SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT [X]
FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
CHECK THE APPROPRIATE BOX:
[ X ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as
permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c)
or Section 240.14a-12
GLADSTONE RESOURCES, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[ X ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-
6(I)(1) and 0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the amount
on which the fling fee is calculated and state how it was
determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided
by Exchange Act Rule 0-11(a)(2) and identify the
filing for which the offsetting fee was paid
previously. Identify the previous filing by
registration statement number, or the Form or Schedule
and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
GLADSTONE RESOURCES, INC.
3500 Oak Lawn Ave., Suite 590, LB 49
Dallas, TX 75219
------------------------
NOTICE OF 1999 ANNUAL MEETING OF SHAREHOLDERS
to be held June _____, 1999
------------------------
To the shareholders of Gladstone Resources, Inc.:
NOTICE IS HEREBY given that the 1999 Annual Meeting of
Shareholders (the "Meeting") of Gladstone Resources, Inc. (the
"Company") will be held at 3500 Oak Lawn Avenue, Suite 590,
Dallas, TX 75219 on June ______, 1999 at 10:00 a.m., for the
following purposes:
1. To elect five (5) Directors to serve until the 2000 Annual
Meeting of Shareholders and until their successors are duly
elected and qualified;
2. To approve a one-for-five reverse stock split (the "Reverse
Stock Split") of the Company's outstanding Common Stock;
3. To approve the merger of the Company into a wholly-owned
subsidiary of the Company to be organized under the laws of the
State of Delaware ("Gladstone-Delaware") in order to effect the
change of the Company's state of incorporation from Washington to
Delaware (the "Reincorporating"), pursuant to an Agreement and
Plan of Merger in the form attached as Exhibit A to the
accompanying proxy statement (the "Reincorporating Merger
Agreement"). Upon the consummation of the Reincorporating, the
Company shall continue its operations as a Delaware corporation;
4. In connection with the Reincorporating to approve and adopt
provisions of the Certificate of Incorporation of
Gladstone-Delaware ("Delaware Certificate") in the form attached
as Exhibit B to the attached proxy statement which provisions
would (i) authorize up to 10 million shares of Common Stock
("Delaware Certificate Proposal One"), (ii) authorize up to
5 million shares of a new class of undesignated Preferred Stock
("Blank Check Preferred Stock"), which would allow the Board of
Directors of the Company to issue, without further shareholder
action, one or more series of Preferred Stock, ("Delaware
Certificate Proposal Two"), (iii) require that all shareholder
actions be taken at a shareholders meeting ("Delaware Certificate
Proposal Three"), (iv) eliminate cumulative voting in the election
of directors ("Delaware Certificate Proposal Four"), (v) provide
that officers and directors of the Company shall receive indemnification
from the Company to the fullest extent permitted by Delaware law
("Delaware Certificate Proposal Five"),(vi) require the vote of the
holders of 66-2/3% of the voting power of the Company to amend the
provisions of (iii) and (v) above, or to amend or repeal the Delaware
Bylaws, if shareholders ever seek to amend or repeal the Delaware Bylaws
("Delaware Certificate Proposal Six", and together with the
foregoing proposals the "Delaware Certificate Proposals"); and
5. To transact such other business as may properly come before
the Meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on
June ____, 1999 as the record date for the determination of
shareholders entitled to notice of and to vote at the Meeting or
any adjournments thereof.
A list of shareholders of the Company entitled to notice of and
to vote at the Meeting will be available for examination at the
Meeting and during ordinary business hours from June __, 1999 to
the date of the Meeting at the principal offices of the Company
at the address set forth above.
You are cordially invited to attend the Meeting.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING
REGARDLESS OF THE NUMBER OF SHARES YOU HOLD. YOU ARE INVITED TO
ATTEND THE MEETING IN PERSON, BUT WHETHER OR NOT YOU PLAN TO
ATTEND, PLEASE COMPLETE, DATE, SIGN AND RETURN THE ACCOMPANYING
PROXY IN THE ENCLOSED ENVELOPE. IF YOU DO ATTEND THE MEETING, YOU
MAY, IF YOU PREFER, REVOKE YOUR PROXY AND VOTE YOUR SHARES IN
PERSON.
By Order of the Board of Directors,
Sheila Irons
SECRETARY
June ___, 1999
TABLE OF CONTENTS
Page
INTRODUCTION............................................. 1
THE MEETING.............................................. 1
TIME, DATE AND PLACE OF MEETING......................... 1
RECORD DATE AND OUTSTANDING SHARES...................... 1
INTENTIONS TO VOTE...................................... 2
VOTING OF PROXIES; REVOCATION........................... 2
VOTE REQUIRED; DISSENTERS RIGHTS........................ 2
PROXY SOLICITATION AND EXPENSES......................... 3
ELECTION OF DIRECTORS (ITEM 1) AND MANAGEMENT
INFORMATION............................................. 4
DIRECTORS............................................... 4
MEETINGS OF THE BOARD OF DIRECTORS...................... 5
DIRECTORS FEES.......................................... 5
BENEFICIAL OWNERSHIP OF FIVE PERCENT OR
GREATER SHAREHOLDERS................................... 5
BENEFICIAL OWNERSHIP OF DIRECTORS AND
EXECUTIVE OFFICERS..................................... 6
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.......... 6
EXECUTIVE COMPENSATION.................................. 7
OPTION/SAR GRANTS IN LAST FISCAL YEAR................... 7
AGGREGATED OPTION/SAR EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR END OPTION/SAR VALUES...... 7
LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR..... 8
EMPLOYMENT CONTRACTS AND TERMINATION OF
EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS.......... 8
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT....... 8
REVERSE STOCK SPLIT (ITEM 2)............................. 8
GENERAL................................................. 8
REASONS FOR THE REVERSE STOCK SPLIT..................... 8
EFFECT OF THE REVERSE STOCK SPLIT....................... 9
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS............... 9
REINCORPORATING PROPOSAL (ITEM 3)........................ 10
GENERAL................................................. 10
PRINCIPAL FEATURES OF THE REINCORPORATING
AND THE MERGER......................................... 11
PRINCIPAL REASONS FOR THE REINCORPORATING............... 11
POSSIBLE DISADVANTAGES OF REINCORPORATING............... 12
AMENDMENT, DEFERRAL OR TERMINATION OF THE
REINCORPORATING MERGER AGREEMENT....................... 13
FEDERAL INCOME TAX CONSQUENCES OF THE
REINCORPORATING........................................ 13
EXCHANGE OF STOCK CERTIFICATES........................... 13
DISSENTERS' RIGHTS....................................... 14
ADOPTION OF DELAWARE CERTIFICATE PROPOSALS (ITEM 4)...... 15
DELAWARE CERTIFICATE PROPOSAL ONE:
INCREASE IN AUTHORIZED CAPITAL STOCK.................... 16
GENERAL................................................. 16
PRINCIPAL REASONS FOR AUTHORIZATION..................... 16
POSSIBLE DISADVANTAGES.................................. 16
DELAWARE CERTIFICATE PROPOSAL TWO:
AUTHORIZATION OF BLANK CHECK PREFERRED.................. 16
GENERAL................................................. 16
I
PRINCIPAL REASONS FOR AUTHORIZATION..................... 16
POSSIBLE DISADVANTAGES OF AUTHORIZATION................. 17
DELAWARE CERTIFICATE PROPOSAL THREE:
ELIMINATION OF SHAREHOLDER CONSENTS...................... 17
GENERAL................................................. 17
REASONS FOR PROPOSAL.................................... 17
POSSIBLE DISADVANTAGES OF PROPOSAL...................... 18
DELAWARE CERTIFICATE PROPOSAL FOUR:
ELIMINATION OF CUMULTIVE VOTING......................... 18
GENERAL................................................. 18
REASONS FOR PROPOSAL.................................... 18
POSSIBLE DISADVANTAGES OF PROPOSAL...................... 18
DELAWARE CERTIFICATE PROPOSAL FIVE:
INDEMNIFICATION......................................... 19
DELAWARE CERTIFICATE PROPOSAL SIX:
SUPERMAJORITY VOTING REQUIREMENTS TO AMEND OR
REPEAL CERTAIN PROVISIONS OF THE CERTIFICATE
OF INCORPORATION OR BYLAWS.............................. 19
INTERESTED PARTIES....................................... 19
MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED SHAREHOLDER MATTERS............................. 20
MARKET FOR COMMON STOCK................................. 20
DIVIDENDS............................................... 20
HOLDERS OF RECORD....................................... 20
INCORPORATION OF CERTAIN
INFORMATION BY REFERENCE................................ 20
SHAREHOLDER PROPOSALS.................................... 20
OTHER MATTERS............................................ 20
EXHIBIT A - REINCORPORATING MERGER AGREEMENT
EXHIBIT B - CERTIFICATE OF INCORPORATION OF GLADSTONE - DELAWARE
EXHIBIT C - WBCA DISSENTERS' RIGHTS
EXHIBIT D - COMPARISON OF WASHINGTON AND DELAWARE CORPORATE LAW
II
PROXY STATEMENT
---------------------
GLADSTONE RESOURCES, INC.
