SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant |X| Filed by a party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary proxy statement.
|_| Confidential, for use of the Commission only (as permitted by Rule
14a-6(e)(2)).
|X| Definitive proxy statement.
|_| Definitive additional materials.
|_| Soliciting material under Rule 14a-12.
The St. Lawrence Seaway Corporation
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Not Applicable
-----------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
______________________________________________________________________
(2) Aggregate number of securities to which transaction applies:
______________________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule ( 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
______________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
______________________________________________________________________
(5) Total fee paid:
______________________________________________________________________
i
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
______________________________________________________________________
(2) Form, Schedule or Registration Statement No.:
______________________________________________________________________
(3) Filing Party:
______________________________________________________________________
(4) Date Filed:
______________________________________________________________________
ii
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THE ST. LAWRENCE SEAWAY CORPORATION
Hanna II, Suite P
6011 E. Hanna Avenue
Beach Grove, Indiana 46203
NOTICE OF THE ANNUAL MEETING OF STOCKHOLDERS
To Be Held on July 10, 2007
To the Stockholders of
The St. Lawrence Seaway Corporation:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of The St.
Lawrence Seaway Corporation, an Indiana corporation (the "Company"), will be
held at Room 112, Indiana Convention Center & RCA Dome, 100 South Capitol Ave.,
Indianapolis, IN 46225, on July 10, 2007, at 10:00 a.m., local time, for the
following purposes:
1. To elect four directors of the Company;
2. To consider and act upon a proposal to approve the sale of Common
Stock of the Company and Warrants issued by the Company to Bernard
Zimmerman & Company, Inc.;
3. To consider and act upon a proposal to amend and restate, in its
entirety, the Company's By-Laws;
4. To consider and act upon a proposal to reincorporate the Company
from Indiana to Delaware;
5. To consider and act upon a proposal to amend and restate in its
entirety the Company's Restated Articles of Incorporation, as amended, to,
among other things:
(a) approve the increase in the number of authorized shares of
the Company from 4,000,000 shares, all of which are Common Stock, to
50,010,000 shares, consisting of 48,500,000 shares of Common Stock,
510,000 shares of a "tracking stock" known as Class A Common Stock and
1,000,000 shares of preferred stock, and to decrease the par value of
the Common Stock from One Dollar ($1.00) to One Cent ($0.01);
(b) approve the authorization of 1,000,000 shares of a blank
check preferred class of stock, par value $0.01; and
(c) approve the authorization of a non transferable,
non-tradeable, non-voting and non-certificated "tracking stock" class
of securities known as the Class A Common Stock;
6. To approve the issuance of the "tracking stock" known as the Class
A Common Stock to the Record Holders in connection with, and upon
consummation of the Transaction (as defined in the accompanying Proxy
Statement of even date herewith). The sale of Common Stock and Warrants to
Bernard Zimmerman & Company, Inc. will close after the distribution of the
Class A Common Stock to existing shareholders, and, as such, Bernard
Zimmerman & Company, Inc. will receive no "tracking stock" in the
contemplated issuance; and
7. The ratification of the appointment of Mahoney Sabol & Company, LLP
as our independent registered public auditors for the fiscal year ending
March 31, 2007, and fiscal year ending March 31, 2008;
iii
8. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Included with this mailing and incorporated by reference herein is the
Company's Annual Report on Form 10-KSB for fiscal year ended March 31, 2006,
which includes Financial Statements and the Management's Discussion and Analysis
of Financial Conditions and Results of Operations for fiscal year ended March
31, 2006. Given that the Form 10-KSB for the fiscal year ended March 31, 2007 is
not yet prepared, we have also included, and incorporated by reference, the most
recent Form 10-QSB for the quarter and nine months ended December 31, 2006 in
order to provide you with the most updated financials of, and other information
regarding, the Company.
Pursuant to Section 23-1-44-8 of the Indiana Business Corporation Law,
shareholders of the Company are entitled to assert dissenter's rights with
respect to certain of the transactions herein for which we seek shareholder
approval. See the section entitled "Change of Control" on page 6 and Proposal
Two: Dissenter's Rights in the attached Proxy Statement.
The Board of Directors has fixed the close of business on May 9, 2007, as
the record date (the "Record Date") for the meeting, and only holders of the
Company's Common Stock of record at such time will be entitled to vote at the
meeting or any adjournment thereof.
By Order of the Board of Directors,
/s/ JACK C. BROWN
-----------------
JACK C. BROWN
Secretary
Beach Grove, Indiana
May 30, 2007
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. WHETHER OR NOT
YOU PLAN TO ATTEND THE MEETING, PLEASE MARK, SIGN, DATE, AND RETURN THE
ACCOMPANYING PROXY IN THE ENCLOSED ENVELOPE. IF YOU DO ATTEND THE MEETING, YOU
MAY WITHDRAW YOUR PROXY AND VOTE IN PERSON.
iv
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THE ST. LAWRENCE SEAWAY CORPORATION
Hanna II, Suite P
6011 E. Hanna Avenue
Beach Grove, Indiana 46203
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
To Be Held on July 10, 2007
SOLICITATION AND REVOCATION OF PROXIES
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of The St. Lawrence Seaway Corporation, an Indiana
corporation (the "Company"), of proxies to be voted at the Annual Meeting of
Stockholders of the Company to be held on July 10, 2007, or at any adjournment
thereof (the "Annual Meeting"), for the purposes set forth in the accompanying
Notice of Annual Meeting. This Proxy Statement and accompanying proxy were first
sent on or about May 30, 2007, to stockholders of record on May 9, 2007. A copy
of the Annual Report on Form 10-KSB for fiscal year ended March 31, 2006, which
includes Financial Statements and the Management's Discussion and Analysis of
Financial Conditions and Results of Operations for fiscal year ended March 31,
2006, is being mailed together with this Proxy Statement to all stockholders
entitled to vote at the Annual Meeting and is incorporated by reference herein.
Given that the Form 10-KSB for the fiscal year ended March 31, 2007 is not yet
prepared, we have also attached the most recent Form 10-QSB for the quarter and
nine months ended December 31, 2006 in order to provide you with the most
updated financials of, and other information regarding, the Company.
If the accompanying proxy is properly executed and returned, the shares
represented by the proxy will be voted at the Annual Meeting. If a stockholder
indicates in his or her proxy a choice with respect to any matter to be acted
upon, that stockholder's shares will be voted in accordance with such choice. If
no choice is indicated, such shares will be voted "FOR" (a) the election of all
of the nominees for directors listed below; (b) the approval of the sale of
Common Stock of the Company and Warrants issued by the Company to Bernard
Zimmerman & Company, Inc., also known as the "Transaction"; (c) the amendment
and restatement, in its entirety, of the Company's Bylaws; (d) the approval of
the reincorporation of the Company from Indiana to Delaware in connection with;
(e) the approval of the amendment and restatement in its entirety of the
Company's Amended & Restated Articles of Incorporation to provide for, among
other things, (i) an increase in the number of authorized shares of stock from
4,000,000 shares, all of which are Common Stock, to 50,010,000 shares,
consisting of 48,500,000 shares of Common Stock, 510,000 shares of a "tracking
stock" known as Class A Common Stock, par value ($0.01), and 1,000,000 shares of
preferred stock, par value ($0.01) (as described below), and to decrease the par
value of the Common Stock from One Dollar ($1.00) to One Cent ($0.01); (ii) the
authorization of 1,000,000 shares of a blank check preferred class of stock; and
(iii) the authorization of a tracking stock to be created known as the Class A
Common Stock; (f) the approval of the issuance of the "tracking stock" known as
Class A Common Stock to the Record Holders in connection with, and upon
consummation of, the Transaction; and (g) the ratification of the appointment of
Mahoney Sabol & Company, LLP as our independent registered public auditors for
the fiscal year ended March 31, 2007 and fiscal year ending March 31, 2008. A
stockholder giving a proxy may revoke it by giving written notice of revocation
to the Secretary of the Company at any time before it is voted, by executing
another valid proxy bearing a later date and delivering such proxy to the
Secretary of the Company prior to or at the Annual Meeting, or by attending the
Annual Meeting and voting in person.
The expenses of this proxy solicitation, including the cost of preparing
and mailing this Proxy Statement and accompanying proxy, will be borne by the
Company. Such expenses will also include the charges and expenses of banks,
brokerage firms and other custodians, nominees or fiduciaries for forwarding
solicitation material regarding the Annual Meeting to beneficial owners of the
Company's Common Stock. Solicitation of proxies may be made by mail, telephone,
personal interviews or by other means by the Board of Directors or employees of
the Company who will not be additionally compensated in connection therewith,
but who may be reimbursed for their out-of-pocket expenses in connection
therewith.
v
STOCKHOLDERS ENTITLED TO VOTE
Stockholders of record at the close of business on May 9, 2007, will be
entitled to vote at the Annual Meeting. As of May 9, 2007, there were issued and
outstanding 427,069 shares of Common Stock, par value $1.00 per share, of the
Company (the "Common Stock"). Each share of Common Stock is entitled to one
vote. There is no cumulative voting with respect to the election of directors.
The presence in person or by proxy of the holders of a majority of the shares
issued and outstanding at the Annual Meeting and entitled to vote will
constitute a quorum for the transaction of business. Votes withheld from
nominees for directors, abstentions, and broker non-votes will be counted for
purposes of determining whether a quorum has been reached. Votes will be
tabulated by an inspector of election appointed by the Board of Directors of the
Company. With regard to the election of directors, votes may be cast in favor of
or withheld from each nominee; votes that are withheld will have the effect of a
negative vote. Abstentions, which may be specified on all proposals, except the
election of directors, will have the effect of a negative vote. A broker
non-vote will have no effect on the outcome of the election of directors and the
ratification of the independent auditors. A broker non-vote will be treated as a
negative vote with respect to the approval of (i) the sale by the Company of
common stock and warrants to Bernard Zimmerman and Company, Inc.; (ii) the
restatement and amendment of the Company's By-Laws; (iii) the reincorporation of
the Company from Indiana to Delaware in connection with; (iv) the restatement
and amendment of the Company's Articles of Incorporation; and (v) the issuance
by the Company of the Class A Common Stock, also known as the "Tracking Stock."
vi
TABLE OF CONTENTS
Notice of Annual Meeting iii
Solicitation and Revocation of Proxies v
General Information 1
Security Ownership 5
Executive Compensation 6
Proposal One: Election of Directors 8
Proposal Two: Approval of Stock and Warrant Purchase Agreement 12
Background 12
Risk Factors 13
Historical Background 14
Proposal Three: Approval of the Amendment and Restatement of
Company's By-Laws 20
Proposal Four: Approval of the Reincorporation of the Company
to Delaware 24
The Reincorporation 24
Comparison of Shareholder Rights 26
Federal Income Tax Consequences 34
Proposal Five: Approval of Amendment and Restatement of
Company's Certificate of Incorporation 35
Increase Total Number of Authorized Shares 35
Authorization of "Blank Check" Preferred Stock 37
Authorization of Tracking Stock 38
Proposal Six: Approval of Issuance of Tracking Stock 40
The Tracking Stock Proposal 40
Risk Factors 41
Federal Income tax Consequences 45
Regulatory Approval 46
Proposal Seven: Ratification of Independent Auditors 47
Report of Audit Committee 49
Report of Compensation Committee 50
Certain Relationships and Related Transactions 51
Section 16(a) Beneficial; Ownership Reporting Compliance 52
Other Matters 52
ANNEX A: Audit Committee Charter A-1
ANNEX B: Amended and Restated By-Laws B-1
ANNEX C: Amended and Restated Certificate of Incorporation C-1
ANNEX D: Director Indemnification D-1
PROXY CARD
vii
THE ST. LAWRENCE SEAWAY CORPORATION
Hanna II, Suite P
6011 E. Hanna Avenue
Beach Grove, Indiana 46203
(317) 639-5292
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
July 10, 2007
GENERAL INFORMATION ABOUT THE ANNUAL MEETING
Why did you send me this Proxy Statement?
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of The St. Lawrence Seaway Corporation, an
Indiana corporation (the "Company"), of proxies, in the accompanying form,
to be used at the Annual Meeting of Stockholders to be held at Room 112,
Indiana Convention Center & RCA Dome, 100 South Capitol Ave., Indianapolis,
IN 46225, on July 10, 2007 at 10:00 a.m., and any adjournments thereof (the
"Meeting"). This Proxy Statement along with the Notice of the Annual
Meeting of Stockholders summarizes the purposes of the Meeting and the
information you need to know about the Meeting.
This Proxy Statement, the Notice of the Annual Meeting of Stockholders
and the accompanying proxy card are being mailed on or about May 30, 2007
to all stockholders entitled to notice of and to vote at the Meeting.
Who can vote?
Only those stockholders who owned The St. Lawrence Seaway Corporation
common stock, $1.00 par value per share (the "Common Stock" or the
"Shares"), at the close of business on the record date are entitled to vote
at the Meeting. The close of business on May 9, 2007 has been fixed as the
record date for determining the stockholders entitled to notice of and to
vote at the Meeting (the "Record Date"). As of the close of business on May
9, 2007, the Company had 427,069 shares of Common Stock outstanding and
entitled to vote.
You do not need to attend the Meeting to vote your Shares. Shares
represented by valid proxies, received in time for the Meeting and not
revoked prior to the Meeting, will be voted at the Meeting. A stockholder
may revoke a proxy before the proxy is voted by delivering to our Corporate
Secretary a signed statement of revocation or a duly executed proxy card
bearing a later date. Any stockholder who has executed a proxy card but
attends the meeting in person may revoke the proxy and vote at the meeting.
How many votes do I have?
Each share of The St. Lawrence Seaway Corporation Common Stock
entitles you to one vote.
How do I vote?
Whether you plan to attend the Meeting or not, we urge you to vote by
proxy. Voting by proxy will not affect your right to attend the Meeting. If
your Shares are registered directly in your name through our stock transfer
agent, Continental Stock Transfer & Trust Company, or you have stock
certificates, you may vote:
1
o By mail. Complete and mail the enclosed proxy card in the
enclosed postage prepaid envelope. Your proxy will be voted in
accordance with your instructions. If you sign the proxy card but
do not specify how you want your Shares voted, they will be voted
as recommended by the Company's Board of Directors.
o In person at the Meeting. If you attend the Meeting, you may
deliver your completed proxy card in person or you may vote by
completing a ballot, which will be available at the Meeting.
If your Shares are held in "street name" (held in the name of a bank,
broker or other nominee), you must provide the bank, broker or other
nominee with instructions on how to vote your Shares and can do so as
follows:
o By mail. You will receive instructions from your broker or other
nominee explaining how to vote your Shares.
o In person at the Meeting. Contact the broker or other nominee who
holds your Shares to obtain a broker's proxy card and bring it
with you to the Meeting. You will not be able to vote at the
Meeting unless you have a proxy card from your broker.
How does the Board of Directors recommend I vote on the Proposals?
The Board of Directors recommends that you vote for all proposals as
follows:
o "FOR" the election of the nominees of the Board of Directors;
o "FOR" the approval of the stock and warrant sale to Bernard
Zimmerman & Company, Inc.;
o "FOR" the amendment and restatement, in its entirety, of the
By-Laws of the Company;
o "FOR" the reincorporation of the Company from Indiana to
Delaware;
o "FOR" the amendment and restatement of the Company's Certificate
of Incorporation which will effectively be a vote (i) to increase
the number of authorized shares of Common Stock of the Company
from 4,000,000 to 48,500,000, (ii) to decrease the par value of
the Company's Common Stock from $1.00 to $0.01, (iii) to
authorize a class of 1,000,000 undesignated "blank check"
Preferred Stock, and (iii) to authorize 510,000 shares of a
tracking stock known as Class A Common Stock and sometimes
referred to herein as the "Tracking Stock";
o "FOR" the issuance of the Class A Common Stock, sometimes
referred to herein as the "Tracking Stock," to the holders of
record of the Company on a date to be set by the Board of
Directors. Note that the sale of Common Stock and Warrants to
Bernard Zimmerman & Company, Inc. will close after the
distribution of the Class A Common Stock to existing
shareholders, and, as such, Bernard Zimmerman & Company, Inc.
will receive no "tracking stock" in the contemplated issuance;
and
o "FOR" the approval of the appointment of Mahoney & Sabol Company,
LLP as our independent registered auditors for the fiscal year
ended March 31, 2007 and the fiscal year ending March 31, 2008.
2
If any other matter is presented, the proxy card provides that your
shares will be voted by the proxy holder listed on the proxy card in
accordance with his or her best judgment. At the time this Proxy Statement
was printed, we knew of no matters that needed to be acted on at the
Meeting, other than those discussed in this Proxy Statement.
May I revoke my proxy?
If you give us your proxy, you may revoke it any time before the
Meeting. You may revoke your proxy in any one of the following ways:
o By signing a new proxy card and submitting it as instructed
above;
o If your Shares are held in street name, revoking by written
notice, as instructed above. Only your latest vote will be
counted. If your shares are held in street name, you will not be
able to vote at the meeting unless you have a proxy card from
your broker;
o Attend the Meeting in person and voting in person. Attending the
Meeting in person will not in and of itself revoke a previously
submitted proxy unless you specifically request it.
Any stockholder who has executed a proxy but is present at the
Meeting, and who wishes to vote in person, may do so by revoking his or her
proxy as described in the preceding paragraph.
What if I receive more than one proxy card?
You may receive more than one proxy card or voting instruction form if
you hold your Shares in more than one account, which may be registered in
form or held in street name. Please vote in the manner described under How
do I vote? for each account to ensure that all of your Shares are voted.
Will My Shares be Voted if I Do Not Return My Proxy Card?
If your Shares are registered in your name or if you have stock
certificates, they will not be voted if you do not return your proxy card
by mail or vote at the meeting as described above under How do I vote? If
you hold your Shares through a broker, bank or other representative,
generally the broker or your representative may only vote the Common Stock
that it holds for you in accordance with your instructions. We encourage
you to provide voting instructions. This ensures your Shares will be voted
at the Meeting in the manner you desire. However, if it has not timely
received your instructions, the broker or your representative may vote on
only certain matters for which it has discretionary voting authority. If a
broker or your representative cannot vote on a particular matter because it
does not have discretionary voting authority, or if a broker or your
representative may, but does not, exercise such discretionary authority,
this is a "broker non-vote" on that matter.
What vote is required to approve each proposal and how are votes counted?
The affirmative vote of a majority of the shares constituting a quorum
is required for the approval of Proposals 1 and 7. The affirmative vote of
the holders of a majority of the outstanding shares of Common Stock is
required for the approval of Proposals 2 through 6, the sale of Common
Stock and Warrants to Bernard Zimmerman & Company, Inc., the approval of
the reincorporation of the Company from Indiana to Delaware, the amendments
to and restatements of the Company's Certificate of Incorporation and
By-laws, and the issuance of the "tracking stock" known as the Class A
Common Stock. Abstentions and broker non-votes will have the same effect as
a vote against Proposals 2 through 6.
3
Where a stockholder specifies a choice on the proxy as to how his or
her Shares are to be voted on a particular matter, the Shares will be voted
accordingly. If no choice is specified, the Shares will be voted "FOR" the
election of the nominees to the Board of Directors, "FOR" the approval of
the stock and warrant sale, "FOR" the amendment and restatement of the
Company's By-Laws, "FOR" the reincorporation to Delaware and, "FOR" the
amendments to the Company's Certificate of Incorporation, "FOR" the
issuance of shares of Class A Common Stock, and "FOR" the ratification of
the independent registered auditor of the Company. 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 a written notice of revocation
or a duly executed proxy bearing a later date.
What are the costs of soliciting these proxies?
The cost of soliciting proxies, including expenses in connection with
preparing and mailing this Proxy Statement, will be borne by the Company.
Solicitation of proxies by mail may be supplemented by telephone, telegram,
telex and personal solicitation by the directors and officers of the
Company. No additional compensation will be paid for such solicitation.
What constitutes a quorum for the Meeting?
Shares represented in person or by valid proxies in the form enclosed
received in time for use at the Meeting and not revoked at or prior to the
Meeting, will be voted at the Meeting. The presence, in person or by proxy,
of the holders of a majority of the outstanding shares of the Common Stock
is necessary to constitute a quorum at the Meeting. Votes of stockholders
of record who are present at the Meeting in person or by proxy,
abstentions, and broker non-votes are counted for purposes of determining
whether a quorum exists.
4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of the record date the beneficial share
ownership of persons who, to the knowledge of the Corporation, beneficially
owned as of the record date, more than 5% of the outstanding shares of Common
Stock of the Corporation, and of each director and executive officer, and of all
officers and directors as a group.
- ----------------------------------- ------------------------- -----------------------
Name and Address of Number of Shares Percentage of Shares
Beneficial Owner Beneficially Owned(1) Beneficially Owned(2)
- ----------------------------------- ------------------------- -----------------------
5% or greater Stockholders
- ----------------------------------- ------------------------- -----------------------
Ronald Alan Zlatniski 40,663 (3) 9.5%
731 Prince Road
Greensboro, NC 27455
- ----------------------------------- ------------------------- -----------------------
Executive Officers and Directors
- ----------------------------------- ------------------------- -----------------------
Joel M. Greenblatt 93,750 (4)(5) 20.5% (4)
100 Jericho Quadrangle
Suite 212
Jericho, NY 11753
- ----------------------------------- ------------------------- -----------------------
Daniel L. Nir 56,250 (5)(6) 12.1% (6)
Gracie Capital
590 Madison Avenue, 28th Floor
New York, NY 10022
- ----------------------------------- ------------------------- -----------------------
Jack C. Brown 20,456 (7) 4.6% (7)
Hanna II, Suite P
6011 E. Hanna Avenue
Beach Grove, Indiana 46203
- ----------------------------------- ------------------------- -----------------------
Edward B. Grier, III 0 *
Gracie Capital
590 Madison Avenue, 28th Floor
New York, NY 10022
- ----------------------------------- ------------------------- -----------------------
Directors and executive officers as 170,456 (4)(5)(6)(7) 33.5% (4)(6)(7)
a group (four persons)
- ----------------------------------- ------------------------- -----------------------
Total 211,119 41.5%
- ----------------------------------- ------------------------- -----------------------
* Less than 1% of outstanding shares
(1) Unless otherwise indicated, includes shares owned by a spouse, minor
children, by relatives sharing the same home and entities owned or
controlled by the named person. Also includes shares if the named person
has the right to acquire such shares within 60 days after May 9, 2007, by
the exercise of any warrant, stock option or other right. Unless otherwise
noted, shares are owned of record and beneficially by the named person.
(2) Unless otherwise indicated, based upon 427,069 shares of common stock
outstanding on May 9, 2007.
(3) Based on a Form 13D/A filed by Mr. Zlatniski on November 20, 2006.
(4) Includes 29,166 shares subject to a currently exercisable common stock
warrant transferred to him from the Windward Group L.L.C.
(5) On January 30, 2006, Windward Group L.L.C. was dissolved and the Company's
common stock and stock warrants owned by it were distributed to its
members, Joel M. Greenblatt and Daniel L. Nir, at a ratio of 62.5% and
37.5%, respectively. After the dissolution on January 30, 2006, Mr.
Greenblatt owned 31,250 shares of the Company's common stock and a
currently exercisable warrant to purchase 62,500 shares of the Company's
common stock at $3.00 per share, and Mr. Nir owned 18,750 shares of the
Company's common stock and a currently exercisable warrant to purchase
37,500 shares of the Company's common stock expiring on September 21, 2007.
Mr. Greenblatt exercised a portion of his common stock warrant and
purchased 16,667 shares of the Company's common stock on January 31, 2006
and another 16,667 shares on June 13, 2006, bringing his holdings to 64,584
shares of common stock and a warrant currently outstanding to purchase
29,166 shares of common stock at $3.00 per share, expiring on September 21,
2007.
5
(6) Includes 37,500 shares subject to a currently exercisable common stock
warrant transferred from the Windward Group L.L.C.
(7) Includes 15,000 shares subject to currently exercisable stock options
granted on June 11, 1983, as amended, and expiring on September 21, 2007,
with a per share exercise price of $3.00
No other person or group has reported that it is the beneficial owner of more
than 5% of the outstanding Common Stock of the Company.
CHANGE OF CONTROL
It is expected that if the Transaction is consummated, as defined and
described in the section entitled, "Proposal Two: Approval of the Stock and
Warrant Purchase," the constitution of the Board is expected to be affected, and
a change in control is contemplated as three of the four existing directors will
resign and be replaced by new directors. In addition, if Proposal Two is
approved, and Bernard Zimmerman & Company, Inc. exercises all of the warrants
purchased thereunder (and no additional issuances of Common Stock are made by
the Company), then Bernard Zimmerman & Company, Inc. will beneficially own 43.2%
of the issued and outstanding Common Stock of the Company.
Pursuant to Section 23-1-44-8 of the Indiana Business Corporation Law (the
"IBCL"), Company shareholders have the right to dissent and obtain payment of
the fair value for their shares.
EXECUTIVE COMPENSATION
REMUNERATION OF DIRECTORS AND OFFICERS
Employment Agreements, Termination of Employment and Change in Control
Arrangements
None of the executive officers of the Company has an employment agreement.
Except as noted below, neither the Corporation's Chief Executive Officer
nor any other executive officers of the Corporation (collectively the "Named
Executives") received salary, bonus or other annual compensation for rendering
services to the Company during the fiscal years ended March 31, 2006, 2005 and
2004. During each of the two fiscal years ended March 31, 2004, and March 31,
2005 the Corporation paid to Jack C. Brown, Secretary and a Director, a monthly
fee of $500 for administrative services that he rendered to the Corporation.
Such fee arrangement terminated on March 31, 2005.
SUMMARY COMPENSATION TABLE
As permitted by Item 402 of Regulation S-K, the Summary Compensation Table
has been intentionally omitted as there was no compensation awarded to, earned
by or paid to the Named Executives which is required to be reported in such
Table for any fiscal year covered thereby. In addition, no transactions between
the Corporation and a third party where the primary purpose of the transaction
was to furnish compensation to a Named Executive were entered into for any
fiscal year covered thereby.
OPTION/SAR GRANTS IN FISCAL YEAR ENDED MARCH 31, 2007
No options or stock appreciation rights were granted in the fiscal year
ended March 31, 2007. On September 20, 2002, the options originally granted to
Mr. Brown on June 18, 1983 were amended by extending the expiration date thereof
from September 21, 2002 to September 21, 2007. On September 20, 2002, the
Warrant held by Windward Group, L.L.C. for the purchase of 100,000 shares of
common stock at $3.00 per share, which was to expire on September 21, 2002, was
extended by the Board of Directors for an additional five years, such that it
now expires on September 21, 2007.
6
AGGREGATED OPTION/SAR EXERCISES IN FISCAL YEAR ENDED MARCH 31, 2004 AND FISCAL
YEAR-END OPTION/SAR VALUES
The Corporation has a stock option plan originally adopted by shareholders
on June 12, 1978, and revised and approved by shareholders on June 13, 1983,
September 21, 1987 and August 28, 1992. The Corporation currently has one
outstanding Stock Option Agreement entered into pursuant to the stock option
plan. The options granted thereunder expire on September 21, 2007.
No options were exercised during fiscal year ended March 31, 2007. The
following table presents the value of unexercised options held by Mr. Brown as
of March 31, 2007. There are currently no outstanding stock appreciation rights.
- ----------------------- ------------ ------------ -------------------------------- --------------------------------
Name Shares Value Number of Securities Value of Unexercised
Acquired Realized
on Exercise Underlying Unexercised In-the-Money Options as of
($) March 31, 2007($)
(#) Options as of March 31,
2007(#)
- ----------------------- ------------ ------------ -------------------------------- --------------------------------
Exercisable Unexercisable Exercisable Unexercisable
- ----------------------- ------------ ------------ -------------- ----------------- -------------- -----------------
Jack C. Brown 0 $0 15,000 0 $19,500(1) $0
- ----------------------- ------------ ------------ -------------- ----------------- -------------- -----------------
(1) This amount represent the difference between the exercise price of the stock options and $4.30, which was the
closing price of our common stock on March 30, 2007, the date closest to the fiscal year end as reported by
the OTC Bulletin Board for all in-the-money options held by the listed officer. The in-the- money stock
options ranged have an exercise price of $3.00 per share.
- -------------------------------------------------------------------------------------------------------------------
LONG TERM INCENTIVE PLANS - Awards in Fiscal Year Ended March 31, 2007
Not applicable.
COMPENSATION OF DIRECTORS
Directors of the Corporation receive a fee of $100 for each meeting of the
Board of Directors which they attend plus reimbursement for reasonable travel
expense. All fees were waived by the Directors for meetings in fiscal year ended
March 31, 2007. No options or stock were issued to any directors for fiscal year
ended March 31, 2007.
