<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
TeraGLOBAL Communications Corp.
- --------------------------------------------------------------------------------
(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>
TeraGLOBAL Communications Corp. Logo
May __, 1999
Dear Shareholders:
You are cordially invited to attend TeraGLOBAL Communications Corp.'s Annual
Meeting of Shareholders on Thursday, June 24, 1999 at 10:00 a.m. (Pacific
Time). The meeting will be held at 600 W. Broadway, San Diego, California.
The matters to be acted upon are described in the accompanying Notice of Annual
Meeting and Proxy Statement. At the meeting, we will also report on TeraGLOBAL
Communications Corp.'s operations and respond to any questions you may have.
Sincerely,
Paul Cox
Chairman of the Board
<PAGE>
TERAGLOBAL COMMUNICATIONS CORP.
225 Broadway, Suite 1600
San Diego, California 92101
----------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JULY 15, 1999
The annual meeting of the Shareholders of TeraGLOBAL Communications
Corp. (the "Company") will be held at 600 W. Broadway, San Diego, California
92101, at 10:00 a.m. on June 24, 1999, for the following purposes:
1. To approve and adopt an Agreement of Merger providing for the merger
of the Company into a newly formed Delaware corporation for the
purpose of changing the Company's state of incorporation from Wyoming
to Delaware (the "Reincorporation") and in connection with the
Reincorporation approve an increase in the authorized capital stock of
the Company from 50,100,000 shares to 201,000,000 shares consisting of
200,000,000 shares common stock $ .001 par value per share and
1,000,000 shares of preferred stock $ .001 par value per share.
2. To approve and adopt the Company's 1999 Stock Option Plan.
3. To elect a board of four (4) Directors.
4. To transact such other business as may properly be brought before the
meeting or any adjournments thereof.
Only shareholders of record as of May 19, 1999 will be entitled to notice
of, and to vote at, the meeting and any adjournment thereof.
The Company's Proxy Statement is attached to this notice. Financial and
other information concerning the Company is contained in the Annual Report on
Form 10-KSB for the fiscal year ended December 31, 1999.
Your vote is important regardless of the number of shares of stock that you
hold. Whether or not you plan to attend in person, you are urged to fill in the
enclosed proxy and to sign and forward it in the enclosed business reply
envelope, which requires no postage if mailed in the United States. It is
important that your shares be represented at the meeting in order that the
presence of a quorum may be assured. Any shareholder who signs and sends in a
proxy may revoke it by executing a new proxy with a later date, by written
notice of revocation to the Secretary of the Company at any time before it is
voted, or by attendance at the meeting and voting in person. Your cooperation in
promptly returning your proxy will help limit expenses incident to proxy
solicitation.
By Order of the Board of Directors
May 21, 1999 Paul Cox, Chairman
<PAGE>
TERAGLOBAL COMMUNICATIONS CORP.
225 Broadway, Suite 1600
San Diego, California 92101
---------------------
PROXY STATEMENT
---------------------
INTRODUCTION
This proxy statement is furnished by and on behalf of the Board of
Directors of TeraGLOBAL Communications Corp., a Wyoming corporation (the
"Company") in connection with solicitation of proxies for use at the Annual
Meeting of Shareholders of the Company (the "Annual Meeting"), and at any
postponements thereof. The Annual Meeting will be held to be held at 10:00
a.m. on June 24, 1999 at 600 W. Broadway, San Diego, California, 92101.
Only shareholders of record at the close of business on May 19, 1999 (the
"Record Date") are entitled to notice of, and to vote at, the Annual Meeting.
There were ___________ shares of common stock issued and outstanding at the
Record Date. Proxies and proxy statements were first given to shareholders on
approximately May 21, 1999.
The Company is bearing the expense of soliciting proxies and the cost of
preparing, assembling and mailing material in connection with the solicitation
of proxies. Proxies will be furnished by mail and may be solicited by
directors, officers and other employees of the Company, without additional
compensation, in person or by telephone or facsimile transmission. The Company
will also request brokerage firms, banks, nominees, custodians and fiduciaries
to forward proxy materials to the beneficial owners of shares of common stock as
of the Record Date and will reimburse such persons for the cost of forwarding
the proxy materials in accordance with customary practice.
VOTING
Shareholders of record as of the Record Date are entitled to one vote for
each share held on all matters to come before the meeting, except that
shareholders may have cumulative voting rights with respect to the election of
Directors. A majority of the outstanding shares of record, represented in
person or by proxy, will constitute a quorum at the meeting. Except with regard
to the election of directors, a majority of the shares constituting the quorum
must vote "for" a proposed action in order to approve such action. With respect
to the election of directors, the candidates receiving the highest number of
votes of the shares entitled to be voted for them, up to the number of directors
to be elected by such shares, are elected.
Certain provisions of California corporate law apply to the Company by
virtue of its physical presence in that state, including the right to have
cumulative voting for Directors. The proxy process does not permit shareholders
to cumulate votes. No shareholder can cumulate votes unless the candidate or
candidates' names for which such votes are to be cast have been placed in
nomination prior to voting and a shareholder has given notice of the
shareholders' intention to cumulate the shareholders' votes at the meeting and
prior to voting. If any shareholder has given such notice, all shareholders may
cumulate their votes for candidates in nomination. Management does not, at this
time, intend to give notice of cumulative voting or to cumulate the votes it may
hold pursuant to the proxies solicited by this Proxy Statement. However, if the
required notice by a shareholder is given in proper format at the meeting,
management intends to cumulatively vote all of the proxies held by it in favor
of the nominees for office as set forth in this Proxy Statement.
All proxies which are returned will be counted by the Inspector of
Elections in determining the presence of a quorum and on each issue to be voted
on. An abstention from voting or a broker non-vote will not be counted in the
voting process. The shares represented by proxies which are returned properly
signed will be voted in accordance with the shareholders' directions. If the
proxy card is signed and returned without direction as to how they are to be
voted, the shares will be voted as recommended by the Board of Directors.
Shareholders may revoke any proxy before it is voted by attendance at the
meeting and voting in person, by executing a new proxy with a later
<PAGE>
date and delivering such proxy to the Secretary of the Company, or by giving
written notice of revocation to the Secretary of the Company.
CERTAIN INFORMATION WITH RESPECT OF DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS AND EXECUTIVE OFFICERS
During fiscal year 1998 the Board held one meeting, which was attended by
all directors. The Board of Directors also took action by written consent on 13
occasions. The Company formed Audit and Compensation Committees in April 1999.
The Audit Committee is responsible for reviewing the services performed by the
Company's independent auditors and internal audit department, evaluating the
Company's accounting policies and its system of internal controls and reviewing
significant financial transactions. The Compensation Committee is primarily
responsible for reviewing compensation to be paid to officers of the Company and
for administering the Company's equity-based incentive plans. Mr. John F.A.V.
Cecil, who is not an employee, is the sole current member of the Audit and
Compensation Committees. The Company does not have a Nominating Committee.
The name of, principal occupation of, and certain additional information
about the four directors, each of whom are also nominees, are set forth below,
together with information concerning the Company's executive officers.
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Paul Cox 36 Chairman of the Board and President
David Fann 44 Director and Chief Executive
Grant Holcomb 39 Director, Chief Technical Officer and Secretary
Jack F.A.V. Cecil 43 Director
James A. Mercer III 37 Vice President and Secretary
Issa Nakhleh 36 Chief Financial Officer
</TABLE>
PAUL COX. Paul Cox has been Chairman of the Board and President of the
Company since February 1997. He founded and became the President of ATI Access
Technologies Inc. in 1996 and Video Stream Inc. in February of 1997. In 1995,
Mr. Cox was the President and a shareholder of International Video Conferencing,
Inc., a provider of video conferencing facilities, and had earlier been an
Associate with Pierce Scraper, where he advised clients on commercial
investments. In 1994, he was a Senior Analyst with Colliers International, a
commercial real estate leasing and advisory firm. Prior to 1994, Mr. Cox
practiced commercial and residential mortgage administration with Canada Trust.
Mr. Cox holds a B.A. in International Relations and Economics from the
University of British Columbia.
DAVID FANN. David Fann has been the Chief Executive Officer and a Director
of the Company since September 1998. He has been the President of TechnoVision,
Inc., a subsidiary of the Company, since November 1995. From February 1995 to
October 1995, Mr. Fann served as Vice President of Sales and Marketing for
Quadraplex, a video conferencing company. He co-founded Totally Automated
Systems Communications in January 1993 and served as Vice President of that
company from January 1993 until January 1995. From January 1987 to December
1992, he served as Operations Officer for Networks, Inc. From January 1982 to
December 1986, Mr. Fann was Regional Manager for Famous Furniture Rentals.
GRANT K. HOLCOMB. Grant K. Holcomb has been a director and the Chief
Technical Officer and Secretary of the Company since December 1997. From July
1996 to July 1998, Mr. Holcomb was the founder and President of Interactive
Solution Group, Inc., where he developed user interface applications for some of
the core technologies currently utilized by the Company. From July 1991 to
April 1996, Mr. Holcomb was the Vice President of Research and Development at
Multimedia Design Corporation. From August 1990 to April 1991, he served in the
United States Marine Corps as an Operations and Commanding Officer in Operations
Desert Shield and Desert Storm. From August 1987 to August 1990, he served as an
instructor of Electrical Engineering and Digital Logic and Microprocessors at
the U.S. Naval Academy. Mr. Holcomb holds a Bachelor of Science degree in
Electrical Engineering from The Citadel and has completed his academic
requirements for his Masters of Science degree in Electrical Engineering from
The Naval Postgraduate School.
<PAGE>
JOHN F.A.V. CECIL. John F.A.V. Cecil has been a director of the Company
since March 1999. Since 1992 Mr. Cecil has served as the President of Biltmore
Farms Inc., a real estate development company. Mr. Cecil is currently a member
of the Board of Directors of First Union National Bank of North Carolina,
Mission-St. Joseph's Health Systems, Inc., and The Association of Governing
Boards of Universities and Colleges. He is also the Vice-Chairman - Board of
Governors of the University of North Carolina, which is responsible for the
general determination, control, supervision, management and governance of all
affairs of the 16 constituent institutions. Mr. Cecil holds a Bachelor of Arts
degree from the University of North Carolina at Chapel Hill and a Masters in
International Management (M.I.M.), from the American Graduate School of
International Management.
JAMES A. MERCER III. James A. Mercer III has been the Vice President of
the Company since March 1999 and the Secretary of the Company since April
1999. From April 1994 to March 1999, Mr. Mercer was a partner of, and
associated with, the law firm of Luce, Forward, Hamilton & Scripps LLP, San
Diego, California where he specialized in corporate and securities law. From
December 1991 to April 1994 he was associated with the law firm of O'Conner,
Cavanagh, Andersen, Westover, Killingsworth & Beschars in Arizona. From
August 1989 to December 1991 he was associated with the law firm of Ervin,
Cohen & Jessop in Beverly Hills, California. Mr. Mercer obtained his B.A.
from the University of California at Los Angeles. He obtained an MBA with
concentration in Administrative Finance from California State University
Fullerton. He received his J.D. from the University of Southern California.
ISSA NAKHLEH. Issa Nakhleh has been the Chief Financial Officer of the
Company since June 1998. From November 1995 to May 1996, Mr. Nakhleh was a
consultant with European Acquisition Capital, a subsidiary of Enskildia Banken
of Sweden. From July 1995 until October 1995, he was associated with NatWest
Ventures, a subsidiary of the NatWest Banking Group, the second largest venture
capital company in the United Kingdom. From April 1992 to July 1994, he held an
associate position within a public accounting firm advising primarily on
corporate finance and corporate governance for public companies. From June 1990
to March 1992, Mr. Nakhleh served as Vice President, Finance and Administration,
for a video and audio storage products manufacturer. From 1987 to 1990, he
served as controller for a lighting products manufacturer. Mr. Nakhleh obtained
his MBA (Distinction) from the University of Warwick, Coventry, England. He
obtained his professional accounting designation from the Certified General
Accountants Association of Canada.
DIRECTOR COMPENSATION
Directors do not receive compensation for their services as directors.
Outside directors are reimbursed for their expenses incurred to attend meetings.
In addition, outside directors are eligible for stock option grants pursuant to
the Company's 1997 Stock Option Plan and the proposed 1999 Stock Option Plan.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of April 15, 1999 certain information
with respect to the beneficial ownership of common stock by (a) each person
known by the Company to be the beneficial owner of more than 5% of its
outstanding common stock, (b) each of the Company's directors and (c) all
directors and executive officers as a group. Except as noted below, to the best
of the Company's knowledge, each of such persons has sole voting and investment
power with respect to the shares beneficially owned.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF
BENEFICIAL OWNER SHARES PERCENT OF CLASS
------------------- ------------ ----------------
<S> <C> <C>
Paul Cox 6,525,450 36.1%
David Fann 1,600,000(1) 8.6%
Grant K. Holcomb 1,724,550(1) 9.2%
John F.A.V. Cecil 72,175(2) 0.4%
All executive officers and directors 10,069,300(3) 51.6%
as a group (6 persons)
</TABLE>
- -----------------
(1) Includes 600,000 shares issuable upon the exercise of outstanding stock
options.
(2) Includes 25,000 shares issuable upon the exercise of outstanding stock
options, and 5,200 shares held in trust for the benefit of Mr. Cecil's
minor children. Mr. Cecil disclaims beneficial ownership of such shares.
(3) Includes 1,240,900 shares issuable upon the exercise of outstanding stock
options.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers and persons who own more than ten percent of
the Company's common stock to file with the Securities and Exchange Commission
initial reports of ownership and reports of changes in ownership of the
Company's common
<PAGE>
stock. Upon filing any such report with the Securities and Exchange
Commission, the filing person must furnish the Company with a copy of such
report.
The Company filed a Registration Statement on Form 10-SB to voluntarily
become a reporting company under the Securities Exchange Act of 1934 on November
25, 1998. Under the terms of the Securities Exchange Act of 1934, the
obligation to file reports of ownership did not commence until fiscal year 1999.
EXECUTIVE COMPENSATION AND BENEFITS
The compensation and benefits program of the Company is designed to
attract, retain and motivate employees to operate and manage the Company for the
best interests of its constituents. Executive compensation is designed to
provide incentives for those senior members of management who bear
responsibility for the Company's goals and achievements. The compensation
philosophy is based on a base salary, with opportunity for significant bonuses
to reward outstanding performance, and a stock option program.
EXECUTIVE COMPENSATION
The following tables and notes show the compensation provided to the Chief
Executive Officer and the other most highly compensated executive officers, who
served as such at the end of fiscal 1998 and whose annual compensation exceeds
$100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ALL OTHER
ANNUAL COMPENSATION LONG TERM COMPENSATION COMP.
--------------------------- -------------------------------- ----------
AWARDS PAYOUTS
SECURITIES
OTHER RESTRICTED UNDERLYING LTIP
ANNUAL STOCK OPTIONS/ PAYOUTS
NAME/TITLE SALARY BONUS COMP. AWARDS SARS (3)
(1)
$ $ $ $ # $
- ----------------------- ----------- ----- ------ ---------- ---------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Paul Cox, President 141,023 -- -- -- -- --
David Fann, Chief
Executive Officer 54,000(2) -- -- -- 300,000 --
Grant Holcomb, Chief
Technical Officer and
Secretary 124,324(3) -- -- -- 300,000 --
</TABLE>
(1) Consists solely of options granted under the 1997 Stock Option Plan.
(2) Mr. Fann served as Chief Executive Officer for the period from
September 1, 1998 to December 31, 1998
(3) Mr. Holcomb served as Chief Technical Officer for the period from
April 1, 1998 to December 31, 1998
<PAGE>
AGGREGATED OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF SECURITIES PERCENT OF TOTAL
UNDERLYING OPTIONS/SARS GRANTED EXERCISE PRICE
OPTIONS/SARS GRANTED TO EMPLOYEES IN FISCAL OR BASE PRICE EXPIRATION
NAME (#) YEAR ($/SHARE) DATE
- --------------- -------------------- ---------------------- -------------- ----------
<S> <C> <C> <C> <C>
David Fann 300,000 24.47 $3.06 9/1/2008
Grant Holcomb 300,000 24.47 $1.35 2/28/2008
</TABLE>
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUE
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES "IN THE MONEY"
UNDERLYING UNEXERCISED OPTIONS/SARS AT FISCAL
SHARES OPTIONS/SARS AT FISCAL YEAR-END(2)
ACQUIRED VALUE YEAR-END(1) $
ON EXERCISE REALIZED ------------------------- -------------------------
NAME # $
Exercisable/Unexercisable Exercisable/Unexercisable
- ----------------- ----------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
David Fann -- -- 300,000 / 0 150,000 / 0
Grant Holcomb -- -- 300,000 / 0 663,000 / 0
</TABLE>
- --------------------
1 All options granted at 100% of fair market value. Optionees may satisfy
the exercise price by submitting currently owned shares, in-the-money
options and/or cash.
