SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRING IN PROXY STATEMENT
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 [ ]
<TABLE>
<CAPTION>
Check the appropriate box:
<S> <C> <C> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of
[X] Definitive Proxy Statement the Commission Only
[ ] Definitive Additional Materials (as permitted by
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12 Rule 14a-6(e)(2))
</TABLE>
RHEOMETRIC SCIENTIFIC, 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):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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 identity 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>
RHEOMETRIC SCIENTIFIC, INC.
One Possumtown Road
Piscataway, New Jersey 08854
-----------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
to be held on May 31, 2000
TO THE STOCKHOLDERS OF
RHEOMETRIC SCIENTIFIC, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Annual Meeting") of Rheometric Scientific, Inc., a New Jersey corporation (the
"Company"), will be held at the Company's headquarters, One Possumtown Road,
Piscataway, New Jersey 08854 on Wednesday, May 31, 2000, at 10:00 a.m., local
time, for the following purposes:
1. To elect a Board of Directors;
2. To consider and act with respect to certain matters
contemplated by the Securities Purchase Agreement dated
February 17, 2000 among the Company, Axess Corporation and
Andlinger Capital XXVI LLC, namely:
(a) a proposal to change the Company's state of
incorporation from New Jersey to Delaware by
merging the Company into a newly formed,
wholly-owned Delaware subsidiary;
(b) a proposal to increase the authorized number of
shares of Common Stock of the Company from
20,000,000 to 49,000,000 shares; and
(c) a proposal to authorize a new class of preferred
stock, $.01 par value (the "Preferred Stock")
consisting of 1,000,000 shares of Preferred
Stock, of which 1,000 shares of Preferred Stock
would be designated Convertible Redeemable
Preferred Stock and issued to Axess Corporation
as contemplated pursuant to the Securities
Purchase Agreement;
3. To consider and act upon a proposal to approve the Company's
2000 Stock Option Plan;
4. To ratify the appointment of independent accountants for the
fiscal year ending December 31, 2000; and
5. To consider and act upon such other matters as may properly
come before the meeting or any adjournments or postponements
thereof.
The Board of Directors has fixed May 1, 2000 as the record date for
determination of stockholders entitled to notice of and to vote at the Annual
Meeting and any adjournments or postponements thereof. Accordingly, only holders
of record of Common Stock, no par value, at the close of business on such date
(the "Stockholders") shall be entitled to vote at the Annual Meeting and any
adjournments or postponements thereof. A complete list of Stockholders is open
to the examination of any Stockholder for any purpose germane to the meeting,
during ordinary business hours, at the Company's headquarters, One Possumtown
Road, Piscataway, New Jersey 08854.
<PAGE>
A copy of the Company's Annual Report for the fiscal year ended
December 31, 1999 is enclosed herewith.
By Order of the Board of Directors,
Robert M. Castello, Chairman of the Board
Dated: May 11, 2000
YOU ARE URGED TO FILL IN, SIGN, DATE AND MAIL THE ENCLOSED PROXY. IF YOU ATTEND
THE ANNUAL MEETING AND VOTE IN PERSON, THE PROXY WILL NOT BE USED. IF THE PROXY
IS MAILED IN THE UNITED STATES IN THE ENCLOSED ENVELOPE, NO POSTAGE IS REQUIRED.
THE PROMPT RETURN OF YOUR PROXY WILL SAVE THE EXPENSE INVOLVED IN FURTHER
COMMUNICATION.
<PAGE>
RHEOMETRIC SCIENTIFIC, INC.
One Possumtown Road
Piscataway, New Jersey 08854
------------------
PROXY STATEMENT
for the Annual Meeting of Stockholders
to be held on May 31, 2000
------------------
May 11, 2000
TO THE STOCKHOLDERS:
This Proxy Statement ("Proxy Statement") is being furnished to
stockholders of Rheometric Scientific, Inc., a New Jersey corporation (the
"Company"), in connection with the solicitation of proxies in the accompanying
form by the Board of Directors for use at the Annual Meeting of Stockholders
(including any adjournments or postponements thereof, the "Annual Meeting") to
be held at the Company's headquarters, One Possumtown Road, Piscataway, New
Jersey 08854 on Wednesday, May 31, 2000 at 10:00 a.m., local time. The
approximate date on which this Proxy Statement and the accompanying form of
proxy will be sent to the stockholders is May 11, 2000.
All holders of record (the "Stockholders") of the Company's common
stock, no par value (the "Common Stock"), at the close of business on May 1,
2000 (the "Record Date"), are entitled to vote at the meeting and their presence
is desired. Each outstanding share of Common Stock as of the Record Date is
entitled to one vote. At the close of business on May 1, 2000, 16,821,491 shares
of Common Stock were outstanding.
If a Stockholder cannot be present in person at the Annual Meeting, the
Board of Directors of the Company requests such Stockholder to execute and
return the enclosed proxy as soon as possible. The person who signs the proxy
must be either (i) the registered Stockholder of such shares of Common Stock or
(ii) a trustee, executor, administrator, guardian, attorney-in-fact, officer of
a corporation or any other person acting in a fiduciary or representative
capacity on behalf of such registered Stockholder. A Stockholder can, of course,
revoke a proxy at any time before it is voted, if so desired, by filing with the
Secretary of the Company an instrument revoking the proxy or by returning a duly
executed proxy bearing a later date, or by attending the Annual Meeting and
voting in person. Any such filing should be sent to Rheometric Scientific, Inc.,
One Possumtown Road, Piscataway, New Jersey 08854; Attention: Secretary.
Attendance at the Annual Meeting will not by itself constitute revocation of a
proxy.
The Company is paying all costs of the solicitation of proxies,
including the expenses of printing and mailing to its Stockholders this Proxy
Statement, the accompanying Notice of Annual Meeting of Stockholders, the
enclosed proxy and the Company's 1999 Annual Report. The Company will also
reimburse brokerage houses and other custodians, nominees and fiduciaries for
their expenses, in accordance with the regulations of the Securities and
Exchange Commission, in sending proxies and proxy materials to the beneficial
owners of the Company's Common Stock. Officers or employees of the Company may
also solicit proxies in person, or by mail, telegram or telephone, but such
persons will receive no compensation for such work, other than their normal
compensation as such officers or employees.
PURPOSE OF THE ANNUAL MEETING
As previously reported, on March 6, 2000, pursuant to a Securities
Purchase Agreement dated as of February 17, 2000, by and between the Company,
Axess Corporation ("Axess") and Andlinger Capital XXVI LLC ("Andlinger
Capital"), as amended (the "Securities Purchase Agreement") and certain related
agreements, Andlinger Capital purchased (i) 10,606,000 shares of newly issued
common stock of the Company (the "Investor Shares") and (ii) warrants to
purchase (x) an additional 2,000,000 shares of common stock of the Company at an
exercise price of $1.00 per share, exercisable at any time prior to March 6,
2007 (the "Investor A Warrants") and (y) an additional
<PAGE>
4,000,000 shares of common stock of the Company at an exercise price of $3.00
per share, exercisable at any time prior to March 6, 2003 (the "Investor B
Warrants," and collectively with the Investor A Warrants, the "Investor
Warrants"). Upon consummation of this transaction (the "Investment
Transaction"), under the rules for determining beneficial ownership issued by
the Securities and Exchange Commission, Andlinger Capital acquired the power to
vote an aggregate of 16,606,000 shares of the Company's common stock (of which
6,000,000 shares are attributable to the Investor Warrants) representing
approximately 73.6% of the issued and outstanding common stock of the Company.
In connection with the Investment Transaction, five members of the
Company's Board of Directors (Messrs. Leonard Bogner, Walter M. Bromm, Alan R.
Eschbach, Alexander F. Giacco and R. Michael Hendricks) resigned from their
positions as directors of the Company. Under the terms of the Securities
Purchase Agreement, the Company has agreed that the size of its Board of
Directors would consist of seven directors, of which four shall be designees of
Andlinger Capital, one shall be a designee of Axess, one shall be independent of
Andlinger Capital and Axess and one shall be the Chief Executive Officer of the
Company. Andlinger Capital's designees for the board of directors are Merrick G.
Andlinger, Mark F. Callaghan, David R. Smith and Robert M. Castello (who also
serves as Chief Executive Officer). Axess's nominee is Richard J. Giacco, and
Robert K. Prud'homme serves as a director who is independent of Andlinger
Capital and Axess.
At the Annual Meeting, the Stockholders will consider and vote upon the
election of six directors to hold office until the next annual meeting and until
their respective successors shall have been elected and qualified, or, until
resignation, removal or death as provided in the Bylaws of the Company. In
addition to the election of directors, Stockholders will consider and vote upon
the Company's 2000 Stock Option Plan and certain matters contemplated by the
Securities Purchase Agreement, namely: (a) a proposal to change the Company's
state of incorporation from New Jersey to Delaware by merging the Company into a
newly formed, wholly-owned Delaware subsidiary; (b) a proposal to increase the
authorized number of shares of Common Stock of the Company from 20,000,000 to
49,000,000 shares; and (c) a proposal to authorize a new class of preferred
stock, $.01 par value (the "Preferred Stock") consisting of 1,000,000 shares of
Preferred Stock, of which 1,000 shares of Preferred Stock would be designated
Convertible Redeemable Preferred Stock and issued to Axess as contemplated
pursuant to the Securities Purchase Agreement.
Stockholders may also consider and vote upon such other matters as may
properly come before the Annual Meeting or any adjournments or postponements
thereof.
VOTE REQUIRED; PROXIES
The presence in person or by proxy of a majority of the shares of
Common Stock outstanding and entitled to vote as of the Record Date is required
for a quorum at the Annual Meeting. If a quorum is present, those nominated
directors receiving a plurality of the votes cast will be elected. Accordingly,
shares not voted in the election of directors (including shares covered by a
proxy as to which authority is withheld to vote for all nominees) and shares not
voted for any particular nominee (including shares covered by a proxy as to
which authority is withheld to vote for only one or less than all of the
identified nominees) will not prevent the election of any of the nominees for
director. For all other matters submitted to Stockholders at the meeting, if a
quorum is present, the affirmative vote of a majority of the shares represented
at the meeting and entitled to vote is required for approval. As a result,
abstention votes will have the effect of a vote against such matters.
Shares of Common Stock which are represented by properly executed
proxies, unless such proxies shall have previously been properly revoked, will
be voted in accordance with the instructions indicated in such proxies. If no
contrary instructions are indicated, such shares will be voted (1) FOR the
election of all of the nominees for director named in this Proxy Statement; (2)
FOR a proposal to change the Company's state of incorporation from New Jersey to
Delaware by merging the Company into a newly formed, wholly-owned Delaware
subsidiary; (3) FOR a proposal to increase the authorized number of shares of
Common Stock of the Company from 20,000,000 to 49,000,000 shares; (4) FOR a
proposal to authorize a new class of preferred stock, $.01 par value, consisting
of 1,000,000 shares of Preferred Stock, of which 1,000 shares of Preferred Stock
would be designated Convertible Redeemable Preferred Stock and issued to Axess
as contemplated pursuant to the Securities Purchase Agreement; (5) FOR approval
of the Company's 2000 Option Plan and (6) in the discretion of the persons named
in the proxies as proxy appointees as to any other matter that may properly come
before the Annual Meeting.
2
<PAGE>
Shares held by brokers and other Stockholder nominees may be voted on
certain matters but not others. This can occur, for example, when the broker or
nominee does not have the discretionary authority to vote shares of Common Stock
and is instructed by the beneficial owner thereof to vote on a particular matter
but is not instructed on other matters. These are known as "non-voted" shares.
Non-voted shares will be counted for purposes of determining whether there is a
quorum at the meeting, but with respect to the matters as to which they are
"non-voted," they will have no effect upon the outcome of the vote thereon.
PROPOSAL No. 1 -- ELECTION OF DIRECTORS
The Board of Directors of the Company consists of six members, all of
whom have been nominated for election at the meeting, and there is currently one
vacancy. If elected, such directors will hold office until the next annual
meeting of stockholders and until their respective successors shall have been
elected and qualified, or, until resignation, removal or death as provided in
the Bylaws of the Company.
Directors
The following table sets forth certain information as of May 1, 2000,
regarding the six nominees for director:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Robert M. Castello 59 Chairman of the Board and Chief Executive Officer
Mark F. Callaghan 48 Director
David R. Smith 70 Director
Merrick G. Andlinger 41 Director
Richard J. Giacco 47 Director
Robert K. Prud'homme 52 Director
</TABLE>
Robert M. Castello assumed the position referred to above on March 6,
2000. Mr. Castello has been a principal of Andlinger & Company, Inc. ("Andlinger
& Company") since 1995. Mr. Castello has been the Chairman of X.O. Tec
Corporation, a medical products company, since 1997. Mr. Castello was President
and CEO of CBI Holding Co., a pharmaceutical wholesaler. Previously, Mr.
Castello held Vice Presidential positions at McKesson Drug Co., Seatrain Lines,
and W.R. Grace.
Mark F. Callaghan has been a Director of the Company since March 6,
2000. Mr. Callaghan has been a principal of Andlinger & Company since 1999. Mr.
Callaghan was an independent consultant in mergers and acquisitions from 1995 to
1999. Mr. Callaghan was a Vice President of Panorama Press from 1994 to 1995.
Mr. Callaghan is a member of the Board of Directors of CyberAlert, Inc. and of
CraftShop.com, Inc.
David R. Smith has been a Director of the Company since March 6, 2000.
Mr. Smith has been the Chairman of M-Tec, a manufacturer of specialized
materials used in extreme temperature and harsh environments servicing the
automotive and aerospace industries, as well as paper, chemical, refining and
electrical power plant exhaust systems, since August 1995. Mr. Smith was a
principal of Andlinger & Company from June 1, 1984 until October 1, 1998. From
June 1, 1994 until October 1, 1998 Mr. Smith was the President of Andlinger &
Company. Mr. Smith formerly served on the Board of Directors of United
Stationers, Inc.
Merrick G. Andlinger has been a Director of the Company since March 6,
2000. Mr. Andlinger has been a principal of Andlinger & Company since 1999. Mr.
Andlinger was the President and CEO of Pure Energy Corporation, a motor fuel and
chemical development company from 1996 until 1999. From 1994 until 1996, Mr.
Andlinger was a Managing Director in the Global Energy and Power Group in the
Corporate Finance department of Smith Barney Inc. and the Group's co-head from
1995 until 1996. Mr. Andlinger is a member of the Board of Directors of
CyberAlert, Inc. and formerly was a member of the Board of Directors of Pure
Energy Corporation.
Richard J. Giacco has been a Director of the Company since 1992. Mr.
Giacco was a Vice President of the Company from February 19, 1998 until March 6,
2000. Mr. Giacco has been the President of Axess since March 1999 and its
General Counsel since its inception in 1991. Prior thereto, Mr. Giacco served as
Associate General
3
<PAGE>
Counsel for Safeguard Scientifics, Inc., a computer software and electronics
company from 1985 until 1991. Mr. Giacco is the son of Alexander F. Giacco, the
Chairman of the Board of the Company from August 31, 1997 until March 6, 2000
and the President and Chief Executive Officer of the Company from February 6,
1997 until March 6, 2000.
Robert K. Prud'homme has been a Director of the Company since 1981. Mr.
Prud'homme has been a professor of Chemical Engineering at Princeton University
since 1978. Mr. Prud'homme is a consultant to Dow Chemical Company, Block Drug,
Helene Curtis and Rhodia Incorporated.
Compensation of Directors
Non-employee directors who are not affiliated with either Andlinger
Capital or Axess of the Company are paid an annual retainer fee of $3,000, plus
$1,000 per Board meeting attended in person and reimbursement of their travel
expenses. No fees are paid for committee meetings or special telephonic
meetings.
On September 25, 1997, the Board of Directors approved an amendment to
the Company's 1996 Stock Option Plan to include members of the Board of
Directors who are not officers of the Company and who are not officers or
directors of an affiliate of the Company, which was approved by the stockholders
of the Company on November 5, 1998. On March 1, 1999, Mr. Giacco received a
grant of an option to purchase 75,000 shares of Common Stock of the Company at
an exercise price of $.29 per share. On May 1, 2000 Mr. Smith and Dr. Prud'homme
each received grants of options to purchase 15,000 shares of Common Stock of the
Company pursuant to the 1996 Stock Option Plan at an exercise price of $7.25 per
share.
Directors who are also officers or employees of the Company do not
receive any additional compensation for services as a director.
The Company has entered into Indemnification Agreements with each of
its directors providing for indemnification by the Company for liabilities and
expenses in connection with pending or threatened legal proceedings by reason of
service to or on behalf of the Company. The indemnification agreements provide,
among other things, for the procedures and remedies applicable to each
director's indemnification rights. Board of Directors and Committee Meetings
The Board of Directors has a Stock Option and Compensation Committee
(the "Compensation Committee"), which is responsible for administering the 1996
Stock Option Plan. During the fiscal period ended December 31, 1999, and until
their resignations in connection with the closing under the Investment
Transaction, the members of the Compensation Committee were Messrs. Bogner,
Hendricks, and Bromm. During the fiscal year ended December 31, 1999 the
Compensation Committee held one meeting. On April 11, 2000, the Board of
Directors appointed Messrs. Callaghan and Smith and Dr. Prud'homme members of
the Compensation Committee.
The Board of Directors has an Audit Committee which reviews the scope
and procedures of the audit activities of the independent auditors and their
reports on their audits. It also reviews reports from the Company's financial
management and independent auditors on compliance with corporation policies and
the adequacy of the Company's internal accounting controls. During the fiscal
period ended December 31, 1999, the members of the Audit Committee were Messrs.
Hendricks and Bogner, and Dr. Prud'homme and the Audit Committee held one
meeting. On April 11, 2000, the Board of Directors appointed Messrs. Andlinger
and Giacco and Dr. Prud'homme members of the Audit Committee.
In 1999, the Board of Directors of the Company held seven meetings. No
member of the Board of Directors attended in 1999 fewer than 75% of the
aggregate of (1) the total number of meetings of the Board of Directors held
during the period for which he has been a director and (2) the total number of
meetings held by all committees on which he served.
The Board of Directors recommends that Stockholders vote "FOR" each of
the nominees listed above.
4
<PAGE>
Executive Officers
The following table sets forth certain information as of May 1, 2000
regarding the executive officers of the Company:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Robert M. Castello 59 Chairman of the Board and Chief Executive Officer
Joseph Musanti 42 Vice President of Finance & Materials, Chief Financial
Officer, Treasurer and Assistant Secretary
Ronald F. Garritano 61 Vice President of Technology and Engineering
Matthew Bilt 57 Vice President of Human Resources and Administration
Donald W. Becker 42 Vice President of Sales and Marketing, Americas
For a description of the business experience of Robert M. Castello, see "Directors."
</TABLE>
Joseph Musanti has been the Vice President of Finance & Materials and
Chief Financial Officer of the Company since June 1, 1997 and the Treasurer and
Assistant Secretary since July 17, 1997. Prior thereto, Mr. Musanti was the
Director of Operations from November 1994 to June 1, 1997; UK Financial Manager
from April 1994 to November 1994; and Manager, Materials, Cost, and Inventory
from October 1992 to April 1994.
Ronald F. Garritano has been the Company's Vice President of Technology
since June 1992 and the Company's Vice President of Engineering since July 1977.
Matthew Bilt has been the Company's Vice President of Human Resources
and Administration since July 17, 1997. Prior thereto, Mr. Bilt was the
Company's Vice President of Human Resources from November 10, 1994 until July
17, 1997; the Company's Vice President of Human Resources and Administration
from May 3, 1994 until November 10, 1994; and the Company's Director of Human
Resources from June 2, 1986 until May 3, 1994.
Donald W. Becker has been the Company's Vice President of Sales and
Marketing, Americas since April 1999. Prior thereto, Mr. Becker was the
Company's Sales and Marketing Manager in 1998; the Company's Marketing Manager
from 1997 until 1998; and the Company's Rheology Product Manager, Americas from
1989 until 1997.
Officers of the Company serve at the discretion of the Board of
Directors.
5
<PAGE>
Compensation of Executive Officers
The following table sets forth a summary of the compensation paid by
the Company in the years ended December 31, 1999, 1998 and 1997, to the Chief
Executive Officer of the Company, and to the Company's four most highly
compensated executive officers who received over $100,000 in compensation during
1999 from the Company (collectively, the "Named Executive Officers").
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
Securities
Name and Other Annual Underlying All Other
Principal Position Year Salary Bonus Compensation Options Compensation(1)
- ------------------ ---- ------ ----- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Robert M. Castello (2)
Chairman of the Board and
Chief Executive Officer
Alexander F. Giacco(3) 1999 $ 0 $ 0 $ 0 $ 0 $ 0
President, Chief 1998 0 0 0 0 0
Executive Officer and
Director
Ronald F. Garritano 1999 165,385 0 0 0 2,813
Vice President of 1998 162,860 0 0 50,000 2,813
Technology and Engineering 1997 146,506 0 0 0 2,672
Matthew Bilt 1999 127,500 0 0 0 2,586
Vice President of Human 1998 128,049 0 0 15,000 2,414
Resources and 1997 116,693 0 0 0 1,660
Administration
Joseph Musanti 1999 134,807 0 0 40,000 2,250
Vice President of 1998 128,616 0 0 0 2,250
Finance, Chief Financial
Officer, Treasurer and
Assistant Secretary
Donald W. Becker 1999 123,351 0 0 15,000 394
Vice President of Sales
and Marketing, Americas
- ------------------------------
(1) Includes contributions under the Company's Savings and Investment Retirement Plan.
(2) Mr. Castello became Chairman of the Board and Chief Executive Officer of the Company on March 6, 2000.
(3) Mr. A. Giacco resigned from his positions as President, Chief Executive Officer and Director as of March
6, 2000. Mr. A. Giacco had succeeded Alan R. Eschbach as the President and Chief Executive Officer of
the Company on February 6, 1998. Mr. A. Giacco is the managing director of Axess, the Company's former
parent.
</TABLE>
6
<PAGE>
Option Grants
The number of shares of Common Stock available for purchase under the
Company's 1996 Stock Option Plan, as amended (the "Stock Option Plan") is
500,000. Options for an aggregate of 414,400 shares have been granted under the
Stock Option Plan. During the Company's 1999 fiscal year, 75,000 options were
granted to employees under the Stock Option Plan. No options were granted to the
Named Executive Officers during the 1999 fiscal year.
Option Exercises and Year-End Options Values
The following table presents at December 31, 1999, the number of
securities underlying unexercised options and the value of unexercised
in-the-money options held by the Named Executive Officers. During the fiscal
year ended December 31, 1999 no options were exercised.
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised,
Unexercised Options In-The-Money Options
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Ronald F. Garritano 26,000 42,000 $1,375 $4,125
Matthew Bilt 10,800 13,600 413 1,238
Joseph Musanti 14,875 31,625 1,100 3,300
Donald W. Becker 4,125 11,375 413 1,238
</TABLE>
7
<PAGE>
Employment Agreements
The Company amended and restated written employment agreements with Mr.
Bilt in December 1998 and with Mr. Garritano in March 1998, and with Mr. Musanti
in October 1999. In addition, the Company entered into a written employment
agreement with Mr. Becker in May 1999. Under these agreements, base annual
salary is $150,000 for Mr. Garritano, $115,000 for Mr. Bilt, $120,000 for Mr.
Musanti, and $80,000 for Mr. Becker, all subject to discretionary increase by
the Board of Directors. Messrs. Bilt, Musanti and Becker's employment agreements
had or have an initial term of one year and can be continued from year to year
thereafter at the option of the Company. Mr. Garritano's agreement, which was
amended in March 1998, has an initial term of three years and can be continued
from year to year thereafter.
The employment agreements contain a provision that provides for the
executives to be compensated should their employment be terminated upon a change
of control. Messrs. Bilt, Musanti and Becker's agreements indicate that they
would be entitled to receive one year's base pay, plus any bonus participation
or other benefit that the executive may be entitled to for up to one year. Upon
a termination resulting from a change of control, Mr. Garritano's employment
agreement provides for the greater of the term of the agreement or one year's
base pay, plus any bonus participation or other benefit to which he may be
entitled in that period. If a change of control were to occur today and Mr.
Garritano's employment was terminated, Mr. Garritano would be entitled to
receive one year's base pay, plus any bonus participation or other benefit to
which he may be entitled in that period.
Subsequent to the Investment Transaction, each employment agreement was
amended to revise the "change of control" provision. The agreements now provide
for one year's base pay for terminations up to February 16, 2001 and ten month's
base pay for termination between February 17, 2001 and February 17, 2002.
Thereafter the agreements will expire. If terminations occur prior to February
17, 2001, the minimum obligation under such contracts in the aggregate is
approximately $553,000. If terminations occur between February 17, 2002 and
February 17, 2002, the minimum obligation under such contracts in the aggregate
is approximately $461,000.
Michael Starita, a former Vice President of Manufacturing of the
Company and the father of Dr. Joseph M. Starita, a past Chairman of the Board,
was party to a contract entered into in 1982, which entitled him to be paid
$15,000 per year for a period of 10 years following his retirement. During
fiscal year ended June 30, 1985, Mr. M. Starita received an advance payment of
$45,115 with respect to such post-retirement payments. The amount so advanced
will be deducted from the post-retirement payments to be made to him. Mr. M.
Starita's post-retirement payments commenced during 1994.
Compensation Committee Report on Executive Compensation
During the fiscal period ended December 31, 1999, and until their
resignations in connection with the closing under the Investment Transaction,
the members of the Compensation Committee were Messrs. Bogner, Hendricks, and
Bromm. The following is the report of the Compensation Committee for the fiscal
year ended December 31, 1999, which appeared in the Company's information
statement pursuant to Section 14(f) of the Securities Exchange Act, as amended,
and which was mailed to stockholders on or about February 18, 2000.
Decisions on compensation of the Company's executives generally are
made by the three member Compensation Committee. Each member of the Compensation
Committee is a non-employee director. All decisions by the Compensation
Committee relating to the compensation of Company's executive officers are
approved by the full Board of Directors.
Executive Compensation Policies. The Compensation Committee's executive
compensation policies are designed to provide competitive levels of compensation
that integrate compensation with the Company's annual and long-term performance
goals, reward above-average corporate performance, recognize individual
initiative and
8
<PAGE>
achievements, and assist the Company in attracting and retaining qualified
executives. Target levels of the executive officer's overall compensation are
intended to be consistent with others in the Company's industry.
All the Named Executive Officers, other than Messrs. Davis, A. Giacco
and R. Giacco, are employed pursuant to written employment agreements which
establish their base annual salary. The terms of the agreements in the judgment
of the Compensation Committee are standard and appropriate for these executives
and accordingly were endorsed by the Compensation Committee and ratified by the
remaining members of the Board.
The Compensation Committee endorses the position that stock ownership
by management and stock-based performance compensation arrangements are
beneficial in aligning management's and shareholder's interests in the
enhancement of shareholder value. Thus, the Compensation Committee has utilized
these elements in compensation packages for its executive officers by providing
significant Incentive Stock Options.
Named Executive Officers, other than Mr. A. Giacco, may be granted
options to purchase common stock and are eligible to participate on the same
terms as non-executive employees in the Company's Savings and Investment
Retirement Plan (the "Savings Plan"), a broad-based plan which accords benefits
based on pre-established formulas and eligibility criteria, as well as Company
group life and health insurance plans. All decisions with respect to option
grants will be made solely by the Compensation Committee, subject to approval by
the full Board of Directors.
President and CEO Compensation. As Chief Executive Officer of the
Company from September 20, 1993 until August 31, 1997, Mr. Davis did not receive
any compensation from the Company. The Company agreed to pay Axess a management
fee of $150,000 per year for services to be rendered by Mr. Davis. Mr. Davis had
devoted substantially all of his time on behalf of Axess to the Company during
his tenure. Mr. Davis retired on August 31, 1997. The management fee for the
fiscal year ended December 31, 1997 was $100,000.
Mr. Eschbach became President and Chief Executive Officer on August 31,
1997 when Mr. Davis retired. During Mr. Eschbach's tenure as President and Chief
Executive Officer (August 31, 1997 to February 6, 1998), he was compensated
pursuant to his employment agreement with the Company and received no additional
compensation upon becoming President and CEO. On February 6, 1998, Mr. Alexander
F. Giacco became President and Chief Executive Officer. Mr. A. Giacco receives
no compensation from the Company, and Axess has elected not to require the
Company to pay a management fee for said services.
Respectfully submitted,
Leonard Bogner
R. Michael Hendricks
Walter Bromm
On April 11, 2000, the Board of Directors appointed Messrs. Callaghan
and Smith and Dr. Prud'homme members of the Compensation Committee. The newly
appointed Compensation Committee intends to review the compensation of executive
officers for the fiscal 2000 year and to deliver its report in connection with
the 2001 annual meeting of stockholders.
Performance Graph
The following graph and table compare the annual change in the
cumulative total return, assuming reinvestment of dividends, on the Company's
Common Stock, which has been traded on the OTC Bulletin Board ("OTCBB") under
the symbol "RHEM" since April 14, 1998, with the annual change in the cumulative
total returns of the NASDAQ Market Index and an index comprised of public
companies whose securities have been trading publicly since January 1, 1995 and
which report under the standard industrial classification code 3826 (31
companies, excluding the Company) (the "SIC Code Index"), which the Company
considers to be its peer industry
9
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group. The graph assumes an investment of $100 on January 1, 1995, in each of
the Common Stock, the stocks comprising the NASDAQ Market Index and the stocks
comprising the SIC Code Index.
<TABLE>
<CAPTION>
Comparison of Cumulative Total Return Among the Company, NASDAQ Market Index and the SIC Code Index
Graph Omitted
<S> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------
December 31,
--------------------------------------------------------------------
COMPANY/INDEX/MARKET 1994 1995 1996 1997 1998 1999
------------------------------------ --------- --------- ----------- ------------ ----------- -----------
Rheometric Scientific, Inc. 100.00 120.00 155.01 75.01 22.51 40.01
------------------------------------ --------- --------- ----------- ------------ ----------- -----------
SIC Code Index 100.00 160.26 191.77 227.51 285.70 462.23
------------------------------------ --------- --------- ----------- ------------ ----------- -----------
NASDAQ Market Index 100.00 129.71 161.18 197.16 278.08 490.46
------------------------------------ --------- --------- ----------- ------------ ----------- -----------
Source: Media General Financial Services
</TABLE>
10
<PAGE>
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding the
beneficial ownership of the Common Stock as of March 31, 2000 by (i) each person
who, to the knowledge of the Company, beneficially owns more than 5% of the
outstanding Common Stock of the Company, (ii) the directors and certain officers
of the Company and (iii) all directors and officers of the Company as a group.
