<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
Wiltek, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
WILTEK, INC.
542 WESTPORT AVENUE
NORWALK, CONNECTICUT 06851
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of Shareholders of Wiltek, Inc. will be held at the Omni
Berkshire Place Hotel, 21 East 52nd Street, New York, New York 10022, on
Thursday, July 15, 1999 at 10:00 a.m., for the following purposes:
1. To elect five directors to serve until the next Annual Meeting of
Shareholders and until their successors are elected and have qualified.
2. To consider and approve the formation of E-Sync Networks, Inc., a
Delaware corporation and a wholly-owned subsidiary of the Corporation,
and the merger of the Corporation with and into E-Sync Networks, Inc.,
with the effect of (i) changing the name of the Corporation, (ii)
changing the state of incorporation of the Corporation and (iii)
amending the Certificate of Incorporation and By-laws of the
Corporation.
3. To consider and approve the adoption of the Corporation's 1999
Long-Term Incentive Plan.
4. To consider and act upon such other business as may properly come
before the meeting or any adjournment or adjournments thereof.
The date fixed by the Board of Directors as the record date for the
determination of the shareholders entitled to notice of and to vote at said
Annual Meeting or any adjournment or adjournments thereof is the close of
business on May 13, 1999.
Each shareholder has and may assert dissenters' rights with respect to the
Reincorporation, and thereby obtain payment of the fair value of such holder's
shares, as provided under Sections 33-855 to 33-872, inclusive, of the
Connecticut General Statutes, as amended. The right of any such holder to
exercise such rights is contingent upon strict compliance with the requirements
set forth in the applicable provisions of such sections. A complete copy of
Sections 33-855 to 33-872 of the Connecticut General Statutes, as amended, is
attached as Exhibit A.
By Order of the Board of Directors,
Walter Keisch Signature
Walter R. Keisch
Secretary
Dated: June 24, 1999
SHAREHOLDERS, WHETHER OR NOT THEY EXPECT TO ATTEND THE MEETING PERSONALLY,
ARE REQUESTED TO DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING
ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. SHAREHOLDERS
WHO HAVE RETURNED THEIR PROXIES, BUT WHO ATTEND THE MEETING IN PERSON MAY VOTE
AT THE MEETING, IF THEY WISH.
<PAGE> 3
WILTEK, INC.
542 WESTPORT AVENUE
NORWALK, CONNECTICUT 06851
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
JULY 15, 1999
SOLICITATION AND REVOCATION OF PROXIES
This proxy statement is furnished in connection with the solicitation of
proxies by the Directors of Wiltek, Inc. (the "Corporation") for use at its
Annual Meeting of Shareholders, to be held on July 15, 1999 at the Omni
Berkshire Place Hotel, 21 East 52nd Street, New York, New York 10022, and will
be mailed to shareholders on or about June 24, 1999.
The Annual Meeting is called for the purposes of (i) electing directors,
(ii) considering and voting upon the reincorporation of the Corporation as a
Delaware corporation under the name E-Sync Networks, Inc., through the merger of
the Corporation with and into E-Sync Networks, Inc. ("E-Sync Networks"), and
certain amendments to the Corporation's Certificate of Incorporation and
By-laws, (iii) considering and voting upon the Corporation's 1999 Long-Term
Incentive Plan, and (iv) conducting such other business as may properly come
before the meeting. Any proxy given pursuant to this solicitation may be revoked
by the person executing the same by written instruction given to the Secretary
of the Corporation at any time prior to its exercise; by filing a later dated
proxy with the Secretary; or by voting at the meeting, but mere attendance at
the meeting will not effect such a revocation.
Solicitation of proxies by management will be made by mail and also may be
made by telephone and personal solicitation by the Corporation's officers,
Directors or regular employees, who will receive no remuneration therefor. The
cost of such solicitation will be borne by the Corporation. In addition, the
Corporation will request banks, brokers or other persons holding shares in their
names or the names of their nominees to distribute proxies, proxy material and
annual reports to the beneficial owners of such shares, and will reimburse such
persons for their reasonable out-of-pocket expenses incurred in making such
distribution.
A copy of the Corporation's Annual Report to Shareholders on Form 10-KSB
(as amended by Form 10-KSB/A-1) containing certified financial statements for
the fiscal year ended October 31, 1998 and management's discussion and analysis,
is included herewith, but is not to be considered as a part of the proxy
soliciting materials.
VOTING RIGHTS
Only holders of shares of Common Stock and Preferred Stock of record at the
close of business on May 13, 1999 are entitled to vote at the meeting. On that
date, there were 3,987,128 shares of Common Stock outstanding and entitled to
vote, each such share having one vote, and 1,000,000 shares of Preferred Stock
outstanding and entitled to vote, each such share having 2.5 votes (the number
of votes that the holder of such share would be entitled to cast had such holder
converted such share into Common Stock on the record date). There are no
cumulative voting rights. The holders of a majority of the outstanding shares
entitled to vote, present in person or represented by proxy, will constitute a
quorum for the transaction of business at the Annual Meeting. Abstentions and
broker non-votes are counted for purposes of determining the number of shares
represented at the Annual Meeting, but are deemed not to have voted on the
proposals. Broker non-votes occur when a broker nominee, holding shares in
street name for the beneficial owner thereof, has not received voting
instructions from the beneficial owner and does not have discretionary authority
to vote. The Election of Directors requires the affirmative vote of a plurality
of the votes cast by the shares entitled to vote in the election. The
Reincorporation requires the approval by each voting group entitled to vote
separately by a majority of all the votes entitled to be cast by each separate
voting group. The 1999 Long-Term Incentive Plan requires the affirmative vote of
a majority of shares voting. All properly executed proxies received at or prior
to the meeting will be voted pursuant to the instructions set forth therein,
and, if no instructions are given, will be VOTED FOR ALL management proposals.
1
<PAGE> 4
PROPOSAL 1:
INFORMATION WITH RESPECT TO NOMINEES FOR ELECTION AS DIRECTORS
The following paragraphs set forth the slate of nominees proposed for
election as Directors; the present principal occupation, including position, if
any, with the Corporation, of each nominee; and his age and his business
experience during the past five years. With the exception of Nathan Gantcher,
all nominees proposed for election as Directors are currently Directors of the
Corporation. The paragraphs below are based in part on information received from
the respective nominees and in part from the records of the Corporation.
PETER J. BONI, 53, currently is Chairman of the Board of SageMaker, Inc.,
and as of February 1, 1999, he also became President and Chief Executive Officer
of Prime Response, Inc. From 1998 to 1999, he worked as an independent
consultant. In 1993, Mr. Boni joined Bachman Information Systems, where he
served as President and Chief Executive Officer until 1998. In 1996, Bachman
Information Systems merged with Cadre Technologies and changed its name to
Cayenne Software. Cayenne Software was acquired by Sterling Software in 1998.
Mr. Boni was appointed as a Director of Wiltek on January 28, 1999.
NATHAN GANTCHER, 58, is Vice Chairman of CIBC World Markets Corp., the USA
section 20 broker dealer of Canadian Imperial Bank of Commerce. Mr. Gantcher is
also a Senior Vice President of CIBC and a member of the CIBC World Markets
Executive Board and Co-Chairman of its USA Management Committee. From 1968 until
1997, Mr. Gantcher was employed at Oppenheimer & Co., Inc., where he was named
Executive Vice President in 1980 and President and Co-CEO in 1983, which
positions he held until Oppenheimer was acquired by CIBC in November 1997. Mr.
Gantcher is Chairman of the Board of Trustees of Tufts University. He is a
member of the Board of Overseers at the Columbia University School of Business
and Chairman of its Nominating Committee. Mr. Gantcher is also a member of the
Council on Foreign Relations, a Director of Mack-Cali Realty Corp., a Senior
Advisor of RRE Investors, and a former governor of the American Stock Exchange.
STEPHEN D. GRUBBS, 47, is Executive Vice President, Director of National TV
Buying and Program Development and a member of the Board of Directors of BBDO
New York. Mr. Grubbs joined BBDO in 1977 and was appointed Director of National
TV Buying and Program Development in 1986. In 1995, he was named a member of the
Board of Directors of BBDO New York and was elected Executive Vice President in
1996. Mr. Grubbs serves on the Board of Directors of Advertising Information
Services and is a former Chairman of the American Association of Advertising
Agencies' Network TV Committee. Mr. Grubbs was elected as a Director of Wiltek
on May 27, 1999 in order to fill an existing vacancy on the Board.
JOHN C. MAXWELL, III, 40, is the Managing Director of the New York based
venture fund CECAP. From 1996 to 1997, he was the Vice President of Business
Development and Market Research for the Advanced Technology and Corporate
Development Group of Compaq Computer Corporation where he headed mergers and
acquisitions, and established Compaq's venture capital effort. Prior to joining
Compaq, Mr. Maxwell was Managing Director of the Research/Investment Banking
Boutique at SoundView Financial Group, where he served from 1990 to 1996. He
also served as Vice President for Dillon Read & Co., one of Wall Street's
leading investment banking firms. Mr. Maxwell serves on the Board of Directors
of E-Certify, PCSat, and CompuCom Systems, Inc. Mr. Maxwell was appointed
Chairman of the Board and Chief Executive Officer of Wiltek on January 28, 1999.
DAVID S. TEITELMAN, 42, joined the Corporation in 1982 and served in a
variety of positions including software engineering, operations and systems
engineering, where he gained extensive experience in communication and directory
protocols and authored messaging systems across a broad range of environments.
He became Manager of Systems Engineering in 1986 and Director of Marketing and
Systems Engineering in 1994. In 1995, he was selected to become President and
Chief Executive Officer of the Corporation. He was appointed to Wiltek's Board
of Directors in 1997.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recommends voting in favor of the slate of nominees
proposed for election as Directors. Proxies solicited by the Board of Directors
will be voted FOR the nominees unless shareholders
2
<PAGE> 5
specify otherwise. Such nominees, if elected, will hold office until the next
Annual Meeting of Shareholders and until their respective successors shall have
been duly elected and qualified. It is not anticipated that any of the nominees
will be unavailable to serve as a Director of the Corporation, but if that
contingency should arise prior to the election, the persons named in the
accompanying proxy, when voting at the meeting, are authorized to substitute
another person chosen by the Corporation's Board of Directors.
INFORMATION REGARDING THE BOARD AND ITS COMMITTEES
There are currently two committees of the Board of Directors, an Audit
Committee and a Compensation Committee. The Board of Directors does not have a
Nominating Committee. The Audit Committee, of which Graeme MacLetchie is the
sole member, recommends to the Board of Directors the engagement of the
independent accountants and reviews with the independent accountants the scope
and results of the audit, the Corporation's internal accounting system and the
recommendations of the independent accountants with respect to accounting
matters. The Committee met once during fiscal 1998. Mr. MacLetchie is not a
nominee for reelection to the Board of Directors. The Compensation Committee, of
which Graeme MacLetchie is the sole member, determines executive salary and
bonuses. The Committee met once during fiscal 1998. The Board intends to elect
new members to these committees at the Annual Meeting of Directors following the
Annual Meeting of Shareholders.
During the 1998 fiscal year, the Board of Directors held five meetings. All
of the Directors attended 100% of the meetings, except F. Spencer Pooley, who
resigned as a Director on January 28, 1999, who attended 40% of the meetings.
Through June 10, 1998, Directors of the Corporation who are not full-time
employees received a fee of $500 per quarter for their services as director,
payable in advance, and were entitled to reimbursement of expenses for
attendance at meetings. Commencing with the September 29, 1998 meeting and
through the April 26, 1999 meeting, in lieu of the quarterly payment,
non-employee directors received a fee of $1,500 per meeting they attended, and
the Chairman was entitled to received a fee of $2,500 per meeting he attended.
On May 27, 1999, the Board approved a fee of $1,000 (plus reimbursement for
travel expenses) for attendance by non-employee directors at regularly scheduled
meetings, in lieu of the prior fee, effective with the next regularly scheduled
meeting.
EXECUTIVE COMPENSATION
The following table sets forth information with respect to cash
compensation, paid or accrued by the Corporation for its last three fiscal years
each ended October 31, to its executive officers whose aggregate cash and cash
equivalent forms of remuneration in fiscal 1998 exceeded $100,000.
3
<PAGE> 6
ANNUAL COMPENSATION
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------- ----------------
ALL OTHER SHARES OF COMMON
ANNUAL STOCK UNDERLYING
COMPENSATION OPTIONS(#)
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) (1) (2)
- --------------------------- ---- --------- -------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
David S. Teitelman............... 1998 160,000 40,982 1,663 50,000(3)
President & CEO 1997 118,333 34,200(4) 3,853 --
1996 108,603 23,320(5) 460 --
William P. Bunce(6).............. 1998 106,667 15,480 -- 25,000(3)
Vice President, Marketing 1997 110,052 25,501(7) -- --
1996 72,031 18,811 -- --
Kevin P. Carathanasis............ 1998 106,667 20,491 -- 25,000(3)
Vice President, Messaging
Services 1997 85,625 20,650(8) -- --
1996 44,000 -- -- 50,000(9)
David P. Holst-Grubbe(10)........ 1998 115,000 32,412 733 25,000(3)
Vice President, Sales 1997 85,487 70,098(11) -- 50,000(12)
1996 14,296 19,186(13) -- --
</TABLE>
- ---------------
(1) Represents compensation related to personal use of corporate vehicles.
(2) All options expire on the earlier of the expiration date or 90 days from
the termination of employment with the Corporation.
(3) Represents options currently exercisable at a price of $0.87 per share.
Options expire December 30, 2007.
(4) Includes $15,000 representing the fair market value of stock accrued in
fiscal 1997 and granted in fiscal 1998 to Mr. Teitelman.
(5) Includes $13,320 representing the fair market value of stock accrued in
fiscal 1996 and granted in fiscal 1997 to Mr. Teitelman.
(6) Mr. Bunce ceased to be an officer of the Corporation effective September
30, 1998 and left the Corporation's employ on January 31, 1999.
(7) Includes $10,325 representing the fair market value of stock accrued in
fiscal 1997 and granted in fiscal 1998 to Mr. Bunce.
(8) Includes $10,325 representing the fair market value of stock accrued in
fiscal 1997 and granted in fiscal 1998 to Mr. Carathanasis.
(9) Represents options currently exercisable at a price of $0.56 per share.
Options expire June 17, 2006.
(10) Mr. Holst-Grubbe left the Corporation's employ on February 8, 1999.
(11) Includes $1,823 representing the fair market value of stock accrued in
fiscal 1997 and granted in fiscal 1998 to Mr. Holst-Grubbe.
(12) Represents options currently exercisable at a price of $0.25 per share.
Options expire December 20, 2006.
(13) Includes $3,436 representing the fair market value of stock accrued in
fiscal 1996 and granted in fiscal 1997 to Mr. Holst-Grubbe.
------------------------
125,000 shares of common stock were granted from the 1994 Employee's Stock
Option Plan to four of the Executive Officers of the Corporation during the
Fiscal Year ended October 31, 1998. There are in effect employment agreements
effective January 1, 1999, with Messrs. Teitelman, Carathanasis, Holst-Grubbe
and Walter Keisch, the Corporation's Chief Financial Officer and an executive
officer of the Corporation, providing for employment for one year from January
1, 1999, at an annual base compensation of $168,000 for
4
<PAGE> 7
Mr. Teitelman, $120,000 for Mr. Keisch, $120,000 for Mr. Holst-Grubbe, and
$110,000 for Mr. Carathanasis. These agreements are terminable, but except for
certain circumstances, upon such termination the officer will be entitled to
severance payments equal to one-half to one and one-half times their annual base
compensation rate at termination. The employment agreements do not preclude the
payment of bonuses in addition to the specified base compensation.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- ------------------------- -----------------------------------------------------------------------------
(A) (B) (C) (D) (E)
NUMBER OF SHARES % OF TOTAL
OF COMMON STOCK OPTIONS GRANTED
UNDERLYING OPTIONS TO EMPLOYEES IN EXERCISE PRICE
NAME GRANTED(#)(2) FISCAL YEAR ($/SHARE) EXPIRATION DATE
---- ------------------- --------------- -------------- -----------------
<S> <C> <C> <C> <C>
David S. Teitelman....... 50,000 25.6% $0.87 December 30, 2007
William P. Bunce(1)...... 25,000 12.8% $0.87 May 1, 1999
Kevin Carathanasis....... 25,000 12.8% $0.87 December 30, 2007
David P. 25,000 12.8% $0.87 May 9, 1999
Holst-Grubbe(3)........
</TABLE>
- ---------------
(1) Mr. Bunce ceased to be an officer of the Corporation effective September 30,
1998 and left the Corporation's employ on January 31, 1999.
(2) Options were issued on December 30, 1997 and became fully exercisable on
December 30, 1998.
(3) Mr. Holst-Grubbe left the Corporation's employ on February 8, 1999.
---------------
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FY-END(#) IN-THE MONEY
------------------------- OPTIONS AT FY-END
NAME EXERCISABLE/UNEXERCISABLE ($)(1)(2)
- ---- ------------------------- --------------------
<S> <C> <C>
David S. Teitelman................................... 101,000/50,000 $16,000
William P. Bunce(3).................................. 0/25,000 --
Kevin P. Carathanasis................................ 50,000/25,000 --
David P. Holst-Grubbe................................ 50,000/25,000 $ 8,000
</TABLE>
- ---------------
(1) Based on last trade price as of October 31, 1998, being $0.41.
(2) All In-the Money options were fully exercisable at fiscal year-end.
(3) Mr. Bunce ceased to be an officer of the Corporation effective September 30,
1998.
EMPLOYEE BENEFIT PLANS
401(k) PENSION PLAN
The Wiltek, Inc. 401(k) Pension Plan, adopted as of November 1, 1985, is
available to all employees who have been in the Corporation's employ for six
months. Each participant in the plan may elect to contribute up to 15% of his or
her compensation pursuant to a Salary Reduction Agreement. Contributions by the
one-third most highly compensated participants may be limited to less than 15%
in accordance with statutory
5
<PAGE> 8
restrictions of 401(k) plans. The Corporation may, in its sole discretion, elect
to make a matching contribution of up to two-thirds of each participant's
contribution. Each participant directs the investment of the contributions for
his or her account in shares of one or more of four Phoenix Series funds. Upon
retirement or termination of employment, the full value of the shares in such
participants' account is paid in cash to the participant in a single lump sum.
In the event of the death of a participant, the payment is made to his or her
designated beneficiary, if any, who may elect payment to be made in the form of
an annuity.
OTHER STOCK OPTION PLANS
1983 AND 1988 STOCK OPTIONS
No shares of the Common Stock of the Corporation are reserved for issuance
pursuant to the 1983 Stock Option Plan, (the "1983 Plan"), which expired June 8,
1988. All remaining option grants under the plan expired during fiscal 1998. An
aggregate of 11,500 shares of the Common Stock of the Corporation is reserved
for issuance pursuant to the 1988 Stock Option Plan, (the "1988 Plan"), which
expired June 6, 1993. Since both of these plans had expired prior to the
commencement of Fiscal 1998, no options were available for grant during the
Fiscal Year ended October 31, 1998.
Under both the 1983 and 1988 Plans, the Board of Directors, acting upon the
recommendation of the Compensation Committee, composed of Directors not eligible
to receive options, granted options for the purchase of shares at an option
price not less than the fair market value at date of grant. Upon exercise under
either Plan, the full purchase price is to be paid in cash except that, if so
authorized in writing in advance by the Committee, payment may also be made in
outstanding shares of Wiltek common stock, or a combination of shares and cash.
Options issued under both Plans are either incentive stock options ("ISOs")
or nonqualified stock options ("NQSOs"); have option terms of 10 years or less,
and are non-transferable, except by testamentary disposition or the laws of
descent and distribution. While NQSOs may be exercised in full or in part at any
time, ISOs may not be exercised for a period of one year after the date of grant
and expire unless exercised within three months (or in the case of death or
disability, one year) following termination of employment. NQSOs expire ten days
later than ISOs. Under the 1988 Plan, grants of options to any one employee
which first become exercisable in any given calendar year were limited to stock
having a fair market value, at the date of grant, of no more than $100,000.00.
NO STOCK OPTIONS EXERCISED UNDER '83 AND '88 PLANS
No options were exercised by any officers and/or employees during the three
year period ending October 31, 1998. As of October 31, 1998, there were no
options outstanding at an exercise price lower than the fair market value of the
stock and no options granted by the Corporation have been repriced during the
last completed fiscal year.
1994 STOCK OPTIONS
The 1994 Employees' Stock Option Plan authorizing 750,000 shares and 1994
Non-Employee Directors'/Officers' Stock Option Plan authorizing 100,000 shares
were approved by the shareholders at the annual meeting held on March 28, 1995.
An aggregate of 606,800 shares and 70,000 shares of common stock of the
Corporation is reserved for issuance pursuant to the 1994 Employees' Stock
Option Plan and the 1994 Non-Employee Directors'/ Officers' Stock Option Plan
respectively. The 1994 Plans expire on August 23, 1999.
Both Plans were created to give a proprietary interest in the Corporation
to those key employees, and present and future Directors/Officers who are not
employees but whose performance strongly influences the Corporation's success,
to stimulate their efforts on behalf of the shareholders and the Corporation, to
retain their services, and to attract to the Corporation other individuals of
outstanding ability.
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<PAGE> 9
The Plan authorizes the Compensation Committee, composed of Directors
ineligible to receive options, to grant options, through August 23, 1999, to
eligible employees and non-employees (the Directors/Officers) at a purchase
price not less than the fair market value at the date of the grant. Options
granted under the Plans may be in the form of Incentive Stock Options ("ISOs"),
or options which do not qualify as ISOs ("NQSOs"). Grants of options to any one
employee which, under the terms of the Plans, first become exercisable in any
given calendar year may not be made with respect to stock having a fair market
value, at the date of grant, of more than $100,000.
Upon exercise of any option, the full purchase price is to be paid in cash,
except that, if so authorized in advance by the Committee, payment may be made
in outstanding shares of Wiltek, Inc. stock, or in a combination of such shares
and cash.
The option term under the 1994 Plans may not exceed a period of 10 years.
While NQSOs may be exercised in full or in part at any time, ISOs may not be
exercised for a period of one year after the date of grant and no employee may
exercise in any one calendar year, ISOs exercisable for the first time, with
respect to stock having a fair market value of more than $100,000. ISOs
terminate unless exercised within three months following termination of
employment, except that if the termination is for disability or death the period
is one year. NQSOs terminate ten days later than ISOs. Options are
non-transferable, except by testamentary disposition or the laws of descent and
distribution. Upon the expiration or termination of an option, the shares which
were set aside for the exercise of such option again become available for the
grant of new options thereon until the expiration date of the plans.
STOCK OPTIONS EXERCISED UNDER THE 1994 PLANS
48,000 shares of common stock were exercised during fiscal year 1998 under
the 1994 option plans. As of October 31, 1998, 396,800 shares of employee and
35,000 shares of non-employee options were outstanding at an exercise price
lower than the fair market value of the stock. No options granted by the
Corporation have been repriced during the last completed fiscal year.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of June 4, 1999, the shares of Common
Stock beneficially owned by (a) each person who is known by the Corporation to
be the beneficial owner of 5% or more of the outstanding Common Stock of the
Corporation and (b) Management, including: each director and nominee for
director; each executive officer during fiscal 1998 and as of June 4, 1999 and
all officers and directors as a group.
COMMON STOCK
<TABLE>
<CAPTION>
AMOUNT AND NATURE % OF
NAME AND ADDRESS OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP CLASS(1)
------------------------------------ ----------------------- --------
<S> <C> <C>
Commercial Electronics Capital Partnership, L.P........ 1,183,040(2)(3) 23.4%
c/o Commercial Electronics, L.L.C.
375 Park Avenue, Suite 1604
New York, New York 10152
Electronics Investments, L.L.C......................... 1,183,040(4) 23.4%
c/o Commercial Electronics, L.L.C.
375 Park Avenue, Suite 1604
New York, New York 10152
Commercial Electronics, L.L.C. ........................ 3,549,120(2)(5) 50.3%
375 Park Avenue, Suite 1604
New York, New York 10152
Michael P. Schulhof.................................... 4,732,160(6) 58.7%
c/o Commercial Electronics, L.L.C.
375 Park Avenue, Suite 1604
New York, New York 10152
</TABLE>
7
<PAGE> 10
<TABLE>
<CAPTION>
AMOUNT AND NATURE % OF
NAME AND ADDRESS OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP CLASS(1)
------------------------------------ ----------------------- --------
<S> <C> <C>
John C. Maxwell, III................................... 116,000(7)(11)(16) 2.9%
c/o Commercial Electronics, L.L.C.
375 Park Avenue, Suite 1604
New York, New York 10152
Peter J. Boni.......................................... 0(7) *
138 Marlborough Street
Boston, MA 02116
Graeme MacLetchie...................................... 338,439(7)(9)(10) 8.3%
1 Dunham Place
Irvington, New York 10533
Stephen D. Grubbs...................................... 0(7) *
c/o BBDO New York
1285 Avenue of the Americas
New York, NY 10019
Nathan Gantcher........................................ 0(8) *
c/o CIBC World Markets Corp.
One World Financial Center
200 Liberty Street
New York, NY 10281
David S. Teitelman..................................... 258,341(7)(11)(12) 6.1%
14 Clinton Street
Fairfield, Connecticut 06430
David Holst-Grubbe..................................... 91,513(11)(13)(14) 2.3%
38 Suncrest Court
Torrington, CT 06790
William P. Bunce....................................... 112,400(11)(15)(16) 2.8%
389 Washington Avenue
Glencoe, IL 60022
Kevin P. Carathanasis.................................. 101,868(11)(17) 2.5%
8515 Manassas Road
Tampa, FL 60022
Walter R. Keisch....................................... 75,000(11)(18)(19) 1.8%
27 Christianna Drive
Monroe, CT 06468
Peter Cincogrono....................................... 0(11)(20) *
135 Tower Road
Middlebury, CT 06762
Philip S. Baden........................................ 0(11)(21) *
45 Skyview Drive
Stamford, CT 06902
All executive officers and directors as a group (9 1,093,561 25.1%
persons).............................................