3500 OAK LAWN AVE., SUITE 590, LB 49
DALLAS, TEXAS 75219
------------------------
1999 ANNUAL MEETING OF SHAREHOLDERS
JUNE ____, 1999
------------------------
INTRODUCTION
This Proxy Statement is furnished in connection with the
solicitation of proxies on behalf of the Board of Directors of
Gladstone Resources, Inc., a Washington corporation (the
"Company" or "Gladstone"), for use at the 1999 Annual Meeting of
Shareholders (the "Meeting") to be held at 3500 Oak Lawn, Suite
590, Dallas, Texas 75219, on June ___, 1999 at 10:00 a.m., and
at any adjournments thereof.
This Proxy Statement, the accompanying proxy card and the
Annual Report of the Company are first being mailed on or about
June ___, 1999, to all shareholders of the Company. Although the
Annual Report and this Proxy Statement are being mailed together,
the Annual Report shall not be deemed a part of this Proxy
Statement.
At the Meeting, the Company's shareholders will vote upon
(i) the election of five (5) directors of the Company to serve
until the next annual meeting of shareholders; (ii) a proposal to
effect a one-for-five reverse stock split of the Company's
outstanding Common Stock (the "Reverse Stock Split"); (iii) a
proposal to reincorporate the Company in Delaware (the
"Reincorporating"); (iv) certain proposals to adopt provisions of
the Certificate of Incorporation of Gladstone-Delaware (the
"Delaware Certificate"); and (v) such other business as may
properly come before the meeting or any adjournments thereof.
The Board of Directors of the Company has nominated the five
(5) directors presented in this proxy statement for election and
has approved the Reverse Stock Split, the Reincorporating, each
proposal to adopt provisions of the Delaware Certificate (the
"Delaware Certificate Proposals") and recommends that holders of
Common Stock vote "FOR" the election of the five (5) nominees for
election as directors and "FOR" the approval of the Reverse Stock
Split, the Reincorporating, and the Delaware Certificate
Proposals.
THE MEETING
Time, Date and Place of Meeting
This Proxy Statement is being furnished in connection with
the solicitation of proxies by the Board of Directors of the
Company for use at the Meeting of Shareholders to be held at
10:00 a.m. on June ____, 1999 at 3500 Oak Lawn Avenue, Suite 590,
Dallas, Texas 75219.
Record Date and Outstanding Shares
The Board of Directors of the Company has fixed the close of
business on June ___, 1999 as the record date (the "Record Date")
for the determination of shareholders entitled to notice of, and
to vote at, the Meeting or any adjournment thereof. Accordingly,
only holders of record of the Company's Common Stock, no par
value per
1
share (the "Common Stock"), at the close of business on the
Record Date will be entitled to vote at the Meeting, either by
proxy or in person. As of the Record Date, there were 4,244,060
shares of Common Stock of the Company outstanding. Each share of
Common Stock entitles the holder to one vote. There is no
cumulative voting and there are no other voting securities of the
Company outstanding.
Intentions to Vote
The members of the Board of Directors and the executvie officers
of the Company, which hold an aggregate of 70.29% of the outstanding
shares of Common Stock of the Company, have indicated to the Company
that they intend to vote their shares for the five (5) nominees for
director and for the Reverse Stock Split, the Reincorporating and the
Delaware Certificate Proposals. As of the Record Date, the total number
of shares of Common Stock which the Board and the executive officers
has indicated a desire to vote equals 2,983,062 shares of Common Stock.
See "Ownership of Common Stock by Management."
Voting of Proxies; Revocation
All properly executed proxies received by the Company prior
to the Meeting and not revoked will be voted in accordance with
the instructions marked thereon. Unless instructions to the
contrary are marked thereon, proxies will be voted "FOR" the
election as directors of those persons named below, "FOR" the
Reverse Stock Split, "FOR" the Company's proposed Reincorporating
and "FOR" the adoption of each of the Delaware Certificate
Proposals. The Board of Directors of the Company knows of no
business other than that mentioned herein, which will be
presented for consideration at the Meeting. If any other matter
is properly presented, it is the intention of the persons named
in the enclosed proxy to vote in accordance with their best
judgment. Any shareholder may revoke his or her proxy at any time
prior to the exercise thereof by giving written notice to the
Secretary of the Company at the Company's address indicated
above, by submitting a duly executed proxy bearing a later date,
or by attending the Annual Meeting and expressing a desire to
vote in person. Attendance at the Meeting will not, in itself,
constitute revocation of a proxy.
Vote Required; Dissenters Rights
A majority of the outstanding Common Stock must be
represented in person or by proxy at the Meeting in order to
constitute a quorum for the transaction of business. Pursuant to
the Washington business corporation act ("WBCA"), directors shall be elected
by plurality vote at each annual meeting of shareholders and accordingly
abstentions and broker non-votes will have no effect on the election of
directors. Shareholders are entitled to cumulate their votes in the election
of directors. A broker non-vote occurs if a broker or other nominee does
not have discretionary authority and has not received instructions with respect
to a particular item. Under cumulative voting, each shareholder is entitled
to cast as many votes as shall equal the number of shares held by
the shareholder multiplied by the number of directors to be
elected, and such votes may all be cast for a single director or
may be distributed among the directors to be elected as the
shareholder wishes. If a shareholder desires to cumulate his or
her votes, the accompanying proxy should be marked to indicate
clearly that the shareholder desires to exercise the right to
cumulate votes and to specify how the votes are to be allocated
among the nominees for directors. For example, a shareholder may
write "cumulate" on the accompanying proxy card and write below
the name of the nominee or nominees for whom the shareholder
desires to cast votes the number of votes to be cast for such
nominee or nominees. Alternatively, without exercising his or her
right to vote cumulatively, a shareholder may instruct the proxy
holders not to vote for one or more of the nominees by writing in
the space provided on the accompanying proxy card for withholding
authority to vote for a nominee the nominee name. If
the accompanying proxy card is not marked with respect to the
election of directors, authority will be granted to the persons
named in the accompanying proxy card to cumulate votes if they so
choose and to allocate votes among the nominees in such a manner
as they determine is necessary in order to elect all or as many
of the nominees as possible.
The Reverse Stock Split must be approved by the affirmative
vote of the holders of a majority of the outstanding shares of
Common Stock. The Reincorporating and the Delaware Certificate
Proposals must be approved by the affirmative vote of the holders
of two thirds (2/3) of the outstanding shares of Common Stock.
Abstentions and broker non-votes will have the effect of a "no"
vote with respect to the approval of the Reverse Stock Split, the
Reincorporating and the Delaware Certificate Proposals. A broker
non-vote occurs if a broker or other nominee does not have
discretionary authority and has not received instructions with
respect to a particular item. Pursuant to the WBCA, holders of
Company Common Stock who do not vote in favor of the
Reincorporating
2
and holders of less than five shares of the Common Stock who do
not vote in favor of the Reverse Stock Split and comply with the
detailed provisions contained in Chapter 23B.13 of the WBCA will
be entitled to dissent and seek the payment of the fair value of
their shares of Gladstone-Washington. See "Dissenters Rights." A
copy of Chapter 23B.13 of the WBCA is reproduced as Exhibit C to
this Proxy Statement. Shareholders desiring to dissent should
read such materials carefully. A vote for those proposals will
result in a waiver of any shareholder's dissenters' rights. A
vote against those proposals without otherwise complying with the
additional notice and other provisions of Chapter 23B.13 of the
WBCA will not effectively exercise a dissenting shareholder's
dissenters' rights. BECAUSE AN EXECUTED PROXY CARD WILL BE VOTED
FOR THE APPROVAL AND ADOPTION OF THE PROPOSALS UNLESS OTHERWISE
SPECIFIED, A SHAREHOLDER RETURNING A SIGNED BUT UNMARKED PROXY
CARD WILL WAIVE HIS OR HER RIGHT TO DISSENT FROM THE
REINCORPORATING OR, IF APPLICABLE, THE REVERSE STOCK SPLIT.
Proxy Solicitation and Expenses
The accompanying proxy is being solicited on behalf of the
Board of Directors of the Company. All expenses of this
solicitation, including the cost of preparing, assembling, and
mailing this proxy soliciting material and Notice of Meeting of
Shareholders, will be paid by the Company. Solicitation of
holders of Common Stock by mail, telephone, facsimile or by
personal solicitation may be done by directors, officers and
regular employees of the Company, for which they will receive no
additional compensation. Brokerage houses and other nominees,
fiduciaries and custodians nominally holding shares of Common
Stock as of the Record Date will be requested to forward proxy
soliciting material to the beneficial owners of such shares, and
will be reimbursed by the Company for their reasonable out-of-
pocket expenses.
3
ELECTION OF DIRECTORS (ITEM 1) AND MANAGEMENT INFORMATION
Directors
Five directors are to be elected at the Meeting, to serve
until the Company's next annual meeting of shareholders and until
their respective successors are elected and qualified, or until
their earlier resignation or removal.
The following table sets forth certain information for each
nominee and present director of the Company. Each of the nominees
for director named in the following table is now serving as a
director of the Company and was appointed to the Board of
Directors in March, 1999. There is no family relationship between
any of the directors or between any director and any executive
officer of the Company.
