SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 [Fee Required]
For the fiscal year ended May 31, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT
OF 1934 [No Fee Required]
For the transition period from _____ to _______
COMMISSION FILE NUMBER: 0-13187
NOVACON CORPORATION
(Name of small business issuer in its charter)
DELAWARE 13-3074570
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5451 HILLTOP AVENUE NO., SAINT PAUL, MN 55042
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (651) 704-9160
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, $.01 PAR VALUE
(Title of class)
Check whether the issuer (1)has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes[ ] No[X]
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by referenced in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [ ]
The issuer's revenues for the fiscal year ended May 31, 2000 were $89,593.
As of December 20, 2000, 15,000,000 shares of the issuer's Common Stock
were deemed outstanding, and the aggregate market value of the Common Stock of
the issuer (based upon the average of the closing bid and asked prices of the
Common Stock at that date), excluding outstanding shares beneficially owned by
the directors and executive officers was approximately $550,000.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the following document are incorporated herein by reference:
Part III -- The Registrant's Information Statement for its 2000 Annual Meeting
(the "2000 Statement") to the extent specific sections are referred to herein.
Exhibit Index is located at page 35
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
PART I
This Annual Report on Form 10-KSB contains statements that are forward-
looking, including statements relating to anticipated operating results, patent
litigation, financial resources, manufacture, distribution, and the commercial
status of Novacon's existing product lines. Investors are cautioned that,
although Novacon believes that its expectations are based on reasonable
assumptions, forward-looking statements involve risks and uncertainties which
may affect Novacon's business and prospects, including changes in economic and
market conditions, competitive developments, acquisition and maintenance of
strategic alliances and other factors. In addition, Novacon expects the
unfavorable default judgment in a patent infringement litigation will have a
serious adverse material impact on the Company. This judgment has eliminated
Novacon's ability to continue business operations. These risks and
uncertainties include, but are not limited to, Novacon's ability to obtain
sufficient working capital, identify and develop totally new business
opportunities, and the risks and uncertainties described in "Risk Factors" in
this Report.
ITEM 1. DESCRIPTION OF BUSINESS
History, Discontinued Business Operations and Recent Corporate Events
Discontinued Business Operations. Cardiac Pacemaker Business. Novacon
Corporation ("Novacon" or the "Company"), formerly known as Cardio-Pace
Medical, Inc., was organized in April 1981 to develop, manufacture and market
its proprietary Durapulse(tm) cardiac pacemaker and accessory products.
Although the Company achieved sales of its pacemaker medical device and
accessories products, it did not achieve profitability. The Company suspended
manufacturing the cardiac pacemaker in 1990. During 1985, the Company entered
into an agreement with Qinling Semiconductor Company to establish Qinming
Medical, Inc., a Sino-American joint venture in Baoji, China, for the
manufacture and distribution of cardiac pacemakers and accessory products,
which are still manufactured and distributed in China. In 1992 the Company
sold its 49% interest in the joint venture to Qinming.
Drug Infusion Pump Business. Until August 2000 Novacon designed, developed,
manufactured and marketed low-cost, disposable elastomeric infusion pumps for
pain management and was developing other applications for its elastomeric
infusion pump technology. Substantially all of the Company's revenues since
1995 were derived from the sale of elastomeric infusion pumps that were designed
to deliver small quantities of pain medication at a nominally constant flow
rate. Novacon's elastomeric infusion pumps, marketed as the dib(tm) Drug
Infusion Balloon Pump, were authorized by the United States FDA for sale in the
United States for epidural, intravenous and percutaneous infusion of a wide
range of medications, including narcotic and non-narcotic anesthetics,
chemotherapy agents and antibiotics. Novacon Corporation terminated its drug
infusion pump business activity as of August 31, 2000.
Pending Acquisition Terminated. During November 1999 Novacon entered into a
preliminary agreement to acquire a recently organized, international medical
trading company, Santerra Medical Technology, Inc. ("Santerra"). Santerra is a
development stage medical technology trading company specializing in
implantable and interventional medical device products. Primary products
include those for coronary and peripheral vascular disease, heart valve
replacement, orthopedic reconstruction, and minimally invasive surgery.
These products are manufactured by MicroVal, S.A. ("MicroVal") and Fabrique
d'Implants et d'Instruments Chirurgicaux ("Fii"), affiliates of Ste. Francaise
d'Etude et Realisation d'Outillage ("SFERO"), St. Etienne, France. Santerra
operates in a single industry segment --- providing medical device products.
In July 2000, Novacon and Santerra mutually terminated the preliminary
acquisition agreement.
Supply Agreement Breached. On September 1, 1998, the Company entered into a
distribution agreement with its key supplier, DIB International Company, Ltd.,
Tokyo, Japan. The agreement is in effect for a four year period and provides
for minimum purchase quantities by the Company. The Company has breached the
terms of the distribution agreement, but to date, the supplier has not taken
any action against such breach. At this time, management is unaware of the
potential financial effect of its breach.
Innovasive Devices Agreement Terminated. During May 1999 Novacon entered into
an exclusive three year Supply Agreement with Innovasive Devices, Inc. to
furnish its elastomeric infusion pumps for Innovasive Device's post-operative
Freedom(tm) Infusion System in the North, Central and South American markets.
The agreement was annually renewable after its initial term. It required
Innovasive Devices to purchase a minimum of 10,000 infusion pumps in the first
contract year, and annually thereafter an increasing minimum number not less
than 110 percent of the prior year's sales. Innovasive Devices develops,
manufactures and markets medical devices for orthopedic and sports medicine
surgery. On February 11, 2000, Johnson & Johnson Company, through a wholly
owned subsidiary, completed the acquisition of Innovasive Devices, Inc. as
previously announced in November 1999. On March 16, 2000, Mitek Products, the
Johnson & Johnson subsidiary, citing the default judgment against Novacon
described below, and Novacon's breach of representation and warranty regarding
the supply of products free from infringement, terminated the Supply Agreement
with Innovasive Devices.
Letter of Intent to Acquire Your.Net, Inc. Expired. The Company entered into
a letter of intent on September 14, 2000 that contemplated the combination of
Your.Net, Inc., a privately held Minnesota corporation, with the Company. The
parties have recently determined not to proceed in accordance with the terms
of the letter of intent. However, discussions are continuing which could result
in a full or partial stock exchange or merger or other combination between the
Company and Your.Net, Inc. If such a transaction were to occur, it is
contemplated that the Company would issue a newly authorized class of common
shares, $0.001 par value, to the Your.Net, Inc. shareholders in an amount
presently unknown but expected not to exceed 18,000,000 shares. There is no
assurance that any such transaction will be agreed to or occur, and if
consummated, that the terms will not be different from those referred to above.
Patent Litigation and Judgment. On July 23, 1999, Novacon was served with a
complaint filed in the United States District Court, Central District of
California, Santa Ana, California, by I-Flow Corporation alleging various
causes of action for patent interference against Novacon with respect to its
elastomeric infusion pump technology. Novacon took the position that the
California court lacked jurisdiction and elected not to appear. I-Flow
Corporation claimed the dib(tm) Drug Infusion Balloon Pump design violated
its patents and was subsequently awarded damages, legal fees and costs.
Novacon denied the Dib(tm) design infringed any I-Flow patents and regarded
this legal action as strictly anti-competitive. However, Novacon was
financially unable to respond to this lawsuit in California and therefore
I-Flow was granted a final default judgment on May 3, 2000 which awarded
I-Flow Corporation a permanent injunction restraining Novacon from importing,
manufacturing, and selling its dib(tm) Drug Infusion Balloon Pump in the
United States. In addition, I-Flow was awarded damages and costs totaling
$1,344,581. Novacon believes this judgment has had a serious material adverse
effect on its business and financial condition. During October 2000 Novacon
and I-Flow entered into a conditional settlement of the judgment. The
settlement agreement provides that Novacon will pay I-Flow Corporation
$144,000 cash and issue to it 500,000 shares of new Novacon Common Stock
(see Information Statement for detailed information with respect to the
proposed reverse split of Novacon common stock from 15,000,000 shares of
common stock to 1,250,000 shares of Common Stock, $0.001 par value, and the
increase of capital stock to 50,000,000 shares of Common Stock, $0.001 par
value. The settlement agreement provides that payment of the settlement must
be made no later than December 31, 2000 or the agreement becomes null and
void.
Settlement of Company Indebtedness with David P. Lang. In conjunction with
the court judgment in favor of I-Flow Corporation described above, effective
August 31, 2000, the Board of Directors approved the conveyance of all Novacon
Corporation assets (with a book basis of $89,000 at May 31, 2000) to
David P. Lang, Chief Executive Officer, and John D. Lang, Manager, Operations,
in full payment of their accrued, unpaid salaries of $392,711 and full
satisfaction of the indebtedness owing to David P. Lang for his previous loan
of $75,000. In addition, David P. Lang agreed to assume full responsibility
for all Company liabilities, except the settlement damages to I-Flow
Corporation and financial statement audit costs and expenses.
Lapsed Corporate Charter and Revival; Delinquent SEC Periodic Reports.
During 1993 Novacon permitted its Delaware corporate charter to lapse and
suspended filing its periodic reports required under the Securities Exchange
Act of 1934, as amended, since 1996 primarily because of its lack of financial
resources. Novacon revived its Delaware corporate charter on August 20, 1999
and all corporate activities conducted during the interim lapse period were
automatically ratified back to the charter lapse date. Upon holding its annual
stockholders' meeting in January 2001 to elect new directors, Novacon believes
it will be in compliance with the provisions of the Delaware General
Corporation Law.
No Current Business Operations. Novacon currently has no business operations.
Risk Factors
Cautionary Factors That May Affect Future Results. Certain statements
contained in this Annual Report by Novacon do not relate strictly to historical
or current facts. As such, they are considered "forward-looking statements"
which provide current expectations or forecasts of future events. Such
statements can be identified by the use of terminology such as "anticipate,"
"believe," "estimate," "expect," "intend," "may," "could," "possible," "plan,"
"project," "will," "forecast" and similar words or expressions. Novacon's
forward-looking statements generally relate to its business development
strategies, financial results, and business opportunity development. One must
carefully consider forward-looking statements and understand that such
statements involve a variety of risks and uncertainties, known and unknown,
and may be affected by inaccurate assumptions. Consequently, no forward-
looking statement can be guaranteed and actual results may vary materially.
It is not possible to foresee or identify all factors affecting Novacon's
forward-looking statements and investors therefore should not consider any
list of such factors to be an exhaustive statement of all risks, uncertainties
or potentially inaccurate assumptions. Novacon undertakes no obligation to
update any forward-looking statement.
Although it is not possible to create a comprehensive list of all factors
that may cause actual results to differ from Novacon's forward-looking
statements, such factors include, among others, (i) the difficulties and
uncertainties associated with the lengthy and costly process of new business
development such as delays, difficulties or failures in achieving acceptable
agreements and alliances; (ii) business acquisitions, dispositions,
discontinuations or restructurings by Novacon; (iii) the integration of
businesses acquired by Novacon; (iv) Novacon's financial condition; and
(v) economic factors over which Novacon has no control, including changes in
inflation, foreign currency rates and interest rates. More detailed discussions
of many of these factors are including in the following sections.
Novacon notes these factors as permitted by the Private Securities
Litigation Reform Act of 1995:
Risks Relating to Novacon
Substantial, Continuing Operating Losses. Novacon has incurred losses
for the fiscal years ended May 31, 2000, 1999, 1998, 1997 and 1996 in the
amounts of $1,545,271, $135,672, $115,034, $132,526 and $95,229, respectively,
and there is no assurance that substantial operating losses will not continue
indefinitely. As of May 31, 2000, Novacon has incurred an accumulated deficit
since its inception of $10,458,791. Consequently, there can be no assurance
that Novacon will achieve profitable operations. In the event Novacon is
unable to eliminate continuing operating losses and acquire substantial new
working capital, for which there can be no assurance, Novacon's business
operations will cease and its stockholders will lose their entire investment.
No Financial Resources. Effective August 31, 2000 Novacon has no financial
resources and an outstanding judgment against it related to the patent
infringement litigation previously described. Moreover, Novacon has no
current business operations to generate revenues and there can be no assurance
that Novacon will obtain any financial resources or achieve any business
operations. Moreover, if Novacon achieves any business operations there can be
no assurance that such operations will generate revenues or that such
operations will be profitable.
Working Capital Deficit. As of the fiscal year ended May 31, 2000,
Novacon had a stockholders' deficit of $1,842,128. At that date, the company's
liabilities were $1,931,690 and its assets were $89,562. Although $392,711 of
the company's debt represented accrued salaries payable to David P. Lang, Chief
Executive Officer, and his son John D. Lang, Novacon had a working capital
deficit of $1,847,316. Novacon immediately requires substantial working capital
for which there is no assurance. In the event Novacon is unable to acquire
substantial new working capital, Novacon's business operations will cease and
its stockholders will lose their entire investment.
Patent Litigation Judgment. On May 3, 2000 I-Flow Corporation was granted a
permanent injunction restraining Novacon from importing, manufacturing, and
selling its dib(tm) Drug Infusion Balloon Pump in the United States. In
addition, I-Flow was awarded damages and costs totaling $1,344,581. Although
Novacon and I-Flow Corporation have entered into a settlement agreement whereby
Novacon has agreed to pay I-Flow $144,000 cash and issue to it 500,000 shares
of new Novacon Common Stock, Novacon currently does not have sufficient funds
to make the cash payment nor has it accomplished the corporate restructuring in
order to issue the shares. Moreover, the settlement agreement provides that
payment of the settlement must be made no later than December 31, 2000 or the
agreement becomes null and void. Consequently, there is no assurance that
Novacon will be able to satisfy the I-Flow judgment. In the event that Novacon
is unable to pay and satisfy the I-Flow judgment, Novacon expects to cease its
existence.
Dividends Not Likely. Novacon has not paid any dividends on its capital
stock since its incorporation and does not intend to pay any cash dividends in
the foreseeable future.
Suspension Of Trading of Company Common Stock. Novacon suspended filing
its periodic reports required under the Securities Exchange Act of 1934, as
amended, since 1996 primarily because of its lack of financial resources. The
SEC may initiate investigation or commence enforcement proceedings against the
company and its management for violation of the periodic reporting
requirements. Any such action undertaken by the SEC could result in the
imposition of fines or suspension of trading of the company's Common Stock.
Limited Public Trading Market And No Assurance Of Ability To Resell
Company Common Stock: There is no assurance that any public market for the
company's Common Stock will not be volatile. There have been periods of extreme
fluctuation in the stock markets that, in many cases, were unrelated to the
operating performance of, or announcements concerning, the issuers of the
affected securities. Securities of issuers having relatively limited
capitalization or securities recently offered in a public offering or being
publicly traded are particularly susceptible to change based on short-term
trading strategies of certain investors. Accordingly, there can be no
assurance that stockholders will be able to resell the shares of company
Common Stock at
any price.
Although Novacon's Common Stock is eligible for public trading, it may
be relevant for company stockholders that Novacon's Common Stock be eligible
for inclusion on the NASDAQ Small-Cap Market(r). Under the current adopted
rules of the National Association of Securities Dealers, Inc. ("NASD"), in
order to qualify for initial quotation of securities on NASDAQ, a company,
among other things, must have at least $4,000,000 in total assets, 1,000,000
shares in the public float, $5,000,000 in market value of public float and a
minimum bid of $5.00 per share. For continued listing, a company, among other
things, must have $2,000,000 in total assets, 500,000 shares in the public
float, $1,000,000 in market value of public float and a minimum bid price of
$1.00 per share.
