<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Materials Pursuant to Section 240.14a-11(c) or 240.14a-12
COMPOST AMERICA HOLDING COMPANY, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/x/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
1) Title of each class of securities to which transaction
applies:
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2) Aggregate number of securities to which transaction
applies:
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3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11(set forth
in the amount on which the filing fee is calculated and
state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.
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3) Filing Party:
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4) Date Filed:
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COMPOST AMERICA HOLDING COMPANY, INC.
One Gateway Center, 25th floor, Newark, New Jersey 07102
Notice of Annual Meeting of Shareholders
To the Shareholders of Compost America Holding Company, Inc.:
NOTICE IS HEREBY GIVEN that the annual meeting of the shareholders of COMPOST
AMERICA HOLDING COMPANY, INC. (the "Company") will be held at the Gateway Hilton
Hotel, Raymond Blvd., Newark, New Jersey 07192, on Thursday, September 28, 2000,
at the hour of 8:00 o'clock in the morning (local time) for the following
purposes:
1. To elect Charles Carson, Christopher Daggett, Michael Goodman, Brian
Marshall, Peter Petrillo and Marvin Roseman as Directors of the Company
to serve a term of one year or until their successors are duly
appointed and qualified;
2. To ratify the selection by the Company's Board of Directors of
Rothstein, Kass & Company, P.C. as independent accountants to
audit the books of account of the Company for the current
fiscal year;
3. To approve the Company's change of its state of incorporation
from New Jersey to Delaware, its change of name and its increase in
authorized common shares by (1) approving the merger of the Company
into its newly-formed, wholly-owned Delaware subsidiary (the
"Reincorporation Merger"), pursuant to an Agreement and Plan of Merger
(the "Reincorporation Merger Agreement") set forth in Annex I to the
Proxy Statement which accompanies this Notice of Meeting, and, assuming
shareholder approval of the Reincorporation Merger, (2) approving the
change of the Company's name from Compost America Holding Company, Inc.
to Phoenix Waste Services Company, Inc. and (3) approving the increase
in the Company's authorized common shares from 100,000,000 to
200,000,000, and
4. To transact such further business as may properly come before the
meeting or any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on July 31, 2000 as the
record date for the determination of shareholders entitled to receive notice of
and to vote at the meeting.
DATED the 7th day of September, 2000.
BY ORDER OF THE BOARD OF DIRECTORS
Richard Franks, Esq., Secretary
PLEASE RETURN YOUR SIGNED PROXY
NOTE: Shareholders who are not able to be personally present at the annual
meeting are requested to promptly sign and return in the enclosed envelope the
accompanying form of proxy for use at the meeting. This will not prevent you
from voting in person at the meeting. It will, however, help assure a quorum and
avoid added proxy solicitation costs.
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COMPOST AMERICA HOLDING COMPANY, INC.
One Gateway Center, 25th floor, Newark, New Jersey 07102
September 7, 2000
-------------------
PROXY STATEMENT
-------------------
This proxy statement is furnished in connection with the solicitation
of proxies by the Board of Directors of COMPOST AMERICA HOLDING COMPANY, INC.
(the "Company") for use at the annual meeting of the shareholders of the Company
to be held on Thursday, September 28, 2000 at 8:00 o'clock in the morning (local
time) at the Gateway Hilton Hotel, Raymond Blvd., Newark, New Jersey 07102, for
the purpose of considering and voting on the three proposals described in the
accompanying notice of meeting. These three proposals are:
Proposal No. 1 - Election of Directors. Proxies are being solicited to elect
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six persons to the Company's Board of Directors.
Proposal No. 2 - Ratification of the Appointment of Auditors. Proxies also are
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being solicited to ratify the re-appointment of Rothstein, Kass and Company,
Inc. as the Company's auditors.
Proposal No. 3 - Reincorporation into Delaware, Change of Name and Increase
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in Authorized Common Shares. Finally, proxies also are being solicited to
---------------------------
approve an Agreement and Plan of Merger (the "Reincorporation Merger Agreement")
resulting in a Reincorporation Merger, as a result of which the Company will
change its state of incorporation from New Jersey to Delaware and, if the
Agreement and Plan of Merger is approved, also will change its name from Compost
America Holding Company, Inc. to Phoenix Waste Services Company, Inc. and will
increase its authorized common shares from 100,000,000 to 200,000,000, along
with certain other changes set forth in this proxy statement and in the
documents annexed hereto.
It is expected that the solicitation will be primarily by mail, but
proxies also may be solicited personally or by telephone by officers and
employees of the Company who will not receive additional compensation for such
solicitation. The cost of solicitation of proxies will be borne directly by the
Company.
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The form of proxy forwarded to shareholders with the notice of meeting
confers discretionary authority upon the proxy nominees with respect to the
matters identified in the notice of meeting, or other matters that may properly
come before the meeting. The form of proxy allows the shareholder to specify
that the shares registered in his/her name may be voted for or against or
withheld from voting in the election of directors and the ratification of the
appointment of auditors and may vote for or vote against or abstain from voting
on the proposed merger of the Company into its newly-formed, wholly-owned
Delaware subsidiary, which would have the effect of changing the Company's state
of incorporation from New Jersey to Delaware (the "Reincorporation Merger") and,
if the Reincorporation Merger Agreement is approved, changing the name of the
Company to Phoenix Waste Services Company, Inc. (herein sometimes referred to as
"Phoenix") and increasing its number of authorized common shares from
100,000,000 to 200,000,000, all as specified in the notice of meeting.
The shares represented by proxies solicited hereby will be voted for or
voted against or withheld from voting, in each case, in accordance with the
specifications made by the shareholders giving such proxy.
In respect of proxies solicited hereby in which the shareholders fail
to specify how they want their shares to be voted, these shares will be VOTED
FOR the election of management's nominees for directors and VOTED FOR the
ratification of the appointment of the auditors and VOTED FOR the
Reincorporation Merger Agreement, the change of name and the increase in
authorized common shares.
For voting purposes, abstentions will be counted for the purpose of
establishing a quorum and will not be voted. Broker non-votes will be counted
for the purpose of establishing a quorum but will not be voted.
Proxies given by shareholders for use at the meeting may be revoked at
any time prior to their use. In addition to revocation in any manner permitted
by law, a proxy may be revoked in any one of the following ways:
(a) by signing a form of proxy bearing a later date and depositing it with the
Secretary of the Company prior to the closing of the polls at the meeting;
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(b) as to any matter on which a vote has not already been cast pursuant to the
authority conferred by such proxy, by signing written notice of revocation and
delivering it to either the Secretary or the Chairman of the meeting prior to
the closing of the polls at the meeting;
(c) by attending the meeting in person and personally voting the shares
represented by the proxy; or
(d) by an instrument in writing executed by the shareholder or by his/her
attorney authorized in writing, or, if the shareholder is a corporation, under
its corporate seal, or by an officer or attorney thereof duly authorized, and
deposited either at the head office of the Company at any time up to and
including the last business day preceding the day of the meeting, or any
adjournment thereof, at which the proxy is to be used, or with the Chairman of
such meeting on the day of the meeting, or any adjournment thereof, and upon
either of such deposits the proxy is revoked.
VOTING SHARES AND PRINCIPAL HOLDERS THEREOF
The authorized capital of the Company consists of 25,000,000 Preferred
Shares, no par value, of which 169,000 shares have been designated as Series A
Exchangeable Redeemable Preferred Stock ("Series A Preferred Shares"), 5,000,000
shares have been designated as $2.50 Series B Convertible Preferred Stock
("Series B Preferred Shares"), 91,000 shares have been designated as Series C
Redeemable Convertible Preferred Stock ("Series C Preferred Shares") and 17,500
shares have been designated as Series D Exchangeable Redeemable Preferred Stock
("Series D Preferred Shares") (collectively, the "Preferred Shares") and
100,000,000 common shares, no par value (the "Common Shares").
As of July 31, 2000, the record date for the meeting, 169,000 Series A
Preferred Shares, 401,000 Series B Preferred Shares, 91,000 Series C Preferred
Shares and 8,771 Series D Preferred Shares and 67,213,844 Common Shares were
issued and outstanding. Holders of outstanding Common Shares of record at the
close of business on July 31, 2000 will be entitled to one vote per share at the
annual meeting to be held on September 28, 2000. Except as indicated herein,
holders of Preferred Shares are not entitled to vote on the election of
directors or on the ratification of the appointment of auditors or, unless it
adversely affects their interests, on the Reincorporation Merger. The
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Certificate of Designation for the Company's Series B Preferred Shares (the
"Series B Certificate") provides that any merger of the Company shall be deemed
a liquidation, thereby triggering a redemption of the Series B Preferred Shares
at a price of $2.50 per share plus any accrued and unpaid dividends. The Series
B Certificate further provides that the Company's Certificate of Incorporation
may not be amended in any way which affects the rights and preferences of
holders of the Series B Preferred Shares without the prior written consent of at
least fifty percent (50%) of the holders of the Series B Preferred Shares.
Management is requesting a consent and waiver from the holders of the Series B
Preferred Shares. Management does not believe that the Reincorporation Merger
will adversely affect the interests of the other Preferred Shares and,
accordingly, does not believe that holders of those Preferred Shares should have
voting rights with respect to the Reincorporation Merger. However, if the
Reincorporation Merger is approved by the Company's common shareholders, then
holders of all Preferred Shares would have the right to dissent and to have
their Preferred Shares appraised and redeemed for "Fair Value" in accordance
with the provisions of Chapter 11 of the New Jersey Business Corporation Act. If
Fair Value were determined to be the Liquidation Value of the Preferred Shares,
then the cost of such a redemption would be prohibitive to the Company. For
these reasons, the Company will not proceed with the Reorganization Merger until
all of the holders of the Series B Preferred Shares and substantially all of the
holders of the other Preferred Shares have executed a consent and waiver to the
Reorganization Merger.
Summary of Principal Features
of Common Shares
Dividend Rights
Holders of Common Shares are entitled to receive such dividends as may
be declared by the Board of Directors of the Company out of the profits arising
out of the business of the Company.
Voting Rights
Holders of Common Shares are entitled to one vote for each share held
on every matter submitted to a vote of shareholders. Shareholders do not have
the right to cumulate their votes in the election of directors.
Liquidation Rights
In the event of any liquidation, dissolution or winding-up of the
Company, after provision for payment of the debts and other liabilities of the
Company, including the Company's obligations to the holders of its Preferred
Shares, the holders of the Common Shares shall be entitled to share ratably in
the remaining assets of the Company.
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Miscellaneous
The Common Shares have no conversion rights, no pre-emptive rights and
no liabilities for calls or assessments.
Transfer Agent and Registrar
Chase Mellon Shareholder Services, 44 Wall Street, 6th floor, New York,
New York 10005 is the transfer agent and registrar for the Common Shares.
Principal Holders
The Company's only class of securities that is entitled to vote
generally on all matters is its Common Shares.
The following table sets forth, as of July 31, 2000 all persons known
by the Company to be beneficial owners of more than five percent of the
Company's Common Shares and the Common Shares ownership in the Company, directly
or indirectly, of each of its directors, proposed directors and executive
officers and by all directors, proposed directors and executive officers of the
Company as a group.
Amount and
Nature of
Name and Address Beneficial Percent of
of Beneficial Owners (1) Ownership Class
------------------------ ------------ -----
Bentley King Associates, Inc. 1,200,000 (2) 2.0%
7960 Castle Pines Avenue
Las Vegas, NV 89113
Charles R. Carson 238,334 (3) *
590 Madison Avenue, 38th fl.
New York, NY 10022
(Director)
Chadwick Partners, LLC 1,259,375 (4) 2.1%
764 Easton Avenue
Somerset, NJ 08873
Anthony P. Cipollone 370,000 (5) *
One Gateway Center, 25th fl.
Newark, NY 07102
(Treasurer, Controller)
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Christopher J. Daggett (4) *
764 Easton Avenue
Somerset, NJ 08873
(Office of the President,
Proposed Director)
Richard L. Franks 50,000 (6) *
One Gateway Center, 25th fl.
Newark, NJ 07102
(Vice President, Secretary)
Michael Goodman none *
345 Park Avenue, 41st fl.
New York, NY 10154
(Proposed Director)
Brian D. Marshall none *
345 Park Avenue, 41st fl.
New York, NY 10154
(Proposed Director)
Peter Petrillo (7) *
345 Park Avenue, 41st fl.
New York, NY 10154
(Director)
Marvin H. Roseman (2) *
7960 Castle Pines Avenue
Las Vegas, NV 8913
(Office of the President,
Proposed Director)
John T. Shea (7) *
345 Park Avenue, 41st fl.
New York, NY 10154
(Director)
Christopher R. Smith none *
2840 Howe Road, Suite D
Martinez, CA 94553
(Director)
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W-L Associates, LLC 33,587,105 (7) 50.0%
c/o Wasteco Management Corp.
c/o Corporation Service company
1013 Centre Road
Wilmington, DE 19805
Officers and Directors 36,704,814 (8) 52.2%
As A Group (8 Persons)
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* Less than 1%
(1) Unless otherwise indicated, each person named in the table exercises sole
voting and investment power with respect to all shares beneficially owned.
(2) Includes 1,200,000 shares which may be acquired by Bentley King Associates,
Inc. within sixty days upon the exercise of options. Marvin H. Roseman is the
President of Bentley King Associates, Inc.
(3) Includes 238,334 shares which may be acquired by Mr. Carson within sixty
days upon the exercise of options.
(4) Includes 4,375 shares owned directly and 1,255,000 shares which may be
acquired by Chadwick Partners, LLC within sixty days upon the exercise of
options. Christopher J. Daggett is the President of Chadwick Partners, LLC.
(5) Includes 20,000 shares owned directly by Mr. Cipollone and 350,000 shares
which may be acquired by Mr. Cipollone within sixty days upon the exercise of
options.
(6) Includes 50,000 shares which may be acquired by Mr. Franks within sixty days
upon the exercise of options.
(7) Peter Petrillo, as the sole officer and director of the manager of W-L
Associates, LLC, controls the voting of W-L Associates, LLC. Mr. Petrillo holds
no Common Shares or options or warrants to acquire Common Shares in his own
name.
(8) Includes 3,093,334 shares which may be acquired within sixty days upon the
exercise of options and warrants. As at July 31, 2000, the Company had
67,213,844 shares outstanding. An additional 18,934,445 shares were subject to
acquisition within sixty days upon the exercise of options and warrants and the
conversion of notes, for a total of 86,148,289 shares on
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PROPOSAL NO. 1
ELECTION OF DIRECTORS
Each person whose name appears below has been nominated to be elected
as a director of the Company to serve for a term of one year or until his
successor is elected or appointed and qualified. The persons named below also
will be the directors of Phoenix if the Reincorporation Merger is approved.
Shares represented by proxies will be voted in favor of the election of the
persons named below as directors unless a shareholder has specified in his/her
proxy that his/her shares are to be withheld from voting in the election of one
or more of the nominees for director or are to be voted against one or more
nominees. If any one or more of these persons are unable to serve as a Director,
proxies will have discretionary authority to vote shares for the election of any
other person or persons nominated by the Board of Directors to serve as
replacement directors. The Board of Directors recommends a vote FOR the election
of these six nominees as directors of the Company.
Director Age Director Since
-------- --- --------------
Charles R. Carson 54 1997
Christopher Daggett 50 *
Michael Goodman 36 *
Brian D. Marshall 26 *
Peter Petrillo 40 1997
Marvin Roseman 71 *
* Has not previously served as a director
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Business Experience
CHARLES R. CARSON - DIRECTOR
Charles R. Carson became a Director of the Company in November, 1997.
He has been a principal of Churchill Capital, Inc. since February 1999. From
1985 through 1999, Mr. Carson was a Partner at Quirk, Carson, Peppet, Inc.
("QCP"). QCP was established in 1985 to serve as investment bankers and
management consultants to small and mid-sized companies (those with annual
revenues of approximately $10 million to $200 million) in the
environmental/waste management industry.
CHRISTOPHER DAGGETT - OFFICE OF THE PRESIDENT, PROPOSED DIRECTOR
Christopher Daggett joined the Company's Office of the President in
April, 1999. Since 1996, Mr. Daggett has been the President of Chadwick
Partners, a firm seeking to acquire, remediate and redevelop or sell
environmentally impaired real estate and environmentally impaired companies.
From 1990 through 1996, prior to forming Chadwick Partners, Mr. Daggett was a
managing director at William E. Simon & Sons, a New Jersey based investment
firm.
MICHAEL GOODMAN - PROPOSED DIRECTOR
Michael Goodman has been a vice-president in the direct equity
investment group at Wafra Investment Advisory Group, Inc., an affiliate of W-L
Associates, Inc. in New York City, since August 2000. From July 1998 through
July 2000 he was a principal of Equinox Investment Partners, LLC, a private
investment company in Darien, Connecticut. From January 1986 through June 1998,
when he joined Equinox, Mr. Goodman was a vice-president (lending officer) at
Chase Manhattan Bank in New York City. He was formerly a director of Acme
International LLC and PBT Brands, Inc.
BRIAN D. MARSHALL - PROPOSED DIRECTOR
Brian D. Marshall is an associate in the direct equity investment group
at Wafra Investment Advisory Group, Inc., an affiliate of W-L Associates, Inc.,
in New York City. From 1996 through April 1999, when he joined Wafra, Mr.
Marshall was an analyst in the investment banking group of Prudential Securities
Incorporated in New York City. Prior to 1996 he was a student at the Wharton
School of the University of Pennsylvania.
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PETER PETRILLO - DIRECTOR
Peter Petrillo has been a vice president in the direct equity
investment group at Wafra Investment Advisory Group, Inc. since January 1995.
From January 1991 to December 1994, Mr. Petrillo was a partner at Claymore
Partners Ltd., a strategic and turnaround consulting firm. Prior to that he was
a vice president at Lambert Brussels Capital Corporation. He became a Director
of the Company in 1997.
MARVIN ROSEMAN - OFFICE OF THE PRESIDENT, PRESIDENT OF ALL SUBSIDIARIES,
PROPOSED DIRECTOR
Marvin Roseman joined the Company's Office of the President in April
1999. From 1994 through the present, Mr. Roseman has been the President of
Bentley King Associates, a business consulting firm located in Las Vegas,
Nevada. Prior thereto, he was a self-employed consultant to the cable industry.
During the fiscal year ended April 30, 2000, thirteen directors'
meeting were held. No director attended fewer than 75% of such meetings except
for Christopher Smith, who attended six of the thirteen meetings, G. Chris
Andersen, who attended eight of the thirteen meetings and Roger E. Tuttle, who
attended nine of the thirteen meetings. Messrs. Smith, Andersen and Tuttle are
not standing for re-election as directors of the Company. Directors receive no
compensation or reimbursement of expenses for attending meetings of the Board.
The Board of Directors of the Company has an Audit Committee consisting of
Messrs. Carson (Chairman) and Petrillo. The primary duties of the audit
committee are to advise the Board in its selection of auditors and to supervise
the work of the auditors on behalf of the Board. During the fiscal year ended
April 30, 2000, there were two meetings of the audit committee.
Compliance With Section 16(a) of the Exchange Act
For its fiscal year ended April 30, 2000, the Company is not aware of
any failure to file on a timely basis reports required by Section 16(a) of the
Securities Exchange Act of 1934, as amended, by any director, officer or
beneficial owner of more than ten percent of the common shares of the Company.
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Executive Compensation
Name Annual Compensation All
and Fiscal Other Long- Other
Principal Year Annual Term Compen-
Position Ended Salary Bonus Comp. Comp. sation
---------- ------- --------- ----- ------ ------- -------
Christopher 4/30/00 $320,000(1) none none none $ 13,371
Daggett, 4/30/99 $ none none none none $ none
Office of 4/30/98 $ none none none none $ none
the President
Marvin H. 4/30/00 $320,000(1) none none none $145,793(2)
Roseman, 4/30/99 $ none none none none $ none
Office of 4/30/98 $ none none none none $ none
the President
Roger E. 4/30/00 $ none none none none $ none
Tuttle, 4/30/99 $225,000 none none none $ 9,210
former Pres. 4/30/98 $350,000 none none none $ 12,488
and CEO
Robert J. 4/30/00 $325,000 none none none $535,000(3)
Longo, 4/30/99 $325,000 none none none $242,200(3)
President 4/30/98 $162,500(4) none none none $ 3,600
of EPIC
Richard L. 4/30/00 $236,307(5) none none none $ 72,000(2)
Franks, 4/30/99 $ none none none none $ none
VP, Sec. 4/30/98 $ none none none none $ none
Anthony P. 4/30/00 $150,000 none none none $ 3,600
Cipollone, 4/30/99 $126,923 none none none $ none
Treasurer 4/30/98 $ 33,654 none none none $ none
(1) Paid as a Consulting Fee. Includes $80,000 paid for services rendered
during the prior fiscal year.
(2) Primarily reimbursement for living and related expenses.
(3) Includes a fee of $700,000 for providing a personal indemnification for
a surety bond issued to the Company, and other reimbursable expenses.
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(4) Commencing November 3, 1997
(5) Includes $44,307 paid for services rendered during the prior fiscal
year.
Options/SAR Grants Table
Number of %age of
Shares Total
Under- Options
lying Granted
Options in Fiscal Exercise or Base Expiration
Name Granted Year Price Per Share Date
------- --------- --------- ----------------- -----------
C. Daggett none n/a n/a n/a
M. Roseman none n/a n/a n/a
R. Tuttle none n/a n/a n/a
R. Longo none n/a n/a n/a
R. Franks none n/a n/a n/a
A. Cipollone none n/a n/a n/a
Aggregated Option/SAR Exercises In Last Fiscal Year And
Fiscal Year-End Option/SAR Value Table
------------------------------------------
Number of Value of
Shares Under Unexercised
Unexercised In-the-Money
Shares Options at Options at
Acquired Value FY-End; Exer/ FY-End; Exer/
Name On Exerc. Realized non-Exer'able Non-Exer'able (2)
------- --------- -------- ------------ ------------
C. Daggett none none none n/a
M. Roseman none none none n/a
R. Tuttle none none 1,209,875 n/a
R. Longo none none 1,500,000 (1) n/a
R. Franks none none 50,000 n/a
A. Cipollone none none 350,000 n/a
(1) 900,000 shares exercisable, 600,000 shares non-exercisable
(2) The market price of the Company's common stock as at its April 30, 2000
fiscal year end was $0.25 per share. No options were "in-the-money" at
the time.
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Long-Term Incentive Plan ("LTIP") Awards Table
None of the persons included above were covered by any LTIP.
Compensation Of Directors
No Director of the Company is compensated for serving as a director.
Employment Contracts And Termination Of Employment And
Change-In-Control Arrangements
None of the persons included above were covered by any employment
contracts, termination of employment or change-in-control arrangements other
than as set forth in the agreements described below.
On May 1, 1997 the Company entered into an amended employment agreement
with its then President, Roger E. Tuttle. This agreement provided for employment
as the Company's President through August 1, 2004 at an initial annual salary of
$350,000 (of which $125,000 was not to be paid until the Company's cash
resources were sufficient to permit payment thereof) with annual increases
commensurate with the growth of the Company, plus a bonus of 5% of the Company's
consolidated net income after taxes on the first $25,000,000 thereof and 2%
thereafter. Mr. Tuttle also received options to purchase 1,000,000 Common Shares
at $2.50 per share exercisable through August 1, 2004. In addition, he was to
receive a one-time bonus of $500,000 when the Common Shares were accepted for
listing on The NASDAQ Small Cap Stock Market or National Market System.
This agreement was further amended effective May 1, 1999 and was
terminated by the Company for cause in August 1999. Mr. Tuttle disputed this
termination. On June 15, 2000 this dispute was settled, at which time Mr. Tuttle
was paid $300,000, with an additional $600,000 to be paid over 36 months. Mr.
Tuttle also was issued 930,000 Common Shares to replace shares previously
distributed by him on behalf of the Company, the exercise price for his
1,000,000 options was reduced to $1.50 and the expiration date for these options
was extended to March 31, 2005.
On November 3, 1997 the Company's wholly owned subsidiary,
Environmental Protection & Improvement Company, Inc. ("EPIC"), entered into an
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employment agreement with Robert J. Longo ("Longo"). This agreement provided for
Longo's employment as the President of EPIC through September 15, 2002 at an
initial annual salary of $325,000 and a bonus formula, plus options to purchase
1,500,000 Common Shares at $1.00 per share exercisable through September 16,
2002, which options vested 500,000 initially, and 200,000 annually commencing
September 15, 1998. EPIC was sold by the Company on June 15, 2000 and this
agreement was terminated, at which time a termination payment of $900,000 was
made to Longo in settlement of his rights under his employment agreement.
The Company entered into an employment agreement with Richard L.
Franks, the Company's Vice President, Secretary and General Counsel, for a five
year term effective February 1, 1999. The agreement calls for an annual salary
of $192,000, a bonus of $100,000 upon the financial closing of each of the
Miami, Florida and Newark, New Jersey waste disposal projects and options to
purchase 50,000 Common Shares at an exercise price of $1.22 per share for a
period of five years.
The Company entered into an employment agreement with Anthony P.
Cipollone, the Company's Treasurer and Controller, effective September 1998
through April 2001 which calls for an annual salary of $150,000 plus options to
purchase 350,000 Common Shares at an exercise price of $1.00 per share for a
period of three years.
Since April 1999, the Company has been managed by an Office of the
President, which positions, since August 1999, have been held solely by two
consultants, Christopher J. Daggett and Marvin H. Roseman. From April 1999
through June 2000, each served on a month-to-month basis, and each was paid
$20,000 per month, plus expenses.
Effective June 29, 2000, the Company entered into a Consulting
Agreement with Bentley King Associates, Inc. which provided for the consulting
services of its President, Marvin H. Roseman, for a three year term, during
which term Mr. Roseman will be a member of the Company's Office of the
President, for a monthly fee of $20,000, plus options granted to Bentley King
Associates, Inc. to purchase 1,200,000 shares of the Company's common stock at
$0.01 per share for a period of ten years and to purchase an additional
2,000,000 shares, which options will be granted only if certain performance
levels are reached.
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Effective June 29, 2000, the Company entered into a Consulting
Agreement with Chadwick Partners, LLC which provided for the consulting services
of its President, Christopher J. Daggett, for a three year term, during which
term Mr. Daggett will be a member of the Company's Office of the President, for
a monthly fee of $20,000, plus options granted to Chadwick Partners, LLC to
purchase 1,200,000 shares of the Company's common stock at $0.01 per share for a
period of ten years and to purchase an additional 2,000,000 shares, which
options will be granted only if certain performance levels are reached.
Report On Repricing Of Options/SARS - None
Certain Relationships and Related Transactions
Employment agreements of Roger E. Tuttle, Robert J. Longo, Richard L.
Franks and Anthony P. Cipollone and Consulting Agreements with Bentley King
Associates, Inc. (Marvin H. Roseman) and Chadwick Partners, LLC (Christopher J.
Daggett) and Termination Agreements with Roger E. Tuttle and Robert J. Longo are
described above.
During the fiscal year ended April 30, 1999, while serving as a
Director of the Company, earned a fee of $700,000 from the Company for providing
a personal indemnification for a surety bond acquired by the Company. $225,000
of this fee was paid in the fiscal year ended April 30, 1999.
In June 2000, Churchill Capital, Inc., of which Charles Carson, a
Director of the Company, is a principal, was paid a fee of $790,000 for its
assistance in arranging for the sale of EPIC. In June 2000, Mr. Carson was paid
$72,600, and is still owed approximately $170,000, for financial advisory
services provided in prior years by Quirk, Carson & Peppet, of which Mr. Carson
was a principal.
PROPOSAL NO. 2
RATIFICATION OF THE APPOINTMENT OF AUDITORS
Upon recommendation of the Board of Directors, and subject to
ratification by the shareholders at the September 28, 2000 Annual Meeting, the
Board of Directors has reappointed Rothstein, Kass & Company, P.C. as
independent accountants to examine the consolidated financial statements of the
Company for the fiscal year ending April 30, 2001.
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If the Board's appointment is not ratified, or if Rothstein, Kass &
Company, P.C. declines to act or becomes incapable of action, or if their
employment is discontinued, the Board will appoint other independent accountants
whose continued employment after the next Annual Meeting of Shareholders shall
be subject to ratification by the shareholders at that time.
It is not anticipated that representatives of Rothstein, Kass &
Company, P.C. will be present at the Annual Meeting. The persons named in the
accompanying form of proxy intend to vote such proxies to ratify the appointment
of Rothstein, Kass & Company, P.C. unless a contrary choice is indicated. The
Board of Directors recommends a vote FOR ratification of the appointment of
Rothstein, Kass & Company, P.C. as the Company's independent accountants.
PROPOSAL NO. 3
CHANGE THE STATE OF INCORPORATION OF THE COMPANY
FROM NEW JERSEY TO DELAWARE, CHANGE THE NAME OF
THE COMPANY AND INCREASE ITS AUTHORIZED COMMON SHARES
Introduction
The principal changes proposed to be effected as a result of Proposal
No. 3, the Reincorporation Merger, include the change in the Company's state of
incorporation, and, if and only if the Reincorporation Merger is approved, the
change of the Company's name and an increase in the Company's number of
authorized common shares, as well as certain other changes in the Company's
Certificate of Incorporation and By-Laws. All of these changes are discussed
below and are embodied in the Agreement and Plan of Merger (the "Reincorporation
Merger Agreement") between the Company and Phoenix Waste Services Company, Inc.
