<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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 Material Pursuant to Section 240.14a-12
CYNET, INC.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(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)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
CYNET, INC.
12777 JONES ROAD, SUITE 400
HOUSTON, TEXAS 77070
----------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
WEDNESDAY, JUNE 28, 2000
10:00 A.M. - CENTRAL TIME
On behalf of our Board of Directors, we cordially invite you to
attend the 2000 CYNET, Inc. Annual Meeting of Shareholders. At the meeting,
we will:
1. Elect the Board of Directors;
2. Approve an amendment to our Articles of Incorporation to
increase the number of authorized shares of our Class A Common
Stock, no par value, from 40,000,000 to 100,000,000 shares;
3. Approve an amendment to our 1997 Stock Option Plan to increase
the number of shares of our Class A Common Stock authorized for
issuance under the plan from 2,000,000 shares to an aggregate of
5,000,000 shares;
4. Approve the change of our state of incorporation from Texas to
Delaware;
5. Approve the establishment of a classified board of directors
when the reincorporation occurs as proposed above;
6. Approve and ratify the selection of BDO Seidman, LLP as our
independent auditors; and
7. Conduct other business properly brought before the meeting.
Shareholders who owned our Class A Common Stock and our Series D
Preferred Stock at the close of business on May 3, 2000 may attend and vote at
the meeting. A shareholder's list will be available at our offices listed
above for a period of ten days prior to the meeting. If you cannot attend the
meeting, you may vote by mailing the proxy card in the enclosed
postage-prepaid envelope. Any shareholder attending the meeting may vote in
person, even though he or she has already returned a proxy.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE,
DATE, SIGN AND PROMPTLY RETURN THE PROXY IN THE ENCLOSED ENVELOPE.
SHAREHOLDERS WHO ATTEND THE MEETING MAY REVOKE THEIR PROXIES AND VOTE IN
PERSON.
We look forward to seeing you at the meeting.
By Order of the Board of Directors
/s/ Samuel C. Beale
-----------------------------------
Samuel C. Beale
VICE PRESIDENT, GENERAL COUNSEL AND
SECRETARY
Houston, Texas
June 9, 2000
<PAGE>
CYNET, INC.
12777 JONES ROAD, SUITE 400
HOUSTON, TEXAS 77070
-----------------------
PROXY STATEMENT
2000 ANNUAL MEETING OF SHAREHOLDERS
JUNE 28, 2000
-----------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
Our Board of Directors is soliciting proxies for the 2000 Annual
Meeting of Shareholders to be held on Wednesday, June 28, 2000 at 10:00 a.m.
(Houston time) at the Wyndham Greenspoint Hotel, located at 12400 Greenspoint
Drive, Houston, Texas 77060, and at any adjournments or postponements of the
meeting. This proxy statement contains important information for you to
consider when deciding how to vote on the matters brought before the meeting.
Please read it carefully.
CYNET will pay the costs of soliciting proxies from shareholders.
Directors, officers and regular employees may solicit proxies on behalf of
CYNET, without additional compensation, personally or by telephone. Voting
materials, which include the proxy statement, proxy card and 2000 Annual
Report, will be mailed to shareholders on or about June 9, 2000.
QUESTIONS AND ANSWERS
Q: Who can attend and vote at the meeting?
A: You can attend and vote at the meeting if you were a holder of our
Class A Common Stock and Series D Preferred Stock at the close of
business on the record date, May 3, 2000. On that date, there were
27,728,188 shares outstanding and entitled to vote at the Annual
Meeting, including 1,766,423 shares of outstanding Series D Preferred
Stock.
Q: What am I voting on?
A: You are voting on:
- The election of directors;
- The approval of an amendment to our Articles of Incorporation
to increase the number of authorized shares of the Company's
Class A Common Stock, no par value, from 40,000,000 to
100,000,000 shares;
- The approval of an amendment to our 1997 Stock Option Plan to
increase the number of shares of Class A Common Stock
authorized for issuance under the plan from 2,000,000 to
5,000,000;
2
<PAGE>
- The approval of the change of our state of incorporation from
Texas to Delaware by merging CYNET into a newly organized,
wholly-owned subsidiary corporation;
- The approval of the establishment of a classified board of
directors when the reincorporation occurs; and
- The approval and ratification of the selection of BDO
Seidman, LLP as our independent auditors.
The nine individuals receiving the highest number of "FOR" votes
will be elected to the Board of Directors. The approval of the amendment to
the Articles of Incorporation and the change to a Delaware corporation
(including the establishment of a classified Board of Directors) requires the
affirmative "FOR" vote of a two-thirds majority of the shares present at the
meeting and entitled to vote. The approval of the amendment to the 1997 Stock
Option Plan, and the selection of our independent auditors requires the
affirmative "FOR" vote of a simple majority of the shares present at the
meeting and entitled to vote.
Q: How will the proxies vote on any other business brought up at the
meeting?
A: By submitting your proxy card, you authorize the proxies to use their
judgment to determine how to vote on any other matter brought before
the meeting. We do not know of any other business to be considered at
the meeting.
The proxies' authority to vote according to their judgment applies
only to shares you own as a shareholder of record.
Q: How do I cast my vote?
A: If you hold your shares as a shareholder of record, you can vote in
person at the Annual Meeting or you can vote by mail. If you are a
street-name shareholder, you will receive instructions from your bank,
broker or other nominee describing how to vote your shares.
The enclosed proxy card contains instructions for mail voting. The
proxies identified on the front of the proxy card will vote the shares
of which you are the shareholder of record in accordance with your
instructions. If you submit a proxy card without giving specific
voting instructions, the proxies will vote those shares as recommended
by the Board of Directors.
Q: How does the board recommend I vote on the proposals?
A: The board recommends you vote "FOR" each of the nominees to the Board
of Directors; "FOR" the amendment to the Articles of Incorporation;
"FOR" the amendment to the 1997 Stock Option Plan; "FOR" the change to
a Delaware corporation; "FOR" the establishment of a classified Board
of Directors upon reincorporation; and "FOR" the selection of our
independent auditors.
Q: Can I revoke my proxy card?
A: Yes. You can revoke your proxy card by:
- Submitting a new proxy card;
- Giving written notice before the meeting to our Secretary
stating that you are revoking your proxy card; or
- Attending the meeting and voting your shares in person.
3
<PAGE>
Q: Who will count the vote?
A: The inspector(s) of election will count the vote. A representative of
our outside legal counsel, Chamberlain, Hrdlicka, White, Williams &
Martin, will act as the inspector of the election.
Q: What is a "quorum?"
A: A quorum is the number of shares that must be present to hold the
meeting. The quorum requirement for the meeting is one-half of the
outstanding shares as of the record date, present in person or
represented by proxy. If you submit a valid proxy card or attend the
meeting, your shares will be counted to determine whether there is a
quorum. Abstentions and broker non-votes count toward the quorum.
"Broker non-votes" occur when nominees (such as banks and brokers)
that hold shares on behalf of beneficial owners do not receive voting
instructions from the beneficial owners by ten days before the meeting
and do not have discretionary voting authority to vote those shares.
Q: Will broker non-votes or abstentions affect the voting results?
A: Although abstentions and broker non-votes count for quorum purposes,
they do not count as votes "FOR" or "AGAINST" a proposal. As a result,
abstentions and broker non-votes will not affect the voting results on
the matters to be voted on at the meeting.
Q: What shares are included on my proxy card?
A: Your proxy card represents all shares registered to your account in
the same social security number and address.
Q: What does it mean if I get more than one proxy card?
A: Your shares are probably registered in more than one account. You
should vote each proxy card you receive. We encourage you to
consolidate all your accounts by registering them in the same name,
social security number and address.
Q: How many votes can I cast?
A: On all matters you are entitled to one vote per share.
Q: When are shareholder proposals due for the 2001 Annual Meeting of
Shareholders?
A: If you want to present a proposal from the floor at the 2001 Annual
Meeting, you must give us written notice of your proposal no later
than December 31, 2000. If the date of the 2001 Annual Meeting is
more than 30 calendar days before or after the date of our 2000
Annual Meeting, your written notice will be timely if we receive it
by the close of business on the tenth day following the date that we
publicly announce the date of the 2001 Annual Meeting. Your notice
should be sent to the Secretary, CYNET, Inc., 12777 Jones Road, Suite
400, Houston, Texas 77070.
If instead of presenting your proposal at the meeting you want your
proposal to be considered for inclusion in next year's proxy
statement, you must submit the proposal in writing to the Secretary so
that it is received at the above address by December 15, 2000.
Q: Where can I find the voting results of the meeting?
A: The preliminary voting results will be announced at the meeting. The
final results will be published in our quarterly report on Form 10-QSB
for the second quarter of fiscal 2000.
4
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
INFORMATION CONCERNING SOLICITATION AND VOTING....................................................................1
ELECTION OF DIRECTORS.............................................................................................5
Nominees ....................................................................................................5
Current Structure of the Board of Directors and 1999 Meetings................................................7
Director Compensation and Board Committees...................................................................7
Votes Required For Election..................................................................................7
INCREASE OF AUTHORIZED CLASS A COMMON STOCK.......................................................................8
Effect of Proposed Amendment.................................................................................8
Votes Required For Approval..................................................................................9
APPROVAL OF THE AMENDMENT TO THE COMPANY'S
1997 STOCK OPTION PLAN.......................................................................................9
Votes Required For Approval.................................................................................10
REINCORPORATION OF THE COMPANY IN DELAWARE.......................................................................10
Summary Description of the Proposal.........................................................................10
Securities Act Consequences.................................................................................12
Federal Income Tax Consequences.............................................................................12
Effect on Current Market Value of Company's Common Stock....................................................12
Principal Reasons for and Effects of the Reincorporation....................................................13
Certain Changes in the Rights of Shareholders...............................................................13
CYNET-Delaware Certificate of Incorporation.................................................................21
Rights of Dissenting Shareholders...........................................................................22
Votes Required For Reincorporation..........................................................................23
APPROVAL OF THE ESTABLISHMENT OF A CLASSIFIED
BOARD OF DIRECTORS WHEN THE REINCORPORATION OCCURS..........................................................23
General ...................................................................................................23
Classified Board............................................................................................24
Votes Required and Recommendation of the Board of Directors.................................................25
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS....................................................................26
Relationship with Independent Public Accountants............................................................26
Votes Required For Approval.................................................................................26
OTHER INFORMATION................................................................................................26
Security Ownership Summary..................................................................................26
Executive Officers and Key Employees........................................................................28
Executive Compensation and Other Information................................................................29
Employment Agreements.......................................................................................33
Certain Relationships and Related Transactions..............................................................35
OTHER MATTERS....................................................................................................38
Compliance With Section 16(a) of the Exchange Act...........................................................38
Shareholder Proposal Information............................................................................38
Miscellaneous Matters.......................................................................................38
</TABLE>
5
<PAGE>
ELECTION OF DIRECTORS
(PROPOSAL 1)
At the Annual Meeting, nine directors will be elected (constituting
the entire Board of Directors). Each director is to hold office until the
next Annual Meeting or until a successor is elected and qualified, unless the
proposal to establish a classified Board of Directors is adopted by the
shareholders, as described in Proposal Five, in which case only directors
designated as Class I directors will be elected at the next Annual Meeting.
The persons named below have been nominated by the Board of Directors. Except
for Vincent W. Beale, Sr., Wayne Schroeder and Daniel C. Lawson, none of the
nominees is currently serving as a director. All nominees have consented to
be named and have indicated their intent to serve if elected. If any nominee
should become unavailable for election, your proxy may be voted for a
substitute nominee by the persons named in the proxy or the size of the board
may be reduced accordingly; however, the board is not aware of any
circumstances likely to make any nominee unavailable for election.
NOMINEES
<TABLE>
<CAPTION>
NAME AGE POSITION
------------------------- ----------- ---------------------------------------------------
<S> <C> <C>
Vincent W. Beale, Sr. 51 Chairman of the Board, Chief Executive Officer,
President and Director
Bernard B. Beale 43 Executive Vice President and Chief Operating
Officer
Samuel C. Beale 44 Vice President, General Counsel and Secretary
R. Greg Smith 41 Vice President, Chief Financial Officer
Wayne Schroeder 57 Director
Daniel C. Lawson 54 Director
Craig T. Jackson 50 *
Gerald W. McIntosh 59 *
Gregory E. Webb 54 *
</TABLE>
* Directorship effective when elected by our shareholders.
For certain information about the beneficial ownership of our stock
by each of the Nominees, see "Other Information --Security Ownership Summary."
VINCENT W. BEALE, SR. was elected Chairman of the Board of Directors,
Chief Executive Officer and President of the Company on January 28, 1998. Mr.
Beale acted as a consultant to the Company from June 1997 until January 1998.
Mr. Beale is the President and majority owner of Cynet Holdings, a limited
liability company, which is the largest shareholder of the Company. Prior to
joining the Company, Mr. Beale was employed for more than fifteen years with
various investment banking firms including Merrill Lynch, Pierce, Fenner &
Smith, Inc., Kidder Peabody & Co., Inc., Paine Webber, Inc. and Shearson
Lehman Hutton, Inc.
BERNARD B. BEALE joined the Company in January 1998 as a special
consultant to the Chairman to assist in the reorganization of the Company's
business operations. In July 1998, Mr. Beale was named Executive Vice
President and Chief Operating Officer of the Company. Before joining the
Company, Mr. Beale was employed by The Equitable Company, a financial services
firm, and certain other investment banking firms from 1985 to 1998. From 1979
to 1985, he was employed in various positions including accounting, human
resources and project management with Western Electric and AT&T. Mr. Beale
holds a Master of Science degree in Business Management from Aurora
University, Aurora, Illinois, and a Bachelor of Arts degree from Oakwood
College, Huntsville, Alabama.
6
<PAGE>
SAMUEL C. BEALE became Vice President, General Counsel and Secretary
of the Company in May 1998. Mr. Beale was an attorney engaged in private law
practice for eight years prior to joining the Company. Prior to entering the
practice of law in November 1990, Mr. Beale spent more than ten years in the
computer industry with companies such as IBM Corporation, Sperry Univac,
Martin Marietta and IOCS, in positions ranging from systems engineer to data
processing manager to sales. Mr. Beale holds a Juris Doctor degree from the
Ohio State University College of Law and a Bachelor of Arts degree from
Harvard University.
R. GREG SMITH joined the Company in August 1998 as Vice President and
Chief Financial Officer. Mr. Smith was employed for more than 12 years in the
health care information systems industry prior to joining the Company. ADAC
Healthcare Information Systems ("ADAC") most recently employed Mr. Smith as
Vice President Finance and Chief Financial Officer from 1995 until joining the
Company. In 1996, ADAC became the first health care manufacturer to receive
the Malcolm Baldridge National Quality Award. Before joining ADAC, Mr. Smith
held numerous financial management positions from 1985 through 1995 for
Community Health Computing, Inc. ("CHC"), including Vice President Finance and
Chief Financial Officer from 1994 through 1995. ADAC acquired CHC in 1995 and
retained Mr. Smith as the Chief Financial Officer for their combined health
care information systems businesses. Mr. Smith holds a Bachelor of Business
Administration degree in Finance from Sam Houston State University.
WAYNE SCHROEDER joined the Company in October 1997 as Chief Financial
Officer and Secretary and was elected to the Board of Directors in February
1998. In April 1998, Mr. Schroeder resigned as an officer of the Company to
become the Controller of Capstar Broadcasting Corporation. Mr. Schroeder was
Vice President - Finance, Secretary and Director of Boundless Corporation from
November 1996 to October 1997. Mr. Schroeder was self-employed as a financial
and accounting consultant from June 1994 to October 1996. From July 1987 to
May 1994, Mr. Schroeder served as Chief Operating Officer, Chief Financial
Officer and a director of Arrhythmia Research Technology, Inc. Mr. Schroeder
graduated from the University of Texas at Austin with a degree in finance and
accounting.
DANIEL C. LAWSON was appointed to the Board of Directors during
January 2000 to fill a vacancy in the Board of Directors when the number of
directors was increased from three to four directors. Mr. Lawson is Chairman
and Chief Executive Officer of the DCL Company, Inc. ("DCLC"), a Houston-based
diversified group of companies with expertise in all phases of supplying
products and services to urban public transportation services. Through a joint
effort with Penske Corporation and GE Capital, Mr. Lawson and Roger Penske
created the first turnkey maintenance program for transportation systems. Mr.
Lawson has been recognized by various national publications, including The New
York Times, Black Enterprise, Essence, Fortune, Money and USA Today for his
knowledge of African-American business.
CRAIG T. JACKSON is the Chairman of the Board of Directors and Chief
Executive Officer of Sanders Engineering Co., Inc., a general and mechanical
contracting company in Orange County, California. Prior to his position at
Sanders Engineering Co., Inc., Mr. Jackson served ten years at Carrier Air
Conditioning Co. in Southern California. Mr. Jackson is also the Vice
President and co-founder of Northern Neck Enterprises, Inc. Mr. Jackson holds
a Masters of Business Administration from Pepperdine University and a Bachelor
of Science in Mechanical Engineering from Howard University.
GERALD W. MCINTOSH is an entrepreneur, founder and President of
Partners 5 West, a non-profit community development company. Prior to founding
Partners 5 West, Mr. McIntosh co-founded or acquired several for profit
companies including Administaff, which currently trades on the New York Stock
Exchange.
7
<PAGE>
Mr. McIntosh holds a Masters of Public Administration and an Associates degree
in Hospital Administration from the University of Southern California and a
Bachelor of Science degree in Biology from LaSierra University.
GREGORY E. WEBB is Chairman, CEO and President of
CityMainStreet.com, Inc., an IP Telephony business focused on Latin America,
India, and the United States utilizing alternative wireless and cable access.
Prior to founding CityMainStreet.com, Inc., Mr. Webb held numerous senior
executive level positions over the last 33 years in communications and
computer industries, including a successful 20 year career with AT&T from
1967-1987 where he last held the position of Group Market Manager - Market
and Product Line Management. Mr. Webb's more recent positions include CEO of
InterDigital Communications Corp. from 1996-1997 and Corporate Vice President
of Qualcomm, Inc. from 1995-1996. Mr. Webb holds a Masters in Management from
Northwestern University, a Bachelors of Science in Economics from Xavier
University and graduate studies in marketing, high-speed communication, and
econometrics from Harvard Business School, Northwestern and Xavier
University, respectively. Mr. Webb has also been a guest speaker at numerous
wireless conferences and electronic trade shows.
CURRENT STRUCTURE OF THE BOARD OF DIRECTORS AND 1999 MEETINGS
The Board of Directors of the Company currently consists of Vincent
W. Beale, Sr. (Chairman of the Board), Daniel C. Lawson (outside director) and
Wayne Schroeder (outside director). Members of the Board of Directors are
elected annually by the shareholders entitled to vote on the election of
directors. The Board is required to have an annual meeting following the
annual shareholder meeting. Actions can be taken without a meeting if all of
the directors consent in the form of a written consent action. A majority
vote at a duly called meeting of the Board of Directors at which a quorum is
present is required for a motion to be carried at such meeting. A majority of
the total number of directors constitutes a quorum. During 1999, there were
no meetings of the Board of Directors. Instead, the Board of Directors acted
pursuant to unanimous written consent actions.
DIRECTOR COMPENSATION AND BOARD COMMITTEES
Directors who are employees or consultants of the Company do not
receive any compensation for serving as directors. All directors are
reimbursed for ordinary and necessary expenses incurred in attending any
meeting of the Board of Directors or any committee thereof or otherwise
incurred in their capacities as directors.
The Board of Directors has established an Audit Committee and a
Compensation Committee. The Audit Committee recommends the appointment of
auditors and oversees our accounting and audit functions. The Compensation
Committee determines executive officers' and key employees' salaries and
bonuses and administers the 1997 Plan. Following their election to the Board
of Directors, Messrs. Daniel C. Lawson and Wayne Schroeder will serve as
members of the Audit Committee and Messrs. Daniel C. Lawson and Gerald W.
McIntosh will serve as members of the Compensation Committee.
VOTES REQUIRED FOR ELECTION
The nine nominees who receive the greatest number of "FOR" votes of
the shares entitled to vote represented at the Annual Meeting in person or
represented by proxy will be elected as directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ELECTION OF ALL NINE NOMINEES TO
OUR BOARD OF DIRECTORS.
8
<PAGE>
INCREASE OF AUTHORIZED CLASS A COMMON STOCK
(PROPOSAL 2)
Our Articles of Incorporation, as currently in effect, currently
authorize the issuance of an aggregate of 40,000,000 shares of our Class A
Common Stock. The Board of Directors has proposed an amendment to Article Four
of our Articles of Incorporation to increase the number of authorized shares
of its Class A Common Stock from 40,000,000 to 100,000,000 shares. The
shareholders are being asked to approve this amendment at the 2000 Annual
Meeting.
The Board of Directors believes the increase in the number of
authorized shares of Class A Common Stock is advisable in order to make shares
of the Class A Common Stock available, as needed, to meet potential equity
financing requirements of the Company, for use in connection with possible
acquisitions of other businesses, stock dividends and other corporate
purposes. We have no present arrangements, commitments, plans or intentions
with respect to the sale or issuance of any additional shares of Class A
Common Stock, except in connection with the following:
- We intend to conduct an exchange offer pursuant to which the
Company would offer to exchange all outstanding shares of
Class B Common Stock (and warrants to purchase same) for
newly-issued shares (and warrants) of Class A Common Stock,
on a one-for-one basis.
- We intend to issue shares of our Class A Common Stock
pursuant to exercises of employee stock options granted in
the ordinary course of our business.
EFFECT OF PROPOSED AMENDMENT
In the event that the amendment is adopted, the number of authorized
shares of Class A Common Stock will be increased from 40,000,000 to
100,000,000 shares as of the day on which the amendment is filed with the
Secretary of State of the State of Texas. These additional shares would be
available for issuance at the directors' discretion without the accompanying
delay and the expense involved in further action by the shareholders, except
as required by applicable law or regulations. Shareholders presently do not
have any preemptive or preferential right to receive or acquire any new shares
issued by the Company. The additional authorized shares could be issued to
make any attempt to change the control of the Company more difficult if the
Board of Directors were to determine that such an attempt was not in the best
interest of the Company. For example, additional shares of Class A Common
Stock could be sold in private placement transactions to persons, groups or
entities who are considered by the Board of Directors to support the board's
careful deliberation of any proposal in the best interest of the Company and
all shareholders as a group. Issuance of additional shares of Class A Common
Stock would also have the effect of diluting the percentage voting power of
existing shareholders of the Class A Common Stock and, depending on the
consideration for which the shares were issued, could dilute earnings per
share. Each additional share of Class A Common Stock authorized by the
proposed amendment would have the same rights and privileges as each share of
Class A Common Stock currently outstanding.
If the proposed amendment is adopted, the first and fifth paragraphs
of Article Four of our Articles of Incorporation would be amended to read as
follows:
Paragraph One. "The aggregate number of shares which the
corporation shall have authority to issue is 130,000,000 consisting of
120,000,000 shares of common stock, having no par value ("Common
Stock"), and 10,000,000 shares of preferred stock, no par value
("Preferred Stock")."
9
<PAGE>
Paragraph Five. "The corporation is authorized to issue, out
of the 120,000,000 authorized shares of Common Stock, two classes of
Common Stock, Class A and Class B, each having no par value. Class A
shall consist of up to 100,000,000 shares designated as Class A Common
Stock ("Class A Common Stock") and Class B shall consist of up to
20,000,000 shares designated as Class B Common Stock ("Class B Common
Stock"). The preferences, and relative, participating, optional and
other special rights, and the qualifications, limitations or
restrictions of each class shall be the same except that, unless
otherwise required by law, the shares of Class B Common Stock shall
not be entitled to vote, either on matters presented at any meeting of
shareholders of the corporation or by written consent."
