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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
---------------
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF
1934 (AMENDMENT NO. 1)
Filed by Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
MSI HOLDINGS, INC.
(Name of Registrant as Specified in its Charter)
------------------------------
(Name of Person Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i) and 0-11.
(1) Title of each class of securities to which the 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 the transaction:
Total proposed maximum aggregate value of the 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 No.:
(3) Filing Party:
(4) Date Filed:
================================================================================
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July 25, 2000
Dear Shareholder:
You are cordially invited to attend the annual meeting of shareholders
of MSI Holdings, Inc. to be held at 10:00 a.m., local time, on August 31, 2000,
at _______________________________________. At this meeting you will be asked
to:
1. Elect nine directors;
2. Approve our 2000 Stock Option Plan;
3. Approve the reincorporation of our company from Utah to
Delaware, including a one-for-three share combination of our
common stock in which each three shares of our stock would be
automatically converted into one share of the Delaware
successor corporation.
It is important that your shares be represented at the meeting;
therefore, if you do not expect to attend in person, please sign and date the
enclosed proxy and return it in the enclosed envelope at your earliest
convenience.
Very truly yours,
--------------------------------
Robert J. Gibbs
Chairman of the Board and Chief
Executive Officer
Austin, Texas
July 25, 2000
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MSI HOLDINGS, INC.
1121 EAST 7TH STREET
AUSTIN, TEXAS 78702
(512) 476-6925
-----------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 31, 2000
To our shareholders:
This is a notice that the annual meeting of shareholders of MSI
Holdings, Inc., a Utah corporation, will be held on August 31, 2000 at 10:00
a..m., local time, at ______________________________________. The purpose of
this meeting is for you to:
1. Elect nine of our directors.
2. Approve our 2000 Stock Option Plan. A copy of the plan is
attached as Appendix A.
3. Approve our reincorporation from Utah to Delaware through the
merger of our company into Aperian, Inc. Aperian is a newly
formed Delaware corporation that will be the surviving
corporation in the merger. As part of the merger, each three
shares of our common stock will be converted into one share of
common stock of Aperian. A copy of the plan of merger is
attached as Appendix B.
Your board of directors has determined that only holders of shares of
our common stock at the close of business on July 18, 2000, will be entitled to
notice of, and to vote at, the annual meeting or any adjournments or
postponements of the annual meeting. A form of proxy and a proxy statement
containing more detailed information with respect to the matters to be
considered at the annual meeting accompany this notice.
By order of the Board of Directors,
-----------------------------------
Douglas W. Banister
Secretary
Austin, Texas
July 25, 2000
_______________________
WHETHER OR NOT YOU ARE ABLE TO ATTEND THE ANNUAL MEETING, PLEASE SIGN,
DATE AND RETURN THE ACCOMPANYING PROXY CARD PROMPTLY IN THE ENCLOSED ENVELOPE.
NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES. PLEASE DO NOT SEND IN ANY
CERTIFICATES FOR YOUR SHARES AT THIS TIME. YOU MAY REVOKE YOUR PROXY AND VOTE IN
PERSON IF YOU DECIDE TO ATTEND THE MEETING.
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TABLE OF CONTENTS
<TABLE>
<S> <C>
THE ANNUAL MEETING OF STOCKHOLDERS........................................... 1
Date, Time and Place of the Annual Meeting................................ 1
Matters to be Considered at the Annual Meeting............................ 1
Proxy Solicitation........................................................ 1
Record Date and Quorum Requirement........................................ 1
Voting Procedures......................................................... 1
Voting and Revocation of Proxies.......................................... 2
Other Matters to Be Considered............................................ 2
PROPOSAL ONE - ELECTION OF DIRECTORS......................................... 3
PROPOSAL TWO - ADOPTION OF MSI'S 2000 STOCK OPTION PLAN...................... 4
PROPOSAL THREE - REINCORPORATION OF MSI...................................... 5
Introduction.............................................................. 5
Vote Required............................................................. 5
Principal Reasons for the Proposed Reincorporation........................ 5
Authorized Capital........................................................ 6
One-for-Three Stock Combination........................................... 6
Provisions Relating to Composition of Board of Directors.................. 7
Monetary Liability of Directors........................................... 7
Antitakeover Implications................................................. 8
Other Provisions of the Charter and Bylaws of Aperian..................... 9
No Change in the Business, Management, Employee Plans or Location of
Principal Facilities....................................................10
Significant Differences Between the Corporation Laws of Utah and
Delaware................................................................10
Appraisal Rights..........................................................13
Summary of Federal Income Tax Consequences of the Proposed
Reincorporation.........................................................14
DIRECTORS AND EXECUTIVE OFFICERS.............................................15
Relationships among Board Members and Executive Officers..................17
Meetings and Committees of Directors......................................17
MANAGEMENT COMPENSATION......................................................18
Compensation of Executive Officers........................................18
Summary Compensation Table................................................18
Compensation of Directors.................................................19
Compensation of Chief Executive Officer and Other Executives..............20
Related Party Transactions................................................20
2000 Stock Option Plan....................................................20
Retirement Plans..........................................................22
Limitations of Liability and Indemnification Matters......................22
STOCK OWNERSHIP OF PRINCIPAL OWNERS AND MANAGEMENT...........................24
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE......................26
</TABLE>
Appendices:
A -- Stock Option Plan
B -- Plan of Merger
C -- Certificate of Incorporation of Aperian, Inc.
D -- Bylaws of Aperian, Inc.
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MSI HOLDINGS, INC.
1121 EAST 7TH STREET
AUSTIN, TEXAS 78702
2000 ANNUAL MEETING OF SHAREHOLDERS
PROXY STATEMENT
DATE, TIME AND PLACE OF THE ANNUAL MEETING
The annual meeting will be held on August 31, 2000 at 10:00 a..m.,
local time at
________________________________________________.
MATTERS TO BE CONSIDERED AT THE ANNUAL MEETING
The purpose of the annual meeting is to consider and vote upon three
proposals. For the first proposal you will elect nine of our directors. For the
second proposal you will consider and vote upon our 2000 Stock Option Plan. For
the third proposal you will consider and vote upon our reincorporation from Utah
to Delaware.
PROXY SOLICITATION
Your board of directors is soliciting your proxy pursuant to this proxy
statement. We will pay all expenses incurred in connection with solicitation of
the enclosed proxy. Our officers, directors and regular employees may solicit
proxies in person or by telephone. They will receive no additional compensation
for their services. We also have retained Georgeson & Company, Inc. to assist
with the proxy solicitation process for a fee of $5,500, including reimbursement
of various expenses. We have requested brokers and nominees who hold stock in
their names to furnish this proxy statement to their customers, and we will
reimburse these brokers and nominees for their related out-of-pocket expenses.
This proxy statement and the accompanying proxy card are being mailed to
shareholders on or about July 25, 2000.
RECORD DATE AND QUORUM REQUIREMENT
Our common stock is our only outstanding voting security. The board has
fixed the close of business on July 18, 2000 as the record date for the
determination of shareholders entitled to notice of, and to vote at, the annual
meeting and any adjournments or postponements of the annual meeting. If you hold
our common stock at the close of business on the record date, you will be
entitled to one vote for each share you hold on each matter submitted to a vote
of shareholders. At the close of business on the record date, there were
___________ shares of our common stock issued and outstanding held by __________
holders of record. As of March 31, 2000, our directors and executive officers
beneficially owned an aggregate of 375,404 shares of our common stock, or
approximately 1.0% of the outstanding shares of our common stock entitled to
vote.
The holders of a majority of the outstanding shares entitled to vote at
the annual meeting must be present in person or represented by proxy to
constitute a quorum for the transaction of business. Abstentions are counted as
present for purposes of determining the presence or absence of a quorum for the
transaction of business.
VOTING PROCEDURES
The election of directors will be determined by plurality vote. You may
not cumulate your votes in the election of directors. Approval of the stock
option plan will require the votes cast favoring the stock option plan to exceed
the votes cast opposing the stock option plan, not counting abstentions.
Approval of the plan of merger will require the affirmative vote of a majority
of the shares of our common stock outstanding. Therefore, abstentions will have
a neutral effect on the election of directors and approval of the stock option
plan. However, abstentions or the failure to vote on the reincorporation
proposal will have the same effect as a vote cast against approval of the
proposal.
Your broker and, in many cases, your nominee will not have
discretionary power to vote on the stock option plan or the reincorporation
proposal. Accordingly, you should instruct your broker or nominee how to vote. A
broker non-vote occurs if a broker or other nominee does not have discretionary
authority and has not received instructions with
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respect to a particular item. A broker non-vote will have the same effect as an
abstention on the stock option plan and a vote against the reincorporation
proposal.
VOTING AND REVOCATION OF PROXIES
You may revoke your proxy at any time before it is exercised by:
o filing with our Secretary an instrument revoking it;
o submitting a properly executed proxy bearing a later date; or
o voting in person at the annual meeting.
Unless revoked, all your shares represented by a properly executed proxy
received by our Secretary will be voted in accordance with your instructions.
Shares represented by each proxy that is properly executed and returned and upon
which no contrary instructions are indicated will be voted:
o FOR the election of the nine persons named below as the
nominees of our board of directors for election to the board
of directors;
o FOR the proposal to adopt our 2000 Stock Option Plan;
o FOR the approval and adoption of the plan of merger to
reincorporate our company from Utah to Delaware, which
includes a one-for-three share combination of our common
stock.
Your shares will be voted by proxy at the annual meeting if your proxy
card is properly signed, dated and received by our Secretary prior to or at the
annual meeting.
OTHER MATTERS TO BE CONSIDERED
The board of directors is not aware of any other matter that will be
brought before the annual meeting. If, however, other matters are presented,
your proxy will be voted in the discretion of the holder of your proxy.
SHAREHOLDER PROPOSALS
Shareholders may submit proposals on matters appropriate for
shareholder action at the annual meeting to be held in 2001. Shareholder
proposals for the 2001 annual meeting must be received by us at our offices at
1121 East 7th Street, Austin, Texas, 78702, no later than March 25, 2001 for
inclusion in the proxy statement and form of proxy relating to the annual
meeting. Any shareholder proposal received after March 25, 2001 will be
considered untimely. We may, in our sole discretion, refuse to accept and
include any untimely shareholder proposal on the agenda of the annual meeting.
INDEPENDENT AUDITORS
Ernst & Young LLP were our independent auditors for the fiscal year
ended March 31, 2000. The audit committee of the board of directors did not
convene during the fiscal year ended March 31, 2000 for the purpose of selecting
independent auditors for the 2000 fiscal year. A representative of Ernst & Young
LLP will be present at the annual meeting.
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PROPOSAL ONE - ELECTION OF DIRECTORS
The board of directors currently consists of eight members. The
nominating committee of your board of directors has designated the following
nominees for election as our directors:
Jack C. Baum
Christopher Brickler
Donald H. Brush, Ph.D.
Daniel Dornier
Robert J. Gibbs
Stephen J. Metzger
Humbert B. Powell, III
Davinder Sethi
Raymond Wicki
Six of the nominees are members of our board of directors. For
information about each nominee, see "Directors and Executive Officers" below.
Should any nominee become unable or unwilling to accept nomination or election,
the person acting under the proxy will vote for election in his stead of any
other person whom the board of directors recommends. The board of directors has
no reason to believe that any nominee named above will be unable or unwilling to
serve if elected.
If elected, each nominee's term on the board will expire at the 2001
annual meeting of our shareholders. However, if the reincorporation proposal is
approved by our shareholders and the merger is effected, our board will be
divided into three classes as nearly equal in number as possible. The classes
will serve for staggered three-year terms, with one class standing for election
at each annual meeting of shareholders. Upon the merger, the board will
determine which directors become part of each class. It is the board's intention
to designate:
o Daniel Dornier, Donald H. Brush, Ph.D. and Raymond Wicki as
directors whose terms expire at our 2001 annual meeting.
o Humbert B. Powell, III, Jack C. Baum and Christopher Brickler
as directors whose terms expire at our 2002 annual meeting.
o Robert J. Gibbs, Stephen J. Metzger and Davinder Sethi as
directors whose terms expire at our 2003 annual meeting.
If our board is divided into three classes, any vacancies that occur
may be filled by our board of directors and the persons appointed may serve for
the remainder of the full term of the vacated positions.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR ELECTION OF ALL
NOMINEES AS DIRECTORS.
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PROPOSAL TWO - ADOPTION OF MSI'S 2000 STOCK OPTION PLAN
Your board of directors proposes that our shareholders approve the
terms of our 2000 Stock Option Plan, a copy of which is attached as Appendix B.
We have used stock options as a key element of our overall compensation program
for our employees. The board of directors and the compensation committee of the
board of directors believe that it is important to have equity-based incentives
available to attract and retain quality employees.
At the same time that your board adopted the 2000 Stock Option Plan, it
terminated all of our prior stock option plans. Options under the new plan were
substituted for all options outstanding under our prior plans. The maximum
number of shares of common stock that could have been issued under the prior
plans was 4,500,000.
The maximum number of shares of common stock that may be issued
pursuant to stock options granted under the 2000 Stock Option Plan is 12,000,000
(subject to adjustment in certain circumstances). Of that number, 7,627,446
shares remain available for grant as of March 31, 2000. For a description of the
stock option plan, including information regarding persons eligible for
participation in the plan and the tax effects of the plan, see "Management
Compensation - Stock Option Plan" below.
Upon reincorporation, the number of share of common stock underlying
the options granted under the 2000 Stock Option Plan will be altered to maintain
the same proportion of total outstanding shares as existed before the
reincorporation. Thus, amounts noted herein are estimated to be divided by three
after reincorporation.
In addition to the foregoing stock Options, our 2000 Stock Option Plan
contemplates the distribution of other equity-based awards tied to the Company's
common stock. Such awards are subject to the discretion of the Board of
Directors or the Board-appointed Committee authorized to administer the 2000
Stock Option Plan. Receipt of the awards may be subject to achievement of
performance-based factors at the discretion of the Board or Committee. The
maximum number of shares that may be issued pursuant to the non-stock option
awards is 1,200,000, or ten percent of the total issuable shares under the 2000
Stock Option Plan.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ADOPTION OF
THE STOCK OPTION PLAN.
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PROPOSAL THREE - REINCORPORATION OF MSI
INTRODUCTION
For the reasons stated below, the board of directors believes that our
best interests and the best interest or our shareholders will be served by
changing our state of incorporation from Utah to Delaware. The board of
directors has approved the reincorporation, which will be effected pursuant to
the plan of merger. Under the plan of merger, you will become shareholders of
Aperian. Aperian will continue to operate our business. Pursuant to the plan of
merger, each three outstanding shares of our common stock will automatically be
converted into one share of Aperian's common stock, $.01 par value. We began
doing business under the name of Aperian on March 6, 2000.
If approved by you, it is anticipated that the merger will become
effective as soon as practicable following the annual meeting.
VOTE REQUIRED
Approval of the reincorporation proposal will require the affirmative
vote of the majority of our outstanding shares of common stock on the record
date. Delaware law and the certificate of incorporation and bylaws of Aperian
differ from Utah law and our existing charter and bylaws. Therefore, approval of
the reincorporation proposal will also constitute approval of:
o an increase in the number of authorized shares of common stock
from 50,000,000 to 150,000,000;
o a one-for-three share combination of our common stock;
o dividing your board of directors into three classes of
directors with staggered terms;
o limiting the personal liability of directors for monetary
damages for breach of fiduciary duty;
o provisions that may reduce our vulnerability to unsolicited
takeover attempts; and
o other provisions of the certificate of incorporation and
bylaws of Aperian, copies of which are attached as Appendices
C and D.
PRINCIPAL REASONS FOR THE PROPOSED REINCORPORATION
As we plan for the future, the board of directors and management
believe that it is essential to be able to draw upon well established principles
of corporate governance in making legal and business decisions. The prominence
and predictability of Delaware corporate law provide a reliable foundation on
which our governance decisions can be based and we believe that shareholders
will benefit from the responsiveness of Delaware corporate law to their needs
and to those of the corporation they own. We also believe that reincorporation
in Delaware may reduce the cost and time involved in raising capital and
engaging in other business transactions because investors and other companies
and their counsel are generally more familiar with Delaware law.
Prominence, Predictability and Flexibility of Delaware Law. Delaware
has for many years followed a policy of encouraging incorporation in that state
and has been a leader in adopting, construing and implementing comprehensive,
flexible corporate laws responsive to the legal and business needs of
corporations organized under its laws. Many corporations have chosen Delaware
initially as a state of incorporation or have subsequently changed corporate
domicile to Delaware in a manner similar to that proposed by us. The Delaware
courts have developed considerable expertise in dealing with corporate law
issues and a substantial body of case law has developed construing Delaware law
and establishing public policies with respect to corporate legal affairs.
Increased Ability to Attract and Retain Qualified Directors. Both Utah
and Delaware law permit a corporation to include a provision in its charter
document that reduces or limits the monetary liability of directors for breaches
of fiduciary duty. Although our charter has no such provision, Aperian's charter
has such a provision, as explained in more detail below under "Monetary
Liability of Directors and Officers." The increasing frequency of claims and
litigation directed against directors and officers has greatly expanded the
risks facing directors and officers of corporations in
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exercising their duties. The amount of time and money required to respond to
claims and to defend litigation can be substantial. It is our desire to reduce
these risks to our directors and officers and to limit situations in which
monetary damages can be recovered against directors so that we may continue to
attract and retain qualified directors who otherwise might be unwilling to serve
because of the risks involved. We believe that Delaware case law regarding a
corporation's ability to limit director liability is more developed and provides
more guidance than Utah law.
Well Established Principles of Corporate Governance. There is
substantial judicial precedent in the Delaware courts as to the legal principles
applicable to measures that may be taken by a corporation and as to the conduct
of the board of directors under the business judgment rule. We believe that our
shareholders will benefit from the well established principles of corporate
governance that Delaware law affords.
AUTHORIZED CAPITAL
As a part of the reincorporation, our authorized capital stock will
increase. Our articles of incorporation currently authorize us to issue up to
50,000,000 shares of common stock, $0.10 par value, and 10,000,000 shares of
preferred stock, $2.00 par value. The certificate of incorporation of Aperian
authorizes 150,000,000 shares of common stock, $0.01 par value, and 10,000,000
shares of preferred stock, $0.01 par value. The preferred stock may be issued
from time to time, and will have the rights, preferences, privileges and
restrictions as the board of Aperian may determine, without any vote or other
approval by the stockholders of Aperian. The rights of holders of Aperian common
stock will be subject to the rights of the holders of any preferred stock that
may be issued in the future. The board believes that the ability to issue
preferred stock provides desirable flexibility in connection with possible
future corporate transactions. Issuance of preferred stock also could make it
more difficult for a third party to acquire a majority of the outstanding voting
stock, thereby delaying, deferring or preventing a change in control. Aperian
has no present plan to issue any shares of its preferred stock.
ONE-FOR-THREE STOCK COMBINATION
If you approve the reincorporation, then upon the effectiveness of the
reincorporation each three outstanding shares of our common stock, $.10 par
value per share, will automatically be converted into one share of new common
stock, $.01 par value per share, of Aperian. The then outstanding stock
certificates for shares of our common stock will represent one-third as many
shares of common stock of Aperian after the stock combination is effective. We
will not issue fractional shares of Aperian common stock. Instead of receiving
fractional shares, shareholders who hold a number of shares not evenly divisible
by three immediately prior to the date that the reincorporation takes effect
will be entitled to receive cash for any fractional share. The surrender of
certificates representing shares of our common stock will not be necessary to
effect the combination of shares. However, we will request that holders of our
common stock send in their certificates to be exchanged into certificates for
the new common stock.
Reasons for the Stock Combination. Many investors look upon low priced
stock as unduly speculative in nature and, as a matter of policy, avoid
investment in these stocks. Investors may believe that low stock prices reflect
companies that are of low quality or poor performers. Accordingly, we believe
that the current per share price of the our common stock may reduce the
effective marketability of the shares because of the reluctance of many leading
brokerage firms to recommend low priced stocks to their clients. Brokerage firm
policies and practices tend to discourage individual brokers from dealing in low
priced stocks for various reasons, including the perception that those stocks
are unduly speculative. Additionally, many institutional investors have policies
prohibiting them from holding low priced stock in their own portfolios, which
not only reduces the number of potential buyers of our stock but also adversely
affects our ability to raise capital in public and private markets. The
structure of trading commissions tends to have an adverse impact upon holders of
low priced stock because the brokerage commission on a purchase or sale of low
priced stock generally represents a higher percentage of the sales price than
the commission on higher priced stocks. Moreover, analysts at many brokerage
firms will not monitor the trading activity of lower priced stocks.
Your board believes that the stock combination should put our common
stock in a price range that will enhance its marketability to the financial
community and investing public and may mitigate any reluctance on the part of
brokers and investors to trade in our common stock. This combination should also
enhance our ability to raise the additional capital we need to expand our
operations.
Effects of the Stock Combination. The principal effect of the one-for-three
stock combination will be to decrease the number of outstanding shares of common
stock from _______ to approximately _______ shares of common stock, based on
share information as of the record date. The stock combination would not affect
our
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shareholders' proportionate equity interest in us. In addition, your board will
take appropriate action to adjust proportionately the number of shares of our
common stock issuable upon exercise of outstanding options and other convertible
securities, and to adjust the related exercise prices, to reflect the stock
combination. The stock combination will not affect the registration of the
common stock under the Securities Exchange Act of 1934 or the listing of our
common stock on Nasdaq.
The stock combination may leave some shareholders with one or more "odd
lots" of common stock, which means stock in amounts of less than 100 shares. The
odd lots may be more difficult to sell, or require greater transaction costs per
share to sell, than shares in even multiples of 100.
Each shareholder's percentage ownership of our common stock will not be
altered except for the effect of the elimination of fractional shares. We
estimate that it will cost less than $25,000 to pay for fractional shares.
PROVISIONS RELATING TO COMPOSITION OF BOARD OF DIRECTORS
Classified Board of Directors. Our directors are elected annually for a
term of one year. Aperian's certificate of incorporation provides that the board
of directors shall be divided into three classes of directors, each class to be
as nearly equal in number of directors as possible. The classification of the
board of directors of Aperian will have the effect of making it more difficult
to change the composition of the board of directors. No director may be removed,
other than for cause, prior to the end of the term for which the director was
elected to serve. At least two stockholder meetings, instead of one, will be
required to effect a change in the control of the board. The board of directors
believes that a classified board with staggered terms will help to assure the
continuity and stability of our management and policies in the future, since a
majority of the directors at any time will have prior experience as our
directors.
If the reincorporation proposal is approved, the directors of MSI who
are elected at the annual meeting of shareholders will continue as the directors
of Aperian after the proposed reincorporation is consummated and until their
successors have been duly elected and qualified. They will serve for the terms
indicated under "Proposal One - Election of Directors."
Size of the Board of Directors. The bylaws of Aperian provide for a
board of directors consisting of not less than one member, as determined by a
majority of directors then in office. Our bylaws provide for a board of
directors consisting of five members unless our board of directors determines
otherwise. Delaware and Utah law permit the board of directors, acting alone, to
change the authorized number of directors by amendment to the bylaws. Following
the proposed reincorporation, the board of directors of Aperian could amend the
bylaws to change the size of the board of directors from nine directors without
further stockholder approval.
