<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
DYNAMIC MATERIALS CORPORATION
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
DYNAMIC MATERIALS CORPORATION
551 ASPEN RIDGE DRIVE
LAFAYETTE, COLORADO 80026
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 23, 1997
To the Shareholders of
DYNAMIC MATERIALS CORPORATION:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of DYNAMIC
MATERIALS CORPORATION, a Colorado corporation (the "Company"), will be held on
Friday, May 23, 1997 at 12:00 p.m. local time at Nemacolin Woodlands Resort &
Spa, Route 40E, Farmington, Pennsylvania 15437 for the following purposes:
1. To elect four directors to serve for the ensuing year and until
their successors are elected.
2. To approve the amendment and restatement of the Company's 1992
Incentive Stock Option Plan and 1994 Nonemployee Director Stock Option Plan
in the form of the 1997 Equity Incentive Plan and to increase the aggregate
number of shares of Common Stock authorized for issuance under such plan by
275,000 shares.
3. To approve the reincorporation of the Company into Delaware.
4. To ratify the selection of Arthur Andersen LLP as independent
accountants of the Company for its fiscal year ending December 31, 1997.
5. To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on April 10, 1997,
as the record date for the determination of shareholders entitled to notice of
and to vote at this Annual Meeting and at any adjournment or postponement
thereof.
By Order of the Board of Directors,
/s/ RICHARD A. SANTA
RICHARD A. SANTA
Chief Financial Officer
and Secretary
Lafayette, Colorado
April 17, 1997
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR
REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE PREPAID IF
MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE
GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING. PLEASE
NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR OTHER
NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE RECORD
HOLDER A PROXY ISSUED IN YOUR NAME.
<PAGE> 3
DYNAMIC MATERIALS CORPORATION
551 ASPEN RIDGE DRIVE
LAFAYETTE, COLORADO 80026
---------------------
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 23, 1997
---------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
Dynamic Materials Corporation, a Colorado corporation (the "Company"), for use
at the Annual Meeting of Shareholders to be held on Friday, May 23, 1997 at
12:00 p.m. local time (the "Annual Meeting"), or at any adjournment or
postponement thereof, for the purposes set forth herein and in the accompanying
Notice of Annual Meeting. The Annual Meeting will be held at Nemacolin Woodlands
Resort & Spa, Route 40E, Farmington, Pennsylvania 15437. The Company intends to
mail this proxy statement and accompanying proxy card on or about April 17,
1997, to all shareholders entitled to vote at the Annual Meeting.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies, including
preparation, assembly, printing and mailing of this proxy statement, the proxy
and any additional information furnished to shareholders. Copies of solicitation
materials will be furnished to banks, brokerage houses, fiduciaries and
custodians holding in their names shares of Common Stock beneficially owned by
others to forward to such beneficial owners. The Company may reimburse persons
representing beneficial owners of Common Stock for their costs of forwarding
solicitation materials to such beneficial owners. Original solicitation of
proxies by mail may be supplemented by telephone, telegram or personal
solicitation by directors, officers or other regular employees of the Company.
No additional compensation will be paid to directors, officers or other regular
employees for such services.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of Common Stock at the close of business on April
10, 1997 will be entitled to notice of and to vote at the Annual Meeting. At the
close of business on April 10, 1997 the Company had outstanding and entitled to
vote 2,675,958 shares of Common Stock.
Each holder of record of Common Stock on such date will be entitled to one
vote for each share held on all matters to be voted upon at the Annual Meeting.
All votes will be tabulated by the inspector of elections appointed for the
meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions and broker non-votes will be
considered present at the Annual Meeting for the purpose of establishing a
quorum.
With regard to the election of directors, votes may be cast in favor or
withheld; votes that are withheld will be excluded entirely from the vote and
will have no effect.
Abstentions may be specified on the proposals to approve the 1997 Equity
Incentive Plan, to reincorporate the Company in Delaware and to ratify the
Company's auditors. Abstentions on the proposal to ratify the Company's auditors
will have no effect. Abstentions on the proposals to approve the 1997 Equity
Incentive Plan and to reincorporate the Company in Delaware will have the effect
of a negative vote.
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Brokerage firms who hold shares in "street name" for customers have the
authority to vote those shares with respect to the election of directors and the
ratification of the appointment of the Company's auditors if such firms have not
received voting instructions from a beneficial owner. Brokers will not have
authority to vote shares with respect to the proposals to approve the 1997
Equity Incentive Plan or to reincorporate the Company in Delaware. The failure
of a broker to vote shares in the absence of instructions (a "broker non-vote")
will have the effect of a vote against the proposals to approve the 1997 Equity
Incentive Plan and to reincorporate the Company in Delaware; broker non-votes
will have no effect with respect to any other matter considered at the Annual
Meeting.
REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Secretary of the Company at the Company's principal executive office, 551 Aspen
Ridge Road, Lafayette, Colorado 80026, a written notice of revocation or a duly
executed proxy bearing a later date, or it may be revoked by attending the
meeting and voting in person. Attendance at the meeting will not, by itself,
revoke a proxy. If no direction is indicated, the shares will be voted FOR the
election of each of the nominees for director, FOR the 1997 Equity Incentive
Plan, FOR the reincorporation of the Company into Delaware and FOR the selection
of Arthur Andersen LLP as the Company's independent accountants for the current
fiscal year. The persons named in the proxies will have discretionary authority
to vote all proxies with respect to additional matters that are properly
presented for action at the Annual Meeting.
SHAREHOLDER PROPOSALS
Proposals of shareholders that are intended to be presented at the
Company's 1998 Annual Meeting of Shareholders must be received by the Company
not later than December 18, 1997 in order to be included in the proxy statement
and proxy relating to that Annual Meeting.
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PROPOSAL 1 -- ELECTION OF DIRECTORS
There are four nominees for election to the Board at the Annual Meeting.
Each director to be elected will hold office until the next annual meeting of
shareholders and until his successor is elected and has qualified, or until such
director's earlier death, resignation or removal. Each nominee listed below is
currently a director of the Company, having been elected by the shareholders. If
Proposal 3, reincorporation of the Company into Delaware, is approved, then the
Company will have a classified Board of Directors and only two of such four
directors will be re-elected at the next annual meeting. For a further
discussion of the classified Board please see Proposal 3.
Shares represented by executed proxies will be voted, if authority to do so
is not withheld, for the election of the four nominees named below. In the event
that any nominee should be unavailable for election as a result of an unexpected
occurrence, such shares will be voted for the election of such substitute
nominee as management may propose. Each person nominated for election has agreed
to serve if elected and management has no reason to believe that any nominee
will be unable to serve. Directors are elected by a plurality of the votes
present in person or represented by proxy and entitled to vote.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF EACH NAMED NOMINEE.
NOMINEES
The names of the nominees and certain information about them are set forth
below.
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE SINCE
---- --- --------
<S> <C> <C>
Mr. Dean K. Allen............................... 61 July 1993
Mr. David E. Bartlett........................... 44 February 1996
Mr. Paul Lange.................................. 44 October 1993
Dr. George W. Morgenthaler...................... 70 June 1986
</TABLE>
MR. DEAN K. ALLEN. Mr. Allen has served the Company as a director since
July 1993. Mr. Allen is President of Parsons Europe, Middle East and South
Africa, a position he has held since February 1996. Mr. Allen was Vice President
and General Manager of Raytheon Engineers and Constructors, Europe, from
February 1994 to December 1995, and was President of Allen & Associates from
April 1992 to 1994.
MR. DAVID E. BARTLETT. Mr. Bartlett has served the Company as a director
since February 1996. Mr. Bartlett is Vice President of Business Development and
General Counsel of Agent Based Curricula, Inc., a position he has held since
September 1996. Prior thereto, Mr. Bartlett was a partner in the Boulder office
of the law firm of Cooley Godward LLP and was with such firm since 1987.
MR. PAUL LANGE. Mr. Lange has served as President, Chief Executive Officer
and a director of the Company since October 1993. Prior to joining the Company
Mr. Lange was Vice President and General Manager of the Engineered Materials
Group of Englehard Corporation, Director at Englehard/Hankuk and Chairman of the
Board of Englehard Canada, from 1989 to 1993.
DR. GEORGE W. MORGENTHALER. Mr. Morgenthaler has served as a director of
the Company since June 1986 and during the period from 1971 to 1976. Dr.
Morgenthaler has been a Professor of Aerospace Engineering and Associate Dean of
Engineering at the University of Colorado at Boulder since 1986.
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Executive Officers
The following individuals serve as executive officers of the Company. Each
executive officer is elected annually by the Board of Directors and serves at
the pleasure of the Board.
<TABLE>
<CAPTION>
NAME POSITION AGE
---- -------- ---
<S> <C> <C>
Mr. Paul Lange President and Chief Executive Officer 44
Mr. Richard A. Santa Chief Financial Officer 46
Mr. Michael W. Beam Vice President of Marketing and Sales 45
Mr. Edward G. Reineke Vice President of Operations 39
</TABLE>
MR. PAUL LANGE. See above.
MR. RICHARD A. SANTA. Mr. Santa has been employed by the Company since
October 1996. Prior to joining the Company, Mr. Santa was Corporate Controller
of Scott Sports Group Inc. from 1993 to October 1996. From 1992 to 1993 Mr.
Santa was Chief Financial Officer of Scott USA, a division of Scott Sports Group
Inc.
MR. MICHAEL W. BEAM. Mr. Beam has been employed by the Company since April
1995. Prior to joining the Company, Mr. Beam was Director of Worldwide Sales at
Indium Corporation, a producer and manufacturer of indium-based products, from
1990 to 1995.
MR. EDWARD G. REINEKE. Mr. Reineke has been employed by the Company since
April 1986 and became Vice President of Operations effective January 1, 1996.
Prior to becoming Vice President of Operations, he held the positions of Senior
Development Engineer, Engineering Manager, New Business Development Manager and
Director of Operations.
BOARD COMMITTEES AND MEETINGS
During the fiscal year ended December 31, 1996, the Board of Directors held
nine meetings. The Board has an Audit Committee and a Compensation Committee.
The Audit Committee meets with the Company's independent accountants at
least annually to review the results of the annual audit and discuss the
financial statements; recommends to the Board the independent accountants to be
retained; and receives and considers the accountants' comments as to controls,
adequacy of staff and management performance and procedures in connection with
audit and financial controls. During the year ended December 31, 1996, the Audit
Committee was composed of two non-employee directors, Messrs. Edward A. Keible
and Michael C. Hone. Mr. Hone resigned from the Board of Directors in January
1997, and Mr. Keible is not standing for re-election. The Audit Committee met
once during such fiscal year. The Audit Committee is currently composed of two
non-employee directors, Mr. Bartlett and Dr. Morgenthaler.
The Compensation Committee makes recommendations concerning salaries and
incentive compensation, awards stock options to employees and non-employee
directors under the Company's stock option plans and otherwise determines
compensation levels and performs such other functions regarding compensation as
the Board may delegate. During the year ended December 31, 1996, the
Compensation Committee was composed of three non-employee directors, Messrs.
Allen and Keible and Dr. Morgenthaler. It met once during such fiscal year. The
Compensation Committee is currently composed of three non-employee directors,
Messrs. Allen and Bartlett and Dr. Morgenthaler.
During the fiscal year ended December 31, 1996, each Board member attended
75% or more of the meetings of the Board and of the committees on which he
served that were held during the period(s) for which he served as a director and
committee member.
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PROPOSAL 2 -- APPROVAL OF 1997 EQUITY INCENTIVE PLAN
In January, 1992, the Board of Directors adopted, and the shareholders
subsequently approved, the Company's 1992 Incentive Stock Option Plan (the "1992
Plan"). As a result of a series of amendments, at December 31, 1996 there were
550,000 shares of the Company's Common Stock authorized for issuance under the
1992 Plan.
At December 31, 1996, options (net of canceled or expired options) covering
an aggregate of 421,750 shares of the Company's Common Stock had been granted
under the 1992 Plan, and only 128,250 shares (plus any shares that might in the
future be returned to the plan as a result of the cancellation or expiration of
options) remained available for future grant under the 1992 Plan.
In September 1994, the Board of Directors adopted, and the shareholders
subsequently approved, the Company's 1994 Nonemployee Director Stock Option Plan
(the "1994 Plan"), authorizing the issuance of 100,000 shares of the Company's
Common Stock thereunder.
At December 31, 1996, options (net of canceled or expired options) covering
an aggregate of 52,500 shares of the Company's Common Stock had been granted
under the 1994 Plan, and only 47,500 shares (plus any shares that might in the
future be returned to the plan as a result of the cancellation or expirations of
options) remained available for future grant under the 1994 Plan.
In March 1997, the Board approved the amendment and restatement of the 1992
Plan and the 1994 Plan in the form of the 1997 Equity Incentive Plan (the "1997
Plan"), subject to shareholder approval. The 1997 Plan enhances the flexibility
of the Board and the Compensation Committee in granting stock options to the
Company's employees, consultants and non-employee directors by including
provisions for the grant of incentive stock options and nonstatutory stock
options out of a single share reserve. The 1997 Plan also updates the 1992 Plan
and 1994 Plan to comply with new Rule 16b-3 ("Rule 16b-3") of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and provides the Board
with more flexibility to amend the plan in the future. The amendment and
restatement also increases the number of shares authorized for issuance under
the 1997 Plan by 275,000 shares, from a total of 650,000 shares to 925,000
shares. The Board adopted this amendment to ensure that the Company can continue
to grant stock options to employees at levels determined appropriate by the
Board and the Compensation Committee.
The 1997 Plan also will generally permit the Company, under Section 162(m)
of the Internal Revenue Code of 1986, as amended (the "Code"), to continue to be
able to deduct as a business expense certain compensation attributable to the
exercise of stock options granted under the 1992 Plan. Section 162(m) denies a
deduction to any publicly held corporation for certain compensation paid to
specified employees in a taxable year to the extent that the compensation
exceeds $1,000,000 for any covered employee. See "Federal Income Tax
Information" below for a discussion of the application of Section 162(m). In
light of the Section 162(m) requirements, the Board has amended and restated the
1992 Plan and the 1994 Plan in the form of the 1997 Plan, subject to shareholder
approval, to include a limitation providing that no employee may be granted
options under the 1997 Plan during a calendar year to purchase in excess of
200,000 shares of Common Stock. Previously, no such formal limitation was placed
on the number of shares available for option grants to an employee. In addition,
the 1992 Plan and 1994 Plan were amended and restated in the form of the 1997
Plan, subject to shareholder approval, to provide that, in the Board's
discretion, directors who grant options to covered employees generally will be
"outside directors" as defined in Section 162(m). For a description of this
requirement, see "Administration."
Shareholders are requested in this Proposal 2 to approve the 1997 Plan. If
the shareholders fail to approve this Proposal 2, options granted under the 1997
Plan will not qualify as performance-based compensation and, in some
circumstances, the Company may be denied a business expense deduction for
compensation recognized in connection with the exercise of these stock options.
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy at the meeting and entitled to vote will be
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required to approve the 1997 Plan. Abstentions and broker non-votes on Proposal
2 will have the effect of a negative vote. A copy of the 1997 Plan is attached
as Exhibit A.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 2.
The essential features of the 1997 Plan are outlined below:
GENERAL
The 1997 Plan provides for the grant of both incentive and nonstatutory
stock options. Incentive stock options granted under the 1997 Plan are intended
to qualify as "incentive stock options" within the meaning of Section 422 of the
Code. Nonstatutory stock options granted under the 1997 Plan are not intended to
qualify as incentive stock options under the Code. See "Federal Income Tax
Information" for a discussion of the tax treatment of incentive and nonstatutory
stock options.
PURPOSE
The 1997 Plan was adopted to provide a means by which selected officers and
employees of and consultants to the Company and its affiliates could be given an
opportunity to purchase stock in the Company, to assist in retaining the
services of employees holding key positions, to secure and retain the services
of persons capable of filling such positions and to provide incentives for such
persons to exert maximum efforts for the success of the Company. All of the
Company's approximately 110 employees are eligible to participate in the 1997
Plan.
ADMINISTRATION
The 1997 Plan is administered by the Board of Directors of the Company. The
Board has the power to construe and interpret the 1997 Plan and, subject to the
provisions of the 1997 Plan, to determine the persons to whom and the dates on
which options will be granted, the number of shares to be subject to each
option, the time or times during the term of each option within which all or a
portion of such option may be exercised, the exercise price, the type of
consideration and other terms of the option. The Board of Directors is
authorized to delegate administration of the 1997 Plan to a committee composed
of not fewer than two members of the Board. The Board has delegated
administration of the 1997 Plan to the Compensation Committee of the Board. As
used herein with respect to the 1997 Plan, the "Board" refers to the
Compensation Committee as well as to the Board of Directors itself.
Proposed regulations under Section 162(m) of the Code require that the
directors who serve as members of the Compensation Committee must be "outside
directors." The 1992 Plan and the 1994 Plan have been amended and restated in
the form of the 1997 Plan, subject to shareholder approval, to provide that, in
the Board's discretion, directors serving on the Committee will also be "outside
directors" within the meaning of Section 162(m). This limitation would exclude
from the Compensation Committee (i) current employees of the Company, (ii)
former employees of the Company receiving compensation for past services (other
than benefits under a tax-qualified pension plan), (iii) current and former
officers of the Company, (iv) directors currently receiving direct or indirect
remuneration from the Company in any capacity (other than as a director), unless
any such person is otherwise considered an "outside director" for purposes of
Section 162(m). The Company currently intends to monitor the proposed
regulations and will determine at the appropriate time whether to make any
change to the composition of its Compensation Committee if any would be required
by the final regulations.
ELIGIBILITY
Incentive stock options may be granted under the 1997 Plan only to
employees (including officers) of the Company and its affiliates. Employees
(including officers), directors and consultants are eligible to receive
nonstatutory stock options under the 1997 Plan.
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No incentive stock option may be granted under the 1997 Plan to any person
who, at the time of the grant, owns (or is deemed to own) stock possessing more
than 10% of the total combined voting power of the Company or any affiliate of
the Company, unless the option exercise price is at least 110% of the fair
market value of the stock subject to the option on the date of grant, and the
term of the option does not exceed five years from the date of grant. For
incentive stock options granted under the 1997 Plan after 1997, the aggregate
fair market value, determined at the time of grant, of the shares of Common
Stock with respect to which such options are exercisable for the first time by
an optionee during any calendar year (under all such plans of the Company and
its affiliates) may not exceed $100,000.
Subject to shareholder approval of this Proposal 2, the Company has added
to the 1997 Plan a per-employee, per-calendar year limitation equal to 200,000
shares of Common Stock. The purpose of adding this limitation is generally to
permit the Company to continue to be able to deduct for tax purposes the
compensation attributable to the exercise of options granted under the 1997
Plan. Previously, the Board or the Compensation Committee determined in its
discretion the number of shares subject to each option.
STOCK SUBJECT TO THE 1997 PLAN
If options granted under the 1992 Plan, 1994 Plan or 1997 Plan expire or
otherwise terminate without being exercised, the Common Stock not purchased
pursuant to such options again becomes available for issuance under the 1997
Plan.
TERMS OF OPTIONS
The following is a description of the permissible terms of options under
the 1997 Plan. Individual option grants may be more restrictive as to any or all
of the permissible terms described below.
Exercise Price; Payment. The exercise price of incentive stock options
under the 1997 Plan may not be less than the fair market value of the Common
Stock subject to the option on the date of the option grant, and in some cases
(see "Eligibility" above) may not be less than 110% of such fair market value.
The exercise price of nonstatutory options under the 1997 Plan may not be less
than 85% of the fair market value of the Common Stock subject to the option on
the date of the option grant. However, if options were granted with exercise
prices below market value, deductions for compensation attributable to the
exercise of such options could be limited by Section 162(m). See "Federal Income
Tax Information." At April 10, 1997, the closing price of the Company's Common
Stock as reported on the Nasdaq Stock Market (National Market) was $10.50 per
share.
In the event of a decline in the value of the Company's Common Stock, the
Board has the authority to offer employees the opportunity to replace
outstanding higher priced options, whether incentive or nonstatutory, with new
lower priced options. To the extent required by Section 162(m), an option
repriced under the 1997 Plan is deemed to be canceled and a new option granted.
Both the option deemed to be canceled and the new option deemed to be granted
will be counted against the 200,000-share limitation.
The exercise price of options granted under the 1997 Plan must be paid
either: (a) in cash or by check at the time the option is exercised; or (b) at
the discretion of the Board, (i) by delivery of other Common Stock of the
Company, (ii) pursuant to a deferred payment arrangement or (c) in any other
form of legal consideration acceptable to the Board.
Option Exercise. Options granted under the 1997 Plan may become exercisable
in cumulative increments ("vest") as determined by the Board. Shares covered by
options granted under the 1997 Plan will typically vest at the rate of 25% on
each anniversary of the date of grant over four years, except with respect to
option grants to non-employee directors which will vest in full on the first
anniversary of the date of the grant. Shares covered by currently outstanding
options granted under the 1992 Plan typically vest at the rate of 25% on each
anniversary of the date of grant over four years during the optionee's
employment. Shares covered by currently outstanding options granted under the
1994 Plan typically vest in full on the first anniversary of the date of grant.
Shares covered by options granted in the future under the 1997 Plan may be
subject to different vesting terms. The Board has the power to accelerate the
time during which an option may be exercised. In
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addition, options granted under the 1997 Plan may permit exercise prior to
vesting, but in such event the optionee may be required to enter into an early
exercise stock purchase agreement that allows the Company to repurchase shares
not yet vested at their exercise price should the optionee leave the employ of
the Company before vesting. To the extent provided by the terms of an option, an
optionee may satisfy any federal, state or local tax withholding obligation
relating to the exercise of such option by a cash payment upon exercise, by
authorizing the Company to withhold a portion of the stock otherwise issuable to
the optionee, by delivering already-owned stock of the Company or by a
combination of these means.
Term. The maximum term of options under the 1997 Plan is 10 years, except
that in certain cases (see "Eligibility") the maximum term is five years.
Options under the 1997 Plan terminate three months after termination of the
optionee's employment or relationship as a consultant or director of the Company
or any affiliate of the Company, unless (a) such termination is due to such
person's permanent and total disability (as defined in the Code), in which case
the option may, but need not, provide that it may be exercised at any time
within one year of such termination; (b) the optionee dies while employed by or
serving as a consultant or director of the Company or any affiliate of the
Company, or within three months after termination of such relationship, in which
case the option may, but need not, provide that it may be exercised (to the
extent the option was exercisable at the time of the optionee's death) within 18
months of the optionee's death by the person or persons to whom the rights to
such option pass by will or by the laws of descent and distribution; or (c) the
option by its terms specifically provides otherwise. Individual options by their
terms may provide for exercise within a longer period of time following
termination of employment or the consulting relationship. The option term may
also be extended in the event that exercise of the option within these periods
is prohibited for specified reasons.
ADJUSTMENT PROVISIONS
If there is any change in the stock subject to the 1997 Plan or subject to
any option granted under the 1997 Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or otherwise), the 1997 Plan and options
outstanding thereunder will be appropriately adjusted as to the class and the
maximum number of shares subject to such plan, the maximum number of shares
which may be granted to an employee during a calendar year, and the class,
number of shares and price per share of stock subject to such outstanding
options.
EFFECT OF CERTAIN CORPORATE EVENTS
The 1997 Plan provides that, in the event of a dissolution or liquidation
of the Company, or specified types of mergers or other corporate
reorganizations, to the extent permitted by law, any surviving corporation will
be required to either assume options outstanding under the 1997 Plan or
substitute similar options for those outstanding under such plan, or such
outstanding options will continue in full force and effect. In the event that
any surviving corporation declines to assume or continue options outstanding
under the 1997 Plan, or to substitute similar options, then the time during
which such options may be exercised will be accelerated and the options
terminated if not exercised during such time. The acceleration of an option in
the event of an acquisition or similar corporate event may be viewed as an
anti-takeover provision, which may have the effect of discouraging a proposal to
acquire or otherwise obtain control of the Company.
