SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X] Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
[_] Confidential, For Use of the Commission Only (As Permitted by Rule
14A-6(E)(2))
CHANCELLOR CORPORATION
(Name of Registrant as Specified In Its Charter)
NAME OF COMPANY
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount
on which the filing fee is calculated and state how it was
determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the
date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
CHANCELLOR CORPORATION
210 South Street
Boston, Massachusetts 02111
May 7, 1999
To the Stockholders of Chancellor Corporation:
Chancellor Corporation (the "Company") is pleased to send you the enclosed
notice of the Annual Meeting of Stockholders (the "Meeting") to be held at 2:00
p.m. on Friday, June 25, 1999 at the offices of Bingham Dana LLP, 150 Federal
Street, Boston, MA 02110.
Ordinary annual meeting business will be transacted at the Meeting,
including the election of directors. Three (3) other actions will be submitted
to the stockholders at the Meeting:
1. to approve an amendment to the Company's By-Laws to make
certain changes to improve the efficiency of the operation of the Company by the
Board of Directors and to afford the Board greater latitude and flexibility in
the management of the Company;
2. to approve an amendment to the Company's 1997 Stock Option Plan
increasing the number of shares reserved under the Plan from 4,000,000 to
7,500,000; and
3. to ratify the selection by the Board of Directors of Metcalf,
Rice, Fricke and Davis as the Company's independent public accountants for the
1999 fiscal year.
Please review the Company's enclosed Proxy Statement and Annual Report on
Form 10-KSB carefully. If you have any questions regarding this material,
please do not hesitate Peter J. Mullen, Clerk, at (617) 368-2700.
Sincerely yours,
Brian M. Adley
Chairman and
Chief Executive Officer
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING PLEASE COMPLETE THE ENCLOSED
PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER TO ASSURE
REPRESENTATION OF YOUR SHARES AT THE MEETING.
<PAGE>
CHANCELLOR CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
210 South Street
Boston, Massachusetts 02111
To be held on June 25, 1999
The Annual Meeting of Stockholders (the "Meeting") of Chancellor
Corporation (the "Company") will be held on Friday, June 25, 1999, at 2:00 p.m.
at the offices of Bingham Dana LLP, 150 Federal Street, Boston, MA 02110 for the
following purposes:
1. To elect three (3) directors to hold office until their successors shall
be elected and shall have qualified;
2. To approve an amendment to the Company's By-Laws to make certain changes
to improve the efficiency of the operation of the Company by the Board of
Directors and to afford the Board greater latitude and flexibility in the
management of the Company;
3. To approve an amendment to the Company's 1997 Stock Option Plan (the
"1997 Plan") increasing the number of shares reserved under the Plan from
4,000,000 to 7,500,000;
4. To ratify the selection by the Board of Directors of Metcalf, Rice,
Fricke and Davis as the Company's independent public accountants for the 1999
fiscal year; and
5. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The Board has fixed the close of business on April 23, 1999, as the record
date for the determination of stockholders entitled to notice of, and to vote
and act at, the Meeting and only stockholders of record at the close of business
on the date are entitled to notice of, and to vote and act at, the Meeting.
Stockholders are cordially invited to attend the Meeting in person. However, to
assure your representation at the Meeting, please complete and sign the enclosed
proxy card and return it promptly. If you choose, you may still vote in person
at the Meeting even though you previously submitted a proxy card.
BY ORDER OF THE BOARD OF DIRECTORS
CHANCELLOR CORPORATION
Peter J. Mullen
Clerk
Boston, Massachusetts
May 7, 1999
<PAGE>
CHANCELLOR CORPORATION
210 South Street
Boston, Massachusetts 02111
(617) 368-2700
____________________
PROXY STATEMENT
____________________
ANNUAL MEETING OF STOCKHOLDERS
to be held June 25, 1999
INTRODUCTION
The Annual Meeting of Stockholders
This Proxy Statement is being furnished to holders of shares of Common
Stock, $.01 par value (the "Common Stock") and Series AA Convertible Preferred
Stock, $.01 par value (the "Series AA Preferred Stock") of Chancellor
Corporation, a Massachusetts corporation ("Chancellor" or the "Company"), in
connection with the solicitation of proxies by the Board of Directors (the
"Board") of the Company for use at the Annual Meeting of Stockholders (the
"Meeting") to be held at the offices of Bingham Dana LLP, 150 Federal Street,
Boston, MA 02110, on June 25, 1999 at 2:00 p.m., and at any adjournment or
adjournments thereof.
Matters to be Considered at the Meeting
At the Meeting, Stockholders will be acting upon the following matters: (i)
to elect three (3) directors to hold office until their successors shall be
elected and shall have qualified; (ii) to approve an amendment to the Company's
By-Laws to make certain changes to improve the efficiency of the operation of
the Company by the Board of Directors and to afford the Board greater latitude
and flexibility in the management of the Company; (iii) to approve an amendment
to the Company's 1997 Stock Option Plan increasing the number of share reserved
under the Plan from 4,000,000 to 7,500,000; and (iv) to ratify the selection by
the Board of Directors of Metcalf, Rice, Fricke and Davis as the Company's
independent public accountants for the 1999 fiscal year. See "ELECTION OF
DIRECTORS", "AMENDMENT OF BY-LAWS", "AMENDMENT TO THE 1997 STOCK OPTION PLAN",
and "RATIFICATION OF AUDITORS".
Recommendations of the Board of Directors
The Board unanimously recommends adoption of all the matters to be
submitted to the stockholders at the Meeting.
Beneficial Ownership of Securities and Voting Rights
As of the close of business on April 23, 1999, the record date for the
Meeting, there were outstanding 43,365,536 shares of Common Stock and 5,000,000
shares of Series AA Preferred Stock (the Common Stock and the Series AA
Preferred Stock are collectively referred to herein as the "Stock").
Holders of the Common Stock and Series AA Preferred Stock are entitled to one
vote for each share of Common Stock or Series AA Preferred Stock held of record
at the close of business on the record date. For more information about the
Company's outstanding stock, see "OTHER INFORMATION -- Principal Stockholders."
<PAGE>
Proxies; Votes Required
A stockholder may revoke his, her or its proxy at any time prior to its use
by giving written notice to the Secretary of the Company, by executing a revised
proxy at a later date or by attending the Meeting and voting in person. Proxies
in the form enclosed, unless previously revoked, will be voted at the Meeting in
accordance with the specifications made thereon or, in the absence of such
specifications, in favor of the election of the nominees for directors listed
herein, in favor of the proposal to amend to the Company's By-Laws, in favor of
the proposal to amend the Company's Articles of Organization, in favor of the
proposal to amend the Company's 1997 Stock Option Plan, and with respect to any
other business which may properly come before the Meeting, in the discretion of
the named proxies.
If, in a proxy submitted on a stockholder's behalf by a person acting
solely in a representative capacity, the proxy is marked clearly to indicate
that the shares represented thereby are not being voted with respect to one or
more proposals, then that proxy will not be counted as present at the Meeting
with respect to such proposals. Proxies submitted with abstentions as to one or
more proposals will be counted as present for purposes of establishing a quorum
for such proposals. Any proxy may be revoked at any time prior to the voting
thereof by delivering to the Clerk of the Company a written revocation of a duly
executed proxy bearing a later date or by voting in person at the Meeting. The
expected date of the first mailing of this proxy statement and the enclosed
proxy is May 21, 1999.
The affirmative vote of a plurality of the shares of the Company's Stock
present at the Meeting, in person or by proxy, is required for the reelection of
the members of the Board. The affirmative vote of the holders of a majority of
the shares of the Company's Stock issued and outstanding is required for the
amendment of the Company's by-laws, the approval of the amendment to the 1997
Stock Option Plan, and the ratification of auditors.
Shares of the Company's Common Stock represented by executed proxies
received by the Company will be counted for purposes of establishing a quorum at
the Meeting, regardless of how or whether such shares are voted on any specific
proposal. With respect to the required vote on any particular matter,
abstentions will be treated as votes cast or shares present and represented,
while votes withheld by nominee recordholders who did not receive specific
instructions from the beneficial owners of such shares will not be treated as
votes cast or as shares present or represented.
TABLE OF CONTENTS
Page No.
---------
Introduction 1
Table of Contents 2
Election of Directors 3
Executive Compensation 6
Amendment of By-Laws 9
Amendment to the 1997 Stock Option Plan 10
Ratification of Auditors 13
Other Information 13
<PAGE>
ELECTION OF DIRECTORS
PROPOSAL 1
Introduction
Pursuant to Section 50A of Chapter 156B of the Massachusetts General Laws,
the Board is currently divided into three (3) classes having staggered terms of
three (3) years each. Under Section 50A, the Board may determine the total
number of directors and the number of directors to be elected at any annual
meeting or special meeting in lieu thereof. The Board has fixed at two (2) the
number of Class II directors to be elected at the 1999 Annual Meeting and has
fixed at one (1) the number of Class III directors to be elected at the 1999
Annual Meeting. At the Meeting, the stockholders will be asked to elect M. Rea
Brookings and Rudolph Peselman as Class II directors to serve in such capacity
until the 2002 Annual Meeting and until their successors are duly elected and
qualified. Also at the Meeting, the stockholders will be asked to elect
Franklyn E. Churchill as a Class III director to serve in such capacity until
the 2001 Annual Meeting and until his successor is duly elected and qualified.
It is the intention of the persons named in the enclosed proxy to vote to
elect the three nominees named above, one of whom is an incumbent director, and
each of whom has consented to serve if elected. If some unexpected occurrence
should make necessary, in the direction of the Board of Directors, the
substitution of some other person for any of the nominees, it is the intention
of the persons named in the proxy to vote for the election of such other persons
as may be designated by the Board of Directors.
Nominees, Directors, Executive Officers and Advisors
The directors, executive officers and advisors of the Company are as
follows:
Name Age Position(s) Held
- ---- --- -----------------
Brian M. Adley 36 Chairman, Chief Executive Officer
M. Rea Brookings* 54 President, Tomahawk
Rudolph Peselman** 53 Director
Franklyn E. Churchill* 60 President, Chief Operating Officer
David F. Herring 54 Executive Vice President, Tomahawk
Craig Jackson 39 Vice President of Remarketing
David C. Volpe 44 Financial and Business Development Consultant
Jonathan Ezrin 44 Principal Accounting Officer
Colleen M. Durand 37 Controller
* Nominee for election as a director
** Nominee for re-election as a director
There are no family relationships between any directors, executive officer,
advisor or person nominated or chosen to become a director or executive officer.
