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 ss.240.14a-12
TELAXIS COMMUNICATIONS CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
5) Total fee paid:
-----------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
-----------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
3) Filing Party:
-----------------------------------------------------------------------
4) Date Filed:
-----------------------------------------------------------------------
Telaxis Communications Corporation
presently doing business as
YDI WIRELESS
--------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 24, 2003
--------------------------
Dear Stockholder:
You are cordially invited to attend the annual meeting of stockholders of
Telaxis Communications Corporation, a Massachusetts corporation presently doing
business as YDI Wireless ("Telaxis" or the "Company"), to be held on June 24,
2003, at 9:00 a.m., at The Doubletree Hotel at Tyson's Corner , 7801 Leesburg
Pike, Falls Church, Virginia.
At this meeting, you will be asked to vote upon the following matters:
1. To elect one Class I director to the board of directors;
2. To consider and vote upon a proposal to amend Telaxis' Restated
Articles of Organization, as amended to date, to effect a
reverse/forward stock split in which a reverse 1-for-1,000 stock
split would be followed immediately by a forward 250-for-1 stock
split;
3. To consider and act upon a proposal to change Telaxis' jurisdiction
of incorporation to Delaware;
4. To consider and act upon a proposal to change the legal name of
Telaxis to "YDI Wireless, Inc."; and
5. To transact such other business as may properly come before the
meeting and at any adjournment of the meeting.
If the action regarding the change of the jurisdiction of incorporation
from Massachusetts to Delaware is approved by the stockholders at the meeting
and effected by Telaxis, any stockholder (a) who files with Telaxis, before the
taking of the vote on the approval of such action, written objection to the
proposed action stating that he, she or it intends to demand payment for his,
her or its shares if the action is taken and (b) whose shares are not voted in
favor of such action, has or may have the right to demand in writing from
Telaxis, within twenty days after the date of mailing to him, her or it of
notice in writing that the change of the jurisdiction of incorporation has
become effective, payment for his, her or its shares and an appraisal of the
value thereof. Telaxis and any such stockholder shall in such cases have the
rights and duties and shall follow the procedure set forth in Sections 88 to 98,
inclusive, of Chapter 156B of the General Laws of Massachusetts.
Stockholders of record at the close of business on May 7, 2003 will be
entitled to vote at this meeting and at any adjournment of the meeting.
Please mark, sign, date and return the enclosed form of proxy as promptly
as possible to assure your representation at the meeting. If you attend the
meeting, you may vote in person even if you have returned a proxy.
By Order of the Board of Directors
[June 3], 2003 David L. Renauld, Clerk
TELAXIS COMMUNICATIONS CORPORATION
PRESENTLY DOING BUSINESS AS
YDI WIRELESS
8000 LEE HIGHWAY
FALLS CHURCH, VIRGINIA 22042
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
We are furnishing this proxy statement to our stockholders in connection
with the solicitation by our board of directors of proxies for use at the annual
meeting of stockholders to be held on Tuesday, June 24, 2003 at 9:00 a.m. at The
Doubletree Hotel at Tyson's Corner , 7801 Leesburg Pike, Falls Church, Virginia,
and any adjournment thereof. A copy of our 2003 Annual Report on Form 10-K is
being mailed with this proxy statement to each stockholder entitled to vote at
the meeting. This proxy statement and accompanying proxy materials will first be
mailed to all stockholders entitled to vote at the meeting on or about [June 3],
2003.
Record Date and Outstanding Shares
The board of directors has fixed the close of business on May 7, 2003 as
the record date for determining stockholders entitled to notice of and to vote
at the annual meeting. Accordingly, only holders of record of shares of our
common stock at the close of business on that date will be entitled to notice of
and to vote at the annual meeting and any adjournment thereof. At the close of
business on May 7, 2003, 54,208,312 shares of our common stock were outstanding.
Quorum and Votes Required
Each holder of record of shares of our common stock on the record date is
entitled to cast one vote per share, in person or by properly executed proxy, on
any matter that may properly come before the annual meeting. The presence in
person or by properly executed proxy of the holders of a majority of the shares
of our common stock outstanding on the record date is necessary to constitute a
quorum at the annual meeting. In general, Telaxis will treat votes withheld from
the nominee for election of director, abstentions, and broker non-votes as
present or represented for purposes of determining the existence of a quorum.
The Class I director will be elected at the annual meeting by a plurality
of the votes cast by the stockholders entitled to vote at the election. Votes
withheld from the nominee and broker non-votes will not affect the outcome of
the vote on this proposal.
Each of the proposal to amend Telaxis' Restated Articles of Organization,
as amended to date, to effect the contemplated reverse/forward stock split and
the proposal to change the legal name of Telaxis to "YDI Wireless, Inc."
requires the affirmative vote of a majority of the outstanding shares of
Telaxis' common stock for approval. The proposal to change the jurisdiction of
Telaxis' incorporation from Massachusetts to Delaware requires the affirmative
vote of two-thirds of the outstanding shares of Telaxis' common stock for
approval. Abstentions and broker non-votes will have the same effect as votes
against these three proposals.
The board of directors believes that both Concorde Equity, LLC and Michael
F. Young will vote in favor of the proposals to elect the director-nominee, to
effect the reverse/forward stock split, to reincorporate into Delaware, and to
change the legal name of Telaxis. Because Concorde Equity and Mr. Young together
own more than two-thirds of the shares of Telaxis' common stock outstanding on
the record date for this annual meeting, we expect that all of these proposals
will be approved by our stockholders regardless of how our other stockholders
vote.
2
Proxy Voting and Revocation
All proxies received pursuant to this solicitation will be voted except as
to matters where authority to vote is specifically withheld. Where a choice is
specified as to a given proposal, the proxies will be voted in accordance with
the specification. If no choice is specified, the persons named in the proxies
intend to vote for the election of the nominee for director and for all of the
other proposals described in this proxy statement.
The board of directors does not know of any matters, other than the
matters described in this proxy statement, which are expected to be presented
for consideration at the annual meeting. If any other matters are properly
presented for consideration at the annual meeting, the persons named in the
accompanying proxy will have discretion to vote on such matters in accordance
with their best judgment.
Stockholders who execute proxies may revoke them at any time before such
proxies are voted by filing with our Clerk, at or before the annual meeting, a
written notice of revocation bearing a later date than the proxy or by executing
and delivering to our Clerk at or before the annual meeting later-dated proxies
relating to the same shares. Attendance at the annual meeting will not have the
effect of revoking a proxy unless the stockholder so attending so notifies our
Clerk in writing at any time prior to the voting of the proxy. Our Clerk's
address is 20 Industrial Drive East, South Deerfield, MA 01373.
Solicitations
Proxies are being solicited by and on behalf of our board of directors. We
will bear the entire cost of solicitation of proxies. In addition to
solicitation by mail, our directors, officers, and regular employees (who will
not be specifically engaged or compensated for such services) may solicit
proxies by telephone or otherwise. Arrangements will be made with brokerage
houses and other custodians, nominees, and fiduciaries to forward proxies and
proxy materials to their clients who beneficially own shares of our common
stock, and we will reimburse them for their expenses.
Recent Change of Control of Telaxis
On April 1, 2003, we completed a strategic combination transaction (the
"combination") with Young Design, Inc., a privately held Virginia corporation
("YDI"), pursuant to a definitive strategic combination agreement dated as of
March 17, 2003. Pursuant to the terms of that agreement, we formed a subsidiary,
WFWL Acquisition Subsidiary, that merged with and into YDI and we issued new
shares of our common stock to the stockholders of YDI. Telaxis is the continuing
corporation, and our stockholders continued holding our common stock following
the transaction.
Incorporated in 1986, YDI is a supplier of technically advanced,
high-speed wireless data communication systems that operate in the license-free
radio bands. YDI built its reputation on 2.4 GHz and 5.8 GHz extended range
outdoor solutions. It has an extensive line of radios, wireless local area
network (WLAN) devices, wireless metropolitan area network (WMAN) systems,
amplifiers, cables and antennas. YDI has manufactured and supplied equipment for
thousands of wireless Internet service providers (WISPs) and businesses
worldwide. YDI is also a source for Agere 802.11b Wi-Fi(TM) compatible wireless
networking system products for small- and medium-sized original equipment
manufacturers (OEM) in North America, Central America, South America, and the
Caribbean region.
In connection with the combination, each outstanding share of YDI common
stock was converted into the right to receive 2.5 shares of our common stock.
This exchange ratio was determined through arms-length negotiation between YDI
and us. As a result, we issued 37,499,999 shares of our common stock to the two
former stockholders of YDI. 20,663,267 shares were issued to Concorde Equity,
LLC, and 16,836,732 shares were issued to Michael F. Young. Robert E.
Fitzgerald, former Chief Executive Officer of YDI and our current Chief
Executive Officer, owns over fifty percent of the equity interests of Concorde
Equity and is President and Managing Member of that entity. Immediately after
the closing of the transaction, we had 54,208,312 shares of our common stock
outstanding, and YDI is now our wholly-owned subsidiary. Based on shares
3
outstanding as of the record date, the two former YDI stockholders own
approximately 69% of the combined company and the pre-transaction Telaxis
stockholders own approximately 31% of the combined company.
We have assumed each outstanding option to purchase shares of YDI common
stock and converted them into options to purchase shares of our common stock.
The exercise price and number of shares obtainable upon exercise of each such
option was adjusted based on the exchange ratio. As a result, we assumed options
to purchase a total of 1,778,750 shares of our common stock, each with an
exercise price of $.40 per share. Included in this number are options to
purchase 165,000 shares of our common stock held by Mr. Fitzgerald and options
to purchase 135,000 shares of our common stock held by Mr. Young.
In connection with this transaction, Mr. Fitzgerald became our Chief
Executive Officer, Mr. Young became our President and Chief Technical
Officer, Mr. Gordon D. Poole became our Vice President - Sales West, and Mr.
Patrick L. Milton became our Chief Financial Officer and Treasurer. Also,
Messrs. Fitzgerald, Young, Poole, and Daniel A. Saginario became members of
our board of directors.
As a result of this transaction, we are now headquartered in YDI's Falls
Church, Virginia facilities. We currently have approximately 100 employees.
Sales offices are located in YDI's Falls Church and Sunnyvale, California
locations. Another sales office may be opened in Telaxis' facility near Dallas,
Texas, which is currently vacant as a result of a restructuring plan. Telaxis'
South Deerfield, Massachusetts operation is the product and technology
development center for the combined company.
We voluntarily de-listed our common stock from the Nasdaq SmallCap Market
at the close of markets on March 31, 2003. Our common stock is now quoted for
trading on the Over-the-Counter Bulletin Board under the ticker symbol "TLXS."
PROPOSAL 1
ELECTION OF DIRECTORS
Under our by-laws, the board of directors consists of seven persons. The
board is currently classified into three classes, as nearly equal in number as
possible, whose terms of office expire at different times in annual succession.
There are two Class I directors whose terms expire at the 2003 annual
meeting of our stockholders: Ralph A. Goldwasser and Gordon D. Poole. Mr. Poole
is a nominee for re-election as a Class I director. We do not presently intend
to fill the other Class I director position. We believe that a board of
directors consisting of seven members is too large for a company of our size and
status. In connection with our proposed reincorporation into Delaware, we are
proposing to reduce the size of our board to five members. Proxies may not be
voted for more than one nominee.
If Mr. Poole is elected, there will be two directors (Carol B. Armitage
and Michael F. Young) whose terms expire at the annual meeting of our
stockholders in 2004, three directors (Robert E. Fitzgerald, Daniel A.
Saginario, and John L. Youngblood) whose terms expire at the annual meeting of
our stockholders in 2005, and one director (Gordon D. Poole) whose term expires
at the annual meeting of our stockholders in 2006.
The members of each class currently are elected to serve a three-year
term. It is intended that the persons named on the proxy card as proxies will
vote shares of our common stock so authorized for the re-election of Mr. Poole
to the board of directors. The board of directors expects that Mr. Poole will be
available for election; but if he should become unavailable, it is intended that
the proxy would be voted for another nominee who would be designated by the
board of directors, unless the number of directors is reduced.
Under our current charter and by-laws, Mr. Poole would serve until the
annual meeting of our stockholders in 2006 and until his successor is elected
and qualified or his earlier death, resignation, or removal. Mr. Poole is
4
currently a director of Telaxis, and he has agreed to serve as a director if
elected at the annual meeting.
As described in the discussion below relating to the reincorporation
proposal, we are proposing to eliminate the classified nature of our board of
directors in connection with our reincorporating into Delaware. Therefore, if
the reincorporation proposal is approved, the board classes described above
would be eliminated and each member of our board of directors would be elected
at each annual stockholders meeting.
The board of directors recommends a vote FOR the election of the nominee
described above.
The biographical summaries of the nominee for director of Telaxis and the
other directors of Telaxis appear below under the heading "Board of Directors,
Executive Officers, and Key Employees."
BOARD OF DIRECTORS, EXECUTIVE OFFICERS,
AND KEY EMPLOYEES
Our directors, executive officers, and key employees are as follows:
Name Age Position
Carol B. Armitage......... 45 Chairperson of the Board of Directors
Robert E. Fitzgerald...... 38 Chief Executive Officer and Director
Michael F. Young.......... 51 President, Chief Technical Officer, and Director
Gordon D. Poole........... 38 Vice President - Sales West and Director
Patrick L. Milton......... 54 Chief Financial Officer and Treasurer
David L. Renauld.......... 37 Vice President, Legal and Corporate Affairs,
Secretary, and Clerk
Kenneth R. Wood(1)........ 48 Vice President, Engineering
Ralph A. Goldwasser....... 56 Director
Daniel A. Saginario....... 59 Director
John L. Youngblood, Ph.D.. 62 Director
- ------------------------
(1) Key employee
Carol B. Armitage has been Chairperson of our board of directors since
April 2003 and a director since October 2000. Since January 1998, she has been a
consultant to companies involved in broadband communications. From September
1995 to December 1997, she served in several senior management roles at General
Instrument, where her last position was as Senior Vice President, Technology and
Strategy. From 1979 to September 1995, she held various engineering and
management positions at Bell Laboratories, including Director in the wideband
access division. Ms. Armitage holds a B.S. in electrical engineering from the
University of Delaware and an M.S. in electrical engineering from Princeton
University.
Robert E. Fitzgerald has been our Chief Executive Officer and a director
since April 2003. He was Chief Executive Officer and a director of YDI from
March 1999 to April 2003. From July 1998 to February 1999, Mr. Fitzgerald was an
attorney with the law firm of Greenberg Traurig. Prior to that, he was an
attorney with the law firm of Ginsburg, Feldman & Bress. He holds a B.A. in
economics from the University of California - Los Angeles and a J.D. from the
University of California - Los Angeles School of Law.
Michael F. Young has been our President, Chief Technical Officer and a
director since April 2003. He was President, Chief Technical Officer, and a
director of YDI from when it was incorporated in February 1986 to April 2003.
Before starting YDI, Mr. Young was an officer in the United States Army Signal
Corps and left the service at the rank of Captain. He holds a bachelors degree
in electrical engineering from the Polytechnic Institute of Brooklyn and a
masters degree in radio and television broadcasting from Brooklyn College.
5
Gordon D. Poole has been our Vice President - Sales West and a director
since April 2003. He was Vice President - Sales West and a director of YDI from
April 2001 to April 2003. From March 2000 to April 2001, he was President of Go
Wireless Data Inc., a subsidiary of YDI that was a wireless distribution
company. Prior to that, he was in law school. He holds a B.A. in political
science from San Jose State University and a J.D. from Santa Clara University.
Patrick L. Milton has been our Chief Financial Officer and Treasurer
since April 2003. He was Chief Financial Officer and Treasurer of YDI from
April 2002 to April 2003. From March 1999 to April 2002, he was Chief
Financial Officer of ioWave, Inc., a manufacturer of point-to-point wireless
equipment. From January 1998 to March 1999, he was Chief Financial Officer
and Senior Vice President of Operations for Net-Tel Corp., a competitive
local exchange carrier and long distance telephone service provider. Mr.
Milton holds a B.B.A. in Accounting and an M.B.A. from the University of
Wisconsin-Whitewater.
David L. Renauld has been our Vice President, Legal and Corporate
Affairs and Secretary since November 1999. He has been our Clerk since May
1999. From January 1997 to November 1999, he was an attorney with Mirick,
O'Connell, DeMallie & Lougee, LLP, a law firm in Worcester, Massachusetts.
From September 1991 to December 1996, he was an attorney with Richards,
Layton & Finger, a law firm in Wilmington, Delaware. Mr. Renauld holds a
B.A. in mathematics/arts from Siena College and a J.D. from Cornell
University.
Kenneth R. Wood has been our Vice President, Engineering since December
1997. From April 1990 to December 1997, he was our Senior Microwave Engineer
and Program Manager. Mr. Wood holds a B.S. in electrical engineering from
the University of Pretoria and an M.S. in microwaves from the University of
London.
Ralph A. Goldwasser has been a director since December 2001. Since March
2001, he has been a consultant to several technology companies. From January
2000 to December 2001, Mr. Goldwasser was Executive Vice President and Chief
Financial Officer of Adero Inc., a development stage company that provided
global turnkey content distribution network services enabling rapid deployment
of Web content worldwide. From June 1998 to January 2000, he was Senior Vice
President and Chief Financial Officer of Avici Systems Inc., a developer of
next-generation Internet backbone routing platforms. From 1983 to October 1997,
he held various financial and management positions at BBN Inc., where his last
position was Senior Vice President and Chief Financial Officer. BBN was a
publicly-traded internetworking company that provided comprehensive Internet
services and related technologies and was acquired by GTE Corporation in 1997.
Mr. Goldwasser holds a B.E. in electrical engineering from City College of New
York and an M.B.A from New York University. He is also a Certified Public
Accountant.
Daniel A. Saginario has been a director since April 2003. From January
2000 until February 2003, he was Chief Executive Officer, President, and a
director of ioWave, Inc. From January 1998 to January 2000, he was President of
the Global Network Solutions division of L-3 Communications, a multi-billion
dollar public company specializing in the supply of military technology. Mr.
Saginario also spent over thirty years in various positions at NYNEX (now
Verizon), where his positions included President of NYNEX Interactive
Information Services Company, a holding company managing certain of NYNEX's
investments, and Corporate Director - Strategic Planning & Corporate
Development. Mr. Saginario holds a B.B.A. from Baruch College and an M.B.A from
Pace University.
Dr. John L. Youngblood has been a director since June 1992. From June
1992 to April 2003, he was our Chief Executive Officer. From March 1993 to
April 2003, he was our President. He holds a B.S. in electrical engineering
from the University of Texas at Arlington, and both an M.S. and a Ph.D. in
electrical engineering from Oklahoma State University.
Board of Directors
Our board of directors is currently divided into three classes, with
one class of directors elected each year at the annual meeting of
stockholders for a three-year term of office. Messrs. Goldwasser and Poole
serve in the class whose terms expire in 2003, and Mr. Poole is being
nominated for re-election. Ms. Armitage and Mr. Young serve in the class
6
whose terms expire in 2004. Messrs. Fitzgerald, Saginario, and Youngblood
serve in the class whose terms expire in 2005. Our executive officers and
key employees named above are elected annually by the directors and serve at
the discretion of the directors. There are no family relationships among our
directors and executive officers.
We are proposing to eliminate the classified nature of our board of
directors in connection with our reincorporating into Delaware. Therefore, if
the reincorporation proposal is approved as we expect, the board classes
described above would be eliminated and each member of our board of directors
after reincorporating would be elected at each annual meeting of our
stockholders.
The board of directors meets on a regularly scheduled basis and holds
special meetings as required. The board met twenty-one times during 2002 and
acted by written consent once. None of our incumbent directors attended fewer
than 75% of the total meetings of the board and committee meetings on which such
board member served in 2002 during the period he or she served as a director or
member of the committee.
We have a standing Audit Committee, Compensation Committee, and Nominating
Committee, each of which was established by the board of directors.
The members of our Audit Committee during 2002 were Allan M. Doyle,
Jr., Albert E. Paladino, and Mr. Goldwasser. The members of our Audit
Committee currently are Messrs. Goldwasser and Saginario and Ms. Armitage.
The Audit Committee held six meetings during 2002. The Audit Committee
selects and engages our independent auditors, reviews and evaluates our audit
and control functions, reviews the results and scope of the audit and other
services provided by our independent auditors, and performs such other duties
as may from time to time be determined by the board of directors.
The members of our Compensation Committee during 2002 were Ms. Armitage
and Messrs. Paladino, Doyle, and Youngblood. The members of our Compensation
Committee currently are Messrs. Saginario and Goldwasser and Ms. Armitage. The
Compensation Committee held two meetings during 2002 and met informally in
connection with several meetings of the board of directors in 2002. The
Compensation Committee reviews the compensation and benefits of our executive
officers, recommends and approves stock awards under our stock option plans (a
shared power with the full board of directors), makes recommendations to the
board of directors regarding compensation matters, and performs such other
duties as may from time to time be determined by the board of directors.
The members of our Nominating Committee during 2002 were Ms. Armitage, Dr.
Paladino, and Raphael H. Amit (from May 2002 until his resignation from the
board of directors in October 2002). The members of our Nominating Committee
currently are Ms. Armitage and Messrs. Goldwasser and Saginario. The Nominating
Committee held two meetings during 2002. The Nominating Committee recommends
candidates for membership on the board of directors based on
committee-established guidelines, consults with the Chairperson of the board on
committee assignments, considers candidates for the board of directors proposed
by stockholders, and performs such other duties as may from time to time be
determined by the board of directors.
The Nominating Committee will consider a candidate for director proposed
by a stockholder. A candidate must be highly qualified and be both willing and
expressly interested in serving on the board of directors. A stockholder wishing
to propose a candidate for the Nominating Committee's consideration should
forward the candidate's name and qualifications to our Clerk at 20 Industrial
Drive East, South Deerfield, MA 01373. The Nominating Committee has full
discretion in considering its nominations to the board of directors.
7
AUDIT COMMITTEE
Our board of directors has adopted and approved a formal written charter
for the Audit Committee. The members of the Audit Committee during 2002 were,
and the current members of the Audit Committee are, "independent" as defined in
the listing standards of the National Association of Securities Dealers.
Audit Committee Report
In connection with its function to oversee and monitor the financial
reporting process of Telaxis, the Audit Committee has done the following:
o reviewed and discussed the audited financial statements for
the fiscal year ended December 31, 2002 with our management;
o discussed with PricewaterhouseCoopers LLP, our independent
auditors for the fiscal year ended December 31, 2002, the
matters required to be discussed by SAS 61 (Codification of
Statements on Auditing Standards, AU ss. 380); and
o received the written disclosures and the letter from
PricewaterhouseCoopers LLP required by Independence Standards
Board Standard No. 1 (Independence Discussions with Audit
Committees) and has discussed with PricewaterhouseCoopers LLP
its independence.
Based on the foregoing, the Audit Committee recommended to the board of
directors that the audited financial statements be included in our annual report
on Form 10-K for the fiscal year ended December 31, 2002.
In evaluating the independence of our auditors, the Audit Committee
considered whether the services they provided to our company beyond their audit
and review of our financial statements was compatible with maintaining their
independence. The Audit Committee also considered the amount of fees they
received for audit and non-audit services.
Messrs. Doyle and Paladino were members of our Audit Committee in 2002
and participated in the deliberations of the Audit Committee relating to our
fiscal year 2002 financial results and related items set forth above.
However, Messrs. Doyle and Paladino are no longer members of our board of
directors or Audit Committee. Ms. Armitage and Mr. Saginario joined our
Audit Committee in April 2003. They did not participate in any of the
deliberations of the Audit Committee with respect to our fiscal year 2002
financial results and, accordingly, they did not participate in this report.
Audit Committee
Ralph A. Goldwasser, Chairman
8
MATERIAL RELATIONSHIPS
AND RELATED PARTY TRANSACTIONS
Stephen L. Ward's last day of employment with Telaxis was in January 2003.
Mr. Ward had been our Executive Vice President Marketing and Sales. In January
2003, we entered into a letter agreement with Mr. Ward that terminated his
employment agreement that had been signed in July 2001 and that specified the
terms for Mr. Ward's separation from service. Mr. Ward received a separation
payment of $131,252 (an amount equal to seven months of his base salary), which
was paid shortly after his last day of employment. His employment agreement had
provided for separation payments in an aggregate amount equal to twelve months
of his base salary, payable over twelve months. We also agreed to make the
payments to continue Mr. Ward's health and dental benefits under COBRA through
August 31, 2003. Mr. Ward's rights under his option agreements remained
unchanged. Mr. Ward provided a general release to us and agreed to comply with
confidentiality, insider trading, non-solicitation, and non-competition
provisions.
In August 2002, we amended the employment agreements of Dennis C. Stempel
and David L. Renauld. In January 2003, we made the same amendments to the
employment agreements of John L. Youngblood and Kenneth R. Wood, a key employee
of ours. These amendments address the amount of severance the employees would be
entitled to receive if the employee's employment is involuntarily terminated for
reasons other than cause or if the employee terminates his employment for good
reason, as defined in the employment agreements, after a change of control of
Telaxis. The amendments reduced the amount of severance in those circumstances
from twelve months to eleven months and provided that the full amount would be
paid on the last day of employment rather than over twelve months. The
amendments removed the provision reducing severance payments by amounts earned
by the employee at subsequent employment. The amendments also removed the
requirement for us to continue to provide benefits (or cash in lieu thereof) to
the employee for the twelve-month period following termination of employment.
The employees also agreed to provide consultation and advice to us for a period
of up to three months following termination of his employment.
In January 2003, we made further amendments to the employment agreements
of Messrs. Stempel and Renauld. The January 2003 amendments specify that the
employee's last day of employment will be established either by us upon thirty
days notice to the employee or by the employee upon thirty days notice to us.
However the date is set, the termination will be treated as an involuntary
termination by us without cause entitling the employee to the separation
benefits specified in his employment agreement, as amended; provided, however,
to be entitled to the separation benefits, Mr. Stempel could only establish a
last day of employment of March 31, 2003 or later and Mr. Renauld could only
establish a last day of employment of May 31, 2003 or later.
In August 2002, we amended certain stock option agreements of Messrs.
Stempel and Renauld. In January 2003, we made the same amendments to certain
stock option agreements of Messrs. Youngblood and Wood. These amendments
increased the post-termination exercise period for certain options from three
months to two years. These amendments also increased the number of unvested
options that would be accelerated upon a change of control of Telaxis. All of
the affected stock options had exercise prices higher than the market price of
our common stock on the dates of the amendments and as of May 7, 2003. The
following table summarizes the number of stock options that accelerated on April
1, 2003 due to the terms of the stock option agreements, amended in certain
cases as described above, and the transaction with YDI described above, the
total number of vested stock options on April 1, 2003, and the number of those
vested stock options with a two-year post-termination exercise period.
9
- --------------------------------------------------------------------------------
Number of Vested
Options with
Number of Options Total Number of Two-Year
That Accelerated on Vested Options on Post-Termination
Name of Employee April 1, 2003 April 1, 2003 Exercise Period
- --------------------------------------------------------------------------------
John L. Youngblood 73,216 468,902 408,602
- --------------------------------------------------------------------------------
Dennis C. Stempel 47,512 204,455 195,195
- --------------------------------------------------------------------------------
David L. Renauld 53,652 189,950 130,740
- --------------------------------------------------------------------------------
Kenneth R. Wood 35,959 190,709 179,014
- --------------------------------------------------------------------------------
As described above under "Recent Change of Control of Telaxis," we
completed a strategic combination transaction with YDI on April 1, 2003. Please
refer to that section for more details relating to that transaction and its
effects.
In connection with the transaction with YDI, the employment of each of
Messrs. Youngblood and Stempel by the Company terminated. We are still
negotiating the terms of the separation of each of Messrs. Youngblood and
Stempel from the Company. We cannot predict the outcome of these negotiations or
whether a resolution of these matters will be achieved without litigation.
Effective April 2003, we entered into indemnification agreements with
Messrs. Fitzgerald, Poole, Milton, Saginario, and Young. The terms of these
agreements are substantially the same as the indemnification agreements we
previously entered into with our other directors and officers. These agreements
contain provisions that are, in some respects, broader than the specific
indemnification provisions contained in the Massachusetts Business Corporation
Law and in our by-laws. In general, the indemnification agreements may require
us:
o to indemnify our directors and officers against liabilities that may
arise due to their status or service as officers or directors, other
than liabilities that may arise with respect to any matter as to
which the person seeking indemnification is adjudicated not to have
acted in good faith in the reasonable belief that their action was
in the best interest of Telaxis; and
o to advance their expenses incurred as a result of any proceeding
against them as to which they may be entitled to indemnification.
