<PAGE>
===============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Dynatec International, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
<PAGE>
Dynatec International, Inc.
3820 West Great Lakes Drive
Salt Lake City, UT 84120
(801) 973-9500
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 15, 1999
To the Shareholders:
Notice is hereby given that the annual meeting (the "Annual Meeting") of
the shareholders of Dynatec International, Inc. (the "Company") will be held at
the Company's corporate offices located at 3820 Great Lakes Drive, Salt Lake
City, Utah 84120, on Wednesday, September 15, 1999, at 11:00 a.m., M.S.T. for
the following purposes, which are discussed in the following pages and which are
made part of this Notice:
1. To elect four directors to serve as the Board of Directors until the
next annual meeting of shareholders or until their successors are duly
elected and qualified;
2. To approve the Board of Directors' selection of KPMG LLP as the
Company's independent public accountants to audit the consolidated
financial statements of the Company and its subsidiaries for the
fiscal year ending December 31, 1999;
3. To approve a series of transactions pursuant to which the Company (i)
has issued convertible debentures in the aggregate principal amount of
$1,500,000 to five institutional investors, which debentures are
convertible into shares of common stock, (ii) has issued warrants to
purchase a total of 750,000 shares of common stock, (iii) has issued
20,000 shares of common stock in payment of certain fees to placement
agents; and (iv) may issue up to $225,000 of common stock as payment
of certain contract damages, the net effect of which transactions may
be the issuance of more than 20% of the total number of shares of the
Company's common stock, par value $.01 per share ("Common Stock"),
issued and outstanding prior to the commencement of such transactions;
4. To approve the adoption of the Company's 1999 Incentive Stock Option
Plan under which certain employees, officers, directors and
consultants may receive options to purchase shares of the Company's
Common Stock, thereby attracting, retaining, and rewarding such
persons, and strengthening the mutuality of interests between such
persons and the Company's shareholders;
5. To authorize the amendment of the Company's Articles of Incorporation
to (i) create and authorize for future issuance a new class of capital
stock of the Company, consisting of ten million (10,000,000) shares of
preferred stock, par value $.01 per share ("Preferred Stock"), and
(ii) vest in the Board of Directors of the Company the authority to
establish by resolution of the Board of Directors, at or prior to the
time of issuance, without further vote or action by the shareholders
of the Company, distinct series of such Preferred Stock, and to fix by
resolution the rights, preferences, privileges, and restrictions of
each such series which the Board might designate; and
6. To consider and act upon any other matters that properly may come
before the Annual Meeting or any adjournment thereof.
The Company's Board of Directors has fixed the close of business on Friday,
July 30, 1999, as the record date (the "Record Date") for the determination of
shareholders having the right to notice of, and to vote at, the Annual Meeting
and any adjournment thereof. A list of such shareholders will be available for
examination by a shareholder as of the record date for any purpose germane to
the meeting during ordinary business hours at the offices of the Company at 3820
West Great Lakes Drive, Salt Lake City, Utah 84120, during the 10 business days
prior to the Annual Meeting.
<PAGE>
You are requested to date, sign and return the enclosed proxy, which is
solicited by the Board of Directors of the Company and will be voted as
indicated in the accompanying proxy statement. Your vote is important. Please
sign and date the enclosed Proxy and return it promptly in the enclosed return
envelope whether or not you expect to attend the meeting. The giving of your
proxy as requested hereby will not affect your right to vote in person should
you decide to attend the Annual Meeting. The return envelope requires no
postage if mailed in the United States. If mailed elsewhere, foreign postage
must be affixed. Your proxy is revocable at any time before the Annual Meeting.
By Order of the Board of Directors,
Frederick W. Volcansek, Sr.
Chairman and Chief Executive Officer
Salt Lake City, Utah
August 10, 1999
<PAGE>
Dynatec International, Inc.
3820 West Great Lakes Drive
Salt Lake City, Utah 84120
----------------------------------
PROXY STATEMENT
----------------------------------
ANNUAL MEETING OF SHAREHOLDERS
The enclosed proxy is solicited by the Board of Directors of Dynatec
International, Inc. ("Dynatec" or the "Company") for use in voting at the annual
meeting of shareholders (the "Annual Meeting") to be held at 3820 Great Lakes
Drive, Salt Lake City, Utah 84120, on Wednesday, September 15, 1999, at 11:00
a.m., M.S.T., and at any postponement or adjournment thereof, for the purposes
set forth in the attached notice. When proxies are properly dated, executed and
returned, the shares they represent will be voted at the Annual Meeting in
accordance with the instructions of the shareholder completing the proxy. If a
signed proxy is returned but no specific instructions are given, the shares will
be voted:
1. FOR the election of the slate of Directors set forth in this Proxy;
2. FOR approval of the Board of Directors' selection of KPMG LLP as the
Company's independent public accountants to audit the consolidated
financial statements of the Company and its subsidiaries for the fiscal
year ending December 31, 1999;
3. FOR approval of a series of transactions pursuant to which the Company
(i) has issued convertible debentures in the aggregate principal amount
of $1,500,000 to five institutional investors, which debentures are
convertible into shares of common stock, (ii) has issued warrants to
purchase a total of 750,000 shares of common stock, (iii) has issued
20,000 shares of common stock in payment of certain fees to placement
agents; and (iv) may issue up to $225,000 of common stock as payment of
certain contract damages, the net effect of which transactions may be
the issuance of more than 20% of the total number of shares of the
Company's common stock, par value $.01 per share ("Common Stock"),
issued and outstanding prior to the commencement of such transactions;
4. FOR approval of the adoption of the 1999 Incentive Stock Option Plan ;
and
5. FOR the amendment of the Company's Articles of Incorporation to create
and authorize for future issuance a new class of capital stock of the
Company, consisting of ten million (10,000,000) shares of Preferred
Stock, par value $.01 per share, and (ii) vest in the Board of Directors
of the Company the authority to establish by resolution of the Board of
Directors, at or prior to the time of issuance, without further vote or
action by the shareholders of the Company, distinct series of such
Preferred Stock, and to fix by resolution the rights, preferences,
privileges, and restrictions of each such series which the Board might
designate.
A shareholder giving a proxy has the power to revoke it at any time prior to its
exercise by voting in person at the Annual Meeting, by giving written notice to
the Company prior to the Annual Meeting or by giving a later dated proxy.
The presence at the Annual Meeting, in person or by proxy, of the holders
of a majority of the Company's Common Stock issued and outstanding and entitled
to vote at the Annual Meeting is necessary to constitute a quorum to transact
business. Each share of Common Stock represented at the Annual Meeting in
person or by proxy will be counted for purposes of determining whether a quorum
is present. In deciding all matters, a holder of Common Stock
<PAGE>
on the Record Date shall be entitled to cast one vote for each share of Common
Stock then registered in such holder's name. Abstentions and broker non-votes
will count for purposes of establishing a quorum; their effect on the specific
proposals included in this Proxy Statement is discussed separately below. Votes
cast by shareholders who attend and vote in person or by proxy at the Annual
Meeting will be counted by inspectors to be appointed by the Company (the
Company anticipates that the inspectors will be employees, attorneys or agents
of the Company).
Under Utah law and the Company's Articles of Incorporation and Bylaws, each
of the Company's directors will be elected by a plurality of the votes cast by
the shares entitled to vote in the election of directors. Under Utah law,
approval of proposals 2, 3, 4 and 5 requires the affirmative vote of a majority
of the shares of Common Stock present or represented at the Annual Meeting and
entitled to vote thereon. Additionally, the Rules of the Nasdaq Stock Market,
which apply to the Company for so long as the Common Stock is quoted on the
Nasdaq SmallCap Market, require approval of Proposal No. 3 by a majority of the
votes actually cast on the proposal in person or by proxy. Abstentions on
proposals 2, 3, 4 and 5 may be specified and will be counted for purposes of
determining the number of shares present or represented and entitled to vote
thereon. As a result, abstentions will have the same effect as votes against
these proposals. Broker non-votes will not be counted as votes cast or entitled
to be cast on the proposal and therefore will have no effect on the result of
the vote.
The close of business on July 30, 1999, has been fixed as the Record Date
for determining the shareholders entitled to notice of, and to vote at, the
Annual Meeting. Each share shall be entitled to one vote on all matters. As
of the Record Date there were ______________ shares of Common Stock outstanding
and entitled to vote. For a description of the principal holders of such stock,
see "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT" below.
This Proxy Statement and the enclosed Proxy are being furnished to
shareholders on or about August 10, 1999.
----------------------------------------
PROPOSAL NO. 1
TO ELECT FOUR DIRECTORS TO SERVE AS THE BOARD OF DIRECTORS UNTIL THE NEXT ANNUAL
MEETING OF SHAREHOLDERS OR UNTIL SUCCESSORS ARE DULY ELECTED AND QUALIFIED.
The Company's Bylaws provide that the number of directors shall be
determined from time to time by the shareholders or the Board of Directors, but
that there shall be no less than three. Presently the Company's Board of
Directors consists of four members, all of whom are nominees for election at the
Annual Meeting. Each director elected at the Annual meeting will hold office
until his successor is elected and qualified, or until the director resigns, is
removed or becomes disqualified. A plurality of votes cast by the shares
entitled to vote in the election of directors will be required to elect each
director. Unless marked otherwise, proxies received will be voted for the
election of each of the nominees named below. If any such person is unable or
unwilling to serve as a director at the date of the Annual Meeting or any
postponement or adjournment thereof, the proxies will be voted for a substitute
nominee, designated by the proxy holders or by the present Board of Directors to
fill such vacancy, or for the balance of those nominees named without nomination
of a substitute, or the Board may be reduced accordingly. The Board of Directors
has no reason to believe that any of such nominees will be unwilling or unable
to serve if elected as a director. The nominees for consideration at the Annual
Meeting are as follows:
. Frederick W. Volcansek, Sr.
. Paul A. Boyer
. Wayne L. Berman
. Reed Newbold
-2-
<PAGE>
The Board of Directors recommends a vote FOR each nominee to the Board of
Directors.
The following table sets forth certain information regarding the executive
officers and directors of Dynatec as of June 30, 1999.
<TABLE>
<CAPTION>
Name Age Title
- ------------- --- --------------------
<S> <C> <C>
Frederick W. Volcansek, Sr. 53 Chairman of the Board of Directors and
Chief Executive Officer
Paul A. Boyer 35 Senior Vice President, Chief Financial Officer
and Director
Reed Newbold 52 Director
Wayne L. Berman 42 Director
</TABLE>
Frederick W. Volcansek Sr. was employed by the Company's Board of Directors
as the Company's Chief Executive Officer on February 6, 1999. On that same day
he was appointed Chairman of the Company's Board of Directors. Prior to that
time, Mr. Volcansek served as an outside director of the Company from 1988 to
February 6, 1999. Before accepting full-time employment as the Chief Executive
Officer of the Company, from June 1996 to February 1999 Mr. Volcansek was the
Vice President of Development for TM Global Power, LLC and the President of
Mosbacher Power do Brasil Ltda. in Houston, Texas. Mr. Volcansek also has
several years' experience in international market development and as a political
consultant for several large multi-national corporations, including US West,
Enron and Ogden Corp. President Bush appointed Mr. Volcansek Deputy Under
Secretary of the U.S. Department of Commerce (International Trade
Administration) from June 19, 1992, after serving as Deputy Assistant Secretary
of Commerce for Trade and Development from June 1990. Mr. Volcansek received a
B.S. degree in 1967 from Texas Tech University.
Paul A. Boyer has been Senior Vice President, Chief Financial Officer and
Secretary of the Company since October 1998. He was appointed to the Company's
Board of Directors on January 14, 1999. Prior to joining the Company, from
November 1996 to October 1998, Mr. Boyer served as Director of Finance for Mrs.
Fields' Original Cookies, Inc., were he was responsible for mergers and
acquisitions, corporate budgeting, financial planning and strategic analysis.
Mr. Boyer also served as Chief Financial Officer of Wasatch Education Systems,
an educational software development company from October 1990 to November 1996 .
Mr. Boyer received his Masters in Accountancy from San Diego State University in
1987.
Wayne L. Berman was appointed to the Company's Board of Directors on March
5, 1999. Mr. Berman presently is Managing Director of Park Strategies, L.L.C.,
an international business consultancy he founded in 1999. In that capacity, he
advises companies including Lockheed Martin, American International Group, US
West, BMW Corporation, AON Corporation and Philip Morris on matters relating to
new business opportunities, international financing strategies and strategic
relationships. Mr. Berman also is currently a Fellow at the Center for
Strategic and International Studies and was recently appointed to the Library of
Congress' Board of Trustees. From 1993 to 1999, Mr. Berman was Managing
Director of Berman Enterprises, an international consultancy. Prior to that,
Mr. Berman was Managing Partner of American Mercantile Group, a private merchant
bank, in which capacity he developed and managed a $100 million merchant banking
fund specializing in middle-market American companies with underdeveloped
exports. In January 1989, President George Bush appointed Mr. Berman Assistant
Secretary of Commerce for Policy, a position he occupied until January 1991. He
has held numerous other political positions, including Vice Presidential
Campaign Director for Dole-Kemp (1996), member of the Budget and Policy
Priorities Committee of the Pataki transition team (1994), Deputy Director and
Executive Producer, 1992 Republican National Convention, Senior Staff and
Director of Congressional Relations, Bush Campaign (1988), and Deputy Director
of the Reagan-Bush Transition Team (1981). Mr. Berman received his Bachelor of
Arts at the University of Buffalo and attended graduate school at Georgetown
University.