Business Experience of Directors, Executive Officers and Consultants
NOMINEES TO SERVE AS DIRECTORS FOR A TERM EXPIRING
AT THE 2002 ANNUAL MEETING (CLASS II DIRECTORS)
Ms. Brookings has served as President of Tomahawk Truck and Trailer Sales,
a wholly owned subsidiary of the Company, since its inception in 1991. Prior to
co-founding Tomahawk, Ms. Brookings held a number of executive and operational
positions owning, managing, and operating a number of retail establishments from
1984 through 1990. Ms. Brookings is the architect of Tomahawk's extensive
customer service/telemarketing concept. Under Ms. Brookings' leadership, gross
revenues grew from approximately $500,000 in 1991 to approximately $40,000,000
in 1998. The Company's retail business grew from 59 units sold in 1991 to over
2,200 units sold in 1998. Ms. Brookings is a public speaker on family issues
and holds a Bachelor's degree from the University of Arkansas, along with work
at the Masters level in English Literature and Communications.
Mr. Peselman was elected a director in December 1996. He has extensive
experience in international trade and business development, specifically in the
Russian Federation and Commonwealth of Independent States. He has been
President and Director of Kent International, Ltd., an international business
development and consulting company since 1989. Mr. Peselman was Vice President
of Eric Management, a real estate development and management company, from 1976
to 1989 and had served as a director of Engineering Firm, a firm which managed
technical reconstruction of a furniture manufacturing facility in the Ukraine,
from 1970 to 1988.
NOMINEE TO SERVE AS A DIRECTOR FOR A TERM EXPIRING
AT THE 2001 ANNUAL MEETING (CLASS III DIRECTORS)
Mr. Churchill has served as President and Chief Operating Officer of the
Company since July 1998. If Mr. Churchill is elected as a member of the Board
of Directors, Mr. Churchill will be the sole Class III Director. Prior to
joining the Company, Mr. Churchill served as Vice President of Acquisitions for
Associates First Capital Corporation, the second largest specialty finance
company in the country and a former subsidiary of Ford Motor Corporation. Mr.
Churchill has also served as Executive Vice President for Gelco/GE Fleet
Management. During his 12 years at Gelco, Mr. Churchill managed the fleet
leasing operations that grew from approximately 90,000 units under lease or
management, to over 600,000 units under lease or management. Additionally, Mr.
Churchill oversaw the origination of approximately 80,000 units under lease or
management per year, and the remarketing of approximately 80,000 units per year.
Mr. Churchill has also served in various executive and managerial capacities
with Ford Motor Credit Corporation (FMCC), where he was responsible for opening
several FMCC offices in the New England and New York areas. Mr. Churchill later
headed up FMCC's northeastern operations, which at the time was one of Ford's
largest regional operation with respect to lease, wholesale, commercial and
retail loans outstanding. Mr. Churchill holds a degree in business from Hofstra
University and a degree in law from LaSalle University.
DIRECTOR SERVING A TERM EXPIRING AT THE
2000 ANNUAL MEETING (CLASS I DIRECTORS)
Mr. Adley was elected a director in July 1995 and is the sole Class I
Director. As part of the restructuring that occurred in late December 1996, Mr.
Adley became the Chairman of the Board and Chief Executive Officer of the
Company. Mr. Adley has been Chairman and Chief Executive Officer of Vestex
Capital Corporation, a private investment firm and a large shareholder of the
Company. Mr. Adley has also served in a number of senior management capacities
for several public and private companies. From 1985 to 1989, Mr. Adley was a
Senior Consultant at Price Waterhouse. Mr. Adley has several undergraduate
degrees in accountancy and management, a Masters of Business Administration and
a Juris Doctorate.
Executive Officers and Consultants
Mr. Herring has served as Executive Vice President and Chief Financial
Officer of Tomahawk Truck and Trailer Sales since its inception in 1991. Prior
to co-founding Tomahawk, Mr. Herring was a Manager at Gelco/GE Fleet Management
from 1985 through 1991. From 1980 through 1985, Mr. Herring was the Treasurer
of Trucks, Inc., which specialized in bankruptcies and liquidations in the motor
carrier industry. From 1974 through 1985, Mr. Herring was engaged in the public
accounting field as a Partner of Swearingen and Herring Co., CPA. Mr. Herring
holds a degree in Accounting and Mathematics from Northwest Missouri University
and is a member of the American Institute of Certified Public Accountants.
Mr. Jackson has been employed by the Company since April 1984. He
currently holds the position of Vice President of Remarketing and is responsible
for the sale and re-lease of all leased equipment held in the Company's
portfolio and in the trusts under management. Prior to his current position, he
held the title of Vice President of Operations with responsibility for
purchasing and servicing all newly leased equipment. Prior to his employment
with the Company, Mr. Jackson held various positions with The Hertz Corporation,
the last being fuel buyer in Hertz's New York corporate headquarters. Mr.
Jackson received a BS in management and industrial relations from Wilkes College
in Wilkes Barre, Pennsylvania in 1980.
Mr. Volpe has been engaged as a financial and business development
consultant to the Company since March 1997. He is the Managing Director of
Vineyard Capital Ventures, a consulting firm providing financial and business
advisory services to private and public companies in the medical,
telecommunications, high technology and financial services industries. Prior to
founding Vineyard Capital Ventures, Mr. Volpe was the Vice President of Finance
and Chief Financial Officer for FaxNet Corporation from May 1996 through March
1997 and Cynosure, Inc. from September 1993 through May 1996. Mr. Volpe was the
Director of Finance for a publicly held environmental systems manufacturer from
July 1991 through September 1993. Additionally, Mr. Volpe was an Audit Manager
with Price Waterhouse from June 1986 through July 1991. He holds undergraduate
degrees from the California State University at Northridge and the California
State University at Bakersfield and is a member of the American Institute of
Certified Public Accountants (AICPA).
Mr. Ezrin has been the Principal Accounting Officer of the Company since
1997. Prior to serving as Principal Accounting Officer, Mr. Ezrin held a number
of financial positions with the Company, including Controller from 1997 to 1999,
Assistant Controller from 1996 to 1997, Accounting Manager from 1993 to 1996,
and Senior Accountant from 1992 to 1993. Prior to joining the Company, Mr.
Ezrin was Controller or Assistant Controller for several privately held
companies from 1980 to 1991. Mr. Ezrin holds a Bachelors of Science in
Accounting from Northeastern University and a Masters of Business
Administration.
Ms. Durand has been the Controller of the Company since 1999. Prior to
serving as Controller, Ms. Durand served as the Company's Assistant Controller
from 1998 to 1999. Prior to joining the Company, Ms. Durand served in the
capacities of Controller, Assistant Controller and Financial Manager of several
privately held corporations, including Hill Holiday Connors Cosmopoulos, T.J.
Clark, Rizzo Simon Cohn, and Leonard Monahan. Ms. Durand holds a Bachelors of
Science in Accounting from Suffolk University.
Certain Transactions
The above-named directors, executive officers and consultants have
indicated that neither they nor any of their respective affiliates has any
relationship with the Company that is required to be disclosed pursuant to Item
404 of Regulation S-B promulgated under the Securities Exchange Act of 1934
except for the transactions referred to under "Compensation Committee Interlocks
and Insider Participation".
Committees; Attendance
The Audit Committee of the Board was formed in 1983 and is currently
composed of Messrs. Adley and Peselman. Mr. Adley is Chairman of the Audit
Committee. The functions of the Audit Committee include recommending to the
Board the appointment of the independent auditors, reviewing the independence of
the auditors, meeting with the auditors to review the scope and result of the
annual audit, reviewing the Company's accounting procedures, internal controls,
and proposed changes in financial and accounting standards and principles, and
reviewing the scope of other services provided by the auditors.
Messrs. Adley and Peselman are the current members of the Company's
Resource and Compensation Committee. Mr. Peselman is Chairman of the Resource
and Compensation Committee. The Resource and Compensation Committee was formed
in 1983. Its function includes reviewing the total compensation paid to the
Company's directors and officers and the granting of stock options. Since March
24, 1992, a special Option Compensation Committee has administered stock option
plans in connection with the granting of stock options to persons who are
executive officers. Messrs. Adley and Peselman currently compose the Option
Compensation Committee.
The Mergers and Acquisitions Committee was formed in February 1996 and is
currently composed of Messrs. Adley and Peselman. Mr. Adley is Chairman of this
committee.
Attendance. During the year ended December 31, 1998, the Board held 12
meetings, the Audit Committee had 5 meetings, the Compensation Committee held 5
meetings and the Mergers and Acquisitions Committee held 6 meetings. Each
director attended more than 75% of the meetings of the Board and of the
committees of which he was a member.
Directors' Compensation
As a result of the restructuring that occurred in December 1996, Directors no
longer receive any cash fees with respect to services rendered. The only
compensation that directors of the Company currently receive is the grant of
stock options pursuant to the Company's 1994 Directors Stock Option Plan, as
amended, and reimbursement of reasonable out of pocket expenses. Under that
plan, as amended, non-employee directors elected prior to December 31, 2007 may
be granted options at the discretion of the Option Compensation Committee
subject to the availability of an adequate number of shares of Common Stock
reserved for issuance under the Plan. There are currently 1,333,000 shares of
Common Stock available for grant under the Plan.
EXECUTIVE COMPENSATION
The annual and long-term remuneration paid to or accrued for the Chief
Executive Officer and each of the other four most highly compensated executive
officers of the Company for services rendered during the years ended December
31, 1998, 1997 and 1996 was as follows:
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Compensation All Other
-------------------
Name and Principal Salary Bonus (1) Compensation Options
------------------- ----------- ------------- --------
Position Year $ $ $ #
- ------------------------ ------------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Brian M. Adley 1998 1 - - -
Chairman & CEO 1997 - - - -
1996 - - - -
Franklyn E. Churchill 1998 83,718 - - 2,500,000(8)
President & COO (2) 1997 - - - -
1996 - - - -
John J. Powell 1998 50,000 - 500(6)
President (3) 1997 153,854 - 38,400(6)(7) 1,200,000(9)
1996 15,000 - 500(6)
M. Rea Brookings 1998 83,333 - - -
President, Tomahawk (4) 1997 - - - -
1996 - - - -
David F. Herring 1998 83,333 - - -
Exec. VP, Tomahawk (5) 1997 - - - -
1996 - - - -
Craig Jackson 1998 84,000 66,654 500(6)
Vice President of 1997 84,000 45,439 500(6) 400,000(10)
Remarketing 1996 84,000 32,893 500(6) -
</TABLE>
________________________
(1) Unless otherwise specified, figure includes commissions paid under the
Company's incentive program for sales personnel.