VOTES REQUIRED FOR APPROVAL
Approval of the amendment by the shareholders requires the
affirmative vote of the holders of at least two-thirds of the shares entitled
to vote represented at the Annual Meeting in person or represented by proxy.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE INCREASE IN
THE AUTHORIZED SHARES OF CLASS A COMMON STOCK CONTAINED IN THE PROPOSED
AMENDMENT TO THE ARTICLES OF INCORPORATION.
APPROVAL OF THE AMENDMENT TO THE COMPANY'S
1997 STOCK OPTION PLAN
(PROPOSAL 3)
On October 20, 1997, the Board of Directors and a majority of the
holders of Class A Common Stock adopted our 1997 Stock Option Plan, which plan
was amended and restated effective July 31, 1999 (the "1997 Plan"). Effective
May 23, 2000, the Board of Directors adopted an amendment to the 1997 Plan
authorizing an increase in the number of shares available for issuance from
2,000,000 to 5,000,000 shares. This increase was expressly made subject to the
approval of our shareholders.
Currently, the 1997 Plan provides that a maximum of 2,000,000 shares
of Class A Common Stock may be issued under the 1997 Plan. As of the Record
Date, no shares were available for issuance upon exercise of option granted
under the 1997 Plan. Thus, additional shares must be authorized for us to be
able to continue to grant options under the 1997 Plan. Furthermore, as we
continue to grow, we anticipate adding a significant number of employees
eligible to receive options under the 1997 Plan; therefore, we believe a
substantial increase in the number of shares authorized to be issued under the
1997 Plan is warranted at this time.
The purposes of the 1997 Plan are to advance the best interest of our
shareholders and to attract, retain and motivate key employees and persons
affiliated with us, and provide such persons with additional incentive to
further the business, promote the long-term financial success and increase
shareholder value of the Company by increasing their proprietary interest in
the success of the Company. The Board of Directors believes the 1997 Plan has
fulfilled these purposes and that the continued availability of equity
incentives under the 1997 Plan will be a significant factor in our ability to
attract and retain key management personnel who share primary responsibility
for our management and growth. The number of participants currently eligible
to participate in the 1997 Plan is approximately 97 persons.
10
<PAGE>
The 1997 Plan provides that certain amendments may only be made with
the approval of our shareholders. One such amendment requiring shareholder
approval is an amendment that increases the maximum number of shares of stock
that may be issued under the 1997 Plan. This summary of the amendment to the
1997 Plan is qualified in its entirety by reference to the full text of the
amendment, a copy of which is attached hereto as APPENDIX A.
The Board of Directors believes the continued availability of options
under the 1997 Plan is important to our ability to attract and retain
qualified management personnel and consultants. Therefore, the Board of
Directors strongly believes that the adoption of the amendment to the 1997
Plan is in the best interest of our shareholders.
VOTES REQUIRED FOR APPROVAL
Approval of the amendment to the 1997 Plan requires the affirmative
vote of the holders of at least a majority of the shares entitled to vote
represented at the Annual Meeting in person or represented by proxy.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF AMENDMENT TO THE 1997
PLAN.
REINCORPORATION OF THE COMPANY IN DELAWARE
(PROPOSAL 4)
SUMMARY DESCRIPTION OF THE PROPOSAL
GENERAL
The Board of Directors has approved a proposal to change our state of
incorporation from Texas to Delaware (the "Reincorporation"), subject to
approval and adoption by our shareholders of the Agreement and Plan of Merger
("Plan of Merger") in substantially the form of APPENDIX B to this Proxy
Statement. After the shareholders have approved the proposed Plan of Merger,
CYNET will be merged into a newly organized, wholly-owned Delaware subsidiary
that will be the surviving corporation ("CYNET-Delaware"). CYNET-Delaware
currently has no operations. YOU ARE URGED TO READ CAREFULLY THIS SECTION OF
THE PROXY STATEMENT, INCLUDING EACH RELATED APPENDIX REFERENCED IN THIS
SECTION AND ATTACHED HERETO BEFORE VOTING ON THE REINCORPORATION.
In connection with the Reincorporation, we will continue to do
business as "CYNET, Inc."
The Reincorporation will not result in any material change in our
name, business, assets or financial position or in the persons who constitute
our Board of Directors or management. Upon the effective date of the merger
(the "Effective Date"): (i) the legal existence of the Company as a separate
corporation will cease; (ii) CYNET-Delaware, as the surviving corporation,
will succeed to the assets and assume the liabilities of the Company; (iii)
each outstanding share of our Class A Common Stock and our Class B Common
Stock (collectively, the "Common Stock") will automatically be converted into
one share of Class A Common Stock, $.001 par value per share, of
CYNET-Delaware and one share of Class B Common Stock, $.001 par value per
share, of CYNET-Delaware, respectively (collectively, such shares of Class A
and Class B Common Stock being, the "CYNET-Delaware Common Stock"), and (iv)
each outstanding share of each series of our Preferred Stock, no par value
(collectively, the "Preferred Stock") will automatically be converted into one
share of a corresponding series of Preferred Stock, $.001 par value per share,
of CYNET-Delaware, with each such series having identical terms, preferences
and relative rights in all respects
11
<PAGE>
(collectively, the "CYNET-Delaware Preferred Stock"). However, there will be
no automatic conversion for those shares with respect to which the holders
thereof duly exercise their dissenters' rights under Texas law. See "Rights of
Dissenting Shareholders" below. Outstanding options and warrants to purchase
our Common Stock will automatically be converted into options and warrants to
purchase CYNET-Delaware Common Stock. The terms of the Reincorporation are
described in more detail in the Agreement and Plan of Merger (the "Plan of
Merger") attached hereto as APPENDIX B and all references to the
Reincorporation are qualified by and subject to the more complete information
set forth therein.
Following the Effective Date, certificates representing shares of our
Common Stock and Preferred Stock will be deemed to represent an equal number
of shares of CYNET-Delaware Common Stock and CYNET-Delaware Preferred Stock.
IT WILL NOT BE NECESSARY FOR THE HOLDERS OF CYNET'S COMMON STOCK AND PREFERRED
STOCK TO SURRENDER THEIR CERTIFICATES FOR NEW CERTIFICATES REPRESENTING
CYNET-DELAWARE COMMON STOCK AND CYNET-DELAWARE PREFERRED STOCK OR, TO THE
EXTENT SUBSCRIPTIONS FOR SHARES OF THE COMPANY'S COMMON STOCK OR PREFERRED
STOCK HAVE BEEN SUBMITTED AND THE COMPANY HAS NOT YET ACCEPTED SUCH
SUBSCRIPTIONS AND/OR HAS NOT YET ISSUED CERTIFICATES IN RESPECT OF SUCH
SUBSCRIPTIONS, CYNET-DELAWARE SHALL ISSUE SUCH CERTIFICATES IN ITS NAME IN THE
AMOUNTS SUBSCRIBED FOR UPON ACCEPTANCE OF SUCH SUBSCRIPTIONS. The Common Stock
of the Company will continue to be traded on the Nasdaq OTC Bulletin Board,
which will consider the existing stock certificates as constituting "good
delivery" in transactions subsequent to the Reincorporation.
The Reincorporation will become effective upon filing merger
documents in Delaware and Texas, which are expected to be made as soon as
practicable following shareholder approval. Pursuant to the terms of the Plan
of Merger, the merger may be abandoned by the Boards of Directors of CYNET and
CYNET-Delaware any time prior to the Effective Date (whether before or after
shareholder approval). In addition, the Board of Directors of CYNET may amend
the Plan of Merger at any time prior to the Effective Date, provided that any
amendment made subsequent to shareholder approval may not (i) alter or change
the amount or kind of shares to be received in exchange for or on conversion
of all or any of the shares of CYNET, (ii) alter or change any term of the
Certificate of Incorporation of CYNET-Delaware, or (iii) alter or change any
of the terms and conditions of the Plan of Merger, if such alteration or
change would adversely affect the holders of our Common Stock or Preferred
Stock.
After the Effective Date, the Certificate of Incorporation of
CYNET-Delaware, the form of which is attached hereto as APPENDIX C (the
"Certificate of Incorporation"), and the Bylaws of CYNET-Delaware, the form of
which is attached hereto as APPENDIX D ("Bylaws") will govern the surviving
corporation. All references to the Certificate of Incorporation and Bylaws are
qualified by and subject to the more complete information set forth therein.
Certain changes in the rights of the shareholders of CYNET will result under
Delaware law and the new Certificate of Incorporation and Bylaws. See "Certain
Changes in the Rights of Shareholders."
SECURITIES ACT CONSEQUENCES
The shares of CYNET-Delaware to be issued in exchange for shares of
CYNET may or may not be registered under the Securities Act of 1933, as
amended ("Securities Act"). Shares of CYNET that are currently registered
under the Securities Act will be exchanged for registered shares of
CYNET-Delaware. Shares of CYNET that are not currently registered under the
Securities Act will be exchanged for shares of CYNET-Delaware that are not
registered under the Securities Act, in reliance upon an exemption with
respect to a merger which has as its sole purpose a change in the domicile of
the corporation. Shareholders
12
<PAGE>
holding unregistered securities of CYNET-Delaware will be subject to the same
restrictions on transfer as those to which their present unregistered shares
of stock in CYNET are subject. In order to compute compliance with the holding
period of Rule 144 under the Securities Act, shareholders will be deemed to
have acquired their shares in CYNET-Delaware on the date they acquired their
shares in CYNET. In summary, CYNET-Delaware and its stockholders will be in
the same respective position under the Federal securities laws after the
Reincorporation as were CYNET and its shareholders prior to the
Reincorporation.
FEDERAL INCOME TAX CONSEQUENCES
We believe that for federal income tax purposes no gain or loss will
be recognized by the Company, CYNET-Delaware or the shareholders of the
Company who receive CYNET-Delaware Common Stock for their Company Common Stock
in connection with the Reincorporation. The adjusted tax basis of CYNET-
Delaware Common Stock received by a shareholder of the Company as a result of
the Reincorporation will be the same as the adjusted tax basis of the Company
Common Stock converted into such CYNET-Delaware Common Stock. A shareholder
who holds Company Common Stock will include in his holding period for the
CYNET-Delaware Common Stock which he receives as a result of the
Reincorporation his holding period for the Company Common Stock converted into
such CYNET-Delaware Common Stock.
The receipt of cash, pursuant to the exercise of dissenters' rights,
as the fair value for shares of the Company's Common Stock will be a taxable
transaction for Federal income tax purposes to shareholders receiving such
cash. A dissenting shareholder who owns no shares of CYNET-Delaware Common
Stock after the consummation of the Reincorporation (either directly or
constructively pursuant to certain rules of constructive ownership under
applicable tax laws) will recognize gain or loss measured by the difference
between the cash so received and such shareholder's adjusted tax basis in the
shares of the Company's Common Stock exchanged therefor. Such gain or loss
will be treated as a capital gain or loss if the shares of the Company's
Common Stock are capital assets in the hands of such shareholder, and will be
long-term capital gain or loss if such shareholder has held such shares for
more than one year.
State, local or foreign income tax consequences to shareholders may
vary from the Federal income tax consequences described above, and
shareholders are urged to consult their own tax advisor as to the consequences
to them of the Reincorporation under all applicable tax laws.
EFFECT ON CURRENT MARKET VALUE OF COMPANY'S COMMON STOCK
We do not know of any reason why implementation of the
Reincorporation and the conversion of shares of Common Stock of the Company
into shares of CYNET-Delaware Common Stock would cause the market value of
the CYNET-Delaware Common Stock following the Reincorporation to be different
from the present market value of the outstanding shares of the Common Stock
of the Company.
PRINCIPAL REASONS FOR AND EFFECTS OF THE REINCORPORATION
The State of Delaware has long been the leader in adopting,
construing and implementing comprehensive, flexible corporation laws which are
conducive to the operational needs and independence of corporations domiciled
in that state. The corporation law of Delaware is widely regarded as the most
extensive and well-defined body of corporate law in the United States. Both
the legislature and the courts in Delaware have demonstrated an ability and a
willingness to act quickly and effectively to meet changing business needs.
The Delaware judiciary has acquired considerable expertise in dealing with
complex corporate issues. Moreover, the Delaware courts have repeatedly shown
their willingness to accelerate the resolution of such complex corporate
issues within the very limited time available to meet the needs of
13
<PAGE>
parties engaged in corporate litigation. It is anticipated that the General
Corporation Law of Delaware will continue to be interpreted and construed in
significant court decisions, thus lending greater predictability and guidance
in managing and structuring the internal affairs of a corporation and its
relationships and contacts with others. For a discussion of certain
differences in shareholder rights and the powers of management under Delaware
and Texas law, see "Certain Changes in the Rights of Shareholders" below.
CERTAIN CHANGES IN THE RIGHTS OF SHAREHOLDERS
After the Reincorporation, the shareholders of CYNET, a Texas
corporation, will become stockholders of CYNET-Delaware, a Delaware
corporation. Some of the differences between the Texas and Delaware
corporation laws, as well as differences between the charter and bylaws of
CYNET and those of CYNET-Delaware are set forth below. This description of
differences is a summary only and does not purport to be a complete
description of all differences.
THE DELAWARE BUSINESS COMBINATIONS STATUTE. Section 203 of the
Delaware General Corporation Law (the "Delaware Business Combinations
Statute"), prohibits certain transactions between a Delaware corporation and
an "interested stockholder," which is broadly defined as a person (including
the affiliates and associates of such person) that is directly or indirectly a
beneficial owner of 15% or more of the voting power of the outstanding voting
stock of a Delaware corporation. This provision prohibits certain business
combinations (including mergers, consolidations, sales or other dispositions
of assets having an aggregate market value of 10% or more of either the
consolidated assets of a company, and certain transactions that would increase
the interested stockholder's proportionate share of ownership in a company or
grant the interested stockholder disproportionate financial benefits) between
an interested stockholder and a company for a period of three years after the
date the interested stockholder acquired its stock, unless: (i) the business
combination or the transaction in which the stockholder became an interested
stockholder is approved by such company's Board of Directors prior to the date
the interested stockholder becomes an interested stockholder; (ii) the
interested stockholder acquired at least 85% of the voting stock of such
company in the transaction in which it became an interested stockholder; or
(iii) the business combination is approved by a majority of the Board of
Directors and the affirmative vote of two-thirds of the votes entitled to be
cast by disinterested stockholders at an annual or special meeting.
If the Reincorporation is consummated, the Delaware Business
Combinations Statute will apply to CYNET-Delaware. We are currently subject to
the Texas Business Corporation Act, which also prohibits certain transactions
with "affiliated shareholders" for a three-year period after the acquisition.
Under the Texas Business Corporation Act, an affiliated shareholder is one
owning 20% or more of our outstanding voting shares (rather than 15% under
Delaware law). Thus, under the Delaware Business Combination Statute,
shareholders owning 15% of CYNET-Delaware's Common Stock (or in certain cases
an even smaller percentage) might be able to block certain transactions which
is a smaller percentage than is currently the case under Texas law. The
application of either statute could make more difficult or discourage a tender
offer for CYNET-Delaware's Common Stock or the completion of a "second step"
merger by a holder of a substantial block of CYNET-Delaware's Common Stock,
irrespective of whether such action might be perceived by stockholders holding
a majority of CYNET-Delaware's Common Stock to be beneficial to it and its
stockholders.
The application of the Delaware Business Combinations Statute could
adversely affect the ability of stockholders to benefit from certain
transactions which are opposed by the Board of Directors or by stockholders
owning 15% of CYNET-Delaware's Common Stock, even if the price offered in such
transactions represents a premium over the then-current market price of
CYNET-Delaware's Common Stock, to the extent that such a market then exists.
To the extent that the Board of Directors' disapproval of a
14
<PAGE>
proposed transaction discourages establishment of a controlling stock
interest, the position of the Board of Directors and current management may be
strengthened, thereby assisting those persons in retaining their positions.
However, the Board of Directors believes that, on balance, becoming
subject to the provisions of the Delaware Business Combinations Statute will
be in the best interest of CYNET and its shareholders. In recent years there
have been a number of surprise takeovers of publicly-owned corporations. These
transactions have occurred through tender offers or other sudden purchases of
a substantial number of outstanding shares. Frequently, these tender offers
and other share purchases have been followed by a merger or other form of
complete acquisition of the target company by the purchaser without any
negotiations with the Board of Directors of the target company. Such a "second
step" business combination automatically eliminates minority interests in the
target company, often for less valuable consideration per share than was paid
in the purchaser's original tender offer or market purchases. In other
instances, a purchaser has used its controlling interest to effect other
transactions having an adverse impact on the target company and its
stockholders. The Board of Directors has carefully considered the potential
adverse effects of being subject to the Delaware Business Combinations Statute
described above and has concluded that the adverse effects are outweighed by
the protection which this statute will afford us and our shareholders.
RIGHT OF SHAREHOLDERS TO VOTE ON CERTAIN MERGERS. Under Texas law,
shareholders have the right to vote on all mergers to which the corporation is
a party (except for the merger into the surviving corporation of subsidiaries
owned 90% or more by the surviving corporation, for which a shareholder vote
also is not required under Delaware law). In certain circumstances, different
classes of securities may be entitled to vote separately as classes with
respect to such transactions. Unless the articles of incorporation provide
otherwise, approval of the holders of at least two-thirds of all outstanding
shares entitled to vote is required by Texas law to approve a merger, while
under Delaware law approval by the holders of a majority of all outstanding
shares is required to approve a merger, unless the certificate of
incorporation provides otherwise. Unless the articles of incorporation provide
otherwise, the approval of the shareholders of the corporation in a merger is
not required under Texas law if all of the following are met: (i) the
corporation is the sole surviving corporation in the merger; (ii) there is no
amendment to the corporation's articles of incorporation; (iii) each
shareholder holds the same number of shares after the merger as before, with
identical designations, preferences, limitations and relative rights; (iv) the
voting power of the shares outstanding after the merger plus the voting power
of the shares issuable as a result of the merger (taking into account
convertible securities and warrants, options or other rights to purchase
securities issued pursuant to the merger) does not exceed the voting power of
the shares outstanding prior to the merger by more than 20%; (v) the number of
participating shares (that is, shares whose holders are entitled to
participate without limitation in dividends or other distributions)
outstanding after the merger plus the participating shares issuable as a
result of the merger (taking into account convertible securities and warrants,
options or other rights to purchase securities issued pursuant to the merger)
does not exceed the number of participating shares outstanding prior to the
merger by more than 20%; and (vi) the Board of Directors of the corporation
adopts a resolution approving the plan of merger. Under Delaware law, unless
the certificate of incorporation provides otherwise, stockholders of the
surviving corporation in a merger have no right to vote, except under limited
circumstances, on the acquisition by merger directly into the surviving
corporation in cases where: (x) the agreement of merger does not amend the
certificate of incorporation of such corporation; (y) each share of stock of
such corporation outstanding immediately prior to the effective date of the
merger is to be an identical outstanding or treasury share of the corporation
after the effective date of the merger; and (z) either no shares of common
stock of the surviving corporation, and no shares, securities or obligations
convertible into such stock are to be issued or delivered under the plan of
merger, or the authorized unissued shares or the treasury shares of common
stock of the surviving corporation to be issued or delivered under the plan of
merger plus those initially issuable upon conversion of any other shares,
securities or obligations
15
<PAGE>
to be issued or delivered under such plan do not exceed 20% of the shares of
common stock of such corporation outstanding immediately prior to the
effective date of the merger. Our current Articles of Incorporation and the
CYNET-Delaware Certificate of Incorporation do not alter the statutory rules
described above.
SALES, LEASES, EXCHANGES OR OTHER DISPOSITIONS. The sale, lease,
exchange or other disposition (not including any pledge, mortgage, deed of
trust or trust indenture, unless otherwise provided in the articles of
incorporation) of all, or substantially all, of the property and assets of a
Texas corporation, if not made in the usual and regular course of its
business, requires the approval of the holders of at least two thirds of the
outstanding shares of the corporation. Under Texas law, the transfer of
substantially all of a corporation's assets to wholly-owned subsidiaries in
such a manner that the corporation continues to indirectly engage in its
business is deemed to be in the usual and regular course of its business. A
Delaware corporation may sell, lease or exchange all or substantially all of
its property and assets when and as authorized by a majority of the
outstanding stock of the corporation entitled to vote thereon, unless the
certificate of incorporation provides to the contrary. CYNET-Delaware's
Certificate of Incorporation does not so provide.
APPRAISAL RIGHTS. Except for the limited classes of mergers,
consolidations, sales and asset dispositions for which no shareholder approval
is required under Texas law, and as set forth in this paragraph, shareholders
of Texas corporations have appraisal rights in the event of a merger,
consolidation, sale, lease, exchange or other disposition of all, or
substantially all, the property and assets of the corporation. Notwithstanding
the foregoing, a shareholder of a Texas corporation has no appraisal rights
with respect to any plan of merger in which there is a single surviving or new
domestic or foreign corporation, or with respect to any plan of exchange, if:
(i) the shares held by the shareholder are part of a class of shares which are
listed, or authorized for listing upon official notice of issuance, on a
national securities exchange, the Nasdaq Stock Market or designated as a
national market security on an interdealer quotation system by the National
Association of Securities Dealers, Inc., or are held of record by not less
than 2,000 holders, on the record date for the plan of merger or the plan of
exchange; and (ii) the shareholder is not required by the terms of the plan of
merger or exchange to accept for his shares any consideration other than (a)
shares of a corporation that, immediately after the merger or exchange, will
be part of a class or series of shares which are: (x) listed, or authorized
for listing upon official notice of issuance, on a national securities
exchange, or (y) held of record by not less than 2,000 holders; and (b) cash
in lieu of fractional shares otherwise entitled to be received. The appraisal
rights of a shareholder of a Texas corporation are summarized under "Rights of
Dissenting Shareholders" below. Under Delaware law, shareholders have no
appraisal rights in the event of a merger or consolidation of the corporation
if the stock of the Delaware corporation is listed on a national securities
exchange or designated as a national market system security on an interdealer
quotation system by the National Association of Securities Dealers, Inc., or
if such stock is held of record by more than 2,000 shareholders, or in the
case of a merger in which a Delaware corporation is the surviving corporation,
if: (i) the agreement of merger does not amend the certificate of
incorporation of the surviving corporation; (ii) each share of stock of the
surviving corporation outstanding immediately prior to the effective date of
the merger is to be an identical outstanding share of the surviving
corporation after the effective date of the merger; and (iii) the increase in
the outstanding shares as a result of the merger does not exceed 20% of the
shares of the surviving corporation outstanding immediately prior to the
merger. Even if appraisal rights would not otherwise be available under
Delaware law in the cases described in the preceding sentence, stockholders
would still have appraisal rights if they are required by the terms of the
agreement of merger or consolidation to accept for their stock anything other
than: (i) shares of stock (a) of the surviving corporation; (b) of any other
corporation whose shares will be either listed on a national securities
exchange or designated as a national market system security on an interdealer
quotation system by the National Association of Securities Dealers, Inc.; or
(c) held of record by more than 2,000 stockholders; (ii) cash in lieu of
fractional shares; or (iii) a combination of such shares and cash. Otherwise,
stockholders of a
16
<PAGE>
Delaware corporation have appraisal rights in consolidations and mergers.
Under Delaware law, any corporation may provide in its certificate of
incorporation that appraisal rights will also be available as a result of an
amendment to its certificate of incorporation or the sale of all or
substantially all of the assets of the corporation. CYNET-Delaware currently
has no such provisions in its Certificate of Incorporation.
SHAREHOLDER CONSENT TO ACTION WITHOUT A MEETING. Under Texas law, any
action that may be taken at a meeting of the shareholders may be taken without
a meeting if written consent thereto is signed by all the holders of shares
entitled to vote thereon. The articles of incorporation of a Texas corporation
may provide that action by written consent in lieu of a meeting may be taken
by the holders of that number of shares which, under the corporation's
articles of incorporation, would be required to take the action which is the
subject of the consent at a meeting at which the holders of the shares
entitled to vote thereon were present and voted. Our Articles of Incorporation
do address the use of written consents in lieu of a meeting with respect to
any action subject to shareholder approval. As a result, the taking of any
such action without a meeting requires the written consent of the holder or
holders of CYNET's shares having not less than the minimum number of votes
that would be necessary to take such action at a meeting where the holders of
all shares entitled to vote on the action were present and voted. Under
Delaware law, unless otherwise provided in the certificate of incorporation,
any action that can be taken at such meeting can be taken without a meeting if
written consent thereto is signed by the holders of outstanding stock having
the minimum number of votes necessary to authorize or take such action at a
meeting of the stockholders. As currently proposed, CYNET-Delaware's
Certificate of Incorporation does not prohibit the stockholders from taking
action by written consent without a meeting of stockholders.
