholder of any assets of the Corporation or any Subsidiary having an aggregate Fair Market Value (as hereinafter defined) equal to or greater than 15% of the Corporation's assets as set forth on the Corporation's most recent audited consolidated financial statements; or 1.3. the issuance or transfer by the Corporation or any Subsidiary (in one transaction or a series of transactions) of any securities of the Corporation or any Subsidiary to any Interested Shareholder or any Affiliate of any Interested Shareholder in exchange for cash, securities or other property (or a combination thereof) having an aggregate Fair Market Value equal to or greater than 15% of the Corporation's assets as set forth on the Corporation's most recent audited consolidated financial statements; or 3. 4 1.4. any reclassification of securities (including any reverse stock split), or recapitalization of the Corporation, or any merger or consolidation of the Corporation with any of its Subsidiaries or any other transaction (whether or not with or into or otherwise involving any Interested Shareholder) which has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class of equity or convertible securities of the Corporation or any Subsidiary which is Beneficially Owned (as hereinafter defined) by any Interested Shareholder or any Affiliate of any Interested Shareholder; shall require the affirmative vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of voting power of all of the then-outstanding shares of the Voting Stock, voting together as a single class. Such affirmative vote shall be required notwithstanding any other provisions of these Amended and Restated Articles of Incorporation or any provision of law or of any agreement with any national securities exchange or otherwise which might otherwise permit a lesser vote or no vote. 2. The term "Business Combination" as used in this Article VII shall mean any transaction which is referred to in any one or more of subparagraphs 1.1 through 1.4 of Section 1. 3. The provisions of Section 1. of this Article VII shall not be applicable to any particular Business Combination, and such Business Combination shall require only such affirmative vote as is required by law, any other provision of these Amended and Restated Articles of Incorporation and any preferred stock designation, if, in the case of a Business Combination that does not involve any cash or other consideration being received by the shareholders of the Corporation, solely in their respective capacities as shareholders of the Corporation, the condition specified in the following paragraph 3.1 is met, or, in the case of any other Business Combination, the conditions specified in either of the following paragraph 3.1 or paragraph 3.2 are met: 3.1. The Business Combination shall have been approved by: (a) a majority of the Continuing Directors (as hereinafter defined); provided however, that this condition shall not be capable of satisfaction unless there are at least two Continuing Directors; or (b) a majority of the shares not held by the Interested Shareholder. 4. 5 3.2. All of the following conditions shall have been met: (a) The consideration to be received by holders of shares of a particular class (or series) of outstanding Voting Stock (including Common Stock and other than Excluded Preferred Stock (as hereinafter defined)) shall be in cash or in the same form as the Interested Shareholder or any of its Affiliates has previously paid for shares of such class (or series) of Voting Stock. If the Interested Shareholder or any of its Affiliates have paid for shares of any class (or series) of Voting Stock with varying forms of consideration, the form of consideration to be received per share by holders of shares of such class (or series) of Voting Stock shall be either cash or the form used to acquire the largest number of shares of such class (or series) of Voting Stock previously acquired by the Interested Shareholder. (b) The aggregate amount of (x) the cash and (y) the Fair Market Value, as of the date (the "Consummation Date") of the consummation of the Business Combination, of the consideration other than cash to be received per share by holders of Common Stock in such Business Combination shall be at least equal to the higher of the following (in each case appropriately adjusted in the event of any stock dividend, stock split, combination of shares or similar event): (i) (if applicable) the highest per share price paid by the Interested Shareholder or any of its Affiliates for any shares of Common Stock acquired by them within the two-year period immediately prior to the date of the first public announcement of the proposal of the Business Combination (the "Announcement Date") or in any transaction in which the Interested Shareholder became an Interested Shareholder, whichever is higher; and (ii) the Fair Market Value per share of Common Stock on the Announcement Date or the first date on which the Interested Shareholder became an Interested Shareholder (the "Determination Date") (which, if more than two years prior to the Announcement Date shall be deemed to be the date two years prior to the Announcement Date), whichever is higher. (c) The aggregate amount of (x) the cash and (y) the Fair Market Value, as of the Consummation Date, of the consideration other than cash to be received per share by holders of shares of any class (or series), other than Common Stock or Excluded Preferred Stock, of outstanding Voting Stock shall be at least equal to the higher of the following (in each case appropriately adjusted in the event of any stock dividend, stock split, combination of shares or similar event), it being intended that the requirements of this paragraph 3.2(c) shall be required to be met with respect to every such class (or series) of outstanding Voting Stock whether or not the Interested 5. 6 Shareholder or any of its Affiliates has previously acquired any shares of a particular class (or series) of Voting Stock): (i) (if applicable) the highest per share price paid by the Interested Shareholder or any of its Affiliates for any shares of such class (or series) of Voting Stock acquired by them within the two-year period immediately prior to the Announcement Date or in any transaction in which it became an Interested Shareholder, whichever is higher; and (ii) the Fair Market Value per share of such class (or series) of Voting Stock on the Announcement Date or on the Determination Date, whichever is higher. (d) After such Interested Shareholder has become an interested Shareholder and prior to the consummation of such Business Combination: (a) except as approved by a majority of the Continuing Directors, there shall have been no failure to declare and pay at the regular date therefor any full quarterly dividends (whether or not cumulative) on any outstanding Preferred Stock; (b) there shall have been (I) no reduction in the annual rate of dividends paid on the Common Stock (except as necessary to reflect any subdivision of the Common Stock), except as approved by a majority of the Continuing Directors, and (II) an increase in such annual rate of dividends as necessary to reflect any reclassification (including any reverse stock split), recapitalization, reorganization or any similar transaction which has the effect of reducing the number of outstanding shares of the Common Stock, unless the failure so to increase such annual rate is approved by a majority of the Continuing Directors; and (c) neither such Interested Shareholder nor any of its Affiliates shall have become the beneficial owner of any additional shares of Voting Stock except as part of the transaction which results in such Interested Shareholder becoming an Interested Shareholder. (e) After such Interested Shareholder has become an Interested Shareholder, such Interested Shareholder and any of its Affiliates shall not have received the benefit, directly or indirectly (except proportionately, solely in such Interested Shareholder's or Affiliate's capacity as a shareholder of the Corporation), of any loans, advances, guarantees, pledges or other financial assistance or any tax credits or other tax advantages provided by the Corporation, whether in anticipation of or in connection with such Business Combination or otherwise. (f) A proxy or information statement describing the proposed Business Combination and complying with the requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder (or any subsequent provisions replacing such Act, rules or regulations) shall be mailed to all shareholders of the Corporation at least 30 days prior to the consummation of such Business Combination 6. 7 (whether or not such proxy or information statement is required to be mailed pursuant to such Act or subsequent provisions). (g) Such Interested Shareholder shall have supplied the Corporation with such information as shall have been requested pursuant to Section 6 of this Article VII within the time period set forth therein. 4. For the purposes of this Article VII: 4.1. A "person" means any individual, limited partnership, general partnership, corporation or other firm or entity. 4.2. "Interested Shareholder" means any person (other than the Corporation or any Subsidiary) who or which: (a) is the Beneficial Owner (as hereinafter defined), directly or indirectly, of fifteen percent (15%) or more of the voting power of all of the then-outstanding shares of the Voting Stock; or (b) is an Affiliate of the Corporation and at any time within the two-year period immediately prior to the date in question was the Beneficial Owner, directly or indirectly, of fifteen percent (15%) or more of the voting power of all of the then-outstanding shares of the Voting Stock; or (c) is an assignee of or has otherwise succeeded to any shares of Voting Stock which were at any time within the two-year period immediately prior to the date in question beneficially owned by an Interested Shareholder, if such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the 1933 Act. 4.3. A person shall be a "Beneficial Owner" of, or shall "Beneficially Own," any Voting Stock: (a) which such person or any of its Affiliates or Associates (as hereinafter defined) beneficially owns, directly or indirectly within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as in effect on the adoption date of these Amended and Restated Articles of Incorporation; or (b) which such person or any of its Affiliates or Associates has (a) the right to acquire (whether such right is exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (b) the right to vote pursuant to any agreement, arrangement or understanding (but shall not 7. 8 be deemed to be the Beneficial Owner of any shares of Voting Stock solely by reason of a revocable proxy granted for a particular meeting of shareholders, pursuant to a public solicitation of proxies for such meeting, and with respect to which shares neither such person nor any such Affiliate or Associate is otherwise deemed the Beneficial Owner); or (c) which is beneficially owned, directly or indirectly, within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as in effect on the adoption date of these Amended and Restated Articles of Incorporation, by any other person with which such person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting (other than solely by reason of a revocable proxy as described in subparagraph (b) of this paragraph 4.3) or disposing of any shares of Voting Stock; provided, however, that in case of any employee stock ownership or similar plan of the Corporation or of any Subsidiary in which the beneficiaries thereof possess the right to vote any shares of Voting Stock held by such plan, no such plan nor any trustee with respect thereto (nor any Affiliate of such trustee), solely by reason of such capacity of such trustee, shall be deemed, for any purposes hereof, to beneficially own any shares of Voting Stock held under any such plan. 4.4. For the purposes of determining whether a person is an Interested Shareholder pursuant to paragraph 4.2 of this Section 4, the number of shares of Voting Stock deemed to be outstanding shall include shares deemed owned through application of paragraph 4.3 of this Section 4 but shall not include any other unissued shares of Voting Stock which may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise. 4.5. "Affiliate" or "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on the adoption date of these Amended and Restated Articles of Incorporation. 4.6. "Subsidiary" means any corporation of which a majority of any class of equity security is owned, directly or indirectly, by the Corporation; provided, however, that for the purposes of the definition of Interested Shareholder set forth in paragraph 4.2 of this Section 4, the term "Subsidiary" shall mean only a corporation of which a majority of each class of equity security is owned directly or indirectly, by the Corporation. 4.7. "Continuing Director" means any member of the Board of Directors of the Corporation who is a director originally elected or appointed upon incorporation of the Corporation or who is not an Interested Shareholder or affiliated with the Interested Shareholder and was a member of the Board of Directors prior to the time that the 8. 9 Interested Shareholder became an Interested Shareholder and any director who is thereafter chosen to fill any vacancy on the Board of Directors or who is elected and who, in either event, is not an Interested Shareholder or unaffiliated with the Interested Shareholder and in connection with his or her initial assumption of office is recommended for an appointment or election by a majority of Continuing Directors then on the Board. 4.8. "Fair Market Value" means: (i) in the case of stock, the highest closing sale price on the last trading day immediately Preceding the date in question of a share of such stock on the composite Tape for New York Stock Exchange-Listed Stocks, or, if such stock is not quoted on the Composite Tape, on the New York Stock Exchange, or, if such stock is not listed on such Exchange, on the principal United States securities exchange registered under the Securities Exchange Act of 1934 on which such stock is listed, or, if such stock is not listed on any such exchange, the highest closing sale price quotation with respect to a share of such stock on the last trading day preceding the date in question on the National Association of Securities Dealers, Inc. Automated Quotations System or any system then in use, or if no such quotations are available, the fair market value on the date in question of a share of such stock as determined by the Board in accordance with Section 5 of this Article VII; and (ii) in the case of property other than cash or stock, the fair market value of such property on the date in question as determined by the Board in accordance with Section 5 of this Article VII. 4.9. In the event of any Business Combination in which the Corporation survives, the phrase "consideration other than cash to be received" as used in paragraphs 3.2(b) and 3.2(c) of Section 3 of this Article VII shall include the shares of Common Stock and/or the shares of any other class (or series) of outstanding Voting Stock retained by the holders of such shares. 4.10. "Whole Board" means the total number of directors which the Corporation would have if there were no vacancies. 4.11. "Excluded Preferred Stock" means any series of Preferred Stock with respect to which the preferred stock designation creating such series expressly provides that the provisions of this Article VII shall not apply. 