(2) Employment commenced July 1, 1998.
(3) Employment commenced November 22, 1996. Employee resigned effective May
6, 1998.
(4) Employment commenced August 1, 1998.
(5) Employment commenced August 1, 1998.
(6) Includes $500 paid by the Company during the fiscal year with respect to
the Company's 401(k) plan.
(7) Includes approximately $5,900 on the use of the Company's automobile and
approximately $32,000 paid in living and accommodation expenses through December
1997.
(8) Includes a total of 350,000, 250,000, 200,000, and 200,000 shares that
Mr. Churchill is entitled to acquire through the exercise of stock options that
were granted on July 1, 1998 and vest on July 1, 1998, 1999, 2000 and 2001,
respectively. Also includes a total of 1,500,000 shares that Mr. Churchill is
entitled to acquire through the exercise of a stock purchase warrant by and
between Mr. Churchill and Vestex Capital Corporation.
(9) All stock options held by Mr. Powell that were unvested as of May 6,
1998, the date of his resignation, were cancelled. At the time of his
resignation, Mr. Powell held vested options to purchase a total of 200,000
shares that were subsequently wholly exercised in October 1998.
Includes a total of 33,333; 33,333 and 33,334 shares that Mr. Jackson is
entitled to acquire through the exercise of stock options that were granted on
October 1, 1997 and vest on October 1, 1999, 2000 and 2001, respectively, for
which the vesting and exercise dates for these options can be accelerated upon
the completion of certain predetermined performance criteria.
<TABLE>
<CAPTION>
Option Grants in Last Fiscal Year
Number of % of Total
Securities Options Granted
Underlying to Employees Exercise or
Options in Fiscal Base Price Expiration
Name Granted (1) Year ($/Sh) Date
- --------------------- ----------- ---------------- ------------ ----------
<S> <C> <C> <C> <C>
Franklyn E. Churchill 350,000 15.44% 0.20 10/1/2002
200,000 8.82% 0.35 10/1/2003
200,000 8.82% 0.75 10/1/2004
250,000 11.03% 1.00 10/1/2005
</TABLE>
___________________
Options granted on October 1, 1997 generally vest to the employees over a
five-year period. Each of the five tranches of options granted vest on October
1, 1998, 1999, 2000, 2001 and 2002, respectively.
<TABLE>
<CAPTION>
Aggregated Option Exercises in Last Fiscal year and FY-End Option Values
Number of Securities Value of
Underlying Unexercised Unexercised in-the-Money
Shares Options at FY-End Options at FY-End ($)
Name Acquired (#) $ Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C>
Franklyn E. Churchill 350,000 650,000 185,500 107,000
John J. Powell 200,000 64,000 - - -
Craig Jackson 80,000 340,000 42,400 81,266
</TABLE>
Compensation Committee Interlocks and Insider Participation
Other than Brian M. Adley, Chief Executive Officer of the Company, no
person serving on the Compensation Committee at any time during fiscal year 1998
was a present or former officer or employee of the Company or any of its
subsidiaries. During fiscal year 1998, no executive officer of the Company
served as a member of the board of directors or compensation committee (or other
board committee performing equivalent functions) of another entity, one of whose
executive officers served on the Company's Board of Directors or Compensation
Committee.
The Company is provided investment banking and consulting services by an
affiliate of the Company's majority stockholder, Vestex Capital Corporation
("VCC"), pursuant to a consulting agreement approved by the shareholders at the
1995 Annual Meeting of the Stockholders, as amended in July 1998. VCC provides
specified services including, but not limited to, general business consulting,
the development and implementation of the Company's 1997 transition and
turnaround strategies, development of domestic and international business
opportunities and growth strategies, identification and development of strategic
alliances, support of merger and acquisition activity, debt and equity raising
efforts, and other financing activities.
<PAGE>
AMENDMENT OF THE COMPANY'S BY-LAWS
PROPOSAL 2
The Board of Directors has resolved to recommend to the stockholders that
the Company's By-Laws be amended and restated to make certain changes to improve
the efficiency of the operation of the Company by the Board of Directors and to
afford the Board greater latitude and flexibility in the management of the
Company. The form of the amended and restated By-Laws are attached hereto as
Exhibit A to this Proxy Statement (the "Amended By-Laws").
The following is a summary of the material changes proposed to be made to
the Company's By-Laws:
Calling of Special Meetings
The present By-Laws provide for a manner by which a special meeting of
stockholders (which is also applicable in the event of the Clerk's death,
absence, incapacity or refusal to call a meeting) may be called by (i) three
directors acting in concert, or (ii) one or more of the stockholders who hold at
least 10% of the capital stock entitled to vote (as if all outstanding shares of
preferred stock had been converted). The proposed amendment would increase the
percentage required for shareholders to call a special meeting from 10% to 40%
of the capital stock entitled to vote.
Voting and Proxies
As the Company's current By-Laws do not provide in detail as to how (i)
voting at meetings of stockholders should be conducted, the Amended By-Laws
allow for voting by voice vote unless voting by ballot is requested by any
stockholder, (ii) all questions will be determined by majority vote, or, if two
or more classes of stock are entitled to vote as separate classes, a majority
vote of each class, except (a) where a larger vote is required by law, the
Articles of Organization or By-Laws, or (b) in the case of elections of
directors, which shall be by plurality vote, (iii) the Board may appoint an
inspector of elections for stockholders meetings. These provisions are designed
to clarify procedures to be followed at meetings of stockholders.
Election and Qualification of Directors
The current By-Laws require that should a vacancy on the Board of Directors
occur arising from resignation, removal or any increase in the number of
directors, the Board may fill that vacancy, only upon the unanimous written
instruction of those stockholders who are entitled to fill such vacancy.
Although the rest of the members of the Board may exercise the powers of the
full Board until the vacancy is filled, the Board's ability to quickly elect one
or more directors to fill vacancies is highly limited, as an unanimous written
instruction of the Company's stockholders is required. The Amended By-Laws
would allow the Board to fill any such vacancies without such unanimous written
instruction.
Implicit Items
The current By-Laws of the Company fail to provide for certain powers of
the Board of Directors that may be deemed implicit generally. Accordingly, the
Amended By-Laws provide for such powers explicitly, to avoid ambiguity and
confusion in the future. These matters include (i) the power of the Board to
issue and sell or otherwise dispose of such shares of the Company's authorized
but unissued capital stock to such persons and at such times and for such
consideration, cash, property, services, expenses, or otherwise, and upon such
terms as it shall determine from time to time, (ii) the authority of the Board
to fix the compensation of all officers of the Company and authorize executive
officers to fix the compensation of subordinate employees, (iv) the procedure to
be followed in the event of a lost or mutilated stock certificate, and (v) the
fixing of a default record date and provision for the closing of the transfer
books in the event that the Board does not do so.
Conflict of Interest
The current By-Laws do not address the issues that may arise when a
stockholder, director or officer of the Company may have an interest in a
contract or other transaction involving the Company, which is a disincentive for
such persons or entities to enter into agreements with the Company that may
actually be very beneficial to the Company. The Amended By-Laws would prevent
the automatic invalidation of such contracts or transactions when this situation
arises, provided that the nature and extent of the interest was disclosed to, or
known by, the entire Board before acting on such contract or transaction.
Indemnification of Directors and Officers
While the Company's current Articles of Organization do provide for the
indemnification of officers and directors of the Company, the current By-Laws do
not include similar provisions. The Amended By-Laws include provisions which
deal with (i) rights to indemnification, (ii) settlements, (iii) notification
and defense of proceedings, (iv) expenses, and (vii) partial indemnification.
The Company believes that including such indemnification provisions, in addition
to the protections offered by the Company's Articles of Organization, would help
in attracting and retain talented officers and directors, who typically demand
indemnification and similar protections from the Company.
The foregoing summary is not a complete description of all amendments to
the Company's current By-Laws, and is qualified in its entirety by reference to
the form of the proposed amended and restated By-Laws attached hereto.
Recommendation of the Board of Directors
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE AMENDMENT
TO THE COMPANY'S BY-LAWS.
AMENDMENT TO THE 1997 STOCK OPTION PLAN
PROPOSAL 3
Introduction
On August 29, 1997, the Company's stockholders approved the 1997 Stock
Option Plan (the "1997 Plan") which had been adopted, subject to stockholder
approval, by the Board of Directors on March 20, 1997. Subsequently, on May 15,
1998, the Company's stockholders approved an amendment to the 1997 Plan which
had been adopted, subject to stockholder approval, by the Board of Directors in
April 1998. Currently, options to purchase a total of 4,000,000 shares of
Common Stock may be granted under the 1997 Plan to employees of the Company
(including employees who are directors), consultants who are not employees and
other affiliates of the Company, who are defined as persons associated with the
Company in such other capacity or relationship as may be permitted by the Board
of Directors (recipients of stock options are herein known collectively as
"Participants"). Throughout 1998 a total of 1,911,500 shares were granted to
employees of the Company, consultants and other associated persons under the
1997 Plan.
Proposed Amendment
On December 17, 1998, the Board of Directors adopted an Amendment, subject
to stockholder approval at the Company's June 25, 1999 Annual Meeting. The
Amendment provides for increasing the number of shares of Common Stock available
for grant pursuant to the 1997 Plan from 4,000,000 shares to 7,500,000 shares.
Description of the 1997 Plan
The 1997 Plan covers a total of 4,000,000 shares of Common Stock (this
number will increase to 7,500,000 if the Amendment is approved). Options may be
awarded under the 1997 Plan to employees of the Company (including employees who
are directors), consultants who are not employees and other affiliates of the
Company as defined below. Not more than 4,000,000 shares (this number will
increase to 7,500,000 if the Amendment is approved) may be issued to any
individual pursuant to the exercise of options granted under the 1997 Plan,
during the ten-year life of the 1997 Plan. The 1997 Plan provides for the grant
of options intended to qualify as incentive stock options under Section 422A of
the Internal Revenue Code of 1986, as amended (the "Code") ("Incentive Stock
Options"), and options which are not Incentive Stock Options ("Non-Statutory
Stock Options").