Generally, holders of securities not eligible for NASDAQ Small-Cap
Market(r) inclusion may have difficulty in selling their securities should
they desire to do so. In such event, due to the low price of the securities,
many brokerage firms will not effect transactions in such securities and it is
unlikely that any bank or financial institution will accept such securities as
collateral, which would have an adverse effect in developing or sustaining any
market for such securities.
The SEC has adopted regulations which generally define "penny stock" to
be
any equity security that has a market price (as defined) less than $5.00 per
share or an exercise price less than $5.00 per share, subject to certain
exceptions. During periods when Novacon's Common Stock does not qualify for
inclusion on the NASDAQ Small-Cap Market or is removed therefrom, the Common
Stock may become subject to rules that impose additional sales practice
requirements on broker-dealers who sell such securities to persons other than
established customers and accredited investors (generally those with assets in
excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together
with their spouse). For transactions covered by these rules, the broker
dealer must make a special suitability determination for the purchase of such
securities and have received the purchaser's written consent to the transaction
prior to the purchase. Additionally, for any transaction involving a penny
stock, unless exempt, the rules require the delivery, prior to the transaction,
of a disclosure schedule prepared by the SEC relating to the penny stock
market. The broker-dealer also must disclose the commissions payable to both
the broker dealer and the registered representative, current quotations for
the securities and, if the broker-dealer is the sole market-maker, the
broker-dealer must disclose this fact and the broker-dealer's presumed control
over the market. Finally, monthly statements must be sent disclosing recent
price information for the penny stock held in the account and information on
the limited market in penny stocks. Consequently, the "penny stock" rules
may restrict the ability of broker-dealers to sell Novacon's securities and
may affect the ability of company stockholders to sell such securities in the
secondary market.
Recently, the SEC has proposed regulations which, if adopted, will
impose additional sales practice requirements on broker-dealers who sell
securities whose issuers are not subject to the periodic reporting requirements
of the Securities Exchange Act of 1934, as amended. For transactions covered
by these proposed rules, the broker dealer must undertake special actions with
respect to the market of such stocks. Consequently, these proposed rules may
restrict the ability of broker-dealers to sell Novacon's securities and may
affect the ability of purchasers to sell their shares in the secondary market.
Business Strategy
Novacon's primary business goal is to effect a combination with an existing
company with business operations. Novacon entered into a letter of intent on
September 14, 2000 that contemplated the combination of Your.Net, Inc., a
privately-held Minnesota corporation, with the Company. The parties have
recently determined not to proceed in accordance with the terms of the letter
of intent and it expired. However, discussions are continuing which could
result in a full or partial stock exchange or merger or other combination
between the Company and Your.Net, Inc. If such a transaction were to occur,
it is contemplated that the Company would issue a newly authorized class of
common shares, $0.001 par value, to the Your.Net, Inc. shareholders in an
amount presently unknown but expected not to exceed 18,000,000 shares. There
is no assurance that any such transaction will be agreed to or occur, and if
consummated, that the terms will not be different from those referred to
above.
Employees
As of December 20, 2000, Novacon employed one full-time person,
David P. Lang, Chief Executive Officer and President, and one part-time
employee, John D. Lang, Manager, Operations.
ITEM 2. DESCRIPTION OF PROPERTY
Novacon leases approximately 500 square feet of administrative office
space in Lake Elmo, Minnesota, from David P. Lang, Novacon's Chief Executive
Officer, on a $700 monthly rental basis. Novacon believes its space
requirements for the foreseeable future are adequate.
ITEM 3. LEGAL PROCEEDINGS
On July 23, 1999, Novacon was served with a complaint filed in the United
States District Court, Central District of California, Santa Ana, California,
by I-Flow Corporation alleging various causes of action for patent interference
against Novacon with respect to its elastomeric infusion pump technology.
Novacon took the position that the California court lacked jurisdiction and
elected not to appear. I-Flow Corporation claimed the dib(tm) Drug Infusion
Balloon Pump design violated its patents and was subsequently awarded damages,
legal fees and costs. Novacon denied the Dib(tm) design infringed any I-Flow
patents and regarded this legal action as strictly anti-competitive. However,
Novacon was financially unable to respond to this lawsuit in California and
therefore I-Flow was granted a final default judgment on May 3, 2000 which
awarded I-Flow Corporation a permanent injunction restraining Novacon from
importing, manufacturing, and selling its dib(tm) Drug Infusion Balloon Pump
in the United States. In addition, I-Flow was awarded damages and costs
totaling $1,344,581. Novacon believes this judgment has had a serious
material adverse effect on its business and financial condition. During
October 2000 Novacon and I-Flow entered into a conditional settlement of the
judgment. The settlement agreement provides that Novacon will pay I-Flow
Corporation $144,000 cash and issue to it 500,000 shares of new Novacon Common
Stock (see Information Statement for detailed information with respect to the
proposed reverse split of Novacon common stock from 15,000,000 shares of common
stock to 1,250,000 shares of Common Stock, $0.001 par value, and the increase
of capital stock to 50,000,000 shares of Common Stock, $0.001 par value. The
settlement agreement provides that payment of the settlement must be made no
later than December 31, 2000 or the agreement becomes null and void.
Novacon is not presently a party to any other material pending legal
proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is traded on the OTC Pink Sheets market under the
symbol "NVCN". Novacon common stock began trading publicly in January, 1985
on the NASDAQ Small Cap following its initial public stock offering. Trading
in the Company's common stock was de-listed to the NASDAQ OTCBB
(Bulletin Board) in 1987. In February, 2000, due to filing Forms 10-KSB
without audited financial statements, trading in the Company's common stock
was referred from the OTCBB (Bulletin Board) to OTC Pink Sheet quotations.
The following table shows for the period indicated the high and low quotations
per share of common stock. These Pink Sheet quotations reflect inter-dealer
prices, without retail mark-up, mark-down or commissions and may not
necessarily represent actual transactions.
Common Stock
HIGH LOW
2000
Fourth Quarter Ended May 31, 2000......................... $ .05 .04
Third Quarter Ended February 28 2000...................... .09 .05
Second Quarter Ended November 30, 1999.................... .20 .09
First Quarter Ended August 30, 1999....................... .45 .03
1999
Fourth Quarter Ended May 31, 1999......................... $ .05 .03
Third Quarter Ended February 28, 1999..................... .04 .02
Second Quarter Ended November 30,1998..................... .03 .01
First Quarter Ended August 30, 1998....................... .03 .01
Record Holders
The last reported sale price of the Common Stock on the Nasdaq Bulletin
Board on December 1, 2000 was $0.05. As of December 1, 2000, there were
approximately 1,235 stockholders of record of the Company's Common Stock.
Dividends
Novacon has never declared or paid any cash dividends on its Common
Stock. Novacon currently intends to retain all available funds for use in its
business and therefore does not anticipate paying any cash dividends in the
foreseeable future. Any future determination relating to dividend policy will
be made in the discretion of the Board of Directors of the Company and will
depend on a number of factors, including the future earnings, capital
requirements, financial condition and future prospects of Novacon and such
other factors as the Board of Directors may deem relevant.
Sales of Unregistered Securities
On November 25, 1999, Novacon sold 2,927,096 shares of its Common Stock to
David P. Lang for approximately $78,760 and 1,000,000 shares to John D. Lang
for $26,500, both in payment of accrued salaries. Upon completion of the
transaction, David P. Lang owned 3,957,074 shares, or approximately 27% of the
outstanding shares of Common Stock, and John D. Lang owned 1,090,000 shares,
or approximately 7% of the Common Stock of Novacon. Novacon relied upon
Section 4(6) of the Securities Act of 1933, as amended, and Regulation D
promulgated thereunder, in effecting these sales of unregistered securities.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
General
Novacon has been in the business of designing, developing, manufacturing, and
marketing of disposable elastomeric infusion pumps for pain management and
other developing infusion therapies. Substantially all the Company's product
revenues since 1994 have been generated by sales of these infusion pumps.
The Company's series of Dib(tm), Ranger(tm) and Freedom(tm) infusion
pumps are FDA authorized for full commercial distribution in the United States
and are indicated for a wide range of epidural, intravenous and subcutaneous
infusion of drugs. These indications include obstetrical anesthesia (labor &
delivery), post-operative and chronic pain management, morphine trials,
chemotherapies, and antibiotic infusions.
A recent and rapidly growing pump application is the treatment of post-
operative pain following arthroscopic knee and shoulder surgery. The
Company's Freedom(tm) Infusion System was approved for commercial distribution
by the U.S. Food and Drug Administration in September, 1999 for these
applications in this new market segment.
However, the Company's opportunities to participate in the U.S. infusion
marketplace were completely eliminated by an unfavorable ruling in a patent
infringement lawsuit brought by a California competitor. On July 23, 1999,
Novacon was served with a complaint filed in the United States District Court,
Central District of California, Santa Ana, California, by I-Flow Corporation
alleging various causes of action for patent interference against Novacon with
respect to its elastomeric infusion pump technology. Novacon took the
position that the California court lacked jurisdiction and elected not to
appear. I-Flow Corporation claimed the dib(tm) Drug Infusion Balloon Pump
design violated its patents and was subsequently awarded damages, legal fees
and costs. Novacon denied the Dib(tm) design infringed any I-Flow patents and
regarded this legal action as strictly anti-competitive. However, Novacon
was financially unable to respond to this lawsuit in California and therefore
I-Flow was granted a final default judgment on May 3, 2000 which awarded
I-Flow Corporation a permanent injunction restraining Novacon from importing,
manufacturing, and selling its dib(tm) Drug Infusion Balloon Pump in the
United States. In addition, I-Flow was awarded damages and costs totaling
$1,344,581, shown in the Statement of Operations as litigation settlement.
Novacon believes this judgment has had a serious material adverse effect on
its business and financial condition. Furthermore, the I-Flow patent
infringement judgment was interpreted as breach of representation and warranty
in the termination of a Supply Agreement with Innovasive Devices, Inc. During
May, 1999 Novacon entered into an exclusive three year Supply Agreement with
Innovasive Devices, Inc. to furnish its elastomeric infusion pumps for
Innovasive Device's post-operative Freedom(tm) Infusion System in the North,
Central and South American markets. The agreement was annually renewable
after its initial term. It required Innovasive Devices to purchase a minimum
of 10,000 infusion pumps in the first contract year, and annually thereafter
an increasing minimum number not less than 110 percent of the prior year's
sales. Innovasive Devices develops, manufactures and markets medical devices
for orthopedic and sports medicine surgery. On February 11, 2000 the Johnson
& Johnson Company, through a wholly owned subsidiary, completed the acquisition
of Innovasive Devices, Inc. as previously announced in November, 1999. On
March 16, 2000, Mitek Products, the Johnson & Johnson subsidiary, citing the
default judgment against Novacon and Novacon's breach of representation and
warranty regarding the supply of products free from infringement, terminated
the Supply Agreement with Innovasive Devices.
The Company has an accumulated deficit of $10,458,791 as of May 31, 2000
and has incurred annual operating losses for the past five years. If the
Company does not achieve an operating profit during 2001, it may be unable to
continue in business.
Results of Operations
The following table sets forth for the years indicated the percentage
relationship to net sales of certain items in the Company's statements of
operations and the percentage changes in the dollar amounts of such items on
a comparative basis for the three fiscal years ended May 31, 2000:
May 31, 2000 May 31, 1999 May 31, 1998
%sales %change %sales %change %sales %change
Net Sales $89,593 +12 $79,902 +41 $56,664 -26
Cost of
Goods Sold 64 $57,656 +62 44 $35,491 +3 61 $34,530 -20
Operating
Expenses 246 $219,081 +26 217 $173,505 +27 240 $136,086 -13
Fiscal Year 2000 and Fiscal Year 1999:
Net Sales. Net sales increased 12% in 2000 from 1999 to $89,593 from
$79,902.
Cost of Goods Sold and Operating Expenses. Cost of Goods Sold increased 62%
in 2000 over 1999 to $57,656 from $35,491.
As a percentage of net sales, general and administrative expenses in 2000 were
246%. Litigation settlement expenses in 2000 were $1,344,582, or 1501% of net
sales.
Fiscal Year 1999 and Fiscal Year 1998
Net Sales. Net sales increased 41% in 1999 over 1998 to $79,902 from $56,664.
Cost of Sales and Operating Expenses. Cost of sales increased 3% in 1999 over
1998 to $35,491 from $34,530.
As a percentage of net sales, general and administrative expenses in 1999 were
217%.
Fiscal Year 1998 and Fiscal Year 1997
Net Sales. Net sales decreased 26% in 1998 over 1997 to $56,664 from $76,509.
Cost of Sales and Operating Expenses. Cost of sales decreased 20% in 1998 from
1997 to $34,530 from $43,016.
As a percentage of net sales, general and administrative expenses in 1998 were
240%.
Liquidity and Capital Resources
Novacon has financed its operations in recent years primarily through cash
flows from operations and loans from a director. The Company has not secured
any equity funding since its initial public offering in 1985 and a secondary
offering in 1987. In 1996 the Company obtained $30,000 from three individuals
through the issuance of convertible promissory notes. The Company exercised
the individuals' conversion rights in November, 2000, by converting, without
the individuals approval, the $30,000 of note payables to 300,000 shares of
common stock. In 1999, the Company obtained an unsecured loan of $75,000 from
a director. Approximately 67% of the Company's current liabilities, excluding
the litigation damages of $1,344,582, are unpaid salaries to management.
For 2000 the Company had net cash used in operations of a negative $61,848,
compared to net cash used in operations in 1999 of negative $9,042 and net cash
provided by operations of $4,119 in 1997.
Capital expenditures were less than $2,500 for fiscal 1998, 1999 and 2000,
respectively. The Company's 1998, 1999 and 2000 capital expenditures included
computer and software equipment.
Management believes that the Company's current level of cash and cash
equivalents are not sufficient to meet its needs for working capital and
capital expenditures for the next twelve months. The Company's recurring
losses, negative cash flow from operations and net working capital deficiency
raise substantial doubt about its ability to continue as a going concern.
Furthermore, the I-Flow Corporation litigation discussed in this report
resulted in a final default judgment on May 3, 2000, which awarded I-Flow
Corporation a permanent injunction restraining Novacon from importing,
manufacturing, and selling its dib(tm) Drug Infusion Balloon Pump in the
United States. In addition, I-Flow was awarded damages and costs totaling
$1,344,581. Novacon believes this judgment has had a serious material adverse
effect on its business and financial condition. The Company has opted to
discontinue operations and pursue a merger or acquisition strategy in an
effort to preserve shareholder value. In this regard, effective August 31,
2000, the Board of Directors approved the conveyance of all Novacon
Corporation assets ($89,562 at May 31, 2000) to David P. Lang and John D. Lang
in full payment of their accrued, unpaid salaries of $392,711 and full
satisfaction of the indebtedness owing to David P. Lang for his previous
loan of $75,000. In addition, David P. Lang has agreed to assume full
responsibility for all company liabilities, except annual auditing fees and
the settlement damages to I-Flow Corporation. Novacon Corporation ceased all
commercial activity as of August 31, 2000.