5. A majority of the Whole Board but only if a majority of the Whole Board shall then consist of Continuing Directors or, if a majority of the Whole Board shall not then consist of Continuing Directors, a majority of the then Continuing Directors, shall have the power and duty to determine, on the basis of information known to them after reasonable inquiry, all facts necessary to determine compliance with this Article VII, including, without limitation, (i) whether a person is an Interested Shareholder, (ii) the number of shares of Voting Stock beneficially owned by any person (iii) whether a person 9. 10 is an Affiliate or Associate of another, (iv) whether the applicable conditions set forth in paragraph 3.2 of Section 3 have been met with respect to any Business Combination, (v) the Fair Market Value of stock or other property in accordance with paragraph 4.8 of Section 4 of this Article VII, and (vi) whether the assets which are the subject of any Business Combination referred to in paragraph 1.2 of Section 1 have or the consideration to be received for the issuance or transfer of securities by the Corporation or any Subsidiary in any Business Combination referred to in paragraph 1.3 of Section 1 has, an aggregate Fair Market Value equal to or greater than 15% of the Corporation's assets as set forth on the Corporation's most recent audited consolidated financial statements. 6. A majority of the Whole Board shall have the right to demand, but only if a majority of the Whole Board shall then consist of Continuing Directors, or, if a majority of the Whole Board shall not then consist of Continuing Directors, a majority of the then Continuing Directors shall have the right to demand, that any person who it is reasonably believed is an Interested Shareholder (or holds of record shares of Voting Stock Beneficially Owned by any Interested Shareholder) supply the Corporation with complete information as to (i) the record owner(s) of all shares Beneficially Owned by such person who it is reasonably believed is an Interested Shareholder, (ii) the number of, and class or series of, shares Beneficially Owned by such person who it is reasonably believed is an Interested Shareholder and held of record by each such record owner and the number(s) of the stock certificate(s) evidencing such shares, and (iii) any other factual matter relating to the applicability of effect of this Article VII, as may be reasonably requested of such person, and such person shall furnish such information within 10 days after receipt of such demand. 7. Nothing contained in this Article VII shall be construed to relieve any Interested Shareholder from any fiduciary obligation imposed by law. VIII 1. The Corporation reserves the right to amend, alter, change or repeal any provision contained in these Amended and Restated Articles of Incorporation, in the manner now or hereafter prescribed by statute, except as provided in paragraph 2 of this Article VIII, and all rights conferred upon the shareholders herein are granted subject to this reservation. 2. Notwithstanding any other provisions of these Amended and Restated Articles of Incorporation or any provision of law which might otherwise permit a lesser vote or no vote, but in addition to any affirmative vote of the holders of any particular class or series of the voting power of the Corporation required by law, these Amended and Restated Articles of Incorporation or any preferred stock designation, the affirmative vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting 10. 11 power of all of the then-outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to alter, amend or repeal Article VI, Article VII or this Article VIII. * * * 3. The foregoing amended and restated articles of incorporation have been duly approved by the board of directors. 4. The foregoing amended and restated articles of incorporation have been duly approved by the required vote of shareholders in accordance with Sections 902 and 903 of the Corporations Code. On the record date for the shareholder approval of the foregoing amended and restated articles of incorporation, the total number of outstanding shares of the Corporation was 764,001 shares of Common Stock, 225,807 shares of Series A Preferred, 204,422 shares of Series B Preferred, 236,944 shares of Series C Preferred, and 1,611,800 shares of Series D Preferred. The number of shares voting in favor of the amendment equaled or exceeded the vote required. The percentage vote required was more than one-half of the Common Stock and more than two-thirds of the Preferred Stock voting as a single class. 5. Subsequent to such shareholder approval and prior to the filing of this certificate, all outstanding shares of Preferred Stock were converted into shares of Common Stock. 11. 12 We further 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: September 23, 1996, at Pomona, California. /s/ Orval D. Madden ____________________________________ Orval D. Madden, Chief Executive Officer /s/ Jay A. Johnson ____________________________________ Jay A. Johnson Assistant Secretary 12. EX-4.2 3 EXHIBIT 4.2 1 EXHIBIT 4.2 - -------------------------------------------------------------------------------- AMENDED AND RESTATED BYLAWS OF HOT TOPIC, INC. DATED SEPTEMBER 23, 1996 - -------------------------------------------------------------------------------- 2 TABLE OF CONTENTS
PAGE ARTICLE I. OFFICES........................................................... 1 Section 1. Principal Office............................................ 1 Section 2. Other Offices............................................... 1 ARTICLE II. MEETINGS OF SHAREHOLDERS.......................................... 1 Section 1. Place of Meeting............................................ 1 Section 2. Annual Meeting.............................................. 1 Section 3. Special Meeting............................................. 3 Section 4. Notice of Shareholders' Meetings............................ 4 Section 5. Manner of Giving Notice; Affidavit of Notice................ 4 Section 6. Quorum...................................................... 5 Section 7. Adjourned Meeting; Notice................................... 5 Section 8. Voting...................................................... 5 Section 9. Waiver of Notice or Consent by Absent Shareholders.......... 6 Section 10. Shareholder Action by Written Consent Without a Meeting..................................................... 7 Section 11. Proxies..................................................... 7 Section 12. Inspectors of Election...................................... 8 ARTICLE III. DIRECTORS......................................................... 8 Section 1. Powers...................................................... 8 Section 2. Number and Qualification of Directors....................... 9 Section 3. Election and Term of Office of Directors.................... 9 Section 4. Vacancies................................................... 9 Section 5. Place of Meetings and Meetings by Telephone................. 10 Section 6. Annual Meeting.............................................. 10 Section 7. Other Regular Meetings...................................... 10 Section 8. Special Meetings............................................ 10 Section 9. Quorum...................................................... 10 Section 10. Waiver of Notice............................................ 11 Section 11. Adjournment................................................. 11 Section 12. Notice of Adjournment....................................... 11 Section 13. Action Without Meeting...................................... 11 Section 14. Fees and Compensation of Director........................... 11 Section 15. Removal Without Cause....................................... 12
i. 3 TABLE OF CONTENTS (CONTINUED)
PAGE ARTICLE IV. COMMITTEES........................................................ 12 Section 1. Committees of Directors..................................... 12 Section 2. Meetings and Action of Committees........................... 12 ARTICLE V. OFFICERS.......................................................... 13 Section 1. Officers.................................................... 13 Section 2. Election of Officers........................................ 13 Section 3. Subordinate Officers........................................ 13 Section 4. Removal and Resignation of Officers......................... 13 Section 5. Vacancies in Offices........................................ 14 Section 6. Chairman of the Board....................................... 14 Section 7. President................................................... 14 Section 8. Vice President.............................................. 14 Section 9. Secretary................................................... 14 Section 10. Chief Financial Officer..................................... 15 Section 11. Excessive Compensation...................................... 15 ARTICLE VI. RECORDS AND REPORTS............................................... 15 Section 1. Maintenance and Inspection of Share Register................ 15 Section 2. Maintenance and Inspection of Bylaws........................ 16 Section 3. Maintenance and Inspection of Other Corporate Records..................................................... 16 Section 4. Inspection by Directors..................................... 16 Section 5. Annual Report to Shareholders............................... 17 Section 6. Financial Statements........................................ 17 Section 7. Annual Statement of General Information..................... 17 ARTICLE VII. GENERAL CORPORATE MATTERS......................................... 18 Section 1. Record Date for Purposes Other than Notice and Voting...................................................... 18 Section 2. Checks, Drafts, Evidences of Indebtedness................... 18 Section 3. Corporate Contracts and Instruments; How Executed........... 18 Section 4. Certificate for Shares...................................... 18 Section 5. Lost Certificates........................................... 19 Section 6. Representation of Shares of Other Corporations.............. 19 Section 7. Construction and Definitions................................ 20
ii. 4 TABLE OF CONTENTS (CONTINUED)
PAGE ARTICLE VIII. AMENDMENTS........................................................ 20 Section 1. Amendment by Shareholders................................... 20 Section 2. Amendment by Directors...................................... 20 ARTICLE IX. INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS...... 20 Section 1. Director.................................................... 20 Section 2. Officers, Employees and Other Agents........................ 21 Section 3. Determination by the Corporation............................ 21 Section 4. Good Faith.................................................. 21 Section 5. Expenses.................................................... 22 Section 6. Enforcement................................................. 22 Section 7. Non-Exclusivity of Rights................................... 23 Section 8. Survival of Rights.......................................... 23 Section 9. Insurance................................................... 23 Section 10. Amendments.................................................. 23 Section 11. Employee Benefit Plans...................................... 23 Section 12. Saving Clause............................................... 23 Section 13. Certain Definitions......................................... 23
iii. 5 AMENDED AND RESTATED BYLAWS OF HOT TOPIC, INC. ARTICLE I OFFICES SECTION 1. PRINCIPAL OFFICE. The board of directors shall fix the location of the principal executive office of the corporation at any place within or outside the State of California. If the principal executive office is located outside this state, and the corporation has one or more business offices in this state, the board of directors shall fix and designate a principal business office in the State of California. SECTION 2. OTHER OFFICES. The board of directors may at any time establish branch or subordinate offices at any place or places where the corporation is qualified to do business. ARTICLE II MEETINGS OF SHAREHOLDERS SECTION 1. PLACE OF MEETING. Meetings of shareholders shall be held at any place within or outside the State of California designated by the board of directors. In the absence of any such designation, shareholders' meetings shall be held at the principal executive office of the corporation. SECTION 2. ANNUAL MEETING. The annual meeting of the shareholders shall be held each year on a date and at a time designated by the board of directors. If this day shall be a legal holiday, then the meeting shall be held on the next succeeding business day, at the same hour. At each annual meeting, directors shall be elected and other proper business may be transacted. At an annual meeting of the shareholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be: (i) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the board of directors, (ii) otherwise properly brought before the meeting by or at the direction of the board of directors, or (iii) otherwise properly brought before the meeting by a shareholder. For business to be properly brought before an annual meeting by a shareholder, the shareholder must have 1. 6 given timely notice thereof in writing to the secretary of the corporation. To be timely, a shareholder's notice must be delivered to or mailed and received at the principal executive offices of the corporation not less than one hundred twenty (120) calendar days in advance of the date specified in the corporation's proxy statement released to shareholders in connection with the previous year's annual meeting of shareholders; provided, however, that in the event that no annual meeting was held in the previous year or the date of the annual meeting has been changed by more than thirty (30) days from the date contemplated at the time of the previous year's proxy statement, notice by the shareholder to be timely must be so received a reasonable time before the solicitation is made. A shareholder's notice to the secretary shall set forth as to each matter the shareholder 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 address, as they appear on the corporation's books, of the shareholder proposing such business, (iii) the class and number of shares of the corporation which are beneficially owned by the shareholder, (iv) any material interest of the shareholder in such business and (v) any other information that is required to be provided by the shareholder pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the "1934 Act"), in his capacity as a proponent of a shareholder proposal. Notwithstanding the foregoing, in order to include information with respect to a shareholder proposal in the proxy statement and form of proxy for a shareholders' meeting, shareholders must provide notice as required by the regulations promulgated under the 1934 Act. Notwithstanding anything in these bylaws to the contrary, no business shall be conducted at any annual meeting except in accordance with the procedures set forth in this paragraph. The chairman of the annual meeting shall, if the facts warrant, determine and declare at the meeting that business was not properly brought before the meeting and in accordance with the provisions of this paragraph, and, if he should so determine, he shall so declare at the meeting that any such business not properly brought before the meeting shall not be transacted. Only persons who are nominated in accordance with the procedures set forth in this paragraph shall be eligible for election as directors. Nominations of persons for election to the board of directors of the corporation may be made at a meeting of shareholders by or at the direction of the board of directors or by any shareholder of the corporation entitled to vote in the election of directors at the meeting who complies with the notice procedures set forth in this paragraph. 