In addition, we currently maintain a policy for directors' and officers'
insurance.
As a result of our transaction with YDI, we acquired the lease for YDI's
headquarters facilities in Falls Church, Virginia, which is leased from Merry
Fields, LLC, a Delaware limited liability company. Merry Fields is wholly-owned
by Concorde Equity and Michael F. Young. The annual lease amount is
approximately $263,000, subject to a three percent annual increase. The lease
expires on December 31, 2010. Merry Fields acquired the facility in 2000 using
proceeds from a bank loan. YDI guaranteed that bank loan, which as of December
31, 2002 had an outstanding principal amount of $1,521,800 and an interest rate
of 7.34%. As part of the transaction between YDI and Telaxis, Concorde Equity
and Mr. Young agreed to indemnify YDI and Telaxis if YDI has to pay any money
under that guarantee.
In 2002, we paid Dr. Paladino a retainer of $60,000 per year for his
services as chairman of the board of directors of our company.
Our Policy on Interested Transactions
We have adopted a policy whereby contracts and business arrangements with
our officers, directors or stockholders or entities for whom they serve as
officers, directors, trustees or members must be on an arm's-length basis and
approved by the board of directors. Our current articles of organization and
10
by-laws require approval of the contract or transaction by a majority of the
independent directors who have no interest in the contract or transaction.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND OUR DIRECTORS AND MANAGEMENT
The following table provides information regarding the beneficial
ownership of our outstanding common stock by:
o each person or group that we know owns more than 5% of the common
stock,
o each of our directors,
o each of our named executive officers,
o each person who became one of our executive officers since the end
of our last completed fiscal year, and
o all of our current directors and executive officers as a group.
Amounts are as of May 7, 2003 for our directors and named executive
officers. Amounts for 5% stockholders are reported as of the date such
stockholders reported such holdings in filings under the Securities Exchange Act
of 1934, as amended, unless more recent information was provided.
Beneficial ownership is determined under rules of the SEC and includes
shares over which the indicated beneficial owner exercises voting and/or
investment power. Shares of common stock that we may issue upon the exercise of
options or warrants currently exercisable or exercisable within 60 days of May
7, 2003 are deemed outstanding for computing the percentage ownership of the
person holding the options or warrants but are not deemed outstanding for
computing the percentage ownership of any other person. Except as we otherwise
indicate, we believe the beneficial owners of the common stock listed below,
based on information furnished by them, have sole voting and investment power
over the number of shares listed opposite their names. Unless we otherwise
indicate, the address for each 5% stockholder is 8000 Lee Highway, Falls Church,
VA 22042.
11
Shares Number
Issuable of Shares
pursuant to Beneficially
Warrants Owned
and Options (Including
Exercisable the Number
within of Shares Percentage of
60 days of shown in the Shares
Name of Beneficial Owner May 7, 2003 first column) Outstanding
------------------------ ----------- ------------- -------------
Concorde Equity, LLC(1) ............ 0 20,663,267 38.1%
Robert E. Fitzgerald(1) ............ 82,500 20,745,767 38.2
Michael F. Young(2) ................ 67,500 16,904,232 31.1
Dr. Meir Barel(3) .................. 0 2,719,058 5.0
Possart Strasse No. 9
81679 Munich, Germany
Carol B. Armitage(4) ............... 27,250 33,000 *
Gordon D. Poole(5) ................. 62,500 62,500 *
Patrick L. Milton(6) ............... 31,250 31,250 *
David L. Renauld(7) ................ 291,045 302,545 *
Ralph A. Goldwasser ................ 8,000 12,000 *
Daniel A. Saginario ................ 16,666 16,666 *
John L. Youngblood(8) .............. 486,847 512,677 *
Stephen L. Ward(9) ................. 37,500 333,991 *
Dennis C. Stempel(10) .............. 204,455 216,666 *
All current executive officers
and directors as a group
(9 persons) ....................... 1,073,558 38,620,637 69.9
- ------------------------
* Less than 1%.
(1) Mr. Fitzgerald is President and Managing Member of Concorde Equity.
Concorde Equity became a significant stockholder in connection with the
completion of our transaction with YDI on April 1, 2003. Mr. Fitzgerald
became a director and our Chief Executive Officer also in connection with
the completion of our transaction with YDI on April 1, 2003. Mr.
Fitzgerald has the sole power to vote or direct the vote, and the sole
power to dispose or direct the disposition of, the shares beneficially
owned by Concorde Equity. Mr. Fitzgerald disclaims beneficial ownership of
the shares beneficially held by Concorde Equity, except to the extent of
his pecuniary interest in those shares.
(2) Mr. Young became a significant stockholder, a director, and our President
and Chief Technical Officer in connection with the completion of our
transaction with YDI on April 1, 2003.
(3) Represents 88,500 shares held by Dr. Barel directly and 2,630,558 shares
held by the following entities: (a) 1,111,111 shares held by Star Growth
Enterprise, (b) 517,992 shares held by SVE Star Ventures Enterprises No.
V, (c) 285,768 shares held by SVM Star Ventures Management GmbH Nr. 3
("SVM 3"), (d) 91,963 shares held by SVE Star Ventures Management GmbH Nr.
3 & Co. Betelligungs KG Nr. 2, and (e) 623,724 shares held by SVE Star
Ventures Enterprises No. VII. SVM 3 manages the investments of those
entities. Dr. Meir Barel is the sole director and primary owner of SVM 3.
SVM 3 and Dr. Barel each have the sole power to vote or direct the vote,
and the sole power to dispose or direct the disposition of, the shares
beneficially owned by the entities listed above. Dr. Barel disclaims
beneficial ownership of the shares beneficially held by those entities,
except to the extent of his pecuniary interest in those shares.
(4) Ms. Armitage has joint ownership and shared voting and investment power
with her husband of 2,000 shares of our common stock.
(5) Mr. Poole became a director and our Vice President - Sales West in
connection with the completion of our transaction with YDI on April 1,
2003.
(6) Mr. Milton became our Chief Financial Officer and Treasurer in connection
with the completion of our transaction with YDI on April 1, 2003.
(7) Mr. Renauld has joint ownership and shared voting and investment power
with his wife of 5,000 shares of our common stock.
(8) Dr. Youngblood is a director. He was our Chief Executive Officer and
President until April 2003.
(9) Mr. Ward was our Executive Vice President, Marketing and Sales until
January 2003. Includes 162,000 shares of our common stock held by members
of Mr. Ward's immediate family.
(10) Mr. Stempel was our Senior Vice President, Finance and Operations, Chief
Financial Officer, and Treasurer until April 2003.
EXECUTIVE COMPENSATION
Summary Compensation. The following table summarizes the compensation
earned for services rendered to us in all capacities during 2002 by our Chief
Executive Officer and our other executive officers during 2002. We refer to
these executives as our "named executive officers" elsewhere in this proxy
statement.
12
Summary Compensation Table
for 2000, 2001, and 2002
Long-Term
Compensation
------------------------------
Annual Compensation Awards
------------------------------------- ------------------------------
Restricted Securities
Other Annual Stock Underlying All Other
Name and Year Salary Bonus Compensation Award(s) Options Compensation
Principal Position ($) ($) ($) ($) (#) ($)(a)
- ------------------------------- ---- ------- --------- ------------ ---------- ---------- ------------
John L. Youngblood(b) ......... 2002 255,216 0 0 0 0 3,730(c)
Former President and Chief 2001 255,216 0 0 0 100,000 3,738(d)
Executive Officer 2000 239,609 5,561 0 0 53,580 2,114
Stephen L. Ward(e)............. 2002 225,004 30,000(f) 0 0 0 380(g)
Former Executive Vice 2001 99,521 0 0 0 300,000 126(g)
President, Marketing and
Sales
Dennis C. Stempel(h)........... 2002 157,498 0 0 0 20,000 3,759(i)
Former Senior Vice 2001 157,498 0 0 0 100,000 2,732(j)
President, Finance and 2000 151,083 2,062 0 0 25,385 2,114
Operations, Chief Financial
Officer, and Treasurer
David L. Renauld............... 2002 153,774 0 0 0 10,000 3,499(k)
Vice President, Legal and 2001 153,774 0 0 0 100,000 3,571(l)
Corporate Affairs, Secretary 2000 150,491 3,243 0 0 37,750 27,043(m)
and Clerk
- -------------------------
(a) Unless otherwise indicated, amounts in this column consist of matching
amounts of $2,000 contributed by Telaxis to a defined contribution plan
for the named executive officers and premiums on term life insurance of
$114 paid by Telaxis.
(b) Dr. Youngblood was our Chief Executive Officer and President until April
2003.
(c) Represents matching amounts of $2,500 contributed by Telaxis to a defined
contribution plan for Mr. Youngblood, premiums on term life insurance of
$445 paid by Telaxis, and reimbursement of tax return preparation expenses
of $785.
(d) Represents matching amounts of $2,500 contributed by Telaxis to a defined
contribution plan for Mr. Youngblood, premiums on term life insurance of
$443 paid by Telaxis, and reimbursement of tax return preparation expenses
of $795.
(e) Mr. Ward became our Executive Vice President, Marketing and Sales in July
2001. He held that position until January 2003.
(f) In connection with our hiring Mr. Ward in July 2001, we agreed to pay him
a cash bonus of $30,000 in January 2002. In February 2002, Mr. Ward chose
to receive this bonus in stock rather than cash and therefore was issued
34,091 shares of Telaxis common stock (which had a fair market value of
$0.88 per share on the date of issuance for an aggregate fair market value
of $30,000).
(g) Represents premiums on term life insurance paid by Telaxis.
(h) Mr. Stempel was our Senior Vice President, Finance and Operations, Chief
Financial Officer, and Treasurer until April 2003.
(i) Represents matching amounts of $2,500 contributed by Telaxis to a defined
contribution plan for Mr. Stempel, premiums on term life insurance of $233
paid by Telaxis, and reimbursement of tax return preparation expenses of
$1,026.
(j) Represents matching amounts of $2,500 contributed by Telaxis to a defined
contribution plan for Mr. Stempel and premiums on term life insurance of
$232 paid by Telaxis.
(k) Represents matching amounts of $2,500 contributed by Telaxis to a defined
contribution plan for Mr. Renauld, premiums on term life insurance of $225
paid by Telaxis, and reimbursement of tax return preparation expenses of
$774.
(l) Represents matching amounts of $2,500 contributed by Telaxis to a defined
contribution plan for Mr. Renauld, premiums on term life insurance of $224
paid by Telaxis, and reimbursement of tax return preparation expenses of
$847.
(m) Represents reimbursement of relocation expenses of $24,929, matching
amounts of $2,000 contributed by Telaxis to a defined contribution plan
for Mr. Renauld, and premiums on term life insurance of $114 paid by
Telaxis.
Option Grants in 2002. The following table provides information regarding
all options granted to our named executive officers in 2002. Amounts reported in
the last two columns of the table represent hypothetical values that the holder
could realize by exercising the options immediately before their expiration,
assuming the value of our common stock appreciates at the specified compounded
annual rates over the terms of the options. These numbers are calculated based
13
on the SEC's rules and do not represent our estimate of future stock price
growth. Actual gains, if any, on stock option exercises and common stock
holdings will depend on the timing of exercise and the future performance of our
common stock. We may not achieve the rates of appreciation assumed in this
table, and the named executive officers may not receive the calculated amounts.
This table does not take into account any appreciation or depreciation in the
price of our common stock from the date of grant to the current date. The values
shown are net of the option exercise price, but do not include deductions for
taxes or other expenses associated with the exercise.
Option Grants
in 2002
Individual Grants
----------------------------------------------------------------- Potential
Realizable Value
at Assumed
Percent Annual Rates
Number of of Total of Stock Price
Securities Options Appreciation
Underlying Granted to Exercise for Option Term
Options Employees in Price Expiration ------------------
Name Granted (#) Fiscal Year (%) ($/Share) Date 5% ($) 10% ($)
------------- ----------- --------------- --------- ---------- ------- -------
John L. Youngblood.................. 0 0 -- -- -- -
Stephen L. Ward..................... 0 0 -- -- -- -
Dennis C. Stempel................... 10,000 25.97 1.00 5/21/12 6,289 15,937
10,000 25.97 0.38 8/29/12 2,390 6,056
David L. Renauld.................... 10,000 25.97 0.38 8/29/12 2,390 6,056
All options were granted at fair market value on the date of grant as
determined by our board of directors. The board of directors determined the fair
market value of our common stock based on the trading value of our stock on the
date of grant.
Each of these options, with the exception of Mr. Stempel's grant for
10,000 shares that expires on May 21, 2012 (which vested in full on the date of
grant), vests over a three-year period, vesting as to 25% of the shares that may
be purchased under the option on the date of grant and as to an additional 6.25%
on the first day of January, April, July, and October following the date of
grant until the option has fully vested. All of the unvested options became
fully vested upon the completion of the transaction with YDI in April 2003.
All stock options granted to the named executive officers in 2002, with
the exception of Mr. Stempel's grant for 10,000 shares that expires on May 21,
2012, terminate on the earlier of:
o two years after the date of his death or disability or the date of
termination of the executive's employment, or
o 10 years from the date of grant.
The stock options granted to Mr. Stempel that expire on May 21, 2012
terminate on the earliest of:
o two years after the date of termination of his employment if he
ceases to be employed by us except as a result of his death or
disability,
o one year after his death or disability, or
o 10 years from the date of grant.
Aggregated Option Exercises and Fiscal Year-End Option Values. The
following table provides information regarding stock options exercised in 2002
and the value of all unexercised options held by the named executive officers at
the end of 2002. The value realized upon the exercise of options is based on the
last sale prices of the common stock on the respective dates of exercise, as
reported by the Nasdaq Stock Market, less the applicable option exercise prices.
The value of unexercised in-the-money options represents the difference between
14
the fair market value of our common stock on December 31, 2002 ($0.18 per share)
and the option exercise price, multiplied by the number of shares underlying the
option.
2002 Aggregated Option Exercises
and Fiscal Year-End Option Values
Number of Shares
of Common Stock Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
Fiscal Year-End (#) Fiscal Year-End ($)
Shares --------------------------- ---------------------------
Acquired on Value
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ------------ ----------- ------------- ----------- -------------
John L. Youngblood............ 0 0 378,402 97,679 0 0
Stephen L. Ward............... 0 0 118,750 181,250 0 0
Dennis C. Stempel............. 0 0 134,241 74,644 0 0
David L. Renauld.............. 3,000 1,260 118,166 77,984 0 0
Employment Agreements and Change-of-Control Provisions
We have employment agreements with Messrs. Youngblood, Stempel, and
Renauld, all having substantially the same terms (other than position and
salary). Each employment agreement had an original term of 24 months and renews
automatically on a quarterly basis, provided that the agreement has not
terminated before the renewal date. The annual compensation for each officer was
initially set at an annual base salary in the following amount: Dr. Youngblood -
$255,216, Mr. Stempel - $157,497, and Mr. Renauld - $153,774. Under his
agreement, we furnished Dr. Youngblood with a company automobile at our expense.
Under their agreements, Messrs. Stempel and Renauld are entitled to an annual
car allowance of $7,800.
Each of Messrs. Youngblood, Stempel, and Renauld are entitled to receive
severance payments for either eleven months or twenty-four months after
termination of his employment depending on the circumstances under which his
employment terminates. If we terminate an officer's employment for cause, he
will not be entitled to severance payments. The employee will be entitled to
eleven months of severance if the employee's employment is involuntarily
terminated for reasons other than cause or if the employee terminates his
employment for good reason, as defined in the employment agreements, after a
change of control of Telaxis. The maximum 24-month severance period will apply
only if we terminate an officer's employment without cause after we undergo a
"change of control" that was not approved by a majority of our board of
directors. A "change of control" is defined in each employment agreement to
include the completion of a merger or consolidation of Telaxis with any other
entity (other than a merger or consolidation in which Telaxis is the surviving
entity and is owned at least 50% collectively by persons who were stockholders
of Telaxis before the transaction), the sale of substantially all of Telaxis'
assets to another entity, any transaction that results in a person or group
holding 50% or more of the combined voting power of Telaxis' outstanding
securities, or changes to Telaxis' board of directors that result in the persons
who were either directors on the date of the employment agreement or their
nominated successors no longer comprising a majority of the board. The full
amount of the severance payment would be paid on the last day of employment.
There is no provision reducing severance payments by amounts earned by the
employee at subsequent employment or for us to continue to provide benefits (or
cash in lieu thereof) to the employee for any period following termination of
employment. The employees also agreed to provide consultation and advice to us
for a period of up to three months following termination of his employment.
The employment agreements of Messrs. Stempel and Renauld also contain
additional provisions stating that the employee's last day of employment will be
established either by us upon thirty days notice to the employee or by the
employee upon thirty days notice to us. However the date is set, the termination
will be treated as an involuntary termination by us without cause entitling the
employee to the separation benefits specified in his employment agreement, as
amended; provided, however, to be entitled to the separation benefits, Mr.
15
Stempel could only establish a last day of employment of March 31, 2003 or later
and Mr. Renauld could only establish a last day of employment of May 31, 2003 or
later.
Following the completion of our business combination with YDI, our board
of directors approved the terms of an amended employment agreement with Mr.
Renauld. Under the terms approved by the board, Mr. Renauld would continue in
his current role with his current salary (which may be adjusted in the future).
He would no longer receive his annual car allowance. Mr. Renauld would be
entitled to receive severance under similar circumstances as contemplated under
his current agreement, but the amount of severance would be eleven months of
base salary. In addition, for a period of one year after the closing of our
business combination with YDI, Mr. Renauld would be entitled to receive a
declining amount of severance if he terminates his employment voluntarily
without good reason. The severance payment would initially equal nine months'
base salary and would be reduced by one month's base salary for each two months
that Mr. Renauld remains with us after the completion of the business
combination, such that he would receive a severance payment of only four months'
base salary if he voluntarily terminates his employment without good reason in
the last two months of the one-year period. On April 2, 2003, our board granted
Mr. Renauld a stock option to purchase 100,000 shares of our common stock at an
exercise price of $.24 per share, the fair market value of our common stock on
that date. This option will terminate if Mr. Renauld terminates his employment
without good cause in the one-year period described above and receives the
severance payment described above. We have not yet executed an amended
employment agreement with Mr. Renauld reflecting the foregoing terms.
The employment of each of Dr. Youngblood and Mr. Stempel was terminated
in connection with the transaction with YDI. See "Material Relationships and
Related Party Transactions" above.
Under the stock option agreements, a large portion of the unvested options
held by Messrs. Youngblood, Stempel, and Renauld vested and became immediately
exercisable upon the completion of the transaction with YDI in April 2003. See
"Material Relationships and Related Party Transactions" above.
In July 2001, we entered into an employment agreement with Mr. Ward
having substantially similar terms as the agreements with Messrs. Stempel and
Renauld (other than position and salary). Mr. Ward's annual base salary was
set at $225,004. We terminated Mr. Ward's employment agreement in connection
with his leaving Telaxis' employment. See "Material Relationships and
Related Party Transactions" above.
Director Compensation
In 2002, our compensation policy for directors contemplated the following
compensation:
o a $10,000 annual retainer for serving on the board
o a $2,000 annual retainer for serving as chairman of a standing
committee of the board
o $1,000 for each board meeting attended in person
o $500 for each committee meeting attended in person
o at a minimum, the following rights to acquire shares of our common
stock:
o for each new non-employee director elected or appointed to the
board, a non-qualified stock option to purchase 12,000 shares
of our common stock that vests in three equal annual
installments beginning on the date of grant
o for each incumbent non-employee director, a fully vested,
non-qualified stock option to purchase 9,000 shares of our
common stock granted immediately following each annual meeting
of stockholders, as long as the director has served at least
one complete year before the date of the annual meeting and
continues to serve as a director after the meeting
In May 2002, we granted an option to purchase 9,000 shares of our
common stock at $1.00 per share to Dr. Paladino, Ms. Armitage, Mr. Doyle, and
Mr. Norbury in accordance with this standard policy.
16
In 2002, we paid Dr. Paladino a retainer of $60,000 per year for his
services as chairman of our board of directors.
We recently changed our compensation policy for directors. Our policy now
contemplates the following compensation:
o an $11,000 annual retainer for serving on the board
o a $6,500 annual retainer for serving as chairperson of the board
o a $5,000 annual retainer for serving as chairperson of the audit
committee of the board
o a $2,500 annual retainer for serving as a member of the audit
committee of the board
o a $1,500 annual retainer for serving as chairperson of the
compensation committee of the board
o a $500 annual retainer for serving as chairperson of the nominating
committee of the board
o at a minimum, the following rights to acquire shares of our common
stock:
o for each new non-employee director elected or appointed to the
board, a non-qualified stock option to purchase 50,000 shares
of our common stock that vests in three equal annual
installments beginning on the date of grant
o for each incumbent non-employee director, a fully vested,
non-qualified stock option to purchase 15,000 shares of our
common stock granted immediately following each annual meeting
of stockholders, as long as the director has served at least
one complete year before the date of the annual meeting and
continues to serve as a director after the meeting
We will also reimburse our non-employee directors for reasonable expenses
incurred in attending meetings of the board of directors and its committees.
Compensation Committee Interlocks and Insider Participation
In 2002, our board of directors had a compensation committee consisting
of four directors - Drs. Paladino and Youngblood and Mr. Doyle and Ms.
Armitage. Dr. Youngblood, who was then our President and Chief Executive
Officer, served as a member of our compensation committee during 2002. Dr.
Youngblood participated in discussions regarding the compensation of our
executive officers. None of our executive officers served as a member of the
board of directors or compensation committee of any other entity that has one
or more executive officers serving as a member of our board of directors or
compensation committee. Dr. Paladino serves as chairman of the board of
directors and a member of the compensation committee of RF Micro Devices, of
which Mr. Norbury, one of our directors in 2002, was Chief Executive Officer
until January 2003.
Board Compensation Committee Report on Executive Compensation
Overall Policy
Our executive compensation program is designed to be closely linked to
corporate performance and return to stockholders by linking a significant
portion of executive compensation to our success. The overall objectives of this
strategy are to provide competitive salaries necessary to attract and retain the
highest quality talent, to reward performances that accomplish our goals and
priorities, and to provide incentives that link the executive officers'
opportunities for financial reward with that of the stockholders.
The Compensation Committee is responsible for setting and administering
the policies that govern the compensation of our executive officers. Generally,
the three principal components of the compensation program for executive
officers are base salary, bonus, and equity-based incentives (typically stock
options), although awards are not necessarily granted in all three categories
every year. In reaching decisions on compensation, the Compensation Committee
17
also takes into account the full compensation package provided by Telaxis to the
officers, including severance plans, insurance, and benefits generally available
to all employees of Telaxis.
This report addresses our compensation policies as they relate to
compensation reported for 2002.
Salary Administration
The ranges of appropriate base salaries for executives are determined
based in part on analysis of salary data on positions of comparable
responsibility within the telecommunications industry. Salaries of executive
officers are reviewed annually, and any adjustments are made by evaluating the
performance of Telaxis and of each executive officer and taking into account any
change in the executive's responsibilities. Exceptional performances are
generally compensated with performance-related bonuses rather than raising base
salaries, reflecting the Compensation Committee's emphasis on linking pay to
performance criteria. The Compensation Committee elected not to increase the
base salaries of our named executive officers in 2002.
Bonus Program
Executives are eligible to receive bonuses based on the overall
performance of Telaxis and based on individual achievement. Bonuses are awarded
based upon the recommendation of the Chief Executive Officer and the
Compensation Committee's evaluation of the executive officer's achievement of
his or her goals. In 2002, the Compensation Committee awarded no cash bonuses to
the named executive officers. See "Executive Compensation - Summary Compensation
Table in 2000, 2001, and 2002."
Stock Option Program
Under our active stock plans, we may grant stock options and stock
appreciation rights to any or all of our directors, employees, officers, and
consultants. The Compensation Committee believes that long-term incentive
awards, such as stock options, link the executive's opportunity for financial
reward with that of the stockholders, in that the value of an executive's stock
options increases as the value of the stockholders' stock increases. The
Compensation Committee granted options to executive officers in order to
continue to incentivize the officers towards the achievement of our long-term
goals.
In 2002, the Compensation Committee granted options for 30,000 shares
of our common stock in the aggregate to the named executive officers, other
than Dr. Youngblood. See "Executive Compensation - Option Grants in 2002."
Compensation of the Chief Executive Officer
Dr. Youngblood's 2002 base compensation was pursuant to an employment
contract negotiated with Telaxis in 1994 as revised in December 2000. In 2000,
the Compensation Committee elected to increase Dr. Youngblood's base
compensation by approximately sixteen percent (16%). This increase was both a
market adjustment for Dr. Youngblood's salary and a merit increase. The
Compensation Committee elected not to increase Dr. Youngblood's base
compensation in 2001 or 2002. The Compensation Committee's determination of the
amount of Dr. Youngblood's bonus was made after a review of the achievement of
Dr. Youngblood's goals for the year. The Compensation Committee did not award
Dr. Youngblood any cash bonus in 2002. See "Executive Compensation - Summary
Compensation Table in 2000, 2001, and 2002." Dr. Youngblood was not granted any
options for shares of our common stock in 2002. See "Executive Compensation -
Option Grants in 2002."
Policy Regarding Section 162(m) of the Internal Revenue Code
Section 162(m) of the Internal Revenue Code limits Telaxis' ability to
deduct, for income tax purposes, compensation in excess of $1.0 million paid to
the chief executive officer and the four most highly compensated officers of
Telaxis (other than the chief executive officer) in any year, unless the
compensation qualifies as "performance-based compensation." The aggregate base
salaries, bonuses and non-equity compensation of each of Telaxis' officers have
18
not historically exceeded, and are not in the foreseeable future expected to
exceed, the $1.0 million limit. The Compensation Committee's policy with respect
to equity compensation is that it would prefer to cause the compensation to be
deductible by Telaxis; however, the Compensation Committee also weighs the need
to provide appropriate incentives to Telaxis' officers against the potential
adverse tax consequences that may result under Section 162(m) from the grant of
equity compensation that does not qualify as performance-based compensation. The
Compensation Committee has granted and may continue to grant equity compensation
to Telaxis' officers that does not qualify as performance-based compensation
that could be in excess of the Section 162(m) limits in circumstances when the
Committee believes such grants are appropriate.
Messrs. Paladino and Doyle were members of our Compensation Committee
in 2002 and participated in the deliberations of the Compensation Committee
relating to executive compensation in 2002 and related items set forth
above. However, Messrs. Paladino and Doyle are no longer members of our
board of directors or Compensation Committee. Dr. Youngblood was a member of
our Compensation Committee in 2002 but is no longer a member of our
Compensation Committee. Mr. Saginario joined our Compensation Committee in
April 2003. He did not participate in any of the deliberations of the
Compensation Committee with respect to our executive compensation in 2002
and, accordingly, he did not participate in this report.
Compensation Committee
Carol B. Armitage
John L. Youngblood
STOCK PERFORMANCE GRAPH
The graph below provides an indicator of the cumulative total shareholder
return for our common stock for the period beginning on the date of the initial
public offering of our common stock (February 2, 2000) through the end of our
most recently-completed fiscal year (December 31, 2002), as compared to the
returns of (i) The Nasdaq Stock Market (U.S.) and (ii) the Nasdaq Electronic
Components Stocks Index during the same period. The graph assumes that $100 was
invested on February 2, 2000 in our common stock (at the initial offering price
of $17.00) and in The Nasdaq Stock Market (U.S.) and the Nasdaq Electronic
Components Stocks Index and that, as to the indices, dividends were reinvested.
We have not, since our inception, paid any dividends on our common stock.
Cumulative Total Shareholder Return
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL]
- --------------------------------------------------------------------------------
February 2, December 31, December 31, December 31,
2000 2000 2001 2002
- --------------------------------------------------------------------------------
Telaxis $100 $10.66 $4.24 $1.06
- --------------------------------------------------------------------------------
Nasdaq Stock
Market (U.S.) $100 $60.49 $47.99 $33.17
- --------------------------------------------------------------------------------
Nasdaq Electronic
Components $100 $68.01 $46.34 $24.82
- --------------------------------------------------------------------------------
19
PROPOSAL 2
REVERSE / FORWARD STOCK SPLIT
Summary
The board of directors has authorized, and recommends for your approval,
an amendment to Telaxis' Restated Articles of Organization, as amended to date,
to effect a reverse/forward stock split in which a reverse 1-for-1,000 stock
split would be followed immediately by a forward 250-for-1 stock split. In
summary, the net effect would approximate a reverse 1-for-4 stock split of our
common stock reducing the number of outstanding shares of our common stock by
approximately 75%, but the reverse/forward split would not increase the par
value of our common stock or change the number of authorized shares of our
capital stock.