-3-
<PAGE>
Reed Newbold has been an outside Director of the Company since 1988. Mr.
Newbold is the founder of Newbold Financial, a financial planning and mortgage
brokerage services company. He also served as Vice President of Tracy Collins
Bank & Trust.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of December 31, 1998, the number of
shares of Common Stock of the Company beneficially owned by all persons known to
be holders of more than five percent of the Company's Common Stock and by the
executive officers and directors of the Company individually and as a group.
Unless indicated otherwise, the address of the shareholder is the Company's
principal executive offices, 3820 West Great Lakes Drive, Salt Lake City, Utah
84120.
The Company has only one class of equity, common stock, par value $.01 per
share. The only persons known by the Board of Directors to be the beneficial
owners of more than five percent of the outstanding shares of the Common Stock
of the Company, as of December 31, 1998 are indicated in the following table:
<TABLE>
<CAPTION>
Name and Address of Common Stock Percent of Class
Beneficial Owner Beneficially Owned as of 12/31/98
---------------- ------------------ --------------
<S> <C> <C>
Boa Sorte Limited 162,000 5.6%
Partnership
1819 East Southern Avenue
Mesa, AZ 85204
Ditta Limited Partnership 158,831 5.5%
1819 East Southern Avenue
Mesa, AZ 85204
Muito Bem, LTD (1) 158,000 5.5%
3078 American Saddler Dr.
Park City, UT 84060
- ----------------------------
</TABLE>
The above table reflects actual beneficial ownership as of December 31,
1998. It does not take into account shares subject to issuance under Common
Stock purchase options granted under the Company's existing stock option plans
or otherwise. A total of 2,891,627 shares were outstanding at December 31, 1998.
(1) Muito Bem LTD is a limited partnership in which Mr. Donald M. Wood, the
Company's former Chairman and Chief Executive Officer, is a limited partner
and the president of the corporate general partner. Mr. Wood is deemed to
be a beneficial owner of these shares.
During 1996 and 1997, the Company's Board of Directors authorized grants of
non-qualified stock options which are tied to the profitability of the Company
and based upon minimum years of employment. Options to purchase a total of
840,000 shares at an exercise price of $2.00 per share were granted on December
31, 1999. To vest, the holder-employee must continue his employment with the
Company through the year 2001, and the Company must be profitable three out of
four years commencing January 1, 1998. 800,000 additional non-qualified stock
options with similar terms were granted on January 2, 1997. To vest, the
holder-employee must continue his employment with the
-4-
<PAGE>
Company through the year 2001, and the Company must be profitable three out of
four years commencing January 1, 1998.
In 1996, the Company granted 537,500 non-qualified stock options to Muito
Bem Ltd., an entity owned by Donald M. Wood, the Company's former Chairman and
Chief Executive Officer, at an exercise price of $2.50 per share in
consideration of all knowledge, trade secrets and a continuing non-compete
agreement, regarding the telephone headset product line, as well as personal
real estate pledged as collateral on Company debts by the chief executive
officer. In addition, WAC Research, Inc., an entity affiliated with Mr. Wood,
was granted 200,000 options having terms identical to the Muito Bem options.
These options are not exercisable until December 30, 2000. Subsequent to the
issuance of these options, the strike price was adjusted from $2.00 to $2.50 per
share to reflect the market value on the date of grant. In January 1999, upon
his resignation from the Company, Mr. Wood agreed to the cancellation of all of
the Muito Bem options and a total of 900,000 non-qualified Common Stock purchase
options granted to him on December 31, 1996 and January 2, 1997.
The following table sets out the beneficial ownership of the Company's
common stock of all of the Company's directors and officers.
SECURITY OWNERSHIP OF MANAGEMENT
<TABLE>
<CAPTION>
Amount and Nature of
Beneficial Ownership of
Common Stock by
Management as of
Name December 31, 1998 Percent of Class
---- ----------------- ----------------
<S> <C> <C>
Donald M. Wood (3) 188,007 (1) 6.5%
Frederick R. Jack (4) 37,009 (2) 1.3%
Reed D. Newbold 2,000 (5)
All directors and officers 227,016 7.9%
as a group (5 persons)
</TABLE>
(1) Includes 2,007 shares owned by Annalee G. Wood, spouse of Donald M. Wood;
162,000 shares held by Muito Bem LTD of which Donald M. Wood is deemed a
beneficial owner; and 24,000 shares subject to options exercisable under
incentive stock option plan.
(2) Includes 19,000 shares subject to options exercisable under the incentive
stock option plan.
(3) Resigned from the Company on January 14, 1999.
(4) Resigned from the Company on March 17, 1999.
(5) Ownership is less than 1% of the outstanding shares of the Company.
-5-
<PAGE>
Board Compensation
From March 1, 1999 until June 30, 1999, members of the Company's Board of
Directors, other than officers of the Company, were compensated $2,000 per month
for their services rendered. Until March 1, 1999, board members were
compensated in the amount of $10,000 annually. In June 1999, the Company issued
stock options to the non-employee members of the Board of Directors, which
option grants replace future cash compensation. As of July 1, 1999, Employee
directors are not compensated for their services on the Board of Directors,
although until July 1, 1999 they received compensation according to the
historical rate of $10,000 per annum.
Board of Directors Committees
Three functioning committees of the Company's Board of Directors have been
organized including (i) Executive Committee, (ii) Compensation Committee and
(iii) Audit Committee. Following is a brief description of each of these
committees.
Executive Committee. The Executive Committee is composed of Messrs.
-------------------
Volcansek (Chairman), and Boyer. The purpose of this committee is to act on the
behalf of the entire Board of Directors with respect to routine matters between
Board Meetings.
Compensation Committee. The Compensation Committee is composed of Messrs.
----------------------
Berman (Chairman), Newbold and Volcansek. The purpose of this committee is to
ensure that the Company has a broad plan of executive compensation that is
competitive and motivating to the degree that it will attract, hold and inspire
performance of managerial and other key personnel of a quality and nature that
will enhance the growth and profitability of the Company.
Audit Committee. The Audit Committee is comprised of Messrs. Newbold
---------------
(Chairman), Berman and Volcansek. The purpose of the Audit Committee is to
provide oversight and review of the Company's accounting and financial reporting
process in consultation with the Company's independent auditors.
Indemnification and Compensation
The Company's Bylaws authorize the Company to indemnify its present and
former directors and officers and to pay or reimburse expenses for such
individuals in advance of the final disposition of a proceeding upon receipt of
an undertaking by or on behalf of such individuals to repay such amounts if so
required.
Executive Compensation
The following table sets forth information with regard to compensation for
services rendered in all capacities to the Company by the Chief Executive
Officer, the four most highly compensated executive officers other than the CEO
who were serving as executive officers at the end of the last completed fiscal
year and two additional individuals for whom disclosure would have been
provided, but for the fact that the individual was not serving as an executive
officer at the end of the last completed fiscal year. Information set forth in
the table reflects compensation earned by such individuals for services with the
Company or its subsidiaries.
-6-
<PAGE>
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term Compensation
---------------------------------------------------
Annual Compensation Awards Payouts
----------------------------------------------------------------------------------------
Securities
Other Restricted Underlying
Annual Stock Options/ LTIP All Other
Name and Salary Bonus (2) Compensation Award(s) SARs (3) Payouts Compensation
Principal Position Year ($) ($) ($) ($) (#) ($) ($)
- ------------------ ---- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Donald M. Wood (4) 1998 $193,723 $1,624 $12,500 - - - -
Chairman and CEO 1997 194,433 3,249 14,000 - 14,000 - -
1996 194,640 1,421 8,000 - 10,000 - -
F. Randy Jack (5) 1998 140,333 1,725 10,000 - - - -
President and COO 1997 129,142 3,465 14,000 - 10,000 - -
1996 142,440 1,522 8,000 - 9,000 - -
Dale Gledhill (6) 1998 162,556 355 - - - - -
Vice President Sales 1997 143,029 541 - - - - -
1996 124,354 152 - - - - -
</TABLE>
_________________
(1) Total cash compensation shown above does not include the value of company
leased or owned vehicles and insurance payments made on behalf of officers.
Such items are included on the individual officers W-2's. The amounts
shown as other annual compensation are directors fees received during the
fiscal year.
(2) Bonus compensation includes time in service bonus.
(3) An incentive stock option plan was implemented in November 1996. Options
were granted as approved by the Board of Directors on December 30, 1996 and
again on January 2, 1997.
(4) Resigned from Company on January 14, 1999.
(5) Resigned from Company on March 17, 1999.
(6) Not an Executive Officer.
Employment Agreements
Mr. Wood and Mr. Jack had employment contracts with the Company prior to
their respective resignations. In both cases, their employment contracts were
terminated upon their respective resignations. Additionally, Mr. Volcansek, the
Company's Chief Executive Officer as of February 5, 1999, and Mr. Boyer, the
Company's Chief Financial Officer as of October 19, 1998, each have employment
contracts with the Company.
Messrs. Volcansek, Boyer and Lloyd M. "Tag" Taggart, the Company's Senior
Vice President Sales, each have employment agreements that provide for a period
of employment of four years from the date of the agreements, subject to
termination provisions and to extension of the agreement as provided for
therein. The employment agreements permits each of them to participate in any
incentive compensation plan adopted by the Company, benefit plans and an equity-
based plan or arrangements. If the Company terminates any of Messrs. Volcansek,
Boyer and Taggart employment for cause, or if any of them terminate their
employment without good reason, the Company has no further obligation to pay
them under their respective contracts. If the Company terminates any of their
employment without cause, the terminated executive may receive
-7-
<PAGE>
severance pay equal to two years of his then current annual salary. In the event
of a merger, acquisition, dissolution or transfer of substantially all of the
Company's assets, the contracts must then be honored by the surviving entity or
it must purchase the contracts for a sum equal to three (3) years' base salary.
The employment agreements prohibits each of the Messrs. Volcansek, Boyer and
Taggart for two years from the date of termination of their respective
employment under the agreements, from becoming an employee, owner (except for
investments in up to 5% of the equity securities of a company listed or traded
on a national securities exchange or the NASDAQ Stock Market), officer, agent or
director of a firm or person that competes with the Company in the consumer
products industry. The employment agreements have customary provisions for
vacation, fringe benefits, payment of expenses and automobile allowances. Mr.
Volcansek's base salary is $195,000, Mr. Boyer's base salary is $150,000, and
Mr. Taggart's base salary is $140,000. In July 1999, Mr. Volcansek's base salary
was increased to $205,000.
Stock Plans
In November 1996, the Company's shareholders approved an Incentive Stock
Option Plan (the "1996 Plan") for the benefit of the officers and employees of
the Company. No formal criteria for grants under the 1996 Plan were
established, except that the 1996 Plan authorizes grants of no more than 300,000
shares of Common Stock. The 1996 Plan provides that options will be granted
under that plan at exercise prices equal to the market value as of the date the
option is granted. On January 2, 1997 and December 30, 1996, the Board of
Directors approved the issuance of 105,000 and 95,000 qualified incentive stock
options pursuant to the 1996 Plan.
Proposal Number 4 in this Proxy Statement concerns the proposal by the
Board of Directors for the shareholders of the Company to adopt a new stock
option plan. Shareholders should also read the description of the proposed
stock option plan under "PROPOSAL NO. 4" below.
Compliance with Section 16(a) of the Exchange Act
During the year ended December 31, 1998, as far as the Company is aware,
all officers and directors prepared and timely filed all Forms 3, 4 and 5
required by Section 16(a) of the Exchange Act, except that a Form 3 for Mr.
Boyer inadvertently was not timely filed. This oversight subsequently was
corrected. Mr. Boyer has had no transactions in the Company's common stock.
Certain Relationships and Related Transactions
The Company's subsidiary Softalk, Inc., holds licensing rights for the
patent and trademark rights associated with the Company's Softalk product line
pursuant to a royalty agreement with WAC Research Inc., a Utah corporation
("WAC"). Donald M. Wood, a shareholder who, until January 14, 1999, was the
Company's Chairman and Chief Executive Officer, owns a one-half equity interest
in WAC. WAC obtained the patent and trademark rights for the Softalk products
in August 1986, when WAC purchased them from the inventor of Softalk and related
products in a private transaction. The purchase price for such patent and
trademark rights was $1 to 2 million, which was paid to Practical Innovations,
Inc., in a combination of Dynatec common stock and cash. Under the terms of the
agreement, Dynatec was obligated to pay a 10% royalty on all Softalk sales. At
that time, WAC and the Board of Directors of the Company determined that the 10%
royalty was onerous and non-sustainable. Therefore, WAC agreed to lower the
royalty to 5%. In addition, under the royalty arrangement between WAC and
Dynatec, the payment of royalties for the fourth quarter of each year is
contingent upon the Company obtaining a specified level of earnings for each
calendar year. During the years ended December 31, 1998 and 1997, the Company
paid WAC $172,669 and $120,312, respectively, in royalties.