The percentages of shares of Common Stock held or beneficially owned by any
Stockholder or group of Stockholders are based upon the total number of shares
of Common Stock outstanding as of March 31, 2000. Except as indicated, each
person listed below has sole voting and investment power with respect to the
shares set forth opposite such person's name.
Shares Beneficially Owned
-------------------------
Name Number Percentage
Andlinger Capital XXVI LLC (1) 16,606,000 73.6%
Axess Corporation (2) 2,861,257 17.3
Gerhard R. Andlinger (3) 16,606,000 73.6
Stephen A. Magida (4) 16,606,000 73.6
Robert M. Castello (5)(6) 16,606,000 73.6
Mark F. Callaghan (5)(6) 16,606,000 73.6
David R. Smith (5) 1,000 *
Merrick G. Andlinger (5)(6) 16,606,000 73.6
Richard J. Giacco (5) (7) 78,000 *
Robert K. Prud'homme (5) 25,000 *
Joseph Musanti (5) 14,875 *
Ronald F. Garritano (5) 29,735 *
Matthew Bilt (5) 12,900 *
Donald W. Becker (5) 4,125 *
All executive officers and
directors as a group (10 persons) 16,770,635 74.1
(5)
- ------------------------
* Less than 1%.
(1) The address for Andlinger Capital XXVI LLC is 105 Harbor Drive, Suite
125, Stamford, Connecticut 06902. Includes 6,000,000 shares of Common
Stock Andlinger Capital XXVI LLC has the right to acquire upon the
exercise of warrants.
(2) The address for Axess Corporation is 100 Interchange Boulevard, Newark,
Delaware 19711-3549. Pursuant to the Securities Purchase Agreement the
Company will reissue to Axess, subject to an affirmative vote of the
Stockholders of Proposal No. 3, 4,400,000 shares of Common Stock, and
will also issue to Axess, subject to the affirmative vote of the
Stockholders of Proposal No. 4, 1,000 Shares of Preferred Stock
convertible into 1,000,000 Shares of Common Stock. Following the
affirmative vote of the Stockholders of Proposals Nos. 3 and 4 and the
reissuance and issuance of all securities to be reissued and issued to
Axess pursuant to the Securities Purchase Agreement, the number of
shares and percentage of shares, respectively, of Common Stock
beneficially owned by Axess will be 8,261,257 and 37.6%.
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<PAGE>
Andlinger Capital, which currently owns 10,606,000 shares of Common
Stock, and Axess have agreed pursuant to the Voting Agreement to, among
other things, vote to in favor of Proposals Nos. 3 and 4. Therefore the
holders of shares of Common Stock representing 81.3% of currently
issued and outstanding shares of Common Stock have agreed to vote in
favor of Proposals Nos. 3 and 4.
(3) The address for Mr. G. Andlinger is c/o Andlinger & Company, Inc., 4445
North A1A, Suite #235, Vero Beach, Florida 32963. As reported in a
Schedule 13D filed with the Securities and Exchange Commission on March
17, 2000, by virtue of Mr. G. Andlinger's relationship with Mr. Magida
and as a controlling person of Andlinger & Company, Inc., Mr. G.
Andlinger may be deemed to have shared power to dispose of or direct
the disposition of and shared power to vote or direct the vote of an
aggregate of 16,606,000 shares of Common Stock (of which 6,000,000
shares are attributable to the Warrants) representing 73.6% of the
issued and outstanding shares of Common Stock (including as outstanding
for purposes of determining such percentage shares of Common Stock
issuable upon exercise of warrants held by Andlinger Capital ). Mr. G.
Andlinger disclaims beneficial ownership of the shares of Common Stock
held by Andlinger Capital.
(4) The address for Mr. Magida is 105 Harbor Drive, Suite 125, Stamford,
Connecticut 06902. As reported in a Schedule 13D filed with the
Securities and Exchange Commission on March 17, 2000, Mr. Magida, as
manager and as a member of Andlinger Capital, has shared power to vote
or direct the vote of, and shared power to dispose of or direct the
disposition of, an aggregate of 16,606,000 shares of Common Stock (of
which 6,000,000 shares are attributable to the Warrants), representing
73.6% of the issued and outstanding shares of Common Stock (including
as outstanding for purposes of determining such percentage shares of
Common Stock issuable upon exercise of the warrants held by Andlinger
Capital.
(5) The address for each director and officer of the Company is c/o
Rheometric Scientific, Inc., One Possumtown Road, Piscataway, New
Jersey 08854.
(6) As reported in a Schedule 13D filed with the Securities and Exchange
Commission on March 17, 2000, Messrs. Castello, Callaghan and M.
Andlinger by virtue of their relationships with the other reporting
persons on such Schedule 13D and as members of Andlinger Capital may be
deemed to have shared power to vote or direct the vote of, and shared
power to dispose of or direct the disposition of, an aggregate of
16,606,000 shares of Common Stock (of which 6,000,000 shares are
attributable to the Warrants) representing 73.6% of the issued and
outstanding shares of Common Stock (including as outstanding for
purposes of determining such percentage shares of Common Stock issuable
upon exercise of warrants held by Andlinger Capital). Messrs. Castello,
Callaghan and M. Andlinger disclaim beneficial ownership of such
shares.
(7) Includes beneficial ownership of 1,000 shares held in an investment
partnership for the benefit of Mr. Giacco's children and managed by Mr.
Giacco and 75,000 shares Mr. Giacco has an unqualified option to
purchase within 60 days of March 31, 2000.
Certain Relationships and Related Transactions
On September 30, 1999, Axess and the Company consolidated all
outstanding debt of the Company to Axess, in an Amended and Restated
Subordinated Unsecured Working Capital Note (the "Note") made by the Company in
favor of Axess in the amount of $8,205,907.09. The debt consolidated under the
Note (the "Axess Debt") included outstanding principal, unpaid interest through
December 31, 1998, amounts due to Axess under a management agreement with the
Company and amounts due to Axess for insurance premium advances.
On March 6, 2000, pursuant to the Securities Purchase Agreement and
certain related agreements Andlinger Capital purchased (i) 10,606,000 shares of
newly issued common stock of the Company (the "Investor Shares") and (ii)
warrants to purchase (x) an additional 2,000,000 shares of common stock of the
Company at an exercise price of $1.00 per share, exercisable at any time prior
to March 6, 2007 (the "Investor A Warrants") and (y) an additional 4,000,000
shares of common stock of the Company at an exercise price of $3.00 per share,
exercisable at any time prior to March 6, 2003 (the "Investor B Warrants," and
collectively with the Investor A Warrants, the "Investor Warrants"), for the
aggregate consideration of $1,825,000 (the "Purchase Price"). Upon consummation
of this transaction Andlinger Capital acquired beneficial ownership (as
determined under the rules of the Securities and Exchange Commission) to vote an
aggregate of 16,606,000 shares of the Company's common stock (of which 6,000,000
shares are attributable to the Investor Warrants) representing approximately
73.6% of the issued and
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<PAGE>
outstanding common stock of the Company (including as outstanding for the
purposes of determining such percentage the 6,000,000 shares issuable upon
exercise of the Investor Warrants). The acquisition of these securities by
Andlinger Capital constitutes a change in control of the Company.
The Securities Purchase Agreement also provides that, subject to
certain exceptions, for so long as Andlinger Capital and its affiliates continue
to own in the aggregate not less than 50% of their Initial Threshold Amount (as
defined below), the Company and its Board of Directors will support the
nomination of and shall take certain actions such that the slate of nominees
recommended by the Board of Directors to stockholders for election as directors
at each annual meeting of stockholders includes at least the number of designees
of Andlinger Capital equal to the number of directors that would constitute a
majority of directors following such election, and that Andlinger Capital shall
be entitled to have at least one of its designees appointed to each Committee of
the Board of Directors. As defined in the Securities Purchase Agreement,
"Initial Threshold Amount" means the aggregate of the number of shares of common
stock purchased by Andlinger Capital under the Securities Purchase Agreement and
the number of shares of common stock issuable under the Investor A Warrants (as
if issued on the closing date under the Securities Purchase Agreement). The
initial designees of Andlinger Capital to serve on the Board of Directors of the
Company, each of whom has been added to the Board of Directors of the Company as
of March 6, 2000 (the closing date under the Securities Purchase Agreement), are
Mr. Castello, Mr. Callaghan, Mr. Smith and Mr. M. Andlinger.
Based on information received from Andlinger Capital, the members of
Andlinger Capital are Mr. Magida and Mr. M. Andlinger. It is anticipated that
Mr. Castello and Mr. Callaghan will each be admitted as members of Andlinger
Capital. Mr. Magida is an attorney and principal and secretary of Andlinger &
Company, Inc., a Delaware corporation ("ACO") and the manager and a member of
Andlinger Capital and the trustee of the Gerhard R. Andlinger Intangible Asset
Management Trust (the "Trust"), which may be deemed a controlling person of
Andlinger Capital. Gerhard R. Andlinger, a private investor and a principal,
sole stockholder and a controlling person of ACO, is the sole beneficiary under
the Trust. Messrs. Castello and Callaghan are principals of ACO, employees of
one or more affiliates of ACO and are anticipated to become members of Andlinger
Capital. Mr. M. Andlinger is a principal of ACO, an employee of one or more
affiliates of ACO and a member of Andlinger Capital. ACO is in the business of
identifying and assisting in the implementation of potential acquisitions,
investments and other transactions on behalf of its principals. Andlinger
Capital has been organized by its members with the business purpose of investing
in the Company. The source of funds to pay the Purchase Price under the
Securities Purchase Agreement was from initial cash contributions made by each
member of Andlinger Capital to Andlinger Capital in an amount proportionate to
his or its interest therein and the amount and source of such contributions was,
(1) in the case of the Trust, $748,050 from property of the Trust, and (2) in
the case of Messrs. Castello, Magida, Callaghan and M. Andlinger, $255,500,
$36,500, $164,250 and $109,500, respectively, in each case from a loan made by
Mr. G. Andlinger from his personal funds at an interest rate of 10% per annum.
The Securities Purchase Agreement contemplates that the Company will
submit to its stockholders for approval (the "Stockholder Approval") proposals
to (i) reincorporate the Company from New Jersey to Delaware (the
"Reincorporation"); (ii) increase the authorized number of shares of capital
stock to 49,000,000 shares of common stock and 1,000,000 shares of preferred
stock; and (iii) authorize the issuance of the preferred stock as contemplated
in the Securities Purchase Agreement. In order to effect the intent of the
parties to the Securities Purchase Agreement that the Company issue the Investor
Shares on the closing date, at the closing of the Securities Purchase Agreement
Axess contributed 4,400,000 shares of common stock to the Company, in exchange
for the Company's agreement to reissue to Axess 4,400,000 shares of common stock
(the "Axess Reissue Shares") subject to the Stockholder Approval, and
Reincorporation and amendment of the Company's certificate of incorporation to
authorize the issuance of such shares.
Upon the closing under the Securities Purchase Agreement, Axess
cancelled the Axess Debt in exchange for (x) the payment by the Company to Axess
of $3,500,000 in cash; (y) the issuance to Axess of a promissory note in the
principal amount of $1,000,000 payable upon the sale of the Company's Process
Control Rheometer Product Line and (z) the issuance to Axess, of a warrant (the
"Preferred Stock Warrant" and collectively with the Investor Warrants, the
"Warrants") to purchase 1,000 shares of the Company's non-voting convertible
redeemable preferred stock to be issued, subject to Stockholder Approval,
pursuant to an amendment to the certificate of incorporation of the Company.
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<PAGE>
Prior to the purchase by Andlinger Capital of the Investor Shares and
the Investor Warrants, Axess agreed to contribute 2,800,000 shares of common
stock to the Company.
In connection with the Securities Purchase Agreement, the Company,
Andlinger Capital, and Axess have entered into a Registration Rights Agreement,
dated as of March 6, 2000 (the "Registration Rights Agreement"). The
Registration Rights Agreement provides for the registration with the Securities
and Exchange Commission of the Investor Shares, the Axess Reissue Shares, and
the shares of common stock issuable upon the exercise of the Warrants owned by
Andlinger Capital and Axess. Furthermore, in connection with the Securities
Purchase Agreement, the Company, Andlinger Capital, and Axess have entered into
a Stockholders' Agreement dated as of March 6, 2000 (the "Stockholders'
Agreement"). Pursuant to the Stockholders' Agreement, Andlinger Capital and
Axess have agreed, among other things, not to transfer their respective shares
of common stock without the prior written consent of the other stockholders
party thereto, except (1) pursuant to "piggyback" or "demand" registrations
under the Registration Rights Agreement, (2) pursuant to an exemption from
registration under Rule 144 under the Securities Act of 1933, as amended, in
transactions effected after the first anniversary of the closing date under the
Securities Purchase Agreement, (3) to certain transferees, (4) as collateral
security in a bona fide arm's-length loan or credit transaction, provided the
stockholder retains the authority to vote such securities in the absence of any
default thereunder, (5) pursuant to a tender offer, and (6) pursuant to a
transaction duly approved by the stockholders of the Company. The Company,
Andlinger Capital and Axess also entered into a Voting Agreement, dated as of
February 17, 2000, pursuant to which Andlinger Capital and Axess agreed to vote
in favor of the items to be submitted for Stockholder Approval pursuant to the
Securities Purchase Agreement as described above.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers and any persons who own more than ten percent of the
Company's Common Stock to file with the Securities and Exchange Commission
various reports as to ownership of such Common Stock. Such persons are required
by Securities and Exchange Commission regulation to furnish the Company with
copies of all Section 16(a) forms they file. To the Company's knowledge, based
solely on its review of the copies of such reports furnished to the Company, the
aforesaid Section 16(a) filing requirements were met on a timely basis during
1999.
PROPOSAL No. 2 -- CHANGE THE STATE OF INCORPORATION OF THE COMPANY FROM NEW
JERSEY TO DELAWARE
Principal Reasons for the Reincorporation Proposal
The Board of Directors believes that the best interests of the Company
and its stockholders will be served by changing the Company's state of
incorporation from New Jersey to Delaware. At the time of the Company's
incorporation in New Jersey in 1981 under the name of Rheometrics, Inc., the New
Jersey Business Corporation Act was deemed to be adequate for the conduct of the
Company's business, in part because of the limited business and basic
organizational features of the Company at that time. Over the years, the
expansion of the Company's business has increased its need for a more
sophisticated corporate structure and a more flexible and current regulatory
foundation.
For many years, Delaware has followed a policy of encouraging
incorporation in that state and, in furtherance of that policy, has adopted
comprehensive, modern and adaptable corporation laws which are periodically
updated and revised to meet changing business needs. Delaware courts have
developed considerable expertise in dealing with corporate legal issues and a
substantial body of case law has developed construing Delaware law and
establishing public policy with respect to Delaware corporations. The relative
clarity and predictability of Delaware corporate law presented in the numerous
precedents decided by the Delaware courts should be of great advantage to the
Company by allowing it to make corporate decisions and take actions with
increased confidence of what the outcome and consequences of those decisions and
actions will be under the General Corporation Law of the State of Delaware.
Further, the Delaware Secretary of State's office is staffed with experienced
regulators recognized for their efficient and business-sensitive approach to
administering the state's business laws and regulations. As a result of these
and other factors, many major corporations have chosen Delaware
14
<PAGE>
for their initial domicile or have subsequently reincorporated in Delaware in a
manner similar to that proposed by the Company.
For the foregoing reasons, the Board of Directors believes that the
activities of the Company, both present and contemplated, can be better managed
if the Company is governed by Delaware law. It should be noted, however, that
stockholders in some instances have fewer rights and hence less protection under
Delaware law than under New Jersey law. See the discussion under the heading
"Comparison of Stockholders' Rights under New Jersey Law and Delaware Law,"
below.
The Company's Board of Directors has unanimously approved, subject to
Stockholder approval, a proposal (the "Reincorporation Proposal") to change the
Company's state of incorporation from New Jersey to Delaware by means of a
merger (the "Reincorporation Merger") of the Company with and into a newly
formed, wholly-owned subsidiary of the Company that has been incorporated under
Delaware law ("Newco"). The principal office of Newco will be One Possumtown
Road, Piscataway, New Jersey 08854, telephone (732) 560-8550. If the
Stockholders approve the Reincorporation Proposal, Newco will be the surviving
corporation of the Reincorporation Merger. A consequence of the Reincorporation
Merger will be a change in the law applicable to the Company's corporate affairs
from New Jersey law to Delaware law, which will also result in certain
differences in stockholders' rights.
The following discussion summarizes certain aspects of the
Reincorporation Proposal, including certain material differences between New
Jersey law and Delaware law. This summary does not purport to be a complete
description of the Reincorporation Proposal or the differences between
stockholders' rights under New Jersey law and Delaware law and is qualified in
its entirety by reference to (i) the Agreement and Plan of Merger, between the
Company and Newco (the "Reincorporation Merger Agreement"), attached hereto as
Annex I (ii) the certificate of incorporation of Newco attached hereto as Annex
II, and (iii) the bylaws of Newco attached hereto as Annex III. Copies of the
Company's certificate of incorporation, as amended, and bylaws are available for
inspection at the Company's principal office, and copies will be sent to
stockholders on request, without charge.
Approval of the Reincorporation Proposal by the Stockholders will also
constitute approval of the Reincorporation Merger and the Reincorporation Merger
Agreement, as well as other matters included in the Reincorporation Proposal
described in this proxy statement. Pursuant to the terms of the Reincorporation
Merger Agreement, Newco's certificate of incorporation and bylaws will replace
the Company's certificate of incorporation and bylaws as the charter documents
affecting corporate governance and stockholders' rights. For a description of
the differences between the Company's certificate of incorporation and bylaws
and Newco's certificate of incorporation and bylaws, see "Comparison of Certain
Charter Document Provisions," below.
The approval of the Reincorporation Proposal will affect certain rights
of the Company's stockholders. Accordingly, stockholders are urged to carefully
read this proxy statement and the appendices.
Principal Features of the Reincorporation Proposal
Upon the consummation of the Reincorporation Merger, the separate
existence of the Company will cease and Newco, to the extent permitted by law,
will succeed to all business, properties, assets and liabilities of the Company.
Each share of Common Stock of the Company issued and outstanding immediately
prior to the consummation of the merger will, by virtue of the Reincorporation
Merger, be converted into one share of common stock of Newco. Upon the
consummation of the merger, certificates which immediately prior to the
consummation of the Reincorporation Merger represented common stock of the
Company, including common stock held in the treasury of the Company, will be
deemed for all purposes to represent the same number of shares of Newco common
stock. It will not be necessary for Stockholders to exchange their existing
stock certificates for stock certificates of Newco.
Approval of the Reincorporation Proposal will not result in any change
in the business, management, assets or liabilities of the Company. The directors
and officers of the Company will be the directors of Newco following the
Reincorporation Merger. Following the consummation of the Reincorporation
Merger, the Newco common stock will be listed on the OTCBB, where the Common
Stock of the Company is currently listed. The OTCBB will
15
<PAGE>
consider the delivery of existing stock certificates representing Common Stock
of the Company as constituting "good delivery" of shares of the Newco common
stock in transactions subsequent to the Reincorporation Merger.
Pursuant to the terms of the Reincorporation Merger Agreement, each
option and warrant to purchase Common Stock of the Company outstanding
immediately prior to the consummation of the Reincorporation Merger will become
an option or warrant to purchase Newco common stock, subject to the same terms
and conditions as set forth in the Company's 1996 Stock Option Plan or other
agreement pursuant to which such option or warrant was granted. All employee
benefit plans and other agreements and arrangements of the Company will be
continued by Newco upon the same terms and subject to the same conditions as
currently in effect.
In accordance with generally accepted accounting principles, the
Company expects that following the Reincorporation Merger the assets and
liabilities of the Company will be carried forward at their recorded historical
book values.
Comparison of Certain Charter Document Provisions
Newco's certificate of incorporation and bylaws are different from the
Company's certificate of incorporation and bylaws. Some differences are
primarily the result of differences between Delaware law and New Jersey law.
Significant provisions and certain important similarities and differences are
discussed below.
Capital Stock
Both Delaware and New Jersey law provide that a corporation has the
power to issue the number of shares stated in its certificate of incorporation.
Such shares may consist of one or more classes and any class may be divided into
one or more series. Each class or classes and series may be with or without par
value and have such designation and relative voting, dividend, liquidation and
other rights, preferences and limitations as stated in the certificate of
incorporation.
The authorized capital stock of the Company currently consists of
20,000,000 shares of Common Stock, no par value and no other shares of capital
stock.
Subject to stockholder approval of Proposals No. 3 and 4, the
capitalization of Newco will consist of 49,000,000 shares of Common Stock, $.01
par value per share and 1,000,000 shares of preferred stock.
New Jersey law and Delaware law are similar with respect to the manner
in which directors may fix the terms of a series of preferred stock and the
terms which may be so fixed. Under both Delaware law and New Jersey law, the
certificate of incorporation may authorize the directors to fix the terms of a
series of preferred stock and/or provide for different voting rights between
series of preferred stock. Newco's certificate of incorporation permits the
Board of Directors to exercise broad discretion in fixing the terms and/or
voting rights of a series of preferred stock.
Preemptive Rights
Under New Jersey law and Delaware law, stockholders have preemptive
rights to purchase shares only if the certificate of incorporation so provides.
The Company's certificate of incorporation and Newco's certificate of
incorporation do not provide stockholders with preemptive rights.
Compromises with Creditors and Shareholders
Delaware law provides that a certificate of incorporation may contain a
provision allowing for a compromise or arrangement between a corporation and its
creditors or shareholders. Under such a provision, whenever such a compromise or
arrangement is proposed, a Delaware court may order a meeting for the purpose of
eliciting an agreement to the compromise or the arrangement which would be
binding on all such creditors and/or shareholders and the corporation. Newco's
certificate of incorporation contains such a provision.
16
<PAGE>
Board Of Directors; Committees
Under New Jersey law, a board of directors may consist of one or more
members as provided in the bylaws and subject to any provision contained in the
certificate of incorporation. The participation of directors with a majority
vote will constitute a quorum for the transaction of business unless the
certificate of incorporation or the bylaws provide otherwise. However, in no
event will the quorum be less than one third of the votes of the board. Changes
to a bylaw or amendment of the certificate of incorporation can be made by the
vote of a majority of the shares entitled to vote at a meeting at which a quorum
is present, or by the written consent of the stockholders of a majority of the
outstanding shares entitled to vote, or by the board. The Company's bylaws
provide that the number of directors of the Company may not be less than three
nor more than fifteen, with the precise number to be fixed from time to time.
Although the number of directors may be changed, currently, the number of
directors has been fixed at seven. Elected directors hold office until the next
annual meeting and until successors are elected and qualified, subject to
earlier death, resignation, incapacity or removal from office. Under the
Company's bylaws, special meetings of the Board of Directors may be called by
the president. Newco's bylaws provide that special meetings may be called by the
Chairman of the Board, the Chief Executive Officer or any director. Pursuant to
the Company's bylaws, a majority of the entire board constitutes a quorum for
the transaction of business by the Board of Directors, and an act by a majority
of the quorum of directors constitutes an act of the Board of Directors. Newco's
bylaws provide an equivalent provision.
Under Delaware law, a board of directors of a corporation may consist
of one or more members as provided in the bylaws, unless the certificate of
incorporation fixes the number of directors. A majority of the total number of
directors will constitute a quorum for the transaction of business unless the
certificate of incorporation or the bylaws require a greater number. However, a
quorum may not be less than one-third of the number of directors. The Newco
bylaws provide that the number of directors of Newco will be seven unless
otherwise determined by a vote of a majority of the entire Board of Directors.
Action by a majority of the directors present at a meeting at which a quorum is
present is considered to be an act of the entire Newco board. Each director will
hold office until the annual meeting of the stockholders next succeeding his
election and until his successor is elected and qualified, or until his prior
death, resignation or removal.
Delaware law provides that a transaction between a corporation and one
or more of its directors or officers or an entity in which one or more of its
directors or officers has an interest may not be voided if: (1) the material
facts of the relationship or interest is disclosed or known to the board or
committee so deciding and the contract or transaction is authorized in good
faith by a majority vote of the disinterested stockholders, even if the number
of disinterested directors is less than a quorum; (2) the material facts of the
relationship or interest is disclosed to the stockholders and a majority of the
stockholders approve of the transaction; or (3) the contract or transaction is
fair and reasonable to the Company. A similar provision under New Jersey law
permits a transaction to be declared void if it is between a corporation and one
or more directors or entities in which a director has an interest.
New Jersey law allows the board of directors, by resolution adopted by
a majority of the entire board, to designate an executive committee or other
committee or committees, each consisting of one or more members, with the power
and authority (to the extent permitted by law) to act on behalf of the entire
board if the certificate or bylaws so provides. The Company's bylaws provides
for such committees. Delaware law allows the establishment of committees of the
board without the need to so provide in the certificate or the bylaws. Newco's
bylaws provide that the board may designate an executive committee or other such
committees, each consisting of one or more members, with such powers as the
board may determine.
Cumulative Voting. The Company's certificate of incorporation and
bylaws do not provide for cumulative voting in the election of directors, nor do
Newco's certificate of incorporation and bylaws. Therefore the stockholders of a
majority of the voting power of Newco will be entitled to elect all of the
directors of Newco.
Newly Created Directorships and Vacancies. Under New Jersey law, any
vacancy, however caused, may be filled by a majority vote of the remaining
directors. Any directorship not filled by the board may be filled by the
stockholders at a meeting of the stockholders. The Company's bylaws provide that
vacancies, however caused, including vacancies resulting from any increase in
the authorized number of directors, may be filled by a majority of the directors
then in office, or by a sole remaining director. Each director so elected will
hold office for the
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unexpired portion of the term of the director whose place will be vacant, and
until his successor is elected and qualified.
Under Delaware law, vacancies and newly created directorships may be
filled, in the case of directors elected by all stockholders as a single class,
by a majority vote of directors or by the sole remaining director.
Alternatively, in the case of directors elected by a class or series of stock, a
majority of directors so elected or by the sole director so elected can fill
vacancies. The Newco bylaws provide that any vacancy in the board occurring by
an increase in the number of directors, or by reason of the death, resignation,
disqualification, removal (unless such removal will be filled by the
stockholders at the meeting at which the removal was effected), inability to act
of any director, or otherwise, will be filled for the unexpired portion of the
term by the vote of not less than a majority of the remaining directors then
holding office, at any regular meeting or special meeting of the board called
for that purpose.
Removal of Directors. Under New Jersey law, directors may be removed,
subject to certain qualifications, for cause or, unless otherwise provided in
the certificate of incorporation, without cause by an affirmative vote of
stockholders entitled to vote for the election of directors. The Company's
bylaws provide that directors may be removed for cause by an affirmative vote of
all stockholders entitled to vote for the election of directors. However, no act
by a removed board member or members will be invalidated solely because the
director was removed.
Under Delaware law, directors may be removed, subject to certain
qualifications, with or without cause, by an affirmative vote of stockholders
entitled to vote for the election of directors. The Newco bylaws provide that
any director may be removed, with or without cause, at any time by the
affirmative vote of the stockholders holding an aggregate of at least a majority
of the outstanding shares of Newco.
Director Liability and Indemnification of Officers and Directors. Both
New Jersey law and Delaware law contain provisions and limitations regarding
directors' liability and regarding indemnification by a corporation of its
officers, directors and employees.
New Jersey law permits a New Jersey corporation to include a provision
in its certificate of incorporation which eliminates or limits the personal
liability of a director or officer to the Company or its stockholders for
monetary damages for breach of fiduciary duties as a director or officer.
However, no such provision may eliminate or limit the liability of a director or
officer for any breach of duty based upon an act or omission (i) in breach of
the director's or officer's duty of loyalty to the Company or its stockholders,
(ii) not in good faith or involving a knowing violation of law, or (iii)
resulting in receipt by such person of an improper personal benefit. Under New
Jersey law, corporations are also permitted to indemnify directors in certain
circumstances and required to indemnify directors under certain circumstances.
Under New Jersey law, a director, officer, employee or agent may, in general, be
indemnified by the Company if he has acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
Company and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. In addition, under New
Jersey law, corporations must indemnify a director to the extent the director
has been successful on the merits or otherwise. The Company's certificate of
incorporation includes such a provision. The Company's certificate of
incorporation does not have any provisions relating to the availability of
equitable remedies (such as an injunction or rescission) for breach of fiduciary
duty. However, as a practical matter, equitable remedies may not be available in
particular circumstances.
Delaware law permits a corporation to include a provision in its
certificate of incorporation which eliminates or limits the personal liability
of a director to the Company or its stockholders for monetary damages in the
case of a breach of fiduciary duties by a director, including conduct which
could be characterized as negligence or gross negligence. However, no such
provision may eliminate or limit the liability of a director (i) in the case of
a breach of the director's duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) for the unlawful payment of
dividends or unlawful stock purchase or redemption or other violations of
Section 174 of the Delaware General Corporation Law, or (iv) for any transaction
from which the director derived an improper personal benefit. This provision may
be extended to persons other than directors if such persons exercise or perform
any of the powers or duties otherwise conferred or imposed upon the board of
directors. Delaware law further provides that no such provision can eliminate or
limit the liability of a director for any act or omission occurring prior to the
date when
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such provision becomes effective. Under Delaware law, a corporation has the
power to indemnify a director against judgments, settlements and expenses in any
litigation or other proceeding other than a derivative suit, if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to a criminal proceeding, had no
reasonable cause to believe his conduct was unlawful. The indemnification
provisions of Delaware law make mandatory the indemnification of a director to
the extent that the director has been successful on the merits or otherwise,
thus possibly requiring indemnification of settlements in certain instances.
Delaware law also provides that a director may be indemnified by the corporation
for expenses of a derivative suit even if he is not successful on the merits.
However, the director must have acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation. This is subject, in the case of an adverse judgment, to court
approval. The Newco certificate of incorporation includes such a provision.
Amendments to Bylaws. New Jersey law provides that a board of directors
has the power to make, alter and repeal a corporation's bylaws, unless such
power is reserved to the corporation's shareholders in the corporation's
certificate of incorporation. The Company's Bylaws reserves such power to the
shareholders. Under Delaware law, the shareholders of a Delaware corporation
and, if the certificate of incorporation so provides, the board of directors,
have the power to adopt, amend or repeal a corporation's bylaws. Newco's
certificate of incorporation grants the board of directors the power to amend
Newco's bylaws.
