SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. _____)
Filed by the registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box: [ ]
[X] Preliminary Proxy Statement [ ] Confidential, For Use
[ ] Definitive Proxy Statement of the Commission
[ ] Definitive Additional Materials Only (as permitted by
[ ] Soliciting Material Pursuant to Rule Rule 14-a-6(e)(2)
14a-11(c) or Rule 14a-12
CONDOR CAPITAL, 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):
[X] 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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(3) Filing party:
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(4) Date filed:
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CONDOR CAPITAL, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 19, 2000
To The Shareholders:
NOTICE IS HEREBY GIVEN that the 2000 Annual Meeting of Shareholders of Condor
Capital, Inc., a Colorado Corporation, will be held on April 19, 2000 at 3:00
p.m., Pacific Time at 3858 W. Carson Street, Suite 127, Torrance, California
90503-6705. At the meeting, shareholders will act on the following matters:
1. Election of three (3) Directors for a term of one year each;
2. Ratification of the appointment of Jones, Jensen & Company as the
Company's independent accountants for the fiscal year 2000;
3. To consider and vote upon a proposed change in the Company's state of
incorporation from Colorado to Nevada;
4. The adoption of the Condor Capital, Inc., 2000 Stock Option Plan;
5. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Shareholders of record at the close of business on March 17, 2000, are
entitled to notice and to vote at the meeting or any postponements or
adjournments. A complete list of the shareholders entitled to vote at the
meeting will be open to the examination of any shareholder, for any purpose
germane to the meeting, during normal business hours for the ten-day period
ending immediately preceding the date of the meeting, at the Company's offices
at 3858 W. Carson Street, Suite 127, Torrance, CA 90503-6705.
All shareholders are cordially invited to attend the Annual Meeting in
person. However, to ensure your representation at the Annual 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 Annual Meeting may vote in person, even though he or she has returned a
Proxy.
By Order of the Board of Directors
/S/ W. Patrick Battista
March 27, 2000 W. Patrick Battista
Corporate Secretary
DIRECTIONS TO THE
2000 Annual Meeting of Shareholders
to be held at:
3858 W. Carson Street, Suite 127
Torrance, California 90503-6703
(Wednesday, April 19, 2000, 3:00 P.M.)
[MAP TO ANNUAL MEETING LOCATION]
Condor Capital, Inc.
3858 W. Carson Street, Suite 127
Torrance, California 90503-6703
2000 Annual Meeting of Shareholders
April 19, 2000
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PROXY STATEMENT
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INFORMATION CONCERNING SOLICITATION AND VOTING
General
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The enclosed proxy is solicited on behalf of the Board of Directors of
Condor Capital, Inc. (the "Company") for use at the Annual Meeting of
Shareholders to be held April 19, 2000 at 3:00 p.m. local time, or at any
adjournment thereof, for purposes set forth herein and in the accompanying
Notice of Annual Meeting of Shareholders. The meeting will be held at 3858 W.
Carson Street, Suite 127, Torrance, California 90503-6705, (310) 944-9771. When
proxies are properly dated, executed and returned, the shares they represent
will be voted at the meeting in accordance with the instructions of the
shareholder. If no specific instructions are given, the shares will be voted for
the election of the nominees for directors set forth herein and, at the
discretion of the proxy holders, upon such other business as may properly come
before the meeting or any adjournment or postponement thereof.
Record Date and Voting Securities
- ---------------------------------
The close of business on March 17, 2000, has been fixed as the record date
for the determination of shareholders entitled to notice of and to vote at the
Annual Meeting or at any adjournments or postponements thereof. At the record
date, 20,155,010 shares of common stock, no par value per share (the "Common
Stock"), were outstanding, and the Company had approximately 1,002 shareholders
of record.
Revocability of Proxies
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Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Company (Attention:
Secretary) a written notice of revocation or a duly executed proxy bearing a
later date or by attending the meeting and voting in person.
Solicitation
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The cost of solicitation will be borne by the Company. In addition, the
Company may reimburse brokerage firms and other persons representing beneficial
owners of shares for their expenses in forwarding solicitation materials to such
beneficial owners. The Company's directors, officers and employees, without
additional compensation, may solicit proxies personally or by telephone,
facsimile or telegram. Although the exact cost of preparation, mailing and
holding of the meeting is not known at this time, it is anticipated that the
cost will be approximately $5,000.
1
Voting Securities and Principal Holders
---------------------------------------
The Company has two (2) classes of stock, Common stock, no par value
("Common Stock") and Preferred Stock, no par value ("Preferred Stock"). The
Preferred Stock is comprised of Series A Convertible Preferred Stock no par
value ("Series A Preferred Stock") and Series B Convertible Preferred Stock, no
par value ("Series B Preferred Stock"). The Common Stock, Series A Preferred
Stock and Series B Preferred Stock are all entitled to notice and the right to
vote on the matters of the Corporation. However, at the Record Date, the only
shares issued and outstanding were 20,155,010 shares of the Company's Common
stock and therefore the only class of stock entitled to notice and the right to
vote on the matters of the Company is the Common Stock.
Voting Rights
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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 Annual Meeting. This
Proxy Statement and the accompanying Proxy were mailed to shareholders on or
about March ___, 2000.
The required quorum for the transaction of business at the Annual Meeting
is a majority of the votes eligible to be cast by holders of shares of common
stock issued and outstanding on the Record Date. Shares that are voted "FOR,"
"AGAINST," "WITHHELD" OR "ABSTAIN" are treated as being present at the Annual
Meeting for the purposes of establishing a quorum and are also treated as shares
entitled to vote at the Annual Meeting (the "Votes Cast") with respect to such
matter.
Assuming that a quorum is present:
(i) with respect to voting on the election of directors, shareholders shall
not be entitled to cumulate votes and the candidates receiving the highest
number of votes, up to the number of directors to be elected, shall be elected.
Votes cast against a candidate or which are withheld shall have no effect;
(ii) the affirmative vote of the holders of a majority of the shares
present and voting will be required to ratify the appointment of Jones, Jensen &
Company as the Company's independent accountants for the fiscal year 2000;
(iii) the affirmative vote of the holders of two-thirds of all votes
entitled to be cast will be required to approve the change of domicile of the
Company through the merger of the Company with and into its wholly owned
subsidiary, Condor Capital, Inc., a Nevada corporation; and
(iv) the affirmative vote of the holders of a majority of the shares
present and voting will be required to approve the Condor Capital, Inc. 2000
Stock Option Plan (the "Plan" or "2000 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 but
will not be counted as a vote FOR or AGAINST a proposal. Abstentions may be
specified on all proposals except the election of directors. A broker "non-vote"
will have no effect on the adoption of the 2000 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 two-thirds of all
votes of the outstanding shares of Common Stock.
2
Voting Proxies
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The shares of common stock represented by all properly executed proxies
received in time for the meeting will be voted in accordance with the directions
given by the shareholders. If no specification is made, the shares will be voted
FOR the nominee named herein as a director, or their respective substitute as
may be appointed by the Board of Directors and FOR all other proposals.
Security Ownership of Certain Beneficial Owners and Management
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The following table sets forth the beneficial ownership of Common Stock of
the Company as of March 13, 2000 for the following: (i) persons known by the
Company to own beneficially more than five percent (5%) of the Company's Common
stock, (ii) each of the Company's director, (iii) each of the executive
officer's listed in the "Summary Compensation Table" set forth herein, and (iv)
all directors and executive officers as a group.
Name of Beneficial Amount of Percent of
Owner Ownership Class
------------------ --------- ----------
Sefik Yerli 2,500,000 6.20%
Fatma Yerlie 2,500,000 6.20%
John Venette(1) 100,000 0.49%
Robert Hirsekorn(1) 88,120 0.44%
Lee E. Gahr(2) 0 -
W. Patrick Battista(2) 0 -
George H. Lerg(2) 0 -
All Directors and Officers as a Group 0 -
(1) John Venette and Robert Hirsekorn are former officers and directors.
(2) Lee E. Gahr, W. Patrick Battista and George H. Lerg are the present
directors and executive officers of the Company.
Section 16(a) Compliance
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Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers, directors and persons who own more than ten percent of the
Company's Common Stock, to file initial reports of beneficial ownership on Form
3, changes in beneficial ownership on Form 4 and an annual statement of
beneficial ownership on Form 5, with the SEC. Such executive officers, directors
and greater than ten percent shareholders are required by SEC rules to furnish
the Company with copies of all such forms that they have filed.
Based solely on its review of the copies of such forms received by the
Company and representations from certain reporting persons, the Company believes
that during the period from October 19, 1999 (the date which the Company first
became subject to Section 16(a)) until September 30, 1999, all Section 16(a)
filing requirements applicable to its executive officers, directors and
ten-percent shareholders were complied with.
3
Compensation of Directors and Executive Officers
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The following table shows certain information concerning the compensation
of each executive officer of the Company for the fiscal year ended September 30,
1999.
SUMMARY COMPENSATION TABLE
Long Term
Compensation
Awards
------------
Annual Compensation Other Common Stock
----------------------------- Annual Underlying All Other
Salary Bonus Compensation Options /SARs Compensation
Name and Position Year ($) ($) ($) (#) ($)
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Robert Hirsekorn
President 1999 $0 $0 $0 0 0
John J. Venette 1999 $0 $0 $0 0 0
Secretary/Treasurer
Employment Contracts
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There are no employment contracts to which the Company is a party.
Compensation of Directors
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The only compensation of any kind paid to any director or officer of the
Company during the fiscal year ended September 30, 1999 or during either of the
preceding two fiscal years was the issuance of 235,620 shares of Common Stock to
Robert Hirsekorn, and 100,000 shares of Common Stock to John Venette in January
of 1999. Of the shares issued to Mr. Hirsekorn, 12,000 shares had been
authorized for issuance in 1991 and 1993 but had never been issued, 23,620
shares were authorized in August 1997 for services performed for the Company,
and 200,000 shares were authorized in January of 1999, again, for services
performed for the Company. The shares issued to Mr. Venette were authorized in
January of 1999 for services performed for the Company. There are no other
arrangements for the payment of any compensation to directors of the Company.
Option Grants
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No options have been granted pursuant to the 1988 Incentive Stock Option
Plan.
4
PROPOSAL 1.
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ELECTION OF DIRECTORS
Three directors are to be elected at the annual meeting, to hold office for
a term of one (1) year until the next annual meeting of shareholders or until
their successors are duly elected and qualified. It is intended that the
accompanying proxy will be voted in favor of the nominees to serve as directors
unless the shareholder indicates to the contrary on the proxy. Management
expects that the nominees will be available for election, but if any such
nominee is not a candidate at the time the election occurs, it is intended that
such proxy will be voted for the election of another nominee to be designated by
the Board of Directors to fill any such vacancy. Votes withheld will be counted
for the purpose of determining the presence or absence of a quorum for the
transaction of business at the meeting but have no other legal effect upon the
election of directors under Colorado law.
The nominees who are all continuing directors of the Company were elected
pursuant to that certain Acquisition Agreement and Plan of Reorganization
between the Company and the Shareholders of Rogart Limited, a corporation
organized under the laws of the Turkish Republic of Northern Cyprus.
PRESENT DIRECTORS WHO ARE NOMINEES FOR REELECTION
Nominee Name Age Director Since Position
- ------------ --- -------------- ------------------------------
Lee E. Gahr 36 February 16, 2000 Chairman of the Board,
President, CEO and Director
W. Patrick Battista 56 February 16, 2000 Chief Financial Officer
and Secretary
George H. Lerg 64 February 16, 2000 Director
Biographies of Nominees
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Lee E. Gahr
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Mr. Gahr, a resident of Vancouver, BC, has a strong background in
international trade and finance. Mr. Gahr studied business administration and
computer drafting while at the same time establishing an international marketing
and trading company based in Edmonton, Alberta.
Mr. Gahr relocated to Vancouver, BC in 1988 to participate as a
draftsperson on the Alcan "Kemano" power plant project. While in Vancouver, Mr.
Gahr established a trading company which dealt primarily in goods and services
for the Far East markets. In 1991, as a result of businesses in Eastern Russia,
Mr. Gahr became a consultant for the Khabarovsk, Krai Administration, detailing
economic growth and expansion for the city and region of Khabarovsk in the
Russian Federation. His increased involvement in commerce in the Far East
allowed him to relocate in Hong Kong in 1992.
While residing in Hong Kong, Mr. Gahr advised selective corporations on
expansion into the Peoples Republic of China. The focus of this consultation was
for corporations based in Hong Kong, Singapore and Malaysia to expend their
growth in to the Chinese economy beyond that of traditional trade. This
involvement in China contributed to Mr. Gahr becoming a special consultant to
the Ministry of Agriculture regarding the rebuilding and growth of selective
areas within the Ministry of Agriculture. In 1994 Mr. Gahr returned to Vancouver
where he established himself in the field of international financing. For the
5
years since, Mr. Gahr has been involved either as consultant or participant in
numerous financings, both within the public and private arenas. These projects
have required Mr. Gahr's participation in locations stretching across North
America, Eastern and Western Europe, the United Arab Emirates, Turkey and
Mexico.
Presently, Mr. Gahr has divested himself of all business interests save
that of serving as Chairman, President and CEO of Condor Capital Inc. He
continues to serve as a contributing member of a think-tank committee for the
development and integration of Eastern Europe and Middle Eastern business into
the European Union marketplace.
W. Patrick Battista
-------------------
Mr. Battista, a native of Chicago Illinois, is a long term resident of Los
Angeles, California. The majority of Mr. Battista's scholastic years where spent
in California where, while attending college, he joined a large aero-space firm
located in the Los Angeles area. He became project manager in charge of research
and development of environmental cryogenic systems for all space projects under
contract with the company.
