<PAGE> 1
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:
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Exsorbet Industries, 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):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rules 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:
- --------------------------------------------------------------------------------
/X/ 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> 2
[LOGO]
EXSORBET INDUSTRIES, INC.
4294 LAKELAND DRIVE, SUITE 200, FLOWOOD, MISSISSIPPI 39204
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of Shareholders of Exsorbet Industries, Inc. (the
"Company") will be held at the Harvey Hotel, 200 East Amite, Jackson,
Mississippi, 39201, on December 10, 1996, at 9:00 a.m. (Central Standard Time),
for the following purposes:
(1) to elect six directors to serve on the Company's Board of
Directors;
(2) to consider and vote upon a proposal to reincorporate the
Company under the laws of the State of Delaware by means of a
merger of the Company with and into a newly formed
wholly-owned subsidiary incorporated in the State of Delaware;
(3) the consider and vote upon a proposal to eliminate cumulative
voting rights with respect to the election of the Board of
Directors;
(4) to consider and vote upon a proposal to create a series of
preferred stock with such rights, privileges and preferences
as the Board of Directors may determine from time to time;
(5) to consider and vote upon a proposal to change the name of the
Company to "Consolidated Eco-Systems, Inc.";
(6) to ratify the selection of Cooper, Shuffield & Company as the
Company's independent certified public accountants for the
fiscal year ending December 31, 1996; and
(7) to transact such other business as may properly be brought
before the meeting or any adjournment thereof.
The shareholders of record at the close of business on October 29,
1996 are entitled to notice of and to vote at this Annual Meeting or any
adjournment thereof.
We hope that you attend the Annual Meeting in person, but in any event
you are urged to mark, date, sign and return your proxy in the enclosed
self-addressed envelope as soon as possible so that your shares may be voted in
accordance with your desires. Any proxy given by a shareholder may be revoked
by that shareholder at any time prior to the voting of the proxy.
EXSORBET INDUSTRIES, INC.
/S/ SAM SEXTON III
Sam Sexton III
Secretary
November 14, 1996
<PAGE> 3
[LOGO]
EXSORBET INDUSTRIES, INC.
4294 LAKELAND DRIVE, SUITE 200, FLOWOOD, MISSISSIPPI 39208
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
DECEMBER 10, 1996
The enclosed proxy is solicited by and on behalf of the Board of
Directors of Exsorbet Industries, Inc. (the "Company") for use at the Annual
Meeting of Shareholders (the "Annual Meeting") to be held at the Harvey Hotel,
200 East Amite, Jackson, Mississippi, 39201, on December 10, 1996, at 9:00 a.m.
(Central Standard Time), and at any adjournment of such Annual Meeting. The
matters to be considered and acted upon at the Annual Meeting are described in
the foregoing notice of the meeting and this Proxy Statement. The persons named
as proxies are Dr. Edward L. Schrader and Sam Sexton III, each of whom is
presently a director of the Company.
This Proxy Statement and the related form of proxy are being mailed on
or about November 14, 1996 to all shareholders of record on October 29, 1996.
Shares of the Company's common stock, $.001 per share par value (the "Common
Stock"), represented by proxies will be voted as described in this Proxy
Statement or as otherwise specified by a shareholder. As to the election of
directors, a shareholder may, by checking the appropriate box on the proxy: (i)
vote for all director nominees as a group; (ii) withhold authority to vote for
all director nominees as a group; or (iii) vote for all director nominees as a
group except those nominees identified by the shareholder in the appropriate
area. See "Proposal No. 1: Election of Directors" below. With respect to the
other proposals, a shareholder may, by checking the appropriate box on the
proxy: (i) vote "FOR" the proposal; (ii) vote "AGAINST" the proposal; or (iii)
"ABSTAIN" from voting on the proposal. Any proxy given by a shareholder may be
revoked by the shareholder at any time prior to the voting of the proxy by
delivering a written notice of revocation to the Secretary of the Company, by
executing and delivering a later-dated proxy or by attending the Annual Meeting
and voting in person.
The cost of soliciting, preparing, assembling and mailing the proxy,
this Proxy Statement, and other materials enclosed therewith, and all clerical
and other expenses of proxy solicitation will be borne by the Company. In
addition, directors, officers and employees of the Company and its subsidiaries
may solicit proxies by telephone, telegram or in person. The Company also has
employed Interwest Transfer Company, a proxy solicitation firm, to solicit
proxies from brokers and banks at a cost of approximately $2,000.00. The
Company also will request brokerage houses and other custodians, nominees and
fiduciaries to forward soliciting materials to the beneficial owners of Common
Stock held of record by such parties and will reimburse such parties for their
expenses in forwarding such materials.
The information contained in the "Compensation Committee Report on
Executive Compensation" below and "Performance of the Common Stock" below shall
not be deemed "filed" with the Securities and Exchange Commission (the "SEC")
or subject to Regulations 14A or 14C or to the liabilities of Section 18 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
<PAGE> 4
VOTING RIGHTS
The holders of record of the 14,956,467 shares of Common Stock
outstanding on October 29, 1996 will be entitled to one vote for each share
held on all matters coming before the Annual Meeting except for the election of
directors. Shareholders will have the right to cumulate their votes in the
election of directors. Every shareholder entitled to vote at such election for
directors shall have the right to vote, in person or by proxy, the number of
shares owned by him or her for as many persons as there are directors to be
elected and for those who the shareholder has the right to vote.
METHOD OF VOTING
The presence, in person or by proxy, of the holders of a majority of
the outstanding shares of Common Stock entitled to vote is necessary to
constitute a quorum at the Annual Meeting. If a quorum is present, the
affirmative vote of a majority of all the outstanding shares of stock shall be
the act of the shareholders with respect to Proposals Nos. 2, 4 and 5. With
respect to Proposal No. 3, the affirmative vote of three-fourths of all the
outstanding shares of Common Stock is necessary to approve the proposal.
Proposal Nos. 6 and 7 require only a majority of the shares present. Once a
quorum is present at a duly organized and convened meeting, shareholders may
continue to do business notwithstanding the withdrawal of enough shareholders
to leave less than a quorum. If a quorum is not present or represented at the
Annual Meeting, the shareholders present at the meeting or represented by
proxy, have the power to adjourn the Annual Meeting from time to time, without
notice other than an announcement at the Annual Meeting, until a quorum is
present or represented. At any such adjourned Annual Meeting at which a quorum
is present or represented, any business may be transacted that might have been
transacted at the original Annual Meeting.
Abstentions may be specified on all proposals (other than the election
of directors) and will be counted towards a quorum. With respect to the
election of directors, votes may be cast in favor or withheld. Directors are
elected by a plurality of the votes cast at the Annual Meeting, and votes that
are withheld will be excluded entirely from the vote and will have no effect.
Brokers who hold shares in street name for customers are required to
vote those shares in accordance with instructions received from the beneficial
owners. In addition, brokers are entitled to vote on certain items, such as
the election of directors and other "discretionary items," even when they have
not received instructions from beneficial owners. Brokers are not permitted to
vote for other "non-discretionary" items without specific instructions from the
beneficial owners. Such "broker non-votes" will be counted towards a quorum.
Under applicable Idaho law and in accordance with the Company's bylaws, broker
non-votes are not counted in determining the total number of votes cast and
will have no effect with respect to Proposal No. 1, the election of directors.
With respect to Proposal Nos. 2-6, broker non-votes will be counted as votes
against the proposals.
ANNUAL REPORT
The annual report for the Company's fiscal year ended December 31,
1995, including audited financial statements (the "Annual Report"), is being
furnished with this Proxy Statement to shareholders of record as of October 29,
1996. The annual report does not constitute a part of the proxy solicitation
materials.
2
<PAGE> 5
OWNERSHIP OF COMMON STOCK8
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
ownership of the Company's Common Stock as of November 1, 1996 (except as
otherwise indicated) by (a) each director and named executive officer of the
Company; (b) all current executive officers and directors of the Company as a
group; and (c) each person known to the Company who is a beneficial holder of
more than five percent of the shares of its Common Stock.
<TABLE>
<CAPTION>
Shares Directly or Percent of
Name and Address Beneficially Owned (1) Class
- ---------------- ------------------ ----------
<S> <C> <C>
DIRECTORS
Charles E. Chunn, Jr. . . . . . . . . . . . . . . . . . . . . 410,000(2)(9) 2.66%
Director, Executive Vice President and Treasurer
9704 Bridgeford
Fort Smith, AR 72903
James J. Connors, Jr. . . . . . . . . . . . . . . . . . . . . . 245,000(2)(9) 1.61%
Director and Executive Vice President
10539 Country Road 1
Fairhope, AL 36532
Dr. Edward L. Schrader . . . . . . . . . . . . . . . . . . . . 335,000(4)(9) 2.18%
Director and President
504 Merganser Trail
Clinton, MS 39056
Sam Sexton III . . . . . . . . . . . . . . . . . . . . . . . . 300,000(5)(9) 1.95%
Director and Secretary
P.O. Box 1526
Fort Smith, AR 72902
Robert D. Vick . . . . . . . . . . . . . . . . . . . . . . . . 245,000(3)(9) 1.61%
Director and Executive Vice President
111 Meadowview
Brandon, MS 39042
Larry Woodcock . . . . . . . . . . . . . . . . . . . . . . . . 1,352,021(6)(9) 8.86%
Director and Executive Vice President
1890 Swisco Road
Sulphur, LA 70663
EXECUTIVE OFFICERS
Caleb H. Dana . . . . . . . . . . . . . . . . . . . . . . . . . 170,000(7) 1.13%
Executive Vice President
103 Pinetrail Place
Madison, MS 39110
Kenneth R. McDonald . . . . . . . . . . . . . . . . . . . . . . 514,469(9) 3.42%
Executive Vice President
P.O. Box 398
Double Springs, AL 35553
Edward M. Penick, Jr. . . . . . . . . . . . . . . . . . . . . . 158,940(8) 1.05%
Executive Vice President
10 Longfellow Place
Little Rock, AR 72207
</TABLE>
3
<PAGE> 6
<TABLE>
<S> <C> <C>
OTHER 5% SHAREHOLDERS
American Physicians Service Group, Inc. . . . . . . . . . . . . 3,300,000(10) 19.23%
1301 Capital of Texas Highway, Suite C-300
Austin, TX 78746
First Commercial Trust Co., N.A. . . . . . . . . . . . . . . . 1,193,600(11) 7.89%
400 West Capitol
Little Rock, AR 72201
Directors and Executive . . . . . . . . . . . . . . . . . . . . 3,730,430(12) 22.44%
Officers as a Group (9 persons)
</TABLE>
(1) All shares are owned directly with voting and dispositive powers
unless otherwise stated.
(2) Includes 325,000 shares of Common Stock issuable upon options
exercisable within 60 days.
(3) Includes 125,000 shares of Common Stock issuable upon options
exercisable within 60 days.
(4) All of these shares of Common Stock are issuable upon options
exercisable within 60 days.
(5) Includes 295,000 shares of Common Stock issuable upon options
exercisable within 60 days.
(6) Mr. Woodcock and his wife, Marilyn Woodcock, jointly own 1,152,021
shares of Common Stock and each holds options exercisable within 60
days to acquire 100,000 shares of Common Stock.
(7) Includes 50,000 shares of Common Stock issuable upon options
exercisable within 60 days.
(8) Includes 60,000 shares of Common Stock issuable upon options
exercisable within 60 days.
(9) As part of the transaction to acquire 7-7, Inc., an Ohio corporation
("7-7"), several individuals each granted an option to American
Physicians Service Group, Inc., a Texas corporation ("APS") to
purchase an aggregate of 1,400,000 shares of Common Stock from such
exercisable within 60 days at a price of $2.75 per share. Such
individuals include Messrs. Chunn, Connors, Schrader, Sexton, Vick,
Woodcock and McDonald, who each granted an option to APS for 180,000,
122,500, 167,500, 200,000, 122,500, 317,500 and 190,000, respectively.
(10) Includes 2,100,000 shares of Common Stock issuable upon options
exercisable within 60 days. Of these 2,100,000 shares of Common
Stock, 1,400,000 may be acquired pursuant to options granted by
Messrs. Chunn, Connors, Schrader, Sexton, Vick, Woodcock, McDonald and
a former officer of the Company.
(11) Pursuant to the terms of a trust agreement between the former President
of the Company, Floyd Leland Ogle, and First Commercial Trust Co.,
N.A., the trustee ("First Commercial"), 1,458,100 shares of Common
Stock, along with a currently exercisable option to purchase 50,000
shares of Common Stock were placed into trust on or about February 26,
1996 for the benefit of Mr. Ogle's wife, Terrie Ogle. First Commercial
has sold 314,500 shares of Common Stock as of November 1, 1996. The
trust agreement provides that First Commercial will vote the shares in
the trust at the Annual Meeting in proportion to the manner in which
all the remaining outstanding shares vote. First Commercial disclaims
beneficial ownership of these shares.
(12) Includes 2,635,338 shares of Common Stock issuable upon options
exercisable within 60 days.
4
<PAGE> 7
PROPOSAL NO. 1: ELECTION OF DIRECTORS
Each of the persons set forth below has been nominated for election to
the Board of Directors, to serve for a term of one year until the next annual
meeting of shareholders or until his successor is elected and qualified. See
"Directors and Executive Officers--Nominees for Election as Directors." The
shares represented by proxies will be voted as specified by the shareholder.
If a shareholder does not specify his or her choice, the shares will be voted
in favor of the election of the nominees listed on the proxy except that, in
the event any nominee should not continue to be available for election, such
proxies will be voted for the election of such other person as the Board of
Directors may recommend. The Company does not presently contemplate that any
of the nominees will become unavailable for election for any reason.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
DIRECTORS AND EXECUTIVE OFFICERS
The Company's Bylaws provide that the number of directors on the Board
of Directors shall be fixed by the Board of Directors. During fiscal year 1995,
the Company's Board of Directors was fixed at three and consisted of Charles E.
Chunn, Jr., Floyd Leland Ogle and Sam Sexton III. Mr. Ogle resigned from his
positions as an officer and director of the Company in February of 1996. After
Mr. Ogle resigned, Dr. Edward L. Schrader was appointed by the remaining
directors to the Board of Directors on February 21, 1996. In accordance with an
agreement between the Company and Larco Environmental Services, Inc., a
Louisiana corporation ("Larco"), upon the Company's acquisition of Larco, the
membership of the Board of Directors was increased by one and Larry Woodcock,
one of Larco's former shareholders, was appointed to the Board of Directors. In
August of 1996, the Board of Directors increased the size of the Board of
Directors by two to its current number of six and appointed two additional
employees of the Company to the Board of Directors: James J. Connors, Jr. on
August 19 and Robert D. Vick on August 22. The shareholders shall cast their
votes for the election of directors for these six seats on the Board of
Directors.
In addition to these six seats, the Company has agreed to increase the
membership of the Board of Directors after the Annual Meeting pursuant to and in
accordance with that certain Stock Purchase Agreement, dated September 30, 1996
by and among the Company and the former shareholders of 7-7, Inc., an Ohio
corporation ("7-7") and attached as Exhibit 2.1 to the Company's Form 8-K/A-1
filed with the SEC on October 16, 1996, which describes the acquisition of 7-7
and its related financing (the "7-7 Form 8-K") and that certain Shareholders
Rights Agreement (herein so called), dated September 30, 1996 by and between the
Company and American Physicians Service Group, Inc., a Texas corporation, which
provided the financing for the acquisition of 7-7 ("APS"), and attached as
Exhibit 10.10 to the 7-7 Form 8-K. The Company has agreed pursuant to the Stock
Purchase Agreement to increase the membership of the Board of Directors by one
and appoint a former shareholder of 7-7, as selected by the former shareholders,
to the Board of Directors after the Annual Meeting. Additionally, the Company
has agreed pursuant to the Shareholders Rights Agreement to increase the
membership of the Board of Directors by one and appoint an individual designated
by APS to the Board of Directors promptly after this Annual Meeting. The
Shareholders Rights Agreement further requires the Company to appoint a second
individual designated by APS if APS acquires one-half of the shares of Common
Stock that APS is entitled to purchase pursuant to that certain Stock Warrant
(herein so called) dated September 30, 1996 by and between the Company and APS,
attached as Exhibit 10.11 to the 7-7 Form 8-K, which provides for the
acquisition of 300,000 shares of Common Stock, and those certain Option
Agreements (herein so called) each dated September 30, 1996 each by a present or
former officer or director of the Company and APS, a form of which is attached
as Exhibit 10.14 to the 7-7 Form 8-K and provides for the acquisition of an
aggregate of 1,400,000 shares of Common Stock from such persons. The obligation
to appoint a second individual designated by APS to the Board of Directors
arises if APS acquires one half of the Common Stock that it is entitled to
acquire pursuant to the Stock Warrant and the Option Agreements. Once APS
possesses the right to appoint two members of the Board of Directors and in the
event the membership of Board of Directors is increased or otherwise becomes
larger than ten members, the Board of Directors will increase its membership by
one and APS shall be entitled to designate a third member to be appointed by the
Company to the Board of Directors.
The following sets forth certain information regarding the nominees
for election to the Company's Board of Directors and the Company's Executive
Officers:
5
<PAGE> 8
NOMINEES FOR ELECTION AS DIRECTORS
<TABLE>
<CAPTION>
Director
Name Age Since
------------------------ --- ----------
<S> <C> <C>
Charles E. Chunn, Jr. 38 12/1/93
James J. Connors, Jr. 37 8/19/96
Edward L. Schrader 45 2/21/96
Sam Sexton III 38 12/20/93
Robert D. Vick 39 8/22/96
Larry Woodcock 49 6/26/96
</TABLE>
Charles E. Chunn, Jr.
Mr. Chunn joined the Company on December 1, 1993 as a Director and
Secretary/Treasurer. He served as Secretary/Treasurer until he was elected to
the position of President/Treasurer of the Company on February 26, 1996. Mr.
Chunn served as President/Treasurer until he was elected to the positions of
Executive Vice President and Treasurer on April 1, 1996. Mr. Chunn was
Managing Partner of Chunn & Company, CPA, a firm of certified public
accountants, from 1982 until 1994 and served as Treasurer of InterFinance
Corporation, a privately held general finance business, in 1994.
James J. Connors, Jr.
Mr. Connors joined the Company on December 28, 1995 as the Chairman of
Eco-Systems, Inc. ("Eco-Systems"), a wholly owned subsidiary of the Company,
when Eco-Systems was acquired by the Company. He had served as Chairman of
Eco-Systems since March of 1993. He was appointed to Executive Vice President
of the Company on April 1, 1996. From 1989 to 1993, Mr. Connors was Vice
President of Woodward-Clyde Associates, a privately held engineering firm based
in Denver, Colorado ("Woodward-Clyde").
Dr. Edward L. Schrader.
Dr. Schrader joined the Company on February 21, 1996 as a Director.
He was elected President and Chief Executive Officer of the Company on April 1,
1996. He has served as an international oil spill and environmental consultant
since 1988. From 1990 to 1995, Dr. Schrader was Chairman of the Department of
Geology and a Director of Millsaps Sorbent Laboratory at Millsaps College,
Jackson, Mississippi. Currently, he is an Associate Dean in the Division of
Sciences of Millsaps College.
Sam Sexton III.
Mr. Sexton joined the Company on December 20, 1993 as a Director and
Vice President. He served as Vice President until his election as Secretary of
the Company on February 21, 1996. Mr. Sexton has served as general counsel to
the Company since April of 1996. From 1987 until April of 1996, he maintained
a private legal practice with Sexton Law Firm, P.A. in Fort Smith, Arkansas.
Robert Vick.
Mr. Vick joined the Company on December 28, 1995, as Principal
Engineer for Eco-Systems. He has served in such capacity with Eco-Systems
since March of 1993 and continues to serve in such capacity. He was elected to
the position of Executive Vice President on April 1, 1996. Mr. Vick has served
as a Director of the
6
<PAGE> 9
Company since August 22, 1996. From 1991 to 1993 he served as an associate and
Senior Project Engineer for Woodward- Clyde.
Larry Woodcock.
Mr. Woodcock joined the Company on June 26, 1996 as a Director and
Executive Vice President. From 1979 to 1996 he served as President of Larco
Environmental Services, Inc., a Louisiana corporation ("Larco"), which has been
a wholly-owned subsidiary of the Company since June 26, 1996.
EXECUTIVE OFFICERS
The executive officers of the Company consist of Charles E. Chunn, Jr.,
James J. Connors, Jr., Caleb H. Dana, Jr., Kenneth R. McDonald, Edward M.
Penick, Jr., Dr. Edward L. Schrader, Sam Sexton III, Robert Vick and Larry
Woodcock. Messrs. Chunn, Connors, Schrader, Sexton, Vick and Woodcock are
currently also directors of the Company. See "--Nominees for Election as
Directors."
Caleb H. Dana.
Mr. Dana joined the Company on December 28, 1995, as Principal
Regulatory Officer of Eco-Systems, when Eco-Systems was acquired by the
Company. He had served in the same capacity with Eco-Systems since March of
1993. He has served as an Executive Vice President of the Company from April,
1996 until the present time. From 1989 to 1993, Mr. Dana served as an
associate with Woodward-Clyde. Mr. Dana also worked for the Mississippi
Department of Environmental Quality, Board of Pollution Control for eleven
years, and for the United States Environmental Protection Agency for two years.
Kenneth R. McDonald.
Mr. McDonald joined the Company as an Executive Vice President in June,
1996. He served as President and Chairman of the Board of K.R. Industrial
Service of Alabama, Inc. from 1991 to the present time. From 1989 to 1991, Mr.
McDonald acted as President of Industrial Service of the Midwest, a privately
held company, in St. Louis, Missouri.
Edward M. Penick, Jr.
Mr. Penick joined the Company in September 1995 as Chairman of the
Board of Consolidated Environmental Services, Inc., a wholly owned subsidiary of
the Company. In April, 1996 he was appointed as head of the Company's Investor
Relations Division. Mr. Penick also has extensive experience in the banking
industry, having previously worked for Twin Cities Bank based in Little Rock,
Arkansas from 1968 to 1991. When he left in April of 1991 he was a Vice
Chairman.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Company has a Compensation Committee, which during fiscal 1995
consisted of Charles E. Chunn, Jr. and Floyd Leland Ogle. See "Compensation
Committee Interlocks and Insider Participation" and "Compensation Committee
Report on Executive Compensation." The Compensation Committee reviews and
makes recommendations to the Board of Directors on officer and senior employee
compensation, stock option awards and other compensation, administers the
Incentive Plan and generally oversees matters relating to compensation of
employees of the Company. The Compensation Committee met or unanimously voted
on resolutions six times during fiscal year 1995.
The Company does not have standing audit or nominating committees.
The full Board of Directors met or unanimously voted on resolutions 8
times during fiscal year 1995. Each of the directors attended and acted upon
100% of the aggregate number of Board of Director meetings or consents and
Board of Director Committee meetings or consents during fiscal year 1995.
7
<PAGE> 10
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
During fiscal year 1995, the Compensation Committee was composed of
Charles E. Chunn, Jr. and Floyd Leland Ogle, the former President of the
Company.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth all compensation paid to each person
who served as the Company's Chief Executive Officer during fiscal year 1995 and
any other highly compensated executive officers of the Company whose total
annual compensation was in excess of $100,000 during fiscal year 1995:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
------------------- ----------------------
Securities Underlying
Options/SARs(1)
Name Year Salary($) #
- ----------------------- ---- --------- ----------------
<S> <C> <C> <C>
Gale F. Strother (2) 1995 2,400 ----
1994 60,600 ----
Floyd Leland Ogle(3) 1995 50,000(4)
Charles E. Chunn, Jr. 1995 3,627 50,000(4)
1994 --- ----
Gary Cotten(5) 1995 --- 50,000(4)
</TABLE>
_____________________________
(1) Represents the number of options granted to the named executive
officer for the year noted. The Company has not made any grants of
SARs.
(2) Mr. Strother served as President of the Company from December 9, 1993
until March 21, 1995. As of March 21, 1995, he was no longer an
executive officer of the Company.
(3) Mr. Ogle served as President of the Company from March 21, 1995 until
February 21, 1996. As of February 21, 1996, Mr. Ogle was no longer an
executive officer of the Company.
(4) Each of these persons received options to purchase the 50,000 shares
of Common Stock at an exercise price of $5.00 per share. The Common
Stock's closing price on the date of the grant was $7.875 per share.
Therefore, the total fair market value of the options was equivalent
to $2.875 per share on the date of the grant. The fair market value
of an option for 50,000 shares of stock was $143,750 on the date of
grant.
(5) Mr. Cotten served as the Company's Chief Operating Officer from
January 1, 1995 until March 29, 1996. As of March 29, 1996 Mr. Cotten
was no longer an executive officer of the Company.
8
<PAGE> 11
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table summarizes all individual grants of stock options
made during fiscal year 1995 to each of the named executive officers of the
Company.
<TABLE>
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation
Individual Grants for Option Term
-------------------------------------------------------------------------------------------------- --------------------------------
Number of
Securities
Underlying % of Total
Options/ Options/SARs Exercise
SARs Granted to or Base Market Price
Granted Employees in Price Date of on the Date Expiration
Name (#) Fiscal Year ($/SH) Grant of Grant(1) Date 0%$(2) 5%($)(3)(4) 10%($)(3)(4)
-------- ------ ------------ -------- ------- ------------ ---------- ------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gale F. Strother . . 0 --- $ --- ---- $ ---- ---- $ ---- $ ---- $ ----
President
Floyd Leland Ogle . . 50,000 9.01% 5.00 5/25/95 7 7/8 5/25/98 143,750 205,815 274,081
President
Charles E. Chunn, Jr. 50,000 9.01% 5.00 5/25/95 7 7/8 5/25/98 143,750 205,815 274,081
Secretary/Treasurer
Gary Cotten . . . . . 50,000 9.01% 5.00 5/25/95 7 7/8 5/25/98 143,750 205,815 274,081
Chief Operating
Officer
All Shareholders(5) . 554,667(6) 100.0% $2,437,194 $4,345,055 $ 6,969,899
</TABLE>
_______________________________________
(1) The Market Price on the Date of Grant is the closing price of the
Company's Common Stock as reported by Nasdaq.
(2) This column represents the value of the option at the grant-date
market price.
(3) These are hypothetical values using assumed growth as prescribed by
the Securities and Exchange Commission.
(4) The potential realizable value is calculated from the market price of
the option on the date of grant appreciated at the specified rate
(i.e. 5% or 10%) over the term of the option minus the exercise price
of the option.
(5) Includes the named executive officers listed above.
(6) These options were granted with exercise prices ranging between $.001
and $8.00 per share and expiration dates between 7/5/98 and 12/27/05.
9
<PAGE> 12
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
The following table shows aggregate exercises of options (or tandem
stock appreciation rights) and free- standing stock appreciation rights during
the year ended December 31, 1995, by each of the named executive officers.
<TABLE>
<CAPTION>
Number of Value of
Securities Underlying Unexercised
Unexercised Options/ In-the-Money
SARs at Options/SARs at
December 31, 1995 December 31, 1995
Shares Acquired (#)(1) ($)(1)(2)
on Exercise Exercisable (E)/ Exercisable (E)/
Name (#) Unexercisable (U) Unexercisable (U)
- ---- ---------------- --------------------- --------------------
<S> <C> <C> <C>
Gale F. Strother . . . . . . . --- 50,000 E $ 168,750 E
President 0 U 0 U
Floyd Leland Ogle . . . . . . . --- 50,000 E 168,750 E
President 0 U 0 U
Charles E. Chunn, Jr. . . . . --- 85,000 E 286,875 E
Secretary/Treasurer 0 U 0 U
Gary Cotten . . . . . . . . . . --- 50,000 E 168,750 E
Executive Vice President 0 U 0 U
</TABLE>
_______________________________________
(1) The Company has not made any grants of SARs.
(2) Amounts shown are based upon the closing price of the Company's Common
Stock on December 29, 1995, which was $8 3/8.
EMPLOYMENT AGREEMENTS
Set forth below are descriptions of the Company's employment
agreements with Charles E. Chunn, Jr., James J. Connors, Jr., Caleb H. Dana,
Kenneth R. McDonald, Edward M. Penick, Jr. Dr. Edward L. Schrader, Sam Sexton
III, Robert D. Vick and Larry Woodcock and his wife, Marilyn Woodcock.
On December 28, 1995, the Company entered into employment agreements
with James J. Connors, Jr., Caleb H. Dana, Edward M. Penick, Jr. and
Robert D. Vick. Each employment agreement is for a period of five years.
Messrs. Connors, Dana and Vick's employment agreements each provide for an
annual salary of $130,000. Mr. Penick's employment agreement provides for an
annual salary of $75,000. All salaries will be adjusted annually for increases
in the cost of living. Additionally, Messrs. Connors, Dana and Vick were each
given an option to acquire up to 8,889 shares of Common Stock for a price of
$.001 per share.
On May 15, 1996, the Company entered into employment agreements with
Charles E. Chunn, Jr., Dr. Edward L. Schrader, and Sam Sexton III. Mr.
Chunn's employment agreement supersedes a previous employment agreement that
was effective January 1, 1996.
Each employment agreement is for a period of five years and will be
automatically renewed for up to two additional five year periods unless the
Company gives written notice of its intent not to renew an employment agreement
at least thirty months in advance of the expiration of its term. The
employment agreements provide that Mr. Chunn, Dr. Schrader and Mr. Sexton each
will be paid salaries at annual rates of $160,000, $165,000, and $94,000,
respectively, increased annually at least five percent for increases in the
cost of living.
10
<PAGE> 13
The employment agreements provide that, if the Company requests the
employee to relocate, and the employee agrees, the Company will pay the
employee: (i) the cost of a moving service; (ii) the cost of a real estate
agency; (iii) an amount equal to a down payment and closing costs on a home at
the employee's new location, limited to 10 percent of the cost of a new home of
3,600 square feet within thirty miles of the employee's new work location; and
(iv) a relocation bonus equal to the employee's salary for a period of one
year. If the Company demands that the employee relocate, then the Company will
provide the same incentives except that the Company will provide a relocation
bonus equal to the employee's salary for a period of five years.
The employment agreements also provide annual incentive bonuses
through which each employee receives additional compensation in the form of
cash or options to acquire the Common Stock. The Company will be obligated to
register the shares of an employee upon demand provided that each employee may
make only one such demand per year. Mr. Chunn and Dr. Schrader are each
entitled to an annual incentive bonus equal to four percent of the net income
of the Company. Mr. Sexton is entitled a bonus equal to two percent of the
net income of the Company.
Additionally, the employment agreements grant each of Messrs. Chunn,
Schrader and Sexton stock options for 100,000, 210,000 and 150,000 shares,
respectively, of the Common Stock immediately exercisable at $.25 per share.
These options were rescinded by the Company and new options were granted on
November 1, 1996 for the same number of shares at $2.00 per share. The Company
will, at the option of the employee, purchase from the employee all or part of
his options, as determined by the employee, at the fair market value of the
Common Stock at the date of termination. All stock options held by the
employees are assignable.
The employment agreements provide that, if there is a change in
control of the Company, the employees will receive certain payments from the
Company. The agreements define "change in control" as a change in control of a
nature that would be required to be reported pursuant to Item 5(f) of Schedule
14A of Regulation 14A promulgated under the Exchange Act, provided that such
change of control shall be deemed to have occurred if: (i) any person (as
defined in sections 13(d) and 14(d) of the Exchange Act) other than the Company
or any person, who on the date hereof is a director, is a beneficial owner,
directly or indirectly, of securities of the Company representing 20 percent of
the combined voting power of the Company's then outstanding shares; or (ii)
during any two consecutive years during the term of the employment agreements,
individuals who, as of the date of the employment agreements, constitute the
Board of Directors, cease for any reason to constitute at least a majority of
the Board of Directors. If, as a result of a change in control of the Company,
the position of the employee is changed, even though the compensation is not
changed, the employee will receive the following amounts: Mr. Chunn and Dr.
Schrader will receive three and one half percent of the greater of (i) the
value of the total assets of the Company and its subsidiaries as of the date of
the change in control; (ii) the total amount of consideration paid for the
acquisition of stock resulting in the change of control; (iii) the fair market
value of the stock acquired which resulted in the change of control, as of the
time of the acquisition; or (iv) the fair market value of the stock acquired
which resulted in a change of control, as of the time of the final events
occurring which resulted in the change of control. Mr. Sexton will receive one
and one half percent of the greater of the previous four values.
Each of the employment agreements provides that the Company will
provide liability insurance insuring each employee against liability resulting
from actions, or failure to take actions, of the employee in performing the
employee's duties, provided that such insurance will not cover intentional
misconduct. The employment agreements further provide that, in the event the
employee becomes disabled, the Company will continue to pay the employee's
salary until such time as the employment agreement is terminated in accordance
with its termination provisions. If the employee's employment is terminated by
death, the Company will pay the employee's estate his then current salary
through the last day of the month on which such death occurs, and will continue
to pay the employee's salary for an additional three months. Under these
employment agreements, employment may be terminated (i) by the employee's
death; (ii) by the Company for due cause; or (iii) at the election of the
employee by giving 60 days advance written notice to the Company.