During 1995, the Company sold all rights and interest in various
discontinued products to WAC for $193,000 in the form of a demand note bearing
8% interest. As part of the transaction, inventory and molds were also sold at
cost to WAC.
-8-
<PAGE>
In June 1997, the Company received 18,000 shares of its common stock from
WAC as payment in full of all outstanding balances. Such shares were valued at
the market price of $10.00 per share, which represented the current market value
of the stock. The treasury stock was used to pay off $154,000 on the note and
accrued interest and $26,000 of other WAC related receivables.
In September 1998 WAC advanced $98,403 to the Company as reimbursement to
the Company of Mr. Wood's salary for the first six months of 1998. The Company
subsequently determined that this amount was a payable to WAC, and at December
31, 1998 the Company had recognized the $98,403 in accounts payable - related
party, in the accompanying balance sheet. In February 1999, the Company repaid
this amount to WAC.
Donald M. Wood, who served as the Company's Chief Executive Officer during
the entirety of 1998 and until January 14, 1999, owned a residential rental
property in Park City, Utah during all of 1997 and until August 1998. The
Company leased this property from him to use for Dynatec-related travel,
promotional work, lodging, and entertainment for customers, suppliers, and
employees. The monthly rental payment for this property was $7,000. The
Company paid $56,000 and $84,000 for each of the years ending December 31, 1998
and 1997, respectively. This cost also covered operating and maintenance costs,
and general care of the property. In August 1998, this property was sold by Mr.
Wood. As a result, the Company is no longer obligated to pay rental fees.
In July 1998, the Company's Board of Directors commenced an internal
investigation into the facts and circumstances of a number of transactions
between the Company and certain of its officers and directors as well as several
general corporate and management concerns brought to the attention of the
Company's independent directors. The Company engaged an unrelated third party
to conduct the investigation, which the Company eventually terminated in January
1999. Thereafter, Donald M. Wood resigned and retired from the Company. The
Company does not anticipate taking further action, legal or otherwise, with
respect to the matters investigated, although the Company, through its new
management, has identified several areas in which new corporate governance
policies have been adopted or old policies changed. In connection with the
investigation, several of the Company's directors engaged independent legal
counsel. An aggregate of $230,000 of such legal fees were reimbursed by the
Company pursuant to action by the Company's Board of Directors at the
commencement of the investigation.
During 1997 the Board of Directors authorized grants of various options
under both non-qualified and incentive stock options programs. The non-
qualified plans included 537,500 options granted to Muito Bem Ltd., an entity
controlled by a shareholder and former CEO of the Company, at a strike price of
$2.50 per share. The shareholder and former executive officer of the Company
who owns Muito Bem, Ltd. agreed in 1999 to cancel all stock options issued to
Muito Bem, Ltd. Additionally, in 1997, 200,000 options were granted to WAC, at a
strike price of $2.50 per share in consideration for certain royalty reductions
and travel expense reimbursements.
In May 1989, the Company engaged Alpha Tech Stock Transfer Company ("Alpha
Tech") as the Company's stock transfer agent. Alpha Tech served in that
capacity until January 13, 1999, when the Company notified Alpha Tech of the
Company's termination of Alpha Tech's agency and instructed Alpha Tech to
transfer the Company's records to American Stock Transfer Company, New York, New
York. James W. Farrell, the principal of Alpha Tech, is the brother-in-law of
Donald M. Wood, the Company's Chairman and Chief Executive Officer until his
resignation from the Company effective January 14, 1999. During the years ended
December 31, 1998 and 1997, the Company paid Alpha Tech a total of $1,530 and
$16,679, respectively, in fees for services rendered. The Company believes that
the fees paid to Alpha Tech during these periods were roughly comparable to the
fees it would have paid to a similar local transfer agent for similar services.
-9-
<PAGE>
PROPOSAL NO. 2
TO APPROVE THE BOARD OF DIRECTORS' SELECTION OF KPMG LLP AS THE COMPANY'S
INDEPENDENT PUBLIC ACCOUNTANTS TO AUDIT THE CONSOLIDATED FINANCIAL STATEMENTS OF
THE COMPANY AND ITS SUBSIDIARIES FOR THE FISCAL YEAR ENDING DECEMBER 31, 1999.
The Board of Directors of the Company has selected KPMG LLP as the
independent public accountants for the Company to audit its consolidated
financial statements for the fiscal year ending December 31, 1999. KPMG LLP
also served as the Company's independent public accountants for the fiscal year
ended December 31, 1998.
At the Annual Meeting, shareholders will be asked to ratify the selection
by the Board of Directors of KPMG LLP as the Company's independent public
accountants. The vote of a majority of the shares cast at the Annual Meeting
will ratify this selection.
Representatives of KPMG LLP are expected to attend the Annual Meeting and
will have an opportunity to make a statement if they desire, and they will be
available to respond to appropriate questions from shareholders.
The Board of Directors recommends a vote for ratification of the selection of
independent public accountants.
PROPOSAL NO. 3
TO APPROVE A SERIES OF TRANSACTIONS PURSUANT TO WHICH THE COMPANY (I) HAS ISSUED
CONVERTIBLE DEBENTURES IN THE AGGREGATE PRINCIPAL AMOUNT OF $1,500,000 TO FIVE
INSTITUTIONAL INVESTORS, WHICH DEBENTURES ARE CONVERTIBLE INTO SHARES OF COMMON
STOCK, (II) HAS ISSUED WARRANTS TO PURCHASE A TOTAL OF 750,000 SHARES OF COMMON
STOCK, (III) HAS ISSUED 20,000 SHARES OF COMMON STOCK IN PAYMENT OF CERTAIN FEES
TO PLACEMENT AGENTS; AND (IV) MAY ISSUE UP TO $225,000 OF COMMON STOCK AS
PAYMENT OF CERTAIN CONTRACT DAMAGES, THE NET EFFECT OF WHICH TRANSACTIONS MAY BE
THE ISSUANCE OF MORE THAN 20% OF THE TOTAL NUMBER OF SHARES OF THE COMPANY'S
COMMON STOCK, ISSUED AND OUTSTANDING PRIOR TO THE COMMENCEMENT OF SUCH
TRANSACTIONS.
Introduction
On May 21, 1998, the Company entered into a Convertible Debenture and
Equity Line of Credit Agreement ("Credit Agreement") with five accredited
investors (the "Investors"), none of which had previously been affiliated with
or a shareholder of the Company. Pursuant to the Credit Agreement, the Investors
purchased convertible debentures (the "Debentures") in the aggregate face amount
of $1,500,000. The Debentures accrue interest on the principal amount of the
Debentures at a rate of twelve percent (12%) per annum until a registration
statement registering the shares underlying the Debentures (the "Registration
Statement") is declared effective, at which time the interest rate will be
reduced to six percent (6%) per annum. The principal amount of the Debentures
and any interest accrued on the Debentures is convertible into shares of Common
Stock according to a conversion formula under which the principal amount being
converted, plus the amount of the accrued interest, is divided by the lesser of:
(i) 75% of the average of the three lowest closing bid prices of the Common
Stock as quoted on the Nasdaq Small Cap Market during the 22 trading-day period
immediately preceding the conversion date, and (ii) $6.50. As of the date
hereof, a total of $132,500 principal amount of Convertible Debentures, together
with accrued principal thereon have been converted into a total of 106,923
shares of Common Stock.
-10-
<PAGE>
The Credit Agreement further required the Company to purchase an additional
$500,000 principal amount of Debentures immediately after the date of
effectiveness of a registration statement covering the shares of Common Stock
issuable under the Credit Agreement and the various convertible instruments
issued in connection with that agreement (the "Additional Debentures").
In addition to the sale of the Debentures, in connection with the Credit
Agreement, the Company also obtained the right to use a "put" mechanism to draw
down up to $10,000,000 of additional equity capital under an equity line of
credit (the "Equity Line of Credit"). Under the Credit Agreement, the Company
was obligated to exercise this put mechanism with respect to a minimum of
$1,000,000 of the Equity Line of Credit at some time during the two year period
following the effective date of the registration statement covering the shares
of Common Stock issuable under the Equity Line of Credit. All amounts drawn
under the Equity Line of Credit were to be drawn in increments of not less than
$50,000. In return for the payment by the Investors of additional capital upon
such put exercises, the Company was required to issue shares (the "Equity Line
Shares") of its Common Stock at a per share purchase price equal to 80% of the
average of the three lowest closing bid prices of the Common Stock during a six
day valuation period commencing three days before the put date and ending two
days after the put date. The put mechanism could not be used, and the Company
had no obligation to exercise any portion of the put mechanism, until after the
effective date of the registration statement for the Common Stock underlying the
Credit Agreement.
In connection with the Credit Agreement, the Company issued warrants to
purchase shares of the Company's Common Stock to the Investors and to the
placement agent and its assignees who arranged the private placement (the
"Placement Agent"). These warrants have a three year term from the issue date
and were issued as Series A (the "Series A Warrants") and Series B (the "Series
B Warrants") as follows:
Placement Exercise
Investors Agent Price
----------- --------- --------
Series A Warrants 150,000 150,000 $6.50
Series B Warrants 150,000 300,000 $7.15
Additionally, upon the purchase and sale of the Additional Debentures, the
Company was obligated to issue 50,000 additional Series A Warrants to the
Placement Agent and 50,000 additional Series A Warrants to the Investors.
As additional consideration to the Placement Agent, the Company agreed to
and did issue at the closing of the Debentures in May 1998 a total of 20,000
shares of restricted common stock. Additionally, the Company agreed to issue up
to 60,000 additional shares of common stock to the Placement Agent if, when and
as the Company exercised the put mechanism described above in connection with
the Equity Line of Credit, at the rate of 6,000 shares for each $1,000,000 of
put exercises. The additional 60,000 shares of Common Stock were issued in May
1998 and presently are held in escrow.
Under the Credit Agreement, and because a registration statement covering
the Common Stock issuable under the Credit Agreement, the Debentures and the
Warrants, was not declared effective on or before August 22, 1998, the Company
became obligated to pay liquidated damages to the Investors. Between September
23, 1998 and February 23, 1999, the Company paid a total of $210,000 in such
liquidated damages to the Investors. As of March 1999, and continuing
thereafter until such time as the registration statement is declared effective,
the Company was obligated to pay liquidated damages in the amount of $45,000 per
month.
On June 25, 1999, the Company and the Investors entered into a Modification
Agreement ("Modification Agreement"), under which the parties agreed to cancel
the Equity Line of Credit and all of the parties' respective obligations
-11-
<PAGE>
thereunder. The parties to the Modification Agreement also agreed to cancel the
Investors' obligation to purchase and the Company's obligation to sell the
Additional Debentures upon the effectiveness of the registration statement.
Additionally, the Modification Agreement provides for the modification and
temporary abatement of the Company's obligation to pay cash liquidated damages
resulting from the Company's obligation to have the Registration Statement
declared effective on or before August 28, 1998. Specifically, under the
Modification Agreement, the Company is to accrue the $45,000 of monthly
liquidated damages for the period from February 24, 1999 through and including
June 23, 1999, which accrued amount is payable at any time after October 1,
1999, upon request for payment therefore by the Investors, in shares of Common
Stock. The number of shares of Common Stock issuable upon such payment shall be
determined by dividing the total amount of damages accrued by 100% of the
average of the closing bid prices of the Common Stock during the five trading
day period immediately preceding the date of such payment. Additionally, under
the Modification Agreement, the Company's obligation to pay liquidated damages
under the Credit Agreement is abated from June 24, 1999 through and including
September 23, 1999, provided that the Registration Statement is declared
effective on or before October 31, 1999. If the Registration Statement is not
declared effective on or before October 31, 1999, the Modification Agreement's
provisions providing for the payment of liquidated damages in stock and the
abatement of liquidated damages from June 24, 1999 to September 23, 1999, as
well as the Company's ability to pay accrued liquidated damages in Common Stock
may be rescinded at the option of the Investors. Except to the extent
specifically modified by the Modification Agreement, the terms and conditions of
the Credit Agreement and the documents and instruments incorporated in the
Credit Agreement continue in force.
The Company filed the Registration Statement on Form SB-2 with the
Securities and Exchange Commission as required by the Credit Agreement to
register the shares of Common Stock underlying the Debentures, the Warrants, and
the Equity Line of Credit, and, in June 1999 filed Amendment Nos. 1 and 2 to the
Registration Statement. Amendment No. 2 covers the shares of Common Stock
issuable only under the Debentures, the Warrants and the shares of Common Stock
issued to the Placement Agent as fees and to be issued to the Investors as
payment of liquidated damages. The Registration Statement is not effective as of
the date of this Proxy Statement. There can be no assurance that the
Registration Statement will ever be declared effective.