MONETARY LIABILITY OF DIRECTORS
The certificate of incorporation of Aperian provides for the
elimination of personal monetary liability of directors to the fullest extent
permissible under law. Our articles of incorporation do not have any similar
provision, although Utah law permits similar limitations on director liability.
Aperian's charter provides that directors will not be liable to Aperian or its
stockholders for monetary damages for breach of fiduciary duty, except for:
o any breach of a director's duty of loyalty to Aperian or its
stockholders;
o acts or omissions that are not in good faith or that involve
intentional misconduct or knowing violation of the law;
o unlawful payment of dividends or unlawful stock purchase or
redemptions under Section 174 of the Delaware General
Corporation Law; and
o any transaction in which the director derived an improper
personal benefit.
Your board of directors believes that these provisions are appropriate
in order for your company to attract and retain qualified directors who
otherwise might be unwilling to serve because of the risks involved.
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ANTITAKEOVER IMPLICATIONS
Delaware, like many other states, permits a corporation to adopt a
number of measures that are designed to reduce a corporation's vulnerability to
unsolicited takeover attempts. The reincorporation proposal is not being
proposed in order to prevent a change in control, nor is it in response to any
present attempt known to the board of directors to acquire control of us or to
obtain representation on the board of directors.
The reincorporation proposal has antitakeover implications:
o Section 203 of the Delaware General Corporation Law restricts
"business combinations" with "interested stockholders" for
three years following the date that a person become an
interested stockholder, unless the board of directors approves
the business combination.
o The restriction of the ability of stockholders to act by
written consent, under the bylaws of Aperian, may make it more
difficult for stockholders to coordinate action outside a duly
called annual or special meeting.
o The bylaws of Aperian provide for a classified board, which
may hinder the ability of a potential acquirer to gain control
of the board of directors.
o For a detailed discussion of all of the changes which will be
implemented as part of the proposed reincorporation, see "The
Charters and Bylaws of MSI and Aperian" and "Significant
Differences Between the Corporation Laws of Utah and
Delaware".
Our board of directors believes that unsolicited takeover attempts may
be unfair or disadvantageous to us and our shareholders because:
o a non-negotiated takeover bid may be timed to take advantage
of temporarily depressed stock prices;
o a non-negotiated takeover bid may be designed to foreclose or
minimize the possibility of more favorable competing bids or
alternative transactions; and
o a non-negotiated takeover bid may involve the acquisition of
only a controlling interest in the corporation's stock,
without affording all stockholders the opportunity to receive
the same economic benefits.
By contrast, in a transaction in which an acquirer must negotiate with
an independent board of directors, the board can and should take account of the
underlying and long-term values of our business, technology and other assets,
the possibilities for alternative transactions on more favorable terms, possible
advantages from a tax-free reorganization, anticipated favorable developments in
our business not yet reflected in the stock price and equality of treatment of
all stockholders.
Despite the belief of the board of directors as to the benefits to
shareholders of the reincorporation proposal, it may be disadvantageous to the
extent that it has the effect of discouraging a future takeover attempt that is
not approved by the board of directors, but which a majority of the stockholders
may deem to be in their best interest or in which stockholders may receive a
substantial premium for their shares over the then current market value or over
their cost basis in the shares. As a result, stockholders who might wish to
participate in a tender offer may not have an opportunity to do so. In addition,
to the extent that the provisions enable the board of directors to resist a
takeover or a change in control, they could make it more difficult to change the
existing board of directors and management.
In addition to the provisions described above, other provisions of the
certificate of incorporation and bylaws of Aperian may have antitakeover
implications, including some of those discussed below.
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<PAGE> 13
OTHER PROVISIONS OF THE CHARTER AND BYLAWS OF APERIAN
The provisions of the Aperian certificate of incorporation and bylaws
are similar to those of our articles of incorporation and bylaws in many
respects. However, the reincorporation includes the implementation of provisions
in the Aperian certificate of incorporation and bylaws that alter the rights of
stockholders and the powers of management. Some of these provisions have
antitakeover implications as discussed above. Approval by shareholders of the
proposed reincorporation will constitute an approval of the inclusion in the
Aperian certificate of incorporation and bylaws of each of the provisions
described below.
Filling Vacancies on the Board of Directors. Under Delaware law,
vacancies and newly created directorships may be filled by a majority of the
directors then in office or by a sole remaining director. The bylaws of Aperian
provide that all vacancies in the board of directors may be filled by a majority
of the remaining directors or by a sole remaining director. However, whenever
the holders of any class or series of stock are entitled to elect directors by
the provisions of the certificate of incorporation, vacancies and newly created
directorships of that class or series may be filled by a majority of the
directors elected by that class or series then in office, or by a sole remaining
director so elected. A director elected to fill a vacancy for an unexpired term
which extends beyond the next annual meeting must be elected by the shareholders
at that annual meeting to continue to fill the unexpired term. Utah law and our
current bylaws are similar in effect.
Nominations of Director Candidates and Introduction of Business at
Stockholder Meetings. The bylaws of Aperian establish an advance notice
procedure with regard to the nominations by persons other than the board of
directors of candidates for election as directors and with regard to certain
matters to be brought before an annual meeting. There are no similar provisions
in our existing bylaws.
Aperian's nomination procedure and business procedure provide that at
an annual meeting, only that business may be conducted and nominees may be
elected as have been brought before the meeting by the board of directors or by
a stockholder who has given timely written notice to the Secretary of Aperian.
To be timely, a stockholder's notice must be delivered to or mailed and received
at the principal executive offices of Aperian not less than 30 days nor more
than 90 days prior to the anniversary date of the immediately preceding annual
meeting of stockholders. Any notice given during this period will remain valid
in the event the meeting date is rescheduled. If the annual meeting is called
for a date that is not within 30 days before or after the anniversary date,
notice also can be received not later than the close of business on the tenth
day following notice of the date of the annual meeting.
To be in proper form, the nomination procedure and business procedure
provide that a stockholder's notice must contain:
o the name and address of the stockholder who intends to make
the nominations or propose the business;
o the person or persons to be nominated or the business to be
proposed;
o any interest of the stockholder in the proposed business;
o information regarding each nominee to be proposed that is
required to be included in a proxy statement filed under the
proxy rules of the Securities and Exchange Commission; and
o if applicable, the consent of each nominee to serve as
director if so elected.
By requiring advance notice of nominations by stockholders, the board
of directors has an opportunity to consider the qualifications of the proposed
nominees and to inform the stockholders about the qualifications. By requiring
advance notice of proposed business, the board has an opportunity to inform
stockholders of any business proposed and the board's position on the proposal.
This will enable stockholders to better determine whether they desire to attend
the meeting or grant a proxy to the board of directors. Although the Aperian
bylaws do not give the board any power to approve or disapprove stockholder
nominations for the election of directors or any other business desired by
stockholders to be conducted at a meeting, the Aperian bylaws may have the
effect of precluding a nomination for the election of directors or of precluding
any other business at a particular meeting if the proper procedures are not
followed. In addition, the procedures may discourage or deter a third party from
conducting a solicitation of proxies to elect its own slate of directors or
otherwise attempting to obtain control of us, even if the attempt might be
beneficial to us and our stockholders.
Action by Written Consent of the Stockholders. The bylaws of Aperian
allow any action by the stockholders, which may be taken at a duly called annual
or special meeting, to be taken without a meeting if two-thirds of the
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<PAGE> 14
outstanding stock entitled to vote consent in writing stating the actions so
taken. Our existing bylaws allow our shareholders to take action without a
meeting if we receive the written consent of shareholders representing at least
the number of outstanding shares that would be necessary to take the action in a
meeting in which all shares entitled to vote were present.
Amendment of Bylaws. The certificate of incorporation of Aperian allows
the bylaws of Aperian to be amended or restated by the board of directors or by
the affirmative vote of the holders of two-thirds of the stock entitled to vote
for the election of directors. Our present articles of incorporation allow the
amendment of our bylaws by the board of directors or by the holders of a
majority of our common stock. Therefore, after the proposed reincorporation,
amendment of our bylaws by the stockholders will require a greater affirmative
vote and may be significantly more difficult.
Supermajority Vote. The certificate of incorporation of Aperian
requires the affirmative vote of the holders of two-thirds of the stock entitled
to vote for the election of directors in order to amend the following provisions
of Aperian's certificate of incorporation:
o the provision restricting actions by written consent of the
stockholders of Aperian;
o the provision allowing amendment of Aperian's bylaws only by
the board of directors or the holders of two-thirds of the
stock entitled to vote for the election of directors;
o the provision allowing special meetings of the stockholders of
Aperian to be called by the board of directors or by the
holders of ten percent of stock entitled to vote;
o the provision establishing a classified board of directors;
and
o this provision regarding supermajority voting requirements.
Our present articles of incorporation and bylaws do not contain a
similar voting requirement. Therefore, after the proposed reincorporation, the
amendment of these parts under provisions of our certificate of incorporation
will be significantly more difficult.
NO CHANGE IN THE BUSINESS, MANAGEMENT, EMPLOYEE PLANS OR LOCATION OF PRINCIPAL
FACILITIES
The reincorporation proposal will effect a change only in our name,
legal domicile and other changes of a legal nature as described in this proxy
statement. The board of directors and management believe that the name Aperian
will result in a more appropriate image and brand for our company. The proposed
reincorporation will not result in any change in the business, management
(except as described in this proxy statement), fiscal year, assets or
liabilities or location of our principal facilities. The directors who are
elected at the annual meeting will become the directors of Aperian. All of our
obligations will become the obligations of Aperian. Our employee benefit
arrangements will also be continued by Aperian upon the terms and subject to the
conditions currently in effect. After the merger, the shares of common stock of
Aperian will continue to be traded, without interruption, in the same principal
market as the shares of common stock of MSI are traded prior to the merger.
Prior to the effective date of the merger, we will obtain any consents
required for the merger from parties with whom we may have contractual
arrangements. As a result, our rights and obligations under our contractual
arrangements will continue and be assumed by Aperian.
SIGNIFICANT DIFFERENCES BETWEEN THE CORPORATION LAWS OF UTAH AND DELAWARE
The corporation laws of Utah and Delaware differ in many respects.
Although all the differences are not set forth in this proxy statement, the
differences that could materially affect the rights of shareholders are
discussed below.
Stockholder Approval of Certain Business Combinations. In recent years,
a number of states have adopted special laws designed to make certain kinds of
"unfriendly" corporate takeovers, or other transactions involving a corporation
and one or more of its significant stockholders, more difficult. Under the Utah
Control Shares Acquisitions Act, shares acquired in a "control share
acquisition" by a single shareholder or group of shareholders that give the
shareholder or group more than 20% of the voting power of certain public Utah
corporations cease to have voting rights
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<PAGE> 15
until a resolution allowing the shares to be voted is approved by a majority of
the outstanding shares of the corporation (excluding shares held by officers,
directors and the acquiror). The Utah Control Shares Acquisitions Act applies
only to a corporation formed under the laws of the State of Utah that has all of
the following:
o 100 or more shareholders;
o its principal office or place of business, or substantial
assets, located in Utah; and
o any of (i) more than 10% of its shareholders resident in Utah,
(ii) more than 10% of its shares owned by Utah residents or
(iii) 10,000 shareholders that are Utah residents.
We do not have our principal office, any place of business, or substantial
assets in the State of Utah or a significant number of shareholders who are Utah
residents. Accordingly, the protections and restrictions of the Control Shares
Act do not presently apply to us or our common stock.
Section 203 of the Delaware General Corporate Law prohibits a
corporation from engaging in a "business combination" with an "interested
stockholder" for three years following the date that the person becomes an
interested stockholder. The three-year moratorium imposed on business
combinations by Section 203 does not apply if:
o prior to the date on which the stockholder becomes an
interested stockholder the board of directors approves either
the business combination or the transaction which resulted in
the person becoming an interested stockholder;
o the interested stockholder owns 85% of the corporation's
voting stock upon consummation of the transaction which made
him an interested stockholder; or
o the business combination is approved by the board of directors
and approved at a stockholder meeting by the holders of
two-thirds of the voting stock not owned by the interested
stockholder.
Section 203 only applies to Delaware corporations that have a class of
voting stock that is listed on a national securities exchange, are quoted on an
interdealer quotation system, such as Nasdaq, or are held of record by more than
2,000 shareholders. However, a corporation may elect not to be governed by
Section 203 by a provision in its Certificate of Incorporation or its Bylaws.
Aperian has not opted out of Section 203. Accordingly, following consummation of
the reincorporation transaction, Section 203 will confer upon the board of
directors the power to reject certain business combinations with interested
shareholders, even though a potential acquiror may be offering a substantial
premium.
Removal of Directors. Under Utah law, any director may be removed, with
or without cause, with the approval of a majority of the shares voting at a duly
convened shareholders meeting. However, under Delaware law, a director of a
corporation with a classified board may be removed only for cause. The
certificate of incorporation of Aperian provides for a classified board of
directors. Consequently, a director of Aperian may be removed from office only
with cause, with the affirmative vote of a majority of the outstanding shares or
with the written consent of two-thirds of the outstanding shares entitled to
vote.
Indemnification and Limitation of Liability. Utah and Delaware have
similar laws respecting indemnification by a corporation of its officers,
directors, employees and other agents. The laws of both states also permit
corporations to adopt a provision in their charter eliminating the liability of
a director to the corporation or its stockholders for monetary damages for
breach of the director's fiduciary duty of care. We do not have such a provision
in our current charter, but Aperian has such a provision. There are nonetheless
differences between the laws of the two states respecting indemnification and
limitation of liability. In general, Delaware law is somewhat broader in
allowing corporations to indemnify and limit the liability of corporate agents.
Utah law does not permit the elimination of monetary liability where
liability is based on:
o a financial benefit received by a director to which the
director is not entitled;
o an intentional infliction of harm on the corporation or its
shareholders;
o an unlawful distribution; or
o an intentional violation of criminal law.
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Delaware law does not permit the elimination of monetary liability for:
o breaches of the director's duty of loyalty to the corporation
or its stockholders;
o acts or omissions not in good faith or involving intentional
misconduct or knowing violations of law;
o the payment of unlawful dividends or unlawful stock
repurchases or redemptions; or
o transactions in which the director received an improper
personal benefit.
Utah law permits indemnification of expenses incurred in derivative or
third-party actions, except that with respect to derivative actions no
indemnification may be made without court approval when a person is adjudged
liable to the corporation. Similarly, Delaware law allows indemnification of
expenses incurred during derivative and third-party actions; however, Delaware
law requires court approval of indemnification in both derivative and
third-party actions when a person is adjudged liable to the corporation.
Dividends and Repurchase of Shares. Utah law dispenses with the
concepts of par value of shares as well as statutory definitions of capital,
surplus and the like. The concepts of par value, capital and surplus exist under
Delaware law.
Under Utah law, a corporation may not make any distribution, or
repurchase its shares if, after giving affect to the distribution or repurchase:
o the corporation would not be able to pay its debts as they
become due in the normal course; or
o its total assets would be less than the sum of its total
liabilities plus the amount, if any, payable upon liquidation
to holders of any preferred stock with distribution rights
superior to the rights of holders of common stock.
Delaware law permits a corporation to declare and pay dividends out of
surplus or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of all classes having a preference upon the
distribution of assets. In addition, Delaware law generally provides that a
corporation may redeem or repurchase its shares only if the capital of the
corporation is not impaired and the redemption or repurchase would not impair
the capital of the corporation.
To date, MSI has not paid any cash dividends on its outstanding shares
of common stock and does not anticipate doing so in the foreseeable future.
Stockholder Voting. Both Utah and Delaware law generally require that
the holders of a majority of the shares of voting stock of both acquiring and
target corporations approve statutory mergers. Neither Utah nor Delaware law
requires a stockholder vote of the surviving corporation in a merger if:
o the merger agreement does not amend the existing certificate
of incorporation;
o each share of the stock of the surviving corporation
outstanding immediately before the merger is an identical
outstanding share after the merger; and
o either no shares of common stock of the surviving corporation
and no securities convertible into common stock are to be
delivered under the plan of merger, or the authorized unissued
shares or the treasury shares of common stock of the surviving
corporation to be delivered under the plan of merger plus
those initially issuable upon conversion of any other
securities to be delivered under the plan do not exceed 20% of
the shares of common stock outstanding immediately prior to
the merger.
Both Utah law and Delaware law also require that a sale of all or
substantially all of the assets of a corporation be approved by the holders of a
majority of the outstanding voting shares of the selling corporation.
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<PAGE> 17
Utah law also requires that mergers, reorganizations, sales of assets
and similar transactions be approved by a majority vote of each voting group
entitled to vote separately on the plan of merger, reorganization or sale. In
general, a class or series of stock is entitled to vote separately (or together
with similarly affected shares of different series of the same class) if the
proposed transaction would change the rights, preferences or limitations of the
respective class or series. In contrast, Delaware law generally does not require
class voting, except in certain transactions involving an amendment to the
certificate of incorporation that adversely affects a class of shares. As a
result, stockholder approval of transactions may be easier to obtain under
Delaware law for companies that have more than one class of shares outstanding.
Appraisal Rights. Under both Utah law and Delaware law, a stockholder
of a corporation participating in major corporate transactions may be entitled
to appraisal rights under which the stockholder may receive cash in the amount
of the fair market value of his or her shares in lieu of the consideration he or
she would otherwise receive in the transaction. Fair market value is determined
exclusive of any element of value arising from the accomplishment or expectation
of the merger or consolidation. In determining fair market value, courts
generally apply various valuation methods commonly used in the financial
community. Under Delaware law, appraisal rights are not available with respect
to the sale, lease or exchange of all or substantially all of the assets of a
corporation, while Utah law provides for appraisal rights in these
circumstances. Each of Utah and Delaware law provide exemption from appraisal
for a transaction by a corporation the shares of which are either listed on a
national securities exchange or are held of record by more than 2,000 holders if
the stockholders receive only shares of the surviving corporation or shares of
any other corporation that are either listed on a national securities exchange
or held of record by more than 2,000 holders, plus cash in lieu of fractional
shares. Delaware and Utah law also provide an exemption to a corporation
surviving a merger if no vote of the stockholders of the surviving corporation
is required to approve the merger.
Inspection of Records. Delaware law allows stockholders and directors
to inspect the corporation's records and stockholders list for purposes
reasonably related to the person's interests as a stockholder or director upon
written demand. In contrast, under Utah law, directors or shareholders may
inspect certain corporate records for any purpose as long as the directors or
shareholders gives the corporation written notice five business days in advance.
Other records, including the shareholder list and minutes from meetings of the
board of directors, may be inspected only for a purpose reasonably related to
the shareholder's or director's interest.
APPRAISAL RIGHTS
Our shareholders do not have appraisal rights triggered by the
reincorporation.
EXCHANGE OF STOCK CERTIFICATES AND PAYMENT FOR FRACTIONAL SHARES.
If you approve and adopt the reincorporation, shareholders will be
requested to exchange their stock certificates for new certificates representing
the shares of Aperian common stock that will evidence the effect of the stock
combination. Our shareholders of record on the date that the one-for-three stock
combination takes effect will be furnished the necessary materials and
instructions for the surrender and exchange of share certificates at the
appropriate time by our transfer agent, Interwest Transfer. Our shareholders
will not have to pay a transfer fee or other fee in connection with the exchange
of certificates.
No fractional shares of new common stock will be issued as a result of
the stock combination. Instead of receiving fractional shares, shareholders who
hold a number of shares not evenly divisible by three immediately prior to the
date that the reincorporation takes effect will be entitled to receive cash for
any fractional share. The amount of cash, without interest, is determined by
multiplying:
o the fractional interest to which the shareholder would
otherwise be entitled, after taking into account all shares of
common stock then held by the shareholder; and
o the product of three multiplied by the closing price of our
common stock on the Nasdaq Stock Market immediately preceding
the date on which the reincorporation is effective.
Any shareholder whose certificate for our common stock has been lost, destroyed
or stolen will be entitled to issuance of a certificate representing the shares
of Aperian common stock after giving effect to the stock combination upon
satisfying our requirements and the requirements of our transfer agent.
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SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES OF THE PROPOSED REINCORPORATION
The following is a discussion of the federal income tax considerations
that may be relevant to holders of our common stock who receive Aperian common
stock in exchange for their MSI common stock as a result of the proposed
reincorporation. The discussion does not address all of the tax consequences of
the proposed reincorporation that may be relevant to particular shareholders,
such as dealers in securities, or those shareholders who acquired their shares
upon the exercise of stock options, nor does it address the tax consequences to
holders of options or warrants to acquire Aperian common stock. Furthermore, no
foreign, state, or local tax considerations are addressed herein. IN VIEW OF THE
VARYING NATURE OF THE TAX CONSEQUENCES, EACH SHAREHOLDER IS URGED TO CONSULT HIS
OR HER OWN TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES OF THE PROPOSED
REINCORPORATION INCLUDING THE APPLICABILITY OF FEDERAL, STATE, LOCAL OR FOREIGN
TAX LAWS.
Subject to the limitations, qualifications and exceptions described
herein, and assuming the proposed reincorporation qualifies as a reorganization
within the meaning of Section 368(a) of the Code, the following tax consequences
generally should result:
o No gain or loss should be recognized by holders of MSI common
stock upon receipt of Aperian common stock pursuant to the
proposed reincorporation;
o The aggregate tax basis of the Aperian common stock received
by each stockholder in the proposed reincorporation should be
equal to the aggregate tax basis of MSI common stock
surrendered in exchange therefor;
o The holding period of the Aperian common stock received by
each shareholder of MSI should include the period for which
the shareholder held MSI common stock surrendered in exchange
therefor, provided that the MSI common stock was held by the
shareholder as a capital asset at the time of proposed
reincorporation; and
o MSI should not recognize gain or loss for federal income tax
purposes as a result of the proposed reincorporation, and
Aperian should succeed, without adjustment, to the federal
income tax attributes of MSI.
In addition, the one-for-three stock combination will qualify as a
recapitalization described in Section 386(a)(1)(E) of the Code, and no gain or
loss will be recognized by us in connection with the stock combination. The
receipt by a shareholder of shares of common stock, except to the extent that
cash is received in lieu of fractional shares, in the stock combination will be
a nontaxable transaction for federal income tax purposes. Consequently, except
with respect to cash received in lieu of fractional shares of common stock, a
shareholder will not recognize taxable gain or loss with respect to shares of
common stock received as a result of the stock combination. In addition, the
aggregate tax basis of a shareholder's shares of common stock prior to the stock
combination, excluding the portion of the basis allocable to fractional shares
of common stock, will carry over as the tax basis of the shareholder's shares of
common stock received as a result of the combination. Each shareholder will be
required to allocate his or her basis in the shares of common stock ratably
among the total number of shares of common stock received as a result of stock
combination. The holding period of the shares of new common stock will include
the holding period during which the shareholder held our current common stock,
provided that the common stock is held by the shareholder as a capital asset
when the stock combination is completed.
We have not requested a ruling from the Internal Revenue Service with
respect to the federal income tax consequences of the proposed reincorporation
under the tax code. A successful IRS challenge to the reorganization status of
the proposed reincorporation would result in a stockholder recognizing gain or
loss with respect to each share of MSI common stock exchanged in the proposed
reincorporation equal to the difference between the stockholder's basis in the
share and the fair market value, as of the time of the proposed reincorporation,
of the Aperian common stock received in exchange therefor. In this event, a
stockholder's aggregate basis in the shares of Aperian common stock received in
the exchange would equal their fair market value on such date, and the
stockholder's holding period for the shares would not include the period during
which the stockholder held MSI common stock.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE REINCORPORATION.