Only employees of the Company or its subsidiaries (approximately 90
persons) may be granted Incentive Stock Options. Affiliates of the Company,
defined as employees of the Company, members of the Company's Board of
Directors, or persons associated with the Company in such other capacity or
relationship as may be permitted by the Board of Directors, may be granted
Non-Statutory Stock Options. Except as provided below, no person may be granted
any option under the 1997 Plan who, at the time such option is granted, owns
Common Stock of the Company possessing more than 10% of the combined voting
power of all classes of stock of the Company.
The Option Compensation Committee of the Board of Directors will administer
the 1997 Plan, select the persons to whom options are granted and fix the terms
of such options.
The exercise date of an option granted under the 1997 Plan will be fixed by
the Committee, but may not be later than ten years from the date of grant.
Options may be granted under the 1997 Plan until March 20, 2007. Options may be
exercised in such installments as are fixed by the Committee.
Options under the 1997 Plan will not be transferable by the Participant other
than by will or the laws of descent and distribution, although they may be
exercised during the Participant's lifetime by his/her legal representative if
he/she becomes incapacitated. All options must be exercised within three months
after termination of the Participant's affiliation with the Company, except that
options shall remain outstanding for their entire term following termination due
to death or for one year following termination due to permanent disability.
The exercise price of Incentive Stock Options granted under the 1997 Plan
must be at least equal to the fair market value of the Common Stock, as
determined by the Board of Directors, on the date of grant. Non-Statutory Stock
Options may be granted at exercise prices not less than 100% of the fair market
value of the Common Stock on the date of the grant or not less than 110% of such
fair market value in the case of options granted to an employee who at the time
of grant possess more than 10% of the total combined voting power of all classes
of stock of the Company. The Option Compensation Committee is authorized to
determine, in its discretion, the exercise price of other options, including any
options that may be regranted to employees after their original grant has lapsed
unexercised.
The 1997 Plan provides for automatic adjustment to the number of shares of
Common Stock issuable upon exercise of options granted under the 1997 Plan to
reflect stock dividends, stock splits, reorganizations, mergers and various
other transactions occurring after the date of grant. Payment for shares
purchased upon exercise of an option must be made in cash or, at the Committee's
discretion, by delivery of shares of Common Stock of the Company, or by a
combination of such methods.
The Company's Board of Directors may at any time amend or revise the terms
of the 1997 Plan, except that no such amendment or revision may be made without
the approval of the holders of a majority of the Company's outstanding capital
stock, voting together as a single class, if such amendment or revision would
(a) materially increase the number of shares which may be issued under the 1997
Plan (other than changes in capitalization), (b) increase the maximum term of
options, (c) decrease the minimum option price, (d) permit the granting of
options to anyone not included within the 1997 Plan's eligible categories, (e)
extend the term of the 1997 Plan or (f) materially increase the benefits
accruing to eligible individuals under the 1997 Plan.
The 1997 Plan contains the following terms and conditions required in order
to permit treatment of the options granted thereunder as incentive stock
options: (i) all incentive stock options must be expressly designated as such at
the time of grant and (ii) if any person to whom an incentive stock option is
granted owns, at the time of the grant of such option, Common Stock possessing
more than 10% of the combined voting power of all classes of the Company, then
(a) the purchase price per share of the Common Stock subject to such option
shall not be less than 110% of the fair market value of one share of Common
Stock at the time of grant and (b) the exercise period shall not exceed five
years from the date of grant.
Federal Income Tax Consequences
Incentive Stock Options. In general, a Participant will not recognize
taxable income upon the grant or exercise of an Incentive Stock Option.
Instead, a Participant will recognize taxable income with respect to an
Incentive Stock Option only upon the sale of Common Stock acquired through the
exercise of the option ("ISO Stock"). The exercise of an Incentive Stock
Option, however, may subject the Participant to the alternative minimum tax.
Generally, the tax consequences of selling ISO Stock will vary with the length
of time that the Participant has owned the ISO Stock at the time it is sold. If
the Participant sells ISO Stock after having owned it for at least two years
from the date the option was granted (the "Grant Date") and one year from the
date the option was exercised (the "Exercise Date"), then the Participant will
recognize long-term capital gain in an amount equal to the excess of the sale
price of the ISO Stock over the exercise price.
If the Participant sells ISO Stock for more than the exercise price prior to
having owned it for at least two years from the Grant Date and one year from the
Exercise Date (a "Disqualifying Disposition"), then any gain will be treated as
ordinary compensation income to the extent that it does not exceed the gain that
the Participant would have realized had he sold the shares immediately upon
exercise of the option and the remaining gain, if any, will be a capital gain.
This capital gain will be a long-term capital gain if the Participant has held
the ISO Stock for more than one year prior to the date of sale.
If a Participant sells ISO Stock for less than the exercise price, then the
Participant will recognize capital loss equal to the excess of the exercise
price over the sale price of the ISO Stock. This capital loss will be a
long-term capital loss if the Participant has held the ISO Stock for more than
one year prior to the date of sale.
Nonqualified Stock Options. A Participant will not recognize taxable income
upon the grant of a Non-Statutory Stock Options. A Participant who exercises a
Non-Statutory Stock Options, generally, will recognize ordinary compensation
income in an amount equal to the excess of the fair market value of the Common
Stock acquired through the exercise of the option ("NSO Stock") on the Exercise
Date over the exercise price.
With respect to any NSO Stock, a Participant will have taxable income recognized
upon the exercise of the option. Upon selling NSO Stock, a Participant
generally will recognize capital gain or loss in an amount equal to the excess
of the sale price of the NSO Stock over the Participant's tax basis in the NSO
Stock. This capital gain or loss will be a long-term gain or loss if the
Participant has held the NSO Stock for more than one year prior to the date of
the sale.
Tax Consequences to the Company. The Company will be entitled to a
deduction in connection with a grant of a stock option only in the event and to
the extent ordinary income is recognized by the Participant. Any such deduction
will be allowed to the Company for its taxable year within which ends the
taxable year in which the Participant's recognition of ordinary income occurs.
Any such deduction will be subject to the limitations of Section 162(m) of the
Internal Revenue Code.
Once income associated with such a grant is recognizable to a Participant
for Federal income tax purposes, the Participant must either pay to the Company
an amount sufficient to satisfy any federal, state and local taxes required to
be withheld or make alternative arrangements acceptable to the Company.
The foregoing summary is not a complete description of all tax aspects of
the Plan. The foregoing relates only to Federal income taxes; there may be
other Federal tax consequences associated with the Plan, as well as foreign,
state and local tax consequences.
Recommendation of the Board of Directors
THE BOARD OF DIRECTORS BELIEVES THE ADOPTION OF THE PROPOSED AMENDMENT TO
THE 1997 STOCK OPTION PLAN IS IN THE BEST INTERESTS OF THE COMPANY AND ITS
STOCKHOLDERS AND THEREFORE RECOMMENDS A VOTE FOR THE PROPOSAL. THE AMENDMENT TO
THE 1997 PLAN WILL NOT BECOME EFFECTIVE UNLESS IT IS APPROVED BY THE
STOCKHOLDERS AT THE MEETING.
RATIFICATION OF AUDITORS
PROPOSAL 4
Introduction
The Board has appointed Metcalf, Rice, Fricke and Davis, certified public
accountants, as auditors to examine the financial statement of the Company for
fiscal 1999 and to perform other appropriate accounting services and is
requesting ratification of such appointment by the stockholders. Metcalf, Rice,
Fricke and Davis has served as the Company's auditors since February 1999.
In the event that the stockholders do not ratify the appointment of
Metcalf, Rice, Fricke and Davis, the adverse vote will be considered as a
direction to the Board to select other auditors for the next fiscal year.
However, because of the difficulty and expense of making any substitution of
auditors after the beginning of the current fiscal year, it is contemplated that
the appointment for fiscal 1999 will be permitted to stand unless the Board
finds other reasons for making a change.
It is understood that even if the selection of Metcalf, Rice, Fricke and
Davis is ratified, the Board, in its sole discretion, may direct the appointment
of a new independent accounting firm at any time during the year if the Board
feels that such a change would be in the best interests of the Company and its
stockholders.
OTHER INFORMATION
PROXY SOLICITATION
All costs of solicitation of proxies will be borne by the Company. In
addition to solicitation by mail, the officers and regular employees of the
Company may solicit proxies personally or by telephone.
OTHER BUSINESS
The Board knows of no other matter to be presented at the meeting. If any
additional matter should properly come before the meeting, it is the intention
of the persons named in the enclosed proxy to vote such proxy in accordance with
their judgment on any such matters.
<PAGE>
PRINCIPAL STOCKHOLDERS
As of the close of business on April 23, 1999, the record date for the
meeting, there were 43,365,536 shares of Common Stock and 5,000,000 shares of
Series AA Preferred Stock outstanding. Holders of the Common Stock and Series
AA Preferred Stock of the Company are entitled to one vote for each share of
Common Stock and Series AA Preferred Stock, respectively, held of record at the
close of business on the record date.
The number of shares of Common Stock beneficially owned by the persons or
entities known by management to be the beneficial owners of more than 5% of the
outstanding shares, the number of shares beneficially owned by each director,
each nominee for election or re-election as a director and each executive
officer, the number of shares beneficially owned by all directors and officers
as a group, as of the record date, as "beneficial ownership" has been defined
under rules promulgated by the Securities and Exchange Commission, and the
actual sole or shared voting power of such persons, as of the record date, are
set forth in the following table.
Securities and Exchange Commission Rule 13d-3 defines "beneficial ownership" as
voting or investment decision power over shares. Beneficial ownership does not
necessarily mean that the holder enjoys any economic benefit from those shares.