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 in accordance with the provisions of the preceding paragraph. Such shareholder's notice shall set forth (i) as to each person, if any, whom the shareholder proposes to nominate for election or re election as a director: (A) the name, age, business address and residence address of such person, (B) the principal occupation or employment of such person, (C) the class and number of shares of 2. 7 the corporation which are beneficially owned by such person, (D) a description of all arrangements or understandings between the shareholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nominations are to be made by the shareholder, and (E) any other information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the 1934 Act (including without limitation such person's written consent to being named in the proxy statement, if any, as a nominee and to serving as a director if elected); and (ii) as to such shareholder giving notice, the information required to be provided pursuant to the preceding paragraph. At the request of the board of directors, any person nominated by a shareholder for election as a director shall furnish to the secretary of the corporation that information required to be set forth in the shareholder's notice of nomination which pertains to the nominee. No person shall be eligible for election as a director of the corporation unless nominated in accordance with the procedures set forth in this paragraph. The chairman of the meeting shall, if the facts warrant, determine and declare at the meeting that a nomination was not made in accordance with the provisions of this paragraph, and if he should so determine, he shall so declare at the meeting, and the defective nomination shall be disregarded. SECTION 3. SPECIAL MEETING. Special meetings of the shareholders may be called at any time by the board of directors, the chairman of the board, the president, a vice president, the secretary or by one or more shareholders holding not less than one-tenth (1/10th) of the voting power of the corporation. Except as next provided, notice shall be given as for the annual meeting. Upon receipt of a written request addressed to the chairman, president, vice president or secretary, mailed or delivered personally to such office by any person (other than the board) entitled to call a special meeting of shareholders, such officer shall cause notice to be given, to the shareholders entitled to vote, that a meeting will be held at a time requested by the person or persons calling the meeting, not less than thirty-five (35) nor more than sixty (60) days after the receipt of such request. If such notice is not given within twenty (20) days after receipt of such request, the persons calling the meeting may give notice thereof in the manner provided by these bylaws or apply to the Superior Court as provided in Section 305(c) of the Corporations Code of California. Such person's notice delivered to such office shall set forth as to each matter such person proposes to bring before the special meeting (i) a brief description of the business desired to be brought before the special meeting and the reasons for conducting such business at the special meeting, (ii) the name and address, as they appear on the corporation's books, of the person proposing such business, if applicable, (iii) the class and number of shares of the corporation which are beneficially owned by the person, if applicable, (iv) any material interest of the person in such business and (v) any other information that is 3. 8 required to be provided by the shareholder pursuant to Regulation 14A under the 1934 Act. SECTION 4. NOTICE OF SHAREHOLDERS' MEETINGS. All notices of meetings shall be sent or otherwise given in accordance with Section 5 of this Article II not less than ten (10) nor more than sixty (60) days before the date of the meeting. The notice shall specify the place, date and hour of the meeting and (i) in the case of a special meeting, the general nature of the business to be transacted, or (ii) in the case of the annual meeting, those matters which the board of directors, at the time of giving the notice, intends to present for action by the shareholders. The notice of any meeting at which directors are to be elected shall include the name of any nominee or nominees whom, at the time of the notice, management intends to present for election. If action is proposed to be taken at any meeting for approval of (i) a contract or transaction in which a director has a direct or indirect financial interest, pursuant to Section 310 of the Corporations Code of California, (ii) an amendment of the articles of incorporation, pursuant to Section 902 of that Code, (iii) a reorganization of the corporation, pursuant Section 1201 of that Code, (iv) a voluntary dissolution of the corporation, pursuant to Section 1900 of that Code, or (v) a distribution in dissolution other than in accordance with the rights of outstanding preferred shares, pursuant to Section 2007 of that Code, the notice shall also state the general nature of that proposal. SECTION 5. MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE. Notice of any meeting of shareholders shall be given either personally or by first-class mail or telegraphic or other written communication, charges prepaid, addressed to the shareholder at the address of that shareholder appearing on the books of the corporation or given by the shareholder to the corporation for the purpose of notice. If no such address appears on the corporation's books or is given, notice shall be deemed to have been given if sent to that shareholder by first-class mail or telegraphic or other written communication to the corporation's principal executive office, or if published at least once in a newspaper of general circulation in the county where that office is located. Notice shall be deemed to have been given at the time when delivered personally or deposited in the mail or sent by telegram or other means of written communication. If any notice addressed to a shareholder at the address of that shareholder appearing on the books of the corporation is returned to the corporation by the United States Postal Service marked to indicate that the United States Postal Service is unable to deliver the notice to the shareholder at that address, all future notices or reports shall be deemed to have been duly given without further mailing if these shall be available to the shareholder on written demand of the shareholder at the principal executive office of the corporation for a period of one year from the date of giving of the notice. 4. 9 An affidavit of the mailing or other means of giving any notice of any shareholders' meeting shall be executed by the secretary, assistant secretary or any transfer agent of the corporation giving the notice, and shall be filed and maintained in the minute book of the corporation. SECTION 6. QUORUM. The presence in person or by proxy of the holders of a majority of the shares entitled to vote at any meeting of shareholders shall constitute a quorum for the transaction of business. The shareholders 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 shareholders to leave 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. SECTION 7. ADJOURNED MEETING; NOTICE. Any shareholders' meeting, annual or special, whether or not a quorum is present, may be adjourned from time to time by the vote of the majority of the shares represented at that meeting, either in person or by proxy, but in the absence of a quorum, no other business may be transacted at that meeting, except as provided in Section 6 of this Article II. When any meeting of shareholders, either annual or special, is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place are announced at a meeting at which the adjournment is taken, unless a new record date for the adjourned meeting is fixed, or unless the adjournment is for more than forty-five (45) days from the date set for the original meeting, in which case the board of directors shall set a new record date. Notice of any such adjourned meeting shall be given to each shareholder of record entitled to vote at the adjourned meeting in accordance with the provisions of sections 4 and 5 of this Article II. At any adjourned meeting, the corporation may transact any business which might have been transacted at the original meeting. SECTION 8. VOTING. The shareholders entitled to vote at any meeting of shareholders shall be determined in accordance with the provisions of Section 11 of this Article II, subject to the provisions of Sections 702 to 704, inclusive, of the Corporations Code of California (relating to voting shares held by a fiduciary, in the name of a corporation or in joint ownership). The shareholders' vote may be by voice vote or by ballot; provided, however, that any election for directors must be by ballot if demanded by any shareholder before the voting has begun. On any matter other than elections of directors, any shareholder may vote part of the shares in favor of the proposal and refrain from voting the remaining shares or vote them against the proposal, but, if the shareholder fails to specify the number of shares which the shareholder is voting affirmatively, it will be conclusively presumed that the shareholder's approving vote is with respect to all shares that the shareholder is entitled to vote. If a quorum is present, the affirmative vote 5. 10 of the majority of the shares represented at the meeting and entitled to vote on any matter (other than the election of directors) shall be the act of the shareholders, unless the vote of a greater number or voting by classes is required by the Corporations Code of California or by the articles of incorporation. At a shareholders' meeting at which directors are to be elected, no shareholder shall be entitled to cumulate votes (i.e., cast for any one or more candidates a number of votes greater than the number of the shareholder's shares) unless the candidates' names have been placed in nomination prior to commencement of the voting and a shareholder has given notice prior to commencement of the voting of the shareholder's intention to cumulate votes. If any shareholder has given such a notice, then every shareholder entitled to vote may cumulate votes for candidates in nomination 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 that shareholder's shares are entitled, or distribute the shareholder's votes on the same principle among any or all of the candidates, as the shareholder thinks fit. The candidates receiving the highest number of votes, up to the number of directors to be elected, shall be elected. On and after the first date upon which the corporation has equity securities qualified for trading on the Nasdaq National Market and has 800 holders of its equity securities as of the record date of its most recent annual meeting of shareholders (the "Qualifying Record Date"): (A) cumulative voting shall no longer be available to the shareholders, (B) the immediately preceding paragraph shall no longer be applicable, (C) the third sentence of the first paragraph of this Section 8 shall read, "Any shareholder may vote part of the shares in favor of the proposal and refrain from voting the remaining shares or vote them against the proposal, but, if the shareholder fails to specify the number of shares which the shareholder is voting affirmatively, it will be conclusively presumed that the shareholder's approving vote is with respect to all shares that the shareholder is entitled to vote", and (D) the parenthetical reference in the first paragraph of this Section 8, "(other than the election of directors)," shall no longer be applicable. SECTION 9. WAIVER OF NOTICE OR CONSENT BY ABSENT SHAREHOLDERS. The transactions at any meeting of shareholders, either annual or special, however called and noticed, and wherever held, shall be as valid as though had at a meeting duly held after regular call and notice, if a quorum be present either in person or by proxy, and if, either before or after the meeting, each person entitled to vote, who was not present in person or by proxy, signs a written waiver of notice, a consent to holding of the meeting or an approval of the minutes. The waiver of notice or consent need not specify either the business to be transacted or the purpose of any annual or special meeting of shareholders, except that if action is taken or proposed to be taken for approval of any of those matters specified in the second paragraph of Section 4 of this Article II, the waiver of notice or consent shall state the general nature of the proposal. All such waivers, consents or 6. 11 approvals shall be filed with the corporate records or made a part of the minutes of the meeting. Attendance by a person at a meeting shall also constitute a waiver of notice of that meeting, except when the person objects, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened, and except that attendance at a meeting is not a waiver of any right to object to the consideration of matters not included in the notice of the meeting if that objection is expressly made at the meeting. SECTION 10. SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING. No action shall be taken by the shareholders of the corporation, except at an annual or special meeting of the shareholders called in accordance with these bylaws. (a) RECORD DATE FOR SHAREHOLDER NOTICE, VOTING AND GIVING CONSENTS. For purposes of determining the shareholders entitled to notice of or to vote at any meeting, the board of directors may fix, in advance, a record date, which shall not be more than sixty (60) days nor less than ten (10) days before the date of any such meeting, and in this event only shareholders of record on the date so fixed are entitled to notice or to vote, as the case may be, notwithstanding any transfer of any shares on the books of the corporation after the record date, except as otherwise provided in the Corporations Code of California. If the board of directors does not so fix a record date, the record date for determining shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the business day next preceding the day an 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. SECTION 11. PROXIES. Every person entitled to vote for directors or on any other matter shall have the right to do so either in person or by one or more agents authorized by a written proxy signed by the person and filed with the secretary of the corporation. A proxy shall be deemed signed if the shareholder's name is placed on the proxy (whether by manual signature, typewriting, telegraphic transmission or otherwise) by the shareholder or the shareholder's attorney in fact. A validly executed proxy which does not state that it is irrevocable shall continue in full force and effect unless (i) revoked by the person executing it, before the vote pursuant to that proxy, by a writing delivered to the corporation stating that the proxy is revoked, or by a subsequent proxy executed by, or attendance at the meeting and voting in person by, the person executing the proxy; or (ii) written notice of the death or incapacity of the maker of that proxy is received by the corporation before the vote pursuant to that proxy is counted; provided, however, that no proxy shall be valid after the expiration of eleven (11) months from the date of the proxy, unless otherwise provided in the proxy. The revocability of a proxy that states on its face 7. 