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DIRECTORS AND EXECUTIVE OFFICERS
The following table summarizes information concerning each of our
directors, director nominees and officers as of the date of this proxy
statement.
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
Robert J. Gibbs (1)(2) 45 President, Chief Executive Officer and Director
Christopher Brickler (1) 28 Executive Vice President - Marketing and Business
Development and Director
Marsha Cameron 45 Executive Vice President - Administration
Wayne A. Irwin 38 Executive Vice President - Sales and Business
Operations
Douglas W. Banister 38 Chief Financial Officer and Vice President -
Finance
James P. Bates 53 Chief Information Officer
Blandina Cardenas 43 Director
Ernesto M. Chavarria 43 Director
Daniel Dornier (1)(3)(4) 36 Director
Stephen J. Metzger (1)(2)(3)(4) 47 Director
Humbert B. Powell, III 61 Director
Davinder Sethi (1)(2)(3)(4) 52 Director
Jack C. Baum 43 Director Nominee
Dr. Donald H. Brush 53 Director Nominee
Raymond Wicki 56 Director Nominee
</TABLE>
------------------------------------
(1) Member of the executive committee
(2) Member of the nominating committee
(3) Member of the audit committee
(4) Member of the compensation committee
Robert J. Gibbs joined us in June 1999 as president and chief executive
officer. From 1997 to 1999, Mr. Gibbs founded and served as a consultant with
Sigma Solutions Group, which provides executive management services for high
tech startup companies. From 1990 to 1997, Mr. Gibbs served as president,
executive vice president and chief financial officer of Uniden America
Corporation, a wireless products and services company. He received a bachelor of
science in finance from the University of Colorado and received a master of
business administration from Southern Methodist University.
Christopher Brickler joined us in June 2000 as executive vice president
of marketing and business development. Mr. Brickler has been a director of our
company since October 1999. From December 1998 to October 1999, he served as
vice president of BT Global Business Markets, a communications services provider
based in London. Previously, he was employed for five years with GTE, most
recently in the development of GTE's Internet technology. He received a bachelor
of business administration degree from the University of Texas.
Marsha Cameron joined us in May 2000 as executive vice president of
administration. From 1995 to 2000, Ms. Cameron served as vice president of
workforce effectiveness for GTE Corporation. From 1991 to 1995, she served in
several capacities for Watson Wyatt, most recently as Worldwide Practice
Director of Compensation Consulting. She received a bachelor of science from
University of California at Riverside and a master of science from Columbia
University in New York.
Wayne A. Irwin joined us in May 2000 as executive vice president of
sales, marketing, and operations. From 1997 to 2000, Mr. Irwin served as
assistant vice president - Web Commerce, and assistant vice president of channel
strategy at GTE Corporation. From 1993 to 1997, he served as director -
wholesale markets for GTE Network Services. He received a bachelor of science in
business administration from Central Michigan University and received a master
of business administration from Xavier University in Cincinnati.
Douglas W. Banister joined us in August 1999 as chief financial officer
and vice president of finance. From 1990 to 1999, Mr. Banister served as
accounting manager, vice president and chief financial officer of Uniden America
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<PAGE> 20
Corporation. From 1987 to 1990, Mr. Banister served as controller for D.R.
Horton Custom Homes. From 1983 to 1987, he served as a senior auditor with Ernst
& Young, L.L.P. He received a bachelor of business administration in accounting
from Texas Wesleyan University. He has been a certified public accountant since
1986.
James P. Bates joined us in May 2000 as chief information officer and
vice president. From 1998 to 2000, Mr. Bates served as a consulting practice
director, e-Business and Internet applications, with Oracle Corporation. From
1996 to 1998, he served as chief information officer and vice president,
Information Services with Vari*Lite, Inc. From 1989 to 1996, he served as a
manager in the software engineering and information technology groups at DSC
Communications, Inc. He received a bachelor of business administration from the
University of Texas at Austin and received a master of business administration
from the University of Utah. He has been a certified public accountant since
1985.
Blandina Cardenas has been a director of our company since November
1997. Since 1995, Dr. Cardenas has been an associate professor of education
leadership at the University of Texas at San Antonio. From 1992 to 1995, she was
a Professor at Southwest Texas State University. She received a doctorate in
educational leadership from the University of Massachusetts at Amherst and a
bachelor in journalism from the University of Texas at Austin.
Ernesto M. Chavarria has been a director of our company since November
1997 . Mr. Chavarria has been employed by ITBR, Inc., an international
consulting company, since 1978 and has served as its president since 1990.
Daniel Dornier has been a director of our company since July 1998. From
August 1991 to June 1993, Mr. Dornier was an investment banker with SBC-Warburg
Dillon Reed. From 1993 to 1995, Mr. Dornier was a private investment manager for
various family-owned companies. From 1995 to 1998, Mr. Dornier served as
president of Dornier Capital Advisors, where he managed investments for high net
worth individuals in Europe. In 1998, he co-founded Greenwich AG, Hamburg, which
focuses on early stage investments in high-growth companies in Germany and the
U.S. Mr. Dornier studied business at the University of Nuertingen, Germany and
received an MBA from the Zurich campus of the City University, Bellevue,
Washington.
Stephen J. Metzger has been a director of our company since August
1999. Currently, Mr. Metzger is Managing Director of AngelWorks, a philanthropic
foundation. From 1998 to 1999, he was the chief executive officer of Waller
Creek Communications, an Austin, Texas based competitive local exchange carrier.
From 1994 to present, Mr. Metzger has managed Manchester International
Incorporated, a company which provides interim management, strategy, business
development, specialized training and investment consulting to
telecommunications carriers, computer companies and network equipment providers.
From 1991 to 1993, Mr. Metzger was president and chief executive officer of
NetCommand, a consulting firm specializing in the development of internet
services, electronic data interchange and electronic commerce strategy, products
and organizations for global corporations, international carriers and value
added networks.
Humbert Powell, III has been a director of our company since August
1999. Since 1997, he has been a managing director of Sanders Morris Mundy, an
NASD-member investment banking firm. From 1995 to 1997, Mr. Powell was vice
chairman and director of Marleau, Lemire, Securities, Inc. and chairman of the
board of Marleau, Lemire USA. From 1988 through February 1995, Mr. Powell served
as a senior managing director in the Corporate Finance Department of Bear
Stearns & Co. Mr. Powell currently serves as a director for Bikers Dream Inc.,
Evolve, Lawman Corp., Millennium Vue Inc. and Osicom Technologies Inc., and as a
trustee of Salem-Teikyo University. Mr. Powell received degrees in business and
economics from the University of Florida and Salem University.
Davinder Sethi has been a director of our company since August 1999.
Since 1996, he has been an independent advisor and investor in the fields of
information technologies and finance. From 1990 to 1996, he served as director
and senior advisor to Barclays de Zoete Wedd. Dr. Sethi currently serves as a
director of Pamet Systems, Inc., where he also serves on the audit and
compensation committees. Dr. Sethi received a doctorate and a masters degree in
operations research, economics and statistics from the University of California
at Berkeley and is a graduate of the executive management program of
Pennsylvania State University.
Jack C. Baum has been the president of Sagebrook Technology since 1998.
From 1997 to 1998, he was a principal of Engles Urso Foomer Capital Corporation.
Prior to 1997, he founded and owned Canyon Cafe. Mr. Baum serves on the board of
directors of Furr's Bishop's, Inc., BridgePoint Technical Manufacturing
Corporation, WiseCity.com, FuGEN Technologies, Isochron Data Corporation, Vital
Careers, Emplawyernet.com, SkillsVillage.com, New Network, Ltd. and Fuel
Marketing Solutions. Mr. Baum received his bachelor's degree in business
administration from the University of Texas in 1977.
16
<PAGE> 21
Dr. Donald H. Brush is co-founder and has been president of The Renova
Corporation since 1985. Dr. Brush was formerly on the tenured faculty of
Rensselaer Polytechnic Institute, where he taught the management of science and
technology, and The University of Texas at Dallas, where he was director of the
undergraduate management program. Dr. Brush is a director of the Hogan Quality
Institute and the Texas Quality Consortium and is on the editorial board of the
Journal for Corporate Education. Mr. Brush received his doctorate and masters
degrees in psychology from the University of Georgia and his bachelor's degree
in psychology from Denison University.
Raymond Wicki is a co-founder and chairman of M2, a Swiss investment
company, and Bern Venture, a Berne based venture capital fund. From 1990 to
2000, he was the chief executive officer of Ban von Graffenried, a family owned
private bank in Bern. Mr. Wicki serves on the boards of several industrial,
finance and service companies in Switzerland, Germany and the United States. Mr.
Wicki received a degree in business administration and a doctorate in finance
and taxation from the University of Berne. Mr. Wicki also received a masters
degree in business administration from Kent State University.
We have no knowledge of any arrangement or understanding in existence
between any executive officer named above and any other person pursuant to which
any such executive officer was or is to be elected to such office or offices.
All of our officers serve at the pleasure of our board of directors. All
officers will hold office until the next annual meeting of our shareholders.
RELATIONSHIPS AMONG BOARD MEMBERS AND EXECUTIVE OFFICERS
Christopher Brickler, executive vice president - marketing and business
development and one of our directors, is the step-son of Robert J. Gibbs, our
president and chief executive officer.
MEETINGS AND COMMITTEES OF DIRECTORS
The board of directors held 21 meetings during the fiscal year ended
March 31, 2000. Humbert Powell, III attended fewer than 75% of the meeting of
the board of directors during the fiscal year ended March 31, 2000.
The board of directors has four standing committees: the executive
committee; the audit committee; the compensation committee; and the nominating
committee. The executive committee, which met nine times during the fiscal year
ended March 31, 2000, is authorized to exercise the powers of the board of
directors during the intervals between meetings of the board of directors and
has the authority to conduct any business the board of directors is authorized
to conduct. The audit committee, which did not meet during the fiscal year ended
March 31, 2000, recommends to the board of directors the engagement of our
independent accountants and reviews the plans for, and the results and scope of,
the annual auditing engagement. The compensation committee, which did not meet
during the fiscal year ended March 31, 2000, is responsible for determining the
compensation of executive officers, including bonuses, and administering our
stock option plan. The nominating committee, which was constituted on February
22, 2000, did not meet during the fiscal year ended March 31, 2000. The
nominating committee recommends nominees for membership on the board of
directors. The executive committee consists of Messrs. Brickler, Dornier, Gibbs,
Metzger and Sethi. The audit committee consists of Messrs. Sethi, Dornier and
Metzger. The compensation committee consists of Messrs. Dornier, Metzger, and
Sethi. The nominating committee consists of Messrs. Gibbs, Metzger and Sethi.
The nominating committee of your board of directors will not consider
nominees for the Board of Directors recommended by you or other shareholders.
17
<PAGE> 22
MANAGEMENT COMPENSATION
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE. The following table summarizes the
compensation earned during each of the last three fiscal years by (i) our chief
executive officers who served during the fiscal year ended March 31, 2000, (ii)
two most highly compensated other executive officers whose salary and bonus for
the fiscal year ended March 31, 2000 was $100,000 or greater and (iii) two
executive officers whose salary and bonus for the fiscal year ended March 31,
2000 was $100,000 or greater and who were not serving as an executive officer at
the end of the fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------------------------------- ----------------------------------
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS COMPENSATION
------------------------------ -------- ----------- ------------ ----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
ROBERT J. GIBBS.............. 2000 $144,690 -- 1,362,950 --
CHAIRMAN AND $170,000
CHIEF EXECUTIVE OFFICER
GLENN BIRK................... 2000 $106,282 -- 155,000 --
VICE PRESIDENT OF SALES $ 83,335
DOUGLAS W. BANISTER.......... 2000 $123,116 -- $ 781 100,000 --
CHIEF FINANCIAL OFFICER
JOSE G. CHAVEZ............... 2000 $ 19,162 -- 62,500 --
FORMER PRESIDENT AND 1999 $ 95,000
CHIEF EXECUTIVE OFFICER 1998 $105,500 $7,800
ROGER LANE................... 2000 $115,785 -- -- -- --
FORMER CHIEF OPERATING
OFFICER
</TABLE>
18
<PAGE> 23
OPTION GRANTS IN LAST FISCAL YEAR. The following table sets forth
information regarding the stock options granted to and exercised by the named
executive officers during the fiscal year ending March 31, 2000.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
% OF TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED DATE OF
UNDERLYING TO GRANT
OPTIONS EMPLOYEES EXERCISE MARKET EXPIRATION
GRANTED IN FISCAL 2000 PRICE PRICE DATE
----------- -------------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
ROBERT J. GIBBS.................... 1,362,950 40.94% $5.56 $5.56 June 2009
CHAIRMAN AND CHIEF EXECUTIVE
OFFICER
GLENN BIRK.......................... 55,000 1.65% $6.63 $6.63 August 2009
VICE PRESIDENT OF SALES
GLENN BIRK.......................... 100,000 3.00% $4.56 $4.56 August 2009
VICE PRESIDENT OF SALES
DOUGLAS W. BANISTER................. 100,000 3.00% $4.50 $4.50 August 2009
CHIEF FINANCIAL OFFICER
JOSE G. CHAVEZ...................... -- -- -- -- --
FORMER PRESIDENT AND
CHIEF EXECUTIVE OFFICER
ROGER LANE.......................... -- -- -- -- --
FORMER CHIEF OPERATING OFFICER
</TABLE>
OPTION EXERCISES AND FISCAL YEAR END VALUES. The following table
provides information about the number of shares issued upon option exercises by
the named executive officers during fiscal year ended March 31, 2000, and the
value realized by the named executive officers. The table also provides
information about the number and value of options held by the named executive
officers at March 31, 2000.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL
YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY
UNDERLYING UNEXERCISED OPTIONS AT
SHARES OPTIONS AT YEAR-END YEAR-END (1)
ACQUIRED ON VALUE ------------------------------ -------------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
ROBERT J. GIBBS............ -- -- 545,180 817,770 $12,059,382 $18,089,072
CHAIRMAN AND CHIEF EXECUTIVE
OFFICER
GLENN BIRK................. -- -- 80,000 75,000 1,669,600 1,565,250
VICE PRESIDENT OF SALES
DOUGLAS W. BANISTER........ -- -- 25,000 75,000 587,500 1,762,500
CHIEF FINANCIAL OFFICER
JOSE G. CHAVEZ............. -- -- -- -- -- --
FORMER PRESIDENT AND CHIEF
EXECUTIVE OFFICER
ROGER LANE................. -- -- -- -- -- --
FORMER CHIEF OPERATING
OFFICER
</TABLE>
------------
(1) Value based on the March 31, 2000 closing price of the common stock of
$28.50 per share.
COMPENSATION OF DIRECTORS
We pay each director who is not an employee of ours $1,000 for
attending each meeting of the board of directors and $500 for attending each
committee meeting. Each director also receives options to purchase 25,000 shares
19
<PAGE> 24
of common stock upon becoming a director and 25,000 options annually for each
subsequent year. Additionally, we reimburse each director for expenses incurred
in attending meetings of the board of directors and committees of the board of
directors.
COMPENSATION OF CHIEF EXECUTIVE OFFICER AND OTHER EXECUTIVES
In June 1999, we entered into an employment agreement with Robert J.
Gibbs, our president and chief executive officer. Mr. Gibbs' agreement provides
for a two-year term with a two-year extension and a base salary of $150,000 for
the first year and $240,000 during the second year and each subsequent term, if
the agreement is extended. In addition, Mr. Gibbs' agreement provides for
options to purchase up to 1,362,950 shares of common stock at $5.56 per share
having the following terms: (i) options to purchase 272,590 shares of common
stock vested immediately upon grant on June 30, 1999, (ii) options to purchase
272,590 shares of common stock to vest 91 days after the grant date, (iii)
options to purchase 545,180 shares of common stock to vest on the first
anniversary of the grant date and (iv) options to purchase 272,590 shares of
common stock to vest on the second anniversary of the grant date. Mr. Gibbs'
agreement also entitles him to receive a bonus equal to 1.5% of each equity
offering consummated by us during his first year of employment. The bonus is
capped at $170,000 and has already been paid in full. Mr. Gibbs' agreement also
provides for a discretionary bonus to be decided by the board of directors of up
to $50,000 during the first year. Additional bonus opportunities are available
in the second year. Upon termination of Mr. Gibbs' employment for death,
disability or without cause, Mr. Gibbs is entitled to payments over a two-year
period equal to $240,000. Mr. Gibbs' agreement also provides for a $800 monthly
transportation allowance. Mr. Gibbs' agreement is terminable by either party at
any time.
As of March 24, 1999, we entered into an employment agreement with
Roger M. Lane, Chief Operating Officer. The agreement provided for an annual
base salary of $120,000 and reimbursement of ordinary, necessary and documented
business expenses. In addition, the agreement provided for stock options to
purchase up to 450,000 shares of common stock vesting as follows: (i) options to
purchase 100,000 shares of common stock will vest at six months after the grant
date of March 24, 1999; (ii) options to purchase an additional 110,000 shares of
common stock will vest on the first anniversary of the grant date; and (iii)
options to purchase 120,000 shares of common stock will vest on each of the
second and third anniversary of the grant date. The agreement is terminable by
either party. In July 1999, the agreement and Mr. Lane's employment with us were
terminated. As severance, Mr. Lane received 40,000 common stock warrants, with a
$3.75 strike price, one year's annual salary, a $400 per month car allowance,
health insurance and all other employee benefits.
On June 15, 1997, we entered into employment agreements with Jose
Chavez, director, president and chief executive officer, and Mitchell Kettrick,
director, secretary and vice president. On April 20, 1999 their agreements and
employment with us was terminated.
RELATED PARTY TRANSACTIONS
On December 20, 1999, we settled a previously disclosed business
obligation regarding a consulting agreement with Dr. Davinder Sethi, a director,
and MMH Investments, Inc., a company that is principally owned and controlled by
Robert Hersch, our former vice president of corporate finance. Pursuant to the
settlement, we issued 150,000 shares of common stock to MMH Investments, Inc.,
and agreed to immediately register the shares for resale on Form S-3. We
understand that MMH Investments, Inc. will pay each of Mr. Sethi and Humbert B.
Powell, III, a director, 37,500 of these shares.
On December 1, 1997, we entered into a consulting agreement with an
entity whose president is Ernesto Chavarria, a director of our company. The
terms and consulting agreement include the following: $10,000 fee per month plus
reasonable business expenses, 75,000 shares of Common Stock (issued on January
13, 1998), an option to purchase 75,000 shares of Common Stock, and various fees
and commissions for acquisitions or sales secured by the entity. During the year
ended March 31, 2000 we recognized expenses totaling $94,282 related to this
consulting agreement. This agreement was terminated on December 31, 1999, and we
are currently discussing matters related to the termination with Mr. Chavarria.
2000 STOCK OPTION PLAN
Our stock option plan gives certain individuals and our key employees
who are responsible for our continued growth an opportunity to acquire a
proprietary interest in MSI, and thus to create in such persons an increased
interest
20
<PAGE> 25
in and a greater concern for the welfare of MSI. The stock option plan provides
for the grant of options to acquire up to 12,000,000 shares of common stock.
Grants of stock options with respect to 4,372,554 shares of common stock have
been made under the stock option plan.
The stock option plan is to be administered by our compensation
committee, which is currently comprised of Messrs. Dornier, Metzger, and Sethi.
The compensation committee has authority, subject to the terms of the stock
option plan (including the formula grant provisions and the provisions relating
to incentive stock options contained therein), to determine when and to whom to
make grants or awards under the stock option plan, the number of shares to be
covered by the grants or awards, the types and terms of the grants and awards,
and the exercise price of stock options. Moreover, the compensation committee
will have the authority, subject to the provisions of the stock option plan, to
establish such rules and regulations as it deems necessary for the proper
administration of the stock option plan and to make such determinations and
interpretations and to take such action in connection with the stock option plan
and any grants and awards thereunder as it deems necessary or advisable. The
compensation committee's determinations and interpretations under the stock
option plan are final, binding and conclusive on all participants and need not
be uniform and may be made by the compensation committee selectively among
persons who receive, or are eligible to receive, grants and awards and awards
under the stock option plan.
Grants of "incentive stock options" within the meaning of section 422
of the Internal Revenue Code of 1986, as amended (the "Code"), and non-qualified
stock options (options which do not qualify under section 422 of the Code) may
be made under the Stock Option Plan to key employees. Grants of non-qualified
stock options may be made to eligible non-employees (as defined in the Stock
Option Plan).
The exercise price per share of common stock under each option is fixed
by the compensation committee on the date of grant; provided, however, that the
exercise price of an incentive stock option granted to a person who, at the time
of grant, owns our shares which possessing more than 10% of the total combined
voting power of all classes of our stock may not be less than 110% of the fair
market value of a share of common stock on the date of grant. No option is
exercisable after the expiration of ten years from the date of grant, unless, as
to any non-qualified stock option, otherwise expressly provided in the option
agreement; provided, however, that no incentive stock option granted to a person
who, at the time of grant, owns our stock possessing more than 10% of the total
combined voting power of all classes of our stock is exercisable after the
expiration of five years from the date of grant.
In the event of a change of control or sale of MSI, all outstanding
stock options may, subject to the sole discretion of the compensation committee,
become exercisable in full at such time or times as the compensation committee
may determine. Each stock option accelerated by the compensation committee would
terminate on such date (not later than the stated exercise date) as the
compensation committee determines.
Unless an option or other agreement provides otherwise, upon the date
of death of an optionee (or upon the termination of an optionee because of such
optionee's disability), the person who acquires the right to exercise the option
of such optionee (or the optionee in the case of disability) must exercise such
option within 180 days after the date of death (or termination in the case in
disability), unless a longer period is expressly provided in such incentive
stock option or a shorter period is established by the compensation committee,
but in no event after the expiration date of such option. Following an
optionee's termination of employment for cause, all stock options held by such
optionee will immediately be canceled as of the date of termination of
employment. Following an optionee's termination of employment other than for
cause, such optionee must exercise his stock option within 30 days after the
date of such termination, unless a longer period is expressly provided in such
stock option or a shorter period is established by the compensation committee,
provided that no incentive stock option shall be exercisable more than three
months after such termination.
The option exercise price may be paid in cash, or, in the discretion of
the compensation committee, by the delivery of shares of common stock previously
owned by the participant, or by a combination of these methods.
Also, in the discretion of the compensation committee, payment may be
made by delivering a properly executed exercise notice to MSI together with a
copy of irrevocable instructions to a broker to deliver promptly to MSI the
amount of sale or loan proceeds to pay the exercise price.
Except as otherwise expressly provided in any non-qualified stock
option, stock options may be transferred by a participant only by will or by the
laws of descent and distribution and may be exercised only by the participant
during his lifetime.
In addition to the foregoing stock Options, our 2000 Stock Option Plan
contemplates the distribution of other
21
<PAGE> 26
equity-based awards tied to the Company's common stock. Such awards are subject
to the discretion of the Board of Directors or the Board-appointed Committee
authorized to administer the 2000 Stock Option Plan. Receipt of the awards may
be subject to achievement of performance-based factors at the discretion of the
Board or Committee. The maximum number of shares that may be issued pursuant to
the non-stock option awards is 1,200,000, or ten percent of the total issuable
shares under the 2000 Stock Option Plan.
