SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14C
of the Securities Exchange Act of 1934
(Amendment No. ___)
Check the appropriate box:
/ / Preliminary Information Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14c-5(d)(2))
/X/ Definitive Information Statement
SSI CAPITAL CORP.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Charter)
Payment of Filing Fee (Check the appropriate box):
/x/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14c-5(g)
and O-11
1) Title of each class of securities to which transaction applies:
--------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
--------------------------------------------------------------
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
--------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
--------------------------------------------------------------
5) Total fee paid:
--------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0- 11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
1) Amount Previously Paid:
--------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
--------------------------------------------------------------
3) Filing Party:
--------------------------------------------------------------
4) Date Filed:
--------------------------------------------------------------
5649\564901DK.14C
June 20, 1997
1
<PAGE>
SSI CAPITAL CORP.
ENGLEWOOD, COLORADO
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 15, 1997
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of SSI
Capital Corp. (the "Company") will be held at the Company's offices at 2901
South Tejon Street, Englewood, Colorado on August 15, 1997 at 10:00 a.m. local
time, for the purpose of considering and acting upon the following:
1. The approval of the Reincorporation Proposal.
2. The approval of the adoption of the Company's 1997 Stock Option Plan and
previous grants under the Plan.
3. Any and all other matters that may properly come before the meeting and
any adjournment thereof.
The Board of Directors has fixed the close of business on July 21, 1997, as
the record date for determining the stockholders entitled to notice of and to
vote at the meeting and any adjournment thereof, and only holders of Common
Stock of the Company of record at such date will be entitled to notice of and to
vote at the meeting. Such stockholders may vote in person or by proxy. You are
cordially invited to attend the meeting.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY.
By Order of the Board of
Directors,
GARY H. SCHLATTER
President
Denver, Colorado
July 22, 1997
5649\564901DK.14C
June 20, 1997
2
<PAGE>
SSI CAPITAL CORP.
ENGLEWOOD, COLORADO
--------------------
INFORMATION STATEMENT
FOR SPECIAL MEETING OF STOCKHOLDERS
AUGUST 15, 1997
This Information Statement is furnished in connection with a special
meeting of SSI Capital Corp., (the "Company") to be held at the offices of the
Company, 2901 South Tejon Street, Englewood, Colorado 80110 on August 15, 1997,
at 10:00 a.m. local time. This Information Statement is intended to be released
to stockholders of the Company on or about July 25, 1997.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY.
RECORD DATE AND VOTING SECURITIES
The Board of Directors has selected the close of business on July 21, 1997
as the record date for determining the stockholders entitled to notice of, and
to vote at, the meeting or any adjournment thereof. The number of shares of
Common Stock, $.001 par value (the "Common Stock") of the Company outstanding on
July 21, 1997 was 18,246,940. Stockholders present or represented and entitled
to vote on any matter at the meeting or any adjournment thereof will be entitled
to one vote on such matter for each share of the Common Stock of the Company
held by them as of the record date.
THE REINCORPORATION PROPOSAL
The Company's Board of Directors has unanimously approved, and recommends
for shareholder approval, the proposed change of the Company's jurisdiction of
incorporation from the State of New York to the State of Colorado (the
"Reincorporation Proposal"). The Reincorporation Proposal would be effected
through the merger (the "Merger") of the Company with and into OraLabs Holding
Corp., a newly-formed wholly owned subsidiary of the Company that is
incorporated in Colorado ("OraLabs Holding"), with OraLabs Holding as the
surviving corporation in the Merger (the "Reincorporation"). OraLabs Holding has
not conducted any business other than with respect to the proposed Merger. The
Reincorporation would not result in any change in the business, management,
5649\564901DK.14C
June 20, 1997
3
<PAGE>
executive officers, directors, location of principal executive offices, assets,
liabilities or net worth of the Company. By operation of law, upon the
completion of the Merger, all assets, property, rights, liabilities and
obligations of the Company would be transferred to and assumed by OraLabs
Holding. The Merger would be accomplished pursuant to the terms and conditions
of a plan of merger (the "Merger Agreement") between the Company and OraLabs
Holding, a copy of which is attached hereto as Exhibit A. The Company's officers
and directors, who together may be deemed to beneficially own approximately 84%
of the common stock of the Company, have indicated that they intend to vote FOR
the Reincorporation Proposal.
The principal purpose of the Reincorporation is to change the law
applicable to the Company's corporate affairs from the New York Business
Corporation Law ("NYBCL") to the Colorado Business Corporation Act ("CBCA"),
because the Company's headquarters and manufacturing plant are in Colorado and
because the Company believes that Colorado corporation law offers a number of
advantages and no disadvantages when compared with New York corporation law. See
"Principal Reasons for Changing the State of Incorporation to Colorado," below.
In addition, the Reincorporation would, as a result of the transactions
contemplated by the Merger Agreement, reduce (the "Reverse Stock Split") the
number of outstanding shares of Common Stock on a proportionate one-for-two
basis. (See "The Reverse Stock Split," below). Also, the Company's new name,
OraLabs Holding Corp. (such change of name being referred to herein as the "Name
Change"), will better reflect the business nature of the Company.
The Merger Agreement has been approved and adopted by (i) the Company's
Board of Directors in accordance with the NYBCL; and (ii) the Board of Directors
of OraLabs Holding, and the Company as sole stockholder of OraLabs Holding, each
in accordance with the CBCA. The Merger Agreement was executed on June 25, 1997.
Board Recommendation:
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE REINCORPORATION PROPOSAL.
Principal Effects Of The Reincorporation The Company's Board of Directors
has unanimously approved the Reincorporation, and the Merger Agreement pursuant
to which it would be effected, in order to accomplish the two principal
objectives specified below. The Merger, if consummated, would have the following
principal effects:
(1) The Company Will Be A Colorado Corporation. The Company would become a
Colorado corporation through the Merger (the merger of the Company with and
into OraLabs Holding, a wholly owned subsidiary of the Company that is
incorporated in Colorado). OraLabs Holding has not conducted any business
other than with respect to the proposed Merger. The Merger would not result
in any change in the business, management, executive officers, directors,
5649\564901DK.14C
June 20, 1997
4
<PAGE>
location of principal executive offices, assets, liabilities or net worth
of the Company. By operation of law, upon the completion of the Merger, all
assets, property, rights, liabilities and obligations of the Company would
be transferred to and assumed by OraLabs Holding. As a result of the
Reincorporation, the Company's corporate affairs would be governed by
Colorado corporation law, which the Board of Directors believes has certain
advantages over New York corporation law. See "Principal Reasons for
Changing the State of Incorporation to Colorado," below. For a discussion
of certain differences between Colorado and New York corporate law, please
refer to "Principal Differences Between New York and Colorado Corporate
Law," Exhibit B attached hereto, which describes such differences in
greater detail. OraLabs Holding, as the surviving corporation in the
Merger, may be referred to herein as the "Surviving Corporation."
(2) The Number Of Outstanding Shares Of Common Stock Will Be Decreased.
Pursuant to the Merger Agreement, each outstanding share of Common Stock
will be converted into one-half of a share of common stock of the Surviving
Corporation having otherwise rights, limitations, designations and
preferences identical to those the Common Stock had immediately prior to
the Merger. As examples of the conversion of shares of Common Stock in the
Merger, (i) a stockholder holding one hundred shares of Common Stock
immediately prior to the Merger would hold fifty shares of common stock of
the Surviving Corporation upon completion of the Merger and (ii) a
stockholder holding one hundred fifty-five shares of Common Stock
immediately prior to the Merger would hold seventy-eight shares (as a
result of rounding up the fractional one-half share to the next highest
whole number of shares) of common stock of the Surviving Corporation upon
completion of the Merger. Accordingly, the Reverse Stock Split will affect
all shares of Common Stock on a proportionate basis, and each stockholder
of OraLabs Holding will have the same proportionate interest (except for
the insignificant change resulting from rounding up each fractional
one-half share) in OraLabs Holding upon completion of the Merger that such
stockholder had in the Company immediately prior to the Merger.
Principal Reasons For Changing The State Of Incorporation To Colorado. When
incorporated in 1981, the Company was engaged in a business operated in the
State of New York. The Company subsequently declared bankruptcy, and after its
emergence from bankruptcy in 1991, the sole business of the Company was to seek
an appropriate acquisition or merger company. In 1997 the Company acquired
OraLabs, Inc., a Colorado corporation ("the SSI Subsidiary"), as a wholly owned
subsidiary of the Company. This was accomplished through what is commonly known
as a reverse triangular merger, which closed on May 1, 1997. The sole
shareholder and director of the SSI Subsidiary prior to consummation of the
merger became a director and the predominant shareholder of the Company upon
closing the merger. Although the Company's products are sold in many states, its
manufacturing facility and executive offices are located in the State of
Colorado.
The Company reviewed both New York law and Colorado law and determined from
that review that it would be preferable for the Company to be governed by
Colorado law. The Company determined that there would be material advantages and
no material disadvantages to be governed by Colorado law rather than by New
5649\564901DK.14C
June 20, 1997
5
<PAGE>
York law. For a discussion of certain differences in stockholders' rights and
the powers of management under the CBCA and the NYBCL, see "Principal
Differences Between New York and Colorado Corporation Laws," below, and Exhibit
B to this Information Statement, which describes certain differences between New
York and Colorado corporate law in greater detail.
Principal Differences Between New York And Colorado Corporation Laws. The
Reincorporation would effect several changes in the governing rules of the
Company and in the rights of shareholders as a result of differences between the
NYBCL and the CBCA. The provisions of the NYBCL and CBCA differ in many
respects, including without limitation with respect to dividends, statutory
"dissenters' rights," consideration for acquisition for shares, shareholder vote
to approve certain business combinations, classification of the board of
directors, the right to examine the subject corporation's books and records, the
ability to enter into "business combinations" with certain shareholders, and the
manner in which a corporate transaction with an "interested director" may be
approved by the remaining directors.
The CBCA is in certain areas less protective of rights of stockholders than
the NYBCL is of the rights of shareholders. For example, the voting requirement
under the CBCA for approval of certain business combinations is a majority of
the outstanding voting shares, whereas the NYBCL imposes a requirement of
approval by 66 2/3% of the voting shares; the CBCA does not provide for
statutory "dissenters' rights" for certain types of transactions and in certain
cases where such rights would be available under the NYBCL; the CBCA does not
require stockholder approval for the issuance of stock options to officers,
directors or employees or for the making of loans to directors, whereas such
transactions require stockholder approval under the NYBCL. Under the NYBCL,
loans to directors must be authorized by a vote of the shareholders, which is
not required under the CBCA. As a result, if the Reincorporation Proposal is
approved by the Company's stockholders as provided herein, certain of their
rights as stockholders will be affected thereby. A more detailed analysis of
certain principal differences between New York and Colorado corporate law is set
forth in Exhibit B hereto, "Principal Differences Between New York and Colorado
Corporate Laws".
In addition to changes arising generally under Colorado law, the Merger
Agreement contemplates that the existing certificate of incorporation (the
"Current Certificate of Incorporation") and by-laws (the "Current By-Laws") of
the Company would be changed in the Merger, and that OraLabs Holding would be
governed by a new certificate of incorporation (the "OraLabs Holding Articles of
Incorporation") and by-laws (the "OraLabs Holding By-Laws"). The OraLabs Holding
Articles of Incorporation and the OraLabs Holding By-Laws will be substantially
similar to the Current Certificate of Incorporation and the Current By-Laws,
respectively. Material differences are summarized below. Copies of the OraLabs
Holding Articles of Incorporation and the OraLabs Holding By-Laws are attached
hereto as Exhibits C and D respectively. See "Principal Differences Between the
Charter Documents of the Company and OraLabs Holding."
5649\564901DK.14C
June 20, 1997
6
<PAGE>
Principal Differences Between The Charter Documents Of The Company And
OraLabs Holding. The OraLabs Holding Articles of Incorporation and the OraLabs
Holding By-Laws are substantially similar to the Company's Certificate of
Incorporation and By-Laws. Certain differences between the existing Certificate
of Incorporation and By-Laws of the Company, on the one hand, and the OraLabs
Holding Articles of Incorporation and OraLabs Holding By-Laws, on the other
hand, arise principally from certain differences generally between the NYBCL and
the CBCA. See "Principal Differences Between New York and Colorado Corporate
Laws," above, and Exhibit B hereto.
The following is a summary of what the Company believes to be the major
differences between the provisions of the Company's Certificate of Incorporation
and By-laws and the OraLabs Holding Articles of Incorporation and OraLabs
Holding By-laws. This summary does not purport to be complete, and reference is
made to the OraLabs Holding Articles of Incorporation and OraLabs Holding
By-laws, copies of which are attached hereto as Exhibits C and D respectively.
Copies of the Company's existing Certificate of Incorporation and By-Laws are
available for inspection at the Company's executive offices, and copies thereof
will be sent to stockholders, without charge, upon request.
Capital Stock. The OraLabs Holding Articles of Incorporation authorizes
OraLabs Holding to issue up to twenty-five million (25,000,000) shares of a
class of common stock, having a par value of $0.001 and one million (1,000,000)
shares of a class of preferred stock, having a par value of $0.001. The Current
Certificate of Incorporation authorizes 100,000,000 shares of a class of common
stock having a par value of $.001 and 1,000,000 shares of a class of preferred
stock, with the preferred stock having a par value of $0.01. Under both the
Current Certificate of Incorporation and the OraLabs Holding Articles, the board
of directors has the power to issue the preferred stock in various series
without obtaining shareholder approval.
Quorum. The OraLabs Holding Articles of Incorporation provides that a
majority of the shares of a voting group entitled to vote at a meeting
represents a quorum, whereas the Current Certificate of Incorporation does not
include such a provision and under the NYBCL, the quorum is at least a majority
of the voting shares.
Limitation Of Liability Of Directors. The OraLabs Holding Articles of
Incorporation provides that to the fullest extent permitted by the CBCA, a
director of the corporation shall not be liable to the corporation or its
shareholders for monetary damages for breach of fiduciary duty as a director,
and that any repeal or modification of that provision by the shareholders of the
Company shall be prospective only. The Current Certificate of Incorporation
provides that no director shall be liable to the Corporation or its shareholders
for monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to the
Corporation or its shareholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or in knowing violation of law, (iii)
imposed under the NYBCL; or (iv) for any transaction from which the director
derived an improper personal benefit. The Company believes that the provision of
the OraLabs Holding Articles of Incorporation provides a broader limitation of
liability than does the Current Certificate of Incorporation. (See, "Principal
Differences Between New York And Colorado Corporate Laws" and Exhibit B attached
hereto.)
5649\564901DK.14C
June 20, 1997
7
<PAGE>
Conflict Transactions. The OraLabs Holding Articles of Incorporation
provides that conflict transactions as defined under the CBCA are neither void
nor voidable under certain conditions and where certain actions are taken by the
board of directors, a committee thereof or the shareholders with respect
thereto. The Current Certificate of Incorporation does not contain a comparable
provision. However, under the CBCA, one of the methods by which a conflict
transaction can be ratified is where the material facts of the transaction are
disclosed and in good faith a majority of disinterested directors approves the
transaction, even though the disinterested directors are less than a quorum of
the board. Under the NYBCL, unanimous approval of disinterested directors is
required where the number of disinterested directors is less than a quorum of
the board, unless the transaction has been approved by the shareholders after
full disclosure of the transaction. (See, "Principal Differences Between New
York and Colorado Corporate Laws" and Exhibit B attached hereto.)
Indemnification. Both the OraLabs Holding Articles of Incorporation and the
Current Certificate of Incorporation provide for indemnification of directors,
officers and others under certain circumstances. As the law governing
indemnification in the NYBCL and CBCA are different, the effect of the
provisions in the respective governing documents are different as well. (See
"Principal Differences Between New York And Colorado Corporate Law" and Exhibit
B attached hereto.)
Differences In Bylaws. The Current Bylaws and the OraLabs Holding Bylaws
have many differences, most of which are derived from the differences in the
corporate law from which they are derived. One such difference is that under the
NYBCL, the president of a corporation must also be a director. There is no such
requirement under the CBCA, and such a provision is not included in the OraLabs
Holding Bylaws.
THE REVERSE STOCK SPLIT
The Merger Agreement provides that, at the completion of the Merger, (i)
each share of Common Stock issued and outstanding will, by virtue of the Merger
and without any action on the part of any holder thereof, be converted into
one-half of a share of OraLabs Holding Common Stock; and (ii) all Common Stock
then held in the Company's treasury, if any, shall cease to exist, and all
certificates representing such shares will be canceled by virtue of the Merger.
Other than with respect to the Reverse Stock Split, the rights,
designations, limitations and preferences of OraLabs Holding Common Stock will
in all respects be identical to the rights, designations, limitations and
preferences of the Common Stock immediately prior to the Merger. The Reverse
Stock Split will apply to all shares of the Common Stock on a proportionate
basis and, accordingly, the Reverse Stock Split would not change the ownership
interest or proportional voting power of the holders of the Common Stock.
Stockholders holding shares of Common Stock in an amount not divisible by two
will receive one whole share for the one fractional, one-half share which would
otherwise have been issued.
5649\564901DK.14C
June 20, 1997
8
<PAGE>
The principal purpose of the one-for-two Reverse Stock Split is to enhance
the Surviving Corporation's ability, after the Merger, to have the OraLabs
Holding Common Stock listed on the Nasdaq SmallCap Market. (An application to
list the Company's Common Stock on the OTC Bulletin Board has been filed, but
there has been no active market for the Company's Common Stock in many years).
In order for a company's stock to be listed on the Nasdaq SmallCap Market, it
must meet certain requirements, which are expected to include that: (i) the
stock must have a minimum bid price of $4.00 per share; (ii) the stock must be
held by more than 300 holders; (iii) 1,000,000 shares must be publicly held
having a market value not less than $5 million; (iv) the company must have
either $4 million of net tangible assets, $50 million of market capitalization,
or $750 thousand of net income during at least two of the last three years; (v)
the company must have capital and surplus of at least $2 million; and (vi) the
Company must have at least three registered and active market makers.
