SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. _____)
Filed by the registrant [ ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use
[X] Definitive Proxy Statement of the Commission
[ ] Definitive Additional Materials Only (as permitted by
[ ] Soliciting Material Pursuant to Rule 14-a-6(e)(2)
Rule 14a-11(c) or Rule 14a-12
SYNTHONICS TECHNOLOGIES, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No Fee Required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transactions applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials:
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[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement no.:
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(4) Date filed:
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SYNTHONICS TECHNOLOGIES, INC.
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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 3, 1999
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TO OUR SHAREHOLDERS:
Notice is hereby given that a Special Meeting of Shareholders of
Synthonics Technologies, Inc. (the "Company") will be held at the offices of
Troop Steuber Pasich Reddick & Tobey LLP, 2029 Century Park East, 24th Floor,
Los Angeles, California 90067 on December 3, 1999 at 2:00 p.m., California time.
The Special Meeting is being held for the following purposes:
1. To consider and vote upon a proposed change in the Company's state
of incorporation from Utah to Delaware.
2. To approve a new stock option plan authorizing the issuance of
10,000,000 shares of Common Stock.
3. To transact such other business as may properly come before the
Special Meeting or any adjournments or postponements thereof.
Only shareholders of record of the Common Stock of the Company at the
close of business on November 4, 1999 are entitled to notice of and to vote at
the Special Meeting and at any adjournments or postponements thereof.
All shareholders are cordially invited to attend the Special Meeting in
person. However, to ensure your representation at the Special Meeting, you are
urged to mark, sign and return the enclosed Proxy as promptly as possible in the
postage prepaid envelope enclosed for that purpose. Any shareholder attending
the Special Meeting may vote in person, even though he or she has returned a
Proxy.
BY ORDER OF THE BOARD OF DIRECTORS
/S/ CHARLES S. PALM
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Secretary
Westlake Village, California 91362
November 19, 1999
IN ORDER TO ENSURE YOUR REPRESENTATION AT THE MEETING, PLEASE COMPLETE, DATE,
SIGN AND RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED ENVELOPE AS PROMPTLY AS
POSSIBLE. IF YOU DO ATTEND THE MEETING, YOU MAY, IF YOU PREFER, REVOKE YOUR
PROXY AND VOTE YOUR SHARES IN PERSON.
SYNTHONICS TECHNOLOGIES, INC.
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PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 3, 1999
This Proxy Statement is furnished in connection with the solicitation of proxies
by the Board of Directors (the "Board") of Synthonics Technologies, Inc., a Utah
corporation ("Synthonics Utah" or the "Company"), for use at a Special Meeting
of Shareholders (the "Special Meeting") to be held at 2029 Century Park East,
24th Floor, Los Angeles, California 90067 (310) 728-3000, on December 3, 1999 at
2:00 p.m., California time, and at any adjournments or postponements thereof,
for the purposes set forth herein and in the attached Notice of Special Meeting
of Shareholders. Accompanying this Proxy Statement is the Board's Proxy for the
Special Meeting, which you may use to indicate your vote on the proposals
described in this Proxy Statement.
All Proxies which are properly completed, signed and returned to the Company
prior to the Special Meeting, and which have not been revoked, will unless
otherwise directed by the shareholder, be voted in accordance with the
recommendations of the Board set forth in this Proxy Statement. A shareholder
may revoke his or her Proxy at any time before it is voted either by filing with
the Secretary of the Company, at its principal executive offices, a written
notice of revocation or a duly executed proxy bearing a later date, or by
attending the Special Meeting and expressing a desire to vote his or her shares
in person.
The close of business on November 4, 1999, has been fixed as the record date for
the determination of shareholders entitled to notice of and to vote at the
Special Meeting or at any adjournments or postponements of the Special Meeting.
At the record date, 28,421,679 shares of common stock, par value $0.01 per share
(the "Common Stock"), were outstanding, and the Company had approximately 600
shareholders of record.
A shareholder is entitled to cast one vote for each share held of record on the
record date on all matters to be considered at the Special Meeting. This Proxy
Statement and the accompanying Proxy were mailed to shareholders on or about
November 20, 1999.
The presence, in person or by proxy, of the holders of majority of the
outstanding shares of Common Stock is necessary to constitute a quorum at the
Special Meeting. Assuming that a quorum is present, (i) the affirmative vote of
the holders of a majority of the outstanding shares of Common Stock will be
required to approve the merger of the Company with and into its wholly owned
subsidiary, Synthonics Technologies Mergercorp., a Delaware corporation and (ii)
the affirmative vote of the holders of a majority of the shares present and
voting will be required to approve the Synthonics Technologies, Inc. 1999 Stock
Option Plan (the "1999 Plan").
Abstentions and broker "non-votes" (i.e., shares identified as held by brokers
or nominees as to which instructions have not been received from the beneficial
owners or persons entitled to vote that the broker or nominee does not have
discretionary power to vote on a particular matter) will be counted toward
determining the presence of a quorum for the transaction of business.
Abstentions may be specified on all proposals. A broker "non-vote" will have no
effect on the adoption of the 1999 Plan, but broker "non-votes" could affect the
outcome of the Reincorporation proposal because the Company must obtain approval
of this proposal from the holders of a majority of the outstanding shares of
Common Stock.
If the accompanying proxy is properly signed and returned to the Company and not
revoked, it will be voted in accordance with the instructions contained therein.
Unless contrary instructions are given, the persons designated as proxy holders
in the accompanying Proxy will vote "FOR" the adoption of the 1999 Plan, "FOR"
the Reincorporation and as recommended by the Board with regard to any other
matters which may properly come before the Meeting or if no such recommendation
is given, in their own discretion. Each Proxy granted by a shareholder may be
revoked by such shareholder at any time thereafter by writing to the Secretary
of the Company prior to the Meeting, or by execution and delivery of a
subsequent Proxy or by attendance and voting in person at the Meeting, except as
to any matter or matters upon which, prior to such revocation, a vote shall have
been cast pursuant to the authority conferred by such Proxy.
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The cost of soliciting these proxies, consisting of the printing, handling, and
mailing of the Proxy and related material, and the actual expense incurred by
brokerage houses, custodians, nominees and fiduciaries in forwarding proxy
material to the beneficial owners of stock, will be paid by the Company. In
order to assure that there is a quorum present at the Special Meeting, it may be
necessary for certain officers, directors, regular employees and other
representatives of the Company to solicit proxies by telephone or telegraph or
in person. These persons will receive no extra compensation for their services.
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PROPOSAL 1
REINCORPORATION OF THE COMPANY
INTRODUCTION
For the reasons set forth below, the Board believes that the best interests of
the Company and its shareholders will be served by changing the Company's state
of incorporation from Utah to Delaware (the "Reincorporation"). The Board has
approved the Reincorporation, which will be effected pursuant to the Merger
Agreement described below. Under the Merger Agreement, the Company will be
merged with and into its newly formed Delaware subsidiary, Synthonics
Technologies Mergercorp. ("Synthonics Delaware"). Synthonics Delaware is a
wholly-owned subsidiary of the Company recently incorporated in Delaware solely
for the purpose of effecting the Reincorporation. Synthonics Delaware currently
has no material assets and no business operations. Upon the effectiveness of the
Reincorporation, the Company will cease to exist and Synthonics Delaware will
continue to operate the Company's business under the name "Synthonics
Technologies, Inc."
At the Special Meeting, the shareholders of the Company (the "Shareholders")
will be asked to consider and vote upon the Reincorporation as outlined in the
Agreement and Plan of Merger by and between Synthonics Delaware and Synthonics
Utah, attached as Exhibit A (the "Merger Agreement"). For the reasons set forth
below, the Board believes that approval of the Reincorporation is in the best
interests of the Company and its shareholders. Shareholder approval of the
Reincorporation will constitute approval of the Merger Agreement and all related
transactions, which will effect the change in the legal domicile of the company.
REASONS FOR THE REINCORPORATION
The Board believes that the Reincorporation will provide flexibility for both
the management and business of the Company. For many years, Delaware has
followed a policy of encouraging incorporation in that state and has been a
leader in adopting, construing and implementing comprehensive, flexible
corporate laws responsive to the legal and business needs of corporations
organized under its laws. Such an environment will enhance the Company's
operations and its ability to obtain equity financing and to effect acquisitions
and other transactions. Delaware has consistently followed a policy of
encouraging incorporation in that state and, in furtherance of that policy, has
adopted comprehensive, modern and flexible corporate laws that are periodically
updated and revised to meet changing business needs.
The Delaware courts have developed considerable expertise in dealing with
corporate issues, and a substantial body of case law has developed in the
construction of Delaware law, resulting in greater predictability with respect
to corporate legal affairs. The Delaware courts can rely on numerous precedents
in interpreting the legal principles applicable to measures that may be taken by
a corporation and as to the conduct of the Board under the business judgment
rule. Consequently, many corporations originally domiciled elsewhere have
subsequently changed corporate domicile to Delaware in a manner similar to that
proposed by the Company.
THE MERGER
After the Reincorporation is effected by the Merger Agreement, Synthonics
Delaware will emerge as the surviving corporation. The terms and conditions of
the Reincorporation are set forth in the Merger Agreement to this Proxy
Statement, and the summary of the terms and conditions of the Reincorporation
set forth below is qualified by reference to the full text of the Merger
Agreement. Upon consummation of the Reincorporation, Synthonics Delaware will
continue to exist in its present form under the name "Synthonics Technologies,
Inc.", and the Company will cease to exist. The Reincorporation will change the
legal domicile of the Company, but will not result in a change in the principal
offices, business, management, capitalization, assets or liabilities of the
Company. By operation of law, Synthonics Delaware will succeed to all of the
assets and assume all of the liabilities of the Company.
The Board of Directors of Synthonics Delaware ("Delaware Board") will be
comprised of the persons elected to the Company's Board at the Annual Meeting.
The Delaware Board will be divided into three classes, each class shall
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serve for a term of three years commencing upon its election subsequent to the
Reincorporation. Initially, the Class I directors will serve until the 2000
annual meeting, the Class II directors will serve until the 2001 annual meeting
and the Class III directors will serve until the 2002 annual meeting. Ronald S.
Spears, Tim Paulson and Thomas Carpenter would be Class I directors, F. Michael
Budd and Charles S. Palm would be Class II directors, and Vera Campbell, Diana
L. Maranon and David L. Stewart would be Class III directors. It is anticipated
that the directors of Synthonics Delaware will elect as officers of Synthonics
Delaware the same persons who are elected as officers of the Company following
the Special Meeting.
After the Reincorporation, the rights of shareholders and the Company's
corporate affairs will be governed by the Delaware General Corporation Law (the
"DGCL") and by the certificate of incorporation and bylaws of Synthonics
Delaware, instead of the Utah Business Corporation Act (the "URBCA") and the
articles of incorporation and bylaws of the Company. Certain material
differences are discussed below under "Comparison of Shareholders Rights under
Delaware and Utah Corporate Law and Charter Documents." A copy of the
certificate of incorporation of Synthonics Delaware (the "Delaware Certificate")
is included as Exhibit B to this Proxy Statement. The articles of incorporation
and bylaws of the Company and the bylaws of Synthonics Delaware (the "Delaware
Bylaws") are available for inspection by shareholders of the Company at the
principal offices of the Company located at 31324 Via Colinas, Suite 106,
Westlake Village, California 91362, (818)707-6000.
Upon the effectiveness of the Reincorporation, each outstanding share of the
Common Stock of the Company will be automatically converted into one fully paid
and nonassessable share of the Common Stock of Synthonics Delaware ("Delaware
Common Stock"). Each share of Class A Preferred Stock of the Company ("Class A
Preferred Stock") issued and outstanding immediately prior to thereto shall be
converted into one share of Class A Preferred Stock of Synthonics Delaware
("Delaware Class A Preferred Stock") and each share of Common Stock of
Synthonics Delaware issued and outstanding immediately prior thereto shall be
cancelled and returned to the status of authorized but unissued shares.
Each outstanding certificate representing shares of Common Stock and Class A
Preferred Stock will continue to represent the same number of shares of Delaware
Common Stock and Delaware Class A Preferred Stock, respectively, and such
certificates will be deemed for all corporate purposes to evidence ownership of
shares of Delaware Common Stock and Delaware Class A Preferred Stock, as the
case may be. IT WILL NOT BE NECESSARY FOR THE COMPANY'S SHAREHOLDERS TO EXCHANGE
THEIR EXISTING STOCK CERTIFICATES FOR STOCK CERTIFICATES OF SYNTHONICS DELAWARE.
Following the effectiveness of the Reincorporation, Synthonics Delaware will
assume and continue the Company's 1998 Stock Award Plan, and the outstanding and
unexercised portion of all options to purchase Common Stock of Synthonics Utah,
including without limitation all options outstanding under such stock plan,
shall be converted into options of Synthonics Delaware, such that one option for
shares of Synthonics Utah shall be converted into one option for an equal number
of shares of Synthonics Delaware. The Company's other employee benefit plans and
arrangements will also be continued by Synthonics Delaware upon the same terms
and conditions existing before the Reincorporation.
Consummation of the Reincorporation is subject to the approval of the Company's
shareholders. The affirmative vote of the holders of a majority of the votes
represented by the outstanding shares of the Common Stock voting together as a
class, whether or not present at the Special Meeting, who are entitled to vote
at the Special Meeting is required for the approval and adoption of the
Reincorporation. The Reincorporation is expected to become effective as soon as
practicable after shareholder approval is obtained and all other conditions to
the Reincorporation have been satisfied, including the receipt of all consents,
orders and approvals necessary for consummation of the Reincorporation. Prior to
its effectiveness, however, the Reincorporation may be abandoned by the Board
if, for any reason, the Board determines that consummation of the
Reincorporation is no longer advisable.
FEDERAL INCOME TAX CONSEQUENCES OF THE REINCORPORATION
The Reincorporation of the Company pursuant to the Merger Agreement will be a
tax free reorganization under the Internal Revenue Code of 1986, as amended.
Accordingly, a holder of the Common Stock or Class A Preferred Stock (in each
case, a "Holder") will not recognize gain or loss in respect of Holder's Common
or Class A Preferred Stock as a result of the Reincorporation. The Holder's
basis in a share of Synthonics Delaware will be the same as
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Holder's basis in the corresponding share of the Company held immediately prior
to the Reincorporation. The Holder's holding period in a share of Synthonics
Delaware will include the period during which Holder held the corresponding
share of the Company, provided Holder held the corresponding share as a capital
asset at the time of the Reincorporation.
In addition, neither the Company nor Synthonics Delaware will recognize gain or
loss as a result of the Reincorporation, and Synthonics Delaware will generally
succeed, without adjustment, to the tax attributes of the Company. Upon
Reincorporation, however, Synthonics Delaware will be subject to Delaware
franchise tax, which is based on the total asset value of the corporation. The
estimated amount of the Delaware franchise tax is approximately $620 per year.
The foregoing summary of federal income tax consequences is included for general
information only and does not address all income tax consequences to all of the
Company's shareholders. The Company's shareholders are urged to consult their
own tax advisors as to the specific tax consequences of the Reincorporation with
respect to the application and effect of state, local and foreign income and
other tax laws.
SECURITIES ACT CONSEQUENCES
Pursuant to Rule 145(a) (2) under the Securities Act of 1933, as amended (the
"Securities Act"), a merger which has the sole purpose of changing an issuer's
domicile within the United States does not involve a sale of securities for the
purposes of the Securities Act. Accordingly, separate registration of shares of
common stock of Synthonics Delaware will not be required.
DESCRIPTION OF CAPITAL STOCK AND VOTING RIGHTS
The Company's authorized capital consists of 100,000,000 shares of Common Stock,
par value $.01 per share, and 20,550,000 shares of Preferred Stock of which
550,000 are designated Class A Preferred Stock par value $10.00 per share and of
which 20,000,000 are designated Class B Preferred Stock.
As of September 30, 1999, there were 27,621,679 shares of Common Stock
outstanding and 10,000 shares of Class A Preferred Stock outstanding. There were
no shares of Class B Preferred Stock outstanding. The holders of Common Stock
and Class A Preferred Stock are entitled to receive dividends, on a
share-for-share basis if, as and when declared by the Board out of funds legally
available therefore as provided for in the Company's Amended and Restated Bylaws
("Utah Bylaws"). Each share of Common Stock has, for all purposes, one vote per
share. Each share of Class A Preferred Stock is not entitled to vote upon the
election of directors or upon any other matters.
COMPARISON OF SHAREHOLDER RIGHTS UNDER DELAWARE AND UTAH CORPORATE LAW AND
CHARTER DOCUMENTS
GENERAL. Subject to shareholder approval prior to the effective time (the
"Effective Time") of the Reincorporation, the Company will change its domicile
to Delaware and shall thereafter be governed by the DGCL and by the Delaware
Certificate and the Delaware Bylaws ("Delaware Charter Documents"). Upon the
filing with and acceptance by the Secretary of State of Delaware of a
Certificate of Merger in Delaware, the Company will become Synthonics Delaware
and the outstanding shares of Company Common Stock will be deemed for all
purposes to evidence ownership of, and to represent, shares of Synthonics
Delaware Common Stock.
The Delaware Charter Documents effectively replace the Company's current Amended
and Restated Articles of Incorporation ("Utah Articles") and the Utah Bylaws
(together, the "Utah Charter Documents") including providing officers, directors
and agents of Synthonics Delaware with certain indemnification rights in
addition to those currently provided for the Company.
If the Reincorporation is consummated, holders of Common Stock and Preferred
Stock (and holders of options, warrants or other securities exchangeable for or
convertible into Common Stock) will become holders of Delaware Common Stock,
which will result in their rights as shareholders being governed by the laws of
the State of Delaware. In addition, their rights as shareholders will be
governed by the Delaware Charter Documents. It is not
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practical to describe all of the differences between the Delaware Articles and
the Utah Articles and the Delaware Bylaws and the Utah Bylaws or all of the
differences between the laws of the States of Delaware and Utah. The following
is a summary of some of the significant rights of the shareholders under Utah
and Delaware law and under the Utah and Delaware Charter Documents. This summary
is qualified in its entirety by reference to the full text of such documents and
laws.
AUTHORIZED CAPITAL STOCK
The following discussion is qualified in its entirety by reference to the
Delaware Charter Documents.
The total number of shares that may be issued by Synthonics Delaware is
120,550,000 of the par value per share hereinafter set forth. The description of
the classes of shares and a statement of the number of shares in each class and
the relative rights, voting power, restrictions and preferences granted to and
imposed upon the shares of each class are discussed below.
COMMON STOCK. The authorized capital stock of Synthonics Delaware, upon
effectuation of the transaction set forth in the Merger Agreement, will consist
of 100,000,000 shares of Delaware Common Stock $0.01 par value. Each share of
Delaware Common Stock shall have, for all purposes one vote per share. Subject
to the cumulative dividend preference to holders of Delaware Class A Preferred
and Delaware Class B Preferred Stock, the shares of Delaware Common Stock are
entitled to participate in any dividends available therefor in equal amounts per
share on all outstanding Delaware Preferred Shares and Delaware Common Stock.