Given the structure of the conversion formula applicable to the Debentures
and the formula for determining the number of shares payable as liquidated
damages, there effectively is no limitation on the number of shares of Common
Stock issuable under the Credit Agreement, as modified. As the market price of
the Common Stock decreases, the number of shares of Common Stock underlying the
Debentures continues to increase.
The following table provides the number of shares of common stock issuable
upon conversion of the Debentures, the exercise of all of the Series A and
Series B Warrants, and the payment by the Company of a total of $225,000 of
liquidated damages (based upon a hypothetical conversion of the Debentures and
payment of such liquidated damages as of June 25, 1999) and the percentage of
the Common Stock that would be held by the Investors under the Credit Agreement
assuming such hypothetical conversions, exercises and issuances. The table
shows the potential ownership of the Investors and the Placement Agent assuming
the following:
(i) Conversion by the Investors of an aggregate amount of $1,367,500
aggregate principal amount of the Debentures as of June 25, 1999. The
number of shares is determined by dividing the total aggregate amount,
$1,367,500 by $1.30475. The table also includes payment of accrued
interest as of June 25, 1999 at the rate of twelve percent (12%) per
annum from May 22, 1998, on the aggregate principal amount of
$1,367,500, although under the terms of the Debentures, the premium
accrues at twelve percent only until the Registration Statement is
declared effective, at which time the accrual rate is reduced to six
percent (6%) per annum until the Debenture is fully converted.
-12-
<PAGE>
(ii) The exercise by the Investors and the Placement Agent of a total of
750,000 presently exercisable Common Stock purchase warrants.
(iii) The hypothetical issuance by the Company of 120,000 shares of Common
Stock in payment of accrued liquidated damages in the aggregate
amount of $225,000, as of June 25, 1999, on which date the
conversion price would have been $1.875.
(iv) The issuance by the Company of 20,000 shares of common stock to the
Placement Agent as of May 22, 1998.
Under the terms and conditions of the Credit Agreement, as modified by the
Modification Agreement, as of each conversion of the Convertible Debentures, the
number of shares issuable upon such conversion by each Investor may not exceed
the number of shares which, when aggregated with all other shares of Common
Stock then owned by such Investor and which were acquired under this Agreement,
would result in the Investor owning more than 9.99% of all of such Common Stock
as would be outstanding on such closing date. This restriction does not prevent
such holders from converting and selling some of their convertible security
position and thereafter converting or exercising the rest or another significant
portion of their holding. In this way, individual Investors could sell more
than 9.999% of the outstanding Common Stock in a relatively short time frame
while never beneficially owning more than 9.999% of the outstanding Common Stock
at a time. For purposes of calculating the number of shares of Common Stock
issuable assuming a full conversion of the total aggregate amount of the
Debentures, the effect of such 9.999% limitation has been disregarded. The
number of shares issuable to each of the holders as described in the table below
therefore may exceed the actual number of shares such holders may be entitled to
beneficially own upon conversion of the Convertible Debentures, exercises of
the Warrants and issuance of shares as payment of liquidated damages. The
following information is not determinative of any person's beneficial ownership
of Common Stock pursuant to Rule 13d-3 or any other provision under the
Securities Exchange Act of 1934, as amended.
-13-
<PAGE>
POTENTIAL OWNERSHIP OF SHARES
ASSUMING FULL CONVERSION
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Percentage of Ownership
Number of Shares Potentially Assuming Full Conversion,
Name Owned by Shareholder Exercise and Issuance
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Autost Anstalt Schaan 714,276 (1) 17.0%
- ----------------------------------------------------------------------------------------------------------
Balmore Funds S.A. 714,276 (1) 17.0%
- ----------------------------------------------------------------------------------------------------------
Ellis Enterprises 114,258 (2) 3.2%
- ----------------------------------------------------------------------------------------------------------
Hewlette Fund 56,984 (3) 1.6 %
- ----------------------------------------------------------------------------------------------------------
TLG Realty 114,620 (4) 3.2%
- ----------------------------------------------------------------------------------------------------------
Settondown Capital International, Ltd 102,500 (5) 2.8%
- ----------------------------------------------------------------------------------------------------------
Manchester Asset Management Limited 117,500 (6) 3.2%
- ----------------------------------------------------------------------------------------------------------
Avalon Capital Limited 125,000 (7) 3.4%
- ----------------------------------------------------------------------------------------------------------
Avalon Capital, Inc. 125,000 (7) 3.4%
- ----------------------------------------------------------------------------------------------------------
Totals 2,184,413 38.4%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
_____________________
(1) Includes: (a) 444,529 shares issuable upon the hypothetical conversion as
of June 25, 1999, of Convertible Debentures in the aggregate principal
amount of $580,000; (b) 59,122 shares issuable as payment in stock of
$77,140 of accrued premium on $580,000 principal amount of Convertible
Debentures, assuming a hypothetical conversion on June 25, 1999; (c) 62,500
shares issuable on exercise of A Warrants; (d) 62,500 shares issuable on
exercise of B Warrants; (e) 35,624 shares issued upon conversion as of June
10, 1999 of Convertible Debentures in the aggregate principal amount of
$45,000 and interest accrued thereon; and (f) 50,000 shares hypothetically
issued as of June 25, 1999 as payment of accrued liquidated damages.
(2) Includes: (a) 61,314 shares issuable upon the hypothetical conversion as of
June 25, 1999, of Convertible Debentures in the aggregate principal amount
of $80,000; (b) 8,155 shares issuable as payment in stock of $10,640 of
accrued premium on $80,000 principal amount of Convertible Debentures,
assuming a hypothetical conversion on June 25, 1999; (c) 10,000 shares
issuable on exercise of A Warrants; (d) 10,000 shares issuable on exercise
of B Warrants; (e) 16,789 shares issued upon conversion as of June 10,
1999 of Convertible Debentures in the aggregate principal amount of $20,000
and interest accrued thereon; and (f) 8,500 shares hypothetically issued as
of June 25, 1999 as payment of accrued liquidated damages.
(3) Includes: (a) 26,825 shares issuable upon the hypothetical conversion as of
June 25, 1999, of Convertible Debentures in the aggregate principal amount
of $35,000; (b) 3,568 shares issuable as payment in stock of $4,655 of
accrued premium on $35,000 principal amount of Convertible Debentures,
assuming a hypothetical conversion on June 25, 1999; (c) 5,000 shares
issuable on exercise of A Warrants; (d) 5,000 shares issuable on exercise
of B Warrants; (e) 12,591 shares issued upon conversion as of June 10,
1999 of Convertible Debentures in the aggregate principal
-14-
<PAGE>
amount of $15,000 and interest accrued thereon; and (f) 4,000 shares
hypothetically issued as of June 25, 1999 as payment of accrued liquidated
damages.
(4) Includes: (a) 70,895 shares issuable upon the hypothetical conversion as of
June 25, 1999, of Convertible Debentures in the aggregate principal amount
of $92,500; (b) 9,429 shares issuable as payment in stock of $12,303 of
accrued premium on $92,500 principal amount of Convertible Debentures,
assuming a hypothetical conversion on June 25, 1999; (c) 10,000 shares
issuable on exercise of A Warrants; (d) 10,000 shares issuable on exercise
of B Warrants; (e) 6,296 shares issued upon conversion as of June 10, 1999
of Convertible Debentures in the aggregate principal amount of $7,500 and
interest accrued thereon; and (f) 8,000 shares hypothetically issued as of
June 25, 1999 as payment of accrued liquidated damages.
(5) Includes: (a) 20,000 total shares issued or to be issued as placement agent
fees; and (b) 82,500 shares issuable on exercise of A Warrants.
(6) Includes: (a) 67,500 shares issuable on exercise of A Warrants; and (b)
50,000 shares issuable on exercise of B Warrants.
(7) All shares issuable on exercise of all B Warrants.
Nasdaq SmallCap Market(TM) Shareholder Approval Requirement
The Common Stock is quoted on the Nasdaq SmallCap Market(TM). Because of
that listing, the Company is contractually obligated to comply with applicable
rules of the Nasdaq Stock Market. Nasdaq Stock Market Rule 4310(c)(25)(H)
requires shareholder approval for the issuance of shares of common stock in a
transaction or series of transactions involving, among other types of
transactions, the sale or issuance by the issuer of common stock (or securities
convertible into or exercisable for common stock) equal to 20% or more of the
common stock or 20% or more of the voting power obtained before the issuance for
less than the greater of book or market value of the stock. As is described in
the table above, the conversion of all or substantially of the total aggregate
amount of the Convertible Debentures, together with the issuance of the shares
of Common Stock issuable as liquidated damages and the exercise of all of the A
and B Warrants could result in the issuance by the Company of more than 20% of
the Common Stock outstanding before the Credit Agreement was executed.
In recognition of this possibility and the requirements of the Nasdaq Stock
Market, the Company covenanted, in connection with the Credit Agreement, that it
would hold the Annual Meeting at which the Board of Directors would recommend
that the shareholders approve the sale of the Debentures and the related
transactions to the extent such transactions could result in the issuance of
more than 20% of the Common Stock outstanding immediately prior to such series
of transactions.
The Company's Board of Directors now solicits your proxy to be voted to
approve such transactions by approving this Proposal No. 3.
Risk Factors
In considering how to respond to the solicitation of your proxy for this
Proposal No. 3, you should carefully consider the following risks:
-15-
<PAGE>
Holders of Dynatec Common Stock are subject to the risk of substantial
dilution to their interests as a result of the conversion of the
Convertible Debentures, the issuance of the Common Stock as payment for
liquidated damages and exercise of the Warrants.
Introduction
The Convertible Debentures are convertible and the liquidated damages are
payable at prices or according to formulas that are based on the market price of
Common Stock at and around the time of conversion or issuance. Therefore, there
effectively is no limitation on the number of shares of Common Stock into which
the Convertible Debentures may be converted or that are issuable as payment of
liquidated damages. As the market price of Common Stock decreases, the number
of shares of Common Stock issuable upon conversion of the Convertible Debentures
and the payment of liquidated damages continues to increase. If the investors
were to acquire and hold all of the shares of Common Stock underlying the
Convertible Debentures the Warrants, the Placement Agent fees and liquidated
damages, they collectively would own 38.4% of the common stock that would then
be issued and outstanding, assuming a hypothetical conversion as of June 25,
1999. You should carefully consider the following specific risks.
Overall Dilution to Market Price and Relative Voting Power of Previously
Issued Common Stock
The conversion of the Convertible Debentures, the issuance of the Common
Stock as payment of liquidated damages and the exercise of the Warrants may
result in substantial dilution to the equity interests of other holders of
Common Stock. Specifically, the issuance of a significant amount of additional
Common Stock resulting from those transactions would result in a decrease of the
relative voting control of Common Stock issued and outstanding prior to the
conversion of the Convertible Debentures, the issuance of the Common Stock as
payment of liquidated damages and the exercise of the Warrants. Furthermore,
public resales of Common Stock following the conversion of the Convertible
Debentures, the issuance of the Common Stock in payment of liquidated damages
Shares and the exercise of the Warrants likely would depress the prevailing
market price of the Common Stock. Even prior to the time of actual conversions
or issuances, the market "overhang" resulting from the mere existence of
Dynatec's obligation to honor such conversions and issuances could depress the
market price of the Common Stock.
Increased Dilution with Decreases in Market Price of Common Stock
The Convertible Debentures are convertible and Common Stock is issuable in
payment of liquidated damages at a floating price that will be determined by
reference to the prevailing market price of Common Stock at the time of
conversion or issuance. As a result, the lower the market price of the Common
Stock at and around the time of such conversions or issuances, the more Common
Stock will be issuable. Any increase in the number of shares of Common Stock
issued upon conversion or issuance as a result of decreases in the prevailing
market price would compound the risks of dilution described in the preceding
paragraph.
Increased Potential for Short Sales
Downward pressure on the market price of Common Stock that likely would
result from any resales of Common Stock issued on conversion of the Convertible
Debentures or issuance of Common Stock as payment of liquidated damages or
exercise of the Warrants could encourage short sales of common stock by the
Investors or others. Material amounts of such short selling could place further
downward pressure on the market price of the Common Stock.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL NO. 3
-16-
<PAGE>
____________________________
PROPOSAL NO. 4
PROPOSED ADOPTION OF DYNATEC INTERNATIONAL, INC., 1999 STOCK OPTION AND
INCENTIVE PLAN TO OFFER TO CERTAIN OF THE COMPANY'S OFFICERS, EMPLOYEES,
DIRECTORS, AND CONSULTANTS OPTIONS TO ACQUIRE EQUITY INTERESTS IN THE COMPANY,
THEREBY ATTRACTING, RETAINING, AND REWARDING SUCH PERSONS, AND STRENGTHENING THE
MUTUALITY OF INTERESTS BETWEEN SUCH PERSONS AND THE COMPANY'S SHAREHOLDERS.