SENIOR CONVERTIBLE SERIES A PREFERRED STOCK
Commercial Electronics Capital Partnership, L.P........ 250,000(2) 25.0%
c/o Commercial Electronics, L.L.C.
375 Park Avenue, Suite 1604
New York, New York 10152
</TABLE>
8
<PAGE> 11
<TABLE>
<CAPTION>
AMOUNT AND NATURE % OF
NAME AND ADDRESS OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP CLASS(1)
------------------------------------ ----------------------- --------
<S> <C> <C>
Electronics Investment, L.L.C.......................... 250,000(22) 25.0%
c/o Commercial Electronics, L.L.C.
375 Park Avenue, Suite 1604
New York, New York 10152
Commercial Electronics, L.L.C.......................... 750,000(2) 75.0%
375 Park Avenue, Suite 1604
New York, New York 10152
Michael P. Schulhof.................................... 1,000,000(23) 100.0%
c/o Commercial Electronics, L.L.C.
375 Park Avenue, Suite 1604
New York, New York 10152
</TABLE>
- ---------------
* Less than one percent.
(1) In each case where shares of Common Stock subject to warrants, options or
preferred shares are included as being beneficially owned by an individual
or entity, the percentage of such shares owned by such individual or entity
is calculated as if such warrants, options or preferred shares have been
exercised or converted prior to such calculation.
(2) Directly owned by such entity.
(3) Comprised of 183,040 shares of Common Stock, 375,000 shares of Common Stock
acquirable upon the exercise of warrants and 625,000 shares of Common Stock
acquirable upon the conversion of Preferred Stock.
(4) Comprised of the shares of Common Stock beneficially owned by Commercial
Electronics Capital Partnership, L.P. ("CECAP"). Electronics Investment,
L.L.C. ("EI") is the general partner of CECAP.
(5) Comprised of 549,120 shares of Common Stock, 1,125,000 shares of Common
Stock acquirable upon the exercise of warrants and 1,875,000 shares of
Common Stock acquirable upon the conversion of Preferred Stock.
(6) Comprised of the 732,160 shares of Common Stock directly owned by CECAP and
Commercial Electronics, L.L.C. ("CE"), 1,500,000 shares of Common Stock
acquirable by CECAP and CE upon the exercise of warrants and 2,500,000
shares of Common Stock acquirable by CECAP and CE upon the conversion of
Preferred Stock. Mr. Schulhof is the manager of both EI and CE (as well as
an investor therein).
(7) A director of the Corporation.
(8) A nominee for director of the Corporation.
(9) Comprised of 333,439 shares of Common Stock directly owned and 5,000 shares
of Common Stock owned by his wife.
(10) Mr. MacLetchie disclaims beneficial ownership of 5,000 of such shares which
are owned by his wife.
(11) An executive officer of the Corporation.
(12) Comprised of 107,341 shares of Common Stock and 151,000 shares of Common
Stock acquirable upon the exercise of options.
(13) Comprised of 91,513 shares of Common Stock directly owned.
(14) Mr. Holst-Grubbe left the Corporation's employ on February 8, 1999.
(15) Mr. Bunce ceased being an officer of the Corporation effective September
30, 1998, and left the Corporation's employ on January 31, 1999.
(16) Comprised of 112,400 shares of Common Stock directly owned.
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<PAGE> 12
(17) Comprised of 26,868 shares of Common Stock and 75,000 shares of Common
Stock acquirable upon the exercise of options.
(18) Comprised of 75,000 shares of Common Stock acquirable upon exercise of
options.
(19) Mr. Keisch became an officer of the Corporation on December 18, 1999.
(20) Mr. Cincogrono became an officer of the Corporation on March 8, 1999.
(21) Mr. Baden became an officer of the Corporation on April 5, 1999.
(22) Comprised of shares of Preferred Stock directly owned by CECAP.
(23) Comprised of shares of Preferred Stock directly owned by CECAP and CE.
------------------------
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
directors, executive officers and 10% beneficial owners of any class of equity
securities of the Corporation to file certain reports concerning their ownership
of the Corporation's equity securities. Based solely upon a review of Forms 3
and 4 and amendments thereto furnished to the Corporation during its most
recently completed fiscal year, and Forms 5 and amendments thereto furnished to
the Corporation with respect to its most recently completed fiscal year, the
directors, officers and beneficial owners of 10% or more of any class of the
Corporation's securities which failed to make the requisite filings on a timely
basis are set forth below.
Jay Fitzpatrick failed to file timely a Form 4 to report his January 28,
1999 sales of 210,527 shares of Common Stock to Commercial Electronics, L.L.C.
and 70,176 shares of Common Stock to Commercial Electronics Capital Partnership,
L.P. Such failure was due to Mr. Fitzpatrick's death shortly after the closing
of such sales. A Form 4 was subsequently filed by the executor of Mr.
Fitzpatrick's estate on behalf of Mr. Fitzpatrick on March 17, 1999.
F. Spencer Pooley failed to file timely a Form 4 to report his January 28,
1999 sales of 154,278 shares of Common Stock to Commercial Electronics, L.L.C.
and 51,426 shares of Common Stock to Commercial Electronics Capital Partnership,
L.P. A Form 4 was subsequently filed on behalf of Mr. Pooley in March 1999.
PROPOSAL 2:
REINCORPORATION
On April 9, 1999, the Corporation's Board of Directors approved, subject to
shareholder approval, a proposal (the "Reincorporation Proposal") to change the
Corporation's state of incorporation from Connecticut to Delaware and to effect
certain changes to the Corporation's Certificate of Incorporation by means of a
merger (the "Merger") of the Corporation with and into E-Sync Networks, Inc.
("E-Sync"), a newly formed, wholly-owned Delaware subsidiary of the Corporation
that has been incorporated to effect the Reincorporation Proposal. The principal
office of E-Sync is located at 542 Westport Avenue, Norwalk, Connecticut 06851,
telephone (203) 853-7400. If the shareholders approve the Reincorporation
Proposal, the Corporation will be merged with and into E-Sync, with the effect
of (i) changing the name of the Corporation, (ii) changing the state of
incorporation of the Corporation and (iii) amending the Certificate of
Incorporation and By-laws of the Corporation. E-Sync will be the surviving
corporation (the "Surviving Corporation") of the Merger. The law applicable to
the Corporation's corporate affairs will change from the Connecticut Business
Corporation Act (the "Connecticut Law") to the General Corporation Law of the
State of Delaware (the "Delaware Law"), and will include certain changes in
shareholders' rights. See "Comparison of Shareholders' Rights under the
Connecticut Law and the Delaware Law."
The following discussion summarizes certain aspects of the Reincorporation
Proposal, including material differences between the Connecticut Law and the
Delaware Law. This summary does not purport to be a complete description of the
Reincorporation Proposal or the differences between shareholders' rights under
the Connecticut Law and the Delaware Law and is qualified in its entirety by
reference to (i) the Agreement and Plan of Merger, by and between the
Corporation and E-Sync (the "Merger Agreement") attached hereto as
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<PAGE> 13
Exhibit B, (ii) the Certificate of Incorporation of E-Sync (the "New
Certificate") attached hereto as Exhibit C, (iii) the Certificate of Designation
attached hereto as Exhibit D which will be filed prior to the Merger, and which
will create the Series A Preferred Stock of E-Sync, with the same terms as the
Corporation's Series A Preferred Stock, and (iv) the By-laws of E-Sync (the "New
By-laws") attached hereto as Exhibit E. Copies of the Corporation's Restated
Certificate of Incorporation (the "Present Certificate") and By-laws (the
"Present By-laws") are available for inspection at the Corporation's executive
office, and copies will be sent to shareholders without charge, on request.
Approval of the Reincorporation Proposal by the Corporation's shareholders
will also constitute approval of the Merger and the Merger Agreement, as well as
other matters included in the Reincorporation Proposal described in this Proxy
Statement. Pursuant to the terms of the Merger Agreement, the New Certificate
and the New By-laws will replace the Present Certificate and the Present By-laws
as the charter documents affecting corporate governance and shareholders'
rights. For a description of the differences between the Present Certificate and
Present By-laws and the New Certificate and New By-laws, see "Certain Charter
Document Provisions".
The approval of the Reincorporation Proposal will affect certain rights of
shareholders. Accordingly, shareholders are urged to read carefully this Proxy
Statement and the Exhibits hereto. Shareholders of the Corporation whose shares
are not voted in favor of the Reincorporation Proposal will have statutory
dissenter's rights. See "Rights of Dissenting Shareholders". If a significant
number of shareholders elect to pursue appraisal rights, the Directors will
reconsider, and may abandon, the reincorporation.
PRINCIPAL FEATURES OF THE REINCORPORATION PROPOSAL
At the Effective Time of the Merger (as defined in the Merger Agreement),
the separate existence of the Corporation will cease and the Surviving
Corporation, to the extent permitted by law, will succeed to all business,
properties, assets and liabilities of the Corporation. The name of the
Corporation will be changed to E-Sync Networks, Inc. Each share of Common Stock
of the Corporation issued and outstanding immediately prior to the Effective
Time will by virtue of the Merger be converted into one share of Common Stock,
par value $0.01 per share, of the Surviving Corporation ("Surviving Corporation
Common Stock"). At the Effective Time, certificates which immediately prior to
the Effective Time represented shares of Common Stock of the Corporation,
including shares held in the treasury of the Corporation, will be deemed for all
purposes to represent the same number of shares of Surviving Corporation Common
Stock. Each share of Series A Preferred Stock of the Corporation issued and
outstanding immediately prior to the Effective Time will by virtue of the Merger
be converted into one share of Series A Preferred Stock, par value $0.01 per
share, of the Surviving Corporation ("Surviving Corporation Preferred Stock").
At the Effective Time, certificates which immediately prior to the Effective
Time represented shares of Series A Preferred Stock of the Corporation will be
deemed for all purposes to represent the same number of shares of Surviving
Corporation Preferred Stock. As soon as practicable following the Effective
Time, each shareholder will be entitled to receive certificates representing
shares of Surviving Corporation Common Stock or Surviving Corporation Series A
Preferred Stock, as applicable.
Although approval of the Reincorporation Proposal will result in a change
in the name of the Corporation, it will not result in a change in the business,
management, assets or liabilities of the Corporation. The Directors and Officers
of the Corporation, including those Directors elected at the Annual Meeting of
Shareholders to be held on July 15, 1999, will be the Directors of the Surviving
Corporation following the Merger. Following the consummation of the Merger,
Surviving Corporation Common Stock will be traded on the OTC Bulletin Board,
where the Corporation's Common Stock is currently traded under the symbol WLTK.
Pursuant to the terms of the Merger Agreement, all warrants, options,
agreements, convertible securities or other commitments (collectively,
"Options") to purchase shares of Common Stock or Series A Preferred Stock of the
Corporation outstanding immediately prior to the Effective Time will become an
option or warrant to purchase Surviving Corporation Common Stock or Surviving
Corporation Preferred Stock, as the case may be, at the same exercise price per
share, and containing such other terms and conditions as pertained
11
<PAGE> 14
under the Options outstanding immediately prior to the Effective Time. All
employee benefit plans and other agreements and arrangements of the Corporation
(including without limitation the Corporation's 1999 Long-Term Incentive Plan,
if approved by the shareholders) will be continued by the Surviving Corporation
upon the same terms and subject to the same conditions as currently in effect.
It is anticipated that, if approved by the shareholders, subject to
dissenter's rights, the Merger will become effective as soon as practicable
after the Annual Meeting. See "Rights of Dissenting Shareholders". However, the
Merger Agreement provides that the Merger Agreement may be terminated at any
time prior to the Effective Time upon the Agreement of the Corporation and
E-Sync.
PRINCIPAL REASONS FOR THE REINCORPORATION PROPOSAL
The Board of Directors believes that the best interests of the Corporation
and its shareholders will be served by changing the Corporation's state of
incorporation from Connecticut to Delaware. At the time of the Corporation's
incorporation in Connecticut, the Connecticut Law was deemed to be adequate for
the conduct of the Corporation's business, in part because the business of the
Corporation at that time was limited. In the intervening years, that judgment
has changed.
For many years, Delaware has followed a policy of encouraging incorporation
in that state and, in furtherance of that policy, has adopted comprehensive,
modern and flexible corporation laws which are periodically updated and revised
to meet changing business needs. Many major corporations have chosen Delaware
for their initial domicile or have subsequently reincorporated in Delaware in a
manner similar to that proposed by the Corporation. Delaware courts have
considerable experience in dealing with corporate legal issues, and a
substantial body of case law has developed construing the Delaware Law and
establishing public policy with respect to Delaware corporations. The
Corporation does not believe Connecticut courts have had an opportunity to
develop a similar level of experience. The greater expertise of the Delaware
courts should be of great advantage to the Corporation by allowing the
Corporation to make corporate decisions and take corporate actions with greater
confidence in the predictability of the corporate law governing Delaware
corporations. In addition, while Connecticut's corporation law is based on the
Model Business Corporation Act, which has been adopted by a significant number
of other states, it has some unique provisions that the Corporation believes are
unattractive to it. For example, in acting on a merger proposal, the Connecticut
Law requires the Board of Directors to consider the interests of "other
constituencies", such as employees, customers, suppliers, creditors or the
communities in which the Corporation's facilities are located. While the
Corporation believes most jurisdictions permit the board of directors of a
corporation incorporated there to consider these interests where the board
considers it appropriate, no other jurisdiction requires the board of directors
of a corporation incorporated there to consider these interests. The Corporation
is uncertain as to how, in the absence of clear guidance, it would balance the
interests of stockholders, on the one hand, and these other constituencies, on
the other, in some circumstances. Under the Delaware Law, the Board would be
permitted to consider the best interests of the Corporation and its stockholders
exclusively. The Board believes this is a more appropriate standard for it to
act under. As a further example, the Connecticut Law allows the Corporation, in
its charter, to limit, but not eliminate, personal financial liability of
directors in certain circumstances described more fully below. The lowest limit
permitted is an amount equal to the compensation received by a director from the
Corporation in the year of a breach of duty. This standard introduces some
uncertainty, such as what would be "compensation received" in all circumstances,
and the compensation to be included with respect to management directors. The
Delaware Law does not contain these uncertainties.
The proposed Reincorporation will change the name of the Corporation from
Wiltek, Inc. to E-Sync Networks, Inc. The Board of Directors believes that the
name E-Sync Networks, Inc. is more desirable because the new name more aptly
describes the Corporation's new strategic direction in the e-commerce
marketplace. In addition, the directors wanted to trademark the Corporation's
name, and the name "Wiltek, Inc." was already trademarked by another company.
In addition, the proposed Reincorporation will, under the Delaware Law,
limit director liability and afford indemnification rights to directors and
officers to a slightly greater extent. No separate shareholder vote will be
solicited with regard to the inclusion in the New Certificate and the New
By-laws of provisions related to
12
<PAGE> 15
indemnification of officers or directors and elimination of director liability
for monetary damages. Shareholders should note that a vote in favor of the
Reincorporation Proposal will constitute approval and ratification of these
provisions in the New Certificate and the New By-laws. For purposes of the
discussion below, "officers" includes officers and key employees of the
Corporation and persons who serve as directors, officers, employees, and agents
of other business enterprises at the request of the Corporation.
The intense competition and rapid change that have characterized businesses
have greatly expanded the challenges and risks facing directors. There has been
an accompanying increase in the frequency of claims and litigation directed
against directors and officers. In addition, although the cost of directors' and
officers' insurance has recently shown signs of returning to acceptable levels,
the amount of risk covered by such policies has significantly decreased. Many
corporations are currently unable to obtain adequate insurance. As a result of
the significant potential liability and relatively small compensation associated
with service, particularly as a director, it has become a standard practice for
corporations such as the Corporation to offer extensive indemnification rights
to officers and directors, and to limit the liability of directors to the
fullest possible extent. In order to attract and retain talented and experienced
directors and officers, the Board of Directors believes it is important for the
Corporation to offer its directors and officers maximum protection.
In general, the Delaware Law permits a corporation to indemnify its
directors and officers under a somewhat broader range of circumstances than does
the current Connecticut Law. The Delaware Law expressly provides that the
statutory indemnification provisions are not exclusive. Therefore, under the
Delaware Law, a corporation may include in its By-laws, and in agreements
between the corporation and its directors and officers, provisions expanding the
scope of indemnification beyond that specifically provided by the statutory
language.
In order to provide directors and officers with increased protection from
the risk of litigation and personal liability, and thereby ensure that the
Corporation can continue to attract and retain experienced individuals to serve
as directors and officers and that directors and officers will continue to
consider all possible alternatives when making business decisions, the Board of
Directors has determined that the Reincorporation is in the best interests of
the Corporation. Because the members of the Board of Directors will be
beneficiaries of the indemnification provisions, the members of the Board of
Directors have a personal interest in the approval of the Reincorporation at the
potential expense of shareholders.
For the foregoing reasons, the Board of Directors believes that the
activities of the Corporation can be carried on better if the Corporation is
able to operate as a corporation organized and governed by the Delaware Law. It
should be noted, however, that shareholders in some instances have fewer rights
and hence less protection under the Delaware Law than under the Connecticut Law.
See "Comparison of Shareholders' Rights under the Connecticut Law and the
Delaware Law".
CERTAIN CHARTER DOCUMENT PROVISIONS
Significant provisions of the New Certificate and New By-laws and certain
important similarities and differences between them and the Present Certificate
and Present By-laws are discussed below.
The authorized capital stock of the Corporation currently consists of
1,000,000 shares of Preferred Stock, without par value, and 9,000,000 shares of
Common Stock, without par value. The capitalization of the Surviving Corporation
will consist of 10,000,000 shares of Preferred Stock, par value $0.01 per share,
and 50,000,000 shares of Common Stock, par value $0.01 per share. Other than the
change in the number of authorized shares, the provisions in the New Certificate
setting the terms of the Surviving Corporation Common Stock and the Surviving
Corporation Preferred Stock are unchanged from the provisions of the Present
Certificate.
While the Corporation presently has no agreements or understandings with
respect to acquisitions or financings, the availability of the additional
authorized shares will give the Board of Directors of the Surviving Corporation
flexibility in acquisition negotiations as well as in possible future
financings. Other purposes for which the additional authorized shares could be
used include stock dividends or stock splits, conversions of
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<PAGE> 16
future issues of convertible securities, exchanges for outstanding debt,
contributions to employee benefit plans or other corporate purposes not now
anticipated.
The Board of Directors of the Surviving Corporation will be able to
authorize issuance of additional shares of Surviving Corporation Common Stock or
Surviving Corporation Preferred Stock for the foregoing purposes without further
shareholder approval, unless required by a particular transaction or by
applicable law. Shareholders of the Surviving Corporation will have no
preemptive rights to purchase any shares of Surviving Corporation Common Stock
or Surviving Corporation Preferred Stock issued in the future. Depending upon
the terms thereof, the issuance of additional shares of Surviving Corporation
Common Stock or Surviving Corporation Preferred Stock may or may not have a
dilutive effect of the present equity ownership position of the Surviving
Corporation's then existing shareholders.
The Board of Directors of the Corporation (which will be the Board of
Directors of the Surviving Corporation after consummation of the Merger)
believes it advisable for the Surviving Corporation to have at its disposal
additional authorized shares in order to enable the Surviving Corporation, as
the need may arise, to take prompt advantage of market conditions and the
availability of favorable business opportunities without the delay and expense
incident to holding a special meeting of Surviving Corporation shareholders.
The Board of Directors of the Surviving Corporation has the authority to
provide for the issuance of shares of Preferred Stock in series, to establish
from time to time the number of shares to be included in each series, and to fix
the designation, powers, preferences and rights of the holders of shares of each
series, and the qualifications, limitations and restrictions thereof.
The New By-laws require that, at any annual or special meeting of
shareholders, proposals by shareholders will be considered only if advance
notice thereof has been given on a timely basis. Generally, notice of a proposal
must be given to the Secretary of the Corporation not less than 60 nor more than
90 days prior to the date of the meeting. The New By-laws also require that
nominations by shareholders of persons for election as Directors must be made
pursuant to notice to the Secretary of the Corporation. Generally, such notice
must be given not less than 60 nor more than 90 days prior to the date of the
meeting of shareholders. The Present By-laws do not similarly restrict the
Corporation's shareholders.
COMPARISON OF SHAREHOLDERS' RIGHTS UNDER THE CONNECTICUT LAW AND THE DELAWARE
LAW
The rights of shareholders of the Corporation are currently governed by the
Connecticut Law. Upon consummation of the Reincorporation, the Corporation's
shareholders will become shareholders of E-Sync and their rights will be
governed by the Delaware Law, which differs in certain material respects from
the Connecticut Law. The following is a summary of certain differences between
the Connecticut Law and the Delaware Law. The identification of specific
differences is not meant to indicate that other differences do not exist. This
summary is qualified in its entirety by reference to the full text of each of
the applicable state statutes.
QUORUM REQUIREMENTS. Under the Connecticut Law, in all matters, other than
the election of directors, if a quorum exists, a majority of the votes cast at a
meeting of the shareholders present in person or by proxy and entitled to vote
thereon shall be the act of the shareholders, unless the certificate of
incorporation or the Connecticut Law requires a greater number of votes.
Similarly, the Delaware Law states that, in all matters, other than the
election of directors, if a quorum exists, a majority of the votes cast at a
meeting of the shareholders present in person or by proxy and entitled to vote
thereon shall be the act of the shareholders.
REMOVAL OF DIRECTORS. The Connecticut Law provides that shareholders may
remove one or more directors with or without cause unless the certificate of
incorporation provides that directors may be removed only for cause. The
Connecticut Law also enables a corporation or 10% of its shareholders to seek
removal of a director through court action in cases of fraud, dishonesty or
gross abuse of power or discretion if removal is in the interest of the
corporation.
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Under the Delaware Law, any director or the entire board of directors may
be removed, with or without cause, by the holders of a majority of the shares
entitled to vote at an election of directors, except in certain circumstances
involving a classified board or cumulative voting. The Delaware Law does not
have a corresponding provision entitling a corporation or 10% of its
shareholders to seek removal of a director through court action in cases of
fraud, dishonesty or gross abuse of power or discretion if removal is in the
interest of the corporation.
NEWLY-CREATED DIRECTORSHIPS AND VACANCIES. Under the Connecticut Law,
unless the certificate of incorporation provides otherwise, if a vacancy occurs
on the board of directors, including a vacancy resulting from an increase in the
number of directors: (i) the shareholders may fill the vacancy, (ii) the board
of directors may fill the vacancy or (iii) if the directors remaining in office
constitute fewer than a quorum of the board of directors, they may fill the
vacancy by the affirmative vote of a majority of all the directors remaining in
office.
Under the Delaware Law, any vacancies in the board and any newly created
directorships resulting by reason of any increase in the number of directors
elected by all of the shareholders having the right to vote as a single class
may be filled by the board, acting by a majority of the remaining directors then
in office, although less than a quorum, or by a sole remaining director.
AMENDMENT TO CERTIFICATE OF INCORPORATION OR BY-LAWS. Under the
Connecticut Law, a proposed amendment to the certificate of incorporation must
be recommended by the corporation's board, unless the corporation's board
determines that because of conflicts of interest or other special circumstances
it should make no recommendation or that none is required by the Connecticut
Law, followed by, in most circumstances, the approval by (i) a majority of the
votes entitled to be cast on the amendment by any voting group with respect to
which the amendment would create dissenters' rights and (ii) a majority of the
votes cast by every other voting group entitled to vote on the amendments,
unless a greater vote is required by law, the certificate of incorporation or
the corporation's board. An amendment to the by-laws that adds, changes or
deletes a greater quorum or voting requirement must meet the same quorum
requirement and be adopted by the same vote required to take action under the
quorum and voting requirements then in effect or proposed to be adopted,
whichever is greater.
According to the Delaware Law, an amendment to the certificate of
incorporation may be authorized by the vote of the board, followed by the vote
of the holders of a majority of all outstanding shares entitled to vote thereon
at a meeting of shareholders. Pursuant to the Delaware Law, the by-laws may be
adopted, amended or repealed by the affirmative vote of the holders of a
majority of all outstanding shares entitled to vote thereon.
SPECIAL MEETINGS; ACTION WITHOUT MEETING. Under the Connecticut Law,
special meetings of a corporation's shareholders may be called by the
corporation's board or by such other persons as are authorized to do so by the
certificate of incorporation or by-laws or upon the written request and delivery
to the corporate secretary from the holders of at least 10% of the shares
entitled to vote on a particular issue.
Pursuant to the Delaware Law, special meetings of shareholders may be
called by the corporation's board or by such other persons as are authorized to
do so by the certificate of incorporation or by-laws.
Under the Delaware Law, unless otherwise provided in the certificate of
incorporation, any action required or permitted to be taken by shareholders of a
Delaware corporation may be taken without a meeting and without a shareholder
vote, if a written consent setting forth the action to be taken is signed by the
holders of shares of outstanding stock having the requisite number of votes that
would be necessary to authorize such action at a meeting at which all
shareholders entitled to vote were present.