This transaction is comprised of a reverse stock split (the "Reverse
Split") pursuant to which each 1,000 shares of our common stock registered in
the name of a stockholder at the effective time of the Reverse Split will be
converted into one share of our common stock, followed immediately by a forward
stock split (the "Forward Split") pursuant to which each share of our common
stock outstanding upon consummation of the Reverse Split will be converted into
250 shares of our common stock. As permitted under Massachusetts law, shares of
our common stock that would be converted into less than one share in the Reverse
Split will instead be converted into the right to receive a cash payment as
described below (we refer to the Reverse Split, the Forward Split, and these
cash payments, collectively, as the "Reverse/Forward Split"). However, if a
registered stockholder holds 1,000 or more shares of our common stock in his or
her account at the effective time of the Reverse Split, any fractional share in
such account resulting from the Reverse Split will not be cashed out. Rather,
the entire amount of the shares in that stockholder's account would be affected
by the Forward Split. If, after the Forward Split, the stockholder would have a
fractional share in the account, the number of shares will be rounded up to the
next whole share.
If our stockholders approve the Reverse/Forward Split, the board of
directors will have the discretion to determine if and when to effect it and
reserves the right to abandon it even if approved by the stockholders (see
"--Reservation of Rights"). We expect that, if stockholders approve and the
board elects to implement the Reverse/Forward Split, the Reverse/Forward Split
would be consummated within one year of the date of the annual meeting. We also
expect the Reverse/Forward Split would be consummated before the contemplated
reincorporation of Telaxis into Delaware (assuming that proposal is approved by
our stockholders as we expect).
We believe that the Reverse/Forward Split will result in significantly
reduced stockholder record keeping and mailing expenses for Telaxis, will
provide holders of fewer than 1,000 shares with an efficient, cost-effective way
to cash-out their investments, and will better position Telaxis for future stock
price appreciation.
If approved by stockholders and implemented by the board of directors, the
Reverse/Forward Split will become effective on such date as may be determined by
the board upon the filing of the necessary amendments to Telaxis' Restated
Articles of Organization, as amended to date, with the Secretary of State of the
Commonwealth of Massachusetts (the "Effective Date"). The form of the proposed
amendments to Telaxis' Restated Articles of Organization, as amended to date,
necessary to effect the Reverse/Forward Split are attached to this proxy
statement as Appendix A.
Effect on Stockholders
If approved by stockholders at the annual meeting and implemented by the
board of directors, the Reverse/Forward Split will affect Telaxis stockholders
as follows:
- ----------------------------------- -------------------------------------------
Stockholder Status before
completion Net Effect after Completion of the
of the Reverse/Forward Split Reverse/Forward Split
- ----------------------------------- -------------------------------------------
Registered stockholders holding These stockholders will hold approximately
1,000 or more shares of our 1/4 the number of shares of our common
common stock in an account stock held before the Reverse/Forward
Split
- ----------------------------------- -------------------------------------------
20
- ----------------------------------- -------------------------------------------
Registered stockholders holding Shares will be converted into the right to
fewer than 1,000 shares of our receive cash (see "- - Determination of
common stock in an account Cash-Out Price" at page 26)
- ----------------------------------- -------------------------------------------
Stockholders holding common stock We intend for the Reverse/Forward Split to
in street name through a nominee treat stockholders holding common stock in
(such as a bank or broker) street name through a nominee (such as a
bank or broker) in the same manner as
stockholders whose shares are registered
in their names. Nominees will be
instructed to effect the Reverse/Forward
Split for their beneficial holders.
However, nominees may have different
procedures, and stockholders holding
shares in street name should contact their
nominees.
- ----------------------------------- -------------------------------------------
Reasons for the Reverse/Forward Split
The board of directors recommends that stockholders approve the
Reverse/Forward Split described herein for the following reasons. These, and
other reasons, are described in detail under "--Background and Purpose of the
Reverse/Forward Split" below.
Telaxis has a large number of stockholders that own relatively few shares.
Specifically, as of May 7, 2003, of Telaxis' approximately 257 registered
stockholders, approximately 141 held fewer than 1,000 shares of common stock. In
addition, as of May 7, 2003, of Telaxis' approximately 5,615 stockholders
holding common stock in street name through a nominee (e.g., a bank or broker),
approximately 4,010 held fewer than 1,000 shares of common stock in their
accounts. In summary, stockholders holding fewer than 1,000 shares in their
account represented approximately 71% of the total number of our stockholders,
but these stockholders collectively held only approximately 1.7% of our common
stock outstanding on the record date. (This analysis assumes no stockholder has
more than one account.) Continuing to maintain accounts for all these
stockholders, including costs associated with required stockholder mailings,
will cost Telaxis thousands of dollars each year. The Reverse/Forward Split will
reduce the number of stockholders with small accounts and result in cost savings
for Telaxis.
In many cases, it is relatively expensive for stockholders with fewer than
1,000 shares of our common stock to sell their shares on the open market,
particularly given the relatively low recent trading price of our common stock.
The Reverse/Forward Split would cash out stockholders with small accounts
without transaction costs such as brokerage fees. However, if these stockholders
do not want to cash out their holdings of common stock, they may buy additional
shares on the open market to increase the number of shares of common stock in
their account to at least 1,000 or, if applicable, consolidate/transfer their
accounts into an account with at least 1,000 shares of common stock.
The number of shares of our outstanding common stock increased
dramatically from approximately 16.8 million to approximately 54.2 million due
to our recent transaction with YDI. We believe that number is too large for a
company of our size and expected financial performance. We believe that the
number of shares of our common stock outstanding after the Reverse/Forward Split
(expected to be approximately 13.3 million) is more appropriate and would better
position us for future stock price appreciation.
The Reverse/Forward Split should also increase the near-term per share
market price of our common stock. Since the net effect of the Reverse/Forward
Split would approximate a reverse 1-for-4 split of our common stock, an
expectation would be for the per share market price of our common stock to
quadruple. There can be no assurance, however, that the market price of our
common stock will rise in proportion to the reduction in the number of
outstanding shares resulting from the Reverse/Forward Split, if at all. The
desire for a near-term increase in the market price of our common stock is not
one of our primary motivations for proposing the Reverse/Forward Split. Rather,
21
our board of directors focused on cost savings and establishing an
appropriately-sized outstanding share base for long-term, sustainable stock
price appreciation.
Structure of the Reverse/Forward Split
The Reverse/Forward Split includes both a reverse stock split and a
forward stock split of our common stock. If the Reverse/Forward Split is
approved by stockholders and implemented by the board of directors, the Reverse
Split is expected to occur at 6:00 p.m. on the Effective Date and the Forward
Split is expected to occur at 6:01 p.m. on the Effective Date. Upon consummation
of the Reverse Split, each registered stockholder on the Effective Date will
receive one share of our common stock for each 1,000 shares of our common stock
held in his or her account at that time. If a registered stockholder holds 1,000
or more shares of our common stock in his or her account, any fractional share
in such account will not be cashed out after the Reverse Split. Any registered
stockholder who holds fewer than 1,000 shares of our common stock in his or her
account at the time of the Reverse Split (also referred to as a "Cashed-Out
Stockholder") will receive a cash payment instead of fractional shares. This
cash payment will be determined and paid as described below under
"--Determination of Cash-Out Price" at page 26. Immediately following the
Reverse Split, all stockholders who are not Cashed-Out Stockholders will receive
250 shares of common stock for every one share of common stock they held
following the Reverse Split, plus a proportionate number of shares of common
stock for any fraction of a share they held following the Reverse Split. If,
after the Forward Split, these stockholders would have a fractional share in
their account, the number of shares will be rounded up to the next whole share.
We intend for the Reverse/Forward Split to treat stockholders holding
common stock in street name through a nominee (such as a bank or broker) in the
same manner as stockholders whose shares are registered in their names, and
nominees will be instructed to effect the Reverse/Forward Split for their
beneficial holders. Accordingly, we also refer to those street name holders who
receive a cash payment instead of fractional shares as "Cashed-Out
Stockholders." However, nominees may have different procedures, and stockholders
holding shares in street name should contact their nominees.
In general, the Reverse/Forward Split can be illustrated by the following
examples:
- --------------------------------- ---------------------------------------------
Hypothetical Situation Result
- --------------------------------- ---------------------------------------------
Ms. Sigma is a registered After the Reverse/Forward Split, Ms. Sigma
stockholder who holds 5,000 will hold 1,250 shares of our common stock
shares of our common stock in her (5,000 / 1,000 = 5; 5 * 250 = 1,250).
account prior to the
Reverse/Forward Split.
- --------------------------------- ---------------------------------------------
Mr. Alpha is a registered Instead of receiving a fractional share of
stockholder who holds 750 shares our common stock immediately after the
of our common stock in his Reverse Split, Mr. Alpha's shares will be
account prior to the converted into the right to receive cash.
Reverse/Forward Split. If the procedure described below under
"--Determination of Cash-Out Price" resulted
in a per share price of [$0.20] per share,
Mr. Alpha would receive [$150] ([$0.20] x 750
shares).
Note: If Mr. Alpha wants to continue his
investment in Telaxis, he can, prior to the
Effective Date, buy at least 250 more shares
of our common stock and hold them in his
same account. Mr. Alpha would have to act
far enough in advance of the Reverse/Forward
Split so that the purchase is completed and
the additional shares are credited in his
same account by the close of business
(eastern time) on the Effective Date.
- --------------------------------------------------------------------------------
22
- --------------------------------- ---------------------------------------------
Ms. Omega has two separate record As described above, Ms. Omega will receive
accounts. As of the Effective cash payments equal to the cash-out price of
Date, she holds 750 shares of her common stock in each record account
common stock in one account and instead of receiving fractional shares.
250 shares of common stock in the Assuming a hypothetical cash-out price of
other. All of her shares are [$0.20]per share, Ms. Omega would receive
registered in her name only. two checks totaling [$200] (750 x [$0.20]=
$150; 250 x [$0.20]= $50; $150 + $50 = $200).
Note: If Ms. Omega wants to continue her
investment in Telaxis, she can consolidate or
transfer her two record accounts prior to the
Effective Date into an account with at least
1,000 shares of our common stock.
Alternatively, she can buy at least 250 more
shares for the first account and 750 more
shares for the second account and hold them
in those accounts. She would have to act far
enough in advance of the Reverse/Forward
Split so that the consolidation or the
purchase is completed by the close of
business (eastern time) on the Effective
Date.
- --------------------------------- ---------------------------------------------
Mr. Tau has two separate record After the Reverse/Forward Split, Mr. Tau
accounts. As of the Effective will hold 1,250 shares of our common stock
Date, he holds 5,000 shares of in his first account (5,000 / 1,000 = 5; 5*
common stock in his first 250 = 1,250) and Mr. Tau will receive a cash
account and 500 shares of common payment equal to the cash-out price of his
stock in his second account. common stock in his second account instead
All of his shares are registered of receiving fractional shares. Assuming a
in his name only. hypothetical cash-out price of [$0.20] per
share, Mr. Tau would receive [$100] ([$0.20]
x 500 shares).
As described above, Mr. Tau would not be a
Cashed-Out Stockholder with respect to his
first account but would be a Cashed-Out
Stockholder with respect to his second
account.
Note: If Mr. Tau wants to continue his entire
investment in Telaxis, he can consolidate or
transfer his two record accounts prior to the
Effective Date into an account with at least
1,000 shares of our common stock.
Alternatively, he can buy at least 500 more
shares for his second account and hold them
in that account. He would have to act far
enough in advance of the Reverse/Forward
Split so that the consolidation or the
purchase is completed by the close of
business (eastern time) on the Effective
Date.
- --------------------------------- ---------------------------------------------
Ms. Delta is a registered After the Reverse/Forward Split, Ms. Delta
stockholder who holds 5,003 will hold 1,251 shares of our common stock.
shares of our common stock in her Because Ms. Delta holds more than 1,000
account prior to the shares of our common stock in her account,
Reverse/Forward Split. fractional shares will not be cashed out
after the Reverse Split and any fractional
shares remaining after the Forward Split will
be rounded up to the next whole share. (5,003
/ 1,000 = 5.003; 5.003 * 250 = 1,250.75,
which will be rounded up to 1,251)
- --------------------------------- ---------------------------------------------
Mr. Theta holds shares of our We intend for the Reverse/Forward Split to
common stock in a brokerage treat stockholders holding our common stock
account or accounts as of the in street name through a nominee (such as a
Effective Date. bank or broker) in the same manner as
stockholders whose shares are registered in
their names. Nominees will be instructed to
effect the Reverse/Forward Split for their
beneficial holders. However, nominees may
have different procedures, and stockholders
holding our common stock in street name
should contact their nominees.
- --------------------------------------------------------------------------------
23
Despite the foregoing examples, we will have the discretion to apply the
Reverse/Forward Split to any stockholder who may divide his, her, or its shares
into more than one account and thereby become a Cashed-Out Stockholder. For
example, if Ms. Sigma transfers the 5,000 shares in her account into ten
separate accounts holding 500 shares each, we will have the discretion to apply
the Reverse/Forward Split to her, as a result of which she would not become a
Cashed-Out Stockholder but instead would hold 1,250 shares of common stock.
Background and Purpose of the Reverse/Forward Split
Telaxis had a stockholder base of approximately 5,872 stockholders as of
May 7, 2003, consisting of approximately 257 registered stockholders and
approximately 5,615 stockholders holding common stock in street name through a
nominee (e.g., a bank or broker). As of May 7, 2003, approximately 141
registered holders of common stock owned fewer than 1,000 shares. At that time,
these stockholders represented approximately 55% of the total number of
registered holders of common stock, but these accounts represented approximately
only 0.08% of the total number of outstanding shares of common stock. In
addition, as of May 7, 2003, approximately 4,010 street name stockholders owned
fewer than 1,000 shares. At that time, these stockholders represented
approximately 71% of the total number of street name stockholders, but these
accounts represented approximately only 1.6% of the total number of outstanding
shares of common stock. In summary, stockholders holding fewer than 1,000 shares
in their account represented approximately 71% of the total number of our
stockholders, but these stockholders collectively held only approximately 1.7%
of our common stock outstanding on the record date. This analysis assumes no
stockholder has more than one account.
We expect to save costs as a result of the Reverse/Forward Split. The cost
of administering each registered stockholder's account, including printing and
mailing costs to mail proxy materials and the annual report, is the same
regardless of the number of shares held in that account. Therefore, our costs to
maintain such small accounts are disproportionately high when compared to the
total number of shares involved.
In light of these disproportionate costs, the board believes that it is in
the best interests of Telaxis and its stockholders as a whole to eliminate the
administrative burden and costs associated with such small accounts. We expect
that we will reduce the total cost of administering stockholder accounts by
thousands of dollars each year if we complete the Reverse/Forward Split. This
would be a significant savings given the size of Telaxis.
Moreover, the Reverse/Forward Split will provide stockholders with fewer
than 1,000 shares of common stock with a cost-effective way to cash out their
investments, because Telaxis will pay the transaction costs in connection with
the Reverse/Forward Split. Otherwise, stockholders with small holdings would
likely incur brokerage fees which are disproportionately high relative to the
market value of their shares if they wanted to sell their stock, particularly
given the relatively low recent trading price of our common stock. The
Reverse/Forward Split will eliminate these problems for most stockholders with
small holdings.
Another primary reason for the Reverse/Forward Split is to provide Telaxis
with an appropriate number of shares of outstanding common stock for long-term,
sustainable stock price appreciation. The number of shares of our outstanding
common stock increased dramatically from approximately 16.8 million to
approximately 54.2 million due to our recent transaction with YDI. We believe
that number is too large for a company of our size and expected financial
performance. We believe that the number of shares of our common stock
outstanding after the Reverse/Forward Split (expected to be approximately 13.3
million) is more appropriate and would better position us for future, long-term
stock price appreciation. Because there will be fewer shares of our common stock
outstanding, we anticipate that the per share net income or loss and net book
value of our common stock will be increased. In turn, we anticipate this will
enable greater long-term stock price appreciation as investors apply typical
valuation methodologies to our common stock, such as valuing our stock based on
a multiple of earnings per share.
The Reverse/Forward Split should also increase the near-term per share
market price of our common stock. Since the net effect of the Reverse/Forward
Split would approximate a reverse 1-for-4 split of our common stock, an
expectation would be for the per share market price of our common stock to
quadruple. There can be no assurance, however, that the market price of our
common stock will rise in proportion to the reduction in the number of
24
outstanding shares resulting from the Reverse/Forward Split. The desire for a
near-term increase in the market price of our common stock is not one of our
primary motivations for proposing the Reverse/Forward Split. Rather, as
discussed above, our board of directors focused on establishing an
appropriately-sized outstanding share base for long-term, sustainable stock
price appreciation and reducing the costs associated with administering
stockholder accounts.
The market price of our common stock is dependent upon our performance and
prospects and other factors, a number of which are unrelated to the number of
shares of our common stock outstanding and many of which are not within our
control. Our performance depends in large part on our ability to benefit from
the recent combination transaction of Telaxis and YDI, which has only recently
been completed. As a result, there is little history on which to estimate the
likelihood of our successfully integrating Telaxis and YDI and realizing the
expected synergies and other benefits from that transaction.
Although the Reverse/Forward Split will not, by itself, impact our assets
or prospects, the Reverse/Forward Split could result in a decrease in the
aggregate market value of our common stock. If the Reverse/Forward Split is
effected and the market price of our common stock declines, the percentage
decline as an absolute number and as a percentage of our overall market
capitalization may be greater than would occur in the absence of the
Reverse/Forward Split. Furthermore, the reduced number of shares that will be
outstanding after the Reverse/Forward Split could significantly reduce the
trading volume and otherwise adversely affect the liquidity of our common stock.
This is particularly applicable given that we expect our public float after the
Reverse/Forward Split to be approximately 3.9 million shares. When we use the
term public float, we are referring to our outstanding common stock less the
shares of our common stock held by our 10% stockholders, directors, and senior
management. This expectation is based on information as of the record date,
which will likely vary from information as of the Effective Date.
The board of directors believes that the risks associated with the
Reverse/Forward Split are outweighed by the expected benefits resulting from the
Reverse/Forward Split.
In addition, we may in the future pursue alternative methods of reducing
our stockholder base, whether or not the Reverse/Forward Split is approved and
implemented, including odd-lot tender offers, stock repurchases, and programs to
facilitate sales by stockholders of odd-lot holdings. However, there can be no
assurance that we will decide to pursue any such transaction.
Effect of the Reverse/Forward Split on Telaxis Stockholders
Registered Stockholders with Fewer than 1,000 Shares of Common Stock:
If we complete the Reverse/Forward Split and you are a Cashed-Out
Stockholder (i.e., a stockholder holding fewer than 1,000 shares of our common
stock in any one account immediately prior to the Reverse Split):
o You will not receive fractional shares of stock as a result of the
Reverse Split in respect of your shares.
o Instead of receiving fractional shares, you will receive a cash
payment in respect of your affected shares. See "--Determination of
Cash-Out Price" at page 26.
o After the Reverse Split, you will have no further interest in
Telaxis with respect to your cashed-out shares. These shares will no
longer entitle you to the right to vote as a stockholder or share in
Telaxis' assets, earnings, or profits or in any dividends paid after
the Reverse Split. In other words, you will no longer hold your
cashed-out shares, and you will have only the right to receive cash
for these shares. In addition, you will not be entitled to receive
interest with respect to the period of time between the Effective
Date and the date you receive your payment for the cashed-out
shares.
25
o You will not have to pay any service charges or brokerage
commissions in connection with the Reverse/Forward Split.
o As soon as practicable after we effect the Reverse/Forward Split,
you will receive a payment for the cashed-out shares you held
immediately prior to the Reverse Split in accordance with the
procedures described below.
o If you are a Cashed-Out Stockholder with a stock certificate
representing your cashed-out shares, you will receive a transmittal
letter as soon as practicable after the Effective Date. The letter
of transmittal will contain instructions on how to surrender your
certificate(s) to Telaxis' exchange agent, which is expected to be
Telaxis' transfer agent Registrar and Transfer Company, for your
cash payment. You will not receive your cash payment until you
surrender your outstanding certificate(s) to our exchange agent,
together with a completed and executed copy of the letter of
transmittal. Please do not send your certificates until you receive
your letter of transmittal. For further information, see "--Stock
Certificates" below.
o All amounts owed to you will be subject to applicable federal income
tax and state abandoned property laws.
o You will not receive any interest on cash payments owed to you as a
result of the Reverse/Forward Split.
NOTE: If you want to continue to hold common stock after the
Reverse/Forward Split, you may do so by taking either of the following actions
far enough in advance so that it is completed by the Effective Date:
(1) purchase a sufficient number of shares of common stock so that you
hold at least 1,000 shares of our common stock in one account prior
to the Reverse Split; or
(2) if applicable, consolidate your accounts so that you hold at least
1,000 shares of our common stock in one account prior to the Reverse
Split.
You will be responsible for any brokerage commissions, services charges, and
other fees associated with any purchases and/or account consolidations that you
may choose to undertake.
Registered Stockholders with 1,000 or More Shares of Common Stock:
If you are a registered stockholder with 1,000 or more shares of our
common stock in your account as of 6:00 p.m. on the Effective Date, we will
first reclassify your shares into one-one thousandth (1/1,000) of the number of
shares you held immediately prior to the Reverse Split. One minute after the
Reverse Split, at 6:01 p.m., we will reclassify your shares in the Forward Split
into 250 times the number of shares you held after the Reverse Split, which will
result in approximately 1/4 the number of shares you held before the Reverse
Split. If, after the Forward Split, you would be holding a fractional share of
our common stock in your account, we will round your holdings up to the next
whole share. Following the Reverse/Forward Split, each share of our common stock
will still entitle the holder thereof to one vote per share.
To illustrate, if you held 5,000 shares of our common stock in your
account immediately prior to the Reverse Split, your shares would be converted
into 5 shares in the Reverse Split and then to 1,250 shares in the Forward
Split. If you held 5,003 shares of our common stock in your account immediately
prior to the Reverse Split, your shares would be converted into 5.003 shares in
the Reverse Split and then to 1,250.75 shares in the Forward Split, which would
be rounded up to 1,251 shares.
26
Street Name Holders of Common Stock:
We intend for the Reverse/Forward Split to treat stockholders holding
common stock in street name through a nominee (such as a bank or broker) in the
same manner as stockholders whose shares are registered in their names. Nominees
will be instructed to effect the Reverse/Forward Split for their beneficial
holders. However, nominees may have different procedures, and stockholders
holding common stock in street name should contact their nominees.
Holders of Telaxis Stock Options or Warrants:
If the Reverse/Forward Split is effected, all outstanding options and
warrants entitling their holders to purchase shares of our common stock will
automatically be affected, regardless of whether the options or warrants entitle
their holders to purchase more or less than 1,000 shares of our common stock.
Unlike outstanding shares of our common stock, options and warrants to purchase
less than 1,000 shares of our common stock will be adjusted in the same manner
as options and warrants to purchase more than 1,000 shares of our common stock,
subject to the effects of rounding described below.
The net effect on the number of shares subject to those options and
warrants will be to reduce the number to approximately 1/4 the number in effect
immediately prior to the Reverse/Forward Split. Specifically, in the Reverse
Split, the number of shares subject to those options and some of those warrants
will be divided by 1,000. The number of shares subject to the remaining warrants
would be divided by a number slightly higher than 1,000 due to our cashing out
fractional shares of our common stock that would have been outstanding after the
Reverse Split. In the Forward Split, the number of shares subject to those
options and warrants will be multiplied by 250. If, after the Reverse/Forward
Split, any option or warrant would entitle its holder to purchase a fractional
share of our common stock, the number of shares subject to that option or
warrant will be rounded up to the next whole share.
Correspondingly, the per share exercise price of those options and
purchase price of those warrants will be increased by a factor of approximately
4 in direct proportion to the net effect of the Reverse/Forward Split.
Specifically, in the Reverse Split, the price of those options and some of those
warrants will be multiplied by 1,000. The price of the remaining warrants would
be multiplied by a number slightly higher than 1,000 due to our cashing out
fractional shares of our common stock that would have been outstanding after the
Reverse Split. Then in the Forward Split, the price will be divided by 250.
After the Reverse/Forward Split, the exercise price of each option and purchase
price of each warrant will be rounded down to the nearest cent if it otherwise
would have been in fractions of a cent.
Therefore, the aggregate dollar amount payable for the purchase of the
shares subject to the options and warrants will remain unchanged, subject only
to the effects of rounding for fractional shares and/or fractional pennies.
For example, assume an optionee held options to purchase 500 shares of our
common stock at an exercise price of $1.00 per share immediately prior to the
Reverse/Forward Split. After the Reverse/Forward Split, the optionee would hold
options to purchase 125 shares of our common stock at $4.00 per share. First, in
the Reverse Split, the option would be converted into an option to buy 1/2 share
at $1,000 per share. Then in the Forward Split, the option would be converted
into an option to buy 125 shares at $4.00 per share.
Determination of Cash-Out Price
In order to avoid the expense and inconvenience of issuing fractional
shares to stockholders who hold less than one share of our common stock after
the Reverse Split, Telaxis will pay cash for those shares. If stockholders
approve the Reverse/Forward Split at the annual meeting and it is completed, the
board of directors will arrange to have Telaxis pay cash for the fractional
shares based on the trading value of the common stock that is cashed out. This
cash-out payment will be an amount per share equal to the daily average of the
highest and lowest sale prices per share of our common stock on the
Over-The-Counter Bulletin Board averaged over a period of the twenty most recent
trading days on which our common stock was traded ending on (and including) the
Effective Date, without interest.
27
We expect to use our cash on hand to make these payments.
Effect of the Reverse/Forward Split on Telaxis
With the exception of the number of shares issued and outstanding, the
rights and preferences of the shares of our common stock prior and subsequent to
the Reverse/Forward Split will remain the same. After the effectiveness of the
Reverse/Forward Split, we do not anticipate that our financial condition, the
percentage ownership of management, or any aspect of our business would
materially change as a result of the Reverse/Forward Split. We do expect the
number of our stockholders to decrease significantly.
The Reverse/Forward Split will not affect the public registration of our
common stock with the SEC under the Securities Exchange Act of 1934, as amended.
Similarly, we do not expect that the Reverse/Forward Split will affect the
continued listing of our common stock on the Over-The-Counter Bulletin Board. In
connection with the Reverse/Forward Split, the proposed reincorporation, and the
proposed name change, we expect that we will be given a new ticker symbol.
We are currently authorized to issue a maximum of 100,000,000 shares of
our common stock. On May 7, 2003, there were 54,208,312 shares of our common
stock issued and outstanding. The number of authorized shares of our common
stock will not change as a result of the Reverse/Forward Split. However, the
number of shares of our common stock issued and outstanding will be reduced by
over 75% as a result of the Reverse/Forward Split. This reduction will result
from two factors. The primary factor is that the final net effect of the Reverse
Split (1-for-1,000) followed by the Forward Split (250-for-1) (before taking
fractional shares into account) will approximate a reverse 1-for-4 split of our
common stock, which would reduce the number of our outstanding shares by
approximately 75%. Also, following the Reverse Split, we will pay cash for the
fractional shares of the Cashed-Out Stockholders, which means that the total
number of outstanding shares of our common stock will be further reduced by the
cash-out of the shares held by the Cashed-Out Stockholders immediately prior to
the Reverse Split. We expect to have approximately 13.3 million shares of our
common stock outstanding immediately after the Reverse/Forward Split.
Thus, the Reverse/Forward Split will effectively increase the number of
authorized and unissued shares of our common stock available for future issuance
by approximately 90% from approximately 45.8 million to approximately 86.7
million. Following the Reverse/Forward Split, the board of directors will have
the authority, subject to applicable securities laws, to issue such authorized
and unissued shares without further stockholder approval, upon such terms and
conditions as the board of directors deems appropriate. These shares could be
used for any proper corporate purpose approved by the board of directors
including, among other purposes, future financing transactions and acquisitions
or other strategic transactions. Although the board of directors presently has
no intention of doing so, our stock could be issued in such a manner, and
pursuant to such terms and conditions, that would make a change of control of
Telaxis or removal of our management more difficult. Holders of our common stock
have no preemptive or other subscription rights.