COMPENSATION COMMITTEE INTERLOCK AND INSIDER PARTICIPATION
The Board of Directors does not have any standing audit, nominating or
compensation committees or any other committees performing similar functions.
Therefore, there are no relationships or transactions involving members of the
Compensation Committee during the fiscal year ended March 31, 2007 required to
be reported pursuant to Item 402(j) of Regulation S-K.
DIRECTOR INDEPENDENCE
The Company has four directors, Mssrs. Greenblatt, Brown, Nir and Grier.
The Board of Directors has made the determination that none of the members of
the Board is independent, as defined by the NASDAQ Stock Market (the Company's
Common Stock is not listed or traded on NASDAQ, but over the counter trades of
the Company are quoted on the OTC Bulletin Board, Stock Symbol STLS.OB). Mr.
Brown, Mr. Nir and Mr. Grier are officers of the Company. Mr. Greenblatt has a
"material relationship" with the Company as a significant shareholder, and
therefore cannot be considered independent, as defined by NASDAQ.
7
MATTERS TO BE BROUGHT BEFORE THE MEETING
PROPOSAL ONE
ELECTION OF DIRECTORS
The Board of Directors of the Company (the "Board of Directors") has
nominated Jack C. Brown, Joel M. Greenblatt, Daniel L. Nir and Edward B. Grier
III, who currently serve as directors and whose terms expire at the Annual
Meeting, and is standing for re-election to serve until they are re-elected or
until their respective successors are duly elected and qualified. The Company
knows of no reason why any of the nominees will be unavailable or unable to
serve.
The Board of Directors recommends a vote "FOR" each of the following
nominees for directors.
Nominees for Directors
The Board of Directors currently consists of four members whose terms will
expire at the next annual meeting of shareholders or when their successors are
duly elected and qualified. Directors will be elected by a plurality of the
votes cast at the annual meeting.
Jack C. Brown, age 87, is the Secretary of the Company. He has served as a
director since 1959. Mr. Brown is a retired attorney who practiced in
Indianapolis, Indiana. Mr. Brown serves as a director of no other public
entities.
Joel M. Greenblatt, age 49, was elected to the Board of Directors in 1993.
He serves as Chairman of the Board. Mr. Greenblatt has been a Managing Partner
of Gotham Capital ("Gotham") and its predecessors since 1985. Gotham is a
private investment partnership which owns securities, equity interests,
distressed debt, trade claims and bonds, derivatives, and options and warrants
of issuers engaged in a variety of businesses. Mr. Greenblatt is a director of
no other public entities.
Daniel L. Nir, age 46, was elected to the Board of Directors in 1993. He
has served as the President and Treasurer of the Company since December 1993.
Mr. Nir is a Manager of Sargeant Capital Ventures, LLC since December 1997, and
has served as a Managing Partner of Gracie Capital, L.P., since December 1998.
He served as a Managing Partner of Gotham prior thereto. Mr. Nir is a director
of no other public entities.
Edward B. Grier III, age 48, has served as a director since 1993. Mr. Grier
has served as a Limited Partner of Gracie Capital, L.P. since January 1999; a
Vice President of Gotham from 1992-1994 and a limited partner of Gotham from
January 1, 1995 through December 31, 1998. Mr. Grier is a director of no other
public entities.
Name Age Position Proposed Term
- ----------------------------------------------------------------------------------------------------------
Joel M. Greenblatt 49 Member of the Board of Directors (nominee) One Year, Expiring 2008
Jack C. Brown 87 Secretary and Member of the Board of Directors One Year, Expiring 2008
(nominee)
Daniel L. Nir 46 President, Treasurer and Member of the Board of One Year, Expiring 2008
Directors (nominee)
Edward B. Grier III 48 Vice President and Member of the Board of One Year, Expiring 2008
Directors (nominee)
8
Note that while the proposed terms set forth above are made in accordance with
the requirements of the current Bylaws of the Company, it is expected that upon
the consummation of the Transaction as described in "Proposal Two: Approval of
the Stock and Warrant Purchase: The Transaction," certain of the nominees who
you are being asked to elect at this time, Mr. Brown, Mr. Nir and Mr. Greenblatt
will resign. Mr. Grier will remain as a director. Mr. Grier, as the sole
remaining director, will then fill the vacancies created by such resignations
with the appointment of Mr. Zimmerman and his nominees, Mr. Duane L. Berlin and
Mr. Ronald A. Zlatniski who shall each serve until the next annual meeting at
which time it is expected that they will be nominees for election by the
Shareholders. The biographical summaries of Mr. Zimmerman, Mr. Berlin and Mr.
Zlatniski are listed below.
Bernard Zimmerman , age 74, is the President and majority stockholder of
Bernard Zimmerman & Company, Inc., a private merchant banking and financial
consulting firm. Mr. Zimmerman currently serves as Chairman of the Board of
FCCC, Inc. From 1985 to January 2007, Mr. Zimmerman was a member of the Board of
Directors of Sbarro, Inc., and served as its Chairman of the Audit and
Compensation Committees for 15 years. He has also been a Certified Public
Accountant for more than 35 years.
Duane L. Berlin , age 48, is the Principal and Managing attorney of Lev &
Berlin, P.C., a Connecticut based law firm, representing numerous public and
private entities. Mr. Berlin was also a partner and Managing Director of
Westwood Capital Partners, an SEC registered securities broker dealer from 2000
through 2003. Mr. Berlin serves as a director of no other public entities.
Ronald A. Zlatniski, age 43, is a private investor as well as an
operational specialist at Franklin Street Partners, a private investment
management firm and trust company. Mr. Zlatniski has significant holdings in a
number of publicly traded companies, including at the Company. Mr. Zlatniski
serves as a director of no other public entities.
Mr. Grier, Mr. Zimmerman, Mr. Berlin and Mr. Zlatniski are hereafter
referred to as the "Post-Transaction Directors."
BOARD OF DIRECTORS MEETINGS; COMMITTEES
During the fiscal year ended March 31, 2007, the Board of Directors held
six formal meetings. Members of the Board frequently confer informally in person
and by telephone and also take formal action by written consent. The Board of
Directors believes that this procedure is sufficient to serve the current needs
of the Company without undue expenses of frequent formal meetings.
The Board of Directors does not have any standing audit, nominating or
compensation committees or committees performing similar functions. The Board of
Directors believes that a nominating and compensation committee has not been
warranted given the size of the Board and the participation of all four
directors in the consideration of nominees for director and for compensation
issues. The Board of Directors does not have a charter governing the nominating
process. The Board of Directors has made the determination that none of the
members of the Board is independent, as defined by the NASDAQ Stock Market (the
Company's Common Stock is not listed or traded on NASDAQ but is rather traded
only over the counter and quoted on the OTC Bulletin Board). Mr. Brown, Mr. Nir
and Mr. Grier are officers of the Company and therefore cannot be considered
independent, as defined by NASDAQ. The Board of Directors intends to appoint an
Audit Committee upon consummation of the Transaction which committee shall be
governed by the Audit Committee Charter attached hereto as Annex A.
DIRECTOR NOMINATION PROCESS
The Board of Directors will consider director candidates properly
recommended by stockholders. Stockholders who wish to recommend to the Board
candidates for election to the Board of Directors must do so in writing. The
recommendation should be sent to the Secretary of the Company, at The St.
Lawrence Seaway Corporation, Hanna II, Suite P, 6011 E. Hanna Avenue, Beach
Grove, Indiana 46204, or the Company's then current address, who will, in turn,
forward the recommendation to the Board. The recommendation must set forth (i)
the name and address as they appear on the Company's books of the stockholder
making the recommendation and the class and number of shares of capital stock of
the Company beneficially owned by such stockholder and (ii) the name of the
candidate and all information relating to the candidate that is required to be
disclosed in solicitations of proxies for election of directors under the
federal proxy rules. The recommendation must be accompanied by the candidate's
written consent to being named in the Company's proxy statement as a nominee for
election to the Board and to serving as a director, if elected. Stockholders
must also comply with all requirements of the Company's By-Laws with respect to
nomination of persons for election to the Board of Directors. See "Other
Matters: Proposals of Stockholders" for requirements for submissions.
9
The Board believes that nominees for election to the Board of Directors
should possess sufficient business or financial experience and a willingness to
devote the time and effort necessary to discharge the responsibilities of a
director. This experience can include, but is not limited to, service on other
boards of directors or active involvement with other boards of directors, as
well as experience in the industries in which the Company conducts its business.
The Board does not believe that nominees for election to the Board of Directors
should be selected through mechanical application of specified criteria. Rather,
the Board believes that the qualifications and strengths of individuals should
be considered in their totality with a view to nominating persons for election
to the Board of Directors whose backgrounds, integrity, and personal
characteristics indicate that they will make a contribution to the Board of
Directors.
The Board intends to identify candidates for election to the Board of
Directors through the personal knowledge and experience of the members of the
Board as well as through third-party recommendations. Candidates will be
evaluated based upon their backgrounds and interviews with members of the Board.
The Board does not plan to have any differences in the manner in which the Board
evaluates nominees for election as a director of the Company based on whether
the nominee has been recommended by a stockholder or otherwise.
CODE OF ETHICS
The Company has adopted a code of ethics for its principal executive
officer and principal financial officer. The Code of Ethics is available in
print to any shareholder who requests it in writing to the Company at The St.
Lawrence Seaway Corporation, Hanna II, Suite P, 6011 E. Hanna Avenue, Beach
Grove, Indiana 46203.
ATTENDANCE AT ANNUAL MEETINGS OF STOCKHOLDERS
The Company does not have a policy with regard to Board members' attendance
at annual meetings of stockholders. Our last meeting of shareholders occurred on
October 27, 2004. One Board member attended such meeting of stockholders.
STOCKHOLDER COMMUNICATION POLICY
Stockholders may send communications to the Board of Directors or
individual members of the Board by writing to them, care of Secretary, The St.
Lawrence Seaway Corporation, Hanna II, Suite P, 6011 E. Hanna Avenue, Beach
Grove, Indiana 46203 (or any other then current mailing address), who will
forward the communication to the intended director or directors. If the
stockholder wishes the communication to be confidential, then the communication
should be provided in a form that will maintain confidentiality.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Based solely on a review of Forms 3 and 4 and amendments thereto, furnished
to the Corporation during the fiscal year ended March 31, 2007 and Forms 5 and
amendments thereto furnished to the Corporation with respect to the fiscal year
ended March 31, 2007, no director, officer or beneficial owner of more than 10%
of the Corporation's equity securities failed to file on a timely basis reports
required by Section 16(a) of the Exchange Act during the fiscal year ended March
31, 2007.
10
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" EACH OF THE NOMINEES
TO THE BOARD OF DIRECTORS.
The affirmative vote of a plurality of the shares represented at this
meeting, after a quorum is achieved, is required to elect the Nominees to the
Board of Directors. If any of the other Proposals contained herein are not
approved by the shareholders (other than Proposals One and Seven which will be
effected regardless of the outcome of the other Proposals), the Company expects
that (1) the Directors which the shareholders will have re-elected will remain
in office unless they are removed or resign in accordance with the by-laws and
certificate of incorporation of the Company currently in effect; and (2) the
balance of the proposals will not be effected, including the consummation of the
Transaction.
The Board recommends a vote "FOR" each of the nominees to the Board of
Directors, which, in the event the other Proposals herein are approved and the
Transaction is consummated, would effectively approve the appointment of the
Post-Transaction Directors. Unless marked to the contrary, proxies received will
be voted FOR approval of the nominated directors.
11
PROPOSAL TWO
APPROVAL OF THE STOCK AND WARRANT PURCHASE
SET FORTH BELOW IS SELECTED INFORMATION ABOUT THE PROPOSED SALE OF SHARES
OF COMMON STOCK AND WARRANTS OF THE COMPANY TO BERNARD ZIMMERMAN & COMPANY, INC.
THE SUMMARY MAY NOT CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. TO
UNDERSTAND THE TRANSACTION FULLY, WE STRONGLY ENCOURAGE YOU TO READ CAREFULLY
THIS ENTIRE PROXY STATEMENT AS WELL AS THE PURCHASE AGREEMENT WHICH WAS
PREVIOUSLY FILED AS AN EXHIBIT TO A FORM 8-K FILED ON OR ABOUT JANUARY 10, 2007.
PLEASE REFER TO THE SECTIONS ENTITLED "BACKGROUND-THE TRANSACTIONS," "RISK
FACTORS SET FORTH ON PAGES 12 AND 13, RESPECTIVELY.
BACKGROUND - THE TRANSACTION
On January 10, 2007, The Company entered into a Stock and Warrant Purchase
Agreement (the "Purchase Agreement") with Bernard Zimmerman & Company, Inc., an
investment and merchant banking company (the "Investor"), pursuant to which the
Investor has agreed to purchase: (i) 75,000 shares of Common Stock of the
Company (the "Common Stock") for a total purchase price of $75,000; and (ii) a
ten year warrant for a total purchase price of $2,500 which permits the Investor
to purchase up to 250,000 shares of Common Stock at an exercise price of $1.00
per share (the "Warrant"). The purchase and the related events are hereafter
referred to as the "Transaction". The Common Stock and Warrant will be sold to
the Investor pursuant to an exemption from registration under Section 4(2) of
the Securities Act of 1933, as amended. The Common Stock being sold to the
Investor will represent approximately 15% of the outstanding Common Stock of the
Company after the issuance of the Common Stock as part of the Transaction (and
before the exercise of the Warrant). If Bernard Zimmerman & Company, Inc.
exercises all of the Warrants issued in the Transaction, the Investor would own
approximately 43.2% of the issued and outstanding Common Stock of the Company if
no other shares are issued.
Under the terms of the Purchase Agreement, and subject to shareholder
approval, as required, it is contemplated that immediately prior to the closing
under the Purchase Agreement, the Company will convert to a Delaware corporation
and issue to all stockholders as of the Record Date and to holders of certain
currently held outstanding options and warrants of current officers and
directors who are entitled to receive such distributions upon the exercise of
such outstanding instruments (if they exercise their options or warrants before
their expiration), on a pro rata basis, shares of the Company's newly authorized
Class A Common Stock, which will represent the interest of the Company's
investments in, and ventures with, New York University School of Medicine and T3
Therapeutic, LLC. The Class A Common Stock, also referred to herein as the
"Tracking Stock" will be non-voting, non-tradable, non-transferable,
non-certificated and held in book entry form only. The Company will not issue
any Tracking Stock to the Investor in connection with the Investor's acquisition
of Common Stock and the Warrant or to any parties other than the holders of the
Company's Common Stock as of the Record Date and to holders of certain currently
held outstanding options and warrants of current officers and directors who are
entitled to receive such distributions upon the exercise of such outstanding
instruments (if they exercise their options or warrants before their
expiration). You are being asked to approve certain of the required actions
contemplated under the Purchase Agreement in accordance with your rights as a
shareholder.
In connection with the closing under the Purchase Agreement, and subject to
shareholder approval, as required, the Company has agreed to appoint Mr. Bernard
Zimmerman, the principal of the Investor, to the Board of Directors along with
one or more of the Investor's nominees. The purchase Agreement requires that,
upon consummation of the Transaction, the nominees who you are being asked to
elect at this time will resign, except for Mr. Edward Grier who will remain as a
director. Mr. Grier, as the sole remaining director, will then fill the
vacancies created by such resignations with the appointment of Mr. Zimmerman and
his nominee(s). Following the closing under the Purchase Agreement, Mr.
Zimmerman shall serve as President, Chairman of the Board of Directors, and
Treasurer, Mr. Duane L. Berlin shall serve as Secretary, and the Company's
existing officers will resign.
12
The issuance of the Tracking Stock and the other transactions contemplated
by the Purchase Agreement are subject to approval of the shareholders of the
Company by no later than August 31, 2007 (unless extended by mutual agreement
between the Company and the Investor).
RISK FACTORS
In addition to other information provided or incorporated by reference in this
document, you should consider the following information carefully in deciding
whether to vote in favor of Proposal 2.
AFTER CLOSING OF THE TRANSACTION, THE COMPANY MAY NOT BE SUCCESSFUL IN
EFFECTUATING A FUTURE BUSINESS COMBINATION.
While the intention of the Investor and the Company is to seek a future business
combination, reverse merger, acquisition or other transaction for the Company,
there can be no assurance that the Company will ever effectuate such a
transaction. Accordingly, the prospects of the Company may never advance as a
result of the Transaction and may not result in any material appreciation in the
value of the Company's stock or of equity of the Company.
THE TERMS AND/OR EFFECTS OF A POTENTIAL BUSINESS COMBINATION MAY NOT ULTIMATELY
BE FAVORABLE TO THE COMPANY.
Even if the Company successfully effectuates a business combination, there can
be no assurance as to how favorable the terms of such a transaction would be,
whether and to what extent the stockholders of the Company will suffer dilution
of their ownership of the Company or whether the business combination would be
successful, profitable or result in any material appreciation in the value of
the Company's stock or of equity of the Company.
AFTER CLOSING OF THE TRANSACTION AND THE ISSUANCE OF THE TRACKING STOCK, THE
REMAINDER OF THE COMPANY WILL HAVE MINIMAL ASSETS.
There can be no assurance that once the Tracking Stock is issued to existing
holders of Common Stock of the Company and to holders of certain currently held
outstanding options and warrants of current officers and directors who are
entitled to receive such distributions upon the exercise of such outstanding
instruments (if they exercise their options or warrants before their
expiration), and if any distributions or dividends relating to the Medical
Investments are allocated to Tracking Stock holders, that the balance of the
Company will retain any value independent of the Medical Investments.
THE TRANSACTION CONTEMPLATED BY THE PURCHASE AGREEMENT MAY NOT BE CONSUMMATED.
Even if the terms of the Purchase Agreement are approved by the Company's
stockholders, there is a risk that the Transaction will not close. The Purchase
Agreement contains numerous conditions to closing. If one or more of these
conditions is not satisfied or waived, then the transactions contemplated by and
described in the Purchase Agreement may not close.
AFTER THE CONSUMMATION OF THE TRANSACTION, THE "TRACKING STOCK" KNOWN AS THE
CLASS A COMMON STOCK MAY NOT BE DISTRIBUTED.
Whether or not the Purchase Agreement closes, there may be no distribution of
the Tracking Stock to the Company's stockholders due to unforeseen
circumstances, including, but not limited to, tax liabilities or state or
federal securities laws issues related to the issuance, though the Company
currently intends to do so immediately after the closing of the Transaction, if
approved.
13
HISTORICAL BACKGROUND OF THE TRANSACTION
Background on the Company
The Company is an Indiana corporation organized on March 31, 1959. Prior to
1998, the Company principally engaged in farming, timber harvesting and other
traditional agricultural activities. The Company is currently engaged in
investing in drug development programs and in evaluating other alternatives to
its former business, including continuing its evaluation of operating companies
for acquisition, merger or investment. Pending any such transaction, the Company
will continue its practice of maintaining any cash assets in relatively liquid
interest/dividend bearing money market investments. Eventually such assets may
be used for an acquisition or for a partial payment of an acquisition or for the
commencement of a new business. The Company currently has no revenues, other
than insignificant interest income, and has minimal net worth.
RESEARCH FUNDING. In recent years, the Company has examined several
investment and acquisition opportunities in technology and Internet-related
fields, but ultimately determined that they were not suitable for the Company.
The Company has broadened its search to opportunities to participate in funding
the development of pharmaceuticals and health-related products. The following is
a summary of the two ventures the Company has entered into.
In January 2002, the Company entered into a Research Funding Agreement with
New York University School of Medicine, New York, New York, under which the
Company provided funding for the further development of certain NYU medical
discoveries and technology, in return for which the Company is entitled to
receive license fees from the future commercial uses of such discoveries. Such
technology is subject to pending NYU patent applications and generally relates
to treatment of certain prostate enlargements and prostate cancers. Under the
Research Funding Agreement, the Company agreed to provide research funding of
$25,000 for each of eight calendar quarters, in exchange for which the Company
is entitled to receive 1.5% of future license revenues from the sale, license or
other commercialization of the patents. The first payment was made in connection
with the execution of the Research Funding Agreement in January 2002. The
Company had the option to provide additional funds for up to three additional
years of development, in exchange for which the Company's share of license
revenue from the patents would increase to a maximum of 3.75%. The Company did
not exercise this option. Development and commercialization of the patents is
highly speculative and subject to numerous scientific, financial, practical and
commercial uncertainties. There can be no assurances that the Company will
receive any license revenues as a result of this Research Funding Agreement. Any
value previously attributed to this investment was expensed in the Fiscal Year
ended March 31, 2002.
In a separate matter, the Company entered into a joint venture agreement as
of June 25, 2002 (the "Original Agreements"), under which it has provided
development funding to a newly-formed private Delaware limited liability
company, T3 Therapeutics, LLC (the "Development Company"), for specified drug
treatment protocols for thyroid and cardiovascular disease, in exchange for an
equity interest in the Development Company. Such treatments are in early stage
development and involve the use of novel formulations of hormones, delivered in
controlled release formulations. Funding provided by the Company is being used
for the purpose of financing development of new formulations of such hormones,
and to conduct animal and human clinical trials.
Under the Original Agreement, (i) T3 Therapeutics, Inc. (the "Founder
Company") contributed to the Development Company all of its right, title and
interest in the design, development and research of certain medicinal products
in exchange for an 87.5% Class A ownership stake in the Development Company,
(ii) the Company provided development funding of $750,000 to the Development
Company in exchange for a 12.5% preferential Class B ownership stake in the
Development Company, and (iii) Mr. Edward Grier, a vice president and director
of the Company, was granted an option to purchase 25 Class B units in the
Development Company. In connection with the consummation of the transactions
contemplated by the Original Agreement, Mr. Grier purchased 25 Class A units in
the Development Company from the Founder Company for $150,000, which resulted in
the Founder Company having an 85% Class A ownership stake in the Development
Company and Mr. Grier having a 2.5% Class A ownership stake in the Development
Company. In addition, the Original Agreement provided for a follow-on investment
by the Company of an additional $750,000 if certain preliminary FDA testing
approvals were secured, with a corresponding increase in the Company's ownership
stake in the Development Company to 25%.
14
As of November 16, 2005, the Company, the Founder Company and Mr. Grier
(together with the Founder Company, the "Other Members") entered into an Amended
and Restated Limited Liability Company Agreement (the "Amendment") of the
Development Company, which amended and restated the Original Agreement to, among
other things, provide for satisfaction of any contingent follow-on investment
obligation of the Company in exchange for its making a $50,000 investment on or
about the time of execution of the Amendment, and for the conversion of all of
the Company's preferential Class B interests in the Development Company
(including certain redemption, registration and contingent additional unit
rights), as well as all of the interests of Mr. Grier and the Founder Company,
into a single non-preferential class of unit interests. The $50,000 follow-on
investment increased the Company's ownership stake in the Development Company to
25%, subject to adjustment and dilution. As of March 31, 2006, the Company's
ownership stake in the Development Company has been diluted to approximately
21.8% upon the issuance by the Development Company of Development Company units
to the original patent licensor in exchange for the original patent licensor's
modified royalty agreement with the Development Company. Further dilution of the
Company's ownership stake is expected as the Development Company raises
additional capital to fund operations.
If the product is licensed by Development Company to a pharmaceutical
partner the Company is entitled to a portion of Development Company's resulting
royalties and progress payments. The amount of ownership and royalties to be
received by the Company is subject to adjustment, based upon (i) ownership and
license arrangements that the Development Company makes with laboratories that
provide research and formulation expertise and products, (ii) development or
licensing transactions, or (iii) other sources of financing. Development and
commercialization of the treatment protocols is highly speculative and subject
to numerous scientific, practical, financial and commercial uncertainties.
Prior to the follow-on investment noted above, the Company carried the
investment at the March 31, 2005 restated value of $680,000. As the $50,000
investment increased the Company's equity share by 12.5% to 25% (prior to
subsequent dilution noted above), the Company reviewed the original 12.5%
investment for impairment, and concluded that the original investment should be
reduced to equal the value of the follow-on investment. As such, the Company
recorded a loss on the other than temporary decline in the value of its original
investment balance. Accordingly, an impairment loss of $630,000 was recorded
during the fiscal year ended March 31, 2006. A reconciliation of the investment
account is as follows:
Balance March 1, 2005 (as restated) $680,000
Add: Follow-on investment, November 16, 2005 50,000
----------
New balance as of December 31, 2005 730,000
Less:
Impairment loss - Fiscal Year ended March 31, 2006 630,000
Equity in loss of the investment (Development Company) 10,000
----------
Balance, March 31, 2006 $ 90,000
As of the March 31, 2007, Mr. Grier was a 2.5% Member of the Development
Company and had an option to purchase an approximate 2.5% (25 units) additional
ownership stake in the Development Company.
The two above described medical ventures are the basis of the Medical
Investments which relate to the Tracking Stock.
15
Background of the Investor
Bernard Zimmerman & Company, Inc., an investment and merchant banking
company, also known as, the "Investor", has entered into the Purchase Agreement
with the Company. Mr. Bernard Zimmerman, the principal of the Investor was
previously the Chairman of the Board and President from 1990 to 1993, and owned
50,000 shares of Common Stock and 100,000 warrants, all of which were sold in
1993. Mr. Zimmerman currently owns no securities of the Company.
The Investor intends to help position the Company to facilitate a future
business combination or transaction with a third party or entity through a
merger, reverse merger, consolidation, stock or asset purchase, joint venture or
investment in order to maximize future profitability of the Company and
stockholder equity. Mr. Zimmerman would be appointed to serve as Chairman of the
Board of Directors, filling the vacancy of one of the resigning directors.
Pursuant to the Purchase Agreement, subsequent to the consummation of the
Transaction, Mr. Zimmerman, once appointed, would serve as a director and
officer to the Company and may become a "control person" of the Company as that
term is defined in the Securities Exchange Act of 1934.
Effect on Board of Directors
The terms of the Purchase Agreement grants the Investor the right to designate
three or more of the Company's nine directors. It is contemplated under the
Purchase Agreement that Mr. Zimmerman will designate Mr. Berlin, Mr. Zlatniski
and himself as new directors. As such, only one of the four existing directors
would remain on the Board, and after the consummation of the Transaction, Mr.
Grier will have effected the appointment of three of the four directors. Mr.
Zimmerman, as the new Chairman of the Board, may appoint others in the future.
Exemption from Securities Act of 1933
The offering of securities contemplated by the Purchase Agreement is exempt from
the registration requirements of Section 5 of the Securities Act of 1933 (the
"Securities Act") pursuant to Section 4(2) of the Securities Act as a
transaction not involving any public offering of securities.
Use of Proceeds
The proceeds of the proposed sale of the securities would be used for general
corporate purposes.
Implications of Large Block Sale
The 75,000 shares of Common Stock plus 250,000 shares of Common Stock which may
be acquired by Bernard Zimmerman & Company, Inc. under the Warrant represents
43.2% of the Company's Common Stock outstanding, assuming full conversion of the
Warrants, after the consummation of the Transaction. Such a large block of newly
issued common shares would dilute each stockholder's effective voting power. See
also "Potential Negative Implications to Stockholders from the Purchase
Agreement."
Regulatory Requirements
Certain federal or state regulatory requirements must be complied with in
connection with the proposed Transaction. The company, however, is not required
to obtain approval (other than stockholder approval) in order to consummate the
Transaction.
Potential Negative Implications to Stockholders from the Purchase Agreement
While the Board of Directors and management believe the proposed Transaction
represents the best available opportunity for stockholders to achieve an
increase in the value of their stock, they also stress that the proposed
Purchase Agreement may present potentially negative implications to stockholders
for the following reasons:
16
o After the closing of the Transaction, the Company will
immediately realize a $75,000 increase in book value and cash
assets of the Company, however, there can be no assurance that
there will be a successful future business combination or other
transaction effected with an appropriate operating business
o Current management will no longer control day to day management
of the Company.
o The 75,000 shares of Common Stock plus 250,000 shares issuable
upon exercise of the Warrant would represent approximately 43.2%
of the Company's total Common Stock outstanding after the
closing, assuming full conversion of the Warrants. The issuance
of such a large block of shares will dilute each stockholder's
effective voting power.
o The sale could also negatively affect the price of the Common
Stock as a result of the dilution to other stockholders caused by
the issuance of additional Common Stock and Warrants exercisable
into Common Stock to the Investor.
o The Investor would designate the holders of three of the
Company's four Board seats that would exist after Closing and is
entitled to appoint additional Directors up to the maximum number
allowed by the Company's By-Laws, which is currently five. This
would result in their having substantial control over the policy
and operations of the Company, including potential material
transactions in which the Company may engage.
Dissenter's Rights.
Pursuant to Section 23-1-44-8 of the IBCL, Company shareholders have the
right to dissent and obtain payment of the fair value for their shares.