Comparison of Stockholders' Rights under New Jersey Law and Delaware Law
Amendment of Certificate of Incorporation and Bylaws
To amend certain terms of a corporation's certificate of incorporation,
New Jersey law allows an amendment to be made by board action alone (for
example, an amendment to effect a share dividend). Other, general amendments
under New Jersey law require the action of the board with the approval of
shareholders holding a majority of the voting stock entitled to vote thereon
(and, if applicable, a majority of the outstanding stock of each class entitled
to vote thereon) unless the corporation's certificate of incorporation requires
a greater percentage. The Company's certificate does not require such a
percentage. Delaware law requires the approval of shareholders holding a
majority of the voting power of the outstanding stock of the corporation (and,
if applicable, a majority of the outstanding stock of each class entitled to
vote thereon) in order to amend the corporation's certificate of incorporation,
unless a greater number or proportion is specified in the certificate of
incorporation. Newco's certificate of incorporation does not specify such
greater number or other proportion of holders of securities having power to
vote.
Under Delaware law, the stockholders of a Delaware corporation and, if
the certificate of incorporation so provides, the board of directors, have the
power to adopt, amend or repeal a corporation's bylaws. Delaware law requires
the approval of stockholders holding a majority of the voting power of the
outstanding stock of a company (and, if applicable, a majority of the
outstanding stock of each class entitled to vote thereon) in order to amend a
company's certificate of incorporation. However, a greater number or proportion
may be specified in the certificate of incorporation. Newco's certificate of
incorporation does not specify such greater number or other proportion of
stockholders of securities having power to vote on amendments. Newco's
certificate of incorporation and bylaws provide that the directors of Newco have
the power to amend the bylaws. This authority, however, does not extend to
giving directors power to change provisions regarding the quorum for meetings of
stockholders or of the board or any provisions regarding removal of directors or
filling board vacancies resulting from removal by stockholders. The grant of
such authority to the board does not divest or otherwise affect the power of the
stockholders to adopt, amend or repeal the bylaws. Newco's bylaws provide that
the stockholders may amend or repeal the bylaws by the affirmative vote of the
stockholders holding at least a majority of the outstanding shares. The notice
or waiver of such meeting must summarize the proposed amendment.
Right to Call a Special Meeting of Shareholders
New Jersey law provides that a special meeting of shareholders may be
called by the president, the board of directors, any shareholder, director,
officer or other person as may be provided in the bylaws. Upon application of
the holder or holders of not less than ten percent of all the shares entitled to
vote at a meeting, the Superior Court of New Jersey, for good cause shown, may
order that a special meeting be called.
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Delaware Law provides that only the board of directors or such person
or persons as may be authorized by the certificate of incorporation or bylaws
may call special meetings of the shareholders. Newco's bylaws provide that
special meetings of shareholders may be called by the Board of Directors or by
the Chief Executive Officer. Special shareholder meetings must be called by the
Chief Executive Officer or the Secretary upon the written request of a majority
of the Board of Directors or the written request of shareholders owning a
majority of the shares, provided that such request must state the purpose(s) of
the proposed meeting.
Loans To Directors/Officers/Employees
New Jersey law allows a corporation to lend money to, or guaranty an
obligation of, any director, officer or employee of the Company or any
subsidiary whenever the directors determine that such an action may reasonably
be expected to benefit the Company. However, a director who votes for such an
action may be held jointly and severally liable if the loan or guaranty is made
contrary to the provisions of New Jersey law. Delaware law permits a corporation
to lend money to, or to guarantee an obligation of, an officer or other employee
of the Company or any subsidiary thereof, including an officer or employee who
is also a director of the Company or of its subsidiaries, whenever such loan or
guarantee may, in the judgment of the directors, reasonably be expected to
benefit the Company. In contrast to New Jersey law, Delaware law generally does
not impose liability on the directors who vote for or assent to a loan to or a
guarantee of an obligation of an officer, director or stockholder.
Anti-Takeover Provisions
New Jersey law provides, among other things, that any person making an
offer to purchase from shareholders generally in excess of ten percent (10%) (or
such amount which, when aggregated with such person's present holdings, exceeds
ten percent (10%) of any class of equity securities) of any corporation or other
issuer of securities organized under the laws of New Jersey must, twenty (20)
days before the offer is made, file a disclosure statement with the target
company and with the Bureau of Securities of the Division of Consumer Affairs of
the New Jersey Department of Law and Public Safety.
Such a takeover bid may not proceed until after the receipt by the
filing party of permission from the Bureau of Securities. Such permission may
not be denied unless the Bureau, after a public hearing, finds that (i) the
financial condition of the offeror may jeopardize the financial stability of the
target company or prejudice the interests of any employees or security
stockholders who are unaffiliated with the offeror, (ii) the terms of the offer
are unfair or inequitable to the security stockholders of the target company,
(iii) the plans and proposals which the offeror has to make any material change
in the target company's business, corporate structure, or management are not in
the interest of the target company's remaining security stockholders or
employees, (iv) the competence, experience and integrity of those persons who
would control the operation of the target company are such that it would not be
in the interest of the target company's remaining stockholders or employees to
permit the takeover, or (v) the terms of the takeover bid do not comply with the
provisions of Chapter 10A of the New Jersey Business Corporation Act.
Chapter 10A (the "Shareholder Protection Act") was added to the New
Jersey Business Corporation Act in 1986 to protect stockholders and other
corporate "constituents." It generally provides that no resident domestic
corporation will engage in any business combination with any interested
stockholder for a period of five (5) years following that interested
stockholder's stock acquisition date unless the business combination is approved
by the board of directors prior to that stock acquisition date. An "interested
stockholder" is any person (other than the resident domestic corporation or its
subsidiary) that (i) is the beneficial owner directly or indirectly, of ten
percent (10%) or more of the voting power of the outstanding voting stock of the
resident domestic corporation, or (ii) is an affiliate or associate of that
resident domestic corporation who, at any time within the five (5) year period
immediately prior to the date in question, was a beneficial owner. A "beneficial
owner" of stock is a person that, individually or with or through any of its
affiliates or associates (i) beneficially owns that stock directly or
indirectly, (ii) has the right to acquire or vote that stock, or (iii) has any
agreement, arrangement or understanding for the purpose of acquiring, holding,
voting or disposing of that stock with any other beneficial owner thereof. An
"affiliate" of a beneficial owner is a person that directly or indirectly
through one or more intermediaries controls, or is controlled by or under common
control with, the beneficial owner.
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Accordingly, New Jersey law gives the Company's board of directors a
veto power over any business combination proposed by a person who directly or
indirectly acquires ten percent (10%) or more of the Company's voting stock. The
"business combinations" at which these provisions are directed include any
merger or consolidation.
Unless it falls under certain excluded categories of transactions, a
business combination is prohibited unless any one of the following three
conditions is satisfied:
(1) the board of directors must approve the business combination prior
to the stock acquisition date of the interested stockholder;
(2) the business combination occurs more than five years after the
stock acquisition date of the interested stockholder and the stockholders of
two-thirds of the voting stock of the resident domestic corporation not
beneficially owned by the interested stockholder must approve the business
combination by affirmative vote at a meeting called for that purpose; or
(3) (a) the business combination occurs more than five years after the
stock acquisition date of the interested stockholder,
(b) the stockholders of the resident domestic corporation must
receive the higher of (i) the maximum price paid by the interested stockholder
during the five (5) years preceding the announcement date or the date the
interested stockholder became such, whichever is higher, or (ii) the market
value of the resident domestic corporation's common stock on the announcement
date or the interested stockholder's stock acquisition date, whichever yields a
higher price;
(c) the stockholder of stock other than common stock receives a
similarly determined price, taking into account the highest preferential amount
per share to which the stockholders of such shares are entitled in the event of
any liquidation, dissolution or winding up of the resident domestic corporation,
plus any preferential dividends to which they would be entitled that is not
included in the preferential amount;
(d) the consideration to the stockholders is paid in cash or in the
same form that the interested stockholder used to acquire the largest block of
stock that he acquired;
(e) the stockholders of all outstanding stock not owned by the
interested stockholder received the consideration required by the preceding
paragraphs in the business combination; and
(f) the interested stockholder did not become the beneficial owner
of any additional shares of stock of the resident domestic corporation between
his stock acquisition date and the date of consummation of the business
combination, except as part of the transaction that resulted in his becoming an
interested stockholder by virtue of proportionate stock splits, dividends or
distributions not themselves constituting a business combination, to a business
combination meeting the conditions of paragraph (d) bought to purchase at a
price that would have satisfied the requirements of paragraphs (b), (c) and (d).
There are no provisions in Newco's certificate of incorporation or
bylaws which relate to business combinations. Under the Delaware law an
agreement of merger, or the sale, lease or exchange of all or substantially all
of a corporation's assets, must be approved by the corporation's board of
directors and the stockholders of a majority of the outstanding shares of stock.
Delaware's anti-takeover provision, embodied in Section 203 of the Delaware
General Corporation Law, provides that if a person acquires fifteen percent
(15%) or more of a corporation's voting stock (thereby becoming an "interested
stockholder") that person may not engage in a wide range of transactions
("business combinations") with the Company. The restriction lasts for a period
of three (3) years following the date the person became an interested
stockholder unless (i) the board of directors approved either the business
combination or the transaction which resulted in the person acquiring such
voting stock prior to that acquisition date, (ii) upon consummation of the
transaction which resulted in the person's becoming an interested stockholder,
that person owned at least eighty-five percent (85%) of the Company's voting
stock outstanding at the time the transaction commenced (excluding shares owned
by officers and directors and shares owned by employee stock plans in which
participants do not have the right to confidentially determine whether
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shares will be tendered in a tender or exchange offer), or (iii) the business
combination is approved by the board of directors and authorized by the
affirmative vote (at an annual or special meeting and not by written consent) of
at least sixty-six and two-thirds percent (66-2/3%) of the outstanding voting
stock not owned by the interested stockholder.
For the purpose of determining whether a stockholder is the "owner" of
fifteen percent (15%) or more of a corporation's voting stock for purposes of
Section 203, ownership is defined broadly to include beneficial ownership and
other indicia of control. A "business combination" is also defined broadly as
including (i) mergers and sales or other dispositions of ten percent (10%) or
more of the assets of a corporation with or to an interested stockholder, (ii)
certain transactions resulting in the issuance or transfer to the interested
stockholder of any stock of the Company or its subsidiaries, (iii) certain
transactions which would result in increasing the proportionate share of the
stock of the Company or its subsidiaries owned by the interested stockholder,
and (iv) receipt in certain instances by the interested stockholder of the
benefit (except proportionately as a stockholder) of any loans, advances,
guarantees, pledges or other financial benefits.
The restrictions placed on interested stockholders under Delaware law
do not apply under certain circumstances. For instance, the restrictions do not
apply: if the Company's original certificate of incorporation contains a
provision by which it expressly elects not to be governed by the statute, (ii)
if the Company, by action of its stockholders, adopts an effective amendment to
its bylaws or certificate of incorporation expressly electing not to be governed
by Section 203, or (iii) if the business combination is proposed prior to the
consummation or abandonment of and after the announcement of a proposed
transaction with an independent party.
The proposed transactions referred to above are limited to (i) a merger
or consolidation of the Company (except for a merger in which a vote of the
stockholders of the Company is not required); (ii) a sale, lease, exchange,
mortgage, pledge, transfer or other disposition (in one transaction or a series
of transactions), whether as part of a dissolution or otherwise, of assets of
the Company or of any direct or indirect majority-owned subsidiary of the
Company (other than to any direct or indirect wholly-owned subsidiary or to the
Company) having an aggregate market value equal to fifty percent (50%) or more
of either the aggregate market value of all of the assets of the Company
determined on a consolidated basis or the aggregate market value of all the
outstanding stock of the Company; or (iii) a proposed tender or exchange offer
for fifty percent (50%) or more of the outstanding voting stock of the Company.
The corporation is required to give not less than twenty (20) days notice to all
interested stockholders prior to the consummation of any of the transactions
described above.
Dividends
New Jersey law prohibits a corporation from making a distribution to
its stockholders if, after giving effect to such distribution, the Company would
be unable to pay its debts as they become due in the usual course of business or
the Company's total assets would be less than its total liabilities. Delaware
law permits a corporation to pay dividends out of any surplus. If it does not
have a surplus, a dividend may be paid out of any net profits for the fiscal
year in which the dividend is paid or for the preceding fiscal year (provided
that such payment will not reduce capital below the amount of capital
represented by all classes of shares having a preference upon the distribution
of assets).
Stockholder Proposal and Nomination Procedure
The Company's bylaws and certificate of incorporation are silent on the
issue of advance notice of stockholder proposals and director nominations at
annual meetings. New Jersey law does not explicitly require that stockholder
proposals be the subject of an advance notice to stockholders.
The Newco bylaws and certificate of incorporation are silent on the
issue of advance notice of stockholder proposals and director nominations at
annual meetings. Delaware General Corporation Law does not explicitly require
that stockholder proposals be the subject of an advance notice to stockholders.
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Dissolution
New Jersey law and Delaware law each provide that a corporation may be
voluntarily dissolved by (i) the written consent of all its stockholders or (ii)
the adoption by the Company's board of directors of a resolution recommending
that the Company be dissolved and submission of the resolution to a meeting of
stockholders, at which meeting the resolution is adopted. New Jersey law
requires that to effect a dissolution by consent of stockholders, all
stockholders entitled to vote thereon must sign and file a certificate of
dissolution. If dissolution is pursuant to the action of the board and
stockholders, New Jersey law requires the affirmative vote of the majority of
votes cast (assuming that the number of votes cast constitutes a quorum) by the
stockholders entitled to vote, while Delaware law requires the affirmative vote
of a majority of the outstanding stock entitled to vote thereon.
Appraisal Rights
Under New Jersey law, dissenting stockholders who comply with certain
procedures are entitled to appraisal rights in connection with the merger,
consolidation, sale, lease exchange or other disposition of all or substantially
all of the assets of a corporation not in the usual or regular course of
business, unless the certificate of incorporation otherwise provides. However,
appraisal rights are not provided when (i) the shares to vote on such
transaction are listed on a national securities exchange or held of record by
not less than 1,000 stockholders (or stockholders receive in such transaction
cash and/or securities which are listed on a national securities exchange or
held of record by not less than 1,000 stockholders), or (ii) no vote of the
corporation's stockholders is required for the proposed transaction. See "Rights
of Dissenting Stockholders," below.
Under Delaware law, dissenting stockholders who follow prescribed
statutory procedures are entitled to appraisal rights in connection with certain
mergers or consolidations, unless otherwise provided in the corporation's
certificate of incorporation. Such appraisal rights are not provided when (i)
the shares of the corporation are listed on a national securities exchange or
designated as a national market system security by the National Association of
Security Dealers or held of record by more than 2,000 stockholders and
stockholders receive in the merger shares of the Company or of any other
corporation the shares of which are listed on a national securities exchange or
designated as a national market system security by the National Association of
Security Dealers, or held of record by more than 2,000 stockholders, or (ii) the
corporation is the surviving corporation and no vote of its stockholders is
required for the merger.
Repurchases Of Stock
New Jersey law prohibits a corporation from repurchasing or redeeming
its shares if (i) after giving effect to such repurchase or redemption, the
corporation would be unable to pay its debts as they become due in the usual
course of business or the corporation's total assets would be less than its
total liabilities, (ii) after giving effect to such repurchase or redemption,
the corporation would have no equity outstanding, (iii) the redemption or
repurchase price exceeded that specified in the securities acquired, or (iv)
such repurchase or redemption is contrary to any restrictions contained in the
corporation's certificate of incorporation. Under Delaware law, a corporation
may repurchase or redeem its shares only out of surplus and only if such
purchase does not impair its capital. However, a corporation may redeem common
stock out of capital if such shares will be retired upon redemption and the
stated capital of the corporation is thereupon reduced in accordance with
Delaware law.
Federal Income Tax Consequences of the Reincorporation Merger
The Company will not request a ruling from the United States Internal
Revenue Service regarding the federal income tax consequences of the
Reincorporation Merger. However, the Company believes the merger will constitute
a "mere change in ... place of organization" under Section 368(a)(1)(F) of the
Internal Revenue Code. Consequently, owners of the Common Stock will not
recognize any gain or loss for federal income tax purposes as a result of the
conversion of their Common Stock into shares of Newco's common stock. For
federal income tax purposes, a stockholder's aggregate basis in the shares of
the Newco common stock received in the Reincorporation Merger will equal such
stockholder's aggregate basis in the Common Stock converted therefor and such
stockholder's holding period for the Newco common stock received in the merger
will include his holding period in the Common Stock converted therefor.
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Likewise, the Company will not recognize any gain or loss for federal
income tax purposes upon the transfer of its property to Newco pursuant to the
Reincorporation Merger. In addition, Newco will succeed to and take into account
the earnings and profits, accounting method and other tax attributes of the
Company specified in Section 381(c) of the Internal Revenue Code.
Owners of the Common Stock should consult their own tax advisors as to
the application and effect of state, local and foreign income and other tax laws
to the conversion of their Common Stock into shares of Newco common stock
pursuant to the Reincorporation Merger.
Rights of Dissenting Stockholders
Chapter 11 of the New Jersey Business Corporation Act sets forth the
rights of shareholders of the Company who object to the Plan of Merger and the
adoption of the Merger Agreement. Any shareholder of the Company who does NOT
vote in favor of the Reincorporation Proposal or who duly revokes his vote in
favor of such transaction may be paid, in cash, the fair market value of his
shares, provided each and every one of the following actions is strictly
complied with, within the time provided therefor:
1. Prior to the taking of the vote of the shareholders of the Company,
a dissenting shareholder must file with the Company, addressed to the attention
of Joseph Musanti, Assistant Secretary of the Company, a written Notice of
Dissent therefrom, stating that the shareholder intends to demand payment for
his shares if the Reincorporation Merger occurs.
2. Within ten (10) days after the Reincorporation Merger has taken
effect, Newco must give written notice of the effective date of such action, by
certified mail, to each shareholder who filed a written Notice of Dissent.
3. Within twenty (20) days after the mailing of the notice of the
effective date of the reincorporation, any shareholder to whom Newco was
required to give such notice and who has filed a written Notice of Dissent, may
make written demand on Newco for the payment of the fair value of his shares.
4. Not later than twenty (20) days after making such written demand for
payment, the dissenting shareholder must submit the certificate or certificates
representing his or her shares to Newco, addressed to the attention of Joseph
Musanti for notation thereon that such demand has been made, whereupon such
certificate or certificates will be returned to the shareholder.
5. Not later than ten (10) days following such twenty (20) day written
demand period, if the dissenting shareholder has made such written demand, Newco
must mail the dissenting shareholder the balance sheet and the surplus statement
of Newco as of the last available date (which shall not be earlier than twelve
(12) months prior to the date of the Merger and a profit and loss statement or
statements for not less than a twelve (12) month period ending on the date of
such balance sheet. This mailing may be accompanied by a written offer from
Newco to pay each dissenting shareholder his shares at a specified price deemed
by Newco to be the fair value thereof.
6. If the fair value of the shares is not agreed upon between the
dissenting shareholder and Newco within thirty (30) days following the ten (10)
day mailing period, the shareholder is entitled to serve upon Newco, not later
than thirty (30) days after the expiration of the thirty (30) day period
available (after the ten (10) day mailing period) for reaching agreement on the
fair value, a demand that Newco commence an action in the Superior Court of New
Jersey for the determination of the fair value of the shareholder's Newco
shares.
7. If Newco fails to commence such action within thirty (30) days
following receipt of the dissenting shareholder's demand that it do so, the
shareholder will be entitled to commence such an action in the name of Newco not
later than ninety (90) days following his or her demand that Newco commence such
action. Newco intends to commence such a proceeding in the event of such a
disagreement.
A negative vote on the Reincorporation Proposal does not constitute a
"written objection" required to be filed by an objecting stockholder. Failure by
a stockholder to vote against the Reincorporation Proposal will not,
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however, constitute a waiver of rights under Chapter 11 of the New Jersey
Business Corporation Act provided that a written objection is properly filed and
such stockholder has not voted in favor of the Reincorporation Proposal.
The foregoing does not purport to be a complete statement of the
provisions of Chapter 11 of the New Jersey Business Corporation Act and is
qualified in its entirety by reference to the Chapter, a copy of which is
reproduced in full as Annex IV. Each stockholder intending to exercise
dissenters' rights should review Annex IV carefully and consult his counsel for
a more complete and definitive statement of the rights of dissenting
stockholders and the proper procedure in order to exercise such rights.
Under the Merger Agreement, the Board of Directors may abandon the
Reincorporation Merger, even after stockholder approval, if for any reason the
Board determines that it is inadvisable to proceed, including considering the
number of shares for which appraisal rights have been exercised and the cost to
the Company thereof.
A vote for the Reincorporation Proposal will constitute specific
stockholder approval for the adoption of the Reincorporation Merger agreement
and all other transactions related to the Reincorporation Merger proposal.
The Board of Directors recommends that Stockholders vote "FOR" the
approval of the Reincorporation Proposal.
The Reincorporation Proposal is related to Proposal 3 (Increase in
Authorized Shares of Common Stock) and Proposal 4 (Authorization of Preferred
Stock), although each proposal is being voted on separately. If the
Reincorporation Proposal, the Increase in Authorized Common Stock Proposal and
the Authorized of Preferred Stock Proposal are each approved by the requisite
vote of stockholders, it is contemplated that the increase in authorized Common
Stock and the authorization and issuance of the Preferred Stock would be
accomplished in connection with the Reincorporation Merger and the provisions of
the certificate of incorporation of the Surviving Corporation in the
Reincorporation Merger. If for any reason, the Reincorporation Merger is not
approved by the requisite vote of stockholders or is otherwise not consummated,
and the Increase in Authorized Common Stock Proposal or the Authorization of
Preferred Stock Proposal is approved by the requisite vote of stockholders, the
Board of Directors may consummate the change in capitalization by amending the
Company's New Jersey Articles of Incorporation as may be required.
PROPOSAL No. 3 -- Increasing the authorized number of shares
of Common Stock of the Company to 49,000,000 shares
The Company's Certificate of Incorporation currently authorizes the
Company to issue up to 20,000,000 shares of Common Stock, 16,567,139 of which,
as of March 31, 2000 were issued and outstanding and of which no shares were
reserved for issuance. Thus, even before considering its obligations under the
Securities Purchase Agreement, as of March 31, 2000 the Company only had
available to it 3,432,261 authorized and unissued shares as of that date. In
addition, pursuant to the Securities Purchase Agreement, the Company is
obligated to issue 4,400,000 shares of Common Stock to Axess (as defined in the
Securities Purchase Agreement, the "Axess Reissue Shares") and may be required
to issue up to 1,000,000 shares of Common Stock (subject to adjustment) upon
conversion of the Convertible Redeemable Preferred Stock issuable under the
Preferred Stock Warrant. Accordingly, the number of authorized, non-designated
shares of Common Stock to be available for issuance by the Company in respect of
the Axess Reissue Shares and in the future (for financing purposes or otherwise)
necessitates an increase in authorized shares. The Board of Directors believes
that the Increase in Common Stock Proposal, by increasing the shares of
authorized Common Stock to 49,000,000 from 20,000,000, if adopted, will assist
the Company's flexibility with respect to possible future stock splits, equity
and/or debt financings, stock-for-stock acquisitions, stock dividends or other
transactions that involve the issuance of Common Stock.
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The additional shares of Common Stock to be authorized under the Common
Stock Proposal, along with other authorized and unissued shares of Common Stock,
will be available for any future private or public offerings to raise capital,
potential acquisitions, issuance upon exercise of the stock options granted
under the Company's stock option plans, conversion of convertible Preferred
Stock, if and when issued by the Company, and other legitimate corporate
purposes. The increase will give the Board of Directors greater flexibility in
implementing the Company's business plan. Except with respect to the Axess
Reissue Shares, there are no current plans or commitments for issuing shares of
Common Stock other than upon exercise of stock options and outstanding warrants
(including the Investor Warrants and the Preferred Stock Warrant).
In general, the Board of Directors of the Company is authorized to
approve the issuance of additional shares of Common Stock, without prior notice
to or approval by the Stockholders, in connection with any transactions which
the Board of Directors determines to be in the best interests of the
Stockholders.
In addition, both New Jersey law, which currently governs the actions
of the Company, and Delaware law, which would govern the actions of the Company
following the Reincorporation Merger, if approved, generally require stockholder
approval for the Company to issue shares in connection with a merger or
consolidation with another corporation.
The Stockholders should also be aware that, if the Preferred Stock
Proposal set forth below is approved, it would be possible for the Board to
authorize a new class or series of preferred stock, which might be limited in
number, but which would be convertible into shares of Common Stock at such a
rate as to substantially increase the number of outstanding, or potentially
outstanding, shares of Common Stock. For a further discussion of the potential
impact of the Preferred Stock Proposal, see Proposal No. 4 below.
A potential effect of the increase in the number of authorized shares
of Common Stock is that the interests of the existing Stockholders in the
Company could be substantially diluted, by way of ownership percentage and
voting power, through the issuance of authorized but unissued Common Stock,
without Stockholder approval. Such dilutive transactions could occur even
without an increase in the number of authorized shares, but the potential for
such transactions is increased by the authorization of the substantial
additional number of authorized but unissued shares of Common Stock covered by
the Common Stock Proposal.
Neither the Board of Directors nor management is aware of any efforts
by any person to accumulate the Common Stock of the Company or to obtain control
of the Company by means of a merger, tender offer, solicitation in opposition to
management or otherwise.
At the present time, the Company's Charter and bylaws do not contain
any provisions generally viewed to be "shark repellents" or to have an
anti-takeover effect.
Stockholders should also be aware that the authorization of the "blank
check" preferred stock pursuant to the Preferred Stock Proposal, discussed in
Proposal No. 4 below, could be viewed as having an anti-takeover effect. The
Board of Directors has unanimously approved and recommended to the Stockholders
the adoption of the Common Stock Proposal. The Board of Directors does not view
the Common Stock Proposal as having an anti-takeover purpose or effect, and as
noted in Proposal No. 4 below with respect to the Preferred Stock Proposal, the
Board of Directors and management of the Company have represented that such
preferred stock will not be used, without prior Stockholder approval, for
anti-takeover purpose and that such preferred stock will not have super-majority
voting rights
If the Increase in Common Stock Proposal is adopted by the
Stockholders, such proposal will become effective on the date the
Reincorporation Merger is effected if the Reincorporation Proposal is approved
by the Stockholders, or on the date a certificate of amendment is filed in New
Jersey, the Company's state of incorporation, if the Reincorporation Proposal is
not so approved.
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The Board of Directors recommends that Stockholders vote "FOR" the
authorization of additional shares of Common Stock.
PROPOSAL No. 4 -- AUTHORIZING 1,000,000 SHARES OF PREFERRED STOCK
By resolutions adopted on April 11, 2000, the Board of Directors
approved and declared advisable the authorization of 1,000,000 shares of
preferred stock, $.01 par value per share, of the Company to be issued from time
to time with such rights, preferences and priorities as the Board of Directors
shall designate; provided that such preferred stock shall not be used for anti-
takeover purposes and shall not have super-majority voting rights. If the
Reincorporation Proposal is approved by the requisite vote of stockholders, the
Proposal would be effected by the provisions of the certificate of incorporation
of the Surviving Corporation, which expressly authorize a class of Preferred
Stock. If the Reincorporation Proposal is not approved by the requisite vote of
stockholders, or the Reincorporation Merger is otherwise not consummated, the
Proposal would be effected by amending the Company's certificate of
incorporation as proposed by the Board of Directors.
Reasons for and Effect of the Proposed Amendment
The proposed amendment and restatement of the certificate of
incorporation would (i) authorize the Board of Directors to issue up to
1,000,000 shares of Preferred Stock and (ii) authorize the Board of Directors to
classify any unissued shares of Preferred Stock and reclassify any previously
classified but unissued shares of Preferred Stock of any series from time to
time. Prior to the issuance of shares of each series, the Board of Directors
will be required to set, the terms, preferences, conversion or other rights,
voting powers, restrictions, limitations as to dividends or other distributions,
qualifications and terms or conditions of redemption for each such class or
series of Preferred Stock. Shares of Preferred Stock of any such series will be
available for issuance without further action by the Stockholders (except as
required by applicable laws or regulations).
The Board of Directors of the Company will not solicit shareholder
approval in connection with the issuance of the Preferred Stock, except to the
extent such approval is required by law or under the rules of the OTCBB or
similar body. The terms of any Preferred Stock to be offered, including dividend
rates, conversion features, voting rights, preemptive rights, redemption rights,
liquidation rights, and similar matters will be determined by the Board of
Directors at the time of such offering. The Preferred Stock may have a
preference over the Common Stock as to the payment of dividends, as to the right
to distribution of assets upon redemption of shares or upon liquidation of the
Company, or as to both dividends and assets, and such other preferences as may
be fixed by the Board of Directors.
The proposed amendment to authorize Preferred Stock does not effect any
change in the number or rights of authorized shares of Common Stock except to
the extent that any class or series of Preferred Stock authorized by the Board
of Directors may grant to the holders thereof preferential rights that would
grant to the holders of such class or series certain preferences or priorities
over the holders of the Common Stock, such as a liquidation or dividend
preference.
The Company's primary purpose in having Preferred Stock available for
issuance is to provide for authorization to issue the Series A Preferred Stock
(as defined and described below) and to allow greater flexibility with respect
to future financings or acquisitions and in carrying out other corporate
purposes. Since no Preferred Stock has been issued, and the issuance of the same
(other than the issuance of the Series A Preferred Stock) is not currently
contemplated, it is not possible to know whether or to what extent such
Preferred Stock (other than the Series A Preferred Stock), if issued, would have
preference over the holders of Common Stock in the distribution of any assets in
the event of a liquidation.
Advantages and Disadvantages
The advantage of the proposed amendment is that it provides the Board
of Directors with the flexibility to issue the Preferred Stock with such terms
as may be necessary to sell the Preferred Stock to investors on a timely basis.
If the Company was required to obtain stockholder approval of the specific
terms, rights and preferences of a series of Preferred Stock prior to issuing
such series of Preferred Stock, obtaining such approval could take several
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months. Changes in market conditions during such period could result in the
terms that are approved by the stockholders no longer being acceptable to
investors.
The disadvantage of the proposed amendment is that management of the
Corporation cannot predict with any certainty what effect, if any, the issuance
of any shares of Preferred Stock will have on the voting or other rights of the
holders of the Corporation's Common Stock. In addition, the Board of Directors
could use the Preferred Stock to deter or defeat a hostile attempt to acquire
control of the Corporation. See "Antitakeover Effect" below.
If this amendment and restatement is approved by the Stockholders, the
Board of Directors would be authorized to issue Preferred Stock in one or more
series and to determine, at the time of creating each series, the distinctive
designation of, and the number of shares in, the series, its dividend rate, the
price and terms on which such shares may be redeemed, the terms of any
applicable sinking fund, the amount payable upon liquidation, dissolution or
winding up, the conversion rights, if any, and such other rights, preferences
and priorities of such series as the Board of Directors may be permitted to fix
under the laws of the State of Delaware or, if the Reincorporation Proposal is
not approved, the laws of the State of New Jersey, as in effect at the time such
series is created.