If the Reincorporation Proposal is approved by the Company's stockholders
as provided herein (see "Vote Required for Approval of the Reincorporation
Proposal," below), upon completion of the Merger, the Surviving Corporation will
use its commercially reasonable efforts to cause the Surviving Corporation
Common Stock to be listed on the Nasdaq SmallCap Market. The Company believes
that the Reverse Stock Split would increase the acceptance of the OraLabs
Holding Common Stock by the financial community and the investing public. The
SSI Subsidiary has had at least $750 thousand of net income during the past two
years. However, there can be no assurance that the market price (if a market
exists) of the OraLabs Holding Common Stock will rise in proportion to the
reduction in the number of shares of the OraLabs Holding Common Stock
outstanding as a result of the Reverse Stock Split. Further, as noted above,
there can be no assurance that the Surviving Corporation will be able to satisfy
the other Nasdaq SmallCap Market listing standards, or that the OraLabs Holding
Common Stock will be approved for listing on the Nasdaq SmallCap Market. In
addition, as a result of the Reverse Stock Split, stockholders currently owning
less than 200 shares of Common Stock will receive "odd-lots" of less than 100
shares of OraLabs Holding Common Stock after the Merger. Such holdings may be
more difficult to sell, and, in general, brokerage commissions and other costs
of transactions in such "odd-lot" holdings may be higher than the cost of
transactions in excess of 100 shares. Stockholders may wish to consult with
their brokers concerning such potential increased commissions and other costs in
respect of "odd-lot" holdings.
THE MERGER AGREEMENT
Set forth below is a description of certain material terms of the Merger
Agreement, other than the Reverse Stock Split, which is described above. This
description does not purport to describe all terms of the Merger Agreement and
is qualified in its entirety by reference to the Merger Agreement, a copy of
which is attached as Exhibit A to this Information Statement. Under the Merger
Agreement, the Company would be merged with and into OraLabs Holding, a
newly-formed wholly owned subsidiary of the Company that is incorporated in
Colorado, with OraLabs Holding as the surviving corporation in the Merger.
OraLabs Holding has not conducted any business other than with respect to the
proposed Merger. The Merger would not result in any change in the business,
management, executive officers, directors, location of principal executive
5649\564901DK.14C
June 20, 1997
9
<PAGE>
offices, assets, liabilities or net worth of the Company. By operation of law,
upon the completion of the Merger, all assets, property, rights liabilities and
obligations of the Company would be transferred to and assumed by OraLabs
Holding as the surviving corporation. Shareholders will not have any statutory
"dissenters' rights" under the NYBCL with respect to the Merger.
Effect On Capital Stock. The securities of OraLabs Holding to be issued to
Company stockholders in the Merger will not be registered under the Securities
Act of 1933, as amended (the "1933 Act"), in reliance upon Rule 145(a)(2)
promulgated under the 1933 Act and such securities of OraLabs Holding will not
be deemed to be "restricted securities" within the meaning of Rule 144(a)(3)
under the 1933 Act, to the extent the holders thereof do not currently hold
restricted securities of the Company.
Certificates. Upon completion of the Merger, holders of shares of Common
Stock will not be required to surrender their certificates representing Common
Stock and each currently outstanding certificate will be deemed for all
corporate purposes to evidence ownership of the reduced number of shares
resulting from the reverse stock split. The records of the Company's Transfer
Agent will automatically be revised to reflect that each certificate
representing shares of Common Stock will be deemed to represent that number of
shares of OraLabs Holding Common Stock equal to half of the number of shares of
Common Stock reflected on such certificates immediately prior to the Merger
(plus one share if the shareholder would otherwise have been entitled to the
issuance of a fractional, one-half share). Do not send stock certificates to the
Company in connection with the transactions described in this Information
Statement. New stock certificates reflecting the number of shares resulting from
the reverse stock split will be issued only as currently outstanding
certificates are transferred. The Company will obtain a new CUSIP number for its
shares of Common Stock issued after the Reverse Stock Split is effected.
Accounting Treatment Of The Merger. In accordance with generally accepted
accounting principles, the Company expects that the Merger will be accounted for
as a reorganization of entities under common control at historical cost in a
manner similar to a pooling of interests. Under this accounting method, the
assets and liabilities of the combining entities will be carried forward at
their recorded historical book values.
Certain Federal Income Tax Consequences. For federal income tax purposes,
the Reincorporation (including the Merger) will be treated as a tax-free
reorganization. Consequently, no gain or loss will be recognized by holders of
the shares of Common Stock and no gain or loss will be recognized by the
Company. In addition, for these purposes, the reverse stock split will not
result in recognized gain or loss to the holders of Common Stock of the Company.
Accordingly, holders of shares of OraLabs Holding Common Stock will have the
same aggregate basis in those shares as the aggregate basis they had in the
Common Stock before the Reincorporation, Merger and Reverse Stock Split.
Furthermore, the holding period of shares of OraLabs Holding Common Stock will
include the period in which the Common Stock was held prior to the
Reincorporation and Reverse Stock Split.
5649\564901DK.14C
June 20, 1997
10
<PAGE>
Conditions To The Merger, Amendment, Waiver, Termination. The obligations
of the Company to effect the Merger are subject to the following conditions:
(a) obtaining the requisite Company stockholder approvals for the Merger
and the Merger Agreement pursuant to the NYBCL (see "Vote Required for
Approval of the Reincorporation Proposal," below);
(b) obtaining the consent of the New York Commissioner of Taxation and
Finance to the Merger, as provided in Section 907(f) of the NYBCL; and
(c) the absence of any material pending or threatened litigation concerning
the Merger or other transaction contemplated by the Merger Agreement.
The Merger Agreement may be amended and any of its provisions, including
any conditions precedent, may be waived by the Company at any time prior to the
completion of the Merger, if, in the sole judgment of the Board of Directors,
such amendment would not adversely affect the rights and interests of the
Company's stockholders thereunder. Notwithstanding any approval by the
stockholders of the Company of the Reincorporation Proposal, the Merger
Agreement may be terminated and the Merger may be abandoned at any time prior to
the completion of the Merger by the Board of Directors, if the Board of
Directors determines for any reason that the consummation of the transactions
contemplated by the Merger Agreement would not be advisable or in the best
interests of the Company and its stockholders.
Vote Required For Approval Of The Reincorporation Proposal. Approval of the
Reincorporation Proposal will require the affirmative vote of the holders of
two-thirds of the outstanding shares of Common Stock entitled to vote at the
Special Meeting. The Company's officers and directors, who together may be
deemed to beneficially own approximately 84% of the Common Stock of the Company,
have indicated that they intend to vote FOR the Reincorporation Proposal. A vote
for the Reincorporation Proposal will be a vote for (i) the Reincorporation from
New York to Colorado through the Merger; and (ii) the other transactions
contemplated by the Merger Agreement, including the Reverse Stock Split and the
Name Change. Abstentions will be counted toward the tabulation of votes counted
and will have the same effect as negative votes, while broker non-votes will not
be counted for any purpose in determining whether this matter has been approved.
No Fractional Shares. As described above, fractional shares, or
certificates representing such fractional interests, will not be issued in the
Merger. See "The Reverse Stock Split." Instead, shareholders who would otherwise
have received a fractional, one-half share will receive an additional whose
share in lieu thereof. Certificates of the same shareholder of record will be
aggregated prior to computing the number of OraLabs Holding common shares to
which the shareholder shall be entitled as a result of the Reverse Stock Split.
THE COMPANY URGES ALL SHAREHOLDERS TO CAREFULLY READ THIS
5649\564901DK.14C
June 20, 1997
11
<PAGE>
BOARD PROPOSAL 1, EXHIBIT B HERETO DESCRIBING CERTAIN PRINCIPAL DIFFERENCES
BETWEEN NEW YORK AND COLORADO CORPORATION LAW, AND ATTACHMENTS A, C AND D
HERETO, WHICH CONTAIN THE MERGER AGREEMENT, THE ORALABS HOLDING ARTICLES OF
INCORPORATION AND THE ORALABS HOLDING BY-LAWS, RESPECTIVELY.
The Board of Directors recommends that shareholders vote FOR the
Reincorporation Proposal.
PROPOSAL 2
APPROVAL OF THE 1997 STOCK PLAN
AND PREVIOUS OPTION GRANTS
In April 1997, the SSI Subsidiary adopted its 1997 Stock Plan (the "1997
Plan"), which was assumed by the Board of Directors of the Company on May 1,
1997. There are 1,000,000 shares of the Company's Common Stock authorized for
issuance under the 1997 Plan. There are 474,000 options outstanding under the
1997 Plan, all of which are incentive stock options and are held by two
employees. Shareholders are requested in this Proposal 2 to approve the 1997
Plan and such option grants.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR PROPOSAL 2.
The essential features of the 1997 Stock Plan are outlined below. THE
FOLLOWING DESCRIPTION OF THE 1997 STOCK PLAN IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE FULL TEXT OF THE PLAN WHICH IS SET FORTH AS EXHIBIT E TO THIS
INFORMATION STATEMENT.
General. The 1997 Stock Plan provides for the grant of both incentive and
nonstatutory stock options (collectively, the "Stock Awards"). Incentive stock
options granted under the 1997 Stock Plan are intended to qualify as "incentive
stock options" within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"). Nonstatutory stock options granted under the 1997
Stock Plan are intended not 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 Stock Plan was adopted to provide a means by which
selected employees of and consultants to the Company and its affiliates could be
given an opportunity to purchase stock in the Company, to assist in attracting
and retaining the services of employees holding positions of substantial
responsibility, to secure and retain the services of persons capable of filling
5649\564901DK.14C
June 20, 1997
12
<PAGE>
such positions and to provide incentives for such persons to exert maximum
efforts for the success of the Company. All of the Company's employees and
consultants are eligible to participate in the 1997 Stock Plan.
Administration. The 1997 Stock Plan is administered by the Board of
Directors of the Company. The Board has the power to construe and interpret the
1997 Stock Plan and, subject to the provisions of the 1997 Stock 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 Stock Plan to a committee and/or subcommittee composed of members of the
Board. As used herein with respect to the 1997 Stock Plan, the "Board" refers to
any such committee or subcommittee as well as to the Board of Directors.
Eligibility. Incentive stock options may be granted under the 1997 Stock
Plan only to selected employees (including officers) of the Company and its
affiliates. Persons who receive incentive stock options under the 1997 Stock
Plan may also be recipients of nonstatutory options under the 1997 Stock Plan.
No incentive stock option may be granted under the 1997 Stock 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 Stock Plan, current law requires
that 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.
Stock Subject to the 1997 Stock Plan. If options granted under the 1997
Stock 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 Stock Plan.
Terms of Options. The following is a description of the permissible terms
of options under the 1997 Stock 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 Stock 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 Stock 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. See "Federal Income Tax Information."
The Board has the authority to offer employees the opportunity to replace
outstanding higher priced options, whether incentive or nonstatutory, with new
options priced as of the date of the substituted grant The exercise price of
5649\564901DK.14C
June 20, 1997
13
<PAGE>
options granted under the 1997 Stock Plan must be paid either: (a) in cash 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) by the Company retaining
from the total number of shares as to which the option is exercised, that number
of shares whose fair market value on the date of exercise equals the total
exercise price for the options being exercised, or (iii) in any other form of
legal consideration acceptable to the Board.
Option Exercise. Options granted under the 1997 Stock Plan may become
exercisable in cumulative increments ("vest") as determined by the Board. The
vesting of shares covered by outstanding options under the 1997 Stock Plan may
vary from option to option. To the extent permitted by the Board, 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 Stock Plan is 10
years, except that in certain cases (see "Eligibility") the maximum term is five
years. If earlier than the stated expiration date of an option, an option under
the 1997 Stock Plan terminate three months after termination of the optionee's
continuous status as an employee or consultant of the Company or any affiliate
of the Company, unless (a) such termination is due to such person's disability,
in which case the option may be exercised at any time within six months of such
termination (but not later than the stated expiration date of the option); (b)
the optionee dies while employed by or serving as a consultant of the Company or
any affiliate of the Company, or within three months after termination of such
relationship, in which case the option may be exercised (to the extent the
option was exercisable at the time of the optionee's death) within twelve months
(but not later than the stated expiration date of the option) 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.
Adjustment Provisions. If there is any change in the stock subject to
the 1997 Stock Plan or subject to any award granted under the 1997 Stock 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 Stock Plan and awards 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. Assuming approval of the
Reincorporation Proposal which includes the Reverse Stock Split, The number of
shares of stock which may be the subject of the 1997 Stock Plan shall be 500,000
of which 237,000 options shall be outstanding.
Effect of Certain Corporate Events. The 1997 Stock Plan provides that,
in the event of a dissolution or liquidation of the Company, any options
outstanding under the 1997 Stock Plan shall terminate unless exercised prior to
5649\564901DK.14C
June 20, 1997
14
<PAGE>
such dissolution or liquidation. In the event of a specified type of merger or
other corporate reorganization, or in the event of a specified acquisition of at
least 50% of the voting power entitled to vote in an election of directors, to
the extent permitted by law, any surviving corporation will be required to
either assume options outstanding under the 1997 Stock 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
Stock Plan, or to substitute similar options, such options shall terminate
unless exercised prior to such merger or corporate reorganization.
Duration, Amendment and Termination. The Board may suspend or
terminate the 1997 Stock Plan without shareholder approval or ratification at
any time or from time to time. Unless sooner terminated, the 1997 Stock Plan
will terminate on April 25, 2007. The Board may also amend the 1997 Stock Plan
at any time or from time to time. However, to the extent shareholder approval is
required, no amendment will be effective unless approved by the shareholders of
the Company within twelve months before or after its adoption by the Board. The
Board may submit any other amendment to the 1997 Stock Plan for shareholder
approval, including, but not limited to, amendments intended to satisfy the
requirements of Rule 16b-3 promulgated under federal securities laws or 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 Stock 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 as provided in the option agreement. In any case, the
optionee may designate in writing a third party who may exercise the option in
the event of the optionee's death.
Federal Income Tax Information.
-------------------------------
Incentive Stock Options. Incentive stock options under the 1997 Stock
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 until the later of two years from the date on which the
option is granted and 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
5649\564901DK.14C
June 20, 1997
15
<PAGE>
the stock was held for more than one year. Long-term capital gains currently are
generally subject to lower tax rates than ordinary income. 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 Stock Plan generally have the following federal income tax
consequences. There are generally 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 in 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 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 Treasury 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.
Previous Grants Of Options. There are a total of 474,000 options
------------------------------
outstanding under the 1997 Plan. 372,000 of the Options were granted to a
significant employee of the SSI Subsidiary, and 102,000 options were granted to
5649\564901DK.14C
June 20, 1997
16
<PAGE>
Emile Jordan, an executive officer of the Company (see "Principal Stockholders
and Holdings of Management"). All of the options granted are incentive stock
options having an exercise price of $0.50 per share, and expire ten years after
the date of grant (the options granted to the significant employee were granted
in April 1997 and all of the other options were granted in June 1997). One-third
of the options to the significant employee vested immediately with the balance
vesting over two years. The options held by Mr. Jordan vest 20% per year
commencing June 1998. Although the approval of the proposals in this Information
Statement will result in the Company being governed by Colorado law, which does
not require shareholder approval of grants of options, New York law does require
the affirmative vote of a majority of the shares entitled to vote with respect
to the issuance of options to officers, directors or employees.
Vote Required For Approval Of The 1997 Stock Plan And Previous Options
Grants Proposal.
Approval of the 1997 Stock Plan Proposal will require the affirmative vote
of the holders of the majority of the outstanding shares of Common Stock
entitled to vote at the Special Meeting. The Company's officers and directors,
who together may be deemed to beneficially own approximately 84% of the Common
Stock of the Company, have indicated that they intend to vote FOR this Proposal.
Abstentions will be counted toward the tabulation of votes counted and will have
the same effect as negative votes, while broker non-votes will not be counted
for any purpose in determining whether this matter has been approved.
THE COMPANY URGES ALL SHAREHOLDERS TO CAREFULLY READ THIS BOARD PROPOSAL 2
AND EXHIBIT E HERETO WHICH CONSTITUTES THE TEXT OF THE PLAN.
The Board of Directors recommends that shareholders vote FOR the Approval
of the 1997 Stock Plan and the previous grants of options under the 1997 Stock
Plan. A vote for Proposal 2 is a vote for both approval of the 1997 Stock Plan
and of the options previously granted under the Plan.
5649\564901DK.14C
June 20, 1997
17
<PAGE>
PRINCIPAL STOCKHOLDERS AND HOLDINGS OF MANAGEMENT
The following table sets forth certain information as of June 15, 1997,
regarding (i) each person known by the Company to be the beneficial owner of
more than five percent (5%) of the outstanding shares of Common Stock, (ii) each
director, nominee and named executive officer of the Company, and (iii) all
directors and officers as a group.
<TABLE>
<CAPTION>
Name and Address Amount and Nature
of Beneficial Owner of Beneficial Ownership Percent of Class
- ------------------- ----------------------- ----------------
<S> <C> <C>
Gary H. Schlatter 14,917,399 81.8%
2901 South Tejon Street
Englewood, CO 80110
Suzan M. Schlatter (1) 0 0
2901 South Tejon Street
Englewood, CO 80110
Allen R. Goldstone 340,000 1.9%
5353 Manhattan Circle, Suite 201
Boulder, CO 80303
Emile Jordan (2) 24,000 *
2901 South Tejon Street
Englewood, CO 80110
Edmond O'Donnell (3) 354,394 1.9%
150 Vanderbilt Motor Parkway, Suite 311
Hauppauge, NY 11788
Lawrence Kaplan (3) 461,569 2.5%
150 Vanderbilt Motor Parkway, Suite 311
Hauppauge, NY 11788
All Directors and Executive Officers 570,976 32.6%
As Group (two persons)(4) as of
November 30, 1996
All Directors and Executive Officers 15,281,399 83.7%
As Group (four persons) (2),(5)
</TABLE>
- ----------------------
* Less than 1%
(1) Suzan Schlatter is the spouse of Gary Schlatter. She disclaims all of the
shares owned by her husband.
(2) Excludes 102,000 incentive stock options issued to Mr. Jordan pursuant to
the Company's 1997 Stock Plan, none of which vest until June 1998.
(3) Includes 41,862 shares (the "O.K. Shares") owned by O.K. Associates, a
partnership consisting of Mr. O'Donnell and Mr. Kaplan. As of the end of
the November 1996 fiscal year of the Company, Mr. O'Donnell and Mr. Kaplan
were the sole officers and directors of the Company. As of that date, Mr.
O'Donnell beneficially owned 307,519 shares of the Company, 265,657 of
which were directly owned and 41,862 of which were the O.K. Shares. Mr.
O'Donnell's percentage ownership as of said date was 17.6 percent. As of
that date, Mr. Kaplan beneficially owned 305,319 shares of the Company,
263,457 of which were directly owned and 41,862 of which were the O.K.
Shares. Mr. Kaplan's percentage ownership as of said date was 17.5 percent.
