SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of the Securities Exchange
Act of 1934
Check the appropriate box:
|X| Preliminary Information Statement
|X| Confidential, for Use of the Commission Only (as permitted by Rule
14c-5(d)(2))
| | Definitive Information Statement
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CONVERSION TECHNOLOGIES INTERNATIONAL, INC.
(Name of Registrant As Specified In Charter)
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Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
| | Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
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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):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
- --------------------------------------------------------------------------------
| | Fee paid previously with preliminary materials.
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| | 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:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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CONVERSION TECHNOLOGIES INTERNATIONAL, INC.
7 San Bartola Drive
St. Augustine, Florida 32086
INFORMATION STATEMENT
INTRODUCTION
This information statement is being mailed or otherwise furnished to
stockholders of Conversion Technologies International, Inc., a Delaware
corporation, in connection with the prior receipt by the Board of Directors of
written consents of the holders of a majority in voting power of our outstanding
common stock and preferred stock approving an increase in our authorized number
of shares of common stock, par value $.00025 per share, from 50,000,000 to
200,000,000 shares (the "Charter Amendment"), which would be accomplished by
means of a merger between us and a newly formed wholly-owned subsidiary, CTI
Subsidiary Corp., pursuant to which CTI Subsidiary Corp. will merge into us (the
"Merger") and our Restated Certificate of Incorporation will be amended to
effect the increase in authorized shares.
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Our Board of Directors believes that it is advisable and in our best
interest to increase our authorized common stock, by means of the Merger, to
have available sufficient authorized shares of common stock for issuance upon
conversion of a new class of convertible preferred stock which we are offering
in a private financing, to permit exercise of options which have been authorized
for grant upon consummation of the financing and to otherwise provide for our
future needs.
This information statement is being sent to stockholders on or about
_________, 1999.
We Are Not Asking You For A Proxy And
You Are Requested Not To Send Us A Proxy
The date of this information statement is ________, 1999
Vote Required
Under Delaware law, the vote which was required to approve the Merger and
Charter Amendment was the affirmative vote of the holders of a majority of the
voting power represented by our outstanding common stock and preferred stock,
voting together as a class. As of July 9, 1999, there were 6,947,045 shares of
common stock outstanding and 545,830 shares of Series A Preferred Stock
outstanding. Each share of common stock is entitled to one vote and each share
of preferred stock, which is designated as Series A Preferred Stock, is entitled
to 20 votes. To be entitled to vote, stockholders must have appeared as
stockholders of record on the books of our transfer agent, American Stock
Transfer & Trust Company, as of July 9, 1999.
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Vote Obtained- Section 228 of the Delaware General Corporation Law
Section 228 of the Delaware General Corporation Law provides that in lieu
of a stockholder meeting the written consent of the holders of the outstanding
shares of stock entitled to vote, having not less than the minimum number of
votes which would be necessary to authorize or take action at a meeting at which
all shares entitled to vote thereon were present and voted, may be substituted
for such meeting. In order to eliminate the costs and management time involved
in holding a special meeting and in order to effect the amendment as early as
possible in order to accomplish the purposes as hereafter described, our Board
of Directors voted to utilize, and did in fact obtain, the written consent of
the holders of a majority of the voting power represented by our common stock
and preferred stock, voting together as a class.
Pursuant to Section 228 of the Delaware Law, we are required to provide
prompt notice of the taking of the corporate action without a meeting to
stockholders who have not consented in writing to such action. This information
statement is intended to provide such notice and to comply with Section 14(c) of
the Securities Exchange Act of 1934, as amended. Section 14(c) requires that
issuers who have not solicited consents from each holder of its registered
securities entitled to vote must distribute to such holders an information
statement.
Our stockholders are entitled to appraisal rights with respect to the
Merger provided that they comply with the conditions established by Section 262.
In order for the Merger to be consummated, no more than 5% of the outstanding
shares of each class of voting stock may validly demand statutory appraisal
rights with respect to the Merger within the 20 day period prescribed by
Delaware law; provided, however, that our Board of Directors shall have the
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authority to waive such condition if, in its business judgment, it deems such
waiver to be in our best interests. Stockholders who provided their written
consent approving the Merger will not be eligible for appraisal rights. See
"Appraisal Rights" below.
