<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:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 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 a 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 [2,658,129] 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 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. A failure of
brokers 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 , 1997, the closing price of the Company's Common
Stock as reported on the Nasdaq Stock Market (National Market) was $
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.......... $ (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 $ per share, the closing
price of the Company's Common Stock on April , 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 18). 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 18). 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 18). 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 19). 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 20). 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 20). 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 21). 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
23). 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 23). 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 23). 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 ($.05), of which
2,536,940 shares were issued and outstanding as of November 14, 1996, and (b)
four million (4,000,000) authorized shares of Preferred Stock, par value Five
Cents ($.05), of which none were issued and outstanding as of November 14, 1996.
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
19
<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 662/3 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 662/3 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.
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<PAGE> 25
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 3.
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 9.1%
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............................................. 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 10.7%
</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
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.
(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
$6.58 per share. As of April 1, 1997 no options had been exercised under the
1994 Plan, as amended and restated with the 1992 Plan in the form of the 1997
Plan.
In January 1997, the Company entered into an employment agreement with Mr.
Lange, pursuant to which Mr. Lange will continue to serve as a director of the
Company for so long as he is employed as the Company's Chief Executive Officer.
See "Employment Agreement."
26
<PAGE> 29
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY OF COMPENSATION
The following table shows compensation awarded or paid to, or earned by,
the Company's executive officers (the "Named Executive Officers") during the
fiscal years ended December 31, 1996, 1995 and 1994:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1) LONG-TERM COMPENSATION
------------------------------------------- -------------------------------
NAME AND PRINCIPAL FISCAL OTHER ANNUAL AWARDS ALL OTHER
POSITION YEAR SALARY ($) BONUS ($) COMPENSATION ($) OPTIONS (#) COMPENSATION ($)
------------------ ------ ---------- --------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Paul Lange............................. 1996 166,333 40,000 -- 25,000 --
President and 1995 158,250 25,000 -- 31,000 --
Chief Executive Officer 1994 150,000 25,000 -- 30,000 --
Richard A. Santa....................... 1996 21,846 -- -- 25,000 --
Chief Financial Officer (2)
Michael W. Beam........................ 1996 109,750 22,069 20,000 10,147(4)
Vice President, 1995 80,250 -- 28,000 7,607(4)
Marketing and Sales(3)
Edward G. Reineke...................... 1996 79,922 14,493 -- 17,500 --
Vice President, 1995 72,212 -- -- 16,000 --
Operations 1994 69,152 -- -- 15,000 --
</TABLE>
- ---------------
(1) Perquisites, including auto allowance, were less than the lesser of $50,000
or 10% of total salary and bonus for each fiscal year.
(2) Mr. Santa joined the Company in October 1996.
(3) Mr. Beam joined the Company in April 1995.
(4) The Company made a relocation loan in the principal amount of $30,000 to Mr.
Beam in July 1995, in connection with his joining the Company. The loan is
being forgiven by the Company in monthly installments over a three-year
period beginning in April 1995.
27
<PAGE> 30
STOCK OPTION GRANTS AND EXERCISES
The Company grants options to its executive officers under its 1992 Plan,
as amended and restated with the 1994 Plan in the form of the 1997 Plan
(collectively, the "Plans"). As of April 1, 1997, options to purchase a total
of shares were outstanding under the Plans and options to
purchase shares remained available for grant thereunder.
The following tables show for the fiscal year ended December 31, 1996,
certain information regarding options granted to, exercised by, and held at
year-end by, the Named Executive Officers:
OPTION GRANTS IN FISCAL 1996
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS GRANTED EXERCISE OR
OPTIONS TO EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED (#) FISCAL YEAR ($/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% $7.875 11/03/06
</TABLE>
- ---------------
(1) Any option that is exercisable on the date of termination of employment may
be exercised for a period of 30 days following such termination, unless the
termination was a result of death or disability, in which case the option
may be exercised for a period of three months or 12 months, respectively.
OPTION EXERCISES IN FISCAL 1996 AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
DECEMBER 31, 1996 DECEMBER 31, 1996 (1)
----------------- ---------------------
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE 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 21, 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.
1.
<PAGE> 33
(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.
(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.
2.
<PAGE> 34
(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.
(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.
3.
<PAGE> 35
(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
4.
<PAGE> 36
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 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.
5.
<PAGE> 37
(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
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.
6.
<PAGE> 38
(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
7.
<PAGE> 39
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 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.
(1) 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
8.
<PAGE> 40
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
(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
9.
<PAGE> 41
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 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
10.
<PAGE> 42
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
11.
<PAGE> 43
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.
(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.
12.
<PAGE> 44
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
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
13.
<PAGE> 45
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.
14.
<PAGE> 46
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
<PAGE> 47
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.
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,
<PAGE> 48
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.