The entries for Mr. O'Donnell and Mr. Kaplan in the above table include the
O.K. Shares for each of them and reflect their respective ownership after
the issuance to them in May 1997 of additional shares upon completion of
the reverse triangular merger by which the Company acquired 100% ownership
of the SSI Subsidiary.
(4) This line item reflects the amount and nature of ownership of the Company's
common stock as of the end of the November 1996 fiscal year. See the
preceding footnote.
(5) This line item reflects the amount and nature of ownership of the Company's
common stock as of June 15, 1997.
5649\564901DK.14C
June 20, 1997
18
<PAGE>
Change in Control of Company. On May 1, 1997, closing occurred pursuant to
a Merger Agreement and Plan of Reorganization (the "Merger Agreement",
previously filed with the Securities and Exchange Commission on May 14, 1997 as
an exhibit to Form 8-K) entered into between the Company, the Company's newly
organized wholly-owned subsidiary named Oralmerge, Inc., and the SSI Subsidiary,
a privately held Colorado corporation. At the time of closing, the SSI
Subsidiary became a wholly owned subsidiary of the Company, and Oralmerge was
merged into the SSI Subsidiary so that Oralmerge had no further existence.
Pursuant to the closing, Gary Schlatter, the president of the SSI Subsidiary,
obtained control of the Company by being issued 14,917,399 shares of the common
stock of the Company, which amounted to approximately 85% of all of the
outstanding shares of stock of the Company at the time of completion of the
merger. Pursuant to the terms of the Merger Agreement, the former directors (Mr.
O'Donnell and Mr. Kaplan) resigned upon consummation of the merger, and Mr.
Schlatter, Suzan Schlatter and Allen Goldstone were appointed by the resigning
directors to their positions on the board. There are no arrangements known to
the Company, the operations of which may at a subsequent date result in a change
of control of the Company.
EXECUTIVE COMPENSATION
The following table sets forth for the fiscal year ended December 31, 1996,
the compensation for service in all capacities to the Company of the person who
was at that date the chief executive officer of the Company. No executive
officer of the Company received any salary or bonus during the fiscal year ended
December 31, 1996. (On May 29, 1997, the Company changed its fiscal year-end
from November to December. The information set forth herein is identical for
both the November 1996 year-end and the December 1996 year-end.)
<TABLE>
<CAPTION>
Name of Chief
Executive Officer Year Salary ($) Bonus ($) Other Annual Compensation
- ----------------- ---- ---------- --------- -------------------------
<S> <C> <C> <C> <C>
Edmond O'Donnell 1996 0 0 0
1995 0 0 0
1994 0 0 0
1993 0 0 0
</TABLE>
Compensation of Directors. There are no standard arrangements or other
arrangements pursuant to which directors of the Company are compensated for any
services provided as a director. There were no such arrangements pursuant to
which any director was compensated during the Company's last completed fiscal
year for services as a director. The Company may adopt arrangements for
compensation of directors in the future.
Employment Contracts. The only employment agreement which contains a
"change in control" provision is the Amended and Restated Employment Agreement
5649\564901DK.14C
June 20, 1997
19
<PAGE>
between the SSI Subsidiary and Gary Schlatter. The Employment Agreement is for a
period of three years commencing May 1, 1997, and provides for a base salary of
$80,000, $220,000 and $242,000 for each of the three years respectively. The SSI
Subsidiary may give bonuses to Mr. Schlatter as the board of directors
determines in its discretion. Under certain circumstances which may be
considered a "change in control", Mr. Schlatter is entitled to receive a lump
sum payment equal to all of the compensation to which he otherwise would have
been entitled had the Employment Agreement remained in effect for its entire
term. These circumstances are the following:
(a) the sale by the SSI Subsidiary of substantially all of its assets;
(b) the sale, exchange or other disposition, in one transaction or a
series of related transactions, of at least forty percent (40%) of the
outstanding voting shares of the SSI Subsidiary;
(c) a decision by the SSI Subsidiary to terminate its business and
liquidate its assets;
(d) the merger or consolidation of the SSI Subsidiary with another
entity or an agreement to such merger or consolidation or any other type of
reorganization;
(e) If the SSI Subsidiary makes a general assignment for the benefit
of creditors, files a voluntary bankruptcy petition, files a petition or answer
seeking a reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any law, there shall have been filed any
petition or application for the involuntary bankruptcy of the SSI Subsidiary, or
other similar proceeding, in which an order for relief is entered or which
remains undismissed for a period of thirty days or more, or the SSI Subsidiary
seeks, consents to, or acquiesces in the appointment of a trustee, receiver, or
liquidator of the SSI Subsidiary or any material party of its assets; or
(f) there are material changes in Mr. Schlatter's duties and
responsibilities without his written consent.
OTHER BUSINESS
The Board of Directors of the Company knows of no other matters to be
presented at the special meeting of stockholders.
By order of the
Board of Directors,
Gary H. Schlatter,
President
Englewood, Colorado
July 22, 1997
5649\564901DK.14C
June 20, 1997
20
<PAGE>
Effective upon filing with the Office of the
Secretary of State for the State of Colorado
PLAN OF MERGER OF
SSI CAPITAL CORP. AND
ORALABS HOLDING CORP.
THIS PLAN OF MERGER is entered into this 25th day of June 1997, by and
between ORALABS HOLDING CORP., a Colorado corporation (hereinafter referred to
as the "Surviving Corporation" or "OraLabs"), and SSI CAPITAL CORP., a New York
corporation (hereinafter referred to as the "Acquired Corporation").
W I T N E S S E T H:
WHEREAS, Surviving Corporation is a corporation duly organized and existing
under the laws of the State of Colorado, having been incorporated on June 25th,
1997, and has authorized capital stock consisting of twenty-five million
(25,000,000) shares of $0.001 par value common stock, one hundred (100) shares
of which are issued and outstanding (the "OraLabs Common Stock"), as well as one
million (1,000,000) shares of $0.001 par value preferred stock (the "OraLabs
Preferred Stock"), none of which are issued and outstanding; and
WHEREAS, Acquired Corporation is a corporation duly organized and existing
under the laws of the State of New York, having been incorporated on January 30,
1981, and has authorized capital stock consisting of 100,000,000 shares of
$0.001 par value common stock, eighteen million two hundred forty-six thousand
nine hundred forty (18,246,940) shares of which shares of which are issued and
outstanding (the "SSI Common Stock"), as well as one million (1,000,000) shares
of preferred stock $0.01 par value, none of which are issued and outstanding
(the "SSI Preferred Stock"); and
WHEREAS, Acquired Corporation is the owner of 100% of all of the issued and
outstanding common stock of the surviving corporation; and
WHEREAS, the Board of Directors of both Surviving Corporation and Acquired
Corporation, respectively, deem it to be desirable and in the best interest of
and to the advantage of the respective corporations and shareholders, for
Acquired Corporation to be merged into Surviving Corporation pursuant to this
Plan of Merger, Section 907(c) of the New York Business Corporation Law
("NYBCL") and Section 7-111-107 of the Colorado Business Corporation Act
("CBCA").
NOW THEREFORE, in consideration of the mutual covenants, conditions,
understandings and agreements herein set forth and for the purpose of
prescribing the terms and conditions of this Plan of Merger, the parties agree
as follows:
EXHIBIT A
5649\564901DK.POM
6/13/97
<PAGE>
Effective upon filing with the Office of the
Secretary of State for the State of Colorado
1. Merger. Upon the filing of the Articles of Merger of Surviving
Corporation and Acquired Corporation (hereinafter referred to as "Articles of
Merger") with the Secretary of State for the State of Colorado (such day
sometimes referred to herein as "effective date"), Acquired Corporation shall be
merged with and into Surviving Corporation which shall survive the merger and
shall have the corporate name of OraLabs Holding Corp., and Surviving
Corporation, as the sole remaining corporation, shall continue to exist by
virtue of and shall be governed by the laws of the State of Colorado. The single
corporation, Surviving Corporation, which shall so survive the merger is
hereafter sometimes referred to as the "sole remaining corporation."
2. Conditions. The merger set forth in Paragraph 1 above is conditional and
contingent upon the occurrence of the following prior to the effective date;
A. Approval by the Board of Directors of both Surviving Corporation
and Acquired Corporation, by appropriate corporate resolution, of this Plan of
Merger;
B. Submission of this Plan of Merger to the shareholders of the
Acquired Corporation for approval by at least two-thirds (2/3) of the
outstanding shares of the Acquired Corporation entitled to vote thereon, and
C. The Acquired Corporation and the Surviving Corporation shall have
each received, or waived receipt of, such licenses, permits, consents,
approvals, authorizations, qualifications, and orders of governmental
authorities and parties to contracts with the applicable corporation as are
necessary for consummation of the transactions contemplated by this Plan of
Merger.
3. Articles of Incorporation, Bylaws. From and after the effective date and
until thereafter amended or supplemented or repealed in accordance with their
respective terms, the Articles of Incorporation and the Bylaws of the Surviving
Corporation in the forms attached hereto as Exhibits A and B, respectively,
shall be the Articles of Incorporation and the Bylaws of the Surviving
Corporation.
4. Directors and Officers. The Directors and Officers of the Surviving
Corporation immediately prior to the effective date shall be the directors and
officers of the Surviving Corporation, each to hold office (subject to the
Bylaws of the Surviving Corporation) until their respective successors shall be
duly elected or appointed and qualified.
5. Conversion of Outstanding Stock Of Acquired Corporation. Forthwith upon
the effective date, each of the issued and outstanding shares of SSI Common
Stock, and all rights in respect thereof, shall be converted into one-half (1/2)
fully paid and non-assessable shares of OraLabs Common Stock, and each
-2-
5649\564901DK.POM
6/13/97
<PAGE>
certificate nominally representing shares of SSI Common Stock shall for all
purposes be deemed to evidence the ownership of the appropriate number of shares
of OraLabs Common Stock. For purposes of this conversion, all shares owned of
record by a stockholder of the Acquired Corporation shall be aggregated prior to
conversion of those shares into the appropriate number of shares of OraLabs
Common Stock, so that no shareholder of record of the Acquired Corporation shall
own more than one fractional share of OraLabs Common Stock; and with respect to
each shareholder who owns a fractional share of OraLabs Common Stock, each such
shareholder shall be issued one whole share of OraLabs Common Stock for the one
fractional share owned by such shareholder as a result of the conversion.
6. Options, Warrants and Rights. At the effective date, all options,
warrants or rights then outstanding which immediately prior thereto had given
the holder thereof the right to purchase shares of SSI Common Stock shall, by
virtue of this Plan of Merger and without further action on the part of the
holder thereof, be changed and converted into options, warrants or rights giving
the holder thereof the right to purchase one-half the number of shares of
OraLabs Common Stock at the same aggregate exercise price and containing such
other terms and conditions as existed under such options, warrants or rights
immediately prior to the effective date.
7. Retirement of Organization Stock. Forthwith upon the effective date,
each of the one hundred (100) shares of OraLabs Common Stock presently issued
and outstanding shall be retired, and no shares of OraLabs Common Stock or other
securities of the surviving corporation shall be issued in respect thereof.
8. Effect of Merger. Upon the effective date of the merger, Acquired
Corporation shall be merged with and into Surviving Corporation in accordance
with the provisions of this Plan of Merger and in accordance with the laws of
the State of Colorado, and the separate existence of Acquired Corporation shall
-3-
5649\564901DK.POM
6/13/97
<PAGE>
cease. The sole remaining corporation shall, upon the effective date of the
merger and thereafter, possess all the rights, privileges, immunities and
franchises of a public, as well as a private nature, of both Surviving
Corporation and Acquired Corporation; and all property, real, personal and mixed
and all debts due on whatever account, including subscriptions to shares, and
all causes of action, and every other interest of or belonging or due to each of
Surviving Corporation and Acquired Corporation shall be deemed to be transferred
to and invested in the sole remaining corporation without further act or deed;
and the title to any real estate, or any interest therein, vested in either
Surviving Corporation or Acquired Corporation shall not revert or be in any way
impaired by reason of the merger. Such transfer to vesting in the sole remaining
corporation shall be deemed to occur by operation of law.
The sole remaining corporation shall, on the effective date of the merger
and thereafter, be responsible for and liable for all of the liabilities and
obligations of Surviving Corporation and Acquired Corporation so merged; and any
claim existing or action or proceeding, whether civil or criminal, pending by or
against either Surviving Corporation or Acquired Corporation may be prosecuted
as if the merger had not occurred, or said sole remaining corporation may be
substituted in its place. Neither the rights of creditors or any liens upon the
property of either Surviving Corporation or Acquired Corporation shall be
impaired by the merger.
9. Subsequent Documentation. From time to time, as and when requested by
the sole remaining corporation, Acquired Corporation shall execute and deliver,
or cause to be executed and delivered, all such deeds and other instruments, and
will take or cause to be taken such further or other action as the sole
remaining corporation may deem necessary or desirable in order to vest in and
conform to the sole remaining corporation, title to and possession of, all its
property, rights, privileges, powers and franchises and otherwise to carry out
the intent and purposes of this Plan of Merger.
-4-
5649\564901DK.POM
6/13/97
<PAGE>
10. Abandonment of Merger. This Plan of Merger may be terminated and the
merger provided for hereby abandoned in the event that the Board of Directors of
either Surviving Corporation or Acquired Corporation shall at any time prior to
the effective date of the merger contemplated hereby vote for termination and
abandonment of said merger, whether before or after adoption and approval of
this Plan of Merger by the shareholders of the Acquired Corporation.
11. Name and Principal Office. The name of the Surviving Corporation shall
be OraLabs and its principal executive offices shall be 2901 South Tejon Street,
Englewood, Colorado 80110.
12. Colorado Law. This Plan of Merger shall be governed by and construed in
accordance with the internal laws of the State of Colorado.
13. No Waiver. No provision of this Plan of Merger may be waived, except by
an agreement in writing signed by the waiving party. A waiver of any term or
provision shall not be construed as a waiver of any other term or provision.
14. Binding Effect. This Plan of Merger shall be binding upon the parties,
and their successors and assigns. The parties hereto agree to do any and all
things necessary to effectuate the purpose of this Plan of Merger.
15. Severability. If any provision of this Plan of Merger is declared by
any court of competent jurisdiction to be invalid for any reason, such
invalidity shall not affect the remaining provisions. On the contrary, such
remaining provisions shall be fully severable and this Plan of Merger shall be
construed and enforced as if such invalid provision never had been inserted in
this Plan of Merger.
16. Amendment. This Plan of Merger may be amended, altered or revoked at
any time, in whole or in part, by filing with this Plan of Merger a written
instrument setting forth such changes, signed by all of the parties hereto and
adopted by appropriate corporate resolution and by a majority vote of the
shareholders of each corporation which is a party hereto entitled to vote
thereon.
-5-
5649\564901DK.POM
6/13/97
<PAGE>
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals on
the day and year first written above.
ORALABS HOLDING CORP.
By: /s/ GARY H. SCHLATTER
-----------------------------------------
Gary H. Schlatter, President
SSI CAPITAL CORP.
By: /S/ GARY H. SCHLATTER
-----------------------------------------
Gary H. Schlatter, President
-6-
5649\564901DK.POM
6/13/97
<PAGE>
PRINCIPAL DIFFERENCES BETWEEN NEW YORK AND
COLORADO CORPORATE LAW
The following discussion summarizes certain principal differences between
the New York Business Corporation Law (the "NYBCL") and the Colorado Business
Corporation Act (the "CBCA"). This summary does not purport to be a complete
description of such corporation laws or the differences between stockholders'
rights under each of the NYBCL and CBCA, respectively, and is qualified by
reference to each of the NYBCL and the CBCA.
Dividends. Under the NYBCL, dividends may be paid only out of surplus. The
CBCA provides that the Board of Directors may authorize distributions unless,
after giving effect to any distribution the corporation would not be able to pay
its debts as they become due in the usual course of business or the total assets
of the corporation would be less than the sum of its total assets plus (unless
the certificate of incorporation permits otherwise) the amount that would be
needed, if the corporation were to be dissolved at the time of distribution, to
satisfy the preferential rights upon dissolution of stockholders whose
preferential rights are superior to those receiving the distribution.
Dissenters' Rights of Appraisal. Under the NYBCL, dissenting stockholders
who follow prescribed statutory procedures are entitled to appraisal rights in
connection with certain mergers, consolidations and sales of all or
substantially all of the assets of the corporation. The CBCA provides similar
rights and procedures with respect to those transactions. However, under the
CBCA, such rights are not provided in certain circumstances, including
transactions in which shares of the corporation being voted in a merger or
consolidation are listed on a national securities exchange, designated as
national market system securities by the National Association of Securities
Dealers, Inc. (the "NASD") or are held of record by more than 2,000 stockholders
and in which shares to be received in such merger or consolidation are shares of
the surviving corporation or are listed on a national securities exchange or
designated as national market system securities by the NASD or are held of
record by more than 2,000 stockholders.
Liability of Directors. Under the NYBCL, a director who votes for or
concurs in any of the following corporate actions shall be liable to the
corporation for the benefit of its creditors or shareholders, to the extent of
any injury suffered by such persons, respectively, as a result of such action:
the declaration of any dividend or other distribution to the extent that the
distribution is in excess of surplus; the purchase of shares of the corporation
to the extent that it does not comply with applicable law, which generally
requires that the purchase shall be out of surplus or the purchase is out of
stated capital if the purchase is made for the purpose of eliminating fractions
of shares, collecting or compromising indebtedness to the corporation, or paying
shareholders with respect to dissenters' rights; the distribution of assets to
shareholders after dissolution of the corporation without paying or adequately
providing for all known liabilities of the corporation; or the making of a loan
to a director without shareholder approval. However, a director is not liable
if, under the circumstances, he performed his duty as a director in good faith
and with that degree of care which an ordinarily prudent person in a like
position would use under similar circumstances.
EXHIBIT B
5649\564901DK.EXB
June 16, 1997
<PAGE>
Under the CBCA, a director who votes for or assents to a distribution,
which after giving effect to the distribution, the corporation would not be able
to pay its debts as they become due or the total assets of the corporation would
be less than the sum of its total liabilities, plus the amount that would be
needed if the corporation were to be dissolved at the time of the distribution
to satisfy existing stockholder preferential rights upon dissolution, is
personally liable to the corporation for the amount of the excess distribution.
However, the director will not be liable if it is established that the director
performed the director's duties in good faith with the care an ordinarily
prudent person in a like position would exercise under similar circumstances and
in a manner the director reasonably believed to be in the best interests of the
corporation.