Increase in Authorized Common Stock and Merger
We currently have 50,000,000 shares of common stock authorized,
substantially all of which shares would be outstanding on a fully diluted basis,
giving effect to shares issuable on conversion or exercise of securities
convertible into or exercisable for common stock at current conversion and
exercise rates. We are currently offering in a private financing of up to
5,000,000 shares of a new series of preferred stock, which will be designated as
"Series B Preferred Stock" (the "Series B Preferred Financing"). Each share of
Series B Preferred Stock will be initially convertible into 20 shares of common
stock, resulting in a potential issuance of an additional 100,000,000 shares of
common stock. In addition, our Board of Directors has authorized the grant of
options exercisable at $.03 per share to certain of our directors and officers.
The total number of options to be issued will be such that, after issuance, the
holders will be entitled to purchase upon exercise thereof, up to 20% of the
outstanding shares of common stock on a fully diluted basis. As such, we have an
insufficient number of authorized shares of common stock to permit conversion or
exercise of all such securities. Accordingly, the Board of Directors has
authorized an increase in the authorized shares of common stock from 50,000,000
to 200,000,000. Such increase will be accomplished by means of the Merger of CTI
Subsidiary Corp., a nonoperating wholly-owned subsidiary of ours formed for the
sole purpose of merging with us. Upon effectiveness of the Merger, our Restated
Certificate of Incorporation will be automatically amended to effect the Charter
Amendment increasing the authorized shares
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of common stock. The sole purpose of the Merger is to effect such increase and
thereby enable us to issue and sell Series B Preferred Stock in the Series B
Preferred Financing, to permit exercise of options which have been authorized
for grant and to otherwise provide for our future needs. Upon consummation of
the Merger, we will be the surviving corporation and each share of stock of CTI
Subsidiary will be cancelled and cease to exist. The shares of our security
holders will not be changed or affected by the Merger.
Appraisal Rights
Holders of shares of common stock and Series A Preferred Stock are
entitled to appraisal rights under Section 262 of the Delaware General
Corporation Law with respect to the Merger, provided that they comply with the
conditions established by Section 262.
The following discussion is not a complete statement of the law relating
to appraisal rights and is qualified in its entirety by reference to Annex A.
This discussion and Annex A should be reviewed carefully by any holder who
wishes to exercise statutory appraisal rights or who wishes to preserve the
right to do so, as failure to comply with the procedures set forth herein or
therein will result in the loss of appraisal rights.
A record holder of shares of common stock or Series A Preferred Stock who
makes the demand described below with respect to such shares, who does not vote
in favor of or deliver a written consent approving the Merger, and who otherwise
complies with the statutory requirements of Section 262, will be entitled to an
appraisal by the Delaware Court of Chancery of the fair value of his or her
shares of common stock and/or Series A Preferred Stock. All references in this
summary of appraisal rights to a "stockholder" or "holders of shares of
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common stock or Series A Preferred Stock" are to the record holder or holders of
shares of common stock or Series A Preferred Stock.
Under Section 262, where a merger is accomplished pursuant to Section 228
of the Delaware General Corporation Law (Action by Written Consent in Lieu of
Stockholder Meeting), either before or within 10 days after the effective date
of the merger (the "Effective Time") each constituent corporation (or, after the
Effective Time, the surviving constituent corporation) must notify each
stockholder of each constituent corporation entitled to appraisal rights of the
merger and that appraisal rights are available to such stockholders and include
in each such notice a copy of Section 262.
Holders of shares of common stock or Series A Preferred Stock who desire
to exercise their appraisal rights must deliver a written demand for appraisal
to us within 20 days after the date of mailing of the statutory notice, which is
the date of this Information Statement. A demand for appraisal must be executed
by or on behalf of the stockholder of record and must reasonably inform us of
the identity of the stockholder of record and that such stockholder intends
thereby to demand appraisal of the common stock or Series A Preferred Stock.
Within 120 days after the Effective Time, either we or any stockholder who
has complied with the required conditions of Section 262 may file a petition in
the Delaware Court, with a copy served on us in the case of a petition filed by
a stockholder, demanding a determination of the fair value of the shares of all
dissenting stockholders. We have no present intent to file an appraisal petition
and stockholders seeking to exercise appraisal rights should not assume that we
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will file such a petition or that we will initiate any negotiations with respect
to the fair value of such shares. Accordingly, holders of common stock or Series
A Preferred Stock who desire to have their shares appraised should initiate any
petitions necessary for the perfection of their appraisal rights within the time
periods and in the manner prescribed in Section 262. Within 120 days after the
Effective Time, any stockholder who has theretofore complied with the applicable
provisions of Section 262 will be entitled, upon written request, to receive
from us a statement setting forth the aggregate number of shares of common stock
or Series A Preferred Stock not voting in favor of the Merger and with respect
to which demands for appraisal were received by us and the number of holders of
such shares. Such statement must be mailed within 10 days after we have received
the written request therefor.
