SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant |X|
Filed by a Party other than the Registrant | |
Check the appropriate box:
|X| Preliminary Proxy Statement | | Confidential, For Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
| | Definitive Proxy Statement
| | Definitive Additional Materials
| | Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Sel-Drum International, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required
| | Fee computed on table below per Exchange Act Rules 14a-6(i) (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 identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement no.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE>
SEL-DRUM INTERNATIONAL, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JANUARY 6, 1998
The Annual Meeting of Shareholders of SEL-DRUM INTERNATIONAL, INC. (the
"Company") will be held at the Venture Inn Burlington-on-the-Lake, 2020
Lakeshore Road, Burlington, Ontario, Canada L7S 1Y2, on Tuesday, January 6, 1998
at, 3:00 p.m. local time, for the following purposes more fully described in the
accompanying proxy statement:
1. To elect three directors of the Company.
2. To consider and act upon a proposal to approve the reincorporation
of Sel-Drum International, Inc., a Colorado corporation ("Sel-Drum
Colorado"), by merging Sel-Drum Colorado into a newly-formed New
York subsidiary, Sel-Drum International, Inc.
3. To consider and act upon a proposal to approve and ratify the
selection of Mengel, Metzger, Barr & Co. LLP as the Company's
independent auditors for the fiscal year ending July 31, 1998.
4. To transact such other business as may properly come before the
Meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on November 21,
1997 as the record date for the determination of shareholders entitled to notice
of and to vote at the Meeting and any adjournments thereof.
BY ORDER OF THE BOARD OF DIRECTORS
Robert E. Asseltine
CHAIRMAN OF THE BOARD
Dated: December 9, 1997
<PAGE>
SEL-DRUM INTERNATIONAL, INC.
501 AMHERST STREET
BUFFALO, NEW YORK 14207
PROXY STATEMENT
GENERAL INFORMATION
This proxy statement is furnished to shareholders in connection with the
solicitation of proxies by the Board of Directors of Sel-Drum International,
Inc. (the "Company") to be used at the Annual Meeting of Shareholders of the
Company which will be held on Tuesday, January 6, 1998, and at any adjournments
thereof (the "Meeting"). This proxy statement and accompanying form of proxy are
being first mailed to shareholders on or about December 9, 1997. The proxy, when
properly executed and received by the Secretary of the Company prior to the
Meeting, will be voted as therein specified unless revoked by filing with the
Secretary prior to the Meeting a written revocation or a duly executed proxy
bearing a later date. Unless authority to vote for one or more of the director
nominees is specifically withheld according to the instructions, a signed proxy
will be voted FOR the election of the three director nominees named herein and,
unless otherwise indicated, FOR each of the other two proposals described in
this proxy statement and the accompanying notice of meeting.
The cost of soliciting proxies will be borne by the Company. In addition
to solicitation by use of the mails, directors, officers or regular employees of
the Company, without extra compensation, may solicit proxies personally or by
telephone or other telecommunication. The Company has requested persons holding
stock for others in their names or in the names of nominees to forward
soliciting material to the beneficial owners of such shares and will, if
requested, reimburse such persons for their reasonable expenses in so doing.
VOTING
As of November 21, 1997, the record date for the Meeting, there were
7,642,500 shares of the Company's Common Stock, no par value (the "Common
Stock"), issued and outstanding. Only shareholders of record on the books of the
Company at the close of business on November 21, 1997 are entitled to notice of
and to vote at the Meeting.
Each shareholder of record is entitled to one vote for each share of
Common Stock registered in his name. One third of the outstanding Common Stock,
represented in person or by proxy at the Meeting, will constitute a quorum for
the transaction of all business.
Once a quorum is present, Directors will be elected by a plurality of the
votes cast, in person or by proxy, at the Meeting. The affirmative vote of a
majority of the issued and outstanding shares of Common Stock is required for
approval of the proposal to approve the reincorporation of the Company and the
affirmative vote of a majority of the outstanding shares entitled to vote at the
Meeting is required for approval of the other proposal described in this proxy
statement and the accompanying notice of meeting.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth certain information as of December 5, 1997
regarding the Common Stock held by (i) each person known to the Company to be a
record or beneficial owner of more than 5% of the Common Stock, (ii) each
director or nominee of the Company, (iii) each "Named Executive" (see "EXECUTIVE
COMPENSATION"), and (iv) all directors and executive officers of the Company as
a group.
NUMBER OF SHARES PERCENT
NAME AND ADDRESS OF OF COMMON STOCK OF
BENEFICIAL OWNER(1) BENEFICIALLY OWNED (2) CLASS (2)
------------------- ---------------------- ---------
Robert E. Asseltine 1,759,680 (3) 23.02 %
Brian F. Turnbull 4,514,000 (4) 59.06
Brien Murtagh 345,000 4.51
Raymond C. Sparks 250,000 (5) 3.17
Robert M. Orr -0- -
All directors and executive 6,868,680 87.03
officers as a group (6 persons)
(1) The address of such persons is c/o Sel-Drum International, Inc., 501
Amherst Street, Buffalo, New York 14207.
(2) As reported by such persons as of December 5, 1997, with such percentage
based on 7,642,500 shares issued and outstanding, except where the
issuance of shares pursuant to a presently exercisable option indicated in
the other footnote hereto would increase the number of shares owned by
such person and the number of shares outstanding.
(3) Includes 237,000 shares owned of record by Mr. Asseltine's wife.
(4) Shares owned of record by 547118 Ontario Ltd., an Ontario corporation
controlled by Mr. Turnbull.
(5) Includes a presently exercisable option to purchase 250,000 shares of
Common Stock.
ELECTION OF DIRECTORS
Three directors are to be elected by the shareholders at the Meeting, each
to hold office for a term expiring in 1999 or until his successor is duly
elected and qualifies.
The Board of Directors recommends the election of the three nominees named
below, two of whom are currently directors of the Company. Unless authority to
vote for one or more of the nominees is specifically withheld according to the
instructions, proxies in the enclosed form will be voted FOR the election of
each of the three nominees named below.
The Board of Directors does not contemplate that any of the nominees will
be unable to serve as a director, but if that contingency should occur prior to
the voting of the proxies, the persons named in the enclosed proxy reserve the
right to vote for such substitute nominee or nominees as they, in their
discretion, shall determine.
- 2 -
<PAGE>
PROPOSED FOR ELECTION AS DIRECTORS
AT THE 1998 ANNUAL MEETING
DIRECTOR
NAME AND BACKGROUND SINCE
------------------- -----
ROBERT E. ASSELTINE, age 66, has been with the Company since 1996
February 1, 1995. Mr. Asseltine was the founder and CEO of
Micron Imaging Corp., the photocopier drum manufacturer now
owned by the Company, which was amalgamated with Sel-Drum
Corporation in November 1996. Prior to founding Micron Imaging
Corp. in 1991, Mr. Asseltine was the founder and President of
the Copytron Group of companies, formerly western Canada's
largest independent copier dealer, which was sold to Savin
Canada.
BRIAN F. TURNBULL, age 62, the Company's founder, has been in 1996
the photocopier industry his entire business career. The
Sel-Drum Group of companies started in 1978 with Mr.
Turnbull's launching Sel-Drum Corp. Mr. Turnbull will
terminate his Employment Agreement with the Company effective
January 1, 1998. Mr. Turnbull will remain with the Company as
a full-time consultant and will focus his efforts at
developing the Company's international sales.
ROBERT M. ORR, age 53, is a former partner in the law firm of -
Ross & McBride, the Company's Canadian corporate counsel. Mr.
Orr's 25 years of practice experience includes representation
of small to medium sized corporations in connection with
corporate restructuring, financing and commercial real estate.
BOARD MEETINGS AND COMMITTEES OF THE BOARD
The Board of Directors held three 3 meetings during the fiscal year ended
July 31, 1997 ("Fiscal 1997"). Each current director who was in office during
Fiscal 1997 attended at least 75% of the total of such Board meetings and
meetings of Board Committees on which he served.
For the fiscal year ending July 31, 1998 ("Fiscal 1998"), the Board of
Directors has established, among other Committees, an Audit Committee, a
Compensation and Benefits Committee, and a Nominating Committee of the Board.
The current members of the Audit Committee are Mr. Orr and Mr. Asseltine.
The Committee will review with Mengel, Metzger, Barr & Co. LLP, the Company's
independent auditors, the Company's financial statements and internal accounting
procedures, Mengel, Metzger, Barr & Co. LLP's auditing procedures and fees, and
the possible effects of professional services upon the independence of Mengel,
Metzger, Barr & Co. LLP.
The current members of the Compensation and Benefits Committee are Mr.
Asseltine and Mr. Orr. The Committee makes recommendations to the Board with
respect to compensation and benefits paid to the Company's management (see
"EXECUTIVE COMPENSATION").
- 3 -
<PAGE>
The current members of the Nominating Committee are Mr. Asseltine and Mr.
Turnbull. The Nominating Committee makes nominations to the Board and considers
and establishes procedures regarding nominations to the Board submitted by
shareholders. Shareholder recommendations for nomination to the Board should be
sent to the Company, to the attention of the President.
DIRECTORS' COMPENSATION
Directors are reimbursed for their reasonable expenses incident to travel
and attendance at meetings. Directors do not receive any other compensation for
attendance at meetings.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company believes that all reports required to be filed during or with
respect to Fiscal 1997 by its directors and executive officers were made on a
timely basis. In making this statement, the Company has relied on the written
representations of its directors and executive officers.
EXECUTIVE OFFICERS
The Company is currently served by four 4 executive officers, who are
elected annually by the Board of Directors and serve until their successors are
elected and qualify:
BRIAN F. TURNBULL, age 62, is the Company's founder. Mr. Turnbull has been
in the photocopier industry his entire business career. The Sel-Drum Group of
companies started in 1978 with Mr. Turnbull's launching Sel-Drum Corp. Mr.
Turnbull will terminate his Employment Agreement with the Company effective
January 1, 1998. Mr. Turnbull will remain with the Company as a full-time
consultant and will focus his efforts at developing the Company's international
sales.
BRIEN MURTAGH, age 49, has been with Sel-Drum for over 15 years and became
Executive Vice President of Sales on February 1, 1995. Prior to assuming this
position, he was Vice President of Sel-Drum Corporation and Sel-Drum Corporation
(U.S.A.), Inc. Mr. Murtagh has been associated with the reprographics industry
for many years, starting with Nashua in the U.K.
RAYMOND C. SPARKS, age 47, has been the Company's President and Chief
Executive Officer since November 1, 1997. From 1993 to 1997, Mr. Sparks was the
President, Chairman of the Board and Chief Executive Officer of The Village
Green Bookstores, Inc., a publicly-held specialty retailer. Mr. Sparks has eight
years of public accounting experience in South Africa with Ernst & Young and
later, with Webb & Company. Since 1979, Mr. Sparks has been engaged in the
retail industry, primarily in supermarket and specialty stores, in both
operational and financial capacities. Mr. Sparks was Financial Director for
Burlington Industries in Cape Town until 1983. From 1983 to 1987, Mr. Sparks was
- 4 -
<PAGE>
Divisional Financial Manager for Checkers Supermarkets Ltd. in Cape Town. Mr.