The holders of Delaware Common Stock issued and outstanding have and possess the
right to receive notice of shareholders' meetings and to vote upon the election
of directors or upon any other matter as to which approval of the outstanding
shares of Delaware Common Stock or approval of the common shareholders is
required or requested. Shareholders will not have a right to cumulate their
votes for the election of directors.
PREFERRED STOCK. Upon effectuation of the transaction set forth in the Merger
Agreement, the authorized capital stock of Synthonics Delaware will include
550,000 shares of Delaware Class A Preferred Stock with a stated par value of
$10.00 per share, and 20,000,000 shares of Delaware Class B Preferred Stock,
with a stated par value of $.01. The designations, powers, preferences, rights
and restrictions granted or imposed upon the Delaware Class A Preferred Stock
are substantially identical to the powers, preferences, rights and restrictions
granted or imposed upon the Class A Preferred Stock. The Board will have
authority to issue the undesignated Delaware Class B Preferred Stock in one or
more series and to determine the powers, preferences and rights and the
qualifications, limitations or restrictions granted to or imposed upon any
wholly unissued series of undesignated Delaware Class B Preferred Stock and to
fix the number of shares constituting any series and the designation of such
series, without any further vote or action by the stockholders of the Company.
The issuance of Class B Preferred Stock may have the effect of delaying,
deferring or preventing a change in control of the Company without further
action by the stockholders and may adversely effect the voting and other rights
of the holders of Delaware Common Stock.
VOTING RIGHTS WITH RESPECT TO EXTRAORDINARY CORPORATE TRANSACTIONS
DELAWARE. Approval of mergers and consolidations and sales, leases or exchanges
of all or substantially all of the property or assets of a corporation, requires
the affirmative vote or consent of the holders of a majority of the outstanding
shares entitled to vote, except that, unless required by the certificate of
incorporation, no vote of shareholders of the corporation surviving a merger is
necessary if: (i) the merger does not amend the certificate of incorporation of
the corporation; (ii) each outstanding share immediately prior to the merger is
to be an identical share after the merger and (iii) either no common stock of
the corporation and no securities or obligations convertible into common stock
are to be issued in the merger, or the common stock to be issued in the merger
plus that initially issuable on conversion of other securities issued in the
merger does not exceed 20% of the common stock of the corporation outstanding
immediately before the merger.
UTAH. A merger, share exchange or sale of all or substantially all of the assets
of a corporation (other than a sale in the ordinary course of the corporation's
business) requires the approval of a majority (unless the articles of
incorporation, the bylaws or a resolution of the board of directors requires a
greater number) of the outstanding shares of the corporation (voting in separate
voting groups, if applicable). No vote of the shareholders of the surviving
corporation in a merger is required if: (i) the articles of incorporation of the
surviving corporation will not
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be changed; (ii) each shareholder of the surviving corporation whose shares were
outstanding immediately before the effective date of the merger will hold the
same number of shares, with identical designations, preferences, limitations and
relative rights, immediately after the merger; (iii) the number of voting shares
outstanding immediately after the merger, plus the number of voting shares
issuable as a result of the merger (either by the conversion of securities
issued pursuant to the merger or the exercise of rights and warrants issued
pursuant to the merger), will not exceed by more than 20% of the total number of
voting shares of the surviving corporation outstanding immediately before the
merger; and (iv) the number of participating shares (shares that entitle their
holder to participate without limitation in distributions) outstanding
immediately after the merger, plus the number of participating shares issuable
as a result of the merger (either by the conversion of securities issued
pursuant to the merger or the exercise of rights and warrants issued pursuant to
the merger), will not exceed by more than 20% the total number of participating
shares of the surviving corporation outstanding immediately before the merger.
Both Utah and Delaware law require that a sale of all or substantially all of
the assets of a corporation be approved by a majority of the outstanding voting
shares of the corporation transferring such assets. With certain exceptions,
Utah law also requires certain sales of assets and similar transactions be
approved by a majority vote of each class of shares outstanding. In contrast,
Delaware law generally does not require class voting, except in certain
transactions involving an amendment to the certificate of incorporation that
adversely affects a specific class of shares. As a result, shareholder approval
of such transactions may be easier to obtain under Delaware law for companies
that have more than one class of shares outstanding.
SHAREHOLDERS CONSENT WITHOUT A MEETING
DELAWARE. Unless otherwise provided in the certificate of incorporation, action
requiring the vote of shareholders, including the removal and election of
directors, may be taken without a meeting, without prior notice and without a
vote, by the written consent of shareholders having not less than the minimum
number of votes that would be necessary to take such action at a meeting at
which all shares entitled to vote thereon were present and acted.
UTAH. Unless otherwise provided in the articles of incorporation, action
requiring the vote of shareholders may be taken without a meeting and without
prior notice by one or more written consents of the shareholders having not less
than the minimum number of votes that would be necessary to take such action at
a meeting at which all shares entitled to vote thereon were present and voted
(if shareholder action is by less than unanimous written consent, notice shall
be provided to the shareholders who did not consent at least ten days before the
consummation of the transaction, action or event authorized by the
shareholders). However, any written consent for the election of directors must
be unanimous and the shareholders of any corporation in existence prior to July
1, 1992, are required to adopt a resolution permitting action by less than
unanimous written consent; otherwise, the shareholders are only permitted to act
by unanimous written consent.
DISSENTERS' RIGHTS
DELAWARE. Shareholders are entitled to demand appraisal of their shares in the
case of mergers or consolidations, except where: (i) they are shareholders of
the surviving corporation and the merger did not require their approval under
the DGCL; (ii) the corporation's shares are either listed on a national
securities exchange or designated as a national market system security on an
interdealer quotation system by The National Association of Securities Dealers,
Inc.; or (iii) the corporation's shares are held of record by more than 2,000
shareholders. Appraisal rights are available in either (i), (ii) or (iii) above,
however, if the shareholders are required by the terms of the merger or
consolidation to accept any consideration other than (a) stock of the
corporation surviving or resulting from the merger or consolidation, (b) shares
of stock of another corporation which are either listed on a national securities
exchange or designated as a national market system security on an interdealer
quotation system by the National Association of Securities Dealers, Inc. or held
of record by more than 2,000 shareholders, (c) cash in lieu of fractional
shares, or (d) any combination of the foregoing appraisal rights are not
available in the case of a sale, lease, exchange or other disposition by a
corporation of all or substantially all of its property and assets.
UTAH. In connection with a merger, share exchange or sale, lease, exchange or
other disposition of all or substantially all of the assets of a corporation
(other than in the ordinary course of the corporation's business), a dissenting
shareholder, after complying with certain procedures, is entitled to payment
from the corporation of the
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fair value of the shareholder's shares. The fair value is estimated by the
corporation. However, if the shareholder is unwilling to accept the
corporation's estimate, the shareholder may provide the corporation with an
estimate of the fair value and demand payment of that amount. If the corporation
is unwilling to pay that amount, the corporation shall apply for judicial
determination of the fair value. Unless the articles of incorporation, bylaws or
a resolution of the board of directors provide otherwise, shareholders are not
entitled to dissenters' rights when the shares are listed on a national
securities exchange or the National Market System of NASDAQ, or are held of
record by more than 2,000 holders. However, this exception does not apply if,
pursuant to the corporate action, the shareholder will receive anything except
(i) shares of the surviving corporation, (ii) shares of a corporation that is or
will be listed on a national securities exchange, the National Market System of
NASDAQ, or held of record by more than 2,000 holders, (iii) cash in lieu of
fractional shares or (iv) any combination of the foregoing.
DIVIDENDS
DELAWARE. Dividends may be paid either (i) out of surplus (the excess at any
time of the net assets of the corporation over the amount of its capital), or
(ii) in case there is no surplus, out of the corporation's net profits for the
fiscal year in which the dividend is declared and/or its net profits for the
preceding fiscal year. A corporation may redeem or repurchase its shares only if
the capital of the corporation is not impaired and such redemption or repurchase
would not impair the capital of the corporation.
UTAH. A corporation is prohibited from making a distribution to its shareholders
if, after giving effect to the distribution, the corporation would not be able
to pay its debts as they become due in the usual, course of business or the
corporation's total assets would be less than its total liabilities (plus any
amounts necessary to satisfy any preferential rights).
ANTI-TAKEOVER STATUTES
DELAWARE. Except under certain circumstances, the Delaware law prohibits a
"business combination" between the corporation and an "interested shareholder"
within three years of the shareholder becoming an "interested shareholder."
Generally, an "interested shareholder" is a person or group that directly or
indirectly, controls 15% or more of the outstanding voting stock or is an
affiliate or associate of the corporation and was the owner of 15% or more of
such voting stock at any time within the previous three years. A "business
combination" includes a merger, consolidation, sale or other disposition of
assets having an aggregate value in excess of 10% of the aggregate market value
of the consolidated assets of the corporation or its outstanding stock, and
certain transactions that would increase the interested shareholders'
proportionate share ownership in the board of directors prior to the date the
interested shareholder became an interested shareholder under the DGCL, such
business combinations between a corporation and an interested shareholder are
prohibited unless (a) prior to the date the person became an interested director
the board of directors approved either the business combination or the
transaction which resulted in the person becoming an interested shareholder; (b)
the interested shareholder acquired at least 85% of the outstanding voting stock
of the corporation in the transaction in which the shareholder became an
interested shareholder excluding, for purposes of determining the number of
shares outstanding, shares held by persons who are directors and also officers
and by employee stock plans in which participants do not have the right to
determine confidentially whether shares held subject to the plan will be
tendered; (c) the business combination is approved by a majority of the board of
directors and by the affirmative vote of two thirds of the votes entitled to be
cast by disinterested shareholders at an annual or special meeting, (d) the
corporation does not have a class of voting stock that is listed on a national
securities exchange, authorized for quotation on an interdealer quotation system
of a registered national securities association, or held by more than 2,000
shareholders unless any of the foregoing results from action taken, directly or
indirectly, by an interested shareholder or (e) the corporation has opted out of
this provision. Synthonics Delaware has not opted out of these provisions
governing business combinations as permitted under the Delaware Law.
The Delaware Board will approve Argoquest 7, LLC as a significant stockholder of
that corporation as a result of the Reincorporation. Accordingly, Argoquest 7,
LLC will not be deemed an Interested Stockholder for the purposes of Section
203, and Argoquest 7, LLC will be permitted to pursue further Business
Combinations with Synthonics Delaware should he desire to do so in the future
provided that it shall not control greater than 20% of Synthonics Delaware's
voting stock. No other Business Combinations have been proposed or are
contemplated.
Page 9
UTAH. The Utah Control Share Acquisitions Act, set forth in Sections 61-6-1
through 61-6-12 of the Utah Code Annotated, provides, among other things, that,
when any person obtains shares (or the power to direct the voting shares) of "an
issuing public corporation" such that the person's voting power equals or
exceeds any of three levels (20%, 33 1/3% or 50%), the ability to vote (or to
direct the voting of) the "control shares" is conditioned on approval by a
majority of the corporation's shares (voting in voting groups, if applicable),
excluding the "interested shares". Shareholder approval may occur at the next
annual meeting of the shareholders, or, if the acquiring person requests and
agrees to pay the associated costs of the corporation, at a special meeting of
the shareholders (to be held within 50 days of the corporation's receipt of the
request by the acquiring person). If authorized by the articles of incorporation
or the bylaws, the corporation may redeem "control shares" at the fair market
value if the acquiring person fails to file an "acquiring person statement" or
if the shareholders do not grant voting rights to control shares. If the
shareholders grant voting rights to the control shares, and if the acquiring
person obtained a majority of the voting power, shareholders may be entitled to
dissenters' rights under the URBCA. An acquisition of shares does not constitute
a control share acquisition if (i) the corporation's articles of incorporation
or bylaws provide that this Act does not apply, (ii) the acquisition is
consummated pursuant to a merger in accordance with the URBCA or (iii) under
certain other specified circumstances.
QUORUM OF DIRECTORS
DELAWARE. Unless a greater or lesser number is required for a quorum by the
certificate of incorporation or bylaws (but in no event less than one-third of
the votes of the entire board or committee), a majority of the directors then in
office shall constitute a quorum. Under the Delaware Bylaws, the act of a
majority of directors present at a meeting duly held shall be the act of the
Board once a quorum is present.
UTAH. A quorum of the board of directors consists of a majority of the fixed
number of directors if the corporation has a fixed board size, or if the
corporation's bylaws provide for a variable board size, a majority of the number
of directors prescribed, or if no number is prescribed, the number in office.
However, the articles of incorporation or the bylaws may establish a higher or
lower number of directors to constitute a quorum, but in no event may the number
be less than one-third of the number of directors.
DERIVATIVE SUITS
DELAWARE. The plaintiff must have been a shareholder of the corporation at
the time of the transaction of which he complains or his stock thereafter
must have devolved upon him by operation of law.
UTAH. A person may not commence a derivative action unless the person was a
shareholder of the corporation at the time when the transactions complained of
occurred (unless the person became a shareholder through transfer by operation
of law from a person who was a shareholder at the time). The complaint must be
verified and allege with particularity (i) the demand made on the board of
directors and that either the demand was refused or ignored by the board of
directors, or (ii) if no demand was made on the board of directors, why the
person did not make the demand. If a court finds that the proceeding was
commenced without reasonable cause, the court may require the plaintiff to pay
the defendant's reasonable expenses, including counsel fees.
SPECIAL MEETINGS OF SHAREHOLDERS
DELAWARE. Shareholders generally do not have the right to call meetings of
shareholders unless such right is granted in the certificate of incorporation or
bylaws. However, if a corporation fails to hold its annual meeting within a
period of 30 days after the date designated therefor, or if no date has been
designated for a period of 13 months after its last annual meeting, the Delaware
Court of Chancery may order a meeting to be held upon the application of a
shareholder. The Delaware Bylaws permit a special meeting to be called at any
time by a majority of the board of directors, the chairman of the board, the
chief executive officer, or the president of Synthonics Delaware.
UTAH. Special meetings of the shareholders may be called by: (i) the board of
directors (ii) the person or persons authorized by the bylaws to call a special
meeting, or (iii) the holders of shares representing at least 10% of all votes
entitled to be cast on any issue proposed to be considered at the special
meeting. The corporation shall give notice
Page 10
of the date, time and place of the meeting no fewer than 10 and no more than 60
days before the meeting. Notice of a special meeting must include a description
of the purposes for which the special meeting is called.
AMENDMENTS TO CHARTER
DELAWARE. Amendments to the certificate of incorporation require the affirmative
vote of the holders of a majority of the outstanding shares entitled to vote
thereon, except that if the certificate of incorporation requires the vote of a
greater number of proportion of the directors or of the holders of any class of
stock than is required by the DGCL with respect to any matter, the provision of
the certificate of incorporation may not be amended, altered or repealed by
Synthonics Delaware except by such greater vote.
UTAH. The board of directors may propose amendments to the articles of
incorporation for submission to the shareholders. For an amendment to be
adopted, (i) the board of directors must recommend the amendment to the
shareholders (unless the board determines that because of a conflict of interest
or other special circumstances it should not make a recommendation and
communicates the basis for its determination to the shareholders), and (ii)
unless the articles of incorporation, the bylaws (if authorized by the articles
of incorporation) or a resolution of the board of directors require a greater
number, the amendment must be approved by (a) a majority of the votes entitled
to be cast on the amendment by any voting group as to which the amendment would
create dissenters' rights, (b) a majority of the votes entitled to be cast on
the amendment by any voting group as to which the amendment would materially and
adversely affect the voting group's rights in shares (including preferential
rights, rights in redemption, preemptive rights, voting rights or rights in
certain reverse splits), and (c) a majority of the votes cast for all other
voting groups (voting separately, as applicable, with shares constituting a
quorum present for each voting group).
NOTICE, ADJOURNMENT AND PLACE OF STOCKHOLDERS' MEETINGS.
DELAWARE. There is no specific statutory requirement under Delaware law with
regard to advance notice of director nominations and shareholder proposals.
Absent a bylaw restriction, director nominations and shareholder proposals may
be made without advance notice at the annual meeting. However, federal
securities laws generally provide that shareholder proposals that the proponent
wishes to include in the Company's proxy materials must be received not less
than 120 days in advance of the date stated in the proxy statement released in
connection with the previous years annual meeting.
UTAH. The Utah law and Utah Charter Documents require that notice of
shareholders' meetings be given between 10 and 60 days before a meeting unless
the shareholders waive or reduce the notice period by unanimous consent in
writing.
Both Utah and Delaware law provide for adjournments of shareholders' meetings.
The Utah Charter Documents require notice of the adjournment if the adjournment
is for 30 days or more. Delaware law and the Delaware Charter Documents require
that if the adjournment is for more than 30 days or if a new record date is
fixed, notice must be given to the shareholders as for an original meeting.
Both the Delaware law and Utah law permit meetings of shareholders to be held at
such place as is designated by or in the manner provided in the Bylaws. If not
so designated, Delaware law requires that the meeting be held at the registered
office of the Delaware corporation, while Utah law provides for the principal
office of the corporation.
DIRECTORS
DELAWARE. The Delaware Certificate provides that the number of members of the
Delaware Board shall be not less than five nor more than nine, until changed by
a duly adopted amendment to the Delaware Certificate or to the Delaware Bylaws.
A majority of the number of directors then in office constitutes a quorum for
the transaction of business. In the absence of a quorum, a majority of the
directors present may adjourn any meeting from time to time until a quorum is
present.
Page 11
The Delaware Certificate provides that the Delaware Board shall be divided into
three classes of directors, each class to be as nearly equal in number of
directors as possible. Like the Utah Articles, the Delaware Certificate does not
permit cumulative voting in the election of directors. Accordingly, the holders
of a majority of the voting power of the outstanding shares of voting stock can
now elect all of the Company's directors. The classification of the Delaware
Board will have the effect of making it more difficult to change the composition
of the Delaware Board. At least two shareholder meetings, instead of one, will
be required to effect a change in the control of the Delaware Board. The Board
believes that a classified Board with staggered terms will help to assure the
continuity and stability of the Company's management and policies in the future,
since a majority of the directors at any time will have prior experience as
directors of the Company.
The directors of the Corporation shall be divided into three classes, designated
Class I, Class II and Class III. The term of the initial Class I directors shall
terminate on the date of the 2000 annual meeting of stockholders; the term of
the initial Class II directors shall terminate on the date of the 2001 annual
meeting of stockholders and the term of the initial Class III directors shall
terminate on the date of the 2002 annual meeting of stockholders. At each annual
meeting of stockholders beginning in 2000, successors to the class of directors
whose term expires at that annual meeting shall be elected for a three-year
term.
UTAH. The Utah Articles provide that the Board consists of not less than three
(3) directors with actual number being determined by resolutions adopted by the
Board or the holders of the Company's Common Stock. Currently, the Company has
eight (8) directors. The Board is divided into three classes, with each director
serving a three year term, staggered by class so that one class is elected each
year. A majority of the number of directors constitutes a quorum for the
transaction of business. The Utah Bylaws provide that a vacancy among the
directors may be filled for the unexpired term by the affirmative vote of a
majority of the remaining directors in office, though less than a quorum.