BUSINESS COMBINATION STATUTES. The Connecticut Law generally prohibits a
Connecticut corporation from engaging in certain business combinations (as
defined by the statute to include certain mergers and consolidations,
dispositions of assets and issuances of securities, as well as certain other
transactions) with an interested shareholder (as defined by the statute
generally to include holders of 10% or more of the outstanding stock of the
corporation) for a period of five years following the date that such shareholder
became an interested shareholder, (i) unless the business combination or the
purchase of stock is approved by the corporation's board and by a majority of
the non-employee directors of which there must be at least two,
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<PAGE> 18
prior to the date such shareholder became an interested shareholder or (ii)
unless the interested shareholder was an interested shareholder on February 1,
1988, unless subsequent to June 7, 1988, such interested shareholder increased
its proportionate share of the voting power of the outstanding voting stock of
the corporation (excluding any increase approved by the corporation's board
before such increase occurs). The Connecticut Law also generally requires
business combinations with an interested shareholder to be approved by the board
of directors and then by the affirmative vote of at least (1) the holders of 80%
of the voting power of the outstanding shares of voting stock and (2) the
holders of 66 2/3% of such voting power excluding the voting stock held by the
interested shareholder, unless the consideration to be received by the
shareholders of the corporation meet certain price and other requirements set
forth in the statute or unless the board of directors of the corporation has by
resolution determined to exempt business combinations with such interested
shareholder prior to the time that such shareholder became an interested
shareholder.
Section 203 of the Delaware Law, in general, prohibits a Delaware
corporation from engaging in a business combination (defined as a variety of
transactions, including mergers, as set forth below) with an interested
shareholder (defined generally as a person that is the beneficial owner of 15%
or more of a corporation's outstanding voting stock) for a period of three years
following the date that such person became an interested shareholder unless,
among other things, prior to the date such person became an interested
shareholder, the board of directors of the corporation approved either the
business combination or the transaction that resulted in the shareholder
becoming an interested shareholder or at or subsequent to such time the business
combination is approved by the board of directors and authorized at an annual or
special meeting of shareholders (not by written consent) by the affirmative vote
of a least 66 2/3% of the outstanding voting stock which is not owned by the
interested shareholder.
STOCKHOLDER VOTE REQUIRED FOR CERTAIN FUNDAMENTAL TRANSACTIONS. Under the
Connecticut Law, the sale of all or substantially all of a corporation's assets
other than in the regular course of business requires the affirmative vote of a
majority of the outstanding shares entitled to vote. Unless the certificate of
incorporation provides otherwise, and except under certain circumstances where
the Connecticut corporation is the surviving corporation, a merger or share
exchange of a Connecticut corporation must be approved by each voting group
entitled to vote separately on the plan by a majority of all of the votes
entitled to be cast thereon by that voting group.
The Delaware Law generally requires that mergers and consolidations, and
sales, leases or exchanges of all or substantially all of a corporation's
property and assets, be approved by a vote of the holders of a majority of the
outstanding stock entitled to vote, unless a corporation's certificate of
incorporation requires a greater-than-majority vote.
DIVIDENDS. Under the Connecticut Law, a corporation may make a
distribution to shareholders, including a dividend or stock repurchase, with
respect to their shares unless, after giving effect to such distribution, (i)
the corporation would not be able to pay its debts as they become due in the
usual course of business or (ii) the corporation's total assets would be less
than the sum of its total liabilities plus the amount that would be needed, if
the corporation were to be dissolved at the time of the distribution, to satisfy
the preferential rights upon dissolution of shareholders whose preferential
rights are superior to those receiving the distribution.
Under the Delaware Law, a corporation's board may from time to time declare
and pay dividends out of its capital surplus or out of its net profits for the
fiscal year in which the dividend is declared and/or the preceding fiscal year.
LIMITATION ON DIRECTORS' LIABILITY. The Connecticut Law authorizes a
corporation to limit the personal liability of a director to the corporation and
its subsidiaries for monetary damages for breach of duty as a director.
The Delaware Law authorizes corporations to limit or eliminate the personal
liability of directors to corporations and their shareholders for monetary
damages for breach of directors' fiduciary duty of care.
INTERESTED DIRECTOR TRANSACTIONS. Under the Connecticut Law, no
transaction effected or proposed to be effected by a corporation, its
subsidiaries or any other entity in which the corporation has a controlling
interest may be enjoined, set aside, or give rise to an award of damages or
other sanctions merely because a director of
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<PAGE> 19
the corporation, or any person with whom or which he/she has a personal,
economic or other association, has an interest in the transaction which is not a
"director's conflicting interest transaction" as defined in the Connecticut Law.
A director's conflicting interest transaction will not be enjoined, set aside,
or give rise to damages or other sanctions if (i) the transaction received the
affirmative vote of a majority, but no fewer than two, of the disinterested
directors on the corporation's board or on a duly empowered committee of the
board who voted on the transaction after adequate disclosure to them, (ii) the
transaction received a majority of the votes entitled to be cast by the holders
of all shares, excluding those beneficially owned by the director with the
conflict and/or by any persons related to the director or (iii) the transaction,
judged according to the circumstances at the time of the commitment, is
established to have been fair to the corporation.
Under the Delaware Law, no transaction between a Delaware corporation and
one or more of its directors or an entity in which one or more of its directors
are directors or officers or have a financial interest will be void or voidable
solely for that reason and no such transaction will be void or voidable solely
because the director is present at or participates in the meeting of the board
or committee which authorizes the transaction, if, after the material facts of
the director's interest are disclosed to or known by the board or the committee,
the transaction is (i) in good faith authorized by the disinterested directors
or committee of disinterested directors by a vote sufficient for such purpose,
(ii) is approved by a vote of the shareholders after disclosure of the material
facts of the director's interest or (iii) the transaction is fair to the
corporation as of the time it is authorized by the board, committee or
shareholders.
INDEMNIFICATION OF DIRECTORS AND OFFICERS. Under the Connecticut Law
unless the certificate of incorporation provides otherwise, a corporation must
indemnify a director, officer, and any other employee or agent of the
corporation who was wholly successful, on the merits or otherwise, in the
defense of any proceeding to which he was a party because he is or was a
director, officer or other employee or agent of the corporation against
reasonable expenses incurred by him in connection with the proceeding.
Additionally, a corporation must indemnify the director, officer or other
employee or agent of the corporation made party to a proceeding if (i) he
conducted himself in good faith and (ii) he reasonably believed (A) in the case
of conduct in his official capacity with the corporation, that his conduct was
in its best interests and (B) in all other cases, that his conduct was at least
not opposed to its best interests and (iii) in the case of any criminal
proceeding, he had no reasonable cause to believe his conduct was unlawful.
Unless a court orders otherwise, the Connecticut Law prohibits indemnification
(i) in connection with a proceeding by or in the right of the corporation except
for reasonable expenses if it is determined that the director, officer or other
employee or agent has met the relevant standard of conduct or (ii) in connection
with any other proceeding in which he was adjudged liable to the corporation or
in connection with any other proceeding on the basis that an improper personal
benefit was received by him. Indemnification under the Connecticut Law in
connection with a proceeding by or in the right of the corporation in which the
director was adjudged liable is limited to reasonable expenses incurred in
connection with the proceeding. The indemnification requirements under the
Connecticut Law remain limited by the provision in the Connecticut Law that
requires that such indemnification be authorized in the specific case after a
determination that indemnification is permissible in the circumstances because
the director, officer or other employee or agent has met the standard of conduct
set forth by the Connecticut Law.
Under the Delaware Law, a corporation may generally indemnify its
directors, officers, employees or agents for acts performed in good faith and in
a manner such person reasonably believed to be in or not opposed to the best
interest of the corporation, and with respect to any criminal action or
proceeding, had no reasonable cause to believe that such person's act was
unlawful.
DISSENTERS' RIGHTS OF APPRAISAL. The Connecticut Law provides for
dissenters' rights to obtain payment of the fair value of shares to objecting
corporation shareholders (i) entitled to vote on a merger or share exchange,
(ii) in a short form merger of a subsidiary into its parent corporation, (iii)
on the sale of all or substantially all of the assets of a corporation other
than in the usual or regular course of business (except when done pursuant to
court order or a liquidation plan resulting in distributions to shareholders
within one year after the date of sale), (iv) on an amendment to the certificate
of incorporation that materially and adversely affects rights in respect of
dissenters' shares and (v) in any corporate action taken pursuant to a
shareholder vote to the extent the certificate of incorporation, the by-laws or
a directors' resolution provides
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that voting or non-voting shareholders are entitled to dissent and obtain
payment for their shares. Under the Connecticut Law, the dissenter's right of
appraisal and payment under the statute is the dissenter's exclusive remedy.
The Delaware Law generally entitles a shareholder to exercise appraisal
rights upon a merger or consolidation of the corporation effected pursuant to
the Delaware Law if the holder complies with the requirements of Section 262
thereof. Appraisal rights are available under Section 262 of the Delaware Law if
shareholder approval was required for the merger or consolidation and holders of
shares in the constituent corporation are required by the terms of the merger to
accept consideration other than shares of stock of the surviving corporation,
shares of stock of any corporation listed on a national securities exchange,
designated as a national market system security by the National Association of
Securities Dealers, Inc. or held of record by more than 2,000 shareholders, or
cash in lieu of fractional shares.
DURATION OF PROXIES. Under the Connecticut Law, a proxy is not to be voted
or acted upon after the expiration of 11 months from the date of such proxy,
unless it specifies the length of time for which it is to continue in force or
limits its use to a particular meeting not yet held. The Connecticut Law
provides that an appointment of a proxy is revocable unless the appointment form
conspicuously states that it is irrevocable and the appointment is coupled with
an interest which includes proxies created for (i) a pledgee, (ii) a person who
has purchased or agreed to purchase the shares, (iii) a creditor of the
corporation who extends credit in consideration of the proxy, (iv) an employee
of the corporation whose employee contract requires the proxy and (v) a person
designated under a voting agreement.
Under the Delaware Law, a proxy is not valid after three years from the
date of such proxy unless the proxy provides for a longer period. A proxy may be
made 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 proxy may be made irrevocable regardless of whether the interest with
which it is coupled is an interest in the stock itself or an interest in the
corporation generally.
LOANS TO OFFICERS. Under the Delaware Law, a corporation may lend money
to, or guarantee any obligation of, or otherwise assist any officer or other
employee of the corporation, including any officer or employee who is director
of the corporation, whenever in the judgment of the directors, such loan,
guaranty or assistance may reasonably be expected to benefit the corporation.
The Connecticut Law does not have a corresponding provision.
CLASSIFICATION OF THE BOARD OF DIRECTORS. The Connecticut Law permits a
Connecticut corporation to provide for the staggering of the terms of its
directors by dividing the total number of directors into up to five groups, with
each group containing approximately the same percentage of the total, as nearly
as may be.
The Delaware Law permits a Delaware corporation to classify its board of
directors into 1, 2, or 3 classes. The Delaware Law provides that in the case of
a corporation, whose board is classified, shareholders can only remove directors
for cause, unless the certificate of incorporation provides otherwise.
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The Corporation will not request a ruling from the Internal Revenue Service
regarding the Federal income tax consequences of the Merger. However, the
Corporation believes the Merger will constitute a reorganization under Section
368 of the Internal Revenue Code of 1986, as amended (the "Code"). Consequently,
shareholders will not recognize any gain or loss for Federal income tax purposes
as a result of the conversion of their shares into shares of the Surviving
Corporation. For Federal income tax purposes, a shareholder's aggregate basis in
the shares of the Surviving Corporation received in the Merger will equal such
shareholder's aggregate basis in the shares of the Corporation converted
therefor and such shareholder's holding period for the shares of the Surviving
Corporation received in the Merger will include such shareholder's holding
period in the shares of the Corporation converted therefor.
Likewise, the Corporation will not recognize any gain or loss for Federal
income tax purposes upon the transfer of its property to the Surviving
Corporation pursuant to the Merger. In addition, the Surviving
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<PAGE> 21
Corporation will succeed to and take into account the earnings and profits,
accounting methods, and other tax attributes of the Corporation specified in
Section 381(c) of the Code.
Holders of shares of the Corporation should consult their own tax advisors
as to the application and effect of state, local and foreign income and other
tax laws to the conversion of their shares of the Corporation into shares of the
Surviving Corporation pursuant to the Merger.
RIGHTS OF DISSENTING SHAREHOLDERS
If the Reincorporation Proposal is approved by the Corporation's
shareholders, a shareholder of the Corporation objecting to its terms may seek
relief as a dissenting shareholder under Sections 33-855 through 33-872,
inclusive, of the Connecticut Law. An outline of such sections follows; however
it is qualified by and reference is made to the full text of that section, which
is attached hereto as Exhibit A. FAILURE TO COMPLY WITH SUCH SECTIONS MAY RESULT
IN A TERMINATION OR WAIVER OF THE RIGHTS OF THE DISSENTING SHAREHOLDER.
1. A shareholder claiming dissenter's rights and seeking to obtain
payment of the fair value of such shareholder's shares under the Connecticut Law
in connection with the Reincorporation Proposal must be a record or beneficial
owner of shares of the Corporation on the record date set for determining those
shareholders entitled to vote on the Reincorporation Proposal.
2. A record shareholder may assert dissenters' rights as to fewer than
all the shares registered in such record shareholder's name only if such record
shareholder dissents with respect to all shares beneficially owned by any one
person and notifies the Corporation in writing of the name and address of each
person on whose behalf he asserts dissenters' rights. The rights of a partial
dissenter are determined as if the shares as to which he dissents and his other
shares were registered in the names of different shareholders.
3. A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if, prior to assenting dissenters' rights, he submits to
the Corporation the record shareholder's written consent to the dissent, and
only if he dissents with respect to all shares of which he is the beneficial
shareholder or over which he has power to direct the vote.
4. A shareholder who wishes to assert dissenters' rights must, before the
vote is taken, deliver to the Corporation written notice of his intent to demand
payment (an "Intent to Demand Notice") for his shares if the Reincorporation
Proposal is effectuated. The shareholder must not vote his shares in favor of
the Reincorporation Proposal. A shareholder who does not deliver such notice, or
who votes in favor of the Reincorporation Proposal, is not entitled to payment
for his shares.
5. If the Reincorporation Proposal is approved at the Annual Meeting, the
Corporation must, within ten days following the Reincorporation, deliver a
written dissenters' notice (a "Dissenters' Notice") to all shareholders who both
(a) delivered an Intent to Demand Notice to the Corporation and (b) did not vote
in favor of the Reincorporation Proposal.
6. The Dissenters' Notice will include information as to where and when
the dissenting shareholder must send the Payment Demand (as defined below), and
where and when certificates for certificated shares must be deposited, and other
information required by the Connecticut Law.
7. A shareholder sent a Dissenters' Notice must deliver a demand (a
"Payment Demand"), demanding payment, and certifying whether such shareholder
acquired beneficial ownership of the shares before the date required to be set
forth in the Dissenters' Notice, and must deposit his certificates in accordance
with the terms of the Dissenters' Notice.
8. A shareholder who delivers a Payment Demand and deposits his share
certificates as required by the Dissenters' Notice retains all other rights of a
shareholder until these rights are canceled or modified by the taking of the
proposed corporate action.
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9. A shareholder who does not deliver a Payment Demand or deposit his
share certificates where required, each by the date set in the Dissenters'
Notice, is not entitled to payment for his shares under the Connecticut Law.
10. Except in certain circumstances described in the Connecticut Law, as
soon as the Reincorporation is consummated, or upon receipt of a Payment Demand,
the Corporation must pay each dissenter who complied with the steps described in
paragraph 7 above the amount the Corporation estimates to be the fair value of
his shares, plus accrued interest. The payment must be accompanied by the
Corporation's balance sheet as of the end of a fiscal year ending not more than
sixteen months before the date of payment, an income statement for that year, a
statement of changes in shareholders' equity for that year and the latest
available interim financial statements, if any, and other documentation required
by the Connecticut Law.
11. If the Corporation does not effectuate the Reincorporation within
sixty days after the date set for demanding payment and depositing share
certificates, the Corporation shall return the deposited certificates and
release the transfer restrictions imposed on uncertificated shares. If after
returning deposited certificates and releasing transfer restrictions, the
Corporation effectuates the Reincorporation, it must send a new Dissenters'
Notice and repeat the payment demand procedure.
12. In certain circumstances set forth in the Connecticut Law, a dissenter
may notify the Corporation in writing of his own estimate of the fair value of
his shares and amount of interest due, and demand payment of his estimate, less
any payment received or, in other circumstances, reject the Corporation's offer.
A dissenter waives this right unless he notifies the Corporation of his demand
in writing within thirty days after the Corporation made or offered payment for
his shares.
13. Where the right to be paid the value of shares is made available to a
shareholder, such remedy is the exclusive remedy for a shareholder against the
Reincorporation, whether or not such shareholder asserts such right.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recommends approval of the Reincorporation. Proxies
solicited by the Board of Directors will be voted FOR the Reincorporation unless
shareholders specify otherwise.
PROPOSAL 3:
1999 LONG-TERM INCENTIVE PLAN
The Corporation's 1999 Long-Term Incentive Plan (the "Plan") was adopted by
the Board of Directors on April 9, 1999. A copy of the Plan is attached hereto
as Exhibit F and the following summary description is qualified in its entirety
by reference to the Plan. The purposes of the Plan are to advance the long-term
interests of the Corporation by motivating key employees and consultants and the
directors of the Corporation with the opportunity to obtain a proprietary and
vested interest in the growth and performance of the Corporation, and to
generate an increased incentive to contribute to the Corporation's future
success and prosperity, thereby enhancing the value of the Corporation for the
benefit of shareholders and the ability of the Corporation to attract and retain
individuals of exceptional talent. Under the terms of the Plan, the Committee
(as defined below) may grant stock options, stock appreciation rights, limited
stock appreciation rights, restricted stock awards and/or performance shares to
key employees and consultants of the Corporation, and shall grant shares of
Common Stock to non-employee directors as set forth in the Plan.
The Plan will be effective as of April 9, 1999, subject to shareholder
approval, and will remain in effect so long as shares of Common Stock available
for grants or awards thereunder. If the Merger is approved, then upon
consummation of the Merger, the Plan will be re-named "E-Sync Networks, Inc.'s
1999 Long-Term Incentive Plan", and will apply to the Surviving Corporation in
the same manner as it applies to the Corporation.
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NUMBER OF SHARES
The Plan provides that 750,000 shares of Common Stock will be available in
the aggregate for the grant of stock options, stock appreciation rights, limited
stock appreciation rights, restricted stock awards, grants to non-employee
directors and/or performance shares from time to time. The market value of such
750,000 shares of Common Stock, based upon the last reported trading price per
share on June 3, 1999, being $4.56, is $3,420,000. No more than 180,000 shares
of Common Stock subject to the Plan may be awarded in any year to any
participant in the Plan.
These numbers are subject to adjustment to reflect certain distributions of
shares of stock and certain stock changes such as stock dividends, stock splits
and share exchanges. Shares of Common Stock available for issuance under the
Plan may be authorized but unissued treasury shares. Shares of Common Stock
covered by lapsed, canceled, surrendered or terminated options or other awards
will be available again for grant under the Plan.
ADMINISTRATION; ELIGIBILITY
The Plan will be administered by a committee (the "Committee"), or in the
absence of a designated Committee, by the Board. Members of the Committee will
be appointed by and will serve at the pleasure of the Board of Directors.
Following the meeting of shareholders, the new Board of Directors will determine
the initial members of the Committee. Except with respect to Non-Employee
Directors, the selection of the participants in the Plan and the extent of the
participation of each will be determined by the Committee. Such participants
will be employees and consultants of the Corporation whose performance, as
determined by the Committee, can have an effect on the growth, profitability and
success of the Corporation. As of today, the Corporation has approximately 70
employees and four Non-Employee Directors, including John C. Maxwell, III, the
Chairman and Chief Executive Officer, who is not an employee, of the
Corporation, all of whom will be eligible to participate in the Plan.
STOCK OPTIONS
The Committee may grant a participant the option to purchase shares of
Common Stock of the Corporation through incentive stock options qualified under
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code") or
options not qualified under Section 422 of the Code ("non-qualified stock
options") or a combination of both. Incentive stock options must be granted at
not less than 100% of the fair market value of the underlying Common Stock on
the date the option is granted, and at not less than 110% of such fair market
value if granted to an employee who, at the time of grant, owns stock having
more than 10% of the total combined voting power of all classes of stock of the
Corporation (a "Ten Percent Stockholder"). However, in the Committee's sole
discretion, non-qualified stock options may be granted at less than fair market
value. Upon exercise, the option price is to be paid in full in cash, in shares
of Common Stock, in such other consideration as the Committee may deem
appropriate, or through an arrangement with a broker. Options will be
exercisable in whole or in part, provided that no stock option may be
exercisable more than ten years after the date of its grant, and with respect to
an incentive stock option granted to a Ten Percent Stockholder, no such
incentive stock option may be exercisable more than five years after the date of
its grant.
STOCK APPRECIATION RIGHTS
The Committee may grant participants the right to receive a payment equal
to the appreciation in market value of a stated number of shares of Common Stock
from the date of the agreement granting the stock appreciation right (the "base
price") to its date of exercise or, if the Committee shall so determine in the
case of any such right other than one related to any incentive stock option, at
any time during a specified period before the date of exercise. These stock
appreciation rights may or may not be granted in tandem with stock options.
Stock appreciation rights granted in tandem with stock options will be
exercisable only to the extent the related stock option is exercisable and upon
exercise of such a tandem stock appreciation right, the related stock option
shall be canceled to the extent of the number of stock appreciation rights
exercised.
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LIMITED STOCK APPRECIATION RIGHTS
The Committee may grant participants the right to receive a payment in cash
equal to the appreciation over the base price by the greater of (i) the highest
price of shares of Common Stock paid in connection with a change in control and
(ii) (a) if the shares are traded on an exchange, the highest closing trade
price per share on such exchange during the 60 days prior to the change in
control, and (b) if the shares are not traded on an exchange, but are traded
over-the-counter, the average of the highest daily closing bid and ask price of
the shares of Common Stock during the 60 days prior to the change in control.
These limited stock appreciation rights may only be granted in tandem with a
stock option or stock appreciation right, but may be granted at the time such
option or stock appreciation right is granted or at any time thereafter. Limited
stock appreciation rights are exercisable in full for a period of seven months
following the date of a change in control.
If limited stock appreciation rights are exercised, the stock options and
stock appreciation rights to which they are attached can no longer be exercised.
If the stock options or stock appreciation rights are exercised or terminated,
the related unexercised limited stock appreciation rights are simultaneously
canceled.
RESTRICTED STOCK AWARDS
The Plan permits the Committee to award restricted stock to participants
with such terms, conditions, restrictions or limitations as the Committee deems
appropriate (including, in the discretion of the Committee, without payment of
consideration by the participant). While the restrictions are in effect, the
Committee may permit a participant the right to vote shares and the right to
receive any dividends. Restricted stock awards may be evidenced by stock
certificates, book-entry registrations or in such other manner as the Committee
determines.
GRANTS OF OPTIONS TO NON-EMPLOYEE DIRECTORS
The Plan provides that all Non-Employee Directors in office on the date of
the approval of the Plan by the Corporation's Board of Directors, and each
person who thereafter becomes a Non-Employee Director, on the date they become a
Non-Employee Director, will receive a Non-qualified Stock Option to purchase
20,000 shares of Common Stock at a price equal to the fair market value of such
a share on such date, exercisable after the first anniversary of the date of
grant thereof, and through the tenth anniversary of the date of the grant
thereof. For these purposes, the fair market value of a share shall be the last
reported trading price on the last trading day before the date such Non-Employee
Director becomes entitled to receive the options (or, if there were no trades on
such date, the average of the bid and asked prices per share on such date).
PERFORMANCE SHARES
The Plan permits the Committee to grant performance shares to participants,
which will entitle such employee to convert the performance shares into shares
of Common Stock, into cash or into a combination thereof, as determined by the
Committee, if pre-determined performance targets or goals are met. Performance
goals may include, but not be limited to, one or more of the following:
operating earnings, net earnings, return on equity, income, market share,
shareholder return, combined ratio, level of expenses or growth in revenue. The
Committee will determine the length of the performance period. Award payments
made in cash rather than by the issuance of shares will not result in additional
shares being available under the Plan.
EMPLOYMENT; TRANSFERABILITY
The Committee is authorized under the Plan to adopt policies regarding the
entitlement of participants in the event of retirement, permanent disability or
death, or in cases of special circumstances. These policies may vary depending
upon the specific circumstances and the individual involved.
The Committee in its sole discretion may permit the assignment or transfer
of the rights and interests of a participant under the Plan, and of any security
issued or granted under the Plan; provided, however, an award
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<PAGE> 25
under the Plan may not be assignable or transferrable unless the exercise
thereof and subsequent sale are eligible for registration on a Registration
Statement on Form S-8.
AMENDMENTS
The Committee may amend, alter or discontinue the Plan at any time but may
not, without the affected participant's consent, make any amendment, alteration
or discontinuation that would impair the rights of a participant under an award
previously granted. In addition, the Committee may not, without shareholder
approval, adopt any amendment which would (a) increase the number of shares of
Common Stock which may be issued under the Plan (except in the event of certain
extraordinary occurrences, as described in the Plan), (b) change the employees
or class of employees eligible to participate in the Plan, or (c) change the
terms of grants to Non-Employee Directors provided for in the Plan.
NEW PLAN BENEFITS
WILTEK, INC.'S 1999 LONG-TERM INCENTIVE PLAN
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING
NAME AND POSITION DOLLAR VALUE OPTIONS(1)
- ----------------- ------------ ------------------
<S> <C> <C> <C>
Non-Employee Director Group
John C. Maxwell, III.................................. $8,740(2) 20,000
Peter J. Boni......................................... $8,740(2) 20,000
Graeme MacLetchie..................................... $8,740(2) 20,000
Stephen D. Grubbs..................................... $5,000(3) 20,000
Nathan Gantcher....................................... (4) 20,000
</TABLE>
- ---------------
(1) Represents non-qualified stock option awards to be made under the Plan,
subject to shareholder approval.
(2) Based on the difference between the last reported trading price on April 8,
1999, the trading day before the date such individual became entitled to
receive options, and the last reported trading price on June 3, 1999.
(3) Based on the difference between the last reported trading price on May 28,
1999, the trading day before the date such individual became entitled to
receive options, and the last reported trading price on June 3, 1999.