12 that it is irrevocable shall be governed by the provisions of Sections 705(e) and 705(f) of the Corporations Code of California. SECTION 12. INSPECTORS OF ELECTION. Before any meeting of shareholders, the board of directors may appoint any persons other than nominees for office to act as inspectors of election at the meeting or its adjournment. If no inspectors of election are so appointed, the chairman of the meeting may, and on the request of any shareholder or a shareholder's proxy shall, appoint inspectors of election at the meeting. The number of inspectors shall be either one (1) or three (3). If inspectors are appointed at a meeting on the request of one or more shareholders or proxies, the holders of a majority of shares or their proxies present at the meeting shall determine whether one (1) or three (3) inspectors are to be appointed. If any person appointed as inspector fails to appear or fails or refuses to act, the chairman of the meeting may, and upon the request of any shareholder or a shareholder's proxy shall, appoint a person to fill that vacancy. These inspectors shall: (a) Determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum and the authenticity, validity and effect of proxies; (b) Receive votes, ballots or consents; (c) Hear and determine all challenges and questions in any way arising in connection with the right to vote; (d) Count and tabulate all votes or consents; (e) Determine when the polls shall close; (f) Determine the result; and (g) Do any other acts that may be proper to conduct the election or vote with fairness to all shareholders. ARTICLE III DIRECTORS SECTION 1. POWERS. Subject to the provisions of the Corporations Code of California and any limitations in the articles of incorporation and these bylaws relating to action required to be approved by the shareholders or by the outstanding shares, the business and affairs of the corporation shall be managed and all corporate powers shall be exercised by or under the direction of the board of directors. 8. 13 SECTION 2. NUMBER AND QUALIFICATION OF DIRECTORS. (a) The number of directors of the corporation shall be not less than six (6) nor more than eleven (11) and the exact number of directors shall be fixed within these limits from time to time by approval of the board of directors. The indefinite number of directors may be changed, or a definite number fixed without provision for an indefinite number, by a duly adopted amendment to the articles of incorporation or by an amendment to this bylaw duly adopted by the vote of holders of sixty-six and two-thirds percent (66-2/3%) of the outstanding shares entitled to vote. No amendment may change the stated maximum number of authorized directors to a number greater than two (2) times the stated minimum number of directors minus one (1). SECTION 3. ELECTION AND TERM OF OFFICE OF DIRECTORS. Directors shall be elected at each annual meeting by the shareholders to hold office until the next annual meeting. Each director, including a director elected to fill a vacancy, shall hold office until the expiration of the term for which elected and until a successor has been elected and qualified. SECTION 4. VACANCIES. Vacancies in the board of directors may be filled by a majority of the remaining directors, though less than a quorum, or by a sole remaining director. Each director so elected shall hold office until the next annual meeting of the shareholders and until a successor has been elected and qualified. A vacancy or vacancies in the board of directors shall be deemed to exist in the event of the death, resignation, or removal of any director, or if the board of directors by resolution declares vacant the office of a director who has been declared of unsound mind by an order of court or convicted of a felony, or if the authorized number of directors is increased, or if the shareholders fail, at any meeting of shareholders at which any director or directors are elected, to elect the number of directors to be voted for at that meeting. The shareholders may elect a director or directors at any time to fill any vacancy or vacancies not filled by the directors. Any director may resign effective on giving written notice to the chairman of the board, the president, the secretary or the board of directors, unless the notice specifies a later time for that resignation to become effective. If the resignation of a director is effective at a future time, the board of directors may elect a successor to take office when the resignation becomes effective. No reduction of the authorized number of directors shall have the effect of removing any director before that director's term of office expires. 9. 14 SECTION 5. PLACE OF MEETINGS AND MEETINGS BY TELEPHONE. Regular meetings of the board of directors may be held at any place within or outside the State of California that has been designated from time to time by resolution of the board. In the absence of such a designation, regular meetings shall be held at the principal executive office of the corporation. Special meetings of the board shall be held at any place within or outside the State of California that has been designated in the notice of the meeting or, if not stated in the notice or there is no notice, at the principal executive office of the corporation. Any meeting, regular or special, may be held by conference telephone or similar communication equipment, so long as all directors participating in the meeting can hear one another, and all such directors shall be deemed to be present in person at the meeting. SECTION 6. ANNUAL MEETING. Immediately following each annual meeting of shareholders, the board of directors shall hold a regular meeting for the purpose of organization, any desired election of officers and the transaction of other business. Notice of this meeting shall not be required. SECTION 7. OTHER REGULAR MEETINGS. Other regular meetings of the board of directors shall be held without call at such time as shall from time to time be fixed by the board of directors. Such regular meetings may be held without notice. SECTION 8. SPECIAL MEETINGS. Special meetings of the board of directors for any purpose or purposes may be called at any time by the chairman of the board, the president, any vice president, the secretary or any two directors. 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, charges prepaid, addressed to each director at that director's address as it is shown on the records of the corporation. In the event that the notice is mailed, it shall be deposited in the United States mail at least four (4) days before the time of the holding of the meeting. In the event that the notice is delivered personally or by telephone or telegram, it shall be delivered personally or by telephone or to the telegraph company at least forty-eight (48) hours before the time of the holding of the meeting. Any oral notice given personally or by telephone may be communicated either to the director or to a person at the office of the director who the person giving the notice has reason to believe will promptly communicate it to the director. The notice need not specify the purpose of the meeting, or the place of the meeting if the meeting is to be held at the principal executive office of the corporation. SECTION 9. QUORUM. A majority of the authorized number of directors shall constitute a quorum for the transaction of business, except to adjourn as provided in Section 11 of this Article III. Every act or decision done or made by a majority of the directors present at a meeting duly held at which a quorum is present shall be regarded as 10. 15 the act of the board of directors, subject to the provisions of Section 310 of the Corporations Code of California (as to approval of contracts or transactions in which a director has a direct or indirect material financial interest), Section 311 of that Code (as to appointment of committees) and Section 317(e) of that Code (as to indemnification of directors). A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for that meeting. SECTION 10. WAIVER OF NOTICE. The transaction of any meeting of the board of directors, however called and noticed or wherever held, shall be as valid as though had at a meeting duly held after regular call and notice if a quorum is present and if, either before or after the meeting, each of the directors not present signs a written waiver of notice, a consent to holding the meeting or an approval of the minutes. The waiver of notice or consent need not specify the purpose of the meeting. All such waivers, consents and approvals shall be filed with the corporate records or made a part of the minutes of the meeting. Notice of a meeting shall also be deemed given to any director who attends the meeting without protesting, before or at its commencement, the lack of notice to that director. SECTION 11. ADJOURNMENT. A majority of the directors present, whether or not constituting a quorum, may adjourn any meeting to another time and place. SECTION 12. NOTICE OF ADJOURNMENT. Notice of the time and place of holding an adjourned meeting need not be given, unless the meeting is adjourned for more than twenty-four (24) hours, in which case notice of the time and place shall be given before the time of the adjourned meeting, in the manner specified in Section 8 of this Article III, to the directors who were not present at the time of the adjournment. SECTION 13. ACTION WITHOUT MEETING. Any action required or permitted to be taken by the board of directors may be taken without a meeting, if all members of the board shall individually or collectively consent in writing to that action. Such action by written consent shall have the same force and effect as a unanimous vote of the board of directors. Such written consent or consents shall be filed with the minutes of the proceedings of the board. SECTION 14. FEES AND COMPENSATION OF DIRECTOR. Directors and members of committees may receive such compensation, if any, for their services, and such reimbursement of expenses, as may be fixed or determined by resolution of the board of directors. This Section 14 shall not be construed to preclude any director from serving the corporation in any other capacity as an officer, agent, employee or otherwise, and receiving compensation for those services. 11. 16 SECTION 15. REMOVAL WITHOUT CAUSE. Any or all of the directors may be removed without cause if the removal is approved by the outstanding shares entitled to vote. ARTICLE IV COMMITTEES SECTION 1. COMMITTEES OF DIRECTORS. The board of directors may, by resolution adopted by a majority of the authorized number of directors, designate one or more committees, each consisting of two (2) or more directors, to serve at the pleasure of the board. The board may designate one or more directors as alternate members of any committee, who may replace any absent member at any meeting of the committee. Any committee, to the extent provided in the resolution of the board, shall have all the authority of the board, except with respect to: (a) the approval of any action which, under the Corporations Code of California, also requires shareholders' approval or approval of the outstanding shares; (b) the filling of vacancies on the board of directors or any committee; (c) the fixing of compensation of the directors for serving on the board or any committee; (d) the amendment or repeal of bylaws or the adoption of new bylaws; (e) the amendment or repeal of any resolution of the board of directors which by its express terms is not so amendable or repealable; (f) a distribution to the shareholders of the corporation, except at a rate or in a periodic amount or within a price range determined by the board of directors; (g) the appointment of any other committees of the board of directors or the members of these committees. SECTION 2. MEETINGS AND ACTION OF COMMITTEES. Meetings and action of committees shall be governed by, and held and taken in accordance with, the provisions of Article III of these bylaws, Section 5 (place of meetings), Section 7 (regular meetings), Section 8 (special meetings and notice), Section 9 (quorum), Section 10 (waiver of notice), Section 11 (adjournment), Section 12 (notice of adjournment) and Section 13 (action without meeting), with such changes in the context of those bylaws as are necessary to substitute the committee and its members for the board of directors and its members, except that the time of regular meetings of committees may be determined 12. 17 either by resolution of the board of directors or by resolution of the committee; special meetings of committees may also be called by resolution of the board of directors; and notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee. The board of directors may adopt rules for the government of any committee not inconsistent with the provisions of these bylaws. ARTICLE V OFFICERS SECTION 1. OFFICERS. The officers of the corporation shall be a president, a secretary and a chief financial officer. The corporation may also have, at the discretion of the board of directors, a chairman of the board, one or more vice presidents, one or more assistant secretaries, one or more assistant treasurers and such other officers as may be appointed in accordance with the provisions of Section 3 of this Article V. Any number of offices may be held by the same person. SECTION 2. ELECTION OF OFFICERS. The officers of the corporation, except such officers as may be appointed in accordance with the provisions of Section 3 or Section 5 of this Article V, shall be chosen by the board of directors, and each shall serve at the pleasure of the board, subject to the rights, if any, of an officer under any contract of employment. SECTION 3. SUBORDINATE OFFICERS. The board of directors may appoint, and may empower the president to appoint, such other officers as the business of the corporation may require, each of whom shall hold office for such period, have such authority and perform such duties as are provided in the bylaws or as the board of directors may from time to time determine. SECTION 4. REMOVAL AND RESIGNATION OF OFFICERS. Subject to the rights, if any, of an officer under any contract of employment, any officer may be removed, either with or without cause, by the board of directors, at any regular or special meeting of the board, or, except in case of an officer chosen by the board of directors, by any officer upon whom such power of removal may be conferred by the board of directors. Any officer may resign at any time by giving written notice to the corporation. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice; and, unless otherwise specified in that notice, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the corporation under any contract to which the officer is a party. 13. 