Sparks moved to the United States in 1987, and became Chief Financial Officer of
Checkers Restaurants, Brooklyn, New York. In 1989, he was named Vice President
of Finance at Tie Rack (U.S.) Inc. Mr. Sparks was the Chief Operating and Chief
Financial Officer of Burke & Burke (New York) in 1991. Mr. Sparks was Vice
President of Conston Corporation, an apparel retailer located in Philadelphia
before he joined Village Green in June 1993. Mr. Sparks holds the professional
qualification of Chartered Accountant (C.A.(S.A.)), and was awarded a Bachelor
of Commerce (with honors) degree in Financial Accounting by the University of
Cape Town, South Africa.
JOHN C. HALL, age 55, joined the Company in 1985 as the Financial Manager.
On February 1, 1995, he was appointed as Director of Finance. Previously, he was
employed for five years by Butler Metals Co., an automotive related company in
the position of Manager of Accounting. Prior to his employment with Butler, he
was employed by T.R.W. in Canada in the capacity of Chief Accountant. Mr. Hall
earned his C.M.A. in 1972.
EXECUTIVE COMPENSATION
Shown on the table below is information on the annual and long-term
compensation for services rendered to the Company in all capacities, for the
fiscal years ended July 31, 1997, 1996 and 1995, paid by the Company to those
persons who were, at July 31, 1997, the Chief Executive Officer and each other
executive officer of the Company (collectively, the "Named Executives").
SUMMARY COMPENSATION TABLE
Long Term
Annual Compensation Compensation
------------------------------ ------------
Other
Annual
Compen- All Other
Name and Salary Bonus sation Compensation
Principal Position Year ($)(1) ($)(1) ($) ($)
- -------------------- ------- ----------- --------- -------- ------------
Brian Turnbull, 1997 $210,000 $52,497 -0- $16,760(2)
President and Chief 1996 $210,000 $47,437 -0- $16,760(2)
Executive Officer 1995 $169,974 $33,591 -0- $16,760(2)
Brien Murtagh 1997 $91,250 $52,487 -0- $2,000(3)
1996 $72,830 $47,437 -0- $2,000(3)
1995 $50,003 $119,640 -0- $2,000(3)
(1) Does not include the value of perquisites and other personal benefits
because the aggregate amount of such compensation for any year does not
exceed 10% of the total amount of annual salary and bonus for any Named
Executive.
(2) Represents the payment of certain term life insurance premiums for a $1.45
million insurance policy on the life of Mr. Turnbull, for which 547118
Ontario Ltd., an Ontario corporation controlled by Mr. Turnbull, is the
beneficiary. The Company will be reimbursed payment of all insurance
premiums out of the proceeds of the insurance policy upon the death of Mr.
Turnbull.
(3) Represents the payment of certain term life insurance premiums for a
$365,000 insurance policy on the life of Mr. Murtagh. The Company is the
beneficiary of this life insurance policy.
- 5 -
<PAGE>
STOCK OPTIONS
The Company does not have a Stock Option Plan.
EMPLOYMENT AGREEMENTS
Effective as of November 1, 1997, the Company entered into an Employment
Agreement with Raymond C. Sparks (the "Employment Agreement") to serve as the
President and Chief Executive Officer of the Company. The Agreement provides for
a term of three years, subject to termination as provided in the Agreement, and
provides that as compensation under the Agreement, Mr. Sparks will be paid
$125,000 (U.S.) annual salary. Mr. Sparks also received an option to purchase
250,000 shares of the Company's no par value Common Stock, at an exercise price
of forty cents ($.40) per share. The Employment Agreement also provides for a
$25,000 relocation allowance, fringe benefits, including health insurance, on
terms which may be agreed to from time to time by the Company and Mr. Sparks.
RELATED TRANSACTIONS
The Company is owed $115,000 by 547117 Ontario Ltd. and 547118 Ontario
Ltd., both of which are controlled by Brian Turnbull, a Director and the former
President and Chief Executive Officer, in the form of an interest-free loan from
the Company's subsidiary, Sel-Drum Corporation. The loan was used to provide
leasehold and structural improvements to the Company's Burlington, Ontario
facility.
On November 4, 1997, the Company loaned $117,742 to Mr. Asseltine in
connection with the purchase of 293,680 shares of Common Stock pursuant to a
private transaction with Stephen Datson, a former officer and director. The loan
is due and payable on May 2, 1998 and bears an interest rate of 10% per annum.
The Company's Sel-Drum Imaging Corporation subsidiary has issued to each of
Messrs. Turnbull and Asseltine, Preferred Stock which is redeemable at the
Company's option at $727.30 per share per share. Mr. Asseltine owns 1,760 Class
C Preferred Shares and Mr. Turnbull owns 4,840 Class D Preferred Shares. These
shares were issued to Mr. Turnbull and Mr. Asseltine in connection with the
Company's transaction with Dakota Equities, Ltd. in February, 1995.
PROPOSAL TO APPROVE THE REINCORPORATION OF THE COMPANY
IN NEW YORK BY MERGING THE COMPANY INTO A WHOLLY-OWNED
NEW YORK SUBSIDIARY
GENERAL
The Board of Directors has unanimously approved, and recommends for
shareholder approval, the change of the Company's state of incorporation from
Colorado to New York. The transaction, if consummated, will not result in any
change in the business, management, assets, liabilities or net worth of the
- 6 -
<PAGE>
Company. Reincorporation in New York will allow the Company to take advantage of
certain provisions of the corporate laws of New York. Also, New York is a state
in which the Company currently maintains its principal place of business and is
in close geographic proximity to Ontario, Canada, where the Company maintains a
significant distribution center and its administrative offices. The purposes and
effects of the proposed transaction are summarized below.
In order to effect the Company's reincorporation in New York, the Company
will be merged into a newly-formed, wholly-owned subsidiary incorporated in New
York. The New York subsidiary has not engaged in any activities except in
connection with the proposed transaction. The mailing address of the New York
subsidiary's principal executive offices and its telephone number are the same
as those of the Company. In connection with its recommendation that the Company
reincorporate in New York, the Board of Directors has approved, and recommends
to the shareholders for their adoption and approval, an Agreement and Plan of
Merger (the "Reincorporation Agreement") pursuant to which the Company will be
merged with and into the New York subsidiary. The full texts of the
Reincorporation Agreement and the Certificate of Incorporation and By-laws of
the successor New York corporation under which the Company's business would be
conducted after the merger are set forth hereto as APPENDIX A, APPENDIX B, and
APPENDIX C, respectively. The discussion contained in this proxy statement is
qualified in its entirety by reference to such Appendices.
The reincorporation of the Company in New York through the above-described
merger (hereinafter referred to as the "Reincorporation") requires approval of
the Company's shareholders by the affirmative vote of the holders of a majority
of all outstanding shares of Common Stock. Shareholders who do not vote for the
proposal and who dissent by complying with the procedures required by the
Colorado Business Corporation Act will have the right, if the Reincorporation is
consummated, to receive payment of the fair value of their shares. See "Right to
Dissent and Appraisal," below.
In the following discussion of the proposed Reincorporation: (i) the term
"Sel-Drum Colorado" refers to the Company as currently organized as a Colorado
corporation; (ii) the term "Sel-Drum New York" refers to the new wholly-owned
New York subsidiary of Sel- Drum Colorado that will be the surviving corporation
after the completion of the transaction; and (iii) the term "Company" includes
either or both, as the context may require, without regard to the state of
incorporation.
Upon shareholder approval of the Reincorporation, and upon approval of
appropriate certificates of merger by the Secretaries of State of the States of
New York and Colorado, Sel-Drum Colorado will be merged with and into Sel-Drum
New York pursuant to the Reincorporation Agreement, resulting in a change in the
Company's state of incorporation. The Company will then be subject to the New
York Business Corporation Law and the Certificate of Incorporation and By-laws
set forth in APPENDIX B and APPENDIX C, respectively. Upon the effective time of
the Reincorporation, each outstanding share of Common Stock of Sel-Drum Colorado
and each share of Common Stock of Sel-Drum Colorado held in the treasury of
Sel-Drum Colorado automatically will be converted into one share of Common Stock
- 7 -
<PAGE>
of Sel-Drum New York. Outstanding options to purchase shares of Common Stock of
Sel-Drum Colorado will be converted into options to purchase the same number of
shares of Common Stock of Sel-Drum New York. Each employee stock plan and any
other employee benefit plan to which Sel-Drum Colorado is a party, whether or
not such plan relates to the Common Stock of Sel-Drum Colorado will be assumed
by Sel-Drum New York and, to the extent any such plan provides for the issuance
or purchase of Common Stock of Sel-Drum Colorado will be deemed to provide for
the issuance or purchase of shares of Common Stock of Sel-Drum New York.
It will not be necessary for shareholders of the Company to exchange their
existing stock certificates for stock certificates of Sel-Drum.
The Common Stock of the Company will continue to be traded on the
Over-the- Counter Electronic Bulletin Board.
PRINCIPAL REASONS FOR CHANGING THE COMPANY'S STATE OF INCORPORATION
Since inception in 1978, the Sel-Drum family of companies have had no real
ties to the State of Colorado. Sel-Drum International, Inc. became a Colorado
corporation as a result of a series of transactions in 1995 which lead to the
acquisition of Dakota Equities, Ltd., a publicly-held blind pool. Since the
Company's principal place of business is in New York, the Board of Directors
believes that the Reincorporation is consistent with the current geographic
location of the Company's principal place of business. In addition, in August
1997, the New York legislature amended New York's Business Corporation Law to
provide greater flexibility in the management of New York corporations. The
amendments effectively remove most of the substantive differences which
previously kept the Board of Directors, upon advice of counsel, from
reincorporating within the state. The amendments to the New York Business
Corporation Laws are effective February 23, 1998. If the shareholders approve
the proposal to reincorporate, the Company intends to take advantage of these
amendments to the New York Business Corporation Law.
COMPARISON OF CERTAIN PROVISIONS OF THE CERTIFICATES OF INCORPORATION AND
BY-LAWS OF SEL-DRUM NEW YORK AND SEL-DRUM COLORADO
Upon the Reincorporation, the Certificate of Incorporation and By-laws of
Sel-Drum New York will become the Company's Certificate of Incorporation and
By-laws. The following is a summary of certain significant differences between
the provisions of the Certificate of Incorporation and By-laws of Sel-Drum New
York and those of the Certificate of Incorporation and By-laws of Sel-Drum
Colorado. This summary does not purport to be a complete statement of the
differences between the Certificates of Incorporation and By-laws of Sel-Drum
New York and Sel-Drum Colorado, and is qualified in its entirety by reference to
the Certificate of Incorporation and By-laws of Sel-Drum New York, which are
attached hereto as APPENDIX B and APPENDIX C, respectively, as well as to the
Certificate of Incorporation and By-laws of Sel-Drum Colorado, which are
available for inspection at the principal executive offices of the Company and
which will be sent to shareholders of the Company upon written request.