Reasons for the Transaction
The Board of Directors and management of the Company have determined that
in order to maximize the potential profitability of the Company and benefits to
the shareholders of the Company, it is in the best interests of the shareholders
and the Company to seek a transaction or series of transactions that will
capitalize on the benefits of public ownership while seeking corporate
opportunities for the Company. The costs associated with maintaining the Company
as a public entity are inappropriate for the Company's current ventures and the
Company is currently not positioned to exploit the capital markets generally
available to public corporations nor any other advantage or opportunity of being
a publicly held company.
Furthermore, Bernard Zimmerman and Company, Inc., the proposed purchaser of
the Common Stock and Warrants has extensive experience in corporate finance and
business transactions, an immediate interest and the financial capability to
purchase such Common Stock and Warrants, which could be lost if the Company
fails to conclude such a sale. No other party or parties have made a definitive
offer nor provided any definitive plan for the Company at any price or on any
terms and, in any event, the Company has not received any offers or proposals
for such a purpose at terms as favorable as those being offered by the proposed
Investor. Management has no reason to believe that such an offer may be
forthcoming at any time in the future.
Subsequent Plans
Following the closing of the transactions contemplated by and described
in the Purchase Agreement, a new, experienced management team will seek an
appropriate merger, reverse merger, acquisition, business combination or other
transaction for the Company in order to increase stockholder value and better
realize the value inherent in the Company's status as a publicly held company.
In the event that the Purchase Agreement is consummated, then the Company's
current management will have a very limited role in the management of the
Company based on the fact that all current officers will resign and the current
directors will hold only one of the four seats on the Board of Directors.
Further, the Board may be increased to up to five persons based on the proposed
Delaware By-Laws after shareholder approval hereunder (See Proposal Three). In
addition, the Company will file the proposed amended and restated certificate of
incorporation with the Delaware Secretary of State, as described in Proposal
Five (the "Delaware Certificate of Incorporation"). The current management and
significant shareholders hold warrants and options and will continue to do so
until September 21, 2007, unless exercised earlier.
17
Effective Time of the Sale
In accordance with the terms of the Purchase Agreement, the closing of the
transactions contemplated by the Purchase Agreement shall occur as soon as
practicable following approval by the Company's stockholders.
Conditions to Closing
The completion of the transactions contemplated by the Purchase Agreement
depends upon the satisfaction of a number of conditions, including, among
others:
o Approval of the Purchase Agreement by a majority of the
outstanding shares of stock of the Company.
o Accuracy in all material respects of the representations and
warranties contained in the Purchase Agreement.
o Compliance in all material respects with all agreements and
obligations of the Company that is required to be complied with
before consummation of the Transaction, and delivery of a
certificate to that effect.
o Common Stock and Warrants (along with the underlying securities
issuable thereunder) are to be delivered and are exempt from 1933
Act and the registration and/or qualification requirements of all
applicable state securities laws.
o Absence of any law or injunction preventing the sale.
o Approval by the stockholders of the Company of the election of
the nominees for directors of the Company (see Proposal 1), the
investment by Bernard Zimmerman & Company, Inc. (Proposal 2), the
reincorporation from Indiana to Delaware in connection with the
amendment and restatement of the by-laws and certificate of
incorporation of the Company (see Proposals 2, 3, 4 and 5), the
issuance of the Class A Stock (see Proposal 6).
Vote Required.
The affirmative vote of the holders of the Company's is not required for the
Investor to purchase the Common Stock and Warrants under the terms of the
Company's corporate documents, however, the Company desires that a majority of
the outstanding shares of the Company vote in favor of the Transaction
contemplated by and described in the Purchase Agreement. The Board has
determined it will seek the approval of the shareholders in fairness to existing
shareholders given that there will be material effects on the Company, including
a change in control, amendment to corporate documents, a reincorporation in
Delaware and the issuance a tracking stock. In the event the approval of the
shareholders is not obtained for this Proposal 2, the Company will not
consummate the Transaction or Proposals 3, 4, 5 or 6.
18
Recommendation of the Board of Directors.
The Board of Directors unanimously recommends that the stockholders vote "FOR"
the approval of the Purchase Agreement (Item No. 2 on the proxy card). All
material factors the Board of Directors considered in deciding whether to
approve and recommend the Purchase Agreement are disclosed in this Proxy
Statement.
19
PROPOSAL THREE
APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE BY-LAWS OF THE
CORPORATION
The Board is recommending amending and restating the By-Laws of the
Company, which will repeal in their entirety all of the currently existing
By-Law provisions and substitute the new provisions set forth in the By-Laws
which would be adopted upon reincorporation in the State of Delaware ("Delaware
By-Laws") attached to this proxy statement as Annex B. Therefore, the current
By-Laws will be entirely replaced with the Delaware By-Laws in Annex B.
General Information and Board Approval
As part of the adoption of the Delaware By-Laws, the Board of Directors has
unanimously approved and recommends that the shareholders approve the amended
and restated By-Laws, also known as the Delaware By-Laws.
Effect of Change
The Delaware By-Laws will effect a change in the governing laws of the
Company, the most significant of which are described below under the heading
"Comparison of Shareholder Rights Before and After the Adoption of the Delaware
By-Laws" below and "Comparison of Shareholder Rights Before and After the
Reincorporation" in Proposal Four.
Reasons for the Adoption of the Delaware By-Laws
The Board is recommending the Delaware By-Laws in connection with its
proposed reincorporation in Delaware. The Board is making this recommendation in
order to make the By-Laws more consistent with the changes to Delaware statutes
and regulations in contemplation of a reincorporation from Indiana to Delaware.
The amendment and restatement reorganizes the By-Laws and makes various changes
to clarify language, update terminology and conform the charter to current laws
of Delaware. As mentioned above, operating under the current By-Laws can be
difficult because its provisions often do not contemplate the current state of
the regulatory environment and the conduct of business in Delaware, as well as
the Transaction discussed in detail below. The Board believes the material
changes to the By-Laws, described below, along with the other changes contained
in the Delaware By-Laws will allow for a smother operation of the Corporation
upon its reincorporation and in light of the proposed changes to its Certificate
of Incorporation upon which you are also being asked to vote.
The Adoption of the Delaware By-Laws
The Delaware By-Laws have been approved by the current Board of Directors
of the Company. Approval of the Delaware By-Laws requires the affirmative vote
of the holders of a majority of all of the votes entitled to be cast thereon.
Anti-Takeover Effect of the Delaware By-Laws
If the Delaware By-Laws are approved, certain provisions of the Delaware
Certificate of Incorporation and Delaware By-Laws may have anti- takeover
implications.
Certain provisions of the IBCL, specifically the Constituent Interests
Provision and the Control Share Acquisitions Provisions as described in
"Comparison of Rights of Shareholders," below, have no comparable provisions
under Delaware law. These statutory provisions and certain provisions of the
Delaware Certificate of Incorporation and Delaware Bylaws may have the effect of
discouraging an unsolicited attempt by another person or entity to acquire
control of the Company. Such provisions may make tender offers, and certain
other transactions, more difficult or more costly and could discourage or limit
shareholder participation in such types of transactions, whether or not such
transactions were favored by the majority of the shareholders. As of this date,
the Board of Directors is unaware of any specific effort to accumulate the
Company's Common Stock or to obtain control of the Company by means of a merger,
tender offer or otherwise.
20
See also the risk factors set forth in "Proposal Four" under the Section
"Comparison of Shareholder Rights Before and After the Reincorporation" for
certain additional risks to shareholders in the adoption of the Delaware By-Laws
and for further discussion as provisions of the Delaware By-Laws as they differ
from not only the current By-Laws, but from Delaware law under the General
Corporation Law of the State of Delaware (the "DGCL").
COMPARISON OF SHAREHOLDER RIGHTS BEFORE AND AFTER THE ADOPTION OF THE DELAWARE
BY-LAWS
Because of differences between the IBCL and the DGCL, as well as
differences between the Company's governing documents before and after the
adoption of the Delaware By-Laws, the adoption of the Delaware By-Law will
effect some changes in the rights of the Company's shareholders. Summarized
below are the most significant differences between the rights of the
shareholders of the Company before and after the adoption of the Delaware
By-Laws, as a result of the differences between the IBCL and the DGCL and the
current Bylaws and the Delaware Bylaws.
The material differences of these bylaws are discussed below. Additional
differences are discussed in Proposal Four under the header, "Comparison of
Shareholder Rights Before and After the Reincorporation."
Capital Stock.
After the filing of the Delaware Certificate of Incorporation and Delaware
Bylaws, and assuming Proposal Five is approved by the shareholders, the number
of authorized shares will increase from 4,000,000, par value $1.00 per share, to
50,010,000, par value $0.01 per share, consisting of 48,500,000 shares of Common
Stock, par value $0.01 per share, 510,000 shares of Class A Common Stock, par
value $0.01 per share, and 1,000,000 shares of Preferred Stock, par value $0.01
per share.
In addition, the holders of the Company's Common Stock will be entitled to
such dividends as may be declared from time to time by the Board of Directors
from funds legally available therefor, and will be entitled to receive, pro
rata, all assets available for distribution to such holders upon liquidation.
Holders of Tracking Stock will have no voting or transfer rights except as
specifically set forth in the Delaware Certificate of Incorporation and as
summarized in Section III of Proposal Five and Proposal Six, and they will hold
their shares in book entry form only. No shares of the Company's Common Stock
have any preemptive, redemption or conversion rights, or the benefits of any
sinking fund.
Size and Classification of the Board of Directors.
Section 141(b) of the DGCL provides that the board of directors of a
Delaware corporation shall consist of one or more members. The number of
directors shall be fixed by, or in the manner provided in, the bylaws unless the
certificate of incorporation fixes the number of directors, in which case a
change in the number of directors shall be made only by amendment of the
certificate. Section 23-1-33-3 of the IBCL provides that the board of directors
of an Indiana corporation must consist of one or more individuals, with the
number specified in or fixed in accordance with the articles of incorporation or
bylaws.
Pursuant to Section 141(d) of the DGCL, the directors may, by the
certificate of incorporation, by an initial bylaw or by a bylaw adopted by a
vote of the shareholders, be divided into one, two or three classes. Section
23-1-33-6 of the IBCL provides that the articles of incorporation, or, if the
articles of incorporation so authorize, the bylaws, may provide for staggering
the terms of directors by dividing the total number of directors into either two
or three classes.
21
The Company's Board of Directors is currently composed of four members,
which number may be changed by the Board of Directors, provided that the number
of directors will not be less than three or more than five. The current
Certificate of Incorporation and current Bylaws provide that the Board of
Directors is not staggered. Similarly, neither the Delaware Certificate of
Incorporation nor the Delaware Bylaws provide for staggered terms for directors.
Removal of Directors.
The current By-Laws are silent as to how directors may be removed. The
Delaware Bylaws permit removal of directors, with or without cause, by a vote of
the majority of shareholders entitled to vote.
Newly Created Directorships and Vacancies.
The current Certificate of Incorporation and By-Laws are silent as to how
vacancies are to be filled. The Delaware Bylaws provide that vacancies are to be
filled by the affirmative vote of a majority of the remaining directors though
less than a quorum or by a sole remaining director.
Quorum and Vote Required to Take Action.
The current Bylaws states that a 1/3 of the directors then elected
constitute a quorum. The current Bylaws are silent as to what constitutes a
quorum for the transaction of business. The Delaware Bylaws provide that a
majority of the total number of directors constitutes a quorum for the
transaction of business and that the act of a majority of the directors present
at any meeting at which there is quorum is the act of the Board of Directors.
Limitation on Directors' Liability.
The current Certificate of Incorporation is silent as to the limitations on
directors' liability. The current Bylaws and the Delaware Certificate of
Incorporation and Bylaws provide that directors liability is limited to the
fullest extent permitted by the DGCL.
Special Meetings of Shareholders.
The current Bylaws permit calling of special meeting in the manner
prescribed by the IBCL. The Delaware Bylaws provide that a majority of the Board
of Directors, the Chairman, or the President may call a Special Meeting.
Business Combinations Involving Interested Shareholders.
The current Certificate of Incorporation and current Bylaws are silent as
to whether they are governed by Section 23-1-42 of the IBCL. The Delaware Bylaws
do not exclude the Company from restrictions imposed under Section 203 of the
DGCL.
Control Share Acquisitions.
The current Certificate of Incorporation and current Bylaws do not
specifically exclude the Company, from the restrictions imposed by the Control
Share Acquisition Provisions of the IBCL. See also "Proposal Four: Comparison of
Shareholder Rights Before and After the Reincorporation: Control Share
Acquisition" for a more detailed discussion of Control Share Acquisitions.
Vote by Proxy.
Under the Delaware By-Laws, and in accordance with Section 212 of the DGCL,
proxies are valid for three years from its date of issuance, unless otherwise
provided in the proxy. The current Bylaws are silent as to the term of validity
of proxies.
22
Amendment of Certificate or Articles of Incorporation and Bylaws.
The current Certificate of Incorporation provides for amendments in the
manner prescribed by the IBCL. The current Bylaws may be amended by the vote of
2/3 of the directors then in office. The Delaware By-Laws may be amended at an
annual or special meeting of the shareholders by the affirmative vote of a
majority of shareholders entitled to vote at such meeting. The Delaware
Certificate of Incorporation may be amended with the vote of a majority of
outstanding shares of Common Stock entitled to vote, or with respect to those
votes that would adversely affect any other class of stock, with the vote of a
majority of such affected shares.
Advance Notice Provisions.
The current Bylaws and Certificate of Incorporation do not establish an
advance notice procedure for shareholders to make nominations of candidates for
election as directors, nor of notice of shareholder meetings. The Delaware
Bylaws provide that the record date and notice of shareholder meetings be
delivered to each stockholder entitled to vote at such meeting no less than 10
days nor more than 60 days prior to such meeting in order to be consistent with
Section 222 of the DGCL. The Delaware By-Laws do not establish an advance notice
procedure for shareholders to make nominations of candidates for election as
directors.
Effective Time
If the Delaware By-Laws are approved, it is anticipated that the Delaware
By-Laws will become effective at the time discussed in the section describing
the Transaction. However, the Delaware By-Laws may be terminated and abandoned
by action of the Board of Directors at any time prior to their effective time,
whether before or after the approval by the Company's shareholders, if the Board
of Directors determines for any reason, in its sole judgment and discretion,
that the consummation of the Transaction and the adoption of the Delaware
By-Laws would be inadvisable or not in the best interests of the Company and its
shareholders.
Effect of Not Obtaining the Required Vote for Approval
If the Delaware By-Laws fail to obtain the requisite vote for approval, the
Reincorporation (described in Proposal Four) will not be consummated and the
Company will continue to be incorporated in Indiana, and the Transaction (set
forth in Proposal Two), along with Proposals Five and Six , even if approved by
the Shareholders, may not be effectuated.
VOTING
Under our current By-Laws and Section 23-1-39-1 of the Indiana Business
Corporation Law, the affirmative vote of the holders of the Company's is not
required to approve the proposed Delaware By-Laws, however, the Company desires
that a majority of the outstanding shares of the Company vote to approve the
proposed Delaware By-Laws. The Board has determined it will seek the approval of
the shareholders in fairness to existing shareholders given that there will be
material effects on the Company including a number of changes to relevant
provisions. If the Delaware By-Laws are not approved by the shareholders, or if
any of the other Proposals contained herein are not approved by the shareholders
(other than Proposals One and Seven which will be effected regardless of the
outcome of the other Proposals), the Company expects that its current By-Laws,
as amended, will continue in effect, and that the balance of the Proposals
(other than Proposals One and Seven) will not be effected.
The Board recommends a vote "FOR" the approval of the adoption of the
Delaware By-Laws. Unless marked to the contrary, proxies received will be voted
FOR approval of the Delaware By-Laws.
23
PROPOSAL FOUR
APPROVAL OF THE REINCORPORATION TO DELAWARE
The Board is recommending reincorporating the Company from Indiana to
Delaware in connection with, and as part of, amending and restating the By-Laws
of the Company. In addition, the approval of the reincorporation from Indiana to
Delaware by shareholders is one of the events required in order to effect the
Transaction.
THE REINCORPORATION
General Information and Board Approval
The Board of Directors has unanimously approved and recommends that the
shareholders approve the reincorporation to Delaware. The reincorporation will
be effected pursuant to dissolution of the Indiana corporation and simultaneous
incorporation in Delaware (the "Reincorporation").
Effect of Change
The Reincorporation will effect a change in the legal domicile of the
Company and other changes of a legal nature, the most significant of which are
described below under the heading "Comparison of Shareholder Rights Before and
After the Reincorporation." At the effective time of the reincorporation, your
shares of Company Common Stock will be deemed an equal number of shares the
Company as a Delaware corporation with no further action required on your part.
Reasons for the Reincorporation
Delaware is a nationally recognized leader in adopting and implementing
comprehensive and flexible corporate laws. The DGCL is frequently revised and
updated to accommodate changing legal and business needs and is more
comprehensive, widely used and interpreted than other state corporate laws,
including the IBCL.
In addition, Delaware has established a specialized court, the Court of
Chancery, which has exclusive jurisdiction over matters relating to the DGCL.
The Chancery Court has no jurisdiction over criminal or tort cases, and
corporate cases are heard by judges, without juries, who have many years of
experience with corporate issues. Traditionally, this has meant that the
Delaware courts are able in most cases to process corporate litigation
relatively quickly and effectively. By comparison, many states, including
Indiana, do not have a specialized judiciary for matters relating to corporate
issues.
Delaware courts have developed considerable expertise in dealing with
corporate legal issues and produced a substantial body of case law construing
the DGCL, with multiple cases concerning areas that no Indiana court has
considered. Because our judicial system is based largely on legal precedents,
the abundance of Delaware case law should serve to enhance the relative clarity
and predictability of many areas of corporate law, which should offer added
advantages to the Company by allowing our Board of Directors and management to
make corporate decisions and take corporate actions with greater assurance as to
the validity and consequences of those decisions and actions.
Reincorporation from Indiana to Delaware may also make it easier to attract
future candidates willing to serve on our Board of Directors, because many such
candidates are already familiar with Delaware corporate law, including
provisions relating to director indemnification, from their past business
experience.
Upon completion of the Reincorporation, the rights of the shareholders of
the Company will be governed by the DGCL, the Delaware Certificate of
Incorporation and Delaware By-Laws.
24
The Reincorporation
At the effective time of the Reincorporation, each outstanding share of the
Company's Common Stock will automatically be deemed one share of the Company's
Common Stock, as incorporated in Delaware. You will not have to exchange your
existing stock certificates of the Company.
The Delaware Reincorporation has been approved by the current Board of
Directors of the Company. Approval of the Reincorporation requires the
affirmative vote of the holders of a majority of all of the votes entitled to be
cast thereon.
Effective Time
If the Reincorporation is approved, it is anticipated that the
Reincorporation will become effective at the time discussed in the section
describing the Transaction. However, the Reincorporation may be terminated and
abandoned by action of the Board of Directors at any time prior to the effective
time of the Reincorporation, whether before or after the approval by the
Company's shareholders, if the Board of Directors determines for any reason, in
its sole judgment and discretion, that the consummation of the Reincorporation
would be inadvisable or not in the best interests of the Company and its
shareholders.
Effect of Not Obtaining the Required Vote for Approval
If the Reincorporation fail to obtain the requisite vote for approval, the
Reincorporation will not be consummated and the Company will continue to be
incorporated in Indiana, and the Transaction (set forth in Proposal Two), along
with Proposals Three, Five and Six, even if separately approved by the
Shareholders, may not be effectuated.
Anti-Takeover Effect of Reincorporation
Delaware, like many other states, permits a corporation to adopt a number
of measures which are designed to reduce a corporation's vulnerability to
hostile takeover attempts. It should be noted, however, that the Reincorporation
is not being proposed in order to prevent any present attempt known to the Board
to acquire control of the Company or to obtain representation on the Board.
Certain differences between Indiana and Delaware law, which will be
effective upon consummation of the Reincorporation, could have an impact on
unapproved takeover attempts. Section 203 of the DGCL, restricts certain
"business combinations" with "interested shareholders" for three years following
the date that a person becomes an interested shareholder, unless the Board
approves the business combination. For a discussion of differences between the
laws of Indiana and Delaware that may affect the shareholders, see "Comparison
of Shareholder Rights Before and After the Reincorporation" below.
The Board recognizes that unsolicited hostile takeover attempts do not
always have unfavorable consequences or effects and may provide all of the
shareholders with considerable value for their shares. To the extent that the
Reincorporation may provide greater deterrence to takeover offers and greater
defenses against takeovers, the Reincorporation may have the effect of
discouraging or defeating future takeover attempts which a substantial number or
majority of the Company's shareholders might wish to accept and which might
provide a substantial premium over market prices. The Board, however, believes
that the potential suddenness and disadvantages of unapproved takeover attempts
(such as disruption of our business and the possibility of terms which may be
less favorable to all of the shareholders than would be available in a
Board-approved transaction) are sufficiently great that, on balance, prudent
steps to reduce the likelihood of such takeover attempts and to help ensure that
the Board has adequate opportunity to fully consider and respond to any takeover
attempt and actively negotiate its terms, are in the Company's best interests
and the best interests of its shareholders.
25
Certain provisions of the IBCL, specifically the Constituent Interests
Provision and the Control Share Acquisitions Provisions as described in
"Comparison of Rights of Shareholders Before and After the Reincorporation,"
below, have no comparable provisions under Delaware law. These statutory
provisions and certain provisions of the Delaware Certificate of Incorporation
and Delaware Bylaws may have the effect of discouraging an unsolicited attempt
by another person or entity to acquire control of the Company. Such provisions
may make tender offers, and certain other transactions, more difficult or more
costly and could discourage or limit shareholder participation in such types of
transactions, whether or not such transactions were favored by the majority of
the shareholders. As of this date, the Board of Directors is unaware of any
specific effort to accumulate the Company's Common Stock or to obtain control of
the Company by means of a merger, tender offer or otherwise.
COMPARISON OF SHAREHOLDER RIGHTS BEFORE AND AFTER THE REINCORPORATION
Because of differences between the IBCL and the DGCL, as well as
differences between the Company's governing documents before and after the
reincorporation, the reincorporation will effect some changes in the rights of
the Company's shareholders. Summarized below are the most significant
differences between the rights of the shareholders of the Company before and
after the reincorporation (and the adoption of the Delaware Bylaws), as a result
of the differences among the IBCL and the DGCL.
The DGCL differs from the IBCL in many respects. The material differences
of these statutes are discussed below. In addition, the material differences
between the current Certificate of Incorporation and current Bylaws as compared
to the Delaware Certificate of Incorporation and Delaware Bylaws are also
discussed below. Certain additional differences are discussed in Proposal Four
under the header, "Comparison of Shareholder Rights Before and After the
Reincorporation."
Capital Stock.
The Reincorporation will not affect the capital stock of the Company except
to the extent that the rights of shareholders will be governed by Delaware law
rather than Indiana law.
At the effective time of the Reincorporation, each outstanding share of the
Company's Common Stock will automatically be deemed one share of the Company's
Common Stock, as incorporated in Delaware. You will not have to exchange your
existing stock certificates of the Company, all of which shall be deemed validly
issued, fully paid and nonassessable.
After the Reincorporation, holders of the Company's Common Stock will
continue to be entitled to one vote per share on all matters submitted to a vote
of the shareholders, including the election of directors. Both the DGCL and the
IBCL permit the certificate or articles of incorporation to allow the Board of
Directors to issue and fix the dividend, voting and redemption rights,
liquidation preferences and other rights, privileges and restrictions of one or
more series of preferred stock without further shareholder action. The Company's
Preferred Stock may be issued from time to time in one or more series with such
relative dividend, voting and other rights, privileges and restrictions as the
Board of Directors may determine. The ability of the Board to issue Preferred
Stock and determine its relative dividend, voting and other rights without
further shareholder action will not be affected by the Reincorporation. The
issuance of Preferred Stock, while providing flexibility in connection with
possible acquisitions and other corporate purposes, could, among other things,
adversely affect the voting power of the holders of Common Stock and, under
certain circumstances, make it more difficult for a third party to gain control
of the Company, discourage bids for the Company's Common Stock at a premium or
otherwise affect the market price of the Company's Common Stock.
Size and Classification of the Board of Directors.
The Board of Directors of the Company following the Reincorporation will
have the same number of directors and composition as the Company's current Board
of Directors.
26
Removal of Directors.
Section 141(k) of the DGCL provides that any director or the entire board
of directors may generally be removed with or without cause by a majority
shareholder vote.
Under Section 23-1-33-8 of the IBCL, directors may be removed in any manner
provided in the articles of incorporation. In addition, unless the articles of
incorporation provide otherwise, the shareholders or directors may remove one or
more directors with or without cause. A director may be removed by the
shareholders, if they are otherwise authorized to do so, only at a meeting
called for that purpose and such purpose must be stated in the notice of the
meeting. A director elected by a voting group of shareholders may be removed
only by that voting group.
Newly Created Directorships and Vacancies.
Under Section 223 of the DGCL, unless the certificate of incorporation or
the bylaws of a corporation provide otherwise, a majority vote of the directors
then in office may fill vacancies and newly created directorships, even if the
number of current directors is less than a quorum or only one director remains.
If the directors filling a vacancy on the board constitute less than a majority
of the whole board (as measured before an increase in the size of the board),
the Delaware Court of Chancery may, upon application of shareholders holding at
least 10% of the outstanding voting shares, summarily order an election to fill
the vacancy or replace directors chosen by the directors then in office. Unless
otherwise provided in the certificate of incorporation or bylaws, when one or
more directors resign effective at a future date, a majority of directors then
in office, including those who have so resigned, may vote to fill the vacancy.
Under Section 23-1-33-9 of the IBCL, unless the articles of incorporation
provide otherwise, if a vacancy occurs on the board of directors, including a
vacancy resulting from an increase in the number of directors, the remaining
directors, even if less than a quorum, may fill the vacancy by majority vote. If
the vacant office was held by a director elected by a voting group of
shareholders, only the holders of shares of that voting group may vote to fill
the vacancy if it is filled by shareholders. A vacancy that will occur at a
specific later date by reason of resignation of a director effective at a later
date may be filled before the vacancy occurs, but the new director may not take
office until the vacancy occurs.
Quorum and Vote Required to Take Action.
Section 141(b) of the DGCL provides that a majority of the total number of
directors shall constitute a quorum for the transaction of business unless the
certificate of incorporation or bylaws of the incorporation require a greater
number. In addition, unless the certificate of incorporation provides otherwise,
the bylaws may provide for a quorum of less than a majority, which in no case
shall be less than one-third of the total number of directors. The board of
directors shall act by the vote of a majority of the directors present at a
meeting at which a quorum is present, unless the certificate of incorporation or
the bylaws require the vote of a greater number.
Under Section 23-1-34-5 of the IBCL, unless the articles of incorporation
or bylaws require a greater number, a majority of the fixed or prescribed number
of directors constitutes a quorum. Additionally, the articles of incorporation
or bylaws may authorize a quorum of no fewer than one-third of the fixed or
prescribed number of directors. If a quorum is present when a vote is taken, the
affirmative vote of a majority of the directors present is the act of the board
of directors unless the articles of incorporation or bylaws provide otherwise.
Limitation on Directors' Liability.
Section 102(b)(7) of the DGCL allows a corporation, through its certificate
of incorporation, to limit or eliminate the personal liability of directors to
the corporation and its shareholders for damages for breach of fiduciary duty.
However, this provision excludes any limitation on liability for: (i) any breach
of the director's duty of loyalty to the corporation or its shareholders; (ii)
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law; (iii) willful or negligent violation of the laws
governing the payment of dividends or the purchase or redemption of stock; or
(iv) any transaction from which the director derives an improper personal
benefit.
27
Section 23-1-35-1 of the IBCL provides that a director is not liable for
any action taken as a director, or any failure to act, unless the director has
breached or failed to perform the duties of the director's office in compliance
with Section 23-1-35-1 and the breach or failure to perform constitutes willful
misconduct or recklessness. Subject to this standard, a director who votes or
assents to distributions in violation of Section 23-1-28-3 of the IBCL or the
articles of incorporation is personally liable to the corporation for the amount
of the illegal distribution and is entitled to contribution from the other
directors who voted for or assented to such distribution and the shareholders
who received the distribution.
Indemnification of Directors and Officers.
Section 145 of the DGCL provides that a corporation may indemnify any
person made a party or threatened to be made a party to any type of proceeding
(other than certain actions by or in right of the corporation) because he or she
is or was a director, officer, employee or agent of the corporation or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, against expenses, judgments, fines and amounts
paid in settlement actually and reasonably incurred in connection with such
proceeding if such person 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; or in a criminal proceeding, if he or she had no reasonable cause
to believe his or her conduct was unlawful. Expenses incurred by an officer or
director (or other employees or agents as deemed appropriate by the board of
directors) in defending a civil, criminal or administrative proceeding may be
paid by the corporation in advance of the final disposition of such proceeding
upon receipt of an undertaking by or on behalf of such person to repay such
amount if it is ultimately determined that such person is not entitled to be
indemnified by the corporation. To indemnify a party, the corporation must
determine that the party met the applicable standards of conduct.