NAME AGE POSITION WITH THE COMPANY
--------------- --- -------------------------------------------
Johnathan M. Hill 49 President, Chief Executive Officer and
Director
Charles B. Humphrey 43 Director
H. Wayne Gifford 61 Director
Katherine R. Murphy 42 Treasurer, Assistant Secretary and Director
Fred Oliver 74 Director
Johnathan M. Hill has served as President, Chief Executive
Officer and a director of Gladstone since March 1999. Mr. Hill
also is the President of Hill & Hill Production Company, an oil
and gas production company, the Secretary and Treasurer of Hill
Energy Company, an oil and gas investment company, and the Vice
President of HPC Operating Company, an oil and gas operating
company, all based in Dallas, Texas, positions he has held since
1985.
Charles B. Humphrey has served as a director of the Company
since March, 1999. Mr. Humphrey also is the President, Treasurer,
and sole Director of Humphrey Oil Corporation, an oil and gas
exploration company based in Dallas, Texas, and the President and
a Director of Lindenshire, Inc., a real estate development
company based in Dallas, Texas, positions he has held since 1984.
Mr. Humphrey also has been engaged in real estate development and
investment individually and through numerous other partnerships,
joint ventures and corporations since 1984.
H. Wayne Gifford has served as a director of Gladstone since
March, 1999. Mr. Gifford also is the President and a Director of
Gifford Operating Company, an oil and gas operating company based
in Dallas, Texas, positions he has held since 1987. Mr. Gifford
has also been active as an independent geological consultant
since 1980.
Katherine R. Murphy has served as Treasurer, Assistant
Secretary and a director of Gladstone since March, 1999. Ms.
Murphy also is the Vice President and Assistant Secretary of
Humphrey Oil Corporation, a position she has held since 1989.
4
Fred Oliver has served as a director of Gladstone since
March, 1999. Mr. Oliver also is the President of Petroleum
Ventures of Texas, Inc., an oil and gas investment company based
in Dallas, Texas, positions he has held since 1975. Mr. Oliver
also has been engaged in geological and engineering consulting
since 1953.
Unless authority to vote for one or more nominees is
withheld, the enclosed proxy will be voted "FOR" the election of
all of the nominees listed below. Although the Board of Directors
does not contemplate that any of the nominees will be unable to
serve, if such a situation arises prior to the Meeting, the
persons named in the enclosed proxy will vote for the election of
such other person(s) as may be nominated by the Board of
Directors.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT THE SHAREHOLDERS
VOTE FOR EACH OF THE FIVE NOMINEES NAMED ABOVE.
Meetings of the Board of Directors
The Board of Directors acted by unanimous written consent on
one occasion during the fiscal year ended December 31, 1998. The
Board of Directors did not have an audit, compensation, executive
or other committee during the fiscal year ended December 31,
1998.
Directors Fees
During the fiscal year ended December 31, 1998, the
directors were not paid any fees for services as a director or
attendance at meetings of the Board of Directors. On April 19,
1999, the Board of Directors of the Company has approved a fee of
$250 for each meeting attended by a director.
Beneficial Ownership of Five Percent or Greater Shareholders
The following table sets forth beneficial owners of five
percent or more of the Company's outstanding shares of Common
Stock known to the Company as of March 31, 1999. All shares
shown in the table reflect sole voting and investment power
unless otherwise indicated.
Number of
Shares Percent
Name and address Beneficially of Total
of beneficial owner Owned(1) Shares
- --------------------------------- ---------- ---------------
Charles B. Humphrey 1,080,819 25.47%
3500 Oak Lawn, Suite 590, LB 49
Dallas, TX 75219
Johnathan M. Hill 1,080,819 25.47
3500 Oak Lawn, Suite 590, LB 49
Dallas, TX 75219
Sheila Irons, Individually and as Trustee of
Humphrey Children's Trust 302,630(2) 7.13
3500 Oak Lawn, Suite 590, LB 49
Dallas, TX 75219
Fred Oliver 259,397 6.11
4625 Greenville Ave., Suite 205
Dallas, TX 75206
David Tyrrell, individually and as Trustee of
the Katherine Desporte Tyrrell Trust 216,164(3) 5.09
4625 Greenville Ave., Suite 203
Dallas, TX 75206
____________________
(1) Based upon the joint Schedule 13D filed January 29, 1999 by Mr. Charles B.
Humphrey, Mr. Johnathan M. Hill, Mr. Fred Oliver, Mr. David Tyrrell, Mr. H.
Wayne Gifford, Ms. Katherine R. Murphy and Ms. Sheila Irons (the "Group")
as a group and certain of the members of the Group individually. Each
member
5
of the Group disclaims beneficial ownership of the shares of Common Stock
held by the Group or any other member of the Group.
(2) Includes 216,164 Shares held by Humphrey Children's Trust. Ms. Irons
disclaims beneficial ownership of the shares of Common Stock held by the
Humphrey Children's Trust.
(3) Includes 108,082 shares held by Katherine Desporte Tyrrell Trust. Mr.
Tyrrell disclaims beneficial ownership of the shares of Common Stock held
by the Katherine Desporte Tyrrell Trust.
Beneficial Ownership of Directors and Executive Officers
The following table sets forth the number of shares of
Common Stock beneficially owned by each director of the Company,
each executive officer of the Company and all directors and
executive officers as a group as of March 31, 1999. All shares
shown in the table reflect sole voting and investment power
unless otherwise indicated.
Number of
Shares Percent
Name and address of Beneficially of Total
beneficial owner Owned(1) Shares(1)
- --------------------------------- ---------- --------
Directors and Executive Officers
Charles B. Humphrey 1,080,819 25.47%
3500 Oak Lawn, Suite 590, LB 49
Dallas, TX 75219
Johnathan M. Hill 1,080,819 25.47
3500 Oak Lawn, Suite 590, LB 49
Dallas, TX 75219
Fred Oliver 259,397 6.11
4625 Greenville Ave., Suite 205
Dallas, TX 75206
H. Wayne Gifford 172,931 4.07
4625 Greenville Ave., Suite 203
Dallas, TX 75206
Katherine R. Murphy 86,466 2.04
3500 Oak Lawn, Suite 590, LB 49
Dallas, TX 75219
Sheila Irons, Individually and as Trustee
of Humphrey Children's Trust
3500 Oak Lawn, Suite 590, LB 49
Dallas, TX 75206 302,630 7.13
Directors and Executive Officers as a Group
(6 individuals) 2,983,062 70.29
_____________________
(1) Based upon the joint Schedule 13D filed January 29, 1999 by Mr. Charles B.
Humphrey, Mr. Johnathan M. Hill, Mr. Fred Oliver, Mr. David Tyrrell, Mr. H.
Wayne Gifford, Ms. Katherine R. Murphy and Ms. Sheila Irons (the "Group")
as a group and certain of the members of the Group individually. Each
member of the Group disclaims beneficial ownership of the shares of Common
Stock held by the Group or any other member of the Group.
Certain Relationships and Related Transactions
Pursuant to certain operating agreements by and between the
Company and Mr. Edward B. Brooks, Jr., the President and a
director of the Company during the fiscal year ended December 31,
1998, Mr. Brooks serves as the operator of certain of the
Company's oil and gas interests. Pursuant to such operating
agreements, the Company
6
paid the following described amounts to Mr. Brooks in 1997 and
1998 and Mr. Brooks paid the following described amounts to the
Company in 1997 and 1998.
Mr. Brooks paid the Company $90,802 and $72,602,
respectively, in 1997 and 1998 as the Company's share of gas
sales from properties in Schleicher County. The Company paid
Mr. Brooks $68,881 and $52,306, respectively, in 1997 and 1998
for the Company's share of operating costs on properties in Kent
County and Schleicher County. In 1998, the Company also paid
Mr. Brooks $4,734 for the Company's share of operating expenses
on the Schleicher and Kent County properties that were paid by
Mr. Brooks in 1997.
In 1997, the Company paid Mr. Brooks $228,472 for the
Company's share of the cost of a seismic study on properties in
Stonewall County and the cost of drilling two wells in other
counties in Texas, which turned out to be non-productive. In
1998, the Company paid Mr. Brooks $18,915 for the Company's share
of the seismic study on properties in Stonewall County and
$37,591 for the Company's share of the cost of drilling a well in
Stonewall County that was nonproductive. In 1998, the Company
paid $24,335 to Mr. Brooks for the Company's share of lease costs
of properties in Stonewall County.
In 1997 and 1998, the Company reimbursed Mr. Brooks $1,769
and $1,159, respectively, for expenses incurred by him in
operating a Company owned vehicle that was provided to him for
Company business.
Executive Compensation
The table below includes compensation paid by the Company
for services rendered in fiscal 1998, 1997 and 1996 to Mr. Edward
B. Brooks, Jr., the former President and Chief Executive Officer
of the Company. None of the other executive officers of the
Company had total salary and bonus in excess of $100,000 during
the fiscal year ended December 31, 1998.
