<PAGE>
- --------------------------------------------------------------------------------
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement (Amendment No. 1)
[ ] 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 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
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
.................................................................
2) Aggregate number of securities to which transaction applies:
.................................................................
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):...
4) Proposed maximum aggregate value of transaction:
.................................................................
5) Total fee paid:
.................................................................
[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:....................................
2) Form, Schedule or Registration Statement No................
3) Filing Party:..............................................
4) Date Filed:................................................
- --------------------------------------------------------------------------------
<PAGE>
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 ____________, 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 _____________, ________________, 1999, at __: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, ________, 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
______________, 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 ____________, _____________, 1999, at
___: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. 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. 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
-1-
<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 __________, 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 ___________, 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:
o Frederick W. Volcansek, Sr.
o John P. Schmitz
o Wayne L. Berman
o 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 December 5, 1999.
<TABLE>
<CAPTION>
Name Age Title
<S> <C> <C>
Frederick W. Volcansek, Sr. 53 Chairman of the Board of Directors and
Chief Executive Officer
Lloyd M. Taggart 55 Senior Vice President Sales
Michael L. Whaley 43 Senior Vice President, Chief Financial Officer
Reed Newbold 52 Director
John P. Schmitz 44 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. Mr. Volcansek served as Deputy Under Secretary of the U.S.
Department of Commerce (International Trade Administration) from June to October
1992. Prior to that appointment, Mr. Volcansek served 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.
Lloyd M. Taggart joined the Company in April 1999. Prior to joining
the Company, from 1994 to 1999, Mr. Taggart was the President and CEO of Sweet
Water Ranch, Inc., a manufacturer of custom, handmade reproductions of the
legendary western style Molesworth furniture. Mr. Taggart expanded distribution
of that company's products from twenty-three states to all fifty states and
eight foreign countries. After service in the United States Navy, in 1972, Mr.
Taggart joined the Clorox Company's brand management team in Oakland,
California. He also served for three terms as a Commissioner of the Colorado
River Commission, a board that controls and markets $25,000,000 of hydro
electrical power generated by the Hoover Dam and 5,000,000,000 GPM of water
allocated to Nevada from the Colorado River. Mr. Taggart received a B.S. degree
from Brigham Young University in 1969.
Michael L. Whaley joined the Company as Senior Vice President and
Chief Financial Officer on October 29, 1999. Prior to joining the Company, Mr.
Whaley worked for a year as an Engagement Manager for Prism Consulting
International of Bethesda, Maryland, a strategy and operations consulting firm.
Before that, he worked as the Director of Westinghouse Electric Corporation's
Government Privatization Activities Division from February 1997 though August
1998, and as the Chief Financial Officer of Westinghouse's Commercial Nuclear
Fuel Division from January 1993 through February 1997. Mr. Whaley received his
B.S. degree in accounting from Norfolk State University in Norfolk, Virginia,
and received a Certificate of Completion of the Harvard Business School Program
for Management Development.
John P. Schmitz was appointed to the Company's Board of Directors on
September 16, 1999. Since 1993, he has been a partner at the Washington, D.C.
office of the law firm of Mayer, Brown & Platt where his practice specializes in
the areas of energy and environment, government and international. From 1989 to
1993 he was Deputy Counsel to President George Bush, and from 1985 to 1989 was
Deputy Counsel to Vice President George Bush. From 1984 to
-3-
<PAGE>
1985, he was an attorney at the firm of Wilmer, Cutler & Pickering, Washington,
D.C. In 1984 he was employed at the Robert Bosch Foundation Fellowship, Office
of Bundestag Member Matthias Wissmann, Bonn, and Office of General Counsel,
Robert Bosch, GmbH, Stuttgart, Germany. From 1983 to 1984 he was law clerk to
The Honorable Antonin Scalia, U.S. Court of Appeals for the District of
Columbia, Washington, D.C. Mr. Schmitz received his J.D. from the Stanford Law
School in 1981, his M.S. from the California Institute of Technology in 1978,
and his B.A. from Georgetown University in 1976. His recent professional
activities include, among other activities, the Carnegie Endowment for
International Peace, Study Group on American-European Community Relations, 1993
to date; the International Republican Institute, Rule of Law Advisory Board,
1993 to date; U.S. Representative, Joint U.S.-Panama Commission on the
Environment, 1993-1994; Member, U.S. Delegation, United Nations Conference on
Environment and Development (UNCED), Rio de Janeiro, June 1992. He is admitted
to the bars of Pennsylvania and the District of Columbia.