Additionally, Dr. Schrader's employment agreement provides that the
Company will pay, as an inducement payment to Dr. Schrader, $50,000 a year for
four years for a total of $200,000. The employment agreement provides for
immediate payment of the entire $200,000 if any of four events occurs: (i)
termination of Dr. Schrader's employment with the Company; (ii) severe
financial difficulties of the Company involving potential litigation; (iii) a
change in control of the Company; or (iv) a resolution by the Board of
Directors requiring an immediate payment.
Also, Mr. Chunn is a party to a contract dated January 1, 1996
providing for payment of $220,000 in compensation which vests on December 31,
2000 or at his termination. A loan of up to fifty percent of this amount may be
borrowed at any time prior to the vesting of the compensation. Mr. Chunn is
also a party to another contract calling for payment of an additional sum of
$50,000 per year for four years for a total of $200,000. The agreement provides
for immediate payment of the entire $200,000 if any of four events occurs:
(i) termination of Mr. Chunn's employment with the Company; (ii) severe
financial difficulties of the Company involving potential litigation; (iii) a
change in control of the Company; or (iv) a resolution by the Board of
Directors requiring an immediate payment.
11
<PAGE> 14
On June 26, 1996 the Company entered into employment agreements with
Larry and Marilyn Woodcock. The employment agreements shall automatically
renew for an additional five years unless written notice of the intent not to
renew is given, by either party prior to the expiration of the first four year
period. According to the employment agreements, Mr. and Mrs. Woodcock's annual
salary will be $125,000 and $60,000, respectively, adjusted annually in
accordance with any increase in the cost of living.
Mr. and Mrs. Woodcock's employment agreements provide that each will
receive options to acquire 100,000 shares of the Common Stock exercisable at
$0.25 per share, on each of June 26, 1996, 1997 and 1998. The options will be
exercisable for up to ten years contingent upon the continued employment of the
employee. The employment agreement further provides that the Company will
insure and indemnify Mr. and Mrs. Woodcock against liability for actions taken
as an employee, excluding intentional misconduct.
On June 27, 1996 the Company entered into an employment agreement with
Kenneth McDonald that was for a period of five years and provides for an annual
salary of $100,000. Upon his achievement of sales goals set by the Company,
Mr. McDonald will receive options to purchase 257,234 shares and 257,235 shares
of Common Stock exercisable at $.25 per share on June 27, 1997 and 1998,
respectively.
INCENTIVE AWARD PLAN
In 1995 the Board of Directors adopted and the Company's shareholders
approved the 1995 Incentive Award Plan of Exsorbet Industries, Inc. (the
"Incentive Plan"). A maximum of 1,800,000 shares of Common Stock may be issued
pursuant to options and awards under the Incentive Plan. To date, no stock
awards have been granted under the Incentive Plan, but options to purchase
1,585,524 of Common Stock have been granted. Of these, 600,000 were granted in
connection with the acquisition of Larco.
According to the its terms, the general administration of the
Incentive Plan is the responsibility of a committee consisting of two or more
outside directors appointed by the Board of Directors (the "Plan Committee").
The Plan Committee has the absolute discretion to determine which employees of
the Company are key employees, and to select from among the key employees,
those who will receive options and/or performance bonus awards, which may
include stock or cash. An employee, in consideration of any stock option or
performance award granted pursuant to the Incentive Plan, will enter into an
agreement to remain in the employ of the Company or a subsidiary of the Company
for a period of time to be determined by the Plan Committee after the stock
option or performance award is granted. The Plan Committee has the discretion
to make loans to key employees with respect to the exercise or receipt of
outstanding options or performance awards granted under the Incentive Plan.
Pursuant to the Incentive Plan, the Plan Committee may grant incentive
stock options pursuant to section 422 of the Internal Revenue Code of 1986, as
amended, or the Plan Committee may grant non-qualified options. The purchase
price of each share of stock issued pursuant to the exercise of an incentive
stock option may not be less than the fair market value of the stock on the
date of the grant of the option. Incentive stock options may be exercised by
the grantee six months after the date the option is granted but the options
will expire ten years after the grant date. The purchase price of each share of
stock issued pursuant to a nonqualified option will be set by the Plan
Committee, and it may be less than the fair market value of the stock on the
date of grant, but may not be less than the par value of the stock.
The period after which the right to exercise an option vests in a
grantee will be set by the Plan Committee, but, at any time, the Plan Committee
may accelerate the period in which options vest. Options may be exercised in
whole or in part. Options granted under the Incentive Plan are exercisable only
while the recipient is an employee of the Company, but the Plan Committee may
provide that the option may be exercised within a year after the employee's
death or disability, or within three months after termination of employment for
any other reason.
The Incentive Plan provides that the Company may grant options to
purchase Common Stock to employee directors. The employee directors may
receive, on a yearly basis beginning on March 31 of each year, options to
purchase Common Stock in an amount equal to 10,000 shares for each $1,000,000
of net income of the Company for the preceding year, as reflected in the
Company's audited financial statements prepared by the Company's independent
auditors. The exercise price for the options will be 80% of the fair market
value of the Common Stock on the date the option was granted. Options granted
to employee directors are exercisable only after six months from the date of
grant, and the options expire ten years after the date of grant.
12
<PAGE> 15
Restricted stock may be awarded to any key employee designated by the
Plan Committee pursuant to a restricted stock agreement, which shall be
executed by the key employee and an authorized officer of the Company.
Restricted shares are subject to such restrictions as the Plan Committee shall
provide, including restrictions based on duration of employment with the
Company, Company performance, or individual performance. The holders of
restricted shares, however, will be entitled to vote their restricted shares
and to receive dividend payments. The Plan Committee retains the right, after
restricted stock is issued, to remove any and all restrictions imposed by the
restricted stock agreement.
The Incentive Plan may be wholly or partially amended, suspended or
terminated at any time by the Board of Directors of the Company, except that no
action will be taken by the board that would otherwise require stockholder
approval. In the event of any change in the outstanding shares of the Company
through merger, consolidation, reorganization, recapitalization, stock split,
stock dividend, or other like change in capital structure, the Plan Committee
may make an appropriate adjustment to increase the maximum number and type of
shares that may be issued pursuant to the Incentive Plan. In the event of such
a change or exchange of outstanding shares, other than for securities of
another corporation or by reorganization, the Plan Committee will make an
appropriate adjustment to maintain the proportionate interest if the holders of
options under the Incentive Plan.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ACQUISITION OF LARCO ENVIRONMENTAL SERVICES, INC.
On June 26, 1996, the "Company" entered into an Agreement and Plan of
Merger (the "Larco Agreement") between the Company, Larco Acquisition, Inc., an
Arkansas corporation and wholly owned subsidiary of the Company, Larco, and
Larry Woodcock and his wife, Marilyn Woodcock. Pursuant to the Larco Agreement,
the Company beneficially acquired all of the outstanding common stock of Larco
from its sole shareholders, Mr. and Mrs. Woodcock. In return, Mr. and Mrs.
Woodcock received 1,152,021 shares of Common Stock. The Board of Directors of
the Company determined this consideration to be fair and reasonable by
determining the fair market value of Larco to be, at a minimum, $4,500,000.
The value of the Common Stock at closing, based on a five day closing price
prior to closing, was approximately $3.89. The amount of Common Stock
provided, the Board believed, was representative of the fair market value of
Larco. The Company will register these shares pursuant to the Securities Act
of 1933, as amended (the "Securities Act") at its own expense upon the request
of Mr. and Mrs. Woodcock. The Company also purchased real estate used by Larco
from Mr. and Mrs. Woodcock for $1,388,000. In connection with the transaction
Mr. and Mrs. Woodcock entered into employment agreements and will receive cash
compensation of $125,000 and $60,000, respectively, per year for the next five
years. In addition, they received options to acquire up to 600,000 shares of
Common Stock. For a more complete description of Mr. and Mrs. Woodcock's
employment agreements, see "COMPENSATION OF EXECUTIVE OFFICERS--Employment
Agreements."
ACQUISITION OF KR INDUSTRIAL SERVICE OF ALABAMA, INC.
On June 27, 1996, the Company entered into a Stock Exchange Agreement
(the "KR Agreement") by and between the Company, KR Acquisition, Inc., an
Arkansas corporation and wholly owned subsidiary of the Company, KR Industrial
Service of Alabama, Inc., an Alabama corporation ("KR Industrial"), Kenneth R.
McDonald, his wife, Carolyn McDonald, and Kenneth A. Flatt, Jr. Pursuant to
the terms of the KR Agreement, the Company beneficially acquired all of the
outstanding common stock of KR Industrial from its sole shareholders, Mr. and
Mrs. McDonald and Mr. Flatt. In return, Mr. and Mrs. McDonald received 545,338
shares of Common Stock. The Board of Directors of the Company determined this
consideration to be fair and reasonable by determining the fair market value of
KR Industrial to be $2,120,000. The value of the Common Stock at closing,
based on a five day closing price prior to closing, was approximately $3.89.
The amount of Common Stock provided was representative of the fair market value
of KR Industrial. In connection with this transaction, Mr. McDonald was
appointed Executive Vice President of the Company and entered into an employment
agreement with the Company which has a term of five years and that provides for
an annual salary of $100,000 and options for up to 514,469 shares of Common
Stock. See "COMPENSATION OF EXECUTIVE OFFICERS--Employment Agreements."
Additionally, in connection with this transaction, the Company loaned
$500,000 to Mr. McDonald and his wife, Carolyn, on June 27, 1996 and has agreed
to loan them an additional $250,000 on June 27, 1997. The loan
13
<PAGE> 16
bears interest at a 5.5% annual rate. The Company took a security interest in,
and possession of 288,103 shares of Common Stock to secure the debt. The loan
is due on June 27, 1998, but may be extended, at Mr. and Mrs. McDonald's
option, for an additional six months.
COMPENSATION OF DIRECTORS
Each director of the Company also serves as an officer and the Company
has executed employment agreements with each director to govern such employment
relationships. The directors of the Company receive no additional compensation
for their service as directors.
14
<PAGE> 17
PERFORMANCE OF THE COMMON STOCK
The graph below compares the cumulative total return of the Company's
Common Stock to the Nasdaq Market Index and the Sanitation Services, N.E.C.
Index assuming a $100 investment on January 3, 1995.
[GRAPH]
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Compensation Committee's (the "Committee") policy is to review and
make recommendations to the Board of Directors on cash compensation, stock
option and restricted stock awards and other compensation for the Company's
executive officers. The Committee may take into account many factors in making
the determination of aggregate compensation. Such factors include (1) the
financial results of the Company for the preceding fiscal year, (2) the
performance of the Company's stock and (3) compensation paid to executive
officers in prior years. The result is totally subjective.
In fiscal year 1995 the Company entered into employment agreements
with Messrs. Connors, Dana, Penick and Vick. The Company entered into an
employment agreement with Charles E. Chunn, Jr., during fiscal year 1996 that
became effective on January 1, 1996. Such employment agreement was superseded
on May 15, 1996. Between May and August of 1996 the Company entered into
employment agreements with most of its executive officers. See "COMPENSATION
OF EXECUTIVE OFFICERS--Employment Agreements." Compensation of the Company's
executive officers is comprised of (1) annual salary, (2) annual incentive
compensation, (3) stock option and restricted stock awards and (4) other
employee benefits. The compensation earned by executive officers in annual
incentive compensation and stock option and restricted stock awards is intended
to align the interests of management and shareholders.
15
<PAGE> 18
Annual salary is determined by the skills and experience required by
the position, the impact of the individual on the Company and the performance
of the individual, and, as discussed above, the Company's existing employment
agreements.
During fiscal 1995, the Committee granted options for the issuance of
164,667 shares pursuant to the Incentive Plan. The Committee did not make any
restricted stock awards pursuant to the Incentive Plan in fiscal year 1995.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICERS
During fiscal year 1995 the Company had two Chief Executive Officers
("CEO"). Gale F. Strother served as CEO from December 9, 1993 until March 21,
1995 and Floyd Leland Ogle served as CEO from March 21, 1995 until February 21,
1996.
During 1995 Mr. Strother received approximately $2,400 in cash
compensation and Mr. Ogle received stock options for the issuance of 50,000
shares of Common Stock. The Company, during 1995, was still a start-up company
and had a policy of minimizing cash compensation to officers to conserve such
financial resources to finance the Company's growth.
The Company's CEO is now Dr. Edward Schrader. Dr. Schrader is
compensated pursuant to a written employment agreement and the Committee may
award discretionary bonuses in addition to the compensation specified in his
employment agreement. For a description of his employment agreement, see
"COMPENSATION OF EXECUTIVE OFFICERS--Employment Agreements."
By: James J. Connors, Jr.
Robert Vick
16
<PAGE> 19
PROPOSAL NO. 2: REINCORPORATION IN DELAWARE
GENERAL
On August 14, 1996, the Board of Directors unanimously approved, and
recommends for shareholder approval, the change of the Company's state of
incorporation from Idaho to Delaware (the "Reincorporation"). The transaction
will not result in any change in the business, management, assets, liabilities
or net worth of the Company. Reincorporation in Delaware will allow the
Company to take advantage of certain provisions of the corporate laws of
Delaware. The purposes and effects of the proposed transaction are summarized
below.
In order to effect the Company's Reincorporation in Delaware, the
Company will be merged with and into Consolidated Eco-Systems, Inc. ("CESI"), a
newly-formed, wholly-owned subsidiary of the Company incorporated in Delaware.
CESI has not engaged in any activities except in connection with the proposed
transaction. The mailing address of its principal executive offices and its
telephone number are the same as those of the Company. As part of its approval
and recommendations of the Company's Reincorporation in Delaware, the Board of
Directors has approved, and recommends to the shareholders for their adoption
and approval, an Agreement and Plan of Merger (the "Merger Agreement") pursuant
to which the Company will be merged with and into CESI. The full texts of the
Merger Agreement and the Certificate of Incorporation (the "CESI Certificate of
Incorporation") and Bylaws (the "CESI Bylaws") under which the Company's
business would be conducted after the Reincorporation are set forth as Exhibits
A, B and C, respectively, hereto. The discussion contained in this Proxy
Statement is qualified in its entirety by reference to such Exhibits.
In the following discussion of the proposed Reincorporation, the term
"Company" includes either or both, the Company and CESI as the context may
require, without regard to the state of incorporation.
Upon shareholder approval of the Reincorporation and the receipt by
the Company of any required third party consents to the Reincorporation, and
upon the filing of appropriate certificates of merger with the Secretaries of
State of the States of Idaho and Delaware, the Company will be merged with and
into CESI pursuant to the Merger Agreement, resulting in a change in the
Company's state of incorporation from Idaho to Delaware. The Company will then
be subject to the Delaware General Corporation Law ("DGCL") and the CESI
Certificate of Incorporation and the CESI Bylaws set forth as Exhibit B and
Exhibit C, respectively. The effectiveness of the Reincorporation and the
merger contemplated to result therefrom is conditioned upon the filing by both
the Company and CESI of Articles of Merger with the State of Idaho and a
Certificate of Merger with the State of Delaware. Upon the effective time (the
"Effective Time") of the Reincorporation, each outstanding share of Common
Stock and each share of Common Stock held in the treasury of the Company, if
any, will be automatically converted into one share of Common Stock of CESI,
$.001 par value ("CESI Common Stock").
Outstanding options to purchase shares of Common Stock will be
converted automatically into options to purchase the same number of shares of
CESI Common Stock. The Incentive Plan and any other employee benefit plans to
which the Company is a party, whether or not such plan relates to the Common
Stock, will be assumed by CESI and, to the extent any such plan provides for
the issuance or purchase of Common Stock, it will be deemed to provide for the
issuance or purchase of shares of CESI Common Stock.
IT WILL NOT BE NECESSARY FOR SHAREHOLDERS OF THE COMPANY TO EXCHANGE
THEIR EXISTING STOCK CERTIFICATES FOR CESI STOCK CERTIFICATES; OUTSTANDING
STOCK CERTIFICATES OF THE COMPANY SHOULD NOT BE DESTROYED OR SENT TO THE
COMPANY. The CESI Common Stock will be traded in place of the Common Stock on
the Nasdaq SmallCap Market, which will consider the existing stock certificates
as constituting "good delivery" in transactions subsequent to the
Reincorporation.
PRINCIPAL REASONS TOR CHANGING THE COMPANY'S STATE OF INCORPORATION
The Board of Directors of the Company believes that the
Reincorporation will provide flexibility for both the management and business
of the Company. Delaware is recognized both domestically and internationally
as a favorable legal and regulatory environment within which to operate. Such
an environment will enhance the Company's operations and its ability to effect
acquisitions and other transactions. For many years, Delaware has
17
<PAGE> 20
followed a policy of encouraging incorporation in that state and, in
furtherance of that policy, has adopted comprehensive, modern and flexible
corporate laws that are periodically updated and revised to meet changing
business needs. As a result, many major companies have initially chosen
Delaware for their domicile or have subsequently reincorporated in Delaware.
The Delaware courts have developed considerable expertise in dealing with
corporate issues, and a substantial body of case law has developed construing
Delaware law and establishing public policies with respect to Delaware
companies, thereby providing greater predictability with respect to corporate
legal affairs.
Delaware law is more familiar to lenders and investors, and therefore
may provide the Company with a more favorable legal environment in which to
seek additional financing. Because Delaware corporate law is more predictable
and familiar to lenders and investors than is Idaho corporate law, and because
Delaware courts have substantially greater experience in handling matters of a
corporate nature, the Board of Directors believes that changing the Company's
domicile from Idaho to Delaware would make the Company more attractive to new
and existing shareholders, lenders and investors. The Board of Directors also
believes that the Reincorporation will provide flexibility for both the
management and business of the resulting Company.
The Board of Directors has determined that the most practical and
economical means of reincorporating the Company in Delaware would be through a
reincorporation merger of the Company with and into a wholly-owned subsidiary
of the Company incorporated in Delaware for such purpose. Merger with a
wholly-owned subsidiary is the usual means of reincorporation in another
jurisdiction, since it is inexpensive to accomplish and will qualify as a
tax-free reorganization. Since a reincorporation merger is the usual and most
practical and economical means of reincorporating the Company in Delaware, it
was the only alternative considered by the Board of Directors.
EFFECTS ON THE COMPANY
Upon the effective date of the Reincorporation, the business and
internal affairs of the Company will be governed by the DGCL, the CESI
Certificate of Incorporation and CESI Bylaws. The Reincorporation will not
result in a change in the business, assets and liabilities of the Company. If
the Merger Agreement is approved, the Board of Directors of the Company will be
comprised of the same six members elected at the Annual Meeting in connection
with the current Proposal No. 1. The directors elected will serve until the
next annual meeting of the shareholders of the Company, or until their
respective successors are elected and qualified. CESI will also have the same
executive officers as did the Company prior to the Reincorporation.
CAPITALIZATION
The CESI Certificate of Incorporation authorizes the issuance of
50,000,000 shares of CESI Common Stock and creates a series of preferred stock,
$.001 par value (the "Preferred Stock") consisting of 10,000,000 authorized
shares, with a corresponding right conferred upon the Board of Directors to set
the dividend, voting, conversion and liquidation rights as well as such
redemption or sinking fund provisions of such preferred stock as the Board of
Directors may from time to time determine. Currently, the Company is
authorized to issue 50,000,000 shares of Common Stock, of which 15,060,589 are
issued.
CHANGE OF NAME
Upon completion of the Reincorporation, the Company's name will be
changed from Exsorbet Industries, Inc. to Consolidated Eco-Systems, Inc. Such
name change is to reflect the Company's expansion of environmental related
services offered to clients and the declining importance to the Company's
revenues of the organic peat-moss based absorbent product called "Exsorbet,"
which is manufactured and marketed by the Company.
COMPARATIVE RIGHTS OF SHAREHOLDERS
Upon the effective date of the Reincorporation, holders of the Common
Stock will become holders of CESI Common Stock and the rights of former Company
shareholders will be governed by the CESI Certificate of Incorporation, the
CESI Bylaws and the DGCL.
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Shareholders should note the following significant differences between
the DGCL and the Idaho Business Corporation Act (the "IBCA") as they affect the
rights of shareholders. The following comparison of the DGCL and the CESI
Certificate of Incorporation and the CESI Bylaws, on the one hand, and the IBCA
and the Company's existing Articles of Incorporation (the "Idaho Articles of
Incorporation") and Bylaws (the "Idaho Bylaws"), on the other, is not intended
to be complete and is qualified in its entirety by reference to the CESI
Certificate of Incorporation and the CESI Bylaws and the Idaho Articles of
Incorporation and Idaho Bylaws. Copies of the CESI Certificate of Incorporation
and the CESI Bylaws are attached hereto as Exhibits B and C, respectively.
Copies of the Company's existing Idaho Articles of Incorporation and Idaho
Bylaws are available for inspection at the principal executive office of the
Company and copies will be sent to shareholders, without charge, upon written
request directed to Sam Sexton, III, Esq., Secretary, Exsorbet Industries, Inc.,
1401 South Waldron, Suite 201, Fort Smith Arkansas 72903, Telephone Number (501)
452-1987.
Distributions to Shareholders
A Delaware corporation may, unless restricted by its certificate of
incorporation, pay dividends out of surplus. If there is no surplus, a
Delaware corporation may pay dividends out of net profits for the fiscal year
in which declared or for the preceding fiscal year if the amount of capital of
the corporation following the declaration and payment of the dividends is not
less than the aggregate amount of capital represented by the issued and
outstanding shares of all classes of stock having a preference upon the
distribution of assets. An Idaho corporation may make distributions to
shareholders out of unrestricted and unreserved earned surplus except when the
corporation is insolvent or when the payment thereof would be contrary to any
provision in the articles of incorporation. An Idaho corporation may only make
a distribution out of capital surplus subject to several conditions including
either an express provision in the articles of incorporation or approval by a
majority of the shareholders.
Anti-Takeover Statutes
Both the DGCL and the IBCA have Business Combination Laws and the IBCA
has a Control Share Acquisition Law, which are designed to encourage potential
acquirers of publicly traded corporations to obtain the consent and approval of
the proposed target's board of directors prior to commencing a tender offer for
the target company's shares. This is accomplished by restricting the publicly
traded corporation from entering into business combination transactions with
the potential acquirers, from undertaking many post-acquisition financial
restructuring alternatives or by denying the shares held by a potential
acquirers voting rights.
Both the IBCA and the DGCL provide that a corporation may not engage
in a business combination, which is defined to include, among other
transactions, any merger or consolidation with, or sale of a substantial amount
or assets to, an interested shareholder for a period of three years after such
person became an interested shareholder. The IBCA defines an interested
shareholder as one who owns 10% or more of the outstanding voting shares. The
DGCL, however, defines an interested shareholder as one who owns 15% or more of
the outstanding voting shares. Additionally, the DGCL provides that such a
business combination is not prohibited if, upon consummation of the transaction
that resulted in the shareholder becoming interested, such shareholder owns at
least 85% of the outstanding voting shares, excluding, for the purposes of
determining the number of shares outstanding, shares owned by (i) persons who
are directors and also officers, and (ii) employee plans in which employee
participants do not have the right to determine confidentially whether shares
held subject to the plan will be tendered in a tender offer. In Idaho, these
restrictions will not apply to a corporation that so provides in its articles
of incorporation by an amendment approved by a two- thirds vote of all the
outstanding voting shares, excluding interested shares, or in its bylaws. A
corporation may elect not be governed by such section of the DGCL by so
providing in its original certificate of incorporation or by an amendment
approved by a two-thirds majority vote, excluding interested shares. Neither
the Idaho Articles of Incorporation, Idaho Bylaws nor the CESI Certificate of
Incorporation expressly elect not to be governed by such statutes.
The IBCA contains a Control Share Acquisition Law which requires an
entity that obtains shares of a public corporation must make certain
disclosures to the corporation if the entity enters into an acquisition that
increases its voting power to any of the following ranges: (i) 20%, (ii) 33%
or (iii) greater than 50%. Upon acquisition of a new range of voting power by
an entity, the shareholders of the corporation must hold a special meeting and
vote on a resolution as to whether the newly acquired shares by the entity will
be entitled to voting rights. The resolution must be approved by a two-thirds
vote of all the outstanding voting shares, excluding the interested shares, for
the acquired
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shares to be accorded voting rights. Unless the articles or bylaws provide
otherwise, the corporation may call for the redemption of the acquired shares
if either (i) no notice was provided by the acquiring entity; or (ii) the
shareholders voted not to accord voting rights to the acquired shares. The
Control Share Acquisition Law will not apply to a corporation that so elects in
its articles of incorporation or bylaws. The Idaho Articles of Incorporation
and Idaho Bylaws do not contain such an election.
Delaware does not contain a comparable statute.
Cumulative Voting
The DGCL provides that shareholders shall be entitled to cumulate
their votes in the election of directors or under specified circumstances if
the certificate of incorporation so provides. The IBCA provides for
shareholders to cumulate their votes in the elections of directors unless
otherwise provided in the articles of incorporation. Currently, the Company's
shareholders have cumulative voting rights in the election of the Board of
Directors. The Board of Directors has determined that cumulative voting rights
are not in the best interest of the Company's shareholders and the CESI
Certificate of Incorporation does not provide for them. However, in Idaho only
the affirmative vote of three-fourths of the Company's shareholders can
authorize such a change. Therefore, to eliminate cumulative voting rights the
shareholders must approve Proposal No. 3, below, by the required vote. If not,
the Company's shareholders will still have the right to cumulate their votes in
the election of directors. If Proposal No. 3 is not approved and this
Proposal No. 2 is approved, the Company will be reincorporated in Delaware and
shareholders will still have cumulative voting rights. Once in Delaware,
however, an affirmative vote of only a majority of the outstanding shares of
such is required to amend the Company's certificate of incorporation to
eliminate cumulative voting rights.
Dissenters' Appraisal Rights
Both the IBCA and the DGCL provide for appraisal rights in the event
of extraordinary corporate action. The IBCA provides that any shareholder may
dissent from and obtain payment for his shares in the event of a merger,
consolidation, sale of substantially all the assets of the corporation,
exchange of shares or amendment to the articles of incorporation that
materially and adversely affects the rights of the shareholders. The DGCL
provides for similar appraisal rights in the case of a merger or consolidation.
Appraisal rights are available in the event of (i) a sale of substantially all
the assets or (ii) an amendment to the certificate of incorporation only if the
certificate of incorporation so provides. The CESI Certificate of
Incorporation does grant any appraisal rights beyond those for a merger or
consolidation. Additionally, the DGCL does not provide for an exchange of
shares. For a discussion of the Company's shareholders appraisal rights in
connection with the Reincorporation, see "Dissenters' Rights of Appraisal with
Respect to the Reincorporation" and "DISSENTERS' RIGHTS OF APPRAISAL FOR THE
COMPANY'S SHAREHOLDERS."
Calling a Special Meeting of Shareholders
Under the DGCL, a special meeting of shareholders can be called by the
corporation's board of directors or by such person or persons as may be
authorized by the corporation's certificate of incorporation or bylaws. The
CESI Certificate of Incorporation does not authorize any person to call a
special meeting of shareholders. The CESI Bylaws, however, provide that a
special meeting may be called by the Chairman of the Board of Directors, the
President, a majority of the Board of Directors or upon written request of
shareholders of record of not less than 10% of all shares entitled to vote at
such meeting.
The IBCA provides that the articles of incorporation or the bylaws may
provide that a special meeting of shareholders can be called by any specified
percentage of shareholders. The Idaho Articles of Incorporation do not include
any such provision. The Idaho Bylaws do, however, provide that a special
meeting of shareholders may be called by the President, a majority of the Board
of Directors or holders of no less than 10% of all the shares entitled to vote
at such a special meeting.
Shareholder Quorum Requirements
Both the DGCL and IBCA provide that a majority of the shares entitled
to vote, represented in person or by proxy, shall constitute a quorum at a
meeting of shareholders, unless the articles or certificate of incorporation
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provides otherwise. The Idaho Articles of Incorporation do not provide
otherwise, however, the CESI Certificate of Incorporation provides that
one-third of the shares entitled to vote, represented in person or by proxy,
shall constitute a quorum.
Amendments to Bylaws
Under the DGCL, the board of directors can amend the bylaws of a
corporation only if such right is expressly conferred upon the board of
directors in its certificate of incorporation. Under the IBCA, a corporation's
board of directors may amend or repeal the bylaws unless such power is
expressly reserved to the shareholders in the articles of incorporation. The
CESI Certificate of Incorporation permits the Board of Directors to adopt,
alter or amend the CESI Bylaws. The Idaho Articles of Incorporation do not
restrict the Board of Directors' authority to adopt, alter or amend the Idaho
Bylaws.
Merger with Subsidiary
Under the DGCL, a parent corporation may merge into a subsidiary and a
subsidiary may merge into its parent, without shareholder approval, where such
parent corporation owns at least 90% of the outstanding shares of each class of
capital stock of its subsidiary. The IBCA permits a merger of a subsidiary
into its parent, but not vice versa without shareholder approval, subject to
the same conditions.
Removal of Directors; Filling Vacancies on the Board of Directors
Under the DGCL, any director or the entire board of directors
generally may be removed, with or without cause, by the holders of a majority
of the shares entitled to vote at an election of directors. Under the IBCA,
shareholders may remove one or more directors with or without cause, at a
meeting of the shareholders called expressly for that purpose by and among the
vote of the holders of a majority of shares entitled to vote at an election of
the board of directors. If less than the entire board of directors is removed,
no one director may be removed if the votes cast against his removal would be
sufficient to elect him if then cumulatively voted at an election of the entire
board of directors.
Under the CESI Bylaws, newly created directorships resulting from any
increase in the number of directors or any vacancies on the Board of Directors
may be filled by the affirmative vote of a majority of the directors then in
office. In addition, the CESI Bylaws provide that the directors elected to fill
vacancies on the Board of Directors will hold office until the next election of
directors.
The Idaho Bylaws provide that vacancies on the Board of Directors will
be filled in the same manner.
Amendment or Repeal of the Certificate or Articles of Incorporation
Under the DGCL, 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, 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 CESI Certificate of Incorporation does not provide
otherwise.
All amendments to the articles of incorporation of an Idaho
corporation must be approved by a majority of all the votes entitled to vote
thereon, unless any class of shares is entitled to vote thereon as a class, in
which event the amendment must be approved by a majority vote of each class of
shares entitled to vote thereon.
Shareholder Records
The DGCL provides that any shareholder with a proper purpose may
inspect and copy the books, records and shareholder lists of a corporation.
The IBCA additionally provides that to inspect such records a shareholder must
have been a shareholder of record for the preceding six months or own 10% of
the outstanding shares of the corporation.
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Corporate Action Without A Shareholder Meeting
The DGCL and the IBCA both permit corporate action without a meeting
of shareholders. The DGCL requires written consent of the holders of that
number of shares necessary to authorize the proposed corporate action being
taken, unless the certificate of incorporation or articles of incorporation,
respectively, expressly provide otherwise. In the event such proposed
corporate action is taken without a meeting by less than the unanimous written
consent of shareholders, the DGCL requires that prompt notice of the taking of
such action be sent to those shareholders who have not consented in writing.
The IBCA requires the unanimous written consent of all shareholders entitled to
vote thereon.
AMENDMENT, DEFERRAL OR TERMINATION OF THE MERGER AGREEMENT
If approved by the shareholders at the Annual Meeting, it is
anticipated that the Reincorporation will become effective at the earliest
practicable date. However, the Merger Agreement provides that the Merger
Agreement may be amended, modified or supplemented before or after approval by
the shareholders of the Company; but no such amendment, modification or
supplement may be made if it would have a material adverse effect upon the
rights of the Company's shareholders unless it has been approved by the
shareholders. The Merger Agreement also provides that the Company may
terminate and abandon the Reincorporation or defer its consummation for a
reasonable period, notwithstanding shareholder approval, if in the opinion of
the Board of Directors or, in the case of deferral, of an authorized officer,
such action would be in the best interests of the Company and its shareholders.
Specifically, the Merger Agreement provides that the Company may terminate the
Merger Agreement if in excess of one percent of the outstanding shares of the
Company perfect their dissenters' appraisal rights pursuant to Section 30-1-80
and as discussed in "DISSENTERS' RIGHTS OF APPRAISAL FOR THE COMPANY'S
SHAREHOLDERS." The Merger Agreement also provides that the consummation of the
Reincorporation is subject to certain conditions, including the absence of
pending or threatened litigation regarding the Reincorporation, and the
approval, if necessary, of the CESI Common Stock for listing on the Nasdaq
Small Cap Market upon official notice of issuance.
FEDERAL INCOME TAX CONSEQUENCES OF THE REINCORPORATION
The Company has been advised by counsel that, for Federal income tax
purposes, no gain or loss will be recognized by the holders of Common Stock or
options to purchase Common Stock as a result of the consummation of the
Reincorporation and no gain or loss will be recognized by the Company or CESI.
Each holder of Common Stock will have the same basis in the CESI Common Stock
received pursuant to the Merger Agreement as he had in the Common Stock held
immediately prior to the Reincorporation, and his holding period with respect
to the CESI Common Stock will include the period during which he held the
corresponding Common Stock, so long as the Common Stock was held as a capital
asset at the time of consummation of the Reincorporation.