<TABLE>
<CAPTION>
Name and Common Stock Percentage
Address of Beneficially of Shares Voting Power (1)
Beneficial Owner Owned Outstanding Shares Percentage
- ------------------------------ ------------ --------------- ---------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Vestex Capital Corporation (2) 26,068,906 (3)(4)(5) 44.7% 16,068,906 (3)(5) 33.2%
Brian M. Adley (2) 31,193,906 (3)(4)(5)(6)(7) 53.4% 21,118,906 (3)(5)(6) 43.7%
Franklyn E. Churchill (10) 350,000 (8) * 0 *
M. Rea Brookings (11) 2,070,000 4.3% 2,070,000 4.3%
David F. Herring (11) 2,070,000 4.3% 2,070,000 4.3%
Craig Jackson (12) 107,000 (9) * 27,000 *
Rudolph Peselman (13) 125,000 (7) * 0 *
Directors, Officers and
Executives as a
Group (6 Persons) 35,915,906 (3)(14) 60.9% 25,285,906 (3) 52.3%
</TABLE>
___________________
* Less than one percent (1.0%)
(1) Number of votes of which each person is entitled to cast expressed as a
number and as a percentage of all votes which all stockholders are entitled to
cast at the Meeting; assumes no exercise of stock options.
(2) This stockholder's address is 405 Waltham Street, Suite 314, Lexington,
MA 02173.
(3) Assumes conversion of 500,000 shares of outstanding Series AA Preferred
into a like number of shares of Common Stock.
(4) Includes a Warrant to purchase a total of 10,000,000 shares of Common
Stock held by Vestex Capital Corporation.
(5) Includes approximately 4,150,000 shares that have been reserved under
Warrant Agreements for certain key employees.
(6) Includes all shares owned by Vestex Capital Corporation reported above.
Mr. Adley has sole or shared voting power as to all such shares, but does not
necessarily enjoy any economic benefit from these shares.
(7) Includes 75,000 and 125,000 shares which Mr. Adley and Mr. Peselman,
respectively, are entitled to acquire through the exercise of outstanding stock
options prior to December 1998.
(8) Mr. Churchill is deemed to own 350,000 of these shares by virtue of
options to purchase these shares which are currently exercisable or exercisable
within 60 days from the date of this table. Mr. Churchill has a total of
1,000,000 shares that he is entitled to acquire through the exercise of
incentive stock options from the Company. Also, this figure does not include a
total of 1,500,000 shares that Mr. Churchill is entitled to acquire through the
exercise of a stock purchase warrant by and between Mr. Churchill and Vestex
Capital Corporation.
(9) Mr. Jackson is deemed to own 80,000 of these shares by virtue of stock
options which are currently exercisable or exercisable within 60 days from the
date of this table.
(10) Mr. Churchill maintains a business address at 210 South Street, Boston,
MA 02111.
(11) Ms. Brookings and Mr. Herring maintain a business address at 4382 S.
Moreland Avenue, Conley, GA 30288
(12) Mr. Jackson maintains a business address at 700 Division Street,
Elizabeth, NJ 07201.
(13) Mr. Peselman maintains a business address at 255 Washington Street,
Suite 150, Newton, MA 02158.
Includes 630,000 shares beneficially owned by all current directors and
executive officers as a group based on stock options which are exercisable or
exercisable within 60 days of this table.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company is aware that the following individuals have not filed Form 3,
4 or 5, as may be required: Vestex Capital Corporation, Brian M. Adley, M. Rea
Brookings, Rudolph Peselman and Franklyn E. Churchill. The Company believes
that it is the intent of these individuals to file all appropriate forms by June
11, 1999.
INFORMATION CONCERNING AUDITORS
Based upon the recommendation of its Audit Committee, the Board of
Directors has selected the firm of Metcalf Rice Fricke & Davis as the
independent auditors of the Company for the fiscal year ending December 31,
1999. Metcalf Rice Fricke & Davis has acted in such capacity for the Company
since February 1999. The Company does not anticipate having a representative of
Metcalf Rice Fricke & Davis present at the Meeting.
DEADLINE FOR SUBMISSION OF STOCKHOLDER PROPOSALS
Stockholders may present proposals for inclusion in the 2000 Proxy
Statement provided that such proposals are received by the Clerk of the Company
no later than January 28, 2000 and are otherwise in compliance with applicable
Securities and Exchange Commission regulations.
ADDITIONAL INFORMATION
Accompanying this Proxy Statement is a copy of the Company's Annual Report
on Form 10-KSB for the year ended December 31, 1998. The Annual Report on Form
10-KSB constitutes the Company's Annual Report to its Stockholders for purposes
of Rule 14a-3 under the Securities Exchange Act of 1934.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 and in accordance therewith files reports, proxy statements
and other information with the Securities and Exchange Commission (the
"Commission"). Such reports, proxy statements and other information are
available for inspection and copying at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, DC 20549 at the following regional offices of the Commission:
500 West Madison, 14th Floor, Chicago, Illinois 60661-2511 and 7 World Trade
Center, New York, New York 10048. Copies of such material may be obtained upon
payment of the Commission's customary charges by writing to the Public Reference
Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, DC 20549.
Stockholders who have questions in regard to any aspect of the matters
discussed in this Proxy Statement should contact Peter J. Mullen of the Company
at (617) 368-2700.
<PAGE>
Exhibit A
---------
CHANCELLOR CORPORATION
----------------------
BY-LAWS
-------
Article - General.
Offices.
- --------------
The principal office of the corporation shall be in Boston, Massachusetts.
The corporation may also have offices at such other place or places within or
without Massachusetts as the Board of Directors may from time to time determine
or the business of the corporation may require.
Seal.
- -----------
The seal of the corporation, if any, shall be in the form of a circle
inscribed with the name of the corporation, the year of its incorporation and
the word "Massachusetts". When authorized by the Board of Directors and to the
extent not prohibited by law, a facsimile of the corporate seal may be affixed
or reproduced.
Fiscal Year.
- -------------------
The fiscal year of the corporation shall be the twelve months ending
December 31 of each year.
Article - Stockholders.
Place of Meeting.
- -------------------------
Meetings of stockholders shall be held at the principal office of the
corporation or, to the extent permitted by the Articles of Organization, at such
other place within the United States as the Board of Directors may from time to
time designate.
Annual Meetings.
- -----------------------
The annual meeting of stockholders shall be held within six months after
the end of the fiscal year of the corporation, on such date and at such time as
the Board of Directors may determine, for the purpose of electing a Board of
Directors and transacting such other business as may properly be brought before
such meeting. At the annual meeting any business may be transacted whether or
not the notice of such meeting shall have contained a reference thereto, except
where such a reference is required by law, the Articles of Organization or these
By-laws. If the annual meeting is not held on the date determined in accordance
with this Section, a special meeting in lieu of the annual meeting may be held
with all the force and effect of an annual meeting.
Special Meetings.
- ------------------------
Special meetings of stockholders may be called by the President or by the
Board of Directors, and shall be called by the Clerk or, in case of death,
absence, incapacity or refusal of the Clerk, by any other officer, upon written
application of one or more stockholders who hold at least forty per cent (40%)
interest of the capital stock entitled to vote at the meeting. At any special
meeting only business to which a reference shall have been contained in the
notice of such meeting may be transacted.
Notice of Meetings.
- ---------------------------
Written or printed notice of each meeting of stockholders, stating the
place, date and hour and the purposes of the meeting shall be given by the Clerk
or other officer calling the meeting at least seven days, but not more than
sixty days, before the meeting to each stockholder entitled to vote at the
meeting or entitled to such notice by leaving such notice with him at his
residence or usual place of business or by mailing it, postage prepaid, and
addressed to the stockholder at his address as it appears in the records of the
corporation. No notice need be given to any stockholder if he, or his
authorized attorney, waives such notice by a writing executed before or after
the meeting and filed with the records of the meeting or by his presence, in
person or by proxy, at the meeting. Any person authorized to give notice of any
such meeting may make affidavit of such notice, which, as to the facts therein
stated, shall be conclusive. It shall be the duty of every stockholder to
furnish to the Clerk of the corporation or to the transfer agent, if any, of the
class of stock owned by him, his current post office address.
Quorum.
- -------------
At all meetings of stockholders the holders of a majority in interest of
all capital stock entitled to vote at such meeting or, if two or more classes of
stock are issued, outstanding and entitled to vote as separate classes, a
majority in interest of each class, present in person or represented by proxy,
shall constitute a quorum. The announcement of a quorum by the officer
presiding at the meeting shall constitute a conclusive determination that a
quorum is present. The absence of such an announcement shall have no
significance. Shares of its own stock held by the corporation or held for its
use and benefit shall not be counted in determining the total number of shares
outstanding at any particular time. If a quorum is not present or represented,
the stockholders present or represented and entitled to vote at such meeting, by
a majority vote, may adjourn the meeting from time to time, without notice other
than announcement at the meeting until a quorum is present or represented. At
any adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted if the meeting had
been held as originally called. The stockholders present at a duly organized
meeting may continue to transact business until adjournment notwithstanding the
withdrawal of one or more stockholders so as to leave less than a quorum.
Voting.
- -------------
Except as otherwise provided by law or the Articles of Organization, at all
meetings of stockholders each stockholder shall have one vote for each share of
stock entitled to vote and registered in his name and a proportionate vote for a
fractional share. Any stockholder may vote in person or by proxy dated not more
than six months prior to the meeting and filed with the Clerk of the meeting.
Every proxy shall be in writing, subscribed by a stockholder or his authorized
attorney-in-fact, and dated. A proxy with respect to stock held in the name of
two or more persons shall be valid if executed by any one of them unless at or
prior to exercise of the proxy the corporation receives a specific written
notice to the contrary from any one of them. No proxy shall be valid after the
final adjournment of the meeting. Voting on all matters, including the election
of directors, shall be by voice vote unless voting by ballot is requested by any
stockholder. At all meetings of stockholders, any matter put to a vote of
stockholders shall be determined by a vote of a majority of the shares voting on
such matter, or, if two or more classes of stock are entitled to vote as
separate classes on such matter, a vote of a majority of the shares voting of
each class, present in person or represented by proxy, except (i) where a larger
vote is required by law, the Articles of Organization or these By-Laws, or (ii)
in the case of elections of directors by stockholders, which shall be decided by
a vote of a plurality of shares so voting. The corporation shall not, directly
or indirectly, vote shares of its own stock.
Inspectors of Election.
- -------------------------------
One or more inspectors may be appointed by the Board of Directors before or
at each meeting of stockholders, or, if no such appointment shall have been
made, the presiding officer may make such appointment at the meeting. At the
meeting for which they are appointed, such inspectors shall open and close the
polls, receive and take charge of the proxies and ballots, and decide all
questions touching on the qualifications of voters, the validity of proxies and
the acceptance and rejection of votes. If any inspector previously appointed
shall fail to attend or refuse or be unable to serve, the presiding officer
shall appoint an inspector in his place.