PROCEDURES FOR FILLING VACANT DIRECTORSHIPS. Under Texas law, any
vacancy occurring in the Board of Directors may be filled by the shareholders
or by the affirmative vote of a majority of the remaining directors, although
less than a quorum. A directorship to be filled by reason of an increase in
the number of directors may be filled by the shareholders or by the Board of
Directors for a term of office continuing only until the next election of one
or more directors by the shareholders, provided that the Board of Directors
may not fill more than two such directorships during the period between any
two successive annual meetings of shareholders. Under Delaware law, unless the
certificate of incorporation or bylaws provide otherwise, vacancies and newly
created directorships resulting from any increase in the authorized number of
directors may be filled by a majority of the directors then in office,
although less than a quorum. The Certificate of Incorporation and Bylaws of
CYNET-Delaware do not provide otherwise.
RIGHT TO CALL MEETINGS. Under Texas law, holders of not less than 10%
of all of the shares entitled to vote have the right to call a special
shareholders' meeting, unless the articles of incorporation provide for a
number of shares greater than or less than 10%, but in no event may the
articles of incorporation provide for a number of shares greater than 50% that
would be required to call a special meeting. Our Articles of Incorporation do
not alter the statutory rule described herein. Delaware law provides that
special meetings of the stockholders may be called by the Board of Directors
or such other persons as are authorized in the certificate of incorporation or
bylaws. The Certificate of Incorporation and Bylaws of CYNET-Delaware provide
that special meetings of the holders of any class or series or of all classes
or series of the corporation's stock for any purpose or purposes may be called
at any time by the President or the Board of Directors, or (ii) the holders of
at least forty percent (40%) of all the shares entitled to vote at such
special meeting.
VOTING BY PROXY. Under Texas and Delaware law, a shareholder may
authorize another person or persons to act for such shareholder by proxy.
However, unless otherwise provided in the proxy, under Delaware law a proxy is
valid for three years from its date, while a proxy under Texas law is only
valid for eleven (11) months from its date.
17
<PAGE>
CHARTER AMENDMENTS. Under Texas law, an amendment to the articles of
incorporation requires the approval of the holders of at least two thirds of
the outstanding shares of the corporation, unless a different amount, not less
than a majority, is specified in the articles of incorporation. Our Articles
of Incorporation do not so provide. Delaware law provides that amendments to
the certificate of incorporation must be approved by the holders of a majority
of the corporation's stock entitled to vote thereon, unless the certificate of
incorporation provides for a greater number. CYNET-Delaware's Certificate of
Incorporation does not provide for any such greater number.
BYLAW AMENDMENTS. Under Texas law, the Board of Directors may amend,
repeal or adopt a corporation's bylaws unless the articles of incorporation
reserve this power exclusively to the shareholders, or the shareholders in
amending, repealing or adopting a particular bylaw expressly provide that the
Board of Directors may not amend or repeal that bylaw. Our Articles of
Incorporation do not restrict the ability of the Board of Directors to amend,
repeal or adopt bylaws, and CYNET's shareholders have not to date amended,
repealed or adopted a particular bylaw restricting the ability of the Board of
Directors to amend or repeal such bylaw. Similarly, under Delaware law, the
right to amend, repeal or adopt the bylaws is permitted to the stockholders of
the corporation and the corporation's Board of Directors, if the corporation's
certificate of incorporation so provides. CYNET-Delaware's Certificate of
Incorporation provides that its bylaws may be amended, repealed or adopted by
the Board of Directors. Under Delaware law, the power to amend, repeal or
adopt the bylaws so conferred upon the Board of Directors of CYNET-Delaware
will not divest its stockholders of the power, or limit their power, to amend,
repeal or adopt such bylaws.
CLASS VOTING. Under Texas law, class voting is required in connection
with certain amendments of a corporation's articles of incorporation, a merger
or consolidation requiring shareholder approval if the plan of merger or
consolidation contains any provision which, if contained in a proposed
amendment to a Corporation's articles of incorporation, would require class
voting, or certain sales of all or substantially all of the assets of a
corporation. In contrast, under Delaware law, class voting is not required in
connection with such matters, except in the case of an amendment of a
corporation's certificate of incorporation which adversely affects a class of
shares.
REMOVAL OF DIRECTORS. A Texas corporation may provide for the removal
of a director with or without cause in its articles of incorporation or
bylaws. Our Bylaws currently provide that directors may be removed, for cause,
by the vote of a majority of the shares entitled to vote thereon. Under
Delaware law, a majority of stockholders may remove a director with or without
cause except: (i) if the Board of Directors of a Delaware corporation is
classified (i.e., elected for staggered terms), in which case a director may
only be removed for cause, unless the corporation's certificate of
incorporation provides otherwise; and (ii) in the case of a corporation which
possesses cumulative voting, if less than the entire board is to be removed,
no director may be removed without cause if the votes cast against his removal
would be sufficient to elect him if then cumulatively voted at an election of
the entire Board of Directors, or, if there be classes of directors, at an
election of the class of directors of which he is a part. The Certificate of
Incorporation of CYNET-Delaware specifically prohibits cumulative voting. The
Certificate of Incorporation of CYNET-Delaware provides that the Board of
Directors will consist of three classes of directors, with each class to
consist of as nearly an equal number of directors as possible and with each
class of directors coming up for election by the shareholders every three
years. See Proposal Five for a full explanation of the classified Board of
Directors. Assuming approval of the proposal for a classified board of
directors, directors of CYNET-Delaware may only be removed for cause. The
Certificate of Incorporation of CYNET-Delaware does not provide for a
super-majority vote for removal of directors, but provides that the provisions
for the staggered board may not be amended except by a two-thirds vote of the
shareholders. The Bylaws of CYNET-Delaware provide that at any meeting of
stockholders called expressly for the purpose of removing a director or
directors, any director may be removed, with or without cause; provided that
whenever any director shall
18
<PAGE>
have been elected by the holders of any class of stock voting separately as a
class under the provisions of the Certificate of Incorporation, such director
may be removed and the vacancy filled only by the holders of that class of
stock voting separately as a class. The Certificate of Incorporation of
CYNET-Delaware does not presently provide for the election of any directors by
the holders of any class of stock of the corporation voting separately as a
class.
INSPECTION OF BOOKS AND RECORDS. Under Texas law, a shareholder may,
for a proper purpose, inspect the books and records of a corporation if such
shareholder holds at least 5% of the outstanding shares of stock of the
corporation or has been a holder of shares for at least six months prior to
such demand. Under Delaware law, any shareholder may inspect the corporation's
books and records for a proper purpose.
DISTRIBUTIONS AND DIVIDENDS. Under Texas law, a distribution is
defined as a transfer of money or other property (except a corporation's
shares or rights to acquire its shares), or an issuance of indebtedness, by a
corporation to its shareholders in the form of: (i) a dividend on any class or
series of the corporation's outstanding shares; (ii) a purchase, redemption or
other acquisition by the corporation, directly or indirectly, of its shares;
or (iii) a payment in liquidation of all or a portion of its assets. Under
Texas law, a corporation may make a distribution, subject to restrictions in
its charter, if it does not render the corporation unable to pay its debts as
they become due in the course of its business, and if it does not exceed the
corporation's surplus. Surplus is defined under Texas law as the excess of net
assets (essentially, the amount by which total assets exceed total debts) over
stated capital (essentially, the aggregate par value of the issued shares
having a par value plus consideration paid for shares without par value that
have been issued), as such stated capital may be adjusted by the board. This
limitation does not apply to distributions involving a purchase or redemption
of shares to eliminate fractional shares, collect indebtedness, pay dissenting
shareholders or redeem shares if net assets equal or exceed the proposed
distribution.
Under Delaware law, a corporation may, subject to any restrictions
contained in its Certificate of Incorporation, pay dividends out of surplus
and, if there is not surplus, out of net profits for the current and/or the
preceding fiscal year, unless the net assets of the corporation are less than
the capital represented by issued and outstanding stock having preferences on
asset distributions. Surplus is defined under Delaware law as the excess of
the net assets (essentially, the amount by which total assets exceed total
liabilities) over capital (essentially, the aggregate par value of the shares
of the corporation having a par value that have been issued plus consideration
paid for shares without par value that have been issued), as such capital may
be adjusted by the board. The Certificate of Incorporation of CYNET-Delaware
does not provide otherwise.
STOCK REDEMPTION AND REPURCHASE. As noted above, under Texas law, the
purchase or redemption by a corporation of its shares constitutes a
distribution. Accordingly, the discussion above relating to distributions is
applicable to stock redemptions and repurchases. Under Delaware law, a
corporation may purchase or redeem shares of any class except when its capital
is impaired or would be impaired by such purchase or redemption. A corporation
may, however, purchase or redeem out of capital, shares that are entitled upon
any distribution of its assets to a preference over another class or series of
its stock, or, if no shares entitled to such a preference are outstanding, any
of its own shares, if such shares are to be retired and the capital reduced.
INDEMNIFICATION OF DIRECTORS AND OFFICERS. Texas and Delaware law
have similar provisions and limitations regarding indemnification by a
corporation of its officers, directors, employees and agents. If the
Reincorporation is approved, the indemnification provisions of Delaware law
will not apply to any act or omission that occurs before the Effective Date.
The following is a summary comparison of the indemnification provisions of
Texas and Delaware law:
19
<PAGE>
SCOPE. Under Texas law, a corporation is permitted to provide
indemnification or advancement of expenses, by articles of
incorporation or bylaw provision, resolution of the shareholders or
directors, agreement, or otherwise, against judgments, penalties,
fines, settlements and reasonable expenses actually incurred by the
person in connection with the proceeding. However, if the person is
found liable to the corporation, or if the person is found liable on
the basis he received an improper personal benefit, indemnification
under Texas law is limited to the reimbursement of reasonable expenses
and no indemnification will be available if the person is found liable
for willful or intentional misconduct.
Delaware law permits a corporation to indemnify directors,
officers, employees, or agents against judgments, fines, amounts paid
in settlement, and reasonable costs, expenses and counsel fees paid or
incurred in connection with any proceeding, other than an action by or
in the right of the corporation, to which such director, officer,
employee or agent may be a party, provided such a director, officer,
employee or agent shall have acted in good faith and shall have
reasonably believed (a) in the case of a civil proceeding, that his
conduct was in or not opposed to the best interests of the
corporation, or (b) in the case of a criminal proceeding, that he had
no reasonable cause to believe his conduct was unlawful. In
connection with an action by or in the right of the corporation
against a director, officer, employee or agent, the corporation has
the power to indemnify such director, officer, employee or agent for
reasonable expenses incurred in connection with such suit (a) if such
person acted in good faith and in a manner not opposed to the best
interests of the corporation, and (b) if found liable to the
corporation, only if ordered by a court of law. Section 145 of the
Delaware General Corporation Law provides that such section is not
exclusive of any other indemnification rights which may be granted by
a corporation to its directors, officers, employees or agents.
The Certificate of Incorporation of CYNET-Delaware provides
for mandatory indemnification of directors and officers to the fullest
extent permitted by Delaware law, unless the corporation determines
that the person seeking indemnification did not meet the standards set
forth above. The Certificate of Incorporation of CYNET-Delaware
permits indemnification of other persons to the extent authorized
from time to time by the Board of Directors. The right to
indemnification is a contract right and includes the right to be paid
by the corporation the expenses incurred in defending any such
proceeding in advance of its final disposition, provided that the
indemnitee undertakes to repay all amounts so advanced if it is
ultimately determined that such indemnitee is not entitled to be
indemnified for such expenses.
ADVANCEMENT OF EXPENSES. Under Texas law, expenses, including
reasonable court costs and attorneys' fees, incurred by a director who
was, is, or is threatened to be made a named defendant or respondent
in a proceeding because the person is or was a director of such
corporation may be paid or reimbursed by the corporation prior to the
final disposition of the proceeding after the corporation receives:
(i) a written affirmation by the director of his good faith belief
that he has met the standard of conduct necessary for indemnification
under Texas law; and (ii) a written undertaking by or on behalf of
the director to repay the amount paid or reimbursed if it is
ultimately determined that he has not met those requirements or if it
is ultimately determined that indemnification for such expenses is
prohibited under Texas law.
Delaware law provides for the advancement of expenses for
such proceedings upon receipt of a similar undertaking; such
undertaking, however, need not be in writing. Delaware law does not
require that such director give an affirmation regarding his conduct
in order to receive an advance of expenses.
20
<PAGE>
PROCEDURE FOR INDEMNIFICATION. Texas law provides that a
determination that indemnification is appropriate shall be made: (i)
by a majority vote of a quorum consisting of directors who, at the
time of the vote, are not party to the proceeding; (ii) if such a
quorum cannot be obtained, by a majority vote of a special committee
of the Board of Directors consisting solely of two or more directors,
who at the time of the vote, are not party to the proceeding; (iii)
by a majority vote of special legal counsel; or (iv) by vote of all
shareholders, but excluding from the vote those shares held by
directors who, at the time of the vote, are party to the proceeding.
Delaware law provides that a determination that
indemnification is appropriate shall be made: (i) by a majority vote
of directors who are not party to the proceeding, even though less
than a quorum; (ii) if there are no such directors or if such
directors so direct, by independent legal counsel in a written
opinion; or (iii) by stockholder vote.
MANDATORY INDEMNIFICATION. Under Texas law, indemnification
by the corporation is mandatory only if the director is wholly
successful on the merits or otherwise, in the defense of the
proceeding. Delaware law requires indemnification with respect to any
claim, issue or matter on which the director is successful on the
merits or otherwise, in the defense of the proceeding.
INSURANCE. Texas and Delaware law both allow a corporation to
purchase and maintain insurance on behalf of (i) any person who is or
was a director, officer, employee or agent of the corporation, or (ii)
any person who is or was serving at the request of the corporation as
a director, officer, employee or agent of another corporation or
enterprise, against any liability asserted against such person and
incurred by such person in such a capacity or arising out of his
status as such a person, whether or not the corporation would
otherwise have the power to indemnify him against that liability.
Under Texas law, a corporation may also establish and maintain
arrangements, other than insurance, to protect these individuals,
including a trust fund or surety arrangement.
PERSONS COVERED. Texas law expressly and separately
addresses the indemnification of officers, employees and agents. The
protections afforded to these persons under Texas law resemble those
provided to directors. Delaware law provides the same indemnification
rights to officers, employees and agents as it provides for directors.
STANDARD OF CARE. The standard of care required under Texas
and Delaware law is substantially the same. In general, directors are
charged with the duty in their decision-making process and oversight
responsibilities to act as would a reasonably prudent person in the
conduct of such person's own affairs.
CONTINUITY OF INDEMNIFICATION. Texas law does not contain a
provision that expressly provides indemnification after a directorship
has terminated for acts or omissions which took place prior to such
termination. Delaware law does contain a provision which expressly
provides that the statutory indemnification provisions: (i) apply to a
director after the termination of the directorship with respect to
acts performed while a director, and (ii) inure to the benefit of the
estate and personal representatives of the director.
SHAREHOLDER REPORT. Texas law requires a written report to
the shareholders upon indemnification or advancement of expense.
Delaware law does not have a similar reporting requirement.
21
<PAGE>
SPECIFIC INSTANCES OF DIRECTOR LIABILITY. Texas law holds the
directors of a corporation specifically liable for corporate
distributions that are not permitted by statute, unless the directors
acted in good faith and with ordinary care in determining that
adequate provision existed to permissibly make a distribution.
Delaware law does not contain provisions analogous to this provision
of Texas law.
LIMITED LIABILITY OF DIRECTORS. Texas law permits a
corporation to eliminate in its articles of incorporation all monetary
liability of a director to the corporation or its shareholders for
conduct in the performance of such director's duties. However, Texas
law does not permit any limitation of the liability of a director for:
(i) breaching the duty of loyalty to the corporation or its
shareholders; (ii) failing to act in good faith; (iii) engaging in
intentional misconduct or a known violation of law; (iv) engaging in a
transaction from which the director obtains an improper benefit; or
(v) violating applicable statutes which expressly provide for the
liability of a director.
Delaware law similarly permits the adoption of a provision in
the certificate of incorporation limiting or eliminating the monetary
liability of a director to a corporation or its stockholders by reason
of a director's breach of the fiduciary duty of care. Delaware law
does not permit any limitation of the liability of a director for:
(i) breaching the duty of loyalty to the corporation or its
stockholders; (ii) failing to act in good faith; (iii) engaging in
intentional misconduct or a known violation of law; (iv) obtaining an
improper personal benefit from the corporation; or (v) declaring an
improper dividend or approving an illegal stock purchase or
redemption. Our Articles of Incorporation and CYNET-Delaware's
Certificate of Incorporation both eliminate the monetary liability of
a director to the fullest extent permitted by applicable law.
CYNET-DELAWARE CERTIFICATE OF INCORPORATION
Set forth below is a description of certain provisions in the
CYNET-Delaware Certificate of Incorporation. This is only a summary and is
qualified in its entirety by reference to CYNET-Delaware's Certificate of
Incorporation, which is attached hereto as APPENDIX C.
Assuming the approval of the amendment to our Articles of
Incorporation described in Proposal Two, the number of shares of authorized
capital stock of CYNET-Delaware will be the same as that of the Company on the
Effective Date. Holders of CYNET-Delaware's Class A Common Stock and Series D
Preferred Stock will be entitled to one vote per share on matters voted upon
by the stockholders. The holders of CYNET-Delaware's Class A Common Stock will
be entitled to receive dividends when and as declared by the Board of
Directors, in its discretion, from funds legally available therefor.
Holders of the securities of CYNET-Delaware shall not be entitled as
a matter of right, preemptive or otherwise, to subscribe for or purchase any
securities of CYNET-Delaware now or hereafter authorized to be issued, or
securities held in CYNET-Delaware's treasury, whether issued or sold for cash,
other consideration, as a dividend, or otherwise. The Class A Common Stock and
Series D Preferred Stock of CYNET-Delaware will also have no cumulative voting
rights, which means that holders of a majority of shares voting for the
election of directors can elect all members of the Board of Directors. A
majority vote of the shares present in person or represented by proxy is also
generally sufficient for actions that require the vote or concurrence of
stockholders, except as otherwise required by Delaware law for certain
extraordinary transactions. Upon consummation of the Reincorporation, all of
the shares of CYNET-Delaware Common Stock issued in exchange for CYNET's
Common Stock will be fully paid and nonassessable. Such shares will not be
redeemable or subject to further calls or assessments.
22
<PAGE>
The CYNET-Delaware Preferred Stock, like that of CYNET'S Preferred
Stock, will be issuable in series by action of the Board of Directors. The
Board of Directors will be authorized to fix the designations, powers,
preferences and other rights and the qualifications, limitations or
restrictions thereof in substantially the same manner as currently provided
with respect to the Preferred Stock of CYNET.
RIGHTS OF DISSENTING SHAREHOLDERS
With certain exceptions which are not applicable to the
Reincorporation, Article 5.11 of the Texas Business Corporation Act gives each
shareholder of the Company the right to object to a merger and to demand
payment of the fair value of his shares calculated as of the day before the
vote was taken authorizing the merger, excluding any appreciation or
depreciation in anticipation of the merger. Inasmuch as the Reincorporation
contemplates such a merger of the Company, the rights under Article 5.11 will
apply to the Reincorporation. However, because the Reincorporation is not
intended to have any material effect upon the Company's business or financial
condition, the Company reserves its right to abandon the Reincorporation for
any reason at any time before the merger becomes effective, and would expect
to do so if the holders of a substantial number of shares of our Common Stock
or Preferred Stock exercise such dissenter's rights.
In order to perfect his dissenter's rights, a shareholder of CYNET
must, prior to the taking of the vote of shareholders on the merger, file with
CYNET a written objection to the merger, notifying CYNET that his right to
dissent will be exercised if the merger is effected and specifying the address
to which notice shall be delivered or mailed in such event. If our merger into
CYNET-Delaware is effected and the shareholder has not voted in favor thereof,
CYNET must, within ten days after the merger is effected, deliver or mail to
such shareholder written notice thereof and such shareholder may, within ten
days from the delivery or mailing of such notice, make written demand on the
surviving corporation for payment of the fair value of his shares. Such demand
must state the number and class of shares owned by the dissenting shareholder
and his estimate of the fair value thereof. It is not necessary for the
shareholder to vote against the Reincorporation (although he may not vote in
favor of the Reincorporation, if he desires to preserve his dissenter's
appraisal rights); however, any shareholder failing to make demand within the
ten day period will be bound by such corporate action. A vote against or
abstaining with respect to the proposed Reincorporation will not satisfy the
requirement that the shareholder make demand for payment of his shares. Within
20 days after demanding payment for his or her shares in the manner described
above, each holder of certificates representing shares so demanding payment
shall submit such certificates to CYNET for notation thereon that such demand
has been made.
Within 20 days after receipt by CYNET of a demand by the dissenting
shareholder for payment of the fair value of his shares, we shall deliver or
mail to the dissenting shareholder a written notice that CYNET will either:
(i) pay the amount claimed within 90 days after the date the merger is
effected upon the surrender of the duly endorsed certificates; or (ii) pay
some other amount as the fair value within 90 days after the date the merger
was effected, upon receipt of notice within 60 days after the date the merger
was effected from the shareholder that he will accept such amount in exchange
for surrender of his duly endorsed certificates. If the Company and the
dissenting shareholder can agree upon the fair value, such value will be paid
and the dissenting shareholder shall cease to have any interest in such shares
or in the corporation. If agreement as to the fair value cannot be reached,
either the dissenting shareholder or the Company may, within the time limits
prescribed by Article 5.12, file a petition in a court of competent
jurisdiction in Harris County, Texas, asking for a finding and determination
of the fair value of such shares. Court costs will be allocated between the
parties in such manner as the court shall determine to be fair and equitable.
23
<PAGE>
The foregoing summary does not purport to be a complete statement of
the rights of dissenting shareholders, and such summary is qualified in its
entirety by references to Article 5.11, 5.12 and 5.13 of the Texas Business
Corporation Act, which are reproduced in full as APPENDIX E hereto.
VOTES REQUIRED FOR REINCORPORATION
Approval of the Reincorporation requires the affirmative vote of the
holders of at least two-thirds of the shares entitled to vote represented at
the Annual Meeting in person or represented by proxy.
THE BOARD OF DIRECTORS BELIEVES THAT THE REINCORPORATION IS IN THE
BEST INTEREST OF THE COMPANY AND ITS SHAREHOLDERS AND RECOMMENDS A VOTE FOR
ITS APPROVAL.
APPROVAL OF THE ESTABLISHMENT OF A CLASSIFIED
BOARD OF DIRECTORS WHEN THE REINCORPORATION OCCURS
(PROPOSAL 5)
GENERAL
The Company's Board of Directors currently consists of members
elected to one-year terms at each annual meeting of the shareholders. As part
of the Company's proposed Reincorporation in Delaware (see Proposal Four
regarding the Reincorporation in Delaware) and the merger into CYNET-
Delaware thereby contemplated, the Company seeks to establish a classified
board of directors by dividing the Board of Directors into three classes with
staggered terms.