2 Calculated based upon the December 31, 1998 fair market value share price
of $3.56 less the share price to be paid upon exercise.
EMPLOYMENT AGREEMENTS
The Company has entered into Employment Agreements with each of Paul Cox,
David Fann and Grant Holcomb effective as of September 30, 1998. Pursuant to
those agreements, Paul Cox will serve as President of the Company, David Fann
will serve as Chief Executive Officer of the Company and Grant Holcomb will
serve as Chief Technical Officer of the Company. Each of these agreements
provides for a base annual salary of $162,000 per annum, or a higher amount as
the Board of Directors may determine. The Board of Directors amended the
Employment Agreements in March 1999 to increase the base salary under each
agreement to $200,000.
In addition to base salary, Messrs. Fann, Cox and Holcomb are eligible for
bonuses under certain conditions. Both Messrs. Fann and Holcomb are eligible for
stock option grants under the Company's 1997 Stock Option Plan and all other
profit sharing or bonus plans generally available to Company officers.
The agreements expire on September 30, 2002. In the event the Company
terminates the executives without cause, each executive will receive his salary
remaining through the end of the term of his Employment Agreement, and
continuation of certain employee benefits.
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company's predecessor was formed in February 1997 under the name Video
Stream, Inc. under the Canadian Corporations Act. Video Stream Inc. was founded
to perform research and development on various connectivity solutions and went
on to develop specialty communications technology hardware and services. In
October 1997, Video Stream, Inc. was merged with and into Triple "D" Court, a
Wyoming corporation, with the shareholders of Video Stream, Inc., Paul Cox and
Grant Holcomb, gaining control of the combined entity. Triple "D" Court was a
publicly traded shell corporation, with no operations, whose shares were traded
on the OTC Bulletin Board maintained by National Association of Securities
Dealers. Following the consummation of the merger the surviving entity changed
its name to Video Stream International, Inc. Effective September 1998, the
Company officially changed its name to "TeraGlobal Communications Corp."
TechnoVision Communications, Inc. ("TechnoVision") was founded in November
1995 by David Fann, its President and a director of TechnoVision. Pursuant to
an exchange offer which concluded August 10, 1998, the Company acquired 99.1% of
the outstanding common stock of TechnoVision from its stockholders on the basis
of one share of the Company's stock for every two shares of TechnoVision stock
exchanged. Mr. Fann is an officer and director of TechnoVision and was at the
time of the exchange offer. In transactions taking place in January and April
1999, the Company loaned Mr. Fann an aggregate of $40,000. The loans are
payable upon demand and bear interest at the minimum applicable federal rate.
In July 1998, the Company acquired from Interactive Solutions Group, Inc.
all of the membership interests in ISG Acquisition, LLC, a Delaware limited
liability company wholly owned by Interactive Solutions Group. ISG Acquisition
holds substantially all of the intellectual property assets of Interactive
Solutions Group related to network and multimedia products and technologies.
The interest in ISG Acquisition was acquired by the Company in exchange for the
forgiveness of a loan of $160,000 and the assumption of liabilities of ISG
Acquisition up to $91,000, for a total purchase price of $251,000. Interactive
Solutions Group was formed on July 15, 1996 by Grant Holcomb, its President. Mr.
Holcomb is an officer and director of the Company, and was at the time of the
acquisition of Interactive Solutions Group.
During 1997 and 1998, Grant Holcomb, a current officer and director of the
Company, provided consulting services for the Company relating to software
development and hardware requirements in connection with the development of the
TeraCOM product and related technologies. The Company paid Mr. Holcomb $10,000
in the year ended December 31, 1997 and for the nine month period ended
September 30, 1998. In addition, Mr. Holcomb provided consulting services to
TechnoVision in connection with the development of the TeraCOM(tm) technology.
TechnoVision paid Mr. Holcomb approximately $30,000 in the year ended December
31, 1997. During 1998, TechnoVision loaned an aggregate of $56,500 to Grant
Holcomb. The loans are evidenced by promissory notes, payable on or before June
1, 1999, bearing interest at 8% per annum. In April 1999, the Company loaned
Mr. Holcomb an aggregate of $161,500. The loans are payable upon demand and bear
interest at the minimum applicable federal rate. Mr. Holcomb used a portion of
the proceeds of this loan to repay the obligation to TechnoVision in full.
OVERVIEW OF PROPOSALS
This Proxy Statements contains three proposals requiring shareholder
action. Proposal No. 1 requests approval of a Merger Agreement to effect a
reincorporation of the Company from Wyoming into Delaware. Proposal No. 2 seeks
approval of the Company's 1999 Stock Option Plan. Proposal No. 3 requests the
election of four directors to the Company's Board. Each proposal is discussed
in more detail in the pages that follow.
<PAGE>
PROPOSAL 1--APPROVAL OF THE REINCORPORATION OF THE COMPANY
IN THE STATE OF DELAWARE
PROPOSAL
The Board of Directors has unanimously approved a proposal to change the
Company's state of incorporation from Wyoming to Delaware (the
"Reincorporation"). The Board of Directors believes this change to be in the
best interests of the Company and its shareholders for several reasons. The
Reincorporation will allow the Company the increased flexibility and
predictability afforded by Delaware law. In addition, the Board believes that
the Reincorporation will enhance the Company's ability to attract and retain
qualified members of the Company's Board of Directors as well as encourage
directors to continue to make independent decisions in good faith on behalf of
the Company. Finally, the Board of Directors believes that the Reincorporation
will enable the Board to more fully consider any proposed takeover attempt and
to better negotiate terms that maximize the benefit to the Company and its
shareholders. For the reasons explained below, the Company believes it is
beneficial and important that the Company avail itself of Delaware law by
reincorporating in Delaware.
PREDICTABILITY OF DELAWARE LAW. For many years Delaware has followed a
policy of encouraging incorporation in that state. In furtherance of that
policy, Delaware has adopted comprehensive corporate laws that are revised
regularly to meet changing business circumstances. The Delaware legislature is
particularly sensitive to issues regarding corporate law and is especially
responsive to developments in modern corporate law. The Delaware courts have
developed considerable expertise in dealing with corporate issues as well as a
substantial body of case law construing Delaware's corporate law. As a result of
these factors, it is anticipated that Delaware law will provide greater
predictability in the Company's legal affairs than is presently available under
Wyoming law.
ABILITY TO ATTRACT AND RETAIN DIRECTORS: In 1986, Delaware amended its
corporate law to allow corporations to limit the personal monetary liability of
its directors for their conduct as directors under certain circumstances. The
directors have elected to adopt such a provision in the Certificate of
Incorporation which would govern the Company after the Reincorporation.
Delaware law does not permit a Delaware corporation to limit or eliminate the
liability of its directors for breaches of their fiduciary duty of loyalty,
intentional misconduct, bad faith conduct, unlawful distributions or any
transaction from which the director derives an improper personal benefit. While
Wyoming law was more recently amended to permit similar limitations on the
liability of directors, Wyoming does not have the depth of case law interpreting
its statutory provisions. The Board of Directors believes that Delaware
incorporation, and the provisions of the Delaware Certificate of Incorporation,
will enhance the Company's ability to recruit and retain directors in the
future. However, the shareholders should be aware that such a provision inures
to the benefit of the directors, and the interest of the Board of Directors in
recommending the Reincorporation may therefore be in conflict with the interests
of the shareholders. See "Limitations on Director Liability" and
"Indemnification of Officers and Directors" below for a more complete discussion
of these issues.
HOSTILE TAKEOVERS. Delaware law, more so than Wyoming law, permits the
Company to take protective measures in order to deter hostile takeover attempts.
A hostile takeover attempt may have a positive or a negative effect on the
Company and its shareholders, depending on the circumstances surrounding a
particular takeover attempt. Takeover attempts that have not been negotiated or
approved by the board of directors of a corporation can seriously disrupt the
business and management of a corporation and generally present to the
shareholders the risk of terms which may be less than favorable to all of the
shareholders than would be available in a board-approved transaction. Board
approved transactions may be carefully planned and undertaken at an opportune
time in order to obtain maximum value for the corporation and all of its
shareholders with due consideration to matters such as the recognition or
postponement of gain or loss for tax purposes, the management and business of
the acquiring corporation and maximum strategic deployment of corporate assets.
The Board of Directors recognizes that hostile takeover attempts do not
always have the unfavorable consequences or effects described above and may
frequently be beneficial to the shareholders, providing all of the shareholders
with considerable value for their shares. However, the Board of Directors
believes that the potential disadvantages of unapproved takeover attempts are
sufficiently great that prudent steps may in the future be required to reduce
the likelihood of such takeover attempts, in the best interests of the Company
and its shareholders.
<PAGE>
Shareholders should recognize that one of the effects of the
Reincorporation may be to discourage a future attempt to acquire control of the
Company which is not presented to and approved by the Board of Directors, but
which a substantial number and perhaps even a majority of the Company's
shareholders might believe to be in their best interests or in which
shareholders might receive a substantial premium for their shares over the
current market prices. As a result, shareholders that might desire to
participate in such a transaction may not have an opportunity to do so.
METHOD OF REINCORPORATION
The proposed Reincorporation would be accomplished by merging the Company
into a newly-formed Delaware corporation which, just before the merger, will be
a wholly-owned subsidiary of the Company (the "Delaware corporation"), pursuant
to an Agreement and Plan of Merger (the "Merger Agreement"), a copy of which is
attached as Exhibit A to this Proxy Statement. Upon the effective date of the
merger, the Delaware corporation's name will be TeraGLOBAL Communications
Corporation. The Reincorporation will not result in any change in the Company's
business, assets or liabilities, will not cause its corporate headquarters to be
moved and will not result in any relocation of management or other employees.
On the effective date of the proposed Reincorporation, each outstanding
share of common stock of the Company will automatically convert into one share
of common stock of the Delaware corporation, and shareholders of the Company
will automatically become shareholders of the Delaware corporation. On the
effective date of the Reincorporation, the number of outstanding shares of
common stock of the Delaware corporation will be equal to the number of shares
of common stock of the Company outstanding immediately prior to the effective
date of the Reincorporation. In addition, each outstanding option or right to
acquire shares of common stock of the Company will be converted into an option
or right to acquire an equal number of shares of common stock of the Delaware
corporation, under the same terms and conditions as the original options or
rights. The Company's 1999 Stock Option Plan (if approved by the shareholders
at the annual meeting) and its 1997 Stock Option Plan will be adopted and
continued by the Delaware corporation following the Reincorporation.
Shareholders should recognize that approval of the proposed Reincorporation will
constitute approval of the adoption and assumption of those plans by the
Delaware corporation.
No action need be taken by shareholders to exchange their stock
certificates; this will be accomplished at the time of the next transfer by the
shareholder. Certificates for shares in the Company will automatically
represent an equal number of shares in the Delaware corporation upon completion
of the merger.
It is anticipated that the Reincorporation, if approved by the
shareholders, would be completed as soon thereafter as practicable. However,
the Reincorporation may be abandoned or the Merger Agreement may be amended
(with certain exceptions), either before or after shareholder approval has been
obtained, if in the opinion of the Board of Directors, circumstances arise that
make such action advisable; provided, that any amendment that would effect a
material change from the charter provisions discussed in this Proxy Statement
would require further approval by the holders of a majority of the outstanding
shares of the common stock.
SIGNIFICANT CHANGES CAUSED BY REINCORPORATION
In general, the Company's corporate affairs are governed at present by the
corporate law of Wyoming, the Company's state of incorporation, and by the
Company's Articles of Incorporation, as amended (the "Wyoming Articles") and the
Company's Restated Bylaws (the "Wyoming Bylaws"), which have been adopted
pursuant to Wyoming law. The Wyoming Articles and Wyoming Bylaws are available
for inspection during business hours at the principal executive offices of the
Company. In addition, copies may be obtained by writing to the Company at 225
Broadway, Suite 1600, San Diego, California 92101, Attention: Corporate
Secretary.
If the Reincorporation proposal is adopted, the Company will merge into,
and its business will be continued by, the Delaware corporation. Following the
merger, issues of corporate governance and control would be controlled by
Delaware, rather than Wyoming law. The Wyoming Articles and Wyoming Bylaws,
will, in effect, be replaced by the Certificate of Incorporation of the Delaware
Company (the "Delaware Certificate") and the bylaws of the Delaware Company (the
"Delaware Bylaws"), copies of which are attached as Exhibits B and C to this
Proxy
<PAGE>
Statement. Accordingly, the differences among these documents and between
Delaware and Wyoming law are relevant to your decision whether to approve the
Reincorporation proposal.
A number of significant differences between Wyoming and Delaware law and
among the various charter documents are summarized in the chart below.
Shareholders are requested to read the following chart in conjunction with the
discussion following the chart and the Merger Agreement, the Delaware
Certificate and the Delaware Bylaws attached to this Proxy Statement. For each
item summarized in the chart, there is a reference to a page of this Proxy
Statement on which a more detailed discussion appears.
<TABLE>
<CAPTION>
ISSUE DELAWARE WYOMING
------------------------ -------------------------------------- ----------------------------
<S> <C> <C>
Limitation of Liability of Directors Delaware law permits the limitation of Wyoming law permits similar
and Officers (see page 10) liability of directors and officers to limitations on the liability
the Company except in connection with of directors; however, the
(i) breaches of the duty of loyalty; Wyoming Articles do not
(ii) acts or omissions not in good currently provide for such
faith or involving intentional limitations.
misconduct or knowing violations of
law; (iii) the payment of unlawful
dividends or unlawful stock
repurchases or redemptions; or (iv)
transactions in which a director
received an improper personal benefit.
Indemnification of Directors and The Delaware Bylaws require The Wyoming Bylaws require
Officers (see page 11) indemnification and advancement of indemnification except for
expenses to the fullest extent allowed liability arising from
by Delaware law. negligence or willful
misconduct, and permit, rather
than require, advancement of
expenses.
Shareholder Power to Call Special The Delaware Bylaws permit the Board The Wyoming Bylaws permit the
Shareholder Meeting (see page 11) of Directors, the Chairman of the Board of Directors, the
Board or the President to call a President or the holders of
special meeting of shareholders. 10% or more of the votes
entitled to be cast at the
meeting to call a special
meeting of shareholders.
Tender Offer Statute (see page 12) Restricts hostile two-step takeovers. No comparable statute.
Amendment of Certificate Amendment of the Delaware Certificate Amendment of the Wyoming
requires approval by a majority of the Articles requires approval by
outstanding shares except that the a majority of the outstanding
Board of Directors may amend the shares, except that the Board
Articles in certain respects which do of Directors may amend the
not adversely affect the Articles in certain respects
shareholders. which do not adversely affect
the shareholders.
Shareholder Action By Written Consent Can be taken by a majority of the Can be taken only by all
(see page 12) outstanding stock with prompt notice shareholders unanimously.
to shareholders who did not give
consent.
Loans to Officers and Directors Board of Directors may authorize if Loans to directors allowed
(see page 13) reasonably expected to benefit the only if approved by
corporation. shareholders or if authorized
by Board of Directors in the
belief that the loan will
benefit the corporation.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Rights of Shareholders to Inspect Permitted for any purpose reasonably Any shareholder may inspect
Shareholder List (see page 13) related to shareholder's interest as a prior to shareholder meeting.
shareholder. Holder of 5% of outstanding
shares who has been
shareholder for 6 months may
inspect for proper purpose.
Appraisal Rights (see page 13) Generally available for mergers and Generally available for most
consolidations. mergers, consolidations, share
exchanges and sales of assets.
Dividends (see page 14) Paid from surplus or net profits. Payable only if corporation
would still be able to pay its
debts and any amounts payable
to superior preferred
rightholders upon dissolution.
Other Responsive legislature, larger body of
corporate case law and more expert
judiciary provides more predictable
corporate legal environment.
</TABLE>
LIMITATIONS ON DIRECTOR LIABILITY. Both Wyoming and Delaware permit a
corporation to limit the personal liability of a director to the corporation or
its shareholders for monetary damages for breach of certain duties as a
director. The Wyoming and Delaware laws adopt a self-governance approach by
enabling a corporation to take advantage of these provisions only if an
amendment to the charter limiting such liability is approved by a majority of
the outstanding shares or such language is included in the original charter.