- 8 -
<PAGE>
CAPITALIZATION
The Certificate of Incorporation of Sel-Drum New York authorizes the
issuance of 100,000,000 shares of Common Stock, par value $.01 per share, and
10,000,000 shares of Preferred Stock, par value $.01 per share. Sel-Drum New
York's Preferred Stock may be issued in series, each series being composed of
such number of shares and having such dividend or interest rates, liquidation,
voting rights, conversion prices, redemption prices, maturity dates and other
rights, if any, as the Board of Directors may determine. Currently, Sel-Drum
Colorado is authorized to issue 100,000,000 shares of Common Stock, no par
value, 7,642,500 shares of which were outstanding as of November 21, 1997. Sel-
Drum Colorado is also authorized to issue 10,000,000 shares of Preferred
Stock. In the Reincorporation, one share of Common Stock of Sel-Drum Colorado
will be converted into one share of Common Stock of Sel-Drum New York.
REMOVAL OF DIRECTORS; FILLING VACANCIES ON THE BOARD OF DIRECTORS
The Sel-Drum New York By-laws provide that any Director or the entire
Board of Directors may be removed, with or without cause, by the holders of a
majority of the shares entitled to vote at an election of Directors. The
Sel-Drum Colorado By-laws similarly provide that a Director may be removed, with
or without cause, by the holders of a majority of the shares entitled to vote at
an election of Directors. However, the Sel-Drum New York By-laws also authorize
the Board of Directors, by majority vote, to remove a Director for cause.
Under the Sel-Drum New York By-laws, if the office of any Director becomes
vacant, the remaining Directors in office, though less than a quorum, by a
majority vote, may appoint any qualified person to fill such vacancy, such
appointee to hold office until the next annual meeting of shareholders or until
his successor shall be duly chosen.
The Sel-Drum Colorado By-laws provide that if any vacancies occur in the
Board of Directors, all of the Directors then in office, even if less than a
quorum, may, by majority vote choose a successor or successors, or fill a newly
created directorship, and the Directors so chosen shall hold office until the
next annual meeting of the shareholders and until their successors shall be duly
elected and qualified, unless sooner displaced; provided, however, that if in
the event of any such vacancy, the Directors remaining in office shall be unable
by majority vote, to fill such vacancy, within thirty (30) days of the
occurrence thereof, the President or the Secretary of the Company may call a
special meeting of the shareholders at which such vacancy shall be filled.
LIMITATION ON DIRECTORS' LIABILITY
The Sel-Drum Colorado By-laws provide that no Director of the Company
shall be personally liable for any monetary damages for breaches of fiduciary
duty as a Director; provided, however, that this provision shall not eliminate
or limit the liability of a Director: (i) for any breach of the Director's duty
of loyalty to the Company or its shareholders; (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law; or (iii) for any transaction from which the Director derived an improper
personal benefit.
- 9 -
<PAGE>
The Sel-Drum New York Certificate of Incorporation provides that the
personal liability of the Company's Directors for breach of duty as a Director
shall be eliminated to the fullest extent permitted by the New York Business
Corporation Law. Section 402(b) of the New York Business Corporation Law
provides that no such provision shall eliminate or limit the liability of any
Director if a judgment or other final adjudication adverse to him establishes
that: (i) his acts or omissions were in bad faith or involved intentional
misconduct; (ii) he personally gained a financial profit or other advantage to
which such Director was not legally entitled; or (iii) the Director's acts
violated Section 719 of the New York Business Corporation Law, which relates to
the improper payment of a dividend, an invalid purchase of shares or
distribution of assets, and unauthorized loans to Directors.
AMENDMENT OR REPEAL OF THE CERTIFICATE AND BY-LAWS
The Sel-Drum New York Certificate of Incorporation is silent as to the
amendment or repeal of the Certificate of Incorporation. Effective February 23,
1998, under the New York Business Corporation Law, unless the certificate of
incorporation otherwise provides, amendments of the certificate of incorporation
generally require the approval of the holders of a majority of the outstanding
shares entitled to vote thereon, and if the amendment would increase or decrease
the number of authorized shares of any class or series or the par value of such
shares or would adversely affect the rights, powers or preferences of such class
or series, a majority of the outstanding shares of such class or series also
would have to approve the amendment. The Sel-Drum New York By-laws provide that
the By-laws may be amended or repealed by the vote of a majority either of the
shareholders or the Board of Directors.
The Sel-Drum Colorado By-laws and Sel-Drum Colorado Certificate of
Incorporation generally require majority approval of the shareholders for
amendment of its provisions.
LIMITATION ON CALL OF MEETINGS
The Sel-Drum New York By-laws provide that a special meeting of
shareholders may be called by the President or the Board of Directors.
The Sel-Drum Colorado By-laws permit a special meeting of shareholders to
be called by the President, the Board of Directors or shareholders of at least
10% of outstanding shares entitled to vote and shall be called by the President
or the Secretary at the request in writing of a majority of the Directors or
shareholders of at least 10% of outstanding shares entitled to vote.
CERTAIN DIFFERENCES BETWEEN THE CORPORATION LAWS OF NEW YORK AND COLORADO
Summarized below are certain differences between the New York Business
Corporation Law and the Colorado Business Corporation Act which may affect the
- 10 -
<PAGE>
interests of the holders of the Company's stock. This summary does not purport
to be a complete statement of the differences between the New York Business
Corporation Law and the Colorado Business Corporation Act and related laws
affecting shareholders' rights, and is qualified in its entirety by reference to
the provisions of these laws.
VOTE REQUIRED FOR MERGERS
New York law requires the affirmative vote of two-thirds of a
corporation's outstanding shares to authorize a merger, consolidation,
dissolution or disposition of substantially all of its assets. Effective
February 23, 1998, New York law will require an affirmative vote of a majority
of a corporation's outstanding shares to authorize a merger, consolidation,
dissolution or disposition of substantially all of its assets. Colorado law
requires the affirmative vote of a majority of the outstanding shares to
authorize any such action, unless otherwise expressly provided in the
certificate of incorporation.
DIVIDENDS
Under both New York and Colorado law, a corporation may generally pay
dividends out of surplus. In addition, Colorado law, and effective February 23,
1998, New York law permits a corporation, under certain circumstances, to pay
dividends if there is no surplus out of its net profits for the fiscal year in
which the dividend is declared and/or the preceding fiscal year.
LOANS TO DIRECTORS
New York law currently prohibits loans to directors unless authorized by
shareholder vote. Colorado law, and effective February 23, 1998, New York law,
permits the Board of Directors, without shareholder approval, to authorize loans
to corporate directors who also are officers, whenever, in the judgment of the
directors, such loan may reasonably be expected to benefit the Company.
STOCK REPURCHASES
New York law permits repurchases of shares out of surplus except when the
corporation is insolvent or would thereby be made insolvent, and permits a
corporation to purchase its own shares out of stated capital, except when the
corporation is insolvent or would thereby be made insolvent, if the purchase is
made for the purpose of: (i) eliminating fractions of shares; (ii) collecting or
compromising indebtedness to the corporation; or (iii) paying shareholders
entitled to receive payment for their shares under the appraisal provisions of
the New York corporation laws. Under Colorado law, a corporation may purchase or
redeem shares of any class except when its capital is impaired or such purchase
would cause impairment of capital, except that a corporation may purchase or
redeem out of capital any of its preferred shares if such shares will be retired
upon the acquisition and the capital of the corporation will be thereby reduced.
- 11 -
<PAGE>
SHAREHOLDER RECORDS
Under New York Law, a person must be a shareholder for at least six
months, or be authorized in writing by the holders of 5% of any class of a
corporation's outstanding shares, in order to examine the minutes and
shareholder records of a corporation. Effective February 23, 1998, New York law
will permit any shareholder with a proper purpose to demand inspection. Under
Colorado law, any shareholder with a proper purpose may demand inspection.
CORPORATE ACTION WITHOUT A MEETING OF SHAREHOLDERS
A shareholder meeting to authorize corporate action may be dispensed with
by a New York corporation only upon the written consent of all shareholders.
Effective February 23, 1998, a New York corporation will be allowed to authorize
corporate action upon the written consent of the holders of that number of
shares necessary to authorize the proposed action being taken, unless the
certificate of incorporation expressly provides otherwise. Colorado law permits
corporate action without a meeting of shareholders upon the written consent of
the holders of that number of shares necessary to authorize the proposed
corporate action being taken, unless the certificate of incorporation expressly
provides otherwise.
RIGHTS AND OPTIONS
New York requires shareholder approval of any plan pursuant to which
rights or options are to be granted to directors, officers or employees.
Colorado law does not require shareholder approval of such plans, although
various other applicable legal requirements, such as rules of the Securities and
Exchange Commission, make shareholder approval of certain rights or option plans
necessary or desirable.
DISSENTERS' RIGHTS
Both Colorado and New York law provide that, upon compliance with the
applicable requirements and procedures, a dissenting shareholder has the right
to receive the fair value of his shares if he objects to: (i) certain mergers
and consolidations; (ii) a sale, lease, exchange or other disposition of all or
substantially all of the assets requiring shareholder approval; (iii) any share
exchange in which the Company is participating as a subject corporation, where
the shareholder's stock is being acquired in the exchange; or (iv) certain
amendments to the certificate of incorporation which adversely affect the rights
of shareholders.
CONSIDERATION FOR SHARES
New York law currently provides that neither obligations of the subscriber
for future payments nor obligations of the subscriber for future services shall
constitute payment or part payment for shares of a corporation. Further,
certificates for shares may not be issued until the full amount of the
consideration therefor has been actually paid or services actually performed
(except in the case of shares purchased pursuant to stock options under a plan
- 12 -
<PAGE>
permitting installment payments). Colorado law, and effective February 23, 1998,
New York law, provides that shares of stock may be issued, and deemed to be
fully paid and non-assessable, if the corporation receives consideration having
a value not less than the par value of such shares and the corporation receives
a binding obligation of the subscriber to pay the balance of the subscription
price.
NOTICES AND RECORD DATE
Under Colorado law, and effective February 23, 1998 under New York law, a
board of directors may fix the record date for a shareholder meeting and give
notices for such meetings not more than sixty days nor less than ten days before
the date of the meeting. New York law currently provides that the record date be
fixed not more than fifty days nor less than ten days before a shareholder
meeting.
FEDERAL TAX CONSEQUENCES
The merger which will take place in connection with the Reincorporation
should, under current law, constitute a tax-free reorganization under section
368 of the Internal Revenue Code of 1986, as amended (the "Code"). No ruling has
been or is expected to be requested from the Internal Revenue Service ("IRS") as
to the tax consequences of the Reincorporation. Since no ruling has been
obtained, no assurance can be given that the IRS will agree with the conclusions
of counsel or that a challenge by the IRS, if made, will not be successful.