Future awards, if any, that will be made to eligible participants in
the stock option plan are subject to the discretion of the compensation
committee and, therefore, are not determinable at this time. The following table
sets forth, for certain executive officers and groups, the awards that have been
received under the stock option plan through March 31, 2000.
<TABLE>
<CAPTION>
TOTAL NUMBER OF
SHARES GRANTED
UNDER
NAMED EXECUTIVE OFFICERS AND OFFICERS, STOCK OPTION PLAN
DIRECTORS, AND EMPLOYEE GROUPS AS OF MARCH 31, 2000
------------------------------------- ------------------------
<S> <C>
Robert J. Gibbs......................................... 1,362,950
Glenn Birk.............................................. 155,000
Douglas W. Banister .................................... 100,000
Non-Executive Director Group............................ 250,000
Non-Executive Officer Employee Group.................... 750,000
</TABLE>
RETIREMENT PLANS
We sponsor a Section 401(k) defined contribution plan for all
employees.
LIMITATIONS OF LIABILITY AND INDEMNIFICATION MATTERS
Our revised articles of incorporation provide that our directors are
not personally liable to us or our shareholders for monetary damages for breach
of fiduciary duty as directors, except for liability
o for any breach of the directors' duty of loyalty to us or our
shareholders,
o for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law,
o in respect of certain unlawful dividend payments or stock
redemptions or purchases or
o for any transaction from which the director derived an
improper personal benefit.
The effect of these provisions is to eliminate our rights and the rights of our
shareholders (through shareholders' derivative suits) to recover monetary
damages against a director for breach of fiduciary duty as a director (including
breaches resulting from grossly negligent behavior), except in the situations
described above.
We have entered indemnification agreements with each of our directors
and executive officers to be effective upon the merger. Pursuant to these
agreements, under which we will indemnify the director or officer to the fullest
extent permitted by law and will advance expenses if the director or officer
becomes a party to or witness or other participant in any threatened, pending or
completed action, suit or proceeding by reason of any occurrence related to the
fact that the person is or was a director, officer, employee, agent or fiduciary
of us or our subsidiary or another entity at our request, unless a reviewing
party (either outside counsel or a committee appointed by the board of
directors) determines that the person would not be entitled to indemnification
under applicable law. In addition, if a change in control or a potential change
in control occurs and if the person indemnified so requests, we will establish a
trust for the benefit of the indemnitee and fund the trust in an amount
sufficient to satisfy all expenses reasonably anticipated at the time of the
request to be incurred in connection with any claim relating to an indemnifiable
event. The reviewing party will
22
<PAGE> 27
determine the amount deposited in the trust. An indemnitee's rights under his
indemnification agreement will not be exclusive of any other rights under our
revised articles of incorporation or bylaws or applicable law.
We believe that these provisions and agreements will assist us in
attracting and retaining qualified individuals to serve as directors and
officers.
23
<PAGE> 28
STOCK OWNERSHIP OF PRINCIPAL OWNERS AND MANAGEMENT
The following table provides as of June 22, 2000, the number and
percentage of outstanding shares of common stock beneficially owned by (A) each
person who beneficially owns more than five percent of the outstanding shares of
our common stock; (B) each of our executive officers; (C) each of our directors;
and (D) all of our officers and directors as a group.
<TABLE>
<CAPTION>
Name and Address of Number of Shares Percentage of
Beneficial Owner Beneficially Owned (1)(2) Outstanding Shares
------------------- ------------------------- -------------------
<S> <C> <C>
Entrepreneurial Investors, Ltd. (3) 6,379,167 17.2%
P.O. Box 40643
Freeport, G.B., Bahamas
Jose G. Chavez (4) 2,663,000 7.2%
8021 Bottle Brush
Austin, Texas 78750
Andrew Ramirez 2,873,750 7.8%
40 North IH 35, TH-6
Austin, Texas 78701
Douglas W. Banister (5) 50,000 *
James P. Bates -- --
Christopher Brickler (6) 70,945 *
Marsha Cameron -- *
Blandina Cardenas 5,000 *
Ernesto M. Chavarria 67,500 *
Daniel Dornier 243,620 .7%
Robert J. Gibbs (7) 1,090,360 2.9%
Wayne Irwin -- --
Stephen J. Metzger (8) 117,016 *
Humbert B. Powell, III (9) 26,323 *
Davinder Sethi (9) 25,000 *
All directors and officers as a group (10) 2,029,514 5.54%
</TABLE>
* Denotes less than 1% ownership.
24
<PAGE> 29
(1) The rules of the SEC provide that, for the purposes hereof, a
person is considered the "beneficial owner" of shares with respect to which the
person, directly or indirectly, has or shares the voting or investment power,
irrespective of his economic interest in the shares. Unless otherwise noted,
each person identified possesses sole voting and investment power over the
shares listed, subject to community property laws.
(2) Calculations are based on 36,631,604 outstanding shares of common
stock as of June 22, 2000. Shares of common stock subject to options that are
exercisable within 60 days of June 22, 2000, are deemed beneficially owned by
the person holding such options for the purposes of calculating the percentage
of ownership of such person but are not treated as outstanding for the purpose
of computing the percentage of any other person.
(3) Includes 500,000 shares of common stock issuable upon the exercise
of warrants.
(4) Includes 100,000 shares of common stock issuable upon the exercise
of stock options.
(5) Includes 50,000 shares of common stock issuable upon the exercise
of stock options.
(6) Includes 55,000 shares of common stock issuable upon the exercise
of stock options and warrants to purchase common stock.
(7) Includes 1,090,360 shares of common stock issuable upon the
exercise of stock options.
(8) Includes 85,000 shares of common stock issuable upon the exercise
of stock options and warrants to purchase common stock.
(9) Includes 25,000 shares of common stock issuable upon the exercise
of stock options.
(10) Includes information in the notes above and, in addition, 10,000
shares of common stock held by other officers of our company and 323,750 shares
of common stock issuable upon the exercise of stock options held by other
officers of our company.
25
<PAGE> 30
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The following table sets forth each of our directors, officers and
holders of 10% or more of our outstanding stock at any time during the fiscal
year ended March 31, 2000 who we know to have failed to file on a timely basis
the described forms required to be filed under the Securities Exchange Act of
1934. Each late transaction was reported on a Form 5 in May 2000.
<TABLE>
<CAPTION>
NUMBER OF FAILURES TO
FILE REPORTS
NUMBER OF NUMBER OF TRANSACTIONS
NAME AND PRINCIPAL POSITION FORM 3 FORM 4 FORM 5 LATE REPORTS NOT REPORTED A TIMELY BASIS
--------------------------- -------- -------- -------- ------------- ----------------------------
<S> <C> <C> <C> <C> <C>
Robert J. Gibbs 0 1 0 0 1
President, Chief Executive Officer and Director
Douglas W. Banister 1 0 0 0 0
Chief Financial Officer
Cliff Luckey 1 1 0 0 4
Chief Technology Officer
Glenn Birk 0 3 1 0 4
Vice President of Sales
Russell Birk 1 0 0 0 0
Vice President of Corporate Finance
Gary Fortin 0 1 0 0 1
Vice President of Marketing
Patricia V. Hrabina 1 1 0 0 2
Vice President of Human Resources
Mark R. Slosson 1 0 0 0 0
Vice President of Wholesale Markets
Shawn Wiora 1 0 0 0 0
Vice President of Strategic Markets
Bruce Cummings 1 0 0 0 0
Vice President of New Markets
Christopher Brickler 1 2 0 0 3
Executive Vice President - Marketing and
Business Development and
Director
Blandira Cardenas 0 1 1 0 1
Director
Ernesto M. Chavarria 0 2 1 0 9
Director
Daniel Dornier 0 3 1 0 61
Director
Stephen J. Metzger 1 3 0 0 4
Director
Humbert B. Powell, III 1 2 0 0 2
Director
Davinder Sethi 1 1 0 0 1
Director
Robert Frank 1 0 0 0 0
former Chief Operating Officer
Robert Hersch 1 2 1 0 4
former Vice President of Corporate
Finance
Stephen Joseph Hoelscher 0 4 0 0 5
former Controller
</TABLE>
26
<PAGE> 31
MSI HOLDINGS, INC.
2000 STOCK OPTION PLAN
(RESTATEMENT)
1. Purpose.
MSI Holdings, Inc., a Utah corporation (herein, together with its
successors, referred to as the "Company"), by means of this 2000 Stock Option
Plan (the "Plan"), desires to afford certain individuals and employees of the
Company and any parent corporation or subsidiary corporation thereof now
existing or hereafter formed or acquired (such parent and subsidiary
corporations referred to herein as "Related Entities") who are responsible for
the continued growth of the Company an opportunity to acquire a proprietary
interest in the Company and thus to create in such persons an increased interest
in and a greater concern for the welfare of the Company and any Related
Entities. As used in the Plan, the terms "parent corporation" and "subsidiary
corporation" shall mean, respectively, a corporation within the definition of
such terms contained in Sections 424(e) and 424(f) of the Internal Revenue Code
of 1986, as amended (the "Code"). All capitalized terms not otherwise defined in
Sections 1 through 17 of this Plan shall have the meanings set forth in Section
18 of this Plan.
The stock options described in Sections 6 and 7 (the "Options"), and other
stock or equity-based awards described in Section 8 (the "Awards"), are a matter
of separate inducement and, except as specifically provided herein or elsewhere,
are not in lieu of any salary or other compensation for services.
2. Administration.
(a) Committee. The Board of Directors of the Company (the "Board of
Directors") shall administer the Plan with respect to all Employees (as
hereinafter defined) or Eligible Non-Employees (as hereinafter defined) or may
delegate all or part of its duties under this Plan to any committee or
sub-committee appointed by the Board of Directors (the "Committee") or to any
officer or committee of officers of the Company, subject in each case to such
conditions and limitations as the Board of Directors may establish and subject
to the following sentence. Unless a majority of the members of the Board of
Directors determines otherwise: (a) the Committee shall be constituted in a
manner that satisfies the requirements of Rule 16b-3, which Committee shall
administer the Plan with respect to all Employees or Eligible Non-Employees who
are subject to Section 16 of the Exchange Act in a manner that satisfies the
requirements of Rule 16b-3; and (b) the Committee shall be constituted in a
manner that satisfies the requirements of Section 162(m), which Committee shall
administer the Plan with respect to "performance-based compensation" for all
Employees or Eligible Non-Employees who are reasonably expected to be "covered
employees" as those terms are defined in Section 162(m). The number of persons
that shall constitute the Committee shall be determined from time to time by a
majority of all the members of the Board of Directors, but shall in no event be
fewer than required by Rule 16b-3 and Section 162(m) where applicable. Except
for references in Sections 2(a), 2(b), and 2(c) and unless the context otherwise
requires, references herein to the Committee shall also refer to the Board of
Directors as administrator of the Plan for Employees or Eligible Non-Employees
or to the appropriate delegate of the Committee or the Board of Directors.
<PAGE> 32
(b) Duration, Removal, Etc. The members of the Committee shall serve at the
pleasure of the Board of Directors, which shall have the power, at any time and
from time to time, to remove members from or add members to the Committee.
Removal from the Committee may be with or without cause. Any individual serving
as a member of the Committee shall have the right to resign from membership in
the Committee by written notice to the Board of Directors. The Board of
Directors, and not the remaining members of the Committee, shall have the power
and authority to fill vacancies on the Committee, however caused.
(c) Meetings and Actions of Committee. The Board of Directors shall
designate which of the Committee members shall be the chairman of the Committee.
If the Board of Directors fails to designate a Committee chairman, the members
of the Committee shall elect one of the Committee members as chairman, who shall
act as chairman until he ceases to be a member of the Committee or until the
Board of Directors elects a new chairman. The Committee shall hold its meetings
at those times and places as the chairman of the Committee may determine. At all
meetings of the Committee, a quorum for the transaction of business shall be
required, and a quorum shall be deemed present if at least a majority of the
members of the Committee are present. At any meeting of the Committee, each
member shall have one vote. All decisions and determinations of the Committee
shall be made by the majority vote or majority decision of all of its members
present at a meeting at which a quorum is present; provided, however, that any
decision or determination reduced to writing and signed by all of the members of
the Committee shall be as fully effective as if it had been made at a meeting
that was duly called and held. The Committee may make any rules and regulations
as it may deem advisable for the conduct of its business that are not
inconsistent with the provisions of the Plan, the certificate of incorporation
of the Company, the by-laws of the Company, Rule 16b-3 so long as it is
applicable, and Section 162(m) so long as it is applicable.
3. Shares Available.
Subject to the adjustments provided in Section 10, the maximum aggregate
number of shares of common stock, $0.10 par value, of the Company ("Common
Stock") in respect of which Options and Awards may be granted for all purposes
under the Plan shall be 12,000,000 shares, provided, however, that no more than
10% of such shares shall be available for issuance under Awards granted pursuant
to Section 8. If, for any reason, any shares as to which Options have been
granted cease to be subject to purchase thereunder, including the expiration of
such Option, the termination of such Option prior to exercise, or the forfeiture
of such Option, or any shares as to which Awards have been granted are forfeited
or surrendered, such shares shall thereafter be available for grants under the
Plan. Options or Awards granted under the Plan may be fulfilled in accordance
with the terms of the Plan with (i) authorized and unissued shares of the Common
Stock, (ii) issued shares of such Common Stock held in the Company's treasury,
or (iii) issued shares of Common Stock reacquired by the Company in each
situation as the Board of Directors or the Committee may determine from time to
time.
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4. Eligibility and Bases of Participation.
Grants of Incentive Options (as hereinafter defined) and Non-Qualified
Options (as hereinafter defined) may be made under the Plan, subject to and in
accordance with Section 6, to Employees. As used herein, the term "Employee"
shall mean any employee of the Company or any Related Entity, including officers
and directors of the Company or any Related Entity who are also employees of the
Company or any Related Entity, who is regularly employed on a salaried basis and
who is so employed on the date of such grant.
Grants of Non-Qualified Options may be made, subject to and in accordance
with Section 7, to any Eligible Non-Employee. As used herein, the term "Eligible
Non-Employee" shall mean any director of the Company who is not regularly
employed on a salaried basis with the Company and any other person or entity of
any nature whatsoever, specifically including an individual, a firm, a company,
a corporation, a partnership, a trust, or other entity (collectively, a
"Person"), that the Committee designates as eligible for a grant of Options
pursuant to this Plan because such Person performs bona fide consulting,
advisory, or other services for the Company or any Related Entity (other than
services in connection with the offer or sale of securities in a capital-raising
transaction) and the Board of Directors or the Committee determines that the
Person has a direct and significant effect on the financial development of the
Company or any Related Entity.
Grants of Awards may be made under the Plan, subject to and in accordance
with Section 8, to Employees and Eligible Non-Employees.
The adoption of this Plan shall not be deemed to give any Person a right to
be granted any Options or any Awards.
Notwithstanding any other provision of this Plan to the contrary, with
respect to the grant of any Options or Awards to any Employee or Eligible
Non-Employee, the Committee shall first determine the number of shares (or
units) in respect of which Options or Awards are to be granted to such Employee
or Eligible Non-Employee and shall then cause to be granted to such Employee or
Eligible Non-Employee an Option exercisable for such shares or an Award for such
shares (or units). The exercise price per share of Common Stock under each
Option and the value of each share of Common Stock (or unit) under each Award
shall be fixed by the Committee at the time of grant of the Option or Award and
shall not be less than 85% of the Fair Market Value of a share of Common Stock
on the date of grant; provided, in the case of an Incentive Option (as
hereinafter defined) the exercise price per share shall not be less than 100% of
the Fair Market Value of a Share of Common Stock on the date of grant, except as
provided in 6(a) hereof.
5. Authority of Committee.
Subject to the express provisions of the Plan and any applicable law with
which the Company intends the Plan to comply, the Committee shall have the
authority, in its sole and absolute discretion, (a) to adopt, amend, and rescind
administrative and interpretive rules and regulations relating to the Plan,
including without limitation to adopt and observe such procedures concerning the
counting of Options or Awards against the Plan and individual maximums as it may
deem appropriate from time
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<PAGE> 34
to time; (b) to determine the Employees or Eligible Non-Employees to whom, and
the time or times at which, Options and Awards shall be granted; (c) to
determine the number of shares of Common Stock (or units) that shall be the
subject of each Option or Award; (d) to determine the terms and provisions of
each agreement evidencing Options or Awards granted hereunder (which need not be
identical), including provisions defining or otherwise relating to (i) the term
and the period or periods and extent of exerciseability of the Options, (ii) the
forfeitability of any shares (or units) or any restrictions on shares (or units)
subject to an Award, (iii) the extent to which the transferability of shares of
Common Stock issued or transferred pursuant to any Option or Award is
restricted, (iv) the effect of termination of employment on the Option or Award,
(iv) the effect of approved leaves of absence (consistent with any applicable
provisions of the Code or Treasury regulations) and (v) the establishment of
procedures for an optionee to exercise an Option by delivering that number of
shares of Common Stock already owned by such optionee having an aggregate Fair
Market Value which shall equal the Option exercise price; provided, however,
that if the Committee permits, pursuant to Section 6(b) or 7(a)(ii), payment of
the exercise price of an Option with previously acquired shares of Common Stock
(A) in the case of Incentive Options, no shares shall be used to pay the
exercise price under this paragraph unless (1) such shares were not acquired
through the exercise of Incentive Options or (2) if so acquired, (x) such shares
have been held for more than two years since the grant of such Incentive Options
and for more than one year since the exercise of such Incentive Options (the
"Holding Period"), or (y) if such shares have not been held for the Holding
Period, the optionee elects in writing to use such shares to pay the exercise
price under this paragraph, (B) no such procedure shall be available if there is
an opinion of the Company's independent accounting firm that the use of such a
procedure could negatively affect the financial statements of the Company or a
Related Entity, and (C) notwithstanding any provision in the Plan to the
contrary, no such shares shall be used to pay the Option exercise price unless
such shares shall have been held by the optionee for a period of six months
prior to the date of exercise of the Option; (e) to accelerate, pursuant to
Section 9 or otherwise, the vesting or exerciseability (or time of
exerciseability) of all or part of any Option, or the vesting or lapsing of
restrictions on all or part of any Award, that has been granted; (f) to construe
the respective agreements evidencing Options and Awards pursuant to the Plan;
(g) to make determinations of the Fair Market Value of the Common Stock pursuant
to the Plan; (h) to delegate its duties under the Plan to such agents as it may
appoint from time to time, subject to the second sentence of Section 2(a); and
(i) to make all other determinations, perform all other acts, and exercise all
other powers and authority necessary or advisable for administering the Plan,
including the delegation of those ministerial acts and responsibilities as the
Committee deems appropriate. The Committee may correct any defect, supply any
omission or reconcile any inconsistency in the Plan, in any Option, in any
Award, or in any agreements evidencing Options or Awards granted hereunder in
the manner and to the extent it deems necessary or desirable to carry the Plan
into effect, and the Committee shall be the sole and final judge of that
necessity or desirability. The determinations of the Committee on the matters
referred to in this Section 5 shall be final and conclusive. The Committee shall
not have the power to appoint members of the Committee or to terminate, modify,
or amend the Plan. Those powers are vested in the Board of Directors.
An Option shall be vested and/or exercisable, and the restrictions on any
Awards shall lapse, in whole or in part and at such times as determined by the
Committee. The Committee in its discretion may provide that an Option shall be
vested or exercisable, and the restrictions on any Awards shall lapse, only upon
the attainment of one or more performance goals or targets established by the
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<PAGE> 35
Committee, which are based on (i) the price of a share of Common Stock, (ii) the
Company's earnings per share, (iii) the Company's market share, (iv) the market
share of a business unit of the Company designated by the Committee, (v) the
Company's sales, (vi) the sales of a business unit of the Company designated by
the Committee, (vii) the net income (before or after taxes) of the Company or a
business unit of the Company designated by the Committee, (viii) the cash flow
return on investment of the Company or any business unit of the Company
designated by the Committee, (ix) the earnings before or after interest, taxes,
depreciation, and/or amortization of the Company or any business unit of the
Company designated by the Committee, (x) the economic value added, or (xi) the
return on stockholders' equity achieved by the Company.
From time to time, the Board of Directors and appropriate officers of the
Company shall be and are authorized to take whatever actions are necessary to
file required documents with governmental authorities, stock exchanges, and
other appropriate Persons to make shares of Common Stock available for issuance
pursuant to agreements evidencing Options or Awards granted hereunder.
6. Stock Options for Employees.
Subject to the express provisions of this Plan, the Committee shall have
the authority to grant incentive stock options pursuant to Section 422 of the
Code ("Incentive Options"), to grant non-qualified stock options (options which
do not qualify under Section 422 of the Code) ("Non-Qualified Options"), and to
grant both types of Options to Employees. No Incentive Option shall be granted
pursuant to this Plan after the earlier of ten years from the date of adoption
of the Plan or ten years from the date of approval of the Plan by the
stockholders of the Company. Notwithstanding anything in this Plan to the
contrary, Incentive Options may be granted only to Employees. The terms and
conditions of the Options granted under this Section 6 shall be determined from
time to time by the Committee; provided, however, that the Options granted under
this Section 6 shall be subject to all terms and provisions of the Plan (other
than Sections 7 and 8), including the following:
(a) Option Exercise Price. Subject to Section 4, the Committee shall
establish the Option exercise price at the time any Option is granted at such
amount as the Committee shall determine; provided, that in the case of an
Incentive Option, such price shall not be less than the Fair Market Value per
share of Common Stock at the date the Option is granted; and provided, further,
that in the case of an Incentive Option granted to a person who, at the time
such Incentive Option is granted, owns shares of the Company or any Related
Entity which possess more than 10% of the total combined voting power of all
classes of shares of the Company or of any Related Entity, the option exercise
price shall not be less than 110% of the Fair Market Value per share of Common
Stock at the date the Option is granted. The Option exercise price shall be
subject to adjustment in accordance with the provisions of Section 10 of the
Plan.
(b) Payment. The price per share of Common Stock with respect to each
Option exercise shall be payable at the time of such exercise. Such price shall
be payable in cash or by any other means acceptable to the Committee, including
delivery to the Company of shares of Common Stock owned by the optionee pursuant
to a procedure created pursuant to Section 5(d) of the Plan. Shares delivered to
the Company in payment of the Option exercise price shall be valued at the Fair
Market Value of the Common Stock on the day preceding the date of the exercise
of the Option.
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<PAGE> 36
(c) Continuation of Employment. Each Incentive Option shall be granted to
an Employee only when he is an employee of the Company or a Related Entity and
may only be exercised while such optionee is an employee of the Company or a
Related Entity or within three months after termination of employment with the
Company or related Entity.
(d) Exerciseability of Stock Option. Subject to Section 9, each Option
shall be exercisable in one or more installments as the Committee may determine
at the time of the grant. No Incentive Option by its terms shall be exercisable
after the expiration of ten years from the date of grant of such Option;
provided, however, that no Incentive Option granted to a person who, at the time
such Option is granted, owns stock of the Company, or any Related Entity,
possessing more than 10% of the total combined voting power of all classes of
stock of the Company, or any Related Entity, shall be exercisable after the
expiration of five years from the date such Option is granted.