ALTHOUGH IT IS NOT ANTICIPATED THAT STATE OR LOCAL INCOME TAX
CONSEQUENCES TO SHAREHOLDERS WILL VARY FROM THE FEDERAL INCOME TAX CONSEQUENCES
DESCRIBED ABOVE, SHAREHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE
EFFECT OF THE REINCORPORATION UNDER STATE, LOCAL OR FOREIGN INCOME TAX LAWS.
The Company has also been advised by legal tax counsel that the
Company will not recognize gain or loss for Federal income tax purposes as a
result of the Reincorporation, and that CESI will succeed without adjustment to
the tax attributes of the Company. The Company is not currently subject to
franchise or state income taxation in Idaho, other than nominal filing fees.
If the Reincorporation is approved, CESI will be subject to Delaware franchise
tax. Shareholders should be aware that annual franchise taxes in Delaware,
based on the Company's assets and authorized shares, giving effect to the
Reincorporation, are estimated to be in excess of $42,000, annually.
DISSENTERS' RIGHTS OF APPRAISAL WITH RESPECT TO THE REINCORPORATION
If this Proposal No. 2 is approved, the shareholders of the Company
who do not vote in favor of this Proposal No. 2 and who follow certain
procedures set forth in Section 30-1-81 of the IBCA may be entitled pursuant to
Section 30- 1-80 of the IBCA to have such shareholders shares appraised and to
receive "fair value" of such shares. "DISSENTERS' RIGHTS OF APPRAISAL FOR THE
COMPANY'S SHAREHOLDERS."
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VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
The Merger Agreement and the Reincorporation in this Proposal No. 2
has been approved by the Board of Directors. In order to approve and adopt the
Merger Agreement and the Reincorporation as discussed in this Proposal No. 2,
the affirmative vote of the holders of a majority of the outstanding shares of
Common Stock is required.
CONFIRMATION AND ADOPTION OF THE MERGER AGREEMENT AND REINCORPORATION AS
DISCUSSED IN THIS PROPOSAL NO. 2 WILL AFFECT CERTAIN RIGHTS OF SHAREHOLDERS.
ACCORDINGLY, SHAREHOLDERS ARE URGED TO READ CAREFULLY THIS ENTIRE PROXY
STATEMENT, INCLUDING THE EXHIBITS, BEFORE VOTING.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS
VOTE "FOR" THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE
REINCORPORATION.
PROPOSAL NO. 3: ELIMINATION OF CUMULATIVE VOTING
On August 14, 1996, the Board of Directors unanimously approved and
recommended that the Company's shareholders consider and approve an amendment
to the Idaho Articles of Incorporation that would eliminate cumulative voting
in the election of directors. If the shareholders approve this Proposal No. 3
by an affirmative vote of three-fourths of the outstanding shares, the
Company's shareholders will no longer have cumulative voting rights. This
Proposal No. 3 is independent of all other proposals and only a vote of
three-fourths of all the shares outstanding will eliminate the Company's
shareholders' cumulative voting rights. Depending on whether Proposal No. 2 is
approved and if this Proposal No. 3 is approved, the CESI Certificate of
Incorporation or the Idaho Articles of Incorporation may need to be amended to
effect the outcome of the vote on this Proposal No. 3. See "Reasons for the
Elimination of Cumulative Voting."
DESCRIPTION OF CUMULATIVE VOTING
Cumulative voting entitles a shareholder to cast a number of votes
equal to the number of directors to be elected multiplied by the number of
shares of Common Stock held by such shareholder, and to cast all such votes for
one nominee or to distribute such votes among up to as many candidates as there
are positions to be filled. Nominees receiving the highest number of votes on
the foregoing basis up to the total number of directors to be elected are
elected as directors.
In the absence of cumulative voting, each director is elected by a
simple majority vote and, accordingly, a shareholder or a group of shareholders
must hold a majority of the outstanding shares of Common Stock to cause the
election of one or more nominees. Cumulative voting enables a minority
shareholder or a group of shareholder holding a relatively small number of
shares to elect a representative to the Board of Directors over the desires of
the majority, by casting all of his or their cumulated votes for that
representative. For example, in the election of six directors (the current
number of authorized directors of the Company), with cumulative voting, a
shareholder or a group of shareholders holding at least 14.3 percent of the
outstanding shares of Common Stock is guaranteed the ability to elect one
director. Furthermore, if cumulative voting is in effect, a director may not
be removed by the shareholders if the votes cast against such removal would be
sufficient to elect such director under cumulative voting in an election of the
number of directors authorized as of the last election of directors, assuming
that the same number of votes were cast as are being cast for removal.
REASONS FOR THE ELIMINATION OF CUMULATIVE VOTING
The IBCA provides that each shareholder may cumulate his or her votes
in the election of directors. An Idaho corporation may, however, eliminate
cumulative voting by amending its articles of incorporation. An amendment of
the articles of incorporation to eliminate cumulative voting requires the
affirmative vote of three-fourths of all outstanding shares of voting stock.
The proposal to eliminate cumulative voting has been unanimously
approved by the Board of Directors because it believes that each director
should represent the interests of all shareholders, and that the presence on
the Board of
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Directors of one or more directors representing the interests of a minority
shareholder or a group of shareholders which are not consistent with, and may
be in conflict with, the interests of the majority could disrupt the management
of the Company and prevent it from operating in the most effective manner. The
elimination of cumulative voting will help ensure that each director represents
the best interests of all shareholders, rather than the interests of any
special constituency, because shareholders holding a majority of the voting
shares will have the power to elect each of the directors to be elected at any
annual meeting.
The elimination of cumulative voting will make it more difficult for a
minority shareholder or a group of shareholders to obtain representation on the
Board of Directors without the concurrence of holders of a majority of the
outstanding shares of Common Stock. In addition, while the proposal is not
intended as a takeover-resistive device, the elimination of cumulative voting
may have certain takeover-resistive effects. It may under certain
circumstances discourage or render more difficult a merger, tender offer or
proxy contest; discourage the acquisition of large blocks of the Company's
shares by persons who would not make such an acquisition without assurances of
the ability to attain representation on the Board of Directors; deter the
assumption of control by a holder of a large block of the Company's shares; or
render more difficult the removal or replacement of incumbent directors and
management.
If this Proposal No. 3 is not approved and Proposal No. 2 is approved
by the shareholders, the Company will be governed by the CESI Certificate of
Incorporation, which currently does not provide for cumulative voting. In such
case, the CESI Certificate of Incorporation will be amended as provided in
Exhibit E to provide such cumulative voting rights. If Proposal No. 3 is
approved and Proposal No. 2 is not approved by the shareholders, then the
Company will be governed by the Idaho Articles of Incorporation, which in
conjunction with the IBCA, currently provides for cumulative voting, and the
Idaho Articles of Incorporation will be amended as follows:
"VIII.
The holders of shares of stock entitled to vote in the election of
directors of the Corporation shall not be entitled to cumulate votes for the
purposes of such election."
DISSENTERS' RIGHTS OF APPRAISAL WITH RESPECT TO THE ELIMINATION OF CUMULATIVE
VOTING
If this Proposal No. 3 is approved, the shareholders of the Company
who do not vote in favor of this Proposal No. 3 and who follow certain
procedures set forth in Section 30-1-81 of the IBCA may be entitled pursuant to
Section 30- 1-80 of the IBCA to have such shareholders shares appraised and to
receive "fair value" of such shares. See "DISSENTERS' RIGHTS OF APPRAISAL FOR
THE COMPANY'S SHAREHOLDERS."
EXPRESS CONDITION OF THE ELIMINATION OF CUMULATIVE VOTING
The Company's shareholders should note that elimination of cumulative
voting rights pursuant to this Proposal No. 3 is expressly conditioned on not
more than one percent of the outstanding shares of Common Stock perfecting
their dissenters' rights of appraisal pursuant to Sections 30-1-80. For a
discussion of such rights, please see "DISSENTERS' RIGHTS OF APPRAISAL FOR THE
COMPANY'S SHAREHOLDERS."
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
This Proposal No. 3 has been approved by the Board of Directors. In
order to approve this Proposal No. 3 and eliminate cumulative voting rights,
the affirmative vote of three-fourths of all the shares outstanding is
required.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR"
THE ELIMINATION OF CUMULATIVE VOTING RIGHTS WITH RESPECT TO THE ELECTION OF
DIRECTORS.
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PROPOSAL NO. 4: AUTHORIZATION TO ISSUE UP TO 10,000,000 SHARES
OF PREFERRED STOCK
On August 14, 1996, the Board of Directors unanimously approved and
recommended that the Company's shareholders consider and approve an amendment
to Article V of the Idaho Articles of Incorporation that would authorize a
series of preferred stock, par value $.001 per share, with a right conferred
upon the Board of Directors to set the dividend, voting, conversion and
liquidation rights as well as such redemption or sinking fund provisions of
such preferred stock as they may determine from time to time (the "Preferred
Stock"). If the shareholders approve this Proposal No. 4, the number of shares
of Preferred Stock available for issuance would be 10,000,000 shares. If
Proposal No. 2 is approved by the shareholders and all required third party
consents, if any, related thereto are obtained, upon appropriate further action
taken by the Board of Directors and executive officers of the Company, the
creation of the Preferred Stock will happen automatically, as the CESI
Certificate of Incorporation provides for the creation of the Preferred Stock
and as such the shareholders' vote regarding this Proposal No. 4 will have no
effect. If for any reason Proposal No. 2 was not approved or the Board of
Directors of the Company elected not to proceed with the Reincorporation for
any reason, the affirmative vote of the holders of a majority of all of the
issued and outstanding Common Stock would be required for approval of this
Proposal No. 4.
REASONS FOR THE AUTHORIZATION OF THE PREFERRED STOCK
The creation of the Preferred Stock has been recommended by the Board
of Directors to assure that an adequate supply of authorized, unissued shares
is available for general corporate needs and to provide the Board of Directors
with the necessary flexibility to issue preferred stock in connection with
acquisitions, merger transactions or financings without the expense and delay
incidental to obtaining shareholder approval of an amendment to the Idaho
Articles of Incorporation at the time of such action, except as may be required
for a particular issuance by applicable law or by the rules of any stock
exchange on which the Company's securities may then be listed. Although the
Preferred Stock may be used for such purposes as raising additional capital or
the financing of an acquisition or business combination, the Company currently
has no plans or arrangements related to the issuance of any of the Preferred
Stock proposed to be authorized by the amendment to the Idaho Articles of
Incorporation. Such shares would, however, be available for issuance without
further action by the shareholders, unless required by applicable law. There
would be no public trading market for the Preferred Stock until such time as a
registration statement filed by the Company with the SEC became effective, or
an exemption from registration pursuant to the Securities Act of 1933, as
amended (the "Securities Act"), became applicable. The Company does not
presently contemplate registering the shares of Preferred Stock under the
Securities Act nor does it contemplate seeking an exemption from registration
under said act.
If authorized, the Preferred Stock may be issued in one or more
series, the terms of which may be determined at the time of issuance by the
Board of Directors, without further action by the shareholders, and may include
voting rights (including the right to vote as a series on particular matters),
preferences as to dividends and liquidation, conversation and redemption rights
and sinking fund provisions. The issuance of any Preferred Stock could affect
the rights of the holders of Common Stock and therefore reduce the value of the
Common Stock and make it less likely that holders of Common stock would receive
a premium upon a sale of their shares of Common Stock. In particular, specific
rights granted to future holders of Preferred Stock could be issued to restrict
the Company's ability to merge with or sell its assets to a third party, which
could have the effect of delaying or preventing a change of control of the
Company and may adversely affect the rights of holders of Common Stock.
The Board of Directors believes that the proposed amendment to Article
V of the Idaho Articles of Incorporation will provide several long-term
advantages to the Company and its shareholders. The approval of this Proposal
No. 4 might enable the Company to pursue acquisitions or enter into
transactions that the Board of Directors believes provides the potential for
growth and profit. If the shares of Preferred Stock are available,
transactions dependent upon the issuance of Preferred Stock will be less likely
to be undermined by delays and uncertainties occasioned by the need to obtain
shareholder authorization for the Preferred Stock prior to consummation of such
transactions. The consummation of such transactions do not generally require
the approval of shareholders, however where the issuance of shares of Preferred
Stock which are convertible into shares of Common Stock could result in an
increase of 20% or more of the then outstanding shares of Common Stock,
shareholder approval is required. The ability to issue shares of preferred
stock, as the Board of Directors determines from time to time to be in the
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Company's best interests, will also permit the Company to avoid the extra
expenses which would be incurred in holding special shareholder meetings solely
to approve the creation of the Preferred Stock.
If Proposal No. 4 is adopted, the Idaho Articles of Incorporation
would be amended to delete Article V in its entirety and replace the same as
provided in Exhibit F.
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
The authorization for 10,000,000 shares of Preferred Stock in this
Proposal No. 4 have been approved by the Board of Directors of the Company. In
order to approve this Proposal No. 4, the affirmative vote of the holders of a
majority of the outstanding shares of Common Stock is required. However, if
Proposal No. 2 is adopted, the authorization of the Preferred Stock will happen
without the need for an amendment to the Idaho Articles of Incorporation as the
CESI Certificate of Incorporation authorizes the Preferred Stock.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE
APPROVAL OF THE AUTHORIZATION TO ISSUE UP TO 10,000,000 SHARES OF PREFERRED
STOCK.
PROPOSAL NO. 5: CHANGE OF THE COMPANY'S NAME
On August 14, 1996, the Company's Board of Directors has unanimously
approved, subject to shareholder approval, a change of the Company's name to
Consolidated Eco-Systems, Inc." Management believes that the change of the
Company's name is appropriate in light of the nature of its business and
Proposal No. 2. If Proposal No. 2 is approved and the Reincorporation is
consummated, the name change will be effected by virtue of the merger described
in Proposal No. 2 and the shareholders' vote regarding this Proposal No. 5 will
have no effect.
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
Approval of the change of the Company's name requires the affirmative
vote of a majority of all the issued and outstanding Common Stock. If for any
reason Proposal No. 2 was not approved or the Board of Directors of the Company
elected not to proceed with the Reincorporation for any reason, the affirmative
vote of the holders of a majority of all of the issued and outstanding Common
Stock would be required for approval of this proposal. In that event, the
Idaho Articles of Incorporation will be amended to delete Article I in its
entirety and replace the same with the following:
"I.
The name of the corporation shall be Consolidated Eco-Systems, Inc."
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS
VOTE "FOR" THE APPROVAL OF THE CHANGE OF THE COMPANY'S NAME TO CONSOLIDATED
ENVIRONMENTAL SERVICES, INC.
PROPOSAL NO. 6: RATIFICATION OF APPOINTMENT OF PUBLIC ACCOUNTANTS
Upon the recommendation of the Board of Directors, the Board has
reappointed Cooper, Shuffield & Company as independent certified public
accountants for the Company to audit the consolidated financial statements of
the Company and its subsidiaries for the fiscal year ending December 31, 1996
("Fiscal 1996").
The Company's Board of Directors recommends the ratification of the
appointment of Cooper, Shuffield & Company as independent certified public
accounts for the Company to audit the financial statements of the Company for
Fiscal 1996. If a majority of the shareholders voting at the Annual Meeting at
which a quorum is present, in person or by proxy, should not approve such
appointment, the Board of Directors of the Company will reconsider the
appointment of independent certified public accountants.
26
<PAGE> 29
VOTE REQUIRED
The affirmative vote of holders of a majority of the outstanding
shares of Common Stock present and voting at the Annual Meeting at which a
quorum is present is required for he reappointment of Cooper, Shuffield &
Company as the Company's independent certified public accountants for Fiscal
1996.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors unanimously records that the shareholders vote
"FOR" the reappointment as independent certified public accounts of the Company
for the Fiscal 1996.
DISSENTERS' RIGHTS OF APPRAISAL FOR THE COMPANY'S SHAREHOLDERS
If Proposal No. 2 (Reincorporation and the Merger Agreement) is
approved by the shareholders and not abandoned or terminated, or Proposal No. 3
(Elimination of Cumulative Voting) is approved by the Company's shareholders
and any express conditions are satisfied, any holder of Common Stock may, by
not voting for approval of Proposal No. 2 or Proposal No. 3, whichever is the
case, and by following the procedures set forth in Section 30-1-81 of the IBCA
("Section 30-1-81"), be entitled pursuant to Section 30-1-80 of the IBCA
("Section 30-10-80") to have such shareholder's shares appraised and to receive
payment of the "fair value" of such shares. The shares with respect to which
shareholders have perfected their demand for appraisal rights in accordance
with Section 30-1-81 and have not effectively withdrawn or lost such rights are
referred to in this Proxy Statement as "dissenting shares."
If the Reincorporation is consummated or cumulative voting rights
eliminated, dissenting holders of the Common Stock may be entitled to have the
"fair value" (exclusive of any element of value arising from the accomplishment
or expectation of the Reincorporation or elimination of cumulative voting
rights) of their shares immediately prior to the consummation of the
Reincorporation or elimination of cumulative voting rights, as these may be,
paid to them by complying with the provisions of Section 30-1-81.
The following is a brief summary of Section 30-1-81, which sets forth
the procedures for dissenting from the Proposal No. 2 or Proposal No. 3 and
demanding statutory appraisal rights. Failure to follow these procedures
exactly could result in the loss of appraisal rights. This summary contains
all material information relating to the rights of the Company's shareholders
to an appraisal of the value of their shares under Sections 30-1-80 and
30-1-81. This summary does not, however, restate every provision of Sections
30-1-80 and 30-1-81, and this summary is qualified in its entirety by reference
to Sections 30-1-80 and 30-1-81, the full texts of which are attached hereto as
Exhibit D.
This Proxy Statement constitutes notice to holders of the Company's
Common Stock concerning the availability of appraisal rights under Section
30-1-81.
Shareholders electing to exercise their appraisal rights under Section
30-1-81 must not vote for the approval of the proposal from which such
shareholders desire to dissent. A shareholder who votes for the approval of
Proposal No. 2 or Proposal No. 3 shall not acquire a right to payment for his
shares under Sections 30-1-80 and 30-1-81 with respect to such proposal.
However, abstaining from voting or voting against Proposal No. 2 or Proposal
No. 3, and thereby the Reincorporation and the Merger Agreement or elimination
of cumulative voting rights, whichever the case may be, is not sufficient
notice to the Company by a shareholder that such shareholder is requesting
appraisal rights. Rather, a shareholder desiring to assert dissenters'
appraisal rights must give express notice, separate and distinct from the act
of abstaining from voting or voting against Proposal No. 2 or Proposal No. 3,
to the Company that such shareholder is demanding his or her statutory
appraisal rights, as provided in Sections 30-1-80 and 30-1-81 with respect to
such proposal.
A demand for dissenters' appraisal rights must be executed by or for
the shareholder of record fully and correctly, as such shareholder's name
appears on the share certificate. A beneficial owner of shares that is not the
record owner may assert his or her appraisal rights with respect to shares held
on his or her behalf if the shareholder submits to the Company at or before the
assertion of his or her appraisal rights a written consent of the record
holder. A record owner, such as a broker, who holds Common Stock for others
may assert dissenters' appraisal rights to the shares for all or less than all
the beneficial owners of shares as to which such person is the record owner.
In such
27
<PAGE> 30
case such record owner must demand dissenters' appraisal rights with respect to
all shares beneficially owned by one person and disclose the name and address
of the person on whose behalf he or she dissents.
If this Proposal No. 2 or Proposal No. 3 is approved by the required
vote at the Annual Meeting, the Company shall mail a further notice (the
"Notice") to the shareholders who refrained from voting in favor of Proposal
No. 2 or Proposal No. 3, whichever the case may be. The Notice shall: (i)
state where and when a demand for payment must be sent and stock certificates
must be deposited in order to obtain payment (such date cannot be less than 30
days from the mailing of the Notice); (ii) inform holders of uncertificated
shares to what extent transfer of shares will be restricted from the time that
demand for payment is received; (iii) supply a form for demanding payment which
includes a request for certification of the date on which the shareholder or
the person on whose behalf the shareholder dissents, acquired beneficial
ownership of the shares; and (iv) be accompanied by a copy of Sections 30-1-80
and 30-1-81.
A Company shareholder who fails to demand payment, or deposit
certificates, as required by the Notice shall have no rights under Section
30-1-80 or Section 30-1-81 to receive payment for his or her shares of Common
Stock and if such shareholder was attempting to dissent from Proposal No. 2,
his or her shares shall be converted pursuant to the Merger Agreement into an
equal number of shares of CESI Common Stock.
Upon consummation of the transactions contemplated by Proposal No. 2
or Proposal No. 3, or upon the receipt of demand for payment if such
transactions have already been consummated, the Company shall remit to
dissenters who have made demand and have deposited their certificates, the
amount which the surviving corporation estimates to be the "fair value" of such
shares, with interest if any has accrued. The remittance shall be accompanied
by certain financial information regarding the Company, a statement of the
Company's estimate of the fair value of the shares and a notice of the
dissenter's right to demand supplemental payment for his or her shares.
If, with respect to the Reincorporation, within 60 days after the date
set forth in the Notice for demanding payment and depositing share
certificates, the Reincorporation is not consummated and the Company has not
paid the shareholder for his or her shares as provided for above, the
shareholder shall retain all rights of a shareholder until such rights are
modified by the consummation of the Reincorporation.
In the event the Company fails to remit payment as required, or if the
dissenter believes that the amount remitted is less than the fair market value
of his or her shares, or that the interest is not correctly determined, the
dissenter may send the Company his or her own estimate of the fair market value
of the shares or of the interest and demand payment of the deficiency. If the
dissenter does not file such an estimate within 30 days after the mailing of
the remittance by the Company, the dissenter shall be entitled to no more than
the amount remitted. Within 60 days after receiving a demand for payment, if
any such demand for payment remains unsettled, the Company shall file in the
district court in Nez Perce County, Idaho, a petition requesting that the fair
value of the shares and interest thereon be determined by the court.
All dissenters, wherever residing, whose demands have not been settled
will be made parties to such proceeding as in an action against their shares.
A copy of the petition will be served on each such dissenter. The court shall
have plenary and exclusive jurisdiction to determine the fair value of
dissenters' shares. The court may appoint one or more persons as appraisers to
receive evidence and recommend a decision on the question of fair value of the
shares. All dissenters who are made parties to such action will be entitled to
judgment for the amount by which the fair value of their shares is found to
exceed the amount previously remitted, together with interest. Sections
30-1-80 and 30-1-81 do not set forth a specific method by which the court is to
determine the fair value of the shares and the Company is not aware of any
reported opinions of Idaho courts setting forth the method by which a court
will determine the fair value of shares. Such value may be more than, less
than or equal to the current trading price of the Company on the Nasdaq
SmallCap Market.
If the Company fails to file a petition within 60 days after receiving
a demand for payment, each dissenter who made a demand and who has not already
settled his or her claim against the Company will be paid by the Company the
amount demanded by him or her, together with interest.
In the event that the dissenter was not the beneficial owner with
respect to shares as to which he or she demanded appraisal rights on the date
of the first announcement of the Reincorporation or the proposal to eliminate
28
<PAGE> 31
cumulative voting rights, whichever the case may be, then the Company will not
be required to remit the fair value of the shares as outlined above. Instead,
the Company must only provide the dissenter its estimate of the fair value of
the shares, state the rate of interest to be used, and offer to pay the
resulting amounts on receiving the dissenter's agreement to accept them in full
satisfaction. If the dissenting shareholder rejects the offer, the dissenter
must commence the complete procedure outlined in the paragraphs above, which
begins with the dissenter first providing the Company his or her own estimate
of the value of the shares within 30 days of the Company mailing its offer. If
the dissenter fails to do so, and was attempting to dissent from Proposal No.
2, his shares of Common Stock will be converted pursuant to the Merger
Agreement into an equal number of shares of CESI.
The costs and expenses associated with the proceeding for determining
the fair value of the dissenting shares will be determined, if necessary, by
the court and assessed against the Company. The court may assess costs and
expenses against the dissenters if it deems the action brought by such
shareholders to be arbitrary or not in good faith. Similarly, fees and
expenses of counsel and experts for the respective parties will be assessed, if
necessary, as the court deems equitable, based upon the actions of the Company
in complying with Section 30-1-81 and the good faith, or lack thereof, of the
dissenting shareholders. Finally, if the court determines that services of
counsel for any dissenter were of substantial benefit to other dissenters, it
may award counsel reasonable fees paid from the amounts awarded to the
dissenters who were benefited.
Shareholders should note that the Merger Agreement provides that the
Board of Directors may terminate the Merger Agreement if in excess of one
percent of the Company's shareholders exercise dissenters' appraisal rights
with respect to Proposal No. 2 pursuant to Section 30-1-80. See "PROPOSAL NO.
2: REINCORPORATION IN DELAWARE--Amendment, Deferral or Termination of the
Merger Agreement."
Similarly, the Board of Directors has expressly conditioned the
elimination of cumulative voting rights on the condition that no more than one
percent of the Company's Shareholders perfect their dissenters' appraisal
rights with respect to Proposal No. 3 pursuant to Section 30-1-80. See
"PROPOSAL NO. 3: ELIMINATION OF CUMULATIVE Voting--Express Condition of the
Elimination of Cumulative Voting."
COMPLIANCE WITH SECTION 16(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than 10 percent of a registered
class of the Company's equity securities, to file with the SEC initial reports
of ownership and reports of changes in ownership of Common Stock and other
equity securities of the Company. Executive officers, directors and greater
than 10 percent stockholders are required by SEC Regulations to furnish the
Company with copies of all Section 16 (a) forms they file.
To the Company's knowledge, based solely upon review of the copies of
such reports furnished to the Company during the year ended December 31, 1995,
the Company has found that: Gary Cotton, who was an executive officer of the
Company during 1995, failed to file the Initial Statement of Beneficial
Ownership of Securities on Form 3, any Statements of Changes in Beneficial
Ownership on Form 4, if required, and an Annual Statement of Changes in
Beneficial Ownership on Form 5, if required.
INDEPENDENT PUBLIC ACCOUNTANTS
Cooper, Shuffield & Company has been the Company's independent public
accountant for the fiscal year ending December 31, 1995. A representative of
Cooper, Shuffield & Company is expected to be present at the Annual Meeting.
Such representative will have the opportunity to make a statement if the
representative desires to do so and is expected to be available to respond to
appropriate questions.
29
<PAGE> 32
OTHER BUSINESS
The management knows of no other business that will be presented for
consideration at the Annual Meeting, but should any other matters be brought
before the meeting, it is intended that the persons named in the accompanying
proxy will vote such proxy at their discretion.
SHAREHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
Any shareholder desiring to present a proposal to the shareholders at
the 1997 Annual Meeting of Shareholders, which currently is expected to be
scheduled on June 5, 1997, must transmit such proposal to the Company so that
it is received by the Company at its principal executive offices on or before
February 10, 1997, unless the Company notifies the shareholders otherwise. All
such proposals should be in compliance with applicable SEC regulations.
By Order of the Board of Directors,
/s/ SAM SEXTON III
Sam Sexton III
Secretary
November 14, 1996
30
<PAGE> 33
EXHIBIT INDEX
Number Description
A Agreement and Plan of Merger
B Certificate of Incorporation of Consolidated
Eco-Systems, Inc.
C Bylaws of Consolidated Eco-Systems, Inc.
D Sections 30-1-80 and 30-1-81 of the Idaho Business
Corporation Act
E Proposed Amendment to the Certificate of
Incorporation of Consolidated Eco- Systems, Inc.
regarding cumulative voting
F Proposed Amendment to the Articles of Incorporation
of Exsorbet Industries, Inc. regarding the issuance
of preferred stock, par value $.001 per share
Proxy Form of Proxy
<PAGE> 34
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Merger Agreement") is entered into
by and between Exsorbet Industries, Inc., an Idaho corporation (the "Company"),
and Consolidated Eco-Systems, Inc., a Delaware corporation ("CESI").
WHEREAS, the Company is a corporation organized and existing under the
laws of the State of Idaho and whose authorized capital consists of 50,000,000
shares of common stock, par value $.001 per share (the "Common Stock"), of
which 11,897,618 shares are issued and outstanding and entitled to vote;
WHEREAS, CESI is a corporation organized and existing under the laws
of the State of Delaware and whose authorized capital consists of 60,000,000
shares of capital stock, consisting of (i) 50,000,000 shares of common stock,
par value $.001 per share (the "CESI Common Stock"), of which 100 shares are
issued and outstanding, owned by the Company and entitled to vote and (ii)
10,000,000 shares of preferred stock, par value $.001 per share, none of which
are issued and outstanding;
WHEREAS, the respective Boards of Directors of the Company and CESI
deem it advisable and in the best interests of each such corporation that the
Company merge with and into CESI upon the terms and subject to the conditions
of this Merger Agreement for the purpose of effecting the reincorporation of
the Company in the State of Delaware;
WHEREAS, the respective Boards of Directors of the Company and CESI
have authorized and approved the merger of the Company with and into CESI in
accordance with the provisions of Section 368 of the Internal Revenue Code of
1986, as amended (the "Code"), and Sections 30-1-71 et seq. of the Idaho
Business Corporation Act (the "IBCA") and Sections 252 et seq. of the General
Corporation Law of Delaware (the "DGCL"), upon terms and conditions set forth
in this Merger Agreement (the "Merger") and directed that it be executed by the
undersigned officers and that it be submitted to the shareholders of the
Company for approval; and
WHEREAS, it is the intention of the parties hereto that the Merger
shall be a tax free reorganization pursuant to the applicable provisions of the
Code.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, and for the purpose of stating the
terms and conditions of the Merger, the mode of affectuating the same, and such
other details and provisions as are deemed desirable, the parties hereto have
agreed, and do hereby agree subject to the terms and conditions hereinafter set
forth, as follows:
1. Merger. At the Effective Time (as defined herein) of the
Merger, the Company shall be merged with and into CESI. CESI shall be the
surviving corporation of the Merger (hereinafter sometimes referred to as the
"Surviving Corporation"), and the separate corporate existence of the Company
shall cease. The Merger shall become effective upon the filing of a
Certificate of Merger with the Secretaries of State of the States of Idaho and
Delaware. The date and time when the Merger shall become effective is herein
referred to as the "Effective Time."
2. Governing Documents.
a. The Certificate of Incorporation of CESI as it may be
amended or restated subject to applicable law, and as in effect immediately
prior to the Effective Time, shall constitute the Certificate of Incorporation
of the Surviving Corporation without further change or amendment until
thereafter amended in accordance with the provisions thereof and applicable
law.
b. The Bylaws of CESI as in effect immediately prior to
the Effective Time shall constitute the Bylaws of the Surviving Corporation
without change or amendment until thereafter amended in accordance with the
provisions thereof and applicable law.
<PAGE> 35
3. Officers and Directors. The persons who are officers and
directors of the Company immediately prior to the Effective Time shall, after
the Effective Time, be the officers and directors of the Surviving Corporation,
without change until their successors have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in accordance
with the Surviving Corporation's Certificate of Incorporation and Bylaws and
applicable law.
4. Name. The name of the Surviving Corporation shall be
Consolidated Eco-Systems, Inc.
5. Succession. At the Effective Time, the separate corporate
existence of the Company shall cease, and the Surviving Corporation shall
possess all the rights, privileges, powers and franchises of a public or
private nature and be subject to all the restrictions, disabilities and duties
of the Company and all the rights, privileges, powers and franchises of the
Company, and all property, real, personal and mixed, and all debts due to the
Company on whatever account, as well for share subscriptions and all other
things in action, shall be vested in the Surviving Corporation; and all
property, rights, privileges, powers and franchises, and all and every other
interest shall be thereafter as effectively the property of the Surviving
Corporation as the same were of the Company, and the title of any real estate
vested by deed or otherwise shall not revert or be in any way impaired by
reason of the Merger, but all rights of creditor and liens upon any property of
the Company shall thenceforth attach to the Surviving Corporation and may be
enforced against it to the same extent as if such debts, liabilities and duties
had been incurred or contracted by it; provided, however, that such liens upon
property of the Company will be limited to the property affected thereby
immediately prior to the Merger. All corporate acts, plans, policies,
agreements, arrangements, approvals and authorizations of the Company, its
shareholders, Board of Directors and committees thereof, officers and agents
which were valid and effective immediately prior to the Effective Time, shall
be taken for all purposes as the acts, plans, policies, agreements,
arrangements, approvals and authorizations of the Surviving Corporation, its
shareholders, Board of Directors and committees thereof, respectively, and
shall be as effective and binding thereon as the same were with respect to the
Company.
6. Conversion of Shares. At the Effective Time, by virtue of the
Merger and without any action on the part of the holder thereof:
a. Each share of the Common Stock outstanding
immediately prior to the Effective Time shall be converted into, and shall
become, one fully paid and nonassessable share of CESI Common Stock.
b. The 100 shares of CESI Common Stock issued and
outstanding in the name of the Company shall be canceled and retired, and no
payment shall be made with respect thereto, and such shares shall resume the
status of unauthorized and unissued shares of CESI Common Stock.