Assuming that the Reincorporation constitutes a tax-free reorganization,
the federal income tax consequences to the Company and its shareholders are as
follows: (i) no gain or loss will be recognized to Sel-Drum Colorado or Sel-Drum
New York as a result of this transaction; (ii) no gain or loss will be
recognized to shareholders who exchange their Sel- Drum Colorado Common Stock
solely for Sel-Drum New York Common Stock; (iii) the tax basis of shareholders
in the Common Stock of Sel-Drum New York to be received in this transaction will
be the same basis shareholders presently have in the Common Stock of Sel- Drum
Colorado; and (iv) the holding period of shares of the Common Stock of Sel-Drum
New York will include the period during which the shares of Common Stock of
Sel-Drum Colorado were held, provided such shares of Common Stock of Sel-Drum
Colorado were held as capital assets on the effective date of the
Reincorporation. In most instances, a dissenting shareholder who receives
payment for Common Stock upon exercise of the right of appraisal will recognize
gain or loss for federal income tax purposes measured by the difference between
the basis for the Common Stock and the amount of payment received. Such gain or
loss will be capital gain or loss if the shares of Common Stock were held as
capital assets on the effective date of the Reincorporation.
The foregoing summary of federal income tax consequences is included for
general information only and does not address the federal income tax
consequences to all holders, including those who acquired shares of Common Stock
pursuant to the exercise of employee stock options or otherwise as compensation
and corporations subject to the alternative minimum tax. In view of the
- 13 -
<PAGE>
individual nature of tax consequences, holders are urged to consult their own
tax advisors as to the specific tax consequences of the transaction, including
the application and effect of state, local and foreign income and other tax
laws.
RIGHT TO DISSENT AND APPRAISAL
Section 7-113-102 of the Colorado Business Corporation Act ("BCA") sets
forth the rights of shareholders of the Company who object to the merger which
will take place in connection with the Reincorporation. Any shareholder of the
Company who does not vote in favor of the Reincorporation may, if the
Reincorporation is effected, obtain payment in cash of the fair value of his
shares by complying with requirements of Section 7-113-201, 7-113- 202 and
7-13-203 of the BCA. The dissenting shareholder must file with the Company,
before the shareholder's vote on the Reincorporation, a written objection
including a notice of election to dissent, the dissenting shareholder's name and
residence address, the number of shares as to which the objection applies and a
demand for payment of the fair value of such shares if the Reincorporation is
effected. FAILURE BY A SHAREHOLDER TO PROVIDE SUCH AN OBJECTION CONSTITUTES A
WAIVER OF THE RIGHT TO DISSENT. Such objection is not required from any
shareholder to whom the Company did not give proper notice of the meeting
pursuant to which such vote was taken. Within ten days after the vote of
shareholders authorizing the Reincorporation, the Company must give written
notice of such authorization to each dissenting shareholder who filed written
objection or from whom written objection was not required. Within thirty days
after the giving of such notice, any shareholder from whom written objection was
not required and who elects to dissent from the proposed Reincorporation must
file with the Company a written notice of such election, stating the dissenting
shareholder's name and residence address, the number of shares to which the
notice applies and a demand for payment of the fair value of shares.
Shareholders may not dissent as to fewer than all of their shares. At the time
of filing the notice of election to dissent or within one month thereafter, the
shareholder must submit the certificate(s) representing his shares to the
Company or its transfer agent for notation thereon of the election to dissent,
after which such certificates will be returned to the shareholder. Failure to
submit the certificates for such notation may result in the loss of dissenter's
rights. Within ten days after the expiration of the period within which
shareholders may file their notices of election to dissent, the Company must
make a written offer (which, if the Reincorporation has not been consummated,
may be conditioned upon such consummation) to each shareholder who has filed
such notice of election to pay for the shares at a specified price which the
Company considers to be their fair value. A dissenting shareholder has a period
of thirty days within which to accept or reject such written offer or he may be
deemed to have waived his dissenter's rights. A judicial proceeding may be
instituted by the Company to determine the rights of dissenting shareholders and
to fix the fair value of their shares. If the Company does not institute such a
proceeding, the dissenting shareholders may institute the same. The Company is
not required to notify the dissenting shareholders of the Company's decision not
to institute such a proceeding, and the Company currently does not intend to
give such notice. A negative vote on the Reincorporation does not constitute a
"written objection" required to be filed by a dissenting shareholder. Failure to
vote against the Reincorporation, or failure to specify any vote on the proxy
card, however, will not constitute a waiver of rights under Section 7-113 (Part
2) of the BCA provided that written objection has been properly filed.
- 14 -
<PAGE>
The foregoing summary does not purport to be a complete statement of the
provisions of Section 7-113 Part 2 of the BCA and is qualified in its entirety
by reference to that Section, a copy of which ia attached hereto as APPENDIX D.
AMENDMENT
The Reincorporation Agreement may be amended, modified or supplemented
prior to the effective time of the Reincorporation upon the approval of the
Board of Directors of Sel- Drum Colorado and Sel-Drum New York. However, no
amendment, modification or supplement may be made after the adoption of the
Reincorporation Agreement by the shareholders of Sel-Drum Colorado which changes
the Reincorporation Agreement in a way which, in the judgment if the Board of
Directors of Sel-Drum Colorado, would have a material adverse effect on the
shareholders of Sel-Drum Colorado unless such amendment, modification or
supplement is approved by such shareholders.
TERMINATION
The Reincorporation Agreement provides that the Board of Directors of
Sel-Drum Colorado may terminate the Reincorporation Agreement and abandon the
merger contemplated thereby at any time prior to its effective time, whether
before or after approval by the shareholders of Sel-Drum Colorado if the
Reincorporation shall not have received the requisite approval of the
shareholders of Sel-Drum Colorado or the Board of Directors of Sel-Drum Colorado
determines for any reason in its sole judgment that the consummation of the
transaction would be inadvisable or not in the best interests of Sel-Drum
Colorado and its shareholders.
SHAREHOLDER VOTE REQUIRED TO APPROVE THE PROPOSAL
Approval of the proposal will require the affirmative vote of the holders
of a majority of the issued and outstanding shares of Common Stock . The Board
of Directors recommends a vote in favor of the Company's Reincorporation in New
York and the persons named in the enclosed proxy (unless otherwise instructed
therein) will vote such proxies FOR such proposal.
SELECTION OF INDEPENDENT AUDITORS
The firm of Mengel, Metzger, Barr & Co. LLP, certified public accountants,
served as the independent auditors of the Company for Fiscal 1997.
The Board of Directors has selected Mengel, Metzger, Barr & Co. LLP as the
Company's independent auditors for the fiscal year ending July 31, 1998. This
selection will be presented to the shareholders for their approval at the
Meeting. The Board of Directors recommends a vote in favor of the proposal to
- 15 -
<PAGE>
approve and ratify this selection, and the persons named in the enclosed proxy
(unless otherwise instructed therein) will vote such proxies FOR such proposal.
If the shareholders do not approve this selection, the Board of Directors will
reconsider its choice.
The Company has been advised by Mengel, Metzger, Barr & Co. LLP that a
representative will be present at the Meeting and will be available to respond
to appropriate questions. In addition, the Company intends to give such
representative an opportunity to make any statements if he should so desire.
SHAREHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
In order for any shareholder proposal to be included in the Company's
proxy statement to be issued in connection with the 1999 Annual Meeting of
Shareholders, such proposal must be received by the Company no later than
September 9, 1998.
OTHER MATTERS
The Board of Directors does not know of any other matters that are to be
presented for action at the Meeting. Should any other matter come before the
Meeting, however, the persons named in the enclosed proxy will have
discretionary authority to vote all proxies with respect to such matter in
accordance with their judgment.
BY ORDER OF THE BOARD OF DIRECTORS
Robert E. Asseltine
CHAIRMAN OF THE BOARD
Dated: December 9, 1997
- 16 -
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger is made as of November 21, 1997 by and
between Sel-Drum International, Inc., a Colorado Corporation ("Sel-Drum
Colorado"), and Sel-Drum International, Inc., a New York Corporation, which is a
newly-formed and wholly-owned subsidiary of Sel-Drum Colorado ("Sel-Drum New
York").
WHEREAS, Sel-Drum Colorado is a business corporation of the State of
Colorado originally formed under the name Dakota Equities, Ltd., with its
principal office located at 501 Amherst Street, City of Buffalo, County of Erie;
and
WHEREAS, the total number of shares of stock which Sel-Drum Colorado has
authority to issue is 110,000,000, 100,000,000 of which are Common Stock, no par
value, of which 7,642,500 shares are issued and outstanding, and remaining of
which are Preferred Stock, no par value; and
WHEREAS, Sel-Drum New York is a business corporation of the State of New
York with its principal office located at 501 Amherst Street, City of Buffalo,
County of Erie; and
WHEREAS, the total authorized capital stock of Sel-Drum New York is (i)
100,000,000 shares of Common Stock with a par value of $.01 each, of which one
share is issued and outstanding and owned by Sel-Drum Colorado; and (ii)
10,000,000 shares of Preferred Stock, $.01 par value, none of which are issued
and outstanding; and
WHEREAS, the Colorado Business Corporation Act permits a Merger of a
business corporation of the State of Colorado with and into a business
corporation of another jurisdiction; and
WHEREAS, the New York Business Corporation Law permits the Merger of a
business corporation of another jurisdiction with and into a business
corporation of the State of New York; and
WHEREAS, Sel-Drum Colorado deems it advisable and to the advantage,
welfare and best interests of the corporation and its shareholders to merge
Sel-Drum Colorado with and into Sel-Drum New York pursuant to the provisions of
the Colorado Business Corporation Act and pursuant to the provisions of the New
York Business Corporation Law upon the terms and conditions hereinafter set
forth;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereby agree as follows:
1. Sel-Drum Colorado and Sel-Drum New York shall, pursuant to the
provisions of the Colorado Business Corporation Act and the provisions of the
- 1 -
<PAGE>
New York Business Corporation Law, be merged with and into a single corporation,
known as Sel-Drum New York, which shall be the surviving corporation from and
after the effective time of the Merger (which is sometimes hereinafter referred
to as the "Surviving Corporation"), which shall continue to exist as Surviving
Corporation under the name Sel-Drum International, Inc. pursuant to the
provisions of the Business Corporation Law of the State of New York. The
separate existence of Sel-Drum Colorado, which is sometimes hereinafter referred
to the "Terminating Corporation," shall cease at said effective time in
accordance with the provisions of the Colorado Business Corporation Act.
2. Annexed hereto and made a part hereof is a copy of the Certificate
of Incorporation of the Surviving Corporation as the same shall be in force and
effect at the effective time of the Merger herein in the State of New York; and
the Surviving Corporation's Certificate of Incorporation shall continue to be
the Certificate of Incorporation until amended and changed pursuant to the
provisions of the Business Corporation Law of the State of New York.
3. The present By-laws of the Surviving Corporation will be the By-laws
of the Surviving Corporation and will continue in full force and effect until
changed, altered or amended as therein provided and in the manner prescribed by
the provisions of the New York Business Corporation Law.
4. The Directors and Officers in office of the Surviving Corporation at
the effective time of the Merger shall be the members of the first Board of
Directors and the first Officers of the Surviving Corporation, all of whom shall
hold their directorships and offices until the election and qualifications of
their respective successors or until their tenure is otherwise terminated in
accordance with the By-laws of the Surviving Corporation.
5. Upon the effective time of the Merger, by virtue of the Merger and
without any action on the part of any holder of Common Stock, each Sel-Del Drum
Colorado Common Share outstanding immediately prior thereto shall be changed and
converted into and shall be one fully paid and non-assessable share of Sel-Drum
New York Common Stock.