The Wyoming Articles do not currently eliminate the liability of directors to
the corporation as permitted by Wyoming law.
The Delaware Certificate does eliminate the liability of directors to the
fullest extent permissible under Delaware law, as such law exists currently or
as it may be amended in the future. Under Delaware law, such provision may not
eliminate or limit director monetary liability for (a) breaches of the
director's duty of loyalty to the corporation or its shareholders; (b) acts or
omissions not in good faith or involving intentional misconduct or knowing
violations of law; (c) the payment of unlawful dividends or unlawful stock
repurchases or redemptions; or (d) transactions in which the director received
an improper personal benefit. Such limitation of liability provision also may
not limit director's liability for violation of, or otherwise relieve the
Delaware corporation or its directors from the necessity of complying with,
federal or state securities laws or affect the availability of non-monetary
remedies such as injunctive relief or rescission.
The proposed Reincorporation and associated measures are designed to shield
a director from suits by the Delaware Company or its shareholders for monetary
damages for negligence or gross negligence by the director in failing to satisfy
the director's duty of care. As a result, an action for monetary damages
against a director predicated on a breach of the duty of care would be available
only if the Delaware corporation or its shareholders were able to establish that
the director was disloyal in his conduct, failed to act in good faith, engaged
in intentional misconduct, knowingly violated the law, derived an improper
personal benefit or approved an illegal dividend or stock repurchase.
Consequently, the effect of such measures may be to limit or eliminate an
effective remedy which might otherwise be available to a shareholder who is
dissatisfied with the Board of Directors' decisions. Although an aggrieved
shareholder could sue to enjoin or rescind an action taken or proposed by the
Board of Directors, such remedies may not be timely or adequate to prevent or
redress injury in all cases.
The Company believes that directors are motivated to exercise due care in
managing the Company's affairs primarily by concern for the best interests of
the Company and its shareholders rather than by the fear of potential monetary
damage awards. As a result, the Company believes that the Reincorporation
proposal should sustain the Board of Directors' continued high standard of
corporate governance without any decrease in accountability by directors to the
Company and its shareholders. The Company also believes that failure to limit
director liability as permitted by Delaware law may discourage highly qualified
candidates from becoming directors of the Company.
<PAGE>
INDEMNIFICATION OF OFFICERS AND DIRECTORS. Wyoming and Delaware have
similar laws respecting indemnification by a corporation of its officers and
directors. There are nonetheless certain differences between the laws of the
two states, as well as the Wyoming and Delaware Bylaws.
The Wyoming Bylaws require that the Company indemnify each of its directors
and officers against any liability incurred by reason of such person's status as
a director or officer, except for liabilities arising out of such person's own
negligence or willful misconduct. The Delaware Bylaws require that the Delaware
corporation indemnify its directors and officers, and persons serving at the
Company's request as directors or officers of other corporations, to the fullest
extent permitted by Delaware law, provided that the Delaware corporation will
not be required to indemnify any director or officer in connection with a
proceeding initiated by such person unless the proceeding was authorized by the
Board of Directors.
Both Wyoming and Delaware law permit indemnification of officers and
directors against liability incurred in third-party actions if the indemnitee
acted in good faith and he or she reasonably believed the acts were in or at
least not opposed to the best interests of the Company. In the case of a
criminal proceeding, the indemnitee must have had no reasonable cause to believe
his or her acts were unlawful.
Wyoming law permits indemnification against expenses incurred in derivative
or third-party actions, provided that the indemnitee has met the standard of
conduct described in the previous paragraph. Delaware law permits
indemnification against expenses in the same manner, except that, without court
approval, no indemnification may be made in respect of any derivative action in
which the indemnitee is adjudged liable for negligence or misconduct in the
performance of his or her duty to the corporation.
Wyoming law permits the Company to advance expenses to an officer or
director related to a proceeding, contingent on the involved person's commitment
to repay any such advance if it is ultimately determined that he or she is not
entitled to indemnification. The Delaware Bylaws require, rather than merely
permit, such advancement of expenses.
Under Wyoming law and the Wyoming Articles, the Company may provide
indemnification or advances expenses to officers and directors only as permitted
by the Wyoming statute relating to such indemnification or advances. On the
other hand, a provision of Delaware law states that the indemnification provided
by statute shall not be deemed exclusive of any other rights under any bylaw,
agreement, vote of shareholders or disinterested directors or otherwise. As a
result, under Delaware law, the Delaware corporation is permitted to indemnify
its directors and officers within the limits established by law and public
policy, pursuant to an express contract, bylaw provision, shareholder vote, vote
of disinterested directors or otherwise, any or all of which could provide
indemnification rights broader than those currently available under the Wyoming
Bylaws or the Wyoming indemnification statutes.
The indemnification and limitation of liability provisions of Wyoming law,
and not Delaware law, will apply to actions of the directors and officers of the
Company made prior to the proposed Reincorporation. Nevertheless, the Board of
Directors has recognized in considering this Reincorporation proposal that the
individual directors have a personal interest in obtaining the application of
Delaware law to such indemnity and limitation of liability issues affecting them
and the Company in the event such issues arise from a potential future case.
The Board of Directors also recognizes that the application of Delaware law, to
the extent that any director or officer is actually indemnified in circumstances
where indemnification would not be available under Wyoming law and the Wyoming
Articles, would result in expense to the Company which the Company would not
incur if the Company were not reincorporated. The Board of Directors believes,
however, that the overall effect of Reincorporation is to provide a corporate
legal environment that enhances the Company's ability to attract and retain high
quality outside directors and thus benefits the interests of the Company and its
shareholders.
SHAREHOLDER POWER TO CALL SPECIAL SHAREHOLDER MEETING. Under Wyoming law
and the Wyoming Bylaws, a special meeting of shareholders may be called by the
Board of Directors, the President or the holders of shares entitled to cast not
less than 10% of the votes at such meeting. Under Delaware law and the Delaware
Bylaws, a special meeting of shareholders may be called by the Board of
Directors, the Chairman of the Board of Directors or the President.
<PAGE>
ACTION BY WRITTEN CONSENT OF SHAREHOLDERS. Under Wyoming law, the
shareholders may execute a shareholder action by written consent in lieu of a
meeting of shareholders only if the written consent is signed by all
shareholders. Under Delaware law, such action by written consent may be taken
by the number of shares that would have been necessary to authorize the action
at a meeting of shareholders, provided that prompt notice of the taking of the
action is given to those shareholders who did not consent and who would have
been entitled to vote on such action at a meeting.
ANTI-TAKEOVER MEASURES. Delaware law has been widely viewed to permit
a corporation greater flexibility in governing its internal affairs and its
relationships with shareholders and other parties than do the laws of many other
states, including Wyoming. In particular, Delaware law permits a corporation to
adopt a number of measures designed to reduce a corporation's vulnerability to
hostile takeover attempts. Such measures are either not currently permitted or
are more narrowly drawn under Wyoming law. Among these measures is the
elimination of the right of shareholders to call special shareholders' meetings
which is described above. The Board of Directors has not adopted or proposed
other permitted anti-takeover measures at this time. However, there can be no
assurance that the Board of Directors will not adopt such measures in the
future.
In addition to permitted anti-takeover measures, for certain corporations,
Section 203 of the Delaware General Corporation Law ("Section 203") limits the
ability of a potential acquiror to conduct a hostile takeover, as more fully
described below. Section 203 only applies to Delaware corporations which have a
class of voting stock that is (i) listed on a national securities exchange, (ii)
authorized for quotation on the Nasdaq Stock Market or (iii) held of record by
more than 2,000 shareholders. While the Company does not currently meet any of
these tests, the Company may in the future meet one of the tests and become
subject to Section 203.
A number of states (but not Wyoming) have adopted special laws designed to
make certain kinds of "unfriendly" corporate takeovers, or other transactions
involving a corporation and one or more of its significant shareholders, more
difficult. Under Section 203, certain "business combinations" by Delaware
corporations with "interested stockholders" are subject to a three-year
moratorium unless specified conditions are met. Section 203 prohibits a Delaware
corporation from engaging in a "business combination" with an "interested
shareholder" for three years following the date that such person becomes an
interested stockholder. There is no equivalent provision to Section 203 under
Wyoming law.
With certain exceptions, an interested stockholder is a person or group who
or which owns 15% or more of the corporation's outstanding voting stock
(including any rights to acquire stock pursuant to an option, warrant,
agreement, arrangement or understanding, or upon the exercise of conversion or
exchange rights, and stock with respect to which the person has voting rights
only), or is an affiliate or associate of the corporation and was the owner of
15% or more of such voting stock at any time within the previous three years.
For purposes of Section 203, the term "business combination" is defined broadly
to include mergers with or caused by the interested stockholder; sales or other
dispositions to the interested stockholder (except proportionately with the
corporation's other stockholders) of assets of the corporation or a subsidiary
equal to ten percent or more of the aggregate market value of the corporation's
consolidated assets or its outstanding stock; the issuance or transfer by the
corporation or a subsidiary of stock of the corporation or such subsidiary to
the interested stockholder (except for transfers in a conversion or exchange or
a pro rata distribution or certain other transactions, none of which increase
the interested stockholder's proportionate ownership of any class or series of
the corporation's or such subsidiary's stock); or receipt by the interested
stockholder (except proportionately as a stockholder), directly or indirectly,
of any loans, advances, guarantees, pledges or other financial benefits provided
by or through the corporation or a subsidiary.
The three year moratorium imposed on business combinations by Section 203
does not apply if: (i) prior to the date on which such stockholder becomes an
interested stockholder the board of directors approves either the business
combination or the transaction which resulted in the person becoming an
interested stockholder; (ii) the interested stockholder owns 85% of the
corporation's voting stock upon consummation of the transaction which made him
or her an interested stockholder (excluding from the 85% calculation shares
owned by directors who are also officers of the target corporation and shares
held by employee stock plans which do not permit employees to decide
confidentially whether to accept a tender or exchange offer); or (iii) on or
after the date such person becomes an interested stockholder, the board approves
the business combination and it is also approved at a stockholder meeting by
sixty-six and two-thirds percent (66 2/3%) of the voting stock not owned by the
interested stockholder.
<PAGE>
A Delaware corporation may elect not to be governed by Section 203 by a
provision in its original certificate of incorporation or an amendment thereto
or to the bylaws, which amendment must be approved by majority stockholder vote
and may not be further amended by the board of directors. The Delaware
corporation does not intend to elect not to be governed by Section 203.
The constitutionality of Section 203 is challenged from time to time in
lawsuits arising out of ongoing takeover disputes, and it is not yet clear
whether and to what extent its constitutionality will be upheld by the courts.
The Company believes that so long as the constitutionality of Section 203 is
upheld, Section 203 will encourage any potential acquiror to negotiate with the
Delaware corporation's Board of Directors. Section 203 also has the effect of
limiting the ability of a potential Delaware acquiror to make a two-tiered bid
for the Delaware corporation in which all stockholders would not be treated
equally. Shareholders should note that the application of Section 203 to the
Delaware corporation will confer upon the Board the power to reject a proposed
business combination, even though a potential acquiror may be offering a
substantial premium for the Delaware Company's shares over the then current
market price (assuming the stock is then publicly traded).
There can be no assurance that the Board of Directors would not adopt any
further anti-takeover measures available under Delaware law. Moreover, the
availability of such measures under Delaware law, whether or not implemented,
may have the effect of discouraging a future takeover attempt which a majority
of the Delaware corporation's shareholders may deem to be in their best
interests or in which shareholders may receive a premium for their shares over
then current market prices. As a result, shareholders who might desire to
participate in such transactions may not have the opportunity to do so.
Shareholders should recognize that, if adopted, the effect of such measures,
along with the possibility of discouraging takeover attempts, may be to limit in
certain respects the rights of shareholders of the Delaware corporation compared
with the rights of shareholders of the Company.
The Board of Directors recognizes that hostile takeover attempts do not
always have the unfavorable consequences or effects described above and may
frequently be beneficial to the shareholders, providing all of the shareholders
with considerable value for their shares. However, the Board of Directors
believes that the potential disadvantages of unapproved takeover attempts (such
as disruption of the Company's business and the possibility of terms which may
be less than favorable to all of the shareholders than would be available in a
board-approved transaction) are sufficiently great such that prudent steps to
reduce the likelihood of such takeover attempts and to enable the Board of
Directors to fully consider the proposed takeover attempt and actively negotiate
its terms are in the best interests of the corporation and its shareholders.
LOANS TO OFFICERS AND DIRECTORS. Wyoming law provides that a corporation
may not make a loan or guarantee for the benefit of a director unless it is
approved by a majority of the outstanding shares (excluding shares owned by the
director receiving the loan or guarantee) or the board of directors determines
that the loan or guarantee benefits the corporation and either approves the loan
or guarantee or approves a general plan authorizing such loans or guarantees.
Under Delaware law, a corporation may make loans or guarantees for the benefit
of directors, officers or other employees when, in the judgment of the board of
directors, the loan or guaranty may reasonably be expected to benefit the
corporation.
INSPECTION OF SHAREHOLDER LIST. Under Wyoming law, any shareholder has the
right to inspect the shareholder list during the period beginning two days after
notice of a meeting of shareholders and continuing through the meeting.
Otherwise, only holders of at least 5% of the outstanding shares who have been
shareholders for at least six months have the right to inspect the shareholder
list, provided they give five days written notice and the demand to inspect the
list is made in good faith and for a proper purpose. Delaware law permits any
shareholder of record to inspect the shareholder list for any purpose reasonably
related to that person's interest as a shareholder.
APPRAISAL RIGHTS RELATING TO MERGERS AND REORGANIZATIONS. Under both
Wyoming law and Delaware law, a shareholder of a corporation participating in
certain mergers and reorganizations may be entitled to receive cash in the
amount of the "fair value" of his or her shares, as determined by a court, in
lieu of the consideration he or she would otherwise receive in the transaction.
In both Wyoming and Delaware, appraisal rights may not be available if a
shareholder vote was not required to approve the merger or reorganization.
Under Delaware law appraisal rights are not available to shareholders with
respect to a merger or consolidation by a corporation, the shares of which are
either listed on a national securities exchange or designated
<PAGE>
as a national market system security or an interdealer quotation system
security by the National Association of Securities Dealers, Inc., or are held
of record by more than 2,000 holders if the shareholders receive shares of
the surviving corporation or shares of any other corporation which are
similarly listed or dispersed, and the shareholders do not receive any other
property in exchange for their shares except cash for fractional shares.
HOLDING COMPANY REORGANIZATION. Section 251(g) has been added to the
Delaware General Corporation Law permitting a Delaware corporation to reorganize
as a holding company without stockholder approval. The reorganization
contemplated by the statute is accomplished by merging the subject corporation
with or into a direct or indirect wholly-owned subsidiary of the corporation and
converting the stock of the corporation into stock of another direct or indirect
wholly owned subsidiary of the corporation, which would be the new holding
company. The statute eliminates the requirement for a stockholder vote on such
a merger but contains several provisions designed to ensure that the rights of
stockholders are not changed by or as a result of the merger, except and to the
extent that such rights could be changed without such a stockholder approval
under existing law. Appraisal rights are not available to stockholders in a
merger that qualifies as a holding company reorganization.
DIVIDEND. Under Wyoming law, dividends or other distributions to
shareholders may not be made if, after giving effect to the distribution, the
corporation would not be able to pay its debts in the usual course of business
or the corporation's total assets would be less than the sum of its total
liabilities plus the amount that would be needed to satisfy superior
preferential rights if the corporation immediately dissolved. Delaware law
allows the payment of dividends and redemption of stock out of surplus or out of
net profits for the current and immediately preceding fiscal years. The Company
has never paid cash dividends and has no present plans to do so.
FEDERAL INCOME TAX CONSEQUENCES OF THE REINCORPORATION
The Reincorporation provided for in the Merger Agreement is intended to be
a tax-free reorganization under the Internal Revenue Code of 1986, as amended.
Assuming the Reincorporation qualifies as a reorganization, no gain or loss will
be recognized to the holders of capital stock of the Company as a result of
consummation of the Reincorporation, and no gain or loss will be recognized by
the Company or the Delaware Company. Each former holder of capital stock of the
Company will have the same basis in the capital stock of the Delaware
corporation received by such holder pursuant to the Reincorporation as such
holder has in the capital stock of the Company held by such holder at the time
of consummation of the Reincorporation. Each shareholder's holding period with
respect to the Delaware Company's capital stock will include the period during
which such holder held the corresponding Company capital stock, provided the
latter was held by such holder as a capital asset at the time of consummation of
the Reincorporation. The Company has not obtained a ruling from the Internal
Revenue Service or an opinion of legal or tax counsel with respect to the
consequences of the Reincorporation.