If a petition for an appraisal is timely filed, at the hearing on such
petition, the Delaware Court will determine which stockholders are entitled to
appraisal rights. The Delaware Court may require the stockholders who have
demanded an appraisal for their shares and who hold stock represented by
certificates to submit their certificates of stock to the Register in Chancery
for notation thereon of the pendency of the appraisal proceedings; and if any
stockholder fails to comply with such direction, the Delaware Court may dismiss
the proceedings as to such stockholder. Where proceedings are not dismissed, the
Delaware Court will appraise the shares of common stock or Series A Preferred
Stock owned by such stockholders, determining the fair value of such shares
exclusive of any element of value arising from the accomplishment or expectation
of the Merger, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value.
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No representation is made as to the outcome of the appraisal of fair value
as determined by the Court. In determining "fair value", the Delaware Court is
required to take into account all relevant factors. In Weinberger v. UOP, Inc.,
the Delaware Supreme Court discussed the factors that could be considered in
determining fair value in an appraisal proceeding, stating that "proof of value
by any techniques or methods which are generally considered acceptable in the
financial community and otherwise admissible in court" should be considered and
that "[f]air price obviously requires consideration of all relevant factors
involving the value of a company." The Delaware Supreme Court has stated that in
making this determination of fair value the court must consider market value,
asset value, dividends, earnings prospects, the nature of the enterprise and any
other facts which could be ascertained as of the date of the merger which throw
any light on future prospects of the merged corporation. Section 262 provides
that fair value is to be "exclusive of any element of value arising from the
accomplishment or expectation of the merger." In Cede & Co. v. Technicolor,
Inc., the Delaware Supreme Court stated that such exclusion is a "narrow
exclusion [that] does not encompass known elements of value," but which rather
applies only to the speculative elements of value arising from such
accomplishment or expectation. In Weinberger, the Delaware Supreme Court
construed Section 262 to mean that "elements of future value, including the
nature of the enterprise, which are known or susceptible of proof as of the date
of the merger and not the product of speculation, may be considered." In
addition, Delaware courts have decided that the statutory appraisal remedy,
depending on the factual circumstances, may or may not be a stockholder's
exclusive remedy in connection with transactions such as the merger.
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The cost of the appraisal proceeding may be determined by the Delaware
Court and taxed against the parties as the Delaware Court deems equitable in the
circumstances. However, costs do not include attorneys' and expert witness fees.
Each dissenting stockholder is responsible for his or her attorneys' and expert
witness expenses, although, upon application of a dissenting stockholder, the
Delaware Court may order that all or a portion of the expenses incurred by any
dissenting stockholder in connection with the appraisal proceeding, including
without limitation, reasonable attorneys' fees and the fees and expenses of
experts, be charged pro rata against the value of all shares of stock entitled
to appraisal.
Any holder of shares of common stock or Series A Preferred Stock who has
duly demanded appraisal in compliance with Section 262 will not be entitled to
vote for any purpose any shares subject to such demand or to receive payment of
dividends or other distributions on such shares, except for dividends or
distributions payable to stockholders of record at a date prior to the Effective
Time.
At any time within 60 days after the Effective Time, any stockholder will
have the right to withdraw such demand for appraisal and to accept the terms
offered in the Merger (i.e., to retain their shares); after this period, the
stockholder may withdraw such demand for appraisal only with our consent. If no
petition for appraisal is filed with the Delaware Court within 120 days after
the Effective Time, stockholders' rights to appraisal shall cease, and all
holders of shares of common stock or Series A Preferred Stock will be entitled
to retain their shares pursuant to the terms of the merger agreement. Inasmuch
as we have no obligation to file such a petition, and we have no present
intention to do so, any holder of shares of common stock or
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Series A Preferred Stock who desires such a petition to be filed is advised to
file it on a timely basis. Any stockholder may withdraw such stockholder's
demand for appraisal by delivering to us a written withdrawal of his or her
demand for appraisal, except (i) that any such attempt to withdraw made more
than 60 days after the Effective Time will require our written approval and (ii)
that no appraisal proceeding in the Delaware Court shall be dismissed as to any
stockholder without the approval of the Delaware Court, and such approval may be
conditioned upon such terms as the Delaware Court deems just.