The total number of shares that will be cashed-out, the resulting number
of shares outstanding, the resulting number of shares available for future
issuance, and the total cash to be paid by us are unknown at this time. Also, we
do not know what the daily average of the highest and lowest sale prices per
share of our common stock on the Over-The-Counter Bulletin Board for the period
of the twenty most recent trading days on which our common stock was traded
ending on the Effective Date will be. However, by way of example, if the
Reverse/Forward Split had been completed as of May 7, 2003, when the daily
average of the highest and lowest sale prices per share of our common stock on
the Over-The-Counter Bulletin Board averaged over the twenty most recent
Over-The-Counter Bulletin Board trading days on which our common stock was
traded then ended was approximately $0.208, then the cash payments that would
have been issued to Cashed-Out Stockholders, including both registered and
street name holders, would have been approximately $190,388. The actual amounts
will depend on the number of Cashed-Out Stockholders on the Effective Date,
which will likely vary from the number of such stockholders on May 7, 2003.
28
The par value of our common stock will remain at $.01 per share after the
Reverse/Forward Split. As a result, on the Effective Date, the stated capital on
our balance sheet attributable to our common stock will be reduced by
approximately 75% of its present amount, and the additional paid-in-capital
account will be credited with the amount by which the stated capital is reduced.
Stock Certificates
Commencing on the Effective Date, each existing certificate representing
shares of our issued and outstanding common stock held by our registered
stockholders owning 1,000 or more shares of our common stock immediately prior
to the Reverse Split in one account will be deemed for all corporate purposes to
evidence ownership of the reduced number of shares of common stock resulting
from the Reverse/Forward Split. Assuming that the reverse/forward split
proposal, the reincorporation proposal, and the name change proposal are
approved by our stockholders as we expect and implemented, we will be issuing
new certificates representing shares of our common stock held by those
stockholders after all of those items are completed. These new certificates
would reflect the new number of shares of our common stock held by the
stockholder, our new corporate name, and our new jurisdiction of incorporation.
Each of these stockholders will receive a letter of transmittal after these
items are completed. These stockholders will be asked to surrender to the
exchange agent their old stock certificates in exchange for new certificates
representing ownership of the reduced number of shares of our common stock
resulting from the Reverse/Forward Split in accordance with the procedures set
forth in the letter of transmittal. No new certificates will be issued to any
stockholder until such stockholder has surrendered such stockholder's
outstanding certificate(s), together with the properly completed and executed
letter of transmittal, to the exchange agent.
After the Reverse/Forward Split, certificates representing shares held by
Cashed-Out Stockholders will only represent the right to receive the cash
payment for those shares described in this proxy statement. Any Cashed-Out
Stockholder with share certificates will receive a letter of transmittal after
the Effective Date. These stockholders must complete and sign the letter of
transmittal and return it with their stock certificate(s) to the exchange agent
before they can receive cash payment for those shares.
We expect that our transfer agent, Registrar and Transfer Company, will
act as exchange agent for purposes of implementing the exchange of stock
certificates or surrender of stock certificates for cash payments, as the case
may be.
Certain Federal Income Tax Consequences of the Reverse/Forward Split
We have summarized below certain federal income tax consequences to
Telaxis and its stockholders resulting from the Reverse/Forward Split. This
summary is based on U.S. federal income tax law existing as of the date of this
proxy statement, and such tax laws may change, even retroactively. We have not
sought and will not seek an opinion of counsel or a ruling from the Internal
Revenue Service regarding the federal income tax consequences of the
Reverse/Forward Split. This summary does not discuss all aspects of federal
income taxation that may be important to you in light of your individual
circumstances. Many stockholders (such as financial institutions, insurance
companies, broker-dealers, tax-exempt organizations, and foreign persons) may be
subject to special tax rules. Other stockholders may also be subject to special
tax rules, including but not limited to: stockholders who received common stock
as compensation for services or pursuant to the exercise of an employee stock
option, or stockholders who have held, or will hold, stock as part of a
straddle, hedging, or conversion transaction for federal income tax purposes. In
addition, this summary does not discuss any state, local, foreign, or other tax
considerations. This summary assumes that you are a U.S. citizen and have held,
and will hold, your shares as capital assets under the Internal Revenue Code.
You should consult your tax advisor as to the particular federal, state, local,
foreign, and other tax consequences, in light of your specific circumstances.
We believe that the Reverse/Forward Split will constitute a reorganization
within the meaning of section 368(a)(1)(E) of the Internal Revenue Code.
Accordingly, we expect that the Reverse/Forward Split will have the following
material federal income tax consequences:
29
1. No gain or loss will be recognized by Telaxis as a result of the
Reverse/Forward Split.
2. If you receive shares of our common stock and no cash in the
Reverse/Forward Split, you will not recognize any gain or loss as a result of
the Reverse/Forward Split and you will have the same aggregate adjusted tax
basis and holding period in your common stock as you had in such stock
immediately prior to the Reverse/Forward Split.
3. If you receive solely cash as a result of the Reverse/Forward Split,
you will recognize capital gain or loss equal to the difference between the cash
you receive for your cashed-out stock and your aggregate adjusted tax basis in
such stock.
4. If you receive both cash and shares of our common stock in the
Reverse/Forward Split, you generally will recognize gain, but not loss, in an
amount equal to the lesser of (i) the excess of the sum of the aggregate fair
market value of your shares of our common stock plus the cash received over your
adjusted tax basis in the shares, or (ii) the amount of cash received in the
Reverse/Forward Split. Your aggregate adjusted tax basis in your shares of
common stock held immediately after the Reverse/Forward Split will be equal to
your aggregate adjusted tax basis in your shares of common stock held
immediately prior to the Reverse/Forward Split, increased by any gain recognized
in the Reverse/Forward Split, and decreased by the amount of cash received in
the Reverse/Forward Split.
Any gain you recognize as a result of receiving cash in addition to shares
of our common stock in the Reverse/Forward Split will be capital gain, provided
that your receipt of cash is neither essentially equivalent to a dividend within
the meaning of section 302 of the Internal Revenue Code, nor has the effect of a
distribution of a dividend within the meaning of section 356(a)(2) of the
Internal Revenue Code. If your gain is not treated as capital gain, the gain
will be treated as ordinary income to you to the extent of your ratable share of
Telaxis' undistributed earnings and profits, then as a tax-free return of
capital to the extent of your aggregate adjusted tax basis in your shares, and
any remaining gain will be treated as a capital gain.
Appraisal Rights
Stockholders do not have appraisal or dissenter's rights under
Massachusetts state law or under Telaxis' Restated Articles of Organization, as
amended to date, or By-laws in connection with the Reverse/Forward Split.
Reservation of Rights
We reserve the right to abandon the Reverse/Forward Split without further
action by our stockholders at any time before the filing of the necessary
amendments to Telaxis' Restated Articles of Organization, as amended to date,
with the Massachusetts Secretary of State, even if the Reverse/Forward Split has
been authorized by our stockholders at the annual meeting. By voting in favor of
the Reverse/Forward Split, you are expressly also authorizing us to determine
not to proceed with the Reverse/Forward Split if we should so decide.
Voting
The affirmative vote of at least a majority of our common stock
outstanding and entitled to vote is necessary to approve the proposed
Reverse/Forward Split. We believe that both Concorde Equity and Michael F. Young
will vote in favor of the Reverse/Forward Split. Because Concorde Equity and Mr.
Young together own more than two-thirds of our common stock outstanding on the
record date for this annual meeting, we expect that the Reverse/Forward Split
will be approved by our stockholders regardless of how our other stockholders
vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO AMEND
TELAXIS' RESTATED ARTICLES OF ORGANIZATION, AS AMENDED TO DATE, TO EFFECT THE
DESCRIBED REVERSE/FORWARD STOCK SPLIT.
30
PROPOSAL 3
REINCORPORATION INTO DELAWARE
Summary
The board of directors has unanimously approved, and recommends for your
approval, a proposal to change our jurisdiction of incorporation from
Massachusetts to Delaware. The reincorporation would be accomplished by merging
Telaxis with and into YDI Wireless, Inc., a Delaware corporation we recently
organized as a wholly-owned subsidiary solely for the purpose of our
reincorporating into Delaware (the "Reincorporation Merger"). Under the terms of
the Reincorporation Merger, each share of our common stock, par value $.01 per
share, outstanding immediately prior to the Reincorporation Merger will be
converted into one share of YDI Wireless' common stock, par value $.01 per
share, subject to any exercise of appraisal rights. Options and warrants to
purchase shares of our common stock outstanding immediately prior to the
Reincorporation Merger will be converted into options or warrants, as the case
may be, to purchase the same number of shares of YDI Wireless' common stock.
The board of directors believes it is beneficial that we obtain the
advantages of Delaware law. The board of directors believes the proposed change
in domicile is in our best interests and the best interests of our stockholders
for several reasons, including:
o the greater predictability and flexibility afforded by
Delaware corporate law and its greater responsiveness to
corporate needs,
o the more predictable corporate environment afforded by
Delaware to corporate directors and officers,
o the greater certainty afforded by Delaware law with respect to
directors' duties in the face of takeover offers and responses
to unsolicited takeover offers, and
o greater familiarity of investors, possible strategic partners,
and others with Delaware corporations rather than
Massachusetts corporations.
Our corporate actions are currently governed by Massachusetts law and our
Massachusetts Restated Articles of Organization, as amended to date (the
"Massachusetts Charter"), and our Massachusetts by-laws (the "Massachusetts
By-laws"), both of which have been filed publicly with the Securities and
Exchange Commission. If the Reincorporation Merger is approved by our
stockholders and completed, our corporate affairs will be governed by Delaware
law, the certificate of incorporation of YDI Wireless (the "Delaware Charter"),
which is attached as Appendix B, and the by-laws of YDI Wireless, which are
attached as Appendix C (the "Delaware By-laws"). The Reincorporation Merger, by
itself, would not involve any change in our business, properties, or capital
structure. Upon the effective date of the Reincorporation Merger, YDI Wireless
will be the continuing corporation and will own all of the assets and will be
responsible for all of the liabilities of Telaxis.
In connection with the Reincorporation Merger, we are also proposing to
terminate the substantive effect of Telaxis' existing stockholder rights plan.
A proposal to change our legal name to "YDI Wireless, Inc." is being
submitted separately in this proxy statement for consideration at the annual
meeting. If the proposed change of name and the Reincorporation Merger are
approved as we expect, the change of name will be accomplished in connection
with the Reincorporation Merger. If the Reincorporation Merger is not approved
but the proposed change of name is approved, we will effect the name change by
amending our Massachusetts Charter.
A proposal to effect a reverse/forward split of our outstanding common
stock is also being submitted separately in this proxy statement for
consideration at the annual meeting. If both the Reverse/Forward Split and the
31
Reincorporation Merger are approved as we expect, we expect to effect the
Reverse/Forward Split prior to the Reincorporation Merger.
Interests of Our Directors and Officers in this Proposal
Our directors may benefit from reincorporation in Delaware. In some
circumstances, Delaware law may reduce directors' potential personal liability.
The board of directors, in approving the Reincorporation Merger, may have
different interests than our stockholders or have interests in conflict with the
interests of our stockholders. Our board of directors, our management, and their
affiliated stockholders may have different interests than the unaffiliated
stockholders. For a more complete discussion of the principal differences
between Massachusetts and Delaware law and the charters and by-laws of Telaxis
and YDI Wireless as they affect stockholders, see "Significant Changes Caused by
the Reincorporation" below.
The Delaware Charter does not prohibit stockholder action by written
consent. Accordingly, after the Reincorporation Merger, Messrs. Fitzgerald and
Young, who together control over two-thirds of our common stock outstanding on
the record date, will have the ability to take action by written consent without
a meeting if they choose to act together. This ability would be subject to the
notice requirements of Delaware law and the provisions of the Securities
Exchange Act of 1934, as amended. Under those provisions as currently in effect,
we would be required to deliver to stockholders an information statement
regarding the action at least 20 calendar days before the action is taken.
Reasons for Reincorporation
Telaxis was incorporated under Massachusetts law in 1982. At the time,
incorporating in Massachusetts was a logical and natural choice considering our
location in Massachusetts. As part of our recent transaction with YDI, we moved
our principal offices to Falls Church, Virginia and our Massachusetts operations
are now primarily related to research and development. We see reincorporating
Telaxis in Delaware as another step in our corporate transition.
The primary reasons for the reincorporation are as follows.
Predictability, Flexibility, and Responsiveness to Corporate Needs.
Delaware has a policy of encouraging incorporation in its state and of promoting
the adoption, implementation, and construction of modern corporate laws
responsive to the changing business environment. Reincorporating in Delaware
will allow us to take advantage of Delaware's developed statutory and case law.
Delaware has adopted comprehensive and flexible corporate laws which are revised
regularly to meet changing business circumstances. The Delaware Legislature is
sensitive to issues regarding corporate law and has repeatedly demonstrated its
ability and commitment to act quickly in response to developments in modern
corporate law. In addition, Delaware offers a system of specialized chancery
courts to deal with corporate law questions. These courts have developed
considerable expertise in dealing with corporate issues and are capable of
acting much quicker than courts in other jurisdictions. The Delaware courts have
also created a substantial and influential body of case law construing
Delaware's corporate law. In fact, Massachusetts judges sometimes rely on
decisions of Delaware courts on corporate law issues given the relative dearth
of Massachusetts corporate law decisions and the influence of Delaware corporate
law and judiciary. 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. As a result of
these factors, it is anticipated that Delaware law will provide greater
efficiency, predictability, and flexibility in our legal affairs than is
presently available under Massachusetts law.
Directors and Officers. The board of directors believes that
reincorporation under Delaware law will enhance our 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 our behalf.
The law of Delaware offers greater certainty and stability from the perspective
of those who serve as corporate officers and directors. The parameters of
director and officer liability have been more extensively addressed in Delaware
court decisions and are therefore better defined and better understood than
under Massachusetts law. The recent focus on corporate governance issues for
32
public companies in general and intense competition that has characterized the
wireless equipment industry have greatly expanded the challenges and risks
facing the directors and officers of public companies generally and companies in
our industry in particular. Recent legislative changes at the federal level,
including the Sarbanes-Oxley Act of 2002, have caused and are continuing to
cause significant changes in the way public companies have been operated and are
putting increasing focus on the roles and responsibilities of directors and
officers in operating and managing public companies. Although to date we have
not experienced difficulty in retaining directors or officers, we are concerned
that retention could become more difficult as a result of the significant and
increasing potential liability and relatively small compensation associated with
service as a director. We believe that the corporate environment afforded by
Delaware will enable us to compete more effectively with other public companies,
many of which are incorporated in Delaware, in the recruitment of talented and
experienced directors and officers.
The board of directors believes that Delaware law strikes an appropriate
balance with respect to personal liability of directors and officers, and that
reincorporation in Delaware will enhance our ability to recruit and retain
directors and officers in the future, while providing appropriate protection for
stockholders from possible abuses by directors and officers. In this regard, it
should be noted that directors' personal liability is not, and cannot be,
eliminated under Delaware law for intentional misconduct, bad faith conduct or
any transaction from which the director derives an improper personal benefit.
Takeover Response. Telaxis currently has in place a number of measures
designed to protect stockholder interests in the event of a hostile takeover
attempt against Telaxis. YDI Wireless would have measures comparable to some of
these protective mechanisms. Many of these measures have not been as fully
tested in the Massachusetts courts as in the Delaware courts. As a result,
Delaware law affords greater certainty that these measures will be interpreted,
sustained, and applied in accordance with the intentions of the board of
directors. In addition, Delaware case law provides a well developed body of law
defining the proper duties and decision making process expected of a board of
directors in evaluating potential and proposed corporate takeover offers and
business combinations. The board of directors believes that these measures and
related Delaware law will help the board of directors to protect our corporate
strategies, to consider fully any proposed takeover and alternatives, and, if
appropriate, to negotiate terms that maximize the benefit to our stockholders.
Greater Familiarity of Others with Delaware Corporations. Delaware has
long been a preferred domicile for many major American corporations, and
Delaware law and administrative practices have become comparatively well-known
and widely understood. We believe this greater familiarity will be a benefit as
we continue to grow and do business. Given the uncertainty in our industry, we
believe there are opportunities for selective acquisitions and other forms of
strategic combinations and partnering. Since many of the other companies we may
approach relating to strategic transactions may not be located in Massachusetts,
we believe in general being a Delaware corporation would be more familiar to
them. We believe this familiarity and other benefits of being a Delaware
corporation would make us a more attractive strategic partner. Also, investors
and others we may approach for equity or debt financing in general are familiar
with Delaware corporations and the advantages of being a Delaware corporation.
Thus, we expect that being a Delaware corporation could favorably impact any
fundraising activities we may undertake.
Reincorporation Procedure
The proposed reincorporation would be accomplished by merging Telaxis into
YDI Wireless, a new wholly-owned Delaware subsidiary of Telaxis, pursuant to an
Agreement and Plan of Merger and Reincorporation (the "Reincorporation
Agreement"), a copy of which is attached as Appendix D. YDI Wireless will
succeed to the business, assets, and liabilities of Telaxis, and the rights of
our stockholders will be governed by the laws of the State of Delaware and by
the terms and provisions of the Delaware Charter and the Delaware By-laws. The
reincorporation, by itself, will not result in any change in our business,
assets, or liabilities, will not cause us to move our corporate headquarters
from the current Falls Church, Virginia location, and will not result in any
relocation of management or other employees.
33
The directors and officers of YDI Wireless will be the directors and
officers of the combined company. The directors and officers of YDI Wireless are
the same as the directors and officers of Telaxis except that Ralph A.
Goldwasser and Dr. John L. Youngblood are not directors of YDI Wireless.
Therefore, neither Mr. Goldwasser nor Dr. Youngblood will be a director of the
combined company. These changes will reduce the number of our directors to five,
which our board of directors believes is an appropriate number for a company of
our size. Dr. Youngblood has informed us that he opposes Messrs. Goldwasser and
Youngblood no longer being on our board of directors.
On the effective date of the proposed reincorporation, each outstanding
share of common stock of Telaxis will automatically convert into one share of
common stock of YDI Wireless, and stockholders of Telaxis will automatically
become stockholders of YDI Wireless. At the effective time of the
reincorporation, the number of outstanding shares of common stock of YDI
Wireless will be equal to the number of shares of common stock of Telaxis
outstanding immediately prior to the effective time of the reincorporation.
The effects described in the preceding paragraph are subject to the
appraisal rights of Telaxis' stockholders. Stockholders have the right to
dissent from the Reincorporation Merger and to demand and receive an appraisal
of their shares of Telaxis' common stock by complying with the requirements of
Sections 86 through 98 of the Massachusetts Business Corporation Law. See "Right
to Dissent and Appraisal Rights of Stockholders" below. Stockholders are urged
to consult their tax advisors as to the federal, state, or local tax
consequences of the Reincorporation Merger and the exercise of their appraisal
rights.
In addition, each outstanding option or warrant to acquire shares of
common stock of Telaxis will be converted into an option or warrant to acquire
an equal number of shares of common stock of YDI Wireless, under the same terms
and conditions as the options or warrants existing immediately prior to the
effective time of the reincorporation. Telaxis' employee benefit plans in effect
immediately prior to the Reincorporation Merger, including the Incentive Stock
Option Plan of 1986, the 1987 Stock Plan, the 1988 Stock Plan, the 1996 Stock
Plan, the 1997 Stock Plan, the 1999 Stock Plan, the 2001 Nonqualified Stock
Plan, and the Young Design, Inc. 2002 Stock Incentive Plan, will be adopted and
continued by YDI Wireless following the reincorporation.
Assuming that both the Reverse/Forward Split and the Reincorporation
Merger are approved at the annual meeting as we expect, we expect to effect the
Reincorporation Merger after effecting the Reverse/Forward Split. Therefore, we
expect that the number of shares of outstanding YDI Wireless common stock would
equal the number of shares of outstanding Telaxis common stock after the
Reverse/Forward Split, subject to appraisal rights. Also, the Telaxis stock
options and warrants and stock plans adopted and assumed by YDI Wireless would
be those stock options, warrants, and plans after giving effect to the
Reverse/Forward Split.
The Reincorporation Merger will not affect the public registration of our
common stock with the SEC under the Securities Exchange Act of 1934, as amended.
Similarly, we do not expect that the Reincorporation Merger will affect the
continued listing of our common stock on the Over-The-Counter Bulletin Board. In
connection with the Reverse/Forward Split, the Reincorporation Merger, and the
proposed name change, we expect that we will be given a new ticker symbol.
Stock Certificates
Commencing on the effective date of the Reincorporation Merger, each
existing certificate representing shares of Telaxis' issued and outstanding
common stock (except certificates held by stockholders who have validly
exercised their appraisal rights or held by Cashed-Out Stockholders, assuming
that the Reverse/Forward Split is implemented before the Reincorporation Merger
as we expect) will be deemed for all corporate purposes to evidence ownership of
shares of YDI Wireless' issued and outstanding common stock. Assuming that the
reverse/forward split proposal, the reincorporation proposal, and the name
change proposal are approved by our stockholders as we expect and implemented,
we will be issuing new certificates representing shares of our common stock to
our stockholders entitled to receive new certificates after all of these items
are completed. These new certificates would reflect the new number of shares of
our common stock held by the stockholder, our new corporate name, and our new
jurisdiction of incorporation. Each of these stockholders will receive a letter
of transmittal after all of these items are completed. These stockholders will
34
be asked to surrender to the exchange agent their old stock certificates in
exchange for new certificates representing ownership of our common stock in
accordance with the procedures set forth in the letter of transmittal. No new
certificates will be issued to any stockholder until such stockholder has
surrendered such stockholder's outstanding certificate(s), together with the
properly completed and executed letter of transmittal, to the exchange agent.
We expect that our transfer agent, Registrar and Transfer Company, will
act as exchange agent for purposes of implementing the exchange of stock
certificates.
As described above under the Reverse/Forward Split proposal, certificates
held by Cashed-Out Stockholders will be converted into the right to receive cash
in the Reverse/Forward Split. As a result, Cashed-Out Stockholders will not
receive certificates representing shares of common stock of YDI Wireless.
Significant Changes Caused by the Reincorporation
In general, Telaxis' corporate affairs are governed at present by the
corporate law of Massachusetts, Telaxis' jurisdiction of incorporation, and by
the Massachusetts Charter and the Massachusetts By-laws, which have been adopted
pursuant to Massachusetts law. The Massachusetts Charter and the Massachusetts
By-laws have been filed publicly with the Securities and Exchange Commission and
are available for inspection during business hours at the offices of Telaxis
located at 20 Industrial Drive East, South Deerfield, Massachusetts 01373. In
addition, copies may be obtained by writing to Telaxis Communications
Corporation, 20 Industrial Drive East, South Deerfield, Massachusetts 01373,
Attention: Clerk.
If the Reincorporation Agreement is adopted and approved, Telaxis will
merge into, and its business will be continued by, YDI Wireless. Following the
Reincorporation Merger, issues of corporate governance and control would be
determined under Delaware rather than Massachusetts law. The Massachusetts
Charter and the Massachusetts By-laws, will, in effect, be replaced by the
Delaware Charter and the Delaware By-laws. Accordingly, it is important for our
stockholders to understand the differences among these documents and between
Delaware and Massachusetts law in deciding whether to approve the
Reincorporation Merger.
A number of differences between the Massachusetts Business Corporation Law
(the "MBCL") and the General Corporation Law of the State of Delaware (the
"DGCL") and related laws of each jurisdiction affecting stockholders' rights and
among the various charter documents of Telaxis and YDI Wireless which may affect
the interests of our stockholders are summarized below. The following discussion
summarizes what we believe are the more important differences in the corporate
laws of Delaware and Massachusetts and does not purport to be an exhaustive
discussion of all of the differences. Such differences can only be determined in
full by reference to the actual laws of the Commonwealth of Massachusetts and
the State of Delaware and to the case law interpreting these statutes. As a
result, the summary is qualified in its entirety by reference to the provisions
of these laws and related case law. In addition, both Massachusetts and Delaware
law provide that many of the statutory provisions as they affect various rights
of holders of shares may be modified by provisions in the charter or by-laws of
the corporation. Our stockholders are advised to consult with their own legal
counsel regarding all such matters.
Capital Stock
The Massachusetts Charter authorizes Telaxis to issue 104,500,000 shares
of capital stock, of which 100,000,000 shares are common stock and 4,500,000
shares are preferred stock. Of these preferred shares, 1,000,000 have been
designated as Class One Participating Cumulative Preferred Stock in connection
with Telaxis' stockholders rights plan. The Delaware Charter authorizes YDI
Wireless to issue 104,500,000 shares of capital stock, of which 100,000,000
shares are common stock and 4,500,000 shares are preferred stock. The Delaware
Charter does not contain provisions similar to those relating to Telaxis' Class
One Participating Cumulative Preferred Stock because the substantive effect of
the Telaxis stockholder rights plan would terminate immediately before
effectiveness of the Reincorporation Merger.
The Massachusetts Charter also contains provisions relating to Class A
Preferred Stock, Class B Preferred Stock, Class C Preferred Stock, Class D
Preferred Stock, and Class E Preferred Stock. These provisions relate to
35
preferred stock that was issued (if at all) while Telaxis was a private company.
All outstanding shares of those classes of preferred stock were converted into
common stock upon the initial public offering of Telaxis' common stock in
February 2000. The Delaware Charter does not contain terms relating to any of
these old classes of preferred stock.
As mentioned above, except for those shares purchased from dissenting
stockholders pursuant to their appraisal rights, each share of Telaxis' common
stock outstanding immediately before the Reincorporation Merger will be
converted into and exchanged for one share of YDI Wireless' common stock. YDI
Wireless' common stock, like the common stock of Telaxis, will have no
preemptive, conversion, redemption, or similar rights. Upon the liquidation of
YDI Wireless, the holders of common stock would be entitled to share ratably in
the net assets available for distribution to stockholders subject to the rights
of holders of any shares of preferred stock which may be issued in the future.
Since the shares of common stock of YDI Wireless, like those of Telaxis, do not
have cumulative voting rights, the holders of more than 50% of the shares voting
for the election of directors can elect 100% of the directors if they choose to
do so. Concorde Equity and Mr. Young together currently own more than 50% of
Telaxis' outstanding common stock and are expected to own more than 50% of YDI
Wireless' outstanding common stock immediately after the completion of the
Reincorporation Merger.
Telaxis Stockholder Rights Plan
Telaxis recently amended its stockholder rights plan to provide that the
substantive effect of such plan will terminate immediately prior to the
effective time of the Reincorporation Merger. The recent amendment amended the
rights plan by shortening the period of time within which the stock purchase
rights issued or issuable under the plan are exercisable. Prior to the recent
amendment, the rights plan provided that the rights would be exercisable until
the earlier of (i) ten years after the rights plan was originally executed or
(ii) the date that the rights are redeemed in accordance with the plan. The
amendment revised those provisions to provide that the rights are exercisable
until the earliest of (i) ten years after the rights plan was originally
executed, (ii) the date that the rights are redeemed in accordance with the
plan, and (iii) one minute before the effectiveness of the reincorporation
merger of Telaxis and YDI Wireless. Accordingly, if the stockholders approve and
we implement the Reincorporation Merger, none of the rights will thereafter be
exercisable. By voting in favor of the Reincorporation Merger, you are also
authorizing us to terminate the substantive effect of Telaxis' existing
stockholder rights plan.
Extraordinary Transactions
The DGCL generally requires that mergers and consolidations, and sales,
leases or exchanges of all or substantially all of a corporation's property and
assets, be approved both by the directors and by a vote of the holders of a
majority of the outstanding stock entitled to vote, though a corporation's
certificate of incorporation may require a greater-than-majority vote. Under the
DGCL, a corporation that is the surviving corporation in a merger need not have
stockholder approval for the merger if (i) each share of the surviving
corporation's stock outstanding prior to the merger remains outstanding in
identical form after the merger, (ii) there is no amendment to its certificate
of incorporation, and (iii) the consideration going to stockholders of the
non-surviving corporation is not common stock (or securities convertible into
common stock) of the surviving corporation or, if it is such stock or securities
convertible into such stock, the aggregate number of shares of common stock
actually issued or delivered, or initially issuable upon conversion, does not
exceed twenty percent of the shares of the surviving corporation's common stock
outstanding immediately prior to the effective date of the merger. The Delaware
Charter does not provide anything different from the DGCL requirements.
The MBCL generally requires approval of mergers and consolidations and
sales, mortgages, leases, or exchanges of all or substantially all of a
corporation's property by a vote of two-thirds of the shares of each class of
stock outstanding and entitled to vote thereon, except that (i) the articles of
organization may provide (which the Massachusetts Charter does not) for a vote
of a lesser proportion but not less than a majority of each such class and (ii)
unless required by the corporation's articles of incorporation (which the
Massachusetts Charter does not), an agreement providing for a merger need not be
submitted to the stockholders of a corporation surviving a merger but may be
approved by vote of its directors if (a) the agreement of merger does not change
the name, the amount of shares authorized of any class of stock, or other
provisions of the articles of organization of such corporation, (b) the
authorized unissued shares or shares held in the treasury of such corporation of
any class of stock of such corporation to be issued or delivered pursuant to the
agreement of merger do not exceed 15% of the shares of such corporation of the
same class outstanding immediately prior to the effective date of the merger,
and (c) the issue by vote of the directors of any unissued stock to be issued
pursuant to the agreement of merger has been authorized in accordance with the
provision of the MBCL governing the issue of authorized but unissued capital
stock.