(as previously defined, "Phoenix"), the Company's wholly-owned Delaware
subsidiary. The Board of Directors believes that the best interests of the
Company and its stockholders will be served by adopting and approving the
Reincorporation Merger Agreement and, accordingly, the Reincorporation Merger,
the change of name and the increase in the authorized common shares.
Shareholders will vote separately on the Reincorporation Merger
Agreement, the change of name and the increase in authorized common shares.
Should the Reincorporation Merger Agreement not be approved, then the issue of
the change of name and the increase in authorized common shares in the
newly-formed Delaware corporation will be moot, and shareholder votes on these
two issues will not be counted. If the Reincorporation Merger Agreement is
approved, but the change of name proposal is not approved, then the name of the
Delaware corporation will be Compost America Holding Company, Inc. If the
Reincorporation Merger Agreement is approved, but the increase in authorized
common shares is not approved, then the number of authorized common shares of
the Delaware corporation shall be 100,000,000, the same as the Company.
Principal Reasons For The Reincorporation Merger Agreement
The principal changes proposed to be effected by the Reincorporation
Merger Agreement include the change in the Company's name, an increase in the
authorized number of common shares and certain other changes in the Company's
Certificate of Incorporation and By-Laws. All of these changes are discussed
below. The Board of Directors believes that the best interests of the Company
and its stockholders will be served by adopting the Reincorporation Merger
Agreement.
For many years, Delaware has followed a policy of encouraging
incorporation in that state and, in furtherance of that policy, has adopted
comprehensive, modern and adaptable corporate laws which are periodically
updated and revised to meet changing business needs. Delaware courts have
developed considerable expertise in dealing with corporate legal issues and a
substantial body of case law has developed construing Delaware law and
establishing public policy with respect to Delaware corporations. The relative
clarity and predictability of Delaware corporate law presented in the numerous
precedents decided by the Delaware courts should be of great advantage to the
Company by allowing it to make corporate decisions and take actions with
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increased confidence of what the outcome and consequences of those decisions and
actions will be under the General Corporation Law of the State of Delaware.
Further, the Delaware Secretary of State's office is staffed with experienced
regulators recognized for their efficient and business-sensitive approach to
administering the state's business laws and regulations. As a result of these
and other factors, many major corporations have chosen Delaware for their
initial domicile or have subsequently reincorporated in Delaware in a manner
similar to that proposed by the Company.
For the foregoing reasons, the Board of Directors believes that the
activities of the Company, both present and contemplated, can be better managed
if the Company is governed by Delaware law. It should be noted, however, that
stockholders in some instances have fewer rights and hence less protection under
Delaware law than under New Jersey law. See the discussion under the heading
"Comparison of Stockholder Rights Under The New Jersey Business Corporation Act
And The Delaware General Corporation Law," below.
The Company's Board of Directors has unanimously approved, subject to
stockholder approval, a proposal to change the Company's state of incorporation
from New Jersey to Delaware by means of the Reincorporation Merger of the
Company with and into Phoenix Waste Services Company, Inc. as embodied in the
Reincorporation Merger Agreement. The principal office of Phoenix will be the
same as the Company's present principal office, One Gateway Center, 25th floor,
Newark, New Jersey 07102. If the stockholders approve the Reincorporation Merger
Agreement, Phoenix will be the surviving corporation of the Reincorporation
Merger. A consequence of the Reincorporation Merger will be a change in the law
applicable to the Company's corporate affairs from New Jersey law to Delaware
law, which will also result in certain differences in stockholders' rights.
The following discussion summarizes certain aspects of the
Reincorporation Merger Agreement, including certain material differences between
New Jersey law and Delaware law. This summary does not purport to be a complete
description of the Reincorporation Merger Agreement or the differences between
stockholders' rights under New Jersey law and Delaware law and is qualified in
its entirety by reference to (i) the Reincorporation Merger Agreement attached
hereto as Annex I (ii) the certificate of incorporation of Phoenix (including
all certificates of designation relating to existing series of preferred stock)
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attached hereto as Annex II, and (iii) the by-laws of Phoenix attached hereto as
Annex III. Copies of the Company's present certificate of incorporation, as
amended (including all certificates of designation relating to existing series
of preferred stock), and by-laws are available for inspection at the Company's
principal office, and copies will be sent to stockholders on request, without
charge.
Approval of the Reincorporation Merger Agreement by the stockholders
will constitute approval of the Reincorporation Merger. Pursuant to the terms of
the Reincorporation Merger Agreement, Phoenix's certificate of incorporation and
by-laws will replace the Company's certificate of incorporation and by-laws as
the charter documents affecting corporate governance and stockholders' rights.
For a description of certain differences between the Company's certificate of
incorporation and by-laws and Phoenix's certificate of incorporation and
by-laws, see "Comparison of Certain Charter Document Provisions," below.
The approval of the Reincorporation Merger Agreement will affect
certain rights of the Company's stockholders. Accordingly, stockholders are
urged to carefully read this proxy statement and its appendices.
Principal Features Of The Reincorporation Merger
Upon the approval of the Reincorporation Merger by the Company's
shareholders, the Company's Board of Directors shall select a date,
approximately fourteen days after the date of shareholder approval, on which
date (the "Effective Date") the Reincorporation Merger shall be consummated.
Upon the consummation of the Reincorporation Merger, the separate
existence of the Company will cease and Phoenix, to the extent permitted by law,
will succeed to all business, properties, assets and liabilities of the Company.
Each Common Share and share of preferred stock of the Company issued and
outstanding immediately prior to the consummation of the merger will, by virtue
of the Reincorporation Merger, be converted into one Common Share or share of
preferred stock, respectively, of Phoenix. Upon the consummation of the
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Reorganization Merger, stock certificates which immediately prior to the
Reincorporation Merger represented common stock or preferred stock of the
Company, including Common Shares or preferred stock held in the treasury of the
Company, will be deemed for all purposes to represent the same number of shares
of Phoenix common stock or of Phoenix preferred stock, respectively.
Stockholders will not be required to exchange their existing stock certificates
for stock certificates of Phoenix. However, following the Reincorporation
Merger, if any stock certificates of the Company are submitted to Phoenix or to
its transfer agent for transfer, or if any stockholder so requests, a new stock
certificate representing the subject Phoenix shares will be delivered to the
transferee or holder of such shares. Upon the request of any stockholder Phoenix
will, without charge, furnish such holder a statement of the powers,
designations, preferences and relative, participating, optional, or other
special rights of each class of stock or series thereof that Phoenix is
authorized to issue, and of the qualifications, limitations or restrictions of
such preferences and/or rights. This exchange of securities will be exempt from
the registration requirements of the federal securities laws.
Approval of the Reincorporation Merger Agreement will not result in any
change in the business, management, assets or liabilities of the Company. The
directors and officers of the Company will be the directors and officers of
Phoenix following the Reincorporation Merger. On the Effective Date, the Phoenix
common stock will be listed on the Electronic Bulletin Board of the National
Association of Securities Dealers, Inc, where the Common Shares of the Company
are currently listed. The Company's transfer agent will consider the delivery of
existing stock certificates representing Common Shares of the Company as
constituting "good delivery" of shares of Phoenix common stock in transactions
subsequent to the Reincorporation Merger.
Pursuant to the terms of the Reincorporation Merger Agreement, each
option and warrant to purchase Common Shares of the Company outstanding
immediately prior to the consummation of the Reincorporation Merger will become
an option or warrant to purchase Phoenix common stock, subject to the same terms
and conditions as set forth in the agreement pursuant to which such option or
warrant was granted. All employee benefit plans and other agreements and
arrangements of the Company will be continued by Phoenix upon the same terms and
subject to the same conditions as currently in effect.
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In accordance with generally accepted accounting principles, the
Company expects that following the Reincorporation Merger the assets and
liabilities of the Company will be carried forward at their recorded historical
book values.
In accordance with the Reincorporation Merger Agreement, all agreements
and obligations of the Company will be assumed by, and become obligations of,
Phoenix, upon the Effective Date of the Reincorporation Merger.
The Reincorporation Merger does not require the approval of any federal
or state regulatory agency, nor does the transfer of any of the Company's
existing permits or licenses to Phoenix require the consent of any such
regulatory agency.
While it is anticipated that, if approved by the stockholders, the
Reincorporation Merger will become effective approximately fourteen days after
such approval, the Reincorporation Merger Agreement does provide that the Merger
may be abandoned by the mutual consent of the board of directors of both the
Company and Phoenix prior to the Effective Date, either before or after
stockholder approval. In addition, the Reincorporation Merger Agreement may be
amended prior to the Effective Date of the Reincorporation Merger, either before
or after stockholder approval, to the fullest extent permitted by applicable
law.
Change of Name
The Company's name, Compost America Holding Company, Inc., initially
was selected to reflect the Company's intent, at that time, to build invessel
composting facilities in major urban centers. The Reorganization Merger has the
effect of changing the name of the Company to Phoenix Waste Services Company,
Inc., reflecting the Company's business plan to participate in various aspects
of the waste management business.
Change of Authorized Capital Stock
Both Delaware and New Jersey law provide that a corporation has the
power to issue the number of shares stated in its certificate of incorporation.
Such shares may consist of one or more classes and any class may be divided into
one or more series. Each class or classes and series may be with or without par
value and have such designation and relative voting, dividend, liquidation and
other rights, preferences and limitations as stated in the certificate of
incorporation.
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The authorized capital stock of the Company currently consists of 100
million shares of common stock, no par value per share, and 25 million shares of
preferred stock, no par value per share. The capitalization of Phoenix will
consist of 200 million shares of common stock, $0.001 par value per share, and
25 million shares of preferred stock, $0.001 par value per share. This
represents an increase of 100,000,000 authorized common shares. The management
of the Company, who will be the management of Phoenix, believes that this
increase is desirable in order to preserve the flexibility to use common shares
for acquisitions, to pay for assets or services, to provide incentives to
employees and others in the form of options or for other corporate purposes.
However, management has no present plans for the issuance of any of these
additional authorized common shares. The change from no par value to $0.001 par
value was effected to reduce the obligations of Phoenix with regard to the
annual Delaware franchise tax and certain corporate filing fees in Delaware.
New Jersey law and Delaware law are similar with respect to the manner
in which directors may fix the terms of a series of preferred stock and the
terms which may be so fixed. Under both Delaware law and New Jersey law, the
certificate of incorporation may authorize the directors to fix the terms of a
series of preferred stock and provide for different voting or other rights
between series of preferred stock. Phoenix's certificate of incorporation
permits the board of directors to exercise broad discretion in fixing the terms
and rights of a series of preferred stock.
The Company has authorized four separate series of preferred stock,
designated as Series A Exchangeable Redeemable Preferred Stock (169,000 shares
authorized, 169,000 shares outstanding), $2.50 Series B Convertible Preferred
Stock (5,000,000 shares authorized, 401,000 shares outstanding), Series C
Redeemable Convertible Preferred Stock (91,000 shares authorized, 91,000 shares
outstanding), and Series D Exchangeable Redeemable Preferred Stock (17,500
shares authorized, 8,771 shares outstanding). Phoenix will authorize the same
four series of preferred stock in the same authorized amounts except that the
Series D Exchangeable Redeemable Preferred Stock will be authorized only in the
amount of the 8,771 outstanding shares; and each holder of such shares prior to
the Reincorporation Merger will receive a like share as a result of the
Reincorporation Merger, with certain changes to the terms of the shares
primarily to reflect the Reincorporation Merger and certain differences between
New Jersey and Delaware law. The terms of the four series of preferred stock to
be issued by Phoenix in the Reincorporation Merger are set forth in Annex II to
this proxy statement. Phoenix's Board of Directors will have the power to fix
the terms and rights of, and issue, additional series of preferred stock in the
future.
There are no substantive changes being made to the preferred stock
although certain typographical errors contained in the original certificates of
designation are being corrected, including erroneous references to particular
series of preferred stock. In addition, the certificates of designation for the
Series A, Series C and Series D Preferred Stock have been clarified to reflect
the original intent that in the case of a change of control, the redemption
price for such stock will be $101 per share and not 101% of par value.
Comparison Of Certain Other Charter Document Provisions
Phoenix's certificate of incorporation and by-laws are generally
similar to the Company's certificate of incorporation and by-laws, but there are
some differences. Some of these changes, such as the change in name and the
change in the number of authorized common shares, do not reflect differences
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between New Jersey and Delaware law, but have been determined by the Company's
board of directors to be desirable. Other differences are primarily the result
of differences between Delaware law and New Jersey law. Significant provisions
and certain important similarities and differences are discussed below.
No Preemptive Rights
Under New Jersey law and Delaware law, stockholders have preemptive
rights to purchase shares only if the certificate of incorporation so provides.
The Company's certificate of incorporation and Phoenix's certificate of
incorporation do not provide stockholders with preemptive rights.
Board of Directors; Committees
Under New Jersey law, a board of directors may consist of one or more
members as provided in the by-laws and subject to any provision contained in the
certificate of incorporation. The participation of directors with a majority
vote will constitute a quorum for the transaction of business unless the
certificate of incorporation or the by-laws provide otherwise. However, in no
event will the quorum be less than one-third of the votes of the board. The
Company's by-laws provide that the number of directors of the Company shall be
nine. Elected directors hold office until the next annual meeting and until
successors are elected and qualified, subject to earlier death, resignation,
incapacity or removal from office. Under the Company's by-laws, special meetings
of the Board of Directors may be called by the president or any two directors.
Phoenix's by-laws contain an equivalent provision. Pursuant to the Company's
by-laws, a majority of the entire board constitutes a quorum for the transaction
of business by the board of directors, and an act by a majority of the quorum of
directors constitutes an act of the Board of Directors. Phoenix's by-laws
contain an equivalent provision.
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Under Delaware law, a board of directors of a corporation may consist
of one or more members as provided in the by-laws, unless the certificate of
incorporation fixes the number of directors. A majority of the total number of
directors will constitute a quorum for the transaction of business unless the
certificate of incorporation or the by-laws require a greater number. However, a
quorum may not be less than one-third of the number of directors. The Phoenix
by-laws provide that the number of directors of Phoenix will be not less than
three or more than nine, with the exact number within that range to be
determined by the board from time to time. At the Effective Date of the
Reincorporation Merger, Phoenix will have the same six directors as the Company.
Each director will hold office until the annual meeting of the stockholders next
succeeding his election and until his successor is elected and qualified, or
until his prior death, resignation or removal. Action by a majority of the
directors present at a meeting at which a quorum is present constitutes action
by the entire Phoenix board.
New Jersey law allows the board of directors, by resolution adopted by
a majority of the entire board, to designate an executive committee or other
committee or committees, each consisting of one or more members, with the power
and authority (to the extent permitted by law) to act on behalf of the entire
board if the certificate or by-laws so provides. The Company's by-laws provide
that the Company's board shall not act through an executive committee or any
other committee, except a compensation committee and an audit committee, subject
to certain restrictions and requirements. Delaware law gives a board of
directors broad authority to establish committees. Under Phoenix's by-laws, the
board of directors of Phoenix may designate one or more committees, each
committee to consist of one or more directors. Any such committee, to the extent
provided in the resolution of the board of directors, shall have and may
exercise all the powers and authority of the board in the management of the
business and affairs of Phoenix, except that no committee shall have the power
or authority in reference to (i) approving or adopting, or recommending to the
stockholders, any action or matter expressly required by the Delaware General
Corporation Law to be submitted to stockholders for approval, or (ii) adopting,
amending or repealing any by-law of Phoenix. Because Delaware law generally does
not permit direct management of a corporation's affairs by its stockholders,
Phoenix's by-laws, unlike the Company's by-laws, do not include a provision
requiring a board recommendation as a pre-condition to certain stockholder
actions.
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Cumulative Voting
The Company's certificate of incorporation and by-laws do not provide
for cumulative voting in the election of directors, nor do Phoenix's certificate
of incorporation and by-laws. Therefore the stockholders of a majority of the
voting power of Phoenix will be entitled to elect all of the directors of
Phoenix.
Newly Created Directorships and Vacancies
Although New Jersey law permits any vacancy, however caused, to be
filled by a majority vote of the remaining directors, the Company's by-laws
provide that vacancies, however caused, including vacancies resulting from any
increase in the authorized number of directors, may be filled only by the
stockholders and not by the directors.
Delaware law specifically provides that, unless otherwise provided in a
corporation's certificate of incorporation or by-laws, vacancies and newly
created directorships may be filled by a majority vote of directors, even if
less than a quorum, or by a sole remaining director. The Phoenix by-laws provide
that, unless otherwise required by law or by board resolution, newly created
directorships or any vacancy on the board occurring for any reason may be filled
only by the directors and not by the stockholders. As a result of this change,
stockholders of Phoenix will have less control of the governance of Phoenix,
through its Board, than stockholders of the Company had.
Removal of Directors
Under New Jersey law, directors may be removed, subject to certain
qualifications, for cause or, unless otherwise provided in the certificate of
incorporation, without cause by an affirmative vote of stockholders entitled to
vote for the election of directors. The Company's by-laws provide that directors
may be removed by the stockholders with or without cause.
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Under Delaware law, directors may be removed by the stockholders,
subject to certain qualifications, with or without cause, by an affirmative vote
of a majority of the shares entitled to vote for the election of directors. The
Phoenix by-laws provide that any director may be removed, with or without cause,
by the stockholders.
Director Liability and Indemnification of Officers and Directors
Both New Jersey law and Delaware law contain provisions and limitations
regarding directors' liability and regarding indemnification by a corporation of
its officers, directors and employees.
New Jersey law permits a New Jersey corporation to include a provision
in its certificate of incorporation which eliminates or limits the personal
liability of a director or officer to the Company or its stockholders for
monetary damages for breach of fiduciary duties as a director or officer.
However, no such provision may eliminate or limit the liability of a director or
officer for any breach of duty based upon an act or omission (i) in breach of
the director's or officer's duty of loyalty to the corporation or its
stockholders, (ii) not in good faith or involving a knowing violation of law, or
(iii) resulting in receipt by such person of an improper personal benefit. Under
New Jersey law, corporations are also permitted to indemnify directors in
certain circumstances and required to indemnify directors under certain
circumstances. Under New Jersey law, a director, officer, employee or agent may,
in general, be indemnified by the Company if he has acted in good faith and in a
manner he reasonably believed to be in, or not opposed to, the best interests of
the corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. In addition, under New
Jersey law, corporations must indemnify a director to the extent the director
has been successful on the merits or otherwise. The Company's certificate of
incorporation requires the Company, to the extent permitted by law, to defend,
indemnify and hold harmless its directors and officers.
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Delaware law permits a corporation to include a provision in its
certificate of incorporation, which is included in Phoenix's certificate of
incorporation, which eliminates or limits the personal liability of a director
to the corporation or its stockholders for monetary damages for breach of
fiduciary duty. However, no such provision may eliminate or limit the liability
of a director (i) in the case of a breach of the director's duty of loyalty to
the corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) for the unlawful payment of dividends or unlawful stock purchase or
redemption or other violations of Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived an
improper personal benefit. Delaware law further provides that no such provision
can eliminate or limit the liability of a director for any act or omission
occurring prior to the date when such provision becomes effective. Under
Delaware law, a corporation has the power to indemnify its directors, officers,
employees and agents against judgments, settlements and expenses in any
litigation or other proceeding, if the person acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to a criminal proceeding, had no reasonable
cause to believe his conduct was unlawful. The indemnification provisions of
Delaware law require indemnification of a present or former director or officer
to the extent that he has been successful on the merits or otherwise in defense
of any action or claim. Delaware law also permits indemnification of expenses in
a derivative suit if the person acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, subject to court approval if the person is adjudged liable. The
Phoenix certificate of incorporation and by-laws generally require Phoenix to
indemnify and advance litigation expenses to its directors and officers to the
extent permitted by Delaware law.
Comparison Of Stockholder Rights Under The New Jersey Business
Corporation Act And The Delaware General Corporation Law
As noted above, following the reincorporation, your rights as
stockholders will cease to be governed by New Jersey law. The following
summarizes certain material differences between your rights as a stockholder of
a New Jersey corporation and your rights as a stockholder of a Delaware
corporation.
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Amendment Of Certificate Of Incorporation
The New Jersey Business Corporation Act ("NJBCA") provides that an
amendment to a corporation's certificate of incorporation may be made by board
action alone in regard to certain actions (for example, an amendment to effect a
share dividend). Other amendments to the certificate of incorporation require
the action of the board with the approval of stockholders holding a majority of
the voting stock entitled to vote thereon, unless the corporation's certificate
of incorporation requires a greater percentage. The Company's certificate of
incorporation does not require such greater percentage. However, pursuant to the
respective certificates of designation relating to each of the Company's four
series of preferred stock, certain amendments and other actions must be approved
by the holders of two-thirds (or, in the case of the Series B Preferred, 50%) of
the outstanding shares of each such series. Certain matters also must be
approved by the holders of two-thirds of the Series A and Series D Preferred
Stock, voting together as a single class.
The Delaware General Corporation Law ("DGCL") requires the approval of
stockholders holding a majority of the voting power of the outstanding stock of
the corporation (and, if applicable, a majority of the outstanding stock of each
class or series entitled to vote separately thereon) to amend the corporation's
certificate of incorporation, unless a higher vote is specified in the
certificate of incorporation. Phoenix's certificate of incorporation does not
require a higher vote. The series voting rights specified in the Company's
certificates of designation are included in each of the four certificates of
designation relating to the Phoenix preferred stock (attached hereto as Annex
II).
Amendments To By-laws
The NJBCA provides that a Board of Directors has the power to make,
alter and repeal a corporation's by-laws, unless such power is reserved to the
corporation's stockholders in the corporation's certificate of incorporation.
The Company's by-laws reserve that power to the stockholders. Under the DGCL,
the stockholders of a Delaware corporation and, if the certificate of
incorporation so provides, the board of directors, have the power to adopt,
amend or repeal a corporation's by-laws. Under Phoenix's certificate of
incorporation, the board of directors is expressly authorized to adopt, amend or
repeal Phoenix's by-laws. While this grant of authority to the board does not
divest the stockholders of their power to adopt, amend or repeal the Phoenix
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by-laws, it does place more corporate power in the hands of the board. Unlike
the Company's by-laws, Phoenix's by-laws do not provide that they are subject to
a certain Stockholder Agreement dated November 3, 1997.
Stockholder Proposals
Neither the DGCL nor the NJBCA explicitly require that stockholder
proposals be the subject of an advance notice to stockholders. Phoenix's
certificate of incorporation and by-laws are silent on the issue of advance
notice of stockholder proposals.
Special Meeting Of Stockholders
The NJBCA provides that a special meeting of stockholders may be called
by the president or the board of directors or any stockholder, director, officer
or other person as may be provided in the by-laws. Upon application of the
holder or holders of not less than 10% of all the shares entitled to vote at a
meeting, the Superior Court of New Jersey, for good cause shown, may order that
a special meeting be called. The DGCL provides that only the board of directors
or such person or persons as may be authorized by the certificate of
incorporation or by-laws may call special meetings of the stockholders. The
Company's by-laws provide that special meetings may be called by either the
board of directors or upon the request of the holders of not less than 10% of
the outstanding stock entitled to vote at such special meeting. Phoenix's
by-laws provide that only the President, the persons holding the Office of the
President, or the Board of Directors may order the calling of a special meeting
of stockholders, thus taking this corporate power away from the stockholders.
Management believes that this provision is in the best interests of the Company
since meetings called by dissident stockholders is potentially expensive and
disruptive to the Company.
Anti-Takeover Provisions
The NJBCA provides that any person making an offer to purchase in
excess of 10% (or such amount which, when aggregated with such person's present
holdings, exceeds 10% of any class of equity securities) of any corporation or
other issuer of securities organized under the laws of New Jersey must, twenty
days before the offer is made, file a disclosure statement with the target
company and with the Bureau of Securities of the Division of Consumer Affairs of
the New Jersey Department of Law and Public Safety (the "Bureau"). The takeover
bid may not proceed until after the receipt by the filing party of the Bureau's
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permission. Such permission may not be denied unless the Bureau, after a public
hearing, finds that (i) the financial condition of the offeror is such as to
jeopardize the financial stability of the target company or prejudice the
interests of any employees or security holders who are unaffiliated with the
offeror, (ii) the terms of the offer are unfair or inequitable to the security
holders of the target company, (iii) the plans and proposals which the offeror
has to make any material change in the target company's, business, corporate
structure, or management are not in the interest of the target company's
remaining security holders or employees, (iv) the competence, experience and
integrity of those persons who would control the operation of the target company
are such that it would not be in the interest of the target company's remaining
security holders or employees to permit the takeover, or (v) the terms of the
takeover bid do not comply with the provisions of Chapter 10A of the NJBCA.
Chapter 10A was added to the NJBCA in 1986 to protect stockholders and
other corporate "constituents." It generally provides that no resident domestic
corporation shall engage in any business combination with any interested
stockholder for a period of five years following that interested stockholder's
stock acquisition date unless the business combination is approved by the board
of directors prior to that stock acquisition date. An "interested stockholder"
is any person (other than the resident domestic corporation or its subsidiary)
that (i) is the beneficial owner directly or indirectly of 10% or more of the
voting power of the outstanding voting stock of the resident domestic
corporation or (ii) is an affiliate or associate of that resident domestic
corporation and, at any time within the five year period immediately prior to
the date in question, was a beneficial owner, directly or indirectly, of 10% or
more of the voting power of the then outstanding stock of that resident
corporation. A "beneficial owner" of stock is a person that, individually or
with or through any of its affiliates or associates (i) beneficially owns that
stock, directly or indirectly, (ii) has the right to acquire or vote that stock,
or (iii) has any agreement, arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of that stock with any other beneficial
owner thereof. An "affiliate" of a beneficial owner is a person that directly or
indirectly, through one or more intermediaries, controls, or is controlled by,
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or is under common control with, the beneficial owner. Accordingly, the NJBCA
gives the Company's board of directors a veto power over any "business
combination" proposed by one who directly or indirectly acquires 10% or more of
the Company's voting stock. The New Jersey definition of "business combinations"
includes any merger or consolidation.
With the exception of certain excluded categories of transactions, a
"business combination" is prohibited unless any one of the following three
conditions are satisfied: (1) the board of directors of the resident domestic
corporation must approve the business combination prior to the stock acquisition
date of the interested stockholder; (2) the holders of two-thirds of the voting
stock of the resident domestic corporation not beneficially owned by the
interested stockholder must approve the business combination by affirmative vote
at a meeting called for that purpose; or (3) (a) the stockholders of the
resident domestic corporation must receive the higher of (i) the highest price
paid for any shares of common stock of the resident domestic corporation paid by
the interested stockholder during the five years preceding the announcement date
or the date the interested stockholder became such, whichever is higher, or (ii)
the market value of the resident domestic corporation's common stock on the
announcement date or the interested stockholder's stock acquisition date,
whichever yields a higher price, plus, in either case, interest compounded
annually, (b) the holder of stock other than common stock receives a similarly
determined price, taking into account the highest preferential amount per share
to which the holders of such shares are entitled if there is a liquidation,
dissolution or winding up of the resident domestic corporation, plus any
preferential dividends to which they would be entitled that are not included in
the preferential amount, (c) the consideration to the stockholders is paid in
cash or in the same form that the interested stockholder used to acquire the
largest block of stock that he acquired, (d) the holders of all outstanding
stock not owned by the interested stockholder received the consideration
required by the preceding paragraphs in the business combination, and (e) the
interested stockholder did not become the beneficial owner of any additional
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shares of stock of the resident domestic corporation between his stock
acquisition date and the date of consummation of the business combination,
except (i) as part of the transaction that resulted in his becoming an
interested stockholder, (ii) by virtue of proportionate stock splits, dividends
or distributions not themselves constituting a business combination, (iii)
through a business combination meeting the conditions of paragraph (c) above, or
(iv) through purchase at a price that would have satisfied the requirements of
paragraphs (a), (b)and (c), above.
Delaware's anti-takeover provision, embodied in Section 203 of the
DGCL, provides that if a person acquires 15% or more of a corporation's voting
stock (thereby becoming an "interested stockholder") that person may not engage
in a wide range of transactions ("business combinations") with the corporation
for a period of three years following the date the person became an interested
stockholder unless (i) the board of directors approved either the business
combination or the transaction that resulted in the person acquiring such voting
stock prior to that acquisition date, (ii) upon consummation of the transaction
which resulted in the person becoming an interested stockholder, that person
owned at least 85% of the corporation's voting stock outstanding at the time the
transaction commenced (excluding shares owned by officers and directors and
shares owned by employee stock plans in which participants do not have the right
to determine confidentially whether shares will be tendered in a tender or
exchange offer), or (iii) the business combination is approved by the board of
directors and authorized by the affirmative vote (at an annual or special
meeting and not by written consent) of at least 66-2/3% of the outstanding
voting stock not owned by the interested stockholder. To determine whether a
stockholder is the "owner" of 15% or more of a corporation's voting stock under
Section 203, ownership is defined broadly to include beneficial ownership and
other indicia of control. A Delaware "business combination" is also defined
broadly as including (i) mergers and sales or other dispositions of 10% or more
of the assets of a corporation with or to an interested stockholder, (ii)
certain transactions resulting in the issuance or transfer to the interested
stockholder of any stock of the corporation or its subsidiaries, (iii) certain
transactions that would result in increasing the proportionate share of the
stock of the corporation or its subsidiaries owned by the interested
stockholder, and (iv) receipt in certain instances by the interested stockholder
of the benefit (except proportionately as a stockholder) of any loans, advances,
guarantees, pledges or other financial benefits.