A successful IRS challenge to the reorganization status of the proposed
Reincorporation (in consequence of a failure to satisfy the "continuity of
interest" requirement or otherwise) would result in a shareholder recognizing
gain or loss with respect to each share of the Company's common stock exchanged
in the proposed Reincorporation equal to the difference between the
shareholder's basis in such share and the fair market value, as of the time of
exchange therefor. In such event, a shareholder's aggregate basis in the shares
of the common stock received in the exchange would equal their fair market value
on such date, and the shareholder's holding period for such common stock would
commence anew.
THE FOREGOING IS ONLY A SUMMARY OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES.
SHAREHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISERS REGARDING THE SPECIFIC TAX
CONSEQUENCES TO THEM OF THE PROPOSED REINCORPORATION, INCLUDING THE
APPLICABILITY OF THE LAWS OF ANY STATE OR OTHER JURISDICTION.
PURPOSES AND EFFECTS OF PROPOSED INCREASE IN THE NUMBER OF AUTHORIZED SHARES OF
COMMON STOCK
The proposed Certificate of Incorporation for the Delaware corporation
would increase the number of shares of common stock the Company is authorized to
issue from 50,000,000 to 200,000,000. The additional 150
<PAGE>
million shares would be a part of the existing class of common stock and, if
and when issued, would have the same rights and privileges as the shares of
common stock presently issued and outstanding. At May 15, 1999, ________
shares of common stock were outstanding. The Board of Directors believes it
is desirable to increase the number of shares of common stock the Company is
authorized to issue to provide the Company with adequate flexibility in the
future. The Company has no present commitments, agreements, or intent to
issue additional shares of common stock, other than with respect to currently
reserved shares, in connection with transactions in the ordinary course of
the Company's business, or shares which may be issued under the Company's
stock option, stock purchase, and other existing employee benefit plans.
The proposed Certificate of Incorporation would permit the issuance of
additional shares up to the new 200 million maximum authorization without
further action or authorization by shareholders (except as may be required in a
specific case by law or the Nasdaq Stock Market rules). The Board believes it is
prudent for the Company to have this flexibility. The holders of common stock of
the Company are not entitled to preemptive rights. Accordingly, the issuance of
additional shares of common stock might dilute, under certain circumstances, the
ownership and voting rights of Shareholders. The proposed increase in the number
of shares of common stock the Company is authorized to issue is not intended to
inhibit a change in control of the Company. The availability for issuance of
additional shares of common stock could discourage, or make more difficult,
efforts to obtain control of the Company. For example, the issuance of shares of
common stock in a public or private sale, merger, or similar transaction would
increase the number of outstanding shares, thereby possibly diluting the
interest of a party attempting to obtain control of the Company. The Company is
not aware of any pending or threatened efforts to acquire control of the
Company.
EFFECT OF AUTHORIZATION OF PREFERRED STOCK
The Board of Directors also believes it is advisable to authorize the
issuance up to 1,000,000 shares of preferred stock, par value $.001 per share,
as proposed under the Certificate of Incorporation. The preferred stock would
be available to the Company for issuance in one or more series as determined in
the future by the Board of Directors. The Board would be empowered to fix,
among other things, the designation of and number of shares to comprise each
series and the relative rights, preferences and privileges of shares of each
series, including the dividends payable thereon, voting rights, conversion
rights, the price and terms on which shares may be redeemed, the amounts payable
upon such shares in the event of voluntary of involuntary liquidation and any
sinking fund provisions for redemption or purchases of such shares. The
authorized shares of preferred stock would provide the Company with additional
flexibility concerning possible future acquisitions and financing and enable it
to quickly capitalize on company opportunities.
In casting votes on this Proposal, stockholders should be aware that the
Board of Directors, without further stockholder approval, may issue preferred
stock with voting or conversion rights which could adversely affect the voting
power of the holders of the common stock, or which could be used as a defensive
measure in connection with an attempted hostile takeover of the Company. Such
shares could be privately placed with purchasers who might align themselves with
the Board of Directors in opposing a hostile takeover bid. In addition, the
Board could authorize holders of series of preferred stock to vote as a class,
either separately or with the holders of common stock, or any merger, sale or
exchange of assets by the Company or any other extraordinary corporate
transaction. The Board could also issue Preferred Stock having terms that could
discourage an acquisition attempt or other transaction that some stockholders
might believe to be in their best interest or in which stockholders might
receive premium for their stock over the then current market price of such
stock. The Company, however, has no plans or arrangement to issue any shares of
preferred stock.
VOTE REQUIRED
The affirmative vote of a majority of the shares of common stock of the
Company outstanding as of the Record Date will be required to approve this
Proposal.
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE
REINCORPORATION OF THE COMPANY IN DELAWARE.
<PAGE>
PROPOSAL 2 -- APPROVAL OF THE TERAGLOBAL COMMUNICATIONS CORP.
1999 STOCK OPTION PLAN
PROPOSAL
The Board of Directors believes that attracting and retaining highly
qualified key employees and directors is essential to the Company's growth and
success. The Board of Directors also believes that important advantages to the
Company are gained by a comprehensive compensation program that includes
different types of incentives for motivating such individuals and rewards for
outstanding service. Stock options have been, and will continue to be, an
important element of the Company's compensation program because stock options
enable employees and directors to acquire or increase their proprietary interest
in the Company, promoting a close identity of interests between such individuals
and the Company's shareholders. Stock options also provide to employees and
directors an increased incentive to expend their maximum efforts for the success
of the Company's business.
The Company adopted a 1997 Stock Option Plan which provides for the grant
of options to purchase up to 1,500,000 shares of the Company's common stock.
The Company has granted a number of options under its 1997 Stock Option Plan,
and only a limited number of shares remain available for stock option grants
under the 1997 Stock Option Plan. Stock option grants under the 1997 Stock
Option Plan have been an important aspect of the Company's compensation program
in attracting and retaining senior executives, directors and other key
personnel. The Board of Directors believes that it is in the interests of the
Company and its shareholders that the ability of the Company to grant stock
option awards be continued.
Accordingly, on February 15, 1999 the Board of Directors adopted, subject
to stockholder approval, the TeraGLOBAL Communications Corp. 1999 Stock Option
Plan. In authorizing grants of options, the 1999 Stock Option Plan is intended
to give the Company greater flexibility to respond to rapidly changing business,
economic and regulatory requirements and conditions. In addition, such
flexibility will enhance the ability of the Company to closely link compensation
to performance. The 1999 Stock Option Plan will not become effective unless
approved by the holders of a majority of the shares of common stock present or
represented and voting thereon at the Annual Meeting. The Company has issued
900,000 options under the 1999 Stock Option Plan. In the event that the 1999
Stock Option Plan is not approved, those options will be canceled.
The following discussion of the material features of the 1999 Stock Option
Plan is qualified by reference to the text of the 1999 Stock Option Plan which
is set forth in Exhibit D hereto.
STOCK OPTIONS. Under the terms of the 1999 Stock Option Plan, the
Compensation Committee of the Board of Directors (the "Committee") is authorized
to grant either incentive stock options ("ISOs"), which can result in
potentially favorable tax treatment to the participant, and nonqualified stock
options. The Committee determines the exercise price per share of common stock
subject to an option, provided that the exercise price of an ISO may not be less
than the fair market value of the common stock on the date of grant. The term
of each option, the times at which each option shall be exercisable, and
provisions requiring forfeiture of unexercised options at or following
termination of employment, generally will be fixed by the Committee, except no
ISO will have a term exceeding ten years. Options may be exercised by payment
of the exercise price in cash, or in stock or other property as the Committee
may determine from time to time.
OTHER TERMS OF OPTIONS. The flexible terms of the Option Plan will permit
the Committee to impose performance conditions with respect to any option.
Those conditions may require that an option be forfeited, in whole or in part,
if performance objectives are not met, or require that the time of
exercisability or settlement of an option be linked to achievement of
performance conditions.
SHARES SUBJECT TO THE PLAN. Under the 1999 Stock Option Plan, 1,500,000
shares of common stock will be available for issuance of options.
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. The number of share of common
stock covered by outstanding options and the exercise price of the outstanding
options under the 1999 Stock Option Plan shall be
<PAGE>
adjusted to reflect stock splits, stock dividends and other changes in the
Company's capital structure which effect an increase or decrease in the
number of the Company's outstanding shares without receipt of consideration.
The 1999 Stock Option Plan provides that, in the event of a "Capital
Transaction," unless outstanding options are assumed by a successor
corporation, all such options will vest and may be exercised in the 30 days
prior to the Capital Transaction and will then terminate immediately prior to
the Capital Transaction. A "Capital Transaction" is defined as: a merger or
consolidation in which the Company is not the surviving corporation; a sale
or exchange by the Company of all or substantially all its assets; a merger,
reorganization or consolidation in which the Company is the surviving
corporation and shareholders exchange their stock for securities or property;
a liquidation of the Company or similar transaction.
ELIGIBILITY. Any officer, director or employee of, and certain persons
rendering services to, the Company and its subsidiaries or affiliated companies
is eligible to receive awards under the 1999 Stock Option Plan. Directors of
the Company who are not employees are eligible for grants of nonqualified
options under the 1999 Stock Option Plan.
TERM. No awards may be granted under the Option Plan after February 15,
2009.
NO ASSIGNMENT. Options granted under the Option Plan may not be pledged or
otherwise encumbered and are not transferable except by will or by the laws of
intestate succession.
AMENDMENT. The Board of Directors may, subject to any shareholder approval
required by applicable law, amend the Option Plan with respect to any shares of
common stock at that time not subject to options.
FEDERAL INCOME TAX IMPLICATIONS OF THE PLAN. The following description
summarizes the material federal income tax consequences arising with respect to
the issuance and exercise of options granted under the Option Plan. The grant
of an option will create no tax consequences for the participant or the Company.
A participant will not have taxable income upon exercising an ISO (except that
the alternative minimum tax may apply) and the Company will receive no deduction
at that time. Upon exercising an option other than an ISO, the participant must
generally recognize ordinary income equal to the difference between the exercise
price and fair market value of the freely transferable and nonforfeitable common
stock acquired on the date of exercise. In such case, the Company will be
entitle to a deduction equal to the amount recognized as ordinary income by the
participant.
A participant's disposition of shares acquired upon the exercise of an
option generally will result in short-term or long-term capital gain or loss
measured by the difference between the sale price and the participant's tax
basis in such shares (or the exercise price of the option in the case of shares
acquired by exercise of an ISO and held for the applicable ISO holding periods).
Generally, there will be no tax consequences to the Company in connection with a
disposition of shares acquired under an option, except that the Company will be
entitled to a deduction (and the participant will recognize ordinary taxable
income) if shares acquired upon exercise of an ISO are disposed of before the
applicable ISO holding periods have been satisfied.
With respect to awards involving stock or other property that is restricted
as to transferability and subject to a substantial risk of forfeiture, the
participant must generally recognize ordinary income equal to the fair market
value of the shares or other property received at the first time the shares or
other property become transferable or not subject to a substantial risk of
forfeiture, whichever occurs earlier. The Company will be entitled to a
deduction in an amount equal to the ordinary income recognized by the
participant. A participant may elect under Section 83(b) of the Code to be
taxed at the time of receipt of shares or other property rather than upon lapse
of restrictions on transferability or the substantial risk of forfeiture, but if
the participant subsequently forfeits such shares or property he would not be
entitled to any tax deduction, including as a capital loss, for the value of the
shares or property on which he previously paid tax. Such election must be made
and filed with the Internal Revenue Service within thirty days of the receipt of
the shares or other property.
Section 162(m) of the Code limits deductibility of certain compensation for
each of the Chief Executive Officer of the Company and the additional four
executive officers who are highest paid and employed at year end to $1 million
per year.
<PAGE>
The foregoing summarizes the material federal income tax consequences
arising with respect to the issuance and exercise of options granted under the
Option Plan. Different tax rules may apply with respect to participants who are
subject to Section 16 of the Exchange Act, when they acquire stock in a
transaction deemed to be a nonexempt purchase under that statute or within six
months of an exempt grant of a derivative security under the Option Plan. This
summary does not address the effects of other federal taxes or taxes imposed
under state, local or foreign tax laws.
INTERESTED PARTIES. David Fann and Grant Holcomb, both directors and
executive officers of the Company, have each been granted 300,000 shares of the
Company's common stock contingent upon shareholder approval of the Option Plan.
The following table sets forth the options that will be received under the 1999
Stock Option Plan that are currently determinable:
NEW PLAN BENEFITS
<TABLE>
<CAPTION>
TERAGLOBAL COMMUNICATIONS CORP. 1999 STOCK OPTION PLAN
DOLLAR NUMBER OF
NAME AND POSITION VALUE ($) OPTIONS
------------------ --------- ---------
<S> <C> <C>
David Fann, Director and Chief Executive Officer 0 300,000
Grant Holcomb, Director and Chief Technical Officer 0 300,000
</TABLE>
VOTE REQUIRED
The affirmative vote of a majority of the votes cast or a majority of the
quorum will be required to approve this proposal.
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS VOTE
"FOR" APPROVAL OF THE OPTION PLAN.
<PAGE>
PROPOSAL 3 -- ELECTION OF DIRECTORS
PROPOSAL
The Directors of the Company are elected annually and hold office until the
next annual meeting of shareholders and until their successors shall have been
elected and shall have qualified. In the event any nominee is unable to or
declines to serve as a director at the time of the annual meeting, the proxy
will be voted for a substitute selected by the Board of Directors. Management
has no reason to believe, at this time, that the persons named will be unable,
or will decline, to serve if elected.
The nominees for election to the Board of Directors of the Company are:
Paul Cox, David Fann, Grant Holcomb and John F.A.V. Cecil.
VOTE REQUIRED
The four nominees for director receiving the highest number of affirmative
votes of the shares entitled to be voted for them shall be elected as directors.
Votes withheld from any director are counted for purposes of determining the
presence or absence of the quorum, but have no other legal effect.
RECOMMENDATION
THE BOARD RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" ALL FOUR NOMINEES.
<PAGE>
OTHER BUSINESS
The Board of Directors knows of no other matters to be brought before the
Annual Meeting of Shareholders. However, if any other matters are properly
brought before the Annual Meeting, the persons appointed in the accompanying
proxy intend to vote the shares represented in accordance with their best
judgement.
PROPOSALS OF SHAREHOLDERS
For proposals of shareholders to be included at the 2000 annual meeting of
shareholders, anticipated to be held in June 2000, such proposals must be
received by the Company not later than January 23, 2000. The acceptance of such
proposals is subject to Securities and Exchange Commission guidelines.
ANNUAL REPORT TO SHAREHOLDERS
The Company's Annual Report on Form 10-KSB for fiscal year 1998 (which is
not part of the Company's proxy soliciting materials) is being mailed to the
company's stockholders with this Proxy Statement. A copy of the Company's
Annual Report on Form 10-KSB will be furnished without charge to shareholders
upon request to:
INVESTOR RELATIONS
TERAGLOBAL COMMUNICATIONS CORP.
225 BROADWAY, SUITE 1600
SAN DIEGO, CALIFORNIA 92101
By Order of the Board of Directors
Paul Cox, President
San Diego, California
May 21, 1999
<PAGE>
EXHIBIT A
---------
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger ("Agreement") is made as of ___,
1999 by and among TERAGLOBAL COMMUNICATIONS CORPORATION, a Wyoming
corporation ("TeraGlobal") and a Delaware corporation ("Surviving
Corporation") with reference to the following facts:
A. TeraGlobal has 50,000,000 shares of common stock authorized,
______ of which are issued and outstanding. Surviving Corporation, a wholly
owned subsidiary of TeraGlobal, has 200,000 shares of common stock
authorized, of which one share is issued and outstanding. TeraGlobal owns
all of the outstanding shares of Surviving Corporation.
B. The respective Boards of Directors of TeraGlobal and Surviving
Corporation deem it advisable and in the best interests of both corporate
parties and their respective shareholders for TeraGlobal to merge with and
into Surviving Corporation (the "Merger"), for the separate corporate
existence of TeraGlobal to cease, and for Surviving Corporation to be the
surviving corporation, all pursuant to this Agreement and the applicable
provisions of the Wyoming Business Corporation Act and the Delaware General
Corporation Law.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants contained herein, the parties agree as follows:
1. MERGER. Upon approval of the Merger by a majority of the
outstanding shares of TeraGlobal and Surviving Corporation, a Certificate of
Merger, substantially in the form attached hereto as Exhibit "A", shall be
filed with the Delaware Secretary of State, at which time the Merger will be
effective (the "Effective Time").