Antitakeover Effect
The adoption of the amendment would empower the Board of Directors,
without shareholder approval, to issue a block of Preferred Stock to persons
friendly to or affiliated with the Company's management and having terms,
including voting power, which may have the effect of deterring or discouraging,
among other things, a non-negotiated tender or exchange offer for the Company's
stock, a proxy contest for control of the Company, the assumption of control of
the Company by a holder of a large block of the Company's stock, and the removal
of the Company's management. The proposed amendment is not the result of any
effort to obtain control of the Company or to accumulate the Company's stock
that is known to management of the Company, and the Company's management has no
present intent to propose other antitakeover measures in the foreseeable future.
The increase in the authorized but unissued shares of Preferred Stock
could make a change in control of the Company more difficult to achieve. The
flexibility to issue additional Preferred Stock can enhance the Board's
arm's-length bargaining capability on behalf of the Company's stockholders in a
take-over situation, and the ability to designate the rights of, and to issue,
such stock could be used by an incumbent board to make a change of control of
the Company more difficult. The Board has no present intention to use the
Preferred Stock for such a purpose. The Company is not aware of any present
effort to effect a change of control or takeover of the Company.
Although the purpose of seeking an increase in the number of authorized
capital stock is not intended for anti-takeover purposes, SEC rules require
disclosure of charter and bylaw provisions that could have an anti-takeover
effect.
The Board of Directors represents that it will not, without prior
stockholder approval, issue any Preferred Stock, the principal intent of which
is to have an anti-takeover effect, or assist in the implementation of a
stockholder rights plan. No Preferred Stock will be issued with the purpose of
providing a block of voting power in support of management.
As described above, as a condition to the closing under the Securities
Purchase Agreement, Axess canceled the Axess Debt in exchange for, among other
things the issuance of the Preferred Stock Warrant and an agreement by the
Company to recommend that the Stockholders approve (i) an amendment to the
Company's certificate of incorporation designating the terms of a class of
preferred stock in respect of the Preferred Stock Warrant (the "Series A
Preferred Stock") and (ii) the issuance of such Series A Preferred Stock.
The material terms of the Series A Preferred Stock are as follows:
Dividends. No dividends will accrue or be payable with respect to the
Series A Preferred Stock.
Liquidation Preference. Upon any voluntary or involuntary liquidation,
dissolution or winding-up of the Company, the holders of Series A Preferred
Stock will be entitled to receive out of the assets of the Company available for
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distribution to the holders of its capital stock, whether such assets are
capital, surplus or earnings, an amount in cash equal to $1,000,000 before any
payment shall be made or any assets distributed to the holders of any Common
Stock or any other class or series of capital stock of the Company. If the
assets of the Company are not sufficient to pay in full the payments payable to
the holders of outstanding shares of the Series A Preferred Stock, then such
holders shall share equally and ratably in any distribution of assets.
Redemption. On each of the first 5 anniversaries of the closing under
the Securities Purchase Agreement (March 6, 2000), until all 1,000 shares have
been redeemed, the Series A Preferred Stock will be subject to a mandatory
redemption of 200 shares at a price per share of $1,000.
Voting Rights. Holders of the Series A Preferred Stock, in their
capacity as such, shall not be entitled or permitted to vote, except as
otherwise required under applicable law and as set forth in the Company's
certificate of incorporation.
Conversion. Each share of Series A Preferred Stock will be convertible
at the holder's option, during the redemption period, into 1,000 shares of
Common Stock (such number of shares being subject to adjustment pursuant to the
certificate of incorporation) at a conversion price per share of Common Stock of
$1.00 (as such price may be adjusted from time to time pursuant to the
certificate of incorporation).
Anti-dilution Protection. The Series A Preferred Stock will be
protected against dilution and the certificate of incorporation provides that
the holder of any shares of Series A Preferred Stock shall at all times after
the date of issuance be entitled to receive upon exercise of the conversion
privilege no less than the same proportionate ownership of all of the
outstanding shares of the capital stock and other securities of the Company
(including without limitation proportionate voting rights) as the holder of
Series A Preferred Stock would receive if such exercise rights would have been
exercised on the date of issuance
The foregoing description of the terms of the Series A Preferred Stock
is qualified in its entirety by the complete terms of the Series A Preferred
Stock set forth in Newco's Certificate of Incorporation in Annex II hereto.
If the Proposal to Authorize Preferred Stock is approved by the
requisite vote of stockholders, it will become effective upon the date the
Reincorporation Merger is effected if the Reincorporation Proposal is approved
by the Stockholders, or on the date a certificate of amendment is filed in New
Jersey, the Company's state of incorporation, if the Reincorporation Proposal is
not so approved.
The Board of Directors unanimously recommends that you vote "FOR" the
proposal to authorize the issuance of Preferred Stock in the Company.
PROPOSAL No. 5 -- APPROVAL OF THE COMPANY'S 2000 STOCK OPTION PLAN
The following summary description of the Company's 2000 Stock Option
Plan (the "2000 Stock Option Plan") is qualified in its entirety by reference to
the 2000 Stock Option Plan attached hereto as Annex V.
Summary Description Of The Plan
Substantially all of the shares authorized for issuance under the 1996
Stock Option Plan have been allocated. As a result, on April 11, 2000, the
Company's Board of Directors adopted the 2000 Stock Option Plan, subject to
approval by the stockholders of the Company. Under the 2000 Stock Option Plan,
all Company employees are eligible for awards of incentive or non-qualified
stock options and consultants of the Company or any Affiliate (as defined in the
2000 Stock Option Plan) of the Company capable of contributing significantly to
the successful performance of the Company are eligible for awards other than
incentive stock options. The Company believes that awards under the 2000 Stock
Option Plan provide employees and consultants an incentive to assist the Company
to achieve long-range performance goals and to enable them to participate in the
long-term growth of the Company, thereby contributing to the Company's success.
A total of 1,000,000 shares of Common Stock have been reserved for issuance
under the 2000 Stock Option Plan. As of April 10, 2000, the market value of the
Common Stock covered by the 2000 Stock Option Plan was $8,125,000. Upon approval
of the 2000 Stock Option Plan by the stockholders, the Company intends to
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register, on a Form S-8 to be filed with the Securities and Exchange Commission,
the shares of Common Stock subject to options granted under the 2000 Stock
Option Plan.
The Company's Board of Directors or a Committee it appoints (the
"Committee") administers the 2000 Stock Option Plan and to the extent permitted
by applicable law, has the authority to delegate to one or more executives of
the Company the power to grant awards to participants who are not subject to the
reporting requirements of Section 16 of the Securities Exchange Act of 1934, as
amended ("Section 16").
Optionees will enter into stock option agreements setting forth the
terms and conditions under which options are granted under the 2000 Stock Option
Plan. The options are to be granted at an exercise price that is not less than
100% of the fair market value of the Company's Common Stock at the date of grant
in the case of incentive stock options and not less than 85% of the fair market
value of the Common Stock on the grant date in the case of non-qualified stock
options. The calculation of fair market value is based on the closing price of
the Company's Common Stock on the OTCBB on the last trading day prior to the
grant date. Each option granted pursuant to the 2000 Stock Option Plan is
exercisable at such times and subject to such terms and conditions as the Board
of Directors or the Committee may specify in the applicable award or thereafter.
The consideration to be paid for the optioned shares shall be payment in cash or
by personal check, cashier's check, certified check or wire transfer, unless
payment in some other manner is approved by the Board of Directors, including by
promissory note or other shares of the Company's Common Stock. The term of each
option shall be 10 years from the grant date, unless the Committee determines a
shorter period. If an optionee ceases to be an employee or consultant of the
Company for any reason other than permanent and total disability or death, he or
she may, but only within ninety (90) days (or such other period of time as is
determined by the Committee and set forth in the option agreement) after the
date of termination of service to the Company, exercise the option to the extent
that he or she was entitled to exercise it at the date of termination of
service, provided that no option may be exercised after the expiration of the
option period. If an optionee ceases to be an employee or consultant as a result
of permanent and total disability or death, the vested portion of the option may
be exercised at any time within twelve (12) months after the date of termination
of service (or such other period of time as is determined by the Committee and
set forth in the option agreement), provided that no option may be exercised
after the expiration of the option period.
In the event that the Committee determines that any stock dividend,
extraordinary cash dividend, creation of a class of equity securities,
recapitalization, reorganization, merger, consolidation, split-up, spin-off,
combination, exchange of shares, warrants or rights offering to purchase Common
Stock at a price substantially below market value, or other similar transaction
affects the Common Stock such that an adjustment is required in order to
preserve the benefits or potential benefits intended to be made available under
the 2000 Stock Option Plan, then the Committee shall equitably adjust any or all
of (i) the number and kind of shares in respect of which awards may be made
under the 2000 Stock Option Plan, (ii) the number and kind of shares subject to
outstanding awards, and (iii) the exercise price with respect to any of the
foregoing, and if considered appropriate, the Committee may make provision for a
cash payment with respect to an outstanding award, provided that the number of
shares subject to any award shall always be a whole number.
The Board of Directors of the Company may amend, suspend or terminate
the 2000 Stock Option Plan at any time, except that no amendment may be made
without approval of the Company's stockholders if such approval is necessary to
comply with any applicable tax or regulatory requirement, including any
requirement for exemptive relief under Section 16.
Certain Federal Income Tax Consequences
Incentive Stock Options
Neither the grant, nor the exercise, of an incentive stock option will
result in income being recognized by the optionee. If the stock obtained by the
exercise of the incentive stock option is sold more than one year after exercise
and at least two years after the grant of the option, the entire difference
between the option price and the sale price of the stock will be reportable as
long term capital gain. Under such circumstances, the Company will not be
entitled to any deduction relating to the optionee's sale. If the optionee does
not hold the shares for the requisite one and two-year periods, at the time of
disposition of the shares, he will recognize ordinary income measured by the
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excess of the fair market value of the shares on the date of exercise over the
exercise price. If the shares are disposed of at a price in excess of their fair
market value on the exercise date, such excess will be treated as a capital
gain. Such capital gain will be short-term if the period between the exercise
and disposition is one year or less, or long-term if such period exceeds one
year. The Company will be entitled to a deduction on such disposition equal to
the ordinary income recognized by the optionee. If the optionee disposes of the
shares prior to the satisfaction of the one and two-year periods, and the amount
realized on that disposition is less than the fair market value on the exercise
date, the optionee will recognize ordinary income measured by the excess of the
amount realized over the exercise price. The Company will be entitled to a
deduction in an amount equal to the ordinary income recognized by the optionee.
The excess of the fair market value of the shares over the exercise
price on the date of exercise, while not resulting in taxable income, will
increase the optionee's alternative minimum taxable income, which in turn, may
result in the optionee being subject to the alternative minimum tax for that
year.
Non-Qualified Stock Options
An optionee will not recognize any income on the grant of a
non-qualified option. However, on the exercise of the non-qualified option,
income will be recognized measured by the excess of the fair market value of the
stock over the exercise price. The income recognized by the exercise will be
ordinary income, and the Company will be entitled to a deduction in the same
amount as the ordinary income recognized by the optionee. If the optionee is an
employee at the time of exercise, the ordinary income will be considered wages
and subject to withholding.
Upon a subsequent sale of the shares obtained by the exercise of the
non-qualified option, the optionee will recognize a capital gain or loss
measured by the difference between the sale price and the fair market value of
the shares on the exercise date.
The Board Of Directors Recommends that Stockholders Vote "FOR" the
Approval of the 2000 Stock Option Plan.
PROPOSAL No. 6 -- RATIFICATION OF APPOINTMENT OF
INDEPENDENT PUBLIC ACCOUNTANTS
On March 17, 2000, the Company dismissed PricewaterhouseCoopers LLP as
its independent accountants. The reports of PricewaterhouseCoopers LLP on the
financial statements of the Company for the past two fiscal years contained no
adverse opinion or disclaimer of opinion and were not qualified or modified as
to uncertainty, audit scope or accounting principle. The Board of Directors of
the Company, as well as the member of the Audit Committee, participated in and
approved the decision to change independent accountants. In connection with its
audits for the two most recent fiscal years and through March 17, 2000, there
had been no disagreements with PricewaterhouseCoopers LLP on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreements if not resolved to the satisfaction of
PricewaterhouseCoopers LLP would have caused them to make reference thereto in
their report on the financial statements for such years. During the two most
recent fiscal years and through March 17, 2000, there have been no reportable
events (as defined in Regulation S-K Item 304(a)(1)(v) promulgated by the SEC).
The Board of Directors has appointed Mahoney Cohen & Company, certified
public accountants, as the independent certified public accountants of the
Company for the fiscal year ending December 31, 2000. The Board of Directors
desires to obtain the Stockholders' ratification of such appointment. A
resolution ratifying the appointment will be offered at the Annual Meeting. If
the resolution is not adopted, the adverse vote will be considered as direction
to the Board of Directors to select other accountants. Ratification requires the
affirmative vote by holders of at least a majority of the shares of Common Stock
voting on such matter. Representatives of Mahoney Cohen & Company are expected
to be present at the Annual Meeting. The representatives will have the
opportunity to make a statement, although they are currently not expected to do
so. The representatives are expected to be available to respond to appropriate
questions.
The Board of Directors recommends that the Stockholders vote "FOR" the
ratification of Mahoney Cohen & Company as the Company's independent accountants
for the fiscal year ending December 31, 2000.
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OTHER MATTERS
The Board of Directors of the Company knows of no other matters which
are to be brought before the Annual Meeting. If any other matters should be
presented for proper action, it is the intention of the persons named in the
Proxy to vote in accordance with their discretion pursuant to the terms of the
proxy.
PROPOSALS OF STOCKHOLDERS
Proposals of stockholders intended to be presented at the 2001 Annual
Meeting of Stockholders must be received at the Company's executive offices on
or before January 8, 2001 for inclusion in the Company's Proxy Statement with
respect to such meeting.
RHEOMETRIC SCIENTIFIC, INC.
By Robert M. Castello, Chairman and
Chief Executive Officer
IT IS IMPORTANT THAT THE PROXIES BE RETURNED PROMPTLY. THEREFORE, STOCKHOLDERS
WHO DO NOT EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON ARE URGED TO FILL IN,
SIGN, DATE AND RETURN THE ENCLOSED PROXY.
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ANNEX I
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of June __, 2000, by and between
Rheometric Scientific, Inc., a Delaware corporation ("Rheometric Delaware"), and
Rheometric Scientific, Inc., a New Jersey corporation ("Rheometric New Jersey")
and the sole shareholder of Rheometric Delaware.
WHEREAS, the Board of Directors and the shareholders of each of
Rheometric Delaware and Rheometric New Jersey have each approved the merger of
Rheometric New Jersey with and into Rheometric Delaware in accordance with the
General Corporation Law of the State of Delaware (the "GCL") and the New Jersey
Business Corporation Act (the "NJBCA") upon the terms and subject to the
conditions set forth herein. NOW, THEREFORE, in consideration of the foregoing
and the mutual covenants and agreements herein contained, and intending to be
legally bound hereby, Rheometric Delaware and Rheometric New Jersey hereby agree
as follows:
1. The Merger. Upon the terms and conditions hereof, and in accordance with
the GCL and the NJBCA, at the Effective Time (as defined below), Rheometric New
Jersey shall be merged with and into Rheometric Delaware (the "Merger").
2. Effective Time. As soon as practicable following the execution hereof
Rheometric New Jersey and Rheometric Delaware shall file with the Secretary of
State of the State of Delaware a certificate of ownership and merger executed in
accordance with the relevant provisions of the GCL, and Rheometric Delaware and
Rheometric New Jersey shall file with the Secretary of State of the State of New
Jersey a certificate of merger executed in accordance with the relevant
provisions of the NJBCA. The Merger shall become effective at the time each such
filing is completed (the "Effective Time").
3. Effects of the Merger. The Merger shall have the effects set forth in the
GCL and the NJBCA. Without limiting the generality of the foregoing, at the
Effective Time: (a) the separate existence of Rheometric New Jersey shall cease;
(b) Rheometric Delaware as the surviving corporation (the "Surviving
Corporation") shall possess all of the rights, privileges, powers, immunities,
purposes and franchises, both public and private, of each of Rheometric New
Jersey and Rheometric Delaware; (c) all real and personal property, tangible and
intangible of every kind and description belonging to Rheometric New Jersey and
Rheometric Delaware shall be vested in the Surviving Corporation without further
act or deed, and the title to any real estate or any interest therein vested in
either Rheometric New Jersey or Rheometric Delaware shall not revert or in any
way be impaired by reason of the Merger; and (d) the Surviving Corporation shall
assume all the obligations of Rheometric New Jersey.
4. Certificate of Incorporation and Bylaws. The Certificate of Incorporation
and Bylaws of Rheometric Delaware shall be the Certificate of Incorporation and
Bylaws of the Surviving Corporation.
5. Directors. The directors of Rheometric New Jersey at the Effective Time
shall be the initial directors of the Surviving Corporation, until their
successors shall have been duly elected or appointed and qualified.
6. Officers. The officers of Rheometric New Jersey at the Effective Time
shall be the initial officers of the Surviving Corporation, until their
successors shall have been duly appointed.
7. Conversion of Stock of Rheometric Delaware and Rheometric New Jersey.
(a) At the Effective Time, each share of common stock, no par value per
share, of Rheometric New Jersey (the "Rheometric New Jersey Common Stock")
issued and outstanding immediately prior to the Effective Time shall, by virtue
of the Merger and without any action on the part of the holder thereof, be
converted into and become one fully paid and nonassessable share of common
stock, $.01 par value per share, of Rheometric Delaware (the "Rheometric
Delaware Common Stock"). Upon the surrender to Rheometric Delaware
<PAGE>
of any certificates evidencing shares of Rheometric New Jersey Common Stock by
any holder thereof, Rheometric Delaware agrees to issue to such holder
certificates evidencing an equal number of shares of Rheometric Delaware Common
Stock.
(b) Each share of capital stock of Rheometric Delaware issued and
immediately prior to the Effective Time shall, by virtue of the Merger and
without any action on the part of the holder thereof, be cancelled and retired
and cease to exist.
8. Warrants, Options and Debentures. At the Effective Time, any warrants or
options to purchase shares of Rheometric New Jersey Common Stock, and any rights
to receive Rheometric New Jersey Common Stock upon conversion of any debentures
or other instruments (collectively, the "Rights") issued by Rheometric New
Jersey and outstanding at the Effective Time shall, by virtue of the Merger and
without any action on the part of the holders of the Rights, be converted into
and become warrants, options or rights to purchase or receive, as the case may
be (the "New Rights"), an equal number of shares of Rheometric Delaware Common
Stock upon substantially the same terms and conditions as the Rights and any
other rights and obligations contained in the certificates evidencing the Rights
shall be deemed to be and shall become the rights and obligations of Rheometric
Delaware. At the Effective Time, by its signature below, Rheometric Delaware
assumes absolutely, unconditionally and irrevocably the obligations of
Rheometric New Jersey under the certificates and other instruments evidencing
the Rights. At the Effective Time, Rheometric Delaware agrees to reserve for
issuance shares of Rheometric Delaware Common Stock equal in number to the
number of shares of Rheometric New Jersey Common Stock for which the New Rights
may be exercised. Upon the surrender to Rheometric Delaware of any certificate
or other instrument evidencing Rights by any holder of Rights, Rheometric
Delaware agrees to issue to any such holder a certificate or other instrument,
as the case may be, evidencing New Rights to purchase that number of shares of
Rheometric Delaware Common Stock equal to the number of shares of Rheometric New
Jersey Common Stock for which the Rights so surrendered were exercisable.
9. Other Actions. From and after the Effective Time, the parties hereto
shall take such other and further actions, in addition to the filings described
in paragraph 1, as may be required by law to make the Merger effective.
10. Governing Law. This Agreement shall be governed by, and construed and
interpreted in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws; provided, however, that the consummation and effectiveness of the Merger
shall be governed by and construed in accordance with the laws of the State of
Delaware and the laws of the State of New Jersey.
11. Descriptive Headings. The descriptive headings herein are inserted for
convenience of reference only and are not intended to be part of or to affect
the meaning or interpretation of this Agreement.
12. Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person any
rights, benefits or remedies of any nature whatsoever under or by reason of this
Agreement except for Sections 7 and 8 hereof (which are intended to be for the
benefit of the persons referred to therein, and may be enforced by such
persons).
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<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed on its behalf by a duly authorized officer, all as of
the day and year first above written.
RHEOMETRIC SCIENTIFIC, INC.
a New Jersey corporation
By:
-----------------------------
RHEOMETRIC SCIENTIFIC, INC.
a Delaware corporation
By:
----------------------------
<PAGE>
ANNEX II
CERTIFICATE OF INCORPORATION
OF
RHEOMETRIC SCIENTIFIC, INC.
The undersigned, for the purpose of organizing a corporation (the
"Corporation") pursuant to the provisions of the General Corporation Law of the
State of Delaware ("DGCL"), does make and file this Certificate of Incorporation
and does hereby certify as follows:
FIRST: Name. The name of the corporation is Rheometric Scientific, Inc.
SECOND: Registered Office. The registered office of the Corporation is
to be located at 1209 Orange Street, City of Wilmington, County of New Castle,
State of Delaware 19801. The name of its registered agent is The Corporation
Trust Company, whose address is Corporation Trust Center, 1209 Orange Street,
Wilmington, Delaware 19801.
THIRD: Purposes. The purpose of the Corporation is to engage in any
lawful act or activity for which corporations may be organized under the General
Corporation Law.
FOURTH: Capitalization. The aggregate number of shares of stock which
the Corporation is authorized to issue is Fifty Million (50,000,000) shares, of
which: Forty Nine Million (49,000,000) shares shall be Common Stock, $.01 par
value per share ("Common Stock"); and One Million (1,000,000) shares shall be
Preferred Stock, no par value ("Preferred Stock").
The following is a statement of the designations and the powers,
preferences and rights, and the qualifications, limitations or restrictions
thereof, in respect of each class of stock of the Corporation:
I. Undesignated Preferred Stock.
Subject to the limitations prescribed by law, and in addition to the
description of the Series A Convertible Redeemable Preferred Stock as
hereinafter set forth in Article FIFTH hereof, the Board of Directors of the
Corporation shall have the authority to cause the issuance of one or more series
of Preferred Stock and with respect to each such series, to fix by resolution or
resolutions providing for the issuance of such series, the number of shares of
such series, the voting powers, full or limited, if any, of the shares of such
series and the designations, preferences and relative, participating, optional
or other special rights and the qualifications, limitations or restrictions
thereof. The Board of Directors shall have all powers and rights with respect to
the Preferred Stock which are not inconsistent with any limitations prescribed
by law or this Article FOURTH, including, but not limited to, the determination
or fixing of the following:
(i) The designation and number of shares of such series;
(ii) The dividend rate of such series, the conditions and dates
upon which such dividends shall be payable, the relation which such
dividends shall bear to the dividends payable on any other class or
classes of stock, and whether such dividends shall be cumulative or
noncumulative;
(iii) Whether the shares of such series shall be subject to
redemption by the Corporation and, if made subject to such redemption,
the times, prices and other terms and conditions of such redemption;
(iv) The terms and amount of any sinking fund provided for the
purchase or redemption of the shares of such series;
<PAGE>
(v) Whether or not the shares of such series shall be convertible
into or exchangeable for shares of any other class or classes or of any
other series of any class or classes of stock of the Corporation, and,
if provision be made for conversion or exchange, the times, prices,
rates, adjustments and other conditions of such conversion or exchange;
(vi) The extent, if any, to which the holders of the shares of
such series shall be entitled to vote with respect to the election of
directors or otherwise;
(vii) The restrictions, if any, on the issue or reissue of any
additional Preferred Stock; and
(viii) Notwithstanding any other provision of this Article FOURTH,
the rights of the holders of the shares of such series upon the
dissolution of, or upon the distribution of assets of, the Corporation.
Unless and except to the extent otherwise required by law or provided
in the resolution or resolutions of the Board of Directors creating any series
of Preferred Stock, the holders of Preferred Stock shall have no voting power
with respect to any matter whatsoever.
II. Common Stock
The Common Stock shall rank junior to the Preferred Stock with respect
to payment of dividends and distribution on liquidation, dissolution or winding
up of the Corporation.
Except as required by law or as otherwise provided in the resolution or
resolutions of the Board of Directors creating any series of Preferred Stock,
all voting rights shall be vested in the holders of the Common Stock. At each
meeting of stockholders of the Corporation, each holder of Common Stock shall be
entitled to one vote for each share on each matter to come before the meeting.
FIFTH: Series A Convertible Redeemable Preferred Stock.
There is hereby designated a Series A Preferred Stock, with the
following preferences and relative participation, optional and other rights,
qualifications, and limitations.
I. Certain Definitions.
As used in this Article FIFTH, the following terms shall have
the following meanings (with terms defined in the singular having comparable
meanings when used in the plural and vice versa), unless the context otherwise
requires:
"Affiliate" an "Affiliate" of a person shall have the meaning set forth
in Rule 12b-2 of the Exchange Act as in effect on the date hereof and, in
addition, shall include "Associates" (as defined in Rule 12b-2 of the Exchange
Act as in effect on the date hereof) of such person and its Affiliates.
"Board of Directors" means the Board of Directors of the Corporation.
"Business Day" means a day other than a Saturday, Sunday, national or
Delaware State holiday or other day on which commercial banks in Delaware are
authorized or required by law to close.
"Capital Stock" means any and all shares, interests, participations,
rights or other equivalents (however designated) of corporate stock of any kind
or nature whatsoever.
"Common Stock" means the Common Stock, $.01 par value per share, of the
Corporation and any other class of common stock hereafter authorized by the
Corporation from time to time.
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<PAGE>
"Constituent Entity" has the meaning specified in Article FIFTH,
Section VIII(A)(e) hereof.
"Conversion Agent" has the meaning specified in Article FIFTH, Section
VIII(A) hereof.
"Conversion Price" has the meaning specified in Article FIFTH, Section
VIII(A) hereof.
"Conversion Shares" has the meaning specified in Article FIFTH, Section
VIII(A) hereof.
"Corporation" has the meaning specified in Article FIRST.
"Current Market Price": per share of Common Stock at any date: the
average of the daily market prices over a period of 20 consecutive business days
before such date. The market price for each such business day shall be the last
sale price on such day on the principal securities exchange on which the Common
Stock is then listed or admitted to trading, or, if no sale takes place on such
day on any such exchange, the average of the closing bid and asked prices on
such day as officially quoted on any such exchange, or if the Common Stock is
not then listed or admitted to trading on any stock exchange, the market price
for each such business day shall be the average of the closing bid and asked
prices on such day in the over-the-counter market, as reported through the NASD
Over-the-Counter Bulletin Board. If and so long as there shall be no exchange or
over-the-counter market for the Common Stock during the 20-day period prior on
which Current Market Price is to be determined, the Current Market Price shall
be determined by the Board of Directors in good faith and on a reasonable basis;
provided, however, that in case the Corporation makes an underwritten public
offering of shares of Common Stock, for purposes of the adjustment, if any,
pursuant to Section XIV, the Current Market Price with respect to such shares
shall be deemed to be the price to the public shown in the final prospectus used
in connection with such public offering.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Securities": Common Stock or other securities issued (i)
pursuant to the exercise of the conversion privileges hereunder, (ii) pursuant
to a bona fide underwritten public offering registered under the Securities Act
of 1933, as amended, (iii) pursuant to the exercise of options or rights granted
or available to employees of the Corporation pursuant to a Corporation stock
option plan or stock purchase plan in existence on December 31, 1998 or
thereafter duly approved by the stockholders of the Corporation, (iv) pursuant
to any acquisition agreement or plan of merger or consolidation that provides
for the acquisition by the Corporation of capital stock or assets if either (A)
the number of shares of Common Stock issued pursuant to this clause (iv) in any
given acquisition transaction does not exceed 20% of the number of shares of
Common Stock outstanding immediately prior to giving effect to such issuance, or
(B) the issuance of Common Stock in such acquisition transaction is approved by
the holders of a majority of the outstanding Common Stock of the Corporation,
and (v) in connection with any exercise of any of the warrants or options
described in Schedule 2.2. of the Stock Purchase Agreement or issued under any
security, right or option issued or granted pursuant to the Stock Purchase
Agreement.
"Holder" means a registered holder of shares of Series A Stock.
"Liquidation Preference" means the Original Liquidation Preference on
the Series A Stock.
"Original Issue Date" means the date on which shares of Series A Stock
were first issued by the Corporation.
"Original Liquidation Preference" means $1,000 per share of Series A
Stock.
"Permitted Transferee" means for the purposes of this Agreement, in the
case of Investor (as defined in the Stock Purchase Agreement) or any Permitted
Transferee of Investor, (i) the members of Investor, (ii) the spouse or children
or grandchildren (in each case, natural or adopted) or any trust for the sole
benefit of the spouse or children or grandchildren (in each case, natural or
adopted) of any member of Investor, (iii) the heirs, executors, administrators
or personal representatives upon the death of any member of Investor or upon the
3
<PAGE>
incompetency or disability of any member of Investor for purposes of the
protection and management of the assets of such member, and (iv) any Affiliate
of Investor or its members.
"Person" means any individual, general partnership, limited
partnership, limited liability company, corporation, trust, joint stock company,
association, joint venture or any other entity or organization, whether or not a
legal entity, including a government or political subdivision or an agency or
instrumentality thereof.
"Redemption Date" has the meaning specified in Article Fifth, Section
VI(B)(i)(b) hereof.
"Redemption Notice" has the meaning specified in Article Fifth, Section
VI(B)(i) hereof.
"Redemption Price" has the meaning specified in Article Fifth, Section
VI(A)(i) hereof.
"SEC" means the Securities and Exchange Commission.
"Series A Stock" means the Series A Convertible Redeemable Preferred
Stock.
"Stock Purchase Agreement" means the Securities Purchase Agreement
dated as of February 17, 2000, among the Corporation, Axess Corporation and the
Investor (as defined therein).
"Subsidiaries" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock or other equity interest entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers, trustees or similar offices thereof is at the time owned or
controlled directly or indirectly, by such Person or one or more of the other
Subsidiaries of such Person (or any combination thereof) and (ii) any
partnership (a) the sole general partner or the managing partner of which is
such Person or a Subsidiary of such Person or (b) the only general partners of
which are such Person or of one or more Subsidiaries of such Person (or any
combination thereof).
"Trigger Event" means such time as the Investor (as defined in the
Stock Purchase Agreement) or any Permitted Transferee is no longer the
beneficial owner in the aggregate of at least 6,303,000 shares of Common Stock,
no par value per share, of the Corporation, as such number of shares may be
adjusted from time to time hereafter in the event that the Corporation shall
subdivide the outstanding shares of Common Stock into a greater number of shares
of Common Stock, or combine the outstanding shares of Common Stock into a lesser
number of shares, or issue by reclassification of its shares of Common Stock any
shares of the Corporation, or in the case any other similar event occurs.