36
The DGCL has a business combination statute, Section 203. Section 203 of
the DGCL generally prohibits a Delaware corporation from engaging in "business
combinations" with "interested stockholders" under certain circumstances unless
certain board or stockholder approvals are obtained. Unless a corporation opts
into the applicability of Section 203 by a provision in its certificate of
incorporation, Section 203 does not apply to a corporation if the corporation's
voting stock is not listed on a national securities exchange, authorized for
quotation on the NASDAQ Stock Market, or held of record by 2,000 or more
stockholders. Since YDI Wireless will not satisfy these requirements and the
Delaware Charter does not opt into the applicability of Section 203, Delaware's
business combination statute will not apply to YDI Wireless immediately after
the Reincorporation Merger. This would change if YDI Wireless meets one of the
conditions to applicability set forth above in the future.
Telaxis is subject to the provisions of Chapter 110F of the Massachusetts
General Laws, Massachusetts' business combination statute. In general, this
statute prohibits a Massachusetts corporation with more than 200 stockholders
from engaging in a "business combination" with "interested stockholders" for a
period of three years after the date of the transaction in which the person
becomes an interested stockholder, unless (i) the interested stockholder obtains
the approval of the board of directors prior to becoming an interested
stockholder, (ii) the interested stockholder acquires ninety percent of the
outstanding voting stock of the corporation (excluding shares held by certain
affiliates of the corporation) at the time the stockholder becomes an interested
stockholder, or (iii) the business combination is approved by both the board of
directors and holders of two-thirds of the outstanding voting stock of the
corporation (excluding shares held by the interested stockholder). An
"interested stockholder" is a person who, together with affiliates and
associates, owns (or at any time within the prior three years did own) five
percent or more of the corporation's voting stock. A "business combination"
includes a merger, consolidation, certain stock or asset sales, and certain
other specified transactions resulting in a financial benefit to the interested
stockholder. Telaxis may at any time elect not to be governed by Chapter 110F by
amending the Massachusetts Charter or Massachusetts By-laws, but such an
amendment would not be effective for twelve months and would not apply to a
business combination with any person who became an interested stockholder prior
to the adoption of the amendment.
In addition, Chapter 110D of the Massachusetts General Laws, entitled
"Regulation of Control Shares Acquisitions," applies to Telaxis and provides, in
general, that any stockholder of a corporation subject to this statute who
acquires twenty percent or more of the outstanding voting stock of such
corporation may not vote such stock unless the other stockholders of such
corporation so authorize. Telaxis has not opted out of this statute, although it
could do so at any time by amending the Massachusetts Charter or Massachusetts
By-laws. Such an amendment would only affect control share acquisitions that
occur after the effective date of the amendment.
Anti-takeover Measures
The board of directors believes that a hostile takeover attempt may have a
negative effect on the Company and its stockholders. Takeover attempts that have
not been negotiated or approved by the board of directors of a corporation can
seriously disrupt the business and management of a corporation and generally
present the risk of terms which are less favorable to all of the stockholders
than would be available in a negotiated, board-approved transaction. By
contrast, board-approved transactions can be carefully planned and undertaken at
an opportune time in order to obtain maximum value for the corporation and all
of its stockholders, with due consideration to matters such as capturing the
value from longer term strategies, the recognition or postponement of gain or
loss for tax purposes, and the management and business of the acquiring
corporation.
The Massachusetts Charter and the Massachusetts By-laws already include
certain provisions available to Telaxis under Massachusetts law to deter hostile
takeover attempts and to help provide adequate opportunity for the board to
consider and respond to a takeover offer. These provisions include a classified
board and elimination of cumulative voting. The provisions relating to a
classified board are not included in the Delaware Charter and the Delaware
By-laws. The Delaware Charter and the Delaware By-laws will also not allow
cumulative voting.
37
As described above, the substantive effect of Telaxis' current stockholder
rights plan would be terminated immediately before effectiveness of the
Reincorporation Merger.
YDI Wireless would also retain the rights currently available to Telaxis
under Massachusetts law to issue shares of its authorized but unissued capital
stock. Following the effectiveness of the proposed Reincorporation Merger,
shares of authorized and unissued common stock and preferred stock of YDI
Wireless could (within the limits imposed by applicable law) be issued, or
preferred stock could be created and issued with terms, provisions, and rights,
to make a takeover of YDI Wireless more difficult and therefore less likely.
This is particularly applicable given that much of YDI Wireless' preferred stock
is "blank-check" preferred stock, which means that the preferences, rights, and
other terms of this stock can be set by the board of directors without any
action of the stockholders. Any such issuance of additional stock could have the
effect of diluting the earnings per share and book value per share of existing
shares of common stock and preferred stock, and such additional shares could be
used to dilute the stock ownership of persons seeking to obtain control of YDI
Wireless.
In addition to specific anti-takeover measures, a number of differences
between Massachusetts and Delaware law, which are effective without action by
YDI Wireless, could have a bearing on unapproved takeover attempts. For example,
both Massachusetts and Delaware have "business combination" laws that may deter
hostile takeovers. However, as described above, the Delaware business
combination statute will not immediately apply to YDI Wireless. Further, the
Massachusetts law may prohibit a broader scope of transactions than the Delaware
law because a larger group of stockholders will qualify as "interested
stockholders" and fewer transactions will qualify for an exemption from the
prohibition on business combinations. In addition, the Massachusetts "control
share" statute provides Massachusetts corporations with additional anti-takeover
protections with respect to hostile takeovers.
More generally, Delaware law may permit a corporation greater flexibility
in governing its internal affairs and its relationships with stockholders and
other parties, including various measures taken in response to unsolicited
takeover offers, than do the laws of many other states, including Massachusetts.
In addition to the measures described above, certain types of "poison pill"
defenses (such as stockholder rights plans) have been upheld by Delaware courts,
but have not yet been dispositively addressed by Massachusetts courts, thus
rendering their effectiveness and interpretation in Massachusetts less certain.
The MBCL has a so-called "constituency statute" which provides that, when
a director determines what he or she reasonably believes to be in the best
interests of the corporation, the director may consider the interests of the
corporation's employees, suppliers, creditors, and customers, the economy of the
state, region and nation, community and societal considerations, and the
long-term and short-term interests of the corporation and its stockholders,
including the possibility that these interests may be best served by the
continued independence of the corporation. In the context of a hostile takeover
attempt, this provision might enable a director to conclude, on the basis of one
or more of these factors, that a transaction offering the best outcome for
stockholders is not necessarily in the best interests of the corporation. This
discretion to consider the interests of persons other than stockholders could
have an anti-takeover effect. Delaware has no similar statute applicable to
directors of Delaware corporations.
Appraisal Rights
Massachusetts law generally provides stockholders with appraisal rights in
more situations than does Delaware law.
Under the DGCL, appraisal rights are available to dissenting stockholders
in connection with a statutory merger or consolidation in certain specified
situations. Appraisal rights are not available under the DGCL when a corporation
is to be the surviving corporation and no vote of its stockholders is required
in order to approve the merger. In addition, unless otherwise provided in a
corporation's charter, no appraisal rights are available under the DGCL to
holders of shares of any class of stock which is either (i) listed on a national
securities exchange or designated as a national market system security on an
inter-dealer quotation system by the National Association of Securities Dealers,
Inc. or (ii) held of record by more than 2,000 stockholders, unless such
stockholders are required by the terms of the merger to accept in exchange for
38
their shares anything other than: (a) shares of stock of the surviving
corporation; (b) shares of stock of another corporation which are or will be
listed on a national securities exchange or designated as a national market
system security on an inter-dealer quotation system by the National Association
of Securities Dealers, Inc. or held of record by more than 2,000 stockholders;
(c) cash in lieu of fractional shares of such stock; or (d) any combination
thereof. Appraisal rights are not available under the DGCL in the event of the
sale, lease, or exchange of all or substantially all of a corporation's assets
or the adoption of an amendment to its certificate of incorporation, unless such
rights are granted in the certificate of incorporation. The Delaware Charter
does not grant such rights.
Under the MBCL, appraisal rights are available to a stockholder when the
stockholders collectively vote (i) to sell, lease, or exchange all or
substantially all of the corporation's property and assets, (ii) to adopt an
amendment to the corporation's articles of organization which adversely affects
the rights of the stockholder, or (iii) to merge or consolidate with another
corporation, unless a vote of the stockholders was not required to approve such
merger or consolidation.
Special Meeting of Stockholders
The DGCL provides that special meetings of stockholders may be called only
by the directors or by any other person or persons as may be authorized by the
corporation's certificate of incorporation or by-laws. The Delaware By-laws
provide that special meetings may be called at any time but only by the board of
directors.
Under the MBCL, special meetings of stockholders of a corporation with a
class of voting stock registered under the Securities Exchange Act of 1934,
unless otherwise provided in the articles of organization or bylaws, must be
called by the Clerk (or, in certain circumstances, any other officer) upon
written application by stockholders who hold at least 40% in interest of the
capital stock entitled to vote thereon. The Massachusetts By-laws provide that
special meetings of stockholders may be called by the President or by the board
of directors of Telaxis, and shall be called by the Clerk or, in case of death,
absence, incapacity, or refusal of the Clerk, by any other officer upon written
application of stockholders who hold at least 30% in interest of the capital
stock entitled to be vote at the proposed meeting.
Voting Requirements and Quorums for Stockholder Meetings
Under the DGCL, a majority of the issued and outstanding stock entitled to
vote at any meeting of stockholders shall constitute a quorum for the
transaction of business at such meeting, unless the certificate of incorporation
or by-laws specify a different percentage, but in no event may a quorum consist
of less than one-third of the shares entitled to vote at the meeting. Under the
DGCL, the affirmative vote of the majority of shares present in person or
represented by proxy at a duly held meeting at which a quorum is present and
entitled to vote on the subject matter is deemed to be the act of the
stockholders, unless the DGCL, the certificate of incorporation, or the by-laws
specify a different voting requirement.
The Delaware By-laws provide that, except as otherwise provided by law or
in the Delaware Charter or Delaware By-laws, the holders of a majority of the
issued and outstanding stock of YDI Wireless entitled to vote shall constitute a
quorum for the transaction of business. The Delaware By-laws provide that when a
quorum is present, action on a matter is approved by the affirmative vote of a
majority of the total shares present at the meeting and entitled to vote on the
matter, unless otherwise provided by the Delaware Charter, Delaware By-laws, or
the DGCL.
Under the MBCL, unless the articles of organization or by-laws provide
otherwise, a majority of the issued and outstanding stock entitled to vote at
any meeting constitutes a quorum. Except for the election of directors and other
fundamental matters, the MBCL does not prescribe the percentage vote required
for stockholder action.
Under the Massachusetts By-laws, a majority of the shares of Telaxis then
outstanding and entitled to vote constitutes a quorum for the transaction of
business. The Massachusetts By-laws provide, except where a different vote is
39
required by law, the Massachusetts Charter, or the Massachusetts By-laws, all
questions shall be determined by a vote of a majority of each class voting.
Business Conducted at Stockholder Meetings
The Delaware By-laws provide that, at an annual meeting, subject to any
other applicable requirements, only such business may be conducted as has been
either specified in the notice of meeting, proposed at the time of the meeting
by or at the direction of the YDI Wireless board of directors, or proposed at
such time by a stockholder who had given timely prior written notice to the
Secretary of YDI Wireless of such stockholder's intention to bring such business
before the meeting. For a stockholder's notice to be timely, notice must be
received by YDI Wireless not less than 90 days nor more than 120 days prior to
the first anniversary of the preceding year's annual meeting (provided, however,
that in the event that the date of the annual meeting is more than thirty days
before or more than seventy days after such anniversary date, notice by the
stockholder must be delivered not earlier than the close of business on the one
hundred twentieth day prior to such annual meeting and not later than the close
of business on the later of the ninetieth day prior to such annual meeting or
the tenth day following the day on which public announcement of the date of such
meeting is first made by the company). The notice must contain certain
information about such business and the stockholder who proposes to bring the
business before the meeting, including a brief description of the business the
stockholder proposes to bring before the meeting, the name and address of the
stockholder proposing such business, the reasons for conducting the business at
the meeting, the class and number of shares of stock of YDI Wireless
beneficially owned by such stockholder, and any material interest of such
stockholder in the business so proposed. If the Chairman of a meeting of YDI
Wireless stockholders determines that business was not properly brought before
the meeting in accordance with the foregoing procedures, such business will not
be conducted at the meeting. Nothing in the Delaware By-laws precludes
discussion by any stockholder of any business properly brought before the annual
meeting in accordance with the above-mentioned procedures. The Delaware By-laws
further provide that business transacted at any special meeting of the
stockholders shall be limited to matters relating to the purpose or purposes
stated in the notice of meeting.
The Massachusetts By-laws provide that business conducted at the annual
meeting may be specified by the board of directors or the President, in addition
to anything required by law, the Massachusetts Charter, or the Massachusetts
By-laws. The Massachusetts By-laws further provide that business transacted at
any special meeting of the stockholders shall be limited to matters relating to
the purpose or purposes stated in the notice of meeting.
Nomination and Election of Directors
The Delaware By-laws provide that, except as otherwise provided by law,
directors are elected by the vote of the holders of a plurality of the shares of
stock present, in person or by proxy, at the meeting and entitled to vote.
Neither the Delaware Charter nor the Delaware By-laws allows cumulative voting
for the election of directors. The Delaware By-laws provide that notice of
proposed stockholder nominations of candidates for election as directors at an
annual meeting must be received by the Secretary of YDI Wireless not less than
90 days nor more than 120 days prior to the first anniversary of the preceding
year's annual meeting (provided, however, that in the event that the date of the
annual meeting is more than thirty days before or more than seventy days after
such anniversary date, notice by the stockholder must be delivered not earlier
than the close of business on the one hundred twentieth day prior to such annual
meeting and not later than the close of business on the later of the ninetieth
day prior to such annual meeting or the tenth day following the day on which
public announcement of the date of such meeting is first made by the company).
The notice must contain certain information about the proposed nominee,
including age, business and residence addresses and principal occupation, the
number of shares of stock of YDI Wireless beneficially owned, and such other
information as would be required to be included in a proxy statement soliciting
proxies for the election of the proposed nominee, and certain information about
the stockholder proposing to nominate that person. YDI Wireless may also require
any proposed nominee to furnish other information reasonably required by YDI
Wireless to determine the proposed nominee's eligibility to serve as a director.
If the Chairman of a meeting of YDI Wireless stockholders determines that a
person was not nominated in accordance with the foregoing procedures, such
person shall not be eligible for election as a director.
40
The Massachusetts By-laws do not contain specific provisions regarding the
nomination of directors.
Inspection Rights
Under the DGCL, every stockholder has a right to examine, in person or by
agent or attorney, during the usual hours for business, and for any proper
purpose, the corporation's stock ledger, a list of its stockholders, and its
other books and records, and to make copies or extracts therefrom. In order to
exercise the foregoing right, a stockholder must submit a written demand to the
corporation, under oath, stating the purpose of the inspection. If the
corporation refuses to permit an inspection demanded by a stockholder, or fails
to reply to a stockholder's demand within five business days after such demand
has been made, a stockholder may apply to the Delaware Court of Chancery to
compel the inspection. Where a stockholder seeks to have the Chancery Court
compel an inspection of the corporation's books and records, other than its
stock ledger or list of stockholders, the stockholder must first establish that
it has complied with the formal requirements of making a demand for inspection
and that the inspection is for a proper purpose. For purposes of this provision
of the DGCL, a "proper purpose" is one that is reasonably related to such
person's interest as a stockholder. The Delaware By-laws provide that YDI
Wireless shall prepare a complete list of stockholders entitled to vote at a
given meeting at least ten days before such meeting. Such list shall be open for
examination by any stockholder for any purpose germane to the relevant meeting,
during ordinary business hours, for a period of at least ten days prior to such
meeting.
The MBCL requires that every domestic corporation maintain in
Massachusetts, and make available for inspection by its stockholders, the
original or attested copies of the corporation's articles of organization,
by-laws, records of all meetings of incorporators and stockholders, and the
stock and transfer records listing the names of all stockholders and their
record addresses and the amount of stock held by each. The MBCL further provides
that if any officer or agent of a corporation having charge of such corporate
records (or copies thereof) refuses or neglects to exhibit them in legible form
or to produce for examination a list of stockholders, with the record address
and amount of stock owned by each, such officer or agent or the corporation will
be liable to any stockholder for all actual damages sustained by reason of such
refusal or neglect. In an action for damages or a proceeding in equity under
this provision of the MBCL, it is a defense that the actual purpose and reason
for the inspection is to secure a list of stockholders or other information for
the purpose of selling the list or information or for using them for a purpose
other than in the interest of the person seeking them, as a stockholder,
relative to the affairs of the corporation. In addition to the rights of
inspection provided by the MBCL, a stockholder of a Massachusetts corporation
has a common law right to inspect additional documents which, if such request is
refused by the corporation, may be obtained by petitioning a court for the
appropriate order. When petitioned for such an order, the court must exercise
its discretion to determine that such stockholder is acting in good faith and
for the purposes of advancing the interests of the corporation and protecting
such holder's own interest as a stockholder.
The Massachusetts Charter provides that no stockholder shall have any
right to examine any books or property of Telaxis if there is reasonable ground
for belief that such examination will for any reason be adverse to the interests
of Telaxis, and a vote of the board of directors refusing permission to make
such examination shall be prima facie evidence that such examination would be
adverse to the interests of the corporation.
The Massachusetts By-laws provide that the original or attested copies of
the Massachusetts Charter, the Massachusetts By-laws, and records of all
meetings of incorporators and stockholders, and the stock and transfer records,
shall be kept in Massachusetts at the principal office of Telaxis or at an
office of its Clerk or transfer agent. The Massachusetts By-laws also provide
that such corporate documents shall be available at all reasonable times for
inspection by any stockholder for any proper purpose but not to secure a list of
stockholders for the purpose of selling such list or copies thereof or of using
the same for a purpose other than in the interest of the applicant, as a
stockholder, relative to the affairs of Telaxis.
Action by Consent of Stockholders
Under the DGCL, unless the certificate of incorporation provides
otherwise, any action required or permitted to be taken by stockholders at any
annual or special meeting may be taken without a meeting and without prior
41
notice, if the stockholders having the number of votes that would be necessary
to take such action at a meeting at which all stockholders were present and
voted, consent to the action in writing and the written consents are filed with
the records of the meetings of stockholders. All such consents must, in order to
be effective, be signed and delivered to the corporation within sixty days after
the earliest dated consent is delivered to the corporation.
Under the MBCL, any action required or permitted to be taken by
stockholders at a meeting may be taken without a meeting if every stockholder
entitled to vote on the matter consents to the action in writing and the written
consents are filed with the records of the meetings of stockholders. The
Massachusetts By-laws provide that any action by stockholders may be taken
without a meeting if all stockholders entitled to vote on the matter consent to
the action by writing. Given that we have thousands of stockholders, these
provisions have the practical effect of preventing our stockholders from acting
by written consent.
The Delaware Charter does not prohibit stockholder action by written
consent. Accordingly, after the Reincorporation Merger, Messrs. Fitzgerald and
Young, who together control over two-thirds of our common stock outstanding on
the record date, will have the ability to take action by written consent without
a meeting if they choose to act together. This ability would be subject to the
notice requirements of Delaware law and the provisions of the Securities
Exchange Act of 1934, as amended. Under those provisions as currently in effect,
we would be required to deliver to stockholders an information statement
regarding the action at least 20 calendar days before the action is taken.
Cumulative Voting
Under the DGCL, a corporation may provide in its certificate of
incorporation for cumulative voting by stockholders in the election of
directors. The Delaware Charter does not provide for cumulative voting.
The MBCL has no cumulative voting provision, and the Massachusetts Charter
does not provide for cumulative voting.
Dividends and Stock Repurchases
Under the DGCL, a corporation generally is permitted to declare and pay
dividends out of surplus or out of net profits for the current and/or preceding
fiscal year, provided that the capital of the corporation is not less than the
aggregate amount of capital represented by the issued and outstanding stock of
all classes having a preference upon the distribution of assets. In addition,
under the DGCL, a corporation may generally redeem or repurchase shares of its
stock if the capital of the corporation is not impaired and if such redemption
or repurchase will not impair the capital of the corporation. Under the DGCL,
the directors of a corporation are jointly and severally liable to the
corporation and its stockholders for negligently or willfully making improper
dividend payments, stock repurchases or redemptions. Directors held to be liable
pursuant to this provision of the DGCL are entitled to be subrogated to the
rights of the corporation against stockholders receiving dividends on, or assets
for the sale or redemption of, their stock with knowledge that such dividend,
repurchase, or redemption was unlawful. Directors who are absent or who dissent
may be exonerated from liability.
Under the MBCL, the directors of a corporation will be jointly and
severally liable if a payment of dividends or a redemption or a repurchase of a
corporation's stock (i) is made when the corporation is insolvent, (ii) renders
the corporation insolvent, or (iii) violates the corporation's articles of
organization. Stockholders to whom a corporation makes any distribution (except
a distribution of stock of the corporation) if the corporation is, or is thereby
rendered, insolvent, are liable to the corporation for the amount of such
distribution made, or for the amount of such distribution which exceeds that
which could have been made without rendering the corporation insolvent, but in
either event only to the extent of the amount paid or distribution to them,
respectively. In such event, a stockholder who pays more than such holder's
proportionate share of such distribution or excess shall have a claim for
contribution against the other stockholders.
42
The Massachusetts Charter provides that dividends may be paid on Telaxis'
common stock as and when declared by the Telaxis board of directors, subject to
the relative rights and preferences of any then outstanding preferred stock. No
shares of preferred stock of Telaxis are currently outstanding. Telaxis has
never declared or paid cash dividends on its capital stock.
Classification, Number and Qualification of the Board of Directors
The DGCL permits (but does not require) classification of a corporation's
board of directors into one, two, or three classes. Under the DGCL, the number
of directors shall be fixed or determined in the manner the by-laws provide,
unless the corporation's certificate of incorporation fixes the number of
directors, in which case the number of directors may only be changed by amending
the certificate of incorporation. The Delaware Charter and the Delaware By-laws
do not provide for the classification of the board of directors of YDI Wireless.
The Delaware By-laws provide that the number of directors will be fixed from
time to time by the YDI Wireless board of directors. The size of the YDI
Wireless board of directors is currently fixed at five members. Neither the
Delaware Charter nor the Delaware By-laws set forth specific qualification
requirements for directors. Any vacancy on the YDI Wireless board of directors,
however occurring, including a vacancy resulting from an enlargement of the YDI
Wireless board of directors, may be filled by vote of a majority of the
directors then in office.
The MBCL requires classification of a publicly-traded corporation's board
of directors into three classes (each having a three-year term) and imposes
certain other obligations, unless the directors of such corporation elect by
vote to be exempt from such requirement or the stockholders of such corporation,
at a meeting duly called for such purpose, elect to be exempt from such
requirement by a vote of two-thirds of each class of stock outstanding. The
Massachusetts Charter and the Massachusetts By-laws provide for the
classification of Telaxis' board of directors into three classes, as nearly
equal in number as possible, with the terms of the classes staggered so that
only one class is elected each year, in each case for a three-year term or until
a successor to each director in each such class is duly elected and qualified.
The MBCL requires that the number of directors be fixed or determined in the
corporation's by-laws but shall not be less than three directors whenever there
are more than two stockholders of record. The Massachusetts By-laws provide that
the number of directors of Telaxis shall consist of seven members. The
Massachusetts By-laws provide that the number of directors may be increased at
any meeting of the stockholders or by the directors then in office.
Neither the Massachusetts Charter nor the Massachusetts By-laws set forth
specific qualification requirements for directors.
Removal of Directors
Under the DGCL, stockholders may generally remove directors with or
without cause by a majority vote; however, stockholders may remove members of a
classified board only for cause, unless the certificate of incorporation
provides otherwise. The Delaware Charter does not establish a classified board
and does not require cause for director removal.
MBCL Section 50A, which requires that publicly held Massachusetts
corporations that have not "opted out" of Section 50A have a classified board of
directors, also provides that directors who are so classified shall be subject
to removal by the stockholders only for cause. In addition, the Massachusetts
By-laws provide that a director may be removed from office at any time, but only
for cause and only by the vote of holders of not less a majority of the stock
outstanding and entitled to vote.
Vacancies on the Board of Directors
Under the DGCL, unless otherwise provided in the certificate of
incorporation or by-laws, vacancies on the board of directors and newly created
directorships resulting from any increase in the authorized number of directors
may be filled by the vote of a majority of directors then in office, even though
less than a quorum. The DGCL also provides that where directors are elected by
classes or series of stock, vacancies are to be filled by the remaining
43
directors elected by the class or series in whose directorships the vacancy
occurs. The Delaware Charter and the Delaware By-laws provide that newly created
directorships resulting from any increase in the authorized number of directors
or any vacancies in the YDI Wireless board of directors for any other reason may
be filled by a majority vote of the directors then in office, although less than
a quorum, or by a sole remaining director. A director elected to fill a vacancy
shall be elected to hold office until the next election of the class for which
such director shall have been chosen, subject to the election and qualification
of his or her successor and to his or her earlier death, resignation, or
removal.
The MBCL provides that in the case of a classified board (such as
Telaxis'), any vacancy in the board of directors, including a vacancy resulting
from the enlargement of the board of directors, shall be filled solely by the
affirmative vote of a majority of the directors then in office, even though less
than a quorum. The Massachusetts By-laws also provide that newly created
directorships resulting from any increase in the number of directors or any
vacancy shall be filled solely by Telaxis' board of directors.
Exculpation of Directors
The DGCL permits a corporation to provide in its certificate of
incorporation that a director shall not be personally liable for monetary
damages resulting from breaches of fiduciary duties. Under the DGCL, a charter
provision limiting directorial liability cannot relieve a director of personal
liability for (i) any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii)
unlawful payment of dividends or unlawful repurchases or redemptions of stock,
or (iv) any transactions from which the director derived an improper personal
benefit.
The MBCL allows a corporation's articles of organization to limit the
personal liability of its directors for breaches of their fiduciary duties.
Under the MBCL, this limitation is generally unavailable for acts or omission by
a director which (i) were in violation of such director's duty of loyalty to the
corporation or its stockholders, (ii) were in bad faith or which involved
intentional misconduct or a knowing violation of law, or (iii) involved any
transaction from which the director derived an improper personal benefit. The
MBCL also prohibits the elimination or limitation of director liability for
unauthorized loans to insiders or distributions that violate the corporation's
articles of organization or that occur when a corporation is, or which render a
corporation, insolvent.
The Delaware Charter and the Massachusetts Charter provide for limitations
on directors' liability as permitted by the DGCL and the MBCL, respectively.
Indemnification of Directors, Officers, and Others
Both the DGCL and the MBCL generally permit indemnification of directors,
officers, employees, and certain others for expenses incurred by them by reason
of their position with the corporation, if such person has acted in good faith
and with the reasonable belief that his or her conduct was in or not opposed to
the best interest of the corporation. However, unlike the MBCL, the DGCL does
not permit a corporation to indemnify persons against judgments in actions
brought by or in the right of the corporation.
The Delaware By-laws generally provide that YDI Wireless shall indemnify
any director or officer of YDI Wireless to the fullest extent permitted by
applicable law against all liability and loss suffered and expenses (including
attorneys' fees) reasonably incurred in any action, suit, or proceeding brought
against him by virtue of his position as a director or officer of YDI Wireless.
The DGCL also provides that, notwithstanding the foregoing, to the extent that a
director or officer has been successful, on the merits or otherwise, including
the dismissal of an action without prejudice, he is required to be indemnified
by the corporation against all expenses (including attorneys' fees) incurred in
connection therewith. Indemnification is required to be made unless YDI Wireless
determines that the applicable standard of conduct required for indemnification
has not been met. In the event of a determination by YDI Wireless that the
director or officer did not meet the applicable standard of conduct required for
indemnification, or if YDI Wireless fails to make an indemnification payment
within thirty days after such payment is claimed by such person, such person is
permitted to petition the court to make an independent determination as to
44
whether such person is entitled to indemnification. The Delaware By-laws further
provide that YDI Wireless shall pay the expenses (including attorneys' fees) of
a director or officer incurred in advance of the final disposition of an action
or proceeding upon receipt of an undertaking by the person to repay such payment
if it is adjudicated that such person is not entitled to indemnification under
the Delaware By-laws or otherwise.