ELECTION AND REMOVAL OF DIRECTORS
DELAWARE. The Delaware Bylaws provide that directors shall hold office until the
next annual meeting of shareholders following their election. Any director, or
the entire Board, may be removed only for cause, and only by the vote of a
majority of the voting power of the Company. Vacancies on the board may be
filled by the directors.
UTAH. The Utah Bylaws provide that each director shall hold office until the
next annual meeting of shareholders and until his or her successor shall have
been elected and qualified. Under Utah law and the Utah Charter Documents,
directors may be removed by a majority vote of shareholders, with or without
cause. Vacancies on the board may be filled by the directors or the
shareholders.
INSPECTION OF BOOKS AND RECORDS
DELAWARE. Pursuant to Article IX of the Delaware Certificate, any stockholder of
record, in person or by attorney or other agent, shall, upon written demand
under oath stating the purpose thereof delivered to the Corporation's principal
place of business, have the right during the usual hours for business to inspect
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. A proper purpose shall mean a purpose reasonably related to such
person's interest as a Stockholder. In every instance where an attorney or other
agent shall be the person who seeks the right to inspection, the demand under
oath shall be accompanied by a power of attorney or such other writing that
authorizes the attorney or other agent to so act on behalf of the stockholder.
UTAH. Upon providing the corporation with a written demand at least five
business days before the date the shareholder wishes to make an inspection, a
shareholder and his agent and attorneys are entitled to inspect and copy,
during regular business hours, (i) the articles of incorporation, bylaws,
minutes of shareholders meetings for the previous three years, written
communications to shareholders for the previous three years, names and business
addresses of the officers and directors, the most recent annual report delivered
to the State of Utah, and financial statements for the previous three years and
(ii) if the shareholder is acting in good faith and for a proper purpose,
excerpts from the records of the board of directors and shareholders (including
minutes of meetings, written consents and waivers of notices), accounting
records and shareholder lists.
Page 12
TRANSACTIONS WITH OFFICERS AND DIRECTORS
DELAWARE. Under the DGCL, contracts or transactions in which a director or
officer is financially interested are not automatically void or voidable, if
approved by the shareholders or the directors under substantially the same
circumstances as in Utah. Approval by the shareholders, however, requires only a
simple majority. Board approval must be by a majority of the disinterested
directors, but interested directors may be counted for purposes of establishing
a quorum.
UTAH. Utah law provides that every director who is in any way, directly or
indirectly, interested in a proposed contract or transaction with the Company is
liable to account to the Company for any profit made as a consequence of the
Company entering into such transaction unless such person (a) disclosed his or
her interest at the meeting of directors where the proposed transaction was
first considered, and, after his or her disclosure, the transaction was approved
by the a majority of the disinterested directors; (b) disclosed his or her
interest prior to a meeting or written consent of shareholders and, after his or
her disclosure, the transaction was approved by the a majority of the
disinterested shares; or (c) can show that the contract or transaction was fair
and reasonable to the Company.
LIMITATION ON LIABILITY OF DIRECTORS; INDEMNIFICATION OF OFFICERS AND
DIRECTORS
DELAWARE. Delaware law permits a corporation to adopt provisions in its
certificate of incorporation eliminating or limiting the personal liability of a
director to the corporation or its shareholders for monetary damages for breach
of fiduciary duty as a director, with the following exceptions: (a) a breach of
the director's duty of loyalty; (b) payment of an unlawful stock dividend or
making an unlawful stock repurchase or redemption; (c) acts or omissions not in
good faith or involving intentional misconduct or a knowing violation of law; or
(d) in any transaction in which the director derived an improper personal
benefit. The Delaware Certificate eliminates the liability of directors of the
corporation for monetary damages to the fullest extent permissible under
Delaware law.
Delaware law permits a corporation to indemnify its current and former
directors, officers, employees and other agents under circumstances similar to
those for which the Utah Charter Documents provide. Article IX, paragraph (a) of
the Delaware Certificate requires Synthonics Delaware to indemnify all such
persons whom it has the power to indemnify to the fullest extent legally
permissible by the Delaware law. The Delaware Bylaws permit Synthonics Delaware
to advance expenses to a director or officer, provided that the director or
executive officer undertakes to repay amounts advanced if it is ultimately
determined that such person is not entitled to indemnification, and subject to
such other conditions as the Board may impose.
Indemnification rights under Delaware law are not exclusive. Accordingly,
Synthonics Delaware's Bylaws specifically permit Synthonics Delaware to
indemnify its directors, officers, employees and other agents pursuant to an
agreement, bylaw provision, shareholder vote or vote of disinterested directors
or otherwise, any or all of which may provide indemnification rights broader
than those currently available under the Utah or Delaware indemnification
statutes.
UTAH. The URBCA permits a corporation, if so provided in its articles of
incorporation, its bylaws or in a shareholder resolution, to eliminate or limit
the personal liability of a director to the corporation or its shareholders for
monetary damages due to any action taken or any failure to take action as a
director, except liability for: (a) improper financial benefits receive by a
director; (b) intentional inflictions of harm on the corporation or its
shareholders; (c) payment of dividends to shareholders making the corporation
insolvent; and (d) intentional violations of criminal law. The Utah Charter
Documents eliminate the liability of directors of the corporation for monetary
damages to the fullest extent permissible under URBCA.
Under the URBCA, a corporation may indemnify its current and former directors,
officers, employees and other agents made party to any proceeding because of
their relationship to the corporation against expenses, judgments, fines,
settlements and other amounts actually and reasonably incurred in connection
with such proceeding if that person acted in good faith and reasonably believed
his or her conduct to be in the corporation's best interests, and, in the case
of a criminal proceeding, had no reasonable cause to believe his or her conduct
was unlawful. The URBCA also permits a corporation to indemnify its directors,
officers, employees and other agents in connection with a
Page 13
proceeding by or in the right of the corporation to procure a judgment in its
favor by reason of the fact that the person is such an agent of the corporation,
against expenses actually and reasonably incurred by such person in connection
with the proceeding. The URBCA prohibits the indemnification of an agent in
connection with a proceeding by or in the right of the corporation in which the
director, officer, employee or agent was adjudged liable to the corporation, or
in connection with any other proceeding in which the agent is adjudged liable on
the basis that the agent derived an improper personal benefit. The Utah Charter
Documents permit indemnification of all such persons whom it has the power to
indemnify to the fullest extent legally permissible under the URBCA. The URBCA
permits a corporation to advance expenses incurred by a director, officer,
employee or agent who is a party to a proceeding in advance of final disposition
of the proceeding if that person provides (a) a written affirmation of his good
faith belief that he acted in good faith, in the corporation's best interests
and, in the case of a criminal proceeding, had no reasonable cause to believe
his conduct was unlawful; (b) a written undertaking by or on behalf of that
person to repay the advance if it is ultimately determined that such person's
conduct did not meet the statutory standard required for indemnification; and
(c) the corporation determines under the facts then known that indemnification
would not be precluded. The Utah Charter Documents permit such advances.
Both the Delaware Charter Documents and Utah Charter Documents provide that
Synthonics Delaware and the Company, respectively, may purchase insurance on
behalf of those persons entitled to be indemnified by the Company.
DISSENTERS' RIGHTS AS A RESULT OF THE REINCORPORATION MERGER
Shareholders have dissenters' rights in Utah as a result of the proposed
Reincorporation. Shareholders who oppose the Reincorporation will have the right
to receive payment for the value of their shares as set forth in sections
16-10(a)-1301 et. seq. of the URBCA. A copy of these sections is attached hereto
as Exhibit C to this Proxy Statement. The material requirements for a
shareholder to properly exercise his or her rights are summarized below.
However, these provisions are very technical in nature, and the following
summary is qualified in its entirety by the actual statutory provisions that
should be carefully reviewed by any shareholder wishing to assert such rights.
Under the URBCA, such dissenters' rights will be available only to those common
or preferred shareholders of the Company who (i) object to the proposed
Reincorporation in writing prior to or at the Special Meeting before the vote on
the matter is taken (a negative vote will not itself constitute such a written
objection); and (ii) do not vote any of their shares in favor of the proposed
Reincorporation at the Special Meeting.
Within ten days after the effective date of the Reincorporation, Synthonics
Delaware will send to each shareholder who has satisfied both of the foregoing
conditions a written notice in which Synthonics Delaware will notify such
shareholders of their right to demand payment for their shares and will supply a
form for dissenting shareholders to demand payment. Shareholders will have 30
days to make their payment demands or lose such rights. If required in the
notice sent by Synthonics Delaware, each dissenting shareholder must also
certify whether or not he or she acquired beneficial ownership of such shares
before or after the date of the first announcement to the news media of the
proposed transaction.
Upon receipt of each demand for payment, Synthonics Delaware will pay each
dissenting shareholder the amount that Synthonics Delaware estimates to be the
fair value of such shareholder's shares, plus interest from the date of the
completion of the Reincorporation to the date of payment. With respect to any
dissenting shareholder who does not certify that he or she acquired beneficial
ownership of the shares prior to the first public announcement of the
transaction, Synthonics Delaware may, instead of making payment, offer such
payment if the dissenter agrees to accept it in full satisfaction of his or her
demand. "Fair value" with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the Reincorporation, excluding
any appreciation or depreciation in anticipation of such events.
Any dissenter who does not wish to accept the payment or offer made by
Synthonics Delaware must notify Synthonics Delaware in writing of his or her own
estimate of the fair value of the shares within 30 days after the date
Synthonics Delaware makes or offers payment. If the dissenting shareholder and
Synthonics Delaware are unable to agree on the fair value of the shares, then
Synthonics Delaware will commence a proceeding with the Utah courts within 60
days after receiving the dissenter's notice of his or her own estimate of fair
value. If Synthonics Delaware does not commence such a proceeding within the
60-day period, it must pay each dissenter whose demand
Page 14
remains unresolved the amount demanded by such dissenter. If a proceeding is
commenced, the court will determine the fair value of the shares and may appoint
one or more appraisers to help determine such value.
All dissenting shareholders must be a party to the proceeding, and all such
shareholders will be entitled to judgment against Synthonics Delaware for the
amount of the fair value of their shares, to be paid on surrender of the
certificates representing such shares. The judgment will include an allowance
for interest (at a rate determined by the court) to the date of payment. The
costs of the court proceeding, including the fees and expenses of any
appraisers, will be assessed against Synthonics Delaware unless the court finds
that the dissenters acted arbitrarily, vexatiously or not in good faith in
demanding payment at a higher amount than that offered by Synthonics Delaware.
Both Synthonics Delaware and the dissenters must bear their own respective
legal fees and expenses, unless the court requires one party to pay such legal
fees and expenses because of the conduct of such party.
The loss or forfeiture of appraisal rights simply means the loss of the right to
receive a cash payment from Synthonics Delaware in exchange for shares. In such
event the shareholder would still hold the appropriate number of shares of
Synthonics Delaware.
THE FOREGOING IS ONLY A SUMMARY OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES.
SHAREHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISERS REGARDING THE SPECIFIC TAX
CONSEQUENCES TO THEM OF THE PROPOSAL TO REINCORPORATE IN DELAWARE INCLUDING THE
APPLICABILITY OF THE LAWS OF ANY STATE OR OTHER JURISDICTION.
IMPACT ON HOLDERS OF COMPANY PREFERRED STOCK
The Delaware Class A Preferred Stock will have substantially the same rights,
preferences and privileges as the Class A Preferred Stock. Shares of Delaware
Class A Preferred Stock will be convertible, on a one-for-one basis, into shares
of the Synthonics Delaware Common Stock. For a general comparison of the rights
of stockholders under Delaware and Utah law, see "Comparison of Shareholder
Rights under Utah and Delaware Corporate Law and Charter Documents," above.
INCORPORATION BY REFERENCE OF CERTAIN FINANCIAL INFORMATION
The following portions of the Company's Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1998 are incorporated herein by reference:
'Management's Discussion and Analysis of Financial Condition and Operational
Results' and 'Financial Statement and Supplementary Data.' The following
portions of the Company's Quarterly Report on Form 10-QSB for the period ended
September 30, 1999 are also incorporated herein by reference: 'Part I. Item 1:
Financial Statements' and 'Part I. Item 2: Management's Discussion and Analysis
of Financial Condition and Results of Operations.' Copies of these documents are
available without charge to any person, including any beneficial holder of the
Company's Common Stock to whom this Proxy Statement was delivered, on written or
oral request to Synthonics Technologies, Inc. 31324 Via Colinas, Suite 106,
Westlake Village, California 91362, Attention: Secretary (telephone number:
(818) 707-6000).
Any statement contained in a document all or a portion of which is incorporated
by reference herein shall be deemed to be modified or superseded for purposes of
this Proxy Statement to the extent that a statement contained herein or in any
subsequently filed document that also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed to constitute a part of this Proxy
Statement except as so modified or superseded.
VOTE REQUIRED
Under Utah law, the affirmative vote of a majority of the outstanding shares of
Common Stock is needed to approve the proposed Reincorporation.
Although the Board has recommended that the foregoing proposal be adopted,
shareholders should be aware that the continuing Directors may have a personal
interest in the Reincorporation because it broadens the scope of indemnification
available to Directors. The broader scope of indemnification available under
Delaware law could
Page 15
result in increased costs and expenses to the Company to the potential indirect
detriment of the shareholders. See "Comparison of Shareholder Rights under Utah
and Delaware Corporation Laws and Charter Documents."
AMENDMENT TO THE MERGER AGREEMENT; TERMINATION
The Merger Agreement may be terminated and the Reincorporation abandoned,
notwithstanding shareholder approval, by the Board of Directors of the Company
at any time before consummation of the Reincorporation if (i) shareholders
holding more than five percent (5%) of the issued and outstanding shares of the
Company's Common Stock dissent and seek appraisal rights; or (ii) the Board of
Directors of the Company determines that in its judgment the Reincorporation
does not appear to be in the best interests of the Company or its shareholders.
In the event the Merger Agreement is terminated or the shareholders fail to
approve the Reincorporation, the Company would remain as a Utah corporation.
RECOMMENDATION OF THE BOARD OF DIRECTORS
FOR THE REASONS STATED ABOVE, THE BOARD OF DIRECTORS OF THE COMPANY BELIEVES
THAT THE TRANSACTIONS CONTEMPLATED BY THE PROPOSED REINCORPORATION MERGER ARE
DESIRABLE AND IN THE BEST INTERESTS OF THE COMPANY'S SHAREHOLDERS AND
UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" SUCH PROPOSAL.
Page 16
PROPOSAL 2
1999 STOCK OPTION PLAN
GENERAL
On October 1, 1999, the Board approved the creation of the Synthonics
Technologies, Inc. 1999 Stock Option Plan (the "1999 Plan" or "the Plan"), the
provisions and terms of which are similar to the Synthonics Technologies, Inc.
1998 Stock Option Plan (the "1998 Plan") and which will enable the Company to
obtain and retain the services of the types of employees, consultants, officers
and Directors who will contribute to the Company's long range success and to
provide incentives which are linked directly to increases in share value which
will inure to the benefit of all shareholders of the Company. The Board believes
that the ability to grant stock-based awards is important to the future success
of the Company. The grant of stock options and other stock-based awards can
motivate high levels of performance and provide an effective means of
recognizing employee contributions to the success of the Company. The creation
of a new stock option plan will increase the number of shares available for
awards and will enable the Company to continue realizing the benefits of
granting stock-based compensation.
At November 17, 1999 the closing sale price of the Common Stock was $0.08
per share.
SUMMARY OF 1999 PLAN TERMS
The following summary of the 1999 Plan is qualified in its entirety by the
specific language of the 1999 Plan, a copy of which is attached as "Exhibit D."
PURPOSE. The purpose of the 1999 Plan is to advance the interests of the Company
and its shareholders by strengthening the Company's ability to obtain and retain
the services of the types of employees, consultants, officers and directors who
will contribute to the Company's long term success and to provide incentives
which are linked directly to increases in stock value will inure to the benefit
of all shareholders of the Company.
ADMINISTRATION. The 1999 Plan may be administered by the Board of Directors,
or a committee of two or more directors appointed by the Board of Directors
whose members serve at the pleasure of the Board. The party administering
the 1999 Plan is referred to as the "Administrator."
Subject to the provisions of the 1999 Plan, the Administrator has full and final
authority (i) to construe and interpret the Plan and apply its provisions; (ii)
to promulgate, amend and rescind rules and regulations relating to the
administration of the Plan; (iii) to authorize any person to execute, on behalf
of the Company, any instrument required to carry out the purposes of the Plan;
(iv) to determine when Rights are to be granted under the Plan; (v) from time to
time to select, subject to the limitations set forth in this Plan, those
Eligible Persons to whom Rights shall be granted; (vi) to determine the number
of shares of Stock to be made subject to each Right; (vii) to determine whether
each Stock Option is to be an Incentive Stock Option or a Non-Statutory Option;
(viii) to prescribe the terms and conditions of each Stock Option and Purchase
Right, including, without limitation, the purchase price and medium of payment,
vesting provisions and repurchase provisions, and to specify the provisions of
the Stock Option Agreement or Stock Purchase Agreement relating to such grant or
sale; (ix) to amend any outstanding Rights for the purpose of modifying the time
or manner of vesting, the purchase price or exercise price, as the case may be,
subject to applicable legal restrictions and to the consent of the other party
to such agreement; (x) to determine the duration and purpose of leaves of
absences which may be granted to a Participant without constituting termination
of their employment for purposes of the Plan; (xi) to make decisions with
respect to outstanding Stock Options that may become necessary upon a change in
corporate control or an event that triggers anti-dilution adjustments; and (xii)
to make any and all other determinations which it determines to be necessary or
advisable for administration of the Plan.
STOCK SUBJECT TO THE PLAN. Subject to adjustments for a change in the number of
outstanding share of Stock through the declaration of stock dividends, stock
splits, or through a recapitalization resulting in Stock splits, or combinations
or exchanges of the outstanding shares, the total number of shares of Stock
reserved and available for issuance under the 1999 Plan shall be 10,000,000.
Shares reserved for the Plan may consist, in whole or in part, of authorized and
unissued shares or treasury shares.
Page 17
ELIGIBILITY. Any person who is a director, officer, employee or consultant of
the Company, or any of its subsidiaries (a "Participant"), is eligible to be
considered for the grant of awards under the 1999 Plan. As of September 30,
1999, approximately 10 officers, directors, employees and independent
contractors of the Company were eligible to receive awards under the 1999 Plan.
TYPES OF AWARDS. Awards authorized under the 1999 Plan may consist of any type
of arrangement with a Participant that, by its terms, involves or might involve
or be made with reference to the issuance of shares of the Company's Common
Stock, or a derivative security with an exercise or conversion price related to
the Common Stock or with a value derived from the value of the Common Stock.