(4) Not yet determinable.
------------------------
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the Federal income tax treatment of the
incentive stock options, non-qualified stock options, stock appreciation rights,
limited stock appreciation rights, restricted stock awards and performance
shares that may be granted under the Plan based upon the current provisions of
the Code and regulations promulgated thereunder.
INCENTIVE STOCK OPTIONS. Incentive stock options under the Plan are
intended to meet the requirements of Section 422 of the Code. Under this section
of the Code, the grant of an incentive stock option will not result in the
realization of income to the option holder, and the Corporation will likewise
not be entitled to a deduction. Furthermore, if an option holder acquires stock
upon the exercise of an incentive stock option, no income will result to the
option holder and the Corporation will be allowed no deduction as a result of
such exercise if the following conditions are met: (a) at all times during the
period beginning with the date of the grant of the option and ending on the date
three months before the date of such exercise, the option holder is an employee
of the Corporation or of a subsidiary; and (b) the option holder makes no
disposition of the stock within two years from the date the option is granted
nor within one year after the option is exercised. In the event of a sale of
such stock by the option holder after compliance with these conditions, any gain
realized over the price paid for the stock will ordinarily be treated as a
capital gain, and any loss will ordinarily be treated as a capital loss, in the
year of sale. The exercise of an incentive stock option may result in
alternative minimum tax liability to the option holder.
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If the option holder fails to comply with the employment or holding period
requirements discussed above, such person will be treated as having received
compensation taxable as ordinary income and/or having received a capital gain
(or loss) in an amount equal to the difference between the option price and the
fair market value of the shares on the date of exercise, in accordance with the
provisions of the Code. If the option holder is treated as having received
compensation because of this failure to comply with either condition above, an
equivalent deduction from income will be allowed to the Corporation in the same
year.
NON-QUALIFIED STOCK OPTIONS. The grant of a non-qualified stock option
will not result in the realization of income for Federal tax purposes for an
option holder, nor will the grant entitle the Corporation to a tax deduction. An
option holder who exercises a non-qualified stock option will generally realize
compensation taxable as ordinary income in an amount equal to the difference
between the option price and the fair market value of the shares on the date of
exercise, and the Corporation will be entitled to a deduction from income in the
same amount. The option holder's basis in such shares will be the fair market
value on the date exercised, and capital gain or loss will be recognized in the
year of a subsequent sale.
STOCK APPRECIATION RIGHTS. The grant of a stock appreciation right will
not result in tax consequences to the Corporation or to an award holder. A
holder who exercises a stock appreciation right will realize compensation
taxable as ordinary income in an amount equal to the cash or the fair market
value of the shares or other property received on the date of exercise, and the
Corporation will be entitled to a deduction in the same amount.
If an employee allows a stock appreciation right granted in tandem with an
option to expire, otherwise than as a result of exercising a related option, the
Internal Revenue Service may contend that the employee will have taxable income
in the year of expiration equal to the amount of cash or the fair market value
of stock or other property which he would have received if he had exercised his
stock appreciation right immediately before it expired. In addition, under
Treasury Regulations governing incentive stock options, a stock appreciation
right with respect to an incentive stock option must be granted at the same time
the incentive stock option is granted in order to ensure that the incentive
stock option remains qualified as such.
LIMITED STOCK APPRECIATION RIGHTS. The grant of a limited stock
appreciation right will not result in tax consequences to the Corporation or to
a participant. A participant who exercises a limited stock appreciation right
will realize compensation taxable as ordinary income in an amount equal to the
cash or the fair market value of the shares or other property received on the
date of exercise, and the Corporation will be entitled to a deduction in the
same amount. A participant who does not exercise at the time of a change in
control and allows the limited stock appreciation rights to lapse could be taxed
as though exercise had occurred at either of those two dates.
RESTRICTED STOCK AWARDS. Restricted stock awards granted under the Plan
will constitute taxable income to the recipient, and a deductible expense to the
Corporation, in the year in which the restrictions lapse unless the participant
elects to recognize income in the year the award is made. Unless such an
election is made, the amount of the taxable income and corresponding deduction
will be equal to the excess of the fair market value of the stock on the date
the restrictions lapse over the amount, if any, paid for such stock. The
Corporation is also allowed a compensation deduction for dividends paid to
participants (provided they have not elected to recognize income at the time of
the award) on restricted stock while the restrictions remain in force.
PERFORMANCE SHARES. Performance Shares awarded under the Plan will not
constitute a taxable event to the recipient until such time as the recipient
actually receives shares of Common Stock or cash or other property related to
such award. The amount of taxable income will be equal to the amount of cash
received or the fair market value of stock or other property received at such
time. The Corporation will be entitled to a compensation deduction in the same
year.
PERFORMANCE-BASED COMPENSATION. Generally, a federal income tax deduction
is unavailable for annual compensation in excess of $1,000,000 paid to any of
the five most highly compensated officers of a public company. Compensation that
qualifies as performance-based compensation, however, is not counted toward the
$1,000,000 limit. All grants made under the Plan other than grants of Restricted
Stock are intended to qualify as performance-based compensation.
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INTEREST OF CERTAIN PERSONS
Each of the directors and executive officers of the Corporation has an
interest in the proposal to adopt the Plan because all employees and
non-employee directors of the Corporation are eligible to receive awards under
such Plan. However, no determination has yet been made as to specific recipients
and amounts of such awards.
MISCELLANEOUS
If the Merger is approved, then upon consummation of the Merger, the Plan
will be re-named "E-Sync Networks, Inc.'s 1999 Long-Term Incentive Plan", and
will apply to the Surviving Corporation in the same manner as it is applicable
to the Corporation.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recommends approval of the Plan. Proxies solicited
by the Board of Directors will be voted FOR the Plan unless shareholders specify
otherwise.
INDEPENDENT ACCOUNTANTS
Grant Thornton LLP acted as the Corporation's independent accountants in
the audit of its books and accounts for the fiscal year which ended October 31,
1998. The fiscal year-end of the Corporation has been changed to December 31,
effective with the fiscal year ending in 1999. KPMG LLP has been retained to act
as independent accountants for the current fiscal year ending December 31, 1999.
Representatives of KPMG LLP are expected to be present at the meeting and will
have the opportunity to make a statement if they desire to do so and will also
be available to respond to appropriate questions.
SHAREHOLDER PROPOSALS
Proposals of shareholders submitted for consideration at the 2000 Annual
Meeting of Shareholders must be received by the Corporation no later than
February 24, 2000 in order to be included in the proxy statement and proxy card
for that meeting.
OTHER MATTERS
As of the date of this Proxy Statement, the management has no knowledge of
any other business to be presented to the meeting, but if other business is
properly brought before the meeting the persons named in the Proxy will vote
according to their discretion.
By Order of the Board of Directors,
Walter Keisch Signature
Walter R. Keisch
Secretary
Dated: June 24, 1999
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Exhibit A
CONNECTICUT GENERAL STATUTES
DISSENTERS' RIGHTS
33-855. DEFINITIONS
As used in section 33-855 to 33-872, inclusive:
1. "Corporation" means the issuer of the shares held by a dissenter before
the corporate action or the surviving or acquiring corporation by merger or
share exchange of that issuer.
2. "Dissenter" means a shareholder who is entitled to dissent from
corporate action under section 33-856 and who exercises that right when and in
the manner required by sections 33-860 to 33-868, inclusive.
3. "Fair value", with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action.
4. "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate that is fair and
equitable under all the circumstances.
5. "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
6. "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
7. "Shareholder" means the record shareholder or the beneficial
shareholder.
33-856. RIGHT TO DISSENT
(a) A shareholder is entitled to dissent from, and obtain payment of the
fair value of his shares in the event of, any of the following corporate
actions:
(1) Consummation of a plan of merger to which the corporation is a party
(A) if shareholder approval is required for the merger by section
33-817 or the certificate of incorporation and the shareholder is
entitled to vote on the merger or (B) if the corporation is a
subsidiary that is merged with its parent under section 33-818;
(2) Consummation of a plan of share exchange to which the corporation is
a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
(3) Consummation of a sale or exchange of all, or substantially all, of
the property of the corporation other than in the usual and regular
course of business, if the shareholder is entitled to vote on the
sale or exchange, including a sale in dissolution, but not including
a sale pursuant to court order or a sale for cash pursuant to a plan
by which all or substantially all of the net proceeds of the sale
will be distributed to the shareholders within one year after the
date of sale;
(4) An amendment of the certificate of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because
it: (A) alters or abolishes a preferential right of the shares; (B)
creates, alters or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption
or repurchase, of the shares; (C) alters or abolishes a preemptive
right of the holder of the shares to acquire shares or other
securities; (D) excludes or limits the right of the shares to vote
on any matter, or to cumulate votes, other than a limitation by
dilution through issuance of shares or other securities with similar
voting
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rights; or (E) reduces the number of shares owned by the shareholder
to a fraction of a share if the fractional share so created is to be
acquired for cash under section 33-668; or
(5) Any corporate action taken pursuant to a shareholder vote to the
extent the certificate of incorporation, by-laws or a resolution of
the board of directors provides that voting or nonvoting
shareholders are entitled to dissent and obtain payment for their
shares.
(b) Where the right to be paid the value of shares is made available to a
shareholder by this section, such remedy shall be his exclusive remedy as holder
of such shares against the corporate transactions described in this section,
whether or not he proceeds as provided in sections 33-855 to 33-872, inclusive.
33-857. DISSENT BY NOMINEES AND BENEFICIAL OWNERS
(a) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the corporation in writing of
the name and address of each person on whose behalf he asserts dissenters'
rights. The rights of a partial dissenter under this subsection are determined
as if the shares as to which he dissents and his other shares were registered in
the names of different shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to shares
held on his behalf only if: (1) he submits to the corporation the record
shareholder's written consent to the dissent not later than the time the
beneficial shareholder asserts dissenters' rights; and (2) he does so with
respect to all shares of which he is the beneficial shareholder or over which he
has power to direct the vote.
33-858, 33-859. RESERVED FOR FUTURE USE
33-860. NOTICE OF DISSENTERS' RIGHTS
(a) If proposed corporate action creating dissenters' rights under section
33-856 is submitted to a vote at a shareholders' meeting, the meeting notice
shall state that shareholders are or may be entitled to assert dissenters'
rights under sections 33-855 to 33-872, inclusive, and be accompanied by a copy
of said sections.
(b) If corporate action creating dissenters' rights under section 33-856 is
taken without a vote of shareholders, the corporation shall notify in writing
all shareholders entitled to assert dissenters' rights that the action was taken
and send them the dissenters' notice described in section 33-862.
33-861. NOTICE OF INTENT TO DEMAND PAYMENT
(a) If proposed corporate action creating dissenters' rights under section
33-856 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights (1) shall deliver to the corporation before
the vote is taken written notice of his intent to demand payment for his shares
if the proposed action is effectuated and (2) shall not vote his shares in favor
of the proposed action.
(b) A shareholder who does not satisfy the requirements of subsection (a)
of this section is not entitled to payment for his shares under sections 33-855
to 33-872, inclusive.
33-862. DISSENTERS' NOTICE
(a) If proposed corporate action creating dissenters' rights under section
33-856 is authorized at a shareholders' meeting, the corporation shall deliver a
written dissenters' notice to all shareholders who satisfied the requirements of
section 33-861.
(b) The dissenters' notice shall be sent no later than ten days after the
corporate action was taken and shall:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
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(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Supply a form for demanding payment that includes the date of the
first announcement to news media or to shareholders of the terms of
the proposed corporate action and requires that the person asserting
dissenters' rights certify whether or not he acquired beneficial
ownership of the shares before that date;
(4) Set a date by which the corporation must receive the payment demand,
which date may not be fewer than thirty nor more than sixty days
after the date the subsection (a) of this section notice is
delivered; and
(5) Be accompanied by a copy of sections 33-855 to 33-872, inclusive.
33-863. DUTY TO DEMAND PAYMENT
(a) A shareholder sent a dissenters' notice described in section 33-862
must demand payment, certify whether he acquired beneficial ownership of the
shares before the date required to be set forth in the dissenters' notice
pursuant to subdivision (3) of subsection (b) of said section and deposit his
certificates in accordance with the terms of the notice.
(b) The shareholder who demands payment and deposits his share certificates
under subsection (a) of this section retains all other rights of a shareholder
until these rights are canceled or modified by the taking of the proposed
corporate action.
(c) A shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under sections 33-855 to 33-872,
inclusive.
33-864. SHARE RESTRICTIONS
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under section 33-866.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the taking of the proposed corporate action.
33-865. PAYMENT
(a) Except as provided in section 33-867, as soon as the proposed corporate
action is taken, or upon receipt of a payment demand, the corporation shall pay
each dissenter who complied with section 33-863 the amount the corporation
estimates to be the fair value of his shares, plus accrued interest.
(b) The payment shall be accompanied by: (1) the corporation's balance
sheet as of the end of a fiscal year ending not more than sixteen months before
the date of payment, an income statement for that year, a statement of changes
in shareholders' equity for that year and the latest available interim financial
statements, if any; (2) a statement of the corporation's estimate of the fair
value of the shares; (3) an explanation of how the interest was calculated; (4)
a statement of the dissenter's right to demand payment under section 33-860; and
(5) a copy of sections 33-855 to 33-872, inclusive.
33-866. FAILURE TO TAKE ACTION
(a) If the corporation does not take the proposed action within sixty days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
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(b) If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under section 33-862 and repeat the payment demand procedure.
33-867. AFTER-ACQUIRED SHARES
(a) A corporation may elect to withhold payment required by section 33-865
from a dissenter unless he was the beneficial owner of the shares before the
date set forth in the dissenters' notice as the date of the first announcement
to news media or to shareholders of the terms of the proposed corporate action.
(b) To the extent the corporation elects to withhold payment under
subsection (a) of this section, after taking the proposed corporate action, it
shall estimate the fair value of the shares, plus accrued interest, and shall
pay this amount to each dissenter who agrees to accept it in full satisfaction
of his demand. The corporation shall send with its offer a statement of its
estimate of the fair value of the shares, an explanation of how the interest was
calculated and a statement of the dissenter's right to demand payment under
section 33-868.
33-868. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of his estimate, less any payment under section 33-865, or reject the
corporation's offer under section 33-867 and demand payment of the fair value of
his shares and interest due, if:
(1) The dissenter believes that the amount paid under section 33-865 or
offered under section 33-867 is less than the fair value of his
shares or that the interest due is incorrectly calculated;
(2) The corporation fails to make payment under section 33-865 within
sixty days after the date set for demanding payment; or
(3) The corporation, having failed to take the proposed action, does not
return the deposited certificates or release the transfer
restrictions imposed on uncertificated shares within sixty days
after the date set for demanding payment.
(b) A dissenter waives his right to demand payment under this section
unless he notifies the corporation of his demand in writing under subsection (a)
of this section within thirty days after the corporation made or offered payment
for his shares.
33-869, 33-870. RESERVED FOR FUTURE USE
33-871. COURT ACTION
(a) If a demand for payment under section 33-868 remains unsettled, the
corporation shall commence a proceeding within sixty days after receiving the
payment demand and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding within
the sixty-day period, it shall pay each dissenter whose demand remains unsettled
the amount demanded.
(b) The corporation shall commence the proceeding in the superior court for
the judicial district where a corporation's principal office or, if none in this
state, its registered office is located. If the corporation is a foreign
corporation without a registered office in this state, it shall commence the
proceeding in the superior court for the judicial district where the registered
office of the domestic corporation merged with or whose shares were acquired by
the foreign corporation was located.
(c) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the proceeding as in an
action against their shares and all parties must be served with a copy of the
petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law.
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(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) of this section is plenary and exclusive. The court may
appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers described
in the order appointing them, or in any amendment to it. The dissenters are
entitled to the same discovery rights as parties in other civil proceedings.
(e) Each dissenter made a party to the proceeding is entitled to judgment
(1) for the amount, if any, by which the court finds the fair value of his
shares, plus interest, exceeds the amount paid by the corporation, or (2) for
the fair value, plus accrued interest, of his after-acquired shares for which
the corporation elected to withhold payment under section 33-867.
33-872. COURT COSTS AND COUNSEL FEES
(a) The court in an appraisal proceeding commenced under section 33-871
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court. The court shall
assess the costs against the corporation, except that the court may assess costs
against all or some of the dissenters, in amounts the court finds equitable, to
the extent the court finds the dissenters acted arbitrarily, vexatiously or not
in good faith in demanding payment under section 33-868.
(b) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable: (1) against
the corporation and in favor of any or all dissenters if the court finds the
corporation did not substantially comply with the requirements of sections 3-860
to 33-868, inclusive; or (2) against either the corporation or a dissenter, in
favor of any other party, if the court finds that the party against whom the
fees and expenses are assessed acted arbitrarily, vexatiously or not in good
faith with respect to the rights provided by sections 33-855 to 33-872,
inclusive.
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
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Exhibit B
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated June , 1999, by and between WILTEK,
INC., a Connecticut corporation (hereinafter called "Wiltek"), and E-SYNC
NETWORKS, INC., a Delaware corporation (hereinafter called "E-Sync"; Wiltek and
E-Sync being hereinafter sometimes collectively referred to as the "Constituent
Corporations").
W I T N E S S E T H:
WHEREAS, Wiltek is a corporation duly organized and existing under the laws
of the State of Connecticut, under its present name, and has, as of the date
hereof, authorized capital stock of ten million (10,000,000) shares, of which
one million (1,000,000) shares are preferred stock, no par value per share
("Wiltek Preferred Stock"), and nine million (9,000,000) shares are common
stock, no par value per share ("Wiltek Common Stock"), of which 4,062,128 shares
of common stock and 1,000,000 shares of preferred stock are issued and
outstanding; and
WHEREAS, the 1,000,000 outstanding shares of Wiltek Preferred Stock have
been designated as Senior Convertible Series A Preferred Stock ("Wiltek Series A
Preferred Stock"); and
WHEREAS, E-Sync is a corporation duly organized and existing under the laws
of the State of Delaware, under its present name, and has, as of the date
hereof, authorized capital stock of sixty million (60,000,000) shares, of which
ten million (10,000,000) shares are preferred stock, par value $0.01 per share,
and fifty million (50,000,000) shares are common stock, par value $0.01 per
share, of which 100 shares of common stock are issued and outstanding and held
by Wiltek beneficially and of record; and
WHEREAS, 1,000,000 shares of E-Sync's preferred stock have been designated
as Senior Convertible Series A Preferred Stock ("Surviving Corporation Series A
Preferred Stock"); and
WHEREAS, Wiltek and E-Sync wish to effect the merger of Wiltek with and
into E-Sync (the "Merger"), with E-Sync being the surviving corporation of the
Merger, as authorized by the statutes of the States of Delaware and Connecticut
under and pursuant to the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein contained, and for the purpose of prescribing the terms
and conditions of the Merger, the mode of carrying the same into effect, the
manner and basis of converting or exchanging the shares of each of the
Constituent Corporations into or for shares of the Surviving Corporation (as
hereinafter defined), or the cash to be paid or to be delivered in exchange for
shares of a Constituent Corporation, and such other details and provisions as
are deemed necessary or proper, the parties hereto have agreed and do hereby
agree as follows:
ARTICLE I
In accordance with the provisions of this Agreement, the provisions of the
Delaware General Corporation Law and the provisions of the Connecticut Business
Corporation Act, Wiltek shall be merged with and into E-Sync, which is hereby
designated as the "Surviving Corporation", which shall not be a new corporation
and which shall continue its corporate existence as a Delaware corporation to be
governed by the laws of the State of Delaware. The name of the Surviving
Corporation shall be E-SYNC NETWORKS, INC.
ARTICLE II
The Certificate of Incorporation of E-Sync, as in existence at the
Effective Time of the Merger (as hereinafter defined), shall become and be the
Certificate of Incorporation of the Surviving Corporation.
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ARTICLE III
The By-laws of E-Sync as in existence at the Effective Time of the Merger
shall become and be the By-laws of the Surviving Corporation until thereafter
duly altered, amended or repealed.
ARTICLE IV
The directors and officers of Wiltek immediately prior to the Effective
Time of the Merger shall be the directors and officers of the Surviving
Corporation immediately upon the occurrence of the Merger, in both cases until
such time as their successors shall have been duly elected and shall have
qualified.
ARTICLE V
The authorized capital stock of the Surviving Corporation at the Effective
Time of the Merger shall consist of 50,000,000 shares of Common Stock, .01 value
per share (hereinafter called "Common Stock of the Surviving Corporation"), and
10,000,000 shares of Preferred Stock, .01 par value per share (hereinafter
called "Preferred Stock of the Surviving Corporation") of which 1,000,000 shares
will be Surviving Corporation Series A Preferred Stock.
ARTICLE VI
The manner and basis of converting or exchanging the capital stock of each
of the Constituent Corporations into or for capital stock of the Surviving
Corporation, or the cash and securities to be paid or delivered in exchange
therefor, as the case may be, at the Effective Time of the Merger, and the mode
of carrying the Merger into effect, shall be as follows:
(a) Each share of E-Sync Common Stock issued and outstanding at the
Effective Time of the Merger shall, by virtue of the Merger and without any
further action on the part of the holder thereof, be canceled without
consideration.
(b) Each share of Wiltek Common Stock issued and outstanding at the
Effective Time of the Merger shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into and shall become one
fully paid and nonassessable share of the Common Stock of the Surviving
Corporation, which shares shall constitute the only issued and outstanding
shares of common stock of the Surviving Corporation.
(c) Each share of Wiltek Series A Preferred Stock issued and outstanding at
the Effective Time of the Merger shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into and shall become one
fully paid and nonassessable share of the Surviving Corporation Series A
Preferred Stock, which shares shall constitute the only issued and outstanding
shares of Preferred Stock of the Surviving Corporation.
(d) 1. As soon as practicable after the Effective Time of the Merger, each
holder of Wiltek Common Stock converted pursuant to Article 6(b) hereof and each
holder of Wiltek Series A Preferred Stock converted pursuant to Article 6(c)
hereof, as the case may be, will be entitled to receive certificates
representing the shares of Common Stock of the Surviving Corporation as provided
in Article 6(b) hereof or the shares of Surviving Corporation Series A Preferred
Stock pursuant to Article 6(c) hereof, as the case may be, in either case upon
surrender to the Surviving Corporation of one or more certificates representing
such holder's shares of Wiltek Common Stock or Wiltek Series A Preferred Stock,
as the case may be, for cancellation. Until so surrendered, each such
certificate shall upon and after the Effective Time of the Merger be deemed for
all purposes to represent and evidence only the right to receive a certificate
representing the specified number of shares of Common Stock of the Surviving
Corporation or Surviving Corporation Series A Preferred Stock, as the case may
be.
2. With respect to the claim for share certificates under Articles 6(b) or
6(c) of any record holder of shares of either Wiltek Common Stock or Wiltek
Preferred Stock whose share certificates have been lost or
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destroyed, the Board of Directors of the Surviving Corporation, in its
discretion, may impose such terms and conditions precedent to the delivery of
such certificates as it deems expedient, and may require such bonds or other
indemnities as it deems adequate to protect the Surviving Corporation from any
claim that may be brought against it with respect to any certificate alleged to
have been lost or destroyed.
3. At the Effective Time of the Merger, the stock transfer books of Wiltek
shall be closed, and no transfers of Wiltek Common Stock or Wiltek Preferred
Stock shall thereafter be made.
(e) If any certificate for shares of Common Stock or Preferred Stock of the
Surviving Corporation is to be issued in a name other than that in which the
certificate surrendered in exchange therefor is registered, it shall be a
condition of the issuance thereof that the certificate so surrendered shall be
properly endorsed and otherwise in proper form for transfer and that the person
requesting such exchange pay to the Surviving Corporation any transfer or other
taxes required by reason of the issuance of a certificate for shares of Common
Stock or Preferred Stock of the Surviving Corporation in any name other than
that of the registered holder of the certificate surrendered, or establish to
the satisfaction of the Surviving Corporation that such tax has been paid or is
not payable.
ARTICLE VII
At the Effective Time of the Merger:
(a) The number of shares of Common Stock and Preferred Stock of the
Surviving Corporation which the outstanding shares of Wiltek Common Stock and
Preferred Stock shall have become pursuant to the provisions of Article VI of
this Agreement and Plan of Merger shall be deemed to be issued and outstanding,
and the capital of the Surviving Corporation shall be $.01 for each share of
Common Stock or Preferred Stock of the Surviving Corporation then issued and
outstanding.
(b) All outstanding warrants, options, agreements, convertible securities
or other commitments (collectively "Options") pursuant to which Wiltek is or may
become obligated to issue any shares of its capital stock or other securities of
Wiltek shall, automatically and without further action on the part of the holder
thereof, be converted into Options giving the holder thereof the right to
purchase the same number of shares of Common Stock or Preferred Stock, as the
case may be, of the Surviving Corporation, at the same exercise price per share,
and containing such other terms and conditions, as pertained under the Options
outstanding immediately prior to the Effective Time of the Merger.
ARTICLE VIII
Notwithstanding the approval and adoption of this Agreement and Plan of
Merger by Wiltek and E-Sync, this Agreement and Plan of Merger may be terminated
at any time prior to the Effective Time of the Merger upon the agreement of
Wiltek and E-Sync. In the event of the termination of this Agreement and Plan of
Merger as provided above, this Agreement and Plan of Merger shall forthwith
become void and there shall be no liability on the part of any of the parties
hereto.
ARTICLE IX
The Merger shall become effective when all the following actions shall have
been taken in the following order: (a) this Agreement and Plan of Merger shall
have been adopted, approved, executed, acknowledged and certified on behalf of
each Constituent Corporation in accordance with the General Corporation Law of
the State of Delaware and the Connecticut Business Corporation Act; (b) an
appropriate Articles of Merger shall have been signed, verified and sealed on
behalf of each Constituent Corporation and delivered to and filed by the
Secretary of the State of the State of Connecticut in accordance with the
Connecticut Business Corporation Act; and (c) this Agreement and Plan of Merger
so adopted, approved, executed, acknowledged and certified shall have been filed
in the office of the Secretary of State of the State of Delaware (the particular
time and date at which the later to occur of the two aforesaid filings shall
take place is herein referred to as the "Effective Time of the Merger").