II. Designation.
The series of preferred stock authorized hereunder shall be designated
as the "Series A Convertible Redeemable Preferred Stock." The number of shares
constituting such series shall be equal to 1,000. The par value of the Series A
Stock shall be $.01 per share of Series A Stock, and the Original Liquidation
Preference of the Series A Stock shall be $1,000 per share.
III. Ranking; Subordination.
(A) The Series A Stock shall rank, with respect to distributions upon
the liquidation, dissolution or winding-up of the Corporation, senior to all
classes or series of Common Stock, preferred stock or other Capital Stock of the
Corporation, except as provided in Section VII (C) (iv) hereof.
(B) The Series A Stock shall be subordinate at all times and in all
material respects to any obligations of the Corporation to its primary lender.
IV. Dividends.
No dividends will accrue or be payable with respect to the Series A
Stock.
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<PAGE>
V. Payment on Liquidation.
Upon any voluntary or involuntary liquidation, dissolution or
winding-up of the Corporation, the Holders will be entitled to receive out of
the assets of the Corporation available for distribution to the holders of its
Capital Stock, whether such assets are capital, surplus or earnings, an amount
in cash equal to the Liquidation Preference, before any payment shall be made or
any assets distributed to the holders of any Common Stock or any other class or
series of Capital Stock of the Corporation. If upon any voluntary or involuntary
liquidation, dissolution or winding-up of the affairs of the Corporation, the
assets of the Corporation are not sufficient to pay in full the payments payable
to the holders of outstanding shares of the Series A Stock, then such holders
shall share, equally and ratably in any distribution of assets in proportion to
the full payments, determined as of the date of such voluntary or involuntary
liquidation, dissolution or winding-up, to which they are entitled by virtue of
being Holders of Series A Stock. For purposes hereof, a Trigger Event shall be
deemed to be a liquidation.
VI. Redemption.
(A) Mandatory Redemption. On each of the following anniversaries of the
Closing Date (as defined in the Stock Purchase Agreement) (each, a "Mandatory
Redemption Date"), the Corporation shall redeem from any source of funds legally
available therefor, in the manner provided in Article FIFTH, Section VI(B)
below, the shares of the Series A Stock indicated below at the "Redemption
Price."
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Anniversary No. of Shares of Series A Price/Share Total
Stock
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
1st 200 $1,000 $200,000
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
2nd 200 $1,000 $200,000
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
3rd 200 $1,000 $200,000
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
4th 200 $1,000 $200,000
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
5th 200 $1,000 $200,000
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
TOTAL 1,000 $1,000,000
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
</TABLE>
The Corporation shall not enter into any agreement that would prohibit
or restrict its ability to redeem the Series A Stock on the Mandatory Redemption
Date in accordance with Article FIFTH Section VI hereof. Notwithstanding
anything in the contrary contained herein, upon the occurrence of a Trigger
Event, the Company shall redeem, in accordance with the procedure provided in
Article FIFTH, Section (B) below, all outstanding Series A Stock in full. Any
Series A Stockholder may elect to convert the Series A Stock held by such Holder
prior to the date set for redemption in accordance with the conversion
provisions set forth in Article FIFTH, Section VIII hereof. The redemption of
the Series A Stock shall take place not more than thirty (30) days following the
occurrence of a Trigger Event.
(B) Procedure for Redemption. (i) Not more than sixty (60) and not less
than thirty (30) days prior to the date fixed for any redemption of the Series A
Stock, written notice (the "Redemption Notice") shall be given by first-class
mail, postage prepaid by the Corporation to each Holder of record of shares to
be redeemed on the record date fixed for such redemption of the Series A Stock
at such Holder's address as the same appears on the security register maintained
by the Corporation. The Redemption Notice shall state:
(a) the Redemption Price;
(b) the date fixed for redemption (the "Redemption Date");
(c) that the Holder is to surrender to the Corporation, at the place or
places, which shall be designated in such Redemption Notice, its certificates
representing the shares of Series A Stock to be redeemed;
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<PAGE>
(ii) On or before the Redemption Date, each Holder of Series A Stock to
be redeemed shall surrender the certificate or certificates representing such
shares of Series A Stock to the Corporation, in the manner and at the place
designated in the Redemption Notice, and on the Mandatory Redemption Date the
full Redemption Price for such shares shall be payable in cash to the Person
whose name appears on such certificate or certificates as the owner thereof. In
the event that less than all of the shares represented by any such certificate
are redeemed, a new certificate shall be issued representing the unredeemed
shares. For any Holder to whom a Redemption Price in excess of $10,000 is
payable, if such Holder notifies the Corporation in writing prior to the
Mandatory Redemption Date that it elects to receive payment of the Redemption
Price by wire transfer, then payment shall be made in such manner to the account
specified in such notice.
(iii) If a Redemption Notice shall have been duly given, and if, on or
before the Redemption Date specified therein, all funds necessary for such
redemption shall have been irrevocably set aside by the Corporation, separate
and apart from its other funds, in trust for the pro rata benefit of the Holders
of the Series A Stock called for redemption so as to be and continue to be
available therefor in a manner reasonably satisfactory to the Holders of a
majority of the shares of Series A Stock called for redemption, then,
notwithstanding that any certificate for shares so called for redemption shall
not have been surrendered for cancellation, all shares so called for redemption
shall be deemed no longer outstanding, and all rights with respect to such
shares shall forthwith on such Mandatory Redemption Date cease and terminate,
except only the right of the Holders thereof to receive the amount payable on
redemption thereof.
(iv) Each Holder of Series A Stock may at its sole discretion waive its
right to receive the proceeds of a redemption hereunder by giving written notice
within 24 hours of a Redemption Date as to any particular Redemption Date. The
waiver of this right as to any particular Redemption Date shall have no effect
on the right to receive proceeds on any subsequent Redemption Date.
VII. Voting Rights.
(A) Holders of the Series A Stock, in their capacity as such, shall not
be entitled or permitted to vote, except as otherwise required under Delaware
law and as set forth below.
(B) Without the approval of Holders of at least 90% of the shares of
Series A Stock then outstanding, voting or consenting, as the case may be,
separately as a single class, given in person or by proxy, either in writing or
by resolution adopted at an annual or special meeting called for the purpose,
the Corporation will not, directly or indirectly, amend, modify or repeal the
Certificate of Incorporation (including without limitation by filing any other
certificate of designation) or by-laws of the Corporation so as to adversely
affect in any manner, or take any other action that may adversely affect in any
manner, the specified designations, rights, preferences, privileges or voting
rights of the Series A Stock.
(C) So long as any Series A Stock is outstanding, the Corporation shall
not, without the consent in lieu of a meeting, or the affirmative vote at a
meeting called for such purpose, of Series A stockholders of record that hold at
least a majority of the outstanding Series A Stock voting as a separate class:
(i) directly or indirectly, redeem, purchase or otherwise acquire
for value, or set apart money or other property for the
mandatory purchase or other analogous fund for the
redemption, purchase or acquisition of, any shares of Common
Stock other than those relating to the buyback of any
employee or management owned Common Stock.
(ii) amend, alter or repeal, in any manner whatsoever, the
designations, powers, preferences, relative participating,
optional or otherwise special rights, qualifications,
limitations and restrictions of the Series A Stock;
(iii) increase the number of shares of Series A Stock of the
Corporation authorized to be issued;
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<PAGE>
(iv) reclassify any shares of the Corporation's Capital Stock as
shares ranking senior to or on parity with the Series A Stock
with respect to rights on liquidation, redemption or for
payment of any dividend or distribution other than in
liquidation; provided that, however, the Corporation may
issue up to 1,000 shares of a series of Preferred Stock which
shall be pari-passu with the Series A Stock; and provided
further that the conversion price, conversion ratio and
redemption or distribution provisions of such new series
shall be on terms no more favorable than those of the Series
A Stock.
(D) In any case in which the Holders of Series A Stock shall be
entitled to vote hereunder or otherwise be entitled to vote pursuant to Delaware
law, each Holder of shares of Series A Stock shall be entitled to such number of
votes that would attach to the number of shares of Common Stock that would have
been issued had such shares of Series A Stock been converted immediately prior
to the record date in respect of such vote.
(E) The Corporation shall not issue shares of Series A Stock other than
the 1,000 shares originally issued.
VIII. Conversion.
(A) General Rights. Each share of Series A Stock shall be convertible
at Holder's option, during the redemption period, into 1,000 shares of Common
Stock (such number of shares being subject to adjustment pursuant to this
Section VIII) at a conversion price per share of Common Stock of $1.00 (as such
price may be adjusted from time to time pursuant to this Section VIII, the
"Conversion Price").
In order to exercise the conversion privilege, a Holder shall surrender
the certificate(s) representing such shares, accompanied by transfer
instrument(s) reasonably satisfactory to the Corporation, at any of the offices
or agencies maintained for such purpose by the conversion agent designated by
the Corporation (the "Conversion Agent") and shall give written notice to the
Corporation that the Holder elects to convert such shares. The initial
Conversion Agent shall be the Corporation. Such notice shall also state the
name(s), together with address(es), in which the certificate(s) for shares of
Common Stock shall be issued and the effective date of such conversion, which
shall be a date within 10 Business Days after the mailing of such notice. As
promptly as practicable after the surrender of such shares of Series A Stock as
aforesaid, the Corporation shall at the office of such Conversion Agent, issue
and deliver to such Holder, or on its written order, to a Person designated by
such Holder, certificate(s) representing the number of full shares of Common
Stock issuable upon the conversion of such shares of Series A Stock in
accordance with the provisions hereof ("Conversion Shares"), and any fractional
interest in respect of a share of Common Stock arising upon such conversion
shall be settled as provided for below. If the conversion occurs before the
Conversion Shares have been registered with the SEC, then they shall bear an
appropriate restrictive legend regarding the fact that they have not been
registered. Certificates will be issued representing the balance of any
remaining shares of Series A Stock in any case in which fewer than all of the
shares of Series A Stock represented by a certificate are converted. Each
conversion shall be deemed to have been effected immediately prior to the close
of business on the Business Day specified by the Holder in the transfer
instruments referred to above (provided that the shares of Series A Stock shall
have been surrendered to the Corporation as aforesaid), and the Person(s) in
whose name(s) any certificate(s) for shares of Common Stock shall be issuable
upon such conversion shall be deemed to have become the holder(s) of record of
the Common Stock represented thereby at such time. In either circumstance, such
conversion shall be at the Conversion Price in effect on the date specified in
such transfer instruments.
Any fractional interest in a share of Common Stock resulting from
conversion of any share(s) of Series A Stock may, at the option of the
Corporation, be paid in cash (computed to the next highest cent) based on the
last reported sale price of the Common Stock on the last trading day prior to
the date on which such share or shares of Series A Stock are converted in the
manner set forth above. If more than one certificate representing shares of
Series A Stock shall be surrendered for conversion at one time by the same
Holder, the number of shares issuable upon conversion thereof shall be computed
on the basis of the aggregate number of shares of Series A Stock represented by
such certificates which are to be converted.
(B)(i) In order to prevent dilution of the conversion right granted
hereunder, the Conversion Price and the number of shares of Common Stock into
which each share of Series A Stock shall be convertible shall be
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<PAGE>
subject to adjustment from time to time in accordance with this Section VIII(B).
Upon each adjustment of the Conversion Price pursuant to this Section VIII(B),
the Holder shall thereafter be entitled to acquire upon conversion under Section
VIII(A), at the Applicable Conversion Price (as hereinafter defined), the number
of shares of Common Stock obtainable by multiplying the Conversion Price in
effect immediately prior to such adjustment by the number of shares of Common
Stock acquirable immediately prior to such adjustment and dividing the product
thereof by the Applicable Conversion Price resulting from such adjustment.
The Conversion Price in effect at the time of the exercise of
conversion rights hereunder set forth in Section VIII(A) shall be subject to
adjustment from time to time as follows:
(a) If at any time after the date of issuance hereof the Corporation
shall grant or issue any shares of Common Stock, or grant or issue any rights or
options for the purchase of, or stock or other securities convertible into,
Common Stock (such convertible stock or securities being herein collectively
referred to as "Convertible Securities") other than:
(i) Excluded Securities; or
(ii) shares issued, subdivided or combined in transactions described in
Section VIII(C) if and to the extent that the number of shares of Common Stock
received upon conversion of the Series A Stock shall have been previously
adjusted pursuant to Section VIII(C) as a result of such issuance, subdivision
or combination of such securities;
for a consideration per share which is less than the lower of (1) the Conversion
Price in effect immediately prior to such issuance or sale (the "Applicable
Conversion Price"), or (2) the Current Market Price per share of Common Stock on
the date the Corporation fixed the offering price of such additional shares (the
"Applicable Market Price"), then the Applicable Conversion Price shall, and
thereafter upon each issuance or sale for a consideration per share which is
less than the lower of the Applicable Conversion Price or the Applicable Market
Price shall, simultaneously with such issuance or sale, be adjusted, so that
such Applicable Conversion Price shall equal a price determination by
multiplying the Applicable Conversion Price by a fraction, the numerator of
which shall be:
(A) the sum of (x) the total number of shares of Common Stock
outstanding when the Applicable Conversion Price became effective, plus (y) the
number of shares of Common Stock which the aggregate consideration received, as
determined in accordance with subsection (B)(iii) for the issuance or sale of
such additional Common Stock or securities convertible into Common Stock
("Convertible Securities") deemed to be an issuance of Common Stock as provided
in subsection (B)(iv), would purchase (including any consideration received by
the Corporation upon the issuance of any shares of Common Stock since the date
the Applicable Conversion Price became effective not previously included in any
computation resulting in an adjustment pursuant to this Section VIII(B) at the
Applicable Conversion Price;
and the denominator of which shall be
(b) the total number of shares of Common Stock outstanding (or
deemed to be outstanding as provided in subsection (B)(iv) hereof) immediately
after the issuance or sale of such additional shares.
If, however, the Applicable Conversion Price thus obtained would result
in the issuance of a lesser number of shares upon conversion than would be
issued at the initial Conversion Price specified in Section VIII(A), as
appropriate, the Applicable Conversion Price shall be such initial Conversion
Price.
Upon each adjustment of the Conversion Price pursuant to this
subsection (i), the total number of shares of Common Stock into which the Series
A Stock shall be convertible shall be such number of shares (calculated to the
nearest tenth) purchasable at the Applicable Conversion Price multiplied by a
fraction, the numerator of which shall be the Conversion Price in effect
immediately prior to such adjustment and the denominator of which shall be the
Conversion Price in effect immediately after such adjustment.
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Notwithstanding anything to the contrary in this subsection (B), if the
Corporation issues additional shares of Common Stock or Convertible Securities
for a price per share of Common Stock in the case of the issuance of Common
Stock, or for a price per share of Common Stock deliverable upon exercise,
conversion or exchange of such securities in the case of Convertible Securities,
at a price per share less than the Applicable Conversion Price, but not less
than the Current Market Price per share of Common Stock on the date the
Corporation fixed the offering price of such additional shares, no adjustment of
the Applicable Conversion Price shall be made unless the Corporation issues, or
may be obligated to issue under any Convertible Securities, more than an
aggregate of 3,000,000 shares of Common Stock, after which such adjustment shall
be made pursuant to this subsection (B).
(ii) Anything in this Section VIII to the contrary notwithstanding, no
adjustment in the Conversion Price shall be made in connection with the issuance
of any Excluded Securities.
(iii) For the purpose of subsection (B)(i), the following provisions
shall also be applied:
(a) In case of the issuance or sale of additional shares of Common
Stock for cash, the consideration received by the Corporation therefor shall be
deemed to be the amount of cash received by the Company for such shares, before
deducting therefrom any commissions, compensation or other expenses paid or
incurred by the Corporation for any underwriting of, or otherwise in connection
with, the issuance or sale of such shares.
(b) In the case of the issuance of Convertible Securities, the
consideration received by the Corporation therefor shall be deemed to be the
amount of cash, if any, received by the Corporation for the issuance of such
rights or options, plus the minimum amounts of cash and fair value of other
consideration, if any, payable to the Corporation upon the exercise of such
rights or options or payable to the Corporation upon conversion of such
Convertible Securities.
(c) In the case of the issuance of shares of Common Stock or
Convertible Securities for a consideration in whole or in part, other than cash,
the consideration other than cash shall be deemed to be the fair market value
thereof as reasonably determined in good faith by the Board of Directors of the
Corporation (irrespective of accounting treatment thereof); provided, however,
that if such consideration consists of the cancellation of debt issued by the
Corporation, the consideration shall be deemed to be the amount the Corporation
received upon issuance of such debt (gross proceeds) plus accrued interest and,
in the case of original issue discount or zero coupon indebtedness, accrued
value to the date of such cancellations, but not including any premium or
discount at which the debt may then be trading or which might otherwise be
appropriate for such class of debt.
(d) In case of the issuance of additional shares of Common Stock
upon the conversion or exchange of any obligations (other than Convertible
Securities), the amount of the consideration received by the Corporation for
such Common Stock shall be deemed to be the consideration received by the
Corporation for such obligations or shares so converted or exchanged, before
deducting from such consideration so received by the Corporation any expenses or
commissions or compensation incurred or paid by the Corporation for any
underwriting of, or otherwise in connection with, the issuance or sale of such
obligations or shares, plus any consideration received by the Corporation in
connection with such conversion or exchange other than a payment in adjustment
of interest and dividends. If obligations or shares of he same class or series
of a class as the obligations or shares so converted or exchanged have been
originally issued for different amounts of consideration, then the amount of
consideration received by the Corporation upon the original issuance of each of
the obligations or shares so converted or exchange upon the original issuance of
each of the obligations or shares so converted or exchange shall be deemed to be
the average amount of the consideration received by the Corporation upon the
original issuance of all such obligations or shares. The amount of consideration
received by the Corporation upon the original issuance of the obligations or
shares so converted or exchanged and the amount of the consideration, if any,
other than such obligations or shares, received by the Corporation upon such
conversion or exchange shall be determined in the same manner as provided in
paragraphs (a) and (b) above with respect to the consideration received by the
Corporation in case of the issuance of additional shares of Common Stock or
Convertible Securities.
(e) In the case of the issuance of additional shares of Common
Stock as a dividend, the aggregate number of shares of Common Stock issued in
payment of such dividend shall be deemed to have been
9
<PAGE>
issued at the close of business on the record date fixed for the determination
of stockholders entitled to such dividend and shall be deemed to have been
issued without consideration; provided, however, that if the Corporation, after
fixing such record date, shall legally abandon its plan to so issue Common Stock
as a dividend, no adjustment of the Applicable Conversion Price shall be
required by reason of the fixing of such record date.
(iv) For purposes of the adjustment provided for in subsection (B)(i)
above, if at any time the Corporation shall issue any Convertible Securities,
the Corporation shall be deemed to have issued at the time of the issuance of
such Convertible Securities the maximum number of shares of Common Stock
issuable upon conversion of the total amount of such Convertible Securities.
(v) On the expiration, cancellation or redemption of any Convertible
Securities, the Conversion Price then in effect hereunder shall forthwith be
readjusted to such Conversion Price as would have been obtained (a) had the
adjustments made upon the issuance or sale of such expired, canceled or redeemed
Convertible Securities been made upon the basis of the issuance of only the
number of shares of Common Stock theretofore actually delivered upon the
exercise or conversion of such Convertible Securities (and the total
consideration received therefor) and (b) had all subsequent adjustments been
made on only the basis of the Conversion Price as readjusted under this
subsection (B)(v) for all transactions (which would have affected such affected
Conversion Price) made after the issuance or sale of such Conversion Securities.
(vi) Anything in this Section VIII to the contrary notwithstanding, no
adjustment to the Conversion Price shall be required unless such adjustment
would require an increase or decrease of at least 1% in such Conversion Price;
provided, however, that any adjustments which by reason of this subsection
(B)(vi) are required to be made shall be carried forward and taken into account
in making subsequent adjustments. All calculations under this Section VIII shall
be made to the nearest cent.
(C) In case the Corporation shall subdivide the outstanding shares of
Common Stock into a greater number of shares of Common Stock, or combine the
outstanding shares of Common Stock into a lesser number of shares, or issue by
reclassification of its shares of Common Stock any shares of the Corporation, or
in the case any other similar event occurs, the Conversion Price in effect
immediately prior thereto shall be adjusted so that the Holders of Series A
Stock thereafter surrendered for conversion shall be entitled to receive the
number of shares of Common Stock which such Holder would have owned or been
entitled to receive after the happening of any of the events described above if
such shares of Series A Stock had been converted immediately prior to the
happening of such event on the day upon which such subdivision, combination or
reclassification, as the case may be, becomes effective. Such adjustment shall
become effective immediately after the opening of business on the day following
the day upon which such subdivision, combination, reclassification or other
similar event becomes effective.
(D) No Dilution Generally. The Corporation shall not take any action,
directly or indirectly, to avoid or seek to avoid the observance or performance
of any of the terms of this Article Fifth, but shall at all times in good faith
assist in carrying out all of such terms and in the taking of all such action as
may be necessary, appropriate or desirable in order to protect the rights of the
holder of Series A Stock, it being the intent of this Section VIII (D) that the
holder of any shares of Series A Stock shall at all times after the date hereof
be entitled to receive upon exercise of the conversion privilege no less than
the same proportionate ownership of all of the outstanding shares of the capital
stock and other securities of the Corporation (including without limitation
proportionate voting rights) as the holder of Series A Stock would receive if
such exercise rights would have been exercised on the date hereof.
(E) The Corporation shall be entitled, at its election, to make such
reductions in the Conversion Price, in addition to those required by this
Section VIII, as it in its discretion shall determine to be advisable in order
that any stock dividend, subdivision or combination of shares, distribution of
capital stock or rights or warrants to purchase stock or securities, or
distribution of evidences of indebtedness or assets (other than cash dividends
or distributions paid from earnings) or other event shall be a tax free
distribution for federal income tax purposes.
(F) Whenever the Conversion Price is adjusted as herein provided, the
Corporation shall promptly notify each Holder in writing of such adjustment, at
its last address as the same appears on the securities register maintained by
the Corporation.
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(G) In case of (i) any consolidation of the Corporation with, or merger
of the Corporation into, any other entity, (ii) any merger of another entity
into the Corporation (other than a merger which does not result in any
reclassification, conversion, exchange or cancellation of outstanding shares of
Common Stock) or (iii) any sale or transfer of all or substantially all of the
assets of the Corporation, each Holder shall have the right thereafter to
convert such share only into the kind and amount of securities, cash and other
property receivable upon such consolidation, merger, sale or transfer by a
holder of the number of shares of Common Stock into which such share of Series A
Stock might have been converted immediately prior to such consolidation, merger,
sale or transfer, assuming such holder of Common Stock is not an entity with
which the Corporation consolidated or into which the Corporation merged or which
merged into the Corporation or to which such sale or transfer was made, as the
case may be (a "Constituent Entity"), or an affiliate of a Constituent Entity
and failed to exercise its rights of election, if any, as to the kind or amount
of securities, cash or other property receivable upon such consolidation,
merger, sale or transfer (provided that if the kind or amount of securities,
cash and other property receivable upon such consolidation, merger, sale or
transfer is not the same for each share of Common Stock held immediately prior
to such consolidation, merger, sale or transfer by other than a Constituent
Entity or an affiliate thereof and in respect of which such rights of election
shall not have been exercised (a "non-electing share"), then for the purpose of
this subsection (e) the kind and amount of securities, cash and other property
receivable upon such consolidation, merger, sale or transfer by each
non-electing share shall be deemed to be the kind and amount so receivable per
share by a plurality of the non-electing shares). If necessary, appropriate
adjustment shall be made in the application of the provisions set forth herein
with respect to the rights and interests thereafter of the Holders, to the end
that the provisions set forth herein shall thereafter correspondingly be made
applicable, as nearly as they may reasonably be, in relation to any shares of
stock or other securities or property thereafter deliverable on the conversion
of the shares. Any such adjustment shall be evidenced by a certificate of
independent public accountants and a notice of such adjustment filed and mailed
in the manner set forth in subsection (d) above and containing the information
set forth in such subsection (d), and any adjustment so certified shall for all
purposes hereof conclusively be deemed to be an appropriate adjustment, absent
manifest error. The above provisions shall similarly apply to successive
consolidations, mergers, sales or transfers.
In case:
(i) of any consolidation or merger to which the Corporation is a party
and for which approval of any stockholders of the Corporation is required, or of
the sale or transfer of all or substantially all of the assets of the
Corporation; or
(ii) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Corporation;
then the Corporation shall cause to be filed with any Conversion Agent and shall
cause to be mailed to each Holder at its last address as the same appears on the
securities register maintained by the Corporation, at least 15 days prior to the
applicable record or effective date hereinafter specified, a notice stating (A)
the date on which a record is to be taken for the purpose of such actions, or,
if the record is not to be taken, the date as of which the holders of Common
Stock of record are to be determined, or (B) the date on which such
consolidation, merger, share exchange, sale, transfer, dissolution, liquidation
or winding-up is expected to become effective, and the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities, cash or other property deliverable
upon such consolidation, merger, share exchange, sale, transfer, dissolution,
liquidation or winding-up.
(H) The Corporation will pay any and all documentary stamp or similar
issue or transfer taxes payable in respect of the issue or delivery of shares of
Common Stock on conversion of shares of Series A Stock pursuant hereto;
provided, however, that the Corporation shall not be required to pay any tax
which may be payable in respect of any transfer involved in the issue or
delivery of shares of Common Stock in a name other than that of the Holder of
the shares of Series A Stock to be converted, and no such issue or delivery
shall be made unless and until the Person requesting such issue or delivery has
paid to the Corporation the amount of any such tax or has established, to the
satisfaction of the Corporation, that such tax has been paid.
(I) The Corporation covenants that it will cause all shares of Common
Stock which may be issued upon conversions of shares of Series A Stock to be,
upon issue, duly and validly issued, fully paid and non-assessable, free of all
liens and charges and not subject to any preemptive rights.
11
<PAGE>
(J) The Corporation covenants that it will at all times reserve and
keep available, free from preemptive rights, out of the aggregate of its
authorized but unissued shares of Common Stock, the full number of shares of
Common Stock deliverable upon the conversion of all outstanding shares of Series
A Stock not theretofore converted.
IX. Covenant to Report.
Whether or not the Corporation is subject to the reporting requirements
of Section 13 or Section 15(d) of the Exchange Act, the Corporation will deliver
for filing with the SEC, all information, documents and reports specified in
Section 13 and Section 15(d) of the Exchange Act.
X. Mutilated or Missing Series A Stock Certificates.
If any of the Series A Stock certificates shall be mutilated, lost,
stolen or destroyed, the Corporation shall issue, in exchange and in
substitution for and upon cancellation of the mutilated Series A Stock
certificate, or in lieu of and substitution for the Series A Stock certificate
lost, stolen or destroyed, a new Series A Stock certificate of like tenor and
representing an equivalent amount of shares of Series A Stock, but only upon
receipt of evidence of such loss, theft or destruction of such Series A Stock
certificate and indemnity, if requested, reasonably satisfactory to the
Corporation.
XI. Reissuance; Preemptive Rights.
(A) Shares of Series A Stock that have been issued and reacquired in
any manner, including shares purchased, redeemed or surrendered for conversion,
may not be redesignated or reissued.
(B) No shares of Series A Stock shall have any rights of preemption
whatsoever as to any securities of the Corporation, or any warrants, rights or
options issued or granted with respect thereto, regardless of how such
securities or such warrants, rights or options may be designated, issued, or
granted.
XII. Business Day.
If any payment or redemption shall be required by the terms hereof to
be made on a day that is not a Business Day, such payment or redemption shall be
made on the immediately succeeding Business Day.
XIII. Headings.
The headings contained herein are for convenience of reference only and
shall not affect the interpretation of any of the provisions hereof.
XIV. Severability of Provisions.
If any right, preference or limitation of the Series A Stock set forth
in this Certificate of Incorporation (as this Certificate of Incorporation may
be amended from time to time) is invalid, unlawful or in capable of being
enforced by reason of any rule or law or public policy, all other rights,
preferences and limitations set forth in this Certificate of Incorporation, as
amended, which can be given effect without the invalid, unlawful or
unenforceable right, preference or limitation shall, nevertheless remain in full
force and effect, and no right, preference or limitation herein set forth shall
be deemed dependent upon any other such right, preference or limitation unless
so expressed herein.
XV. Notice to the Corporation.
All notices and other communications required or permitted to be given
to the Corporation hereunder shall be made by first-class mail, postage prepaid,
to the Corporation at its principal executive offices at the following address:
Rheometric Scientific, Inc., One Possumtown Road, Piscataway, New Jersey
08854-2103, Attention: President). Minor imperfections in any such notice shall
not affect the validity thereof.
12
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XVI. Miscellaneous.
All payments to Holders to be made "in cash" hereunder shall be made in
U.S. dollars.
* * *
SIXTH: No Preemptive Rights. No stockholder of the Corporation shall
have any preemptive or preferential right, nor be entitled to such as a matter
of right, to subscribe for or purchase any part of any new or additional issue
of stock of the Corporation of any class or series, whether issued for money or
for consideration other than money, or of any issue of securities convertible
into stock of the Corporation.
SEVENTH: Meetings; Books and Records. Meetings of the stockholders may
be held within or without the State of Delaware, as the Bylaws may provide.
Subject to the provisions of any law or regulation, the books of the Corporation
may be kept outside the State of Delaware at such place or places as may be
designated from time to time by the Board of Directors or in the Bylaws of the
Corporation.
EIGHTH: Management of Business. The following provisions are inserted
for the management of the business and for the conduct of the affairs of the
Corporation, and for further definition, limitation and regulation of the powers
of the Corporation and of its directors and stockholders: (a) Number and
Election of Directors. The number of directors from time to time shall be fixed
by, or in the manner provided in, the Bylaws of the Corporation, but shall not
be less than three (3) nor more than nine (9). The election of directors need
not be by written ballot unless the Bylaws of the Corporation so provide.
(b) Bylaws. The original Bylaws of the Corporation shall be
adopted by the sole incorporator. In furtherance and not in limitation of the
powers conferred by statute, the Board of Directors is expressly authorized to
adopt, amend or repeal the Bylaws of the Corporation.
(c) Corporate Powers and Authority. All corporate powers and
authority of the Corporation (except as at the time otherwise provided by law,
by this Certificate of Incorporation or by the Bylaws) shall be vested in and
exercised by the Board of Directors.