A classified board is one in which a certain member, but not all, of
the directors are elected on a rotating basis each year. This method of
electing directors makes changes in the composition of the board of directors
more difficult, and thus a potential change in control of a corporation a
lengthier and more difficult process. Under Texas law, a company may provide
for a classified board of directors by adopting amendments to its bylaws,
which amendments must be approved by the shareholders if the classification of
directors is to be effective prior to the next annual meeting of shareholders
at which directors are elected. Although the Company qualifies to adopt a
classified board of directors, its Board of Directors has not previously done
so. Delaware law permits, but does not require, a classified board of
directors, pursuant to which the directors can be divided into as many as
three classes with staggered terms of office, with only one class of directors
standing for election each year. The Certificate of Incorporation and Bylaws
of CYNET-Delaware provide for a classified Board of Directors with three
classes of directors (the "Classified Board Provision").
Under the Classified Board Provision, the Board of Directors would be
divided into three classes, designated Class I, Class II and Class III. All
directors in Class I would hold office until the first annual meeting of the
shareholders following the implementation of the Classified Board Provision;
all directors in Class II would hold office until the second annual meeting of
the shareholders following such implementation of the Classified Board
Provision; and all directors in Class III would hold office until the third
annual meeting of the shareholders following such implementation of the
Classified Board Provision and, in each case, until their successors are duly
elected and qualified or until their earlier resignation, removal from office
or death. As a result, only one class of directors will be elected at each
annual meeting of stockholders, with the remaining classes continuing their
respective two-year and three-year terms until their successors are duly
elected and qualified or until earlier resignation, removal from office or
death. Any
24
<PAGE>
director chosen by the directors to fill a vacancy in the Board of Directors
shall hold office for the unexpired term in respect of which such vacancy
occurs.
If the proposal for Reincorporation in Delaware is adopted by the
shareholders, the directors of CYNET-Delaware, who are nominated for election
under Proposal One, will be divided into classes as follows:
<TABLE>
<CAPTION>
_______________________________________________________________________________
CLASS NAME
_______________________________________________________________________________
<S> <C>
Class I Craig T. Jackson
_______________________________________________________________________________
Class I Gregory E. Webb
_______________________________________________________________________________
Class I Wayne Schroeder
_______________________________________________________________________________
Class II Bernard B. Beale
_______________________________________________________________________________
Class II R. Greg Smith
_______________________________________________________________________________
Class II Samuel C. Beale
_______________________________________________________________________________
Class III Vincent W. Beale, Sr.
_______________________________________________________________________________
Class III Daniel C. Lawson
_______________________________________________________________________________
Class III Gerald W. McIntosh
_______________________________________________________________________________
</TABLE>
By approving Proposal Five, shareholders will be approving the
Classified Board Provision, the election of the same directors who are
nominated for election to the Board of Directors of the company under Proposal
One, and the initial classification of those directors as set forth above.
CLASSIFIED BOARD
At each annual meeting scheduled to be held after the proposed
Reincorporation, directors to replace those of a class whose terms expire at
such annual meeting shall be elected to hold office until the third succeeding
annual meeting and until their respective successors shall have been duly
elected and qualified. If the number of directors is later changed, any newly
created directorships or decrease in directorships shall be so apportioned
among the classes as to make all classes as nearly equal in number as is
practicable. Thus, after the proposed Reincorporation, shareholders will elect
only one-third of the directors at each annual meeting of shareholders.
The Board of Directors believes that dividing the directors into
three classes is advantageous to the Company and its shareholders because by
providing that directors will serve three-year terms rather than one-year
terms, the likelihood of continuity and stability in the policies formulated
by the Board will be enhanced. Although the Board of Directors is not aware of
any problems experienced by the Company in the past with respect to such
continuity and stability, the Board of Directors believes that a classified
Board of Directors could decrease the likelihood of such problems arising in
the future. In addition, the Board of Directors believes that a classified
Board of Directors will assist the Company in attracting and retaining
qualified persons to serve as members of the Board of Directors.
25
<PAGE>
The Board of Directors also believes that a classified board would,
if adopted, reduce the possibility that a third party could effect an
unsolicited change in control of the Company's Board of Directors. A
classified board would likely allow the Board and management, if confronted by
a proposal from a third party who has acquired a block of the Company's Common
Stock, sufficient time to review the proposal and appropriate alternatives to
the proposal and to attempt to negotiate a better transaction, if possible,
for the shareholders.
The Board of Directors for the Company believes that if a potential
acquiror were to purchase a significant or controlling interest in the
Company, such potential acquiror's ability to remove the Company's directors
and obtain control of the Board and thereby remove the Company's management
would severely curtail the Company's ability to negotiate effectively with
such potential acquiror. The threat of obtaining control of the Board may
deprive the Board of Directors the time and information necessary to evaluate
the proposal, to study alternative proposals and to help ensure that the best
price is obtained in any transaction involving the Company which may
ultimately be undertaken.
Since the creation of a classified board will increase the amount of
time required for a takeover bidder to obtain control of the Company without
the cooperation of the Board, even if the takeover bidder were to acquire a
majority of the Company's outstanding Common Stock, the existence of a
classified board could tend to discourage certain tender offers which
shareholders might feel would be in their best interests. Because tender
offers for control usually involve a purchase price higher than the current
market price, the creation of a classified board could also discourage open
market purchases by a potential takeover bidder. Such tender offers or open
market purchases could increase the market price of the Company's stock,
enabling shareholders to sell their shares at a price higher than that which
otherwise would prevail. In addition, the creation of a classified board could
make the Company's Common Stock less attractive to persons who invest in
securities in anticipation of an increase in price if a takeover attempt
develops. Since these provisions will make the removal of a director more
difficult, it will increase the directors' security in their positions and,
since the Board has the power to retain and discharge management, would tend
to perpetuate incumbent management. In addition, the additional time required
to change control of the Board makes it more difficult for shareholders to
change the composition of the Board even if they believe such a change
desirable.
The foregoing discussion of the Certificate of Incorporation and
Bylaws of CYNET-Delaware is qualified in its entirety by reference to the
relevant sections of such Certificate and Bylaws attached to this Proxy
Statement as Appendices C and D, respectively.
VOTES REQUIRED AND RECOMMENDATION OF THE BOARD OF DIRECTORS
Approval of the adoption of a classified Board of Directors after the
proposed Reincorporation, which will also constitute approval of the
provisions of the Certificate of Incorporation and the Bylaws of
CYNET-Delaware establishing such a classified Board, will require the
affirmative vote of the majority of outstanding shares of Common Stock of the
Company. As a result, abstentions and broker non-votes will have the same
effect as a vote against the proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ESTABLISHMENT OF A
CLASSIFIED BOARD.
26
<PAGE>
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
(PROPOSAL 6)
Subject to the approval of the shareholders, the Board of Directors
has appointed the firm of BDO Seidman, LLP, as independent public accountants
to examine our consolidated financial statements for the fiscal year ending
December 31, 2000. BDO Seidman, LLP audited our financial statements for the
fiscal year ended December 31, 1999. Representatives of BDO Seidman, LLP are
expected to be present at the Annual Meeting and will have an opportunity to
make a statement, if they so desire, and to respond to appropriate questions
from those attending the meeting.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Except for certain statements regarding our ability to continue as a
going concern, the audit reports of BDO Seidman, LLP on our consolidated
financial statements during the fiscal years ended December 31, 1998 and 1999
did not contain any adverse opinion or disclaimer of opinion, nor were they
modified as to uncertainty, audit scope, or accounting principles.
In connection with the audits of the fiscal years ended December 31,
1998 and 1999 by BDO Seidman, LLP, there were no disagreements with BDO
Seidman, LLP on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedures, which disagreements if
not resolved to its satisfaction would have caused BDO Seidman, LLP to make
reference to the subject matter of the disagreement in connection with its
opinion.
VOTES REQUIRED FOR APPROVAL
The ratification of the appointment of BDO Seidman, LLP requires the
vote of the holders of at least a majority of the shares entitled to vote
represented at the Annual Meeting in person or represented by proxy.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION AND APPOINTMENT
OF BDO SEIDMAN, LLP AS THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS FOR THE
FISCAL YEAR ENDING DECEMBER 31, 2000.
OTHER INFORMATION
SECURITY OWNERSHIP SUMMARY
The following table sets forth, as of March 15, 2000, the number of
outstanding shares of Class A Common Stock (the Company's only class of voting
securities) owned by (i) each person known by the Company to beneficially own
more than 5% of its outstanding Class A Common Stock, (ii) each director,
(iii) each named executive officer and (iv) all officers and directors as a
group.
27
<PAGE>
<TABLE>
<CAPTION>
Shares of Class A
Name of Beneficial Owner Common Percent of Class(1)
Stock Beneficially Owned
----------------------------------------------- ------------------------------- ------------------------------
<S> <C> <C>
Vincent W. Beale, Sr. 16,939,283 shares(2) 45.2%
Cynet Holdings, LLC 15,691,283 shares(3) 41.9%
Leonard Childress 3,164,964 shares(4) 8.5%
Guy M. Lewis 2,883,888 shares(5) 7.7%
Northern Neck Enterprises, Inc. 2,868,268 shares(6) 7.6%
Houston Economic Opportunity Fund, L.P. 2,180,023 shares(7) 5.8%
Bernard B. Beale 1,150,000 shares(8)(9) 3.1%
Samuel C. Beale 1,100,000 shares(8)(9) 2.9%
Wayne Schroeder 100,000 shares(8) *
Daniel C. Lawson 100,000 shares *
David R. Hearon, Jr. 37,500 shares(8) *
R. Greg Smith 33,333 shares(8) *
All directors and executive officers
as a group (6 people) 17,460,116 shares(10) 46.6%
</TABLE>
--------------------------
* Less than one percent.
(1) Percentages shown are based upon (i) 27,879,236 shares of Class A
Common Stock presently outstanding, (ii) warrants to purchase
8,593,571 shares of Class A Common Stock, (iii) 972,500 shares
subject to vested stock options. On this basis, for purposes of these
calculations, the number of shares used is 37,445,307.
(2) Represents (i) 15,691,283 shares beneficially owned by Cynet Holdings,
of which Mr. Beale is the President and majority owner, (ii) 1,148,000
shares which may be purchased at any time prior to April 13, 2003, at
a purchase price of $1.00 per share upon exercise of a warrant
originally issued to Ray C. Davis in April 1998, and (iii) 100,000
shares subject to vested stock options.
(3) Includes (i) 9,473,000 shares purchased from Ray C. Davis and related
entities controlled by Mr. Davis, (ii) 5,225,472 shares purchased
pursuant to the Subscription Agreement between the Company and Cynet
Holdings (the "Holdings Subscription Agreement"), (iii) 1,090,000
shares which may be purchased at any time prior to July 22, 2003, at a
purchase price of $1.00 per share, upon exercise of a warrant issued
pursuant to the Holdings Subscription Agreement, and (iv) 152,811
shares purchased in 1999 as part of the financing of the company's
registered rescission offer. The amount shown excludes 250,000 shares
that were pledged to an unaffiliated financial institution in 1998 and
subsequently foreclosed upon. See "Certain Relationships and Related
Transactions."
(4) Includes (i) 1,300,000 shares deemed beneficially owned by Mr.
Childress as a result of his interest in Cynet Holdings and (ii)
1,000,000 shares which may be purchased at any time prior to July 22,
2003, at a purchase price of $1.00 per share, upon exercise of a
warrant originally issued pursuant to the Holdings Subscription
Agreement.
(5) Includes 2,000,000 shares which may be purchased at any time prior to
July 22, 2003, at a purchase price of $1.00 per share, upon exercise
of a warrant originally issued pursuant to the Holdings Subscription
Agreement.
(6) Includes (i) 1,500,000 shares deemed beneficially owned by Northern
Neck Enterprises, Inc. as a result of its interest in Cynet Holdings
and (ii) 1,000,000 shares which may be purchased at any time
28
<PAGE>
prior to July 22, 2003, at a purchase price of $1.00 per share, upon
exercise of a warrant originally issued pursuant to the Holdings
Subscription Agreement.
(7) Represents (i) 1,766,423 shares into which an equal number of shares
of the Series D Redeemable Convertible Preferred Stock may be
converted and (ii) 413,600 shares, which may be purchased upon
exercise of a warrant issued pursuant to the Enron Advisory Agreement.
(8) Includes shares subject to vested stock options.
(9) Includes shares deemed beneficially owned as a result of an interest
in Cynet Holdings.
(10) Includes an aggregate of 7,425,683 shares that such persons have the
right to acquire within 60 days pursuant to warrants and options held
by such persons.
EXECUTIVE OFFICERS AND KEY EMPLOYEES
The table below sets forth information concerning our executive
officers and significant employees, including their ages and positions with us
as of April 30, 2000. See "Election of Directors--Nominees" for biographical
information concerning Vincent W. Beale, Sr., Bernard B. Beale, Samuel C.
Beale and R. Greg Smith.
<TABLE>
<CAPTION>
NAME AGE POSITION
------------------------------- ------------- -----------------------------------------------------
<S> <C> <C>
Vincent W. Beale, Sr. 51 Chairman of the Board, Chief Executive Officer,
President and Director
Bernard B. Beale 43 Executive Vice President and Chief Operating
Officer
David R. Hearon, Jr. 62 Senior Vice President, Institutional Development
Samuel C. Beale 44 Vice President, General Counsel and Secretary
R. Greg Smith 41 Vice President, Chief Financial Officer
Michael A. Galloway 54 Vice President, Technical Operations
Tom Y. Ren 33 Vice President
Menashe Ben David 47 Vice President
</TABLE>
DAVID R. HEARON, JR. joined the Company in March 1998 as Vice
President and Chief Technical Officer. In March 2000, Mr. Hearon was promoted
to Senior Vice President, Institutional Development. From July 1996 until
joining the Company, Mr. Hearon was President of Hearon & Associates, an
independent consulting firm providing consulting services in the areas of
information technology, manufacturing, customer support, re-engineering and
human resource development. From 1959 to May 1996, Mr. Hearon was employed by
Lucent Technologies and its predecessors, AT&T and Western Electric, in
management positions related to telecommunications and information technology,
including engineering, manufacturing voice and data networks, and call
centers. Mr. Hearon holds a Bachelor's degree in Mechanical Engineering from
the City College of New York and has participated in post-graduate business
and engineering programs at the University of Chicago and City College of New
York.
MICHAEL A. GALLOWAY joined the Company in February 2000 as Vice
President, Technical Operations. Prior to joining the Company, Mr. Galloway
served three years at General Motors International Operations in Berkshire, UK,
where he held the position of Executive Director of Change Management. Mr.
Galloway's many responsibilities at General Motors included operations
management, process engineering and information technology program management.
Mr. Galloway also served on several technical teams, leading the development
of global voice and data strategies and customer-facing Internet applications,
web hosting and architecture. During the 30 years prior to his position at
General Motors, Mr. Galloway held various
29
<PAGE>
positions with Dresser-Kellogg Energy Services, Merck & Co., McDermott
International and Brown & Root, Inc.
TOM Y. REN, joined the Company in October 1999 and serves as a
Vice-President and Director of CYNET Interactive. Prior to joining the
Company, Mr. Ren co-founded and served as President of AECsoft USA, Inc., a
Houston-based software company. For more than the past four years, Mr. Ren has
also held positions with the World Trade Network (wt.net) as Vice President of
Web Development and with COADE Engineering Software as a senior developer. Mr.
Ren graduated from the University of Houston with dual Master's Degrees in
Physics and Chemical Engineering and is a licensed Professional Engineer in
the State of Texas. Mr. Ren engineered and developed the ADC2000 technology, a
web-based trading, Business to Business and Business to Consumer
local/vertical portal technology.
MENASHE BEN-DAVID joined the Company in January 2000 and serves as a
Vice President of the Company. Mr. Ben-David brings over 20 years of
communications and technology experience to his position with CYNET. Prior to
joining the Company, Mr. Ben-David served one year as President of GlobeWave,
Inc., a wholly owned subsidiary of Teliran Electronics, Ltd., where he was
instrumental in bringing new wireless cell/modem technology to the market. Mr.
Ben-David also provided senior sales, marketing, financial, operational and
executive-level leadership to domestic and global wireless resellers and end
users. Before joining GlobeWave, Mr. Ben-David held positions with Geotek
Communications as Vice President of Field Operations and Bogen Communications
as Executive Vice President and Chief Operating Officer.
Vincent W. Beale, Sr., Bernard B. Beale and Samuel C. Beale are
siblings. There are no other family relationships among any of the Company's
directors and executive officers.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY COMPENSATION TABLE. The following table sets forth
information with respect to all forms of compensation paid by the Company to
the named individuals for the years ended December 31, 1999, 1998 and 1997. No
other director or executive officer received salary and bonus which exceeded
$100,000 during any of the three fiscal years ended December 31, 1999. See "--
Employment Agreements" below for information regarding the current
compensation of certain of the Company's directors and the executive officers
named below.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
SECURITIES
NAME AND FISCAL OTHER ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS(1) COMPENSATION
------------------ ---- ------ ----- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Vincent W. Beale, Sr. 1999 $180,000 -- -- -- --
President and Chief 1998 $133,693 $30,000 -- 100,000 shares --
Executive Officer
(since 1/98)
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
SECURITIES
NAME AND FISCAL OTHER ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS(1) COMPENSATION
------------------ ---- ------ ----- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Ray C. Davis 1998 $110,287 -- -- -- $188,326(2)
President and Chief 1997 $198,430 $50,000 $7,500(3) -- $250,000(4)
Executive Officer
(until 1/98)
Bernard B. Beale 1999 $153,136 $30,000 -- -- --
Executive Vice 1998 $131,696 -- -- 150,000 shares --
President, Chief
Operating Officer
(since 1/98)
David R. Hearon, Jr. 1999 $150,000 -- -- -- --
Vice President, Chief 1998 $122,226 $30,000 -- 75,000 shares --
Technical Officer
(since 3/98)
Samuel C. Beale 1999 $108,000 -- -- -- --
Vice President, 1998 $90,845 -- -- 100,000 shares --
General Counsel and
Secretary
(since 3/98)
R. Greg Smith 1999 $125,000 $30,000 -- -- --
Vice President, Chief 1998 $42,308 -- -- 100,000 shares --
Financial Officer
(since 8/98)
Vickroy Stone 1997 -- -- --(5) -- --
Chief Financial
Officer
(9/95 to 2/97)
31
<PAGE>
LONG-TERM
COMPENSATION
SECURITIES
NAME AND FISCAL OTHER ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS(1) COMPENSATION
------------------ ---- ------ ----- ------------ ------------ ------------
John Kim 1997 $262,302 $6,000 -- -- --
Vice President, Sales -- -- --
(4/96 to 2/98)
Keith Shaffner 1997 $9,231 -- -- -- $1,976,663(6)
Vice President
(6/97 to 11/97)
</TABLE>
-------------------
(1) Refers to incentive stock options to purchase shares of Class A Common
Stock at a purchase price of $0.39 per share granted to Vincent W.
Beale, Sr., Bernard B. Beale, David R. Hearon, Jr., Samuel C. Beale and
R. Greg Smith under the 1997 Plan in accordance with their respective
employment agreements with the Company. (See "-- Option Grants" and "--
Employment Agreements").
(2) Represents (i) a $121,043 account receivable owed by Mr. Davis to the
Company which was forgiven in exchange for the termination of Mr.
Davis' employment agreement pursuant to the Settlement Agreement and
Mutual Release in Full executed between the Company and Mr. Davis. See
"--Employment Agreements" and (ii) $67,283 of property transferred to
Mr. Davis as compensation for services rendered. See "-- Certain
Relationships and Related Transactions."
(3) Represents the value of providing Mr. Davis the use of an automobile
owned by the Company.
(4) Represents consideration paid to Mr. Davis in exchange for his
assignment to the Company of all of his "intellectual property." See
"-- Certain Relationships and Related Transactions."
(5) Excludes (i) the repurchase by the Company of 450,000 shares of Class A
Common Stock from Mr. Stone for $450,000 and (ii) the issuance of
warrants to purchase 450,000 shares of Class A Common Stock which were
deemed to have no value on the date of issuance. See "--Certain
Relationships and Related Transactions."
(6) Represents $1,005,136 paid to Mr. Shaffner, individually, and $971,527
paid to his affiliate, CyFax, Inc. See "--Certain Relationships and
Related Transactions."
OPTION GRANTS. Under the 1997 Plan, incentive options to purchase
shares of the Class A Common Stock have been granted to Vincent W. Beale, Sr.,
Bernard B. Beale, David R. Hearon, Jr., Samuel C. Beale and R. Greg Smith in
accordance with their respective employment agreements described in
"--Employment Agreements" below as follows: 100,000 shares to Vincent W.
Beale, Sr. which vested immediately on the date of grant, 150,000 shares to
Bernard B. Beale which vested immediately on the date of grant, 100,000 shares
to Samuel C. Beale which vested immediately on the date of grant, 75,000
shares to David R. Hearon, Jr. which vest ratably over a four-year period, and
100,000 shares to R. Greg Smith which vest ratably over a three-year period.
Each of these stock options has an exercise price of $0.39 per share.
OPTION EXERCISES AND YEAR-END OPTION VALUES. The table below sets
forth information regarding the value of stock options outstanding at December
31, 1999 held by each of the officers named below. None of such officers
exercised any stock options during 1999. The Company did not issue any SARs
during the
32
<PAGE>
fiscal year ended December 31, 1999. Values for "in the money" options
represent the position spread between the exercise price of existing options
and the market value for the Company's Class A Common Stock on December 31,
1999:
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR END AT DECEMBER 31, 1999
NAME EXERCISABLE/UNEXERCISEABLE (1) EXERCISABLE/UNEXERCISEABLE(2)
---- -------------------------- --------------------------
<S> <C> <C>
Vincent W. Beale, Sr.
President,
Chief Executive Officer 100,000 $151,000
(since 1/98) ------- --------
100,000/0 $151,000/0
Bernard B. Beale
Executive Vice President,
Chief Operating Officer 150,000 $226,500
(since 1/98) ------- --------
150,000/0 $226,500/0
David R. Hearon, Jr.
Vice President,
Chief Technical Officer 75,000 $113,250
(since 3/98) ------ --------
18,750/56,250 $28,313/$84,938
Samuel C. Beale
Vice President, General
Counsel and Secretary 100,000 $151,000
(since 3/98) ------- --------
100,000/0 $151,000/0
R. Greg Smith
Vice President,
Chief Financial Officer 100,000 $151,000
(since 8/98) ------- --------
33,333/66,667 $50,333/$100,667
</TABLE>
-------------------
(1) Indicates number of options exercisable and unexerciseable as of
December 31, 1999.
(2) Based upon $1.51 per share, the estimated fair market value of a share
of the Class A Common Stock at December 31, 1999, as determined by
reference to the last transaction in 1999 involving the sale and
issuance of shares of our Class A Common Stock.
None of the Company's executive officers was granted awards under any
long-term incentive plan during the fiscal year ended December 31, 1999.
33
<PAGE>
EMPLOYMENT AGREEMENTS
On June 17, 1997, the Company entered into a Consulting Agreement
with Vincent W. Beale, Sr., pursuant to which Mr. Beale agreed to assist the
Company with respect to an initial public offering and certain proposed
mergers and acquisitions. Mr. Beale was paid an aggregate of $189,000 in
consulting fees under the terms of the Consulting Agreement.
Effective February 1, 1998, the Company terminated his Consulting
Agreement and entered an employment agreement with Vincent W. Beale, Sr.
pursuant to which Mr. Beale serves as the Chairman of the Board and Chief
Executive Officer of the Company. The agreement has an initial term of five
years and can continue for additional one-year periods upon the agreement of
Mr. Beale and the Company, and requires Mr. Beale to devote substantially all
of his business time, attention and energy exclusively to the business of the
Company, and to use his best efforts to promote the success of the Company's
business. In exchange, Mr. Beale is entitled to (i) receive an annual salary,
commencing February 1, 1998, of $180,000 (subject to annual review by the
Board of Directors), (ii) earn an incentive bonus in accordance with the
Company's bonus plan to be established for its executives, (iii) receive a
signing bonus of $30,000, (iv) an option under the Company's 1997 Plan to
purchase 100,000 shares of Class A Common Stock at a price of $0.39 per share
which vests immediately when granted and (v) participate in the Company's
other employee benefit plans. Mr. Beale's employment agreement is terminable
by the Company at any time for "cause," as specified in the agreement, and in
certain other events. The employment agreement also contains covenants
limiting Mr. Beale's right to compete with the Company during the term of the
employment agreement and for two years after the termination of his employment.