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.
<PAGE> 49
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
<PAGE> 50
(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.
<PAGE> 51
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
<PAGE> 52
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 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.
1.
<PAGE> 53
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.
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
2.
<PAGE> 54
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.
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.
3.
<PAGE> 55
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:
NAME MAILING ADDRESS
Craig Garby Cooley Godward LLP
2595 Canyon Blvd, Suite 250
Boulder, CO 80302
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
4.
<PAGE> 56
EXHIBIT D
BYLAWS
OF
BOOM, INC.
(A DELAWARE CORPORATION)
<PAGE> 57
<TABLE>
<S> <C> <C>
ARTICLE I. OFFICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1. Registered Office. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Other Offices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II. CORPORATE SEAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 3. Corporate Seal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE III. STOCKHOLDERS' MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 4. Place of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 5. Annual Meetings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 6. Special Meetings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 7. Notice of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 8. Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 9. Adjournment and Notice of Adjourned Meetings . . . . . . . . . . . . . . . . . . 5
Section 10. Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 11. Joint Owners of Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 12. List of Stockholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 13. Action Without Meeting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 14. Organization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE IV. DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 15. Number And Term Of Office. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 16. Powers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 17. Classes of Directors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 18. Vacancies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 19. Resignation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 20. Removal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 21. Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(a) Annual Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(b) Regular Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(c) Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(d) Telephone Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(e) Notice Of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(f) Waiver Of Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 22. Quorum and Voting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 23. Action Without Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 24. Fees and Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Section 25. Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
(a) Executive Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(b) Other Committees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(c) Term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(d) Meetings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 26. Organization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
i.
<PAGE> 58
<TABLE>
<S> <C>
ARTICLE V. OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 27. Officers Designated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 28. Tenure and Duties of Officers . . . . . . . . . . . . . . . . . . . . . . . . 11
(a) General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(b) Duties of Chairman of the Board of Directors . . . . . . . . . . . . . . . . . 12
(c) Duties of President . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(d) Duties of Vice Presidents . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(e) Duties of Secretary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(f) Duties of Chief Financial Officer . . . . . . . . . . . . . . . . . . . . . . 12
Section 29. Delegation of Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 30. Resignations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 31. Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE VI. EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES OWNED
BY THE CORPORATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 32. Execution of Corporate Instruments . . . . . . . . . . . . . . . . . . . . . . 13
Section 33. Voting of Securities Owned by the Corporation . . . . . . . . . . . . . . . . 14
ARTICLE VII. SHARES OF STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 34. Form and Execution of Certificates . . . . . . . . . . . . . . . . . . . . . . 14
Section 35. Lost Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 36. Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 37. Fixing Record Dates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 38. Registered Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE VIII. OTHER SECURITIES OF THE CORPORATION . . . . . . . . . . . . . . . . . . . . . . . 16
Section 39. Execution of Other Securities . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE IX. DIVIDENDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 40. Declaration of Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 41. Dividend Reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE X. FISCAL YEAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 42. Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE XI. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 43. Indemnification of Directors, Executive Officers, Other Officers,
Employees and Other Agents . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(a) Directors [And Executive Officers] . . . . . . . . . . . . . . . . . . . . . . 17
(b) [Other Officers,] -[Use Previous Language If The Company Is Providing
Mandatory Indemnification Only To Directors Or Directors And
Executive Officers]-Employees and Other Agents. . . . . . . . . . . . . . . . 18
(c) Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>
ii.
<PAGE> 59
<TABLE>
<S> <C>
(d) Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(e) Non-Exclusivity of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(f) Survival of Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(g) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(h) Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(i) Saving Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(j) Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE XII. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 44. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(a) Notice To Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(b) Notice To Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(c) Affidavit of Mailing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(d) Time Notices Deemed Given . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(e) Methods of Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(f) Failure To Receive Notice . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(g) Notice To Person With Whom Communication Is Unlawful . . . . . . . . . . . . . 21
(h) Notice To Person With Undeliverable Address . . . . . . . . . . . . . . . . . 21
ARTICLE XIII. AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 45. Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE XIV. LOANS TO OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 46. Loans To Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
</TABLE>
iii.
<PAGE> 60
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))
<PAGE> 61
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 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))
2.
<PAGE> 62
(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 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.
3.
<PAGE> 63
(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
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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 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
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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 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
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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
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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))
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
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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))
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
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(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))
(d) MEETINGS. Unless the Board of Directors shall
otherwise provide, regular meetings of the Executive Committee or any other
committee appointed pursuant to this
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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
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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 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))
(c) 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
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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.
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
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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
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containing the information required 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.
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(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)
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.
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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 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).
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(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
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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 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:
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(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
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
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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
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the corporation, to any stockholder to whom (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
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.
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 the other matters as they may properly come before the meeting.
</TABLE>
You are encouraged to specify your choices by making 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.