NINTH: Compromise or Arrangement. Whenever a compromise or arrangement
is proposed between the Corporation and its creditors or any class of them
and/or between the Corporation and its stockholders or any class of them, any
court of equitable jurisdiction within the State of Delaware may, on the
application in a summary way of the Corporation or of any creditor or
stockholder thereof, or on the application of any receiver or receivers
appointed for the Corporation under the provision of Section 291 of the DGCL, or
on the application of trustees in dissolution or of any receiver or receivers
appointed for the Corporation under Section 279 of the DGCL, order a meeting of
the creditors or class of creditors, and/or of the stockholders or class of
stockholders of the Corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the Corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of the
Corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders of the Corporation, as the case may be, and also on the
Corporation.
TENTH: Limitation on Liability; Indemnification. The Directors of the
Corporation shall be entitled to the benefits of all limitations on the
liability of Directors generally that are now or hereafter become available
under the DGCL. Without limiting the generality of the foregoing, to the fullest
extent permitted by the DGCL, as it exists on the date hereof or as it may
hereafter be amended, no director of the Corporation shall be personally liable
to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders,
13
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(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL,
or (iv) for any transaction from which the director derived an improper personal
benefit. If the DGCL is amended after the filing of this Restated Certificate of
Incorporation to authorize corporate action further eliminating or limiting the
personal liability of Directors, then the liability of a Director of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the DGCL, as so amended. Any repeal or modification of this Article TENTH or any
adoption of any provision of this Restated Certificate of Incorporation
inconsistent with this Article TENTH shall be prospective only, and shall not
affect, to the detriment of any director, any limitation on the personal
liability of a director of the Corporation existing at the time of such repeal,
modification or adoption.
ELEVENTH: Reservation of Amendment Power. Subject to the limitations
set forth herein, the Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by law, and all rights and powers conferred
herein on stockholders, directors and officers are subject to this reserved
power.
TWELFTH: The name and mailing address of the sole incorporator is:
Name Mailing Address
---- ---------------
Scott E. Lerner, Esq. Dechert Price & Rhoads
30 Rockefeller Plaza
New York, New York 10112
The undersigned, being the sole incorporator hereinbefore named, for
the purpose of forming a corporation pursuant to the General Corporation Law of
the State of Delaware, does make this Certificate, hereby declaring and
certifying that the facts herein stated are true, and accordingly has hereunto
set his hand this ___ day of June __, 2000.
-----------------------------
Scott E. Lerner
14
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ANNEX III
================================================================================
RHEOMETRIC SCIENTIFIC, INC.
(a Delaware corporation)
BYLAWS
As adopted on June __, 2000
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Page
ARTICLE I STOCKHOLDERS....................................................................................1
Section 1.1. Annual Meetings........................................................................1
Section 1.2. Special Meetings.......................................................................1
Section 1.3. Notice of Meetings; Waiver.............................................................1
Section 1.4. Quorum.................................................................................1
Section 1.5. Voting.................................................................................2
Section 1.6. Voting by Ballot.......................................................................2
Section 1.7. Adjournment............................................................................2
Section 1.8. Proxies................................................................................2
Section 1.9. Inspectors of Elections................................................................2
Section 1.10. Opening and Closing of Polls...........................................................3
Section 1.11. Stockholder Action by Written Consent..................................................3
ARTICLE II BOARD OF DIRECTORS.....................................................................................3
Section 2.1. General Powers.........................................................................3
Section 2.2. Number and Term of Office..............................................................3
Section 2.3. Election of Directors..................................................................4
Section 2.4. Annual and Regular Meetings............................................................4
Section 2.5. Special Meetings; Notice...............................................................4
Section 2.6. Quorum; Voting.........................................................................4
Section 2.7. Adjournment............................................................................4
Section 2.8. Action Without a Meeting...............................................................4
Section 2.9. Regulations; Manner of Acting..........................................................5
Section 2.10. Resignations...........................................................................5
Section 2.11. Removal of Directors...................................................................5
Section 2.12. Vacancies and Newly Created Directorships..............................................5
Section 2.13. Compensation...........................................................................5
Section 2.14. Reliance on Accounts and Reports, etc..................................................5
ARTICLE III COMMITTEES OF DIRECTORS AND ADVISORY BOARD............................................................6
Section 3.1. Committees of Directors................................................................6
Section 3.2. Proceedings............................................................................6
Section 3.3. Quorum and Manner of Acting............................................................6
Section 3.4. Action by Telephonic Communications....................................................6
Section 3.5. Absent or Disqualified Members.........................................................6
Section 3.6. Resignations...........................................................................6
Section 3.7. Removal................................................................................6
Section 3.8. Vacancies..............................................................................7
Section 3.9. Advisory Board.........................................................................7
ARTICLE IV OFFICERS...............................................................................................7
Section 4.1. Number.................................................................................7
Section 4.2. Election...............................................................................7
Section 4.3. Compensation...........................................................................7
Section 4.4. Removal and Resignation; Vacancies.....................................................7
Section 4.5. Authority and Duties of Officers.......................................................7
Section 4.6. Chairman of the Board..................................................................7
Section 4.7. Vice Chairman of the Board.............................................................8
Section 4.8. President..............................................................................8
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Section 4.9. Vice Presidents........................................................................8
Section 4.10. Secretary..............................................................................8
Section 4.11. Assistant Secretary....................................................................8
Section 4.12. Treasurer..............................................................................9
Section 4.13. Additional Officers....................................................................9
Section 4.14. Security...............................................................................9
ARTICLE V CAPITAL STOCK...........................................................................................9
Section 5.1. Certificates of Stock, Uncertificated Shares...........................................9
Section 5.2. Signatures; Facsimile..................................................................9
Section 5.3. Lost, Stolen or Destroyed Certificates.................................................9
Section 5.4. Transfer of Stock......................................................................9
Section 5.5. Record Date...........................................................................10
Section 5.6. Registered Stockholders...............................................................10
Section 5.7. Transfer Agent and Registrar..........................................................10
ARTICLE VI INDEMNIFICATION.......................................................................................10
Section 6.1. Nature of Indemnity...................................................................11
Section 6.2. Successful Defense....................................................................11
Section 6.3. Determination that Indemnification is Proper..........................................11
Section 6.4. Advance Payment of Expenses...........................................................11
Section 6.5. Procedure for Indemnification of Directors and Officers...............................11
Section 6.6. Survival; Preservation of Other Rights................................................12
Section 6.7. Insurance.............................................................................12
Section 6.8. Severability..........................................................................12
Section 6.9. Limitation on Liability...............................................................12
Section 6.10. Appearance as a Witness...............................................................12
Section 6.11. Indemnification of Employees and Agents...............................................12
ARTICLE VII OFFICES........................................................................................13
Section 7.1. Registered Office and Agent...........................................................13
Section 7.2. Other Offices.........................................................................13
ARTICLE VIII GENERAL PROVISIONS..................................................................................13
Section 8.1. Dividends.............................................................................13
Section 8.2. Reserves..............................................................................13
Section 8.3. Execution of Instruments..............................................................13
Section 8.4. Deposits..............................................................................13
Section 8.5. Checks................................................................................13
Section 8.6. Sale, Transfer, etc...................................................................13
Section 8.7. Voting as Stockholder.................................................................14
Section 8.8. Fiscal Year...........................................................................14
Section 8.9. Seal..................................................................................14
Section 8.10. Books and Records; Inspection.........................................................14
ARTICLE IX AMENDMENT OF BYLAWS...................................................................................14
Section 9.1. Amendment.............................................................................14
ARTICLE X CONSTRUCTION...........................................................................................14
Section 10.1. Construction..........................................................................14
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<PAGE>
RHEOMETRIC SCIENTIFIC, INC.
(a Delaware corporation)
BYLAWS
As adopted on June __, 2000
ARTICLE I
STOCKHOLDERS
Section 1.1. Annual Meetings. The annual meeting of the stockholders of
the Corporation for the election of Directors and for the transaction of such
other business as properly may come before such meeting, including, without
limitation, for the purpose of the delivery of an annual report of the Board of
Directors, shall be held at such place, within or without the State of Delaware,
such date, and such time as designated by the Board of Directors and set forth
in the notice or waiver of notice of the meeting.
Section 1.2. Special Meetings. Special meetings of the stockholders for
any proper purpose or purposes may be called at any time by the Board of
Directors or the Chief Executive Officer. A special meeting shall be called by
the Chief Executive Officer or by the Chairman or Vice Chairman of the Board of
Directors pursuant to a resolution approved by a majority of the entire Board of
Directors. Such special meetings of the stockholders shall be held at such
places, within or without the State of Delaware, as shall be specified in the
respective notices or waivers of notice thereof. Only business within the
purpose or purposes described in the notice or waiver thereof required by these
Bylaws may be conducted at a special meeting of the stockholders. No stockholder
shall have the power to require that a meeting of the stockholders be held or
that any matter be voted on by the stockholders.
Section 1.3. Notice of Meetings; Waiver.
(a) Written or printed notice of the place, date and hour of the
meeting of the stockholders, and, in the case of a special meeting, the purpose
or purposes for which such meeting is called, shall be delivered not less than
ten (10) nor more than sixty (60) days prior to the meeting, either personally
or by mail, by or at the direction of the Board of Directors or person calling
the meeting, to each stockholder of record entitled to vote at such meeting. If
such notice is mailed, it shall be deemed to have been delivered to a
stockholder on the third day after it is deposited in the United States mail,
postage prepaid, addressed to the stockholder at his or her address as it
appears on the record of stockholders of the Corporation, or, if he or she shall
have filed with the Secretary of the Corporation a written request that notices
to him or her be mailed to some other address, then directed to him or her at
such other address. Such further notice shall be given as may be required by law
or otherwise by these Bylaws.
(b) No notice of any meeting of stockholders need be given to any
stockholder who submits a signed waiver of notice, whether before or after the
meeting. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders need be specified in a written
waiver of notice. The attendance of any stockholder at a meeting of stockholders
shall constitute a waiver of notice of such meeting, except when the stockholder
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business on the ground that the meeting is
not lawfully called or convened.
Section 1.4. Quorum. Except as otherwise required by law or by the
Certificate of Incorporation, a quorum shall be present at a meeting of
stockholders if the holders of record of more than 50% of the then
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outstanding shares entitled to vote at a meeting of the stockholders are
represented at the meeting in person or by proxy.
Section 1.5. Voting. If, pursuant to Section 5.5 of these Bylaws, a
record date has been fixed, every holder of record of shares entitled to vote at
a meeting of stockholders shall be entitled to one vote for each share
outstanding in his or her name on the books of the Corporation at the close of
business on such record date. If no record date has been fixed, then every
holder of record of shares entitled to vote at a meeting of stockholders shall
be entitled to one vote for each share of stock standing in his or her name on
the books of the Corporation at the close of business on the day next preceding
the day on which notice of the meeting is given, or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is
held. Except as otherwise required by law or by the Certificate of Incorporation
or by these Bylaws, the vote of a majority of the shares represented in person
or by proxy at any meeting at which a quorum is present shall be sufficient for
the transaction of any business at such meeting.
Section 1.6. Voting by Ballot. No vote of the stockholders need be
taken by written ballot unless otherwise required by law. Any vote which need
not be taken by ballot may be conducted in any manner approved by the meeting.
Section 1.7. Adjournment. The chairman of the meeting or the holders of
record of more than 50% of the then outstanding shares entitled to vote at a
meeting of the stockholders shall have the power to adjourn such meeting from
time to time, without any notice other than announcement at the meeting of the
time and place of the holding of the adjourned meeting, provided that if the
adjournment is for more than thirty days, or if after the adjournment a new
record date for the adjourned meeting is fixed pursuant to Section 5.5 of these
Bylaws, a notice of the adjourned meeting, conforming to the requirements of
Section 1.3 of these Bylaws, shall be given to each stockholder of record
entitled to vote at such meeting. If such meeting is adjourned by the
stockholders, the resumption of such meeting shall occur at such time and place
as shall be determined by a vote of the holders of record of more than 50% of
the then outstanding shares entitled to vote at such meeting of the
stockholders. Upon the resumption of such adjourned meeting, any business may be
transacted that might have been transacted at the meeting as originally called.
Section 1.8. Proxies. Any stockholder entitled to vote at any meeting
of the stockholders or to express consent to or dissent from corporate action in
writing without a meeting may vote in person or may authorize another person or
persons to vote at any such meeting and express such consent or dissent for him
or her by proxy executed in writing by the stockholder. A stockholder may
authorize a valid proxy by executing a written instrument signed by such
stockholder, or by causing his or her signature to be affixed to such writing by
any reasonable means including, but not limited to, by facsimile signature or
photographic, photostatic, or similar reproduction or by transmitting or
authorizing the transmission of a telegram, telex, cablegram or other means of
electronic transmission to the person designated as the holder of the proxy, a
proxy solicitation firm or a like authorized agent. No such proxy shall be voted
or acted upon after the expiration of three years from the date of such proxy
unless such proxy provides for a longer period. Every proxy shall be revocable
at the pleasure of the stockholder executing it, except in those cases where
applicable law provides that a proxy shall be irrevocable. A stockholder may
revoke any proxy which is not irrevocable by attending the meeting and voting in
person or by filing an instrument in writing revoking the proxy or by filing
another duly executed proxy bearing a later date with the Secretary. Proxies by
telegram, cablegram or other electronic transmission must either set forth or be
submitted with information from which it can be determined that the telegram,
cablegram or other electronic transmission was authorized by the stockholder.
Any copy, facsimile telecommunication or other reliable reproduction of a
writing or transmission created pursuant to this section may be substituted or
used in lieu of the original writing or transmission for any and all purposes
for which the original writing or transmission could be used, provided that such
copy, facsimile telecommunication or other reproduction shall be a complete
reproduction of the entire original writing or transmission.
Section 1.9. Inspectors of Elections. Preceding any meeting of the
stockholders, the Board of Directors shall appoint one or more persons to act as
Inspectors of Elections, and may designate one or more
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alternate inspectors. In the event no inspector or alternate is able to act, the
person presiding at the meeting shall appoint one or more inspectors to act at
the meeting. Each inspector, before entering upon the discharge of the duties of
an inspector, shall take and sign an oath faithfully to execute the duties of
inspector with strict impartiality and according to the best of his or her
ability. The inspector shall:
(a) ascertain the number of shares outstanding and the voting
power of each,
(b) determine the shares represented at a meeting and the validity
of proxies and ballots, count all votes and ballots,
(c) determine and retain for a reasonable period a record of the
disposition of any challenges made to any determination by the inspectors; and
(d) certify his or her determination of the number of shares
represented at the meeting, and his or her count of all votes and ballots.
The inspector may appoint or retain other persons or entities to assist
in the performance of the duties of inspector.
When determining the shares represented and the validity of proxies and
ballots, the inspector shall be limited to an examination of the proxies, any
envelopes submitted with those proxies, any information provided in accordance
with Section 1.8 of these Bylaws, ballots and the regular books and records of
the Corporation. The inspector may consider other reliable information for the
limited purpose of reconciling proxies and ballots submitted by or on behalf of
banks, brokers or their nominees or a similar person which represent more votes
than the holder of a proxy is authorized by the record owner to cast or more
votes than the stockholder holds of record. If the inspector considers other
reliable information as outlined in this section, the inspector, at the time of
his or her certification pursuant to (e) of this section, shall specify the
precise information considered, the person or persons from whom the information
was obtained, when this information was obtained, the means by which the
information was obtained, and the basis for the inspector's belief that such
information is accurate and reliable.
Section 1.10. Opening and Closing of Polls. The date and time for the
opening and the closing of the polls for each matter to be voted upon at a
stockholder meeting shall be announced at the meeting. The inspector of the
election shall be prohibited from accepting any ballots, proxies or votes or any
revocations thereof or changes thereto after the closing of the polls, unless
the Court of Chancery upon application by a stockholder shall determine
otherwise.
Section 1.11. Stockholder Action by Written Consent. Unless otherwise
provided by law, by the Certificate of Incorporation or by these Bylaws, any
action required to be taken at any meeting of stockholders, or any action which
may be taken at any meeting of such stockholders, may be taken without a
meeting, without prior notice and without a vote if a consent in writing,
setting forth the action so taken, shall be signed by the holders of outstanding
stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted. Prompt notice of the taking of the
corporate action without a meeting by less than unanimous written consent shall
be given to those stockholders who have not consented in writing.
ARTICLE II
BOARD OF DIRECTORS
Section 2.1. General Powers. Except as may otherwise be provided by
law, by the Certificate of Incorporation or by these Bylaws, the property,
affairs and business of the Corporation shall be managed by or under the
direction of the Board of Directors and the Board of Directors may exercise all
the powers of the Corporation
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and may make all decisions and take all actions for the Corporation. The powers
of the Corporation which may be exercised by the Directors without the approval
of the stockholders shall include, without limitation, the power to purchase,
hold and sell investments; to borrow and loan funds and provide guarantees of
the obligations of others; and to acquire other companies in the ordinary course
of business.
Section 2.2. Number and Term of Office. The number of Directors shall
be seven (7) or such other number as may be fixed from time to time exclusively
pursuant to a resolution adopted by a majority of the entire Board of Directors,
but shall consist of not less than three (3) Directors nor more than fifteen
(15) Directors. Each Director shall hold office for the term for which he is
appointed or elected and until his or her successor has been duly elected and
qualified, or until his or her earlier death, insanity, retirement, resignation
or removal. Directors need not be residents of the State of Delaware.
Section 2.3. Election of Directors. Except as otherwise provided in
Sections 2.11 and 2.12 of these Bylaws, the Directors shall be elected at each
annual meeting of the stockholders. If the annual meeting for the election of
Directors is not held on the date designated therefor, the Directors shall cause
the meeting to be held as soon thereafter as convenient. At each meeting of the
stockholders for the election of Directors, provided a quorum is present, the
Directors shall be elected by a plurality of the votes validly cast in such
election.
Section 2.4. Annual and Regular Meetings. The annual meeting of the
Board of Directors for the purpose of electing officers and for the transaction
of such other business as may come before the meeting shall be held as soon as
possible following adjournment of the annual meeting of the stockholders at the
place of such annual meeting of the stockholders. Notice of such annual meeting
of the Board of Directors need not be given. The Board of Directors from time to
time may by resolution provide for the holding of regular meetings and fix the
place (which may be within or without the State of Delaware) and the date and
hour of such meetings, provided that such meetings shall be held no less
frequently than quarterly. Notice of regular meetings need not be given,
provided, however, that if the Board of Directors shall fix or change the time
or place of any regular meeting, notice of such action shall be mailed promptly,
or sent by telephone, including a voice messaging system or other system or
technology designed to record and communicate messages, telegraph, facsimile,
electronic mail or other electronic means to each Director who shall not have
been present at the meeting at which such action was taken, addressed to him or
her at his or her usual place of business, or shall be delivered to him or her
personally. Notice of such action need not be given to any Director who attends
the first regular meeting after such action is taken without protesting the lack
of notice to him or her, prior to, or at the commencement of such meeting, or to
any Director who submits a signed waiver of notice, whether before or after such
meeting.
Section 2.5. Special Meetings; Notice. Special meetings of the Board of
Directors shall be held whenever called by any Director, date and hour as may be
specified in the respective notices or waivers of notice of such meetings.
Special meetings of the Board of Directors may be called on at least forty-eight
hours' notice to each other Director, if notice is given to each Director
personally or by telephone, including a voice messaging system or other system
or technology designed to record and communicate messages, telegraph, facsimile,
electronic mail or other electronic means, or on five days' notice from the
official date of deposit in the mail if notice is mailed to each Director,
addressed to him or her at his or her usual place of business. Notice of any
special meeting need not be given to any Director who attends such meeting
without protesting the lack of notice to him or her, prior to or at the
commencement of such meeting, or to any Director who submits a signed waiver of
notice, whether before or after such meeting, and any business may be transacted
thereat. Such notice need not state the purpose or purposes of, nor the business
to be transacted at, such meeting, except as may otherwise be required by law or
provided for by the Certificate of Incorporation.
Section 2.6. Quorum; Voting. Unless otherwise required by law or
provided in the Certificate of Incorporation, at all meetings of the Board of
Directors, the presence of a majority of the total number of Directors then in
office shall constitute a quorum for the transaction of business of the
Directors. Except as otherwise required by law, or except as provided herein or
in the Certificate of Incorporation, the act or vote of a majority of the total
number of Directors then in office shall be the act of the Board of Directors. A
Director who is present at a meeting of the Directors at which action on any
matter of the Corporation is taken shall be presumed to have assented to the
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action unless his dissent shall be entered in the minutes of the meeting or
unless he shall file his written dissent to such action with the person acting
as secretary of the meeting before the adjournment thereof or shall deliver such
dissent to the Corporation immediately after the adjournment of the meeting.
Such right to dissent shall not apply to a Director who voted in favor of such
action.
Section 2.7. Adjournment. A majority of the Directors present, whether
or not a quorum is present, may adjourn any meeting of the Board of Directors to
another time or place. No notice need be given of any adjourned meeting unless
the time and place of the adjourned meeting are not announced at the time of
adjournment, in which case notice conforming to the requirements of Section 2.5
of these Bylaws shall be given to each Director.
Section 2.8. Action Without a Meeting. Any action permitted or required
by law, the Certificate of Incorporation, or these Bylaws to be taken at a
meeting of the Directors or of any committee designated by the Directors may be
taken without a meeting if a consent in writing, setting forth the action to be
taken, is signed by all the Directors or members of such committee, as the case
may be, provided that the writing or writings are filed with the minutes of
proceedings of the Board of Directors or committee. Such consent shall have the
same force and effect as a unanimous vote at a meeting and may be stated as such
in any document or instrument filed with the Secretary of State of Delaware, and
the execution of such consent shall constitute attendance or presence in person
at a meeting of the Board of Directors or any such committee, as the case may
be. Subject to the requirements of law, the Certificate of Incorporation, or
these Bylaws for notice of meetings, Directors, or members of any committee
designated by the Board of Directors, may participate in and hold a meeting of
the Board of Directors or any committee of Directors, as the case may be, by
means of a conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and
participation in such meeting shall constitute attendance and presence in person
at such meeting, except where a person participates in the meeting for the
express purpose of objecting to the transaction of any business on the ground
that the meeting is not lawfully called or convened.
Section 2.9. Regulations; Manner of Acting. Meetings of the Board of
Directors may be held at such place or places as shall be determined from time
to time by resolution of the Directors. At all meetings of the Board of
Directors, business shall be transacted in such order as shall from time to time
be determined by resolution of the Directors to the extent consistent with
applicable law, the Certificate of Incorporation and these Bylaws. The Board of
Directors may adopt such other rules and regulations for the conduct of meetings
of the Board of Directors and for the management of the property, affairs and
business of the Corporation as the Board of Directors may deem appropriate.
Attendance of a Director at a meeting shall constitute a waiver of notice of
such meeting, except where a Director attends a meeting for the express purpose
of objecting to the transaction of any business on the ground that the meeting
is not lawfully called or convened. The Directors shall act only as a Board, and
the individual Directors shall have no power as such.
Section 2.10. Resignations. Any Director may resign at any time. Such
resignation shall be made in writing, signed by such Director, to the
Corporation and shall take effect at the time specified therein, or if no time
be specified, at the time of its receipt by the remaining Directors. The
acceptance of a resignation shall not be necessary to make it effective, unless
expressly so provided in the resignation.
Section 2.11. Removal of Directors. Except as otherwise provided by law
or the Certificate of Incorporation, any Director may be removed at any time,
with or without cause, upon the affirmative vote of the holders of a majority of
the combined voting power of the then outstanding stock of the Corporation
entitled to vote generally in the election of Directors at any meeting of such
stockholders, including meetings called expressly for that purpose, and at which
a quorum of stockholders is present. Subject to the rights of the holders of any
series of preferred stock of the Corporation, any vacancy in the Board of
Directors caused by any such removal shall be filled at such meeting by the
stockholders entitled to vote for the election of the Director so removed.
Section 2.12. Vacancies and Newly Created Directorships. Subject to the
rights of the holders of any series of preferred stock of the Company and except
as provided in Section 2.11, if any vacancies occur in the Board
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of Directors, by reason of death, resignation, removal or otherwise, or if the
authorized number of Directors shall be increased, the Directors then in office
shall continue to act and such vacancies and newly created Directorships may be
filled by a majority of the Directors then in office, although less than a
quorum. A Director elected to fill a vacancy or a newly created Directorship
shall hold office until the next election of the class of Directors for which
such Director has been chosen and until his or her successor has been elected
and qualified or until his or her earlier death, resignation or removal.
Section 2.13. Compensation. Directors may receive such sums for their
services and expenses as may be directed by resolution of the Board; provided
that nothing herein contained shall be construed to preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed like
compensation for their services and expenses.
Section 2.14. Reliance on Accounts and Reports, etc. A Director, or a
member of any committee designated by the Board of Directors shall, in the
performance of his or her duties, be fully protected in relying in good faith
upon the records of the Corporation and upon information, opinions, reports or
statements presented to the Corporation by any of the Corporation's officers or
employees, or committees designated by the Board of Directors, or by any other
person as to the matters the Director or member reasonably believes are within
such other person's professional or expert competence and who has been selected
with reasonable care by or on behalf of the Corporation.
ARTICLE III
COMMITTEES OF DIRECTORS AND ADVISORY BOARD
Section 3.1. Committees of Directors. The Board of Directors may
designate one or more committees, each such committee to consist of one or more
Directors, as fixed from time to time by the Board of Directors. The Board of
Directors may designate one or more Directors as alternate members of any such
committee, who may replace any absent or disqualified member or members at any
meeting of such committee. Thereafter, members (and alternate members, if any)
of each such committee may be designated at the annual meeting of the Board of
Directors. Any such committee may be dissolved or re-designated from time to
time by the Board of Directors. Each member (and each alternate member) of any
such committee (whether designated at an annual meeting of the Board of
Directors or to fill a vacancy or otherwise) shall hold office until his or her
successor shall have been designated or until he or she shall cease to be a
Director, or until his or her earlier death, resignation or removal.
Section 3.2. Proceedings. Any such committee may fix its own rules of
procedure and may meet at such place (within or without the State of Delaware),
at such time and upon such notice, if any, as it shall determine from time to
time. Any such committee shall keep regular minutes of its meetings and report
the same to the Board of Directors at the next meeting of the Board following
such committee meeting, except that when the Board meeting is held within two
days after the committee meeting, such report shall, if not made at the first
meeting, be made to the Board of Directors at its second meeting following such
committee meeting.
Section 3.3. Quorum and Manner of Acting. Except as may be otherwise
provided in the resolution creating such committee, at all meetings of any
committee the presence of members (or alternate members) constituting a majority
of the total authorized membership of such committee shall constitute a quorum
for the transaction of business. The act of the majority of the members present
at any meeting at which a quorum is present shall be the act of such committee.
Any action required or permitted to be taken at any meeting of any such
committee may be taken without a meeting if all members of such committee shall
consent to such action in writing and such writing or writings are filed with
the minutes of the proceedings of the committee. The members of any such
committee shall act only as a committee, and the individual members of such
committee shall have no power as such.
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Section 3.4. Action by Telephonic Communications. Members of any
committee designated by the Board of Directors may participate in a meeting of
such committee by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this provision shall
constitute presence in person at such meeting.
Section 3.5. Absent or Disqualified Members. In the absence or
disqualification of a member of any committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he, she
or they constitute a quorum, may unanimously appoint another member of the Board
of Directors to act at the meeting in the place of any such absent or
disqualified member.
Section 3.6. Resignations. Any member (and any alternate member) of any
committee may resign at any time by delivering a written notice of resignation,
signed by such member, to the Chairman or the President. Unless otherwise
specified therein, such resignation shall take effect upon delivery.
Section 3.7. Removal. Any member (and any alternate member) of any
committee may be removed from his or her position as a member (or alternate
member, as the case may be) of such committee at any time, either for or without
cause, by resolution adopted by a majority of the whole Board of Directors.
Section 3.8. Vacancies. If any vacancy shall occur in any committee, by
reason of disqualification, death, resignation, removal or otherwise, the
remaining members (and any alternate members) shall continue to act, and any
such vacancy may be filled by the Board of Directors.
Section 3.9. Advisory Board. The Board of Directors may, in their sole
discretion, form and appoint persons to an advisory board of the Corporation
(the "Advisory Board") and pay compensation to persons serving on the Advisory
Board. The sole purpose of the Advisory Board shall be to advise the Board of
Directors and the Advisory Board shall have no other powers.
ARTICLE IV
OFFICERS
Section 4.1. Number. The officers of the Corporation shall be
designated by the Board of Directors and shall include such officers as the
Directors may from time to time determine, which officers may (but need not)
include a Chairman of the Board, a Vice Chairman of the Board, a President, one
or more Vice Presidents (and in case of each such Vice President, with such
descriptive title, if any, as the Directors shall deem appropriate), a
Secretary, an Assistant Secretary, and a Treasurer. The Board of Directors also
may elect one or more other officers as the Board of Directors may determine.
Any number of offices may be held by the same person. No officer need be a
Director of the Corporation.
Section 4.2. Election. Officers shall be chosen in such manner and
shall hold their offices for such terms as determined by the Board of Directors.
Each officer shall hold office until his or her successor has been elected and
qualified in his stead, or until his or her earlier death, resignation,
retirement, disqualification, or removal from office.
Section 4.3. Compensation. The Corporation shall have the authority to
pay and provide compensation and other benefits to its officers and employees.
The compensation and benefits of all officers of the Corporation shall be fixed
from time to time by the Board of Directors, unless otherwise delegated by the
Board of Directors to a particular committee or officer.
Section 4.4. Removal and Resignation; Vacancies. Any officer may be
removed for or without cause at any time by the Board of Directors or by the
President, if such powers of removal have been conferred by the Board of
Directors, but such removal shall be without prejudice to the contract rights,
if any, of the person so
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removed. Designation of an officer shall not itself create contract rights. Any
officer may resign at any time by delivering a written notice of resignation,
signed by such officer, to the Board of Directors or the President. Unless
otherwise specified therein, such resignation shall take effect upon delivery.
Any vacancy occurring in any office of the Corporation by death, resignation,
removal or otherwise, shall be filled by the Board of Directors. The Board of
Directors may abolish any office at any time unless prohibited by law or
statute.
Section 4.5. Authority and Duties of Officers. In addition to any
specifically enumerated duties, services, and powers, the officers of the
Corporation shall have such authority and shall exercise such powers and perform
such duties as may be specified by law or statute, by the Certificate of
Incorporation, and by these Bylaws, or as the Board of Directors may from time
to time determine or as may be assigned to such officers by any competent
superior officer. The Board of Directors may also at any time limit or
circumvent the enumerated duties, services and powers of any officer. In
addition to the designation of officers and the enumeration of their respective
duties, services and powers, the Board of Directors may grant powers of
attorneys to individuals to act as agent for or on behalf of the Corporation, to
do any act which would be binding on the Corporation, to incur any expenditures
on behalf of or for the Corporation, or to execute, deliver and perform any
agreements, acts, transactions or other matters on behalf of the Corporation.