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.
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 8, 1999, 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.
-4-
<PAGE>
<TABLE>
<CAPTION>
Name, Title, and Address of Common Stock Percent of Class as of
Beneficial Owner Beneficially Owned September 30, 1999
<S> <C> <C>
Austost Anstalt Schaan (1) 1,155,555 (2) 23.5%
5% Beneficial Owner
733 Fuerstentum Liechtenstein
Landstrasse 163
Balmore Funds, S.A. (1) 1,155,555 (2) 23.5%
5% Beneficial Owner
Trident Chambers
P.O. Box 146
Roadstown, Tortula BVI
Touchstone Transport Services 457,660 12.2%
5% Beneficial Owner
c/o Oxford International Management, Inc.
Suite 1402, 14th Floor
PDCP Bank Centre, 8737 Paseo De Roxas
Cor. Makati Avenue, Makati City
Philippines
Wilford A. Cardon 520,831 (3) 13.7%
5% Beneficial Owner
1819 East Southern Avenue, Suite B-10
Mesa, Arizona 85204-5219
Frederick W. Volcansek, Sr., 104,225 (4) 2.7%
Chairman and Chief Executive Officer
Lloyd M. "Tag" Taggart 62,500 (5) 1.6%
Senior Vice President Sales
Michael L. Whaley 50,000 (6) 1.3%
Senior Vice President and Chief Financial
Officer
Reed Newbold 45,925 (7) 1.1%
Director
Wayne L. Berman 15,625 (5) *
Director
John P. Schmitz 12,500 (6) *
Director
Directors and Officers as a group 290,775 7.2%
- -------------------------
</TABLE>
* Less than one percent.
-5-
<PAGE>
(1) Represents estimate of shares issuable upon conversion of
total of $531,000 principal amount of the Company's
convertible debentures held of record by the named
shareholder as of November 30, 1999. Solely for purposes of
estimating the number of shares of common stock that would
be issuable to and therefore beneficially owned by such
person as set forth in the table above, the Company has
assumed that such person has converted all of the
convertible debentures issued to it as of November 30,
1999, on which date the conversion price of the convertible
debentures would have been $0.75. The actual conversion
price and payment price and the number of shares of common
stock issuable upon such conversion or payment of
liquidated damages could differ substantially. The
information set forth in the table, above, is based on the
Company's estimation based on hypothetical conversions and
is not determinative of any person's beneficial ownership
of the Company's common stock pursuant to Rule 13d-3 or any
other provision under the Securities Exchange Act of 1934,
as amended.
(2) Includes: (a) 708,000 shares issuable upon the hypothetical
conversion as of November 30, 1999, of presently issued
convertible debentures in the aggregate principal amount of
$531,000; (b) 131,452 shares issuable as payment in stock
of $98,589 of accrued interest on $531,500 principal amount
of Convertible Debentures, assuming a hypothetical
conversion on August 31, 1999; (c) 62,500 shares issuable
on exercise of presently issued A Warrants; (d) 62,500
shares issuable on exercise of presently issued B Warrants;
(e) 99,640 shares issued prior to the date hereof upon
conversion of $94,000 principal amount of Convertible
Debentures and interest accrued thereon; and (f) 91,463
potentially issuable shares.