Subsequent to aerospace industry, Mr. Battista became Vice President of
Marketing for a manufacture of computerized audio/visual advertising equipment
which also provided consulting services to independent computer peripheral
equipment manufacturers. His responsibility was for initial development,
research and feasibility studies of product marketability and the implementation
of local, national and international sales, coordinated national and
international national media placement and public relations for product
promotion.
Mr. Battista formed Battista Investments, Inc., which acquired, brokered
and developed numerous real estate investments. For more than twenty years, Mr.
Battista was involved in the real estate market, experienced in the sale of
single family residences, managing multiple residential offices, operating
income and investment divisions for a conglomerate tax preparation firm, and the
organization of group investments for the acquisition of commercial and
residential income property.
Currently, Mr. Battista is President of Desert Gaming Inc. (1993) and North
Bay Gaming Inc. (1994). Desert Gaming and North Bay Gaming have the exclusive
distribution rights of electronic technologies used in the gaming industry.
Desert Gaming is predominant in the State of Arizona while North Bay has rights
for ten Northeastern and Central States.
George H. Lerg
--------------
Mr. Lerg, an attorney and resident of San Diego, received a Bachelor of
Science degree in Aeronautical Engineering in 1958 from Arizona State and a
Juris Doctorate degree n 1966 from the University of San Diego. Mr. Lerg served
three years as Aeronautical Engineering Officer in the Air Force, McChord AFB,
Washington. As Squadron Legal Officer, Mr. Lerg served on numerous Military
Courts and received Honorable discharge as a Reserve Captain whereupon Mr. Lerg
was awarded the Air Force Commendation Medal by Secretary of the Air Force,
Eugene M. Zuckert, for outstanding service.
Upon graduation from USD, Mr. Lerg served one year as Research Attorney to
Justice Martin J. Coughlin of the Court of Appeal, Fourth District, State of
California and has practiced ten years as a trial attorney in the Federal and
State courts. For the past two decades Mr. Lerg has practiced all phases of
corporate law and business negotiations. He has served in various positions,
including: General Counsel, Executive Vice President, Chief Executive Officer,
President, Director and Chairman of the Board. He has specialized in advising
start-up leading edge technology companies. The focus of many of these
organizations has been on energy. He has been a contributor to an energy
publication developed by the Office of Technology Assessment for Congress. The
subject was: "Energy Efficiency in the Federal Government: Government by Good
Example?"
6
At present Mr. Lerg is acting as consultant to Voltek, Inc., developer of
the internationally patented Aluminum/Air "Fuel Pak(R)" Fuel Cell. Mr. Lerg
serves as General Counsel and Director to Float Incorporated, developer of
patented technology which provides for a stable platform at sea. Float Inc. is
involved in the potential development of off-shore airports in San Diego and
Japan. Mr. Lerg is "Of Counsel" to the law firm of Potter, Day & Associates, a
firm specializing in international negotiations and asset protection. Mr. Lerg
has recently been named General Counsel to the Board of Directors of ENSTAR,
developer of the Baldwin Ultracapacitor and a revolutionary flexible solar cell.
Mr. Lerg is a recognized Public Speaker on energy and personal security matters.
THE BOARD OF DIRECTORS RECOMMENDS VOTING FOR
THE NOMINEES LISTED ABOVE.
PROPOSAL 2.
-----------
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Company has appointed Jones, Jensen & Company as the Company's
independent accountants for the fiscal year ending September 30, 2000. Jones,
Jensen & Company has not previously served as the Company's independent
accountants. However, the Company believes Jones, Jensen & Company has the
qualifications, skills, and reputation necessary to adequately represent the
interests of the Company. Services to be provided to the Company by Jones,
Jensen & Company in fiscal 2000 include examination of the Company's
consolidated financial statements, review of quarterly reports and services in
connection consultations on various tax and information matters.
THE BOARD OF DIRECTORS RECOMMENDS VOTING FOR SUCH RATIFICATION.
PROPOSAL 3.
-----------
CHANGING THE COMPANY'S STATE OF INCORPORATION
FROM COLORADO TO NEVADA (the "REINCORPORATION").
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 Colorado to Nevada (the "Reincorporation"). The
Board has approved the Reincorporation, which will be effected pursuant to the
Agreement and Plan of Merger (the "Merger Agreement") described below. Under the
Merger Agreement, the Company will be merged with and into its newly formed
Nevada subsidiary, Condor Capital, Inc., ("Condor Nevada"). Condor Nevada is a
wholly-owned subsidiary of the Company recently incorporated in Nevada solely
for the purpose of effecting the Reincorporation. Condor Nevada currently has no
material assets and no business operations. Upon the effectiveness of the
Reincorporation, the Company will cease to exist and Condor Nevada will continue
to operate the Company's business under the name "Condor Capital, Inc."
At the Annual Meeting, the shareholders of the Company (the "Shareholders")
will be asked to consider and vote upon the Reincorporation as outlined in the
Merger Agreement by and between Condor Nevada and Condor Colorado, attached as
Exhibit A. 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.
7
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, Nevada 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. Consequently, many corporations originally domiciled
elsewhere have subsequently changed corporate domicile to Nevada in a manner
similar to that proposed by the Company.
THE MERGER
After the Reincorporation is effected by the Merger Agreement, Condor
Nevada will emerge as the surviving corporation. The terms and conditions of the
Merger are set forth in the Merger Agreement attached as an exhibit to this
Proxy Statement, and the summary of the terms and conditions of the Merger set
forth below is qualified by reference to the full text of the Merger Agreement.
Upon consummation of the Merger, Condor Nevada will continue to exist in its
present form under the name "Condor Capital, 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,
Condor Nevada will succeed to all of the assets and assume all of the
liabilities of the Company.
The Board of Directors of Condor Nevada will be comprised of the persons
elected to the Company's Board of Directors at the Annual Meeting. The Condor
Nevada Board of Directors will be of one class, and shall serve for a term of
one year commencing upon election subsequent to the Reincorporation. It is
anticipated that the directors of Condor Nevada will elect as officers of Condor
Nevada the same persons who are elected as officers of the Company following the
Annual Meeting.
After the Merger, the rights of shareholders and the Company's corporate
affairs will be governed by the Nevada Revised Statutes (the "NRS") and by the
Articles of Incorporation and bylaws of Condor Nevada, instead of the Colorado
Business Corporation Act (the "CBCA") and the articles of incorporation and
bylaws of the Company. Certain material differences are discussed below under
"Comparison of Shareholders Rights under Nevada and Colorado Corporate Law and
Charter Documents." A copy of the Articles of Incorporation of Condor Nevada
(the "Nevada Articles") are included as Exhibit B to this Proxy Statement. The
articles of incorporation and bylaws of the Company and the bylaws of Condor
Nevada (the "Nevada Bylaws") are available for inspection by shareholders of the
Company at the principal offices of the Company located at 3858 W. Carson
Street, Suite 127, Torrance, California 90503-6705. Telephone (310) 944-9771.
Upon the effectiveness of the Merger, each share of Common Stock of the
Company ("Common Stock") issued and outstanding immediately prior thereto shall
be converted into shares of fully paid and nonassessable shares of the Common
Stock of Condor Nevada at a ratio of 1 to 1, and each share of Common Stock of
Condor Nevada 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 will
continue to represent the same number of shares of Condor Nevada Common Stock
and such certificates will be deemed for all corporate purposes to evidence
ownership of shares of Condor Nevada Common Stock. IT WILL NOT BE NECESSARY FOR
THE COMPANY'S SHAREHOLDERS TO EXCHANGE THEIR EXISTING STOCK CERTIFICATES FOR
STOCK CERTIFICATES OF CONDOR NEVADA.
8
Following the effectiveness of the Reincorporation, assuming the
ratification of the adoption of the 2000 Stock Option Plan, Condor Nevada will
assume and continue the Company's 2000 Stock Option Plan of which there have
been no options issued under the 2000 Plan and there are not any other
outstanding options to purchase Common Stock of Condor Colorado.
Consummation of the Merger is subject to the approval of the Company's
shareholders. The affirmative vote two-thirds of all votes entitled to be cast,
whether or not present at the Annual Meeting, who are entitled to vote at the
Annual Meeting is required for the approval and adoption of the Merger. The
Merger is expected to become effective as soon as practicable after shareholder
approval is obtained and all other conditions to the Merger have been satisfied,
including the receipt of all consents, orders and approvals necessary for
consummation of the Merger. Prior to its effectiveness, however, the Merger may
be abandoned by the Board if, for any reason, the Board determines that
consummation of the Merger 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, Series A Preferred Stock, and Series
B Preferred Stock (in each case, a "Holder") will not recognize gain or loss in
respect of Holder's Common Stock, Series A Preferred or Series B Preferred Stock
as a result of the Reincorporation. The Holder's basis in a share of Condor
Nevada will be the same as 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 Condor Nevada 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 Condor Nevada will recognize gain or
loss as a result of the Reincorporation, and Condor Nevada will generally
succeed, without adjustment, to the tax attributes of the Company. Nevada has no
corporate income tax, no taxes on corporate shares, no franchise tax, no
personal income tax, no I.R.S. information sharing agreement, nominal annual
fees, minimal reporting and disclosure requirements, and shareholders are not
public record.
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 Condor Nevada will not be required.
DESCRIPTION OF CAPITAL STOCK AND VOTING RIGHTS
The Company's authorized capital consists of 800,000,000 shares of Common
Stock, no par value and 10,000,000 shares of Preferred Stock, no par value. The
Preferred Stock is comprised of 141,100 shares of Series A Convertible Preferred
Stock, no par value, and 140,000 shares of Series B Convertible Preferred Stock,
no par value. As of March 13, 2000 there were 20,155,010 shares of Common Stock
outstanding and no shares of Series A Convertible Preferred or Series B
9
Convertible Preferred Stock outstanding. The holders of Common Stock, Series A
Convertible Preferred and Series B Convertible Preferred Stock are entitled to
vote on all matters to come before a vote of the shareholders of the Company.
The Series A Preferred Stock and Series B Preferred Stock both contain a
liquidation preference of $.01 per share. The holders of Class A Preferred and
Class B Preferred Stock are not entitled to receive dividends.
COMPARISON OF SHAREHOLDER RIGHTS UNDER NEVADA AND COLORADO CORPORATE LAW
AND CHARTER DOCUMENTS
As set forth below, the Company is governed by the Colorado Business
Corporation Act. However, because the Company was in business before and on June
30, 1994, certain grandfather provisions of the CBCA maintain the two-thirds of
all votes entitled to be cast requirement to approve a merger, or a plan of
share exchange, or an amendment to the articles of incorporation as compared to
a majority of all votes entitled to be cast for corporations that were formed
after June 30, 1994.
GENERAL. Subject to shareholder approval prior to the effective time (the
"Effective Time") of the Reincorporation, the Company will change its domicile
to Nevada and shall thereafter be governed by the Nevada Revised Statues ("NRS")
and by the Nevada Articles and the Nevada Bylaws (together, the "Nevada Charter
Documents"). Upon the filing with and acceptance by the Secretary of State of
Nevada of Articles of Merger in Nevada, the Company will become Condor Capital,
Inc., a Nevada Corporation, ("Condor Nevada") and the outstanding shares of
Company Common Stock will be deemed for all purposes to evidence ownership of,
and to represent, shares of Condor Nevada Common Stock.
The Nevada Charter Documents effectively replace the Company's current
Articles of Incorporation, as amended ("Colorado Articles") and the Colorado
Bylaws (together, the "Colorado Charter Documents") including providing
officers, directors and agents of Condor Nevada 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 Nevada
Common Stock, which will result in their rights as shareholders being governed
by the laws of the State of Nevada. In addition, their rights as shareholders
will be governed by the Nevada Charter Documents. It is not practical to
describe all of the differences between the Nevada Articles and the Colorado
Articles and the Nevada Bylaws and the Colorado Bylaws or all of the differences
between the laws of the States of Nevada and Colorado. The following is a
summary of some of the significant rights of the shareholders under Colorado and
Nevada law and under the Colorado and Nevada 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
Nevada Charter Documents. The authorized capital stock of Condor Nevada, upon
effectuation of the transaction set forth in the Merger Agreement is 125,000,000
shares as 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 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 $0.001 per share. Each share of
Common Stock shall have, for all purposes one (1) vote per share. 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.
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PREFERRED STOCK. The total number of shares of Preferred Stock this
Corporation is authorized to issue is Twenty-five million (25,000,000) shares
with a stated par value of $0.001 per share. The Board of Directors is hereby
authorized from time to time, without shareholder action, to provide for the
issuance of Preferred Stock in one or more series not exceeding in the aggregate
the number of Preferred Stock authorized by these Articles of Incorporation, as
amended from time to time. The Board of Directors of the Corporation is vested
with authority to determine and state the designations and the preferences,
limitations, relative rights, and voting rights, if any of each such series by
the adoption and filing in accordance with the Nevada Revised States, before the
issuance of any shares of such series, of an amendment or amendments to these
Articles of Incorporation determining the terms of such series, which amendment
need not be approved by the shareholder or the holders of any class or series of
shares except as provided by law. All shares of Preferred Stock of the same
series shall be identical with each other in all respects.
VOTING RIGHTS WITH RESPECT TO EXTRAORDINARY CORPORATE TRANSACTIONS
NEVADA. Approval of 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 thereon.
COLORADO. Because the Colorado Charter Documents are silent on the matter
the vote of shareholders required to approve a plan of merger or a plan of share
exchange, or to approve a transaction involving a sale, lease, exchange, or
other disposition of all, or substantially all, of its property, with or without
its good will, otherwise than in the usual and regular course of business such
plan requires the approval of a two-thirds of all the votes entitled to be cast
thereon.
If the Reincorporation is consummated it will be easier to consummate
extraordinary corporate transactions as the shareholder vote needed to pass such
transactions will decrease from a two-thirds approval to a simple majority of
all of the votes entitled to be cast on the transaction by each voting group
entitled to vote thereon.