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The restrictions on interested stockholders under the DGCL do not apply
under certain circumstances, including without limitation, the following: (i)
the corporation does not have a class of voting stock that is listed on a
national securities exchange, quoted on the NASDAQ Stock Market or held of
record by more than 2,000 stockholders; (ii) the corporation's original
certificate of incorporation contains a provision expressly electing not to be
governed by Section 203; (iii) if the corporation, by action of its
stockholders, adopts an amendment to its by-laws or certificate of incorporation
expressly electing not to be governed by Section 203, provided that the
amendment is approved by the affirmative vote of not less than a majority of the
outstanding shares entitled to vote and that the amendment will not be effective
until twelve months after its adoption and will not apply to any business
combination with a person who became an interested stockholder at or prior to
its adoption; or (iv) if the business combination is proposed before the
consummation or abandonment of and subsequent to the earlier of the public
announcement or the required notice of the proposed transaction which (a)
constitutes one of the transactions described in the following sentence; (b) is
with or by a person who either was not an interested stockholder during the
previous three years or who became an interested stockholder with the approval
of the corporation's board of directors; and (c) is approved or not opposed by a
majority of the members of the board of directors then in office (but not less
than one) who were directors before any person becoming an interested
stockholder during the previous three years or were recommended for election or
elected to succeed such directors by a majority of such directors. The proposed
transactions referred to in clause (a) of the preceding sentence are limited to
(i) a merger or consolidation of the corporation (except for a merger in which a
vote of the stockholders of the corporation is not required); (ii) a sale,
lease, exchange, mortgage, pledge, transfer or other disposition (in one
transaction or a series of transactions), whether as part of a dissolution or
otherwise, of assets of the corporation or of any direct or indirect
majority-owned subsidiary of the corporation (other than to any directly or
indirectly wholly-owned subsidiary or to the corporation) having an aggregate
market value equal to 50% or more of either the aggregate market value of all of
the assets of the corporation determined on a consolidated basis or the
aggregate market value of all the outstanding stock of the corporation; or (iii)
a proposed tender or exchange offer for 50% or more of the outstanding voting
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stock of the corporation. The corporation is required to give not less than
twenty days notice to all interested stockholders prior to the completion of any
of the transactions described above. At present, Phoenix is not authorized for
quotation on the NASDAQ Stock Market and does not have 2,000 shareholders of
record and therefore will NOT be subject to Section 203.
Mergers, Acquisitions And Other Transactions
In addition to the anti-takeover provisions discussed above, the NJBCA
provides that the sale of substantially all of a corporation's assets, through
mergers, consolidations, and any acquisitions which involve the issuance of
additional voting shares, such that the number of additional voting shares
issued exceeds 40% of the voting shares outstanding prior to the transaction,
must be approved by a majority of the shares (or, if applicable, a majority of
each class or series of shares) entitled to vote thereon. Under the DGCL,
mergers and consolidations require the approval of a majority of the shares
outstanding and entitled to vote thereon. Similarly, a sale of substantially all
of a Delaware corporation's assets must be approved by a majority of such shares
outstanding. However, the DGCL does not require stockholder approval for
acquisitions, whether or not additional shares are issued to effectuate the
transaction, so long as the corporation has sufficient available shares. The
DGCL allows a board of directors to issue additional shares of stock, up to the
amount authorized in a corporation's certificate of incorporation, unless the
certificate of incorporation otherwise provides, which Phoenix's certificate of
incorporation does not.
Dissolution
The NJBCA and the DGCL each provide that a corporation may be dissolved
voluntarily by (i) the written consent of all its stockholders or (ii) the
adoption by the corporation's board of directors of a resolution recommending
that the corporation be dissolved and submission of the resolution to a meeting
of stockholders at which meeting the resolution is adopted. The NJBCA requires
that to effect a dissolution by consent of stockholders, all stockholders
entitled to vote thereon must sign and file a certificate of dissolution. If
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dissolution is pursuant to the action of the board and stockholders, the
affirmative vote of the majority of votes cast (assuming that the number of
votes cast constitutes a quorum) by the stockholders entitled to vote thereon is
necessary. The DGCL provides for two means of dissolving a company. The board
may adopt a resolution dissolving the company subject to the approval of the
holders of a majority of the shares entitled to vote thereon, or the
stockholders may act without a board recommendation if all the stockholders
entitled to vote thereon consent in writing to the dissolution.
Dividends
The NJBCA prohibits a corporation from making a distribution to its
stockholders if, after giving effect to such distribution, the corporation would
be unable to pay its debts as they become due in the usual course of business or
the corporation's total assets would be less than its total liabilities. The
DGCL permits a corporation to pay dividends from any surplus, or, if a
corporation does not have a surplus, the DGCL provides that a dividend may be
paid from any net profits from the fiscal year in which the dividend is paid or
from the preceding fiscal year (if the payment will not reduce capital below the
amount of capital represented by all classes of shares having a preference upon
the distribution of assets).
Action Without A Meeting
Under the NJBCA, most actions which may be taken by stockholders at a
meeting may be taken without a meeting if all the stockholders entitled to vote
thereon give their written consent. However, if stockholder approval is required
to effectuate a merger, consolidation, acquisition or sale of assets, the
transaction may also be effectuated if all of the stockholders entitled to vote
concur in writing and all other stockholders are provided with advance notice
conforming to statutory requirements. The DGCL provides that, unless otherwise
provided by the certificate of incorporation, any action which may be taken at a
meeting of stockholders may be taken without a meeting, without prior notice and
without a vote, if the holders of stock having not less than the minimum number
of votes otherwise required to approve such action consent in writing. Phoenix's
certificate of incorporation does not restrict Phoenix's stockholders from
acting by written consent.
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Transactions With Directors
The DGCL provides that a contract or transaction between a corporation
and one or more of its directors or officers or an entity in which one or more
of its directors or officers has an interest is not void or voidable solely for
that reason if: (1) the material facts of the interest and the contract or
transaction are disclosed or known to the board or committee so deciding and the
contract or transaction is authorized in good faith by a majority vote of the
disinterested directors so acting, even if the number of disinterested directors
is less than a quorum; (2) such material facts are disclosed to the stockholders
and the stockholders approve the contract or transaction in good faith; or (3)
the contract or transaction is fair as to the corporation. New Jersey law
includes a similar provision governing transactions between a corporation and
one or more directors or entities in which a director has an interest. A recent
amendment to Section 122 of the DGCL further provides that a corporation may
renounce in its certificate of incorporation or by board action any interest or
expectancy of the corporation in a specified business opportunity or class or
category of business opportunities.
Office of the President
Pursuant to board resolution, the Company authorized the creation of an
Office of the President with all the powers and obligations of a president and
chief executive officer. Phoenix's by-laws authorize Phoenix to have either an
individual President or an Office of the President, as determined by the board
from time to time. The Phoenix board is authorized to fix the number of persons
who shall hold the Office of the President.
Loans To Directors/Officers/Employees
The NJBCA allows a corporation to lend money to, or guaranty an
obligation of, any director, officer or employee of the corporation or any
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subsidiary whenever the directors determine that the action may reasonably be
expected to benefit the corporation. However, a director who votes for the
action may be held jointly and severally liable if the loan or guaranty is made
contrary to the provisions of the NJBCA. The DGCL permits a corporation to lend
money to, or to guarantee an obligation of, an officer or other employee of the
corporation or any of its subsidiaries, including an officer or employee who is
also a director of the corporation or of its subsidiaries, whenever such loan or
guarantee may, in the judgment of the directors, reasonably be expected to
benefit the corporation.
Appraisal Rights
Under the NJBCA, dissenting stockholders who comply with certain
procedures are entitled to appraisal rights in a merger, consolidation or sale,
lease, exchange or other disposition of all or substantially all of the assets
of a corporation not in the usual or regular course of business. However,
appraisal rights are not provided, unless the certificate of incorporation
provides otherwise, when (i) the shares to vote on such transaction are listed
on a national securities exchange or held of record by not less than 1,000
holders (or stockholders receive in such transaction cash and/or securities
which are listed on a national securities exchange or held of record by not less
than 1,000 stockholders) or (ii) no vote of the corporation's stockholders is
required for the proposed transaction. The specific requirements for dissenting
shareholders to exercise their appraisal rights under the NJBCA are summarized
more fully below in "Rights of Dissenting Shareholders". Under the DGCL,
dissenting stockholders who follow prescribed statutory procedures are entitled
to appraisal rights in certain mergers or consolidations. Such appraisal rights
are not provided when (i) the shares of the corporation are listed on a national
securities exchange or designated as a national market system security by the
NASD or held of record by more than 2,000 stockholders and stockholders receive
in the merger shares of the surviving corporation or of any other corporation
the shares of which are listed on a national securities exchange or designated
as a national market system security by the NASD, or held of record by more than
2,000 stockholders or (ii) the corporation is the surviving corporation and no
vote of its stockholders is required for the merger.
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Repurchases Of Stock
The NJBCA prohibits a corporation from repurchasing or redeeming its
shares if (i) after giving effect to the repurchase or redemption, the
corporation would be unable to pay its debts as they become due in the usual
course of business or the corporation's total assets would be less than its
total liabilities, (ii) after giving effect to the repurchase or redemption, the
corporation would have no equity outstanding, (iii) the redemption or repurchase
price exceeded that specified in the securities acquired, or (iv) the repurchase
or redemption is contrary to any restrictions contained in the corporation's
certificate of incorporation. Under the DGCL, a corporation may repurchase or
redeem its shares only if the purchase does not impair its capital. However, a
corporation may redeem preferred stock from capital if such shares will be
retired upon redemption and the stated capital of the corporation is thereupon
reduced in accordance with the DGCL.
Compromises With Creditors And Stockholders
The DGCL law provides that a certificate of incorporation may contain a
provision allowing for a compromise or arrangement between a corporation and its
creditors or stockholders. Under such a provision, whenever such a compromise or
arrangement is proposed, a Delaware court may order a meeting for the purpose of
eliciting an agreement to the compromise or the arrangement which would be
binding on all such creditors and/or stockholders and the corporation. Phoenix's
certificate of incorporation does not contain such a provision.
Federal Income Tax Consequences of the Reincorporation Merger
The Company will not request a ruling from the United States Internal
Revenue Service about the federal income tax consequences of the Reincorporation
Merger. However, the Company believes that the Reincorporation Merger will
constitute a reorganization under Section 368 of the Internal Revenue Code, as
amended (the "Code"). Consequently, holders of the Common Shares will not
recognize any gain or loss for federal income tax purposes from the conversion
of their Common Shares into common shares of Phoenix. For federal income tax
purposes, a holder's aggregate basis in the shares of Phoenix received in the
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Reincorporation Merger will equal the holder's aggregate basis in the Common
Shares converted therefor and such holder's holding period for the Phoenix
common shares received in the Reincorporation Merger will include his holding
period in the Common Shares converted therefor.
Likewise, the Company will not recognize any gain or loss for federal
income tax purposes upon the transfer of its property to Phoenix pursuant to the
Reincorporation Merger. In addition, Phoenix will succeed to and take into
account of the earnings and profits, accounting methods, and other tax
attributes of the Company specified in Section 381(c) of the Code.
Holders of Common Shares should consult their own tax advisors as to
the application and effect of state, local and foreign income and other tax laws
on the conversion of their Common Shares into shares of the common stock of
Phoenix pursuant to the Reincorporation Merger.
Rights of Dissenting Stockholders
Chapter 11 of the NJBCA sets forth the rights of stockholders of the
Company who object to the Reincorporation Merger Agreement. The provisions of
Chapter 11 are summarized herein. However, this summary does not purport to be a
complete statement of Chapter 11, and a shareholder who may wish to dissent is
advised to review carefully, alone or with such shareholder's adviser, all of
Chapter 11 and, specifically, Section 11-2 thereof with respect to notice of
dissent. Any stockholder of the Company who does NOT vote in favor of the
Reincorporation Merger Agreement may be paid, in cash, the fair value of his
shares, provided each and every one of the following actions is strictly
complied with, within the time provided therefor:
1. Prior to September 28, 2000, the date of the taking of the
vote of the stockholders of the Company on the Reincorporation Merger, a
dissenting stockholder must file with the Company, addressed to the attention of
Richard Franks, Esq., Secretary of the Company, a written notice of dissent
therefrom, stating that the stockholder intends to demand payment for his shares
if the Reincorporation Merger occurs (a "Notice of Dissent"). The form of the
Notice of Dissent which may be given by nonconsenting shareholders is included
herewith as Annex IV.
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2. Within ten days after the Effective Date of the
Reincorporation Merger, Phoenix must give written notice ("Notice of Completion
of Transaction") of the Effective Date of such action, by certified mail, to
each stockholder who filed a written Notice of Dissent.
3. Within twenty days after the mailing of the Notice of
Completion of Transaction, any stockholder to whom Phoenix was required to give
such notice and who has filed timely a written Notice of Dissent, may make
written demand on Phoenix for the payment of the fair value of his shares.
4. Not later than twenty days after making such written demand
for payment, the dissenting stockholder must submit the certificate or
certificates representing his or her shares to Phoenix, addressed to the
attention of Richard Franks, Secretary, for notation thereon that such demand
has been made, whereupon such certificate or certificates will be returned to
the stockholder.
5. Not later than ten days following such twenty day written
demand period, if the dissenting stockholder has made such written demand,
Phoenix must mail to the dissenting stockholder the balance sheet and the
surplus statement of Phoenix as of the last available date (which shall not be
earlier than twelve months prior to the Effective Date of the Merger and a
profit and loss statement or statements for not less than a twelve month period
ending on the date of such balance sheet. This mailing may be accompanied by a
written offer from Phoenix to pay each dissenting stockholder his shares at a
specified price deemed by Phoenix to be the fair value thereof.
6. If the fair value of the shares is not agreed upon between
the dissenting stockholder and Phoenix within thirty days following the ten day
mailing period, the stockholder is entitled to serve upon Phoenix, not later
than thirty days after the expiration of the thirty day period available for
reaching agreement on the fair value, a demand that Phoenix commence an action
in the Superior Court of New Jersey for the determination of the fair value of
the stockholder's Phoenix shares.
7. If Phoenix fails to commence such action within thirty days
following receipt of the dissenting stockholder's demand that it do so, the
stockholder will be entitled to commence such an action in the name of Phoenix
not later than sixty days following the expiration of the thirty day period
within which Phoenix may commence such action.
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8. The New Jersey Superior Court retains jurisdiction of all
actions to determine fair value, including the power to appoint an appraiser to
assist in such determination.
9. Any judgment of the New Jersey Superior Court shall include
interest at an equitable rate determined by the Court from the date of the
dissenter's demand for payment. The Court also has the power to apportion and
assess the costs of the court proceeding between the Company and the
dissenter(s) on an equitable basis.
10. A dissenting shareholder may request the withdrawal of his
demand for payment of the fair value of his shares at any time, but such
withdrawal is effective only with the written consent of the Company.
11. The enforcement by a dissenting shareholder of his right
to receive payment for his shares shall preclude such dissenting shareholder
from enforcing any other right to which he might otherwise be entitled by virtue
of share ownership, except claims based upon alleged, unlawful or fraudulent
acts by the Company relating to such dissenting shareholder or claims that the
Company exceeded its statutory power.
12. A dissenting shareholder who accepts payment of the fair
value of his shares ceases to have any rights of a shareholder of the Company
(and, accordingly, of Phoenix) from the time he makes his demand for payment.
13. A dissenting shareholder who, with the Company's consent,
withdraws his demand for payment, continues to be a shareholder of the Company
(and, therefore, of Phoenix).
A negative vote on the Reincorporation Merger Agreement does not
constitute a "written objection" required to be filed by an objecting
stockholder. Failure by a stockholder to vote against the Reincorporation Merger
Agreement will not, however, constitute a waiver of rights under Chapter 11 of
the NJBCA provided that a written objection is properly filed and such
stockholder has not voted in favor of the Reincorporation Merger Agreement.
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Under the Reincorporation Merger Agreement, the Board of Directors may
abandon the Reincorporation Merger, even after stockholder approval, if for any
reason the board determines that it is inadvisable to proceed, including
considering the number of shares for which appraisal rights have been exercised
and the cost to the Company thereof.
A vote for the Reincorporation Merger Agreement will constitute
specific stockholder approval for the adoption of the Reincorporation Merger and
all other transactions related to the Reincorporation Merger.
The board of directors of the Company recommends that stockholders vote
"FOR" the approval of the Reincorporation Merger Agreement, the change of name
and the increase in the number of authorized common shares.
VOTE NEEDED FOR APPROVAL
Under New Jersey law, the holders of shares entitled to cast a majority
of the votes at a meeting shall constitute a quorum at such meeting. Chapter 10
of the NJBCA provides that a plan of merger for companies organized after
December 31, 1968 (which includes the Company) must be approved by the
affirmative vote of a majority of the votes cast by the holders of shares
entitled to vote thereon and, in addition, if any class or series is entitled to
vote thereon as a class, the affirmative vote of a majority of the votes cast in
each class vote. Similarly, the change of name and the increase in authorized
common shares must be approved by a majority of the votes cast by the holders of
the Company's common shares. All officers, directors and record owners of 5% or
more of the Company's Common Shares, who together own 33,611,480 Common Shares,
or 50.0% of the Company's outstanding common shares, have indicated that they
will vote FOR the Reorganization Merger Agreement, the change of name and the
increase in authorized common shares.
OTHER BUSINESS
The Board of Directors is not aware of any other business which may
come before the meeting. However, if any other matters do properly come before
the meeting, it is the intention of the persons named in the accompanying form
of proxy, pursuant to discretionary authority conferred thereby, to vote the
proxy in accordance with their best judgment on such matters.
FINANCIAL STATEMENTS
The consolidated balance sheet, consolidated income statement and other
financial statements together with the notes thereto for the year ended April
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30, 2000 are incorporated herein, and are included in the Company's Year 2000
Annual Report which accompanies this proxy statement.
The Company's financial statements for its past two fiscal years ended
April 30, 2000 and April 30, 1999, respectively, and the Management Discussion
and Analysis of Financial Condition and Results of Operations, Description of
Business and Recent Market Price of the Company's Common Stock, all as set forth
in the Company's Form 10-KSB for the fiscal year ended April 30, 2000, all as
filed with the United States Securities and Exchange Commission, are
incorporated by reference herein.
AVAILABLE INFORMATION
A copy of the Company's Form 10-KSB annual report for the year ended
April 30, 2000 as filed with the Securities and Exchange Commission is included
with this Proxy Statement.
SHAREHOLDER PROPOSALS
Any shareholder intending to present a proposal at the 2001 Annual
Meeting must submit that proposal to the Company no later than February 28, 2001
for consideration for inclusion in the Company's 2001 proxy statement and form
of proxy.
APPROVAL OF DIRECTORS
The contents and the sending of this proxy statement have been approved
by the Board of Directors of the Company.
DATED the 7th day of September, 2000.
"Richard Franks"
"Secretary"
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COMPOST AMERICA HOLDING COMPANY, INC.
One Gateway Center, 25th floor, Newark, New Jersey 07102
FORM OF PROXY FOR USE AT THE ANNUAL MEETING OF SHAREHOLDERS
September 28, 2000
The undersigned shareholder of COMPOST AMERICA HOLDING COMPANY, INC. (the
"Company") hereby appoints Marvin Roseman, Office of the President of the
Company, or, failing him, Richard Franks, Esq., Secretary of the Company, or
instead of either of the foregoing
-------------------------------------------------------------------------------
as nominee of the undersigned to attend and act for and on behalf of the
undersigned at the annual meeting of the shareholders of the Company to be held
on Thursday, the 28th day of September, 2000, and at any adjournment or
adjournments thereof, to the same extent and with the same power as if the
undersigned was personally present at the said meeting or such adjournment or
adjournments thereof and without limiting the generality of the power hereby
conferred, the proxy nominees designated above are directed, with regard to the
shares registered in the name of the undersigned, to:
1. (a) VOTE_____OR WITHHOLD FROM VOTING_____ OR VOTE AGAINST_____ in the
election of Charles Carson as a director of the Company (Note 1).
(b) VOTE_____OR WITHHOLD FROM VOTING_____ OR VOTE AGAINST_____ in the
election of Christopher Daggett as a director of the Company (Note 1).
(a) VOTE_____OR WITHHOLD FROM VOTING_____ OR VOTE AGAINST_____ in the
election of Michael Goodman as a director of the Company (Note 1).
(a) VOTE_____OR WITHHOLD FROM VOTING_____ OR VOTE AGAINST_____ in the
election of Brian Marshall as a director of the Company (Note 1).
(a) VOTE_____OR WITHHOLD FROM VOTING_____ OR VOTE AGAINST_____ in the
election of Peter Petrillo as a director of the Company (Note 1).
(a) VOTE_____OR WITHHOLD FROM VOTING_____ OR VOTE AGAINST_____ in the
election of Marvin Roseman as a director of the Company (Note 1).
2. VOTE_____OR WITHHOLD FROM VOTING_____OR VOTE AGAINST_____ for the
re-appointment of Rothstein, Kass & Company, P.C., as independent accountants to
audit the books of account of the Company for the current fiscal year (Note 1).
<PAGE>
3. (a) VOTE FOR_____OR VOTE AGAINST_____OR ABSTAIN FROM VOTING_____ the merger
of the Company into its newly-formed, wholly-owned Delaware subsidiary (the
"Reincorporation Merger") pursuant to the Reincorporation Merger Agreement, as
discussed in the Proxy Statement (Note 1), and, only if the Reincorporation
Merger Agreement is approved,
(b) VOTE FOR_____OR VOTE AGAINST_____OR ABSTAIN FROM VOTING_____ the change
in the Company's name, as a result of the Reincorporation Merger, from Compost
America Holding Company, Inc., a New Jersey corporation, to Phoenix Waste
Services Company, Inc., a Delaware corporation, as discussed in the Proxy
Statement (Note 1), and
(c) VOTE FOR_____OR VOTE AGAINST_____OR ABSTAIN FROM VOTING_____ the change
in the Company's authorized common shares, as a result of the Reincorporation
Merger, from 100,000,000 in Compost America Holding Company, Inc. to 200,000,000
in Phoenix Waste Services Company, Inc., as discussed in the Proxy Statement
(Note 1).
If any amendments or variations to the matters above referred to or if any other
matters identified in the notice of meeting are proposed at the meeting or any
adjournment or adjournments thereof or if any other matters which are not now
known to Management should properly come before the meeting or any adjournment
or adjournments thereof, this proxy confers discretionary authority on the
person voting the proxy to vote on such amendments or variations or such other
matters in accordance with the best judgment of such person.
THIS PROXY IS SOLICITED BY MANAGEMENT AND BY THE BOARD OF DIRECTORS OF THE
COMPANY. A SHAREHOLDER HAS THE RIGHT TO APPOINT A PERSON (WHO NEED NOT BE A
SHAREHOLDER) TO REPRESENT HIM AND TO ATTEND, VOTE AND ACT FOR HIM AND ON HIS
BEHALF AT THE MEETING OTHER THAN THE PROXY NOMINEE DESIGNATED ABOVE AND MAY
EXERCISE SUCH RIGHT BY INSERTING THE NAME OF A PERSON HE NOMINATES AS PROXY
NOMINEE IN THE BLANK SPACE PROVIDED ABOVE FOR THAT PURPOSE.
A shareholder who has submitted a proxy for the meeting may revoke it at any
time before it is voted at the meeting.
DATED , 2000. (Note 2)
------------------- ------------------------
Name of Shareholder Signature of Shareholder
(Please Print)
NOTES:
1. In the event that no specification has been made with respect to voting
for or voting against or withholding from voting on the election of
directors (Item 1) on the appointment of auditors (Item 2) or on the
merger of the Company, the change of name and the increase in the
number of authorized common shares (Item 3), the proxy nominee is
instructed to VOTE the shares represented by this form of proxy FOR
Items 1, 2 and 3.
2. This form of proxy must be dated and signed by the shareholder or his
attorney authorized in writing or, if the shareholder is a corporation,
under its corporate seal, or by an officer or attorney thereof duly
authorized. If this form of proxy is not dated in the space provided
above, it will be deemed to bear the date on which this form of proxy
is mailed to the shareholder.
<PAGE>
Annex I
AGREEMENT AND PLAN OF MERGER
BETWEEN
COMPOST AMERICA HOLDING COMPANY, INC.
(A NEW JERSEY CORPORATION)
AND
PHOENIX WASTE SERVICES COMPANY, INC.
(A DELAWARE CORPORATION)
AGREEMENT AND PLAN OF MERGER (this "Merger Agreement") made by and
between Compost America Holding Company, Inc., a New Jersey corporation
("Compost"), and Phoenix Waste Services Company, Inc., a Delaware corporation
and a wholly-owned subsidiary of Compost ("Phoenix"), which corporations are
sometimes referred to herein individually as a "Constituent Corporation" and
collectively as "Constituent Corporations."
W I T N E S S E T H:
WHEREAS, the Board of Directors of Compost has determined to
reincorporate Compost in the State of Delaware under the name Phoenix Waste
Services Company, Inc. (the "Reincorporation");
WHEREAS, the Board of Directors of each of Compost and Phoenix has
determined to implement the Reincorporation by effecting the merger (the
"Merger") of Compost with and into Phoenix (hereinafter, in such capacity,
sometimes referred to as the "Surviving Corporation") as permitted by the
Delaware General Corporation Law and the New Jersey Business Corporation Act,
under and pursuant to the terms hereinafter set forth;
WHEREAS, as a result of the Merger, each share of stock of Compost
issued and outstanding immediately prior to the Merger will be converted into a
like share of stock of Phoenix;
WHEREAS, the Board of Directors of each of Compost and Phoenix has
determined that this Merger Agreement is advisable and in the best interests of
each of the Constituent Corporations and its stockholders; and
WHEREAS, it is intended that the Merger will qualify as a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder;
<PAGE>
NOW THEREFORE, the parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.1. The Merger. Upon the terms and subject to the conditions of
this Merger Agreement and in accordance with the Delaware General Corporation
Law and the New Jersey Business Corporation Act, at the Effective Time, as
hereinafter defined, Compost shall be merged with and into Phoenix. As a result
of the Merger, the separate corporate existence of Compost shall cease and
Phoenix shall continue as the surviving corporation of the Merger and shall
continue the name "Phoenix Waste Services Company, Inc." This Merger Agreement
shall constitute the "plan of merger" required by section 14A:10-1 of the New
Jersey Business Corporation Act.
Section 1.2. Effective Time. The effective time and date of the Merger,
herein referred to as the "Effective Time," shall be the time at which an
appropriate Certificate of Merger relating to the Merger is filed in the office
of the Secretary of State of the State of Delaware in accordance with the
provisions of Section 252 of the Delaware General Corporation Law, or such later
time as is determined by Compost and Phoenix and stated in such Certificate of
Merger.
Section 1.3. Effects of the Merger. At the Effective Time, the separate
existence of Compost shall cease, and the Surviving Corporation shall succeed,
without other transfer, to all the rights and property of Compost and shall be
subject to all the debts, liabilities and obligations of Compost as provided
under applicable law.
Section 1.4. Directors and Officers. The directors and officers of
Phoenix in office immediately prior to the Effective Time shall be the directors
and officers of the Surviving Corporation from and after the Effective Time, in
each case until their respective successors are duly elected or appointed and
qualified.
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<PAGE>
ARTICLE II
CONVERSION OF SECURITIES
Section 2.1. Effect on Capital Stock. At the Effective Time, by virtue
of the Merger and without any action on the part of Compost or Phoenix or their
respective stockholders:
(a) Cancellation of Phoenix Stock. Each share of stock of
Phoenix issued and outstanding immediately prior to the Effective Time shall be
canceled and cease to exist without being converted into any stock or other
consideration whatsoever.
(b) Effect of Merger on Compost Stock. Each share of stock of
Compost issued and outstanding or held by Compost immediately prior to the
Effective Time, other than Dissenting Shares (as defined hereinafter), shall be
converted into the following (the "Merger Consideration"):
(i) Common Stock. Each share of the common stock, no par
value per share, of Compost shall be converted into one share of common
stock, $.001 par value per share, of Phoenix;
(ii) Series A Exchangeable Redeemable Preferred Stock. Each
share of the Series A Exchangeable Redeemable Preferred Stock, no par
value per share, of Compost shall be converted into one share of Series
A Exchangeable Redeemable Preferred Stock, $.001 par value per share, of
Phoenix;
(iii) $2.50 Series B Convertible Preferred Stock. Each share
of the $2.50 Series B Convertible Preferred Stock, no par value per
share, of Compost shall be converted into one share of $2.50 Series B
Convertible Preferred Stock, $.001 par value per share, of Phoenix;
(iv) Series C Redeemable Convertible Preferred Stock. Each
share of the Series C Redeemable Convertible Preferred Stock, no par
value per share, of Compost shall be converted into one share of Series
C Redeemable Convertible Preferred Stock, $.001 par value per share, of
Phoenix; and
(v) Series D Exchangeable Redeemable Preferred Stock. Each
share of the Series D Exchangeable Redeemable Preferred Stock, no par
value per share, of Compost shall be converted into one share of Series
D Exchangeable Redeemable Preferred Stock, $.001 par value per share, of
Phoenix.