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Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of July 9, 1999, certain information as
to the stock ownership and voting power of all persons (or groups of persons)
known by us to be the beneficial owner of more than five percent (5%) of the
common stock, each of our directors, each of the executive officers and all
directors and executive officers as a group.
Number of Shares
Beneficially Percentage of
Name of Beneficial Owner(1) Owned (2) Voting Power (3)
- --------------------------- ---------------- ----------------
Eckardt C. Beck (4) 429,171 2.4
Peter H. Gardner (5) 46,338 *
Alexander P. Haig (6) 15,121 *
Douglas M. Costle (7) 15,000 *
Stephen D. Fish (8) 463,000 2.6
Irwin M. Rosenthal (9) 15,121 *
John G. Murchie (10) 37,062 *
All officers and directors as a
group (7 persons) (11) 1,020,813 5.6
Technology Funding Venture
Partners V, An Aggressive
Growth Fund, L.P. (12) 1,547,266 8.4
The Aries Fund,
a Cayman Islands Trust (13)
787 7th Avenue
48th Floor
New York, New York 10019 2,175,891 11.7
Aries Domestic Fund, L.P. (14)
787 7th Avenue, 48th Floor
New York, New York 10019 1,268,697 6.9
Porter Partners, L.P. (15)
100 Shoreline, Suite 211B
Mill Valley, California 94941 896,000 5.0
P.A.W. Offshore Fund, Ltd. (16)
90 Mees Pierson
904 East Bay Street
P.O. Box 55-6233
Nassau, Bahamas 1,120,000 6.3
- ----------
* Less than one percent.
(1) Unless otherwise indicated and subject to applicable community property
laws, each stockholder has sole voting and investment power with respect
to all shares of common stock beneficially owned by such
(footnotes continued on next page)
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stockholder. Unless otherwise indicated, the address of each stockholder
is c/o Conversion Technologies International, Inc., 7 San Bartola Drive,
St. Augustine, Florida 32086.
(2) The number of shares beneficially owned by each person named in the table
includes shares held by each individual of (i) the Company's common stock;
(ii) the Company's Series A Preferred Stock, as converted into common
stock; (iii) Series A Preferred Stock subject to warrants that are
presently exercisable, as converted into common stock; and (iv) common
stock subject to options or warrants that are presently exercisable or
exercisable within 60 days of July 9, 1999.
(3) Applicable percentage of voting power is based on the 17,863,645 shares of
common stock outstanding (on a diluted basis) as of July 9, 1999. That
number is comprised of 6,947,045 outstanding shares of common stock and
10,916,600 shares of common stock issuable upon conversion of 545,830
outstanding shares of Series A Preferred Stock. Shares of Series A
Preferred Stock and common stock subject to options and warrants that are
presently exercisable or exercisable within 60 days are deemed to be
beneficially owned by the person holding such options and warrants for the
purpose of computing the percentage of ownership of such person but are
not treated as outstanding for the purpose of computing the percentage of
any other person.
(4) Includes 13,833 shares of common stock held and 224,000 shares of common
stock issuable upon conversion of 11,200 outstanding shares of Series A
Preferred Stock. Also includes currently exercisable options to purchase
191,338 shares of common stock. Excludes options to purchase 120,000
shares of common stock which are not exercisable within 60 days. Also
excludes options to be granted to such individual upon consummation of, as
well as shares which the individual may purchase in, the Series B
Preferred Financing. The address of such stockholder is 6345 NW 26th
Terrace, Boca Raton, Florida 33496.
(5) Includes currently exercisable options to purchase 46,338 shares of common
stock. Excludes options to purchase 10,000 shares of common stock which
are not exercisable within 60 days. Also excludes options to be granted
to such individual upon consummation of the Series B Preferred Financing.
Mr. Gardner was formerly an Investment Officer at Technology Funding, Inc.
("TFI"), the Managing General Partner of Technology Funding Partners III,
L.P. ("TFP III") and Technology Funding Partners V, an Aggressive Growth
Fund, L.P. ("TFVP V"). Mr. Gardner disclaims beneficial ownership of all
securities of the Company owned by TFP III and TFVP V.