SHAREHOLDERS CONSENT WITHOUT A MEETING
NEVADA. Any action required or permitted to be taken at a meeting of the
shareholders may be taken without a meeting if, before or after the action, a
written consent thereto is signed by shareholders holding at least a majority of
the voting power, except that if a different proportion of voting power is
required for such an action at a meeting, then that proportion of written
consents is required. In no instance where action is authorized by written
consent need a meeting of shareholders be called or notice given.
COLORADO. Any action required or permitted by the CBCA to be taken at a
shareholders' meeting may be taken without a meeting if all of the shareholders
entitled to vote thereon consent to such action in writing. No action taken
without a meeting shall be effective unless the corporation has received
writings that describe and consent to the action, signed by all of the
shareholders entitled to vote on the action. Any such writing may be received by
the corporation by electronically transmitted facsimile or other form of wire or
wireless communication providing the corporation with a complete copy thereof,
including a copy of the signature thereto. Any shareholder who has signed a
writing describing and consenting to action taken pursuant to this section may
revoke such consent by a writing signed and dated by the shareholder describing
the action and stating that the shareholder's prior consent thereto is revoked,
if such writing is received by the corporation prior to the date the last
writing necessary to effect the action is received by the corporation.
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If the Reincorporation is consummated, the number of shareholders required
to consent to an action without a shareholders meeting will decrease from all
shareholders providing their consent to the action in writing, to a simple
majority of the voting power shareholders consenting to the action in writing.
DISSENTERS' RIGHTS
NEVADA. 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 Nevada Revised Statutes (NRS); (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.
COLORADO. In addition to the rights and restrictions afforded dissenting
shareholders under Nevada law, a shareholder, whether or not entitled to vote,
is entitled to dissent and obtain payment of the fair value of the shareholder's
shares in the event of a reverse split that reduces the number of shares owned
by the shareholder to a fraction of a share or to scrip if the fractional share
or scrip so created is to be acquired for cash or the scrip is to be voided.
DIVIDENDS
NEVADA. The Nevada Bylaws provide that, dividends on outstanding Preferred
Shares shall be paid or declared and set apart for payment before any dividends
shall be paid or declared and set apart for payment on the common shares with
respect to the same dividend period. If upon any voluntary or involuntary
liquidation, dissolution, or winding up of the Corporation, the assets available
for distribution to holders of Preferred Shares of all series shall be
insufficient to pay such holders the full preferential amount to which they are
entitled, then such assets shall be distributed ratably among the shares of all
series of Preferred Shares in accordance with the respective preferential
amounts (including unpaid cumulative dividends, if any) payable with respect
thereto. Subject to the cumulative dividend preferences to holders of Preferred
Shares, the shares of Common Stock are entitled to participate in any dividends
available therefore 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 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 Preferred Shares and Common Stock. The
Board of Directors is authorized, without shareholder action, to provide for the
issuance of Preferred Shares in one or more series not exceeding in the
aggregate the number of Preferred Shares authorized by the 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 thereof.
12
COLORADO. The Colorado charter documents provide that the Preferred Shares
shall not receive a dividend, and that dividends may be paid upon the Common
Stock, as and when declared by the Board of Directors, out of funds of the
Corporation to the extent and in the manner provided by law.
If the Reincorporation is consummated, the Board of Directors of the
Company will have the authority to issue Preferred shares with a dividend
preference that was not available under the Colorado Charter documents.
ANTI-TAKEOVER STATUTES
NEVADA. Except under certain circumstances Nevada law prohibits a "business
combination" between the corporation and an "interested shareholder", however
the Nevada Articles expressly elect not to be governed by these provisions as
contained in NRS 87.411 to 78.444 inclusive. To the extent permissible under the
applicable law of any jurisdiction to which the corporation may become subject
by reason of the conduct of business, the ownership of assets, the residence of
shareholders, the location of offices or facilities, or any other item, the
Company has elected not to be governed by the provisions of any statute that (i)
limits, restricts, modified, suspends, terminates, or otherwise affects the
rights of any shareholder to cast one vote for each share of common stock
registered in the name of such shareholder on the books of the corporation,
without regard to whether such shares were acquired directly from the Company or
from any other person and without regard to whether such shareholder has the
power to exercise or direct the exercise of voting power over any specific
fraction of the shares of common stock of the Company issued and outstanding or
(ii) grants to any shareholder the right to have his or her stock redeemed or
purchased by the corporation or any other shareholder on the acquisition by any
person or group of persons of shares of the Company. In particular, to the
extent permitted under the laws of the state of Nevada, the Company elects not
to be governed by any such provision, including the provisions of the Nevada
Control Share Acquisitions Act, Sections 78.378 to 78.3793, inclusive, of the
Nevada Revised Statutes, or any statute of similar effect or tenor.
COLORADO. Colorado law does not specifically address anti-takeover
provisions.
QUORUM OF DIRECTORS
NEVADA. A majority of the Board of Directors in office shall constitute a
quorum for the transaction of business, but if at any meeting of the Board there
be less than a quorum present, a majority of those present may adjourn from time
to time, until a quorum shall be present, and no notice of such adjournment
shall be required. The Board of Directors may prescribe rules not in conflict
with these Bylaws for the conduct of its business; provided, however, that in
the fixing of salaries of the officers of the corporation, the unanimous action
of all the directors shall be required.
COLORADO. A quorum at all meetings of the Board of Directors consists of a
majority of the number of directors then holding office, but a smaller number
may adjourn from time to time without further notice, until a quorum is secured.
The act of a majority of the Directors present at a meeting which a quorum is
present shall be the act of the Board of Directors.
SPECIAL MEETINGS OF SHAREHOLDERS
NEVADA. Special meetings of the shareholders may be held at the office of
the corporation in the State of Nevada, or elsewhere, whenever called by the
President, or by the Board of Directors, or by vote of, or by an instrument in
writing signed by the holders of a majority of the issued and outstanding
capital stock. Not less than ten (10) nor more than sixty (60) days written
notice of such meeting, specifying the day, hour and place, when and where such
meeting shall be convened, and the objects for calling the same, shall be mailed
in the United States Post Office, or via express or overnight mail, addressed to
each of the shareholders of record at the time of issuing the notice, and at
his, her, or its address last known, as the same appears on the books of the
corporation.
13
The written certificate of the officer or officers calling any special
meeting setting forth the substance of the notice, and the time and place of the
mailing of the same to the several shareholders, and the respective addresses to
which the same were mailed, shall be prima facie evidence of the manner and fact
of the calling and giving such notice.
COLORADO. A corporation shall hold a special meeting of shareholders: (a)
On call of its board of directors or the person or persons authorized by the
bylaws or resolution of the board of directors to call such a meeting; or (b) If
the corporation receives one or more written demands for the meeting, stating
the purpose or purposes for which it is to be held, signed and dated by the
holders of shares representing at least ten percent of all the votes entitled to
be cast on any issue proposed to be considered at the meeting. Special
shareholders' meetings may be held in or out of this state at the place stated
in or fixed in accordance with the bylaws, or, if not so stated or fixed, at a
place stated in or fixed in accordance with a resolution of the board of
directors. If no place is so stated or fixed, special meetings shall be held at
the corporation's principal office. Only business within the purpose or purposes
described in the notice of the meeting may be conducted at a special
shareholders' meeting.
AMENDMENTS TO CHARTER
NEVADA. The articles of incorporation may be amended in any of the
following respects by a vote of a majority of the shareholders entitled to vote
on an amendment: (a) by addition to its corporate powers and purposes, or
diminution thereof, or both. (b) by substitution of other powers and purposes,
in whole or in part, for those prescribed by its articles of incorporation, (c)
by increasing, decreasing or reclassifying its authorized stock, by changing the
number, par value, preferences, or relative, participating, optional or other
rights, or the qualifications, limitations or restrictions of such rights, of
its shares, or of any class or series of any class thereof whether or not the
shares are outstanding at the time of the amendment, or by changing shares with
par value, whether or not the shares are outstanding at the time of the
amendment, into shares without par value or by changing shares without par
value, whether or not the shares are outstanding at the time of the amendment,
into shares with par value, either with or without increasing or decreasing the
number of shares, and upon such basis as may be set forth in the certificate of
amendment, (d) by changing the name of the corporation, (e) by making any other
change or alteration in its articles of incorporation that may be desired. If
any proposed amendment would alter or change any preference or any relative or
other right given to any class or series of outstanding shares, then the
amendment must be approved by the vote, in addition to the affirmative vote
otherwise required, of the holders of shares representing a majority of the
voting power of each class or series affected by the amendment regardless of
limitations or restrictions on the voting power thereof.
COLORADO. The board of directors or the holders of shares representing at
least ten percent of all of the votes entitled to be cast on the amendment may
propose an amendment to the articles of incorporation for submission to the
shareholders. For an amendment to the articles of incorporation to be adopted
(a) The board of directors shall recommend the amendment to the shareholders
unless the amendment is proposed by shareholders or unless the board of
directors determines that, because of conflict of interest or other special
circumstances, it should make no recommendation and communicates the basis for
its determination to the shareholders with the amendment; and (b) such amendment
shall be approved by each voting group entitled to vote separately on the
amendment by two-thirds of all the votes entitled to be cast on the amendment by
that voting group.
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NOTICE, ADJOURNMENT AND PLACE OF SHAREHOLDERS' MEETINGS
NEVADA. The Board of Directors may designate any place, either within or
without the state of incorporation, as the place of meeting for any annual or
special meeting. A waiver of notice, signed by all shareholders entitled to vote
at a meeting, may designate any place, either within or without the state of
incorporation, as the place for the holding of such meeting. If no designation
is made, the place of meeting shall be the registered office of the corporation
in the state of incorporation. Nevada Bylaws provide that the notification of
the annual meeting shall state the purpose or purposes for which the meeting is
called and the date, time, and the place, which may be within or without this
state, where it is to be held. A copy of such notice shall be either delivered
personally to, or shall be mailed with postage prepaid, to each shareholder of
record entitled to vote at such meeting not less than ten (10) nor more than
sixty (60) days before such meeting.
COLORADO. Written notice stating the place, day, and hour of the meeting,
and, in case of a special meeting, the purpose or purposes for which the meeting
is called, shall be delivered not less than ten (10) days nor more than fifty
(50) days before the date of the meeting, either personally or by mail, by or at
the direction of the President, the Secretary, or the officer or person calling
the meeting to each shareholder of record entitled to vote at such meeting;
except that, if the authorized shares are to be increased, at least thirty days
notice shall be given, and if the sale of all or substantially all of the
corporation's assets is to be voted upon, at least twenty days notice shall be
given.
DIRECTORS
NEVADA. The Nevada Certificate provides that the initial number of members
of the Nevada board shall be three (3), and thereafter shall not be less than
one nor more than seven (7), and may, at any time or times, be increased or
decreased by a duly adopted amendment to the Articles of Incorporation, or in
such manner as shall be provided in the Bylaws of the corporation or by an
amendment to the Bylaws of the corporation duly adopted by either the Board of
Directors or the Shareholders.
COLORADO. The Colorado Articles provide that the number of directors shall
be fixed by the Bylaws of the Corporation, with the provision that there need
only be only as many directors as there are shareholders in the event that the
outstanding shares are held of record by fewer than three shareholders. The
Bylaws provide that the Board shall not be more than seven (7) directors. A
majority of the number of directors constitutes a quorum for the transaction of
business. The Colorado 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
NEVADA. The Nevada Bylaws provide each director shall hold office until the
next annual meeting of shareholders and until his or her successor shall have
been elected and qualified. At a meeting expressly called for the removal of one
or more directors, such directors may be removed by a vote of a majority of the
shares of outstanding stock of the corporation entitled to vote at an election
of directors. Vacancies on the board may be filled by the remaining directors.
COLORADO. The Colorado 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 Colorado law and the Colorado
Charter Documents, directors may be removed only if the number of votes cast in
favor of removal exceeds the number of votes cast against removal, with or
without cause. Vacancies on the board may be filled by the remaining directors
or the shareholders.
15
INSPECTION OF BOOKS AND RECORDS
NEVADA. Pursuant to the Bylaws of Condor Nevada, the Board of Directors
shall have power to close the share books of the corporation for a period of not
to exceed sixty (60) days preceding the date of any meeting of shareholders, or
the date for payment of any dividend, or the date for the allotment of rights,
or capital shares shall go into effect, or a date in connection with obtaining
the consent of shareholders for any purpose. In lieu of closing the share
transfer books as aforesaid, the Board of Directors may fix in advance a date,
not exceeding sixty (60) days preceding the date of any meeting of shareholders,
or the date for the payment of any dividend, or the date for the allotment of
rights, or the date when any change or conversion or exchange of capital shares
shall go into effect, or a date in connection with obtaining any such consent,
as a record date for the determination of the shareholders entitled to a notice
of, and to vote at, any such meeting and any adjournment thereof, or entitled to
receive payment of any such dividend, or to any such allotment of rights, or to
exercise the rights in respect of any such change, conversion or exchange of
capital stock, or to give such consent. If the share transfer books shall be
closed or a record date set for the purpose of determining shareholders entitled
to notice of or to vote at a meeting of shareholders, such books shall be closed
for, or such record date shall be, at least ten (10) days immediately preceding
such meeting.
COLORADO. Pursuant to the Colorado Bylaws, the officer or agent having
charge of the stock transfer on the books for shares of the corporation shall
make, at least ten days before such meeting of shareholders, a complete record
of the shareholders entitled to vote at each meeting of shareholders or any
adjournment thereof, arranged in alphabetical order, with the address and the
number of shares held by each. The record, for a period of ten (10) days prior
to such meeting, shall be kept in file at the principal office of the company,
whether within or without the State of Colorado, and shall be subject to
inspection by any shareholder for any purpose germane to the meeting at any time
during usual business hours. Such record shall be produced and kept open at the
time and place of the meeting and shall be subject to the inspection of any
shareholder for any purpose germane to the meeting during the whole time of the
meeting for the purposes thereof. The original stock transfer books shall be the
prima facie evidence as to who are the shareholders entitled to examine the
record or transfer books or to vote at any meeting of shareholders.