18 SECTION 5. VACANCIES IN OFFICES. A vacancy in any office because of death, resignation, removal, disqualification or any other cause shall be filled in the manner prescribed in these bylaws for regular appointments to that office. SECTION 6. CHAIRMAN OF THE BOARD. The chairman of the board, if such an officer be elected, shall, if present, preside at meetings of the board of directors and exercise and perform such other powers and duties as may be from time to time assigned to him by the board of directors or prescribed by the bylaws. If there is no president, the chairman of the board shall in addition be the chief executive officer of the corporation and shall have the powers and duties prescribed in Section 7 of this Article V. SECTION 7. PRESIDENT. Subject to such supervisory powers, if any, as may be given by the board of directors to the chairman of the board, if there be such an officer, the president shall be the chief executive officer of the corporation and shall, subject to the control of the board of directors, have general supervision, direction and control of the business and the officers of the corporation. He shall preside at all meetings of the shareholders and, in the absence of the chairman of the board, or if there be none, at all meetings of the board of directors. He shall have the general powers and duties of management usually vested in the office of president of a corporation, and shall have such other powers and duties as may be prescribed by the board of directors or these bylaws. SECTION 8. VICE PRESIDENT. In the absence or disability of the president, the vice presidents, if any, in order of their rank as fixed by the board of directors or, if not ranked, a vice president designated by the board of directors, shall perform all the duties of the president, and when so acting shall have all the powers of, and be subject to all the restrictions upon, the president. The vice presidents shall have such other powers and perform such other duties as from time to time may be prescribed for each of them, respectively, by the board of directors or the bylaws, and the president or the chairman of the board. SECTION 9. SECRETARY. The secretary shall keep or cause to be kept, at the principal executive office or such other place as the board of directors may direct, a book of minutes of all meetings and actions of directors, committees of directors and shareholders, with the time and place of holding, whether regular or special, and, if special, how authorized, the notice given, the names of those present at directors' meetings or committee meetings, the number of shares present or represented at shareholders' meetings, and the proceedings. 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 shareholders and their addresses, the number and classes of shares held by each, the 14. 19 number and date of certificates issued for the same, and the number and date of cancellation of every certificate surrendered for cancellation. The secretary shall give, or cause to be given, notice of all meetings of the shareholders and of the board of directors required by these bylaws or by law to be given, and shall keep the seal of the corporation, if one be adopted, in safe custody, and shall have such other powers and perform such other duties as may be prescribed by the board of directors or by these bylaws. SECTION 10. CHIEF FINANCIAL OFFICER. The chief financial officer shall keep and maintain, or cause to be kept and maintained, adequate and correct books and records of accounts of the properties and business transactions of the corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital, retained earnings and shares. The books of account shall at all reasonable times be open to inspection by any directors. The chief financial officer shall deposit all moneys and other valuables in the name and to the credit of the corporation with such depositories as may be designated by the board of directors. He shall disburse the funds of the corporation as may be ordered by the board of directors, shall render to the president and directors, whenever they request it, an account of all of his transactions as chief financial officer and of the financial condition of the corporation, and shall have the powers and perform such other duties as may be prescribed by the board of directors or these bylaws. SECTION 11. EXCESSIVE COMPENSATION. If the Internal Revenue Service disallows as a business deduction to the corporation any part of the salary or other compensation paid by it to any officer, director or employee as being excessive compensation, that part disallowed shall be repaid to the corporation by the officer, director or employee, unless the board of directors declares otherwise. ARTICLE VI RECORDS AND REPORTS SECTION 1. MAINTENANCE AND INSPECTION OF SHARE REGISTER. The corporation shall keep at its principal executive office, or at the office of its transfer agent or registrar, if either be appointed and as determined by resolution of the board of directors, a record of its shareholders, giving the names and addresses of all shareholders and the number and classes of shares held by each shareholder. A shareholder or shareholders of the corporation holding at least five percent (5%) in the aggregate of the outstanding voting shares of the corporation may (i) inspect and copy the records of shareholders' names and addresses and shareholdings during usual 15. 20 business hours on five (5) days' prior written demand on the corporation, and (ii) obtain from the transfer agent of the corporation, on written demand and on the tender of such shareholders' names and addresses, a list of who are entitled to vote for the election of directors, and their shareholdings, as of the most recent record date for which that list has been compiled or as of a date specified by the shareholder after the date of demand. This list shall be made available to any such shareholder by the transfer agent on or before the later of five (5) days after the demand is received or the date specified in the demand as the date as of which the list is to be compiled. The record of shareholders shall also be open to inspection on the written demand of any shareholder or holder of a voting trust certificate, at any time during usual business hours, for a purpose reasonably related to the holder's interests as a shareholder or as the holder of a voting trust certificate. Any inspection and copying under this Section 1 may be made in person or by an agent or attorney for the shareholder or holder of a voting trust certificate making the demand. SECTION 2. MAINTENANCE AND INSPECTION OF BYLAWS. The corporation shall keep at its principal executive office, or if its principal executive office is not in the State of California, at its principal business office in this state, the original or a copy of the bylaws as amended to date, which shall be open to inspection by the shareholders at all reasonable times during office hours. If the principal executive office of the corporation is outside the State of California and the corporation has no principal business office in this state, the Secretary shall, upon the written request of any shareholder, furnish to that shareholder a copy of the bylaws as amended to date. SECTION 3. MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS. The accounting books and records and minutes of proceedings of the shareholders and the board of directors and any committee or committees of the board of directors shall be kept at such place or places designated by the board of directors or, in the absence of such designation, at the principal executive office of the corporation. The minutes shall be kept in written form and the accounting books and records shall be kept either in written form in any other form capable of being converted into written form. The minutes and accounting books and records shall be open to inspection upon the written demand of any shareholder or holder of a voting trust certificate, at any reasonable time during usual business hours, for a purpose reasonably related to the holder's interests as a shareholder or as the holder of a voting trust certificate. The inspection may be made in person or by an agent or attorney, and shall include he right to copy and make extracts. These rights of inspection shall extend to the records of each subsidiary corporation of the corporation. SECTION 4. INSPECTION BY DIRECTORS. Every director shall have the absolute right at any reasonable time to inspect all books, records and documents of every kind and the physical properties of the corporation and each of its subsidiary corporations. This inspection by a director may be made in person or by an agent or attorney and the right of inspection includes the right to copy and make extracts of documents. 16. 21 SECTION 5. ANNUAL REPORT TO SHAREHOLDERS. The annual report to shareholders referred to in Section 1501 of the Corporations Code of California is expressly dispensed with, but nothing herein shall be interpreted as prohibiting the board of directors from issuing annual or other periodic reports to the shareholders of the corporation as they consider appropriate. SECTION 6. FINANCIAL STATEMENTS. A copy of any annual financial statement and any income statement of the corporation for each quarterly period of each fiscal year, and any accompanying balance sheet of the corporation as of the end of each such period, that has been prepared by the corporation shall be kept on file in the principal executive office of the corporation for twelve (12) months and each such statement shall be exhibited at all reasonable times to any shareholder demanding an examination of any such statement or a copy shall be mailed to any such shareholder. If a shareholder or shareholders holding at least five percent (5%) of the outstanding shares of any class of stock of the corporation makes a written request to the corporation for an income statement of the corporation for the three-month, six-month or nine-month period of the then current fiscal year ended more than thirty (30) days before the date of the request, and a balance sheet of the corporation as of the end of that period, the chief financial officer shall cause that statement to be prepared, if not already prepared, and shall deliver personally or mail that statement or statements to the person making the request within thirty (30) days after the receipt of the request. If the corporation has not sent to the shareholder an annual report which is available for the last fiscal year, this report shall likewise be delivered or mailed to the shareholder within thirty (30) days after the request. The corporation shall also, on the written request of any shareholder, mail to the shareholder a copy of the last annual, semi-annual or quarterly income statement which it has prepared, and a balance sheet as of the end of that period. The quarterly income statements and balance sheets referred to in this section shall be accompanied by the report, if any, of any independent accountants engaged by the corporation or the certificate of an authorized officer of the corporation that the financial statements were prepared without audit from the books and records of the corporation. SECTION 7. ANNUAL STATEMENT OF GENERAL INFORMATION. The corporation shall, by the end of the calendar month of the anniversary date of its incorporation each year, file with the Secretary of State of the State of California, on the prescribed form, a statement setting forth the authorized number of directors, the number of any vacancies on the board, the names and complete business or residence addresses of all incumbent directors, the names and complete business or residence addresses of the chief executive officer, secretary and chief financial officer, the street address of its principal executive 17. 22 office, if the principal executive office is not in this state, the principal business office in this state, and the general type of business constituting the principal business activity of the corporation, together with a designation of the agent of the corporation for the purpose of service of process, all in compliance with Section 1502 of the Corporations Code of California. ARTICLE VII GENERAL CORPORATE MATTERS SECTION 1. RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING. For purposes of determining the shareholders entitled to receive payment of any dividend or other distribution or allotment of any rights or entitled to exercise any rights in respect of any other lawful action, the board of directors may fix, in advance, a record date, which shall not be more than sixty (60) days before any such action, and in that case only shareholders of record on the date so fixed are entitled to receive the dividend, distribution, allotment, rights or to exercise the rights, as the case may be, notwithstanding any transfer of any shares on the books of the corporation after the record date so fixed, except as otherwise provided in the Corporations Code of California. If the board of directors does not so fix a record date, the record date for determining shareholders for any such purpose shall be at the close of business on the day on which the board adopts the applicable resolution or the sixtieth (60th) day before the date of that action, whichever is later. SECTION 2. CHECKS, DRAFTS, EVIDENCES OF INDEBTEDNESS. All checks, drafts or other orders for payment of money, notes or other evidences of indebtedness, issued in the name of or payable to the corporation, shall be signed or endorsed by such person or persons and in such manner as from time to time determined by resolution of the board of directors. SECTION 3. CORPORATE CONTRACTS AND INSTRUMENTS; HOW EXECUTED. The board of directors, except as otherwise provided in these bylaws, may authorize any officer or officers, agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the corporation, and this authority may be general or confined to specific instances; and, 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. SECTION 4. CERTIFICATE FOR SHARES. A certificate or certificates for shares of the capital stock of the corporation may be issued to each shareholder when any of these 18. 