(3) Includes 158,831 shares and 162,000 shares owned
respectively by two entities affiliated with Mr. Cardon,
and presently exercisable options to purchase 200,000
shares owned by another entity as to which Mr. Cardon
exercises voting control.
(4) Includes 10,000 shares issuable on exercise of options
having an exercise price of $2.00 per share; 15,000 shares
issuable on exercise of options having an exercise price of
$2.50; 103,125 shares issuable on exercise of options
having an exercise price of $1.625 per share; and 1,100
shares.
(5) All shares issuable on exercise of options having an
exercise price of $1.625 per share.
(6) All shares issuable on exercise of options having an
exercise price of $1.03 per share.
(7) Includes 10,000 shares issuable on exercise of options
having an exercise price of $2.00 per share; 15,000 shares
issuable on exercise of options having an exercise price of
$2.50, 15,625 shares issuable on exercise of options having
an exercise price of $1.625 per share; and 5,300 shares.
During 1996 and 1997, the 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
30, 1996, and 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 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 Mr. Wood. 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.
-6-
<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
Two functioning committees of the Company's Board of Directors have
been organized including (i) Compensation Committee and (ii) Audit Committee.
Following is a brief description of each of these committees.
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.
-7-
<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 $12,500 - - - -
Chairman and CEO 1997 194,433 3,249 14,000 - 14,000 - -
1996 194,640 1,421 8,000 - 10,000 - -
F. Randy Jack (5) 1998 140,333 1,725 10,000 - - - -
President and COO 1997 129,142 3,465 14,000 - 10,000 - -
1996 142,440 1,522 8,000 - 9,000 - -
Dale Gledhill (6) 1998 162,556 355 - - - - -
Vice President Sales 1997 143,029 541 - - - - -
1996 124,354 152 - - - - -
- -----------------
</TABLE>
(1) Total cash compensation shown above does not include the value of
company leased or owned vehicles and insurance payments made on
behalf of officers. Such items are included on the individual
officers W-2's. The amounts shown as other annual compensation are
directors fees received during the fiscal year.
(2) Bonus compensation includes time in service bonus.
(3) An incentive stock option plan was implemented in November 1996.
Options were granted as approved by the Board of Directors on
December 30, 1996 and again on January 2, 1997.
(4) Resigned from Company on January 14, 1999.
(5) Resigned from Company on March 17, 1999.
(6) Not an Executive Officer; resigned from the Company in April 1999.
-8-
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised In-
Options/SARS at FY-End the-Money Options/SARS
(#) at FY-End($)
Shares Acquired
on Value Realized Exercisable/ Exercisable/
Name Exercise ($) Unexercisable Unexercisable
- ---- ---------- ----- --------------- --------------
<S> <C> <C> <C> <C>
Donald M. Wood (1) - - 924,000 (2) $5,000/
Chairman and CEO $250,000
F. Randy Jack (3) - - 249,000 $4,500/
President and COO $65,000
Dale Gledhill (4) - - 163,000 $3,000/
Vice President Sales $20,000
</TABLE>
(1) Resigned from Company on January 14, 1999.
(2) Excludes options to purchase 737,500 shares issued to two separate
entities affiliated with Mr. Wood. The value of such excerisable,
in-the-money options as of December 31, 1998, was $368,750. After December
31, 1998, Mr. Wood agreed to the cancellation of options to purchase
900,000 shares, which options were granted to him individually in 1996 an
1997, and options to purchase 537,500 shares of common stock that were
issued to an entity affiliated with him in 1996.
(3) Resigned from Company on March 17, 1999.
(4) Not an Executive Officer, resigned from the Company in April 1999.
Employment Agreements
Mr. Wood and Mr. Jack had employment contracts with the Company that were
terminated upon 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.