Action Without Meeting.
- -------------------------------
Any action which may be taken by stockholders may be taken without a
meeting if all stockholders entitled to vote on the matter consent to the action
in writing and the written consents are filed with the records of the meetings
of stockholders. Such consents shall be treated for all purposes as a vote at a
meeting.
Article - Directors.
Powers.
- -------------
Except as otherwise provided by law, the Articles of Organization or these
By-laws, the business of the corporation shall be managed by a Board of
Directors who may exercise all the powers of the corporation.
Number, Election and Term of Office.
- -----------------------------------------------
The Board of Directors shall consist of not less than three directors nor
more than thirteen directors. Within the limits specified, the number of
directors shall be determined (i) by a vote of the stockholders at the annual
meeting, or (ii) by a vote of the stockholders at a special meeting called for
the purpose by the Board of Directors, or (iii) by vote of the Board of
Directors. Except for the initial directors and except as provided in 3.14,
the directors shall be elected at the annual meeting of the stockholders or at a
special meeting. All directors shall hold office until the following annual
meeting or special meeting in lieu of the annual meeting and until their
successors are chosen and qualified.
Place of Meetings.
- --------------------------
Meetings of the Board of Directors may be held at any place within or
without the Commonwealth of Massachusetts.
Annual Meetings.
- -----------------------
A meeting of the Board of Directors for the election of officers and the
transaction of general business shall be held each year beginning in 1999, at
the place of and immediately after the final adjournment of the annual meeting
of stockholders or the special meeting in lieu of the annual meeting. No notice
of such annual meeting need be given.
Regular Meetings.
- ------------------------
Regular meetings of the Board of Directors may be held, without notice, at
such time and place as the Board of Directors may determine. Any director not
present at the time of the determination shall be advised, in writing, of any
such determination.
Special Meetings.
- ------------------------
Special meetings of the Board of Directors, including meetings in lieu of
the annual or regular meetings, may be held upon notice at any time upon the
call of the President and shall be called by the President or the Clerk or, in
case of the death, absence, incapacity or refusal of the Clerk, by any other
officer, upon written application, signed by any two directors, stating the
purpose of the meeting.
Notice of Meetings.
- ---------------------------
Wherever notice of any meetings of the Board of Directors is required by
these By-laws or by vote of the Board of Directors, such notice shall state the
place, date and hour of the meeting and shall be given to each director by the
President, Clerk or other officer calling the meeting at least two days prior to
such meeting if given in person by telephone or by telecopier or at least four
days prior to such meeting if given by mail. Notice shall be deemed to have
been duly given, if by mail, by depositing the notice in the post office as a
first class letter, postage prepaid, or, if by telecopier, by completing the
telecopier transmission and receiving an answer-back, the letter or telecopy
being addressed to the director at his last known mailing address or telecopy
number as it appears on the books of the corporation. No notice need be given
to any director who waives such notice by a writing executed before or after the
meeting and filed with the records of the meeting or by his attendance at the
meeting without protesting at or before the commencement of the meeting the lack
of notice to him. No notice of adjourned meetings of the Board of Directors
need be given.
Quorum.
- -------------
At all meetings of the Board of Directors, a majority of the directors then
in office shall constitute a quorum. If a quorum is not present, those present
may adjourn the meeting from time to time until a quorum is obtained. At any
adjourned meeting at which a quorum shall be present, any business may be
transacted which might have been transacted if the meeting had been held as
originally called.
Voting.
- -------------
At any meeting of the Board of Directors, the vote of a majority of those
present shall decide any matter except as otherwise provided by law, the
Articles of Organization or these By-laws.
Action Without Meeting.
- --------------------------------
Any action which may be taken at any meeting of the Board of Directors may
be taken without a meeting if all the directors consent to the action in writing
and the written consents are filed with the records of the meetings of the Board
of Directors. Such consents shall be treated for all purposes as a vote at a
meeting.
Meetings by Telephone Conference Calls.
- --------------------------------------------------
Directors or members of any committee designated by the Board of Directors
may participate in a meeting of the Board of Directors or such committee by
means of a conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other at the same
time and participation by such means shall constitute presence in person at a
meeting.
Resignations.
- --------------------
Any director may resign by giving written notice to the President or Clerk.
Such resignation shall take effect at the time or upon the event specified
therein, or, if none is specified, upon receipt. Unless otherwise specified in
the resignation, its acceptance shall not be necessary to make it effective.
Removal.
- ---------------
A director may be removed from office with or without cause by vote of the
holders of a majority in interest of the stock entitled to vote in the election
of such director and may be removed from office with cause by vote of a majority
of the directors then in office. A director may be removed for cause only after
reasonable notice and opportunity to be heard before the body proposing to
remove him.
Vacancies.
- -----------------
In the event of a vacancy in the Board of Directors, by reason of an
enlargement of the Board of Directors or otherwise, the remaining directors, by
majority vote, may elect a director to fill such vacancy and may exercise the
powers of the full Board of Directors until the vacancy is filled, provided
--------
however, that if the vacancy in the Board of Directors is that of a director
elected by a particular class of preferred stockholders, such preferred
stockholders shall have the right to fill the vacancy. Vacancies in the Board
of Directors may be filled only by election of a Director to fill such vacancy
in accordance with this Section 3.14.
Compensation of Directors.
- -----------------------------------
Directors may be paid such compensation for their services and such
reimbursement for expenses of attendance at meetings as the Board of Directors
may from time to time determine. No such payment shall preclude any director
from serving the corporation in any other capacity and receiving compensation
therefor.
Committees.
- ------------------
The Board of Directors may, by vote of a majority of the directors then in
office, appoint from their number one or more committees and delegate to such
committees some or all of their powers to the extent permitted by law, the
Articles of Organization or these By-laws. Except as the Board of Directors may
otherwise determine, any such committee shall be governed in the conduct of its
business by the rules governing the conduct of the business of the Board of
Directors contained in these By-laws and may, by majority vote of the entire
committee, make other rules for the conduct of its business. The Board of
Directors shall have power at any time to fill vacancies in any such committees,
to change its membership or to discharge the committee.
Issuance of Stock.
- ---------------------------
The Board of Directors shall have power to issue and sell or otherwise
dispose of such shares of the corporation's authorized but unissued capital
stock to such persons and at such times and for such lawful consideration,
including cash, property, services, a debt, note or expenses (except that, in
the case of such stock having a par value, lawful consideration other than a
debt or note of the purchaser must be received to the extent of such par value),
and upon such terms as it shall determine from time to time.
Article - Officers.
Officers.
- ---------------
The officers of the corporation shall consist of a President, a Treasurer,
a Clerk, and such other officers with such other titles as the Board of
Directors may determine, including but not limited to a Chairman of the Board of
Directors, a Secretary, one or more Vice Presidents, Assistant Treasurers and
Assistant Clerks, and Assistant Secretaries. Any officer may be required to
give a bond for the faithful performance of his duties in such form and with
such sureties as the Board of Directors may determine. Any number of offices
may be held by the same person.
Election and Term of Office.
- --------------------------------------
Except for the initial officers and except as provided in 4.10, the
President, Treasurer and Clerk shall be elected by the Board of Directors at its
annual meeting or at the special meeting held in lieu of the annual meeting and
shall hold office until the following annual meeting of the Board of Directors
or the special meeting in lieu of said annual meeting and until their successors
are chosen and qualified. Other officers may be chosen by the Board of
Directors at the annual meeting or any other meeting and shall hold office for
such period as the Board of Directors may prescribe.
President.
- ----------------
Unless the Board of Directors otherwise determines, the President shall be
the chief executive officer of the corporation. He shall have the general
control and management of the corporation's business and affairs. He need not
be a director. Unless there is a Chairman of the Board, the President shall
preside at all meetings of the Board of Directors and of the stockholders.
Vice Presidents.
- -----------------------
The Vice President, or if there be more than one, the Vice Presidents,
shall perform such of the duties of the President on behalf of the corporation
as may be respectively assigned to him or them from time to time by the Board of
Directors or the President. The Board of Directors may designate a Vice
President as the Executive Vice President, and in the absence or inability of
the President to act, such Executive Vice President shall have and possess all
of the powers and discharge all of the duties of the President, subject to the
control of the Board of Directors.
Treasurer and Assistant Treasurer.
- -------------------------------------------
The Treasurer shall be the principal financial officer of the corporation.
He shall have custody and control over all funds and securities of the
corporation, maintain full and adequate accounts of all moneys received and paid
by him on account of the corporation and, subject to the control of the Board of
Directors, discharge all duties incident to the office of Treasurer. Any
Assistant Treasurer shall perform such of the duties of the Treasurer and such
other duties as the Board of Directors, the President or the Treasurer may
designate. The Treasurer shall have authority, in connection with the normal
business of the corporation, to sign contracts, bids, bonds, powers of attorney
and other documents when required.
Clerk and Assistant Clerk.
- -----------------------------------
The Clerk shall be the principal recording officer of the corporation. He
shall record all proceedings of the stockholders and discharge all duties
incident to the office of Clerk. Unless a Secretary is appointed by the Board
of Directors to perform such duties, the Clerk shall record all proceedings of
the Board of Directors and of any committees appointed by the Board of
Directors. Any Assistant Clerk shall perform such of the duties of the Clerk
and such other duties as the Board of Directors, the President or the Clerk may
designate. In the absence of the Clerk or any Assistant Clerk from any meeting
of stockholders, the Board of Directors or any committee appointed by the Board
of Directors, a Temporary Clerk designated by the person presiding at the
meeting shall perform the duties of the Clerk. The Clerk shall be a resident of
the Commonwealth of Massachusetts unless a resident agent has been appointed by
the corporation pursuant to law to accept service of process.
Secretary and Assistant Secretary.
- -------------------------------------------
If appointed by the Board of Directors, the Secretary shall record all
proceedings of the Board of Directors and discharge all duties incident to the
office of Secretary. Any Assistant Secretary shall perform such of the duties of
the Secretary and such other duties as the Board of Directors, President or
Secretary may designate. The Board of Directors and any committee appointed by
the Board of Directors may appoint a Secretary and one or more Assistant
Secretaries to perform the functions of the Secretary and Assistant Secretary
for such committee.
Resignation.
- ------------------
Any officer may resign by giving written notice to the President or Clerk.
Such resignation shall take effect at the time or upon the event specified
therein, or, if none is specified, upon receipt. Unless otherwise specified in
the resignation, its acceptance shall not be necessary to make it effective.