2. SURVIVING CORPORATION. At the Effective Time, TeraGlobal
shall be merged with and into Surviving Corporation, subject to the terms of
this Agreement. The separate existence of TeraGlobal shall cease and
Surviving Corporation shall be the surviving corporation.
3. EFFECT ON SURVIVING CORPORATION SHARES. At the Effective
Time, each outstanding share of common stock of Surviving Corporation issued
and outstanding immediately prior to the Effective Time shall be canceled,
and no shares of common stock of Surviving Corporation shall be issued in
respect thereof.
4. EFFECT ON TERAGLOBAL SHARES. At the Effective Time, each
outstanding share of common stock of TeraGlobal then issued and outstanding
shall be converted into and represent the right to receive one (1) fully paid
and nonassessable share of common stock of Surviving Corporation ("Merger
Consideration"), and each certificate nominally representing shares of common
stock of TeraGlobal shall for all purposes be deemed to evidence the
ownership of a like number of shares of common stock of Surviving
Corporation. The holders of such certificates shall not be required
immediately to surrender the same in exchange for certificates of common
stock of Surviving Corporation but, as certificates nominally representing
<PAGE>
shares of common stock of TeraGlobal are surrendered, the Surviving
Corporation shall cause to be issued certificates representing shares of
common stock of Surviving Corporation.
5. RIGHTS OF SURVIVING CORPORATION. At the Effective Time: (i)
Surviving Corporation shall succeed to and possess, without other transfer,
all of the rights, privileges, powers and franchises of TeraGlobal, of a
public as well as a private nature, and be subject to all of the
restrictions, disabilities, liabilities and duties of TeraGlobal; (ii) all of
the rights, privileges, powers and franchises of TeraGlobal, and all
property, real, personal and mixed, and all debts due to TeraGlobal on
whatever account, as well as all other things in action or belonging to
TeraGlobal shall be vested in the Surviving Corporation; (iii) all corporate
acts, plans, policies, agreements, arrangements, approvals and authorizations
of TeraGlobal, its shareholders, Board of Directors and committees thereof,
officers and agents which were valid and effective immediately prior to the
Effective Time shall be taken for all purposes as the acts, plans, policies,
agreements, arrangements, approvals and authorizations of the Surviving
Corporation, and shall be as effective and binding thereon as the same were
with respect to TeraGlobal; (iv) the employees and agents of TeraGlobal shall
become the employees and agents of the Surviving Corporation; and (v) all
rights of creditors and all liens upon the property of TeraGlobal shall be
preserved unimpaired, provided that such liens shall be limited to the
property affected thereby immediately prior to the Effective Time.
6. ARTICLES. At the Effective Time, the Certificate of
Incorporation of Surviving Corporation in effect immediately prior to the
Effective Time shall be and remain the Certificate of Incorporation of
Surviving Corporation, until amended in accordance with the Delaware General
Corporation Law.
7. BYLAWS. At the Effective Time, the bylaws of Surviving
Corporation in effect immediately prior to the Effective Time shall be and
remain the bylaws of Surviving Corporation, until amended as provided therein
and in accordance with the Delaware General Corporation Law.
8. DIRECTORS. At and after the Effective Time, the directors and
officers of Surviving Corporation shall continue in office until the next
annual meeting of stockholders and until their successors shall have been
elected and qualified.
9. OFFICERS. After the Effective Time, TeraGlobal, through the
persons who were its officers immediately prior to the Merger, shall execute
or cause to be executed such further assignments, assurances or other
documents as may be necessary or desirable to confirm title to properties,
assets and rights in Surviving Corporation.
10. REORGANIZATION. This Agreement and Plan of Merger is intended
as a plan of reorganization within the meaning of Section 368(a) of the
United States Internal Revenue Code of 1986, as amended.
11. TERMINATION. This Agreement may be terminated and the
proposed Merger abandoned at any time prior to the Effective Time and whether
before or after approval of this
<PAGE>
Agreement by the Boards of Directors of
Surviving Corporation or TeraGlobal or the shareholders of Surviving
Corporation or TeraGlobal.
12. COMPLIANCE WITH LAW. The effect of the Merger is as
prescribed by law.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first set forth above.
TERAGLOBAL COMMUNICATIONS CORPORATION,
A WYOMING CORPORATION
By:
-----------------------------------
Paul Cox, President
By:
-----------------------------------
James A. Mercer III, Secretary
[NAME OF DELAWARE CORP]
By: -----------------------------------
Paul Cox, President
By:
-----------------------------------
James A. Mercer III, Secretary
<PAGE>
CERTIFICATE OF MERGER OF
TERAGLOBAL COMMUNICATIONS CORPORATION
INTO
hereby certifies that:
1. The name and state of incorporation of each of the
constituent corporations of the merger is as follows:
TeraGlobal Communication Corporation Wyoming
Delaware
2. An Agreement and Plan of Merger between the parties to the
merger has been approved, adopted, certified, executed and acknowledged by
each of the constituent corporations in accordance with the requirements of
section 252 of the Delaware General Corporation Law.
3. The name of the surviving corporation of the merger is.
4. The Certificate of Incorporation of, a Delaware corporation,
shall be the Certificate of Incorporation of the surviving corporation, until
amended in accordance with the Delaware General Corporation Law, provided
that such Certificate shall be amended at the Effective Time to change the
name of the surviving corporation to "TeraGlobal Communications Corporation."
5. The executed Agreement and Plan of Merger is on file at an
office of the surviving corporation, the address of which is 225 Broadway,
Suite 1600, San Diego, California 92101.
6. A copy of the Agreement and Plan of Merger will be furnished
by the surviving corporation, on request and without cost, to any stockholder
of any constituent corporation.
7. The authorized capital stock of TeraGlobal, a Wyoming
corporation, consists of ________________ shares of common stock, ___ par
value.
Dated: ___, 1999
[NAME OF DELAWARE CORPORATION]
By:
-------------------------------------------
Paul Cox, President
1382258.1
1382258.1
<PAGE>
EXHIBIT B
---------
CERTIFICATE OF INCORPORATION
OF
TERAGLOBAL COMMUNICATIONS CORPORATION.
* * * * *
1. The name of the corporation is:
TeraGLOBAL Communications Corporation.
2. The address of the corporation's registered office in the State
of Delaware is 9 East Loockerman St., Suite. 214, Dover, Delaware. The name of
its registered agent at such address is National Corporate Research, Ltd.
3. The nature of the business or purposes to be conducted or
promoted is to engage in any lawful act or activity for which corporations may
be organized under the Delaware General Corporation Law ("Delaware Law").
4. The total number of shares of stock which the corporation shall
have authority to issue is (i) a total of 200,000,000 shares of Common Stock,
par value $0.01 per share and (ii) 1,000,000 shares of Preferred Stock, par
value $0.01 per share. The number of authorized shares of any class or classes
of capital stock of the corporation may be increased or decreased (but not below
the number of shares thereof then outstanding) by the affirmative vote of the
holders of a majority of the voting power of the stock of the corporation
entitled to vote generally in the election of directors, irrespective of the
provisions of Section 242(b)(2) of the Delaware Law or any corresponding
provision hereinafter enacted. The Board of Directors is hereby empowered to
authorize by resolution or resolutions, from time to time, the issuance of one
or more classes or series of Preferred Stock and to fix the voting powers, full
or limited, or no voting powers and the designations, preferences and relative,
participating, optional or other special rights, if any, and the qualifications
or restrictions thereof, if any, with respect to each such class or series of
Preferred Stock and the number of shares constituting each such class or series,
and to increase or decrease the number of shares of any such class or series to
the extent permitted by Delaware Law.
5. The name and mailing address of the incorporator is
James A. Mercer III
225 Broadway, Ste. 1600
San Diego, CA 92101
The power of the incorporator as such shall terminate upon the filing of this
Certificate of Incorporation
6 The names and mailing addresses of the persons who are to serve
as directors until the first annual meeting of stockholders or until their
successors are elected and qualified are:
<TABLE>
<CAPTION>
Name Address
---------------- -----------------------------------------
<S> <C>
David Fann c/o TeraGLOBAL Communications Corporation
225 Broadway Street, Suite 1600
San Diego, CA 92101
Paul Cox c/o TeraGLOBAL Communications Corporation
225 Broadway Street, Suite 1600
San Diego, CA 92101
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Name Address
---------------- -----------------------------------------
<S> <C>
Grant Holcomb c/o TeraGLOBAL Communications Corporation
225 Broadway Street, Suite 1600
San Diego, CA 92101
John F.A.V. Cecil c/o Biltmore Farms, Inc.
Post Office Box 5355
Ashville, NC 28813
</TABLE>
7. Election of directors need not be by written ballot unless the
bylaws of the corporation so provide. There shall be no cumulative voting in
the election of directors.
8. The Board of Directors is expressly authorized to adopt, alter,
amend and repeal the bylaws of the corporation to the maximum extent permitted
by Delaware Law, subject to the power of the stockholders of the corporation to
alter or repeal any bylaw whether adopted by them or otherwise.
9. The corporation shall indemnify its officers and directors to the
fullest extent permitted by Delaware Law.
(a) A director of the corporation shall not be liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director to the fullest extent permitted by Delaware Law.
(b) (i) Each person (and the heirs, executors or administrators of such
person) who was or is a party or is threatened to be made a party to, or is
involved in any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that such person is or was a director or officer of the corporation or is or was
serving at the request of the corporation as a director or officer of another
corporation, partnership, joint venture, trust or other enterprise, shall be
indemnified and held harmless by the corporation to the fullest extent permitted
by Delaware Law. The right to indemnification conferred herein shall also
include the right to be paid by the corporation the expenses incurred in
connection with any such proceeding in advance of its final disposition to the
fullest extent authorized by Delaware Law. The right to indemnification
conferred herein shall be a contract right.
(ii) The Corporation may, by action of its Board of Directors,
provide indemnification to such of the employees and agents of the Corporation
to such extent and to such effect as the Board of Directors shall determine to
be appropriate and authorized by Delaware Law.
(c) The Corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any expense, liability or loss
incurred by such person in any such capacity or arising out of his status as
such, whether or not the Corporation would have the power to indemnify him
against such liability under Delaware Law.
(d) The rights and authority conferred herein shall not be exclusive of
any other right that any person may otherwise have or hereafter acquire.
(e) Neither the amendment nor repeal of this Section 9, nor the adoption
of any provision of this Certificate of Incorporation or the bylaws of the
corporation, nor, to the fullest extent permitted by Delaware Law, any
modification of law, shall eliminate or reduce the effect of this Section 9 in
respect of any acts or omissions occurring prior to such amendment, repeal,
adoption or modification.
10. The Corporation reserves the right to amend this Certificate of
Incorporation in any manner permitted by Delaware Law and, except as otherwise
provided in Section 10, all rights and powers conferred herein on stockholders,
directors and officers, if any, are subject to this reserved power.
I, the undersigned incorporator, for the purpose of forming a
corporation pursuant to the Delaware
<PAGE>
General Corporation Law, do execute this Certificate, and do certify that
this is my act and deed and the facts herein stated are true, and accordingly
have hereunto set my hand on _________________, 1999.
---------------------------------
James A. Mercer III, Incorporator
<PAGE>
EXHIBIT C
---------
BYLAWS
of
TERAGLOBAL COMMUNICATIONS CORPORATION
A Delaware Corporation
* * * * *
ARTICLE I
Offices
Section 1.1 PRINCIPAL OFFICE. The Board of Directors shall fix the
location of the principal executive office of the corporation at any place
within or outside the State of Delaware.
Section 1.2 OTHER OFFICES. The Board of Directors may establish branch
or subordinate offices at any time at any place or places.
ARTICLE II
Stockholders
Section 2.1 TIME AND PLACE OF MEETINGS. All meetings of stockholders
shall be held at such place, either within or without the state of Delaware, on
such date and at such time as may be determined from time to time by the Board
of Directors.
Section 2.2 ANNUAL MEETINGS. Annual meetings of stockholders shall be
held to elect a Board of Directors and transact such other businesses that may
be properly brought before the meeting.
Section 2.3 SPECIAL MEETINGS. Special meetings of stockholders may be
called by the Board of Directors, the Chairman of the Board or the President.
Section 2.4 NOTICE OF MEETINGS. Whenever stockholders are required or
permitted to take any action at a meeting, a written notice of the meeting shall
be given which shall state the place, date and hour of the meeting, and, in the
case of a special meeting, the purpose or purposes for which the meeting is
called. Unless otherwise provided by applicable law, the Certificate of
Incorporation or these bylaws, the written notice of any meeting shall be given
no less than ten (10) nor more than sixty (60) days before the date of the
meeting to each stockholder entitled to vote at such meeting. If mailed, such
notice shall be deemed to be given when deposited in the United States mail,
first-class, postage prepaid, directed to the stockholder at his address as it
appears on the records of the corporation.
Section 2.5 RECORD DATE. In order that the corporation may determine
the stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or 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 stock or for the purpose of any
other lawful action, the Board of Directors may fix a record date, which record
date shall not precede the date upon which the resolution fixing the record date
is adopted by the Board of Directors and which record date: in the case of
determination of stockholders entitled to vote at any meeting of stockholders or
adjournment
<PAGE>
thereof, shall, unless otherwise required by law, not be more than sixty (60)
nor less than ten (10) days before the date of such meeting, in the case of
determination of stockholders entitled to express consent to corporate action
in writing without a meeting, shall not be more than ten (10) days after the
date upon which the resolution fixing the record date is adopted by the Board
of Directors; and in the case of any other action, shall not be more than
sixty (60) days prior to such other action. If no record date is fixed: (i)
the record date for determining stockholders entitled to notice of or to vote
at a meeting of stockholders shall be at the close of business on the day
next preceding the day on which notice is given, or, if notice is waived, at
the close of business on the day next preceding the day on which the meeting
is held; (ii) the record date for determining stockholders entitled to
express consent to corporate action in writing without a meeting, when no
prior action of the Board of Directors is required by law, shall be the first
date on which a signed written consent setting forth the action taken or
proposed to be taken is delivered to the corporation in accordance with
applicable law, or, if prior action by the Board of Directors is rquired by
law, such record date shall be at the close of business on the day on which
the Board of Directors adopts the resolution taking such prior action; and
(iii) the record date for determining stockholders for any other purpose
shall be at the close of business on the day on which the Board of Directors
adopts the resolution relating thereto. A determination of stockholders of
record entitled to notice of or to vote at a meeting of stockholders shall
apply to any adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
Section 2.6 CONDUCT AT MEETINGS. The Chairman of the Board of
Directors, or such other person as the Board of Directors may select, shall
preside as chairman of any meeting of stockholders. The chairman of a meeting
of stockholders shall designate a secretary for such meeting, who shall take and
keep or cause to be taken and kept minutes of the proceedings thereof. The
conduct of all meetings of stockholders shall at all times be within the
discretion of the chairman of the meeting and shall be conducted under such
rules as he or she may prescribe.
Section 2.7 ADJOURNMENTS. Any meeting of stockholders may be adjourned
from time to time to reconvene at the same or some other place, and notice need
not be given of any such adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the adjourned
meeting the corporation may transact any business which might have been
transacted at the original meeting. 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. At the adjourned
meeting, the corporation may transact any business, which might have been
transacted at the original meeting.
Section 2.8 QUORUM. Unless otherwise provided under the certificate of
incorporation or these bylaws, and subject to Delaware law, the presence, in
person or by Proxy, of the holders of majority of the votes entitled to be cast
by the stockholders entitled to vote generally, present, in person, or by Proxy,
shall constitute a quorum for the transaction of business at any meeting of the
stockholders; provided that in the case of any vote to be taken by classes, the
holders of majority of the vote entitled to be cast by the stockholders of a
particular class shall constitute a quorum for the transaction of business by
such class.
Section 2.9 VOTING. Except as otherwise provided by the certificate of
incorporation, each stockholder entitled to vote at any meeting of stockholders
shall be entitled to one vote for each share of stock held by him or her which
has voting power upon the matter in question. Except with respect to the
election of directors, voting at meetings of stockholders need not be by written
ballot. Directors shall be elected by a plurality of the votes of the shares
present in person or by proxy at the meeting and entitled to vote on the
election of directors. Except as otherwise provided in the certificate of
incorporation or these bylaws, in all matters other than the election of
directors, the affirmative vote of the majority of shares present in person or
by proxy at the meeting and entitled to vote on the subject matter shall be the
act of the stockholders.