TRANSACTIONS WITH OFFICERS AND DIRECTORS
NEVADA. Article 10. of the Nevada Charter documents state that the Nevada
Corporation expressly elects NOT to be governed by NRS 78.411 to 78.444
inclusive, which govern combinations with interested shareholders, affiliates
and associates of the Nevada Corporation. The result of this election provides
greater freedom to the Nevada Corporation regarding certain mergers,
consolidations, sales, transfers and other dispositions between itself and
interested shareholders of the Nevada Corporation.
COLORADO. The Company Articles in conjunction with the CBCA provide that no
contract or other transaction between the Corporation and one or more of its
directors or any other corporation, firm, association, or entity in which one or
more of its directors are directors or officers or a re financially interested
shall either be void or voidable solely because of such relationship or interest
or solely because such directors are present at the meeting of the board of
directors or a committee thereof which authorizes, approves, or ratifies such
contract or transaction or solely because their votes are counted for such
purpose if: (a) the fact of such relationship or interest is disclosed or know
to the board of directors or committee which authorizes, approves, or ratifies
the contract or transaction by a vote or consent sufficient for the purposes
without counting the votes or consents of such interested directors; or (b) the
fact that such relationship or interest is disclosed or known to the
shareholders entitled to vote and they authorize, approve or ratify such
contract or transaction by vote or written consent; or (c) the contact or
transaction is fair and reasonable to the corporation. Common or interested
directors may be counted in determining the presence of a quorum at a meeting of
the board of directors or a committee thereof which authorizes, approves, or
ratifies such contract or transaction.
16
LIMITATION ON LIABILITY OF DIRECTORS; INDEMNIFICATION OF OFFICERS
AND DIRECTORS NEVADA.
Pursuant to the Nevada Charter Documents, the corporation shall have the
power to indemnify any person who was or is a party or is threatened to be made
a party to any threatened, pending, or completed action, or suit by or in the
right of the corporation to procure a judgment in its favor by reason of the
fact that he or she is or was a director, officer, employee, or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise, against expenses (including attorneys'
fees) judgments, fines, and amounts paid in settlement actually and reasonably
incurred by him or her in connection with any such action, suit or proceeding,
if he or she acted in good faith and in a manner he or she reasonably believed
to be in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
his or her conduct was unlawful. The termination of any action, suit, or
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which he or she reasonably
believed to be in or not opposed to the best interests of the corporation, and
with respect to any criminal action or proceeding, he or she had reasonable
cause to believe that his or her conduct was unlawful.
Condor Nevada Bylaws specifically provide that the corporation shall have
the power to indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending, or completed action or suit by or in
the right of the corporation to procure a judgment in its favor by reason of the
fact that he or she is or was a director, officer, employee, or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise, against expenses (including attorneys'
fees) actually and reasonably incurred by him or her in connection with the
defense or settlement of such action or suit, if he or she acted in good faith
and in a manner he or she reasonably believed to be in or not opposed to the
best interests of the corporation, except that no indemnification shall be made
in respect of any claim, issue, or matter as to which such a person shall have
been adjudged to be liable for negligence or misconduct in the performance of
his or her duty to the corporation, unless and only to the extent that the court
in which the action or suit was brought shall determine on application that,
despite the adjudication of liability but in view of all circumstances of the
case, the person is fairly and reasonably entitled to indemnity for such
expenses as the court deems proper.
COLORADO. The Colorado Articles and the CBCA provide that the corporation
shall eliminate or limit the personal liability of a director to the corporation
or to its shareholders for monetary damages for breach of fiduciary duty as a
director; except that any such provision shall not eliminate or limit the
liability of a director to the corporation or to its shareholders for monetary
damages for any breach of the director's duty of loyalty to the corporation or
to its shareholders, acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, or any transaction from
which the director directly or indirectly derived an improper personal benefit.
No such provision shall eliminate or limit the liability of a director to the
corporation or to its shareholders for monetary damages for any act or omission
occurring before the date when such provision becomes effective. No director or
officer shall be personally liable for any injury to person or property arising
out of a tort committed by an employee unless such director or officer was
personally involved in the situation giving rise to the litigation or unless
such director or officer committed a criminal offense in connection with such
situation.
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DISSENTERS' RIGHTS AS A RESULT OF THE REINCORPORATION MERGER
Shareholders have dissenters' rights in Colorado 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 pursuant to Colorado
Revised Statutes Annotated ("C.R.S.A.") C.R.S.A. section 7-113-101 et. sec. A
copy of Section 7-113-201 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 Colorado Law, 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 Annual 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 Annual Meeting.
Within ten days after the effective date of the Reincorporation, Condor
Nevada will send to each shareholder who has satisfied both of the foregoing
conditions a written notice in which Condor Nevada 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 Condor Nevada, 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, Condor Nevada will pay each
dissenting shareholder the amount that Condor Nevada 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, Condor Nevada 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 Condor Nevada must notify
Condor Nevada in writing of his or her own estimate of the fair value of the
shares within 30 days after the date Condor Nevada makes or offers payment. If
the dissenting shareholder and Condor Nevada are unable to agree on the fair
value of the shares, then Condor Nevada will commence a proceeding with the
Colorado courts within 60 days after receiving the dissenter's notice of his or
her own estimate of fair value. If Condor Nevada does not commence such a
proceeding within the 60-day period, it must pay each dissenter whose demand
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 Condor Nevada 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 Condor Nevada 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 Condor Nevada. Both Condor Nevada 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 Condor Nevada in exchange for shares.
In such event the shareholder would still hold the appropriate number of shares
of Condor Nevada.
18
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 NEVADA INCLUDING THE
APPLICABILITY OF THE LAWS OF ANY STATE OR OTHER JURISDICTION.
IMPACT ON HOLDERS OF COMPANY PREFERRED STOCK
No Preferred Stock is issued or outstanding.
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 September 30, 1999 are incorporated herein by reference:
"Item 1. Business", "Item 5. Market Information for Common Equity and Related
Shareholder Matters", and "Item 7. Financial Statements."' The following
portions of the Company's Quarterly Report on Form 10-QSB for the period ended
December 31, 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 Condor Capital, Inc. 3858 W. Carson Street, Suite
127, Torrance, CA 90503-7605, Attention: Secretary (telephone number: (310)
944-9771).
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 Colorado law, the affirmative vote of two-thirds of all the votes
entitled to be cast 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 Nevada law
could result in increased costs and expenses to the Company to the potential
indirect detriment of the shareholders. See "Comparison of Shareholder Rights
under Colorado and Nevada 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 Colorado corporation.
19
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.
Vote Required For Adoption
- --------------------------
The affirmative vote of holders of two-thirds of all the votes entitled to
be cast is required to approve the proposed Merger Agreement.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL.
PROPOSAL 4.
----------
THE ADOPTION OF THE COMPANY YEAR 2000 STOCK OPTION PLAN.
On March 3, 2000, the Board adopted the Condor Capital, Inc. 2000 Stock
Option Plan (the "2000 Plan" or "the Plan"), the provisions and terms of which
are more flexible than the Condor Capital, Inc. 1988 Incentive Stock Option Plan
(the "1988 Plan") which has expired by its terms. The 2000 Plan enables 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 realize the benefits
of granting stock-based compensation. The Company's stock is quoted on the OTC
Bulletin Board under the ticker symbol "CNOP." The last closing sale price of
the Common Stock as of March 13, 2000 was $1.625 per share.
SUMMARY OF 2000 PLAN TERMS
The following summary of the 2000 Plan is qualified in its entirety by the
specific language of the 2000 Plan, a copy of which is attached as "Exhibit D."
PURPOSE. The purpose of the 2000 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 2000 Plan may be administered by the Board of
Directors, or a committee of appointed by the Board of Directors whose members
serve at the pleasure of the Board. The Board of Committee administering the
2000 Plan is referred to as the "Committee." Subject to the provisions of the
2000 Plan, the Committee 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 awards
are to be granted under the Plan; (v) from time to time to select, subject to
20
the limitations set forth in this Plan, those eligible persons to whom options
shall be granted; (vi) to determine the number of shares of stock to be made
subject to each grant of an option; (vii) to determine whether each option is to
be an Incentive Stock Option or a Nonqualified Stock Option; (viii) to prescribe
the terms and conditions of each stock Option, including, without limitation,
the exercise price and method of payment, vesting provisions and repurchase
provisions, and to specify the provisions of the Stock Option Agreement relating
to such grant or sale; (ix) to amend any outstanding options 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 an optionee 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 shares 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 2000 Plan shall
be 5,000,000. Shares reserved for the Plan may consist, in whole or in part, of
authorized and unissued shares or treasury shares.
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 2000 Plan.
CONSIDERATION. The Common Stock or other property underlying an option may
be issued for any lawful consideration as determined by the Committee,
including, without limitation, a cash payment, services rendered, or the
cancellation of indebtedness. An option may provide for a exercise 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 option may
permit the recipient to pay the exercise 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 option.
TERMINATION OF OPTIONS. All options granted under the 2000 Plan expire
seven (7) years from the date of grant, or such shorter period as is determined
by the Committee. 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 2000 Plan.
AMENDMENT AND TERMINATION OF THE 2000 PLAN. The Committee may amend the
2000 Plan at any time, may suspend it from time to time or may terminate it
without approval of the shareholders; provided, however, that shareholder
approval is required for any amendment which materially increases the number of
shares for which options may be granted, materially modifies the requirements of
eligibility, or materially increases the benefits which may accrue to recipients
of options under the 2000 Plan. However, no such action by the Board or
shareholders may unilaterally alter or impair any option previously granted
under the 2000 Plan without the consent of the recipient of the option.
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-qualified
stock options ("Non-qualified Stock Options") based upon the United States
22
Internal Revenue Code of 1986, as amended, and the Treasury Regulations
promulgated thereunder, all of which are subject to modification at any time.
The 2000 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 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-QUALIFIED STOCK OPTIONS. No income generally
is recognized by a holder of Non-qualified Stock Options at the time
Non-qualified Stock Options are granted under the 2000 Plan. In general, at the
time shares of Common Stock are issued to a holder pursuant to the exercise of
Non-qualified 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-qualified 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-qualified
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.
23
CONSEQUENCES TO THE COMPANY: NON-QUALIFIED 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-qualified Stock Options.
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 2000 STOCK OPTION PLAN ARE DESIRABLE AND IN THE BEST INTERESTS OF THE
COMPANY'S SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE
"FOR" SUCH PROPOSAL.
Vote Required For Adoption
- --------------------------
The affirmative vote of holders of a majority of the Common Shares present
in person or by proxy at the meeting is required to approve the proposed 2000
Stock Option Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL.
Deadline for Receipt of Shareholder Proposals for the 2001 Annual Meeting.
- -------------------------------------------------------------------------
Proposals of shareholders of the Company which are intended to be presented
at the Company's 2001 Annual Meeting of Shareholders, must be received by the
Company no later than September 30, 2000 and otherwise be in compliance with the
Company's Articles of Incorporation and Bylaws and with applicable laws and
regulations in order to be included in the proxy statement and form of Proxy
relating to that meeting.
OTHER BUSINESS
--------------
The Company knows of no other matters to be submitted at the meeting. If
any other matters properly come before the meeting or any adjournment or
postponement thereof, it is the intention of the persons named in the enclosed
form of Proxy to vote the shares they represent as the Board of Directors may
recommend.
By Order of the Board of Directors
/S/ W. Patrick Battista
March 27, 2000 W. Patrick Battista
Corporate Secretary
24
EXHIBIT A
---------
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (hereinafter called the "Merger
Agreement") is made as of March XY, 2000, by and between Condor Capital, Inc., a
Colorado corporation ("Condor Colorado"), and Condor Capital, Inc., a Nevada
corporation ("Condor Nevada"). Condor Colorado and Condor Nevada are sometimes
referred to as the "Constituent Corporations."
Recitals
A. Whereas, The authorized capital stock of Condor Colorado consists of
800,000,000 shares of Common Stock, no par value of which 20,155,010 shares are
issued and outstanding, and 10,000,000 shares of Preferred Stock, no par value,
of which 141,100 shares are designated Series A Convertible Preferred Stock, no
par value and 140,000 are designated Series B Convertible Preferred Stock, no
par value. There are no shares of Preferred Stock issued and outstanding.
B. Whereas, the authorized capital stock of Condor Nevada, upon
effectuation of the transactions set forth in this Merger Agreement, will
consist of 100,000,000 shares of Common Stock, $0.001 par value and 25,000,000
shares of Preferred Stock, $0.001 par value.
C. Whereas, the directors of the Constituent Corporations deem it advisable
and to the advantage of the Constituent Corporations that Condor Colorado merge
with and into Condor Nevada upon the terms and conditions herein provided, for
the sole purpose of effecting a change of domicile from the State of Colorado to
the State of Nevada.
D. Whereas, the merger will have no effect or change in the nature of the
business or management of the resulting business operating through the surviving
corporation.
Agreement
NOW, THEREFORE, the parties do hereby adopt the plan of reorganization
encompassed by this Merger Agreement and do hereby agree that Condor Colorado
shall merge into Condor Nevada on the following terms, conditions and other
provisions:
1. TERMS AND CONDITIONS.
1.1 Merger. Condor Colorado shall be merged with and into Condor Nevada
(the "Merger"), and Condor Nevada shall be the surviving corporation (the
"Surviving Corporation") effective upon the date when this Merger Agreement is
filed with the Secretary of State of Nevada (the "Effective Date").