Indemnification of Directors and Officers. The NYBCL authorizes
indemnification protection to its directors and officers, which is not exclusive
of any other rights to which a director or officer seeking indemnification may
be entitled, such as by a resolution of the shareholders, a resolution of the
directors or a contract providing for such indemnification. Under the CBCA, a
corporation is authorized to provide indemnification to its officers and
directors, as well as to its employees, fiduciaries, and agents, and unless
limited by its articles of incorporation, a corporation shall indemnify a person
who was wholly successful in the defense of any proceeding to which the person
was a party because the person is or was a director, against reasonable expenses
incurred by the person in connection with the proceeding. However, under the
CBCA, a corporation is not permitted to indemnify its directors to any greater
extent than described in the CBCA, but a corporation is entitled to indemnify
officers, employees, fiduciaries and agents who are not directors to a greater
extent than provided in the CBCA, if not inconsistent with public policy, and if
provided for by the corporation's bylaws, general or specific action of its
board of directors or shareholders, or contract.
Under the NYBCL, corporations have the power to purchase and maintain
insurance to indemnify the corporation or its officers and directors in
instances in which they may be indemnified under the NYBCL. The CBCA permits a
corporation to provide insurance to directors, officers, employees, fiduciaries
and agents without restriction even though the corporation does not have the
power to indemnify such persons or even though its power to indemnify is more
restricted than the insurance coverage. The CBCA provides that if a corporation
indemnifies a director in connection with a proceeding by or in the right of the
corporation (i.e., a derivative suit), the corporation shall give written notice
thereof to the shareholders with or before the notice of the next shareholders'
meeting. There is no comparable provision in the NYBCL.
Issuance to Officers, Directors and Employees of Rights or Options to
Purchase Shares. The NYBCL requires the affirmative vote of a majority of the
shares entitled to vote in order to issue officers, directors or employees
options or rights to purchase stock. The CBCA does not require stockholder
approval of such transactions.
Vote Required for Certain Transactions. The NYBCL requires that certain
mergers, consolidations and sales of all or substantially all of the assets not
in the ordinary course of business be approved by the holders of two-thirds of
-2-
5649\564901DK.EXB
June 16, 1997
<PAGE>
the outstanding shares entitled to vote thereon. The CBCA provides that, unless
the certificate of incorporation provides otherwise, a majority vote of
outstanding shares is required to amend the corporate charter, to dissolve the
corporation, to affect a merger or consolidation or to sell, lease, or exchange
all or substantially all of the corporation's assets.
Loans to Directors. The NYBCL requires that loans to directors be
authorized by an affirmative vote of stockholders as provided in the NYBCL.
Under the CBCA, a corporation may make loans to its officers, directors and
employees. However, a board of directors or a committee thereof may not
authorize a loan, by a corporation to a director or to an entity in which a
director of the corporation is a director or officer or has a financial
interest, or a guaranty, by the corporation of an obligation of a director of
the corporation or of an obligation of an entity in which a director of the
corporation is a director or officer or has a financial interest, until at least
ten days after written notice of the proposed authorization of the loan or
guaranty has been given to the shareholders who would be entitled to vote
thereon if the issue of the loan or guaranty were submitted to a vote of the
shareholders.
Interested Directors. The NYBCL requires the unanimous approval of
disinterested directors for the approval of a transaction between a corporation
and one or more of its directors or officers where the transaction has not been
fully disclosed and approved by the shareholders entitled to vote thereon and a
vote of disinterested directors is insufficient to constitute an act of the
board. Under the CBCA, such a transaction may be approved by the affirmative
votes of a majority of the disinterested directors even though the disinterested
directors do not constitute a quorum.
Redeemable Shares. The NYBCL generally permits redemption only at the
option of the corporation, while the CBCA permits redeemable shares to be
redeemed at the option of the corporation or the stockholder.
Corporation Action Without a Stockholders' Meeting. Both the NYBCL and the
CBCA permit corporate action without a stockholders' meeting only upon the
written consent of all stockholders entitled to vote on such action.
Inspectors. Under the NYBCL, if the bylaws require or if a shareholder
requests, a corporation must appoint one or more inspectors who are obligated to
perform certain duties with respect to a meeting of the shareholders. There is
no comparable provision in the CBCA.
Consideration for Shares. Under the NYBCL, neither obligations of the
subscriber for future payments nor obligations of the subscriber for future
services constitute payment or partial payment for shares of a corporation.
Furthermore, certificates or shares may not be issued until the full amount of
the consideration therefor has been paid (except in the case of shares purchased
pursuant to stock options under a plan permitting installment payments). Under
the CBCA, the board of directors may authorize the issuance of shares for
consideration consisting of any tangible or intangible property or benefit to
the corporation, including cash, promissory notes, services performed (but not
-3-
5649\564901DK.EXB
June 16, 1997
<PAGE>
the obligation to perform future services) and other securities of the
corporation. However, a promissory note of a subscriber or an affiliate of a
subscriber for shares shall not constitute consideration for the shares unless
the note is negotiable and is secured by collateral, other than the shares,
having a fair market value at least equal to the principal amount of the note,
and any note must be a negotiable instrument on which there is an obligation to
pay independent of collateral, and does not include a non-recourse note.
Classification of the Board of Director. The NYBCL permits a classified
board with as many as four classes, but forbids fewer than three directors in
any class. The CBCA permits a classified board with as many as three classes,
but requires that the board be divided into two or three groups, with each group
containing one-half or one-third of the total, as near as may be. The CBCA does
not specify a minimum number of directors for each class.
Business Combination Statutes. The NYBCL prohibits any "business
combination" (as therein defined) between a "resident domestic corporation" and
an "interested stockholder" for five years after the date that the interested
stockholder becomes an interested stockholder unless prior to the date the board
of directors of the domestic corporation approved the business combination or
the transaction that resulted in the interested stockholder becoming an
interested stockholder. After five years, such a business combination is
permitted under certain circumstances. There is no comparable provision in the
CBCA. However, in connection with a corporation creating and issuing "rights"
(which mean rights, options, warrants or convertible securities entitling the
holders thereof to purchase, receive, or acquire shares of the corporation or
assets or debts or other obligations of the corporation), the corporation can
include terms which include any of the following, provided that the board
remains subject to its fiduciary duty: preclude or limit any significant
shareholder from exercising, converting, transferring or receiving rights;
impose conditions upon the exercise, conversion, transfer, or receipt of rights
by any significant shareholder that differ from those imposed on other holders
of the same class of rights; or provide that, upon exercise or conversion, any
significant shareholder shall be entitled to receive securities, obligations, or
assets, the terms or nature of which may differ from the securities,
obligations, or assets to be received by the other holders of the same class of
rights. A "significant shareholder" means any person owning, or offering to
acquire directly or indirectly, a number or percentage, as specified by the
board of directors, of the outstanding voting shares of a corporation, or any
transferee of such person.
Number of Directors. Under the NYBCL, the number of directors may not be
less than three (unless there are less than three stockholders) and any higher
number may be fixed by the bylaws or by action of the stockholders or of the
board of directors under specific provisions of the bylaws adopted by the
stockholders. The number of directors may be increased or decreased by amendment
of the bylaws or by action of the stockholders or of the board of directors
under the specific provisions of a bylaw adopted by the stockholders, subject to
certain provisions. Under the CBCA, a corporation may have as few as one
director and there are no maximum limits. Under the CBCA, the bylaws or the
articles of a corporation may establish a range for the number of directors by
fixing a minimum and maximum number of directors. If such a range is
established, the number may be fixed or changed from time to time within the
range by either the shareholders or the board.
-4-
5649\564901DK.EXB
June 16, 1997
<PAGE>
Examination of Books and Records. Under the NYBCL, any person who has been
a shareholder of record of a corporation for at least six months immediately
preceding his demand, or any person holding at least five percent of any class
of the outstanding shares, upon at least five days' written demand, shall have
the right to examine the corporation's minutes of the proceedings of its
shareholders and record of shareholders. However, under the NYBCL, an inspection
described in the preceding sentence may be denied to the shareholder upon his
refusal to furnish the corporation an affidavit that such inspection is not
desired for a purpose which is in the interest of a business or object other
than the business of the corporation and that he has not within five years sold
or offered for sale any list of shareholders of any corporation of any type or
kind or aided or abetted any person in procuring any such record of shareholders
for any such purpose. In addition, upon the written request of any person who
has been a shareholder of record for at least six months immediately preceding
his request, or of any person holding at least five percent of any class of the
outstanding shares, the corporation shall give or mail to such shareholder an
annual balance sheet and profit and loss statement for the preceding fiscal
year, and if any interim balance sheet or profit and loss statement has been
distributed to its shareholders or otherwise made available to the public, the
most recent such interim balance sheet or profit and loss statement.
Under the CBCA, a stockholder has a right to inspect and copy books and
records under two circumstances. First, stockholders have an absolute right to
review records which the corporation is required to maintain in its principal
office (which include its articles of incorporation, bylaws, minutes of
stockholders' meetings for the past three years, written communications during
the past three years to stockholders, a list of names and business addresses of
current directors and officers, a copy of its corporate report delivered to the
Secretary of State of Colorado, and all financial statements prepared for the
past three years). Second, a stockholder has the right to review minutes of
stockholders and board meetings, accounting records and a stockholder list if
the stockholder has been a stockholder for three months or is at least a five
percent stockholder and the demand is made in good faith with particularity and
fora proper purpose as defined in the CBCA.
Cumulative Voting. Under the NYBCL, the certificate of incorporation of any
corporation may provide that in all elections of directors of such corporation
each shareholder shall have cumulative voting. The certificate of incorporation
of the Company does not have a provision permitting cumulative voting. Under the
CBCA, stockholders have cumulative voting unless prohibited in the articles of
incorporation. The Articles of Incorporation of OraLabs Holding Corp. prohibits
cumulative voting. Accordingly, there will be no practical effect with respect
to cumulative voting on the reincorporation of the Company from New York to
Colorado.
Dissolution. Under the NYBCL, a dissolution shall be authorized at a
meeting of shareholders by the vote of the holders of two-thirds of all
outstanding shares entitled to vote thereon, except as may otherwise be provided
in the corporation's certificate of incorporation. Under the CBCA, a corporation
can dissolve upon its board of directors adopting a resolution setting forth a
proposal to dissolve, which proposal is approved by majority of the
shareholders.
-5-
5649\564901DK.EXB
June 16, 1997
<PAGE>
ARTICLES OF INCORPORATION
OF
ORALABS HOLDING CORP.
KNOW ALL MEN BY THESE PRESENTS: That the undersigned incorporator, being at
least eighteen (18) years or more, and desiring to form a corporation under the
Colorado Business Corporation Code, does hereby make, execute, acknowledge, and
deliver to the Secretary of State of the State of Colorado these Articles of
Incorporation:
ARTICLE I - NAME AND PRINCIPAL OFFICE
The name of the corporation shall be OraLabs Holding Corp., and the address
of the corporation's initial principal office shall be 2901 South Tejon Street,
Englewood, Colorado 80110.
ARTICLE II - PERIOD OF DURATION
The corporation shall exist in perpetuity from and after the date of filing
these Articles of Incorporation with the Secretary of State of the State of
Colorado, unless sooner dissolved according to law.
ARTICLE III - PURPOSES
The purposes for which the corporation is organized are to engage in, and
to transact all lawful business for which corporations may be incorporated
pursuant to the Colorado Business Corporation Act.
ARTICLE IV - POWERS
The corporation shall have all powers and rights permitted under the
Colorado Business Corporation Act, including without limitation, those
necessary, suitable, proper, or convenient to effectuate the purposes for which
the corporation is organized.
ARTICLE V - CAPITAL STOCK
The aggregate number of shares of capital stock which the corporation shall
have the authority to issue is twenty-five million (25,000,000) shares of a
class of $0.001 par value common stock, and one million (1,000,000) shares of a
EXHIBIT C
5649\564900DK.AOI
06/13/97
<PAGE>
class of $0.001 par value preferred stock, which may be issued in one or more
series. Shares of capital stock may be issued for consideration consisting of
any tangible or intangible property or benefit to the corporation and, when
issued, shall be fully paid and non-assessable. With respect to the class of
preferred shares and any series thereof, the designations, powers, preferences,
rights, qualifications, limitations and restrictions thereof, and variations in
the relative rights and preferences as between different series, shall be
established by the Board of Directors in accordance with the Colorado Business
Corporation Act. Except for such voting powers, if any, as may be expressly
stated by the Board of Directors when establishing the rights and other
attributes of preferred stock, the holders of such preferred stock shall have no
voting power whatsoever except as required by law. The preferences and relative
participating, optional or other special rights, qualifications, limitations, or
restrictions of the common stock of the corporation are as follows:
1. Distributions. Distributions in cash, property, or shares of the
corporation may be paid upon the common stock, as and when declared by the Board
of Directors, out of funds of the corporation to the extent and in the manner
permitted by law.
2. Payment on Liquidation. Upon any liquidation, dissolution, or winding-up
of the corporation, and after payment or the setting aside of amounts sufficient
to provide for payment in full of all debts and liabilities of and other claims
against the corporation, the remaining net assets of the corporation shall be
distributed pro rata to the holders of the common stock, except as preferential
payments of assets may be first paid to holders of preferred shares in
accordance with preferences afforded any preferred shares which may subsequently
be issued. The Board of Directors may, from time to time, distribute to the
shareholders in partial liquidation, a portion of its assets, in cash or
property, in the manner permitted by law.
3. Voting Rights. Each holder of common stock shall be entitled to one
vote, or fraction of a vote, for each share, or corresponding fraction of a
share, of common stock held by each such shareholder. The shares of this class
of common stock shall have unlimited voting rights and shall constitute the sole
voting group of the corporation except to the extent any additional voting group
or groups may hereafter be established.
4. Transfer of Shares. The corporation shall have the right by appropriate
action to impose restrictions upon the transfer of any shares of its stock or
any interest therein, from time to time issued, provided that such restrictions
as may from time to time be imposed, or notice of the substance thereof, shall
be set forth on the face or back of the certificate representing such shares of
stock.
5649\564900DK.AOI
06/13/97
-2-
<PAGE>
ARTICLE VI - NO CUMULATIVE VOTING
Cumulative voting shall not be permitted in the election of directors of
the corporation or otherwise.
ARTICLE VII - QUORUM OF VOTING GROUPS
At all meetings of shareholders, a majority of the shares of a voting group
entitled to vote at such meeting, represented in person or by proxy, shall
constitute a quorum of that voting group.
ARTICLE VIII - DIRECTORS
The corporate powers shall be exercised by or under the authority of, and
the business and affairs of the corporation shall be managed under the direction
of, a Board of Directors.
ARTICLE IX - LIMITATION OF LIABILITY OF DIRECTORS
To the fullest extent permitted by the Colorado Business Corporation Act as
the same exists or may be hereafter amended, a director of the corporation shall
not be liable to the corporation or its shareholders for monetary damages for
breach of fiduciary duty as a director. Any repeal or modification of this
Article by the shareholders of the corporation shall be prospective only and
shall not adversely affect any right or protection of a director of the
corporation existing at the time of such repeal or modification.
ARTICLE X - RIGHTS OF DIRECTORS AND OFFICERS
TO CONTRACT WITH CORPORATION
1. As used in this section, "conflicting interest transaction" means any of
the following:
a. A loan or other transaction involving assistance by the corporation
to a director of the corporation or to an entity in which a director of the
corporation is a director or officer or has a financial interest;
b. A guaranty by the corporation of an obligation of a director of the
corporation or of an obligation of an entity in which a director of the
corporation is a director or officer or has a financial interest; or
c. A contract or transaction between the corporation and a director of
the corporation or between the corporation and an entity in which a director of
the corporation is a director or officer or has a financial interest.
5649\564900DK.AOI
06/13/97
-3-
<PAGE>
2. No conflicting interest transaction shall be either void or voidable, be
enjoined, be set aside, or give rise to an award of damages or other sanctions
in a proceeding by a shareholder or by or in the right of the corporation,
solely because of such conflicting interest in the transaction, or solely
because such directors or officers are present at or participate in a meeting of
the board of directors or a committee thereof which authorizes, approves, or
ratifies such a conflicting interest transaction, or solely because his or her
votes are counted for such purpose if:
a. The material facts of such relationship or interest and as to the
conflicting interest transaction are disclosed or known to the board of
directors or committee and such board or committee in good faith authorizes,
approves, or ratifies the conflicting interests transaction by the affirmative
vote of a majority of disinterested directors even though the disinterested
directors are less than a quorum; or
b. The material facts of such relationship or interest and as to the
conflicting interest transaction are disclosed or known to the shareholders
entitled to vote thereon and the conflicting interest transaction is
specifically authorized, approved, or ratified in good faith by vote of the
shareholders; or
c. The conflicting interest transaction is fair as to the corporation
as of the time it is authorized, approved or ratified by the board of directors,
a committee thereof, or the shareholders. Common or interested directors may be
counted in determining the presence of a quorum at a meeting of the board of
directors or a committee thereof which authorizes, approves, or ratifies such
conflicting interest transaction.
ARTICLE XI - INDEMNIFICATION
The corporation shall indemnify, to the maximum extent permitted by law,
any person who is or was a director, officer, agent, fiduciary or employee of
the corporation against any claim, liability or expense arising against or
incurred by such person made party to a proceeding because he or she is or was a
director, officer, agent, fiduciary or employee of the corporation or because he
or she is or was serving another entity or employee benefit plan as a director,
officer, partner, trustee, employee, fiduciary or agent at the corporation's
request. The corporation shall further have the authority to the maximum extent
permitted by law to purchase and maintain insurance providing such
indemnification.
5649\564900DK.AOI
06/13/97
-4-
<PAGE>
ARTICLE XII - BYLAWS
A majority of the Board of Directors of the corporation shall have the
power to adopt such initial bylaws as may be deemed necessary or convenient for
the proper government and management of the business and affairs of the
corporation, and a majority of the Board of Directors shall have the power to
amend, alter, or repeal the same at any regular meeting or at any special
meeting called for that purpose.