Removal.
- --------------
An officer may be removed from office with cause, after reasonable notice
and opportunity to be heard, or without cause, in either case, by vote of a
majority of the directors then in office.
Vacancies.
- -----------------
The Board of Directors may fill any vacancy occurring in any office for any
reason and may, in its discretion, leave unfilled for such period as it may
determine any offices other than those of President, Treasurer and Clerk.
Subordinate Officers.
- -----------------------------
The Board of Directors may, from time to time, authorize any officer to
appoint and remove subordinate officers and to prescribe their powers and
duties. The term "subordinate officers" shall in no event include the
President, Treasurer and Clerk.
Compensation.
- --------------------
The Board of Directors may fix the compensation of all officers of the
corporation and may authorize any officer upon whom the power of appointing
subordinate officers may have been conferred to fix the compensation of such
subordinate officers.
Article - Stock.
Stock Certificates.
- --------------------------
Each stockholder shall be entitled to a certificate or certificates of
stock of the corporation in such form as the Board of Directors may from time to
time prescribe. Each certificate shall be duly numbered and entered in the
books of the corporation as it is issued, shall state the holder's name and the
number and the class and the designation of the series, if any, of his shares,
shall be signed by the President or a Vice President and by the Treasurer or an
Assistant Treasurer and may, but need not, be sealed with the seal of the
corporation. If any stock certificate is signed by a transfer agent, or by a
registrar, other than a director, officer or employee of the corporation, the
signatures thereon of the officers may be facsimiles. In case any officer who
has signed or whose facsimile signature has been placed on any certificate shall
have ceased to be such officer before such certificate is issued, it may
nevertheless be issued by the corporation and delivered with the same effect as
if he were such officer at the time of its issue. Every certificate of stock
which is subject to any restriction on transfer pursuant to the Articles of
Organization, the By-laws or any agreement to which the corporation is a party,
shall have the restrictions noted conspicuously on the certificate and shall
also set forth on the face or back of the certificate either (i) the full text
of the restriction, or (ii) a statement of the existence of such restriction and
a statement that the corporation will furnish a copy thereof to the holder of
such certificate upon written request and without charge. Every certificate
issued at a time when the corporation is authorized to issue more than one class
or series of stock shall set forth upon the face or back of the certificate
either (i) the full text of the preferences, voting powers, qualifications and
special and relative rights of the shares of each class and series, if any,
authorized to be issued, as set forth in the Articles of Organization or (ii) a
statement of the existence of such preferences, powers, qualifications and
rights, and a statement that the corporation will furnish a copy thereof to the
holder of such certificate upon written request and without charge.
Transfer of Stock.
- --------------------------
Subject to any transfer restrictions then in force, the shares of stock of
the corporation shall be transferable only upon its books by the holders thereof
in person or by their duly authorized attorneys or legal representatives. Such
transfer shall be effected by delivery of the old certificate, together with a
duly executed assignment and power to transfer endorsed thereon or attached
thereto and with such proof of the authenticity of the signature and such proof
of authority to make the transfer as the corporation or its agents may
reasonably require, to the person in charge of the stock and transfer books and
ledgers or to such other person as the Board of Directors may designate, who
shall thereupon cancel the old certificate and issue a new certificate. The
corporation may treat the holder of record of any share or shares of stock as
the owner of such stock, and shall not be bound to recognize any equitable or
other claim to or interest in such share on the part of any other person,
whether or not it shall have notice thereof, express or otherwise.
Fixing Date for Determination of Stockholders' Rights.
- ------------------------------------------------------------------
The Board of Directors may fix in advance a time, not exceeding sixty days
preceding the date of any meeting of stockholders, or the date for the payment
of any dividend or the making of any distribution to stockholders, or the date
for the allotment of rights, or the date when any change or conversion or
exchange of capital stock shall go into effect, or the last date on which the
consent or dissent of stockholders may be effectively expressed for any purpose,
as the record date for determining the stockholders entitled to notice of, and
to vote at, such meeting and any adjournment thereof, to receive such dividend
or distribution, to receive such allotment of rights, or to exercise the rights
in respect of any such change, conversion or exchange of capital stock, or to
express such consent or dissent. In such case only stockholders of record on
the date so fixed shall have such right, notwithstanding any transfer of stock
on the books of the corporation after the record date. In lieu of fixing such
record date, the Board of Directors may close the stock transfer books for all
or any part of such period. In any case in which the Board of Directors does
not fix a record date or provide for the closing of the transfer books, the
record date shall be the thirtieth day next preceding the date of such meeting,
the dividend payment or distribution date, the date for allotment of rights, the
date for exercising of rights in respect of any such change, conversion or
exchange of capital stock, or the date for expressing such consent or dissent,
as the case may be.
Lost, Mutilated or Destroyed Certificates.
- ----------------------------------------------------
No certificates for shares of stock of the corporation shall be issued in
place of any certificate alleged to have been lost, mutilated or destroyed,
except upon production of such evidence of the loss, mutilation or destruction
and upon indemnification of the corporation and its agents to such extent and in
such manner as the Board of Directors may prescribe and as required by law.
Article - Miscellaneous Management Provisions.
--------------------------------------------------
Execution of Instruments.
- ---------------------------------
Except as otherwise provided in these By-laws or as the Board of Directors
may generally or in particular cases authorize the execution thereof in some
other manner, all instruments, documents, deeds, leases, transfers, contracts,
bonds, notes, checks, drafts and other obligations made, accepted or endorsed by
the corporation shall be signed by the President or a Vice President, or by the
Treasurer or an Assistant Treasurer, or by the Clerk. Facsimile signatures may
be used in the manner and to the extent authorized generally or in particular
cases by the Board of Directors.
Corporate Records.
- -------------------------
The original, or attested copies, of the Articles of Organization, By-laws,
and records of all meetings of incorporators and stockholders, and the stock and
transfer records, which shall contain the names of all stockholders and the
record address and the amount of stock held by each, shall be kept in the
Commonwealth of Massachusetts at the principal office of the corporation, or at
an office of its Clerk, its resident agent or its transfer agent. The copies
and records need not all be kept in the same office. They shall be available at
all reasonable times for inspection by any stockholder for any proper purpose.
They shall not be available for inspection to secure a list of stockholders or
other information for the purpose of selling such list or information or copies
thereof or of using the same for a purpose other than in the interest of the
applicant, as a stockholder, relative to the affairs of the corporation.
Voting of Securities owned by this Corporation.
- -----------------------------------------------------------
Subject always to the specific directions of the Board of Directors, (i)
any shares or other securities issued by any other corporation and owned or
controlled by this corporation may be voted in person at any meeting of security
holders of such other corporation by the President of this corporation if he is
present at such meeting, or in his absence by the Treasurer of this corporation
if he is present at such meeting, and (ii) whenever, in the judgment of the
President, it is desirable for this corporation to execute a proxy or written
consent in respect to any shares or other securities issued by any other
corporation and owned by this corporation, such proxy or consent shall be
executed in the name of this corporation by the President, without the necessity
of any authorization by the Board of Directors, affixation of corporate seal or
countersignature or attestation by another officer, provided that if the
President is unable to execute such proxy or consent by reason of sickness,
absence from the United States or other similar cause, the Treasurer may execute
such proxy or consent. Any person or persons designated in the manner above
stated as the proxy or proxies of this corporation shall have full right, power
and authority to vote the shares or other securities issued by such other
corporation and owned by this corporation the same as such shares or other
securities might be voted by this corporation.
Interested Transactions.
- -------------------------------
No contract or other transaction of this corporation with any other person,
corporation, association, or partnership shall be affected or invalidated by the
fact that (i) this corporation is a stockholder or partner in such other
corporation, association, or partnership, or (ii) any one or more of the
officers or directors of this corporation is an officer, director or partner of
such other corporation, association or partnership, or (iii) any officer or
director of this corporation, individually or jointly with others, is a party to
or is interested in such contract or transaction. Any director of this
corporation may be counted in determining the existence of a quorum at any
meeting of the board of directors for the purpose of authorizing or ratifying
any such contract or transaction, and may vote thereon, with like force and
effect as if he or she were not so interested or were not an officer, director,
or partner of such other corporation, association, or partnership.
Article - Indemnification.
Right to Indemnification.
- ---------------------------------
The corporation shall indemnify and hold harmless each person who was or is
a party or is threatened to be made a party to or is otherwise involved in any
threatened, pending or completed action, suit, proceeding or investigation,
whether civil, criminal or administrative (a "Proceeding"), by reason of being,
having been or having agreed to become, a director or officer of the
corporation, or serving, having served or having agreed to serve, at the request
of the corporation, as a director or officer of, or in a similar capacity with,
another organization or in any capacity with respect to any employee benefit
plan (any such person being referred to hereafter as an "Indemnitee"), or by
reason of any action alleged to have been taken or omitted in such capacity,
against all expense, liability and loss (including without limitation reasonable
attorneys' fees, judgments, fines, "ERISA" excise taxes or penalties) incurred
or suffered by the Indemnitee or on behalf of the Indemnitee in connection with
such Proceeding and any appeal therefrom, unless the Indemnitee shall have been
adjudicated in such Proceeding not to have acted in good faith in the reasonable
belief that his or her action was in the best interest of the corporation or, to
the extent such matter relates to service with respect to an employee benefit
plan, in the best interests of the participants or beneficiaries of such
employee benefit plan. Notwithstanding anything to the contrary in this
Article, except as set forth in 7.6 below, the corporation shall not indemnify
or advance expenses to an Indemnitee seeking indemnification in connection with
a Proceeding (or part thereof) initiated by the Indemnitee, unless the
initiation thereof was approved by the Board of Directors of the corporation.
Settlements.
- ------------------
Subject to compliance by the Indemnitee with the applicable provisions of
7.5 below, the right to indemnification conferred in this Article shall include
the right to be paid by the corporation for amounts paid in settlement of any
such Proceeding and any appeal therefrom, and all expenses (including attorneys'
fees) incurred in connection with such settlement, pursuant to a consent decree
or otherwise, unless it is held or determined pursuant to 7.5 below that the
Indemnitee did not act in good faith in the reasonable belief that his or her
action was in the best interest of the corporation or, to the extent such matter
relates to service with respect to an employee benefit plan, in the best
interests of the participants or beneficiaries of such employee benefit plan.