1.2 Succession. On the Effective Date, Condor Nevada shall continue its
corporate existence under the laws of the State of Nevada, and the separate
existence and corporate organization of Condor Colorado, 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
A-1
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 Condor Colorado and Condor Nevada. 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 Condor Colorado issued and outstanding immediately prior thereto shall be
converted into shares of fully paid and nonassessable shares of the Common Stock
of Condor Nevada at a ratio of 1 to 1, and (ii) each share of Common Stock of
Condor Nevada 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 Condor Colorado shall be deemed for
all purposes to evidence ownership of and to represent the shares of Condor
Nevada into which the shares of Condor Colorado 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 Condor Nevada evidenced by such
outstanding certificate as above provided.
1.6 Options. On the Effective Date, the Surviving Corporation will assume
and continue Condor Colorado's 2000 Stock Option Plan, assuming that the same is
adopted at the Annual Meeting of the Shareholders of Condor Colorado, and the
outstanding and unexercised portions of all options to purchase Common Stock of
Condor Colorado, if any, including without limitation all options outstanding
under such stock plan and any other outstanding options, shall be converted into
options of Condor Nevada, such that an option for shares of Condor Colorado
shall be converted into an option for shares of Condor Nevada 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, Condor Nevada hereby assumes the outstanding
and unexercised portions of such options and the obligations of Condor Colorado
with respect thereto, if any.
2. CHARTER DOCUMENTS, DIRECTORS AND OFFICERS.
2.1 Articles of Incorporation and Bylaws. The Articles of Incorporation and
Bylaws of Condor Nevada in effect on the Effective Date shall continue to be the
Articles of Incorporation and Bylaws of the Surviving Corporation.
A-2
2.2 Directors. The directors of Condor Colorado 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 Condor Colorado 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.
3. 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 Condor Colorado 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 Condor Colorado 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
Condor Colorado 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
Condor Colorado, this Merger Agreement may be amended in any manner (except
that, after the approval of the Merger Agreement by the shareholders of Condor
Colorado, the principal terms may not be amended without the further approval of
the shareholders of Condor Colorado) as may be determined in the judgment of the
respective Board of Directors of Condor Nevada and Condor Colorado 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 Condor Colorado in
accordance with applicable provisions of the Business Corporations Act of the
State of Utah; and Condor Colorado, as sole shareholder of Condor Nevada, shall
have approved the Merger in accordance with the General Corporation Law of the
State of Nevada; and any and all consents, permits, authorizations, approvals,
and orders deemed in the sole discretion of Condor Colorado 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 Condor Colorado or Condor Nevada or both, notwithstanding
the approval of this Merger Agreement by the shareholders of Condor Colorado or
Condor Nevada, 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
Condor Colorado and Condor Nevada, 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 Condor Colorado
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.
A-3
IN WITNESS WHEREOF, this Merger Agreement, having first been duly approved
by the Board of Directors of Condor Colorado and Condor Nevada, is hereby
executed on behalf of each said corporation and attested by their respective
officers thereunto duly authorized.
CONDOR CAPITAL, INC.
A Colorado Corporation
- ---------------------------------- -----------------------------------
By: Lee E. Gahr By: W. Patrick Battista
Its: President and CEO Its: Secretary
CONDOR CAPITAL, INC.
A Nevada Corporation
- ---------------------------------- -----------------------------------
By: Lee E. Gahr By: W. Patrick Battista
Its: President and CEO Its: Secretary
A-4
EXHIBIT B
---------
ARTICLES OF INCORPORATION
OF
CONDOR CAPITAL, INC.
- --------------------------------------------------------------------------------
ARTICLE 1.
Company Name
------------
1.1 The name of this corporation is Condor Capital Inc.
ARTICLE 2.
Duration
--------
2.1 The corporation shall continue in existence perpetually unless sooner
dissolved according to law.
ARTICLE 3.
Principal Office
----------------
3.1 The principal office in the state of Nevada is located at 318 North
Carson Street, Suite 208, Carson City Nevada 89701. The name and address of its
Resident Agent is Paracorp Incorporated, 318 North Carson Street, Suite 208,
Carson City, Nevada 89701.
ARTICLE 4.
Purpose
-------
4.1 The purpose for which the corporation is organized is to engage in any
lawful activity within or without the State of Nevada.
ARTICLE 5.
Board of Directors
------------------
5.1. Number. The members of the governing Board of the Corporation shall be
styled "Directors", and the first Board shall be three (3) in number. The Number
of directors shall not be reduced to less than one (1) nor exceed seven (7) and
may, at any time or times, be increased or decreased in such manner as shall be
provided in the Bylaws of the corporation or by an amendment to the Bylaws of
the corporation duly adopted by either the Board of Directors or the
Shareholders.
B-1
5.2 The names and addresses of the first Board of Directors are as follows:
Lee E. Gahr
#602-1489 Marine Drive
West Vancouver
BC, Canada V7T 1B8
W. Patrick Battista
3858 W. Carson Street
Suite 127
Torrance, California 90503-6705
George H. Lerg
P.O. Box 3228
Rancho Santa Fe, California 92067-3228
ARTICLE 6.
Capital Stock
--------------
6.1 Authorized Capital Stock. 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 Five Million (125,000,000) 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.
6.2 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 $0.001 per
share. Each share of Common Stock shall have, for all purposes one (1) vote per
share. 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.
6.3. Preferred Stock. The total number of shares of Preferred Stock this
Corporation is authorized to issue is Twenty-five million (25,000,000) shares
with a stated par value of $0.001 per share. The Board of Directors is hereby
authorized from time to time, without shareholder action, to provide for the
issuance of Preferred Stock in one or more series not exceeding in the aggregate
the number of Preferred Stock authorized by these Articles of Incorporation, as
amended from time to time. The Board of Directors of the Corporation is vested
with authority to determine and state the designations and the preferences,
limitations, relative rights, and voting rights, if any of each such series by
the adoption and filing in accordance with the Nevada Revised States, before the
issuance of any shares of such series, of an amendment or amendments to these
Articles of Incorporation determining the terms of such series, which amendment
need not be approved by the stockholder or the holders of any class or series of
shares except as provided by law. All shares of Preferred Stock of the same
series shall be identical with each other in all respects.
B-2
ARTICLE 7.
No Further Assessments
----------------------
7.1 The capital stock, after the amount of the subscription price has been
paid in money, property, or services, as the Directors shall determine, shall be
subject to no further assessment to pay the debts of the corporation, and no
stock issued as fully paid up shall ever be assessable or assessed, and these
Articles of Incorporation shall not and cannot be amended, regardless of the
vote therefore, so as to amend, modify or rescind this Article 6., or any of the
provisions hereof.
ARTICLE 8.
No Preemptive Rights
--------------------
8.1 None of the shares of the Corporation shall carry with them any
preemptive right to acquire additional or other shares of the corporation and no
holder of any stock of the Corporation shall be entitled, as of right, to
purchase or subscribe for any part of any unissued shares of stock of the
Corporation or for any additional shares of stock, of any class or series, which
may at any time be issued, whether now or hereafter authorized, or for any
rights, options, or warrants to purchase or receive shares of stock or for any
bonds, certificates of indebtedness, debentures, or other securities.
ARTICLE 9.
No Cumulative Voting
--------------------
9.1 Shareholders will not have a right to cumulate their votes for the
election of directors or for any purpose.
ARTICLE 10.
Election Not to be Governed By Provisions of NRS 78.411 to 78.444.
------------------------------------------------------------------
10.1 The Corporation, pursuant to NRS 78.434, hereby elects not to be
governed by the provisions of NRS 78.411 to 78.411, inclusive.
ARTICLE 11.
Indemnification of Officers and Directors
-----------------------------------------
11.1 The Corporation shall indemnify its directors, officers, employee,
fiduciaries and agents to the fullest extent permitted under the Nevada Revised
Statutes.
11.2 Every person who was or is a party or is threatened to be made a party
to or is involved in any action, suit or proceedings, whether civil, criminal,
administrative or investigative, by reason of the fact that he or a person for
whom he is the legal representative is or was a director or officer of the
corporation or is or was serving at the request of the corporation as a director
or officer of another corporation, or as its representative in a partnership,
joint venture, trust or other enterprise, shall be indemnified and held harmless
to the fullest extent legally permissible under the law of the State of Nevada
from time to time against all expenses, liability and loss (including attorney's
fees, judgments, fines and amounts paid or to be paid in settlement) reasonably
B-3
incurred or suffered by him in connection therewith. Such right of
indemnification shall be a contract right which may be enforced in any manner
desired by such person. Such right of indemnification shall not be exclusive of
any other right which such directors, officers or representatives may have or
hereafter acquire and, without limiting the generality of such statement, they
shall be entitled to their respective rights of indemnification under any
By-Law, agreement, vote of stockholders, provision of law or otherwise, as well
as their rights under this Article.
11.3 Without limiting the application of the foregoing, the Board of
Directors may adopt By-Laws from time to time with respect to indemnification to
provide at all times the fullest indemnification permitted by the law of the
State of Nevada and may cause the corporation to purchase and maintain insurance
on behalf of any person who is or was a director or officer of the corporation
as a director of officer of another corporation, or as its representative in a
partnership, joint venture, trust or other enterprise against any liability
asserted against such person and incurred in any such capacity or arising out of
such status, whether or not the corporation would have the power to indemnify
such person.
11.4 The private property of the Stockholders, Directors and Officers shall
not be subject to the payment of corporate debts to any extent whatsoever.
11.5 No director, officer or shareholder shall have any personal liability
to the corporation or its stockholders for damages for breach of fiduciary duty
as a director or officer, except that this provision does not eliminate nor
limit in any way the liability of a director or officer for:
(a) Acts or omissions which involve intentional misconduct, fraud or a
knowing violation of law; or
(b) The payment of dividends in violation of Nevada Revised Statutes
(N.R.S.) 78.300.
ARTICLE 12.
12.1 The name and address of the incorporator of the Corporation are as
follows:
NAME
----------------------
Paracorp Incorporated
318 North Carson Street
Suite 208
Carson City, Nevada 89701
IN WITNESS WHEREOF, we have hereunto set our hands this 13th day of March,
2000, hereby declaring and certifying that the facts stated hereinabove are
true.
/S/ Paracorp Incorporated
------------------------------
Paracorp Incorporated
B-4
CERTIFICATE OF ACCEPTANCE OF APPOINTMENT OF RESIDENT AGENT
I, Paracorp Incorporated, hereby accept appointment as Resident Agent for
the above named corporation.
- ------------------------------------ Dated: March 14, 2000
(Signature of resident Agent)
B-5
EXHIBIT C
---------
COLORADO BUSINESS CORPORATION ACT
7-113-201 - Notice of dissenters' rights.
(1) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is submitted to a vote at a shareholders' meeting, the notice
of the meeting shall be given to all shareholders, whether or not entitled to
vote. The notice shall state that shareholders are or may be entitled to assert
dissenters' rights under this article and shall be accompanied by a copy of this
article and the materials, if any, that, under articles 101 to 117 of this
title, are required to be given to shareholders entitled to vote on the proposed
action at the meeting. Failure to give notice as provided by this subsection (1)
shall not affect any action taken at the shareholders' meeting for which the
notice was to have been given, but any shareholder who was entitled to dissent
but who was not given such notice shall not be precluded from demanding payment
for the shareholder's shares under this article by reason of the shareholder's
failure to comply with the provisions of section 7-113-202 (1).
(2) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is authorized without a meeting of shareholders pursuant to
section 7-107-104, any written or oral solicitation of a shareholder to execute
a writing consenting to such action contemplated in section 7-107-104 shall be
accompanied or preceded by a written notice stating that shareholders are or may
be entitled to assert dissenters' rights under this article, by a copy of this
article, and by the materials, if any, that, under articles 101 to 117 of this
title, 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 notice as provided by this subsection (2)
shall not affect any action taken pursuant to section 7-107-104 for which the
notice was to have been given, but any shareholder who was entitled to dissent
but who was not given such notice shall not be precluded from demanding payment
for the shareholder's shares under this article by reason of the shareholder's
failure to comply with the provisions of section 7-113-202 (2).
C-1
EXHIBIT D
---------
CONDOR CAPITAL, INC.
2000 STOCK OPTION PLAN
- --------------------------------------------------------------------------------
The following constitutes the provisions of the 2000 Stock Option Plan of
Condor Capital, Inc.
ARTICLE 1.
OVERVIEW
--------
1.1 Purpose. The purpose of the 2000 Stock Option Plan (the "Plan") is to
attract, retain, and reward persons providing services to Condor Capital, Inc.,
a Colorado corporation, and any successor corporation thereto (collectively
referred to as the "Company"), and any present or future parent and/or
subsidiary corporations of such corporation (all of which along with the Company
being individually referred to as a "Participating Company" and collectively
referred to as the "Participating Company Group"), and to motivate such persons
to contribute to the growth and profits of the Participating Company Group in
the future. For purposes of the Plan, a parent corporation and a subsidiary
corporation shall be as defined in Sections 424(e) and 424(f) of the Internal
Revenue Code of 1986, as amended (the "Code").
ARTICLE 2.
CERTAIN DEFINITIONS
-------------------
2.1 For the purpose of the Plan, the terms defined in this Article 2.,
shall have the meanings set out below. All capitalized terms not defined in this
Article 2., shall have the meanings ascribed to them in other parts of this
Agreement.
2.2 "Board" means the Board of Directors of the Company.
2.3 "Code" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor thereto.
2.4 "Committee" means a committee of the Board designated by the Board to
administer the Plan.
2.5 "Company" means Condor Capital, Inc., a corporation organized under the
laws of the State of Colorado (or any successor corporation).
2.6 "Date of Grant" means the date on which the Board of Committee adopts a
resolution expressly granting an Option to an Optionee 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.
2.7 "Director" means a member of the Board.
2.8 "Disability" means permanent and total disability as defined by the
Board or Committee.