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At the Effective Time of the Merger:
(a) except to the extent otherwise provided by this Agreement and Plan of
Merger and by law, the separate existence of Wiltek shall cease;
(b) Wiltek shall be merged in accordance with the provisions of this
Agreement and Plan of Merger with and into E-Sync, which shall continue, as the
Surviving Corporation, to be subject to the laws of the State of Delaware and to
the jurisdiction of its courts; and
(c) the rights, privileges, powers and franchises, as well of a public as
of a private nature, of each of the Constituent Corporations shall be vested in
and possessed by the Surviving Corporation, subject to all the restrictions,
disabilities and duties of each of the Constituent Corporations; and all and
singular the rights, privileges, powers and franchises of each of the
Constituent Corporations, and all property, real, personal and mixed, of each of
the Constituent Corporations and all debts due to each of the Constituent
Corporations on whatever account, as well for stock subscriptions as all other
things in action or belonging to each of the Constituent Corporations, shall be
vested in the Surviving Corporation, and all property, rights, privileges,
powers and franchises, and all and every other interest shall be thereafter the
property of the Surviving Corporation to the same extent that they were of the
respective Constituent Corporations, and the title to any real estate vested by
deed or otherwise, under the laws of the State of Delaware, the State of
Connecticut or of any other jurisdiction, in either of the Constituent
Corporations, shall not revert or in any way be impaired by reason of the
Merger; provided, however, that all rights of creditors and all liens upon any
property of either of the Constituent Corporations shall be preserved
unimpaired, limited in lien to the property affected by such liens at the time
of the Merger, and all debts, liabilities and duties of the respective
Constituent Corporations shall thenceforth attach to the Surviving Corporation,
and may be enforced against it to the same extent as if said debts, liabilities
and duties had been incurred or contracted by it.
ARTICLE X
The Surviving Corporation as soon as practicable after the Effective Time
of the Merger shall, pursuant to Section 103(c)(5) of the Delaware General
Corporation Law, cause a copy of this Agreement and Plan of Merger, certified by
the Secretary of State of the State of Delaware, to be recorded in the office of
the Recorder of the County of New Castle, Delaware. If at any time the Surviving
Corporation shall consider or be advised that any further assignment or
assurance in law or other action is necessary or desirable to vest, perfect, or
confirm, of record or otherwise, in the Surviving Corporation, the title to any
property or rights of Wiltek or E-Sync acquired or to be acquired by or as a
result of the Merger, the proper officers and directors of Wiltek and the
Surviving Corporation, respectively, shall be, and they hereby are, severally
and fully authorized to execute and deliver such proper deeds, assignments and
assurances in law and take such other action as may be necessary or proper in
the name of Wiltek or the Surviving Corporation to vest, perfect or confirm
title to such property or rights in the Surviving Corporation and otherwise
carry out the purposes of this Agreement and Plan of Merger.
ARTICLE XI
For the convenience of the parties and to facilitate the filing and
recording of this Agreement and Plan of Merger, any number of counterparts
hereof may be executed, and each such counterpart shall be deemed to be an
original instrument.
This Agreement and Plan of Merger shall not be amended except by an
instrument in writing signed on behalf of the parties hereto.
This Agreement and Plan of Merger and the legal relations between the
parties hereto shall be governed by and construed in accordance with the laws of
the State of Delaware, except insofar as the internal law of the State of
Connecticut shall mandatorily apply to the Merger.
IN WITNESS WHEREOF, Wiltek has caused this Agreement and Plan of Merger to
be signed by its President and its Secretary pursuant to due authorization
adopting and approving this Agreement and Plan of
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Merger; E-Sync has caused this Agreement and Plan of Merger to be signed by its
President and its Secretary pursuant to due authorization adopting and approving
this Agreement and Plan of Merger; and Wiltek and E-Sync have each caused its
corporate seal to be hereto affixed, all on the date first above written.
WILTEK, INC.
By:
------------------------------------
President
[corporate seal]
By:
------------------------------------
Secretary
E-SYNC NETWORKS, INC.
By:
------------------------------------
President
[corporate seal]
By:
------------------------------------
Secretary
B-5
<PAGE> 38
Exhibit C
CERTIFICATE OF INCORPORATION
OF
E-SYNC NETWORKS, INC.
(UNDER SECTION 102 OF THE DELAWARE GENERAL CORPORATION LAW)
* * * *
FIRST: The name of the corporation is E-Sync Networks, Inc.
SECOND: The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be formed under the General Corporation Law
of the State of Delaware (the "G.C.L.").
THIRD: (a) The total number of shares of all classes of capital stock
which the corporation shall have authority to issue is Sixty Million
(60,000,000) of which Ten Million (10,000,000) shares shall be Preferred Stock,
par value $0.01 per share, and Fifty Million (50,000,000) shares shall be Common
Stock, par value $0.01 per share.
(b) The Board of Directors of the corporation is authorized to
provide for the issuance of the shares of Preferred Stock in series, by filing a
certificate pursuant to the applicable law of the State of Delaware to establish
from time to time the number of shares to be included in each such series, and
to fix the designation, powers, preferences and rights of the shares of each
such series and the qualifications, limitations and restrictions thereof.
The authority of the Board with respect to each series shall include, but
not be limited to, determination of the following:
(i) The number of shares constituting that series and the distinctive
designation of that series;
(ii) The dividend rate of the shares of that series, whether dividends
shall be cumulative, and, if so, from which date or dates, and the
relative rights of priority, if any, of payment of dividends of that
series;
(iii) Whether that series shall have voting rights, in addition to the
voting rights provided by law, and, if so, the terms of such voting
rights;
(iv) Whether that series shall have conversion privileges, and, if so, the
terms and conditions of such conversion, including provision for
adjustment of the conversion rate in such events as the Board of
Directors shall determine;
(v) Whether or not the shares of that series shall be redeemable, and, if
so, the terms and conditions of such redemption, including the date or
dates upon or after which they shall be redeemable, and the amount per
share payable in case of redemption, which amount may vary under
different conditions and at different redemption dates;
(vi) Whether that series shall have a sinking fund for the redemption or
purchase of shares of that series, and, if so, the terms and amount of
such sinking fund;
(vii) The rights of the shares of that series in the event of voluntary or
involuntary liquidation, dissolution or winding up of the
corporation, and the relative rights of priority, if any, of payment
of shares of that series; and
(viii) Any other relative rights, preferences and limitations of that
series.
FOURTH: The address of the registered office of the corporation in the
State of Delaware is located at 1013 Centre Road, City of Wilmington, County of
New Castle, Delaware 19805, and the name of the registered agent of the
corporation at such address is Corporation Service Company.
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<PAGE> 39
FIFTH: In addition to any affirmative vote required by law, by this
Certificate of Incorporation or by any instrument establishing one or more
series of Preferred Stock, unless recommended to the shareholders by the Board
of Directors: (i) any merger or consolidation of the corporation; (ii) any sale,
lease, exchange, mortgage, pledge, transfer or other disposition (in one
transaction or a series of transactions) of all or substantially all of the
assets of the Corporation; or (iii) any amendment of this Article FIFTH of this
Certificate of Incorporation shall require the affirmative vote of the holders
of at least 75 percent of the then-outstanding shares of the stock having voting
rights, voting together as a single class. Such affirmative vote shall be
required notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or no vote.
SIXTH: The Board of Directors shall have the power to make, alter or
repeal the By-laws of the corporation.
SEVENTH: The election of the Board of Directors need not be by written
ballot unless the By-laws so provide.
EIGHTH: Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
sec.291 of Title 8 of the Delaware Code or on the application of trustees in
dissolution or of any receiver or receivers appointed for this corporation under
sec.279 of Title 8 of the Delaware Code order a meeting of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three fourths in value of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of this corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of this corporation as consequence of such
compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders, of this corporation, as the case
may be, and also on this corporation.
NINTH: The corporation shall indemnify, and advance expenses, to the
fullest extent permitted by Section 145 of the G.C.L. as amended from time to
time to each person that such section grants the corporation the power to
indemnify and advance expenses to.
TENTH: No director of the corporation shall be personally liable to the
corporation or any of its stockholders for monetary damages for breach of
fiduciary duty as a director; provided, however, that the foregoing clause shall
not apply to any liability of a director (i) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of Title 8 of the G.C.L., or (iv) for
any transaction from which the director derived an improper personal benefit. If
the G.C.L. is amended to authorize corporate action further eliminating or
limiting the personal liability of directors, then the liability of a director
of the corporation shall be eliminated or limited to the fullest extent
permitted by the G.C.L., as so amended. The provisions of this paragraph are not
intended to, and shall not, limit, supersede or modify any other defense
available to a director under applicable law. Any repeal or modification of the
foregoing paragraph by the stockholders of the corporation shall not adversely
affect any right or protection of a director of the corporation existing at the
time of such repeal or modification.
/s/ DAVID I. ALBIN
--------------------------------------
David I. Albin, Esq.
Sole Incorporator
Dated: June , 1999
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<PAGE> 40
EXHIBIT D
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF PREFERRED STOCK
OF
E-SYNC NETWORKS, INC.
E-Sync Networks, Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
That, pursuant to authority conferred upon the Board of Directors by the
Certificate of Incorporation of said corporation, and pursuant to the provisions
of Section 151 of Title 8 of the Delaware Code of 1953, said Board of Directors
adopted a resolution by the unanimous written consent of its members, filed with
the minutes of the Board, providing for the issuance of a series of a new series
of preferred stock designated as "Senior Convertible Series A Preferred Stock",
which resolution is as follows:
RESOLVED that, pursuant to the authority vested in the Board of Directors
of E-Sync Networks, Inc., a Delaware corporation (the "Company") in accordance
with the provisions of the Certificate of Incorporation of the Company (the
"Certificate of Incorporation"), a series of the class of authorized Senior
Convertible Series A Preferred Stock, par value $0.01 per share, of the Company,
is hereby created and that the designation and number of shares thereof and the
voting powers, preferences and relative, participating, optional and other
special rights of the shares of such series, and the qualifications, limitations
and restrictions thereof are as follows:
SECTION 1. DESIGNATION AND NUMBER.
(a) The shares of such series shall be designated as "Senior Convertible
Series A Preferred Stock" (the "Series A Stock"). The number of shares initially
constituting the Series A Stock shall be 1,000,000, which number may be
decreased (but not increased) by the Board of Directors without a vote of
stockholders; provided, however, that such number may not be decreased below the
number of then outstanding shares of Series A Stock.
(b) The Series A Stock shall, with respect to dividend rights and rights
upon liquidation, dissolution or winding up, rank prior to all other classes and
series of capital stock of the Company now or hereafter authorized (except as
may be authorized pursuant to Section 3(b)) including, without limitation, the
Common Stock.
(c) Capitalized terms used herein and not otherwise defined shall have the
meanings set forth in Section 9.
SECTION 2. DIVIDENDS AND DISTRIBUTIONS.
In the event that the Company shall declare a dividend or make any other
distribution (including, without limitation, in cash, in capital stock (which
shall include, without limitation, any options, warrants or other rights to
acquire capital stock) of the Company or other property or assets) to holders of
Common Stock, then the Board of Directors shall declare, and the holder of each
share of Series A Stock shall be entitled to receive, a dividend or distribution
in an amount equal to the amount of such dividend or distribution received by a
holder of the number of shares of Common Stock for which such share of Series A
Stock is convertible on the record date for such dividend or distribution. Any
such amount shall be paid to the holders of shares of Series A Stock at the same
time such dividend or distribution is made to holders of Common Stock.
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<PAGE> 41
SECTION 3. VOTING RIGHTS.
In addition to any voting rights provided by law or in the Securities
Purchase Agreement, the holders of shares of Series A Stock shall have the
following voting rights:
(a) So long as the Series A Stock is outstanding, each share of Series A
Stock shall entitle the holder thereof to vote, in person or by proxy, at a
special or annual meeting of stockholders, on each of the matters entitled to be
voted on by holders of Common Stock, voting together as a single class with
other shares entitled to vote thereon. With respect to any such vote, each share
of Series A Stock shall entitle the holder thereof to cast that number of votes
per share as is equal to the number of votes that such holder would be entitled
to cast had such holder converted its shares of Series A Stock into Common Stock
on the record date for determining the stockholders of the Company eligible to
vote on any such matters.
(b) Unless the consent or approval of a greater number of shares shall then
be required by law, the affirmative vote of the holders of at least a majority
of the outstanding shares of Series A Stock, voting separately as a single
class, in person or by proxy, at a special or annual meeting of stockholders
called for the purpose, shall be necessary to (i) authorize, increase the
authorized number of shares of, or issue (including on conversion or exchange of
any convertible or exchangeable securities or by reclassification), any shares
of any class or classes of Senior Stock or Parity Stock, (ii) authorize, adopt
or approve an amendment to the Certificate of Incorporation that would increase
or decrease the par value of the shares of Series A Stock, or alter or change
the powers, preferences or special rights of the shares of Series A Stock, other
Parity Stock or Senior Stock, (iii) amend, alter or repeal the Certificate of
Incorporation so as to affect the shares of Series A Stock adversely, including,
without limitation, by granting any voting right to any holder of notes, bonds,
debentures or other debt obligations of the Company, (iv) authorize or issue any
security convertible into, exchangeable for or evidencing the right to purchase
or otherwise receive any shares of any class or classes of Senior Stock or
Parity Stock, or (v) effect an Extraordinary Event.
(c) If on any date (i) the Company shall have failed to satisfy its
obligation to convert shares of Series A Stock pursuant to Section 7, or (ii) a
breach of Article 8 of the Securities Purchase Agreement shall have occurred and
be continuing for a period of at least 30 days, then the number of directors
constituting the Board of Directors shall, without further action, be increased
by one and the holders of shares of Series A Stock shall have, in addition to
the other voting rights set forth herein, the exclusive right, voting separately
as a single class, to elect a director of the Company to fill such newly created
directorship, by written consent as provided herein, or at a special meeting of
such holders called as provided herein. Any such additional director shall
continue as a director (subject to reelection or removal as provided in Section
3(d)(ii)) and the holders of Series A Stock shall have such additional voting
rights until such time as (A) any conversion obligation provided in Section 7
that has become due shall have been satisfied or (B) there shall exist no breach
of Article 8 of the Stock Purchase Agreement, as the case may be, at which time
such additional director shall cease to be a director and such additional voting
rights of the holders of Series A Stock shall terminate subject to revesting in
the event of each and every subsequent event of the character indicated above,
provided that the conditions set forth in the proviso above shall not have
occurred. Notwithstanding anything to the contrary contained herein, in the
event the Company shall have breached Section 8.9 of the Securities Purchase
Agreement, all references to the right of the holders of shares of Series A
Stock to elect one director to the Board of Directors of the Company shall
instead refer to the right of such holders to elect that number of directors
that shall constitute a majority of such Board of Directors.
(d) (i) The right of holders of shares of Series A Stock to take any action
as provided in Section 3(c) may be exercised at any annual meeting of
stockholders or at a special meeting of holders of shares of Series A Stock held
for such purpose as hereinafter provided or at any adjournment thereof, or by
the written consent, delivered to the Secretary of the Company, of the holders
of the minimum number of shares required to take such action, which shall be a
majority of the outstanding shares of Series A Stock unless otherwise required
by law.
So long as such right to vote continues (and unless such right has been
exercised by written consent of the minimum number of shares required to take
such action), the President of the Company may call, and upon the written
request of holders of record of at least 5% of the outstanding shares of Series
A Stock,
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<PAGE> 42
addressed to the Secretary of the Company at the principal office of the
Company, shall call, a special meeting of the holders of shares entitled to vote
as provided herein. Such meeting shall be held within 30 days after delivery of
such request to the Secretary, at the place and upon the notice provided by law
and in the by-laws of the Company for the holding of meetings of stockholders.
(ii) At each meeting of stockholders at which the holders of shares of
Series A Stock shall have the right, voting separately as a single class, to
elect one director of the Company as provided in Section 3(c) (or, in the case
of a breach of Section 8.9 of the Securities Purchase Agreement, the number of
directors that shall constitute a majority of the Board of Directors) or to take
any action, the presence in person or by proxy of the holders of record of
one-third of the total number of shares of Series A Stock then outstanding and
entitled to vote on the matter shall be necessary and sufficient to constitute a
quorum. At any such meeting or at any adjournment thereof:
(A) the absence of a quorum of the holders of shares of Series A Stock
shall not prevent the election of directors other than those to be elected
by the holders of shares of Series A Stock, and the absence of a quorum of
the holders of shares of any other class or series of capital stock shall
not prevent the election of directors to be elected by the holders of
shares of Series A Stock, or the taking of any action as provided in this
Section 3; and
(B) in the absence of a quorum of the holders of shares of Series A
Stock, a majority of the holders of such shares present in person or by
proxy shall have the power to adjourn the meeting as to the actions to be
taken by the holders of shares of Series A Stock from time to time and
place to place without notice other than announcement at the meeting until
a quorum shall be present.
For taking of any action as provided in Section 3(b) or Section 3(c) by the
holders of shares of Series A Stock, each such holder shall have one vote for
each share of such stock standing in his name on the transfer books of the
Company as of any record date fixed for such purpose or, if no such date be
fixed, at the close of business on the Business Day next preceding the day on
which notice is given, or if notice is waived, at the close of business on the
Business Day next preceding the day on which the meeting is held.
Each director elected by the holders of shares of Series A Stock as
provided in Section 3(c) shall, unless his or her term shall expire earlier in
accordance with the provisions thereof, hold office until the annual meeting of
stockholders next succeeding his election or until his or her successor, if any,
is elected and qualified.
If any director so elected by the holders of Series A Stock shall cease to
serve as a director before his or her term shall expire (except by reason of the
termination of the voting rights accorded to the holders of Series A Stock in
accordance with Section 3(c)), the holders of the Series A Stock then
outstanding and entitled to vote for such director may, by written consent as
provided herein, or at a special meeting of such holders called as provided
herein, elect a successor to hold office for the unexpired term of the director
whose place shall be vacant.
Any director elected by the holders of shares of Series A Stock voting
separately as a single class may be removed from office with or without cause by
the vote or written consent of the holders of at least a majority of the
outstanding shares of Series A Stock, at the time of removal. A special meeting
of the holders of shares of Series A Stock may be called in accordance with the
procedures set forth in Section 3(c)(i).
SECTION 4. CERTAIN RESTRICTIONS.
(a) Whenever the Company shall not have converted shares of Series A Stock
at a time required by Section 7, at such time and thereafter until all
conversion obligations provided in Section 7 that have come due shall have been
satisfied, the Company shall not: (A) declare or pay dividends, or make any
other distributions, on any shares of Junior Stock, or (B) declare or pay
dividends, or make any other distributions, on any shares of Parity Stock,
except dividends or distributions paid ratably on the Series A Stock and all
Parity Stock on which dividends are payable or in arrears, in proportion to the
total amounts to which the holders of all shares of the Series A Stock and such
Parity Stock are then entitled.
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<PAGE> 43
(b) Whenever the Company shall not have converted shares of Series A Stock
at a time required by Section 7, at such time and thereafter until all
conversion obligations provided in Section 7 that have come due shall have been
satisfied, the Company shall not redeem, purchase or otherwise acquire for
consideration, or require the conversion of, any shares of Junior Stock or
Parity Stock.
(c) The Company shall not permit any Subsidiary of the Company, or cause
any other Person, to purchase or otherwise acquire for consideration any shares
of capital stock of the Company unless the Company could, pursuant to Section
4(b), purchase such shares at such time and in such manner.
SECTION 5. REACQUIRED SHARES.
Any shares of Series A Stock converted, exchanged, redeemed, purchased or
otherwise acquired by the Company or any of its Subsidiaries or other Affiliates
in any manner whatsoever shall be retired and canceled promptly after the
acquisition thereof. All such shares of Series A Stock shall upon their
cancellation become authorized but unissued shares of Series A Stock, no par
value, of the Company and, upon the filing of an appropriate certificate with
the Secretary of State of the State of Connecticut, may be reissued as part of
another series of preferred stock, no par value per share, of the Company
subject to the conditions or restrictions on issuance set forth herein, but in
any event may not be reissued as shares of Series A Stock or other Parity Stock
unless all of the shares of Series A Stock issued on the Issue Date shall have
already been redeemed, converted or exchanged.
SECTION 6. LIQUIDATION, DISSOLUTION OR WINDING UP.
(a) If the Company shall commence a voluntary case under the United States
bankruptcy laws or any applicable bankruptcy, insolvency or similar law of any
other country, or consent to the entry of an order for relief in an involuntary
case under any such law or to the appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or other similar official) of the
Company or of any substantial part of its property, or make an assignment for
the benefit of its creditors, or admit in writing its inability to pay its debts
generally as they become due, or if a decree or order for relief in respect of
the Company shall be entered by a court having jurisdiction in the premises in
an involuntary case under the United States bankruptcy laws or any applicable
bankruptcy, insolvency or similar law of any other country, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or other
similar official) of the Company or of any substantial part of its property, or
ordering the winding up or liquidation of its affairs, and on account of any
such event the Company shall liquidate, dissolve or wind up, or if the Company
shall otherwise liquidate, dissolve or wind up, no distribution shall be made
(i) to the holders of shares of Junior Stock unless, prior thereto, the holders
of shares of Series A Stock, subject to Section 7, shall have received the
Liquidation Preference, plus all accrued and unpaid dividends, to the date of
distribution, with respect to each share, or (ii) to the holders of shares of
Parity Stock, except distributions made ratably on the Series A Stock and all
other Parity Stock in proportion to the total amounts to which the holders of
all shares of the Series A Stock and other Parity Stock are entitled upon such
liquidation, dissolution or winding up.
(b) Neither the consolidation or merger of the Company with or into any
other Person nor the sale or other distribution to another Person of all or
substantially all the assets, property or business of the Company shall be
deemed to be a liquidation, dissolution or winding up of the Company for
purposes of this Section 6.
SECTION 7. CONVERSION.
(a) Any holder of Series A Stock shall have the right, at its option, at
any time and from time to time, to convert, subject to the terms and provisions
of this Section 7, any or all of such holder's shares of Series A Stock into
such number of fully paid and non-assessable shares of Common Stock as is equal,
subject to Section 7(g), to the product of the number of shares of Series A
Stock being so converted multiplied by the quotient of (i) Liquidation
Preference divided by the (ii) Conversion Price (as defined below) then in
effect. The "Conversion Price" shall be $1.20 per share, subject to adjustment
as set forth in Section 7(d). Such conversion right shall be exercised by the
surrender of the shares of Series A Stock to be converted (the "Shares") to the
Company at any time during usual business hours at its principal place of
business to be
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<PAGE> 44
maintained by it, accompanied by written notice that the holder elects to
convert such Shares and specifying the name or names (with address) in which a
certificate or certificates for shares of Common Stock are to be issued and (if
so required by the Company) by a written instrument or instruments of transfer
in form reasonably satisfactory to the Company duly executed by the holder or
its duly authorized legal representative and transfer tax stamps or funds
therefor, if required pursuant to Section 7(k).
All Shares surrendered for conversion shall be delivered to the Company for
cancellation and canceled by it and no Shares shall be issued in lieu thereof.
(b) As promptly as practicable after the surrender, as herein provided, of
any Shares for conversion pursuant to Section 7(a), the Company shall deliver to
or upon the written order of the holder of the Shares so surrendered a
certificate or certificates representing the number of fully paid and
non-assessable shares of Common Stock into which such Shares may be or have been
converted in accordance with the provisions of this Section 7. Subject to the
following provisions of this Section 7, such conversion shall be deemed to have
been made immediately prior to the close of business on the date that such
Shares shall have been surrendered in satisfactory form for conversion, and the
Person or Persons entitled to receive the Common Stock deliverable upon
conversion of such Shares shall be treated for all purposes as having become the
record holder or holders of such Common Stock at such appropriate time, and such
conversion shall be at the Conversion Price in effect at such time; provided,
however, that no surrender shall be effective to constitute the Person or
Persons entitled to receive the Common Stock deliverable upon such conversion as
the record holder or holders of such Common Stock while the share transfer books
of the Company shall be closed (but not for any period in excess of five days),
but such surrender shall be effective to constitute the Person or Persons
entitled to receive such Common Stock as the record holder or holders thereof
for all purposes immediately prior to the close of business on the next
preceding day on which such share transfer books are open, and such conversion
shall be deemed to have been made at, and shall be made at the Conversion Price
in effect at, such time on such next preceding day. If the last day for the
exercise of the conversion right shall not be a Business Day, then such
conversion right may be exercised on the next preceding Business Day.
(c) Upon (i) the third anniversary of the Issue Date, each outstanding
share of Series A Stock, or (ii) if earlier, the transfer of any shares of
Series A Stock by an Initial Holder to any Person other than an Affiliate of
such Initial Holder, such shares of Series A Stock, shall automatically, with no
further action required to be taken by the Company or the holder thereof, be
converted into such number of fully paid and non-assessable shares of Common
Stock as is equal to the product of the number of shares of Series A Stock being
so converted, multiplied by the quotient of (i) the Liquidation Preference
divided by (ii) the Conversion Price then in effect. Immediately thereafter,
each holder of Series A Stock subject to such conversion, shall be deemed to be
the holder of record of the Common Stock issuable upon conversion of such
holder's Series A Stock, notwithstanding that the share register of the Company
shall then be closed or that certificates representing such Common Stock shall
not then be actually delivered to such Person. Upon notice from the Company,
each holder of Series A Stock so converted shall promptly surrender to the
Company, at any where the Company shall maintain a transfer agent for its Series
A Stock and Common Stock, certificates representing the shares so converted,
duly endorsed in blank or accompanied by proper instruments of transfer. On the
date of such automatic conversion, all rights with respect to the shares of
Series A Stock so converted, including the rights, if any, to receive notices
and vote, will terminate, except only the rights of holders thereof to (A)
receive certificates for the number of shares of Common Stock into which such
shares of Series A Stock have been converted, (B) be paid any declared but
unpaid dividends thereon and (C) exercise the rights to which they are entitled
as holders of Common Stock.