Awards are not restricted to any specified form or structure and may include
sales, bonuses and other transfers of stock, restricted stock, stock options,
reload stock options, stock purchase warrants, other rights to acquire stock or
securities convertible into or redeemable for stock, stock appreciation rights,
phantom stock, dividend equivalents, performance units or performance shares, or
any other type of award which the Administrator shall determine is consistent
with the objectives and limitations of the 1999 Plan. An award may consist of
one such security or benefit, or two or more of them in tandem or in the
alternative.
CONSIDERATION. The Common Stock or other property underlying an award may be
issued for any lawful consideration as determined by the Administrator,
including, without limitation, a cash payment, services rendered, or the
cancellation of indebtedness. An award may provide for a purchase price of the
Common Stock or other property at a value less than the fair market value of the
Common Stock or other property on the date of grant. In addition, an award may
permit the recipient to pay the purchase price of the Common Stock or other
property or to pay such recipient's tax withholding obligation with respect to
such issuance, in whole or in part, by delivering previously owned shares of
capital stock of the Company or other property, or by reducing the number of
shares of Common Stock or the amount of other property otherwise issuable
pursuant to such award.
TERMINATION OF AWARDS. All awards granted under the 1999 Plan expire ten years
from the date of grant, or such shorter period as is determined by the
Administrator. No option is exercisable by any person after such expiration. If
an award expires, terminates or is canceled, the shares of Common Stock not
purchased thereunder shall again be available for issuance under the 1999 Plan.
AMENDMENT AND TERMINATION OF THE 1999 PLAN. The Administrator may amend the 1999
Plan at any time, may suspend it from time to time or may terminate it without
approval of the stockholders; provided, however, that stockholder approval is
required for any amendment which materially increases the number of shares for
which awards may be granted, materially modifies the requirements of
eligibility, or materially increases the benefits which may accrue to recipients
of awards under the 1999 Plan. However, no such action by the Board or
stockholders may unilaterally alter or impair any award previously granted under
the 1999 Plan without the consent of the recipient of the award.
FEDERAL INCOME TAX CONSEQUENCES FOR STOCK OPTIONS
The following is a general discussion of the principal United States federal
income tax consequences of both "incentive stock options" within the meaning of
Section 422 of the Code ("Incentive Stock Options") and non-statutory stock
options ("Non-statutory Stock Options") based upon the United States Internal
Revenue Code of 1986, as amended, and the Treasury Regulations promulgated
thereunder, all of which are subject to modification at any time. The 1999 Plan
does not constitute a qualified retirement plan under Section 401(a) of the Code
(which generally covers trusts forming part of a stock bonus, pension or
profit-sharing plan funded by employer and/or employee contributions which are
designed to provide retirement benefits to participants under certain
circumstances) and is not subject to the Employee Retirement Income Security Act
of 1974 (the pension reform law which regulates most types of privately funded
pension, profit sharing and other employee benefit plans).
CONSEQUENCES TO EMPLOYEES: INCENTIVE STOCK OPTIONS. No income is recognized for
federal income tax purposes by an optionee at the time an Incentive Stock Option
is granted, and, except as discussed below, no income is recognized by an
optionee upon his or her exercise of an Incentive Stock Option. If the optionee
makes no disposition of the Common Stock received upon exercise within two years
from the date such option was granted or one year from the date such option is
exercised (the "ISO Holding Period Requirements"), the optionee will
Page 18
recognize long-term capital gain or loss when he or she disposes of his or her
Common Stock. Such gain or loss generally will be measured by the difference
between the exercise price of the option and the amount received for the Common
Stock at the time of disposition.
If the optionee disposes of the Common Stock acquired upon exercise of an
Incentive Stock Option without satisfying the ISO Holding Period Requirements,
any amount realized from such "disqualifying disposition" will be taxed at
ordinary income tax rates in the year of disposition to the extent that (i) the
lesser of (a) the fair market value of the shares of Common Stock on the date
the Incentive Stock Option was exercised or (b) the fair market value of such
shares at the time of such disposition exceeds (ii) the Incentive Stock Option
exercise price. Any amount realized upon disposition in excess of the fair
market value of the shares of Common Stock on the date of exercise will be
treated as long-term or short-term capital gain depending upon the length of
time the shares have been held.
The use of stock acquired through exercise of an Incentive Stock Option to
exercise an Incentive Stock Option will constitute a disqualifying disposition
if the ISO Holding Period Requirements have not been satisfied.
For alternative minimum tax purposes, the excess of the fair market value of the
shares of Common Stock as of the date of exercise over the exercise price of the
Incentive Stock Option is included in computing that year's alternative minimum
taxable income. However, if the shares of Common Stock are disposed of in the
same year, the maximum alternative minimum taxable income with respect to those
shares is the gain on disposition of the shares. There is no alternative minimum
taxable income from a disqualifying disposition in subsequent years.
CONSEQUENCES TO EMPLOYEES: NON-STATUTORY STOCK OPTIONS. No income generally is
recognized by a holder of Non-statutory Stock Options at the time Non-statutory
Stock Options are granted under the 1999 Plan. In general, at the time shares of
Common Stock are issued to a holder pursuant to the exercise of Non-statutory
Stock Options, the holder will recognize ordinary income equal to the excess of
the fair market value of the shares on the date of exercise over the exercise
price.
A holder will recognize gain or loss on the subsequent sale of Common Stock
acquired upon exercise of Non-statutory Stock Options in an amount equal to the
difference between the sales price and the tax basis of the Common Stock, which
will include the exercise price paid plus the amount included in the holder's
income by reason of the exercise of the Non-statutory Stock Options. Provided
the shares of Common Stock are held as a capital asset, any gain or loss
resulting from a subsequent sale will be short-term or long-term capital gain or
loss depending upon the length of time the shares have been held.
CONSEQUENCES TO THE COMPANY: INCENTIVE STOCK OPTIONS. The Company will not be
allowed a deduction for federal income tax purposes at the time of the grant or
exercise of an Incentive Stock Option. There are also no federal income tax
consequences to the Company as a result of the disposition of Common Stock
acquired upon exercise of an Incentive Stock Option if the disposition is not a
"disqualifying disposition." At the time of a disqualifying disposition by an
optionee, the Company will be entitled to a deduction for the amount received by
the optionee to the extent that such amount is taxable to the optionee at
ordinary income tax rates.
CONSEQUENCES TO THE COMPANY: NON-STATUTORY STOCK OPTIONS. Generally, the Company
will be entitled to a deduction for federal income tax purposes in the Company's
taxable year in which the optionee's taxable year of income inclusion ends and
in the same amount as the optionee is considered to have realized ordinary
income in connection with the exercise of Non-statutory Stock Options.
Page 19
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth, as to the Chief Executive Officer and as
to each of the other four most highly compensated officers whose compensation
exceeded $100,000 during the last fiscal year (the "Named Executive Officers"),
information concerning all compensation paid for services to the Company in all
capacities during the last three fiscal years.
SUMMARY COMPENSATION TABLE
LONG TERM
ANNUAL COMPENSATION COMPENSATION
----------------------- ------------
OTHER NUMBER
FISCAL YEAR ANNUAL SECURITIES
NAME AND PRINCIPAL(1) ENDED SALARY COMPENSATION UNDERLYING
- --------------------- ----------- ------ ------------ ----------
F. Michael Budd............. December 31, 1998 $ -- 720,465
Chief Executive December 31, 1997 $ 90,000 -- 378,860
December 31, 1996 $ -0- -- 750,000
Charles S. Palm............. December 31, 1998 $ -- 385,142
Secretary and Chief December 31, 1997 $ 150,000 -- 189,430
Technical Officer December 31, 1996 $ 150,000 -- 1,162,260
Joseph R. Maher............. December 31, 1998 $ 101,500 -- 78,195
Vice President of December 31, 1997 $ 36,000 -- 280,000
Marketing and Sales December 31, 1996 $ -0- -- --
<FN>
(1)For a description of employment agreements between certain executive
officers and the Company, see "Employment Agreements with Executive
Officers" below.
</FN>
Page 20
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information regarding the grant of
stock options made during the fiscal year ended December 31, 1998 to the Named
Executive Officers.
OPTION GRANTS IN LAST FISCAL YEAR
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO
OPTION EMPLOYEES IN EXERCISE OR EXPIRATION
NAME GRANTED FISCAL YEAR BASE PRICE DATE
---- ---------- -------------- ----------- ----------
F. Michael Budd................. 720,465 60.05% $ 0.53 12/31/03
Charles S. Palm................. 385,142 31.24% $ 0.53 12/31/03
Joseph R. Maher................. 78,195 6.34% $ 0.53 12/31/03
STOCK OPTIONS HELD AT FISCAL YEAR END
The following table sets forth, for those Named Executive Officers who held
stock options at fiscal year end, certain information regarding the number of
shares of Common Stock underlying stock options held at fiscal year end and the
value of options held at fiscal year end based upon the last reported sales
price of the Common Stock on the OTC Bulletin Board October 31, 1999 ($0.09 per
share). No stock options were exercised by any Named Executive Officer during
fiscal 1998.
AGGREGATED FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1998 DECEMBER 31, 1998
------------------------- --------------------------
NAME EXERCISED UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------- ------------- ----------- -------------
F. Michael Budd............ 1,399,325 150,000 -0- -0-
Charles S. Palm............ 358,195 -0- -0- -0-
Joseph R. Maher............ 3,401,037 150,000 -0- -0-
Page 21
EMPLOYMENT AGREEMENTS WITH EXECUTIVE OFFICERS
F. Michael Budd and Charles S. Palm both have employment contracts with
the Company. Both are effective until December 31, 2000. Each contract contains
an Incentive Stock Option for 750,000 shares of common stock. The option price
per share is $.50 and the 750,000 shares vest over a four year period with all
shares being vested by July 1, 2000.
Thomas K. Carpenter received compensation for Business Development
consulting services totaling $10,000 during the fiscal year ended December 31,
1998.
REQUIRED VOTE
The approval of the 1999 Plan requires the affirmative vote of a majority of the
votes entitled to be cast by the holders of shares of the Company's Common Stock
present or represented and entitled to vote on this matter at the Special
Meeting. An abstention will be counted toward the tabulation of votes cast and
will have the same effect as a vote against the proposal. A broker non-vote,
however, will not be treated as a vote cast for or against approval of the
proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR"
THE APPROVAL OF THE 1999 STOCK OPTION PLAN.
Page 22
OTHER MATTERS
The Company does not know of any other matters that are to be presented for
action at the Meeting. If any other matters are properly brought before the
Meeting, the persons named in the accompanying proxy will vote the shares
represented by the proxy in accordance with their judgment on those matters.
Westlake Village, California
November 19, 1999
Page 23
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (hereinafter called the "Merger Agreement") is
made as of October 26, 1999, by and between SYNTHONICS TECHNOLOGIES, INC., a
Utah corporation ("Synthonics Utah"), and SYNTHONICS TECHNOLOGY MERGERCORP., a
Delaware corporation ("Synthonics Delaware"). Synthonics Utah and Synthonics
Delaware are sometimes referred to as the "Constituent Corporations."
The authorized capital stock of Synthonics Utah consists of one hundred million
(100,000,000) shares of Common Stock, par value $0.01 per share, twenty million
five hundred fifty thousand (20,550,000) shares of Preferred Stock of which five
hundred fifty thousand are designated Series A Preferred Stock par value $10.00
per share and of which twenty million (20,000,000) are designated Series B
Preferred Stock. The authorized capital stock of Synthonics Delaware, upon
effectuation of the transactions set forth in this Merger Agreement, will
consist of 100,000,000 shares of Common Stock par value $0.01 and 20,550,000
shares of Preferred Stock.
The directors of the Constituent Corporations deem it advisable and to the
advantage of the Constituent Corporations that Synthonics Utah merge into
Synthonics Delaware upon the terms and conditions herein provided.
NOW, THEREFORE, the parties do hereby adopt the plan of reorganization
encompassed by this Merger Agreement and do hereby agree that Synthonics Utah
shall merge into Synthonics Delaware on the following terms, conditions and
other provisions:
I. TERMS AND CONDITIONS.
1.1 MERGER. Synthonics Utah shall be merged with and into Synthonics
Delaware (the "Merger"), and Synthonics Delaware shall be the surviving
corporation (the "Surviving Corporation") effective upon the date when this
Merger Agreement is filed with the Secretary of State of Delaware (the
"Effective Date").
1.2 SUCCESSION. On the Effective Date, Synthonics Delaware shall continue
its corporate existence under the laws of the State of Delaware, and the
separate existence and corporate organization of Synthonics Utah, except insofar
as it may be continued by operation of law, shall be terminated and cease.
1.3 TRANSFER OF ASSETS AND LIABILITIES. On the Effective Date, the rights,
privileges, powers and franchises, both of a public as well as of a private
nature, of each of the Constituent Corporations shall be vested in and possessed
by the Surviving Corporation, subject to all of the disabilities, duties and
restrictions of or upon each of the Constituent Corporations; and all and
singular rights, privileges, powers and franchises of each of the Constituent
Corporations, and all property, real, personal and mixed, of each of the
Constituent Corporations, and all debts due to each of the Constituent
Corporations on whatever account, and all things in action or belonging to each
of the Constituent Corporations shall be transferred to and vested in the
Surviving Corporation; and all property, rights, privileges, powers and
franchises, and all and every other interest, shall be thereafter the property
of the Surviving Corporation as they were of the Constituent Corporations, and
the title to any real estate vested by deed or otherwise in either of the
Constituent Corporations shall not revert or be in any way impaired by reason of
the Merger; provided, however, that the liabilities of the Constituent
Corporations and of their shareholders, directors and officers shall not be
affected and all rights of creditors and all liens upon any property of either
of the Constituent Corporations shall be preserved unimpaired, and any claim
existing or action or proceeding pending by or against either of the Constituent
Corporations may be prosecuted to judgment as if the Merger had not taken place
except as they may be modified with the consent of such creditors and all debts,
liabilities and duties of or upon each of the Constituent Corporations shall
attach to the Surviving Corporation, and may be enforced against it to the same
extent as if such debts, liabilities and duties had been incurred or contracted
by it.
1.4 COMMON STOCK OF SYNTHONICS UTAH AND SYNTHONICS DELAWARE. On the
Effective Date, by virtue of the Merger and without any further action on the
part of the Constituent Corporations or their shareholders, (i) each share of
Common Stock of Synthonics Utah issued and outstanding immediately prior thereto
shall be
Page A-1
converted into shares of fully paid and nonassessable shares of the Common Stock
of Synthonics Delaware at a ratio of 1 to 1 (ii) each share of Series A
Preferred Stock of Synthonics Utah issued and outstanding immediately prior to
thereto shall be converted into shares of the Common Stock of Synthonics
Delaware at a ratio of 1 to 1, and (iii) each share of Common Stock of
Synthonics Delaware issued and outstanding immediately prior thereto shall be
cancelled and returned to the status of authorized but unissued shares.
1.5 STOCK CERTIFICATES. On and after the Effective Date, all of the
outstanding certificates which prior to that time represented shares of the
Common Stock or of the Preferred Stock of Synthonics Utah shall be deemed for
all purposes to evidence ownership of and to represent the shares of Synthonics
Delaware into which the shares of Synthonics Utah represented by such
certificates have been converted as herein provided and shall be so registered
on the books and records of the Surviving Corporation or its transfer agents.
The registered owner of any such outstanding stock certificate shall, until such
certificate shall have been surrendered for transfer or conversion or otherwise
accounted for to the Surviving Corporation or its transfer agent, have and be
entitled to exercise any voting and other rights with respect to and to receive
any dividend and other distributions upon the shares of Synthonics Delaware
evidenced by such outstanding certificate as above provided.
1.6 OPTIONS. On the Effective Date, the Surviving Corporation will assume
and continue Synthonics Utah's 1998 Stock Award Plan, and the outstanding and
unexercised portions of all options to purchase Common Stock of Synthonics Utah,
including without limitation all options outstanding under such stock plan and
any other outstanding options, shall be converted into options of Synthonics
Delaware, such that an option for shares of Synthonics Utah shall be converted
into an option for shares of Synthonics Delaware at a ratio of 1 to 1. No other
changes in the terms and conditions of such options will occur. Effective on the
Effective Date, Synthonics Delaware hereby assumes the outstanding and
unexercised portions of such options and the obligations of Synthonics Utah with
respect thereto.
II. CHARTER DOCUMENTS, DIRECTORS AND OFFICERS.
2.1 CERTIFICATE OF INCORPORATION AND BYLAWS. The Certificate of
Incorporation and Bylaws of Synthonics Delaware in effect on the Effective Date
shall continue to be the Certificate of Incorporation and Bylaws of the
Surviving Corporation.
2.2 DIRECTORS. The directors of Synthonics Utah immediately preceding the
Effective Date shall become the directors of the Surviving Corporation on and
after the Effective Date to serve until the expiration of their terms and until
their successors are elected and qualified.
2.3 OFFICERS. The officers of Synthonics Utah immediately preceding the
Effective Date shall become the officers of the Surviving Corporation on and
after the Effective Date to serve at the pleasure of its Board of Directors.
III. MISCELLANEOUS.
3.1 FURTHER ASSURANCES. From time to time, and when required by the
Surviving Corporation or by its successors and assigns, there shall be executed
and delivered on behalf of Synthonics Utah such deeds and other instruments, and
there shall be taken or caused to be taken by it such further and other action,
as shall be appropriate or necessary in order to vest or perfect in or to
conform of record or otherwise, in the Surviving Corporation the title to and
possession of all the property, interests, assets, rights, privileges,
immunities, powers, franchises and authority of Synthonics Utah and otherwise to
carry out the purposes of this Merger Agreement, and the officers and directors
of the Surviving Corporation are fully authorized in the name and on behalf of
Synthonics Utah or otherwise to take any and all such action and to execute and
deliver any and all such deeds and other instruments.
3.2 AMENDMENT. At any time before or after approval by the shareholders of
Synthonics Utah, this Merger Agreement may be amended in any manner (except
that, after the approval of the Merger Agreement by the shareholders of
Synthonics Utah, the principal terms may not be amended without the further
approval of the shareholders of Synthonics Utah) as may be determined in the
judgment of the respective Board of Directors of
Page A-2
Synthonics Delaware and Synthonics Utah to be necessary, desirable, or expedient
in order to clarify the intention of the parties hereto or to effect or
facilitate the purpose and intent of this Merger Agreement.
3.3 CONDITIONS TO MERGER. The obligations of the Constituent Corporations
to effect the transactions contemplated hereby is subject to satisfaction of the
following conditions (any or all of which may be waived by either of the
Constituent Corporations in its sole discretion to the extent permitted by law):
the Merger shall have been approved by the shareholders of Synthonics Utah
in accordance with applicable provisions of the Business Corporations Act of the
State of Utah; and
Synthonics Utah, as sole stockholder of Synthonics Delaware, shall have
approved the Merger in accordance with the General Corporation Law of the State
of Delaware; and
any and all consents, permits, authorizations, approvals, and orders
deemed in the sole discretion of Synthonics Utah to be material to consummation
of the Merger shall have been obtained.