(6) Includes currently exercisable options to purchase 15,121 shares of common
stock. Excludes options to purchase 10,000 shares of common stock which
are not exercisable within 60 days. Also excludes options to be granted to
such individual upon consummation of the Series B Preferred Financing.
(7) Includes currently exercisable options to purchase 15,000 shares of common
stock. Excludes options to purchase 10,000 shares of common stock which
are not exercisable within 60 days. Also excludes options to be granted to
such individual upon consummation of the Series B Preferred Financing.
(8) Includes 448,000 shares issuable upon conversion of 22,400 shares of
Series A Preferred Stock and currently exercisable options to purchase
15,000 shares of common stock. Excludes options to purchase 10,000 shares
of common stock which are not exercisable within 60 days. Also excludes
options to be granted to such individual upon consummation of, as well as
shares which the individual may purchase in, the Series B Preferred
Financing.
(9) Includes currently exercisable options to purchase 15,121 shares of common
stock. Excludes options to purchase 10,000 shares of common stock which
are not exercisable within 60 days. Also excludes options to be granted to
such individual upon consummation of the Series B Preferred Financing.
(10) Includes currently exercisable options to purchase 37,062 shares of common
stock. Excludes options to purchase 66,668 shares of common stock which
are not exercisable within 60 days. Also excludes options to be granted to
such individual upon consummation of the Series B Preferred Financing.
(footnotes continued on next page)
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(11) Calculation does not include securities held by Mr. Goldman or Mr. Pappas
who are no longer directors or officers of the Company. Calculation
excludes options to purchase 236,668 shares of common stock which are not
exercisable within 60 days. Also excludes options to be granted to any of
such individuals upon consummation of, as well as shares which these
individuals may purchase in, the Series B Preferred Financing.
(12) Includes (A) securities held by TFVP V consisting of (i) 207,547 shares of
common stock, (ii) 176,400 shares of common stock issuable upon conversion
of 8,820 shares of Series A Preferred Stock, (iii) shares of common stock
issuable upon exercise of 371,822 Class A Warrants (includes the Class B
Warrants underlying such Class A Warrants), and (iv) 51,884 shares of
common stock underlying additional warrants, and (B) securities held by
TFP III consisting of (i) 69,180 shares of common stock, (ii) 529,200
shares of common stock issuable upon conversion of 26,460 shares of Series
A Preferred Stock, (iii) shares of common stock issuable upon exercise of
123,940 Class A Warrants (includes the Class B Warrants underlying such
Class A Warrants) and (iv) 17,293 shares of common stock underlying
additional warrants.
(13) Paramount Capital Asset Management, Inc. ("PCAM") is the Investment
Manager to The Aries Fund, a Cayman Islands Trust (the "Aries Trust").
Lindsay A. Rosenwald, M.D. is President and sole shareholder of PCAM. PCAM
and Dr. Rosenwald may be considered to beneficially own the securities
owned by the Aries Trust by virtue of their authority to vote and/or
dispose of the securities. Securities held by the Aries Trust consist of
1,478,400 shares of common stock issuable upon conversion of 73,920 shares
of Series A Preferred Stock, shares of common stock issuable upon exercise
of 148,728 Class A Warrants (includes the Class B Warrants underlying such
Class A Warrants); 400,903 shares of common stock underlying additional
warrants, and 147,860 shares of common stock underlying Series A Preferred
Stock subject to warrants. In addition, Dr. Rosenwald beneficially owns
205,134 shares of our common stock and warrants to purchase 44,727 shares
of our common stock. Excludes shares which may be purchased in the Series
B Preferred Financing.
(14) PCAM is the General Partner of the Aries Domestic Fund L.P. Dr. Rosenwald
is the President and sole shareholder of PCAM. PCAM and Dr. Rosenwald may
be considered to beneficially own the securities owned by the Aries
Domestic Fund, L.P. by virtue of their authority to vote and/or dispose of
the securities. PCAM and Dr. Rosenwald beneficially own all securities of
the Company held by the Aries Domestic Fund, L.P. Securities held by Aries
Domestic Fund, L.P. consist of 761,600 shares of common stock issuable
upon conversion of 38,080 shares of Series A Preferred Stock, shares of
common stock issuable upon exercise of 247,882 Class A Warrants (including
the Class B Warrants underlying such Class A Warrants); warrants to
purchase an additional 183,035 shares of common stock, and warrants to
purchase Series A Preferred Stock which is convertible into 76,180 shares
of common stock. In addition, Dr. Rosenwald beneficially owns 205,134
shares of the Company common stock and warrants to purchase 44,727 shares
of Conversion Technologies common stock. Excludes shares which may be
purchased in the Series B Preferred Financing.