Such powers of attorney may be revoked or modified as deemed necessary by the
Board of Directors.
Section 4.6. Chairman of the Board. The Chairman of the Board shall, if
one is designated by the Board of Directors and if present, preside at all
meetings of the stockholders and of the Board of Directors and exercise and
perform such other powers and duties as may be from time to time assigned by the
Board of Directors. He shall assist the Directors in the formulation of the
policies of the Corporation, and shall be available to other officers for
consultation and advice.
Section 4.7. Vice Chairman of the Board. The Vice Chairman of the
Board, if one is designated by the Board of Directors, shall, in the absence of
the Chairman of the Board, preside at all meetings of the stockholders and of
the Board of Directors and exercise and perform such other powers and duties as
may be from time to time assigned by the Board of Directors.
Section 4.8. President. The President, if one is designated by the
Board of Directors, shall be the Chief Executive Officer of the Corporation and
shall have day-to-day supervision of the affairs of the Corporation, such powers
and duties subject at all times to the authority of the Board of Directors. In
the absence or disability of the Chairman of the Board and the Vice Chairman of
the Board, the President shall exercise the powers and perform the duties of the
Chairman of the Board.
Section 4.9. Vice Presidents. Each Vice President that is designated by
the Board of Directors shall generally assist the President and shall have such
powers and perform such duties and services as shall from time to time be
prescribed or delegated to him by the President or the Board of Directors.
Section 4.10. Secretary. The Secretary, if one is designated by the
Board of Directors, shall have the following powers and duties:
(a) He or she shall keep or cause to be kept a record of all the
proceedings of the meetings of the stockholders and of the Board of Directors in
books provided for that purpose.
(b) He or she shall cause all notices to be duly given in
accordance with the provisions of these Bylaws and as required by law.
(c) Whenever any committee shall be appointed pursuant to a
resolution of the Board of Directors, he or she shall furnish a copy of such
resolution to the members of such committee.
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(d) He or she shall be the custodian of the records and of the
seal of the Corporation and cause such seal (or a facsimile thereof) to be
affixed to all certificates representing shares of the Corporation prior to the
issuance thereof and to all instruments the execution of which on behalf of the
Corporation under its seal shall have been duly authorized in accordance with
these Bylaws, and when so affixed he or she may attest the same.
(e) He or she shall properly maintain and file all books, reports,
statements, certificates and all other documents and records required by law,
the Certificate of Incorporation or these Bylaws.
(f) He or she shall have charge of the stock books and ledgers of
the Corporation and shall cause the stock and transfer books to be kept in such
manner as to show at any time the number of shares of stock of the Corporation
of each class issued and outstanding, the names (alphabetically arranged) and
the addresses of the holders of record of such shares, the number of shares held
by each holder and the date as of which each became such holder of record.
(g) He or she shall sign (unless the Treasurer, an Assistant
Treasurer or an Assistant Secretary shall have signed) certificates representing
shares of the Corporation the issuance of which shall have been authorized by
the Board of Directors.
(h) He or she shall perform, in general, all duties incident to
the office of Secretary and such other duties as may be specified in these
Bylaws or as may be assigned to him or her from time to time by the Board of
Directors or the President.
Section 4.11. Assistant Secretary. The Assistant Secretary, if one is
designated by the Board of Directors, shall generally assist the Secretary.
Section 4.12. Treasurer. The Treasurer, if one is designated by the
Board of Directors, shall be the chief accounting and financial officer of the
Corporation and have custody of all the funds, securities and other valuables of
the Corporation which may have or shall come into his or her hands. The
Treasurer shall have active control of and shall be responsible for all matters
pertaining to the accounts and finances of the Corporation and shall have such
powers and perform such duties as may be prescribed by the President, the Board
of Directors or elsewhere in these Bylaws.
Section 4.13. Additional Officers. The Board of Directors may appoint
such other officers and agents as it may deem appropriate, and such other
officers and agents shall hold their offices for such terms and shall exercise
such powers and perform such duties as may be determined from time to time by
the Board of Directors. The Board of Directors from time to time may delegate to
the President the power to appoint subordinate officers or agents and to
prescribe their respective rights, terms of office, authorities and duties. Any
such officer or agent may remove any such subordinate officer or agent appointed
by him or her, for or without cause.
Section 4.12. Security. The Board of Directors may require any officer,
agent or employee of the Corporation to provide security for the faithful
performance of his or her duties, in such amount and of such character as may be
determined from time to time by the Board of Directors.
ARTICLE V
CAPITAL STOCK
Section 5.1. Certificates of Stock, Uncertificated Shares. The shares
of the Corporation shall be represented by certificates, provided that the Board
of Directors may provide by resolution or resolutions that some or all of any or
all classes or series of the stock of the Corporation shall be uncertificated
shares. Any such resolution shall not apply to shares represented by a
certificate until each certificate is surrendered to the Corporation.
Notwithstanding the adoption of such a resolution by the Board of Directors,
every holder of stock in
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the Corporation represented by certificates and upon request every holder of
uncertificated shares shall be entitled to have a certificate signed by, or in
the name of the Corporation, by the President or a Vice President, and by the
Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary,
representing the number of shares registered in certificate form. Such
certificate shall be in such form as the Board of Directors may determine, to
the extent consistent with applicable law, the Certificate of Incorporation and
these Bylaws.
Section 5.2. Signatures; Facsimile. All of such signatures on the
certificate referred to in Section 5.1 of these Bylaws may be a facsimile,
engraved or printed, to the extent permitted by law. In case any officer,
transfer agent or registrar who has signed, or whose facsimile signature has
been placed upon a certificate shall have ceased to be such officer, transfer
agent or registrar before such certificate is issued, it may be issued by the
Corporation with the same effect as if he or she were such officer, transfer
agent or registrar at the date of issue.
Section 5.3. Lost, Stolen or Destroyed Certificates. The Corporation
may direct that a new certificate be issued in place of any certificate
theretofore issued by the Corporation alleged to have been lost, stolen or
destroyed, upon delivery to the Corporation of an affidavit of the owner or
owners of such certificate, setting forth such allegation. The Corporation may
require the owner of such lost, stolen or destroyed certificate, or his or her
legal representative, to give the Corporation a bond sufficient to indemnify it
against any claim that may be made against it on account of the alleged loss,
theft or destruction of any such certificate or the issuance of any such new
certificate.
Section 5.4. Transfer of Stock. Upon surrender to the Corporation or
the transfer agent of the Corporation of a certificate for shares, duly endorsed
or accompanied by appropriate evidence of succession, assignment or authority to
transfer, the Corporation shall issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
Within a reasonable time after the transfer of uncertificated stock, the
Corporation shall send to the registered owner thereof a written notice
containing the information required to be set forth or stated on certificates
pursuant to Sections 151, 156, 202(a) or 218(a) of the Delaware General
Corporation Law. Subject to the provisions of the Certificate of Incorporation
and these Bylaws, the Board of Directors may prescribe such additional rules and
regulations as it may deem appropriate relating to the issue, transfer and
registration of shares of the Corporation.
Section 5.5. Record Date. In order to determine the stockholders
entitled to notice of, or entitled to vote at, any meeting of stockholders or
any adjournment thereof, the Board of Directors may fix in advance a record
date, which record date shall not precede the date on which the resolution
fixing the record date is adopted by the Board of Directors, and which shall not
be more than sixty nor less than ten days before the date of such meeting. A
determination of stockholders of record entitled to notice of or entitled to
vote at a meeting of stockholders shall apply to any adjournment of the meeting,
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
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In order that the Corporation may determine the stockholders entitled
to receive payment of any dividend or other distribution or allotment of any
rights of the stockholders entitled to exercise any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action, the Board of Directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall be not more than sixty days prior to such
action. If no record date is fixed, the record date for determining stockholders
for any such purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto.
Section 5.6. Registered Stockholders. Prior to due surrender of a
certificate for registration of transfer, the Corporation may treat the
registered owner as the person exclusively entitled to receive dividends and
other distributions, to vote, to receive notice and otherwise to exercise all
the rights and powers of the owner of the shares represented by such
certificate, and the Corporation shall not be bound to recognize any equitable
or legal claim to or interest in such shares on the part of any other person,
whether or not the Corporation shall have notice of such claim or interests.
Whenever any transfer of shares shall be made for collateral security, and not
absolutely, it shall be so expressed in the entry of the transfer if, when the
certificates are presented to the Corporation for transfer or uncertificated
shares are requested to be transferred, both the transferor and transferee
request the Corporation to do so.
Section 5.7. Transfer Agent and Registrar. The Board of Directors may
appoint one or more transfer agents and one or more registrars, and may require
all certificates representing shares to bear the signature of any such transfer
agents or registrars.
ARTICLE VI
INDEMNIFICATION
Section 6.1. Nature of Indemnity. The Corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding (a "Proceeding"),
whether civil, criminal, administrative, arbitrative, or investigative, or any
appeal in such a Proceeding or any inquiry or investigation that could lead to
such a Proceeding, by reason of the fact that he or she, or a person of whom he
or she is the legal representative, is or was or has agreed to become a Director
or officer of the Corporation, or is or was serving or has agreed to serve at
the request of the Corporation as a director, officer, partner, venturer,
proprietor, trustee, employee, agent, or similar functionary of another foreign
or domestic corporation, limited liability company, partnership, joint venture,
sole proprietorship, trust, employee benefit plan, or other enterprise, or by
reason of any action alleged to have been taken or omitted in such capacity,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him or her or on his or her
behalf in connection with such action, suit or proceeding and any appeal
therefrom, provided that he or she acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding had no
reasonable cause to believe his or her conduct was unlawful. The indemnification
provided in this Article VI could involve indemnification for negligence or
under theories of strict liability. In the case of an action or suit by or in
the right of the Corporation to procure a judgment in its favor (1) the
indemnification of a Director or officer shall be limited to expenses (including
attorneys' fees) actually and reasonably incurred by such person in the defense
or settlement of such action or suit, and (2) no indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Corporation unless and only to the extent that the
Delaware Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Delaware Court of
Chancery or such other court shall deem proper. Notwithstanding the foregoing,
but subject to Section 6.5 of these Bylaws, the Corporation shall not be
obligated to indemnify a Director or officer of the Corporation in respect of a
Proceeding (or part thereof) instituted by such Director or officer, unless such
Proceeding (or part thereof) has been authorized by the Board of Directors.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he or she reasonably believed to be in or not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his or her
conduct was unlawful.
The rights granted pursuant to this Article VI shall be deemed contract
rights. No amendment, modification or repeal of this Article VI shall have the
effect of limiting or denying any such rights with respect to actions taken or
Proceedings arising prior to any such amendment, modification or repeal.
Section 6.2. Successful Defense. To the extent that a Director,
officer, employee or agent of the Corporation has been successful on the merits
or otherwise in defense of any action, suit or proceeding referred to in
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Section 6.1 of these Bylaws or in defense of any claim, issue or matter therein,
he or she shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him or her in connection therewith.
Section 6.3. Determination that Indemnification is Proper. Any
indemnification of a Director or officer of the Corporation under Section 6.1 of
these Bylaws (unless ordered by a court) shall be made by the Corporation unless
a determination is made that indemnification of the Director or officer is not
proper in the circumstances because he or she has not met the applicable
standard of conduct set forth in Section 6.1 of these Bylaws. Any such
determination shall be made (1) by a majority vote of the Directors who are not
parties to such action, suit or proceeding, even though less than a quorum, or
(2) if there are no such Directors, or if such Directors so direct, by
independent legal counsel in a written opinion, or (3) by the stockholders.
Section 6.4. Advance Payment of Expenses. The right to indemnification
conferred in this Article VI shall include the right to be paid or reimbursed by
the Corporation the reasonable expenses incurred by a person of the type
entitled to be indemnified under Sections 6.1, 6.2, and 6.3 who was, is, or is
threatened to be made a named defendant or respondent in a Proceeding in advance
of the final disposition of the Proceeding and without any determination as to
the person's ultimate entitlement to indemnification; provided, however, that
the payment of such expenses incurred by any such person in advance of the final
disposition of a Proceeding shall be made only upon delivery to the Corporation
of a written affirmation by such Director or officer of his or her good faith
belief that he has met the standard of conduct necessary for indemnification
under this Article VI and a written undertaking, by or on behalf of such person,
to repay all amounts so advanced if it shall ultimately be determined that such
indemnified person is not entitled to be indemnified under this Article VI or
otherwise. The Board of Directors may authorize the Corporation's counsel to
represent such Director, officer, employee or agent in any action, suit or
proceeding, whether or not the Corporation is a party to such action, suit or
proceeding.
Section 6.5. Procedure for Indemnification of Directors and Officers.
Any indemnification of a Director or officer of the Corporation under Sections
6.1, 6.2, and 6.3 of these Bylaws, or advance of costs, charges and expenses to
a Director or officer under Section 6.4 of these Bylaws, shall be made promptly,
and in any event within thirty days, upon the written request of the Director or
officer. If a determination by the Corporation that the Director or officer is
entitled to indemnification pursuant to this Article is required, and the
Corporation fails to respond within sixty days to a written request for
indemnity, the Corporation shall be deemed to have approved such request. If the
Corporation denies a written request for indemnity or advancement of expenses,
in whole or in part, or if payment in full pursuant to such request is not made
within thirty days, the right to indemnification or advances as granted by this
Article shall be enforceable by the Director or officer in any court of
competent jurisdiction. Such person's costs and expenses incurred in connection
with successfully establishing his or her right to indemnification, in whole or
in part, in any such action shall also be indemnified by the Corporation. It
shall be a defense to any such action (other than an action brought to enforce a
claim for the advance of costs, charges and expenses under Section 6.4 of these
Bylaws where the required undertaking, if any, has been received by or tendered
to the Corporation) that the claimant has not met the standard of conduct set
forth in Section 6.1 of these Bylaws, but the burden of proving such defense
shall be on the Corporation. Neither the failure of the Corporation (including
its Board of Directors, its independent legal counsel, and its stockholders) to
have made a determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances because he or she
has met the applicable standard of conduct set forth in Section 6.1 of these
Bylaws, nor the fact that there has been an actual determination by the
Corporation (including its Board of Directors, its independent legal counsel,
and its stockholders) that the claimant has not met such applicable standard of
conduct, shall be a defense to such action or create a presumption that the
claimant has not met the applicable standard of conduct.
Section 6.6. Survival; Preservation of Other Rights. The foregoing
indemnification provisions shall be deemed to be a contract between the
Corporation and each Director, officer, employee and agent who serves in any
such capacity at any time while these provisions as well as the relevant
provisions of the Delaware General Corporation Law are in effect and any repeal
or modification thereof shall not affect any right or obligation then existing
with respect to any state of facts then or previously existing or any action,
suit or proceeding previously or thereafter brought or threatened based in whole
or in part upon any such state of facts. Such a "contract right" may not be
modified retroactively without the consent of such Director, officer, employee
or agent.
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The indemnification and the advancement and payment of expenses
provided by this Article VI shall not be deemed exclusive of any other rights to
which those indemnified may be entitled under any Bylaw, common or statutory
law, provision of the Certificate of Incorporation, agreement, vote of
stockholders or disinterested Directors or otherwise, both as to action in his
or her official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a Director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
Section 6.7. Insurance. The Corporation shall purchase and maintain
insurance, at its expense, to protect the Corporation and any person who is or
was or has agreed to become a Director, officer, employee, or agent of the
Corporation, or is or was serving at the request of the Corporation as a
Director, officer, partner, venturer, proprietor, trustee, employee, agent, or
similar functionary of another foreign or domestic corporation, limited
liability company, partnership, joint venture, sole proprietorship, trust,
employee benefit plan, or other enterprise against any expense, liability, or
loss asserted against him or her or incurred by him or her or on his or her
behalf in any such capacity, or arising out of his or her status as such,
whether or not the Corporation would have the power to indemnify him or her
against such liability under the provisions of this Article, provided that such
insurance is available on acceptable terms, which determination shall be made by
a vote of a majority of the entire Board of Directors.
Section 6.8. Severability. If this Article VI or any portion hereof
shall be invalidated on any ground by any court of competent jurisdiction, then
the Corporation shall nevertheless indemnify and hold harmless each Director or
officer or any other person indemnified pursuant to this Article VI as to costs,
charges and expenses (including reasonable attorneys' fees), judgments, fines
and amounts paid in settlement with respect to any action, suit or proceeding,
whether civil, criminal, administrative or investigative to the full extent
permitted by any applicable portion of this Article VI that shall not have been
invalidated and to the fullest extent permitted by applicable law.
Section 6.9. Limitation on Liability. No Director or officer shall be
personally liable, as such, for any action taken or omitted from being taken
unless: (i) such Director or officer breached or failed to perform the duties of
his office; and (ii) the breach or failure to perform constituted recklessness,
self-dealing or willful misconduct. The foregoing shall not apply to any
responsibility or liability under a criminal statute or liability for the
payment of taxes under Federal, state, or local law.
Section 6.10. Appearance as a Witness. Notwithstanding any other
provision of this Article VI, the Corporation shall pay or reimburse expenses
incurred by a Director or officer in connection with his appearance as a witness
or other participation in a Proceeding at a time when he is not a named
defendant or respondent in the Proceeding.
Section 6.11. Indemnification of Employees and Agents. The Corporation,
by adoption of a resolution of the Board of Directors, may indemnify and advance
expenses to an employee or agent of the Corporation to the same extent and
subject to the same conditions under which it may indemnify and advance expenses
to Directors and officers under this Article VI; and, the Corporation may
indemnify and advance expenses to persons who are not or were not Directors,
officers, employees or agents of the Corporation but who are or were serving at
the request of the Corporation as director, officer, partner, venturer,
proprietor, trustee, employee, agent or similar functionary of another foreign
or domestic corporation, limited liability company, partnership, joint venture,
sole proprietorship, trust, employee benefit plan or other enterprise against
any liability asserted against him or her and incurred by him or her in such a
capacity or arising out of his or her status as such a person to the same extent
that it may indemnify and advance expenses to Directors and officers of the
Corporation under this Article VI.
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ARTICLE VII
OFFICES
Section 7.1. Registered Office and Agent. The registered agent and
office of the Corporation in the State of Delaware shall be The Corporation
Trust Company, located at 1209 Orange Street, in the City of Wilmington, County
of New Castle (19801) or such other agent and office (which need not be a place
of business of the company) as the Board of Directors may designate from time to
time in the manner provided by law.
Section 7.2. Other Offices. The Corporation may maintain offices or
places of business at such other locations within or without the State of
Delaware as the Board of Directors may from time to time determine or as the
business of the Corporation may require.
ARTICLE VIII
GENERAL PROVISIONS
Section 8.1. Dividends. Subject to any applicable provisions of law and
the Certificate of Incorporation, dividends upon the shares of the Corporation
may be declared by the Board of Directors at any regular or special meeting of
the Board of Directors and any such dividend may be paid in cash, property, or
shares of the Corporation's capital stock.
Section 8.2. Reserves. There may be set aside out of any funds of the
Corporation available for dividends such sum or sums as the Board of Directors
from time to time, in its absolute discretion, thinks proper as a reserve or
reserves to meet contingencies, or for equalizing dividends, or for repairing or
maintaining any property of the Corporation or for such other purpose as the
Board of Directors shall think conducive to the interest of the Corporation, and
the Board of Directors may similarly modify or abolish any such reserve.
Section 8.3. Execution of Instruments. The President, any Vice
President, the Secretary or the Treasurer may enter into any contract or execute
and deliver any instrument in the name and on behalf of the Corporation. The
Board of Directors or the President may authorize any other officer or agent to
enter into any contract or execute and deliver any instrument in the name and on
behalf of the Corporation. Any such authorization may be general or limited to
specific contracts or instruments.
Section 8.4. Deposits. Any funds of the Corporation may be deposited
from time to time in such banks, trust companies or other depositories as may be
determined by the Board of Directors or the President, or by such officers or
agents as may be authorized by the Board of Directors or the President to make
such determination.
Section 8.5. Checks. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such agent or agents
of the Corporation, and in such manner, as the Board of Directors or the
President from time to time may determine.
Section 8.6. Sale, Transfer, etc. of Securities. To the extent
authorized by the Board of Directors or by the President, any Vice President,
the Secretary or the Treasurer or any other officers designated by the Board of
Directors or the President may sell, transfer, endorse, and assign any shares of
stock, bonds or other securities owned by or held in the name of the
Corporation, and may make, execute and deliver in the name of the Corporation,
under its corporate seal, any instruments that may be appropriate to effect any
such sale, transfer, endorsement or assignment.
Section 8.7. Voting as Stockholder. Unless otherwise determined by
resolution of the Board of Directors, the President or any Vice President shall
have full power and authority on behalf of the Corporation to attend any meeting
of stockholders of any corporation in which the Corporation may hold stock and
to act, vote (or
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execute proxies to vote) and exercise in person or by proxy all other rights,
powers and privileges incident to the ownership of such stock. Such officers
acting on behalf of the Corporation shall have full power and authority to
execute any instrument expressing consent to or dissent from any action of any
such corporation without a meeting. The Board of Directors may by resolution
from time to time confer such power and authority upon any other person or
persons.
Section 8.8. Fiscal Year. The fiscal year of the Corporation shall
commence on the first day of January of each year (except for the Corporation's
first fiscal year which shall commence on the date of incorporation) and shall
terminate in each case on December 31.
Section 8.9. Seal. The seal of the Corporation shall be circular in
form, and shall contain the name of the Corporation, the year of its
incorporation and the words "Corporate Seal" and "Delaware." The form of such
seal shall be subject to alteration by the Board of Directors. The seal may be
used by causing it or a facsimile thereof to be impressed, affixed or
reproduced, or may be used in any other lawful manner.
Section 8.10. Books and Records; Inspection. Except to the extent
otherwise required by law, the books and records of the Corporation shall be
kept at such place or places within or without the State of Delaware as may be
determined from time to time by the Board of Directors.
ARTICLE IX
AMENDMENT OF BYLAWS
Section 9.1. Amendment. Subject to any express provision in the
Certificate of Incorporation to the contrary, these Bylaws may be amended,
altered or repealed:
(a) by resolution adopted by a majority of the Board of Directors
at any special or regular meeting of the Board of Directors without the assent
or vote of the stockholders of the Corporation if, in the case of such special
meeting only, notice of such amendment, alteration or repeal is contained in the
notice or waiver of notice of such meeting; or
(b) at any regular or special meeting of the stockholders upon the
affirmative vote of not less a majority of the holders of the combined voting
power of the outstanding shares of the Corporation entitled to vote generally in
the election of Directors if, in the case of such special meeting only, notice
of such amendment, alteration or repeal is contained in the notice or waiver of
notice of such meeting.
ARTICLE X
CONSTRUCTION
Section 10.1. Construction. In the event of any conflict between the
provisions of these Bylaws as in effect from time to time and the provisions of
the Certificate of Incorporation of the Corporation as in effect from time to
time, the provisions of such Certificate of Incorporation shall be controlling.
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ANNEX IV
NEW JERSEY BUSINESS CORPORATION ACT
TITLE 14A. CORPORATIONS, GENERAL
CHAPTER 11. RIGHTS OF DISSENTING SHAREHOLDERS
14A:11-1. Right Of Shareholders To Dissent.
(1) Any shareholder of a domestic corporation shall have the right to
dissent from any of the following corporate actions
(a) Any plan of merger or consolidation to which the corporation is a
party, provided that, unless the certificate of incorporation otherwise
provides
(i) a shareholder shall not have the right to dissent from any
plan of merger or consolidation with respect to shares
(A) of a class or series which is listed on a national
securities exchange or is held of record by not less than 1,000
holders on the record date fixed to determine the shareholders
entitled to vote upon the plan of merger or consolidation; or
(B) for which, pursuant to the plan of merger or
consolidation, he will receive (x) cash, (y) shares, obligations
or other securities which, upon consummation of the merger or
consolidation, will either be listed on a national securities
exchange or held of record by not less than 1,000 holders, or (z)
cash and such securities;
(ii) a shareholder of a surviving corporation shall not have the
right to dissent from a plan of merger, if the merger did not require
for its approval the vote of such shareholders as provided in section
14A:10-5.1 or in subsection 14A:10-3(4), 14A:10-7(2) or 14A:10-7(4);
or
(b) Any sale, lease, exchange or other disposition of all or
substantially all of the assets of a corporation not in the usual or
regular course of business as conducted by such corporation, other than a
transfer pursuant to subsection (4) of N.J.S.14A:10-11, provided that,
unless the certificate of incorporation otherwise provides, the shareholder
shall not have the right to dissent.
(i) with respect to shares of a class or series which, at the
record date fixed to determine the shareholders entitled to vote upon
such transaction, is listed on a national securities exchange or is
held of record by not less than 1,000 holders; or
(ii) from a transaction pursuant to a plan of dissolution of the
corporation which provides for distribution of substantially all of
its net assets to shareholders in accordance with their respective
interests within one year after the date of such transaction, where
such transaction is wholly for
(A) cash; or
(B) shares, obligations or other securities which, upon
consummation of the plan of dissolution will either be listed on
a national securities exchange or held of record by not less than
1,000 holders; or
(C) cash and such securities; or
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(iii) from a sale pursuant to an order of a court having
jurisdiction.
(2) Any shareholder of a domestic corporation shall have the right to
dissent with respect to any shares owned by him which are to be acquired
pursuant to section 14A:10-9.
(3) A shareholder may not dissent as to less than all of the shares owned
beneficially by him and with respect to which a right of dissent exists. A
nominee or fiduciary may not dissent on behalf of any beneficial owner as to
less than all of the shares of such owner with respect to which the right of
dissent exists.
(4) A corporation may provide in its certificate of incorporation that
holders of all its shares, or of a particular class or series thereof, shall
have the right to dissent from specified corporate actions in addition to those
enumerated in subsection 14A:11-1(1), in which case the exercise of such right
of dissent shall be governed by the provisions of this Chapter.
14A:11-2. Notice of Dissent; Demand for Payment; Endorsement of Certificates.
(1) Whenever a vote is to be taken, either at a meeting of shareholders or
upon written consents in lieu of a meeting pursuant to section 14A:5-6, upon a
proposed corporate action from which a shareholder may dissent under section
14A:11-1, any shareholder electing to dissent from such action shall file with
the corporation before the taking of the vote of the shareholders on such
corporate action, or within the time specified in paragraphs 14A:5-6(2)(b) or
14A:5-6(2)(c), as the case may be, if no meeting of shareholders is to be held,
a written notice of such dissent stating that he intends to demand payment for
his shares if the action is taken.
(2) Within 10 days after the date on which such corporate action takes
effect, the corporation, or, in the case of a merger or consolidation, the
surviving or new corporation, shall give written notice of the effective date of
such corporate action, by certified mail to each shareholder who filed written
notice of dissent pursuant to subsection 14A:11-2(1), except any who voted for
or consented in writing to the proposed action.
(3) Within 20 days after the mailing of such notice, any shareholder to
whom the corporation was required to give such notice and who has filed a
written notice of dissent pursuant to this section may make written demand on
the corporation, or, in the case of a merger or consolidation, on the surviving
or new corporation, for the payment of the fair value of his shares.
(4) Whenever a corporation is to be merged pursuant to section 14A:10-5.1
or subsection 14A:10-7(4) and shareholder approval is not required under
subsections 14A:10-5.1(5) and 14A:10-5.1(6), a shareholder who has the right to
dissent pursuant to section 14A:11-1 may, not later than 20 days after a copy or
summary of the plan of such merger and the statement required by subsection
14A:10-5.1(2) is mailed to such shareholder, make written demand on the
corporation or on the surviving corporation, for the payment of the fair value
of his shares.
(5) Whenever all the shares, or all the shares of a class or series, are to
be acquired by another corporation pursuant to section 14A:10-9, a shareholder
of the corporation whose shares are to be acquired may, not later than 20 days
after the mailing of notice by the acquiring corporation pursuant to paragraph
14A:10-9(3)(b), make written demand on the acquiring corporation for the payment
of the fair value of his shares.
(6) Not later than 20 days after demanding payment for his shares pursuant
to this section, the shareholder shall submit the certificate or certificates
representing his shares to the corporation upon which such demand has been made
for notation thereon that such demand has been made, whereupon such certificate
or certificates shall be returned to him. If shares represented by a certificate
on which notation has been made shall be transferred, each new certificate
issued therefor shall bear similar notation, together with the name of the
original dissenting holder of such shares, and a transferee of such shares shall
acquire by such transfer no rights in the corporation other than those which the
original dissenting shareholder had after making a demand for payment of the
fair value thereof.
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(7) Every notice or other communication required to be given or made by a
corporation to any shareholder pursuant to this Chapter shall inform such
shareholder of all dates prior to which action must be taken by such shareholder
in order to perfect his rights as a dissenting shareholder under this Chapter.
14A:11-3. "Dissenting Shareholder" Defined; Date for Determination of Fair
Value.
(1) shareholder who has made demand for the payment of his shares in the
manner prescribed by subsection 14A:11-2(3), 14A:11-2(4) or 14A:11-2(5) is
hereafter in this Chapter referred to as a "dissenting shareholder."
(2) Upon making such demand, the dissenting shareholder shall cease to have
any of the rights of a shareholder except the right to be paid the fair value of
his shares and any other rights of a dissenting shareholder under this Chapter.
(3) "Fair value" as used in this Chapter shall be determined
(a) As of the day prior to the day of the meeting of shareholders
at which the proposed action was approved or as of the day prior to
the day specified by the corporation for the tabulation of consents to
such action if no meeting of shareholders was held; or
(b) In the case of a merger pursuant to section 14A:10-5.1 or
subsection 14A:10-7(4) in which shareholder approval is not required,
as of the day prior to the day on which the board of directors
approved the plan of merger; or
(c) In the case of an acquisition of all the shares or all the
shares of a class or series by another corporation pursuant to section
14A:10-9, as of the day prior to the day on which the board of
directors of the acquiring corporation authorized the acquisition, or,
if a shareholder vote was taken pursuant to section 14A:10-12, as of
the day provided in paragraph 14A:11-3(3)(a).
In all cases, "fair value" shall exclude any appreciation or
depreciation resulting from the proposed action.
14A:11-4. Termination of Right of Shareholder to be Paid the Fair Value of His
Shares.
(1) The right of a dissenting shareholder to be paid the fair value of his
shares under this Chapter shall cease if
(a) he has failed to present his certificates for notation as
provided by subsection 14A:11-2(6), unless a court having
jurisdiction, for good and sufficient cause shown, shall otherwise
direct;
(b) his demand for payment is withdrawn with the written consent
of the corporation;
(c) the fair value of the shares is not agreed upon as provided
in this Chapter and no action for the determination of fair value by
the Superior Court is commenced within the time provided in this
Chapter;
(d) the Superior Court determines that the shareholder is not
entitled to payment for his shares;
(e) the proposed corporate action is abandoned or rescinded; or
(f) a court having jurisdiction permanently enjoins or sets aside
the corporate action.