(e) Death. If any optionee's employment with the Company or a Related
Entity terminates due to the death of such optionee, the estate of such
optionee, or a Person who acquired the right to exercise such Option by bequest
or inheritance or by reason of the death of the optionee, shall have the right
to exercise such Option in accordance with its terms at any time and from time
to time within 180 days after the date of death unless a shorter or longer
period is expressly provided in such Option (but in no event prior to the 90th
day after the death of such optionee) or established by the Committee pursuant
to Section 9 (but in no event after the expiration date of such Option).
(f) Disability. If the employment of any optionee terminates because of his
Disability, such optionee or his legal representative shall have the right to
exercise the Option in accordance with its terms at any time and from time to
time within 180 days after the date of such termination unless a shorter or
longer period is expressly provided in such Option (but in no event prior to the
90th day after the date of such termination of employment) or established by the
Committee pursuant to Section 9 (but not after the expiration date of the
Option); provided, however, that in the case of an Incentive Option, the
optionee or his legal representative shall in any event be required to exercise
the Incentive Option within one year after termination of the optionee's
employment due to his Disability.
(g) Termination for Good Cause. Unless an optionee's Option expressly
provides otherwise or the Committee determines otherwise, such optionee shall
immediately forfeit all rights under his Option as of the date of termination of
employment with the Company or Related Entity, except as to the shares of stock
already purchased thereunder, if the employment of such optionee with the
Company or a Related Entity is terminated by the Company or any Related Entity
for Good Cause. The determination that there exists Good Cause for termination
shall be made by the Committee (unless otherwise agreed to in writing by the
Company and the optionee), and any decision in respect thereof by the Committee
shall be final and binding on all parties in interest.
(h) Other Termination of Employment. If the employment of an optionee with
the Company or a Related Entity terminates for any reason other than those
specified in Sections 6(e), 6(f) or 6(g) above, such optionee shall have the
right to exercise his Option in accordance with its terms, within one year after
the date of such termination, unless a shorter or longer period is expressly
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<PAGE> 37
provided in such Option or established by the Committee pursuant to Section 9
(but not after the expiration date of the Option); provided, that no Incentive
Option shall be exercisable more than three months after such termination.
(i) Maximum Exercise. The aggregate Fair Market Value of stock (determined
at the time of the grant of the Option) with respect to which Incentive Options
are exercisable for the first time by an optionee during any calendar year under
all plans of the Company and any Related Entity shall not exceed $100,000.
7. Stock Option Grants to Eligible Non-Employees.
(a) Subject to the express provisions of this Plan, the Committee shall
have the authority to grant Non-Qualified Options to Eligible Non-Employees. The
terms and conditions of the Options granted under this Section 7 shall be
determined from time to time by the Committee; provided, however, that the
Options granted under this Section 7 shall be subject to all terms and
provisions of the Plan (other than Sections 6 and 8), including the following:
(i) Option Exercise Price. Subject to Section 4, the Committee shall
establish the Option exercise price at the time any Non-Qualified Option is
granted at such amount as the Committee shall determine. The Option
exercise price shall be subject to adjustment in accordance with the
provisions of Section 10 of the Plan.
(ii) Payment. The price per share of Common Stock with respect to each
Option exercise shall be payable at the time of such exercise. Such price
shall be payable in cash or by any other means acceptable to the Committee,
including delivery to the Company of shares of Common Stock owned by the
optionee pursuant to a procedure created pursuant to Section 5(d) of the
Plan. Shares delivered to the Company in payment of the Option exercise
price shall be valued at the Fair Market Value of the Common Stock on the
day preceding the date of the exercise of the Option.
(iii) Exerciseability of Stock Option. Subject to Section 9, each
Option shall be exercisable in one or more installments as the Committee
may determine at the time of the grant. No Option shall be exercisable
after the expiration of ten years from the date of grant of the Option,
unless otherwise expressly provided in such Option.
(iv) Death. If the retention by the Company or any Related Entity of
the services of any Eligible Non-Employee terminates because of his death,
the estate of such optionee, or a Person who acquired the right to exercise
such Option by bequest or inheritance or by reason of the death of the
optionee, shall have the right to exercise such Option in accordance with
its terms, at any time and from time to time within 180 days after the date
of death unless a shorter or longer period is expressly provided in such
Option (but in no event prior to the 90th day after the death of such
optionee) or established by the Committee pursuant to Section 9 (but in no
event after the expiration date of such Option).
(v) Disability. If the retention by the Company or any Related Entity
of the services of any Eligible Non-Employee terminates because of his
Disability, such optionee or
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<PAGE> 38
his legal representative shall have the right to exercise the Option in
accordance with its terms at any time and from time to time within 180 days
after the date of the optionee's termination unless a shorter or longer
period is expressly provided in such Option (but in no event prior to the
90th day after the date of such termination of employment) or established
by the Committee pursuant to Section 9 (but not after the expiration of the
Option).
(vi) Termination for Good Cause. If the retention by the Company or
any Related Entity of the services of any Eligible Non-Employee is
terminated (i) for Good Cause or (ii) as a result of removal of the
optionee from office as a director of the Company or of any Related Entity
for cause by action of the stockholders of the Company or such Related
Entity in accordance with the by-laws of the Company or such Related
Entity, as applicable, and the corporate law of the jurisdiction of
incorporation of the Company or such Related Entity, then such optionee
shall immediately forfeit his rights under his Option except as to the
shares of stock already purchased. The determination that there exists Good
Cause for termination shall be made by the Committee (unless otherwise
agreed to in writing by the Company and the optionee) and any decision in
respect thereof by the Committee shall be final and binding on all parties
in interest.
(vii) Other Termination of Relationship. If the retention by the
Company or any Related Entity of the services of any Eligible Non-Employee
terminates for any reason other than those specified in subsections
7(a)(iv), (a)(v) or (a)(vi) above, such optionee shall have the right to
exercise his or its Option in accordance with its terms within one year
after the date of such termination, unless a shorter or longer period is
expressly provided in such Option or established by the Committee pursuant
to Section 9 (but not after the expiration date of the Option).
(b) An Eligible Non-Employee that is a non-employee director of the Company
may elect to receive Options in lieu of all or a portion of such director's
annual cash retainer fee, if any, for services as a director of the Company.
Notwithstanding subsection 7(a)(ii), the following shall apply if a non-employee
director elects to receive all or a portion of his/her annual cash retainer in
Options:
(i) Method of Election. Except as otherwise specified by the
Committee, a non-employee director's election shall be made in accordance
with the following provisions. Unless the Committee provides otherwise, the
election may be made only by written notice delivered to the Committee
prior to the first day of the calendar year in which the cash payment would
otherwise be made. The election shall specify the amount of the annual cash
retainer that is to be paid in the form of Options and shall be irrevocable
except for payments otherwise payable in the next calendar year after the
date of a written notice of revocation.
(ii) Terms of Options. The date of grant of an Option granted pursuant
to this Section 7(b) shall be the later of (1) the date all corporate
action necessary to effect the grant has been completed or (2) the date on
which the portion of the annual cash retainer fee that the non-employee
director has elected not to receive would otherwise have been paid. The
number of shares subject to that Option shall be determined by dividing the
foregone amount of the annual cash retainer fee otherwise due and payable
on the date of grant by the value of
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<PAGE> 39
an Option for one share of Common Stock on the date of grant having the
terms set forth herein, which value shall be calculated pursuant to a
Black-Scholes Model or similar valuation method selected by the Committee.
The exercise price with respect to a share of Common Stock subject to that
Option shall be the Fair Market Value of a share of Common Stock on the
Option's date of grant.
8. Awards.
Subject to the express provisions of this Plan, the Committee shall have
the authority to grant Awards of shares of Common Stock or other equity-based
awards to Employees or Eligible Non-Employees. The terms and conditions of the
Awards granted under this Section 8 shall be determined from time to time by the
Committee and set forth in an agreement evidencing such Award; provided,
however, that the Awards granted under this Section 8 shall be subject to all
terms and provisions of the Plan (other than Sections 6 and 7), including the
following:
(a) Price. Subject to Section 4, the Committee shall establish the
price or value of the shares of Common Stock, or the value of units,
subject to an Award, provided, however, that the price or value of shares
of Common Stock shall not be less than 85% of the Fair Market Value of a
share of Common Stock on the date of grant.
(b) Payment. The Committee shall determine the amount and form of any
payment (if applicable) for Common Stock received pursuant to an Award,
provided, that, in the absence of such a determination, an award-holder
shall not be required to make any payment for Common Stock received
pursuant to an Award, except to the extent otherwise required by law.
(c) Forfeiture Restrictions. An Award or shares of Common Stock that
may be the subject of an Award may be subject to restrictions (the
"Forfeiture Restrictions") such that an award-holder will have an
obligation to forfeit or surrender all or part of the Award or any shares
received under an Award under the Forfeiture Restrictions. The Forfeiture
Restrictions shall be determined by the Committee in its sole discretion,
and the Committee may provide that the Forfeiture Restrictions shall lapse
upon (i) the attainment of one or more performance goals or targets
established by the Committee, which are based on (A) the price of a share
of Common Stock, (B) the Company's earnings per share, (C) the Company's
market share, (D) the market share of a business unit of the Company
designated by the Committee, (E) the Company's sales, (F) the sales of a
business unit of the Company designated by the Committee, (G) the net
income (before or after taxes) of the Company or a business unit of the
Company designated by the Committee, (H) the cash flow return on investment
of the Company or any business unit of the Company designated by the
Committee, (I) the earnings before or after interest, taxes, depreciation,
and/or amortization of the Company or any business unit of the Company
designated by the Committee, (J) the economic value added, or (K) the
return on stockholders' equity achieved by the Company; (ii) the
award-holder's continued employment or service with the Company for a
specified period of time; (iii) the occurrence of any event or the
satisfaction of any other condition specified by the Committee
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<PAGE> 40
in its sole discretion; or (iv) a combination of any of the foregoing. Each
Award may, in the discretion of the Committee, have different Forfeiture
Restrictions.
(d) Term. The term of any Award shall not exceed ten years from the
date of grant of the Award.
9. Change of Control.
Except as otherwise expressly provided in a particular Option or Award, if
(i) a Change of Control shall occur or (ii) the Company shall enter into an
agreement providing for a Change of Control, then the Committee may declare any
or all Options or Awards outstanding under the Plan to be exercisable in full at
such time or times as the Committee shall determine and the Company may purchase
any or all of such Options or Awards for an amount of cash equal to the amount
that could have been attained upon the exercise of such Options or Awards or the
realization of the optionee's or award-holder's rights had such Option or Award
been currently exercisable. Each Option and Award accelerated by the Committee
pursuant to the preceding sentence shall terminate, notwithstanding any express
provision thereof or any other provision of the Plan, on such date (not later
than the stated exercise date) as the Committee shall determine.
10. Adjustment of Shares.
Except as otherwise contemplated in Section 9, and unless otherwise
expressly provided in a particular Option or Award, in the event that, by reason
of any merger, consolidation, combination, liquidation, reorganization,
recapitalization, stock dividend, stock split, split-up, split-off, spin-off,
combination of shares, exchange of shares or other like change in capital
structure of the Company (collectively, a "Reorganization"), the Common Stock is
substituted, combined, or changed into any cash, property, or other securities,
or the shares of Common Stock are changed into a greater or lesser number of
shares of Common Stock, the number and/or kind of shares and/or interests
subject to an Option or Award and the per share price or value thereof shall be
appropriately adjusted by the Committee to give appropriate effect to such
Reorganization. Any fractional shares or interests resulting from such
adjustment shall be eliminated. Notwithstanding the foregoing, (i) each such
adjustment with respect to an Incentive Option shall comply with the rules of
Section 424(a) of the Code, and (ii) in no event shall any adjustment be made
that would render any Incentive Option granted hereunder other than an
"incentive stock option" for purposes of Section 422 of the Code. The maximum
aggregate number of shares of Common Stock in respect of which Options or Awards
may be granted under this Plan as provided for in Section 3, and the maximum
number that may be granted to any one individual in a calendar year pursuant to
Section 21, shall be subject to adjustment as contemplated above.
Except as otherwise contemplated in Section 9, and unless otherwise
expressly provided in a particular Option or Award, in the event that the
Company is not the surviving entity of a Reorganization and, following such
Reorganization and, in connection with such Reorganization, any optionee or
award-holder will hold Options or Awards issued pursuant to this Plan which have
not been exercised, canceled, forfeited, or terminated in connection therewith,
the Company shall cause such Options or Awards to be assumed (or canceled and
replacement options or awards issued) by
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the surviving entity or a Related Entity with such changes in the number and/or
kind of shares and/or interests subject to an Option and Award and the per share
price or the value thereof as the Committee determines is necessary to give
appropriate effect to such Reorganization. In the event of any perceived
conflict between the provisions of Section 9 and this Section 10, the
Committee's determination under Section 9 shall control.
11. Assignment or Transfer.
(a) Transfer of Incentive Options. Incentive Options are not transferable
by an optionee other than by will or the laws of descent and distribution.
(b) Transfer of Non-Qualified Options or Awards.
(i) Permitted Transferees. The Committee may, in its discretion,
permit an optionee or award-holder to transfer all or any portion of a
Non-Qualified Option or Award, or authorize all or a portion of any
Non-Qualified Option or Award to be granted to an optionee or award-holder
to be on terms that permit transfer by such optionee or award-holder, to
(A) the spouse, former spouse, children, stepchildren, grandchildren,
parents, stepparents, grandparents, siblings, nieces, nephews,
mother-in-law, father-in-law, sons-in-law, daughters-in-law,
brothers-in-law, or sisters-in-law of the optionee or award-holder,
including adoptive relationships, or any other person sharing the
optionee's or award-holder's household (other than a tenant or employee)
(collectively, "Immediate Family Members"), (B) a trust or trusts in which
such Immediate Family Members have more than fifty percent of the
beneficial interest, (C) a foundation in which such Immediate Family
Members (or the optionee or award-holder) control the management of assets,
or (D) any other entity in which such Immediate Family Members (or the
optionee or award-holder) own more than fifty percent of the voting
interests (collectively, "Permitted Transferees"); provided that (x) there
may be no consideration for any such transfer, (y) subsequent transfers of
Non-Qualified Options or Awards transferred as provided above shall be
prohibited except subsequent transfers back to the grantee of the Option or
Award and transfers to other Permitted Transferees of the grantee of the
Option or Award.
(ii) Domestic Relations Orders. In the Committee's sole discretion,
Non-Qualified Options or Awards may be transferred pursuant to domestic
relations orders entered or approved by a court of competent jurisdiction
upon delivery to the Company of written notice of such transfer and a
certified copy of such order.
(iii) Other Transfers and Exercise Rights. Except as expressly
permitted by Sections 11(b)(i) and 11(b)(ii), Non-Qualified Options
requiring exercise, or any Awards subject to Forfeiture Restrictions, shall
not be transferable other than by will or the laws of descent and
distribution. In the event that a legal representative has been appointed
in connection with the Disability of an optionee, the optionee's Options
may be exercised by the legal representative.
-11-
<PAGE> 42
(iv) Effect of Transfer. Following the transfer of any Non-Qualified
Option as contemplated by Sections 11(b)(i), 11(b)(ii) and 11(b)(iii), (A)
such Non-Qualified Option or Award shall continue to be subject to the same
terms and conditions as were applicable immediately prior to transfer,
provided that the term "optionee" shall be deemed to refer to the Permitted
Transferee, the recipient under a domestic relations order, or the estate
or heirs of a deceased optionee, as applicable, to the extent appropriate
to enable the optionee to exercise the transferred Non-Qualified Option in
accordance with the terms of this Plan and applicable law, (B) such Award
shall continue to be subject to the same terms and conditions as were
applicable immediately prior to transfer, provided that the term
"award-holder" shall be deemed to refer to the Permitted Transferee, the
recipient under a domestic relations order, or the estate or heirs of a
deceased award-holder, as applicable and to the extent appropriate, (C) the
provisions of Sections 7(a)(iv) through (vii) hereof shall continue to be
applied with respect to the original optionee and, following the occurrence
of any such events described therein the Non-Qualified Options shall be
exercisable by the Permitted Transferee, the recipient under a domestic
relations order, or the estate or heirs of a deceased Holder, as
applicable, only to the extent and for the periods specified in Sections
7(a)(iv) through (vii), and (D) in the discretion of the Committee, all
voting control in the Common Stock transferred pursuant to the exercise of
Non-Qualified Options or acquired pursuant to an Award shall be retained in
the grantee of the Option or Award.
(c) Procedures and Restrictions. Any optionee or award-holder desiring to
transfer an Option or Award as permitted under Section 11(a) or 11(b) shall make
application therefor in the manner and time specified by the Committee and shall
comply with such other requirements as the Committee may require to assure
compliance with all applicable securities laws. The Committee shall not give
permission for such a transfer if (i) it would give rise to short-swing
liability under Section 16(b) of the Exchange Act, or (ii) it may not be made in
compliance with all applicable federal, state and foreign securities laws.
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<PAGE> 43
12. Compliance with Securities Laws.
The Company shall not in any event be obligated to file any registration
statement under the Securities Act or any applicable state securities law to
permit exercise of any option or to issue any Common Stock in violation of the
Securities Act or any applicable state securities law. Each optionee or
award-holder (or, in the event of his death or, in the event a legal
representative has been appointed in connection with his Disability, the Person
exercising the Option or Award) shall, as a condition to his right to exercise
any Option, deliver to the Company an agreement or certificate containing such
representations, warranties and covenants as the Company may deem necessary or
appropriate to ensure that the issuance of shares of Common Stock pursuant to
such exercise is not required to be registered under the Securities Act or any
applicable state securities law.
Certificates for shares of Common Stock, when issued pursuant to the Plan,
may have substantially the following legend, or statements of other applicable
restrictions, endorsed thereon, and may not be immediately transferable:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS.
THE SHARES MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED, TRANSFERRED OR
OTHERWISE DISPOSED OF UNTIL THE HOLDER HEREOF PROVIDES EVIDENCE
SATISFACTORY TO THE ISSUER (WHICH, IN THE DISCRETION OF THE ISSUER, MAY
INCLUDE AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER) THAT SUCH OFFER,
SALE, PLEDGE, TRANSFER OR OTHER DISPOSITION WILL NOT VIOLATE APPLICABLE
FEDERAL OR STATE LAWS.
This legend shall not be required for shares of Common Stock issued
pursuant to an effective registration statement under the Securities Act and in
accordance with applicable state securities laws.
13. Withholding Taxes.
By acceptance of the Option or Award, the optionee or award-holder will be
deemed to (i) agree to reimburse the Company or Related Entity by which the
optionee or award-holder is employed for any federal, state, or local taxes
required by any government to be withheld or otherwise deducted by such
corporation in connection with such Option or Award ; (ii) authorize the Company
or any Related Entity by which the optionee or award-holder is employed to
withhold from any cash compensation paid to the optionee or in the optionee's
behalf, or to the award-holder or on the award-holder's behalf, an amount
sufficient to discharge any federal, state, and local taxes imposed on the
Company, or the Related Entity by which the optionee or award-holder is
employed, and which otherwise has not been reimbursed by the optionee or
award-holder, in connection with the Option or Award; and (iii) agree that the
Company may, in its discretion, hold the stock certificate to which the optionee
or award-holder is entitled in connection with the Option or Award as security
for the payment of the aforementioned withholding tax liability, until cash
sufficient to pay that liability has been accumulated, and may, in its
discretion, effect such withholding by retaining shares issuable in connection
with the Option or Award having a Fair Market Value which is equal to the amount
to be withheld.
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<PAGE> 44
14. Costs and Expenses.
The costs and expenses of administering the Plan shall be borne by the
Company and shall not be charged against any Option or Award nor to any
individual receiving an Option or Award.
15. Funding of Plan.
The Plan shall be unfunded. The Company shall not be required to make any
segregation of assets to ensure the payment of any Option or Award under the
Plan.
16. Other Incentive Plans.
The adoption of the Plan does not preclude the adoption by appropriate
means of any other plan for employees or other individuals who provide services
to the Company or Related Entity.
17. Effect on Employment.
Nothing contained in the Plan or any agreement related hereto or referred
to herein shall affect, or be construed as affecting, the terms of employment of
any Employee except to the extent specifically provided herein or therein.
Nothing contained in the Plan or any agreement related hereto or referred to
herein shall impose, or be construed as imposing, an obligation on (i) the
Company or any Related Entity to continue the employment of any Employee, and
(ii) any Employee to remain in the employ of the Company or any Related Entity.
18. Definitions.
In addition to the terms specifically defined elsewhere in the Plan, as
used in the Plan, the following terms shall have the respective meanings
indicated below unless another definition is agreed to in writing by the Company
and the optionee in an option grant agreement with respect to such term or a
similar term:
(a) "Affiliate" shall mean, as to any Person, a Person that directly, or
indirectly through one or more intermediaries, controls, or is controlled by, or
is under common control with, such Person.
(b) "Award" shall have the meaning set forth in Section 1.
(c) "Board of Directors" shall have the meaning set forth in Section 2
hereof.
(d) "Change of Control" shall mean the first to occur of the following
events: (i) any sale, lease, exchange, or other transfer (in one transaction or
series of related transactions) of all or substantially all of the assets of the
Company to any Person or group of related Persons for purposes of Section 13(d)
of the Exchange Act, (ii) a majority of the Board of Directors of the Company
shall
-14-
<PAGE> 45
consist of Persons who are not Continuing Directors; (iii) the acquisition after
the date of acceptance of this Plan by any Person or Group of the power,
directly or indirectly, to vote or direct the voting of securities having more
than 50% of the ordinary voting power for the election of directors of the
Company, or (iv) the approval by the stockholders of the Company of a merger or
consolidation of the Company with any other entity, other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity or such surviving entity's parent) at least fifty percent (50%)
of the total voting power represented by the voting securities of the Company or
such surviving entity or such surviving entity's parent outstanding immediately
after such merger or consolidation.
(e) "Code" shall have the meaning set forth in Section 1 hereof.
(f) "Committee" shall have the meaning set forth in Section 2 hereof.
(g) "Common Stock" shall have the meaning set forth in Section 3 hereof.
(h) "Company" shall have the meaning set forth in Section 1 hereof.
(i) "Continuing Director" shall mean, as of the date of determination, any
Person who (i) was a member of the Board of Directors of the Company on the date
of adoption of this Plan or (ii) was nominated for election or elected to the
Board of Directors of the Company with the affirmative vote of a majority of the
Continuing Directors who were members of such Board of Directors at the time of
such nomination or election.
(j) "Disability" shall mean permanent disability as defined under Section
22(e)(3) of the Code.
(k) "Eligible Non-Employee" shall have the meaning set forth in Section 4
hereof.
(l) "Employee" shall have the meaning set forth in Section 4 hereof.
(m) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(n) "Fair Market Value", shall, as it relates to the Common Stock, mean, at
the option of the Committee, the average of the high and low prices or the
closing price of such Common Stock as reported on the principal national
securities exchange on which the shares of Common Stock are then listed or the
NASDAQ National Market, as applicable, on the date specified herein for such a
determination, or if there were no sales on such date, on the next succeeding
day or immediately preceding day on which there were sales, or if such Common
Stock is not listed on a national securities exchange or the NASDAQ National
Market, the last reported bid price in the over-the-counter market, or if such
shares are not traded in the over-the-counter market, the per share cash price
for which all of the outstanding Common Stock could be sold to a willing
purchaser in an arms length transaction (without regard to minority discount,
absence of liquidity, or transfer restrictions imposed by any applicable law or
agreement) at the date of the event giving rise to a need for a
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<PAGE> 46
determination. Except as may be otherwise expressly provided in a particular
Option or Award, Fair Market Value shall be determined in good faith by the
Committee.