ITEM 6A. QUANTITATIVE AND QUALITATIVE DISCLOSURE
Not Applicable.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
The following financial statements of Novacon Corporation
are included in Item 7:
Balance Sheet for the years ended May 31, 2000 and 1999............page 52
Statement of operations for the years ended
May 31, 2000 and 1999..............................................page 53
Statement of Changes in Shareholder Equity (Deficit)...............page 54
Notes to Financial Statements......................................page 56
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to Directors and Executive Officers of the
Company is incorporated by reference to the Company's definitive Information
Statement for its annual meeting of stockholders to be filed with the
Securities and Exchange Commission (the "Information Statement").
ITEM 10. EXECUTIVE COMPENSATION
Information with respect to this item is incorporated by reference to
the Company's Information Statement.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information with respect to this item is incorporated by reference to
the Company's Information Statement.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Information with respect to this item is incorporated by reference to
the Company's Information Statement.
PART IV
ITEM 13. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS ON FORM 8-KSB
(a) 1. FINANCIAL STATEMENTS
See index to financial statements under Item 8, on page __ for a list
of all financial statements filed as part of this report.
2. EXHIBITS REQUIRED TO BE FILED BY ITEM 601 OF REGULATION S-K
The following exhibits are filed as part of this Annual Report on Form
10-KSB or are incorporated herein by reference:
1. Information Statement for the 2000 Annual Meeting
(b) 1. REPORTS ON FORM 8-KSB
Letter of Intent to Acquire Your.Net, Inc., September 14, 2000
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Action of 1934, as amended, the registrant has duly caused this
Report to be signed on its behalf by the undersigned, thereunto duly
authorized.
NOVACON CORPORATION
Date: December 20, 2000 By: /s/ David P. Lang
------------------------------------
David P. Lang, Chairman of the Board,
Chief Executive Officer (Principal
Executive Officer), Chief Financial
Officer (Principal Financial and
Accounting Officer)
______________
David P. Lang
Director
December 20, 2000
NOVACON CORPORATION
FINANCIAL STATEMENTS
For the Years Ended
May 31, 2000, 1999 and 1998
NOVACON CORPORATION
INDEX TO FINANCIAL STATEMENTS
For the Years Ended May 31, 2000, 1999 and 1998
Independent Auditors' Report 1
Balance Sheet 2
Statement of Operations 3
Statement of Changes in Shareholders' Deficit 4
Statement of Cash Flows 5
Notes to Financial Statements 6-11
INDEPENDENT AUDITORS' REPORT
Board of Directors
Novacon Corporation
St. Paul, Minnesota
We have audited the accompanying balance sheets of Novacon Corporation as of
May 31, 2000, 1999 and 1998 and the related statements of operations,
shareholders' deficit and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Novacon Corporation as of
May 31, 2000, 1999 and 1998, and the results of its operations and its cash
flows for the years then ended, in conformity with generally accepted
accounting principles.
As discussed in Note 2 to the financial statements, the Company's recurring
losses, negative cash flow from operations and net working capital deficiency
raise substantial doubt about its ability to continue as a going concern.
Management's plans as to these matters are also described in Note 2. The
May 31, 2000, 1999 and 1998 financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/SILVERMAN OLSON THORVILSON & KAUFMANN LTD
CERTIFIED PUBLIC ACCOUNTANTS
Minneapolis, Minnesota
November 15, 2000
NOVACON CORPORATION
BALANCE SHEET
May 31, 2000, 1999 and 1998
ASSETS 2000 1999 1998
Current assets:
Cash $3,294 $ - $711
Accounts receivable 7,386 14,095 15,369
Inventory 73,694 64,106 71,824
Other current assets - 6,419 -
Total current assets 84,374 84,620 87,904
Property and
equipment,
net (Note 3) 5,188 6,115 8,524
Total assets $ 89,562 $ 90,735 $ 96,428
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Checks drawn in
excess of available
funds $ - $3,258 $ -
Accounts payable 43,716 42,966 26,864
Accrued compensation 392,711 272,711 172,711
Accrued interest 31,412 18,841 13,338
Accrued litigation
settlement (Note 6) 1,344,582 - -
Notes payable -
related parties
(Note 4) 89,269 19,816 14,700
Notes payable -
third parties (Note 5) 30,000 30,000 30,000
Total liabilities 1,931,690 387,592 257,613
Commitments and
contingencies
(Notes 2 and 6) - - -
Shareholders' deficit:
Common stock,
$.01 par value;
15,000,000 shares
authorized,
10,722,904 shares
issued, and
outstanding 107,229 107,229 107,229
Paid-in capital 8,509,434 8,509,434 8,509,434
Accumulated deficit(10,458,791 (8,913,520) (8,777,848)
Total shareholders'
deficit (1,842,128) (296,857) (161,185)
Total liabilities
and shareholders'
deficit $ 89,562 $90,735 $96,428
See accompanying notes to financial statements.
NOVACON CORPORATION
STATEMENT OF OPERATIONS
For the Years Ended May 31, 2000, 1999 and 1998
2000 1999 1998
Net sales $ 89,593 $ 79,902 $ 56,664
Cost of
goods sold 57,656 35,491 34,530
Gross profit 31,937 44,411 22,134
General and
administrative
expenses 219,081 173,505 136,086
Litigation
settlement
(Note 6) 1,344,582 - -
Loss from
operations (1,531,726) (129,094) (113,952)
Other income (expense):
Interest expense (13,941) (7,452) (6,158)
Miscellaneous 396 874 5,076
Total other
income (expense) (13,545) (6,578) (1,082)
Net loss $(1,545,271 $(135,672) $(115,034)
Net loss
per share $ (0.14) $ (0.01) $ (0.01)
Weighted average
number of shares
outstanding 10,722,904 10,722,904 10,722,904
See accompanying notes to financial statements.
NOVACON CORPORATION
STATEMENT OF CHANGES IN SHAREHOLDERS' DEFICIT
For the Years Ended May 31, 2000, 1999 and 1998
Common Stock
Additional Total
Number Paid-In Accumulated Shareholders'
Shares Amount Capital Deficit Deficit
Balances
at May 31,
1997 10,722,904 $107,229 $8,509,434 $(8,662,814) $(46,151)
Net loss - - - (115,034) (115,034)
Balances
at May 31,
1998 10,722,904 107,229 8,509,434 (8,777,848) (161,185)
Net loss - - - (135,672) (135,672)
Balances
at May 31,
1999 10,722,904 107,229 8,509,434 (8,913,520) (296,857)
Net loss - - - (1,545,271) (1,545,271)
Balances
at May 31,
2000 10,722,904 107,229 8,509,434 (10,458,791) (1,842,128)
See accompanying notes to financial statements.
NOVACON CORPORATION
STATEMENT OF CASH FLOWS
For the Years Ended May 31, 2000, 1999 and 1998
2000 1999 1998
Cash flows from
operating activities:
Net loss $(1,545,271) $(135,672) $(115,034)
Adjustments to reconcile
net loss to net cash
provided by(used in)
operating activities:
Depreciation 1,980 2,452 2,328
(Increase) decrease in assets:
Accounts receivable 6,709 1,274 10,630
Other receivables - - 28,956
Inventory (9,587) 7,718 3,660
Other current assets 6,419 (6,419) -
Increase (decrease) in liabilities:
Accounts payable 749 16,102 (4,463)
Accrued compensation 120,000 100,000 71,947
Accrued interest 12,571 5,503 6,095
Accrued litigation
settlement 1,344,582
Net cash provided by
(used in) operating
activities (61,848) (9,042) 4,119
Cash flows from investing activities:
Purchase of property and
equipment (1,053) (43) (1,479)
Net cash used by
investing activities (1,053) (43) (1,479)
Cash flows from financing activities:
Increase (decrease) in checks
drawn in excess of available
funds (3,258) 3,258 -
Issuance of notes payable -
related parties 75,000 19,458 23,500
Repayment of notes payable -
related parties (5,547) (14,342) (26,000)
Net cash provided by (used in)
financing activities 66,195 8,374 (2,500)
Increase (decrease) in cash 3,294 (711) 140
Cash - beginning of year - - 571
Cash - end of year $3,294 $ - $711
Supplemental schedule of cash flow
information:
Cash paid during the year
for interest $1,493 $1,899 $63
See accompanying notes to financial statements.
NOVACON CORPORATION
NOTES TO FINANCIAL STATEMENTS
For the Years Ended May 31, 2000, 1999 and 1998
Note 1: Significant Accounting Policies
Nature of Organization:
Novacon Corporation assembles and distributes disposable drug infusion pumps
designed for hospital and home applications in pain management. The Company
had an exclusive United States manufacturing and marketing agreement with the
Japanese developer of the proprietary technology used in the design of these
pumps.
On May 3, 2000, the Company was subjected to a summary judgment on a patent
infringement lawsuit (Note 6) in which it was ordered to cease all sales
within the United States. Subsequent to the summary judgment, the Company
has limited distribution of its drug infusion pumps to customers in Asia and
Europe.
Accounts Receivable:
The Company considers its accounts receivable to be fully collectible;
accordingly, no allowance for doubtful accounts has been recorded. If the
collectability of any accounts becomes questionable, it will be reserved for
and charged to operations.
Inventory:
Inventory was recorded at the lower of cost (determined on a first-in, first-
out basis) or market. Inventory on hand consisted of work in process and
finished goods.
Property and Equipment:
Property and equipment is stated at cost. Depreciation is computed using
straight-line methods and is expensed based upon the estimated useful lives
of the assets.
Expenditures for additions and improvements are capitalized, while repairs
and maintenance are expensed as incurred.
Income Taxes:
Income taxes are provided for the tax effects of transactions reported in the
financials statements and consist of taxes currently due plus deferred taxes,
if any. Deferred taxes represent the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
Use of Estimates:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make certain estimates and
assumptions about the future outcome of current transactions which may affect
the reporting and disclosure of these transactions. Accordingly, actual
results could differ from those estimates used in the preparation of these
financial
statements.
NOVACON CORPORATION
NOTES TO FINANCIAL STATEMENTS
For the Years Ended May 31, 2000, 1999 and 1998
Note 1: Significant Accounting Policies (Continued)
Per Share Data:
The net income (loss) per share was computed based on the weighted average
number of shares outstanding during the year. Statement of Financial
Accounting SFAS No. 128 "Earnings Per Share" requires the presentation of
basic and fully diluted earnings per share. The Company has outstanding notes
payable which could be converted to common stock. The calculation of income
per share of common stock assuming full dilution takes into account the effect
of these convertible securities when the effect would be dilutive. For the
periods presented, the effect of this item was either antidilutive or not
materially different from the income (loss) per share of common stock
presented in the financial statements.
Note 2: Continued Existence and Management's Plan
During 2000, the Company incurred a net loss of $1,545,271 and a negative
cash flow from operations of $61,848 resulting in a negative working capital
position of $1,842,128 and an accumulated deficit totaling $10,458,791 at
May 31, 2000. In addition, the Company is legally prohibited from selling
its principal product line in the United States. On September 25, 2000, the
Company entered into a letter of intent to acquire all the issued and
outstanding shares (Note 6) of Your.Net, Inc. In conjunction with this, the
Company has also entered into a mutual release to settle the summary judgment
in its patent infringement litigation (Note 6) by issuing 500,000 shares of
post acquisition stock and paying $144,000 in cash. Management believes that
acquisition of Your.Net, Inc. and the ensuing business opportunities this
transaction brings, will allow Novacon Corporation to settle all remaining
obligations and continue in existence.
In the event that management's plans as described above are not successful,
the Company may be forced to liquidate. The financial statements do not
contain any adjustments which might be necessary if the Company is unable to
continue as a going concern.
Note 3: Property and Equipment
Property and equipment consisted of the following at May 31:
Estimated
Useful Life
2000 1999 1998 in Years
Office equipment $5,896 $5,896 $5,896 7
Machinery and equipment 10,555 9,502 9,459 3-7
Total property and equipment 16,451 15,398 15,355
Less accumulated depreciation 11,263 9,283 6,831
Property and equipment, net $5,188 $6,115 $8,524
Depreciation expense in 2000, 1999 and 1998 was $1,980, $2,452
and $2,328, respectively.
NOVACON CORPORATION
NOTES TO FINANCIAL STATEMENTS
For the Years Ended May 31, 2000, 1999 and 1998
Note 4: Related Party Activity
Notes payable - related parties:
Notes payable - related parties consists of various notes payable to a board
member, an officer/shareholder and entities controlled by relatives of the
officer/shareholder. The notes bear interest at variable rates from 0% to
10%, are unsecured and due upon demand. Balances outstanding on these notes
payable aggregated $89,269, $19,816, and $14,700 at May 31, 2000, 1999, and
1998 respectively.
Interest expense incurred on these notes payable aggregated $8,541, $2,002
and $768 during 2000, 1999 and 1998 respectively. Accrued interest on these
notes payable aggregated $7,048, $808 and $705 at May 31, 2000, 1999 and 1998,
respectively.
Rent expense:
The Company rents office space from an officer/shareholder on a month to
month basis. Rent expense aggregated $3,800, $10,900 and $6,000 during 2000,
1999 and 1998, respectively.
Note 5: Notes Payable - Third Parties
Notes payable - third parties consisted of the following at May 31,
2000 1999 1998
Convertible notes
payable - interest-
bearing at 18%,
unsecured and due in
November 1997 and
March 1998. In
November 2000, the
notes were converted
into 300,000 shares
of common stock
(Note 6). $30,000 $30,000 $30,000
Note 6: Commitments and Contingencies
Stock Option Plan:
The Plan expired in August of 1997 with no exercises, grants, or forfeitures
during the year ended May 31, 1998. During 1998, 500,000 of non-qualified
options outstanding to an officer/shareholder at an exercise price of
$.09 per share expired unexercised.
Supply and Distribution Agreement:
On September 1, 1998, the Company entered into a distribution agreement with
its key supplier (Note 7). The agreement is in effect for a four year period
and provides for minimum purchase quantities by the Company. The Company has
breached the terms of the distribution agreement, but to date, the supplier
has not taken any action against such breach. At this time, management is
unaware of the potential financial effect of its breach.
NOVACON CORPORATION
NOTES TO FINANCIAL STATEMENTS
For the Years Ended May 31, 2000, 1999 and 1998
Note 6: Commitments and Contingencies (Continued)
Settlement of Accrued Salaries and Third Party Note Repayments:
In August 1999, the Board of Directors authorized the issuance of 3,927,096
shares of its common stock to an officer/shareholder and a relative of the
officer/shareholder in lieu of $105,260 of prior accrued salaries. The actual
shares of stock were issued in November 2000. Additionally, in November 2000,
the Company exercised the third party note holders' conversion rights by
converting, without note holders' approval, the $30,000 of third party note
payables (Note 5) to 300,000 shares of common stock. To date, no action has
been taken by the former third party note holders.
Additionally, on May 31, 2000, the Board of Directors authorized the
conveyance of all of the Company's assets to an officer/shareholder and a
relative of the officer/shareholder in full settlement of all remaining
accrued salaries. The actual conveyance and salary settlement release is
expected to occur in December 2000.
Patent Infringement Lawsuit:
On July 24, 1999, the Company was served with a patent infringement lawsuit.