Long-Term
Compensation
Annual Compensation Awards
------------------------------------------- -----------
Securities All Other
Name and Principal Other Annual Underlying Compensation
position Year Salary($) Bonus($) ($) Compensation Options(#) ($)
- -------------------- ---- --------- -------- --- ------------ -------- ----------
Edward B. Brooks, Jr. 1998 0 --- (1) --- --- ---
President and CEO 1997 0 --- (1) --- --- ---
1996 0 --- (1) --- --- ---
_______________
(1) The Company provided Mr. Brooks a vehicle for Company business. The
Company's depreciation expense for 1996, 1997 and 1998 for the vehicle was
$3,060, $4,900 and $2,664, respectively. The Company also reimbursed
Mr. Brooks $1,769 and $1,159 in 1997 and 1998, respectively, for costs
incurred by Mr. Brooks in connection with the operation of such vehicle.
Option/SAR Grants in Last Fiscal Year
No stock options or stock appreciation rights were granted to the President
by the Company during fiscal 1998.
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year End
Option/SAR Values
No stock options or stock appreciation rights were exercised by the
President in fiscal 1998, and no stock options or stock appreciation rights were
outstanding at the end of fiscal 1998.
7
Long-Term Incentive Plan Awards in Last Fiscal Year
The Company did not have any long-term incentive plans in effect during
fiscal 1998.
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements
The Company does not have any employment agreements with any of its
officers.
Compliance With Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers and persons who own more than 10%
of the Company's common stock to file with the Securities and Exchange
Commission ("SEC") initial reports of ownership and reports of changes in
ownership of common stock and other equity securities of the Company. Officers,
directors and greater than 10% shareholders are required by SEC regulations to
furnish the Company with copies of all Section 16(a) reports they file. To the
Company's knowledge, based solely on the review of the copies of such reports
filed during the fiscal year ended December 31, 1998, all required Section 16(a)
filings were made.
REVERSE STOCK SPLIT (ITEM 2)
General
The Board of Directors of the Company has approved a proposal to amend the
Company's Restated Certificate of Incorporation (the "Restated Certificate") to
effect a one-for-five reverse stock split of the Company's outstanding Common
Stock, subject to the approval of the Company's shareholders. This proposal
provides for the combination and reclassification of the presently issued and
outstanding shares of Common Stock, into a smaller number of shares of identical
Common Stock, on the basis of one share of Common Stock for each five shares of
Common Stock previously issued and outstanding (the "Reverse Stock Split").
Except as may result from the payment of cash for fractional shares resulting
from the Reverse Stock Split and as to those shareholders owning fewer than five
shares, each shareholder will hold the same percentage of Common Stock
outstanding immediately following the Reverse Stock Split as each shareholder
did immediately prior to the Reverse Stock Split. If approved by the Company's
shareholders as provided herein, the Reverse Stock Split will be effected by
filing the following amendment to Article Sixth of the Company's Restated
Certificate (the "Reverse Stock Split Amendment").
"Upon the filing of this Amendment to the Restated Certificate of
Incorporation (the "Effective Time"), each five shares of the
corporation's Common Stock theretofore outstanding shall, without any
action on the part of the holder thereof, be automatically converted
into one share of the corporation's Common Stock, provided that no
fractional shares shall be issued and in lieu thereof, each holder of
Common Stock who holds any number of shares of Common Stock not evenly
divisible by five immediately prior to the Effective Time will be
entitled to receive cash in the sum of such holder's post split
fractional interest multiplied by $1.00."
At the Effective Time, each five shares of Common Stock issued and
outstanding will automatically be reclassified and converted into one of share
of Common Stock. Fractional shares of Common Stock will not be issued as a
result of the Reverse Stock Split. Shareholders entitled to receive a fractional
share of Common Stock as a consequence of the Reverse Stock Split will, instead,
be entitled to receive cash in the sum of such shareholder's post split
fractional interest multiplied by $1.00.
Reasons For The Reverse Stock Split
The primary purpose of the Reverse Stock Split is to increase the per share
value of the Company's Common Stock. The higher per share value of the Common
Stock will bring the Company closer to meeting listing standards of the Nasdaq
Stock Market. The Board of Directors also believes that the current low per
share
8
price of the Common Stock has or may have a negative effect on the Company's
ability to use the Common Stock in connection with possible future transactions
such as financings, strategic alliances, acquisitions and other uses not
presently determinable.
For the above reasons, the Company believes that the Reverse Stock Split is
in the best interests of the Company and its shareholders. However, there can be
no assurances that the Reverse Stock Split will have the desired consequences.
Effect Of The Reverse Stock Split
Subject to shareholder approval, the Reverse Stock Split will be effected
by filing the Reverse Stock Split Amendment to the Company's Restated
Certificate and will be effective immediately upon such filing. Although the
Company expects to file the Reverse Stock Split Amendment with the Washington
Secretary of State's office promptly following approval at the Annual Meeting of
Shareholders, the actual timing of such filing will be determined by the
Company's management based upon their evaluation as to when such action will be
most advantageous to the Company and its shareholders. The Company reserves the
right to forego or postpone filing the Reverse Stock Split Amendment if such
action is determined to be in the best interests of the Company and its
shareholders.
Each of the Company's shareholders who owns five or more shares of Common
Stock will continue to own one or more shares of Common Stock and will continue
to share in the assets and future growth of the Company as a shareholder. Each
shareholder that owns five or more shares of Common Stock will own that number
of shares as equals 1/5th as many shares as such shareholder owned before the
Reverse Stock Split, subject to the adjustment for fractional shares, in which
case such shareholder shall receive cash in lieu of such fractional share. Each
shareholder that owns fewer than five shares of Common Stock will have such
shareholder's fractional share of Common Stock paid in cash.
The Reverse Stock Split will also result in some shareholders owning "odd
lots" of less than 100 shares of Common Stock received as a result of the
Reverse Stock Split. Brokerage commissions and other costs of transactions in
odd lots may be higher, particularly on a per-share basis, than the cost of
transactions in even multiples of 100 shares.
The Company is currently authorized to issue Six Million (6,000,000) shares
of Common Stock of which Four Million Two Hundred Forty-Four Thousand Sixty
(4,244,060) shares were issued and outstanding at the close of business on the
record date.
Adoption of the Reverse Stock Split will reduce the shares of Common Stock
outstanding on June ____, 1999, the record date, from Four Million Two Hundred
Forty-Four Thousand Sixty (4,244,060) to approximately 848,812, but will not
affect the number of authorized shares of Common Stock. (However, such number
of authorized shares will be increased if Delaware Certificates Proposal One is
adopted.) After the Reverse Stock Split, the Company estimates that it will have
approximately the same number of shareholders.
Certain Federal Income Tax Considerations
The following discussion describes certain material federal income tax
considerations relating to the Reverse Stock Split. This discussion is based
upon the Internal Revenue Code of 1986, as amended (the "Code"), existing and
proposed regulations thereunder, legislative history, judicial decisions, and
current administrative rulings and practices, all as amended and in effect on
the date hereof. Any of these authorities could be repealed, overruled, or
modified at any time. Any such change could be retroactive and, accordingly,
could cause the tax consequences to vary substantially from the consequences
described herein. No ruling from the Internal Revenue Service (the "IRS") with
respect to the matters discussed herein has been requested, and there is no
assurance that the IRS would agree with the conclusions set forth in this
discussion.
9
This discussion may not address certain federal income tax consequences
that may be relevant to particular shareholders in light of their personal
circumstances (such as persons subject to the alternative minimum tax) or to
certain types of shareholders (such as dealers in securities, insurance
companies, foreign individuals and entities, financial institutions, and tax-
exempt entities) who may be subject to special treatment under the federal
income tax laws. This discussion also does not address any tax consequences
under state, local or foreign laws.
SHAREHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS AS TO THE PARTICULAR
TAX CONSEQUENCES OF THE REVERSE STOCK SPLIT FOR THEM, INCLUDING THE
APPLICABILITY OF ANY STATE, LOCAL OR FOREIGN TAX LAWS, CHANGES IN APPLICABLE TAX
LAWS AND ANY PENDING OR PROPOSED LEGISLATION.
The Reverse Stock Split is intended to be a tax-free re-capitalization to
the Company and its shareholders, except for those shareholders who receive cash
in lieu of a fractional share. Shareholders will not recognize any gain or loss
for federal income tax purposes as a result of the Reverse Stock Split, except
for those shareholders receiving cash in lieu of a fractional share (as
described below). The holding period for shares of Common Stock after the
Reverse Stock Split will include the holding period of shares of Common Stock
before the Reverse Stock Split, provided that such shares of Common Stock are
held as a capital asset at the Effective Time. The adjusted basis of the shares
of Common Stock after the Reverse Stock Split will be the same as the adjusted
basis of the shares of Common Stock before the Reverse Stock Split excluding the
basis of fractional shares.
A shareholder who receives cash in lieu of fractional shares will be
treated as if the Company has issued fractional shares to such shareholder and
then immediately redeemed such shares for cash. Such shareholder would
generally recognize gain or loss, as the case may be, measured by the difference
between the amount of cash received and the basis of such shareholder's shares
(prior to the Reverse Stock Split) allocable to such fractional share.
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE REVERSE STOCK SPLIT AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THIS PROPOSAL.