Section 2.10 PROXIES. Each stockholder entitled to vote at a meeting of
stockholders may authorize another person or persons to act for him or her by
proxy, but no such proxy shall be voted or acted upon after three (3) 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 may revoke any proxy, which is not
irrevocable, by attending the meeting and voting in person or by filing an
instrument in writing revoking the proxy or another duly executed proxy bearing
a later date with the secretary of the corporation.
<PAGE>
Section 2.11 INSPECTOR OF ELECTIONS. 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. If no inspector is able to act at a
meeting of stockholders, the person presiding at the meeting shall appoint one
or more inspectors to act at the meeting. Each inspector, before entering upon
the discharge of the duties of inspector, shall take and sign an oath faithfully
to execute the duties of inspector with strict impartiality and according to the
best of such inspector's ability. The inspectors shall: (1) ascertain the
number of shares outstanding and the voting power of each; (2) determine the
shares represented at a meeting and the validity of proxies and ballots; (3)
count all votes and ballots; (4) determine and retain for a reasonable period a
record of the disposition of any challenges made to any determination by the
inspectors; and (5) certify their determination of the number of shares
represented at the meeting and their count of all votes and ballots. 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 the inspectors thereto,
shall accept changes after the closing of the polls.
Section 2.12 STOCKHOLDERS LIST. The secretary shall prepare and make, at
least ten (10) days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at the meeting, arranged in alphabetical order,
and showing the address of each stockholder and the number of shares registered
in the name of each stockholder. Such list shall be open to the examination of
any stockholder, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least ten (10) days prior to the meeting,
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or, if not so specified, at the
place where the meeting is to be held. The list shall also be produced and kept
at the time and place of the meeting during the whole time thereof and may be
inspected by any stockholder who is present. Upon the willful neglect or
refusal of the directors to produce such a list at any meeting for the election
of directors, they shall be ineligible for election to any office at such
meeting. The stock ledger of the corporation shall be the only evidence as to
who are the stockholders entitled to examine the stock ledger, the list of
stockholders required by this Section or the books of the corporation, or to
vote in person or by proxy at any meeting of stockholders.
Section 2.13 ACTION BY CONSENT OF STOCKHOLDERS. Unless otherwise
provided in the certificate of incorporation, any action required or permitted
to be taken at any annual or special meeting of the stockholders may be taken
without a meeting, without prior notice and without a vote, if a consent or
consents in writing, setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted, and shall be
delivered to the corporation by delivering to its registered office in Delaware,
its principal place of business, or an officer or an agent of the corporation
having custody of the ? in which proceedings of shareholders are recorded.
Delivery made to the corporations registered office shall be by hand or
certified or registered mail, return receipt requested. Prompt notice of the
taking of the corporate action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not consented in writing
and who, if the action had been taken at a meeting, would have been entitled to
notice of the meeting if the record date for such meeting had been the date that
written consents signed by a sufficient number of stockholders to take the
action were delivered to the corporation as provided by applicable law.
Section 2.14 ORGANIZATION. At each meeting a stockholders, the Chairman
of the Board, if one shall of been elected, (or in the absence of, or if one
shall of not been elected, the Chief Executive Officer) shall act as Chairman of
the meeting. The secretary, (or in his absence or inability to act, the person
whom the chairman of the meeting shall appoint as the secretary of the meeting)
shall act as secretary of the meeting and keep the minutes thereof. The order
of business at all meetings of stockholders shall be as determined by the
chairman of the meeting.
ARTICLE III
Board of Directors
Section 3.1 POWERS. Except as provided under applicable law, in the
certificate of incorporation and these bylaws, the business and affairs of the
corporation shall be managed and all corporate powers shall be exercised by or
under the direction of the Board of Directors.
<PAGE>
Section 3.2 NUMBER; QUALIFICATIONS. The Board of Directors shall
consist of one or more members, the number thereof to be determined from time to
time by resolution of the Board of Directors; provided, however, that no
reduction in the authorized number of directors shall have the effect of
removing any director before the expiration of his or her term of office.
Directors need not be stockholders.
Section 3.3 ELECTION RESIGNATION; REMOVAL. At each annual meeting of
stockholders, the stockholders shall elect directors each of whom shall hold
office until the next annual meeting of stockholders or until his or her
successor is elected and qualified or until his or her earlier resignation or
removal.
Section 3.4 RESIGNATION. Any director may resign at any time upon
written notice to the Board of Directors or the secretary of the corporation.
Section 3.5 REMOVAL. Any director may be removed, with or without
cause, by the holders of a majority of the shares then entitled to vote at an
election of directors, subject to any restrictions imposed by applicable law.
Section 3.6 VACANCIES. Any newly created directorship or any vacancy
occurring in the Board of Directors for any cause may be filled by a majority of
the remaining members of the Board of Directors, although such majority is less
than a quorum, or by a plurality of the votes cast at a meeting of stockholders,
and each director so elected shall hold office until the expiration of the term
of office of the director whom he has replaced or until his successor is elected
and qualified or until his or her earlier resignation or removal. Whenever the
holders of any class or classes of stock or series thereof are entitled to elect
one or more directors by the Certificate of Incorporation, vacancies and newly
created directorships of such class or classes or series may be filled by a
majority of directors elected by such class or classes or series thereof then in
office or by a sole remaining Director so elected. Each Director so chosen
shall hold office until his successor is elected and qualified, or until earlier
death, registration or removal. If there are no Directors in office, then an
election of Directors may be held in accordance with Delaware law.
Section 3.7 ANNUAL MEETING. The Board of Directors shall meet for the
purpose of organization, the election of officers and the transaction of other
business, as soon as practical after each annual meeting of stockholders, on the
same day and at the same place where such annual meetings shall be held. Notice
of such meeting need not be given. In the event that such annual meeting is not
so held the annual meeting of the Board of Directors may be held at such place
either within or without the state of Delaware, on such date and at such time
this will be specified in a notice thereof given as provided in section VII of
this article or in a waiver of notice signed by any director who chooses to
waive the requirement of notice.
Section 3.8 REGULAR MEETINGS. Regular meetings of the Board of
Directors may be held at such places within or without the State of Delaware and
at such times as the Board of Directors may from time to time determine, and if
so determined, notices thereof need not be given; provided, however, that any
director not participating in such determination shall receive prompt notice of
such determination.
Section 3.9 SPECIAL MEETINGS. Special meetings of the Board of
Directors may be held at any time or place within or without the State of
Delaware whenever called by the President, any Vice President, the Secretary, or
by any member of the Board of Directors. Notice of a special meeting of the
Board of Directors shall be given to each director at least twenty-four (24)
hours before the special meeting in such manner, as is determined by the Board
of Directors.
Section 3.10 COMMITTEES. The Board of Directors may, by resolution
passed by a majority of the whole Board of Directors (including vacancies),
designate one or more committees, each committee to consist of one or more of
the directors of the corporation. The Board of Directors may designate one or
more directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he, she
or they constitute a quorum, may unanimously appoint another member of the Board
of Directors to act at the meeting in place of any such absent or disqualified
member. Any such committee, to the extent permitted by applicable law and to
the extent provided in a resolution of the Board of Directors, shall have and
may exercise all the powers and authority of the Board of
<PAGE>
Directors in the management of the business and affairs of the corporation,
and may authorize the seal of the corporation to be affixed to all papers
which may require it.
Section 3.11 TELEPHONIC MEETINGS PERMITTED. Members of the Board of
Directors, or any committee designated by the Board of Directors, may
participate in a meeting thereof by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
bylaw shall constitute presence in person at such meeting.
Section 3.12 QUORUM; VOTE REQUIRED FOR ACTION. At all meetings of the
Board of Directors a majority of the whole Board of Directors (including
vacancies) shall constitute a quorum for the transaction of business. Except in
cases in which the certificate of incorporation or these bylaws otherwise
provide, the vote of a majority of the directors present at a meeting at which a
quorum is present shall be the act of the Board of Directors.
Section 3.13 ORGANIZATION. Meetings of the Board of Directors shall be
presided over by the Chairman of the Board, if any, or in his absence by the
Vice Chairman of the Board, if any, or in his absence by the President, or in
their absence by a chairman chosen at the meeting. The secretary shall act as
secretary of the meeting, but in his absence the chairman of the meeting may
appoint any person to act as secretary of the meeting.
Section 3.14 ADJOURNMENTS. Any meeting of the Board of Directors at
which a quorum is initially present may be adjourned to another time and place
by the Board of Directors without notice; provided, however, that if such
meeting is adjourned for more than forty-eight (48) hours, notice shall be given
as provided in Section 3.5 above.
Section 3.15 ACTION BY CONSENT OF DIRECTORS. Unless otherwise restricted
by the 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 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 or such committee.
Section 3.16 RIGHTS OF INSPECTION. Any director shall have the right to
examine the corporation's stock ledger, a list of its stockholders and its other
books and records for a purpose reasonably related to the director's position as
a director.
Section 3.17 COMPENSATION OF DIRECTORS. Unless otherwise restricted by
the certificate of incorporation or these bylaws, the Board of Directors shall
have the authority to fix the compensation of directors. The directors may be
paid their expenses, if any, of attendance at each meeting of the Board of
Directors and may be paid a fixed sum for attendance at each meeting of the
Board of Directors or a stated salary as director. No such payment shall
preclude any director from serving the corporation in any other capacity and
receiving compensation therefor. Members of committees of the Board of
Directors may be allowed like compensation for attending committee meetings.
Unless the Board of Directors otherwise provides, each committee designated by
the Board of Directors may make, alter and repeal rules for the conduct of its
business. In the absence of such rules each committee shall conduct its
business in the same manner as the Board of Directors conducts its business
pursuant to Article II of these bylaws.
ARTICLE IV
Officers
Section 4.1 PRINCIPAL OFFICERS. The principal officers of the
Corporation shall be a chief executive officer, a president, one or more vice
presidents, a treasurer and a secretary who shall have the duty, among other
things, to record the proceedings of the meetings of stockholders and directors
in a book kept for that purpose. The Corporation may also have such other
principal officers, including a chairman, a vice chairman or one or more
controllers, as the Board of Directors may in its discretion appoint. One person
may hold the offices and perform the duties of any two or more of said offices,
except that no one person shall hold the offices and perform the duties of
president and secretary.
Section 4.2 ELECTION, TERM OF OFFICE AND REMUNERATION. The principal
officers of the Corporation
<PAGE>
shall be elected annually by the Board of Directors at the annual meeting
thereof. Each such officer shall hold office until his successor is elected
and qualified, or until his earlier death, resignation or removal. The
remuneration of all officers of the Corporation shall be fixed by the Board
of Directors. Any vacancy in any office shall be filled in such manner as the
Board of Directors shall determine.
Section 4.3 SUBORDINATE OFFICERS. In addition to the principal officers
enumerated in Section 1 of this Article 4, the corporation may have one or
more assistant treasurers, assistant secretaries and assistant controllers and
such other subordinate officers, agents and employees as the Board of Directors
may deem necessary, each of whom shall hold office for such period as the Board
of Directors may from time to time determine. The Board of Directors may
delegate to any principal officer the power to appoint and to remove any such
subordinate officers, agents or employees.
Section 4.4 REMOVAL. Except as otherwise permitted with respect to
subordinate officers, any officer may be removed, with or without cause, at any
time, by the Board of Directors.
Section 4.5 RESIGNATIONS. Any officer may resign at any time by giving
written notice to the Board of Directors (or to a principal officer if the Board
of Directors has delegated to such principal officer the power to appoint and to
remove such officer). The resignation of any officer shall take effect upon
receipt of notice thereof or at such later time as shall be specified in such
notice; and unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 4.6 POWERS AND DUTIES. The officers of the Corporation shall
have such powers and perform such duties incident to each of their respective
offices and such other duties as may from time to time be conferred upon or
assigned to them by the Board of Directors.
ARTICLE V
Stock
Section 5.1 CERTIFICATES. Every holder of stock shall be entitled to
have a certificate signed by or in the name of the corporation by the Chairman
or Vice Chairman of the Board of Directors, if any, or the President or a Vice
President, and by the Treasurer or an Assistant Treasurer, or the Secretary or
an Assistant Secretary, of the corporation, certifying the number of shares
owned by him or her in the corporation. Any of or all 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 shall have ceased to be such officer, transfer agent, or registrar
before such certificate is issued, such certificate may be issued by the
corporation with the same effect as if he or she were such officer, transfer
agent, or registrar at the date of issue.
Section 5.2 LOST, STOLEN OR DESTROYED STOCK CERTIFICATES; ISSUANCE OF
NEW CERTIFICATES ISSUANCE OF NEW CERTIFICATES. The corporation may issue a new
certificate in the place of any certificate theretofore issued by it and alleged
to have been lost, stolen or destroyed, and the corporation may require the
owner of the lost, stolen or destroyed certificate, or his or her legal
representative, to give the corporation a bond sufficient to indemnify it
against any claim that may be made against it on account of the alleged loss,
theft or destruction of any such certificate or the issuance of such new
certificate.
ARTICLE VI
MISCELLANEOUS
Section 6.1 FISCAL YEAR. The fiscal year of the corporation shall be
determined by resolution of the Board of Directors
Section 6.2 SEAL. The corporate seal shall have the name of the
corporation inscribed thereon and shall be in such form as may be approved from
time to time by the Board of Directors.
Section 6.3 STOCKHOLDERS RIGHTS OF INSPECTION. Any stockholder, in
person or by attorney or other agent, shall, for any purpose reasonably related
to such person's interest as a stockholder and upon written demand under oath
stating such purpose, have the right during usual business hours to inspect the
corporation's stock ledger,
<PAGE>
a list of its stockholders, and its other books and records, and to make
copies or extracts therefrom. In every instance where an attorney or other
agent shall be the person who seeks the right to inspection, the demand under
oath shall be accompanied by a power of attorney or such other writing which
authorizes the attorney or other agent to so act on behalf of the stockholder.
Section 6.4 CORPORATE RECORDS. The secretary of the corporation, or
such other officer as the Board of Directors may direct, shall keep or cause to
be kept, at the principal executive office of the corporation or at such other
place as the Board of Directors may direct, a book of minutes of all meetings
and actions of the Board of Directors, committees of the Board of Directors and
stockholders. The minutes shall state the time and place of the meeting,
whether regular or special, the notice given (if any) and the proceedings of the
meeting. In the case of a meeting of the Board of Directors or a committee
thereof, the minutes shall state the names of those present at the meeting. In
the case of a meeting of stockholders, the minutes shall state the number of
shares represented at the meeting in person or by proxy. The secretary of the
corporation, or such other officer as the Board of Directors may direct, shall
keep or cause to be kept, at the principal executive office of the corporation
or at the office of the corporation's transfer agent or registrar or at such
other place as the Board of Directors may direct, a stock ledger showing the
names of all stockholders and their addresses, the number and classes of stock
held by each, the number and date of the certificate(s) evidencing such stock,
and the number and date of cancellation of every certificate surrendered for
cancellation. Any records maintained by the corporation in the regular course
of its business, including its stock ledger, books of account, and minute books,
may be kept on, or be in the form of, punch cards, magnetic tape, photographs,
microphotographs, or any other information storage device, provided that the
records so kept can be converted into clearly legible form within a reasonable
time. The corporation shall so convert any records so kept upon the request of
any person entitled to inspect the same.
Section 6.5 WAIVER OF NOTICE OF MEETINGS OF STOCKHOLDERS, DIRECTORS AND
COMMITTEES. Any written waiver of notice, signed by the person entitled to
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 because 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.
Section 6.6 INTERESTED DIRECTOR TRANSACTIONS. No contract or
transaction between the corporation and one or more of its directors or
officers, or between the corporation and any other corporation, partnership,
association, or other organization in which one or more of its directors or
officers are directors or officers, or have a financial interest, shall be void
or voidable solely for this reason, or solely because the director or officer is
present at or participates in the meeting of the Board of Directors or committee
thereof which authorizes the contract or transaction, or solely because his, her
or their votes are counted for such purpose, if: (i) the material facts as to
his or her relationship or interest and as to the contract or transaction are
disclosed or are known to the Board of Directors or the committee, and the Board
of Directors or committee in good faith authorizes the contract or transaction
by the affirmative votes of a majority of the disinterested directors, even
though the disinterested directors be less than a quorum; (ii) the material
facts as to his or her relationship or interest and as to the contract or
transaction are disclosed or are known to the stockholders entitled to vote
thereon, and the contract or transaction is specifically approved in good faith
by vote of the stockholders; (iii) the contract or transaction is fair as to the
corporation as of the time it is authorized, approved or ratified by the Board
of Directors, a committee thereof, or the stockholders. Common or interested
directors may be counted in determining the presence of a quorum at a meeting of
the Board of Directors or of a committee, which authorizes the contract or
transaction.