Section 2.2. Appraisal. Notwithstanding anything in this Merger
Agreement to the contrary, each share of stock of Compost issued and outstanding
immediately prior to the Effective Time and held by a person (a "Dissenting
Stockholder") who
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<PAGE>
is entitled to appraisal rights under the New Jersey Business Corporation Act
and who complies with all the applicable provisions of the New Jersey Business
Corporation Act concerning the right of stockholders to seek appraisal of their
shares ("Dissenting Shares") shall not be converted as described in this Article
II but shall instead become the right to receive such consideration as may be
determined to be due to such Dissenting Stockholder pursuant to the laws of the
State of New Jersey.
Section 2.3. Stock Certificates. From and after the Effective Time, all
of the outstanding stock certificates which immediately prior thereto
represented shares of common stock or preferred stock of Compost shall be deemed
for all purposes to evidence ownership of and to represent the shares of Phoenix
into which the Compost shares represented by such certificates have been
converted as provided herein. The registered owner on the books and records of
Phoenix of any such outstanding stock certificate shall, unless and until such a
certificate shall have been surrendered for transfer or otherwise to Phoenix or
its transfer agent, have and be entitled to exercise any voting and other rights
with respect to and to receive any dividends or other distributions on the
shares of Phoenix evidenced by such outstanding certificate. Upon the submission
to Phoenix or its transfer agent of any such stock certificates for transfer, or
upon the request of any registered owner of shares and submission of the subject
stock certificates to Phoenix or its transfer agent, such transferee or owner
shall be issued new stock certificates of Phoenix evidencing the subject shares.
Upon the request of any registered owner, Phoenix will, without charge, furnish
such owner a statement of the powers, designations, preferences and relative,
participating, optional, or special rights of each class of stock or series
thereof that Phoenix is authorized to issue, and of the qualifications,
limitations or restrictions of such preferences and/or rights. Any request for
new stock certificates will be subject to standard stock transfer requirements
including proper endorsement, signature guarantee, if required, and payment of
applicable taxes.
Section 2.4. Compost Stock Options and Warrants. As soon as practicable
following the date of this Agreement and prior to the Effective Time, Compost
and Phoenix shall take such actions as may be required to adjust the terms of
all outstanding stock options and warrants of Compost (respectively the "Compost
Options" and "Compost Warrants"), whether vested or unvested, as necessary to
provide that, at the Effective Time, each Compost Option and each Compost
Warrant outstanding immediately prior thereto shall be amended and converted
into an option or warrant, as the case may be, to acquire, on the same terms and
conditions as were applicable to such Compost Option or Compost Warrant, the
same number and type of shares of Phoenix for the same purchase price payable
under the terms of such Compost Option or Compost Warrant (each Compost Option
or Compost Warrant, as so adjusted, an "Adjusted Option" or "Adjusted Warrant"),
and shall make such other changes to any option plans, warrant agreements and
arrangements of Compost as Compost and Phoenix may agree are appropriate to give
effect to the Merger. At the Effective Time and by virtue of the Merger, each
Compost Option and each Compost Warrant outstanding at the Effective Time shall
be converted into an Adjusted Option or Adjusted Warrant, as the case may be, in
accordance with this Section 2.4.
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<PAGE>
Section 2.5. Compost Employee Benefit Plans. From and after the
Effective Time, Phoenix shall assume all obligations of Compost under any and
all employee benefit plans in effect immediately prior thereto, and shall adopt
and continue in effect all such plans upon the same terms and conditions as were
in effect immediately prior to the Merger, with such changes as Compost and
Phoenix may agree are appropriate to give effect to the Merger.
ARTICLE III
CERTIFICATE OF INCORPORATION AND BY-LAWS
Section 3.1. Certificate of Incorporation. The Certificate of
Incorporation of Phoenix shall be unaffected by the Merger, and, upon the
Effective Time, shall continue in effect as the Certificate of Incorporation of
the Surviving Corporation, until amended or repealed in accordance with the
provisions thereof and of applicable law.
Section 3.2. By-laws. The By-laws of Phoenix shall be unaffected by the
Merger, and, upon the Effective Time, shall continue in effect as the By-laws of
the Surviving Corporation, until amended or repealed in accordance with the
provisions thereof and of applicable law.
ARTICLE IV
AMENDMENT AND TERMINATION
Section 4.1. Amendment. To the fullest extent permitted by applicable
law, this Merger Agreement may be amended by mutual consent of the Boards of
Directors of the Constituent Corporations at any time prior to the Effective
Time, notwithstanding any approval of this Merger Agreement by the stockholders
of either or both of the Constituent Corporations.
Section 4.2. Termination. To the fullest extent permitted by applicable
law, this Merger Agreement may be terminated, and the Merger herein provided for
may be abandoned, by mutual consent of the Boards of Directors of the
Constituent Corporations at any time prior to the Effective Time,
notwithstanding any approval of this Merger Agreement by the stockholders of
either or both of the Constituent Corporations.
IN WITNESS WHEREOF, this Merger Agreement, having first been duly
approved by the respective Boards of Directors of each Constituent Corporation,
is hereby executed on behalf of each Constituent Corporation by a duly
authorized officer thereof, this _____ day of ____________, 2000.
COMPOST AMERICA HOLDING COMPANY, INC.
(A NEW JERSEY CORPORATION)
By:
-----------------------------------
Name:
Office:
PHOENIX WASTE SERVICES COMPANY, INC.
(A DELAWARE CORPORATION)
By:
-----------------------------------
Name:
Office:
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<PAGE>
Annex II
CERTIFICATE OF INCORPORATION
OF
PHOENIX WASTE SERVICES COMPANY, INC.
FIRST: The name of the corporation is Phoenix Waste Services Company,
Inc. (hereinafter referred to as the "Corporation").
SECOND: The address of the registered office of the Corporation in the
State of Delaware is 1201 North Market Street, Post Office Box 1347, in the City
of Wilmington, County of New Castle. The name of the registered agent of the
Corporation at that address is Delaware Corporation Organizers, Inc.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the Delaware General
Corporation Law.
FOURTH: A. The total number of shares of all classes of stock which the
Corporation shall have authority to issue is Two Hundred Twenty-Five Million
(225,000,000), consisting of Two Hundred Million (200,000,000) shares of Common
Stock, par value $.001 per share (the "Common Stock"), and Twenty-Five Million
(25,000,000) shares of Preferred Stock, par value $.001 per share (the
"Preferred Stock").
B. The board of directors is authorized, subject to any
limitations prescribed by law, to provide for the issuance of shares of
Preferred Stock in series, and by filing a certificate pursuant to the
applicable law of the State of Delaware (such certificate being hereinafter
referred to as a "Preferred Stock Designation"), to establish from time to time
the number of shares to be included in each such series, and to fix the
designation, powers, preferences, and rights of the shares of each such series
and any qualifications, limitations or restrictions thereof. The number of
authorized shares of Preferred Stock may be increased or decreased (but not
below the number of shares thereof then outstanding) by the affirmative vote of
the holders of a majority of the Common Stock, without a vote of the holders of
the Preferred Stock, or of any series thereof, unless a vote of any such holders
is required pursuant to the terms of any Preferred Stock Designation.
FIFTH: The following provisions are inserted for the management of the
business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
A. The business and affairs of the Corporation shall be
managed by or under the direction of the board of
<PAGE>
directors. In addition to the powers and authority expressly conferred
upon them by statute or by this Certificate of Incorporation or the
by-laws of the Corporation, the directors are hereby empowered to
exercise all such powers and do all such acts and things as may be
exercised or done by the Corporation.
B. The directors of the Corporation need not be elected by
written ballot unless the by-laws so provide.
C. The board of directors is expressly empowered to adopt,
amend or repeal by-laws of the Corporation.
SIXTH: A director of the Corporation shall not be personally liable to
the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit. If the Delaware General Corporation Law is amended to
authorize corporate action further eliminating or limiting the personal
liability of directors, then the liability of a director of the Corporation
shall be eliminated or limited to the fullest extent permitted by the Delaware
General Corporation Law, as so amended.
To the fullest extent permitted by the Delaware General Corporation Law,
the Corporation shall indemnify all persons who, from time to time, are serving
or have served as directors or officers of the Corporation, subject to such
limitations as may be provided in the by-laws of the Corporation with respect to
indemnification in connection with a proceeding (or part thereof), other than a
proceeding to enforce rights to indemnification, which was initiated by such
person and not authorized by the board of directors.
Any repeal or modification of this Article by the stockholders of the
Corporation shall not adversely affect any right or protection of a director of
the Corporation existing at the time of such repeal or modification.
SEVENTH: The Corporation reserves the right to amend or repeal any
provision contained in this Certificate of Incorporation in the manner
prescribed by the laws of the State of Delaware and all rights conferred upon
stockholders are granted subject to this reservation.
2
<PAGE>
EIGHTH: The name and mailing address of the incorporator is:
Delaware Corporation Organizers, Inc.
P.O. Box 1347
Wilmington, Delaware 19899
I, THE UNDERSIGNED, being the incorporator, for the purpose of forming a
corporation under the laws of the State of Delaware, do make, file and record
this Certificate of Incorporation, and, accordingly, have hereto set my hand
this 28th day of August, 2000.
DELAWARE CORPORATION ORGANIZERS, INC.
----------------------------------------
By: Cynthia M. Caskey
Vice President
3
<PAGE>
Annex II
CERTIFICATE OF DESIGNATION
OF
SERIES A EXCHANGEABLE REDEEMABLE PREFERRED STOCK
(Par Value $.001 Per Share)
OF
PHOENIX WASTE SERVICES COMPANY, INC.
Phoenix Waste Services Company, Inc., a Delaware corporation
(hereinafter called the "Company"), hereby certifies that the following
resolution was adopted by the Board of Directors of the Company pursuant to
Section 151 of the Delaware General Corporation Law at a meeting duly called and
held on _________, 2000:
RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors of this Company, in accordance with the provisions of the
Certificate of Incorporation of the Company, the Board of Directors hereby
creates a series of preferred stock, par value $.001 per share, of the Company
and hereby states the designation and number of shares, and fixes the relative
rights, preferences, and limitations thereof as follows:
1. Designation and Rank.
---------------------
The designation of such series of the preferred stock shall be the
Series A Exchangeable Redeemable Preferred Stock, par value $.001 per share (the
"Series A Preferred Stock"). The number of shares of Series A Preferred Stock
(the "Shares") shall be One Hundred Sixty-Nine Thousand. The Series A Preferred
Stock shall rank (i) prior to the common stock, par value $.001 per share, of
the Company (the "Common Stock"), (ii) on a parity with all shares of the
Company's Series C Convertible Redeemable Preferred Stock, par value $.001 per
share (the "Series C Preferred Stock") and with all shares of the Company's
Series D Exchangeable Redeemable Preferred Stock, par value $.001 per share (the
"Series D Preferred Stock"), (iii) subordinate and junior to all indebtedness of
the Company now or hereafter existing, and (iv) prior to the $2.50 Series B
Convertible Preferred Stock, par value $.001 per share (the "Series B Preferred
Stock"), as to liquidation and other payment rights as provided in Section 4(d)
and to any other class or series of capital stock of the Company hereafter
created (unless it specifically, by its terms, ranks on a parity with the Series
A Preferred Stock) (each such junior class or series of capital stock and the
Common Stock being hereinafter referred to as the "Junior Stock"), in each case
as to dividends and distributions of assets upon liquidation, dissolution or
winding up of the Company, whether voluntary or involuntary.
<PAGE>
2. Cumulative Dividends; Priority.
-------------------------------
(a) The holders of record of shares of Series A Preferred Stock are
entitled to a cumulative noncompounded dividend equal to 8% per annum, payable
when declared by the Company's Board of Directors, and, except for any
redemption provided in that certain Sharing Agreement dated March 31, 2000 by
and among the Company, Wasteco Ventures Limited and Robert J. Longo, as amended
(the "Sharing Agreement"), upon any exchange or redemption of the Series A
Preferred Stock. Dividends shall be payable semi-annually by the Company on June
30th and December 31st of each year. Through November 3, 2004, dividends on the
Series A Preferred Stock may be paid either in cash or, at the election of the
Company, by delivery of additional shares of Common Stock having an aggregate
"Market Value" (as hereinafter defined) equal to the amount of such dividend, or
in any combination of cash and shares of Common Stock. For purposes of dividend
payments, each share of Common Stock will be deemed to have a "Market Value"
equal to ninety percent (90%) of the "Average Share Price" as defined in Section
5(a) for the ten (10) consecutive trading days preceding the dividend payment
date. Dividends on shares of the Series A Preferred Stock will be cumulative on
a daily basis from the date of initial issuance of such shares of Series A
Preferred Stock. Dividends will be payable, in arrears, to holders of record as
they appear on the stock books of the Company on such record dates (such record
dates being not more than 60 days nor less than 10 days preceding the relevant
payment date), as shall be fixed by the Board of Directors. The amount of
dividends payable for each full dividend period shall be computed by dividing
the annual dividend payment by two. The amount of dividends payable for the
initial dividend period or any period shorter or longer than a full dividend
period shall be calculated on the basis of a 360-day year of twelve 30-day
months. No dividends may be declared or paid or set apart for payment on any
stock on a parity with the Series A Preferred Stock with regard to the payment
of dividends unless there shall also be or have been declared and paid or set
apart for payment on the Series A Preferred Stock like dividends, for all
dividend payment periods of the Series A Preferred Stock ending on or before the
dividend payment date of such parity stock, ratably in proportion to the
respective amounts of dividends (x) accumulated and unpaid or payable on such
parity stock, on the one hand, and (y) accumulated and unpaid through the
dividend payment period or periods of Series A Preferred Stock next preceding
such dividend payment date, on the other hand.
Except as set forth in the preceding sentence, unless full cumulative
dividends on the Series A Preferred Stock have been paid, no dividends (other
than in Common Stock of the Company) may be paid or declared or set aside for
payment or other distribution made, upon the Common Stock or any other Junior
Stock of the Company or stock on a parity with the Series A Preferred Stock as
to dividends, nor may any Common Stock or any other Junior Stock or parity stock
of the Company, except as provided in the Sharing Agreement, be redeemed,
purchased or
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<PAGE>
otherwise acquired for any consideration (or any payment be made to or available
for a sinking fund for the redemption of any shares of such stock); provided,
that any such Junior Stock or parity stock may be converted into or exchanged
for stock of the Company ranking junior to the Series A Preferred Stock as to
dividends.
3. Voting Rights.
--------------
(a) The Series A Preferred Stock shall have the following class
voting rights. So long as any shares of the Series A Preferred Stock remain
outstanding, the Company shall not, without the affirmative vote or consent of
the holders of at least sixty-six and 2/3 percent of the shares of the Series A
Preferred Stock outstanding at the time, given in person or by proxy, either in
writing or at a meeting, in which the holders of the Series A Preferred Stock
vote separately as a class: (i) authorize, create or issue (other than the
shares of Series C Preferred Stock and Series D Preferred Stock outstanding on
the date of the filing of this Certificate of Designation), or increase the
authorized or issued amount of any class or series of stock ranking prior to or
on a parity with the Series A Preferred Stock, with respect to payment of
dividends or the distribution of assets on liquidation, dissolution or winding
up; (ii) amend, alter or repeal the provisions of the Series A Preferred Stock,
whether by merger, consolidation or otherwise, so as to affect materially and
adversely any right, preference, privilege or voting power of the Series A
Preferred Stock; provided, however, that any creation and issuance of other
series of Junior Stock shall not be deemed to materially and adversely affect
such rights, preferences, privileges or voting powers; (iii) repurchase, or pay
cash dividends on, shares of the Company's Junior Stock; provided, that
dividends may be paid on Junior Stock so long as at the time of such payment (A)
all dividends on the Series A Preferred Stock shall have been paid in full, and
(B) if dividends on Junior Stock are payable in cash, all dividends on the
Series A Preferred Stock thereafter paid shall similarly be paid in cash, or
(iv) amend the Certificate of Incorporation or By-Laws of the Company so as to
affect materially and adversely any right, preference, privilege or voting power
of the Series A Preferred Stock; provided, however, that any creation and
issuance of other series of Junior Stock shall not be deemed to materially and
adversely affect such rights, preferences, privileges or voting powers.
(b) Except as provided above and except as otherwise required by
applicable law, the Series A Preferred Stock shall have no voting rights.
4. Liquidation Preference.
-----------------------
(a) In the event of the liquidation, dissolution or winding up of
the affairs of the Company, whether voluntary or involuntary, after payment or
provision for payment of the debts
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<PAGE>
and other liabilities of the Company, the holders of shares of the Series A
Preferred Stock then outstanding, pari passu with the holders of shares of the
Series C Preferred Stock and the Series D Preferred Stock, shall be entitled to
receive, out of the assets of the Company whether such assets are capital or
surplus of any nature, before any distribution shall be made to the holders of
the Common Stock or any other Junior Stock, an amount (the "Liquidation
Preference") per share equal to $100 per share of the Series A Preferred Stock,
plus cumulative and unpaid dividends at the rate of 8% per annum, through the
date of liquidation, dissolution or winding up, whether or not declared, and no
more, before any payment shall be made or any assets distributed to the holders
of the Common Stock or any other Junior Stock. If the assets of the Company are
not sufficient to pay in full the liquidation payment payable to the holders of
outstanding shares of the Series A Preferred Stock and any series of preferred
stock or any other class of stock on a parity, as to rights on liquidation,
dissolution or winding up, with the Series A Preferred Stock (the "Parity
Securities"), provided that the holders of a majority of the shares of Series A
Preferred Stock have approved such Parity Securities (other than the 91,000
shares of Series C Preferred Stock and 8,771 shares of Series D Preferred Stock
outstanding on the date of the filing of this Certificate of Designation) in
accordance with Section 3(a) hereof, then the holders of outstanding shares of
the Series A Preferred Stock are entitled to be paid on a pro-rata basis
together with the other Parity Securities. The liquidation payment with respect
to each outstanding fractional share of Series A Preferred Stock shall be equal
to a ratably proportionate amount of the liquidation payment with respect to
each outstanding share of Series A Preferred Stock. All payments for which this
Section 4(a) provides shall be in cash, property (valued at its fair market
value as determined by an independent nationally recognized investment banking
firm) or a combination thereof; provided, however, that no cash shall be paid to
holders of Junior Stock unless each holder of the outstanding shares of Series A
Preferred Stock and each holder of Parity Securities has been paid in cash the
full amount of the Liquidation Preference to which such holder is entitled as
provided herein. After payment of the full amount of the Liquidation Preference
to which each holder is entitled, such holders of shares of Series A Preferred
Stock will not be entitled to any further participation as such in any
distribution of the assets of the Company.
(b) A consolidation or merger of the Company with or into any other
corporation or corporations, or a sale of all or substantially all of the assets
of the Company, shall not be deemed to be a liquidation, dissolution, or winding
up within the meaning of this Section 4.
(c) Written notice of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Company, stating a payment date
and the place where the
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<PAGE>
distributable amounts shall be payable, shall be given by mail, postage prepaid,
no less than 30 days prior to the payment date stated therein, to the holders of
record of the Series A Preferred Stock at their respective addresses as the same
shall appear on the books of the Company.
(d) Together with the Series C Preferred Stock and the Series D
Preferred Stock outstanding as of the date of the filing of this Certificate of
Designation, the liquidation preference set forth in this Paragraph 4, and all
other payment rights hereunder, shall be senior and prior in all events to any
other preferred stock now or hereafter issued by the Company, including, without
limitation, the Series B Preferred Stock, unless the parity or priority of such
other preferred stock is approved by the Series A Preferred Stock as herein
provided.
5. Miscellaneous.
(a) Average Share Price. As used herein, the term "Average Share
Price" shall mean the average of the last sale price per share of the Company's
shares of Common Stock as reported by Bloomberg, L.P. ("Bloomberg") (or, if
Bloomberg is not then providing quotes, from a comparable reputable source), on
any one of the following securities markets on which such Common Stock shall
then be quoted, namely, (a) the American Stock Exchange, (b) the NASDAQ National
Market System ("NASDAQNMS"), (c) the NASDAQ System (other than the NASDAQNMS),
(d) the New York Stock Exchange or (e) the National Quotation Bureau, Inc. for
quotes on the Electronic Bulletin Board or the "Pink Sheets," as the case may
be, for the applicable number of consecutive trading days immediately preceding
the dividend payment date.
(b) No Impairment. The Company shall not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Company.
(c) Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given (i) on the same date, if delivered
personally or by facsimile by not later than 5:00 p.m. New York time (provided
that a copy of such facsimile shall be simultaneously sent to the Company at One
Gateway Center, 25th Floor, Newark, New Jersey 07102, Fax: 973-297-5454, or its
then current address and facsimile number), or (ii) three business days
following being mailed by certified or registered mail, postage prepaid,
return-receipt requested, addressed to the holder of record at its address
appearing on the books of the Company.
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<PAGE>
6. Redemptions.
------------
(a) Voluntary Redemption. Subject to the right of the holders of
Series A Preferred Stock to effect an exchange of their shares of Series A
Preferred Stock at any time prior to 5:00 p.m. New York City time on the date
fixed for redemption and subject to compliance with the provisions of this
Section 6(a), the Company shall have the right, exercisable at any time on not
more than sixty (60) days and not less than fifteen (15) days prior written
notice to the holders of Series A Preferred Stock (the "Voluntary Redemption
Notice"), to redeem all or any portion of the Shares of Series A Preferred Stock
at a redemption price for each share of Series A Preferred Stock to be redeemed
(the "Voluntary Redemption Price") equal to the sum of (i) $100 per share, and
(ii) all accrued dividends on such Share to the date fixed for redemption (the
"Voluntary Redemption Date"). If the Company redeems less than all of the
outstanding shares of Series A Preferred Stock on any Voluntary Redemption Date,
such redemption shall be effected on a pro-rata basis among the holders of
record.
(b) Mandatory Redemption. On November 3, 2004 (the "Mandatory
Redemption Date"), the Company shall redeem all of the Shares then outstanding
at a redemption price for each Share to be redeemed (the "Mandatory Redemption
Price") equal to the sum of (i) $100 per share, and (ii) all accrued dividends
on such Share to the Mandatory Redemption Date.
(c) Method of Payment. The Company shall pay an aggregate amount for
all Shares to be redeemed hereunder (the "Redemption Payment"), calculated by
multiplying the number of Shares so redeemed by the applicable Voluntary
Redemption Price or Mandatory Redemption Price, as the case may be, on the
Voluntary Redemption Date or Mandatory Redemption Date, as applicable, by
payment of the Voluntary Redemption Price or the Mandatory Redemption Price, as
applicable, by bank cashiers' or certified check payable to the applicable
holders of the Series A Preferred Stock or wire transfer of immediately
available funds to accounts designated in writing by such holders received by
the Company at least five (5) business days prior thereto. If, for any reason,
the full applicable Redemption Payment is not timely made pursuant to this
Section 6(c), such defaulted Redemption Payment shall thereafter bear default
interest at the lower of the highest legal rate or 15% per annum until paid in
full.
(d) Delivery of Series A Preferred Stock. The holders of Series A
Preferred Stock whose Shares are to be redeemed pursuant to this Section 6 shall
deliver to the Company, against receipt of the applicable Voluntary Redemption
Payment or Mandatory Redemption Payment, all of their Shares to be redeemed,
duly endorsed in blank for transfer or accompanied by a duly executed stock
power with the signature of the record owner guaranteed by a bank or member firm
of the New York Stock Exchange.
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<PAGE>
7. No Preemptive Rights.
---------------------
Except as provided in Sections 8 and 9 hereof, no holder of the Series A
Preferred Stock shall be entitled as of right to subscribe for, purchase or
receive any part of any new or additional shares of any class, whether now or
hereafter authorized, any bonds or debentures, or other evidences of
indebtedness convertible into or exchangeable for shares of any class, but all
such new or additional shares of any class or bonds or debentures, or other
evidences of indebtedness convertible into or exchangeable for shares may be
issued and disposed of by the Board of Directors on such terms and for such
consideration (to the extent permitted by law), and to such person or persons as
the Board of Directors in its absolute discretion may deem advisable.
8. Exchange for Senior Subordinated Notes.
---------------------------------------
At any time after November 3, 2000, the Series A Preferred Stock will be
exchangeable for 9% Senior Subordinated Notes of the Company due November 3,
2004, at the rate of $100 principal amount of such notes for each Share. The
exchanging holder shall furnish to the Company irrevocable written notice of
such exchange, together with the certificates evidencing the Shares to be
exchanged, duly endorsed in blank for transfer or accompanied by a duly executed
stock power, with the signature of the record holder guaranteed by a bank or a
member firm of the New York Stock Exchange.
9. Series A Special Redemption.
----------------------------
(a) Subject to subsection (e) hereof, each holder of Series A
Preferred Stock shall have the right to require the redemption of a portion or
all of its Series A Preferred Stock upon a Series A Redemption Event (as
hereinafter defined) and in the Series A Redemption Amount (as hereinafter
defined) at a price equal to $100 per share plus a sum equal to all cash
dividends accrued and unpaid to the Series A Redemption Date (as hereinafter
defined) and any stock dividends accrued and unpaid to such date.
(b) Within 30 days of a Series A Redemption Event the Company shall
mail a notice (the "Series A Redemption Notice") to each holder of record of the
Series A Preferred Stock stating:
A: The Series A Redemption Amount; and
B: (i) that a Series A Redemption Event has occurred,
that an offer (the "Series A Redemption Event Offer") limited to
the Series A Redemption Amount is being made pursuant to the
terms of the Series A Preferred Stock and that all shares of the
Series A Preferred Stock validly tendered and
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<PAGE>
not in excess of the Series A Redemption Amount will be accepted
for redemption. If more than one registered owner of Series A
Preferred Stock at the time of any Series A Redemption Event
Offer tenders stock for redemption, Series A Preferred Stock
shall be accepted for redemption pro rata based upon the ratio
that the number of shares submitted for redemption by each
holder bears to the total number of shares of Series A Preferred
Stock submitted for redemption;
(ii) the redemption price and the date of redemption
(which shall be a business day no earlier than 30 days nor later
than 60 days from the date such notice is mailed) (the "Series A
Redemption Date");
(iii) that any shares of Series A Preferred Stock not
tendered or redeemed will continue to accumulate dividends;
(iv) that, unless the Company defaults in the payment
of the Series A Preferred Stock redemption price, any shares of
Series A Preferred Stock accepted for redemption pursuant to the
Series A Redemption Event Offer shall cease to accumulate
dividends after the Series A Redemption Date;
(v) that holders whose shares of Series A Preferred
Stock are being redeemed only in part will be issued new
certificates representing shares of Series A Preferred Stock
equal in number to the unredeemed portion of the shares of
Series A Preferred Stock surrendered; provided that each
certificate representing shares of Series A Preferred Stock
redeemed and each new certificate representing shares of Series
A Preferred Stock issued shall be in whole shares.
(c) On or about the Series A Redemption Date:
(i) the transfer agent for the Series A Preferred
Stock shall deliver to the Company a certificate specifying the
aggregate number of shares of Series A Preferred Stock delivered
for purchase by the holders of Series A Preferred Stock prior to
the Series A Redemption Date pursuant to the Series A Redemption
Event Offer;
(ii) The Company shall accept for redemption a number
of shares of Series A Preferred Stock equal to the lesser of the
number of shares of Series A Preferred Stock tendered
-8-
<PAGE>
for redemption or the number of whole shares equal to the Series
A Redemption Amount divided by the redemption price in Section
9(a) above;
(iii) The Company shall deposit with the transfer
agent for the Series A Preferred Stock money sufficient to pay
the redemption price of all shares of Series A Preferred Stock
accepted for redemption by the Company; and
(iv) The Company shall deliver, or cause to be
delivered, to the transfer agent for the Series A Preferred
Stock an officer's certificate specifying the shares of Series A
Preferred Stock accepted for redemption by the Company.
(d) The Series A Preferred Stock transfer agent shall promptly mail
to the holders of Series A Preferred Stock so accepted payment in an amount
equal to the Series A Preferred Stock redemption price, and the transfer agent
for the Series A Preferred Stock shall promptly authenticate and mail to such
holders of Series A Preferred Stock a new certificate representing shares of
Series A Preferred Stock equal in number to any unredeemed shares of Series A
Preferred Stock surrendered; provided that each share of Series A Preferred
Stock redeemed and each new certificate representing shares of Series A
Preferred Stock issued shall be in whole shares. The Company will notify the
holders of Series A Preferred Stock of the results of the Series A Redemption
Event Offer as soon as practicable after the Series A Redemption Date.
(e) "Series A Redemption Event" shall mean each instance in which
the amount in the Series A Security Account (as hereinafter defined) exceeds the
Series A Redemption Amount, provided, however, that such Series A Redemption
Event shall cease whenever the Company shall mail a Series A Redemption Notice
to each holder of record of the Series A Preferred Stock as hereinabove
provided.