3.4 ABANDONMENT OR DEFERRAL. At any time before the Effective Date, this
Merger Agreement may be terminated and the Merger may be abandoned by the Board
of Directors of either Synthonics Utah or Synthonics Delaware or both,
notwithstanding the approval of this Merger Agreement by the shareholders of
Synthonics Utah or Synthonics Delaware, or the consummation of the Merger may be
deferred for a reasonable period of time if, in the opinion of the Boards of
Directors of Synthonics Utah and Synthonics Delaware, such action would be in
the best interest of such corporations. In the event of termination of this
Merger Agreement, this Merger Agreement shall become void and of no effect and
there shall be no liability on the part of either Constituent Corporation or its
Board of Directors or shareholders with respect thereto, except that Synthonics
Utah shall pay all expenses incurred in connection with the Merger or in respect
of this Merger Agreement or relating thereto.
3.5 COUNTERPARTS. In order to facilitate the filing and recording of this
Merger Agreement, the same may be executed in any number of counterparts,
each of which shall be deemed to be an original.
Page A-3
IN WITNESS WHEREOF, this Merger Agreement, having first been duly approved by
the Board of Directors of Synthonics Utah and Synthonics Delaware, is hereby
executed on behalf of each said corporation and attested by their respective
officers thereunto duly authorized.
SYNTHONICS TECHNOLOGIES, INC.
A Utah corporation
By /S/ F. MICHAEL BUDD
---------------------------------
Name: F. Michael Budd
Title: Chief Executive Officer
ATTEST:
/S/ CHARLES S. PALM
- -------------------------------------
Name: Charles S. Palm
Title: Secretary
SYNTHONICS TECHNOLOGIES MERGER CORP.
A Delaware corporation
By /S/ F. MICHAEL BUDD
---------------------------------
Name: F. Michael Budd
Title: Chief Executive Officer
ATTEST:
/S/ CHARLES S. PALM
- -------------------------------------
Name: Charles S. Palm
Title: Secretary
Page A-4
EXHIBIT B
CERTIFICATE OF INCORPORATION
OF
SYNTHONICS TECHNOLOGIES MERGERCORP.
FIRST: The name of this corporation is SYNTHONICS
TECHNOLOGIES MERGERCORP (the "Corporation").
SECOND: The address of the registered office of the Corporation in
the State of Delaware is c/o National Registered Agents, Inc., 9 East Loockerman
Street, City of Dover, County of Kent, Delaware 19901. The name of its
registered agent at such address is National Registered Agents, Inc.
THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which a corporation may now or hereafter be
organized under the General Corporation Law of the State of Delaware as set
forth in Title 8 to the Delaware Code (the "GCL").
FOURTH: (a) The total number of shares that may be issued by the
Corporation and that the Corporation will be authorized to have is One Hundred
Twenty Million Five Hundred Fifty Thousand (120,550,000) of the par value per
share hereinafter set forth. A description of the classes of shares and a
statement of the number of shares in each class and the relative rights, voting
power, and preferences granted to the and restrictions imposed upon the shares
of each class are as follows:
(b) COMMON STOCK. The total number of shares of
Common Stock this Corporation shall have the authority to issue is One Hundred
Million (100,000,000). The Common Stock shall have a stated par value of $0.01
per share. Each share of Common Stock shall have, for all purposes one (1) vote
per share. Subject to the cumulative dividend preference to holders of Class A
and Class B Preferred Shares as provided in herein, the shares of Common Stock
are entitled to participate in any dividends available therefor in equal amounts
per share on all outstanding Preferred Shares and Common Stock. Subject to the
provisions for the payment of the liquidation preference to the holders of Class
A and Class B Preferred Shares as provided herein, the Common Stock is entitled
to participate in all distributions to shareholders made upon liquidation,
dissolution, or winding up of the corporation in equal amounts per share as all
outstanding Class A and Class B Preferred Shares and Common Stock. The holders
of Common Stock issued and outstanding have and possess the right to receive
notice of shareholders' meetings and to vote upon the election of directors or
upon any other matter as to which approval of the outstanding shares of Common
Stock or approval of the common shareholders is required or requested.
Shareholders will not have a right to cumulate their votes for the election of
directors.
(c) CLASS A PREFERRED SHARES. The total number of shares
of Class A Preferred Shares this Corporation is authorized to issue is Five
Hundred fifty Thousand (550,000), with a stated par value of $10.00 per share.
The designations, powers, preferences, rights and restrictions granted or
imposed upon the Class A Preferred Shares and holders thereof are as follows:
(i) DIVIDEND PREFERENCE. The Class A Preferred
Shareholders are entitled to receive dividends on a
cumulative basis at the rate of twelve percent (12%)
of its stated par value per annum (the "Dividend
Preference"), payable on a quarterly basis on the
fifteenth (15th) day of the next month following the
end of each fiscal quarter. Such dividends shall
accrue from the date of issuance whether or not
earned. Dividends on the Class A Preferred Shares
shall be cumulative so that if dividends required to
be paid on said shares are not paid or set apart for
payment by the Board of Directors on or before
fifteenth day of the month following the end of each
fiscal quarter, in which the same are due, the rights
thereof shall cumulate and remain due and payable by
the Corporation. No dividends or other distributions
may be made to the Common Stock during any
Page B-1
fiscal year of the Corporation until dividends on the
Preferred Shares in the amount of the Dividend
Preference have been paid or set apart for payment.
(ii) LIQUIDATION PREFERENCE.
(A) In the event of a voluntary, or involuntary
liquidation, dissolution or winding up of the Corporation, the
holders of Class A Preferred Shares shall be entitled to
receive out of the assets of the Corporation, whether such
assets are capital or surplus of any nature, an amount equal
to the stated par value less the aggregate amount of all prior
distributions to its Preferred Shareholders made to holders of
all classes of Preferred Shares, plus any accrued previously
declared but unpaid dividends (the amount so determined being
hereinafter referred to as the "Liquidation Preference"). No
distribution shall be made to the holders of the Common Shares
upon liquidation, dissolution, or winding up until after the
full amount of the Liquidation Preference has been distributed
or provided to the holders of the Preferred Shares.
(B) If, upon such liquidation, dissolution or winding up
the assets thus distributed among the Preferred Shareholders
shall be insufficient to permit payment to such shareholders
of the full amount of the Liquidation Preference, the entire
assets of the Corporation shall be distributed ratably among
the holders of all classes of Preferred Shares.
(C) In the event of any voluntary, or involuntary
liquidation, dissolution or winding up of the Corporation,
when the Corporation has completed distribution of the full
Liquidating Preference to the holders of the Class A Preferred
Shares, the Class A Preferred Shares shall be considered to
have been redeemed, and thereafter, the remaining assets of
the Corporation shall be paid in equal amounts on all
outstanding shares of Common Stock.
(D) A consolidation or merger of the Corporation with or
into any other corporation or corporations, or a sale of all
or substantially all of the assets of the Corporation shall
not be deemed a liquidation, dissolution or winding up within
the meaning of this clause (ii).
(iii) REDEMPTION RIGHTS. The Corporation, at the option of the
Board of Directors, may at any time redeem after
December 31, 1998, all of the outstanding Class A
Preferred Shares by paying, in cash, a sum equal to the
$10.50 per share for each Class A Preferred Share so
redeemed, hereinafter referred to as the "redemption
price" by giving to each Class A Preferred Shareholder
of record at his or her last known address, as shown on
the records of the Corporation at least thirty (30) days
prior notice in writing, by first-class mail, postage
prepaid stating the date and plan of redemption,
hereinafter called he "redemption notice." On or after
the date fixed for redemption, each holder of shares
called for redemption shall surrender his or her
certificate(s) for such shares to the Corporation at the
place designated in the redemption notice and shall
thereupon be entitled to receive payment of the
redemption price. If the redemption notice is duly
given, and if sufficient funds are available therefore
on the date fixed for redemption, then, whether or not
the certificates evidencing the shares to be redeemed
are surrendered, all rights with respect to such shares
shall terminate on the date fixed for redemption, except
the right of the holders to receive the redemption
price, without interest, on surrender of their
certificates therefor. Shares redeemed by the
Corporation shall be restored to the status of
authorized but unissued shares of the Corporation.
Page B-2
(iv) CONVERSION RIGHTS. At any time up to and including
two (2) days before the date fixed for redemption of
redeemable shares in a notice of redemption (as
provided above), holders of the Class A Preferred
Shares being redeemed who endorse the share
certificates and deliver them together with a written
notice of their intent to convert to the corporation
at its principal office, shall be entitled to convert
and receive five (5) shares of Common Stock for each
share being converted at the rate of $2.00 per share
of Common Stock being converted into. Such
redemption is subject to the following adjustments,
terms, and conditions:
(A) If the number of outstanding shares of common Stock
has been increased or decreased since the initial issuance of
the Class A Preferred Shares (or series having conversion
rights (by reason of any split, stock dividend, merger,
consolidation or other capital change or reorganization
affecting the number of outstanding shares of Common Stock),
the number of shares of common Stock to be issued on
conversion to the holders or Class A Preferred Shares shall
equitably be adjusted by appropriate amendment of this
article. The purpose of such adjustment is to preserve fairly
and equitably (as far as reasonably possible) the original
conversion rights of the Class A Preferred shares being
converted. No redemption notice pursuant to this article shall
be given until an amendment to the articles required to effect
this adjustment has been made.
(B) Shares converted under this article shall not be
reissued. The corporation shall at all times reserve and keep
available a sufficient number of authorized but unissued
common shares, and shall obtain and keep in effect any
required permits to enable it to issue and deliver all common
shares required to implement the conversion rights granted
herein.
(C) No fractional shares shall be issued upon
conversion, but the corporation shall pay cash for any
fractional shares of Common Stock to which shareholders may be
entitled at the fair value of such shares at the time of
conversion. The board of directors shall determine such fair
value.
(v) DEFAULT CONVERSION RIGHTS. If the Corporation is in
default in the payment of any dividend to be paid to
the holders of the Class A Preferred Shares, at any
time up to and including two (2) days before the date
fixed for redemption of redeemable shares in a notice
of redemption (as provided above), who endorse the
share certificates and deliver them together with a
written notice of their intent to convert to the
corporation at its principal office, shall be
entitled to convert and receive seven (7) shares of
Common Stock for each share being converted at the
rate of $1.43 per share of Common Stock being
converted into. Such conversion and redemption is
subject to the adjustments, terms and conditions set
forth in Article Fourth paragraph (c)(iv).
(vi) VOTING RIGHTS. The Class A Preferred Shares shall be
non-voting and the holders of Class A Preferred Shares
shall not be entitled to vote upon the election of
directors or upon any other matters.
(d) ISSUANCE AND TERMS OF CLASS B PREFERRED
Shares. The total number of shares of Class B Preferred Shares this Corporation
is authorized to issue is Twenty Million (20,000,000), with a stated par value
of $0.01. The Board of Directors is hereby authorized from time to time, without
shareholder action, to provide for the issuance of Class B Preferred Shares in
one or more series not exceeding in the aggregate the number of Class B
Preferred Shares authorized by this Certificate of Incorporation, as amended
from time to time; and to determine with respect to each such series the voting
powers, if any (which voting powers, if granted, may be full or limited),
designations, preferences, and relative, participating, option, or other special
rights, and the qualifications, limitations, or restrictions relating thereto,
including without limiting the generality, of the foregoing, the voting rights
relating to Class B Preferred Shares of any series (which may be one or more
votes per share or a fraction of a vote per share, which may vary, over time,
and which may be applicable generally or only upon the happening and continuance
of stated events or conditions), the rate of dividend to which holders of
Class B
Page B-3
Preferred Shares of any series may be entitled (which may be cumulative or
non-cumulative), the rights of holders of Class B Preferred Shares of any series
in the event of liquidation, dissolution, or winding up of the affairs of the
Corporation, the rights, if any, of holders of Class B Preferred Shares of any
series to convert or exchange such Class B Preferred Shares of such series for
shares of any other class or series of capital stock or for any other
securities, property., or assets of the Corporation or any subsidiary (including
the determination of the price or prices or the rate or rates applicable to such
rights to convert or exchange and the adjustment thereof, the time or times
during which the right to convert or exchange shall be applicable, and the time
or times during which a particular price or rate shall be applicable), whether
or not the shares of that series shall be redeemable, and if so, the terms and
conditions of such redemption, including the date or dates upon or after which
they shall be redeemable, and the amount per share payable in case of
redemption, which amount may vary under different conditions and at different
redemption dates, and whether any shares of that series shall be redeemed
pursuant to a retirement or sinking fund or otherwise and the terms and
conditions of such obligation.
(e) Before the Corporation shall issue any Class B
Preferred Shares of any series, Certificate of Designation or an Amended or
Amended and Restated Certificate of Incorporation, fixing the voting powers,
designations, preferences, the relative, participating, option, or other rights,
if any, and the qualifications, limitations, and restrictions, if any, relating
to the Class B Preferred Shares of such series, and the number of Class B
Preferred Shares of such series authorized by the Board of Directors to be
issued shall be filed with the Secretary of State in accordance with the
Delaware General Corporations Law ("GCL") and shall become effective without any
shareholder action. The Board of Directors is further authorized to increase or
decrease (but not below the number of such shares of such series then
outstanding) the number of shares of any series subsequent to the issuance of
shares of that series.
FIFTH: Special meetings of the stockholders for any purpose or
purposes may be called at any time only by the Board of Directors, the Chairman
of the Board, the Chief Executive Officer or President of the Corporation.
SIXTH: (a) The directors of the Corporation shall be divided into
three classes, designated Class I, Class II and Class III. The term of the
initial Class I directors shall terminate on the date of the 2002 annual meeting
of stockholders; the term of the initial Class II directors shall terminate on
the date of the 2001 annual meeting of stockholders and the term of the initial
Class III directors shall terminate on the date of the 2000 annual meeting of
stockholders. At each annual meeting of stockholders beginning in 2000,
successors to the class of directors whose term expires at that annual meeting
shall be elected for a three-year term. If the number of directors is changed,
any increase or decrease shall be apportioned among the classes so as to
maintain the number of directors in each class as nearly equal as reasonably
possible, and any additional directors of any class elected to fill a vacancy
resulting from a increase in such class shall hold office for a term that shall
coincide with the remaining term of that class, but in no case will a decrease
in the number of directors shorten the term of any incumbent directors. A
director shall hold office until the annual meeting for the year in which his
term expires and until his successor shall be elected and shall qualify,
subject, however, to prior death, resignation, retirement, disqualification or
removal from office. Any vacancy on the Board of Directors, howsoever resulting,
shall be filled only by a majority of the directors then in office, even if less
than a quorum, or by a sole remaining director and not by the stockholders. Any
director elected to fill a vacancy shall hold office for a term that shall
coincide with the terms of the class to which such director shall have been
elected.
(b) Subject to the rights, if any, of the holders
of shares of Preferred Stock then outstanding, any or all of the directors of
the Corporation may be removed from office at any time, for cause only, by the
affirmative vote of the holders of a majority of the outstanding shares of the
Corporation then entitled to vote generally in the election of directors,
considered for purposes of this Article SIXTH as one class.
(c) Notwithstanding the foregoing, whenever the
holders of any one or more classes or series of Preferred Stock issued by the
Corporation shall have the right, voting separately by class or series to elect
directors at an annual or special meeting of stockholders, the election, term of
office, filling of vacancies and other features of such directorships shall be
governed by the terms of this Certificate of Incorporation or the resolution or
resolutions adopted by the Board of Directors pursuant to paragraph (c) of
Article FOURTH applicable thereto, and such directors so elected shall not be
divided into classes pursuant to this Article SIXTH unless expressly provided by
such terms.
Page B-4
SEVENTH: (a) Elections of directors at an annual or special
meeting of stockholders need not be by written ballot unless the Bylaws of
the Corporation shall otherwise provide.
(b) Any action required or permitted to be taken at
any annual or special meeting of stockholders may be taken only upon the vote of
the stockholders at an annual or special meeting duly noticed and called, as
provided in the Bylaws of the Corporation, and may not be taken by written
consent of the stockholders pursuant to the GCL.
EIGHTH: The officers of the Corporation shall be chosen in such a
manner, shall hold their offices for such terms and shall carry out such duties
as are determined solely by the Board of Directors, subject to the right of the
Board of Directors to remove any officer or officers at any time with or without
cause.
NINTH: (a) The Corporation shall indemnify to the fullest extent
authorized or permitted by law (as now or hereafter in effect) any person made,
or threatened to be made, a defendant or witness to any action, suit or
proceeding (whether civil or criminal or otherwise) by reason of the fact that
he/she, his/her testator or intestate, is or was a director or officer of the
Corporation or by reason of the fact that such director or officer, at the
request of the Corporation, is or was serving any other Corporation,
partnership, joint venture, trust, employee benefit plan or enterprise, in any
capacity. Nothing contained herein shall affect any rights to indemnification to
which employees other than directors and officers may be entitled by law. No
amendment or repeal of this Section (a) of Article NINTH shall apply to or have
any effect on any right to indemnification provided hereunder with respect to
any acts or omissions occurring prior to such amendment or repeal.
(b) No director of the Corporation shall be
personally liable to the Corporation or its stockholders for monetary damages
for any breach of fiduciary duty by such a director as a director.
Notwithstanding the foregoing sentence, a director shall be liable to the extent
provided by applicable law (i) for any breach of the director's duty of loyalty
to the Corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) pursuant to Section 174 of the GCL, or (iv) for any transaction from which
such director derived an improper personal benefit. No amendment to repeal of
this Section (b) of Article NINTH shall apply to or have any effect on the
liability or alleged liability of any director of the Corporation for or with
respect to any acts or omissions of such director occurring prior to such
amendment or repeal.
(c) In furtherance and not in limitation of the
powers conferred by statute:
(i) The Corporation may purchase and maintain insurance
on behalf of any person who is or was a director,
officer, employee or agent of the Corporation, or is
serving at the request of the Corporation as a
director, officer, employee or agent of another
corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise against any
liability asserted against him or her and incurred by
him or her in any such capacity, or arising out of
his or her status as such, whether or not the
Corporation would have the power to indemnify against
such liability under the provisions of law; and
(ii) The Corporation may create a trust fund, grant a
security interest and/or use other means (including,
without limitation, letters of credit, surety bonds
and/or other similar arrangements), as well as enter
into contracts providing indemnification to the
fullest extent authorized or permitted by law and
including as part thereof provisions with respect to
any or all of the foregoing to ensure the payment of
such amounts as may become necessary to effect
indemnification as provided therein, or elsewhere.
TENTH: In furtherance and not in limitation of the powers
conferred by statute, the Board of Directors is expressly authorized to
adopt, repeal, alter, amend or rescind the Bylaws of the Corporation.
Page B-5
ELEVENTH: The name and mailing address for the Incorporator of
the Corporation is as follows: F. Michael Budd, 31324 Via Colinas, Suite 106,
Westlake Village, California 91362.