Section 6.7 REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The
President or any other officer or officers authorized by the Board of Directors
or the President are each authorized to vote, represent, and exercise on behalf
of the corporation all rights incident to any and all shares of any other
corporation or corporations held by the corporation. The authority herein
granted may be exercised either by any such officer in person or by any other
person authorized so to do by proxy or power of attorney duly executed by said
officer.
<PAGE>
Section 6.8 AMENDMENT OF BYLAWS. These bylaws or any of them may be
altered or repealed, and new bylaws made, by the stockholders entitled to vote
thereon at any annual special meeting there or by the Board of Directors.<PAGE>
<PAGE>
EXHIBIT D
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TERAGLOBAL COMMUNICATIONS CORP.
1999 STOCK OPTION PLAN
1. PURPOSE. This Stock Option Plan (the "Plan") a is intended to serve
as an incentive to, and to encourage stock ownership by, certain eligible
participants rendering services to TeraGlobal Communications Corp., a Wyoming
corporation (the "Corporation"), and certain affiliates as set forth below, so
that they may acquire or increase their proprietary interest in the Corporation.
2. ADMINISTRATION.
2.1 COMMITTEE. The Plan shall be administered by the Board of
Directors of the Corporation (the "Board of Directors") or a committee of two or
more members appointed by the Board of Directors (the "Committee") who are
members of the Board of Directors. The Committee shall select one of its
members as Chairman and shall appoint a Secretary, who need not be a member of
the Committee. The Committee shall hold meetings at such times and places as it
may determine and minutes of such meetings shall be recorded. Acts by a
majority of the Committee in a meeting at which a quorum is present and acts
approved in writing by a majority of the members of the Committee shall be valid
acts of the Committee.
2.2 TERM. If the Board of Directors selects a Committee, the members
of the Committee shall serve on the Committee for the period of time determined
by the Board of Directors and shall be subject to removal by the Board of
Directors at any time. The Board of Directors may terminate the function of the
Committee at any time and resume all powers and authority previously delegated
to the Committee.
2.3 AUTHORITY. The Committee shall have sole discretion and
authority to grant options under the Plan to eligible participants rendering
services to the Corporation or any "parent" or "subsidiary" of the Corporation
("Parent or Subsidiary"), as defined in Section 424 of the Internal Revenue Code
of 1986, as amended (the "Code"), at such times, under such terms and in such
amounts as it may decide. For purposes of this Plan and any Stock Option
Agreement (as defined below), the term "Corporation" shall include any Parent or
Subsidiary, if applicable. Subject to the express provisions of the Plan, the
Committee shall have complete authority to interpret the Plan, to prescribe,
amend and rescind the rules and regulations relating to the Plan, to determine
the details and provisions of any Stock Option Agreement, to accelerate any
options granted under the Plan and to make all other determinations necessary or
advisable for the administration of the Plan.
2.4 TYPE OF OPTION. The Committee shall have full authority and
discretion to determine, and shall specify, whether the eligible individual will
be granted options intended to qualify as incentive options under Section 422 of
the Code ("Incentive Options") or options which are not intended to qualify
under Section 422 of the Code ("Non-Qualified Options"); provided, however, that
Incentive Options shall only be granted to employees of the Corporation,
<PAGE>
or a Parent or Subsidiary thereof, and shall be subject to the special
limitations set forth herein attributable to Incentive Options.
2.5 INTERPRETATION. The interpretation and construction by the
Committee of any provisions of the Plan or of any option granted under the Plan
shall be final and binding on all parties having an interest in this Plan or any
option granted hereunder. No member of the Committee shall be liable for any
action or determination made in good faith with respect to the Plan or any
option granted under the Plan.
3. ELIGIBILITY.
3.1 GENERAL. All directors, officers, employees of and certain
persons rendering services to the Corporation, or any Parent or Subsidiary,
relative to the Corporation's, or any Parent's or Subsidiaries', management,
operation or development shall be eligible to receive options under the Plan.
The selection of recipients of options shall be within the sole and absolute
discretion of the Committee. No person shall be granted an option under this
Plan unless such person has executed the grant representation letter set forth
on Exhibit "A," as such Exhibit may be amended by the Committee from time to
time and no person shall be granted an Incentive Option under this Plan unless
such person is an employee of the Corporation, or a Parent or Subsidiary, on the
date of grant.
3.2 TERMINATION OF ELIGIBILITY.
3.2.1 If an optionee ceases to be employed by the
Corporation, or its Parent or Subsidiary, is no longer an officer or member of
the Board of Directors of the Corporation or no longer performs services for the
Corporation, or its Parent or Subsidiary for any reason (other than for "cause,"
as hereinafter defined, or such optionee's death), any option granted hereunder
to such optionee shall expire 90 days after the date of the occurrence giving
rise to such termination of eligibility (or 1 year in the event an optionee is
"disabled," as defined in Section 22(e)(3) of the Code) or upon the date it
expires by its terms, whichever is earlier. Any option that has not vested in
the optionee as of the date of such termination shall immediately expire and
shall be null and void. The Committee shall, in its sole and absolute
discretion, decide whether an authorized leave of absence or absence for
military or governmental service, or absence for any other reason, shall
constitute termination of eligibility for purposes of this Section.
3.2.2 If an optionee ceases to be employed by the
Corporation, or its Parent or Subsidiary, is no longer an officer or member of
the Board of Directors of the Corporation, or no longer performs services for
the Corporation, or its Parent or Subsidiary and such termination is as a result
of "cause," as hereinafter defined, then all options granted hereunder to such
optionee shall expire on the date of the occurrence giving rise to such
termination of eligibility or upon the date it expires by its terms, whichever
is earlier, and such optionee shall have no rights with respect to any
unexercised options. For purposes of this Plan, "cause" shall mean an
optionee's personal dishonesty, misconduct, breach of fiduciary duty,
incompetence, intentional failure to perform stated obligations, willful
violation of any law, rule,
<PAGE>
regulation or final cease and desist order, or any material breach of any
provision of this Plan, any Stock Option Agreement or any employment
agreement.
3.3 DEATH OF OPTIONEE AND TRANSFER OF OPTION. In the event an
optionee shall die, an option may be exercised (subject to the condition that no
option shall be exercisable after its expiration and only to the extent that the
optionee's right to exercise such option had accrued at the time of the
optionee's death) at any time within six months after the optionee's death by
the executors or administrators of the optionee or by any person or persons who
shall have acquired the option directly from the optionee by bequest or
inheritance. Any option that has not vested in the optionee as of the date of
death or termination of employment, whichever is earlier, shall immediately
expire and shall be null and void. No option shall be transferable by the
optionee other than by will or the laws of intestate succession.
3.4 LIMITATION ON OPTIONS. No person shall be granted any Incentive
Option to the extent that the aggregate fair market value of the Stock (as
defined below) to which such options are exercisable for the first time by the
optionee during any calendar year (under all plans of the Corporation as
determined under Section 422(d) of the Code) exceeds $100,000.
4. IDENTIFICATION OF STOCK. The Stock, as defined herein, subject to the
options shall be shares of the Corporation's authorized but unissued or acquired
or reacquired common stock (the "Stock"). The aggregate number of shares
subject to outstanding options shall not exceed 1,500,000 shares of Stock
(subject to adjustment as provided in Section 6). If any option granted
hereunder shall expire or terminate for any reason without having been exercised
in full, the unpurchased shares subject thereto shall again be available for
purposes of this Plan.
5. TERMS AND CONDITIONS OF OPTIONS. Any option granted pursuant to the
Plan shall be evidenced by an agreement ("Stock Option Agreement") in such form
as the Committee shall from time to time determine, which agreement shall comply
with and be subject to the following terms and conditions:
5.1 NUMBER OF SHARES. Each option shall state the number of shares
of Stock to which it pertains.
5.2 OPTION EXERCISE PRICE. Each option shall state the option
exercise price, which shall be determined by the Committee; provided, however,
that (i) the exercise price of any Incentive Option shall not be less than the
fair market value of the Stock, as determined by the Committee, on the date of
grant of such option, (ii) the exercise price of any Incentive Option granted to
an employee who owns more than 10% of the total combined voting power of all
classes of the Corporation's stock, as determined for purposes of Section 422 of
the Code, shall not be less than 110% of the fair market value of the Stock, as
determined by the Committee, on the date of grant of such option, and (iii) the
exercise price of any Non-Qualified Option shall not be less than _____% of the
fair market value of the Stock, as determined by the Committee, on the date of
grant of such option.
<PAGE>
5.3 TERM OF OPTION. The term of an option granted hereunder shall be
determined by the Committee at the time of grant, but shall not exceed ten years
from the date of the grant. The term of any Incentive Option granted to an
employee who owns more than 10% of the total combined voting power of all
classes of the Corporation's stock, as determined for purposes of Section 422 of
the Code, shall in no event exceed five years from the date of grant. All
options shall be subject to early termination as set forth in this Plan. In no
event shall any option be exercisable after the expiration of its term.
5.4 METHOD OF EXERCISE. An option shall be exercised by written
notice to the Corporation by the optionee (or successor in the event of death)
and execution by the optionee of an exercise representation letter in the form
set forth on Exhibit "B," as such Exhibit may be amended by the Committee from
time to time. Such written notice shall state the number of shares with respect
to which the option is being exercised and designate a time, during normal
business hours of the Corporation, for the delivery thereof ("Exercise Date"),
which time shall be at least 30 days after the giving of such notice unless an
earlier date shall have been mutually agreed upon. At the time specified in the
written notice, the Corporation shall deliver to the optionee at the principal
office of the Corporation, or such other appropriate place as may be determined
by the Committee, a certificate or certificates for such shares.
Notwithstanding the foregoing, the Corporation may postpone delivery of any
certificate or certificates after notice of exercise for such reasonable period
as may be required to comply with any applicable listing requirements of any
securities exchange. In the event an option shall be exercisable by any person
other than the optionee, the required notice under this Section shall be
accompanied by appropriate proof of the right of such person to exercise the
option.
5.5 MEDIUM AND TIME OF PAYMENT. The option exercise price shall be
payable in full on or before the option Exercise Date in any one of the
following alternative forms:
5.5.1 Full payment in cash or certified bank or cashier's
check;
5.5.2 A Promissory Note (as defined below);
5.5.3 Full payment in shares of Stock having a fair market
value on the Exercise Date in the amount equal to the option exercise price;
5.5.4 A combination of the consideration set forth in
Sections 5.5.1, 5.5.2 and 5.5.3 equal to the option exercise price; or
5.5.5 Any other method of payment complying with the
provisions of Section 422 of the Code with respect to Incentive Options,
including, but not limited to, the delivery by optionee of an irrevocable
direction to a securities broker approved by the Corporation to sell the Stock
and to deliver all or part of the sales proceeds to the Corporation in payment
of all or part of the exercise price and any withholding taxes provided that the
terms of payment are established by the Committee at the time of grant and any
other method of payment established by the Committee with respect to
Non-Qualified Options.
<PAGE>
5.6 FAIR MARKET VALUE. The fair market value of a share of Stock on
any relevant date shall be determined in accordance with the following
provisions:
5.6.1 If the Stock at the time is neither listed nor admitted
to trading on any stock exchange nor traded in the over-the-counter market, then
the fair market value shall be determined by the Committee after taking into
account such factors as the Committee shall deem appropriate.
5.6.2 If the Stock is not at the time listed or admitted to
trading on any stock exchange but is traded in the over-the-counter market, the
fair market value shall be the mean between the highest bid and lowest asked
prices (or, if such information is available, the closing selling price) of one
share of Stock on the date in question in the over-the-counter market, as such
prices are reported by the National Association of Securities Dealers through
its NASDAQ system or any successor system. If there are no reported bid and
asked prices (or closing selling price) for the Stock on the date in question,
then the mean between the highest bid price and lowest asked price (or the
closing selling price) on the last preceding date for which such quotations
exist shall be determinative of fair market value.
5.6.3 If the Stock is at the time listed or admitted to
trading on any stock exchange, then the fair market value shall be the closing
selling price of one share of Stock on the date in question on the stock
exchange determined by the Committee to be the primary market for the Stock, as
such price is officially quoted in the composite tape of transactions on such
exchange. If there is no reported sale of Stock on such exchange on the date in
question, then the fair market value shall be the closing selling price on the
exchange on the last preceding date for which such quotation exists.
5.7 PROMISSORY NOTE. Subject to the requirements of applicable state
or Federal law or margin requirements, payment of all or part of the purchase
price of the Stock may be made by delivery of a full recourse promissory note
("Promissory Note"). The Promissory Note shall be executed by the optionee,
made payable to the Corporation and bear interest at such rate as the Committee
shall determine, but in no case less than the minimum rate which will not cause
under the Code (i) interest to be imputed, (ii) original issue discount to
exist, or (iii) any other similar results to occur. Unless otherwise determined
by the Committee, interest on the Note shall be payable in quarterly
installments on March 31, June 30, September 30 and December 31 of each year. A
Promissory Note shall contain such other terms and conditions as may be
determined by the Committee; provided, however, that the full principal amount
of the Promissory Note and all unpaid interest accrued thereon shall be due not
later than five years from the date of exercise. The Corporation may obtain
from the optionee a security interest in all shares of Stock issued to the
optionee under the Plan for the purpose of securing payment under the Promissory
Note and shall retain possession of the stock certificates representing such
shares in order to perfect its security interest.
5.8 RIGHTS AS A SHAREHOLDER. An optionee or successor shall have no
rights as a shareholder with respect to any Stock underlying any option until
the date of the issuance to such optionee of a certificate for such Stock. No
adjustment shall be made for dividends
<PAGE>
(ordinary or extraordinary, whether in cash, securities or other property) or
distributions or other rights for which the record date is prior to the date
such Stock certificate is issued, except as provided in Section 6.
5.9 MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. Subject to the
terms and conditions of the Plan, the Committee may modify, extend or renew
outstanding options granted under the Plan, or accept the surrender of
outstanding options (to the extent not exercised) and authorize the granting of
new options in substitution therefor.
5.10 OTHER PROVISIONS. The Stock Option Agreements shall contain such
other provisions, including without limitation, restrictions or conditions upon
the exercise of options, as the Committee shall deem advisable.
6. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.
6.1 SUBDIVISION OR CONSOLIDATION. Subject to any required action by
shareholders of the Corporation, the number of shares of Stock covered by each
outstanding option, and the exercise price thereof, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Stock of
the Corporation resulting from a subdivision or consolidation of shares or the
payment of a stock dividend (but only on the Stock) or any other increase or
decrease in the number of such shares effected without receipt of consideration
by the Corporation. Any fraction of a share subject to option that would
otherwise result from an adjustment pursuant to this Section shall be rounded
downward to the next full number of shares without other compensation or
consideration to the holder of such option.
6.2 CAPITAL TRANSACTIONS. Upon a sale or exchange of all or
substantially all of the assets of the Corporation, a merger or consolidation in
which the Corporation is not the surviving corporation, a merger, reorganization
or consolidation in which the Corporation is the surviving corporation and
shareholders of the Corporation exchange their stock for securities or property,
a liquidation of the Corporation or similar transaction ("Capital Transaction"),
this Plan and each option issued under this Plan, whether vested or unvested,
shall terminate immediately prior to such Capital Transaction, unless such
options are assumed by a successor corporation in a merger or consolidation;
provided, however, that unless the outstanding options are assumed by a
successor corporation in a merger or consolidation, subject to terms approved by
the Committee, all optionees will have the right, during the 30 days prior to
such Capital Transaction, to exercise all vested options. In the event there is
a merger or consolidation where the Corporation is not the surviving
corporation, all options granted under this Plan shall vest 30 days prior to
such merger or consolidation unless such options are assumed by the successor
corporation in such merger or consolidation. The Committee may (but shall not
be obligated to) (i) accelerate the vesting of any option or (ii) apply the
foregoing provisions, including but not limited to termination of this Plan and
any options granted pursuant to the Plan, in the event there is a sale of 50% or
more of the stock of the Corporation in any two-year period or a transaction
similar to a Capital Transaction.