(f) "Series A Redemption Amount" shall mean the amount, not less
than $1,000,000 except as specified hereinafter upon termination of the Series A
Security Account, and not exceeding $3,000,000 in the aggregate, of cash and
cash equivalent property held by or for the credit of the Series A Security
Account in excess of any reasonable reserve for the payment of fees and expenses
of such Security Account. The "Series A Security Account" shall mean an account
at a bank or brokerage firm maintained by the Company to secure and as a method
of funding the redemption of Series A Preferred Stock upon Series A Redemption
Events. Such Account is maintained pursuant to a security agreement (the
"Security Agreement") as required by the Sharing Agreement. Upon termination of
the Series A Security Account in accordance with the terms of the Security
Agreement, any amount remaining in such Series A Security Account immediately
prior to such termination shall be deemed a Series A Redemption Amount and
accordingly shall be applied to fund a Series A Redemption Event Offer.
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<PAGE>
10. Change in Control.
------------------
(a) Upon the occurrence of a Change in Control (as hereinafter
defined), each holder of Series A Preferred Stock shall have the right to
require the redemption of its Series A Preferred Stock by the Company in cash,
pursuant to the offer described below (the "Change in Control Offer") at a price
(the "Change in Control Redemption Price") equal to $101 per share plus a sum
equal to all dividends accrued and unpaid thereon (if any) to the related Change
in Control Redemption Date (as hereinafter defined). A "Change in Control" shall
mean (i) a merger, consolidation or reorganization of the Company, if, after
giving effect thereto, the holders of the Common Stock prior to such
transactions shall fail to own at least 51% of the capital stock entitled to
vote for the election of directors in the successor entity, (ii) the sale of a
majority or more of the assets of the Company in any single transaction or in
any series of related transactions or (iii) a change in the composition of the
Board of Directors of the Company such that during any period of two consecutive
years the individuals who at the beginning of such period were directors of the
Company shall cease for any reason to constitute a majority of the directors
then in office (and not designated to sit on the Board by any holder of
preferred stock) unless the individuals replacing such directors were elected or
nominated by the Board of Directors of the Company.
(b) Within 30 days of any Change in Control, the Company shall mail
a notice (the "Change in Control Notice") to each holder of record of the Series
A Preferred Stock stating:
(i) that a Change in Control has occurred, that the Change
in Control Offer is being made pursuant to the terms of the Series A
Preferred Stock and that all Shares validly tendered will be accepted
for redemption;
(ii) the redemption price and the date of redemption (which
shall be a business day no earlier than 30 days nor later than 60 days
from the date such notice is mailed) (the "Change in Control Redemption
Date");
(iii) that any Shares not tendered or redeemed will continue
to accumulate dividends;
(iv) that, unless the Company defaults in the payment of the
Change in Control Redemption Price, any Shares accepted for redemption
pursuant to the Change in Control Offer shall cease to accumulate
dividends after the Change in Control Redemption Date;
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<PAGE>
(v) that holders of Series A Preferred Stock electing to
have any Shares redeemed pursuant to the Change in Control Offer will be
required to surrender the certificates representing such Shares to the
transfer agent for the Series A Preferred Stock at the address specified
in the notice prior to 1:00 p.m., New York City time, on the business
day immediately preceding the Change in Control Redemption Date; and
(vi) that holders whose Shares are being redeemed only in
part will be issued new certificates representing Shares equal in number
to the unredeemed portion of the Shares surrendered; provided that each
certificate representing Shares issued shall be in whole shares.
(c) On or about the Change in Control Redemption Date:
(i) the transfer agent for the Series A Preferred Stock
shall deliver to the Company a certificate specifying the aggregate
number of Shares delivered for purchase by the holders of Series A
Preferred Stock prior to the Change in Control Redemption Date pursuant
to the Change in Control Offer;
(ii) The Company shall accept for redemption Shares so
delivered;
(iii) The Company shall deposit with the transfer agent for
the Series A Preferred Stock money sufficient to pay the Change in
Control Redemption Price of all Shares accepted for payment by the
Company; and
(iv) The Company shall deliver, or cause to be delivered, to
the transfer agent for the Series A Preferred Stock an officer's
certificate specifying the Shares accepted for payment by the Company.
(d) The transfer agent for the Series A Preferred Stock shall
promptly mail to the holders of Series A Preferred Stock so accepted payment in
an amount equal to the Change in Control Redemption Price, and the transfer
agent for the Series A Preferred Stock shall promptly authenticate and mail to
such holders of Series A Preferred Stock a new certificate representing Shares
equal in number to any unredeemed Shares surrendered; provided that each Share
redeemed and each new certificate representing Shares issued shall be in whole
Shares. The Company will notify the holders of Series A Preferred Stock of the
results of the Change in Control Offer as soon as practicable after the Change
in Control Redemption Date.
-11-
<PAGE>
11. Notwithstanding anything to the contrary contained in this
certificate, no redemption of Series A Preferred Stock shall be permissible
except in compliance with the Delaware General Corporation Law. Any proposed
redemption of the Series A Preferred Stock authorized herein shall be reduced to
an amount which complies with such statute, or if such reduction is not
feasible, deferred until such time as a Series A Redemption Event Offer may be
made in compliance with such statute.
IN WITNESS WHEREOF, this Certificate of Designation has been executed on
behalf of the Company by its duly authorized officer this ___ day of
___________, 2000.
PHOENIX WASTE SERVICES COMPANY, INC.
By:
-----------------------------------
[Name and Title]
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<PAGE>
CERTIFICATE OF DESIGNATION
OF
$2.50 SERIES B CONVERTIBLE PREFERRED STOCK
(Par Value $.001 Per Share)
OF
PHOENIX WASTE SERVICES COMPANY, INC.
Phoenix Waste Services Company, Inc., a Delaware corporation
(hereinafter called the "Company"), hereby certifies that the following
resolution was adopted by the Board of Directors of the Company pursuant to
Section 151 of the Delaware General Corporation Law at a meeting duly called and
held on _________, 2000:
RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors of this Company, in accordance with the provisions of the
Certificate of Incorporation of the Company, the Board of Directors hereby
creates a series of preferred stock, par value $.001 per share, of the Company
and hereby states the designation and number of shares, and fixes the relative
rights, preferences, and limitations thereof as follows:
1. Designation; Number of Shares; Stated Value.
--------------------------------------------
The designation of said series of preferred stock shall be $2.50 Series
B Convertible Preferred Stock (the "Series B Preferred Stock"). The number of
shares of Series B Preferred Stock shall be 5,000,000. The liquidation value of
the Series B Preferred Stock shall be $2.50 per share, together with any accrued
and unpaid dividends, if there is a sale of substantially all of the stock or
assets of the Company in a non-public transaction or liquidation of the Company.
The shares of Series B Preferred Stock shall be issued as whole shares and shall
have a par value of $.001 per share.
2. Conversion.
-----------
(a) Each share of Series B Preferred Stock is
convertible into one share of the common stock, par value $.001
per share ("Common Stock") of the Company (rounded to the
nearest whole share) (the "Conversion Rate") at any time after
September 15, 1997, or as otherwise may be agreed by the holder
and the Company at the option of the holder.
(b) The Conversion Rate shall be subject to
adjustment as follows:
(i) In case the Company shall (A) pay a dividend on
its Common Stock in shares of its Common Stock, (B)
subdivide its
<PAGE>
outstanding shares of Common Stock or (C) combine its
outstanding shares of Common Stock into a smaller number
of shares, the conversion rate in effect at the time of
such dividend, subdivision, or combination shall be
proportionately adjusted so that the holder of the
Series B Preferred Stock surrendered for conversion
after such time shall be entitled to receive the number
and kind of shares which he would have owned or have
been entitled to receive had such Series B Preferred
Stock been converted immediately prior to such time.
Such adjustment shall be made successively whenever any
event listed above shall occur.
(ii) In case of any consolidation of the Company
into, or merger of the Company with or into, any other
corporation, or in case of any sale or transfer of all
or substantially all of the assets of the Company, or in
the case of any reclassification of its shares of Common
Stock, the holder of each share of Series B Preferred
Stock then outstanding shall have the right thereafter
to convert such share into the kind and amount of shares
of stock and other securities, cash and other property
receivable upon such consolidation, merger, sale,
transfer or reclassification by a holder of the number
of shares of Common Stock of the Company into which such
share of Series B Preferred Stock might have been
converted immediately prior to such consolidation,
merger, sale, transfer or reclassification. In any such
event, effective provision shall be made in the articles
or certificate of incorporation of the resulting or
surviving corporation or other corporation issuing or
delivering such shares, other
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<PAGE>
securities, cash or other property or otherwise so that
the provisions set forth herein for the protection of
the conversion rights of the Series B Preferred Stock
shall thereafter be applicable, as nearly as reasonably
may be, to any such other shares of stock and other
securities, cash and other property deliverable upon
conversion of the Series B Preferred Stock remaining
outstanding or other convertible stock or securities
received by the holders in place thereof; and any such
resulting or surviving corporation or other corporation
issuing or delivering such shares, other securities,
cash or other property shall expressly assume the
obligation to deliver, upon the exercise of the
conversion privilege, such shares, securities, cash or
other property as the holders of the Series B Preferred
Stock remaining outstanding, or other convertible stock
or securities received by the holders in place thereof,
shall be entitled to receive pursuant to the provisions
hereof and to make provision for the protection of the
conversion right as above provided. In case shares,
securities, cash or other property other than Common
Stock shall be issuable or deliverable upon conversion
as aforesaid, then all references to Common Stock in
this paragraph 2(b) shall be deemed to apply, so far as
provided and as nearly as is reasonable, to any such
shares, other securities, cash or other property.
(iii) No fractional interests in Common Stock shall be
issued upon conversion of shares of Series B Preferred
Stock. Instead of any fractional share of Common Stock
which would otherwise be issuable upon conversion of any
share of Series B Preferred Stock, the Company shall
issue an additional share of Common Stock by rounding
the fractional interest to the nearest whole share or,
if there is no nearest whole share, rounding upward to
the next whole share.
(iv) If at any time, as a result of any adjustment
made pursuant to this paragraph 2(b), the holder of any
share of Series B Preferred Stock thereafter surrendered
for conversion shall become entitled to receive any
shares of the Company other than shares of its Common
Stock, the number of such other shares so receivable
upon conversion of any share of Series B Preferred Stock
shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable
to the provisions with respect to the Common Stock
contained in subdivision (i), above, with respect to the
Common Stock.
-3-
<PAGE>
(v) Whenever any adjustment is required in the
number of shares into which each share of Series B
Preferred Stock is convertible, the Company shall
forthwith cause to be mailed to the holders of record of
the Series B Preferred Stock a copy of a statement
describing in reasonable detail the method of
calculation used in the adjustment.
(c) Upon any conversion of shares of Series B
Preferred Stock, the shares so converted shall have the status
of authorized and unissued shares of preferred stock,
unclassified as to series, and the number of shares of preferred
stock which the Company shall have authority to issue shall not
be decreased by the conversion of shares of Series B Preferred
Stock. The Company shall at all times reserve and keep
available, out of its authorized and unissued stock or stock
held as treasury stock, solely for the purpose of effecting the
conversion of the Series B Preferred Stock, such number of
shares of its Common Stock as shall from time to time be
sufficient to effect the conversion of all shares of Series B
Preferred Stock from time to time outstanding. For the purpose
of this paragraph 2(c), the full number of shares of Common
Stock issuable upon the conversion of all outstanding shares of
Series B Preferred Stock shall be computed as if at the time of
computation of such number of shares of Common Stock all
outstanding shares of Series B Preferred Stock were held by a
single holder. The Company shall from time to time, in
accordance with the laws of the State of Delaware, increase the
authorized number of shares of its Common Stock if at any time
the number of shares of its Common Stock authorized and not
outstanding shall be insufficient to permit the conversion of
all the then outstanding Series B Preferred Stock.
(d) The Company will pay any and all issue or other
taxes that may be payable in respect of any issue or delivery of
shares of Common Stock on conversion of Series B Preferred Stock
pursuant hereto. The Company shall not, however, be required to
pay any tax which may be payable in respect of any transfer
involved in the issue or delivery of Common Stock in a name
other than that in which the Series B Preferred Stock so
converted was registered, and no such issue or delivery shall be
made unless and until the person requesting such issue has paid
to the Company the amount of such tax, or has established, to
the satisfaction of the Company, that such tax has been paid.
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<PAGE>
(e) Before taking any action which would cause an
adjustment reducing the conversion rate such that the conversion
price would be below the then par value of the Common Stock, the
Company will take any corporate action which may, in the opinion
of its counsel, be necessary in order that the Company may
validly and legally issue fully paid and nonassessable shares of
Common Stock at the conversion rate as so adjusted.
3. Number of Shares.
-----------------
The Board of Directors reserves the right, by subsequent amendment to
this resolution, from time to time to decrease the number of shares which
constitute the Series B Preferred Stock (but not below the number of shares
thereof then outstanding) and, subject to anything to the contrary set forth in
the Certificate of Incorporation applicable to the preferred stock, to subdivide
the number of shares, the stated value per share and the liquidation value per
share of the Series B Preferred Stock and in other respects to amend, within the
limitations provided by law, this resolution and the Certificate of
Incorporation.
4. Liquidation Rights.
-------------------
Upon the sale of substantially all of the stock and assets of the
Company in a non-public transaction or dissolution, liquidation or winding up of
the Company, whether voluntary or involuntary, the holders of Series B Preferred
Stock shall be entitled, subject to the rights of the Company's Series A
Exchangeable Redeemable Preferred Stock, its Series C Redeemable Convertible
Preferred Stock, its Series D Exchangeable Redeemable Preferred Stock or any
other class of preferred stock having a superior liquidation preference, to
receive out of the assets of the Company available for distribution to
stockholders an amount equal to their original investment of $2.50 per share,
plus any accrued and unpaid dividends, before any payment or distribution shall
be made on the Common Stock or on any other class of stock junior to the Series
B Preferred Stock. If upon such liquidation, dissolution or winding up of the
Company whether voluntary or involuntary, the assets of the Company shall be
insufficient to permit payment to the holders of Series B Preferred Stock of the
amount distributable as aforesaid, then the entire assets of the Company shall
be distributed ratably among the holders of the Series B Preferred Stock, in
proportion to the liquidation preference payable under this paragraph 4. For
purposes of this paragraph 4, the merger or consolidation of the Company or the
sale of all or substantially all of the Company's assets shall be deemed to be a
liquidation, dissolution or winding up of the Company. After the payment to the
holders of the shares of the Series B Preferred Stock of the full preferential
amounts provided for in this paragraph 4, such preferred shares have no further
rights and no right or claim to any remaining assets of the Company.
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<PAGE>
5. Voting Rights.
--------------
(a) The shares of Series B Preferred Stock shall have no voting
rights except for those provided for by law. In exercising the voting rights
granted by operation of law, each share of Series B Preferred Stock shall be
entitled to one vote. In addition, the Company may not, without the prior
written consent of at least fifty (50%) percent of the holders of the Series B
Preferred Stock:
(i) amend the Certificate of Incorporation or any
certificate or statement of the designations of the
powers, preferences and rights of any classes of
stock to in any way affect the rights and preferences
of holders of the Series B Preferred Stock; and
(ii) authorize any other class of preferred shares ranking
equal or superior to the Series B Preferred Stock.
6. Dividends.
----------
(a) (1) The holders of the Series B Preferred Stock shall be
entitled to receive dividends, per annum, at the rate of one share of Common
Stock for every ten shares of the Series B Preferred Stock held (the "Dividend
Rate"), payable once a year each year on the last business day of the month of
April commencing in 1998 (the "Dividend Payment Date"). Such dividends shall be
paid to the holders of record at the close of business on a record date ten
business days prior to the Dividend Payment Date. Each such annual dividend
shall be fully cumulative and shall accrue (whether or not declared), without
interest, from the first day of the annual period in which such dividend may be
payable as herein provided, except that with respect to the first annual
dividend, such dividend with respect to any outstanding shares of Series B
Preferred Stock shall accrue from the date of the purchase of said shares of
Series B Preferred Stock from the Company. No fractional shares of Common Stock
shall be issued as a dividend pursuant to this section; instead, all fractional
shares shall be rounded to the nearest whole share or, if there is no nearest
whole share, upward to the next whole share.
(a) (2) The Dividend Rate shall be subject to adjustment as
follows:
(i) In case the Company shall (A) pay a dividend on its
Common Stock in shares of its Common Stock, (B) subdivide its
outstanding shares of Common Stock or (C) combine its outstanding shares
of Common Stock
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<PAGE>
into a smaller number of shares, the Dividend Rate in effect at the time
of such dividend, subdivision, or combination shall be proportionately
adjusted so that the holder of the Series B Preferred Stock entitled to
the dividend after such time shall be entitled to receive the number and
kind of shares which he would have owned or have been entitled to
receive had such dividend been paid immediately prior to such time. Such
adjustment shall be made successively whenever any event listed above
shall occur.
(ii) In case of any consolidation of the Company into, or
merger of the Company with or into, any other corporation, or in case of
any sale or transfer of all or substantially all of the assets of the
Company, or in case of any reclassification of its shares of Common
Stock, each holder of Series B Preferred Stock then outstanding shall
have the right thereafter to receive as a dividend, for every ten shares
of Series B Preferred Stock held by such holder, the kind and amount of
shares of stock and other securities, cash and other property receivable
upon such consolidation, merger, sale, transfer or reclassification by a
holder of one share of Common Stock of the Company immediately prior to
such consolidation, merger, sale, transfer or reclassification. In any
such event, effective provision shall be made in the articles or
certificate of incorporation of the resulting or surviving corporation
or other corporation issuing or delivering such shares, other
securities, cash or other property or otherwise so that the provisions
set forth herein for the protection of the dividend rights of the Series
B Preferred Stock shall thereafter be applicable, as nearly as
reasonably may be, to any such other shares of stock and other
securities, cash and other property deliverable upon the payment of a
dividend on the Series B Preferred Stock outstanding; and any such
resulting or surviving corporation or other corporation issuing or
delivering such shares, other securities, cash or other property shall
expressly assume the obligation to deliver, upon the payment of the
dividend, such shares, securities, cash or other property as the holders
of the Series B Preferred Stock shall be entitled to receive pursuant to
the provisions hereof and to make provision for the protection of the
dividend right as above provided. In case shares, securities, cash or
other property other than Common Stock shall be issuable or deliverable
upon payment of the dividend as aforesaid, then all references to Common
Stock in this section 6(a)(2)(ii) shall be deemed to apply, so far as
provided and as nearly as is reasonable, to any such shares, other
securities, cash or other property.
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(b) All dividends paid with respect to shares of the Series B
Preferred Stock pursuant to this section 6 shall be paid pro rata to the holders
entitled thereto.
7. Redemption.
-----------
The Company shall have no right of redemption of the Series B Preferred
Stock.
IN WITNESS WHEREOF, this Certificate of Designation is executed on
behalf of the Company by its duly authorized officer this ____ day of
___________, 2000.
PHOENIX WASTE SERVICES COMPANY, INC.
By:
-----------------------------------
[Name and Title]
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CERTIFICATE OF DESIGNATION
OF
SERIES C REDEEMABLE CONVERTIBLE PREFERRED STOCK
(Par Value $.001 Per Share)
OF
PHOENIX WASTE SERVICES COMPANY, INC.
Phoenix Waste Services Company, Inc., a Delaware corporation
(hereinafter called the "Company"), hereby certifies that the following
resolution was adopted by the Board of Directors of the Company pursuant to
Section 151 of the Delaware General Corporation Law at a meeting duly called and
held on _________, 2000:
RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors of this Company, in accordance with the provisions of the
Certificate of Incorporation of the Company, the Board of Directors hereby
creates a series of preferred stock, par value $.001 per share, of the Company
and hereby states the designation and number of shares, and fixes the relative
rights, preferences, and limitations thereof as follows:
1. Designation and Rank. The designation of such series of the preferred
stock shall be the Series C Redeemable Convertible Preferred Stock, par value
$.001 per share (the "Series C Preferred Stock"). The maximum number of shares
of Series C Preferred Stock (the "Shares") shall be Ninety-One Thousand. The
Series C Preferred Stock shall rank (i) prior to the common stock, par value
$.001 per share, of the Company (the "Common Stock"), (ii) on a parity with all
shares of the Company's Series A Exchangeable Redeemable Preferred Stock, par
value $.001 per share (the "Series A Preferred Stock") and with all shares of
the Company's Series D Exchangeable Redeemable Preferred Stock, par value $.001
per share (the "Series D Preferred Stock"), (iii) subordinate and junior to all
indebtedness of the Company now or hereafter existing, and (iv) prior to the
Company's $2.50 Series B Convertible Preferred Stock, par value $.001 per share
(the "Series B Preferred Stock"), as to liquidation and other payment rights as
provided in Section 4(d) and to any other class or series of capital stock of
the Company hereafter created (unless it specifically, by its terms, ranks on a
parity with the Series C Preferred Stock) (each such junior class or series of
capital stock and the Common Stock being hereinafter referred to as the "Junior
Stock"), in each case as to dividends and distributions of assets upon
liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary.
<PAGE>
2. Cumulative Dividends: Priority.
-------------------------------
(a) Payment of Dividends. The holders of record of shares of
Series C Preferred Stock are entitled to a non-cumulative noncompounded dividend
as set forth below, payable when declared by the Company's Board of Directors,
and, except for any redemption provided in that certain Sharing Agreement dated
March 31, 2000 by and among the Company, Wasteco Ventures Limited and Robert J.
Longo, as amended (the "Sharing Agreement"), upon any redemption of the Series C
Preferred Stock.
(b) After May 3, 1999, dividends on the Series C Preferred Stock
shall be at the rate of 8% per annum, payable (when and if declared by the
Company's Board of Directors) semi-annually by the Company, on June 30th and
December 31st of each year. All such dividends may be paid in cash or, at the
election of the Company, by delivery of additional shares of Common Stock having
an aggregate "Market Value" (as hereinafter defined) equal to the amount of such
dividend. For purposes of payment of dividends, each share of Common Stock will
be deemed to have a "Market Value" equal to ninety percent (90%) of the "Average
Share Price" as defined in Section 5(k) for the ten (10) consecutive trading
days preceding the dividend payment date.
3. Voting Rights.
--------------
(a) The Series C Preferred Stock shall have the following class
voting rights. So long as any shares of the Series C Preferred Stock remain
outstanding, the Company shall not, without the affirmative vote or consent of
the holders of at least sixty-six and 2/3 percent of the shares of the Series C
Preferred Stock outstanding at the time, given in person or by proxy, either in
writing or at a meeting, in which the holders of the Series C Preferred Stock
vote separately as a class: (i) authorize, create or issue (other than the
Series A Preferred Stock and the Series D Preferred Stock outstanding on the
date of the filing of this Certificate of Designation), or increase the
authorized or issued amount of any class or series of stock ranking prior to or
on a parity with the Series C Preferred Stock, with respect to payment of
dividends or the distribution of assets on liquidation, dissolution or winding
up; (ii) amend, alter or repeal the provisions of the Series C Preferred Stock,
whether by merger, consolidation or otherwise, so as to affect materially and
adversely any right, preference, privilege or voting power of the Series C
Preferred Stock; provided, however, that any creation and issuance of other
series of Junior Stock shall not be deemed to materially and adversely affect
such
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rights, preferences, privileges or voting powers; (iii) repurchase, or pay cash
dividends on, shares of the Company's Junior Stock; provided, that dividends may
be paid on Junior Stock so long as at the time of such payment (A) all dividends
on the Series C Preferred Stock shall have been paid in full, and (B) if
dividends on Junior Stock are payable in cash, all dividends on the Series C
Preferred Stock thereafter paid shall similarly be paid in cash, or (iv) amend
the Certificate of Incorporation or By-Laws of the Company so as to affect
materially and adversely any right, preference, privilege or voting power of the
Series C Preferred Stock provided, however, that any creation and issuance of
other series of Junior Stock shall not be deemed to materially and adversely
affect such rights, preferences, privileges or voting powers.
(b) Except with respect to transactions upon which the Series C
Preferred Stock shall be entitled to vote separately as a class pursuant to
Section 3(a) above and except as otherwise required by applicable law, the
Series C Preferred Stock shall not vote prior to the date on which the Series C
Preferred Stock shall become convertible; thereafter, the Series C Preferred
Stock shall vote as a class pursuant to Section 3 (a) above together with the
Common Stock and not as a separate class on all other issues and transactions
with respect to which the Common Stock is entitled to vote pursuant to
applicable law or the Certificate of Incorporation, each share of Series C
Preferred Stock being entitled to a number of votes per share equal to (i) one
multiplied by (ii) the number of shares of Common Stock into which each share of
Series C Preferred Stock is convertible on the record date used to determine
shares eligible to vote on such transaction.
4. Liquidation Preference.
-----------------------
(a) In the event of the liquidation, dissolution or winding up of
the affairs of the Company, whether voluntary or involuntary, after payment or
provision for payment of the debts and other liabilities of the Company, the
holders of shares of the Series C Preferred Stock then outstanding, pari passu
with the holders of the shares of the Series A Preferred Stock and the Series D
Preferred Stock, shall be entitled to receive, out of the assets of the Company
whether such assets are capital or surplus of any nature, before any
distribution shall be made to the holders of the Common Stock or any other
Junior Stock, an amount (the "Liquidation Preference") per share equal to $100
per share of the Series C Preferred Stock, plus declared,
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payable, and unpaid dividends at the then applicable dividend rate per annum,
through the date of liquidation, dissolution or winding up, whether or not
declared, and no more, before any payment shall be made or any assets
distributed to the holders of the Common Stock or any other Junior Stock. If the
assets of the Company are not sufficient to pay in full the liquidation payment
payable to the holders of outstanding shares of the Series C Preferred Stock and
any series of preferred stock or any other class of stock on a parity, as to
rights on liquidation, dissolution or winding up, with the Series C Preferred
Stock (the "Parity Securities"), provided that the holders of a majority of the
shares of Series C Preferred Stock approve such Parity Securities (other than
the shares of Series A Preferred Stock and Series D Preferred Stock outstanding
on the date of the filing of this Certificate of Designation) in accordance with
Section 3(a) hereof, then the holders of outstanding shares of the Series C
Preferred Stock are entitled to be paid on a pro-rata basis together with the
other Parity Securities, based on the relative liquidation value of shares of
Series C Preferred Stock and the Parity Securities. The liquidation payment with
respect to each outstanding fractional share of Series C Preferred Stock shall
be equal to a ratably proportionate amount of the liquidation payment with
respect to each outstanding share of Series C Preferred Stock. All payments for
which this Section 4(a) provides shall be in cash, property (valued at its fair
market value as determined by an independent nationally recognized investment
banking firm) or a combination thereof; provided, however, that no cash shall be
paid to holders of Junior Stock unless each holder of the outstanding shares of
Series C Preferred Stock and each holder of Parity Securities has been paid in
cash the full amount of the Liquidation Preference to which such holder is
entitled as provided herein. After payment of the full amount of the Liquidation
Preference to which each holder is entitled, such holders of shares of Series C
Preferred Stock will not be entitled to any further participation as such in any
distribution of the assets of the Company.
(b) A consolidation or merger of the Company with or into any other
corporation or corporations, or a sale of all or substantially all of the assets
of the Company, shall not be deemed to be a liquidation, dissolution, or winding
up within the meaning of this Section 4.
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(c) Written notice of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Company, stating a payment date
and the place where the distributable amounts shall be payable, shall be given
by mail, postage prepaid, no less than 30 days prior to the payment date stated
therein, to the holders of record of the Series C Preferred Stock at their
respective addresses as the same shall appear on the books of the Company.
(d) Together with the Series A Preferred Stock and the Series D
Preferred Stock outstanding as of the date of the filing of this Certificate of
Designation, the liquidation preference set forth in this paragraph 4, and all
other payment rights hereunder, shall be senior and prior in all events to any
other preferred stock now or hereafter issued by the Company, including, without
limitation, the Series B Preferred Stock unless the parity or priority of such
other preferred stock is approved by the Series C Preferred Stock as herein
provided.
5. Conversion.
-----------
Subject at all times to the Company's right of voluntary redemption of
the Series C Preferred Stock provided in Section 6 of this Certificate of
Designations, the holders of shares of Series C Preferred Stock shall have the
right, at their option, to convert shares of Series C Preferred Stock into
shares of Common Stock at any time following May 3, 1999, on and subject to the
following terms and conditions:
(a) The shares of Series C Preferred Stock shall be convertible at
the office of any transfer agent for the Series C Preferred Stock, and at such
other office or offices, if any, as the Board of Directors may designate, into
fully paid and nonassessable shares (calculated as to each conversion to the
nearest 1/100th of a share) of Common Stock, at the conversion price, determined
as hereinafter provided, in effect at the time of conversion, each share of
Series C Preferred Stock being valued at $100 for the purpose of such
conversion. The price at which shares of Common Stock shall be delivered upon
conversion (the "conversion price") shall be 80% of the Average Share Price (as
hereinafter defined) for all the trading days during the last month prior to May
3, 1999. The conversion price shall be adjusted as provided in paragraph (d)
below.