DURATION, AMENDMENT AND TERMINATION
The Board may suspend or terminate the 1997 Plan without shareholder
approval or ratification at any time or from time to time. Unless sooner
terminated, the 1997 Plan will terminate on March 3, 2007.
The Board may also amend the 1997 Plan at any time or from time to time.
However, no amendment will be effective unless approved by the shareholders of
the Company within twelve months before or after its adoption by the Board if
the amendment would: (a) modify the requirements as to eligibility for
participation (to the extent such modification requires shareholder approval in
order for the 1997 Plan to satisfy Section 422 of the Code, if applicable, or
Rule 16b-3 of the Exchange Act); (b) increase the number of shares reserved for
8
<PAGE> 11
issuance upon exercise of options; or (c) change any other provision of the 1997
Plan in any other way if such modification requires shareholder approval in
order to comply with Rule 16b-3 of the Exchange Act or satisfy the requirements
of Section 422 of the Code. The Board may submit any other amendment to the 1997
Plan for shareholder approval, including, but not limited to, amendments
intended to satisfy the requirements of Section 162(m) of the Code regarding the
exclusion of performance-based compensation from the limitation on the
deductibility of compensation paid to certain employees.
RESTRICTIONS ON TRANSFER
Under the 1997 Plan, an incentive stock option may not be transferred by
the optionee otherwise than by will or by the laws of descent and distribution,
and during the lifetime of the optionee may be exercised only by the optionee. A
nonstatutory stock option may not be transferred except by will or by the laws
of descent and distribution or pursuant to a "qualified domestic relations
order." In addition, shares subject to repurchase by the Company under an early
exercise stock purchase agreement may be subject to restrictions on transfer
which the Board deems appropriate.
FEDERAL INCOME TAX INFORMATION
Incentive Stock Options. Incentive stock options under the 1997 Plan are
intended to be eligible for the favorable federal income tax treatment accorded
"incentive stock options" under the Code.
There generally are no federal income tax consequences to the optionee or
the Company by reason of the grant or exercise of an incentive stock option.
However, the exercise of an incentive stock option may increase the optionee's
alternative minimum tax liability, if any.
If an optionee holds stock acquired through exercise of an incentive stock
option for at least two years from the date on which the option is granted and
at least one year from the date on which the shares are transferred to the
optionee upon exercise of the option, any gain or loss on a disposition of such
stock will be long-term capital gain or loss. Generally, if the optionee
disposes of the stock before the expiration of either of these holding periods
(a "disqualifying disposition"), at the time of disposition, the optionee will
realize taxable ordinary income equal to the lesser of (a) the excess of the
stock's fair market value on the date of exercise over the exercise price, or
(b) the optionee's actual gain, if any, on the purchase and sale. The optionee's
additional gain, or any loss, upon the disqualifying disposition will be a
capital gain or loss, which will be long-term or short-term depending on whether
the stock was held for more than one year. Long-term capital gains currently are
generally subject to lower tax rates than ordinary income. The maximum capital
gains rate for federal income tax purposes is currently 28% while the maximum
ordinary income rate is effectively 39.6% at the present time. Slightly
different rules may apply to optionees who acquire stock subject to certain
repurchase options or who are subject to Section 16(b) of the Exchange Act.
To the extent the optionee recognizes ordinary income by reason of a
disqualifying disposition, the Company will generally be entitled (subject to
the requirement of reasonableness, the provisions of Section 162(m) of the Code
and the satisfaction of a tax reporting obligation) to a corresponding business
expense deduction in the tax year in which the disqualifying disposition occurs.
Nonstatutory Stock Options. Nonstatutory stock options granted under the
1997 Plan generally have the following federal income tax consequences:
There are no tax consequences to the optionee or the Company by reason of
the grant of a nonstatutory stock option. Upon exercise of a nonstatutory stock
option, the optionee normally will recognize taxable ordinary income equal to
the excess of the stock's fair market value on the date of exercise over the
option exercise price. Generally, with respect to employees, the Company is
required to withhold from regular wages or supplemental wage payments an amount
based on the ordinary income recognized. Subject to the requirement of
reasonableness, the provisions of Section 162(m) of the Code and the
satisfaction of a tax reporting obligation, the Company will generally be
entitled to a business expense deduction equal to the taxable ordinary income
realized by the optionee. Upon disposition of the stock, the optionee will
recognize a capital gain or loss equal to the difference between the selling
price and the sum of the amount paid for such
9
<PAGE> 12
stock plus any amount recognized as ordinary income upon exercise of the option.
Such gain or loss will be long or short-term depending on whether the stock was
held for more than one year. Slightly different rules may apply to optionees who
acquire stock subject to certain repurchase options or who are subject to
Section 16(b) of the Exchange Act.
Potential Limitation on Company Deductions. As part of the Omnibus Budget
Reconciliation Act of 1993, the U.S. Congress amended the Code to add Section
162(m), which denies a deduction to any publicly held corporation for
compensation paid to certain employees in a taxable year to the extent that
compensation exceeds $1,000,000 for a covered employee. It is possible that
compensation attributable to stock options, when combined with all other types
of compensation received by a covered employee from the Company, may cause this
limitation to be exceeded in any particular year.
Certain kinds of compensation, including qualified "performance-based
compensation," are disregarded for purposes of the deduction limitation. In
accordance with proposed regulations issued under Section 162(m), compensation
attributable to stock options will qualify as performance-based compensation,
provided that the option is granted by a compensation committee comprised solely
of "outside directors" and either: (i) the option plan contains a per-employee
limitation on the number of shares for which options may be granted during a
specified period, the per-employee limitation is approved by the shareholders,
and the exercise price of the option is no less than the fair market value of
the stock on the date of grant; or (ii) the option is granted (or exercisable)
only upon the achievement (as certified in writing by the compensation
committee) of an objective performance goal established in writing by the
compensation committee while the outcome is substantially uncertain, and the
option is approved by shareholders.
New Plan Benefits. The following table presents certain information with
respect to options to be granted under the 1997 Plan during the Company's fiscal
year ending December 31, 1997 to (i) the Named Executive Officers (as defined in
"Executive Compensation" below), (ii) all executive officers as a group, (iii)
all non-executive officer directors as a group, and (iv) all non-executive
officer employees as a group.
NEW PLAN BENEFITS
<TABLE>
<CAPTION>
1997 EQUITY INCENTIVE PLAN
-------------------------------------------
NUMBER OF SHARES SUBJECT
NAME AND POSITION DOLLAR VALUE(1) TO OPTIONS GRANTED
----------------- --------------- ------------------------
<S> <C> <C>
Paul Lange(2)........................................... $196,875 25,000
Richard A. Santa(2)..................................... $200,000 25,000
Michael W. Beam(2)...................................... $157,500 20,000
Edward G. Reineke(2).................................... $137,813 17,500
All Executive Officers as a Group(2).................... $692,188 87,500
All Non-Executive Officer Directors as a Group.......... $157,500(3) 15,000
All Non-Executive Officer Employees as a Group(2)....... $613,938 80,500
</TABLE>
- ---------------
(1) Exercise price multiplied by the number of shares underlying the option(s).
(2) Option grants to this person or group of persons will be made at the
discretion of the Board and are not determinable at this time. Accordingly,
this table sets forth information regarding option grant actually made to
such person or group of persons during the Company's fiscal year ended
December 31, 1996.
(3) Based on an assumed exercise price of $10.50 per share, the closing price of
the Company's Common Stock on April 10, 1997, as reported on the Nasdaq
Stock Market (National Market). The actual exercise price will be equal to
the closing price on May 23, 1997.
10
<PAGE> 13
PROPOSAL 3 -- REINCORPORATION OF THE COMPANY IN DELAWARE
AND RELATED CHANGES TO THE RIGHTS OF SHAREHOLDERS
GENERAL
In March 1997, the Board of Directors unanimously approved a proposal to
change the Company's state of incorporation from Colorado to Delaware (the
"Reincorporation"). The Board of Directors believes the change in domicile to be
in the best interests of the Company and its shareholders for several reasons.
Principally, the Board of Directors believes that reincorporation will enhance
the Company's ability to attract and retain qualified directors as well as to
encourage directors to continue to make independent decisions in good faith on
behalf of the Company. To date, the Company has not experienced difficulty in
retaining directors. The Company, however, believes that the more favorable
corporate environment afforded by Delaware will enable it to compete more
effectively with other public companies, most of which are incorporated in
Delaware, to attract new directors and to retain its current directors.
Reincorporation in Delaware will allow the Company the increased flexibility and
predictability afforded by Delaware law. Concurrent with the reincorporation,
the Company proposes to adopt or maintain certain measures designed to make
hostile takeovers of the Company more difficult. The Board believes that
adoption of these measures will enable the Board to consider fully any proposed
takeover attempt and to negotiate terms that maximize the benefit of any
proposed takeover attempt to the Company and its shareholders.
In recent years, a number of major public companies have obtained the
approval of their shareholders to reincorporate in Delaware. For the reasons
explained below, the Company believes it is beneficial and important that the
Company likewise avail itself of Delaware law.
For many years, Delaware has followed a policy of encouraging incorporation
in that state. In furtherance of that policy, Delaware has adopted comprehensive
corporate laws that are revised regularly to meet changing business
circumstances. The Delaware Legislature is particularly sensitive to issues
regarding corporate law and is especially responsive to developments in modern
corporate law. The Delaware courts have developed considerable expertise in
dealing with corporate issues as well as a substantial body of case law
construing Delaware's corporate law. As a result of these factors, it is
anticipated that Delaware law will provide greater predictability in the
Company's legal affairs than is presently available under Colorado law.
In 1986, Delaware amended its corporate law to allow corporations to limit
the personal monetary liability of its directors for their conduct as directors
under certain circumstances. It should be noted that Delaware law does not
permit a Delaware corporation to limit or eliminate the liability of its
directors for intentional misconduct, bad faith conduct or any transaction from
which the director derives an improper personal benefit or for violations of
federal laws such as the federal securities laws. Colorado amended its corporate
law in 1987 in a manner similar to that of Delaware to permit a Colorado
corporation to limit the personal monetary liability of its directors for their
conduct as directors under certain circumstances, and the Company amended its
Articles of Incorporation in 1988 to take advantage of these changes in Colorado
law. Nonetheless, the Board of Directors believes that the protection from
liability for directors is somewhat greater under the Delaware law than under
the Colorado law and therefore that Delaware incorporation will enhance the
Company's ability to recruit and retain directors in the future. The Board has
included such a provision in the Delaware Certificate of Incorporation (the
"Delaware Certificate") and Bylaws (the "Delaware Bylaws"). Shareholders should,
however, be aware that such a provision inures to the benefit of the directors,
and the interest of the Board in recommending the reincorporation may therefore
be in conflict with the interests of the shareholders. See "Indemnification and
Limitation of Liability" for a more complete discussion of these issues.
In addition, portions of the reincorporation proposal may have the effect
of deterring hostile takeover attempts. A hostile takeover attempt may have a
positive or a negative effect on the Company and its shareholders, depending on
the circumstances surrounding a particular takeover attempt. Takeover attempts
that have not been negotiated or approved by the board of directors of a
corporation can seriously disrupt the business and management of a corporation
and generally present to the shareholder the risk of terms that may be less than
favorable to all of the shareholders than would be available in a board-approved
transaction.
11
<PAGE> 14
Board-approved transactions may be carefully planned and undertaken at an
opportune time in order to obtain maximum value for the corporation and all of
its shareholders with due consideration to matters such as the recognition or
postponement of gain or loss for tax purposes, the management and business of
the acquiring corporation and maximum strategic deployment of corporate assets.
The Board of Directors recognizes that hostile takeover attempts do not
always have the unfavorable consequences or effects described above and may
frequently be beneficial to the shareholders, providing all of the shareholders
with considerable value for their shares. However, the Board of Directors
believes that the potential disadvantages of unapproved takeover attempts are
sufficiently great that prudent steps to reduce the likelihood of such takeover
attempts are in the best interests of the Company and its shareholders.
Accordingly, the reincorporation plan includes certain proposals that may have
the effect of discouraging or deterring hostile takeover attempts.
Notwithstanding the Board's belief as to the benefits to shareholders of
the anti-takeover measures, shareholders should recognize that one of the
effects of such changes may be to discourage a future attempt to acquire control
of the Company that is not presented to and approved by the Board of Directors,
but that a substantial number and perhaps even a majority of the Company's
shareholders might believe to be in their best interest or to provide a
substantial premium to shareholders for their shares over the current market
prices. As a result, shareholders who might desire to participate in such a
transaction may not have an opportunity to do so.
The Company's current Articles of Incorporation, as amended (the "Colorado
Articles") and Bylaws (the "Colorado Bylaws") already include some provisions
available to certain public companies under Colorado law that deter hostile
takeover attempts, such as elimination of cumulative voting, and a requirement
that a vacancy on the Board resulting from an increase in number of directors be
filled by the majority vote of the directors. Such provisions will also be
included in the Company's new charter documents following the reincorporation.
In addition, the Delaware Certificate and Bylaws will contain provisions that
prevent shareholders from removing any director without cause, eliminate
shareholder actions by written consent, create advance notice requirements for
director nominations and shareholder proposals and supermajority requirements
for amendment of certain provisions in the Delaware Certificate and Bylaws.
In considering the proposals, shareholders should be aware that the overall
effect of certain of the proposed changes is to make it more difficult for
holders of a majority of the outstanding shares of Common Stock to change the
composition of the Board of Directors and to remove existing management in
circumstances where a majority of the shareholders may be dissatisfied with the
performance of the incumbent directors or otherwise desire to make changes.
The provisions in the Company's new charter documents could make a proxy
contest a less effective means of removing or replacing existing directors or
could make it more difficult to make a change in control of the Company that is
opposed by the Board of Directors. This strengthened tenure and authority of the
Board of Directors could enable the Board of Directors to resist change and
otherwise thwart the desires of a majority of the shareholders. Because these
provisions may have the effect of continuing the tenure of the current Board of
Directors, the Board has recognized that the individual director has a personal
interest in these provisions that may differ from those of the shareholders.
However, the Board believes that the primary purpose of these provisions is to
ensure that the Board will have sufficient time to consider fully any proposed
takeover attempt in light of the short and long-term benefits and other
opportunities available to the Company and, to the extent the Board determines
to proceed with the takeover, to negotiate effectively terms that would maximize
the benefits to the Company and its shareholders.
The Board of Directors has considered the potential disadvantages and
believes that the potential benefits of the provisions included in the proposed
charter documents outweigh the possible disadvantages. In particular, the Board
believes that the benefits associated with attracting and retaining skilled and
experienced outside directors and enabling the Board to fully consider and
negotiate proposed takeover attempts, as well as the greater sophistication,
breadth and certainty of Delaware law, make the reincorporation proposed
beneficial to the Company, its management and its shareholders.
12
<PAGE> 15
The proposal to include these anti-takeover provisions in the proposed
reincorporation does not reflect knowledge on the part of the Board of Directors
or management of any proposed takeover or other attempt to acquire control of
the Company. Management may in the future propose other measures designed to
discourage takeovers apart from those proposed in this Proxy Statement, if
warranted from time to time in the judgment of the Board of Directors.
The proposed reincorporation would be accomplished by merging the Company
into a newly formed Delaware corporation which, just before the merger, will be
a wholly-owned subsidiary of the Company (the "Delaware Company"), pursuant to
an Agreement and Plan of Merger (the "Merger Agreement"), a copy of which is
attached as Exhibit B to this Proxy Statement. Upon the effective date of the
merger, the Delaware Company's name will remain Dynamic Materials Corporation.
The reincorporation will not result in any changes in the Company's business,
assets or liabilities, will not cause its corporate headquarters to be moved and
will not result in any relocation of management or other employees.
Following the effectiveness of the proposed reincorporation, each
outstanding share of Common Stock of the Company would automatically convert
into one share of Common Stock of the Delaware Company, and shareholders of the
Company would automatically become shareholders of the Delaware Company. On the
effective date of the reincorporation, the number of outstanding shares of
Common Stock of the Delaware Company would be equal to the number of shares of
Common Stock of the Company outstanding immediately prior to the effective date
of the reincorporation. In addition, each outstanding option or right to acquire
shares of Common Stock of the Company would be converted into an option or right
to acquire an equal number of shares of Common Stock of the Delaware Company,
under the same terms and conditions as the original options or rights. All of
the Company's employee benefit plans, including the 1992 Incentive Stock Option
Plan and the Non-Employee Directors Stock Option Plan, as amended and restated
in the form of the 1997 Equity Incentive Plan, would be continued by the
Delaware Company following the reincorporation. Shareholders should recognize
that approval of the proposed reincorporation will constitute approval of the
adoption and assumption of those plans by the Delaware Company.
No action need be taken by shareholders to exchange their stock
certificates now; this will be accomplished at the time of the next transfer by
the shareholder. Certificates for shares in the Company will automatically
represent an equal number of shares in the Delaware Company upon completion of
the merger.
Under the Colorado Articles and the Colorado Bylaws, the affirmative vote
of at least 50% of the outstanding shares of the Company's voting stock is
required for approval of the reincorporation. If approved by the shareholders,
it is anticipated that the reincorporation will be completed as soon thereafter
as practicable. The reincorporation may be abandoned or the Merger Agreement may
be amended (with certain exceptions), either before or after shareholder
approval has been obtained if, in the opinion of the Board of Directors,
circumstances arise that make such action advisable; provided, that any
amendment that would effect a material change from the charter provisions
discussed in this Proxy Statement would require further approval by the holders
of at least 50% of the outstanding voting shares.
SIGNIFICANT CHANGES CAUSED BY REINCORPORATION
In general, the Company's corporate affairs are governed at present by the
corporate law of Colorado, the Company's state of incorporation, and by the
Colorado Articles and the Colorado Bylaws, which have been adopted pursuant to
Colorado law. The Colorado Articles and Colorado Bylaws are available for
inspection during business hours at the principal executive offices of the
Company. In addition, copies may be obtained by writing to the Company at
Dynamic Materials Corporation, 551 Aspen Ridge Drive, Lafayette, Colorado 80026,
Attention: Corporate Secretary.
If the reincorporation proposal is adopted, the Company will merge into,
and its business will be continued by, the Delaware Company. Following the
merger, issues of corporate governance and control would be controlled by
Delaware law rather than Colorado law. The Colorado Articles and Colorado Bylaws
will, in effect, be replaced by the Certificate of the Delaware Company (the
"Delaware Certificate") and the Bylaws of the Delaware Company (the "Delaware
Bylaws"), copies of which are attached as Exhibits C
13
<PAGE> 16
and D to this Proxy. Accordingly, the differences among these documents and
between Delaware and Colorado law are relevant to your decision whether to
approve the reincorporation proposal.
A number of differences between Colorado and Delaware law and between
provisions of the Colorado and Delaware charter documents are summarized in the
chart below. Shareholders are requested to read the following chart in
conjunction with the discussion following the chart and the Merger Agreement,
the Delaware Certificate and the Delaware Bylaws attached to this Proxy
Statement. For most items summarized in the chart, there is a reference to a
page of this Proxy Statement on which a more detailed discussion appears.
<TABLE>
<CAPTION>
ISSUE DELAWARE COLORADO
----- -------- --------
<S> <C> <C>
Limitation of Liability of Directors Delaware statute permits the Colorado law permits the limitation
and Officers (see page 16). limitation of liability of of liability of directors and
directors and officers to the officers to the corporation
same extent as Colorado law; except in connections with (i)
however, Delaware's case law breaches of the duty of loyalty;
defining a director's fiduciary (ii) acts or omissions not in
duty to the Company is more good faith or involving
extensive than Colorado's. The intentional misconduct or knowing
Delaware Certificate provides violations of law; (iii) the
that the liability of directors payment of unlawful dividends or
shall be eliminated or limited to unlawful stock repurchases or
the fullest extent permissible by redemptions; or (iv) transactions
the Delaware General Corporation in which a director received an
Law, as it currently exists and improper personal benefit. The
as it may be amended. Colorado Articles provide for the
elimination or limitation of
liability to the fullest extent
permitted by the Colorado
Corporation Code.
Number of Directors (see page 17). The number of directors may be The number of directors must be set
fixed by the Certificate of forth in the corporation's
Incorporation, amendment of which Bylaws, amendment of which can be
provision would require both effected by either the Board of
Board of Director and stockholder Directors or the shareholders
approval. The Delaware separately. The Colorado Bylaws
Certificate provides the number fix the number of directors at
as that to be fixed exclusively five.
by the Board.
Classified Board (see page 17). A corporation may have up to three A corporation may have up to three
classes in a classified board of classes in a classified board of
directors with staggered terms. directors with staggered terms;
The Delaware Certificate however, the Colorado Bylaws
presently designates three provide that directors are
classes of directors with elected at each annual meeting of
staggered terms. the shareholders rather than as
classes with staggered terms.
Removal of Directors by Shareholders Stockholders may not remove Shareholders may remove directors
(see page 17). directors from a classified Board without cause if the
without cause unless the corporation's Articles of
corporation's Certificate of Incorporation do not provide
Incorporation specifically otherwise and if the number of
provides that stockholders may do votes cast in favor of removal
so. The Delaware Certificate exceeds the number of votes cast
presently provides for no removal against removal. The Colorado
without cause and removal for Articles do not provide
cause by affirmative vote of a otherwise, and the Colorado
majority of the outstanding Bylaws provide that any director
shares of voting stock entitled may be removed without cause by a
to vote at an election of majority of shares entitled to
directors. vote at a meeting expressly
called for that purpose.
</TABLE>
14
<PAGE> 17
<TABLE>
<CAPTION>
ISSUE DELAWARE COLORADO
----- -------- --------
<S> <C> <C>
Calling of Special Shareholder Stockholders may call special The Board of Directors, or persons
Meeting (see page 18). meetings only if the authorized by the board of
corporation's Certificate of directors or the bylaws, may call
Incorporation or bylaws so a special meeting, as may
provide. The Delaware Certificate shareholders holding shares
provides that only the Board of representing at least 10% of all
Directors, the Chairman of the votes entitled to be cast on any
Board or the Chief Executive issue proposed to be considered
Officer may call special at a meeting. The Colorado Bylaws
meetings. provide that the Board, the
President, or the holders of at
least 10% of all shares entitled
to be cast may call a special
meeting.
Shareholder Action by Written Consent Unless the Certificate of Unless the Articles of
in Lieu of a Shareholder Vote at a Incorporation provides otherwise, Incorporation provide otherwise,
Shareholder Meeting (see page 19). any action that may be taken at a any action that may be taken at a
shareholders' meeting may be shareholders' meeting may be
taken without a meeting if taken without a meeting if all of
consents in writing are signed by the shareholders entitled to vote
the holders of outstanding stock thereon consent to such action in
having not less than the minimum writing. The Colorado Articles do
number of votes that would be not provide otherwise, and the
necessary to take such action at Colorado Bylaws provide that any
a meeting at which all shares action that may be taken at a
entitled to vote thereon were shareholders' meeting may be
present. The Delaware Certificate taken without a meeting if all of
provides, however, that no action the shareholders entitled to vote
shall be taken by the thereon consent to such action in
stockholders by written consent, writing.
but rather that stockholders may
take action at annual or special
meetings.
Advance Notice Requirement for Under Delaware law, there is no Under Colorado law, there is no
Shareholder Proposals and Director specific requirement with regard specific requirement with regard
Nominations (see page 19). to advance notice of director to advance notice of director
nominations and shareholder nominations and shareholder
proposals. The Delaware Bylaws proposals. The Colorado Bylaws do
provide that in order for not restrict director
director nominations and nominations.
stockholder proposals to be
properly brought before the
meeting, the stockholder must
have delivered timely notice to
the Secretary of the corporation.