The Company's Board of Directors has approved and recommended that the
Company's shareholders adopt the Dynatec International, Inc. 1999 Stock Option
and Incentive Plan (the "1999 Plan"). The Company's Common Stock is quoted on
the Nasdaq SmallCap Market. The rules of the Nasdaq Stock Market, as recently
amended to apply to companies listed on the SmallCap Market, require that
shareholder approval be obtained when a stock option or purchase plan is to be
established or other arrangement made pursuant to which stock may be acquired by
officers or directors. Moreover, the 1999 Plan authorizes the issuance of
qualifying incentive stock options ("ISO") as that term is defined under Section
422 of the Internal Revenue Code of 1986, as amended. Applicable rules and
regulations require that the plan under which ISOs are granted must be approved
by the shareholders of the issuer company. In compliance with these policies
and requirements, at the Annual Meeting, the Company's shareholders will be
asked to approve the adoption of the 1999 Plan, and the Board of Directors is
soliciting the enclosed proxy as to that decision. A brief description of the
material provisions of the 1999 Plan follows.
The 1999 Plan provides for the award of ISOs and Non-Statutory Stock
Options ("NSOs") to key employees and the award of non-qualified stock options,
stock appreciation rights, and other compensatory and incentive awards as
specified in the 1999 Plan to directors, employees and certain nonemployees who
have important relationships with the Company or its subsidiaries. The 1999
Plan was adopted by the Board of Directors effective as of May 1, 1999, which
date is the effective date of the 1999 Plan. The principal provisions of the
1999 Plan are summarized below.
Administration.
The 1999 Plan is administered by a committee of three members of the
Company's Board of Directors, at least two of whom are non-employee directors
of the Company (the "1999 Plan Committee"). The 1999 Plan Committee may be the
Compensation Committee of the Board. The 1999 Plan Committee will determine and
designate the individuals and classes of individuals to whom awards under the
1999 Plan should be made and the amount, terms and conditions of the awards.
The 1999 Plan Committee may adopt and amend rules relating to the administration
of the 1999 Plan. The 1999 Plan Committee presently is comprised of Messrs.
Wayne L. Berman, Reed Newbold and Frederick W. Volcansek, Sr. The 1999 Plan is
intended to comply with and Sections 162(m) and 422 of the Internal Revenue Code
of 1986, as amended (the "Code"), and the regulations thereto.
Eligibility.
Awards under the 1999 Plan may be made to officers, directors or key
employees of the Company and its subsidiaries, and to nonemployee agents,
consultants, advisors, and other persons whom the 1999 Plan Committee believes
have made or will make an important contribution to the Company or any
subsidiary thereof, subject to Section 422 of the Code, which limits the grant
of ISOs to executive officers and other senior managerial and professional
employees.
Shares Available.
-17-
<PAGE>
Subject to adjustment as provided in the 1999 Plan, a maximum of 640,000
shares of the Company's common stock will be reserved for issuance thereunder.
If an option or stock appreciation right granted under the 1999 Plan expires or
is terminated or canceled, the unissued shares subject to such option or stock
appreciation right are again available under the 1999 Plan. In addition, if
shares sold or awarded as a bonus under the 1999 Plan are forfeited to the
Company or repurchased by the Company, the number of shares forfeited or
repurchased are again available under the 1999 Plan. In the absence of an
effective registration statement under the Securities Act of 1933, as amended
(the "Act"), all shares granted under the 1999 Plan will be restricted as to
subsequent resales or transfer, pursuant to Rule 144 under the Act.
Term.
The 1999 Plan has no term and is unlimited in duration. In the event the
1999 Plan is terminated according to its terms, it shall remain in effect as
long as any awards under the 1999 Plan are outstanding. Notwithstanding the
foreoing, no ISO may be granted under the 1999 Plan on a date that is more than
ten years from the date the 1999 Plan was adopted.
Stock Option Grants (NSOs and ISOs).
The 1999 Plan Committee may grant ISOs and NSOs under the 1999 Plan. With
respect to each option grant, the 1999 Plan Committee will determine the number
of shares subject to the option, the option price, the period of the option, the
time or times at which the option may be exercised (including whether the option
will be subject to any vesting requirements and whether there will be any
conditions precedent to exercise of the option), and the other terms and
conditions of the option. Unless the Committee determines, in its sole
discretion, that there are circumstances which reasonably justify the
establishment of a lower option price, the option or exercise price per share of
NSOs shall be 100% of the fair market value of a share of the Company's common
stock on the date the NSOs are granted.
ISOs are subject to special terms and conditions. The aggregate fair
market value, on the date of the grant, of the common stock for which an ISO is
exercisable for the first time by the optionee during any calendar year may not
exceed $100,000. An ISO may not be granted to an employee who possesses more
than 10% of the total voting power of the Company's stock unless the option
price is at least 110% of the fair market value of the Common Stock subject to
the option on the date it is granted, and the option is not exercisable for 5
years after the date of grant. No ISO may be exercisable after 10 years from
the date of grant. The option price may not be less than 100% of the fair
market value of the Common Stock covered by the option at the date of grant.
In connection with the grant of NSOs or ISOs, the 1999 Plan authorizes the
issuance of "Reload Options" which allow employees to receive options to
purchase that number of shares that shall equal (i) the number of shares of
common stock used to exercise underlying NSOs or ISOs, and (ii) if authorized by
the 1999 Plan Committee, the number of shares of common stock used to satisfy
any tax withholding requirement incident to the exercise of the underlying NSOs
or ISOs.
No shares may be issued pursuant to the exercise of an option until full
payment therefor has been made. Upon the exercise of an option, the number of
shares reserved for issuance under the 1999 Plan will be reduced by the number
of shares issued upon exercise of the option.
Stock Appreciation Rights.
Stock appreciation rights ("SARs") may be granted under the 1999 Plan:
SARs are granted concurrently with or subsequent to stock options, and permit
the option holder to be paid, in common stock, the excess of the fair market
value of each share of common stock underlying the stock option at the date of
exercise of the SARs and the fair market value of each share of common stock
underlying the option at the grant date. The exercise of SARs shall be in lieu
of the exercise of the
-18-
<PAGE>
stock option underlying the SARs, and upon such exercise a corresponding number
of stock options shall be canceled. Alternate SARs are exercisable upon the same
terms and conditions as are applicable to the options underlying them. Upon the
exercise of an Alternate SAR, the number of shares reserved for issuance under
the 1999 Plan will be reduced by the number of shares issued.
Stock Awards.
The 1999 Plan Committee may award shares of common stock under any one of
three separate options under the 1999 Plan. "Stock Units" are rights to receive
shares of common stock in the future. "Performance Shares" are rights to
receive shares of common stock or Stock units that are contingent on the
achievement of performance or other objectives during a specified period.
"Restrict Stock" award entitled the recipient thereof to receive shares of
common stock subject to a risk of forfeiture or other restrictions that will
lapse upon the achievement of one or more goals relating to completion of
service by the participant or the achievement of performance or other
objectives.
The 1999 Plan Committee may determine the recipients of such stock awards,
the number of shares to be awarded, the time of the award and, if applicable,
the conditions or restrictions of such awards. No stock bonus awards have been
granted under the 1999 Plan.
Non-Assignability of 1999 Plan Awards
No award under the 1999 Plan shall be assignable or transferable by the
recipient thereof, except by will or the laws of descent or pursuant to a
qualified domestic relations order as defined in the Code.
Changes in Capital Structure.
The 1999 Plan provides that if the outstanding common stock of the Company
is increased or decreased or changed into or exchanged for a different number or
kind of shares or other securities of the Company or of another corporation by
reason of any recapitalization, stock split or certain other transactions,
appropriate adjustment will be made by the 1999 Plan Committee in the number and
kind of shares available for grants under the 1999 Plan. In addition, the 1999
Plan Committee will make appropriate adjustments in the number and kind of
shares as to which outstanding options will be exercisable.
Change in Control Transactions
In the event of a "Change in Control," all awards under the 1999 Plan shall
become fully exercisable. For purposes of the 1999 Plan, "Change in Control"
means, and except as otherwise provided in the1999 Plan or the award agreement
reflecting the applicable award, a sale of all or substantially all of the
Company's assets, a change in the beneficial ownership of the Company's voting
common stock or a change in the composition of the Board of the Company which
occurs as follows: (i) any "Person" (as such term is used in Section 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended ("Exchange Act")) is
or becomes a beneficial owner, directly or indirectly, of Stock of the Company
representing 25% or more of the total voting power of the Company's then
outstanding Stock, which Person did not beneficially own at least 10% of the
outstanding stock as of the effective date of the 1999 Plan; (ii) a tender offer
(for which a filing has been made with the SEC which purports to comply with the
requirements of Section 14(d) of the Exchange Act and the corresponding SEC
rules) is made for the Stock of the Company. In case of such a tender offer, the
Change in Control will be deemed to have occurred upon the first to occur of (i)
any time during the tender offer when the Person making the offer owns or has
accepted for payment Stock of the Company with 25% or more of the total voting
power of the Company's outstanding Stock or (ii) three business days before the
offer is to terminate unless the offer is withdrawn first, if the Person making
the offer could own, by the terms of the offer plus any shares owned by this
Person, Stock with 50% or more of the total voting power of the
-19-
<PAGE>
Company's outstanding Stock when the offer terminates; or (iii) individuals who
were the Board's nominees for election as directors of the Company immediately
prior to a meeting of the shareholders of the Company involving a contest for
the election of directors shall not constitute a majority of the Board following
the election.
Tax Consequences.
The following description addresses the federal income tax consequences of
the 1999 Plan. Although the Company believes the following statements are
correct based on existing provisions of the Code and legislative history and
administrative and judicial interpretations thereof, no assurance can be given
that changes will not occur which would modify such statements. Also, such
statements are intended only to provide basic information. Each 1999 Plan
participant should consult his or her own tax advisor concerning the tax
consequences of participation in the 1999 Plan because individual financial and
federal tax situations may vary, and state and local tax considerations may be
significant.
Certain options authorized to be granted under the 1999 Plan are intended
to qualify as ISOs for federal income tax purposes. Under federal income tax law
currently in effect, the optionee will recognize no income upon grant or
exercise of the ISO. If an employee exercises an ISO and does not dispose of any
of the option shares within two years following the date of grant and within one
year following the date of exercise, then any gain realized upon subsequent
disposition of the shares will be treated as income from the sale or exchange of
a capital asset held for more than one year. If an employee disposes of shares
acquired upon exercise of an ISO before the expiration of either the one-year
holding period or the two-year waiting period, any amount realized will be
taxable as ordinary compensation income in the year of such disqualifying
disposition to the extent that the lesser of the fair market value of the shares
on the exercise date or the fair market value on the date of disposition exceeds
the exercise price. The Company will not be allowed any deduction for federal
income tax purposes at either the time of the grant or the exercise of an ISO.
Upon any disqualifying disposition by an employee, the Company will generally be
entitled to a deduction to the extent the employee realized ordinary income.
Certain options authorized to be granted under the 1999 Plan will be
treated as NSOs for federal income tax purposes. Under federal income tax law
presently in effect, no income is realized by the grantee of an NSO until the
option is exercised. When the NSO is exercised, the optionee will realize
ordinary compensation income, and the Company will generally be entitled to a
deduction, in the amount by which the market value of the shares subject to the
option at the time of exercise exceeds the exercise price. Upon the sale of
shares acquired upon exercise of an NSO, the excess of the amount realized from
the sale over the market value of the shares on the date of exercise will be
taxable.
An employee who receives stock in connection with the performance of
services will generally realize income at the time of receipt unless the shares
are not substantially vested for purposes of Section 83 of the Code and no
election under Section 83(b) of the Code is filed within 30 days after the
original transfer. The Company generally will be entitled to a tax deduction in
the amount includable as income by the employee at the same time or times as the
employee recognizes income with respect to the shares. The Company is required
to withhold employment taxes on the amount of the income the employee
recognizes. A participant who receives a cash bonus right under the 1999 Plan
generally will recognize income equal to the amount of any cash bonus paid at
the time of receipt of the bonus, and the Company generally will be entitled to
a deduction equal to the income recognized by the participant.
Section 162(m) of the Code limits to $1 million per person the amount the
Company may deduct for compensation paid to any of its most highly compensated
officers. Compensation received through the exercise of an option or SAR will
not be subject to the $1 million limit if the option or SAR and the plan
pursuant to which it is granted meet certain requirements. The currently
applicable requirements are that the option or SAR be granted by a committee of
at least two disinterested directors and that the exercise price of the option
or the SAR be not less than fair market value of the Common
-20-
<PAGE>
Stock on the date of grant. Accordingly, the Company believes compensation
received on exercise of options and SARs granted under the 1999 Plan in
compliance with the above requirements will not be subject to the $1 million
deduction limit.
Amendments to 1999 Plan
The Company's Board of Directors may at any time and from time to time
terminate or modify or amend the 1999 Plan in any respect, including in response
to changes in securities, tax or other laws or rules, regulations or regulatory
interpretations thereof applicable to the 1999 Plan or to comply with stock
exchange rules or requirements, provided that no amendment or termination may,
absent the written consent to the change by the affected participated, adversely
affect the rights of any participant under any award granted under the 1999 Plan
as of such date.