(b) In order to convert shares of the Series C Preferred Stock into
Common Stock, the holder thereof shall surrender to the Company, at any time
during normal business hours at the principal office of the Company, the
certificate or certificates
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<PAGE>
evidencing the shares of Series C Preferred Stock to be converted, accompanied
by (i) written notice to the Company that such holder elects to convert
("Conversion Notice"), (ii) if so required by the Company, instruments of
transfer, in form satisfactory to the Company, duly executed by the registered
holder or by his duly authorized attorney and (iii) transfer tax stamps or funds
therefor. Shares of the Series C Preferred Stock shall be deemed to have been
converted immediately prior to the close of business on the day of surrender of
such shares for conversion in accordance with the foregoing provisions (the
"conversion date"), and the person or persons entitled to receive the Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such Common Stock at such time. As promptly as
practicable on or after the conversion date, the Company shall issue and shall
deliver at said office against delivery of one or more certificates evidencing
Series C Preferred Stock a certificate or certificates for the number of full
shares of Common Stock issuable upon such conversion, together with a cash
payment in lieu of any fraction of a share, as hereinafter provided, to the
person or persons entitled to receive the same.
(c) No fractional shares of Common Stock shall be issued upon
conversion of shares of Series C Preferred Stock, but, in lieu of any fraction
of a share of Common Stock which would otherwise be issuable in respect of the
aggregate number of shares of Series C Preferred Stock surrendered for
conversion at one time by the same holder, the Company shall pay in cash as an
adjustment of such fraction an amount equal to the same fraction of the Closing
Price (as defined below) on the date on which such shares of Series C Preferred
Stock were duly surrendered for conversion, or, if such date is not a trading
day, on the next trading day.
(d) The conversion price shall be adjusted from time to time as
follows:
(1) In case the Company shall (i) pay a dividend (or make a
distribution) on its outstanding shares of Common Stock in Common Stock, (ii)
subdivide or split its outstanding shares of Common Stock into a larger number
of shares by reclassification or otherwise, (iii) combine its outstanding shares
of Common Stock into a smaller number of shares by reclassification or
otherwise, or (iv) issue any shares of Common Stock by reclassification, the
conversion price in effect at the time of the record date for such dividend or
distribution or other
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<PAGE>
effective date of such subdivision, combination or reclassification shall be
adjusted so that the holder of any shares of Series C Preferred Stock
surrendered for conversion after such time shall be entitled to receive the
number of shares of Common Stock which he would have owned or been entitled to
receive had such shares of the Series C Preferred Stock been converted
immediately prior to such time.
(2) In case the Company shall issue rights or warrants to all
holders of its Common Stock entitling them to subscribe for or purchase shares
of Common Stock at a price per share less than the current market price per
share (determined as provided in clause (4) below) on the record date for the
distribution of such rights or warrants, the conversion price in effect at the
opening of business on such record date shall be adjusted so that the same shall
equal the price determined by multiplying the conversion price then in effect by
a fraction, of which the numerator shall be the number of shares of Common Stock
then outstanding plus the number of shares of Common Stock which the aggregate
exercise price of such warrants or rights exercised would purchase at such
current market price and of which the denominator shall be the number of shares
of Common Stock then outstanding plus the number of additional shares of Common
Stock issuable upon the exercise of such warrants or rights. Such adjustment
shall become effective at the opening of business on the business day next
following the computation thereof. If the conversion price shall be adjusted at
any time under or by reason of provisions in this clause (2), then, in case of
the delivery of Common Stock upon the exercise of any such right or warrant the
conversion price then in effect hereunder shall forthwith be adjusted to such
respective amount as would have been obtained had such right or warrant never
been issued as to such Common Stock and had adjustments been made upon the
issuance of the shares of Common Stock delivered as aforesaid.
(3) In case the Company shall distribute to all holders of its
Common Stock evidences of its indebtedness or assets (excluding any cash or
stock dividends or distributions and dividends referred to in clause (1) above
or rights or warrants to subscribe for or purchase securities of the Company or
any of its subsidiaries other than shares of Common Stock referred to in clause
(2) above), then in each such case the conversion price shall be adjusted so
that the same shall equal the price determined by multiplying the conversion
price in effect immediately prior to the date of such distribution by a fraction
of which the numerator shall be the current market price per
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<PAGE>
share (determined as provided in clause (4) below) of the Common Stock on the
record date mentioned below less the then fair market value (as determined by
the Board of Directors, whose determination shall be conclusive) of the portion
of the assets or evidences of indebtedness or rights or warrants so distributed
applicable to one share of Common Stock, and the denominator shall be such
current market price per share of the Common Stock. Such adjustment shall become
effective on the opening of business on the business day next following the
record date for the determination of stockholders entitled to receive such
distribution.
(4) For the purpose of any computation under clause (1), (2) or (3)
above, the current market price per share of Common Stock on any date shall be
deemed to be the Average Share Price for the 30 consecutive trading days
commencing not more than 45 trading days before the day in question, such 30
consecutive trading day period to be specified by the Board of Directors prior
to the commencement of 45 trading days before the day in question, or in the
event the Board of Directors fails to specify such 30 consecutive trading days,
such 30 consecutive trading days shall be deemed to have commenced on the 40th
trading date before the day in question.
(5) No adjustment in the conversion price pursuant to this paragraph
5 shall be required unless such adjustment would require an increase or decrease
of at least 1% in such price; provided, that any adjustment which by reason of
this clause (5) is not required to be made shall be carried forward and taken
into account in any subsequent adjustment and will be made not more than three
years after the time it would have been made but for the provisions of this
clause (5); provided further that, at the time of any adjustment, such
adjustment shall include all adjustments to the date thereof then being carried
forward. All calculations under this paragraph 5 shall be made to the nearest
l/100th of a cent or to the nearest 1/100th of a share, as the case may be.
(e) In case of any consolidation or merger of the Company with or
into another corporation or in the case of any sale or conveyance to another
corporation (other than a wholly-owned subsidiary of the Company) of all or
substantially all of the property and assets of the Company, the holder of a
share of the Series C Preferred Stock shall have the right thereafter to convert
such share into the kind and amount of shares of stock and other securities and
properties receivable upon such
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consolidation, merger, sale or conveyance by a holder of the number of shares of
Common Stock into which such share of Series C Preferred Stock might have been
converted immediately prior to such consolidation, merger, sale or conveyance
and shall have no other conversion right with regard to such share of Series C
Preferred Stock. In the event of such a consolidation, merger, sale or
conveyance, effective provision shall be made in the certificate of
incorporation of the resulting or surviving corporation or otherwise for the
protection of the conversion rights of the shares of the Series C Preferred
Stock which shall be applicable, as nearly as reasonably may be, to any such
other shares of stock and other securities and property deliverable upon
conversion of shares of the Series C Preferred Stock. In case securities or
properties other than Common Stock shall be issuable or deliverable upon
conversion as aforesaid, then all references in this paragraph 5 shall be deemed
to apply, so far as appropriate and as nearly as may be, to such other
securities or properties.
(f) Whenever the conversion price is adjusted as herein provided:
(1) the Company shall compute the adjusted conversion price
in accordance with this paragraph 5 and shall prepare a certificate
signed by the President or one of the Vice Presidents and the Treasurer
or one of the Assistant Treasurers of the Company setting forth the
adjusted conversion price, and such certificate shall forthwith be filed
with the transfer agent for the Series C Preferred Stock; and
(2) a notice stating that the conversion price has been
adjusted and setting forth the adjusted conversion price shall, as soon
as practicable, be mailed to the holders of record of the outstanding
shares of Series C Preferred Stock.
(g) In case at any time:
(1) the Company shall declare a dividend (or any other
distribution) on its Common Stock payable otherwise than in cash out of
profits or surplus; or
(2) the Company shall authorize the granting to the holders
of its Common Stock of rights to subscribe for or purchase any shares of
capital stock of any class or series or of any other rights; or
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(3) of any reclassification of the capital stock of the
Company (other than a subdivision or combination of its outstanding
shares of Common Stock), or of any consolidation or merger to which the
Company is a party and for which approval of any stockholders of the
Company is required, or of the sale or transfer of all or substantially
all of the property and assets of the Company, or of the voluntary or
involuntary dissolution, liquidation or winding up of the Company;
then the Company shall cause to be mailed to the transfer agent for the Series C
Preferred Stock and to the holders of record of the outstanding shares of Series
C Preferred Stock, at least 20 days (or 10 days in any case specified in clause
(1) or (2) above) prior to the applicable record date hereinafter specified, a
notice stating (x) the date on which a record is to be taken for the purpose of
such dividend, distribution or rights, or, if a record is not to be taken, the
date as of which the holders of Common Stock of record entitled to such
dividend, distribution or rights are to be determined, or (y) the date on which
such reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up is expected to become effective, and the date as of
which it is expected that holders of Common Stock of record shall be entitled to
exchange their shares of Common Stock for securities or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up.
(h) The Company shall at all times reserve and keep available, free
from preemptive rights, out of its authorized but unissued Common Stock, for the
purpose of effecting the conversion of the shares of the Series C Preferred
Stock, the full number of shares of Common Stock then deliverable upon the
conversion of all shares of Series C Preferred Stock then outstanding.
(i) The Company will pay any and all transfer taxes that may be
payable in respect of the issuance or delivery of shares of Common Stock on
conversion of shares of Series C Preferred Stock pursuant hereto. The Company
shall not, however, be required to pay any tax which may be payable in respect
of any transfer involved in the issue or delivery of Common Stock in a name
other than that in which the Series C Preferred Stock so
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converted was registered, and no such issue or delivery shall be made unless and
until the person requesting such issue has paid to the Company the amount of any
such tax, or has established, to the satisfaction of the Company, that such tax
has been paid.
(j) For the purpose of this paragraph 5, the term "Common Stock"
shall include any stock of any class of the Company which has no preference in
respect of dividends or of amounts payable in the event of any voluntary or
involuntary liquidation, dissolution or winding up of the Company, and which is
not subject to redemption by the Company. However, shares issuable on conversion
of shares of the Series C Preferred Stock shall include only shares of Common
Stock as such Common Stock exists on the date of this Certificate or shares of
any class or classes resulting from any reclassification or reclassifications
thereof and which have no preference in respect of dividends or of amounts
payable in the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company and which are not subject to redemption by the
Company, provided that if at any time there shall be more than one such
resulting class, the shares of each such class then so issuable shall be
substantially in the proportion which the total number of shares of such class
resulting from all such reclassifications bears to the total number of shares of
all such classes resulting from all such reclassifications.
(k) Average Share Price. As used herein, the term "Average Share
Price" shall mean the average of the last sale price per share of the Company's
shares of Common Stock as reported by Bloomberg, L.P. ("Bloomberg") (or, if
Bloomberg is not then providing quotes, from a comparable reputable source), on
any one of the following exchanges on which such Common Stock shall then be
quoted; namely, (a) the American Stock Exchange, (b) the NASDAQ National Market
System ("NASDAQ NMS"), (c) the NASDAQ System (other than the NASDAQ NMS), (d)
the New York Stock Exchange, or (e) the National Quotation Bureau, Inc. for
quotes on the Electronic Bulletin Board or the "Pink Sheets", as the case may
be, for the applicable number of consecutive trading days immediately preceding
the dividend payment date or conversion date specified in Section 2(b) or this
Section 5, as the case may be. "Closing Price" shall mean the last sale price
per share on any particular date, determined as aforesaid.
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6. Redemptions.
------------
(a) Voluntary Redemption. Subject to compliance with the provisions
of this Section 6(a), the Company shall have the right
exercisable at any time on or after November 3, 2002, on not more than sixty
(60) days and not less than fifteen (15) days prior written notice to the
holders of Series C Preferred Stock (the "Voluntary Redemption Notice"), to
redeem all or any portion of the Shares of Series C Preferred Stock at a
redemption price for each Share of Series C Preferred Stock to be redeemed (the
"Voluntary Redemption Price") equal to the sum of (i) $100 per Share, and (ii)
all declared, payable and unpaid dividends on such Share to the date fixed for
redemption (the "Voluntary Redemption Date").
(b) Mandatory Redemption. On November 3, 2004 (the "Mandatory
Redemption Date"), the Company shall redeem all of the Shares then outstanding
at a redemption price for each Share to be redeemed (the "Mandatory Redemption
Price") equal to the sum of (i) $100 per Share, and (ii) all accrued dividends
on such Share to the Mandatory Redemption Date.
(c) Method of Payment. The Company shall pay an aggregate amount for
all Shares to be redeemed hereunder (the "Redemption Payment"), calculated by
multiplying the number of Shares so redeemed by the applicable Voluntary
Redemption Price or Mandatory Redemption Price, as the case may be, on the
Voluntary Redemption Date or Mandatory Redemption Date, as applicable, by
payment of the Voluntary Redemption Price or Mandatory Redemption Price, as
applicable, by bank cashiers' or certified check payable to the applicable
holders of the Series C Preferred Stock or wire transfer of immediately
available funds to accounts designated in writing by such holders received by
the Company at least five (5) business days prior thereto. If, for any reason,
the full applicable Redemption Payment is not timely made pursuant to this
Section 6(c), such defaulted Redemption Payment shall thereafter bear default
interest at the lower of the highest legal rate or 15% per annum until paid in
full.
(d) Delivery of Series C Preferred Stock. The holders of Series C
Preferred Stock whose Shares are to be redeemed pursuant to this Section 6 shall
deliver to the Company, against receipt of the applicable Voluntary Redemption
Payment or Mandatory Redemption Payment, all of their Shares to be redeemed,
duly endorsed in blank for transfer or accompanied by a duly executed stock
power with the signature of the record owner guaranteed by a bank or member firm
of the New York Stock Exchange.
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7. No Preemptive Rights. Except as provided in Sections 5, 8, and 9 hereof,
no holder of the Series C Preferred Stock shall be entitled as of right to
subscribe for, purchase or receive any part of any new or additional shares of
any class, whether now or hereafter authorized, or any bonds or debentures, or
other evidences of indebtedness convertible into or exchangeable for shares of
any class, but all such new or additional shares of any class or bonds or
debentures, or other evidences of indebtedness convertible into or exchangeable
for shares may be issued and disposed of by the Board of Directors on such terms
and for such consideration (to the extent permitted by law), and to such person
or persons as the Board of Directors in its absolute discretion may deem
advisable.
8. Exchange for Senior Subordinated Notes. At any time after November 3,
2000, the Series C Preferred Stock will be exchangeable for 9% Senior
Subordinated Notes of the Company due November 3, 2004, at the rate of $100
principal amount of such notes for each Share. The exchanging holder shall
furnish to the Company irrevocable written notice of such exchange, together
with the certificates evidencing the Shares to be exchanged, duly endorsed in
blank for transfer or accompanied by a duly executed stock power, with the
signature of the record holder guaranteed by a bank or a member of the firm of
the New York Stock Exchange.
9. Series C Special Redemption.
----------------------------
(a) Subject to subsection (e) hereof, each holder of Series C
Preferred Stock shall have the right to require the redemption of a portion or
all of its Series C Preferred Stock upon a Series C Redemption Event (as
hereinafter defined) and in the Series C Redemption Amount (as hereinafter
defined) at a price equal to $100 per share plus a sum equal to all cash
dividends accrued and unpaid to the Series C Redemption Date (as hereinafter
defined) and any stock dividends accrued and unpaid to such date.
(b) Within 30 days of a Series C Redemption Event the Company shall
mail a notice (the "Series C Redemption Notice") to each holder of record of the
Series C Preferred Stock stating:
A: The Series C Redemption Amount; and
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B: (i) that a Series C Redemption Event has occurred, that an
offer (the "Series C Redemption Event Offer") limited to
the Series C Redemption Amount is being made pursuant to
the terms of the Series C Preferred Stock and that all
shares of the Series C Preferred Stock validly tendered
and not in excess of the Series C Redemption Amount will
be accepted for redemption. If more than one registered
owner of Series C Preferred Stock at the time of any
Series C Redemption Event Offer tenders stock for
redemption, Series C Preferred Stock shall be accepted
for redemption only in the same proportions in which
those submitting Series C Preferred Stock share
ownership of it;
(ii) the redemption price and the date of redemption (which
shall be a business day no earlier than 30 days nor
later than 60 days from the date such notice is mailed)
(the "Series C Redemption Date");
(iii) that any shares of Series C Preferred Stock not tendered
will continue to accumulate dividends;
(iv) that, unless the Company defaults in the payment of the
Series C Preferred Stock redemption price, any shares of
Series C Preferred Stock accepted for redemption
pursuant to the Series C Redemption Event Offer shall
cease to accumulate dividends after the Series C
Redemption Date;
(v) that holders whose shares of Series C Preferred Stock
are being redeemed only in part will be issued new
certificates representing shares of Series C Preferred
Stock equal in number to the unredeemed portion of the
shares of Series C Preferred Stock surrendered; provided
that each certificate representing shares of Series C
Preferred Stock redeemed and each new certificate
representing shares of Series C Preferred Stock issued
shall be in whole shares.
(c) On or about the Series C Redemption Date:
(i) the transfer agent for the Series C Preferred Stock
shall deliver to the Company a certificate specifying
the aggregate number of shares of Series C Preferred
Stock delivered for purchase by the holders of Series C
Preferred Stock prior to the Series C Redemption Date
pursuant to the Series C Redemption Event Offer;
-14-
<PAGE>
(ii) The Company shall accept for redemption shares of Series
C Preferred Stock or portions thereof so delivered;
(iii) The Company shall deposit with the transfer agent for
the Series C Preferred Stock money sufficient to pay the
redemption price of all shares of Series C Preferred
Stock accepted for redemption by the Company; and
(iv) The Company shall deliver, or cause to be delivered, to
the transfer agent for the Series C Preferred Stock an
officers' certificate specifying the shares of Series C
Preferred Stock or portions thereof accepted for
redemption by the Company.
(d) The transfer agent for the Series C Preferred Stock shall
promptly mail to the holders of Series C Preferred Stock so accepted payment in
an amount equal to the Series C Preferred Stock redemption price, and the
transfer agent for the Series C Preferred Stock shall promptly authenticate and
mail to such holders of Series C Preferred Stock a new certificate representing
shares of Series C Preferred Stock equal in number to any unredeemed shares of
Series C Preferred Stock surrendered; provided that each share of Series C
Preferred Stock redeemed and each new certificate representing shares of Series
C Preferred Stock issued shall be in whole shares. The Company will notify the
holders of Series C Preferred Stock of the results of the Series C Redemption
Event Offer as soon as practicable after the Series C Redemption Date.
(e) "Series C Redemption Event" shall mean each instance in which
the amount in the Series C Security Account exceeds the Series C Redemption
Amount, provided however, that such Series C Redemption Event shall cease
whenever the Company shall mail a Series C Redemption Notice to each holder of
record of the Series C Preferred Stock as hereinabove provided.
(f) "Series C Redemption Amount" shall mean the amount, not less
than $1,000,000 except as specified hereinafter upon termination of the Series C
Security Account, and not exceeding $6,200,000 in the aggregate, of cash and
cash equivalent property held by or for the credit of the Series C Security
Account in excess of any reasonable reserve for the payment of fees and expenses
of such Security Account. The Company maintains the Series C Security Account to
secure and as a method of funding the Series C Redemptions upon Series C
Redemption Events. Such Account is maintained pursuant to a security agreement
(the "Security Agreement") as required by the Sharing Agreement. Upon
termination of the Series C Security
-15-
<PAGE>
Account in accordance with the terms of the Security Agreement, any amount
remaining in such Series C Security Account shall be deemed a Series C
Redemption Amount and accordingly shall be applied to fund a Series C Redemption
Event Offer.
10. Change in Control.
------------------
(a) Upon the occurrence of a Change in Control (as hereinafter
defined), each holder of Series C Preferred Stock shall have the right to
require the redemption of its Series C Preferred Stock by the Company in cash,
pursuant to the offer described below (the "Change in Control Offer") at a price
(the "Change in Control Redemption Price") equal to $101 per share plus a sum
equal to all dividends accrued and unpaid thereon (if any) to the related Change
in Control Redemption Date (as hereinafter defined). A "Change in Control" shall
mean (i) a merger, consolidation or reorganization of the Company, if, after
giving effect thereto, the holders of the Common Stock prior to such
transactions shall fail to own at least 51% of the capital stock entitled to
vote for the election of directors in the successor entity, (ii) the sale of a
majority or more of the assets of the Company in any single transaction or in
any series of related transactions or (iii) a change in the composition of the
Board of Directors of the Company such that during any period of two consecutive
years the individuals who at the beginning of such period were directors of the
Company shall cease for any reason to constitute a majority of the directors
then in office (and not designated to sit on the Board by any holder of
preferred stock) unless the individuals replacing such directors were elected or
nominated by the Board of Directors of the Company.
(b) Within 30 days of any Change in Control the Company shall mail a
notice (the "Change in Control Notice") to each holder of record of the Series C
Preferred Stock stating:
(i) that a Change in Control has occurred, that the Change
in Control Offering is being made pursuant to the terms of the Series C
Preferred Stock and that all Shares validly tendered will be accepted for
redemption;
(ii) the redemption price and the date of redemption (which
shall be a business day no earlier than 30 days nor later than 60 days from the
date such notice is mailed) (the "Change in Control Redemption Date");
-16-
<PAGE>
(iii) that any Shares not tendered will continue to accumulate
dividends;
(iv) that, unless the Company defaults in the payment of the
Change in Control Redemption Price, any Shares accepted for redemption pursuant
to the Change in Control Offer shall cease to accumulate dividends after the
Change in Control Redemption Date;
(v) that holders of Series C Preferred Stock electing to
have any Shares redeemed pursuant to the Change in Control Offer will be
required to surrender the certificates representing such Shares to the transfer
agent for the Series C Preferred Stock at the address specified in the notice
prior to 1:00 P.M., New York City time, on the business day immediately
preceding the Change in Control Redemption Date; and
(vi) that holders whose Shares are being redeemed only in
part will be issued new certificates representing Shares equal in number to the
unredeemed portion of the Shares surrendered; provided that each certificate
representing Shares redeemed and each new certificate representing Shares issued
shall be in whole Shares.
(c) On or about the Change in Control Redemption Date:
(i) the transfer agent for the Series C Preferred Stock
shall deliver to the Company a certificate specifying the aggregate number of
Shares delivered for purchase by the holders of Series C Preferred Stock prior
to the Change in Control Redemption Date pursuant to the Change in Control
Offer;
(ii) The Company shall accept for redemption shares of Series
C Preferred Stock so delivered;
(iii) The Company shall deposit with the transfer agent for
the Series C Preferred Stock money sufficient to Pay the Change in Control
Redemption Price of all Shares accepted for payment by the Company; and
(iv) The Company shall deliver, or cause to be delivered, to
the transfer agent for the Series C Preferred Stock an officers' certificate
specifying the Shares accepted for payment by the Company.
-17-
<PAGE>
(d) The transfer agent for the Series C Preferred Stock shall
promptly mail to the holders of Series C Preferred Stock so accepted payment in
an amount equal to the Change in Control Redemption Price, and the transfer
agent for the Series C Preferred Stock shall promptly authenticate and mail to
such holders of Series C Preferred Stock a new certificate representing Shares
equal in number to any unredeemed Shares surrendered; provided that each Share
redeemed and each new certificate representing Shares issued shall be in whole
Shares. The Company will notify the holders of Series C Preferred Stock of the
results of the Change in Control Offer as soon as practicable after the Change
in Control Redemption Date.
11. Miscellaneous.
--------------
(a) No Impairment. The Company shall not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Company.
(b) Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given (i) on the same date, if delivered
personally or by facsimile by not later than 5:00 p.m. New York time (provided,
that a copy of such facsimile shall be simultaneously sent to the Company at its
principal place of business), or (ii) three business days following being mailed
by certified or registered mail, postage prepaid, return-receipt requested,
addressed to the holder of record at its address appearing on the books of the
Company.
12. Notwithstanding anything to the contrary contained in this certificate,
no redemption of Series C Preferred Stock shall be permissible except in
compliance with the Delaware General Corporation Law. Any proposed redemption of
the Series C Preferred Stock authorized herein shall be reduced in an amount to
effect compliance with such statute, or if such reduction is not feasible,
deferred until such time as a redemption may be made in compliance with such
statute.
-18-
<PAGE>
IN WITNESS WHEREOF, this Certificate of Designation is executed on
behalf of the Company by its duly authorized officer this ____ day of
___________, 2000.
PHOENIX WASTE SERVICES COMPANY, INC.
By:
-----------------------------------
[Name and Title]
-19-
<PAGE>
CERTIFICATE OF DESIGNATION
OF
SERIES D EXCHANGEABLE REDEEMABLE PREFERRED STOCK
(Par Value $.001 Per Share)
OF
PHOENIX WASTE SERVICES COMPANY, INC.
Phoenix Waste Services Company, Inc., a Delaware corporation
(hereinafter called the "Company"), hereby certifies that the following
resolution was adopted by the Board of Directors of the Company pursuant to
Section 151 of the Delaware General Corporation Law at a meeting duly called and
held on _________, 2000:
RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors of this Company, in accordance with the provisions of the
Certificate of Incorporation of the Company, the Board of Directors hereby
creates a series of preferred stock, par value $.001 per share, of the Company
and hereby states the designation and number of shares, and fixes the relative
rights, preferences, and limitations thereof as follows:
1. Designation and Rank. The designation of such series of the preferred
stock shall be the Series D Exchangeable Redeemable Preferred Stock, par value
$.001 per share (the "Series D Preferred Stock"). The number of shares of Series
D Preferred Stock (the "Shares") shall be Eight Thousand Seven Hundred
Seventy-One (8,771). The Series D Preferred Stock shall rank (i) prior to the
common stock, par value $.001 per share, of the Company (the "Common Stock"),
(ii) on a parity with all shares of the Company's Series A Exchangeable
Redeemable Preferred Stock, par value $.001 per share (the "Series A Preferred
Stock") and the Company's Series C Redeemable Convertible Preferred Stock, par
value $.001 per share (the "Series C Preferred Stock"), (iii) subordinate and
junior to all indebtedness of the Company now or hereafter existing, and (iv)
prior to the Company's $2.50 Series B Convertible Preferred Stock, par value
$.001 per share (the "Series B Preferred Stock") as to liquidation and other
payment rights as provided in Section 4(d) and to any other class or series of
capital stock of the Company hereafter created (unless it specifically, by its
terms, ranks on a parity with the Series D Preferred Stock) (each such junior
class or series of capital stock and the Common Stock being hereinafter referred
to as the "Junior Stock"), in each case as to dividends and distributions of
assets upon liquidation, dissolution or winding up of the Company, whether
voluntary or involuntary.
2. Cumulative Dividends; Priority.
-------------------------------
(a) The holders of record of shares of Series D Preferred Stock are
entitled to a cumulative noncompounded dividend equal
<PAGE>
to 8% per annum, payable when declared by the Company's Board of Directors, and
upon any exchange or redemption of the Series D Preferred Stock. Dividends shall
be payable semi-annually by the Company on June 30th and December 31st of each
year. Through November 3, 2004, dividends on the Series D Preferred Stock may be
paid either in cash or, at the election of the Company, by delivery of
additional shares of Common Stock having an aggregate "Market Value" (as
hereinafter defined) equal to the amount of such dividend, or in any combination
of cash and shares of Common Stock. For purposes of dividend payments, each
share of Common Stock will be deemed to have a "Market Value" equal to ninety
percent of the "Average Share Price" as defined in Section 5(a) for the ten
consecutive trading days preceding the dividend payment date. Dividends on
shares of the Series D Preferred Stock will be cumulative on a daily basis from
the date of initial issuance of such shares of Series D Preferred Stock.
Dividends will be payable, in arrears, to holders of record as they appear on
the stock books of the Company on such record dates (such record dates being not
more than 60 days nor less than 10 days preceding the relevant payment date), as
shall be fixed by the Board of Directors. The amount of dividends payable for
each full dividend period shall be computed by dividing the annual dividend
payment by two. The amount of dividends payable for the initial dividend period
or any period shorter or longer than a full dividend period shall be calculated
on the basis of a 360-day year of twelve 30-day months. No dividends may be
declared or paid or set apart for payment on any stock on a parity with the
Series D Preferred Stock with regard to the payment of dividends unless there
shall also be or have been declared and paid or set apart for payment on the
Series D Preferred Stock like dividends, for all dividend payment periods of the
Series D Preferred Stock ending on or before the dividend payment date of such
parity stock, ratably in proportion to the respective amounts of dividends (x)
accumulated and unpaid or payable on such parity stock, on the one hand, and (y)
accumulated and unpaid through the dividend payment period or periods of Series
D Preferred Stock next preceding such dividend payment date, on the other hand.
Except as set forth in the preceding sentence, unless full cumulative
dividends on the Series D Preferred Stock have been paid, no dividends (other
than in Common Stock of the Company) may be paid or declared or set aside for
payment or other distribution made, upon the Common Stock or any other Junior
Stock of the Company or stock on a parity with the Series D Preferred Stock as
to dividends, nor may any Common Stock or any other Junior Stock or parity stock
of the Company, except as provided in that certain Sharing Agreement dated March
31, 2000 between the Company, Wasteco Ventures Limited and Robert J. Longo, as
amended, be redeemed, purchased or otherwise acquired for any consideration (or
any payment be made to or available for a sinking fund for the redemption of any
shares of such stock); provided, that any such Junior Stock or parity stock may
be converted into or exchanged for stock of the Company ranking junior to the
Series D Preferred Stock as to dividends.