(15) Includes 896,000 shares of common stock underlying 44,800 shares of Series
A Preferred Stock. Jeffrey H. Porter is the Managing General Partner of
Porter Partners, L.P. Mr. Porter may be considered a beneficial owner of
the securities owned by Porter Partners, L.P. by virtue of his authority
to vote and/or dispose of the securities held by Porter Partners, L.P. Mr.
Porter disclaims beneficial ownership of all securities of the Company
held by Porter Partners, L.P.
(16) Includes 1,120,000 shares of common stock underlying 56,000 shares of
Series A Preferred Stock. Peter Wright is the Investment Manager for the
P.A.W. Offshore Fund, Ltd. Mr. Wright may be considered the beneficial
owner of the securities owned by the P.A.W. Offshore Fund, Ltd. by virtue
of his authority to vote and/or dispose of the Company's securities held
by P.A.W. Offshore Fund, Ltd. Mr. Wright disclaims beneficial ownership of
all securities of the Company held by P.A.W. Offshore Fund, Ltd.
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Interest of Certain Persons
Our Board of Directors has authorized the grant of options exercisable at
$.03 per share to certain of our directors and officers upon consummation of the
Series B Preferred Financing. The total number of options to be issued will be
such that, after issuance, the holders will be entitled to purchase upon
exercise thereof, up to 20% of the outstanding shares of common stock on a fully
diluted basis. Issuance of shares of common stock upon exercise of these options
would be contingent upon effecting the Merger and related Charter Amendment. In
addition, certain directors and/or associates may purchase Series B Preferred
Stock in the Series B Preferred Financing.
By Order of the Board of Directors
--------------------------------------------
Eckardt C. Beck
Acting President and Chief Executive Officer
St. Augustine, Florida
_______, 1999
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Annex A
TITLE 8. CORPORATIONS
CHAPTER 1. GENERAL CORPORATION LAW
SUBCHAPTER IX. MERGER OR CONSOLIDATION
8 Del. C. ss. 262 (1998)
ss. 262. Appraisal rights
(a) Any stockholder of a corporation of this State who holds shares of stock
on the date of the making of a demand pursuant to subsection (d) of this section
with respect to such shares, who continuously holds such shares through the
effective date of the merger or consolidation, who has otherwise complied with
subsection (d) of this section and who has neither voted in favor of the merger
or consolidation nor consented thereto in writing pursuant to ss. 228 of this
title shall be entitled to an appraisal by the Court of Chancery of the fair
value of the stockholder's shares of stock under the circumstances described in
subsections (b) and (c) of this section. As used in this section, the word
"stockholder" means a holder of record of stock in a stock corporation and also
a member of record of a nonstock corporation; the words "stock" and "share" mean
and include what is ordinarily meant by those words and also membership or
membership interest of a member of a nonstock corporation; and the words
"depository receipt" mean a receipt or other instrument issued by a depository
representing an interest in one or more shares, or fractions thereof, solely of
stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or series
of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to ss. 251 (other than a merger effected pursuant to ss.
251(g) of this title), ss. 252, ss. 254, ss. 257, ss. 258, ss. 263 or ss. 264 of
this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to determine
the stockholders entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or consolidation, were either
(i) listed on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or (ii) held of record by more than 2,000 holders;
and further provided that no appraisal rights shall be available for any shares
of stock of the constituent corporation surviving a merger if the merger did not
require for its approval the vote of the stockholders of the surviving
corporation as provided in subsection (f) of ss. 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series of
stock of a constituent corporation if the holders thereof are required by the
terms of an agreement of merger or consolidation pursuant to ss.ss. 251, 252,
254, 257, 258, 263 and 264 of this title to accept for such stock anything
except:
a. Shares of stock of the corporation surviving or resulting from such
merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts in
respect thereof, which shares of stock (or depository receipts in respect
thereof) or depository receipts at the effective date of the merger or
consolidation will be either listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or held of record
by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a. and b. of this paragraph; or
d. Any combination of the shares of stock, depository receipts and cash
in lieu of fractional shares or fractional depository receipts described in the
foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under ss. 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall be
available for the shares of the subsidiary Delaware corporation.