Mr. Volcansek, Lloyd M. Taggart, the Company's Senior Vice President
Sales, and Michael L. Whaley, the Company's Senior Vice President and Chief
Financial Officer, each have employment agreements that provide for a period of
employment of four years from the date of the agreements, subject to termination
and extension provisions. The agreements permit each of them to participate in
any incentive compensation plan adopted by the Company and benefit and
equity-based plans or arrangements. If the Company terminates either of Mr.
Volcansek's, Mr. Taggart's, or Mr. Whaley's employment for cause, or if either
of them terminates their employment without good reason, the Company has no
further obligation to pay them under their respective agreements. If the Company
terminates either of them without cause, the terminated executive may receive
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 employment agreements must then be honored by the
surviving entity or it must purchase the agreements for a sum equal to three (3)
years' base salary. The employment agreements prohibit each of Messrs.
Volcansek, Taggart, and Whaley 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,
-9-
<PAGE>
payment of expenses and automobile allowances. Mr. Volcansek's base salary is
$205,000, Mr. Taggart's base salary is $168,000, and Mr. Whaley's base salary is
$145,000.
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 was corrected. Mr.
Boyer has had no transactions in the Company's common stock.
Certain Relationships and Related Transactions
Softalk, Inc., one of the Company's subsidiaries, 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. The Company
believes that the terms of these transactions are as favorable as they would be
if they were between Dynatec and an unrelated third party.
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. 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 common stock was issued to WAC to pay $154,000 on
the note, including accrued interest, and $26,000 of other WAC obligations to
Dynatec. The Company believes that the terms of these transactions are as
favorable as they would be if they were between Dynatec and an unrelated third
party.
-10-
<PAGE>
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 recognized the obligation on its consolidated balance sheet. In
February 1999, the Company repaid this amount to WAC. The Company believes that
the terms of these transactions are as favorable as they would be if they were
between Dynatec and an unrelated third party.
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 total rents of $56,000 and $84,000 for 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. The
Company believes that the terms of these transactions are as favorable as they
would be if they were between Dynatec and an unrelated third party.
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 its former Chairman and Chief Executive Officer 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 terminated in January 1999.
Thereafter, the Company's former Chairman and CEO resigned and retired from the
Company. The Company does not anticipate taking further action, legal or
otherwise, with respect to the matters and individuals 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 ongoing 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 plans. These options are
described in detail in Note 14 to the accompanying financial statements for the
years ended December 31, 1998 and 1997. 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 an exercise price of $2.50 per share. The
shareholder and former executive officer of the Company who owns Muito Bem
agreed in 1999 to cancel all stock options issued to Muito Bem. Additionally, in
1997, 200,000 options were granted to WAC, at an exercise price of $2.50 per
share in consideration for certain royalty reductions and abatements. The
Company believes that the terms of these transactions are as favorable as they
would be if they were between Dynatec and an unrelated third party.
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 & Trust 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.
The Company believes that the terms of these transactions are as favorable as
they would be if they were between Dynatec and an unrelated third party.
-11-
<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
Private 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 $207,500 principal amount of Convertible
Debentures, together with accrued principal thereon have been converted into a
total of 182,746 shares of Common Stock.
-12-
<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 the Registration Statement (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. 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.
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:
<TABLE>
<CAPTION>
Placement Exercise
Investors Agent Price
--------------- ---------------- ---------------
<S> <C> <C> <C>
Series A Warrants 150,000 150,000 $6.50
Series B Warrants 150,000 300,000 $7.15
</TABLE>
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 the Registration Statement 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 entered into a Modification Agreement with
the Investors, under which the Investors and the Company agreed to cancel and
terminate all parties' rights and obligations with respect to the Line of Credit
and the additional $500,000 principal amount of Convertible Debentures issuable
upon the effectiveness of the registration statement of which this Prospectus is
part. The Modification Agreement also modified the Company's obligations with
respect to liquidated damages payable under the Credit Agreement in the current
monthly amount of $45,000, which damages will be accrued for the months of
April, May and June 1999 and was abated for July, August and September
-13-
<PAGE>
1999, provided that the registration statement was effective on or before
October 31, 1999.