REINCORPORATING PROPOSAL (ITEM 3)
General
The Board of Directors of the Company has approved and recommends that the
shareholders approve the proposed merger of the Company into a wholly owned
subsidiary to be incorporated under the laws of the State of Delaware for the
purpose of changing the Company's state of incorporation from the State of
Washington to the State of Delaware (the "Reincorporating"). The Board of
Directors believes that the Reincorporating will result in significant
advantages as more fully described in the section entitled "Principal Reasons
For The Reincorporating And The Merger" below.
The following discussion summarizes certain aspects of the proposed
Reincorporating of the Company from the State of Washington to the State of
Delaware pursuant to the Agreement and Plan of Merger (the "Reincorporating
Merger Agreement") between the Company and a wholly owned subsidiary to be
incorporated under the laws of the State of Delaware ("Gladstone-Delaware").
This summary is not intended to be complete and is subject to, and qualified in
its entirety by, reference to (i) the "Comparison Of Washington And Delaware
Corporate Law" attached as Exhibit D to this Proxy Statement, (ii) the
Reincorporating Merger Agreement, a copy of which is attached to this Proxy
Statement as Exhibit A, (iii) the Certificate of Incorporation of Gladstone-
Delaware ("Delaware Certificate"), a copy of which is attached to this Proxy
Statement as Exhibit B, and (iv) the WBCA Dissenters' Rights Statute, a copy of
which is attached to this Proxy Statement as Exhibit C. Copies of the Restated
Articles of Incorporation of the Company ("Washington Articles") are available
for inspection at the principal executive office of the Company and copies will
be sent to shareholders, without charge, upon oral or written request directed
to Gladstone Resources, Inc., 3500 Oak Lawn, Suite 590, LB 49, Dallas, Texas
75219, Attention:
10
Corporate Secretary, (214) 528-9710. In this discussion of the Reincorporating,
the terms "Company" or "Gladstone-Washington" refer to the existing Washington
corporation and the term "Gladstone -Delaware" refers to the new Delaware
corporation which is the proposed successor to Gladstone-Washington.
Principal Features Of The Reincorporating and The Merger
The Reincorporating will be effected by the merger (the "Merger") of
Gladstone-Washington with and into Gladstone-Delaware, which will be
incorporated under the Delaware General Corporation Law ("DGCL") for purposes of
the Merger. Gladstone-Delaware will be the surviving corporation in the Merger.
Gladstone-Washington will cease to exist as a result of the Merger.
Upon completion of the Merger, each outstanding share of Common Stock, no
par value per share, of Gladstone-Washington after giving effect to the Reverse
Stock Split will be converted into one share of Common Stock, $.001 par value,
of Gladstone-Delaware. As a result, the existing shareholders of Gladstone-
Washington will automatically become shareholders of Gladstone-Delaware,
Gladstone-Washington will cease to exist, and Gladstone-Delaware will continue
to operate the business of the Company. Gladstone-Washington stock certificates
will be deemed to represent the same number of Gladstone-Delaware shares as were
represented by such Gladstone-Washington stock certificates prior to the
Reincorporating after giving effect to the Reverse Stock Split.
The Reincorporating will not result in any change to the daily business
operations of the Company or the present location of the principal executive
offices of the Company in Dallas, Texas. The financial condition and results of
operations of Gladstone-Delaware immediately after the consummation of the
Reincorporating will be identical to that of Gladstone-Washington immediately
prior to the consummation of the Reincorporating. In addition, at the effective
time of the Merger, the Board of Directors of Gladstone-Delaware will consist of
those persons who were directors of Gladstone-Washington immediately prior to
the Merger. In addition, the individuals serving as executive officers of
Gladstone-Washington immediately prior to the Merger will serve as executive
officers of Gladstone-Delaware upon the effectiveness of the Merger.
Principal Reasons For The Reincorporating
As the Company plans for the future, the Board of Directors and management
believe that it is essential to be able to draw upon well established principles
of corporate governance in making legal and business decisions. The prominence
and predictability of Delaware corporate law provide a reliable foundation on
which the Company's governance decisions can be based. The Company believes that
the shareholders will benefit from the responsiveness of Delaware corporate law
to their needs and to those of the corporation they own.
For many years the State of Delaware has followed a policy of encouraging
incorporation in that state and, in furtherance of that policy, has adopted
comprehensive, modern and flexible corporate laws which are periodically updated
and revised to meet changing business needs. As a result, many corporations have
been initially incorporated in Delaware or have subsequently reincorporated in
Delaware in a manner similar to that proposed by the Company. Because of
Delaware's prominence as a state of incorporation for many corporations, the
Delaware courts have developed considerable expertise in dealing with corporate
issues and a substantial body of case law has developed construing the DGCL and
establishing public policies with respect to corporations incorporated in
Delaware. Consequently, the DGCL is comparatively well known and understood. It
is anticipated that, as in the past, the DGCL will continue to be interpreted
and explained in a number of significant court decisions. The Board of Directors
believes that reincorporation in Delaware should provide greater predictability
with respect to the Company's corporate affairs.
In addition, the Delaware Secretary of State is particularly flexible,
expert and responsive in its administration of the filings required for mergers,
acquisitions and other corporate transactions. Delaware has become a preferred
domicile for most major corporations in the United States and Delaware law and
Delaware law and administrative practices have become comparatively well-known
and widely understood. As a result of these
11
factors, it is anticipated that Delaware law will provide greater efficiency,
predictability and flexibility in the Company's legal affairs than presently
available under Washington law.
The Board believes that the proposed Reincorporating under Delaware law
will enhance the Company's ability to attract and retain qualified directors and
officers as well as encourage directors and officers to continue to make
independent decisions in good faith on behalf of the Company. The law of
Delaware offers greater certainty and stability from the perspective of those
who serve as corporate officers and directors. To date, the Company has not
experienced difficulty in retaining directors or officers. However, as a result
of the significant potential liability and relatively small compensation
associated with service as a director, the Company believes that the better
understood, and comparatively stable, corporate environment afforded by Delaware
will enable it to compete more effectively with other public companies, most of
which are incorporated in Delaware, in the recruitment of talented and
experienced directors and officers. The parameters of director and officer
liability are more extensively addressed in Delaware court decisions and
therefore are better defined and better understood than under Washington law.
The Board believes that Delaware law strikes an appropriate balance with
respect to personal liability of directors and officers, and that
Reincorporating in Delaware will enhance the Company's ability to recruit and
retain directors and officers in the future, while providing appropriate
protection for shareholders from possible abuses by directors and officers.
Delaware law permits a corporation to eliminate or limit the personal liability
of its directors to the corporation or any of its shareholders for monetary
damages for breach of fiduciary duty as a director of the corporation; however,
directors' personal liability is not, and can not be, eliminated under Delaware
law for intentional misconduct, bad faith conduct or any transaction from which
the director derives an improper personal benefit, or for violations of federal
laws such as federal securities laws.
The Board of Directors has not viewed the increased protections permitted
under the DGCL as a reason for recommending the Reincorporating. Shareholders
should note, however, that since members of the Board of Directors will receive
the benefit of expanded indemnification provisions and limitations on liability,
the Board of Directors may be viewed as having a personal interest in the
approval of the Reincorporating at the potential expense of shareholders.
As a Delaware corporation, Gladstone-Delaware would qualify for the
provisions of Section 203 of DGCL (the "Delaware Business Combination Statute"),
which regulates certain business combinations between a corporation and an
"Interested shareholder" thereof. With certain exceptions, section 203 prevents
a person who acquires 15% or more of the voting stock of a Delaware corporation
(an "Interested Shareholder") from effecting a merger or certain other business
combinations with such corporation for three years, unless the corporation's
board of directors, prior to the date the acquiror becomes an Interested
Shareholder, approves either the business combination or the transaction that
results in the acquiror's becoming an Interested Shareholder. While the
Reincorporating Proposal is not being recommended in response to any specific
effort of which the Company is aware to accumulate the Company's shares or to
obtain control of the Company, the Board believes that the provisions of the
Delaware Business Combination Statute will enhance the Board's ability to assure
more equitable treatment of the Company's shareholders in the event that a
possible take over attempt. For a more complete description of the Delaware
Business Combinations Statute, see "Business Combinations" of Exhibit D
attached to this Proxy Statement.
Possible Disadvantages of Reincorporating
As a result of the Merger, the Company would be subject to the Delaware
Business Combination Statute which may deter certain acquisitions of the Company
in transactions that are not approved by the Board of Directors. In addition,
the DGCL has been publicly criticized on the grounds that it does not afford
minority shareholders all the same substantive rights and protections that are
available under the laws of a number of other states (including Washington).
For example, if the Reincorporating is consummated, the Company will not be
required in the future under the DGCL to obtain shareholder approval, or to
grant class voting and appraisal rights, in connection with certain kinds of
mergers and corporate reorganizations which under Washington law would be
subject to those requirements. For information regarding those and other
material differences between the WBCA
12
and the DGCL, see Exhibit D attached to this Proxy Statement. The Board of
Directors believes that the advantages of the Reincorporating to the Company and
its shareholders outweigh its possible disadvantages.