7. Stock Certificates. At and after the Effective Time, all of
the outstanding certificates which immediately prior to the Effective Time
represented shares of the Common Stock shall be deemed for all purposes to
evidence ownership of, and to represent shares of, CESI Common Stock into which
the shares of the Common Stock formerly represented by such certificates have
been converted as herein provided. The registered owner on the books and
records of the Company or its transfer agent of any such outstanding stock
certificate shall, until such certificate shall have been surrendered for
transfer or otherwise accounted for to the Surviving Corporation or its
transfer agent, have and be entitled to exercise any voting or other rights
with respect to and to receive any dividends and other distributions upon the
shares of CESI Common Stock evidenced by such outstanding certificate as above
provided. Nothing contained herein shall be deemed to require the holder of
any shares of the Common Stock to surrender the certificate or certificates
representing such shares in exchange for a certificate or certificates
representing shares of CESI Common Stock.
8. Options. Each right in or to, or option to purchase, shares
of the Common Stock, granted under the 1995 Incentive Award Plan of Exsorbet
Industries, Inc. (the "Plan") or otherwise, which is outstanding immediately
prior to the Effective Time, shall, by virtue of the Merger and without any
action of the part of the holder thereof, be converted into and become a right
in or to, or an option to purchase at the same option price per share, the same
number of shares of CESI Common Stock, upon the same terms and subject to the
same conditions as set forth in the Plan or otherwise as in effect at the
Effective Time. The same number of shares of CESI Common Stock shall be
reserved for purposes of the outstanding options as is equal to the number of
shares of the Company under the Plan including the outstanding rights or
options or portions thereof granted pursuant to the Plan and otherwise.
A-2
<PAGE> 36
9. Other Employee Benefit Plans. As of the Effective Time, the
Surviving Corporation hereby assumes all obligations of the Company under any
and all employee benefit plans in effect as of the Effective Time or with
respect to which employee rights or accrued benefits are outstanding as of the
Effective Time.
10. Conditions. The consummation of the Merger is subject to
satisfaction of the following conditions prior to the Effective Time:
a. The Merger shall have received the requisite approval
of the holders of the Common Stock and all necessary action shall have been
taken to authorize the execution, delivery and performance of the Merger
Agreement by the Company and CESI.
b. All approvals and consents necessary or desirable, if
any, in connection with the consummation of the Merger shall have been
obtained.
c. No suit, action, proceeding or other litigation shall
have been commenced or threatened to be commenced which, in the opinion of the
Company or CESI, would pose a material restriction on or impair consummation of
the Merger, performance of this Merger Agreement or the conduct of the business
of CESI after the Effective Time, or create a risk of subjecting the Company or
CESI or their respective shareholders, officers or directors, to material
damages, costs, liability or other relief in connection with the Merger or this
Merger Agreement.
d. The shares of CESI Common Stock to be issued or
reserved for issuance shall, if required, have been approved for listing on the
Nasdaq SmallCap Market upon official notice of issuance.
11. Governing Law. This Merger Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware.
12. Amendment. Subject to applicable law and subject to the
rights of the Company shareholders further to approve any amendment which would
have a material adverse effect on such shareholders, this Merger Agreement may
be amended, modified or supplemented by written agreement of the parties hereto
at any time prior to the Effective Time with respect to any of the terms
contained herein.
13. Deferral or Abandonment. At any time prior to the Effective
Time, this Merger Agreement may be terminated and the Merger may be abandoned
or the time of consummation of the Merger may be deferred for a reasonable time
by the Board of Directors of either the Company or CESI or both,
notwithstanding approval of this Merger Agreement by the shareholders of the
Company or the sole stockholder of CESI, or both, if circumstances arise which,
in the opinion of the Board of Directors of the Company or CESI, make the
Merger inadvisable or such deferral of the time of consummation thereof
advisable. Specifically, the Board of Directors of the Company may terminate
this Merger Agreement any time prior to the effective time if holders of an
excess of one percent of the Common Stock perfect their dissenters' rights of
appraisal pursuant to, and in accordance with, Sections 30-1-80 and 30-1-81 of
the IBCA.
14. Further Assurances. From time to time, as and when required
or requested by either the Company or CESI, as applicable, or by its respective
successors and assigns, there shall be executed and delivered on behalf of the
other corporation, or by its respective successors and assigns, such deeds,
assignments and other instruments, and there shall be taken or caused to be
taken by it all such further and other action, as shall be appropriate or
necessary in order to vest, perfect or confirm, of record or otherwise,
immunities, powers, franchise and authority of the Company and otherwise to
carry out the purposes of this Merger Agreement, and the officers and directors
of each corporation are fully authorized in the name and on behalf of such
corporation or otherwise, to take any and all such action and to execute and
deliver any and all such deeds, assignments and other instruments.
15. Counterparts. This Merger Agreement may be executed in any
number of counterparts, each of which shall be an original, but such
counterparts shall together constitute but one and the same instrument.
16. Headings. The headings of the several articles herein have
been inserted for convenience of reference only and are not intended to be a
part or to affect the meaning or interpretation of this Merger Agreement.
A-3
<PAGE> 37
IN WITNESS WHEREOF, the Company and CESI have caused this Merger
Agreement to be signed by their respective duly authorized officers and
delivered this _____ day of __________________, 1996.
EXSORBET INDUSTRIES, INC.,
an Idaho corporation
By:
-----------------------------------
Title:
--------------------------------
CONSOLIDATED ECO-SYSTEMS, INC.
a Delaware corporation
By:
-----------------------------------
Title:
--------------------------------
A-4
<PAGE> 38
EXHIBIT B
CERTIFICATE OF INCORPORATION
OF
CONSOLIDATED ECO-SYSTEMS, INC.
FIRST: The name of the Corporation is Consolidated Eco-Systems, Inc.
(hereinafter called the "Corporation") .
SECOND: The registered office of the Corporation in the State of
Delaware is located at Corporation Trust Center, 1209 Orange Street, in the
City of Wilmington, County of New Castle. The name of the registered agent of
the Corporation at such address is The Corporation Trust Company.
THIRD: The purpose for which the Corporation is organized is to
engage in any and all lawful acts and activity for which corporations may be
organized under the General Corporation Law of Delaware. The Corporation will
have perpetual existence.
FOURTH: The total number of shares of stock which the Corporation
shall have authority to issue is 60,000,000 shares of capital stock, classified
as (i) 10,000,000 shares of preferred stock, par value $.001 per share
("Preferred Stock"), and (ii) 50,000,000 shares of common stock, par value
$.001 per share ("Common Stock").
The designations and the powers, preferences, rights, qualifications,
limitations, and restrictions of the Preferred Stock and Common Stock are as
follows:
1. Provisions Relating to the Preferred Stock.
(a) The Preferred Stock may be issued from time to time
in one or more classes or series, the shares of each class or series to have
such designations and powers, preferences, and rights, and qualifications,
limitations, and restrictions thereof, as are stated and expressed herein and
in the resolution or resolutions providing for the issue of such class or
series adopted by the board of directors of the Corporation as hereafter
prescribed.
(b) Authority is hereby expressly granted to and vested
in the board of directors of the Corporation to authorize the issuance of the
Preferred Stock from time to time in one or more classes or series, and with
respect to each class or series of the Preferred Stock, to fix and state by the
resolution or resolutions from time to time adopted providing for the issuance
thereof the following:
(i) whether or not the class or series is to have voting
rights, full, special, or limited, or is to be without voting rights, and
whether or not such class or series is to be entitled to vote as a separate
class either alone or together with the holders of one or more other classes or
series of stock;
(ii) the number of shares to constitute the class or
series and the designations thereof;
(iii) the preferences, and relative, participating,
optional, or other special rights, if any, and the qualifications, limitations,
or restrictions thereof, if any, with respect to any class or series;
(iv) whether or not the shares of any class or series
shall be redeemable at the option of the Corporation or the holders thereof or
upon the happening of any specified event, and, if redeemable, the redemption
price or prices (which may be payable in the form of cash, notes, securities,
or other property), and the time or times at which, and the terms and
conditions upon which, such shares shall be redeemable and the manner of
redemption;
(v) whether or not the shares of a class or series shall
be subject to the operation of retirement or sinking funds to be applied to the
purchase or redemption of such shares for retirement, and, if such retirement
or sinking fund or funds are to be established, the annual amount thereof, and
the terms and provisions relative to the operation thereof;
<PAGE> 39
(vi) the dividend rate, whether dividends are payable in
cash, stock of the Corporation, or other property, the conditions upon which
and the times when such dividends are payable, the preference to or the
relation to the payment of dividends payable on any other class or classes or
series of stock, whether or not such dividends shall be cumulative or
noncumulative, and if cumulative, the date or dates from which such dividends
shall accumulate;
(vii) the preferences, if any, and the amounts thereof
which the holders of any class or series thereof shall be entitled to receive
upon the voluntary or involuntary dissolution of, or upon any distribution of
the assets of, the Corporation;
(viii) whether or not the shares of any class or
series, at the option of the Corporation or the holder thereof or upon the
happening of any specified event, shall be convertible into or exchangeable
for, the shares of any other class or classes or of any other series of the
same or any other class or classes of stock, securities, or other property of
the Corporation and the conversion price or prices or ratio or ratios or the
rate or rates at which such exchange may be made, with such adjustments, if
any, as shall be stated and expressed or provided for in such resolution or
resolutions; and
(ix) such other special rights and protective provisions
with respect to any class or series as may to the board of directors of the
Corporation seem advisable.
(c) The shares of each class or series of the Preferred
Stock may vary from the shares of any other class or series thereof in any or
all of the foregoing respects. The board of directors of the Corporation may
increase the number of shares of the Preferred Stock designated for any
existing class or series by a resolution adding to such class or series
authorized and unissued shares of the Preferred Stock not designated for any
other class or series. The board of directors of the Corporation may decrease
the number of shares of the Preferred Stock designated for any existing class
or series by a resolution subtracting from such class or series authorized and
unissued shares of the Preferred Stock designated for such existing class or
series, and the shares so subtracted shall become authorized, unissued, and
undesignated shares of the Preferred Stock.
2. Provisions Relating to the Common Stock.
(a) Each share of Common Stock of the Corporation shall
have identical rights and privileges in every respect. The holders of shares
of Common Stock shall be entitled to vote upon all matters submitted to a vote
of the stockholders of the Corporation and shall be entitled to one vote for
each share of Common Stock held.
(b) Subject to the prior rights and preferences, if any,
applicable to shares of the Preferred Stock or any series thereof, the holders
of shares of the Common Stock shall be entitled to receive such dividends
(payable in cash, stock, or otherwise) as may be declared thereon by the board
of directors at any time and from time to time out of any funds of the
Corporation legally available therefor.
(c) In the event of any voluntary or involuntary
liquidation, dissolution, or winding-up of the Corporation, after distribution
in full of the preferential amounts, if any, to be distributed to the holders
of shares of the Preferred Stock or any series thereof, the holders of shares
of the Common Stock shall be entitled to receive all of the remaining assets of
the Corporation available for distribution to its stockholders, ratably in
proportion to the number of shares of the Common Stock held by them. A
liquidation, dissolution, or winding-up of the Corporation, as such terms are
used in this Paragraph (c), shall not be deemed to be occasioned by or to
include any consolidation or merger of the Corporation with or into any other
corporation or corporations or other entity or a sale, lease, exchange, or
conveyance of all or a part of the assets of the Corporation.
3. General.
(a) Subject to the foregoing provisions of this
Certificate of Incorporation, the Corporation may issue shares of its Preferred
Stock and Common Stock from time to time for such consideration (not less than
the par value thereof) as may be fixed by the board of directors of the
Corporation, which is expressly authorized to fix the same in its absolute and
uncontrolled discretion subject to the foregoing conditions. Shares so issued
for which the consideration shall have been paid or delivered to the
Corporation shall be deemed fully paid stock and shall not be
B-2
<PAGE> 40
liable to any further call or assessment thereon, and the holders of such
shares shall not be liable for any further payments in respect of such shares.
(b) The Corporation shall have authority to create and
issue rights and options entitling their holders to purchase shares of the
Corporation's capital stock of any class or series or other securities of the
Corporation, and such rights and options shall be evidenced by instrument(s)
approved by the board of directors of the Corporation. The board of directors
of the Corporation shall be empowered to set the exercise price, duration,
times for exercise, and other terms of such options or rights; provided,
however, that the consideration to be received for any shares of capital stock
subject thereto shall not be less than the par value thereof.
FIFTH: The name of the incorporator of the Corporation is Todd W.
Taylor, and the mailing address of such incorporator is 2001 Ross Avenue, Suite
4500, Dallas, Texas 75201.
SIXTH: The number of directors constituting the initial board of
directors is six and thereafter may be fixed by or in a manner provided in the
bylaws. The name and mailing address of each person who is to serve as
director until the first annual meeting of stockholders or until his successor
is elected and qualified are as follows:
<TABLE>
<CAPTION>
NAME ADDRESS
---- -------
<S> <C>
Charles Chunn, Jr. 9704 Bridgeford
Fort Smith, AR 72903
James J. Connors, Jr. 10539 Country Road 1
Fairhope, AL 36532
Dr. Edward L. Schrader 504 Merganser Trail
Clinton, MS 39056
Sam Sexton, III P.O. Box 1526
Fort Smith, AR 72902
Robert D. Vick 111 Meadowview
Brandon, MS 39042
Larry Woodcock 1890 Swisco Road
Sulphur, LA 70663
</TABLE>
SEVENTH: Directors of the Corporation need not be elected by written
ballot unless the by-laws of the Corporation otherwise provide.
EIGHTH: The directors of the Corporation shall have the power to
adopt, amend, and repeal the by-laws of the Corporation.
NINTH: No contract or transaction between the Corporation and one or
more of its directors, officers, or stockholders or between the Corporation and
any person (as used herein "person" means other corporation, partnership,
association, firm, trust, joint venture, political subdivision, or
instrumentality) or other organization in which one or more of its directors,
officers, or stockholders are directors, officers, or stockholders, or have a
financial interest, shall be void or voidable solely for this reason, or solely
because the director or officer is present at or participates in the meeting of
the board or committee which authorizes the contract or transaction, or solely
because his, her, or their votes are counted for such purpose, if: (i) the
material facts as to his or her relationship or interest and as to the contract
or transaction are disclosed or are known to the board of directors or the
committee, and the board of directors or committee in good faith authorizes the
contract or transaction by the affirmative votes of a majority of the
disinterested directors, even though the disinterested directors be less than a
quorum; or (ii) the material facts as to his or her relationship or interest
and as to the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or (iii) the
contract or transaction is fair as to the Corporation as of the time it is
authorized, approved, or ratified by the board
B-3
<PAGE> 41
of directors, a committee thereof, or the stockholders. Common or interested
directors may be counted in determining the presence of a quorum at a meeting
of the board of directors or of a committee which authorizes the contract or
transaction.
TENTH: The Corporation shall indemnify any person who was, is, or is
threatened to be made a party to a proceeding (as hereinafter defined) by
reason of the fact that he or she (i) is or was a director or officer of the
Corporation or (ii) while a director or officer of the Corporation, is or was
serving at the request of the Corporation as a director, officer, partner,
venturer, proprietor, trustee, employee, agent, or similar functionary of
another foreign or domestic corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan, or other enterprise, to the
fullest extent permitted under the Delaware General Corporation Law, as the
same exists or may hereafter be amended. Such right shall be a contract right
and as such shall run to the benefit of any director or officer who is elected
and accepts the position of director or officer of the Corporation or elects to
continue to serve as a director or officer of the Corporation while this
Article Tenth is in effect. Any repeal or amendment of this Article Tenth
shall be prospective only and shall not limit the rights of any such director
or officer or the obligations of the Corporation with respect to any claim
arising from or related to the services of such director or officer in any of
the foregoing capacities prior to any such repeal or amendment to this Article
Tenth. Such right shall include the right to be paid by the Corporation
expenses incurred in defending any such proceeding in advance of its final
disposition to the maximum extent permitted under the Delaware General
Corporation Law, as the same exists or may hereafter be amended. If a claim
for indemnification or advancement of expenses hereunder is not paid in full by
the Corporation within sixty (60) days after a written claim has been received
by the Corporation, the claimant may at any time thereafter bring suit against
the Corporation to recover the unpaid amount of the claim, and if successful in
whole or in part, the claimant shall also be entitled to be paid the expenses
of prosecuting such claim. It shall be a defense to any such action that such
indemnification or advancement of costs of defense are not permitted under the
Delaware General Corporation Law, but the burden of proving such defense shall
be on the Corporation. Neither the failure of the Corporation (including its
board of directors or any committee thereof, independent legal counsel, or
stockholders) to have made its determination prior to the commencement of such
action that indemnification of, or advancement of costs of defense to, the
claimant is permissible in the circumstances nor an actual determination by the
Corporation (including its board of directors or any committee thereof,
independent legal counsel, or stockholders) that such indemnification or
advancement is not permissible shall be a defense to the action or create a
presumption that such indemnification or advancement is not permissible. In
the event of the death of any person having a right of indemnification under
the foregoing provisions, such right shall inure to the benefit of his or her
heirs, executors, administrators, and personal representatives. The rights
conferred above shall not be exclusive of any other right which any person may
have or hereafter acquire under any statute, by-law, resolution of stockholders
or directors, agreement, or otherwise.
The Corporation may additionally indemnify any employee or agent of
the Corporation to the fullest extent permitted by law.
As used herein, the term "proceeding" means any threatened, pending,
or completed action, suit, or proceeding, whether civil, criminal,
administrative, arbitrative, or investigative, any appeal in such an action,
suit, or proceeding, and any inquiry or investigation that could lead to such
an action, suit, or proceeding.
ELEVENTH: A director of the Corporation shall not be personally
liable to the Corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived an
improper personal benefit. Any repeal or amendment of this Article Eleventh by
the stockholders of the Corporation shall be prospective only, and shall not
adversely affect any limitation on the personal liability of a director of the
Corporation arising from an act or omission occurring prior to the time of such
repeal or amendment. In addition to the circumstances in which a director of
the Corporation is not personally liable as set forth in the foregoing
provisions of this Article Eleventh, a director shall not be liable to the
Corporation or its stockholders to such further extent as permitted by any law
hereafter enacted, including without limitation any subsequent amendment to the
Delaware General Corporation Law.
B-4
<PAGE> 42
I, the undersigned, for the purpose of forming the Corporation under
the laws of the State of Delaware, do make, file, and record this Certificate
of Incorporation and do certify that this is my act and deed and that the facts
stated herein are true and, accordingly, I do hereunto set my hand on this ____
day of November, 1996.
----------------------------
Todd W. Taylor
B-5
<PAGE> 43
EXHIBIT C
BYLAWS
OF
CONSOLIDATED ECO-SYSTEMS, INC.
A DELAWARE CORPORATION
<PAGE> 44
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE ONE: OFFICES
1.1 Registered Office and Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Other Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE TWO: MEETINGS OF STOCKHOLDERS
2.1 Annual Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.2 Special Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.3 Place of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.4 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.5 Voting List . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.6 Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.7 Required Vote; Withdrawal of Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.8 Method of Voting; Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.9 Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.10 Conduct of Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.11 Inspectors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE THREE: DIRECTORS
3.1 Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.2 Number; Qualification; Election; Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.3 Change in Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.4 Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.5 Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.6 Meetings of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.7 First Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.8 Election of Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.9 Regular Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.10 Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.11 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.12 Quorum; Majority Vote . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.13 Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.14 Presumption of Assent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.15 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE FOUR: COMMITTEES
4.1 Designation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.2 Number; Qualification; Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.3 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.4 Committee Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.5 Alternate Members of Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.6 Regular Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.7 Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.8 Quorum; Majority Vote . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.9 Minutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.10 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.11 Responsibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
</TABLE>
(i)
<PAGE> 45
<TABLE>
<S> <C> <C>
ARTICLE FIVE: NOTICE
5.1 Method . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.2 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE SIX: OFFICERS
6.1 Number; Titles; Term of Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.2 Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
6.3 Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.4 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.5 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.6 Chairman of the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.7 President . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.8 Vice Presidents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.9 Treasurer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.10 Assistant Treasurers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.11 Secretary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.12 Assistant Secretaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE SEVEN: CERTIFICATES AND SHAREHOLDERS
7.1 Certificates for Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.2 Replacement of Lost or Destroyed Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.3 Transfer of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.4 Registered Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.5 Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.6 Legends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE EIGHT: MISCELLANEOUS PROVISIONS
8.1 Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.2 Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.3 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.4 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.5 Seal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.6 Resignations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.7 Securities of Other Corporations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.8 Telephone Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.9 Action Without a Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.10 Invalid Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.11 Mortgages, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.12 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.13 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.14 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
(ii)
<PAGE> 46
BYLAWS
OF
CONSOLIDATED ECO-SYSTEMS, INC.
A Delaware Corporation
PREAMBLE
These bylaws are subject to, and governed by, the General Corporation
Law of the State of Delaware (the "Delaware General Corporation Law") and the
certificate of incorporation of Consolidated Eco-Systems, Inc., a Delaware
corporation (the "Corporation"). In the event of a direct conflict between the
provisions of these bylaws and the mandatory provisions of the Delaware General
Corporation Law or the provisions of the certificate of incorporation of the
Corporation, such provisions of the Delaware General Corporation Law or the
certificate of incorporation of the Corporation, as the case may be, will be
controlling.
ARTICLE ONE: OFFICES
1.1 Registered Office and Agent. The registered office and
registered agent of the Corporation shall be as designated from time to time by
the appropriate filing by the Corporation in the office of the Secretary of
State of the State of Delaware.
1.2 Other Offices. The Corporation may also have offices at such
other places, both within and without the State of Delaware, as the board of
directors may from time to time determine or as the business of the Corporation
may require.
ARTICLE TWO: MEETINGS OF STOCKHOLDERS
2.1 Annual Meeting. An annual meeting of stockholders of the
Corporation shall be held each calendar year on such date and at such time as
shall be designated from time to time by the board of directors and stated in
the notice of the meeting or in a duly executed waiver of notice of such
meeting. At such meeting, the stockholders shall elect directors and transact
such other business as may properly be brought before the meeting.
2.2 Special Meeting. A special meeting of the stockholders may be
called at any time by the Chairman of the Board, the President, the board of
directors, and shall be called by the President or the Secretary at the request
in writing of the stockholders of record of not less than ten percent of all
shares entitled to vote at such meeting or as otherwise provided by the
certificate of incorporation of the Corporation. A special meeting shall be
held on such date and at such time as shall be designated by the person(s)
calling the meeting and stated in the notice of the meeting or in a duly
executed waiver of notice of such meeting. Only such business shall be
transacted at a special meeting as may be stated or indicated in the notice of
such meeting or in a duly executed waiver of notice of such meeting.
2.3 Place of Meetings. An annual meeting of stockholders may be
held at any place within or without the State of Delaware designated by the
board of directors. A special meeting of stockholders may be held at any place
within or without the State of Delaware designated in the notice of the meeting
or a duly executed waiver of notice of such meeting. Meetings of stockholders
shall be held at the principal office of the Corporation unless another place
is designated for meetings in the manner provided herein.
2.4 Notice. (a) Written or printed notice stating the place,
day, and time of each meeting of the stockholders and, in case of a special
meeting, the purpose or purposes for which the meeting is called shall be
delivered not less than ten nor more than 60 days before the date of the
meeting, either personally or by mail, by or at the direction of the President,
the Secretary, or the officer or person(s) calling the meeting, to each
stockholder of record entitled to vote at such meeting. If such notice is to
be sent by mail, it shall be directed to such stockholder at his address as it
appears on the records of the Corporation, unless he shall have filed with the
Secretary of the Corporation a written request that notices to him be mailed to
some other address, in which case it shall be directed to him at such other
address. Notice of any meeting of stockholders shall not be required to be
given to any
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stockholder who shall attend such meeting in person or by proxy and shall not,
at the beginning of such meeting, object to the transaction of any business
because the meeting is not lawfully called or convened, or who shall, either
before or after the meeting, submit a signed waiver of notice, in person or by
proxy.
(b) Notice shall not be required to be given to any stockholder to
whom (a) notice of two consecutive annual meetings, and all notices of meetings
or of the taking of action by written consent without a meeting to such
stockholder during the period between such two annual meetings, or (b) all, and
at least two, payments (if sent by first class mail) of dividends or interest
on securities during a twelve month period, have been mailed addressed to such
stockholder at his address as shown on the records of the Corporation and have
been returned undeliverable. Any action or meeting which shall be taken or
held without notice to such stockholder shall have the same force and effect as
if such notice had been duly given. If any such stockholder shall deliver to
the Corporation a written notice setting forth his then current address, the
requirement that notice be given to such stockholder shall be reinstated.
2.5 Voting List. At least ten days before each meeting of
stockholders, the Secretary or other officer of the Corporation who has charge
of the Corporation's stock ledger, either directly or through another officer
appointed by him or through a transfer agent appointed by the board of
directors, shall prepare a complete list of stockholders entitled to vote
thereat, arranged in alphabetical order and showing the address of each
stockholder and number of shares registered in the name of each stockholder.
For a period of ten days prior to such meeting, such list shall be kept on file
at a place within the city where the meeting is to be held, which place shall
be specified in the notice of meeting or a duly executed waiver of notice of
such meeting or, if not so specified, at the place where the meeting is to be
held and shall be open to examination by any stockholder during ordinary
business hours. Such list shall be produced at such meeting and kept at the
meeting at all times during such meeting and may be inspected by any
stockholder who is present.
2.6 Quorum. The holders of a majority of the outstanding shares
entitled to vote on a matter, present in person or by proxy, shall constitute a
quorum at any meeting of stockholders, except as otherwise provided by law, the
certificate of incorporation of the Corporation, or these bylaws. If a quorum
shall not be present, in person or by proxy, at any meeting of stockholders,
the stockholders entitled to vote thereat who are present, in person or by
proxy, or, if no stockholder entitled to vote is present, any officer of the
Corporation may adjourn the meeting from time to time, without notice other
than announcement at the meeting (unless the board of directors, after such
adjournment, fixes a new record date for the adjourned meeting), until a quorum
shall be present, in person or by proxy. At any adjourned meeting at which a
quorum shall be present, in person or by proxy, any business may be transacted
which may have been transacted at the original meeting had a quorum been
present; provided that, if the adjournment is for more than 30 days or if after
the adjournment a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting shall be given to each stockholder of record entitled
to vote at the adjourned meeting.
2.7 Required Vote; Withdrawal of Quorum. When a quorum is present
at any meeting, the vote of the holders of at least a majority of the
outstanding shares entitled to vote who are present, in person or by proxy,
shall decide any question brought before such meeting, unless the question is
one on which, by express provision of statute, the certificate of incorporation
of the Corporation, or these bylaws, a different vote is required, in which
case such express provision shall govern and control the decision of such
question. The stockholders present at a duly constituted meeting may continue
to transact business until adjournment, notwithstanding the withdrawal of
enough stockholders to leave less than a quorum.
2.8 Method of Voting; Proxies. Except as otherwise provided in
the certificate of incorporation of the Corporation or by law, each outstanding
share, regardless of class, shall be entitled to one vote on each matter
submitted to a vote at a meeting of stockholders. Elections of directors need
not be by written ballot. At any meeting of stockholders, every stockholder
having the right to vote may vote either in person or by a proxy executed in
writing by the stockholder or by his duly authorized attorney-in-fact, or by
any proxy method permitted by the Delaware General Corporation Law. Each such
proxy shall be filed with the Secretary of the Corporation before or at the
time of the meeting. No proxy shall be valid after three years from the date
of its execution, unless otherwise provided in the proxy. If no date is stated
in a proxy, such proxy shall be presumed to have been executed on the date of
the meeting at which it is to be voted. Each proxy shall be revocable unless
expressly provided therein to be irrevocable and coupled with an interest
sufficient in law to support an irrevocable power or unless otherwise made
irrevocable by law.
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2.9 Record Date. (a) For the purpose of determining stockholders
entitled to notice of or to vote at any meeting of stockholders, or any
adjournment thereof, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion, or exchange of stock or for the purpose of
any other lawful action, the board of directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted by the board of directors, for any such determination
of stockholders, such date in any case to be not more than 60 days and not less
than ten days prior to such meeting nor more than 60 days prior to any other
action. If no record date is fixed:
(i) The record date for determining stockholders entitled
to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is
given or, if notice is waived, at the close of business on the day
next preceding the day on which the meeting is held.
(ii) The record date for determining stockholders for any
other purpose shall be at the close of business on the day on which
the board of directors adopts the resolution relating thereto.
(iii) A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the board of
directors may fix a new record date for the adjourned meeting.
(b) In order that the Corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting, the board
of directors may fix a record date, which record date shall not precede the
date upon which the resolution fixing the record date is adopted by the board
of directors, and which date shall not be more than ten days after the date
upon which the resolution fixing the record date is adopted by the board of
directors. If no record date has been fixed by the board of directors, the
record date for determining stockholders entitled to consent to corporate
action in writing without a meeting, when no prior action by the board of
directors is required by law or these bylaws, shall be the first date on which
a signed written consent setting forth the action taken or proposed to be taken
is delivered to the Corporation by delivery to its registered office in the
State of Delaware, its principal place of business, or an officer or agent of
the Corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the Corporation's registered
office in the State of Delaware, principal place of business, or such officer
or agent shall be by hand or by certified or registered mail, return receipt
requested. If no record date has been fixed by the board of directors and
prior action by the board of directors is required by law or these bylaws, the
record date for determining stockholders entitled to consent to corporate
action in writing without a meeting shall be at the close of business on the
day on which the board of directors adopts the resolution taking such prior
action.
2.10 Conduct of Meeting. The Chairman of the Board, if such office
has been filled, and, if not or if the Chairman of the Board is absent or
otherwise unable to act, the President shall preside at all meetings of
stockholders. The Secretary shall keep the records of each meeting of
stockholders. In the absence or inability to act of any such officer, such
officer's duties shall be performed by the officer given the authority to act
for such absent or non- acting officer under these bylaws or by some person
appointed by the meeting.
2.11 Inspectors. The board of directors shall, in advance of any
meeting of stockholders, appoint one or more inspectors to act at such meeting
or any adjournment thereof. If any of the inspectors so appointed shall fail
to appear or act, or if inspectors shall not have been appointed, the chairman
of the meeting shall, appoint one or more inspectors. Each inspector, before
entering upon the discharge of his duties, shall take and sign an oath
faithfully to execute the duties of inspector at such meeting with strict
impartiality and according to the best of his ability. The inspectors shall
determine the number of shares of capital stock of the Corporation outstanding
and the voting power of each, the number of shares represented at the meeting,
the existence of a quorum, and the validity and effect of proxies and shall
receive votes, ballots, or consents, hear and determine all challenges and
questions arising in connection with the right to vote, count and tabulate all
votes, ballots, or consents, determine the results, and do such acts as are
proper to conduct the election or vote with fairness to all stockholders. On
request of the chairman of the meeting, the inspectors shall make a report in
writing of any challenge, request, or matter determined by them and shall
execute a certificate of any fact found by them. No director or candidate for
the office of director shall act as an inspector of an election of directors.
Inspectors need not be stockholders.
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ARTICLE THREE: DIRECTORS
3.1 Management. The business and property of the Corporation
shall be managed by the board of directors. Subject to the restrictions
imposed by law, the certificate of incorporation of the Corporation, or these
bylaws, the board of directors may exercise all the powers of the Corporation.
3.2 Number; Qualification; Election; Term. The number of
directors which shall constitute the entire board of directors shall be not
less than one. The first board of directors shall consist of the number of
directors named in the certificate of incorporation of the Corporation or, if
no directors are so named, shall consist of the number of directors elected by
the incorporator(s) at an organizational meeting or by unanimous written
consent in lieu thereof. Thereafter, within the limits above specified, the
number of directors which shall constitute the entire board of directors shall
be determined by resolution of the board of directors or by resolution of the
stockholders at the annual meeting thereof or at a special meeting thereof
called for that purpose. Except as otherwise required by law, the certificate
of incorporation of the Corporation, or these bylaws, the directors shall be
elected at an annual meeting of stockholders at which a quorum is present.
Directors shall be elected by a plurality of the votes of the shares present in
person or represented by proxy and entitled to vote on the election of
directors. Each director so chosen shall hold office until the first annual
meeting of stockholders held after his election and until his successor is
elected and qualified or, if earlier, until his death, resignation, or removal
from office. None of the directors need be a stockholder of the Corporation or
a resident of the State of Delaware. Each director must have attained the age
of majority.
3.3 Change in Number. No decrease in the number of directors
constituting the entire board of directors shall have the effect of shortening
the term of any incumbent director.
3.4 Removal. Except as otherwise provided in the certificate of
incorporation of the Corporation or these bylaws, at any meeting of
stockholders called expressly for that purpose, any director or the entire
board of directors may be removed, with or without cause, by a vote of the
holders of a majority of the shares then entitled to vote on the election of
directors; provided, however, that so long as stockholders have the right to
cumulate votes in the election of directors pursuant to the certificate of
incorporation of the Corporation, if less than the entire board of directors is
to be removed, no one of the directors may be removed if the votes cast against
his removal would be sufficient to elect him if then cumulatively voted at an
election of the entire board of directors.