23 shares are fully paid, and the board of directors may authorize the issuance of certificates or shares as partly paid provided that these certificates shall state the amount of consideration to be paid for them and the amount paid. All certificates shall be signed in the name of the corporation by the chairman of the board or vice chairman of the board or the president or vice president and by the chief financial officer or an assistant treasurer or the secretary or any assistant secretary, certifying the number of shares and the class or series of shares owned by the shareholder. Any or all of the signatures on the certificate may be facsimile. In the event that any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed on a certificate shall have ceased to be that officer, transfer agent or registrar before that certificate is issued, it may be issued by the corporation with the same effect as if that person were an officer, transfer agent or registrar at the date of issue. Notwithstanding any provision in these bylaws to the contrary, the board of directors of the corporation may issue, record and transfer its shares of capital stock by electronic or other means not involving any issuance of certificates, including provisions for notice to purchasers in substitution for the required statements on certificates required by the Corporations Code of California, and as may be required by the California Commissioner of Corporation in administering the California Corporate Securities Law of 1968, which has been (1) approved by the United States Securities and Exchange Commission, (2) is authorized in any statute of the United States or (3) is in accordance with Division 8 (commencing with Section 801) of the California Commercial Code. If the board of directors implements the provisions of this paragraph, the provisions shall not become effective as to previously issued and outstanding certificated shares until the certificates therefor have been surrendered to the corporation. SECTION 5. LOST CERTIFICATES. Except as provided in this Section 5, no new certificate for shares shall be issued to replace an old certificate unless the latter is surrendered to the corporation and canceled at the same time. The board of directors may, in case any share certificate or certificate for any other security is lost, stolen or destroyed, authorize the issuance of a replacement certificate on such terms and conditions as the board may require, including provision for indemnification of the corporation secured by a bond or other adequate security sufficient to protect the corporation against any claim that may be made against it, including any expense or liability on account of the alleged loss, theft or destruction of the certificate or the issuance of the replacement certificate. SECTION 6. REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The chairman of the board, the president, any vice president or any other person authorized by resolution of the board of directors or by any of the foregoing designated officers, is authorized to vote on behalf of the corporation any and all shares of any other corporation or corporations, foreign or domestic, standing in the name of the corporation. The 19. 24 authority granted to these 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 by any of these officers in person or by any person authorized to do so by a proxy duly executed by these officers. SECTION 7. CONSTRUCTION AND DEFINITIONS. Unless the context requires otherwise, the general provisions, rules of construction and definitions in the Corporations Code of California shall govern the construction of these bylaws. Without limiting the generality of this provision, the singular number includes the plural, the plural number includes the singular and the term "person" includes both a corporation and a natural person. ARTICLE VIII AMENDMENTS SECTION 1. AMENDMENT BY SHAREHOLDERS. New bylaws may be adopted or these bylaws may be amended or repealed by the vote of a majority of the outstanding shares entitled to vote; provided, however, that (i) if the articles of incorporation of the corporation set forth the number of authorized directors of the corporation, the authorized number of directors may be changed only by an amendment of the articles of incorporation, and (ii) Article II, Sections 2, 3, 8 and 10, Article III, Sections 2 and 4 and this Article VIII, Section 1 of these bylaws may be altered, amended or repealed by the affirmative vote of at least sixty-six and two-thirds percent (66-2/3%) of the outstanding shares of the outstanding shares entitled to vote. SECTION 2. AMENDMENT BY DIRECTORS. Subject to the rights of the shareholders as provided in Section 1 of this Article VIII, bylaws other than a bylaw or an amendment of a bylaw changing the authorized number of directors may be adopted, amended or repealed by the board of directors. ARTICLE IX INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS SECTION 1. DIRECTOR. The corporation shall indemnify its directors to the fullest extent not prohibited by the Corporations Code of California; provided, however, that the corporation may limit the extent of such indemnification by individual contracts with its directors; and, provided, further, that the corporation shall not be required to indemnify any director in connection with any proceeding (or part thereof) initiated by such person or any proceeding by such person against the corporation or its directors, officers, 20. 25 employees or other agents unless (i) such indemnification is expressly required to be made by law, (ii) the proceeding was authorized by the board of directors of the corporation or (iii) such indemnification is provided by the corporation, in its sole discretion, pursuant to the powers vested in the corporation under the Corporations Code of California. SECTION 2. OFFICERS, EMPLOYEES AND OTHER AGENTS. The corporation shall have power to indemnify its officers, employees and other agents as set forth in the Corporations Code of California. SECTION 3. DETERMINATION BY THE CORPORATION. Promptly after receipt of a request for indemnification hereunder (and in any event within 90 days thereof), a reasonable, good faith determination as to whether indemnification of the director is proper under the circumstances because such director has met the applicable standard of care shall be made by: (a) a majority vote of a quorum consisting of directors who are not parties to such proceeding; (b) if such quorum is not obtainable, by independent legal counsel in a written opinion; or (c) approval or ratification by the affirmative vote of a majority of the shares of this corporation represented and voting at a duly held meeting at which a quorum is present (which shares voting affirmatively also constitute at least a majority of the required quorum) where the shares owned by the person to be indemnified shall not be considered entitled to vote thereon. SECTION 4. GOOD FAITH. (a) For purposes of any determination under this bylaw, a director shall be deemed to have acted in good faith and in a manner he reasonably believed to be in the best interests of the corporation and its shareholders, and, with respect to any criminal action or proceeding, to have had no reasonable cause to believe that his conduct was unlawful, if his action is based on information, opinions, reports and statements, including financial statements and other financial data, in each case prepared or presented by: (1) one or more officers or employees of the corporation whom the director believed to be reliable and competent in the matters presented; (2) counsel, independent accountants or other persons as to matters which the director believed to be within such person's professional competence; and 21. 26 (3) a committee of the Board upon which such director does not serve, as to matters within such committee's designated authority, which committee the director believes to merit confidence; so long as, in each case, the director acts without knowledge that would cause such reliance to be unwarranted. (b) The termination of any 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 he reasonably believed to be in the best interests of the corporation and its shareholders or that he had reasonable cause to believe that his conduct was unlawful. (c) The provisions of this Section 4 shall not be deemed to be exclusive or to limit in any way the circumstances in which a person may be deemed to have met the applicable standard of conduct set forth by the Corporations Code of California. SECTION 5. EXPENSES. The corporation shall advance, prior to the final disposition of any proceeding, promptly following request therefor, all expenses incurred by any director in connection with such proceeding upon receipt of an undertaking by or on behalf of such person to repay said amounts if it shall be determined ultimately that such person is not entitled to be indemnified under this bylaw or otherwise. SECTION 6. ENFORCEMENT. Without the necessity of entering into an express contract, all rights to indemnification and advances to directors under this bylaw shall be deemed to be contractual rights and be effective to the same extent and as if provided for in a contract between the corporation and the director. Any right to indemnification or advances granted by this bylaw to a director shall be enforceable by or on behalf of the person holding such right in the forum in which the proceeding is or was pending or, if such forum is not available or a determination is made that such forum is not convenient, in any court of competent jurisdiction if (i) the claim for indemnification or advances is denied, in whole or in part, or (ii) no disposition of such claim is made within ninety (90) days of request therefor. The claimant in such enforcement action, if successful in whole or in part, shall be entitled to be paid also the expense of prosecuting his claim. The corporation shall be entitled to raise as a defense to any such action (other than an action brought to enforce a claim for expenses incurred in connection with any proceeding in advance of its final disposition when the required undertaking has been tendered to the corporation) that the claimant has not met the standards of conduct that make it permissible under the Corporations Code of California for the corporation to indemnify the claimant for the amount claimed. Neither the failure of the corporation (including its board of directors, independent legal counsel or its shareholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he has met the applicable standard of conduct set forth in the Corporations Code of California, nor an actual determination by 22. 27 the corporation (including its board of directors, independent legal counsel or its shareholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that claimant has not met the applicable standard of conduct. SECTION 7. NON-EXCLUSIVITY OF RIGHTS. To the fullest extent permitted by the corporation's articles of incorporation and the Corporations Code of California, the rights conferred on any person by this bylaw shall not be exclusive of any other right which such person may have or hereafter acquire under any statute, provision of the articles of incorporation, bylaws, agreement, vote of shareholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding office. The corporation is specifically authorized to enter into individual contracts with any or all of its directors, officers, employees or agents respecting indemnification and advances, to the fullest extent permitted by the Corporations Code of California and the corporation's articles of incorporation. SECTION 8. SURVIVAL OF RIGHTS. The rights conferred on any person by this bylaw shall continue as to a person who has ceased to be a director and shall inure to the benefit of the heirs, executors and administrators of such a person. SECTION 9. INSURANCE. The corporation, upon approval by the board of directors, may purchase insurance on behalf of any person required or permitted to be indemnified pursuant to this bylaw. SECTION 10. AMENDMENTS. Any repeal or modification of this bylaw shall only be prospective and shall not affect the rights under this bylaw in effect at the time of the alleged occurrence of any action or omission to act that is the cause of any proceeding against any agent of the corporation. SECTION 11. EMPLOYEE BENEFIT PLANS. The corporation shall indemnify the directors and officers of the corporation who serve at the request of the corporation as trustees, investment managers or other fiduciaries of employee benefit plans to the fullest extent permitted by the Corporations Code of California, and any other applicable laws. SECTION 12. SAVING CLAUSE. If this bylaw or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the corporation shall nevertheless indemnify each director to the fullest extent permitted by any applicable portion of this bylaw that shall not have been invalidated, or by any other applicable law. SECTION 13. CERTAIN DEFINITIONS. For the purposes of this bylaw, the following definitions shall apply: 23. 28 (a) The term "proceeding" shall be broadly construed and shall include, without limitation, the investigation, preparation, prosecution, defense, settlement and appeal of any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative, arbitrative or investigative. (b) The term "expenses" shall be broadly construed and shall include, without limitation, court costs, attorneys' fees, witness fees, fines, amounts paid in settlement or judgment and any other costs and expenses of any nature or kind incurred in connection with any proceeding, including expenses of establishing a right to indemnification under this bylaw or any applicable law. (c) The term the "corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this bylaw with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued. (d) References to a "director," "officer," "employee" or "agent" of the corporation shall include, without limitation, situations where such person is serving corporation as a director, officer, employee, trustee or agent of another corporation, partnership, joint venture, trust or other enterprise. 24. EX-5.1 4 EXHIBIT 5.1 1 EXHIBIT 5.1 [Cooley Godward LLP Letterhead] October 9, 1996 Hot Topic, Inc. 3410 Pomona Boulevard Pomona, California 91768 Ladies and Gentlemen: You have requested our opinion with respect to certain matters in connection with the filing by Hot Topic, Inc. (the "Company") of a Registration Statement on Form S-8 (the "Registration Statement") with the Securities and Exchange Commission covering the offering of 931,795 shares of the Company's Common Stock, no par value (the "Shares"), including 391,875 shares issuable pursuant to outstanding stock options under the Company's 1996 Equity Incentive Plan (the "Equity Plan"), 346,500 additional shares available for grant under the Equity Plan, 13,420 shares issuable pursuant to outstanding stock options (the "Options") issued outside the Equity Plan, 23,334 shares available for grant under the Company's 1996 Non-Employee Directors' Stock Option Plan (the "Directors' Plan"), 6,666 shares issuable pursuant to outstanding stock options under the Directors' Plan, and 150,000 shares available for grant under the Company's Employee Stock Purchase Plan (the "Stock Purchase Plan"). In connection with this opinion, we have examined the Registration Statement and related Prospectus, your Articles of Incorporation, as amended, and By-laws, as amended, and such other documents, records, certificates, memoranda and other instruments as we deem necessary as a basis for this opinion. We have assumed the genuineness and authenticity of all documents submitted to us as originals, the conformity to originals of all documents submitted to us as copies thereof, and the due execution and delivery of all documents where due execution and delivery are a prerequisite to the effectiveness thereof. On the basis of the foregoing, and in reliance thereon, we are of the opinion that the Shares, when sold and issued in accordance with the Registration Statement and the Equity Plan, the Options, the Directors' Plan or the Stock Purchase Plan, as the case may be, will be validly issued, fully paid and nonassessable. We consent to the filing of this opinion as an exhibit to the Registration Statement. Very truly yours, COOLEY GODWARD LLP /s/ M. WAINWRIGHT FISHBURN, JR. - -------------------------------- M. Wainwright Fishburn, Jr. EX-23.1 5 EXHIBIT 23.1 1 EXHIBIT 23.1 CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statement (Form S-8), pertaining to the 1996 Equity Incentive Plan, Non-Plan Stock Options, 1996 Non-Employee Directors' Stock Option Plan and the Employee Stock Purchase Plan of Hot Topic, Inc. of our report dated March 19, 1996 (except as to the penultimate