TWELFTH: The Corporation reserves the right to repeal, alter,
amend or rescind any provision contained in this Certificate of
Incorporation, in the manner now or hereafter prescribed by statute, and all
rights conferred on stockholders herein are granted subject to this
reservation.
IN WITNESS WHEREOF, the undersigned has executed the Certificate of
Incorporation this ___ day of October, 1999.
------------------------------
F. Michael Budd
Incorporator
Page B-6
EXHIBIT C
UTAH BUSINESS CORPORATION ACT SECTION 1301-1331 OF PART 13
PART 13. DISSENTERS' RIGHTS
16-10A-1301 DEFINITIONS.-For purposes of Part 13:
(1) "Beneficial shareholder" means the person who is a beneficial
owner of shares held in a voting trust or by a nominee as the record
shareholder.
(2) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action, or the surviving or acquiring corporation by merger
or share exchange of that issuer.
(3) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Section 16-10a-1302 and who exercises that right when and
in the manner required by Sections 16-10a-1320 through 16-10a-1328.
(4) "Fair value" with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action.
(5) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the statutory rate set forth in Section
15-1-1, compounded annually.
(6) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares
that are registered in the name of a nominee to the extent the beneficial owner
is recognized by the corporation as the shareholder as provided in Section
16-10a-723.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
16-10A-1302 RIGHT TO DISSENT.- (1) A shareholder, whether or not entitled
to vote, is entitled to dissent from, and obtain payment of the fair value of
shares held by him in the event of, any of the following corporate actions:
(a) consummation of a plan of merger to which the corporation is a party
if:
(i) shareholder approval is required for the merger by Section
16-10a-1103 or the articles of incorporation; or
(ii) the corporation is a subsidiary that is merged with its parent under
Section 16-10a-1104;
(b) consummation of a plan of share exchange to which the corporation is a
party as the corporation whose shares will be acquired;
(c) consummation of a sale, lease, exchange or other disposition of all,
or substantially all, of the property of the corporation for which a shareholder
vote is required under Subsection 16-10a-1202(1), but not including a sale for
cash pursuant to a plan by which all or substantially all of the net proceeds of
the sale will be distributed to the shareholders within one year after the date
of sale; and
(d) consummation of a sale, lease, exchange, or other disposition of all,
or substantially all, of the property of an entity controlled by the corporation
if the shareholders of the corporation were entitled to vote upon the consent of
the corporation to the disposition pursuant to Subsection 16-10a-1202(2).
(2) A shareholder is entitled to dissent and obtain payment of the fair
value of his shares in the event of any other corporate action to the extent the
articles of incorporation, bylaws, or a resolution of the board of directors so
provides.
(3) Notwithstanding the other provisions of this part, except to the
extent otherwise provided in the articles of incorporation, bylaws, or a
resolution of the board of directors, and subject to the limitations set forth
in Subsection (4), a shareholder is not entitled to dissent and obtain payment
under Subsection (1) of the fair value of the shares of any class or series of
shares which either were listed on a national securities exchange registered
under the federal Securities Exchange Act of 1934, as amended, or on the
National Market System of the National Association of Securities Dealers
Automate4d Quotation System, or were held of record by more than 2,000
shareholders, at the time of:
(a) the record date fixed under Section 16-10a-707 to determine the
shareholders entitled to receive notice of the shareholders' meeting at which
the corporate action is submitted to vote;
(b) the record date fixed under Section 16-10a-704 to determine
shareholders entitled to sign writings consenting to the proposed corporate
action; or
(c) the effective date of the corporate action if the corporate action is
authorized other than by a vote of shareholders.
Page C-1
(4) The limitation set forth in Subsection (3) does not apply if the
shareholder will receive for his shares, pursuant to the corporate action,
anything except:
(a) shares of the corporation surviving the consummation of the plan
of merger or share exchange;
(b) shares of a corporation which at the effective date of the plan of
merger or share exchange either will be listed on a national securities exchange
registered under the federal Securities Exchange Act of 1934, as amended, or on
the National Market System of the National Association of Securities Dealers
Automated Quotation System, or will be held of record by more than 2,000
shareholders;
(c) cash in lieu of fractional shares; or
(d) any combination of the shares described in Subsection (4), or
cash in lieu of fractional shares; or
(5) A shareholder entitled to dissent and obtain payment for his shares
under this part may not challenge the corporate action creating the entitlement
unless the action is unlawful or fraudulent with respect to him or to the
corporation.
16.10A-1303 DISSENT BY NOMINEES AND BENEFICIAL OWNERS.-(1) A record
shareholder may assert dissenters' rights as to fewer than all the shares
registered in his name only if the shareholder dissents with respect to all
shares beneficially owned by any one person and causes the corporation to
receive written notice which states the dissent and the name and address of each
person on whose behalf dissenters' rights are being asserted. The rights of a
partial dissenter under this subsection are determined as if the shares as to
which the shareholder dissents and the other shares held of record by him were
registered in the names of different shareholders.
(2) A beneficial shareholder may assert dissenters'; rights as to shares
held on his behalf only if:
(a) the beneficial shareholder causes the corporation to receive the
record shareholder's written consent to the dissent not later than the time the
beneficial shareholder asserts dissenters' rights; and
(b) the beneficial shareholder dissents with respect to all shares of
which he is the beneficial shareholder.
(3) The corporation may require that, when a record shareholder dissents
with respect to the shares held by any one or more beneficial shareholders, each
beneficial shareholder must certify to the corporation that both he and the
record shareholders of all shares owned beneficially by him have asserted, or
will timely assert, dissenters' rights as to all the shares unlimited on the
ability to exercise dissenters' rights. The certification requirement must be
stated in the dissenters' rights. The certification requirement must be stated
in the dissenters' notice given pursuant to Section 16-10a-1322.
16-10A-1320 NOTICE OF DISSENTERS' RIGHTS.--(1) If a proposed corporate
action creating dissenters' rights under Section 16-10a- 1302 is submitted to a
vote at a shareholders' meeting, the meeting notice must be sent to all
shareholders of the corporation as of the applicable record date, whether or not
they are entitled to vote at the meeting. The notice shall state that
shareholders are or may be entitled to assert dissenters' rights under this
part. The notice must be accompanied by a copy of this part and the materials,
if any, that under this chapter are required to be given the shareholders
entitled to vote on the proposed action at the meeting. Failure to give notice
as required by this subsection does not affect any action taken at the
shareholders' meeting for which the notice was to have been given.
(2) If a proposed corporate action creating dissenters' rights under
Section 16-10a- 1302 is authorized without a meeting of shareholders pursuant to
Section 16-10a-704, any written or oral solicitation of a shareholder to execute
a written consent to the action contemplated by Section 16-10a-704 must be
accompanied or preceded by a written notice stating that shareholders are or may
be entitled to assert dissenters' rights under this part, by a copy of this
part, and by the materials, if any, that under this chapter would have been
required to be given to shareholders entitled to vote on the proposed action if
the proposed action were submitted to a vote at a shareholders' meeting. Failure
to give written notice as provided by this subsection does not affect any action
taken pursuant to Section 16-10a-704 for which the notice was to have been
given.
16-10A-1321 DEMAND FOR PAYMENT - ELIGIBILITY AND NOTICE OF INTENT.--(1) If
a proposed corporate action creating dissenters' rights under Section 16-10a-
1302 is submitted to a vote at a shareholders' meeting, a shareholder who wishes
to assert dissenters' rights:
(a) must cause the corporation to receive, before the vote is taken,
written notice of his intent to demand payment for shares if the proposed action
is effectuated; and
(b) may not vote any of his shares in favor of the proposed action.
Page C-2
(2) If a proposed corporate action creating dissenter's rights under
Section 16-10a-1302 is authorized without a meeting of shareholders pursuant to
Section 16-10a-704, a shareholder who wishes to assert dissenters' rights may
not execute a writing consenting to the proposed corporate action.
(3) In order to be entitled to payment for shares under this part, unless
otherwise provided in the articles of incorporation, bylaws, or a resolution
adopted by the board of directors, a shareholder must have been a shareholder
with respect to the shares for which payment is demanded as of the date the
proposed corporate action creating dissenters' rights under Section 16-10a-1302
is approved by the shareholders, if shareholder approval is required, or as of
the effective date of the corporate action if the corporate action is authorized
other than by a vote of shareholders.
(4) A shareholder who does not satisfy the requirements of Subsections (1)
through (3) is not entitled to payment for shares under this part.
16-10A-1322 DISSENTER'S NOTICE.--(1) If a proposed corporate action
creating dissenters' rights under Section 16-10a-1302 is authorized, the
corporation shall give a written dissenters' notice to all shareholders who are
entitled to demand payment for their shares under this part.
(2) The dissenters' notice required by Subsection (1) must be sent no
later than ten days after the effective date of the corporate action creating
dissenters' rights under Section 16-10a-1302, and shall:
(a) state that the corporate action was authorized and the effective date
or proposed effective date of the corporate action;
(b) state an address at which the corporation will receive payment demands
and an address at which certificates for certificated shares must be deposited;
(c) inform holders of uncertificated shares to what extent transfer of the
shares will be restricted after the payment demand is received;
(d) supply a form for demanding payment, which form requests a dissenter
to state an address to which payment is to be made;
(e) set a date by which the corporation must receive the payment demand
and by which certificates for certificated shares must be deposited at the
address indicated in the dissenters' notice, which dates may not be fewer than
30 nor more than 70 days after the date the dissenters' notice required by
Subsection (1) is given;
(f) state the requirement contemplated by Subsection 16-10a-1303(3),
if the requirement is imposed; and
(g) be accompanied by a copy of this part.
16-10A-1323 PROCEDURE TO DEMAND PAYMENT.--(1) A shareholder who is given a
dissenters' notice described in Section 16-10a-1322, who meets the requirements
of Section 16-10a-1321, and wishes to assert dissenters' rights must, in
accordance with the terms of the dissenters' notice:
(a) cause the corporate to receive a payment demand, which may be the
payment demand form contemplated in Subsection 16-10a-1322(2)d, duly completed,
or may be stated in another writing;
(b) deposit certificates for his certified for his certificated shares in
accordance with the terms of the dissenters' notice; and
(c) if required by the corporation in the dissenters' notice described in
Section 16-10a-1322, as contemplated by Section 16-10a-1327, certify in writing,
in or with the payment demand, whether or not he or the person on whose behalf
he asserts dissenters' rights acquired beneficial ownership of the shares before
the date of the first announcement to news media or to shareholders of the terms
of the proposed corporate action creating dissenters' rights under Section
16-10a-1302.
(2) A shareholder who demands payment in accordance with Subsection (1)
retains all rights of a shareholder except the right to transfer the shares
until the effective date of the proposed corporate action giving rise to the
exercise of dissenters' rights and has only the right to receive payment for the
shares after the effective date of the corporate action.
(3) A shareholder who does not demand payment and deposit share
certificates as required, by the date or dates set in the dissenters' notice, is
not entitled to payment for shares under this part.
Page C-3
16-10A-1324 UNCERTIFICATED SHARES.--(1) Upon receipt of a demand for
payment under Section 16-10a-1323 from a shareholder holding uncertificated
shares, and in lieu of the deposit of certificates representing the shares, the
corporation may restrict the transfer of the shares until the proposed corporate
action is taken or the restrictions are released under Section 16-10a-1326.
(2) In all other respects, the provisions of Section 16-10a-1323 apply to
shareholders who own uncertificated shares.
16-10A-1325 PAYMENT.--(1) Except as provided in Section 16-10a-1327, upon
the later of the effective date of the corporate action creating dissenters'
rights under Section 16-10a-1302, and receipt by the corporation of each payment
demand pursuant to Section 16-10a-1323, the corporation shall pay the amount the
corporation estimates to be the fair value of the dissenters' shares, plus
interest to each dissenter who has compiled with Section 16-10a-1323, and who
meets the requirements of Section 16-10a-1321, and who has not yet received
payment.
(2) Each payment made pursuant to Subsection (1) must be accompanied
by:
(a) (i) (A) the corporation's balance sheet as of the end of its most
recent fiscal year, or if not available, a fiscal year ending not more than 16
months before the date of payment;
(B) an income statement for that year;
(C) a statement of changes in shareholders' equity for that year and a
statement of cash flow for that year, if the corporation customarily provides
such statements to shareholders; and
(D) the latest available interim financial statements, if any;
(ii) the balance sheet and statements referred to in Subsection (i)
must be audited if the corporation customarily provides audited financial
statements to shareholders;
(b) a statement of the corporation's estimate of the fair value of the
shares and the amount of interest payable with respect to the shares;
(c) a statement of the dissenter's right to demand payment under
Section 16-10a-1328; and
(d) a copy of this part.
16-10A-1326 FAILURE TO TAKE ACTION.--(1) If the effective date of the
corporate action creating dissenters' rights under Section 16-10a-1302 does not
occur within 60 days after the date set by the corporation as the date by which
the corporation must receive payment demands as provided in Section 16-10a-1322,
the corporation shall return all deposited certificates and release the transfer
restrictions imposed on uncertificated shares, and all shareholders who
submitted a demand for payment pursuant to Section 116-10a-1323 share thereafter
have all rights of a shareholder is if no demand for payment had been made.
(2) If the effective date of the corporate action creating dissenters'
rights under Section 16-10a-1302 occurs more than 60 days after the date set by
the corporation as the date by which the corporation must receive payment
demands as provided in Section 16-10a-1322, then the corporation shall send a
new dissenters' notice, as provided in Section 16-10a-1322, and the provisions
of Sections 16-10a-1323 through 16-10a-1328 shall again be applicable.
16-10A-1327 SPECIAL PROVISIONS RELATING TO SHARES ACQUIRED AFTER
ANNOUNCEMENT OF PROPOSED CORPORATE ACTION.--(1) A corporation may, with the
dissenters' notice given pursuant to Section 16-10a-1302, state the date of the
first announcement to news media or to shareholders of the terms of the proposed
corporate action creating dissenters' rights under Section 16-10a-1302 and state
that a shareholder who asserts dissenters' rights must certify in writing, in or
with the payment demand, whether or not he or the person on whose behalf he
asserts dissenters' rights acquired beneficial ownership of the shares before
that date. With respect to any dissenter who does not certify in writing, in or
with the payment demand that he or the person on whose behalf the dissenters'
rights are being asserted, acquired beneficial ownership of the shares before
the date, the corporation may, in lieu of making the payment provided in Section
16-10a-1325, offer to make payment if the dissenter agrees to accept it in full
satisfaction of the demand.
(2) An offer to make payment under Subsection (1) shall include or be
accompanied by the information required by Subsection 16-10a-1325(2).
16-10A-1328 PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR
OFFER.--(1) A dissenter who has not accepted an offer made by a corporation
under Section 16-10a-1327 may notify the corporation in writing of his own
estimate of the fair value of his shares and demand payment of the estimate
amount, plus interest, less any payment made under Section 16-10a-1325, if:
Page C-4
(a) the dissenter believes that the amount paid under Section 16-10a-1325
or offered under Section 16-10a-1327 is less than the fair value of the shares;
(b) the corporation fails to make payment under Section 16-10a-1325 within
60 days after the date set by the corporation as the date by which it must
receive the payment demand; or
(c) the corporation, having failed to take the proposed corporate action
creating dissenters' rights, does not return the deposited certificates or
release the transfer restriction imposed on uncertificated shares as required by
Section 16-10a-1326.
(2) A dissenter waives the right to demand payment under this section
unless he causes the corporation to receive the notice required by Subsection
(1) within 30 days after the corporation made or offered payment for this shares
16-10A-1330 JUDICIAL APPRAISAL OF SHARES--COURT ACTIONS.--(1) If a demand
for payment under Section 16-10a-1328 remains unresolved, the corporation shall
commence a proceeding within 60 days after receiving the payment demand
contemplated by Section 16-10a-1328, and petition the court to determine the
fair value of the shares and the amount of interest. If the corporation does not
commence the proceeding within the 60-day period, it shall pay each dissenter
whose demand remains unresolved the amount demanded.
(2) The corporation shall commence the proceeding described in Subsection
(1) in the district court of the county in this state where the corporation's
principal office, or if it has no principal office in this state, the county
where its registered office is located. If the corporation is a foreign
corporation without a registered office in this state, it shall commence the
proceeding in the county in this state where the registered office of the
domestic corporation merged with, or whose shares were acquired by, the foreign
corporation was located.
(3) The corporation shall make all dissenters who have satisfied the
requirements of Sections 16-10a-1321, 16-10a-1323, and a16-10a-1328, whether or
not they are residents of this state whose demands remain unresolved, parties to
the proceeding commenced under Subsection (2) as an action against their shares.
All such dissenters who are named as parties must be served with a copy of the
petition. Service on each dissenter may be by registered or certified mail to
the address stated in his payment demand made pursuant to Section 16-10a-1328.
If no address is stated in the payment demand, service may be made at the
address stated in the payment demand given pursuant to Section 16-10a-1323. If
no address is stated in the payment demand, service may be made at the address
shown on the corporation's current record of shareholders for the record
shareholder holding the dissenter's shares. Service may also be made otherwise
as provided by law.
(4) The jurisdiction of the court in which the proceeding is commenced
under Subsection (2) is plenary and exclusive. The court may appoint one or more
persons as appraisers to receive evidence and recommend decision on the question
of fair value. The appraisers have the powers described in the order appointing
them, or in any amendment to it. The dissenters are entitled to the same
discovery rights as parties in other civil proceedings.
(5) Each dissenter made a party to the proceeding commenced under
Subsection (2) is entitled to judgment:
(a) for the amount, if any, by which the court finds that the fair value
of his shares, plus interest, exceeds the amount paid by the corporation
pursuant to Section 16-10a-1325; or
(b) for the fair value, plus interest, of the dissenters' after-acquired
shares for which the corporation elected to withhold payment under Section
16-10a-1327.
16-10A-1331 COURT COSTS AND COUNSEL FEES.--(1) The court in an appraisal
proceeding commenced under Section 16-10a-1330 shall determine all costs of the
proceeding, including the reasonable compensation and expenses of appraisers
appointed by the court. The court shall assess the costs against the
corporation, except that the court may assess costs against all or some of the
dissenters acted arbitrarily, vexatiously, or not in good faith in demanding
payment under Section 16-10a-1328.
(2) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable.
(a) against the corporation and in favor of any or all dissenters if the
court finds the corporation did not substantially comply with the requirements
of Sections 16-10a-1320 through 16-10a-1328; or
(b) against either the corporation or one or more dissenters, in favor of
any other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith with
respect to the rights provided by this part.
Page C-5
(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to those counsel reasonable fees to be paid out of the amounts awarded the
dissenters who were benefited.
Page C-6
EXHIBIT D
SYNTHONICS TECHNOLOGIES, INC.