Section 23-1-37-8 and Section 23-1-37-13 of the IBCL provide that a
corporation may indemnify any individual made a party to a proceeding (including
a proceeding by or in the right of the corporation) because the individual is or
was a director, officer, employee or agent of the corporation against liability
incurred in the proceeding if the individual acted in good faith and reasonably
believed (i) in the case of conduct in the individual's official capacity with
the corporation, that the individual's conduct was in the corporation's best
interests and (ii) in all other cases, that the individual's conduct was at
least not opposed to the corporation's best interests. In the case of any
criminal proceeding, the individual must have had either reasonable cause to
believe the conduct was lawful or no reasonable cause to believe that it was
unlawful. In addition, Section 23-1-37-9 and Section 23-1-37-13 provide that a
corporation, unless limited by its articles of incorporation, must indemnify a
director or officer who was wholly successful in the defense of any proceeding
to which the director or officer was a party because the director or officer is
or was a director or officer of the corporation against reasonable expenses
incurred by the director or officer in connection with the proceeding.
The current Certificate of Incorporation and current Bylaws are silent as
to indemnification of directors and officers. However, the officers and Board of
Directors have been provided indemnification pursuant to a letter agreement, the
form of which is attached hereto as Annex D. The Delaware Certificate of
Incorporation and Bylaws provide for mandatory indemnification to the fullest
extent permitted by Delaware law. All new directors and officers will also be
afforded similar indemnifications.
Dividends.
Subject to any restrictions in a corporation's certificate of
incorporation, Section 170 of the DGCL allows the board of directors of a
Delaware corporation to declare and pay dividends out of surplus or, if there is
no surplus, out of its net profits for the fiscal year in which the dividend is
declared and/or the preceding fiscal year.
28
Section 23-1-28-1 of the IBCL allows a board of directors to make
distributions to shareholders, unless otherwise provided in the articles of
incorporation. However, pursuant to Section 23-1-28-3 of the IBCL, no
distribution may be made if, after giving effect to the distribution the
corporation would be unable to pay its debts as they become due in the ordinary
course of business or the corporation's assets would be less than the sum of its
liabilities plus, except as otherwise specifically allowed by the articles of
incorporation, the amount that would be needed, if the corporation were to be
dissolved at the time of the distribution, to satisfy the rights of preferential
shareholders whose rights are superior to those receiving the distribution.
Action by Shareholders through Written Consent.
Under Section 228(a) of the DGCL, unless otherwise provided in a
corporation's certificate of incorporation, any action required to be taken at
an annual or special meeting of the shareholders may be taken in the absence of
a meeting, without prior written notice and without a vote. Such action may be
taken by the written consent of shareholders in lieu of a meeting setting forth
the action so taken and signed by the holders of outstanding stock representing
the number of shares necessary to take such action at a meeting at which all
shares entitled to vote were present and voted. Section 3.12 of the Delaware
By-Laws also permits action by written consent. Article 8 of the current By-Laws
does not explicitly permit shareholder action by written consent, but the
current By-Laws incorporate by reference the provisions of the IBCL, including
Section 23-1-29-4, which does permit such action.
Under Section 23-1-29-4 of the IBCL, any action required or permitted to be
taken at a meeting of shareholders may be taken without a meeting if a written
consent thereto is signed by all of the shareholders entitled to vote on the
action.
Special Meetings of Shareholders.
Under Section 211(d) of the DGCL, special meetings of shareholders may be
called by the board of directors and by such other person or persons as may be
authorized to do so by the corporation's certificate of incorporation or bylaws.
Section 23-1-29-2 of the IBCL provides that a corporation with more than 50
shareholders must hold a special meeting of shareholders on demand of its board
of directors or the person or persons specifically authorized to do so by the
articles of incorporation or bylaws.
Cumulative Voting.
Both Section 214 of the DGCL and Section 23-1-30-9 of the IBCL allow a
corporation to provide for cumulative voting in the certificate of incorporation
or the articles of incorporation. Neither the current Certification or Bylaws or
the Delaware Certificate of Incorporation or Bylaws provide for cumulative
voting.
Necessary Vote to Effect Merger (Not Involving Interested Shareholder).
The DGCL requires a majority vote of the shares outstanding and entitled to
vote in order to effectuate a merger between two Delaware corporations (Section
251(c)) or between a Delaware corporation and a corporation organized under the
laws of another state (a "foreign corporation") (Section 252(c)). However,
unless required by the certificate of incorporation, Sections 25(f) and 252(e)
do not require a vote of the shareholders of a constituent corporation surviving
the merger if: (i) the merger agreement does not amend that corporation's
certificate of incorporation; (ii) each share of that corporation's stock
outstanding before the effective date of the merger is identical to an
outstanding or treasury share of the surviving corporation after the merger; and
(iii) in the event the merger plan provides for the issuance of common stock or
securities convertible into common stock by the surviving corporation, the
common stock issued and the common stock issuable upon conversion of the issued
securities do not exceed 20% of the shares outstanding immediately before the
effective date of the merger.
29
Section 23-1-40-3 of the IBCL requires a majority vote of the shares
entitled to vote in order to effectuate a merger or share exchange. However, the
vote of the shareholders of the surviving corporation on a plan of merger is not
required if: (i) the articles of incorporation of the surviving corporation will
not differ from its articles before the merger; (ii) each shareholder of the
surviving corporation whose shares were outstanding immediately before the
effective date of the merger will hold the same proportionate number of shares
relative to the number of shares held by all such shareholders (except for
shares of the surviving corporation received solely as a result of the
shareholder's proportionate shareholdings in the other corporations party to the
merger), with identical designations, preferences, limitations and relative
rights, immediately after the merger; (iii) the number of voting shares
outstanding immediately after the merger, plus the number of voting shares
issuable as a result of the merger (either by the conversion of securities
issued pursuant to the merger or the exercise of rights and warrants issued
pursuant to the merger), will not exceed by more than 20% the total number of
voting shares of the surviving corporation outstanding immediately before the
merger; and (iv) the number of participating shares outstanding immediately
after the merger, plus the number of participating shares issuable as a result
of the merger (either by the conversion of securities issued pursuant to the
merger or the exercise of rights and warrants issued pursuant to the merger),
will not exceed by more than 20% the total number of participating shares of the
surviving corporation outstanding immediately before the merger.
Business Combinations Involving Interested Shareholders.
Section 203 of the DGCL provides that, with certain exceptions, a Delaware
corporation may not engage in any of a broad range of business combinations,
such as mergers, consolidations and sales of assets, with an "interested
shareholder" for a period of three years from the date that such person became
an interested shareholder unless: (i) the transaction that results in the
person's becoming an interested shareholder or the business combination is
approved by the board of directors of the corporation before the person becomes
an interested shareholder; (ii) upon consummation of the transaction which
results in the shareholder becoming an interested shareholder, the interested
shareholder owns 85% or more of the voting stock of the corporation outstanding
at the time the transaction commenced, excluding shares owned by persons who are
directors and also officers and shares owned by certain employee stock plans; or
(iii) on or after the date the person becomes an interested shareholder, the
business combination is approved by the corporation's board of directors and by
holders of at least two-thirds of the corporation's outstanding voting stock,
excluding shares owned by the interested shareholder, at a meeting of
shareholders. Under Section 203, an "interested shareholder" is defined as any
person, other than the corporation and any direct or indirect majority-owned
subsidiary, that is the owner of 15% or more of the outstanding voting stock of
the corporation or an affiliate or associate of the corporation and was the
owner of 15% or more of the outstanding voting stock of the corporation or any
time within the three-year period immediately prior to the date on which it is
sought to be determined whether such person is an interested shareholder.
Section 203 does not apply to a corporation that so provides in an amendment to
its certificate of incorporation or bylaws passed by a majority of its
outstanding shares at any time. Such shareholder action does not become
effective for 12 months following its adoption and would not apply to persons
who were already interested shareholders at the time of the amendment.
Sections 23-1-43-1 to 23-1-43-23 of the IBCL restrict the ability of a
"resident domestic corporation" to engage in any business combination with an
"interested shareholder" for five years after the interested shareholder's date
of acquiring shares unless the business combination or the purchase of shares by
the interested shareholder on the interested shareholder's share acquisition
date is approved by the board of directors of the resident domestic corporation
before that date. If the combination was not previously approved, the interested
shareholder may effect a combination after the five-year period only if such
shareholder receives approval from a majority of the disinterested shares or the
offer meets certain fair price criteria. For purposes of the above provisions,
"resident domestic corporation" means an Indiana corporation that has 100 or
more shareholders. "Interested shareholder" means any person, other than the
resident domestic corporation or its subsidiaries, who is (i) the beneficial
owner, directly or indirectly, of 10% or more of the voting power of the
outstanding voting shares of the resident domestic corporation or (ii) an
affiliate or associate of the resident domestic corporation and at any time
within the five-year period immediately before the date in question was the
beneficial owner of 10% or more of the voting power of the then outstanding
shares of the resident domestic corporation. The above provisions do not apply
to corporations that so elect in its original articles of incorporation or in an
amendment to its articles of incorporation approved by a majority of the
disinterested shares. Such an amendment, however, would not become effective for
18 months after its passage and would apply only to stock acquisitions occurring
after its effective date.
30
Control Share Acquisitions.
Pursuant to Sections 23-1-42-1 to 23-1-42-11 of the IBCL ("Control Share
Acquisition Provisions"), an acquiring person who makes a "control share
acquisition" in an "issuing public corporation" may not exercise voting rights
on any "control shares" unless such voting rights are conferred by a majority
vote of the disinterested shareholders of the issuing corporation at a special
meeting of such shareholders held upon the request and at the expense of the
acquiring person. Unless otherwise provided in a corporation's articles of
incorporation or bylaws before a control share acquisition has occurred, in the
event that control shares acquired in a control share acquisition are accorded
full voting rights and the acquiring person acquires control shares with a
majority or more of all voting power, all shareholders of the issuing
corporation have dissenters' rights to receive the fair value of their shares.
Under the IBCL, "control shares" means shares acquired by a person that, when
added to all other shares of the issuing public corporation owned by that person
or in respect of which that person may exercise or direct the exercise of voting
power, would otherwise entitle that person to exercise voting power of the
issuing public corporation in the election of directors within any of the
following ranges: (i) one-fifth or more but less than one-third; (ii) one-third
or more but less than a majority; or (iii) a majority or more. "Control share
acquisition" means, subject to certain exceptions, the acquisition, directly or
indirectly, by any person of ownership of, or the power to direct the exercise
of voting power with respect to, issued and outstanding control shares. Shares
acquired within 90 days or pursuant to a plan to make a control share
acquisition are considered to have been acquired in the same acquisition.
"Issuing public corporation" means a corporation which is organized in Indiana,
has 100 or more shareholders, has its principal place of business, its principal
office or substantial assets within Indiana and has either: (i) more than 10% of
its shareholders resident in Indiana; (ii) more than 10% of its shares owned by
Indiana residents; or (iii) 10,000 shareholders resident in Indiana. The above
provisions do not apply if, before a control share acquisition is made, the
corporation's articles of incorporation or bylaws (including board adopted
bylaws) provide that they do not apply.
There is no corresponding provision under the DGCL.
Constituent Interests.
Section 23-1-35-1 of the IBCL provides that the board of directors, in
discharging its duties, may consider, in its discretion, both the long-term and
short-term best interests of the corporation, taking into account, and weighing
as the directors deem appropriate, the effects of an action on the corporation's
shareholders, employees, suppliers and customers and the communities in which
offices or other facilities of the corporation are located and any other factors
the directors consider pertinent. Section 23-1-35-1 specifically provides that
certain judicial decisions in Delaware and other jurisdictions, which might be
looked upon for guidance in interpreting Indiana law, including decisions that
propose a higher or different degree of scrutiny in response to a proposed
acquisition of the corporation, are inconsistent with the proper application of
that section.
There is no corresponding provision in the DGCL. The current Certificate of
Incorporation and Bylaws do not specifically incorporate these terms.
Procedures to Regulate Changes in Control.
Section 23-1-22-4 of the IBCL provides that, in addition to any other
provision authorized by any other section of the IBCL or contained in the
articles of incorporation or the bylaws, a corporation may establish one or more
procedures to regulate transactions that would, when consummated, result in a
change of "control" of the corporation. Such a procedure may be established in
the original articles of incorporation or bylaws, by an amendment to the
articles of incorporation or, notwithstanding the fact that a vote of the
shareholders would otherwise be required by any other provision of the IBCL or
the articles of incorporation, by an amendment to the bylaws. For the purposes
of Section 23-1-22-4, "control" means, for any corporation that has 100 or more
shareholders, the beneficial ownership, or the direct or indirect power to
direct the voting, of not less than 10% of the voting shares of a corporation's
outstanding voting shares.
There is no corresponding provision under the DGCL.
31
Appraisal Rights; Dissenters Rights.
Both Section 262 of the DGCL and Section 23-1-44-8 of the IBCL provide that
shareholders have the right, in some circumstances, to dissent from certain
corporate reorganizations and to instead obtain payment of the fair value of
their shares. Under Section 262 of the DGCL, unless a corporation's certificate
of incorporation provides otherwise, dissenters do not have the rights of
appraisal with respect to: (i) a merger or consolidation by a corporation, the
shares of which are either listed on a national securities exchange or held by
more than 2,000 shareholders, if the shareholders receive (a) shares in the
surviving corporation, (b) shares of another corporation that are publicly
listed or held by more than 2,000 shareholders, (c) cash in lieu of fractional
shares described in (a) and (b) of this paragraph, or (d) any combination of the
above; or (ii) shareholders of a corporation surviving a merger if no vote of
the shareholders of the surviving corporation is required to approve the merger.
Under Section 23-1-44-8 of the IBCL, dissenters do not have rights of appraisal
with respect to shares of any class or series of stock registered on a national
securities exchange or traded on the National Association of Securities Dealers,
Inc. Automated Quotation System Over-the-Counter Markets-National Market or a
similar market or unless the articles of incorporation, bylaws or resolution of
the board of directors provide that non-voting shares are entitled to dissent,
if they were not entitled to vote on the corporate reorganization.
Redeemable Shares.
Section 151(b) of the DGCL provides that the certificate of incorporation
or a resolution of the board of directors providing for the issuance of a class
of stock may make such class of stock subject to redemption at the option of the
corporation or the shareholders, or upon the happening of a specified event, as
long as immediately following any such redemption the corporation has at least
one share of at least one series of stock with full voting powers.
Section 23-1-25-1 of the IBCL provides that the articles of incorporation
of a corporation may authorize one or more classes of shares that are redeemable
or convertible as specified in the articles of incorporation at the option of
the corporation, the shareholder or another person or upon the occurrence of a
designated event.
Vote by Proxy.
Under the Delaware By-Laws and Section 212 of the DGCL, proxies are valid
for three years from its date of issuance, unless otherwise provided in the
proxy. The IGCL provides that proxies are valid for eleven (11) months unless a
shorter or longer period is expressly provided in the appointment.
Rights, Warrants or Options.
Under Section 157 of the DGCL, rights or options to purchase shares of any
class of stock may be authorized by a corporation's board of directors subject
to the provisions of the certificate of incorporation. The terms of such rights
or options must be fixed and stated in the certificate of incorporation or in a
resolution or resolutions adopted by the board of directors.
Under Section 23-1-26-5 of the IBCL, a corporation, acting through its
board of directors, may create or issue rights, options or warrants for the
purchase of shares or other securities of the corporation or any successor in
interest of the corporation. The board of directors shall determine the terms
upon which the rights, options or warrants are issued, their form and content
and the consideration for which the shares or other securities are to be issued.
32
Preemptive Rights.
Under Section 102(b)(3) of the DGCL and Section 23-1-27-1 of the IBCL,
absent an express provision in a corporation's certificate of incorporation or
articles of incorporation, a shareholder does not, by operation of law, possess
preemptive rights to subscribe to an additional issue of stock. Neither the
current Certificate of Incorporation nor current Bylaws nor Delaware Certificate
of Incorporation nor Delaware Bylaws provide for preemptive rights.
Amendment of Certificate or Articles of Incorporation and Bylaws.
Section 242 of the DGCL and Sections 23-1-38-7 of the IBCL permit a
corporation to amend its certificate of incorporation or articles of
incorporation in any respect, provided the amendment contains only provisions
that would be lawful in an original certificate of incorporation or articles of
incorporation filed at the time of amendment. To amend a certificate of
incorporation or the articles of incorporation, the board must adopt a
resolution presenting the proposed amendment. In addition, under the DGCL, a
majority of the shares entitled to vote, as well as a majority of shares of each
class entitled to vote, must approve the amendment to make it effective. Under
the IBCL, an amendment to the articles of incorporation of an Indiana
corporation generally may be adopted if the votes cast favoring the amendment
exceed the votes cast opposing the amendment, except that any amendment that
would create dissenters' rights must be approved by a majority of the votes
entitled to be cast. Under the DGCL and the IBCL, when the substantial rights of
a class of shares will be affected by an amendment, the holders of those shares
are entitled to vote as a class even if the shares are non-voting shares. When
one or more series in a class of shares, and not the entire class, will be
adversely affected by an amendment, the affected series may vote as a class.
Under Section 242(b)(2) of the DGCL, the right to vote as a class may be
limited in certain circumstances. Any provision in the certificate of
incorporation which requires a greater vote than required by law cannot be
amended or repealed except by such greater vote. Section 242(c) of the DGCL
provides that, in its resolution proposing an amendment, the board may insert a
provision allowing the board to abandon the amendment, without concurrence by
shareholders, after the amendment has received shareholder approval but before
its filing with the Secretary of State.
Section 109 of the DGCL provides that the power to amend the bylaws rests
with the shareholders entitled to vote, although the certificate of
incorporation may confer the power to amend the bylaws upon the board of
directors. Section 109 further provides that the fact that the certificate of
incorporation confers such power upon the board of directors neither limits nor
divests the shareholders of the power to amend the bylaws. Section 23-1-39-1 of
the IBCL, on the other hand, provides that, unless the articles of incorporation
provide otherwise, only the board of directors of a corporation may amend the
bylaws.
Inspection of Books and Records.
Section 220 of the DGCL entitles any shareholder of record of a
corporation, in person or by an agent, upon written demand under oath stating
the purpose thereof, to inspect during usual business hours, for any proper
purpose, the corporation's stock ledger, a list of its shareholders and its
other books and records, and to make copies or extracts therefrom. A proper
purpose means a purpose reasonably related to such person's interest as a
shareholder.
Section 23-1-52-2 of the IBCL entitles any shareholder of a corporation to
inspect and copy, during regular business hours, certain enumerated corporate
records if the shareholder gives the corporation at least five days' advance
written notice. Certain records may be inspected only if: (i) the shareholder's
demand is made in good faith and for a proper purpose, (ii) the shareholder
describes with reasonable particularity the shareholder's purpose and (iii) the
records to be inspected are directly connected with the shareholder's purpose.
33
FEDERAL INCOME TAX CONSEQUENCES OF THE REINCORPORATION
The following discussion addresses the material federal income tax
consequences of the reincorporation that are applicable to holders of shares of
the Company's Common Stock. The discussion does not address all federal income
tax consequences that may be relevant to a particular holder of shares of the
Company's Common Stock, or any foreign, state or local tax considerations.
Accordingly, holders of the Company's Common Stock are urged to consult their
own tax advisors as to the specific federal, foreign, state and local tax
consequences to them as a result of the reincorporation.
The following discussion is based upon the Internal Revenue Code of 1986,
as amended (the "Code"), applicable Treasury Regulations, judicial authority and
administrative rulings and practice, all as of the date hereof. The Company has
not and will not request a ruling from the Internal Revenue Service regarding
the tax consequences of the reincorporation merger.
The Company believes that the reincorporation and the resulting
reincorporation of the Company from Indiana to Delaware will constitute a
tax-free reorganization within the meaning of Section 368(a) of the Code.
Accordingly, for federal income tax purposes, (i) no gain or loss will be
recognized by the holders of shares of the Company's Common Stock upon
consummation of the Reincorporation, (ii) the aggregate tax basis of shares of
the Common Stock of the Company as a Delaware corporation will be the same as
the aggregate tax basis of shares of the Company' Common Stock as an Indiana
corporation.
REGULATORY APPROVAL
To the Company's knowledge, the only required governmental approval or
filing necessary in connection with the consummation of the reincorporation will
be the filing of the Articles of Dissolution with the Secretary of State of
Indiana and the filing of the Certificate of Incorporation with the Secretary of
State of Delaware. Any federal or state regulatory requirements that must be
complied with in connection with the proposals set forth herein shall be
obtained in accordance with the requirements of the appropriate regulatory
authorities.
VOTING
The vote of the holders of a majority of the outstanding shares of common
stock is required to approve the proposed Delaware Reincorporation. If the
Reincorporation is not approved by the shareholders, or if any of the other
Proposals contained herein are not approved by the shareholders (other than
Proposals One and Seven which will be effected regardless of the outcome of the
other Proposals), the Company expects that it will not reincorporate, and that
the balance of the Proposals (other than Proposals One and Seven) will not be
effected, and the Transaction will not be consummated.
The Board recommends a vote "FOR" the approval of the Reincorporation.
Unless marked to the contrary, proxies received will be voted FOR approval of
the Reincorporation.
34
PROPOSAL FIVE
APPROVAL OF AMENDED AND
RESTATED ARTICLES OF INCORPORATION
GENERAL INFORMATION
The Board is recommending amending and restating the Certificate of
Incorporation of the Company, which will repeal in their entirety its existing
Certificate of Incorporation provisions and substitute the new provisions set
forth in the Certificate of Incorporation which would be adopted upon
Reincorporation in the State of Delaware ("Delaware Certificate of
Incorporation") attached to this proxy statement as Annex C. Therefore, the
current Certificate of Incorporation will be entirely replaced with the Delaware
Certificate of Incorporation in Annex C. The Board is recommending the Delaware
Certificate of Incorporation, generally to make the Certificate of Incorporation
more consistent with the Delaware statutes and regulations in contemplation of
the Reincorporation from Indiana to Delaware. The Delaware Certificate of
Incorporation reorganizes the Certificate of Incorporation and makes various
changes to clarify language, update terminology and conform the charter to
current laws of Delaware, as well as to authorize the issuance of a new class of
securities, to decrease the par value of our Common Stock, to approve the
authorization of a blank check preferred class of shares and to increase the
number of authorized shares of Common Stock. As mentioned above, operating under
the current Certificate of Incorporation can be difficult because its provisions
often do not contemplate the current state of the regulatory environment the
conduct of business in Delaware, as well as the Transaction. The Board believes
the material changes to the Certificate of Incorporation, described below, along
with the other changes contained in the Delaware Certificate of Incorporation
will allow for a smother operation of the Corporation upon its Reincorporation
and in light of the proposed changes to its Certificate of Incorporation upon
which you are also being asked to vote.
I. INCREASE TOTAL NUMBER OF AUTHORIZED SHARES, AND DECREASE THE PAR VALUE
----------------------------------------------------------------------
OF COMMON STOCK
- ---------------
General Information and Board Approval
The Board of Directors approved on January 10, 2007, and is recommending to
the shareholders for approval at the annual meeting, as part of the Delaware
Articles of Incorporation, a provision that would increase the number of shares
of stock which the Company is authorized to issue from 4,000,000 to 50,010,000,
consisting of (i) 48,500,000 shares of Common Stock, and decreasing the par
value from One Dollar ($1,00) to One Cent ($0.01), (ii) 510,000 shares of a
tracking stock known as the Class A Common Stock, par value $0.01 per share,
(iii) 1,000,000 shares of Preferred Stock, par value $0.01 per share. This
proposal is referred to elsewhere in this proxy statement as the "Common Stock
Authorization Increase." The Board determined that this amendment is advisable
and should be considered at the annual meeting. The full text of the proposed
Delaware Certificate of Incorporation is attached hereto as Annex C.
Purpose and Effect of Proposed Increase
The Company currently has 4,000,000 shares of authorized common stock. As
of the record date, the Company has 427,069 shares of common stock issued and
outstanding. The Company has reserved for issuance 81,666 shares of common stock
in connection with its currently outstanding options and warrants.
35
The proposed Delaware Certificate of Incorporation would increase the
number of shares of stock the Company is authorized to issue from 4,000,000 to
50,010,000, consisting of (i) 48,500,000 shares of Common Stock, and
simultaneously decrease the par value from One Dollar ($1,00) to One Cent
($0.01), (ii) 510,000 shares of a tracking stock known as the Class A Common
Stock, par value $0.01 per share, (iii) 1,000,000 shares of Preferred Stock, par
value $0.01 per share. The additional 44,500,000 shares of Common Stock
(excluding Class A Common Stock) would be a part of the same existing class of
Common Stock, and, if and when issued, would have the same rights and privileges
as the shares of Common Stock currently issued and outstanding. Management
believes that the availability of additional authorized shares for issuance from
time to time in the Board of Directors' discretion in connection with possible
acquisitions of other companies, future financings, investment opportunities,
stock option grants and recapitalizations or for other corporate purposes is
desirable in order to avoid repeated separate amendments to our Certificate of
Incorporation and the delay and expense incurred in holding special meetings of
the stockholders to approve such amendments. We currently have no specific
understandings, arrangements or agreements with respect to any future
acquisitions that would require us to issue a material amount of new shares of
our common stock, except as described elsewhere in this Proxy Statement.
However, the Board of Directors believes that the currently available unissued
shares do not provide sufficient flexibility for corporate action in the future.
The Company may issue shares of common stock in connection with
acquisitions, mergers, reverse mergers, or joint ventures in the future. In
addition, depending on market conditions and the Company's needs over time, the
Company may in the future issue equity securities to raise additional capital.
The proposed Delaware Certificate of Incorporation would permit the
issuance of additional shares, at the discretion of the Board, up to the new
maximum authorization. If the Board deems it to be in the best interests of the
Company and its shareholders to issue additional shares of common stock in the
future, the Board will not generally seek further authorization by vote of the
shareholders, unless such authorization is otherwise required in a specific case
by law or by any other exchange on which the Company 's common stock may be
quoted. The Board believes it is prudent for the Company to have this
flexibility. The holders of common stock are not entitled to preemptive rights.
Accordingly, the issuance of additional shares of common stock will have the
effect, under certain circumstances, of diluting the ownership, earnings per
share, and voting right of shareholders.
The proposed increase in the number of shares of common stock that the
Company is authorized to issue is not intended to inhibit a change in control of
the Company. The Board is aware, however, that an increase in the number of
authorized but unissued shares of common stock could discourage, or make more
difficult, efforts to obtain control of the Company. We could use the increased
number of authorized shares to frustrate persons attempting to gain control of
the Company that would otherwise pay an above-market premium favored by a
majority of stockholders. For example, the Board could privately place shares
with purchasers who may join with the Board in opposing a hostile takeover or
issue securities that would dilute the stock ownership of persons seeking to
obtain control of the Company. Several shareholder groups own a significant
amount of the Company 's outstanding stock, and this proposal is not directed
towards, nor resulting from any agreement or understanding with, such holders.
However, it is expected that such groups will be voting in favor of the
Proposals set forth herein, There are certain provisions in our bylaws and
articles of incorporation (as well as in the bylaws and certificate of
incorporation that will govern in the event that the proposed reincorporation in
Delaware is approved by the shareholders and consummated) that also could have
an anti-takeover effect, in particular the ability to grant shares of the
preferred stock which would be authorized upon the approval of our Delaware
Certificate of Incorporation. The Board is not aware of any pending or
threatened efforts to acquire control of the Company and is not recommending
this proposal as part of an anti-takeover strategy.
Amendment and Restatement of the Certificate of Incorporation
If this proposal is approved, a Certificate of Incorporation will be filed
with the Secretary of State of the State of Delaware which would, in effect,
amend and restate the Company's existing Certificate of Incorporation currently
filed with the Secretary of State of Indiana.
The form of our Delaware Certificate of Incorporation is set forth in its
entirety at Annex C. This proposal is dependent on the other proposals set forth
in this Proxy Statement under Proposals 2, 3, 4 and 6, and, in the event that
any or all of such other proposals are not approved, the Company does not intend
to effect this approval sought under this Proposal. However, if all of the
Proposals are approved, including this Proposal Number 5, the increase in
authorized shares will be accomplished by filing the Delaware Certificate of
Incorporation with the Secretary of State of Delaware which effectively amends
and restates our current Certificate of Incorporation.