The Massachusetts By-laws provide that Telaxis shall, to the extent
legally permissible, indemnify each of its directors, officers, employees, and
agents (including persons who were acting at its request as directors, trustees,
or officers of another organization, including service with respect to any
employee benefit plan) against all judgments, fines, penalties, costs and
expenses (including amounts paid in settlement other than to Telaxis) reasonably
incurred by such person in connection therewith. The Massachusetts By-laws
further provide that indemnification may, in the discretion of the Telaxis board
of directors, include payments of costs and expenses incurred in advance of the
final disposition of an action or proceeding upon receipt of an undertaking by
the person indemnified to repay such payment if it is adjudicated that such
person is not entitled to indemnification under the Massachusetts By-laws.
Transactions with Interested Parties
The DGCL provides that no transaction between a corporation and one or
more of its directors or officers, or an entity in which one or more of its
directors or officers are directors or officers or have a financial or other
interest, shall be void or voidable solely for that reason, nor will such a
transaction be void or voidable solely because the director or officer is
present at or votes at the meeting of the board of directors or committee which
authorizes the transaction or solely because his or her votes are counted for
such purpose, provided that (i) the material facts as to the relationship or
interest and as to the transaction are disclosed or are known to the board of
directors or a committee thereof and the board or committee authorizes the
transaction by the affirmative vote of a majority of the disinterested directors
even though the disinterested directors number less than a quorum, (ii) the
material facts as to the interested director's or officer's relationship or
interest and as to the transaction are disclosed or are known to the
stockholders entitled to vote thereon and the transaction is specifically
approved in good faith by vote of those stockholders, or (iii) the transaction
is fair as to the corporation as of the time it is authorized, approved, or
ratified by the board of directors or committee or the stockholders. The DGCL
permits common or interested directors to be counted in determining the presence
of a quorum at a meeting of the board or of a committee that authorizes an
interested director or officer transaction.
The MBCL contains no provision comparable to that of the DGCL on this
topic. The Massachusetts Charter and the Massachusetts By-laws provide that no
transaction of Telaxis shall, in the absence of fraud, be affected or
invalidated by the fact that any director, officer, or stockholder of Telaxis or
any organization of which he may be a director, officer, stockholder, or member
may be a party to or may have an interest in such transaction, provided that the
fact and nature of such interest was disclosed to, or known by, the entire board
of directors of Telaxis or a majority thereof before acting on such transaction.
The Massachusetts Charter and the Massachusetts By-laws further provide that an
interested director may be counted in determining the existence of a quorum and
may vote for purposes of authorizing any such transactions as if such director
were not interested, provided that any vote relating to that transaction must be
adopted by a majority of the disinterested directors. The Massachusetts Charter
also provides no such interested director, officer, or stockholder will be
liable to account to Telaxis for any profit or benefit realized through any such
approved transaction. The Massachusetts Charter further provides that, to the
extent permitted by law, the Telaxis stockholders can authorize or ratify any
corporate transaction or action of the board of directors, provided that, with
respect to interested transactions, the nature of the transaction and the
interests of the director, officer, or stockholder must be summarized in
materials sent to the stockholders before the meeting and fully disclosed at the
meeting.
Charter Amendments
Under the DGCL, charter amendments require the approval of the board of
directors and both a general vote of a majority of all outstanding shares
entitled to vote thereon and a class vote of a majority of all outstanding
shares of each class entitled to vote as a class. The DGCL requires a class vote
of holders of a particular class of stock if, among other bases, an amendment
will adversely affect the powers, preferences, or special rights of a particular
45
class of stock. Under the DGCL, a provision in a corporation's certificate of
incorporation requiring a supermajority vote of the board of directors or
stockholders may be amended only by such supermajority vote. In addition, any
amendment, repeal, or modification of the exculpation provision of the Delaware
Charter shall be prospective only.
Under the MBCL, a majority vote of each class of stock outstanding and
entitled to vote thereon is required to authorize an amendment of the articles
of organization effecting one or more of the following: (i) an increase or
reduction of the capital stock of any authorized class; (ii) a change in the par
value of authorized shares with par value or any class thereof; (iii) a change
of authorized shares (or any class thereof) from shares with par value to shares
without par value, or from shares without par value to shares with par value;
(iv) certain changes in the number of authorized shares (or any class thereof);
or (v) a corporate name change. Subject to certain conditions, a two-thirds vote
of each class of stock outstanding and entitled to vote thereon is required to
authorize any other amendment of the articles of organization, but the articles
of organization may provide for authorization by a vote of a lesser proportion
but not less than a majority of each class of stock outstanding and entitled to
vote thereon. If any amendment requiring a two-thirds vote by statute would
adversely affect the rights of any class or series of stock, a two-thirds vote
of such class voting separately, or a two-thirds vote of such series, voting
together with any other series of the same class adversely affected in the same
manner, is also necessary to authorize such amendment. In each case, the
two-thirds proportion may be reduced to a majority in the articles of
organization as described above. The Massachusetts Charter and the Massachusetts
By-laws do not contain additional provisions reducing the proportion of
outstanding shares needed to amend the Massachusetts Charter.
Amendments to By-laws
Under the DGCL, the power to adopt, amend, or repeal by-laws lies in the
stockholders entitled to vote; provided, however, that any corporation may, in
its certificate of incorporation, also confer the power to adopt, amend, or
repeal bylaws upon its board of directors.
The Delaware Charter grants the YDI Wireless board of directors the
authority to adopt, amend, and repeal the Delaware By-laws.
The MBCL provides that stockholders may make, amend, or repeal a
corporation's by-laws and, if so provided in its articles of organization, the
board of directors may also have these powers, except with respect to any
provision thereof which by law, the articles of organization, or the by-laws
requires action by the stockholders. Any by-law adopted by the directors can be
amended or repealed by the stockholders.
The Massachusetts Charter provides that Telaxis' board of directors may
make, amend, or repeal the Massachusetts By-laws, except as provided by law or
the Massachusetts By-laws. The Massachusetts By-laws provide that the
Massachusetts By-laws may be amended or repealed, and new by-laws adopted, by
either the stockholders or a majority of the directors then in office, except
that no amendment may be made by the board of directors on matters reserved to
the stockholders by law, the Massachusetts Charter, or the Massachusetts
By-laws. Changes by stockholders require the vote of at least 75% of Telaxis'
then-outstanding common stock entitled to vote.
Certain Federal Income Tax Consequences of the Reincorporation Merger
We have summarized below certain federal income tax consequences to
Telaxis and its stockholders resulting from the Reincorporation Merger. This
summary is based on U.S. federal income tax law existing as of the date of this
proxy statement, and such tax laws may change, even retroactively. We have not
sought and will not seek an opinion of counsel or a ruling from the Internal
Revenue Service regarding the federal income tax consequences of the
Reincorporation Merger. This summary does not discuss all aspects of federal
income taxation that may be important to you in light of your individual
circumstances. Many stockholders (such as financial institutions, insurance
companies, broker-dealers, tax-exempt organizations, and foreign persons) may be
subject to special tax rules. Other stockholders may also be subject to special
tax rules, including but not limited to: stockholders who received common stock
as compensation for services or pursuant to the exercise of an employee stock
46
option, or stockholders who have held, or will hold, stock as part of a
straddle, hedging, or conversion transaction for federal income tax purposes. In
addition, this summary does not discuss any state, local, foreign, or other tax
considerations. This summary assumes that you are a U.S. citizen and have held,
and will hold, your shares as capital assets under the Internal Revenue Code.
You should consult your tax advisor as to the particular federal, state, local,
foreign, and other tax consequences, in light of your specific circumstances.
We believe that the Reincorporation Merger will constitute a
reorganization within the meaning of section 368(a)(1)(F) of the Internal
Revenue Code. Accordingly, we expect that the Reincorporation Merger will have
the following material federal income tax consequences:
1. No gain or loss will be recognized by Telaxis as a result of the
Reincorporation Merger.
2. You will not recognize any gain or loss as a result of your receipt of
shares of YDI Wireless common stock in exchange for shares of Telaxis common
stock in the Reincorporation Merger, and you will have the same aggregate
adjusted tax basis and holding period in your YDI Wireless common stock as you
had in your Telaxis common stock immediately prior to the Reincorporation
Merger.
Right to Dissent and Appraisal Rights of Stockholders
Sections 86 through 98 of the Massachusetts Business Corporation Law sets
forth the rights of stockholders of Telaxis who object to the Reincorporation
Merger. Any stockholder of Telaxis who does not vote in favor of the
Reincorporation Merger, or who duly revokes his vote in favor of the
Reincorporation Merger, may, if the Reincorporation Merger is consummated,
obtain payment in cash of the fair value of his shares by complying with the
requirements of Sections 86 through 98, which are attached as Appendix E, of the
Massachusetts Business Corporation Law. The dissenting stockholder must file
with us, before the taking of the vote on the Reincorporation Merger proposal, a
written objection to the Reincorporation Merger stating that he or she intends
to demand payment for his or her shares if the Reincorporation Merger is
consummated. Any objections should be sent to our Clerk at 20 Industrial Drive
East, South Deerfield, MA 01373. The dissenting stockholder must not vote for
the Reincorporation Merger. Within ten days after the vote of stockholders
authorizing the Reincorporation Merger, we must give written notice of such
authorization to each dissenting stockholder who has complied with the statutory
requirements. Within thirty days after the expiration of the period within which
stockholders may file their demand for payment, YDI Wireless must pay each
stockholder who has filed such demand the fair value of such stockholder's
stock. If we and the dissenting stockholder are unable to agree as to such
value, Section 90 of the Massachusetts Business Corporation Law provides for
judicial determination of value. In the event of such a disagreement, a court
proceeding shall be commenced by us or the dissenting stockholder in the
Superior Court of the Commonwealth of Massachusetts.
A negative vote on the Reincorporation Merger does not constitute a
"written objection" required to be filed by an objecting stockholder. An
abstention from voting on the Reincorporation Merger or failure to specify any
vote on the proxy card will not constitute a waiver of rights under Sections 86
through 98 of the Massachusetts law provided that a written objection has been
properly filed.
The foregoing summary does not purport to be a complete statement of the
provisions of Sections 86 through 98 of the Massachusetts law and is qualified
in its entirety by reference to those sections, copies of which are attached
hereto as Appendix E.
Assuming that both the Reverse/Forward Split and the Reincorporation
Merger are approved by our stockholders as we expect and we effect the
Reverse/Forward Split prior to the Reincorporation Merger as we currently
contemplate, no Cashed-Out Stockholder will have appraisal rights with respect
to the Reincorporation Merger.
47
Reservation of Rights
We reserve the right to abandon the Reincorporation Merger without further
action by our stockholders at any time before the filing of the necessary
documents with the Delaware Secretary of State and with the Massachusetts
Secretary of State, even if the Reincorporation Merger has been authorized by
our stockholders at the annual meeting. By voting in favor of the
Reincorporation Merger, you are expressly also authorizing us to determine not
to proceed with the Reincorporation Merger if we should so decide.
Voting
The affirmative vote of at least two-thirds of our common stock
outstanding and entitled to vote is necessary to approve the proposed
Reincorporation Merger. As the sole stockholder of YDI Wireless, we will
authorize the Reincorporation Merger for YDI Wireless. We believe that both
Concorde Equity and Michael F. Young will vote in favor of the Reincorporation
Merger. Because Concorde Equity and Mr. Young together own more than two-thirds
of our common stock outstanding on the record date for this annual meeting, we
expect that the Reincorporation Merger will be approved by our stockholders
regardless of how our other stockholders vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO CHANGE THE
COMPANY'S JURISDICTION OF INCORPORATION FROM MASSACHUSETTS TO DELAWARE.
PROPOSAL 4
CORPORATE NAME CHANGE
The board of directors has approved an amendment to Telaxis' Restated
Articles of Organization, as amended to date, which would change the name of the
Company from Telaxis Communications Corporation to YDI Wireless, Inc. In the
event that the Reincorporation Merger is approved as we expect, we will effect
the change of name in connection with the Reincorporation Merger rather than by
amendment of our Massachusetts Charter.
We believe that the name "Telaxis Communications" is closely associated
with our company as it existed prior to the April 2003 transaction with YDI.
Upon completion of that transaction, we began doing business as YDI Wireless,
with the intent of changing our name to YDI Wireless, Inc. upon receiving the
required vote of the stockholders at our next annual meeting. In the definitive
documents reflecting the transaction with YDI, we agreed to submit a proposal to
our stockholders recommending that we change our legal name from Telaxis
Communications Corporation to YDI Wireless, Inc.
We believe that the name "YDI Wireless" is an appropriate name to reflect
the combination of YDI and Telaxis. As a result of that transaction, we now have
a substantial number of customers and suppliers who have been used to doing
business with us as YDI, whereas we have fewer customers and suppliers who are
accustomed to doing business with us as Telaxis Communications. We also believe
that the name "YDI" has positive name recognition in our industry. We believe
that the name "YDI Wireless" will enable us to retain and build on that positive
name recognition while reflecting the expanded suite of wireless products we
expect to be able to offer to our customers due to Telaxis' development
capabilities. While we expect there will be costs associated with this name
change, we do not anticipate the costs of publicizing the change of name to be
substantial because of the large number of customers, suppliers, and others who
already know us as YDI and because we have been doing business as YDI Wireless
since April 2003.
The name change will not affect the public registration of our common
stock with the SEC under the Securities Exchange Act of 1934, as amended.
Similarly, we do not expect that the name change will affect the continued
listing of our common stock on the Over-The-Counter Bulletin Board. In
connection with the Reverse/Forward Split, the Reincorporation Merger, and the
proposed name change, we expect that we will be given a new ticker symbol.
48
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO CHANGE THE
COMPANY'S NAME TO YDI WIRELESS, INC.
Section 16(a) Beneficial Ownership
Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
our directors and executive officers and persons who own more than ten percent
of our common stock (collectively, "Reporting Persons") to file with the SEC
initial reports of beneficial ownership and reports of changes in beneficial
ownership of our common stock. Each Reporting Person is required by SEC
regulations to furnish us with copies of such Section 16(a) reports. Based on
our records and other information, we believe that all of these filing
requirements were met with respect to our last fiscal year (which ended on
December 31, 2002).
INDEPENDENT PUBLIC ACCOUNTANTS
The firm of PricewaterhouseCoopers LLP, independent certified public
accountants, served as our auditors for the fiscal year ended December 31, 2002.
We have selected BDO Seidman, LLP, independent certified public accountants, as
our auditors for the fiscal year ending December 31, 2003. A representative of
BDO Seidman, LLP is expected to be present at the annual meeting, 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. We do not expect a
representative of PricewaterhouseCoopers LLP to be present at the annual
meeting.
Change of Auditors
On April 2, 2003, PricewaterhouseCoopers LLP resigned as our independent
auditor following the change of control transaction with YDI. The reports of
PricewaterhouseCoopers LLP on the financial statements of Telaxis for the years
ended December 31, 2001 and 2002 contained no adverse opinion or disclaimer of
opinion and were not qualified or modified as to uncertainty, audit scope, or
application of accounting principles. During the years ended December 31, 2001
and 2002 and through April 2, 2003, there were no disagreements with
PricewaterhouseCoopers LLP on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of PricewaterhouseCoopers
LLP, would have caused them to make reference thereto in their report on the
financial statements for such years, and there were no "reportable events" as
described in Item 304 of Regulation S-K.
On May 1, 2003, we engaged BDO Seidman, LLP as our independent auditor for
the fiscal year ending December 31, 2003.
Audit Fees
The aggregate fees for professional services rendered by
PricewaterhouseCoopers LLP in connection with their audit of our annual
financial statements for 2002 and their review of our interim financial
statements included in our quarterly reports on Form 10-Q for 2002 were
approximately $132,000.
Financial Information Systems Design and Implementation Fees
During 2002, PricewaterhouseCoopers LLP rendered no professional services
relating to the design and implementation of our financial information systems.
All Other Fees
The aggregate fees for all other services rendered by
PricewaterhouseCoopers LLP to us during 2002 were approximately $150,000.
49
SHAREHOLDER PROPOSALS
Any stockholder who wishes to submit a proposal for action to be included
in our proxy statement and form of proxy relating to our 2004 annual meeting of
stockholders is required to submit such proposal to our Clerk at 20 Industrial
Drive East, South Deerfield, Massachusetts 01373 on or before [February 3],
2004.
Any stockholder that intends to present a proposal that will not be
included in the proxy statement for our 2004 annual meeting must submit such
proposal to our Clerk at 20 Industrial Drive East, South Deerfield,
Massachusetts 01373 on or before [April 19], 2004. Proposals submitted after
that date will be considered untimely for purposes of Rule 14a-5(e)(2) under the
Securities Exchange Act of 1934, as amended.
OTHER MATTERS
The board of directors knows of no other matters that will be presented
for consideration at the annual meeting. If any other matters are properly
brought before the meeting, it is the intention of the persons named in the
accompanying proxy to vote on such matters in accordance with their best
judgment.
By order of the Board of Directors
David L. Renauld, Clerk
[June 3], 2003
A copy (without exhibits) of Telaxis' Annual Report on Form 10-K for the year
ended December 31, 2002 as filed with the Securities and Exchange Commission has
been mailed to each stockholder with this proxy statement. Telaxis will provide,
without charge, an additional copy of the annual report to any stockholder upon
written request by the stockholder. Requests should be addressed to David L.
Renauld, Telaxis Communications Corporation, 20 Industrial Drive East, South
Deerfield, MA 01373.
50
Appendix A
SUBSTANTIVE PROVISIONS OF
PROPOSED FORM OF ARTICLES OF AMENDMENT TO
RESTATED ARTICLES OF ORGANIZATION
TO EFFECT REVERSE STOCK SPLIT
FEDERAL IDENTIFICATION
NO. 04-2751645
The Commonwealth of Massachusetts
William Francis Galvin
Secretary of the Commonwealth
One Ashburton Place, Boston, Massachusetts 02108-1512
ARTICLES OF AMENDMENT
(General Laws, Chapter 156B, Section 72)
We, ________________, President, and ________________, Clerk, of Telaxis
Communications Corporation, located at 20 Industrial Drive East, South
Deerfield, Massachusetts 01373, certify that these Articles of Amendment
affecting articles numbered IV of the Articles of Organization were duly adopted
at a meeting held on June 24, 2003, by vote of _________________ shares of
Common Stock of ___________________ shares outstanding, being at least a
majority of each type, class or series outstanding and entitled to vote thereon:
To replace the first two paragraphs under Article IV, Capital Stock
in its entirety with the following two paragraphs:
The total number of shares of all classes of stock which the
corporation shall have authority to issue is One Hundred Twenty-Six
Million Five Hundred Eighty Thousand (126,580,000) shares, consisting of
One Hundred Million (100,000,000) shares of Common Stock, par value $.01
per share (the "Common Stock"), and Twenty-Six Million Five Hundred Eighty
Thousand (26,580,000) shares of Preferred Stock, par value $.01 per share
(the "Preferred Stock").
At the same time as the Articles of Amendment in which this text is
contained become effective (the "Effective Time"), each one (1) share of
Common Stock issued and outstanding or held in the treasury of the
corporation immediately prior to the Effective Time, will be and hereby is
automatically reclassified and changed (without any further act) into one
one-thousandth (1/1,000th) of a fully-paid and nonassessable share of
Common Stock, without increasing or decreasing the par value thereof,
provided that no fractional shares shall be issued in respect of any
shares of Common Stock held by any holder in any one account which account
has fewer than 1,000 shares of Common Stock immediately prior to the
Effective Time, and that, instead of issuing such fractional shares, the
corporation shall pay in cash an amount per share equal to the daily
average of the highest and lowest sale prices per share of the Common
Stock on the Over-The-Counter Bulletin Board, averaged over a period of
twenty consecutive trading days ending on (and including) the Effective
Date, without interest.
The foregoing amendment(s) will become effective when these Articles of
Amendment are filed in accordance with General Laws, Chapter 156B, Section 6
unless these articles specify, in accordance with the vote adopting the
amendment, a later effective date not more than thirty days after such filing,
in which event the amendment will become effective on such later date.
Later effective date: __________ ___, 200__ at 6:00 p.m.
Signed under the penalties of perjury, this ____________ day of
________________, 200___.
, President
- -------------------------------------
, Clerk
- -----------------------------------------
2
SUBSTANTIVE PROVISIONS OF
PROPOSED FORM OF ARTICLES OF AMENDMENT TO
RESTATED ARTICLES OF ORGANIZATION
TO EFFECT FORWARD STOCK SPLIT
FEDERAL IDENTIFICATION
NO. 04-2751645
The Commonwealth of Massachusetts
William Francis Galvin
Secretary of the Commonwealth
One Ashburton Place, Boston, Massachusetts 02108-1512
ARTICLES OF AMENDMENT
(General Laws, Chapter 156B, Section 72)
We, ________________, President, and ________________, Clerk, of Telaxis
Communications Corporation, located at 20 Industrial Drive East, South
Deerfield, Massachusetts 01373, certify that these Articles of Amendment
affecting articles numbered IV of the Articles of Organization were duly adopted
at a meeting held on June 24, 2003, by vote of _________________ shares of
Common Stock of ___________________ shares outstanding, being at least a
majority of each type, class or series outstanding and entitled to vote thereon:
To replace the first two paragraphs under Article IV, Capital Stock
in its entirety with the following two paragraphs:
The total number of shares of all classes of stock which the
corporation shall have authority to issue is One Hundred Twenty-Six
Million Five Hundred Eighty Thousand (126,580,000) shares, consisting of
One Hundred Million (100,000,000) shares of Common Stock, par value $.01
per share (the "Common Stock"), and Twenty-Six Million Five Hundred Eighty
Thousand (26,580,000) shares of Preferred Stock, par value $.01 per share
(the "Preferred Stock").
At the same time as the Articles of Amendment in which this text is
contained become effective (the "Effective Time"), each one (1) share of
Common Stock issued and outstanding or held in the treasury of the
corporation immediately prior to the Effective Time, will be and hereby is
automatically reclassified and changed (without any further act) into two
hundred fifty (250) fully-paid and nonassessable shares of Common Stock,
without increasing or decreasing the par value thereof, and each fraction
of a share of Common Stock issued and outstanding or held in the treasury
of the corporation immediately prior to the Effective Time will be and
hereby is automatically reclassified and changed (without any further act)
into a number of fully-paid and nonassessable shares of Common Stock equal
3
to the product of two hundred fifty (250) and such fraction, which product
shall be rounded up to the nearest whole share.
The foregoing amendment(s) will become effective when these Articles of
Amendment are filed in accordance with General Laws, Chapter 156B, Section 6
unless these articles specify, in accordance with the vote adopting the
amendment, a later effective date not more than thirty days after such filing,
in which event the amendment will become effective on such later date.
Later effective date: __________ ___, 200__ at 6:01 p.m.
Signed under the penalties of perjury, this ____________ day of
________________, 200___.
, President
- -------------------------------------
, Clerk
- -----------------------------------------
4
Appendix B
RESTATED CERTIFICATE OF INCORPORATION
OF
YDI WIRELESS, INC.
The present name of the corporation is YDI Wireless, Inc. The corporation
was incorporated under the name YDI Wireless, Inc. by the filing of its original
Certificate of Incorporation with the Secretary of State of the State of
Delaware on May 5, 2003. This Restated Certificate of Incorporation of the
corporation, which both restates and further amends the provisions of the
corporation's Certificate of Incorporation, was duly adopted in accordance with
the provisions of Sections 242 and 245 of the General Corporation Law of the
State of Delaware and by the written consent of its sole stockholder in
accordance with Section 228 of the General Corporation Law of the State of
Delaware. The Certificate of Incorporation of the corporation is hereby amended
and restated to read in its entirety as follows:
FIRST. The name of the corporation is YDI Wireless, Inc.
SECOND. The address of the corporation's registered office in the State of
Delaware is One Rodney Square, 10th Floor, Tenth and King Streets, in the City
of Wilmington, County of New Castle, 19801. The name of its registered agent at
such address is RL&F Service Corp.
THIRD. The purpose of the corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
FOURTH. The total number of shares of stock which the corporation shall
have authority to issue is one hundred four million five hundred thousand
(104,500,000), consisting of four million five hundred thousand (4,500,000)
shares of Preferred Stock, par value $.01 per share (hereinafter referred to as
"Preferred Stock"), and one hundred million (100,000,000) shares of Common
Stock, par value $.01 per share (hereinafter referred to as "Common Stock").
The Preferred Stock may be issued from time to time in one or more series.
The Board of Directors is hereby authorized to provide for the issuance of
shares of Preferred Stock in one or more series and, by filing a certificate
pursuant to the applicable law of the State of Delaware (hereinafter referred to
as "Preferred Stock Designation"), to establish from time to time the number of
shares to be included in each such series, and to fix the designation, powers,
preferences and rights of the shares of each such series and the qualifications,
limitations and restrictions thereof. The authority of the Board of Directors
with respect to each series shall include, but not be limited to, determination
of the following:
(a) The designation of the series, which may be by
distinguishing number, letter or title.
(b) The number of shares of the series, which number the Board of
Directors may thereafter (except where otherwise provided in the Preferred Stock
Designation) increase or decrease (but not below the number of shares thereof
then outstanding).
(c) The amounts payable on, and the preferences, if any, of shares
of the series in respect of dividends, and whether such dividends, if any, shall
be cumulative or noncumulative.
(d) Dates at which dividends, if any, shall be payable.
(e) The redemption rights and price or prices, if any, for
shares of the series.
(f) The terms and amount of any sinking fund provided for the
purchase or redemption of shares of the series.
(g) The amounts payable on, and the preferences, if any, of shares
of the series in the event of any voluntary or involuntary liquidation,
dissolution, or winding up of the affairs of the corporation.
(h) Whether the shares of the series shall be convertible into or
exchangeable for shares of any other class or series, or any other security, of
the corporation or any other corporation, and, if so, the specification of such
other class or series or such other security, the conversion or exchange price
or prices or rate or rates, any adjustments thereof, the date or dates at which
such shares shall be convertible or exchangeable and all other terms and
conditions upon which such conversion or exchange may be made.
(i) Restrictions on the issuance of shares of the same series
or of any other class or series.
(j) The voting rights, if any, of the holders of shares of the
series.
The Common Stock shall be subject to the express terms of the Preferred
Stock and any series thereof. Except as may otherwise be provided in this
Certificate of Incorporation, in a Preferred Stock Designation or by applicable
law, the holders of shares of Common Stock shall be entitled to one vote for
each such share upon all questions presented to the stockholders, the Common
Stock shall have the exclusive right to vote for the election of directors and
for all other purposes, and holders of Preferred Stock shall not be entitled to
vote at or receive notice of any meeting of stockholders.
The corporation shall be entitled to treat the person in whose name any
share of its stock is registered as the owner thereof for all purposes and shall
not be bound to recognize any equitable or other claim to, or interest in, such
share on the part of any other person, whether or not the corporation shall have
notice thereof, except as expressly provided by applicable law.
2
FIFTH. Unless and except to the extent that the by-laws of the
corporation shall so require, the election of directors of the corporation
need not be by written ballot.
SIXTH. In furtherance and not in limitation of the powers conferred by the
laws of the State of Delaware, the Board of Directors of the corporation is
expressly authorized to make, alter and repeal the by-laws of the corporation.
SEVENTH. A director of the corporation shall not be liable to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except to the extent such exemption from liability or
limitation thereof is not permitted under the General Corporation Law of the
State of Delaware as the same exists or may hereafter be amended. Any amendment,
modification or repeal of the foregoing sentence shall not adversely affect any
right or protection of a director of the corporation hereunder in respect of any
act or omission occurring prior to the time of such amendment, modification or
repeal.
EIGHTH. The corporation reserves the right at any time, and from time to
time, to amend, alter, change or repeal any provision contained in this
Certificate of Incorporation, and other provisions authorized by the laws of the
State of Delaware at the time in force may be added or inserted, in the manner
now or hereafter prescribed by law; and all rights, preferences and privileges
of any nature conferred upon stockholders, directors or any other persons by and
pursuant to this Certificate of Incorporation in its present form or as
hereafter amended are granted subject to the rights reserved in this article.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
3
IN WITNESS WHEREOF, the undersigned has executed this Restated Certificate
of Incorporation this __th day of ________, 200__.
YDI WIRELESS, INC.
By:
-----------------------------------
Name:
Title:
4
Appendix C
BY-LAWS
OF
YDI WIRELESS, INC.