ARTICLE XIII - NEGATION OF EQUITABLE INTERESTS
Unless a person is recognized as a shareholder through procedures
established by the corporation pursuant to Colorado Revised Statutes
ss.7-107-204 or any similar law, the corporation shall be entitled to treat the
registered holder of any shares of the corporation as the owner thereof for all
purposes permitted by the Colorado Business Corporation Act, including without
limitation all rights deriving from such shares, and the corporation shall not
be bound to recognize any equitable or other claim to, or interest in, such
shares or rights deriving from such shares on the part of any other person
including without limitation, a purchaser, assignee or transferee of such
shares, unless and until such other person becomes the registered holder of such
shares or is recognized as such, whether or not the corporation shall have
either actual or constructive notice of the claimed interest of such other
person. By way of example and not of limitation, until such other person has
become the registered holder of such shares or is recognized pursuant to
Colorado Revised Statutes ss.7-107-204 or any similar applicable law, he shall
not be entitled: (i) to receive notice of the meetings of the shareholders; (ii)
to vote at such meetings; (iii) to examine a list of the shareholders; (iv) to
be paid dividends or other distributions payable to shareholders; or (v) to own,
enjoy and exercise any other rights deriving from such shares against the
corporation. Nothing contained herein will be construed to deprive any
beneficial shareholder, as defined in Colorado Revised Statutes ss.
7-113-101(1), of any right he may have pursuant to Article 113 of the Colorado
Business Corporation Act or any subsequent law.
ARTICLE XIV - REGISTERED OFFICE
The street address of the corporation's initial registered office is 303
East 17th Avenue, Suite 940, Denver, Colorado 80203. The name of the
corporation's initial registered agent at that office is Douglas B. Koff, and
the consent of the registered agent is designated by the signature of the
initial registered agent on these Articles of Incorporation.
5649\564900DK.AOI
06/13/97
-5-
<PAGE>
ARTICLE XV - INCORPORATOR
The name and address of the incorporator is Douglas B. Koff, 303 East
Seventeeth Avenue, Suite 940, Denver, Colorado 80203.
IN WITNESS WHEREOF, the above-named incorporator has hereunder signed his
name on this 25th day of June, 1997.
/s/ DOUGLAS B. KOFF
------------------------------------------
Douglas B. Koff, Incorporator
IN WITNESS WHEREOF, the undersigned consents to the appointment as the
initial registered agent of the corporation this 25th day of June, 1997.
/s/ DOUGLAS B. KOFF
------------------------------------------
Douglas B. Koff, Registered Agent
5649\564900DK.AOI
06/13/97
-6-
<PAGE>
Table of Contents
Article Page
I. Offices ............................................ 1
II. Shareholders ....................................... 1
III. Board of Directors ................................. 7
IV. Officers and Agents ................................ 11
V. Stock .............................................. 13
VI. Indemnification of Certain Persons ................. 14
VII. Miscellaneous ...................................... 18
Effective: June 25, 1997
BYLAWS
OF
ORALABS HOLDING CORP.
ARTICLE I
Offices
-------
The principal office of the corporation shall be designated from time to
time by the corporation and may be within or outside of Colorado.
The corporation may have such other offices, either within or outside
Colorado, as the board of directors may designate or as the business of the
corporation may require from time to time.
The registered office of the corporation required by the Colorado Business
Corporation Act to be maintained in Colorado may be, but need not be, identical
with the principal office, and the address of the registered office may be
changed from time to time by the board of directors.
ARTICLE II
Shareholders
------------
Section 1. Annual Meeting. The annual meeting of the shareholders shall be
held during the month of May of each year on a date and at a time fixed by the
board of directors of the corporation (or by the president in the absence of
action by the board of directors), beginning with the year 1998, for the purpose
of electing directors and for the transaction of such other business as may come
before the meeting. If the election of directors is not held on the day fixed as
provided herein for any annual meeting of the shareholders, or any adjournment
thereof, the board of directors shall cause the election to be held at a special
meeting of the shareholders as soon thereafter as it may conveniently be held.
A shareholder may apply to the district court in the county in Colorado
where the corporation's principal office is located or, if the corporation has
no principal office in Colorado, to the district court of the county in which
the corporation's registered office is located to seek an order that a
shareholder meeting be held (i) if an annual meeting was not held within six
months after the close of the corporation's most recently ended fiscal year or
EXHIBIT D
5649\564900DK.BYL
06/13/97
<PAGE>
fifteen months after its last annual meeting, whichever is earlier, or (ii) if
the shareholder participated in a proper call of or proper demand for a special
meeting and notice of the special meeting was not given within thirty days after
the date of the call or the date the last of the demands necessary to require
calling of the meeting was received by the corporation pursuant to C.R.S. ss.
7-107-102(1)(b), or the special meeting was not held in accordance with the
notice.
Section 2. Special Meetings. Unless otherwise prescribed by statute,
special meetings of the shareholders may be called for any purpose by the
president or by the board of directors. The president shall call a special
meeting of the shareholders if the corporation receives one or more written
demands for the meeting, stating the purpose or purposes for which it is to be
held, signed and dated by holders of shares representing at least ten percent of
all the votes entitled to be cast on any issue proposed to be considered at the
meeting.
Section 3. Place of Meeting. The board of directors may designate any
place, either within or outside Colorado, as the place for any annual meeting or
any special meeting called by the board of directors. A waiver of notice signed
by all shareholders entitled to vote at a meeting may designate any place,
either within or outside Colorado, as the place for such meeting. If no
designation is made, or if a special meeting is called other than by the board,
the place of meeting shall be the principal office of the corporation.
Section 4. Notice of Meeting. Written notice stating the place, date, and
hour of the meeting shall be given not less than ten nor more than sixty days
before the date of the meeting, except (i) that if the number of authorized
shares is to be increased, at least thirty days' notice shall be given, or (ii)
if any other longer notice period is required by the Colorado Business
Corporation Act. Notice of a special meeting shall include a description of the
purpose or purposes of the meeting. Notice of an annual meeting need not include
a description of the purpose or purposes of the meeting except the purpose or
purposes shall be stated with respect to (i) an amendment to the articles of
incorporation of the corporation, (ii) a merger or share exchange in which the
corporation is a party and, with respect to a share exchange, in which the
corporation's shares will be acquired, (iii) a sale, lease, exchange or other
disposition, other than in the usual and regular course of business, of all or
substantially all of the property of the corporation or of another entity which
this corporation controls, in each case with or without the goodwill, (iv) a
dissolution of the corporation, or (v) any other purpose for which a statement
of purpose is required by the Colorado Business Corporation Act. Notice shall be
given personally or by mail, private carrier, telegraph, teletype,
electronically transmitted facsimile or other form of wire or wireless
communication by or at the direction of the president, the secretary, or the
officer or persons calling the meeting, to each shareholder of record entitled
to vote at such meeting. If mailed and if in a comprehensible form, such notice
shall be deemed to be given and effective when deposited in the United States
mail, addressed to the shareholder at his address as it appears in the
corporation's current record of shareholders, with postage prepaid. If notice is
given other than by mail, and provided that such notice is in a comprehensible
form, the notice is given and effective on the date received by the shareholder.
If requested by the person or persons lawfully calling such meeting, the
secretary shall give notice thereof at corporate expense. No notice need be sent
to any shareholder if three successive notices mailed to the last known address
of such shareholder have been returned as undeliverable until such time as
another address for such shareholder is made known to the corporation by such
shareholder. In order to be entitled to receive notice of any meeting, a
shareholder shall advise the corporation in writing of any change in such
shareholder's mailing address as shown on the corporation's books and records.
5649\564900DK.BYL
06/13/97
-2-
<PAGE>
When a meeting is adjourned to another date, time or place, notice need not
be given of the new date, time or place if the new date, time or place of such
meeting is announced before adjournment at the meeting at which the adjournment
is taken. At the adjourned meeting the corporation may transact any business
which may have been transacted at the original meeting. If the adjournment is
for more than 120 days, or if a new record date is fixed for the adjourned
meeting, a new notice of the adjourned meeting shall be given to each
shareholder of record entitled to vote at the meeting as of the new record date.
A shareholder may waive notice of a meeting before or after the time and
date of the meeting by a writing signed by such shareholder. Such waiver shall
be delivered to the corporation for filing with the corporate records. Further,
by attending a meeting either in person or by proxy, a shareholder waives
objection to lack of notice or defective notice of the meeting unless the
shareholder objects at the beginning of the meeting to the holding of the
meeting or the transaction of business at the meeting because of lack of notice
or defective notice. By attending the meeting, the shareholder also waives any
objection to consideration at the meeting of a particular matter not within the
purpose or purposes described in the meeting notice unless the shareholder
objects to considering the matter when it is presented.
Section 5. Fixing of Record Date. For the purpose of determining
shareholders entitled to (i) notice of or vote at any meeting of shareholders or
any adjournment thereof, (ii) receive distributions or share dividends, or (iii)
demand a special meeting, or to make a determination of shareholders for any
other proper purpose, the board of directors may fix a future date as the record
date for any such determination of shareholders, such date in any case to be not
more than seventy days, and, in case of a meeting of shareholders, not less than
ten days, prior to the date on which the particular action requiring such
determination of shareholders is to be taken. If no record date is fixed by the
directors, the record date shall be the date on which notice of the meeting is
mailed to shareholders, or the date on which the resolution of the board of
directors providing for a distribution is adopted, as the case may be. When a
determination of shareholders entitled to vote at any meeting of shareholders is
made as provided in this Section, such determination shall apply to any
adjournment thereof unless the board of directors fixes a new record date, which
it must do if the meeting is adjourned to a date more than 120 days after the
date fixed for the original meeting.
Notwithstanding the above, the record date for determining the shareholders
entitled to take action without a meeting or entitled to be given notice of
action so taken shall be the date a writing upon which the action is taken is
first received by the corporation. The record date for determining shareholders
entitled to demand a special meeting shall be the date of the earliest of any of
the demands pursuant to which the meeting is called.
Section 6. Voting Lists. The secretary shall make, at the earlier of ten
days before each meeting of shareholders or two business days after notice of
the meeting has been given, a complete list of the shareholders entitled to be
given notice of such meeting or any adjournment thereof. The list shall be
arranged by voting groups and within each voting group by class or series of
shares, shall be in alphabetical order within each class or series, and shall
show the address of and the number of shares of each class or series held by
each shareholder. For the period beginning the earlier of ten days prior to the
meeting or two business days after notice of the meeting is given and continuing
through the meeting and any adjournment thereof, this list shall be kept on file
at the principal office of the corporation, or at a place (which shall be
identified in the notice) in the city where the meeting will be held. Such list
shall be available for inspection on written demand by any shareholder
(including for the purpose of this Section 6 any holder of voting trust
certificates) or his agent or attorney during regular business hours and during
5649\564900DK.BYL
06/13/97
-3-
<PAGE>
the period available for inspection. The original stock transfer books shall be
prima facie evidence as to the shareholders entitled to examine such list or to
vote at any meeting of shareholders.
Any shareholder, his agent or attorney may copy the list during regular
business hours and during the period it is available for inspection, provided
(i) the shareholder has been a shareholder for at least three months immediately
preceding the demand or holds at least five percent of all outstanding shares of
any class of shares as of the date of the demand, (ii) the demand is made in
good faith and for a purpose reasonably related to the demanding shareholder's
interest as a shareholder, (iii) the shareholder describes with reasonable
particularity the purpose and the records the shareholder desires to inspect,
(iv) the records are directly connected with the described purpose, and (v) the
shareholder pays a reasonable charge covering the costs of labor and material
for such copies, not to exceed the estimated cost of production and
reproduction.
Section 7. Recognition Procedure for Beneficial Owners. The board of
directors may adopt by resolution a procedure whereby a shareholder of the
corporation may certify in writing to the corporation that all or a portion of
the shares registered in the name of such shareholder are held for the account
of a specified person or persons. The resolution may set forth (i) the types of
nominees to which it applies, (ii) the rights or privileges that the corporation
will recognize in a beneficial owner, which may include rights and privileges
other than voting, (iii) the form of certification and the information to be
contained therein, (iv) if the certification is with respect to a record date,
the time within which the certification must be received by the corporation, (v)
the period for which the nominee's use of the procedure is effective, and (vi)
such other provisions with respect to the procedure as the board deems necessary
or desirable. Upon receipt by the corporation of a certificate complying with
the procedure established by the board of directors, the persons specified in
the certification shall be deemed, for the purpose or purposes set forth in the
certification, to be the registered holders of the number of shares specified in
place of the shareholder making the certification.
Section 8. Quorum and Manner of Acting. A majority of the votes entitled to
be cast on a matter by a voting group shall constitute a quorum of that voting
group for action on the matter. If less than a majority of such votes are
represented at a meeting, a majority of the votes so represented may adjourn the
meeting from time to time without further notice, for a period not to exceed 120
days for any one adjournment. If a quorum is present at such adjourned meeting,
any business may be transacted which might have been transacted at the meeting
as originally noticed. The shareholders present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough shareholders to leave less than a quorum, unless the meeting is
adjourned and a new record date is set for the adjourned meeting.
If a quorum exists, action on a matter other than the election of directors
by a voting group is approved if the votes cast within the voting group favoring
the action exceed the votes cast within the voting group opposing the action,
unless the vote of a greater number or voting by classes is required by law or
the articles of incorporation.
Section 9. Proxies. At all meetings of shareholders, a shareholder may vote
by proxy by signing an appointment form or similar writing, either personally or
by his duly authorized attorney-in-fact. A shareholder may also appoint a proxy
by transmitting or authorizing the transmission of a telegram, teletype, or
other electronic transmission providing a written statement of the appointment
to the proxy, a proxy solicitor, proxy support service organization, or other
person duly authorized by the proxy to receive appointments as agent for the
proxy, or to the corporation. The transmitted appointment shall set forth or be
transmitted with written evidence from which it can be determined that the
5649\564900DK.BYL
06/13/97
-4-
<PAGE>
shareholder transmitted or authorized the transmission of the appointment. The
proxy appointment form or similar writing shall be filed with the secretary of
the corporation before or at the time of the meeting. The appointment of a proxy
is effective when received by the corporation and is valid for eleven months
unless a different period is expressly provided in the appointment form or
similar writing.
Any complete copy, including an electronically transmitted facsimile, of an
appointment of a proxy may be substituted for or used in lieu of the original
appointment for any purpose for which the original appointment could be used.
Revocation of a proxy does not affect the right of the corporation to
accept the proxy's authority unless (i) the corporation had notice that the
appointment was coupled with an interest and notice that such interest is
extinguished is received by the secretary or other officer or agent authorized
to tabulate votes before the proxy exercises his authority under the
appointment, or (ii) other notice of the revocation of the appointment is
received by the secretary or other officer or agent authorized to tabulate votes
before the proxy exercises his authority under the appointment. Other notice of
revocation may, in the discretion of the corporation, be deemed to include the
appearance at a shareholders' meeting of the shareholder who granted the proxy
and his voting in person on any matter subject to a vote at such meeting.
The death or incapacity of the shareholder appointing a proxy does not
affect the right of the corporation to accept the proxy's authority unless
notice of the death or incapacity is received by the secretary or other officer
or agent authorized to tabulate votes before the proxy exercises his authority
under the appointment.
The corporation shall not be required to recognize an appointment made
irrevocable if it has received a writing revoking the appointment signed by the
shareholder (including a shareholder who is a successor to the shareholder who
granted the proxy) either personally or by his attorney-in-fact, notwithstanding
that the revocation may be a breach of an obligation of the shareholder to
another person not to revoke the appointment.
Subject to Section 11 and any express limitation on the proxy's authority
appearing on the appointment form, the corporation is entitled to accept the
proxy's vote or other action as that of the shareholder making the appointment.
Section 10. Voting of Shares. Each outstanding share of common stock shall
be entitled to one vote, except in the election of directors, and each
fractional share shall be entitled to a corresponding fractional vote on each
matter submitted to a vote at a meeting of shareholders. Each outstanding share
of preferred stock shall have no voting rights except as expressly stated by the
Board of Directors when it specifies the preferences, rights and limitations of
any such preferred shares, or as required by law. Cumulative voting shall not be
permitted in the election of directors or for any other purpose. Each record
holder of common stock shall be entitled to vote in the election of directors
and shall have as many votes for each of the shares owned by him as there are
directors to be elected and for whose election he has the right to vote.
At each election of directors, that number of candidates equaling the
number of directors to be elected, having the highest number of votes cast in
favor of their election, shall be elected to the board of directors.
5649\564900DK.BYL
06/13/97
-5-
<PAGE>
Except as otherwise ordered by a court of competent jurisdiction upon a
finding that the purpose of this Section would not be violated in the
circumstances presented to the court, the shares of the corporation are not
entitled to be voted if they are owned, directly or indirectly, by a second
corporation, domestic or foreign, and the first corporation owns, directly or
indirectly, a majority of the shares entitled to vote for directors of the
second corporation except to the extent the second corporation holds the shares
in a fiduciary capacity.
Redeemable shares are not entitled to be voted after notice of redemption
is mailed to the holders and a sum sufficient to redeem the shares has been
deposited with a bank, trust company, or other financial institution under an
irrevocable obligation to pay the holders the redemption price on surrender of
the shares.
Section 11. Corporation's Acceptance of Votes. If the name signed on a
vote, consent, waiver, proxy appointment, or proxy appointment revocation
corresponds to the name of a shareholder, the corporation, if acting in good
faith, is entitled to accept the vote, consent, waiver, proxy appointment or
proxy appointment revocation and give it effect as the act of the shareholder.
If the name signed on a vote, consent, waiver, proxy appointment or proxy
appointment revocation does not correspond to the name of a shareholder, the
corporation, if acting in good faith, is nevertheless entitled to accept the
vote, consent, waiver, proxy appointment or proxy appointment revocation and to
give it effect as the act of the shareholder if:
(i) the shareholder is an entity and the name signed purports to be that of
an officer or agent of the entity;
(ii) the name signed purports to be that of an administrator, executor,
guardian or conservator representing the shareholder and, if the corporation
requests, evidence of fiduciary status acceptable to the corporation has been
presented with respect to the vote, consent, waiver, proxy appointment or proxy
appointment revocation;
(iii) the name signed purports to be that of a receiver or trustee in
bankruptcy of the shareholder and, if the corporation requests, evidence of this
status acceptable to the corporation has been presented with respect to the
vote, consent, waiver, proxy appointment or proxy appointment revocation;
(iv) the name signed purports to be that of a pledgee, beneficial owner or
attorney-in-fact of the shareholder and, if the corporation requests, evidence
acceptable to the corporation of the signatory's authority to sign for the
shareholder has been presented with respect to the vote, consent, waiver, proxy
appointment or proxy appointment revocation;
(v) two or more persons are the shareholder as co-tenants or fiduciaries
and the name signed purports to be the name of at least one of the co-tenants or
fiduciaries, and the person signing appears to be acting on behalf of all the
co-tenants or fiduciaries; or
(vi) the acceptance of the vote, consent, waiver, proxy appointment or
proxy appointment revocation is otherwise proper under rules established by the
corporation that are not inconsistent with this Section 11.