36
Voting
The affirmative vote of the holders of a majority of the outstanding shares
of common stock is required to approve the proposed Delaware Certificate of
Incorporation, which, in turn would effectively authorize the increase
authorized shares of stock from 4,000,000 to 50,010,000, consisting of (i)
48,500,000 shares of Common Stock, and to decrease the par value from One Dollar
($1,00) to One Cent ($0.01), (ii) 510,000 shares of Class A Common Stock, par
value $0.01 per share, (iii) 1,000,000 shares of Preferred Stock, par value
$0.01 per share. If the Delaware Certificate of Incorporation is not approved by
the shareholders, or if any of the other Proposals contained herein are not
approved by the shareholders (other than Proposals One and Seven which will be
effected regardless of the outcome of the other Proposals), the Company expects
that its current Restated Articles of Incorporation, as amended, which currently
authorize the issuance of 4,000,000 shares of common stock, will continue in
effect, and the Transaction will not be consummated.
The Board recommends a vote "FOR" the adoption of the Delaware Certificate
of Incorporation, which would effectively authorize the increase authorized
shares from 4,000,000 to 50,010,000 and reduce the par value of the Common Stock
from One Dollar ($1.00) to One Cent ($0.01). Unless marked to the contrary,
proxies received will be voted FOR approval of the Delaware Certificate of
Incorporation.
II. AUTHORIZATION OF 1,000,000 SHARES OF "BLANK CHECK" PREFERRED STOCK
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General Information and Board Approval
On January 10, 2007, our Board of Directors authorized and approved,
subject to shareholder approval, an amendment to authorize the creation of
1,000,000 shares of preferred stock (the "Blank Check Preferred"), which our
Board of Directors deemed to be in the best interests of the Company and our
shareholders.
Terms of the Blank Check Preferred
The proposed amendment, which would be a part of the Delaware Certificate
of Incorporation, would change our Certificate of Incorporation to provide for
1,000,000 shares of "blank check" preferred shares, as more specifically set
forth in Section 4.1 if the Delaware Certificate of Incorporation attached
hereto as Annex C.
The authorization of the Blank Check Preferred will become effective upon
the filing of the Delaware Certificate of Incorporation with the Delaware
Secretary of State.
The preferred stock to be authorized is commonly referred to as "blank
check" preferred stock ("Blank Check Preferred") because the Blank Check
Preferred would have such designations, preferences and relative, participating,
optional or other special rights and qualifications, limitations or restrictions
thereof as shall be expressed in the resolution or resolutions providing for the
issue of such stock adopted by the Board of Directors from time to time. As
such, the Blank Check Preferred would be available for issuance without further
action by our shareholders, except as may be required by applicable law or
pursuant to the requirements of the exchange or quotation system upon which our
securities are then trading or quoted.
The Board of Directors believes that the creation of Blank Check Preferred
is advisable and in the best interests of our company and our shareholders for
several reasons. The authorization of the Blank Check Preferred would permit the
Board of Directors to issue such stock without shareholder approval and,
thereby, provide us with maximum flexibility in structuring acquisitions, joint
ventures, strategic alliances, capital-raising transactions and for other
corporate purposes. The Blank Check Preferred would enable us to respond
promptly to and take advantage of market conditions and other favorable
opportunities without incurring the delay and expense associated with calling a
special shareholders' meeting to approve a contemplated stock issuance.
37
The authorization of the Blank Check Preferred would also afford us greater
flexibility in responding to unsolicited acquisition proposals and hostile
takeover bids. The issuance of Blank Check Preferred could have the effect of
making it more difficult or time consuming for a third party to acquire a
majority of our outstanding voting stock or otherwise effect a change of
control. Shares of Blank Check Preferred may also be sold to third parties that
indicate that they would support the Board in opposing a hostile takeover bid.
The availability of Blank Check Preferred could have the effect of delaying a
change of control and of increasing the consideration ultimately paid to our
company and our shareholders. The proposed Blank Check Preferred amendment to
the existing Certificate of Incorporation is not intended to be an anti-takeover
measure, and we are not aware of any present third party plans to gain control
of our company.
The actual effect of the issuance of any shares of Blank Check Preferred
upon the rights of holders of the common stock cannot be stated until the Board
determines the specific rights of the holders of such Blank Check Preferred.
However, the effects might include, among other things, restricting dividends on
the common stock, diluting the voting power of the common stock, reducing the
market price of the common stock, or impairing the liquidation rights of the
common stock, without further action by the shareholders. Holders of the common
stock will not have preemptive rights with respect to the Blank Check Preferred.
Although we may consider issuing Blank Check Preferred in the future for
purposes of raising additional capital or in connection with acquisition
transactions, we currently have no binding agreements, arrangements or
commitments with respect to the issuance of the Blank Check Preferred.
Voting
The affirmative vote of the holders of a majority of the outstanding shares
of common stock is required to approve the proposed Delaware Certificate of
Incorporation, which, in turn would effectively approve the authorization of the
Blank Check Preferred. If the Delaware Certificate of Incorporation is not
approved by the shareholders, or if any of the other Proposals contained herein
are not approved by the shareholders (other than Proposals One and Seven which
will be effected regardless of the outcome of the other Proposals), the Company
expects that its current Restated Articles of Incorporation, as amended, which
currently do not provide for the Blank Check Preferred, will continue in effect,
and that the balance of the Proposals (other than Proposals One and Seven) will
not be effected.
The Board recommends a vote "FOR" the adoption of the Delaware Certificate
of Incorporation, which would effectively approve the authorization of the Blank
Check Preferred. Unless marked to the contrary, proxies received will be voted
FOR approval of the Delaware Certificate of Incorporation.
III. AUTHORIZATION OF THE "TRACKING STOCK" KNOWN AS CLASS A COMMON STOCK
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General Information and Board Approval
On January 10, 2007, our Board of Directors authorized and approved,
subject to shareholder approval, an amendment to the certificate of
incorporation which would authorize a new class of common stock designated as
Class A Common Stock "tracking stock" (also referred to as the "Tracking
Stock")) consisting of 510,000 shares, which our Board of Directors deemed to be
in the best interests of the Company and our shareholders.
Terms of the "Tracking Stock"
We will initially authorize 510,000 shares of the Tracking Stock. The
rights, terms, preferences and privileges of the Tracking Stock are more
particularly set forth in Article 12 of the Delaware Certificate of
Incorporation attached hereto as Annex C. We intend the Tracking Stock to
reflect the performance of the Medical Investments. In this proxy statement, we
will also ask for your approval to issue the Tracking Stock to holders of record
as of the Record Date as a tracking stock and to holders of certain currently
held outstanding options and warrants of current officers and directors who are
entitled to receive such distributions upon the exercise of such outstanding
instruments (if they exercise their options or warrants before their
expiration).
38
Holders of the Tracking Stock shall only be entitled to vote upon the
following matters: (i) authorizing, effecting or validating the merger or
consolidation of the Company into or with any other corporation if such merger,
reverse merger or consolidation would materially adversely affect the powers or
rights of the Tracking Stock either directly by amendment of the provisions of
the Delaware Certificate of Incorporation relating to the Tracking Stock or
indirectly by requiring the holders of the Tracking Stock to accept or retain,
in such merger, reverse merger or consolidation, anything other than shares of
such class or shares of the surviving or resulting corporation having, in either
case, powers and rights identical to those of the holders of Class A Common
Stock prior to such merger or consolidation; or (ii) any proposed amendment of
the Delaware Certificate of Incorporation which would alter or change the
powers, preferences or special rights of holders of the Tracking Stock so as to
affect them adversely.
If the Delaware Certificate of Incorporation is approved by the
shareholders, and the Transaction is consummated, we will file the Delaware
Certificate of Incorporation which would effectively implement the authorization
of the Tracking Stock. The Company will not seek to list the Tracking Stock on
any securities exchange or with NASDAQ, nor will the Tracking Stock be quoted at
any time. In addition, the Tracking Stock will not be certificated or
transferable. If a shareholder sells his or her Common Stock after the date
which is set by the Board of Directors as the record date for determining who is
entitled to receive the Tracking Stock, he or she will continue to be a
stockholder of the Company insofar as such holder owns the Tracking Stock, given
that it is non-transferable. See the section entitled "Proposal Six: Approval of
the Issuance of the Tracking Stock: The Tracking Stock Proposal" for information
regarding the transaction in which the Tracking Stock are to be issued.
Voting
The affirmative vote of the holders of a majority of the outstanding shares
of common stock is required to approve the proposed Delaware Certificate of
Incorporation, which, in turn would effectively approve the authorization of the
Tracking Stock. If the Delaware Certificate of Incorporation is not approved by
the shareholders, or if any of the other Proposals contained herein are not
approved by the shareholders (other than Proposals One and Seven which will be
effected regardless of the outcome of the other Proposals), the Company expects
that its current Restated Articles of Incorporation, as amended, which currently
do not provide for the Tracking Stock, will continue in effect, and that the
balance of the Proposals (other than Proposals One and Seven) will not be
effected, and the Transaction will not be consummated.
The Board recommends a vote "FOR" the adoption of the Delaware Certificate
of Incorporation, which would effectively approve the authorization of the
Tracking Stock. Unless marked to the contrary, proxies received will be voted
FOR approval of the Delaware Certificate of Incorporation.
39
PROPOSAL SIX
APPROVAL OF THE ISSUANCE OF THE "TRACKING STOCK"
KNOWN AS CLASS A COMMON STOCK
THE TRACKING STOCK PROPOSAL
In connection with the Transaction, and subject to shareholder approval, we
intend to issue a new class of securities known as the Class A Common Stock,
which is a "tracking stock" (referred to herein as "Class A Common Stock" or
"Tracking Stock"). The authorization of the Class A Common Stock is also subject
to your approval in Proposal Five. Note that the sale of Common Stock and
Warrants to Bernard Zimmerman & Company, Inc. will close after the distribution
of the Class A Common Stock to existing shareholders, and, as such, Bernard
Zimmerman & Company, Inc. will receive no "tracking stock" in the contemplated
issuance.
On January 10, 2007, our Board of Directors authorized and approved,
subject to shareholder approval, the amendment and restatement, in its entirety,
of the Company's current Certificate of Incorporation which effectively
authorizes and issues the Tracking Stock to shareholders as of the date which is
set by the Board of Directors as the record date for determining who is entitled
to receive the Tracking Stock on the Company's books only.
If the shareholders approve the tracking stock proposal, we will be
authorized to amend and restate our current certificate of incorporation to
authorize the Board of Directors to issue a series of common stock known as the
Class A Common Stock.
To be clear, "tracking stock" is a type of common stock that the issuing
company intends to reflect (or "track") the performance of a particular
business. In this case, the Tracking Stock is being issued to track the
Company's medical investments in, and ventures with, New York University School
of Medicine and T3 Therapeutic, LLC (the "Medical Investments"). Tracking stock
is an equity interest in a corporation or, in this case, a segment of a
corporation, with rights determined in part by reference to the performance of
specific assets of the corporation.
As noted above, we propose creating a new series of common stock, to be
designated as Class A Common Stock, in the form of tracking stock. We will
initially authorize 510,000 shares of Class A Common Stock. The rights, terms,
preferences and privileges of the Tracking Stock is more particularly set forth
in Article 12 of the Delaware Certificate of Incorporation attached hereto as
Annex C. We intend the Tracking Stock to reflect the performance of the Medical
Investments. Given that the Tracking Stock is non-transferable, non-listed,
non-voting and non-certificated, we can't assure you that any perceived value of
the Tracking Stock will in fact reflect the performance of the Medical
Investments as we intend. Holders of either the Tracking Stock or Common Stock
will also continue to be common stockholders of the Company for so long as they
hold shares of either the Tracking Stock or the Common Stock and, as such, may
be subject to risks associated with an investment in the Company as a whole and
all of our businesses, assets and liabilities. If a shareholder sells his or her
Common Stock, he or she will continue to be a stockholder of the Tracking Stock,
as it is non-transferable.
If the Delaware Certificate of Incorporation is approved by the
shareholders, and the Transaction is consummated, and we file the Delaware
Certificate of Incorporation implementing the tracking stock proposal, we will
issue to holders of Common Stock of record on a date to be set by the Board of
Directors, as a distribution, one share of Tracking Stock for each share of
Common Stock held by each shareholder.
The Board of Directors believes that designating the Class A Common Stock
as a tracking stock will segregate the value of the Medical Investments and
assist in the current shareholders maintaining such accrued value after the
consummation of the Transaction. In addition, in the event the Company
ultimately engages in a strategic transaction, the tracking stock will help the
value of the Medical Investments remain with the existing shareholders, while
preserving the financial, tax, strategic and operational benefits of being a
single enterprise. This proposal will not result in a distribution or spin-off
of any of our assets or liabilities and will not affect ownership of our assets
or responsibility for our liabilities. Holders of Tracking Stock will all be
stockholders of the same company and subject to all risks associated with an
investment in the Company and all of our businesses, assets and liabilities.
This series of Class A Common Stock does not represent ownership interests in
the assets of any business group, but they do entitle their holders to certain
special rights to receive distributions as set forth in Section III of Proposal
Five and in Proposal Six.
40
You are being asked to consider and vote in favor of the tracking stock
proposal. If you approve the Delaware Certificate of Incorporation, you will
have effectively approved the tracking stock proposal. Our Board of Directors,
in its sole discretion, may determine not to proceed with the tracking stock
proposal at any time prior to the effectiveness of the Delaware Certificate of
Incorporation, or may determine not to designate Class A Common Stock in the
Delaware Certificate of Incorporation.
DISTRIBUTION OF DIVIDENDS
We currently intend to distribute to holders of the Tracking Stock, net revenue
received as a result of the Medical Investments, by way of a dividend or other
form of distribution, as declared by our Board in accordance with the Delaware
Certificate of Incorporation.
EXEMPTION FROM SECURITIES ACT OF 1933
The offering of securities contemplated by the Purchase Agreement is exempt from
the registration requirements of Section 5 of the Securities Act pursuant to
Section 4(2) of the Securities Act as a transaction not involving any public
offering of securities. These securities will be non-transferable, non-listed,
non-voting and non-certificated, and may not be offered and sold by recipients
absent registration or exemption from such registration requirements.
RISK FACTORS
When evaluating whether to vote in favor of the tracking stock proposal, you
should carefully consider the risk factors described below, as well as the other
information included in this proxy statement, before you decide how to vote on
the proposals.
WE CANNOT PREDICT THE PRICE AT WHICH OUR COMMON STOCK WILL TRADE FOLLOWING THE
ISSUANCE OF THE TRACKING STOCK.
The market price of our Common Stock after the Transaction may not equal or
exceed the current market price of our Common Stock. Some of the terms of the
Tracking Stock and Common Stock may adversely affect the trading price of the
Common Stock, including the segregation of the Medical investments into the
Tracking Stock. Holders of Common Stock and Tracking Stock will be common
stockholders of the Company and will not have any legal rights relating to
specific assets of the Company, outside of their respective classes.
Holders of Common Stock and Tracking Stock will be stockholders of the same
company. As a result, holders of Tracking Stock will continue to be subject to
all of the risks of an investment in the Company and all of our businesses,
assets and liabilities. The issuance of Tracking Stock, and the allocation of
assets and liabilities and stockholders' equity between the Company generally,
and the Medical Investments will not result in a distribution or spin-off to
stockholders of any of our assets or liabilities and will not affect ownership
of our assets or responsibility for our liabilities or those of our
subsidiaries. The assets we attribute to the Company as a whole will reflect the
liabilities of the Medical Investments, whether such liabilities arise from
lawsuits, contracts or indebtedness that we attribute to another segment of the
Company - namely, the two segments of the Company would consist of (i) the
segment of the Company which contains the Medical Investments and (ii) the
balance of the Company, independent of the Medical Investments. If we are unable
to satisfy one segment's liabilities out of the assets we attribute to it, we
may be required to satisfy those liabilities with assets we have attributed to
another segment of the Company. Further, holders of Common Stock and Tracking
Stock will only have the rights specified in our restated charter, and will not
have any legal rights related to specific assets of any other specific segment
of the Company, outside of their respective classes. Further, in the event you
dispose of your Common Stock, you will continue to hold the Tracking Stock;
however, in such event your rights will be limited to those afforded to holders
of the Tracking Stock only.
41
THE TRACKING STOCK IS NON-TRANSFERABLE.
If a shareholder sells his or her Common Stock after the date which is set by
the Board of Directors as the record date for determining who is entitled to
receive the Tracking Stock, he or she will continue to be a stockholder of the
Company insofar as such holder owns the Tracking Stock, given that it is
non-transferable.
THE TRACKING STOCK HAS UNCERTAIN VALUE.
The Company currently attributes minimal value to the Medical Investments (to
which the Tracking Stock relates) which may ultimately be written down to zero.
Accordingly, the Company could elect to write off the value of such assets from
the financial statements of the Company. In addition, the Medical Investments
could be pledged, disposed of for no value, or otherwise transferred, in each
case, with no resulting distribution to the holders.
FINANCIAL PERFORMANCE OF ONE SEGMENT OF THE COMPANY COULD ADVERSELY AFFECT THE
OTHER SEGMENT
The financial performance of the Medical Investments or the other segments of
the Company could affect our consolidated results of operations or financial
condition and could, if significant, affect the results of operations or
financial condition of the other group and any value of the Tracking Stock
relating to the Company in general.
IF THE MEDICAL INVESTMENTS ENCOUNTER FINANCIAL DIFFICULTY, THE VALUE OF THE
COMPANY'S COMMON STOCK MAY SUFFER FOR REASONS UNRELATED TO THE PROSPECTS OF THAT
SEGMENT OF THE COMPANY
Financial results of each segment of the Company - namely, the segment
consisting of the Company as a whole, independent of the Medical Investments,
and the segment which contains the Medical Investments - will affect the
Company's consolidated results of operations, financial position and borrowing
costs. This could affect the results of operations or financial position of the
Company as a whole or the market price of the Common Stock even though such
losses relate solely to the segment of the Company related to the Medical
Investments. Even though the Medical Investments are held in connection with the
Tracking Stock, their status could be perceived as part of the Company, and poor
performance could import itself to the Common Stock value. In addition, the
investments are revaluated on an ongoing basis which could result in a material
adverse effect on the shareholder's equity in the Company, including that of
both the holders of Common Stock and of the Tracking Stock.
HOLDERS OF TRACKING STOCK HAVE NO VOTING RIGHTS, EXCEPT THE LIMITED RIGHTS TO
PROTECT THEIR OWN EXISTING INTERESTS.
Because of the limited voting rights of holders of the Tracking Stock, their
rights could be adversely impacted with no power to vote thereupon. Holders of
Tracking Stock may only vote upon (i) authorizing, effecting or validating the
merger or consolidation of the Company into or with any other corporation if
such merger or consolidation would materially adversely affect the powers or
rights of holders of Tracking Stock either directly by amendment of the
provisions of the Delaware Certificate of Incorporation relating to the Tracking
Stock or indirectly by requiring the holders of Tracking Stock to accept or
retain, in such merger or consolidation, anything other than shares of such
class or shares of the surviving or resulting corporation having, in either
case, powers and rights identical to those of the Tracking Stock prior to such
merger or consolidation; or (ii) any proposed amendment of the Delaware
Certificate of Incorporation which would alter or change the powers, preferences
or special rights of Tracking Stock so as to affect them adversely.
42
THE COST OF MAINTAINING SEPARATE SEGMENTS WILL LIKELY EXCEED THE COSTS
ASSOCIATED WITH OPERATING THE COMPANY AS A SINGLE ENTITY
The costs associated with implementing the tracking stock proposal and the
ongoing costs of operating separate segments - namely, consisting of the Company
as a whole, independent of the Medical Investments, and the segment which
contains the Medical Investments - will likely exceed the costs associated with
operating the Company as it currently exists. At a minimum, the issuance of
Tracking Stock will result in a complex capital structure.
HAVING MULTIPLE SERIES OF COMMON STOCK COULD CREATE POTENTIAL CONFLICTS OF
INTEREST AND OUR BOARD OF DIRECTORS COULD MAKE DECISIONS THAT ADVERSELY AFFECT
STOCKHOLDERS OF ONE OR BOTH GROUPS
Having two series of common stock could give rise to occasions when the
interests of holders of one or more series might diverge or appear to diverge
from the interests of holders of the remaining series. Our Board of Directors,
in its sole discretion, will make operational and financial decisions and
implement policies that may affect these businesses differently, potentially
favoring one group at the expense of the other. Examples of such disparate
allocations include decisions as to, how to allocate consideration received in
connection with a merger involving the Company among holders of each series of
common stock in accordance with Article 12.8 of the Delaware Certificate of
Incorporation; whether or when to approve dispositions of assets of any group;
and how to allocate available cash between the Company, generally, and the
Medical Investments and decisions as to whether and how to make transfers of
funds from one group to another depending on the source of revenue or available
cash, cash equivalents or market securities, within the limits of Article 12 of
the Delaware Certificate of Incorporation.
If directors own disproportionate interests (in percentage or value terms) in
Common Stock or Tracking Stock, that disparity could create or appear to create
potential conflicts of interest when they are faced with decisions that could
have different implications for the stockholders of any group. However, the
Company does not expect to make any further investments, medical or otherwise,
in the Medical Investments.
PRINCIPLES OF DELAWARE LAW MAY PROTECT DECISIONS OF OUR BOARD OF DIRECTORS THAT
HAVE A DISPARATE IMPACT UPON HOLDERS OF COMMON STOCK AND TRACKING STOCK
Delaware law provides that a board of directors owes an equal duty to all
stockholders regardless of class or series and does not have separate or
additional duties to the holders of any particular class or series of stock.
Recent cases in Delaware involving tracking stocks have established that
decisions by directors or officers involving differing treatment of tracking
stocks may be judged under the "business judgment rule." Under these principles
of Delaware law and the "business judgment rule," you may not be able to
challenge board of directors' decisions that have a disparate impact upon
holders of Common Stock or Tracking Stock, if the board of directors is
adequately informed with respect to such decisions and acts in good faith and in
the honest belief that it is acting in the best interest of our stockholders and
does not have a conflict of interest.
STOCKHOLDERS WILL NOT VOTE ON HOW TO ALLOCATE CONSIDERATION RECEIVED IN
CONNECTION WITH A STRATEGIC INVESTMENT, MERGER OR TRANSACTION OF THE COMPANY
BETWEEN HOLDERS OF COMMON STOCK OR TRACKING STOCK
Our Delaware Certificate of Incorporation will not contain any provisions
governing how consideration received in connection with a merger or
consolidation involving the Company is to be allocated among the holders of
Common Stock and Tracking Stock, to the extent permitted under the Delaware
Certificate of Incorporation and Delaware By-Laws. While holders of Tracking
Stock are only entitled to the portion of cash, cash equivalents or market
securities that the Board allocates and are derived from the Medical
Investments, it may be unclear as to how to apportion the allocation of such
amounts in a total business combination or transaction involving the Company.
Holders of the Tracking Stock shall only be entitled to vote upon authorizing,
effecting or validating such merger or consolidation of the Company into or with
any other corporation if such merger, reverse merger or consolidation would
materially adversely affect the powers or rights of the Tracking Stock either
directly by amendment of the provisions of the Delaware Certificate of
Incorporation relating to the Tracking Stock or indirectly by requiring the
holders of the Tracking Stock to accept or retain, in such merger, reverse
merger or consolidation, anything other than shares of such class or shares of
the surviving or resulting corporation having, in either case, powers and rights
identical to those of the holders of Class A Common Stock prior to such merger
or consolidation. As a result, the consideration to be received by holders of
Common Stock or Tracking Stock in any such merger or consolidation may be
materially less valuable than the consideration they would have received if that
group had been sold separately or if they had a separate class vote on such
merger or consolidation.
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OUR BOARD OF DIRECTORS HAS SOLE DISCRETION TO CHANGE CASH MANAGEMENT AND
ALLOCATION POLICIES WITHOUT STOCKHOLDER APPROVAL, WHICH COULD FAVOR ONE GROUP TO
THE DETRIMENT OF THE OTHERS
Our Board of Directors has the power to adopt certain policies relating to cash
management and allocations between the Company, generally, and the segment
devoted to the Medical Investments. Although it has no present intention to do
so, the Board of Directors may, in the exercise of its business judgment in
accordance with the directors' fiduciary duties to the Company and our
stockholders, modify, rescind or add to any of these policies. A decision to
modify or rescind these policies, or adopt additional policies, could have
different effects on the holders of Common Stock or Tracking Stock, or could
adversely affect the holders of one series of common stock compared to the
other. The Board of Directors' discretion to change these policies makes it
riskier to be a holder of Common Stock or Tracking Stock than a holder of
ordinary common stock. Our Board of Directors will make any decision relating to
these matters in the good faith business judgment that the decision is in the
best interests of the Company and all of our stockholders as a whole. We cannot
assure you that the policies determined by our Board of Directors are as
favorable to the holders of Common Stock or Tracking Stock than policies that
could be set by a group if it were a separate company.
WE MAY DISPOSE OF ASSETS OF THE COMPANY OR OF THE MEDICAL INVESTMENTS SEGMENT
WITHOUT YOUR APPROVAL
Delaware law requires stockholder approval only for a sale or other disposition
of all or substantially all of the assets of the Company. Holders of the
Tracking Stock shall only be entitled to vote upon (i) authorizing, effecting or
validating the merger or consolidation of the Company into or with any other
corporation if such merger, reverse merger or consolidation would materially
adversely affect the powers or rights of the Tracking Stock either directly by
amendment of the provisions of the Delaware Certificate of Incorporation
relating to the Tracking Stock or indirectly by requiring the holders of the
Tracking Stock to accept or retain, in such merger, reverse merger or
consolidation, anything other than shares of such class or shares of the
surviving or resulting corporation having, in either case, powers and rights
identical to those of the holders of Class A Common Stock prior to such merger
or consolidation; or (ii) any proposed amendment of the Delaware Certificate of
Incorporation which would alter or change the powers, preferences or special
rights of holders of the Tracking Stock so as to affect them adversely. As long
as the contemplated transaction does not fall into one of the above categories,
we may approve sales and other dispositions of any amount of the assets of that
group without any stockholder approval. If we dispose of all or substantially
all of the assets of any group, we would be required, if the disposition is not
an exempt disposition under the terms of our restated charter, to choose one of
the following two alternatives:
o declare and pay a dividend; or
o redeem shares of the relevant series of common stock,
in each case, only to the extent permitted under the Delaware Certificate of
Incorporation.
Consequently, holders of any series of common stock may receive less value for
their shares than the value that a third-party buyer might pay for all or
substantially all of the assets of such group. The Board of Directors will
decide, in its sole discretion, how to proceed and is not required to select the
option that would result in the highest value to holders of Common Stock or
Tracking Stock.
44
The Company may incur a tax liability upon a sale of the assets of a group,
which would be allocated to that group and reduce the amount available for
distribution to the holders of the tracking stock for that group. By contrast,
if the group were a separate corporation whose stock was held directly by such
holders, they could sell their stock directly to the buyer, in which case no
corporate-level tax would be incurred. Consequently, the holders of tracking
stock could receive less upon a disposition of a group than they would if they
held directly stock of a corporation that owned only that group.
WE ARE NOT REQUIRED TO PAY DIVIDENDS EQUALLY ON COMMON STOCK AND TRACKING STOCK
Although we do not intend to change our current dividend policy with respect to
our existing Common Stock, we may pay cash dividends, to the extent cash, cash
equivalents or marketable securities becomes available in accordance with the
Delaware Certificate of Incorporation, to the holders of the Tracking Stock, our
Board of Directors could elect to pay dividends on neither series of common
stock, on one, but not both series of common stock, or on both series of common
stock, in equal or unequal amounts. Such a decision would not necessarily have
to reflect the financial performance of either the segment of the Company that
contains the Medical Investments or the balance of any assets of the Company;
the amount of assets available for dividends on either series of common stock,
or any other factor.
WE MAY NOT ISSUE TRACKING STOCK AT ALL
This proxy statement describes our current intentions regarding the future
issuance of Tracking Stock. Because this issuance is subject to various
conditions and uncertainties, we cannot assure you that the issuance will occur
in the event that tax liabilities, federal or state securities laws, or other
regulations or unforeseen circumstances prevent us from doing so.