3.5 Vacancies. Vacancies and newly-created directorships
resulting from any increase in the authorized number of directors may be filled
by a majority of the directors then in office, though less than a quorum, or by
the sole remaining director, and each director so chosen shall hold office
until the first annual meeting of stockholders held after his election and
until his successor is elected and qualified or, if earlier, until his death,
resignation, or removal from office. If there are no directors in office, an
election of directors may be held in the manner provided by statute. If, at
the time of filling any vacancy or any newly-created directorship, the
directors then in office shall constitute less than a majority of the whole
board of directors (as constituted immediately prior to any such increase), the
Court of Chancery may, upon application of any stockholder or stockholders
holding at least 10% of the total number of the shares at the time outstanding
having the right to vote for such directors, summarily order an election to be
held to fill any such vacancies or newly-created directorships or to replace
the directors chosen by the directors then in office. Except as otherwise
provided in these bylaws, when one or more directors shall resign from the
board of directors, effective at a future date, a majority of the directors
then in office, including those who have so resigned, shall have the power to
fill such vacancy or vacancies, the vote thereon to take effect when such
resignation or resignations shall become effective, and each director so chosen
shall hold office as provided in these bylaws with respect to the filling of
other vacancies.
3.6 Meetings of Directors. The directors may hold their meetings
and may have an office and keep the books of the Corporation, except as
otherwise provided by statute, in such place or places within or without the
State of Delaware as the board of directors may from time to time determine or
as shall be specified in the notice of such meeting or duly executed waiver of
notice of such meeting.
3.7 First Meeting. Each newly elected board of directors may hold
its first meeting for the purpose of organization and the transaction of
business, if a quorum is present, immediately after and at the same place as
the annual meeting of stockholders, and no notice of such meeting shall be
necessary.
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3.8 Election of Officers. At the first meeting of the board of
directors after each annual meeting of stockholders at which a quorum shall be
present, the board of directors shall elect the officers of the Corporation.
3.9 Regular Meetings. Regular meetings of the board of directors
shall be held at such times and places as shall be designated from time to time
by resolution of the board of directors. Notice of such regular meetings shall
not be required.
3.10 Special Meetings. Special meetings of the board of directors
shall be held whenever called by the Chairman of the Board, the President, or
any director.
3.11 Notice. The Secretary shall give notice of each special
meeting to each director at least 24 hours before the meeting. Notice of any
such meeting need not be given to any director who shall, either before or
after the meeting, submit a signed waiver of notice or who shall attend such
meeting without protesting, prior to or at its commencement, the lack of notice
to him. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the board of directors need be specified in the
notice or waiver of notice of such meeting.
3.12 Quorum; Majority Vote. At all meetings of the board of
directors, a majority of the directors fixed in the manner provided in these
bylaws shall constitute a quorum for the transaction of business. If at any
meeting of the board of directors there be less than a quorum present, a
majority of those present or any director solely present may adjourn the
meeting from time to time without further notice. Unless the act of a greater
number is required by law, the certificate of incorporation of the Corporation,
or these bylaws, the act of a majority of the directors present at a meeting at
which a quorum is in attendance shall be the act of the board of directors. At
any time that the certificate of incorporation of the Corporation provides that
directors elected by the holders of a class or series of stock shall have more
or less than one vote per director on any matter, every reference in these
bylaws to a majority or other proportion of directors shall refer to a majority
or other proportion of the votes of such directors.
3.13 Procedure. At meetings of the board of directors, business
shall be transacted in such order as from time to time the board of directors
may determine. The Chairman of the Board, if such office has been filled, and,
if not or if the Chairman of the Board is absent or otherwise unable to act,
the President shall preside at all meetings of the board of directors. In the
absence or inability to act of either such officer, a chairman shall be chosen
by the board of directors from among the directors present. The Secretary of
the Corporation shall act as the secretary of each meeting of the board of
directors unless the board of directors appoints another person to act as
secretary of the meeting. The board of directors shall keep regular minutes of
its proceedings which shall be placed in the minute book of the Corporation.
3.14 Presumption of Assent. A director of the Corporation who is
present at a meeting of the board of directors at which action on any corporate
matter is taken shall be presumed to have assented to the action unless his
dissent shall be entered in the minutes of the meeting or unless he shall file
his written dissent to such action with the person acting as secretary of the
meeting before the adjournment thereof or shall forward any dissent by
certified or registered mail to the Secretary of the Corporation immediately
after the adjournment of the meeting. Such right to dissent shall not apply to
a director who voted in favor of such action.
3.15 Compensation. The board of directors shall have the authority
to fix the compensation, including fees and reimbursement of expenses, paid to
directors for attendance at regular or special meetings of the board of
directors or any committee thereof; provided, that nothing contained herein
shall be construed to preclude any director from serving the Corporation in any
other capacity or receiving compensation therefor.
ARTICLE FOUR: COMMITTEES
4.1 Designation. The board of directors may, by resolution
adopted by a majority of the entire board of directors, designate one or more
committees.
4.2 Number; Qualification; Term. Each committee shall consist of
one or more directors appointed by resolution adopted by a majority of the
entire board of directors. The number of committee members may be increased or
decreased from time to time by resolution adopted by a majority of the entire
board of directors. Each
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committee member shall serve as such until the earliest of (i) the expiration
of his term as director, (ii) his resignation as a committee member or as a
director, or (iii) his removal as a committee member or as a director.
4.3 Authority. Each committee, to the extent expressly provided
in the resolution establishing such committee, shall have and may exercise all
of the authority of the board of directors in the management of the business
and property of the Corporation except to the extent expressly restricted by
law, the certificate of incorporation of the Corporation, or these bylaws.
4.4 Committee Changes. The board of directors shall have the
power at any time to fill vacancies in, to change the membership of, and to
discharge any committee.
4.5 Alternate Members of Committees. The board of directors may
designate one or more directors as alternate members of any committee. Any
such alternate member may replace any absent or disqualified member at any
meeting of the committee. If no alternate committee members have been so
appointed to a committee or each such alternate committee member is absent or
disqualified, the member or members of such committee present at any meeting
and not disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another member of the board of directors to act
at the meeting in the place of any such absent or disqualified member.
4.6 Regular Meetings. Regular meetings of any committee may be
held without notice at such time and place as may be designated from time to
time by the committee and communicated to all members thereof.
4.7 Special Meetings. Special meetings of any committee may be
held whenever called by any committee member. The committee member calling any
special meeting shall cause notice of such special meeting, including therein
the time and place of such special meeting, to be given to each committee
member at least 24 hours before such special meeting. Neither the business to
be transacted at, nor the purpose of, any special meeting of any committee need
be specified in the notice or waiver of notice of any special meeting.
4.8 Quorum; Majority Vote. At meetings of any committee, a
majority of the number of members designated by the board of directors shall
constitute a quorum for the transaction of business. If a quorum is not
present at a meeting of any committee, a majority of the members present may
adjourn the meeting from time to time, without notice other than an
announcement at the meeting, until a quorum is present. The act of a majority
of the members present at any meeting at which a quorum is in attendance shall
be the act of a committee, unless the act of a greater number is required by
law, the certificate of incorporation of the Corporation, or these bylaws.
4.9 Minutes. Each committee shall cause minutes of its
proceedings to be prepared and shall report the same to the board of directors
upon the request of the board of directors. The minutes of the proceedings of
each committee shall be delivered to the Secretary of the Corporation for
placement in the minute books of the Corporation.
4.10 Compensation. Committee members may, by resolution of the
board of directors, be allowed a fixed sum and expenses of attendance, if any,
for attending any committee meetings or a stated salary.
4.11 Responsibility. The designation of any committee and the
delegation of authority to it shall not operate to relieve the board of
directors or any director of any responsibility imposed by law upon the board
of directors or such director.
ARTICLE FIVE: NOTICE
5.1 Method. Whenever by statute, the certificate of incorporation
of the Corporation, or these bylaws, notice is required to be given to any
committee member, director, or stockholder and no provision is made as to how
such notice shall be given, personal notice shall not be required and any such
notice may be given (a) in writing, by mail, postage prepaid, addressed to such
committee member, director, or stockholder at his address as it appears on the
books or (in the case of a stockholder) the stock transfer records of the
Corporation, or (b) by any other method permitted by law (including but not
limited to overnight courier service, telegram, telex, or telefax). Any notice
required or permitted to be given by mail shall be deemed to be delivered and
given at the time when the same is deposited in the United States mail as
aforesaid. Any notice required or permitted to be given by overnight courier
service shall be deemed to be delivered and given at the time delivered to such
service with all charges prepaid and
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addressed as aforesaid. Any notice required or permitted to be given by
telegram, telex, or telefax shall be deemed to be delivered and given at the
time transmitted with all charges prepaid and addressed as aforesaid.
5.2 Waiver. Whenever any notice is required to be given to any
stockholder, director, or committee member of the Corporation by statute, the
certificate of incorporation of the Corporation, or these bylaws, a waiver
thereof in writing signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be equivalent to the
giving of such notice. Attendance of a stockholder, director, or committee
member at a meeting shall constitute a waiver of notice of such meeting, except
where such person attends for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
ARTICLE SIX: OFFICERS
6.1 Number; Titles; Term of Office. The officers of the
Corporation shall be a President, a Secretary, and such other officers as the
board of directors may from time to time elect or appoint, including a Chairman
of the Board, one or more Vice Presidents (with each Vice President to have
such descriptive title, if any, as the board of directors shall determine), and
a Treasurer. Each officer shall hold office until his successor shall have
been duly elected and shall have qualified, until his death, or until he shall
resign or shall have been removed in the manner hereinafter provided. Any two
or more offices may be held by the same person. None of the officers need be a
stockholder or a director of the Corporation or a resident of the State of
Delaware.
6.2 Removal. Any officer or agent elected or appointed by the
board of directors may be removed by the board of directors whenever in its
judgment the best interest of the Corporation will be served thereby, but such
removal shall be without prejudice to the contract rights, if any, of the
person so removed. Election or appointment of an officer or agent shall not of
itself create contract rights.
6.3 Vacancies. Any vacancy occurring in any office of the
Corporation (by death, resignation, removal, or otherwise) may be filled by the
board of directors.
6.4 Authority. Officers shall have such authority and perform
such duties in the management of the Corporation as are provided in these
bylaws or as may be determined by resolution of the board of directors not
inconsistent with these bylaws.
6.5 Compensation. The compensation, if any, of officers and
agents shall be fixed from time to time by the board of directors; provided,
however, that the board of directors may delegate the power to determine the
compensation of any officer and agent (other than the officer to whom such
power is delegated) to the Chairman of the Board, or the President, or a
committee of directors.
6.6 Chairman of the Board. The Chairman of the Board, if elected
by the board of directors, shall have such powers and duties as may be
prescribed by the board of directors. Such officer shall preside at all
meetings of the stockholders and of the board of directors. Such officer may
sign all certificates for shares of stock of the Corporation.
6.7 President. The President shall be the chief executive officer
of the Corporation and, subject to the board of directors, he shall have
general executive charge, management, and control of the properties and
operations of the Corporation in the ordinary course of its business, with all
powers with respect to such properties and operations as may be reasonably
incident to such responsibilities. If the board of directors has not elected a
Chairman of the Board or in the absence or inability to act of the Chairman of
the Board, the President shall exercise all of the powers and discharge all of
the duties of the Chairman of the Board. As between the Corporation and third
parties, any action taken by the President in the performance of the duties of
the Chairman of the Board shall be conclusive evidence that there is no
Chairman of the Board or that the Chairman of the Board is absent or unable to
act.
6.8 Vice Presidents. If the board of directors elects or appoints
one or more Vice Presidents, each Vice President shall have such powers and
duties as may be assigned to him by the board of directors, the Chairman of the
Board, or the President, and (in order of their seniority as determined by the
board of directors or, in the absence of such determination, as determined by
the length of time they have held the office of Vice President) shall exercise
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the powers of the President during that officer's absence or inability to act.
As between the Corporation and third parties, any action taken by a Vice
President in the performance of the duties of the President shall be conclusive
evidence of the absence or inability to act of the President at the time such
action was taken.
6.9 Treasurer. If the board of directors elects or appoints a
Treasurer, the Treasurer shall have custody of the Corporation's funds and
securities, shall keep full and accurate account of receipts and disbursements,
shall deposit all monies and valuable effects in the name and to the credit of
the Corporation in such depository or depositories as may be designated by the
board of directors, and shall perform such other duties as may be prescribed by
the board of directors, the Chairman of the Board, or the President.
6.10 Assistant Treasurers. If the board of directors elects or
appoints one or more Assistant Treasurers, each Assistant Treasurer shall have
such powers and duties as may be assigned to him by the board of directors, the
Chairman of the Board, or the President. The Assistant Treasurers (in the
order of their seniority as determined by the board of directors or, in the
absence of such a determination, as determined by the length of time they have
held the office of Assistant Treasurer) shall exercise the powers of the
Treasurer during that officer's absence or inability to act.
6.11 Secretary. Except as otherwise provided in these bylaws, the
Secretary shall keep the minutes of all meetings of the board of directors and
of the stockholders in books provided for that purpose, and he shall attend to
the giving and service of all notices. He may sign with the Chairman of the
Board or the President, in the name of the Corporation, all contracts of the
Corporation and affix the seal of the Corporation thereto. He may sign with
the Chairman of the Board or the President all certificates for shares of stock
of the Corporation, and he shall have charge of the certificate books, transfer
books, and stock papers as the board of directors may direct, all of which
shall at all reasonable times be open to inspection by any director upon
application at the office of the Corporation during business hours. He shall
in general perform all duties incident to the office of the Secretary, subject
to the control of the board of directors, the Chairman of the Board, and the
President.
6.12 Assistant Secretaries. If the board of directors elects or
appoints one or more Assistant Secretaries, each Assistant Secretary shall have
such powers and duties as may be assigned to him by the board of directors, the
Chairman of the Board, or the President. The Assistant Secretaries (in the
order of their seniority as determined by the board of directors or, in the
absence of such a determination, as determined by the length of time they have
held the office of Assistant Secretary) shall exercise the powers of the
Secretary during that officer's absence or inability to act.
ARTICLE SEVEN: CERTIFICATES AND SHAREHOLDERS
7.1 Certificates for Shares. Certificates for shares of stock of
the Corporation shall be in such form as shall be approved by the board of
directors. The certificates shall be signed by the Chairman of the Board or
the President or a Vice President and also by the Secretary or an Assistant
Secretary or by the Treasurer or an Assistant Treasurer. Any and all
signatures on the certificate may be a facsimile and may be sealed with the
seal of the Corporation or a facsimile thereof. If any officer, transfer
agent, or registrar who has signed, or whose facsimile signature has been
placed upon, a certificate has ceased to be such officer, transfer agent, or
registrar before such certificate is issued, such certificate may be issued by
the Corporation with the same effect as if he were such officer, transfer
agent, or registrar at the date of issue. The certificates shall be
consecutively numbered and shall be entered in the books of the Corporation as
they are issued and shall exhibit the holder's name and the number of shares.
7.2 Replacement of Lost or Destroyed Certificates. The board of
directors may direct a new certificate or certificates to be issued in place of
a certificate or certificates theretofore issued by the Corporation and alleged
to have been lost or destroyed, upon the making of an affidavit of that fact by
the person claiming the certificate or certificates representing shares to be
lost or destroyed. When authorizing such issue of a new certificate or
certificates the board of directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost or destroyed
certificate or certificates, or his legal representative, to advertise the same
in such manner as it shall require and/or to give the Corporation a bond with a
surety or sureties satisfactory to the Corporation in such sum as it may direct
as indemnity against any claim, or expense resulting from a claim, that may be
made against the Corporation with respect to the certificate or certificates
alleged to have been lost or destroyed.
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7.3 Transfer of Shares. Shares of stock of the Corporation shall
be transferable only on the books of the Corporation by the holders thereof in
person or by their duly authorized attorneys or legal representatives. Upon
surrender to the Corporation or the transfer agent of the Corporation of a
certificate representing shares duly endorsed or accompanied by proper evidence
of succession, assignment, or authority to transfer, the Corporation or its
transfer agent shall issue a new certificate to the person entitled thereto,
cancel the old certificate, and record the transaction upon its books.
7.4 Registered Stockholders. The Corporation shall be entitled to
treat the holder of record of any share or shares of stock as the holder in
fact thereof and, accordingly, shall not be bound to recognize any equitable or
other claim to or interest in such share or shares on the part of any other
person, whether or not it shall have express or other notice thereof, except as
otherwise provided by law.
7.5 Regulations. The board of directors shall have the power and
authority to make all such rules and regulations as they may deem expedient
concerning the issue, transfer, and registration or the replacement of
certificates for shares of stock of the Corporation.
7.6 Legends. The board of directors shall have the power and
authority to provide that certificates representing shares of stock bear such
legends as the board of directors deems appropriate to assure that the
Corporation does not become liable for violations of federal or state
securities laws or other applicable law.
ARTICLE EIGHT: MISCELLANEOUS PROVISIONS
8.1 Dividends. Subject to provisions of law and the certificate
of incorporation of the Corporation, dividends may be declared by the board of
directors at any regular or special meeting and may be paid in cash, in
property, or in shares of stock of the Corporation. Such declaration and
payment shall be at the discretion of the board of directors.
8.2 Reserves. There may be created by the board of directors out
of funds of the Corporation legally available therefor such reserve or reserves
as the directors from time to time, in their discretion, consider proper to
provide for contingencies, to equalize dividends, or to repair or maintain any
property of the Corporation, or for such other purpose as the board of
directors shall consider beneficial to the Corporation, and the board of
directors may modify or abolish any such reserve in their discretion.
8.3 Books and Records. The Corporation shall keep correct and
complete books and records of account, shall keep minutes of the proceedings of
its stockholders and board of directors and shall keep at its registered office
or principal place of business, or at the office of its transfer agent or
registrar, a record of its stockholders, giving the names and addresses of all
stockholders and the number and class of the shares held by each.
8.4 Fiscal Year. The fiscal year of the Corporation shall be
fixed by the board of directors; provided, that if such fiscal year is not
fixed by the board of directors and the selection of the fiscal year is not
expressly deferred by the board of directors, the fiscal year shall be the
calendar year.
8.5 Seal. The seal of the Corporation shall be such as from time
to time may be approved by the board of directors.
8.6 Resignations. Any director, committee member, or officer may
resign by so stating at any meeting of the board of directors or by giving
written notice to the board of directors, the Chairman of the Board, the
President, or the Secretary. Such resignation shall take effect at the time
specified therein or, if no time is specified therein, immediately upon its
receipt. Unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
8.7 Securities of Other Corporations. The Chairman of the Board,
the President, or any Vice President of the Corporation shall have the power
and authority to transfer, endorse for transfer, vote, consent, or take any
other action with respect to any securities of another issuer which may be held
or owned by the Corporation and to make, execute, and deliver any waiver,
proxy, or consent with respect to any such securities.
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8.8 Telephone Meetings. Stockholders (acting for themselves or
through a proxy), members of the board of directors, and members of a committee
of the board of directors may participate in and hold a meeting of such
stockholders, board of directors, or committee by means of a conference
telephone or similar communications equipment by means of which persons
participating in the meeting can hear each other, and participation in a
meeting pursuant to this section shall constitute presence in person at such
meeting, except where a person participates in the meeting for the express
purpose of objecting to the transaction of any business on the ground that the
meeting is not lawfully called or convened.
8.9 Action Without a Meeting. (a) Unless otherwise provided in
the certificate of incorporation of the Corporation, any action required by the
Delaware General Corporation Law to be taken at any annual or special meeting
of the stockholders, or any action which may be taken at any annual or special
meeting of the stockholders, may be taken without a meeting, without prior
notice, and without a vote, if a consent or consents in writing, setting forth
the action so taken, shall be signed by the holders (acting for themselves or
through a proxy) of outstanding stock having not less than the minimum number
of votes that would be necessary to authorize or take such action at a meeting
at which the holders of all shares entitled to vote thereon were present and
voted and shall be delivered to the Corporation by delivery to its registered
office in the State of Delaware, its principal place of business, or an officer
or agent of the Corporation having custody of the book in which proceedings of
meetings of stockholders are recorded. Every written consent of stockholders
shall bear the date of signature of each stockholder who signs the consent and
no written consent shall be effective to take the corporate action referred to
therein unless, within sixty days of the earliest dated consent delivered in
the manner required by this Section 8.9(a) to the Corporation, written consents
signed by a sufficient number of holders to take action are delivered to the
Corporation by delivery to its registered office in the State of Delaware, its
principal place of business, or an officer or agent of the Corporation having
custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the Corporation's registered office, principal
place of business, or such officer or agent shall be by hand or by certified or
registered mail, return receipt requested. If any such action is taken by less
then unanimous consent of the stockholders, prompt notice thereof shall be
given to all nonconsenting stockholders.
(b) Unless otherwise restricted by the certificate of incorporation
of the Corporation or by these bylaws, any action required or permitted to be
taken at a meeting of the board of directors, or of any committee of the board
of directors, may be taken without a meeting if a consent or consents in
writing, setting forth the action so taken, shall be signed by all the
directors or all the committee members, as the case may be, entitled to vote
with respect to the subject matter thereof, and such consent shall have the
same force and effect as a vote of such directors or committee members, as the
case may be, and may be stated as such in any certificate or document filed
with the Secretary of State of the State of Delaware or in any certificate
delivered to any person. Such consent or consents shall be filed with the
minutes of proceedings of the board or committee, as the case may be.
8.10 Invalid Provisions. If any part of these bylaws shall be held
invalid or inoperative for any reason, the remaining parts, so far as it is
possible and reasonable, shall remain valid and operative.
8.11 Mortgages, etc. With respect to any deed, deed of trust,
mortgage, or other instrument executed by the Corporation through its duly
authorized officer or officers, the attestation to such execution by the
Secretary of the Corporation shall not be necessary to constitute such deed,
deed of trust, mortgage, or other instrument a valid and binding obligation
against the Corporation unless the resolutions, if any, of the board of
directors authorizing such execution expressly state that such attestation is
necessary, or unless such attestation is required by law.
8.12 Headings. The headings used in these bylaws have been
inserted for administrative convenience only and do not constitute matter to be
construed in interpretation.
8.13 References. Whenever herein the singular number is used, the
same shall include the plural where appropriate, and words of any gender should
include each other gender where appropriate.
8.14 Amendments. These bylaws may be altered, amended, or repealed
or new bylaws may be adopted by the stockholders or by the board of directors
at any regular meeting of the stockholders or the board of directors or at any
special meeting of the stockholders or the board of directors if notice of such
alteration, amendment, repeal, or adoption of new bylaws be contained in the
notice of any such special meeting of the stockholders.
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The undersigned, the Secretary of the Corporation, hereby certifies
that the foregoing bylaws were adopted by unanimous consent by the directors of
the Corporation as of November ___, 1996.
--------------------------------------
Sam Sexton III, Secretary
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EXHIBIT D
IDAHO CODE
GENERAL LAWS
TITLE 30. CORPORATIONS
CHAPTER 1. GENERAL BUSINESS CORPORATIONS
IDAHO CODE SECTION 30-1-80
30-1-80 RIGHT OF SHAREHOLDERS TO DISSENT AND OBTAIN PAYMENT FOR SHARES.
(a) Any shareholder of a corporation shall have the right to
dissent from, and to obtain payment for his shares in the event of any of the
following corporate actions:
(1) Any plan of merger or consolidation to which the
corporation is a party, except as provided in subsection (c) of this
section;
(2) Any sale, lease, exchange, or other disposition of
all or substantially all of the property and assets of the corporation
not made in the usual or regular course of its business, including a
sale in dissolution, but not including a sale pursuant to an order of
a court having jurisdiction in the premises or a sale for cash on
terms requiring that all or substantially all of the net proceeds of
sale be distributed to the shareholders in accordance with their
respective interests within one (1) year after the date of sale;
(3) Any plan of exchange to which the corporation is a
party, as the corporation the shares of which are to be acquired;
(4) Any amendment of the articles of incorporation which
materially and adversely affects the rights appurtenant to the shares
of the dissenting shareholder in that it:
(i) Alters or abolishes a preferential right of
such shares;
(ii) Creates, alters or abolishes a right in
respect of the redemption of such shares, including a provision
respecting a sinking fund for the redemption or repurchase of such
shares;
(iii) Alters or abolishes a preemptive right of the
holder of such shares to acquire shares or other securities;
(iv) Excludes or limits the right of the holder of
such shares to vote on any matter, or to cumulate his votes, except
as such right may be limited by dilution through the issuance of
shares or other securities with similar voting rights; or
(5) Any other corporate action taken pursuant to a
shareholder vote with respect to which the articles of incorporation,
the bylaws, or a resolution of the board of directors directs that
dissenting shareholders shall have a right to obtain payment for their
shares.
(b)(1) A record holder of shares may assert dissenters' rights as to
less than all of the shares registered in his name only if he dissents with
respect to all the shares beneficially owned by any one (1) person, and
discloses the name and address of the persons on whose behalf he dissents. In
that event, his rights shall be determined as if the shares as to which he has
dissented and his other shares were registered in the names of different
shareholders.
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(2) A beneficial owner of shares who is not the record
holder may assert dissenters' rights with respect to shares held on
his behalf, and shall be treated as a dissenting shareholder under the
terms of this section and section 30-1-31, Idaho Code, if he submits
to the corporation at the time of or before the assertion of these
rights a written consent of the record holder.
(c) The right to obtain payment under this section shall
not apply to the shareholders of the surviving corporation in a merger
if a vote of the shareholders of such corporation is not necessary to
authorize such merger.
(d) A shareholder of a corporation who has a right under
this section to obtain payment for his shares shall have no right at
law or in equity to attack the validity of the corporate action that
gives rise to his right to obtain payment, nor to have the action set
aside or rescinded, except when the corporate action is unlawful or
fraudulent with regard to the complaining shareholder or to the
corporation.
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IDAHO CODE
GENERAL LAWS
TITLE 30. CORPORATIONS
CHAPTER 1. GENERAL BUSINESS CORPORATIONS
IDAHO CODE SECTION 30-1-81
30-1-81 PROCEDURES FOR PROTECTION OF DISSENTERS' RIGHTS.
(a) As used in this section:
(1) "Dissenter" means a shareholder or beneficial owner
who is entitled to and does assert dissenters' rights under section
30-1-80, Idaho Code, and who has performed every act required up to
the time involved for the assertion of such rights.
(2) "Corporation" means the issuer of the shares held by the
dissenter before the corporate action or the successor by merger or
consolidation of that issuer.
(3) "Fair value" of shares means their value immediately
before the effectuation of the corporate action to which the dissenter
objects, excluding any appreciation or depreciation in anticipation of
such corporate action unless such exclusion would be inequitable.
(4) "Interest" means interest from the effective date of the
corporate action until the date of payment at the average rate
currently paid by the corporation on its principal bank loans, or, if
none, at such rate as is fair and equitable under all the
circumstances.
(b) If a proposed corporate action which would give rise to
dissenters' rights under subsection (a) of section 30-1-80, Idaho Code, is
submitted to a vote at a meeting of shareholders, the notice of meeting shall
notify all shareholders that they have or may have a right to dissent and
obtain payment for their shares by complying with the terms of this section,
and shall be accompanied by a copy of sections 30-1-80 and 30-1-81, Idaho Code.
(c) If the proposed corporate action is submitted to a vote at a
meeting of shareholders, any shareholder who wishes to dissent and obtain
payment for his shares shall refrain from voting his shares in approval of such
action. A shareholder who votes in favor of such action shall acquire no right
to payment for his shares under this section or section 30-1-80, Idaho Code.
(d) If the proposed corporate action is approved by the required
vote at a meeting of shareholders, the corporation shall mail a further notice
to all shareholders who refrained from voting in favor of the proposed action.
If the proposed corporate action is to be taken without a vote of shareholders,
the corporation shall send to all shareholders who are entitled to dissent and
demand payment for their shares a notice of the adoption of the plan of
corporate action. The notice shall:
(1) State where and when a demand for payment must be
sent and certificates of certificated shares must be deposited in
order to obtain payment;
(2) Inform holders of uncertificated shares to what
extent transfer of shares will be restricted from the time that demand
for payment is received;
(3) Supply a form for demanding payment which includes a
request for certification of the date on which the shareholder, or the
person on whose behalf the shareholder dissents, acquired beneficial
ownership of the shares; and
(4) Be accompanied by a copy of sections 30-1-80 and
30-1-81, Idaho Code. The time set for the demand and deposit shall be
not less than thirty (30) days from the mailing of the notice.
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(e) A shareholder who fails to demand payment, or fails (in the
case of certificated shares) to deposit certificates, as required by a notice
pursuant to subsection (d) of this section shall have no right under this
section or section 30-1-80, Idaho Code, to receive payment for his shares. If
the shares are not represented by certificates, the corporation may restrict
their transfer from the time of receipt of demand for payment until
effectuation of the proposed corporate action, or the release of restrictions
under the terms of subsection (f) of this section. The dissenter shall retain
all other rights of a shareholder until these rights are modified by
effectuation of the proposed corporate action.
(f)(1) Within sixty (60) days after the date set for demanding
payment and depositing certificates, if the corporation has not effectuated the
proposed corporate action and remitted payment for shares pursuant to paragraph
(3) of this subsection, it shall return any certificates that have been
deposited, and release uncertificated shares from any transfer restrictions
imposed by reason of the demand for payment.
(2) When uncertificated shares have been released from
transfer restrictions, and deposited certificates have been returned,
the corporation may at any later time send a new notice conforming to
the requirements of subsection (d) of this section, with like effect.
(3) Immediately upon effectuation of the proposed
corporate action, or upon receipt of demand for payment if the
corporate action has already been effectuated, the corporation shall
remit to dissenters who have made demand and (if their shares are
certificated) have deposited their certificates, the amount which the
corporation estimates to be the fair value of the shares, with
interest if any has accrued. The remittance shall be accompanied by:
(i) The corporation's closing balance sheet and
statement of income fora fiscal year ending not more than sixteen (16)
months before the date of remittance, together with the latest
available interim financial statements;
(ii) A statement of the corporation's estimate of
fair value of the shares; and
(iii) A notice of the dissenter's right to demand
supplemental payment.
(g) (1) If the corporation fails to remit as required by subsection
(f) hereof, or if the dissenter believes that the amount remitted is less than
the fair value of his shares, or that the interest is not correctly determined,
he may send the corporation his own estimate of the value of the shares or of
the interest and demand payment of the deficiency.
(2) If the dissenter does not file such an estimate
within thirty (30)days after the corporation's mailing of its
remittance, he shall be entitled to no more than the amount remitted.
(h) (1) Within sixty (60) days after receiving a demand for payment
pursuant to subsection (g) hereof, if any such demands for payment remain
unsettled, the corporation shall file in an appropriate court a petition
requesting that the fair value of the shares and interest thereon be determined
by the court.
(2) An appropriate court shall be the district court in
the county of this state where the registered office of the
corporation is located. If, in the case of a merger or consolidation
or exchange of shares, the corporation is a foreign corporation
without a registered office in this state, the petition shall be filed
in the county where the registered office of the foreign corporation
was last located. If there is no known registered office, the petition
may be filed in Ada County, Idaho.
(3) All dissenters, wherever residing, whose demands have
not been settled shall be made parties to the proceeding as in an
action against their shares. A copy of the petition shall be served on
each such dissenter. If a dissenter is a nonresident, the copy may be
served on him by registered or certified mail or by publication as
provided by law.
(4) The jurisdiction of the court shall be plenary and
exclusive. The court may appoint one (1) or more persons as appraisers
to receive evidence and recommend a decision on the question of fair
value.
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The appraisers shall have such power and authority as shall be
specified in the order of their appointment or in any amendment
thereof. The dissenters shall be entitled to discovery in the same
manner as parties in other civil suits.
(5) All dissenters who are made parties shall be entitled
to judgment for the amount by which the fair value of their shares is
found to exceed the amount previously remitted, with interest.
(6) If the corporation fails to file a petition as
provided in paragraph(1) of this subsection (h), each dissenter who
made a demand and who has not already settled his claim against the
corporation shall be paid by the corporation the amount demanded by
him, with interest, and may sue therefor in an appropriate court.
(i) (1) The costs and expenses of any proceeding under subsection (h)
of this section, including the reasonable compensation and expenses of
appraisers appointed by the court, shall be determined by the court and
assessed against the corporation, except that any part of the costs and
expenses may be apportioned and assessed as the court may deem equitable
against all or some of the dissenters who are parties and whose action in
demanding supplemental payment the court finds to be arbitrary, vexatious, or
not in good faith.
(2) Fees and expenses of counsel and of experts for the
respective parties may be assessed as the court may deem equitable
against the corporation and in favor of any or all dissenters if the
corporation failed to comply substantially with the requirements of
this section, and may be assessed against either the corporation or a
dissenter, in favor of any other party, if the court finds that the
party against whom the fees and expenses are assessed acted
arbitrarily, vexatiously, or not in good faith in respect to the
rights provided by this section and section 30-1-80, Idaho Code.