Amendment of Certificate (see page The Delaware Certificate provides The Colorado Articles may be
21). that the provisions relating to amended by the approval of a
(i) indemnification of officers majority of the members of the
and directors; (ii) the number of Board and a majority of the
and election of directors; and outstanding shares.
(iii) the amendment of the
Delaware Certificate can only be
amended by the affirmative votes
of the Board and the holders of
at least 66 2/3 percent of the
voting power of the outstanding
voting stock; other provisions
may be amended by the affirmative
votes of the Board and holders of
a majority of the voting power of
the outstanding stock.
Amendment of Bylaws (see page 21). The Delaware Bylaws may be amended The Colorado Bylaws may be amended
or repealed either by the Board or repealed either by the Board
or by the holders of at least or by the holders of a majority
66 2/3% of the voting power of in interest of the outstanding
the outstanding capital stock. stock of the Company.
</TABLE>
15
<PAGE> 18
<TABLE>
<CAPTION>
ISSUE DELAWARE COLORADO
----- -------- --------
<S> <C> <C>
Loans to Officers and Directors (see The Board of Directors may The Board of Directors must provide
page 22). authorize loans or guarantees to at least ten-day notice to
officers, including officers who shareholders prior to offering
are directors, if such loan or loans or guarantees for the
guaranty may reasonably be benefit of directors or officers.
expected to benefit the Company. The Colorado Bylaws provide that
The Delaware Bylaws provide that loans or guarantees to directors
the corporation may authorize and officers require Board of
loans or guarantees to officers, Directors authorization and
including those who are approval by two- thirds of the
directors, if the Board of outstanding shares of the
Directors reasonably expects such corporation.
assistance to benefit the
corporation.
Other A responsive legislature and larger A moderately responsive legislature
body of corporate case law in and a limited body of corporate
Delaware provide a more case law in Colorado provide less
predictable corporate legal guidance for corporations in
environment in Delaware. Colorado.
</TABLE>
INDEMNIFICATION AND LIMITATION OF LIABILITY
Colorado and Delaware have similar laws respecting indemnification by a
corporation of its directors, employees and other agents. Under both Colorado
and Delaware law, corporations may limit the liability of directors, except in
connection with the following instances: (a) breaches of the director's duty of
loyalty to the corporation or its shareholders; (b) acts or omissions not in
good faith, or involving intentional misconduct or knowing violations of law;
(c) the payment of unlawful dividends or unlawful stock repurchases or
redemptions; or (d) transactions in which the director received an improper
personal benefit. Such limitation of liability provision also may not limit
director's liability for violation of, or otherwise relieve the Company or its
directors from the necessity of complying with, federal or state securities laws
or affect the availability of non-monetary remedies such as injunctive relief or
rescission.
The Colorado Articles eliminate the liability of directors to the
corporation to the fullest extent permissible under Colorado law. In addition,
the Company, following shareholder approval, entered into indemnification
agreements with its officers and directors. The Delaware Certificate also
eliminates the liability of directors to the fullest extent permissible under
Delaware law, as such law currently exists or as it may be amended in the
future. Furthermore, a provision of Delaware law states that the indemnification
provided by statute shall not be deemed exclusive of any other rights under any
bylaw, agreement, vote of shareholders or disinterested directors or otherwise.
Under Delaware law, therefore, the indemnification agreements entered into by
the Colorado Company with its officers and directors may be assumed by the
Delaware Company upon completion of the proposed reincorporation. If the
proposed reincorporation is approved, the indemnification agreements will be
assumed as previously approved by the Company's shareholders without change.
THUS A VOTE IN FAVOR OF THE PROPOSED REINCORPORATION WILL ALSO APPROVE
ASSUMPTION OF THE INDEMNIFICATION AGREEMENTS IN THEIR PRESENT FORM. ALTHOUGH THE
LAW IN THIS REGARD IS NOT CERTAIN, SHAREHOLDERS WHO VOTE IN FAVOR OF THE
REINCORPORATION PROPOSAL, AND THEREBY APPROVE ASSUMPTION OF THE INDEMNITY
CONTRACTS, MAY BE PREVENTED FROM CHALLENGING THE VALIDITY OF THE INDEMNITY
CONTRACTS IN A SUBSEQUENT COURT PROCEEDING.
The indemnification and limitation of liability provisions of Colorado law,
and not Delaware law, will apply to actions of the directors and officers of the
Colorado Company made prior to the proposed reincorporation. Nevertheless, the
Board has recognized in considering this reincorporation proposal that the
individual directors have a personal interest in obtaining the application of
Delaware law to such indemnity and limitation of liability issues affecting them
and the Company in the event they arise from a potential future case, and that
the application of Delaware law, to the extent that any director or officer is
actually indemnified in circumstances where indemnification would not be
available under Colorado law, would result in expense to the Company that the
Company would not incur if the Company were not reincorporated. The Board
believes, however, that the overall effect of reincorporation is to provide a
corporate legal environment that enhances the Company's ability to attract and
retain high quality outside directors and thus benefits the interests of the
Company and its shareholders.
16
<PAGE> 19
OTHER MATTERS RELATING TO DIRECTORS
Number of Directors. Colorado law requires that the number of persons
constituting the corporation's Board of Directors, whether a specific number or
a range of size, be fixed by the Bylaws. Colorado law permits either the Board
of Directors or the shareholders to amend the provision in the Bylaws that
establishes the number of directors. The Colorado Bylaws provide for a Board of
Directors of five members. The Bylaws also provide that either the Board or the
shareholders may amend the Bylaws at any annual or special meeting.
Delaware law permits the fixing of the number of directors in the
certificate of incorporation, in which case the number of directors may be
changed only by the manner specified in the Certificate of Incorporation or by
amendment of the Certificate of Incorporation, which would require approval of
both the shareholders and the Board. The Delaware Certificate provides that the
number of directors shall be fixed exclusively by the Board of Directors by
resolution.
Elections; Classified Board of Directors. Both Colorado and Delaware law
permit, but do not require, the adoption of a classified Board of Directors with
staggered terms. A maximum of three classes of directors is permitted by both
Colorado and Delaware law, with members of one class to be elected each year for
a maximum term of three years. The Colorado Bylaws currently do not provide for
a classified Board of Directors, but rather require that directors be elected at
each annual meeting of the shareholders. The Delaware Certificate provides that
the directors be divided into three classes, with staggered three-year terms.
The existence of a classified Board may deter so-called "creeping
acquisitions" in which a person or group seeks to acquire (i) a controlling
position without paying a normal control premium to the selling stockholders;
(ii) a position sufficient to exert control over the Company through a proxy
contest or otherwise; or (iii) a block of stock with a view toward attempting to
promote a sale or liquidation or a repurchase by the Company of the block at a
premium, or an exchange of the block for assets of the Company. Faced with a
classified Board of Directors, such a person or group would have to assess
carefully its ability to control or influence the Company. If free of the
necessity to act in response to an immediately threatened change in control, the
Board of Directors can act in a more careful and deliberative manner to make and
implement appropriate business judgments in response to a creeping acquisition.
The Board of Directors of the Colorado Company will also be the Board of
Directors of the Delaware Company if the reincorporation proposal is approved.
By approving Proposal 3, shareholders would be approving the election of the
same directors as would be elected to the Board of Directors of the Company in
the event the shareholders approve Proposal One. If the Reincorporation is
approved, the Board will, by resolution, divide the directors into three classes
designated as Class I, Class II and Class III. The term of office of the Class I
directors will expire at the 1998 annual meeting of stockholders, and Class I
directors will be elected for a full three-year term at such annual meeting. The
terms of Class II and Class III directors will expire at the 1999 and 2000
annual meetings, respectively, and Class II and Class III directors will be
elected for full three-year terms at those respective annual meetings. If
adopted, the provision would be applicable to every subsequent election of
directors and have the effect of requiring at least two annual meetings to gain
control of the Board of Directors versus only one under the current system.
Removal of Directors. Under Colorado law, shareholders may remove directors
without cause if the corporation's Articles of Incorporation do not provide
otherwise and if the number of votes cast in favor of removal exceed the number
of votes cast against removal. The Colorado Articles allow such removal without
cause because they do not provide otherwise. In addition, the Colorado Bylaws
specifically provide that a majority of shares entitled to vote at a meeting
expressly called to remove a director may remove such director without cause.
Under Delaware law, stockholders may not remove directors on a classified Board
of Directors without cause unless the corporation's Certificate of Incorporation
provides for removal without cause. The Delaware Certificate provides that,
subject to the rights of holders of any preferred stock, no director shall be
removed without cause. The Delaware Certificate further provides that, subject
to limitations imposed by law, directors may be removed with cause by an
affirmative vote of the holders of a majority of the voting power of all
then-outstanding shares of voting stock. The term "cause" with respect to the
removal of directors is not defined in the Delaware General Corporation Law, and
its meaning has not been precisely delineated by the Delaware courts.
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<PAGE> 20
Conversely, these provisions regarding number of directors, election and
Board structure and removal of directors might be disadvantageous to
stockholders because they might limit the stockholders' flexibility in
determining the composition of the Board or making other changes even in
circumstances where a majority of the stockholders might be dissatisfied with
the performance of the incumbent directors. Under Delaware law, however, the
Board has a fiduciary duty to act in the best interests of the stockholders.
This duty offsets to a great extent the potential disadvantages to stockholders
of these provisions.
CAPITALIZATION; BLANK CHECK PREFERRED
The Company's capital stock consists of (a) fifteen million (15,000,000)
authorized shares of Common Stock, par value Five Cents ($.05), of which
2,675,958 shares were issued and outstanding as of April 10, 1997, and (b) four
million (4,000,000) authorized shares of Preferred Stock, par value Five Cents
($.05), of which none is issued and outstanding.
Upon the effectiveness of the reincorporation, the Delaware Company will
have the same number of outstanding shares of Common Stock that the Company had
outstanding immediately prior to the reincorporation.
The capitalization of the Delaware Company is identical to the
capitalization of the Company with authorized capital stock of fifteen million
(15,000,000) shares of Common Stock, par value Five Cents ($.05) and four
million (4,000,000) shares of Preferred Stock, par value Five Cents ($.05),
consistent with maintaining adequate capitalization for the current needs of the
Company. The Delaware Company's authorized but unissued shares of Preferred
Stock will be available for future issuance.
Under the Delaware Certificate, as under the Colorado Articles, the Board
of Directors has the authority to determine or alter the rights, preferences,
privileges and restrictions to be granted to or imposed upon any wholly unissued
series of Preferred Stock and to fix the number of shares constituting any such
series and to determine the designation thereof. See "Anti-Takeover Measures."
The Board may authorize the issuance of Preferred Stock in connection with
various corporate transactions, including corporate partnering arrangements. The
Board may also authorize the issuance of Preferred Stock for the purpose of
adopting a shareholder rights plan. If the reincorporation is approved, it is
not the present intention of the Board of Directors to seek shareholder approval
prior to any issuance of Preferred Stock, except as required by law or
regulation.
SHAREHOLDER POWER TO CALL SPECIAL SHAREHOLDERS' MEETING
Under Colorado law, a special meeting of shareholders may be called by the
Board of Directors, a person authorized by the Board of Directors or Bylaws, or
shareholders holding shares representing at least 10% of all votes entitled to
be cast at such meeting. The Colorado Bylaws provide that the Board, the
President, or holders of at least 10% of all shares entitled to be cast at such
a meeting may call a special meeting. Under Delaware law, a special meeting of
stockholders may be called by the Board of Directors or by any other person
authorized to do so in the Certificate of Incorporation or the Bylaws. The
Delaware Certificate provides that such a meeting may be called only by the
Board, the Chairman of the Board, or the Chief Executive Officer. Elimination of
the ability of stockholders holding 10% of the voting power of all stockholders
to call a special meeting may lengthen the amount of time required to take
stockholder actions because the Company and the Board of directors are only
required to hold one meeting of stockholders per year. Such elimination of a
stockholder power to call special meetings may deter hostile takeover attempts
because, without the ability to call a special meeting, a holder or group of
holders controlling a majority in interest of the corporation's capital stock
will not be able to amend the Bylaws or remove directors until the annual
meeting of stockholders is held.
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<PAGE> 21
ACTIONS BY WRITTEN CONSENT OF SHAREHOLDERS IN LIEU OF A SHAREHOLDER VOTE AT A
SHAREHOLDER MEETING
Under Colorado law, unless the articles of incorporation provide otherwise,
any action that may be taken at a shareholders' meeting may be taken without a
meeting if all shareholders entitled to vote thereon consent to such action in
writings. Under Delaware law, unless the articles of incorporation provide
otherwise, any action that may be taken at a shareholders' meeting may be taken
without a meeting if consents in writing are signed by holders of outstanding
stock having not less than the minimum number of votes that would be necessary
to take such action if a meeting at which all shares entitled to vote thereon
were present. The Colorado Articles do not eliminate shareholder action by
written consent, and the Colorado Bylaws provide that shareholders may take
actions by unanimous written consent. The Delaware Certificate eliminates
actions by written consent of shareholders.
Elimination of such shareholder written consents may lengthen the amount of
time required to take shareholder actions because certain actions by written
consent are not subject to a minimum notice requirement while a shareholders'
meeting may be subject to such a minimum notice requirement. The elimination of
shareholders written consents might deter hostile takeover attempts because of
the lengthened shareholder approval process. Without the ability to act by
written consent, a holder or group of holders controlling a majority in interest
of the Company's capital stock would not be able to amend the Bylaws or remove
directors pursuant to a written consent, but would rather have to wait until the
annual meeting of stockholder to take action. The Board thinks this provision,
like the other provisions to be included in the Delaware Certificate and Bylaws,
will enhance the Board's opportunity to consider fully and negotiate effectively
in the context of a takeover attempt.
ADVANCE NOTICE REQUIREMENT FOR SHAREHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
There is no specific statutory requirement under either Colorado or
Delaware law with regard to advance notice of director nominations and
shareholder proposals. Absent a bylaw restriction, director nominations and
shareholder proposals may be made without advance notice at the annual meeting.
However, federal securities laws generally provide that shareholders who wish to
include proposals in the Company's proxy materials must submit such proposals
not less than 120 days in advance of the date of the proxy statement released in
connection with the next annual meeting.
The Colorado Bylaws do not restrict director nominations. The Delaware
Bylaws provide that in order for director nominations or stockholder proposals
to be properly brought before the meeting, the stockholder must have delivered
timely notice to the Secretary of the corporation. To be timely, notice must
have been delivered not later than the close of business on the 60th day nor
earlier than the close of business on the 90th day prior to the first
anniversary of the preceding year's annual meeting. In the event that no annual
meeting was held in the previous year or the date of the annual meeting was
changed by more than 30 days from the date contemplated at the time of the
previous year's proxy statement, notice by the stockholder must be received not
earlier than the close of business on the 90th day prior to such annual meeting
and not later than the close of business on the later of the 60th day prior to
such annual meeting or, in the event public announcement of the date of such
annual meeting was first made by the corporation fewer than 70 days prior to the
date of such annual meeting, the close of business on the 10th day following the
day on which public announcement of the date of such meeting is first made by
the corporation. Proper notice under the federal securities laws for a proposal
to be included in the Company's proxy materials will constitute proper notice
under the Delaware Bylaws. These notice requirements help ensure that
stockholders are aware of all proposals to be voted on at the meeting and have
the opportunity to consider each proposal in advance of the meeting.
ANTI-TAKEOVER MEASURES
Delaware law has been widely viewed to permit a corporation greater
flexibility in governing its internal affairs and its relationships with
shareholders and other parties than do the laws of many other states, including
Colorado. In particular, Delaware law permits a corporation to adopt a number of
measures designed
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<PAGE> 22
to reduce a corporation's vulnerability to hostile takeover attempts. Such
measures may be more narrowly drawn under Colorado law. For example, certain
types of "poison pill" defenses (such as shareholder rights plans) have been
upheld by Delaware courts, while Colorado courts have yet to decide on the
validity of such defenses, thus rendering their effectiveness in Colorado less
certain.
As discussed herein, certain provisions of the Delaware Certificate could
be considered to be anti-takeover measures. The Company does not have any
present intention of adopting any further anti-takeover measures (such as a
shareholder rights plan), nor does the Board of Directors have knowledge that
any attempt to gain control of the Company is being contemplated. However, as
discussed above, numerous differences between Colorado and Delaware law,
effective without additional action by the Delaware Company, could have a
bearing on unapproved takeover attempts.
One such difference is the existence of a Delaware statute regulating
certain business combinations, which statute is intended to limit coercive
takeovers of companies incorporated in Delaware. Colorado has no comparable
statute. The Delaware law provides that a corporation may not engage in any
business combination with any interested shareholder for a period of three years
following the date that such shareholder became an interested shareholder,
unless (i) prior to the date the shareholder became an interested shareholder
the Board approved the business combination or the transaction that resulted in
the shareholder becoming an interested shareholder, or (ii) upon consummation of
the transaction that resulted in the shareholder becoming an interested
shareholder, the interested shareholder owned at least 85% of the voting stock,
or (iii) the business combination is approved by the Board and authorized by
66 2/3% of the outstanding stock that is not owned by the interested
stockholder. Any Delaware corporation may decide to opt out of the statute at
any time by action of its stockholders. This statute will apply to the Company
following the Reincorporation, and the Company has no present intention of
opting out of the statute.
There can be no assurance that the Board of Directors would not adopt any
further anti-takeover measures available under Delaware law (some of which may
not require shareholder approval). Moreover, the availability of such measures
under Delaware law, whether or not implemented, may have the effect of
discouraging a future takeover attempt that a majority of the Delaware Company's
shareholders may deem to be in their best interests or that might provide
shareholders with a premium for their shares over then current market prices. As
a result, shareholders who might desire to participate in such transactions
might not have the opportunity to do so. Shareholders should recognize that, if
adopted, the effect of such measures, along with the possibility of discouraging
takeover attempts, might be to limit in certain respects the rights of
shareholders of the Delaware Company compared with the rights of shareholder of
the Colorado Company.
The Board of Directors recognizes that hostile takeover attempts do not
always have unfavorable consequences or effects and may frequently be beneficial
to the shareholders, providing all of the shareholders with considerable value
for their shares. However, the Board of Directors believes that the potential
disadvantages of unapproved takeover attempts (such as disruption of the
Company's business and the possibility of terms that may be less than favorable
to all of the shareholders than would be available in a Board approved
transaction) are sufficiently great such that prudent steps to reduce the
likelihood of such takeover attempts and to enable the Board to fully consider
the proposed takeover attempt and actively negotiate its terms are in the best
interests of the Company and its shareholders.
In addition to the various anti-takeover measures that would be available
to the Delaware Company after the reincorporation due to the application of
Delaware law, the Delaware Company would retain the rights currently available
to the Company under Colorado law to issue shares of its authorized but unissued
capital stock. Following the effectiveness of the proposed reincorporation,
shares of authorized and unissued Common Stock and Preferred Stock of the
Delaware Company could (within the limits imposed by applicable law) be issued
in one or more transactions, or Preferred Stock could be issued with terms,
provisions and rights that would make more difficult and, therefore, less
likely, a takeover of the Delaware Company. Any such issuance of additional
stock could have the effect of diluting the earnings per share and book value
per share of existing shares of Common Stock and Preferred Stock, and such
additional shares could be used to dilute the stock ownership of persons seeking
to obtain control of the Delaware Company.
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<PAGE> 23
It should be noted that the voting rights to be accorded to any unissued
series of Preferred Stock of the Delaware Company ("Delaware Preferred Stock")
remain to be fixed by the Delaware Board. Accordingly, if the Delaware Board so
authorizes, the holders of Delaware Preferred Stock may be entitled to vote
separately as a class in connection with approval of certain extraordinary
corporate transactions in circumstances where Delaware law does not ordinarily
require such a class vote, or might be given a disproportionately large number
of votes. Such Delaware Preferred Stock could also be convertible into a large
number of shares of Common Stock of the Delaware Company under certain
circumstances or have other terms that might make acquisition of a controlling
interest in the Delaware Company more difficult or more costly, including the
right to elect additional directors to the Delaware Board. Potentially, the
Delaware Preferred Stock could be used to create voting impediments or to
frustrate persons seeking to effect a merger or otherwise gain control of the
Delaware Company. Also, the Delaware Preferred Stock could be privately placed
with purchasers who might side with the management of the Delaware Company in
opposing a hostile tender offer or other attempt to obtain control.
The Board may also authorize the issuance of Preferred Stock in connection
with various corporate transactions, including corporate partnering
arrangements. The Board may also authorize the issuance of Preferred Stock for
the purpose of adopting a shareholder rights plan. However, future issuances of
Delaware Preferred Stock as an anti-takeover device might preclude shareholders
from taking advantage of a situation that might otherwise be favorable to their
interests. In addition (subject to the considerations referred to above as to
applicable law), the Delaware Board could authorize issuance of shares of Common
Stock of the Delaware Company ("Delaware Common Stock") or Delaware Preferred
Stock to a holder who might thereby obtain sufficient voting power to ensure
that any proposal to alter, amend, or repeal provisions of the Delaware
Certificate unfavorable to a suitor would not receive the necessary vote of
66 2/3 percent of the voting stock required for certain of the proposed
amendments (as described below).
If the reincorporation is approved, it is not the present intention of the
Board of Directors to seek shareholder approval prior to any issuance of the
Delaware Preferred Stock or Delaware Common Stock, except as required by law or
regulation. Frequently, opportunities arise that require prompt action, and it
is the belief of the Board of Directors that the delay necessary for shareholder
approval of a specific issuance would be a detriment to the Delaware Company and
its shareholders. The Board of Directors does not intend to issue any Preferred
Stock except on terms that the Board of Directors deems to be in the best
interests of the Delaware Company and its then existing shareholders.
AMENDMENT OF CERTIFICATE
The Colorado Articles may be amended by the approval of a majority of the
members of the Board of Directors and by a majority of the outstanding shares.
The Delaware Certificate provides that the provisions relating to (i)
indemnification of officers and directors; (ii) the number of and election of
directors; and (iii) the amendment of the Delaware Certificate can only be
amended by the affirmative votes of the Board of Directors and the holders of at
least 66 2/3 percent of the voting power of the outstanding voting stock of the
Delaware Company. By raising the vote required to amend the aforementioned
provisions, a holder or group of holders controlling a majority in interest of
the Company's capital stock will face greater obstacles in amending those
particular provisions in the Delaware Certificate.
AMENDMENT OF BYLAWS
The Colorado Bylaws may be amended or repealed either by the Board of
Directors or by the holders of a majority in interest of the outstanding stock
of the Company. Upon the effectiveness of the proposed reincorporation, the
Delaware Bylaws may be amended or repealed either by the Board of Directors or
by the holders of at least 66 2/3 percent of the voting power of the outstanding
capital stock of the Delaware Company. By raising the vote required to amend the
Bylaws, a holder or group of holders controlling a majority in interest of the
Company's capital stock will face greater obstacles in amending the Bylaws.
21
<PAGE> 24
LOANS TO OFFICERS, DIRECTORS AND EMPLOYEES
Colorado law provides that a corporation may not authorize any loan or
guaranty for the benefit of any director until at least 10 days after providing
written notice of the proposed authorization to shareholders who would be
entitled to vote thereon if the issue of the loan or guaranty were submitted to
a vote of the shareholders.
Under Delaware law, a corporation may make loans to, or guarantee the
obligations of, officers or other employees when in the judgment of the board of
directors, the loan or guaranty may reasonably be expected to benefit the
corporation. Both Colorado law and Delaware law permit such loans or guaranties
to be unsecured and without interest.
FEDERAL INCOME TAX CONSEQUENCES OF THE REINCORPORATION
The reincorporation provided for in the Merger Agreement is intended to be
a tax free reorganization under the Internal Revenue Code of 1986, as amended.