(d) The Conversion Price shall be subject to adjustment as follows:
(i) In case the Company shall at any time or from time to time (A) pay
a dividend or make any other distribution (other than a dividend or
distribution paid or made to holders of shares of Series A Stock in the
manner provided in Section 2) on the outstanding shares of any of its
Common Stock in capital stock (which, for purposes of this Section 7(d)
shall include, without limitation, any dividends or distributions in the
form of options, warrants or other rights to acquire capital stock) of the
Company or any Subsidiary or Affiliate thereof, (B) subdivide the
outstanding shares of any of its Common Stock into
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<PAGE> 45
a larger number of shares, (C) combine the outstanding shares of any of its
Common Stock into a smaller number of shares, or (D) issue any shares of
its capital stock in a reclassification of any of its Common Stock, then,
and in each such case, the Conversion Price in effect immediately prior to
such event shall be adjusted (and any other appropriate actions shall be
taken by the Company) so that the holder of any share of Series A Stock
thereafter surrendered for conversion shall be entitled to receive the
number of shares of Common Stock or other securities of the Company that
such holder would have owned or would have been entitled to receive upon or
by reason of any of the events described above, had such share of Series A
Stock been converted immediately prior to the occurrence of such event. An
adjustment made pursuant to this Section 7(d)(i) shall become effective
retroactively (A) in the case of any such dividend or distribution, to a
date immediately following the close of business on the record date for the
determination of holders of any of its Common Stock entitled to receive
such dividend or distribution or (B) in the case of any such subdivision,
combination or reclassification, to the close of business on the day upon
which such corporate action becomes effective.
(ii) In case the Company shall at any time or from time to time
distribute to any holder of shares of its Common Stock (including any such
distribution made in connection with a consolidation or merger in which the
Company is the resulting or surviving corporation and the Common Stock is
not changed or exchanged) cash, evidences of indebtedness of the Company or
another issuer, securities of the Company or another issuer or other assets
(excluding (A) dividends or distributions paid or made to holders of shares
of Series A Stock in the manner provided in Section 2 and (B) dividends
payable in shares of Common Stock for which adjustment is made under
Section 7(d)(i)) or rights or warrants to subscribe for or purchase
securities of the Company (excluding those in respect of which adjustments
in the Conversion Price is made pursuant to Section 7(d)(i), then, and in
each such case, the Conversion Price then in effect shall be adjusted by
dividing the Conversion Price in effect immediately prior to the date of
such distribution by a fraction (x) the numerator of which shall be the
Current Market Price of the Common Stock on the record date referred to
below and (y) the denominator of which shall be such Current Market Price
of the Common Stock less the then fair market value (as determined in good
faith by the Board of Directors of the Company, in the case of any such
distribution other than a distribution of cash, based on an opinion of a
nationally recognized investment banking firm unaffiliated with either the
Company or the holders of the Series A Stock, chosen by the Company (which
shall bear the expense thereof) and reasonably acceptable to a majority of
the holders of the Series A Stock, a certified resolution with respect to
which shall be mailed to the holders of the Series A Stock) of the portion
of the cash, evidences of indebtedness, securities or other assets so
distributed or of such subscription rights or warrants applicable to one
share of Common Stock (but such denominator not to be less than one);
provided, however, that no adjustment shall be made with respect to any
distribution of rights to purchase securities of the Company if the holder
of shares of Series A Stock would otherwise be entitled to receive such
rights upon conversion at any time of shares of Series A Stock into Common
Stock unless such rights are subsequently redeemed by the Company, in which
case such redemption shall be treated for purposes of this Section 7(d)(ii)
as a dividend on the Common Stock. Such adjustment shall be made whenever
any such distribution is made and shall become effective retroactively to a
date immediately following the close of business on the record date for the
determination of stockholders entitled to receive such distribution.
(iii) In case the Company at any time or from time to time shall take
any action affecting its Common Stock which could have a dilutive effect on
the number of shares of Common Stock that may be issued upon conversion of
the Series A Stock, other than an action described in any of Section
7(d)(i), 7(d)(ii) or Section 7(h), or an action which would have the same
dilutive effect on the Series A Stock as on the Common Stock, then, and in
each such case, the Conversion Price shall be adjusted in such manner and
at such time as the Board of Directors of the Company in good faith
determines to be equitable in the circumstances (such determination to be
evidenced in a resolution, a certified copy of which shall be mailed to the
holders of the Series A Stock).
(iv) In the event that any convertible or exchangeable securities,
options, warrants or other rights, the issuance of which shall have given
rise to an adjustment pursuant to this Section 7(d) ("Convertible
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Securities"), shall have expired or terminated without the exercise thereof
and/or if there shall have been an increase, with the passage of time or
otherwise, in the price payable upon the exercise or conversion thereof or
a decrease in the number of shares of Common Stock issuable upon the
exercise or conversion thereof, then the Conversion Price hereunder shall
be readjusted (but to no greater extent then originally adjusted) on the
basis of (A) eliminating from the computation of the Conversion Price as of
the time of the issuance of the Convertible Securities any shares of Common
Stock corresponding to such Convertible Securities as shall have expired or
terminated, (B) treating the additional shares of Common Stock, if any,
actually issued or issuable pursuant to the previous exercise of such
Convertible Securities as having been issued for the consideration actually
received and receivable therefor and (C) treating any of such Convertible
Securities which remain outstanding as being subject to exercise or
conversion on the basis of such exercise or conversion price as shall be in
effect at such time.
(e) If the Company shall take a record of the holders of any of its Common
Stock for the purpose of entitling them to receive a dividend or other
distribution, and shall thereafter and before the distribution to stockholders
thereof legally abandon its plan to pay or deliver such dividend or
distribution, then thereafter no adjustment in the Conversion Price then in
effect shall be required by reason of the taking of such record.
(f) Upon any increase or decrease in the Conversion Price, then, and in
each such case, the Company promptly shall deliver to each registered holder of
Series A Stock at least ten Business Days prior to effecting any of the
foregoing transactions a certificate, signed by the President or a
Vice-President and by the Treasurer or an Assistant Treasurer or the Secretary
or an Assistant Secretary of the Company, setting forth in reasonable detail the
event requiring the adjustment and the method by which such adjustment was
calculated and specifying the increased or decreased Conversion Price then in
effect following such adjustment.
(g) No fractional shares or scrip representing fractional shares shall be
issued upon the conversion of any shares of Series A Stock. If more than one
share of Series A Stock shall be surrendered for conversion at one time by the
same holder, the number of full shares of Common Stock issuable upon conversion
thereof shall be computed on the basis of the aggregate number of the shares of
Series A Stock so surrendered. If the conversion of any share or shares of
Series A Stock results in a fraction, an amount equal to such fraction
multiplied by the Current Market Price of the Common Stock on the Business Day
preceding the day of conversion shall be paid to such holder in cash by the
Company.
(h) In case of any capital reorganization or reclassification or other
change of outstanding shares of Common Stock (other than a change in par value,
or from par value to no par value, or from no par value to par value), or in
case of any consolidation or merger of the Company with or into another Person
(other than a consolidation or merger in which the Company is the resulting or
surviving Person and which does not result in any reclassification or change of
outstanding Common Stock), or in case of any sale or other disposition to
another Person of all or substantially all of the assets of the Company (any of
the foregoing, a "Transaction"), the Company, or such successor or purchasing
Person, as the case may be, shall execute and deliver to each holder of Series A
Stock at least ten Business Days prior to effecting any of the foregoing
Transactions a certificate that the holder of each share of Series A Stock then
outstanding shall have the right thereafter to convert such share of Series A
Stock into the kind and amount of shares of stock or other securities (of the
Company or another issuer) or property or cash receivable upon such Transaction
by a holder of the number of shares of Common Stock into which such share of
Series A Stock could have been converted immediately prior to such Transaction.
Such certificate shall provide for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Section
7. If, in the case of any such Transaction, the stock, other securities, cash or
property receivable thereupon by a holder of Common Stock includes shares of
stock or other securities of a Person other than the successor or purchasing
Person and other than the Company, which controls or is controlled by the
successor or purchasing Person or which, in connection with such Transaction,
issues stock, securities, other property or cash to holders of Common Stock,
then such certificate also shall be executed by such Person, and such Person
shall, in such certificate, specifically acknowledge the obligations of such
successor or purchasing Person and acknowledge its obligations to issue such
stock, securities, other property or cash to the holders of Series A Stock upon
conversion of the shares of Series A Stock as provided above. The provisions of
this Section 7(h) and any equivalent thereof in any such certificate similarly
shall apply to successive Transactions.
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(i) In case at any time or from time to time:
(A) the Company shall declare a dividend (or any other distribution)
on its Common Stock;
(B) the Company shall authorize the granting to the holders of its
Common Stock of rights or warrants to subscribe for or purchase any shares
of stock of any class or of any other rights or warrants;
(C) there shall be any reclassification of the Common Stock; or
(D) there shall be an Extraordinary Event; then the Company shall mail
to each holder of shares of Series A Stock at such holder's address as it
appears on the transfer books of the Company, as promptly as possible but
in any event at least ten days prior to the applicable date hereinafter
specified, a notice stating (x) the date on which a record is to be taken
for the purpose of such dividend, distribution or rights or warrants or, if
a record is not to be taken, the date as of which the holders of Common
Stock of record to be entitled to such dividend, distribution or rights are
to be determined, or (y) the date on which such reclassification or
Extraordinary Event is expected to become effective; provided that in the
case of any event to which Section 7(h) applies, the Company shall give at
least ten days' prior written notice as aforesaid. Such notice also shall
specify the date as of which it is expected that holders of Common Stock of
record shall be entitled to exchange their Common Stock for shares of stock
or other securities or property or cash deliverable upon such
reclassification or Extraordinary Event.
(j) The Company shall at all times reserve and keep available for issuance
upon the conversion of the Series A Stock, such number of its authorized but
unissued shares of Common Stock as will from time to time be sufficient to
permit the conversion of all outstanding shares of Series A Stock, and shall
take all action required to increase the authorized number of shares of Common
Stock if at any time there shall be insufficient authorized but unissued shares
of Common Stock to permit such reservation or to permit the conversion of all
outstanding shares of Series A Stock.
(k) The issuance or delivery of certificates for Common Stock upon the
conversion of shares of Series A Stock shall be made without charge to the
converting holder of shares of Series A Stock for such certificates or for any
tax in respect of the issuance or delivery of such certificates or the
securities represented thereby, and such certificates shall be issued or
delivered in the respective names of, or in such names as may be directed by,
the holders of the shares of Series A Stock converted; provided, however, that
the Company shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of any such certificate in
a name other than that of the holder of the shares of Series A Stock converted,
and the Company shall not be required to issue or deliver such certificate
unless or until the Person or Persons requesting the issuance or delivery
thereof shall have paid to the Company the amount of such tax or shall have
established to the reasonable satisfaction of the Company that such tax has been
paid.
SECTION 8. CERTAIN REMEDIES.
Any registered holder of Series A Stock shall be entitled to an injunction
or injunctions to prevent breaches of the provisions of this Certificate of
Amendment and to enforce specifically the terms and provisions of this
Certificate of Amendment in any court of the United States or any state thereof
having jurisdiction, this being in addition to any other remedy to which such
holder may be entitled at law or equity.
SECTION 9. DEFINITIONS.
For the purposes of this Certificate of Designations, Rights and
Preferences, the following terms shall have the meanings indicated:
"AFFILIATE" shall have the meaning ascribed to such term in Rule 12b-2
of the General Rules and Regulations under the Exchange Act.
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or
other day on which commercial banks in the City of New York are authorized
or required by law or executive order to close.
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"COMMON STOCK" of the Company shall mean the Common Stock, no par
value, and any other common stock of the Company issued from time to time.
"CONVERSION PRICE" shall have the meaning given it in Section 7
hereof.
"CURRENT MARKET PRICE" per share shall mean, on any date specified
herein for the determination thereof, (a) the average daily Market Price of
the Common Stock for those days during the period of 30 days, ending on
such date, on which the national securities exchanges were open for
trading, and (b) if the Common Stock is not then listed or admitted to
trading on any national securities exchange or quoted in the over-counter
market, the Market Price on such date.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Securities and Exchange
Commission thereunder.
"EXTRAORDINARY EVENT" means (i) the voluntary or involuntary
liquidation, dissolution or winding up of the Company, (ii) the voluntary
sale, conveyance, exchange or transfer to another Person of all or
substantially all of the assets of the Company and its Subsidiaries or
(iii) the merger or consolidation of the Company with one or more other
Persons.
"FAIR MARKET VALUE" shall mean the amount which a willing buyer, under
no compulsion to buy, would pay a willing seller, under no compulsion to
sell, in an arm's-length transaction.
"INITIAL HOLDER" shall mean Commercial Electronics Capital
Partnership, L.P. and Commercial Electronics, L.L.C. or any other Person to
whom shares of Series A Stock are issued pursuant to and in accordance with
the terms of the Securities Purchase Agreement.
"ISSUE DATE" shall mean the first date on which shares of Series A
Stock are issued.
"JUNIOR STOCK" shall mean any capital stock of the Company ranking
junior (either as to dividends or upon liquidation, dissolution or winding
up) to the Series A Stock.
"LIQUIDATION PREFERENCE" with respect to a share of Series A Stock
shall mean $3.00.
"MARKET PRICE" shall mean, per share of Common Stock, on any date
specified herein: (a) the closing price per share of the Common Stock on
such date published in such date is published in The Wall Street Journal,
the average of the closing bid and asked prices on such date, as officially
reported on the principal national securities exchange on which the Common
Stock is then listed or admitted to trading; or (b) if the Common Stock is
not then listed or admitted to trading on any national securities exchange
but is designated as a national market system security by the NASD, the
last trading price of the Common Stock on such date; or (c) if there shall
have been no trading on such date or if the Common Stock is not so
designated, the average of the reported closing bid and asked prices of the
Common Stock, on such date as shown by NASDAQ and reported by any member
firm of the New York Stock Exchange selected by the Company; or (d) if none
of (a), (b) or (c) is applicable, the Fair Market Value per share
determined in good faith by the Board of Directors of the Company based on
an opinion of a nationally recognized investment banking firm unaffiliated
with either the Company or the holders of the Series A Stock, chosen by the
Company (who shall bear the expense thereof) and acceptable to the holders
of at least a majority in interest of the Series A Stock.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"NASDAQ" shall mean the National Market System of the National
Association of Securities Dealers, Inc. Automated Quotations System.
"PARITY STOCK" shall mean any capital stock of the Company, including
the Series A Stock, ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Stock.
"PERSON" shall mean any individual, firm, corporation, partnership,
trust, incorporated or unincorporated association, joint venture, joint
stock company, government (or an agency or political subdivision thereof)
or other entity of any kind, and shall include any successor (by merger or
otherwise) of such entity.
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"SECURITIES PURCHASE AGREEMENT" shall mean the Securities Purchase
Agreement, dated as of January , 1999, by and between the Company,
Commercial Electronics Capital Partnership, L.P. and Commercial
Electronics, L.L.C., as the same may be amended from time to time.
"SENIOR STOCK" shall mean any capital stock of the Company ranking
senior (either as to dividends or upon liquidation, dissolution or winding
up) to the Series A Stock.
"SUBSIDIARY" of any Person shall mean any corporation or other entity
of which a majority of the voting power of the voting equity securities or
equity interest, or rights to profits, is owned, directly or indirectly, by
such Person.
IN WITNESS WHEREOF, said corporation has caused this Certificate to be
signed by , its , this day of June,
1999.
E-SYNC NETWORKS, INC.
By:
------------------------------------
[title]
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<PAGE> 50
Exhibit E
BY-LAWS
OF
E-SYNC NETWORKS, INC.
(A DELAWARE CORPORATION)
ARTICLE I
IDENTIFICATION AND OFFICES
SECTION 1. NAME. The name of the Corporation is E-Sync Networks, Inc.
SECTION 2. SEAL. Upon the seal of the Corporation shall appear the name
of the Corporation and the state and year of incorporation, and the words
"Corporate Seal."
SECTION 3. OTHER OFFICES. The Corporation shall maintain a registered
office in the State of Delaware. The Corporation may have an office or offices
at such other place or places, within or without the State of Delaware, as the
Board of Directors may from time to time determine or as the activities of the
Corporation may require.
ARTICLE II
STOCKHOLDERS' MEETINGS
SECTION 1. PLACE OF MEETINGS. Meetings of the stockholders of the
Corporation shall be held at the principal office of the Corporation, or at such
other place within or without the State of Delaware as may be fixed by the Board
of Directors and stated in the notice of meeting or in a duly executed waiver of
notice thereof.
SECTION 2. ANNUAL MEETING. An annual meeting of the stockholders for the
election of directors and the transaction of such other business as may properly
come before the meeting shall be held each year on such date in the first six
months of the Corporation's fiscal year as shall be designated by the Board of
Directors, or in the absence of such designation, on the first Tuesday of the
seventh month of the fiscal year, if not a legal holiday, and if a legal
holiday, then on the next succeeding business day, or on such other date as
shall be fixed by the Board of Directors.
SECTION 3. SPECIAL MEETING. Special meetings of the stockholders may be
called by the Board of Directors, the Chairman or the President, or as otherwise
provided by law.
SECTION 4. NOTICE. A notice in writing, of each meeting of stockholders,
stating the place, day and hour of the meeting, shall be given as required by
law.
SECTION 5. CONSENT. Any action which, under any provision of the General
Corporation Law of the State of Delaware, may be taken at a meeting of
stockholders, may be taken without a meeting if consent in writing, setting
forth the action so taken or to be taken, is 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, or by their duly
authorized attorneys, and filed with the Secretary of the Corporation as part of
the corporate records. Prompt notice of the taking of any such action shall be
given to those stockholders who did not consent in writing.
SECTION 6. QUORUM. Except as otherwise specifically provided by these
By-laws, the Corporation's Certificate of Incorporation or by applicable law, at
any meeting of the stockholders the holders of a majority of the shares entitled
to vote, present in person or represented by proxy, shall constitute a quorum.
The affirmative vote, at a meeting of stockholders duly held and at which a
quorum is present, of a majority of the voting power of the shares represented
at such meeting which are entitled to vote on the subject matter shall be the
act of the stockholders, except with respect to the election of directors or as
is otherwise specially
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provided by a By-law, by the Certificate of Incorporation or by law. Directors
shall be elected by a plurality of the shares present in person or represented
by proxy at the meeting and entitled to vote on the election of directors. The
holders of a majority of the voting power of the shares entitled to vote
represented at a meeting may adjourn such meeting from time to time.
SECTION 7. VOTING. Except as otherwise provided by law or the certificate
of incorporation and subject to the provisions of Section 2 of Article V of
these by-laws, each outstanding share of common stock shall be entitled to one
vote on each matter submitted to a vote at a meeting of stockholders.
SECTION 8. PROXIES. Every person entitled to vote or execute consents,
waivers or releases in respect of shares of stock may do so in person or by one
or more agents authorized by a written dated proxy executed by him. A
photographic or similar reproduction of a proxy or a telegram, cablegram,
wireless or similar transmission of a proxy sent by such person is a sufficient
writing. No proxy shall be valid after eleven months from its date of execution
unless it specifies the length of time for which it is to continue in force or
limits its use to a particular meeting not yet held.
SECTION 9. WAVIER OF NOTICE. Notice of any stockholders meeting may be
waived, in writing, by any shareholder, either before or after the time stated
therein and, if any shareholder entitled to vote is present at a stockholders
meeting and does not protest, prior to or at the commencement of the meeting,
the lack of receipt of proper notice, such shareholder shall be deemed to have
waived notice of such meeting.
SECTION 10. ADVANCE NOTICE OF STOCKHOLDER'S PROPOSALS. At any annual or
special meeting of stockholders, proposals by stockholders shall be considered
only if advance notice thereof has been timely given as provided herein. Notice
of any proposal to be presented by any stockholder at any meeting of
stockholders shall be given to the Secretary of the Corporation not less than 60
nor more than 90 days prior to the date of the meeting; provided, however, that
if the date of the meeting is first publicly announced or disclosed less than 70
days prior to the date of the meeting, such notice shall be given not more than
ten days after such date is first so announced or disclosed. No additional
public announcement or disclosure of the date of any annual meeting of
stockholders need be made if the Corporation shall have previously disclosed, in
these by-laws or otherwise, that the annual meeting in each year is to be held
on a determinable date, unless and until the Board determines to hold the
meeting on a different date. Any stockholder who gives notice of any such
proposal shall deliver therewith the text of the proposal to be presented and a
brief written statement of the reasons why such stockholder favors the proposal
and setting forth such stockholder's name and address, the class and number of
all shares of each class of stock of the Corporation beneficially owned by such
stockholder and any material interest of such stockholder in the proposal (other
than as a stockholder). The Chairman of the meeting shall, if the facts warrant,
determine and declare whether such notice has not been duly given and if he
should so determine he shall so declare to the meeting and direct that the
proposal not be considered.
SECTION 11. ADVANCE NOTICE OF STOCKHOLDER'S NOMINEES. Only persons who
are nominated in accordance with the procedures set forth in this Section 11
shall be eligible for election as directors. Nominations of persons for election
to the Board of Directors of the Corporation may be made at a meeting of
stockholders by or at the direction of the Board of Directors or by any
stockholder of the Corporation entitled to vote for the election of Directors at
the meeting who complies with the notice procedures set forth in this Section
11. Such nominations, other than those made by or at the direction of the Board
of Directors, shall be made pursuant to timely notice in writing to the
Secretary of the Corporation. To be timely, a stockholder's notice shall be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than 60 days nor more than 90 days prior to the meeting;
provided, however, that in the event that less than 70 days notice or prior
public disclosure of the date of the meeting is given or made to stockholders,
notice by the stockholder to be timely must be so received not later than the
close a business on the tenth day following the day on which such notice of the
date of the meeting was mailed or such public disclosure was made. Such
stockholder's notice shall set forth (a) as to each person who the stockholder
proposes to nominate for election or reelection as a director, (i) the name,
age, business address and residence address of such person, (ii) the principal
occupation or employment of such person, (iii) the class and number of shares of
the Corporation which are beneficially owned by such person, and (iv) any other
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required, in
each
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case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as
amended (including without limitation such person's written consent to being
named in the proxy statement as a nominee and to serving as a director if
elected); and (b) as to the stockholder giving the notice (i) the name and
address, as they appear in the Corporation's books, of such stockholder and (ii)
the class and number of shares of the Corporation which are beneficially owned
by such stockholder. At the request of the Board of Directors any person
nominated by the Board of Directors for election as a director shall furnish to
the Secretary of the Corporation that information required to be set forth in
the stockholder's notice of nomination which pertains to the nominee. No person
shall be eligible for election as a director of the Corporation unless nominated
in accordance with the procedure set forth in this Section 11. The Chairman of
the meeting shall, if the facts warrant, determine and declare to the meeting
the nomination was not made in accordance with procedures described by the
By-Laws, and if he should so determine, he shall so declare to the meeting and
the defective nomination shall be disregarded.
ARTICLE III
DIRECTORS
SECTION 1. POWERS, NUMBER AND TERM. The property, business and affairs of
this Corporation shall be controlled, managed and conducted by a Board of
Directors of not less than three nor more than eleven directors, who shall hold
office until the next annual meeting and until their successors shall be elected
and shall have qualified. The number of directors within such maximum and
minimum shall be the number fixed by resolution of the stockholders or
directors, or in the absence thereof, shall be the number of directors elected
at the preceding annual meeting of stockholders plus the number, if any, elected
since such meeting to fill a vacancy created by an increase in the size of the
Board. The number of directors fixed as aforesaid may from time to time be
increased or decreased in the same manner; provided, however, that no reduction
in the number of directorships shall remove any director in office or shorten
his term. Directors need not be residents of the State of Delaware or
stockholders of the Corporation.
SECTION 2. QUORUM. At all meetings of the Board of Directors, the
presence of a majority of the directors shall be required to constitute a
quorum, but in the absence of a quorum a lessor number may adjourn any meeting
from time to time until a quorum is present. The act of a majority of the
directors present at a meeting at which a quorum is present at the time of the
act shall be the act of the Board of Directors, unless the act of a greater
number is required by law or by these By-laws. A director may participate at a
meeting of the Board of Directors by means of a conference telephone or similar
communications equipment, provided such equipment enables all directors at a
meeting to hear one another.
SECTION 3. MEETINGS. Regular or special meetings of the Board of
Directors may be held within or without the State of Delaware. Meetings of the
Board of Directors may be called at any time by the Chairman or the President,
and it shall be the duty of the President to call such meetings whenever
requested in writing so to do by a majority of the Board of Directors. A regular
meeting of the Board of Directors may be held without call immediately after and
at the same place as the annual meeting of the stockholders or any special
meeting of the stockholders at which a Board of Directors is elected. The Board
of Directors may fix fees of directors, including reasonable allowance for
expenses actually incurred in connection with their duties.
SECTION 4. NOTICE AND PURPOSE OF MEETING. At least two days' written or
oral notice shall be given of all such meetings to every member of the Board of
Directors. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the Board of Directors need be specified in the
notice or waiver of notice of such meeting unless required by these by laws.
Said notice may be waived by a written waiver signed by all of the directors who
receive no such notice of meeting. Attendance by a director at a meeting,
without protesting, prior to or at the commencement of the meeting, the lack of
proper notice, shall be deemed to be a waiver by such director of notice of such
meeting.