(3) If the court finds that the services of counsel for
any dissenter were of substantial benefit to other dissenters
similarly situated and should not be assessed against the corporation,
it may award to counsel reasonable fees to be paid out of the amounts
awarded to the dissenters who were benefitted.
(j) (1) Notwithstanding the foregoing provisions of this section, the
corporation may elect to withhold the remittance required by subsection (f) of
this section from any dissenter with respect to shares of which the dissenter
(or the person on whose behalf the dissenter acts) was not the beneficial owner
on the date of the first announcement to news media or to shareholders of the
terms of the proposed corporate action. With respect to such shares, the
corporation shall, upon effectuating the corporate action, state to each
dissenter its estimate of the fair value of the shares, state the rate of
interest to be used (explaining the basis thereof), and offer to pay the
resulting amounts on receiving the dissenter's agreement to accept them in full
satisfaction.
(2) If the dissenter believes that the amount offered is
less than the fair value of the shares and interest determined
according to this section, he may within thirty (30) days after the
date of mailing of the corporation's offer, mail the corporation his
own estimate of fair value and interest, and demand their payment. If
the dissenter fails to do so, he shall be entitled to no more than the
corporation's offer.
(3) If the dissenter makes a demand as provided in
paragraph (2) of this subsection (j), the provisions of subsections
(h) and (i) of this section shall apply to further proceedings on the
dissenter's demand.
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EXHIBIT E
PROPOSED AMENDMENT TO THE
CERTIFICATE OF INCORPORATION OF
CONSOLIDATED ECO-SYSTEMS, INC.
REGARDING CUMULATIVE VOTING
If Proposal No. 2 is approved by the shareholders and Proposal No. 3
is not approved, the Certificate of Incorporation of Consolidated Eco-Systems,
Inc. will be amended by adding TWELFTH as follows:
"TWELFTH: Each stockholder of the Corporation shall be entitled to as
many votes as shall equal the number of votes which he would be entitled to
cast for the election of directors with respect to his shares of stock
multiplied by the number of directors to be elected by him and that he may cast
all of such votes for a single director or may distribute them among the number
to be voted for, or any two or more as he may see fit."
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EXHIBIT F
PROPOSED AMENDMENT TO THE
ARTICLES OF INCORPORATION OF
EXSORBET INDUSTRIES, INC.
REGARDING THE ISSUANCE OF PREFERRED
STOCK, PAR VALUE $.001 PER SHARE
If Proposal No. 2 is not approved by the shareholders of the Company
and Proposal No. 4 is so approved, the Articles of Incorporation of Exsorbet
Industries, Inc. will be amended by deleting Article V in its entirety and
replacing such with the following:
"V.
The total number of shares of stock which the Corporation shall have
authority to issue is 60,000,000 shares of capital stock, classified as (i)
10,000,000 shares of preferred stock, par value $.001 per share ("Preferred
Stock"), and (ii) 50,000,000 shares of common stock, par value $.001 per share
("Common Stock").
The designations and the powers, preferences, rights, qualifications,
limitations, and restrictions of the Preferred Stock and Common Stock are as
follows:
1. Provisions Relating to the Preferred Stock.
(a) The Preferred Stock may be issued from time to time
in one or more classes or series, the shares of each class or series to have
such designations and powers, preferences, and rights, and qualifications,
limitations, and restrictions thereof, as are stated and expressed herein and
in the resolution or resolutions providing for the issue of such class or
series adopted by the board of directors of the Corporation as hereafter
prescribed.
(b) Authority is hereby expressly granted to and vested
in the board of directors of the Corporation to authorize the issuance of the
Preferred Stock from time to time in one or more classes or series, and with
respect to each class or series of the Preferred Stock, to fix and state by the
resolution or resolutions from time to time adopted providing for the issuance
thereof the following:
(i) whether or not the class or series is to have voting
rights, full, special, or limited, or is to be without voting rights, and
whether or not such class or series is to be entitled to vote as a separate
class either alone or together with the holders of one or more other classes or
series of stock;
(ii) the number of shares to constitute the class or
series and the designations thereof;
(iii) the preferences, and relative, participating,
optional, or other special rights, if any, and the qualifications, limitations,
or restrictions thereof, if any, with respect to any class or series;
(iv) whether or not the shares of any class or series
shall be redeemable at the option of the Corporation or the holders thereof or
upon the happening of any specified event, and, if redeemable, the redemption
price or prices (which may be payable in the form of cash, notes, securities,
or other property), and the time or times at which, and the terms and
conditions upon which, such shares shall be redeemable and the manner of
redemption;
(v) whether or not the shares of a class or series shall
be subject to the operation of retirement or sinking funds to be applied to the
purchase or redemption of such shares for retirement, and, if such retirement
or sinking fund or funds are to be established, the annual amount thereof, and
the terms and provisions relative to the operation thereof;
(vi) the dividend rate, whether dividends are payable in
cash, stock of the Corporation, or other property, the conditions upon which
and the times when such dividends are payable, the preference to or the
relation
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to the payment of dividends payable on any other class or classes or series of
stock, whether or not such dividends shall be cumulative or noncumulative, and
if cumulative, the date or dates from which such dividends shall accumulate;
(vii) the preferences, if any, and the amounts thereof
which the holders of any class or series thereof shall be entitled to receive
upon the voluntary or involuntary dissolution of, or upon any distribution of
the assets of, the Corporation;
(viii) whether or not the shares of any class or
series, at the option of the Corporation or the holder thereof or upon the
happening of any specified event, shall be convertible into or exchangeable
for, the shares of any other class or classes or of any other series of the
same or any other class or classes of stock, securities, or other property of
the Corporation and the conversion price or prices or ratio or ratios or the
rate or rates at which such exchange may be made, with such adjustments, if
any, as shall be stated and expressed or provided for in such resolution or
resolutions; and
(ix) such other special rights and protective provisions
with respect to any class or series as may to the board of directors of the
Corporation seem advisable.
(c) The shares of each class or series of the Preferred
Stock may vary from the shares of any other class or series thereof in any or
all of the foregoing respects. The board of directors of the Corporation may
increase the number of shares of the Preferred Stock designated for any
existing class or series by a resolution adding to such class or series
authorized and unissued shares of the Preferred Stock not designated for any
other class or series. The board of directors of the Corporation may decrease
the number of shares of the Preferred Stock designated for any existing class
or series by a resolution subtracting from such class or series authorized and
unissued shares of the Preferred Stock designated for such existing class or
series, and the shares so subtracted shall become authorized, unissued, and
undesignated shares of the Preferred Stock.
2. Provisions Relating to the Common Stock.
(a) Each share of Common Stock of the Corporation shall
have identical rights and privileges in every respect. The holders of shares
of Common Stock shall be entitled to vote upon all matters submitted to a vote
of the stockholders of the Corporation and shall be entitled to one vote for
each share of Common Stock held.
(b) Subject to the prior rights and preferences, if any,
applicable to shares of the Preferred Stock or any series thereof, the holders
of shares of the Common Stock shall be entitled to receive such dividends
(payable in cash, stock, or otherwise) as may be declared thereon by the board
of directors at any time and from time to time out of any funds of the
Corporation legally available therefor.
(c) In the event of any voluntary or involuntary
liquidation, dissolution, or winding-up of the Corporation, after distribution
in full of the preferential amounts, if any, to be distributed to the holders
of shares of the Preferred Stock or any series thereof, the holders of shares
of the Common Stock shall be entitled to receive all of the remaining assets of
the Corporation available for distribution to its stockholders, ratably in
proportion to the number of shares of the Common Stock held by them. A
liquidation, dissolution, or winding-up of the Corporation, as such terms are
used in this Paragraph (c), shall not be deemed to be occasioned by or to
include any consolidation or merger of the Corporation with or into any other
corporation or corporations or other entity or a sale, lease, exchange, or
conveyance of all or a part of the assets of the Corporation.
3. General.
(a) Subject to the foregoing provisions of this
Certificate of Incorporation, the Corporation may issue shares of its Preferred
Stock and Common Stock from time to time for such consideration (not less than
the par value thereof) as may be fixed by the board of directors of the
Corporation, which is expressly authorized to fix the same in its absolute and
uncontrolled discretion subject to the foregoing conditions. Shares so issued
for which the consideration shall have been paid or delivered to the
Corporation shall be deemed fully paid stock and shall not be liable to any
further call or assessment thereon, and the holders of such shares shall not be
liable for any further payments in respect of such shares.
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(b) The Corporation shall have authority to create and
issue rights and options entitling their holders to purchase shares of the
Corporation's capital stock of any class or series or other securities of the
Corporation, and such rights and options shall be evidenced by instrument(s)
approved by the board of directors of the Corporation. The board of directors
of the Corporation shall be empowered to set the exercise price, duration,
times for exercise, and other terms of such options or rights; provided,
however, that the consideration to be received for any shares of capital stock
subject thereto shall not be less than the par value thereof."
F-3
<PAGE> 66
<TABLE>
<S> <C> <C>
[EXSORBET LOGO] PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY The undersigned hereby (a) acknowledges receipt of the
Notice of Annual Meeting of Stockholders of Exsorbet
Industries, Inc. to be held on December 10, 1996 and the
Annual Meeting of proxy statement in connection therewith, each dated
Stockholders to be held November 14, 1996, (b) appoints Charles E. Chunn, Jr.
December 10, 1996 and Dr. Edward L. Schrader, or either of them, as
Proxies, each with the power to appoint a substitute,
(c) authorizes the Proxies to represent and vote, as
designated below, all the shares of Common Stock of
Exsorbet Industries, Inc., held of record by the
undersigned on October 24, 1996 at such annual meeting
and at any adjournment(s) thereof, and (d) revokes any
proxies heretofore given.
</TABLE>
1. Adoption and approval of the proposal to elect Charles E. Chunn, Jr;
James J. Conners; Sam Sexton III; Dr. Edward L. Schrader; Robert D.
Vick; and Larry Woodcock to the Board of Directors of Exsorbet
Industries, Inc. (the "Company").
[ ] FOR - all nominees listed above [ ] WITHHOLD AUTHORITY TO
VOTE - for all nominees
listed above
To withhold authority to vote for any individual nominee(s), strike a line
through or otherwise strike the nominee(s) named in the list above.
To distribute your votes on a cumulative basis, write below the name(s) of the
nominee(s) you wish to vote for and the number of votes you wish to cast for
each.
--------------------------------------------------------------------------
2. Adoption and approval of the proposal to reincorporate the Company in
Delaware.
[ ] FOR [ ] AGAINST [ ] ABSTAIN FROM
3. Adoption and approval of the proposal to eliminate cumulative voting
in the election of directors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN FROM
(Continued and to be signed on reverse side)
- --------------------------------------------------------------------------------
(Continued from other side)
4. Adoption and approval of the proposal to authorize issuance of up to
10,000,000 shares of preferred stock, par value $.001 per share.
[ ] FOR [ ] AGAINST [ ] ABSTAIN FROM
5. Adoption and approval of the proposal to change the Company's name
from Exsorbet Industries, Inc. to Consolidated Eco-Systems, Inc.
6. Adoption and approval of Cooper, Shuffield & Company as the Company's
independent certified public accounts for fiscal year 1996.
7. In their discretion, the Proxies are authorized to vote upon such
other business as may properly come before the meeting or any
adjournment(s) or postponement(s) thereof.
[ ] FOR [ ] AGAINST [ ] ABSTAIN FROM
THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS INDICATED,
THIS PROXY WILL BE VOTED "FOR" EACH PROPOSAL.
IMPORTANT: Please date this proxy
- -------------------------------------- and sign exactly as your name or
names appear thereon. If stock is
held jointly, signature should
include both names. Executors,
administrators, trustees, guardians
and others signing in the
representative capacity, please so
indicate when signing.
DATED: , 1996
---------------------------- ---------------------------------
Signature
PLEASE SIGN, DATE AND RETURN THIS PROXY ---------------------------------
PROMPTLY IN THE ACCOMPANYING ENVELOPE. Signature if held jointly
<PAGE> 67
EXHIBIT INDEX
<TABLE>
Number Description
------ -----------
<S> <C>
A Agreement and Plan of Merger
B Certificate of Incorporation of Consolidated Eco-Systems, Inc.
C Bylaws of Consolidated Eco-Systems, Inc.
D Sections 30-1-80 and 30-1-81 of the Idaho Business Corporation
Act
E Proposed Amendment to the Certificate of Incorporation of
Consolidated Eco-Systems, Inc. regarding cumulative voting
F Proposed Amendment to the Articles of Incorporation of Exsorbet
Industries, Inc. regarding the issuance of preferred stock, par
value $.001 per share
Proxy Form of Proxy
</TABLE>
<PAGE> 68
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER ("Merger Agreement") is entered into
by and between Exsorbet Industries, Inc., an Idaho corporation (the "Company"),
and Consolidated Eco-Systems, Inc., a Delaware corporation ("CESI").
WHEREAS, the Company is a corporation organized and existing under the
laws of the State of Idaho and whose authorized capital consists of 50,000,000
shares of common stock, par value $.001 per share (the "Common Stock"), of
which 11,897,618 shares are issued and outstanding and entitled to vote;
WHEREAS, CESI is a corporation organized and existing under the laws
of the State of Delaware and whose authorized capital consists of 60,000,000
shares of capital stock, consisting of (i) 50,000,000 shares of common stock,
par value $.001 per share (the "CESI Common Stock"), of which 100 shares are
issued and outstanding, owned by the Company and entitled to vote and (ii)
10,000,000 shares of preferred stock, par value $.001 per share, none of which
are issued and outstanding;
WHEREAS, the respective Boards of Directors of the Company and CESI
deem it advisable and in the best interests of each such corporation that the
Company merge with and into CESI upon the terms and subject to the conditions
of this Merger Agreement for the purpose of effecting the reincorporation of
the Company in the State of Delaware;
WHEREAS, the respective Boards of Directors of the Company and CESI
have authorized and approved the merger of the Company with and into CESI in
accordance with the provisions of Section 368 of the Internal Revenue Code of
1986, as amended (the "Code"), and Sections 30-1-71 et seq. of the Idaho
Business Corporation Act (the "IBCA") and Sections 252 et seq. of the General
Corporation Law of Delaware (the "DGCL"), upon terms and conditions set forth
in this Merger Agreement (the "Merger") and directed that it be executed by the
undersigned officers and that it be submitted to the shareholders of the
Company for approval; and
WHEREAS, it is the intention of the parties hereto that the Merger
shall be a tax free reorganization pursuant to the applicable provisions of the
Code.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, and for the purpose of stating the
terms and conditions of the Merger, the mode of affectuating the same, and such
other details and provisions as are deemed desirable, the parties hereto have
agreed, and do hereby agree subject to the terms and conditions hereinafter set
forth, as follows:
1. Merger. At the Effective Time (as defined herein) of the
Merger, the Company shall be merged with and into CESI. CESI shall be the
surviving corporation of the Merger (hereinafter sometimes referred to as the
"Surviving Corporation"), and the separate corporate existence of the Company
shall cease. The Merger shall become effective upon the filing of a
of the State of Delaware and whose authorized capital consists of 60,000,000
Certificate of Merger with the Secretaries of State of the States of Idaho and
Delaware. The date and time when the Merger shall become effective is herein
referred to as the "Effective Time."
2. Governing Documents.
a. The Certificate of Incorporation of CESI as it may be
amended or restated subject to applicable law, and as in effect immediately
prior to the Effective Time, shall constitute the Certificate of Incorporation
of the Surviving Corporation without further change or amendment until
thereafter amended in accordance with the provisions thereof and applicable
law.
<PAGE> 69
b. The Bylaws of CESI as in effect immediately prior to
the Effective Time shall constitute the Bylaws of the Surviving Corporation
without change or amendment until thereafter amended in accordance with the
provisions thereof and applicable law.
3. Officers and Directors. The persons who are officers and
directors of the Company immediately prior to the Effective Time shall, after
the Effective Time, be the officers and directors of the Surviving Corporation,
without change until their successors have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in accordance
with the Surviving Corporation's Certificate of Incorporation and Bylaws and
applicable law.
4. Name. The name of the Surviving Corporation shall be
Consolidated Eco-Systems, Inc.
5. Succession. At the Effective Time, the separate corporate
existence of the Company shall cease, and the Surviving Corporation shall
possess all the rights, privileges, powers and franchises of a public or
private nature and be subject to all the restrictions, disabilities and duties
of the Company and all the rights, privileges, powers and franchises of the
Company, and all property, real, personal and mixed, and all debts due to the
Company on whatever account, as well for share subscriptions and all other
things in action, shall be vested in the Surviving Corporation; and all
property, rights, privileges, powers and franchises, and all and every other
interest shall be thereafter as effectively the property of the Surviving
Corporation as the same were of the Company, and the title of any real estate
vested by deed or otherwise shall not revert or be in any way impaired by
reason of the Merger, but all rights of creditor and liens upon any property of
the Company shall thenceforth attach to the Surviving Corporation and may be
enforced against it to the same extent as if such debts, liabilities and duties
had been incurred or contracted by it; provided, however, that such liens upon
property of the Company will be limited to the property affected thereby
immediately prior to the Merger. All corporate acts, plans, policies,
agreements, arrangements, approvals and authorizations of the Company, its
shareholders, Board of Directors and committees thereof, officers and agents
which were valid and effective immediately prior to the Effective Time, shall
be taken for all purposes as the acts, plans, policies, agreements,
arrangements, approvals and authorizations of the Surviving Corporation, its
shareholders, Board of Directors and committees thereof, respectively, and
shall be as effective and binding thereon as the same were with respect to the
Company.
6. Conversion of Shares. At the Effective Time, by virtue of the
Merger and without any action on the part of the holder thereof:
a. Each share of the Common Stock outstanding
immediately prior to the Effective Time shall be converted into, and shall
become, one fully paid and nonassessable share of CESI Common Stock.
b. The 100 shares of CESI Common Stock issued and
outstanding in the name of the Company shall be canceled and retired, and no
payment shall be made with respect thereto, and such shares shall resume the
status of unauthorized and unissued shares of CESI Common Stock.
7. Stock Certificates. At and after the Effective Time, all of
the outstanding certificates which immediately prior to the Effective Time
represented shares of the Common Stock shall be deemed for all purposes to
evidence ownership of, and to represent shares of, CESI Common Stock into which
the shares of the Common Stock formerly represented by such certificates have
been converted as herein provided. The registered owner on the books and
records of the Company or its transfer agent of any such outstanding stock
certificate shall, until such certificate shall have been surrendered for
transfer or otherwise accounted for to the Surviving Corporation or its
transfer agent, have and be entitled to exercise any voting or other rights
with respect to and to receive any dividends and other distributions upon the
shares of CESI Common Stock evidenced by such outstanding certificate as above
provided. Nothing contained herein shall be deemed to require the holder of
any shares of the Common Stock to surrender the certificate or certificates
representing such shares in exchange for a certificate or certificates
representing shares of CESI Common Stock.
A-2
<PAGE> 70
8. Options. Each right in or to, or option to purchase, shares
of the Common Stock, granted under the 1995 Incentive Award Plan of Exsorbet
Industries, Inc. (the "Plan") or otherwise, which is outstanding immediately
prior to the Effective Time, shall, by virtue of the Merger and without any
action of the part of the holder thereof, be converted into and become a right
in or to, or an option to purchase at the same option price per share, the same
number of shares of CESI Common Stock, upon the same terms and subject to the
same conditions as set forth in the Plan or otherwise as in effect at the
Effective Time. The same number of shares of CESI Common Stock shall be
reserved for purposes of the outstanding options as is equal to the number of
shares of the Company under the Plan including the outstanding rights or
options or portions thereof granted pursuant to the Plan and otherwise.
9. Other Employee Benefit Plans. As of the Effective Time, the
Surviving Corporation hereby assumes all obligations of the Company under any
and all employee benefit plans in effect as of the Effective Time or with
respect to which employee rights or accrued benefits are outstanding as of the
Effective Time.
10. Conditions. The consummation of the Merger is subject to
satisfaction of the following conditions prior to the Effective Time:
a. The Merger shall have received the requisite approval
of the holders of the Common Stock and all necessary action shall have been
taken to authorize the execution, delivery and performance of the Merger
Agreement by the Company and CESI.
b. All approvals and consents necessary or desirable, if
any, in connection with the consummation of the Merger shall have been
obtained.
c. No suit, action, proceeding or other litigation shall
have been commenced or threatened to be commenced which, in the opinion of the
Company or CESI, would pose a material restriction on or impair consummation of
the Merger, performance of this Merger Agreement or the conduct of the business
of CESI after the Effective Time, or create a risk of subjecting the Company or
CESI or their respective shareholders, officers or directors, to material
damages, costs, liability or other relief in connection with the Merger or this
Merger Agreement.
d. The shares of CESI Common Stock to be issued or
reserved for issuance shall, if required, have been approved for listing on the
Nasdaq SmallCap Market upon official notice of issuance.
11. Governing Law. This Merger Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware.
12. Amendment. Subject to applicable law and subject to the
rights of the Company shareholders further to approve any amendment which would
have a material adverse effect on such shareholders, this Merger Agreement may
be amended, modified or supplemented by written agreement of the parties hereto
at any time prior to the Effective Time with respect to any of the terms
contained herein.
13. Deferral or Abandonment. At any time prior to the Effective
Time, this Merger Agreement may be terminated and the Merger may be abandoned
or the time of consummation of the Merger may be deferred for a reasonable time
by the Board of Directors of either the Company or CESI or both,
notwithstanding approval of this Merger Agreement by the shareholders of the
Company or the sole stockholder of CESI, or both, if circumstances arise which,
in the opinion of the Board of Directors of the Company or CESI, make the
Merger inadvisable or such deferral of the time of consummation thereof
advisable. Specifically, the Board of Directors of the Company may terminate
this Merger Agreement any time prior to the effective time if holders of an
excess of one percent of the Common Stock perfect their dissenters' rights of
appraisal pursuant to, and in accordance with, Sections 30-1-80 and 30-1-81 of
the IBCA.
A-3
<PAGE> 71
14. Further Assurances. From time to time, as and when required
or requested by either the Company or CESI, as applicable, or by its respective
successors and assigns, there shall be executed and delivered on behalf of the
other corporation, or by its respective successors and assigns, such deeds,
assignments and other instruments, and there shall be taken or caused to be
taken by it all such further and other action, as shall be appropriate or
necessary in order to vest, perfect or confirm, of record or otherwise,
immunities, powers, franchise and authority of the Company and otherwise to
carry out the purposes of this Merger Agreement, and the officers and directors
of each corporation are fully authorized in the name and on behalf of such
corporation or otherwise, to take any and all such action and to execute and
deliver any and all such deeds, assignments and other instruments.
15. Counterparts. This Merger Agreement may be executed in any
number of counterparts, each of which shall be an original, but such
counterparts shall together constitute but one and the same instrument.
16. Headings. The headings of the several articles herein have
been inserted for convenience of reference only and are not intended to be a
part or to affect the meaning or interpretation of this Merger Agreement.
IN WITNESS WHEREOF, the Company and CESI have caused this Merger
Agreement to be signed by their respective duly authorized officers and
delivered this _____ day of __________________, 1996.
EXSORBET INDUSTRIES, INC.,
an Idaho corporation
By:
---------------------------------------
Title:
------------------------------------
CONSOLIDATED ECO-SYSTEMS, INC.
a Delaware corporation
By:
----------------------------------------
Title:
------------------------------------
A-4
<PAGE> 72
EXHIBIT B
CERTIFICATE OF INCORPORATION
OF
CONSOLIDATED ECO-SYSTEMS, INC.
FIRST: The name of the Corporation is Consolidated Eco-Systems, Inc.
(hereinafter called the "Corporation") .
SECOND: The registered office of the Corporation in the State of
Delaware is located at Corporation Trust Center, 1209 Orange Street, in the
City of Wilmington, County of New Castle. The name of the registered agent of
the Corporation at such address is The Corporation Trust Company.
THIRD: The purpose for which the Corporation is organized is to
engage in any and all lawful acts and activity for which corporations may be
organized under the General Corporation Law of Delaware. The Corporation will
have perpetual existence.
FOURTH: The total number of shares of stock which the Corporation
shall have authority to issue is 60,000,000 shares of capital stock, classified
as (i) 10,000,000 shares of preferred stock, par value $.001 per share
("Preferred Stock"), and (ii) 50,000,000 shares of common stock, par value
$.001 per share ("Common Stock").
The designations and the powers, preferences, rights, qualifications,
limitations, and restrictions of the Preferred Stock and Common Stock are as
follows:
1. Provisions Relating to the Preferred Stock.
(a) The Preferred Stock may be issued from time to time
in one or more classes or series, the shares of each class or series to have
such designations and powers, preferences, and rights, and qualifications,
limitations, and restrictions thereof, as are stated and expressed herein and
in the resolution or resolutions providing for the issue of such class or
series adopted by the board of directors of the Corporation as hereafter
prescribed.
(b) Authority is hereby expressly granted to and vested
in the board of directors of the Corporation to authorize the issuance of the
Preferred Stock from time to time in one or more classes or series, and with
respect to each class or series of the Preferred Stock, to fix and state by the
resolution or resolutions from time to time adopted providing for the issuance
thereof the following:
(i) whether or not the class or series is to have voting
rights, full, special, or limited, or is to be without voting rights, and
whether or not such class or series is to be entitled to vote as a separate
class either alone or together with the holders of one or more other classes or
series of stock;
(ii) the number of shares to constitute the class or
series and the designations thereof;
(iii) the preferences, and relative, participating,
optional, or other special rights, if any, and the qualifications, limitations,
or restrictions thereof, if any, with respect to any class or series;
(iv) whether or not the shares of any class or series
shall be redeemable at the option of the Corporation or the holders thereof or
upon the happening of any specified event, and, if redeemable, the redemption
price or prices (which may be payable in the form of cash, notes, securities,
or other property), and the time or times at which, and the terms and
conditions upon which, such shares shall be redeemable and the manner of
redemption;
<PAGE> 73
(v) whether or not the shares of a class or series shall
be subject to the operation of retirement or sinking funds to be applied to the
purchase or redemption of such shares for retirement, and, if such retirement
or sinking fund or funds are to be established, the annual amount thereof, and
the terms and provisions relative to the operation thereof;
(vi) the dividend rate, whether dividends are payable in
cash, stock of the Corporation, or other property, the conditions upon which
and the times when such dividends are payable, the preference to or the
relation to the payment of dividends payable on any other class or classes or
series of stock, whether or not such dividends shall be cumulative or
noncumulative, and if cumulative, the date or dates from which such dividends
shall accumulate;
(vii) the preferences, if any, and the amounts thereof
which the holders of any class or series thereof shall be entitled to receive
upon the voluntary or involuntary dissolution of, or upon any distribution of
the assets of, the Corporation;
(viii) whether or not the shares of any class or
series, at the option of the Corporation or the holder thereof or upon the
happening of any specified event, shall be convertible into or exchangeable
for, the shares of any other class or classes or of any other series of the
same or any other class or classes of stock, securities, or other property of
the Corporation and the conversion price or prices or ratio or ratios or the
rate or rates at which such exchange may be made, with such adjustments, if
any, as shall be stated and expressed or provided for in such resolution or
resolutions; and
(ix) such other special rights and protective provisions
with respect to any class or series as may to the board of directors of the
Corporation seem advisable.
(c) The shares of each class or series of the Preferred
Stock may vary from the shares of any other class or series thereof in any or
all of the foregoing respects. The board of directors of the Corporation may
increase the number of shares of the Preferred Stock designated for any
existing class or series by a resolution adding to such class or series
authorized and unissued shares of the Preferred Stock not designated for any
other class or series. The board of directors of the Corporation may decrease
the number of shares of the Preferred Stock designated for any existing class
or series by a resolution subtracting from such class or series authorized and
unissued shares of the Preferred Stock designated for such existing class or
series, and the shares so subtracted shall become authorized, unissued, and
undesignated shares of the Preferred Stock.
2. Provisions Relating to the Common Stock.
(a) Each share of Common Stock of the Corporation shall
have identical rights and privileges in every respect. The holders of shares
of Common Stock shall be entitled to vote upon all matters submitted to a vote
of the stockholders of the Corporation and shall be entitled to one vote for
each share of Common Stock held.
(b) Subject to the prior rights and preferences, if any,
applicable to shares of the Preferred Stock or any series thereof, the holders
of shares of the Common Stock shall be entitled to receive such dividends
(payable in cash, stock, or otherwise) as may be declared thereon by the board
of directors at any time and from time to time out of any funds of the
Corporation legally available therefor.
(c) In the event of any voluntary or involuntary
liquidation, dissolution, or winding-up of the Corporation, after distribution
in full of the preferential amounts, if any, to be distributed to the holders
of shares of the Preferred Stock or any series thereof, the holders of shares
of the Common Stock shall be entitled to receive all of the remaining assets of
the Corporation available for distribution to its stockholders, ratably in
proportion to the number of shares of the Common Stock held by them. A
liquidation, dissolution, or winding-up of the Corporation, as such terms are
used in this Paragraph (c), shall not be deemed to be occasioned by or to
include any consolidation or merger of the Corporation with or into any other
corporation or corporations or other entity or a sale, lease, exchange, or
conveyance of all or a part of the assets of the Corporation.
B-2
<PAGE> 74
3. General.
(a) Subject to the foregoing provisions of this
Certificate of Incorporation, the Corporation may issue shares of its Preferred
Stock and Common Stock from time to time for such consideration (not less than
the par value thereof) as may be fixed by the board of directors of the
Corporation, which is expressly authorized to fix the same in its absolute and
uncontrolled discretion subject to the foregoing conditions. Shares so issued
for which the consideration shall have been paid or delivered to the
Corporation shall be deemed fully paid stock and shall not be liable to any
further call or assessment thereon, and the holders of such shares shall not be
liable for any further payments in respect of such shares.
(b) The Corporation shall have authority to create and
issue rights and options entitling their holders to purchase shares of the
Corporation's capital stock of any class or series or other securities of the
Corporation, and such rights and options shall be evidenced by instrument(s)
approved by the board of directors of the Corporation. The board of directors
of the Corporation shall be empowered to set the exercise price, duration,
times for exercise, and other terms of such options or rights; provided,
however, that the consideration to be received for any shares of capital stock
subject thereto shall not be less than the par value thereof.
FIFTH: The name of the incorporator of the Corporation is Todd W.
Taylor, and the mailing address of such incorporator is 2001 Ross Avenue, Suite
4500, Dallas, Texas 75201.
SIXTH: The number of directors constituting the initial board of
directors is six and thereafter may be fixed by or in a manner provided in the
bylaws. The name and mailing address of each person who is to serve as
director until the first annual meeting of stockholders or until his successor
is elected and qualified are as follows:
NAME ADDRESS
---- -------
Charles Chunn, Jr. 9704 Bridgeford
Fort Smith, AR 72903
James J. Conners, Jr. 10539 Country Road 1
Fairhope, AL 36532
Dr. Edward L. Schrader 504 Merganser Trail
Clinton, MS 39056
Sam Sexton, III P.O. Box 1526
Fort Smith, AR 72902
Robert D. Vick 111 Meadowview
Brandon, MS 39042
Larry Woodcock 1890 Swisco Road
Sulphur, LA 70663
SEVENTH: Directors of the Corporation need not be elected by written
ballot unless the by-laws of the Corporation otherwise provide.
EIGHTH: The directors of the Corporation shall have the power to
adopt, amend, and repeal the by-laws of the Corporation.
NINTH: No contract or transaction between the Corporation and one or
more of its directors, officers, or stockholders or between the Corporation and
any person (as used herein "person" means other corporation, partnership,
B-3
<PAGE> 75
association, firm, trust, joint venture, political subdivision, or
instrumentality) or other organization in which one or more of its directors,
officers, or stockholders are directors, officers, or stockholders, or have a
financial interest, shall be void or voidable solely for this reason, or solely
because the director or officer is present at or participates in the meeting of
the board or committee which authorizes the contract or transaction, or solely
because his, her, or their votes are counted for such purpose, if: (i) the
material facts as to his or her relationship or interest and as to the contract
or transaction are disclosed or are known to the board of directors or the
committee, and the board of directors or committee in good faith authorizes the
contract or transaction by the affirmative votes of a majority of the
disinterested directors, even though the disinterested directors be less than a
quorum; or (ii) the material facts as to his or her relationship or interest
and as to the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or (iii) the
contract or transaction is fair as to the Corporation as of the time it is
authorized, approved, or ratified by the board of directors, a committee
thereof, or the stockholders. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the board of directors or
of a committee which authorizes the contract or transaction.