THE IRS COULD ASSERT THAT THE RECEIPT OF TRACKING STOCK IS TAXABLE TO YOU OR US
OR THAT THE TRACKING STOCK IS "SECTION 306 STOCK"
We have been advised by our special tax counsel that unless you receive cash in
lieu of fractional shares, no income, gain or loss will be recognized by you or
the Company for U.S. Federal income tax purposes as a result of the distribution
of a dividend of Tracking Stock to the holders of Common Stock, as we presently
contemplate such transaction would be carried out. However, the IRS could
disagree. There are no court decisions or other authorities that control the tax
treatment of tracking stock such as Class A Common Stock. In addition, the IRS
has announced that it will not issue rulings on the characterization of stock
with characteristics similar to Tracking Stock. It is possible, therefore, that
the IRS could successfully assert that the receipt of Tracking Stock could be
taxable to the Company or you. In addition, it is possible that the IRS will
successfully assert that Tracking Stock is section 306 stock, with the
consequence that the sale price on a subsequent disposition of that stock would
be treated as ordinary income. See "The Tracking Stock Proposal--Certain U.S.
Federal Income Tax Considerations" below.
FEDERAL INCOME TAX CONSEQUENCES OF THE ISSUANCE OF THE "TRACKING STOCK"
The following discussion addresses the material federal income tax
consequences of the Reincorporation that are applicable to holders of shares of
the Company's Common Stock, and the related Tracking Stock. The discussion does
not address all federal income tax consequences that may be relevant to a
particular holder of shares of the Company's Common Stock, or any foreign, state
or local tax considerations. Accordingly, holders of the Company's Common Stock,
and future owners of the Tracking Stock, are urged to consult their own tax
advisors as to the specific federal, foreign, state and local tax consequences
to them as a result of the reincorporation merger.
The following discussion is based upon the Internal Revenue Code of 1986,
as amended (the "Code"), applicable Treasury Regulations, judicial authority and
administrative rulings and practice, all as of the date hereof. The Company has
not and will not request a ruling from the Internal Revenue Service regarding
the tax consequences of the reincorporation merger.
45
The Company believes neither you nor the Company will recognize any income,
gain or loss for federal income tax purposes as a result of the issuance of the
Tracking Stock. Moreover, we believe that, except where cash is received in lieu
of fractional shares, if any, neither you nor the Company will recognize any
income, gain, or loss upon the distribution of a dividend of Tracking Stock to
the holders of Common Stock, as we presently contemplate such transactions would
be carried out. There are, however, no court decisions bearing directly on
similar transactions, and the Internal Revenue Service has announced that it
will not issue advance rulings on the federal income tax consequences of such
transactions. Thus, you should consult a tax advisor.
REGULATORY APPROVAL
To the Company's knowledge, the only required governmental approval or
filing necessary in connection with the issuance of the Tracking Stock will be
certain required filings under the '34 Act. Any federal or state regulatory
requirements that must be complied with in connection with the proposals set
forth herein shall be obtained in accordance with the requirements of the
appropriate regulatory authorities.
VOTING
The affirmative vote of the holders of a majority of the shares outstanding
and entitled to vote is required to approve the issuance of the Tracking Stock.
If the Delaware Certificate of Incorporation is not approved by the
shareholders, or if any of the other Proposals contained herein are not approved
by the shareholders (other than Proposals One and Seven which will be effected
regardless of the outcome of the other Proposals), the Company will not issue
the Tracking Stock and expects that its current Restated Articles of
Incorporation, as amended, which currently do not provide for the Tracking
Stock, will continue in effect, and that the balance of the Proposals (other
than Proposals One and Seven) will not be effected, and the Transaction will not
be consummated.
THE BOARD RECOMMENDS A VOTE "FOR" THE ISSUANCE OF THE TRACKING STOCK.
UNLESS MARKED TO THE CONTRARY, PROXIES RECEIVED WILL BE VOTED FOR APPROVAL OF
THE ISSUANCE OF THE TRACKING STOCK.
46
PROPOSAL SEVEN
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTING FIRM
GENERAL INFORMATION
Sallee & Company, Inc. ("Sallee") had previously acted as the independent
registered public accounting firm (the "independent auditor"). On May 25, 2006,
the Company accepted the resignation of Sallee, and on May 25, 2006 engaged
Mahoney Sabol & Company, LLP ("MS&Co. ") as the Company's new principal
independent registered public accounting firm to audit its financial statements
for the fiscal year ended March 31, 2006. The reports of our independent auditor
on the financial statements for the past two years did not contain an adverse
opinion or a disclaimer of opinion, and was not qualified or modified as to
uncertainty, audit scope, or accounting principles. During the registrant's two
most recent fiscal years and any subsequent interim period preceding the
resignation by Sallee, there were no disagreements with Sallee on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreement(s), if not resolved to the satisfaction
of the former accountant, would have caused it to make reference to the subject
matter of the disagreement(s) in connection with its report.
The Board in its capacity as Audit Committee has also appointed MS&Co. as
the independent auditors of the Company for the fiscal years ending March 31,
2007 and 2008. A proposal will be presented at the Annual Meeting asking the
stockholders to ratify the appointment of MS&Co. as the Company's independent
auditors for fiscal year ended March 31, 2008. If the stockholders do not ratify
the appointment of MS&Co., the Audit Committee will reconsider the appointment.
A representative of MS&Co. may be present at the Annual Meeting. Such
representative, if present, will be given the opportunity to make a statement if
he or she desires to do so and will be available to respond to appropriate
questions.
The services to be provided by MS&Co. for the fiscal year ending March 31,
2007 will include performing the audit of the fiscal 2007 financial statements
and reviewing quarterly reports. MS&Co. has no direct or indirect interest in
the Company. The Board of Directors has considered whether the provision of
non-audit services by MS&Co. is compatible with maintaining MS&Co.'s
independence.
Audit and Non Audit Fees
The following table presents fees for professional audit services
rendered by Sallee and by MS&Co. (as applicable) for the audit of the Company's
annual financial statements for the years ended March 31, 2007, 2006 and 2005.
Fiscal Year Ended Fiscal Year Ended Fiscal Year Ended
------------------ ------------------ ------------------
March 31, 2007 (1) March 31, 2006 March 31, 2005 (3)
------------------ ------------------ ------------------
Audit Fees (4) $ * $ 12,000(2) $ 11,815
Audit-Related Fees (5) $ * $ 4,000(3) $ 2,015
Tax Services (6) $ * $ 1,200(2),(3) $ 2,755
All Other Fees $ * $ -0- $ -0-
47
* These services have not yet been completed as of the date of this
mailing, and accordingly, we are unable to determine what the actual
fees will be.
(1) Services to be performed by MS&Co.
(2) Services performed by MS&Co.
(3) Services performed by Sallee.
(4) Audit fees consist of fees for professional services rendered for the
audit of the Company's financial statements and review of financial
statements included in the Company 's quarterly reports.
(5) Audit-related fees are fees principally for professional services
rendered in connection with accounting consultations and additional
audit procedures related to corporate acquisitions, consultations and
additional audit procedures concerning the initial adoption or
consideration of new financial accounting and reporting standards,
consultations regarding SEC reporting and disclosure matters
pertaining to the Company's annual form 10-KSB filing.
(6) Tax service fees consist of compliance fees for the review and
preparation of original tax returns as well as tax consulting and
planning related fees.
BOARD OF DIRECTORS PRE-APPROVAL POLICY
The Board of Directors, acting as Audit Committee, has not adopted
pre-approval policies and procedures with respect to services provided by the
independent auditor, as all services are approved by the Board prior to the
services being provided.
VOTING
THE BOARD RECOMMENDS A VOTE "FOR" THE RATIFICATION OF MS&CO. AS THE
COMPANY'S INDEPENDENT AUDITORS. UNLESS MARKED TO THE CONTRARY, PROXIES RECEIVED
WILL BE VOTED FOR RATIFICATION OF MS&CO. AS THE COMPANY'S INDEPENDENT AUDITORS
FOR FISCAL YEAR ENDED MARCH 31, 2007 AND FISCAL YEAR ENDING MARCH 31, 2008.
48
REPORT OF THE BOARD OF DIRECTORS IN ITS CAPACITY AS AUDIT COMMITTEE
Securities and Exchange Commission rules require that a company's proxy
statement contain a report of its audit committee. The Company has not
designated a separate Audit Committee and, accordingly, its Board serves that
function. All members of the Board are not deemed independent members under
applicable standards. The Board believes at least one of its members is a
"financial expert" within the meaning of the Act. Management has the primary
responsibility for the financial statements and the financial reporting process,
including the system of internal controls. The Company's independent registered
public accounting firm is responsible for performing an independent audit of the
Company's financial statements and internal control over financial reporting in
accordance with the Public Company Accounting Oversight Board standards and to
issue a report thereon. The Board monitors these processes.
The Board in its capacity as Audit Committee is required to pre-approve the
audit and non-audit services to be performed by the independent auditor in order
to assure that the provision of such services does not impair the auditor's
independence.
Annually the independent auditors will present to the Board in its capacity
as Audit Committee services expected to be performed by the independent auditor
over the next 12 months. The Board in its capacity as Audit Committee will
review and, as it deems appropriate, pre-approve those services. The services
and estimated fees are to be presented to the Board in its capacity as Audit
Committee for consideration in the following categories: Audit, Audit-Related,
Tax and All Other (each as defined in Schedule 14A under the Securities Exchange
Act of 1934). For each service listed in those categories, the Committee is to
receive detailed documentation indicating the specific services to be provided.
The term of any pre-approval is 12 months from the date of pre-approval, unless
the Board in its capacity as Audit Committee specifically provides for a
different period. The Board in its capacity as Audit Committee will review on at
least a quarterly basis the services provided to date by the independent auditor
and the fees incurred for those services. The Board in its capacity as Audit
Committee may also revise the list of pre-approved services and related fees
from time to time, based on subsequent determinations.
In the performance of its oversight function, the Board has reviewed and
discussed the audited financial statements of the Company for the fiscal year
ended March 31, 2006 with management and with the Company's independent
auditors. Specifically, the Board in its capacity as Audit Committee has
discussed with the independent auditors matters required to be discussed by
Statement on Auditing Standards No. 61, Communication with Audit Committees, as
amended and supplemented. The Board has received the written disclosures and the
letter from the Company's independent auditors, Mahoney Sabol & Company, LLP
("MS&Co."), required by Independence Standards Board No. 1, Independence
Discussions With Audit Committees, as amended and supplemented. Additionally,
the Board has discussed with MS&Co. the issue of its independence from the
Company and has concluded that MS&Co. is independent.
The Board has also discussed with the Company's internal auditors and
independent auditors, with and without management present, their evaluations of
the Company's internal control over financial reporting and the overall quality
of the Company's financial reporting.
Submitted by:
THE BOARD OF DIRECTORS IN ITS CAPACITY AS AUDIT COMMITTEE
Joel M. Greenblatt (Chairman) Jack C. Brown
Daniel L. Nir Edward B. Grier III
The Report of the Board in its capacity as Audit Committee shall not be
deemed incorporated by reference by any general statement incorporating by
reference this Proxy Statement into any filing under the Securities Act of 1933,
as amended, or the Securities Exchange Act of 1934, as amended, except to the
extent that the Company specifically incorporates this information by reference,
and shall not otherwise be deemed filed under such Acts.
49
REPORT OF THE BOARD, IN ITS CAPACITY AS COMPENSATION COMMITTEE, ON EXECUTIVE
COMPENSATION
The material in this report is not deemed soliciting material, or will be
deemed filed with the SEC or will be incorporated by reference in any filing of
the Company under the Securities Act of 1933, as amended, or the Exchange Act of
1934, as amended (the "Exchange Act"), whether made before or after the date of
this proxy statement and irrespective of any general incorporating language in
such filing.
The Board in its capacity as Compensation Committee is responsible for
establishing compensation policy and administering the compensation programs of
the Company's executive officers. The Board in its capacity as Compensation
Committee did not meet during fiscal years ended March 31, 2006 or March 31,
2007. The purpose of this report is to inform stockholders of the Company's
compensation policies for executive officers.
Compensation Philosophy
Given that the Company has not paid any material compensation to any
employee for fiscal year ended March 31, 2007, or 2006 the Board in its capacity
as Compensation Committee has not been required to apply or analyze any
compensation policies or to set any policy.
Stock Options
The Plan was established to provide all employees and consultants of the
Company with an opportunity to share, along with stockholders of the Company, in
the long-term performance of the Company. Stock options only have value to the
employee or consultant if the price of the Company's stock appreciates in value
from the date the stock options were granted. Stockholders also benefit from
such stock price appreciation.
Given that the Company has not granted any stock options during the fiscal
year ended March 31, 2007, the Board in its capacity as Compensation Committee
has not been required to apply or analyze any related compensation policies.
Principal Executive Officer Compensation
Given that the Company has not paid any compensation to executive officers
for fiscal year ended March 31, 2007, the Board in its capacity as Compensation
Committee has not been required to apply or analyze any compensation policies.
Conclusion
In the event the Company evolves to a point where employee, officer and
executive compensation is an issue, the Company will revisit its compensation
policies to develop an appropriate rubric of procedures and criteria for awards.
Submitted by:
THE BOARD OF DIRECTORS IN ITS CAPACITY AS COMPENSATION COMMITTEE
Joel M. Greenblatt (Chairman) Jack C. Brown
Daniel L. Nir Edward B. Grier III
50
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company requires that all transactions between the Company and its
executive officers, directors and other affiliates must be approved by a
majority of the members of the Board of Directors and by a majority of the
disinterested members of the Board, and must be on terms no less favorable to
the Company than could be obtained from unaffiliated third parties. The
Company's policy is not reduced to writing, but is observed and recognized in
all minutes and consents where related transactions are at issue.
As of June 25, 2002, the Company entered into a joint venture agreement
(the "Original Agreement") under which it has provided development funding to a
newly-formed private limited liability company, T3 Therapeutics, LLC, a Delaware
limited liability company (the "Development Company"), for specified drug
treatment protocols for thyroid and cardiovascular disease, in exchange for an
equity interest in the Development Company. Such treatments are in early stage
development and involve the use of novel formulations of hormones, delivered in
controlled release formulations. Funding provided by the Company is being used
for the purpose of financing development of new formulations of such hormones,
and to conduct animal and human clinical trials.
Under the Original Agreement, (i) T3 Therapeutics, Inc. (the "Founder
Company") contributed to the Development Company all of its right, title and
interest in the design, development and research of certain medicinal products
in exchange for an 87.5% Class A ownership stake in the Development Company,
(ii) the Company provided development funding of $750,000 to the Development
Company in exchange for a 12.5% preferential Class B ownership stake in the
Development Company, and (iii) Mr. Edward Grier, a vice president and director
of the Company, was granted an option to purchase 25 Class B units in the
Development Company. In connection with the consummation of the transactions
contemplated by the Original Agreement, Mr. Grier purchased 25 Class A units in
the Development Company from the Founder Company for $150,000, which resulted in
the Founder Company having an 85% Class A ownership stake in the Development
Company and Mr. Grier having a 2.5% Class A ownership stake in the Development
Company. In addition, the Original Agreement provided for a follow-on investment
by the Company of an additional $750,000 if certain preliminary FDA testing
approvals were secured, with a corresponding increase in the Company's ownership
stake in the Development Company to 25%.
As of November 16, 2005, the Company, the Founder Company and Mr. Grier
(together with the Founder Company, the "Other Members") entered into an Amended
and Restated Limited Liability Company Agreement (the "Amendment") of the
Development Company, which amended and restated the Original Agreement to, among
other things, provide for satisfaction of any contingent follow-on investment
obligation of the Company in exchange for its making a $50,000 investment on or
about the time of execution of the Amendment, and for the conversion of all of
the Company's preferential Class B interests in the Development Company
(including certain redemption, registration and contingent additional unit
rights), as well as all of the interests of Mr. Grier and the Founder Company,
into a single non-preferential class of unit interests. The $50,000 follow-on
investment increased the Company's ownership stake in the Development Company to
25%, subject to adjustment and dilution. The Company's ownership stake in the
Development Company has been diluted to approximately 21.8% upon the issuance by
the Development Company of Development Company units to the original patent
licensor in exchange for the original patent licensor's modified royalty
agreement with the Development Company. Further dilution of the Company's
ownership stake is expected as the Development Company raises capital to fund
operations.
As of March 31, 2007, Mr. Grier was a 2.5% Member of the Development
Company and held an option to purchase an approximate 2.5% additional ownership
stake in the Development Company.
51
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers, and persons who own more than 10
percent of the Company's Common Stock, to report their initial ownership of the
Common Stock and any subsequent changes in that ownership to the Securities and
Exchange Commission and the New York Stock Exchange, and to furnish the Company
with a copy of each such report. The Securities and Exchange Commission
regulations impose specific due dates for such reports, and the Company is
required to disclose in this Proxy Statement any failure to file by these dates
during and with respect to the fiscal year ended March 31, 2007.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during and with respect to fiscal 2005, all Section 16(a)
filing requirements applicable to its officers, directors and more than 10
percent stockholders were complied with.
Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes in the Company's interest rate risk
position. Other types of market risk, such as foreign exchange rate risk and
commodity price risk, do not arise in the normal course of the Company's
business activities.
OTHER MATTERS
Matters Which May Come Before the Annual Meeting
The Board of Directors knows of no matters other than those described in
this Proxy Statement which will be brought before the Annual Meeting for a vote
of the stockholders. If any other matters properly come before the Annual
Meeting for a stockholder vote, the persons named in the accompanying proxy will
vote thereon in accordance with their best judgment.
Proposals of Stockholders
Stockholders having proposals that they desire to present at the 2008
Annual Meeting of Stockholders of the Company (the "2008 Annual Meeting")
should, if they desire that such proposals be included in the Company's proxy
statement relating to such meeting, submit such proposals to the Company prior
to a date that the Company will establish based upon the date the Company sets
for such meeting. To be included, all submissions must comply with the
requirements of Rule 14a-8 promulgated under the Exchange Act, and the Board of
Directors directs the close attention of interested stockholders to that rule.
Stockholders having proposals that they desire to present at the 2008 Annual
Meeting that are not to be included in the proxy materials for the 2008 Annual
Meeting, or stockholders who wish to nominate a director for such meeting, must
generally do so not less than 60 days nor more than 120 days prior to the 2008
Annual Meeting. Proposals should be mailed to The St. Lawrence Seaway
Corporation, Hanna II, Suite P, 6011 E. Hanna Avenue, Beach Grove, Indiana
46203, or to the Company's then current mailing address.
52
Incorporation by Reference
Incorporated by reference herein is the Company's Annual Report on Form
10-KSB for fiscal year ended March 31, 2006, which includes Financial Statements
and the Management's Discussion and Analysis of Financial Conditions and Results
of Operations for fiscal year ended March 31, 2006, and the most recent Form
10-QSB for the quarter and nine months ended December 31, 2006.
By Order of the Board of Directors,
/s/ Jack C. Brown
-----------------
Jack C. Brown
Secretary
May 30, 2007
Beach Grove, Indiana
53
ANNEX A
-------
AUDIT COMMITTEE CHARTER
ST. LAWRENCE SEAWAY CORPORATION
AUDIT COMMITTEE CHARTER
I. MEMBERSHIP
There shall be a Committee of the Board to be known as the Audit Committee ("the
Committee"). The Committee shall be comprised of at least three members, each of
whom shall be a member of the Board. The members of the Committee shall be
elected by the Board for a term of one year or, if any such member shall be
elected to fill the remaining term of a prior member, until the expiration of
such term. At least one member of the Committee shall be a "financial expert",
as defined by SEC regulations. Each member of the Committee shall be financially
literate, as interpreted by the Board in its business judgment, or shall become
financially literate within a reasonable period of time following his or her
appointment.
The Board shall have sole authority to appoint and remove members of the
Committee. A chairperson of the Committee shall be designated by the Board from
among the members of the Committee.
II. PURPOSE
The Committee shall provide assistance to the Board in fulfilling the Directors'
fiduciary responsibilities relating to:
o The integrity of the Corporation's financial statements;
o The Corporation's compliance with legal and regulatory requirements;
o The qualifications, independence and performance of the Corporation's
independent auditors; and
o The performance of the Corporation's internal audit function.
All actions taken by the Committee shall be in its capacity as a committee of
the Board, and no member of the Committee shall be deemed to have assumed any
liability beyond that of a member of the Board by virtue of becoming a member of
the Committee. The Committee shall seek to maintain free and open communication
among directors, independent auditors, internal auditors and management of the
Corporation in carrying out its responsibilities pursuant to this Charter. All
expenses of the Committee that are necessary or appropriate in carrying out its
duties shall be borne by the Corporation.
III. AUTHORITY AND RESPONSIBILITIES
The Committee may form, and delegate authority to, one or more subcommittees
consisting of one or more members of the Committee when appropriate and as
otherwise permitted by the By-laws of the Corporation as in effect at the time
of such formation and/or delegation, including the authority to grant
preapprovals of audit and permitted non-audit services as described below,
provided that decisions of any such subcommittee to grant preapprovals shall be
presented to the full Committee at its next meeting.
In carrying out its responsibilities under this Charter, the Committee shall:
A. Be solely responsible for the appointment (subject, if applicable, to
shareholder ratification), termination, compensation, and oversight of the work
of the independent auditors undertaken in connection with preparing or issuing
an audit report or related services, including resolution of disagreements
between management of the Corporation and the independent auditors with respect
thereto. The independent auditors shall report directly to the Committee.
Funding for the compensation of the independent auditors, as determined by the
Committee, shall be provided by the Corporation.
B. Preapprove all audit and permitted non- audit services to be provided by
the independent auditors (including the fees and other terms thereof), subject
to the de minimus exceptions for non- audit services provided by Section
10A(i)(1)(B) of the Exchange Act, which services shall be subsequently approved
by the Committee prior to the completion of the audit. Funding for the
compensation of the auditors in respect of all preapproved services, as
determined by the Committee, shall be provided by the Corporation. The Committee
shall not engage the independent auditors to perform any of the specific non-
audit services proscribed by law or regulation.
A-1
C. Receive reports not less frequently than annually from the independent
auditors regarding:
o The critical accounting policies and estimates and other
significant accounting practices of the Company;
o All alternative treatments of financial information within
generally accepted accounting principles that have been
discussed with management of the Corporation, identifying in
each instance the ramifications of the use of each such
alternative disclosure and the treatment preferred by the
independent auditors; and
o All material written communication between the independent
auditors and management of the Corporation (including
writings transmitted by email), such as any management
letter or schedule of unadjusted differences.
o Review on an annual basis a report by the independent
auditors describing the independent audit firm's internal
quality controls and procedures for financial reporting and
any material issues raised by the most recent internal
quality-control review or by any inquiry or investigation by
governmental or professional authorities, respecting one or
more independent audits carried out by the independent audit
firm.
D. Review quarterly with the independent auditors and appropriate members
of management of the Corporation the adequacy and effectiveness of the internal
controls and procedures for financial reporting and disclosure controls and
procedures of the Corporation as required by relevant laws and regulations, as
well as proposed disclosures and certifications with respect thereto.
E. Evaluate the qualifications, performance and independence of the
independent auditors, including considering whether the independent auditors'
quality controls are adequate and whether the provision of permitted non- audit
services by the independent auditors is compatible with maintaining the
independent auditors' independence under relevant laws and regulations as well
as applicable accounting literature. The committee shall, not less frequently
than annually, present its conclusions with respect to the independent auditors
to the Board.
F. Review and discuss the interim financial statements, the Management's
Discussion and Analysis section and other disclosure with management of the
Corporation and the independent auditors prior to the filing by the Corporation
of any Quarterly Report on Form 10-QSB. Further, the Committee shall discuss
with the independent auditors the results of their quarterly review and any
other matters required to be communicated to the Committee by the independent
auditors under generally accepted auditing standards.
G. Review and discuss the audited financial statements, the Management's
Discussion and Analysis section and other disclosure with management of the
Corporation and the independent auditors prior to the filing by the Company of
any Annual Report on Form 10-KSB, including in the review with the independent
auditors a discussion of their judgment about the quality and acceptability of
accounting principles, the reasonableness of significant judgments and the
clarity of the disclosures in the financial statements. Further, the Committee
shall discuss with the independent auditor (i) the results of the annual audit,
(ii) any audit problems or difficulties encountered in the course of performing
the annual audit and management's response thereto, and (iii) any other matters
required to be communicated to the Committee by the independent auditors under
generally accepted auditing standards.
H. Recommend to the Board whether to include the audited financial
statements and Management's Discussion and Analysis in the Corporation's Annual
Report on Form 10-KSB.
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I. Meet with the independent auditors and financial management of the
Corporation to review the scope of the proposed audit for the current year and
the audit procedures to be used, and at the conclusion thereof review such
audit, including any comments or recommendations of the independent auditors.
J. Prepare an audit committee report as required by the SEC to be included
in the Corporation's annual proxy statement
K. Review and evaluate the performance of the lead partner of the
independent auditor team.
L. Discuss with management of the Corporation the Corporation's major
financial risk exposures and the steps management has taken to monitor and
control such exposures, including a discussion of the Corporation's risk
assessment and risk management policies.
M. Ensure the rotation of the lead partner of the independent auditor team
and the audit partner responsible for reviewing the audit as required by laws or
regulations.
N. Obtain from the independent auditors assurance that Section 10A(b) of
the Exchange Act (relating to discovery by the independent auditors in the
course of its audit or related work for the Corporation of any illegal act) has
not been implicated.
O. Discuss with management of the Corporation and the independent auditors
the effect on the Corporation's financial statements and related disclosures of:
o Proposed regulatory and accounting measures that could
affect the Corporation; and
o Off-balance sheet structures utilized by the Corporation.
P. Review the internal audit functions of the Corporation.
Q. Review with management of the Corporation the policies and practices of
the Corporation concerning, and the general content of, earnings press releases
and financial information and guidance, if any.
R. Retain independent legal, accounting or other advisors, all to be funded
by the Corporation.
S. Investigate any matter brought to the Committee's attention within the
scope of its duties.
T. Establish procedures for the receipt, retention, and treatment of
complaints received by the Corporation regarding accounting, internal accounting
controls, financial reporting, disclosure controls, or auditing matters.
U. Review and reassess the adequacy of this Charter at least on an annual
basis, and present any proposed amendments or revisions of this Charter deemed
by the Committee to be necessary or appropriate to the Board for approval.
IV. MEETINGS
The Committee shall meet no less frequently than quarterly. In addition, or as
part of its regularly scheduled meetings, the Committee shall meet with
representatives of the Corporation's management and representatives of the
independent auditors. As part of the Committee's responsibility to foster open
communication in fulfilling its responsibilities under this Charter, the
Committee should meet at least annually with management of the Corporation, the
director of internal audit, and the independent auditors in separate executive
sessions to discuss any matters that the Committee or any of these groups
believe should be discussed privately. The Committee shall make regular reports
to the Board.
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V. MINUTES
Minutes shall be kept of each meeting of the Committee and shall be provided to
each member of the Board as promptly as practicable.
VI. LIMITATION OF COMMITTEE'S ROLE
It is not the duty of the Committee to plan or conduct audits or to determine
that the Corporation's financial statements are in accordance with generally
accepted accounting principles or that the Corporation's disclosures are
accurate in all material respects. These are the responsibilities of management
of the Corporation and the independent auditors. In addition, it is the
responsibility of the Board to determine whether to include audited financial
statements and related disclosure regarding the Corporation in the related
Annual Report on Form 10-KSB of the Corporation. Nothing contained in this
Charter shall be read to directly or indirectly impose any such responsibility
upon the Committee.
A-4
ANNEX B
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AMENDED & RESTATED
BYLAWS OF ST. LAWRENCE SEAWAY CORPORATION
ARTICLE I
Business Offices
The corporation shall have such offices either within or outside the State of
Delaware and within or outside the United States, as the Board of Directors may
from time to time determine or as the business of the corporation may require.
ARTICLE II
Registered Offices and Registered Agents
Section 2.1. Delaware. The address of the initial registered office in the State
of Delaware and the name of the initial registered agent of the corporation at
such address are set forth in the Certificate of Incorporation. The corporation
may, from time to time, designate a different address as its registered office
or a different person as its registered agent, or both; provided, however, that
such designation shall become effective upon the filing of a statement of such
change with the Secretary of State of the State of Delaware as is required by
law.
Section 2.2. Other States. In the event the corporation desires to qualify to do
business in one or more states other than Delaware, the corporation shall
designate the location of the registered office in each such state and designate
the registered agent for service of process at such address in the manner
provided by the law of the state in which the corporation elects to be
qualified.
ARTICLE III
Meetings of Shareholders
Section 3.1. Place of Meetings. Meetings of the shareholders shall be held at
the principal office of the corporation or any other place (within or outside
the State of Delaware and within or outside the United States) designated in the
notice of the meeting.
Section 3.2. Annual Meeting. A meeting of the shareholders shall be held
annually at such time as the Board of Directors may determine (which shall be,
in the case of the first annual meeting, not more than eighteen (18) months
after the organization of the corporation and, in the case of all other
meetings, not more than twelve (12) months after the date of the fiscal year end
of the corporation), at which annual meeting the shareholders shall elect the
positions of the Board of Directors then due for election and transact other
proper business.