Effective March 1, 1998, the Company entered into an employment
agreement with David R. Hearon, Jr. pursuant to which Mr. Hearon serves as the
Vice President of Operations of the Company. The agreement has an initial term
of four years and can continue for additional one-year periods upon the
agreement of Mr. Hearon and the Company, and requires Mr. Hearon to devote
substantially all of his business time, attention and energy exclusively to
the business of the Company, and to use his best efforts to promote the
success of the Company's business. In exchange, Mr. Hearon is entitled to (i)
receive an annual salary, commencing March 1, 1998, of $150,000 (subject to
annual review by the Board of Directors), (ii) earn an incentive bonus in
accordance with the Company's bonus plan to be established for its executives,
(iii) receive a signing bonus of $30,000, (iv) an option under the Company's
1997 Plan to purchase 75,000 shares of Class A Common Stock at a price of
$0.39 per share which vests ratably over a four-year period and (v)
participate in the Company's other employee benefit plans. Mr. Hearon's
employment agreement is terminable by the Company at any time for "cause," as
specified in the agreement, and in certain other events. The employment
agreement also contains covenants limiting Mr. Hearon's right to compete with
the Company during the term of the employment agreement and for two years
after his termination of employment.
Effective March 3, 1997, the Company entered into a three-year
executive employment agreement with Ray C. Davis, the founder of the Company.
The agreement was automatically renewable at the end of its initial term for
consecutive one-year terms and provided for an annual base salary of $220,000,
and incentives (annual and long-term), retirement benefits, welfare benefits,
and fringe benefits, which were available to other executive employees of the
Company. Mr. Davis received a $50,000 signing bonus from the Company upon
execution of his agreement. The agreement also contained provisions for the
acceleration of certain compensation due to Mr. Davis in the event of a
"change of control" of the Company, as defined in the agreement.
34
<PAGE>
Effective April 13, 1998, the employment agreement between the
Company and Ray C. Davis was terminated and Mr. Davis entered into a new
employment agreement with the Company. The agreement had an initial term of
five years, and provided for Mr. Davis to (i) receive an annual salary,
commencing April 13, 1998, of $150,000 (subject to annual review by the Board
of Directors), (ii) receive a warrant to purchase an aggregate of 2,000,000
shares of Class A Common Stock at a price of $1.00 per share and (iii)
participate in certain of the Company's other employee benefit plans. The
employment agreement provided Mr. Davis devotes approximately one-half of his
business time and attention to the business of the Company. All inventions and
technological improvements to the Company's software developed by Mr. Davis
during the term of the employment agreement became the property of the Company
and the Company is not required to compensate Mr. Davis for any such
inventions or improvements. The employment agreement also contained covenants
limiting Mr. Davis's right to compete with the Company during the term of the
employment agreement and for three years after his termination of employment.
Effective August 31, 1998, Mr. Davis resigned from the Company, and the
Company and Mr. Davis entered into a Settlement Agreement and Mutual Release
in Full (the "Davis Settlement"), providing for (i) the termination of Mr.
Davis' employment agreement with the Company, (ii) the Company's forgiveness
and release of $121,043.14 in indebtedness owed by Mr. Davis to the Company,
and (iii) Mr. Davis' release of claims against the Company with respect to his
employment agreement. See "--Certain Relationships and Related Transactions."
Effective July 22, 1998, the Company entered into an employment
agreement with Bernard B. Beale pursuant to which Mr. Beale serves as the
Executive Vice President of the Company. The agreement has an initial term of
four years and can continue for additional one-year periods upon the agreement
of Mr. Beale and the Company, and requires Mr. Beale to devote substantially
all of his business time, attention and energy exclusively to the business of
the Company, and to use his best efforts to promote the success of the
Company's business. In exchange, Mr. Beale is entitled to (i) receive an
annual salary, commencing July 22, 1998, of $150,000 (subject to annual review
by the Board of Directors), (ii) earn an incentive bonus in accordance with
the Company's bonus plan to be established for its executives, (iii) receive a
signing bonus of $30,000, (iv) an option under the Company's 1997 Plan to
purchase 150,000 shares of Class A Common Stock at a price of $0.39 per share
which vests immediately when granted and (v) participate in the Company's
other employee benefit plans. Mr. Beale's employment agreement is terminable
by the Company at any time for "cause," as specified in the agreement, and in
certain other events. The employment agreement also contains covenants
limiting Mr. Beale's right to compete with the Company during the term of the
employment agreement and for two years after his termination of employment.
Effective July 22, 1998, the Company entered into an employment
agreement with Samuel C. Beale pursuant to which Mr. Beale serves as the Vice
President, General Counsel and Secretary of the Company. The agreement has an
initial term of three years and can continue for additional one-year periods
upon the agreement of Mr. Beale and the Company, and requires Mr. Beale to
devote substantially all of his business time, attention and energy
exclusively to the business of the Company, and to use his best efforts to
promote the success of the Company's business. In exchange, Mr. Beale is
entitled to (i) receive an annual salary, commencing July 22, 1998, of
$108,000 (subject to annual review by the Board of Directors), (ii) earn an
incentive bonus in accordance with the Company's bonus plan to be established
for its executives, (iii) receive a signing bonus of $30,000, (iv) an option
under the Company's 1997 Plan to purchase 100,000 shares of Class A Common
Stock at a price of $0.39 per share which vests immediately when granted and
(v) participate in the Company's other employee benefit plans. Mr. Beale's
employment agreement is terminable by the Company at any time for "cause," as
specified in the agreement, and in certain other events. The employment
agreement also contains covenants limiting Mr. Beale's right to compete with
the Company during the term of the employment agreement and for two years
after his termination of employment.
35
<PAGE>
Effective August 26, 1998, the Company entered into an employment
agreement with R. Greg Smith pursuant to which Mr. Smith serves as the Vice
President Finance and Chief Financial Officer of the Company. The agreement
has an initial term of three years and can continue for additional one-year
periods upon the agreement of Mr. Smith and the Company, and requires Mr.
Smith to devote substantially all of his business time, attention and energy
exclusively to the business of the Company, and to use his best efforts to
promote the success of the Company's business. In exchange, Mr. Smith is
entitled to (i) receive an annual salary, commencing August 26, 1998, of
$125,000 (subject to annual review by the Board of Directors), (ii) earn an
incentive bonus in accordance with the Company's bonus plan to be established
for its executives, (iii) receive a signing bonus of $30,000, (iv) an option
under the Company's 1997 Plan to purchase 100,000 shares of Class A Common
Stock at a price of $0.39 per share which vests ratably over a three-year
period and (v) participate in the Company's other employee benefit plans. Mr.
Smith's employment agreement is terminable by the Company at any time for
"cause," as specified in the agreement, and in certain other events. The
employment agreement also contains covenants limiting Mr. Smith's right to
compete with the Company during the term of the employment agreement and for
two years after his termination of employment.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
RAY C. DAVIS. In May and August of 1995, the Company issued an
aggregate of 10,000,000 shares of Class A Common Stock (after giving effect to
a nine for one share dividend) to the Davis Family Partnership, Ltd., the
Charles C. Davis Trust, the Nicholas M. Davis Trust and the Rachel I. Davis
Trust (collectively, the "Davis Interests") for services rendered by Ray C.
Davis in connection with the organization of the Company. The Company valued
such services at $1,000.
In August 1996, the Company purchased 277,000 shares of Class A
Common Stock from the Davis Family Partnership, Ltd. for $277,000. The
purchase price of $1.00 per share of Class A Common Stock was deemed by Mr.
Davis, the then sole director of the Company, to be equal to the fair market
value of the shares purchased based upon sales of shares of Class A Common
Stock by the Company to private investors, at or near the time of the purchase
of shares from the Davis Family Partnership, Ltd. A majority of the proceeds
from the sale of shares of Class A Common Stock to the Company was used by Mr.
Davis to repay certain loans and advances made to him by the Company during
prior periods.
Effective March 3, 1997, Mr. Davis assigned to the Company all right,
title and interest to all "intellectual property" which Mr. Davis owned. In
exchange for such assignment, the Company paid Mr. Davis $250,000. The
Assignment of Intellectual Property executed by Mr. Davis in favor of the
Company defines "intellectual property" to include (i) all patents, patent
applications, patent disclosures and related documents, (ii) all trademarks,
service marks, trade dress logos and trade names, (iii) all copyrights and
registrations and applications for registration thereof, (iv) all mask works
and registrations and applications for registrations, (v) all computer
software, data and documentation, (vi) all trade secrets and confidential
business information, know-how, and related business information, (vii) all
proprietary rights relating to any of the foregoing items and (viii) all
copies and tangible embodiments of any of the foregoing.
In April 1998, the Company transferred certain property having a net
book value of $67,283 to Mr. Davis and recorded such transfers as
compensation. This amount is in addition to compensation paid to Mr. Davis
under his employment agreements. See Note 5 of the Notes to Consolidated
Financial Statements.
Effective August 31, 1998, Mr. Davis resigned as a director, officer
and employee of the Company and the Company and Mr. Davis entered into the
Davis Settlement providing for (i) the termination of Mr. Davis' employment
agreement with the Company, (ii) the Company's forgiveness and release of
claims of
36
<PAGE>
$121,043 in indebtedness owed by Mr. Davis to the Company, and (iii) Mr.
Davis' release of claims against the Company with respect to his employment
agreement.
KEITH SHAFFNER. In November 1996, the Company issued warrants to
purchase an aggregate of 738,000 shares of Class A Common Stock at an exercise
price of $1.00 per share to various persons for assistance in the organization
and formation of sixteen limited liability companies. Among the persons
receiving such warrants was Keith Shaffner, formerly a Vice President of the
Company. Mr. Shaffner received a warrant to purchase 145,500 shares of Class A
Common Stock in this transaction, the value of which was $37,830. Also in
1996, the Company paid Mr. Shaffner an aggregate of $111,315 for services
rendered. On November 14, 1997, the Company entered into a Settlement
Agreement and Mutual Release with Mr. Shaffner for services rendered by him
during 1996 and 1997. In exchange for a complete release of all claims by Mr.
Shaffner and his affiliate, CyFax, Inc. ("CyFax"), against the Company, the
Company issued to Mr. Shaffner: (i) a warrant to purchase 1,150,000 shares of
Class B Common Stock at a price of $1.00 per share, exercisable on or before
August 30, 1999 (which the Company extended until November 4, 2001), valued at
$184,000 at the time of issuance, (ii) a warrant to purchase 1,050,000 shares
of Class B Common Stock at a price of $1.00 per share, exercisable on or
before February 28, 2000 (which the Company extended until November 4, 2001),
valued at $178,500 at the time of issuance, (iii) 500,000 shares of Class A
Common Stock, valued at $500,000 at the time of issuance, and (iv) $51,000 in
cash. The extension of these warrants required the Company to recognize a
non-cash charge of approximately $1,344,000 during the third quarter of 1999.
See Note 5 of the Notes to Consolidated Financial Statements. In addition, the
Company issued 200,000 shares of Class A Common Stock, valued at $78,000, to
CyFax for the termination of an exclusive agent management agreement with the
Company. The Company also paid Mr. Shaffner, individually, $91,636, and CyFax
an aggregate of $893,527 for services rendered in 1997.
CYNET HOLDINGS, LLC. From February 1998 through July 1998, Cynet
Holdings purchased an aggregate of 9,473,000 shares of Class A Common Stock
from the Davis Interests for an aggregate amount of $1,250,000. The funds
utilized by Cynet Holdings to purchase such shares were generated from Cynet
Holdings' equity capital. Vincent W. Beale, Sr. is the President and majority
owner of Cynet Holdings. In July 1998 the Company entered into a Subscription
Agreement with Cynet Holdings, pursuant to which Cynet Holdings committed to
purchase up to 10,000,000 shares of Class A Common Stock of the Company for
$1.00 per share prior to December 31, 1998. In August 1999 the Subscription
Agreement was amended to (i) extend the duration of the Subscription Agreement
to December 31, 1999 and (ii) permit the issuance of Class B Common Stock to
the extent that no authorized Class A Common Stock is available. In January
2000 the Subscription Agreement was amended to extend the duration of the
agreement to June 30, 2000 and increase the purchase price per share payable
by Cynet Holdings from $1.00 to $1.51 per share. As of March 15, 2000, the
Company issued an aggregate of 5,225,472 shares of Class A Common Stock to
Cynet Holdings pursuant to the Holdings Subscription Agreement in exchange for
(i) $4,106,000 in cash contributions, and (ii) the conversion of $1,119,472 in
short-term unsecured borrowings that were converted into shares of Class A
Common Stock at a price of $1.00 per share. In 1998, 250,000 shares of Class A
Common Stock purchased by Cynet Holdings were pledged to an unaffiliated
financial institution and subsequently foreclosed upon. Also pursuant to the
Holdings Subscription Agreement, the Company (i) issued a five-year warrant
entitling Cynet Holdings to purchase an aggregate of 4,800,000 shares of Class
A Common Stock at a price of $1.00 per share and (ii) entered into a
registration rights agreement granting Cynet Holdings certain registration
rights covering the Company's securities held by Cynet Holdings. Cynet
Holdings also entered into an Underwriting Agreement with the Company pursuant
to which Cynet Holdings purchased 584,825 shares of Class A Common Stock for
$1.37 per share as a rescission underwriter in the Rescission Offer.
37
<PAGE>
In July 1999, the Company entered into a Purchase and Sale Agreement
with Cynet Holdings (the "CYNET Interactive Agreement"), pursuant to which
Cynet Holdings transferred all of the outstanding membership interests of
CYNET Interactive to the Company, resulting in CYNET Interactive becoming a
wholly-owned subsidiary of the Company. In consideration for this transfer,
the Company forgave a $118,936 account receivable due from CYNET Interactive.
During 1999, Cynet Holdings provided the Company short-term financing
of an aggregate of $1,119,472 for working capital and other corporate
purposes. These borrowings were unsecured, non-interest bearing and due on
demand by Cynet Holdings. On December 31, 1999, in accordance with the
Holdings Subscription Agreement, the Company issued 1,119,472 shares of Class
A Common Stock to Cynet Holdings in exchange for the cancellation of these
obligations to Cynet Holdings.
In January 2000, Cynet Holdings provided the Company additional
short-term financing of $500,000 for working capital and other corporate
purposes. These borrowings were unsecured, non-interest bearing and due on
demand by Cynet Holdings. In February 2000, the Company repaid the short-term
financing and provided Cynet Holdings a short-term advance of $80,000 for
working capital. This advance is unsecured, bears interest at a rate of 6% per
annum and is due on demand by the Company. Cynet Holdings has advised the
Company that it expects the advance will be repaid on or before June 30, 2000.
On March 1, 2000, Cynet Holdings assigned to the Company its sales
and marketing rights with respect to the Cell Phone/Modem under an agreement
executed between Cynet Holdings and Teliran Electronics, Ltd. (the "Teliran
Agreement"). Cynet Holdings assigned such rights to the Company for an initial
term of one year in consideration for, among other things, the Company's
agreement to satisfy the minimum sales requirements applicable to the Cell
Phone/Modem units as provided in the Teliran Agreement. This assignment is
renewable for additional one-year periods subject to the Company's meeting
such minimum sales requirements.
CYNET INTERACTIVE. On July 31, 1999, the Company acquired from Cynet
Holdings all of the outstanding membership interests of CYNET Interactive,
LLC, a wholly-owned subsidiary of Cynet Holdings, pursuant to the terms of a
Purchase and Sale Agreement (the "CYNET Interactive Agreement") between the
Company and Cynet Holdings. CYNET Interactive, LLC is a Houston, Texas-based
Internet content provider, whose services include graphic and copy design,
application development and web hosting services. Pursuant to the CYNET
Interactive Agreement, the Company acquired all of the membership interests of
CYNET Interactive from Cynet Holdings in exchange for the Company's
forgiveness of a $118,936 account receivable due from CYNET Interactive. As a
result of the acquisition of CYNET Interactive, CYNET Interactive became a
wholly-owned subsidiary of the Company. The acquisition of CYNET Interactive
was approved by the disinterested members of the Company's Board of Directors.
HOUSTON ECONOMIC OPPORTUNITY FUND, L.P. In September 1999, the
Company entered into a Consulting Agreement (the "Enron Advisory Agreement")
with Houston Economic Opportunity Fund, L.P. ("HEOF"), an investor in the
funding of its registered rescission offer and an affiliate of Enron
Corporation, pursuant to which HEOF agreed to provide certain business
advisory services to the Company. Pursuant to the Enron Advisory Agreement,
the Company issued a warrant entitling HEOF to purchase up to 413,600 shares
of Class A Common Stock at a purchase price of $2.00 per share upon the
completion of the Rescission Financing. The warrant is exercisable, in whole
or in part, at any time during the three-year period beginning on September
30, 1999. In December 1999, HEOF acquired 1,766,423 shares of Class A Common
Stock for a purchase price of $1.37 per share as part of the financing of the
Company's registered rescission offer. On February 4, 2000, the Company also
completed a private placement (the "HEOF Financing") of its securities to
HEOF, pursuant to which HEOF (i) invested $1,600,000 in the Company in
38
<PAGE>
exchange for 1,600,000 shares of the Company's newly-issued Series C
Redeemable Callable Preferred Stock, no par value, and (ii) exchanged
1,766,423 shares of Common Stock owned by HEOF for 1,766,423 shares of the
Company's newly-issued Series D Redeemable Convertible Preferred Stock, no par
value. The HEOF Financing was completed pursuant to a Stock Purchase Agreement
dated as of January 31, 2000 by and between the Company and HEOF.
EXECUTIVE EMPLOYMENT AGREEMENTS. In 1998 the Company entered into
employment agreements with each of Vincent W. Beale, Sr., Bernard B. Beale,
David P. Hearon, Jr., Samuel C. Beale and R. Greg Smith. See "Executive
Compensation-- Employment Agreements."
Future transactions with directors, officers, employees or affiliates
of the Company are anticipated to be minimal and will be made or entered into
on terms that are no less favorable to the Company than those that could be
obtained from an unaffiliated third party. Any such transactions will be
approved in advance by a majority of the disinterested members of the Board of
Directors.
OTHER MATTERS
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange
Act") requires our directors, executive officers and persons who own more than
ten percent of a registered class of the Company's voting equity securities,
to file with the Securities and Exchange Commission (the "SEC") initial
reports of ownership and reports of changes in ownership of the Class A Common
Stock and other equity securities of the Company. Officers, directors, and
greater than ten-percent beneficial owners are required by SEC regulation to
furnish the Company with copies of all Section 16(a) reports they file.
Based solely upon a review of the copies of such reports furnished to
the Company, we believe there was compliance for the fiscal year ended
December 31, 1999 with all Section 16(a) filing requirements applicable to the
Company's officers, directors and greater than ten percent beneficial owners.
SHAREHOLDER PROPOSAL INFORMATION
If you want to present a proposal from the floor at the 2001 Annual
Meeting, you must give us written notice of your proposal no later than
December 31, 2000. If the date of the 2001 Annual Meeting is more than 30
calendar days before or after the date of the 2000 Annual Meeting, your
written notice will be timely if we receive it by the close of business on the
tenth day following the date that we publicly announce the date of the 2001
Annual Meeting. Your notice should be sent to our Secretary at 12777 Jones
Road, Suite 400, Houston, Texas 77070.
If instead of presenting your proposal at the meeting you want your
proposal to be considered for inclusion in next year's proxy statement, you
must submit the proposal in writing to the Secretary so that it is received at
the above address by December 15, 2000.
MISCELLANEOUS MATTERS
We have included a copy of our annual report on Form 10-KSB, covering
the fiscal year ended December 31, 1999, which has been filed with the SEC. We
will bear the cost of soliciting proxies in the accompanying form, including
the reimbursement of banks, brokers, and other custodians, nominees, and
fiduciaries for expenses in forwarding solicitation materials to the
beneficial owners of our stock. In addition
39
<PAGE>
to solicitations by mail, a number of our regular employees may, if necessary
to assure the presence of a quorum, solicit proxies in person or by telephone.
By Order of the Board of Directors
/s/ Samuel C. Beale
-----------------------------------
Samuel C. Beale
VICE PRESIDENT, GENERAL COUNSEL AND
SECRETARY
Houston, Texas
June 9, 2000
40
<PAGE>
Appendix A
AMENDMENT
TO CYNET, INC.
1997 STOCK OPTION PLAN
WHEREAS, the CYNET, Inc. 1997 Stock Option Plan (the "Plan") was
adopted by the Board of Directors of CYNET, Inc. and approved by the
shareholders, on October 20, 1997, and as amended and restated on July 31,
1999;
WHEREAS, the Board of Directors of CYNET, Inc. on May 23, 2000,
adopted a resolution amending the Plan to increase the maximum number of
shares of Class A Common Stock, without par value per share, which are
authorized for issuance under the Plan from 2,000,000 shares to 5,000,000
shares;
WHEREAS, under Section 8 of the Plan the Board of Directors has the
authority to amend the Plan, subject to the approval of the shareholders, in
order to increase the aggregate number of shares of Class A Common Stock,
without par value per share, which may be purchased under stock options
granted under the Plan;
NOW, THEREFORE, pursuant to a resolution adopted by the Board of
Directors and subject to shareholder approval, the Plan is hereby amended as
follows, effective _________, 2000:
NEW FIRST SENTENCE
The first sentence of Section 4 of the Plan is amended to
read as follows in its entirety:
"The aggregate number of shares of the Company's Class A
Common Stock, no par value ("Common Stock"), which may be issued upon
the exercise of Options granted under the Plan shall not exceed
5,000,000, subject to adjustment under the provisions of
Section 7 of this Article I."
<PAGE>
APPENDIX B
AGREEMENT AND PLAN OF MERGER
OF
CYNET, INC., A TEXAS CORPORATION
AND
CYNET, INC., A DELAWARE CORPORATION
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") dated as of
___________, 2000, made and entered into by and between CYNET, Inc., a Texas
corporation ("CYNET"), and CYNET, Inc., a Delaware corporation
("CYNET-Delaware"), which corporations are sometimes referred to herein as
the "Constituent Corporations."
W I T N E S S E T H:
WHEREAS, CYNET is a corporation organized and existing under the
laws of the State of Texas, having been incorporated on April 19, 1995; and
WHEREAS, CYNET-Delaware is a wholly-owned subsidiary corporation of
CYNET, having been incorporated on [INSERT DATE OF INCORPORATION]; and
WHEREAS, the respective Boards of Directors of CYNET and
CYNET-Delaware have determined that it is desirable to merge CYNET into
CYNET-Delaware (the "Merger"); and
WHEREAS, the parties intend by this Agreement to effect a
reorganization under Section 368 of the Internal Revenue Code of 1986, as
amended;
NOW, THEREFORE, in consideration of the premises, the mutual
covenants herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree that CYNET shall be merged into CYNET-Delaware upon the terms and
conditions set forth below.
ARTICLE I
MERGER
On the effective date of the Merger (the "Effective Date"), as
provided herein, CYNET shall be merged into CYNET-Delaware, the separate
existence of CYNET shall cease and CYNET-
<PAGE>
Delaware (hereinafter sometimes referred to as the "Surviving Corporation")
shall continue to exist under the name of CYNET, Inc. by virtue of, and shall
be governed by, the laws of the State of Delaware. The address of the
registered office of the Surviving Corporation in the State of Delaware will
be Corporation Trust Center, 1209 Orange Street, in the County of New Castle,
in the City of Wilmington, Delaware 19801.
ARTICLE II
CERTIFICATE OF INCORPORATION OF SURVIVING CORPORATION
The name of the Surviving Corporation shall be "CYNET, Inc." The
Certificate of Incorporation of the Surviving Corporation as in effect on the
date hereof shall be the Certificate of Incorporation of CYNET-Delaware (the
"Delaware Charter") without change, unless and until amended in accordance
with Article VIII of this Agreement or otherwise amended in accordance with
applicable law.