6. Upon the effective time of the Merger, by virtue of the Merger and
without any action on the part of the holders of Common Stock thereof, each
share of Sel-Drum New York Common Stock outstanding immediately prior thereto
shall be cancelled and retired and resume the status of an unauthorized and
unissued share of Sel-Drum New York Common Stock, and no shares of Sel-Drum New
York Common Stock or the securities of Sel-Drum New York shall be issued in
respect thereof and no amount shall be paid or other property delivered in
respect thereof.
7. In the event this Agreement and Plan of Merger shall have been fully
approved and adopted on behalf of the Terminating Corporation in accordance with
the provisions of the Colorado Business Corporation Act and on behalf of the
surviving corporation and in accordance with the provisions of the New York
Business Corporation Law, each corporation agrees that it will cause to be
executed and filed and recorded any document or documents prescribed by the laws
- 2 -
<PAGE>
of the State of Colorado and by the laws of the State of New York, and that each
will cause to be performed all necessary acts within the State of Colorado and
the State of New York and elsewhere to effectuate the Merger provided for
herein.
8. The Board of Directors and the proper officers of the Terminating
Corporation and of the Surviving Corporation are authorized, empowered and
directed to do any and all acts and things, and to make, execute, deliver, file
and record any and all instruments, papers, and documents which shall be or
become necessary, proper, or convenient to carry out or put into effect any of
the provisions of this Agreement and Plan of Merger or of the Merger provided
for herein.
The effective time of this Agreement and Plan of Merger, and the time of
which the Merger herein agreed upon shall become effective in the State of New
York is February 23, 1998.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement and Plan
of Merger as of the date first written above.
- ----------------------------
SEL-DRUM INTERNATIONAL, INC.,
a Colorado Corporation
By: Raymond C. Sparks
Chief Executive Officer and President
- -----------------------------
SEL-DRUM INTERNATIONAL, INC.,
a New York Corporation
By: Raymond C. Sparks
President and Chief Executive Officer
- 3 -
<PAGE>
APPENDIX B
CERTIFICATE OF INCORPORATION
OF
SEL-DRUM INTERNATIONAL, INC.
UNDER SECTION 402 OF THE BUSINESS CORPORATION LAW
The undersigned, for the purpose of forming a corporation pursuant to
Section 402 of the New York Business Corporation Law, certifies that:
1. The name of the Corporation is SEL-DRUM INTERNATIONAL, INC.
2. The purpose for which the Corporation is formed is to engage in any
lawful act or activity for which a corporation may be organized under the
Business Corporation Law, provided that the Corporation is not formed to nor
will it engage in any act or activity requiring the consent or approval of any
state official, department, board, agency or other body without such consent or
approval first being obtained.
3. The office of the Corporation shall be located in the County of
Erie, State of New York.
4. The aggregate number of shares which the Corporation shall have
authority to issue is one hundred ten million (110,000,000) shares, of which a
portion shall be common stock and a portion shall be preferred stock, all as
described below.
A. COMMON STOCK. The aggregate number of common shares which the
Corporation shall have the authority to issue is one hundred million
(100,000,000), each with a par value of $.01 per share, which shares shall be
designated "Common Stock." Subject to all the rights of the Preferred Stock as
expressly provided herein or by law, the Common Stock of the Corporation shall
possess all such rights and privileges as are afforded to capital stock by
applicable law.
B. PREFERRED STOCK. The aggregate number of preferred shares
which the Corporation shall have the authority to issue is ten million
(10,000,000) shares, each with a par value of $.01 per share, which shares shall
be designated "Preferred Stock". Shares of Preferred Stock may be issued from
time to time in one or more series as determined by the Board of Directors. The
Board of Directors is hereby authorized, by resolution or resolutions, to
provide from time to time, out of the unissued shares of Preferred Stock not
then allocated to any series of Preferred Stock, for a series of the Preferred
Stock. Each such series shall have distinctive serial designations. Before any
shares of any such series of Preferred Stock are issued, the Board of Directors
- 1 -
<PAGE>
shall fix and determine, and is hereby expressly empowered to fix and determine
by resolution or resolutions, the voting powers, full or limited, or no voting
powers, and the designations, preferences and relative, participating, optional
or other special rights, and the qualifications, limitations and restrictions
thereof. Before the issue of any shares of a series established by the Board, a
Certificate of Amendment amending the Certificate of Incorporation adding a
provision stating the number, designation, relative rights, preferences, and
limitations of the shares of the series as fixed by the Board, will be filed as
required by New York law.
5. The Secretary of State of the State of New York is hereby designated
as the agent of the Corporation upon whom process in any action or proceeding
against it may be served, and the address to which the Secretary of State shall
mail a copy of process in any action or proceeding against the Corporation which
may be served upon the Secretary of State is 700 Midtown Tower, Rochester, New
York 14604-2070.
6. No shareholder of the Corporation shall be entitled as of right to
purchase or receive any new or additional shares of any class, whether now or
hereafter authorized, or any other securities convertible into, or carrying
options or warrants to purchase, shares of any class; and all such new or
additional shares and all such other securities convertible into, or carrying
options or warrants to purchase, shares may be issued or disposed of by the
Board of Directors to such holders and on such terms as it, in its absolute
discretion, may deem advisable.
7. A member of the Corporation's Board of Directors shall not be
personally liable to the Corporation or its shareholders for damages for any
breach of duty in his or her capacity as such; provided, however, that the
foregoing shall not be construed to eliminate (a) the liability of any director
if a judgment or other adjudication adverse to such director establishes that
such director's acts or omissions were in bad faith or involved intentional
misconduct or a knowing violation of law, or that such director personally
gained in fact a financial profit or other advantage to which he or she was not
legally entitled, or that such director's acts violated Section 719 of the
Business Corporation Law (concerning liability of directors in certain cases),
or (b) the liability of any director for any act or omission prior to the
adoption of this Paragraph. If the Business Corporation Law is amended after
adoption of this Paragraph to authorize corporate action further eliminating or
limiting the personal liability of directors, then the liability of any director
of the Corporation shall be eliminated or limited to the fullest extent
permitted by the Business Corporation Law as so amended. Any repeal or
modification of this Paragraph by the shareholders of the Corporation shall not
adversely affect any right or protection of a director of the Corporation
existing at the time of such repeal or modification.
IN WITNESS WHEREOF, I have signed this Certificate this 21st day of
November, 1997, and hereby affirm the truth of the statements contained herein
under penalties of perjury.
/s/ James M. Jenkins
--------------------
James M. Jenkins
700 Midtown Tower
Rochester, New York 14604-2070
- 2 -
<PAGE>
APPENDIX C
BY-LAWS
OF
SEL-DRUM INTERNATIONAL, INC.
ARTICLE I. MEETINGS OF SHAREHOLDERS
SECTION 1. ANNUAL MEETING. The annual meeting of the shareholders of the
Corporation shall be held on the first Tuesday of January of each year, or if a
legal holiday, on the next business day thereafter, or on such date and at such
time as may be fixed by the Board of Directors and named in the call, for the
election of directors and for the transaction of such other business as may
properly be brought before the meeting.
SECTION 2. SPECIAL MEETINGS. Special meetings of shareholders may be held at any
time in the interval between annual meetings. Special meetings may be called by
the President, or by request of a majority of the Board of Directors, or by the
Secretary upon the written request of the holders of not less than 25 percent of
the shares outstanding and entitled to vote at the meeting, which written
request shall state the purpose or purposes of the meeting and the matters
proposed to be acted on thereat. In the event that a special meeting of
shareholders is called by the Secretary upon such written request, such
requesting shareholders shall pay the reasonably estimated costs of preparing
and mailing notices of such meeting. Nothing contained herein shall limit the
right and power of directors or shareholders to require a special meeting for
the election of directors pursuant to section 603 of the Business Corporation
Law.
SECTION 3. PLACE OF MEETINGS. Each meeting of shareholders shall be held at the
principal office of the Corporation or at such other place within or without the
State of New York as the Board of Directors may from time to time determine.
SECTION 4. NOTICE OF MEETINGS. Written notice of the date, time and place each
meeting of shareholders, indicating that it is being issued by or at the
direction of the person or persons calling the meeting, shall be given
personally or by mail (as hereinafter provided), not less than ten days nor more
than 50 days before the date fixed for the meeting, to each shareholder entitled
to vote at the meeting. In the case of each special meeting of shareholders,
such notice shall also state the purpose or purposes of the meeting, and at the
special meeting no business shall be acted upon which is not related to the
purpose or purposes stated in the notice of the meeting. If at any meeting of
shareholders action is proposed to be taken which would, if taken, entitle
shareholders fulfilling the requirements of section 623 of the Business
- 1 -
<PAGE>
Corporation Law to receive payment for their shares, the notice of such meeting
shall also include a statement of that purpose and to that effect and shall be
accompanied by a copy of said section 623 or an outline of its material terms.
Each notice of meeting of shareholders shall be given to a shareholder by
delivering it to him in person, or by placing it in the United States mail,
first-class postage prepaid and addressed to him at his address as it appears on
the books of the Corporation, unless he shall have filed with the Secretary of
the Corporation a written request that notices intended for him be mailed to
some other address, in which event it shall be mailed to the address designated
in such request. Notice of meeting as required by this Section need not be given
to any shareholder who submits, in person or by proxy, whether before or after
the meeting, a signed waiver of notice. The attendance, in person or by proxy,
of any shareholder at a meeting without protesting prior to the conclusion of
the meeting the lack of notice to him of such meeting, shall constitute a waiver
of notice by him. No notice of an adjourned meeting of shareholders need be
given unless the Board of Directors fixes a new record date for the adjourned
meeting.
SECTION 5. RECORD DATES. For the purpose of determining the shareholders
entitled to notice of or to vote at a meeting of shareholders or any adjournment
thereof, the Board of Directors may fix a date of record which shall not be more
than 50 days nor less than ten days before the date of such meeting. For the
purpose of determining shareholders entitled to express consent to or dissent
from any proposal without a meeting, or for determining shareholders entitled to
receive payment of a dividend or the allotment of any rights, or for any other
action, the Board of Directors may fix a date of record which shall not be more
than 50 days prior to such action.
SECTION 6. QUORUM. At each meeting of shareholders, in order to constitute a
quorum there shall be present in person or represented by proxy shareholders
holding a majority in number of the shares of the Corporation outstanding and
entitled to vote thereat; but if there be no quorum, the holders of such shares
so present or represented may by majority vote adjourn the meeting from time to
time (but not for a period of more than 30 days at any one time) without notice
other than by announcement at the meeting, until a quorum shall attend. At any
such adjournment at which a quorum shall attend, any business may be transacted
which might have been transacted at the meeting as originally called. When a
quorum is once present, it is not broken by the subsequent withdrawal of any
shareholder.
SECTION 7. VOTING. At each meeting of shareholders, each shareholder entitled to
vote thereat may vote in person or by proxy, and shall have one vote for each
share standing in his name on the books of the Corporation. Upon demand of one
or more shareholders holding in the aggregate ten percent of the shares present
in person or represented by proxy and entitled to vote at the meeting, voting
shall be by ballot. A plurality of the votes cast shall be sufficient to elect
directors, and a majority of votes cast shall be sufficient to take any other
action, except as may otherwise by provided by these By-laws.