paragraph of Note 5, and the second, fifth, sixth and seventh paragraphs of Note 6, as to which the date is July 23, 1996) with respect to the financial statements of Hot Topic, Inc. included in the Registration Statement on Form SB-2 (No. 333-5054-LA) filed with the Securities and Exchange Commission. ERNST & YOUNG LLP San Diego, California October 4, 1996 EX-99.6 6 EXHIBIT 99.6 1 EXHIBIT 99.6 FORM OF HOT TOPIC, INC. NON-QUALIFIED STOCK OPTION AGREEMENT FOR GOOD AND VALUABLE CONSIDERATION, Hot Topic, Inc., a California corporation, hereby irrevocably grants to the Employee named below a non-qualified stock option (the "Option") to purchase any part or all of the specified number of shares of its Common Stock upon the terms and subject to the conditions set forth in this Agreement, at the specified purchase price per share without commission or other charge. The Option is granted subject to the Terms and Conditions Relating to Non-Qualified Stock Options attached hereto as EXHIBIT A and incorporated herein (the "Terms and Conditions"). Name of Employee: _______________ Social Security Number: _______________ Number of Shares covered by Option __________ (_____) (the "Option Shares"): Purchase Price Per Option Share: Two Dollars ($2.00) Minimum Number of Option Shares Per Partial Exercise (unless Optionee exercises all of the Option then exercisable): One hundred (100) The Option shall become exercisable as follows: _______ Option Shares shall be subject to purchase on the date hereof. An additional _____ Option Shares shall become subject to purchase on the 1st day of each calendar month, commencing with _____________ and ending __________, and the final ____ Option Shares shall become subject to purchase on _____________. Once subject to purchase, the Option Shares shall remain subject to purchase until _______________ (the "Expiration Date") unless the Option is earlier terminated in accordance with the Terms and Conditions. Date of this Agreement: _________________ HOT TOPIC, INC. ______________________________ Employee's Signature By:_______________________________________ Residence Address: [NAME] _____________________________ _____________________________ 2 TERMS AND CONDITIONS RELATING TO NON-QUALIFIED STOCK OPTIONS __________, 19__ The following Terms and Conditions Relating to Non-Qualified Stock Options (the "Terms and Conditions") apply to the Non-Statutory Stock Options granted on the date hereof by Hot Topic, Inc. to ____________________________. These Terms and Conditions are incorporated by reference into each such Option. Whenever capitalized terms are used in these Terms and Conditions, they shall have the meaning specified (i) in the Hot Topic, Inc. Non-Statutory Stock Option Agreement (the "Facing Page") into which these Terms and Conditions are incorporated by reference, or (ii) below, unless the context clearly indicates to the contrary. As used herein, the "Option Agreement" shall mean the Facing Page and these Terms and Conditions as incorporated therein. The masculine pronoun shall include the feminine and neuter, and the singular the plural, where the context so indicates. 1. TERM OF OPTION. The term of the Option shall be the period commencing on the date of the Option Agreement and ending on the Expiration Date (as defined in the Facing Page), unless terminated earlier as provided herein. 2. EXERCISE PRICE. The exercise price of the Option granted hereby shall be equal to the purchase price per Option Share as set forth on the Facing Page. 3. EXERCISE OF OPTION. (a) The Facing Page sets forth the rate at which the Option Shares shall become subject to purchase by Optionee. (b) Optionee shall exercise the Option to the extent exercisable, in whole or in part, by sending written notice to the Company in the form attached hereto as APPENDIX A of his intention to purchase Option Shares hereunder, together with a check in the amount of the full purchase price of the Option Shares to be purchased. Optionee shall not exercise the Option at any one time with respect to less than the minimum number of Option Shares as is set forth in the Facing Page. (c) Optionee agrees to complete and execute any additional documents which the Company reasonably requests that Optionee complete in order to comply with applicable federal, state and local securities laws, rules and regulations. (d) Subject to the Company 's compliance with all applicable laws, rules and regulations relating to the issuance of such Option Shares and Optionee's compliance 2. 3 with all the terms and conditions of the Option Agreement, the Company shall promptly deliver the Option Shares to the Optionee. (e) Except as otherwise provided herein, the Option may be exercised during the lifetime of the Optionee only by the Optionee. 4. OPTION NOT TRANSFERABLE. The Option granted hereunder shall not be transferable in any manner other than upon the death of Optionee. More particularly (but without limiting the foregoing), the Option may not be assigned, transferred (except as expressly provided herein), pledged or hypothecated in any way, shall not be assignable by operation of law and shall not be subject to execution, attachment or similar process. Any attempted assignment, transfer, pledge, hypothecation or other disposition of the Option contrary to the provisions hereof, or the levy of any execution, attachment or similar process upon the Option, shall be null and void and without effect. 5. TERMINATION OF OPTION. (a) To the extent not previously exercised, the Option shall terminate on the Expiration Date; provided, however, that except as otherwise provided in this Section 5 THE OPTION MAY NOT BE EXERCISED MORE THAN THIRTY (30) DAYS AFTER THE TERMINATION OF: OPTIONEE'S EMPLOYMENT RELATIONSHIP WITH THE COMPANY (THE "EMPLOYMENT RELATIONSHIP") FOR ANY REASON (OTHER THAN UPON OPTIONEE'S DEATH OR DISABILITY, AS DEFINED BELOW). Within such thirty (30) day period, Optionee may exercise the Option only to the extent the same was exercisable on the date of such termination and said right to exercise shall terminate at the end of such period. (b) In the event of the termination of the Employment Relationship as a result of Optionee's total and permanent disability, as defined in Section 22(e)(3) of the Internal Revenue Code of 1986 and as interpreted by the Company's Board of Directors in each case ("Disability"), the Option shall be exercisable for a period of twelve (12) months from the date of such termination, but only to the extent that the Option was exercisable on the date of such termination. (c) In the event of the termination of the Employment Relationship as a result of Optionee's death, the Option shall be exercisable by the Optionee's estate (or by the person who acquires the right to exercise the Option by will or by the laws of descent and distribution) for a period of twelve (12) months from the date of such termination, but only to the extent that the Optionee was entitled to exercise the Option on the date of death. (d) Notwithstanding the preceding paragraphs of this Section 5, if the Company's Board of Directors determines in good faith that Optionee has committed an act of fraud, theft, other act of dishonesty, act of moral turpitude, or any other act 3. 4 materially inimical to the interest of the Company, the Option (including the right to purchase Option Shares hereunder which have accrued but remain unexercised) shall cease to be exercisable simultaneously with such act. (e) Notwithstanding anything herein to the contrary, no portion of any Option which is not exercisable by the Optionee upon the termination of the Employment Relationship shall thereafter become exercisable, regardless of the reason for such termination. 6. NO RIGHT TO CONTINUED EMPLOYMENT. The Option does not confer upon Optionee any right to continue in the employ of the Company, nor does it limit in any way the right of the Company to terminate Optionee's employment at any time, with or without cause. 7. RIGHT OF REPURCHASE OF OPTION SHARES. (a) Notwithstanding any provision herein to the contrary, the Option Shares issued pursuant to the Option shall be subject to a right, but not an obligation, of repurchase by the Company (the "Right of Repurchase"), at the price determined under subsection (b) below, if prior to the Expiration Date or the termination of the Right of Repurchase as provided in Section 9(d) below (i) the Optionee terminates his employment with the Company "without cause" (if Optionee has an employment agreement with the Company defining such term) or for any reason (if Optionee has no such employment agreement), (ii) the Company terminates Optionee's employment with the Company "for cause" (if Optionee has an employment agreement with the Company defining such term) or for any reason (if Optionee has no such employment agreement), or (iii) the Optionee's employment with the Company is terminated because of his death or Disability. Option Shares issued by the Company shall not be transferable by the Optionee during the period during which the Right of Repurchase applies, and the Company may take such steps as it deems necessary to ensure compliance with this restriction. (b) The price per share at which the Company may exercise the Right of Repurchase (the "Repurchase Price") shall be the higher of (i) the price the Optionee paid for such Option Shares or (ii) the fair market value of such Option Shares on the date the Company exercises its Right of Repurchase, as determined in good faith by the Company's Board of Directors (or an officer appointed by the Board of Directors for such purpose), after giving due consideration to the factors set forth in Section 260.140.50 of Title 10 of the California Code of Regulations (exclusive of any reference to an initial public offering price). (c) The Company's Right of Repurchase shall terminate if not exercised by written notice from the Company to the Optionee within ninety (90) days of the first to 4. 5 occur of the events described in clauses (i), (ii) and (iii) of Section 7(a) above. If the Company exercises its Right of Repurchase, it shall give notice thereof to the Optionee within such ninety (90) day period, and, upon receipt of such notice, the Optionee shall immediately endorse and deliver to the Company the stock certificate(s) representing the Option Shares being repurchased, and the Company shall then promptly pay, pursuant to the provisions of Section 7(d) below, the total Repurchase Price to the Optionee. If the Company exercises its Right of Repurchase it shall exercise its right with respect to all (not some) of such Option Shares. (d) The Repurchase Price shall be paid first by cancellation of any obligation for accrued but unpaid interest outstanding under notes issued by the Optionee upon purchase of the Option Shares (if any), next by cancellation of principal outstanding under such notes (if any), and finally by payment in cash of the balance due. (e) In the event the Company does not elect to exercise its Right of Repurchase within the ninety (90) day period, the Option Shares shall no longer be subject to repurchase by the Company pursuant to this Section 7. 8. RIGHT OF FIRST REFUSAL. Unless Optionee is a party to the Shareholders Rights Agreement dated on or about the date hereof among the Company and its shareholders, Optionee agrees that he will not sell or otherwise transfer any Option Shares (including transfer by operation of law) at any time after the expiration of the Right of Repurchase and prior to the termination of this section pursuant to Section 9(d) below unless such Option Shares shall first be offered to the Company as follows: (a) The Optionee shall deliver a notice (the "Notice") to the Company, stating (i) the Optionee's bona fide intention to sell or transfer such Option Shares, (ii) the number of such Option Shares to be sold or transferred, (iii) the consideration for which the Optionee proposes to sell or transfer such Option Shares, (iv) the terms of payment of such consideration and any other terms and conditions of sale, and (v) the name of the proposed purchaser or transferee. (b) Within sixty (60) days after receipt of the Notice, the Company may elect to purchase any or all of the Option Shares to which the Notice refers, for the consideration per share and upon the terms and conditions specified in the Notice, except as set forth in Section 8(e) below for transfers involving non-cash consideration. If the Company elects not to purchase all such Option Shares, the Company may assign its right to purchase the remaining Option Shares. The Company's assignees may elect within sixty (60) days after receipt by the Company of the Notice to purchase any or all Option Shares to which the Notice refers which the Company has not elected to purchase, for the 5. 6 consideration per share and upon the terms and conditions specified in the Notice, except as set forth in Section 8(e) below. An election to purchase shall be made by written notice to the Optionee, specifying the number of Option Shares to be purchased. (c) If the Company and/or its assignees do not so purchase all of such Option Shares within such sixty (60) day period, Optionee shall have a period of thirty (30) days thereafter to transfer all (but not less than all) of such Option Shares (less those Option Shares purchased by the Company and/or its assignees as provided in Section 8(b)) to the transferee referred to in the Notice and for the same consideration and on the other terms as set forth therein; provided, however, that prior to any transfer of such Option Shares, the proposed transferee shall execute and deliver to the Company an agreement with the Company, in form and substance satisfactory to the Company, pursuant to which such transferee agrees to be subject to the relevant provisions of the Option Agreement. (d) In the event that such Option Shares are not transferred in accordance with the terms of the Option Agreement within such 30-day period, the restrictions on transfer provided in this Section 8 shall again become applicable to the Option Shares. (e) If part or all of the purchase consideration specified in a Notice delivered by the Optionee pursuant to this Section 8 is other than cash or purchaser's promissory note or other evidence of indebtedness, the Company and its assignee(s) shall have the right to purchase any or all of the Option Shares specified in the Notice for a cash price equal to the fair market value of the number of Option Shares to be so purchased by the Company and/or its assignee(s). The fair market value of any Option Shares shall be as determined in good faith by the Company's Board of Directors (or an officer appointed by the Board of Directors, for such purposes) after giving due consideration to the factors set forth in Section 260.140.50 of Title 10 of the California Code of Regulations (exclusive of any reference to an initial public offering price). 9. OTHER PROVISIONS REGARDING TRANSFER. (a) Optionee, as a condition for accepting any Option Shares, shall not sell, transfer or pledge any Option Shares subject to the Right of Repurchase described in Section 7 or the right of first refusal described in Section 8 hereof, other than in the manner expressly permitted in the Option Agreement, and any such sale, transfer or pledge of the Option Shares in violation of this Agreement shall be void. The Company shall not be required (i) to transfer on its books any Option Shares which shall have been sold or transferred in violation of any of the provisions set forth in the Option Agreement 6. 