The following table summarizes the awards made by the Committee as of the
date of this proxy statement:
NEW PLAN BENEFITS
<TABLE>
<CAPTION>
1999 Plan
----------------------------------------------------
Name and Position NSOs Granted /(1)/ Percentage of Total Granted
- --------------------------------------------------- ------------------- ------------------------------
<S> <C> <C>
Frederick W. Volcansek, Sr. 125,000 21.85%
Chairman and Chief Executive Officer
Paul A. Boyer 110,000 19.23%
Senior Vice President and Chief Financial Officer
Lloyd M. "Tag" Taggart 100,000 17.48%
Senior Vice President Sales
Executive Group 335,000 58.57%
Non-Executive Director Group 50,000 8.74%
Non-Executive Officer Employee Group 187,000 32.69%
- ----------------------------------------------------------------------------------------------------
</TABLE>
(1) All awards under the 1999 Plan to date were NSOs granted as of June 8,
1999 and have an exercise price of $1.625 per share, which was 100% of
the fair market value on such date. Accordingly, the awards had no
dollar value as of the date of grant. A total of 572,000 NSOs have
been granted as of the date hereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL NO. 4
PROPOSAL NO. 5
PROPOSED AMENDMENT TO THE COMPANY'S ARTICLES OF INCORPORATION (I) TO CREATE AND
AUTHORIZE FOR FUTURE ISSUANCE A NEW CLASS OF CAPITAL STOCK OF THE COMPANY,
CONSISTING OF TEN MILLION (10,000,000) SHARES OF PREFERRED STOCK, PAR VALUE $.01
PER SHARE, AND (II) TO VEST IN THE BOARD OF DIRECTORS OF THE COMPANY THE
AUTHORITY TO ESTABLISH BY RESOLUTION OF THE DIRECTORS, AT OR PRIOR TO THE TIME
OF ISSUANCE, WITHOUT FURTHER VOTE OR ACTION BY THE SHAREHOLDERS OF THE COMPANY,
DISTINCT SERIES OF SUCH PREFERRED STOCK, AND TO FIX BY
-21-
<PAGE>
RESOLUTION THE RIGHTS, PREFERENCES, PRIVILEGES, AND RESTRICTIONS OF EACH SUCH
SERIES WHICH THE BOARD MIGHT DESIGNATE.
The Board of Directors has reviewed and recommend to the shareholders an
amendment to the Company's Restated Articles of Incorporation (the "Amendment"),
pursuant to which Article IV of the Articles of Incorporation would be amended
to: (i) create and authorize for future issuance a new class of capital stock
of the Company, consisting of ten million (10,000,000) shares of Preferred
Stock, par value $.01 per share, and (ii) vest in the Board of Directors of the
Company the authority to amend the Articles of Incorporation, at or prior to the
time of issuance, without further vote or action by the shareholders of the
Company, distinct series of such Preferred Stock, and to establish by such
amendment the rights, preferences, privileges, and restrictions of each such
series which the Board might designate. Such rights and preferences shall
include, but not be limited to, dividend rates, whether dividends are cumulative
or noncumulative, conversion rights, voting rights, terms of redemption, if any,
redemption prices, liquidation preferences, anti-dilution rights, and similar
matters. If the Board of Directors shall authorize the issuance of any series
of Preferred Stock and amend the Articles of Incorporation to establish such
series, such series may be granted the right to elect one or more of the
Company's directors, and such series of Preferred Stock may be granted
preemptive rights to acquire additional issues of such Preferred Stock or any
other class of stock issued by the Company.
The foregoing is only a summary of the Amendment and is not intended to be
complete. Stockholders are urged to read carefully the provisions of the
Amendment, the complete text of which is attached as Exhibit "A" to this
Information Statement. The foregoing summary is qualified in its entirety by
reference to the complete text.
Pursuant to the corporate laws of the state of Utah, if a majority of the
shares at the Annual Meeting are voted in favor of Proposal No. 5, the Company
will then file the Amendment with the Utah Division of Corporations and
Commercial Code. Thereafter, shares of Preferred Stock will be issuable at any
time and from time to time, by action of the Board of Directors, without further
authorization from the Company's stockholders, except as otherwise required by
applicable law or rules and regulations to which the Company may be subject, to
such persons and for such consideration (but not less than the par value
thereof) as the Board of Directors determines.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL NO. 5
________________________________________
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors of the
Company does not intend to present and has not been informed that any other
person intends to present a matter for action at the Annual Meeting other than
as set forth herein and in the Notice of the Special Meeting. If any other
matter properly comes before the meeting, it is intended that the holders of
proxies will act in accordance with their best judgment.
The accompanying proxy is being solicited on behalf of the Board of
Directors of the Company. In addition to the solicitation of proxies by mail,
certain of the officers and employees of the Company, without extra
compensation, may solicit proxies personally or by telephone, and, if deemed
necessary, third party solicitation agents may be engaged by the Company to
solicit proxies by means of telephone, facsimile or telegram, although no such
third party has been engaged by the Company as of the date hereof. The Company
will also request brokerage houses, nominees, custodians and fiduciaries to
forward soliciting materials to the beneficial owners of Common Stock held of
record and will reimburse such persons for forwarding such material. The cost
of this solicitation of proxies will be borne by the Company.
-22-
<PAGE>
_______________________________
SHAREHOLDER PROPOSALS
Any shareholder proposal intended to be considered for inclusion in the
proxy statement for presentation in connection with the 2000 Annual Meeting of
Shareholders must have been received by the Company by December 31, 1999.
The enclosed Proxy is furnished for you to specify your choices with
respect to the matters referred to in the accompanying notice and described in
this Proxy Statement. If you wish to vote in accordance with the Board's
recommendations, merely sign, date and return the Proxy in the enclosed envelope
which requires no postage if mailed in the United States. A prompt return of
your Proxy will be appreciated.
By Order of the Board of Directors
Frederick W. Volcansek, Sr.
Chairman and Chief Executive Officer
Salt Lake City, Utah
___________________, 1999
-23-
<PAGE>
Exhibit A-1
ARTICLES OF AMENDMENT
OF
RESTATED ARTICLES OF INCORPORATION
OF
DYNATEC INTERNATIONAL, INC.
Dynatec International, Inc. (the "Company"), a corporation organized and
existing under the laws of the State of Utah, pursuant to Part 10, Title 16,
Chapter 10A of the Utah Code Annotated, and upon recommendation by the Company's
Board of Directors and approval by the holders of a majority of the Company's
issued and outstanding shares of common stock, hereby adopts the following
amendment to its Restated Articles of Amendment, filed with the Utah Division of
Corporations and Commercial Code on June 26, 1998 (the "Restated Articles of
Amendment").
FIRST: The name of the corporation is DYNATEC INTERNATIONAL, INC.
SECOND: Article IV of the Company's Restated Articles of Amendment is
hereby amended to read as follows:
ARTICLE IV
----------
Capitalization. The total authorized number of shares of the
--------------
Corporation is One Hundred Million (100,000,000) shares of common stock and
ten million (10,000,000) shares of Preferred Stock. All shares of stock
authorized hereunder shall have a par value of one cent ($.01) per share.
The Common Stock shall be of one class and one series without cumulative
voting rights and without any preemptive rights. Except as otherwise
required by statute, these Restated Articles of Incorporation, or provided
for by resolution or resolutions of the Board of Directors, as hereinafter
set forth, the holders of the Common Stock of the Company shall possess the
exclusive right to vote for the election of directors and for all other
corporate purposes. The Board of Directors of the Corporation shall have
the authority to issue the capital stock of the Corporation, and shall have
the authority, without further vote or action of the shareholders of the
Corporation, and to the fullest extent permitted under Section 16-10a-602
of the Revised Utah Business Corporation Act or any successor statute or
other provision of Utah law, and shall have the authority to amend the
Articles of Incorporation without the vote or other action of the
shareholders so as to authorize the creation and issuance of any class or
series of Preferred Stock, and to fix the rights, preferences, privileges,
and restrictions of such series of Preferred Stock, including the annual
rate or rates of dividends for the particular series and whether such
dividends shall be cumulative or noncumulative; the redemption price or
prices for the particular series; the rights, if any, of holders of the
shares of the particular series to convert the same into shares of any
other series or class or other securities of the Company or any other
corporation, with any provisions for the subsequent adjustment of such
conversion rights; the voting rights; anti-dilution rights; terms of
redemption (including sinking fund provisions); the number of shares
constituting any series, and the designation of such series; and to
classify or reclassify any unissued Preferred Stock by fixing or altering
from time to time any of the foregoing rights, privileges and
qualifications. If pursuant to this Article IV, the Corporation's Board of
Directors shall authorize the issuance of any class or series of Preferred
Stock, (i) such class or series of Preferred Stock may be granted the right
to elect one or more of the Company's directors, as the Board of Directors
shall prescribe, and said directors shall have voting rights identical to
the other directors of
-1-
<PAGE>
the Company and shall serve until such time as their successors are elected
or until the class or series of Preferred Stock entitled to elect them
shall cease to be outstanding; and (ii) such class or series of Preferred
Stock may be granted preemptive rights to acquire additional issues of such
Preferred Stock or any other class or series of stock issued by the
Company."
THIRD: The Amendment to Article IV set forth above was recommended to
the shareholders by the Board of Directors pursuant to a
Unanimous Consent Resolution of the Board of Directors dated
___________, 1999, and adopted by the holders of a majority of
the Company's issued and outstanding shares of common stock at
the Company's annual meeting held on September 15, 1999, with
______ shares being voted in favor of the amendment and ______
shares being voted against the amendment.
FOURTH: The amendment to Article VI shall take effect immediately upon
the filing of these Articles of Amendment of the Company's
Restated Articles of Incorporation.
DATED this ____ day of ____________, 1999.
DYNATEC INTERNATIONAL, INC.
By:____________________________________
Its:____________________________________
-2-
<PAGE>
APPENDIX
DYNATEC INTERNATIONAL, INC.
a Utah corporation
1999 Stock Option and Incentive Plan
SECTION 1
GENERAL
-------
1.1 Purpose. This Stock Option and Incentive Plan (the "Plan") has been
established by Dynatec International, Inc., a Utah corporation (the "Company")
to:
- attract and retain persons eligible to participate in the Plan;
- motivate participants in the Plan by means of appropriate
incentives to achieve long-range goals;
- provide incentive compensation opportunities that are competitive
with those of other similar companies;
- closely associate the interests of the participants of the Plan
with those of the Company and its other shareholders by
reinforcing the relationship between participants' rewards and
shareholder gains through equity ownership in the Company and
increased shareholder value.
1.2 Eligibility for Participation. Participants in the Plan shall be
selected by the Committee, and awards under the Plan may be granted by the
Committee, to directors, officers and employees of the Company or any Subsidiary
of the Company, and to other individuals such as consultants and non-employee
agents of the Company or a Subsidiary, whom the Committee believes have made or
will make an essential contribution to the Company or a Subsidiary. Incentive
Stock Options may only be granted to executive officers and other employees of
the Company or a majority-owned Subsidiary who occupy responsible managerial or
professional positions, who have the capability of making a substantial
contribution to the success of the Company or Subsidiary, and who agree, in
writing, to remain in the employ of, and to render services to, the Company or
Subsidiary for a period of at least one (1) year from the date of the grant of
the Award. The Committee has the authority to select particular employees
within the eligible group to receive Awards under the Plan. In making this
selection and in determining the persons to whom Awards under the Plan shall be
granted and the form and amount of awards under the Plan, the Committee shall
consider any factors deemed relevant in connection with accomplishing the
purposes of the Plan, including the duties of the respective persons and the
value of their present and potential services and contributions to the success,
profitability and sound growth of the Company. A person to whom an Award has
been granted is sometimes referred to herein as an "Participant." In the
discretion of the Committee, a Participant may be granted any Award permitted by
the Plan and more than one Award may be granted to a Participant.
-1-
<PAGE>
1.3 Participating Companies. For purposes of the Plan, the term
"Subsidiary" means any subsidiary of the Company, and any business venture
designated by the Committee in which the Company has a significant interest, as
determined in the discretion of the Committee.
1.4 Administration of the Plan. The operation and administration of the
Plan, including the Awards made under the Plan, will be subject to the
provisions of Section 4 (relating to operation and administration). Capitalized
terms in the Plan are defined as set forth in the Plan, including the definition
provisions of Section 7 of the Plan.
SECTION 2
---------
OPTIONS AND SARS
----------------
2.1 Definitions. For purposes of this Plan:
2.1.1 The grant of an "Option" entitles the Participant to purchase
shares of the Company's common stock ("Stock") at an Exercise Price
established by the Committee. Options granted under this Section 2 may be
either Incentive Stock Options ("ISOs"), the tax consequences of which are
intended to be governed by Section 422 of the Internal Revenue Code, as
amended, (the "Code") or Non-Qualified Stock Options ("NQOs"), as
determined in the discretion of the Committee.
2.1.2 An SAR entitles the Participant to receive, in cash or Stock
(as determined in accordance with subsection 2.5), value equal to (or
otherwise based on) the excess of: (a) the Fair Market Value of a specified
number of shares of Stock at the time of exercise; over (b) an Exercise
Price established by the Committee.