The lawsuit was brought about by I-Flow Corporation ("I-Flow") who claimed
the Company encroached on two of I-Flow's patents. The Company did not have
the resources available to defend the lawsuit and as a result, I-Flow filed
for a summary judgment. The summary judgment was granted on May 3, 2000 and
the Company was ordered to pay $1,344,582 in damages, attorney's fees, and
interest. Additionally, the Company was ordered to cease sales of drug
infusion pumps in the United States.
On October 13, 2000, the Company and I-Flow entered into a mutual release
whereby the Company agreed to pay $144,000 and to issue approximately 500,000
post-acquisition shares of the Company to I-Flow. Such shares represent 2.5%,
calculated on a fully diluted basis, of Novacon's stock after consummation of
the acquisition of Your.Net, discussed below. This mutual release becomes
null and void if the acquisition of Your.Net and remittance of all settlement
obligations have not been completed by December 31, 2000.
Your.Net Merger:
The Company executed a letter of intent on September 14, 2000 that
contemplated the combination of Your.Net, Inc., a Minnesota corporation, with
the Company. The parties have recently determined not to proceed in accordance
with the terms of the letter of intent. However, discussions are continuing
which could result in a
full or partial stock exchange or merger or other combination between the
Company and Your.Net, Inc. If such a transaction were to occur, it is
contemplated that the Company would issue a newly authorized class of common
shares, $0.001 par value, to the Your.Net, Inc. shareholders in an amount
presently unknown but expected not to exceed 18,000,000 shares. There is no
assurance that any such transaction will be agreed to or occur, and if
consummated, that the terms will not be different from those referred to
above.
NOVACON CORPORATION
NOTES TO FINANCIAL STATEMENTS
For the Years Ended May 31, 2000, 1999 and 1998
Note 6: Commitments and Contingencies (Continued)
Your.Net Merger (continued):
In conjunction with the above combination, the Company expects to call and
conduct an annual meeting of stockholders to be held during January 2001 at
which time it expects to amend and restate its certificate of incorporation
to (i) change its corporate name and (ii) recapitalize its authorized capital
stock through reducing its issued and outstanding $0.01 par value common stock
(approximately 15,000,000 shares as of November 15, 2000) to approximately
1,250,000 shares of common stock, $0.001 par value, and increase its
authorized capital stock to approximately 25,000,000 shares.
Note 7: Significant Suppliers and Customers
Suppliers:
During 2000, 1999 and 1998, the Company purchased substantially all of its
inventory of disposal drug infusion pumps and related supplies from a
Japanese corporation, pursuant to the terms of a supply and distribution
agreement (Note 6). Total purchases from this supplier aggregated $52,029,
$23,982 and $27,943 during 2000, 1999 and 1998, respectively.
Customers:
During 2000, the Company made sales to three separate domestic customers
representing approximately 42%, 29% and 23% of total sales.
During 1999, the Company made sales to two separate domestic customers
representing approximately 33% and 20% of total sales. Additionally, during
1999, the Company made sales to one Asian customer representing approximately
30% of total sales.
During 1998, the Company made sales to two separate domestic customers
representing approximately 27% and 40% of total sales. Additionally, during
1998, the Company made sales to one Asian customer representing approximately
33% of total sales.
Note 8: Income Taxes
The effective tax rate varies from the maximum federal statutory rate as a
result of the following items:
2000 1999 1998
Tax benefit computed
at the maximum federal
statutory rate (34.0)% (34.0)% (34.0)%
Increase in taxes resulting
from temporary and permanent
reporting differences 32.0 26.0 19.0
Loss to be carried forward 2.0 8.0 15.0
Income tax provision - - -
NOVACON CORPORATION
NOTES TO FINANCIAL STATEMENTS
For the Years Ended May 31, 2000, 1999 and 1998
Note 8: Income Taxes (Continued)
Deferred taxes consisted of the following at May 31:
2000 1999 1998
Asset:
Net operating
loss carryforward $998,000 $1,336,000 $1,566,000
Accrued litigation
settlement 269,000 - -
Other 78,000 54,000 34,000
Deferred tax asset 1,345,000 1,390,000 1,600,000
Less valuation
allowance (1,345,000) (1,390,000) (1,600,000)
Net deferred tax asset $ - $ - $ -
For financial statement purposes, no tax benefit has been reported in 2000,
1999 or 1998 as realization of the tax benefits is uncertain. Accordingly, a
valuation allowance has been established for the full amount of the deferred
tax asset. The net change in the deferred tax valuation allowance was a
decrease of $45,000, $210,000 and $1,864,000 in 2000, 1999 and 1998,
respectively.
At May 31, 2000, the Company had approximate net operating loss carryforwards
as follows for income tax purposes:
Carryforward Expires Net Operating Loss
May 31, Carryforwards
2001 2,387,000
2002 804,000
2003 532,000
2004 83,000
2005 763,000
2007 46,000
2011 95,000
2012 133,000
2018 41,000
2019 36,000
2020 70,000
Total $4,990,000
The utilization of the carryforwards is dependent upon the ability to generate
sufficient taxable income during the carryforward period. In addition,
utilization of these carryforwards may be limited due to ownership changes as
defined in the Internal Revenue Code.
NOVACON CORPORATION
INDEX TO EXHIBITS
I. Schedule 14C Information..........................................page 36
II. Information Statement for 2000 Shareholders' Meeting.............page 37
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of the Securities Exchange
Act of 1934
Check the appropriate box:
[X] Preliminary Information Statement
[ ] Confidential, for use of the Commission only (as permitted by
Rule 14c-5(d)(2)
[ ] Definitive Information Statement
-----------------------------------------------------------------------------
NOVACON CORPORATION
(Name of Registrant as Specified In Its Charter)
-----------------------------------------------------------------------------
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction
applies:
Common Stock, $0.01 par Value
(2) Aggregate number of securities to which transaction
applies:
15,000,000
(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: $0.00
[ ] 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: Not Applicable
(2) Form, Schedule or Registration Statement No.: Not Applicable
(3) Filing Party: Not Applicable
(4) Date Filed: Not Applicable
NOVACON CORPORATION
INFORMATION STATEMENT
-----------------------------------------------------------------------------
GENERAL INFORMATION
-----------------------------------------------------------------------------
This information statement is first being furnished on or about
January 5, 2001, to our shareholders of record as of the close of business on
December 1, 2000 in connection with (1) the amendment of our Amended and
Restated Certificate of Incorporation, (2) the amendment of our Bylaws, and
(3) the election of Directors. The amendment to our Certificate of
Incorporation, which is described in more detail below, will initially
decrease the number of our shares of authorized Common Stock, $0.01 par value,
from 15,000,000 shares to 1,250,000 shares of Common Stock, $0.001 par value,
and then increase the number of shares of our authorized Common Stock, $0.001
par value, from 1,250,000 shares to 50,000,000 shares of Common Stock, $0.001
par value.
Our Board of Directors has approved the amendment of the Certificate
of Incorporation and the Bylaws.
WE ARE NOT ASKING YOU FOR A PROXY, AND YOU ARE REQUESTED NOT TO SEND US ONE,
WITH RESPECT TO THE AMENDMENT. WE ARE SENDING THIS INFORMATION STATEMENT TO
YOU ONLY FOR INFORMATIONAL PURPOSES.
For additional information about us, please refer to our Annual
Report on Form 10-KSB for the year ended May 31, 2000, and the other
periodic filings (including our quarterly reports on Form 10-QSB dated
August 31, 2000 and November 30, 2000, and our periodic report on Form 8-K
dated September 14, 2000) we have made with the Securities and Exchange
Commission, or SEC, which are incorporated herein by this reference. A copy of
our Annual Report is being furnished to you with this Information Statement.
If you would like copies of any of those documents, you can request
(by phone or in writing) copies of them by sending your request to our
principal office: Novacon Corporation, 5451 Hilltop Avenue, Lake Elmo, MN
55042-9539, telephone (651) 704-9160, Attn: John D. Lang, Secretary. We
will not charge you for any of the copies. You can also obtain copies of those
documents from the electronic filing site maintained by the SEC on the
world-wide web (www.sec.gov/archives/edgar), from the SEC's office at
Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 or
the various regional SEC offices.
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THE AMENDMENT TO THE CERTIFICATE OF INCORPORATION
PROPOSAL NO. 1
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Our authorized capital currently consists of 15,000,000 shares of
Common Stock, par value $0.01 per share. Our Board of Directors have
determined that it would be in our best interest to amend and restate our
certificate of incorporation to decrease the number of our authorized shares
of Common Stock, $0.01 par value, from 15,000,000 to 1,250,000 shares of
Common Stock, $0.001 par value, to reflect our inactive business status, and
then increase the number of shares of our authorized Common Stock, $0.001 par
value, from 1,250,000 shares to 50,000,000 shares of Common Stock, $0.001 par
value. In addition, among other matters, we will change our name from Novacon
Corporation to "NVCN Corporation." After the amending and restating our
certificate of incorporation, it will read, in its entirety, as set forth in
Appendix A attached hereto. PLEASE CAREFULLY READ APPENDIX A THAT FULLY SETS
FORTH THE PROPOSED AMENDED AND RESTATED CERTIFICATE OF INCORPORATION. The
amended and restated certificate of incorporation will be effected by (i)
approval of the proposed amended and restated certificate of incorporation by
a majority of our stockholders entitled to vote at our Annual Meeting and (ii)
filing the amended and restated certificate of incorporation with the
Secretary of State for the State of Delaware. The amended and rested
certificate of incorporation will become effective when the filing is accepted
by the Secretary of State's office.
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THE AMENDMENT TO THE BYLAWS
PROPOSAL NO. 2
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Our Board of Directors have determined that it would be in our best interest
to amend our bylaws. After the amending our bylaws, they will read, in their
entirety, as set forth in Appendix B attached hereto. PLEASE CAREFULLY READ
APPENDIX B THAT FULLY SETS FORTH THE PROPOSED AMENDED BYLAWS. The amended by
laws will be effected by approval of the proposed amended bylaws by a majority
of our stockholders entitled to vote at our Annual Meeting. The amended bylaws
will become effective when approved by our stockholders.
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APPROVAL OF THE AMENDMENTS
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On November 30, 2000, our Board of Directors approved the
amendments to our certificate of incorporation and bylaws by unanimous written
consent. In approving the amendments, our Board of Directors considered a
number of factors, including the fact that we have inactive business
operations, that all of shares of presently authorized capital stock have
been issued, that any amalgamation with a third party will probably require
that our stockholders maintain a only a small holding, and that we may have
to issue a substantial number of shares of common stock in the future in
connection with any amalgamation.
The actions described in this information statement will not afford
our stockholders the opportunity to dissent from the actions described herein,
or to receive an agreed or judicially determined value for their shares.
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TAX CONSEQUENCES
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The amendment of our certificate of incorporation as is described in
this information statement should not result in any taxable gain or loss
to us or to you as a stockholder. The tax basis for your shares should
also not be affected by the amendment, nor should the holding period for your
shares. The federal income tax discussion included in this section is included
as general information only. You are urged to consult with your own tax
advisor to determine your tax effects, if any, from the amendment.
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BENEFICIAL OWNERSHIP
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The following table sets forth certain information regarding the
beneficial ownership of our outstanding securities as of December 1, 2000
by the following parties:
all those persons or entities known by us to be beneficial owners of
5% or more of each class of our outstanding securities, or "5%
Stockholders;"
each director and each of our Chief Executive Officer and the next
four highest paid officers, or our Named Executive Officers;
all directors and our executive officers as a group; and
parties that do not fall into any of the categories listed above,
but which approved the amendment.
The data presented are based on information provided to us by the parties
specified above and are being included in this information statement to
provide you with information regarding the relative ownership interests of
the parties who have consented in writing to the amendment and who hold
management positions with us.
Name of Beneficial Owner Class Number of Shares Percentage of Class(1)
David P. Lang Common 3,957,074 26.4%
Chief Executive Officer,
Chief Financial Officer,
and Director
John D. Lang Common 1,090,000 7.3%
Secretary
Paul D. Rieff Common 15,000 0.1%
Director
Walter Zohmann Common 0 --
All directors and officers
as a group (4) persons Common 5,062,074 33.7%
______________________
(1) Based on 15,000,000 outstanding shares of Common Stock. The inclusion
of any shares as "beneficially owned" does not constitute an admission of
beneficial ownership (which has a broad definition under the securities
laws) of these shares. Unless otherwise indicated, each person listed has sole
investment and voting power with respect to the shares listed.
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ELECTION OF DIRECTORS
PROPOSAL NO. 3
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The Company's Certificate of Incorporation provides that the Board of
Directors shall not consist of less than three or more than seven members,
as determined from time to time by the Board. Directors are to serve for one-
year terms. At the 2000 Annual Meeting, three Directors are to be elected to
hold office for the term expiring at the next annual meeting of the
stockholders to be held in 2001, and until his/her successor has been elected
and qualified, or until his/her death, resignation or removal, if earlier.
Nominees
David P. Lang, Director, Paul D. Rieff, Director, and Walter Zohmann,
Director, have been nominated for election to the Board for terms expiring
in 2001. Messrs. Lang, Rieff and Zohmann are current members of the Board.
Certain information regarding each nominee is set forth below:
Nominees for Director (Terms Expiring in 2001)
David P. Lang, age 54, has been the Chief Executive Officer, President
and Chief Financial Officer of the Company since April 1986 and a Director
since 1984. Mr. Lang held international marketing management positions with
Medtronic Europe, S.A., Paris, France (a subsidiary of Medtronic, Inc.) from
1970 to 1975; Medical Europe GmbH, Munich, Germany (a subsidiary of Medical,
Inc.) from 1975 to 1977; Cyberex Corporation from 1979 to 1981; and the
Company since 1982 to present. Mr. Lang has over 15 years business experience
in China, having negotiated the first Sino-American medical electronics joint
venture in 1985. He has lectured in international business at the University
of Minnesota and the University of St. Thomas, and taught courses at
Metropolitan State University. Mr. Lang is a graduate of Harvard College,
B.A. 1968.
Paul D. Rieff, age 64, has been a Director since 1996. Mr. Rieff has
been Managing Director of Asia Cardiovascular Products (ACP), Hong Kong, a
subsidiary of Getz Bros. & Co., Inc., San Francisco, California since 1985.
Prior to joining ACP, he held international marketing management positions
with several medical device manufacturers, including Medtronic, Inc. and
Medical, Inc. Mr. Rieff is a graduate of the University of Minnesota, B.A.
1968.
Walter Zohmann, age 52, has been a Director since 1998. Mr. Zohmann
has been the owner and principal of International Medical Development, Inc.,
Park City, Utah since 1990. International Medical Development, Inc. is a
manufacturer and distributor of spinal needles and airway management products.
Prior to organizing his company, he held sales and marketing positions with
Johnson & Johnson in Germany and the United States. Mr. Zohmann is a graduate
of the University of Nurnburg, B.S. 1970.
Meetings and Committees of the Board of Directors
The Board of Directors held one meeting during 2000 and approved three
consent resolutions.
The Company presently has no committees, but intends to form a
compensation committee and audit committee consisting on non-employee
directors following the seating of directors elected at the Annual Meeting.