SHAREHOLDERS ARE URGED TO READ THE SUMMARY OF CERTAIN SIGNIFICANT DIFFERENCES IN
THE PROVISIONS OF THE WBCA AND THE DGCL AFFECTING THE RIGHTS AND INTERESTS OF
SHAREHOLDERS SET FORTH IN EXHIBIT D ATTACHED TO THIS PROXY STATEMENT.
Amendment, Deferral or Termination of the Reincorporating Merger Agreement
If approved by the shareholders at the Annual Meeting, it is anticipated
that the Reincorporating will become effective at the earliest practicable date.
However, the Reincorporating Merger Agreement provides that it 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
Reincorporating Merger Agreement also provides that the Company may terminate
and abandon the Merger 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.
Federal Income Tax Consequences of the Reincorporating
The Company believes that, for federal income tax purposes, no gain or loss
will be recognized by the holders of Common Stock as a result of the
consummation of the Reincorporating and no gain or loss will be recognized by
Gladstone-Washington or Gladstone-Delaware. Each holder of Common Stock will
have the same basis in the Gladstone-Delaware Common Stock received pursuant to
the Reincorporating (other than those who exercise dissenters' rights) as such
shareholder had in the Common Stock held immediately prior to the
Reincorporating, and the shareholder's holding period with respect to the
Gladstone-Delaware Common Stock will include the period during which such
shareholder held the corresponding Common Stock, so long as the Common Stock was
held as a capital asset at the time of consummation of the Reincorporating.
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 REINCORPORATING UNDER STATE, LOCAL OR FOREIGN INCOME TAX LAWS.
The Company also believes that it will not recognize gain or loss for
federal income tax purposes as a result of the Merger, and that Gladstone-
Delaware will succeed without adjustment to the tax attributes of the Company.
Shareholders should be aware that franchise taxes in the State of Delaware are
likely to be higher than those in the State of Washington. Based on the
Company's present financial position, the estimated annual franchise tax in the
State of Delaware will be approximately the same as the amount of tax paid last
year to the State of Washington.
A dissenting shareholder who receives payment for his shares upon exercise
of his rights of dissent may recognize capital gain or loss for federal income
tax purposes, measured by the difference between the basis for his shares and
the amount of the payment received. Shareholders who may dissent and seek cash
payment for their shares should consult with their tax advisors.
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE REINCORPORATING PROPOSAL
AND THE MERGER AND RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THIS PROPOSAL.
13
EXCHANGE OF STOCK CERTIFICATES
The combination and reclassification of shares of Common Stock pursuant to
the Reverse Stock Split will occur automatically on the Effective Date without
any action on the part of shareholders of the Company and without regard to the
date certificates representing shares of Common Stock prior to the Reverse Stock
Split are physically surrendered for new certificates. If the number of shares
of Common Stock to which a holder is entitled as a result of the Reverse Stock
Split would otherwise include a fraction, the Company will issue to the
shareholder, in lieu of issuing fractional shares of the Company, the cash
payment described above under "Reverse Stock Split-General". The conversion of
shares of Gladstone-Washington Common Stock into Gladstone-Delaware Common Stock
will occur automatically upon the completion of the Merger without any action on
the part of shareholders of the Company and without regard to the date
certificates representing shares of Common Stock prior to the Merger are
physically surrendered.
As soon as practicable after the Effective Date of the Reverse Stock Split
Amendment and consummation of the Merger, transmittal forms will be mailed to
each holder of record of certificates for shares of Common Stock to be used in
forwarding such certificates for surrender and exchange for certificates
representing the number of shares of Gladstone-Delaware Common Stock such
shareholder is entitled to receive as a consequence of the Reverse Stock Split
and the Merger. The transmittal forms will be accompanied by instructions
specifying other details of the exchange. Upon receipt of such transmittal
form, each shareholder should surrender the certificates representing shares of
Common Stock, in accordance with the applicable instructions. Each holder who
surrenders certificates will receive new certificates representing the whole
number of shares of Gladstone-Delaware Common Stock that he or she holds as a
result of the Reverse Stock Split and the Merger and the cash payment for
fractional shares resulting from the Reverse Stock Split. SHAREHOLDERS SHOULD
NOT SEND THEIR STOCK CERTIFICATES UNTIL THEY RECEIVE A TRANSMITTAL FORM.
After the Effective Date of the Reverse Stock Split and the consummation of
the Merger, each certificate representing shares of Common Stock outstanding
prior to the Effective Date and consummation of the Merger (an "Old
Certificate") will, until surrendered and exchanged as described above, be
deemed, for all corporate purposes, to evidence ownership of that number of
shares of Gladstone-Delaware Common Stock into which the shares of Common Stock
evidenced by such certificate have been converted by the Reverse Stock Split and
as a result of the consummation of the Merger, and the cash sum payable in
respect of any fractional shares resulting from the Reverse Stock Split.
DISSENTERS' RIGHTS
Holders of fewer than five shares of Common Stock of Gladstone-Washington
will have the right to dissent and seek the payment of "fair value" of their
shares with regard to the Reverse Stock Split and holders of any number of
shares of Common Stock of Gladstone-Washington will have the right to dissent
and seek payment of the "fair value" of their shares with regard to the
Reincorporating Proposal. Pursuant to Chapter 23B.13 of the WBCA, such holders
of record of Gladstone-Washington Common Stock who object and who follow the
procedures prescribed by Chapter 23B.13 of the WBCA will be entitled to receive
a cash payment equal to the "fair value" of the shares of Gladstone-Washington
Common Stock held by them. Set forth below is a summary of the procedures such
holders of Gladstone-Washington Common Stock must follow in order to exercise
their dissenters' rights under the WBCA. This summary does not purport to be
complete and is qualified in its entirety by reference to Chapter 23B.13 of the
WBCA (a copy of which, as of the date hereof, is attached to this Proxy
Statement as Exhibit C) and to any amendments to, or modifications of, such
provisions as may be adopted after the date hereof.
Any such holder of shares of Common Stock of Gladstone-Washington
contemplating a possibility of objecting to the Proposals should carefully
review the text of Exhibit C (particularly the specified procedural steps
required to perfect their dissenters' rights) and should consult as appropriate
with such holder's legal counsel. The dissenters' rights will be lost if the
procedural requirements of Chapter 23B.13 of the WBCA are not fully and
precisely satisfied.
14
A record shareholder may assert dissenters' rights to fewer than all shares
registered in his name only if he dissents with respect to all shares
beneficially owned by a beneficial holder for whom he acts as nominee and
notifies the Company in writing of the name and address of each person on whose
behalf he has such dissenters' rights. A beneficial holder may assert
dissenters' right as to shares held on his behalf only if he submits to the
Company the record holder's written consent to the dissent not later than the
time the beneficial shareholder asserts dissenters' rights and does so with
respect to all shares to which he is beneficial owner.
Under Chapter 23B.13 of the WBCA, any shareholder who desires to assert
dissenters' rights shall deliver to the Company before the vote is taken written
notice of his intent to demand payment for his shares if the proposed action is
effected and shall not vote his shares in favor of the proposed action. If the
proposed corporate action is effected, the Company shall deliver a written
dissenters' notice to all shareholders who properly exercised their dissenters'
rights within ten (10) days after the corporate action is effected. Such notice
from Company shall include, among other items, a form for demanding payment (and
deliver certificates representing shares of Gladstone-Washington), as well as a
date not less than thirty (30) days and not more than sixty (60) days after the
date of the Company's delivery of the initial dissenters' notice by which the
Company must receive the payment demand. A shareholder who demands payment and
deposits his share certificates in accordance with the terms of the Company's
payment demand shall be entitled to receive from the Company the amount that the
Company estimates to be the "fair value" of the shares plus accrued interest.
Such payment is to be accompanied by specified financial information regarding
the Company, a statement of the Company's estimate of the fair value of the
shares and an explanation of how any accrued interest was calculated. If a
dissenting shareholder disagrees with the Company's calculation of the "fair
value" for the shares tendered, he may notify the corporation in writing of his
own estimate of fair value or reject the Company's offer and demand payment of
fair value of his shares. If a dissenting shareholder waives his rights to
contest the Company's determination of "fair value," he must notify the Company
of his demand of payment of a different value in writing within thirty (30) days
after the Company made or offered payment for his shares.
If a demand for payment remains unsettled, the Company may commence a
proceeding within sixty (60) days after receiving the payment demand and
petition the court to determine the fair value of the shares and accrued
interest. If the Company does not commence a proceeding within the sixty day
period, it must pay to each dissenting shareholder the amount demanded by such
shareholder.