Assuming the reincorporation qualifies as a reorganization, no gain or loss will
be recognized to the holders of capital stock of the Company as a result of
consummation of the reincorporation, and no gain or loss will be recognized by
the Company or the Delaware Company. Each former holder of capital stock of the
Company will have the same basis in the capital stock of the Delaware Company
received by such holder pursuant to the reincorporation as such holder has in
the capital stock of the Company held by such holder at the time of consummation
of the reincorporation. Each shareholder's holding period with respect to the
Delaware Company's capital stock will include the period during which such
holder held the corresponding Company capital stock, provided the latter was
held by such holder as a capital asset at the time of consummation of the
reincorporation. The Company has not obtained a ruling from the Internal Revenue
Service or an opinion of legal or tax counsel with respect to the consequences
of the reincorporation.
The foregoing is only a summary of certain federal income tax consequences.
Shareholders should consult their own tax advisers regarding the specific tax
consequences to them of the merger, including the applicability of the laws of
any state or other jurisdiction.
BOARD RECOMMENDATION
The foregoing discussion is an attempt to summarize the more important
differences in the corporation laws of Delaware and Colorado and does not
purport to be an exhaustive discussion of all of the differences. Such
differences can be determined in full by reference to the Colorado Corporations
Code and to the Delaware General Corporation Law. In addition, both Colorado and
Delaware law provide that some of the statutory provisions as they affect
various rights of holders of shares may be modified by provisions in the charter
or bylaws of the corporation.
A vote FOR the reincorporation proposal will constitute approval of the
merger, the Delaware Certificate, the Delaware Bylaws, assumption of the
indemnification agreements, the adoption and assumption by the Delaware Company
of each of the Company's stock option, stock purchase and employee benefit plans
and all other aspects of this Proposal 3.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 3.
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<PAGE> 25
NO SHAREHOLDERS' APPRAISAL RIGHTS
Under Section 7-113-102 of the Colorado Business Corporation Act ("CBCA"),
shareholders of the Company will not be entitled to dissent and obtain payment
of the fair value of their shares from the Company in connection with the
Reincorporation because the Company's shares are listed on the NASDAQ National
Market System at the time of the record date for the Annual Meeting.
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<PAGE> 26
PROPOSAL 4 -- RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected Arthur Andersen LLP as the Company's
independent accountants for the fiscal year ending December 31, 1997 and has
further directed that management submit the selection of independent accountants
for ratification by the shareholders at the Annual Meeting. Arthur Andersen LLP
has audited the Company's financial statements since 1991. Representatives of
Arthur Andersen LLP are expected to be present at the Annual Meeting, will have
an opportunity to make a statement if they so desire, and will be available to
respond to appropriate questions.
Although, shareholder ratification of the selection of Arthur Andersen LLP
as the Company's independent accountants is not required by the Company's Bylaws
or otherwise, the Board is submitting the selection to the shareholders for
ratification as a matter of good corporate practice. If the shareholders fail to
ratify the selection, the Audit Committee and the Board will reconsider whether
or not to retain that firm. Even if the selection is ratified, the Audit
Committee and the Board in their discretion may direct the appointment of
different independent accountants at any time during the year if they determine
that such a change would be in the best interests of the Company and its
shareholders.
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and voted at the Annual Meeting will be required
to ratify the selection of Arthur Andersen LLP.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 4.
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<PAGE> 27
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of April 1, 1997 by: (i) each director and
nominee for director; (ii) each of the Executive Officers ; (iii) all executive
officers and directors of the Company as a group; and (iv) each person known by
the Company to be the beneficial owner of more than five percent of the
Company's Common Stock.
<TABLE>
<CAPTION>
BENEFICIAL
OWNERSHIP(1)
---------------------
NAME AND ADDRESS NUMBER PERCENT
OF BENEFICIAL OWNER OF SHARES OF TOTAL
------------------- --------- --------
<S> <C> <C>
OKABENA Partners V-6........................................ 264,000 9.9%
422 IDS Center
Minneapolis, MN 55402
Woodland Partners LLC....................................... 241,000 9.0%
60 South Sixth Street, Suite 3750
Minneapolis, MN 55402
William F. Sharp............................................ 141,563 5.3%
4004 Canter Court
Valrico, FL 33594
Mr. Paul Lange(2)........................................... 136,996 5.1%
551 Aspen Ridge Drive
Lafayette, CO 80026
Michael C. Hone(3).......................................... 134,808 5.0%
3534 Clay Street
San Francisco, CA 94118
Mr. Richard A. Santa........................................ -- --
Mr. Michael W. Beam(4)...................................... 13,500 *
Mr. Edward G. Reineke(5).................................... 18,250 *
Mr. Dean K. Allen(6)........................................ 12,500 *
Mr. David E. Bartlett(7).................................... 5,000 *
Dr. George W. Morgenthaler(8)............................... 102,078 3.8%
All executive officers and directors as a group (7
persons)(9)............................................... 288,324 10.6%
</TABLE>
- ---------------
* Less than one percent.
(1) This table is based upon information supplied by officers, directors and
principal shareholders and Schedules 13D and 13G, if any, filed with the
Securities and Exchange Commission (the "SEC"). Unless otherwise indicated
in the footnotes to this table and subject to community property laws where
applicable, the Company believes that each of the shareholders named in this
table has sole voting and investment power with respect to the shares
indicated as beneficially owned. Applicable percentages are based on
2,675,958 shares outstanding on April 1, 1997, adjusted as required by rules
promulgated by the SEC.
(2) Includes 7,111 shares subject to stock options exercisable within 60 days of
April 1, 1997.
(3) Includes 59,660 shares held by Mr. Hone as trustee of a profit-sharing plan
trust for his benefit and 10,000 shares held by Mr. Hone as trustee of a
trust for the benefit of a third party. Also includes 14,500 shares subject
to stock options exercisable within 60 days of April 1, 1997.
(4) Includes 11,500 shares subject to stock options exercisable within 60 days
of April 1, 1997.
(5) Includes 2,500 shares subject to stock option exercisable within 60 days of
April 1, 1997.
(6) Includes 10,500 shares subject to stock options exercisable within 60 days
of April 1, 1997.
(7) Consists solely of shares subject to stock options exercisable within 60
days of April 1, 1997.
(8) Includes 8,000 shares subject to stock options exercisable within 60 days of
April 1, 1997.
(9) See Notes 2 and 4 through 8 above.
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<PAGE> 28
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "1934 Act")
requires the Company's directors and officers, and persons who own more than ten
percent (10%) of a registered class of the Company's equity securities, to file
with the SEC initial reports of ownership and reports of changes in ownership of
Common Stock and other equity securities of the Company. Officers, directors and
greater than ten percent (10%) shareholders are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 1996, all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten percent (10%) beneficial owners were complied with; except that
one report, covering one transaction, was filed late by Mr. Beam, and an initial
report of ownership was filed late by Mr. Bartlett.
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
Each non-employee director of the Company receives a quarterly retainer of
$1,000 and per meeting fees of $1,000 for attendance at Board meetings and $250
for attendance at committee meetings. In the fiscal year ended December 31,
1996, the total compensation paid to non-employee directors was $31,750. The
members of the Board of Directors are also eligible for reimbursement for their
expenses incurred in connection with attendance at Board meetings, in accordance
with Company policy.
Each non-employee director of the Company also receives stock option grants
under the 1994 Plan, as amended and restated with the 1992 Plan in the form of
the 1997 Plan. Only non-employee directors of the Company or an affiliate of
such directors (as defined in the Code) are eligible to receive such options.
The options are not intended by the Company to qualify as incentive stock
options under the Code.
Option grants under the 1994 Plan, as amended and restated with the 1992
Plan in the form of the 1997 Plan, are non-discretionary. Upon the initial
election or appointment of a non-employee director to the Company's Board of
Directors, such director is automatically granted, without further action by the
Company, the Board of Directors or the shareholders of the Company, an option to
purchase 7,500 shares of Common Stock of the Company. On the date of each annual
meeting of the Company's shareholders, each person who is then a non-employee
director and has continuously been a non-employee director since the last annual
meeting is automatically granted an option to purchase 5,000 shares of Common
Stock of the Company. The exercise price of such options is 100% of the fair
market value of the Common Stock subject to the option on the date of the option
grant. The options may not be exercised until the date upon which the optionee,
or the affiliate of the optionee, as the case may be, has provided one year of
continuous service as a non-employee director following the date of grant of the
option, whereupon the option shall become fully exercisable in accordance with
its terms. The term of each option is 10 years. In the event of a merger of the
Company with or into another corporation, or a consolidation, acquisition of
assets or other change-in-control transaction involving the Company, the vesting
of each option will accelerate and the option will terminate if not exercised
prior to the consummation of the transaction.
During the fiscal year ended December 31, 1996, the Company granted options
covering an aggregate of 22,500 shares to four individuals serving as
non-employee directors of the Company, at a weighted-average exercise price of
$6.58 per share. As of April 1, 1997 no options had been exercised under the
1994 Plan, as amended and restated with the 1992 Plan in the form of the 1997
Plan.
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<PAGE> 29
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY OF COMPENSATION
The following table shows compensation awarded or paid to, or earned by,
the Company's executive officers (the "Named Executive Officers") during the
fiscal years ended December 31, 1996, 1995 and 1994:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
------------------------------
ANNUAL COMPENSATION PAYOUTS
-------------------------------------------- AWARDS ----------------
NAME AND PRINCIPAL FISCAL OTHER ANNUAL ----------- ALL OTHER
POSITION YEAR SALARY ($) BONUS ($) COMPENSATION ($)(1) OPTIONS (#) COMPENSATION ($)
------------------ ------ ---------- --------- ------------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Paul Lange.............................. 1996 166,333 40,000 29,515(2) 25,000 79,331(3)
President and 1995 158,250 25,000 -- 31,000 43,410(4)
Chief Executive Officer 1994 150,000 -- -- 30,000 61,376(5)
Richard A. Santa........................ 1996 21,846 -- -- 25,000 --
Chief Financial Officer (6)
Michael W. Beam......................... 1996 109,750 22,069 -- 20,000 10,886(8)
Vice President, 1995 80,250 -- -- 28,000 7,607(9)
Marketing and Sales(7)
Edward G. Reineke....................... 1996 79,922 14,493 -- 17,500 112(10)
Vice President, 1995 72,212 -- -- 16,000 --
Operations 1994 69,152 -- -- 15,000 --
</TABLE>
- ---------------
(1) Except as disclosed in this column, the amount of perquisites provided to
each Named Executive Officer did not exceed the lesser of $50,000 or 10% of
total salary and bonus for each fiscal year.
(2) Includes $28,596 paid to Mr. Lange in consideration for earned but unused
vacation time.
(3) Includes $78,628 paid to Mr. Lange in reimbursement of relocation expenses,
including reimbursement of rental payments, relocation agent services and
other moving expenses. Also includes $703 of life insurance premiums paid
by the Company.
(4) Includes $42,707 of relocation expenses and $703 of life insurance
premiums.
(5) Includes $60,673 of relocation expenses and $703 of life insurance
premiums.
(6) Mr. Santa joined the Company in October 1996.
(7) Mr. Beam joined the Company in April 1995.
(8) The Company made a relocation loan in the principal amount of $30,000 to
Mr. Beam in July 1995, in connection with his joining the Company. The loan
is being forgiven by the Company in monthly installments over a three-year
period beginning in April 1995. $10,147 of such loan was forgiven during
1996. Also includes $739 of life insurance premiums paid by the Company.
(9) Forgiveness of relocation loan (see Note 8).
(10) Life insurance premiums.
27
<PAGE> 30
STOCK OPTION GRANTS AND EXERCISES
The Company grants options to its executive officers under its 1992 Plan,
as amended and restated with the 1994 Plan in the form of the 1997 Plan
(collectively, the "Plans"). As of April 1, 1997, options to purchase a total of
352,065 shares were outstanding under the Plans and options to purchase 175,750
shares remained available for grant thereunder.
The following tables show for the fiscal year ended December 31, 1996,
certain information regarding options granted to, exercised by, and held at
year-end by, the Named Executive Officers:
OPTION GRANTS IN FISCAL 1996
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS GRANTED EXERCISE OR
OPTIONS TO EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE (1)
---- --------------- --------------- ----------- ----------
<S> <C> <C> <C> <C>
Paul Lange.................................. 25,000 14.9% $7.875 11/03/06
Richard A. Santa............................ 25,000 14.9% $ 8.00 10/27/06
Michael W. Beam............................. 20,000 11.9% $7.875 11/03/06
Edward G. Reineke........................... 17,500 10.4% $7.875 11/03/06
</TABLE>
- ---------------
(1) Any option that is exercisable on the date of termination of employment may
be exercised for a period of 30 days following such termination, unless the
termination was a result of death or disability, in which case the option
may be exercised for a period of three months or 12 months, respectively.
OPTION EXERCISES IN FISCAL 1996 AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
DECEMBER 31, 1996 DECEMBER 31, 1996 (1)
----------------- ---------------------
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
---- --------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Paul Lange.................... -- -- 105,980/80,020 $858,482/$436,893
Richard A. Santa.............. -- -- --/25,000 -- /$ 34,375
Michael W. Beam............... -- -- 7,000/41,000 $ 48,906/$176,719
Edward G. Reineke............. -- -- 11,500/37,000 $ 75,437/$156,938
</TABLE>
(1) I.e., value of options for which the fair market value of the Company's
Common Stock at December 31, 1996 ($9.375) exceeds the exercise price.
28
<PAGE> 31
OTHER MATTERS
The Board of Directors knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters are properly brought
before the meeting, it is the intention of the persons named in the accompanying
proxy to vote on such matters in accordance with their best judgment.
By Order of the Board of Directors,
/s/ RICHARD A. SANTA
RICHARD A. SANTA
Chief Financial Officer and
Secretary
April 17, 1997
A COPY OF THE COMPANY'S ANNUAL REPORT TO THE SECURITIES AND EXCHANGE
COMMISSION ON FORM 10-KSB FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996 IS
AVAILABLE WITHOUT CHARGE UPON WRITTEN REQUEST TO: CORPORATE SECRETARY, DYNAMIC
MATERIALS CORPORATION, 551 ASPEN RIDGE DRIVE, LAFAYETTE, COLORADO 80026.
29
<PAGE> 32
EXHIBIT A
DYNAMIC MATERIALS CORPORATION
1997 EQUITY INCENTIVE PLAN
ADOPTED MARCH 4, 1997
APPROVED BY STOCKHOLDERS , 1997
1. PURPOSES.
(a) The purpose of the Plan is to provide a means by which selected
Employees and Directors of and Consultants may be given an opportunity to
benefit from increases in value of the stock of the Company through the granting
of (i) Incentive Stock Options, (ii) Nonstatutory Stock Options, (iii) stock
bonuses, and (iv) rights to purchase restricted stock. The Plan is intended to
be an amendment of and continuation of the Company's 1992 Incentive Stock Option
Plan and 1994 Nonemployee Director Stock Option Plan.
(b) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees, Directors or Consultants, to secure and retain
the services of new Employees, Directors and Consultants, and to provide
incentives for such persons to exert maximum efforts for the success of the
Company and its Affiliates.
(c) The Company intends that the Stock Awards issued under the Plan shall,
in the discretion of the Board or any Committee to which responsibility for
administration of the Plan has been delegated pursuant to subsection 3(c), be
either (i) Options granted pursuant to Section 6 or 7 hereof, including
Incentive Stock Options and Nonstatutory Stock Options or (ii) stock bonuses or
rights to purchase restricted stock granted pursuant to Section 8 hereof. All
Options shall be separately designated Incentive Stock Options or Nonstatutory
Stock Options at the time of grant and a separate certificate or certificates
will be issued for shares purchased on exercise of each type of Option.
2. DEFINITIONS.
(a) "Affiliate" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f) respectively, of the Code.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means a Committee appointed by the Board in accordance with
subsection 3(c) of the Plan.
(e) "Company" means Dynamic Materials Corporation, a Colorado corporation.
(f) "Consultant" means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting services and who is compensated for
such services, provided that the term "Consultant" shall not include Directors
who are paid only a director's fee by the Company or who are not compensated by
the Company for their services as Directors.
(g) "Continuous status as an employee, director or consultant" means that
the service of an individual to the Company, whether as an Employee, Director or
Consultant, is not interrupted or terminated. The Board or the chief executive
officer of the Company may determine, in that party's sole discretion, whether
Continuous Status as an Employee, Director or Consultant shall be considered
interrupted in the case of: (i) any leave of absence approved by the Board or
the chief executive officer of the Company, including sick leave, military
leave, or any other personal leave; or (ii) transfers between the Company,
Affiliates or their successors.
(h) "Covered employee" means the chief executive officer and the four (4)
other highest compensated officers of the Company for whom total compensation is
required to be reported to stockholders under the Exchange Act, as determined
for purposes of Section 162(m) of the Code.
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<PAGE> 33
(i) "Director" means a member of the Board.
(j) "Employee" means any person, including Officers and Directors, employed
by the Company or any Affiliate of the Company. Neither service as a Director
nor payment of a director's fee by the Company shall be sufficient to constitute
"employment" by the Company.
(k) "Exchange act" means the Securities Exchange Act of 1934, as amended.
(l) "Fair market value" means, as of any date, the value of the common
stock of the Company determined as follows.
(1) If the common stock is listed on any established stock exchange or
traded on the Nasdaq National Market or the Nasdaq SmallCap Market, the
Fair Market Value of a share of common stock shall be the closing sales
price for such stock (or the closing bid, if no sales were reported) as
quoted on such exchange or market (or the exchange or market with the
greatest volume of trading in the Company's common stock) on the last
market trading day prior to the day of determination, as reported in The
Wall Street Journal or such other source as the Board deems reliable.
(2) In the absence of such markets for the common stock, the Fair
Market Value shall be determined in good faith by the Board.
(m) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(n) "Non-employee Director" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or subsidiary, does not
receive compensation (directly or indirectly) from the Company or its parent or
subsidiary for services rendered as a consultant or in any capacity other than
as a Director (except for an amount as to which disclosure would not be required
under Item 404(a) of Regulation S K promulgated pursuant to the Securities Act
("Regulation S-K")), does not possess an interest in any other transaction as to
which disclosure would be required under Item 404(a) of Regulation S-K, and is
not engaged in a business relationship as to which disclosure would be required
under Item 404(b) of Regulation S-K; or (ii) is otherwise considered a
"non-employee director" for purposes of Rule 16b-3.
(o) "Nonstatutory Stock Option" means an Option not intended to qualify as
an Incentive Stock Option.
(p) "Officer" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(q) "Option" means a stock option granted pursuant to the Plan.
(r) "Option Agreement" means a written agreement between the Company and an
Optionee evidencing the terms and conditions of an individual Option grant. Each
Option Agreement shall be subject to the terms and conditions of the Plan.
(s) "Optionee" means a person to whom an Option is granted pursuant to the
Plan or, if applicable, such other person who holds an outstanding Option.
(t) "Outside Director" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
the Treasury regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time, and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director, or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.
(u) "Plan" means this 1997 Equity Incentive Plan.
(v) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any successor to
Rule 16b-3, as in effect with respect to the Company at the time discretion is
being exercised regarding the Plan.
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<PAGE> 34
(w) "Securities Act" means the Securities Act of 1933, as amended.
(x) "Stock Award" means any right granted under the Plan, including any
Option, any stock bonus, and any right to purchase restricted stock.
(y) "Stock Award Agreement" means a written agreement between the Company
and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to the
terms and conditions of the Plan.
3. ADMINISTRATION.
(a) The Plan shall be administered by the Board unless and until the Board
delegates administration to a Committee, as provided in subsection 3(c).
(b) The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:
(1) To determine from time to time which of the persons eligible under
the Plan shall be granted Stock Awards; when and how each Stock Award shall
be granted; whether a Stock Award will be an Incentive Stock Option, a
Nonstatutory Stock Option, a stock bonus, a right to purchase restricted
stock, or a combination of the foregoing; the provisions of each Stock
Award granted (which need not be identical), including the time or times
when a person shall be permitted to receive stock pursuant to a Stock
Award; and the number of shares with respect to which a Stock Award shall
be granted to each such person.
(2) To construe and interpret the Plan and Stock Awards granted under
it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award
Agreement, in a manner and to the extent it shall deem necessary or
expedient to make the Plan fully effective.
(3) To amend the Plan or a Stock Award as provided in Section 13.
(4) Generally, to exercise such powers and to perform such acts as the
Board deems necessary or expedient to promote the best interests of the
Company which are not in conflict with the provisions of the Plan.
(c) The Board may delegate administration of the Plan to a committee of the
Board composed of not fewer than two (2) members (the "Committee"), all of the
members of which Committee may be, in the discretion of the Board, Non-Employee
Directors and/or Outside Directors. If administration is delegated to a
Committee, the Committee shall have, in connection with the administration of
the Plan, the powers theretofore possessed by the Board, including the power to
delegate to a subcommittee of two (2) or more Outside Directors any of the
administrative powers the Committee is authorized to exercise (and references in
this Plan to the Board shall thereafter be to the Committee or such a
subcommittee), subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan. Notwithstanding anything in this Section 3 to the
contrary, the Board or the Committee may delegate to a committee of one or more
members of the Board the authority to grant Stock Awards to eligible persons who
(1) are not then subject to Section 16 of the Exchange Act and/or (2) are either
(i) not then Covered Employees and are not expected to be Covered Employees at
the time of recognition of income resulting from such Stock Award, or (ii) not
persons with respect to whom the Company wishes to comply with Section 162(m) of
the Code.
4. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of Section 13 relating to adjustments upon
changes in stock, the stock that may be issued pursuant to Stock Awards shall
not exceed in the aggregate nine hundred twenty-five thousand (925,000) shares
of the Company's common stock. If any Stock Award shall for any reason expire or
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<PAGE> 35
otherwise terminate, in whole or in part, without having been exercised in full,
the stock not acquired under such Stock Award shall revert to and again become
available for issuance under the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
5. ELIGIBILITY.
(a) Incentive Stock Options may be granted only to Employees. Stock Awards
other than Incentive Stock Options may be granted only to Employees, Directors
or Consultants.
(b) No person shall be eligible for the grant of an Incentive Stock Option
if, at the time of grant, such person owns (or is deemed to own pursuant to
Section 424(d) of the Code) stock possessing more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company or of any of
its Affiliates unless the exercise price of such Incentive Stock Option is at
least one hundred ten percent (110%) of the Fair Market Value of such stock at
the date of grant and the Incentive Stock Option is not exercisable after the
expiration of five (5) years from the date of grant.
(c) Subject to the provisions of Section 13 relating to adjustments upon
changes in stock, no person shall be eligible to be granted Options covering
more than two hundred thousand (200,000) shares of the Company's common stock in
any calendar year.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:
(a) Term. No Option shall be exercisable after the expiration of ten (10)
years from the date it was granted.
(b) Price. The exercise price of each Incentive Stock Option shall be not
less than one hundred percent (100%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted; the exercise price of
each Nonstatutory Stock Option shall be set by the Board of Directors on the
date the Option is granted. Notwithstanding the foregoing, an Option (whether an
Incentive Stock Option or a Nonstatutory Stock Option) may be granted with an
exercise price lower than that set forth in the preceding sentence if such
Option is granted pursuant to an assumption or substitution for another option
in a manner satisfying the provisions of Section 424(a) of the Code.
(c) Consideration. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised, or (ii) at
the discretion of the Board or the Committee, at the time of the grant of the
Option, (A) by delivery to the Company of other common stock of the Company, (B)
according to a deferred payment arrangement (however, in the event the Company
reincorporates in Delaware, then payment of the common stock's "par value" (as
defined in the Delaware General Corporation Law) shall not be made by deferred
payment), or other arrangement (which may include, without limiting the
generality of the foregoing, the use of other common stock of the Company) with
the person to whom the Option is granted or to whom the Option is transferred
pursuant to subsection 6(d), or (C) in any other form of legal consideration
that may be acceptable to the Board.
In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be interest
under the deferred payment arrangement.