Compensation to Directors
The Directors received no fees or form of compensation for their
services in such office during 2000, nor does the Company intend to pay any
such fees or compensation during the ensuing year.
Stock Options/Consulting Fees
The Directors received no stock option grants or consulting fees for their
services in such office during 2000, nor does the Company intend to grant any
such options or pay any such fees during the ensuing year.
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EXECUTIVE COMPENSATION
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The following table sets forth certain information regarding
compensation paid during each of the Company's last three fiscal years to
the Company's current chief executive officer (the "Named Executive
Officers"). No other executive officer had total compensation in fiscal year
2000 (based on salary and bonus) exceeding $100,000.
Summary Compensation Table
Name and Annual Compensation Long-Term All Other
Principal
Position Year Salary($) Compensation Compensation(1)
David P. Lang 2000 75,000 0 0
Chief Executive 1999 75,000 0 0
Officer, Chief 1998 75,000 0 0
Financial Officer
(1) Options, Grants and Exercises during Fiscal 2000. The Company granted no
options to Named Executive Officers during Fiscal 2000, nor were any options
exercised. The Company has no outstanding stock appreciation rights or stock
options.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
-----------------------------------------------------------------------------
In November 1999, the Company approved the issuance of 2,927,096 and
1,000,000 shares of Common Stock to David P. Lang and John D. Lang,
respectively, in partial satisfaction of then accrued, but unpaid salaries,
of $78,760 and $26,500. On the date of Board approval action, the directors
deemed the fair market value of the Company's Common Stock to be $0.0265 per
share. The shares were issued during November 2000. David P. Lang and
John D. Lang are, respectively, father and son.
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COMPLIANCE WITH REPORTING REQUIREMENTS OF EXCHANGE ACT
-----------------------------------------------------------------------------
Section 16 of the Securities Exchange Act of 1934, and the rules
promulgated thereunder, requires the Company's officers, directors, and
holders of 10% or more of its outstanding Common Stock to file certain
reports with the Securities and Exchange Commission. To the Company's best
knowledge, based solely on information provided to it by the reporting
individuals, all of the reports required to be filed b these individuals have
been filed, except that Initial Report son Form 3 for John D. Lang were filed
late.
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OTHER MATTERS
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The Board of Directors is not aware that any matter other than those
described in the Notice of Annual Meeting of Stockholders will be presented
for action at the meeting.
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RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
-----------------------------------------------------------------------------
Silverman Olson Thorvilson & Kaufmann, Ltd., has served as the Company's
principal independent accountant to audit the Company's financial statements
for the fiscal years 1992 through 2000. Representatives of Silverman Olson
Thorvilson & Kaufmann, Ltd. are expected to be present at the Annual Meeting
and will have the opportunity to make a statement, if they desire to do so,
and to respond to appropriate questions.
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STOCKHOLDER PROPOSALS FOR THE 2001 ANNUAL MEETING
-----------------------------------------------------------------------------
All stockholder proposals intended to be presented at the 2001 Annual Meeting
of Stockholders must be received by the Company at its offices on or before
July 31, 2001. In addition, a stockholder must give notice to the Company
prior to July 31, 2001, of any proposal which such stockholder intends to
raise at the 2001 Annual Meeting. If the Company receives notice of such
proposal after July 31, 2001, the persons named in the proxy solicited by the
Company's Board of Directors for the 2001 Annual Meeting may exercise
discretionary voting powers with respect to such proposal. Further, under the
Company's proposed Amended and Restated Certificate of Incorporation, or
business to be properly brought before the 2001 Annual Meeting, a stockholder
must give notice in writing to the Secretary of the Company no later than 50
days prior to the date of the meeting. Any proposal not submitted by such
date will not be considered at the 2001 Annual Meeting.
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REPORT ON FORM 10-KSB
-----------------------------------------------------------------------------
A copy of the Company's Annual Report on Form 10-KSB for the fiscal year
ended May 31, 2000, accompanies the Notice of Annual Meeting of the
Stockholders and this Information Statement.
It is important that you attend the Annual Meeting in person or by your
Ballot. Stockholders who do plan to attend the Annual Meeting in person are
urged to complete, sign, date and return the enclosed Ballot by return mail.
December 20, 2000
BY ORDER OF THE BOARD OF DIRECTORS
John D. Lang, Secretary
APPENDIX A
PROPOSED AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
NOVACON CORPORATION
The undersigned, David P. Lang, certifies that he is Chief Executive Officer
of Novacon Corporation, a corporation organized and existing under the laws
of the State of Delaware (hereinafter called the "Corporation"), and does
hereby certify as follows:
1. The current name of the Corporation is Novacon Corporation. The Corporation
was originally incorporated as Cardio-Pace Corporation and the original
Certificate of Incorporation of the Corporation was filed with the Secretary
of State of the State of Delaware on April 20, 1981. The original Certificate
of Incorporation was amended on June 25, 1981, May 13, 1983, January 30, 1984,
August 16, 1984, October 9, 1984, and November 24, 1987.
2. This Amended and Restated Certificate of Incorporation was duly adopted
by and in accordance with the provisions of Sections 228, 242 and 245 of the
General Corporation Law of the State of Delaware as set forth in Title 8 of
the Delaware Code (the "GCL").
3. This Amended and Restated Certificate of Incorporation restates and
integrates and further amends the provisions of the Corporation's Certificate
of Incorporation.
4. Effective upon the filing of this Amended and Restated Certificate of
Incorporation with the Secretary of State, the Company's name will be NVCN
Corporation.
5. Effective upon the filing of this Restated and Amended Certificate of
Incorporation with the Secretary of State, each share of Common Stock
outstanding shall be reclassified and combined into a lesser number of shares
of common stock at a ratio of 12:1, such that each twelve (12) shares of
common stock issued and outstanding shall be reclassified and combined into
and become one (1) share of common stock. No fractional shares of common
stock shall be issued as a result of such reclassification and combination,
but the fair value of fractions of a share shall be paid in lieu thereof;
each holder thereof shall be entitled to receive a cash payment equal to the
holder's fraction of a share of common stock multiplied by the per share fair
market value, as determined by the Board of Directors.
6. The text of the Amended and Restated Certificate of Incorporation of the
Corporation is hereby amended and restated to read in its entirety as
follows:
FIRST: The name of the Corporation is NVCN Corporation (the
"Corporation").
SECOND: The address of the registered office of the Corporation
in the State of Delaware is 1209 Orange Street, City of Wilmington
19801, County of New Castle. The name of its registered agent at
that address is CT Corporation System.
THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which a corporation may be organized
under the General Corporation Law of the State of Delaware (the "GCL").
FOURTH:
(a) Authorized Capital Stock. The total number of shares of stock which the
Corporation shall have authority to issue is 50,000,000 shares of common
stock, par value $0.001 per share (the "Common Stock").
(b) Common Stock. The powers, preferences and rights, and the
qualifications, limitations and restrictions, of each class of the Common
Stock are as follows:
(1) No Cumulative Voting. The holders of shares of Common Stock shall
not have cumulative voting rights.
(2) Dividends; Stock Splits. Subject to any other provisions of this
Amended and Restated Certificate of Incorporation, as it may be amended
from time to time, holders of shares of Common Stock shall be entitled to
receive such dividends and other distributions in cash, stock or property of
the Corporation when, as and if declared thereon by the Board of Directors
from time to time out of assets or funds of the Corporation legally available
therefor.
(3) Liquidation, Dissolution, etc. In the event of any liquidation,
dissolution or winding up (either voluntary or involuntary) of the
Corporation, the holders of shares of Common Stock shall be entitled to
receive the assets and funds of the Corporation available for distribution
after payments to creditors.
(4) Merger, etc. In the event of a merger or consolidation of the
Corporation with or into another entity (whether or not the Corporation is
the surviving entity), the holders of each share of Common Stock shall be
entitled to receive the same per share consideration on a per share basis.
(5) No Preemptive or Subscription Rights. No holder of shares of Common
Stock shall be entitled to preemptive or subscription rights.
(c) Power to Sell and Purchase Shares. Subject to the requirements of
applicable law, the Corporation shall have the power to issue and sell all or
any part of any shares of any class of stock herein or hereafter authorized
to such persons, and for such consideration, as the Board of Directors shall
from time to time, in its discretion, determine, whether or not greater
consideration could be received upon the issue or sale of the same number
of shares of another class, and as otherwise permitted by law. Subject to the
requirements of applicable law, the Corporation shall have the power to
purchase any shares of any class of stock herein or hereafter authorized from
such persons, and for such consideration, as the Board of Directors shall
from time to time, in its discretion, determine, whether or not less
consideration could be paid upon the purchase of the same number of shares of
another class, and as otherwise permitted by law.
(d) Reclassification of Shares of Common Stock, $0.01 Par Value. The issued
and outstanding shares of common stock, $0.01 par value, of the Corporation
shall be and hereby are reclassified and combined into a lesser number of
shares of common stock, $0.001 par value, at a ratio of 12:1, such that each
twelve (12) shares of common stock, $0.01 par value, issued and outstanding
shall be reclassified and combined into and become one (1) share of common
stock, $0.001 par value, and the total number of shares which the Corporation
is authorized to issue is one million two hundred fifty thousand (1,250,000)
shares of Common Stock, par value $0.001. No fractional shares of common
stock shall be issued as a result of such reclassification and combination,
but the fair value of fractions of a share shall be paid in lieu thereof;
each holder thereof shall be entitled to receive a cash payment equal to the
holder's fraction of a share of Common Stock multiplied by the per share fair
market value, as determined by the Board of Directors.
FIFTH: The following provisions are inserted for the management
of the business and the conduct of the affairs of the Corporation, and for
further definition, limitation and regulation of the powers of the Corporation
and of its directors and stockholders:
(a) The business and affairs of the Corporation shall be managed by or under
the direction of the Board of Directors.
b) The number of directors of the Corporation shall be as from time to
time fixed by the Board of Directors, and such number shall never be less
than three nor more than thirteen. Election of directors need not be by
written ballot unless the By-Laws so provide.
(c) A director shall hold office until the annual meeting for the year in
which his or her term expires and until his or her successor shall be elected
and shall qualify, subject, however, to prior death, resignation, retirement,
disqualification or removal from office.
(d) Any vacancy on the Board of Directors that results from an increase in
the number of directors may be filled by a majority of the Board of Directors
then in office, provided that a quorum is present, and any other vacancy
occurring on the Board of Directors may be filled by a majority of the Board
of Directors then in office, even if less than a quorum, or by a sole
remaining director. Any director of any class elected to fill a vacancy
resulting from an increase in the number of directors of such class shall
hold office for a term that shall coincide with the remaining term of that
class. Any director elected to fill a vacancy not resulting from an increase
in the number of directors shall have the same remaining term as that of his
predecessor. Any or all of the directors of the Corporation may be removed
from office at any time, but only for cause and only by the affirmative vote
of the holders of at least a majority of the voting power of the
Corporation's then outstanding capital stock entitled to vote generally in
the election of directors.
(e) In addition to the powers and authority hereinbefore or by statute
expressly conferred upon them, the directors are hereby empowered to exercise
all such powers and do all such acts and things as may be exercised or done
by the Corporation, subject, nevertheless, to the provisions of the GCL,
this Certificate of Incorporation, and any By-Laws adopted by the
stockholders; provided, however, that no By-Laws hereafter adopted by the
stockholders shall invalidate any prior act of the directors which would have
been valid if such By-Laws had not been adopted.
SIXTH: No director shall be personally liable to the Corporation
or any of its stockholders for monetary damages for breach of fiduciary duty
as a director, except to the extent such exemption from liability or
limitation thereof is not permitted under the GCL as the same exists or may
hereafter be amended. If the GCL is amended hereafter to authorize the further
elimination or
limitation of the liability of directors, then the liability of a director
of the Corporation shall be eliminated or limited to the fullest extent
authorized by the GCL, as so amended. Any repeal or modification of this
Article SIXTH by the stockholders of the Corporation shall not adversely
affect any right or protection of a director of the Corporation existing at
the time of such repeal or modification with respect to acts or omissions
occurring prior to such repeal or modification.
SEVENTH: The Corporation shall indemnify its directors and officers to
the fullest extent authorized or permitted by law, as now or hereafter in
effect, and such right to indemnification shall continue as to a person who has
ceased to be a director or officer of the Corporation and shall inure to the
benefit of his or her heirs, executors and personal and legal representatives;
provided, however, that, except for proceedings to enforce rights to
indemnification, the Corporation shall not be obligated to a director or
officer (or his or her heirs, executors or personal or legal representatives) in
connection with a proceeding (or part thereof) initiated by such person unless
such proceeding (or part thereof) was authorized or consented to by the Board of
Directors. The right to indemnification conferred by this Article SEVENTH shall
include the right to be paid by the Corporation the expenses incurred in
defending or otherwise participating in any proceeding in advance of its
final disposition.
The Corporation may, to the extent authorized from time to time by the Board
of Directors, provide rights to indemnification and to the advancement of
expenses to employees and agents of the Corporation similar to those conferred
in this Article SEVENTH to directors and officers of the Corporation.
The rights to indemnification and to the advance of expenses
conferred in this Article SEVENTH shall not be exclusive of any other right
which any person may have or hereafter acquire under this Certificate of
Incorporation, the By-Laws of the Corporation, any statute, agreement, vote
of stockholders or disinterested directors or otherwise.
Any repeal or modification of this Article SEVENTH by the stockholders of
the Corporation shall not adversely affect any rights to indemnification
and to the advancement of expenses of a director or officer of the
Corporation existing at the time of such repeal or modification with respect
to any acts or omissions occurring prior to such repeal or modification.
EIGHTH: Unless otherwise required by law, special meetings
of stockholders, for any purpose or purposes may be called by either (i)
the Chairman of the Board of Directors, if there be one, (ii) the Chief
Executive Officer, or (iii) the Board of Directors. The ability of the
stockholders to call a special meeting is hereby specifically denied.
NINTH: Any action required or permitted to be taken by the
stockholders of the Corporation must be effected at a duly called annual or
special meeting of stockholders of the Corporation, and the ability of the
stockholders to consent in writing to the taking of any action is
hereby specifically denied.
TENTH: Meetings of stockholders may be held within or without
the State of Delaware, as the By-Laws may provide. The books of the
Corporation may be kept (subject to any provision contained in the GCL)
outside the State of Delaware at such place or places as may be designated
from time to time by the Board of Directors or in the By-Laws of the
Corporation.
ELEVENTH: In furtherance and not in limitation of the powers
conferred upon it by the laws of the State of Delaware, the Board of Directors
shall have the power to adopt, amend, alter or repeal the Corporation's
By-Laws. The affirmative vote of at least a majority of the entire Board of
Directors shall be required to adopt, amend, alter or repeal the
Corporation's By-Laws. The Corporation's By-Laws also may be adopted, amended,
altered or repealed by the affirmative vote of the holders of at least eighty
percent (80%) of the voting power of the shares entitled to vote at an
election of directors.
TWELFTH: The Corporation reserves the right to amend, alter,
change or repeal any provision contained in this Certificate of Incorporation
in the manner now or hereafter prescribed in this Certificate of
Incorporation, the Corporation's By-Laws or the GCL, and all rights herein
conferred upon stockholders are granted subject to such reservation.