ARTICLE III
BYLAWS OF THE SURVIVING CORPORATION
The Bylaws of the Surviving Corporation as in effect on the date
hereof shall be the Bylaws of CYNET-Delaware (the "Delaware Bylaws") without
change, unless and until amended in accordance with applicable law.
ARTICLE IV
EFFECT OF MERGER ON STOCK OF CONSTITUENT CORPORATIONS
4.1. On the Effective Date, each outstanding share of Class A and
Class B Common Stock of CYNET, each class being without par value per share
(collectively, the "Common Stock"), other than the shares, if any, for which
appraisal rights shall be perfected under Articles 5.12 and 5.13 of the Texas
Business Corporation Act ("TBCA"), shall be converted into one share of Class
A Common Stock, $.001 par value per share, of CYNET-Delaware, and one share
of Class B Common Stock, $.001 par value per share, of CYNET-Delaware,
respectively (collectively, such shares of Class A and Class B Common Stock
of CYNET-Delaware being the "Delaware Common Stock"), and each outstanding
share of Delaware Common Stock held by CYNET shall be retired and canceled.
The shares of Delaware Common Stock shall be identical to the shares of
Common Stock in all other aspects. In addition, on the Effective Date, each
outstanding share of each series of CYNET'S Preferred Stock, without par
value per share (collectively, the "Preferred Stock"), other than the shares,
if any, for which appraisal rights shall be perfected under Articles 5.12 and
5.13 of the TBCA, shall be converted into one share of the corresponding
series of CYNET-Delaware's Preferred Stock, $.001 par value per share,
respectively (collectively, such shares of such series of Preferred Stock of
CYNET-Delaware being the "Delaware Preferred Stock"). The shares of Delaware
Preferred Stock shall be identical to the shares of Preferred Stock in all
other aspects. The powers, designations, preferences, and rights of the
Delaware Preferred Stock are described in more detail in the Certificates of
Designation, attached hereto as Exhibit A.
2
<PAGE>
4.2. All options and rights to acquire the Common Stock under the
CYNET, Inc. 1997 Restated Stock Option Plan, and under all other outstanding
options, warrants or rights outstanding on the Effective Date will
automatically be converted into equivalent options and rights to purchase the
same number of shares of Delaware Common Stock.
4.3. After the Effective Date, (i) certificates representing shares
of the Common Stock will represent shares of Delaware Common Stock, and (ii)
certificates representing shares of the Preferred Stock will represent shares
of Delaware Preferred Stock, and upon surrender of the same to the transfer
agent for CYNET-Delaware, the holder thereof shall be entitled to receive in
exchange therefor a certificate or certificates representing the number of
shares of Delaware Common Stock or Delaware Preferred Stock into which such
shares of Common Stock or Preferred Stock shall have been converted pursuant
to Article 4.1 of this Agreement.
ARTICLE V
CORPORATE EXISTENCE, POWERS AND
LIABILITIES OF THE SURVIVING CORPORATION
5.1. On the Effective Date, the separate existence of CYNET shall
cease. CYNET shall be merged with and into CYNET-Delaware, the Surviving
Corporation, in accordance with the provisions of this Agreement. Thereafter,
CYNET-Delaware shall possess all the rights, privileges, powers and
franchises of a public as well as of a private nature, and shall be subject
to all the restrictions, disabilities and duties of each of the parties to
this Agreement; all singular rights, privileges, powers and franchises of
CYNET and CYNET-Delaware, and all property, real, personal and mixed and all
debts due to each of them on whatever account, shall be vested in CYNET-
Delaware; and all property, rights, privileges, powers and franchises, and
all and every other interest shall be thereafter the property of
CYNET-Delaware, the Surviving Corporation, as they were of the respective
constituent entities, and the title to any real estate, whether by deed or
otherwise, vested in CYNET and CYNET-Delaware, or either of them, shall not
revert or be in any way impaired by reason of the Merger, but all rights of
creditors and all liens upon the property of the parties hereto, shall be
preserved unimpaired, and all debts, liabilities and duties of CYNET, shall
thenceforth attach to CYNET-Delaware, and may be enforced against it to the
same extent as if said debts, liabilities and duties had been incurred or
contracted by it.
5.2. CYNET agrees that it will execute and deliver, or cause to be
executed and delivered, all such deeds and other instruments and will take or
cause to be taken such further or other action as the Surviving Corporation
may deem necessary in order to vest in and confirm to the Surviving
Corporation title to and possession of all the property, rights, privileges,
immunities, powers, purposes and franchises, and all and every other interest
of CYNET and otherwise to carry out the intent and purposes of this Agreement.
3
<PAGE>
ARTICLE VI
OFFICERS AND DIRECTORS OF SURVIVING CORPORATION
6.1. Upon the Effective Date, the officers and directors of CYNET
shall become the officers and directors of CYNET-Delaware, and such persons
shall hold office in accordance with the Delaware Bylaws until their
respective successors shall have been appointed or elected.
6.2. If upon the Effective Date, a vacancy shall exist in the Board
of Directors of the Surviving Corporation, such vacancy shall be filled in
the manner provided by the Delaware Bylaws.
ARTICLE VII
DISSENTING SHARES
Holders of shares of Common Stock who have complied with all
requirements for perfecting their rights of appraisal set forth in Articles
5.12 and 5.13 of the TBCA shall be entitled to their rights under Texas law.
ARTICLE VIII
APPROVAL BY SHAREHOLDERS, EFFECTIVE DATE,
CONDUCT OF BUSINESS PRIOR TO EFFECTIVE DATE
8.1. Promptly after the approval of this Agreement by the requisite
number of shareholders of CYNET, the respective Boards of Directors of CYNET
and CYNET-Delaware will cause their duly authorized officers to make and
execute Articles of Merger and a Certificate of Merger or other applicable
certificates or documentation effecting this Agreement and shall cause the
same to be filed with the Secretaries of State of Texas and Delaware,
respectively, in accordance with the TBCA and the Delaware General
Corporation Law (the "DGCL"). The Effective Date shall be the date on which
the Merger becomes effective under the TBCA or the date on which the Merger
becomes effective under the DGCL, whichever occurs later.
8.2. The Boards of Directors of CYNET and CYNET-Delaware may amend
this Agreement and the Delaware Charter at any time prior to the Effective
Date, provided that an amendment made subsequent to the approval of the
Merger by the shareholders of CYNET may not (i) change the assessment or type
of shares to be received in exchange for or on conversion of the shares of
the Common Stock; or (ii) change any term of the terms and conditions of this
Agreement if such change would adversely affect the holders of the Common
Stock.
ARTICLE IX
TERMINATION OF MERGER
This Agreement may be terminated and the Merger abandoned at any
time prior to the Effective Date, whether before or after shareholder
approval of this Agreement, by the consent of the Board of Directors of CYNET
and CYNET-Delaware.
4
<PAGE>
ARTICLE X
MISCELLANEOUS
10.1. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas.
10.2. EXPENSES. If the Merger becomes effective, the Surviving
Corporation shall assume and pay all expenses in connection therewith not
theretofore paid by the respective parties. If for any reason the Merger
shall not become effective, CYNET shall pay all expenses incurred in
connection with all the proceedings taken in respect of this Merger Agreement
or relating thereto.
10.3. AGREEMENT. An executed copy of this Merger Agreement will be
on file at the principal place of business of the Surviving Corporation at
12777 Jones Road, Suite 400, Houston, Texas 77070, and, upon request and
without cost, a copy thereof will be furnished to any shareholder.
10.4. COUNTERPARTS. This Merger Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original and
all of which together shall constitute one and the same instrument.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective Presidents and Secretaries, all as of the day
and year first above written.
CYNET, INC.,
a Texas corporation
By:
----------------------------------
Vincent W. Beale, Sr., President
and Chief Executive Officer
ATTEST:
-------------------------------
Samuel C. Beale, Secretary
CYNET, INC.,
a Delaware corporation
By:
----------------------------------
Vincent W. Beale, Sr., President
and Chief Executive Officer
ATTEST:
-------------------------------
Samuel C. Beale, Secretary
6
<PAGE>
Appendix C
CERTIFICATE OF INCORPORATION
OF
CYNET, INC.
ARTICLE ONE
The name of the corporation (the "Corporation") is CYNET, Inc.
ARTICLE TWO
The address of the Corporation's registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, New Castle County,
Wilmington, Delaware 19801. The name of its registered agent at such address
is The Corporation Trust Company.
ARTICLE THREE
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General
Corporation Law of the State of Delaware (the "DGCL").
ARTICLE FOUR
The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 130,000,000 shares which shall
be divided into (a) 10,000,000 shares of preferred stock, $.001 par value per
share (the "Preferred Stock"), and (b) 120,000,000 shares of common stock,
$.001 par value per share (the "Common Stock"), of which 100,000,000 shares
have been designated as Class A Common Stock and 20,000,000 shares have been
designated as Class B Common Stock.
No shareholder shall have any preemptive right to acquire any
additional unissued or treasury shares of the Corporation of any class now or
hereafter authorized or held.
A statement of the powers, preferences and rights, and the
qualifications, limitations or restrictions thereof, in respect of each class
of stock of the Corporation is as follows:
<PAGE>
A. PREFERRED STOCK
The Preferred Stock may be issued from time to time by the Board of
Directors as shares of one or more classes or series. Subject to the
provisions of this Certificate of Incorporation and the limitations
prescribed by law, the Board of Directors is expressly authorized by adopting
resolutions to issue the shares, fix the number of shares and change the
number of shares constituting any series, and to provide for or change the
voting powers, designations, preferences and relative, participating,
optional or other special rights, qualifications, limitations or restrictions
thereof, including dividend rights (and whether dividends are cumulative),
dividend rates, terms of redemption (including sinking fund provisions), a
redemption price or prices, conversion rights and liquidation preferences of
the shares constituting any class or series of the Preferred Stock, without
any further action or vote by the stockholders.
B. COMMON STOCK
1. DIVIDENDS.
Subject to the preferred rights of the holders of shares of any
class or series of Preferred Stock as provided by the Board of Directors with
respect to any such class or series of Preferred Stock, the holders of the
Common Stock shall be entitled to receive, as and when declared by the Board
of Directors out of the funds of the Corporation legally available therefor,
such dividends of the funds of the Corporation legally available therefor,
such dividends (payable in cash, stock or otherwise) as the Board of
Directors may from time to time determine, payable to stockholders of record
on such dates, not exceeding 60 days preceding the dividend payment dates, as
shall be fixed for such purpose by the Board of Directors in advance of
payment of each particular dividend.
2. LIQUIDATION.
In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, after the distribution or
payment to the holders of shares of any class or series of Preferred Stock as
provided by the Board of Directors with respect to any such class or series
of Preferred Stock, the remaining assets of the Corporation available for
distribution to stockholders shall be distributed among and paid to the
holders of Common Stock ratably in proportion to the number of shares of
Common Stock held by them respectively.
3. VOTING RIGHTS.
Except as otherwise required by law, (i) each holder of shares of
Class A Common Stock shall be entitled to one vote for each share of Class A
Common Stock standing in such holder's name on the books of the Corporation,
and (ii) each holder of shares of Class B Common Stock shall have no voting
rights. In the election of directors, votes may not be cumulated.
2
<PAGE>
ARTICLE FIVE
A. BOARD OF DIRECTORS.
All powers of the Corporation shall be vested in and exercised by or
under the direction of the Board of Directors except as otherwise provided
herein or required by law.
For the management of the business and for the conduct of the
affairs of the Corporation, and in further creation, definition, limitation
and regulation of the power of the Corporation and of its directors and
stockholders, it is further provided:
Section 1. ELECTION OF DIRECTORS. Elections of Directors need not be
by written ballot unless the Bylaws of the Corporation shall so provide.
Section 2. NUMBER, ELECTION AND TERMS OF DIRECTORS. The number of
directors shall be fixed from time to time exclusively by the Board of
Directors pursuant to a resolution adopted by a majority of the directors
then in office. The directors shall be classified, with respect to the time
for which they severally hold office, into three classes, each as nearly
equal in number as possible, as shall be provided in the manner specified in
the Bylaws, one class (Class I) to hold office initially for a term expiring
at the annual meeting of stockholders to be held in 2001, another class
(Class II) to hold office initially for a term expiring at the annual meeting
of stockholders to be held in 2002, and another class (Class III) to hold
office initially for a term expiring at the annual meeting of stockholders to
be held in 2003, with the members of each class to hold office until their
successors are duly elected and qualified or until their earlier resignation
or removal. At each annual meeting of the stockholders of the Corporation,
the successors to the class of directors whose term expires at that meeting
shall be elected to hold office for a term expiring at the annual meeting of
stockholders to be held in the third year following the year of their
election. At each annual meeting of stockholders at which a quorum is
present, the persons receiving a plurality of the votes cast shall be
directors.
B. VACANCIES.
Any vacancy on the Board of Directors resulting from death,
retirement, resignation, disqualification or removal from office or other
cause, as well as any vacancy resulting from an increase in the number of
directors which occurs between annual meetings of the stockholders at which
directors are elected, shall be filled only by a two-thirds vote of the
remaining directors then in office, though less than a quorum, except that
those vacancies resulting from removal from office by a vote of the
stockholders may be filled by a vote of the stockholders at the same meeting
at which such removal occurs. The directors chosen to fill vacancies shall
hold office for a term expiring at the end of the next annual meeting of
stockholders at which the term to which they have been elected expires. No
decrease in the number of directors constituting the Board of Directors shall
shorten the term of any incumbent director.
3
<PAGE>
Notwithstanding the foregoing, whenever the holders of one or more
classes or series of Preferred Stock shall have the right, voting separately,
as a class or series, to elect directors, the election, term of office,
filling of vacancies, removal and other features of such directorships shall
be governed by the terms of the resolution or resolutions adopted by the
Board of Directors pursuant to ARTICLE FOUR applicable thereto, and each
director so elected shall not be subject to the provisions of this ARTICLE
FIVE unless otherwise provided therein.
C. POWER TO MAKE, ALTER AND REPEAL BYLAWS.
In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to adopt, amend and
repeal the Bylaws of the Corporation subject to the power of the stockholders
of the Corporation to adopt, amend and repeal any Bylaw whether adopted by
them or otherwise.
D. AMENDMENT AND REPEAL OF ARTICLE FIVE.
Notwithstanding any provision of this Certificate of Incorporation
and of the Bylaws, and notwithstanding the fact that a lesser percentage may
be specified by Delaware law, unless such action has been approved by a
majority vote of the full Board of Directors, the affirmative vote of the
majority of the votes which all stockholders of the then outstanding shares
of capital stock of the Corporation would be entitled to cast thereon, voting
together as a single class, shall be required to amend or repeal any
provisions of this ARTICLE FIVE or to adopt any provision inconsistent with
this ARTICLE FIVE. In the event such action has been previously approved by a
majority vote of the full Board of Directors, the affirmative vote of a
majority of the outstanding stock entitled to vote thereon shall be
sufficient to amend or repeal any provision of this ARTICLE FIVE or adopt any
provision inconsistent with this ARTICLE FIVE. However, the provisions
providing for and relating to the classified Board of Directors may only be
amended by a two-thirds vote which all stockholders of the then outstanding
shares of capital stock of the Corporation would be entitled to cast thereon,
voting together as a single class.
ARTICLE SIX
The Corporation reserves the right to amend, alter, change or repeal
any provision in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute.
ARTICLE SEVEN
No director of the Corporation shall be 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 DGCL or (iv) for any
transaction from which the director derived an improper personal benefit.
4
<PAGE>
ARTICLE EIGHT
The Corporation shall, to the fullest extent permitted by Section
145 of the DGCL, as the same may be amended and supplemented, indemnify each
director and officer of the Corporation from and against any and all of the
expenses, liabilities or other matters referred to in or covered by such
section and the indemnification provided for herein shall not be deemed
exclusive of any other rights to which those indemnified may be entitled
under any Bylaw, agreement, vote of stockholders, vote of disinterested
directors or otherwise, and shall continue as to a person who has ceased to
be a director or officer and shall inure to the benefit of the heirs,
executors and administrators of such persons and the Corporation may purchase
and maintain insurance on behalf of any director or officer to the extent
permitted by Section 145 of the DGCL.
ARTICLE NINE
Special Meetings of the Corporation's stockholders may be called by
the President, the Board of Directors, or such other person or persons as may
be authorized in the Bylaws, and the holders of at least 40% of the issued
and outstanding shares of the Corporation's capital stock entitled to vote on
the matters for which such meetings are proposed to be called.
ARTICLE TEN
The incorporator of the corporation is Faisal H. Kajani whose
mailing address is 1200 Smith Street, Suite 1400, Houston, Texas 77002.
The undersigned incorporator of the corporation hereby acknowledges
that the foregoing certificate of incorporation is his act and deed on this
_______ day of _______________, 2000.
---------------------------------
Faisal H. Kajani
5
<PAGE>
Appendix D
BYLAWS
OF
CYNET, INC.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE 1.
OFFICES...................................................................................................1
Section 1.1 PRINCIPAL OFFICES...........................................................................1
Section 1.2 REGISTERED OFFICES..........................................................................1
Section 1.3 OTHER OFFICES...............................................................................1
ARTICLE 2.
STOCKHOLDERS' MEETINGS....................................................................................1
Section 2.1 ANNUAL MEETING..............................................................................1
Section 2.2 SPECIAL MEETINGS............................................................................1
Section 2.3 NOTICES OF MEETINGS AND ADJOURNED MEETINGS..................................................2
Section 2.4 VOTING LISTS................................................................................2
Section 2.5 QUORUM......................................................................................2
Section 2.6 ORGANIZATION................................................................................3
Section 2.7 VOTING......................................................................................3
Section 2.8 STOCKHOLDERS ENTITLED TO VOTE...............................................................3
Section 2.9 ORDER OF BUSINESS...........................................................................4
Section 2.10 AUTHORIZATION OF PROXIES....................................................................4
Section 2.11 INSPECTORS AND VOTING PROCEDURES............................................................4
ARTICLE 3.
DIRECTORS.................................................................................................5
Section 3.1 MANAGEMENT..................................................................................5
Section 3.2 NUMBER AND TERM.............................................................................5
Section 3.3 QUORUM AND MANNER OF ACTION.................................................................6
Section 3.4 VACANCIES...................................................................................6
Section 3.5 RESIGNATIONS................................................................................6
Section 3.6 REMOVALS....................................................................................6
Section 3.7 ANNUAL MEETINGS.............................................................................7
Section 3.8 REGULAR MEETINGS............................................................................7
Section 3.9 SPECIAL MEETINGS............................................................................7
Section 3.10 ORGANIZATION OF MEETINGS....................................................................7
Section 3.11 PLACE OF MEETINGS...........................................................................7
Section 3.12 COMPENSATION OF DIRECTORS...................................................................8
Section 3.13 ACTION BY UNANIMOUS WRITTEN CONSENT.........................................................8
Section 3.14 PARTICIPATION IN MEETINGS BY TELEPHONE......................................................8
<PAGE>
ARTICLE 4.
COMMITTEES OF THE BOARD...................................................................................8
Section 4.1 MEMBERSHIP AND AUTHORITIES..................................................................8
Section 4.2 MINUTES.....................................................................................9
Section 4.3 VACANCIES...................................................................................9
Section 4.4 TELEPHONE MEETINGS..........................................................................9
Section 4.5 ACTION WITHOUT MEETING......................................................................9
SECTION 5.
OFFICERS..................................................................................................9
Section 5.1 NUMBER AND TITLE............................................................................9
Section 5.2 TERM OF OFFICE; VACANCIES..................................................................10
Section 5.3 REMOVAL OF ELECTED OFFICERS................................................................10
Section 5.4 RESIGNATIONS...............................................................................10
Section 5.5 THE CHAIRMAN OF THE BOARD..................................................................10
Section 5.6 CHIEF EXECUTIVE OFFICER....................................................................10
Section 5.7 PRESIDENT..................................................................................11
Section 5.8 VICE PRESIDENTS............................................................................11
Section 5.9 SECRETARY..................................................................................11
Section 5.10 ASSISTANT SECRETARIES......................................................................11
Section 5.11 TREASURER..................................................................................11
Section 5.12 ASSISTANT TREASURERS.......................................................................12
Section 5.13 SUBORDINATE OFFICERS.......................................................................12
Section 5.14 SALARIES AND COMPENSATION..................................................................12
ARTICLE 6.
INDEMNIFICATION..........................................................................................12
Section 6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS..................................................12
ARTICLE 7.
CAPITAL STOCK............................................................................................13
Section 7.1 CERTIFICATES OF STOCK......................................................................13
Section 7.2 LOST CERTIFICATES..........................................................................13
Section 7.3 FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD FOR CERTAIN PURPOSES...............13
Section 7.4. DIVIDENDS. ................................................................................14
Section 7.5. REGISTERED STOCKHOLDERS....................................................................14
Section 7.6. TRANSFER OF STOCK. ........................................................................14
ARTICLE 8.
MISCELLANEOUS PROVISIONS.................................................................................14
Section 8.1. CORPORATE SEAL. ...........................................................................14
<PAGE>
Section 8.2. FISCAL YEAR................................................................................14
Section 8.3. CHECKS, DRAFTS, NOTES. ....................................................................15
Section 8.4. NOTICE AND WAIVER OF NOTICE................................................................15
Section 8.5. EXAMINATION OF BOOKS AND RECORDS...........................................................15
ARTICLE 9.
AMENDMENTS...............................................................................................16
Section 9.1. AMENDMENTS. ...............................................................................16
</TABLE>
<PAGE>
BYLAWS
OF
CYNET, INC.
ARTICLE 1.
OFFICES
Section 1.1 PRINCIPAL OFFICES.
The principal office of the Corporation shall be in the City of
Houston, Texas.
Section 1.2 REGISTERED OFFICES.
The registered office of the Corporation required to be maintained in
the State of Delaware by the General Corporation Laws of the State of Delaware
may be, but need not be, identical with the Corporation's principal office,
and the location of the registered office may be changed from time to time by
the Board of Directors.
Section 1.3 OTHER OFFICES.
The Corporation may also have offices at such other places both
within and 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 2.
STOCKHOLDERS' MEETINGS
Section 2.1 ANNUAL MEETING.
The annual meeting of the holders of shares of each class or series
of stock as are entitled to notice thereof and to vote thereat pursuant to
applicable law and the Corporation's Certificate of Incorporation for the
purpose of electing directors and transacting such other proper business as
may come before it shall be held in May of each year, at such time, on such
day and at such place, within or without the State of Delaware, as may be
designated by the Board of Directors.
Section 2.2 SPECIAL MEETINGS.
In addition to such special meetings as are provided by law or the
Corporation's Certificate of Incorporation, special meetings of the holders of
any class or series or of all classes or series of
1
<PAGE>
the Corporation's stock for any purpose or purposes, may be called at any time
by the President or the Board of Directors of the Corporation or the holders
of at least 40% of the issued and outstanding shares of the Corporation's
capital stock entitled to vote on the matters that are the subject of the
proposed special meeting, and may be held on such day, at such time and at
such place, within or without the State of Delaware, as shall be designated by
the President or the Board of Directors of the Corporation.
Section 2.3 NOTICES OF MEETINGS AND ADJOURNED MEETINGS.
Except as otherwise provided by law, written notice of any meeting of
Stockholders (i) shall be given either by personal delivery or by mail to each
Stockholder of record entitled to vote thereat, (ii) shall be in such forms as
approved by the Board of Directors, and (iii) shall state the date, place and
hour of the meeting, and, in the case of a special meeting, the purpose for
which the meeting is called. Unless otherwise provided by law, such written
notice shall be given not less than ten (10) nor more than sixty (60) days
before the date of the meeting. Except when a Stockholder attends a meeting
for the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business on the ground that the meeting is not lawfully
called or convened, presence in person or by proxy of a Stockholder shall
constitute a waiver of notice of such meeting. Further, a written waiver of
any notice required by law or by these Bylaws, signed by the person entitled
to notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Except as otherwise provided by law, the business that
may be transacted at any such meeting shall be limited to and consist of the
purpose or purposes stated in such notice. If a meeting is adjourned to
another time or place, notice need not be given of the adjourned meeting if
the time and place thereof are announced at the meeting at which the
adjournment is taken; PROVIDED, HOWEVER, that if the adjournment is for more
than thirty (30) days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each Stockholder of record entitled to vote at the meeting.