(o) "Good Cause", with respect to any Employee, shall mean (unless another
definition is agreed to in writing by the Company and the optionee) termination
by action of the Board of Directors that the Committee determines is because of:
(A) the optionee's or award-holder's conviction of, or plea of nolo contendere
to, a felony or a crime involving moral turpitude; (B) the optionee's or
award-holder's personal dishonesty, incompetence, willful misconduct, willful
violation of any law, rule, or regulation (other than minor traffic violations
or similar offenses) or breach of fiduciary duty which involves personal profit;
(C) the optionee's or award-holder's commission of material mismanagement in the
conduct of his duties as assigned to him by the Board of Directors or the
optionee's supervising officer or officers of the Company or any Related Entity;
(D) the optionee's or award-holder's willful failure to execute or comply with
the policies of the Company or any Related Entity or his stated duties as
established by the Board of Directors or the optionee's or award-holder's
supervising officer or officers of the Company or any Related Entity, or the
optionee's or award-holder's intentional failure to perform the optionee's or
award-holder's stated duties; or (E) substance abuse or addiction on the part of
the optionee or award-holder. "Good Cause", with respect to any Eligible
Non-Employee, shall mean (unless another definition is agreed to in writing by
the Company and the optionee or award-holder) termination by action of the Board
of Directors because of: (A) the optionee's or award-holder's conviction of, or
plea of nolo contendere to, a felony or a crime involving moral turpitude; (B)
the optionee's or award-holder's personal dishonesty, incompetence, willful
misconduct, willful violation of any law, rule, or regulation (other than minor
traffic violations or similar offenses) or breach of fiduciary duty which
involves personal profit; (C) the optionee's or award-holder's commission of
material mismanagement in providing services to the Company or any Related
Entity; (D) the optionee's or award-holder's willful failure to comply with the
policies of the Company in providing services to the Company or any Related
Entity, or the optionee's or award-holder's intentional failure to perform the
services for which the optionee or award-holder has been engaged; (E) substance
abuse or addiction on the part of the optionee or award-holder; or (F) the
optionee's or award-holder's willfully making any material misrepresentation or
willfully omitting to disclose any material fact to the board of directors of
the Company or any Related Entity with respect to the business of the Company or
any Related Entity.
(p) "Holding Period" shall have the meaning set forth in Section 5 hereof.
(q) "Incentive Options" shall have the meaning set forth in Section 6
hereof.
(r) The terms "include," "included" or "including" when used herein shall
mean "including, but not limited to."
(s) "Non-Qualified Options" shall have the meaning set forth in Section 6
hereof.
(t) "Options" shall have the meaning set forth in Section 1 hereof.
(u) "Person" shall have the meaning set forth in Section 4 hereof.
(v) "Plan" shall have the meaning set forth in Section 1 hereof.
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<PAGE> 47
(w) "Related Entity or Entities" shall have the meaning set forth in
Section 1 hereof.
(x) "Reorganization" shall have the meaning set forth in Section 10 hereof.
(y) "Rule 16b-3" shall mean Rule 16b-3, as amended, or other applicable
rules under Section 16(b) of the Exchange Act.
(z) "Section 162(m)" means Section 162(m) of the Code and the Treasury
regulations adopted from time to time thereunder, or any successor law or rule
as it may be amended from time to time.
(aa) "Securities Act" shall mean the Securities Act of 1933.
(bb) "Subsidiary" shall mean, with respect to any Person, any other Person
of which such first Person owns or has the power to vote, directly or
indirectly, securities representing a majority of the votes ordinarily entitled
to be cast for the election of directors or other governing Persons.
19. Amendment of Plan.
The Board of Directors shall have the right to amend, modify, suspend or
terminate the Plan at any time; provided, that no amendment shall be made which
shall increase the total number of shares of the Common Stock which may be
issued and sold pursuant to Options or Awards granted under the Plan or to
change the class of individuals eligible to receive Options or Awards under the
Plan unless such amendment is made by or with the approval of the stockholders
of the Company. The Board of Directors shall have the right to amend the Plan,
the Options, and Awards outstanding thereunder, without the consent or joinder
of any optionee, any award-holder or other Person, in such manner as may be
determined necessary or appropriate by the Board of Directors in order to cause
the Plan and the Options and Awards outstanding thereunder (as applicable) (i)
to qualify as "incentive stock options" within the meaning of Section 422 of the
Code, (ii) to comply with Rule 16b-3 (or any successor rule) under the Exchange
Act (or any successor law) and the regulations (including any temporary
regulations) promulgated thereunder, or (iii) to comply with Section 162(m).
Except as provided above, no amendment, modification, suspension or termination
of the Plan shall alter or impair any Options previously granted under the Plan
without the consent of the holder thereof.
20. Effective Date.
The Plan shall become effective on the date on which it is approved by the
Board of Directors, provided the Plan is approved by the stockholders of the
Company within twelve months thereafter. Notwithstanding any provision in the
Plan or in any agreement evidencing an Option or Award, no Option shall be
exercisable or vest and no Award shall be granted prior to such stockholder
approval.
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<PAGE> 48
21. Individual Limitations on Options and Awards.
No person may be granted during any one year period, Options and Awards
with respect to more than 2,000,000 shares of Common Stock. If an Option or
Award is canceled or forfeited, the canceled Option or Award shall continue to
be counted against the maximum number of shares of Common Stock for which
Options or Awards may be granted to such Person under the Plan. If, after the
grant, the exercise price of an Option is reduced, the transaction shall be
treated as a cancellation of the Option and the grant of a new Option. In such
case, both the Option that is deemed to be canceled and the Option that is
deemed to be granted reduce the maximum number of shares for which Options may
be granted to such Person under the Plan pursuant to Section 21.
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<PAGE> 49
PLAN OF MERGER
OF
MSI HOLDINGS, INC.
WITH AND INTO
APERIAN, INC.
MSI Holdings, Inc., a Utah corporation ("MSI"), shall be merged (the
"Merger") with and into its one hundred percent (100%) owned subsidiary,
Aperian, Inc., a Delaware corporation ("Aperian"), which shall be the surviving
corporation and which is hereinafter referred to as the "Surviving Corporation"
and both of which corporations are hereinafter sometimes referred to as the
"Constituent Corporations," on the following terms and conditions:
FIRST: The name of the Surviving Corporation shall be Aperian,
Inc.
SECOND: The Certificate of Incorporation of Aperian as in
effect on the effect date of the Merger shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter changed or
amended as provided therein or by applicable law.
THIRD: The Bylaws of Aperian as in effect on the effective
date of the Merger shall be the Bylaws of the Surviving Corporation,
until further amended, changed or repealed as provided therein, by the
Certificate of Incorporation of the Surviving Corporation or by law.
FOURTH: The directors of MSI shall from and after the
effective date of the Merger be the directors of the Surviving
Corporation, until their successors are elected and qualified in
accordance with the Certificate of Incorporation and Bylaws of the
Surviving Corporation.
FIFTH: The officers of MSI shall from and after the effective
date of the Merger be the officers of the Surviving Corporation, until
their successors are elected and qualified in accordance with the
Bylaws of the Surviving Corporation.
SIXTH: The mode of carrying the Merger into effect and the
manner and basis of converting the shares of stock of the Constituent
Corporations into shares of stock of the Surviving Corporation shall be
as follows:
(i) Each three shares of common stock, par value $.10
per share, of MSI ("MSI Common Stock") which shall be issued
and outstanding on the effective date of the Merger shall be
converted into and become one (1) fully paid and
non-assessable share of common stock, par value $.01 per share
of the Surviving Corporation.
(ii) Any fraction of a share of common stock of the
Surviving Corporation that would otherwise be due a holder as
a result of clause (i) above shall automatically be eliminated
and, in lieu thereof, the holder thereof shall be entitled to
receive a cash adjustment in respect of such fraction of a
share in an amount based upon a value of the common stock
equal to the product of three multiplied by the
<PAGE> 50
closing of a share of the MSI Common Stock on the last trading
day immediately preceding the effective date of the Merger as
reported by The Nasdaq Stock Market.
(iii) Each share of common stock, par value $.01 per
share, of Aperian ("Aperian Common Stock"), all of which is
held beneficially and of record by MSI, shall no longer be
outstanding and shall automatically be canceled and retired
and shall cease to exist, and no consideration shall be
delivered or deliverable in exchange therefor.
SEVENTH: On the effective date of the Merger: (i) the separate
existence of MSI shall cease and MSI shall be merged with and into
Aperian which shall continue in existence as the Surviving Corporation;
(ii) all right, title and interest to all real estate and other
property owned by the Constituent Corporations shall be transferred to
and vested in the Surviving Corporation, without reversion or
impairment, by operation of law without further act or deed, and
without any transfer or assignment having occurred, but subject to any
existing liens thereon; (iii) all liabilities and obligations of the
Constituent Corporations shall be allocated to the Surviving
Corporation; and (iv) any proceeding pending against each of the
Constituent Corporations may be continued as if the Merger did not
occur, or the Surviving Corporation may be substituted in the
proceeding.
EIGHTH: At any time prior to the filing of articles of merger
complying with Section 16-10a-1105 and 16-10a-1107 of the Utah Revised
Business Corporations Act with the Utah Division of Corporations and
Commercial Code and the filing of a certificate of ownership and merger
complying with Section 253 of the Delaware General Corporation Law with
the Delaware Secretary of State, this Plan of Merger may be abandoned
by resolution of the Board of Directors of MSI, and thereupon this Plan
of Merger shall become wholly void and of no force and effect.
2
<PAGE> 51
CERTIFICATE OF INCORPORATION
OF
APERIAN, INC.
FIRST: The name of the Corporation is Aperian, Inc.
SECOND: The registered office of the Corporation in the State of
Delaware is located at 1209 Orange Street, the City of Wilmington, County of New
Castle. The name of the registered agent of the Corporation at such address is
the Corporation Trust Company.
THIRD: The purpose for which the Corporation is organized is to engage
in any and all lawful acts and activity for which corporations may now or
hereafter be organized under the General Corporation Law of the State of
Delaware. The Corporation shall have all powers that may now or hereafter be
lawful for a corporation to exercise under the General Corporation Law of the
State of Delaware and shall have perpetual existence.
FOURTH: The name of the incorporator is Kyle Fox and his mailing
address is c/o Vinson & Elkins L.L.P., One American Center, 600 Congress Avenue,
Suite 2700, Austin, Texas 78701.
FIFTH: The name and mailing address of the director, who shall serve
until the first annual meeting of stockholders or until his successor is elected
and qualified, is as follows:
<TABLE>
<CAPTION>
Name Address
---- -------
<S> <C>
Robert J. Gibbs 1121 East 7th Street
Austin, Texas 78702
</TABLE>
SIXTH: The total number of shares of capital stock of all classes that
the Corporation shall have authority to issue is One Hundred Sixty Million
(160,000,000) shares consisting of two classes of capital stock: (a) Ten Million
(10,000,000) shares of preferred stock, par value $.01 per share (the "Preferred
Stock"); and (b) One Hundred Fifty Million (150,000,000) shares of common stock,
par value $.01 per share (the "Common Stock").
The designations, powers, preferences, rights, qualifications,
limitations and restrictions of the Preferred Stock and the Common Stock are as
follows:
1. Provisions relating to the Preferred Stock
(a) The shares of Preferred Stock of the Corporation may be issued from time to
time in one or more classes or series thereof, the shares of each class or
series thereof to have such voting powers, full or limited, or no voting powers,
and such designations, preferences and relative, participating, optional or
other special rights, and qualifications, limitations or restrictions thereof,
as are stated and expressed herein or in the resolution or resolutions providing
for the issue of such class or series, adopted by the board of directors of the
Corporation (the "Board of Directors") as hereinafter provided.
<PAGE> 52
(b) Authority is hereby expressly granted to and vested in the Board of
Directors, subject to the provisions of this Article SIXTH and to the
limitations prescribed by the General Corporation Law of the State of Delaware,
to authorize the issuance of the Preferred Stock from time to time in one or
more classes or series, and with respect to each such class or series to fix by
resolution or resolutions providing for the issue of such class or series the
voting powers, full or limited, if any, of the shares of such class or series
and the designations, preferences and relative, participating, optional or other
special rights, and qualifications, limitations and restrictions thereof. The
authority of the Board of Directors with respect to each class or series thereof
shall include, but not be limited to, the determination or fixing of the
following:
(i) whether or not the class or series is to have voting
rights, full, special or limited, or is to be without voting rights,
and whether or not such class or series is to be entitled to vote as a
separate class either alone or together with the holders of one or more
other classes or series of capital stock;
(ii) the number of shares to constitute the class or series
and the designations thereof;
(iii) the preferences and relative, participating, optional or
other special rights, if any, and the qualifications, limitations or
restrictions thereof, if any, with respect to any class or series;
(iv) whether or not the shares of any class or series shall be
redeemable at the option of the Corporation or the holders thereof or
upon the happening of any specified event, and, if redeemable, the
redemption price or prices (which may be payable in the form of cash,
notes, securities or other property) and the time or times at which,
and the terms and conditions upon which, such shares shall be
redeemable and the manner of redemption;
(v) whether or not the shares of a class or series shall be
subject to the operation of retirement or sinking funds to be applied
to the purchase or redemption of such shares for retirement, and, if
such retirement or sinking fund or funds are to be established, the
annual amount thereof and the terms and provisions relative to the
operation thereof;
(vi) the dividend rate, whether dividends are payable in cash,
securities of the Corporation or other property, the conditions upon
which and the times when such dividends are payable, the preference to
or the relation to the payment of dividends payable on any other class
or classes or series of capital stock, whether or not such dividends
shall be cumulative or noncumulative and, if cumulative, the date or
dates from which such dividends shall accumulate;
(vii) the preferences, if any, and the amounts thereof which
the holders of any class or series thereof shall be entitled to receive
upon the voluntary or involuntary dissolution of, or upon any
distribution of the assets of, the Corporation;
2
<PAGE> 53
(viii) whether or not the shares of any class or series, at
the option of the Corporation or the holder thereof or upon the
happening of any specified event, shall be convertible into or
exchangeable for the shares of any other class or classes or of any
other series of the same or any other class or classes of capital
stock, securities, or other property of the Corporation or any other
entity and the conversion price or prices, ratio or ratios, or the rate
or rates at which such conversion or exchange may be made, with such
adjustments, if any, as shall be stated and expressed or provided for
in such resolution or resolutions; and
(ix) such other special rights and protective provisions with
respect to any class or series the Board of Directors may provide.
2. Provisions Relating to the Common Stock
(a) General. Except as otherwise provided herein or as otherwise
provided by applicable law, all shares of Common Stock shall have identical
rights and privileges in every respect.
(b) Dividends. Subject to the prior rights and preferences, if any,
applicable to shares of the Preferred Stock, the holders of the Common Stock
shall be entitled to participate ratably, on a share-for-share basis, in such
dividends, whether in cash, stock or otherwise, as may be declared by the Board
of Directors from time to time out of funds of the Corporation legally available
therefor.
Dividends payable under this Subsection 2(b) shall be paid to
the holders of record of the outstanding Common Stock as their names shall
appear on the stock register of the Corporation on the record date fixed by the
Board of Directors in advance of the declaration and payment of each dividend.
Any shares of Common Stock issued as a dividend pursuant to this Subsection 2(b)
shall, when so issued, be duly authorized, validly issued, fully paid and
non-assessable, and free of all liens and charges. The Corporation shall not
issue fractions of shares of Common Stock on payment of such dividend but shall
issue a whole number of shares to such holder of shares of Common Stock rounded
up or down in the Corporation's sole discretion to the nearest whole number,
without compensation to the stockholder whose fractional share has been rounded
down or from any stockholder whose fractional share has been rounded up.
(c) Voting. The holders of Common Stock shall vote on all matters
submitted to a vote of the stockholders, with each share of Common Stock
entitled to one vote. The holders of Common Stock are not entitled to cumulate
votes in the election of any directors.
(d) Reservation of Shares. The Corporation shall at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock, or out of shares of Common Stock held in its treasury, the full number of
shares of Common Stock into which all shares of any series of Preferred Stock
having conversion privileges from time to time outstanding are convertible.
(e) Liquidation. In the event of any voluntary or involuntary
liquidation, dissolution, or winding-up of the Corporation, after all creditors
of the Corporation shall have
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been paid in full and after payment of all sums payable in respect of Preferred
Stock, if any, the holders of the Common Stock shall share ratably on a
share-for-share basis in all distributions of assets pursuant to such voluntary
or involuntary liquidation, dissolution, or winding-up of the Corporation. For
the purposes of this Subsection 2(e), neither the merger nor the consolidation
of the Corporation into or with another entity or the merger or consolidation of
any other entity into or with the Corporation, or the sale, transfer, or other
disposition of all or substantially all the assets of the Corporation, shall be
deemed to be a voluntary or involuntary liquidation, dissolution, or winding-up
of the Corporation.
(f) Stockholder Action by Written Consent. Any action required to
be taken or that may be taken at any meeting of holders of Common Stock may be
taken without a meeting and without prior notice, if a consent in writing,
setting forth the action so taken, is signed by the holders of not less than
two-thirds of outstanding stock entitled to vote on such action and delivered to
the Secretary of the corporation.
3. General.
(a) Subject to the foregoing provisions of this Certificate of
Incorporation, the Corporation may issue shares of its Common Stock or Preferred
Stock from time to time for such consideration (not less than the par value
thereof) as may be fixed by the Board of Directors, which is expressly
authorized to fix the same in its absolute and uncontrolled discretion. Shares
so issued for which the consideration shall have been paid or delivered to the
Corporation shall be deemed fully paid capital stock and shall not be liable to
any further call or assessment thereon, and the holders of such shares shall not
be liable for any further payments in respect of such shares.
(b) Subject to the foregoing provisions of this Certificate of
Incorporation, the Corporation shall have authority to create and issue rights
and options entitling their holders to purchase shares of the Corporation's
capital stock of any class or series or other securities of the Corporation, and
such rights and options shall be evidenced by instrument(s) approved by the
Board of Directors or a committee of the Board of Directors. The Board of
Directors or a committee of the Board of Directors shall be empowered to set the
exercise price, duration, times for exercise, and other terms of such options or
rights; provided, however, that the consideration to be received for any shares
of capital stock subject thereto shall not be less than the par value thereof.
SEVENTH: The number, classification, and terms of the Board of
Directors of the Corporation and the procedures to elect directors and to remove
directors shall be as follows:
(a) The number of directors constituting the Board of Directors shall
be no less than one, as set from time to time by the Board of Directors pursuant
to the bylaws of the Corporation, plus such number of directors as may be
elected from time to time by the holders of any class or series of Preferred
Stock.
(b) Effective upon the filing with the Secretary of State of the State
of Delaware of a Certificate of Ownership and Merger merging MSI Holdings, Inc.,
a Utah corporation, with and into the Corporation, the directors of the
Corporation shall be divided by the Board of Directors into three classes (the
"Classified Directors") with the first class ("Class I"), the second class
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("Class II") and the third class ("Class III") each to consist as nearly as
practicable of an equal number of directors. The term of office of each Class I
director shall expire at the first annual meeting of the Corporation's
stockholders, the term of office of each Class II director shall expire at the
second annual meeting of the Corporation's stockholders and the term of office
of each Class III director shall expire at the third annual meeting of the
Corporation's stockholders, with each director to hold office until his or her
successor shall have been duly elected and qualified. At each annual meeting of
the Corporation's stockholders, Classified Directors elected to succeed those
Classified Directors whose terms then expire shall be elected for a term of
office to expire at the third succeeding annual meeting of stockholders
following their election. A director elected by the directors to fill a vacancy,
including a newly created directorship, for an unexpired term which extends
beyond the next annual meeting must be elected by the stockholders at that
annual meeting to continue to fill the unexpired term.
(c) The directors of the Corporation need not be elected by written
ballot unless the bylaws of the Corporation otherwise provide.
EIGHTH: No contract or transaction between the Corporation and one or
more of its directors, officers, or stockholders or between the Corporation and
any Person (as hereinafter defined) in which one or more of its directors,
officers, or stockholders are directors, officers, or stockholders, or have a
financial interest, shall be void or voidable solely for this reason, or solely
because the director or officer is present at or participates in the meeting of
the Board of Directors or committee which authorizes the contract or
transaction, or solely because his, her, or their votes are counted for such
purpose, if: (i) the material facts as to his or her relationship or interest
and as to the contract or transaction are disclosed or are known to the Board of
Directors or the committee, and the Board of Directors or committee in good
faith authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the disinterested directors
be less than a quorum; (ii) the material facts as to his or her relationship or
interest and as to the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or (iii) the
contract or transaction is fair as to the Corporation as of the time it is
authorized, approved, or ratified by the Board of Directors, a committee
thereof, or the stockholders. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the Board of Directors or
of a committee which authorizes the contract or transaction. "Person" as used
herein means any corporation, partnership, limited liability company,
association, firm, trust, joint venture, political subdivision or
instrumentality.
NINTH: The Corporation shall indemnify any person who was, is, or is
threatened to be made a party to a proceeding (as hereinafter defined) by reason
of the fact that he or she (i) is or was a director or officer of the
Corporation or (ii) while a director or officer of the Corporation, is or was
serving at the request of the Corporation as a director, officer, partner,
venturer, proprietor, trustee, employee, agent, or similar functionary of
another foreign or domestic corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan, or other enterprise, to the
fullest extent permitted under the General Corporation Law of the State of
Delaware, as the same exists or may hereafter be amended. Such right shall be a
contract right and as such shall run to the benefit of any director or officer
who is elected and accepts the position of director or officer of the
Corporation or elects to continue to serve as a director or officer of the
Corporation while this Article NINTH is in effect. Any repeal or amendment of
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this Article NINTH shall be prospective only and shall not limit the rights of
any such director or officer or the obligations of the Corporation with respect
to any claim arising from or related to the services of such director or officer
in any of the foregoing capacities prior to any such repeal or amendment to this
Article NINTH. Such right shall include the right to be paid by the Corporation
expenses incurred in investigating or defending any such proceeding in advance
of its final disposition to the maximum extent permitted under the General
Corporation Law of the State of Delaware, as the same exists or may hereafter be
amended. If a claim for indemnification or advancement of expenses hereunder is
not paid in full by the Corporation within sixty (60) days after a written claim
has been received by the Corporation, the claimant may at any time thereafter
bring suit against the Corporation to recover the unpaid amount of the claim,
and if successful in whole or in part, the claimant shall also be entitled to be
paid the expenses of prosecuting such claim. It shall be a defense to any such
action that such indemnification or advancement of costs or expenses is not
permitted under the General Corporation Law of the State of Delaware, but the
burden of proving such defense shall be on the Corporation. Neither the failure
of the Corporation (including its Board of Directors or any committee thereof,
independent legal counsel, or stockholders) to have made its determination prior
to the commencement of such action that indemnification of, or advancement of
costs of defense to, the claimant is permissible in the circumstances nor an
actual determination by the Corporation (including its Board of Directors or any
committee thereof, independent legal counsel, or stockholders) that such
indemnification or advancement is not permissible shall be a defense to the
action or create a presumption that such indemnification or advancement is not
permissible. In the event of the death of any Person having a right of
indemnification under the foregoing provisions, such right shall inure to the
benefit of his or her heirs, executors, administrators, and personal
representatives. The rights conferred above shall not be exclusive of any other
right which any Person may have or hereafter acquire under any statute, bylaw,
resolution of stockholders or directors, agreement, or otherwise.