SECTION 8. PROXIES. Every proxy shall be in writing, subscribed by the
shareholder giving the same, or his duly authorized attorney, and dated. No
proxy which is dated more than 11 months before the meeting at which it is
offered shall be accepted, unless such proxy shall, on its face, name a longer
period for which it is to remain in force.
- 2 -
<PAGE>
SECTION 9. CONDUCT OF MEETINGS. Each meeting of shareholders shall be presided
over by the President of the Corporation or, in his absence, by the Chairman of
the Board (if any) or, in the absence of both of them, by an Executive Vice
President (if any) or, in the absence of all such officers, by a chairman chosen
at the meeting. The Secretary of the Corporation or, in his absence, a person
chosen by the chairman of the meeting, shall act as secretary of the meeting.
SECTION 10. ACTION WITHOUT A MEETING. Whenever shareholders are required or
permitted to take any action by vote, such action may be taken without a meeting
on written consent, setting forth the action so taken, signed by the holders of
all shares outstanding and entitled to vote thereon. Such written consent shall
have the same effect as a unanimous vote of the shareholders entitled to vote
thereon.
ARTICLE II. BOARD OF DIRECTORS
SECTION 1. ELECTION AND POWERS. The Board of Directors shall have the management
and control of the business and affairs of the Corporation. The directors shall
be elected by the shareholders entitled to vote thereon at each annual meeting
of shareholders, and each director shall serve until his successor is duly
elected or appointed and qualifies, unless his directorship shall be earlier
vacated by his death, resignation or removal as provided by this Article.
SECTION 2. NUMBER. The number of directors constituting the entire Board of
Directors shall be such number, not less than three, as shall be designated from
time to time by the shareholders or by a majority vote of the entire Board. In
the absence of such designation, the number of directors constituting the entire
Board shall be three. Notwithstanding the foregoing, when all of the shares are
owned beneficially and of record by less than three shareholders, the number of
directors may be less than three but not less than the number of shareholders.
As used in these By-laws, the term "entire Board" shall mean the total number of
directors which the Corporation would have if there were no vacancies.
SECTION 3. VACANCIES. Vacancies on the Board of Directors (including any
vacancies resulting from an increase in the number of directors) created for any
reason except the removal of one or more directors by the shareholders, may be
filled by vote of the Board of Directors. If the number of directors then in
office is less than a quorum, such vacancies may be filled by a majority vote of
the directors then in office. A successor director elected under this Section
shall hold office for the unexpired portion of the term of the director whose
place was vacated. In the event of an increase in the number of directors, each
additional director elected under this Section shall hold office until his
successor has been duly elected or appointed and shall have qualified.
SECTION 4. REMOVAL. Any one or more directors may be removed from office, with
or without cause, by the shareholders entitled to vote in the election of
directors. Any vacancy on the Board resulting from such removal may be filled by
- 3 -
<PAGE>
the shareholders entitled to vote in the election of directors, and any
successor director elected to fill such vacancy shall hold office for the
unexpired portion of the term of the director who was removed.
SECTION 5. MEETINGS. Regular meetings of the Board of Directors shall be held at
such times as the Board may from time to time determine. Special meetings of the
Board of Directors shall be held at any time, upon call by the Chairman of the
Board, the President or at least one-third of the directors then in office.
SECTION 6. PLACE OF MEETINGS. Each meeting of the Board of Directors shall be
held at the principal office of the Corporation or at such other place, within
or without the State of New York, as the Board may from time to time determine.
SECTION 7. NOTICE OF MEETING. Written notice of the date, time and place of each
regular and special meeting of the Board of Directors shall be given to each
director either (a) by delivering the same to him personally, or sending the
same to him by telecopier, telex, telegraph or similar mode of communication, or
leaving the same at his residence or usual place of business, in each case at
least 24 hours before the meeting, or (b) by placing the same in the United
States mail, first-class postage prepaid, or delivering the same to a reputable
express mail delivery service, and addressed to him at his last known address
according to the records of the Corporation, in either case at least three days
before the meeting. No notice of any adjourned meeting of the Board of Directors
need be given other than by announcement at the meeting.
SECTION 8. WAIVER OF NOTICE. Notice of any meeting of the Board of Directors
need not be given to any director who submits a signed written waiver thereof
whether before, during or after the meeting, nor to any director who attends the
meeting without protesting, either prior thereto or at its commencement, the
lack of notice to him.
SECTION 9. QUORUM. A majority of the entire Board shall be necessary to
constitute a quorum for the transaction of any item of business at each meeting
of the Board of Directors; but if at any meeting there be less than a quorum
present, a majority of those directors present may adjourn the meeting from time
to time without notice other than by announcement at the meeting, until a quorum
shall attend. At any such adjournment at which a quorum shall be present, any
business may be transacted which might have been transacted at the meeting as
originally called.
SECTION 10. ACTION WITHOUT A MEETING. Any action required or permitted to be
taken by the Board of Directors or by any committee thereof at a duly held
meeting may be taken without a meeting if all members of the Board of Directors
or of the committee, as the case may be, consent in writing to the adoption of
resolutions authorizing the action. Such resolutions and such written consents
shall be filed with the minutes of the proceedings of the Board of Directors or
of the committee.
SECTION 11. PERSONAL ATTENDANCE BY CONFERENCE COMMUNICATION EQUIPMENT. Any one
or more members of the Board of Directors or of any committee thereof may
participate in a meeting of the Board or of such committee by means of a
- 4 -
<PAGE>
conference telephone or similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time. Participation
by such means shall constitute presence in person at the meeting.
SECTION 12. COMPENSATION. Directors shall not receive compensation for their
services in that capacity, but by resolution of the Board of Directors a fixed
sum and reimbursement of expenses may be paid to directors for attendance at
each meeting of the Board. Nothing herein shall be construed to preclude a
director from serving the Corporation in any other capacity and receiving
compensation therefor.
SECTION 13. EXECUTIVE COMMITTEE AND OTHER COMMITTEES. The Board of Directors
may, in its discretion and by a majority vote of the entire Board, appoint an
Executive Committee, or one or more other committees of the Board, to consist of
three or more directors, as the Board of Directors may from time to time
determine. The Executive Committee shall have and may exercise between meetings
of the Board all the powers of the Board of Directors in the management and
control of the business and affairs of the Corporation, and other committees of
the Board shall have such powers as are conferred upon them by the Board of
Directors, except that neither the Executive Committee nor any other committee
shall have power: (a) to recommend to shareholders any action requiring
shareholder approval; (b) to fill vacancies on the Board of Directors or on any
committee thereof; (c) to fix compensation of directors for service on the Board
of Directors or on any committee thereof; (d) to adopt, amend or repeal by-laws;
(e) to amend or repeal any resolution of the Board of Directors which is not by
its terms made amendable or repealable by such committee; or (f) to remove, or
fix the compensation of, any officer who is elected by the Board of Directors.
In the absence of any member of the Executive Committee or of any other
committee of the Board, the members thereof present at any meeting may appoint a
director previously so designated by the Board of Directors as a committee
alternate to act in place of such absent member. The Board of Directors shall
have the power at any time to change the membership of the Executive Committee
or of any other committee of the Board, to fill vacancies in such committee or
to dissolve it. A majority of the members of the Executive Committee or of any
other committee of the Board shall constitute a quorum for the transaction of
any item of business of such committee. The Executive Committee and each other
committee of the Board may make other rules for the conduct of its business, and
may appoint such subcommittees and assistants, as may from time to time be
necessary, unless the Board of Directors shall provide otherwise.
ARTICLE III. OFFICERS
SECTION 1. ELECTION OF OFFICERS. The Board of Directors shall elect or appoint a
President and a Secretary of the Corporation, and may elect or appoint a
Chairman of the Board from among the directors, one or more Vice Presidents, a
Treasurer and such other officers as it shall determine. Each officer shall
serve at the pleasure of the Board of Directors and until his successor is duly
elected or appointed and qualifies, or until his earlier death, resignation or
removal as provided by this Article. Any two offices may be held by the same
person, except that no person shall hold the offices of President and Secretary
- 5 -
<PAGE>
concurrently. When all of the shares are owned by one person, such person may
hold all or any combination of offices. Any vacancies in any office may be
filled by the Board of Directors.
SECTION 2. ASSISTANT AND SUBORDINATE OFFICERS. The Board of Directors may from
time to time elect or appoint one or more Assistant Secretaries, one or more
Assistant Treasurers and such other subordinate officers or agents of the
Corporation as it may deem proper, each of whom shall hold office at the
pleasure of the Board of Directors and shall have such powers and duties as are
assigned to him by the Board.
SECTION 3. REMOVAL. Any officer of the Corporation may be removed at any time,
with or without cause, by the Board of Directors.
SECTION 4. COMPENSATION. The Board of Directors shall fix the compensation of
all officers of the Corporation, except that the Board of Directors may
authorize the President to fix the compensation of such officers (other than the
President) as the Board may specify.
SECTION 5. CHAIRMAN OF THE BOARD. The Chairman of the Board, if there be one,
shall preside at all meetings of the Board of Directors and shall perform such
other duties as the Board of Directors may direct.
SECTION 6. PRESIDENT. The President shall be the Chief Executive Officer of the
Corporation and shall, subject to the direction of the Board of Directors, have
the general management of the affairs of the Corporation. The President shall
preside at all meetings of the shareholders. If there be no Chairman of the
Board, or in his absence or inability to act, the President shall also perform
all duties of the Chairman of the Board subject, however, to the control of the
Board of Directors.
SECTION 7. VICE PRESIDENTS. Any one or more of the Vice Presidents may be
designated by the Board of Directors as an Executive Vice President. At the
request of the President, or in his absence or inability to act, the Executive
Vice President shall perform the duties and exercise the functions of the
President. If there be no Executive Vice President, or if there be more than
one, the Board of Directors may determine which one or more of the Vice
Presidents shall perform any of such duties or exercise any of such functions;
if such determination is not made by the Board of Directors, the President may
make such determination; otherwise, any of the Vice Presidents may perform any
of such duties or exercise any of such functions. Each Vice President shall have
such other powers and duties as may be properly designated by the Board of
Directors and the President.
SECTION 8. SECRETARY. The Secretary shall keep full minutes of all meetings of
shareholders and of the Board of Directors in books provided for that purpose.
He shall see that all notices are duly given in accordance with the provisions
of these By-laws or as required by law. He shall be the custodian of the records
and of the corporate seal of the Corporation and he shall affix the corporate
seal to all documents the execution of which on behalf of the Corporation is
duly authorized by the Board of Directors, and when so affixed he may attest the
same. The Secretary shall have such other powers and duties as may be properly
designated by the Board of Directors and the President.
- 6 -
<PAGE>
SECTION 9. TREASURER. The Treasurer shall keep correct and complete books and
records of account of the Corporation. Subject to the control and supervision of
the Board of Directors and the President, or such other officer as the Board of
Directors and the President may designate, the Treasurer shall: establish and
execute programs for the provision of the capital required by the Corporation;
maintain banking arrangements to receive, have custody of and disburse the
Corporation's moneys and securities; invest the Corporation's funds as required;
obtain insurance coverage as required; and direct the granting of credit by and
the collection of accounts due to the Corporation. The Treasurer shall have such
other powers and duties as may be properly designated by the Board of Directors
and the President.