Section 2.4 VOTING LISTS.
At least ten (10) days before every meeting of stockholders, the
officer or agent having charge of the stock transfer books for shares of the
Corporation shall make a complete list of Stockholders entitled to vote at
meetings or any adjournments thereof, arranged in alphabetical order and
showing the address of each stockholder and the number of shares registered in
the name of each stockholder, in accordance with applicable law and shall make
same available, during ordinary business hours, for a period of at least ten
(10) days prior to and during each Stockholders' meeting for inspection by the
Corporation's Stockholders as required by law. The Corporation's original
stock transfer books shall be PRIMA FACIE evidence as to who are the
Stockholders entitled to examine such list or transfer books or to vote at any
meeting of Stockholders.
Section 2.5 QUORUM.
Except as otherwise provided by law or by the Corporation's
Certificate of Incorporation, the holders of a majority of the Corporation's
stock issued and outstanding and entitled to vote at a meeting, present in
person or represented by proxy, without regard to class or series, shall
constitute
2
<PAGE>
a quorum at all meetings of the Stockholders for the transaction of business.
If, however, such quorum shall not be present or represented at any meeting of
the Stockholders, the holders of a majority of such shares of stock, present
in person or represented by proxy, may adjourn any meeting from time to time
without notice other than announcement at the meeting, except as otherwise
required by these Bylaws, until a quorum shall be present or represented. At
any such adjourned meeting at which a quorum shall be present or represented,
any business may be transacted which might have been transacted at the meeting
as originally called.
Section 2.6 ORGANIZATION.
Meetings of the Stockholders shall be presided over by the Chairman
of the Board of Directors, if one shall be elected, or in his absence, by the
President or by any Vice President, or, in the absence of any such officers,
by a chairman to be chosen by a majority of the Stockholders entitled to vote
at the meeting who are present in person or by proxy. The Secretary, or, in
his absence, any Assistant Secretary or any person appointed by the individual
presiding over the meeting, shall act as secretary at meetings of the
Stockholders.
Section 2.7 VOTING.
Each Stockholder of record, as determined pursuant to SECTION 2.8,
who is entitled to vote in accordance with the terms of the Corporation's
Certificate of Incorporation and in accordance with the provisions of these
Bylaws, shall be entitled to one vote, in person or by proxy, for each share
of stock registered in his name on the books of the Corporation. Every
Stockholder entitled to vote at any Stockholders' meeting may authorize
another person or persons to act for him by proxy pursuant to SECTION 2.11,
provided that no such proxy shall be voted or acted upon after three years
from its date, unless the proxy provides for a longer period. A duly executed
proxy shall be irrevocable if it states that it is irrevocable and if, and
only as long as, it is coupled with an interest sufficient in law to support
an irrevocable power. A Stockholder's attendance at any meeting shall not have
the effect of revoking a previously granted proxy unless such Stockholder
shall in writing so notify the Secretary of the meeting prior to the voting of
the proxy. Unless otherwise provided by law, no vote on the election of
directors or any question brought before the meeting need be by ballot unless
the chairman of the meeting shall determine that it shall be by ballot or the
holders of a majority of the shares of stock present in person or by proxy and
entitled to participate in such vote shall so demand. In a vote by ballot,
each ballot shall state the number of shares voted and the name of the
Stockholder or proxy voting. Except as otherwise provided by law, by the
Corporation's Certificate of Incorporation or these Bylaws, all elections of
directors and all other matters before the Stockholders shall be decided by
the vote of the holders of a majority of the shares of stock present in person
or by proxy at the meeting and entitled to vote on the matters to be
considered by the Stockholders. In the election of directors, votes may not be
cumulated.
Section 2.8 STOCKHOLDERS ENTITLED TO VOTE.
The Board of Directors may fix a record date not more than sixty (60)
days nor less than ten (10) days prior to the date of any meeting of
Stockholders, or, in the case of corporate action by Stockholder written
consent, not more than ten (10) days after the date upon which the resolution
3
<PAGE>
fixing the record date is adopted by the Board of Directors. The record date
will determine the Stockholders entitled to notice of and to vote at any
meeting of stockholders or any adjournment thereof, or to act by written
consent, and in such case such Stockholders and only such Stockholders as
shall be Stockholders of record on the date so fixed shall be entitled to
notice of and to vote at such meeting and any adjournment thereof, or to act
by written consent, as the case may be, notwithstanding any transfer of any
stock on the books of the Corporation after such record date fixed as
aforesaid.
Section 2.9 ORDER OF BUSINESS.
The order of business at all meetings of Stockholders shall be as
determined by the chairman of the meeting or as is otherwise determined by the
vote of the holders of a majority of the shares of stock present in person or
by proxy and entitled to vote without regard to class or series at the meeting.
Section 2.10 AUTHORIZATION OF PROXIES.
Without limiting the manner in which a Stockholder may authorize
another person or persons to act for him as proxy, the following are valid
means of granting such authority. A Stockholder may execute a writing
authorizing another person or persons to act for him as proxy. Execution may
be accomplished by the Stockholder or his authorized officer, director,
employee or agent signing such writing or causing his or her signature to be
affixed to such writing by any reasonable means including, but not limited to,
by facsimile signature. A Stockholder may also authorize another person or
persons to act for him as proxy by transmitting or authorizing the
transmission of a telegram, cablegram, or other means of electronic
transmission to the person who will be the holder of the proxy or to a proxy
solicitation firm, proxy support service organization or like agent duly
authorized by the person who will be the holder of the proxy to receive such
transmission, provided that any such telegram or other means of electronic
transmission must either set forth or be submitted with information from which
it can be determined that the telegram, cablegram or other electronic
transmission was authorized by the Stockholder. If it is determined that such
telegrams, cablegrams or other electronic transmissions are valid, the
inspectors or, if there are no inspectors, such other persons making that
determination shall specify the information upon which they relied. Any copy,
facsimile telecommunication or other reliable reproduction of the writing or
transmission created pursuant to this Section may be substituted or used in
lieu of the original writing or transmission for any and all purposes for
which the writing or transmission could be used, provided that such copy,
facsimile telecommunication or other reproduction shall be a complete
reproduction of the entire original writing or transmission.
Section 2.11 INSPECTORS AND VOTING PROCEDURES.
(a) The Corporation shall, in advance of any meeting of
Stockholders, appoint one or more inspectors 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 Stockholders, the person presiding at the meeting shall appoint one
or more inspectors to act
4
<PAGE>
at the meeting. Each inspector, before entering upon the discharge of
his duties, shall take and sign an oath faithfully to execute the
duties of inspector with strict impartiality and according to the best
of his ability.
(b) The inspectors shall (i) ascertain the number of
shares outstanding and the voting power of each, (ii) determine the
shares represented at a meeting and the validity of proxies and
ballots, (iii) count all votes and ballots, (iv) determine and retain
for a reasonable period a record of the disposition of any challenges
made to any determination by the inspectors, and (v) certify their
determination of the number of shares represented at the meeting, and
their count of all votes and ballots. The inspectors may appoint or
retain other persons or entities to assist the inspectors in the
performance of the duties of the inspectors.
(c) The date and time of the opening and closing of the
polls for each matter upon which the Stockholders will vote at a
meeting shall be announced at the meeting. No ballot, proxies or
votes, nor any revocations thereof or changes thereto, shall be
accepted by the inspectors after the closing of the polls unless the
Court of Chancery upon application by a Stockholder shall determine
otherwise.
(d) In determining the validity and counting of proxies
and ballots, the inspectors may examine and consider such records or
factors as allowed by the General Corporation Laws of the State of
Delaware.
ARTICLE 3.
DIRECTORS
Section 3.1 MANAGEMENT.
The property, affairs and business of the Corporation shall be
managed by or under the direction of the Board of Directors.
Section 3.2 NUMBER AND TERM.
The number of directors may be fixed from time to time by resolution
of the Board of Directors adopted by the affirmative vote of a majority of the
members of the entire Board of Directors. The directors shall be divided into
three classes as nearly equal in number as possible, with the term of office
of one class expiring each year. Directors shall be assigned to each class in
accordance with a resolution or resolutions of the Board of Directors. The
term of office of each director shall expire at the third Annual Meeting after
election of the class to which he belongs. Directors need not be Stockholders.
No decrease in the number of directors shall have the effect of shortening the
term of office of any incumbent director.
5
<PAGE>
Section 3.3 QUORUM AND MANNER OF ACTION.
At all meetings of the Board of Directors a majority of the total
number of directors holding office shall constitute a quorum for the
transaction of business and the act of a majority of the directors present at
any meeting at which there is a quorum shall be the act of the Board of
Directors, except as may be otherwise specifically provided by law, by the
Corporation's Certificate of Incorporation or these Bylaws. If at any meeting
of the Board of Directors there shall be less than a quorum present, a
majority of those present may adjourn the meeting from time to time until a
quorum is obtained, and no further notice thereof need be given other than by
announcement at such adjourned meeting. Attendance by a director at a meeting
shall constitute a waiver of notice of such meeting except where a director
attends a meeting for the express purpose of objecting, at the beginning of
the meeting, to the transaction of any business on the ground that the meeting
is not lawfully called or convened.
Section 3.4 VACANCIES.
Except as otherwise provided by law or the Corporation's Certificate
of Incorporation, in the case of any increase in the authorized number of
directors or of any vacancy in the Board of Directors, however created, the
additional director or directors may be elected, or, as the case may be, the
vacancy or vacancies may be filled by a two-thirds vote of the directors
remaining on the whole Board of Directors although less than a quorum. In the
event one or more directors shall resign, effective at a future date, such
vacancy or vacancies shall be filled by a majority of the directors who will
remain on the whole Board of Directors, although less than a quorum, or by a
sole remaining director. Any director elected or chosen as provided herein
shall serve until the sooner of: (i) the unexpired term of the directorship to
which he is appointed; (ii) until his successor is elected and qualified; or
(iii) until his earlier resignation or removal.
Section 3.5 RESIGNATIONS.
A director may resign at any time upon written notice of resignation
to the Corporation. Any resignation shall be effective immediately unless a
certain effective date is specified therein, in which event it will be
effective upon such date and acceptance of any resignation shall not be
necessary to make it effective.
Section 3.6 REMOVALS.
Any director or the entire Board of Directors may be removed, with
cause, and another person or persons may be elected to serve for the remainder
of his or their term by the holders of a majority of the shares of the
Corporation entitled to vote in the election of directors. In case any vacancy
so created shall not be filled by the Stockholders at such meeting, such
vacancy may be filled by the directors as provided in SECTION 3.4.
6
<PAGE>
Section 3.7 ANNUAL MEETINGS.
The annual meeting of the Board of Directors shall be held, if a
quorum be present, immediately following each annual meeting of the
Stockholders at the place such meeting of Stockholders took place, for the
purpose of organization and transaction of any other business that might be
transacted at a regular meeting thereof, and no notice of such meeting shall
be necessary. If a quorum is not present, such annual meeting may be held at
any other time or place that may be specified in a notice given in the manner
provided in SECTION 3.9 for special meetings of the Board of Directors or in a
waiver of notice thereof.
Section 3.8 REGULAR MEETINGS.
Regular meetings of the Board of Directors may be held without notice
at such places and times as shall be determined from time to time by
resolution of the Board of Directors. Except as otherwise provided by law, any
business may be transacted at any regular meeting of the Board of Directors.
Section 3.9 SPECIAL MEETINGS.
Special meetings of the Board of Directors may be called by the
President, or by the Secretary on the written request of one-third (1/3) of
the members of the whole Board of Directors stating the purpose or purposes of
such meeting. Notices of special meetings, if mailed, shall be mailed to each
director not later than two (2) days before the day of the meeting is to be
held or if otherwise given in the manner permitted by these Bylaws, not later
than the day before such meeting. Neither the business to be transacted at,
nor the purpose of, any special meetings need be specified in any notice or
written waiver of notice unless so required by the Corporation's Certificate
of Incorporation or by these Bylaws. Any and all business may be transacted at
a special meeting, unless limited by law, the Corporation's Certificate of
Incorporation or by these Bylaws.
Section 3.10 ORGANIZATION OF MEETINGS.
At any meeting of the Board of Directors, business shall be
transacted in such order and manner as such Board of Directors may from time
to time determine, and all matters shall be determined by the vote of a
majority of the directors present at any meeting at which there is a quorum,
except as otherwise provided by these Bylaws or required by law.
Section 3.11 PLACE OF MEETINGS.
The Board of Directors may hold their meetings and have one or more
offices, and keep the books of the Corporation, outside the State of Delaware,
at any office or offices of the Corporation, or at any other place as they may
from time to time by resolution determine.
7
<PAGE>
Section 3.12 COMPENSATION OF DIRECTORS.
By resolution of the Board of Directors, the Directors may be paid a
fixed honorarium for attendance at each meeting or fees and expenses, if any,
of attendance at each meeting or a stated salary for their services as
directors. Nothing herein contained shall be construed to preclude any
director from serving the Corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees may be
allowed like compensation for attending such committee meetings.
Section 3.13 ACTION BY UNANIMOUS WRITTEN CONSENT.
Unless otherwise restricted by law, the Corporation's Certificate of
Incorporation or these Bylaws, any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting if all members of the Board of Directors or of such
committee, as the case may be, consent thereto in writing and the writing or
writings are filed with the minutes of proceedings of the Board of Directors
of the committee.
Section 3.14 PARTICIPATION IN MEETINGS BY TELEPHONE.
Unless otherwise restricted by the Corporation's Certificate of
Incorporation or these Bylaws, members of the Board of Directors or of any
committee thereof may participate in a meeting of such Board of Directors or
committee by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each
other. Participation in a meeting in such manner shall constitute presence in
person at such meeting, except where a person participates in the meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business on the grounds that the meeting is not lawfully
called or convened.
ARTICLE 4.
COMMITTEES OF THE BOARD
Section 4.1 MEMBERSHIP AND AUTHORITIES.
The Board of Directors may, by resolution or resolutions passed by a
majority of the whole Board of Directors, designate one (1) or more Directors
to constitute an Executive Committee and such other committees as the Board of
Directors may determine, each of which committees to the extent provided in
said resolution or resolutions or in these Bylaws, shall have and may exercise
all the powers of the Board of Directors in the management of the business and
affairs of the Corporation, except in those cases where the authority of the
Board of Directors is specifically denied to the Executive Committee or such
other committee or committees by law, the Corporation's Certificate of
Incorporation or these Bylaws, and may authorize the seal of the Corporation
to be affixed to all papers that may require it. The designation of an
Executive Committee or other committee and the delegation thereto of authority
shall not operate to relieve the Board of Directors, or any member thereof, of
any responsibility imposed upon it or him by law.
8
<PAGE>
Section 4.2 MINUTES.
Each committee designated by the Board of Directors shall keep
regular minutes of its proceedings and report the same to the Board of
Directors when required.
Section 4.3 VACANCIES.
The Board of Directors may designate one (1) or more of its members
as alternate members of any committee who may replace any absent or
disqualified member at any meeting of such committee. If no alternate members
have been appointed, the committee member or members thereof present at any
meeting and not disqualified from voting, whether or not he or they constitute
a quorum, may unanimously appoint another member of the Board of Directors to
act at the meeting in the place of any absent or disqualified member. The
Board of Directors shall have the power at any time to fill vacancies in, to
change the membership of, and to dissolve, any committee.
Section 4.4 TELEPHONE MEETINGS.
Members of any committee designated by the Board of Directors may
participate in or hold a meeting by use of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other. Participation in a meeting pursuant to this
SECTION 4.4 shall constitute presence in person at such meeting, except where
a person participates in the meeting for the express purpose of objecting, at
the beginning of the meeting, to the transaction of any business on the ground
that the meeting is not lawfully called or convened.
Section 4.5 ACTION WITHOUT MEETING.
Any action required or permitted to be taken at a meeting of any
committee designated by the Board of Directors may be taken without a meeting
if a consent in writing, setting forth the action so taken, is signed by all
the members of the committee and filed with the minutes of the committee
proceedings. Such consent shall have the same force and effect as a unanimous
vote at a meeting.
SECTION 5.
OFFICERS
Section 5.1 NUMBER AND TITLE.
The elected officers of the Corporation shall be chosen by the Board
of Directors and there shall be a Chief Executive Officer, a President, a Vice
President, a Secretary and a Treasurer. The Board of Directors may also choose
a Chairman of the Board, who must be a Board member of the Board of Directors,
and additional Vice Presidents, Assistant Secretaries and/or Assistant
Treasurers. One person may hold any two or more of these offices and any one
or more of the Vice Presidents may be designated as an Executive Vice
President or Senior Vice President.
9
<PAGE>
Section 5.2 TERM OF OFFICE; VACANCIES.
So far as is practicable, all elected officers shall be elected by
the Board of Directors at the annual meeting of the Board of Directors each
year, and except as otherwise provided in this ARTICLE 5, shall hold office
until the next such meeting of the Board of Directors in the subsequent year
and until their respective successors are elected and qualified or until their
earlier resignation or removal. All appointed officers shall hold office at
the pleasure of the Board of Directors. If any vacancy shall occur in any
office, the Board of Directors may elect or appoint a successor to fill such
vacancy for the remainder of the term.
Section 5.3 REMOVAL OF ELECTED OFFICERS.
Any elected officer may be removed at any time, with or without
cause, by affirmative vote of a majority of the whole Board of Directors, at
any regular meeting or at any special meeting called for such purpose.
Section 5.4 RESIGNATIONS.
Any officer may resign at any time upon written notice of resignation
to the President, Secretary or Board of Directors of the Corporation. Any
resignation shall be effective immediately unless a date certain is specified
for it to take effect, in which event it shall be effective upon such date,
and acceptance of any resignation shall not be necessary to make it effective,
irrespective of whether the resignation is tendered subject to such acceptance.
Section 5.5 THE CHAIRMAN OF THE BOARD.
The Chairman of the Board, if one shall be elected, shall preside at
all meetings of the Stockholders and Board of Directors. In addition, the
Chairman of the Board shall perform whatever duties and shall exercise all
powers that are given to him by the Board of Directors.
Section 5.6 CHIEF EXECUTIVE OFFICER.
The Chief Executive Officer shall be the most senior executive
officer of the Corporation; shall (in the absence of the Chairman of the
Board, if one be elected) preside at meetings of the Stockholders and Board of
Directors; shall be EX OFFICIO a member of all standing committees; shall have
general and active powers to manage the business of the Corporation; shall
implement the general directives, plans and policies formulated by the Board
of Directors; and shall further have such duties, responsibilities and
authorities as may be assigned to him by the Board of Directors. He may sign,
with any other proper officer, certificates for shares of the Corporation and
any deeds, bonds, mortgages, contracts and other documents which the Board of
Directors has authorized to be executed, except where required by law to be
otherwise signed and executed and except where the signing and execution
thereof shall be expressly delegated by the Board of Directors or these
Bylaws, to some other officer or agent of the corporation. In the absence of
the Chief Executive Officer, his duties shall be performed and his authority
may be exercised by the President of the Corporation.
10
<PAGE>
Section 5.7 PRESIDENT.
The President shall, after the Chief Executive Officer, be the most
senior executive officer of the corporation and shall, subject to the
authority of the Chief Executive Officer, implement the general plans and
directives of the Board of Directors and perform such other duties as may be
assigned to him by the Board of Directors.
Section 5.8 VICE PRESIDENTS.
The several Vice Presidents shall have such powers and duties as may
be assigned to them by these Bylaws and as may from time to time be assigned
to them by the Board of Directors and may sign, with any other proper officer,
certificates for shares of the Corporation.
Section 5.9 SECRETARY.
The Secretary, if available, shall attend all meetings of the Board
of Directors and all meetings of the Stockholders and record the proceedings
of the meetings in a book to be kept for that purpose and shall perform like
duties for any committee of the Board of Directors as he shall be designated
to serve. He shall give, or cause to be given, notice of all meetings of the
Stockholders and meetings of the Board of Directors and committees thereof and
shall perform such other duties incident to the office of secretary or as may
be prescribed by the Board of Directors or the President, under whose
supervision he shall be. He shall have custody of the corporate seal of the
Corporation and he, or any Assistant Secretary, or any other person whom the
Board of Directors may designate, shall have authority to affix the same to
any instrument requiring it, and when so affixed it may be attested by his
signature or by the signature of any Assistant Secretary or by the signature
of such other person so affixing such seal.
Section 5.10 ASSISTANT SECRETARIES.
Each Assistant Secretary shall have the usual powers and duties
pertaining to his office, together with such other powers and duties as may be
assigned to him by the Board of Directors, the President or the Secretary. The
Assistant Secretary or such other person as may be designated by the President
shall exercise the powers of the Secretary during that officer's absence or
inability to act.
Section 5.11 TREASURER.
The Treasurer shall have the custody of and be responsible for the
corporate funds and securities, shall keep full and separate accounts of
receipts and disbursements in the books belonging to the Corporation and shall
deposit all monies and other valuable effects in the name and the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. He shall disburse the funds of the Corporation as may be ordered by
the Board of Directors, taking proper vouchers for such disbursements, and
shall render to the President and the Board of Directors, at its regular
meetings, or when the Board of Directors so requires, an account of all his
transactions as Treasurer and of the financial condition of the Corporation
and he shall perform all other duties
11
<PAGE>
incident to the position of Treasurer, or as may be prescribed by the Board of
Directors or the President. If required by the Board of Directors, he shall
give the Corporation a bond in such sum and with such surety or sureties as
shall be satisfactory to the Board of Directors for the faithful performance
of the duties of his office and for the restoration to the Corporation, in
case of his death, resignation, retirement or removal from office, of all
books, papers, vouchers, money and other property of whatever kind in his
possession or under his control belonging to the Corporation.
Section 5.12 ASSISTANT TREASURERS.
Each Assistant Treasurer shall have the usual powers and duties
pertaining to his office, together with such other powers and duties as may be
assigned to him by the Board of Directors, the President or the Treasurer. The
Assistant Treasurer or such other person designated by the President shall
exercise the power of the Treasurer during that officer's absence or inability
to act.
Section 5.13 SUBORDINATE OFFICERS.
The Board of Directors may (i) appoint such other subordinate
officers and agents as it shall deem necessary who shall hold their offices
for such terms, have such authority and perform such duties as the Board of
Directors may from time to time determine, or (ii) delegate to any committee
or officer the power to appoint any such subordinate officers or agents.
Section 5.14 SALARIES AND COMPENSATION.
The salary or other compensation of officers shall be fixed from time
to time by the Board of Directors. The Board of Directors may delegate to any
committee or officer the power to fix from time to time the salary or other
compensation of subordinate officers and agents appointed in accordance with
the provisions of SECTION 5.13.
ARTICLE 6.
INDEMNIFICATION
Section 6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The corporation shall indemnify its current or former directors,
officers, employees and agents or any person who served or is serving at the
request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
from and against any and all expenses, liabilities or other matters to the
fullest extent permitted by the General Corporation Law of Delaware, as the
same exists or may hereafter be amended. Such indemnification shall not be
deemed exclusive of any other rights to which such person may be entitled
under any bylaw, agreement, vote of stockholders or disinterested directors,
or otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall inure to the benefit of
the heirs, executors and administrators of such person.
12
<PAGE>
ARTICLE 7.
CAPITAL STOCK
Section 7.1 CERTIFICATES OF STOCK.