1999 STOCK OPTION PLAN
ARTICLE 1
GENERAL PURPOSE OF PLAN
The name of this plan is the Synthonics Technologies, Inc. 1999 Stock
Option Plan (the "PLAN"). The purpose of the Plan is to enable Synthonics
Technologies, Inc., a Utah corporation (the "COMPANY") to obtain and retain the
services of the types of employees, consultants, officers and Directors who will
contribute to the Company's long range success and to provide incentives which
are linked directly to increases in share value which will inure to the benefit
of all stockholders of the Company.
ARTICLE 2
DEFINITIONS
For purposes of the Plan, the following terms shall be defined as set forth
below:
"ADMINISTRATOR" shall have the meaning as set forth in Article 3.
"BOARD" means the Board of Directors of the Company.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor thereto.
"COMMITTEE" means a committee of the Board designated by the Board to
administer the Plan.
"COMPANY" means Synthonics Technologies, Inc., a corporation organized
under the laws of the State of Utah (or any successor corporation).
"DATE OF GRANT" means the date on which the Administrator adopts a
resolution expressly granting a Right to a Participant or, if a different date
is set forth in such resolution as the Date of Grant, then such date as is set
forth in such resolution.
"DIRECTOR" means a member of the Board.
"DISABILITY" means permanent and total disability as defined by the
Administrator.
"ELECTION" shall have the meaning set forth in Section 11.3(d).
"ELIGIBLE PERSON" means an employee, officer, consultant or Director of
the Company, any Parent or any Subsidiary.
"FAIR MARKET VALUE" per share at any date means (i) if the stock being
valued is listed on an exchange or exchanges, or admitted for trading in a
market system which provides last sale data under Rule 11Aa3-1 of the General
Rules and Regulations of the Securities and Exchange Commission under the
Securities and Exchange Act of 1934, as amended (a "MARKET SYSTEM"), the last
reported sales price per share on the last business day prior to such date on
the principal exchange on which it is traded, or in such a Market System, as
applicable, or if no sale was made on such day on such principal exchange or in
such a Market System, as applicable, the last reported sales price per share on
the most recent day prior to such date on which a sale was reported on such
exchange or such Market System, as applicable; or (ii) if the stock being valued
is not then traded on an exchange or in such a Market System, the average of the
closing bid and asked prices per share for the stock being valued in the
over-the-counter
Page D-1
market as quoted on NASDAQ on the day prior to such date; or (iii) if the stock
being valued is not listed on an exchange or quoted on NASDAQ, an amount
determined in good faith by the Administrator, based on a price at which one
could reasonably expect such stock to be sold in an arm's length transaction,
for cash, other than on an installment basis, to a person not employed by,
controlled by, in control of or under common control with the issuer of such
stock.
"FIRST REFUSAL RIGHT" shall have the meaning set forth in Section 8.1(c)
of the Plan.
"INCENTIVE STOCK OPTION" means a Stock Option intended to qualify as an
"incentive stock option" as that term is defined in Section 422 of the Code.
"NON-STATUTORY OPTION" means a Stock Option intended to not qualify as an
Incentive Stock Option.
"OFFEREE" means a Participant who is granted a Purchase Right pursuant
to the Plan.
"OPTIONEE" means a Participant who is granted a Stock Option pursuant to
the Plan.
"PARENT" means any present or future corporation that would be a "parent
corporation" as that term is defined in Section 424 of the Code.
"PARTICIPANT" means any Eligible Person selected by the Administrator,
pursuant to the Administrator's authority in Article 3, to receive grants of
Rights.
"PLAN" means this Synthonics Technologies, Inc. 1999 Stock Option Plan,
as the same may be amended or supplemented from time to time.
"PURCHASE PRICE" shall have the meaning set forth in Section 7.2(b).
"PURCHASE RIGHT" means the right to purchase Stock granted pursuant to
Article 7.
"RIGHTS" means Stock Options and Purchase Rights.
"REPURCHASE RIGHT" shall have the meaning set forth in Section 8.1(a)
of the Plan.
"RETIREMENT" means retirement from active employment with the Company or
any Parent or Subsidiary as defined by the Administrator.
"SECTION 16(B) PERSON" means a person subject to Section 16(b) of the
Exchange Act.
"SPECIAL TERMINATING EVENT" with respect to a Participant shall mean the
death, Disability or Retirement of that Participant.
"STOCK" means the Common Stock, par value $.001 per share, of the
Company.
"STOCK OPTION" means an option to purchase shares of Stock granted
pursuant to Article 6.
"STOCK OPTION AGREEMENT" shall have the meaning set forth in Section
6.2.
"STOCK PURCHASE AGREEMENT" shall have the meaning set forth in Section
7.2.
"SUBSIDIARY" means any present or future corporation which would be a
"subsidiary corporation" as that term is defined in Section 424 of the Code.
"TAX DATE" shall have the meaning set forth in Section 11.3(d) of the
Plan.
Page D-2
"TEN PERCENT STOCKHOLDER" means a person who on the Date of Grant owns,
either directly or through attribution as provided in Section 424 of the Code,
Stock possessing more than 10% of the total combined voting power of all classes
of stock of his or her employer corporation or of any Parent or Subsidiary.
"TERMINATING EVENT" occurs when a Participant ceases to be an employee,
officer or consultant for the Company or, any Subsidiary or Parent of the
Company for any reason other than death or permanent disability.
"WITHHOLDING RIGHT" shall have the meaning set forth in Section 10.3(c)
of the Plan.
ARTICLE 3
ADMINISTRATION
SECTION 3.1 ADMINISTRATOR. The Plan shall be administered by either (i)
the Board or (ii) the Committee (the group that administers the Plan is referred
to as the "ADMINISTRATOR").
SECTION 3.2 POWERS IN GENERAL. The Administrator shall have the power and
authority to grant to Eligible Persons, pursuant to the terms of the Plan, (i)
Stock Options, (ii) Purchase Rights, or (iii) any combination of the foregoing.
SECTION 3.3 SPECIFIC POWERS. In particular, the Administrator shall have
the authority: (i) to construe and interpret the Plan and apply its provisions;
(ii) to promulgate, amend and rescind rules and regulations relating to the
administration of the Plan; (iii) to authorize any person to execute, on behalf
of the Company, any instrument required to carry out the purposes of the Plan;
(iv) to determine when Rights are to be granted under the Plan; (v) from time to
time to select, subject to the limitations set forth in this Plan, those
Eligible Persons to whom Rights shall be granted; (vi) to determine the number
of shares of Stock to be made subject to each Right; (vii) to determine whether
each Stock Option is to be an Incentive Stock Option or a Non-Statutory Option;
(viii) to prescribe the terms and conditions of each Stock Option and Purchase
Right, including, without limitation, the purchase price and medium of payment,
vesting provisions and repurchase provisions, and to specify the provisions of
the Stock Option Agreement or Stock Purchase Agreement relating to such grant or
sale; (ix) to amend any outstanding Rights for the purpose of modifying the time
or manner of vesting, the purchase price or exercise price, as the case may be,
subject to applicable legal restrictions and to the consent of the other party
to such agreement; (x) to determine the duration and purpose of leaves of
absences which may be granted to a Participant without constituting termination
of their employment for purposes of the Plan; (xi) to make decisions with
respect to outstanding Stock Options that may become necessary upon a change in
corporate control or an event that triggers anti-dilution adjustments; and (xii)
to make any and all other determinations which it determines to be necessary or
advisable for administration of the Plan.
SECTION 3.4 DECISIONS FINAL. All decisions made by the Administrator
pursuant to the provisions of the Plan shall be final and binding on the Company
and the Participants.
SECTION 3.5 THE COMMITTEE. The Board may, in its sole and absolute
discretion, from time to time delegate any or all of its duties and authority
with respect to the Plan to the Committee whose members are to be appointed by
and to serve at the pleasure of the Board. Once appointed, the Committee shall
continue to serve until otherwise directed by the Board. From time to time, the
Board may increase or decrease the size of the Committee, add additional members
to, remove members (with or without cause) from, appoint new members in
substitution therefor, and fill vacancies, however caused, in the Committee. The
Committee shall act pursuant to a vote of the majority of its members or, in the
case of a committee comprised of only two members, the unanimous consent of its
members, whether present or not, or by the written consent of the majority of
its members or, in the case of a Committee comprised of only two members, the
unanimous written consent of its members, and minutes shall be kept of all of
its meetings and copies thereof shall be provided to the Board. Subject to the
limitations prescribed by the Plan and the Board, the Committee may establish
and follow such rules and regulations for the conduct of its business as it may
determine to be advisable.
Page D-3
ARTICLE 4
STOCK SUBJECT TO PLAN
SECTION 4.1 STOCK SUBJECT TO THE PLAN. Subject to adjustment as provided
in Article 9, the total number of shares of Stock reserved and available for
issuance under the Plan shall be 10,000,000 shares. Shares reserved hereunder
may consist, in whole or in part, of authorized and unissued shares or treasury
shares.
SECTION 4.2 UNEXERCISED RIGHTS; REACQUIRED SHARES. To the extent that any
Rights expire or are otherwise terminated without being exercised, the shares
underlying such Rights (and shares related thereto) shall again be available for
issuance in connection with future Rights under the Plan. Shares acquired by the
Company upon exercise of Rights pursuant to Section 6.2(e) or Section 7.2(c) or
Section 11.3 shall not increase the shares available for issuance under the
Plan.
ARTICLE 5
ELIGIBILITY
Directors, officers, employees and consultants of the Company, any Parent
or any Subsidiary, who are responsible for or contribute to the management,
growth or profitability of the business of the Company, any Parent or any
Subsidiary, shall be eligible to be granted Rights hereunder subject to
limitations set forth in this Plan; PROVIDED, HOWEVER, that only officers and
employees shall be eligible to be granted Incentive Stock Options hereunder.
ARTICLE 6
STOCK OPTIONS
SECTION 6.1 GENERAL. Stock Options may be granted alone or in addition to
other Rights granted under the Plan. Each Stock Option granted under the Plan
shall be in such form and under such terms and conditions as the Administrator
may from time to time approve, provided that such terms and conditions are not
inconsistent with the Plan. The provisions of Stock Option Agreements entered
into under the Plan need not be identical. Stock Options granted under the Plan
may be either Incentive Stock Options or Non-Statutory Options.
SECTION 6.2 TERMS AND CONDITIONS OF STOCK OPTIONS. Each Stock Option
granted pursuant to the Plan shall be evidenced by a written option agreement
between the Company and the Optionee (the "STOCK OPTION AGREEMENT"), which shall
comply with and be subject to the following terms and conditions:
(a) NUMBER OF SHARES. Each Stock Option Agreement shall state
the number of shares of Stock to which the Stock Option relates.
(b) Type of Option. Each Stock Option Agreement shall identify
the portion (if any) of the Stock Option which constitutes an Incentive Stock
Option.
(c) Exercise Price. Each Stock Option Agreement shall state
the price at which shares subject to the Stock Option may be purchased (the
"Exercise Price"), which shall, with respect to Incentive Stock Options, be not
less than 100% of the Fair Market Value of the shares of Stock on the Date of
Grant. In the case of Non-Statutory Options, the Exercise Price shall be
determined in the sole discretion of the Administrator; provided, however, that
the Exercise Price shall be no less than 85% of the Fair Market Value of the
shares of Stock on the Date of Grant of the Non-Statutory Option. In the case of
either an Incentive Stock Option or a Non-Statutory Option granted to a Ten
Percent Stockholder, the Exercise Price shall not be less than 110% of such Fair
Market Value.
Page D-4
(d) VALUE OF SHARES. The Fair Market Value of the shares of
Stock (determined as of the Date of Grant) with respect to which Incentive Stock
Options are first exercisable by an Option Holder under this Plan and all other
incentive option plans of the Company and any Parent or Subsidiary in any
calendar year shall not, for such year, in the aggregate, exceed $100,000;
PROVIDED, HOWEVER, that this Section 6.2(d) shall not affect the right of the
Administrator to accelerate or otherwise alter the time of vesting of any
Options granted as Incentive Stock Options even, if as a result thereof, some of
such Options cease being Incentive Stock Options.
(e) MEDIUM AND TIME OF PAYMENT. The Exercise Price shall be
paid in full, at the time of exercise, in cash or cash equivalents or, with the
approval of the Administrator (i) by reducing the number of shares of common
stock issuable pursuant to such exercise which have a Fair Market Value equal to
the rights so exercised or (ii) in shares of common stock of the Company which
have been held by the Optionee for a period of at least six calendar months
preceding the date of surrender and which have a Fair Market Value equal to the
Exercise Price, or in a combination of cash and such shares, and may be effected
in whole or in part (x) with monies received from the Company at the time of
exercise as a compensatory cash payment or (y) to the extent that the Exercise
Price exceeds the par value of the shares so purchased, with monies borrowed
from the Company in accordance with Section 11.5.
(f) TERM AND EXERCISE OF STOCK OPTIONS. Stock Options shall be
exercisable over the exercise period at the times the Administrator may
determine, as reflected in the related Stock Option Agreements. The
Administrator shall have discretion as to the schedule pursuant to which the
Stock Option is initially exercisable; PROVIDED, HOWEVER, that in no event shall
any option vest at a rate of less than 20% per year over 5 years from the Date
of Grant of such Stock Options. The exercise period of any Stock Option shall be
determined by the Administrator, but shall not exceed ten years from the Date of
Grant of the Stock Option. The exercise period shall be subject to earlier
termination upon the occurrence of either a Special Terminating Event, as
provided in Section 11.6, or the Termination of Employment, as provided in
Section 11.7. A Stock Option may be exercised, as to any or all full shares of
Stock as to which the Stock Option has become exercisable, by giving written
notice of such exercise to the Company.
ARTICLE 7
PURCHASE RIGHTS
SECTION 7.1 GENERAL. Purchase Rights may be granted alone or in addition
to other Rights under the Plan. Each sale of Stock under this Article 7 shall be
in such form and under such terms and conditions as the Administrator shall from
time to time approve, provided that such terms and conditions are not
inconsistent with the Plan. The provisions of Stock Purchase Agreements entered
into under the Plan need not be identical.
SECTION 7.2 TERMS AND CONDITIONS OF PURCHASE RIGHTS. Each Purchase Right
granted pursuant to the Plan shall be evidenced by a written stock purchase
agreement between the Company and the Offeree (the "STOCK PURCHASE AGREEMENT"),
which shall comply with and be subject to the following terms and conditions:
(a) NUMBER OF SHARES. Each Stock Purchase Agreement shall state the
number of shares of Stock which may be purchased pursuant to such agreement.
(b) PURCHASE PRICE. Each Stock Purchase Agreement shall state the
price at which the Stock subject to such Stock Purchase Agreement may be
purchased (the "PURCHASE PRICE"), which, with respect to Stock Purchase Rights,
shall be determined in the sole discretion of the Administrator; PROVIDED,
HOWEVER, that the Purchase Price shall be no less than 85% of the Fair Market
Value of the shares of Stock on either the Date of Grant or the Date of Purchase
of the Purchase Right. In the case of a Purchase Right granted to a Ten Percent
Stockholder, the Purchase Price shall not be less than 110% of the Fair Market
Value of the shares of Stock on either the Date of Grant or the Date of Purchase
of the Purchase Right.
(c) MEDIUM AND TIME OF PAYMENT. The Purchase Price shall be paid in
full, at the time of exercise, in cash or cash equivalent or, with the approval
of the Administrator (i) by reducing the number of shares of common stock
issuable pursuant to such exercise which have a Fair Market Value equal to the
rights so exercised or (ii) in shares of common stock of the Company which have
been held by the Offeree for a period of at least six calendar months preceding
the date of surrender and which have a Fair Market Value equal to the Purchase
Price, or in a
Page D-5
combination of cash or cash equivalent and such shares, and may be effected in
whole or in part (x) with monies received from the Company at the time of
exercise as a compensatory cash payment or (y) to the extent the purchase price
exceeds the par value of the shares so purchased, with monies borrowed from the
Company in accordance with Section 11.5 of the Plan.
ARTICLE 8
REACQUISITION OF STOCK OPTIONS, PURCHASE RIGHTS AND STOCK; MARKET STAND-OFF
SECTION 8.1 [INTENTIONALLY OMITTED.]
SECTION 8.2 MARKET STAND-OFF.
Each Stock Option Agreement and Stock Purchase Agreement shall
provide that, in connection with any underwritten public offering by the Company
of its equity securities pursuant to an effective registration statement filed
under the Securities Act of 1933, as amended, including the Company's initial
public offering, the Participant shall agree not to sell, make any short sale
of, loan, hypothecate, pledge, grant any option for the repurchase of, or
otherwise dispose or transfer for value or otherwise agree to engage in any of
the foregoing transactions with respect to any Stock without the prior written
consent of the Company or its underwriters, for such period of time from and
after the effective date of such registration statement as may be requested by
the Company or such underwriters (the "MARKET STAND-OFF"); PROVIDED, HOWEVER,
that in no event shall such period exceed two hundred seventy-five days (275)
days.
ARTICLE 9
ADJUSTMENTS
SECTION 9.1 EFFECT OF CERTAIN CHANGES.
(a) STOCK DIVIDENDS, SPLITS, ETC.. If there is any change in the
number of outstanding shares of Stock through the declaration of stock dividends
or through a recapitalization resulting in Stock splits, or combinations or
exchanges of the outstanding shares, then (i) the number of shares of Stock
available for Rights, (ii) the number of shares of Stock covered by outstanding
Rights and (iii) the Exercise Price or Purchase Price of any Stock Option or
Purchase Right, in effect prior to such change, shall be proportionately
adjusted by the Administrator to reflect any increase or decrease in the number
of issued shares of Stock; PROVIDED, HOWEVER, that any fractional shares
resulting from the adjustment shall be eliminated.
(b) LIQUIDATION, DISSOLUTION, MERGER OR CONSOLIDATION. In the event
of: (i) a dissolution or liquidation of the Company, or any corporate separation
or division, including, but not limited to, a split-up, a split-off or a
spin-off, or a sale of substantially all of the assets of the Company; (ii) a
merger or consolidation in which the Company is not the surviving corporation;
or (iii) a reverse merger in which the Company is the surviving corporation, but
the shares of Company stock outstanding immediately preceding the merger are
converted by virtue of the merger into other property, whether in the form of
securities, cash or otherwise, then, at the sole discretion of the
Administrator, and to the extent permitted by applicable law: (i) any surviving
corporation shall assume any Rights outstanding under the Plan or shall
substitute similar Rights for those outstanding under the Plan; or (ii) such
Rights shall continue in full force and effect; or (iii) such Rights, to the
extent not then exercisable, shall terminate and expire; PROVIDED, HOWEVER, that
not less than thirty days written notice of any such event shall be given to
each Rights holder and if such notice is given, each Rights holder shall have
the right, during the thirty days preceding such event, to exercise the Right as
to all or any part of the shares of Stock covered thereby as to which such Right
is then exercisable, on the condition, however, that such event actually occurs;
and if such event actually occurs, such exercise shall be deemed effective (and,
if applicable, the Rights holder shall be deemed a stockholder with respect to
the Rights exercised) immediately preceding the occurrence of such event, or the
date of record for stockholders entitled to share in such event, if a record
date is set.