ARTICLE IV. SHARE CERTIFICATES
SECTION 1. FORM AND SIGNATURES. The interest of each shareholder of the
Corporation shall be evidenced by certificates for shares in such form as the
Board of Directors may from time to time prescribe. The share certificates shall
be signed by the Chairman of the Board or the President or a Vice President, and
by the Secretary or the Treasurer or an Assistant Secretary or Assistant
Treasurer, sealed with the corporate seal of the Corporation, and countersigned
and registered in such manner, if any, as the Board of Directors may prescribe.
When any share certificate is countersigned by a transfer agent or registered by
a registrar, other than the Corporation itself or its employee, the signatures
of such officers, and the corporate seal, may be facsimiles. In case any officer
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to hold such office before the share certificate is issued,
such certificate may be issued by the Corporation with the same effect as if
such person had not ceased to hold such office.
SECTION 2. TRANSFER OF SHARES. Shares of the Corporation shall be transferred on
the books of the Corporation upon surrender, by the registered holder thereof,
in person or by his attorney, of one or more certificates for the same number of
shares, accompanied by a proper assignment or powers of transfer endorsed
thereon or attached thereto, duly signed by the person appearing by each
certificate to be the owner of the shares represented thereby, with such proof
of authenticity of the signature as the Corporation, or its agents, may
reasonably require. Such certificate shall have affixed thereto all stock
transfer stamps required by law. The Board of Directors shall have power and
authority to make all such other rules and regulations as it may deem expedient
concerning the issue, transfer and registration of certificates for shares.
SECTION 3. MUTILATED, LOST, STOLEN OR DESTROYED CERTIFICATES. The holder of any
certificate representing shares of the Corporation shall immediately notify the
Corporation of any mutilation, loss, theft or destruction thereof. The Board of
Directors may, in its discretion, cause one or more new certificates, for the
same number of shares in the aggregate, to be issued to such holder upon
surrender of the mutilated certificate or, in case of loss, theft or destruction
of the certificate, upon satisfactory proof of such loss, theft or destruction
and the deposit of indemnity by way of bond or otherwise in such form and amount
and with such surety or security as the Board of Directors may require to
indemnify the Corporation and its transfer agent and registrar, if any, against
- 7 -
<PAGE>
loss or liability by reason of the issuance of such new certificates; but the
Board of Directors may, in its discretion, refuse to issue such new certificates
save upon the order of a court having jurisdiction therein.
SECTION 4. STOCK LEDGERS. The stock ledgers of the Corporation, containing the
name and address of each shareholder and the number of shares held by each,
shall be maintained at the principal office of the Corporation, or if there be a
transfer agent, at the office of such transfer agent, as the Board of Directors
shall determine.
SECTION 5. TRANSFER AGENTS AND REGISTRARS. The Corporation may have one or more
transfer agents and one or more registrars of its shares or of any class or
classes of its shares whose respective duties the Board of Directors may from
time to time determine.
ARTICLE V. INDEMNIFICATION
SECTION 1. GENERALLY. Each person who was or is made a party to or is threatened
to be made a party to or is otherwise involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or his testator or
intestate (a) is or was a director or officer of the Corporation or (b) is or
was a director or officer of the Corporation who serves or served, in any
capacity, any other corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise at the request of the Corporation (hereinafter
an "indemnitee"), shall be indemnified and held harmless by the Corporation
against all expense, liability and loss, including without limitation ERISA
excise taxes or penalties, judgments, fines, penalties, amounts paid in
settlement (provided the Board of Directors shall have given its prior consent
to such settlement, which consent shall not be unreasonably withheld by it) and
reasonable expenses, including attorneys' fees, suffered or incurred by such
indemnitee in connection therewith, and such indemnification shall continue as
to an indemnitee who has ceased to be a director or officer and shall inure to
the benefit of the indemnitee's heirs and fiduciaries; provided, however, that
no indemnification may be made to or on behalf of any director or officer if his
acts were committed in bad faith or were the result of active and deliberate
dishonesty and were material to the cause of action so adjudicated or otherwise
disposed of, or if he personally gained in fact a financial profit or other
advantage to which he was not legally entitled. Notwithstanding the foregoing,
except as contemplated by Section 3 of this Article, the Corporation shall
indemnify any such indemnitee in connection with a proceeding (or part thereof)
initiated by such indemnitee only if such proceeding (or part thereof) was
authorized by the Board of Directors.
SECTION 2. ADVANCEMENT OF EXPENSES. All expenses reasonably incurred by an
indemnitee in connection with a threatened or actual proceeding with respect to
which such indemnitee is or may be entitled to indemnification under this
Article shall be advanced to him or promptly reimbursed by the Corporation in
advance of the final disposition of such proceeding, upon receipt of an
undertaking by him or on his behalf to repay the amount of such advances, if
any, as to which he is ultimately found not to be entitled to indemnification
or, where indemnification is granted, to the extent such advances exceed the
- 8 -
<PAGE>
indemnification to which he is entitled. Such person shall cooperate in good
faith with any request by the Corporation that common counsel be used by the
parties to any proceeding who are similarly situated unless to do so would be
inappropriate due to an actual or potential conflict of interest.
SECTION 3. PROCEDURE FOR INDEMNIFICATION.
(a) Not later than 30 days following final disposition of a proceeding
with respect to which the Corporation has received written request by an
indemnitee for indemnification pursuant to this Article or with respect to which
there has been an advancement of expenses pursuant to Section 2 of this Article,
if such indemnification has not been ordered by a court, the Board of Directors
shall meet and find whether the indemnitee met the standard of conduct set forth
in Section 1 of this Article and, if it finds that he did, or to the extent it
so finds, the Board shall authorize such indemnification.
(b) Such standard shall be found to have been met unless (i) a judgment
or other final adjudication adverse to the indemnitee established that the
standard of conduct set forth in Section 1 of this Article was not met, or (ii)
if the proceeding was disposed of other than by judgment or other final
adjudication, the Board of Directors finds in good faith that, if it had been
disposed of by judgment or other final adjudication, such judgment or other
final adjudication would have been adverse to the indemnitee and would have
established that the standard of conduct set forth in Section 1 of this Article
was not met.
(c) If the Board of Directors fails or is unable to make the
determination called for by paragraph (a) of this Section 3, or if
indemnification is denied, in whole or part, because of an adverse finding by
the Board of Directors, or because the Board of Directors believes the expenses
for which indemnification is requested to be unreasonable, such action, inaction
or inability of the Board of Directors shall in no way affect the right of the
indemnitee to make application therefor in any court having jurisdiction
therein. In such action or proceeding, or in a suit brought by the Corporation
to recover an advancement of expenses pursuant to the terms of an undertaking,
the issue shall be whether the indemnitee met the standard of conduct set forth
in Section 1 of this Article, or whether the expenses were reasonable, as the
case may be (not whether the finding of the Board of Directors with respect
thereto was correct). If the judgment or other final adjudication in such action
or proceeding establishes that the indemnitee met the standard set forth in
Section 1 of this Article, or that the disallowed expenses were reasonable, or
to the extent that it does, the Board of Directors shall then find such standard
to have been met or the expenses to be reasonable, as the case may be, and shall
grant such indemnification, and shall also grant to the indemnitee
indemnification of the expenses incurred by him in connection with the action or
proceeding resulting in the judgment or other final adjudication that such
standard of conduct was met, or if pursuant to such court determination such
person is entitled to less than the full amount of indemnification denied by the
Corporation, the portion of such expenses proportionate to the amount of such
indemnification so awarded. Neither the failure of the Board of Directors to
have made timely a determination prior to the commencement of such suit that
indemnification of the indemnitee is proper in the circumstances because the
indemnitee has met the applicable standard of conduct set forth in Section 1 of
- 9 -
<PAGE>
this Article, nor an actual determination by the Board of Directors that the
indemnitee has not met such applicable standard of conduct, shall create a
presumption that the indemnitee has not met the applicable standard of conduct.
In any suit brought by the indemnitee to enforce a right to indemnification, or
by the Corporation to recover an advancement of expenses pursuant to the terms
of an undertaking, the burden of proving that the indemnitee is not entitled to
indemnification, under this Article or otherwise, shall be on the Corporation.
(d) A finding by the Board of Directors pursuant to this Section 3 that
the standard of conduct set forth in Section 1 of this Article has been met
shall mean a finding (i) by the Board of Directors acting by a quorum consisting
of directors who are not parties to such proceeding, or (ii) if such a quorum is
not obtainable, or if obtainable, such a quorum so directs, by the Board of
Directors upon the written opinion of independent legal counsel that
indemnification is proper in the circumstances because the applicable standard
of conduct has been met, or by the shareholders upon a finding that such
standard of conduct has been met.
SECTION 4. CONTRACTUAL ARTICLE. The rights conferred by this Article are
contract rights which shall not be abrogated by any amendment or repeal of this
Article with respect to events occurring prior to such amendment or repeal and
shall, to the fullest extent permitted by law, be retroactive to events
occurring prior to the adoption of this Article. No amendment of the Business
Corporation Law, insofar as it may reduce the permissible extent of the right of
indemnification of an indemnitee under this Article, shall be effective as to
such person with respect to any event, act or omission occurring or allegedly
occurring prior to the effective date of such amendment, irrespective of the
date of any claim or legal action in respect thereof. This Article shall be
binding on any successor to the Corporation, including without limitation any
person or entity which acquires all or substantially all of the Corporation's
assets.
SECTION 5. NON-EXCLUSIVITY. The indemnification provided by this Article shall
not be deemed exclusive of any other rights to which any person covered hereby
may be entitled other than pursuant to this Article. The Corporation is
authorized to enter into agreements with any such person providing rights to
indemnification or advancement of expenses in addition to the provisions
therefor in this Article, and the shareholders and the Board of Directors are
authorized to adopt, in their discretion, resolutions providing any such person
with any such rights.
SECTION 6. INSURANCE. The Corporation may, to the extent authorized from time to
time by the Board of Directors, maintain insurance, at its expense, to protect
itself and any director, officer, employee or agent of the Corporation or of any
other corporation, partnership, joint venture, trust or other enterprise against
any expense, liability or loss, whether or not the Corporation would have the
power to indemnify such person against such expense, liability or loss under
this Article or applicable law.
SECTION 7. INDEMNIFICATION OF EMPLOYEES AND AGENTS OF THE CORPORATION. The
Corporation may, to the extent authorized from time to time by the Board of
Directors, grant rights to indemnification and the advancement of expenses to
any employee or agent of the Corporation with the same scope and effect as
provided by this Article to directors and officers of the Corporation.
- 10 -
<PAGE>
ARTICLE VI. FINANCES
SECTION 1. DIVIDENDS. The Board of Directors, in its sole discretion, may
declare dividends on the shares of the Corporation, payable upon such dates as
the Board of Directors may designate.