Although the Company filed an amendment to the registration statement
on July 2, 1999, the registration statement was not effective by the October 31,
1999 deadline set forth in the Modification Agreement. Moreover, because the
Registration Statement was not declared effective by October 31Company's pending
preliminary proxy statement is being reviewed by the Securities and Exchange
Commission in tandem with the pending registration statement, the Company was
not able to hold its annual meeting of shareholders by the October 31, 1999
deadline. On November 12, 1999, the Company is negotiating for an extension of
the abatement period. If such negotiations are unsuccessful, the Company's
obligation to payand the Investors executed an amendment to the Modification
Agreement that substituted February 15, 2000 for the October 31, 1999 deadline
originally in the Modification Agreement. Consequently, the accrual of
liquidated damages could be reinstated in part or in full until the Registration
Statement is declared effective. will be deferred from June 24, 1999 until
February 15, 2000, provided that the registration statement becomes effective
and shareholder approval of the transaction is obtained on or before that date.
Liquidated damages from February 24, 1999 through June 23, 1999 have been
accrued and continue to be payable by the Company as specified in the
Modification Agreement. The November 12, 1999 agreement also amended the
Convertible Debentures such that, even if the Convertible Debentures are still
outstanding at their maturity date, May 22, 2001, the Convertible Debentures
will not be automatically converted into common stock unless the holders so
elect. In light of the Modification Agreement, the Company will not receive
additional debt or equity financing under the Credit Agreement, except to the
extent of payments for the exercise price of the Warrants.
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. If the market price of
the Common Stock decreases, the number of shares of Common Stock underlying the
Debentures will increase.
The following table identifies the total number of shares of common stock
that would be issued assuming the hypothetical conversion, exercise or issuance
of all of the Convertible Debentures, Warrants and the Damages Shares as of
August 31, 1999, and the payment in shares of common stock for all interest
accrued on the Convertible Debentures as of such date. For purposes of
estimating the number of Damages Shares issuable Dynatec has assumed that the
entire $225,000 of liquidated damages hypothetically has been accrued and has
been converted into common stock as of August 31, 1999. Solely for purposes of
this hypothetical conversion, the conversion price of the Convertible Debentures
would have been $1.031, which constitutes 100% of the average of the closing bid
prices of Dynatec's common stock during the five trading day period immediately
preceding the hypothetical payment date. For purposes of the assumed
hypothetical conversion of the Convertible Debentures, the conversion price is
$0.7035. The table excludes the dilutive effect of conversions of $207,500
principal amount of Convertible Debentures and interest accrued thereon into a
total of 182,746 shares of common stock prior to the date of this proxy
statement.
<TABLE>
<CAPTION>
Debenture
Principal or Shares of
Interest/ Common Stock % of Common
Number of Issuable Upon Stock Owned
Warrants / Conversion, By Holders
Amount of Exercise or After
Convertible Security Damages Issuance Conversion
- ------------------------------------- ------------------- ---------------------- --------------------
<S> <C> <C> <C>
Convertible Debentures $1,239,500 1,652,667 30.6%
Convertible Debenture Interest $ 230,134 306,845 7.6%
A and B Warrants $ 750,000 750,000 16.6%
Damages Shares $ 225,000 219,512 5.5%
----------------------
Total 2,929,024 43.8%
====================== ====================
</TABLE>
-14-
<PAGE>
The following table describes the number of shares of common stock that
would be issuable assuming all of the presently issued and outstanding
Convertible Debentures were converted into common stock, along with any interest
accrued thereon, and the Damages Shares were issued at the following assumed
conversion or issuance prices. The table does not include any adjustment for
differences between the formula for calculating the conversion price for the
Convertible Debentures and interest thereon and for calculating the issue price
for the Damages Shares:
Shares Issuable upon Conversion or Issuance of
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
$1,239,500 $230,134
Principal Accrued
Hypothetical Amount of Interest on $225,000
Conversion/ Convertible Convertible Liquidated Total Common
Exercise Price Debentures Debentures Damages Stock Issuable
- ------------------------ ----------------------- ------------------ --------------------- ---------------------
<S> <C> <C> <C> <C> <C>
$0.50 2,479,000 460,268 450,000 3,389,268
$0.75 1,652,667 306,845 300,000 2,259,512
$1.00 1,239,500 230,134 225,000 1,694,634
$1.25 991,600 184,107 180,000 1,355,707
$1.50 826,333 153,423 150,000 1,129,756
</TABLE>
Given the structure of the conversion formulas applicable to the
Convertible Debentures, interest accrued thereon and the Damages Shares, there
effectively is no limitation on the number of shares of Dynatec common stock
into which such convertible securities may be converted. If the market price of
Dynatec common stock decreases, the number of shares of Dynatec common stock
underlying the Convertible Debentures and the Damages Shares will increase.