------------------------------------------------------------
ARTICLE I
Meetings of Stockholders
Section 1.1. Annual Meetings. If required by applicable law, an annual
meeting of stockholders shall be held for the election of directors at such
date, time, and place, if any, either within or without the State of Delaware,
as may be designated by resolution of the Board of Directors from time to time.
Any other proper business may be transacted at the annual meeting.
Section 1.2. Special Meetings. Special meetings of stockholders for any
purpose or purposes may be called at any time by the Board of Directors, but
such special meetings may not be called by any other person or persons. Business
transacted at any special meeting of stockholders shall be limited to the
purposes stated in the notice.
Section 1.3. Notice of Meetings. Whenever stockholders are required or
permitted to take any action at a meeting, a notice of the meeting shall be
given that shall state the place, if any, date, and hour of the meeting and, in
the case of a special meeting, the purpose or purposes for which the meeting is
called. Unless otherwise provided by law, the certificate of incorporation, or
these by-laws, the notice of any meeting shall be given not less than ten (10)
nor more than sixty (60) days before the date of the meeting to each stockholder
entitled to vote at such meeting. If mailed, such notice shall be deemed to be
given when deposited in the United States mail, postage prepaid, directed to the
stockholder at such stockholder's address as it appears on the records of the
corporation.
Section 1.4. Adjournments. Any meeting of stockholders, annual or special,
may adjourn from time to time to reconvene at the same or some other place, and
notice need not be given of any such adjourned meeting if the time and place
thereof are announced at the meeting at which the adjournment is taken. At the
adjourned meeting, the corporation may transact any business which might have
been transacted at the original meeting. If the adjournment is for more than
thirty (30) days, or if after the adjournment a new record date is fixed for the
adjourned meeting, notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
Section 1.5. Quorum. Except as otherwise provided by law, the certificate
of incorporation, or these by-laws, at each meeting of stockholders the presence
in person or by proxy of the holders of a majority in voting power of the
outstanding shares of stock entitled to vote at the meeting shall be necessary
and sufficient to constitute a quorum. In the absence of a quorum, the
stockholders so present may, by a majority in voting power thereof, adjourn the
meeting from time to time in the manner provided in Section 1.4 of these by-laws
until a quorum shall attend. Shares of its own stock belonging to the
corporation or to another corporation, if a majority of the shares entitled to
vote in the election of directors of such other corporation is held, directly or
indirectly, by the corporation, shall neither be entitled to vote nor be counted
for quorum purposes; provided, however, that the foregoing shall not limit the
right of the corporation or any subsidiary of the corporation to vote stock,
including but not limited to its own stock, held by it in a fiduciary capacity.
Section 1.6. Organization. Meetings of stockholders shall be presided over
by the Chairperson of the Board, if any, or in his or her absence by the Vice
Chairperson of the Board, if any, or in his or her absence by the Chief
Executive Officer, if any, or in his or her absence by the President, or in his
or her absence by a Vice President, or in the absence of the foregoing persons
by a chairperson designated by the Board of Directors, or in the absence of such
designation by a chairperson chosen at the meeting. The Secretary shall act as
secretary of the meeting, but in his or her absence the chairperson of the
meeting may appoint any person to act as secretary of the meeting.
Section 1.7. Voting; Proxies. Except as otherwise provided by or pursuant
to the provisions of the certificate of incorporation, each stockholder entitled
to vote at any meeting of stockholders shall be entitled to one vote for each
share of stock held by such stockholder which has voting power upon the matter
in question. Each stockholder entitled to vote at a meeting of stockholders or
to express consent to corporate action in writing without a meeting may
authorize another person or persons to act for such stockholder by proxy, but no
such proxy shall be voted or acted upon after three years from its date, unless
the proxy provides for a longer period. A proxy shall be irrevocable if it
states that it is irrevocable and if, and only as long as, it is coupled with an
interest sufficient in law to support an irrevocable power. A stockholder may
revoke any proxy which is not irrevocable by attending the meeting and voting in
person or by delivering to the Secretary of the corporation a revocation of the
proxy or a new proxy bearing a later date. Voting at meetings of stockholders
need not be by written ballot. At all meetings of stockholders for the election
of directors at which a quorum is present, a plurality of the votes cast shall
be sufficient to elect. All other elections and questions presented to the
stockholders at a meeting at which a quorum is present shall, unless otherwise
provided by the certificate of incorporation, these by-laws, the rules or
regulations of any stock exchange applicable to the corporation, or applicable
law or pursuant to any regulation applicable to the corporation or its
securities, be decided by the affirmative vote of the holders of a majority in
voting power of the shares of stock of the corporation which are present in
person or by proxy and entitled to vote thereon.
Section 1.8. Fixing Date for Determination of Stockholders of Record. In
order that the corporation may determine the stockholders entitled to notice of
or to vote at any meeting of stockholders or any adjournment thereof, or to
2
express consent to corporate action in writing without a meeting, 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, and which record date: (1) in the case of determination of
stockholders entitled to vote at any meeting of stockholders or adjournment
thereof, shall, unless otherwise required by law, not be more than sixty (60)
nor less than ten (10) days before the date of such meeting; (2) in the case of
determination of stockholders entitled to express consent to corporate action in
writing without a meeting, shall not be more than ten (10) days from the date
upon which the resolution fixing the record date is adopted by the Board of
Directors; and (3) in the case of any other action, shall not be more than sixty
(60) days prior to such other action. If no record date is fixed: (1) 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; (2) the record
date for determining stockholders entitled to express consent to corporate
action in writing without a meeting, when no prior action of the Board of
Directors is required by law, 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 in accordance with applicable law, or, if prior action by the
Board of Directors is required by law, shall be at the close of business on the
day on which the Board of Directors adopts the resolution taking such prior
action; and (3) 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. 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.
Section 1.9. List of Stockholders Entitled to Vote. The officer who has
charge of the stock ledger shall prepare and make, at least ten (10) days before
every meeting of stockholders, a complete list of the stockholders entitled to
vote at the meeting, arranged in alphabetical order, and showing the address of
each stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder, for
any purpose germane to the meeting at least ten (10) days prior to the meeting
(i) on a reasonably accessible electronic network, provided that the information
required to gain access to such list is provided with the notice of meeting, or
(ii) during ordinary business hours at the principal place of business of the
corporation. The list of stockholders must also be open to examination at the
meeting as required by applicable law. Except as otherwise provided by law, the
stock ledger shall be the only evidence as to who are the stockholders entitled
to examine the stock ledger, the list of stockholders, or the books of the
corporation, or to vote in person or by proxy at any meeting of stockholders.
Section 1.10. Action By Written Consent of Stockholders. To the extent
permitted by applicable law and regulations, unless otherwise restricted by the
certificate of incorporation, any action required or permitted to be taken at
any annual or special meeting of the stockholders may be taken without a
3
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 of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted 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 minutes of proceedings of stockholders are
recorded. Delivery made to the corporation's registered office shall be by hand
or by certified or registered mail, return receipt requested. Prompt notice of
the taking of the corporate action without a meeting by less than unanimous
written consent shall, to the extent required by law, be given to those
stockholders who have not consented in writing and who, if the action had been
taken at a meeting, would have been entitled to notice of the meeting if the
record date for such meeting had been the date that written consents signed by a
sufficient number of holders to take the action were delivered to the
corporation.
Section 1.11. Inspectors of Election. The corporation may, and shall if
required by law, in advance of any meeting of stockholders, appoint one or more
inspectors of election, who may be employees of the corporation, to act at the
meeting or any adjournment thereof and to make a written report thereof. The
corporation may designate one or more persons as alternate inspectors to replace
any inspector who fails to act. In the event that no inspector so appointed or
designated is able to act at a meeting of stockholders, the person presiding at
the meeting shall appoint one or more inspectors to act at the meeting. Each
inspector, before entering upon the discharge of his or her duties, shall take
and sign an oath to execute faithfully the duties of inspector with strict
impartiality and according to the best of his or her ability. The inspector or
inspectors so appointed or designated shall (i) ascertain the number of shares
of capital stock of the corporation outstanding and the voting power of each
such share, (ii) determine the shares of capital stock of the corporation
represented at the meeting and the validity of proxies and ballots, (iii) count
all votes and ballots, (iv) determine and retain for a reasonable period a
record of the disposition of any challenges made to any determination by the
inspectors, and (v) certify their determination of the number of shares of
capital stock of the corporation represented at the meeting and such inspectors'
count of all votes and ballots. Such certification and report shall specify such
other information as may be required by law. In determining the validity and
counting of proxies and ballots cast at any meeting of stockholders of the
corporation, the inspectors may consider such information as is permitted by
applicable law. No person who is a candidate for an office at an election may
serve as an inspector at such election.
Section 1.12. Conduct of Meetings. The date and time of the opening and
the closing of the polls for each matter upon which the stockholders will vote
at a meeting shall be announced at the meeting by the person presiding over the
meeting. The Board of Directors may adopt by resolution such rules and
regulations for the conduct of the meeting of stockholders as it shall deem
appropriate. Except to the extent inconsistent with such rules and regulations
as adopted by the Board of Directors, the person presiding over any meeting of
stockholders shall have the right and authority to convene and to adjourn the
meeting, to prescribe such rules, regulations, and procedures and to do all such
acts as, in the judgment of such presiding person, are appropriate for the
proper conduct of the meeting. Such rules, regulations, or procedures, whether
4
adopted by the Board of Directors or prescribed by the presiding person of the
meeting, may include, without limitation, the following: (i) the establishment
of an agenda or order of business for the meeting; (ii) rules and procedures for
maintaining order at the meeting and the safety of those present; (iii)
limitations on attendance at or participation in the meeting to stockholders of
record of the corporation, their duly authorized and constituted proxies, or
such other persons as the presiding person of the meeting shall determine; (iv)
restrictions on entry to the meeting after the time fixed for the commencement
thereof; and (v) limitations on the time allotted to questions or comments by
participants. The presiding person at any meeting of stockholders, in addition
to making any other determinations that may be appropriate to the conduct of the
meeting, shall, if the facts warrant, determine and declare to the meeting that
a matter or business was not properly brought before the meeting and if such
presiding person should so determine, such presiding person shall so declare to
the meeting and any such matter or business not properly brought before the
meeting shall not be transacted or considered. Unless and to the extent
determined by the Board of Directors or the person presiding over the meeting,
meetings of stockholders shall not be required to be held in accordance with the
rules of parliamentary procedure.
Section 1.13. Notice of Stockholder Business and Nominations.
(A) Annual Meetings of Stockholders. (1) Nominations of persons for
election to the Board of Directors of the corporation and the proposal of
business to be considered by the stockholders may be made at an annual meeting
of stockholders only (a) pursuant to the corporation's notice of meeting (or any
supplement thereto), (b) by or at the direction of the Board of Directors, or
(c) by any stockholder of the corporation who was a stockholder of record of the
corporation at the time the notice provided for in this Section 1.13 is
delivered to the Secretary of the corporation, who is entitled to vote at the
meeting, and who complies with the notice procedures set forth in this Section
1.13.
(2) For nominations or other business to be properly brought before
an annual meeting by a stockholder pursuant to clause (c) of paragraph (A)(1) of
this Section 1.13, the stockholder must have given timely notice thereof in
writing to the Secretary of the corporation and any such proposed business other
than the nominations of persons for election to the Board of Directors must
constitute a proper matter for stockholder action. To be timely, a stockholder's
notice shall be delivered to the Secretary at the principal executive offices of
the corporation not later than the close of business on the ninetieth day nor
earlier than the close of business on the one hundred twentieth day prior to the
first anniversary of the preceding year's annual meeting (provided, however,
that in the event that the date of the annual meeting is more than thirty days
before or more than seventy days after such anniversary date, notice by the
stockholder must be so delivered not earlier than the close of business on the
one hundred twentieth day prior to such annual meeting and not later than the
close of business on the later of the ninetieth day prior to such annual meeting
or the tenth day following the day on which public announcement of the date of
such meeting is first made by the corporation). For the purposes of the first
annual meeting of stockholders held after 2003, the first anniversary of the
preceding year's annual meeting shall be deemed to be June 24, 2004. In no event
shall the public announcement of an adjournment or postponement of an annual
meeting commence a new time period (or extend any time period) for the giving of
5
a stockholder's notice as described above. Such stockholder's notice shall set
forth: (a) as to each person whom the stockholder proposes to nominate for
election as a director (i) all information relating to such person that is
required to be disclosed in solicitations of proxies for election of directors
in an election contest, or is otherwise required, in each case pursuant to and
in accordance with Regulation 14A under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and (ii) such person's written consent to being
named in the proxy statement as a nominee and to serving as a director if
elected; (b) as to any other business that the stockholder proposes to bring
before the meeting, a brief description of the business desired to be brought
before the meeting, the text of the proposal or business (including the text of
any resolutions proposed for consideration and in the event that such business
includes a proposal to amend the by-laws of the corporation, the language of the
proposed amendment), the reasons for conducting such business at the meeting,
and any material interest in such business of such stockholder and the
beneficial owner, if any, on whose behalf the proposal is made; and (c) as to
the stockholder giving the notice and the beneficial owner, if any, on whose
behalf the nomination or proposal is made, (i) the name and address of such
stockholder, as they appear on the corporation's books, and of such beneficial
owner, (ii) the class and number of shares of capital stock of the corporation
which are owned beneficially and of record by such stockholder and such
beneficial owner, (iii) a representation that the stockholder is a holder of
record of stock of the corporation entitled to vote at such meeting and intends
to appear in person or by proxy at the meeting to propose such business or
nomination, and (iv) a representation whether the stockholder or the beneficial
owner, if any, intends or is part of a group which intends (a) to deliver a
proxy statement and/or form of proxy to holders of at least the percentage of
the corporation's outstanding capital stock required to approve or adopt the
proposal or elect the nominee and/or (b) otherwise to solicit proxies from
stockholders in support of such proposal or nomination. The foregoing notice
requirements shall be deemed satisfied by a stockholder if the stockholder has
notified the corporation of his or her intention to present a proposal at an
annual meeting in compliance with Rule 14a-8 (or any successor thereof)
promulgated under the Exchange Act and such stockholder's proposal has been
included in a proxy statement that has been prepared by the corporation to
solicit proxies for such annual meeting. The corporation may require any
proposed nominee to furnish such other information as it may reasonably require
to determine the eligibility of such proposed nominee to serve as a director of
the corporation.
(3) Notwithstanding anything in the second sentence of paragraph
(A)(2) of this Section 1.13 to the contrary, in the event that the
number of directors to be elected to the Board of Directors of the corporation
at an annual meeting is increased and there is no public announcement by the
corporation naming the nominees for the additional directorships at least one
hundred days prior to the first anniversary of the preceding year's annual
meeting, a stockholder's notice required by this Section 1.13 shall also be
considered timely, but only with respect to nominees for the additional
directorships, if it shall be delivered to the Secretary at the principal
executive offices of the corporation not later than the close of business on the
tenth day following the day on which such public announcement is first made by
the corporation.
(B) Special Meetings of Stockholders. Only such business shall be
conducted at a special meeting of stockholders as shall have been brought before
the meeting pursuant to the corporation's notice of meeting. Nominations of
6
persons for election to the Board of Directors may be made at a special meeting
of stockholders at which directors are to be elected pursuant to the
corporation's notice of meeting (1) by or at the direction of the Board of
Directors or (2) provided that the Board of Directors has determined that
directors shall be elected at such meeting, by any stockholder of the
corporation who is a stockholder of record at the time the notice provided for
in this Section 1.13 is delivered to the Secretary of the corporation, who is
entitled to vote at the meeting and upon such election, and who complies with
the notice procedures set forth in this Section 1.13. In the event the
corporation calls a special meeting of stockholders for the purpose of electing
one or more directors to the Board of Directors, any such stockholder entitled
to vote in such election of directors may nominate a person or persons (as the
case may be) for election to such position(s) as specified in the corporation's
notice of meeting, if the stockholder's notice required by paragraph (A)(2) of
this Section 1.13 shall be delivered to the Secretary at the principal executive
offices of the corporation not earlier than the close of business on the one
hundred twentieth day prior to such special meeting and not later than the close
of business on the later of the ninetieth day prior to such special meeting or
the tenth day following the day on which public announcement is first made of
the date of the special meeting and of the nominees proposed by the Board of
Directors to be elected at such meeting. In no event shall the public
announcement of an adjournment or postponement of a special meeting commence a
new time period (or extend any time period) for the giving of a stockholder's
notice as described above.
(C) General. (1) Only such persons who are nominated in accordance with
the procedures set forth in this Section 1.13 shall be eligible to be elected at
an annual or special meeting of stockholders of the corporation to serve as
directors and only such business shall be conducted at a meeting of stockholders
as shall have been brought before the meeting in accordance with the procedures
set forth in this Section 1.13. Except as otherwise provided by law, the
chairman of the meeting shall have the power and duty (a) to determine whether a
nomination or any business proposed to be brought before the meeting was made or
proposed, as the case may be, in accordance with the procedures set forth in
this Section 1.13 (including whether the stockholder or beneficial owner, if
any, on whose behalf the nomination or proposal is made solicited (or is part of
a group which solicited) or did not so solicit, as the case may be, proxies in
support of such stockholder's nominee or proposal in compliance with such
stockholder's representation as required by clause (A)(2)(c)(iv) of this Section
1.13) and (b) if any proposed nomination or business was not made or proposed in
compliance with this Section 1.13, to declare that such nomination shall be
disregarded or that such proposed business shall not be transacted.
Notwithstanding the foregoing provisions of this Section 1.13, if the
stockholder (or a qualified representative of the stockholder) does not appear
at the annual or special meeting of stockholders of the corporation to present a
nomination or business, such nomination shall be disregarded and such proposed
business shall not be transacted, notwithstanding that proxies in respect of
such vote may have been received by the corporation.
(2) For purposes of this Section 1.13, "public announcement" shall
include disclosure in a press release reported by the Dow Jones News Service,
Associated Press, or comparable national news service, issued by PR Newswire,
Business Wire, or comparable service, or in a document publicly filed by the
7
corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this Section 1.13, a
stockholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth in this Section 1.13. Nothing in this Section 1.13 shall be deemed to
affect any rights (a) of stockholders to request inclusion of proposals in the
corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act or
(b) of the holders of any series of Preferred Stock to elect directors pursuant
to any applicable provisions of the certificate of incorporation.
ARTICLE II
Board of Directors
Section 2.1. Number; Qualifications. The Board of Directors shall consist
of one or more members, the number thereof to be determined from time to time by
resolution of the Board of Directors. Directors need not be stockholders.
Section 2.2. Election; Resignation; Vacancies. The Board of Directors
shall initially consist of the persons named as directors in the certificate of
incorporation or elected by the incorporator of the corporation, and each
director so elected shall hold office until the first annual meeting of
stockholders or until his or her successor is duly elected and qualified. At the
first annual meeting of stockholders and at each annual meeting thereafter, the
stockholders shall elect directors each of whom shall hold office for a term of
one year or until his or her successor is duly elected and qualified, subject to
such director's earlier death, resignation, disqualification, or removal. Any
director may resign at any time upon notice to the corporation. Unless otherwise
provided by law or the certificate of incorporation, any newly created
directorship or any vacancy occurring in the Board of Directors for any cause
may be filled by a majority of the remaining members of the Board of Directors,
although such majority is less than a quorum, or by a plurality of the votes
cast at a meeting of stockholders, and each director so elected shall hold
office until the expiration of the term of office of the director whom he or she
has replaced or until his or her successor is elected and qualified.
Section 2.3. Regular Meetings. Regular meetings of the Board of Directors
may be held at such places within or without the State of Delaware and at such
times as the Board of Directors may from time to time determine.
Section 2.4. Special Meetings. Special meetings of the Board of Directors
may be held at any time or place within or without the State of Delaware
whenever called by the President, any Vice President, the Secretary, or by any
member of the Board of Directors. Notice of a special meeting of the Board of
Directors shall be given by the person or persons calling the meeting at least
twenty-four hours before the special meeting.
8
Section 2.5. Telephonic Meetings Permitted. Members of the Board of
Directors, or any committee designated by the Board of Directors, may
participate in a meeting thereof by means of conference telephone or other
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
by-law shall constitute presence in person at such meeting.
Section 2.6. Quorum; Vote Required for Action. At all meetings of the
Board of Directors, the directors entitled to cast a majority of the votes of
the whole Board of Directors shall constitute a quorum for the transaction of
business. Except in cases in which the certificate of incorporation, these
by-laws, or applicable law otherwise provides, a majority of the votes entitled
to be cast by the directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors.
Section 2.7. Organization. Meetings of the Board of Directors shall be
presided over by the Chairperson of the Board, if any, or in his or her absence
by the Vice Chairperson of the Board, if any, or in his or her absence by the
Chief Executive Officer, if any, or in his or her absence by the President, or
in their absence by a chairperson chosen at the meeting. The Secretary shall act
as secretary of the meeting, but in his or her absence the chairperson of the
meeting may appoint any person to act as secretary of the meeting.
Section 2.8. Action by Unanimous Consent of Directors. Unless otherwise
restricted by the certificate of incorporation or these by-laws, any action
required or permitted to be taken at any meeting of the Board of Directors, or
of any committee thereof, may be taken without a meeting if all members of the
Board of Directors or such committee, as the case may be, consent thereto in
writing or by electronic transmission and the writing or writings or electronic
transmissions are filed with the minutes of proceedings of the board or
committee in accordance with applicable law.
ARTICLE III
Committees
Section 3.1. Committees. The Board of Directors may designate one or more
committees, each committee to consist of one or more of the directors of the
corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee. In the absence or disqualification of a
member of the committee, the member or members thereof present at any meeting
and not disqualified from voting, whether or not he, she, or they constitute a
quorum, may unanimously appoint another member of the Board of Directors to act
at the meeting in place of any such absent or disqualified member. Any such
committee, to the extent permitted by law and to the extent provided in the
resolution of the Board of Directors, shall have and may exercise all the powers
and authority of the Board of Directors in the management of the business and
affairs of the corporation and may authorize the seal of the corporation to be
affixed to all papers which may require it.
9
Section 3.2. Committee Rules. Unless the Board of Directors otherwise
provides, each committee designated by the Board of Directors may make, alter,
and repeal rules for the conduct of its business. In the absence of such rules,
each committee shall conduct its business in the same manner as the Board of
Directors conducts its business pursuant to Article II of these by-laws.
ARTICLE IV
Officers
Section 4.1. Executive Officers; Election; Qualifications; Term of Office;
Resignation; Removal; Vacancies. The Board of Directors shall elect a President
and Secretary, and it may, if it so determines, choose a Chairperson of the
Board and a Vice Chairperson of the Board from among its members. The Board of
Directors may also choose a Chief Executive Officer, one or more Vice
Presidents, one or more Assistant Secretaries, a Treasurer, and one or more
Assistant Treasurers. Each such officer shall hold office until the first
meeting of the Board of Directors after the annual meeting of stockholders next
succeeding his or her election, and until his or her successor is elected and
qualified or until his or her earlier resignation or removal. Any officer may
resign at any time upon written notice to the corporation. The Board of
Directors may remove any officer with or without cause at any time, but such
removal shall be without prejudice to the contractual rights of such officer, if
any, with the corporation. Any number of offices may be held by the same person.
Any vacancy occurring in any office of the corporation by death, resignation,
removal, or otherwise may be filled for the unexpired portion of the term by the
Board of Directors at any regular or special meeting.
Section 4.2. Powers and Duties of Executive Officers. The officers of the
corporation shall have such powers and duties in the management of the
corporation as may be prescribed in a resolution by the Board of Directors and,
to the extent not so provided, as generally pertain to their respective offices,
subject to the control of the Board of Directors. The Board of Directors may
require any officer, agent, or employee to give security for the faithful
performance of his or her duties.
Section 4.3. Appointing Attorneys and Agents; Voting Securities of Other
Entities. Unless otherwise provided by resolution adopted by the Board of
Directors, the Chairperson of the Board, any Chief Executive Officer, the
President, or any Vice President may from time to time appoint an attorney or
attorneys or agent or agents of the corporation, in the name and on behalf of
the corporation, to cast the votes which the corporation may be entitled to cast
as the holder of stock or other securities in any other corporation or other
entity, any of whose stock or other securities may be held by the corporation,
at meetings of the holders of the stock or other securities of such other
corporation or other entity, or to consent in writing, in the name of the
corporation as such holder, to any action by such other corporation or other
entity, and may instruct the person or persons so appointed as to the manner of
casting such votes or giving such consents, and may execute or cause to be
executed in the name and on behalf of the corporation and under its corporate
10
seal or otherwise, all such written proxies or other instruments as he or she
may deem necessary or proper. Any of the rights set forth in this Section 4.3
which may be delegated to an attorney or agent may also be exercised directly by
the Chairperson of the Board, any Chief Executive Officer, the President, or any
Vice President.
ARTICLE V
Stock
Section 5.1. Certificates. Every holder of stock shall be entitled to have
a certificate signed by or in the name of the corporation by the Chairperson or
Vice Chairperson of the Board of Directors, if any, or the President or a Vice
President, and by the Treasurer or an Assistant Treasurer, or the Secretary or
an Assistant Secretary, of the corporation certifying the number of shares owned
by such holder in the corporation. Any of or all the signatures on the
certificate may be a facsimile. In case any officer, transfer agent, or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent, or registrar
before such certificate is issued, it may be issued by the corporation with the
same effect as if such person were such officer, transfer agent, or registrar at
the date of issue.
Section 5.2. Lost, Stolen, or Destroyed Stock Certificates; Issuance of
New Certificates. The corporation may issue a new certificate of stock in the
place of any certificate theretofore issued by it, alleged to have been lost,
stolen, or destroyed, and the corporation may require the owner of the lost,
stolen, or destroyed certificate, or such owner's legal representative, to give
the corporation a bond sufficient to indemnify it against any claim that may be
made against it on account of the alleged loss, theft, or destruction of any
such certificate or the issuance of such new certificate.
ARTICLE VI
Indemnification
Section 6.1. Right to Indemnification of Directors and Officers. The
corporation shall indemnify and hold harmless, to the fullest extent permitted
by applicable law as it presently exists or may hereafter be amended, any person
(a "Covered Person") who was or is made or is threatened to be made a party or
is otherwise involved in any action, suit, or proceeding, whether civil,
criminal, administrative, or investigative (a "proceeding"), by reason of the
fact that such person, or a person for whom such person is the legal
representative, is or was a director or officer of the corporation or, while a
director or officer of the corporation, is or was serving at the request of the
corporation as a director, officer, employee, or agent of another corporation or
of a partnership, joint venture, trust, enterprise, or nonprofit entity,
including service with respect to employee benefit plans, against all liability
and loss suffered and expenses (including attorneys' fees) reasonably incurred
by such Covered Person in such proceeding. Notwithstanding the preceding
11
sentence, except as otherwise provided in Section 6.3, the corporation shall be
required to indemnify a Covered Person in connection with a proceeding (or part
thereof) commenced by such Covered Person only if the commencement of such
proceeding (or part thereof) by the Covered Person was authorized in advance by
the Board of Directors.
Section 6.2. Prepayment of Expenses of Directors and Officers. The
corporation shall pay the expenses (including attorneys' fees) incurred by a
Covered Person in defending any proceeding in advance of its final disposition,
provided, however, that, to the extent required by law, such payment of expenses
in advance of the final disposition of the proceeding shall be made only upon
receipt of an undertaking by the Covered Person to repay all amounts advanced if
it should be ultimately determined that the Covered Person is not entitled to be
indemnified under this Article VI or otherwise.
Section 6.3. Claims by Directors and Officers. If a claim for
indemnification or advancement of expenses under this Article VI is not paid in
full within thirty days after a written claim therefor by the Covered Person has
been received by the corporation, the Covered Person may file suit to recover
the unpaid amount of such claim and, if successful in whole or in part, shall be
entitled to be paid the expense of prosecuting such claim. In any such action,
the corporation shall have the burden of proving that the Covered Person is not
entitled to the requested indemnification or advancement of expenses under
applicable law.
Section 6.4. Indemnification of Employees and Agents. The corporation may
indemnify and advance expenses to any person who was or is made or is threatened
to be made or is otherwise involved in any proceeding by reason of the fact that
such person, or a person for whom such person is the legal representative, is or
was an employee or agent of the corporation or, while an employee or agent of
the corporation, is or was serving at the request of the corporation as a
director, officer, employee, or agent of another corporation or of a
partnership, joint venture, trust, enterprise, or nonprofit entity, including
service with respect to employee benefit plans, against all liability and loss
suffered and expenses (including attorney's fees) reasonably incurred by such
person in connection with such proceeding. The ultimate determination of
entitlement to indemnification of persons who are non-director or officer
employees or agents shall be made in such manner as is determined by the Board
of Directors in its sole discretion. Notwithstanding the foregoing sentence, the
corporation shall not be required to indemnify a person in connection with a
proceeding initiated by such person if the proceeding was not authorized in
advance by the Board of Directors.