-2-
<PAGE>
3. Voting Rights.
--------------
(a) The Series D Preferred Stock shall have the following class
voting rights. So long as any shares of the Series D Preferred Stock remain
outstanding, the Company shall not, without the affirmative vote or consent of
the holders of at least sixty-six and 2/3 percent of the aggregate shares of the
Series A Preferred Stock and Series D Preferred Stock outstanding at the time,
given in person or by proxy, either in writing or at a meeting, in which the
holders of the Series A Preferred Stock and Series D Preferred Stock vote
together as a single, separate class: (i) authorize, create or issue (other than
the 169,000 shares of Series A Preferred Stock and 91,000 shares of Series C
Preferred Stock outstanding on the date of the filing of this Certificate of
Designation), or increase the authorized or issued amount of, any class or
series of stock ranking prior to or on a parity with the Series D Preferred
Stock with respect to the payment of dividends or the distribution of assets on
liquidation, dissolution or winding up; or (ii) repurchase, or pay cash
dividends on, shares of the Company's Junior Stock; provided, that dividends may
be paid on Junior Stock so long as at the time of such payment (A) all dividends
on the Series D Preferred Stock shall have been paid in full, and (B) if
dividends on Junior Stock are payable in cash, all dividends on the Series D
Preferred Stock thereafter paid shall similarly be paid in cash. In addition, so
long as any shares of the Series D Preferred Stock remain outstanding, the
Company shall not, without the affirmative vote or consent of the holders of at
least sixty-six and 2/3% of the shares of the Series D Preferred Stock
outstanding at the time, given in person or by proxy, either in writing or at a
meeting, in which the holders of the Series D Preferred Stock vote separately as
a class: (x) amend, alter or repeal the provisions of the Series D Preferred
Stock, whether by merger, consolidation or otherwise, so as to affect materially
and adversely any right, preference, privilege or voting power of the Series D
Preferred Stock; provided, however, that any creation and issuance of other
series of Junior Stock shall not be deemed to materially and adversely affect
such rights, preferences, privileges or voting powers; or (y) amend the
Certificate of Incorporation or Bylaws of the Company so as to affect materially
and adversely any right, preference, privilege or voting power of the Series D
Preferred Stock; provided, however, that any creation and issuance of other
series of Junior Stock shall not be deemed to materially and adversely affect
such rights, preferences, privileges or voting powers.
(b) Except as provided above and except as otherwise required by
applicable law, the Series D Preferred Stock shall have no voting rights.
-3-
<PAGE>
4. Liquidation Preference.
-----------------------
(a) In the event of the liquidation, dissolution or winding up of
the affairs of the Company, whether voluntary or involuntary, after payment or
provision for payment of the debts and other liabilities of the Company, the
holders of shares of the Series D Preferred Stock then outstanding, pari passu
with the holders of shares of the Series A Preferred Stock and the Series C
Preferred Stock, shall be entitled to receive, out of the assets of the Company
whether such assets are capital or surplus of any nature, an amount (the
"Liquidation Preference") per share equal to $100 per share of the Series D
Preferred Stock, plus cumulative and unpaid dividends at the rate of 8% per
annum, through the date of liquidation, dissolution or winding up, whether or
not declared, and no more, before any payment shall be made or any assets
distributed to the holders of the Common Stock or any other Junior Stock. If the
assets of the Company are not sufficient to pay in full the liquidation payment
payable to the holders of outstanding shares of the Series D Preferred Stock,
and any series of preferred stock or any other class of stock on a parity, as to
rights on liquidation, dissolution or winding up, with the Series D Preferred
Stock (the "Parity Securities"), provided that the holders of a majority of the
shares of Series D Preferred Stock approve such Parity Securities (other than
the 169,000 shares of Series A Preferred Stock and 91,000 shares of Series C
Preferred Stock outstanding on the date of the filing of this Certificate of
Designation) in accordance with Section 3(a) hereof, then the holders of
outstanding shares of the Series D Preferred Stock are entitled to be paid on a
pro-rata basis together with the other Parity Securities, based on the relative
liquidation value of shares of Series D Preferred Stock and the Parity
Securities. The liquidation payment with respect to each outstanding fractional
share of Series D Preferred Stock shall be equal to a ratably proportionate
amount of the liquidation payment with respect to each outstanding whole share
of Series D Preferred Stock. All payments for which this Section 4(a) provides
shall be in cash, property (valued at its fair market value as determined by an
independent nationally recognized investment banking firm) or a combination
thereof; provided, however, that no cash shall be paid to holders of Junior
Stock unless each holder of the outstanding shares of Series D Preferred Stock
and each holder of Parity Securities has been paid in cash the full amount of
the liquidation payment to which such holder is entitled as provided herein.
After payment of the full amount of the liquidation payment to which each holder
is entitled, such holders of shares of Series D Preferred Stock will not be
entitled to any further participation as such in any distribution of the assets
of the Company.
(b) A consolidation or merger of the Company with or into any
corporation or corporations, or a sale of all or substantially all of the assets
of the Company, shall not be deemed to be a liquidation, dissolution, or winding
up within the meaning of this Section 4.
-4-
<PAGE>
(c) Written notice of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Company, stating a payment date
and the place where the distributable amounts shall be payable, shall be given
by mail, postage prepaid, no less than 30 days prior to the payment date stated
therein, to the holders of record of the Series D Preferred Stock at their
respective addresses as the same shall appear on the books of the Company.
(d) Together with the outstanding Series A Preferred Stock and
outstanding Series C Preferred Stock, the Liquidation Preference set forth in
this Paragraph 4, and all other payment rights hereunder, shall be senior and
prior in all events to any other preferred stock now or hereafter issued by the
Company, including without limitation, the Series B Preferred Stock of the
Company unless the parity or priority of such other preferred stock is approved
by the Series D Preferred Stock as herein provided.
5. Miscellaneous.
--------------
(a) Average Share Price. As used herein, the term "Average Share
Price" shall mean the average of the last sale price per share of the Company's
shares of Common Stock as reported by Bloomberg, L.P. ("Bloomberg") (or, if
Bloomberg is not then providing quotes, from a comparable reputable source), on
any one of the following securities markets on which such Common Stock shall
then be quoted; namely, (a) the American Stock Exchange, (b) the NASDAQ National
Market System ("NASDAQ NMS"), (c) the NASDAQ System (other than the NASDAQ NMS),
(d) the New York Stock Exchange or (e) the National Quotation Bureau, Inc. for
quotes on the Electronic Bulletin Board or the "Pink Sheets," as the case may
be, for the applicable number of consecutive trading days immediately preceding
the dividend payment date.
(b) No Impairment. The Company shall not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Company.
(c) Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given (i) on the same date, if delivered
personally or by facsimile by not later than 5:00 p.m. New York time (provided,
that a copy of such facsimile shall be simultaneously sent to the Company at its
principal place of business or its then current address and facsimile number),
or (ii) three business days following being mailed by certified or registered
mail, postage prepaid, return-receipt requested, addressed to the holder of
record at its address appearing on the books of the Company.
-5-
<PAGE>
6. Redemptions.
------------
(a) Voluntary Redemption. Subject to the right of the holders of
Series D Preferred Stock to effect an exchange of their shares of Series D
Preferred Stock at any time prior to 5:00 p.m. New York City time on the date
fixed for redemption and subject to compliance with the provisions of this
Section 6(a), the Company shall have the right, exercisable at any time on not
more than sixty days and not less than fifteen days prior written notice to the
holders of Series D Preferred Stock (the "Voluntary Redemption Notice"), to
redeem all or any portion of the Shares at a redemption price for each Share to
be redeemed (the "Voluntary Redemption Price") equal to the sum of (i) $100 per
Share, and (ii) all accrued dividends on such Share to the date fixed for
redemption (the "Voluntary Redemption Date"). If the Company redeems less than
all of the outstanding Shares on any Voluntary Redemption Date, such redemption
shall be effected on a pro-rata basis among the holders of record.
(b) Mandatory Redemption. On November 3, 2004 (the "Mandatory
Redemption Date"), the Company shall redeem all of the Shares then outstanding
at a redemption price for each Share to be redeemed (the "Mandatory Redemption
Price") equal to the sum of (i) $100 per Share, and (ii) all accrued dividends
on such Share to the Mandatory Redemption Date.
(c) Method of Payment. The Company shall pay an aggregate amount for
all Shares to be redeemed hereunder (the "Redemption Payment"), calculated by
multiplying the number of Shares so redeemed by the applicable Voluntary
Redemption Price or Mandatory Redemption Price, as the case may be, on the
Voluntary Redemption Date or Mandatory Redemption Date, as applicable, by
payment of the Voluntary Redemption Price or the Mandatory Redemption Price, as
applicable, by bank cashier's or certified check payable to the applicable
holders of the Series D Preferred Stock or wire transfer of immediately
available funds to accounts designated in writing by such holders received by
the Company at least five business days prior thereto. If, for any reason, the
full applicable Redemption Payment is not timely made pursuant to this Section
6(c), such defaulted Redemption Payment shall thereafter bear default interest
at the lower of the highest legal rate or 15% per annum until paid in full.
(d) Delivery of Series D Preferred Stock. The holders of Series D
Preferred Stock whose Shares are to be redeemed pursuant to this Section 6 shall
deliver to the Company, against receipt of the applicable Voluntary Redemption
Payment or Mandatory Redemption Payment, all of their Shares to be redeemed,
duly endorsed in blank for transfer or accompanied by a duly executed stock
power with the signature of the record owner guaranteed by a bank or member firm
of the New York Stock Exchange.
-6-
<PAGE>
7. No Preemptive Rights. Except as provided in Sections 8 and 9 hereof, no
holder of the Series D Preferred Stock shall be entitled as of right to
subscribe for, purchase or receive any part of any new or additional shares of
any class, whether now or hereafter authorized, or any bonds or debentures, or
other evidences of indebtedness convertible into or exchangeable for shares of
any class, but all such new or additional shares of any class or bonds or
debentures, or other evidences of indebtedness convertible into or exchangeable
for shares may be issued and disposed of by the Board of Directors on such terms
and for such consideration (to the extent permitted by law), and to such person
or persons as the Board of Directors in its absolute discretion may deem
advisable.
8. Exchange for Senior Subordinated Notes. At any time after November 3,
2000, the Series D Preferred Stock will be exchangeable for 9% Senior
Subordinated Notes of the Company due November 3, 2004, at the rate of $100
principal amount of such notes for each Share. The exchanging holder shall
furnish to the Company irrevocable written notice of such exchange, together
with the certificates evidencing the Shares to be exchanged, duly endorsed in
blank for transfer or accompanied by a duly executed stock power, with the
signature of the record holder guaranteed by a bank or a member firm of the New
York Stock Exchange.
9. Change in Control.
------------------
(a) Upon the occurrence of a Change in Control (as hereinafter
defined), each holder of Series D Preferred Stock shall have the right to
require the redemption of its Series D Preferred Stock by the Company in cash,
pursuant to the offer described below (the "Change in Control Offer") at a price
(the "Change in Control Redemption Price") equal to $101 per share plus a sum
equal to all dividends accrued and unpaid thereon (if any) to the related Change
in Control Redemption Date (as hereinafter defined). A "Change in Control" shall
mean (i) a merger, consolidation or reorganization of the Company, if, after
giving effect thereto, the holders of the Common Stock prior to such transaction
shall fail to own at least 51% of the capital stock entitled to vote for the
election of directors in the successor entity, (ii) the sale of a majority or
more of the assets of the Company in any single transaction or in any series of
related transactions or (iii) a change in the composition of the Board of
Directors of the Company such that during any period of two consecutive years
the individuals who at the beginning of such period were directors of the
Company shall cease for any reason to constitute a majority of the directors
then in office (and not designated to sit on the Board by any holder of
preferred stock) unless the individuals replacing such directors were elected or
nominated by the Board of Directors of the Company.
-7-
<PAGE>
(b) Within 30 days of any Change in Control, the Company shall mail
a notice (the "Change in Control Notice") to each holder of record of the Series
D Preferred Stock stating:
(i) that a Change in Control has occurred, that the Change
in Control Offer is being made pursuant to the terms of the Series D
Preferred Stock and that all Shares validly tendered will be accepted
for redemption;
(ii) the redemption price and the date of redemption (which
shall be a business day no earlier than 30 days nor later than 60 days
from the date such notice is mailed) (the "Change in Control Redemption
Date");
(iii) that any Shares not tendered or redeemed will continue
to accumulate dividends;
(iv) that, unless the Company defaults in the payment of the
Change in Control Redemption Price, any Shares accepted for redemption
pursuant to the Change in Control Offer shall cease to accumulate
dividends after the Change in Control Redemption Date;
(v) that holders of Series D Preferred Stock electing to
have any Shares redeemed pursuant to the Change in Control Offer will be
required to surrender the certificates representing such Shares to the
transfer agent for the Series D Preferred Stock at the address specified
in the notice prior to 1:00 p.m., New York City time, on the business
day immediately preceding the Change in Control Redemption Date; and
(vi) that holders whose Shares are being redeemed only in
part will be issued new certificates representing Shares equal in number
to the unredeemed portion of the Shares surrendered; provided that each
certificate representing Shares redeemed and each new certificate
representing Shares issued shall be in whole Shares.
(c) On or about the Change in Control Redemption Date:
(i) the transfer agent for the Series D Preferred Stock
shall deliver to the Company a certificate specifying the aggregate
number of Shares delivered for purchase by the holders of Series D
Preferred Stock prior to the Change in Control Redemption Date pursuant
to the Change in Control Offer;
(ii) The Company shall accept for redemption Shares so
delivered;
-8-
<PAGE>
(iii) The Company shall deposit with the transfer agent for
the Series D Preferred Stock money sufficient to pay the Change in
Control Redemption Price for all Shares accepted for payment by the
Company; and
(iv) The Company shall deliver, or cause to be delivered, to
the transfer agent for the Series D Preferred Stock an officer's
certificate specifying the Shares accepted for payment by the Company.
(d) The transfer agent for the Series D Preferred Stock shall
promptly mail to the holders of Series D Preferred Stock so accepted
payment in an amount equal to the Change in Control Redemption Price,
and the transfer agent for the Series D Preferred Stock shall promptly
authenticate and mail to such holders of Series D Preferred Stock a new
certificate representing Shares equal in number to any unredeemed Shares
surrendered, provided that each Share redeemed and each new certificate
representing Shares issued shall be in whole Shares. The Company will
notify the holders of Series D Preferred Stock of the results of the
Change in Control Offer as soon as practicable after the Change in
Control Redemption Date.
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IN WITNESS WHEREOF, this Certificate of Designation has been executed on
behalf of the Company by its duly authorized officer this ______ day of
____________, 2000.
PHOENIX WASTE SERVICES COMPANY, INC.
By:
-----------------------------------
[Name and Title]
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BY-LAWS
OF
PHOENIX WASTE SERVICES COMPANY, INC.
ARTICLE I.
Offices.
SECTION 1. Registered Office. The registered office of Phoenix Waste
Services Company, Inc. (hereinafter referred to as the "Corporation") shall be
maintained at such location within the State of Delaware as is provided in the
Certificate of Incorporation of the Corporation. The Corporation shall maintain
in and in charge of such registered office an agent upon whom process against
the Corporation may be served.
SECTION 2. Other Offices. The Corporation may also have an office or
offices at such other place or places, either within or without the State of
Delaware, as the Board of Directors may from time to time determine or the
business of the Corporation may require.
ARTICLE II.
Meetings of Shareholders.
SECTION 1. Annual Meetings. The annual meeting of the shareholders of
the Corporation for the election of directors and for the transaction of such
business as may properly come before the meeting shall be held on such date and
at such time as the Board of Directors may fix prior to the notice of the
meeting. If the election of directors shall not be held on the day designated
pursuant hereto for any annual meeting or at any adjournment of such meeting,
the directors shall cause the election to be held at a special meeting as soon
thereafter as may be convenient. At such special meeting, the shareholders may
elect the directors and transact other business with the same force and effect
as an annual meeting duly called and held.
SECTION 2. Special Meetings. A special meeting of the shareholders for
any purpose or purposes, unless otherwise prescribed by statute, may be called
at any time and shall be called by the President or the persons appointed to the
Office of the President or the Secretary upon direction of the Board of
Directors.
SECTION 3. Place of Meetings. All meetings of the shareholders of the
Corporation shall be held at the registered office of the Corporation or at such
other place, within or without the State of Delaware, as shall be designated by
the Board of Directors and stated in the notice of the meeting.
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SECTION 4. Notice of Meetings. Notice of the place, date, and time of
all meetings of the shareholders shall be given, not less than ten nor more than
sixty days before the date on which the meeting is to be held, to each
shareholder entitled to vote at such meeting, except as otherwise provided
herein or required by law (meaning, here and hereinafter, as required from time
to time by the Delaware General Corporation Law or the Certificate of
Incorporation of the Corporation).
When a meeting is adjourned to another place, date or time, written
notice need not be given of the adjourned meeting if the place, date and time
thereof are announced at the meeting at which the adjournment is taken;
provided, however, that if the date of any adjourned meeting is more than thirty
days after the date for which the meeting was originally noticed, or if a new
record date is fixed for the adjourned meeting, written notice of the place,
date, and time of the adjourned meeting shall be given in conformity herewith.
At any adjourned meeting, any business may be transacted which might have been
transacted at the original meeting.
SECTION 5. Quorum. At any meeting of the shareholders, the holders of a
majority of all of the shares of the stock entitled to vote at the meeting,
present in person or by proxy, shall constitute a quorum for all purposes,
unless or except to the extent that the presence of a larger number may be
required by law. Where a separate vote by a class or series is required, a
majority of the shares of such class or series present in person or represented
by proxy shall constitute a quorum entitled to take action with respect to that
vote on that matter.
If a quorum shall fail to attend any meeting, the chairman of the
meeting may adjourn the meeting to another place, date or time.
SECTION 6. Organization. At every meeting of the shareholders, the
President or the persons appointed to the Office of the President, or, in his,
her or their absence, a Vice-President, or, in the absence of all the foregoing
persons, a chairman chosen by a majority in interest of the shareholders present
in person or by proxy and entitled to vote thereat, shall act as chairman. The
Secretary, or, in his or her absence, an Assistant Secretary, shall act as
secretary at all meetings of the shareholders. In the absence from any such
meeting of the Secretary or an Assistant Secretary, the chairman may appoint any
person to act as secretary of the meeting.
SECTION 7. Business and Order of Business. At each meeting of the
shareholders, such business may be transacted as shall have been stated in the
notice of such meeting or as determined by the chairman of the meeting, and the
order of business at all meetings of the shareholders shall be as determined by
the chairman.
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SECTION 8. Voting. At each meeting of the shareholders, each shareholder
shall be entitled to one vote, or such other number of votes provided for in the
Certificate of Incorporation or any Certificate of Designation with respect to
such shareholder's stock, in person or by proxy for each share of the
Corporation having voting rights registered in its, his or her name on the books
of the Corporation at the close of business on the record date for such meeting.
Any shareholder entitled to vote may vote in person or by proxy in
writing; provided, however, that no proxy shall be valid more than three years
after the date of the execution thereof, unless otherwise provided therein. The
presence at any meeting of any shareholder who has given a proxy shall not
revoke such proxy unless the shareholder shall file proper notice of such
revocation with the secretary of the meeting prior to the voting of such proxy.
All elections shall be determined by a plurality of the votes cast, and
except as otherwise required by law, all other matters shall be determined by a
majority of the votes cast affirmatively or negatively.
The Corporation may, and to the extent required by law, shall, in
advance of any meeting of shareholders, appoint one or more inspectors of
election to act at the meeting and make a written report thereof. The
Corporation may designate one or more persons as alternate inspectors to replace
any inspector who fails to act. If no inspector or alternate is able to act at a
meeting of shareholders, the person presiding at the meeting may, and to the
extent required by law, shall, appoint one or more inspectors to act at the
meeting. Each inspector, before entering upon the discharge of his or her
duties, shall take and sign an oath faithfully to execute the duties of
inspector with strict impartiality and according to the best of his or her
ability. Every vote taken by ballots shall be counted by a duly appointed
inspector or inspectors.
SECTION 9. List of Shareholders. A complete list of shareholders
entitled to vote at any meeting of shareholders, arranged in alphabetical order
for each class of stock and showing the address of each such shareholder and the
number of shares registered in its, his or her name, shall be open to the
examination of any such shareholder, for any purpose germane to the meeting,
during ordinary business hours for a period of at least ten days prior to the
meeting: (i) on a reasonably accessible electronic network, provided that the
information required to gain access to such list is provided with the notice of
the meeting, or (ii) during ordinary business hours, at the principal place of
business of the Corporation. If the Corporation determines to make the list
available on an electronic network, the Corporation may take reasonable steps to
ensure that such information is available only to stockholders of the
Corporation. If the meeting is to be held at a place, then the
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list shall be produced and kept at the time and place of the meeting during the
whole time thereof, and may be inspected by any stockholder who is present. If
the meeting is to be held solely by means of remote communication, then the list
shall also be open to the examination of any stockholder during the whole time
of the meeting on a reasonably accessible electronic network, and the
information required to access such list shall be provided with the notice of
the meeting.
The stock list shall also be kept at the place of the meeting during the
whole time thereof and shall be open to the examination of any shareholder who
is present. This list shall presumptively determine the identity of the
shareholders entitled to vote at the meeting and the number of shares held by
each of them.
SECTION 10. Action By Shareholders Without a Meeting. Any action
required or permitted to be taken at a meeting of shareholders may be taken
without a meeting if, subject to the provisions of Section 228 of the Delaware
General Corporation Law, shareholders who would have been entitled to cast the
minimum number of votes which would be necessary to authorize such action at a
meeting at which all shareholders entitled to vote thereon were present and
voting shall consent in writing to such action being taken. Whenever corporate
action is so taken, the consents of the shareholders consenting thereto shall be
filed with the minutes of proceedings of the shareholders of the Corporation.
ARTICLE III.
Board of Directors.
SECTION 1. General Powers. The property, affairs, and business of the
Corporation shall be managed by or under the direction of the Board of
Directors.
SECTION 2. Number, Qualifications, and Term of Office. The number of
directors which shall constitute the whole Board of Directors shall be not less
than three or more than nine, the exact number within such range to be fixed
from time to time by the Board of Directors. The directors shall be elected
annually at the annual meeting of the shareholders, and each director shall hold
office until his or her successor shall have been elected and qualified, or
until his or her death, or until he or she shall have resigned in the manner
provided in Section 12 of this Article III or shall have been removed, whichever
shall first occur. Any directors elected to fill a vacancy in the Board of
Directors shall be deemed elected for the unexpired portion of the term of his
or her predecessor on the Board of Directors. Each director, at the time of his
or her election, shall be at least eighteen years of age, but need not be a
shareholder of the Corporation.
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SECTION 3. Election of Directors. At each meeting of the shareholders
for the election of directors, the directors shall be chosen by a plurality of
the votes cast at such election by the holders of shares entitled to vote
thereon. The vote for directors need not be by ballot unless demanded by a
shareholder entitled to vote thereon at the election and before the voting
begins.
SECTION 4. Annual Meetings. The annual meeting of the Board of Directors
shall be held in each year immediately after the annual meeting of shareholders,
at such place as the Board of Directors may fix from time to time, and if so
held, no notice of such meeting need be given.
SECTION 5. Regular Meetings. Regular meetings of the Board of Directors
shall be held at such times as the Board of Directors shall by resolution
determine. Notice of regular meetings need not be given.
SECTION 6. Special Meetings. Special meetings of the Board of Directors
shall be held whenever called by the President or the persons appointed to the
Office of the President or any two directors. Notice of each such meeting shall
be mailed to each director, addressed to him or her at his or her residence or
usual place of business, at least five days before the day on which the meeting
is to be held, or shall be sent to him or her at such place by telegraph, cable,
telex, facsimile, or the equivalent, or be delivered personally or by telephone,
not later than the day preceding the day on which the meeting is to be held
except that in the event of an emergency the President or the persons appointed
to the Office of the President may direct that shorter notice of a special
meeting be given personally or by telephone or telegraph, cable, telex, cable,
facsimile, or the equivalent. Neither the business to be transacted at nor the
purpose of the meeting need be specified in the notice. Notice of any meeting of
the Board of Directors need not be given to any director, however, if waived by
him or her in writing or by telegraph, telex, cable, facsimile, or the
equivalent, whether before or after such meeting be held, and such notice shall
be deemed waived if he or she shall be present at the meeting and not object at
the commencement of the meeting to the lack of notice. Any meeting of the Board
of Directors shall be a legal meeting without any notice thereof having been
given, if all the directors shall be present thereat.
SECTION 7. Place of Meeting. Any meetings of the Board of Directors may
be held in such manner and at such place or places within or without the State
of Delaware as the Board of Directors may from time to time designate.
SECTION 8. Quorum and Manner of Acting. A majority of the directors
shall be required to constitute a quorum for the transaction of business at any
meeting. The act of a majority of the directors present at any meeting at which
a quorum is present shall be the act of the Board of Directors. In the absence
of a quorum, a majority of the directors present may adjourn any meeting from
time to time until a quorum be had. Notice of any adjourned meeting shall be
given in the same manner as notice of special meetings are required to be given
as herein set forth. Except as otherwise provided herein, the directors shall
act only as a board and the individual directors shall have no power as such.
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SECTION 9. Action by Written Consent. Any action required or permitted
to be taken pursuant to authorization voted at a meeting of the Board of
Directors or any committee thereof may be taken without a meeting if all members
of the Board of Directors or of such committee, as the case may be, consent
thereto in writing or by electronic transmission and such consents are filed
with the minutes of the proceedings of the Board of Directors or committee. Such
consent shall have the same effect as a unanimous vote of the Board of Directors
or committee for all purposes and may be stated as such in any certificate or
other document filed with the Secretary of State.
SECTION 10. Organization. At each meeting of the Board of Directors, the
Chairman of the Board (who shall be elected for a one year term by the directors
at the annual meeting of the Board) or, in his or her absence, the President or
the persons appointed to the Office of the President, shall act as chairman. The
Secretary, or, in his or her absence, an Assistant Secretary, or, in the absence
of the Secretary and the Assistant Secretaries, any person appointed by the
Chairman, shall act as secretary of the meeting.
SECTION 11. Order of Business. At all meetings of the Board of
Directors, business may be transacted in such order as the Board of Directors
may from time to time determine.
SECTION 12. Resignations. Any directors of the Corporation may resign at
any time by giving written notice to the Board of Directors or to the President
or the persons holding the Office of the President or the Secretary of the
Corporation. The resignation of any director shall take effect at the time
specified therein; and, unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
SECTION 13. Removal of Directors. Except as otherwise provided in the
Delaware General Corporation Law or the Certificate of Incorporation, any
director may be removed at any time, either with or without cause, by the
shareholders at any regular or special meeting.
SECTION 14. Vacancies. Subject to the rights of the holders of any
series of preferred stock then outstanding, newly created directorships
resulting from any increase in the authorized number of directors or any
vacancies on the Board of
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Directors resulting from death, resignation, retirement, disqualification,
removal from office or other cause shall, unless otherwise required by law or by
resolution of the Board of Directors, be filled only by a majority vote of the
directors then in office, though less than a quorum (and not by stockholders),
and directors so chosen shall hold office for a term expiring at the annual
meeting of stockholders at which the term of office of the class to which they
have been elected expires and until such directors' successors shall have been
duly elected and qualified. No decrease in the number of authorized directors
shall shorten the term of any incumbent director.
SECTION 15. Compensation. The directors shall receive such compensation
for their services as directors and such allowance for travelling expenses for
attendance at meetings of the Board of Directors, as may be determined by the
Board of Directors. The foregoing shall not be construed as prohibiting the
payment to any person who is a director of compensation for services rendered to
the Corporation in any other capacity.
SECTION 16. Board Committees. The Board of Directors may designate one
or more committees, each committee to consist of one or more of the directors of
the Corporation. The Board may designate one or more directors as alternate
members of any committee, who may replace any absent or disqualified member at
any meeting of the committee. In the absence or disqualification of a member of
a committee, the member or members present at any meeting and not disqualified
from voting, whether or not such member or members constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board of Directors,
shall have and may exercise all the powers and authority of the Board of
Directors in the management of the business and affairs of the Corporation, and
may also cause the seal of the Corporation to be affixed to all papers which may
require it; but no such committee shall have the power or authority in reference
to the following matters: (i) approving or adopting, or recommending to the
stockholders, any action or matter expressly required by the Delaware General
Corporation Law to be submitted to stockholders for approval, or (ii) adopting,
amending or repealing any by-law of the Corporation.
SECTION 17. Participation in Meetings by Conference Telephone or Other
Communications Equipment. Members of the Board of Directors, or of any committee
thereof, may participate in a meeting of such Board or committee by means of
conference telephone or other communications equipment by means of which all
persons participating in the meeting can hear each other and such participation
shall constitute presence in person at such meeting.
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ARTICLE IV.
Officers.