The Corporation may additionally indemnify any employee or agent of the
Corporation to the fullest extent permitted by law.
Without limiting the generality of the foregoing, to the extent
permitted by then applicable law, the grant of mandatory indemnification
pursuant to this Article NINTH shall extend to proceedings involving the
negligence of such Person.
As used herein, the term "proceeding" means any threatened, pending, or
completed action, suit, or proceeding, whether civil, criminal, administrative,
arbitrative, or investigative, any appeal in such an action, suit, or
proceeding, and any inquiry or investigation that could lead to such an action,
suit, or proceeding.
TENTH: A director of the Corporation shall not be personally liable to
the Corporation or its stockholders 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 stockholders; (ii) for acts or
omissions not in good faith or which involve intentional misconduct or knowing
violation of law, (iii) under Section 174 of the General Corporation Law of the
State of Delaware; or (iv) for any transaction from which the director derived
an improper personal benefit. Any repeal or amendment of this Article TENTH by
the stockholders of the Corporation shall be prospective only, and shall not
adversely affect any limitation on the personal liability of a director of the
Corporation arising from an act or omission occurring prior to the time of such
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repeal or amendment. In addition to the circumstances in which a director of the
Corporation is not personally liable as set forth in the foregoing provisions of
this Article TENTH, a director shall not be liable to the Corporation or its
stockholders to such further extent as permitted by any law hereafter enacted,
including without limitation any subsequent amendment to the General Corporation
Law of the State of Delaware.
ELEVENTH: A special meeting of the stockholders may be called, and
business to be considered at any such meeting may be proposed, at any time by a
majority of the members of the board of directors or by the holder(s) of at
least ten percent of the issued and outstanding stock entitled to vote on such
matters properly coming before a special meeting of the stockholders.
TWELFTH: All of the power of the Corporation, insofar as it may be
lawfully vested by this Certificate of Incorporation in the Board of Directors,
is hereby conferred upon the Board of Directors of the Corporation. In
furtherance of and not in limitation of that power or the powers conferred by
law, a majority of directors then in office (or such higher percentage as may be
specified in the bylaws with respect to any provision thereof) shall have the
power to adopt, amend and repeal the bylaws of the Corporation. Notwithstanding
any other provisions of this certificate of incorporation or any provision of
law that might otherwise permit a lesser or no vote, but in addition to any
affirmative vote of the holders of any particular class or series of the capital
stock of the Corporation required by law or by this certificate of
incorporation, the affirmative vote of the holders of not less than two-thirds
of the outstanding shares of the Corporation then entitled to vote upon the
election of directors, voting together as a single class, shall be required for
the alteration, amendment, or repeal of the bylaws or adoption of new bylaws by
the stockholders of the Corporation.
THIRTEENTH: Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law that might otherwise permit a lesser or no
vote, but in addition to any affirmative vote of the holders of any particular
class or series of the capital stock of the Corporation required by law or by
this certificate of incorporation, the affirmative vote of the holders of not
less than two-thirds of the outstanding shares of the Corporation then entitled
to vote upon the election of directors, voting together as a single class, shall
be required to amend or repeal, or to adopt any provision inconsistent with,
Section 2(f) of Article Sixth, Article Seventh, Article Eleventh, Article
Twelfth, or this Article Thirteenth of this Certificate of Incorporation.
I, the undersigned, being the incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Delaware, do make this certificate, hereby declaring that this is my
act and deed and that the facts herein stated are true, and accordingly have
hereunto set my hand this ___ day of September, 2000.
By:
------------------------------------------
Name: Kyle K. Fox
<PAGE> 58
BYLAWS
OF
APERIAN, INC.
A DELAWARE CORPORATION
<PAGE> 59
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
ARTICLE I: OFFICES...........................................................1
1.1 Registered Office and Agent.................................1
1.2 Other Offices...............................................1
ARTICLE II: MEETINGS OF STOCKHOLDERS.........................................1
2.1 Annual Meeting..............................................1
2.2 Special Meeting.............................................1
2.3 Place of Meetings...........................................2
2.4 Notice......................................................2
2.5 Notice of Stockholder Business at Annual Meeting............2
2.6 Voting List.................................................3
2.7 Quorum......................................................3
2.8 Required Vote; Withdrawal of Quorum.........................4
2.9 Method of Voting; Proxies...................................4
2.10 Record Date.................................................4
2.11 Stockholder Action Without a Meeting........................5
ARTICLE III: DIRECTORS.......................................................5
3.1 Management..................................................6
3.2 Number; Qualification; Election; Eligibility; Term..........6
3.3 Nomination of Director Candidates...........................6
3.4 Change in Number............................................7
3.5 Removal.....................................................7
3.6 Newly Created Directorships and Vacancies...................7
3.7 Meetings of Directors.......................................7
3.8 Election of Officers........................................8
3.9 Regular Meetings............................................8
3.10 Special Meetings............................................8
3.11 Notice......................................................8
3.12 Quorum; Majority Vote.......................................8
3.13 Procedure...................................................8
3.14 Presumption of Assent.......................................8
3.15 Compensation................................................9
ARTICLE IV: COMMITTEES.......................................................9
4.1 Designation.................................................9
4.2 Number; Qualification; Term.................................9
4.3 Committee Changes...........................................9
4.4 Alternate Members of Committees.............................9
4.5 Regular Meetings............................................9
4.6 Special Meetings............................................9
4.7 Quorum; Majority Vote......................................10
4.8 Minutes....................................................10
4.9 Compensation...............................................10
4.10 Responsibility.............................................10
</TABLE>
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<TABLE>
<S> <C>
ARTICLE V: NOTICE...........................................................10
5.1 Method.....................................................10
5.2 Waiver.....................................................10
ARTICLE VI: OFFICERS........................................................11
6.1 Number; Titles; Term of Office.............................11
6.2 Removal....................................................11
6.3 Vacancies..................................................11
6.4 Authority..................................................11
6.5 Compensation...............................................11
6.6 Chairman of the Board......................................11
6.7 President..................................................11
6.8 Vice Presidents............................................12
6.9 Treasurer..................................................12
6.10 Assistant Treasurers.......................................12
6.11 Secretary..................................................12
6.12 Assistant Secretaries......................................12
ARTICLE VII: CERTIFICATES AND STOCKHOLDERS..................................12
7.1 Certificates for Shares....................................13
7.2 Replacement of Lost or Destroyed Certificates..............13
7.3 Transfer of Shares.........................................13
7.4 Registered Stockholders....................................13
7.5 Regulations................................................13
7.6 Legends....................................................13
ARTICLE VIII: MISCELLANEOUS PROVISIONS......................................14
8.1 Dividends..................................................14
8.2 Reserves...................................................14
8.3 Books and Records..........................................14
8.4 Fiscal Year................................................14
8.5 Seal.......................................................14
8.6 Resignations...............................................14
8.7 Securities of Other Corporations...........................14
8.8 Telephone Meetings.........................................14
8.9 Action Without a Meeting...................................15
8.10 Invalid Provisions.........................................15
8.11 Mortgages, etc.............................................15
8.12 Headings...................................................15
8.13 References.................................................15
8.14 Amendments.................................................15
</TABLE>
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BYLAWS
OF
APERIAN, INC.
A DELAWARE CORPORATION
PREAMBLE
These Bylaws are subject to, and governed by, the General Corporation
Law of the State of Delaware (the "Delaware General Corporation Law") and the
certificate of incorporation (as the same may be amended and restated from time
to time) of Aperian, Inc., a Delaware corporation (the "Corporation"). In the
event of a direct conflict between the provisions of these Bylaws and the
mandatory provisions of the Delaware General Corporation Law or the provisions
of the certificate of incorporation of the Corporation, such provisions of the
Delaware General Corporation Law or the certificate of incorporation of the
Corporation, as the case may be, will be controlling.
ARTICLE I: OFFICES
1.1 Registered Office and Agent. The registered agent of the
Corporation shall be as designated from time to time by the appropriate filing
by the Corporation in the office of the Secretary of State of the State of
Delaware.
1.2 Other Offices. The Corporation may also have offices at such other
places, both within and without the State of Delaware, as the board of directors
may from time to time determine or as the business of the Corporation may
require.
ARTICLE II: MEETINGS OF STOCKHOLDERS
2.1 Annual Meeting. An annual meeting of stockholders of the
Corporation shall be held each calendar year on such date and at such time as
shall be designated from time to time by the board of directors and stated in
the notice of the meeting or in a duly executed waiver of notice of such
meeting. At such meeting, the stockholders shall elect directors and transact
such other business as may properly be brought before the meeting.
2.2 Special Meeting. A special meeting of the stockholders may be
called, and business to be considered at any such meeting may be proposed, at
any time by a majority of the members of the board of directors or by the
holder(s) of at least ten percent of the issued and outstanding stock entitled
to vote on such matters properly coming before a special meeting of the
stockholders.
A special meeting called by the board of directors shall be held on
such date and at such time as shall be designated by the board of directors and
stated in the notice of the meeting or in a duly executed waiver of notice of
such meeting. If a special meeting is called by the holder(s) of at least
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ten percent of the outstanding stock entitled to vote, the request shall be in
writing, signed by such stockholder(s), specifying the time of such meeting and
the general nature of the business proposed to be transacted, and shall be
delivered personally or sent by registered mail or by telegraphic or other
facsimile transmission to the Chairman of the Board, the President, or the
Secretary of the corporation. The officer receiving such request forthwith shall
cause notice to be given to the stockholders entitled to vote, in accordance
with the provisions of Sections 2.3 and 2.4 of this Article II that a meeting
will be held at the time requested by the person or persons calling the meeting,
not less than thirty-five (35) nor more than sixty (60) days after the receipt
of the request. If the notice is not given within twenty (20) days after receipt
of the request, the person(s) requesting the meeting may give the notice.
Nothing contained in this paragraph of this Section 2.2 shall be construed as
limiting, fixing or affecting the time when a meeting of stockholders called by
the board of directors may be held. Only such business shall be transacted at
any special meeting as may be stated or indicated in the notice of such meeting
or in a duly executed waiver of notice of such meeting.
2.3 Place of Meetings. An annual or special meeting of stockholders may
be held at any place within or without the State of Delaware designated by the
board of directors. A special meeting of stockholders may be held at any place
within or without the State of Delaware designated in the notice of the meeting
or a duly executed waive of notice of such meeting. Meetings of stockholders
shall be held at the principal office of the Corporation unless another place is
designated for meetings in the manner provided herein.
2.4 Notice. Written or printed notice stating the place, day, and time
of each meeting of the stockholders and, in case of a special meeting, the
purpose or purposes for which the meeting is called shall be delivered not less
than ten (10) nor more than sixty (60) days before the date of the meeting,
either personally or by mail, by or at the direction of the President, the
Secretary, or the officer or person(s) calling the meeting, to each stockholder
of record entitled to vote at such meeting. If such notice is to be sent by
mail, it shall be directed to each stockholder at his address as it appears on
the records of the Corporation, unless he shall have filed with the Secretary of
the Corporation a written request that notices to him be mailed to some other
address, in which case it shall be directed to him at such other address. Notice
of any meeting of stockholders shall not be required to be given to any
stockholder who shall attend such meeting in person or by proxy and shall not,
at the beginning of such meeting, object to the transaction of any business
because the meeting is not lawfully called or convened, or who shall, either
before or after the meeting, submit a signed waiver of notice, in person or by
proxy.
2.5 Notice of Stockholder Business at Annual Meeting. (a) At an annual
meeting of the stockholders, only such business shall be conducted as shall have
been brought before the meeting (i) pursuant to the Corporation's notice of
meeting, (ii) by or at the direction of a majority of the members of the board
of directors, or (iii) by any stockholder of the Corporation who is a
stockholder of record at the time of giving of notice provided for in this
bylaw, who shall be entitled to vote at such meeting, and who complies with the
notice procedures set forth in paragraph (b) of this bylaw.
(b) For business to be properly brought before an annual meeting by
a stockholder pursuant to clause (iii) of paragraph (a) of this bylaw, the
stockholder must have given timely notice thereof in writing to the Secretary of
the Corporation at the Corporation's principal
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place of business. To be timely, a stockholder's notice must be delivered to or
mailed and received at the principal executive offices of the Corporation not
less than thirty (30) days nor more than ninety (90) days prior to the first
anniversary of the preceding year's annual meeting. Any notice given during this
period will remain valid in the event the meeting date is rescheduled. In the
event that the date of the meeting is changed by more than thirty (30) days from
such anniversary date, notice by the stockholder to be timely also may be
received no later than the close of business on the tenth day following the
earlier of the day on which notice of the date of the meeting was mailed or
public disclosure of the meeting date was made. A stockholder's notice to the
Secretary with respect to business to be brought at an annual meeting shall set
forth (1) the nature of the proposed business with reasonable particularity,
including the exact text of any proposal to be presented for adoption, and the
reasons for conducting that business at the annual meeting, (2) with respect to
each such stockholder, that stockholder's name and address (as they appear on
the records of the Corporation), business address and telephone number,
residence address and telephone number, and the number of shares of each class
of capital stock of the Corporation beneficially owned by that stockholder, and
(3) any interest of the stockholder in the proposed business.
(c) Notwithstanding anything in these bylaws to the contrary, no
business shall be conducted at an annual meeting except in accordance with the
procedures set forth in this bylaw. The chairman of an annual meeting shall, if
the facts warrant, determine and declare to the meeting that business was not
properly brought before the meeting and in accordance with the procedures
prescribed by these bylaws, and if he should so determine, he shall so declare
to the meeting and any such business not properly brought before the meeting
shall not be transacted. Nothing in this bylaw shall relieve a stockholder who
proposes to conduct business at an annual meeting from complying with all
applicable requirements, if any, of the Exchange Act, and the rules and
regulations thereunder.
2.6 Voting List. At least ten days before each meeting of stockholders,
the Secretary or other officer of the Corporation who has charge of the
Corporation's stock ledger, either directly or through another officer appointed
by him or through a transfer agent appointed by the board of directors, shall
prepare a complete list of stockholders entitled to vote thereat, arranged in
alphabetical order and showing the address of each stockholder and number of
shares registered in the name of each stockholder. For a period of ten days
prior to such meeting, such list shall be kept on file at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of meeting or a duly executed waiver of notice of such meeting or, if not
so specified, at the place where the meeting is to be held and shall be open to
examination by any stockholder during ordinary business hours. Such list shall
be produced at such meeting and kept at the meeting at all times during such
meeting and may be inspected by any stockholder who is present.
2.7 Quorum. The holders of a majority of the outstanding shares
entitled to vote on a matter, present in person or by proxy, shall constitute a
quorum at any meeting of stockholders, except as otherwise provided by law, the
certificate of incorporation of the Corporation, or these bylaws. If a quorum
shall not be present, in person or by proxy, at any meeting of stockholders, the
stockholders entitled to vote thereat who are present, in person or by proxy,
or, if no stockholder entitled to vote is present, any officer of the
Corporation may adjourn the meeting from time to time, without notice other than
announcement at the meeting (unless the board of directors, after such
adjournment, fixes a new record date for the adjourned meeting), until a quorum
shall be present, in person or by proxy. At any adjourned meeting at which a
quorum shall be present,
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in person or by proxy, any business may be transacted which may have been
transacted at the original meeting had a quorum been present; provided that, if
the adjournment is for more than 30 days or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
adjourned meeting.
2.8 Required Vote; Withdrawal of Quorum. When a quorum is present at
any meeting, the vote of the holders of at least a majority of the outstanding
shares entitled to vote who are present, in person or by proxy, shall decide any
question brought before such meeting, unless the question is one on which, by
express provision of statute, the certificate of incorporation of the
Corporation, or these bylaws, a different vote is required, in which case such
express provision shall govern and control the decision of such question. The
stockholders present at a duly constituted meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum.
2.9 Method of Voting; Proxies. Except as otherwise provided in the
certificate of incorporation of the Corporation or bylaw, each outstanding
share, regardless of class, shall be entitled to one vote on each matter
submitted to a vote at a meeting of stockholders. Elections of directors need
not be by written ballot. At any meeting of stockholders, every stockholder
having the right to vote may vote either in person or by a proxy executed in
writing by the stockholder or by his duly authorized attorney-in-fact. Each such
proxy shall be filed with the Secretary of the Corporation before or at the time
of the meeting. No proxy shall be valid after three years from the date of its
execution, unless otherwise provided in the proxy. If no date is stated in a
proxy, such proxy shall be presumed to have been executed on the date of the
meeting at which it is to be voted. Each proxy shall be revocable unless
expressly provided therein to be irrevocable and coupled with an interest
sufficient in law to support an irrevocable power or unless otherwise made
irrevocable by law.
2.10 Record Date. (a) For the purpose of determining stockholders
entitled to notice of or to vote at any meeting of stockholders, or any
adjournment thereof, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion, or exchange of stock or for the purpose of
any other lawful action, the board of directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted by the board of directors, for any such determination of
stockholders, such date in any case to be not more than sixty (60) days and not
less than ten (10) days prior to such meeting nor more than sixty (60) days
prior to any other action. If no record date is fixed:
(i) The record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close
of business on the day next preceding the date on which notice is given
or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held.
(ii) The record date for determining stockholders for any
other purpose shall be at the close of business on the day on which the
board of directors adopts the resolution relating thereto.
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(iii) A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the board of
directors may fix a new record date for the adjourned meeting.
(b) Conduct of Meeting. The Chairman of the Board, if such office
has been filled, and, if not or if the Chairman of the Board is absent or
otherwise unable to act, the President shall preside at all meetings of
stockholders. The Secretary shall keep the records of each meeting of
stockholders. In the absence or inability to act of any such officer, such
officer's duties shall be performed by the officer given the authority to act
for such absent or non-acting officer under these bylaws or by some person
appointed by the meeting.
(c) Inspectors. The board of directors may, in advance of any
meeting of stockholders, appoint one or more inspectors to act at such meeting
or any adjournment thereof. If any of the inspectors so appointed shall fail to
appear or act, the chairman of the meeting shall, or if inspectors shall not
have been appointed, the chairman of the meeting may, appoint one or more
inspectors. Each inspector, before entering upon the discharge of his duties,
shall take and sign an oath faithfully to execute the duties of inspector at
such meeting with strict impartiality and according to the best of his ability.
The inspectors shall determine the number of shares of capital stock of the
Corporation outstanding and the voting power of each, the number of shares
represented at the meeting, the existence of a quorum, and the validity and
effect of proxies and shall receive votes, ballots, or consents, hear and
determine all challenges and questions arising in connection with the right to
vote, count and tabulate all votes, ballots, or consents, determine the results,
and do such acts as are proper to conduct the election or vote with fairness to
all stockholders. On request of the chairman of the meeting, the inspectors
shall make a report in writing of any challenge, request, or matter determined
by them and shall execute a certificate of any fact found by them. No director
or candidate for the office of director shall act as an inspector of an election
of directors. Inspectors need not be stockholders.
2.11 Stockholder Action Without a Meeting. Any action required to be
taken or that may be taken at any meeting of holders of Common Stock may be
taken without a meeting and without prior notice, if a consent in writing,
setting forth the action so taken, is signed by the holders of not less than
two-thirds of outstanding stock entitled to vote on such action and delivered to
the Secretary of the corporation.
Unless the written consents of all of the stockholders entitled to vote
have been obtained, notice of any stockholder approval without a meeting shall
be given at least ten days before the consummation of the action authorized by
the approval to those stockholders entitled to vote who have not consented in
writing. The notice must contain or be accompanied by the same material that
would have been required to be sent in a notice of a meeting at which the
proposed action would have been submitted to the stockholders for action.
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ARTICLE III: DIRECTORS
3.1 Management. The business and property of the Corporation shall be
managed by the board of directors. Subject to the restrictions imposed by law,
the certificate of incorporation of the Corporation, or these bylaws, the board
of directors may exercise all the powers of the Corporation.
3.2 Number; Qualification; Election; Eligibility; Term. Except as
otherwise provided in the Certificate of Incorporation, the number of directors
which shall constitute the entire board of directors shall from time to time be
fixed exclusively by the board of directors by a resolution adopted by a
majority of the entire board of directors serving at the time of that vote.
Except as otherwise required by law, the Certificate of Incorporation, or these
bylaws, the directors of the Corporation shall be elected at an annual meeting
of stockholders at which a quorum is present by a plurality of the votes of the
shares present in person or represented by proxy and entitled to vote on the
election of directors or a class of directors. None of the directors need be a
stockholder of the Corporation or a resident of the State of Delaware. Each
director must have attained the age of majority. All directors must, in order to
be elected, meet the eligibility requirements of Section 3.3.
3.3 Nomination of Director Candidates. (a) Nominations of persons for
election to the board of directors of the Corporation at a meeting of
stockholders may be made (i) by or at the direction of the board of directors or
(ii) by any stockholder of the Corporation who is a stockholder of record at the
time of giving of notice provided for in this bylaw, who shall be entitled to
vote for the election of the director so nominated.
(b) Nominations by stockholders shall be made pursuant to timely
notice in writing to the Secretary of the Corporation at the Corporation's
principal place of business. To be timely, a stockholder's notice shall be
delivered to or mailed and received at the principal executive offices of the
Corporation (i) in the case of an annual meeting, not less than thirty (30) days
nor more than ninety (90) days prior to the first anniversary of the preceding
year's annual meeting; provided, however, that in the event that the date of the
annual meeting is changed by more than 30 days from such anniversary date,
notice by the stockholder to be timely must be so received not later than the
close of business on the tenth day following the earlier of the date on which
notice of the date of the meeting was mailed or public disclosure of the meeting
date was made, and (ii) in the case of a special meeting at which directors are
to be elected, not later than the close of business on the tenth day following
the earlier of the day on which notice of the date of the meeting was mailed or
public disclosure of the meeting date was made. Such notice shall set forth (i)
as to each nominee for election as a director all information relating to such
person that would be required to be disclosed in solicitations of proxies for
election of directors, or that otherwise would be required, in each case
pursuant to Regulation 14A under the Exchange Act (including such person's
written consent to serving as a director if elected and, if applicable, to being
named in the proxy statement as a nominee), and (ii) if the nomination is
submitted by a stockholder of record, (A) the name and address, as they appear
on the Corporation's books, of such stockholder of record and the name and
address of the beneficial owner, if different, on whose behalf the nomination is
made and (B) the class and number of shares of the Corporation which are
beneficially owned and owned of record by such stockholder of record and such
beneficial owner.
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(c) No person shall be eligible to serve as a director of the
Corporation unless nominated in accordance with the procedures set forth in this
bylaw. The election of any director in violation of this bylaw shall be void and
of no effect. The chairman of the meeting shall, if the facts warrant, determine
and declare to the meeting that a nomination was not made in accordance with the
procedures prescribed by these bylaws, and if he should so determine, he shall
so declare to the meeting and the defective nomination shall be disregarded.
Notwithstanding the foregoing provisions of this bylaw, a stockholder shall also
comply with all applicable requirements of the Exchange Act and the rules and
regulations thereunder with respect to the matters set forth in this bylaw.