Certificates of stock shall be issued to each Stockholder certifying
the number of shares owned by him in the Corporation and shall be in a form
not inconsistent with the Certificate of Incorporation and as approved by the
Board of Directors. The certificates shall be signed by the Chairman of the
Board, the President or a Vice President and by the Secretary or an Assistant
Secretary, or the Treasurer or an Assistant Treasurer and may be sealed with
the seal of the Corporation or a facsimile thereof. Any or all of the
signatures on the certificate may be a facsimile. In case any officer,
transfer agent or registrar who has signed or whose facsimile signature has
been placed upon a certificate that is issued, it may be issued by the
Corporation with the same effect as if he were such officer, transfer agent or
registrar at the date of issue.
Section 7.2 LOST CERTIFICATES.
The Board of Directors may direct a new certificate to be issued in
place of any certificate theretofore issued by the Corporation alleged to have
been lost, stolen or destroyed, upon the making of an affidavit of that fact
by the owner of such certificate, or his legal representative. When
authorizing the issuance of a new certificate, the Board of Directors may in
its discretion, as a condition precedent to the issuance thereof, require the
owner, or his legal representative, to give a bond in such form and substance
with such surety as it may direct, to indemnify the Corporation against any
claim that may be made on account of the alleged loss, theft or destruction of
such certificate or the issuance of such new certificate.
Section 7.3 FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF
RECORD FOR CERTAIN PURPOSES.
(a) In order that the Corporation may determine the
Stockholders entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of capital
stock or for the purpose of any other lawful action, the Board of
Directors may fix, in advance, a record date, which shall not be more
than sixty (60) days prior to the date of payment of such dividend or
other distribution or allotment of such rights or the date when any
such rights in respect of any change, conversion or exchange of stock
may be exercised or the date of such other action. In such a case,
only Stockholders of record on the date so fixed shall be entitled to
receive any such dividend or other distribution or allotment of
rights or to exercise such rights or for any other purpose, as the
case may be, notwithstanding any transfer of any stock on the books
of the Corporation after any such record date fixed as aforesaid.
(b) If no record date is fixed, the record date for
determining Stockholders for any such purpose shall be at the close
of business on the day on which the Board of Directors adopts the
resolution relating thereto.
13
<PAGE>
Section 7.4. DIVIDENDS.
Subject to the provisions of the Corporation's Certificate of
Incorporation, if any, and except as otherwise provided by law, the directors
may declare dividends upon the capital stock of the Corporation as and when
they deem it to be expedient. Such dividends may be paid in cash, in property
or in shares of the Corporation's capital stock. Before declaring any dividend
there may be set apart out of the funds of the Corporation available for
dividends, such sum or sums as the directors from time to time in their
discretion think proper for working capital or as a reserve fund to meet
contingencies or for equalizing dividends, or for such other purposes as the
directors shall think conducive to the interests of the Corporation and the
directors may modify or abolish any such reserve in the manner in which it was
created.
Section 7.5. REGISTERED STOCKHOLDERS.
Except as expressly provided by law, the Corporation's Certificate of
Incorporation or these Bylaws, the Corporation shall be entitled to treat
registered Stockholders as the only holders and owners in fact of the shares
standing in their respective names and the Corporation shall not be bound to
recognize any equitable or other claim to or interest in such shares on the
part of any other person, regardless of whether it shall have express or other
notice thereof.
Section 7.6. TRANSFER OF STOCK.
Transfers of shares of the capital stock of the Corporation shall be
made only on the books of the Corporation by the registered owners thereof, or
by their legal representatives or their duly authorized attorneys. Upon any
such transfers the old certificates shall be surrendered to the Corporation by
the delivery thereof to the person in charge of the stock transfer books and
ledgers, by whom they shall be canceled and new certificates shall thereupon
be issued.
ARTICLE 8.
MISCELLANEOUS PROVISIONS
Section 8.1. CORPORATE SEAL.
If one is adopted, the corporate seal shall have inscribed thereon
the name of the Corporation and shall be in such form as may be approved by
the Board of Directors. Said seal may be used by causing it or a facsimile
thereof to be impressed or affixed or in any manner reproduced.
Section 8.2. FISCAL YEAR.
The fiscal year of the Corporation shall be fixed by resolution of
the Board of Directors.
14
<PAGE>
Section 8.3. CHECKS, DRAFTS, NOTES.
All checks, drafts or other orders for the payment of money, notes or
other evidences of indebtedness issued in the name of the Corporation shall be
signed by such officer or officers, agent or agents of the Corporation, and in
such manner as shall from time to time be determined by resolution (whether
general or special) of the Board of Directors or may be prescribed by any
officer or officers, or any officer and agent jointly, thereunto duly
authorized by the Board of Directors.
Section 8.4. NOTICE AND WAIVER OF NOTICE.
Whenever notice is required to be given to any director or
Stockholder under the provisions of applicable law, the Corporation's
Certificate of Incorporation or these Bylaws, such notice shall be in writing
and delivered whether (i) personally, or (ii) by registered or certified mail,
or (iii) by telegram, telecopy, or similar facsimile means (delivered during
the recipient's regular business hours). Such notice shall be sent to such
director or Stockholder at the address or telecopy number as it appears on the
records of the Corporation, unless prior to the sending of such notice he has
designated, in a written request to the Secretary of the Corporation, another
address or telecopy number to which notices are to be sent. Notices shall be
deemed given when received, if sent by telegram, telex, telecopy or similar
facsimile means (confirmation of such receipt by confirmed facsimile
transmission being deemed receipt of communications sent by telex, telecopy or
other facsimile means); and when delivered and receipted for (or upon the date
of attempted delivery where delivery is refused), if hand delivered, sent by
express courier or delivery service, or sent by certified or registered mail.
Whenever notice is required to be given under any provision of law, the
Corporation's Certificate of Incorporation or these Bylaws, a waiver thereof
in writing, by telegraph, cable or other form of recorded communication,
signed by the person or persons entitled to said notice, whether before or
after the time stated therein, shall be deemed equivalent to notice.
Attendance of a person at a meeting shall constitute a waiver of notice of
such meeting, except when the person attends a meeting for the express purpose
of objecting, at the beginning of the meeting, to the transaction of any
business on the grounds that the meeting is not lawfully called or convened.
Neither the business to be transacted at, nor the purpose of, any regular or
special meeting of the Stockholders, directors, or members of a committee of
directors need be specified in any written waiver of notice unless so required
by the Corporation's Certificate of Incorporation or these Bylaws.
Section 8.5. EXAMINATION OF BOOKS AND RECORDS.
The Board of Directors shall determine from time to time whether,
and if allowed, when and under what conditions and regulations the accounts
and books of the Corporation (except such as may be statute be specifically
opened to inspection) or any of them shall be open to inspection by the
Stockholders, and the Stockholders' rights in this respect are and shall be
restricted and limited accordingly.
15
<PAGE>
ARTICLE 9.
AMENDMENTS
Section 9.1. AMENDMENTS.
In furtherance and not in limitation of the powers conferred by the
laws of the State of Delaware, the Board of Directors of the corporation is
expressly authorized to adopt, amend or repeal the bylaws of the corporation
subject to the power of the stockholders of the corporation to alter or repeal
any bylaw whether adopted by them or otherwise.
THE UNDERSIGNED, as the duly elected Secretary of the Corporation,
hereby certifies that the Corporation's Board of Directors duly adopted these
Bylaws by written consent action in lieu of organizational meeting dated
_____________, 2000, but effective as of ___________, 2000.
------------------------------
Samuel C. Beale, Secretary
16
<PAGE>
Appendix E
SELECTED SECTIONS OF THE
TEXAS BUSINESS CORPORATION ACT
ART. 5.11. RIGHTS OF DISSENTING SHAREHOLDERS IN THE EVENT OF CERTAIN CORPORATE
ACTIONS
A. Any shareholder of a domestic corporation shall have the right
to dissent from any of the following corporate actions:
(1) Any plan of merger to which the corporation is a party
if shareholder approval is required by Article 5.03 or 5.16 of this Act and
the shareholder holds shares of a class or series that was entitled to vote
thereon as a class or otherwise;
(2) Any sale, lease, exchange or other disposition (not
including any pledge, mortgage, deed of trust or trust indenture unless
otherwise provided in the articles of incorporation) of all, or substantially
all, the property and assets, with or without good will, of a corporation if
special authorization of the shareholders is required by this Act and the
shareholders hold shares of a class or series that was entitled to vote
thereon as a class or otherwise;
(3) Any plan of exchange pursuant to Article 5.02 of this
Act in which the shares of the corporation of the class or series held by the
shareholder are to be acquired.
B. Notwithstanding the provisions of Section A of this Article, a
shareholder shall not have the right to dissent from any plan of merger in
which there is a single surviving or new domestic or foreign corporation, or
from any plan of exchange, if:
(1) the shares held by the shareholder are part of a class
or series, shares of which are on the record date fixed to determine the
shareholders entitled to vote on the plan of merger or plan of exchange: (a)
listed on a national securities exchange; (b) listed on the Nasdaq Stock
Market (or successor quotation system) or designated as a national market
security on an interdealer quotation system by the National Association of
Securities Dealers, Inc., or successor entity; or (c) held of record by not
less than 2,000 holders;
(2) the shareholder is not required by the terms of the plan
of merger or plan of exchange to accept for the shareholder's shares any
consideration that is different than the consideration (other than cash in
lieu of fractional shares that the shareholder would otherwise be entitled to
receive) to be provided to any other holder of shares of the same class or
series of shares held by such shareholder; and
<PAGE>
(3) the shareholder is not required by the terms of the plan
of merger or the plan of exchange to accept for the shareholder's shares any
consideration other than:
(a) shares of a domestic or foreign corporation that,
immediately after the effective time of the
merger or exchange, will be part of a class or
series, shares of which are: (i) listed, or
authorized for listing upon official notice of
issuance, on a national securities exchange; (ii)
approved for quotation as a national market
security on an interdealer quotation system by
the National Association of Securities Dealers,
Inc., or successor entity; or (iii) held of
record by not less than 2,000 holders;
(b) cash in lieu of fractional shares otherwise
entitled to be received; or
(c) any combination of the securities and cash
described in Subdivisions (a) and (b) of this
subsection.
ART. 5.12. PROCEDURE FOR DISSENT BY SHAREHOLDERS AS TO SAID CORPORATE ACTIONS
A. Any shareholder of any domestic corporation who has the right
to dissent from any of the corporate actions referred to in Article 5.11 of
this Act may exercise that right to dissent only by complying with the
following procedures:
(1)(a) With respect to proposed corporate action that is
submitted to a vote of shareholders at a meeting, the shareholder shall file
with the corporation, prior to the meeting, a written objection to the action,
setting out that the shareholder's right to dissent will be exercised if the
action is effective and giving the shareholder's address, to which notice
thereof shall be delivered or mailed in that event. If the action is effected
and the shareholder shall not have voted in favor of the action, the
corporation, in the case of action other than a merger, or the surviving or
new corporation (foreign or domestic) or other entity that is liable to
discharge the shareholder's right of dissent, in the case of a merger, shall,
within ten (10) days after the action is effected, deliver or mail to the
shareholder written notice that the action has been effected, and the
shareholder may, within ten (10) days from the delivery or mailing of the
notice, make written demand on the existing, surviving, or new corporation
(foreign or domestic) or other entity, as the case may be, for payment of the
fair value of the shareholder's shares. The fair value of the shares shall be
the value thereof as of the day immediately preceding the meeting, excluding
any appreciation or depreciation in anticipation of the proposed action. The
demand shall state the number and class of the shares owned by the shareholder
and the fair value of the shares as estimated by the shareholder. Any
shareholder failing to make demand within the ten (10) day period shall be
bound by the action.
2
<PAGE>
(b) With respect to proposed corporate action that is approved
pursuant to Section A of Article 9.10 of this Act, the corporation, in the
case of action other than a merger, and the surviving or new corporation
(foreign or domestic) or other entity that is liable to discharge the
shareholder's right of dissent, in the case of a merger, shall, within ten
(10) days after the date the action is effected, mail to each shareholder of
record as of the effective date of the action notice of the fact and date of
the action and that the shareholder may exercise the shareholder's right to
dissent from the action. The notice shall be accompanied by a copy of this
Article and any articles or documents filed by the corporation with the
Secretary of State to effect the action. If the shareholder shall not have
consented to the taking of the action, the shareholder may, within twenty (20)
days after the mailing of the notice, make written demand on the existing,
surviving, or new corporation (foreign or domestic) or other entity, as the
case may be, for payment of the fair value of the shareholder's shares. The
fair value of the shares shall be the value thereof as of the date the written
consent authorizing the action was delivered to the corporation pursuant to
Section A of Article 9.10 of this Act, excluding any appreciation or
depreciation in anticipation of the action. The demand shall state the number
and class of shares owned by the dissenting shareholder and the fair value of
the shares as estimated by the shareholder. Any shareholder failing to make
demand within the twenty (20) day period shall be bound by the action.
(2) Within twenty (20) days after receipt by the existing,
surviving, or new corporation (foreign or domestic) or other entity, as the
case may be, of a demand for payment made by a dissenting shareholder in
accordance with Subsection (1) of this Section, the corporation (foreign or
domestic) or other entity shall deliver or mail to the shareholder a written
notice that shall either set out that the corporation (foreign or domestic) or
other entity accepts the amount claimed in the demand and agrees to pay that
amount within ninety (90) days after the date on which the action was
effected, and, in the case of shares represented by certificates, upon the
surrender of the certificates duly endorsed, or shall contain an estimate by
the corporation (foreign or domestic) or other entity of the fair value of the
shares, together with an offer to pay the amount of that estimate within
ninety (90) days after the date on which the action was effected, upon receipt
of notice within sixty (60) days after that date from the shareholder that the
shareholder agrees to accept that amount and, in the case of shares
represented by certificates, upon the surrender of the certificates duly
endorsed.
(3) If, within sixty (60) days after the date on which the
corporate action was effected, the value of the shares is agreed upon between
the shareholder and the existing, surviving, or new corporation (foreign or
domestic) or other entity, as the case may be, payment for the shares shall be
made within ninety (90) days after the date on which the action was effected
and, in the case of shares represented by certificates, upon surrender of the
certificates duly endorsed. Upon payment of the agreed value, the shareholder
shall cease to have any interest in the shares or in the corporation.
B. If, within the period of sixty (60) days after the date on
which the corporate action was effected, the shareholder and the existing,
surviving, or new corporation (foreign or domestic) or other entity, as the
case may be, do not so agree, then the shareholder or the
3
<PAGE>
corporation (foreign or domestic) or other entity may, within sixty (60) days
after the expiration of the sixty (60) day period, file a petition in any
court of competent jurisdiction in the county in which the principal office of
the domestic corporation is located, asking for a finding and determination of
the fair value of the shareholder's shares. Upon the filing of any such
petition by the shareholder, service of a copy thereof shall be made upon the
corporation (foreign or domestic) or other entity, which shall, within ten
(10) days after service, file in the office of the clerk of the court in which
the petition was filed a list containing the names and addresses of all
shareholders of the domestic corporation who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the corporation (foreign or domestic) or other entity. If the
petition shall be filed by the corporation (foreign or domestic) or other
entity, the petition shall be accompanied by such a list. The clerk of the
court shall give notice of the time and place fixed for the hearing of the
petition by registered mail to the corporation (foreign or domestic) or other
entity and to the shareholders named on the list at the addresses therein
stated. The forms of the notices by mail shall be approved by the court. All
shareholders thus notified and the corporation (foreign or domestic) or other
entity shall thereafter be bound by the final judgment of the court.
C. After the hearing of the petition, the court shall determine
the shareholders who have complied with the provisions of this Article and
have become entitled to the valuation of and payment for their shares, and
shall appoint one or more qualified appraisers to determine that value. The
appraisers shall have power to examine any of the books and records of the
corporation the shares of which they are charged with the duty of valuing, and
they shall make a determination of the fair value of the shares upon such
investigation as to them may seem proper. The appraisers shall also afford a
reasonable opportunity to the parties interested to submit to them pertinent
evidence as to the value of the shares. The appraisers shall also have such
power and authority as may be conferred on Masters in Chancery by the Rules of
Civil Procedure or by the order of their appointment.
D. The appraisers shall determine the fair value of the shares of
the shareholders adjudged by the court to be entitled to payment for their
shares and shall file their report of that value in the office of the clerk of
the court. Notice of the filing of the report shall be given by the clerk to
the parties in interest. The report shall be subject to exceptions to be heard
before the court both upon the law and the facts. The court shall by its
judgment determine the fair value of the shares of the shareholders entitled
to payment for their shares and shall direct the payment of that value by the
existing, surviving, or new corporation (foreign or domestic) or other entity,
together with interest thereon, beginning 91 days after the date on which the
applicable corporate action from which the shareholder elected to dissent was
effected to the date of such judgment, to the shareholders entitled to
payment. The judgment shall be payable to the holders of uncertificated shares
immediately but to the holders of shares represented by certificates only
upon, and simultaneously with, the surrender to the existing, surviving, or
new corporation (foreign or domestic) or other entity, as the case may be, of
duly endorsed certificates for those shares. Upon payment of the judgment, the
dissenting shareholders shall cease to have any interest in those shares or in
the corporation. The court shall allow the appraisers a reasonable fee
4
<PAGE>
as court costs, and all court costs shall be allotted between the parties in
the manner that the court determines to be fair and equitable.
E. Shares acquired by the existing, surviving, or new corporation
(foreign or domestic) or other entity, as the case may be, pursuant to the
payment of the agreed value of the shares or pursuant to payment of the
judgment entered for the value of the shares, as in this Article provided,
shall, in the case of a merger, be treated as provided in the plan of merger
and, in all other cases, may be held and disposed of by the corporation as in
the case of other treasury shares.
F. The provisions of this Article shall not apply to a merger if,
on the date of the filing of the articles of merger, the surviving corporation
is the owner of all the outstanding shares of the other corporations, domestic
or foreign, that are parties to the merger.
G. In the absence of fraud in the transaction, the remedy provided
by this Article to a shareholder objecting to any corporate action referred to
in Article 5.11 of this Act is the exclusive remedy for the recovery of the
value of his shares or money damages to the shareholder with respect to the
action. If the existing, surviving, or new corporation (foreign or domestic)
or other entity, as the case may be, complies with the requirements of this
Article, any shareholder who fails to comply with the requirements of this
Article shall not be entitled to bring suit for the recovery of the value of
his shares or money damages to the shareholder with respect to the action.
ART. 5.13. PROVISIONS AFFECTING REMEDIES OF DISSENTING SHAREHOLDERS
A. Any shareholder who has demanded payment for his shares in
accordance with either Article 5.12 or 5.16 of this Act shall not thereafter
be entitled to vote or exercise any other rights of a shareholder except the
right to receive payment for his shares pursuant to the provisions of those
articles and the right to maintain an appropriate action to obtain relief on
the ground that the corporate action would be or was fraudulent, and the
respective shares for which payment has been demanded shall not thereafter be
considered outstanding for the purposes of any subsequent vote of shareholders.
B. Upon receiving a demand for payment from any dissenting
shareholder, the corporation shall make an appropriate notation thereof in its
shareholder records. Within twenty (20) days after demanding payment for his
shares in accordance with either Article 5.12 or 5.16 of this Act, each holder
of certificates representing shares so demanding payment shall submit such
certificates to the corporation for notation thereon that such demand has been
made. The failure of holders of certificated shares to do so shall, at the
option of the corporation, terminate such shareholder's rights under Articles
5.12 and 5.16 of this Act unless a court of competent jurisdiction for good
and sufficient cause shown shall otherwise direct. If uncertificated shares
for which payment has been demanded or shares represented by a certificate on
which notation has been so made shall be transferred, any new certificate
issued therefor shall bear similar
5
<PAGE>
notation together with the name of the original dissenting holder of such
shares and a transferee of such shares shall acquire by such transfer no
rights in the corporation other than those which the original dissenting
shareholder had after making demand for payment of the fair value thereof.
C. Any shareholder who has demanded payment for his shares in
accordance with either Article 5.12 or 5.16 of this Act may withdraw such
demand at any time before payment for his shares or before any petition has
been filed pursuant to Article 5.12 or 5.16 of this Act asking for a finding
and determination of the fair value of such shares, but no such demand may be
withdrawn after such payment has been made or, unless the corporation shall
consent thereto, after any such petition has been filed. If, however, such
demand shall be withdrawn as hereinbefore provided, or if pursuant to Section
B of this Article the corporation shall terminate the shareholder's rights
under Article 5.12 or 5.16 of this Act, as the case may be, or if no petition
asking for a finding and determination of fair value of such shares by a court
shall have been filed within the time provided in Article 5.12 or 5.16 of this
Act, as the case may be, or if after the hearing of a petition filed pursuant
to Article 5.12 or 5.16, the court shall determine that such shareholder is
not entitled to the relief provided by those articles, then, in any such case,
such shareholder and all persons claiming under him shall be conclusively
presumed to have approved and ratified the corporate action from which he
dissented and shall be bound thereby, the right of such shareholder to be paid
the fair value of his shares shall cease, and his status as a shareholder
shall be restored without prejudice to any corporate proceedings which may
have been taken during the interim, and such shareholder shall be entitled to
receive any dividends or other distributions made to shareholders in the
interim.
6
<PAGE>
CYNET, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Samuel C. Beale and Amber R. Lee, and
each of them, as proxies, each with the power to appoint his substitute, and
authorizes them to represent and vote, as designated below and on the reverse
side, all of the shares of voting stock of CYNET, Inc. held of record by the
undersigned on May 3, 2000, at the Annual Meeting of Shareholders to be held
at the Wyndham Greenspoint Hotel, located at 12400 Greenspoint Drive, Houston,
Texas 77060, at 10:00 a.m. (Houston time) on Wednesday, June 28, 2000, or any
adjournment(s) thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR ALL NOMINEES" IN ITEM 1 AND
"FOR" ITEMS 2, 3, 4, 5, AND 6.
1. ELECTION OF DIRECTORS OF THE COMPANY
/ / FOR all nominees listed below / / WITHHOLD AUTHORITY to vote
(except as marked to the for all nominees listed
contrary below). below.
Nominees: Vincent W. Beale, Sr., Bernard B. Beale, Samuel C. Beale,
R. Greg Smith, Wayne Schroeder, Daniel C. Lawson, Craig T.
Jackson, Gerald W. McIntosh, Gregory E. Webb
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE(S),
WRITE THE NAME OF THE NOMINEE(S) IN THE SPACE(S) PROVIDED BELOW:
---------------------------------- -------------------------------
2. APPROVAL OF THE AMENDMENT TO THE ARTICLES OF INCORPORATION of the Company.
/ / FOR / / AGAINST / / ABSTAIN
3. APPROVAL OF THE AMENDMENT TO THE 1997 STOCK OPTION PLAN of the Company.
/ / FOR / / AGAINST / / ABSTAIN
(CONTINUED AND TO BE SIGNED AND DATED ON REVERSE SIDE)
4. APPROVAL OF THE CHANGE OF THE STATE OF INCORPORATION of the Company.
/ / FOR / / AGAINST / / ABSTAIN
5. APPROVAL OF THE ESTABLISHMENT OF A CLASSIFIED BOARD OF DIRECTORS UPON
REINCORPORATION of the Company.
/ / FOR / / AGAINST / / ABSTAIN
6. RATIFICATION OF THE APPOINTMENT OF BDO SEIDMAN, LLP as independent
certified public accountants of the Company.
/ / FOR / / AGAINST / / ABSTAIN
7. In their discretion, the proxies are authorized to vote upon any other
matter that properly may come before the meeting or any adjournment
thereof.
This Proxy, when properly executed, will be voted in the manner directed
herein by the stockholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSALS 1, 2, 3, 4, 5, and 6.
SHAREHOLDER:
(Print Name)
--------------------
DATED: ___________, 2000 -----------------------------------
signature
-----------------------------------
signature if held jointly
Please date, sign exactly as your name appears hereon and mail this proxy card
in the enclosed envelope. No postage is required. Where there is more than one
owner, each should sign. When signing as an attorney, administrator, executor,
guardian or trustee, please add your title as such. If executed by a
corporation, this proxy should be signed by a duly authorized officer.
/ / Please check this box if you plan on attending the Annual Meeting.