2.9 "Eligible Person" means an employee, officer, consultant or Director of
the Company, any Parent or any Subsidiary.
D-1
2.10 "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 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.
2.11 "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.
2.12 "Non-Qualified Stock Option" means a Stock Option intended to not
qualify as an Incentive Stock Option.
2.13 "Optionee" means an Eligible Person who is granted a Stock Option
pursuant to the Plan.
2.14 "Parent" means any present or future corporation that would be a
"parent corporation" as that term is defined in Section 424 of the Code.
2.15 "Plan" means this Condor Capital, Inc. 2000 Stock Option Plan, as the
same may be amended or supplemented from time to time.
2.16 "Purchase Right" means the right to purchase Stock granted pursuant to
the Plan.
2.17 "Retirement" means retirement from active employment with the Company
or any Parent or Subsidiary as defined by the Committee or hereunder.
2.18 "Section 16(B) Person" means a person subject to Section 16(b) of the
Exchange Act.
2.19 "Stock" means the Common Stock of the Company or any successor of the
Company.
2.20 "Stock Option" means an option to purchase shares of Stock granted
pursuant to Articles 4, 5 or 6. 2.21 "Stock Option Agreement" shall have the
meaning set forth in Article 7.
2.22 "Subsidiary" means any present or future corporation which would be a
"subsidiary corporation" as that term is defined in Section 424 of the Code.
2.23 "Ten Percent Shareholder" 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.
D-2
ARTICLE 3.
ADMINISTRATION
--------------
3.1 Administration. The following provisions shall govern the
administration of the Plan:
(a) Administration By Board And/Or Committee. The Plan shall be
administered by the Board of Directors of the Company (the "Board")
and/or by a duly appointed committee of the Board (the "Committee")
having such powers as shall be specified by the Board. Any subsequent
references herein to the Board shall also mean the committee if such
committee has been appointed, and unless the powers of the committee
have been specifically limited.
(b) Committee Powers. The Committee shall effect the grant of options
under the Plan by execution of instruments in writing in a form
approved by the Committee. Subject to the express terms and conditions
of the Plan, the Committee shall have full power to construe the Plan
and the terms of any option granted under the Plan, to prescribe,
amend and rescind rules and regulations relating to the Plan or
options and to make all other determinations necessary or advisable
for the Plan's administration, including, without limitation, the
power to:
(i) determine which persons meet the requirements hereof for
selection as participants in the Plan;
(ii) determine to whom of the eligible persons, if any, options
shall be granted under the Plan;
(iii) establish the terms and conditions required or permitted to
be included in every option agreement or any amendments thereto,
including whether options to be granted thereunder shall be
"Incentive Stock Options," as defined in section 422 of the Code,
or nonqualified stock options not described in sections 422(b) or
423(a) of the Code;
(iv) specify the number of shares to be covered by each option;
(v) determine the method by which fair market value of shares of
the Company's common stock will be established under the Plan;
(vi) take appropriate action to amend any option hereunder,
provided that no such action may be taken without the written
consent of the affected optionee;
(vii) cancel outstanding options and issue replacement options
therefore with the consent of the affected optionee; and
(viii) make all other determinations deemed necessary or
advisable for administering the Plan.
The Committee's determination on the foregoing matters shall be conclusive.
(c) Special Rule for Officers and Directors. The grant of options to
employees who are officers or directors of the Company and to
nonemployee directors of the Company may be made by and all discretion
D-3
with respect to the material terms of the options may be exercised by
either (i) the Board of Directors, or (ii) a duly appointed committee
of the Board composed solely of two or more nonemployee directors
having full authority to act in the matter. The term "nonemployee
directors" shall have the meaning set forth in Rule 16b-3 as
promulgated by the Securities and Exchange Commission ("SEC") under
section 16(b) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as that rule may be amended from time to time, and as
interpreted by the SEC ("Rule 16b-3").
(d) Options Authorized. Options may be either Incentive Stock Options
as defined in Section 422 of the Code ("Incentive Stock Options") or
nonqualified stock options.
3.2 Eligibility.
(a) Eligible Persons. Options may be granted only to employees
(including officers) and directors of the Participating Company Group,
or to individuals who are rendering services as consultants, advisors,
or other independent contractors to the Participating Company Group.
The Board shall, in its sole discretion, determine which persons shall
be granted Options (an "Optionee"). Notwithstanding any other
provision of the Plan, no Eligible Person shall in any single calendar
year be granted options to purchase more than an aggregate of three
hundred thousand (300,000) shares of the Company's common stock under
the Plan, as adjusted pursuant to Section 6.2.
(b) Restrictions on Option Grants. A director of a Participating
Company may only be granted a nonqualified stock option unless the
director is also an employee of the Participating Company Group. An
individual who is rendering services as a consultant, advisor, or
other independent contractor may only be granted a nonqualified stock
option.
3.3 Shares Subject to Option. Options shall be for the purchase of shares
of the authorized but unissued common stock or treasury shares of common stock
of the Company (the "Stock"), subject to adjustment as provided in Section 8.2
below. The maximum number of shares of Stock which may be issued under the Plan
shall be Five Million (5,000,000) shares. In the event that any outstanding
Option for any reason expires or is terminated or canceled and/or shares of
Stock subject to repurchase are repurchased by the Company, the shares allocable
to the unexercised portion of such Option, or such repurchased shares, may again
be subject to an Option grant. Notwithstanding the foregoing, any such shares
shall be made subject to a new Option only if the grant of such new Option and
the issuance of such shares pursuant to such new Option would not cause the Plan
or any Option granted under the Plan to contravene Rule 16b-3.
3.4 Time for Granting Options. All Options shall be granted, if at all,
within seven (7) years from the earlier of the date the Plan is adopted by the
Board or the date the Plan approved by the shareholders of the Company.
3.5 Terms, Conditions and Form of Options. Subject to the provisions of the
Plan, the Board shall determine for each Option (which need not be identical)
the number of shares of Stock for which the Option shall be granted, the
exercise price of the Option, the timing and terms of exercisability and vesting
of the Option, the time of expiration of the Option, the effect of the
Optionee's termination of employment or service, whether the Option is to be
treated as an Incentive Stock Option or as a nonqualified stock option, the
method for satisfaction of any tax withholding obligation arising in connection
with the Option, including by the withholding or delivery of shares of stock,
and all other terms and conditions of the Option not inconsistent with the Plan.
Options granted pursuant to the Plan shall be evidenced by written agreements
specifying the number of shares of Stock covered thereby, in such form as the
D-4
Board shall from time to time establish, which agreements may incorporate all or
any of the terms of the Plan by reference and shall comply with and be subject
to the following terms and conditions:
ARTICLE 4.
INCENTIVE STOCK OPTIONS
-----------------------
4.1 Incentive Stock Option Terms and Conditions. Options granted to
employees (but not to nonemployee directors) under the terms and conditions of
this Article 4., are intended to be Incentive Stock Options under section 422 of
the Code. Each Incentive Stock Option granted under the Plan shall be authorized
by action of the Committee and shall be evidenced by a written agreement in such
form as the Committee shall from time to time approve, which agreement shall
comply with and be subject to the following terms and conditions:
(a) Exercise Price. The exercise price for each Option shall be
established at the sole discretion of the Board; provided, however,
that:
(i) the exercise price per share for an Incentive Stock Option
shall be not less than one hundred percent (100%) of the fair
market value, as set forth in Section 2.10, of a share of Stock
on the date of the granting of the Option;
(ii) no Incentive Stock Option granted to an Optionee who at the
time the Option is granted owns stock possessing more than ten
percent (10%) of the total combined voting power of all classes
of stock of a Participating Company within the meaning of Section
422(b)(6) of the Code (a "Ten Percent Owner Optionee") shall have
an exercise price per share less than one hundred ten percent
(110%) of the fair market value, as determined by the Board, of a
share of Stock on the date of the granting of the Option.
Notwithstanding the foregoing, an Option may be granted with an
exercise price lower than the minimum exercise price set forth
above if such Option is granted pursuant to an assumption or
substitution for another option in a manner qualifying with the
provisions of Section 424(a) of the Code.
(b) Exercise Period of Options. The Board shall have the power to set,
including by amendment of an Option, the time or times within which
each Option shall be exercisable or the event or events upon the
occurrence of which all or a portion of each Option shall be
exercisable and the term of each Option; provided, however, that no
Option shall be exercisable after the expiration of seven (7) years
after the date such Option is granted. No Incentive Stock Option
granted to an individual who owns stock possessing more than ten
percent (10%) of the total combined voting power of all classes of
stock of the Company, as determined under the stock ownership rules
specified in Subsection 4.1(c), shall be exercisable after the
expiration of seven (7) years from the date on which that option is
granted.
(c) Determination of Stock Ownership. For purposes of determining in
Subsections 4.1(a) and 4.1(b) whether an employee owns stock
possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company, an employee shall be
considered as owning the stock owned, directly or indirectly, by or
for his or her brothers and sisters (whether by the whole or half
blood), spouse, ancestors, and lineal descendants. Stock owned,
directly or indirectly, by or for a corporation, partnership, estate,
or trust shall be considered as being owned proportionately by or for
its shareholders, partners, or beneficiaries. Stock with respect to
which the employee holds an option shall not be counted.
D-5
(d) Right to Exercise. Each Incentive Stock Option shall become
exercisable and vest according to the terms and conditions established
by the Board and reflected in the written agreement evidencing the
option. Notwithstanding the preceding sentence, all outstanding
Incentive Stock Options shall immediately become exercisable in full
in the event that (i) the shareholders of the Company approve a
dissolution or liquidation of the Company or a sale of all or
substantially all of the Company's assets to another entity; (ii) a
tender within the meaning of Section 14 of the Securities Exchange Act
of 1934, as amended, is made for five percent (5%) or more of the
Company's outstanding capital stock by any person other than the
Company or an affiliate; or (iii) the Company effects an underwritten
public offering of its securities pursuant to a registration statement
filed under the Securities Act of 1933. Each Incentive Stock Option
shall be subject to termination before its date of expiration as
provided in Subsection 4.1(e).
(e) Termination of Employee Options. If an optionee who is an employee
ceases to be an employee of the Company, his or her rights to exercise
an Incentive Stock Option then held shall be only as follows:
(i) Death. If an optionee dies while he or she is employed by the
Company, the optionee's estate shall have the right for a period
of six (6) months (or such longer period as the Committee may
determine at the date of grant or during the term of the option)
after the date of death to exercise the option to the extent the
optionee was entitled to exercise the option on that date,
provided the date of exercise is in no event after the expiration
of the term of the option. To the extent the option is not
exercised within this period, the option will terminate. An
optionee's "estate" shall mean the optionee's legal
representative or any person who acquires the right to exercise
an option by reason of the optionee's death.
(ii) Disability. If an optionee's employment with the Company
ends because the optionee becomes disabled, the optionee or his
or her qualified representative (in the event of the optionee's
mental disability) shall have the right for a period of twelve
(12) months after the date on which the optionee's employment
ends to exercise the option to the extent the optionee was
entitled to exercise the option on that date, provided the date
of exercise is in no event after the expiration of the term of
the option. To the extent the option is not exercised within this
period, the option will terminate.
(iii) Resignation. If an optionee voluntarily resigns from the
Company, the optionee shall have the right for a period of two
(2) months after the date of resignation to exercise the option
to the extent the optionee was entitled to exercise the option on
that date, provided the date of exercise is in no event after the
expiration of the term of the option. To the extent the option is
not exercised within this period, the option will terminate.
(iv) Termination for Reasons other than Cause. If an optionee's
employment is terminated by the Company for reasons other than
"Cause," the optionee shall have the right for a period of two
(2) months after the date of termination to exercise the option
to the extent the optionee was entitled to exercise the option on
that date, provided the date of exercise is in no event after the
expiration of the term of the option. To the extent the option is
not exercised within this period, the option will terminate. The
termination of an optionee's employment by the Company will be
for reasons other than Cause if the termination is NOT due to an
act by the optionee that is described below under "Termination
for Cause."
D-6
(v) Termination for Cause. If an optionee's employment is
terminated by the Company for "Cause," the optionee shall have
the right for a period of one (1) month after the date of
termination to exercise the option to the extent the optionee was
entitled to exercise the option on that date, provided the date
of exercise is in no event after the expiration of the term of
the option. To the extent the option is not exercised within this
period, the option will terminate. For the purpose of this
clause, "Cause" shall mean that: the optionee is determined by
the Committee to have committed an act of embezzlement, fraud,
dishonesty, or breach of fiduciary duty to the Company, or to
have deliberately disregarded the rules of the Company which
resulted in loss, damage, or injury to the Company, or because
the optionee has made any unauthorized disclosure of any of the
secrets or confidential information of the Company, has induced
any client or customer of the Company to break any contract with
the Company, has induced any principal for whom the Company acts
as agent to terminate the agency relationship, or has engaged in
any conduct that constitutes unfair competition with the Company.
(f) Notice of Sale. If an optionee sells or otherwise disposes of any
Shares acquired upon exercise of an Incentive Stock Option, the
optionee shall give the Company notice of the sale or disposition
within five business (5) days thereafter.
(g) Other Reasons. If an optionee's employment with the Company ends
for any reason not mentioned above in this Subsection 4.1(e), all
rights of the optionee in an Incentive Stock Option, to the extent
that it has not been exercised, shall terminate 30 days after the date
the optionee's employment ends.
(h) Limit on Exercise of Incentive Stock Options. To the extent that
the aggregate fair market value (determined as of the time the option
is granted) of the Stock with respect to which Incentive Stock Options
are exercisable for the first time by any individual during any
calendar year (under all plans of the Company and its parent and
subsidiary corporations) exceeds One Hundred Thousand Dollars
($100,000), the options shall be treated as options that are not
Incentive Stock Options.