ADOPTION OF DELAWARE CERTIFICATE PROPOSALS (ITEM 4)
In connection with the Reincorporating, shareholders of the Company are
being asked to approve certain provisions of the Delaware Certificate set forth
in its entirety as Exhibit B hereto which differ from the current provisions of
the Washington Articles and alter the rights currently given to shareholders
under the Washington Articles. The proposed provisions include that the
Delaware Certificate (i) would authorize up to 10 million shares of Delaware
Common Stock; (ii) would authorize up to 5 million shares of a new class of
undesignated Preferred Stock, which would allow the Board of Directors of the
Company to issue, without further shareholder action, one or more series of
Preferred Stock; (iii) will eliminate the ability of shareholders to take action
by written consent thus requiring that all shareholder action be taken at a
meeting of shareholders; (iv) will eliminate cumulative voting in the election
of directors; plurality; (v) will permit directors and officers to be
indemnified to the fullest extent permitted by Delaware law; and (vi) will
require a two-thirds vote of the shareholders to amend the provisions
described in (iii) and (v) above and, if shareholder action is ever sought to
amend the Delaware Bylaws, to amend the Delaware Bylaws. Shareholders should
review the sections describing the principal provisions of the Delaware
Certificate below and Exhibit D for a more complete summary of material
differences in the rights of shareholders of Gladstone-Washington compared
to the rights available to shareholders of Gladstone-Delaware.
APPROVAL OF THE REINCORPORATING WILL AFFECT CERTAIN RIGHTS OF SHAREHOLDERS.
ACCORDINGLY, SHAREHOLDERS ARE URGED TO READ CAREFULLY THIS ENTIRE PROXY
STATEMENT AND THE EXHIBITS TO THE PROXY STATEMENT BEFORE VOTING.
15
DELAWARE CERTIFICATE PROPOSAL ONE:
INCREASE IN AUTHORIZED CAPITAL STOCK
General
The Company's presently authorized capital stock consists of Six Million
shares, all of which are Common Stock, no par value. On March 31, 1999, Four
Million Two Hundred Forty-Four Thousand Sixty (4,244,060) shares of Common Stock
were outstanding. Thus, as of such date, One Million Seven Hundred Fifty-Five
Thousand Nine Hundred Forty (1,755,940) shares of Common Shares remain
unreserved and available for future issuance.
Principal Reasons for Authorization
The proposed Delaware Certificate provides for authorized capital
consisting of 10 million shares of Delaware Common Stock, par value $.001 per
share. The Board of Directors believes that the increase in authorized Common
Stock is in the best interests of the Company and its shareholders and believe
that it is advisable to authorize increasing the authorized Common Stock and
have it available in connection with possible future transactions such as stock
dividends, stock option or other benefit plans, financings, strategic alliances,
acquisitions and other uses not presently determinable and as may be deemed to
be feasible and in the best interests of the Company.
Possible Disadvantages
The Board of Directors is not proposing the increased capitalization as a
means of discouraging tender offers or takeover attempts. However, in the event
of an unsolicited tender offer or takeover proposal, the increased number of
shares could give the Board of Directors greater opportunity to issue shares to
persons who are friendly to management. Such shares might also be available to
make acquisitions or enter into other transactions which might frustrate
potential offerors.
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED DELAWARE CERTIFICATE PROPOSAL
ONE AND RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THIS PROPOSAL.
DELAWARE CERTIFICATE PROPOSAL TWO:
AUTHORIZATION OF BLANK CHECK PREFERRED
General
The Washington Articles presently do not authorize any class of equity
securities other than the Common Stock. The proposed Delaware Certificate would
authorize the issuance by the Company of up to 5 million shares of preferred
stock, par value $.001 per share (the "Preferred Stock").
Principal Reasons for Authorization
The Board of Directors believes that the authorization of the Preferred
Stock is in the best interests of the Company and its shareholders and believes
that it is advisable to authorize such shares and have them available in
connection with possible future transactions, such as financings, strategic
alliances, acquisitions and other uses not presently determinable and as may be
deemed to be feasible and in the best interests of the Company. In addition,
the Board of Directors believes that it is desirable that the Company have the
flexibility to issue shares of Preferred Stock without further shareholder
action, except as otherwise provided by law.
16
The Preferred Stock will have such designations, preferences, conversion
rights, cumulative, relative, participating, optional or other rights, including
voting rights, qualifications, limitations or restrictions thereof as may be
determined by the Board of Directors. Thus, if the Delaware Certificate is
approved, the Board of Directors would be entitled to authorize the creation and
issuance of up to 10 million shares of Preferred Stock in one or more series
with such limitations and restrictions as may be determined in the Board's sole
discretion, without further authorization by the Company's shareholders.
Possible Disadvantages of Authorization
It is not possible to determine the actual effect of the Preferred Stock on
the rights of the shareholders of the Company until the Board of Directors
determines the rights of the holders of a series of the Preferred Stock.
However, such effects might include (i) restrictions on the payments of
dividends to holders of the Common Stock; (ii) dilution of voting power to the
extent that the holders of shares of Preferred Stock are given voting rights;
(iii) dilution of the equity interests and voting power if the Preferred Stock
is convertible into Common Stock; and (iv) restrictions upon any distribution of
assets to the holders of the Common Stock upon liquidation or dissolution and
until the satisfaction of any liquidation preference granted to the holders of
Preferred Stock. Shareholders will not have preemptive rights to subscribe for
shares of Preferred Stock.
The Board of Directors is required by Delaware law to make any
determination to issue shares of Preferred Stock based upon its judgment as
advisable and in the best interests of the shareholders and the Company.
Although the Board of Directors has no present intention of doing so, it could
issues shares of Preferred Stock (within the limits imposed by applicable law)
that could, depending on the terms of such series, make more difficult or
discourage an attempt to obtain control of the Company by means of a merger,
tender offer, proxy contest or other means, when, in the judgment of the Board
of Directors, such action would be in the best interests of the shareholders and
the Company. The issuance of shares of Preferred Stock could be used to create
voting or other impediments or to discourage persons seeking to gain control of
the Company, for example, by the sale of Preferred Stock to purchasers favorable
to the Board of Directors. In addition, the Board of Directors could authorize
holders of a series of Preferred Stock to vote either separately as a class or
with the holders of the Common Stock on any merger, sale or exchange of assets
by the Company or any other extraordinary corporate transaction. The existence
of the additional authorized shares could have the effect of discouraging
unsolicited takeover attempts. The issuance of new shares could also be used to
dilute the stock ownership of the person or entity seeking to obtain control of
the Company should the Board of Directors consider the action of such entity or
person not to be in the best interests of the shareholders and the Company. Such
issuance of Preferred Stock could also have the effect of diluting the earnings
per share and book value per share of the Common Stock.
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED DELAWARE CERTIFICATE PROPOSAL
TWO AND RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THIS PROPOSAL.
DELAWARE CERTIFICATE PROPOSAL THREE:
ELIMINATION OF SHAREHOLDER CONSENTS
General
Under the WBCA any action to be taken or which may be taken at an annual or
special meeting of shareholders may be taken without prior notice and without a
vote if a consent in writing setting forth the action so taken is signed by the
holders of all the outstanding stock of the Company. The Delaware Certificate
would eliminate the ability of the shareholders to take action without a meeting
of shareholders.
Reasons for Proposal
Under Delaware law, when shareholders are to take action at a meeting, a
corporation must give written notice of the meeting to all shareholders entitled
to vote, even when one shareholder or group will have a majority
17
of the votes to be cast. This prior notice allows minority shareholders to take
whatever action they deem appropriate to protect their interests, including
seeking to persuade majority shareholders to follow a different course, selling
their shares or litigation. If action is taken by majority holders by written
consent, no prior notice is necessary and minority holders may not have any
opportunity to protect their interests. The primary purpose of this provision
is to prevent shareholder action without prior notice to all shareholders.
Possible Disadvantages of Proposal
The proposed provision will have the effect of preventing the shareholders
of the Company from taking action at any time other than an annual meeting (or a
special meeting authorized by the Board of Directors or other authorized
persons) to replace directors, amend the Certificate of Incorporation or take
any other action authorized to be taken by shareholders under Delaware law.
Such a provision may have the effect of discouraging potential purchasers from
attempting to acquire control of the Company or, in some cases, may discourage
the accumulation of large blocks of Common Stock.
THE BOARD OF DIRECTORS HAS APPROVED DELAWARE CERTIFICATE PROPOSAL THREE AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THIS PROPOSAL.
DELAWARE CERTIFICATE PROPOSAL FOUR:
ELIMINATION OF CUMULATIVE VOTING
General
Under the DGCL, cumulative voting for the election of directors is
permitted if provided in the corporation's certificate of incorporation. The
Delaware Certificate would not provide for cumulative voting in the election of
directors. Under the WBCA, unless otherwise provided in the articles of
incorporation, shareholders are entitled to cumulate their votes in the election
of directors. The Gladstone-Washington Articles do not provide that shareholders
may not cumulate their votes in the election of directors.
Reasons for Proposal
As stated above, the DGCL does not automatically provide for cumulative
voting in the election of directors. Rather, cumulative voting must be provided
in the certificate of incorporation. Cumulative voting does create a possibility
for some minority representation on the Board of Directors. However, the Board
of Directors believes that a director elected by a small group of shareholders
would feel obligated to act primarily in the special interests of the
shareholders responsible for his or her election. The Board of Directors
believes that such representation of a special interest could encourage
devisiveness and dissension on the Board of Directors that would be detrimental
to the Company and would render more difficult the overridding obligation of
the Board of Directors to manage the business of the corporation for the
benefit of all shareholders. Accordingly, the Board of Directors does not.
believe it is necessary to provide for cumulative voting in the Delaware
Certificate.