7 or (ii) to treat as the owner of such Option Shares or accord the right to vote or pay dividends to any transferee to whom such Option Shares shall have been so transferred. (b) Notwithstanding anything to the contrary contained herein, Optionee is under no restrictions as to the transfer by him of any or all of the Option Shares to his Related Transferees (as defined herein) provided that each such Related Transferee shall first (i) execute a written consent to be bound by all of the relevant provisions of the Option Agreement in form and substance satisfactory to the Company and (ii) give a duplicate original of such consent to the Company. The "Related Transferees" of the Optionee as used herein shall consist of the Optionee's spouse, his adult lineal descendants, the adult spouses of his lineal descendants and trusts for the benefit of any of the foregoing, Optionee and/or his minor lineal descendants. In the event of any transfer by the Optionee to his Related Transferees of all or any part of the Option Shares (or in the event of any subsequent transfer by any such Related Transferee to another Related Transferee of the Optionee), such Related Transferees shall receive and hold the Option Shares subject to the relevant terms of the Option Agreement and the Optionee's rights and obligations hereunder as though the Option Shares were still owned by the Optionee and shall together with the Optionee continue to be deemed to be the "Optionee" for purposes of the Option Agreement, including without limitation restrictions on the transfer of Option Shares. There shall be no further transfer of the Option Shares by a Related Transferee except between and among such Related Transferee, the Optionee and other Related Transferees of the Optionee, or except as permitted by the Option Agreement. The Company advises the Optionee to seek independent tax counsel prior to transferring any Option Shares to any Related Transferee. (c) The Optionee hereby grants to the Company a security interest in the Option Shares for the purpose of ensuring that a transfer in violation of the restrictions set forth in Sections 7, 8 and 9 of this Agreement does not occur. In furtherance of such security interest, the Company may, at its option, retain the certificate(s) evidencing the Option Shares, together with stock assignments executed in blank by the Optionee, until such transfer restrictions terminate in accordance with Section 9(d). The Optionee hereby grants to any officer(s) of the Company the power of attorney to cause the Option Shares to be transferred on the books of the Company in the event the Company and/or its assignees repurchase some or all of the Option Shares in accordance with the Option Agreement. (d) The transfer restrictions provided in Sections 7, 8 and 9 hereof shall terminate if and when a registration statement (other than a registration statement pursuant to any employee, purchase, savings, option, bonus, appreciation, profit sharing, thrift, incentive or similar plan of the Company), filed by the Company under the Securities Act in connection with the initial public offering of its securities, becomes 7. 8 effective, and the sale of securities made pursuant to such registration statement has been completed for an aggregate amount of at least $10,000,000. 10. NOTICE OF TAX ELECTION. If Optionee makes any tax election relating to the treatment of the Option Shares under the Internal Revenue Code of 1986, as amended, Optionee shall promptly notify the Company of such election. 11. MARKET STAND-OFF. (a) In connection with any underwritten public offering by the Company of its equity securities pursuant to an effective registration statement filed under the Securities Act of 1933, as amended, including the Company's initial public offering, Optionee shall not sell, make any short sale of, loan, hypothecate, pledge, grant any option for the purchase of, or otherwise dispose of or transfer for value or otherwise agree to engage in any of the foregoing transactions with respect to any of the Option Shares without the prior written consent of the Company and its underwriters, for such period of time from and after the effective date of such registration statement as may be requested by the Company or such underwriters. This Section 11 shall only remain in effect for the two (2) year period immediately following the effective date of the Company's initial public offering and shall thereafter terminate. (b) Notwithstanding the foregoing, Optionee shall be subject to the market stand-off provisions of this Section 11 only if the executive officers and directors of the Company are also subject to similar arrangements. (c) In order to enforce the provisions of this Section 11, the Company may impose stop-transfer instructions with respect to the Option Shares until the end of the applicable stand-off period. 12. ACKNOWLEDGMENTS OF OPTIONEE. Optionee acknowledges and agrees that: (a) Optionee and his transferees shall have no rights as a shareholder with respect to any Option Shares until the date of the issuance of a stock certificate evidencing such Option Shares. No adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities or other property) or distributions or other rights for which the record date is prior to the date such stock certificate is issued, except as provided in Section 9 is below. (b) All certificates representing the Option Shares shall have endorsed thereon the following legends, the provisions of which are hereby incorporated into the Option Agreement: 8. 9 THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY STATE OTHER THAN THE STATE OF CALIFORNIA AND HAVE BEEN ISSUED AND SOLD PURSUANT TO AN EXEMPTION FROM THE ACT AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED BY THE HOLDERS THEREOF AT ANY TIME EXCEPT (1) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER THE ACT COVERING THE SECURITIES, OR (2) IF, IN THE REASONABLE OPINION OF COUNSEL TO THE CORPORATION, SUCH SHARES MAY BE TRANSFERRED WITHOUT SUCH REGISTRATION. IN ADDITION, SALE, TRANSFER OR HYPOTHECATION OF THIS SECURITY IS RESTRICTED BY THE PROVISIONS OF A NON-QUALIFIED STOCK OPTION AGREEMENT (AND THE TERMS AND CONDITIONS RELATING TO INCENTIVE STOCK OPTIONS INCORPORATED THEREIN) ENTERED INTO BY THE CORPORATION AND THIS SHAREHOLDER DATED AS OF SEPTEMBER 23, 1992, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE CORPORATION AND ALL OF THE PROVISIONS OF WHICH ARE INCORPORATED HEREIN. 13. INVESTMENT REPRESENTATIONS. As an inducement to the Company to grant the Option and issue the Option Shares to the Optionee, the Optionee hereby makes the following representations and warranties, and authorizes the Company to rely upon the same: (a) The Optionee will acquire the Option Shares for investment for his own account, not for resale, without any intention of or view toward or for participating, directly or indirectly, in a distribution of the Option Shares or any portion thereof. (b) Optionee is aware of and familiar with the Company's business affairs and financial condition and has acquired sufficient information about the Company to reach an informed decision to acquire the Option. Optionee has such knowledge and experience in business and financial matters that Optionee is capable of evaluating the merits and risks of acquiring the Option. 9. 10 (c) The Optionee understands that an investment in the Company is speculative, that any possible profits therefrom are uncertain, and that he must bear the economic risks of the investment in the Company for an indefinite period of time. (d) The Optionee understands that the Option Shares have not been registered under the Securities Act in reliance on the exemption provided by Rule 701 promulgated thereunder for compensatory benefit plans; and that the Option Shares have not been registered or qualified under the "blue sky" laws of any state. (e) The Optionee understands that the Option Shares may have to be held indefinitely unless they are subsequently registered under the Securities Act and qualified or registered under other applicable securities laws, rules and regulations, which is unlikely, or unless an exemption from such qualification or registration is available. (f) The Optionee understands and agrees that (i) the legends set forth in Section 12(b) hereof will be placed on the certificate(s) evidencing the Option Shares and on certificate(s) issued to transferees; (ii) the stock records of the Company will be noted with respect to such restrictions; (iii) the Company will not be under any obligation to register the Option Shares or to comply with any exemption available for sale of the Option Shares without registration; and (iv) the information or conditions necessary to permit routine sales of securities of the Company under Rule 144 of the Securities Act are not now available and it is not likely that they will become available in the foreseeable future. (g) The Optionee is a bona fide resident and domiciliary of, not a temporary transient resident of, and has his principal residence in, the state or other jurisdiction set forth under Optionee's signature in the Option Agreement, and Optionee does not have any present intention of moving his principal residence from such state or jurisdiction. 14. WITHHOLDING TAXES. Whenever Option Shares are to be issued under the Option Agreement, the Company shall have the right to require Optionee to remit to the Company an amount sufficient to satisfy federal, state and local withholding tax requirements prior to issuance and/or delivery of any certificate or certificates for such Option Shares. 15. ADJUSTMENTS UPON CHANGES IN COMMON STOCK. (a) If any change is made in the Common Stock subject to the Option (through reorganization, recapitalization, stock dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or otherwise), the class and number of shares and price per share of Common Stock subject to the Option will be appropriately adjusted. 10. 11 (b) In the event the Company is merged or consolidated with another corporation and the Company is the surviving corporation, the Option, whether or not then exercisable, shall pertain to and apply to the securities or other property to which a holder of the number the Option Shares subject to the Option would have been entitled upon such transaction. (c) In the event the Company is merged or consolidated with another corporation and the Company is not the surviving corporation, or in the event substantially all of the property or stock of the Company is acquired by another corporation, or in case of a separation, reorganization, or liquidation of the Company, the Board of Directors of the Company shall, in its sole discretion, either (i) make appropriate provision for protection of the Option by the substitution on an equitable basis of appropriate stock of the Company, or of the merged, consolidated or otherwise reorganized corporation which will be issuable with respect to the stock of the Company, or (ii) upon written notice to the Optionee, provided that the Option must be exercised within a specified period not exceeding sixty (60) days of the date of such notice to the extent the Option is exercisable on the last day of such specified period or it will be terminated. Any portion of the Option which is not exercisable on the last day of such specified period will be terminated and any portion of the Option which is not exercised on or before said last day shall terminate on said last day. 16. MISCELLANEOUS (a) The Option Agreement shall bind and inure to the benefit of the parties' heirs, legal representatives, successors and permitted assigns. (b) The Option Agreement and these Terms and Conditions constitute the entire agreement between the parties pertaining to the subject matter contained herein and they supersede all prior and contemporaneous agreements, representations and understandings of the parties. No supplement, modification or amendment of the Option Agreement shall be binding unless executed in writing by all of the parties. No waiver of any of the provisions of the Option Agreement shall be deemed or shall constitute a waiver of any other provisions, whether or not similar, nor shall any waiver constitute a continuing waiver. No waiver shall be binding unless executed in writing by the party making the waiver. (c) Should any portion of the Option Agreement or these Terms and Conditions be declared invalid and unenforceable, then such portion shall be deemed to be severable from the Option Agreement and shall not affect the remainder hereof. (d) All notices to be sent hereunder shall be delivered in person or sent by United States Mall, certified and postage prepaid, to Optionee at the address set forth 11. 12 on the Facing Page of the Option Agreement or to the Company at its principal place of business, Attention: President. Any change in the address to which notices shall be sent under the Option Agreement to the Optionee shall be made by the Optionee upon ten (10) days' written notice to the Company. (e) The prevailing party in any court action brought to interpret or enforce any provision of the Option Agreement shall be entitled to recover, as an element of the costs of suit, and not as damages, an award of reasonable attorneys' fees, to be fixed by the court. Such award may be made as part of a judgment by default or as part of a judgment after trial or after appeal. (f) The Option Agreement shall be construed according to the laws of the State of California. The Option Agreement is made and entered into in Montclair, California. (g) In consideration of the grant of the Option, all other options for the purchase of the Company's equity securities previously granted to Optionee (excluding any options granted to Optionee pursuant to the Shareholders Rights Agreement dated as of the date hereof between the Company and its shareholders) are hereby cancelled and terminated. (h) In the event the California Department of Corporations, in connection with an application for qualification of the Company's stock option plan, requires any changes to be made to the form Incentive Stock Option Agreement (attached as Exhibit J to the Series A, Series B and Series C Preferred Stock Purchase Agreement dated as of the date hereof) for the protection of optionees, the Company agrees to amend the Option Agreement and these Terms and Conditions to the extent necessary to conform to such required changes. 12. 13 APPENDIX A NOTICE OF EXERCISE OF INCENTIVE STOCK OPTION To: HOT TOPIC, INC. 4650 Arrow Highway Unit C-1 Montclair, California 91763 Attention: President I, a resident of the State of ________________, hereby exercise my incentive stock option granted by HOT TOPIC, INC., a California corporation (the "Company"), on ______________, 199__, subject to all the terms and provisions thereof and notify the Company of my desire to purchase _____ shares of Common Stock of the Company at the exercise price of ________ Dollars ($ ______) per share pursuant to said option. I agree to complete and execute any additional documents which the Company may request that I complete in order to comply with applicable federal, state and local securities laws, rules and regulations. Dated: ____________________ ___________________________ ____________________________ Social Security or [name] Taxpayer I.D. Number Address: ____________________________ ____________________________ ____________________________ 13. -----END PRIVACY-ENHANCED MESSAGE-----