Section 3.3. Special Meetings. A special meeting of the stockholders for any
purpose or purposes may be called by a majority of the Board, the Chairman, or
the President, to be held at such place, date and hour and for such purpose(s)
as shall be designated in the notice or waiver of notice thereof. The place,
date and hour of a special meeting shall be designated by the Board or Directors
in accordance with Section 3.4.
Section 3.4. Notice. Written notice stating the place, date and hour of the
meeting and, in the case of a special meeting, the purpose or purposes for which
the meeting is called, shall be delivered not less than ten (10) nor more than
sixty (60) days before the date of the meeting, either personally or by first
class mail, by or at the direction of the Chairman, President, the Secretary, or
the officer or persons calling the meeting, to each shareholder of record
entitled to vote at such meeting. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail addressed to the shareholder
at his or her address as it appears in the stock ledger of the corporation, with
postage thereon prepaid.
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Notwithstanding the above paragraph, the corporation shall not be required to
give notice of a shareholders' meeting to any shareholder to whom notice of two
consecutive annual meetings, and all notices of meetings or of the taking of
action by written consent without a meeting to such shareholder during the
period between such two consecutive annual meetings, have been mailed under the
procedures outlined above and have been returned undeliverable. Any action or
meeting which shall be taken or held without notice to such shareholder shall
have the same force and effect as if such notice had been duly given. If any
such shareholder delivers to the corporation a written notice setting forth his
or her then current address, the requirement that notice be given to such
shareholder shall be reinstated.
Section 3.5. Notice of Adjourned Meetings. When a meeting is adjourned to
another time or place, the corporation shall not be required to give any notice
of the adjourned meeting if the time and place to which the meeting is adjourned
are announced at the meeting at which the adjournment is taken. At the adjourned
meeting, any business may be transacted that might have been transacted at the
original meeting. If, however, the adjournment is for more than forty-five (45)
days, or if after the adjournment the Board of Directors fixes a new record date
for the adjourned meeting, a notice of the adjourned meeting shall be given as
provided in Section 3.4 above, to each shareholder of record on the new record
date entitled to vote at such meeting.
Section 3.6. Waiver of Notice. Whenever notice is required to be given to any
shareholder, a waiver thereof in writing, signed by the person or persons
entitled to such notice, whether before or after the time stated therein, shall
be the equivalent to the giving of such notice. Attendance by a person at a
meeting shall constitute a waiver of notice of such meeting, except when the
person attends a meeting for the express purpose of objecting, at the beginning
of the meeting, to the transaction of business because the meeting is not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of any regular or special meeting of the shareholders need be specified
in the written waiver of notice.
Section 3.7. Fixing Record Date.
(a) For the purpose of determining shareholders entitled to notice of or to vote
at any meeting of shareholders or any adjournment thereof, the Board of
Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which record date shall not be more than 60 nor less than 10 days
before the date of such meeting. If no record date is fixed by the Board of
Directors, the record date for determining shareholders entitled to notice of or
to vote at a meeting of shareholders shall be at the close of business on the
day next preceding the day on which notice is given, or, if notice is waived, at
the close of business on the day next preceding the day on which the meeting is
held. A determination of shareholders of record entitled to notice of or to vote
at a meeting of shareholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
(b) For purposes of determining the shareholders entitled to consent to
corporate action in writing without a meeting, the Board of Directors may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors, and
which date shall not be more than 10 days after the date upon which the
resolution fixing the record date is adopted by the Board of Directors. If no
record date has been fixed by the Board of Directors, the record date for
determining shareholders entitled to consent to corporate action in writing
without a meeting, when no prior action by the Board of Directors is required by
the General Corporation Laws of the State of Delaware, shall be the first date
on which a signed written consent setting forth the action taken or proposed to
be taken is delivered to the corporation by delivery to its registered office in
the State of Delaware, its principal place of business or an officer or agent of
the corporation having custody of the books in which proceedings of meetings of
shareholders are recorded. Delivery made to a corporation's registered office
shall be by hand, national overnight courier or by certified or registered mail,
return receipt requested. If no record date has been fixed by the Board of
Directors and prior action by the Board of Directors is required by the General
Corporation Law of the State of Delaware, the record date for determining
shareholders entitled to consent to corporate action in writing without a
meeting shall be at the close of business on the day on which the Board of
Directors adopts the resolution taking such prior action.
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(c) For purposes of determining the shareholders entitled to exercise any
rights, or for the purpose of any other lawful action, the Board of Directors
may fix a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted, and which record date shall be
not more than 60 days prior to such action. If no record date is fixed, the
record date for determining shareholders for any such purpose shall be at the
close of business on the day on which the Board of Directors adopts the
resolution relating thereto.
Section 3.8. Record of Shareholders Having Voting Rights. The officer or agent
having charge of the stock ledger of the corporation shall prepare and make, at
least ten (10) days before each meeting of shareholders, to the extent such has
been provided to the corporation by the shareholders, a complete list of the
shareholders entitled to vote at such meeting, arranged in alphabetical order,
and showing the name, address, telephone number, facsimile number and electronic
mail address of each shareholder, to the extent each is provided by such
shareholder. For a period of fifteen (15) days prior to such meeting, the list
shall be open to the examination of any shareholder, for any purpose germane to
the meeting, during ordinary business hours, either at a place within the city
where such meeting is to be held, which place shall be specified in the notice
of the meeting, or if not so specified, at the place where such meeting is to be
held. The list shall also be produced and kept open at the time and place of the
meeting and shall be subject to inspection by any shareholder at any time during
the meeting.
Section 3.9. Shareholder Quorum. Except as otherwise required by law, by the
Certificate of Incorporation or by these Bylaws, the holders of a majority of
the shareholders entitled to vote at such meeting, represented in person or
represented by proxy, shall constitute a quorum at a meeting of shareholders.
When a specified item of business is required to be voted on by a class of
shareholders (if the shareholders are divided into classes), the holders of a
majority of the shareholders entitled to vote at such meeting, represented in
person or represented by proxy, shall constitute a quorum for the transaction of
such item of business by that class of shareholders. If a quorum is present, the
affirmative vote of a majority of the shareholders represented at the meeting
and entitled to vote on the subject matter shall be the act of the shareholders,
unless the vote of a greater number or voting by class is required by the
General Corporation Law of the State of Delaware or by the Certificate of
Incorporation or by these Bylaws. The directors shall be elected by a plurality
of the votes of the shareholders present in person or represented by proxy at
the meeting and entitled to vote on the election of directors.
After a quorum has been established at a shareholders' meeting, the subsequent
withdrawal of shareholders, so as to reduce the number of shareholders in person
or represented by proxy entitled to vote at the meeting below the number
required for a quorum, shall not affect the validity of any action taken at the
meeting or any adjournment thereof.
Section 3.10. Voting. Each shareholder entitled to vote in accordance with the
Certificate of Incorporation of the corporation shall be entitled to one vote on
each matter submitted to a vote at a meeting of the shareholders, except as may
otherwise be provided in the General Corporation Law of the State of Delaware.
A shareholder may vote either in person or by proxy executed in writing by the
shareholder or his or her duly authorized attorney-in-fact.
Section 3.11. Proxies. Every shareholder entitled to vote at a meeting of
shareholders or to express consent or dissent to corporate action in writing
without a meeting, or a shareholder's duly authorized attorney-in-fact, may
authorize another person or persons to act for him/her by proxy.
B-3
Every proxy must be signed by the shareholder or his or her attorney-in-fact. No
proxy shall be valid after three (3) years from its date, unless otherwise
provided in the proxy. All proxies shall be revocable.
Section 3.12. Action by Shareholders Without a Meeting. Any action required to
be taken or which may be taken at any annual or special meeting of shareholders
of the corporation, may be taken without a meeting, without prior notice and
without a vote, if a written consent setting forth the action so taken shall be
signed by shareholders having not less than the minimum number of votes that
would be necessary to authorize or take such action at a meeting at which all
shareholders entitled to vote thereon were present and voted; provided, however,
that no written consent shall be effective unless such consent (i) bears the
date of signature by each shareholder signing such consent and (ii) is delivered
to the corporation within sixty (60) days of the date on which the earliest
consent was delivered to the corporation. Prompt notice of the taking of the
corporate action without a meeting by less than unanimous written consent shall
be given to those shareholders who have not consented in writing.
ARTICLE IV
Directors
Section 4.1. Powers. The business and affairs of the corporation shall be
managed by or under the direction of the Board of Directors, which may exercise
all such powers of the corporation and do all such lawful acts and things as are
not by statute or by the Certificate of Incorporation or by these Bylaws
specifically reserved to the shareholders.
Section 4.2. Qualification. Directors need not be residents of Delaware or of
the United States nor shareholders of the corporation.
Section 4.3. Compensation. The Board of Directors shall have authority to fix
the compensation of directors unless otherwise provided in the Certificate of
Incorporation.
Section 4.4. Number. The number of directors shall consist of not less than
three nor more than five, the exact number of such directors to be determined
from time to time by resolution of the Board of Directors.
Section 4.5. Election and Term. Each person named in the Certificate of
Incorporation or elected by the incorporator(s) at the organization meeting, as
the case may be, as a member of the initial Board of Directors shall hold office
until the first annual meeting of shareholders and until his or her successor
shall have been elected and qualified or until his or her earlier resignation,
removal or death..
Section 4.6. Resignation and Removal of Directors. A director may resign at any
time upon written request to the corporation. Furthermore, any director or the
entire Board of Directors may be removed, with or without cause, by a vote of
the majority of the shareholders entitled to vote for the election of directors
or as otherwise provided in the General Corporation Law of the State of
Delaware.
Section 4.7. Vacancies. Any vacancy occurring in the Board of Directors,
including any vacancy created by reason of an increase in the authorized number
of directors, may be filled by the affirmative vote of a majority of the
remaining directors though less than a quorum of the Board of Directors or by a
sole remaining director. If there is more than one voting class of shareholders,
vacancies of directorships elected by such class may be filled by a majority of
the directors elected by such class or by a sole remaining director. A director
elected to fill a vacancy shall hold office only until the next election of
directors by the shareholders.
Section 4.8. Quorum and Voting. A majority of the number of directors then fixed
in accordance with these Bylaws shall constitute a quorum for the transaction of
business. The vote of a majority of the directors present at a meeting at which
a quorum is present shall be the act of the Board of Directors.
B-4
Section 4.9. Audit, Executive and Other Committees. The Board of Directors, by
resolution adopted by a majority of the full Board of Directors, shall designate
an Audit Committee and may designate an Executive Committee from among its
members and such other committees consisting of at least one director as
determined by the Board of Directors from time to time. Each committee, to the
extent provided in such authorizing resolution, shall have and may exercise all
the power and authority of the Board of Directors in the management of the
business and affairs of the corporation, as limited by the laws of the State of
Delaware.
The Board of Directors, by resolution adopted in accordance with this section,
may designate one or more directors as alternate members of any such committee,
who may act in the place and stead of any absent or disqualified member or
members at any meeting of such committee. In the absence or disqualification of
any member of any such committee or committees, the member or members thereof
present at any meeting and not disqualified from voting, whether or not they
constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or disqualified
member.
Section 4.10. Place of Meetings. Regular and special meetings of the Board of
Directors may be held within or outside the State of Delaware and within or
outside the United States.
Section 4.11. Time, Notice and Call of Meetings. Regular meetings of the Board
of Directors shall be held immediately following the annual meeting of
shareholders each year and at such times thereafter as the Chairman of the Board
of Directors will fix. No notice of regular directors' meetings shall be
required.
Special meetings of the Board of Directors shall be held at such times as called
by the Chairman of the Board, the President of the corporation, or a majority of
directors. Written notice of the time and place of special meetings of the Board
of Directors shall be given to each director by either personal delivery,
national overnight delivery service, e-mail, telegram, cablegram, or telefax at
least 24 hours before the meeting, or by notice mailed to each director at least
five (5) days before the meeting.
Notice of a meeting of the Board of Directors need not be given to any director
who signs a waiver of notice, either before or after the meeting. Attendance of
a director at a meeting shall constitute a waiver of notice of such meeting and
waiver of any and all objections to the place of the meeting, the time of the
meeting, or the manner in which it has been called or conveyed, except when a
director states, at the beginning of the meeting, any objection to the
transaction of business because the meeting is not lawfully called or convened.
Members of the Board of Directors may participate in a meeting of such Board or
of any committee designated by such Board by conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other at the same time. Participating by such means shall
constitute presence in person at a meeting.
Section 4.12. Action Without a Meeting. Any action required or permitted to be
taken at a meeting of the Board of Directors or of any committee thereof may be
taken without a meeting if all the members of the board or committee, as the
case may be, consent thereto in writing, and such writing is filed with the
minutes of the proceedings of the board or committee. Such consent shall have
the same effect as a unanimous vote.
Section 4.13. Director Conflicts of Interest. No contract or other transaction
between the corporation and one or more of its directors or between the
corporation and any other corporation, partnership, association or other
organization in which one or more of the directors of the corporation are
directors or officers or are financially interested, shall be void or voidable
solely because of such relationship or interest or solely because such director
or directors are present at or participate in the meeting of the Board of
Directors or a committee thereof which authorizes, approves or ratifies such
contract or transaction or solely because his or her or their votes are counted
for such purpose, if:
B-5
A. The material facts as to the director's relationship or interest and
as to the contract or transaction are disclosed or are known to the
Board of Directors or committee, and the Board of Directors or
committee in good faith authorizes, approves or ratifies the contract
or transaction by the affirmative votes of a majority of the
disinterested directors, even though the disinterested directors be
less than a quorum; or
B. The material facts as to their relationship or interest and as to
the contract or transaction are disclosed or known to the shareholders
entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of such shareholders; or
C. The contract or transaction is fair as to the corporation at the
time it is authorized, approved or ratified by the Board of Directors,
a committee of the Board of Directors or the shareholders.
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.
ARTICLE V
Audit Committee
Section 5.1. Designation. The Board of Directors shall by a resolution adopted
by a majority of the entire Board designate an Audit Committee. Members of the
Audit Committee may be members of other committees of the Board of Directors and
shall be subject to any federal governance requirements. The members of the
Audit Committee shall elect a chairman by the affirmative vote of a majority of
such members.
Section 5.2. Powers. The power and authority of the Audit Committee shall, to
the extent permitted by law, be to (i) initiate or review the results of an
audit or investigation, at any time, into the business affairs of the
corporation and its subsidiaries, if any; (ii) review the corporation's annual
and quarterly reports; (iii) conduct pre-audit and post-audit reviews with the
Corporation's management, financial employees and independent auditors; and (iv)
exercise such other powers and authority as shall from time to time be assigned
thereto by resolution of the Board of Directors.
Management of the Corporation shall inform the Audit Committee regularly
with respect to the business and financial condition of the Corporation and its
subsidiaries, if any, and shall notify the Audit Committee promptly of (i) any
proposed material change in accounting or financial reporting practices; (ii)
any proposed change of independent auditors; and (iii) such other matters as may
from time to time be designated by the Board of Directors.
In connection with the performance of its duties, the Audit Committee shall
have unrestricted access to and assistance from the officers, employees and
independent auditors of the corporation, and shall be furnished with such
resources and support from the Corporation as the Audit Committee shall deem
necessary. The Audit Committee shall have standing authority to employ, at the
expense of the Corporation, such experts and professionals as the Audit
Committee shall deem appropriate from time to time.
Section 5.3. Reports. The Audit Committee shall report to the Board of Directors
when and as required by the Board of Directors and when and as deemed
appropriate by the Audit Committee, but in any event, not less frequently than
quarterly.
Section 5.4. Meetings. Regular meetings of the Audit Committee shall be held
not less frequently than quarterly. Special meetings of the Audit Committee may
be called by or at the request of the Chairman of the Audit Committee or a
majority of the members of the Audit Committee or the Board of Directors upon 24
hours' notice to the members (unless each member waives such notice before or
after the meeting).
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Subject to Article 4.11, a notice of the place, date and time and the
purpose or purposes of such meeting of the Audit Committee shall be given by the
chairman of the Audit Committee and shall be given to each member by mailing,
delivering by facsimile transmission, telephoning the same or by delivering the
same personally, in each case at least five days before the meeting.
The Audit Committee may hold its meetings at the principal office of the
Corporation or at any other place upon which a majority of the committee may at
any time agree.
ARTICLE VI
Executive Committee
Section 6.1. Designation. The Board of Directors may by a resolution adopted by
a majority of the entire Board designate an Executive Committee of one or more
directors. Members of the Executive Committee may be members of other committees
of the Board of Directors. If the Executive Committee has more than one member,
the members of the Executive Committee shall elect a chairman by the affirmative
vote of a majority of such members.
Section 6.2. Powers. The power and authority of the Executive Committee shall be
as determined by the Board of Directors.
Section 6.3. Reports. The Executive Committee shall report to the Board of
Directors when and as required by the Board of Directors and when and as deemed
appropriate by the Executive Committee, but in any event, not less frequently
than by the next succeeding meeting of the entire Board of Directors.
Section 6.4. Meetings. If the Executive Committee has more than one member,
special meetings of the Executive Committee may be called by or at the request
of the Chairman of the Executive Committee or a majority of the members of the
Executive Committee or the Board of Directors upon 24 hours' notice to members
(unless each member waives such notice before or after the meeting).
If the Executive Committee has more than one member, subject to Section
4.11, a notice of the place, date and time and the purpose or purposes of such
meeting of the Executive Committee shall be given by the Chairman of the
Executive Committee and shall be given to each member by mailing, e-mailing,
delivering by facsimile transmission, telephoning the same or by delivering the
same personally, in each case at least 24 hours before the meeting.
The Executive Committee may hold its meetings at the principal office of
the Corporation or at any other place upon which a majority of the committee may
at any time agree.
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ARTICLE VII
Committees Generally
Section 7.1. Appointment. The Board of Directors by a resolution adopted by a
majority of the entire Board may from time to time appoint one or more
committees, in addition to the Audit Committee and the Executive Committee, for
any purpose or purposes, to the extent lawful, which shall have such powers as
shall be determined and specified by the Board of Directors in the resolution of
designation.
Section 7.2. Procedures, Quorum and Manner of Acting. Each committee shall fix
its own rules of procedure, and, except as otherwise provided herein, shall meet
where and as provided by such rules or by resolution of the Board of Directors.
Except as otherwise provided by law, the presence of a majority of the then
appointed members of a committee shall constitute a quorum for the transaction
of business by that committee, and in every case where a quorum is present the
affirmative vote of a majority of the members of the committee present shall be
the act of the committee. Each member of a committee shall have one vote on all
matters that come before the committee. Each committee shall keep minutes of its
proceedings, and actions taken by a committee shall be reported to the Board of
Directors.
Section 7.3. Action by Written Consent. Any action required or permitted to be
taken at any meeting of any committee of the Board of Directors may be taken
without a meeting if all the members of the committee consent thereto in
writing, and the writing or writings are filed with the minutes of proceedings
of the committee.
Section 7.4. Term; Termination. In the event any person shall cease to be a
director of the corporation, such person shall simultaneously therewith cease to
be a member of any committee designated by the Board of Directors.
Any member of any committee may be removed at any time, with or without
cause, by a resolution of a majority of the entire Board.
Any vacancy in any committee occurring for any reason whatsoever may be
filled in accordance with a resolution of a majority of the entire Board.
ARTICLE VIII
Officers
Section 8.1. Officers. The officers of the corporation shall consist of a
President, a Secretary and a Treasurer, each of whom shall be elected by the
Board of Directors. A Chairman of the Board, one or more Vice Chairmen, one or
more Vice Presidents, one or more Assistant Secretaries, one or more Assistant
Treasurers and such other officers and assistant officers and agents as may be
deemed necessary may be elected or appointed by the Board of Directors from time
to time. Any two (2) or more offices may be held by the same person.
Section 8.2. Duties. The officers of the corporation shall have the following
duties:
A. Chairman of the Board. The Chairman of the Board, if one is elected, shall
preside at all meetings of the Board of Directors and shareholders and shall
have such other duties and authority as may be conferred by the Board of
Directors. The Chairman may also serve as one or more officers of the
corporation if so designated by the Board of Directors.
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B. Vice Chairman. The Vice Chairman, if one is elected, shall, in the absence or
disability of the Chairman of the Board, perform the duties and exercise the
powers of the Chairman of the Board. The Vice Chairman shall also perform
whatever duties and have whatever powers the Board of Directors may from time to
time assign him/her. If more than one Vice Chairman is elected and the Chairman
is absent or becomes disabled, the Board of Directors shall choose one Vice
Chairman to perform the duties and exercise the powers of the Chairman.
C. President. The President shall be the chief executive officer of the
corporation and shall have general and active management of the business and
affairs of the corporation, subject to the direction of the Board of Directors.
The President may also serve as the Chairman of the Board if so elected by the
Board of Directors. If a Chairman of the Board is not elected, the President
shall preside at all meetings of the Board of Directors and shareholders.
D. Vice President. The Vice President, if one is elected, shall, in the absence
or disability of the President, perform the duties and exercise the powers of
the President. He or she also shall perform whatever duties and have whatever
powers the Board of Directors may from time to time assign him or her. If more
than one Vice President is elected, one thereof shall be designated as Executive
Vice President and shall, in the absence or disability of the President, perform
the duties and exercise the powers of the President and each other Vice
President shall only perform whatever duties and have whatever powers the Board
of Directors may from time to time assign him or her.
E. Secretary and Assistant Secretary. The Secretary shall keep accurate records
of the acts and proceedings of all meetings of the shareholders and directors.
The Secretary shall give all notices required by law and by these Bylaws. In
addition, the Secretary shall have general charge of the corporate books and
records and of the corporate seal, and he or she shall affix, or attest the
affixing of, the corporate seal to any lawfully executed instrument requiring
it. The Secretary shall have general charge of the stock ledger of the
corporation and shall keep, at the registered or principal office of the
corporation, a record of the shareholders showing the name, address, telephone
number, facsimile number and electronic mail address of each member. The
Secretary shall sign such instruments as may require his or her signature and,
in general, shall perform all duties as may be assigned to him or her from time
to time by the Chairman, the President or the Board of Directors. The Assistant
Secretary, if one is appointed, shall render assistance to the Secretary in all
the responsibilities described above.
F. Treasurer and Assistant Treasurer. The Treasurer shall have custody of all
corporate funds and financial records, shall keep full and accurate accounts of
receipts and disbursements and render accounts thereof at the annual meetings of
shareholders, and shall perform such other duties as may be prescribed by the
Chairman, the President or the Board of Directors; provided, however, that
certain or all of these duties may be vested in one or more officers as
designated by the Board of Directors. The Assistant Treasurer, if one is
appointed, shall render assistance to the Treasurer in all of the
responsibilities described above.
Section 8.3. Election and Term. The officers of the corporation shall be
appointed by the Board of Directors or appointed by an officer empowered by the
Board to make such appointment. Such appointment by the Board of Directors may
be made at any regular or special meeting of the Board. Each officer shall hold
office for the period designated by the Board of Directors or officer so
designated to appoint, as the case may be.
Section 8.4. Removal of Officers. Any officer or agent elected or appointed by
the Board of Directors may be removed by a majority of the Board whenever, in
its judgment, the best interests of the corporation will be served thereby.
Section 8.5. Vacancies. Any vacancy, however occurring, in any office may be
filled by a majority of the Board of Directors.
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Section 8.6. Compensation. The compensation, if any, of all officers of the
corporation shall be fixed by the Board of Directors and may be changed from
time to time by a majority vote of the Board of Directors. The fact that an
officer is also a director shall not preclude such person from receiving
compensation as either a director or officer, nor shall it affect the validity
of any resolution by the Board of Directors fixing such compensation. The
President shall have authority to fix the salaries, if any, of all employees of
the corporation, other than officers elected or appointed by the Board of
Directors.
ARTICLE IX
Capital Stock
Section 9.1. Certificates. The instruments of debentures, certificate of shares
of the preferred, preference and common capital stock, including the Class A
Common Stock of the corporation shall be in such form as shall be approved by
the Board of Directors. The certificates shall be signed by the Chairman of the
Board or the President and also by the Secretary or the Treasurer. The seal of
the corporation shall be affixed to all certificates. The signatures of the
officers upon a certificate may be facsimiles if the certificate is
countersigned by a transfer agent or registered by a registrar other than the
corporation itself or its employee. Notwithstanding the foregoing provisions
regarding share certificates or any other provisions of this Article IX,
officers of the Corporation may provide that some or all of any or all classes
or series of the corporation's capital stock may be uncertificated shares.
Section 9.2. Stock Ledger. All certificates shall be consecutively numbered, and
the names of the owners, the number of shares and the date of issue, shall be
entered in the corporation's books. The corporation or its duly authorized stock
transfer agent shall keep a book to be known as the stock book, containing the
names, alphabetically arranged, of all persons who are stockholders of the
corporation, showing their places of residence, the number of shares of
preferred, preference and common stock held by each respectively, and the time
when each became the owner thereof, also entries showing from and to whom such
shares shall be transferred, and the number and denomination of all revenue
stamps used to evidence the payment of the stock transfer tax as required by the
laws of the State of Delaware, which books shall be open daily, during usual
business hours, for inspection by any person who shall have been a stockholder
of record in such corporation for a least six months immediately preceding his
demand; or by any person holding or thereunto in writing authorized by the
holders of at least five per centum of any class of its outstanding shares, upon
at least five days written demand. Persons so entitled to inspect stock books
may not make extracts therefrom.
Section 9.3. Share Transfer. Shares shall be transferred only on the books of
the corporation by the holder thereof in person or by his attorney upon the
surrender and cancellation of certificates for a like number of shares, and upon
tender of stock transfer stamps or the equivalent in money to the extent
necessary and sufficient to satisfy all legal requirements for such transfer.
Section 9.4. Board Action. The Board may make such rules and regulations as it
may deem expedient concerning the issue, transfer and registration of
certificates of stock of the corporation.
Section 9.5. Lost Certificates. Certificates for shares of stock or for
debentures in the corporation may be issued in lieu of certificates alleged to
have been lost, stolen, destroyed, mutilated, or abandoned, upon the receipt of
(1) such evidence of loss, theft, destruction or mutilation and a bond of
indemnity in such amount, upon such terms and with such surety, if any, as the
Board of Directors may require in each specific case, or (2) a request by an
appropriate governmental agency or representative for the reissuance of a stock
certificate claimed to be abandoned or escheated in accordance with the
abandoned property or similar law of the state, or (3) in accordance with
general resolutions.
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ARTICLE X
Books and Records
Section 10.1. Books and Records. The corporation shall keep correct and complete
books and records of accounts and shall keep minutes of the proceedings of its
shareholders, Board of Directors and committees of directors.
The corporation shall keep at its registered office or principal place of
business, or at the office of its transfer agent or registrar, a record of the
name, address and telephone number of each shareholder, to the extent the same
as been provided by such shareholder.
Any books, records and minutes may be in written form or in any other form
capable of being converted into clearly legible written form within a reasonable
time.
Section 10.2. Shareholders' Inspection Rights. Any person who is a member, upon
written demand under oath stating the purpose thereof, shall have the right to
examine, in person or by agent or attorney, at any time during the corporation's
usual hours for business, for any proper purpose as determined under the General
Corporation Law of the State of Delaware, the corporation's stock ledger and its
other books and records, but may not make copies or extracts therefrom.
ARTICLE XI
Status
The corporation is organized and shall be operated as a corporation organized
under Delaware law.
ARTICLE XII
Corporate Seal
The Board of Directors shall provide a corporate seal which shall have the name
of the corporation inscribed thereon, and may be a facsimile, engraved, printed,
or an impression seal.
ARTICLE XIII
Amendment
These Bylaws may be repealed, altered or amended or new Bylaws adopted at any
meeting of the stockholders, either annual or special, by the affirmative vote
of a majority of the stock entitled to vote at such meeting, unless a larger
vote is required by these Bylaws or the Certificate of Incorporation.
The Board of Directors shall also have the authority to repeal, alter or amend
these Bylaws or adopt new Bylaws (including, without limitation, the amendment
of any Bylaws setting forth the number of directors who shall constitute the
whole Board of Directors) by unanimous written consent or at any annual,
regular, or special meeting by the affirmative vote of a majority of the whole
number of directors, subject to the power of the stockholders to change or
repeal such Bylaws.
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ARTICLE XIV
Limits on Liability of Directors
To the fullest extent permitted by the General Corporation Law of the State of
Delaware, as the same exists or may hereafter be amended, a director of the
corporation shall not be personally liable to the corporation or its
shareholders for monetary damages for breach of fiduciary duty as a director.