Page D-6
(c) WHERE COMPANY SURVIVES. Section 9.1(b) shall not apply to a
merger or consolidation in which the Company is the surviving corporation,
unless shares of Stock are converted into or exchanged for securities other than
publicly-traded common stock, cash (excluding cash in payment for fractional
shares) or any other thing of value. Notwithstanding the preceding sentence, in
case of any consolidation or merger of another corporation into the Company in
which the Company is the surviving corporation and in which there is a
reclassification or change (including a change to the right to receive an amount
of money payable by cash or cash equivalent or other property) of the shares of
Stock (other than a change in par value, or from par value to no par value, or
as a result of a subdivision or combination, but including any change in such
shares into two or more classes or series of shares), the Administrator
may provide that the holder of each Right then exercisable shall have the right
to exercise such Right solely for the kind and amount of shares of stock and
other securities (including those of any new direct or indirect Parent of the
Company), property, cash or any combination thereof receivable upon such
reclassification change, consolidation or merger by the holder of the number of
shares of Stock for which such Right might have been exercised.
(d) SURVIVING CORPORATION DEFINED. The determination as to which
party to a merger or consolidation is the "SURVIVING CORPORATION" shall be made
on the basis of the relative equity interests of the stockholders in the
corporation existing after the merger or consolidation, as follows: If
immediately following any merger or consolidation the holders of outstanding
voting securities of the Company immediately prior to the merger or
consolidation own equity securities possessing more than 50% of the voting power
of the corporation existing following the merger or consolidation, then for
purposes of this Plan, the Company shall be the surviving corporation. In all
other cases, the Company shall not be the surviving corporation. In making the
determination of ownership by the stockholders of a corporation, immediately
after the merger or consolidation, of equity securities pursuant to this Section
9.1(d), equity securities which the stockholders owned immediately before the
merger or consolidation as stockholders of another party to the transaction
shall be disregarded. Further, for purposes of this Section 9.1(d) only,
outstanding voting securities of a corporation shall be calculated by assuming
the conversion of all equity securities convertible (immediately or at some
future time) into shares entitled to vote.
(e) PAR VALUE CHANGES. In the event of a change in the Stock of the
Company as presently constituted which is limited to a change of all of its
authorized shares with par value, into the same number of shares without par
value, or a change in the par value, the shares resulting from any such change
shall be "STOCK" within the meaning of the Plan.
SECTION 9.2 DECISION OF ADMINISTRATOR FINAL. To the extent that the
foregoing adjustments relate to stock or securities of the Company, such
adjustments shall be made by the Administrator, whose determination in that
respect shall be final, binding and conclusive; PROVIDED, HOWEVER, that each
Incentive Stock Option granted pursuant to the Plan shall not be adjusted in a
manner that causes such Stock Option to fail to continue to qualify as an
Incentive Stock Option without the prior consent of the Optionee thereof.
SECTION 9.3 NO OTHER RIGHTS. Except as hereinbefore expressly provided in
this Article 9, no Rights holder shall have any rights by reason of any
subdivision or consolidation of shares of Company stock or the payment of any
dividend or any other increase or decrease in the number of shares of Company
stock of any class or by reason of any of the events described in Section 9.1,
above, or any other issue by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class; and, except as
provided in this Article 8, none of the foregoing events shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares of Stock subject to Rights. The grant of a Right pursuant to the Plan
shall not affect in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations or changes of its capital or
business structures or to merge or to consolidate or to dissolve, liquidate or
sell, or transfer all or part of its business or assets.
SECTION 9.4 [INTENTIONALLY OMITTED.]
SECTION 9.5 NO RIGHTS AS SHAREHOLDER. Except as specifically provided in
this Article 9, a Rights holder or a transferee of a Right shall have no rights
as a stockholder with respect to any shares covered by the Rights until the date
of the issuance of a Stock certificate to him or her for such shares, and no
adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distributions of other rights for which
the record date is prior to the date such Stock certificate is issued, except as
provided in Section 9.1(b).
Page D-7
SECTION 9.6 TERM OF EMPLOYMENT UNAFFECTED. The receipt of an option does
not give the Optionee any right to continued employment by the Company or a
subsidiary for any period, nor shall the granting of a Stock Option or the
issuance of the shares of Stock on exercise thereof give the Company or any
subsidiary any right to the continued services of the Optionee for any period.
ARTICLE 10
AMENDMENT AND TERMINATION
The Board may amend, alter or discontinue the Plan, but no amendment,
alteration or discontinuation shall be made which would impair the rights of a
Participant under any Right theretofore granted without such Participant's
consent, or which without the approval of the stockholders would:
(a) Except as provided in Article 9, materially increase the total
number of shares of Stock reserved for the purposes of the Plan;
(b) Materially increase the benefits accruing to Participants
or Eligible Persons under the Plan; or
(c) Materially modify the requirements for eligibility under the
Plan.
The Administrator may amend the terms of any award theretofore granted,
prospectively or retroactively, but, subject to Article 3, no such amendment
shall impair the rights of any holder without his or her consent.
ARTICLE 11
GENERAL PROVISIONS
SECTION 11.1 GENERAL RESTRICTIONS.
(a) NO VIEW TO DISTRIBUTE. The Administrator may require each person
acquiring shares of Stock pursuant to the Plan to represent to and agree with
the Company in writing that such person is acquiring the shares without a view
towards distribution thereof. The certificates for such shares may include any
legend that the Administrator deems appropriate to reflect any restrictions on
transfer.
(b) LEGENDS. All certificates for shares of Stock delivered under
the Plan shall be subject to such stop transfer orders and other restrictions as
the Administrator may deem advisable under the rules, regulations and other
requirements of the Securities and Exchange Commission, any stock exchange upon
which the Stock is then listed and any applicable federal or state securities
laws, and the Administrator may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions.
SECTION 11.2 OTHER COMPENSATION. Nothing contained in this Plan shall
prevent the Board from adopting other or additional compensation arrangements,
subject to stockholder approval if such approval is required; and such
arrangements may be either generally applicable or applicable only in specific
cases.
SECTION 11.3 DISQUALIFYING DISPOSITIONS; WITHHOLDING TAXES.
(a) DISQUALIFYING DISPOSITION. Any Participant who shall make a
"DISPOSITION" (as defined in the Code) of all or any portion of an Incentive
Stock Option within two years from the date of grant of such Incentive Stock
Option or within one year after the issuance of the shares of Stock acquired
upon exercise of such Incentive Stock Option shall be required to immediately
advise the Company in writing as to the occurrence of the sale and the price
realized upon the sale of such shares of Stock and to maintain all such shares
of Stock in his or her name so long as he or she maintains beneficial ownership
of such shares of Stock.
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(b) WITHHOLDING REQUIRED. Each Participant shall, no later than the
date as of which the value derived from a Right first becomes includable in the
gross income of the Participant for income tax purposes, pay to the Company, or
make arrangements satisfactory to the Administrator regarding payment of, any
federal, state or local taxes of any kind required by law to be withheld with
respect to the Right or its exercise. The obligations of the Company under the
Plan shall be conditioned upon such payment or arrangements and the Participant
shall, to the extent permitted by law, have the right to request that the
Company deduct any such taxes from any payment of any kind otherwise due to the
Participant.
(c) WITHHOLDING RIGHT. The Administrator may, in its discretion,
grant a Rights holder the right (a "WITHHOLDING RIGHT") to elect to make such
payment by irrevocably requiring the Company to withhold from shares issuable
upon exercise of the Right that number of full shares of Stock having a Fair
Market Value on the Tax Date (as defined below) equal to the amount (or portion
of the amount) required to be withheld. The Withholding Right may be granted
with respect to all or any portion of the Right.
(d) EXERCISE OF WITHHOLDING RIGHT. To exercise a Withholding Right,
the Rights holder must follow the election procedures set forth below, together
with such additional procedures and conditions as may be set forth in the
related Rights agreement or otherwise adopted by the Administrator:
(i) The Rights holder must deliver to the Company his or her
written notice of election (the "ELECTION") to have the Withholding Right apply
to all (or a designated portion) of his or her Right.
(ii) Unless disapproved by the Administrator as provided in
Subsection (iii) below, the Election once made will be irrevocable.
(iii) No Election is valid unless the Administrator consents
to the Election; the Administrator has the right and power, in its sole
discretion, with or without cause or reason therefor, to consent to the
Election, to refuse to consent to the Election, or to disapprove the Election;
and if the Administrator has not consented to the Election on or prior to the
date that the amount of tax to be withheld is fixed and determined by the
Company under applicable federal income tax laws (the "TAX DATE"), the Election
will be deemed approved.
(iv) If the Rights holder on the date of delivery of the
Election to the Company is a Section 16(b) Person, the following additional
provisions will apply:
(A) The Election cannot be made during the six
calendar month period commencing with the date of the grant of the Withholding
Right (even if the Right to which such Withholding Right relates has been
granted prior to such date); PROVIDED, HOWEVER, that this Subsection (A) is not
applicable to any Rights holder at any time subsequent to the death, Disability
or Retirement of the Rights holder;
(B) The Election can only be made on a date which
is six calendar months or more prior to the Tax Date; and
(C) Notwithstanding any other provision of this
Section 11.3(d)(iv), no Section 16(b) Person shall have the right to make any
Election prior to the time that the Company has been subject to the reporting
requirements of Section 13(a) of the Exchange Act for at least a year and has
filed all reports and statements required to be filed pursuant to that Section
for that year.
(e) EFFECT. If the Administrator consents to an Election of a
Withholding Right:
(i) Upon the exercise of the Right (or any portion thereof) to
which the Withholding Right relates, the Company will withhold from the shares
otherwise issuable that number of full shares of Stock having an actual Fair
Market Value equal to the amount (or portion of the amount, as applicable)
required to be withheld under applicable federal and/or state income tax laws as
a result of the exercise; and
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(ii) If the Rights holder is then a Section 16(b) Person who
has made an Election, the related Right may not be exercised, nor may any shares
of Stock issued pursuant thereto be sold, exchanged or otherwise transferred, if
the result of such exercise, or such transaction, would cause the Tax Date to be
less than six full calendar months following the date of the Election.
SECTION 11.4 INDEMNIFICATION. In addition to such other rights of
indemnification as they may have as Directors or members of the Committee, and
to the extent allowed by applicable law, the Administrator shall be indemnified
by the Company against the reasonable expenses, including attorney's fees,
actually incurred in connection with any action, suit or proceeding or in
connection with any appeal therein, to which the Administrator may be party by
reason of any action taken or failure to act under or in connection with the
Plan or any option granted under the Plan, and against all amounts paid by the
Administrator in settlement thereof (provided that the settlement has been
approved by the Company, which approval shall not be unreasonably withheld) or
paid by the Administrator in satisfaction of a judgment in any such action, suit
or proceeding, except in relation to matters as to which it shall be adjudged in
such action, suit or proceeding that such Administrator did not act in good
faith and in a manner which such person reasonably believed to be in the best
interests of the Company, and in the case of a criminal proceeding, had no
reason to believe that the conduct complained of was unlawful; PROVIDED,
HOWEVER, that within 60 days after institution of any such action, suit or
proceeding, such Administrator shall, in writing, offer the Company the
opportunity at its own expense to handle and defend such action, suit or
proceeding.
SECTION 11.5. LOANS. The Company may make loans to Optionees and Offerees
as the Administrator, in its discretion, may determine in connection with the
exercise of outstanding Stock Options and Purchase Rights granted under the
Plan. Such loans shall (i) be evidenced by promissory notes entered into by the
holders in favor of the Company; (ii) be subject to the terms and conditions set
forth in this Section 11.5 and such other terms and conditions, not inconsistent
with the Plan, as the Administrator shall determine; and (iii) bear interest, if
any, at such rate as the Administrator shall determine. In no event may the
principal amount of any such loan exceed the Exercise Price or the Purchase
Price less the par value of the shares of Stock covered by the Stock Option or
Purchase Right, or portion thereof, exercised by the Optionee or Offeree. The
initial term of the loan, the schedule of payments of principal and interest
under the loan, the extent to which the loan is to be with or without recourse
against the holder with respect to principal and applicable interest and the
conditions upon which the loan will become payable in the event of the holder's
termination of employment shall be determined by the Administrator; PROVIDED,
HOWEVER, that the term of the loan, including extensions, shall not exceed 10
years. Unless the Administrator determines otherwise, shares of Stock having a
Fair Market Value at least equal to the principal amount of the loan shall be
pledged by the holder to the Company as security for payment of the unpaid
balance of the loan and such pledge shall be evidenced by a pledge agreement,
the terms of which shall be determined by the Administrator, in its discretion;
PROVIDED, HOWEVER, that each loan shall comply with all applicable laws,
regulations and rules of the Board of Governors of the Federal Reserve System
and any other governmental agency having jurisdiction.
SECTION 11.6 SPECIAL TERMINATION. If a Special Terminating Event occurs,
all Rights theretofore granted to such Rights holder, unless earlier terminated
in accordance with their terms, may be exercised by the Rights holder or by his
or her estate or by a person who acquired the right to exercise such Right by
bequest or inheritance or otherwise by reason of the death or Disability of the
Rights holder at any time within one year after the date of the Special
Terminating Event. Notwithstanding the foregoing, an Incentive Stock Option
shall expire three months after the date of Retirement or termination of
employment of an Optionee.
SECTION 11.7 TERMINATION OF EMPLOYMENT.
(a) GENERAL PROVISION. Except as provided in this Section 11.7, no
Right may be exercised unless the Right holder is then a Director of the
Company, or in the employ of the Company or any Parent or Subsidiary, or
rendering services as a consultant to the Company or any Parent or Subsidiary,
and unless (in the case of an employee or Director) he or she has remained
continuously so employed or engaged since the Date of Grant. If the employment
or services of a Right holder (other than a consultant) shall terminate (other
than by reason of a Special Terminating Event), all Rights previously granted to
the Right holder which are exercisable at the time of such termination may be
exercised for the period ending 90 days after such termination, unless otherwise
provided in the Stock Option Agreement or Stock Purchase Agreement; PROVIDED,
HOWEVER, that no Right may be exercised following the date of its expiration;
PROVIDED FURTHER that notwithstanding any other provision of this Plan or any
Page D-10
Stock Option Agreement or Stock Purchase Agreement, the Right holder shall have
the right to exercise the Right, to the extent it was exercisable at termination
of employment: (i) at least six months from the date of termination if
termination is caused by death or disability; and (ii) at least 30 days from the
date of termination if termination was caused other than by death or disability.
Nothing in the Plan or in any Right granted pursuant to the Plan shall confer
upon an employee or consultant any right to continue in the employ of or
engagement with the Company or any Parent or Subsidiary or interfere in any way
with the right of the Company or any Parent or Subsidiary to terminate such
employment or engagement at any time.
(b) TERMINATION FOR CAUSE. For purposes of the Plan, termination for
"cause" shall mean:
(i) The failure or refusal by the Eligible Person to
perform his duties to the Company;
(ii) The Eligible Person's willful disobedience of any orders
or directives of the Board or any officers thereof acting under the authority
thereof or the Eligible Person's deliberate interference with the compliance by
other employees of the Company with any such orders or directives;
(iii) The failure or refusal of the Eligible Person to abide
by or comply with the written policies, standard procedures or regulations of
the Company;
(iv) Any willful or continued act or course of conduct by the
Eligible Person which the Board in good faith determines might reasonably be
expected to have a material detrimental effect on the Company or the business,
operations, affairs or financial position thereof;
(vi) The committing by the Eligible Person of any fraud,
theft, embezzlement or other dishonest act against the Company;
(vii) The entry of any final cease and desist order against
the Eligible Person, or the entry by the Eligible Person of a guilty plea or
plea of nolo contendere, or a conviction, final and non-appealable judgment or
order against the Eligible Person, in any action or proceeding before any court
or administrative body relating to (A) any felony offense, or (B) any crime of
moral turpitude or a violation involving moral turpitude;
(viii) The Eligible Person's chronic or habitual use of drugs
or chronic or habitual consumption of alcoholic beverages; or
(vi) The determination by the Board of Directors of the
Company, in good faith and in the exercise of reasonable discretion, that the
Eligible Person is not competent to perform his duties of employment.
(c) PERMANENT DISABILITY. For purposes of this Option Agreement,
"permanent disability" shall mean permanent and total disability for a period
longer than six months as defined by the Administrator. Optionee shall not be
considered permanently disabled unless he furnishes proof of such disability in
such form and manner, and at such times, as the Administrator of the Plan may
from time to time require.
SECTION 11.8 NON-TRANSFERABILITY OF RIGHTS. Each Stock Option Agreement
and Stock Purchase Agreement shall provide that the Rights granted under the
Plan shall not be transferable other than by will or by the laws of descent and
distribution, and the Rights may be exercised, during the lifetime of the Rights
holder, only by the Rights holder or by his or her guardian or legal
representative.
SECTION 11.9 REGULATORY MATTERS. Each Stock Option Agreement and Stock
Purchase Agreement shall provide that no shares shall be purchased or sold
thereunder unless and until (i) any then applicable requirements of state or
federal laws and regulatory agencies shall have been fully complied with to the
satisfaction of the Company and its counsel and (ii) if required to do so by the
Company, the Optionee or Offeree shall have executed and delivered to the
Company a letter of investment intent in such form and containing such
provisions as the Board or Committee may require.
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SECTION 11.10 RECAPITALIZATION. Each Stock Option Agreement and Stock
Purchase Agreement shall contain provisions required to reflect the provisions
of Article 8.
SECTION 11.11 DELIVERY. Upon exercise of a Right granted under this Plan,
the Company shall issue Stock or pay any amounts due within a reasonable period
of time thereafter. Subject to any statutory obligations the Company may
otherwise have, for purposes of this Plan, thirty days shall be considered a
reasonable period of time.
SECTION 11.12 OTHER PROVISIONS. The Stock Option Agreements and Stock
Purchase Agreements authorized under the Plan may contain such other provisions
not inconsistent with this Plan, including, without limitation, restrictions
upon the exercise of the Rights, as the Administrator may deem advisable.
SECTION 11.13 MAXIMUM GRANT OF RIGHTS TO ANY PERSON. No person shall
receive Rights representing more than 50% of the aggregate number of shares of
Stock that may be issued pursuant to all Rights under the Plan as set forth in
Section 4.1 hereof.
ARTICLE 12
EFFECTIVE DATE OF PLAN
The Plan shall become effective on the date on which the Plan is adopted
by the Board, subject to approval by the Company's stockholders, which approval
must be obtained within one year from the date the Plan is adopted by the Board.
ARTICLE 13
TERM OF PLAN
No Right shall be granted pursuant to the Plan on or after December 31,
2008, but Rights theretofore granted may extend beyond that date.
ARTICLE 14
INFORMATION TO RIGHTS HOLDERS
The Company will cause a report to be sent to each Rights holder not later
than 120 days after the end of each fiscal year. Such report shall consist of
the financial statements of the Company for such fiscal year and shall include
such other information as is provided by the Company to its stockholders.
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