SECTION 1. Number. The officers of the Corporation shall be a President
or the persons appointed to the Office of the President, one or more
Vice-Presidents (if appointed by the Board of Directors), a Treasurer, and a
Secretary, and one or more Assistant Treasurers and Assistant Secretaries (if
appointed by the Board of Directors), and such other officers as may be elected
or appointed by the Board of Directors in accordance with the provisions of
Section 3 of this Article IV.
SECTION 2. Election, Qualification, and Terms of Office. The officers
shall be elected annually by the Board of Directors. Each officer, except such
officers as may be appointed in accordance with the provisions of Section 3 of
this Article IV, shall hold office until his or her successor shall have been
elected and qualified, or until his or her earlier death, resignation, or
removal in the manner herein provided. Any person may hold more than one office.
SECTION 3. Subordinate Officers. The Board of Directors from time to
time may elect such other officers and appoint such agents and employees as it
may deem necessary or proper. Such officers, agents, and employees shall hold
office for such period, have such authority, and perform such duties as are
provided in these By-laws or as the Board of Directors may from time to time
prescribe.
SECTION 4. Resignations. Any officer may resign at any time by giving
written notice of such resignation to the Board of Directors, the President or
the persons appointed to the Office of the President, or the Secretary of the
Corporation. Unless otherwise specified in such written notice, such resignation
shall take effect upon receipt thereof by the Board of Directors or any such
officer
SECTION 5. Removal. Any officer may be removed, either with or without
cause, by the Board of Directors.
SECTION 6. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification, or any other cause may be filled for the
unexpired portion of the term by the Board of Directors.
SECTION 7. The President. The Corporation shall either have a President
or an Office of the President (as defined in Section 8 below), as determined by
the Board of Directors from time to time. If the Corporation has a President, he
or she shall be the chief executive officer of the Corporation. Subject to the
direction of the Board of Directors he or she shall have general charge of the
business, affairs and property of the Corporation and general supervision over
its officers and agents. If present, he or she shall preside at all meetings of
shareholders and, in the absence of the Chairman of
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the Board (if one has been appointed), at all meetings of the Board of
Directors, and he or she shall see that all orders and resolutions of the Board
or Directors are carried into effect. He or she may sign, with any other officer
thereto authorized, certificates of stock of the Corporation, the issuance of
which shall have been duly authorized. The President may also sign and execute,
in the name of the Corporation, deeds, mortgages, bonds, contracts, agreements,
and other instruments duly authorized by the Board of Directors, except in cases
where the signing and execution thereof shall be expressly delegated by the
Board of Directors to some other officer or agent. From time to time, he or she
shall report to the Board of Directors all matters within his or her knowledge
which the interests of the Corporation may require to be brought to their
attention. He or she shall also perform such other duties as are given to him or
her by these By-laws or as from time to time may be assigned to him or her by
the Board of Directors.
SECTION 8. Office of the President. If the Board of Directors determines
to authorize an Office of the President, such Office of the President shall,
until further direction of the Board, consist of such number of persons as the
Board of Directors shall determine from time to time, which persons shall be
appointed by the Board. Such individuals shall, jointly, have all the powers and
obligations of the President set forth in Section 7, above, and all actions
permitted to be taken by the President must be approved jointly by the
individuals in the Office of the President. Appointees to the Office of the
President may be either paid consultants or full-time employees, subject in each
case to Board approval. If the Board has authorized an Office of the President
rather than appointed a single individual as President, every reference in these
By-Laws to the President shall, unless the context otherwise requires, mean the
Office of the President.
SECTION 9. The Vice-Presidents. The Board may, but need not, elect one
or more Vice-Presidents. At the request of the President or the persons
appointed to the Office of the President, any Vice-President shall perform all
the duties of the President or the persons appointed to the Office of the
President and, when so acting, shall have all the powers of and be subject to
all restrictions upon the President or the persons appointed to the Office of
the President. Each Vice-President shall perform such other duties as are given
to him or her by these By-Laws or as from time to time may be assigned to him or
her by the Board of Directors or the President or the persons appointed to the
Office of the President.
SECTION 10. The Secretary. The Secretary shall:
(a) record all the proceedings of the meetings of the shareholders
and Board of Directors in a book or books to be kept for that purpose;
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(b) cause all notices to be duly given in accordance with the
provisions of these By-Laws and as required by statute;
(c) be custodian of the records and of the seal of the Corporation,
and cause such seal to be affixed to all certificates representing stock of the
Corporation prior to the issuance thereof and to all instruments, the execution
of which on behalf of the Corporation under its seal shall have been duly
authorized;
(d) see that the lists, books, reports, statements, certificates,
and other documents and records required by statute are properly kept and filed;
(e) have charge of the stock and transfer books of the Corporation
and cause such stock and transfer books to be kept in such manner as to show at
any time the amount of stock of the Corporation issued and outstanding, the
names and addresses of the holders of record thereof, the number of shares held
by each, and the date when each became such holder of record;
(f) perform the duties required of him or her under Section 10 of
Article II of these By-Laws;
(g) sign (unless the Treasurer, an Assistant Treasurer, or Assistant
Secretary shall sign) certificates representing stock of the Corporation, the
issuance of which shall have been duly authorized; and
(h) in general, perform all duties incident to the office of
Secretary and such other duties as are given to him or her by these By-Laws or
as from time to time may be assigned to him or her by the Board of Directors or
the President or the persons appointed to the Office of the President.
SECTION 11. The Assistant Secretaries. One or more Assistant Secretaries
may, but need not, be designated by the Board of Directors. At the request of
the Secretary, or in his or her absence or disability, the President or the
persons appointed to the Office of the President or one of the Assistant
Secretaries shall perform all the duties of the Secretary, and, when so acting,
shall have all the powers of and be subject to all restrictions upon the
Secretary. Each Assistant Secretary shall perform such other duties as from time
to time may be assigned to him or her by the Board of Directors, the President
or the persons appointed to the Office of the President, or the Secretary.
SECTION 12. The Treasurer. The Treasurer shall:
(a) have charge of and supervision over and be responsible for the
funds, securities, receipts, and disbursements of the Corporation;
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(b) cause the moneys and other valuable effects of the Corporation
to be deposited in the name and to the credit of the Corporation in such banks
or trust companies, or with such bankers or other depositaries, as shall be
selected in accordance with Section 3 of Article V of these By-laws or to be
otherwise dealt with in such manner as the Board of Directors may direct;
(c) cause the funds of the Corporation to be disbursed by checks or
drafts upon the authorized depositaries of the Corporation, and cause to be
taken and preserved proper vouchers for all monies disbursed;
(d) render to the Board of Directors or the President or the persons
appointed to the Office of the President, whenever requested, a statement of the
financial condition of the Corporation and of all his or her transactions as
Treasurer;
(e) cause to be kept at the principal office of the Corporation or
at such other office (within or without the State of Delaware) as shall be
designated by the Board of Directors, correct books of account of all its
business and transactions;
(f) sign (unless the Secretary, Assistant Secretary or an Assistant
Treasurer shall sign) certificates representing stock of the Corporation, the
issuance of which shall have been duly authorized; and
(g) in general, perform all duties incident to the office of
Treasurer and such other duties as are given to him or her by these By-Laws or
as from time to time may be assigned to him or her by the Board of Directors or
the President or the persons appointed to the Office of the President.
SECTION 13. The Assistant Treasurers. One or more Assistant Treasurers
may, but need not, be designated to act by the Board of Directors. At the
request of the Treasurer, or in his or her absence or disability, the President
or the persons appointed to the Office of the President or one of the Assistant
Treasurers shall perform all the duties of the Treasurer, and, when so acting,
shall have all the powers of and be subject to all restrictions upon the
Treasurer. Each Assistant Treasurer shall perform such other duties as from time
to time may be assigned to him or her by the Board of Directors, the President
or the persons appointed to the Office of the President, or the Secretary.
SECTION 14. Salaries. The salaries of the officers of the Corporation
shall be fixed from time to time by the Board of Directors. No officer shall be
prevented from receiving such salary by reason of the fact that he or she is
also a director of the Corporation.
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ARTICLE V.
Contracts, Checks, Drafts, Bank Accounts, etc.
SECTION 1. Contracts, etc.; How Executed. The President or the persons
appointed to the Office of the President or any Vice-President, subject to the
approval of the Board of Directors, may enter into any contract or execute and
deliver any instrument in the name and on behalf of the Corporation, and such
authorization may be general or confined to specific instances.
SECTION 2. Checks, Drafts, etc. All checks, drafts, or other orders for
the payment of money and all notes or other evidences of indebtedness issued in
the name of the Corporation shall be signed by such officer or officers or agent
or agents of the Corporation as shall be thereunto so authorized from time to
time by resolution of the Board of Directors.
SECTION 3. Deposits. All funds of the Corporation not otherwise employed
shall be deposited from time to time to its credit in such banks or trust
companies or with such bankers or other depositaries as the Board of Directors
may select or as may be selected by any officer or officers or agent or agents
authorized so to do by the Board of Directors. Endorsement for deposit to the
credit of the Corporation in any of its duly authorized depositaries shall be
made in such manner as the Board of Directors from time to time may determine.
SECTION 4. General and Special Bank Accounts. The Board of Directors may
authorize from time to time the opening and keeping of general and special bank
accounts with such banks, trust companies, or other depositaries as it may
designate and may make such special rules and regulations with respect thereto,
not inconsistent with the provisions of these By-Laws, as it may deem expedient.
SECTION 5. Loans. No loans or advances shall be borrowed on behalf of
the Corporation and no negotiable paper shall be issued in its name, unless and
except as authorized by the Board of Directors. Such authorization may be
general or confined to specific instances. Any officer or agent of the
Corporation thereunto so authorized may effect loans and advances for the
Corporation and for such loans and advances may make, execute, and deliver
promissory notes, bonds or other evidences of indebtedness of the Corporation.
Any officer or agent of the Corporation thereunto so authorized may pledge,
hypothecate or transfer, as security for the payment of any and all loans,
advances, indebtedness and liabilities of the Corporation, any and all stock,
bonds, other securities and other personal property at any time held by the
Corporation, and to that end may endorse, assign and deliver the same and do
every act and thing necessary or proper in connection therewith.
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SECTION 6. Proxies. Proxies to vote with respect to shares of stock of
other corporations owned by or standing in the name of the Corporation may be
executed and delivered from time to time on behalf of the Corporation by such
person or persons as shall be thereunto authorized from time to time by the
Board of Directors.
ARTICLE VI.
Shares and Their Transfer
SECTION 1. Stock Certificates. Every holder of shares of the Corporation
shall be entitled to have a certificate, signed by the President or the persons
appointed to the Office of the President or a Vice-President and either the
Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary,
certifying the class and number of shares owned by him or her in the
Corporation. In case any officer of the Corporation who has signed any such
certificate shall cease to be such officer, for whatever cause, before the
certificate shall have been delivered by the Corporation, the certificate shall
be deemed to have been adopted by the Corporation unless the Board of Directors
shall otherwise determine prior to the issuance and delivery thereof, and such
certificate may be issued and delivered as though the person who signed it had
not ceased to be such officer of the Corporation. Certificates representing
shares of stock of the Corporation shall be in such form as shall be approved by
the Board of Directors. There shall be entered upon the stock books of the
Corporation at the time of issuance of each certificate an entry showing the
number of the certificate issued, the name and address of the person owning the
share or shares represented thereby, the class and number of such shares and the
date of issuance thereof. Every certificate exchanged or returned to the
Corporation shall be marked "cancelled," with the date of cancellation.
SECTION 2. Stock Record Books. The stock record books and blank stock
certificates shall be kept by the Secretary of the Corporation or by any officer
or agent designated by the Board of Directors.
SECTION 3. Addresses of Shareholders. Each shareholder shall designate
to the Secretary of the Corporation an address at which notices of meetings and
all other corporate notices may be served, delivered or mailed to him or her,
and if any shareholder shall fail to designate such address, all corporate
notices (whether served or delivered by the Secretary, another shareholder or
any other person) may be served upon him or her by mail directed to him or her
at his or her last known post office address.
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<PAGE>
SECTION 4. Transfer of Shares. Transfers of shares of the Corporation
shall be made on the books of the Corporation by the holder of record thereof or
by his or her attorney thereunto duly authorized by a power of attorney duly
executed in writing and filed with the Secretary of the Corporation and upon
surrender of the certificate or certificates representing such shares. The
Corporation shall be entitled to treat the holder of record of any share or
shares as the absolute owner thereof for all purposes and, accordingly, shall
not be bound to recognize any legal, equitable or other claim to or interest in
such share or shares on the part of any other person, whether or not it shall
have express or other notice thereof, except as otherwise expressly provided by
statute; provided, however, that whenever any transfer of shares shall be made
for collateral security and not absolutely and written notice thereof shall be
given to the Secretary of the Corporation, such fact shall be expressed in the
entry of the transfer. Notwithstanding anything to the contrary contained in
these By-Laws, the Corporation shall not be required or permitted to make any
transfer of shares of the Corporation which violates the terms and provisions of
any agreement restricting the transfer of shares of the Corporation to which the
Corporation shall be a party; provided, that the restriction upon the transfer
of the shares represented by any stock certificate shall be set forth or
referred to upon the certificate.
SECTION 5. Regulations. Subject to the provisions of this Article VI,
the Board of Directors may make such rules and regulations as it may deem
expedient concerning the issuance, transfer and registration of certificates for
shares of the Corporation.
SECTION 6. Lost, Destroyed, and Mutilated Cer-tificates. The holder of
any shares shall promptly notify the Corporation of any loss, destruction or
mutilation of the certificate therefor, and the Board of Directors, in its
discretion, may cause to be issued to him or her a new certificate or
certificates of stock upon surrender of the mutilated certificate or, in case of
loss or destruction of the certificate, upon satisfactory proof of such loss or
destruction, and the Board of Directors, in its discretion, may require the
owner of the lost or destroyed certificate or his or her legal representative to
give the Corporation a bond, in such sum (not exceeding double the value of such
shares) and with such surety or sureties as it may direct, to indemnity the
Corporation against any claim that may be made against it on account of the
alleged loss or destruction of any such certificate.
SECTION 7. Fixing of Record Dates. In order that the Corporation may
determine the shareholders entitled to notice of or to vote at any meeting of
shareholders, or to receive payment of any dividend or other distribution, or
allotment of any rights, or to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other lawful action,
the Board of Directors may, except as otherwise required by law,
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<PAGE>
fix a record date, which record date shall not precede the date on which the
resolution fixing the record date is adopted, and which record date shall not be
more than sixty nor less than ten days before the date of any meeting of
shareholders, nor more than sixty days prior to the time for such other action
as hereinbefore described; provided, however, that if no record date is fixed by
the Board of Directors, 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 day next preceding the day on which notice is given or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held. For determining shareholders entitled to receive
payment of any dividend or other distribution or allotment of rights or to
exercise any rights of change, conversion or exchange of stock or for any other
purpose, if no record date is fixed by the Board of Directors, the record date
shall be at the close of business on the day on which the Board of Directors
adopts a resolution relating thereto.
A determination of shareholders of record entitled to notice of or to
vote at a meeting of shareholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
ARTICLE VII.
Notices
SECTION 1. Notices. Except as otherwise specifically provided herein or
required by law, all notices required to be given to any shareholder may in
every instance be effectively given by (i) hand delivery to the recipient
thereof, (ii) depositing such notice in the mails, postage paid, (iii)
recognized overnight delivery service, (iv) sending such notice by facsimile,
receipt acknowledged, or (v) prepaid telegram or mailgram. Any such notice shall
be addressed to such shareholder at his or her or her last known address as the
same appears on the books of the Corporation. Notices given to shareholders may
be given by electronic transmission in the manner provided by law.
SECTION 2. Waivers. A written waiver of any notice, signed by a
shareholder or director, or waiver by electronic transmission by such person,
whether given before or after the time of the event for which notice is to be
given, shall be deemed equivalent to the notice required to be given to such
shareholder, director, officer, employee or agent. Neither the business nor the
purpose of any meeting need be specified in such a waiver. Attendance at any
meeting shall constitute waiver of notice except attendance for the sole purpose
of objecting to the timeliness of notice.
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<PAGE>
ARTICLE VIII.
Dividends, Surplus, etc.
Subject to the Certificate of Incorporation, any Certificate of
Designation with respect to preferred stock of the Corporation and any
restrictions imposed by statute, the Board of Directors from time to time, in
its discretion, may fix and vary the amount of the working capital of the
Corporation and determine what, if any, dividends shall be declared and paid to
shareholders out of surplus of the Corporation or other funds legally available
therefor.
ARTICLE IX.
Corporate Seal.
The Corporation shall have a corporate seal which shall be in circular
form, shall bear the name of the Corporation and the words and figures denoting
its organization under the laws of the State of Delaware and the year thereof,
and otherwise shall be in such form as shall be approved from time to time by
the Board of Directors.
ARTICLE X.
Fiscal Year.
The fiscal year of the Corporation shall be from May 1 of one year
through April 30 of the following year.
ARTICLE XI.
Accountants.
The Board of Directors of the Corporation shall designate from time to
time the independent accountants of the Corporation.
ARTICLE XII.
Amendments.
All By-Laws of the Corporation shall be subject to amendment, alteration
or repeal, and new By-Laws not inconsistent with any provision of the
Certificate of Incorporation of the Corporation or any provision of law may be
made, by the shareholders or by the Board of Directors to the extent permitted
by the Certificate of Incorporation.
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<PAGE>
ARTICLE XIII.
Force and Effect.
These By-Laws are subject to the provisions of the Delaware General
Corporation Law and the Certificate of Incorporation (including any Certificate
of Designation with respect to preferred stock of the Corporation). If any
provision of these By-Laws is inconsistent with an express provision of such
statute or the Certificate of Incorporation (including any Certificate of
Designation with respect to preferred stock of the Corporation), the provision
of such statute or the Certificate of Incorporation (including any Certificate
of Designation with respect to preferred stock of the Corporation) shall govern
to the extent of such inconsistency.
ARTICLE XIV.
Indemnification of Directors and Officers.
SECTION 1. Right to Indemnification. Each person who was or is made a
party or is threatened to be made a party to or is otherwise involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact that he or she
is or was a director or an officer of the Corporation or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to an employee benefit plan
(hereinafter an "indemnitee"), whether the basis of such proceeding is alleged
action in an official capacity as a director, officer, employee or agent or in
any other capacity while serving as a director, officer, employee or agent,
shall be indemnified and held harmless by the Corporation to the fullest extent
authorized by the Delaware General Corporation Law, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the Corporation to provide broader indemnification
rights than such law permitted the Corporation to provide prior to such
amendment), against all expense, liability and loss (including attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid in
settlement) reasonably incurred or suffered by such indemnitee in connection
therewith; provided, however, that, except as provided in Section 3 of this
ARTICLE XIV with respect to proceedings to enforce rights to indemnification,
the Corporation shall indemnify any such indemnitee in connection with a
proceeding (or part thereof) initiated by such indemnitee only if such
proceeding (or part thereof) was authorized by the Board of Directors of the
Corporation.
SECTION 2. Right to Advancement of Expenses. The right to
indemnification conferred in Section 1 of this ARTICLE XIV shall include the
right to be paid by the Corporation the expenses (including attorneys' fees)
incurred in defending any such proceeding in advance of its final disposition
(hereinafter an "advancement of expenses"); provided, however, that, if the
Delaware General Corporation Law requires, an advancement of expenses incurred
by an indemnitee in his or her capacity as a director or officer (and not in any
other capacity in which
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<PAGE>
service was or is rendered by such indemnitee, including, without limitation,
service to an employee benefit plan) shall be made only upon delivery to the
Corporation of an undertaking (hereinafter an "undertaking"), by or on behalf of
such indemnitee, to repay all amounts so advanced if it shall ultimately be
determined by final judicial decision from which there is no further right to
appeal (hereinafter a "final adjudication") that such indemnitee is not entitled
to be indemnified for such expenses under this Section 2 or otherwise. The
rights to indemnification and to the advancement of expenses conferred in
Sections 1 and 2 of this ARTICLE XIV shall be contract rights and such rights
shall continue as to an indemnitee who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the indemnitee's heirs,
executors and administrators.
SECTION 3. Right of Indemnitee to Bring Suit. If a claim under Section 1
or 2 of this ARTICLE XIV is not paid in full by the Corporation within sixty
days after a written claim has been received by the Corporation, except in the
case of a claim for an advancement of expenses, in which case the applicable
period shall be twenty days, the indemnitee may at any time thereafter bring
suit against the Corporation to recover the unpaid amount of the claim. If
successful in whole or in part in any such suit, or in a suit brought by the
Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking, the indemnitee shall be entitled to be paid also the expense of
prosecuting or defending such suit. In (i) any suit brought by the indemnitee to
enforce a right to indemnification hereunder (but not in a suit brought by the
indemnitee to enforce a right to an advancement of expenses) it shall be a
defense that, and (ii) any suit brought by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the Corporation
shall be entitled to recover such expenses upon a final adjudication that, the
indemnitee has not met any applicable standard for indemnification set forth in
the Delaware General Corporation Law. 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
suit that indemnification of the indemnitee is proper in the circumstances
because the indemnitee has met the applicable standard of conduct set forth in
the Delaware General Corporation Law, nor an actual determination by the
Corporation (including its Board of Directors, independent legal counsel or its
shareholders) that the indemnitee has not met such applicable standard of
conduct, shall create a presumption that the indemnitee has not met the
applicable standard of conduct or, in the case of such a suit brought by the
indemnitee, be a defense to such suit. In any suit brought by the indemnitee to
enforce a right to indemnification or to an advancement of expenses hereunder,
or brought by the Corporation to recover an advancement of expenses pursuant to
the terms of an undertaking, the burden of proving that the indemnitee is not
entitled to be indemnified or to such advancement of expenses under this ARTICLE
XIV or otherwise shall be on the Corporation.
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<PAGE>
SECTION 4. Non-Exclusivity of Rights. The rights to indemnification and
to the advancement of expenses conferred in this ARTICLE XIV shall not be
exclusive of any other right which any person may have or hereafter acquire
under any statute, the Corporation's Certificate of Incorporation, By-laws,
agreement, vote of shareholders or disinterested directors or otherwise.
SECTION 5. Insurance. The Corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law.
SECTION 6. Indemnification of Employees and Agents of the Corporation.
The Corporation may, to the extent authorized from time to time by the Board of
Directors, grant rights to indemnification and to the advancement of expenses to
any employee or agent of the Corporation to the fullest extent of the provisions
of this Article with respect to the indemnification and advancement of expenses
of directors and officers of the Corporation.
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<PAGE>
ANNEX IV
NOTICE TO SHAREHOLDERS
OF
RIGHT TO DISSENT
AND
FORM OF
NOTICE OF DISSENT AND DEMAND
<PAGE>
NOTICE TO SHAREHOLDERS OF RIGHT TO DISSENT
COMPOST AMERICA HOLDING COMPANY, INC.
THIS NOTICE TO SHAREHOLDERS OF RIGHT TO DISSENT is given this 7th day
of September, 2000 pursuant to a resolution of the Board of Directors (the
"Board") of Compost America Holding Company, Inc., a New Jersey corporation (the
"Company"), and Section 14A:5-6(2) and Chapter 11 of the New Jersey Business
Corporation Act (the "Act").
1. You are hereby notified that the Company and its wholly-owned subsidiary,
Phoenix Waste Services Company, Inc., a Delaware corporation ("Phoenix"),
propose and intend to consummate a merger (the "Reorganization Merger") for the
purpose of changing the Company's place of incorporation from New Jersey to
Delaware, to be effective on or about October 12, 2000 or such later date as may
be required by law (the "Effective Date"), whereby, upon satisfaction of certain
conditions stated therein, the Company will merge with Phoenix, Phoenix shall
survive the merger and the Company shall cease to exist. This Reorganization
Merger constitutes a merger within the meaning of Section 14A:11-1(a) of the
Act, thereby requiring approval of the owners of a majority of the Company's
voting shares outstanding.
2. On September 7, 2000 a Proxy Statement describing the Reorganization Merger
was distributed to all shareholders of record of the Company as at July 31, 2000
seeking their approval of the Reorganization Merger at a meeting of the
Company's shareholders to be held on September 28, 2000. A copy of this Proxy
Statement accompanies this Notice to Shareholders of Right to Dissent.
3. You are hereby notified that the proposed effective date of the
Reorganization Merger is October 12, 2000 and that you have certain rights as a
shareholder, including the right to dissent and be paid fair value ("Fair
Value") for your shares.
4. To exercise your right to dissent and receive Fair Value for your shares, you
must provide, within twenty days of the mailing hereof, which date is September
27, 2000, written notice to the Company of your dissent and demand for Fair
Value in the form attached hereto and made a part hereof ("Notice of Dissent and
Demand"). Upon making such Notice of Dissent and Demand, you shall cease to have
<PAGE>
any of the rights of a shareholder except the right to be paid Fair Value for
your shares and any other rights of a dissenting shareholder under the Act. Once
given, your demand may not be withdrawn without the written consent of Phoenix.
Fair Value shall be determined as of September 27, 2000, the day prior to the
day the Company anticipates approval of the Reorganization Merger from a
majority of the shareholders entitled to vote thereon.
5. Notice of Dissent and Demand should be forwarded to:
Compost America Holding Company, Inc.
One Gateway Center, 25th Floor
Newark, NJ 07102
Attention: Richard Franks, Esquire
6. Upon your written Notice of Dissent and Demand, you must submit your share
certificates or certificates representing your shares (the "Certificates") in
the Company at the above address for notation on such Certificate that such
Notice of Dissent and Demand has been made. The Company must receive such
Certificates no later than twenty days after your Notice of Dissent and Demand
and such Certificates shall be returned to you with such notation.
7. Your rights as a dissenting shareholder shall cease if: (1) you fail to
present your certificates for notation within twenty days of your Notice of
Dissent and Demand; (2) your Notice of Dissent and Demand is withdrawn with the
written consent of the Company; (3) Fair Value is not agreed upon and no action
to determine the Fair Value is commenced within the time period provided below
in paragraph 11; (4) the Superior Court of the State of New Jersey determines
that you are not entitled to payment for your shares; (5) the Reorganization
Merger is not approved by the Company's shareholders or directors, is abandoned
or is rescinded; or (6) a court of competent having jurisdiction permanently
enjoins or sets aside the Reorganization Merger.
8. Not later than 10 days after the expiration of the period within which you
may provide a Notice of Dissent and Demand to be paid the Fair Value of your
shares, the Company shall mail to you the balance sheet and the surplus
statement of the Company, as of the latest available date (which shall not be
earlier than 12 months prior to the making of such offer) and a profit and loss
2
<PAGE>
statement or statements representing not less than a 12-month period ended on
the date of such balance sheet. The Company may accompany such mailing with a
written offer to pay you for your shares at a specified price deemed by the
Company to be the Fair Value thereof. Such offer shall be made at the same price
per share to all dissenting shareholders of the same class, or, if shares are
divided into series, of the same series.
9. If, not later than 30 days after the expiration of the 10-day period
specified in paragraph 8 above, Fair Value is agreed upon between you and the
Company, payment therefor shall be made upon surrender of the Certificate to the
Company.
10. If Fair Value is not agreed upon within the 30-day period specified in
paragraph 9 above, you may serve upon the Company a written demand (a
"Determination Demand") that it commence an action in the Superior Court for the
determination of the Fair Value of the shares. Such Determination Demand shall
be served not later than 30 days after the expiration of the 30-day period for
making the Determination Demand and such action shall be commenced by the
Company not later than 30 days after receipt by the Company of such
Determination Demand, but nothing herein shall prevent the Company from
commencing such action at any earlier time.
11. If the Company fails to commence the action as provided in the immediately
preceding paragraph, you may do so in the name of the Company, not later than 60
days after the expiration of the time limited by the immediately preceding
paragraph in which the Company may commence such an action.
12. In any action to determine the Fair Value of shares, the Superior Court of
New Jersey shall (i) have jurisdiction to proceed in a summary manner, (ii) make
all dissenting shareholders parties to the action, (iii) have discretion to
appoint an appraiser to receive evidence and report to the court on the question
of Fair Value and (iv) have the power to render judgment against the Company in
the amount of the Fair Value of the shares. A judgment in any such action shall
be payable upon surrender to the corporation of the Certificate. The costs and
expenses of bringing any such action, including the fees and expenses of any
appraiser but excluding fees and expenses of counsel and any experts you may
employ, will be determined by the court and apportioned among the parties to the
action.
3
<PAGE>
NOTICE OF DISSENT AND DEMAND
The undersigned is the registered owner of _____ shares of common stock
of Compost America Holding Company, Inc., a New Jersey corporation (the
"Company") bearing certificate number(s) ___________ (the "Shares").
The undersigned acknowledges receipt from the Company of a copy of a
Notice to Shareholders of Right to Dissent dated August 31, 2000. In compliance
with the terms of Chapter 11 of the New Jersey Business Corporation Act, the
undersigned hereby notifies the Company that such shareholder wishes to dissent
from the Reorganization Merger (as defined in the Notice to Shareholders of
Right to Dissent) and demands Fair Value (as defined in the Notice to
Shareholders of Right to Dissent) for the Shares.
Print Name of Registered Owner: _________________________
Dated: _________________________
Signature: _________________________
Number of Shares: _________________________
4