ARTICLE XV
Indemnification of Officers and Directors
Section 15.1. Right to Indemnification. Each person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit, or proceeding, whether civil, criminal, administrative, or investigative
(other than an action by or in the right of the corporation), by reason of the
fact that he or she is or was a director, officer or member 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, shall be entitled to indemnification against expenses
(including attorneys' fees), judgments, fines, and amounts paid in settlement to
the fullest extent now or hereafter permitted by applicable law as long as such
person acted in good faith and in a manner that such person reasonably believed
to be in or not be opposed to the best interests of the corporation; provided,
however, that the corporation shall indemnify any such person seeking indemnity
in connection with an action, suit or proceeding (or part thereof) initiated by
such person only if such action, suit or proceeding (or part thereof) was
authorized by the Board of Directors.
Section 15.2. Advance Payment of Expenses. Expenses (including reasonable
attorneys' fees) incurred by any person who is or was an officer, director or
member of the corporation, or who is or was serving at the request of the
corporation as an officer or director of another corporation, partnership, joint
venture, trust or other enterprise, in defending any civil, criminal,
administrative or investigative action, suit or proceeding, shall be paid by the
corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such person to
repay such amount if it is ultimately determined that he or she is not entitled
under applicable law to be indemnified by the corporation.
Section 15.3. Right of Claimant to Bring Suit. If a claim under this Article is
not paid in full by the corporation within ninety (90) days after a written
claim has been received by the corporation, the claimant may at any time
thereafter bring suit against the corporation to recover the unpaid amount of
the claim and, if successful in whole or in part, the claimant shall be entitled
to be paid also the expense of prosecuting such claim. It shall be a defense to
any such action (other than an action brought to enforce a claim for expenses
incurred in defending any action or proceeding in advance of its final
disposition where the required undertaking has been tendered to the corporation
unless such action is based on the claimant having committed an act involving
moral turpitude) that the claimant has not met the standards of conduct which
make indemnification permissible under the General Corporation Law of the State
of Delaware, but the burden of proving such defense shall be on the corporation.
Neither the failure of the corporation (including its Board of Directors,
independent legal counsel, or its shareholders) to have made a determination
prior to the commencement of such action that indemnification of the claimant is
proper in the circumstances because he or she has met the applicable standard of
conduct set forth in the General Corporation Law of the State of Delaware, nor
an actual determination by the corporation (including its Board of Directors,
independent legal counsel, or its shareholders) that the claimant has not met
such applicable standard of conduct, shall be a defense to the action or create
a presumption that the claimant has not met the applicable standard of conduct.
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Section 15.4. Contract Rights. The provisions of this Article shall be a
contract between the corporation and each director, officer or member to which
this Article applies. No repeal or modification of these Bylaws shall invalidate
or detract from any right or obligation with respect to any state of facts
existing prior to the time of such repeal or modification.
Section 15.5. Rights Non-exclusive. The indemnification and advancement of
expenses provided by or granted pursuant to this Article shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
shareholders or disinterested directors or otherwise, both as to action in his
or her official capacity and as to action in another capacity while holding such
office.
Section 15.6. Insurance. The corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, member, 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 any liability asserted against
him or her and incurred by him or her in any such capacity, or arising out of
his or her status as such, whether or not the corporation would have the power
to indemnify him or her against such liability under the provisions of this
Article or of applicable law.
Section 15.7. Definitions. For purposes of this Article, references to "the
corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, and employees
or agents, so that any person who is or was a director, officer, employee or
agent of such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under this Article with respect to the
resulting or surviving corporation as he or she would have with respect to such
constituent corporation if its separate existence had continued, and references
to "other enterprises" shall include employee benefit plans; references to
"fines" shall include any excise taxes assessed on a person with respect to any
employee benefit plan; and references to "serving at the request of the
corporation" shall include any service as a director, officer, employee or agent
of the corporation which imposes duties on, or involves services by, such
director, officer, employee, or agent with respect to an employee benefit plan,
its participants, or beneficiaries; and a person who acted in good faith and in
a manner he or she reasonably believed to be in the interest of the participants
and beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the corporation" as referred to in
this Article.
Section 15.8. Continued Coverage. The indemnification and advancement of
expenses provided by, or granted pursuant to this Article shall, unless
otherwise provided when authorized or ratified, continue as to a person who has
ceased to be a director, officer or member and shall inure to the benefit of the
heirs, executors and administrators of such person.
ARTICLE XVI
General Provisions
Section 16.1. Checks. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
Section 16.2. Fiscal Year. The fiscal year of the corporation shall end on March
31, unless otherwise fixed by resolution of the Board of Directors.
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Section 16.3. Loans. No loans shall be contracted on behalf of the corporation
and no evidence of material indebtedness shall be issued in its name unless
authorized by a resolution of the Board of Directors. Such authority may be
general or confined to specific instances.
Section 16.4. Deposits. All funds of the corporation not otherwise employed
shall be deposited from time to time to the credit of the corporation in such
depositories as the Board of Directors shall direct.
Section 16.5. Contracts. The Board of Directors may authorize any officer or
officers, agent or agents, to enter into any contract or execute and deliver any
instrument on behalf of the corporation, and such authority may be general or
confined to specific instances.
Section 16.6. Counterpart Execution: Facsimile Execution. Any document requiring
the signature of the directors and/or shareholders may be executed in any number
of counterparts with the same effect as if all of the required signatories had
signed the same document. Such executions may be transmitted to the corporation
and/or the other directors and/or shareholders by facsimile and such facsimile
execution shall have the full force and effect of an original signature. All
fully executed counterparts, whether original executions or facsimile executions
or a combination, shall be construed together and shall constitute one and the
same agreement.
THESE BYLAWS WERE READ, APPROVED AND ADOPTED BY THE BOARD OF DIRECTORS OF ST.
LAWRENCE SEAWAY CORPORATION ON THE ____ DAY OF _______, 2007.
(signed)
_______________________, Secretary
B-14
ANNEX C
-------
AMENDED & RESTATED
CERTIFICATE OF INCORPORATION
OF
ST. LAWRENCE SEAWAY CORPORATION
ARTICLE 1.
NAME
The name of the Corporation is St. Lawrence Seaway Corporation
(the "Corporation").
ARTICLE 2.
REGISTERED OFFICE AND AGENT
The address of the Corporation's registered office in the
State of Delaware is 2711 Centerville Road, Wilmington, Delaware 19805. The name
of the registered agent at such address is Corporation Service Company.
ARTICLE 3.
PURPOSE AND POWERS
The purpose for which the Corporation is organized is to
engage in any lawful act or activity for which corporations may be organized
under the Delaware General Corporation Law and to possess and employ all powers
and privileges now or hereafter granted or available under the laws of the State
of Delaware to such corporations.
ARTICLE 4.
CAPITALIZATION
4.1 Authorized Shares. The total number of shares of stock
that the Corporation shall have authority to issue is fifty million, ten
thousand (50,010,000) shares, consisting of (i) forty eight million, five
hundred thousand (48,500,000) shares of common stock, each with a par value of
$0.01 (the "Common Stock"), (ii) five hundred, ten thousand (510,000) shares of
Class A Common Stock, each with a par value of $0.01 (the "Class A Common
Stock"), and (iii) one million (1,000,000) shares of preferred stock, each with
a par value of $0.01 (the "Preferred Stock").
4.2 Preferred Stock. The shares of Preferred Stock may be
issued from time to time in one or more series. The Board of Directors is hereby
vested with authority to fix by resolution or resolutions the designations and
the powers, preferences and relative, participating, optional or other special
rights, and qualifications, limitations, or restrictions thereof, including
without limitation, the dividend rate, conversion rights, redemption price and
liquidation preference, of such series of Preferred Stock, and to fix the number
of shares constituting any such series, and to increase or decrease the number
of shares of any series of Preferred Stock (but not below the number of shares
thereof then outstanding). In case the number of shares of any series shall be
so decreased, the shares constituting such decrease shall resume the status of
undesignated shares of Preferred Stock.
4.3 Dividends on Common Stock. Subject to applicable law and
rights, if any, of the holders of any outstanding class or series of Preferred
Stock, dividends on the Common Stock may be declared and paid out of funds of
the Corporation legally available therefor and shall be paid solely in the
discretion of the Board of Directors; provided, however, that dividends on the
Common Stock may not be paid from the Medical Technologies Investments (as
defined in Article 12) and in addition may not be paid if the Corporation either
(i) has failed to pay the full amount of any dividends payable to the holders of
the Class A Common Stock as provided in Section 12.1 or (ii) has failed to
redeem the Class A Common Stock as provided in Section 12.2.
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4.4 Liquidation Rights. In the event of the dissolution,
liquidation or winding up of the Corporation, whether voluntary or involuntary,
the holders of the outstanding shares of Common Stock shall be entitled to
receive the funds of the Corporation remaining for distribution to its
stockholders (after any distribution required to be made to the holders of
Preferred Stock and holders of the Class A Common Stock). For purposes of this
Section 4.4, the voluntary sale, conveyance, lease, exchange or transfer (for
cash, shares of stock, securities or other consideration) of all or
substantially all of the assets of the Corporation or a consolidation or merger
of the Corporation with one or more other corporations or other persons (whether
or not the Corporation is the corporation surviving such consolidation or
merger) shall not be deemed to be a liquidation, dissolution or winding up,
voluntary or involuntary.
4.5 Voting Rights. Each holder of record of Common Stock shall
have one vote for each share of Common Stock which is outstanding in his, her or
its name on the books of the Corporation and which is entitled to vote. Except
as otherwise required by law or this Certificate of Incorporation (including any
Certificate of Designation relating to Preferred Stock), holders of Class A
Common Stock and holders of any class or series of Preferred Stock, shall not be
entitled to voting rights. Except as otherwise required by this Certificate of
Incorporation (including any Certificate of Designation relating to Preferred
Stock), no holders of Common Stock, Class A Common Stock or Preferred Stock
shall have preemptive rights. In the election of directors, no stockholder shall
be entitled to cumulate votes on behalf of any candidate.
ARTICLE 5.
DIRECTORS
Elections of directors need not be by written ballot unless
the bylaws of the Corporation shall so provide.
ARTICLE 6.
BYLAWS
In furtherance and not in limitation of the powers conferred
by statute, the Board of Directors of the Corporation is expressly authorized to
make, alter or repeal the Bylaws of the corporation, but such authorization
shall not divest the stockholders of the power, nor limit their power, to make,
alter or repeal Bylaws.
ARTICLE 7.
LIMITATIONS OF DIRECTORS' LIABILITY
No director of the Corporation shall be personally liable to
the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except as to liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) for violations of Section 174 of the Delaware General
Corporation Law or (iv) for any transaction from which the director derived any
improper personal benefit. If the Delaware General Corporation Law hereafter is
amended to eliminate or limit further the liability of a director, then, in
addition to the elimination and limitation of liability provided by the
preceding sentence, the liability of each director shall be eliminated or
limited to the fullest extent provided or permitted by the amended Delaware
General Corporation Law. Any repeal or modification of this Article 7 shall not
adversely affect any right or protection of a director under this Article 7 as
in effect immediately prior to such repeal or modification with respect to any
liability that would have accrued, but for this Article 7, prior to such repeal
or modification.
ARTICLE 8.
INDEMNIFICATION
The Corporation shall indemnify its directors and officers to
the fullest extent authorized or permitted by law, as now or hereafter in
effect, and such right to indemnification shall continue as to a person who has
ceased to be a director or officer of the Corporation and shall inure to the
benefit of his or her heirs, executors and personal and legal representatives;
provided, however, that except for proceedings to enforce rights to
indemnification, the Corporation shall not be obligated to indemnify any
director or officer (or his or her heirs, executors or personal or legal
representatives ) in connection with a proceeding (or part thereof) initiated by
such person unless such proceeding (or part thereof) was authorized or consented
to by the Board of Directors. The right to indemnification conferred by this
Article 8 shall include the right to be paid by the Corporation the expenses
incurred in defending or otherwise participating in any proceeding in advance of
its final disposition.
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The rights to indemnification and to the advance of expenses conferred in this
Article 8 shall not be exclusive of any other right which any person may have or
hereafter acquire under this Certificate of Incorporation, the Bylaws of the
Corporation, any statute, agreement, vote of stockholders or disinterested
directors or otherwise.
Any repeal or modification of this Article 8 by the stockholders of the
Corporation shall not adversely affect any rights to indemnification and to the
advancement of expenses of a director or officer of the Corporation existing at
the time of such repeal or modification with respect to any acts or omissions
occurring prior to such repeal or modification.
ARTICLE 9.
AMENDMENTS
The Corporation reserves the right at any time and from time
to time to amend, alter, change or repeal any provision contained in this
Certificate of Incorporation, as from time to time amended, in the manner now or
hereafter prescribed by law; and all rights, preferences and privileges of
whatsoever nature conferred upon stockholders, directors or any other persons
whomsoever by and pursuant to this Certificate of Incorporation in its present
form or as hereafter amended are granted subject to the right reserved in this
Article 9. Except as otherwise provided by law and this Certificate of
Incorporation, the provisions of this Certificate of Incorporation shall not be
modified, revised, altered or amended, repealed or rescinded in whole or in
part, without the approval of a majority of the votes entitled to be cast by the
holders of the Common Stock; provided, however, that with respect to any
proposed amendment of this Certificate of Incorporation (including any
Certificate of Designation relating to any series or class of Preferred Stock)
which would alter or change the powers, preferences or special rights of any
class or series of Preferred Stock so as to affect them adversely, the approval
of a majority of the votes entitled to be cast by the holders of the shares of
such class or series of Preferred Stock affected by the proposed amendment,
voting separately as a class, shall be obtained in addition to the approval of a
majority of the votes entitled to be cast by the holders of the Common Stock.
ARTICLE 10.
TRANSACTIONS WITH DIRECTORS AND OFFICERS
The Corporation shall have authority, to the fullest extent
now or hereafter permitted by the Delaware General Corporation Law, or by any
other applicable law, to enter into any contract or transaction with one or more
of its directors or officers, or with any corporation, partnership, joint
venture, trust, association or other entity in which one or more of its
directors or officers are directors or officers or have a financial interest,
notwithstanding such relationships and notwithstanding the fact that the
director or officer is present at or participates in the meeting of the Board of
Directors or committee thereof which authorizes the contract or transaction.
C-3
ARTICLE 11.
COMPROMISE WITH CREDITORS
Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction with the State of Delaware may, on the application in a summary way
of the Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the Corporation under the
provisions of Section 291 of the General Corporation Law of the State of
Delaware or on the application of trustees in dissolution or of any receiver or
receivers appointed for the Corporation under the provisions of Section 279 of
the General Corporation Law of the State of Delaware order a meeting of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of the Corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the Corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of the
Corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and said reorganization shall, if sanctioned by the
court to which the said application has been made, be binding on all creditors
or class of creditors, and/or on all the stockholders or class of stockholders,
of the Corporation, as the case may be, and also on the Corporation.
ARTICLE 12.
CLASS A COMMON STOCK
In addition to other applicable provisions of this Certificate
of Incorporation, the Class A Common Stock of the Corporation shall have the
following relative powers, preferences and participating, optional or other
special rights, qualifications, limitations and restrictions. Certain
capitalized terms are defined in Section 12.9.
12.1 Dividends on Class A Common Stock. Dividends on the Class
A Common Stock may be declared and paid only out of the Available Medical
Technologies Dividend Amount, and, to the extent permitted by the Delaware
General Corporation Law, shall be paid, promptly and in any event within 60 days
after the Corporation receives any cash, cash equivalents or marketable
securities from the Medical Technologies Investments, in an amount equal to the
Available Medical Technologies Dividend Amount. For purposes of this Certificate
of Incorporation, "Available Medical Technologies Dividend Amount", on any date,
shall mean all cash, cash equivalents and marketable securities received in
connection with the Medical Technologies Investments, net of any Direct
Expenses. If the Corporation is legally prohibited under the Delaware General
Corporation Law from paying the full amount of such dividends, then the
Corporation shall pay the maximum amount of dividends permitted, use best
efforts to resolve any such legal prohibition and make full payment of such
dividends as soon as possible following the date upon which such legal
prohibition is eliminated. Dividends paid on the Common Stock or the Preferred
Stock may not be paid in shares of Class A Common Stock.
12.2 Redemption of Class A Common Stock. If a Medical
Technologies Disposition occurs, then the Corporation shall redeem all of the
outstanding shares of Class A Common Stock for cash and/or securities or other
property received as proceeds of such Medical Technologies Disposition, in an
amount equal, in the aggregate for all outstanding shares of Class A Common
Stock, to the Net Proceeds of such Medical Technologies Disposition (plus any
amount of Net Proceeds of a Medical Technologies Disposition which has not
previously been paid to the holders of Class A Common Stock pursuant to Section
12.1). The Corporation shall make such redemption on or prior to the first
business day following the 60th day following the consummation of the Medical
Technologies Disposition, provided that, if the Corporation is legally
prohibited under the Delaware General Corporation Law from making such
redemption, then the Corporation shall use best efforts to resolve any such
legal prohibition and make such redemption as soon as possible following the
date upon which such legal prohibition is eliminated. For purposes of this
Section 12.2, "Net Proceeds" shall mean an amount equal to the gross proceeds of
the applicable Medical Technologies Disposition after any payment of, or
reasonable provision for, Direct Expenses arising solely from such disposition.
In the event of redemption pursuant to this Section 12.2, the
Corporation shall cause to be given to each holder of Class A Common Stock to be
so redeemed a notice of the redemption date, and the kind and amount of
consideration to be received by such holder with respect to each share of Class
A Common Stock held by such holder, including details as to the calculation
thereof. Such notice shall be sent by first-class mail, postage prepaid, not
less than 10 nor more than 60 days prior to the redemption date, to each holder
of Class A Common Stock at such holder's address as the same appears on the
stock ledger books of the Corporation. Neither the failure to mail such notice
to any particular holder of Class A Common Stock nor any defect therein shall
affect the sufficiency thereof with respect to any other holder of Class A
Common Stock.
C-4
If the redemption date with respect to Class A Common Stock
shall be subsequent to the record date for the payment of a dividend or other
distribution thereon or with respect thereto, the holders of shares of Class A
Common Stock at the close of business on such record date shall be entitled to
receive the dividend or other distribution payable on or with respect to such
shares on the date set for payment of such dividend or other distribution,
notwithstanding the redemption of such shares or the Corporation's default in
payment of the dividend or distribution due on such date.
Promptly following the redemption date, the Corporation will
deliver, to each record holder of shares of Class A Common Stock, any cash, cash
equivalents or certificates representing securities to which such holder shall
be entitled as provided above, together with any fractional payment contemplated
by Section 12.3 and any dividends as provided by Section 12.1. From and after
the redemption date, all rights of a holder of shares of Class A Common Stock
that were redeemed shall cease except for the right to receive such cash, cash
equivalents, certificates, fractional payments and/or dividends.
12.3 Fractional Shares. The Corporation shall not be required
to issue or deliver fractional shares of any capital stock or any fractional
securities to any holder of Class A Common Stock upon redemption, dividend or
other distribution pursuant to this Article XII. If the number of shares of
capital stock or the amount of securities remaining to be issued or delivered to
any holder of Class A Common Stock is a fraction, then the Corporation shall
either issue or deliver such fraction to such holder or pay a cash adjustment in
respect of such fraction in an amount equal to the fair market value of such
fraction on the fifth business day prior to the date such payment is to be made.
For purposes of the preceding sentence, "fair market value" of any fraction
shall be such value as is determined in good faith by the Board of Directors.
12.4 Liquidation Rights. In the event of the dissolution,
liquidation or winding up of the Corporation, whether voluntary or involuntary,
the holders of the outstanding shares of Class A Common Stock shall be entitled
to receive the Medical Technologies Investments or their proceeds.
12.5 Transfer. The shares of Class A Common Stock shall not be
transferable, except upon death of an individual holder or upon liquidation or
dissolution of an entity holder. Shares of Class A Common Stock transferred upon
such death, liquidation or dissolution will continue to remain nontransferable
in the hands of any successor to such deceased, liquidated or dissolved holder.
12.6 Certificates. Except as otherwise provided by the Board
of Directors, the shares of Class A Common Stock shall be uncertificated and
shall not be evidenced by share certificates.
12.7 Cancellation. If the Medical Technology Investments are
permanently impaired and worthless, as reasonably determined by Edward B. Grier
(or, if he is no longer a director, by the Corporation's Board of Directors)
then the Class A Common Stock shall be cancelled for no consideration.
12.8 Required Vote of the Class A Common Stock. Unless the
vote or consent of a greater number of shares shall be required by law, the vote
or consent of the holders of at least a majority of all of the shares of Class A
Common Stock then outstanding, voting as a separate class, shall be necessary
for (i) authorizing, effecting or validating the merger or consolidation of the
Corporation into or with any other corporation if such merger or consolidation
would materially adversely affect the powers or rights of Class A Common Stock
either directly by amendment of the provisions of this Certificate of
Incorporation relating to the Class A Common Stock or indirectly by requiring
the holders of Class A Common Stock to accept or retain, in such merger or
consolidation, anything other than shares of such class or shares of the
surviving or resulting corporation having, in either case, powers and rights
identical to those of the Class A Common Stock prior to such merger or
consolidation; or (ii) any proposed amendment of this Certificate of
Incorporation which would alter or change the powers, preferences or special
rights of Class A Common Stock so as to affect them adversely.
C-5
12.9 Definitions. The following terms shall have the following
meanings (with terms defined in the singular having comparable meaning when used
in the plural and vice versa), unless another definition is provided or the
context otherwise requires:
"Direct Expenses" shall mean the sum of any direct (i) taxes payable by
the Corporation, (ii) transaction costs, including, without limitation,
any legal, investment banking and accounting fees and expenses, and
(iii) other expenses (contingent or otherwise), in each case related
solely to the Medical Technologies Investments.
"Medical Technologies Disposition" shall mean the final sale, transfer,
assignment, conversion, other disposition (whether by merger,
consolidation, sale or contribution of assets or stock or otherwise) or
other transaction involving the Medical Technologies Investments,
following which the Medical Technologies Investments consist solely or
cash, cash equivalents and marketable securities. In the case of a
Medical Technologies Disposition in a series of related transactions,
such Medical Technologies Disposition shall not be deemed to have been
consummated until the consummation of the last of such transactions,
and any cash, cash equivalents and marketable securities received in
transactions other than the last of such transactions shall be included
in the Available Medical Technologies Dividend Amount.
"Medical Technologies Investments" shall mean the Corporation's
indirect or directly owned (i) assets, property and securities acquired
pursuant to the Corporation's Research Funding Agreement with New York
University School of Medicine, (ii) interests in T3 Therapeutics, LLC,
a Delaware limited liability company, (iii) all proceeds from any
issuance of Class A Common Stock (other than the initial issuance of
shares of Class A Common Stock and any issuance upon the exercise of
options or warrants outstanding on the initial issuance date), and (iv)
any proceeds, assets, property or securities received in connection
with the assets described in clauses (i), (ii) or (iii), and this
clause (iv). The amount of the Medical Technologies Investments shall
be reduced by the amount of any dividend or distribution paid to the
holders of Class A Common Stock. Any decision with respect to a sale or
other transaction involving the Medical Technology Investments shall be
made by Edward B. Grier for as long as he remains a director of the
Corporation (provided that Edward B. Grier may retain separate counsel
and investment bankers to provide advice in this regard, the expenses
of which shall be considered Direct Expenses) and then by the
Corporation's Board of Directors in good faith. The Corporation may
contribute the Medical Technologies Investments to a wholly-owned
subsidiary of the Corporation for ease of administration, subject to
consideration of any required consents required by any agreements
related to the Medical Technologies Investments. The Corporation may
not (i) effect any sale, transfer, assignment, conversion, other
disposition (whether by merger, consolidation, sale or contribution of
assets or stock or otherwise) or other transaction involving the
Medical Technologies Investments with any person if the Corporation or
its affiliates, directly or indirectly, owns a majority equity interest
in such other person, or (ii) use, or reserve for use, any Medical
Technologies Investments in any business of the Corporation other than
a business included within the Medical Technologies Investments.
IN WITNESS WHEREOF, St. Lawrence Seaway Corporation has caused this
Certificate of Incorporation to be signed by an authorized officer of the
Corporation this __ day of __________, 2007.
By:
Name:
Title:
C-6
ANNEX D
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DIRECTOR INDEMNIFICATION
THE ST. LAWRENCE SEAWAY CORPORATION
Hanna II, Suite P
6011 E. Hanna Avenue
Beach Grove, Indiana 46203
[ ]
[NAME]
[ADDRESS]
[ADDRESS]
Dear [NAME]:
In consideration of your continued service as a director of St. Lawrence Seaway
Corporation, an Indiana corporation (the "Company"), the Company hereby
contractually agrees to provide you with the indemnification rights currently
provided by the Company to its directors, as described in the Company's articles
and bylaws, which are incorporated herein by reference. Notwithstanding any
future amendments to the Company's articles and bylaws, the Company hereby
agrees to continue to provide you with such indemnification rights so long as
you serve as a director of the Company, and after such service is completed, for
so long as you are exposed to potential liability by reason of your service as a
director of the Company.
The rights granted to you by the Company in this agreement shall not be deemed
exclusive of, or in limitation of, any rights to which you may be entitled under
applicable law, the Company articles and bylaws, or otherwise.
If this letter confirms your understanding of our agreement, please execute the
enclosed counterpart of this letter and return the executed counterpart to
Company counsel.
Very truly yours,
ST. LAWRENCE SEAWAY CORPORATION
By:
__________________________
Accepted and agreed to this [DATE]
__________________________
Signature
__________________________
Print Name
D-1
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[LOGO]
THE ST. LAWRENCE
SEAWAY CORPORATION
This Proxy is Solicited on Behalf of the Board of Directors
for the Annual Meeting of Stockholders to be held July 10, 2007
The undersigned hereby appoints Jack C. Brown and Edward B. Grier, III, and each
of them, with full power of substitution, as proxies to represent and vote all
of the shares of Common Stock the undersigned is entitled to vote at the Annual
Meeting of Stockholders of The St. Lawrence Seaway Corporation to be held on the
10th day of July, 2007, at 10:00 a.m., local time, at Room 112, Indiana
Convention Center & RCA Dome, 100 South Capitol Ave., Indianapolis, IN 46225, in
Indianapolis, Indiana and at any and all adjournments thereof, on all matters
coming before said meeting.
PLEASE MARK, SIGN AND DATE THE PROXY ON THE OTHER SIDE
AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
(Continued on other side)
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Address Change/Comments (Mark the corresponding box on the reverse side)
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> FOLD AND DETACH HERE <
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THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED Please
IN THE MANNER DIRECTED HEREIN BY THE STOCKHOLDER. Mark Here |_|
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED for Address
FOR ALL NOMINEES NAMED IN PROPOSAL 1 AND FOR Change or
PROPOSALS 2, 3, 4, 5, 6 and 7. Comments
SEE REVERSE SIDE
1. Election of Directors.
Nominees: FOR all nominees listed WITHHOLD AUTHORITY INSTRUCTIONS: To withhold authority to vote
01 Joel M. to the left (except as to vote for all for any individual nominee, write the
Greenblatt marked to the nominees listed to nominee's name in the space provided below.
02 Jack C. Brown contrary) the left
03 Daniel L. Nir ------------------------------------------------
04 Edward B. |_| |_|
Grier, III ------------------------------------------------
as Directors.
2. Proposal to approve the transaction related to the Stock and Warrant
Purchase.
|_| FOR |_| AGAINST |_| ABSTAIN
3. Proposal to approve the amendment and restatement of the By-Laws.
|_| FOR |_| AGAINST |_| ABSTAIN
4. Proposal to approve the reincorporation of the Company from Indiana to
Delaware
|_| FOR |_| AGAINST |_| ABSTAIN
5. Proposal to approve the new Certificate of Incorporation, to, among other
items, increase the number of authorized shares from 4,000,000 to 50,010,000,
decrease par value of Common Stock from $1.00 to $0.01, authorize 1,000,000
blank check preferred shares, authorize the "tracking stock" known as the
Class A Common Stock.
|_| FOR |_| AGAINST |_| ABSTAIN
6. Proposal to approve the issuance of the "tracking stock" known as the Class A
Common Stock,
|_| FOR |_| AGAINST |_| ABSTAIN
7. Ratification of the appointment of Mahoney Sabol & Co., LLP as independent
auditors of the Company for fiscal year ended March 31, 2007, and fiscal year
ending March 31, 2008.
|_| FOR |_| AGAINST |_| ABSTAIN
8. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting and at any and all
adjournments thereof.
Dated: , 2007
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Signature
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Signature if held jointly
Please sign exactly as name appears herein, date and return
promptly. When shares are held by joint tenants, both must
sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by duly
authorized officer, and give title of officer. If a
partnership, please sign in partnership name by authorized
person and give title or capacity of person signing.
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> FOLD AND DETACH HERE <
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