SECTION 5. CONSENT. If all the directors (or all members of a committee
thereof) severally or collectively consent in writing to any action to be taken
by the Corporation, such action shall be as valid
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corporate action as though it had been authorized at a meeting of the Board of
Directors (or such committee). The Secretary shall file such consent with the
minutes of the meetings of the Board of Directors.
SECTION 6. VACANCIES. If a vacancy is created by an increase in the
number of directorships, it shall be filled for the unexpired term by the
concurring vote of directors holding a majority of the number of directorships
of the Board of Directors immediately prior to the vote of the increase. Subject
to the provisions of any applicable By-laws adopted by stockholders, any other
vacancy may be filled for the unexpired term by the concurring vote of a
majority of the remaining directors in office, though such remaining directors
are less than a quorum, though the number of directors at the meeting is less
than a quorum and though such majority is less than a quorum.
SECTION 7. COMMITTEES. The Board of Directors, by resolution adopted by
the affirmative vote of directors holding a majority of the directorships at a
meeting at which a quorum is present, may designate two or more directors to
constitute an Executive or other committee or committees, which committees shall
have such powers of the Board of Directors in the management of the property and
affairs of the Corporation as shall be provided in such resolutions, except,
however, the power to declare dividends, to issue stock, or to recommend to
stockholders any action requiring stockholders' approval. A majority of the
members of any such committee shall fix the time and place of its meetings and
shall determine its action, unless the Board of Directors shall provide
otherwise. Each committee shall keep minutes of its proceedings and shall report
the same to the Board of Directors as and when required.
ARTICLE IV
OFFICERS
SECTION 1. GENERAL. A president, a secretary and when deemed necessary by
the Board of Directors, a Chairman of the Board of Directors, a chief executive
officer, a chief operating officer, one or more vice presidents, a treasurer and
such other officers shall be elected by the Board of Directors to hold office
until their respective successors are duly elected and qualified or until their
earlier death or resignation or removal in the manner hereinafter provided. Any
two or more offices may be held by the same person. In all cases where the
duties of any officer, agent or employee are not expressly prescribed by these
by-laws or by the Board of Directors, such officer, agent or employee shall obey
the orders and instructions of the President.
SECTION 2. CHAIRMAN. The Chairman shall, when present, preside at all
meetings of the stockholders and Board of Directors and shall have such
additional powers and shall perform such further duties and have such other
responsibilities (including, without limitation, those of the Chief Executive
Officer), as may from time to time be assigned or delegated to him by the Board
of Directors or the Executive Committee.
SECTION 3. PRESIDENT. The President shall have general direction of the
operations of the Corporation, subject to the control of the Board of Directors,
the Executive Committee and (if applicable) the Chief Executive Officer of the
Corporation. He shall, in the absence of the Chairman, preside at all meetings
of the stockholders and the Board of Directors and shall have such additional
powers and shall perform such further duties and have such other
responsibilities as may from time to time be assigned or delegated to him by the
Board of Directors, the Executive Committee and/or (if applicable) the Chief
Executive Officer of the Corporation. He shall also have authority, unless
otherwise directed by the Board of Directors, to attend in person or by
substitute appointed by him, or to execute on behalf of the Corporation written
instruments appointing a proxy or proxies to represent the Corporation at all
meetings of the stockholders of any corporation in which the Corporation shall
hold any stock, and, at all such meetings and otherwise, may vote the stock so
held by the Corporation and may execute written consents and other instruments
with respect to such stock and may exercise any and all rights and powers
incident to the ownership thereof, subject, however, to the instructions, if
any, of the Board of Directors, the Executive Committee and the Chief Executive
Officer.
SECTION 4. CHIEF EXECUTIVE OFFICER. The Board of Directors may designate
either the Chairman or the President as the Chief Executive Officer of the
Corporation. The Chief Executive Officer shall have direct
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charge of the business and affairs of the Corporation, subject to the control of
the Board of Directors and the Executive Committee.
SECTION 5. CHIEF OPERATING OFFICER. The Chief Operating Officer, if
elected, shall have such responsibilities as shall be given by the Board of
Directors, the Executive Committee and the Chief Executive Officer (if any).
SECTION 6. VICE PRESIDENTS. Vice Presidents, when elected, shall have
such powers and perform such duties as the President or the Board may from time
to time assign and shall perform such other duties as may be prescribed by these
By-laws. At the request of the President, or in case of his absence or inability
to act, any Vice President so appointed shall perform the duties of the
President and, when so acting, shall have all the powers of, and be subject to
all the restrictions upon, the President.
SECTION 7. SECRETARY. The Secretary shall have charge of the seal of the
Corporation and of the stock ledger and transfer books. He shall attend all
meetings of stockholders and shall record all proceedings of such meetings in a
book or books which shall be the property of the Corporation. Except as
otherwise provided in these By-laws, he shall give or cause to be given notice
of all meetings of the Board of Directors and stockholders and shall perform
such other duties as are incident to the office of Secretary or as are assigned
by the Board of Directors.
SECTION 8. ASSISTANT SECRETARY. If one shall be elected, the Assistant
Secretary shall have such powers and perform such duties as the President,
Secretary or the Board may from time to time assign and shall perform such other
duties as may be prescribed by these By-laws. At the request of the Secretary,
or in case of his absence or inability to act, the Assistant Secretary shall
perform the duties of the Secretary and, when so acting, shall have all the
powers of, and be subject to all the restrictions upon, the Secretary.
SECTION 9. TREASURER. If one shall be elected, the Treasurer shall keep
correct and complete records of accounting showing accurately at all times the
financial condition of the Corporation. The Treasurer shall also act as legal
custodian of all moneys, notes, securities, and other valuables that may from
time to time come into the possession of the Corporation, and shall promptly
deposit all funds of the Corporation coming into his hands in the bank or other
depository designated by the Board of Directors and shall keep this bank account
in the name of the Corporation. Whenever requested by the Board of Directors,
the Treasurer shall furnish a statement of the financial condition of the
Corporation and shall perform such other duties as the By-laws may provide and
the Board of Directors may assign.
SECTION 10. ASSISTANT TREASURER. If one shall be elected, the Assistant
Treasurer shall have such powers and perform such duties as the President,
Treasurer or Board may from time to time assign and shall perform such other
duties as may be prescribed by these By-laws. At the request of the Treasurer,
or in case of his absence or inability to act, the Assistant Treasurer shall
perform the duties of the Treasurer and, when so acting, shall have all the
powers of, and be subject to all the restrictions upon, the Treasurer.
SECTION 11. OTHER OFFICERS. Such other officers as are appointed shall
exercise such duties and have such powers as the Board of Directors may assign.
SECTION 12. TRANSFER OF AUTHORITY. In case of the absence of any officer
of the Corporation or for any other reason that the Board of Directors may deem
sufficient, the Board of Directors may transfer the powers or duties of that
officer to any other officer or to any director or employee of the Corporation,
provided that a majority of the entire Board of Directors approves.
SECTION 13. RESIGNATION AND REMOVAL. Any officer may resign or be removed
at any time. An officer who intends to resign shall give written notice to the
Board of Directors in care of the President or the Secretary. Removal of an
officer, with or without cause, may be effected by the Board of Directors.
SECTION 14. VACANCIES. A vacancy occurring in any office may be filled
for the unexpired portion of the term of office by the Board of Directors.
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ARTICLE V
STOCK
SECTION 1. CERTIFICATES, FORM AND TRANSFERS. Each stockholder, upon
payment in full for his stock, shall be entitled to a certificate certifying the
number of shares owned by him in the Corporation. Such certificates may be under
seal, or facsimile seal, of the Corporation and shall be signed by the President
or Vice President and by the Secretary or an Assistant Secretary or the
Treasurer or an Assistant Treasurer except that such signature may be facsimile.
If any officer who has signed or whose facsimile signature has been used on any
such certificate ceases to serve the Corporation as an officer in the capacity
as to which his signature was so used before such certificate has been delivered
by the Corporation, the certificate may, nevertheless, be adopted by the
Corporation and be issued and delivered as though such officer has not ceased to
hold such office.
Each certificate representing shares shall set forth upon the face thereof
as at the time of the issue: (1) the name of the Corporation; (2) a statement
that the Corporation is organized under the laws of the State of Delaware; (3)
the name of the person to whom issued; (4) the number, class and designation of
series, if any, of shares which such certificate represents; and (5) the par
value of each share represented by such certificate or a statement that the
shares are without par value.
Transfers of shares of the stock of the Corporation shall be made only on
the books of the Corporation by assignment in writing by the registered holder
thereof, by his legal representatives, or by his attorney thereunto authorized
by power of attorney duly executed and filed with the Secretary of the
Corporation, or with its transfer agent, if any, and on surrender of the
certificate or certificates for such shares and the payment of all taxes
thereon. The Corporation and its transfer agents and registrars, if any, shall
be entitled to treat the holder of record of any share or shares of stock as the
absolute owner thereof for all purposes except as otherwise expressly provided
by the laws of the State of Delaware. The Board may, from time to time, make
such additional rules and regulations as it may deem expedient, not inconsistent
with these by-laws, concerning the issue, transfer, and registration of
certificates for shares of stock of the Corporation.
SECTION 2. CONSIDERATION AND PAYMENT. The capital stock may be issued for
such consideration as may be fixed from time to time by the Board of Directors
in accordance with applicable law.
SECTION 3. CLOSING OF TRANSFER BOOKS AND RECORD DATES. For the purpose of
determining the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or entitled to receive payment or any
dividend, or for any other proper purpose, the Board of Directors may provide
that the stock transfer books shall be closed for a stated period but such
period shall not exceed, in any case, seventy days. If the stock transfer books
are closed for the purpose of determining stockholders entitled to notice of or
to vote at a meeting of stockholders, such books shall be closed for at least
ten full days immediately preceding the date of such meeting. In lieu of closing
the stock transfer books, the Board of Directors by resolution may fix a date as
the record date for any such determination of stockholders, such date in any
case to be not earlier than the date such action is taken by the Board of
Directors and not more than seventy days, and, in case of a meeting of
stockholders, no less than ten full days, immediately preceding the date of
which the particular event, requiring such determination of stockholders, is to
occur.
When a determination of stockholders entitled to vote at any meeting of
stockholders has been made as provided in this section, such determination shall
apply to any adjournment thereof.
SECTION 4. LOST, STOLEN OR DESTROYED CERTIFICATES. No certificate for
shares of stock in the Corporation shall be issued in place of any certificate
alleged to have been lost, destroyed or stolen, except on receipt of an
affidavit as to such loss, destruction or theft and on delivery to the
Corporation, if the Board of Directors shall so require, of a bond or indemnity
in such amount, upon such terms and secured by such surety, as the Board of
Directors may in its discretion require.
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ARTICLE VI
DIVIDENDS AND RESERVES
SECTION 1. DIVIDENDS. Subject to any limitations or conditions contained
in the Certificate of Incorporation, dividends may be declared by a resolution
duly adopted by the Board of Directors and may be paid in cash, property or in
shares of the capital stock of the Corporation.
SECTION 2. RESERVES. Before payment of any dividend, the Board of
Directors may set aside out of any funds available for dividends such sum or
sums as the Board, in its absolute discretion, may determine as a reserve or
reserves to meet contingencies, to equalize dividends, to repair or maintain
property or to serve other purposes conducive to the interests of the
Corporation.
ARTICLE VII
AMENDMENTS
Except as otherwise provided by law, the certificate of incorporation or
these By-laws, these By-laws may be altered, amended or repealed by the
affirmative vote of the holders of a majority of the voting power of the shares
entitled to vote thereon or by the affirmative vote of directors holding a
majority of the directorships. Any notice of a meeting of stockholders or the
Board of Directors at which these By-laws are to be adopted, amended or repealed
shall include notice of such proposed action. No provision of these By-laws
prescribing the vote required to amend these by-laws or any thereof shall be
amended by a lesser vote. Any By-law adopted by the stockholders, if it shall so
state, may not be altered, amended or repealed by the directors. This Article
VII may not be altered, amended or repealed by the directors.
ARTICLE VIII
FISCAL YEAR
SECTION 1. The fiscal year of the Corporation shall be determined by
resolution of the Board of Directors.
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Exhibit F
WILTEK, INC.'S 1999 LONG-TERM INCENTIVE PLAN
SECTION 1. PURPOSES. The purposes of Wiltek, Inc.'s 1999 Long-Term
Incentive Plan, as amended (the "Plan") are to encourage selected key employees
and consultants, and the directors, of Wiltek, Inc. (the "Company") and its
Affiliates (as hereinafter defined) to acquire a proprietary and vested interest
in the growth and performance of the Company and to generate an increased
incentive to contribute to the Company's future success and prosperity, thereby
enhancing the value of the Company for the benefit of stockholders and the
ability of the Company to attract and retain individuals of exceptional talent.
SECTION 2. DEFINITIONS. As used in the Plan, the following terms shall
have the meanings set forth below:
(a) "AFFILIATE" of a specified person shall mean a person that directly,
or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, the person specified.
(b) "AWARD" shall mean any Option, Stock Appreciation Right, Limited Stock
Appreciation Right, Restricted Stock Award, Performance Share or any
other right, interest, or option granted pursuant to the provisions of
the Plan.
(c) "AWARD AGREEMENT" shall mean any written agreement, contract, or other
instrument or document evidencing any Award granted hereunder and
signed by both the Company and the Participant or by both the Company
and a Non-Employee Director.
(d) "BOARD" shall mean the Board of Directors of the Company.
(e) "CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time, including the rules, regulations, and interpretations
promulgated thereunder.
(f) "COMMITTEE" shall mean the Compensation Committee of the Board,
composed of not less than two directors each of whom is a Non-Employee
Director.
(g) "COMPANY" shall mean Wiltek, Inc.
(h) "CONSULTANT" shall mean any consultant of the Company or any
Affiliate.
(i) "DIVIDEND EQUIVALENT" shall mean any right granted pursuant to
Section 14(i) hereof to receive an equivalent amount of interest or
dividends with respect to the number of shares covered by an Award.
(j) "EMPLOYEE" shall mean any salaried employee of the Company or of any
Affiliate.
(k) "FAIR MARKET VALUE" shall mean, with respect to any property, the
market value of such property determined by such methods or procedures
as shall be established from time to time by the Committee.
(l) "INCENTIVE STOCK OPTION" shall mean an Option granted under Section 6
hereof that is intended to meet the requirements of Section 422 of
the Code or any successor provision thereto.
(m) "LIMITED STOCK APPRECIATION RIGHT" shall mean a Stock Appreciation
Right that can only be exercised in the event of a change in control,
according to the definition and provisions of Section 8 of the Plan.
(n) "NON-EMPLOYEE DIRECTOR" shall mean a person described in both (i) Rule
16b-3(b)(3) promulgated by the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as amended, or any
successor definition adopted by the Securities and Exchange
Commission, and (ii) Treasury Regulation Section 1.162-27(e)(3)(i), or
any successor provision, adopted by the Department of the Treasury.
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(o) "NON-QUALIFIED STOCK OPTION" shall mean an Option granted to a
Participant under Section 6 hereof that is not intended to be an
Incentive Stock Option.
(p) "OPTION" shall mean any right granted to a Participant under the Plan
allowing such Participant to purchase Shares at such price or prices
and during such period or periods as the Committee shall determine.
(q) "PARTICIPANT" shall mean an Employee or Consultant who is selected by
the Committee to receive an Award under the Plan.
(r) "PAYMENT VALUE" shall mean the dollar amount assigned to a Performance
Share which shall be equal to the Fair Market Value per Share on the
close of business on the last day of a Performance Cycle.
(s) "PERSON" shall include, without limitation, any individual,
corporation, partnership, limited liability company, association,
joint-stock company, trust, unincorporated organization, or government
or political subdivision thereof.
(t) "PERFORMANCE CYCLE" or "CYCLE" shall mean the period of time selected
by the Committee during which the performance is measured for the
purpose of determining the extent to which an award of Performance
Shares has been earned.
(u) "PERFORMANCE GOALS" shall mean the objectives established by the
Committee for a Performance Cycle, for the purpose of determining the
extent to which Performance Shares which have been contingently
awarded for such Cycle are earned.
(v) "PERFORMANCE SHARE" shall mean an Award granted pursuant to Section 10
hereof which shall represent the right, subject to the terms set forth
in Section 10 hereof, to either one Share or the Payment Value in cash
of one Share.
(w) "RESTRICTED STOCK" shall mean any Share issued with the restriction
that the holder may not sell, transfer, pledge, or assign such Share
and with such other restrictions as the Committee, in its sole
discretion, may impose (including, without limitation, any restriction
on the right to vote such Share, and the right to receive any cash
dividends), which restrictions may lapse separately or in combination
at such time or times, in installments or otherwise, as the Committee
may deem appropriate.
(x) "RESTRICTED STOCK AWARD" shall mean an award of Restricted Stock under
Section 9 hereof.
(y) "SHARES" shall mean shares of the common stock of the Company, no par
value per share, and such other securities of the Company as the
Committee may from time to time determine.
(z) "STOCK APPRECIATION RIGHT" shall mean any right granted to a
Participant pursuant to Section 7 hereof to receive, upon exercise by
the Participant, the excess of (i) the Fair Market Value of one Share
on the date of exercise or, if the Committee shall so determine in the
case of any such right other than one related to any Incentive Stock
Option, at any time during a specified period before the date of
exercise over (ii) the grant price of the right as specified by the
Committee, in its sole discretion, on the date of grant, which shall
not be less than the Fair Market Value of one Share on such date. Any
payment by the Company in respect of such right may be made in cash,
Shares, other property, or any combination thereof, as the Committee,
in its sole discretion, shall determine.
(aa) "STOCKHOLDER MEETING" shall mean the annual meeting of stockholders of
the Company held each year.
SECTION 3. ADMINISTRATION. The Plan shall be administered by the
Committee, or in the absence of a designated Committee, by the Board, in which
case the term "Committee" shall, for purposes of the Plan, be deemed to refer to
the Board . The Committee shall have full power and authority, subject to such
orders or resolutions not inconsistent with the provisions of the Plan as may
from time to time be adopted by the Board,
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to: (i) select the Employees and Consultants of the Company to whom Awards may
from time to time be granted hereunder; (ii) determine the type or types of
Award to be granted to each Participant hereunder; (iii) determine the number of
Shares to be covered by each Award granted hereunder; provided, however, that
Shares subject to any form of award granted to any individual employee during
any calendar year shall not exceed a total of 180,000 Shares; (iv) determine the
terms and conditions, not inconsistent with the provisions of the Plan, of any
Award granted hereunder; (v) determine whether, to what extent and under what
circumstances Awards may be settled in cash, Shares or other property or
canceled or suspended; (vi) determine whether, to what extent and under what
circumstances cash, Shares and other property and other amounts payable with
respect to an Award under this Plan shall be deferred either automatically or at
the election of the Participant; (vii) interpret and administer the Plan and any
instrument or agreement entered into under the Plan; (viii) establish such rules
and regulations and appoint such agents as it shall deem appropriate for the
proper administration of the Plan; and (ix) make any other determination and
take any other action that the Committee deems necessary or desirable for
administration of the Plan. Decisions of the Committee shall be final,
conclusive and binding upon all persons, including the Company, any Participant,
any stockholder, and any Employee of the Company or of any Affiliate.
Notwithstanding the above, the Committee shall not have discretion with respect
to any Shares granted to Non-Employee Directors pursuant to Section 11 hereof. A
majority of the members of the Committee may determine its actions and fix the
time and place of its meetings.
SECTION 4. SHARES SUBJECT TO THE PLAN.
(a) Subject to adjustment as provided in Section 4(b), the total number of
Shares available for grant under the Plan shall be 750,000 Shares. In addition,
any Shares issued by the Company through the assumption or substitution of
outstanding grants from an acquired company shall not reduce the shares
available for grants under the Plan. Any Shares issued hereunder may consist, in
whole or in part, of authorized and unissued shares or treasury shares. If any
Shares subject to any Award granted hereunder are forfeited or such Award
otherwise terminates without the issuance of such Shares or of other
consideration in lieu of such Shares, the Shares subject to such Award, to the
extent of any such forfeiture or termination, shall again be available for grant
under the Plan.
(b) In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, or other change in corporate structure
affecting the Shares, such adjustment shall be made in the type and aggregate
number of Shares which may be delivered under the Plan or such other securities
to be delivered in place thereof, and in the number of Shares subject to
outstanding Options granted under the Plan, and in the value or number of Shares
subject to Awards granted under the Plan as may be determined to be appropriate
by the Committee, in its sole discretion, provided that the number of Shares
subject to any Award shall always be a whole number, and provided further, that
the number of Shares granted to Non-Employee Directors pursuant to Section 11
hereof and the number of Shares subject in the future to be granted pursuant to
Section 11 hereof shall be subject to adjustment only as set forth in Section
11.
SECTION 5. ELIGIBILITY. Any Employee and/or Consultant (excluding any
member of the Committee) shall be eligible to be selected as a Participant. All
Non-Employee Directors shall automatically be eligible to receive Awards
pursuant to Section 11.
SECTION 6. STOCK OPTIONS. Options may be granted hereunder to
Participants either alone or in addition to other Awards granted under the Plan.
Options granted under the Plan shall be, in the discretion of the Committee,
either Incentive Stock Options or Non-Qualified Stock Options. Incentive Stock
Options may be granted only to Employees. Any Option granted to a Participant
under the Plan shall be evidenced by an Award Agreement in such form as the
Committee may from time to time approve. Any such Option shall be subject to the
following terms and conditions and to such additional terms and conditions, not
inconsistent with the provisions of the Plan, as the Committee shall deem
desirable:
(a) OPTION PRICE. The purchase price per Share purchasable under an Option
shall be determined by the Committee in its sole discretion; provided
that such purchase price in the case of Incentive Stock Options shall
not be less than the Fair Market Value of the Share on the date of the
grant of the Option; provided further that the purchase price per Share
for an Incentive Stock Option granted to
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an Employee who, at the time of grant, owns stock having more than 10
percent of the total combined voting power of all classes of stock of
the Company (a "Ten Percent Stockholder"), shall not be less than 110
percent of the Fair Market Value on the date of grant, all as
determined by the Committee.
(b) OPTION PERIOD. The term of each Option shall be fixed by the Committee
in its sole discretion; provided that no Incentive Stock Option shall
be exercisable after the expiration of ten years from the date the
Option is granted; provided further that no Incentive Stock Option
granted to an Employee who is a Ten Percent Stockholder shall be
exercisable after the expiration of five years from the date the Option
is granted.
(c) EXERCISABILITY. Options shall be exercisable at such time or times as
determined by the Committee at or subsequent to grant.
(d) METHOD OF EXERCISE. Subject to the other provisions of the Plan and
any applicable Award Agreement, any Option may be exercised by the
Participant in whole or in part at any time or times, and the
Participant may make payment of the option price in such form or forms,
including, without limitation, payment by delivery of cash, Shares or
other consideration, or through an arrangement with a broker in which
the Participant delivers to the Company an irrevocable notice of
exercise accompanied by the broker's payment in full and an irrevocable
instruction to the Company to deliver the Shares issuable upon exercise
to the broker for the Participant's account.
(e) INCENTIVE STOCK OPTIONS. In accordance with rules and procedures
established by the Committee, the aggregate Fair Market Value
(determined as of the time of grant) of the Shares with respect to
which Incentive Stock Options held by any Participant which are
exercisable for the first time by such Participant during any calendar
year under the Plan (and under any other benefit plans of the Company
or subsidiary of the Company) shall not exceed $100,000 or, if
different, the maximum limitation in effect at the time of grant under
Section 422 of the Code, or any successor provision, and any
regulations promulgated thereunder. The terms of any Incentive Stock
Option granted hereunder shall comply in all respects with the
provisions of Section 422 of the Code, or any successor provision, and
any regulations promulgated thereunder.
SECTION 7. STOCK APPRECIATION RIGHTS. Stock Appreciation Rights may be
granted hereunder to Participants either alone or in addition to other Awards
granted under the Plan and may, but need not, relate to a specific Option
granted under Section 6. The provisions of Stock Appreciation Rights need not be
the same with respect to each recipient. Any Stock Appreciation Right related to
a Non-qualified Stock Option may be granted at the same time such Option is
granted or at any time thereafter before exercise or expiration of such Option.
Any Stock Appreciation Right related to an Incentive Stock Option must be
granted at the same time such Option is granted. In the case of any Stock
Appreciation Right related to any Option, the Stock Appreciation Right or
applicable portion thereof shall terminate and no longer be exercisable upon the
termination or exercise of the related Option, except that a Stock Appreciation
Right granted with respect to less than the full number of Shares covered by a
related Option shall not be reduced until the exercise or termination of the
related Option exceeds the number of shares not covered by the Stock
Appreciation Right. Any Option related to any Stock Appreciation Right shall no
longer be exercisable to the extent the related Stock Appreciation Right has
been exercised. The Committee may impose such conditions or restrictions on the
exercise of any Stock Appreciation Right as it shall deem appropriate.
SECTION 8. LIMITED STOCK APPRECIATION RIGHTS. Limited Stock Appreciation
Rights may be granted hereunder to Participants in relation to any Option or
Stock Appreciation Right granted under the Plan. A Limited Stock Appreciation
Right may be granted at the time the Option or Stock Appreciation Right is
granted or at any time thereafter. Limited Stock Appreciation Rights are
exercisable in full for a period of seven months following the date of a Change
in Control as defined in Section 12(b).
(a) AMOUNT OF PAYMENT. The amount of payment to which a Participant shall
be entitled upon the exercise of each Limited Stock Appreciation Right
shall be equal to the difference between the
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Option price of the Shares covered by the related Option or Stock
Appreciation Right and the Market Price of such Shares. Market Price is
defined to be the greater of (i) the highest price of the Shares paid
in connection with a Change in Control and (ii) (a) if the Shares are
traded on an exchange, the highest closing trade price per Share on
such exchange during the 60-day period prior to the Change in Control,
and (b) if the Shares are not traded on an exchange, but are traded
over-the-counter, the average of the highest daily closing bid and ask
price per Share during the 60-day period prior to the Change in
Control, in either case as reasonably determined by the Committee.