(d) Transferability. An Incentive Stock Option shall not be transferable
except by will or by the laws of descent and distribution, and shall be
exercisable during the lifetime of the person to whom the Option is
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<PAGE> 36
granted only by such person. A Nonstatutory Stock Option may be transferable to
the extent provided in the Option Agreement. The person to whom the Option is
granted may, by delivering written notice to the Company, in a form satisfactory
to the Company, designate a third party who, in the event of the death of the
Optionee, shall thereafter be entitled to exercise the Option.
(e) Vesting. The total number of shares of stock subject to an Option may,
but need not, be allotted in periodic installments (which may, but need not, be
equal). The Option Agreement may provide that from time to time during each of
such installment periods, the Option may become exercisable ("vest") with
respect to some or all of the shares allotted to that period, and may be
exercised with respect to some or all of the shares allotted to such period
and/or any prior period as to which the Option became vested but was not fully
exercised. The Option may be subject to such other terms and conditions on the
time or times when it may be exercised (which may be based on performance or
other criteria) as the Board may deem appropriate. The provisions of this
subsection 6(e) are subject to any Option provisions governing the minimum
number of shares as to which an Option may be exercised.
(f) Termination of Employment or Relationship as a Director or
Consultant. In the event an Optionee's Continuous Status as an Employee,
Director or Consultant terminates (other than upon the Optionee's death or
disability), the Optionee may exercise the Option (to the extent that the
Optionee was entitled to exercise it as of the date of termination) but only
within such period of time ending on the earlier of (i) the date three (3)
months following the termination of the Optionee's Continuous Status as an
Employee, Director or Consultant (or such longer or shorter period specified in
the Option Agreement), or (ii) the expiration of the term of the Option as set
forth in the Option Agreement. If, at the date of termination, the Optionee is
not entitled to exercise the entire Option, the shares covered by the
unexercisable portion of the Option shall revert to and again become available
for issuance under the Plan. If, after termination, the Optionee does not
exercise the Option within the time specified in the Option Agreement, the
Option shall terminate, and the shares covered by such Option shall revert to
and again become available for issuance under the Plan.
An Optionee's Option Agreement may also provide that if the exercise of the
Option following the termination of the Optionee's Continuous Status as an
Employee, Director, or Consultant (other than upon the Optionee's death or
disability) would result in liability under Section 16(b) of the Exchange Act,
then the Option shall terminate on the earlier of (i) the expiration of the term
of the Option set forth in the Option Agreement, or (ii) the tenth (10th) day
after the last date on which such exercise would result in such liability under
Section 16(b) of the Exchange Act. Finally, an Optionee's Option Agreement may
also provide that if the exercise of the Option following the termination of the
Optionee's Continuous Status as an Employee, Director or Consultant (other than
upon the Optionee's death or disability) would be prohibited at any time solely
because the issuance of shares would violate the registration requirements under
the Securities Act, then the Option shall terminate on the earlier of (i) the
expiration of the term of the Option set forth in the first paragraph of this
subsection 6(f), or (ii) the expiration of a period of three (3) months after
the termination of the Optionee's Continuous Status as an Employee, Director or
Consultant during which the exercise of the Option would not be in violation of
such registration requirements.
(g) Disability of Optionee. In the event an Optionee's Continuous Status as
an Employee, Director or Consultant terminates as a result of the Optionee's
disability, the Optionee may exercise the Option (to the extent that the
Optionee was entitled to exercise it as of the date of termination), but only
within such period of time ending on the earlier of (i) the date twelve (12)
months following such termination (or such longer or shorter period specified in
the Option Agreement), or (ii) the expiration of the term of the Option as set
forth in the Option Agreement. If, at the date of termination, the Optionee is
not entitled to exercise the entire Option, the shares covered by the
unexercisable portion of the Option shall revert to and again become available
for issuance under the Plan. If, after termination, the Optionee does not
exercise the Option within the time specified herein, the Option shall
terminate, and the shares covered by such Option shall revert to and again
become available for issuance under the Plan.
(h) Death of Optionee. In the event of the death of an Optionee during, or
within a period specified in the Option Agreement after the termination of, the
Optionee's Continuous Status as an Employee, Director or Consultant, the Option
may be exercised (to the extent the Optionee was entitled to exercise the Option
as of
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<PAGE> 37
the date of death) by the Optionee's estate, by a person who acquired the right
to exercise the Option by bequest or inheritance or by a person designated to
exercise the option upon the Optionee's death pursuant to subsection 6(d), but
only within the period ending on the earlier of (i) the date twelve (12) months
following the date of death (or such longer or shorter period specified in the
Option Agreement), or (ii) the expiration of the term of such Option as set
forth in the Option Agreement. If, at the time of death, the Optionee was not
entitled to exercise the entire Option, the shares covered by the unexercisable
portion of the Option shall revert to and again become available for issuance
under the Plan. If, after death, the Option is not exercised within the time
specified herein, the Option shall terminate, and the shares covered by such
Option shall revert to and again become available for issuance under the Plan.
(i) Early Exercise. The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee, Director or
Consultant to exercise the Option as to any part or all of the shares subject to
the Option prior to the full vesting of the Option. Any unvested shares so
purchased may be subject to a repurchase right in favor of the Company or to any
other restriction the Board determines to be appropriate.
7. OPTION GRANTS FOR NON-EMPLOYEE DIRECTORS.
(a) Initial Grant For Non-Employee Directors. Each person who is elected
for the first time to be a Non-Employee Director automatically shall, upon the
date of such initial election, be granted an option to purchase seven thousand
five hundred (7,500) shares of common stock of the Company on the terms and
conditions set forth herein.
(b) Annual Grant. On the date of each annual meeting of the Company's
shareholders, (i) each person who is then a Non- Employee Director and
continuously has been a Non-Employee Director since the last annual meeting
automatically shall be granted an option to purchase five thousand (5,000)
shares of common stock of the Company on the terms and conditions set forth
herein and (ii) each other person who is then a Non-Employee Director
automatically shall be granted an option to purchase, on the terms and
conditions set forth herein, the number of shares of common stock of the Company
(rounded up to the nearest whole share) determined by multiplying five thousand
(5,000) shares by a fraction, the numerator of which is the number of days the
person continuously has been a Non-Employee Director as of the date of such
grant and the denominator of which is 365.
(c) Term. The term of each Non-Employee Director's option commences on the
date it is granted and, unless sooner terminated as set forth herein, expires on
the date ("Expiration Date") ten (10) years from the date of grant (or such
shorter period specified in the Option Agreement). If the Non-Employee
Director's Continuous Status as an Employee, Director or Consultant terminates,
the option shall terminate on the earlier of the Expiration Date or the date
three (3) months following the date of termination of such Continuous Status. In
any and all circumstances, a Non-Employee Director's option may be exercised
following termination of his or her Continuous Status as an Employee, Director
or Consultant only as to that number of shares as to which it was exercisable on
the date of termination of such status under the provisions of subsection 7(g).
(d) Price. The exercise price of each Non-Employee Director's option shall
be set by the Board of Directors on the date such option is granted.
(e) Consideration. Payment of the exercise price of each option may be made
under one of the following alternatives, as specified in the Option Agreement:
(1) Payment of the exercise price per share in cash or by check at the
time of exercise; or
(2) Provided that at the time of the exercise the Company's common
stock is publicly traded and quoted regularly in the Wall Street Journal,
payment by delivery of shares of common stock of the Company already owned
by the optionee, held for the period required to avoid a charge to the
Company's reported earnings, and owned free and clear of any liens, claims,
encumbrances or security interest, which common stock shall be valued at
its fair market value on the date preceding the date of exercise; or
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<PAGE> 38
(3) Payment by a combination of the methods of payment specified in
paragraphs (1) and (2) above.
Notwithstanding the foregoing, a Non-Employee Director's option may be
exercised pursuant to a program developed under Regulation T as promulgated by
the Federal Reserve Board which results in the receipt of cash (or check) by the
Company prior to the issuance of shares of the Company's common stock.
(f) Transferability. A Non-Employee Director's option shall be transferable
only to the extent provided in the Option Agreement.
(g) Vesting. A Non-Employee Director's option shall become exercisable as
described in the Option Agreement.
8. TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK.
Each stock bonus or restricted stock purchase agreement shall be in such
form and shall contain such terms and conditions as the Board or the Committee
shall deem appropriate. The terms and conditions of stock bonus or restricted
stock purchase agreements may change from time to time, and the terms and
conditions of separate agreements need not be identical, but each stock bonus or
restricted stock purchase agreement shall include (through incorporation of
provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions as appropriate:
(a) Purchase Price. The purchase price under each restricted stock purchase
agreement shall be such amount as the Board or Committee shall determine and
designate in such Stock Award Agreement, but in no event shall the purchase
price be less than eighty-five percent (85%) of the stock's Fair Market Value on
the date such award is made. Notwithstanding the foregoing, the Board or the
Committee may determine that eligible participants in the Plan may be awarded
stock pursuant to a stock bonus agreement in consideration for past services
actually rendered to the Company or for its benefit.
(b) Transferability. Rights under a stock bonus or restricted stock
purchase agreement shall be transferable only by will or the laws of descent and
distribution, so long as stock awarded under such Stock Award Agreement remains
subject to the terms of the Agreement.
(c) Consideration. The purchase price of stock acquired pursuant to a stock
purchase agreement shall be paid either: (i) in cash at the time of purchase;
(ii) at the discretion of the Board or the Committee, according to a deferred
payment arrangement (however, in the event the Company reincorporates in
Delaware, then payment of the common stock's "par value" (as defined in the
Delaware General Corporation Law) shall not be made by deferred payment), or
other arrangement with the person to whom the stock is sold; or (iii) in any
other form of legal consideration that may be acceptable to the Board or the
Committee in its discretion. Notwithstanding the foregoing, the Board or the
Committee to which administration of the Plan has been delegated may award stock
pursuant to a stock bonus agreement in consideration for past services actually
rendered to the Company or for its benefit.
(d) Vesting. Shares of stock sold or awarded under the Plan may, but need
not, be subject to a repurchase option in favor of the Company in accordance
with a vesting schedule to be determined by the Board or the Committee.
(e) Termination of Employment or Relationship as a Director or
Consultant. In the event a Participant's Continuous Status as an Employee,
Director or Consultant terminates, the Company may repurchase or otherwise
reacquire, subject to the limitations described in subsection 8(d), any or all
of the shares of stock held by that person which have not vested as of the date
of termination under the terms of the stock bonus or restricted stock purchase
agreement between the Company and such person.
9. CANCELLATION AND RE-GRANT OF OPTIONS.
(a) The Board or the Committee shall have the authority to effect, at any
time and from time to time, (i) the repricing of any outstanding Options under
the Plan and/or (ii) with the consent of the affected
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<PAGE> 39
holders of Options, the cancellation of any outstanding Options under the Plan
and the grant in substitution therefor of new Options under the Plan covering
the same or different numbers of shares of stock, but having an exercise price
per share not less than eighty-five percent (85%) of the Fair Market Value (one
hundred percent (100%) of the Fair Market Value in the case of an Incentive
Stock Option) or, in the case of a 10% stockholder (as described in subsection
5(b)) receiving a new grant of an Incentive Stock Option, not less than one
hundred ten percent (110%) of the Fair Market Value) per share of stock on the
new grant date. Notwithstanding the foregoing, the Board or the Committee may
grant an Option with an exercise price lower than that set forth above if such
Option is granted as part of a transaction to which section 424(a) of the Code
applies.
(b) Shares subject to an Option canceled under this Section 9 shall
continue to be counted against the maximum award of Options permitted to be
granted pursuant to subsection 5(c) of the Plan. The repricing of an Option
under this Section 9, resulting in a reduction of the exercise price, shall be
deemed to be a cancellation of the original Option and the grant of a substitute
Option; in the event of such repricing, both the original and the substituted
Options shall be counted against the maximum awards of Options permitted to be
granted pursuant to subsection 5(c) of the Plan. The provisions of this
subsection 9(b) shall be applicable only to the extent required by Section
162(m) of the Code.
10. COVENANTS OF THE COMPANY.
(a) During the terms of the Stock Awards, the Company shall keep available
at all times the number of shares of stock required to satisfy such Stock
Awards.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the Stock Award; provided,
however, that this undertaking shall not require the Company to register under
the Securities Act either the Plan, any Stock Award or any stock issued or
issuable pursuant to any such Stock Award. If, after reasonable efforts, the
Company is unable to obtain from any such regulatory commission or agency the
authority which counsel for the Company deems necessary for the lawful issuance
and sale of stock under the Plan, the Company shall be relieved from any
liability for failure to issue and sell stock upon exercise of such Stock Awards
unless and until such authority is obtained.
11. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Stock Awards shall constitute
general funds of the Company.
12. MISCELLANEOUS.
(a) The Board shall have the power to accelerate the time at which a Stock
Award may first be exercised or the time during which a Stock Award or any part
thereof will vest, notwithstanding the provisions in the Stock Award stating the
time at which it may first be exercised or the time during which it will vest.
(b) Neither an Employee, Director or Consultant nor any person to whom a
Stock Award may be transferred shall be deemed to be the holder of, or to have
any of the rights of a holder with respect to, any shares subject to such Stock
Award unless and until such person has satisfied all requirements for exercise
of the Stock Award pursuant to its terms.
(c) Nothing in the Plan or any instrument executed or Stock Award granted
pursuant thereto shall confer upon any Employee, Director, Consultant or other
holder of Stock Awards any right to continue in the employ of the Company or any
Affiliate (or to continue acting as a Director or Consultant) or shall affect
the right of the Company or any Affiliate to terminate the employment of any
Employee with or without cause the right of the Company's Board of Directors
and/or the Company's stockholders to remove any Director as provided in the
Company's Bylaws and the provisions of the applicable laws of the Company's
state of incorporation, or the right to terminate the relationship of any
Consultant subject to the terms of such Consultant's agreement with the Company
or Affiliate.
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(d) To the extent that the aggregate Fair Market Value (determined at the
time of grant) of stock with respect to which Incentive Stock Options are
exercisable for the first time by any Optionee during any calendar year under
all plans of the Company and its Affiliates exceeds One Hundred Thousand Dollars
($100,000), the Options or portions thereof which exceed such limit (according
to the order in which they were granted) shall be treated as Nonstatutory Stock
Options.
(e) The Company may require any person to whom a Stock Award is granted, or
any person to whom a Stock Award may be transferred, as a condition of
exercising or acquiring stock under any Stock Award, (1) to give written
assurances satisfactory to the Company as to such person's knowledge and
experience in financial and business matters and/or to employ a purchaser
representative reasonably satisfactory to the Company who is knowledgeable and
experienced in financial and business matters, and that he or she is capable of
evaluating, alone or together with the purchaser representative, the merits and
risks of exercising the Stock Award; and (2) to give written assurances
satisfactory to the Company stating that such person is acquiring the stock
subject to the Stock Award for such person's own account and not with any
present intention of selling or otherwise distributing the stock. The foregoing
requirements, and any assurances given pursuant to such requirements, shall be
inoperative if (i) the issuance of the shares upon the exercise or acquisition
of stock under the Stock Award has been registered under a then currently
effective registration statement under the Securities Act, or (ii) as to any
particular requirement, a determination is made by counsel for the Company that
such requirement need not be met in the circumstances under the then applicable
securities laws. The Company may, upon advice of counsel to the Company, place
legends on stock certificates issued under the Plan as such counsel deems
necessary or appropriate in order to comply with applicable securities laws,
including, but not limited to, legends restricting the transfer of the stock.
(f) To the extent provided by the terms of a Stock Award Agreement, the
person to whom a Stock Award is granted may satisfy any federal, state or local
tax withholding obligation relating to the exercise or acquisition of stock
under a Stock Award by any of the following means or by a combination of such
means: (1) tendering a cash payment; (2) authorizing the Company to withhold
shares from the shares of the common stock otherwise issuable to the participant
as a result of the exercise or acquisition of stock under the Stock Award; or
(3) delivering to the Company owned and unencumbered shares of the common stock
of the Company.
13. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject to
any Stock Award (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan will be appropriately
adjusted in the type(s) and maximum number of securities subject to the Plan
pursuant to subsection 4(a) and the maximum number of securities subject to
award to any person during any calendar year pursuant to subsection 5(c), and
the outstanding Stock Awards will be appropriately adjusted in the type(s) and
number of securities and price per share of stock subject to such outstanding
Stock Awards. Such adjustments shall be made by the Board or the Committee, the
determination of which shall be final, binding and conclusive. (The conversion
of any convertible securities of the Company shall not be treated as a
"transaction not involving the receipt of consideration by the Company".)
(b) In the event of: (1) a dissolution, liquidation or sale of all or
substantially all of the assets of the Company; (2) a merger or consolidation in
which the Company is not the surviving corporation; (3) a reverse merger in
which the Company is the surviving corporation but the shares of the Company's
common stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise; or (4) the acquisition by any person, entity or group within
the meaning of Section 13(d) or 14(d) of the Exchange Act, or any comparable
successor provisions (excluding any employee benefit plan, or related trust,
sponsored or maintained by the Company or any Affiliate of the Company) of the
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act, or comparable successor rule) of securities of the Company
representing at least fifty percent (50%) of the combined voting power entitled
to vote in the election of directors then: (i) any surviving
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<PAGE> 41
corporation or acquiring corporation shall assume any Stock Awards outstanding
under the Plan or shall substitute similar stock awards (including an award to
acquire the same consideration paid to the stockholders in the transaction
described in this subsection 13(b)) for those outstanding under the Plan, or
(ii) in the event any surviving corporation or acquiring corporation refuses to
assume such Stock Awards or to substitute similar stock awards for those
outstanding under the Plan, (A) with respect to Stock Awards held by persons
then performing services as Employees, Directors or Consultants, the vesting of
such Stock Awards (and, if applicable, the time during which such Stock Awards
may be exercised) shall be accelerated prior to such event and the Stock Awards
terminated if not exercised (if applicable) after such acceleration and at or
prior to such event, and (B) with respect to any other Stock Awards outstanding
under the Plan, such Stock Awards shall be terminated if not exercised (if
applicable) prior to such event.
14. AMENDMENT OF THE PLAN AND STOCK AWARDS.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 13 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company to the extent such approval is necessary for the Plan to satisfy the
requirements of Section 422 of the Code or any Nasdaq or securities exchange
listing requirements.
(b) The Board may in its sole discretion submit any other amendment to the
Plan for stockholder approval, including, but not limited to, amendments to the
Plan intended to satisfy the requirements of Section 162(m) of the Code and the
regulations promulgated thereunder regarding the exclusion of performance-based
compensation from the limit on corporate deductibility of compensation paid to
certain executive officers.
(c) It is expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide eligible Employees
with the maximum benefits provided or to be provided under the provisions of the
Code and the regulations promulgated thereunder relating to Incentive Stock
Options and/or to bring the Plan and/or Incentive Stock Options granted under it
into compliance therewith.
(d) Rights and obligations under any Stock Award granted before amendment
of the Plan shall not be impaired by any amendment of the Plan unless (i) the
Company requests the consent of the person to whom the Stock Award was granted
and (ii) such person consents in writing.
(e) The Board at any time, and from time to time, may amend the terms of
any one or more Stock Award; provided, however, that the rights and obligations
under any Stock Award shall not be impaired by any such amendment unless (i) the
Company requests the consent of the person to whom the Stock Award was granted
and (ii) such person consents in writing.
15. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless sooner
terminated, the Plan shall terminate on the day before the tenth anniversary of
the date the Plan was adopted by the Board or approved by the stockholders of
the Company, whichever is earlier. No Stock Awards may be granted under the Plan
while the Plan is suspended or after it is terminated.
(b) Rights and obligations under any Stock Award granted while the Plan is
in effect shall not be impaired by suspension or termination of the Plan, except
with the written consent of the person to whom the Stock Award was granted.
16. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no Stock
Awards granted under the Plan shall be exercised unless and until the Plan has
been approved by the stockholders of the Company, which approval shall be within
twelve (12) months before or after the date the Plan is adopted by the Board.
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<PAGE> 42
EXHIBIT B
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Merger Agreement") is made as of
, 1997, by and between Dynamic Materials Corporation, a Colorado
corporation ("Dynamic Materials"), and Boom, Inc., a Delaware corporation
("Boom, Inc."); (Dynamic Materials and Boom, Inc., collectively, the
"Constituent Corporations").
The authorized capital stock of Dynamic Materials consists of fifteen
million (15,000,000) shares of Common Stock, Five Cent ($.05) par value per
share, and four million (4,000,000) shares of Preferred Stock, Five Cent ($.05)
par value per share. The authorized capital stock of Boom, Inc., upon
effectuation of the transactions set forth in this Merger Agreement, will
consist of fifteen million (15,000,000) shares of Common Stock, Five Cent ($.05)
par value per share, and four million (4,000,000) shares of Preferred Stock,
Five Cent ($.05) par value per share.
The directors of the Constituent Corporations deem it advisable and to the
advantage of the Constituent Corporations that Dynamic Materials merge with and
into Boom, Inc. upon the terms and conditions provided herein.
NOW, THEREFORE, the parties do hereby adopt the plan of reorganization
encompassed by this Merger Agreement and do hereby agree that Dynamic Materials
shall merge with and into Boom, Inc. on the following terms, conditions and
other provisions:
1. TERMS AND CONDITIONS
1.1 Merger. Dynamic Materials shall be merged with and into Boom, Inc.
(the "Merger"), and Boom, Inc. shall be the surviving corporation (the
"Surviving Corporation") effective at 12:01 p.m., , 1997 (the
"Effective Date").
1.2 Name Change. On the Effective Date, the name of Boom, Inc. shall be
Dynamic Materials Corporation.
1.3 Succession. On the Effective Date, Boom, Inc. shall continue its
corporate existence under the laws of the State of Delaware, and the separate
existence and corporate organization of Dynamic Materials, except insofar as it
may be continued by operation of law, shall be terminated and cease.
1.4 Transfer of Assets and Liabilities. On the Effective Date, the rights,
privileges, powers and franchises, both of a public as well as of a private
nature, of each of the Constituent Corporations shall be vested in and possessed
by the Surviving Corporation, subject to all of the disabilities, duties and
restrictions of or upon each of the Constituent Corporations; and all and
singular 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, and all things in action or belonging to each
of the Constituent Corporations shall be transferred to and vested in the
Surviving Corporation; and all property, rights, privileges, powers and
franchises, and all and every other interest, thereafter shall be the property
of the Surviving Corporation as they were of the Constituent Corporations, and
the title to any real estate vested by deed or otherwise in either of the
Constituent Corporations shall not revert or be in any way impaired by reason of
the Merger; provided, however, that the liabilities of the Constituent
Corporations and of their stockholders, directors and officers shall not be
affected and all rights of creditors and all liens upon any property of either
of the Constituent Corporations shall be preserved unimpaired, and any claim
existing or action or proceeding pending by or against either of the Constituent
Corporations may be prosecuted to judgment as if the Merger had not been
consummated, except as they may be modified with the consent of such creditors,
and all debts, liabilities and duties of or upon each of the Constituent
Corporations shall attach to the Surviving Corporation, and may be enforced
against it to the same extent as if such debts, liabilities and duties had been
incurred or contracted by it.
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1.5 Common Stock of Dynamic Materials and Boom, Inc. On the Effective
Date, by virtue of the Merger and without any further action on the part of the
Constituent Corporations or their respective stockholders, (i) each share of
Common Stock of Dynamic Materials issued and outstanding immediately prior
thereto shall be combined, changed and converted into one (1) share of Common
Stock of Boom, Inc., in each case fully paid and nonassessable, and (ii) each
share of Common Stock of Boom, Inc. issued and outstanding immediately prior
thereto shall be canceled and returned to the status of authorized but unissued
shares.