IN WITNESS WHEREOF, the Corporation has caused this Amended and Restated
Certificate of Incorporation to be executed as of this __ day of January 2001
in its name and on its behalf by its Chief Executive Officer, pursuant to
Section 103 of the General Corporation Law of the State of Delaware.
NOVACON CORPORATION
Name: /s/David P. Lang
Title: Chief Executive Officer
APPENDIX B
PROPOSED AMENDED BYLAWS
BY-LAWS
of
NVCN CORPORATION
A Delaware Corporation
Effective January __, 2001
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of NVCN
Corporation (the "Corporation") shall be in the City of Wilmington, County
of New Castle, State of Delaware.
Section 2. Other Offices. The Corporation may also have offices
at such other places, both within and without the State of Delaware, as the
Board of Directors may from time to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. Meetings of the stockholders for the
election of directors or for any other purpose shall be held at such time and
place, either within or without the State of Delaware, as shall be designated
from time to time by the Board of Directors and stated in the notice of the
meeting or in a duly executed waiver of notice thereof.
Section 2. Annual Meetings. The annual meetings of stockholders shall
be held on such date and at such time as shall be designated from time to time
by the Board of Directors and stated in the notice of the meeting, at which
meetings the stockholders shall elect directors, and transact such other
business as may properly be brought before the meeting.
Section 3. Special Meetings. Unless otherwise prescribed by law or
by the certificate of incorporation of the Corporation, as amended and restated
from time to time (the "Certificate of Incorporation"), special meetings of
stockholders, for any purpose or purposes, may be called by either (i) the
Chairman of the Board of Directors, (ii) the Chief Executive Officer, or (iii)
the Board of Directors. Such request shall state the purpose or purposes of
the proposed meeting. At a special meeting of the stockholders, only such
business shall be conducted as shall be specified in the notice of meeting
(or any supplement thereto) given by or at the direction of the Board of
Directors.
Section 4. Notice. The Corporation shall give each stockholder written notice
of any meeting of stockholders. The notice shall state the place, date and
hour of the meeting, and, in the case of a special meeting, the purpose or
purposes for which the meeting is called. Unless otherwise required by law,
the written notice of any meeting shall be given not less than ten nor more
thansixty days before the date of the meeting to each stockholder entitled
to vote at such meeting.
Section 5. Quorum. Except as otherwise required by law or by the
Certificate of Incorporation, the holders of a majority of the capital stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business. A quorum, once established,
shall not be broken by the withdrawal of enough votes to leave less than a
quorum. If, however, such quorum shall not be present or represented at any
meeting of the stockholders, the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have power to adjourn the
meeting from time to time in the manner provided in Section 6, until a quorum
is present or represented.
Section 6. Adjournment. Any meeting of the stockholders may be adjourned from
time to time to reconvene at the same or some other place, and notice need not
be given of any such adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the adjourned
meeting, the Corporation may transact any business which might have been
transacted at the original meeting. If the adjournment is for more than thirty
days, or if after the adjournment a new record date is fixed for the adjourned
meeting, notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote at the meeting not less than ten nor more than sixty
days before the date of the meeting.
Section 7. Proxies. Any stockholder entitled to vote may do so in
person or by his or her proxy appointed by an instrument in writing subscribed
by such stockholder or by his or her attorney thereunto authorized, delivered
to the Secretary of the meeting; provided, however, that no proxy shall be
voted or acted upon after three years from its date, unless said proxy
provides for a longer period. Without limiting the manner in which a
stockholder may authorize another person or persons to act for him or her as
proxy, either of the following shall constitute a valid means by which a
stockholder may grant such authority:
(i) A stockholder may execute a writing authorizing another person or
persons to act for him or her as proxy. Execution may be accomplished by the
stockholder or his or her authorized officer, director, employee or agent
signing such writing or causing his or her signature to be affixed to such
writing by any reasonable means, including, but not limited to, by facsimile
signature.
(ii) A stockholder may authorize another person or persons to act for him or
her as proxy by transmitting or authorizing the transmission of a telegram or
other means of electronic transmission to the person who will be the holder
of the proxy or to a proxy solicitation firm, proxy support service
organization or like agent duly authorized by the person who will be the
holder of the proxy to receive such transmission, provided that any such
telegram or other means of electronic transmission must either set forth or be
submitted with information from which it can be determined that the telegram
or other electronic transmission was authorized by the stockholder. Any copy,
facsimile telecommunication or other reliable reproduction of the writing or
transmission authorizing another person or persons to act as proxy for a
stockholder may be substituted or used in lieu of the original writing or
transmission for any and all purposes for which the original writing or
transmission could be used; provided that such copy, facsimile
telecommunication or other reproduction shall be a complete reproduction of
the entire original writing or transmission.
Section 8. Voting. At all meetings of the stockholders at which
a quorum is present, except as otherwise required by law, the Certificate
of Incorporation or these By-Laws, any question brought before any meeting
of stockholders shall be decided by the affirmative vote of the holders of
a majority of the total number of votes of the capital stock present in
person or represented by proxy and entitled to vote on such question, voting
as a single class. The Board of Directors, in its discretion, or the officer
of the Corporation presiding at a meeting of stockholders, in his or her
discretion, may require that any votes cast at such meeting shall be cast
by written ballot.
Section 9. Nature of Business at Annual Meetings of Stockholders.
No business may be transacted at an annual meeting of stockholders, other
than business that is either (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors
(or any duly authorized committee thereof), (b) otherwise properly brought
before the annual meeting by or at the direction of the Board of Directors
(or any duly authorized committee thereof) or (c) otherwise properly brought
before the annual meeting by any stockholder of the Company (i) who is a
stockholder of record on the date of the giving of the notice provided for
in this Section 9 and on the record date for the determination of
stockholders entitled to vote at such annual meeting and (ii) who complies
with the notice procedures set forth in this Section 9.
In addition to any other applicable requirements, for business
to be properly brought before an annual meeting by a stockholder, such
stockholder must have given timely notice thereof in proper written form to
the Secretary of the Company.
To be timely, a stockholder's notice to the Secretary must be
delivered to or mailed and received at the principal executive offices of the
Company not less than sixty (60) days nor more than ninety (90) days prior to
the anniversary date of the immediately preceding annual meeting of
stockholders; provided, however, that in the event that the annual meeting is
called for a date that is not within thirty (30) days before or after such
anniversary date, notice by the stockholder in order to be timely must be so
received not later than the close of business on the tenth (10th) day
following the day on which such notice of the date of the annual meeting was
mailed or such public disclosure of the date of the annual meeting was made,
whichever first occurs.
To be in proper written form, a stockholder's notice to the
Secretary must set forth as to each matter such stockholder proposes to bring
before the annual meeting (i) a brief description of the business desired to
be brought before the annual meeting and the reasons for conducting such
business at the annual meeting, (ii) the name and record address of such
stockholder, (iii) the class or series and number of shares of capital stock
of the Company which are owned beneficially or of record by such stockholder,
(iv) a description of all arrangements or understandings between such
stockholder and any other person or persons (including their names) in
connection with the proposal of such business by such stockholder and any
material interest of such stockholder in such
business and (v) a representation that such stockholder intends to appear in
person or by proxy at the annual meeting to bring such business before the
meeting.
No business shall be conducted at the annual meeting of
stockholders except business brought before the annual meeting in accordance
with the procedures set forth in this Section 9, provided, however, that,
once business has been properly brought before the annual meeting in
accordance with such procedures, nothing in this Section 9 shall be deemed to
preclude discussion by any stockholder of any such business. If the Chairman
of an annual meeting determines that business was not properly brought before
the annual meeting in accordance with the foregoing procedures, the Chairman
shall declare to the meeting that the business was not properly brought
before the meeting and such business shall not be transacted.
Section 10. List of Stockholders Entitled to Vote. The officer
of the Corporation who has charge of the stock ledger of the Corporation
shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for
a period of at least ten days prior to the meeting, either at a place within
the city where the meeting is to be held, which place shall be specified in
the notice of the meeting, or, if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at the time
and place of the meeting during the whole time thereof, and may be inspected
by any stockholder of the Corporation who is present.
Section 11. Stock Ledger. The stock ledger of the Corporation
shall be the only evidence as to who are the stockholders entitled to examine
the stock ledger, the list required by Section 8 of this Article II or the
books of the Corporation, or to vote in person or by proxy at any meeting of
stockholders.
Section 12. Inspectors of Election. In advance of any meeting of
stockholders, the Board by resolution or the Chairman or the Chief Executive
Officer shall appoint one or more inspectors of election to act at the
meeting and make a written report thereof. One or more other persons may be
designated as alternate inspectors to replace any inspector who fails to act.
If no inspector or alternate is present, ready and willing to act at a
meeting of stockholders, the Chairman of the meeting shall appoint one or
more inspectors to act at the meeting. Unless otherwise required by law,
inspectors may be officers, employees or agents of the Corporation. Each
inspector, before entering upon the discharge of his or her duties, shall
take and sign an oath faithfully to execute the duties of inspector with strict
impartiality and according to the best of his or her ability. The inspector
shall have the duties prescribed by law and shall take charge of the polls and,
when the vote is completed, shall make a certificate of the result of the vote
taken and of such other facts as may be required by law.
Section 13. Conduct of Meetings. The Board of Directors of the
Corporation may adopt by resolution such rules and regulations for the conduct
of the meeting of the stockholders as it shall deem appropriate. Except to the
extent inconsistent with such rules and regulations as adopted by the Board of
Directors, the chairman of any meeting of the stockholders shall have the right
and authority to prescribe such rules, regulations and procedures and to do
all such acts as, in the judgment of such chairman, are appropriate for the
proper conduct of the meeting. Such rules, regulations or procedures, whether
adopted by the Board of Directors or prescribed by the chairman of the
meeting, may include, without limitation, the following: (i) the establishment
of an agenda or order of business for the meeting; (ii) the determination of
when the polls shall open and close for any given matter to be voted on at
the meeting; (iii) rules and procedures for maintaining order at the meeting
and the safety of those present; (iv) limitations on attendance at or
participation in the meeting to stockholders of record of the corporation,
their duly authorized and constituted proxies or such other persons as the
chairman of the meeting shall determine; (v) restrictions on entry to the
meeting after the time fixed for the commencement thereof; and (vi)
limitations on the time allotted to questions or comments by participants.
ARTICLE III
DIRECTORS
Section 1. Number and Election of Directors. The Board of
Directors shall consist of not less than three nor more than thirteen members,
the exact number of which shall be determined from time to time by resolution
adopted by the Board of Directors. Except as provided in Section 3 of this
Article III, directors shall be elected by the stockholders at the annual
meetings of stockholders, and each director so elected shall hold office
until such director's successor is duly elected and qualified, or until such
director's death, or until such director's earlier resignation or removal.
Directors need not be stockholders.
Section 2. Nomination of Directors. Only persons who are
nominated in accordance with the following procedures shall be eligible for
election as directors of the Company, except as may be otherwise provided in
the Certificate of Incorporation with respect to the right of holders of
preferred stock of the Corporation to nominate and elect a specified number of
directors in certain circumstances. Nominations of persons for election to the
Board of Directors may be made at any annual meeting of stockholders, or at
any special meeting of stockholders called for the purpose of electing
directors, (a) by or at the direction of the Board of Directors (or any duly
authorized committee thereof) or (b) by any stockholder of the Company (i)
who is a stockholder of record on the date of the giving of the notice
provided for in this Section 2 and on the record date for the determination
of stockholders entitled to vote at such meeting and (ii) who complies with
the notice procedures set forth in this Section 2.
In addition to any other applicable requirements, for a
nomination to be made by a stockholder, such stockholder must have given
timely notice thereof in proper written form to the Secretary of the Company.
To be timely, a stockholder's notice to the Secretary must be
delivered to or mailed and received at the principal executive offices of the
Company (a) in the case of an annual meeting, not less than sixty (60) days
nor more than ninety (90) days prior to the anniversary date of the
immediately preceding annual meeting of stockholders; provided, however,
that in the event that the annual meeting is called for a date that is not
within thirty (30) days before or after such anniversary date, notice by the
stockholder in order to be timely must be so received not later than the
close of business on the tenth (10th) day following the day on which such
notice of the date of the annual meeting was mailed or such public disclosure
of the date of the annual meeting was made, whichever first occurs; and (b)
in the case of a special meeting of stockholders called for the purpose of
electing directors, not later than the close of business on the tenth (10th)
day following the day on which notice of the date of the special meeting was
mailed or public disclosure of the date of the special meeting was made,
whichever first occurs.
To be in proper written form, a stockholder's notice to the Secretary
must set forth (a) as to each person whom the stockholder proposes to nominate
for election as a director (i) the name, age, business address and residence
address of the person, (ii) the principal occupation or employment of the
person, (iii) the class or series and number of shares of capital stock of the
Company which are owned beneficially or of record by the person and (iv) any
other information relating to the person that would be required to be
disclosed in a proxy statement or other filings required to be made in
connection with solicitations of proxies for election of directors pursuant to
Section 14 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations promulgated thereunder; and (b) as to the
stockholder giving the notice (i) the name and record address of such
stockholder, (ii) the class or series and number of shares of capital stock of
the Company which are owned beneficially or of record by such stockholder,
(iii) a description of all arrangements or understandings between such
stockholder and each proposed nominee and any other person or persons
(including their names) pursuant to which the nomination(s) are to be made
by such stockholder, (iv) a representation that such stockholder intends to
appear in person or by proxy at the meeting to nominate the persons named
in its notice and (v) any other information relating to such stockholder that
would be required to be disclosed in a proxy statement or other filings
required to be made in connection with solicitations of proxies for election
of directors pursuant to Section 14 of the Exchange Act and the rules and
regulations promulgated thereunder. Such notice must be accompanied by a
written consent of each proposed nominee to being named
as a nominee and to serve as a director if elected.
No person shall be eligible for election as a director of the
Company unless nominated in accordance with the procedures set forth in this
Section 2. If the Chairman of the meeting determines that a nomination was
not made in accordance with the foregoing procedures, the Chairman shall
declare to the meeting that the nomination was defective and such defective
nomination shall be disregarded.
Section 3. Vacancies. Subject to the terms of any one or more
classes or series of preferred stock, any vacancy on the Board of Directors
that results from an increase in the number of directors may be filled by a
majority of the directors then in office, provided that a quorum is present,
and any other vacancy occurring on the Board of Directors may be filled by a
majority of the Board of Directors then in office, even if less than a quorum,
or by a sole remaining director. Notwithstanding the foregoing, whenever the
holders of any one or more class or classes or series of preferred stock of
the Corporation shall have the right, voting separately as a class, to elect
directors at an annual or special meeting of stockholders, the election, term
of office, filling of vacancies and other features of such directorships shall
be governed by the Certificate of Incorporation.
Section 4. Duties and Powers. The business of the Corporation
shall be managed by or under the direction of the Board of Directors which may
exercise all such powers of the Corporation and do all such lawful acts and
things as are not by statute or by the Certificate of Incorporation or by
these By-Laws required to be exercised or done by the stockholders.
Section 5. Organization. At each meeting of the Board of
Directors, the Chairman of the Board of Directors, or, in his or her
absence, a director chosen by a majority of the directors present, shall
act as Chairman. The Secretary of the Corporation shall act as Secretary at
each meeting of the Board of Directors. In case the Secretary shall be absent
from any meeting of the Board of Directors, an Assistant Secretary shall
perform the duties of Secretary at such meeting; and in the absence from any
such meeting of the Secretary and all the Assistant Secretaries, the Chairman
of the meeting may appoint any person to act as Secretary of the meeting.