ARTICLE 5.
NONQUALIFIED STOCK OPTION
-------------------------
5.1 Nonqualified Stock Option Terms and Conditions. The options granted
under the terms and conditions of this Article 5., are nonqualified stock
options and are not intended to qualify as either a qualified stock option or an
Incentive Stock Option as those terms are defined by applicable provisions of
the Code. Each nonqualified stock option granted under the Plan shall be
authorized by action of the Committee and shall be evidenced by a written
agreement in such form as the Committee shall from time to time approve, which
agreement shall comply with and be subject to the following terms and
conditions:
(a) Exercise Price. The exercise price of each nonqualified stock
option shall not be less than eighty five percent (85%) of the fair
market value as defined in Section 2.10, of a Share of the Company on
the date the option is granted; provided, however, that the exercise
price of a nonqualified stock option granted to an individual who owns
D-7
stock possessing more than ten percent (10%) of the combined voting
power of the Company, its parent, or subsidiaries shall not be less
than one hundred ten percent (110%) of the fair market value of a
Share of the Company on the date the option is granted.
(b) Exercise Period of Options. The Board shall have the power to set,
including by amendment of an Option, the time or times within which
each Option shall be exercisable or the event or events upon the
occurrence of which all or a portion of each Option shall be
exercisable and the term of each Option; provided, however, that no
Option shall be exercisable after the expiration of seven (7) years
after the date such Option is granted. No nonqualified stock option
granted to an individual who owns stock possessing more than ten
percent (10%) of the total combined voting power of all classes of
stock of the Company, as determined under the stock ownership rules
specified in Subsection 5.1(c), shall be exercisable after the
expiration of seven (7) years from the date on which that option is
granted.
(c) Determination of Stock Ownership. For purposes of determining in
Subsections 5.1(a) and 5.1(b) whether an employee owns stock
possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company, an employee shall be
considered as owning the stock owned, directly or indirectly, by or
for his or her brothers and sisters (whether by the whole or half
blood), spouse, ancestors, and lineal descendants. Stock owned,
directly or indirectly, by or for a corporation, partnership, estate,
or trust shall be considered as being owned proportionately by or for
its shareholders, partners, or beneficiaries. Stock with respect to
which the employee holds an option shall not be counted.
(d) Right to Exercise. Each nonqualified stock option shall become
exercisable and vest according to the terms and conditions established
by the Committee and reflected in the written agreement evidencing the
option. Each nonqualified stock option shall be subject to termination
before its date of expiration as provided in Subsection 5.1(e).
(e) Terminations of Options. If an optionee ceases to be an employee
of the Company, his or her rights to exercise a nonqualified stock
option then held shall be only as follows:
(i) Death. If an optionee dies while he or she is employed by the
Company, the optionee's estate shall have the right for a period
of six (6) months (or such longer period as the Committee may
determine at the date of grant or during the term of the option)
after the date of death to exercise the option to the extent the
optionee was entitled to exercise the option on that date,
provided the date of exercise is in no event after the expiration
of the term of the option. To the extent the option is not
exercised within this period, the option will terminate. An
optionee's "estate" shall mean the optionee's legal
representative or any person who acquires the right to exercise
an option by reason of the optionee's death.
(ii) Disability. If an optionee's employment with the Company
ends because the optionee becomes disabled, the optionee or his
or her qualified representative (in the event of the optionee's
mental disability) shall have the right for a period of twelve
(12) months after the date on which the optionee's employment
ends to exercise the option to the extent the optionee was
entitled to exercise the option on that date, provided the date
of exercise is in no event after the expiration of the term of
the option. To the extent the option is not exercised within this
period, the option will terminate.
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(iii) Resignation. If an optionee voluntarily resigns from the
Company, the optionee shall have the right for a period of two
(2) months after the date of resignation to exercise the option
to the extent the optionee was entitled to exercise the option on
that date, provided the date of exercise is in no event after the
expiration of the term of the option. To the extent the option is
not exercised within this period, the option will terminate.
(iv) Termination For Reasons Other Than Cause. If an optionee's
employment is terminated by the Company for reasons other than
"Cause," the optionee shall have the right for a period of two
(2) months after the date of termination to exercise the option
to the extent the optionee was entitled to exercise the option on
that date, provided the date of exercise is in no event after the
expiration of the term of the option. To the extent the option is
not exercised within this period, the option will terminate. The
termination of an optionee's employment by the Company will be
for reasons other than Cause if the termination is NOT due to an
act by the optionee that is described below under "Termination
for Cause."
(v) Termination For Cause. If an optionee's employment is
terminated by the Company for "Cause," the optionee shall have
the right for a period of one (1) month after the date of
termination to exercise the option to the extent the optionee was
entitled to exercise the option on that date, provided the date
of exercise is in no event after the expiration of the term of
the option. To the extent the option is not exercised within this
period, the option will terminate. For the purpose of this
clause, "Cause" shall mean that: the optionee is determined by
the Committee to have committed an act of embezzlement, fraud,
dishonesty, or breach of fiduciary duty to the Company, or to
have deliberately disregarded the rules of the Company which
resulted in loss, damage, or injury to the Company, or because
the optionee has made any unauthorized disclosure of any of the
secrets or confidential information of the Company, has induced
any client or customer of the Company to break any contract with
the Company, has induced any principal for whom the Company acts
as agent to terminate the agency relationship, or has engaged in
any conduct that constitutes unfair competition with the Company.
ARTICLE 6.
NON-EMPLOYEE DIRECTOR OPTIONS
-----------------------------
6.1 Grants to Non-Employee Directors. All options granted to nonemployee
directors shall be subject to the following terms and conditions:
(a) Limits. The aggregate amount of Shares (as adjusted pursuant to
Section 8.2, subject to options granted to all nonemployee directors
as a group shall not exceed twenty percent (20%) of the Shares plus
Shares underlying expired or terminated options that are added back to
the number of Shares available under the Plan.
(b) Nonqualified Options. All stock options granted to nonemployee
directors pursuant to the Plan shall be nonqualified stock options.
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(c) Exercise Price. The exercise price of each option granted to a
nonemployee director shall not be less than 85% of fair market value
per Share; provided, however, that the exercise price of an option
granted to a nonemployee director who owns stock possessing more than
ten percent (10%) of the combined voting power of the Company, its
parent, or subsidiaries shall not be less than one hundred ten percent
(110%) of the fair market value of a Share of the Company on the date
the option is granted. The fair market value of the Shares shall be
determined by the Board.
(d) Duration of Options. Each option granted to a nonemployee director
shall be for a term determined by the Board; provided, however, that
the term of any option may not exceed seven (7) years.
(e) Right to Exercise. Each option granted to a nonemployee director
shall become exercisable and vest according to the terms and
conditions established by the Board and reflected in the written
agreement evidencing the option. Each option granted to a nonemployee
director shall be subject to termination before its date of expiration
as provided in Subsection 6.1(f).
(f) Terminations of Non-employee Director Options. If a non-employee
director ceases to be a director of the Company, his or her rights to
exercise an option then held shall be only as follows:
(i) Death. If a nonemployee director dies while he or she is
serving on the Board of the Company, the director's estate shall
have the right for a period of six (6) months (or such longer
period as the Committee may determine at the date of grant or
during the term of the option) after the date of death to
exercise the option to the extent the director was entitled to
exercise the option on that date, provided the date of exercise
is in no event after the expiration of the term of the option. To
the extent the option is not exercised within this period, the
option will terminate. A director's "estate" shall mean the
director's legal representative or any person who acquires the
right to exercise an option by reason of the director's death.
(ii) Disability. If a nonemployee director's Board membership
ends because the director becomes disabled, the director or his
or her qualified representative (in the event of the director's
mental disability) shall have the right for a period of twelve
(12) months after the date on which the director's Board
membership ends to exercise the option to the extent the director
was entitled to exercise the option on that date, provided the
date of exercise is in no event after the expiration of the term
of the option. To the extent the option is not exercised within
this period, the option will terminate.
(iii) Resignation. If a nonemployee director voluntarily resigns
from the Company's Board, the director shall have the right for a
period of six (6) months after the date of resignation to
exercise the option to the extent the director was entitled to
exercise the option on that date, provided the date of exercise
is in no event after the expiration of the term of the option. To
the extent the option is not exercised within this period, the
option will terminate.
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(iv) Termination for Reasons other than Cause. If a nonemployee
director's Board membership is terminated by the Company for
reasons other than "Cause," the director shall have the right for
a period of six (6) months after the date of termination to
exercise the option to the extent the director was entitled to
exercise the option on that date, provided the date of exercise
is in no event after the expiration of the term of the option. To
the extent the option is not exercised within this period, the
option will terminate. The termination of a nonemployee
director's Board membership will be for reasons other than Cause
if the termination is NOT due to an act by the director that is
described below under "Termination for Cause."
(v) Termination For Cause. If a nonemployee director's Board
membership is terminated by the Company for "Cause," the director
shall have the right for a period of one (1) month after the date
of termination to exercise the option to the extent the director
was entitled to exercise the option on that date, provided the
date of exercise is in no event after the expiration of the term
of the option. To the extent the option is not exercised within
this period, the option will terminate. For the purpose of this
clause, "Cause" shall mean that: the director is determined by
the Committee to have committed an act of embezzlement, fraud,
dishonesty, or breach of fiduciary duty to the Company, or to
have deliberately disregarded the rules of the Company which
resulted in loss, damage, or injury to the Company, or because
the director has made any unauthorized disclosure of any of the
secrets or confidential information of the Company, has induced
any client or customer of the Company to break any contract with
the Company, has induced any principal for whom the Company acts
as agent to terminate the agency relationship, or has engaged in
any conduct that constitutes unfair competition with the Company.
(vi) Other Reasons. If a nonemployee director's Board membership
ends for any reason not mentioned above in this Subsection
6.1(f), all rights of the director in an option, to the extent
that it has not been exercised, shall terminate on the date the
director's Board membership ends.
ARTICLE 7.
STANDARD FORMS OF STOCK OPTION AGREEMENT
----------------------------------------
7.1 Incentive Stock Options. Unless otherwise provided for by the Board at
the time an Option is granted, an Option designated as an Incentive Stock Option
shall comply with and be subject to the terms and conditions of an Incentive
Stock Option Agreement which shall be in such form as designated by the Board of
Directors or Committee from time to time.
7.2 Nonqualified Stock Options. Unless otherwise provided for by the Board
at the time an Option is granted, an Option designated as a Nonqualified Stock
Option shall comply with and be subject to the terms and conditions of a
Nonqualified Stock Option Agreement which shall in such form as designated by
the Board of Directors or Committee from time to time.
7.3 Standard Term For Options. Unless otherwise provided for by the Board
in the grant of an Option, any Option granted hereunder shall be exercisable for
a term of seven (7) years.
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7.4 Authority To Vary Terms. The Board shall have the authority from time
to time to modify, extend, renew or vary the terms of any of the standard forms
of Stock Option Agreement described in Article 8., below either in connection
with the grant or amendment of an individual Option or in connection with the
authorization of a new standard form or forms; provided, however, that the terms
and conditions of such revised or amended standard form or forms of stock option
agreement shall be in accordance with the terms of the Plan. Such authority
shall include, but not by way of limitation, the authority to grant Options
which are not immediately exercisable.
ARTICLE 8.
ADDITIONAL TERMS AND CONDITIONS APPLICABLE TO ALL OPTIONS
---------------------------------------------------------
The following terms and conditions shall apply to all options granted
pursuant to the plan:
8.1 Payment of Exercise Price.
(a) Exercise of Options. Optionees may exercise options only by
providing written notice to the Company at the address specified in
the written agreement evidencing the option. The notice must be
accompanied by full payment in cash for the Shares as to which the
options are exercised.
(b) Forms of Payment Authorized. Payment of the exercise price for the
number of shares of Stock being purchased pursuant to any Option shall
be made (i) in cash, by check, or cash equivalent, (ii) by tender to
the Company of shares of the Company's stock owned by the Optionee
having a fair market value, as determined by the Board (but without
regard to any restrictions on transferability applicable to such stock
by reason of federal or state securities laws or agreements with an
underwriter for the Company), not less than the exercise price, (iii)
by the assignment of the proceeds of a sale of some or all of the
shares being acquired upon the exercise of the Option (including,
without limitation, through an exercise complying with the provisions
of Regulation T as promulgated from time to time by the Board of
Governors of the Federal Reserve System), (iv) by the withholding of
shares being acquired upon exercise of the Option having a fair market
value, as determined by the Board (but without regard to any
restrictions on transferability applicable to such stock by reason of
federal or state securities laws or agreements with an underwriter for
the Company), not less than the exercise price, or (v) by any
combination thereof. The Board may at any time or from time to time
grant Options which do not permit all of the foregoing forms of
consideration to be used in payment of the exercise price and/or which
otherwise restrict one (1) or more forms of consideration.
(c) Tender of Company Stock. Notwithstanding the foregoing, an Option
may not be exercised by tender to the Company of shares of the
Company's stock to the extent such tender of stock, as determined by
the Board, would constitute a violation of the provisions of any law,
regulation and/or agreement restricting the redemption of the
Company's stock. Unless otherwise provided by the Board, an Option may
not be exercised by tender to the Company of shares of the Company's
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stock unless such shares of the Company's stock either have been owned
by the Optionee for more than six (6) months or were not acquired,
directly or indirectly, from the Company. An optionee may also
exercise an option by the delivery and surrender of Shares which (i)
have been owned by the optionee for at least six (6) months or for
such other period as the Committee may require; and (ii) have an
aggregate fair market value on the date of surrender equal to the
exercise price. In addition, an option may be exercised by delivering
to the Company (i) an exercise notice instructing the Company to
deliver the certificates for the Shares purchased to a designated
brokerage firm; and (ii) a copy of irrevocable instructions delivered
to the brokerage firm to sell the Shares acquired upon exercise of the
option and to deliver to the Company from the sale proceeds sufficient
cash to pay the exercise price and applicable withholding taxes
arising as a result of the exercise
(d) Assignment of Proceeds of Sale. The Company reserves, at any and
all times, the right, in the Company's sole and absolute discretion,
to establish, decline to approve and/or terminate any program and/or
procedures for the exercise of Options by means of an assignment of
the proceeds of a sale of some or all of the shares of Stock to be
acquired upon such exercise.