(b) FORM OF PAYMENT. Payments to Participants upon the exercise of Limited
Stock Appreciation Rights shall be made solely in cash.
(c) EFFECT OF EXERCISE. If Limited Stock Appreciation Rights are
exercised, the Options and Stock Appreciation Rights related to them
cease to be exercisable. Upon the exercise or termination of the
Options or Stock Appreciation Rights, the related unexercised Limited
Stock Appreciation Rights terminate.
SECTION 9. RESTRICTED STOCK.
(a) ISSUANCE. Restricted Stock Awards may be issued hereunder to
Participants, for no cash consideration or such consideration as may be
determined by the Committee to be appropriate, either alone or in
addition to other Awards granted under the Plan. The provisions of
Restricted Stock Awards need not be the same with respect to each
recipient.
(b) REGISTRATION. Any Restricted Stock issued hereunder may be evidenced
in such manner as the Committee in its sole discretion shall deem
appropriate, including, without limitation, book-entry registration or
issuance of a stock certificate or certificates. In the event any stock
certificate is issued in respect of shares of Restricted Stock awarded
under the Plan, such certificate shall be registered in the name of the
Participant, and shall bear an appropriate legend referring to the
terms, conditions, and restrictions applicable to such Award.
(c) FORFEITURE. Except as otherwise determined by the Committee at the
time of grant, upon termination of employment for any reason during the
restriction period specified in connection with such award, all shares
of Restricted Stock still subject to restriction shall be forfeited by
the Participant and reacquired by the Company; provided that in the
event of a Participant's retirement, permanent disability or death, or
in cases of special circumstances, the Committee may, in its sole
discretion, when it finds that a waiver would be in the best interests
of the Company, waive in whole or in part any or all remaining
restrictions with respect to such Participant's shares of Restricted
Stock. Unrestricted Shares, evidenced in such manner as the Committee
shall deem appropriate, shall be issued to the grantee promptly after
the period of forfeiture upon satisfaction of all requirements under
the applicable Restricted Stock Award, as determined or modified by the
Committee.
SECTION 10. PERFORMANCE SHARES.
(a) ISSUANCE. Performance Shares may be issued hereunder to Participants
either alone or in addition to other Awards granted under the Plan. The terms of
Performance Shares need not be the same with respect to each recipient.
Performance Shares shall entitle the recipient thereof to convert same into
Shares, cash, or a combination thereof, as determined by the Committee, based
upon satisfaction of pre-determined performance targets or goals. The Committee
shall have sole and complete authority to determine the Employees who shall
receive Performance Shares and the number of such Shares for each Performance
Cycle, and to determine the duration of each Performance Cycle. There may be
more than one Performance Cycle in existence at any one time, and the duration
of Performance Cycles may differ from each other.
(b) PERFORMANCE GOALS. The Committee shall establish Performance Goals for
each Cycle based on any one or more of the following, or any other factor the
Committee deems to be relevant: the operating earnings, net earnings, return on
equity, income, market share, stockholder return, combined ratio, level of
expenses or growth in revenue. During any Cycle, the Committee may adjust the
Performance Goals for such
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Cycle as it deems equitable in recognition of unusual or non-recurring events
affecting the Company, changes in applicable tax laws or accounting principles,
or such other factors as the Committee may determine; provided, however, that no
such adjustment shall be applicable to the extent such adjustment would result
in a disallowance of a tax deduction pursuant to Section 162(m) of the Code.
(c) DETERMINATION OF EARNED PERFORMANCE SHARES. As soon as practicable
after the end of a Performance Cycle, the Committee shall determine the number
of Performance Shares which have been earned on the basis of performance in
relation to the established Performance Goals.
(d) PAYMENT VALUES. As soon as practicable after the expiration of the
Performance Cycle and the Committee's determination under paragraph (c), above,
the Committee shall determine whether the Participant should be distributed cash
and/or Shares. To the extent that distributions are made in cash, the amount of
cash distributed shall be equal to the number of earned Performance Shares for
which cash is being distributed, times the Payment Value. Award payments made in
cash rather than by the issuance of Shares shall not result in additional Shares
being available under the Plan. To the extent that distributions are made in
Shares, the number of Shares distributed shall be equal to the number of earned
Performance Shares for which Shares are being distributed.
SECTION 11. NON-EMPLOYEE DIRECTORS' STOCK GRANTS.
(a) GRANT OF OPTIONS. Each Non-Employee Director in office on the date of
the approval of this Plan by the Company's Board of Directors, and each Person
who thereafter becomes a Non-Employee Director, on the date they become a
Non-Employee Director, shall receive a Non-qualified Stock Option to purchase
20,000 Shares of the Company's Common Stock (as constituted on the date hereof)
at a price equal to the fair market value of such a Share (determined pursuant
to the following sentence) on such date, exercisable after the first anniversary
of the date of grant thereof and through the tenth anniversary of the date of
grant thereof. For purposes of the foregoing, the fair market value of a Share
shall be the last reported trading price on the last trading day before the date
such Non-Employee Director becomes entitled to receive the Options (or, if there
were no trades on such date, the average of the bid and asked prices per Share
on such date).
(b) VESTING AND FORFEITURE. All Options granted to Non-Employee Directors
pursuant to this Section 11 shall be "restricted" and subject to forfeiture
until such Shares vest on the first anniversary of the date of grant. Prior to
vesting, such Options shall be subject to forfeiture upon the voluntary
resignation of such Non-Employee Director, but excluding voluntary resignations
within one year of a Change of Control (as defined below). For purposes of this
Section 11, "Change of Control" shall mean (i) any merger or consolidation or
other corporate reorganization of the Company in which the Company is not the
surviving entity; or (ii) any sale of all or substantially all of the Company's
assets, in either a single transaction or a series of transactions; or (iii) a
liquidation of all or substantially all of the Company's assets; or (iv) if
there is a change within one twelve-month period of a majority of the directors
constituting the Company's Board of Directors at the beginning of such
twelve-month period; or (v) if a single person or entity, or a related group of
persons or entities, at any time subsequent to the date of grant acquires
beneficial ownership of 25% or more of the Company's outstanding voting
securities; unless, with respect to clause (iv), the change of directors is
approved by the Board of Directors as constituted prior to such change and no
event described in clause (v) has occurred.
(c) ADJUSTMENT OF AWARD. In case there shall be a merger, reorganization,
consolidation, recapitalization, stock dividend or other change in corporate
structure such that the Shares of the Company are changed into or become
exchangeable for a different security, thereafter the Options subject to be
granted to Non-Employee Directors pursuant to the provisions of this Section 11
shall be adjusted accordingly.
SECTION 12. CHANGE IN CONTROL.
(a) In order to maintain the Participants' rights in the event of any
Change in Control of the Company, as hereinafter defined, the Committee, as
constituted before such Change in Control, may, in its sole discretion, as to
any Award (except Options granted pursuant to Section 11), either at the time an
Award is made hereunder or any time thereafter, take any one or more of the
following actions: (i) provide for the acceleration of any time periods relating
to the exercise or realization of any such Award so that such Award
F-6
<PAGE> 63
may be exercised or realized in full on or before a date fixed by the Committee;
(ii) provide for the purchase of any such Award, upon the Participant's request,
for an amount of cash equal to the amount that could have been attained upon the
exercise of such Award or realization of the Participant's rights had such Award
been currently exercisable or payable; or (iii) make such adjustment to any such
Award then outstanding as the Committee deems appropriate to reflect such Change
in Control. In addition, the Committee, upon receiving approval of a majority of
the full Board, may, in its discretion, cause any Award outstanding at such time
to be assumed, or new rights substituted therefor, by the acquiring or surviving
corporation after such Change in Control. The Committee may, in its discretion,
include such further provisions and limitations in any agreement documenting
such Awards as it may deem equitable and in the best interests of the Company.
(b) A "Change in Control" shall be deemed to have occurred if, subsequent
to the date of adoption of the Plan by the Company's stockholders (i) any Person
other than a trustee or other fiduciary holding securities under an employee
benefit plan of the Company, and other than the Company or a corporation owned,
directly or indirectly, by the stockholders of the Company in substantially the
same proportions as their ownership of stock of the Company, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange Act
of 1934), directly or indirectly, of securities of the Company representing 25%
or more of the combined voting power of the Company's then outstanding
securities; or (ii) during any period of two consecutive years, individuals who
at the beginning of such period constitute the Board and any new Director (other
than a Director designated by a person who has entered into an agreement with
the Company to effect a transaction described in (i) above) whose election by
the Board or nomination for election by the Company's stockholders was approved
by a vote of at least two-thirds ( 2/3) of the Directors then still in office
who either were Directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute a majority thereof.
SECTION 13. AMENDMENTS AND TERMINATION. The Committee may amend, alter or
discontinue the Plan, but no amendment, alteration, or discontinuation shall be
made that would impair the rights of a Participant under an Award theretofore
granted, without the Participant's consent, or that without the approval of the
Company's stockholders as required by applicable law would:
(a) except as is provided in Section 4(b) or 11(d) of the Plan, increase
the total number of Shares reserved for the purposes of the Plan;
(b) change the Employees or class of Employees eligible to participate in
the Plan; or
(c) change in any way the Shares provided for in Section 11 of the Plan.
The Committee may amend the terms of any Award theretofore granted (except
Options granted pursuant to Section 11 hereof), prospectively or retroactively,
but no such amendment shall impair the rights of any Participant without his
consent. The Committee may also substitute new Awards for Awards previously
granted to Participants, including without limitation previously granted Options
having Fair Market Value or higher option prices.
SECTION 14. GENERAL PROVISIONS.
(a) At the sole discretion of the Committee at the time of grant, Awards
may be assignable or transferable by a Participant or a Non-Employee Director;
provided that no Award shall be assignable or transferable unless the exercise
of such Award and subsequent sale may be covered by a Registration Statement on
Form S-8.
(b) The term of each Award shall be for such period of months or years from
the date of its grant as may be determined by the Committee; provided that in no
event shall the term of any Incentive Stock Option, or any Stock Appreciation
Right related to any Incentive Stock Option, exceed a period of ten (10) years
from the date of its grant; provided further that in no event shall the term of
any Incentive Stock Option, or any Stock Appreciation Right related to any
Incentive Stock Option granted to a Ten Percent Stockholder exceed a period of
five (5) years from the date of its grant.
(c) Nothing in this Plan shall confer upon any Employee or Participant any
right to continue in the employ of the Company or any Affiliate or interfere in
any way with the right of any Company or any Affiliate
F-7
<PAGE> 64
to terminate his or her employment at any time. No Employee or Participant shall
have any claim to be granted any Award under the Plan and there is no obligation
for uniformity of treatment of Employees or Participants under the Plan.
(d) The prospective recipient of any Award under the Plan shall not, with
respect to such Award, be deemed to have become a Participant, or to have any
rights with respect to such Award, until and unless such recipient shall have
executed an Award Agreement or other instrument evidencing the Award and
delivered a fully executed copy thereof to the Company, and otherwise complied
with the then applicable terms and conditions.
(e) Subject to Section 13 hereof, the Committee shall be authorized to make
adjustments in performance award standards or in the terms and conditions of
other Awards in recognition of unusual or nonrecurring events affecting the
Company or its financial statements or changes in applicable laws, regulations
or accounting principles. The Committee may correct any defect, supply any
omission or reconcile any inconsistency in the Plan or any Award in the manner
and to the extent it shall deem desirable to carry it into effect. In the event
the Company shall assume outstanding employee benefit awards or the right or
obligation to make future such awards in connection with the acquisition of
another corporation or business entity, the Committee may, in its discretion,
make such adjustments in the terms of Awards under the Plan as it shall deem
appropriate. Notwithstanding the above, the Committee shall not have the right
to make any adjustments in the terms or conditions of Shares granted pursuant to
Section 11 hereof.
(f) The Committee shall have full power and authority to determine any
other type and form of Award beyond those enumerated above to grant a
Participant for the furtherance of the purposes of the Plan.
(g) The Committee shall have full power and authority to determine whether,
to what extent and under what circumstances any Award (other than Options
granted pursuant to Section 11 hereof) shall be canceled or suspended. In
particular, but without limitation, all outstanding Awards to any Participant
shall be canceled if the Participant, without the consent of the Committee,
while employed by the Company or after termination of such employment, becomes
associated with, employed by, renders services to, or owns any interest in
(other than any nonsubstantial interest, as determined by the Committee), any
business that is in competition with the Company or with any business in which
the Company has a substantial interest as determined by the Committee.
(h) All certificates for Shares delivered under the Plan pursuant to any
Award shall be subject to such stock-transfer orders and other restrictions as
the Committee may deem advisable under the rules, regulations, and other
requirements of the Securities and Exchange Commission, any stock exchange upon
which the Shares are then listed, and any applicable Federal or state securities
law, and the Committee may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions.
(i) Subject to the provisions of this Plan and any Award Agreement, the
recipient of an Award may, if so determined by the Committee, be entitled to
receive, currently or on a deferred basis, interest or dividends, or interest or
Dividend Equivalents, with respect to the number of Shares covered by the Award,
as determined by the Committee, in its sole discretion, and the Committee may
provide that such amounts (if any) shall be deemed to have been reinvested in
additional Shares or otherwise reinvested.
(j) As circumstances may from time to time require, the Committee may in
its sole discretion make available to Participants loans for the purpose of
exercising Options.
(k) The Company shall be authorized to withhold from any Award granted or
payment due under the Plan the amount of withholding taxes due with respect to
an Award or payment hereunder and to take such other action as may be necessary
in the opinion of the Company to satisfy all obligations for the payment of such
taxes. The Company shall also be authorized to accept the delivery of shares by
a Participant in payment for the withholding of federal, state and local taxes
(but not for social security and Medicare taxes) up to the Participant's
marginal tax rate.
F-8
<PAGE> 65
(l) Nothing contained in this Plan shall prevent the Board of Directors
from adopting other or additional compensation arrangements, subject to
stockholder approval if such approval is required; and such arrangements may be
either generally applicable or applicable only in specific cases.
(m) The validity, construction, and effect of the Plan and any rules and
regulations relating to the Plan shall be determined in accordance with the laws
of the State of Connecticut and applicable Federal law.
(n) If any provision of this Plan is or becomes or is deemed invalid,
illegal or unenforceable in any jurisdiction, or would disqualify the Plan or
any Award under any law deemed applicable by the Committee, such provision shall
be construed or deemed amended to conform to applicable laws or if it cannot be
construed or deemed amended without, in the determination of the Committee,
materially altering the intent of the Plan, it shall be stricken and the
remainder of the Plan shall remain in full force and effect.
F-9
<PAGE> 66
June 24, 1999
Dear Shareholder:
The Board of Directors and Management cordially invite you to attend the Annual
Meeting of Shareholders of Wiltek, Inc. The Annual Meeting will be held at 10:00
a.m. on July 15, 1999, at the Omni Berkshire Place Hotel, 21 East 52nd Street,
New York, NY 10022. The enclosed notice of the meeting and Proxy Statement
contain detailed information about the business to be transacted at the meeting.
The Board of Directors has nominated five outstanding candidates for election as
Directors. The Board of Directors recommends that you vote for the nominees.
You are also being asked to approve Wiltek's name change to E-Sync Networks,
Inc., its reincorporation in Delaware, and amendments to the certificate of
incorporation and by-laws accompanying the reincorporation. Technically, the
reincorporation results in the creation of dissenters' rights for shareholders;
however, if a significant number of shareholders elect to pursue dissenters'
rights, the Directors will reconsider, and may abandon, the reincorporation. The
Board of Directors recommends that you vote for the reincorporation.
Finally, you are being asked to approve the adoption of Wiltek's 1999 Long-Term
Incentive Plan. The Board of Directors recommends that you vote for the Plan.
The prompt return of your proxy in the enclosed business return envelope will
save Wiltek additional expenses of solicitation and will help ensure that as
many shares as possible are represented.
Also enclosed, are Wiltek, Inc.'s annual report for the fiscal year ended
October 31, 1998, as filed with the Securities and Exchange Commission on Form
10-KSB as amended by Form 10-KSB/A-1 and Wiltek, Inc.'s Report to Shareholders
for the three months ended March 31, 1999.
While fiscal 1998 was an exceptional year with record growth in sales and
earnings, we are excited about the new strategic direction the Company has taken
since receiving a controlling-interest investment from Commercial Electronics
Capital Partnership. Since then, our shareholders' value has also improved with
a ten fold increase in the Company's share price. We invite you to read more
about the changes that have positioned the Company for tremendous growth in the
e-commerce marketplace in the enclosed first quarter 1999 Report to Shareholders
and to visit our new web site at E-Syncnet.com.
Sincerely,
John C. Maxwell, III
Chairman and Chief Executive Officer
<PAGE> 67
CONSOLIDATED BALANCE SHEETS (Unaudited)
<TABLE>
<CAPTION>
MARCH 31,
1999 1998
------- -------
(THOUSANDS)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalent $ 3,043 $ 340
Accounts receivable, net 947 1,287
Other current assets 185 109
------- -------
Total Current Assets 4,175 1,736
Equipment, net 879 918
Other assets 250 -
------- -------
$ 5,304 $ 2,654
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Term loan payable, current portion $ 13 $ -
Capital lease obligations, current 117 146
Medical benefit obligation, current 25 -
Accounts payable and accrued expenses 1,302 1,117
Deferred revenue 51 5
------- -------
Total Current Liabilities 1,508 1,268
------- -------
Long Term Liabilities
Term loan payable, less current portion 16 -
Capital lease obligations, non-current 46 147
Medical benefit obligation, non-current 232 -
Stockholders' Equity
Convertible Preferred Stock 3,000 -
Common Stock 1,651 1,614
Additional paid in capital 5,597 5,595
Accumulated deficit (5,530) (4,754)
Less treasury stock (1,216) (1,216)
------- -------
Total Stockholders' Equity 3,502 1,239
------- -------
$ 5,304 $ 2,654
</TABLE>
OUR COMPANY
The Company provides solutions for business-to-business electronic
communications in a secure seamless environment. Serving its Fortune 1000
customer base, the Company designs, implements and supports solutions that
facilitate the sending and receiving of faxes and e-mail messages, managing
directories, and makes optimum use of web-based technologies. The operations of
the Company are primarily conducted through two business segments, Managed
services and Professional services.
Managed services provides customers with messaging services for e-mail, fax,
directory services and remote management services supported by a 24-hours-a-day,
7-days-a-week Help Desk that assures reliable and safe electronic
communications. Messaging services includes (i) TotalMail that provides user
access to e-mail, shared calendar, scheduling, distribution lists and folders,
and (ii) Hosting services, whereby the Company maintains customers' mail servers
and runs the e-mail function remotely at one of its sites. Fax services includes
(i) Application to fax which delivers computer generated files from mainframe or
PC-based applications to facsimile devices worldwide, (ii) Mailfax, which
seamlessly sends faxes and attachments via e-mail, and (iii) Inbound fax, which
allows receipt of inbound faxes at the desktop via e-mail. Directory services
allows customers to outsource the management of their corporate data
directories. Secure e-mail and fax messaging services are provided through
public key infrastructure (PKI), digital certificates, and SmartCard
authentication products. Remote management services, offers constant
verification and analysis of multiple network resources, and monitors network
traffic, bandwidth, and file and mail servers.
Professional services is a consulting system design and integration services
organization. As a Microsoft Solution Provider Partner, certified system
engineers and Microsoft product specialists assist customers to design and
develop seamless migration strategies, and in the migration to Microsoft
BackOffice(R) products. The Company's system engineers also provide design and
integration services, whereby they assess customers' information, messaging, and
connectivity needs, evaluate existing infrastructure architecture, define and
test migration processes, and prepare enterprise-wide implementation plans. Then
they develop tools, utilities and conversion software for directory support as
well as design workflow automation solutions. The professional services
organization also supplies clients with experienced project managers to scope,
plan and coordinate virtually any information technology project.
FIRST QUARTER
WILTEK, INC.
REPORT TO SHAREHOLDERS
FOR THE THREE MONTHS ENDED
MARCH 31, 1999
<PAGE> 68
May 18, 1999
TO WILTEK'S SHAREHOLDERS:
On January 28, 1999, Commercial Electronics Capital Partnership, a venture fund
partnered with TRW, purchased a controlling interest in the Company. As a
result, the Company received an infusion of cash, technology and new management
direction. Subsequently, management announced that it will invest heavily in
expanding its e-commerce capabilities, products and services, and offer
e-commerce solutions for its Fortune 1000 client base.
The Company elected to change its fiscal year end from October 31 to December
31, accordingly, 1999 first calendar quarter financial results are presented
herein.
The 16% decline in first quarter 1999 revenues compared to the same period last
year was primarily due to the anticipated discontinuance of custom, legacy-based
messaging services by two large customers who elected in late 1998 to
discontinue outsourcing such services. Net loss for the first quarter of 1999 is
primarily attributable to non-recurring charges and costs pertaining to
significant growth initiatives undertaken by the Company to reposition itself as
a major player in the business-to-business e-commerce market.
Among the expansion initiatives, the Company will relocate its offices and data
center to state of the art facilities in Trumbull, Connecticut, increase its
public relations and marketing activities and significantly expand its sales,
professional services, research & development, and operations staff. These
growth initiatives position the Company for tremendous growth in the competitive
business-to-business e-commerce market and may continue to adversely impact the
Company's earnings in the near term.
The Company also announced on March 31, 1999, that it will be "doing business
as" E-Sync Networks, Inc., and will formally change its legal name, subject to
shareholder approval at its annual shareholders' meeting.
We are excited about the changes and new positioning that has given the Company
a re-birth with a new name and strategic direction. E-Sync Networks has also
significantly expanded its product and service offerings as indicated on the
back cover of this report.
Sincerely,
John C. Maxwell, III David S. Teitelman
Chairman and CEO President
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
<TABLE>
<CAPTION>
===============================================================================================
THREE MONTHS ENDED
MARCH 31,
1999 1998
------ -------
===============================================================================================
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
REVENUES
Managed services $ 959 $ 1,179
Professional services 638 722
===============================================================================================
Total revenues 1,597 1,901
COSTS AND EXPENSES
Cost of managed services 660 634
Cost of professional services 428 560
Sales and marketing expenses 467 240
General and administrative expenses 718 275
Research and development 199 129
Other expense, net 100 2
Interest (income) expense, net (5) 11
- -----------------------------------------------------------------------------------------------
Total Costs and Expenses 2,567 1,851
Net Earnings (Loss) $ (970) $ 50
EARNINGS (LOSS) PER COMMON SHARE:
BASIC $(.25) $ .01
DILUTED $(.25) $ .01
WEIGHTED AVERAGE NUMBER OF SHARES
USED IN PER SHARE CALCULATION
BASIC 3,950 3,844
DILUTED 3,950 4,337
</TABLE>
<PAGE> 69
PROXY
WILTEK, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints DAVID S. TEITLELMAN and JOHN C. MAXWELL, III,
or either of them, the proxy or proxies of the undersigned with full power of
substitution and revocation, to vote and act in his name, place and stead at the
Annual meeting of Shareholders to be held at the Omni Berkshire Place Hotel, 21
East 52nd Street, New York, New York 10022, on Thursday, July 15, 1999 at 10:00
a.m., and at any adjournments thereof, with such powers as the undersigned would
have if he were present thereat.
UNLESS MARKED TO THE CONTRARY, THE PROXIES SHALL BE DEEMED TO HAVE AUTHORITY
TO VOTE "FOR" PROPOSAL 1.
ELECTION OF DIRECTORS (mark only one box)
NOMINEES: Peter J. Boni, Nathan Gantcher, Stephen D. Grubbs, John C. Maxwell,
III, and David S. Teitelman
<TABLE>
<C> <S> <C>
[ ] FOR all nominees listed above
[ ] AUTHORITY WITHHELD as to all nominees
[ ] FOR, except vote withheld as to the following nominee(s):
------------------------------------------------------------------------
</TABLE>
UNLESS MARKED TO THE CONTRARY, THE PROXIES SHALL BE DEEMED TO HAVE AUTHORITY
TO VOTE "FOR" PROPOSAL 2.
<TABLE>
<C> <S> <C>
[ ] FOR Proposal 2 [ ]
<CAPTION>
<C> <C>
[ ] AUTHORITY WITHHELD
</TABLE>
UNLESS MARKED TO THE CONTRARY, THE PROXIES SHALL BE DEEMED TO HAVE AUTHORITY
TO VOTE "FOR" PROPOSAL 3, AND SHALL VOTE UPON ANY OTHER MATTER IN ACCORDANCE
WITH THEIR DISCRETION.
<TABLE>
<C> <S> <C>
[ ] FOR Proposal 3 [ ]
<CAPTION>
<C> <C>
[ ] AUTHORITY WITHHELD
</TABLE>
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
<PAGE> 70
The shares represented hereby will be voted as directed by this Proxy. If no
direction is made, the Proxies will vote such shares FOR the election of all
nominees for director listed under Proposal 1, FOR the Reincorporation described
in Proposal 2, and FOR the 1999 Long-Term Incentive Plan described in Proposal
3, and such Proxies will vote in accordance with their discretion on such other
matters as may properly come before the meeting.
---------------------------------------------
Signature of Shareholder
---------------------------------------------
Signature if held jointly
Dated: __________, 1999
Please sign exactly as name appears hereon.
When shares are held by joint tenants, both
should sign. Executors, administrators,
trustees and other fiduciaries should so
indicate when signing. If a corporation,
please sign in full corporate name by
president, or other authorized officer. If a
partnership, please sign in partnership name
by authorized person. This proxy may be
mailed, postage-free, in the enclosed
envelope.