Section 6.5. Advancement of Expenses of Employees and Agents. The
corporation may pay the expenses (including attorney's fees) incurred by an
employee or agent in defending any proceeding in advance of its final
disposition on such terms and conditions as may be determined by the Board of
Directors.
Section 6.6. Non-Exclusivity of Rights. The rights conferred on any person
by this Article VI shall not be exclusive of any other rights which such person
may have or hereafter acquire under any statute, provision of the certificate of
incorporation, these by-laws, agreement, vote of stockholders or disinterested
directors, or otherwise.
12
Section 6.7. Other Indemnification. The corporation's obligation, if any,
to indemnify any person who was or is serving at its request as a director,
officer, or employee of another corporation, partnership, joint venture, trust,
organization, or other enterprise shall be reduced by any amount such person may
collect as indemnification from such other corporation, partnership, joint
venture, trust, organization, or other enterprise.
Section 6.8. Insurance. The Board of Directors may, to the full extent
permitted by applicable law as it presently exists, or may hereafter be amended
from time to time, authorize an appropriate officer or officers to purchase and
maintain at the corporation's expense insurance: (a) to indemnify the
corporation for any obligation which it incurs as a result of the
indemnification of directors, officers, and employees under the provisions of
this Article VI and (b) to indemnify or insure directors, officers, and
employees against liability in instances in which they may not otherwise be
indemnified by the corporation under the provisions of this Article VI.
Section 6.9. Amendment or Repeal. Any repeal or modification of the
foregoing provisions of this Article VI shall not adversely affect any right or
protection hereunder of any person in respect of any act or omission occurring
prior to the time of such repeal or modification. The rights provided hereunder
shall inure to the benefit of any Covered Person and such person's heirs,
executors, and administrators.
ARTICLE VII
Miscellaneous
Section 7.1. Fiscal Year. The fiscal year of the corporation shall be
determined by resolution of the Board of Directors.
Section 7.2. Seal. The corporate seal shall have the name of the
corporation inscribed thereon and shall be in such form as may be approved from
time to time by the Board of Directors.
Section 7.3. Manner of Notice. Except as otherwise provided herein or
permitted by applicable law, notices to directors and stockholders shall be in
writing and delivered personally or mailed to the directors or stockholders at
their addresses appearing on the books of the corporation. Notice to directors
may be given by telecopier, telephone, or other means of electronic
transmission.
Section 7.4. Waiver of Notice of Meetings of Stockholders, Directors, and
Committees. Any waiver of notice, given by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
13
business to be transacted at nor the purpose of any regular or special meeting
of the stockholders, directors, or members of a committee of directors need be
specified in a waiver of notice.
Section 7.5. Form of Records. Any records maintained by the corporation in
the regular course of its business, including its stock ledger, books of
account, and minute books, may be kept on, or by means of, or be in the form of,
any information storage device or method, provided that the records so kept can
be converted into clearly legible paper form within a reasonable time.
14
Appendix D
AGREEMENT AND PLAN
OF MERGER AND REINCORPORATION
This Agreement and Plan of Merger and Reincorporation (this "Agreement"),
dated as of ________ ___, 200__, is by and between Telaxis Communications
Corporation, a corporation organized under the laws of the Commonwealth of
Massachusetts ("Telaxis"), and YDI Wireless, Inc., a wholly-owned subsidiary of
Telaxis organized under the laws of the State of Delaware ("YDI Wireless"). The
two corporations are hereinafter sometimes called the "Constituent
Corporations." Telaxis is hereinafter also sometimes referred to as the "Merged
Corporation," and YDI Wireless is hereinafter also sometimes referred to as the
"Surviving Corporation."
RECITALS
A. Upon the terms and subject to the conditions of this Agreement and in
accordance with the Massachusetts Business Corporation Law (the "MBCL") and the
Delaware General Corporation Law (the "DGCL"), Telaxis and YDI Wireless will
enter into a business combination transaction pursuant to which Telaxis will
merge with and into YDI Wireless (the "Merger").
B. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Merger. At the Effective Time (as defined in Section 8 below) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the MBCL and DGCL, Telaxis shall be merged with and
into YDI Wireless, the separate corporate existence of Telaxis shall cease, and
YDI Wireless shall continue as the surviving corporation.
2. Effect of Merger.
(a) At the Effective Time, the effect of the Merger shall be as
provided in this Agreement and the applicable provisions of the MBCL and the
DGCL. Without limiting the generality of the foregoing, and subject thereto, at
the Effective Time, all the assets, property, rights, privileges, powers, and
franchises of Telaxis and YDI Wireless shall vest in the Surviving Corporation,
and all debts, liabilities, and duties of Telaxis and YDI Wireless shall become
the debts, liabilities, and duties of the Surviving Corporation. The Surviving
Corporation shall indemnify the directors and officers of each of the
Constituent Corporations against all such debts, liabilities, and duties and
against all claims and demands arising out of or relating to the Merger.
(b) All corporate acts, plans, policies, approvals, and
authorizations of Telaxis, its stockholders, board of directors, committees
elected or appointed by the board of directors, 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, approvals, and authorizations of the
Surviving Corporation and shall be effective and binding thereon as they were on
Telaxis. The employees of Telaxis shall become the employees of the Surviving
Corporation and continue to be entitled to the same rights and benefits they
enjoyed as employees of Telaxis.
3. Charter and By-laws.
(a) The Certificate of Incorporation of YDI Wireless shall be
amended and restated to read in substantially the same form as attached hereto
as Exhibit A and shall be the Certificate of Incorporation of the Surviving
Corporation until the same shall be altered, amended, or repealed as provided
therein or in accordance with applicable law.
(b) The By-laws of YDI Wireless, as they exist immediately prior to
the Effective Time, shall be and remain the By-laws of the Surviving Corporation
until the same shall be altered, amended, or repealed as provided therein or in
accordance with applicable law.
4. Directors and Officers. The directors and officers of YDI
Wireless shall continue in office as the directors and officers,
respectively, of the Surviving Corporation until their respective successors
are duly elected or appointed and qualified.
5. Effect on Capital Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of Telaxis, YDI Wireless, the
holders of any of the following securities, or any other person or entity:
(a) Each share of common stock, par value $.01 per share, of YDI
Wireless, which is issued and outstanding immediately prior to the Effective
Time, shall be canceled.
(b) Each share of common stock, par value $.01 per share, of Telaxis
(the "Telaxis Common Stock") and the associated Right (as defined below) issued
and outstanding immediately prior to the Effective Time (other than any shares
of Telaxis Common Stock to be canceled pursuant to Section 5(c) and Telaxis
Dissenting Shares (as defined in Section 5(d)) will be canceled and extinguished
and be automatically converted into the right to receive one (1) share of common
stock, par value $.01 per share, of YDI Wireless (the "YDI Wireless Common
Stock") upon surrender of the certificate representing such share of Telaxis
Common Stock in the manner provided in Section 6 (or in the case of a lost,
stolen or destroyed certificate, upon delivery of an affidavit (and bond, if
required) in the manner provided in Section 6(g)). "Rights" has the same meaning
as the term "Rights" under the Rights Agreement dated as of May 18, 2001 between
Telaxis and Registrar and Transfer Company as rights agent, as amended to date
(the "Rights Plan").
(c) Each share of Telaxis Common Stock held in the treasury of
Telaxis or owned by YDI Wireless, Telaxis, or any direct or indirect wholly
owned subsidiary of Telaxis or of YDI Wireless immediately prior to the
2
Effective Time shall be canceled and extinguished without any conversion
thereof.
(d) Notwithstanding anything in this Agreement to the contrary,
shares of Telaxis Common Stock that have not been voted for adoption of this
Agreement and with respect to which appraisal rights shall have been properly
perfected in accordance with Sections 85 through 98 of the MBCL (the "Telaxis
Dissenting Shares") shall not be converted into the right to receive shares of
YDI Wireless Common Stock in accordance with this Agreement, at or after the
Effective Time, unless and until the holder of such Telaxis Dissenting Shares
withdraws its demand for such appraisal in accordance with the MBCL or becomes
ineligible for such appraisal. If a holder of Telaxis Dissenting Shares shall
withdraw its demand for such appraisal in accordance with the MBCL, or shall
become ineligible for such appraisal, then, as of the later of the Effective
Time or the occurrence of such event, such holder's Telaxis Dissenting Shares
shall cease to be Telaxis Dissenting Shares and shall be deemed to have
converted as of the Effective Time into the right to receive the shares of YDI
Wireless Common Stock into which its Telaxis Common Stock would otherwise have
converted as of the Effective Time pursuant to this Agreement.
(e) At the Effective Time, each option to purchase Telaxis Common
Stock then outstanding under Telaxis' Incentive Stock Option Plan of 1986, 1987
Stock Plan, 1988 Stock Plan, 1996 Stock Plan, 1997 Stock Plan, 1999 Stock Plan,
and 2001 Nonqualified Stock Option Plan and the Young Design, Inc. 2002 Stock
Incentive Plan (collectively, the "Telaxis Stock Option Plan") shall be assumed
by YDI Wireless in accordance with the terms of Section 7 below. In addition, at
the Effective Time, all outstanding warrants which provide for the issuance of
Telaxis Common Stock upon exercise of the warrant (collectively, the "Telaxis
Warrants") shall be assumed by YDI Wireless and adjusted in accordance with
their respective terms to provide for the issuance of an appropriate number of
shares of YDI Wireless Common Stock (instead of the issuance of Telaxis Common
Stock) as contemplated by Section 7 below.
(f) Notwithstanding any other provision of this Agreement, at the
Effective Time, the Rights Plan shall be terminated pursuant to the terms
thereof.
6. Surrender of Stock Certificates
(a) Registrar and Transfer Company, or another similar institution
selected by YDI Wireless, shall act as exchange agent (the "Exchange Agent") in
the Merger.
(b) Promptly after the Effective Time, the Surviving Corporation
shall cause to be mailed to each holder of record of a certificate or
certificates (the "Certificates") which immediately prior to the Effective Time
represented outstanding shares of Telaxis Common Stock whose shares were
converted into the right to receive shares of YDI Wireless Common Stock pursuant
to Section 5, (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Exchange Agent and shall be in
such form and have such other provisions as YDI Wireless may reasonably specify)
and (ii) instructions for use in effecting the surrender of the Certificates in
exchange for certificates representing shares of YDI Wireless Common Stock. Upon
surrender of a Certificate for cancellation to the Exchange Agent or to such
other agent or agents as may be appointed by YDI Wireless, together with such
3
letter of transmittal, duly completed and validly executed in accordance with
the instructions thereto, the holder of such Certificate shall be entitled to
receive in exchange therefor a certificate representing the number of whole
shares of YDI Wireless Common Stock which such holder has the right to receive
pursuant to Section 5, and the Certificate so surrendered shall forthwith be
canceled. Until so surrendered, each outstanding Certificate that, immediately
prior to the Effective Time, represented shares of Telaxis Common Stock will be
deemed from and after the Effective Time, for all corporate purposes, other than
the payment of dividends, to evidence the right to receive the number of full
shares of YDI Wireless Common Stock into which such shares of Telaxis Common
Stock shall have been so converted in accordance with Section 5.
(c) No dividends or other distributions declared or made after the
date of this Agreement with respect to YDI Wireless Common Stock with a record
date after the Effective Time will be paid to the holder of any unsurrendered
Certificate with respect to the shares of YDI Wireless Common Stock represented
thereby until the holder of record of such Certificate shall surrender such
Certificate. Subject to applicable law, following surrender of any such
Certificate, there shall be paid to the record holder of the certificates
representing whole shares of YDI Wireless Common Stock issued in exchange
therefor, without interest, at the time of such surrender, the amount of
dividends or other distributions with a record date after the Effective Time
payable with respect to such whole shares of YDI Wireless Common Stock.
(d) If any certificate for shares of YDI Wireless Common Stock is to
be issued in a name other than that in which the certificate surrendered in
exchange therefor is registered, it will be a condition of the issuance thereof
that the certificate so surrendered will be properly endorsed and otherwise in
proper form for transfer and that the person requesting such exchange will have
paid to YDI Wireless or any agent designated by it any transfer or other taxes
required by reason of the issuance of a certificate for shares of YDI Wireless
Common Stock in any name other than that of the registered holder of the
certificate surrendered, or established to the satisfaction of YDI Wireless or
any agent designated by it that such tax has been paid or is not payable.
(e) Notwithstanding anything to the contrary in this Agreement, none
of the Exchange Agent, the Surviving Corporation, or any party hereto shall be
liable to a holder of shares of YDI Wireless Common Stock or Telaxis Common
Stock for any amount properly paid to a public official pursuant to any
applicable abandoned property, escheat, or similar law.
(f) All shares of YDI Wireless Common Stock issued upon the
surrender for exchange of shares of Telaxis Common Stock in accordance with the
terms hereof shall be deemed to have been issued in full satisfaction of all
rights pertaining to such shares of Telaxis Common Stock, and there shall be no
further registration of transfers on the records of the Surviving Corporation of
shares of Telaxis Common Stock which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates representing shares
of Telaxis Common Stock are presented to the Surviving Corporation for any
reason, they shall be canceled and exchanged as provided in this Section 6.
(g) In the event any certificates evidencing shares of Telaxis
Common Stock shall have been lost, stolen, or destroyed, the Exchange Agent
shall, upon the making of an affidavit of that fact by the holder thereof, issue
4
in exchange for such shares of Telaxis Common Stock, such shares of YDI Wireless
Common Stock as may be required pursuant to Section 5; provided, however, that
YDI Wireless may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen, or destroyed certificates to
deliver a bond in such sum as it may reasonably direct as indemnity against any
claim that may be made against YDI Wireless, the Surviving Corporation, or the
Exchange Agent with respect to the certificates alleged to have been lost,
stolen, or destroyed.
7. Telaxis Stock Options and Warrants.
(a) At the Effective Time, YDI Wireless shall and hereby does adopt,
assume, and continue the Telaxis Stock Option Plan, as in effect immediately
prior to the Effective Time, automatically without the need of any further
action.
(b) At the Effective Time, each outstanding option to purchase
shares of Telaxis Common Stock (each a "Telaxis Stock Option") under the Telaxis
Stock Option Plan, whether vested or unvested, will be assumed by YDI Wireless
automatically without the need of any further action. Each Telaxis Stock Option
so assumed by YDI Wireless under this Agreement shall continue to have, and be
subject to, the same terms and conditions set forth in the Telaxis Stock Option
Plan immediately prior to the Effective Time, except that (i) such Telaxis Stock
Option shall entitle the holder to purchase (subject to the same vesting
provisions set forth in such Telaxis Stock Option) that number of whole shares
of YDI Wireless Common Stock equal to number of shares of Telaxis Common Stock
that were issuable upon exercise of such Telaxis Stock Option immediately prior
to the Effective Time (without regard to vesting), (ii) the per share exercise
price for the shares of YDI Wireless Common Stock issuable upon exercise of such
assumed Telaxis Stock Option shall be equal to the exercise price per share of
Telaxis Common Stock at which such Telaxis Stock Option was exercisable
immediately prior to the Effective Time, and (iii) such Telaxis Stock Option
shall no longer be exercisable for Telaxis Common Stock.
(c) Promptly after the Effective Time, the Surviving Corporation
shall issue to each holder of an outstanding Telaxis Stock Option a document
evidencing the foregoing assumption of such Telaxis Stock Option by YDI
Wireless.
(d) It is the intention of the parties that the Telaxis Stock
Options assumed by YDI Wireless qualify following the Effective Time as
incentive stock options as defined in Section 422 of the Code to the extent the
Telaxis Stock Options qualified as incentive stock options immediately prior to
the Effective Time.
(e) At the Effective Time, the Telaxis Warrants shall be exercisable
for the appropriate number of shares of YDI Wireless Common Stock instead of
being exercisable for shares of Telaxis Common Stock in accordance with the
terms of the Telaxis Warrants.
(f) Prior to the Effective Time, YDI Wireless shall take all
corporate action necessary to reserve for issuance a sufficient number of shares
of YDI Wireless Common Stock for delivery upon exercise of the Telaxis Stock
Options and the Telaxis Warrants.
5
8. Condition; Effective Time. This Agreement shall be submitted to the
stockholders of each of the Constituent Corporations as and to the extent
provided by law. The Merger shall take effect (the "Effective Time") when any
and all documents or instruments necessary to complete the Merger, pursuant to
the requirements of the MBCL and the DGCL, are accepted for filing by the
appropriate office of the Commonwealth of Massachusetts and the State of
Delaware, respectively, or at such subsequent date or time as may be specified
in those documents or instruments.
9. Termination and Abandonment. This Agreement and the transactions
contemplated hereby may be terminated or abandoned by (i) either Constituent
Corporation at any time prior to its adoption by the stockholders of both of the
Constituent Corporations as and to the extent provided by law or (ii) the mutual
consent of the Constituent Corporations at any time after such adoption by such
stockholders and prior to the Effective Time, in each case for any reason or for
no reason. In the event of such termination or abandonment, this Agreement shall
become wholly void and of no effect and there shall be no further liability or
obligation hereunder on the part of either of the Constituent Corporations or of
its board of directors, officers, or stockholders.
10. Tax Consequences. It is intended by the Constituent Corporations
that the Merger shall constitute a plan of reorganization within the meaning
of Section 368 of the Code.
11. Massachusetts Consent. As of the Effective Time, the Surviving
Corporation hereby (i) agrees that, so long as any such liability of Telaxis or
the Surviving Corporation remains outstanding in the Commonwealth of
Massachusetts, it may be sued in the Commonwealth of Massachusetts for any prior
obligation of Telaxis and any obligation of the Surviving Corporation thereafter
incurred, including the obligation created by MBCL Section 85 and (ii)
irrevocably appoints the Secretary of State of the Commonwealth of Massachusetts
as its agent for service of process in any action for the enforcement of any
such obligation, including taxes, in the same manner as provided in
Massachusetts General Laws, Chapter 181.
12. Further Assurances. If, at any time after the Effective Time, any
other action is necessary or desirable to carry out the purposes of this
Agreement and to vest the Surviving Corporation with full right, title, and
possession to all assets, property, rights, privileges, powers, and franchises
of Telaxis and YDI Wireless, the officers and directors of the Surviving
Corporation are hereby authorized in the name of the corporations that were the
Constituent Corporations to execute, acknowledge, seal, deliver, and perform all
agreements, instruments, and other documents and to do all things as any of them
may deem necessary or desirable to effect the foregoing purposes.
[SIGNATURE PAGE FOLLOWS]
6
IN WITNESS WHEREOF, Telaxis and YDI Wireless have caused this Agreement to
be signed by their respective duly authorized officers, all as of the date first
written above.
TELAXIS COMMUNICATIONS CORPORATION
[Seal] By: _________________________________
Name: Michael F. Young
Title: President
[Seal] By: _________________________________
Name: Patrick L. Milton
Title: Treasurer
YDI WIRELESS, INC.
[Seal] By: _________________________________
Name: Michael F. Young
Title: President
ATTEST:
By: _________________________________
Name: David L. Renauld
Title: Vice President and Secretary
7
Appendix E
EXCERPTS FROM
CHAPTER 156B OF THE MASSACHUSETTS GENERAL LAWS
MASSACHUSETTS BUSINESS CORPORATION LAW
SECTION 85. DISSENTING STOCKHOLDER; RIGHT TO DEMAND PAYMENT FOR STOCK; EXCEPTION
A stockholder in any corporation organized under the laws of Massachusetts
which shall have duly voted to consolidate or merge with another corporation or
corporations under the provisions of sections seventy-eight or seventy-nine who
objects to such consolidation or merger may demand payment for his stock from
the resulting or surviving corporation and an appraisal in accordance with the
provisions of sections eighty-six to ninety-eight, inclusive, and such
stockholder and the resulting or surviving corporation shall have the rights and
duties and follow the procedure set forth in those sections. This section shall
not apply to the holders of any shares of stock of a constituent corporation
surviving a merger if, as permitted by subsection (c) of section seventy-eight,
the merger did not require for its approval a vote of the stockholders of the
surviving corporation.
SECTION 86. SECTIONS APPLICABLE TO APPRAISAL; PREREQUISITES
If a corporation proposes to take a corporate action as to which any
section of this chapter provides that a stockholder who objects to such action
shall have the right to demand payment for his shares and an appraisal thereof,
sections eighty-seven to ninety-eight, inclusive, shall apply except as
otherwise specifically provided in any section of this chapter. Except as
provided in sections eighty-two and eighty-three, no stockholder shall have such
right unless (1) he files with the corporation before the taking of the vote of
the shareholders on such corporate action, written objection to the proposed
action stating that he intends to demand payment for his shares if the action is
taken and (2) his shares are not voted in favor of the proposed action.
SECTION 87. STATEMENT OF RIGHTS OF OBJECTING STOCKHOLDERS IN NOTICE OF MEETING;
FORM
The notice of the meeting of stockholders at which the approval of such
proposed action is to be considered shall contain a statement of the rights of
objecting stockholders. The giving of such notice shall not be deemed to create
any rights in any stockholder receiving the same to demand payment for his
stock, and the directors may authorize the inclusion in any such notice of a
statement of opinion by the management as to the existence or non-existence of
the right of the stockholders to demand payment for their stock on account of
the proposed corporate action. The notice may be in such form as the directors
or officers calling the meeting deem advisable, but the following form of notice
shall be sufficient to comply with this section:
"If the action proposed is approved by the stockholders at the meeting and
effected by the corporation, any stockholder (1) who files with the corporation
before the taking of the vote on the approval of such action, written objection
to the proposed action stating that he intends to demand payment for his shares
if the action is taken and (2) whose shares are not voted in favor of such
action has or may have the right to demand in writing from the corporation (or,
in the case of a consolidation or merger, the name of the resulting or surviving
corporation shall be inserted), within twenty days after the date of mailing to
him of notice in writing that the corporate action has become effective, payment
for his shares and an appraisal of the value thereof. Such corporation and any
such stockholder shall in such cases have the rights and duties and shall follow
the procedure set forth in sections 88 to 98, inclusive, of chapter 156B of the
General Laws of Massachusetts."
SECTION 88. NOTICE OF EFFECTIVENESS OF ACTION OBJECTED TO
The corporation taking such action, or in the case of a merger or
consolidation the surviving or resulting corporation, shall, within ten days
after the date on which such corporate action became effective, notify each
stockholder who filed a written objection meeting the requirements of section
eighty-six and whose shares were not voted in favor of the approval of such
action, that the action approved at the meeting of the corporation of which he
is a stockholder has become effective. The giving of such notice shall not be
deemed to create any rights in any stockholder receiving the same to demand
payment for his stock. The notice shall be sent by registered or certified mail,
addressed to the stockholder at his last known address as it appears in the
records of the corporation.
SECTION 89. DEMAND FOR PAYMENT; TIME FOR PAYMENT
If within twenty days after the date of mailing of a notice under
subsection (e) of section eighty-two, subsection (f) of section eighty-three, or
section eighty-eight, any stockholder to whom the corporation was required to
give such notice shall demand in writing from the corporation taking such
action, or in the case of a consolidation or merger from the resulting or
surviving corporation, payment for his stock, the corporation upon which such
demand is made shall pay to him the fair value of his stock within thirty days
after the expiration of the period during which such demand may be made.
SECTION 90. DEMAND FOR DETERMINATION OF VALUE; BILL IN EQUITY; VENUE
If during the period of thirty days provided for in section eighty-nine
the corporation upon which such demand is made and any such objecting
stockholder fail to agree as to the value of such stock, such corporation or any
such stockholder may within four months after the expiration of such thirty-day
period demand a determination of the value of the stock of all such objecting
stockholders by a bill in equity filed in the superior court in the county where
the corporation in which such objecting stockholder held stock had or has its
principal office in the commonwealth.
SECTION 91. PARTIES TO SUIT TO DETERMINE VALUE; SERVICE
If the bill is filed by the corporation, it shall name as parties
respondent all stockholders who have demanded payment for their shares and with
whom the corporation has not reached agreement as to the value thereof. If the
bill is filed by a stockholder, he shall bring the bill in his own behalf and in
behalf of all other stockholders who have demanded payment for their shares and
with whom the corporation has not reached agreement as to the value thereof, and
service of the bill shall be made upon the corporation by subpoena with a copy
of the bill annexed. The corporation shall file with its answer a duly verified
list of all such other stockholders, and such stockholders shall thereupon be
deemed to have been added as parties to the bill. The corporation shall give
notice in such form and returnable on such date as the court shall order to each
stockholder party to the bill by registered or certified mail, addressed to the
last known address of such stockholder as shown in the records of the
corporation, and the court may order such additional notice by publication or
otherwise as it deems advisable. Each stockholder who makes demand as provided
in section eighty-nine shall be deemed to have consented to the provisions of
this section relating to notice, and the giving of notice by the corporation to
any such stockholder in compliance with the order of the court shall be a
sufficient service of process on him. Failure to give notice to any stockholder
making demand shall not invalidate the proceedings as to other stockholders to
- 2 -
whom notice was properly given, and the court may at any time before the entry
of a final decree make supplementary orders of notice.
SECTION 92. DECREE DETERMINING VALUE AND ORDERING PAYMENT; VALUATION DATE
After hearing the court shall enter a decree determining the fair value of
the stock of those stockholders who have become entitled to the valuation of and
payment for their shares, and shall order the corporation to make payment of
such value, together with interest, if any, as hereinafter provided, to the
stockholders entitled thereto upon the transfer by them to the corporation of
the certificates representing such stock if certificated or, if uncertificated,
upon receipt of an instruction transferring such stock to the corporation. For
this purpose, the value of the shares shall be determined as of the day
preceding the date of the vote approving the proposed corporate action and shall
be exclusive of any element of value arising from the expectation or
accomplishment of the proposed corporate action.
SECTION 93. REFERENCE TO SPECIAL MASTER
The court in its discretion may refer the bill or any question arising
thereunder to a special master to hear the parties, make findings and report the
same to the court, all in accordance with the usual practice in suits in equity
in the superior court.
SECTION 94. NOTATION ON STOCK CERTIFICATES OF PENDENCY OF BILL
On motion the court may order stockholder parties to the bill to submit
their certificates of stock to the corporation for the notation thereon of the
pendency of the bill, and may order the corporation to note such pendency in its
records with respect to any uncertificated shares held by such stockholder
parties, and may on motion dismiss the bill as to any stockholder who fails to
comply with such order.
SECTION 95. COSTS; INTEREST
The costs of the bill, including the reasonable compensation and expenses
of any master appointed by the court, but exclusive of fees of counsel or of
experts retained by any party, shall be determined by the court and taxed upon
the parties to the bill, or any of them, in such manner as appears to be
equitable, except that all costs of giving notice to stockholders as provided in
this chapter shall be paid by the corporation. Interest shall be paid upon any
award from the date of the vote approving the proposed corporate action, and the
court may on application of any interested party determine the amount of
interest to be paid in the case of any stockholder.
SECTION 96. DIVIDENDS AND VOTING RIGHTS AFTER DEMAND FOR PAYMENT
Any stockholder who has demanded payment for his stock as provided in this
chapter shall not thereafter be entitled to notice of any meeting of
stockholders or to vote such stock for any purpose and shall not be entitled to
the payment of dividends or other distribution on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the date of the vote approving the proposed corporate action) unless:
(1) A bill shall not be filed within the time provided in section ninety;
(2) A bill, if filed, shall be dismissed as to such stockholder; or
- 3 -
(3) Such stockholder shall with the written approval of the corporation,
or in the case of a consolidation or merger, the resulting or surviving
corporation, deliver to it a written withdrawal of his objections to and an
acceptance of such corporate action.
Notwithstanding the provisions of clauses (1) to (3), inclusive, said
stockholder shall have only the rights of a stockholder who did not so demand
payment for his stock as provided in this chapter.
SECTION 97. STATUS OF SHARES PAID FOR
The shares of the corporation paid for by the corporation pursuant to the
provisions of this chapter shall have the status of treasury stock, or in the
case of a consolidation or merger the shares or the securities of the resulting
or surviving corporation into which the shares of such objecting stockholder
would have been converted had he not objected to such consolidation or merger
shall have the status of treasury stock or securities.
SECTION 98. EXCLUSIVE REMEDY; EXCEPTION
The enforcement by a stockholder of his right to receive payment for his
shares in the manner provided in this chapter shall be an exclusive remedy
except that this chapter shall not exclude the right of such stockholder to
bring or maintain an appropriate proceeding to obtain relief on the ground that
such corporate action will be or is illegal or fraudulent as to him.
- 4 -