The corporation is entitled to reject a vote, consent, waiver, proxy
appointment or proxy appointment revocation if the secretary or other office or
agent authorized to tabulate votes, acting in good faith, has reasonable basis
for doubt about the validity of the signature on it or about the signatory's
authority to sign for the shareholder.
5649\564900DK.BYL
06/13/97
-6-
<PAGE>
Neither the corporation nor its officers nor any agent who accepts or
rejects a vote, consent, waiver, proxy appointment or proxy appointment
revocation in good faith and in accordance with the standards of this Section is
liable in damages for the consequences of the acceptance or rejection.
Section 12. Informal Action by Shareholders. Any action required or
permitted to be taken at a meeting of the shareholders may be taken without a
meeting if a written consent (or counterparts thereof) that sets forth the
action so taken is signed by all of the shareholders entitled to vote with
respect to the subject matter thereof and received by the corporation. Such
consent shall have the same force and effect as a unanimous vote of the
shareholders and may be stated as such in any document. Action taken under this
Section 12 is effective as of the date the last writing necessary to effect the
action is received by the corporation, unless all of the writings specify a
different effective date, in which case such specified date shall be the
effective date for such action. If any shareholder revokes his consent as
provided for herein prior to what would otherwise be the effective date, the
action proposed in the consent shall be invalid. The record date for determining
shareholders entitled to take action without a meeting is the date the
corporation first receives a writing upon which the action is taken.
Any shareholder who has signed a writing describing and consenting to
action taken pursuant to this Section 12 may revoke such consent by a writing
signed by the shareholder describing the action and stating that the
shareholder's prior consent thereto is revoked, if such writing is received by
the corporation before the effectiveness of the action.
Section 13. Meetings by Telecommunication. Any or all of the shareholders
may participate in an annual or special shareholders' meeting by, or the meeting
may be conducted through the use of, any means of communication by which all
persons participating in the meeting may hear each other during the meeting. A
shareholder participating in a meeting by this means is deemed to be present in
person at the meeting.
ARTICLE III
Board of Directors
------------------
Section 1. General Powers. All corporate powers shall be exercised by or
under the authority of, and the business and affairs of the corporation shall be
managed under the direction of its board of directors, except as otherwise
provided in the Colorado Business Corporation Act or the articles of
incorporation.
Section 2. Number, Qualifications and Tenure. The number of directors of
the corporation shall be fixed from time to time by the board of directors,
within a range of no less than three or more than nine, but no decrease in the
number of directors shall have the effect of shortening the term of any
incumbent director. A director shall be a natural person who is eighteen years
of age or older. A director need not be a resident of Colorado or a shareholder
of the Corporation.
Directors shall be elected at each annual meeting of shareholders. Each
director shall hold office until the next annual meeting of shareholders
following his election and thereafter until his successor shall have been
elected and qualified. Directors shall be removed in the manner provided by the
Colorado Business Corporation Act.
5649\564900DK.BYL
06/13/97
-7-
<PAGE>
Section 3. Vacancies. Any director may resign at any time by giving written
notice to the corporation. Such resignation shall take effect at the time the
notice is received by the corporation unless the notice specifies a later
effective date. Unless otherwise specified in the notice of resignation, the
corporation's acceptance of such resignation shall not be necessary to make it
effective. Any vacancy on the board of directors may be filled by the
affirmative vote of a majority of the shareholders or the board of directors. If
the directors remaining in office constitute fewer than a quorum of the board,
the directors may fill the vacancy by the affirmative vote of a majority of all
the directors remaining in office. If elected by the directors, the director
shall hold office until the next annual shareholders' meeting at which directors
are elected. If elected by the shareholders, the director shall hold office for
the unexpired term of his predecessor in office; except that, if the director's
predecessor was elected by the directors to fill a vacancy, the director elected
by the shareholders shall hold office for the unexpired term of the last
predecessor elected by the shareholders.
Section 4. Regular Meetings. A regular meeting of the board of directors
shall be held without notice immediately after and at the same place as the
annual meeting of shareholders. The board of directors may provide by resolution
the time and place, either within or outside Colorado, for the holding of
additional regular meetings without other notice.
Section 5. Special Meetings. Special meetings of the board of directors may
be called by or at the request of the president or at the request of any two
directors (or one director if there are then less than three (3) persons serving
as directors). The person or persons authorized to call special meetings of the
board of directors may fix any place, either within or outside Colorado, as the
place for holding any special meeting of the board of directors called by them,
provided that no meeting shall be called outside the State of Colorado unless a
majority of the board of directors has so authorized.
Section 6. Notice. Notice of any special meeting shall be given at least
two days prior to the meeting by written notice either personally delivered or
mailed to each director at his business address, or by notice transmitted by
telegraph, telex, electronically transmitted facsimile or other form of wire or
wireless communication. If mailed, such notice shall be deemed to be given and
to be effective on the earlier of (i) three days after such notice is deposited
in the United States mail, properly addressed, with postage prepaid, or (ii) the
date shown on the return receipt, if mailed by registered or certified mail
return receipt requested. If notice is given by telex, electronically
transmitted facsimile or other similar form of wire or wireless communication,
such notice shall be deemed to be given and to be effective when sent, and with
respect to a telegram, such notice shall be deemed to be given and to be
effective when the telegram is delivered to the telegraph company. If a director
has designated in writing one or more reasonable addresses or facsimile numbers
for delivery of notice to him, notice sent by mail, telegraph, telex,
electronically transmitted facsimile or other form of wire or wireless
communication shall not be deemed to have been given or to be effective unless
sent to such addresses or facsimile numbers, as the case may be.
A director may waive notice of a meeting before or after the time and date
of the meeting by a writing signed by such director. Such waiver shall be
delivered to the corporation for filing with the corporate records. Further, a
director's attendance at or participation in a meeting waives any required
notice to him of the meeting unless at the beginning of the meeting, or promptly
upon his later arrival, the director objects to holding the meeting or
transacting business at the meeting because of lack of notice or defective
notice and does not thereafter vote for or assent to action taken at the
meeting. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the board of directors need to be specified in the
notice or waiver of notice of such meeting.
5649\564900DK.BYL
06/13/97
-8-
<PAGE>
Section 7. Quorum. A majority of the number of directors fixed by the board
of directors pursuant to Section 2 or, if no number is fixed, a majority of the
number in office immediately before the meeting begins, shall constitute a
quorum for the transaction of business at any meeting of the board of directors.
If less than such majority is present at a meeting, a majority of the directors
present may adjourn the meeting from time to time without further notice, for a
period not to exceed sixty days at any one adjournment.
Section 8. Manner of Acting. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the board
of directors.
Section 9. Compensation. By resolution of the board of directors, any
director may be paid any one or more of the following: his expenses, if any, of
attendance at meetings, a fixed sum for attendance at each meeting, a stated
salary as director, or such other compensation as the corporation and the
director may reasonably agree upon. No such payment shall preclude any director
from serving the corporation in any other capacity and receiving compensation
therefor.
Section 10. Presumption of Assent. A director of the corporation who is
present at a meeting of the board of directors or committee or subcommittee of
the board at which action on any corporate matter is taken shall be presumed to
have assented to the action taken unless (i) the director objects at the
beginning of the meeting, or promptly upon his arrival, to the holding of the
meeting or the transaction of business at the meeting and does not thereafter
vote for or assent to any action taken at the meeting, (ii) the director
contemporaneously requests that his dissent or abstention as to any specific
action taken be entered in the minutes of the meeting, or (iii) the director
causes written notice of his dissent or abstention as to any specific action to
be received by the presiding officer of the meeting before its adjournment or by
the corporation promptly after the adjournment of the meeting. A director may
dissent to a specific action at a meeting, while assenting to others. The right
to dissent to a specific action taken at a meeting of the board of directors or
a committee or subcommittee of the board shall not be available to a director
who voted in favor of such action.
Section 11. Committees and Subcommittees. By resolution adopted by a
majority of all the directors in office when the action is taken, the board of
directors may designate from among its members an executive committee and one or
more other committees and/or subcommittees, and appoint one or more members of
the board of directors to serve on them. To the extent provided in the
resolution, each committee and/or subcommittee shall have all the authority of
the board of directors, except that no such committee or subcommittee shall have
the authority to (i) authorize distributions, (ii) approve or propose to
shareholders actions or proposals required by the Colorado Business Corporation
Act to be approved by shareholders, (iii) fill vacancies on the board of
directors or any committee or subcommittee thereof, (iv) amend articles of
incorporation, (v) adopt, amend or repeal the bylaws, (vi) approve a plan of
merger not requiring shareholder approval, (vii) authorize or approve the
reacquisition of shares unless pursuant to a formula or method prescribed by the
board of directors, or (viii) authorize or approve the issuance or sale of
shares, or contract for the sale of shares or determine the designations and
relative rights, preferences and limitations of a class or series of shares,
except that the board of directors may authorize a committee or subcommittee or
officer to do so within limits specifically prescribed by the board of
directors. The committee or subcommittee shall then have full power within the
limits set by the board of directors to adopt any final resolution setting forth
all preferences, limitations and relative rights of such class or series and to
authorize an amendment of the articles of incorporation stating the preferences,
limitations and relative rights of a class or series for filing with the
Secretary of State under the Colorado Business Corporation Act.
5649\564900DK.BYL
06/13/97
-9-
<PAGE>
Sections 4, 5, 6, 7, 8 and 12 of Article III, which govern meetings,
notice, waiver of notice, quorum, voting requirements and action without a
meeting of the board of directors, shall apply to committees, subcommittees and
their members appointed under this Section 11.
Neither the designation of any such committee or subcommittee, the
delegation of authority to such committee or subcommittee, nor any action by
such committee or subcommittee pursuant to its authority shall alone constitute
compliance by any member of the board of directors or a member of the committee
or subcommittee in question with his responsibility to conform to the standard
of care set forth in Article III, Section 14 of these bylaws.
Section 12. Informal Action by Directors. Any action required or permitted
to be taken at a meeting of the directors or any committee or subcommittee
designated by the board of directors may be taken without a meeting if a written
consent (or counterparts thereof) that sets forth the action so taken is signed
by all of the directors entitled to vote with respect to the action taken. Such
consent shall have the same force and effect as a unanimous vote of the
directors or committee or subcommittee members and may be stated as such in any
document. Unless the consent specifies a different effective date, action taken
under this Section 12 is effective at the time the last director signs a writing
describing the action taken, unless, before such time, any director has revoked
his consent by a writing signed by the director and received by the president or
the secretary of the corporation.
Section 13. Telephonic Meetings. The board of directors may permit any
director (or any member of a committee or subcommittee designated by the board)
to participate in a regular or special meeting of the board of directors or a
committee or subcommittee thereof through the use of any means of communication
by which all directors participating in the meeting can hear each other during
the meeting. A director participating in a meeting in this manner is deemed to
be present in person at the meeting.
Section 14. Standard of Care. A director shall perform his duties as a
director, including without limitation his duties as a member of any committee
of the board, in good faith, in a manner he reasonably believes to be in the
best interests of the corporation, and with the care an ordinarily prudent
person in a like position would exercise under similar circumstances. In
performing his duties, a director shall be entitled to rely on information,
opinions, reports or statements, including financial statements and other
financial data, in each case prepared or presented by the person herein
designated. However, he shall not be considered to be acting in good faith if he
has knowledge concerning the matter in question that would cause such reliance
to be unwarranted. A director shall not be liable to the corporation or its
shareholders for any action he takes or omits to take as a director if, in
connection with such action or omission, he performs his duties in compliance
with this Section 14.
The designated persons on whom a director is entitled to rely are (i) one
or more officers or employees of the corporation whom the director reasonably
believes to be reliable and competent in the matters presented, (ii) legal
counsel, public accountant, or other person as to matters which the director
reasonably believes to be within such person's professional or expert
competence, or (iii) a committee or subcommittee of the board of directors on
which the director does not serve if the director reasonably believes the
committee or subcommittee merits confidence.
5649\564900DK.BYL
06/13/97
-10-
<PAGE>
ARTICLE IV
Officers and Agents
-------------------
Section 1. General. The officers of the corporation shall be a president,
one or more vice presidents, a secretary, and a controller, each of whom shall
be a natural person eighteen years of age or older. The board of directors or an
officer or officers authorized by the board may appoint such other officers and
assistants as they may consider necessary. The board of directors or the officer
or officers authorized by the board shall from time to time determine the
procedure for the appointment of officers, their term of office, their authority
and duties and their compensation. One person may hold more than one office. In
all cases where the duties of any officer, agent or employee are not prescribed
by the bylaws or by the board of directors, such officer, agent or employee
shall follow the orders and instructions of the president of the corporation.
Section 2. Appointment and Term of Office. The officers of the corporation
shall be appointed from time to time as determined by the board of directors. If
any officer or officers are to be appointed by another officer or officers of
the corporation, such appointments shall be made as soon as conveniently may be.
Each officer shall hold office until the first of the following occurs: his
successor shall have been duly appointed and qualified, his death, his
resignation, or his removal in the manner provided in Section 3.
Section 3. Resignation and Removal. An officer may resign at any time by
giving written notice of resignation to the corporation. The resignation is
effective when the notice is received by the corporation unless the notice
specifies a later effective date.
Any officer or agent may be removed at any time with or without cause by
the board of directors or an officer or officers authorized by the board. Such
removal does not affect the contract rights, if any, of the corporation or of
the person so removed. The appointment of an officer or agent shall not in
itself create contract rights.
Section 4. Vacancies. A vacancy in any office, however occurring, may be
filled by the board of directors, or by the officer or officers authorized by
the board, for the unexpired portion of the officer's term. If an officer
resigns and his resignation is made effective at a later date, the board of
directors, or officer or officers authorized by the board, may permit the
officer to remain in office until the effective date and may fill the pending
vacancy before the effective date if the board of directors or officer or
officers authorized by the board provide that the successor shall not take
office until the effective date. In the alternative, the board of directors or
officer or officers authorized by the board of directors may remove the officer
at any time before the effective date and may fill the resulting vacancy.
Section 5. President. Subject to the direction and supervision of the board
of directors, the president shall have general and active control of its affairs
and business and general supervision of its officers, agents and employees.
Unless otherwise directed by the board of directors, the president shall attend
in person or by substitute appointed by him, or shall execute on behalf of the
corporation written instruments appointing a proxy or proxies to represent the
corporation, at all meetings of the stockholders of any other corporation in
which the corporation holds any stock. On behalf of the corporation, the
president may in person or by substitute or proxy execute written waivers of
notice and consents with respect to any such meetings. At all such meetings and
otherwise, the president, in person or by substitute or proxy, may vote the
stock held by the corporation, execute written consents and other instruments
with respect to such stock, and exercise any and all rights and powers incident
to the ownership of said stock, subject to the instructions, in any, of the
board of directors. The president shall have custody of the controller's bond,
5649\564900DK.BYL
06/13/97
-11-
<PAGE>
if any. The president shall have such additional authority and duties as are
appropriate and customary for the office of president and chief executive
officer, except as the same may be expanded or limited by the board of directors
from time to time.
Section 6. Vice Presidents. The vice presidents shall assist the president
and shall perform such duties as may be assigned to them by the president or by
the board of directors. In the absence of the president, the vice president, if
any (or, if more than one, the vice presidents in the order designated by the
board of directors, of if the board makes no such designation, then the vice
president designated by the president, or if neither the board nor the president
makes any such designation, the senior vice president as determined by first
election of that office), shall have the powers and perform the duties of the
president.
Section 7. Secretary. The secretary shall (i) prepare and maintain as
permanent records the minutes of the proceedings of the shareholders and the
board of directors, a record of all actions taken by the shareholders or board
of directors without a meeting, a record of all actions taken by a committee of
the board of directors in place of the board of directors on behalf of the
corporation, and a record of all waivers of notice of meetings of shareholders
and of the board of directors or any committee thereof, (ii) see that all
notices are duly given in accordance with the provisions of these bylaws and as
required by law, (iii) serve as custodian of the corporate records and of the
seal of the corporation and affix the seal to all documents when authorized by
the board of directors, (iv) keep at the corporation's registered office or
principal place of business a record containing the names and addresses of all
shareholders in a form that permits preparation of a list of shareholders
arranged by voting group and by class or series of shares within each voting
group, that is alphabetical within each class or series and that shows the
address of, and the number of shares of each class or series held by, each
shareholder, unless such a record shall be kept at the office of the
corporation's transfer agent or registrar, (v) maintain at the corporation's
principal office the originals or copies of the corporation's articles of
incorporation, bylaws, minutes of all shareholders' meetings and records of all
action taken by shareholders without a meeting for the past three years, all
written communications within the past thee years to shareholders as a group or
to the holders of any class or series of shares as a group, a list of the names
and business addresses of the current directors and officers, a copy of the
corporation's most recent corporate report filed with the Secretary of State,
and financial statements showing in reasonable detail the corporation's assets
and liabilities and results of operations for the last three years, (vi) have
general charge of the stock transfer books of the corporation, unless the
corporation has a transfer agent, (vii) authenticate records of the corporation,
and (viii) in general, perform all duties incident to the office of secretary
and such other duties as from time to time may be assigned to him by the
president or by the board of directors. Assistant secretaries, if any, shall
have the same duties and powers, subject to supervision by the secretary. The
directors and/or shareholders may however respectively designate a person other
than the secretary or assistant secretary to keep the minutes of their
respective meetings. The board of directors may appoint the person serving as
vice president and general counsel to act as the secretary of the corporation.
Any books, records, or minutes of the corporation may be in written form or
in any form capable of being converted into written form within a reasonable
time.
Section 8. Controller. The controller shall be the principal financial
officer of the corporation, shall have the care and custody of all funds,
securities, evidences of indebtedness and other personal property of the
corporation and shall deposit the same in accordance with the instructions of
the board of directors. He shall receive and give receipts and acquittances for
money paid in on account of the corporation, and shall pay out of the
corporation's funds on hand all bills, payrolls and other just debts of the
5649\564900DK.BYL
06/13/97
-12-
<PAGE>
corporation of whatever nature upon maturity. He shall perform all other duties
incident to such office and, upon request of the board, shall make such reports
to it as may be required at any time. He shall, if required by the board, give
the corporation a bond in such sums and with such sureties as shall be
satisfactory to the board, conditioned upon the faithful performance of his
duties and for the restoration to the corporation of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the corporation. He shall have such other powers and
perform such other duties as may from time to time be prescribed by the board of
directors or the president.
The controller shall also be the principal accounting officer of the
corporation. He shall prescribe and maintain the methods and systems of
accounting to be followed, keep complete books and records of account as
required by the Colorado Business Corporation Act, prepare and file all local,
state and federal tax returns, prescribe and maintain an adequate systems of
internal audit and prepare and furnish to the president and the board of
directors statements of account showing the financial position of the
corporation and the results of its operations.