1.6 Stock Certificates. On and after the Effective Date, all of the
outstanding certificates that, prior to that time, represented shares of Common
Stock of Dynamic Materials shall be deemed for all purposes to evidence
ownership of and to represent the shares of Boom, Inc. into which the shares of
Dynamic Materials represented by such certificates have been converted as herein
provided and shall be so registered on the books and records of the Surviving
Corporation or its transfer agents. The registered owner of any such outstanding
stock certificate shall, until such certificate shall have been surrendered for
transfer or conversion or otherwise accounted for to the Surviving Corporation
or its transfer agent, have and be entitled to exercise any voting and other
rights with respect to and to receive any dividend and other distribution upon
the shares of Boom, Inc. evidenced by such outstanding certificate as above
provided.
1.7 Options. On the Effective Date, if any options or rights granted to
purchase shares of Common Stock of Dynamic Materials under the 1992 Incentive
Stock Option Plan and the 1994 Nonemployee Directors Plan remain outstanding,
then the Surviving Corporation will assume the outstanding and unexercised
portions of such options and such options shall be changed and converted into
options to purchase Common Stock of Boom, Inc., such that an option to purchase
one (1) share of Common Stock of Dynamic Materials shall be converted into an
option to purchase one (1) share of Common Stock of Boom, Inc. No other changes
in the terms and conditions of such options will occur.
1.8 Purchase Rights. On the Effective Date, the Surviving Corporation will
assume the outstanding obligations of Dynamic Materials to issue Common Stock or
other capital stock pursuant to contractual purchase rights granted by Dynamic
Materials, and the outstanding and unexercised portions of all outstanding
contractual rights to purchase Common Stock or other capital stock of Dynamic
Materials shall be changed and converted into contractual rights to purchase
Common Stock or other capital stock, respectively, of Boom, Inc. such that a
contractual right to purchase one (1) share of Common Stock or other capital
stock of Dynamic Materials shall be converted into a contractual right to
purchase one (1) share of Common Stock or other capital stock, respectively, of
Boom, Inc. No other changes in the terms and conditions of such contractual
purchase rights will occur.
1.9 Employee Benefit Plans. On the Effective Date, the Surviving
Corporation shall assume all obligations of Dynamic Materials under any and all
employee benefit plans in effect as of such date with respect to which employee
rights or accrued benefits are outstanding as of such date. On the Effective
Date, the Surviving Corporation shall adopt and continue in effect all such
employee benefit plans upon the same terms and conditions as were in effect
immediately prior to the Merger.
2. CHARTER DOCUMENTS, DIRECTORS AND OFFICERS
2.1 Certificate of Incorporation and Bylaws. The Certificate of
Incorporation of Boom, Inc. in effect on the Effective Date shall continue to be
the Certificate of Incorporation of the Surviving Corporation without change or
amendment until further amended in accordance with the provisions thereof and
applicable law. The Bylaws of Boom, Inc. in effect on the Effective Date shall
continue to be the Bylaws of the Surviving Corporation without change or
amendment until further amended in accordance with the provisions thereof and
applicable law.
2.2 Directors. The directors of Dynamic Materials immediately preceding
the Effective Date shall become the directors of the Surviving Corporation on
and after the Effective Date to serve until the expiration of their terms and
until their successors are elected and qualified.
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2.3 Officers. The officers of Dynamic Materials immediately preceding the
Effective Date shall become the officers of the Surviving Corporation on and
after the Effective Date to serve at the pleasure of its Board of Directors.
3. MISCELLANEOUS
3.1 Further Assurances. From time to time, and when required by the
Surviving Corporation or by its successors and assigns, the Surviving
Corporation shall execute and deliver, or cause to be executed and delivered,
such deeds and other instruments, and the Surviving Corporation shall take or
cause to be taken such further and other action as shall be appropriate or
necessary in order to vest or perfect in or to conform of record or otherwise,
in the Surviving Corporation the title to and possession of all the property,
interests, assets, rights, privileges, immunities, powers, franchises and
authority of Boom, Inc. and otherwise to carry out the purposes of this Merger
Agreement, and the officers and directors of the Surviving Corporation are
authorized fully in the name and on behalf of Boom, Inc. or otherwise to take
any and all such action and to execute and deliver any and all such deeds and
other instruments.
3.2 Amendment. At any time before or after approval by the stockholders of
Dynamic Materials, this Merger Agreement may be amended in any manner (except
that, after the approval of the Merger Agreement by the stockholders of Dynamic
Materials, the principal terms may not be amended without the further approval
of the stockholders of Dynamic Materials) as may be determined in the judgment
of the respective Board of Directors of Boom, Inc. and Dynamic Materials to be
necessary, desirable, or expedient in order to clarify the intention of the
parties hereto or to effect or facilitate the purpose and intent of this Merger
Agreement.
3.3 Conditions to Merger. The obligation of the Constituent Corporations
to effect the transactions contemplated hereby is subject to satisfaction of the
following conditions (any or all of which may be waived by either of the
Constituent Corporations in its sole discretion to the extent permitted by law):
(a) the Merger shall have been approved by the stockholders of Dynamic
Materials in accordance with applicable provisions of the Colorado Business
Corporation Act; and
(b) Dynamic Materials, as sole stockholder of Boom, Inc., shall have
approved the Merger in accordance with the General Corporation Law of the
State of Delaware; and
(c) any and all consents, permits, authorizations, approvals, and
orders deemed in the sole discretion of Dynamic Materials to be material to
consummation of the Merger shall have been obtained.
3.4 Abandonment or Deferral. Notwithstanding the approval of this Merger
Agreement by the stockholders of Dynamic Materials or Boom, Inc., at any time
before the Effective Date, (a) this Merger Agreement may be terminated and the
Merger may be abandoned by the Board of Directors of either Dynamic Materials or
Boom, Inc. or both or (b) the consummation of the Merger may be deferred for a
reasonable period of time if, in the opinion of the Boards of Directors of
Dynamic Materials and Boom, Inc., such action would be in the best interests of
such corporations. In the event of termination of this Merger Agreement, this
Merger Agreement shall become void and of no effect and there shall be no
liability on the part of either Constituent Corporation or their respective
Board of Directors or stockholders with respect thereto, except that Dynamic
Materials shall pay all expenses incurred in connection with the Merger or in
respect of this Merger Agreement or relating thereto.
3.5 Counterparts. In order to facilitate the filing and recording of this
Merger Agreement, the same may be executed in any number of counterparts, each
of which shall be deemed to be an original.
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<PAGE> 45
IN WITNESS WHEREOF, this Merger Agreement, having first been duly approved
by the Board of Directors of Dynamic Materials and Boom, Inc., hereby is
executed on behalf of each such corporations and attested by their respective
officers thereunto duly authorized.
DYNAMIC MATERIALS CORPORATION
A Colorado Corporation
By:
----------------------------------
Paul Lange
Chief Executive Officer
ATTEST:
- ------------------------------------
Richard A. Santa
Secretary
BOOM, INC.
A Delaware Corporation
By:
----------------------------------
Paul Lange
Chief Executive Officer
ATTEST:
- ------------------------------------
Richard A. Santa
Secretary
B-4
<PAGE> 46
EXHIBIT C
CERTIFICATE OF INCORPORATION
OF
BOOM, INC.
The undersigned, a natural person (the "SOLE INCORPORATOR"), for the
purpose of organizing a corporation to conduct the business and promote the
purposes hereinafter stated, under the provisions and subject to the
requirements of the laws of the State of Delaware hereby certifies that:
I.
The name of this corporation is Boom, Inc.
II.
The address of the registered office of the corporation in the State of
Delaware is 1209 Orange Street, City of Wilmington, County of New Castle, and
the name of the registered agent of the corporation in the State of Delaware at
such address is The Corporation Trust Company.
III.
The purpose of this corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
the State of Delaware.
IV.
A. This corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total number
of shares which the corporation is authorized to issue is nineteen million
(19,000,000) shares. Fifteen million (15,000,000) shares shall be Common Stock,
each having a par value of five cents ($.05). Four million (4,000,000) shares
shall be Preferred Stock, each having a par value of five cents ($.05).
B. The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized, by filing a certificate (a
"Preferred Stock Designation") pursuant to the Delaware General Corporation Law,
to fix or alter from time to time the designation, powers, preferences and
rights of the shares of each such series and the qualifications, limitations or
restrictions of any wholly unissued series of Preferred Stock, and to establish
from time to time the number of shares constituting any such series or any of
them; and to increase or decrease the number of shares of any series subsequent
to the issuance of shares of that series, but not below the number of shares of
such series then outstanding. In case the number of shares of any series shall
be decreased in accordance with the foregoing sentence, the shares constituting
such decrease shall resume the status that they had prior to the adoption of the
resolution originally fixing the number of shares of such series.
V.
For the management of the business and for the conduct of the affairs of
the corporation, and in further definition, limitation and regulation of the
powers of the corporation, of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided that:
A. 1. The management of the business and the conduct of the affairs of the
corporation shall be vested in its Board of Directors. The number of directors
which shall constitute the whole Board of Directors shall be fixed exclusively
by one or more resolutions adopted by the Board of Directors.
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<PAGE> 47
2. Subject to the rights of the holders of any series of Preferred
Stock to elect additional directors under specified circumstances, the
directors shall be divided into three classes designated as Class I, Class
II and Class III, respectively. Directors shall be assigned to each class
in accordance with a resolution or resolutions adopted by the Board of
Directors. At the first annual meeting of stockholders following the
adoption and filing of this Certificate of Incorporation, the term of
office of the Class I directors shall expire and Class I directors shall be
elected for a full term of three years. At the second annual meeting of
stockholders following the adoption and filing of this Certificate of
Incorporation, the term of office of the Class II directors shall expire
and Class II directors shall be elected for a full term of three years. At
the third annual meeting of stockholders following the adoption and filing
of this Certificate of Incorporation, the term of office of the Class III
directors shall expire and Class III directors shall be elected for a full
term of three years. At each succeeding annual meeting of stockholders,
directors shall be elected for a full term of three years to succeed the
directors of the class whose terms expire at such annual meeting.
Notwithstanding the foregoing provisions of this Article, each
director shall serve until his successor is duly elected and qualified or
until his death, resignation or removal. No decrease in the number of
directors constituting the Board of Directors shall shorten the term of any
incumbent director.
3. Subject to the rights of the holders of any series of Preferred
Stock, no director shall be removed without cause. Subject to any
limitations imposed by law, the Board of Directors or any individual
director may be removed from office at any time with cause by the
affirmative vote of the holders of a majority of the voting power of all
the then-outstanding shares of voting stock of the corporation, entitled to
vote at an election of directors (the "Voting Stock").
4. Subject to the rights of the holders of any series of Preferred
Stock, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly
created directorships resulting from any increase in the number of
directors, shall, unless the Board of Directors determines by resolution
that any such vacancies or newly created directorships shall be filled by
the stockholders, except as otherwise provided by law, be filled only by
the affirmative vote of a majority of the directors then in office, even
though less than a quorum of the Board of Directors, and not by the
stockholders. Any director elected in accordance with the preceding
sentence shall hold office for the remainder of the full term of the
director for which the vacancy was created or occurred and until such
director's successor shall have been elected and qualified.
B. 1. Subject to paragraph (h) of Section 43 of the Bylaws, the Bylaws may
be altered or amended or new Bylaws adopted by the affirmative vote of at least
sixty-six and two-thirds percent (66 2/3%) of the voting power of all of the
then-outstanding shares of the Voting Stock. The Board of Directors shall also
have the power to adopt, amend, or repeal Bylaws.
2. The directors of the corporation need not be elected by written
ballot unless the Bylaws so provide.
3. No action shall be taken by the stockholders of the corporation
except at an annual or special meeting of stockholders called in accordance
with the Bylaws and no action shall be taken by the stockholders by written
consent.
4. Special meetings of the stockholders of the corporation may be
called, for any purpose or purposes, by (i) the Chairman of the Board of
Directors, (ii) the Chief Executive Officer, or (iii) the Board of
Directors pursuant to a resolution adopted by a majority of the total
number of authorized directors (whether or not there exist any vacancies in
previously authorized directorships at the time any such resolution is
presented to the Board of Directors for adoption).
5. Advance notice of stockholder nominations for the election of
directors and of business to be brought by stockholders before any meeting
of the stockholders of the corporation shall be given in the manner
provided in the Bylaws of the corporation.
C-2
<PAGE> 48
VI.
A. A director of the corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for any breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit. If the Delaware General Corporation Law is amended after
approval by the stockholders of this Article to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director shall be eliminated or limited to the fullest extent
permitted by the Delaware General corporation Law, as so amended.
B. Any repeal or modification of this Article VI shall be prospective and
shall not affect the rights under this Article VI in effect at the time of the
alleged occurrence of any act or omission to act giving rise to liability or
indemnification.
VII.
A. The corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, except as provided in paragraph B. of this
Article VII, and all rights conferred upon the stockholders herein are granted
subject to this reservation.
B. Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the Voting Stock required by law, this Certificate
of Incorporation or any Preferred Stock Designation, the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66 2/3%) of the voting
power of all of the then outstanding shares of the Voting Stock, voting together
as a single class, shall be required to alter, amend or repeal Articles V, VI,
and VII.
The name and the mailing address of the Sole Incorporator is as follows:
<TABLE>
<CAPTION>
NAME MAILING ADDRESS
---- ---------------
<S> <C>
Craig Garby Cooley Godward LLP
2595 Canyon Blvd, Suite 250
Boulder, CO 80302
</TABLE>
IN WITNESS WHEREOF, this Certificate has been subscribed this day of
March, 1997 by the undersigned who affirms that the statements made herein are
true and correct.
------------------------------------
Craig Garby
Sole Incorporator
C-3
<PAGE> 49
EXHIBIT D
BYLAWS
OF
BOOM, INC.
(A DELAWARE CORPORATION)
<TABLE>
<S> <C> <C>
ARTICLE I. OFFICES..................................................... D-3
Section 1. Registered Office........................................... D-3
Section 2. Other Offices............................................... D-3
ARTICLE II. CORPORATE SEAL.............................................. D-3
Section 3. Corporate Seal.............................................. D-3
ARTICLE III. STOCKHOLDERS' MEETINGS...................................... D-3
Section 4. Place of Meetings........................................... D-3
Section 5. Annual Meetings............................................. D-3
Section 6. Special Meetings............................................ D-4
Section 7. Notice of Meetings.......................................... D-5
Section 8. Quorum...................................................... D-5
Section 9. Adjournment and Notice of Adjourned Meetings................ D-5
Section 10. Voting Rights............................................... D-6
Section 11. Joint Owners of Stock....................................... D-6
Section 12. List of Stockholders........................................ D-6
Section 13. Action Without Meeting...................................... D-6
Section 14. Organization................................................ D-6
ARTICLE IV. DIRECTORS................................................... D-7
Section 15. Number and Term of Office................................... D-7
Section 16. Powers...................................................... D-7
Section 17. Classes of Directors........................................ D-7
Section 18. Vacancies................................................... D-7
Section 19. Resignation................................................. D-7
Section 20. Removal..................................................... D-8
Section 21. Meetings.................................................... D-8
(a) Annual Meetings............................................. D-8
(b) Regular Meetings............................................ D-8
(c) Special Meetings............................................ D-8
(d) Telephone Meetings.......................................... D-8
(e) Notice of Meetings.......................................... D-8
(f) Waiver of Notice............................................ D-8
Section 22. Quorum and Voting........................................... D-8
Section 23. Action Without Meeting...................................... D-9
Section 24. Fees and Compensation....................................... D-9
Section 25. Committees.................................................. D-9
(a) Executive Committee......................................... D-9
(b) Other Committees............................................ D-9
(c) Term........................................................ D-9
(d) Meetings.................................................... D-9
Section 26. Organization................................................ D-10
ARTICLE V. OFFICERS.................................................... D-10
Section 27. Officers Designated......................................... D-10
Section 28. Tenure and Duties of Officers............................... D-10
(a) General..................................................... D-10
(b) Duties of Chairman of the Board of Directors................ D-10
(c) Duties of President......................................... D-10
</TABLE>
D-1
<PAGE> 50
<TABLE>
<S> <C> <C>
(d) Duties of Vice Presidents................................... D-11
(e) Duties of Secretary......................................... D-11
(f) Duties of Chief Financial Officer........................... D-11
Section 29. Delegation of Authority..................................... D-11
Section 30. Resignations................................................ D-11
Section 31. Removal..................................................... D-11
ARTICLE VI. EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES
OWNED BY THE CORPORATION.................................... D-12
Section 32. Execution of Corporate Instruments.......................... D-12
Section 33. Voting of Securities Owned by the Corporation............... D-12
ARTICLE VII. SHARES OF STOCK............................................. D-12
Section 34. Form and Execution of Certificates.......................... D-12
Section 35. Lost Certificates........................................... D-13
Section 36. Transfers................................................... D-13
Section 37. Fixing Record Dates......................................... D-13
Section 38. Registered Stockholders..................................... D-13
ARTICLE VIII. OTHER SECURITIES OF THE CORPORATION......................... D-14
Section 39. Execution of Other Securities............................... D-14
ARTICLE IX. DIVIDENDS................................................... D-14
Section 40. Declaration of Dividends.................................... D-14
Section 41. Dividend Reserve............................................ D-14
ARTICLE X. FISCAL YEAR................................................. D-14
Section 42. Fiscal Year................................................. D-14
ARTICLE XI. INDEMNIFICATION............................................. D-14
Section 43. Indemnification of Directors, Executive Officers, Other
Officers, Employees and Other Agents........................ D-14
(a) Directors and Executive Officers............................ D-14
(b) Other Officers, Employees and Other Agents.................. D-15
(c) Expenses.................................................... D-15
(d) Enforcement................................................. D-15
(e) Non-Exclusivity of Rights................................... D-16
(f) Survival of Rights.......................................... D-16
(g) Insurance................................................... D-16
(h) Amendments.................................................. D-16
(i) Saving Clause............................................... D-16
(j) Certain Definitions......................................... D-16
ARTICLE XII. NOTICES..................................................... D-17
Section 44. Notices..................................................... D-17
(a) Notice to Stockholders...................................... D-17
(b) Notice to Directors......................................... D-17
(c) Affidavit of Mailing........................................ D-17
(d) Time Notices Deemed Given................................... D-17
(e) Methods of Notice........................................... D-17
(f) Failure to Receive Notice................................... D-17
(g) Notice to Person with Whom Communication is Unlawful........ D-17
(h) Notice to Person with Undeliverable Address................. D-17
ARTICLE XIII. AMENDMENTS.................................................. D-18
Section 45. Amendments.................................................. D-18
ARTICLE XIV. LOANS TO OFFICERS........................................... D-18
Section 46. Loans to Officers........................................... D-18
</TABLE>
D-2
<PAGE> 51
BYLAWS
OF
BOOM, INC.
(A DELAWARE CORPORATION)
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the corporation in
the State of Delaware shall be in the City of Wilmington, County of New Castle.
(Del. Code Ann., tit. 8, Section 131)
Section 2. Other Offices. The corporation shall also have and maintain an
office or principal place of business at such place as may be fixed by the Board
of Directors, and may also have offices at such other places, both within and
without the State of Delaware as the Board of Directors may from time to time
determine or the business of the corporation may require. (Del. Code Ann., tit.
8, Section 122(8))
ARTICLE II
CORPORATE SEAL
Section 3. Corporate Seal. The corporate seal shall consist of a die
bearing the name of the corporation and the inscription, "Corporate
Seal-Delaware." Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise. (Del. Code Ann., tit. 8,
Section 122(3))
ARTICLE III
STOCKHOLDERS' MEETINGS
Section 4. Place of Meetings. Meetings of the stockholders of the
corporation shall be held at such place, either within or without the State of
Delaware, as may be designated from time to time by the Board of Directors, or,
if not so designated, then at the office of the corporation required to be
maintained pursuant to Section 2 hereof. (Del. Code Ann., tit. 8, Section
211(a))
Section 5. Annual Meetings.
(a) The annual meeting of the stockholders of the corporation, for the
purpose of election of directors and for such other business as may lawfully
come before it, shall be held on such date and at such time as may be designated
from time to time by the Board of Directors. (Del. Code Ann., tit. 8, Section
211(b))
(b) At an annual meeting of the stockholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be properly
brought before an annual meeting, business must be: (A) specified in the notice
of meeting (or any supplement thereto) given by or at the direction of the Board
of Directors, (B) otherwise properly brought before the meeting by or at the
direction of the Board of Directors, or (C) otherwise properly brought before
the meeting by a stockholder. For business to be properly brought before an
annual meeting by a stockholder, the stockholder must have given timely notice
thereof in writing to the Secretary of the corporation. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the corporation not later than the close of
business on the sixtieth (60th) day nor earlier than the close of business on
the ninetieth (90th) day prior to the first anniversary of the preceding year's
annual meeting; provided, however, that in the event that no annual meeting was
held in the previous year or the date of the annual meeting has been changed by
more than thirty (30) days from the date contemplated at the time of the
previous year's proxy statement, notice by the stockholder to be timely must be
so received not earlier than the close of business on the ninetieth (90th) day
prior to such annual meeting and not later than the close of business on the
later of the sixtieth (60th) day prior to such annual meeting or, in the event
public announcement of the date of such annual meeting is first made by the
corporation fewer than seventy (70) days prior to the date of such annual
meeting, the close of business on the tenth (10th) day following the day on
which public announcement of the date of such meeting is first made by
D-3
<PAGE> 52
the corporation. A stockholder's notice to the Secretary shall set forth as to
each matter the stockholder proposes to bring before the annual meeting: (i) a
brief description of the business desired to be brought before the annual
meeting and the reasons for conducting such business at the annual meeting, (ii)
the name and address, as they appear on the corporation's books, of the
stockholder proposing such business, (iii) the class and number of shares of the
corporation that are beneficially owned by the stockholder, (iv) any material
interest of the stockholder in such business and (v) any other information that
is required to be provided by the stockholder pursuant to Regulation 14A under
the Securities Exchange Act of 1934, as amended (the "1934 Act"), in his
capacity as a proponent to a stockholder proposal. Notwithstanding the
foregoing, in order to include information with respect to a stockholder
proposal in the proxy statement and form of proxy for a stockholder's meeting,
stockholders must provide notice as required by the regulations promulgated
under the 1934 Act. Notwithstanding anything in these Bylaws to the contrary, no
business shall be conducted at any annual meeting except in accordance with the
procedures set forth in this paragraph (b). The chairman of the annual meeting
shall, if the facts warrant, determine and declare at the meeting that business
was not properly brought before the meeting and in accordance with the
provisions of this paragraph (b), and, if he should so determine, he shall so
declare at the meeting that any such business not properly brought before the
meeting shall not be transacted. (Del. Code Ann., tit. 8: Section 211(b))
(c) Only persons who are nominated in accordance with the procedures set
forth in this paragraph (c) 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 in the
election of directors at the meeting who complies with the notice procedures set
forth in this paragraph (c). Such nominations, other than those made by or at
the direction of the Board of Directors, shall be made pursuant to timely notice
in writing to the Secretary of the corporation in accordance with the provisions
of paragraph (b) of this Section 5. Such stockholder's notice shall set forth
(i) as to each person, if any, whom the stockholder proposes to nominate for
election or re-election as a director: (A) the name, age, business address and
residence address of such person, (B) the principal occupation or employment of
such person, (C) the class and number of shares of the corporation that are
beneficially owned by such person, (D) a description of all arrangements or
understandings between the stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nominations are to
be made by the stockholder, and (E) any other information relating to such
person that is required to be disclosed in solicitations of proxies for election
of directors, or is otherwise required, in each case pursuant to Regulation 14A
under the 1934 Act (including without limitation such person's written consent
to being named in the proxy statement, if any, as a nominee and to serving as a
director if elected); and (ii) as to such stockholder giving notice, the
information required to be provided pursuant to paragraph (b) of this Section 5.