<PAGE>
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting, shall
notify each of its stockholders who was such on the record date for such meeting
with respect to shares for which appraisal rights are available pursuant to
subsection (b) or (c) hereof that appraisal rights are available for any or all
of the shares of the constituent corporations, and shall include in such notice
a copy of this section. Each stockholder electing to demand the appraisal of
such stockholder's shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for appraisal of such
stockholder's shares. Such demand will be sufficient if it reasonably informs
the corporation of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of such stockholder's shares. A proxy or
vote against the merger or consolidation shall not constitute such a demand. A
stockholder electing to take such action must do so by a separate written demand
as herein provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become effective;
or
(2) If the merger or consolidation was approved pursuant to ss. 228 or ss.
253 of this title, each consitutent corporation, either before the effective
date of the merger or consolidation or within ten days thereafter, shall notify
each of the holders of any class or series of stock of such constitutent
corporation who are entitled to appraisal rights of the approval of the merger
or consolidation and that appraisal rights are available for any or all shares
of such class or series of stock of such constituent corporation, and shall
include in such notice a copy of this section; provided that, if the notice is
given on or after the effective date of the merger or consolidation, such notice
shall be given by the surviving or resulting corporation to all such holders of
any class or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective date
of the merger or consolidation, shall, also notify such stockholders of the
effective date of the merger or consolidation. Any stockholder entitled to
appraisal rights may, within 20 days after the date of mailing of such notice,
demand in writing from the surviving or resulting corporation the appraisal of
such holder's shares. Such demand will be sufficient if it reasonably informs
the corporation of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of such holder's shares. If such notice
did not notify stockholders of the effective date of the merger or
consolidation, either (i) each such constitutent corporation shall send a second
notice before the effective date of the merger or consolidation notifying each
of the holders of any class or series of stock of such constitutent corporation
that are entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send such a
second notice to all such holders on or within 10 days after such effective
date; provided, however, that if such second notice is sent more than 20 days
following the sending of the first notice, such second notice need only be sent
to each stockholder who is entitled to appraisal rights and who has demanded
appraisal of such holder's shares in accordance with this subsection. An
affidavit of the secretary or assistant secretary or of the transfer agent of
the corporation that is required to give either notice that such notice has been
given shall, in the absence of fraud, be prima facie evidence of the facts
stated therein. For purposes of determining the stockholders entitled to receive
either notice, each constitutent corporation may fix, in advance, a record date
that shall be not more than 10 days prior to the date the notice is given,
provided, that if the notice is given on or after the effective date of the
merger or consolidation, the record date shall be such effective date. If no
record date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the day on
which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw such
stockholder's demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or
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consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in Chancery
in which the petition was filed a duly verified list containing the names and
addresses of all stockholders who have demanded payment for their shares and
with whom agreements as to the value of their shares have not been reached by
the surviving or resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be accompanied by such a
duly verified list. The Register in Chancery, if so ordered by the Court, shall
give notice of the time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting corporation and to
the stockholders shown on the list at the addresses therein stated. Such notice
shall also be given by 1 or more publications at least 1 week before the day of
the hearing, in a newspaper of general circulation published in the City of
Wilmington, Delaware or such publication as the Court deems advisable. The forms
of the notices by mail and by publication shall be approved by the Court, and
the costs thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
such stockholder's certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under this
section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed upon
the parties as the Court deems equitable in the circumstances. Upon application
of a stockholder, the Court may order all or a portion of the expenses incurred
by any stockholder in connection with the appraisal proceeding, including,
without limitation, reasonable attorney's fees and the fees and expenses of
experts, to be charged pro rata against the value of all the shares entitled to
an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders
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of record at a date which is prior to the effective date of the merger or
consolidation); provided, however, that if no petition for an appraisal shall be
filed within the time provided in subsection (e) of this section, or if such
stockholder shall deliver to the surviving or resulting corporation a written
withdrawal of such stockholder's demand for an appraisal and an acceptance of
the merger or consolidation, either within 60 days after the effective date of
the merger or consolidation as provided in subsection (e) of this section or
thereafter with the written approval of the corporation, then the right of such
stockholder to an appraisal shall cease. Notwithstanding the foregoing, no
appraisal proceeding in the Court of Chancery shall be dismissed as to any
stockholder without the approval of the Court, and such approval may be
conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation.
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