2.2 Exercise Price. The Exercise Price of each Option and SAR granted
under this Plan will be established by the Committee or will be determined by a
method established by the Committee at the time the Option or SAR is granted;
except that the Exercise Price shall not be less than 100% of the Fair Market
Value of a share of Stock on the date of grant, unless the Committee shall
determine, in its sole discretion, that there are circumstances which reasonably
justify the establishment of a lower Exercise Price.
2.3 Term and Exercise. An Option and an SAR shall be exercisable in
accordance with such terms and conditions and during such periods as may be
established by the Committee.
2.4 Manner of Payment. The payment of the Exercise Price of an Option
granted under this Plan will be subject to the following:
2.4.1 Subject to the following provisions of this subsection 2.4, the
full Exercise Price for shares of Stock purchased upon the exercise of any
Option shall be paid at the time of such exercise (except that, in the case
of an exercise arrangement approved by the Committee and described in
paragraph 2.4.3, payment may be made as soon as practicable after the
exercise).
-2-
<PAGE>
2.4.2 The Exercise Price shall be payable in cash or by tendering, by
either actual delivery of shares or by attestation, shares of Stock
acceptable to the Committee, and valued at Fair Market Value as of the day
of exercise, or in any combination thereof, as determined by the Committee.
2.4.3 The Committee may permit a Participant to elect to pay the
Exercise Price upon the exercise of an Option by irrevocably authorizing a
third party to sell shares of Stock (or a sufficient portion of the shares)
acquired upon exercise of the Option and remit to the Company a sufficient
portion of the sale proceeds to pay the entire Exercise Price and any tax
withholding resulting from such exercise.
2.5 Reload Options. Concurrently with the award of Options to a
Participant in the Plan, the Committee may, subject to the provisions of the
Plan, prescribe and authorize reload options to purchase for cash or for shares
of Stock allotted by the Committee ("Reload Options"). The number of Reload
Options shall equal (i) the number of shares of Stock used to exercise the
underlying Options and (ii) to the extent authorized by the Committee, the
number of shares of Stock used to satisfy any tax withholding requirement
incident to the exercise of the underlying Options. The grant of a Reload
Option will become effective upon the exercise of underlying Option or other
Reload Options through the use of shares of Stock held by the Participant for at
least 12 months. Notwithstanding the fact that the underlying Option may be an
ISO, a Reload Option is not intended to qualify as an ISO under Section 422 of
the Code.
2.5.1 Reload Option Amendment. Each Award Agreement shall state
whether the Committee has authorized Reload Options with respect to the
underlying Option. Upon the exercise of an underlying Option or other Reload
Option, the Reload Option will be evidenced by an amendment to the underlying
Award Agreement.
2.5.2 Reload Option Exercise Price. The Exercise Price per share of
Stock deliverable upon the exercise of a Reload Option shall be the Fair Market
Value of a share of Stock on the date the grant of the Reload Option becomes
effective, unless the Committee shall determine, in its sole discretion, that
there are circumstances which reasonably justify the establishment of a lower
Exercise Price.
2.5.3 Term and Exercise. The term of each Reload Option shall be
equal to the remaining term of the underlying Option.
2.5.4 Termination of Employment. No additional Reload Options shall
be granted to a Participant when Options and/or Reload Options are exercised
pursuant to the terms of this Plan following termination of the Participant's
employment.
2.6 Settlement of Award. Shares of Stock delivered pursuant to the
exercise of an Option or SAR shall be subject to such conditions, restrictions
and contingencies as the Committee may establish in the applicable agreement.
Settlement of SARs may be made in shares of Stock (valued at their Fair Market
Value at the time of exercise), in cash, or in a combination thereof, as
determined in the discretion of the Committee. The Committee, in its
discretion, may impose such conditions, restrictions and contingencies with
respect to shares of Stock acquired pursuant to the exercise of an Option or an
SAR as the Committee determines to be desirable.
-3-
<PAGE>
SECTION 3
---------
OTHER STOCK AWARDS
------------------
3.1 Definitions. For purposes of this Plan:
3.1.1 A "Stock Unit" Award is the grant of a right to receive shares
of Stock in the future;
3.1.2 A "Performance Share" Award is a grant of a right to receive
shares of Stock or Stock Units which is contingent on the achievement of
performance or other objectives during a specified period;
3.1.3 A "Restricted Stock" Award is a grant of shares of Stock and a
"Restricted Stock Unit" Award is the grant of a right to receive shares of
Stock in the future, with such shares of Stock or right to future delivery
of such shares of Stock subject to a risk of forfeiture or other
restrictions that will lapse upon the achievement of one or more goals
relating to completion of service by the Participant, or achievement of
performance or other objectives, as determined by the Committee.
3.2 Restrictions on Stock Awards. Each Stock Unit Award, Restricted Stock
Award, Restricted Stock Unit Award and Performance Share Award under this Plan
will be subject to the following:
3.2.1 Any such Award shall be subject to such conditions,
restrictions and contingencies as the Committee shall determine.
3.2.2 The Committee may designate whether any such Award being
granted to any Participant is intended to be "performance-based
compensation" as that term is used in Section 162(m) of the Code. Any such
Awards designated as intended to be "performance-based compensation" shall
be conditioned upon the achievement of one or more "Performance Measures."
The Performance Measures that may be used by the Committee for such Awards
shall be based on any one or more of the following, as selected by the
Committee: (i) achievement of development milestones or specific goals
related to the Participant's role within the Company; (ii) the experience,
education and particular expertise of the Participant in the context of his
or her role within the Company; and (iii) specific Performance Measures
identified by the Committee and made part of the grant of the Award to such
Participant. For Awards intended to be "performance-based compensation,"
the grant of the Awards and the establishment of the Performance Measures
shall be made during the period required under Code Section 162(m).
-4-
<PAGE>
SECTION 4
---------
OPERATION AND ADMINISTRATION
----------------------------
4.1 Effective Date. Subject to the approval of the shareholders of the
Company at the Company's 1999 annual meeting of its shareholders, the Plan shall
be effective as of May 1, 1999 (the "Effective Date"); provided, however, that
to the extent that Awards are granted under the Plan prior to its approval by
the shareholders, the Awards shall be contingent on approval of the Plan by the
shareholders of the Company at such annual meeting or an intervening special
meeting at which a vote is taken as to approval of the Plan. The Plan shall be
unlimited in duration and, in the event of Plan termination, shall remain in
effect as long as any Awards under it are outstanding; provided, however, that,
to the extent required by the Code, no ISO may be granted under the plan on a
date that is more than ten years from the date the Plan is adopted or, if
earlier, the date the Plan is approved by shareholders.
4.2 Shares Subject to Plan. The shares of Stock for which Awards may be
granted under the Plan shall be subject to the following:
4.2.1 Subject to the following provisions of this subsection 4.2, the
maximum number of shares of Stock that may be delivered to Participants and
their beneficiaries under the Plan shall be 640,000 shares of Stock;
however, the Board may increase such number of shares, but not in any event
without shareholder approval of an increase that would result in the number
of shares available in the aggregate for Awards under the Plan exceeding
10% of the total authorized common shares of the Company.
4.2.2 To the extent any shares of Stock covered by an Award are not
delivered to a Participant or beneficiary because the Award is forfeited or
canceled, or the shares of Stock are not delivered because the Award is
settled in cash or used to satisfy the applicable tax withholding
obligation, such shares will not be deemed to have been delivered for
purposes of determining the maximum number of shares of Stock available for
delivery under the Plan.
4.2.3 If the Exercise Price of any Option granted under the Plan is
satisfied by tendering shares of Stock to the Company (by actual delivery
or by attestation), only the number of shares of Stock issued net of the
shares of Stock tendered shall be deemed delivered for purposes of
determining the maximum number of shares of Stock available for delivery
under the Plan.
4.3 General Restrictions. Delivery of shares of Stock or other amounts
under the Plan shall be subject to the following:
4.3.1 Notwithstanding any other provision of the Plan, the Company
shall have no liability to deliver any shares of Stock under the Plan or
make any other distribution of benefits under the Plan unless such delivery
or distribution would comply with all applicable laws (including, without
limitation, the requirements of the Securities Act of 1933), and the
applicable requirements of any securities exchange or similar entity.
-5-
<PAGE>
4.3.2 To the extent that the Plan provides for issuance of stock
certificates to reflect the issuance of shares of Stock, the issuance may
be effected on a non-certificated basis, to the extent not prohibited by
applicable law or the applicable rules of any stock exchange.
4.4 Tax Withholding. All distributions under the Plan are subject to
withholding of all applicable taxes, and the Committee may condition the
delivery of any shares or other benefits under the Plan on satisfaction of the
applicable withholding obligations. The Committee, in its discretion, and
subject to such requirements as the Committee may impose prior to the occurrence
of such withholding, may permit such withholding obligations to be satisfied
through cash payment by the Participant, through the surrender of shares of
Stock which the Participant already owns, or through the surrender of shares of
Stock to which the Participant is otherwise entitled under the Plan.
4.5 Use of Shares. Subject to the overall limitation on the number of
shares of Stock that may be delivered under the Plan, the Committee may use
available shares of Stock as the form of payment for compensation, grants or
rights earned or due under any other compensation plans or arrangements of the
Company or a Subsidiary, including the plans and arrangements of the Company or
a Subsidiary assumed in business combinations.
4.6 Dividends and Dividend Equivalents. An Award (including without
limitation an Option or SAR Award) may provide the Participant with the right to
receive dividend payments or dividend equivalent payments with respect to Stock
subject to the Award (both before and after the Stock subject to the Award is
earned, vested, or acquired), which payments may be either made currently or
credited to an account for the Participant, and may be settled in cash or Stock
as determined by the Committee. Any such settlements, and any such crediting of
dividends or dividend equivalents or reinvestment in shares of Stock, may be
subject to such conditions, restrictions and contingencies as the Committee
shall establish, including the reinvestment of such credited amounts in Stock
equivalents.
4.7 Payments. Awards may be settled through cash payments, the delivery of
shares of Stock, the granting of replacement Awards, or combination thereof as
the Committee shall determine. Any Award settlement, including payment
deferrals, may be subject to such conditions, restrictions and contingencies as
the Committee shall determine. The Committee may permit or require the deferral
of any Award payment, subject to such rules and procedures as it may establish,
which may include provisions for the payment or crediting of interest, or
dividend equivalents, including converting such credits into deferred Stock
equivalents. Each Subsidiary shall be liable for payment of cash due under the
Plan with respect to any Participant to the extent that such benefits are
attributable to the services rendered for that Subsidiary by the Participant.
Any disputes relating to liability of a Subsidiary for cash payments shall be
resolved by the Committee.
4.8 Transferability. Except as otherwise provided by the Committee, Awards
under the Plan are not transferable except as designated by the Participant by
will or by the laws of descent and distribution.
4.9 Form and Time of Elections. Unless otherwise specified herein, each
election required or permitted to be made by any Participant or other person
entitled to benefits under the Plan, and any permitted modification, or
revocation thereof, shall be in writing filed with the
-6-
<PAGE>
Committee at such times, in such form, and subject to such restrictions and
limitations, not inconsistent with the terms of the Plan, as the Committee shall
require.
4.10 Award Agreement. An Award under the Plan shall be subject to such
terms and conditions, not inconsistent with the Plan, as the Committee shall, in
its sole discretion, prescribe. The terms and conditions of any Award to any
Participant shall be reflected in such form of written document as is determined
by the Committee. A copy of such document shall be provided to the Participant,
and the Committee may, but need not require that the Participant shall sign a
copy of such document. Such document is referred to in the Plan as an "Award
Agreement" regardless of whether any Participant signature is required.
4.11 Action by Company or Subsidiary. Any action required or permitted to
be taken by the Company or any Subsidiary shall be by resolution of its Board,
or by action of one or more members of the Board (including a committee of the
Board) who are duly authorized to act for the Board, or (except to the extent
prohibited by applicable law or applicable rules of any stock exchange) by a
duly authorized officer of such company.
4.12 Gender and Number. Where the context admits, words in any gender
shall include any other gender, words in the singular shall include the plural
and the plural shall include the singular.
4.13 Limitation of Implied Rights.
4.13.1 Neither a Participant nor any other person shall, by reason of
participation in the Plan, acquire any right or title to any assets, funds
or property of the Company or any Subsidiary whatsoever, including, without
limitation, any specific funds, assets, or other property which the Company
or any Subsidiary, in their sole discretion, may set aside in anticipation
of a liability under the Plan. A Participant shall have only a contractual
right to the Stock or amounts, if any, payable under the Plan, unsecured by
any assets of the Company or any Subsidiary, and nothing contained in the
Plan shall constitute a guarantee that the assets of the Company or any
Subsidiary shall be sufficient to pay any benefits to any person.
4.13.2 The Plan does not constitute a contract of employment, and
selection as a Participant will not give any participating employee the
right to be retained in the employ of the Company or any Subsidiary, nor
any right or claim to any benefit under the Plan, unless such right or
claim has specifically accrued under the terms of the Plan. Except as
otherwise provided in the Plan, no Award under the Plan shall confer upon
the holder thereof any rights as a shareholder of the Company prior to the
date on which the individual fulfills all conditions for receipt of such
rights.