8.2 Adjustment of and Changes In Capitalization.
(a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the number of Shares covered by each
outstanding option, and the number of Shares which have been
authorized for issuance under the Plan but as to which no options have
yet been granted, as well as the price per Share covered by each
outstanding option, shall be proportionately adjusted for any increase
or decrease in the number of issued Shares resulting from a stock
split, reverse stock split, stock dividend, recapitalization,
combination or reclassification of the Shares, or any other increase
or decrease in the number of issued Shares effected without receipt of
consideration by the Company; provided, however, that conversion of
any convertible securities of the Company shall not be deemed to have
been "effected without receipt of consideration." Such adjustment
shall be made by the Board of Directors, whose determination in that
respect shall be final, binding, and conclusive. Except as expressly
provided herein, no issuance by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of Shares subject to an option.
(b) Dissolution, Liquidation, Sale, or Merger. In the event of a
proposed dissolution or liquidation of the Company, options
outstanding under the Plan shall terminate immediately before the
consummation of such proposed action. The Board will, in such
circumstances, provide written notice to the optionees of the expected
dates of termination of outstanding options and consummation of the
proposed dissolution or liquidation.
In the event of a proposed sale of all or substantially all of
the assets of the Company, or the merger of the Company with or into
another corporation in a transaction in which the Company is not the
surviving corporation, outstanding options may be assumed or
equivalent options may be substituted by the successor corporation (or
a parent or subsidiary of the successor corporation), unless the
successor corporation does not agree to assume the options or to
substitute equivalent options. If outstanding options are not assumed
or substituted by equivalent options, all outstanding options shall
terminate immediately before the consummation of the sale or merger
(subject to the actual consummation of the sale or merger) and the
Company shall provide written notice to the optionees of the expected
dates of termination of the options and consummation of the
transaction. If the transaction is not consummated, unexercised
options shall continue in accordance with their original terms.
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(c) Notice of Adjustments, Fractional Shares. To the extent the
foregoing adjustments relate to stock or securities of the Company,
such adjustments shall be made by the Committee, whose determination
in that respect shall be final, binding, and conclusive. No right to
purchase fractional shares shall result from any adjustment in options
pursuant to this Section 8.2. In case of any such adjustment, the
shares subject to the option shall be rounded down to the nearest
whole share. Notice of any adjustment shall be given by the Company to
each holder of an option which was in fact so adjusted and the
adjustment (whether or not notice is given) shall be effective and
binding for all purposes of the Plan.
No adjustment shall be made for dividends or other rights for
which the record date is prior to the date of such issuance, except as
provided in this Section 8.2.
Any issue by the Company of shares of stock of any class, or
securities convertible into shares of any class, shall not affect the
number or price of Shares subject to the option, and no adjustment by
reason thereof shall be made. The grant of an option 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 structure or to merge or to consolidate or to
dissolve, liquidate or sell, or transfer all or any part of its
business or assets.
8.3 Transfer of Control. A "Transfer of Control" shall be deemed to have
occurred in the event any of the following occurs with respect to the Company:
(a) the acquisition of direct or indirect ownership of stock by any
person, entity or group of persons or entities acting in concert
possessing more than a majority of the beneficial interest in the
voting stock of the Company;
(b) the direct or indirect sale or exchange by the shareholders of the
Company of all or substantially all of the stock of the Company where
the shareholders of the Company before such sale or exchange do not
retain, directly or indirectly, at least a majority of the beneficial
interest in the voting stock of the Company after such sale or
exchange;
(c) a merger or consolidation where the shareholders of the Company
before such merger or consolidation do not retain, directly or
indirectly, at least a majority of the beneficial interest in the
voting stock of the Company after such merger or consolidation;
(d) the sale, exchange, or transfer of all, or substantially all, of
the assets of the Company other than a sale, exchange, or transfer to
one (1) or more subsidiary of the Company; or
(e) a liquidation or dissolution of the Company. For purposes of the
foregoing, if a group of persons or entities begins to act in concert,
and if such group meets the beneficial ownership requirements set
forth in clause (a) above, then such acquisition shall be deemed to
have occurred on the date the Company first becomes aware of such
group or its actions.
(f) a Stock Option Agreement may, in the discretion of the Board,
provide for accelerated vesting in the event of a Transfer of Control.
In the event of a Transfer of Control, the surviving, continuing,
successor, or purchasing corporation or parent corporation thereof, as
the case may be (the "Acquiring Corporation"), shall either assume the
Company's rights and obligations under outstanding stock option
agreements or substitute options for the Acquiring Corporation's stock
for such outstanding Options. In the event the Acquiring Corporation
elects not to assume or substitute for such outstanding Options in
connection with the Transfer of Control, any unexercisable and/or
unvested shares subject to such outstanding stock option agreements
shall be immediately exercisable and fully vested as of the date
thirty (30) days prior to the proposed effective date of the Transfer
of Control. The exercise and/or vesting of any Option that was
permissible solely by reason of this Section 8.3 shall be conditioned
upon the consummation of the Transfer of Control. Any Options which
are neither assumed or substituted for by the Acquiring Corporation in
connection with the Transfer of Control nor exercised as of the date
of the Transfer of Control shall terminate and cease to be outstanding
effective as of the date of the Transfer of Control.
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8.4 Options Non-Transferable. During the lifetime of the Optionee, the
Option shall be exercisable only by the Optionee. No Option shall be assignable
or transferable by the Optionee, except by will or by the laws of descent and
distribution. In addition, in order for Shares acquired upon exercise of
Incentive Stock Options to receive the tax treatment afforded such Shares, the
Shares may not be disposed of within two years from the date of the option grant
nor within one year after the date of transfer of such Shares to the optionee.
8.5 Termination or Amendment of Plan or Options. The Board, including any
duly appointed committee of the Board, may terminate or amend the Plan or any
Option at any time; provided, however, that without the approval of the
Company's shareholders, there shall be (a) no increase in the total number of
shares of Stock covered by the Plan (except by operation of the provisions of
Section 8.2 above), (b) no change in the class eligible to receive Incentive
Stock Options, and (c) no expansion in the class eligible to receive
nonqualified stock options. In addition to the foregoing, the approval of the
Company's shareholders shall be sought for any amendment to the Plan for which
the Board deems shareholder approval necessary in order to comply with Rule
16b-3. In any event, no amendment may adversely affect any then outstanding
Option or any unexercised portion thereof, without the consent of the Optionee,
unless such amendment is required to enable an Option designated as an Incentive
Stock Option to qualify as an Incentive Stock Option.
The Plan, unless sooner terminated, shall terminate seven (7) years from
the date the Plan was originally adopted by the Board. An option may not be
granted under the Plan after the Plan is terminated.
8.6 Information to Optionees. The Company shall provide to each Optionee
during the period for which he or she has one or more outstanding options,
copies of all annual reports and all other information which is provided to
shareholders of the Company. The Company shall not be required to provide such
information to key employees whose duties in connection with the Company assure
their access to equivalent information.
8.7 Privileges of Stock Ownership, Securities Law Compliance. No Optionee
shall be entitled to the privileges of stock ownership as to any Shares not
actually issued and delivered to the Optionee. The exercise of any option under
the Plan shall be conditioned upon the registration of the Shares with the SEC
and qualification of the options and underlying Shares under the California
securities laws, unless in the opinion of counsel to the Company registration or
qualification is not necessary. The Company shall diligently endeavor to comply
with all applicable securities laws before any options are granted under the
Plan and before any Shares are issued pursuant to the exercise of such options.
8.8 Limitation of Rights.
(a) No Right to an Option. Nothing in the Plan shall be construed to
give any employee or any nonemployee director of the Company any right
to be granted an option.
(b) No Employment Rights. Neither the Plan nor the granting of an
option nor any other action taken pursuant to the Plan shall
constitute or be evidence of any agreement or understanding, express
or implied, that the Company will employ or continue the Board
membership of an optionee for any period of time, or in any position,
or at any particular rate of compensation.
ARTICLE 9.
MISCELLANEOUS PROVISIONS
------------------------
9.1 Effective Date of Plan. The Plan will become effective upon approval by
the Company's shareholders within twelve (12) months of the date the Plan is
adopted by the Company's Board of Directors. Options may be granted under the
Plan at any time after the Plan becomes effective and before the termination of
the Plan.
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9.2 Indemnification. To the extent permitted by applicable law in effect
from time to time, no member of the Board or the Committee shall be liable for
any action or omission of any other member of the Board or Committee nor for any
act or omission on the member's own part, excepting only the member's own
willful misconduct or gross negligence. The Company shall pay expenses incurred
by, and satisfy a judgment or fine rendered or levied against, a present or
former director or member of the Committee in any action against such person
(whether or not the Company is joined as a party defendant) to impose liability
or a penalty on such person for an act alleged to have been committed by such
person while a director or member of the Committee arising with respect to the
Plan or administration thereof or out of membership on the Committee or by the
Company, or all or any combination of the preceding; provided the director or
Committee member was acting in good faith, within what such director or
Committee member reasonably believed to have been within the scope of his or her
employment or authority and for a purpose which he or she reasonably believed to
be in the best interests of the Company or its shareholders. Payments authorized
hereunder include amounts paid and expenses incurred in settling any such action
or threatened action. This section does not apply to any action instituted or
maintained in the right of the Company by a shareholder or holder of a voting
trust certificate representing shares of the Company. The provisions of this
section shall apply to the estate, executor, administrator, heirs, legatees or
devisees of a director or Committee member, and the term "person" as used in
this section shall include the estate, executor, administrator, heirs, legatees
or devisees of such person.
9.3 Withholding. The Company shall have the right to condition the issuance
of Shares upon exercise of an option upon payment by the optionee of any
applicable taxes required to be withheld under federal, state or local tax laws
or regulations in connection with the exercise. To the extent permitted in an
optionee's stock option agreement, an optionee may elect to pay such tax by (i)
requesting the Company to withhold a sufficient number of Shares from the total
number of Shares issuable upon exercise of the option or (ii) delivering a
sufficient number of Shares which have been held by the optionee for at least
six (6) months (or such other period as the Committee may require) to the
Company. This election is subject to approval or disapproval by the Committee.
The value of Shares withheld or delivered shall be the fair market value of the
Shares on the date the exercise becomes taxable as determined by the Committee.
9.4 Further Assurances. All parties to this Plan agree to perform any and
all further acts and to execute and deliver any documents that may reasonably be
necessary to carry out the provisions of this Plan.
9.5 Attorneys' Fees. In any legal action or other proceeding brought by any
party to enforce or interpret the terms of this Plan, the prevailing party shall
be entitled to recover reasonable attorneys' fees and costs. 9.6 Governing Law.
The Plan and all determinations made and actions taken pursuant hereto, to the
extent not otherwise governed by the Code or the securities laws of the United
States, shall be governed by the law of the State of incorporation of the
Company or any successor company.
9.7 Notices. Any written notice to the Company required by any of the
provisions of the Plan shall be addressed to the chief personnel officer or to
the chief executive officer of the Company, and shall become effective when it
is received by the office of the chief personnel officer or the chief executive
officer.
9.8 Entire Agreement. This Plan, together with those documents that are
referenced in the Plan, are intended to be the final, complete, and exclusive
statement of the terms of the agreement between Employee and the Company with
regard to the subject matter of this Plan. This Agreement supersedes all other
prior agreements, communications, and statements, whether written or oral,
express or implied, pertaining to that subject matter. This Plan may not be
contradicted by evidence of any prior or contemporaneous statements or
agreements, oral or written, and may not be explained or supplemented by
evidence of consistent additional terms. This Plan does not effect the terms and
conditions of any options granted by the Company prior to the date of adoption
of this Plan by the Board of Directors.
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9.9 Successors and Assigns. Optionee agrees that he will not assign, sell,
transfer, delegate, or otherwise dispose of, whether voluntarily or
involuntarily, or by operation of law, any rights or obligations under this
Plan, except as expressly permitted by this Plan. Any such purported assignment,
sale, transfer, delegation, or other disposition shall be null and void. Subject
to the limitations set forth in this Plan, the Plan shall be binding on and
inure to the benefit of the successors and assigns of the Company and any
successors and permitted assigns of Employee, including any of his executors,
administrators, or other legal representatives. It shall not benefit any person
or entity other than those specifically enumerated in this Agreement.
9.10 Severability. If any provision of this Plan, or its application to any
person, place, or circumstance, is held by an arbitrator or a court of competent
jurisdiction to be invalid, unenforceable, or void, that provision shall be
enforced to the greatest extent permitted by law, and the remainder of this
Agreement and of that provision shall remain in full force and effect as applied
to other persons, places, and circumstances.
9.11 Interpretation. This Plan shall be construed as a whole, according to
its fair meaning, and not in favor of or against any party. By way of example
and not in limitation, this Plan shall not be construed in favor of the party
receiving a benefit nor against the party responsible for any particular
language in this Plan. Captions are used for reference purposes only and should
be ignored in the interpretation of the Plan. Unless the context requires
otherwise, all references in this Plan to Paragraphs are to the paragraphs of
this Plan.
The undersigned hereby certify that the foregoing Stock Option Plan was
duly adopted and approved by the Board of Directors on March 3, 2000.
/S/ Lee E. Gahr /S/ W. Patrick Battista
- ---------------------------------- -----------------------------------
Lee E. Gahr W. Patrick Battista
President and CEO Secretary
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