Possible Disadvantages of Proposal
The proposed provision will have the effect of eliminating cumulative
voting in the election of directors. This may discourage candidates of minority
shareholders from seeking nomination as a director and may prevent minority
shareholder candidates from being elected to the Board of Directors without the
support of a majority of the shareholders.
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED DELAWARE CERTIFICATE PROPOSAL
FOUR AND RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THIS PROPOSAL.
18
DELAWARE CERTIFICATE PROPOSAL FIVE:
INDEMNIFICATION
The Delaware Certificate would, to the fullest extent permitted under
applicable law as from time to time in effect, (i) require indemnification
(including advancement of expenses) of the Company's directors and officers and
(ii) at the option of the Board of Directors in any particular case the
Company's employees and agents.
The Board of Directors believe that this proposal is desirable for the
Company to be able to continue to attract and retain responsible individuals to
serve as its directors and officers, in light of the present difficult
environment in which such persons, particularly directors, must serve. In recent
years, investigations, claims, actions, suits or proceedings (including
derivative actions) seeking to impose liability on directors and officers of
corporations have become increasingly common. Such proceedings can be extremely
expensive, whatever their eventual outcome. In view of the costs and
uncertainties of litigation in general, it is often prudent to settle
proceedings in which claims against a director or officer are made. Settlement
amounts, even if immaterial to the corporation involved and minor compared to
the enormous amounts frequently claimed, often exceed the financial resources of
most individual director or officer defendants. As a result, an individual may
conclude that potential exposure to the costs and risks of proceedings in which
he or she may become involved may exceed any benefit to him or her from serving
as a director or officer of a corporation.
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED DELAWARE CERTIFICATE PROPOSAL
FIVE AND RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THIS PROPOSAL.
DELAWARE CERTIFICATE PROPOSAL SIX:
SUPERMAJORITY VOTING REQUIREMENTS TO AMEND OR REPEAL CERTAIN
PROVISIONS OF THE CERTIFICATE OF INCORPORATION OR BYLAWS
The Delaware Certificate requires that to amend, repeal or adopt any
provision inconsistent with elimination of shareholder consents or
indemnification of directors, the affirmative vote of at least 66-2/3% of the
outstanding shares of Common Stock of the Company shall be required. The
Delaware Certificate also requires the same threshold for the shareholders to
amend the Bylaws, if shareholders are seeking to amend the Bylaws.
Under the DGCL, amendments to the Certificate of Incorporation would
generally require the approval of the holders of a majority of the outstanding
stock entitled to vote thereon, but the law also permits a corporation to
include provisions in its charter documents which require a greater vote than
the vote otherwise required by law for any corporate action. The requirement of
an increased shareholder vote is designed to prevent a person holding or
controlling a majority, but less than 66-2/3%, of the shares of the Company from
avoiding the requirements of the proposed amendments by simply repealing them.
Further, the Board of Directors of the Company deems it advisable and in the
best interests of the Company and its shareholders to provide that the Company's
Bylaws may not be amended by the shareholders unless such action is approved by
the affirmative vote of the holders of not less than 66-2/3% of the voting power
of all shares of stock of the Company entitled to vote thereon. The Bylaws may
still be amended without shareholder approval by the Board of Directors
consistent with the provisions of applicable Delaware law and the express
permission given in the Delaware Certificate.
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED DELAWARE CERTIFICATE PROPOSAL
SIX AND RECOMMENDS THE SHAREHOLDERS VOTE FOR THIS PROPOSAL.
INTERESTED PARTIES
Except as described above with regard to potential benefits to be received
by the officers and directors of the Company arising from the liability
limitation and indemnification provisions under the DGCL, no director or
executive officer of the Company has any interest, direct or indirect, in the
Reverse Stock Split, the Merger, the
19
proposed Reincorporating, or the Delaware Certificate Proposals other than any
interest arising from the ownership of securities of the Company.
MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
Market for Common Stock
Currently there is no public market for the Company's Common Stock.
Dividends
The Company has never declared or paid any cash dividends on the Common
Stock and does not presently intend to pay cash dividends on the Common Stock in
the foreseeable future. The Company intends to retain future earnings for
reinvestment in its business.
Holders of Record
There were 539 shareholders of record at March 31, 1999, and approximately
_________ beneficial shareholders.
INCORPORATION OF CERTAIN
INFORMATION BY REFERENCE
The information in the Annual Report on Form 10-K for the fiscal year ended
December 31, 1998 filed by the Company with the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934, as amended, is
incorporated by reference in this Proxy.
SHAREHOLDER PROPOSALS
Any shareholder who wishes to submit a proposal for inclusion in the
Company's proxy material and for presentation at the Company's 2000 Annual
Meeting of Shareholders must forward such proposal to the Secretary of the
Company at the address indicated on the first page of this proxy statement, so
that the Secretary receives it no later than _______________.
OTHER MATTERS
The Board of Directors is not aware of any other matters that are to be
presented for action at the Meeting. However, if any other matters properly come
before the Meeting or any adjournment(s) thereof, it is intended that the
enclosed proxy will be voted in accordance with the judgment of the persons
voting the proxy.
By Order of the Board of Directors.
- ----------------------------
Sheila Irons
Secretary
June __, 1999
20
GLADSTONE RESOURCES, INC.
ANNUAL MEETING OF SHAREHOLDERS
JUNE ___, 1999
This proxy is solicited on behalf of the Board of Directors
The undersigned hereby constitutes and appoints Johnathan M. Hill and
Katherine R. Murphy, or either of them, as the true and lawful attorneys and
proxies of the undersigned, with full power of substitution, to represent the
undersigned and to vote all of the shares of Common Stock of Gladstone
Resources, Inc. (the "Company"), that the undersigned is entitled to vote at the
Annual Meeting of Shareholders of the Company to be held on June __, 1999 and at
any adjournments thereof.
1. Election of FOR All nominees named below WITHHOLD AUTHORITY TO
Directors (EXCEPTAS MARKED TO THE VOTE FOR ALL NOMINEES
CONTRARY) / / NAMED BELOW / /
Nominees: Charles B. Humphrey Johnathan M. Hill Fred Oliver
------------------- ----------------- -----------
H. Wayne Gifford Katherine R. Murphy
------------------- -------------------
INSTRUCTION: TO CUMULATE VOTES, WRITE BELOW THE NAME OF THE NOMINEE OR
NOMINEES FOR WHOM YOU DESIRE TO CAST VOTES THE NUMBER OF VOTES TO BE CAST
FOR SUCH NOMINEE.
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
WRITE THE NOMINEE'S NAME ON THE LINE BELOW.)
-----------------------------------------------------
2. To approve a one-for-five reverse stock split of the Company's outstanding
Common Stock.
FOR / / AGAINST / / ABSTAIN / /
3. To approve the merger of the Company into a wholly-owned subsidiary to be
organized under the laws of Delaware in order to effect the change the Company's
state of incorporation from Washington to Delaware.
FOR / / AGAINST / / ABSTAIN / /
4. To approve and adopt provisions of the Certificate of Incorporation of
Gladstone-Delaware ("Delaware Certificate") which would authorize up to 10
million shares of common stock, par value $.001 per share of the Company.
FOR / / AGAINST / / ABSTAIN / /
5. To approve and adopt provisions of the Delaware Certificate of which would
authorize up to 5 million shares of preferred stock, par value $.001 of the
Company.
FOR / / AGAINST / / ABSTAIN / /
6. To approve and adopt provisions of the Delaware Certificate which would
require all shareholder action to be taken at a shareholder meeting.
FOR / / AGAINST / / ABSTAIN / /
7. To approve and adopt provisions of the Delaware Certificate which
eliminates cumulative voting in the election of directors.
FOR / / AGAINST / / ABSTAIN / /
8. To approve and adopt provisions of the Delaware Certificate which would
permit officers and directors of the Company to receive indemnification to the
fullest extent permitted by law.
FOR / / AGAINST / / ABSTAIN / /
9. To approve and adopt provisions of the Delaware Certificate that would
require a 66-2/3% vote of shareholders to amend the foregoing provisions No. 6
and No. 8 and to amend the Delaware Bylaws when shareholder amendments are
sought.
FOR / / AGAINST / / ABSTAIN / /
10. In their discretion, to vote upon such other business as may properly come
before the meeting or any adjournments thereof.
THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO SPECIFIC DIRECTIONS ARE GIVEN,
THIS PROXY WILL BE VOTED "FOR" THE ELECTION OF DIRECTORS, "FOR" EACH OF THE
PROPOSALS SET FORTH HEREIN AND IN THE DISCRETION OF THE PROXY HOLDERS ON ALL
OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING.
Please sign exactly as the name appears on the certificate or certificates
representing shares to be voted by this proxy. When signing as executor,
administrator, attorney, trustee or guardian, please give full title as such. If
a corporation, please sign in full corporate name by president or other
authorized person. If a partnership, please sign in partnership name by
authorized person.
Dated:_____________________________
___________________________________
Signature of Shareholder
___________________________________
Signature (if jointly owned)
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY
PROMPTLY USING THE ENCLOSED ENVELOPE.