TENTH: The Corporation shall indemnify any person who was, is, or is
threatened to be made a party to a proceeding (as hereinafter defined) by
reason of the fact that he or she (i) is or was a director or officer of the
Corporation or (ii) while a director or officer of the Corporation, is or was
serving at the request of the Corporation as a director, officer, partner,
venturer, proprietor, trustee, employee, agent, or similar functionary of
another foreign or domestic corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan, or other enterprise, to the
fullest extent permitted under the Delaware General Corporation Law, as the
same exists or may hereafter be amended. Such right shall be a contract right
and as such shall run to the benefit of any director or officer who is elected
and accepts the position of director or officer of the Corporation or elects to
continue to serve as a director or officer of the Corporation while this
Article Tenth is in effect. Any repeal or amendment of this Article Tenth
shall be prospective only and shall not limit the rights of any such director
or officer or the obligations of the Corporation with respect to any claim
arising from or related to the services of such director or officer in any of
the foregoing capacities prior to any such repeal or amendment to this Article
Tenth. Such right shall include the right to be paid by the Corporation
expenses incurred in defending any such proceeding in advance of its final
disposition to the maximum extent permitted under the Delaware General
Corporation Law, as the same exists or may hereafter be amended. If a claim
for indemnification or advancement of expenses hereunder is not paid in full by
the Corporation within sixty (60) days after a written claim has been received
by the Corporation, the claimant may at any time thereafter bring suit against
the Corporation to recover the unpaid amount of the claim, and if successful in
whole or in part, the claimant shall also be entitled to be paid the expenses
of prosecuting such claim. It shall be a defense to any such action that such
indemnification or advancement of costs of defense are not permitted under the
Delaware General Corporation Law, but the burden of proving such defense shall
be on the Corporation. Neither the failure of the Corporation (including its
board of directors or any committee thereof, independent legal counsel, or
stockholders) to have made its determination prior to the commencement of such
action that indemnification of, or advancement of costs of defense to, the
claimant is permissible in the circumstances nor an actual determination by the
Corporation (including its board of directors or any committee thereof,
independent legal counsel, or stockholders) that such indemnification or
advancement is not permissible shall be a defense to the action or create a
presumption that such indemnification or advancement is not permissible. In
the event of the death of any person having a right of indemnification under
the foregoing provisions, such right shall inure to the benefit of his or her
heirs, executors, administrators, and personal representatives. The rights
conferred above shall not be exclusive of any other right which any person may
have or hereafter acquire under any statute, by-law, resolution of stockholders
or directors, agreement, or otherwise.
The Corporation may additionally indemnify any employee or agent of
the Corporation to the fullest extent permitted by law.
B-4
<PAGE> 76
As used herein, the term "proceeding" means any threatened, pending,
or completed action, suit, or proceeding, whether civil, criminal,
administrative, arbitrative, or investigative, any appeal in such an action,
suit, or proceeding, and any inquiry or investigation that could lead to such
an action, suit, or proceeding.
ELEVENTH: A director of the Corporation shall not be personally
liable to the Corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived an
improper personal benefit. Any repeal or amendment of this Article Eleventh by
the stockholders of the Corporation shall be prospective only, and shall not
adversely affect any limitation on the personal liability of a director of the
Corporation arising from an act or omission occurring prior to the time of such
repeal or amendment. In addition to the circumstances in which a director of
the Corporation is not personally liable as set forth in the foregoing
provisions of this Article Eleventh, a director shall not be liable to the
Corporation or its stockholders to such further extent as permitted by any law
hereafter enacted, including without limitation any subsequent amendment to the
Delaware General Corporation Law.
I, the undersigned, for the purpose of forming the Corporation under
the laws of the State of Delaware, do make, file, and record this Certificate
of Incorporation and do certify that this is my act and deed and that the facts
stated herein are true and, accordingly, I do hereunto set my hand on this
____ day of November, 1996.
----------------------------------
Todd W. Taylor
B-5
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EXHIBIT C
BYLAWS
OF
CONSOLIDATED ECO-SYSTEMS, INC.
A DELAWARE CORPORATION
<PAGE> 78
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE ONE: OFFICES
1.1 Registered Office and Agent . . . . . . . . . . . . . . . . 1
1.2 Other Offices . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE TWO: MEETINGS OF STOCKHOLDERS
2.1 Annual Meeting . . . . . . . . . . . . . . . . . . . . . . . 1
2.2 Special Meeting . . . . . . . . . . . . . . . . . . . . . . 1
2.3 Place of Meetings . . . . . . . . . . . . . . . . . . . . . 2
2.4 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.5 Voting List . . . . . . . . . . . . . . . . . . . . . . . . 2
2.6 Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.7 Required Vote; Withdrawal of Quorum . . . . . . . . . . . . 3
2.8 Method of Voting; Proxies . . . . . . . . . . . . . . . . . 3
2.9 Record Date . . . . . . . . . . . . . . . . . . . . . . . . 4
2.10 Conduct of Meeting . . . . . . . . . . . . . . . . . . . . . 5
2.11 Inspectors . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE THREE: DIRECTORS
3.1 Management . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.2 Number; Qualification; Election; Term . . . . . . . . . . . 5
3.3 Change in Number . . . . . . . . . . . . . . . . . . . . . . 6
3.4 Removal . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.5 Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.6 Meetings of Directors . . . . . . . . . . . . . . . . . . . 6
3.7 First Meeting . . . . . . . . . . . . . . . . . . . . . . . 7
3.8 Election of Officers . . . . . . . . . . . . . . . . . . . . 7
3.9 Regular Meetings . . . . . . . . . . . . . . . . . . . . . . 7
3.10 Special Meetings . . . . . . . . . . . . . . . . . . . . . . 7
3.11 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.12 Quorum; Majority Vote . . . . . . . . . . . . . . . . . . . 7
3.13 Procedure . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.14 Presumption of Assent . . . . . . . . . . . . . . . . . . . 8
3.15 Compensation . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE FOUR: COMMITTEES
4.1 Designation . . . . . . . . . . . . . . . . . . . . . . . . 8
4.2 Number; Qualification; Term . . . . . . . . . . . . . . . . 8
4.3 Authority . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.4 Committee Changes . . . . . . . . . . . . . . . . . . . . . 9
4.5 Alternate Members of Committees . . . . . . . . . . . . . . 9
4.6 Regular Meetings . . . . . . . . . . . . . . . . . . . . . . 9
4.7 Special Meetings . . . . . . . . . . . . . . . . . . . . . . 9
</TABLE>
(i)
<PAGE> 79
<TABLE>
<S> <C> <C>
4.8 Quorum; Majority Vote . . . . . . . . . . . . . . . . 9
4.9 Minutes . . . . . . . . . . . . . . . . . . . . . . . 9
4.10 Compensation . . . . . . . . . . . . . . . . . . . . . 9
4.11 Responsibility . . . . . . . . . . . . . . . . . . . . 9
ARTICLE FIVE: NOTICE
5.1 Method . . . . . . . . . . . . . . . . . . . . . . . . 10
5.2 Waiver . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE SIX: OFFICERS
6.1 Number; Titles; Term of Office . . . . . . . . . . . . 10
6.2 Removal . . . . . . . . . . . . . . . . . . . . . . . 10
6.3 Vacancies . . . . . . . . . . . . . . . . . . . . . . 11
6.4 Authority . . . . . . . . . . . . . . . . . . . . . . 11
6.5 Compensation . . . . . . . . . . . . . . . . . . . . . 11
6.6 Chairman of the Board . . . . . . . . . . . . . . . . 11
6.7 President . . . . . . . . . . . . . . . . . . . . . . 11
6.8 Vice Presidents . . . . . . . . . . . . . . . . . . . 11
6.9 Treasurer . . . . . . . . . . . . . . . . . . . . . . 11
6.10 Assistant Treasurers . . . . . . . . . . . . . . . . . 12
6.11 Secretary . . . . . . . . . . . . . . . . . . . . . . 12
6.12 Assistant Secretaries . . . . . . . . . . . . . . . . 12
ARTICLE SEVEN: CERTIFICATES AND SHAREHOLDERS
7.1 Certificates for Shares . . . . . . . . . . . . . . . 12
7.2 Replacement of Lost or Destroyed Certificates . . . . 13
7.3 Transfer of Shares . . . . . . . . . . . . . . . . . . 13
7.4 Registered Stockholders . . . . . . . . . . . . . . . 13
7.5 Regulations . . . . . . . . . . . . . . . . . . . . . 13
7.6 Legends . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE EIGHT: MISCELLANEOUS PROVISIONS
8.1 Dividends . . . . . . . . . . . . . . . . . . . . . . 14
8.2 Reserves . . . . . . . . . . . . . . . . . . . . . . . 14
8.3 Books and Records . . . . . . . . . . . . . . . . . . 14
8.4 Fiscal Year . . . . . . . . . . . . . . . . . . . . . 14
8.5 Seal . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.6 Resignations . . . . . . . . . . . . . . . . . . . . . 14
8.7 Securities of Other Corporations . . . . . . . . . . . 14
8.8 Telephone Meetings . . . . . . . . . . . . . . . . . . 14
8.9 Action Without a Meeting . . . . . . . . . . . . . . . 15
8.10 Invalid Provisions . . . . . . . . . . . . . . . . . . 15
8.11 Mortgages, etc. . . . . . . . . . . . . . . . . . . . 16
8.12 Headings . . . . . . . . . . . . . . . . . . . . . . . 16
8.13 References . . . . . . . . . . . . . . . . . . . . . . 16
8.14 Amendments . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
(ii)
<PAGE> 80
BYLAWS
OF
CONSOLIDATED ECO-SYSTEMS, INC.
A Delaware Corporation
PREAMBLE
These bylaws are subject to, and governed by, the General Corporation
Law of the State of Delaware (the "Delaware General Corporation Law") and the
certificate of incorporation of Consolidated Eco-Systems, Inc., a Delaware
corporation (the "Corporation"). In the event of a direct conflict between the
provisions of these bylaws and the mandatory provisions of the Delaware General
Corporation Law or the provisions of the certificate of incorporation of the
Corporation, such provisions of the Delaware General Corporation Law or the
certificate of incorporation of the Corporation, as the case may be, will be
controlling.
ARTICLE ONE: OFFICES
1.1 Registered Office and Agent. The registered office and
registered agent of the Corporation shall be as designated from time to time by
the appropriate filing by the Corporation in the office of the Secretary of
State of the State of Delaware.
1.2 Other Offices. The Corporation may also have offices at such
other places, both within and without the State of Delaware, as the board of
directors may from time to time determine or as the business of the Corporation
may require.
ARTICLE TWO: MEETINGS OF STOCKHOLDERS
2.1 Annual Meeting. An annual meeting of stockholders of the
Corporation shall be held each calendar year on such date and at such time as
shall be designated from time to time by the board of directors and stated in
the notice of the meeting or in a duly executed waiver of notice of such
meeting. At such meeting, the stockholders shall elect directors and transact
such other business as may properly be brought before the meeting.
2.2 Special Meeting. A special meeting of the stockholders may be
called at any time by the Chairman of the Board, the President, the board of
directors, and shall be called by the President or the Secretary at the request
in writing of the stockholders of record of not less than ten percent of all
shares entitled to vote at such meeting or as otherwise provided by the
certificate of incorporation of the Corporation. A special meeting shall be
held on such date and at such time as shall be designated by the person(s)
calling the meeting and stated in the notice of the meeting or in a duly
executed waiver of notice of such meeting. Only such business shall be
transacted at a special meeting as may be stated or indicated in the notice of
such meeting or in a duly executed waiver of notice of such meeting.
2.3 Place of Meetings. An annual meeting of stockholders may be
held at any place within or without the State of Delaware designated by the
board of directors. A special meeting of stockholders may be held at any place
within or without the State of Delaware designated in the notice of the meeting
or a duly executed waiver of notice of such meeting. Meetings of stockholders
shall be held at the principal office of the Corporation unless another place
is designated for meetings in the manner provided herein.
2.4 Notice. (a) Written or printed notice stating the place,
day, and time of each meeting of the stockholders and, in case of a special
meeting, the purpose or purposes for which the meeting is called shall be
delivered not less than ten nor more than 60 days before the date of the
meeting, either personally or by mail, by or at the direction of the President,
the Secretary, or the officer or person(s) calling the meeting, to each
stockholder of
<PAGE> 81
record entitled to vote at such meeting. If such notice is to be sent by mail,
it shall be directed to such stockholder at his address as it appears on the
records of the Corporation, unless he shall have filed with the Secretary of
the Corporation a written request that notices to him be mailed to some other
address, in which case it shall be directed to him at such other address.
Notice of any meeting of stockholders shall not be required to be given to any
stockholder who shall attend such meeting in person or by proxy and shall not,
at the beginning of such meeting, object to the transaction of any business
because the meeting is not lawfully called or convened, or who shall, either
before or after the meeting, submit a signed waiver of notice, in person or by
proxy.
(b) Notice shall not be required to be given to any stockholder to
whom (a) notice of two consecutive annual meetings, and all notices of meetings
or of the taking of action by written consent without a meeting to such
stockholder during the period between such two annual meetings, or (b) all, and
at least two, payments (if sent by first class mail) of dividends or interest
on securities during a twelve month period, have been mailed addressed to such
stockholder at his address as shown on the records of the Corporation and have
been returned undeliverable. Any action or meeting which shall be taken or
held without notice to such stockholder shall have the same force and effect as
if such notice had been duly given. If any such stockholder shall deliver to
the Corporation a written notice setting forth his then current address, the
requirement that notice be given to such stockholder shall be reinstated.
2.5 Voting List. At least ten days before each meeting of
stockholders, the Secretary or other officer of the Corporation who has charge
of the Corporation's stock ledger, either directly or through another officer
appointed by him or through a transfer agent appointed by the board of
directors, shall prepare a complete list of stockholders entitled to vote
thereat, arranged in alphabetical order and showing the address of each
stockholder and number of shares registered in the name of each stockholder.
For a period of ten days prior to such meeting, such list shall be kept on file
at a place within the city where the meeting is to be held, which place shall
be specified in the notice of meeting or a duly executed waiver of notice of
such meeting or, if not so specified, at the place where the meeting is to be
held and shall be open to examination by any stockholder during ordinary
business hours. Such list shall be produced at such meeting and kept at the
meeting at all times during such meeting and may be inspected by any
stockholder who is present.
2.6 Quorum. The holders of a majority of the outstanding shares
entitled to vote on a matter, present in person or by proxy, shall constitute a
quorum at any meeting of stockholders, except as otherwise provided by law, the
certificate of incorporation of the Corporation, or these bylaws. If a quorum
shall not be present, in person or by proxy, at any meeting of stockholders,
the stockholders entitled to vote thereat who are present, in person or by
proxy, or, if no stockholder entitled to vote is present, any officer of the
Corporation may adjourn the meeting from time to time, without notice other
than announcement at the meeting (unless the board of directors, after such
adjournment, fixes a new record date for the adjourned meeting), until a quorum
shall be present, in person or by proxy. At any adjourned meeting at which a
quorum shall be present, in person or by proxy, any business may be transacted
which may have been transacted at the original meeting had a quorum been
present; provided that, if the adjournment is for more than 30 days or if after
the adjournment a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting shall be given to each stockholder of record entitled
to vote at the adjourned meeting.
2.7 Required Vote; Withdrawal of Quorum. When a quorum is present
at any meeting, the vote of the holders of at least a majority of the
outstanding shares entitled to vote who are present, in person or by proxy,
shall decide any question brought before such meeting, unless the question is
one on which, by express provision of statute, the certificate of incorporation
of the Corporation, or these bylaws, a different vote is required, in which
case such express provision shall govern and control the decision of such
question. The stockholders present at a duly constituted meeting may continue
to transact business until adjournment, notwithstanding the withdrawal of
enough stockholders to leave less than a quorum.
2.8 Method of Voting; Proxies. Except as otherwise provided in
the certificate of incorporation of the Corporation or by law, each outstanding
share, regardless of class, shall be entitled to one vote on each matter
submitted to a vote at a meeting of stockholders. Elections of directors need
not be by written ballot. At any meeting
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of stockholders, every stockholder having the right to vote may vote either in
person or by a proxy executed in writing by the stockholder or by his duly
authorized attorney-in-fact, or by any proxy method permitted by the Delaware
General Corporation Law. Each such proxy shall be filed with the Secretary of
the Corporation before or at the time of the meeting. No proxy shall be valid
after three years from the date of its execution, unless otherwise provided in
the proxy. If no date is stated in a proxy, such proxy shall be presumed to
have been executed on the date of the meeting at which it is to be voted. Each
proxy shall be revocable unless expressly provided therein to be irrevocable
and coupled with an interest sufficient in law to support an irrevocable power
or unless otherwise made irrevocable by law.
2.9 Record Date. (a) For the purpose of determining stockholders
entitled to notice of or to vote at any meeting of stockholders, or any
adjournment thereof, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion, or exchange of stock or for the purpose of
any other lawful action, the board of directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted by the board of directors, for any such determination
of stockholders, such date in any case to be not more than 60 days and not less
than ten days prior to such meeting nor more than 60 days prior to any other
action. If no record date is fixed:
(i) The record date for determining stockholders entitled
to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is
given or, if notice is waived, at the close of business on the day
next preceding the day on which the meeting is held.
(ii) The record date for determining stockholders for any
other purpose shall be at the close of business on the day on which
the board of directors adopts the resolution relating thereto.
(iii) A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the board of
directors may fix a new record date for the adjourned meeting.
(b) In order that the Corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting, the board
of directors may fix a record date, which record date shall not precede the
date upon which the resolution fixing the record date is adopted by the board
of directors, and which date shall not be more than ten days after the date
upon which the resolution fixing the record date is adopted by the board of
directors. If no record date has been fixed by the board of directors, the
record date for determining stockholders entitled to consent to corporate
action in writing without a meeting, when no prior action by the board of
directors is required by law or these bylaws, shall be the first date on which
a signed written consent setting forth the action taken or proposed to be taken
is delivered to the Corporation by delivery to its registered office in the
State of Delaware, its principal place of business, or an officer or agent of
the Corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the Corporation's registered
office in the State of Delaware, principal place of business, or such officer
or agent shall be by hand or by certified or registered mail, return receipt
requested. If no record date has been fixed by the board of directors and
prior action by the board of directors is required by law or these bylaws, the
record date for determining stockholders entitled to consent to corporate
action in writing without a meeting shall be at the close of business on the
day on which the board of directors adopts the resolution taking such prior
action.
2.10 Conduct of Meeting. The Chairman of the Board, if such office
has been filled, and, if not or if the Chairman of the Board is absent or
otherwise unable to act, the President shall preside at all meetings of
stockholders. The Secretary shall keep the records of each meeting of
stockholders. In the absence or inability to act of any such officer, such
officer's duties shall be performed by the officer given the authority to act
for such absent or non- acting officer under these bylaws or by some person
appointed by the meeting.
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2.11 Inspectors. The board of directors shall, in advance of any
meeting of stockholders, appoint one or more inspectors to act at such meeting
or any adjournment thereof. If any of the inspectors so appointed shall fail
to appear or act, or if inspectors shall not have been appointed, the chairman
of the meeting shall, appoint one or more inspectors. Each inspector, before
entering upon the discharge of his duties, shall take and sign an oath
faithfully to execute the duties of inspector at such meeting with strict
impartiality and according to the best of his ability. The inspectors shall
determine the number of shares of capital stock of the Corporation outstanding
and the voting power of each, the number of shares represented at the meeting,
the existence of a quorum, and the validity and effect of proxies and shall
receive votes, ballots, or consents, hear and determine all challenges and
questions arising in connection with the right to vote, count and tabulate all
votes, ballots, or consents, determine the results, and do such acts as are
proper to conduct the election or vote with fairness to all stockholders. On
request of the chairman of the meeting, the inspectors shall make a report in
writing of any challenge, request, or matter determined by them and shall
execute a certificate of any fact found by them. No director or candidate for
the office of director shall act as an inspector of an election of directors.
Inspectors need not be stockholders.
ARTICLE THREE: DIRECTORS
3.1 Management. The business and property of the Corporation
shall be managed by the board of directors. Subject to the restrictions
imposed by law, the certificate of incorporation of the Corporation, or these
bylaws, the board of directors may exercise all the powers of the Corporation.
3.2 Number; Qualification; Election; Term. The number of
directors which shall constitute the entire board of directors shall be not
less than one. The first board of directors shall consist of the number of
directors named in the certificate of incorporation of the Corporation or, if
no directors are so named, shall consist of the number of directors elected by
the incorporator(s) at an organizational meeting or by unanimous written
consent in lieu thereof. Thereafter, within the limits above specified, the
number of directors which shall constitute the entire board of directors shall
be determined by resolution of the board of directors or by resolution of the
stockholders at the annual meeting thereof or at a special meeting thereof
called for that purpose. Except as otherwise required by law, the certificate
of incorporation of the Corporation, or these bylaws, the directors shall be
elected at an annual meeting of stockholders at which a quorum is present.
Directors shall be elected by a plurality of the votes of the shares present in
person or represented by proxy and entitled to vote on the election of
directors. Each director so chosen shall hold office until the first annual
meeting of stockholders held after his election and until his successor is
elected and qualified or, if earlier, until his death, resignation, or removal
from office. None of the directors need be a stockholder of the Corporation or
a resident of the State of Delaware. Each director must have attained the age
of majority.
3.3 Change in Number. No decrease in the number of directors
constituting the entire board of directors shall have the effect of shortening
the term of any incumbent director.
3.4 Removal. Except as otherwise provided in the certificate of
incorporation of the Corporation or these bylaws, at any meeting of
stockholders called expressly for that purpose, any director or the entire
board of directors may be removed, with or without cause, by a vote of the
holders of a majority of the shares then entitled to vote on the election of
directors; provided, however, that so long as stockholders have the right to
cumulate votes in the election of directors pursuant to the certificate of
incorporation of the Corporation, if less than the entire board of directors is
to be removed, no one of the directors may be removed if the votes cast against
his removal would be sufficient to elect him if then cumulatively voted at an
election of the entire board of directors.
3.5 Vacancies. Vacancies and newly-created directorships
resulting from any increase in the authorized number of directors may be filled
by a majority of the directors then in office, though less than a quorum, or by
the sole remaining director, and each director so chosen shall hold office
until the first annual meeting of stockholders held after his election and
until his successor is elected and qualified or, if earlier, until his death,
resignation, or removal from office. If there are no directors in office, an
election of directors may be held in the manner provided by statute. If, at
the time of filling any vacancy or any newly-created directorship, the
directors then in office shall
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constitute less than a majority of the whole board of directors (as constituted
immediately prior to any such increase), the Court of Chancery may, upon
application of any stockholder or stockholders holding at least 10% of the
total number of the shares at the time outstanding having the right to vote for
such directors, summarily order an election to be held to fill any such
vacancies or newly-created directorships or to replace the directors chosen by
the directors then in office. Except as otherwise provided in these bylaws,
when one or more directors shall resign from the board of directors, effective
at a future date, a majority of the directors then in office, including those
who have so resigned, shall have the power to fill such vacancy or vacancies,
the vote thereon to take effect when such resignation or resignations shall
become effective, and each director so chosen shall hold office as provided in
these bylaws with respect to the filling of other vacancies.
3.6 Meetings of Directors. The directors may hold their meetings
and may have an office and keep the books of the Corporation, except as
otherwise provided by statute, in such place or places within or without the
State of Delaware as the board of directors may from time to time determine or
as shall be specified in the notice of such meeting or duly executed waiver of
notice of such meeting.
3.7 First Meeting. Each newly elected board of directors may hold
its first meeting for the purpose of organization and the transaction of
business, if a quorum is present, immediately after and at the same place as
the annual meeting of stockholders, and no notice of such meeting shall be
necessary.
3.8 Election of Officers. At the first meeting of the board of
directors after each annual meeting of stockholders at which a quorum shall be
present, the board of directors shall elect the officers of the Corporation.
3.9 Regular Meetings. Regular meetings of the board of directors
shall be held at such times and places as shall be designated from time to time
by resolution of the board of directors. Notice of such regular meetings shall
not be required.
3.10 Special Meetings. Special meetings of the board of directors
shall be held whenever called by the Chairman of the Board, the President, or
any director.
3.11 Notice. The Secretary shall give notice of each special
meeting to each director at least 24 hours before the meeting. Notice of any
such meeting need not be given to any director who shall, either before or
after the meeting, submit a signed waiver of notice or who shall attend such
meeting without protesting, prior to or at its commencement, the lack of notice
to him. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the board of directors need be specified in the
notice or waiver of notice of such meeting.
3.12 Quorum; Majority Vote. At all meetings of the board of
directors, a majority of the directors fixed in the manner provided in these
bylaws shall constitute a quorum for the transaction of business. If at any
meeting of the board of directors there be less than a quorum present, a
majority of those present or any director solely present may adjourn the
meeting from time to time without further notice. Unless the act of a greater
number is required by law, the certificate of incorporation of the Corporation,
or these bylaws, the act of a majority of the directors present at a meeting at
which a quorum is in attendance shall be the act of the board of directors. At
any time that the certificate of incorporation of the Corporation provides that
directors elected by the holders of a class or series of stock shall have more
or less than one vote per director on any matter, every reference in these
bylaws to a majority or other proportion of directors shall refer to a majority
or other proportion of the votes of such directors.
3.13 Procedure. At meetings of the board of directors, business
shall be transacted in such order as from time to time the board of directors
may determine. The Chairman of the Board, if such office has been filled, and,
if not or if the Chairman of the Board is absent or otherwise unable to act,
the President shall preside at all meetings of the board of directors. In the
absence or inability to act of either such officer, a chairman shall be chosen
by the board of directors from among the directors present. The Secretary of
the Corporation shall act as the secretary of each meeting of the board of
directors unless the board of directors appoints another person to act as
secretary of the
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meeting. The board of directors shall keep regular minutes of its proceedings
which shall be placed in the minute book of the Corporation.
3.14 Presumption of Assent. A director of the Corporation who is
present at a meeting of the board of directors at which action on any corporate
matter is taken shall be presumed to have assented to the action unless his
dissent shall be entered in the minutes of the meeting or unless he shall file
his written dissent to such action with the person acting as secretary of the
meeting before the adjournment thereof or shall forward any dissent by
certified or registered mail to the Secretary of the Corporation immediately
after the adjournment of the meeting. Such right to dissent shall not apply to
a director who voted in favor of such action.
3.15 Compensation. The board of directors shall have the authority
to fix the compensation, including fees and reimbursement of expenses, paid to
directors for attendance at regular or special meetings of the board of
directors or any committee thereof; provided, that nothing contained herein
shall be construed to preclude any director from serving the Corporation in any
other capacity or receiving compensation therefor.
ARTICLE FOUR: COMMITTEES
4.1 Designation. The board of directors may, by resolution
adopted by a majority of the entire board of directors, designate one or more
committees.
4.2 Number; Qualification; Term. Each committee shall consist of
one or more directors appointed by resolution adopted by a majority of the
entire board of directors. The number of committee members may be increased or
decreased from time to time by resolution adopted by a majority of the entire
board of directors. Each committee member shall serve as such until the
earliest of (i) the expiration of his term as director, (ii) his resignation as
a committee member or as a director, or (iii) his removal as a committee member
or as a director.
4.3 Authority. Each committee, to the extent expressly provided
in the resolution establishing such committee, shall have and may exercise all
of the authority of the board of directors in the management of the business
and property of the Corporation except to the extent expressly restricted by
law, the certificate of incorporation of the Corporation, or these bylaws.
4.4 Committee Changes. The board of directors shall have the
power at any time to fill vacancies in, to change the membership of, and to
discharge any committee.
4.5 Alternate Members of Committees. The board of directors may
designate one or more directors as alternate members of any committee. Any
such alternate member may replace any absent or disqualified member at any
meeting of the committee. If no alternate committee members have been so
appointed to a committee or each such alternate committee member is absent or
disqualified, the member or members of such committee present at any meeting
and not disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another member of the board of directors to act
at the meeting in the place of any such absent or disqualified member.
4.6 Regular Meetings. Regular meetings of any committee may be
held without notice at such time and place as may be designated from time to
time by the committee and communicated to all members thereof.
4.7 Special Meetings. Special meetings of any committee may be
held whenever called by any committee member. The committee member calling any
special meeting shall cause notice of such special meeting, including therein
the time and place of such special meeting, to be given to each committee
member at least 24 hours before such special meeting. Neither the business to
be transacted at, nor the purpose of, any special meeting of any committee need
be specified in the notice or waiver of notice of any special meeting.
4.8 Quorum; Majority Vote. At meetings of any committee, a
majority of the number of members designated by the board of directors shall
constitute a quorum for the transaction of business. If a quorum is not
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present at a meeting of any committee, a majority of the members present may
adjourn the meeting from time to time, without notice other than an
announcement at the meeting, until a quorum is present. The act of a majority
of the members present at any meeting at which a quorum is in attendance shall
be the act of a committee, unless the act of a greater number is required by
law, the certificate of incorporation of the Corporation, or these bylaws.
4.9 Minutes. Each committee shall cause minutes of its
proceedings to be prepared and shall report the same to the board of directors
upon the request of the board of directors. The minutes of the proceedings of
each committee shall be delivered to the Secretary of the Corporation for
placement in the minute books of the Corporation.
4.10 Compensation. Committee members may, by resolution of the
board of directors, be allowed a fixed sum and expenses of attendance, if any,
for attending any committee meetings or a stated salary.
4.11 Responsibility. The designation of any committee and the
delegation of authority to it shall not operate to relieve the board of
directors or any director of any responsibility imposed by law upon the board
of directors or such director.
ARTICLE FIVE: NOTICE
5.1 Method. Whenever by statute, the certificate of incorporation
of the Corporation, or these bylaws, notice is required to be given to any
committee member, director, or stockholder and no provision is made as to how
such notice shall be given, personal notice shall not be required and any such
notice may be given (a) in writing, by mail, postage prepaid, addressed to such
committee member, director, or stockholder at his address as it appears on the
books or (in the case of a stockholder) the stock transfer records of the
Corporation, or (b) by any other method permitted by law (including but not
limited to overnight courier service, telegram, telex, or telefax). Any notice
required or permitted to be given by mail shall be deemed to be delivered and
given at the time when the same is deposited in the United States mail as
aforesaid. Any notice required or permitted to be given by overnight courier
service shall be deemed to be delivered and given at the time delivered to such
service with all charges prepaid and addressed as aforesaid. Any notice
required or permitted to be given by telegram, telex, or telefax shall be
deemed to be delivered and given at the time transmitted with all charges
prepaid and addressed as aforesaid.
5.2 Waiver. Whenever any notice is required to be given to any
stockholder, director, or committee member of the Corporation by statute, the
certificate of incorporation of the Corporation, or these bylaws, a waiver
thereof in writing signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be equivalent to the
giving of such notice. Attendance of a stockholder, director, or committee
member at a meeting shall constitute a waiver of notice of such meeting, except
where such person attends for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
ARTICLE SIX: OFFICERS
6.1 Number; Titles; Term of Office. The officers of the
Corporation shall be a President, a Secretary, and such other officers as the
board of directors may from time to time elect or appoint, including a Chairman
of the Board, one or more Vice Presidents (with each Vice President to have
such descriptive title, if any, as the board of directors shall determine), and
a Treasurer. Each officer shall hold office until his successor shall have
been duly elected and shall have qualified, until his death, or until he shall
resign or shall have been removed in the manner hereinafter provided. Any two
or more offices may be held by the same person. None of the officers need be a
stockholder or a director of the Corporation or a resident of the State of
Delaware.
6.2 Removal. Any officer or agent elected or appointed by the
board of directors may be removed by the board of directors whenever in its
judgment the best interest of the Corporation will be served thereby, but such
removal shall be without prejudice to the contract rights, if any, of the
person so removed. Election or appointment of an officer or agent shall not of
itself create contract rights.
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6.3 Vacancies. Any vacancy occurring in any office of the
Corporation (by death, resignation, removal, or otherwise) may be filled by the
board of directors.
6.4 Authority. Officers shall have such authority and perform
such duties in the management of the Corporation as are provided in these
bylaws or as may be determined by resolution of the board of directors not
inconsistent with these bylaws.
6.5 Compensation. The compensation, if any, of officers and
agents shall be fixed from time to time by the board of directors; provided,
however, that the board of directors may delegate the power to determine the
compensation of any officer and agent (other than the officer to whom such
power is delegated) to the Chairman of the Board, or the President, or a
committee of directors.
6.6 Chairman of the Board. The Chairman of the Board, if elected
by the board of directors, shall have such powers and duties as may be
prescribed by the board of directors. Such officer shall preside at all
meetings of the stockholders and of the board of directors. Such officer may
sign all certificates for shares of stock of the Corporation.
6.7 President. The President shall be the chief executive officer
of the Corporation and, subject to the board of directors, he shall have
general executive charge, management, and control of the properties and
operations of the Corporation in the ordinary course of its business, with all
powers with respect to such properties and operations as may be reasonably
incident to such responsibilities. If the board of directors has not elected a
Chairman of the Board or in the absence or inability to act of the Chairman of
the Board, the President shall exercise all of the powers and discharge all of
the duties of the Chairman of the Board. As between the Corporation and third
parties, any action taken by the President in the performance of the duties of
the Chairman of the Board shall be conclusive evidence that there is no
Chairman of the Board or that the Chairman of the Board is absent or unable to
act.
6.8 Vice Presidents. If the board of directors elects or appoints
one or more Vice Presidents, each Vice President shall have such powers and
duties as may be assigned to him by the board of directors, the Chairman of the
Board, or the President, and (in order of their seniority as determined by the
board of directors or, in the absence of such determination, as determined by
the length of time they have held the office of Vice President) shall exercise
the powers of the President during that officer's absence or inability to act.