4.14 Evidence. Evidence required of anyone under the Plan may be by
certificate, affidavit, document or other information which the person acting on
it considers pertinent and reliable, and signed, made or presented by the proper
party or parties.
-7-
<PAGE>
SECTION 5
---------
CHANGE IN CONTROL
-----------------
5.1 Effect of Change in Control. Except as otherwise provided in the Plan
or the Award Agreement reflecting the applicable Award, upon the occurrence of a
Change in Control:
5.1.1 All outstanding Options (regardless of whether in tandem with
SARs) shall become fully exercisable.
5.1.2 All outstanding SARs (regardless of whether in tandem with
Options) shall become fully exercisable.
5.1.3 All Stock Units, Restricted Stock, Restricted Stock Units, and
Performance Shares shall become fully vested.
5.2 Definition. For purposes of the Plan, the term "Change in Control"
shall mean a sale of all or substantially all of the Company's assets, or a
change in the beneficial ownership of the Company's voting Stock or a change in
the composition of the Board of the Company which occurs as follows:
5.2.1 Any "Person" (as such term is used in Section 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended ("Exchange
Act")) becomes a beneficial owner, directly or indirectly, of Stock of the
Company representing 25% or more of the total voting power of the Company's
then outstanding Stock which Person did not own at least 10% of the
outstanding stock as of the effective date of this Plan.
5.2.2 A tender offer (for which a filing has been made with the SEC
which purports to comply with the requirements of Section 14(d) of the
Exchange Act and the corresponding SEC rules) is made for the Stock of the
Company. In case of such a tender offer, the Change in Control will be
deemed to have occurred upon the first to occur of (i) any time during the
tender offer when the Person making the offer owns or has accepted for
payment Stock of the Company with 25% or more of the total voting power of
the Company's outstanding Stock or (ii) three business days before the
offer is to terminate unless the offer is withdrawn first, if the Person
making the offer could own, by the terms of the offer plus any shares owned
by this Person, Stock with 50% or more of the total voting power of the
Company's outstanding Stock when the offer terminates.
5.2.3 Individuals who were the Board's nominees for election as
directors of the Company immediately prior to a meeting of the shareholders
of the Company involving a contest for the election of directors shall not
constitute a majority of the Board following the election.
-8-
<PAGE>
SECTION 6
---------
COMMITTEE
---------
6.1 Administration. The authority to control and manage the operation and
administration of the Plan shall be vested in a committee (the "Committee") in
accordance with this Section 6. The Committee shall be selected by the Board of
the Company and shall consist of three members of the Board, at least two of
whom are not also employees of the Company. If the Committee does not exist, or
for any other reason determined by the Board, the Board may take any action
under the Plan that would otherwise be the responsibility of the Committee.
6.2 Powers of Committee. The Committee's administration of the Plan shall
be subject to the following:
6.2.1 Subject to the Plan, the Committee will have the authority and
discretion to select from among the Eligible Employees those persons who
shall receive Awards, to determine the time or times of receipt, to
determine the types of Awards and the number of shares covered by the
Awards, to establish the terms, conditions, performance criteria,
restrictions, and other provisions of such Awards, and (subject to the
restrictions imposed by Section 7) to cancel or suspend Awards.
6.2.2 To the extent that the Committee determines that the
restrictions imposed by the Plan preclude the achievement of the material
purposes of the Awards in jurisdictions outside the United States, the
Committee will have the authority and discretion to modify those
restrictions as the Committee determines to be necessary or appropriate to
conform to applicable requirements or practices of jurisdictions outside of
the United States.
6.2.3 The Committee will have the authority and discretion to
interpret the Plan, to establish, amend, and rescind any rules and
regulations relating to the Plan, to determine the terms and provisions of
any Award Agreement made pursuant to the Plan, and to make all other
determinations that may be necessary or advisable for the administration of
the Plan.
6.2.4 Any interpretation of the Plan by the Committee and any
decision made by it under the Plan is final and binding on all persons.
6.2.5 In controlling and managing the operation and administration of
the Plan, the Committee shall take action in a manner that conforms to the
articles and bylaws of the Company, and applicable state corporate law.
6.3 Delegation by Committee. Except to the extent prohibited by
applicable law or the applicable rules of a stock exchange, the Committee may
allocate all or any portion of its responsibilities and powers to any one or
more of its members and may delegate all or any part of its responsibilities and
powers to any person or persons selected by it. Any such allocation or
delegation may be revoked by the Committee at any time.
6.4 Information to be Furnished to Committee. The Company and
Subsidiaries shall furnish the Committee with such data and information as it
determines may be required for it to
-9-
<PAGE>
discharge its duties. The records of the Company and Subsidiaries as to an
employee's or Participant's employment, termination of employment, leave of
absence, reemployment and compensation shall be conclusive on all persons unless
determined to be incorrect. Participants and other persons entitled to benefits
under the Plan must furnish the Committee such evidence, data or information as
the Committee considers desirable to carry out the terms of the Plan.
SECTION 7
---------
AMENDMENT AND TERMINATION
-------------------------
The Board may, at any time, amend or terminate the Plan, provided that no
amendment or termination may, in the absence of written consent to the change by
the affected Participant (or, if the Participant is not then living, the
affected beneficiary), adversely affect the rights of any Participant or
beneficiary under any Award granted under the Plan prior to the date such
amendment is adopted by the Board.
SECTION 8
---------
DEFINED TERMS
-------------
In addition to the other definitions contained herein, the following
definitions shall apply:
8.1 "Award" shall mean any award or benefit granted under the Plan,
including, without limitation, the grant of Options, SARs, Stock Unit Awards,
Restricted Stock Awards, Restricted Stock Unit Awards and Performance Share
Awards.
8.2 "Board" shall mean the Board of Directors of the Company.
8.3 "Code" shall mean the Internal Revenue Code of 1986, as amended. A
reference to any provision of the Code shall include reference to any successor
provision of the Code.
8.4 "Disability" is deemed to occur during the period in which a
Participant is unable, by reason of a medically determinable physical or mental
impairment, to engage in any substantial gainful activity, which condition, in
the opinion of a physician selected by the Committee, is expected to have a
duration of not less than 120 days.
8.5 "Eligible Employee" shall mean any employee of the Company or a
Subsidiary. An Award may be granted to an employee, in connection with hiring,
retention or otherwise, prior to the date the employee first performs services
for the Company or the Subsidiaries, provided that such Award shall not become
vested prior to the date the employee first performs such services.
8.6 "Fair Market Value" of a share of Stock under the Plan, as of any
date, shall be determined as follows:
8.6.1 If the principal market for the Stock is a national securities
exchange or the Nasdaq stock market (including the Nasdaq SmallCap Market),
then "Fair Market Value" as
-10-
<PAGE>
of that date will be the mean between the lowest and highest reported sale
prices of the Stock on that date on the principal exchange on which the
Stock is then listed or admitted to trading.
8.6.2 If sale prices are not available or if the principal market for
the Stock is not a national securities exchange and the Stock is not quoted
on the Nasdaq stock market, the average between the highest bid and lowest
asked prices for the Stock on such day as reported on the Nasdaq OTC
Electronic Bulletin Board Service or by the National Quotation Bureau,
Incorporated, or a comparable service.
8.6.3 If the day is not a business day, and as a result, paragraphs
8.5.1 and 8.5.2 are not applicable, the Fair Market Value of the Stock will
be determined as of the last preceding business day. If paragraphs 8.5.1
and 8.5.2 are otherwise inapplicable, then the Fair Market Value of the
Stock shall be determined in good faith by the Committee.
8.7 "Retirement" of a Participant shall mean the occurrence of a
Participant's Date of Termination after completing at least five years of
service and attaining age 65.
8.8 "Subsidiary" means any company during any period in which it is a
subsidiary corporation as that term is defined in Code section 424(f) with
respect to the Company.
8.7 "Stock" means shares of the Company's common stock.
SECTION 9
---------
MISCELLANEOUS
-------------
9.1 General Restriction. Each Award under the Plan shall be subject to
the requirement that, if at any time the Committee shall determine that (i) the
listing, registration or qualification of the shares of Stock subject or related
thereto upon any securities exchange or under any state or federal law, or (ii)
the consent or approval of any government regulatory body, or (iii) an agreement
by the Participant with respect to the disposition of Stock, is necessary or
desirable as a condition of, or in connection with, the granting of such Award
or the issue or purchase of Stock thereunder, such Award may not be exercised or
consummated in whole or in part unless and until such listing, registration,
qualification, consent, approval or agreement shall have been effected or
obtained free of any conditions not acceptable to the Committee.
9.2 Non-Uniform Determinations. The Committee's determinations under the
Plan (including without limitation determinations of the persons to receive
Awards, the form, amount and timing of such Awards, the terms and provisions of
such Awards and the agreements evidencing same) need not be uniform and may be
made by it selectively among persons who receive, or are eligible to receive,
Awards under the Plan, whether or not such persons are similarly situated.
9.3 Fractional Shares. Fractional shares shall not be granted under any
Award under this Plan, unless the provision of the Plan which authorizes such
Award also specifies the terms under which fractional shares or interests may be
granted.
-11-
<PAGE>
9.4 Effects of Headings. The Section and Subsection headings contained
herein are for convenience only and shall not affect the construction hereof.
ADOPTED BY RESOLUTION OF THE BOARD OF DIRECTORS, EFFECTIVE THE 1/ST/ DAY OF MAY,
1999.
_________________________________________
________________________, Secretary
-12-
<PAGE>
PROXY
DYNATEC INTERNATIONAL, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Frederick W. Volcansek, Sr. and Paul A. Boyer
and each of them as Proxies, with full power of substitution, and hereby
authorizes them to represent and vote, as designated below, all shares of Common
Stock of the Company held of record by the undersigned at the Annual Meeting of
Shareholders to be held at 3820 Great Lakes Drive, Salt Lake City, Utah 84120,
on September 15, 1999, at 11:00 a.m., M.S.T., or at any adjournment thereof.
1. Election of Directors.
FOR WITHHOLD AS TO ALL FOR ALL EXCEPT
/ / / / / /
(INSTRUCTIONS: IF YOU MARK THE "FOR ALL EXCEPT" CATEGORY ABOVE, INDICATE
THE NOMINEE(S) AT TO WHICH YOU DESIRE TO WITHHOLD AUTHORITY BY STRIKING A
LINE THROUGH SUCH NOMINEE(S) NAME IN THE LIST BELOW:)
Frederick W. Volcansek, Sr.
Wayne L. Berman
Paul A. Boyer
Reed Newbold
2. To approve the Board of Directors' selection of KPMG LLP as the Company's
independent public accountants to audit the consolidated financial
statements of the Company and its subsidiaries for the fiscal year ending
December 31, 1999.
FOR AGAINST ABSTAIN
/ / / / / /
3. To approve a series of transactions pursuant to which the Company (i) has
issued convertible debentures in the aggregate principal amount of
$1,500,000 to five institutional investors, which debentures are
convertible into shares of common stock, (ii) has issued warrants to
purchase a total of 750,000 shares of common stock, (iii) has issued 20,000
shares of common stock in payment of certain fees to placement agents; and
(iv) may issue up to $225,000 of common stock as payment of certain
contract damages, the net effect of which transactions may be the issuance
of more than 20% of the total number of shares of the Company's common
stock, par value $.01 per share ("Common Stock"), issued and outstanding
prior to the commencement of such transactions.
-1-
<PAGE>
FOR AGAINST ABSTAIN
/ / / / / /
4. To approve the adoption of the Company's 1999 Incentive Stock Option Plan
under which certain employees, officers, directors and consultants may
receive options to purchase shares of the Company's Common Stock, thereby
attracting, retaining, and rewarding such persons, and strengthening the
mutuality of interests between such persons and the Company's shareholders;
FOR AGAINST ABSTAIN
/ / / / / /
5. To authorize the amendment of the Company's Articles of Incorporation to
(i) create and authorize for future issuance a new class of capital stock
of the Company, consisting of ten million (10,000,000) shares of preferred
stock, par value $.01 per share ("Preferred Stock"), and (ii) vest in the
Board of Directors of the Company the authority to establish by resolution
of the Board of Directors, at or prior to the time of issuance, without
further vote or action by the shareholders of the Company, distinct series
of such Preferred Stock, and to fix by resolution the rights, preferences,
privileges, and restrictions of each such series which the Board might
designate.
FOR AGAINST ABSTAIN
/ / / / / /
6. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSAL NOS. 1, 2, 3, 4, and 5.
Please sign and Date this Proxy Where Shown Below and Return it Promptly:
Date: _____________________________, 1999
Signed:
SIGNATURE(S) ___________________________________________________________________
__________________________________
-2-
<PAGE>
PLEASE SIGN ABOVE EXACTLY AS THE SHARES ARE ISSUED. WHEN SHARES ARE HELD BY
JOINT TENANTS, BOTH SHOULD SIGN. WHEN SIGNING AS ATTORNEY, AS EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF A
CORPORATION, PLEASE SIGN IN FULL CORPORATE NAME BY PRESIDENT OR OTHER AUTHORIZED
OFFICER. IF A PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY AUTHORIZED
PERSON.
-3-