At the request of the Board of Directors, any person nominated by a stockholder
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 that pertains to the nominee. No person shall be eligible for
election as a director of the corporation unless nominated in accordance with
the procedures set forth in this paragraph (c). The chairman of the meeting
shall, if the facts warrant, determine and declare at the meeting that a
nomination was not made in accordance with the procedures prescribed by these
Bylaws, and if he should so determine, he shall so declare at the meeting, and
the defective nomination shall be disregarded. (Del. Code Ann., tit. 8, Sections
212, 214).
(d) For purposes of this Section 5, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service or in a document publicly filed by the
corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the Exchange Act.
Section 6. Special Meetings.
(a) Special meetings of the stockholders of the corporation may be called,
for any purpose or purposes, by (i) the Chairman of the Board of Directors, (ii)
the Chief Executive Officer, or (iii) the Board of Directors pursuant to a
resolution adopted by a majority of the total number of authorized directors
(whether or not there exist any vacancies in previously authorized directorships
at the time any such resolution is presented to
D-4
<PAGE> 53
the Board of Directors for adoption), and shall be held at such place, on such
date, and at such time as the Board of Directors, shall fix.
(b) If a special meeting is called by any person or persons other than the
Board of Directors, the request shall be in writing, specifying the general
nature of the business proposed to be transacted, and shall be delivered
personally or sent by registered mail or by telegraphic or other facsimile
transmission to the Chairman of the Board of Directors, the Chief Executive
Officer, or the Secretary of the corporation. No business may be transacted at
such special meeting otherwise than specified in such notice. The Board of
Directors shall determine the time and place of such special meeting, which
shall be held not less than thirty-five (35) nor more than one hundred twenty
(120) days after the date of the receipt of the request. Upon determination of
the time and place of the meeting, the officer receiving the request shall cause
notice to be given to the stockholders entitled to vote, in accordance with the
provisions of Section 7 of these Bylaws. If the notice is not given within sixty
(60) days after the receipt of the request, the person or persons requesting the
meeting may set the time and place of the meeting and give the notice. Nothing
contained in this paragraph (b) shall be construed as limiting, fixing, or
affecting the time when a meeting of stockholders called by action of the Board
of Directors may be held.
Section 7. Notice of Meetings. Except as otherwise provided by law or the
Certificate of Incorporation, written notice of each meeting of stockholders
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder entitled to vote at such meeting, such
notice to specify the place, date and hour and purpose or purposes of the
meeting. Notice of the time, place and purpose of any meeting of stockholders
may be waived in writing, signed by the person entitled to notice thereof,
either before or after such meeting, and will be waived by any stockholder by
his attendance thereat in person or by proxy, except when the stockholder
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Any stockholder so waiving notice of such meeting shall be
bound by the proceedings of any such meeting in all respects as if due notice
thereof had been given. (Del. Code Ann., tit. 8, Sections 222, 229)
Section 8. Quorum. At all meetings of stockholders, except where otherwise
provided by statute or by the Certificate of Incorporation, or by these Bylaws,
the presence, in person or by proxy duly authorized, of the holders of a
majority of the outstanding shares of stock entitled to vote shall constitute a
quorum for the transaction of business. In the absence of a quorum, any meeting
of stockholders may be adjourned, from time to time, either by the chairman of
the meeting or by vote of the holders of a majority of the shares represented
thereat, but no other business shall be transacted at such meeting. The
stockholders present at a duly called or convened meeting, at which a quorum is
present, may continue to transact business until adjournment, notwithstanding
the withdrawal of enough stockholders to leave less than a quorum. Except as
otherwise provided by law, the Certificate of Incorporation or these Bylaws, all
action taken by the holders of a majority of the vote cast, excluding
abstentions, at any meeting at which a quorum is present shall be valid and
binding upon the corporation; provided, however, that directors shall be elected
by a plurality of the votes of the shares present in person or represented by
proxy at the meeting and entitled to vote on the election of directors. Where a
separate vote by a class or classes or series is required, except where
otherwise provided by the statute or by the Certificate of Incorporation or
these Bylaws, a majority of the outstanding shares of such class or classes or
series, present in person or represented by proxy, shall constitute a quorum
entitled to take action with respect to that vote on that matter and, except
where otherwise provided by the statute or by the Certificate of Incorporation
or these Bylaws, the affirmative vote of the majority (plurality, in the case of
the election of directors) of the votes cast, including abstentions, by the
holders of shares of such class or classes or series shall be the act of such
class or classes or series. (Del. Code Ann., tit. 8, Section 216)
Section 9. Adjournment and Notice of Adjourned Meetings. Any meeting of
stockholders, whether annual or special, may be adjourned from time to time
either by the chairman of the meeting or by the vote of a majority of the shares
casting votes, excluding abstentions. When a meeting is adjourned to another
time or place, notice need not be given of the adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken. At
the adjourned meeting, the corporation may transact any business that might have
been transacted at the original meeting. If the adjournment is for more than
thirty (30) days or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the
D-5
<PAGE> 54
adjourned meeting shall be given to each stockholder of record entitled to vote
at the meeting. (Del. Code Ann., tit. 8, Section 222(c))
Section 10. Voting Rights. For the purpose of determining those
stockholders entitled to vote at any meeting of the stockholders, except as
otherwise provided by law, only persons in whose names shares stand on the stock
records of the corporation on the record date, as provided in Section 12 of
these Bylaws, shall be entitled to vote at any meeting of stockholders. Every
person entitled to vote shall have the right to do so either in person or by an
agent or agents authorized by a proxy granted in accordance with Delaware law.
An agent so appointed need not be a stockholder. No proxy shall be voted after
three (3) years from its date of creation unless the proxy provides for a longer
period. (Del. Code Ann., tit. 8, Sections 211(e), 212(b))
Section 11. Joint Owners of Stock. If shares or other securities having
voting power stand of record in the names of two (2) or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in common, tenants
by the entirety, or otherwise, or if two (2) or more persons have the same
fiduciary relationship respecting the same shares, unless the Secretary is given
written notice to the contrary and is furnished with a copy of the instrument or
order appointing them or creating the relationship wherein it is so provided,
their acts with respect to voting shall have the following effect: (a) if only
one (1) votes, his act binds all; (b) if more than one (1) votes, the act of the
majority so voting binds all; (c) if more than one (1) votes, but the vote is
evenly split on any particular matter, each faction may vote the securities in
question proportionally, or may apply to the Delaware Court of Chancery for
relief as provided in the General Corporation Law of Delaware, Section 217(b).
If the instrument filed with the Secretary shows that any such tenancy is held
in unequal interests, a majority or even-split for the purpose of subsection (c)
shall be a majority or even-split in interest. (Del. Code Ann., tit. 8, Section
217(b))
Section 12. List of Stockholders. The Secretary shall prepare and make, at
least ten (10) days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at said meeting, arranged in alphabetical order,
showing the address of each stockholder and the number of shares registered in
the name of each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten (10) days prior to the meeting, either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not specified, at the place where
the meeting is to be held. The list shall be produced and kept at the time and
place of meeting during the whole time thereof and may be inspected by any
stockholder who is present. (Del. Code Ann., tit. 8, Section 219(a))
Section 13. Action Without Meeting.
(a) No action shall be taken by the stockholders except at an annual or
special meeting of stockholders called in accordance with these Bylaws, and no
action shall be taken by the stockholders by written consent.
Section 14. Organization.
(a) At every meeting of stockholders, the Chairman of the Board of
Directors, or, if a Chairman has not been appointed or is absent, the President,
or, if the President is absent, a chairman of the meeting chosen by a majority
in interest of the stockholders entitled to vote, present in person or by proxy,
shall act as chairman. The Secretary, or, in his absence, an Assistant Secretary
directed to do so by the President, shall act as secretary of the meeting.
(b) The Board of Directors of the corporation shall be entitled to make
such rules or regulations for the conduct of meetings of stockholders as it
shall deem necessary, appropriate or convenient. Subject to such rules and
regulations of the Board of Directors, if any, the chairman of the meeting shall
have the right and authority to prescribe such rules, regulations and procedures
and to do all such acts as, in the judgment of such chairman, are necessary,
appropriate or convenient for the proper conduct of the meeting, including,
without limitation, establishing an agenda or order of business for the meeting,
rules and procedures for maintaining order at the meeting and the safety of
those present, limitations on participation in such meeting to stockholders of
record of the corporation and their duly authorized and constituted proxies and
such other persons as the chairman shall permit, restrictions on entry to the
meeting after the time fixed for the commencement thereof, limitations on the
time allotted to questions or comments by participants and
D-6
<PAGE> 55
regulation of the opening and closing of the polls for balloting on matters that
are to be voted on by ballot. Unless and to the extent determined by the Board
of Directors or the chairman of the meeting, meetings of stockholders shall not
be required to be held in accordance with rules of parliamentary procedure.
ARTICLE IV
DIRECTORS
Section 15. Number and Term of Office. The authorized number of directors
of the corporation shall be fixed in accordance with the Certificate of
Incorporation. Directors need not be stockholders unless so required by the
Certificate of Incorporation. If for any cause, the directors shall not have
been elected at an annual meeting, they may be elected as soon thereafter as
convenient at a special meeting of the stockholders called for that purpose in
the manner provided in these Bylaws. (Del. Code Ann., tit. 8, Sections 141(b),
211(b), (c))
Section 16. Powers. The powers of the corporation shall be exercised, its
business conducted and its property controlled by the Board of Directors, except
as may be otherwise provided by statute or by the Certificate of Incorporation.
(Del. Code Ann., tit. 8, Section 141(a))
Section 17. Classes of Directors. Subject to the rights of the holders of
any series of Preferred Stock to elect additional directors under specified
circumstances, the directors shall be divided into three classes designated as
Class I, Class II and Class III, respectively. Directors shall be assigned to
each class in accordance with a resolution or resolutions adopted by the Board
of Directors. At the first annual meeting of stockholders following the adoption
and filing of this Certificate of Incorporation, the term of office of the Class
I directors shall expire and Class I directors shall be elected for a full term
of three years. At the second annual meeting of stockholders following the
adoption and filing of this Certificate of Incorporation, the term of office of
the Class II directors shall expire and Class II directors shall be elected for
a full term of three years. At the third annual meeting of stockholders
following the adoption and filing of this Certificate of Incorporation, the term
of office of the Class III directors shall expire and Class III directors shall
be elected for a full term of three years. At each succeeding annual meeting of
stockholders, directors shall be elected for a full term of three years to
succeed the directors of the class whose terms expire at such annual meeting.
Notwithstanding the foregoing provisions of this Article, each director
shall serve until his successor is duly elected and qualified or until his
death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
Section 18. Vacancies. Unless otherwise provided in the Certificate of
Incorporation, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors, shall
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by stockholders, be filled only
by the affirmative vote of a majority of the directors then in office, even
though less than a quorum of the Board of Directors. Any director elected in
accordance with the preceding sentence shall hold office for the remainder of
the full term of the director for which the vacancy was created or occurred and
until such director's successor shall have been elected and qualified. A vacancy
in the Board of Directors shall be deemed to exist under this Bylaw in the case
of the death, removal or resignation of any director. (Del. Code Ann., tit. 8,
Section 223(a), (b))
Section 19. Resignation. Any director may resign at any time by delivering
his written resignation to the Secretary, such resignation to specify whether it
will be effective at a particular time, upon receipt by the Secretary or at the
pleasure of the Board of Directors. If no such specification is made, it shall
be deemed effective at the pleasure of the Board of Directors. When one or more
directors shall resign from the Board of Directors, effective at a future date,
a majority of the directors then in office, including those who have so
resigned, shall have power to fill such vacancy or vacancies, the vote thereon
to take effect when such resignation or resignations shall become effective, and
each Director so chosen shall hold office for the unexpired portion of the term
of the director whose place shall be vacated and until his successor shall have
been duly elected and qualified. (Del. Code Ann., tit. 8, Sections 141(b),
223(d))
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Section 20. Removal. Subject to the rights of the holders of any series of
Preferred Stock, no director shall be removed without cause. Subject to any
limitations imposed by law, the Board of Directors or any individual director
may be removed from office at any time with cause by the affirmative vote of the
holders of a majority of the voting power of all the then-outstanding shares of
voting stock of the corporation, entitled to vote at an election of directors
(the "Voting Stock").
Section 21. Meetings.
(a) Annual Meetings. The annual meeting of the Board of Directors shall be
held immediately before or after the annual meeting of stockholders and at the
place where such meeting is held. No notice of an annual meeting of the Board of
Directors shall be necessary and such meeting shall be held for the purpose of
electing officers and transacting such other business as may lawfully come
before it.
(b) Regular Meetings. Except as hereinafter otherwise provided, regular
meetings of the Board of Directors shall be held in the office of the
corporation required to be maintained pursuant to Section 2 hereof. Unless
otherwise restricted by the Certificate of Incorporation, regular meetings of
the Board of Directors may also be held at any place within or without the State
of Delaware that has been designated by resolution of the Board of Directors or
the written consent of all directors. (Del. Code Ann., tit. 8, Section 141(g))
(c) Special Meetings. Unless otherwise restricted by the Certificate of
Incorporation, special meetings of the Board of Directors may be held at any
time and place within or without the State of Delaware whenever called by the
Chairman of the Board, the President or any two of the directors (Del. Code
Ann., tit. 8, Section 141(g))
(d) Telephone Meetings. Any member of the Board of Directors, or of any
committee thereof, may participate in a meeting by means of conference telephone
or similar communications equipment by means of which all persons participating
in the meeting can hear each other, and participation in a meeting by such means
shall constitute presence in person at such meeting. (Del. Code Ann., tit. 8,
Section 141(I))
(e) Notice of Meetings. Notice of the time and place of all special
meetings of the Board of Directors shall be orally or in writing, by telephone,
facsimile, telegraph or telex, during normal business hours, at least
twenty-four (24) hours before the date and time of the meeting, or sent in
writing to each director by first class mail, charges prepaid, at least three
(3) days before the date of the meeting. Notice of any meeting may be waived in
writing at any time before or after the meeting and will be waived by any
director by attendance thereat, except when the director attends the meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. (Del. Code Ann., tit. 8, Section 229)
(f) Waiver of Notice. The transaction of all business at any meeting of
the Board of Directors, or any committee thereof, however called or noticed, or
wherever held, shall be as valid as though had at a meeting duly held after
regular call and notice, if a quorum be present and if, either before or after
the meeting, each of the directors not present shall sign a written waiver of
notice. All such waivers shall be filed with the corporate records or made a
part of the minutes of the meeting. (Del. Code Ann., tit. 8, Section 229)
Section 22. Quorum and Voting.
(a) Unless the Certificate of Incorporation requires a greater number and
except with respect to indemnification questions arising under Section 43
hereof, for which a quorum shall be one-third of the exact number of directors
fixed from time to time in accordance with the Certificate of Incorporation, a
quorum of the Board of Directors shall consist of a majority of the exact number
of directors fixed from time to time by the Board of Directors in accordance
with the Certificate of Incorporation; provided, however, at any meeting whether
a quorum be present or otherwise, a majority of the directors present may
adjourn from time to time until the time fixed for the next regular meeting of
the Board of Directors, without notice other than by announcement at the
meeting. (Del. Code Ann., tit. 8, Section 141(b))
(b) At each meeting of the Board of Directors at which a quorum is present,
all questions and business shall be determined by the affirmative vote of a
majority of the directors present, unless a different vote be required by law,
the Certificate of Incorporation or these Bylaws. (Del. Code Ann., tit. 8,
Section 141(b))
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Section 23. Action Without Meeting. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and such writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee. (Del. Code Ann., tit. 8, Section 141(f))
Section 24. Fees and Compensation. Directors shall be entitled to such
compensation for their services as may be approved by the Board of Directors,
including, if so approved, by resolution of the Board of Directors, a fixed sum
and expenses of attendance, if any, for attendance at each regular or special
meeting of the Board of Directors and at any meeting of a committee of the Board
of Directors. Nothing herein contained shall be construed to preclude any
director from serving the corporation in any other capacity as an officer,
agent, employee, or otherwise and receiving compensation therefor. (Del. Code
Ann., tit. 8, Section 141(h))
Section 25. Committees.
(a) Executive Committee. The Board of Directors may by resolution passed
by a majority of the whole Board of Directors appoint an Executive Committee to
consist of one (1) or more members of the Board of Directors. The Executive
Committee, to the extent permitted by law and provided in the resolution of the
Board of Directors shall have and may exercise all the powers and authority of
the Board of Directors in the management of the business and affairs of the
corporation, including without limitation the power or authority to declare a
dividend, to authorize the issuance of stock and to adopt a certificate of
ownership and merger, and may authorize the seal of the corporation to be
affixed to all papers that may require it; but no such committee shall have the
power or authority in reference to amending the Certificate of Incorporation
(except that a committee may, to the extent authorized in the resolution or
resolutions providing for the issuance of shares of stock adopted by the Board
of Directors fix the designations and any of the preferences or rights of such
shares relating to dividends, redemption, dissolution, any distribution of
assets of the corporation or the conversion into, or the exchange of such shares
for, shares of any other class or classes or any other series of the same or any
other class or classes of stock of the corporation or fix the number of shares
of any series of stock or authorize the increase or decrease of the shares of
any series), adopting an agreement of merger or consolidation, recommending to
the stockholders the sale, lease or exchange of all or substantially all of the
corporation's property and assets, recommending to the stockholders a
dissolution of the corporation or a revocation of a dissolution, or amending the
bylaws of the corporation. (Del. Code Ann., tit. 8, Section 141(c))
(b) Other Committees. The Board of Directors may, by resolution passed by
a majority of the whole Board of Directors, from time to time appoint such other
committees as may be permitted by law. Such other committees appointed by the
Board of Directors shall consist of one (1) or more members of the Board of
Directors and shall have such powers and perform such duties as may be
prescribed by the resolution or resolutions creating such committees, but in no
event shall such committee have the powers denied to the Executive Committee in
these Bylaws. (Del. Code Ann., tit. 8, Section 141(c))
(c) Term. Each member of a committee of the Board of Directors shall serve
a term on the committee coexistent with such member's term on the Board of
Directors. The Board of Directors, subject to the provisions of subsections (a)
or (b) of this Bylaw may at any time increase or decrease the number of members
of a committee or terminate the existence of a committee. The membership of a
committee member shall terminate on the date of his death or voluntary
resignation from the committee or from the Board of Directors. The Board of
Directors may at any time for any reason remove any individual committee member
and the Board of Directors may fill any committee vacancy created by death,
resignation, removal or increase in the number of members of the committee. The
Board of Directors may designate one or more directors as alternate members of
any committee, who may replace any absent or disqualified member at any meeting
of the committee, and, in addition, in the absence or disqualification of any
member of a committee, the member or members thereof present at any meeting and
not disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. (Del. Code Ann.,
tit. 8, Section 141(c))
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(d) Meetings. Unless the Board of Directors shall otherwise provide,
regular meetings of the Executive Committee or any other committee appointed
pursuant to this Section 25 shall be held at such times and places as are
determined by the Board of Directors, or by any such committee, and when notice
thereof has been given to each member of such committee, no further notice of
such regular meetings need be given thereafter. Special meetings of any such
committee may be held at any place that has been determined from time to time by
such committee, and may be called by any director who is a member of such
committee, upon written notice to the members of such committee of the time and
place of such special meeting given in the manner provided for the giving of
written notice to members of the Board of Directors of the time and place of
special meetings of the Board of Directors. Notice of any special meeting of any
committee may be waived in writing at any time before or after the meeting and
will be waived by any director by attendance thereat, except when the director
attends such special meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. A majority of the authorized number of
members of any such committee shall constitute a quorum for the transaction of
business, and the act of a majority of those present at any meeting at which a
quorum is present shall be the act of such committee. (Del. Code Ann., tit. 8,
Sections 141(c), 229)
Section 26. Organization. At every meeting of the directors, the Chairman
of the Board of Directors, or, if a Chairman has not been appointed or is
absent, the President, or if the President is absent, the most senior Vice
President, or, in the absence of any such officer, a chairman of the meeting
chosen by a majority of the directors present, shall preside over the meeting.
The Secretary, or in his absence, an Assistant Secretary directed to do so by
the President, shall act as secretary of the meeting.
ARTICLE V
OFFICERS
Section 27. Officers Designated. The officers of the corporation shall
include, if and when designated by the Board of Directors, the Chairman of the
Board of Directors, the Chief Executive Officer, the President, one or more Vice
Presidents, the Secretary, the Chief Financial Officer, the Treasurer, the
Controller, all of whom shall be elected at the annual organizational meeting of
the Board of Directors. The Board of Directors may also appoint one or more
Assistant Secretaries, Assistant Treasurers, Assistant Controllers and such
other officers and agents with such powers and duties as it shall deem
necessary. The Board of Directors may assign such additional titles to one or
more of the officers as it shall deem appropriate. Any one person may hold any
number of offices of the corporation at any one time unless specifically
prohibited therefrom by law. The salaries and other compensation of the officers
of the corporation shall be fixed by or in the manner designated by the Board of
Directors. (Del. Code Ann., tit. 8, Sections 122(5), 142(a), (b))
Section 28. Tenure and Duties of Officers.
(a) General. All officers shall hold office at the pleasure of the Board of
Directors and until their successors shall have been duly elected and qualified,
unless sooner removed. Any officer elected or appointed by the Board of
Directors may be removed at any time by the Board of Directors. If the office of
any officer becomes vacant for any reason, the vacancy may be filled by the
Board of Directors. (Del. Code Ann., tit. 8, Section 141(b), (e))
(b) Duties of Chairman of the Board of Directors. The Chairman of the Board
of Directors, when present, shall preside at all meetings of the stockholders
and the Board of Directors. The Chairman of the Board of Directors shall perform
other duties commonly incident to his office and shall also perform such other
duties and have such other powers as the Board of Directors shall designate from
time to time. If there is no President, then the Chairman of the Board of
Directors shall also serve as the Chief Executive Officer of the corporation and
shall have the powers and duties prescribed in paragraph (c) of this Section 28.
(Del. Code Ann., tit. 8, Section 142(a))
(c) Duties of President. The President shall preside at all meetings of the
stockholders and at all meetings of the Board of Directors, unless the Chairman
of the Board of Directors has been appointed and is present. Unless some other
officer has been elected Chief Executive Officer of the corporation, the
President
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shall be the chief executive officer of the corporation and shall, subject to
the control of the Board of Directors, have general supervision, direction and
control of the business and officers of the corporation. The President shall
perform other duties commonly incident to his office and shall also perform such
other duties and have such other powers as the Board of Directors shall
designate from time to time. (Del. Code Ann., tit. 8, Section 142(a))
(d) Duties of Vice Presidents. The Vice Presidents may assume and perform
the duties of the President in the absence or disability of the President or
whenever the office of President is vacant. The Vice Presidents shall perform
other duties commonly incident to their office and shall also perform such other
duties and have such other powers as the Board of Directors or the President
shall designate from time to time. (Del. Code Ann., tit. 8, Section 142(a))
(e) Duties of Secretary. The Secretary shall attend all meetings of the
stockholders and of the Board of Directors and shall record all acts and
proceedings thereof in the minute book of the corporation. The Secretary shall
give notice in conformity with these Bylaws of all meetings of the stockholders
and of all meetings of the Board of Directors and any committee thereof
requiring notice. The Secretary shall perform all other duties given him in
these Bylaws and other duties commonly incident to his office and shall also
perform such other duties and have such other powers as the Board of Directors
shall designate from time to time. The President may direct any Assistant
Secretary to assume and perform the duties of the Secretary in the absence or
disability of the Secretary, and each Assistant Secretary shall perform other
duties commonly incident to his office and shall also perform such other duties
and have such other powers as the Board of Directors or the President shall
designate from time to time. (Del. Code Ann., tit. 8, Section 142(a))
(f) Duties of Chief Financial Officer. The Chief Financial Officer shall
keep or cause to be kept the books of account of the corporation in a thorough
and proper manner and shall render statements of the financial affairs of the
corporation in such form and as often as required by the Board of Directors or
the President. The Chief Financial Officer, subject to the order of the Board of
Directors, shall have the custody of all funds and securities of the
corporation. The Chief Financial Officer shall perform other duties commonly
incident to his office and shall also perform such other duties and have such
other powers as the Board of Directors or the President shall designate from
time to time. The President may direct the Treasurer or any Assistant Treasurer,
or the Controller or any Assistant Controller to assume and perform the duties
of the Chief Financial Officer in the absence or disability of the Chief
Financial Officer, and each Treasurer and Assistant Treasurer and each
Controller and Assistant Controller shall perform other duties commonly incident
to his office and shall also perform such other duties and have such other
powers as the Board of Directors or the President shall designate from time to
time. (Del. Code Ann., tit. 8, Section 142(a))
Section 29. Delegation of Authority. The Board of Directors may from time
to time delegate the powers or duties of any officer to any other officer or
agent, notwithstanding any provision hereof.