Section 6. Resignations and Removals of Directors. Any director
of the Corporation may resign at any time, by giving written notice to the
Chairman of the Board of Directors, the Chief Executive Officer or the
Secretary of the Corporation. Such resignation shall take effect at the time
therein specified or, if no time is specified, immediately; and, unless
otherwise specified in such notice, the acceptance of such resignation shall
not be necessary to make it effective. Except as otherwise required by law and
subject to the rights, if any, of the holders of shares of preferred stock
then outstanding, any director or the entire Board of Directors may be
removed from office at any time, but only for cause, and only by the
affirmative vote of the holders of at least a majority in voting power of the
issued and outstanding capital stock of the Corporation entitled to vote in
the election of directors.
Section 7. Meetings. The Board of Directors of the Corporation may
hold meetings, both regular and special, either within or without the State of
Delaware. Regular meetings of the Board of Directors may be held at such time
and at such place as may from time to time be determined by the Board of
Directors and, unless required by resolution of the Board of Directors,
without notice. Special meetings of the Board of Directors may be called by
the Chairman of the Board of Directors, the Vice Chairman, if there be one,
or a majority of the directors then in office. Notice thereof stating the
place, date and hour of the meeting shall be given to each director either
by mail not less than forty-eight (48) hours before the date of the meeting,
by telephone, facsimile, telegram or electronic transmission on twenty-four
(24) hours' notice, or on such shorter notice as the person or persons calling
such meeting may deem necessary or appropriate in the circumstances.
Section 8. Quorum. Except as may be otherwise required by law, the
Certificate of Incorporation or these By-Laws, at all meetings of the Board of
a majority of the entire Board of Directors shall constitute a quorum for the
transaction of business and the act of a majority of the directors present at
any meeting at which there is a quorum shall be the act of the Board of
Directors. If a quorum shall not be present at any meeting of the Board of
Directors, the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting of the time and
place of the adjourned meeting, until a quorum shall be present.
Section 9. Actions of Board by Written Consent. Unless otherwise
provided by the Certificate of Incorporation or these By-Laws, any action
required or permitted to be taken at any meeting of the Board of Directors or
of any committee thereof may be taken without a meeting, if all the members
of the Board of Directors or committee, as the case may be, consent thereto
in writing, and the writing or writings are filed with the minutes of
proceedings of the Board of Directors or committee.
Section 10. Meetings by Means of Conference Telephone. Unless
otherwise provided by the Certificate of Incorporation or these By-Laws,
members of the Board of Directors of the Corporation, or 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, and participation in a meeting pursuant
to this Section 10 shall constitute presence in person at such meeting.
Section 11. Committees. The Board of Directors may designate one
or more committees, each committee to consist of one or more of the directors
of the Corporation. The Board of Directors may designate one or more directors
as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of any such committee. In the absence or
disqualification of a member of a committee, and in the absence of a
designation by the Board of Directors of an alternate member to replace the
absent or
disqualified member, the member or members thereof present at any meeting
and not disqualified from voting, whether or not he, she or they constitute
a quorum, may unanimously appoint another member of the Board of Directors
to act at the meeting in the place of any absent or disqualified member.
Any committee, to the extent permitted by law and provided in the resolution
establishing such committee, shall have and may exercise all the powers and
authority of the Board of Directors in the management of the business and
affairs of the Corporation. Each committee shall keep regular minutes and
report to the Board of Directors when required.
Section 12. Compensation. The directors may be paid their
expenses, if any, of attendance at each meeting of the Board of Directors
and may be paid a fixed sum for attendance at each meeting of the Board of
Directors or a stated salary, or such other emoluments as the Board of
Directors shall from time to time determine. No such payment shall preclude
any director from serving the Corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees may be allowed
like compensation for attending committee meetings.
Section 13. Interested Directors. No contract or transaction
between the Corporation and one or more of its directors or officers, or
between the Corporation and any other corporation, partnership, association,
or other organization in which one or more of its directors or officers are
directors or officers, or have a financial interest, shall be void or voidable
solely for this reason, or solely because the director or officer is present at
or participates in the meeting of the Board of Directors or committee thereof
which authorizes the contract or transaction, or solely because such
person's or their votes are counted for such purpose if (i) the material facts
as to such person's or their relationship or interest and as to the contract or
transaction are disclosed or are known to the Board of Directors or the
committee, and the Board of Directors or committee in good faith authorizes
the contract or transaction by the affirmative votes of a majority of the
disinterested directors, even though the disinterested directors be less than
a quorum; or (ii) the material facts as to such person's or their relationship
or interest and as to the contract or transaction are disclosed or are known
to the stockholders entitled to vote thereon, and the contract or transaction
is specifically approved in good faith by vote of the stockholders; or (iii)
the contract or transaction is fair as to the Corporation as of the time it
is authorized, approved or ratified, by the Board of Directors, a committee
thereof or the stockholders. Common or interested directors may be counted
in determining the presence of a quorum at a meeting of the Board of
Directors or of a committee which authorizes the contract or transaction.
Section 14. Ex Officio Members of the Board of Directors. The Board of
Directors, in its discretion, may appoint one or more persons as ex officio
members of the Board of Directors, who shall serve at the pleasure of the
Board of Directors. Ex officio members of the Board of Directors shall be
permitted to attend meetings of the Board of Directors but shall not be
entitled to vote on any matter before the Board of Directors and shall not
be considered to be directors of the Corporation for any other purpose,
including without limitation, for establishing a quorum, acting by
written consent or providing notice of meetings. Notwithstanding the
foregoing, the Board of Directors may hold meetings that do not include
ex officio members of the Board of Directors.
ARTICLE IV
OFFICERS
Section 1. General. The officers of the Corporation shall be
chosen by the Board of Directors and shall be, a Chief Executive Officer,
a Secretary and a Treasurer. The Board of Directors, in its discretion, may
also choose a Chairman of the Board of Directors (who must be a director of
the Company), a Vice Chairman of the Board of Directors (who must be a
director of the Company), a President, one or more Vice Presidents, Assistant
Secretaries, Assistant Treasurers and other officers. Any number of offices
may be held by the same person, unless otherwise prohibited by law, the
Certificate of Incorporation or these By-Laws. The officers of the Corporation
need not be stockholders of the Corporation nor, except in the case of the
Chairman and the Vice Chairman of the Board of Directors, need such officers
be directors of the Corporation.
Section 2. Election. The Board of Directors at its first meeting
held after each Annual Meeting of Stockholders shall elect the officers of
the Corporation who shall hold their offices for such terms and shall exercise
such powers and perform such duties as shall be determined from time to time
by the Board of Directors; and all officers of the Corporation shall hold
office until their successors are chosen and qualified, or until their
earlier resignation or removal. Any officer elected by the Board of
Directors may be removed at any time by the affirmative vote of a majority
of the Board of Directors. Any vacancy occurring in any office of the
Corporation shall be filled by the Board of Directors. The salaries of all
officers of the Corporation shall be fixed by the Board of Directors.
Section 3. Voting Securities Owned by the Corporation. Powers of attorney,
proxies, waivers of notice of meeting, consents and other instruments
relating to securities owned by the Corporation may be executed in the
name of and on behalf of the Corporation by the Chief Executive Officer,
the President or any Vice President and any such officer may, in the name
of and on behalf of the Corporation, take all such action as any such
officer may deem advisable to vote in person or by proxy at any meeting
of security holders of any corporation in which the Corporation may own
securities and at any such meeting shall possess and may exercise any and
all rights and power incident to the ownership of such securities and
which, as the owner thereof, the Corporation might have exercised and
possessed if present. The Board of Directors may, by resolution, from time
to time confer like powers upon any other person or persons.
Section 4. Chairman of the Board of Directors. The Chairman of
the Board of Directors, if there be one, shall preside at all meetings of
the stockholders and of the Board of Directors. Except where by law the
signature of the Chief Executive Officer is required, the Chairman of the
Board of Directors shall possess the same power as the Chief Executive
Officer to sign all contracts, certificates and other instruments of the
Corporation which may be authorized by the Board of Directors. During the
absence or disability of the Chief Executive Officer, the Chairman of the
Board of Directors shall exercise all the powers and discharge all the
duties of the Chief Executive Officer. The Chairman of the Board of
Directors shall also perform such other duties and may exercise such
other powers as from time to time may be assigned to him or her by these
By-Laws or by the Board of Directors.
Section 5. Vice Chairman. In the absence of the Chairman, the
Vice Chairman, if there be one, shall preside at all meetings of the
stockholders and of the Board of Directors. Except where by law the
signature of the Chief Executive Officer is required, the Vice Chairman
shall possess the
same power as the Chief Executive Officer to sign all contracts, certificates
and other instruments of the Corporation which may be authorized by the Board
of Directors. During the absence or disability of the Chairman, the Vice
Chairman shall exercise all powers and discharge all the duties of the
Chairman. The Vice Chairman shall also perform such other duties and may
exercise such other powers as may from time to time be assigned by these
By-Laws or by the Board of Directors.
Section 6. Chief Executive Officer. The Chief Executive Officer shall,
subject to the control of the Board of Directors and, if there be one, the
Chairman of the Board of Directors, have general supervision of the business
of the Corporation and shall see that all orders and resolutions of the Board
of Directors are carried into effect. The Chief Executive Officer shall
execute all bonds, mortgages, contracts and other instruments of the
Corporation requiring a seal, under the seal of the Corporation, except
where required or permitted by law to be otherwise signed and executed and
except that the other officers of the Corporation may sign and execute
documents when so authorized by these By-Laws, the Board of Directors or the
Chief Executive Officer. In the absence or disability of the Chairman of the
Board of Directors, or if there be none, the Chief Executive Officer shall
preside at all meetings of the stockholders and the Board of Directors. The
Chief Executive Officer shall also perform such other duties and may exercise
such other powers as from time to time may be assigned to him or her by these
By-Laws or by the Board of Directors.
Section 7. President. At the request of the Chief Executive Officer
or in the Chief Executive Officer's absence or in the event of the Chief
Executive Officer's inability or refusal to act (and if there be no Chairman
or Vice Chairman), the President shall perform the duties of the Chief
Executive Officer, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the Chief Executive Officer. The
President shall perform such other duties and have such other powers as the
Board of Directors from time to time may prescribe.
Section 8. Vice Presidents. At the request of the Chief Executive Officer or
in his or her absence or in the event of his or her inability or refusal to
act (and if there be no Chairman, Vice Chairman or President), the Vice
President or the Vice Presidents if there is more than one (in the order
designated by the Board of Directors) shall perform the duties of the Chief
Executive Officer, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the Chief Executive Officer. Each Vice
President shall perform such other duties and have such other powers as the
Board of Directors from time to time may prescribe. If there be no Chairman,
Vice Chairman, President and no Vice President, the Board of Directors shall
designate the officer of the Corporation who, in the absence of the Chief
Executive Officer or in the event of the inability or refusal of the Chief
Executive Officer to act, shall perform the duties of the Chief Executive
Officer, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the Chief Executive Officer.
Section 9. Secretary. The Secretary shall attend all meetings of
the Board of Directors and all meetings of stockholders and record all the
proceedings thereat in a book or books to be kept for that purpose; the
Secretary shall also perform like duties for the standing committees when
required. The Secretary shall give, or cause to be given, notice of all
meetings of the stockholders and special meetings of the Board of Directors,
and shall perform such other duties as may be prescribed by the Board of
Directors, Chairman, Vice Chairman or Chief Executive Officer, under whose
supervision the Secretary shall be. If the Secretary shall be unable or shall
refuse to cause to be given notice of all meetings of the stockholders and
special meetings of the Board of Directors, and if there be no Assistant
Secretary, then either the Board of Directors or the Chief Executive Officer
may choose another officer to cause such notice to be given. The Secretary
shall have custody of the seal of the Corporation and the Secretary or any
Assistant Secretary, if there be one, shall have authority to affix the same
to any instrument requiring it and when so affixed, it may be attested by the
signature of the Secretary or by the signature of any such Assistant
Secretary. The Board of Directors may give general authority to any other
officer to affix the seal of the Corporation and to attest the affixing by
his or her signature. The Secretary shall see that all books, reports,
statements, certificates and other documents and records required by law to
be kept or filed are properly kept or filed, as the case may be.
Section 10. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit
of the Corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the Chief Executive Officer and the Board
of Directors, at its regular meetings, or when the Board of Directors so
requires, an account of all transactions as Treasurer and of the financial
condition of the Corporation.
Section 11. Assistant Secretaries. Except as may be otherwise provided in
these By-Laws, Assistant Secretaries, if there be any, shall perform such
duties and have such powers as from time to time may be assigned to them
by the Board of Directors, the Chief Executive Officer, the President,
if there be one, any Vice President, if there be one, or the Secretary,
and in the absence of the Secretary or in the event of his or her
disability or refusal to act, shall perform the duties of the Secretary,
and when so acting, shall have all the powers of and be subject to all
the restrictions upon the Secretary.
Section 12. Assistant Treasurers. Assistant Treasurers, if
there be any, shall perform such duties and have such powers as from time
to time may be assigned to them by the Board of Directors, the Chief
Executive Officer, the President, if there be one, any Vice President, if
there be one, or the Treasurer, and in the absence of the Treasurer or in
the event of the Treasurer's disability or refusal to act, shall perform
the duties of the Treasurer, and when so acting, shall have all the powers
of and be subject to all the restrictions upon the Treasurer.
Section 13. Other Officers. Such other officers as the Board of Directors may
choose shall perform such duties and have such powers as from time to time
may be assigned to them by the Board of Directors. The Board of Directors
may delegate to any other officer of the Corporation the power to choose such
other officers and to prescribe their respective duties and powers.
ARTICLE V
STOCK
Section 1. Form of Certificates. Every holder of stock in the
Corporation shall be entitled to have a certificate signed, in the name of
the Corporation, (i) by the Chairman or Vice Chairman of the Board of
Directors, the Chief Executive Officer, the President or a Vice President and
(ii) by the Treasurer or an Assistant Treasurer, or the Secretary or an
Assistant Secretary of the Corporation, certifying the number of shares owned
by such holder of stock in the Corporation.
Section 2. Signatures. Any or all of the signatures on a
certificate may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the Corporation with
the same effect as if such person were such officer, transfer agent or
registrar at the date of issue.
Section 3. Lost, Destroyed, Stolen or Mutilated Certificates. The Board of
Directors may direct a new certificate to be issued in place of any
certificate theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate, the Board of Directors may, in
its discretion and as a condition precedent to the issuance thereof, require
the owner of such lost, stolen or destroyed certificate, or such person's
legal representative, to advertise the same in such manner as the Board of
Directors shall require and/or to give the Corporation a bond in such sum as
it may direct as indemnity against any claim that may be made against the
Corporation with respect to the certificate alleged to have been lost, stolen
or destroyed.