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(2) In any case provided for in subsection 14A:11-4(1), the rights of the
dissenting shareholder as a shareholder shall be reinstated as of the date of
the making of a demand for payment pursuant to subsections 14A:11-2(3),
14A:11-2(4) or 14A:11-2(5) without prejudice to any corporate action which has
taken place during the interim period. In such event, he shall be entitled to
any intervening preemptive rights and the right to payment of any intervening
dividend or other distribution, or, if any such rights have expired or any such
dividend or distribution other than in cash has been completed, in lieu thereof,
at the election of the board, the fair value thereof in cash as of the time of
such expiration or completion.
14A:11-5. Rights of Dissenting Shareholder.
(1) A dissenting shareholder may not withdraw his demand for payment of the
fair value of his shares without the written consent of the corporation.
(2) The enforcement by a dissenting shareholder of his right to receive
payment for his shares shall exclude the enforcement by such dissenting
shareholder of any other right to which he might otherwise be entitled by virtue
of share ownership, except as provided in subsection 14A:11-4(2) and except that
this subsection shall not exclude the right of such dissenting shareholder to
bring or maintain an appropriate action to obtain relief on the ground that such
corporate action will be or is ultra vires, unlawful or fraudulent as to such
dissenting shareholder.
14A:11-6. Determination of Fair Value by Agreement.
(1) Not later than 10 days after the expiration of the period within which
shareholders may make written demand to be paid the fair value of their shares,
the corporation upon which such demand has been made pursuant to subsections
14A:11-2(3), 14A:11-2(4) or 14A:11-2(5) shall mail to each dissenting
shareholder the balance sheet and the surplus statement of the corporation whose
shares he holds, as of the latest available date which shall not be earlier than
12 months prior to the making of such offer and a profit and loss statement or
statements for not less than a 12-month period ended on the date of such balance
sheet or, if the corporation was not in existence for such 12-month period, for
the portion thereof during which it was in existence. The corporation may
accompany such mailing with a written offer to pay each dissenting shareholder
for his shares at a specified price deemed by such corporation to be the fair
value thereof. Such offer shall be made at the same price per share to all
dissenting shareholders of the same class, or, if divided into series, of the
same series.
(2) If, not later than 30 days after the expiration of the 10-day period
limited by subsection 14A:11-6(1), the fair value of the shares is agreed upon
between any dissenting shareholder and the corporation, payment therefor shall
be made upon surrender of the certificate or certificates representing such
shares.
14A:11-7. Procedure on Failure to Agree Upon Fair Value; Commencement of Action
to Determine Fair Value.
(1) If the fair value of the shares is not agreed upon within the 30-day
period limited by subsection 14A:11-6(2), the dissenting shareholder may serve
upon the corporation upon which such demand has been made pursuant to
subsections 14A:11-2(3), 14A:11-2(4) or 14A:11-2(5) a written demand that it
commence an action in the Superior Court for the determination of the fair value
of the shares. Such demand shall be served not later than 30 days after the
expiration of the 30-day period so limited and such action shall be commenced by
the corporation not later than 30 days after receipt by the corporation of such
demand, but nothing herein shall prevent the corporation from commencing such
action at any earlier time.
(2) If a corporation fails to commence the action as provided in subsection
14A:11-7(1), a dissenting shareholder may do so in the name of the corporation,
not later than 60 days after the expiration of the time limited by subsection
14A:11-7(1) in which the corporation may commence such an action.
14A:11-8. Action to Determine Fair Value; Jurisdiction of Court; Appointment of
Appraiser.
In any action to determine the fair value of shares pursuant to this
Chapter:
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(a) The Superior Court shall have jurisdiction and may proceed in
the action in a summary manner or otherwise;
(b) All dissenting shareholders, wherever residing, except those
who have agreed with the corporation upon the price to be paid for
their shares, shall be made parties thereto as an action against their
shares quasi in rem;
(c) The court in its discretion may appoint an appraiser to
receive evidence and report to the court on the question of fair
value, who shall have such power and authority as shall be specified
in the order of his appointment; and
(d) The court shall render judgment against the corporation and
in favor of each shareholder who is a party to the action for the
amount of the fair value of his shares.
14A:11-9. Judgment in Action to Determine Fair Value.
(1) A judgment for the payment of the fair value of shares shall be payable
upon surrender to the corporation of the certificate or certificates
representing such shares.
(2) The judgment shall include an allowance for interest at such rate as
the court finds to be equitable, from the date of the dissenting shareholder's
demand for payment under subsections 14A:11-2(3), 14A:11-2(4) or 14A:11-2(5) to
the day of payment. If the court finds that the refusal of any dissenting
shareholder to accept any offer of payment, made by the corporation under
section 14A:11-6, was arbitrary, vexatious or otherwise not in good faith, no
interest shall be allowed to him.
14A:11-10. Costs and Expenses of Action.
The costs and expenses of bringing an action pursuant to section
14A:11-8 shall be determined by the court and shall be apportioned and assessed
as the court may find equitable upon the parties or any of them. Such expenses
shall include reasonable compensation for and reasonable expenses of the
appraiser, if any, but shall exclude the fees and expenses of counsel for and
experts employed by any party; but if the court finds that the offer of payment
made by the corporation under section 14A:11-6 was not made in good faith, or if
no such offer was made, the court in its discretion may award to any dissenting
shareholder who is a party to the action reasonable fees and expenses of his
counsel and of any experts employed by the dissenting shareholder.
14A:11-11. Disposition of Shares Acquired by Corporation.
(1) The shares of a dissenting shareholder in a transaction described in
subsection 14A:11-1(1) shall become reacquired by the corporation which issued
them or by the surviving corporation, as the case may be, upon the payment of
the fair value of shares.
(2) (Deleted by amendment, P.L.1995, c.279.)
(3) In an acquisition of shares pursuant to section 14A:10-9 or section
14A:10-13, the shares of a dissenting shareholder shall become the property of
the acquiring corporation upon the payment by the acquiring corporation of the
fair value of such shares. Such payment may be made, with the consent of the
acquiring corporation, by the corporation which issued the shares, in which case
the shares so paid for shall become reacquired by the corporation which issued
them and shall be cancelled.
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ANNEX V
RHEOMETRIC SCIENTIFIC, INC.
2000 STOCK OPTION PLAN
SECTION 1. Purpose
The purpose of the Rheometric Scientific, Inc. 2000 Stock Option Plan
(the "Plan) is to attract and retain key employees and consultants, to provide
an incentive for them to assist the Company to achieve long-range performance
goals and to enable them to participate in the long-term growth of the Company,
SECTION 2. Definitions
"Affiliate" means any business entity in which the company owns
directly or indirectly 50% or more of the total combined voting power or has a
significant financial interest as determined by the Board or the Committee.
"Award" means any Option awarded under the Plan.
"Board" means the Board of Directors of the Company.
"Change in Control" means (i) the acquisition, directly or
indirectly, by any person or group (within the meaning of Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act")) of the
beneficial ownership of more than fifty percent (50%) of the outstanding
securities of the Company; (ii) a merger or consolidation in which the Company
is not the surviving entity, except for a transaction in which the principal
purpose is to change the state in which the Company is incorporated; (iii) the
sale, transfer or other disposition of all or substantially all of the assets of
the Company; (iv) a complete liquidation or dissolution of the Company; (v) any
reverse merger in which the Company is the surviving entity but in which
securities possessing more than fifty percent (50%) of the total combined voting
power of the Company's outstanding securities are transferred to a person or
persons different from the persons holding those securities immediately prior to
such merger; or (vi) a change in control of a nature that would be required to
be reported in response to Item 6(a) of Schedule 14A of Regulation 14A
promulgated under the Exchange Act, or any successor provision thereto, whether
or not the Company is then subject to such reporting requirements.
"Company" means Rheometric Scientific, Inc.
"Code" means Internal Revenue Code of 1986, as amended from, time to
time.
"Committee" means the Committee appointed by the Board in accordance
with Section 3 of the Plan. If the Board does not appoint or ceases to maintain
a Committee, the term "Committee" shall refer to the Board.
<PAGE>
"Common Stock" or "Stock" means the Common Stock of the Company.
"Consultant" means any independent contractor retained to perform
services for the Company.
"Continuous Employment" means the absence of any interruption or
termination of service as an Employee, Director or Consultant by the Company or
any Subsidiary. Continuous Employment shall not be considered interrupted during
any period of (i) any leave of absence approved by the Company or (ii) transfers
between locations of the Company or between the Company and any Parent,
Subsidiary or successor of the Company. A leave of absence approved by the
Company shall include sick leave, military leave or any other personal leave
approved by an authorized representative of the Company. For purposes of
Incentive Stock Options, no such leave may exceed ninety (90) days, unless
re-employment upon expiration of such leave is guaranteed by statute or
contract.
"Covered Employee" means any individual whose compensation is subject
to the limitations on tax deductibility provided by Section 162(m) of the Code
and any Treasury Regulations promulgated thereunder in effect at the close of
the taxable year of the Company in which an Option has been granted to such
individual.
"Director" means a director of the Company.
"Designated Beneficiary" means the beneficiary designated by a
Participant in a manner determined by the Board or the Committee, to receive
amounts due or exercise rights of the Participant in the event of the
Participant's death. In the absence of an effective designation by a
Participant, Designated Beneficiary shall mean the Participant's estate.
"Effective Date" means the date on which the Plan is initially
approved by the stockholders in accordance with Section 8(c) of the Plan.
"Employee" means any person, including officers (whether or not they
are directors), employed by the Company or any Subsidiary.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means (i) the closing price of a Share on the
principal exchange on which the Shares are traded, or (ii) if the Shares are not
traded on an exchange but are quoted on the Nasdaq National Market or a
successor quotation system, the closing price of the Nasdaq National Market or
such successor quotation system, (iii) the closing price of a Share as most
recently reported on an inter-dealer quotation system through which shares are
traded (which in the case of the grant of an Option, shall be the closing price
determined under clause (i), (ii) or (iii) on the last trading day prior to the
Grant Date), or (iv) if the Shares are not traded as described in (i), (ii) or
(iii), the fair market value of a Share as determined by the Company's Board of
Directors in good faith, based upon such factors as they deem relevant.
Notwithstanding the preceding, for federal, state and local income tax reporting
purposes, fair market value shall be determined by the Committee in accordance
with uniform and nondiscriminatory standards adopted by it from time to time.
Such determination shall be conclusive and binding on all persons.
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<PAGE>
"Grant Date" means, with respect to an Option, the date that the
Option is granted by the Committee.
"Incentive Stock Option" means an option to purchase shares of Common
Stock awarded to a Participant under Section 6 that is intended to meet the
requirements of Section 422 of the Code or any successor provision.
"Non-Employee Director" means a Director of the Company who qualifies
as a Non-Employee Director as such term is defined in Section 240.16b-3(b)(3) of
the General Rules and Regulations promulgated under the Exchange Act (the
"General Rules and Regulations").
"Non-qualified Stock Option" means an option to purchase shares of
Common Stock under Section 6 that is not intended to be an Incentive Stock
Option.
"Option" means an Incentive Stock Option or a Non-qualified Stock
Option.
"Optionee" means an Employee or Consultant who receives an Option.
"Option Agreement" means a written agreement between the Company and
the Optionee, or a written certificate of the Company containing and confirming
the terms of an Award.
"Outside Director" means a Director of the Company who qualifies as
an Outside Director as such term is used in Section 162(m) of the Code and
defined in any applicable Treasury Regulations promulgated thereunder.
"Parent" means a "parent corporation", whether now or hereafter
existing, as defined in Section 424(e) of the Code.
"Participant" means a person selected by the Board or the Committee
to receive an Award under the Plan.
"Reporting Person" means a person subject to Section 16 of the
Securities Exchange Act of 1934 or any successor provision.
"Section 16(b)" means Section 16(b) of the Securities Exchange
Act of 1934, or any successor.
"Section 162(m) Effective Date" means the first date as of
which the limitations on the tax deductibility of certain compensation provided
by Section 162(m) of the Code and any Treasury Regulations promulgated
thereunder are applicable to Options granted under the Plan.
"Share" means a share of the Common Stock subject to an Option, as
adjusted in accordance with Section 13 of the Plan.
"Subsidiary" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.
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<PAGE>
"Termination of Service" means (a) in the case of an Employee, a
cessation of the employee-employer relationship between an employee and the
Company or an Affiliate for any reason, including, but not by way of limitation,
a termination by resignation, discharge, death, disability or the disaffiliation
of an Affiliate, but excluding any such termination where there is a
simultaneous re-employment by the Company or an Affiliate; and (b) in the case
of a Consultant, a cessation of the service relationship between a Consultant
and the Company or an Affiliate for any reason, including, but not by way of
limitation, a termination by resignation, discharge, death, disability or the
disaffiliation of an Affiliate, but excluding any such termination where there
is a simultaneous re-engagement of the Consultant by the Company or an
Affiliate.
SECTION 3. Administration
(a) The Plan shall be administered by the Board or the Committee. The Board
or the Committee shall have authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the operation of the
Plan as it shall from time to time consider advisable, and to interpret the
provisions of the Plan. The Board's or the Committee's decisions shall be final
and binding. To the extent permitted by applicable law, the Board or the
Committee may delegate to one or more executive officers of the Company the
power to make Awards to Participants who are not Reporting Persons and all
determinations under the Plan with respect thereto, provided that the Board or
the Committee shall fix the maximum amount of such Awards for the group and a
maximum for any one Participant.
(b) Members of the Board or Committee who are either eligible for Options
or have been granted Options may vote on any matters affecting the
administration of the Plan or the grant of Options pursuant to the Plan, except
that no such member shall act upon the granting of an Option to him/herself, but
any such member may be counted in determining the existence of a quorum at any
meeting of the Board or the Committee during which action is taken with respect
to the grant of an Option to him or her.
The Committee shall meet at such times and places and upon such
notice as the chairperson determines. A majority of the Committee shall
constitute a quorum. Any acts by the Committee may be taken at any meeting at
which a quorum is present and shall be by majority vote of those members
entitled to vote. Additionally, any acts reduced to writing or approved in
writing by all of the members of the Committee shall be valid acts of the
Committee.
(c) The Plan shall be administered either by (i) the full Board; or (ii) a
Committee of two (2) or more Directors, each of whom is a Non-Employee Director.
The Board shall take all action necessary to administer the Plan so that all
transactions involving Options and Shares issued pursuant to the Plan shall be
exempt from Section 16(b) of the Exchange Act in accordance with the then
effective provisions of Section 240-16b-3 et. seq. of the General Rules and
Regulations; provided that any amendment to the Plan required for compliance
with such provision shall be made consistent with the provisions of Section 8(d)
of the Plan and the General Rules and Regulations.
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<PAGE>
(d) Notwithstanding subsection (b) and (c) above, after the Section 162(m)
Effective Date, the Plan and all Option grants shall be administered and
approved by a Committee comprised solely of two or more Outside Directors.
SECTION 4. Eligibility
All employees, and in the case of Awards other than Incentive Stock
Options, Consultants of the Company or any Affiliate capable of contributing
significantly to the successful performance of the Company, other than any
person who has irrevocably elected not to be eligible, are eligible to be
Participants in the Plan.
SECTION 5. Stock Available for Awards
(a) Subject to adjustment under subsection (b), Awards may be made under
the Plan for up to 1,000,000 shares of Common Stock. If any Award in respect to
shares of Common Stock expires or is terminated unexercised or is forfeited for
any reason, the shares subject to such Award, to the extent of such expiration,
termination or forfeiture, shall again be available for award under the Plan,
subject, however, in the case of Incentive Stock Options, to any limitation
required under the Code. Shares issued under the Plan may consist in whole or in
part of authorized but unissued shares or treasury shares.
(b) In the event that the Board or the Committee determines that any stock
dividend, extraordinary cash dividend, creation of a class of equity securities,
recapitalization, reorganization, merger, consolidation, split-up, spin-off,
combination, exchange of shares, warrants or rights offering to purchase Common
Stock at a price substantially below market value, or other similar transaction
affects the Common Stock such that an adjustment is required in order to
preserve the benefits or potential benefits intended to be made available under
the Plan, then the Board or the Committee, subject, in the case of Incentive
Stock Options, to any limitation required under the Code, shall equitably adjust
any or all of (i) the number and kind of shares in respect of which Awards may
be made under the Plan, (ii) the number and kind of shares subject to
outstanding Awards, and (iii) the exercise price with respect to any of the
foregoing, and if considered appropriate, the Board or the Committee may make
provision for a cash payment with respect to an outstanding Award, provided that
the number of shares subject to any Award shall always be a whole number.
(c) The maximum number of Shares of Common Stock subject to Options that
may be granted to any Participant in the aggregate in any fiscal year of the
Company shall not exceed 100,000, subject to adjustment under subsection (b).
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<PAGE>
SECTION 6. Stock Options
(a) Subject to the provision of the Plan, the Board or the Committee may
award Incentive Stock Options and Non-qualified Stock Options and determine the
number of Shares to be covered by each Option, the option price therefor and the
conditions and limitations applicable to the exercise of the Option. The terms
and conditions of Incentive Stock Options shall be subject to and comply with
Section 422 of the Code, or any successor provision, and any regulations
thereunder.
(b) Any Option granted hereunder shall be exercisable at such times and
under such conditions as determined by the Committee and as shall be permissible
under the terms of the Plan, which shall be specified in the Option Agreement
evidencing the Option. Unless the Committee specifically determines otherwise at
the time of the grant of the Option, each Option shall vest and become
exercisable, cumulatively, as to one-quarter of the Option Shares at the end of
each calendar year after the Grant Date until all of the Optioned Shares have
vested, subject to the Optionee's Continuous Employment. An Option may not be
exercised for fractional shares or for less than one hundred (100) Shares unless
that is all the shares covered by the Option.
(c) The Board or the Committee shall establish the option price at the time
each Option is awarded, which price shall be not less than 100% of the Fair
Market Value of the Common Stock on the Grant Date in the case of Incentive
Stock Options and not less than 85% of the Fair Market Value of the Common Stock
on the Grant Date in the case of Non-qualified Stock Options.
(d) After the Section 162(m) Effective Date, the exercise price of any
Option granted to a Covered Employee shall be at least equal to the Fair Market
Value of the Shares on the Grant Date.
(e) Each Option shall be exercisable at such times and subject to such
terms and conditions as the Board or the Committee may specify in the applicable
Award or thereafter. The Board or the Committee may impose such conditions with
respect to the exercise of Options, including conditions relating to applicable
federal or state securities laws, as it considers necessary or advisable.
(f) Unless the Committee determines otherwise, the term of each Option
granted under the Plan shall be ten (10) years from the Grant Date. The term of
the Option shall be set forth in the Option Agreement. No Option shall be
exercisable after the expiration of ten (10) years from the Grant Date, provided
that no Incentive Stock Option granted to an Employee who, at the date such
Option is granted owns (within the meaning of Section 424(d) of the Code) more
than ten percent (10%) of the total combined voting power of all classes of the
stock of the Company or any Parent or Subsidiary shall be exercisable after the
expiration of five (5) years from the Grant Date.
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(g) No shares shall be delivered pursuant to any exercise of an Option
until payment in full of the option price therefor is received by the Company.
Such payment may be in whole or part in cash or, to the extent permitted by the
Board or the Committee at or after the award of an Option, as provided in the
relevant Option Agreement, upon the delivery of Shares of Common Stock owned by
the Optionee, or such other lawful consideration as the Board or the Committee
may determine.
(h) The consideration to be paid for the Optioned Shares shall be payment
in cash or by personal check, cashier's check, certified check or wire transfer,
unless payment in some other manner shall be approved by the Board of Directors,
including by promissory note, other shares of the Company's Common stock or such
other consideration and method of payment for the issuance of Optioned Shares as
may be permitted by law. Any cash or other property received by the Company from
the sale of Shares pursuant to the Plan shall constitute part of the general
assets of the Company.
(i) If an Optionee is permitted to exercise an Option by delivering Shares
of the Company's Common Stock, the Option Agreement covering such Option may
include provisions authorizing the Optionee to exercise the Option, in whole or
in part, by (i) delivering whole shares of the Company's Common Stock previously
owned by such Optionee (whether or not acquired through the prior exercise of
stock options) having a Fair Market Value equal to the Option price; or (ii)
directing the Company to withhold from the Shares that would otherwise be issued
upon exercise of the Option that number of whole Shares having a Fair Market
Value equal to the Option price. Shares of the Company's Common Stock so
delivered or withheld shall be valued at the Fair Market Value at the close of
the last business day immediately preceding the date of exercise of the Option,
as determined by the Committee. Any balance of the Option price shall be paid in
cash. Any Shares delivered or withheld in accordance with this provision shall
again become available for purposes of the Plan and for Options subsequently
granted thereunder. Any exercise of an Option by a Section 16 Person shall
comply with the relevant requirements of Section 240.16b-1 et seq. of the
General Rules and Regulations.
(j) The Board or the Committee may provide for the automatic award of an
Option upon the delivery of Shares to the Company in payment of an Option for up
to the number of shares so delivered.
(k) If an Optionee shall cease to be an Employee or Consultant for any
reason other than permanent and total disability or death, he or she may, but
only within ninety (90) days (or such other period of time as is determined by
the Committee and set forth in the Option Agreement) after the date of
Termination of Service, exercise his or her Option to the extent that he or she
was entitled to exercise it at the date of Termination of Service, subject to
the condition that no Option shall be exercised after the expiration of the
Option period.
(l) If an Optionee shall cease to be an Employee or Consultant due to
permanent disability, and such Optionee was in Continuous Employment as an
Employee or Consultant from the Grant Date until the Date of Termination of
Service, the Option may be exercised at any time within twelve (12) months
following the date of Termination of Service (or such other period of time as is
determined by the Committee and set forth in the Option Agreement), but
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<PAGE>
only to the extent of the accrued right to exercise at the time of Termination
of Service subject to the condition that no Option shall be exercised after the
expiration of the Option period.
(m) In the event of the death during the Option period of an Optionee who
is at the time of his or her death an Employee or Consultant and who was in
Continuous Employment as such from the Grant Date until the date of death, the
Option may be exercised at any time within twelve (12) months following the date
of death (or such other period of time as is determined by the Committee and set
forth in the Option Agreement) by the Optionee's estate or by a person who
acquired the right to exercise the Option by bequest, inheritance or otherwise
as a result of the Optionee's death, but only to the extent of the accrued right
to exercise at the time of death, subject to the condition that no Option shall
be exercised after the expiration of the Option period.
SECTION 7. General Provisions Applicable to Awards
(a) Reporting Person Limitations. Notwithstanding any other provision of
the Plan, to the extent required to qualify for the exemption provided by Rule
l6b-3 under Section 16(b), any Option issued under the Plan to a Reporting
Person shall not be transferable other than by will or the laws of descent and
distribution and shall be exercisable during the Participant's lifetime only by
the Participant or the Participant's guardian or legal representative.
(b) Documentation. Each Award under the Plan shall be evidenced by an
Option Agreement specifying the terms and conditions thereof and containing such
other terms and conditions not inconsistent with the provisions of the Plan as
the Board or the Committee considers necessary or advisable to achieve the
purposes of the Plan or comply with applicable tax and regulatory laws and
accounting principles.
(c) Board or Committee Discretion. Each type of Award may be made alone or
in addition to or in relation to any other type of Award. The terms of each type
of Award need not be identical, and the Board or the Committee need not treat
Participants uniformly, except as otherwise provided by the Plan or a particular
Award. Any determination with respect to an Award may be made by the Board or
the Committee at the time of Award or at any time thereafter.
(d) Conditions upon Issuance of Shares. Shares shall not be issued with
respect to an Option granted under the Plan unless the exercise of such Option
and the issuance and delivery of such Shares pursuant thereto shall comply with
all relevant provisions of law, including, without limitation, the Securities
Act, the Exchange Act, the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the Shares may then be listed,
and, if required by the Board or Committee, shall be further subject to the
approval of counsel for the Company with respect to such compliance. As a
condition to the exercise of an Option, the Company may require the person
exercising such Option to represent and warrant at the time of any such exercise
that the Shares are being purchased only for investment and without any present
intention to sell or distribute such Shares if, in the opinion of counsel for
the Company, such a representation is required by any of the aforementioned
relevant provisions of law.
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<PAGE>
(e) Reservation of Shares. During the term of this Plan the Company will at
all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan. The inability of the Company
to obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect to the non-issuance or sale of such Shares as to which such
requisite authority shall not have been obtained.
(f) Change in Control. In order to preserve a Participant's right under an
Award in the event of a Change in Control of the Company, the Board or the
Committee in its discretion may, at the time an Award is made or at any time
thereafter, take one or more of the following actions: (i) provide for the
acceleration of any time period relating to the exercise or realization of the
Award, (ii) provide for the purchase of the Award upon the Participant's request
for an amount of cash or other property that would have been received upon the
exercise or realization of the Award had the Award been currently exercisable
and available for sale, (iii) adjust the terms of the Award in a manner
determined by the Board or the Committee to reflect the Change in Control, (iv)
cause the Award to be assumed, or new rights substituted therefor, by another
entity, or (v) make such other provision as the Board or the Committee may
consider equitable and in the best interests of the Company.
(g) Withholding. The Participant shall pay to the Company, or make
provision satisfactory to the Board or the Committee for payment of, any taxes
required by law to be withheld in respect of Awards under the Plan no later than
the date of the event creating the tax liability. In the Board's or the
Committee's discretion, such tax obligations may be paid in whole or in part in
shares of Common Stock, including Shares retained from the Award creating the
tax obligation, valued at their Fair Market Value on the date of delivery. The
Company and its Affiliates may, to the extent permitted by law, deduct any such
tax obligations from any payment of any kind otherwise due to the participant.
(h) Amendment of Award. The Board or the Committee may amend, modify or
terminate any outstanding Award, including substituting therefor another Award
of the same or a different type, changing the date of exercise, accelerating or
waiving the vesting schedule and converting an Incentive Stock Option to a
Non-qualified Stock Option, provided that the Participant's consent to such
action shall be required unless the Board or the Committee determines that the
action, taking into account any related action, would not materially and
adversely affect the Participant.
- 9 -
<PAGE>
SECTION 8. Miscellaneous
(a) No Right To Employment. No persons shall have any claim or right to be
granted an Award, and the grant of an Award shall not be construed as giving a
Participant the right to continued employment or engagement by the Company. The
Company expressly reserves the right at any time to dismiss a Participant free
from any liability or claim under the Plan, except as expressly provided in the
applicable Award.
(b) No Rights As Stockholder. Subject to the provisions of the applicable
Award, no Participant or Designated Beneficiary shall have any rights as a
Stockholder with respect to any shares of Common Stock to be distributed or
acquired under the Plan until he or she becomes the holder thereof.
(c) Effective Date. Subject to the approval of the Stockholders of the
Company, the Plan shall be effective on the date the Plan is approved by a vote
of the Stockholders. Awards may be made before, but expressly subject to, such
approval.
(d) Amendment of Plan. The Board may amend, suspend or terminate the Plan
or any portion thereof at any time, provided that no amendment shall be made
without Stockholder approval if such approval is necessary to comply with any
applicable tax or regulatory requirement, including any requirement for
exemptive relief under Section 16(b).
(e) Governing Law. The provisions of the Plan shall be governed and
interpreted in accordance with the laws of the State of Delaware.
- 10 -
<PAGE>
PROXY CARD
RHEOMETRIC SCIENTIFIC, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
MAY 31, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
KNOW ALL MEN BY THESE PRESENTS, that the undersigned stockholder of
RHEOMETRIC SCIENTIFIC, INC. (the "Company"), a New Jersey corporation, does
hereby constitute and appoint Robert M. Castello, Merrick G. Andlinger and
Joseph Musanti, or any one of them, with full power to act alone and to
designate substitutes, the true and lawful proxies of the undersigned for and in
the name and stead of the undersigned, to vote all shares of Common Stock of the
Company which the undersigned would be entitled to vote if personally present at
the Annual Meeting of Stockholders to be held at the Company's headquarters, One
Possumtown Road, Piscataway, New Jersey 08854, on May 31, 2000 at 10:00 a.m.,
local time, and at any and all adjournments and postponements thereof (the
"Annual Meeting"), on all matters that may come before such Annual Meeting. Said
proxies are instructed to vote on the following matters in the manner herein
specified.
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE OTHER SIDE)
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2, 3, 4, 5 AND 6.
Please mark your vote as indicated in this example [X]
ITEM 1. ELECTION OF DIRECTORS VOTE FOR ALL* WITHHELD FOR ALL
[ ] [ ]
Nominees:
Robert M. Castello Merrick G. Andlinger
Mark F. Callaghan Richard J. Giacco
David R. Smith Robert K. Prud'homme
* To withhold authority to vote for one or more nominee(s), write the name(s) of
the nominee(s) below:
- ------------------------------------------------------------------------------
ITEM 2. PROPOSAL TO CHANGE THE COMPANY'S STATE OF INCORPORATION
FROM NEW JERSEY TO DELAWARE
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
ITEM 3. PROPOSAL TO INCREASE AUTHORIZED COMMON STOCK
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
ITEM 4. PROPOSAL TO AUTHORIZE AND ISSUE PREFERRED STOCK
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
ITEM 5. PROPOSAL TO APPROVE THE 2000 STOCK OPTION PLAN
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
ITEM 6. RATIFICATION OF INDEPENDENT ACCOUNTANTS
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
ITEM 7. OTHER MATTERS
In their discretion, the proxies are authorized to vote upon such other matters
as may properly come before the Annual Meeting.
IF THIS PROXY IS PROPERLY EXECUTED, THE SHARES OF COMMON STOCK COVERED HEREBY
WILL BE VOTED AS SPECIFIED HEREIN. IF NO SPECIFICATION
<PAGE>
IS MADE, SUCH SHARES WILL BE VOTED "FOR" ITEMS 1, 2, 3, 4, 5 AND 6 AND AS THE
PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE
ANNUAL MEETING.
The undersigned hereby revokes all previous Proxies and acknowledges receipt of
the Notice of Annual Meeting dated May 11, 2000, the Proxy Statement attached
thereto and the Annual Report of the Company for the Fiscal year ended December
31, 1999 forwarded therewith.
Dated: _______________________________, 2000
-------------------------------
Signature
-------------------------------
Signature
Please mark, sign and return this Proxy promptly using the enclosed envelope. If
stock is held in the names of joint owners, each should sign. Persons signing as
an attorney, executor, administrator, guardian, trustee, corporate officer or in
any other fiduciary or representative capacity should give full title.