3.4 Change in Number. If the number of directors that constitutes the
whole board of directors is changed in accordance with the Certificate of
Incorporation and these bylaws, the majority of the whole board of directors
that adopts the change shall also fix and determine the number of directors
comprising each class; provided, however, that any increase or decrease in the
number of directors shall be apportioned among the classes as equally as
possible. No decrease in the number of directors constituting the entire board
of directors shall have the effect of shortening the term of any incumbent
director.
3.5 Removal. Except as otherwise provided in the certificate of
incorporation of the Corporation, these bylaws, or by law, at the annual meeting
of stockholders or at any special meeting of stockholders called expressly for
that purpose, a director of any class of directors may be removed before the
expiration date of that director's term of office, with cause only, by an
affirmative vote of the holders of not less than a majority of the outstanding
shares of the class or classes or series of capital stock then entitled to vote
at an election of directors or directors of that class or series, voting
together as a single class.
3.6 Newly Created Directorships and Vacancies. Newly-created
directorships resulting from any increase in the authorized number of directors
and vacancies on the board of directors may be filled by no less than a majority
vote of the remaining directors then in office, and each director so chosen
shall receive the classification of the vacant directorship to which he or she
has been appointed or, if it is a newly created directorship, shall receive the
classification that at least a majority of the board of directors designates and
shall, subject to the last sentence of this paragraph, hold office until the
first annual meeting of stockholders held after his or her appointment for the
purpose of electing directors of that classification and until his successor is
elected and qualified or, if earlier, until his death, resignation, retirement,
disqualification, or removal from office. If there are no directors in office,
an election of directors may be held in the manner provided by statute. Except
as otherwise provided in these bylaws, when one or more directors shall resign
from the board of directors, effective at a future date, a majority of the
directors then in office, including those who have so resigned, shall have the
power to fill such vacancy or vacancies, the vote thereon to take effect when
such resignation or resignations shall become effective, and each director so
chosen shall hold office as provided in these bylaws with respect to the filling
of other vacancies. A director elected by the directors to fill a vacancy,
including a newly created directorship, for an unexpired term which extends
beyond the next annual meeting must be elected by the stockholders at that
annual meeting to continue to fill the unexpired term.
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3.7 Meetings of Directors. The directors may hold their meetings and
may have an office and keep the books of the Corporation, except as otherwise
provided by statute, in such place or places within or without the State of
Delaware as the board of directors may from time to time determine or as shall
be specified in the notice of such meeting or duly executed waiver of notice of
such meeting.
3.8 Election of Officers. At the first meeting of the board of
directors after each annual meeting of stockholders at which a quorum shall be
present, the board of directors shall elect the officers of the Corporation.
3.9 Regular Meetings. Regular meetings of the board of directors shall
be held at such times and places as shall be designated from time to time by
resolution of the board of directors. Notice of such regular meetings shall not
be required.
3.10 Special Meetings. Special meetings of the board of directors shall
be held whenever called by the Chairman of the Board, the President, or any
director.
3.11 Notice. The Secretary shall give written or printed notice of each
special meeting to each director no later than five (5) days before the meeting.
Notice of any such meeting need not be given to any party entitled to notice who
shall, either before or after the meeting, submit a signed waiver of notice or
who shall attend such meeting without protesting, prior to or at its
commencement, the lack of notice to him. Such notice shall state the place, day
and time of the meeting and the purpose or purposes for which the meeting is
called. If the special meeting is called by the Chairman of the Board or
President, and such person determines, in his or her sole discretion that notice
required above would not permit timely action upon the matter to be acted upon
at the meeting, then notice shall be given to each director not less than 24
hours before the time of such meeting, either personally or by telephone,
telegram. or facsimile or electronic transmission .
3.12 Quorum; Majority Vote. At all meetings of the board of directors,
a majority of the directors fixed in the manner provided in these bylaws shall
constitute a quorum for the transaction of business. If at any meeting of the
board of directors there be less than a quorum present, a majority of those
present or any director solely present may adjourn the meeting from time to time
without further notice. Unless the act of a greater number is required by law,
the certificate of incorporation of the Corporation, or these bylaws, the act of
a majority of the directors present at a meeting at which a quorum is in
attendance shall be the act of the board of directors. At any time that the
certificate of incorporation of the Corporation provides that directors elected
by the holders of a class or series of stock shall have more or less than one
vote per director on any matter, every reference in these bylaws to a majority
or other proportion of directors shall refer to a majority or other proportion
of the votes of such directors.
3.13 Procedure. At meetings of the board of directors, business shall
be transacted in such order as from time to time the board of directors may
determine. The Chairman of the Board, if such office has been filled, and, if
not or if the Chairman of the Board is absent or otherwise unable to act, the
President, if he is a director, shall preside at all meetings of the board of
directors. In the absence or inability to act of either such officer, a chairman
shall be chosen by the board of directors from among the directors present. The
Secretary of the Corporation shall act as the secretary of each
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meeting of the board of directors unless the board of directors appoints another
person to act as secretary of the meeting. The board of directors shall keep
regular minutes of its proceedings which shall be placed in the minute book of
the Corporation.
3.14 Presumption of Assent. A director of the Corporation who is
present at the meeting of the board of directors at which action on any
corporate matter is taken shall be presumed to have assented to the action
unless his dissent shall be entered in the minutes of the meeting or unless he
shall file his written dissent to such action with the person acting as
secretary of the meeting before the adjournment thereof or shall forward any
dissent by certified or registered mail to the Secretary of the Corporation
immediately after the adjournment of the meeting. Such right to dissent shall
not apply to a director who votes in favor of such action.
3.15 Compensation. The board of directors shall have the authority to
fix the compensation, including fees and reimbursement of expenses, paid to
directors for attendance at regular or special meetings of the board of
directors or any committee thereof; provided, that nothing contained herein
shall be construed to preclude any director from serving the Corporation in any
other capacity or receiving compensation therefor.
ARTICLE IV: COMMITTEES
4.1 Designation. The board of directors may, by resolution adopted by a
majority of the entire board of directors, designate one or more committees.
4.2 Number; Qualification; Term. Each committee shall consist of one or
more directors appointed by resolution adopted by a majority of the entire board
of directors. The number of committee members may be increased or decreased from
time to time by resolution adopted by a majority of the entire board of
directors. Each committee member shall serve as such until the earliest of (i)
the expiration of his term as director, (ii) his resignation as a committee
member or as a director, or (iii) his removal as a committee member or as a
director.
4.3 Committee Changes. The board of directors shall have the power at
any time to fill vacancies in, to change the membership of, and to discharge any
committee.
4.4 Alternate Members of Committees. The board of directors may
designate one or more directors as alternate members of any committee. Any such
alternate member may replace any absent or disqualified member at any meeting of
the committee. If no alternate committee members have been so appointed to a
committee or each such alternate committee members is absent or disqualified,
the member or members of such committee present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the board of directors to act at the
meeting in the place of any such absent or disqualified member.
4.5 Regular Meetings. Regular meetings of any committee may be held
without notice at such time and place as may be designated from time to time by
the committee and communicated to all members thereof.
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4.6 Special Meetings. Special meetings of any committee may be held
whenever called by any committee member. The committee member calling any
special meeting shall cause notice of such special meeting, including therein
the time and place of such special meeting, to be given to each committee member
at least two days before such special meeting.
4.7 Quorum; Majority Vote. At meetings of any committee, a majority of
the number of members designated by the board of directors shall constitute a
quorum for the transaction of business. If a quorum is not present at a meeting
of any committee, a majority of the members present any adjourn the meeting from
time to time, without notice other than an announcement at the meeting, until a
quorum is present. The act of a majority of the members present at any meeting
at which a quorum is in attendance shall be the act of a committee, unless the
act of a greater number is required by law, the certificate of incorporation of
the Corporation, or these bylaws.
4.8 Minutes. Each committee shall cause minutes of its proceedings to
be prepared and shall report the same to the board of directors upon the request
of the board of directors. The minutes of the proceedings of each committee
shall be delivered to the Secretary of the Corporation for placement in the
minute books of the Corporation.
4.9 Compensation. Committee members may, by resolution of the board of
directors, be allowed a fixed sum and expenses of attendance, if any, for
attending any committee meetings or a stated salary.
4.10 Responsibility. The designation of any committee and the
delegation of authority to it shall not operate to relieve the board of
directors or any director of any responsibility imposed upon it or such director
by law.
ARTICLE V: NOTICE
5.1 Method. Whenever by statute, the certificate of incorporation of
the Corporation, or these bylaws, notice is required to be given to any
committee member, director, or stockholder and no provision is made as to how
such notice shall be given, personal notice shall not be required and any such
notice may be given (a) in writing, by mail, postage prepaid, addressed to such
committee member, director or stockholder at his address as it appears on the
books or (in the case of a stockholder) the stock transfer records of the
Corporation, or (b) by any other method permitted by law (including but not
limited to overnight courier service, telegram, telex, telefax or electronic
transmission). Any notice required or permitted to be given by mail shall be
deemed to be delivered and given at the time when the same is deposited in the
United States mail as aforesaid. Any notice required or permitted to be given by
overnight courier service shall be deemed to be delivered and given at the time
delivered to such service with all charges prepaid and addressed as aforesaid.
Any notice required or permitted to be given by telegram, telex, telefax or
electronic transmission shall be deemed to be delivered and given at the time
transmitted with all applicable charges prepaid and addressed as aforesaid.
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5.2 Waiver. Whenever any notice is required to be given to any
stockholder, director or committee member of the Corporation by statute, the
certificate of incorporation of the Corporation, or these bylaws, a waiver
thereof in writing signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be equivalent to the
giving of such notice. Attendance of a stockholder, director, or committee
member at a meeting shall constitute a waiver of notice of such meeting, except
where such person attends for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
ARTICLE VI: OFFICERS
6.1 Number; Titles; Term of Office. The officers of the Corporation
shall be a President, a Secretary, and such other officers as the board of
directors may from time to time elect or appoint, including a Chairman of the
Board, one or more Vice Presidents (with each Vice President to have such
descriptive title, if any, as the board of directors shall determine), and a
Treasurer. Each officer shall hold office until his successor shall have been
duly elected and shall have qualified, until his death, or until he shall resign
or shall have been removed in the manner hereinafter provided. Any two or more
offices may be held by the same person. None of the officers need be a
stockholder or a director of the Corporation or a resident of the State of
Delaware.
6.2 Removal. Any officer or agent elected or appointed by the board of
directors may be removed by the board of directors whenever in its judgment the
best interest of the Corporation will be served thereby, but such removal shall
be without prejudice to the contract rights, if any, of the person so removed.
Election or appointment of an officer or agent shall not of itself create
contract rights.
6.3 Vacancies. Any vacancy occurring in any office of the Corporation
(by death, resignation, removal, or otherwise) may be filled by the board of
directors.
6.4 Authority. Officers shall have such authority and perform such
duties in the management of the Corporation as are provided in these bylaws or
as may be determined by resolution of the board of directors not inconsistent
with these bylaws.
6.5 Compensation. The compensation, if any, of officers and agents
shall be fixed from time to time by the board of directors; provided, however,
that the board of directors may delegate to a committee of the board of
directors, the Chairman of the Board or the President the power to determine the
compensation of any officer or agent (other than the officer to whom such power
is delegated).
6.6 Chairman of the Board. The Chairman of the Board, if elected by the
board of directors, shall have such powers and duties as may be prescribed by
the board of directors. Such officer shall preside at all meetings of the
stockholders and of the board of directors. Such officer may sign all
certificates for shares of stock of the Corporation.
6.7 President. The President shall be the chief executive officer of
the Corporation and, subject to the board of directors, he shall have general
executive charge, management, and control
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of the properties and operations of the Corporation in the ordinary course of
its business, with all such powers with respect to such properties and
operations as may be reasonably incident to such responsibilities. If the board
of directors has not elected a Chairman of the Board or in the absence of
inability to act of the Chairman of the Board, the President shall exercise all
of the powers and discharge all of the duties of the Chairman of the Board. As
between the Corporation and third parties, any action taken by the President in
the performance of the duties of the Chairman of the Board shall be conclusive
evidence that there is no Chairman of the Board or that the Chairman of the
Board is absent or unable to act.
6.8 Vice Presidents. Each Vice President shall have such powers and
duties as may be assigned to him by the board of directors, the Chairman of the
Board, or the President, and (in order of their seniority as determined by the
board of directors, or in the absence of such determination, as determined by
the length of time they have held the office of Vice President) shall exercise
the powers of the President during that officer's absence or inability to act.
As between the Corporation and third parties, any action taken by a Vice
President in the performance of the duties of the President shall be conclusive
evidence of the absence or inability to act of the President at the time such
action was taken.
6.9 Treasurer. The Treasurer shall have custody of the Corporation's
funds and securities, shall keep full and accurate account of receipts and
disbursements, shall deposit all monies and valuable effects in the name and to
the credit of the Corporation in such depository or depositories as may be
designated by the board of directors, and shall perform such other duties as may
be prescribed by the board of directors, the Chairman of the Board, or the
President.
6.10 Assistant Treasurers. Each Assistant Treasurer shall have such
power and duties as may be assigned to him by the board of directors, the
Chairman of the Board, or the President. The Assistant Treasurers (in the order
of their seniority as determined by the board of directors or, in the absence of
such a determination, as determined by the length of time they have held the
office of Assistant Treasurer) shall exercise the powers of the Treasurer during
that officer's absence or inability to act.
6.11 Secretary. Except as otherwise provided in these bylaws, the
Secretary shall keep the minutes of all minutes of all meetings of the board of
directors and of the stockholders in books provided for that purpose, and he
shall attend to the giving and service of all notices. He may sign with the
Chairman of the Board or the President, in the name of the Corporation, all
contracts of the Corporation and affix the seal of the Corporation thereto. He
may sign with the Chairman of the Board or the President all certificates for
shares of stock of the Corporation, and he shall have charge of the certificate
books, transfer books, and stock papers as the board of directors may direct,
all of which shall at all reasonable times be open to inspection by any director
upon application at the office of the Corporation during business hours. He
shall in general perform all duties incident to the office of the Secretary,
subject to the control of the board of directors, the Chairman of the Board, and
the President.
6.12 Assistant Secretaries. Each Assistant Secretary shall have such
powers and duties as may be assigned to him by the board of directors, the
Chairman of the Board, or the President. The Assistant Secretaries (in the order
of their seniority as determined by the board of directors or,
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in the absence of such a determination, as determined by the length of time they
have held the office of Assistant Secretary) shall exercise the powers of the
Secretary during that officer's absence or inability to act.
ARTICLE VII: CERTIFICATES AND STOCKHOLDERS
7.1 Certificates for Shares. Certificates for shares of stock of the
corporation shall be in such form as shall be approved by the board of
directors. The certificates shall be signed by the Chairman of the Board or the
President or a Vice President and also by the Secretary or an Assistant
Secretary or by the Treasurer or an Assistant Treasurer. Any and all signatures
on the certificate may be a facsimile and may be sealed with the seal of the
Corporation or a facsimile thereof. If any officer, transfer agent, or registrar
who has signed, or whose facsimile signature has been placed upon, a certificate
has ceased to be such officer, transfer agent, or registrar before such
certificate is issued, such certificate may be issued by the Corporation with
the same effect as if he were such officer, transfer agent, or registrar at the
date of issue. The certificates shall be consecutively numbered and shall be
entered in the books of the Corporation as they are issued and shall exhibit the
holder's name and the number of shares.
7.2 Replacement of Lost or Destroyed Certificates. The board of
directors may direct a new certificate or certificates to be issued in place of
a certificate or certificates theretofore issued by the Corporation and alleged
to have been lost or destroyed, upon the making of an affidavit of that fact by
the person claiming the certificate or certificates representing shares to be
lost or destroyed. When authorizing such issue of a new certificate or
certificates, the board of directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost or destroyed
certificate or certificates, or his legal representative, to advertise the same
in such manner as it shall require and/or to give the Corporation a bond with a
surety or sureties satisfactory to the Corporation in such sum as it may direct
as indemnity against any claim, or expense resulting from a claim, that may be
made against the Corporation with respect to the certificate or certificates
alleged to have been lost or destroyed.
7.3 Transfer of Shares. Shares of stock of the Corporation shall be
transferable only on the books of the Corporation by the holders thereof in
person or by their duly authorized attorneys or legal representatives. Upon
surrender to the Corporation or the transfer agent of the Corporation of a
certificate representing shares duly endorsed or accompanied by proper evidence
of succession, assignment or authority to transfer, the Corporation or its
transfer agent shall issue a new certificate to the person entitled thereto,
cancel the old certificate, and record the transaction upon its books.
7.4 Registered Stockholders. The Corporation shall be entitled to treat
the holder of record of any share or shares of stock as the holder in fact
thereof and, accordingly, shall not be bound to recognize any equitable or other
claim to or interest in such share or shares on the part of any other person,
whether or not it shall have express or other notice thereof, except as
otherwise provided by law.
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7.5 Regulations. The board of directors shall have the power and
authority to make all such rules and regulations as they may deem expedient
concerning the issue, transfer and registration or the replacement of
certificates for shares of stock of the Corporation.
7.6 Legends. The board of directors shall have the power and authority
to provide that certificates representing shares of stock bear such legends as
the board of directors deems appropriate to assure that the Corporation does not
become liable for violations of federal or state securities laws or other
applicable law.
ARTICLE VIII: MISCELLANEOUS PROVISIONS
8.1 Dividends. Subject to provisions of law and the certificate of
incorporation of the Corporation, dividends may be declared by the board of
directors at any regular or special meeting and may be paid in cash, in
property, or in shares of capital stock of the Corporation. Such declaration and
payment shall be at the discretion of the board of directors.
8.2 Reserves. There may be created by the board of directors out of
funds of the Corporation legally available therefor such reserve or reserves as
the directors from time to time, in their discretion, consider proper to provide
for contingencies, to equalize dividends, or to repair or maintain any property
of the Corporation, or for such other purpose as the board of directors shall
consider beneficial to the Corporation, and the board of directors may modify or
abolish any such reserve in the manner in which it was created.
8.3 Books and Records. The Corporation shall keep correct and complete
books and records of account, shall keep minutes of the proceedings of its
stockholders and board of directors and shall keep at its registered office or
principal place of business, or at the office of its transfer agent or
registered office or principal place of business, or at the office of its
transfer agent or registrar, a record of its stockholders, giving the names and
addresses of all stockholders and the number and class of the shares held by
each.
8.4 Fiscal Year. The fiscal year of the Corporation shall be fixed by
the board of directors; provided, that if such fiscal year is not fixed by the
board of directors and the selection of the fiscal year is not expressly
deferred by the board of directors, the fiscal year shall be the calendar year.
8.5 Seal. The seal of the Corporation shall be such as from time to
time may be approved by the board of directors.
8.6 Resignations. Any director, committee member, or officer may resign
by so stating at any meeting of the board of directors or by giving written
notice to the board of directors, the Chairman of the Board, the President, or
the Secretary. Such resignation shall take effect at the time specified therein
or, if no time is specified therein, immediately upon its receipt. Unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
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8.7 Securities of Other Corporations. With the prior approval of a
majority of the Corporation's board of directors, the Chairman of the Board, the
President, or any Vice President, the Corporation shall have the power and
authority to transfer, endorse for transfer, vote, consent, or take any other
action with respect to any securities of another issuer which may be held or
owned by the Corporation and to make, execute, and deliver any waiver, proxy or
consent with respect to any such securities.
8.8 Telephone Meetings. Stockholders (acting for themselves or through
a proxy), members of the board of directors and members of a committee of the
board of directors may participate in and hold a meeting of such stockholders,
board of directors or committee by means of a conference telephone or similar
communications equipment by means of which persons participating in the meeting
can hear each other and participation in a meeting pursuant to this section
shall constitute presence in person at such meeting, except where a person
participates in the meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
8.9 Action Without a Meeting. Unless otherwise restricted by the
certificate of incorporation of the Corporation or by these bylaws, any action
required or permitted to be taken at a meeting of the board of directors, or of
any committee of the board of directors, may be taken without a meeting if a
consent or consents in writing, setting forth the action so taken, shall be
signed by all the directors or all the committee members, as the case may be,
entitled to vote with respect to the subject matter thereof, and such consent
shall have the same force and effect as a vote of such directors or committee
members, as the case may be, and may be stated as such in any certificate or
document filed with the Secretary of State of the State of Delaware or in any
certificate delivered to any person. Such consent or consents shall be filed
with the minutes of proceedings of the board or committee, as the case may be.
8.10 Invalid Provisions. If any part of these bylaws shall be held
invalid or inoperative for any reason, the remaining parts, so far as it is
possible and reasonable, shall remain valid and operative.
8.11 Mortgages, etc. With respect to any deed, deed of trust, mortgage
or other instrument executed by the Corporation through its duly authorized
officer or officers, the attestation to such execution by the Secretary of the
Corporation shall not be necessary to constitute such deed, deed of trust,
mortgage or other instrument a valid and binding obligation against the
Corporation unless the resolutions, if any, of the board of directors
authorizing such execution expressly state that such attestation is necessary.
8.12 Headings. The headings used in these bylaws have been inserted for
administrative convenience only and do not constitute matter to be construed in
interpretation.
8.13 References. Whenever herein the singular number is used, the same
shall include the plural where appropriate, and words of any gender should
include each other gender where appropriate.
15
<PAGE> 76
8.14 Amendments. These bylaws may be altered, amended, or repealed or
new bylaws may be adopted by the board of directors at any regular meeting of
the board of directors or at any special meeting of the board of directors if
notice of such alteration, amendment, repeal, or adoption of new bylaws be
contained in the notice of such special meeting.
Adopted as of _________, 2000.
16
<PAGE> 77
The undersigned hereby directs this Proxy to be voted as follows:
PLEASE MARK YOUR VOTES IN THE FOLLOWING
MANNER, USING DARK INK ONLY:
<TABLE>
<CAPTION>
FOR ALL NOMINEES WITHHOLD
(except as marked to ALL NOMINEES
the contrary below)
<S> <C> <C>
1. Election of nine Directors to serve until their 9 9
successors are elected and shall duly qualify.
Nominees:
Jack C. Baum
Christopher Brickler
Donald H. Brush, Ph.D.
Daniel Dornier
Robert J. Gibbs
Stephen J. Metzger
Humbert B. Powell, III
Davinder Sethi
Raymond Wicki
FOR, except vote withheld from the following nominee(s):
----------------------------------
</TABLE>
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
2. Proposal to approve the 2000 Stock Option Plan. 9 9 9
3. Proposal to approve the reincorporation of our 9 9 9
company from Utah to Delaware, including a one-for-three share
combination of our common stock, and to adopt the plan of merger.
4. Any other matters that may properly come before the 9 9 9
meeting or any adjournments of the meeting.
</TABLE>
THIS PROXY WILL BE VOTED AS DIRECTED. IF NO DIRECTION IS INDICATED, THIS PROXY
WILL BE VOTED FOR PROPOSALS 1, 2, 3 AND 4.
A majority of such attorneys or substitutes as shall be present and shall act at
said meeting or any adjournment or adjournments thereof (or if only one shall be
present and act, then that one) shall have and may exercise all of the power of
said attorneys-in-fact hereunder.
Dated: , 2000
-------------------------------------------
Signature(s)
--------------------------------------
This proxy should be dated, signed by the stockholder(s)
exactly as his or her name appears herein, and returned promptly in the enclosed
envelope. Persons signing in a fiduciary capacity should so indicate, if shares
are held by joint tenants or as community property, both shareholders should
sign.