Notification and Defense of Proceedings.
- --------------------------------------------------
The Indemnitee shall notify the corporation in writing as soon as
reasonably practicable of any Proceeding involving the Indemnitee for which
indemnity or advancement of expenses is intended to be sought. Any omission so
to notify the corporation shall not relieve it from any liability that it may
have to the Indemnitee under this Article unless, and only to the extent that,
such omission results in the forfeiture of substantive rights or defenses by the
corporation. With respect to any Proceeding of which the corporation is so
notified, the corporation shall be entitled, but not obligated, to participate
therein at its own expense and/or to assume the defense thereof at its own
expense, with legal counsel reasonably acceptable to the Indemnitee, except as
provided in the last sentence of this 7.3. After notice from the corporation
to the Indemnitee of its election so to assume such defense (subject to the
limitations in the last sentence of this 7.3), the corporation shall not be
liable to the Indemnitee for any fees and expenses of counsel subsequently
incurred by the Indemnitee in connection with such Proceeding, other than as
provided below in this 7.3. The Indemnitee shall have the right to employ his
or her own counsel in connection with such Proceeding, but the fees and expenses
of such counsel incurred after notice from the corporation of its assumption of
the defense thereof at its expense with counsel reasonably acceptable to
Indemnitee shall be at the expense of the Indemnitee unless (i) the employment
of counsel by the Indemnitee at the corporation's expense has been authorized by
the corporation, (ii) counsel to the Indemnitee shall have reasonably concluded
that there may be a conflict of interest or position on any significant issue
between the corporation and the Indemnitee in the conduct of the defense of such
action or (iii) the corporation shall not in fact have employed counsel
reasonably acceptable to the Indemnitee to assume the defense of such Proceeding
within a reasonable time after receiving notice thereof, in each of which cases
the fees and expenses of counsel for the Indemnitee shall be at the expense of
the corporation, except as otherwise expressly provided by this Article. The
corporation shall not be entitled, without the consent of the Indemnitee, to
assume the defense of any Proceeding brought by or in the right of the
corporation or as to which counsel for the Indemnitee shall have reasonably made
the conclusion provided for in clause (ii) above.
Advancement of Expenses.
- --------------------------------
Except as provided in 7.3 of this Article, as part of the right to
indemnification granted by this Article, any expenses (including attorneys'
fees) incurred by an Indemnitee in defending any Proceeding within the scope of
7.1 of this Article or any appeal therefrom shall be paid by the corporation in
advance of the final disposition of such matter, provided, however, that the
payment of such expenses incurred by an Indemnitee in advance of the final
disposition of such matter shall be made only upon receipt of a written
undertaking by or on behalf of the Indemnitee to repay all amounts so advanced
in the event that it shall ultimately be determined that the Indemnitee is not
entitled to be indemnified by the corporation as authorized by 7.1 or 7.2 of
this Article. Such undertaking need not be secured and shall be accepted
without reference to the financial ability of the Indemnitee to make such
repayment. Such advancement of expenses shall be made by the corporation
promptly following its receipt of written requests therefor by the Indemnitee,
accompanied by reasonably detailed documentation, and of the foregoing
undertaking.
Certain Presumptions and Determinations.
- -------------------------------------------------
If, in a Proceeding brought by or in the right of the corporation, a
director or officer of the corporation is held not liable for monetary damages,
whether because that director or officer is relieved of personal liability under
the provisions of Article 6A of the Articles of Organization of the corporation
or otherwise, that director or officer shall be deemed to have met the standard
of conduct set forth in 7.1 and thus to be entitled to be indemnified by the
corporation thereunder. In any adjudicated Proceeding against an Indemnitee
brought by reason of the Indemnitee's serving, having served or agreed to serve,
at the request of the corporation, an organization other than the corporation in
one or more of the capacities indicated in 7.1, if the Indemnitee shall not
have been adjudicated not to have acted in good faith in the reasonable belief
that the Indemnitee's action was in the best interest of such other
organization, the Indemnitee shall be deemed to have met the standard of conduct
set forth in 7.1 and thus be entitled to be indemnified thereunder. An
adjudication in such a Proceeding that the Indemnitee did not act in good faith
in the reasonable belief that the Indemnitee's action was in the best interest
of such other organization shall not create a presumption that the Indemnitee
has not met the standard of conduct set forth in 7.1. In order to obtain
indemnification of amounts paid in settlement pursuant to 7.2 of this Article,
the Indemnitee shall submit to the corporation a written request, including in
such request such documentation and information as is reasonably available to
the Indemnitee and is reasonably necessary to determine whether and to what
extent the Indemnitee is entitled to such indemnification. Any such
indemnification under 7.2 shall be made promptly, and in any event within 60
days after receipt by the corporation of the written request of the Indemnitee,
unless a court of competent jurisdiction holds within such 60-day period that
the Indemnitee did not meet the standard of conduct set forth in 7.2 or the
corporation determines, by clear and convincing evidence, within such 60-day
period that the Indemnitee did not meet such standard. Such determination shall
be made by the Board of Directors of the corporation, based on advice of
independent legal counsel (who may, with the consent of the Indemnitee, be
regular legal counsel to the corporation). The corporation and the directors
shall be under no obligation to undertake any such determination or to seek any
ruling from any court.
Remedies.
- ---------------
The right to indemnification or advances as granted by this Article shall
be enforceable by the Indemnitee in any court of competent jurisdiction if the
corporation denies such a request, in whole or in part, or, with respect to
indemnification pursuant to 7.2, if no disposition thereof is made within the
60-day period referred to above in 7.5. Unless otherwise provided by law, the
burden of proving that the Indemnitee is not entitled to indemnification or
advancement of expenses under this Article shall be on the corporation. Neither
absence of any determination prior to the commencement of such action that
indemnification is proper in the circumstances because the Indemnitee has met
any applicable standard of conduct, nor an actual determination by the
corporation pursuant to 7.5 that the Indemnitee has not met such applicable
standard of conduct, shall be a defense to the action or create a presumption
that the Indemnitee has not met the applicable standard of conduct. The
Indemnitee's expenses (including reasonable attorneys' fees) incurred in
connection with successfully establishing his or her right to indemnification,
in whole or in part, in any such Proceeding shall also be paid by the
corporation.
Contract Right; Subsequent Amendment.
- ----------------------------------------------
The right to indemnification and advancement of expenses conferred in this
Article shall be a contract right. No amendment, termination or repeal of this
Article or of the relevant provisions of Chapter 156B of the Massachusetts
General Laws or any other applicable laws shall affect or diminish in any way
the rights of any Indemnitee to indemnification or advancement of expenses under
the provisions hereof with respect to any Proceeding arising out of or relating
to any action, omission, transaction or facts occurring prior to the final
adoption of such amendment, termination or repeal, except with the consent of
the Indemnitee.
Other Rights.
- --------------------
The indemnification and advancement of expenses provided by this Article
shall not be deemed exclusive of any other rights to which an Indemnitee seeking
indemnification or advancement of expenses may be entitled under any law (common
or statutory), agreement or vote of stockholders or directors or otherwise, both
as to action in his or her official capacity and as to action in any other
capacity while holding office for the corporation, and shall continue as to an
Indemnitee who has ceased to be a director or officer, and shall inure to the
benefit of the estate, heirs, executors and administrators of the Indemnitee.
Nothing contained in this Article shall be deemed to prohibit, and the
corporation is specifically authorized to enter into, agreements with any
Indemnitee providing indemnification rights and procedures different from those
set forth in the Article.
Partial Indemnification.
- -------------------------------
If an Indemnitee is entitled under any provision of this Article to
indemnification by the corporation for some or a portion of the expenses
(including attorneys' fees), judgments, fines or amounts paid in settlement
actually and reasonably incurred by the Indemnitee or on his or her behalf in
connection with any Proceeding and any appeal therefrom but not, however, for
the total amount thereof, the corporation shall nevertheless indemnify the
Indemnitee for the portion of such expenses (including attorneys' fees),
judgments, fines or amounts paid in settlement to which the Indemnitee is
entitled.
Insurance.
- -----------------
The corporation may purchase and maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of the corporation
or another organization or employee benefit plan against any expense, liability
or loss incurred by such person in any such capacity, or arising out of such
person's status as such, whether or not the corporation would have the power to
indemnify such person against such expense, liability or loss under Chapter 156B
of the Massachusetts General Laws.
Merger or Consolidation.
- ---------------------------------
If the corporation is merged into or consolidated with another corporation
and the corporation is not the surviving corporation, the surviving corporation
shall assume the obligations of the corporation under this Article with respect
to any Proceeding arising out of or relating to any action, omission,
transaction or facts occurring on or prior to the date of such merger or
consolidation.
Savings Clause.
- -----------------------
If this Article or any portion hereof shall be invalidated on any ground by
any court of competent jurisdiction, then the corporation shall nevertheless
indemnify and advance expenses to each Indemnitee as to any expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement in connection
with any Proceeding, including an action by or in the right of the corporation,
to the fullest extent permitted by any applicable portion of this Article that
shall not have been invalidated and to the fullest extent permitted by
applicable law.
Subsequent Legislation.
- -------------------------------
If the Massachusetts General Laws are amended after adoption of this
Article to expand further the indemnification permitted to Indemnitees, then the
corporation shall indemnify such persons to the fullest extent permitted by the
Massachusetts General Laws as so amended.
Indemnification of Others.
- -----------------------------------
The corporation may, to the extent authorized from time to time by its
Board of Directors, grant indemnification rights to employees or agents of the
corporation or other persons serving the corporation who are not Indemnitees,
and such rights may be equivalent to, or greater or less than, those set forth
in this Article.
Article - Amendments.
General.
- --------------
These By-laws may be amended, added to or repealed, in whole or in part,
(i) by vote of the stockholders at a meeting, where the substance of the
proposed amendment is stated in the notice of the meeting, or (ii) by vote of a
majority of the directors then in office, except that no amendment may be made
by the Board of Directors on matters reserved to the stockholders by law or the
Articles of Organization or which changes the provisions of these By-laws
relating to the removal of directors or to the requirements for amendment of
these By-laws. Notice of any amendment, addition or repeal of any By-law by the
Board of Directors stating the substance of such action shall be given to all
stockholders not later than the time when notice is given of the meeting of
stockholders next following such action by the Board of Directors. Any By-law
adopted by the Board of Directors may be amended or repealed by the
stockholders.