Section 9. Treasurer. The treasurer, if any, shall serve as an assistant to
the controller and shall perform the duties of the controller to the extent the
board so designates.
ARTICLE V
Stock
-----
Section 1. Certificates. The board of directors shall be authorized to
issue any of its classes of shares with or without certificates. The fact that
the shares are not represented by certificates shall have no effect on the
rights and obligations of shareholders. If the shares are represented by
certificates, such shares shall be represented by consecutively numbered
certificates signed, either manually or by facsimile, in the name of the
corporation by one or more persons designated by the board of directors. In case
any officer who has signed or whose facsimile signature has been placed upon
such certificate shall have ceased to be such officer before such certificate is
issued, such certificate may nonetheless be issued by the corporation with the
same effect as if he were such officer at the date of its issue. Certificates of
stock shall be in such form and shall contain such information consistent with
law as shall be prescribed by the board of directors. If shares are not
represented by certificates, within a reasonable time following the issue or
transfer of such shares, the corporation shall send the shareholder a complete
written statement of all of the information required to be provided to holders
of uncertificated shares by the Colorado Business Corporation Act.
Section 2. Consideration for Shares. Certificated or uncertified shares
shall not be issued until the shares represented thereby are fully paid. The
board of directors may authorize the issuance of shares for consideration
consisting of any tangible or intangible property or benefit to the corporation,
including cash, promissory notes, services performed or other securities of the
corporation. Future services shall not constitute payment or partial payment for
shares of the corporation. The promissory note of a subscriber or an affiliate
of a subscriber shall not constitute payment or partial payment for shares of
the corporation unless the note is negotiable and is secured by collateral,
other than the shares being purchased, having a fair market value at least equal
to the principal amount of the note. For purposes of this Section 2, "promissory
note" means a negotiable instrument on which there is an obligation to pay
independent of collateral and does not include a non-recourse note.
Section 3. Lost Certificates. In case of the alleged loss, destruction or
mutilation of a certificate of stock, the board of directors may direct the
issuance of a new certificate of stock, the board of directors may direct the
5649\564900DK.BYL
06/13/97
-13-
<PAGE>
issuance of a new certificate in lieu thereof upon such terms and conditions in
conformity with law as the board may prescribe. The board of directors may in
its discretion require an affidavit of lost certificate and/or a bond in such
form and amount and with such surety as it may determine before issuing a new
certificate.
Section 4. Transfer of Shares. Upon surrender to the corporation or to a
transfer agent of the corporation of a certificate of stock duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, and receipt of such documentary stamps as may be required by law and
evidence of compliance with all applicable securities laws and other
restrictions, the corporation shall issue a new certificate to the person
entitled thereto, and cancel the old certificate. Every such transfer of stock
shall be entered on the stock books of the corporation which shall be kept at
its principal office or by the person and the place designated by the board of
directors.
Except as otherwise expressly provided in Article II, Sections 7 and 11,
and except for the assertion of dissenters' rights to the extent provided in
Article 113 for the Colorado Business Corporation Act, the corporation shall be
entitled to treat the registered holder of any shares of the corporation as the
owner thereof for all purposes, and the corporation shall not be bound to
recognize any equitable or other claim to, or interest in, such shares or rights
deriving from such shares on the part of any person other than the registered
holder, including without limitation any purchaser, assignee or transferee of
such shares or rights deriving from such shares, unless and until such other
person becomes the registered holder of such shares, whether or not the
corporation shall have either actual or constructive notice of the claimed
interest of such other person.
Section 5. Transfer Agent, Registrars and Paying Agents. The board may at
its discretion appoint one or more transfer agents, registrars and agents for
making payment upon any class of stock, bond, debenture or other security of the
corporation. Such agents and registrars may be located either within or outside
Colorado. They shall have such rights and duties and shall be entitled to such
compensation as may be agreed.
ARTICLE VI
Indemnification of Certain Persons
----------------------------------
Section 1. Definitions. The following definitions shall apply to the terms
as used in this Article:
a. "Corporation" includes this corporation and any domestic or foreign
predecessor entity of the corporation in a merger, or other transaction in which
the predecessor's existence ceased upon consummation of the transaction.
b. "Director" means an individual who is or was a director of the
corporation and an individual who, while a director of the corporation, is or
was serving at the corporation's request as a director, officer, partner,
trustee, employee, or agent of any other foreign or domestic corporation or of
any partnership, joint venture, trust, other enterprise or person, or employee
benefit plan. A director shall be considered to be serving an employee benefit
plan at the corporation's request if his or her duties to the corporation also
impose duties on or otherwise involve services by him or her to the plan or to
participants in or beneficiaries of the plan. "Director" includes, unless the
context otherwise requires, the estate or personal representative of a director.
c. "Expenses" includes attorneys fees.
5649\564900DK.BYL
06/13/97
-14-
<PAGE>
d. "Liability" means the obligation to pay a judgment, settlement,
penalty, fine (including an excise tax assessed with respect to an employee
benefit plan), or reasonable expense incurred with respect to a proceeding.
e. "Official capacity," when used with respect to a director, means
the office of director in the corporation, and, when used with respect to a
person other than a director, means the office in the corporation held by the
officer or the employment or agency relationship undertaken by the employee or
agent on behalf of the corporation. "Official capacity" does not include service
for any other foreign or domestic corporation or for any partnership, joint
venture, trust, other enterprise, or employee benefit plan.
f. "Party" includes a person who was, is, or is threatened to be made
a named defendant or respondent in a proceeding.
g. "Proceeding" means any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative, or investigative
and whether formal or informal.
Section 2. Indemnification for Liability.
a. Except as provided in paragraph d. of this Section 2, the
corporation shall indemnify against liability incurred in any proceeding any
person made a party to the proceeding because he or she is or was a director or
officer if: (i) he or she conducted himself or herself in good faith; (ii) he or
she reasonably believed: (a) in the case of conduct in his or her official
capacity with the corporation, that his or her conduct was in the corporation's
best interests, or (b) in all other cases, that his or her conduct was at least
not opposed to the corporation's best interests; and (iii) in the case of any
criminal proceeding, he or she had no reasonable cause to believe his or her
conduct was unlawful.
b. A director's or officer's conduct with respect to an employee
benefit plan for a purpose he or she reasonably believed to be in the interests
of the participants in or beneficiaries of the plan is conduct that satisfies
the requirements of this Section 2. A director's or officer's conduct with
respect to an employee benefit plan for a purpose that he or she did not
reasonably believe to be in the interests of the participants in or
beneficiaries of the plan shall be deemed not to satisfy the requirements of
this Section 2.
c. The termination of any proceeding by judgment, order, settlement,
or conviction, or upon a plea of nolo contendere or its equivalent, is not of
itself determinative that the person did not meet the standard of conduct set
forth in paragraph a. of this Section 2.
d. The corporation may not indemnify a director or officer under this
Section 2 either: (i) in connection with a proceeding by or in the right of the
corporation in which the director or officer was adjudged liable to the
corporation; or (ii) in connection with any proceeding charging improper
personal benefit to the director or officer, whether or not involving action in
his or her official capacity, in which he or she was adjudged liable on the
basis that personal benefit was improperly received by him or her.
e. Indemnification permitted under this Section 2 in connection with a
proceeding by or in the right of the corporation is limited to reasonable
expenses incurred in connection with the proceeding.
5649\564900DK.BYL
06/13/97
-15-
<PAGE>
Section 3. Mandatory Indemnification.
a. Except as limited by these bylaws, the corporation shall be
required to indemnify a director or officer of the corporation who was wholly
successful, on the merits or otherwise, in defense of any proceeding to which he
or she was a party because the person is or was a director or officer, against
reasonable expenses incurred by him or her in connection with the proceeding.
b. Except as otherwise limited by these bylaws, a director or officer
who is or was a party to a proceeding may apply for indemnification to the court
conducting the proceeding or to another court of competent jurisdiction. On
receipt of an application, the court, after giving any notice the court
considers necessary, may order indemnification in the following manner:
(i) If it determines the director or officer is entitled to
mandatory indemnification, the court shall order indemnification under paragraph
a. of this Section 3, in which case the court shall also order the corporation
to pay the director's or officer's reasonable expenses incurred to obtain
court-ordered indemnification.
(ii) If it determines that the director or officer is fairly and
reasonably entitled to indemnification in view of all the relevant
circumstances, whether or not he or she met the standard of conduct set forth in
paragraph a. of Section 2 of this Article or was adjudged liable in the
circumstances described in paragraph d. of Section 2 of this Article, the court
may order such indemnification as the court deems proper; except that the
indemnification with respect to any proceeding in which liability shall have
been adjudged in the circumstances described in paragraph d. of Section 2 of
this Article is limited to reasonable expenses incurred.
c. Notwithstanding Section 3(b) above in this Article, no person shall
be entitled to be reimbursed for any expense incurred in connection with a court
proceeding to obtain court-ordered indemnification unless such person has first
made a reasonable application to the corporation for indemnification, and the
corporation has either unreasonably denied such application or, through no fault
of the applicant, has been unable to consider such application within a
reasonable time.
Section 4. Limitation on Indemnification.
a. The corporation may not indemnify a director or officer under
Section 2 of this Article unless authorized in the specific case after a
determination has been made that indemnification of the director or officer is
permissible in the circumstances because he or she has met the standard of
conduct set forth in paragraph a. of Section 2 of this Article.
b. The determination required to be made by paragraph a. of this
Section 4 shall be made (i) by the board of directors by a majority vote of a
quorum, which quorum shall consist of directors not parties to the proceeding;
or (ii) if a quorum cannot be obtained, by a majority vote of a committee of the
board designated by the board, which committee shall consist of two or more
directors not parties to the proceeding; except that directors who are parties
to the proceeding may participate in the designation of directors for the
committee.
c. If the quorum cannot be obtained or the committee cannot be
established under paragraph b. of this Section 4, or even if a quorum is
obtained or a committee designated if such quorum or committee so directs, the
determination required to be made by paragraph a. of this Section 4 shall be
5649\564900DK.BYL
06/13/97
-16-
<PAGE>
made: (i) by independent legal counsel selected by a vote of the board of
directors or the committee in the manner specified in subparagraph (i) or (ii)
of paragraph b. of this Section 4 or, if a quorum of the full board cannot be
obtained and a committee cannot be established, by independent legal counsel
selected by a majority vote of the full board; or (ii) by the shareholders.
d. Authorization of indemnification and evaluation as to
reasonableness of expenses shall be made in the same manner as the determination
that indemnification is permissible; except that, if the determination that
indemnification is permissible is made by independent legal counsel,
authorization of indemnification and evaluation as to reasonableness of expenses
shall be made by the body that selected said counsel.
Section 5. Advance of Expenses.
a. The corporation may pay for or reimburse the reasonable expenses
incurred by a director, officer, employee or agent who is a party to a
proceeding in advance of final disposition of the proceeding if:
(i) The director, officer, employee or agent furnishes the
corporation a written affirmation of his or her good faith belief that he or she
has met the standard of conduct described in subparagraph (i) of paragraph a. of
Section 2 of this Article;
(ii) The director, officer, employee or agent furnishes the
corporation a written undertaking, executed personally or on his or her behalf,
to repay the advance if it is determined that he or she did not meet such
standard of conduct; and
(iii) A determination is made that the facts then known to those
making the determination would not preclude indemnification under this Article.
b. The undertaking required by subparagraph (ii) of paragraph a. of
this Section 5 shall be an unlimited general obligation of the director,
officer, employee or agent, but need not be secured and may be accepted without
reference to financial ability to make repayment.
c. Determinations and authorizations of payments under this Section
shall be made in the manner specified under Section 4 of this Article.
Section 6. Reimbursement of Witness Expenses. The sections of this Article
do not limit the corporation's authority to pay or reimburse expenses incurred
by a director in connection with his or her appearance as a witness in a
proceeding at a time when he or she has not been made a named defendant or
respondent in the proceeding.
Section 7. Insurance for Indemnification. The corporation may purchase and
maintain insurance on behalf of a person who is or was a director, officer,
employee, fiduciary, or agent of the corporation or who, while a director,
officer, employee, fiduciary, or agent of the corporation, is or was serving at
the request of the corporation as a director, officer, partner, trustee,
employee, fiduciary, or agent of any other foreign or domestic corporation or of
any partnership, joint venture, trust, other enterprise, or employee benefit
plan against any liability asserted against or incurred by him or her in any
such capacity or arising out of his or her status as such, whether or not the
corporation would have the power to indemnify him or her against such liability
under the provisions of this Article. Any such insurance may be procured from
any insurance company designated by the Board of Directors of the
5649\564900DK.BYL
06/13/97
-17-
<PAGE>
corporation, whether such insurance company is formed under the laws of Colorado
or elsewhere, including any insurance company in which the corporation has
equity or any other interest, through stock or otherwise.
Section 8. Notice of Indemnification. Any indemnification of or advance of
expenses to a director in accordance with this Article, if arising out of a
proceeding by or on behalf of the corporation, shall be reported in writing to
the shareholders with or before the notice of the next shareholders' meeting.
Section 9. Indemnification of Officers, Employees and Agents of the
Corporation. The Board of Directors may indemnify and advance expenses to an
officer, employee or agent of the corporation who is not a director of the
corporation to the same or greater extent as to a director if such
indemnification and advance expense payment is provided for in the Articles of
Incorporation, these bylaws, by resolution of the shareholders or directors or
by contract, in a manner consistent with the Colorado Business Corporation Act.
ARTICLE VII
Miscellaneous
-------------
Section 1. Seal. The corporate seal of the corporation shall be circular in
form and shall contain the name of the corporation and the words, "Seal,
Colorado."
Section 2. Fiscal Year. The fiscal year of the corporation shall be as
established by the board of directors.
Section 3. Amendments. The board of directors shall have power, to the
maximum extent permitted by the Colorado Business Corporation Act, to make,
amend and repeal the bylaws of the corporation at any regular or special meeting
of the board unless the shareholders, in making, amending or repealing a
particular bylaw, expressly provide that the directors may not amend or repeal
such bylaw. The shareholders also shall have the power to make, amend or repeal
the bylaws of the corporation at any annual meeting or at any special meeting
called for that purpose.
Section 4. Gender. The masculine gender is used in these bylaws as a matter
of convenience only and shall be interpreted to include the feminine and neuter
genders as the circumstances indicate.
Section 5. Conflicts. In the event of any irreconcilable conflict between
these bylaws and either the corporation's articles of incorporation or
applicable law, the latter shall control.
Section 6. Receipt of Notices by the Corporation. Notices, shareholder
writings consenting to action, and other documents or writings shall be deemed
to have been received by the corporation when they are actually received: (i) at
the registered office of the corporation in Colorado; (ii) at the principal
office of the corporation (as that office is designated in the most recent
document filed by the corporation with the Secretary of State for Colorado
designating a principal office) addressed to the attention of the secretary of
the corporation; (iii) by the secretary of the corporation wherever the
secretary may be found; or (iv) by any other person authorized from time to time
by the board of directors or the president to receive such writings, wherever
such person is found.
Section 7. Definitions. Except as otherwise specifically provided in these
bylaws, all terms used in these bylaws shall have the same definition as in the
Colorado Business Corporation Act.
5649\564900DK.BYL
06/13/97
-18-
<PAGE>
SSI CAPITAL CORP.
1997 STOCK PLAN
1. Purposes of the Plan. The purposes of this Stock Plan are to attract and
retain the best available personnel for positions of substantial responsibility,
to provide additional incentive to Employees and Consultants of the Company and
its Parent and/or Subsidiaries (if any) and to promote the success of the
Company's business. Options granted under the Plan may be incentive stock
options (as defined under Section 422 of the Code) or nonstatutory stock
options, as determined by the Administrator at the time of grant of an option
and subject to the applicable provisions of Section 422 of the Code, as amended,
and the regulations promulgated thereunder. Stock purchase rights may also be
granted under the Plan.
2. Definitions. As used herein, the following definitions shall apply:
a. "Administrator" means the Board or any of its Committees or
subcommittees thereof appointed pursuant to Section 4 of the Plan.
b. "Board" means the Board of Directors of the Company.
c. "Code" means the Internal Revenue Code of 1986, as amended.
d. "Committee" means the Committee (or any subcommittee thereof)
appointed by the Board of Directors in accordance with paragraph (a) of Section
4 of the Plan.
e. "Common Stock" means the Common Stock of the Company.
f. "Company" means SSI Capital Corp., a New York corporation.
g. "Consultant" means any person, including an advisor, who is engaged
by the Company or any Parent or Subsidiary to render consultative or advisory
services and is compensated for such services, and any director of the Company
whether compensated for such services or not provided that if and in the event
the Company registers any class of any equity security pursuant to the Exchange
Act, the term Consultant shall thereafter not include directors who are not
compensated for their services or are paid only a director's fee by the Company.
h. "Continuous Status as an Employee" means the absence of any
interruption of service or termination of the employment relationship with the
Company (or its Parent or Subsidiary, if any). Continuous Status as an Employee
shall not be considered interrupted in the case of: sick leave, military leave
or any other leave of absence approved by the Board in the exercise of its sole
discretion, provided that such leave is for a period of not more than ninety
(90) days, unless reemployment upon the expiration of such leave is guaranteed
by contract or statute, or unless provided otherwise pursuant to Company policy
adopted from time to time; or in the case of transfers between locations of the
Company or between the Company, its Parent or Subsidiaries, or its successor.
EXHIBIT E
5534\553400DK.SOP
04/23/97
<PAGE>
i. "Employee" means any person, including officers and directors,
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a director's fee by the Company shall not be sufficient to constitute
"employment" by the Company.
j. "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
k. "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system including without limitation
the National Market System of the National Association of
Securities Dealers, Inc. Automated Quotation ("NASDAQ") System,
its Fair Market Value shall be the closing sales price for such
stock (or the closing bid, if no sales were reported, as quoted
on such system or exchange for the last market trading day prior
to the time of determination) as reported in the Wall Street
Journal or such other source as the Administrator deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ System (but not
on the National Market System thereof) or regularly quoted by a
recognized securities dealer but selling prices are not reported,
its Fair Market Value shall be the mean between the high and low
asked prices for the Common Stock, as quoted for the last market
trading day prior to the time of determination, as reported in
the Wall Street Journal or such other source as the Administrator
deems reliable; or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good
faith by the Board.
l. "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code.
m. "Nonstatutory Stock Option" means an Option not intended to qualify
as an Incentive Stock Option.
n. "Option" means a stock option granted pursuant to the Plan.
o. "Optioned Stock" means the Common Stock subject to an Option.
p. "Optionee" means an Employee or Consultant who receives an Option.
q. "Parent" means a "parent corporation", whether now or hereafter
existing, as defined in Section 424 (e) of the Code.
r. "Plan" means this 1997 Stock Plan, as amended from time to time.
s. Intentionally Left Blank.
t. "Share" means a share of the Common Stock, as adjusted in
accordance with Section 13 of the Plan.