Section 30. Resignations. Any officer may resign at any time by giving
written notice to the Board of Directors or to the President or to the
Secretary. Any such resignation shall be effective when received by the person
or persons to whom such notice is given, unless a later time is specified
therein, in which event the resignation shall become effective at such later
time. Unless otherwise specified in such notice, the acceptance of any such
resignation shall not be necessary to make it effective. Any resignation shall
be without prejudice to the rights, if any, of the corporation under any
contract with the resigning officer. (Del. Code Ann., tit. 8, Section 142(b))
Section 31. Removal. Any officer may be removed from office at any time,
either with or without cause, by the affirmative vote of a majority of the
directors in office at the time, or by the unanimous written consent of the
directors in office at the time, or by any committee or superior officers upon
whom such power of removal may have been conferred by the Board of Directors.
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ARTICLE VI
EXECUTION OF CORPORATE INSTRUMENTS AND
VOTING OF SECURITIES OWNED BY THE CORPORATION
Section 32. Execution of Corporate Instruments. The Board of Directors may,
in its discretion, determine the method and designate the signatory officer or
officers, or other person or persons, to execute on behalf of the corporation
any corporate instrument or document, or to sign on behalf of the corporation
the corporate name without limitation, or to enter into contracts on behalf of
the corporation, except where otherwise provided by law or these Bylaws, and
such execution or signature shall be binding upon the corporation. (Del. Code
Ann., tit. 8, Sections 103(a), 142(a), 158)
Unless otherwise specifically determined by the Board of Directors or
otherwise required by law, promissory notes, deeds of trust, mortgages and other
evidences of indebtedness of the corporation, and other corporate instruments or
documents requiring the corporate seal, and certificates of shares of stock
owned by the corporation, shall be executed, signed or endorsed by the Chairman
of the Board of Directors, or the President or any Vice President, and by the
Secretary or Treasurer or any Assistant Secretary or Assistant Treasurer. All
other instruments and documents requiring the corporate signature, but not
requiring the corporate seal, may be executed as aforesaid or in such other
manner as may be directed by the Board of Directors. (Del. Code Ann., tit. 8,
Sections 103(a), 142(a), 158)
All checks and drafts drawn on banks or other depositories on funds to the
credit of the corporation or in special accounts of the corporation shall be
signed by such person or persons as the Board of Directors shall authorize so to
do.
Unless authorized or ratified by the Board of Directors or within the
agency power of an officer, no officer, agent or employee shall have any power
or authority to bind the corporation by any contract or engagement or to pledge
its credit or to render it liable for any purpose or for any amount. (Del. Code
Ann., tit. 8, Sections 103(a), 142(a), 158).
Section 33. Voting of Securities Owned by the Corporation. All stock and
other securities of other corporations owned or held by the corporation for
itself, or for other parties in any capacity, shall be voted, and all proxies
with respect thereto shall be executed, by the person authorized so to do by
resolution of the Board of Directors, or, in the absence of such authorization,
by the Chairman of the Board of Directors, the Chief Executive Officer, the
President, or any Vice President. (Del. Code Ann., tit. 8, Section 123)
ARTICLE VII
SHARES OF STOCK
Section 34. Form and Execution of Certificates. Certificates for the shares
of stock of the corporation shall be in such form as is consistent with the
Certificate of Incorporation and applicable law. Every holder of stock in the
corporation shall be entitled to have a certificate signed by or in the name of
the corporation by the Chairman of the Board of Directors, or the President or
any Vice President and by the Treasurer or Assistant Treasurer or the Secretary
or Assistant Secretary, certifying the number of shares owned by him in the
corporation. Any or all of the signatures on the certificate may be facsimiles.
In case any officer, transfer agent, or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer, transfer agent, or registrar before such certificate is issued, it
may be issued with the same effect as if he were such officer, transfer agent,
or registrar at the date of issue. Each certificate shall state upon the face or
back thereof, in full or in summary, all of the powers, designations,
preferences, and rights, and the limitations or restrictions of the shares
authorized to be issued or shall, except as otherwise required by law, set forth
on the face or back a statement that the corporation will furnish without charge
to each stockholder who so requests the powers, designations, preferences and
relative, participating, optional, or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions of
such preferences and/or rights. Within a reasonable time after the issuance or
transfer of uncertificated stock, the corporation shall send to the registered
owner thereof a written notice containing the information required
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to be set forth or stated on certificates pursuant to this section or otherwise
required by law or with respect to this section a statement that the corporation
will furnish without charge to each stockholder who so requests the powers,
designations, preferences and relative participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights. Except as
otherwise expressly provided by law, the rights and obligations of the holders
of certificates representing stock of the same class and series shall be
identical. (Del. Code Ann., tit. 8, Section 158)
Section 35. Lost Certificates. A new certificate or certificates shall be
issued in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen, or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen, or destroyed. The corporation may require, as a condition
precedent to the issuance of a new certificate or certificates, the owner of
such lost, stolen, or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as it shall require or to
give the corporation a surety bond in such form and amount as it may direct as
indemnity against any claim that may be made against the corporation with
respect to the certificate alleged to have been lost, stolen, or destroyed.
(Del. Code Ann., tit. 8, Section 167)
Section 36. Transfers.
(a) Transfers of record of shares of stock of the corporation shall be made
only upon its books by the holders thereof, in person or by attorney duly
authorized, and upon the surrender of a properly endorsed certificate or
certificates for a like number of shares. (Del. Code Ann., tit. 8, Section 201,
tit. 6, Section 8-401(1))
(b) The corporation shall have power to enter into and perform any
agreement with any number of stockholders of any one or more classes of stock of
the corporation to restrict the transfer of shares of stock of the corporation
of any one or more classes owned by such stockholders in any manner not
prohibited by the General Corporation Law of Delaware. (Del. Code Ann., tit. 8,
Section 160 (a))
Section 37. Fixing Record Dates.
(a) In order that the corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders or any adjournment
thereof, the Board of Directors may fix, in advance, a record date, which record
date shall not precede the date upon which the resolution fixing the record date
is adopted by the Board of Directors, and which record date shall not be more
than sixty (60) nor less than ten (10) days before the date of such meeting. If
no record date is fixed by the Board of Directors, the record date for
determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
(b) In order that the corporation may determine the stockholders entitled
to receive payment of any dividend or other distribution or allotment of any
rights or the stockholders entitled to exercise any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action, the Board of Directors may fix, in advance, a record date, which record
date shall not precede the date upon which the resolution fixing the record date
is adopted, and which record date shall be not more than sixty (60) days prior
to such action. If no record date is fixed, the record date for determining
stockholders for any such purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating thereto. (Del.
Code Ann., tit. 8, Section 213)
Section 38. Registered Stockholders. The corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and shall not be
bound to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of Delaware.
(Del. Code Ann., tit. 8, Sections 213(a), 219)
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ARTICLE VIII
OTHER SECURITIES OF THE CORPORATION
Section 39. Execution of Other Securities. All bonds, debentures and other
corporate securities of the corporation, other than stock certificates (covered
in Section 34), may be signed by the Chairman of the Board of Directors, the
President or any Vice President, or such other person as may be authorized by
the Board of Directors, and the corporate seal impressed thereon or a facsimile
of such seal imprinted thereon and attested by the signature of the Secretary or
an Assistant Secretary, or the Chief Financial Officer or Treasurer or an
Assistant Treasurer; provided, however, that where any such bond, debenture or
other corporate security shall be authenticated by the manual signature, or
where permissible facsimile signature, of a trustee under an indenture pursuant
to which such bond, debenture or other corporate security shall be issued, the
signatures of the persons signing and attesting the corporate seal on such bond,
debenture or other corporate security may be the imprinted facsimile of the
signatures of such persons. Interest coupons appertaining to any such bond,
debenture or other corporate security, authenticated by a trustee as aforesaid,
shall be signed by the Treasurer or an Assistant Treasurer of the corporation or
such other person as may be authorized by the Board of Directors, or bear
imprinted thereon the facsimile signature of such person. In case any officer
who shall have signed or attested any bond, debenture or other corporate
security, or whose facsimile signature shall appear thereon or on any such
interest coupon, shall have ceased to be such officer before the bond, debenture
or other corporate security so signed or attested shall have been delivered,
such bond, debenture or other corporate security nevertheless may be adopted by
the corporation and issued and delivered as though the person who signed the
same or whose facsimile signature shall have been used thereon had not ceased to
be such officer of the corporation.
ARTICLE IX
DIVIDENDS
Section 40. Declaration of Dividends. Dividends upon the capital stock of
the corporation, subject to the provisions of the Certificate of Incorporation,
if any, may be declared by the Board of Directors pursuant to law at any regular
or special meeting. Dividends may be paid in cash, in property, or in shares of
the capital stock, subject to the provisions of the Certificate of
Incorporation. (Del. Code Ann., tit. 8, Sections 170, 173)
Section 41. Dividend Reserve. Before payment of any dividend, there may be
set aside out of any funds of the corporation available for dividends such sum
or sums as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the Board of Directors shall think
conducive to the interests of the corporation, and the Board of Directors may
modify or abolish any such reserve in the manner in which it was created. (Del.
Code Ann., tit. 8, Section 171)
ARTICLE X
FISCAL YEAR
Section 42. Fiscal Year. The fiscal year of the corporation shall be fixed
by resolution of the Board of Directors.
ARTICLE XI
INDEMNIFICATION
Section 43. Indemnification of Directors, Executive Officers, Other
Officers, Employees and Other Agents.
(a) Directors and Executive Officers. The corporation shall indemnify its
directors and executive officers (for the purposes of this Article XI,
"executive officers" shall have the meaning defined in Rule 3b-7 promulgated
under the 1934 Act) to the fullest extent not prohibited by the Delaware General
Corporation
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Law; provided, however, that the corporation may modify the extent of such
indemnification by individual contracts with its directors and executive
officers; and, provided, further, that the corporation shall not be required to
indemnify any director or executive officer in connection with any proceeding
(or part thereof) initiated by such person unless (i) such indemnification is
expressly required to be made by law, (ii) the proceeding was authorized by the
Board of Directors of the corporation, (iii) such indemnification is provided by
the corporation, in its sole discretion, pursuant to the powers vested in the
corporation under the Delaware General Corporation Law or (iv) such
indemnification is required to be made under subsection (d).
(b) Other Officers, Employees and Other Agents. The corporation shall have
power to indemnify its other officers, employees and other agents as set forth
in the Delaware General Corporation Law.
(c) Expenses. The corporation shall advance to any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director or executive
officer of the corporation, or is or was serving at the request of the
corporation as a director or executive officer of another corporation,
partnership, joint venture, trust or other enterprise, prior to the final
disposition of the proceeding, promptly following request therefor, all expenses
incurred by any director or executive officer in connection with such proceeding
upon receipt of an undertaking by or on behalf of such person to repay said
amounts if it should be determined ultimately that such person is not entitled
to be indemnified under this Bylaw or otherwise.
Notwithstanding the foregoing, unless otherwise determined pursuant to
paragraph (e) of this Bylaw, no advance shall be made by the corporation to an
executive officer of the corporation (except by reason of the fact that such
executive officer is or was a director of the corporation in which event this
paragraph shall not apply) in any action, suit or proceeding, whether civil,
criminal, administrative or investigative, if a determination is reasonably and
promptly made (i) by the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to the proceeding, or (ii) if such
quorum is not obtainable, or, even if obtainable, a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, that
the facts known to the decision-making party at the time such determination is
made demonstrate clearly and convincingly that such person acted in bad faith or
in a manner that such person did not believe to be in or not opposed to the best
interests of the corporation.
(d) Enforcement. Without the necessity of entering into an express
contract, all rights to indemnification and advances to directors and executive
officers under this Bylaw shall be deemed to be contractual rights and be
effective to the same extent and as if provided for in a contract between the
corporation and the director or executive officer. Any right to indemnification
or advances granted by this Bylaw to a director or executive officer shall be
enforceable by or on behalf of the person holding such right in any court of
competent jurisdiction if (i) the claim for indemnification or advances is
denied, in whole or in part, or (ii) no disposition of such claim is made within
ninety (90) days of request therefor. The claimant in such enforcement action,
if successful in whole or in part, shall be entitled to be paid also the expense
of prosecuting his claim. In connection with any claim for indemnification, the
corporation shall be entitled to raise as a defense to any such action that the
claimant has not met the standards of conduct that make it permissible under the
Delaware General Corporation Law for the corporation to indemnify the claimant
for the amount claimed. In connection with any claim by an executive officer of
the corporation (except in any action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that such
executive officer is or was a director of the corporation) for advances, the
corporation shall be entitled to raise a defense as to any such action clear and
convincing evidence that such person acted in bad faith or in a manner that such
person did not believe to be in or not opposed to the best interests of the
corporation, or with respect to any criminal action or proceeding that such
person acted without reasonable cause to believe that his conduct was lawful.
Neither the failure of the corporation (including its Board of Directors,
independent legal counsel or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of the claimant is
proper in the circumstances because he has met the applicable standard of
conduct set forth in the Delaware General Corporation Law, nor an actual
determination by the corporation (including its Board of Directors, independent
legal counsel or its stockholders) that the claimant has not met such applicable
standard of conduct, shall be a defense to the action or create a presumption
that claimant has
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not met the applicable standard of conduct. In any suit brought by a director or
executive officer to enforce a right to indemnification or to an advancement of
expenses hereunder, the burden of proving that the director or executive officer
is not entitled to be indemnified, or to such advancement of expenses, under
this Article XI or otherwise shall be on the corporation.
(e) Non-Exclusivity of Rights. The rights conferred on any person by this
Bylaw shall not be exclusive of any other right that such person may have or
hereafter acquire under any statute, provision of the Certificate of
Incorporation, Bylaws, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding office. The corporation is specifically
authorized to enter into individual contracts with any or all of its directors,
officers, employees or agents respecting indemnification and advances, to the
fullest extent not prohibited by the Delaware General Corporation Law.
(f) Survival of Rights. The rights conferred on any person by this Bylaw
shall continue as to a person who has ceased to be a director, officer, employee
or other agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
(g) Insurance. To the fullest extent permitted by the Delaware General
Corporation Law, the corporation, upon approval by the Board of Directors, may
purchase insurance on behalf of any person required or permitted to be
indemnified pursuant to this Bylaw.
(h) Amendments. Any repeal or modification of this Bylaw shall only be
prospective and shall not affect the rights under this Bylaw in effect at the
time of the alleged occurrence of any action or omission to act that is the
cause of any proceeding against any agent of the corporation.
(i) Saving Clause. If this Bylaw or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each director and executive officer to
the full extent not prohibited by any applicable portion of this Bylaw that
shall not have been invalidated, or by any other applicable law.
(j) Certain Definitions. For the purposes of this Bylaw, the following
definitions shall apply:
(1) The term "proceeding" shall be broadly construed and shall
include, without limitation, the investigation, preparation, prosecution,
defense, settlement, arbitration and appeal of, and the giving of testimony
in, any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative.
(2) The term "expenses" shall be broadly construed and shall include,
without limitation, court costs, attorneys' fees, witness fees, fines,
amounts paid in settlement or judgment and any other costs and expenses of
any nature or kind incurred in connection with any proceeding.
(3) The term the "corporation" shall include, in addition to the
resulting corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or merger that,
if its separate existence had continued, would have had power and authority
to indemnify its directors, officers, and employees or agents, so that any
person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under the provisions of this Bylaw with
respect to the resulting or surviving corporation as he would have with
respect to such constituent corporation if its separate existence had
continued.
(4) References to a "director," "executive officer," "officer,"
"employee," or "agent" of the corporation shall include, without
limitation, situations where such person is serving at the request of the
corporation as, respectively, a director, executive officer, officer,
employee, trustee or agent of another corporation, partnership, joint
venture, trust or other enterprise.
(5) References to "other enterprises" shall include employee benefit
plans; references to "fines" shall include any excise taxes assessed on a
person with respect to an employee benefit plan; and
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references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation that
imposes duties on, or involves services by, such director, officer,
employee, or agent with respect to an employee benefit plan, its
participants, or beneficiaries; and a person who acted in good faith and in
a manner he reasonably believed to be in the interest of the participants
and beneficiaries of an employee benefit plan shall be deemed to have acted
in a manner "not opposed to the best interests of the corporation" as
referred to in this Bylaw.
ARTICLE XII
NOTICES
Section 44. Notices.
(a) Notice to Stockholders. Whenever, under any provisions of these
Bylaws, notice is required to be given to any stockholder, it shall be given in
writing, timely and duly deposited in the United States mail, postage prepaid,
and addressed to his last known post office address as shown by the stock record
of the corporation or its transfer agent. (Del. Code Ann., tit. 8, Section 222)
(b) Notice to Directors. Any notice required to be given to any director
may be given by the method stated in subsection (a), or by facsimile, telex or
telegram, except that such notice other than one that is delivered personally
shall be sent to such address as such director shall have filed in writing with
the Secretary, or, in the absence of such filing, to the last known post office
address of such director.
(c) Affidavit of Mailing. An affidavit of mailing, executed by a duly
authorized and competent employee of the corporation or its transfer agent
appointed with respect to the class of stock affected, specifying the name and
address or the names and addresses of the stockholder or stockholders, or
director or directors, to whom any such notice or notices was or were given, and
the time and method of giving the same, shall in the absence of fraud, be prima
facie evidence of the facts therein contained. (Del. Code Ann., tit. 8, Section
222)
(d) Time Notices Deemed Given. All notices given by mail, as above
provided, shall be deemed to have been given as at the time of mailing, and all
notices given by facsimile, telex or telegram shall be deemed to have been given
as of the sending time recorded at time of transmission.
(e) Methods of Notice. It shall not be necessary that the same method of
giving notice be employed in respect of all directors, but one permissible
method may be employed in respect of any one or more, and any other permissible
method or methods may be employed in respect of any other or others.
(f) Failure to Receive Notice. The period or limitation of time within
which any stockholder may exercise any option or right, or enjoy any privilege
or benefit, or be required to act, or within which any director may exercise any
power or right, or enjoy any privilege, pursuant to any notice sent him in the
manner above provided, shall not be affected or extended in any manner by the
failure of such stockholder or such director to receive such notice.
(g) Notice to Person with Whom Communication is Unlawful. Whenever notice
is required to be given, under any provision of law or of the Certificate of
Incorporation or Bylaws of the corporation, to any person with whom
communication is unlawful, the giving of such notice to such person shall not be
required and there shall be no duty to apply to any governmental authority or
agency for a license or permit to give such notice to such person. Any action or
meeting that shall be taken or held without notice to any such person with whom
communication is unlawful shall have the same force and effect as if such notice
had been duly given. In the event that the action taken by the corporation is
such as to require the filing of a certificate under any provision of the
Delaware General Corporation Law, the certificate shall state, if such is the
fact and if notice is required, that notice was given to all persons entitled to
receive notice except such persons with whom communication is unlawful.
(h) Notice to Person with Undeliverable Address. Whenever notice is
required to be given, under any provision of law or the Certificate of
Incorporation or Bylaws of the corporation, to any stockholder to whom
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(i) notice of two consecutive annual meetings, and all notices of meetings or of
the taking of action by written consent without a meeting to such person during
the period between such two consecutive annual meetings, or (ii) all, and at
least two, payments (if sent by first class mail) of dividends or interest on
securities during a twelve-month period, have been mailed addressed to such
person at his address as shown on the records of the corporation and have been
returned undeliverable, the giving of such notice to such person shall not be
required. Any action or meeting that shall be taken or held without notice to
such person shall have the same force and effect as if such notice had been duly
given. If any such person shall deliver to the corporation a written notice
setting forth his then current address, the requirement that notice be given to
such person shall be reinstated. In the event that the action taken by the
corporation is such as to require the filing of a certificate under any
provision of the Delaware General Corporation Law, the certificate need not
state that notice was not given to persons to whom notice was not required to be
given pursuant to this paragraph. (Del. Code Ann, tit. 8, Section 230)
ARTICLE XIII
AMENDMENTS
Section 45. Amendments. Subject to paragraph (h) of Section 43 hereof,
these Bylaws may be altered or amended or new Bylaws adopted by the affirmative
vote of at least sixty-six and two-thirds percent (66 2/3%) of the voting power
of all of the then-outstanding shares of voting stock of the corporation
entitled to vote at an election of directors. The Board of Directors shall also
have the power to adopt, amend, or repeal Bylaws.
ARTICLE XIV
LOANS TO OFFICERS
Section 46. Loans to Officers. The corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other employee
of the corporation or of its subsidiaries, including any officer or employee who
is a Director of the corporation or its subsidiaries, whenever, in the judgment
of the Board of Directors, such loan, guarantee or assistance may reasonably be
expected to benefit the corporation. The loan, guarantee or other assistance may
be with or without interest and may be unsecured, or secured in such manner as
the Board of Directors shall approve, including, without limitation, a pledge of
shares of stock of the corporation. Nothing in these Bylaws shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute. (Del. Code Ann., tit. 8, Section 143)
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PROXY DYNAMIC MATERIALS CORPORATION PROXY
551 Aspen Ridge Drive, Lafayette, Colorado 80026
Proxy Solicited on Behalf of the Board of Directors of the Company
for the Annual Meeting of Shareholders -- May 23, 1997
The undersigned hereby constitutes and appoints Paul Lange and Richard A.
Santa, and each of them, his true and lawful agents and proxies with full power
of substitution in each, to represent the undersigned at the Annual Meeting of
Shareholders of Dynamic Materials Corporation to be held at Nemacolin Woodlands
Resort & Spa, Route 40E, Farmington, Pennsylvania, on Friday, May 23, 1997 at
12:00 p.m. local time and at any postponements, continuations and adjournments
thereof, on all matters coming before said meeting.
<TABLE>
<S> <C> <C> <C> <C>
1. Election of Directors. / / FOR / / WITHHELD
Nominees: Dean K. Allen, David E. Barlett, Paul Lange, George W. Morgenthaler
(To withhold vote for any individual nominee, write that name below)
----------------------------------------------------------------------
2. Approval of 1997 Equity Incentive Plan. / / FOR / / AGAINST / / ABSTAIN
3. Reincorporation of the Company in Delaware. / / FOR / / AGAINST / / ABSTAIN
4. Ratification of Selection of Independent Accountants. / / FOR / / AGAINST / / ABSTAIN
5. In their discretion, upon such other matters as may properly come before the meeting.
</TABLE>
You are encouraged to specify your choices by marking the appropriate
boxes, but you need not mark any boxes if you wish to vote in accordance with
the Board of Directors' recommendations. The persons named herein as agents
and proxies cannot vote your shares unless you sign and return this card.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned. If no direction is made, this proxy will be voted
FOR Proposals 1 through 4.
Dated __________________________, 1997
______________________________________
______________________________________
Signature(s)
Please mark, sign and return promptly
using the enclosed envelope. Executors,
administrators, trustees, etc. should
give a title as such. If the signer is
a corporation, please sign full
corporate name by duly authorized
officer.