Section 4. Transfers. Stock of the Corporation shall be transferable in the
manner prescribed by law and in these By-Laws. Transfers of stock shall be
made on the books of the Corporation only by the person named in the
certificate or by such person's attorney lawfully constituted in writing and
upon the surrender of the certificate therefor, properly endorsed for transfer
and payment of all necessary transfer taxes; provided, however, that such
surrender and endorsement or payment of taxes shall not be required in any
case in which the officers of the Corporation shall determine to waive such
requirement. Every certificate exchanged, returned or surrendered to the
Corporation shall be marked "Cancelled," with the date of cancellation, by the
Secretary or Assistant Secretary of the Corporation or the transfer agent
thereof. No transfer of stock shall be valid as against the Corporation for
any purpose until it shall have been entered in the stock records of the
Corporation by an entry showing from and to whom transferred.
Section 5. Transfer and Registry Agents. The Corporation may from
time to time maintain one or more transfer offices or agencies and registry
offices or agencies at such place or places as may be determined from time to
time by the Board of Directors.
Section 6. Beneficial Owners. The Corporation shall be entitled to recognize
the exclusive right of a person registered on its books as the owner of
shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to
or interest in such share or shares on the part of any other person, whether
or not it shall have express or other notice thereof, except as otherwise
provided by law.
ARTICLE VI
NOTICES
Section 1. Notices. Whenever written notice is required by law,
the Certificate of Incorporation or these By-Laws, to be given to any
director, member of a committee or stockholder, such notice may be given by
mail, addressed to such director, member of a committee or stockholder, at
such person's address as it appears on the records of the Corporation, with
postage thereon prepaid, and such notice shall be deemed to be given at the
time when the same shall be deposited in the United States mail. Written
notice may also be given personally or by telegram, facsimile, telex or cable.
Section 2. Waivers of Notice.
(a) Whenever any notice is required by law, the Certificate of Incorporation
or these By-Laws, to be given to any director, member of a committee or
stockholder, a waiver thereof in writing, signed, by the person or persons
entitled to said notice, whether before or after the time stated therein,
shall be deemed equivalent to notice. Attendance of a person at a meeting,
present by person or represented by proxy, shall constitute a waiver of
notice of such meeting, except where the person attends the meeting for the
express purpose of objecting at the beginning of the meeting to the
transaction of any business because the meeting is not lawfully called or
convened.
(b) Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders, directors or members of a
committee of directors need be specified in any written waiver of notice
unless so required by law, the Certificate of Incorporation or these By-
Laws.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Subject to the requirements of the GCL and
the provisions of the Certificate of Incorporation, dividends upon the
capital stock of the Corporation may be declared by the Board of Directors at
any regular or special meeting of the Board of Directors, and may be paid in
cash, in property, or in shares of the Corporation's capital stock. Before
payment of any dividend, there may be set aside out of any funds of the
Corporation available for dividends such sum or sums as the Board of Directors
from time to time, in its absolute discretion, deems proper as a reserve or
reserves to meet contingencies, or for purchasing any of the shares of capital
stock, warrants, rights, options, bonds, debentures, notes, scrip or other
securities or evidences of indebtedness of the Corporation, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation,
or for any other proper purpose, and the Board of Directors may modify or
abolish any such reserve.
Section 2. Disbursements. All checks or demands for money and notes of
the Corporation shall be signed by such officer or officers or such other
person or persons as the Board of Directors may from time to time designate.
Section 3. Fiscal Year. The fiscal year of the Corporation shall
be fixed by resolution of the Board of Directors.
Section 4. Corporate Seal. The corporate seal shall have
inscribed thereon the name of the Corporation, the year of its organization
and the words "Corporate Seal, Delaware". The seal may be used by causing
it or a facsimile thereof to be impressed or affixed or reproduced or
otherwise.
Section 5. Record Date
(a) In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment
thereof, the board of directors may fix a record date, which record date
shall not precede the date upon which the resolution fixing the record date
is adopted by the Board of Directors, and which record date shall not be more
than sixty nor less than ten days before the date of such meeting. If no
record date is fixed by the Board of Directors, the record date for
determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the
day on which notice is given, or, if notice is waived, at the close of
business on the day next preceding the day on which the meeting is held.
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
providing, however, that the Board of Directors may fix a new record date for
the adjourned meeting.
(b) In order that the Corporation may determine the stockholders entitled
to consent to corporate action in writing without a meeting, the Board of
Directors may fix a record date, which record date shall not precede the
date upon which the resolution fixing the record date is adopted by the
Board of Directors, and which record date shall not be more than ten days
after the date upon which the resolution fixing the record date is adopted
by the Board of Directors. If no record date has been fixed by the Board of
Directors, the record date for determining stockholders entitled to consent
to corporate action in writing without a meeting, when no prior action by
the Board of Directors is required by law, shall be the first date on which
a signed written consent setting forth the action taken or proposed to be
taken is delivered to the Corporation by delivery to its registered office
in this State, its principal place of business, or an officer or agent of
the Corporation having custody of the book in which proceedings of meetings
of stockholders are recorded. Delivery made to a corporation's registered
office shall be by hand or by certified or registered mail, return receipt
requested. If no record date has been fixed by the Board of Directors and
prior action by the Board of Directors is required by law, the record date
for determining stockholders entitled to consent to corporate action in
writing without a meeting shall be at the close of business on the day on
which the Board of Directors adopts the resolutions taking such prior action.
(c) In order that the Corporation may determine the stockholders entitled
to receive payment of any dividend or other distribution or allotment of any
rights or the stockholders entitled to exercise any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix a record date, which record
date shall not precede the date upon which the resolution fixing the record
date is adopted, and which record date shall be not more than sixty days
prior to such action. If no record date is fixed, the record date for
determining stockholders for any such purpose shall be at the close of
business on the day on which the Board of Directors adopts the resolution
relating thereto.
ARTICLE VIII
INDEMNIFICATION
Section 1. Power to Indemnify in Actions, Suits or Proceedings Other than
Those by or in the Right of the Corporation. Subject to Section 3 of this
Article VIII, the Corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the Corporation)
by reason of the fact that such person is or was a director or officer of
the Corporation, or is or was a director or officer of the Corporation
serving at the request of the Corporation as a director or officer, employee
or agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding if such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, such
person had no reasonable cause to believe his or her conduct was unlawful.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that such person
did not act in good faith and in a manner which such person reasonably
believed to be in or not opposed to the best interests of the Corporation,
and, with respect to any criminal action or proceeding, had reasonable
cause to believe that his or her conduct was unlawful.
Section 2. Power to Indemnify in Actions, Suits or Proceedings
by or in the Right of the Corporation. Subject to Section 3 of this Article
VIII, the Corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the Corporation to procure a judgment
in its favor by reason of the fact that such person is or was a director or
officer of the Corporation, or is or was a director or officer of the
Corporation serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, against expenses (including
attorneys' fees) actually and reasonably incurred by such person in
connection with the defense or settlement of such action or suit if such
person acted in good faith and in a manner such person reasonably believed
to be in or not opposed to the best interests of the Corporation; except
that no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable to
the Corporation unless and only to the extent that the Court of Chancery
or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view
of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
Section 3. Authorization of Indemnification. Any indemnification
under this Article VIII (unless ordered by a court) shall be made by the
Corporation only as authorized in the specific case upon a determination
that indemnification of the director or officer is proper in the circumstances
because such person has met the applicable standard of conduct set forth in
Section 1 or Section 2 of this Article VIII, as the case may be. Such
determination shall be made (i) by a majority vote of the directors who are
not parties to such action, suit or proceeding, even though less than a
quorum, or (ii) if there are no such directors, or if such directors so
direct, by independent legal counsel in a written opinion, or (iii) by the
stockholders. To the extent, however, that a director or officer of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding described above, or in defense of any claim, issue
or matter therein, such person shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by such person
in connection therewith, without the necessity of authorization in the
specific case.
Section 4. Good Faith Defined. For purposes of any determination
under Section 3 of this Article VIII, a person shall be deemed to have acted
in good faith and in a manner such person reasonably believed to be in or
not opposed to the best interests of the Corporation, or, with respect to
any criminal action or proceeding, to have had no reasonable cause to believe
his or her conduct was unlawful, if such person's action is based on the
records or books of account of the Corporation or another enterprise, or on
information supplied to such person by the officers of the Corporation or
another enterprise in the course of their duties, or on the advice of legal
counsel for the Corporation or another enterprise or on information or
records given or reports made to the Corporation or another enterprise by an
independent certified public accountant or by an appraiser or other expert
selected with reasonable care by the Corporation or another enterprise.
The term "another enterprise" as used in this Section 4 shall mean any other
corporation or any partnership, joint venture, trust, employee benefit plan
or other enterprise of which such person is or was serving at the request of
the Corporation as a director, officer, employee or agent. The provisions of
this Section 4 shall not be deemed to be exclusive or to limit in any way
the circumstances in which a person may be deemed to have met the applicable
standard of conduct set forth in Section 1 or 2 of this Article VIII, as the
case may be.
Section 5. Indemnification by a Court. Notwithstanding any
contrary determination in the specific case under Section 3 of this Article
VIII, and notwithstanding the absence of any determination thereunder, any
director or officer may apply to the Court of Chancery of the State of
Delaware or any other court of competent jurisdiction in the State of
Delaware for indemnification to the extent otherwise permissible under
Sections 1 and 2 of this Article VIII. The basis of such indemnification by
a court shall be a determination by such court that indemnification of the
director or officer is proper in the circumstances because such person has
met the applicable standards of conduct set forth in Section 1 or 2 of this
Article VIII, as the case may be. Neither a contrary determination in the
specific case under Section 3 of this Article VIII nor the absence of any
determination thereunder shall be a defense to such application or create a
presumption that the director or officer seeking indemnification has not met
any applicable standard of conduct. Notice of any application for
indemnification pursuant to this Section 5 shall be given to the Corporation
promptly upon the filing of such application. If successful, in whole or in
part, the director or officer seeking indemnification shall also be entitled
to be paid the expense of prosecuting such application.
Section 6. Expenses Payable in Advance. Expenses incurred by a director or
officer in defending or investigating a threatened or pending action, suit
or proceeding shall be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount
if it shall ultimately be determined that such person is not entitled to be
indemnified by the Corporation as authorized in this Article VIII.
Section 7. Nonexclusivity of Indemnification and Advancement of
Expenses. The indemnification and advancement of expenses provided by or
granted pursuant to this Article VIII shall not be deemed exclusive of any
other rights to which those seeking indemnification or advancement of expenses
may be entitled under the Certificate of Incorporation or any By-Law,
agreement, contract, vote of stockholders or disinterested directors or
pursuant to the direction (howsoever embodied) of any court of competent
jurisdiction or otherwise, both as to action in such person's official
capacity and as to action in another capacity while holding such office, it
being the policy of the Corporation that indemnification of the persons
specified in Sections 1 and 2 of this Article VIII shall be made to the
fullest extent permitted by law. The provisions of this Article VIII shall
not be deemed to preclude the indemnification of any person who is not
specified in Section 1 or 2 of this Article VIII but whom the Corporation
has the power or obligation to indemnifyunder the provisions of the GCL,
or otherwise.
Section 8. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director or officer of the
Corporation, or is or was a director or officer of the Corporation serving
at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise against any liability asserted against such
person and 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 or the obligation to indemnify such person against such liability
under the provisions of this Article VIII.
Section 9. Certain Definitions. For purposes of this Article VIII,
references to "the Corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify
its directors or officers, so that any person who is or was a director or
officer of such constituent corporation, or is or was a director or officer
of such constituent corporation serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise,
shall stand in the same position under the provisions of this Article VIII
with respect to the resulting or surviving corporation as such person would
have with respect to such constituent corporation if its separate existence
had continued. For purposes of this Article VIII, references to "fines" shall
include any excise taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of the Corporation"
shall include any service as a director, officer, employee or agent of the
Corporation which imposes duties on, or involves services by, such director
or officer with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner such
person reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted
in a manner "not opposed to the best interests of the Corporation" as
referred to in this Article VIII.
Section 10. Survival of Indemnification and Advancement of
Expenses. The indemnification and advancement of expenses provided by,
or granted pursuant to, this Article VIII shall, unless otherwise provided
when authorized or ratified, continue as to a person who has ceased to be
a director or officer and shall inure to the benefit of the heirs,
executors and administrators of such a person.
Section 11. Limitation on Indemnification. Notwithstanding anything contained
in this Article VIII to the contrary, except for proceedings to enforce
rights to indemnification (which shall be governed by Section 5 hereof), the
Corporation shall not be obligated to indemnify any director or officer (or
his or her heirs, executors or personal or legal representatives) or advance
expenses in connection with a proceeding (or part thereof) initiated by such
person unless such proceeding (or part thereof) was authorized or consented
to by the Board of Directors of the Corporation.
Section 12. Indemnification of Employees and Agents. The Corporation may, to
the extent authorized from time to time by the Board of Directors, provide
rights to indemnification and to the advancement of expenses to employees and
agents of the Corporation similar to those conferred in this Article VIII to
directors and officers of the Corporation.
ARTICLE IX
AMENDMENTS
Section 1. Amendments. These By-Laws may be altered, amended or
repealed, in whole or in part, or new By-Laws may be adopted by the Board of
Directors or by the stockholders as provided in the Certificate of
Incorporation.
Section 2. Entire Board of Directors. As used in this Article IX and in these
By-Laws generally, the term "entire Board of Directors" means the total number
of directors which the Corporation would have if there were no vacancies.
NOVACON COPRORATION
ANNUAL MEETING OF STOCKHOLDERS
WEDNESDAY, January 31, 2001
4:00 PM
BALLOT
THIS BALLOT IS FOR USE AT THE ANNUAL MEETING ON JANUARY 31, 2001.
By signing the Ballot, you revoke all prior ballots and proxies and vote your
shares on the matters shown on the reverse side at the Annual Meeting and all
adjournments.
SEE REVERSE FOR VOTING INSTRUCTIONS
PROPOSAL NO. 1:
Approve and adopt an amended and restated certificate of incorporation to (a)
decrease the number of our authorized shares of Common Stock, $0.01 par value,
from 15,000,000 to 1,250,000 shares of Common Stock, $0.001 par value, to
reflect our inactive business status, (b) increase the authorized shares of
Common Stock, $0.001 par value, to 50,000,000 shares, and (c) change the name
of the corporation to NVCN Corporation.
[ ] Yes [ ] No
PROPOSAL NO. 2:
Approve and adopt amended bylaws.
[ ] Yes [ ] No
PROPOSAL NO. 3: NOMINATED DIRECTORS
(1) Elect David P. Lang as a Director to serve until the 2001 Annual
Meeting or until is his successor is duly elected and qualified.
[ ] Yes [ ] No
(2) Elect Paul D. Rieff as a Director to serve until the 2001 Annual
Meeting or until is his successor is duly elected and qualified.
[ ] Yes [ ] No
(3) Elect Walter Zohmann as a Director to serve until the 2001 Annual
Meeting or until is his successor is duly elected and qualified.
[ ] Yes [ ] No
THIS BALLOT WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO
DIRECTION IS GIVEN, IT WILL NOT BE VOTED.
Address Change? Mark Box [ ]
Indicate changes below: Dated: _______________, 2001
Signature(s) in Box
________________________
Print Last Name ______________________
______________________
Please sign exactly as your name(s) appear on the Ballot Card. Trustees,
administrators, etc., should include title and authority. Corporations should
provide full name or corporation and title of authorized officer signing the
Ballot Card.