5534\553400DK.SOP
04/23/97
-2-
<PAGE>
u. Intentionally Left Blank.
v. "Subsidiary" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 13 of
the Plan, the number of Shares that may be issued pursuant to Options granted
under the Plan shall not exceed in the aggregate 1,000,000 Shares. The Shares
may be authorized, but unissued, or reacquired Common Stock. If an Option should
expire or become unexercisable for any reason without having been exercised in
full, the unpurchased Shares which were subject thereto shall, unless the Plan
shall have been terminated, become available for future grant under the Plan.
4. Administration of the Plan.
a. Procedure.
(i) Administration With Respect to Directors and Officers. With
respect to grants of Options to Employees who are also officers
or directors of the Company, the Plan shall be administered by
the Board or a Committee or subcommittee thereof designated by
the Board to grant Options under the Plan without further
approval by the Board. The Administrator shall take such actions
and/or be comprised of such individuals so as to be, at the time
of making a grant of Options, in compliance with Rule 16b-3
promulgated under the Exchange Act or any successor thereto
("Rule 16b-3") with respect to a plan intended to qualify
thereunder for the maximum exemption from Section 16 of the
Exchange Act with respect to Plan transactions.
(ii) Multiple Administrative Bodies. If permitted by Rule 16b-3,
the Plan may be administered by different bodies with respect to
directors, nondirector officers and Employees who are neither
directors nor officers.
(iii) Administration with Respect to Consultants and Other
Employees. With respect to grants of Options to Employees or
Consultants who are neither directors nor officers of the
Company, the Plan shall be administered by (A) the Board or (B) a
Committee (or subcommittee thereof) designated by the Board,
which Committee or subcommittee shall be constituted in such a
manner as to satisfy any legal requirements relating to the
administration (i) of Incentive Stock Option plans (if
applicable), if any, (ii) of governing corporate and securities
laws, and (iii) of the Code (the "Applicable Laws"). Once
appointed, such Committee shall continue to serve in its
designated capacity until otherwise directed by the Board or of
the Committee. From time to time the Board may, with respect to
any Committee or subcommittee, increase the size and appoint
additional members thereof, remove members (with or without
cause) and appoint new members in substitution therefor, fill
vacancies, however caused, and remove all members of the
Committee (and any subcommittee) and thereafter directly
administer the Plan, all to the extent permitted by the
Applicable Laws.
5534\553400DK.SOP
04/23/97
-3-
<PAGE>
b. Powers of the Administrator. Subject to the provisions of the Plan
and in the case of a Committee or subcommittee, the specific duties delegated by
the Board to such Committee or subcommittee, the Administrator shall have the
authority, in its discretion:
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(k) of the Plan:
(ii) to select the officers, Consultants and Employees to whom
Options may from time to time be granted hereunder;
(iii) to determine whether or to what extent Options or any
combination thereof, are granted hereunder;
(iv) to determine the number of shares of Common Stock to be
covered by each such award granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any award granted hereunder (including,
but not limited to the share price and any restriction or
limitation, based in each case on such factors as the
Administrator shall determine in its sole discretion);
(vii) Intentionally Left Blank; and
(viii) to make any other such determinations with respect to
awards under the Plan as it shall be deemed appropriate.
c. Effect of Administrator's Decision. All decisions, determinations
and interpretations of the Administrator shall be final and binding on all
Optionees and any other holders of any Options.
5. Eligibility for Options.
a. Nonstatutory Stock Options may be granted to Employees and
Consultants. Incentive Stock Options may be granted only to Employees. An
Employee or Consultant who has been granted an Option may, if he is otherwise
eligible, be granted an additional Option or Options.
b. Each Option shall be designated in the written option agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designations, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Options designated as Incentive Stock
Options are exercisable for the first time by any Optionee during any calendar
year (under all plans of the Company or any Parent or Subsidiary) exceeds
$100,000, such excess Options shall be treated as Nonstatutory Stock Options.
c. For purposes of Section 5(b), Incentive Stock Options shall be
taken into account in the order in which they were granted, and the Fair Market
Value of the Shares shall be determined as of the time the Option with respect
to such Shares is granted.
5534\553400DK.SOP
04/23/97
-4-
<PAGE>
d. The Plan shall not confer upon any Optionee any right with respect
to continuation of any employment or consulting relationship with the Company,
nor shall it interfere in any way with his right or the Company's right to
terminate his employment or consulting relationship at any time, with or without
cause.
6. Term of Plan. The Plan shall become effective upon the earlier to occur
of its adoption by the Board of Directors or its approval by the stockholders of
the Company as described in Section 19 of the Plan. It shall continue in effect
for a term of ten (10) years unless sooner terminated under Section 15 of the
Plan.
7. Term of Option. The term of each Option shall be the term stated in the
Option Agreement; provided, however, that the term shall be no more than ten
(10) years from the date of grant thereof. However, in the case of an Incentive
Stock Option granted to an Optionee who, at the time the Option is granted, owns
stock representing more than ten percent (10%) of the voting power of all
classes of stock of the Company or any Parent or Subsidiary, the term of the
Option shall be five (5) years from the date of grant thereof or such shorter
term as may be provided in the Option Agreement.
8. Option Exercise Price and Consideration.
a. The per share exercise price for the Shares to be issued pursuant
to exercise of an Option shall be such price as is determined by the Board, but
shall be subject to the following:
(i) in the case of an Incentive Stock Option
(a) granted to an Employee who, at the time of the grant of
such Incentive Stock Option, owns stock representing more
than ten percent (10%) of the voting power of all classes of
stock of the Company or any Parent or Subsidiary, the per
Share exercise price shall be no less than One hundred ten
percent (110%) of the Fair Market Value per Share on the
date of grant.
(b) granted to any Employee, the per Share exercise price
shall be no less than 100% of the Fair Market Value per
Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option
(a) granted to any person, the per Share exercise price
shall be no less than Eighty-five percent (85%) of the Fair
Market Value per Share on the date of grant.
b. The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (i) cash, (ii)
check, (iii) other Shares which (x) in the case of Shares acquired upon exercise
of an Option either have been owned by the Optionee for more than six (6) months
on the date of surrender or were not acquired, directly or indirectly, from the
Company, and (y) have a Fair Market Value on the date of surrender equal to the
5534\553400DK.SOP
04/23/97
-5-
<PAGE>
aggregate exercise price of the Shares as to which said Option shall be
exercised, (iv) authorization for the Company to retain from the total number of
Shares as to which the Option is exercised, that number of Shares whose Fair
Market Value on the date of exercise equals the total exercise price for the
Options being exercised, (v) any combination of the foregoing methods of
payment, or (vi) such other consideration and method of payment for the issuance
of Shares as determined by the Administrator, to the extent permitted under
Applicable Laws.
9. Exercise of Option.
a. Procedure for Exercise; Rights as a Stockholder. Any Option shall
be exercisable at such times and under such conditions as determined by the
Administrator, including the allotment of any number of Options in periodic
installments (which may, but need not, be equal) and including performance
criteria with respect to the Company and/or the Optionee, and as shall be
permitted under the terms of the Plan. An Option may not be exercised for a
fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Administrator, consist of any
consideration and method of payment allowable under Section 8(b) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a stockholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause to
be issued) such stock certificate promptly upon exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued. Exercise of an Option in
any manner shall result in a decrease in the number of Shares which thereafter
may be available, both for purposes of the Plan and for sale under the Option,
by the number of Shares as to which the Option is exercised.
b. Termination of Employment. In the event of termination of an
Optionee's consulting relationship or Continuous Status as an Employee with the
Company (as the case may be), such Optionee may, but only by the earlier of the
expiration date of the term of the Option as set forth in the Option Agreement
or the date that is ninety (90) days after the date of such termination (or, in
the case of a Nonstatutory Stock Option, such other period as is set out by the
Administrator in the Option Agreement, but in no event later than the expiration
date of the term of such Option as set forth in the Option Agreement), exercise
the Option to the extent that Optionee was entitled to exercise it at the date
of such termination. To the extent that Optionee was not entitled to exercise
the Option at the date of such termination, or if Optionee does not exercise
such Option to the extent so entitled within the time specified herein, the
Option shall terminate and the Shares covered by such Option shall revert and
again become available for issuance under the Plan.
If the Optionee ceases to be an employee, officer or director of, or
consultant to the Company as a result of dismissal by the Company for "cause" as
defined herein, all Options theretofore granted to such Optionee but not
theretofore exercised shall terminate immediately upon such dismissal. For the
purposes of the Plan, the term "cause" shall mean: (i) with respect to an
5534\553400DK.SOP
04/23/97
-6-
<PAGE>
Optionee who is a party to a written agreement with or, alternatively,
participates in a compensation or benefit plan of the Company, which agreement
or plan contains a definition of "for cause" or "cause" (or words of like
import) for purposes of termination of employment thereunder by the Company,
"for cause" or "cause" as defined in the most recent of such agreements or
plans; or (ii) in all other cases, as determined by the Board, in its sole
discretion, the wilful commission by the Optionee of a criminal or other act
that causes or probably will cause substantial economic damage to the Company or
substantial injury to the business reputation of the Company, the commission by
the Optionee of an act of fraud in the performance of such Optionee's duties on
behalf of the Company, the continuing wilful failure of an Optionee to perform
the duties of such Optionee to the Company (other than such failure resulting
from the Optionee's incapacity due to physical or mental illness) after written
notice thereof (specifying the particulars thereof in reasonable detail) and a
reasonable opportunity to be heard and cure such failure are given to the
Optionee by the Board or the order of a court of competent jurisdiction
requiring the termination of the Optionee's relationship with the Company. For
purposes of the Plan, no act or failure to act on the Optionee's part shall be
considered "wilful" unless done or omitted to be done by the Optionee not in
good faith and without reasonable belief that the Optionee's action or omission
was in the best interest of the Company.
c. Disability of Optionee. Notwithstanding the provisions of Section
9(b) above, in the event of termination of an Optionee's Consulting relationship
or Continuous Status as an Employee as a result of his disability (as determined
by the Board in accordance with the policies of the Company), Optionee may, but
only within six (6) months from the date of such termination (or in the case of
a Nonstatutory Stock Option, such other longer period as is set out by the
Administrator in the Option Agreement, but in no event later than the expiration
date of the term of such Option as set forth in the Option Agreement), exercise
the Option to the extent otherwise entitled to exercise it at the date of such
termination. To the extent that Optionee was not entitled to exercise the Option
at the date of disability, or if Optionee does not exercise such Option to the
extent so entitled within the time specified herein, the Option shall terminate.
d. Death of Optionee. In the event of the death of an Optionee, the
Option may be exercised, at any time within twelve (12) months following the
date of death (but in no event later than the expiration date of the term of
such Option as set forth in the Option Agreement), by the Optionee's estate or
by a person who acquired the right to exercise the Option by bequest or
inheritance, but only to the extent the Optionee was entitled to exercise the
Option at the date of death. To the extent that Optionee was not entitled to
exercise the Option at the date of death, or if Optionee does not exercise such
Option to the extent so entitled within the time specified herein, the Option
shall terminate.
e. Rule 16b-3. Options granted to persons subject to Section 16(b) of
the Exchange Act must comply with Rule 16b-3 and shall contain such additional
conditions or restrictions as may be required thereunder to qualify for the
maximum exemption from Section 16 of the Exchange Act with respect to Plan
transactions.
10. Transferability of Options. An Incentive Stock Option shall not be
transferable except by will or by the laws of descent or 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 transferrable to the
extent expressly provided in the Option Agreement. To the extent that the
transfer constitutes a bona fide gift or a transfer by will or the laws of
descent and distribution, such transfer shall be permitted only to the extent
5534\553400DK.SOP
04/23/97
-7-
<PAGE>
that such disposition is exempt from the operation of Section 16(b) of the
Exchange Act in accordance with the provisions of Rule 16b-5 promulgated
thereunder or otherwise.
11. Cancellation and Re-Grant of Options. The Board or the Committee (or
its subcommittee) 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 determined on the date of the
substituted grant.
12. Stock Withholding to Satisfy Withholding Tax Obligations. Payment in
full to the Company of any withholding tax liability arising from any exercise
of Options shall be made at the time of exercise to the satisfaction of the
Administrator. At the discretion of the Administrator, Optionees may also
satisfy withholding obligations as provided in this paragraph. When an Optionee
incurs tax liability in connection with an Option, which tax liability is
subject to tax withholding under applicable tax laws, and the Optionee is
obligated to pay the Company an amount required to be withheld under applicable
tax laws, the Optionee may satisfy the withholding tax obligation by electing
either to deliver to the Company other Shares then owned by the Optionee or to
have the Company withhold from the Shares to be issued upon exercise of the
Option, that number of Shares having a Fair Market Value equal to the amount
required to be withheld. The Fair Market Value of the Shares to be delivered or
withheld shall be determined on the date that the amount of tax to be withheld
is to be determined (the "Tax Date").
All elections by an Optionee to have Shares withheld for this purpose shall
be made in writing in a form acceptable to the Administrator and shall be
subject to the following restrictions:
a. the election must be made on or prior to the applicable Tax Date;
b. once made, the election shall be irrevocable as to the particular
Shares of the Option as to which the election is made;
c. all elections shall be subject to the consent or disapproval of the
Administrator;
d. if the Optionee is subject to Rule 16b-3, the election must comply
with the applicable provisions of Rule 16b-3 and shall be subject to such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
In the event the election to have Shares withheld is made by an
Optionee and the Tax Date is deferred under Section 83 of the Code because no
election is filed under Section 83(b) of the Code, the Optionee shall receive
the full number of Shares with respect to which the Option is exercised but such
Optionee shall be unconditionally obligated to tender back to the Company the
proper number of Shares on the Tax Date.
13. Adjustments Upon Changes in Capitalization or Merger.
a. Subject to any required action by the stockholders of the Company,
the number of shares of Common Stock covered by each outstanding Option, and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but as to which no Options have yet been granted or which have been
5534\553400DK.SOP
04/23/97
-8-
<PAGE>
returned to the Plan upon cancellation or expiration of an Option, as well as
the price per Share of Common Stock covered by each such outstanding Option,
shall be proportionately adjusted for any increase or decrease in the number of
issued Shares of Common Stock resulting from a stock split, reverse stock split,
stock dividend, combination or reclassification of the Common Stock, or any
other increase or decrease in the number of issued shares of Common Stock
effected without receipt of consideration by Company; provided, however, that
conversion of any convertible securities of the Company shall not be deemed to
have been "effected without receipt of consideration." Such adjustment shall be
made by the Board, whose determination in that respect shall be final, binding
and conclusive. Except as expressly provided herein, no issuance by the Company
of shares of stock of any class, or securities convertible into shares of stock
of any class, shall affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of shares of Common Stock subject to an
Option.
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; and (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) or 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 either: (i) any surviving corporation
or acquiring corporation shall assume any Options outstanding under the Plan or
shall substitute similar options (including an award to acquire the same
consideration paid to the shareholders in the transaction described in this
subsection 13(a)) for those outstanding under the Plan; or in the event the
successor corporation does not agree to assume the Option or substitute an
equivalent Option, the Board shall notify Optionees at least fifteen (15) days
prior to such proposed action, and to the extent the Option is not exercised,
the Option will terminate immediately prior to the consummation of such proposed
action.
14. Time of Granting Options. The date of grant of an Option shall for all
purposes be the date on which the Administrator makes the determination granting
such Option, or such other date as is determined by the Board. However, such
grant shall not be effective until the Optionee executes a written Option
Agreement with respect to such Option. Notice of the determination shall be
given to each Employee or Consultant to whom an Option is so granted within a
reasonable time after the date of such grant.
15. Amendment and Termination of the Plan.
a. Amendment and Termination. The Board may at any time amend, alter,
suspend or discontinue the Plan, but no amendment, alteration, suspension or
discontinuation shall be made which would impair the rights of any Optionee
under any grant theretofore made, without his or her consent. However, to the
extent that shareholder approval is necessary for the Plan to satisfy the
requirements of Section 422 of the Code, Rule 16b-3, or any other applicable law
or regulation, including the requirements of the NASD or an established stock
exchange, such amendment shall not be effective until shareholder approval is
5534\553400DK.SOP
04/23/97
-9-
<PAGE>
obtained. The Board may in its sole discretion submit any other amendment to the
Plan for shareholder approval.
b. Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan has not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Board, which agreement must be in writing and signed by the Optionee and the
Company.
16. Conditions Upon Issuance of Shares. Shares will not be issued pursuant
to the exercise of an Option unless the exercise of such Option and the issuance
and delivery of such Shares pursuant thereto shall comply with all relevant
provisions of law, including, without limitations, the Securities Act of 1933,
as amended, the Exchange Act, the rules and regulations promulgated thereunder,
and the requirements of any stock exchange upon which the Shares may then be
listed, and shall be further subject to the approval of counsel for the Company
with respect to such compliance.
As a condition to the exercise of an Option, the Company may require the
person exercising such Option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned relevant provisions of law.
The Company shall not be liable for damages due to delay in the delivery or
issuance of any stock certificate for any reason whatsoever, including, but not
limited to, a delay caused by listing requirements of any securities exchange or
any registration requirements under the Securities Act of 1933, as amended, the
1934 Act, or under any other state or federal law, rule or regulation. The
Company is under no obligation to take any action or incur any expense in order
to register or qualify the delivery or transfer of Shares under applicable
securities laws or to perfect any exemption from such registration or
qualification. Furthermore, the Company will not be liable to any Optionee for
failure to deliver or transfer Shares if such failure is based upon the
provisions of this paragraph.
17. Reservation of Shares. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
The inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.
18. Agreements. Options shall be evidenced by written agreements in such
form as the Board shall approve from time to time.
19. Stockholder Approval. Continuance of the Plan shall be subject to
approval by the stockholders of the Company within twelve (12) months before or
after the date the Plan is adopted.
5534\553400DK.SOP
04/23/97
-10-
<PAGE>
Such stockholder approval shall be obtained in the degree and manner required
under applicable state and federal law.
5534\553400DK.SOP
04/23/97
-11-