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.
-15-
<PAGE>
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.
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 agreed under the Credit Agreement to 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:
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. If 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 will 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 August 31, 1999. You should carefully consider the following specific risks.
-16-
<PAGE>
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
and the exercise of the Warrants likely would depress the prevailing market
price of the Common Stock. Even before actual conversions or issuances, the
market "overhang" resulting from 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.
Consequences of Shareholders' Refusal to Approve Transactions
The Purchase Agreement provides that, if the Company's shareholders
do not approve the transactions as outlined above at the Annual Meeting, the
Company is liable for the "economic benefit" of the number of shares that would
be issuable upon conversion in excess of 20% of the shares outstanding on May
22, 1998. "Economic benefit", for these purposes, is the number of shares of
common stock issuable upon conversion of the convertible debentures in excess of
556,002, multiplied by the closing bid price of Dynatec's common stock on the
tenth trading day after the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL NO. 3
----------------------------
-17-
<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
(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.
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
-18-
<PAGE>
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 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
-19-
<PAGE>
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 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
-20-
<PAGE>
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 Stock on the date of
grant. Accordingly, the Company believes compensation received on exercise of
-21-
<PAGE>
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:
-22-
<PAGE>
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 19.70%
Chairman and Chief Executive Officer
Paul A. Boyer (2) 110,000 17.30%
Senior Vice President and Chief Financial Officer
Lloyd M. Taggart 100,000 15.80%
Senior Vice President Sales
Michael L. Whaley 100,000 15.80%
Senior Vice President and Chief Financial Officer
Executive Group 435,000 68.60%
Non-Executive Director Group 75,000 11.80%
Non-Executive Officer Employee Group 124,500 19.60%
</TABLE>
(1) All awards under the 1999 Plan to date were granted between
June 8, 1999 and November 1, 1999, and have an exercise
price which was 100% of the fair market value on the grant
date. Accordingly, the awards had no dollar value as of the
date of grant. A total of 634,500 NSOs have been granted as
of the date hereof.
(2) Mr. Boyer resigned from the Company effective October 8,
1999. Unless exercised on or before January 6, 2000, the
options granted to him will expire.
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 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
-23-
<PAGE>
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 proxy
statement. The foregoing summary is qualified in its entirety by reference to
the complete text.
Under 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.
--------------------------------------------------------------
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
-24-
<PAGE>
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
-25-
<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 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
-1-
<PAGE>
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
, 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.
1.3 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-
<PAGE>
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).
2.4.2 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-
<PAGE>
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.
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
-3-
<PAGE>
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.
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
-5-
<PAGE>
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 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.
-6-
<PAGE>
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 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.
-9-
<PAGE>
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 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
-10-
<PAGE>
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.
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 1ST DAY OF MAY,
1999.
-----------------------------------------
, Secretary
-------------------------
-11-
<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 Lloyd M. Taggart
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 , , 1999, at :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
John P. Schmitz
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-