6.3 ADJUSTMENTS. To the extent that the foregoing adjustments relate
to stock
<PAGE>
or securities of the Corporation, such adjustments shall be made by the
Committee, whose determination in that respect shall be final, binding and
conclusive.
6.4 ABILITY TO ADJUST. The grant of an option pursuant to the Plan
shall not affect in any way the right or power of the Corporation to make
adjustments, reclassifications, reorganizations or changes of its capital or
business structure or to merge, consolidate, dissolve, liquidate, sell or
transfer all or any part of its business or assets.
6.5 NOTICE OF ADJUSTMENT. Whenever the Corporation shall take any
action resulting in any adjustment provided for in this Section, the Corporation
shall forthwith deliver notice of such action to each optionee, which notice
shall set forth the number of shares subject to the option and the exercise
price thereof resulting from such adjustment.
6.6 LIMITATION ON ADJUSTMENTS. Any adjustment, assumption or
substitution of an Incentive Option shall comply with Section 425 of the Code,
if applicable.
7. NONASSIGNABILITY. Options granted under this Plan may not be sold,
pledged, assigned or transferred in any manner other than by will or by the laws
of intestate succession, and may be exercised during the lifetime of an optionee
only by such optionee. Any transfer by the optionee of any option granted under
this Plan in violation of this Section shall void such option and any Stock
Option Agreement entered into by the optionee and the Corporation regarding such
transferred option shall be void and have no further force or effect. No option
shall be pledged or hypothecated in any way, nor shall any option be subject to
execution, attachment or similar process.
8. NO RIGHT OF EMPLOYMENT. Neither the grant nor exercise of any option
nor anything in this Plan shall impose upon the Corporation or any other
corporation any obligation to employ or continue to employ any optionee. The
right of the Corporation and any other corporation to terminate any employee
shall not be diminished or affected because an option has been granted to such
employee.
9. TERM OF PLAN. This Plan is effective on the date the Plan is adopted
by the Board of Directors and options may be granted pursuant to the Plan from
time to time within a period of ten (10) years from such date, or the date of
any required shareholder approval required under the Plan, if earlier.
Termination of the Plan shall not affect any option theretofore granted.
10. AMENDMENT OF THE PLAN. The Board of Directors of the Corporation may,
subject to any required shareholder approval, suspend, discontinue or terminate
the Plan, or revise or amend it in any respect whatsoever with respect to any
shares of Stock at that time not subject to options.
11. APPLICATION OF FUNDS. The proceeds received by the Corporation from
the sale of Stock pursuant to options may be used for general corporate
purposes.
12. RESERVATION OF SHARES. The Corporation, during the term of this Plan,
<PAGE>
shall at all times reserve and keep available such number of shares of Stock as
shall be sufficient to satisfy the requirements of the Plan.
13. NO OBLIGATION TO EXERCISE OPTION. The granting of an option shall not
impose any obligation upon the optionee to exercise such option.
14. APPROVAL OF BOARD OF DIRECTORS AND SHAREHOLDERS. The Plan shall not
take effect until approved by the Board of Directors of the Corporation. This
Plan shall be approved by a vote of the shareholders within 12 months from the
date of approval by the Board of Directors. In the event such shareholder vote
is not obtained, all options granted hereunder, whether vested or unvested,
shall be null and void.
15. WITHHOLDING TAXES. Notwithstanding anything else to the contrary in
this Plan or any Stock Option Agreement, the exercise of any option shall be
conditioned upon payment by such optionee in cash, or other provisions
satisfactory to the Committee, of all local, state, federal or other withholding
taxes applicable, in the Committee's judgment, to the exercise or to later
disposition of shares acquired upon exercise of an option (including any
repurchase of an option or the Stock).
16. PARACHUTE PAYMENTS. Any outstanding option under the Plan may not be
accelerated to the extent any such acceleration of such option would, when added
to the present value of other payments in the nature of compensation which
becomes due and payable to the optionee would result in the payment to such
optionee of an excess parachute payment under Section 280G of the Code. The
existence of any such excess parachute payment shall be determined in the sole
and absolute discretion of the Committee.
17. SECURITIES LAWS COMPLIANCE. Notwithstanding anything contained
herein, the Corporation shall not be obligated to grant any option under this
Plan or to sell, issue or effect any transfer of any Stock unless such grant,
sale, issuance or transfer is at such time effectively (i) registered or exempt
from registration under the Act and (ii) qualified or exempt from qualification
under the California Corporate Securities Law of 1968 and any other applicable
state securities laws. As a condition to exercise of any option, each optionee
shall make such representations as may be deemed appropriate by counsel to the
Corporation for the Corporation to use any available exemption from registration
under the Act or any applicable state securities law.
18. RESTRICTIVE LEGENDS. The certificates representing the Stock issued
upon exercise of options granted pursuant to this Plan will bear the following
legends giving notice of restrictions on transfer under the Act and this Plan,
as follows:
(a) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED OR
TRANSFERRED IN A TRANSACTION WHICH WAS NOT REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, IN RELIANCE UPON AN EXEMPTION
AFFORDED BY SUCH ACT. NO SALE OR TRANSFER OF THESE SHARES SHALL
BE MADE, NO ATTEMPTED SALE OR TRANSFER SHALL BE
<PAGE>
VALID, AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE ANY EFFECT
TO ANY SUCH TRANSACTION UNLESS (A) SUCH TRANSACTION SHALL HAVE
BEEN DULY REGISTERED UNDER THE ACT OR (B) THE ISSUER SHALL HAVE
FIRST RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO IT THAT
SUCH REGISTRATION IS NOT REQUIRED.
(b) Any other legends required by applicable state securities laws as
determined by the Committee.
19. NOTICES. Any notice to be given under the terms of the Plan shall be
addressed to the Corporation in care of its Secretary at its principal office,
and any notice to be given to an optionee shall be addressed to such optionee at
the address maintained by the Corporation for such person or at such other
address as the optionee may specify in writing to the Corporation.
As adopted by the Board of Directors as of February 15, 1999.
TERAGLOBAL COMMUNICATIONS CORP., a
Wyoming corporation
By: /s/ DAVID FANN
--------------------------------
David Fann, Chief Executive Officer
<PAGE>
EXHIBIT A
____________, 1999
TeraGlobal Communications Corp.
225 Broadway, Suite 1600
San Diego, CA 92101
Re: 1999 STOCK OPTION PLAN
To Whom It May Concern:
This letter is delivered to TeraGlobal Communications Corp., a Wyoming
corporation (the "Corporation"), in connection with the grant to
______________________ (the "Optionee") of an option (the "Option") to purchase
__________ shares of common stock of the Corporation (the "Stock") pursuant to
the TeraGlobal Communications Corp. 1999 Stock Option Plan dated _______________
(the "Plan"). The Optionee understands that the Corporation's receipt of this
letter executed by the Optionee is a condition to the Corporation's willingness
to grant the Option to the Optionee.
The Optionee acknowledges that the grant of the Option by the Corporation
is in lieu of any and all other promises of the Corporation to the Optionee,
whether written or oral, express or implied, regarding the grant of options or
other rights to acquire Stock. Accordingly, in anticipation of the grant of the
Option, the Optionee hereby relinquishes all rights to such other rights, if
any, to acquire stock of the Corporation.
In addition, the Optionee makes the following representations and
warranties with the understanding that the Corporation will rely upon them in
the Corporation's determination of whether the grant of the Option meets the
requirements of the "private offering" exemption provided in Section 25102(f) of
the California Corporations Code and certain exemptions provided under the
Securities Act of 1933, as amended.
1. The Optionee acknowledges receipt of a copy of the Plan and Agreement.
The Optionee has carefully reviewed the Plan and Agreement.
2. The Option and the Stock will be acquired by the Optionee for
investment only,
EXHIBIT A - PAGE 10
<PAGE>
for the Optionee's own account, and not with a view to or for
sale in connection with any distribution of the Option or the Stock. The
Optionee will not take, or cause to be taken, any action which would cause the
Optionee, or any entity or person affiliated with the Optionee, to be deemed an
underwriter with respect to the Option or the Stock.
3. The Optionee either:
a. has a preexisting personal or business relationship with the
Corporation or any of its officers, directors or controlling persons of a nature
and duration as would allow the Optionee to be aware of the character, business
acumen, general business and financial circumstances of the Corporation or of
the person with whom such relationship exists; or
b. by reason of the Optionee's business or financial experience, or
the business or financial experience of the Optionee's professional advisor who
is unaffiliated with and is not compensated by the Corporation or any affiliate
or selling agent of the Corporation, directly or indirectly, the Optionee has
the capacity to protect the Optionee's interests in connection with the grant of
the Option and the purchase of the Stock.
4. The Optionee acknowledges that an investment in the Corporation
represents a speculative investment and a high degree of risk. The Optionee
acknowledges that the Optionee has had the opportunity to obtain and review all
information from the Corporation necessary to make a reasonably informed
investment decision and that the Optionee has had all questions asked of the
Corporation answered to the reasonable satisfaction of the Optionee. The
Optionee is able to bear the economic risk of an investment in the Option and
the Stock.
5. The grant of the Option has not been accompanied by the publication of
any advertisement.
6. The Optionee understands and acknowledges that the Stock has not been,
and will not be, registered under the Securities Act of 1933, as amended, or
qualified under the California Corporate Securities Law of 1968. The Optionee
understands and acknowledges that the Stock may not be sold without compliance
with the registration requirements of federal and applicable state securities
laws unless an exemption from such laws is available. The Optionee understands
that the certificate representing the Stock shall bear the legends set forth in
the Plan.
7. The Optionee understands and acknowledges that the Option and the
Stock are subject to the terms and conditions of the Plan.
8. The Optionee understands and agrees that, at the time of exercise of
any part of the Option for Stock, the Optionee may be required to provide the
Corporation with additional representations, warranties and/or covenants similar
to those contained in this letter.
EXHIBIT A - PAGE 11
<PAGE>
9. The Optionee is a resident of the State of ___________________________.
10. The Optionee will notify the Corporation immediately of any change in
the above information which occurs before the Option is exercised in full by the
Optionee.
The foregoing representations and warranties are given on ______________,
1999 at ____________________.
OPTIONEE:
EXHIBIT A - PAGE 12
<PAGE>
EXHIBIT B
____________, 1999
TeraGlobal Communications Corp.
225 Broadway, Suite 1600
San Diego, CA 92101
Re: 1999 STOCK OPTION PLAN
To Whom It May Concern:
I (the "Optionee") hereby exercise my right to purchase __________ shares
of common stock (the "Stock") of TeraGlobal Communications Corp., a Wyoming
corporation (the "Corporation"), pursuant to the TeraGlobal Communications Corp.
1999 Stock Option Plan dated ____________ (the "Plan") and the [Incentive] Stock
Option Agreement (the "Agreement") dated , 1999. As provided in
such Plan, I deliver herewith payment as set forth in the Plan in the amount of
the aggregate option exercise price. Please deliver to me at my address as set
forth above stock certificates representing the subject shares registered in my
name (and (SPOUSE) , as (STYLE OF VESTING)).
The Optionee hereby represents as follows:
1. The Optionee acknowledges receipt of a copy of the Plan and Agreement.
The Optionee has carefully reviewed the Plan and Agreement.
2. The Optionee either:
a. has a preexisting personal or business relationship with the
Corporation or any of its officers, directors or controlling persons of a nature
and duration as would allow the undersigned to be aware of the character,
business acumen, general business and financial circumstances of the Corporation
or of the person with whom such relationship exists; or
b. by reason of the Optionee's business or financial experience or
the business or financial experience of the Optionee's professional advisor(s)
who is (are) unaffiliated with and is (are) not compensated by the Corporation
or any affiliate or selling agent
EXHIBIT B - PAGE 13
<PAGE>
of the Corporation, directly or indirectly, has the capacity to protect the
Optionee's interests in connection with the purchase of nonqualified stock
options of the Corporation and Stock issuable upon the exercise thereof.
3. The Optionee is able to bear the economic risk of his investment in
the stock options of the Corporation and the Stock issuable upon exercise
thereof.
4. The Optionee acknowledges that an investment in the Corporation
represents a speculative investment and a high degree of risk. The Optionee
acknowledges that the Optionee has had the opportunity to obtain and review all
information from the Corporation necessary to make a reasonably informed
investment decision and that the Optionee has had all questions asked of the
Corporation answered to the reasonable satisfaction of the Optionee.
5. The grant of Options for Stock and the exercise of the Options has not
been accompanied by the publication of any advertisement.
6. The Optionee understands and acknowledges that the Stock has not, and
will not, be registered under the Securities Act of 1933, as amended, or
qualified under the California Securities Law of 1968. The Optionee understands
and acknowledges that the Stock may not be sold without compliance with the
registration and qualification requirements of federal and applicable state
securities laws unless exemptions from such laws are available. The Optionee
understands that the certificate representing the Stock shall bear the legends
set forth in the Plan.
7. The Optionee is a resident of the State of __________________________.
8. The Optionee hereby is purchasing for the Optionee's own account and
not with a view to or for sale in connection with any distribution of the stock
options of the Corporation or any Stock issuable upon exercise thereof.
EXHIBIT B - PAGE 14
<PAGE>
The foregoing representations and warranties are given on ______________,
1999 at ____________________.
OPTIONEE:
EXHIBIT B - PAGE 15
<PAGE>
REVOCABLE PROXY--TERAGLOBAL COMMUNICATIONS CORP.
ANNUAL MEETING OF SHAREHOLDERS--JUNE 24, 1999
The undersigned shareholder(s) of TeraGLOBAL Communications Corp. (the
"Company") hereby appoints, constitutes and nominates David Fann and Paul Cox,
and each of them, the attorney, agent and proxy of the undersigned, with full
power of substitution, to vote all shares of the Company which the undersigned
is entitled to vote at the Annual Meeting of Shareholders to be held at 600 W.
Broadway, San Diego, California, on June 24, 1999 at 10:00 a.m. local time, and
any and all adjournments thereof, as fully and with the same force and effect as
the undersigned might or could do if personally present thereat, as follows:
<TABLE>
<S> <C>
1. REINCORPORATION. To approve the Agreement of Merger, a copy of which is attached as Exhibit A to the accompanying Proxy
Statement, providing for the reincorporation of the Company from Wyoming to Delaware and approving an increase in the
authorized capital stock of the Company from 50,100,000 shares to 201,000,000 shares, including 200,000,000 shares of
Common Stock, $.001 par value and 1,000,000 shares of Preferred Stock, $.001 par value.
</TABLE>
/ / FOR / / AGAINST / / ABSTAIN
<TABLE>
<S> <C>
2. 1999 STOCK OPTION PLAN. To approve and adopt the Company's 1999 Stock Option Plan.
</TABLE>
/ / FOR / / AGAINST / / ABSTAIN
<TABLE>
<S> <C>
3. ELECTION OF DIRECTORS. To elect the following four (4) persons to the Board of Directors of the Company to serve until
the 2000 Annual Meeting of Shareholders and until their successors are elected and have qualified:
Paul Cox David Fann Grant K. Holcomb John F.A.V. Cecil
</TABLE>
/ / FOR ALL NOMINEES LISTED ABOVE (EXCEPT AS MARKED TO THE CONTRARY)
/ / WITHHOLD AUTHORITY TO VOTE FOR ALL NOMINEES LISTED ABOVE A SHAREHOLDER MAY
WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE BY LINING THROUGH OR OTHERWISE
STRIKING OUT THE NAME OF SUCH NOMINEE.
<PAGE>
<TABLE>
<S> <C>
4. OTHER BUSINESS. To transact such other business as may properly come before the Meeting and any adjournment or
adjournments thereof.
</TABLE>
The Board of Directors recommends a vote FOR each of the foregoing
proposals. If any other business is properly presented at the Annual Meeting,
this Proxy shall be voted in accordance with the judgment of the proxy holders.
THIS PROXY ALSO VESTS DISCRETIONARY AUTHORITY TO CUMULATE VOTES. THIS PROXY IS
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND MAY BE REVOKED PRIOR TO ITS
USE.
Date: _________________________
_______________________________
_______________________________
Signature(s)
_______________________________
Number of Shares
I (We) will / / will not / /
attend the Annual Meeting in
person.
NOTE: PLEASE SIGN YOUR FULL
NAME. JOINT OWNERS SHOULD EACH
SIGN. WHEN SIGNING AS ATTORNEY,
EXECUTOR, ADMINISTRATOR,
TRUSTEE OR GUARDIAN, PLEASE
GIVE FULL TITLE AS SUCH.