As between the Corporation and third parties, any action taken by a Vice
President in the performance of the duties of the President shall be conclusive
evidence of the absence or inability to act of the President at the time such
action was taken.
6.9 Treasurer. If the board of directors elects or appoints a
Treasurer, the Treasurer shall have custody of the Corporation's funds and
securities, shall keep full and accurate account of receipts and disbursements,
shall deposit all monies and valuable effects in the name and to the credit of
the Corporation in such depository or depositories as may be designated by the
board of directors, and shall perform such other duties as may be prescribed by
the board of directors, the Chairman of the Board, or the President.
6.10 Assistant Treasurers. If the board of directors elects or
appoints one or more Assistant Treasurers, each Assistant Treasurer shall have
such powers and duties as may be assigned to him by the board of directors, the
Chairman of the Board, or the President. The Assistant Treasurers (in the
order of their seniority as determined by the board of directors or, in the
absence of such a determination, as determined by the length of time they have
held the office of Assistant Treasurer) shall exercise the powers of the
Treasurer during that officer's absence or inability to act.
6.11 Secretary. Except as otherwise provided in these bylaws, the
Secretary shall keep the minutes of all meetings of the board of directors and
of the stockholders in books provided for that purpose, and he shall attend to
the giving and service of all notices. He may sign with the Chairman of the
Board or the President, in the name of the Corporation, all contracts of the
Corporation and affix the seal of the Corporation thereto. He may sign with
the Chairman of the Board or the President all certificates for shares of stock
of the Corporation, and he shall have
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charge of the certificate books, transfer books, and stock papers as the board
of directors may direct, all of which shall at all reasonable times be open to
inspection by any director upon application at the office of the Corporation
during business hours. He shall in general perform all duties incident to the
office of the Secretary, subject to the control of the board of directors, the
Chairman of the Board, and the President.
6.12 Assistant Secretaries. If the board of directors elects or
appoints one or more Assistant Secretaries, each Assistant Secretary shall have
such powers and duties as may be assigned to him by the board of directors, the
Chairman of the Board, or the President. The Assistant Secretaries (in the
order of their seniority as determined by the board of directors or, in the
absence of such a determination, as determined by the length of time they have
held the office of Assistant Secretary) shall exercise the powers of the
Secretary during that officer's absence or inability to act.
ARTICLE SEVEN: CERTIFICATES AND SHAREHOLDERS
7.1 Certificates for Shares. Certificates for shares of stock of
the Corporation shall be in such form as shall be approved by the board of
directors. The certificates shall be signed by the Chairman of the Board or
the President or a Vice President and also by the Secretary or an Assistant
Secretary or by the Treasurer or an Assistant Treasurer. Any and all
signatures on the certificate may be a facsimile and may be sealed with the
seal of the Corporation or a facsimile thereof. If any officer, transfer
agent, or registrar who has signed, or whose facsimile signature has been
placed upon, a certificate has ceased to be such officer, transfer agent, or
registrar before such certificate is issued, such certificate may be issued by
the Corporation with the same effect as if he were such officer, transfer
agent, or registrar at the date of issue. The certificates shall be
consecutively numbered and shall be entered in the books of the Corporation as
they are issued and shall exhibit the holder's name and the number of shares.
7.2 Replacement of Lost or Destroyed Certificates. The board of
directors may direct a new certificate or certificates to be issued in place of
a certificate or certificates theretofore issued by the Corporation and alleged
to have been lost or destroyed, upon the making of an affidavit of that fact by
the person claiming the certificate or certificates representing shares to be
lost or destroyed. When authorizing such issue of a new certificate or
certificates the board of directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost or destroyed
certificate or certificates, or his legal representative, to advertise the same
in such manner as it shall require and/or to give the Corporation a bond with a
surety or sureties satisfactory to the Corporation in such sum as it may direct
as indemnity against any claim, or expense resulting from a claim, that may be
made against the Corporation with respect to the certificate or certificates
alleged to have been lost or destroyed.
7.3 Transfer of Shares. Shares of stock of the Corporation shall
be transferable only on the books of the Corporation by the holders thereof in
person or by their duly authorized attorneys or legal representatives. Upon
surrender to the Corporation or the transfer agent of the Corporation of a
certificate representing shares duly endorsed or accompanied by proper evidence
of succession, assignment, or authority to transfer, the Corporation or its
transfer agent shall issue a new certificate to the person entitled thereto,
cancel the old certificate, and record the transaction upon its books.
7.4 Registered Stockholders. The Corporation shall be entitled to
treat the holder of record of any share or shares of stock as the holder in
fact thereof and, accordingly, shall not be bound to recognize any equitable or
other claim to or interest in such share or shares on the part of any other
person, whether or not it shall have express or other notice thereof, except as
otherwise provided by law.
7.5 Regulations. The board of directors shall have the power and
authority to make all such rules and regulations as they may deem expedient
concerning the issue, transfer, and registration or the replacement of
certificates for shares of stock of the Corporation.
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7.6 Legends. The board of directors shall have the power and
authority to provide that certificates representing shares of stock bear such
legends as the board of directors deems appropriate to assure that the
Corporation does not become liable for violations of federal or state
securities laws or other applicable law.
ARTICLE EIGHT: MISCELLANEOUS PROVISIONS
8.1 Dividends. Subject to provisions of law and the certificate
of incorporation of the Corporation, dividends may be declared by the board of
directors at any regular or special meeting and may be paid in cash, in
property, or in shares of stock of the Corporation. Such declaration and
payment shall be at the discretion of the board of directors.
8.2 Reserves. There may be created by the board of directors out
of funds of the Corporation legally available therefor such reserve or reserves
as the directors from time to time, in their discretion, consider proper to
provide for contingencies, to equalize dividends, or to repair or maintain any
property of the Corporation, or for such other purpose as the board of
directors shall consider beneficial to the Corporation, and the board of
directors may modify or abolish any such reserve in their discretion.
8.3 Books and Records. The Corporation shall keep correct and
complete books and records of account, shall keep minutes of the proceedings of
its stockholders and board of directors and shall keep at its registered office
or principal place of business, or at the office of its transfer agent or
registrar, a record of its stockholders, giving the names and addresses of all
stockholders and the number and class of the shares held by each.
8.4 Fiscal Year. The fiscal year of the Corporation shall be
fixed by the board of directors; provided, that if such fiscal year is not
fixed by the board of directors and the selection of the fiscal year is not
expressly deferred by the board of directors, the fiscal year shall be the
calendar year.
8.5 Seal. The seal of the Corporation shall be such as from time
to time may be approved by the board of directors.
8.6 Resignations. Any director, committee member, or officer may
resign by so stating at any meeting of the board of directors or by giving
written notice to the board of directors, the Chairman of the Board, the
President, or the Secretary. Such resignation shall take effect at the time
specified therein or, if no time is specified therein, immediately upon its
receipt. Unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
8.7 Securities of Other Corporations. The Chairman of the Board,
the President, or any Vice President of the Corporation shall have the power
and authority to transfer, endorse for transfer, vote, consent, or take any
other action with respect to any securities of another issuer which may be held
or owned by the Corporation and to make, execute, and deliver any waiver,
proxy, or consent with respect to any such securities.
8.8 Telephone Meetings. Stockholders (acting for themselves or
through a proxy), members of the board of directors, and members of a committee
of the board of directors may participate in and hold a meeting of such
stockholders, board of directors, or committee by means of a conference
telephone or similar communications equipment by means of which persons
participating in the meeting can hear each other, and participation in a
meeting pursuant to this section shall constitute presence in person at such
meeting, except where a person participates in the meeting for the express
purpose of objecting to the transaction of any business on the ground that the
meeting is not lawfully called or convened.
8.9 Action Without a Meeting. (a) Unless otherwise provided in
the certificate of incorporation of the Corporation, any action required by the
Delaware General Corporation Law to be taken at any annual or special meeting
of the stockholders, or any action which may be taken at any annual or special
meeting of the stockholders, may be taken without a meeting, without prior
notice, and without a vote, if a consent or consents in writing, setting
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forth the action so taken, shall be signed by the holders (acting for
themselves or through a proxy) of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such
action at a meeting at which the holders of all shares entitled to vote thereon
were present and voted and shall be delivered to the Corporation by delivery to
its registered office in the State of Delaware, its principal place of
business, or an officer or agent of the Corporation having custody of the book
in which proceedings of meetings of stockholders are recorded. Every written
consent of stockholders shall bear the date of signature of each stockholder
who signs the consent and no written consent shall be effective to take the
corporate action referred to therein unless, within sixty days of the earliest
dated consent delivered in the manner required by this Section 8.9(a) to the
Corporation, written consents signed by a sufficient number of holders to take
action are delivered to the Corporation by delivery to its registered office in
the State of Delaware, its principal place of business, or an officer or agent
of the Corporation having custody of the book in which proceedings of meetings
of stockholders are recorded. Delivery made to the Corporation's registered
office, principal place of business, or such officer or agent shall be by hand
or by certified or registered mail, return receipt requested. If any such
action is taken by less then unanimous consent of the stockholders, prompt
notice thereof shall be given to all nonconsenting stockholders.
(b) Unless otherwise restricted by the certificate of incorporation
of the Corporation or by these bylaws, any action required or permitted to be
taken at a meeting of the board of directors, or of any committee of the board
of directors, may be taken without a meeting if a consent or consents in
writing, setting forth the action so taken, shall be signed by all the
directors or all the committee members, as the case may be, entitled to vote
with respect to the subject matter thereof, and such consent shall have the
same force and effect as a vote of such directors or committee members, as the
case may be, and may be stated as such in any certificate or document filed
with the Secretary of State of the State of Delaware or in any certificate
delivered to any person. Such consent or consents shall be filed with the
minutes of proceedings of the board or committee, as the case may be.
8.10 Invalid Provisions. If any part of these bylaws shall be held
invalid or inoperative for any reason, the remaining parts, so far as it is
possible and reasonable, shall remain valid and operative.
8.11 Mortgages, etc. With respect to any deed, deed of trust,
mortgage, or other instrument executed by the Corporation through its duly
authorized officer or officers, the attestation to such execution by the
Secretary of the Corporation shall not be necessary to constitute such deed,
deed of trust, mortgage, or other instrument a valid and binding obligation
against the Corporation unless the resolutions, if any, of the board of
directors authorizing such execution expressly state that such attestation is
necessary, or unless such attestation is required by law.
8.12 Headings. The headings used in these bylaws have been
inserted for administrative convenience only and do not constitute matter to be
construed in interpretation.
8.13 References. Whenever herein the singular number is used, the
same shall include the plural where appropriate, and words of any gender should
include each other gender where appropriate.
8.14 Amendments. These bylaws may be altered, amended, or repealed
or new bylaws may be adopted by the stockholders or by the board of directors
at any regular meeting of the stockholders or the board of directors or at any
special meeting of the stockholders or the board of directors if notice of such
alteration, amendment, repeal, or adoption of new bylaws be contained in the
notice of any such special meeting of the stockholders.
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The undersigned, the Secretary of the Corporation, hereby certifies
that the foregoing bylaws were adopted by unanimous consent by the directors of
the Corporation as of November ___, 1996.
--------------------------------
Sam Sexton III, Secretary
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EXHIBIT D
IDAHO CODE
GENERAL LAWS
TITLE 30. CORPORATIONS
CHAPTER 1. GENERAL BUSINESS CORPORATIONS
IDAHO CODE SECTION 30-1-80
30-1-80 RIGHT OF SHAREHOLDERS TO DISSENT AND OBTAIN PAYMENT FOR SHARES.
(a) Any shareholder of a corporation shall have the right to
dissent from, and to obtain payment for his shares in the event of any of the
following corporate actions:
(1) Any plan of merger or consolidation to which the
corporation is a party, except as provided in subsection (c) of this
section;
(2) Any sale, lease, exchange, or other disposition of
all or substantially all of the property and assets of the corporation
not made in the usual or regular course of its business, including a
sale in dissolution, but not including a sale pursuant to an order of
a court having jurisdiction in the premises or a sale for cash on
terms requiring that all or substantially all of the net proceeds of
sale be distributed to the shareholders in accordance with their
respective interests within one (1) year after the date of sale;
(3) Any plan of exchange to which the corporation is a
party, as the corporation the shares of which are to be acquired;
(4) Any amendment of the articles of incorporation which
materially and adversely affects the rights appurtenant to the shares
of the dissenting shareholder in that it:
(i) Alters or abolishes a preferential right of
such shares;
(ii) Creates, alters or abolishes a right in
respect of the redemption of such shares, including a provision
respecting a sinking fund for the redemption or repurchase of such
shares;
(iii) Alters or abolishes a preemptive right of the
holder of such shares to acquire shares or other securities;
(iv) Excludes or limits the right of the holder of
such shares to vote on any matter, or to cumulate his votes, except
as such right may be limited by dilution through the issuance of
shares or other securities with similar voting rights; or
(5) Any other corporate action taken pursuant to a
shareholder vote with respect to which the articles of incorporation,
the bylaws, or a resolution of the board of directors directs that
dissenting shareholders shall have a right to obtain payment for their
shares.
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(b)(1) A record holder of shares may assert dissenters' rights as to
less than all of the shares registered in his name only if he dissents with
respect to all the shares beneficially owned by any one (1) person, and
discloses the name and address of the persons on whose behalf he dissents. In
that event, his rights shall be determined as if the shares as to which he has
dissented and his other shares were registered in the names of different
shareholders.
(2) A beneficial owner of shares who is not the record
holder may assert dissenters' rights with respect to shares held on
his behalf, and shall be treated as a dissenting shareholder under the
terms of this section and section 30-1-31, Idaho Code, if he submits
to the corporation at the time of or before the assertion of these
rights a written consent of the record holder.
(c) The right to obtain payment under this section shall
not apply to the shareholders of the surviving corporation in a merger
if a vote of the shareholders of such corporation is not necessary to
authorize such merger.
(d) A shareholder of a corporation who has a right under
this section to obtain payment for his shares shall have no right at
law or in equity to attack the validity of the corporate action that
gives rise to his right to obtain payment, nor to have the action set
aside or rescinded, except when the corporate action is unlawful or
fraudulent with regard to the complaining shareholder or to the
corporation.
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IDAHO CODE
GENERAL LAWS
TITLE 30. CORPORATIONS
CHAPTER 1. GENERAL BUSINESS CORPORATIONS
IDAHO CODE SECTION 30-1-81
30-1-81 PROCEDURES FOR PROTECTION OF DISSENTERS' RIGHTS.
(a) As used in this section:
(1) "Dissenter" means a shareholder or beneficial owner
who is entitled to and does assert dissenters' rights under section
30-1-80, Idaho Code, and who has performed every act required up to
the time involved for the assertion of such rights.
(2) "Corporation" means the issuer of the shares held by the
dissenter before the corporate action or the successor by merger or
consolidation of that issuer.
(3) "Fair value" of shares means their value immediately
before the effectuation of the corporate action to which the dissenter
objects, excluding any appreciation or depreciation in anticipation of
such corporate action unless such exclusion would be inequitable.
(4) "Interest" means interest from the effective date of the
corporate action until the date of payment at the average rate
currently paid by the corporation on its principal bank loans, or, if
none, at such rate as is fair and equitable under all the
circumstances.
(b) If a proposed corporate action which would give rise to
dissenters' rights under subsection (a) of section 30-1-80, Idaho Code, is
submitted to a vote at a meeting of shareholders, the notice of meeting shall
notify all shareholders that they have or may have a right to dissent and
obtain payment for their shares by complying with the terms of this section,
and shall be accompanied by a copy of sections 30-1-80 and 30-1-81, Idaho Code.
(c) If the proposed corporate action is submitted to a vote at a
meeting of shareholders, any shareholder who wishes to dissent and obtain
payment for his shares shall refrain from voting his shares in approval of such
action. A shareholder who votes in favor of such action shall acquire no right
to payment for his shares under this section or section 30-1-80, Idaho Code.
(d) If the proposed corporate action is approved by the required
vote at a meeting of shareholders, the corporation shall mail a further notice
to all shareholders who refrained from voting in favor of the proposed action.
If the proposed corporate action is to be taken without a vote of shareholders,
the corporation shall send to all shareholders who are entitled to dissent and
demand payment for their shares a notice of the adoption of the plan of
corporate action. The notice shall:
(1) State where and when a demand for payment must be
sent and certificates of certificated shares must be deposited in
order to obtain payment;
(2) Inform holders of uncertificated shares to what
extent transfer of shares will be restricted from the time that demand
for payment is received;
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(3) Supply a form for demanding payment which includes a
request for certification of the date on which the shareholder, or the
person on whose behalf the shareholder dissents, acquired beneficial
ownership of the shares; and
(4) Be accompanied by a copy of sections 30-1-80 and
30-1-81, Idaho Code. The time set for the demand and deposit shall be
not less than thirty (30) days from the mailing of the notice.
(e) A shareholder who fails to demand payment, or fails (in the
case of certificated shares) to deposit certificates, as required by a notice
pursuant to subsection (d) of this section shall have no right under this
section or section 30-1-80, Idaho Code, to receive payment for his shares. If
the shares are not represented by certificates, the corporation may restrict
their transfer from the time of receipt of demand for payment until
effectuation of the proposed corporate action, or the release of restrictions
under the terms of subsection (f) of this section. The dissenter shall retain
all other rights of a shareholder until these rights are modified by
effectuation of the proposed corporate action.
(f)(1) Within sixty (60) days after the date set for demanding
payment and depositing certificates, if the corporation has not effectuated the
proposed corporate action and remitted payment for shares pursuant to paragraph
(3) of this subsection, it shall return any certificates that have been
deposited, and release uncertificated shares from any transfer restrictions
imposed by reason of the demand for payment.
(2) When uncertificated shares have been released from
transfer restrictions, and deposited certificates have been returned,
the corporation may at any later time send a new notice conforming to
the requirements of subsection (d) of this section, with like effect.
(3) Immediately upon effectuation of the proposed
corporate action, or upon receipt of demand for payment if the
corporate action has already been effectuated, the corporation shall
remit to dissenters who have made demand and (if their shares are
certificated) have deposited their certificates, the amount which the
corporation estimates to be the fair value of the shares, with
interest if any has accrued. The remittance shall be accompanied by:
(i) The corporation's closing balance sheet and
statement of income fora fiscal year ending not more than sixteen (16)
months before the date of remittance, together with the latest
available interim financial statements;
(ii) A statement of the corporation's estimate of
fair value of the shares; and
(iii) A notice of the dissenter's right to demand
supplemental payment.
(g) (1) If the corporation fails to remit as required by subsection
(f) hereof, or if the dissenter believes that the amount remitted is less than
the fair value of his shares, or that the interest is not correctly determined,
he may send the corporation his own estimate of the value of the shares or of
the interest and demand payment of the deficiency.
(2) If the dissenter does not file such an estimate
within thirty (30)days after the corporation's mailing of its
remittance, he shall be entitled to no more than the amount remitted.
(h) (1) Within sixty (60) days after receiving a demand for payment
pursuant to subsection (g) hereof, if any such demands for payment remain
unsettled, the corporation shall file in an appropriate court a petition
requesting that the fair value of the shares and interest thereon be determined
by the court.
(2) An appropriate court shall be the district court in
the county of this state where the registered office of the
corporation is located. If, in the case of a merger or consolidation
or exchange of
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shares, the corporation is a foreign corporation without a registered
office in this state, the petition shall be filed in the county where
the registered office of the foreign corporation was last located. If
there is no known registered office, the petition may be filed in Ada
County, Idaho.
(3) All dissenters, wherever residing, whose demands have
not been settled shall be made parties to the proceeding as in an
action against their shares. A copy of the petition shall be served on
each such dissenter. If a dissenter is a nonresident, the copy may be
served on him by registered or certified mail or by publication as
provided by law.
(4) The jurisdiction of the court shall be plenary and
exclusive. The court may appoint one (1) or more persons as appraisers
to receive evidence and recommend a decision on the question of fair
value. The appraisers shall have such power and authority as shall be
specified in the order of their appointment or in any amendment
thereof. The dissenters shall be entitled to discovery in the same
manner as parties in other civil suits.
(5) All dissenters who are made parties shall be entitled
to judgment for the amount by which the fair value of their shares is
found to exceed the amount previously remitted, with interest.
(6) If the corporation fails to file a petition as
provided in paragraph(1) of this subsection (h), each dissenter who
made a demand and who has not already settled his claim against the
corporation shall be paid by the corporation the amount demanded by
him, with interest, and may sue therefor in an appropriate court.
(i) (1) The costs and expenses of any proceeding under subsection (h)
of this section, including the reasonable compensation and expenses of
appraisers appointed by the court, shall be determined by the court and
assessed against the corporation, except that any part of the costs and
expenses may be apportioned and assessed as the court may deem equitable
against all or some of the dissenters who are parties and whose action in
demanding supplemental payment the court finds to be arbitrary, vexatious, or
not in good faith.
(2) Fees and expenses of counsel and of experts for the
respective parties may be assessed as the court may deem equitable
against the corporation and in favor of any or all dissenters if the
corporation failed to comply substantially with the requirements of
this section, and may be assessed against either the corporation or a
dissenter, in favor of any other party, if the court finds that the
party against whom the fees and expenses are assessed acted
arbitrarily, vexatiously, or not in good faith in respect to the
rights provided by this section and section 30-1-80, Idaho Code.
(3) If the court finds that the services of counsel for
any dissenter were of substantial benefit to other dissenters
similarly situated and should not be assessed against the corporation,
it may award to counsel reasonable fees to be paid out of the amounts
awarded to the dissenters who were benefitted.
(j) (1) Notwithstanding the foregoing provisions of this section, the
corporation may elect to withhold the remittance required by subsection (f) of
this section from any dissenter with respect to shares of which the dissenter
(or the person on whose behalf the dissenter acts) was not the beneficial owner
on the date of the first announcement to news media or to shareholders of the
terms of the proposed corporate action. With respect to such shares, the
corporation shall, upon effectuating the corporate action, state to each
dissenter its estimate of the fair value of the shares, state the rate of
interest to be used (explaining the basis thereof), and offer to pay the
resulting amounts on receiving the dissenter's agreement to accept them in full
satisfaction.
(2) If the dissenter believes that the amount offered is
less than the fair value of the shares and interest determined
according to this section, he may within thirty (30) days after the
date of mailing of the corporation's offer, mail the corporation his
own estimate of fair value and interest, and demand their payment. If
the dissenter fails to do so, he shall be entitled to no more than the
corporation's offer.
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(3) If the dissenter makes a demand as provided in
paragraph (2) of this subsection (j), the provisions of subsections
(h) and (i) of this section shall apply to further proceedings on the
dissenter's demand.
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EXHIBIT E
PROPOSED AMENDMENT TO THE
CERTIFICATE OF INCORPORATION OF
CONSOLIDATED ECO-SYSTEMS, INC.
REGARDING CUMULATIVE VOTING
If Proposal No. 2 is approved by the shareholders and Proposal No. 3
is not approved, the Certificate of Incorporation of Consolidated Eco-Systems,
Inc. will be amended by adding TWELFTH as follows:
"TWELFTH: Each stockholder of the Corporation shall be entitled to as
many votes as shall equal the number of votes which he would be entitled to
cast for the election of directors with respect to his shares of stock
multiplied by the number of directors to be elected by him and that he may cast
all of such votes for a single director or may distribute them among the number
to be voted for, or any two or more as he may see fit."
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<PAGE> 99
EXHIBIT F
PROPOSED AMENDMENT TO THE
ARTICLES OF INCORPORATION OF
EXSORBET INDUSTRIES, INC.
REGARDING THE ISSUANCE OF PREFERRED
STOCK, PAR VALUE $.001 PER SHARE
If Proposal No. 2 is not approved by the shareholders of the Company
and Proposal No. 4 is so approved, the Articles of Incorporation of Exsorbet
Industries, Inc. will be amended by deleting Article V in its entirety and
replacing such with the following:
"V.
The total number of shares of stock which the Corporation shall have
authority to issue is 60,000,000 shares of capital stock, classified as (i)
10,000,000 shares of preferred stock, par value $.001 per share ("Preferred
Stock"), and (ii) 50,000,000 shares of common stock, par value $.001 per share
("Common Stock").
The designations and the powers, preferences, rights, qualifications,
limitations, and restrictions of the Preferred Stock and Common Stock are as
follows:
1. Provisions Relating to the Preferred Stock.
(a) The Preferred Stock may be issued from time to time
in one or more classes or series, the shares of each class or series to have
such designations and powers, preferences, and rights, and qualifications,
limitations, and restrictions thereof, as are stated and expressed herein and
in the resolution or resolutions providing for the issue of such class or
series adopted by the board of directors of the Corporation as hereafter
prescribed.
(b) Authority is hereby expressly granted to and vested
in the board of directors of the Corporation to authorize the issuance of the
Preferred Stock from time to time in one or more classes or series, and with
respect to each class or series of the Preferred Stock, to fix and state by the
resolution or resolutions from time to time adopted providing for the issuance
thereof the following:
(i) whether or not the class or series is to have voting
rights, full, special, or limited, or is to be without voting rights, and
whether or not such class or series is to be entitled to vote as a separate
class either alone or together with the holders of one or more other classes or
series of stock;
(ii) the number of shares to constitute the class or
series and the designations thereof;
(iii) the preferences, and relative, participating,
optional, or other special rights, if any, and the qualifications, limitations,
or restrictions thereof, if any, with respect to any class or series;
(iv) whether or not the shares of any class or series
shall be redeemable at the option of the Corporation or the holders thereof or
upon the happening of any specified event, and, if redeemable, the redemption
price or prices (which may be payable in the form of cash, notes, securities,
or other property), and the time or times at which, and the terms and
conditions upon which, such shares shall be redeemable and the manner of
redemption;
(v) whether or not the shares of a class or series shall
be subject to the operation of retirement or sinking funds to be applied to the
purchase or redemption of such shares for retirement, and, if such retirement
or
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<PAGE> 100
sinking fund or funds are to be established, the annual amount thereof, and the
terms and provisions relative to the operation thereof;
(vi) the dividend rate, whether dividends are payable in
cash, stock of the Corporation, or other property, the conditions upon which
and the times when such dividends are payable, the preference to or the
relation to the payment of dividends payable on any other class or classes or
series of stock, whether or not such dividends shall be cumulative or
noncumulative, and if cumulative, the date or dates from which such dividends
shall accumulate;
(vii) the preferences, if any, and the amounts thereof
which the holders of any class or series thereof shall be entitled to receive
upon the voluntary or involuntary dissolution of, or upon any distribution of
the assets of, the Corporation;
(viii) whether or not the shares of any class or
series, at the option of the Corporation or the holder thereof or upon the
happening of any specified event, shall be convertible into or exchangeable
for, the shares of any other class or classes or of any other series of the
same or any other class or classes of stock, securities, or other property of
the Corporation and the conversion price or prices or ratio or ratios or the
rate or rates at which such exchange may be made, with such adjustments, if
any, as shall be stated and expressed or provided for in such resolution or
resolutions; and
(ix) such other special rights and protective provisions
with respect to any class or series as may to the board of directors of the
Corporation seem advisable.
(c) The shares of each class or series of the Preferred
Stock may vary from the shares of any other class or series thereof in any or
all of the foregoing respects. The board of directors of the Corporation may
increase the number of shares of the Preferred Stock designated for any
existing class or series by a resolution adding to such class or series
authorized and unissued shares of the Preferred Stock not designated for any
other class or series. The board of directors of the Corporation may decrease
the number of shares of the Preferred Stock designated for any existing class
or series by a resolution subtracting from such class or series authorized and
unissued shares of the Preferred Stock designated for such existing class or
series, and the shares so subtracted shall become authorized, unissued, and
undesignated shares of the Preferred Stock.
2. Provisions Relating to the Common Stock.
(a) Each share of Common Stock of the Corporation shall
have identical rights and privileges in every respect. The holders of shares
of Common Stock shall be entitled to vote upon all matters submitted to a vote
of the stockholders of the Corporation and shall be entitled to one vote for
each share of Common Stock held.
(b) Subject to the prior rights and preferences, if any,
applicable to shares of the Preferred Stock or any series thereof, the holders
of shares of the Common Stock shall be entitled to receive such dividends
(payable in cash, stock, or otherwise) as may be declared thereon by the board
of directors at any time and from time to time out of any funds of the
Corporation legally available therefor.
(c) In the event of any voluntary or involuntary
liquidation, dissolution, or winding-up of the Corporation, after distribution
in full of the preferential amounts, if any, to be distributed to the holders
of shares of the Preferred Stock or any series thereof, the holders of shares
of the Common Stock shall be entitled to receive all of the remaining assets of
the Corporation available for distribution to its stockholders, ratably in
proportion to the number of shares of the Common Stock held by them. A
liquidation, dissolution, or winding-up of the Corporation, as such terms are
used in this Paragraph (c), shall not be deemed to be occasioned by or to
include any consolidation or merger of the Corporation with or into any other
corporation or corporations or other entity or a sale, lease, exchange, or
conveyance of all or a part of the assets of the Corporation.
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<PAGE> 101
3. General.
(a) Subject to the foregoing provisions of this
Certificate of Incorporation, the Corporation may issue shares of its Preferred
Stock and Common Stock from time to time for such consideration (not less than
the par value thereof) as may be fixed by the board of directors of the
Corporation, which is expressly authorized to fix the same in its absolute and
uncontrolled discretion subject to the foregoing conditions. Shares so issued
for which the consideration shall have been paid or delivered to the
Corporation shall be deemed fully paid stock and shall not be liable to any
further call or assessment thereon, and the holders of such shares shall not be
liable for any further payments in respect of such shares.
(b) The Corporation shall have authority to create and
issue rights and options entitling their holders to purchase shares of the
Corporation's capital stock of any class or series or other securities of the
Corporation, and such rights and options shall be evidenced by instrument(s)
approved by the board of directors of the Corporation. The board of directors
of the Corporation shall be empowered to set the exercise price, duration,
times for exercise, and other terms of such options or rights; provided,
however, that the consideration to be received for any shares of capital stock
subject thereto shall not be less than the par value thereof."
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<PAGE> 102
(EXSORBET LOGO) Proxy PROXY SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS
The undersigned hereby (a) acknowledges receipt of
the Notice of Annual Meeting of Stockholders of
Exsorbet Industries, Inc. to be held on December
Annual Meeting of 10, 1996 and the proxy statement in connection
Stockholders to be therewith, each dated November 14 1996, (b)
held December 10, 1996 appoints Dr. Edward L. Schrader and Sam Sexton III,
or either of them, as Proxies, each with the power
to appoint a substitute, (c) authorizes the Proxies
to represent and vote, as designated below, all the
shares of Common Stock of Exsorbet Industries, Inc.,
held of record by the undersigned on October 29,
1996 at such annual meeting and at any
adjournment(s) thereof, and (d) revokes any proxies
heretofore given.
1. Adoption and approval of the proposal to elect Charles E. Chunn, Jr;
James J. Connors; Sam Sexton III; Dr. Edward L. Schrader; Robert D. Vick;
and Larry Woodcock to the Board of Directors of Exsorbet Industries, Inc.
(the "Company").
[ ] FOR - all nominees listed above [ ] WITHHOLD AUTHORITY TO VOTE - for
all nominees listed above
To withhold authority to vote for any individual nominee(s), strike a line
through or otherwise strike the nominee(s) named in the list above.
To distribute your votes on a cumulative basis, write below the name(s) of the
nominee(s) you wish to vote for and the number of votes you wish to cast for
each.
- --------------------------------------------------------------------------------
2. Adoption and approval of the proposal to reincorporate the Company in
Delaware.
[ ] FOR [ ] AGAINST [ ] ABSTAIN FROM
3. Adoption and approval of the proposal to eliminate cumulative voting in
the election of directors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN FROM
(Continued and to be signed on reverse side)
(Continued from other side)
4. Adoption and approval of the proposal to authorize issuance of up to
10,000,000 shares of preferred stock, par value $.001 per share.
[ ] FOR [ ] AGAINST [ ] ABSTAIN FROM
5. Adoption and approval of the proposal to change the Company's name from
Exsorbet Industries, Inc. to Consolidated Eco-Systems, Inc.
6. Adoption and approval of Cooper, Shuffield & Company as the Company's
independent certified public accounts for fiscal year 1996.
7. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment(s) or
postponement(s) thereof.
[ ] FOR [ ] AGAINST [ ] ABSTAIN FROM
THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS INDICATED,
THIS PROXY WILL BE VOTED "FOR" EACH PROPOSAL.
IMPORTANT: Please date this proxy and sign exactly as
your name or names appear thereon. If stock is held
jointly, signature should include both names.
Executors, administrators, trustees, guardians and
others signing in the representative capacity, please
so indicate when signing.
DATED: , 1996
---------- ------------------------------------------
Signature
PLEASE SIGN, DATE AND
RETURN THIS PROXY
PROMPTLY IN THE ------------------------------------------
ACCOMPANYING ENVELOPE. Signature if held jointly