SECTION 2. RESERVES. Before payment of any dividend, there may be set aside out
of any funds of the Corporation available for dividends such sum or sums, as the
Board of Directors, in its sole discretion, may from time to time deem 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 or purposes as the Board of Directors shall deem conducive to the
interests of the Corporation, and the Board of Directors may modify or abolish
any such reserve or reserves in the manner in which it was created.
SECTION 3. BILLS, NOTES, ETC. All checks or demands for money and notes or other
instruments evidencing indebtedness or obligations of the Corporation shall be
made in the name of the Corporation and shall be signed by such officer or
officers or such other person or persons as the Board of Directors may from time
to time designate.
ARTICLE VII. AMENDMENTS
SECTION 1. POWER TO AMEND. By-laws of the Corporation may be adopted, amended or
repealed by the shareholders entitled to vote in the election of directors. In
addition, by-laws of the Corporation may be adopted, amended or repealed by the
Board of Directors by a majority vote of the entire Board, but any by-law
adopted by the Board of Directors may be amended or repealed by such
shareholders.
SECTION 2. NOTICE OF AMENDMENT AFFECTING ELECTION OF DIRECTORS. If any by-law
regulating an impending election of directors is adopted, amended or repealed by
the Board of Directors, there shall be set forth in the notice of the next
meeting of shareholders for the election of directors the by-law so adopted,
amended or repealed, together with a concise statement of the changes made.
ARTICLE VIII. IN GENERAL
SECTION 1. DEFINITIONS.
(a) As used in these By-laws, the term "Business Corporation Law" shall
mean the Business Corporation Law of the State of New York, as it may from time
to time be amended.
- 11 -
<PAGE>
(b) Wherever used in these By-laws, the masculine pronoun shall include
the feminine and the neuter, as appropriate in the context.
SECTION 2. CONSTRUCTION. The provisions of these By-laws shall at all times be
subject to the provisions of applicable law in effect from time to time and the
provisions of the Certificate of Incorporation of the Corporation, as it may
from time to time be amended. In the event of any necessary conflict between any
provision of these By-laws and any provision of applicable law then in effect,
such provision of law shall control. In the event of any necessary conflict
between any provision of these By-laws and any provision of the Certificate of
Incorporation then in effect, such provision of the Certificate of Incorporation
shall control. The Article and Section headings of these By-laws are for
convenience of reference only and do not form a part hereof and do not in any
way modify, interpret or construe the intention expressed hereby.
* * * * *
- 12 -
<PAGE>
APPENDIX D
COLORODO BUSINESS CORPORATION LAW
PROCEDURE FOR EXERCISE OF DISSENTER'S RIGHTS
7-113-201 NOTICE OF DISSENTERS' RIGHTS. - (1) If a proposed corporate
action creating dissenters' rights under section 7-113-102 is submitted to a
vote at a shareholders' meeting, the notice of the meeting shall be given to all
shareholders, whether or not entitled to vote. The notice shall state that
shareholders are or may be entitled to assert dissenters' rights under this
article and shall be accompanied by a copy of this article and the materials, if
any, that, under articles 101 to 117 of this title, are required to be given to
shareholders entitled to vote on the proposed action at the meeting. Failure to
give notice as provided by this subsection (1) shall not affect any action taken
at the shareholders' meeting for which the notice was to have been given, BUT
ANY SHAREHOLDER WHO WAS ENTITLED TO DISSENT BUT WHO WAS NOT GIVEN SUCH NOTICE
SHALL NOT BE PRECLUDED FROM DEMANDING PAYMENT FOR THE SHAREHOLDER'S SHARES UNDER
THIS ARTICLE BY REASON OF THE SHAREHOLDER'S FAILURE TO COMPLY WITH THE
PROVISIONS OF SECTION 7-113-202(1).
(2) If a proposed corporate action creating dissenter's rights under
section 7-113- 102 is authorized without a meeting of shareholders pursuant to
section 7-107-104, any written or oral solicitation of a shareholder to execute
a writing consenting to such action contemplated in section 7-107-104 shall be
accompanied or preceded by a written notice stating that shareholders are or may
be entitled to assert dissenters' rights under this article, by a copy of this
article, and by the materials, if any, that, under articles 101 to 117 of this
title, would have been required to be given to shareholders entitled to vote on
the proposed action if the proposed action were submitted to a vote at a
shareholders' meeting. Failure to give notice as provided by this section (2)
shall not affect any action taken pursuant to section 7-107-104 for which the
notice was to have been given, BUT ANY SHAREHOLDER WHO WAS ENTITLED TO DISSENT
BUT WHO WAS NOT GIVEN SUCH NOTICE SHALL NOT BE PRECLUDED FROM DEMANDING PAYMENT
FOR THE SHAREHOLDER'S SHARES UNDER THIS ARTICLE BY REASON OF THE SHAREHOLDER'S
FAILURE TO COMPLY WITH THE PROVISIONS OF SECTION 7-113-202(2).
7-113-202 NOTICE OF INTENT TO DEMAND PAYMENT. - (1) If a proposed
corporate action creating dissenters' rights under section 7-113-102 is
submitted to a vote at a shareholders' meeting AND IF NOTICE OF DISSENTERS'
RIGHTS HAS BEEN GIVEN TO SUCH SHAREHOLDER IN CONNECTION WITH THE ACTION PURSUANT
TO SECTION 7-113-201(1), A SHAREHOLDER WHO WISHES TO ASSERT DISSENTERS' RIGHTS
SHALL:
(a) Cause the corporation to receive, before the vote is taken, written
notice of the shareholder's intention to demand payment for the shareholder's
shares if the proposed corporate action is effectuated; and
(b) Not vote the shares in favor of the proposed corporate action.
- 1 -
<PAGE>
(2) If a proposed corporate action creating dissenters' rights under
section 7-113- 102 is authorized without a meeting of shareholders pursuant to
section 7-107-104 AND IF NOTICE OF DISSENTERS' RIGHTS HAS BEEN GIVEN TO SUCH
SHAREHOLDER IN CONNECTION WITH THE ACTION PURSUANT TO SECTION 7-113-201(2) A
SHAREHOLDER WHO WISHES TO ASSERT DISSENTERS' RIGHTS SHALL NOT EXECUTE A WRITING
CONSENTING TO THE PROPOSED CORPORATE ACTION.
(3) A shareholder who does not satisfy the requirements of subsection
(1) or (2) of this section is not entitled to demand payment for the
shareholder's shares under this article.
7-113-203 DISSENTERS' NOTICE. - (1) If a proposed corporate action
creating dissenters' rights under section 7-113-102 is authorized, the
corporation shall give a written dissenters' notice to all shareholders who are
entitled to demand payment for their shares under this article.
(2) The dissenters' notice required by subsection (1) of this section
shall be given no later than ten days after the effective date of the corporate
action creating dissenters' rights under section 7-113-102 and shall:
(a) State that the corporate action was authorized and state the
effective date or proposed effective date of the corporate action;
(b) State an address at which the corporation will receive payment
demands and the address of a place where certificates for certificated shares
must be deposited;
(c) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(d) Supply a form for demanding payment, which form shall request a
dissenter to state an address to which payment is to be made;
(e) Set the date by which the corporation must receive the payment
demand and certificates for certificated shares, which date shall not be less
than thirty days after the date the notice required by subsection (1) of this
section is given;
(f) State the requirement contemplated in section 7-113-103(3), if such
requirement is imposed; and
(g) Be accompanied by a copy of this article.
7-113-204 PROCEDURE TO DEMAND PAYMENT. - (1) A shareholder who is given a
dissenters' notice pursuant to section 7-113-203 and who wishes to assert
dissenters' rights shall, in accordance with the terms of the dissenters'
notice:
(a) Cause the corporation to receive a payment demand, which may be the
payment demand form contemplated in section 7-113-203(2)(d), duly completed, or
may be stated in another writing; and
- 2 -
<PAGE>
(b) Deposit the shareholder's certificates for certificated shares.
(2) A shareholder who demands payment in accordance with subsection (1)
of this section retains all rights of a shareholder, except the right to
transfer the shares, until the effective date of the proposed corporate action
giving rise to the shareholder's exercise of dissenters' rights and has only the
right to receive payment for the shares after the effective date of such
corporate action.
(3) Except as provided in section 7-113-207 or 7-113-209(1)(b), the
demand for payment and deposit of certificates are irrevocable.
(4) A shareholder who does not demand payment and deposit the
shareholder's share certificates as required by the date or dates set in the
dissenters' notice is not entitled to payment for the shares under this article.
- 3 -
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
PROXY
SEL-DRUM INTERNATIONAL, INC.
The undersigned hereby appoints RAYMOND C. SPARKS and JOHN A. HALL, and each of them, proxies for the undersigned with
full power of substitution, to vote all shares of the Common Stock of SEL-DRUM INTERNATIONAL, INC. (the "Company") owned by
the undersigned at the Annual Meeting of Shareholders to be held at the Venture Inn Burlington-on-the-Lake, 2020 Lakeshore
Road, Burlington, Ontario, Canada L7S, 1Y2, on Tuesday, January 6, 1998 at 3:00 p.m., local time, and at any adjournment or
adjournments thereof.
1. Election of Directors.
|_| FOR all nominees listed below (except as marked to the contrary).
|_| WITHHOLD AUTHORITY to vote for all nominees listed below.
Instruction: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A LINE THROUGH THE NOMINEE'S NAME LISTED BELOW.
Robert E. Asseltine Brian F. Turnbull Robert M. Orr
2. Proposal to approve the reincorporation of Sel-Drum International, Inc., a Colorado corporation ("Sel-Drum-Colorado"),
by merging Sel-Drum Colorado into a newly-formed New York subsidiary, Sel-Drum International, Inc.
|_| FOR |_| AGAINST |_| ABSTAIN
3. Proposal to approve and ratify the selection of Mengel, Metzger, Barr & Co. LLP as the Company's independent auditors
for the year ending July 31, 1998.
|_| FOR |_| AGAINST |_| ABSTAIN
4. In their discretion, the proxies are authorized to vote upon such other business as may properly come before the
Meeting.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
<PAGE>
(CONTINUED FROM OTHER SIDE)
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY. This Proxy will be voted as specified by
the undersigned. This proxy revokes any prior proxy given by the undersigned. UNLESS AUTHORITY TO VOTE FOR ONE OR MORE OF THE
NOMINEES IS SPECIFICALLY WITHHELD ACCORDING TO THE INSTRUCTIONS, A SIGNED PROXY WILL BE VOTED FOR THE ELECTION OF THE
NOMINEES FOR DIRECTORS AND, UNLESS OTHERWISE SPECIFIED, FOR EACH OF THE OTHER TWO PROPOSALS LISTED HEREIN AND DESCRIBED IN
THE ACCOMPANYING PROXY STATEMENT. The undersigned acknowledges receipt with this Proxy of a copy of the Notice of Annual
Meeting and Proxy Statement dated December 9, 1997, describing more fully the proposals set forth herein.
Dated: _______________________, 1997
____________________________________
____________________________________
Signature(s) of shareholder(s)
Please date and sign name exactly as it
appears hereon. Executors,
administrators, trustees, etc. should so
indicate when signing. If the
shareholder is a corporation, the full
corporate name should be inserted and
the proxy signed by an officer of the
corporation, indicating his title.
</TABLE>
